10-K/A 1 f10ka.htm FORM 10-K Form 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A
Amendment No. 1 to Form 10-K

(Mark One)
 
þ 
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the fiscal year ended December 31, 2005
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 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
  
203/373-2211
(Address of principal executive offices)
  
(Zip Code)
  
(Telephone No.)
         
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
  
Name of each exchange on which registered
Common stock, par value $0.06 per share
  
New York Stock Exchange
Boston Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:
 
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
 
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ
 
Accelerated filer ¨
 
Non-accelerated filer ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ
 
The aggregate market value of the outstanding common equity of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was $367.3 billion. Affiliates of the Company beneficially own, in the aggregate, less than one-tenth of one percent of such shares. There were 10,423,424,768 shares of voting common stock with a par value of $0.06 outstanding at February 10, 2006.
 
 
DOCUMENTS INCORPORATED BY REFERENCE
 
The definitive proxy statement relating to the registrant’s Annual Meeting of Shareowners, held on April 26, 2006, is incorporated by reference in Part III to the extent described therein.
 

 


(1)



 
Table of Contents
 
   
Page
   
 
   
Part I 
  
     
Business
10
Risk Factors
22
Unresolved Staff Comments
23
Properties
23
Legal Proceedings
23
Submission of Matters to a Vote of Security Holders
24
   
Part II 
  
     
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
24
Selected Financial Data
25
Management’s Discussion and Analysis of Financial Condition and Results of Operations
28
Quantitative and Qualitative Disclosures About Market Risk
65
Financial Statements and Supplementary Data
65
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
144
Controls and Procedures
144
Other Information
147
   
Part III 
  
     
Directors and Executive Officers of the Registrant
148
Executive Compensation
149
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
149
Certain Relationships and Related Transactions
149
Principal Accounting Fees and Services
149
   
Part IV 
  
     
Exhibits, Financial Statement Schedules
150
 
156




(2)



 
Overview
 
General Electric Company (GE) is filing this amendment to its Annual Report on Form 10-K for the year ended December 31, 2005, to amend and restate financial statements and other financial information for the years 2005, 2004 and 2003, and financial information for the years 2002 and 2001, and for each of the quarters in the years 2005 and 2004. In addition, we are filing amendments to our Quarterly Reports on Form 10-Q for each of the periods ended September 30, June 30, and March 31, 2006, to amend and restate financial statements for the first three quarters of 2006. The restatement adjusts our accounting for interest rate swap transactions related to a portion of the commercial paper issued by General Electric Capital Corporation (GECC) and General Electric Capital Services, Inc. (GECS), each wholly-owned subsidiaries of GE, from January 1, 2001, the date we adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The restatement has no effect on our cash flows or liquidity, and its effects on our financial position at the ends of the respective restated periods are immaterial. We have not found that any of our hedge positions were inconsistent with our risk management policies or economic objectives.
 
A comparison of the cumulative earnings effects of this non-cash restatement to cumulative earnings from continuing operations before accounting changes follows.
 
(In millions)
Cumulative January 1, 2001-
December 31, 2005
  
         
         
Decrease in earnings from continuing operations before
        
accounting changes
$
(473
)
  
         
Earnings from continuing operations before accounting changes
        
and error corrections
$
77,072
    

 
Background
 
As previously disclosed, the Boston Office of the U.S. Securities and Exchange Commission (SEC) is conducting a formal investigation of our application of SFAS 133. In the course of that investigation, the SEC Enforcement staff raised certain concerns about our accounting for the use of interest rate swaps to fix certain otherwise variable interest costs in a portion of our commercial paper program at GECC and GECS. The SEC Enforcement staff referred such concerns to the Office of Chief Accountant. We and our auditors determined that our accounting for the commercial paper hedging program satisfied the requirements of SFAS 133 and conveyed our views to the staff of the Office of Chief Accountant. Following our discussions, however, the Office of Chief Accountant communicated its view to us that our commercial paper hedging program as structured did not meet the SFAS 133 specificity requirement.
 

