A. Results of Operations

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

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

Unless otherwise indicated, we refer to captions such as revenues and earnings from continuing operations attributable to the Company simply as "revenues" and "earnings" throughout this Management's Discussion and Analysis. Similarly, discussion of other matters in our condensed, consolidated financial statements relates to continuing operations unless otherwise indicated.

Overview

Earnings from continuing operations attributable to the Company decreased 47% to $2.865 billion in the second quarter of 2009 compared with $5.394 billion in the second quarter of 2008. Earnings per share (EPS) from continuing operations were $0.26 in the second quarter of 2009, down 52% compared with $0.54 in the second quarter of 2008.

For the first six months of 2009, earnings from continuing operations attributable to the Company decreased 42% to $5.697 billion compared with $9.745 billion for the same period in 2008. EPS from continuing operations were $0.52 in the first six months of 2009, down 47% compared with $0.98 in the first six months of 2008.

Loss from discontinued operations, net of taxes, was $0.2 billion in the second quarter of 2009 compared with $0.3 billion in the second quarter of 2008, and included the results of GE Money Japan (our Japanese personal loan business, Lake, and Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd.), our U.S. mortgage business (WMC), Plastics, Advanced Materials, most of GE Insurance Solutions Corporation (GE Insurance Solutions), GE Life and Genworth Financial, Inc. (Genworth).

Loss from discontinued operations, net of taxes, was $0.2 billion for the first six months of 2009 compared with $0.4 billion for the same period in 2008.

Net earnings attributable to GE common shareowners decreased 49% to $2.596 billion and EPS decreased 53% to $0.24 in the second quarter of 2009 compared with $5.072 billion and $0.51, respectively, in the second quarter of 2008.

For the first six months of 2009, net earnings attributable to GE common shareowners decreased 43% to $5.332 billion, compared with $9.376 billion for the same period in 2008, and EPS decreased 47% to $0.50, compared with $0.94 in the first six months of 2008.

Revenues of $39.1 billion in the second quarter of 2009 were 17% lower than in the second quarter of 2008, reflecting organic revenue declines, the stronger U.S. dollar and the net effects of acquisitions and dispositions. Industrial sales decreased 7% to $26.0 billion, reflecting the stronger U.S. dollar and organic revenue declines. Sales of product services (including sales of spare parts and related services) decreased 6% to $9.0 billion in the second quarter of 2009. Financial services revenues decreased 29% over the comparable period of last year to $13.4 billion, reflecting organic revenue declines, the stronger U.S. dollar and the net effects of acquisitions and dispositions.

Revenues of $77.5 billion for the first six months of 2009 were 13% lower than revenues of $89.1 billion for the first six months of 2008. Industrial sales of $50.0 billion were 4% lower than in 2008 reflecting the stronger U.S. dollar and organic revenue declines. Financial services revenues for the first six months of 2009 decreased 25% to $27.9 billion as a result of organic revenue declines, the stronger U.S. dollar and the net effects of acquisitions and dispositions.

Overall, acquisitions contributed $1.4 billion and $2.1 billion to consolidated revenues in the second quarters of 2009 and 2008, respectively. Our consolidated earnings in the second quarters of 2009 and 2008 included approximately $0.4 billion and $0.3 billion, respectively, from acquired businesses. We integrate acquisitions as quickly as possible. Only revenues and earnings from the date we complete the acquisition through the end of the fourth following quarter are attributed to such businesses. Dispositions also affected our operations through lower revenues of $1.8 billion and an insignificant amount in the second quarters of 2009 and 2008, respectively. The effect of dispositions on earnings was an insignificant amount and an increase of $0.1 billion in the second quarters of 2009 and 2008, respectively.

Acquisitions contributed $2.6 billion and $4.4 billion to consolidated revenues in the first six months of 2009 and 2008, respectively. Our consolidated net earnings in the first six months of 2009 and 2008 included approximately $0.8 billion and $0.4 billion, respectively, from acquired businesses. Dispositions also affected our operations through lower revenues of $1.9 billion in the first six months of 2009 and higher revenues of $0.5 billion in the first six months of 2008. The effect of dispositions on earnings was an increase of $0.4 billion in both the first six months of 2009 and 2008.

The most significant acquisitions affecting results in 2009 were Airfoils Technologies International - Singapore Pte. Ltd. (ATI-Singapore) and Vital Signs, Inc. at Technology Infrastructure; Hydril Pressure Control at Energy Infrastructure; and CitiCapital, BAC Credomatic (BAC), Bank BPH and Interbanca S.p.A. at Capital Finance.

