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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 June 30, 2004

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 1-35

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 is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No ¨.

     There were 10,558,247,000 shares of common stock with a par value of $0.06 per share outstanding at June 30, 2004.

(1)


Table of Contents

 

General Electric Company

   

Page

   


Part I - Financial Information

   
     

     Item 1. Financial Statements

   

          Condensed Statement of Earnings

   

               Second Quarter Ended June 30, 2004

 

3

               Six Months Ended June 30, 2004

 

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

 

35

     

Part II - Other Information

   
     

     Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

 

36

     Item 4. Submission of Matters to a Vote of Security Holders

 

36

     Item 6. Exhibits and Reports on Form 8-K

 

38

     Signatures

 

40

Forward-Looking Statements

This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "will" or words of similar meaning and include, but are not limited to, statements about the expected future business and financial performance of GE. Forward-looking statements are based on management's current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from these expectations and assumptions due to changes in global political, economic, business, competitive, market, regulatory and other factors. We undertake no obligation to publicly update or review any forward-looking information, whether as a result of new information, future developments or otherwise.

(2)


Table of Contents

 

Part I. Financial Information

Item 1. Financial Statements

Condensed Statement of Earnings
General Electric Company and consolidated affiliates

 

Second quarter ended June 30 (Unaudited)

 
 


 
 

Consolidated

 

GE

 

Financial
Services (GECS)

 
 


 


 


 

(In millions; per-share amounts in dollars)

2004

 

2003

 

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 


 


 

Sales of goods

$

13,643

    

$

12,237

    

$

12,927

    

$

11,670

    

$

728

    

$

568

 

Sales of services

 

7,012

   

5,881

   

7,068

   

5,970

   

   

 

Other income

 

324

   

148

   

328

   

147

   

   

 

Earnings of GECS

 

   

   

1,696

   

1,602

   

   

 

GECS revenues from services

 

16,056

   

15,107

   

   

   

16,405

   

15,319

 
 


 


 


 


 


 


 

     Total revenues

 

37,035

   

33,373

   

22,019

   

19,389

   

17,133

   

15,887

 
 


 


 


 


 


 


 

Cost of goods sold

 

10,749

   

8,949

   

10,060

   

8,485

   

701

   

465

 

Cost of services sold

 

4,376

   

3,476

   

4,432

   

3,565

   

   

 

Interest and other financial charges

 

2,750

   

2,683

   

49

   

215

   

2,818

   

2,533

 

Insurance losses and policyholder and annuity benefits

 

3,744

   

4,256

   

   

   

3,808

   

4,256

 

Provision for losses on financing receivables

 

1,004

   

978

   

   

   

1,004

   

978

 

Other costs and expenses

 

9,485

   

7,949

   

2,988

   

2,364

   

6,669

   

5,731

 

Minority interest in net earnings of
     consolidated affiliates

 

187

   

72

   

111

   

47

   

76

   

25

 
 


 


 


 


 


 


 

     Total costs and expenses

 

32,295

   

28,363

   

17,640

   

14,676

   

15,076

   

13,988

 
 


 


 


 


 


 


 

Earnings before income taxes

 

4,740

   

5,010

   

4,379

   

4,713

   

2,057

   

1,899

 

Provision for income taxes

 

(816

)

 

(1,216

)

 

(455

)

 

(919

)

 

(361

)

 

(297

)

 


 


 


 


 


 


 

     Net earnings

$

3,924

 

$

3,794

 

$

3,924

 

$

3,794

 

$

1,696

 

$

1,602

 
 


 


 


 


 


 


 

Per-share amounts

                                   

     Diluted earnings per share

$

0.38

 

$

0.38

                         

     Basic earnings per share

$

0.38

 

$

0.38

                         

 

                                   

Dividends declared per share

$

0.20

 

$

0.19

                         
                                     

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

 

(3)


Table of Contents

 

Condensed Statement of Earnings
General Electric Company and consolidated affiliates

 

Six months ended June 30 (Unaudited)

 
 


 
 

Consolidated

 

GE

 

Financial
Services (GECS)

 
 


 


 


 

(In millions; per-share amounts in dollars)

2004

 

2003

 

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 


 


 

Sales of goods

$

25,407

 

$

23,354

 

$

24,182

 

$

22,305

 

$

1,304

 

$

1,055

 

Sales of services

 

12,358

   

10,931

   

12,493

   

11,093

   

   

 

Other income

 

461

   

203

   

467

   

223

   

   

 

Earnings of GECS

 

   

   

3,541

   

3,272

   

   

 

GECS revenues from services

 

32,159

   

29,341

   

   

   

32,772

   

29,699

 
 


 


 


 


 


 


 

     Total revenues

 

70,385

   

63,829

   

40,683

   

36,893

   

34,076

   

30,754

 
 


 


 


 


 


 


 

Cost of goods sold

 

19,861

   

17,041

   

18,688

   

16,145

   

1,252

   

902

 

Cost of services sold

 

7,882

   

6,665

   

8,017

   

6,827

   

   

 

Interest and other financial charges

 

5,560

   

5,279

   

288

   

423

   

5,489

   

4,996

 

Insurance losses and policyholder and annuity benefits

 

7,332

   

8,241

   

   

   

7,432

   

8,241

 

Provision for losses on financing receivables

 

1,959

   

1,738

   

   

   

1,959

   

1,738

 

Other costs and expenses

 

18,559

   

15,464

   

5,456

   

4,777

   

13,405

   

10,925

 

Minority interest in net earnings of
     consolidated affiliates

 

270

   

142

   

148

   

79

   

122

   

63

 
 


 


 


 


 


 


 

     Total costs and expenses

 

61,423

   

54,570

   

32,597

   

28,251

   

29,659

   

26,865

 
 


 


 


 


 


 


 

Earnings before income taxes and accounting change

 

8,962

   

9,259

   

8,086

   

8,642

   

4,417

   

3,889

 

Provision for income taxes

 

(1,798

)

 

(2,251

)

 

(922

)

 

(1,634

)

 

(876

)

 

(617

)

 


 


 


 


 


 


 

     Earnings before accounting change

 

7,164

   

7,008

   

7,164

   

7,008

   

3,541

   

3,272

 

Cumulative effect of accounting change (note 4)

 

   

(215

)

 

   

(215

)

 

   

 
 


 


 


 


 


 


 

     Net earnings

$

7,164

 

$

6,793

 

$

7,164

 

$

6,793

 

$

3,541

 

$

3,272

 
 


 


 


 


 


 


 

Per-share amounts before accounting change

                                   

     Diluted earnings per share

$

0.69

 

$

0.70

                         

     Basic earnings per share

$

0.70

 

$

0.70

                         

 

                                   

Per-share amounts after accounting change

                                   

     Diluted earnings per share

$

0.69

 

$

0.68

                         

     Basic earnings per share

$

0.70

 

$

0.68

                         

 

                                   

Dividends declared per share

$

0.40

 

$

0.38

                         

 

                                   

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

 

(4)


Table of Contents

 

Condensed Statement of Financial Position
General Electric Company and consolidated affiliates

 

Consolidated

 

GE

 

Financial
Services (GECS)

 
 


 


 


 

(In millions)

6/30/04

 

12/31/03

 

6/30/04

 

12/31/03

 

6/30/04

 

12/31/03

 
 


 


 


 


 


 


 

Cash and equivalents

$

10,265

    

$

12,664

    

$

2,808

    

$

1,670

    

$

7,995

    

$

11,273

 

Investment securities

 

122,814

   

122,290

   

311

   

380

   

122,503

   

121,910

 

Current receivables

 

13,257

   

10,732

   

13,412

   

10,973

   

   

 

Inventories

 

9,605

   

8,752

   

9,415

   

8,555

   

190

   

197

 

Financing receivables – net

 

252,701

   

247,906

   

   

   

252,701

   

247,906

 

Other GECS receivables

 

37,412

   

37,260

   

   

   

40,789

   

39,616

 

Property, plant and equipment (including
     equipment leased to others) – net

 

61,297

   

53,388

   

16,379

   

14,566

   

44,918

   

38,822

 

Investment in GECS

 

   

   

45,895

   

45,308

   

   

 

Intangible assets

 

80,878

   

55,025

   

53,323

   

30,204

   

27,555

   

24,821

 

All other assets

 

108,856

   

99,466

   

37,637

   

30,448

   

72,239

   

69,981

 
 


 


 


 


 


 


 

Total assets

$

697,085

 

$

647,483

 

$

179,180

 

$

142,104

 

$

568,890

 

$

554,526

 
 


 


 


 


 


 


 

Short-term borrowings

$

160,050

 

$

157,397

 

$

1,255

 

$

2,555

 

$

159,648

 

$

155,468

 

Accounts payable, principally trade accounts

 

23,474

   

19,931

   

9,265

   

8,753

   

17,185

   

13,547

 

Progress collections and price adjustments accrued

 

3,725

   

4,433

   

3,725

   

4,433

   

   

 

Other GE current liabilities

 

19,898

   

17,356

   

19,875

   

17,356

   

   

 

Long-term borrowings

 

175,658

   

172,314

   

10,896

   

8,388

   

165,663

   

164,850

 

Insurance liabilities, reserves and annuity benefits

 

137,789

   

136,264

   

   

   

138,110

   

136,264

 

All other liabilities

 

46,783

   

41,767

   

22,884

   

18,449

   

23,961

   

23,238

 

Deferred income taxes

 

14,695

   

12,647

   

5,004

   

1,911

   

9,691

   

10,736

 
 


 


 


 


 


 


 

Total liabilities

 

582,072

   

562,109

   

72,904

   

61,845

   

514,258

   

504,103

 
 


 


 


 


 


 


 

Minority interest in equity of consolidated
     affiliates

 

16,731

   

6,194

   

7,994

   

1,079

   

8,737

   

5,115

 
 


 


 


 


 


 


 

Accumulated gains/(losses) - net (a)

                                   

     Investment securities

 

(18

)

 

1,620

   

(18

)

 

1,620

   

222

   

1,823

 

     Currency translation adjustments

 

2,655

   

2,987

   

2,655

   

2,987

   

2,414

   

2,639

 

     Derivatives qualifying as hedges

 

(1,151

)

 

(1,792

)

 

(1,151

)

 

(1,792

)

 

(1,097

)

 

(1,727

)

Common stock (10,558,247,000 and 10,063,120,000
     shares outstanding at June 30, 2004 and
     December 31, 2003, respectively)

 

669

   

669

   

669

   

669

   

1

   

1

 

Other capital

 

23,393

   

17,497

   

23,393

   

17,497

   

12,352

   

12,268

 

Retained earnings

 

85,822

   

82,796

   

85,822

   

82,796

   

32,003

   

30,304

 

Less common stock held in treasury

 

(13,088

)

 

(24,597

)

 

(13,088

)

 

(24,597

)

 

   

 
 


 


 


 


 


 


 

Total shareowners' equity

 

98,282

   

79,180

   

98,282

   

79,180

   

45,895

   

45,308

 
 


 


 


 


 


 


 

Total liabilities and equity

$

697,085

 

$

647,483

 

$

179,180

 

$

142,104

 

$

568,890

 

$

554,526

 
 


 


 


 


 


 


 

 

                       

(a)

The sum of accumulated gains/(losses) on investment securities, currency translation adjustments and derivatives qualifying as hedges constitutes "Accumulated nonowner changes other than earnings," and was $1,486 million and $2,815 million at June 30, 2004 and December 31, 2003, respectively.
 

