frm10q1q09.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON, D.C. 20549
 
FORM 10-Q

(Mark One)
 
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2009
 
OR
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ____ to ____
 
Commission file number 001-00035
 
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)

 
New York
 
14-0689340
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
3135 Easton Turnpike, Fairfield, CT
 
06828-0001
(Address of principal executive offices)
 
(Zip Code)
 
(Registrant’s telephone number, including area code) (203) 373-2211
 
_______________________________________________
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
 
There were 10,589,575,000 shares of common stock with a par value of $0.06 per share outstanding at March 27, 2009.



 
(1)

 

General Electric Company
 


   
Page
Part I – Financial Information
   
     
Item 1. Financial Statements
   
 
3
 
4
 
5
 
6
 
7
 
38
 
57
 
57
     
Part II – Other Information
   
     
 
58
 
58
 
59
 
60
 
61
 
Forward-Looking Statements
 
This document contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of U.S. and foreign government programs to restore liquidity and stimulate national and global economies; the impact of conditions in the financial and credit markets on the availability and cost of GE Capital’s funding and on our ability to reduce GE Capital’s asset levels and commercial paper exposure as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the soundness of other financial institutions with which GE Capital does business; the adequacy of our cash flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the current level; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

 
(2)

 

Part I. Financial Information
 
Item 1. Financial Statements.
 
Condensed Statement of Earnings
General Electric Company and consolidated affiliates
 
 
Three months ended March 31 (Unaudited)
 
 
Consolidated
   
GE(a)
 
Financial Services (GECS)
 
(In millions; except share amounts)
2009
 
2008
   
2009
 
2008
 
2009
 
2008
 
                                       
Revenues
                                     
Sales of goods
$
14,072
 
$
14,781
   
$
13,813
 
$
14,447
 
$
273
 
$
367
 
Sales of services
 
10,055
   
9,541
     
10,209
   
9,739
   
   
 
Other income
 
428
   
575
     
479
   
658
   
   
 
GECS earnings from continuing operations
 
   
     
961
   
2,456
   
   
 
GECS revenues from services
 
13,856
   
17,331
     
   
   
14,157
   
17,671
 
Total revenues
 
38,411
   
42,228
     
25,462
   
27,300
   
14,430
   
18,038
 
                                       
Costs and expenses
                                     
Cost of goods sold
 
11,433
   
11,908
     
11,222
   
11,623
   
224
   
317
 
Cost of services sold
 
6,633
   
6,085
     
6,787
   
6,283
   
   
 
Interest and other financial charges
 
5,327
   
6,527
     
376
   
602
   
5,121
   
6,176
 
Investment contracts, insurance losses and
                                     
insurance annuity benefits
 
746
   
804
     
   
   
773
   
848
 
Provision for losses on financing receivables
 
2,336
   
1,343
     
   
   
2,336
   
1,343
 
Other costs and expenses
 
9,337
   
10,207
     
3,364
   
3,552
   
6,129
   
6,784
 
Total costs and expenses
 
35,812
   
36,874
     
21,749
   
22,060
   
14,583
   
15,468
 
                                       
Earnings (loss) from continuing operations
                                     
before income taxes
 
2,599
   
5,354
     
3,713
   
5,240
   
(153
)
 
2,570
 
Benefit (provision) for income taxes
 
318
   
(841
)
   
(842
)
 
(758
)
 
1,160
   
(83
)
Earnings from continuing operations
 
2,917
   
4,513
     
2,871
   
4,482
   
1,007
   
2,487
 
Loss from discontinued operations, net of taxes
 
(21
)
 
(47
)
   
(21
)
 
(47
)
 
(4
)
 
(61
)
Net earnings
 
2,896
   
4,466
     
2,850
   
4,435
   
1,003
   
2,426
 
Less net earnings attributable to noncontrolling interests
 
85
   
162
     
39
   
131
   
46
   
31
 
Net earnings attributable to the Company
 
2,811
   
4,304
     
2,811
   
4,304
   
957
   
2,395
 
Preferred stock dividends declared
 
(75
)
 
     
(75
)
 
   
   
 
Net earnings attributable to GE common
                                     
shareowners
$
2,736
 
$
4,304
   
$
2,736
 
$
4,304
 
$
957
 
$
2,395
 
                                       
                                       
Amounts attributable to the Company
                                     
Earnings from continuing operations
$
2,832
 
$
4,351
   
$
2,832
 
$
4,351
 
$
961
 
$
2,456
 
Loss from discontinued operations, net of taxes
 
(21
)
 
(47
)
   
(21
)
 
(47
)
 
(4
)
 
(61
)
Net earnings attributable to the Company
$
2,811
 
$
4,304
   
$
2,811
 
$
4,304
 
$
957
 
$
2,395
 
                                       
Per-share amounts
                                     
Earnings from continuing operations
                                     
Diluted earnings per share
$
0.26
 
$
0.43
                           
Basic earnings per share
$
0.26
 
$
0.44
                           
                                       
Net earnings
                                     
Diluted earnings per share
$
0.26
 
$
0.43
                           
Basic earnings per share
$
0.26
 
$
0.43
                           
                                       
Dividends declared per share
$
0.31
 
$
0.31
                           
                                       

(a)
Represents the adding together of all affiliated companies except General Electric Capital Services, Inc. (GECS or financial services) which is presented on a one-line basis.
See accompanying notes. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and GECS have been eliminated from the “Consolidated” columns.