Segment Operations

Operating segments comprise our five businesses focused on the broad markets they serve: Energy Infrastructure, Technology Infrastructure, NBC Universal, Capital Finance and Consumer & Industrial.

Segment profit is determined based on internal performance measures used by the Chief Executive Officer to assess the performance of each business in a given period. In connection with that assessment, the Chief Executive Officer may exclude matters such as charges for restructuring; rationalization and other similar expenses; in-process research and development and certain other acquisition-related charges and balances; technology and product development costs; certain gains and losses from acquisitions or dispositions; and litigation settlements or other charges, responsibility for which preceded the current management team.

Segment profit always excludes the effects of principal pension plans, results reported as discontinued operations, earnings attributable to noncontrolling interests of consolidated subsidiaries and accounting changes. Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segment's management is measured - excluded in determining segment profit, which we sometimes refer to as "operating profit," for Energy Infrastructure, Technology Infrastructure, NBC Universal and Consumer & Industrial; included in determining segment profit, which we sometimes refer to as "net earnings," for Capital Finance.

We have reclassified certain prior-period amounts to conform to the current-period's presentation. In addition to providing information on segments in their entirety, we have also provided supplemental information for certain businesses within the segments.

Energy Infrastructure
                  Three months ended June 30         Six months ended June 30
(In millions)            2009              2008            2009             2008

Revenues       $       9,577     $       9,671    $     17,816     $     17,395

Segment profit $       1,792     $       1,579    $      3,065     $      2,649

Revenues
  Energy(a)    $       7,803     $       7,912    $     14,744     $     14,268
  Oil & Gas            1,948             1,895           3,491            3,430

Segment profit
  Energy(a)    $       1,542     $       1,346    $      2,692     $      2,283
  Oil & Gas              283               255             462              416

(a) Effective January 1, 2009, our Water business was combined with Energy. Prior-period amounts were reclassified to conform to the current-period's presentation.

Energy Infrastructure revenues decreased 1%, or $0.1 billion, in the second quarter of 2009 as higher prices ($0.4 billion) and higher volume ($0.1 billion) were more than offset by the stronger U.S. dollar ($0.4 billion) and lower other income ($0.2 billion), primarily related to marks on foreign currency contracts and the lack of a current-year counterpart to a transaction gain. Higher prices were primarily at Energy. Higher volume at Oil & Gas, primarily related to increased equipment sales, was somewhat offset by lower volume at Energy related to decreases in sales of services. The effects of the stronger U.S. dollar were at both Oil & Gas and Energy.

Segment profit increased 13%, or $0.2 billion, as higher prices ($0.4 billion) and lower material and other costs ($0.1 billion) were partially offset by lower other income ($0.3 billion), primarily related to marks on foreign currency contracts and the lack of a current-year counterpart to a transaction gain. Lower material and other costs were primarily at Energy.

Energy Infrastructure revenues increased 2%, or $0.4 billion, in the first six months of 2009 on higher volume ($0.9 billion), including customer contract termination fees, and higher prices ($0.7 billion), partially offset by the stronger U.S. dollar ($0.8 billion) and lower other income ($0.4 billion), primarily related to marks on foreign currency contracts and the lack of a current-year counterpart to a transaction gain. The increase in volume reflected increased sales of thermal equipment at Energy, and the effects of acquisitions and increased equipment sales at Oil & Gas. The increase in price was primarily at Energy and the effects of the stronger U.S. dollar were at both Oil & Gas and Energy.

Segment profit for the first six months of 2009 increased 16%, or $0.4 billion, as higher prices ($0.7 billion), higher volume ($0.1 billion) and the effects of productivity ($0.1 billion) were partially offset by lower other income ($0.4 billion), primarily related to marks on foreign currency contracts and the lack of a current-year counterpart to a transaction gain. The increase in volume was at both Energy and Oil & Gas, while the effects of productivity were primarily at Oil & Gas. Included in segment results was a decrease of $0.2 billion to revenues and $0.1 billion to segment profit related to a change in estimate of measuring progress towards long-term contract completion at Vetco Gray.