(3)

After considering the staff’s view, management recommended to the Audit Committee of our Board of Directors that previously reported financial results be restated to eliminate hedge accounting for the interest rate swaps entered into as part of our commercial paper hedging program from January 1, 2001. The Audit Committee discussed and agreed with this recommendation. At a meeting on January 18, 2007, the Board of Directors adopted the recommendation of the Audit Committee and determined that previously reported results for GE should be restated and, therefore, that the previously filed financial statements and other financial information referred to above should not be relied upon. The restatement resulted from a material weakness in internal control over financial reporting, namely, that we did not have adequately designed procedures to designate, with the specificity required under SFAS 133, each hedged commercial paper transaction.
 
As of January 1, 2007, we modified our commercial paper hedging program and adopted documentation for interest rate swaps that we believe complies with the requirements of SFAS 133 and remediated the related internal control weakness.
 
The SEC investigation into our application of SFAS 133 and hedge accounting is continuing. We continue to cooperate fully.
 
Amendment to this Form 10-K
 
The following sections of this Form 10-K have been revised to reflect the restatement: Part I - Item 1 - Business; Part II - Item 6 - Selected Financial Data, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7A - Quantitative and Qualitative Disclosures About Market Risk; Item 8 - Financial Statements and Supplementary Data and Item 9A - Controls and Procedures; and Part IV - Item 15 - Exhibits and Financial Statement Schedules. Except to the extent relating to the restatement of our financial statements and other financial information described above, the financial statements and other disclosures in this Form 10-K do not reflect any events that have occurred after this Form 10-K was initially filed on March 3, 2006.
 
Effects of Restatement
 
The following tables set forth the effects of the restatement relating to the aforementioned hedge accounting on affected line items within our previously reported Statements of Earnings for the years 2005, 2004, 2003, 2002 and 2001, and for each of the quarters in the years 2005 and 2004. The restatement has no effect on our cash flows or liquidity, and its effects on our financial position at the ends of the respective restated periods are immaterial.
 

(4)

Effects on Statements of Earnings
 

Income (expense);(in millions;
per share amounts in dollars)
Cumulative
through
12/31/05
  
2005
  
2004
  
2003
  
2002
  
2001
  
                                     
GECS commercial paper
                                    
interest rate swap
                                    
adjustment(a)
$
(800
)
$
540
  
$
518
  
$
535
  
$
(1,889
)
$
(504
)
Interest and other financial
                                    
charges
  
24
    
49
    
45
    
1
    
(38
)
  
(33
)
Provision for income taxes
  
303
    
(231
)
  
(222
)
  
(211
)
  
758
    
209
  
Earnings from continuing
                                    
operations before
                                   
accounting changes
  
(473
)
  
358
    
341
    
325
    
(1,169
)
  
(328
)
Earnings before
                                   
accounting changes
  
(473
)
  
358
    
341
    
325
    
(1,169
)
  
(328
)
Net earnings
$
(473
)
$
358
  
$
341
  
$
325
  
$
(1,169
)
$
(328
)

(a)
Included in total revenues.

 

(5)


   
2005
    
2004
    
2003
    
2002
    
2001
  
                               
Per-share amounts - earnings from continuing
                              
operations before accounting changes
                              
Diluted, as reported
$
1.72
  
$
1.56
  
$
1.37
  
$
1.58
  
$
1.29
  
Adjustment
  
0.04
    
0.03
    
0.03
    
(0.12
)
  
(0.03
)
Diluted, as restated
$
1.76
  
$
1.59
  
$
1.40
  
$
1.46
  
$
1.26
  
                               
Basic, as reported
$
1.73
  
$
1.57
  
$
1.37
  
$
1.59
  
$
1.30
  
Adjustment
  
0.03
    
0.03
    
0.04
    
(0.12
)
  
(0.03
)
Basic, as restated
$
1.76
  
$
1.60
  
$
1.41
  
$
1.47
  
$
1.27
  
                               
Per-share amounts - earnings (loss) from
                             
discontinued operations
                             
Diluted, as reported
$
(0.18
)
$
0.05
  
$
0.20
  
$
(0.06
)
$
0.11
  
Adjustment
  
-
    
-
    
-
    
-
    
-
  
Diluted, as restated
$
(0.18
)
$
0.05
  
$
0.20
  
$
(0.06
)
$
0.11
  
                               
Basic, as reported
$
(0.18
)
$
0.05
  
$
0.21
  
$
(0.06
)
$
0.11
  
Adjustment
  
-
    
-
    
-
    
-
    
-
  
Basic, as restated
$
(0.18
)
$
0.05
  
$
0.21
  
$
(0.06
)
$
0.11
  
                               
Per-share amounts - earnings before accounting
                              
changes
                              
Diluted, as reported
$
1.54
  
$
1.61
  
$
1.57
  
$
1.51
  
$
1.40
  
Adjustment
  
0.03
    
0.03
    
0.03
    
(0.11
)
  