 
(3)

 

Condensed Statement of Financial Position
General Electric Company and consolidated affiliates
 
 
Consolidated
   
GE(a)
 
Financial Services (GECS)
 
(In millions; except share amounts)
March 31,
2009
 
December 31,
2008
   
March 31,
2009
 
December 31,
2008
 
March 31,
2009
 
December 31,
2008
 
 
(Unaudited)
       
(Unaudited)
     
(Unaudited)
     
                                       
Assets
                                     
Cash and equivalents
$
46,830
 
$
48,187
   
$
2,127
 
$
12,090
 
$
45,240
 
$
37,486
 
Investment securities
 
41,931
   
41,446
     
150
   
213
   
41,783
   
41,236
 
Current receivables
 
19,198
   
21,411
     
12,611
   
15,064
   
   
 
Inventories
 
13,831
   
13,674
     
13,766
   
13,597
   
65
   
77
 
Financing receivables – net
 
347,647
   
365,168
     
   
   
355,036
   
372,456
 
Other GECS receivables
 
13,182
   
13,439
     
   
   
17,728
   
18,636
 
Property, plant and equipment (including
                                     
equipment leased to others) – net
 
72,222
   
78,530
     
14,032
   
14,433
   
58,190
   
64,097
 
Investment in GECS
 
   
     
60,756
   
53,279
   
   
 
Goodwill
 
80,640
   
81,759
     
56,203
   
56,394
   
24,437
   
25,365
 
Other intangible assets – net
 
14,758
   
14,977
     
11,342
   
11,364
   
3,416
   
3,613
 
All other assets
 
109,040
   
106,899
     
22,219
   
22,435
   
88,180
   
85,721
 
Assets of businesses held for sale
 
   
10,556
     
   
   
   
10,556
 
Assets of discontinued operations
 
1,528
   
1,723
     
64
   
64
   
1,464
   
1,659
 
Total assets
$
760,807
 
$
797,769
   
$
193,270
 
$
198,933
 
$
635,539
 
$
660,902
 
                                       
Liabilities and equity
                                     
Short-term borrowings
$
176,320
 
$
193,695
   
$
1,614
 
$
2,375
 
$
175,676
 
$
193,533
 
Accounts payable, principally trade accounts
 
18,171
   
20,819
     
10,677
   
11,699
   
11,718
   
13,882
 
Progress collections and price adjustments
                                     
accrued
 
11,821
   
12,536
     
12,312
   
13,058
   
   
 
Other GE current liabilities
 
21,494
   
21,560
     
21,494
   
21,624
   
   
 
Long-term borrowings
 
327,658
   
330,067
     
11,171
   
9,827
   
317,412
   
321,068
 
Investment contracts, insurance liabilities
                                     
and insurance annuity benefits
 
33,437
   
34,032
     
   
   
33,946
   
34,369
 
All other liabilities
 
55,911
   
64,796
     
32,192
   
32,767
   
23,846
   
32,090
 
Deferred income taxes
 
5,179
   
4,584
     
(3,872
)
 
(3,949
)
 
9,051
   
8,533
 
Liabilities of businesses held for sale
 
   
636
     
   
   
   
636
 
Liabilities of discontinued operations
 
1,340
   
1,432
     
175
   
189
   
1,165
   
1,243
 
Total liabilities
 
651,331
   
684,157
     
85,763
   
87,590
   
572,814
   
605,354
 
                                       
Preferred stock (30,000 shares outstanding at
                                     
both March 31, 2009 and December 31, 2008)
 
   
     
   
   
   
 
Common stock (10,589,575,000 and 10,536,897,000
                                     
shares outstanding at March 31, 2009 and
                                     
December 31, 2008, respectively)
 
702
   
702
     
702
   
702
   
1
   
1
 
Accumulated other comprehensive income – net(b)
                                     
Investment securities
 
(3,729
)
 
(3,094
)
   
(3,729
)
 
(3,094
)
 
(3,733
)
 
(3,097
)
Currency translation adjustments
 
(4,359
)
 
(299
)
   
(4,359
)
 