Technology Infrastructure
                          Three months ended June 30         Six months ended June 30
(In millions)                    2009              2008            2009             2008

Revenues               $      10,555     $      11,851    $     20,991     $     22,311

Segment profit         $       1,833     $       2,056    $      3,636     $      3,757

Revenues
  Aviation             $       4,619     $       4,923    $      9,436     $      9,243
  Enterprise Solutions           918             1,235           1,831            2,340
  Healthcare                   3,964             4,491           7,509            8,378
  Transportation               1,069             1,202           2,240            2,350

Segment profit
  Aviation             $         923     $         914    $      2,003     $      1,689
  Enterprise Solutions            90               162             192              316
  Healthcare                     590               747           1,001            1,275
  Transportation                 236               241             453              495

Technology Infrastructure revenues decreased 11%, or $1.3 billion, in the second quarter of 2009 as lower volume ($1.1 billion) and the stronger U.S. dollar ($0.3 billion) were partially offset by higher prices ($0.1 billion). The decrease in volume was across all businesses in the segment. The effects of the stronger U.S. dollar were primarily at Healthcare and Enterprise Solutions. Higher prices were primarily at Aviation.

Segment profit decreased 11%, or $0.2 billion, primarily from lower volume ($0.3 billion), partially offset by higher prices ($0.1 billion). The decrease in volume was across all businesses in the segment.

Technology Infrastructure revenues decreased 6%, or $1.3 billion, in the first six months of 2009 as lower volume ($1.3 billion) and the stronger U.S. dollar ($0.6 billion) were offset by higher prices ($0.2 billion) and gains related to acquisitions and dispositions ($0.4 billion), including the ATI-Singapore acquisition and the Times Microwave Systems disposition. The decrease in volume was across all businesses in the segment. The effects of the stronger U.S. dollar were at Healthcare, Enterprise Solutions and Aviation. Higher prices were primarily at Aviation.

Segment profit for the first six months of 2009 decreased 3%, or $0.1 billion, primarily from lower volume ($0.4 billion), higher labor and other costs ($0.1 billion) and lower productivity ($0.1 billion), partially offset by higher prices ($0.2 billion) and gains related to acquisitions and dispositions ($0.4 billion), including the ATI-Singapore acquisition and the Times Microwave Systems disposition. The decrease in volume was across all businesses in the segment. The increase in labor and other costs primarily related to Aviation. The effects of productivity related to Healthcare, Transportation and Enterprise Solutions, partially offset by Aviation.

NBC Universal revenues of $3.6 billion decreased 8%, or $0.3 billion, in the second quarter of 2009 on lower earnings and impairments related to associated companies and investment securities ($0.2 billion) and lower advertising revenues in our broadcast television business ($0.1 billion). Segment profit of $0.5 billion decreased 41%, or $0.4 billion, on lower earnings and impairments related to associated companies and investment securities ($0.3 billion), the effects of lower advertising revenues in our broadcast television business ($0.1 billion) and lower earnings in film ($0.1 billion).

NBC Universal revenues of $7.1 billion for the first six months of 2009 decreased 5%, or $0.4 billion, compared to the comparable period of 2008 on lower earnings and impairments related to associated companies and investment securities ($0.3 billion), lower revenues in film ($0.1 billion) and lower revenues in our broadcast television business ($0.1 billion), partially offset by higher revenues in our cable business ($0.1 billion). Broadcast television results reflect lower advertising revenues, partially offset by revenues from the 2009 Super Bowl broadcast. Segment profit of $0.9 billion decreased 43%, or $0.7 billion, on lower earnings and impairments related to associated companies and investment securities ($0.4 billion), lower earnings in our broadcast television business ($0.3 billion) and lower earnings in film ($0.2 billion), partially offset by higher earnings in our cable business ($0.1 billion).

Capital Finance
                  Three months ended June 30        Six months ended June 30
(In millions)            2009              2008             2009          2008

Revenues       $      12,797     $      17,981    $      25,885     $  34,950

Segment profit $         590     $       2,903    $       1,709     $   5,582




                                  At
               June 30,      June 30,      December 31,
(In millions)    2009          2008           2008

Total assets  $  557,169    $  628,232    $     572,903




                                Three months ended June 30         Six months ended June 30
(In millions)                          2009              2008              2009          2008

Revenues
  Commercial Lending and     $                 $                 $                 $
Leasing (CLL)(a)                     5,219             7,217            10,797        13,823
  Consumer (formerly GE
Money)(a)                            4,883             6,656             9,630        13,096
  Real Estate                        1,013             1,964             1,988         3,847
  Energy Financial Services            490               989             1,134         1,759
  GE Capital Aviation
Services (GECAS)                     1,192             1,155             2,336         2,425