 

See notes to condensed, consolidated financial statements. Consolidating information is shown for "GE" and "Financial Services (GECS)." June 30, 2004, information is unaudited. Transactions between GE and GECS have been eliminated from the "Consolidated" columns.

 

(5)


Table of Contents

 

Condensed Statement of Cash Flows
General Electric Company and consolidated affiliates

 

Six months ended June 30 (Unaudited)

 
 


 
 

Consolidated

 

GE

 

Financial
Services (GECS)

 
 


 


 


 

(In millions)

2004

 

2003

 

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 


 


 

Cash flows – operating activities

   

    

   

    

   

    

   

    

   

    

     

Net earnings

$

7,164

 

$

6,793

 

$

7,164

 

$

6,793

 

$

3,541

 

$

3,272

 

Adjustments to reconcile net earnings to cash

                                   

     provided from operating activities

                                   

          Cumulative effect of accounting changes

 

   

215

   

   

215

   

   

 

          Depreciation and amortization of property,
               plant and equipment

 

4,054

   

3,383

   

1,172

   

1,151

   

2,882

   

2,232

 

          Earnings retained by GECS

 

   

   

(1,699

)

 

(2,944

)

 

   

 

          Deferred income taxes

 

(1,698

)

 

(161

)

 

(187

)

 

287

   

(1,511

)

 

(448

)

          Decrease in GE current receivables

 

797

   

802

   

883

   

726

   

   

 

          Decrease (increase) in inventories

 

(259

)

 

79

   

(284

)

 

98

   

25

   

(19

)

          Increase in accounts payable

 

2,892

   

577

   

127

   

18

   

3,078

   

928

 

          Decrease in GE progress collections

 

(710

)

 

(1,212

)

 

(710

)

 

(1,212

)

 

   

 

          Increase in insurance liabilities, reserves
               and annuity benefits

 

1,930

   

495

   

   

   

1,930

   

495

 

          Provision for losses on financing
             receivables

 

1,959

   

1,738

   

   

   

1,959

   

1,738

 

          All other operating activities

 

1,223

   

(911

)

 

351

   

(888

)

 

1,229

   

(448

)

 


 


 


 


 


 


 

Cash from operating activities

 

17,352

   

11,798

   

6,817

   

4,244

   

13,133

   

7,750

 
 


 


 


 


 


 


 

Cash flows – investing activities

                                   

Additions to property, plant and equipment

 

(6,281

)

 

(4,056

)

 

(849

)

 

(854

)

 

(5,432

)

 

(3,202

)

Net decrease (increase) in financing receivables

 

1,958

   

(10,171

)

 

   

   

1,958

   

(10,171

)

Payments for principal businesses purchased

 

(18,926

)

 

(8,675

)

 

(3,442

)

 

(592

)

 

(15,484

)

 

(8,083

)

All other investing activities

 

4,284

   

(2,286

)

 

387

   

(168

)

 

3,171

   

(2,348

)

 


 


 


 


 


 


 

Cash used for investing activities

 

(18,965

)

 

(25,188

)

 

(3,904

)

 

(1,614

)

 

(15,787

)

 

(23,804

)

 


 


 


 


 


 


 

Cash flows – financing activities

                                   

Net decrease in borrowings (maturities
     90 days or less)

 

(6,545

)

 

(8,659

)

 

(4,280

)

 

(4,062

)

 

(2,013

)

 

(4,075

)

Newly issued debt (maturities longer
     than 90 days)

 

30,859

   

42,269

   

2,595

   

5,341

   

28,241

   

37,140

 

Repayments and other reductions (maturities
     longer than 90 days)

 

(23,729

)

 

(18,530

)

 

(13

)

 

(150

)

 

(23,716

)

 

(18,380

)

Net dispositions of GE treasury shares

 

3,963

   

166

   

3,963

   

166

   

   

 

Dividends paid to shareowners

 

(4,040

)

 

(3,821

)

 

(4,040

)

 

(3,821

)

 

(1,842

)

 

(328

)

All other financing activities

 

(1,294

)

 

206

   

   

   

(1,294

)

 

206

 
 


 


 


 


 


 


 

Cash from (used for) financing activities

 

(786

)

 

11,631

   

(1,775

)

 

(2,526

)

 

(624

)

 

14,563

 
 


 


 


 


 


 


 

Increase (decrease) in cash and equivalents

 

(2,399

)

 

(1,759

)

 

1,138

   

104

   

(3,278

)

 

(1,491

)

Cash and equivalents at beginning of year

 

12,664

   

8,910

   

1,670

   

1,079

   

11,273

   

7,918

 
 


 


 


 


 


 


 

Cash and equivalents at June 30

$

10,265

 

$

7,151

 

$

2,808

 

$

1,183

 

$

7,995

 

$

6,427

 
 


 


 


 


 


 


 

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

 

(6)


Table of Contents

 

Summary of Operating Segments
General Electric Company and consolidated affiliates

 

Second quarter ended
June 30 (Unaudited)

 

Six months ended
June 30 (Unaudited)

 
 


 


 

(In millions)

2004

 

2003

 

2004

2003

 
 


 


 



 

Revenues

                       

     Advanced Materials

$

2,048

 

$

1,743

 

$

3,933

 

$

3,419

 

     Commercial Finance

 

5,732

   

5,180

   

11,123

   

9,956

 

     Consumer Finance

 

3,830

   

3,046

   

7,419

   

5,805

 

     Consumer & Industrial

 

3,490

   

3,282

   

6,587

   

6,174

 

     Energy

 

4,118

   

4,655

   

7,983

   

9,031

 

     Equipment & Other Services

 

2,017

   

869

   

4,027

   

1,833

 

     Healthcare

 

3,372

   

2,402

   

5,867

   

4,542

 

     Infrastructure

 

862

   

760

   

1,638

   

1,436

 

     Insurance

 

5,554

   

6,792

   

11,507

   

13,160

 

     NBC Universal

 

2,867

   

1,955

   

4,449

   

3,426

 

     Transportation     

 

3,903

   

3,389

   

7,308

   

6,368

 

     Corporate items and eliminations

 

(758

)

 

(700

)

 

(1,456

)

 

(1,321

)

 


 


 


 


 

Consolidated revenues

$

37,035

 

$

33,373

 

$

70,385

 

$

63,829

 
 


 


 


 


 

Segment profit (a)

                       

     Advanced Materials

$

161

 

$

134

 

$

332

 

$

256

 

     Commercial Finance

 

975

   

832

   

1,930

   

1,702

 

     Consumer Finance

 

600

   

514

   

1,202

   

1,060

 

     Consumer & Industrial

 

204

   

173

   

353

   

301

 

     Energy

 

634

   

1,057

   

1,284

   

1,955

 

     Equipment & Other Services

 

68

   

(252

)

 

(54

)

 

(510

)

     Healthcare

 

584

   

440

   

923

   

746

 

     Infrastructure

 

134

   

105

   

247

   

199

 

     Insurance

 

53

   

508

   

463

   

1,020

 

     NBC Universal

 

768

   

688

   

1,162

   

1,031

 

     Transportation     

 

810

   

686

   

1,447

   

1,242

 
 


 


 


 


 

          Total segment profit

 

4,991

   

4,885

   

9,289

   

9,002

 

     GE corporate items and eliminations

 

(563

)

 

43

   

(915

)

 

63

 

     GE interest and other financial charges

 

(49

)

 

(215

)

 

(288

)

 

(423

)

     GE provision for income taxes

 

(455

)

 

(919

)

 

(922

)

 

(1,634

)

 


 


 


 


 

Earnings before accounting change

 

3,924

   

3,794

   

7,164

   

7,008

 

     Cumulative effect of accounting change

 

   

   

   

(215

)

 


 


 


 


 

Consolidated net earnings

$

3,924

 

$

3,794

 

$

7,164

 

$

6,793

 
 


 


 


 


 

 

               

(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/losses from dispositions; and litigation settlements or other charges, responsibility for which precedes the current management team. Segment profit excludes or includes interest and other financial charges and segment income taxes according to how a particular 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.

 

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Table of Contents

 

Notes to Condensed, Consolidated Financial Statements (Unaudited)

     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 for the year ended December 31, 2003. 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, "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. As described in our Annual Report on Form 10-K for the year ended December 31, 2003, we reorganized our businesses on January 1, 2004, around markets and customers, reducing our number of reporting segments from 14 to 11. On March 30, 2004, we provided the required reclassified prior-period information about this reorganization in a Form 8-K (as amended on April 19, 2004).

     We have reclassified certain prior-period amounts herein to conform to the current period's presentation.

     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 the 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 actual interim 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/en/company/investor/secreports.htm.

     3. We adopted Financial Accounting Standards Board (FASB) Interpretation No. (FIN) 46R, Consolidation of Variable Interest Entities (Revised), on January 1, 2004, adding $2.6 billion of GECS assets and $2.1 billion of GECS liabilities to our consolidated balance sheet as of that date. The most significant entity consolidated was Penske Truck Leasing Co., L.P. (Penske), which was previously accounted for using the equity method. Penske provides full-service commercial truck leasing, truck rental and logistics services, primarily in North America. This accounting change did not require an adjustment to earnings and will not affect future earnings or cash flows. We adopted FIN 46, Consolidation of Variable Interest Entities, on July 1, 2003, and at that date consolidated certain entities in our financial statements.

(8)


Table of Contents

 

     FIN 46 and FIN 46R changed the accounting for certain types of entities we use in the ordinary course of our securitization activities. Securitization entities consolidated as a result of FIN 46 and FIN 46R differ from other entities included in our consolidated financial statements because, by terms of relevant governing documents, the assets they hold, which are typically financial in nature, are legally isolated and are unavailable to us under any circumstances. Similarly, their liabilities are not our legal obligations but repayment depends primarily on cash flows generated by their assets. These securitization entities normally issue debt in the form of asset-backed securities, that is, debt secured by assets in the entity. We refer to certain of these entities as "consolidated, liquidating securitization entities" because we do not intend to replace the assets they contain; rather, we intend that such entities will liquidate as their assets are repaid. Beginning in the second quarter of 2004, we reclassified the assets, liabilities and operations of consolidated, liquidating securitization entities into the associated financial statement captions. Because their assets and liabilities differ from other assets and liabilities in our financial statements, we are providing supplemental information about these matters below and in notes 9 and 12. Also, to ensure that we have presented all of our securitization activities clearly, we also are providing information about off-balance sheet assets in securitization entities.

 

At

 
 


 

(In millions)

6/30/04

 

12/31/03

 



Assets in consolidated, liquidating securitization entities are shown
     in the following captions:

           

          Investment securities

$

1,363

 

$

1,566

 

          Financing receivables – net (note 9)

 

16,870

   

21,877

 

          All other assets

 

2,746

   

2,352

 

          Other, principally insurance receivables

 

457

   

668

 

               Total

 

21,436

   

26,463

 
 


 


 

Off-balance sheet (a)

 

29,156

   

26,810

 
             

Total securitized assets

$

50,592

 

$

53,273

 
 


 


 


 

(a)

Of amounts off-balance sheet, $6,253 million at June 30, 2004 and $5,759 million at December 31, 2003, were in entities to which we provide credit and/or liquidity support.

 
         
         

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Table of Contents

 

     We continue to engage in off-balance sheet securitization transactions with third-party entities and to use public market, term securitizations. The following table provides further information about the nature of the assets in securitization entities that are both consolidated and off-balance sheet.