(299
)
 
(4,307
)
 
(1,258
)
Cash flow hedges
 
(2,615
)
 
(3,332
)
   
(2,615
)
 
(3,332
)
 
(2,438
)
 
(3,134
)
Benefit plans
 
(14,889
)
 
(15,128
)
   
(14,889
)
 
(15,128
)
 
(359
)
 
(367
)
Other capital
 
39,150
   
40,390
     
39,150
   
40,390
   
27,580
   
18,079
 
Retained earnings
 
121,572
   
122,123
     
121,572
   
122,123
   
44,012
   
43,055
 
Less common stock held in treasury
 
(34,813
)
 
(36,697
)
   
(34,813
)
 
(36,697
)
 
   
 
                                       
Total GE shareowners’ equity
 
101,019
   
104,665
     
101,019
   
104,665
   
60,756
   
53,279
 
Noncontrolling interests(c)
 
8,457
   
8,947
     
6,488
   
6,678
   
1,969
   
2,269
 
Total equity
 
109,476
   
113,612
     
107,507
   
111,343
   
62,725
   
55,548
 
                                       
Total liabilities and equity
$
760,807
 
$
797,769
   
$
193,270
 
$
198,933
 
$
635,539
 
$
660,902
 
                                       

(a)
Represents the adding together of all affiliated companies except General Electric Capital Services, Inc. (GECS or financial services) which is presented on a one-line basis.
(b)
The sum of accumulated other comprehensive income – net was $(25,592) million and $(21,853) million at March 31, 2009 and December 31, 2008, respectively.
(c)
Included accumulated other comprehensive income attributable to noncontrolling interests of $119 million and $149 million at March 31, 2009 and December 31, 2008, respectively.
See accompanying notes. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and GECS have been eliminated from the “Consolidated” columns.


 
(4)

 

Condensed Statement of Cash Flows
General Electric Company and consolidated affiliates
 
 
Three months ended March 31 (Unaudited)
 
 
Consolidated
   
GE(a)
 
Financial Services (GECS)
 
(In millions)
2009
 
2008
   
2009
 
2008
 
2009
 
2008
 
                                       
Cash flows – operating activities
                                     
Net earnings attributable to the Company
$
2,811
 
$
4,304
   
$
2,811
 
$
4,304
 
$
957
 
$
2,395
 
Loss from discontinued operations
 
21
   
47
     
21
   
47
   
4
   
61
 
Adjustments to reconcile net earnings attributable to the
                                     
Company to cash provided from operating activities
                                     
Depreciation and amortization of property,
                                     
plant and equipment
 
2,731
   
2,682
     
550
   
556
   
2,181
   
2,126
 
Earnings from continuing operations retained
                                     
by GECS
 
   
     
(961
)
 
(1,326
)
 
   
 
Deferred income taxes
 
(528
)
 
(990
)
   
74
   
(352
)
 
(602
)
 
(638
)
Decrease in GE current receivables
 
1,952
   
106
     
2,225
   
396
   
   
 
Decrease (increase) in inventories
 
(178
)
 
(1,412
)
   
(170
)
 
(1,375
)
 
12
   
(6
)
Increase (decrease) in accounts payable
 
(1,672
)
 
369
     
(555
)
 
125
   
(1,655
)
 
271
 
Increase (decrease) in GE progress collections
 
(724
)
 
1,436
     
(755
)
 
1,553
   
   
 
Provision for losses on GECS financing receivables
 
2,336
   
1,343
     
   
   
2,336
   
1,343
 
All other operating activities
 
(7,168
)
 
(1,327
)
   
(401
)
 
926
   
(6,707
)
 
(2,217
)
Cash from (used for) operating activities – continuing
                                     
operations
 
(419
)
 
6,558
     
2,839
   
4,854
   
(3,474
)
 
3,335
 
Cash from (used for) operating activities – discontinued
                                     
operations
 
(45
)
 
367
     
   
   
(45
)
 
367
 
Cash from (used for) operating activities
 
(464
)
 
6,925
     
2,839
   
4,854
   
(3,519
)
 
3,702
 
                                       
Cash flows – investing activities
                                     
Additions to property, plant and equipment
 
(2,560
)
 
(3,718
)
   
(756
)
 
(894
)
 
(1,896
)
 
(2,955
)
Dispositions of property, plant and equipment
 
1,183
   
3,212
     
   
   
1,183
   
3,212
 
Net decrease (increase) in GECS financing receivables
 
18,024
   
(11,845
)
   
   
   
17,962
   
(12,448
)
Proceeds from sales of discontinued operations
 
   
203
     
   
203
   
   
 
Proceeds from principal business dispositions
 
9,021
   
4,305
     
175
   
   
8,846
   
4,305
 
Payments for principal businesses purchased
 
(7,128
)
 