(0.03
)
Diluted, as restated
$
1.57
  
$
1.64
  
$
1.60
  
$
1.40
  
$
1.37
  
                               
Basic, as reported
$
1.55
  
$
1.62
  
$
1.58
  
$
1.52
  
$
1.42
  
Adjustment
  
0.03
    
0.03
    
0.03
    
(0.11
)
  
(0.04
)
Basic, as restated
$
1.58
  
$
1.65
  
$
1.61
  
$
1.41
  
$
1.38
  
                               
Per-share amounts - cumulative effect of
                             
accounting changes
                              
Diluted, as reported
$
-
  
$
-
  
$
(0.06
)
$
(0.10
)
$
(0.03
)
Adjustment
  
-
    
-
    
-
    
-
    
-
  
Diluted, as restated
$
-
  
$
-
  
$
(0.06
)
$
(0.10
)
$
(0.03
)
                               
Basic, as reported
$
-
  
$
-
  
$
(0.06
)
$
(0.10
)
$
(0.03
)
Adjustment
  
-
    
-
    
-
    
-
    
-
  
Basic, as restated
$
-
  
$
-
  
$
(0.06
)
$
(0.10
)
$
(0.03
)
                               
Per-share amounts - net earnings
                             
Diluted, as reported
$
1.54
  
$
1.61
  
$
1.51
  
$
1.41
  
$
1.37
  
Adjustment
  
0.03
    
0.03
    
0.03
    
(0.11
)
  
(0.03
)
Diluted, as restated
$
1.57
  
$
1.64
  
$
1.54
  
$
1.30
  
$
1.34
  
                               
Basic, as reported
$
1.55
  
$
1.62
  
$
1.52
  
$
1.42
  
$
1.39
  
Adjustment
  
0.03
    
0.03
    
0.03
    
(0.11
)
  
(0.03
)
Basic, as restated
$
1.58
  
$
1.65
  
$
1.55
  
$
1.31
  
$
1.36
  
                               

 

(6)


 
2005
  
Income (expense);(in millions;
per share amounts in dollars)
Total
  
First quarter
  
Second quarter
  
Third quarter
  
Fourth
quarter
  
                               
GECS commercial paper interest
                              
rate swap adjustment (a)
$
540
  
$
358
  
$
(239
)
$
271
  
$
150
  
Interest and other financial
                              
charges
  
49
    
12
    
11
    
13
    
13
  
Provision for income taxes
  
(231
)
  
(145
)
  
89
    
(111
)
  
(64
)
Earnings from continuing operations
 
358
    
225
    
(139
)
  
173
    
99
  
Net earnings
$
358
  
$
225
  
$
(139
)
$
173
  
$
99
  
                               
(a)
Included in total revenues.
                               
   
2005
  
     
First quarter
  
Second quarter
  
Third quarter
  
Fourth
quarter
  
                               
Per-share amounts - earnings from
                             
continuing operations
                             
Diluted, as reported
      
$
0.33
  
$
0.41
  
$
0.43
  
$
0.55
  
Adjustment
        
0.03
    
(0.01
)
  
0.02
    
0.01
  
Diluted, as restated
      
$
0.36
  
$
0.40
  
$
0.45
  
$
0.56
  
                               
Basic, as reported
      
$
0.34
  
$
0.41
  
$
0.43
  
$
0.55
  
Adjustment
        
0.02
    
(0.01
)
  
0.02
    
0.01
  
Basic, as restated
      
$
0.36
  
$
0.40
  
$
0.45
  
$
0.56
  
                               
Per-share amounts - earnings (loss) from
                             
discontinued operations
                             
Diluted, as reported
      
$
0.04
  
$
0.03
  
$
0.01
  
$
(0.26
)
Adjustment
        
-
    
-
    
-
    
-
  
Diluted, as restated
      
$
0.04
  
$
0.03
  
$
0.01
  
$
(0.26
)
                               