 

At

 
 


 

(In millions)

6/30/04

 

12/31/03

 



Receivables and other assets secured by:

           

     Equipment

$

14,052

 

$

15,616

 

     Commercial real estate

 

15,505

   

16,713

 

     Other assets

 

9,298

   

9,114

 

     Credit card receivables

 

8,368

   

8,581

 

     Other trade receivables

 

3,369

   

3,249

 
 


 


 

Total securitized assets

$

50,592

 

$

53,273

 
 


 


 
         

     4. FASB Statement of Financial Accounting Standards (SFAS) 143, Accounting for Asset Retirement Obligations, became effective for us on January 1, 2003. Under SFAS 143, obligations associated with the retirement of long-lived assets are recorded when there is a legal obligation to incur such costs. This amount is accounted for like an additional element of cost, and, like other cost elements, is depreciated over the corresponding asset's useful life. SFAS 143 primarily affects our accounting for costs associated with the future retirement of facilities used for storage and production of nuclear fuel. On January 1, 2003, we recorded a one-time, non-cash transition charge of $330 million ($215 million after tax, or $0.02 per share) which is reported in the caption "Cumulative effect of accounting change."

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

 

Second quarter ended
June 30

 

Six months ended
June 30

 
 


 


 

(In millions)

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 

Premiums earned by insurance businesses

$

4,218

 

$

5,024

 

$

8,467

 

$

9,637

 

Interest on time sales and loans

 

4,616

   

4,220

   

9,314

   

8,179

 

Operating lease rentals

 

2,584

   

1,779

   

5,069

   

3,513

 

Investment income

 

1,666

   

1,534

   

3,117

   

3,054

 

Financing leases

 

1,074

   

983

   

2,180

   

2,042

 

Fees

 

925

   

470

   

1,795

   

1,345

 

Other income (a)

 

1,322

   

1,309

   

2,830

   

1,929

 
 


 


 


 


 

     Total

$

16,405

 

$

15,319

 

$

32,772

 

$

29,699

 
 


 


 


 


 


 

(a)

Includes the loss on the Genworth Financial, Inc. (Genworth) initial public offering of $388 million for the second quarter and six months ended June 30, 2004.

 
 

 

 

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Table of Contents

 

     6. 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. The effect on operations of the principal pension and retiree benefit plans follows.

 

Principal Pension Plans

 
 


 
 

Second quarter ended
June 30

 

Six months ended
June 30

 
 


 


 

(In millions)

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 

Expected return on plan assets

$

989

 

$

1,018

 

$

1,978

 

$

2,036

 

Service cost for benefits earned(a)

 

(317

)

 

(267

)

 

(650

)

 

(534

)

Interest cost on benefit obligation

 

(549

)

 

(542

)

 

(1,098

)

 

(1,084

)

Prior service cost

 

(110

)

 

(54

)

 

(177

)

 

(108

)

Net actuarial gain (loss) recognized

 

(35

)

 

155

   

(69

)

 

310

 
 


 


 


 


 

Income from (cost of) principal pension plans

$

(22

)

$

310

 

$

(16

)

$

620

 
 


 


 


 


 


(a)

Net of participant contributions.

 
 

 

 
 

 

 

 

 

Principal Retiree Health and
Life Insurance Plans

 
 


 
 

Second quarter ended
June 30

 

Six months ended
June 30

 
 


 


 

(In millions)

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 

Expected return on plan assets

$

37

 

$

40

 

$

74

 

$

80

 

Service cost for benefits earned

 

(64

)

 

(55

)

 

(130

)

 

(108

)

Interest cost on benefit obligation

 

(127

)

 

(119

)

 

(266

)

 

(238

)

Prior service cost

 

(74

)

 

(21

)

 

(149

)

 

(42

)

Net actuarial loss recognized

 

(11

)

 

(32

)

 

(36

)

 

(64

)

 


 


 


 


 

Cost of principal retiree benefit plans

$

(239

)

$

(187

)

$

(507

)

$

(372

)

 


 


 


 


 
 

 

 

     Effective April 1, 2004, we included the effects of the U.S. Medicare Prescription Drug, Improvement and Modernization Act of 2003 in our consolidated financial statements. The effect of recording the federal Medicare subsidy reduced the accumulated postretirement benefit obligation (APBO) by $583 million and had an insignificant effect on our second quarter 2004 operations.

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Table of Contents

 

     7. 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.

   

Second quarter ended June 30

 
   


 
   

2004

 

2003

 
   


 


 

(In millions; per-share amounts in dollars)

 

Diluted

 

Basic

 

Diluted

 

Basic

 
   


 


 


 


 

Consolidated operations

                         

Net earnings available for per-share calculation(a)

 

$

3,924

 

$

3,924

 

$

3,795

 

$

3,794

 
   


 


 


 


 

Average equivalent shares

                         

Shares of GE common stock

   

10,387

   

10,387

   

10,008

   

10,008

 

Employee compensation-related shares,
     including stock options

   

44

   

   

58

   

 
   


 


 


 


 

Total average equivalent shares

   

10,431

   

10,387

   

10,066

   

10,008

 
   


 


 


 


 

Per-share amounts

                         

Net earnings

 

$

0.38

 

$

0.38

 

$

0.38

 

$

0.38

 
   


 


 


 


 
   

Six months ended June 30

 
   


 
   

2004

 

2003

 
   


 


 

(In millions; per-share amounts in dollars)

 

Diluted

 

Basic

 

Diluted

 

Basic

 
   


 


 


 


 

Consolidated operations

                         

Earnings before accounting change for
     per-share calculation(b)

 

$

7,164

 

$

7,164

 

$

7,009

 

$

7,008

 

Cumulative effect of accounting change

   

   

   

(215

)

 

(215

)

   


 


 


 


 

Net earnings available for per-share calculation(b)

 

$

7,164

 

$

7,164

 

$

6,794

 

$

6,793

 
   


 


 


 


 

Average equivalent shares

                         

Shares of GE common stock

   

10,279

   

10,279

   

9,996

   

9,996

 

Employee compensation-related shares,
     including stock options

   

46

   

   

59

   

 
   


 


 


 


 

Total average equivalent shares

   

10,325

   

10,279

   

10,055

   

9,996

 
   


 


 


 


 

Per-share amounts

                         

Earnings before accounting change

 

$

0.69

 

$

0.70

 

$

0.70

 

$

0.70

 

Cumulative effect of accounting change

   

   

   

(0.02

)

 

(0.02

)

   


 


 


 


 

Net earnings

 

$

0.69

 

$

0.70

 

$

0.68

 

$

0.68

 
   


 


 


 


 


(a)

Includes dividend equivalents of $0.2 million and $0.3 million in 2004 and 2003, respectively.

 

(b)

Includes dividend equivalents of $0.5 million in each of 2004 and 2003.

 

 

                         

(12)


Table of Contents

 

     8. Inventories consisted of the following.

 

At

 
 


 

(In millions)

6/30/04

 

12/31/03

 
 


 


 

Raw materials and work in process

$

5,014

 

$

4,530

 

Finished goods

 

4,914

   

4,573

 

Unbilled shipments

 

268

   

281

 

Revaluation to LIFO

 

(591

)

 

(632

)

 


 


 

Total

$

9,605

 

$

8,752

 
 


 


 

 

           

     9. Financing receivables are summarized in the following table.

 

At

 
 


 

(In millions)

6/30/04

 

12/31/03

 



             

Time sales and loans, net of deferred income

$

192,207

 

$

188,842

 

Investment in financing leases, net of deferred income

 

67,100

   

65,320

 
 


 


 
   

259,307

   

254,162

 

Allowance for losses on financing receivables

 

(6,606

)

 

(6,256

)

 


 


 

Financing receivables – net

$

252,701

 

$

247,906

 
 


 


 
         

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

 

At

 
 


 

(In millions)

6/30/04

 

12/31/03

 



             

Time sales and loans, net of deferred income

$

14,023

 

$

18,050

 

Investment in financing leases, net of deferred income

 

2,864

   

3,827

 
 


 


 
   

16,887

   

21,877

 

Allowance for losses on financing receivables

 

(17

)

 

 
 


 


 

Financing receivables – net

$

16,870

 

$

21,877

 
 


 


 
         

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

 

At

 
 


 

(In millions)

6/30/04

 

12/31/03

 
 


 


 

Original cost

$

102,974

 

$

91,212

 

Less: accumulated depreciation and amortization

 

41,677

   

37,824

 
 


 


 

Property, plant and equipment – net

$

61,297

 

$

53,388

 
 


 


 

 

           

(13)


Table of Contents

 

     11. Intangible assets – net, consisted of the following.

 

At

 
 


 

(In millions)

6/30/04

 

12/31/03

 
 


 


 

Goodwill

$

69,403

 

$

47,487

 

Capitalized software

 

2,600

   

2,478

 

Present value of future profits (PVFP)

 

1,576

   

1,562

 

Other intangibles

 

7,299

   

3,498

 
 


 


 

Total

$

80,878

 

$

55,025

 
 


 


 

 

           

     Intangible assets were net of accumulated amortization of $16,420 million at June 30, 2004, and $16,082 million at December 31, 2003.

Goodwill

     Changes in goodwill balances follow.

(In millions)

Balance
1/1/04

 

Acquisitions/
purchase
accounting
adjustments

 

Inter-segment
Transfers

 

Currency
exchange
and other

 

Balance
6/30/04

 
 


 


 


 



 

Advanced Materials

$

2,810

    

$

(10

)

$

    

$

(12

)

$

2,788

Commercial Finance

 

8,627

   

799

    

 

523

   

(34

)

 

9,915

 

Consumer Finance

 

7,779

   

1,036

   

384

   

(36

)

 

9,163

 

Consumer & Industrial

 

795

   

(1

)

 

   

(2

)

 

792

 

Energy

 

4,212

   

(3

)

 

   

(21

)

 

4,188

 

Equipment & Other Services

 

1,029

   

3

   

(523

)

 

1,042

(a)

 

1,551

 

Healthcare

 

4,766

   

8,189

   

   

50

    

 

13,005

 

Infrastructure

 

3,725

   

18

   

   

(13

)

 

3,730

 

Insurance

 

4,092

   

9

   

(384

)

 

31

   

3,748

 

NBC Universal

 

6,448

   

10,870

   

   

(1

)

 

17,317

 

Transportation

 

3,204

   

12

   

   

(10

)

 

3,206

 
 


 


 


 


 


 

Total

$

47,487

 

$

20,922

 

$

 

$

994

 

$

69,403

 
 


 


 


 


 


 
                     


 

(a)

Includes $1,055 million of goodwill associated with the consolidation of Penske effective January 1, 2004.

 

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Table of Contents

 

     The amount of goodwill related to transactions recorded during the first six months of 2004 was $20,187 million, the largest of which were our merger of NBC with Vivendi Universal Entertainment LLLP ($10,589 million), and our acquisitions of Amersham plc ($8,137 million) by Healthcare, WMC Finance Co. ($564 million) by Consumer Finance, and Sophia S.A. ($475 million) and most of the commercial lending business of Transamerica Finance Corporation ($308 million) by Commercial Finance. The amount of goodwill related to purchase accounting adjustments during the first six months of 2004 was $735 million, the largest of which was associated with the 2003 acquisition of First National Bank ($252 million) by Consumer Finance. 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, it is not uncommon for our initial estimates to be revised subsequently.

Intangibles Subject to Amortization

 

At June 30, 2004

 

At December 31, 2003

 
 


 


 

(In millions)

Gross
carrying
amount

 

Accumulated
amortization

 

Net

 

Gross
carrying
amount

 

Accumulated
amortization

 

Net

 
 


 


 


 


 


 


 

PVFP

$

3,433

 

$

(1,857

)

$

1,576

 

$

3,379

 

$

(1,817

)

$

1,562

 

Capitalized software

 

5,357

   

(2,757

)

 

2,600

   

4,911

   

(2,433

)

 

2,478

 

Servicing assets (a)

 

3,545

   

(3,432

)

 

113

   

3,539

   

(3,392

)

 

147

 

Patents, licenses and other

 

5,841

   

(894

)

 

4,947

   

2,721

   

(806

)

 

1,915

 

All other

 

990

   

(458

)

 

532

   

1,095

   

(417

)

 

678

 
 


 


 


 


 


 


 

Total

$

19,166

 

$

(9,398

)

$

9,768

 

$

15,645

 

$

(8,865

)

$

6,780

 
 


 


 


 


 


 


 


 

(a)

Servicing assets, net of accumulated amortization, are associated primarily with serviced residential mortgage loans amounting to $10 billion and $14 billion at June 30, 2004 and December 31, 2003, respectively.

 

 

   

     Indefinite-lived intangible assets were $1,707 million and $758 million at June 30, 2004 and December 31, 2003, respectively, and comprised trademarks, tradenames and U.S. Federal Communication Commission licenses.

     Consolidated amortization expense related to amortizable intangible assets was $419 million and $284 million for the quarters ended June 30, 2004 and 2003, respectively. Consolidated amortization expense related to amortizable intangible assets was $734 million and $720 million for the six months ended June 30, 2004 and 2003, respectively.

(15)


Table of Contents

 

Present Value of Future Profits

     Change in PVFP balances follow.

 

Six months ended June 30

 
 


 

(In millions)

2004

 

2003

 
 


 


 

Balance at January 1

$

1,562

 

$

2,457

 

Acquisitions

 

   

 

Dispositions

 

   

(574

)

Accrued interest (a)

 

32

   

38

 

Amortization

 

(100

)

 

(184

)

Other

 

82

   

(99

)

 


 


 

Balance at June 30

$

1,576

 

$

1,638

 
 


 


 

 


 
 

 

(a)

Interest was accrued at a rate of 5.0% and 4.0% for the six months ended June 30, 2004 and 2003, respectively.

 

 

   

     We evaluate recoverability of PVFP periodically by comparing the current estimate 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, 2004 or 2003.

     Amortization expense for PVFP in future periods will be affected by acquisitions, realized capital gains and losses and 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, 2003, net PVFP balance to be amortized over each of the next five years follows.

2004

 

2005

 

2006

 

2007

 

2008

 


 


 


 


 


 

8.8

%

8.2

%

7.5

%

6.9

%

6.4

%

                   
                   

(16)


Table of Contents

 

     12. GECS borrowings are summarized in the following table.

 

Consolidated
Borrowings

 

Other than
consolidated,
liquidating
securitization entities

 

Consolidated,
liquidating
securitization entities

 




 

At

 
 


 

(In millions)

6/30/04

 

12/31/03

 

6/30/04

 

12/31/03

 

6/30/04

 

12/31/03

 
 


 


 


 


 


 


 

Short-term borrowings

                                   
                                     

Commercial paper

                                   

     Unsecured

$

82,615

 

$

80,598

 

$

82,615

 

$

80,598

 

$

 

$

 

     Asset-backed

 

17,311

   

21,998

   

   

   

17,311

   

21,998

 

Current portion of long-
     term debt

 

43,495

   

38,367

   

42,796

   

37,885

   

699

   

482

 

Other

 

16,227

   

14,505

   

16,227

   

14,505

   

   

 
 


 


 


 


 


 


 

Total

 

159,648

   

155,468

   

141,638

   

132,988

   

18,010

   

22,480

 
 


 


 


 


 


 


 

Long-term borrowings

                                   
                                     

Senior notes

 

151,969

   

150,997

   

150,380

   

149,049

   

1,589

   

1,948

 

Extendible notes

 

12,502

   

12,591

   

12,219

   

12,229

   

283

   

362

 

Subordinated notes

 

1,192

   

1,262

   

1,192

   

1,262

   

   

 
 


 


 


 


 


 


 

Total

 

165,663

   

164,850

   

163,791

   

162,540

   

1,872

   

2,310

 
 


 


 


 


 


 


 

Total borrowings

$

325,311

 

$

320,318

 

$

305,429

 

$

295,528

 

$

19,882

 

$

24,790

 
 


 


 


 


 


 


 
                                     

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

 

Second quarter ended
June 30

 

Six months ended
June 30

 
 


 


 

(In millions)

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 

Net earnings

$

3,924

    

$

3,794

   

$

7,164

    

$

6,793

   

Investment securities – net changes in value

 

(3,305

)

 

2,549

   

(1,638

)

 

3,328

 

Issuance of NBCU shares (note 15) and other

 

2,130

   

   

2,130

   

 

Currency translation adjustments – net

 

(260

)

 

1,515

   

(332

)

 

1,991

 

Derivatives qualifying as hedges – net changes in value

 

646

   

(987

)

 

641

   

(1,137

)

 


 


 


 


 

Total

$

3,135

 

$

6,871

 

$

7,965

 

$

10,975

 
 


 


 


 


 

     14. In 2002, we adopted the stock option expense provisions of SFAS 123, Accounting for Stock Based Compensation for stock options and stock appreciation rights, under the prospective method of transition. We first measure the total cost of each grant at the grant date using the Black-Scholes option pricing model. We then recognize each grant's total cost over the period that the options or stock appreciation rights vest. Under this approach, we charged $26 million and $22 million to net earnings in the second quarters of 2004 and 2003,

(17)


Table of Contents

 

respectively, and $45 million and $44 million in the first six months of 2004 and 2003, respectively. A comparison of as reported and pro-forma net earnings, including effects of expensing stock options and stock appreciation rights, follows.

 

Second quarter ended
June 30

 
 


 

(In millions; per-share amounts in dollars)

2004

 

2003

 
 


 


 

Net earnings, as reported

$

3,924

 

$

3,794

 

Earnings per share, as reported

           

     Diluted

 

0.38

   

0.38

 

     Basic

 

0.38

   

0.38

 

Stock option and appreciation right expense
     included in net earnings

 

26

   

22

 

Total stock option expense (a)

 

64

   

80

 
             

Pro-Forma Effects

           

Net earnings, on pro-forma basis

 

3,886

   

3,736

 

Earnings per share, on pro-forma basis

           

     Diluted

 

0.37

   

0.37

 

     Basic

 

0.37

   

0.37

 

 

           
 

Six months ended
June 30

 
 


 

(In millions; per-share amounts in dollars)

2004

 

2003

 
 


 


 

Net earnings, as reported

$

7,164

 

$

6,793

 

Earnings per share, as reported

           

     Diluted

 

0.69

   

0.68

 

     Basic

 

0.70

   

0.68

 

Stock option and appreciation right expense

     included in net earnings

 

45

   

44

 

Total stock option expense (a)

 

121

   

160

 
             

Pro-Forma Effects

           

Net earnings, on pro-forma basis

 

7,088

   

6,677

 

Earnings per share, on pro-forma basis

           

     Diluted

 

0.69

   

0.66

 

     Basic

 

0.69

   

0.67

 


 

(a)

As if we had applied SFAS 123 since its original effective date. Includes $26 million and $22 million actually recognized in the second quarter of 2004 and 2003 net earnings, respectively. Includes $45 million and $44 million actually recognized in the six months ended June 30, 2004 and 2003 net earnings, respectively.

 
     
     

(18)


Table of Contents

 

     15. On April 8, 2004, we acquired all of the outstanding common shares of Amersham plc, a world leader in medical diagnostics and life sciences. The business has been combined with our Healthcare segment and the results of Amersham's operations have been included in our consolidated financial statements since that date. The total purchase price of $11.4 billion included 341.7 million shares of GE common stock valued at $10.7 billion, cash of $0.2 billion and assumed debt of $0.5 billion. Initial allocation of the purchase price resulted in $8.1 billion being assigned to goodwill, $2.8 billion to identified intangible assets that will be amortized over periods ranging from five to 25 years, $0.2 billion to acquired profit in inventories that have been or will be charged to operations as sold and $0.1 billion to acquired in-process research and development projects charged to operations in the quarter.

     On May 11, 2004, we completed the merger of NBC with Vivendi Universal Entertainment LLLP (VUE) and certain related assets to create one of the world's leading media companies, NBC Universal, Inc. (NBC Universal or NBCU). The results of VUE's operations have been included in our consolidated financial statements since that date. Twenty percent of NBCU's shares were issued to Vivendi Universal (VU) as partial consideration for VU's interest in VUE and the related assets. Our acquired interest in VUE and the related assets was valued at $14.4 billion, for which we exchanged the NBCU shares, paid cash to VUE shareowners of $3.7 billion and assumed debt of $2.5 billion. In March 2004, we had issued 119.4 million shares of our common stock for net cash proceeds of $3.8 billion, and we used most of those proceeds to fund the $3.7 billion we paid to VU. The initial allocation of our acquired interest assigned $10.6 billion to goodwill, $1.2 billion to indefinite-lived intangibles and $0.5 billion to identified intangible assets that will be amortized over periods ranging from two to 20 years. As a result of issuing the NBCU shares, we essentially disposed of 20% of NBC, and therefore recorded an increase in shareowners' equity of $2.2 billion, net of tax. Holders of 6.94% of the VUE common interests did not participate in the merger and remain minority shareowners of VUE at June 30, 2004. One such minority owner also owns an $0.8 billion preferred interest in VUE that is mandatorily redeemable for cash in 2022. The present value of that obligation is included in the caption "All other liabilities" in our condensed consolidated balance sheet, while U.S. Treasury securities held by VUE in the same amount and designated to repay this obligation are included in the caption "All other assets."

     On May 28, 2004, we completed the initial public offering of approximately 146 million, or 30%, of the common shares of Genworth Financial, Inc. (Genworth), our formerly wholly-owned subsidiary that conducts most of our life and mortgage insurance operations. The transaction resulted in a pre-tax loss of $570 million ($336 million after tax) reported in our Insurance segment.

Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition

     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 generally accepted accounting principles (GAAP). Certain of these data are considered "non-GAAP financial measures" under Securities and Exchange Commission regulations; those rules require the supplemental explanation and reconciliation provided in Exhibit 99 to this Form 10-Q report.

(19)


Table of Contents

 

A.  Results of Operations

Overview of Second Quarter and First Half of 2004 with Second Quarter and First Half of 2003

     General Electric Company net earnings increased 3% to $3.924 billion, or $0.38 per share, in the second quarter of 2004, compared with $3.794 billion ($0.38 per share) in the second quarter of 2003.      

     For the first half of 2004, earnings before accounting change rose 2% to $7.164 billion and earnings per share before accounting change decreased to $.69, compared with last year's $0.70. Earnings before accounting change exclude the one-time, non-cash impact of adopting a new accounting rule in 2003 (discussed in note 4 of this Form 10-Q report).

     Revenues of $37.0 billion were 11% higher than in the second quarter of 2003. Industrial sales increased 13% to $20.0 billion. Excluding Energy, which is in the final year of declining heavy-duty gas turbine sales, industrial sales rose 22% reflecting the Amersham and NBC Universal Inc. (NBC Universal or NBCU) transactions as well as a stronger economy. Sales of product services (including sales of spare parts and monitoring, maintenance and repair services) grew 13% to $6.3 billion in the second quarter. Financial services revenues of $17.1 billion were up 8% over last year.

     Revenues for the first six months of 2004 rose 10% to $70.4 billion, compared with $63.8 billion last year. GE sales of goods and services of $36.7 billion were 10% higher than in 2003 primarily reflecting the effects of recent acquisitions ($2.6 billion) and a stronger economy, partially offset by the anticipated declining heavy-duty gas turbine sales at Energy. Financial services revenues of $34.1 billion were 11% higher than in 2003 as a result of acquisitions and origination growth, primarily at Commercial Finance and Consumer Finance, and the consolidation of certain businesses as a result of the adoption of Financial Accounting Standards Board (FASB) Interpretation No. (FIN) 46R, Consolidation of Variable Interest Entities (Revised), partially offset by the absence of revenues from businesses disposed of in 2003 and the effects of the Genworth Financial, Inc. (Genworth) initial public offering.

     GE operating margin in the second quarter of 2004 was 12.6% of sales (12.3% year-to-date), compared with 18.3% for the second quarter of 2003 (16.9% year-to-date), reflecting the effects of lower earnings from our principal pension plans, the effect of lower sales of high-margin heavy-duty gas turbines at Energy and higher in-process research and development and acquisition-related charges.

     Second quarter 2004 results reflected the continued benefits of our diversification and risk management strategies. Nine of our 11 businesses reported double-digit improvements in earnings. Reflecting the stronger economy, orders of our flow businesses (Advanced Materials, Infrastructure and Consumer & Industrial) increased 13% and services orders were up 29%. While we are still adversely affected by inflation from commodities such as benzene, 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.

(20)


Table of Contents

 

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

 

Second quarter ended
June 30

 

Six months ended
June 30

 
 


 


 

(In billions)

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 

Acquisitions

                       

     Revenues

$

2.9

 

$

1.2

 

$

4.4

 

$

3.0

 

     Net earnings

$

0.2

 (a)

$

0.1

 

$

0.4

 (a)

$

0.2

 

 

                       

Dispositions

                       

     Revenues

$

(1.0

)

$

(0.4

)

$

(2.0

)

$

(0.9

)

     Net earnings

$

(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.

 
                         

     We continued to invest in technology. An example is Energy's agreement to acquire the ChevronTexaco Gasification Technology business, which is pursuing cleaner coal technology. At Healthcare, we closed the Amersham acquisition and this biosciences business is performing well. We also saw good orders growth in positron emission tomography (PET) and Ultrasound products, in the China market and at Healthcare IT. Transportation's quarter was highlighted by the selection of our GEnx engine for the Boeing 7E7 Dreamliner. Through CFM International, a 50/50 joint company with Snecma Moteurs of France, we also were selected by the U.S. Navy to power Boeing 737s for the Navy's multi-mission maritime aircraft.

     Commercial Finance added assets through the acquisition of the U.S. leasing business of IKON Office Solutions, completed the largest-ever aircraft engine financing deal in China with China Eastern Airlines and is seeing a good environment for asset growth and acquisitions. Consumer Finance continues its global expansion through acquisitions and organic growth. During the quarter, Consumer Finance entered its 40th country (Latvia) and also completed the acquisition of WMC Finance Co., a U.S. wholesale lender, adding U.S. new-home financing solutions to our global mortgage capabilities.

     We completed the NBC Universal merger in May. We led the major broadcast networks in advertising commitments from May's up-front advertising period, and saw good growth in our cable services and Spanish language network led by Bravo and Telemundo.

     Infrastructure security and water businesses continued to grow. Advanced Materials launched two new applications in the China market and experienced good order growth in the second quarter. Consumer & Industrial continues to execute on our market strategy with high-end appliance unit sales up 21% over last year.

(21)


Table of Contents

 

     During the second quarter, we adjusted our full-year estimated effective tax rate for 2004 in accordance with policy to reflect various developments in the quarter that we did not previously forecast. The largest such adjustment resulted from our settling several issues with the U.S. Internal Revenue Service for the years 1985 through 1999. As part of these settlements, we closed two significant issues: the 1997 tax-free split-off in exchange for Lockheed Martin convertible preferred stock that we received on the disposition of our Aerospace business in 1993, and a 1998 tax loss on the sale of a Puerto Rican subsidiary. An additional adjustment to our annual effective tax rate resulted from tax benefits associated with the NBC Universal merger. The combined effect of these items was a decrease in the 2004 estimated full-year tax rate of GE that, including interest, had the effect of increasing second quarter 2004 earnings by $0.4 billion ($0.04 per share). In addition, we adjusted the full-year estimated effective tax rate of GECS to reflect the loss on the disposition of Genworth shares. The effect of the decrease in the 2004 estimated full-year tax rate of GECS was an increase of $0.1 billion ($0.01 per share) in second quarter 2004 earnings.

     Another factor that was important to our reported operations included the first quarter consolidation of Penske Truck Leasing Co., L.P. (Penske), which previously was accounted for using the equity method. Penske provides full-service commercial truck leasing, truck rental and logistics services, primarily in North America. In the second quarter of 2004, this consolidation increased our reported revenues $0.8 billion ($1.6 billion year-to-date); we reported the increase primarily as operating lease rentals ($0.6 billion for the quarter, $1.2 billion year-to-date) and other income ($0.2 billion for the quarter, $0.4 billion year-to-date). Net earnings were unaffected by this change because our share of Penske earnings were previously reported on a one-line basis.

Segment Analysis

     The comments that follow compare revenues and segment profit by operating segment for the second quarters and first six months of 2004 and 2003.

     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 precedes 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. As described in our Annual Report on Form 10-K for the year ended December 31, 2003, we reorganized our businesses on January 1, 2004, around markets and customers, reducing our number of reporting segments from 14 to 11. On March 30, 2004, we provided the required reclassified prior-period information about this reorganization in a Form 8-K (as amended on April 19, 2004).

     We have reclassified certain prior-period amounts herein to conform to the current period's presentation.

(22)


Table of Contents

 

ADVANCED MATERIALS revenues in the second quarter of 2004 were $2.0 billion, up 17% from $1.7 billion in the second quarter of 2003 reflecting higher volume ($0.3 billion) and the net effects of the weaker U.S. dollar ($0.1 billion). Volume increases resulted from the OSi acquisition and higher demand for plastic resins and quartz products. Operating profit of $0.2 billion in the second quarter of 2004 rose 20% from the second quarter of 2003 as productivity ($0.1 billion) and higher volume more than offset the effect of higher material costs ($0.1 billion), primarily for commodities such as benzene, and lower prices.

Advanced Materials revenues in the first six months of 2004 were $3.9 billion, up 15% from $3.4 billion in the first six months of 2003 as higher volume ($0.4 billion) and the net effects of the weaker U.S. dollar ($0.2 billion) more than offset lower prices ($0.1 billion). Volume increases resulted from the OSi acquisition and higher demand for plastic resins and quartz products. Operating profit of $0.3 billion in the first six months of 2004 rose 30% compared with the first six months of 2003 as productivity ($0.2 billion) more than offset the effect of higher material costs ($0.1 billion), primarily for commodities such as benzene, and lower prices ($0.1 billion).

COMMERCIAL FINANCE

 

Second quarter ended
June 30

 

Six months ended
June 30

 
 


 


 

(In millions)

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 

REVENUES

$

5,732

 

$

5,180

 

$

11,123

 

$

9,956

 
 


 


 


 


 

NET REVENUES

                       

Total revenues

$

5,732

 

$

5,180

 

$

11,123

 

$

9,956

 

Interest expense

 

1,442

   

1,462

   

2,835

   

2,935

 
 


 


 


 


 

Total net revenues

$

4,290

 

$

3,718

 

$

8,288

 

$

7,021

 
 


 


 


 


 

NET EARNINGS

$

975

 

$

832

 

$

1,930

 

$

1,702

 
 


 


 


 


 

 

               
     

At

 
     


 

(In millions)

   

6/30/04

 

6/30/03

 

12/31/03

 
     


 


 


 

TOTAL ASSETS

     

$

223,045

 

$

207,175

 

$

214,016

 
     


 


 


 

 

                       

(23)


Table of Contents

 

 

Second quarter ended
June 30

 

Six months ended
June 30

 
 


 


 

(In millions)

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 

REAL ESTATE

               

Revenues

$

598

 

$

599

 

$

1,201

 

$

1,202

 
 


 


 


 


 

Net earnings

$

215

 

$

198

 

$

445

 

$

464

 
 


 


 


 


 

AVIATION SERVICES

                       

Revenues

$

777

 

$

710

 

$

1,492

 

$

1,424

 
 


 


 


 


 

Net earnings

$

133

 

$

126

 

$

277

 

$

261

 
 


 


 


 


 

 

               
     

At

 
     


 

(In millions)

   

6/30/04

 

6/30/03

 

12/31/03

 
     


 


 


 

REAL ESTATE

                       

Total assets

     

$

31,416

 

$

29,157

 

$

27,767

 
     


 


 


 

AVIATION SERVICES

                       

Total assets

     

$

35,668

 

$

32,305

 

$

33,271

 
     


 


 


 

 

               

Commercial Finance revenues and net earnings increased 11% and 17%, respectively, from the second quarter of 2003. The increase in revenues resulted primarily from acquisitions ($0.7 billion) and origination growth, partially offset by lower securitization activity ($0.1 billion). The increase in net earnings resulted primarily from acquisitions ($0.1 billion) and origination growth, partially offset by lower securitization gains ($0.1 billion).

     Commercial Finance revenues and net earnings increased 12% and 13%, respectively, from the first six months of 2003. The increase in revenues resulted primarily from acquisitions ($1.1 billion), origination growth, and higher investment gains ($0.1 billion), partially offset by lower securitization activity ($0.1 billion). The increase in net earnings resulted primarily from acquisitions ($0.2 billion) and higher investment gains ($0.1 billion), partially offset by lower securitization gains ($0.1 billion).

     The most significant acquisitions affecting Commercial Finance results in 2004 were the U.S. leasing business of IKON Office Solutions, acquired during the second quarter of 2004; the commercial lending business of Transamerica Finance Corporation and Sophia S.A., both acquired during the first quarter of 2004; and the assets of CitiCapital Fleet Services, acquired during the fourth quarter of 2003. These businesses contributed $0.6 billion and $0.1 billion to second quarter 2004 revenues and net earnings, respectively, and $1.0 billion and $0.1 billion to revenues and net earnings, respectively, for the first six months of 2004.

(24)


Table of Contents

 

CONSUMER FINANCE

 

Second quarter ended
June 30

 

Six months ended
June 30

 
 


 


 

(In millions)

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 

REVENUES

$

3,830

 

$

3,046

 

$

7,419

 

$

5,805

 
 


 


 


 


 

NET REVENUES

                       

Total revenues

$

3,830

 

$

3,046

 

$

7,419

 

$

5,805

 

Interest expense

 

844

   

672

   

1,617

   

1,251

 
 


 


 


 


 

Total net revenues

$

2,986

 

$

2,374

 

$

5,802

 

$

4,554

 
 


 


 


 


 

NET EARNINGS

$

600

 

$

514

 

$

1,202

 

$

1,060

 
 


 


 


 


 

 

               
       

At

 
       


 

(In millions)

     

6/30/04

 

6/30/03

 

12/31/03

 
       


 


 


 

TOTAL ASSETS

     

$

116,851

 

$

97,117

 

$

106,530

 
       


 


 


 

 

                 

Consumer Finance revenues and net earnings increased 26% and 17%, respectively, from the second quarter of 2003. The increase in revenues resulted primarily from origination growth, the net effects of the weaker U.S. dollar ($0.3 billion), acquisitions ($0.2 billion) and higher securitization activity ($0.2 billion), partially offset by the 2003 divestiture of The Home Depot private label credit card receivables ($0.3 billion). The increase in net earnings resulted primarily from origination growth, acquisitions, the net effects of the weaker U.S. dollar and higher securitization activity, partially offset by the absence of The Home Depot private label credit card receivables divested in 2003.

     Consumer Finance revenues and net earnings increased 28% and 13%, respectively, from the first six months of 2003. The increase in revenues resulted primarily from acquisitions ($0.6 billion), higher securitization activity ($0.5 billion), origination growth, and the net effects of the weaker U.S. dollar ($0.5 billion), partially offset by the 2003 divestiture of The Home Depot private label credit card receivables ($0.6 billion). The increase in net earnings resulted primarily from origination growth, acquisitions, the net effects of the weaker U.S. dollar and higher securitization activity, partially offset by the absence of The Home Depot private label credit card receivables divested in 2003, and increased costs to launch new products and promote brand awareness in 2004.

          Our most significant acquisitions affecting Consumer Finance in 2004 were First National Bank, which provides mortgage and sales finance products in the United Kingdom, the U.S. retail sales finance unit of Conseco Finance Corp. (Conseco) and GC Corporation (GC Card), which provides credit card and sales finance products in Japan. We acquired First National Bank and Conseco in the second quarter of 2003, and GC Card in the third quarter of 2003. These businesses contributed $0.1 billion to second quarter 2004 revenues and $0.4 billion and $0.1 billion to revenues and net earnings, respectively, for the first six months of 2004.     

(25)


Table of Contents

 

CONSUMER & INDUSTRIAL revenues increased 6% to $3.5 billion in the second quarter of 2004 reflecting higher volume ($0.2 billion), partially offset by lower prices ($0.1 billion). Operating profit in the second quarter of 2004 rose 18% to $0.2 billion as the negative effects of lower prices ($0.1 billion) were more than offset by productivity ($0.1 billion) and higher sales of higher-margin, high-end appliances.

     Consumer & Industrial revenues increased 7% to $6.6 billion during the first half of 2004 as higher volume ($0.5 billion) and the net effects of the weaker U.S. dollar ($0.1 billion) more than offset lower prices ($0.2 billion). Operating profit in the first half of 2004 rose 17% to $0.4 billion as the negative effects of lower prices ($0.2 billion) were more than offset by productivity ($0.2 billion) and higher sales of higher-margin, high-end appliances.

ENERGY revenues fell 12% to $4.1 billion compared with $4.7 billion in the second quarter of 2003, primarily on lower volume ($0.5 billion) and lower prices ($0.2 billion), partially offset by the net effects of the weaker U.S. dollar ($0.1 billion). Energy sold 29 large heavy-duty gas turbines in the second quarter of 2004 compared with 42 units in the second quarter of 2003. Operating profit in the second quarter of 2004 fell 40% to $0.6 billion compared with second quarter 2003 on lower prices ($0.2 billion) and lower volume ($0.1 billion). Also contributing to the drop in revenues and operating profit was absence of a counterpart to $0.2 billion of net contract termination fees in 2003.

     Energy revenues fell 12% to $8.0 billion for the first six months of 2004, primarily on lower volume ($1.1 billion) and lower prices ($0.2 billion), partially offset by the net effects of the weaker U.S. dollar ($0.2 billion). Energy sold 65 large heavy-duty gas turbines in the first six months of 2004, compared with 96 units in the first six months of 2003. Operating profit in the first six months of 2004 fell 34% to $1.3 billion compared with first half 2003, reflecting lower prices ($0.2 billion) and lower volume ($0.2 billion) partially offset by lower material costs ($0.2 billion). Also contributing to the drop in revenues and operating profit was absence of a counterpart to $0.4 billion of net contract termination fees in 2003.

See GE corporate items and eliminations on page 29 for a discussion of items not allocated to this segment.

EQUIPMENT & OTHER SERVICES

 

Second quarter ended
June 30

 

Six months ended
June 30

 
 


 


 

(In millions)

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 

REVENUES

$

2,017

 

$

869

 

$

4,027

 

$

1,833

 
 


 


 


 


 

NET EARNINGS

$

68

 

$

(252

)

$

(54

)

$

(510

)

 


 


 


 


 

 

               

(26)


Table of Contents

 

Equipment & Other Services revenues and net earnings increased $1.1 billion and $0.3 billion, respectively, from the second quarter of 2003. Revenues increased as a result of the adoption of FIN 46R ($0.8 billion), primarily including operating lease rentals ($0.6 billion) and other income ($0.2 billion), and FIN 46 ($0.2 billion). The most significant entity consolidated as a result of FIN 46R was Penske, which was previously accounted for using the equity method. The increase in net earnings resulted primarily from the absence of 2003 investment losses and 2004 investment gains at GE Equity ($0.1 billion).

     Equipment & Other Services revenues and net earnings increased $2.2 billion and $0.5 billion, respectively, from the first six months of 2003. Revenues increased as a result of the adoption of FIN 46R ($1.6 billion), primarily including operating lease rentals ($1.2 billion) and other income ($0.4 billion), and FIN 46 ($0.6 billion). The increase in net earnings resulted primarily from the absence of 2003 investment losses and 2004 investment gains at GE Equity ($0.2 billion).

HEALTHCARE revenues rose 40% to $3.4 billion in the second quarter of 2004 as higher volume ($1.0 billion), primarily from the Amersham acquisition in the second quarter of 2004 ($0.7 billion) and the Instrumentarium acquisition in the fourth quarter of 2003 ($0.2 billion) combined with the net effects of the weaker U.S. dollar ($0.1 billion), more than offset lower prices ($0.1 billion). Operating profit of $0.6 billion in the second quarter of 2004 was 33% higher than 2003 as the effects of higher volume ($0.2 billion) and productivity ($0.1 billion) more than offset the effect of lower prices ($0.1 billion).

     Healthcare revenues rose 29% to $5.9 billion in the first six months of 2004 as higher volume ($1.3 billion), primarily from the Amersham acquisition in the second quarter of 2004 ($0.7 billion) and the Instrumentarium acquisition in the fourth quarter of 2003 ($0.5 billion), and the net effects of the weaker U.S. dollar ($0.2 billion) more than offset the effects of lower prices ($0.2 billion). Operating profit of $0.9 billion in the first six months of 2004 was 24% higher than in the first six months of 2003 as the effects of higher volume ($0.2 billion) and productivity ($0.2 billion) more than offset the effect of lower prices ($0.2 billion).

     See GE corporate items and eliminations on page 29 for a discussion of items not allocated to this segment.

INFRASTRUCTURE revenues of $0.9 billion in the second quarter of 2004 were 13% higher than the corresponding period in 2003 on higher volume ($0.1 billion). Operating profit of $0.1 billion in the second quarter of 2004 rose 28% reflecting the effects of productivity and higher volume.

     Infrastructure revenues of $1.6 billion in the first six months of 2004 were 14% higher than the first six months of 2003 on higher volume ($0.2 billion) principally from Osmonics and other acquisitions and the net effects of the weaker U.S. dollar ($0.1 billion). Operating profit for the first half of 2004 rose 24% to $0.2 billion reflecting productivity and higher volume, partially offset by lower prices.

(27)


Table of Contents

 

INSURANCE

 

Second quarter ended
June 30

 

Six months ended
June 30

 
 


 


 

(In millions)

2004

 

2003

 

2004

 

2003

 
 


 


 


 


 

REVENUES

$

5,554

 

$

6,792

 

$

11,507

 

$

13,160

 
 


 


 


 


 

NET EARNINGS

$

53

 

$

508

 

$

463

 

$

1,020

 
 


 


 


 



 

GE GLOBAL INSURANCE
     HOLDING (ERC)

                       

Revenues

$

2,666

 

$

3,065

 

$

5,313

 

$

5,758

 
 


 


 


 


 

Net earnings

$

142

 

$

119

 

$

282

 

$

240

 
 


 


 


 


 

 

               

Insurance revenues and net earnings decreased 18% and 90%, respectively, from the second quarter of 2003. The decrease in revenues resulted primarily from the 2003 dispositions ($0.8 billion), including GE Edison Life Insurance Company, Financial Guaranty Insurance Company and ERC Life Reinsurance Corporation; the effects of the Genworth initial public offering ($0.4 billion) and net declines in volume resulting from strategic exits of certain business channels, primarily at ERC ($0.4 billion). These decreases were partially offset by the net effects of the weaker U.S. dollar ($0.2 billion). The overall decrease in net earnings resulted primarily from the effects of the Genworth initial public offering and the 2003 dispositions referred to above, partially offset by favorable earnings at ERC, reflecting lower 2004 adverse development on prior year claim reserves.

     Insurance revenues and net earnings decreased 13% and 55%, respectively, from the first six months of 2003. The decrease in revenues resulted primarily from the 2003 dispositions ($1.5 billion), including GE Edison Life Insurance Company, Financial Guaranty Insurance Company and ERC Life Reinsurance Corporation; net declines in volume resulting from strategic exits of certain business channels, primarily at ERC ($0.6 billion) and the effects of the Genworth initial public offering ($0.4 billion). These decreases were partially offset by the net effects of the weaker U.S. dollar ($0.3 billion) and continued favorable pricing at ERC ($0.1 billion). The overall decrease in net earnings resulted primarily from the effects of the Genworth initial public offering and the 2003 dispositions referred to above, partially offset by favorable earnings at ERC, reflecting lower 2004 adverse development on prior year claim reserves.

NBC UNIVERSAL reported a 47% increase in revenues to $2.9 billion in the second quarter of 2004 reflecting higher volume ($0.8 billion), $0.7 billion of which related to the second quarter 2004 merger of NBC with Vivendi Universal Entertainment LLLP (VUE). NBC Universal reported operating profit of $0.8 billion, up 12% from the second quarter of 2003 as a result of the higher volume ($0.3 billion) and higher prices ($0.1 billion), partially offset by higher operating costs ($0.1 billion).

(28)


Table of Contents

 

     NBC Universal reported a 30% increase in revenues to $4.4 billion for the first six months of 2004 reflecting higher volume ($0.9 billion), primarily from the second quarter merger of NBC with VUE. Also contributing to the increase in revenues were price increases ($0.1 billion) and lack of a current period counterpart to lower advertising revenues in 2003 because of the broadcast coverage of the war in Iraq. NBC Universal reported operating profit of $1.2 billion for the first half of 2004, up 13% as a result of higher volume ($0.3 billion) and higher prices ($0.1 billion), partially offset by higher operating costs.

TRANSPORTATION revenues of $3.9 billion increased 15% from the second quarter of 2003 on higher volume ($0.5 billion) including increased sales in military, commercial engines and locomotives. Operating profit increased 18% to $0.8 billion as higher volume more than offset the effects of higher operating costs.

     Transportation revenues of $7.3 billion for the first six months of 2004 rose 15% over 2003 on higher volume ($0.8 billion) including increased sales in military, commercial engines and locomotives. Operating profit increased 17% to $1.4 billion for the first half of 2004 as higher volume more than offset the effects of higher operating costs.

GE CORPORATE ITEMS AND ELIMINATIONS expense increased compared with the second quarter of 2003, reflecting $0.3 billion of Healthcare charges, principally related to the write off of in-process research and development projects and other transitional costs associated with the acquisition of Amersham, and a $0.3 billion reduction in pension earnings compared with the second quarter of 2003, partially offset by a $0.1 billion gain on the sale of Energy's fuel dispenser business.

     GE corporate items and eliminations expense for the first half of 2004 increased compared with 2003, reflecting $0.3 billion of Healthcare charges, principally related to the write off of in-process research and development projects and other transitional costs associated with the acquisition of Amersham, and a $0.6 billion reduction in pension earnings compared with the second half of 2003, partially offset by a $0.1 billion gain on the sale of Energy's fuel dispenser business.

B. Financial Condition

Overview of Financial Position

Major changes in our financial position resulted from the following.

(29)


Table of Contents

 

     Consolidated assets of $697.1 billion at June 30, 2004, were $49.6 billion higher than at December 31, 2003. GE assets increased $37.1 billion; GECS assets increased $14.4 billion.

     GE assets were $179.2 billion at June 30, 2004, an increase of $37.1 billion from December 31, 2003. The increase reflects a $23.1 billion increase in intangible assets and a $7.2 billion increase in All other assets, primarily from the merger of VUE with NBC and the Amersham acquisition. Current receivables and property, plant and equipment also increased $2.4 billion and $1.8 billion, respectively primarily as a result of these two transactions.

     Financial services assets increased by $14.4 billion from the end of 2003 primarily because of increases in buildings and equipment and financing receivables. Buildings and equipment increased to $44.9 billion at June 30, 2004, from $38.8 billion at December 31, 2003, primarily reflecting the consolidation of Penske. Financing receivables, before allowance for losses, increased to $259.3 billion at June 30, 2004, from $254.2 billion at December 31, 2003, primarily from acquisitions ($14.0 billion) and origination growth ($8.4 billion), partially offset by securitization and sales ($11.4 billion), and repayments of financing receivables held in consolidated, liquidating securitization entities ($5.0 billion).

     Consolidated liabilities of $582.1 billion at June 30, 2004, were $20.0 billion higher than the year-end 2003 balance. GE liabilities increased $11.1 billion; GECS liabilities increased $10.2 billion.

     GE liabilities of $72.9 billion increased $11.1 billion from December 31, 2003. Primarily as a result of the merger of VUE with NBC and the Amersham acquisition, all other liabilities increased $4.4 billion, deferred income taxes increased $3.1 billion, and long-term borrowings increased $2.5 billion, while short-term borrowings decreased $1.3 billion. GE's ratio of debt to total capital, including NBCU preferred shares, at the end of June 2004 was 10.7% compared with 12.0% at the end of last year and 13.0% at June 30, 2003.

     Financial services liabilities increased by $10.2 billion to $514.3 billion reflecting increases in borrowings of $5.0 billion and Insurance liabilities, reserves and annuity benefits of $1.8 billion. Insurance liabilities, reserves and annuity benefits increased primarily from growth in long-term care insurance, structured settlements, annuities and separate accounts.

     Consolidated cash and equivalents were $10.3 billion at June 30, 2004, compared with $12.7 billion at December 31, 2003. The decrease reflects lower short-term cash needs.

(30)


Table of Contents

 

     GE cash and equivalents increased $1.1 billion during the first half of 2004 to $2.8 billion at June 30, 2004. GE cash from operating activities (CFOA) in 2004 totaled $6.8 billion, 61% more than reported for the first half of 2003. The most significant source of cash in CFOA is customer-related activities, the largest of which is collecting cash following a product or services sale. GE cash collections from customer-related activities were about $37.9 billion in the first of half of 2004, an increase of about $4.1 billion from the first half of 2003. This increase correlates with the change in comparable GE operating segment revenues. The most significant operating use of cash is to pay our suppliers, employees and others for the wide range of material and services necessary in a diversified global organization. GE cash paid to suppliers, employees and others was about $32.0 billion in the first half of 2004, an increase of about $3.3 billion from the first half of 2003. CFOA also included cash dividends from GECS. These dividends totaled $1.8 billion in 2004 (including special dividends of $1.5 billion, primarily proceeds from the Genworth public offering) and $0.3 billion in 2003. GE cash used for investing activities in 2004 totaled $3.9 billion, $3.4 billion of which was used for business acquisitions. GE cash used for financing activities totaled $1.8 billion at June 30, 2004, and included $4.0 billion for dividends paid to shareowners; $4.0 billion of net stock issuances, most of which was used to fund part of the consideration in the NBCU merger, and a $4.3 billion decrease of debt with maturities of 90 days or less partially offset by a $2.6 billion increase in long-term debt.

     GE cash and equivalents increased $0.1 billion during the first half of 2003 to $1.2 billion at June 30, 2003. Cash provided from operating activities was $4.2 billion during the first six months of 2003, compared with $3.5 billion in the first half of 2002, reflecting lower progress collections and increases in current receivables, partially offset by more earnings retained by GECS. Progress collections are primarily payments received from customers in advance of the sale of heavy-duty gas turbines and aircraft engines. Had collections occurred at the time of sale, cash provided from operating activities would have been $5.5 billion in 2003 compared with $6.1 billion in 2002. Cash used for investing activities ($1.6 billion) during the first six months of 2003 was $7.1 billion lower than in 2002 when $7.5 billion was used for business acquisitions. Cash used for financing activities ($2.5 billion) included $3.8 billion for dividends paid to shareowners and reflected issuances of new longer-term debt ($5.3 billion), partially offset by a $4.1 billion decrease in debt with maturities of 90 days or less.

     Financial services cash and equivalents decreased by $3.3 billion during the first half of 2004 to $8.0 billion. Cash provided from operating activities was $13.1 billion during the first half of 2004, compared with $7.7 billion during the first half of 2003. The increase in cash from operating activities was largely attributable to increases in accounts payable and higher premium deposits received in the current year at Insurance. The use of GECS cash in the first half of 2004 for investing activities was $15.8 billion compared with $23.8 billion in the same 2003 period. The decrease was largely attributable to financing receivables, additions to property, plant and equipment (including equipment leased to others), primarily offset by business acquisitions. Cash used for financing activities totaled $0.6 billion in the first half of 2004.

(31)


Table of Contents

 

     Financial services cash and equivalents decreased by $1.5 billion during the first half of 2003 to $6.4 billion (including $0.6 billion classified as assets held for sale). Cash provided from operating activities was $7.7 billion during the first six months of 2003, compared with $8.8 billion during the first half of 2002. The decrease in cash from operating activities compared with 2002 was largely attributable to lack of a current year counterpart to the prior year increase in reserves for insurance affiliates, partially offset by an increase in accounts payable. Cash from financing activities totaled $14.6 billion, reflecting net additions of debt. The principal use of GECS cash during the period was for investing activities ($23.8 billion), a majority of which was attributable to financing receivables, business acquisitions and additions to property, plant and equipment (including equipment leased to others).

C. Financial Services Portfolio Quality

INVESTMENT SECURITIES comprise mainly investment-grade debt securities held by Insurance in support of obligations to annuitants and policyholders. Investment securities were $122.5 billion at June 30, 2004, compared with $121.9 billion at December 31, 2003. The increase of $0.6 billion was the net result of investing premiums received and reinvesting investment income ($3.1 billion), partially offset by declines in debt markets.

     We regularly review investment securities for impairment based on criteria that include the extent to which cost exceeds market value, the duration of that market decline and the financial health and specific prospects for the issuer. Of securities with unrealized losses at June 30, 2004, approximately $0.1 billion was at risk of being charged to earnings in the next twelve months; approximately half of this amount related to commercial airlines.

     Impairment losses for the first six months of 2004 totaled $0.1 billion compared with $0.4 billion in the comparable 2003 period. Impairments in both periods were recognized for issuers in a variety of industries; we do not believe that any of the impairments indicated likely future impairments in the remaining portfolio.

     Gross unrealized gains and losses were $3.1 billion and $2.2 billion, respectively, at June 30, 2004, compared with $4.6 billion and $1.2 billion, respectively, at year end 2003, primarily reflecting a decrease in the estimated fair value of debt securities as interest rates increased. We estimate that available gains, net of resulting impairment of insurance intangible assets, could be as much as $1.5 billion at June 30, 2004. The market values we used in determining unrealized gains and losses are those defined by relevant accounting standards and should not be viewed as a forecast of gains or losses.

     Investment securities collateralized by commercial aircraft and in an unrealized loss position for twelve months or more as of June 30, 2004, had an aggregate amortized cost of $1.2 billion and an estimated fair value of $0.8 billion. We believe that these securities are in an unrealized loss position because of ongoing negative market reaction to difficulties in the commercial airline industry. Of this $0.4 billion of unrealized losses on securities that have been trading below amortized cost for more than 12 months, approximately 99% is related to securities that are current on all contractual principal and interest terms. For these securities, we do not foresee changes in the timing and amount of estimated cash flows and expect full recovery of our amortized cost. Further, should our cash flow expectation prove to be incorrect, the current market values of aircraft collateral, as obtained from independent appraisers, exceeded both the market value and amortized cost of our securities.

(32)


Table of Contents

 

FINANCING RECEIVABLES is our largest category of assets and represents one of our primary sources of revenues. The portfolio of financing receivables, before allowance for losses, increased to $259.3 billion at June 30, 2004, from $254.2 billion at December 31, 2003, as discussed in the following paragraphs. The related allowance for losses at June 30, 2004, amounted to $6.6 billion compared with $6.3 billion at December 31, 2003, representing our best estimate of probable losses inherent in the portfolio.

     A discussion of the quality of certain elements of the financing receivables portfolio follows. For purposes of that discussion, "delinquent" receivables are those that are 30 days or more past due; "nonearning" receivables are those that are 90 days or more past due (or for which collection has otherwise become doubtful); and "reduced-earning" receivables are commercial receivables whose terms have been restructured to a below-market yield.

     Commercial Finance financing receivables, before allowance for losses, totaled $142.4 billion at June 30, 2004, compared with $135.7 billion at December 31, 2003, and consisted of loans and leases to the equipment, commercial and industrial, real estate and commercial aircraft industries. This portfolio of receivables increased primarily from acquisitions ($13.2 billion) and origination growth ($5.2 billion), partially offset by securitizations and sales ($11.0 billion) and the net effects of foreign currency translation ($0.4 billion). Related nonearning and reduced-earning receivables were $1.8 billion (1.2% of outstanding receivables) at June 30, 2004, compared with $1.7 billion (1.3% of outstanding receivables) at December 31, 2003. Commercial Finance financing receivables are generally backed by assets and there is a broad spread of geographic and credit risk in the portfolio. Gross write-offs were $0.3 billion and $0.6 billion for the first six months of 2004 and 2003, respectively; recoveries were modest.

     Consumer Finance financing receivables, before allowance for losses, were $98.6 billion at June 30, 2004, compared with $94.7 billion at December 31, 2003, and consisted primarily of card receivables, installment loans, auto loans and leases, and residential mortgages. This portfolio of receivables increased as a result of origination growth ($3.2 billion), acquisitions ($0.8 billion) and the net effects of foreign currency translation ($0.4 billion), partially offset by securitization activity ($0.4 billion). Nonearning consumer receivables at June 30, 2004, were $2.6 billion (2.6% of outstanding receivables), compared with $2.5 billion (2.6% of outstanding receivables) at December 31, 2003. This is the result of growth in our secured financing business, a business that tends to experience relatively higher delinquencies but relatively lower losses than the rest of our consumer portfolio, offset by improved portfolio quality and collection results. Gross write-offs for the first six months of 2004 were $1.7 billion compared with $1.4 billion for the first six months of 2003. Recoveries for the first six months of 2004 were $0.4 billion, the same as the 2003 period.

     Equipment & Other Services financing receivables, before allowance for losses, amounted to $18.3 billion and $23.8 billion at June 30, 2004, and December 31, 2003, respectively and consisted primarily of financing receivables in consolidated, liquidating securitization entities, that were consolidated as a result of adoption of FIN 46. This portfolio of receivables decreased because we have ceased transferring assets to these entities. Nonearning receivables at June 30, 2004, were $0.1 billion (0.8% of outstanding receivables), compared with $0.1 billion (0.6% of outstanding receivables) at December 31, 2003.

(33)


Table of Contents

 

     Approximate delinquency rates on managed Commercial Finance equipment loans and leases and Consumer Finance financing receivables follow.

At


6/30/04

12/31/03

6/30/03




Commercial Finance

1.67

%

1.37

%

1.84

%

Consumer Finance

5.58

%

5.57

%

5.81

%

 

     Delinquency rates at Commercial Finance increased from December 31, 2003 to June 30, 2004, reflecting collection results. The decline from June 30, 2003 to June 30, 2004, reflects improved economic conditions and collection results.

     Delinquency rates at Consumer Finance increased slightly from December 31, 2003 to June 30, 2004, as a result of growth in our secured financing business, partially offset by improved portfolio quality. The decline from June 30, 2003 to June 30, 2004, reflects improved portfolio quality and collection results, partially offset by growth in our secured financing business.

D. Additional Considerations

Commercial Airlines

     For our total commercial airline portfolio, we recognized impairment losses on leases, loans and investment securities of $0.1 billion in the first six months of 2004, the same as the first six months of 2003. Equipment under operating leases is subject to our routine impairment review process, which we conduct at least annually considering current and estimated future lease rates as well as customer prospects. We regularly and comprehensively evaluate the recoverability of our loan and investment securities portfolio and assess prospects of our customers. Based upon our consideration of relevant factors, we do not believe that any of our positions is impaired at June 30, 2004.

     Three commercial airline customers are, or have recently been, operating under bankruptcy protection. Following is a discussion of those airlines.

     US Airways Group, parent of US Airways, emerged from its 2002 bankruptcy on March 31, 2003. Our June 30, 2004, US Airways position of $3.0 billion comprised loans, leases, investment securities and commitments, all substantially secured by various equipment, including aircraft. During 2004, as US Airways continued to experience financial difficulties and debt rating downgrade, we negotiated improved terms on our previously committed regional jet financing and obtained certain cross-default provisions. We continue to monitor US Airways' progress in implementing the revised business plan under which all of our obligations would be satisfied in accordance with their terms.

     UAL Corp., the parent company of United Airlines, is currently operating under bankruptcy protection. Our June 30, 2004, United Airlines position of $1.6 billion comprised loans fully secured by commercial aircraft and assets subject to operating leases.

(34)


Table of Contents

 

     Air Canada is currently operating under Canadian bankruptcy protection. Our June 30, 2004, Air Canada position of $2.6 billion was fully secured and comprised debtor-in-possession (DIP) financing during the reorganization period as well as loan and lease arrangements. A significant portion of Air Canada's lease obligations to us is cross-collateralized by security for the DIP facility.

E. Debt Instruments

     During the first six months of 2004, GECS and GECS affiliates issued $27 billion of long-term debt, including $3 billion issued by Genworth in connection with the initial public equity offering described on page 19. This debt was both fixed and floating rate, and was issued to institutional and retail investors in the U.S. and 14 other global markets . Maturities ranged from one to 30 years. We used the proceeds primarily for repayment of maturing long-term debt, but also for acquisitions and organic growth. We anticipate that we will issue between $26 billion and $31 billion of additional long-term debt during the remainder of 2004, although the ultimate amount we issue will depend on our needs and on the markets.

     Following is an analysis of GECS debt obligations other than debt of consolidated, liquidating securitization entities at June 30, 2004, and December 31, 2003.

 

At June 30, 2004

 

At December 31, 2003

 


 


Senior notes

54

%

 

55

%

Commercial paper

27

   

27

 

Current portion of long-term debt

14

   

13

 

Other – bank and other retail deposits

5

   

5

 
 


   


 

Total

100

%

 

100

%

 


   


 

 

         

During the first six months of 2004, GECS paid $1.5 billion of special dividends to GE, of which $1.3 billion was generated from the proceeds of the Genworth initial public offering and $0.2 billion was related to more efficient capital management in the Insurance segment.

Item 4. Controls and Procedures

     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 (i) our disclosure controls and procedures were effective as of June 30, 2004, and (ii) no change in internal control over financial reporting occurred during the quarter ended June 30, 2004, that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

(35)


Table of Contents

 

Part II. Other Information

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

(Shares in thousands)

 

Period

 

Total number
of shares
purchased(a)

 

Average
price paid
per share

 

Total number of
shares purchased as
part of our share
repurchase program(b)

 

Approximate dollar
value of shares that
may yet be purchased
under our share
repurchase program

 


 


 


 


 


 

2004

                     

April

 

2,581

 

$

30.86

 

770

       

May

 

4,926

 

$

30.60

 

640

       

June

 

6,440

 

$

32.11

 

375

       
   


     


     

Total

13,947

 

$

31.34

 

1,785

 

$

6.9 billion

 
   


     


     
 

 

 

(a)

This category includes 12,162 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 401(k) features, we repurchase shares resulting from changes in investments options by plan participants.

 

(b)

This balance represents the number of shares repurchased through the 1994 GE Share Repurchase Program (the Program) under which we are authorized to repurchase up to $30 billion of Company common stock. The Program is flexible and shares are acquired with a combination of borrowings and free cash flow. As major acquisitions or other circumstances warrant, we modify the frequency and amount of share repurchases under the repurchase program.

 
   
   

 

Item 4. Submission of Matters to a Vote of Security Holders

 

 

(a)

The annual meeting of Shareowners of General Electric Company was held on April 28, 2004.

(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

       
     


       
     

For

 

Against

 

Abstain

 

Broker
Non-votes

     


 


 


 


Management Proposals

               

 

               

Ratification of selection of independent
     auditors for 2004

 

8,270,709,190

 

234,409,793

 

70,680,958

 

0

Approval of revenue measurement added to
     executive officer performance goals 

 

5,958,210,579

 

458,555,878

 

140,697,086

 

0

 

               

(36)


Table of Contents

 

Shareowner Proposals

               

 

               

(1)

Relating to cumulative voting

 

1,299,316,778

 

4,889,543,832

 

368,602,934

 

2,018,336,397

(2)

Relating to animal testing

 

229,861,074

 

5,729,954,497

 

597,647,973

 

2,018,336,397

(3)

Relating to nuclear risk

 

435,993,763

 

5,610,137,940

 

511,331,841

 

2,018,336,397

(4)

Relating to report on PCB
     cleanup costs

 

768,543,010

 

5,280,418,318

 

508,502,216

 

2,018,336,397

(5)

Relating to offshore sourcing

 

491,662,430

 

5,563,930,559

 

501,870,555

 

2,018,336,397

(6)

Relating to sustainability index

 

434,552,079

 

5,517,739,472

 

605,171,993

 

2,018,336,397

(7)

Relating to compensation
     committee independence

 

1,049,134,865

 

5,396,716,586

 

111,612,093

 

2,018,336,397

(8)

Relating to pay disparity

 

542,787,927

 

5,741,104,742

 

273,570,875

 

2,018,336,397

(9)

Relating to ending stock options
     and bonuses

 

377,613,162

 

6,060,495,398

 

119,354,982

 

2,018,336,397

(10)

Relating to limiting outside
     directorships

 

1,511,576,709

 

4,889,051,697

 

156,835,138

 

2,018,336,397

(11)

Relating to independent Board
     Chairman

 

1,200,390,958

 

5,244,547,176

 

112,525,410

 

2,018,336,397

(12)

Relating to exploring sale of company

 

154,126,970

 

6,261,635,342

 

141,701,232

 

2,018,336,397

(13)

Relating to holding stock from
     stock options

 

502,752,236

 

5,875,910,595

 

178,800,713

 

2,018,336,397

(14)

Relating to Board independence

 

893,594,223

 

5,544,043,315

 

119,826,006

 

2,018,336,397

(15) 

Relating to political contributions

 

600,264,336

 

5,456,617,878

 

500,581,328

 

2,018,336,397

 

                 

(37)


Table of Contents

 

Election of Directors

               

Director

         

Votes
Received

 

Votes
Withheld

           


 


James I. Cash, Jr.

         

8,303,352,633

 

272,447,308

Dennis D. Dammerman

         

8,370,753,461

 

205,046,480

Ann M. Fudge

         

8,421,080,720

 

154,719,221

Claudio X. Gonzalez

         

7,091,587,693

 

1,484,212,248

Jeffrey R. Immelt

         

8,370,043,648

 

205,756,293

Andrea Jung

         

8,408,049,115

 

167,750,826

Alan G. (A.G.) Lafley

         

8,400,552,385

 

175,247,556

Kenneth G. Langone

         

8,093,461,881

 

482,338,060

Ralph S. Larsen

         

8,423,207,454

 

152,592,487

Rochelle B. Lazarus

         

8,424,591,790

 

151,208,151

Sam Nunn

         

8,231,080,024

 

344,719,917

Roger S. Penske

         

8,220,926,293

 

354,873,648

Robert J. Swieringa

         

8,315,197,097

 

260,602,844

Douglas A. Warner III

         

8,287,209,777

 

288,590,164

Robert C. Wright

         

8,376,383,119

 

199,416,822

Item 6. Exhibits and Reports on Form 8-K

a.

Exhibits

 

 

 
 

Exhibit 11 

Computation of Per Share Earnings*

 

 

 
 

Exhibit 12

Computation of Ratio of Earnings to Fixed Charges

 

 

 
 

Exhibit 31(a)

Certifications of CEO Pursuant to Rule 13a-14(a) under the Exchange Act

 

 

 
 

Exhibit 31(b)

Certifications of CFO Pursuant to Rule 13a-14(a) under the Exchange Act

 

 

 
 

Exhibit 32

Certifications 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 7 to the condensed, consolidated financial statements in this report.

 

 

 

(38)


Table of Contents

 

b.

Reports on Form 8-K during the quarter ended June 30, 2004.

 

 

 

A Form 8-K was filed on April 6, 2004, under Items 5 and 7, relating to an Underwriting Agreement entered into on March 8, 2004, covering our sale of 119,385,000 shares of GE common stock.

 

 

 

A Form 8-K was furnished on April 8, 2004, under Items 5, 7, 9 and 12, relating to GE's April 8, 2004, press release setting forth GE's first quarter 2004 earnings.

 

 

 

A Form 8-K/A was filed on April 19, 2004, under Items 5 and 7, correcting an arithmetic error in GE's Form 8-K filed on March 30, 2004 which provided information about the January 1, 2004, reorganization of our businesses.

 

 

 

A Form 8-K was filed on June 14, 2004, under Items 5 and 7, relating to William Castell's election as Vice Chairman of our Board of Directors.

(39)


Table of Contents

 

Signatures

     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 30, 2004

 

/s/ Philip D. Ameen


 


Date

 

Philip D. Ameen
Vice President and Comptroller
Duly Authorized Officer and Principal Accounting Officer

(40)