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

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

A. Results of Operations -- Third Quarter of 2000 Compared with Third Quarter of 1999

     General Electric Company earnings per share increased 19% to $.32, up from last year's $.27, and net earnings increased 20% to $3.180 billion. Both earnings per share and earnings were records for the quarter.

     Revenues for the third quarter increased to a record $32.0 billion, 18% above last year's quarter, reflecting continued growth from globalization and product services.

     Excluding the effects of a third-quarter retirement benefit provision associated with the new labor agreement, GE's third-quarter operating margin was 17.6% of sales, up from last year's 16.7%, reflecting increasing benefits from GE's focus on product services, Six Sigma quality and e-Business initiatives. GE's reported third-quarter operating margin was 16.6%.

     GE's industrial businesses achieved revenue growth of 18% above third quarter 1999. Operating profit for six of seven operating segments increased by double digits -- led by Power Systems, Medical Systems, Plastics and Aircraft Engines.

     GE Capital Services' third-quarter earnings rose to $1.478 billion, 17% above last year's $1.262 billion. These record results reflect the globalization and diversity of GE Capital's businesses, with strong double-digit increases in its Specialized Financing, Consumer Services, Equipment Management and Mid-Market Financing segments.

     Cash generated from GE's operating activities during the first nine months was a record $9.9 billion, up 34% from last year's $7.4 billion. As part of the $22 billion share repurchase program, GE purchased $495 million of its stock during the third quarter to reach $17.0 billion -- 943 million shares -- purchased since December 1994.

Segment Analysis:

     The comments that follow compare revenues and operating profit by operating segment for the third quarters of 2000 and 1999.

     • Aircraft Engines reported a 15% increase in operating profit despite revenues that were 3% lower compared with the third quarter of 1999. The decrease in revenues primarily reflected a higher proportion of small engines compared with last year, as well as lower product service revenues. The improvement in operating profit was primarily attributable to strong productivity and higher selling prices.

     • Appliances revenues increased 3% over the third quarter of 1999, as higher volume more than offset lower selling prices. Operating profit increased 16% largely as a result of productivity and higher volume from new products which more than offset lower selling prices.

     • GE Capital Services third-quarter earnings rose to $1.478 billion, up 17% from last year's $1.262 billion, with strong double-digit increases in its Specialized Financing, Consumer Services, Equipment Management and Mid-Market Financing activities. The overall improvement in earnings was largely attributable to the effects of continued asset growth, principally from acquisitions of businesses and portfolios, higher origination volume, and the inclusion of an after tax gain of $226 million on the portion of the investment in PaineWebber common stock, which is classified as trading securities. These increases were partially offset by unusual after-tax charges of $239 million for asset writedowns, employee severance and other facilities costs in connection with third quarter decisions to rationalize certain information technology and mortgage servicing operations.

     • Industrial Products and Systems reported a 1% increase in operating profit on revenues that were 1% lower than a year ago. The decrease in revenues primarily reflected lower volume at Transportation Systems, which had a very strong 1999 quarter. The improvement in segment operating profit was primarily attributable to productivity and higher volume at Lighting and Industrial Systems, partially offset by the effects of lower selling prices across most businesses in the segment.

     • NBC reported a 76% increase in revenues largely as a result of its coverage of the 2000 Summer Olympic Games, as well as continued growth in cable operations, particularly at CNBC. Operating profit increased 10% reflecting a strong marketplace, improved results in network operations, cable, and stations, which more than offset higher license fees associated with renewal of certain sports and prime-time programs.

     • Plastics operating profit increased 25% on revenues that were 17% higher than a year ago. The increase in both revenues and earnings were primarily attributable to higher volume and improved selling prices.

     • Power Systems revenues increased 43%, primarily as a result of sharply higher volume in gas turbines and continued growth in product services, including acquisitions. Operating profit rose 69%, reflecting the increase in volume as well as productivity.

     • Technical Products & Services revenues increased 19% from the third quarter of 1999, principally as a result of sharply higher volume at Medical Systems, including acquired businesses. Operating profit grew 39%, reflecting volume growth at Medical Systems and productivity, which more than offset lower selling prices across the segment.

     Net earnings were $9.150 billion in the first nine months of 2000, up 20% from $7.628 billion in the first nine months of 1999. Earnings per share increased 20% to $0.91 from $0.76. Management indicated that it is comfortable with the First Call analysts' consensus estimate of $1.27 per share for the full year 2000.

     Consolidated revenues for the first nine months of 2000 aggregated $94.9 billion, up 20% from $78.8 billion in the first nine months of 1999. GE's sales of goods and services were 19% higher, led by Power Systems, NBC and Medical Systems. The improvement in sales was largely attributable to increases in the volume of goods and services sold,  partially offset by the effects of lower selling prices overall.