(12,759
)
   
(306
)
 
(107
)
 
(6,822
)
 
(12,652
)
Capital contribution from GE to GECS
 
   
     
(9,500
)
 
   
   
 
All other investing activities
 
(2,691
)
 
(722
)
   
54
   
(35
)
 
(2,082
)
 
(375
)
Cash from (used for) investing activities – continuing
                                     
operations
 
15,849
   
(21,324
)
   
(10,333
)
 
(833
)
 
17,191
   
(20,913
)
Cash from (used for) investing activities – discontinued
                                     
operations
 
47
   
(358
)
   
   
   
47
   
(358
)
Cash from (used for) investing activities
 
15,896
   
(21,682
)
   
(10,333
)
 
(833
)
 
17,238
   
(21,271
)
                                       
Cash flows – financing activities
                                     
Net increase (decrease) in borrowings (maturities of
                                     
90 days or less)
 
(17,897
)
 
2,201
     
990
   
(1,658
)
 
(20,129
)
 
3,842
 
Newly issued debt (maturities longer than 90 days)
 
32,064
   
35,827
     
1,226
   
39
   
30,935
   
35,936
 
Repayments and other reductions (maturities longer
                                     
than 90 days)
 
(27,272
)
 
(20,239
)
   
(1,580
)
 
(46
)
 
(25,692
)
 
(20,193
)
Net dispositions (purchases) of GE shares for treasury
 
245
   
(864
)
   
245
   
(864
)
 
   
 
Dividends paid to shareowners
 
(3,350
)
 
(3,110
)
   
(3,350
)
 
(3,110
)
 
   
(1,130
)
Capital contribution from GE to GECS
 
   
     
   
   
9,500
   
 
All other financing activities
 
(577
)
 
498
     
   
   
(577
)
 
498
 
Cash from (used for) financing activities – continuing
                                     
operations
 
(16,787
)
 
14,313
     
(2,469
)
 
(5,639
)
 
(5,963
)
 
18,953
 
Cash from (used for) financing activities – discontinued
                                     
operations
 
   
     
   
   
   
 
Cash from (used for) financing activities
 
(16,787
)
 
14,313
     
(2,469
)
 
(5,639
)
 
(5,963
)
 
18,953
 
Increase (decrease) in cash and equivalents
 
(1,355
)
 
(444
)
   
(9,963
)
 
(1,618
)
 
7,756
   
1,384
 
Cash and equivalents at beginning of year
 
48,367
   
16,031
     
12,090
   
6,702
   
37,666
   
9,739
 
Cash and equivalents at March 31
 
47,012
   
15,587
     
2,127
   
5,084
   
45,422
   
11,123
 
Less cash and equivalents of discontinued operations
                                     
at March 31
 
182
   
309
     
   
   
182
   
309
 
Cash and equivalents of continuing operations
                                     
at March 31
$
46,830
 
$
15,278
   
$
2,127
 
$
5,084
 
$
45,240
 
$
10,814
 
                                       

(a)
Represents the adding together of all affiliated companies except General Electric Capital Services, Inc. (GECS or financial services) which is presented on a one-line basis.
See accompanying notes. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and GECS have been eliminated from the “Consolidated” columns and are discussed in Note 19.

 
(5)

 

Summary of Operating Segments
General Electric Company and consolidated affiliates
 
 
Three months ended March 31
(Unaudited)
 
 (In millions)
2009
 
2008
 
             
Revenues
           
Energy Infrastructure
$
8,239
 
$
7,724
 
Technology Infrastructure
 
10,436
   
10,460
 
NBC Universal
 
3,524
   
3,584
 
Capital Finance
 
13,088
   
16,969
 
Consumer & Industrial
 
2,221
   
2,862
 
Total segment revenues
 
37,508
   
41,599
 
Corporate items and eliminations
 
903
   
629
 
Consolidated revenues
$
38,411
 
$
42,228
 
             
Segment profit(a)
           
Energy Infrastructure
$
1,273
 
$
1,070
 
Technology Infrastructure
 
1,803
   
1,701
 
NBC Universal
 
391
   
712
 
Capital Finance
 
1,119
   
2,679
 
Consumer & Industrial
 
36
   
144
 
Total segment profit
 
4,622
   
6,306
 
Corporate items and eliminations
 
(572
)
 
(595
)
GE interest and other financial charges
 
(376
)
 
(602
)
GE provision for income taxes
 
(842
)
 
(758
)
Earnings from continuing operations attributable to the Company
 
2,832
   
4,351
 
Loss from discontinued operations, net of taxes, attributable
           
to the Company
 
(21
)
 
(47
)
Consolidated net earnings attributable to the Company
$
2,811
 
$
4,304
 
             

(a)
Segment profit always excludes the effects of principal pension plans, results reported as discontinued operations, earnings attributable to noncontrolling interests and accounting changes, and may exclude matters such as charges for restructuring; rationalization and other similar expenses; in-process research and development and certain other acquisition-related charges and balances; technology and product development costs; certain gains and losses from acquisitions or dispositions; and litigation settlements or other charges, responsibility for which preceded the current management team. Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segment’s management is measured – excluded in determining segment profit, which we sometimes refer to as “operating profit,” for Energy Infrastructure, Technology Infrastructure, NBC Universal and Consumer & Industrial; included in determining segment profit, which we sometimes refer to as “net earnings,” for Capital Finance.
See accompanying notes to condensed, consolidated financial statements.

