Page
Part I - Financial Information
Item 1. Financial Statements
Condensed Statement of Earnings
Three Months Ended June 30, 2005		3
Six Months Ended June 30, 2005		4
Condensed Statement of Financial Position		5
Condensed Statement of Cash Flows		6
Summary of Operating Segments		7
Notes to Condensed, Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		19
Item 4. Controls and Procedures		33
Part II - Other Information
Item 1. Legal Proceedings		33
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		34
Item 4. Submission of Matters to a Vote of Security Holders		35
Item 6. Exhibits		36
Signatures		37

 

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 often contain words such as “expects,”“anticipates,”“intends,”“plans,”“believes,”“seeks,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties arise from the behavior of financial markets, including fluctuations in interest rates and commodity prices; from future integration of acquired businesses; from future financial performance of major industries which we serve including, without limitation, the air and rail transportation, energy generation, media, real estate and healthcare industries; from unanticipated loss development in our insurance businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive and regulatory 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

 

Restatement

 

As described in our Annual Report on Form 10-K/A for the year ended December 31, 2004, we restated certain financial statements and other information, including such statements and information for each of the quarters of 2004, with respect to our accounting for certain derivatives transactions not qualifying for accounting purposes as hedges.

 

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Part I. Financial Information

 

Item 1. Financial Statements

 

 

General Electric Company and consolidated affiliates

 

	Three months ended June 30 (Unaudited)
	Consolidated						GE						Financial Services (GECS)
(In millions; per-share amounts in dollars)	2005			2004			2005			2004			2005			2004
Sales of goods	$	14,749		$	13,642		$	14,101		$	12,926		$	664		$	728
Sales of services		8,240			7,012			8,307			7,068			-			-
Other income		596			325			624			329			-			-
Earnings of GECS		-			-			2,299			1,523			-			-
GECS revenues from services		17,971			15,802			-			-			18,314			16,151
Total revenues		41,556			36,781			25,331			21,846			18,978			16,879
Cost of goods sold		11,425			10,749			10,812			10,060			628			701
Cost of services sold		5,171			4,376			5,238			4,432			-			-
Interest and other financial charges		3,897			2,784			336			49			3,714			2,851
Insurance losses and policyholder and
annuity benefits		3,696			3,743			-			-			3,747			3,808
Provision for losses on financing receivables		958			1,004			-			-			958			1,004
Other costs and expenses		10,092			9,486			3,266			2,989			6,994			6,669
Minority interest in net earnings of
consolidated affiliates		456			186			249			110			207			76
Total costs and expenses		35,695			32,328			19,901			17,640			16,248			15,109
Earnings before income taxes		5,861			4,453			5,430			4,206			2,730			1,770
Provision for income taxes		(1,214	)		(702	)		(783	)		(455	)		(431	)		(247	)
Net earnings	$	4,647		$	3,751		$	4,647		$	3,751		$	2,299		$	1,523
Per-share amounts
Diluted earnings per share	$	0.44		$	0.36
Basic earnings per share	$	0.44		$	0.36
Dividends declared per share	$	0.22		$	0.20

See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and GECS have been eliminated from the “Consolidated” columns.

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General Electric Company and consolidated affiliates

 

	Six months ended June 30 (Unaudited)
	Consolidated						GE						Financial Services (GECS)
(In millions; per-share amounts in dollars)	2005			2004			2005			2004			2005			2004
Sales of goods	$	28,405		$	25,406		$	27,089		$	24,181		$	1,338		$	1,304
Sales of services		15,989			12,358			16,152			12,493			-			-
Other income		913			462			954			468			-			-
Earnings of GECS		-			-			4,567			3,494			-			-
GECS revenues from services		35,975			32,147			-			-			36,621			32,760
Total revenues		81,282			70,373			48,762			40,636			37,959			34,064
Cost of goods sold		22,031			19,861			20,789			18,688			1,263			1,252
Cost of services sold		10,107			7,882			10,270			8,017			-			-
Interest and other financial charges		7,674			5,626			717			288			7,234			5,555
Insurance losses and policyholder
and annuity benefits		7,716			7,332			-			-			7,806			7,432
Provision for losses on financing receivables		1,860			1,959			-			-			1,860			1,959
Other costs and expenses		20,163			18,559			6,577			5,456			13,907			13,405
Minority interest in net earnings of
consolidated affiliates		771			270			435			148			336			122
Total costs and expenses		70,322			61,489			38,788			32,597			32,406			29,725
Earnings before income taxes		10,960			8,884			9,974			8,039			5,553			4,339
Provision for income taxes		(2,348	)		(1,767	)		(1,362	)		(922	)		(986	)		(845	)
Net earnings	$	8,612		$	7,117		$	8,612		$	7,117		$	4,567		$	3,494
Per-share amounts
Diluted earnings per share	$	0.81		$	0.69
Basic earnings per share	$	0.81		$	0.69
Dividends declared per share	$	0.44		$	0.40

See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and GECS have been eliminated from the “Consolidated” columns.