     Excluding the effects of a third-quarter retirement benefit provision associated with the new labor agreement, operating margin in the first nine months of 2000 was 18.5% of sales, an improvement over last year's 17.5%. The growth reflects increasing benefits from GE's focus on product services, Six Sigma quality and e-Business initiatives. GE's reported operating margin was 18.1%.

Segment Analysis:

     The following comments compare revenues and operating profit by industry segment for the first nine months of 2000 with the same period of 1999.

     • Aircraft Engines reported revenues that were 1% higher than a year ago, primarily as a result of higher military engine sales and slightly higher volume in product services. Operating profit increased 17%, reflecting productivity and growth in product services, which more than offset higher costs.

     • Appliances revenues were up 8% compared with the first nine months of 1999, as volume increases more than offset lower selling prices. Operating profit increased 6% as productivity and higher volume more than offset the decrease in selling prices and increased spending on new products.

     • GE Capital Services year-to-date earnings rose to $3.965 billion, up 17% from last year's $3.386 billion, reflecting strong double-digit increases in Consumer Services, Mid-Market Financing and Specialized Financing activities. The overall improvement in earnings was largely attributable to the effects of continued asset growth, principally from acquisitions of businesses and portfolios, higher origination volume, a higher level of asset gains, and the inclusion of an after-tax gain of $226 million on the portion of the investment in PaineWebber common stock classified as trading securities. These increases were partially offset by unusual after-tax charges of $239 million for asset writedowns, employee severance and other facilities costs in connection with third quarter decisions to rationalize information technology and mortgage servicing operations.

     • Industrial Products and Systems reported a 13% increase in operating profit on revenues that were 5% higher than a year ago. The increase in revenues primarily reflected volume increases at Lighting and Industrial Systems. The improvement in operating profit was primarily attributable to productivity across the segment, which was partially offset by the effects of lower selling prices.

     • NBC revenues increased 30%, primarily as a result of its coverage of the 2000 Summer Olympic Games, as well as continuing growth in cable operations, particularly at CNBC. Operating profit increased 16% reflecting growth in network, cable operations, and owned and operated stations, somewhat reduced by higher license fees associated with renewal of certain sports and prime-time programs.

     • Plastics operating profit increased 15% on revenues that were 16% higher than a year ago. The increase in both revenues and earnings were primarily attributable to higher volume and improved selling prices.

     • Power Systems revenues increased 61%, primarily as a result of sharply higher volume in gas turbines and continued growth in product services, including acquisitions. Operating profit rose 70%, reflecting productivity and the increase in volume.

     • Technical Products & Services revenues increased 18% over last year, reflecting sharply higher volume at Medical Systems, including acquired businesses. Operating profit grew 31%, largely as a result of volume growth at Medical Systems which more than offset lower selling prices across the segment.

C. Financial Condition

     With respect to the Condensed Statement of Financial Position, consolidated assets of $431.1 billion at September 30, 2000, were $25.9 billion higher than at December 31, 1999.

     GE assets were $92.3 billion at September 30, 2000, an increase of $9.7 billion from December 31, 1999. The increase was primarily attributable to increases in cash ($2.4 billion), normal seasonal increases in inventory ($1.0 billion), earnings retained by GECS ($2.6 billion) and all other assets ($2.7 billion). The change in all other assets resulted primarily from an increase in the prepaid pension asset as well as increases in miscellaneous investments.

     GECS assets increased by $21.0 billion from the end of 1999. The increase in assets was largely attributable to the acquisition of certain assets and the assumption of liabilities of Toho Mutual Life Insurance of Japan (Toho), an entity that was insolvent when acquired. Under the terms of the acquisition, which was consummated in the first quarter, GECS acquired approximately $13.2 billion in cash, as well as investment securities and other receivables in exchange for assuming Toho's existing insurance policyholder liabilities. The significant cash position of Toho at the date of acquisition reflected the liquidity needs of the business including significant policyholder redemptions that occurred through September 30, 2000.

     GECS investment securities increased by $7.7 billion from year-end 1999, largely as a result of the acquisition of Toho. Other assets increased $7.2 billion, primarily reflecting growth in "separate accounts," which are investments controlled by policyholders, as well as acquired real estate ventures of Toho. GE Capital's financing receivables, which, net of the allowance for losses, aggregated $134.1 billion at the end of the third quarter, decreased $0.1 billion from year-end 1999. Management believes that GE Capital's allowance for losses of $3.7 billion at September 30, 2000, is the best estimate of probable losses inherent in the portfolio given its strength and diversity and current economic circumstances.

     Consolidated liabilities of $378.5 billion at September 30, 2000, were $21.1 billion higher than the year-end 1999 balance of $357.4 billion.