 

 
(6)

 

 
Notes to Condensed, Consolidated Financial Statements (Unaudited)
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
The accompanying condensed, consolidated financial statements represent the consolidation of General Electric Company and all companies that we directly or indirectly control, either through majority ownership or otherwise. See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2008 (2008 Form 10-K), which discusses our consolidation and financial statement presentation. As used in this report on Form 10-Q (Report) and in our Annual Report on Form 10-K, “GE” represents the adding together of all affiliated companies except General Electric Capital Services, Inc. (GECS or financial services), which is presented on a one-line basis; GECS consists of General Electric Capital Services, Inc. and all of its affiliates; and “Consolidated” represents the adding together of GE and GECS with the effects of transactions between the two eliminated. GE includes Energy Infrastructure, Technology Infrastructure, NBC Universal and Consumer & Industrial. GECS includes Capital Finance. We have reclassified certain prior-period amounts to conform to the current-period’s presentation. Unless otherwise indicated, information in these notes to condensed, consolidated financial statements relates to continuing operations.
 
Accounting changes
 
Effective January 1, 2008, we adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) 157, Fair Value Measurements, for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. Effective January 1, 2009, we adopted SFAS 157 for all non-financial instruments accounted for at fair value on a non-recurring basis. SFAS 157 establishes a new framework for measuring fair value and expands related disclosures. See Note 15.
 
On January 1, 2009, we adopted SFAS 141(R), Business Combinations. This standard significantly changes the accounting for business acquisitions both during the period of the acquisition and in subsequent periods. Among the more significant changes in the accounting for acquisitions are the following:
 
·  
Acquired in-process research and development (IPR&D) is accounted for as an asset, with the cost recognized as the research and development is realized or abandoned. IPR&D was previously expensed at the time of the acquisition.
 
·  
Contingent consideration is recorded at fair value as an element of purchase price with subsequent adjustments recognized in operations. Contingent consideration was previously accounted for as a subsequent adjustment of purchase price.
 
·  
Subsequent decreases in valuation allowances on acquired deferred tax assets are recognized in operations after the measurement period. Such changes were previously considered to be subsequent changes in consideration and were recorded as decreases in goodwill.
 
·  
Transaction costs are expensed. These costs were previously treated as costs of the acquisition.
 
In April 2009, the FASB issued FASB Staff Position (FSP) FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, which amends the accounting in SFAS 141(R) for assets and liabilities arising from contingencies in a business combination. The FSP is effective January 1, 2009, and requires pre-acquisition contingencies to be recognized at fair value, if fair value can be reasonably determined during the measurement period. If fair value cannot be reasonably determined, the FSP requires measurement based on the recognition and measurement criteria of SFAS 5, Accounting for Contingencies.
 

 
(7)

 

On January 1, 2009, we adopted SFAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51, which requires us to make certain changes to the presentation of our financial statements. This standard requires us to classify noncontrolling interests (previously referred to as “minority interest”) as part of consolidated net earnings ($85 million and $162 million for the three months ended March 31, 2009 and 2008, respectively) and to include the accumulated amount of noncontrolling interests as part of shareowners' equity ($8,457 million and $8,947 million at March 31, 2009 and December 31, 2008, respectively). The net earnings amounts we have previously reported are now presented as "Net earnings attributable to the Company" and, as required by SFAS 160, earnings per share continues to reflect amounts attributable only to the Company. Similarly, in our presentation of shareowners’ equity, we distinguish between equity amounts attributable to GE shareowners and amounts attributable to the noncontrolling interests – previously classified as minority interest outside of shareowners’ equity. In addition to these financial reporting changes, SFAS 160 provides for significant changes in accounting related to noncontrolling interests; specifically, increases and decreases in our controlling financial interests in consolidated subsidiaries will be reported in equity similar to treasury stock transactions. If a change in ownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interests are remeasured with the gain or loss reported in net earnings.
 