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General Electric Company and consolidated affiliates

 

	Consolidated						GE						Financial Services (GECS)
(In millions; except share amounts)	6/30/05			12/31/04			6/30/05			12/31/04			6/30/05			12/31/04
Cash and equivalents	$	12,894		$	15,328		$	1,698		$	3,155		$	11,386		$	12,367
Investment securities		133,952			135,536			396			413			133,578			135,152
Current receivables		13,015			14,233			13,196			14,533			-			-
Inventories		10,501			9,778			10,282			9,589			219			189
Financing receivables - net		276,041			282,699			-			-			276,041			282,699
Insurance receivables - net		24,553			25,709			-			-			24,798			25,971
Other GECS receivables		12,709			10,771			-			-			16,595			14,134
Property, plant and equipment (including
equipment leased to others) - net		64,774			63,334			16,232			16,756			48,542			46,578
Investment in GECS		-			-			55,713			54,292			-			-
Intangible assets - net		85,477			83,240			57,338			54,720			28,139			28,520
All other assets		106,446			109,879			34,964			38,123			72,570			72,894
Total assets	$	740,362		$	750,507		$	189,819		$	191,581		$	611,868		$	618,504
Short-term borrowings	$	145,870		$	157,694		$	3,910		$	3,409		$	142,407		$	154,791
Accounts payable, principally trade accounts		22,754			24,729			9,690			11,013			16,554			17,104
Progress collections and price adjustments accrued		4,054			3,937			4,054			3,937			-			-
Other GE current liabilities		20,006			19,868			19,984			19,898			-			-
Long-term borrowings		219,609			212,670			7,513			7,625			212,998			206,008
Insurance liabilities, reserves and annuity benefits		135,996			140,585			-			-			136,342			140,902
All other liabilities		45,655			49,051			22,419			23,561			23,685			25,572
Deferred income taxes		16,832			14,769			4,021			3,616			12,811			11,153
Total liabilities		610,776			623,303			71,591			73,059			544,797			555,530
Minority interest in equity of consolidated affiliates		17,202			16,383			5,844			7,701			11,358			8,682
Common stock (10,600,811,000 and 10,586,358,000
shares outstanding at June 2005 and
December 2004, respectively)		669			669			669			669			1			1
Accumulated gains (losses) - net
Investment securities		2,944			2,268			2,944			2,268			2,927			2,345
Currency translation adjustments		3,177			6,850			3,177			6,850			2,846			5,104
Cash flow hedges		(1,025	)		(1,223	)		(1,025	)		(1,223	)		(997	)		(1,354	)
Minimum pension liabilities		(633	)		(657	)		(633	)		(657	)		(161	)		(150	)
Other capital		24,855			24,265			24,855			24,265			12,393			12,370
Retained earnings		95,343			91,411			95,343			91,411			38,704			35,976
Less common stock held in treasury		(12,946	)		(12,762	)		(12,946	)		(12,762	)		-			-
Total shareowners’ equity		112,384			110,821			112,384			110,821			55,713			54,292
Total liabilities and equity	$	740,362		$	750,507		$	189,819		$	191,581		$	611,868		$	618,504

The sum of accumulated gains (losses) on investment securities, currency translation adjustments, cash flow hedges and minimum pension liabilities constitutes “Accumulated nonowner changes other than earnings,” and was $4,463 million and $7,238 million at June 30, 2005 and December 31, 2004, respectively.

See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” June 30, 2005, is unaudited. Transactions between GE and GECS have been eliminated from the “Consolidated” columns.

 

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General Electric Company and consolidated affiliates

 

	Six months ended June 30 (Unaudited)
	Consolidated						GE						Financial Services (GECS)
(In millions)	2005			2004			2005			2004			2005			2004
Cash flows - operating activities
Net earnings	$	8,612		$	7,117		$	8,612		$	7,117		$	4,567		$	3,494
Adjustments to reconcile net earnings to cash
provided from operating activities
Depreciation and amortization of
property, plant and equipment		4,282			4,054			1,225			1,172			3,057			2,882
Earnings retained by GECS		-			-			(2,728	)		(1,652	)		-			-
Deferred income taxes		474			(1,731	)		(87	)		(189	)		561			(1,542	)
Decrease in GE current receivables		1,544			797			1,663			883			-			-
Decrease (increase) in inventories		(613	)		(259	)		(583	)		(284	)		(30	)		25
Increase (decrease) in accounts payable		(2,115	)		2,892			(1,228	)		127			(785	)		3,078
Increase (decrease) in GE progress collections		110			(710	)		110			(710	)		-			-
Increase in insurance liabilities, reserves
and annuity benefits		474			1,930			-			-			474			1,930
Provision for losses on financing receivables		1,860			1,959			-			-			1,860			1,959
All other operating activities		900			954			1,043			353			409			1,307
Cash from operating activities		15,528			17,003			8,027			6,817			10,113			13,133
Cash flows - investing activities
Additions to property, plant and equipment		(6,156	)		(6,281	)		(1,049	)		(849	)		(5,107	)		(5,432	)
Net decrease in GECS financing receivables		4,249			1,958			-			-			4,249			1,958
Payments for principal businesses purchased		(10,341	)		(18,926	)		(3,499	)		(3,442	)		(6,842	)		(15,484	)
All other investing activities		4,235			4,633			687			387			2,918			3,171
Cash used for investing activities		(8,013	)		(18,616	)		(3,861	)		(3,904	)		(4,782	)		(15,787	)
Cash flows - financing activities
Increase (decrease) in borrowings
(maturities 90 days or less)		(5,667	)		(3,639	)		48			(1,374	)		(5,801	)		(2,013	)
Newly issued debt (maturities longer than 90 days)		40,501			28,402			87			138			40,353			28,241
Repayments and other reductions (maturities
longer than 90 days)		(38,191	)		(24,178	)		(692	)		(462	)		(37,499	)		(23,716	)
Net dispositions (purchases) of GE treasury shares		(389	)		3,963			(389	)		3,963			-			-
Dividends paid to shareowners		(4,677	)		(4,040	)		(4,677	)		(4,040	)		(1,839	)		(1,842	)
All other financing activities		(1,526	)		(1,294	)		-			-			(1,526	)		(1,294	)
Cash used for financing activities		(9,949	)		(786	)		(5,623	)		(1,775	)		(6,312	)		(624	)
Increase (decrease) in cash and equivalents		(2,434	)		(2,399	)		(1,457	)		1,138			(981	)		(3,278	)
Cash and equivalents at beginning of year		15,328			12,664			3,155			1,670			12,367			11,273
Cash and equivalents at June 30	$	12,894		$	10,265		$	1,698		$	2,808		$	11,386		$	7,995

See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and Financial Services (GECS) have been eliminated from the “Consolidated” columns.