Segment profit
  CLL(a)                     $         232     $         908     $         454     $   1,596
  Consumer(a)                          243             1,065               970         2,056
  Real Estate                         (237)              484              (410)          960
  Energy Financial Services             65               167               140           300
  GECAS                                287               279               555           670




                                                At
                             June 30,      June 30,      December 31,
(In millions)                  2009          2008           2008

Assets
  CLL(a)                    $  219,378    $  241,375    $     228,176
  Consumer(a)                  180,538       226,283          187,927
  Real Estate                   83,960        90,611           85,266
  Energy Financial Services     22,956        21,580           22,079
  GECAS                         50,337        48,383           49,455

(a) During the first quarter of 2009, we transferred Banque Artesia Nederland N.V. (Artesia) from CLL to Consumer. Prior-period amounts were reclassified to conform to the current-period's presentation.

Capital Finance revenues decreased 29% and net earnings decreased 80% compared with the second quarter of 2008. Revenues for the second quarter of 2009 included $1.1 billion of revenue from acquisitions, and were reduced by $1.6 billion as a result of dispositions. Revenues for the quarter also decreased $4.7 billion compared with the second quarter of 2008 as a result of organic revenue declines, driven by a lower asset base and a lower interest rate environment, and the stronger U.S. dollar. Net earnings decreased by $2.3 billion in the second quarter of 2009 compared with the second quarter of 2008, primarily due to higher provisions for losses on financing receivables associated with the challenging economic environment, partially offset by lower selling, general and administrative costs.

Capital Finance revenues decreased 26% and net earnings decreased 69% compared with the first six months of 2008. Revenues for the first six months of 2009 and 2008 included $1.8 billion and $0.2 billion of revenue from acquisitions, respectively, and in 2009 were reduced by $2.0 billion as a result of dispositions. Revenues for the first six months also decreased $8.6 billion compared with the first six months of 2008 as a result of organic revenue declines, primarily driven by a lower asset base and a lower interest rate environment, and the stronger U.S. dollar. Net earnings decreased by $3.9 billion in the first six months of 2009 compared with the first six months of 2008, primarily due to higher provisions for losses on financing receivables associated with the challenging economic environment, partially offset by lower selling, general and administrative costs.

During the first six months of 2009, General Electric Capital Corporation (GE Capital) provided $34 billion of new financings in the U.S. to various companies, infrastructure projects and municipalities. Additionally, we extended $35 billion of credit to approximately 50 million U.S. consumers. GE Capital provided credit to approximately 16,000 new commercial customers and 23,000 new small businesses during the first six months of 2009 in the U.S. and ended the period with outstanding credit to more than 330,000 commercial customers and 145,000 small businesses through retail programs in the U.S.

Additional information about certain Capital Finance businesses follows.

CLL revenues decreased 28% and net earnings decreased 74% compared with the second quarter of 2008. Revenues for the second quarter of 2009 included $0.7 billion from acquisitions, and were reduced by $1.2 billion from dispositions, primarily related to the deconsolidation of Penske Truck Leasing Co., L.P. (PTL). Revenues for the quarter also decreased $1.5 billion compared with the second quarter of 2008 as a result of organic revenue declines ($1.1 billion) and the stronger U.S. dollar ($0.4 billion). Net earnings decreased by $0.7 billion in the second quarter of 2009, resulting from higher provisions for losses on financing receivables ($0.3 billion), lower gains ($0.2 billion) and declines in lower-taxed earnings from global operations ($0.1 billion), partially offset by acquisitions ($0.2 billion).

CLL revenues decreased 22% and net earnings decreased 72% compared with the first six months of 2008. Revenues for the first six months of 2009 and 2008 included $1.2 billion and $0.1 billion from acquisitions, respectively, and were reduced by $1.2 billion from dispositions, primarily related to the deconsolidation of PTL. Revenues for the first six months of 2009 also included $0.3 billion related to a gain on the partial sale of a limited partnership interest in PTL and remeasurement of our retained investment. Revenues for the first six months decreased $3.2 billion compared with the first six months of 2008 as a result of organic revenue declines ($2.5 billion) and the stronger U.S. dollar ($0.7 billion). Net earnings decreased by $1.1 billion in the first six months of 2009, resulting from higher provisions for losses on financing receivables ($0.5 billion), lower gains ($0.4 billion), declines in lower-taxed earnings from global operations ($0.2 billion) and lower investment income ($0.1 billion), partially offset by acquisitions ($0.3 billion). Net earnings also included mark-to-market losses and other-than-temporary impairments ($0.2 billion) and the absence of the 2008 Genpact gain ($0.3 billion), partially offset by the gain on PTL sale and remeasurement ($0.3 billion).