Effective January 1, 2009, we adopted Emerging Issues Task Force (EITF) Issue 07-1, Accounting for Collaborative Arrangements, which requires gross basis presentation of revenues and expenses for principal participants in collaborative arrangements. Our Technology Infrastructure and Energy Infrastructure segments enter into collaborative arrangements with manufacturers and suppliers of components used to build and maintain certain engines, aero-derivatives, and turbines, under which GE and these participants share in risks and rewards of these product programs. Adoption of the standard had no effect as our historical presentation had been consistent with the new requirements. Participation fees earned and recorded as other income totaled an insignificant amount in the first quarter of 2009, and $451 million and $540 million for the years 2008 and 2007, respectively. Payments to participants are recorded as costs of services sold ($103 million in the first quarter of 2009, and $423 million and $320 million for the years 2008 and 2007, respectively) or as cost of goods sold ($439 million in the first quarter of 2009, and $1,932 million and $1,623 million for the years 2008 and 2007, respectively).
 
2. INTERIM PERIOD PRESENTATION
 
The condensed, consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed, consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. It is suggested that these condensed, consolidated financial statements be read in conjunction with the financial statements and notes thereto included in our 2008 Form 10-K. We label our quarterly information using a calendar convention, that is, first quarter is labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish interim quarterly closing dates using a fiscal calendar, which requires our businesses to close their books on either a Saturday or Sunday, depending on the business. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar from 1993 through 2013 is available on our website, www.ge.com/secreports.
 
3. DISCONTINUED OPERATIONS
 
Discontinued operations comprised GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our minority ownership in GE Nissen Credit Co., Ltd.), our U.S. mortgage business (WMC), Plastics, Advanced Materials, GE Life, Genworth Financial, Inc. (Genworth) and most of GE Insurance Solutions Corporation (GE Insurance Solutions). Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.
 

 
(8)

 

GE Money Japan
 
During the third quarter of 2007, we committed to a plan to sell Lake upon determining that, despite restructuring, Japanese regulatory limits for interest charges on unsecured personal loans did not permit us to earn an acceptable return. During the third quarter of 2008, we completed the sale of GE Money Japan, which included Lake, along with our Japanese mortgage and card businesses, excluding our minority ownership in GE Nissen Credit Co., Ltd. As a result, we recognized an after-tax loss of $908 million in 2007 and an incremental loss in 2008 of $361 million. In connection with the transaction, GE Money Japan reduced the proceeds on the sale for estimated interest refund claims in excess of the statutory interest rate. Proceeds from the sale may be increased or decreased based on the actual claims experienced in accordance with terms specified in the agreement, and will not be adjusted unless claims exceed approximately $2,800 million. Estimated claims are not expected to exceed those levels and are based on our historical claims experience and the estimated future requests, taking into consideration the ability and likelihood of customers to make claims and other industry risk factors. However, uncertainties around the status of laws and regulations and lack of certain information related to the individual customers make it difficult to develop a meaningful estimate of the aggregate claims exposure. We review our estimated exposure quarterly, and make adjustments when required. To date, there have been no adjustments to sale proceeds for this matter. GE Money Japan revenues from discontinued operations were $1 million and $290 million in the first quarters of 2009 and 2008, respectively. In total, GE Money Japan earnings (loss) from discontinued operations, net of taxes, were $4 million and $(37) million in the first quarters of 2009 and 2008, respectively.
 
WMC
 
During the fourth quarter of 2007, we completed the sale of our U.S. mortgage business. In connection with the transaction, WMC retained certain obligations related to loans sold prior to the disposal of the business, including WMC’s contractual obligations to repurchase previously sold loans as to which there was an early payment default or with respect to which certain contractual representations and warranties were not met. Reserves related to these obligations were $246 million at March 31, 2009, and $244 million at December 31, 2008. The amount of these reserves is based upon pending and estimated future loan repurchase requests, the estimated percentage of loans validly tendered for repurchase, and our estimated losses on loans repurchased. Based on our historical experience, we estimate that a small percentage of the total loans we originated and sold will be tendered for repurchase, and of those tendered, only a limited amount will qualify as “validly tendered,” meaning the loans sold did not satisfy specified contractual obligations. The amount of our current reserve represents our best estimate of losses with respect to our repurchase obligations. However, actual losses could exceed our reserve amount if actual claim rates, valid tenders or losses we incur on repurchased loans are higher than historically observed. WMC revenues from discontinued operations were $(7) million and $5 million in the first quarters of 2009 and 2008, respectively. In total, WMC’s losses from discontinued operations, net of taxes, were $6 million and $7 million in the first quarters of 2009 and 2008, respectively.
 
GE industrial earnings (loss) from discontinued operations, net of taxes, were $(17) million and $14 million in the first quarters of 2009 and 2008, respectively.
 