 

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General Electric Company and consolidated affiliates

 

	Three months ended June 30 (Unaudited)						Six months ended June 30 (Unaudited)
(In millions)	2005			2004			2005			2004
Revenues
Advanced Materials	$	2,253		$	2,048		$	4,480		$	3,933
Commercial Finance		6,068			5,732			12,108			11,123
Consumer Finance		4,928			3,830			9,617			7,419
Consumer & Industrial		3,576			3,490			6,837			6,587
Energy		4,537			4,118			9,039			7,983
Equipment & Other Services		1,975			1,763			3,894			4,015
Healthcare		3,768			3,372			7,089			5,867
Infrastructure		1,232			862			2,197			1,638
Insurance		6,007			5,554			12,340			11,507
NBC Universal		3,858			2,867			7,459			4,449
Transportation		4,244			3,903			7,977			7,308
Corporate items and eliminations		(890	)		(758	)		(1,755	)		(1,456	)
Consolidated revenues	$	41,556		$	36,781		$	81,282		$	70,373
Segment profit(a)
Advanced Materials	$	258		$	161		$	533		$	332
Commercial Finance		1,215			975			2,366			1,930
Consumer Finance		735			600			1,470			1,202
Consumer & Industrial		227			204			392			353
Energy		698			634			1,295			1,284
Equipment & Other Services		65			(105	)		64			(101	)
Healthcare		672			584			1,081			923
Infrastructure		168			134			315			247
Insurance		284			53			667			463
NBC Universal		979			768			1,688			1,162
Transportation		898			810			1,642			1,447
Total segment profit		6,199			4,818			11,513			9,242
GE corporate items and eliminations		(433	)		(563	)		(822	)		(915	)
GE interest and other financial charges		(336	)		(49	)		(717	)		(288	)
GE provision for income taxes		(783	)		(455	)		(1,362	)		(922	)
Consolidated net earnings	$	4,647		$	3,751		$	8,612		$	7,117

(a)

Segment profit always excludes the effects of principal pension plans 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; certain gains and losses from 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 segment income taxes according to how a particular segment’s management is measured - excluded in determining operating profit for Advanced Materials, Consumer & Industrial, Energy, Healthcare, Infrastructure, NBC Universal and Transportation, but included in determining segment profit, which we refer to as “segment net earnings,” for Commercial Finance, Consumer Finance, Equipment & Other Services and Insurance.

As of July 5, 2005, our 11 businesses were reorganized into six businesses. Results in this Form 10-Q are reported according to the 11-business organization that was in effect during the periods presented.

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1. The accompanying condensed, consolidated quarterly 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 included in the Annual Report on Form 10-K/A for the year ended December 31, 2004. That note discusses consolidation and financial statement presentation. As used in this report on Form 10-Q (Report) and in the Annual Report on Form 10-K/A, “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. We reclassified certain prior-period amounts to conform to the current period’s presentation. One such reclassification related to GECS financings for sales and leases of GE-manufactured equipment. To reflect actual collections of consolidated cash from third parties for such transactions, consolidated cash from operating activities (CCFOA) and consolidated cash used for investing activities (CCUIA) for the six months ended June 30, 2004, are consistent with the classification of such items adopted in the fourth quarter of 2004 and reflected in our 2004 Annual Report on Form 10-K/A. In the first six months of 2004, GECS financed $760 million of GE equipment and collected $410 million on such financings; consequently, we reduced both previously reported CCFOA and CCUIA for the first six months of 2004 by $350 million.

 

As described in our Annual Report on Form 10-K/A for the year ended December 31, 2004, we restated certain financial statements and other information, including such statements and information for each of the quarters of 2004, with respect to our accounting for certain derivatives transactions not qualifying for accounting purposes as hedges.

 

2. The condensed, consolidated quarterly 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. 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.

 

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3. GECS revenues from services are summarized in the following table.

 

	Three months ended June 30						Six months ended June 30
(In millions)	2005			2004			2005			2004
Interest on time sales and loans	$	5,346		$	4,282		$	10,318		$	8,560
Premiums earned by insurance businesses		3,986			4,218			7,974			8,467
Operating lease rentals		2,799			2,584			5,556			5,069
Investment income		1,826			1,666			3,883			3,117
Financing leases		1,035			1,074			2,068			2,180
Fees		1,003			792			1,877			1,662
Other income(a)		2,319			1,535			4,945			3,705
Total(b)	$	18,314		$	16,151		$	36,621		$	32,760

(a)

Included the gain on Genworth Financial, Inc. (Genworth) secondary public offering and repurchase of $163 million for the six months ended June 30, 2005, and the loss on the Genworth initial public offering of $388 million for the three and six months ended June 30, 2004.

(b)

Included $222 million and $563 million related to consolidated, liquidating securitization entities for the three months ended June 30, 2005 and 2004, respectively, and $729 million and $732 million for the six months ended June 30, 2005 and 2004, respectively. Of that total, the amount related to Australian Financial Investments Group (AFIG), a December 2004 acquisition, was $216 million and $373 million in the three and six months ended June 30, 2005, respectively.

 

4. 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 included 34 U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million. The effect on operations of the pension and retiree benefit plans follows.