Basic, as reported
      
$
0.04
  
$
0.03
  
$
0.01
  
$
(0.26
)
Adjustment
        
-
    
-
    
-
    
-
  
Basic, as restated
      
$
0.04
  
$
0.03
  
$
0.01
  
$
(0.26
)
                               
Per-share amounts - net earnings
                             
Diluted, as reported
      
$
0.37
  
$
0.44
  
$
0.44
  
$
0.29
  
Adjustment
        
0.02
    
(0.02
)
  
0.02
    
0.01
  
Diluted, as restated
      
$
0.39
  
$
0.42
  
$
0.46
  
$
0.30
  
                               
Basic, as reported
      
$
0.37
  
$
0.44
  
$
0.44
  
$
0.29
  
Adjustment
        
0.03
    
(0.01
)
  
0.02
    
0.01
  
Basic, as restated
      
$
0.40
  
$
0.43
  
$
0.46
  
$
0.30
  
                               

(7)


 
2004
  
Income (expense);(in millions;
per share amounts in dollars)
Total
  
First quarter
  
Second quarter
  
Third quarter
  
Fourth
quarter
  
                               
GECS commercial paper interest
                              
rate swap adjustment (a)
$
518
  
$
(233
)
$
970
  
$
(381
)
$
162
  
Interest and other financial charges
  
45
    
10
    
10
    
13
    
12
  
Provision for income taxes
  
(222
)
  
87
    
(384
)
  
144
    
(69
)
Earnings from continuing operations
  
341
    
(136
)
  
596
    
(224
)
  
105
  
Net earnings
$
341
  
$
(136
)
$
596
  
$
(224
)
$
105
  
                               
(a)
Included in total revenues.
                               
     
2004
  
     
First quarter
  
Second quarter
  
Third quarter
  
Fourth
quarter
  
                               
Per-share amounts - earnings from
                             
continuing operations
                             
Diluted, as reported
      
$
0.29
  
$
0.35
  
$
0.37
  
$
0.54
  
Adjustment
        
(0.01
)
  
0.06
    
(0.02
)
  
0.01
  
Diluted, as restated
      
$
0.28
  
$
0.41
  
$
0.35
  
$
0.55
  
                               
Basic, as reported
      
$
0.29
  
$
0.35
  
$
0.37
  
$
0.54
  
Adjustment
        
(0.01
)
  
0.06
    
(0.02
)
  
0.01
  
Basic, as restated
      
$
0.28
  
$
0.41
  
$
0.35
  
$
0.55
  
                               
Per-share amounts - earnings (loss) from
                             
discontinued operations
                             
Diluted, as reported
      
$
0.04
  
$
0.01
  
$
0.01
  
$
(0.01
)
Adjustment
        
-
    
-
    
-
    
-
  
Diluted, as restated
      
$
0.04
  
$
0.01
  
$
0.01
  
$
(0.01
)
                               
Basic, as reported
      
$
0.04
  
$
0.01
  
$
0.01
  
$
(0.01
)
Adjustment
        
-
    
-
    
-
    
-
  
Basic, as restated
      
$
0.04
  
$
0.01
  
$
0.01
  
$
(0.01
)
                               
Per-share amounts - net earnings
                             
Diluted, as reported
      
$
0.33
  
$
0.36
  
$
0.38
  
$
0.53
  
Adjustment
        
(0.01
)
  
0.06
    
(0.02
)
  
0.01
  
Diluted, as restated
      
$
0.32
  
$
0.42
  
$
0.36
  
$
0.54
  
                               
Basic, as reported
      
$
0.33
  
$
0.36
  
$
0.39
  
$
0.53
  
Adjustment
        
(0.01
)
  
0.06
    
(0.03
)
  
0.01
  
Basic, as restated
      
$
0.32
  
$
0.42
  
$
0.36
  
$
0.54
  

 
Reversal of these cumulative adjustments will affect net earnings positively over the terms of the underlying interest rate swaps, but to a degree that we do not expect to be significant in any individual period given the terms of the arrangements and actions taken to eliminate the accounting volatility by modifying the documentation in a manner that will enable the swaps to qualify for hedge accounting effective January 1, 2007.
 