 
(9)

 

Assets of GE industrial discontinued operations were $64 million at both March 31, 2009 and December 31, 2008. Liabilities of GE industrial discontinued operations were $175 million and $189 million at March 31, 2009, and December 31, 2008, respectively, and primarily represent taxes payable and pension liabilities related to the sale of our Plastics business in 2007.
 
Summarized financial information for discontinued GECS operations is shown below.
 
 
Three months ended March 31
 
(In millions)
2009
 
2008
 
             
Operations
           
Total revenues
$
(6
)
$
295
 
             
Loss from discontinued operations before
           
income taxes
$
(12
)
$
(101
)
Income tax benefit
 
4
   
40
 
Loss from discontinued operations,
           
net of taxes
$
(8
)
$
(61
)
             
Disposal
           
Gain on disposal before income taxes
$
7
 
$
 
Income tax expense
 
(3
)
 
 
Gain on disposal, net of taxes
$
4
 
$
 
             
Loss from discontinued operations, net of taxes(a)
$
(4
)
$
(61
)
             

(a)
The sum of GE industrial earnings (loss) from discontinued operations, net of taxes, and GECS loss from discontinued operations, net of taxes, are reported as GE industrial earnings (loss) from discontinued operations, net of taxes, on the Condensed Statement of Earnings.

 
 
At
 
(In millions)
March 31,
2009
 
December 31,
2008
 
             
Assets
           
Cash and equivalents
$
182
 
$
180
 
All other assets
 
14
   
19
 
Other
 
1,268
   
1,460
 
Assets of discontinued operations
$
1,464
 
$
1,659
 

 
 
At
 
(In millions)
March 31,
2009
 
December 31,
2008
 
             
Liabilities
           
Liabilities of discontinued operations
$
1,165
 
$
1,243
 

 
Assets at March 31, 2009 and December 31, 2008, were primarily comprised of a deferred tax asset for a loss carryforward, which expires in 2015, related to the sale of our GE Money Japan business.
 

 
(10)

 

4. GECS REVENUES FROM SERVICES
 
GECS revenues from services are summarized in the following table.
 
 
Three months ended March 31
 
(In millions)
2009
 
2008
 
             
Interest on loans
$
5,073
 
$
6,499
 
Equipment leased to others
 
3,485
   
3,810
 
Fees
 
1,160
   
1,369
 
Financing leases
 
908
   
1,163
 
Real estate investments
 
347
   
1,161
 
Premiums earned by insurance activities
 
510
   
542
 
Associated companies
 
165
   
469
 
Investment income(a)
 
665
   
842
 
Net securitization gains
 
326
   
386
 
Other items(b)
 
1,518
   
1,430
 
Total
$
14,157
 
$
17,671
 
             

(a)
Included other-than-temporary impairments on investment securities of $232 million and $162 million in the first quarters of 2009 and 2008, respectively.
(b)
Included a gain on the sale of a limited partnership interest in Penske Truck Leasing Co., L.P. (PTL) and a related gain on the remeasurement of the retained investment to fair value totaling $296 million in the first quarter of 2009. See Note 18.

 
5. POSTRETIREMENT BENEFIT PLANS
 
We sponsor a number of pension and retiree health and life insurance benefit plans. Principal pension plans include the GE Pension Plan and the GE Supplementary Pension Plan. Principal retiree benefit plans generally provide health and life insurance benefits to employees who retire under the GE Pension Plan with 10 or more years of service. Other pension plans include the U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million. Smaller pension plans and other retiree benefit plans are not material individually or in the aggregate. The effect on operations of the pension plans follows.
 
 
Principal Pension Plans
 
Other Pension Plans
 
(In millions)
Three months ended March 31
 
Three months ended March 31
 
 
2009
 
2008
 
2009
 
2008
 
                         
Expected return on plan assets
$
(1,126
)
$
(1,075
)
$
(106
)
$
(137
)
Service cost for benefits earned
 
353
   
300
   
83
   
80
 
Interest cost on benefit obligation
 
669
   
661
   
112
   
124
 
Prior service cost amortization
 
81
   
81
   
2
   
3
 
Net actuarial loss amortization
 
90
   
54
   
29
   
19
 
Pension plans cost
$
67
 
$
21
 
$
120
 
$
89
 

 

 
(11)

 

The effect on operations of principal retiree health and life insurance plans follows.
 