 

	Principal Pension Plans
	Three months ended June 30						Six months ended June 30
(In millions)	2005			2004			2005			2004
Expected return on plan assets	$	(970	)	$	(989	)	$	(1,940	)	$	(1,978	)
Service cost for benefits earned		325			317			650			650
Interest cost on benefit obligation		563			549			1,120			1,098
Prior service cost		62			110			124			177
Net actuarial loss recognized		90			35			171			69
Principal pension plans cost	$	70		$	22		$	125		$	16

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	Other Pension Plans
	Three months ended June 30						Six months ended June 30
(In millions)	2005			2004			2005			2004
Expected return on plan assets	$	(90	)	$	(75	)	$	(180	)	$	(150	)
Service cost for benefits earned		71			65			146			130
Interest cost on benefit obligation		92			79			185			158
Prior service cost		2			2			4			4
Net actuarial loss recognized		26			14			57			28
Other pension plans cost	$	101		$	85		$	212		$	170
	Principal Retiree Health and Life Insurance Plans
	Three months ended June 30						Six months ended June 30
(In millions)	2005			2004			2005			2004
Expected return on plan assets	$	(35	)	$	(37	)	$	(69	)	$	(74	)
Service cost for benefits earned		54			64			107			130
Interest cost on benefit obligation		127			127			253			266
Prior service cost		74			74			149			149
Net actuarial loss recognized		18			11			36			36
Principal retiree benefit plans cost	$	238		$	239		$	476		$	507

 

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5. GE’s authorized common stock consists of 13,200,000,000 shares, each having a par value of $0.06. Information related to the calculation of earnings per share follows.

 

	Three months ended June 30
	2005						2004
(In millions; per-share amounts in dollars)	Diluted			Basic			Diluted			Basic
Consolidated operations
Net earnings available for per-share calculation(a)	$	4,645		$	4,647		$	3,751		$	3,751
Average equivalent shares
Shares of GE common stock outstanding		10,604			10,604			10,387			10,387
Employee compensation-related shares,
including stock options		46			-			44			-
Total average equivalent shares		10,650			10,604			10,431			10,387
Per-share amounts
Net earnings	$	0.44			0.44			0.36			0.36
	Six months ended June 30
	2005						2004
(In millions; per-share amounts in dollars)	Diluted			Basic			Diluted			Basic
Consolidated operations
Net earnings available for per-share calculation(b)	$	8,608		$	8,612		$	7,117		$	7,117
Average equivalent shares
Shares of GE common stock outstanding		10,599			10,599			10,279			10,279
Employee compensation-related shares,
including stock options		45			-			46			-
Total average equivalent shares		10,644			10,599			10,325			10,279
Per-share amounts
Net earnings	$	0.81		$	0.81		$	0.69		$	0.69

(a)	Includes dividend equivalents and dilutive effects of subsidiary-issued stock-based awards of $2 million in 2005 and an inconsequential amount in 2004.
(b)	Includes dividend equivalents and dilutive effects of subsidiary-issued stock-based awards of $4 million in 2005 and an inconsequential amount in 2004.

 

(11)

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6. Inventories consisted of the following.

 

	At
(In millions)	6/30/05			12/31/04
Raw materials and work in process	$	5,508		$	5,042
Finished goods		5,432			4,995
Unbilled shipments		224			402
Revaluation to LIFO		(663	)		(661	)
Total	$	10,501		$	9,778

 

7. GECS financing receivables - net, consisted of the following.

 

	At
(In millions)	6/30/05			12/31/04
Time sales and loans, net of deferred income	$	216,426		$	220,593
Investment in financing leases, net of deferred income		64,653			67,754
		281,079			288,347
Less allowance for losses		(5,038	)		(5,648	)
Financing receivables - net	$	276,041		$	282,699

 

Included in the above are the financing receivables of consolidated, liquidating securitization entities as follows:

 

	At
(In millions)	6/30/05			12/31/04
Time sales and loans, net of deferred income	$	18,059		$	20,728
Investment in financing leases, net of deferred income		1,431			2,125
		19,490			22,853
Less allowance for losses		(5	)		(5	)
Financing receivables - net	$	19,485		$	22,848

 

8. Property, plant and equipment (including equipment leased to others) - net, consisted of the following.

 

	At
(In millions)	6/30/05			12/31/04
Original cost	$	107,844		$	106,355
Less accumulated depreciation and amortization		(43,070	)		(43,021	)
Property, plant and equipment - net	$	64,774		$	63,334

 

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9. Intangible assets - net, consisted of the following.

 

	At
(In millions)	6/30/05			12/31/04
Goodwill	$	72,645		$	71,191
Capitalized software		2,656			2,652
Present value of future profits (PVFP)		1,389			1,426
Other intangibles		8,787			7,971
Total	$	85,477		$	83,240

 

Intangible assets were net of accumulated amortization of $13,716 million at June 30, 2005, and $16,974 million at December 31, 2004.

 

Changes in goodwill balances, net of accumulated amortization, follow.

 

(In millions)	Balance 1/1/05			Acquisitions/ purchase accounting adjustments					Currency exchange, dispositions and other				Balance 6/30/05
Advanced Materials	$	2,850			$	10			$	(77	)		$	2,783
Commercial Finance		10,271				362				(142	)			10,491
Consumer Finance		9,860				(122	)			(426	)			9,312
Consumer & Industrial		779				-				(33	)			746
Energy		4,556				56				(212	)			4,400
Equipment & Other Services		1,459				(3	)			(43	)			1,413
Healthcare		13,259				219				(59	)			13,419
Infrastructure		4,414				1,744				(75	)			6,083
Insurance		3,826				(49	)			(221	)			3,556
NBC Universal		16,672				539				-				17,211
Transportation		3,245				15				(29	)			3,231
Total	$	71,191			$	2,771			$	(1,317	)		$	72,645

 

The amount of goodwill related to new acquisitions recorded during the first six months of 2005 was $2,653 million, the largest of which were the following:

 

•	Infrastructure acquired Edwards Systems Technology ($1,036 million) and Ionics, Inc. ($599 million).