(8)

For additional information relating to the effect of the restatement, see the following items:
 
Part I
 
Item 1 - Business
 
Part II:
 
Item 6 - Selected Financial Data
 
Item 7 - Management’s Discussion and Analysis of Results of Operations and Financial Condition
 
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
 
Item 8 - Financial Statements and Supplementary Data
 
Item 9 - Controls and Procedures
 
Part IV:
 
Item 15 - Exhibits and Financial Statement Schedules
 
In light of the restatement, readers should not rely on our previously filed financial statements and other financial information for the years and for each of the quarters in the years 2005, 2004, 2003, 2002 and 2001.
 

(9)

Part I
 
 
Item 1. Business
 
General
 
Unless otherwise indicated by the context, we use the terms “GE,” “GECS” and “GE Capital” on the basis of consolidation described in note 1 to the consolidated financial statements of General Electric Company (the Company) on page 80. Also, unless otherwise indicated by the context, “General Electric” means the parent company, General Electric Company.
 
General Electric’s address is 1 River Road, Schenectady, NY 12345-6999; we also maintain executive offices at 3135 Easton Turnpike, Fairfield, CT 06828-0001.
 
GE is one of the largest and most diversified industrial corporations in the world. We have engaged in developing, manufacturing and marketing a wide variety of products for the generation, transmission, distribution, control and utilization of electricity since our incorporation in 1892. Over the years, we have developed or acquired new technologies and services that have broadened considerably the scope of our activities.
 
Our products include major appliances; lighting products; industrial automation products; medical diagnostic imaging systems; bioscience assays and separation technology products; electrical distribution and control equipment; locomotives; power generation and delivery products; nuclear power support services and fuel assemblies; commercial and military aircraft jet engines; chemicals and equipment for treatment of water and process systems; security equipment and systems; and engineered materials, such as plastics and silicones.
 
Our services include product services; electrical product supply houses; electrical apparatus installation, engineering, and repair and rebuilding services. Through our affiliate, NBC Universal, Inc., we produce and deliver network television services, operate television stations, produce and distribute motion pictures, operate cable/satellite networks, operate theme parks, and program activities in multimedia and the Internet. Through another affiliate, General Electric Capital Services, Inc., we offer a broad array of financial and other services including consumer financing, commercial and industrial financing, real estate financing, asset management and leasing, mortgage services, consumer savings and insurance services, and reinsurance.
 
In virtually all of our global business activities, we encounter aggressive and able competition. In many instances, the competitive climate is characterized by changing technology that requires continuing research and development, as well as customer commitments. With respect to manufacturing operations, we believe that, in general, we are one of the leading firms in most of the major industries in which we participate. The NBC Television Network is one of four major U.S. commercial broadcast television networks. We also compete with syndicated broadcast television programming, cable and satellite television programming activities and in the motion picture industry. The businesses in which GECS engages are subject to competition from various types of financial institutions, including commercial banks, thrifts, investment banks, broker-dealers, credit unions, leasing companies, consumer loan companies, independent finance companies, finance companies associated with manufacturers, and insurance and reinsurance companies.
 

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This document contains “forward-looking statements” - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties which could adversely or positively affect our future results include: the behavior of financial markets, including fluctuations in interest rates and commodity prices; strategic actions, including dispositions; future integration of acquired businesses; future financial performance of major industries which we serve, including, without limitation, the air and rail transportation, energy generation, media, real estate and healthcare industries; unanticipated loss development in our insurance businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
 
Our consolidated global revenues increased to $77.9 billion in 2005, compared with $66.9 billion in 2004 and $54.3 billion in 2003. For additional information about our global operations, see pages 45 and 46.
 
Operating Segments
 
Segment revenue and profit information is presented on page 38. Additional financial data and commentary on recent financial results for operating segments are provided on pages 36, 37 and 39-44 and in note 26 (pages 127 and 128) to the consolidated financial statements.
 
In the fourth quarter of 2005, we announced the planned sale of the property and casualty insurance and reinsurance businesses and the European life and health operations of GE Insurance Solutions Corporation (GE Insurance Solutions) and completed a Genworth Financial, Inc. (Genworth) secondary public offering, which reduced our ownership in Genworth to 18%. We have reported both GE Insurance Solutions and Genworth as discontinued operations for all periods presented. These businesses were previously reported in the Commercial Finance segment. Also, during the fourth quarter of 2005, our insurance activities, previously reported in the Commercial Finance segment, were transferred to corporate items and eliminations for all periods presented.
 