Consumer revenues decreased 27% and net earnings decreased 77% compared with the second quarter of 2008. Revenues for the second quarter of 2009 included $0.4 billion from acquisitions (including a gain of $0.3 billion on the remeasurement of our previously held equity investment in BAC related to the acquisition of a controlling interest in BAC (BAC acquisition gain)) and were reduced by $0.4 billion as a result of dispositions. Revenues for the quarter decreased $1.8 billion compared with the second quarter of 2008 as a result of organic revenue declines ($1.1 billion) and the stronger U.S. dollar ($0.7 billion). The decrease in net earnings resulted from core declines ($1.2 billion), partially offset by the BAC acquisition gain ($0.2 billion) and higher securitization income ($0.1 billion). Core declines primarily resulted from lower results in the U.S. and U.K., reflecting higher provisions for losses on financing receivables ($0.7 billion), a decline in lower-taxed earnings from global operations ($0.3 billion) and higher impairments ($0.1 billion).

Consumer revenues decreased 26% and net earnings decreased 53% compared with the first six months of 2008. Revenues for the first six months of 2009 included $0.5 billion from acquisitions (including the BAC acquisition gain of $0.3 billion) and were reduced by $0.9 billion as a result of dispositions, and the lack of a current-year counterpart to the 2008 gain on sale of our Corporate Payment Services (CPS) business ($0.4 billion). Revenues for the first six months decreased $2.7 billion compared with the first six months of 2008 as a result of the stronger U.S. dollar ($1.4 billion) and organic revenue declines ($1.3 billion). The decrease in net earnings resulted primarily from core declines ($1.2 billion) and the lack of a current-year counterpart to the 2008 gain on sale of our CPS business ($0.2 billion). These decreases were partially offset by higher securitization income ($0.1 billion) and the BAC acquisition gain ($0.2 billion). Core declines primarily resulted from lower results in the U.S. & U.K., reflecting higher provisions for losses on financing receivables ($1.2 billion) and higher impairments ($0.1 billion), partially offset by growth in lower-taxed earnings from global operations ($0.1 billion). The first six months of 2009 benefit from lower-taxed earnings from global operations included $0.5 billion from the decision to indefinitely reinvest prior-year earnings outside the U.S.

Real Estate revenues decreased 48% and net earnings decreased 149% compared with the second quarter of 2008. Revenues for the quarter decreased $1.0 billion compared with the second quarter of 2008 as a result of organic revenue declines ($0.8 billion), primarily as a result of a decrease in sales of properties, and the stronger U.S. dollar ($0.1 billion). Real Estate net earnings decreased $0.7 billion compared with the second quarter of 2008, primarily from a decrease in gains on sales of properties as compared to the prior period ($0.4 billion) and an increase in provisions for losses on financing receivables and impairments ($0.4 billion). Depreciation expense on real estate equity investments totaled $0.3 billion in both the second quarters of 2009 and 2008.

Real Estate revenues decreased 48% and net earnings decreased 143% compared with the first six months of 2008. Revenues for the first six months decreased $1.9 billion compared with the first six months of 2008 as a result of organic revenue declines ($1.7 billion), primarily as a result of a decrease in sales of properties, and the stronger U.S. dollar ($0.2 billion). Real Estate net earnings decreased $1.4 billion compared with the first six months of 2008, primarily from a decrease in gains on sales of properties as compared to the prior period ($0.9 billion) and an increase in provisions for losses on financing receivables and impairments ($0.5 billion). Depreciation expense on real estate equity investments totaled $0.6 billion in both the first six months of 2009 and 2008.

Energy Financial Services revenues decreased 50% and net earnings decreased 61% compared with the second quarter of 2008. Revenues for the quarter decreased $0.5 billion compared with the second quarter of 2008 as a result of organic declines ($0.5 billion), primarily as a result of the effects of lower energy commodity prices and a decrease in gains on sales of assets. The decrease in net earnings resulted primarily from core declines, including a decrease in gains on sales of assets as compared to the prior period.

Energy Financial Services revenues decreased 36% and net earnings decreased 53% compared with the first six months of 2008. Revenues for the first six months of 2009 included $0.1 billion of gains from dispositions. Revenues for the first six months also decreased $0.7 billion compared with the first six months of 2008 as a result of organic declines ($0.7 billion), primarily as a result of . . .