 

•	Commercial Finance acquired the Transportation Financial Services Group of CitiCapital ($230 million) and the Inventory Finance division of Bombardier Capital ($171 million).

 

•	NBC Universal acquired the previously outstanding minority interest in Vivendi Universal Entertainment LLLP (VUE) ($358 million).

 

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Upon closing an acquisition, we estimate the fair values of assets and liabilities acquired and consolidate the acquisition as quickly as possible. Given the time it takes to obtain pertinent information to finalize the acquired company’s balance sheet (frequently with implications for the price of the acquisition), then to adjust the acquired company’s accounting policies, procedures, books and records to our standards, it is often several quarters before we are able to finalize those initial fair value estimates. Accordingly, subsequent revisions to our initial estimates are not uncommon. During the first six months of 2005, we increased goodwill associated with previous acquisitions by $118 million; the largest such adjustments were increases associated with the 2004 acquisition of Amersham plc (Amersham) by Healthcare ($250 million) and the 2004 combination of NBC with VUE ($128 million), partially offset by a $300 million decrease at GECS, the largest such adjustment was associated with the December 2004 acquisition of Australian Financial Investments Group (AFIG) by Consumer Finance.

 

Intangibles Subject to Amortization

 

	At
	6/30/05											12/31/04
(In millions)	Gross carrying amount			Accumulated amortization					Net			Gross carrying amount			Accumulated amortization					Net
Patents, licenses and other	$	7,065			$	(1,362	)		$	5,703		$	6,366			$	(1,131	)		$	5,235
Capitalized software		5,820				(3,164	)			2,656			5,466				(2,814	)			2,652
PVFP		3,322				(1,933	)			1,389			3,382				(1,956	)			1,426
Acquired intangible assets
and all other		1,688				(654	)			1,034			4,739				(4,037	)			702
Total	$	17,895			$	(7,113	)		$	10,782		$	19,953			$	(9,938	)		$	10,015

 

Indefinite-lived intangible assets were $2,050 million and $2,034 million at June 30, 2005 and December 31, 2004, respectively, and comprised trademarks, tradenames and U.S. Federal Communication Commission licenses.

 

Consolidated amortization expense related to intangible assets subject to amortization was $416 million for the quarters ended June 30, 2005 and 2004. Consolidated amortization expense related to intangible assets subject to amortization for the six months ended June 30, 2005 and 2004, was $836 million and $759 million, respectively.

 

Changes in PVFP balances follow.

 

	Six months ended June 30
(In millions)	2005			2004
Balance at January 1	$	1,426		$	1,562
Accrued interest (a)		42			47
Amortization		(91	)		(115	)
Other		12			82
Balance at June 30	$	1,389		$	1,576

(a)	Interest was accrued at a rate of 6.5% and 6.1% for the six months ended June 30, 2005 and 2004, respectively.

 

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We evaluate recoverability of PVFP periodically by comparing the current estimate of the present value of expected future gross profits with the unamortized asset balance. If such comparison indicates that the expected gross profits will not be sufficient to recover PVFP, the difference is charged to expense. No such expense was recorded in the six months ended June 30, 2005 or 2004.

 

Amortization expense for PVFP in future periods will be affected by acquisitions, realized capital gains and losses or other factors affecting the ultimate amount of gross profits realized from certain lines of business. Similarly, future amortization expense for other intangibles will depend on acquisition activity and other business transactions.

 

The estimated percentage of the December 31, 2004, net PVFP balance to be amortized over each of the next five years follows.

 

2005		2006		2007		2008		2009
8.9	%	8.3	%	7.2	%	6.3	%	5.3	%

 

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10. GECS borrowings are summarized in the following table.

 

	At
(In millions)	6/30/05			12/31/04
Short-term borrowings
Commercial paper
U.S.
Unsecured	$	62,244		$	62,694
Asset-backed(a)		11,326			13,842
Non-U.S.		20,350			20,835
Current portion of long-term debt(b)		31,130			37,530
Other		17,357			19,890
Total		142,407			154,791
Long-term borrowings
Senior notes
Unsecured		189,278			179,692
Asset-backed(c)		8,442			10,939
Extendible notes(d)		14,206			14,258
Subordinated notes(e)		1,072			1,119
Total		212,998			206,008
Total borrowings	$	355,405		$	360,799

(a)	Entirely obligations of consolidated, liquidating securitization entities. See note 13.
(b)	Included short-term borrowings by consolidated, liquidating securitization entities of $829 million and $756 million at June 30, 2005, and December 31, 2004, respectively.
(c)	Entirely obligations of consolidated, liquidating securitization entities as discussed in note 13. The amount related to AFIG, a December 2004 acquisition, was $7,911 million and $9,769 million at June 30, 2005, and December 31, 2004, respectively.
(d)	Included obligations of consolidated, liquidating securitization entities in the amount of $223 million and $267 million at June 30, 2005, and December 31, 2004, respectively.
(e)	At June 30, 2005, and December 31, 2004, $1.0 billion of subordinated notes, issued between 1991 and 1995, were guaranteed by General Electric Company.

 

11. A summary of increases (decreases) in shareowners’ equity that did not result directly from transactions with shareowners, net of income taxes, follows.

 

	Three months ended June 30						Six months ended June 30
(In millions)	2005			2004			2005			2004
Net earnings	$	4,647		$	3,751		$	8,612		$	7,117
Investment securities - net changes in value		1,496			(3,302	)		676			(1,634	)
Currency translation adjustments - net		(3,734	)		(265	)		(3,673	)		(339	)
Cash flow hedges - net changes in value		(431	)		573			198			576
Minimum pension liability - net		11			(3	)		24			(4	)
Total	$	1,989		$	754		$	5,837		$	5,716

 

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12. In 2002, we adopted the stock option expense provisions of SFAS 123, Accounting for Stock Based Compensation, for stock options using the prospective method of transition. A comparison of as reported and pro-forma net earnings, including effects of expensing stock options, follows.

 

	Three months ended June 30						Six months ended June 30
(In millions; per-share amounts in dollars)	2005			2004			2005			2004
Net earnings, as reported	$	4,647		$	3,751		$	8,612		$	7,117
Earnings per share, as reported
Diluted		0.44			0.36			0.81			0.69
Basic		0.44			0.36			0.81			0.69
Stock option expense included in net earnings		21			26			58			45
Total stock option expense		36			64			100			121
Pro-Forma Effects
Net earnings, on pro-forma basis		4,631			3,713			8,569			7,041
Earnings per share, on pro-forma basis
Diluted		0.43			0.36			0.81			0.68
Basic		0.44			0.36			0.81			0.68

 

13. Securitized assets that are reported in our condensed financial statements are held by securitization-related special purpose entities that were consolidated in accordance with Financial Accounting Standards Board (FASB) Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities, as amended. Although we do not control these entities, we consolidated them because we provided a majority of their credit and liquidity support. A majority of these entities were established to issue securities backed by assets that were sold by us and by third parties. These entities differ from others included in our consolidated financial statements because the assets they hold are legally isolated and are unavailable to us under any circumstances. Repayment of their liabilities depends primarily on cash flows generated by their assets. Because we have ceased transferring assets to these entities, balances will decrease as the assets repay. We refer to these entities as “consolidated, liquidating securitization entities.”

 

In December 2004, we acquired AFIG. Before the acquisition, AFIG had established entities to securitize residential real estate mortgages, its primary assets. These entities are required to be consolidated under U.S. generally accepted accounting principles. Similar to consolidated, liquidating securitization entities, no new assets have been transferred post acquisition, and we intend to run off these assets. Because these entities have characteristics similar to those we consolidated when we adopted FIN 46, they are included in the following disclosures about securitization entities.

 

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The following table represents assets in securitization entities, both consolidated and off-balance sheet.

 

	At
(In millions)	6/30/05			12/31/04
Receivables secured by:
Equipment	$	12,251		$	13,941
Commercial real estate		14,450			15,747
Residential real estate - AFIG		7,804			9,094
Other assets		12,006			11,723
Credit card receivables		8,711			7,075
GE trade receivables		3,716			3,582
Total securitized assets	$	58,938		$	61,162

 

	At
(In millions)	6/30/05			12/31/04
Off-balance sheet(a)(b)	$	36,056		$	34,417
On-balance sheet - AFIG		7,804			9,094
On-balance sheet - other(c)		15,078			17,651
Total securitized assets	$	58,938		$	61,162

(a)	At June 30, 2005 and December 31, 2004, liquidity support amounted to $1,800 million and $2,300 million, respectively. These amounts are net of $4,000 million and $4,300 million, respectively, participated or deferred beyond one year. Credit support amounted to $5,900 million and $6,600 million at June 30, 2005 and December 31, 2004, respectively.
(b)	Liabilities for recourse obligations related to off-balance sheet assets were $0.1 billion at both June 30, 2005 and December 31, 2004.
(c)	At June 30, 2005 and December 31, 2004, liquidity support amounted to $12,100 million and $14,400 million, respectively. These amounts are net of $600 million and $1,200 million, respectively, participated or deferred beyond one year. Credit support amounted to $5,700 million and $6,900 million at June 30, 2005 and December 31, 2004, respectively.

 

The portfolio of financing receivables consisted of loans and financing lease receivables secured by equipment, commercial and residential real estate and other assets; and credit card receivables. Examples of these assets include loans and leases on manufacturing and transportation equipment, loans on commercial property, commercial loans, and balances of high credit quality accounts from sales of a broad range of products and services to a diversified customer base.

 

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Assets in consolidated, liquidating securitization entities are shown in the following captions in the Condensed Statement of Financial Position.

 

	At
(In millions)	6/30/05			12/31/04
Investment securities	$	902		$	1,147
Financing receivables - net (note 7) (a)		19,485			22,848
Other assets		2,187			2,408
Other, principally insurance receivables		308			342
Total	$	22,882		$	26,745

(a)	Included $7,804 million and $9,094 million related to AFIG, a December 2004 acquisition, at June 30, 2005 and December 31, 2004, respectively.

 

14. In May 2004, we completed an initial public offering of Genworth Financial, Inc. (Genworth), our formerly wholly-owned subsidiary that conducts most of our consumer insurance business, including life and mortgage insurance operations. In March 2005, we completed a secondary public offering of 80.5 million shares of Class A Common Stock and, concurrently, Genworth repurchased directly from us approximately 19.4 million shares of Genworth Class B Common Stock. These 2005 transactions resulted in a pre-tax gain of $156 million ($86 million after tax) recognized in the Insurance segment and reduced our ownership in Genworth to 51.7%.

 

15. In the second quarter of 2005, we unwound our relationship with IAC/InterActiveCorp. (IAC), acquiring IAC’s preferred and common stock interests in VUE, a subsidiary of NBC Universal. Acquisition of the preferred interests resulted in a pre-tax gain of $260 million ($127 million after tax). Acquisition of the 5.44% minority common stock interest resulted in $358 million of additional goodwill.

 

16. During the second quarter of 2005, we announced plans to reorganize our 11 businesses into six industry-focused businesses: GE Infrastructure; GE Industrial; GE Commercial Financial Services; NBC Universal; GE Healthcare; and GE Consumer Finance - effective July 5. Results in this Form 10-Q are reported according to the 11-business organization that was in effect during the periods presented. We expect to file a Form 8-K, in which we will present prior-period segment results on the new organizational basis, during the third quarter.

 

 

 

General Electric Company’s consolidated financial statements represent the combination of the industrial manufacturing and product services businesses of General Electric Company (GE) and the financial services businesses of General Electric Capital Services, Inc. (GECS or financial services).

 

In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial information but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). Certain of these data are considered “non-GAAP financial measures” under U.S. Securities and Exchange Commission (SEC) rules; those rules require the supplemental explanations and reconciliations provided in Exhibit 99 to this report on Form 10-Q.

 

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Restatement

 

As described in our Annual Report on Form 10-K/A for the year ended December 31, 2004, we restated certain financial statements and other information, including such statements and information for each of the quarters of 2004, with respect to our accounting for certain derivatives transactions not qualifying for accounting purposes as hedges.

 

A. Results of Operations

 

Overview

 

General Electric Company net earnings increased 24% to $4.647 billion, or $0.44 per share, in the second quarter of 2005, compared with $3.751 billion ($0.36 per share) in the second quarter of 2004. Our second quarter 2005 results reflected the portfolio changes made in the last two years and the continued benefits of our diversification and growth initiatives. It was a strong quarter with all 11 of our businesses reporting at least double-digit earnings growth.

 

For the first half of 2005, net earnings rose 21% to $8.612 billion and net earnings per share increased to $0.81, compared with last year’s $0.69.

 

Revenues of $41.6 billion in the second quarter of 2005 were 13% higher than in the corresponding quarter of 2004. Organic revenues - which exclude the effects of acquisitions, dispositions and changes in currency exchange rates, as well as the Insurance segment - increased 8%. Industrial sales increased 12% to $22.4 billion, reflecting the combined effects of the second quarter 2004 combination of NBC with Vivendi Universal Entertainment LLLP (VUE), the acquisitions of Amersham plc (Amersham) and other businesses, and organic growth. Sales of product services (including sales of spare parts and related services) grew 10% to $6.9 billion in the second quarter. Financial services revenues of $19.0 billion were up $2.1 billion or 12% over last year and included $0.8 billion and $0.2 billion of revenue from acquisitions and dispositions, respectively, for the second quarter of 2005. Revenues were reduced by $0.3 billion in the second quarter of 2004 for effects of certain derivatives transactions not qualifying for accounting purposes as hedges. Financial services revenues also increased as a result of organic revenue growth and the weaker U.S. dollar.

 

Revenues for the first six months of 2005 rose 16% to $81.3 billion, compared with $70.4 billion last year. Industrial sales of $43.2 billion were 18% higher than in 2004 primarily reflecting the effects of recent acquisitions ($5.7 billion) and a stronger economy, partially offset by dispositions ($0.7 billion). Financial services revenues for the first six months of 2005 were $38.0 billion, a $3.9 billion, or 11%, increase over the first six months of 2004. Revenues included $1.8 billion and $0.3 billion of revenue from acquisitions for the first six months of 2005 and 2004, respectively, and $0.2 billion in 2005 from the effects of dispositions. Revenues were reduced by $0.1 billion for the first six months of 2005 for effects of certain derivatives transactions not qualifying for accounting purposes as hedges. Revenues also increased as a result of organic revenue growth and the weaker U.S. dollar.

 

During the first half of 2005, we reduced our ownership of Genworth Financial, Inc. (Genworth) to 51.7%, and we used the proceeds to eliminate parent-supported debt at GE Capital. As a result, GECS increased its dividend from 10% to 40% of year-to-date earnings in the second quarter. As we indicated in May 2005, we expect (subject to market conditions) to reduce our ownership in Genworth over the next two years as it transitions to full independence.

 

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Total orders for the quarter increased 13% over second quarter of 2004 and backlog for major equipment orders rose 15% to $23 billion. In addition, global revenues increased 20%. We believe that our diversified portfolio is strategically positioned and performing well.

 

We integrate acquisitions as quickly as possible and only revenues and earnings from the date we complete the acquisition through the end of the fourth following quarter are attributed to such businesses.

 

Effects of the acquisitions and dispositions on comparisons of our operations follow.

 

	Three months ended June 30						Six months ended June 30
(In billions)	2005			2004			2005			2004
Acquisitions
Revenues	$	3.7		$	2.9		$	7.5		$	4.4
Net earnings		0.3			0.2	(a)		0.7			0.4	(a)
Dispositions
Revenues		(0.2	)		(1.0	)		(0.4	)		(2.0	)
Net earnings		0.3			(0.2	)		0.2			(0.3	)

(a)	Before corporate costs of $0.2 billion related to the write off of in-process research and development projects and other transitional costs associated with the acquisition of Amersham.

 

Segment Analysis

 

The following discussion compares revenues and segment profit by operating segment for the three and six months ended June 30, 2005 and 2004. We have reclassified certain prior-period amounts to conform to the current period’s presentation.

 

Segment profit always excludes the effects of principal pension plans 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; certain gains/losses from dispositions; and litigation settlements or other charges, responsibility for which preceded the current management team. Segment profit includes or excludes interest and other financial charges and segment income taxes according to how segment management is measured - excluded in determining operating profit for Advanced Materials, Consumer & Industrial, Energy, Healthcare, Infrastructure, NBC Universal and Transportation, but included in determining segment profit, which we refer to as “segment net earnings,” for Commercial Finance, Consumer Finance, Equipment & Other Services and Insurance.

 

 

Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that our disclosure controls and procedures were effective as of June 30, 2005. Other than the remedial actions taken to address the material weakness in our internal control over financial reporting with respect to accounting for certain derivatives transactions, no change in internal control over financial reporting occurred during the quarter ended June 30, 2005, that materially affected, or is reasonably likely to materially affect, such internal control over financial reporting. Such actions were disclosed in the Form 10-Q for the quarter ended March 31, 2005, and included:

 

•

improving training, education and accounting reviews designed to ensure that all relevant personnel involved in derivatives transactions understand and apply hedge accounting in compliance with Statement of Financial Accounting Standards (SFAS) 133, Accounting for Derivative Instruments and Hedging Activities, as amended; and

 

•	retesting our internal financial controls with respect to the types of hedging transactions affected by the restatement to ensure compliance with SFAS 133.

 

 

 

 

 

On June 14, 2005, the Company received a subpoena from the U.S. Attorney’s Office for the Southern District of New York seeking documents relating to finite risk insurance. The subpoena is general in nature. As previously reported, GE Insurance Solutions, one of GE’s businesses, received a similar subpoena from the Northeast Regional Office of the Securities and Exchange Commission (SEC) on April 29, 2005. The Company will cooperate fully with the SEC and the U.S. Attorney’s Office.

 

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Period(a)		Total number of shares purchased(b)				Average price paid per share				Total number of shares purchased as part of our share repurchase program(c)				Approximate dollar value of shares that may yet be purchased under our share repurchase program
(Shares in thousands)
2005
April			13,578				$36.04				5,100
May			14,827				$36.65				4,763
June			8,138				$35.80				7,363
Total			36,543				$36.24				17,226				$14.3 billion

(a)	Information is presented on a fiscal calendar basis, consistent with our quarterly financial reporting.
(b)	This category includes 19,317 shares repurchased from our various benefit plans, primarily the GE Savings and Security Program (the S&SP). Through the S&SP, a defined contribution plan with Internal Revenue Service Code 401(k) features, we repurchase shares resulting from changes in investment options by plan participants.
(c)	This balance represents the number of shares repurchased through the 2004 GE Share Repurchase Program (the Program) under which we are authorized to repurchase up to $15 billion of our common stock through 2007. The Program is flexible and shares are acquired with a combination of borrowings and free cash flow from the public markets and other sources, including GE Stock Direct, a stock purchase plan that is available to the public. As major acquisitions or other circumstances warrant, we will modify the frequency and amount of share repurchases under the Program.

 

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(a)	The annual meeting of Shareowners of General Electric Company was held on April 27, 2005.
(b)	All director nominees were elected.
(c)	Certain matters voted upon at the meeting and the votes cast with respect to such matters are as follows:
Proposals and Vote Tabulations
		Votes Cast						Broker
		For		Against		Abstain		Non-votes
Management Proposals
Ratification of selection of independent
auditors for 2005		8,801,815,088		142,716,733		80,173,408		-
Shareowner Proposals
(1)	Relating to cumulative voting	1,349,597,407		5,503,899,813		133,378,106		2,037,829,903
(2)	Relating to nuclear risk	495,104,666		5,915,857,041		575,913,619		2,037,829,903
(3)	Relating to PCB cleanup costs	1,773,930,595		4,682,266,676		530,678,055		2,037,829,903
(4)	Relating to over-extended directors	1,921,346,022		4,927,147,645		138,381,659		2,037,829,903
(5)	Relating to sustainability	501,819,761		5,838,521,251		646,534,314		2,037,829,903
(6)	Relating to political contributions	678,250,420		5,752,024,702		556,600,204		2,037,829,903
(7)	Relating to animal testing	206,962,682		6,132,280,551		647,632,093		2,037,829,903
Election of Directors
Director						Votes Received		Votes Withheld
James I. Cash, Jr.						8,852,010,056		172,695,173
William M. Castell						8,801,679,737		223,025,492
Dennis D. Dammerman						8,801,509,856		223,195,373
Ann M. Fudge						8,855,854,691		168,850,538
Claudio X. Gonzalez						7,443,060,958		1,581,644,271
Jeffrey R. Immelt						8,805,173,608		219,531,621
Andrea Jung						8,870,118,746		154,586,483
Alan G. Lafley						8,684,310,039		340,395,190
Ralph S. Larsen						8,861,370,537		163,334,692
Rochelle B. Lazarus						8,871,112,263		153,592,966
Sam Nunn						8,563,402,795		461,302,434
Roger S. Penske						8,623,373,588		401,331,641
Robert J. Swieringa						8,873,136,979		151,568,250
Douglas A. Warner III						8,810,874,479		213,830,750
Robert C. Wright						8,809,040,152		215,665,077

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Exhibit 11	Computation of Per Share Earnings*
Exhibit 12	Computation of Ratio of Earnings to Fixed Charges
Exhibit 31(a)	Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended
Exhibit 31(b)	Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended
Exhibit 32	Certification Pursuant to 18 U.S.C. Section 1350
Exhibit 99	Financial Measures That Supplement Generally Accepted Accounting Principles
	*	Data required by Statement of Financial Accounting Standards No. 128, Earnings per Share, is provided in note 5 to the condensed, consolidated financial statements in this report.

 

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		General Electric Company   (Registrant)
July 29, 2005		/s/ Philip D. Ameen
Date		Philip D. Ameen Vice President and Comptroller Duly Authorized Officer and Principal Accounting Officer

 

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