Operating businesses that are reported as segments include Infrastructure, Industrial, Healthcare, NBC Universal, Commercial Finance and Consumer Finance. There is appropriate elimination of the net earnings of GECS and the immaterial effect of transactions between segments to arrive at total consolidated data. A summary description of each of our operating segments follows.
 
We will also continue our longstanding practice of providing supplemental information for certain businesses within the segments.
 
Infrastructure
 
Infrastructure (27.8%, 27.7% and 32.2% of consolidated revenues in 2005, 2004 and 2003, respectively) produces, sells, finances and services equipment for the air transportation and energy generation industries. We also produce, sell and service equipment for the rail transportation and water treatment industries. During 2005, we made a number of acquisitions, the most significant of which was Ionics, Inc.
 
Our operations are located in North America, Europe, Asia and South America.
 

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Aviation and Aviation Financial Services
 
Aviation produces, sells and services jet engines, turboprop and turbo shaft engines, and related replacement parts for use in military and commercial aircraft. Our military engines are used in a wide variety of aircraft including fighters, bombers, tankers, helicopters and surveillance aircraft and our commercial engines power aircraft in all categories of range: short/medium, intermediate and long-range, as well as executive and regional aircraft. We also produce engines through CFM International, a company jointly owned by GE and Snecma Moteurs of France; and a new engine is being designed and marketed in a joint venture with the Pratt & Whitney division of United Technologies Corporation.
 
We provide maintenance, component repair and overhaul services (MRO), including sales of replacement parts, for many models of engines, including repair and overhaul of engines manufactured by competitors.
 
The worldwide competition in aircraft jet engines and MRO (including parts sales) is intense. Both U.S. and export markets are important. Product development cycles are long and product quality and efficiency are critical to success. Research and development expenditures, both customer-financed and internally funded, are important in this business, as are focused intellectual property strategies and protection of key aircraft engine design, manufacture, repair and product upgrade technologies.
 
Potential sales for any engine are limited by, among other things, its technological lifetime, which may vary considerably depending upon the rate of advance in technology, the small number of potential customers and the limited number of relevant airframe applications. Aircraft engine orders tend to follow military and airline procurement cycles, although these cycles differ from each other.
 
Aviation Financial Services is a global commercial aviation financial services business that offers a broad range of financial products to airlines, aircraft operators, owners, lenders, investors and airport developers. Financial products include leases, aircraft purchasing and trading, loans, engine/spare parts financing, pilot training, fleet planning and financial advisory services. We operate in a highly competitive environment. Our competitors include aircraft manufacturers, banks, financial institutions, and other finance and leasing companies. Competition is based on lease rates and terms, as well as aircraft delivery dates, condition and availability.
 
The U.S. commercial aviation industry continues to face challenges and financial pressure that affect a portion of our commercial aviation business. Many carriers are experiencing major restructuring and reorganization, including bankruptcies. These companies have experienced marginal returns and in some cases losses resulting from competitive pressures and increased fuel costs.
 

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Energy and Energy Financial Services
 
Energy serves power generation, industrial, government and other customers worldwide with products and services related to energy production, distribution and management. We offer wind turbines as part of our renewable energy portfolio, which also includes hydropower, solar, and geothermal technology. We also sell aircraft engine derivatives for use as industrial power sources. Gas turbines and generators are used principally in power plants for generation of electricity and for industrial cogeneration and mechanical drive applications. We are a worldwide supplier of gas turbines for Integrated Gasification Combined Cycle (IGCC) applications, having provided gas turbines for a significant number of the world's operating IGCC plants. IGCC systems convert coal and other hydrocarbons into synthetic gas which, after cleanup, is used as the primary fuel for gas turbines in combined-cycle systems. IGCC systems produce fewer air pollutants compared with traditional pulverized coal power plants. We sell steam turbines and generators to the electric utility industry and to private industrial customers for cogeneration applications. Products also include portable and rental power plants. Nuclear reactors, fuel and support services for both new and installed boiling water reactors are also a part of this segment. We provide our customers with total solutions to meet their needs through a complete portfolio of aftermarket services, including equipment upgrades, contractual services agreements, repairs, equipment installation, monitoring and diagnostics, asset management and performance optimization tools, remote performance testing and Dry Low NOx (DLN) tuning. We continue to invest in advanced technology development that will provide more value to our customers and more efficient solutions that comply with today’s strict environmental regulations.
 
Worldwide competition for power generation products and services is intense. Demand