     GE liabilities increased $4.4 billion to $43.6 billion. Total borrowings were $2.0 billion ($1.2 billion short term and $0.8 billion long term) at September 30, 2000, a decrease of $1.0 billion from December 31, 1999. The ratio of debt to total capital for GE at the end of the third quarter was 3.9% compared with 6.4% at the end of last year and 7.6% at September 30, 1999.

     GECS liabilities increased $19.4 billion to $339.7 billion, compared with $320.3 billion at the end of 1999. The increase was principally attributable to additions to insurance liabilities of $20.4 billion from year-end 1999, primarily the assumption of policyholder liabilities of Toho, as well as increases in separate accounts and additions to reserves related to core growth. Short-term borrowings decreased $5.2 billion from year-end 1999, while long-term borrowings increased by $4.3 billion.

     With respect to cash flows, consolidated cash and equivalents were $8.8 billion at September 30, 2000, an increase of $0.2 billion during the first nine months of 2000. Cash and equivalents were $6.1 billion at September 30, 1999, an increase of $1.8 billion since the beginning of the year.

     GE cash and equivalents increased $2.4 billion during the first nine months of 2000 to $4.4 billion at September 30, 2000. Cash provided from 2000 operating activities was $9.9 billion, an increase of 34% over the $7.4 billion reported for the first nine months of 1999, reflecting continuing improvements in earnings and higher progress collections during the period. Cash used for investing activities ($2.5 billion) principally represented investments in new plant and equipment for a wide variety of projects to lower costs and improve efficiencies. Cash used for financing activities ($5.1 billion) included $1.6 billion for repurchases of common stock under the share repurchase program and $4.0 billion for dividends paid to share owners, a 17% increase in the per-share dividend rate compared with the first nine months of last year.

     GE cash and equivalents increased $0.2 billion during the first nine months of 1999 to $1.4 billion at September 30, 1999. Cash provided from 1999 operating activities was $7.4 billion, an increase of 25% over the $5.9 billion reported for the first nine months of 1998, reflecting continuing improvements in earnings and higher progress collections during the period. Cash used for investing activities ($2.1 billion) principally represented acquisition of businesses and investments in new plant and equipment for a wide variety of projects to lower costs and improve efficiencies. Cash used for financing activities ($5.1 billion) included $1.4 billion for repurchases of common stock under the share repurchase program and $3.4 billion for dividends paid to share owners, a 17% increase in the per-share dividend rate compared with the first nine months of 1998.

     GECS cash and equivalents increased $0.2 billion during the first nine months of 2000. Cash provided from operating activities totaled $3.0 billion, compared with $10.5 billion for the first nine months of 1999. The decrease in cash from operating activities compared with last year was largely attributable to insurance policyholder redemptions associated with the Toho acquisition and a smaller decrease in mortgages held for resale. Cash from financing activities totaled $18.6 billion, primarily as a result of insurance policyholder liabilities assumed in the Toho acquisition. The principal use of GECS cash during the period was for investing activities ($21.4 billion), a majority of which was attributable to growth in financing receivables, property, plant and equipment and higher net purchases of investment securities, which are included in "all other" investing activities.

     GECS cash and equivalents increased $1.8 billion during the first nine months of 1999. Cash provided from operating activities totaled $10.5 billion, compared with $8.0 billion for the first nine months of 1998. Cash was used to fund business acquisitions ($6.7 billion), the largest of which were the acquisitions of Japan Leasing, the financial services business of AVCO and Pheonixcor; for additions to property, plant and equipment ($7.6 billion), principally equipment that is provided to third parties on operating leases; and for additions to financing receivables ($6.8 billion). Cash provided from financing activities resulted primarily from increased borrowings ($12.1 billion) during the first nine months of 1999.

D. Pending Transaction

     On July 12, 2000, Union Bank of Switzerland (UBS) and PaineWebber announced they had entered into a definitive merger agreement (the UBS merger agreement). Through GE Capital Services, GE holds 31,523,600 shares of PaineWebber common stock and has voted in favor of the merger. Fifty percent of the holdings of PaineWebber securities are classified as trading securities; the increase in the share price of those securities through September 30, 2000, has thus been recognized as a pre-tax gain of $369 million. If the merger is completed under the terms of the UBS merger agreement, an additional pre-tax gain of approximately $1.0 billion would be realized. The UBS merger agreement is subject to a number of conditions that are not within the control of GE, resolution of which will affect the amount and timing of proceeds realized from the transaction.

E. Subsequent Event

     On October 22, 2000, General Electric and Honeywell announced that GE agreed to acquire Honeywell in a tax-free merger. The details of this transaction are discussed in the Company's 8-K filing dated October 23, 2000.

F. Forward Looking Statement

     This quarterly report includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in global economic, business, competitive, market and regulatory factors. More detailed information about those factors is contained in GE's 1999 Annual Report on Form 10-K.

Part II. Other Information

Item 6. Exhibits and Reports on Form 8-K