 
Principal Retiree Health and
Life Insurance Plans
 
 
Three months ended March 31
 
 (In millions)
2009
 
2008
 
             
Expected return on plan assets
$
(32
)
$
(33
)
Service cost for benefits earned
 
74
   
63
 
Interest cost on benefit obligation
 
177
   
198
 
Prior service cost amortization
 
168
   
168
 
Net actuarial loss (gain) amortization
 
(27
)
 
9
 
Retiree benefit plans cost
$
360
 
$
405
 

 
6. INCOME TAXES
 
During the first quarter of 2009, following the change in our external credit ratings, funding actions taken and review of our operations, liquidity and funding, we determined that undistributed prior-year earnings of non-U.S. subsidiaries of GECS, on which we had previously provided deferred U.S. taxes, would be indefinitely reinvested outside the U.S. This change increased the amount of prior-year earnings indefinitely reinvested outside the U.S. by approximately $2 billion (to $77 billion), resulting in an income tax benefit of $700 million. Under applicable accounting rules, this tax benefit is recorded entirely in the first quarter tax provision and will not affect the tax provision for future quarters of 2009.
 
The balance of “unrecognized tax benefits,” the amount of related interest and penalties we have provided and what we believe to be the range of reasonably possible changes in the next 12 months, were:
 
 
At
 
(In millions)
March 31,
2009
 
December 31,
2008
 
             
Unrecognized tax benefits
$
6,819
 
$
6,692
 
Portion that, if recognized, would reduce tax expense and effective tax rate(a)
 
4,766
   
4,453
 
Accrued interest on unrecognized tax benefits
 
1,271
   
1,204
 
Accrued penalties on unrecognized tax benefits
 
90
   
96
 
Reasonably possible reduction to the balance of unrecognized tax benefits
           
in succeeding 12 months
 
0-1,600
   
0-1,500
 
Portion that, if recognized, would reduce tax expense and effective tax rate(a)
 
0-1,350
   
0-1,100
 
             

(a)
Some portion of such reduction might be reported as discontinued operations.

 
The IRS is currently auditing our consolidated income tax returns for 2003-2007. In addition, certain other U.S. tax deficiency issues and refund claims for previous years remain unresolved. It is reasonably possible that the 2003-2005 U.S. audit cycle will be completed during the next 12 months, which could result in a decrease in our balance of unrecognized tax benefits. We believe that there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties.
 
GE and GECS file a consolidated U.S. federal income tax return. The GECS provision for current tax expense includes its effect on the consolidated return. The effect of GECS on the consolidated liability is settled in cash as GE tax payments are due.
 

 
(12)

 

7. EARNINGS PER SHARE INFORMATION
 
GE’s authorized common stock consists of 13,200,000,000 shares having a par value of $0.06 each. Information related to the calculation of earnings per share follows.
 
 
Three months ended March 31
 
 
2009(a)
 
2008
 
(In millions; per-share amounts in dollars)
Diluted
 
Basic
 
Diluted
 
Basic
 
                         
Amounts attributable to the Company:
                       
Consolidated
                       
Earnings from continuing operations for
                       
per-share calculation
$
2,823
 
$
2,823
 
$
4,351
 
$
4,351
 
Preferred stock dividends declared
 
(75
)
 
(75
)
 
   
 
Earnings from continuing operations attributable to
                       
common shareowners for per-share calculation
$
2,748
 
$
2,748
 
$
4,351
 
$
4,351
 
Loss from discontinued operations
                       
for per-share calculation
 
(21
)
 
(21
)
 
(47
)
 
(47
)
Net earnings attributable to GE common
                       
shareowners for per-share calculation
 
2,727
   
2,727
   
4,304
   
4,304
 
                         
Average equivalent shares
                       
Shares of GE common stock outstanding
 
10,564
   
10,564
   
9,978
   
9,978
 
Employee compensation-related shares,
                       
including stock options
 
   
   
28
   
 
Total average equivalent shares
 
10,564
   
10,564
   
10,006
   
9,978
 
                         
Per-share amounts
                       
Earnings from continuing operations
$
0.26
 
$
0.26
 
$
0.43
 
$
0.44
 
Loss from discontinued operations
 
   
   
   
 
Net earnings
 
0.26
   
0.26
   
0.43
   
0.43
 
                         

On January 1, 2009, we adopted FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. Under the FSP, our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and, therefore, are included in the computation of earnings per share pursuant to the two-class method. Application of the standard had an insignificant effect.
(a)
At March 31, 2009, there were no potential shares included in our diluted EPS calculation because the effect would have been anti-dilutive. Further information about potential common shares is provided in Notes 23 and 24 of our 2008 Form 10-K.

 
Earnings-per-share amounts are computed independently for earnings from continuing operations, loss from discontinued operations and net earnings. As a result, the sum of per-share amounts from continuing operations and discontinued operations may not equal the total per-share amounts for net earnings.
 

 
(13)

 

8. INVESTMENT SECURITIES
 
The vast majority of our investment securities are classified as available-for-sale and comprise mainly investment-grade debt securities supporting obligations to annuitants and policyholders in our run-off insurance operations and holders of guaranteed investment contracts.
 
 
At
 
 
March 31, 2009
 
December 31, 2008
 
(In millions)
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair value