10-Q 1 ge10q1q15.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 (Mark One)
 
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2015
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 001-00035
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  No 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
Smaller reporting company 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
There were 10,075,929,000 shares of common stock with a par value of $0.06 per share outstanding at March 31, 2015.

























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TABLE OF CONTENTS

 
Page
     
Forward Looking Statements
4
Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
5
    Key Performance Indicators
9
    Consolidated Results
10
    Segment Operations
12
    Corporate Items and Eliminations
29
    Discontinued Operations
30
    Other Consolidated Information
31
    Statement of Financial Position
32
    Financial Resources and Liquidity
35
    Exposures
40
    Critical Accounting Estimates
42
    Other Items
43
Controls and Procedures
44
Other Financial Data
44
Regulations and Supervision
45
Legal Proceedings
46
Financial Statements and Notes
49
Exhibits
99
Form 10-Q Cross Reference Index
100
Signatures
101


FORWARD LOOKING STATEMENTS


This document contains "forward-looking statements" – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," or "target."

Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about our announced plan to reduce the size of our financial services businesses, including expected cash and non-cash charges associated with this plan; expected income; earnings per share; revenues; organic growth; margins; cost structure; restructuring charges; cash flows; return on capital; capital expenditures, capital allocation or capital structure; dividends; and the split between Industrial and GE Capital earnings.

For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:
·
obtaining (or the timing of obtaining) any required regulatory reviews or approvals or any other consents or approvals associated with our announced plan to reduce the size of our financial services businesses;
·
our ability to complete incremental asset sales as part of this plan in a timely manner (or at all) and at the prices we have assumed;
·
changes in law, economic and financial conditions, including interest and exchange rate volatility, commodity and equity prices and the value of financial assets, including the impact of these conditions on our ability to sell or the value of incremental assets to be sold as part of this plan as well as other aspects of this plan;
·
the impact of conditions in the financial and credit markets on the availability and cost of GECC's funding, and GECC's exposure to counterparties;
·
the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults;
·
pending and future mortgage loan repurchase claims and other litigation claims in connection with WMC, which may affect our estimates of liability, including possible loss estimates;
·
our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so;
·
the adequacy of our cash flows and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at planned levels;
·
GECC's ability to pay dividends to GE at the planned level, which may be affected by GECC's cash flows and earnings, financial services regulation and oversight, and other factors;
·
our ability to convert pre-order commitments/wins into orders;
·
the price we realize on orders since commitments/wins are stated at list prices;
·
customer actions or developments such as early aircraft retirements or reduced energy demand and other factors that may affect the level of demand and financial performance of the major industries and customers we serve;
·
the effectiveness of our risk management framework;
·
the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation and litigation;
·
adverse market conditions, timing of and ability to obtain required bank regulatory approvals, or other factors relating to us or Synchrony Financial that could prevent us from completing the Synchrony Financial split-off as planned;
·
our capital allocation plans, as such plans may change including with respect to the timing and size of share repurchases, acquisitions, joint ventures, dispositions and other strategic actions;
·
our success in completing, including obtaining regulatory approvals for, announced transactions, such as the proposed transactions and alliances with Alstom, Appliances and Real Estate, and our ability to realize anticipated earnings and savings;
·
our success in integrating acquired businesses and operating joint ventures;
·
the impact of potential information technology or data security breaches; and
·
the other factors that are described in "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014.

These or other 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. This document includes certain forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materially.
4 2015 1Q FORM 10-Q

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)


HOW WE TALK ABOUT OUR RESULTS

We believe that investors will gain a better understanding of our company if they understand how we measure and talk about our results. Because of the diversity in our businesses, we present our financial statements in a three column format, which allows investors to see our industrial operations separately from our financial services operations. We believe that this provides useful information to investors. When used in this report, unless otherwise indicated by the context, we use the terms to mean the following:

·
General Electric or the Company - the parent company, General Electric Company.
·
GE - the adding together of all affiliates other than General Electric Capital Corporation (GECC), whose continuing operations are presented on a one-line basis, giving effect to the elimination of transactions among such affiliates. Transactions between GE and GECC have not been eliminated at the GE level. We present the results of GE in the center columns of our consolidated statements of earnings, financial position and cash flows. An example of a GE metric is GE cash from operating activities (GE CFOA).
·
General Electric Capital Corporation or GECC or Financial Services – the adding together of all affiliates of GECC, giving effect to the elimination of transactions among such affiliates. We present the results of GECC in the right-side columns of our consolidated statements of earnings, financial position and cash flows. It should be noted that GECC is sometimes referred to as GE Capital or Capital, when not in the context of discussing segment results.
·
GE consolidated – the adding together of GE and GECC, giving effect to the elimination of transactions between GE and GECC. We present the results of GE consolidated in the left-side columns of our consolidated statements of earnings, financial position and cash flows.
·
Industrial – GE excluding GECC. We believe that this provides investors with a view as to the results of our industrial businesses and corporate items. An example of an Industrial metric is Industrial CFOA, which is GE CFOA excluding the effects of dividends from GECC.
·
Industrial segment – the sum of our seven industrial reporting segments without giving effect to the elimination of transactions among such segments. We believe that this provides investors with a view as to the results of our industrial segments, without inter-segment eliminations and corporate items. An example of an industrial segment metric is industrial segment revenue growth.
·
Total segment – the sum of our seven industrial reporting segments and one financial services reporting segment, without giving effect to the elimination of transactions among such segments. We believe that this provides investors with a view as to the results of all of our segments, without inter-segment eliminations and corporate items.

5 2015 1Q FORM 10-Q


OTHER TERMS USED BY GE

·
Revenues – unless otherwise indicated, we refer to captions such as "revenues and other income", simply as revenues.
·
Organic revenues – revenues excluding the effects of acquisitions, dispositions and foreign currency exchange.
·
Earnings – unless otherwise indicated, we refer to captions such as "earnings from continuing operations attributable to the company" simply as earnings.
·
Earnings per share (EPS) – unless otherwise indicated, we refer to "earnings per share from continuing operations attributable to the company" simply as earnings per share.
·
Operating earnings – GE earnings from continuing operations attributable to the company excluding the impact of non-operating pension costs.
·
Segment profit – refers to the operating profit of the industrial segments and the net earnings of the financial services segment. See page 12 for a description of the basis for segment profits.
·
Operating pension costs – comprise the service cost of benefits earned, prior service cost amortization and curtailment loss for our principal pension plans.
·
Non-operating pension costs – comprise the expected return on plan assets, interest cost on benefit obligations and net actuarial loss amortization for our principal pension plans.

NON-GAAP FINANCIAL MEASURES

In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial data 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 SEC rules. Specifically, we have referred, in various sections of this Form 10-Q Report, to:

·
Operating earnings (loss) and operating EPS – Excluding the GE Capital exit impacts
·
Operating and non-operating pension costs
·
Consolidated and GECC Revenues – Excluding the GE Capital exit impacts
·
Industrial segment organic revenue growth
·
Oil & Gas organic revenue and operating profit growth
·
Industrial cash flows from operating activities (Industrial CFOA)
·
GE Capital ending net investment (ENI), excluding liquidity
·
GECC Tier 1 common ratio estimate

The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in Exhibit 99(a) to this Form 10-Q Report. Non-GAAP financial measures referred to in this Form 10-Q Report are designated with an asterisk (*).

6 2015 1Q FORM 10-Q


OUR OPERATING SEGMENTS

We are one of the largest and most diversified infrastructure and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, oil and gas production equipment, and household appliances to medical imaging, business and consumer financing and industrial products.

OUR INDUSTRIAL OPERATING SEGMENTS

Power & Water
Aviation
Transportation
Oil & Gas
Healthcare
Appliances & Lighting
Energy Management
       

OUR FINANCIAL SERVICES OPERATING SEGMENT

GE Capital

Operational and financial overview for our operating segment are provided in the "Segment Operations" section within this MD&A.

THE GE CAPITAL EXIT PLAN

On April 10, 2015, the Company announced a plan (the GE Capital Exit Plan) to reduce the size of its financial services businesses through the sale of most of the assets of GECC over the next 24 months, and to focus on continued investment and growth in the Company's industrial businesses. Under the GE Capital Exit Plan, which was approved on April 2, 2015 and aspects of which were approved on March 31, 2015, the Company will retain certain GECC businesses, principally its vertical financing businesses—GE Capital Aviation Services (GECAS), Energy Financial Services and Healthcare Equipment Finance—that directly relate to the Company's core industrial domain and other operations, including Working Capital Solutions and our run-off insurance activities. The assets planned for disposition include Real Estate, most of Commercial Lending and Leasing and all Consumer platforms (including all U.S. banking assets). The Company expects to execute this strategy using an efficient approach for exiting non-vertical assets that works for the Company's and GECC's debt holders and the Company's shareowners. An element of this approach involves a merger of GECC into the Company to assure compliance with debt covenants as GECC exits non-vertical assets, and the creation of a new intermediate holding company to hold GECC's businesses after the merger. The Company has discussed the GE Capital Exit Plan, aspects of which are subject to regulatory review and approval, with its regulators and staff of the Financial Stability Oversight Council (FSOC) and will work closely with these bodies to take the actions necessary over time to terminate the FSOC's designation of GECC (and the new intermediate holding company, as applicable) as a nonbank systemically important financial institution (nonbank SIFI).

As part of the GE Capital Exit Plan, we agreed to sell the substantial majority of GECC's Real Estate debt and equity portfolio to funds managed by The Blackstone Group (which, at closing, intends to sell a portion of this portfolio to Wells Fargo & Company), and also have letters of intent with other buyers for the majority of the remaining commercial real estate assets. In total, these deals are valued at approximately $26.5 billion.

As part of the GE Capital Exit Plan, on April 10, 2015, the Company and GECC entered into an amendment to their existing financial support agreement. Under this amendment (the Amendment), the Company has provided a full and unconditional guarantee (the Guarantee) of the payment of principal and interest on all tradable senior and subordinated outstanding long-term debt securities and all commercial paper issued or guaranteed by GECC identified in the Amendment. In the aggregate, the Guarantee applied to approximately $210 billion of GECC debt as of April 10, 2015. The Guarantee replaced the requirement that the Company make certain income maintenance payments to GECC in certain circumstances. GECC's U.S. public indentures were concurrently amended to provide the full and unconditional guarantee by the Company set forth in the Guarantee.

7 2015 1Q FORM 10-Q

In connection with the GE Capital Exit Plan, the Company estimates it will incur approximately $23 billion in after-tax charges through 2016, approximately $6 billion of which are expected to result in future net cash expenditures. These charges are expected to relate to: business dispositions, including goodwill allocations (approximately $13 billion), tax expense related to expected repatriation of foreign earnings and write-off of deferred tax assets (approximately $7 billion), and restructuring and other charges (approximately $3 billion).

We recorded $16.1 billion of after-tax charges ($13.8 billion of which is attributable to continuing operations and $2.4 billion of which is attributable to discontinued operations) in the first quarter of 2015 related to the GE Capital Exit Plan. The first quarter charges recorded in continuing operations include tax expense related to expected repatriation of foreign earnings and write-off of deferred tax assets ($6.0 billion), asset impairments due to shortened hold periods ($5.0 billion), and charges on businesses held for sale ($2.8 billion), including goodwill allocation.

PRESENTATION

The consolidated financial statements of General Electric Company (the Company) combine the industrial manufacturing and services businesses of General Electric Company (GE) with the financial services businesses of General Electric Capital Corporation (GECC or financial services).

We integrate acquisitions as quickly as possible. Revenues and earnings from the date we complete the acquisition through the end of the following fourth quarter are considered the acquisition effect of such businesses.

Amounts reported in billions in graphs and tables within this Form 10-Q report are computed based on the amounts in millions. As a result, the sum of the components reported in billions may not equal the total amount reported in billions due to rounding.

Discussions throughout this MD&A are based on continuing operations unless otherwise noted.

REFERENCES

The MD&A should be read in conjunction with the Financial Statements and Notes to the consolidated financial statements.

For additional information related to the GE Capital Exit Plan, GE Capital segment operations and the credit quality of financing receivables, refer to the General Electric Capital Corporation quarterly report on Form 10-Q for the three months ended March 31, 2015.

CORPORATE INFORMATION

GE's Investor Relations website at www.ge.com/investor-relations and our corporate blog at www.gereports.com, as well as GE's Facebook page and Twitter accounts, including @GE_Reports, contain a significant amount of information about GE, including financial and other information for investors. GE encourages investors to visit these websites from time to time, as information is updated and new information is posted.
8 2015 1Q FORM 10-Q

KEY PERFORMANCE INDICATORS

(Dollars in billions; per-share amounts in dollars)

REVENUES PERFORMANCE
 
 
INDUSTRIAL SEGMENT PROFIT
 
INDUSTRIAL SEGMENT MARGIN
       
 
 
1Q 2015
 
Industrial Segment
(1)%
 
Industrial Segment Organic*
3%
 
Financial Services
(39)%
 
Financial Services excluding the GE Capital exit impacts*
(7)%
 
 
 
 
 
EARNINGS (LOSS) PER SHARE
 
 
 
 
 
INDUSTRIAL ORDERS
 
 
 
 
 
INDUSTRIAL BACKLOG
 
 
¢ ¢ Earnings (Loss)   ¢ ¢ Operating Earnings (Loss)*
 
(a) Operating earnings (loss) per share excluding the GE Capital exit impacts* was $0.31.
 
 
 
 
 
 
 
 
 
Equipment
 
 
Services
 
 
 
 
 
 
 
Equipment
 
 
Services
GE CFOA
 
SIGNIFICANT DEVELOPMENTS IN 2015
 
 
 
 
 
 
GECC Dividend
 
Industrial CFOA*
 
 
We announced the GE Capital Exit Plan.
 
We signed an agreement to sell our consumer finance business in Australia and New
Zealand for approximately 6.8 billion Australian dollars and 1.4 billion New Zealand dollars.
 
We acquired Milestone Aviation Group for $1.8 billion on January 30, 2015.
 
The effects of a stronger U.S. dollar primarily relative to the euro decreased consolidated revenues by $1.2 billion.
 
GE returned $2.4 billion to shareowners in the three months ended March 31, 2015
through dividends and stock buybacks.
 
 
*Non-GAAP Financial Measure
9 2015 1Q FORM 10-Q

CONSOLIDATED RESULTS

THREE MONTHS ENDED MARCH 31
(Dollars in billions)

 
REVENUES
 
INDUSTRIAL SEGMENT EQUIPMENT
& SERVICES REVENUES

 

 
 
 
 
Equipment
 
 
Services
 
COMMENTARY: 2015-2014
   
 
Consolidated revenues decreased $4.2 billion, or 12%, primarily due to charges associated with the GE Capital Exit Plan of $3.2 billion and the impact of foreign exchange of $1.2 billion. Consolidated revenues excluding the GE Capital exit impacts* decreased 3%.
·   Industrial segment revenues decreased 1%, reflecting the unfavorable impact of foreign exchange of $0.9 billion, partially offset by higher volume.
·   Financial Services revenues decreased 39% primarily due to the effects of the GE Capital Exit Plan. Financial Services revenues excluding the GE Capital exit impacts* decreased 7%.
·   The effects of acquisitions increased consolidated revenues $0.2 billion and $0.6 billion in 2015 and 2014, respectively. Dispositions affected our ongoing results through lower revenues of $0.3 billion and $2.0 billion in 2015 and 2014, respectively.
 



















*Non-GAAP Financial Measure
10 2015 1Q FORM 10-Q



THREE MONTHS ENDED MARCH 31
(Dollars in billions)

 
EARNINGS (LOSS)
 
INDUSTRIAL SELLING, GENERAL & ADMINISTRATIVE (SG&A) AS A % OF SALES
 
 
¢ ¢ Earnings (Loss)   ¢ ¢ Operating Earnings (Loss)*
 
(a)        Operating earnings excluding the GE Capital exit impacts* was $3.1 billion.
 
 
 
COMMENTARY: 2015 - 2014
   
 
Consolidated earnings decreased $14.1 billion primarily due to lower financial services income resulting from charges associated with the GE Capital Exit Plan of $13.8 billion. The charges included: tax expense related to expected repatriation of foreign earnings and write-off of deferred tax assets; asset impairments due to shortened hold periods; and charges on businesses held for sale, including goodwill allocation.
·   Industrial segment profit increased 9% largely driven by Aviation.
·   Industrial segment margin increased 120 basis points (bps) driven by higher productivity and positive business mix, partially offset by the effects of inflation.
·   Financial Services earnings decreased primarily due to charges associated with the GE Capital Exit Plan.
·   The effects of acquisitions on our consolidated net earnings were an insignificant amount in 2015 and an increase of $0.1 billion in 2014. The effects of dispositions on net earnings were an insignificant amount and a decrease of $1.2 billion in 2015 and 2014, respectively.
·   Industrial SG&A as a percentage of total sales increased slightly to16% primarily as a result of higher non-operating pension costs, restructuring and acquisition-related costs, partially offset by the favorable impact of global cost reduction initiatives.
 

See the "Other Consolidated Information" section within the MD&A of this Form 10-Q for a discussion of income taxes.












*Non-GAAP Financial Measure
11 2015 1Q FORM 10-Q

SEGMENT OPERATIONS

SEGMENT REVENUES AND PROFIT

Segment revenues include revenues and other income related to the segment.

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

Segment profit excludes results reported as discontinued operations and accounting changes. Segment profit also excludes the portion of earnings or loss attributable to noncontrolling interests of consolidated subsidiaries, and as such only includes the portion of earnings or loss attributable to our share of the consolidated earnings or loss of consolidated subsidiaries.

Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segment's management is measured:

·
Interest and other financial charges and income taxes are excluded in determining segment profit (which we sometimes refer to as "operating profit") for the industrial segments.
·
Interest and other financial charges and income taxes are included in determining segment profit (which we sometimes refer to as "net earnings") for the GE Capital segment.

Certain corporate costs, such as shared services, employee benefits and information technology are allocated to our segments based on usage. A portion of the remaining corporate costs is allocated based on each segment's relative net cost of operations.

PLANNED ACQUISITION OF ALSTOM IMPACTS MULTIPLE SEGMENTS

During the second quarter of 2014, GE's offer to acquire the Thermal, Renewables and Grid businesses of Alstom for approximately €12.4 billion (to be adjusted for the assumed net cash or liability at closing) was positively recommended by Alstom's board of directors. As part of the transaction, GE, Alstom and the French Government signed a memorandum of understanding for the formation of three joint ventures in grid technology, renewable energy, and global nuclear and French steam power. Alstom will invest approximately €2.6 billion in these joint ventures at the closing of the proposed transaction.

In the fourth quarter of 2014, Alstom completed its review of the proposed transaction with the works council and obtained approval from its shareholders. Also in the fourth quarter of 2014, GE and Alstom entered into an amendment to the original agreement where GE has agreed to pay Alstom a net amount of approximately €0.3 billion of additional consideration at closing. In exchange for this funding, Alstom has agreed to extend the trademark licensing of the Alstom name from 5 years to 25 years as well as other contractual amendments. The proposed transaction continues to be subject to regulatory approvals, which is currently in process. The transaction is targeted to close in 2015.

The acquisition and alliances with Alstom will impact our Power & Water and Energy Management segments. The impact of the acquired businesses on individual segments will be affected by a number of variables, including operating performance, purchase accounting impacts and expected synergies. In addition, due to the amount of time between signing and closing, the operations of the businesses may fluctuate and impact the overall valuation of the acquired businesses at the time of close and, accordingly, may affect the amounts assigned to the assets and liabilities recorded in purchase accounting.
12 2015 1Q FORM 10-Q

SUMMARY OF OPERATING SEGMENTS
                 
 
Three months ended March 31
(In millions)
 
2015
   
2014
   
V%
                 
Revenues
               
Power & Water
$
5,716
 
$
5,509
   
 4 %
Oil & Gas
 
3,961
   
4,308
   
 (8)%
Energy Management
 
1,685
   
1,672
   
 1 %
Aviation
 
5,674
   
5,778
   
 (2)%
Healthcare
 
4,075
   
4,198
   
 (3)%
Transportation
 
1,308
   
1,227
   
 7 %
Appliances & Lighting
 
1,941
   
1,857
   
 5 %
      Total industrial segment revenues
 
24,360
   
24,549
   
 (1)%
GE Capital
 
5,982
   
9,885
   
 (39)%
      Total segment revenues
 
30,342
   
34,434
   
 (12)%
Corporate items and eliminations
 
(986)
   
(886)
   
 (11)%
Consolidated revenues
$
29,356
 
$
33,548
   
 (12)%
                 
Segment profit (loss)
               
Power & Water
$
871
 
$
888
   
 (2)%
Oil & Gas
 
432
   
446
   
 (3)%
Energy Management
 
28
   
5
   
F
Aviation
 
1,314
   
1,115
   
 18 %
Healthcare
 
587
   
570
   
 3 %
Transportation
 
225
   
202
   
 11 %
Appliances & Lighting
 
103
   
53
   
 94 %
      Total industrial segment profit
 
3,560
   
3,279
   
 9 %
GE Capital
 
(12,544)
   
1,693
   
U
      Total segment profit (loss)
 
(8,984)
   
4,972
   
U
Corporate items and eliminations
 
(1,692)
   
(1,542)
   
 (10)%
GE interest and other financial charges
 
(389)
   
(365)
   
 (7)%
GE provision for income taxes
 
(306)
   
(318)
   
 4 %
Earnings (loss) from continuing operations
               
   attributable to the Company
 
(11,371)
   
2,747
   
U
Earnings (loss) from discontinued
               
   operations, net of taxes
 
(2,202)
   
252
   
U
Consolidated net earnings (loss)
               
   attributable to the Company
$
(13,573)
 
$
2,999
   
U
   
\
           
13 2015 1Q FORM 10-Q

POWER & WATER

OPERATIONAL OVERVIEW
(Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
(a)        Includes Water Process Technologies and Nuclear
 
 
 
 
                         Services              Equipment
ORDERS
 
BACKLOG
 

 
 
 
 
 
Equipment
 
 
Services
 
 
 
 
 
 
 
 
 
Equipment
 
Services
 
UNIT SALES
   
 
   

14 2015 1Q FORM 10-Q



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
 
¢ ¢ Revenues  ¢ ¢ Profit
 
 
 
SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2015 - 2014
       
Segment revenues up $0.2 billion or 4%;
Segment profit down 2% as a result of:
 
·The increase in revenues was driven by higher volume, primarily higher equipment sales at PGP and service sales at PGS partially offset by lower volume at Renewable Energy and Distributed Power, as well as the impact of a stronger U.S. dollar.
·The decrease in profit was mainly due to lower cost productivity driven by HA gas turbine build costs, partially offset by higher volume on gas turbines and favorable business mix.
 
Revenues
Profit
March 31, 2014
$
 5.5
$
 0.9
Volume
 
 0.4
 
 0.1
Price
 
 -
 
 -
Foreign Exchange
 
 (0.3)
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 0.1
Productivity
 
N/A
 
 (0.2)
Other
 
 0.1
 
 -
March 31, 2015
$
 5.7
$
 0.9
         
     

15 2015 1Q FORM 10-Q

OIL & GAS

OPERATIONAL OVERVIEW
(Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
).
 
 
 
(a)        Our drilling product line, previously part of Drilling & Surface (D&S), was realigned as part of Subsea Systems (SS) effective January 1, 2015. Accordingly, Subsea Systems is now Subsea Systems & Drilling (SS&D).
 
 
                          Services           Equipment
 
 
ORDERS
 
BACKLOG
 
 
 
 
 
Equipment

 
Services
 
 
 
 
 
 
 
 
Equipment
 
 
Services
     
     

16 2015 1Q FORM 10-Q



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
¢ ¢ Revenues  ¢ ¢ Profit
 
 
 
SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2015 - 2014
       
Segment revenues down $0.3 billion or 8%;
Segment profit down 3% as a result of:
 
·The decrease in revenues was primarily due to the effects of a stronger U.S. dollar and lower other income. These decreases were partially offset by higher volume. Organic revenues* for the first quarter of 2015 were flat compared with the first quarter of 2014.
·The decrease in operating profit reflects the effects of a stronger U.S. dollar ($0.1 billion). Organic operating profit* grew 11% in the first quarter of 2015.
 
Revenues
Profit
March 31, 2014
$
 4.3
$
 0.4
Volume
 
 0.1
 
 -
Price
 
 -
 
 -
Foreign Exchange
 
 (0.3)
 
 (0.1)
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 0.2
Other
 
 (0.2)
 
 (0.2)
March 31, 2015
$
 4.0
$
 0.4
         
     


*Non-GAAP Financial Measure
17 2015 1Q FORM 10-Q

ENERGY MANAGEMENT

OPERATIONAL OVERVIEW
(Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
                   Services           Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
Equipment
 
 
Services
 
 
 
 
 
 
 
 
Equipment
 
 
Services
     
     

18 2015 1Q FORM 10-Q



FINANCIAL OVERVIEW
 (Dollars in billions)

SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
 
¢ ¢ Revenues   ¢ ¢ Profit
¢ ¢ Revenues   ¢ ¢ Profit
 
 
 
 
COMMENTARY: 2015 - 2014
     
 
Segment revenues up 1%  as a result of:
 
 
·Higher volume ($0.1 billion), partially offset by the effects of a stronger U.S. dollar.
 
Segment profit margin up as a result of:
·Continued SG&A cost reductions.
 
 
 
     
     

19 2015 1Q FORM 10-Q

AVIATION

OPERATIONAL OVERVIEW
(Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
                        Services              Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
Equipment
 
 
Services
 
 
 
 
 
 
Equipment
 
 
Services
UNIT SALES
   
(a)GEnx engines are a subset of commercial engines
(b)Commercial spares shipment rate in millions of dollars per day
   

20 2015 1Q FORM 10-Q



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
 
 
¢ ¢ Revenue   ¢ ¢ Profit
 
 
 
SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2015 - 2014
       
Segment revenues down $0.1billion or 2%;
Segment profit up $0.2 billion or 18% as a result of:
 
·The decrease in revenues was due to lower volume driven by Military and GEnx engines, partially offset by the effects of higher prices in Commercial Engines and Commercial Services businesses.
·The increase in profit was mainly due to higher prices in our Commercial Engines and Commercial Services businesses as well as favorable business mix. These increases were partially offset by effects of inflation and lower volume as discussed above.
 
Revenues
Profit
March 31, 2014
$
 5.8
$
 1.1
Volume
 
 (0.3)
 
 (0.1)
Price
 
 0.2
 
 0.2
Foreign Exchange
 
 -
 
 -
(Inflation)/Deflation
 
N/A
 
 (0.1)
Mix
 
N/A
 
 0.1
Productivity
 
N/A
 
 0.1
Other
 
 -
 
 -
March 31, 2015
$
 5.7
$
 1.3
     
     

21 2015 1Q FORM 10-Q

HEALTHCARE

OPERATIONAL OVERVIEW
(Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
                       Services             Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
Equipment
 
 
Services
 
 
 
 
Equipment
 
 
Services
     
   

22 2015 1Q FORM 10-Q



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
 
 
¢ ¢ Revenues   ¢ ¢ Profit
 
 
 
 
SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2015 - 2014
       
Segment revenues down $0.1 billion or 3%;
Segment profit up 3% as a result of:
 
·The decrease in revenues was due to the impact of a stronger U.S. dollar and lower prices mainly in Healthcare Systems. These decreases were partially offset by higher volume, mainly driven by Life Sciences.
·The increase in profit was mainly due to higher cost productivity including SG&A cost reductions, partially offset by lower prices and the effects of inflation.
 
Revenues
Profit
March 31, 2014
$
 4.2
$
 0.6
Volume
 
 0.2
 
 -
Price
 
 (0.1)
 
 (0.1)
Foreign Exchange
 
 (0.2)
 
 -
(Inflation)/Deflation
 
N/A
 
 (0.1)
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 0.1
Other
 
 -
 
 -
March 31, 2015
$
 4.1
$
 0.6
         
     

23 2015 1Q FORM 10-Q

TRANSPORTATION

OPERATIONAL OVERVIEW
(Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
(a)        Includes Marine, Stationary & Drilling
 
 
 
 
 
 
                    Services              Equipment
ORDERS
 
BACKLOG
 
 
 
 
 
 
Equipment
 
Services
 
 
 
 
 
Equipment
 
 
Services
 
UNIT SALES
   

24 2015 1Q FORM 10-Q



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES & PROFIT
SEGMENT PROFIT MARGIN
 
 
¢ ¢ Revenues   ¢ ¢ Profit
 
 
COMMENTARY: 2015 - 2014
   
Segment revenues up $0.1 billion or 7% as a result of:
·Higher volume ($0.1 billion), primarily due to higher locomotive equipment sales, partially offset by lower volume of services sales.
 
 
Segment profit up 11% as a result of:
·
Higher other income and higher cost productivity.

25 2015 1Q FORM 10-Q

APPLIANCES & LIGHTING

OPERATIONAL OVERVIEW
 (Dollar in billions)

2015 YTD SUB-SEGMENT REVENUES
   
   
 
 
 
 
FINANCIAL  OVERVIEW
(Dollar in billions)
 
SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
 
 
¢ ¢ Revenues   ¢ ¢ Profit
 
 
 
 
COMMENTARY: 2015 - 2014
 
Segment revenues up 5%  as a result of:
·Higher volume ($0.1 billion), driven by higher sales at Appliances, were partially offset by lower prices and the effects of a stronger U.S. dollar.
 
Segment profit up 94% as a result of:
·Improved cost productivity ($0.1 billion) including the effects of classifying Appliances as a business held for sale in the third quarter of 2014, was partially offset by lower prices.

26 2015 1Q FORM 10-Q

GE CAPITAL

OPERATIONAL OVERVIEW
(Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES
 
NET INTEREST MARGIN
 
 
 
ENDING NET INVESTMENT, EXCLUDING LIQUIDITY*
 
 
TIER 1 COMMON RATIO ESTIMATE*
 
 
 
 
 
 
 
 
SIGNIFICANT TRENDS & DEVELOPMENTS

·
The GE Capital Exit Plan - As previously discussed, the Company announced a plan to reduce the size of the financial services businesses through the sale of most of the assets of GECC over the next 24 months. It is expected that as a result of the GE Capital Exit Plan, the GE Capital businesses that will remain with GE will account for about $90 billion in ending net investment (ENI), excluding liquidity, including about $40 billion in the U.S. ENI is a metric used to measure the total capital invested in the financial services businesses. GE Capital's ENI, excluding liquidity, at March 31, 2015 was $303 billion.
·
Australia and New Zealand (ANZ) Consumer Lending - During the first quarter of 2015, we signed an agreement to sell our consumer finance business in Australia and New Zealand to a consortium including KKR, Varde Partners and Deutsche Bank for approximately 6.8 billion Australian dollars and 1.4 billion New Zealand dollars.
·
Milestone Aviation Group – On January 30, 2015, GECAS acquired Milestone Aviation Group, a helicopter leasing business, for approximately $1.8 billion.
·
Synchrony Financial In connection with Synchrony Financial's planned separation from GE, Synchrony Financial filed the related application to the Federal Reserve Board on April 30, 2015. For a further discussion of the Synchrony Financial transaction, see the Synchrony Financial annual report on Form 10-K for the year ended December 31, 2014 and the quarterly report on Form 10-Q for the three months ended March 31, 2015.
·
 Dividends - GECC paid quarterly dividends of $0.5 billion to GE in the three months ended March 31, 2015.

* Non-GAAP Financial Measure
27 2015 1Q FORM 10-Q

FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES & PROFIT (LOSS)(a)
   
         Q1  2014                 Q1 2015(b)
 
¢ ¢ Revenue   ¢ ¢ Profit (Loss)
 
 
 
 
 
 
 
 
 
(a) Interest and other financial charges and income taxes are included in determining segment profit (loss) for the GE Capital segment.
(b) 1Q 2015 revenues included $3.2 billion and operating profit included $13.8 billion (after-tax) of charges related to the GE Capital Exit Plan.
 
 
     
 
COMMENTARY: 2015 - 2014

Segment revenues and profit decreased primarily due to the effects of the GE Capital Exit Plan.

COMMERCIAL LENDING AND LEASING

CLL 2015 revenues decreased 57% and net earnings decreased in the three months ended March 31, 2015. Revenues decreased primarily as a result of estimated losses on businesses classified as assets of businesses held for sale ($1.8 billion) and organic revenue declines ($0.1 billion). Net earnings decreased reflecting higher impairments ($3.2 billion) and higher provisions for losses on financing receivables ($1.2 billion). These decreases are primarily related to the reclassification of assets within CLL to assets of businesses held for sale, including goodwill allocation, and financing receivables held for sale recorded at the lower of cost or fair value, less cost to sell, and asset impairments due to shortened hold periods in connection with the GE Capital Exit Plan.

CONSUMER

Consumer 2015 revenues decreased by 43% and net earnings decreased in the three months ended March 31, 2015. Revenues decreased as a result of higher impairments ($1.4 billion). Net earnings decreased as a result of higher provisions for losses on financing receivables ($2.1 billion), higher impairments ($1.2 billion) and core decreases ($0.2 billion). These decreases are primarily related to the reclassification of assets within Consumer to financing receivables held-for-sale recorded at the lower of cost or fair value, less cost to sell, and asset impairments related to equity method investments in connection with the GE Capital Exit Plan.

ENERGY FINANCIAL SERVICES

Energy Financial Services 2015 revenues decreased 39% and net earnings decreased 77% in the three months ended March 31, 2015. Revenues decreased as a result of lower gains ($0.2 billion) and organic revenue declines ($0.1 billion), partially offset by lower impairments ($0.1 billion). Net earnings decreased as a result of lower gains ($0.1 billion) and core decreases ($0.1 billion), partially offset by lower impairments ($0.1 billion).

GECAS

GECAS 2015 revenues decreased 5% and net earnings decreased 13% in the three months ended March 31, 2015. Revenues decreased as a result of organic revenue declines ($0.1 billion), partially offset by the effects of acquisitions ($0.1 billion) and lower impairments. Net earnings decreased as a result of core decreases ($0.1 billion), partially offset by lower impairments and the effects of acquisitions.
28 2015 1Q FORM 10-Q

CORPORATE ITEMS AND ELIMINATIONS
             
             
REVENUES AND OPERATING PROFIT (COST)
         
             
   
Three months ended March 31
(In millions)
 
2015
   
2014
             
Revenues
         
Total Corporate Items and Eliminations
$
(986)
 
$
(886)
             
Operating profit (cost)
         
 
Principal retirement plans(a)
$
(789)
 
$
(581)
 
Restructuring and other charges
 
(422)
   
(376)
 
Eliminations and other
 
(481)
   
(585)
Total Corporate Items and Eliminations
$
(1,692)
 
$
(1,542)
             
CORPORATE COSTS
         
         
   
Three months ended March 31
(In millions)
 
2015
 
2014
             
Total Corporate Items and Eliminations
$
(1,692)
 
$
(1,542)
Less non-operating pension cost
 
(695)
   
(526)
Total Corporate costs (operating)*
$
(997)
 
$
(1,016)
Less restructuring and other charges
 
(422)
   
(376)
Adjusted total corporate costs (operating)*
$
(575)
 
$
(640)
             
(a)
Included non-operating pension cost* of $0.7 billion and $0.5 billion in the three months ended March 31, 2015 and 2014, respectively, which includes expected return on plan assets, interest costs and non-cash amortization of actuarial gains and losses.

2015 – 2014 COMMENTARY

Revenues and other income decreased $0.1 billion, primarily a result of:
·
A fair value adjustment on a senior unsecured note receivable from a customer.

Operating costs increased $0.2 billion, primarily as a result of:
·
Higher costs associated with our principal retirement plans including the effects of updated mortality assumptions.

COSTS NOT INCLUDED IN SEGMENT RESULTS

Certain amounts are not included in industrial operating segment results because they are excluded from measurement of their operating performance for internal and external purposes. These amounts are included in GE Corporate Items & Eliminations and may include matters such as charges for restructuring; rationalization and other similar expenses; acquisition costs and related charges; technology and product development cost; certain gains and losses from acquisitions or dispositions; and litigation settlements or other charges, for which responsibility preceded the current management team. The amount of costs and gains not included in segment results follows.

COSTS
         
           
 
Three months ended March 31
(In billions)
 
2015
   
2014
           
Power & Water
$
0.1
 
$
0.1
Oil & Gas
 
0.1
   
0.1
Energy Management
 
0.1
   
0.1
Aviation
 
-
   
0.1
Healthcare
 
-
   
0.1
Transportation
 
-
   
-
Appliances & Lighting
 
-
   
-
Total
$
0.4
 
$
0.4
           
*Non-GAAP Financial Measure


29 2015 1Q FORM 10-Q


DISCONTINUED OPERATIONS

Discontinued operations primarily comprises our Real Estate business and our U.S. mortgage business (WMC). Results of operations, financial position and cash flows for these businesses are separately reported as discontinued operations for all periods presented. All of these operations were previously reported in the GE Capital segment.


FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS
           
 
Three months ended March 31
(In millions)
2015
 
2014
           
Earnings (loss) from discontinued operations, net of taxes
$
(2,202)
 
$
252
           

The first quarter 2015 loss from discontinued operations, net of taxes, primarily reflected the following:
·
$2.3 billion after-tax loss at our Real Estate business (including a $2.4 billion loss on the planned disposal).

The first quarter 2014 earnings from discontinued operations, net of taxes, primarily reflected the following:
·
$0.2 billion after-tax earnings at our Real Estate business.

For additional information related to discontinued operations, see Note 2 to the consolidated financial statements.

30 2015 1Q FORM 10-Q

OTHER CONSOLIDATED INFORMATION

INCOME TAXES

Income taxes have a significant effect on our net earnings. As a global commercial enterprise, our tax rates are affected by many factors, including our global mix of earnings, the extent to which those global earnings are indefinitely reinvested outside the United States, legislation, acquisitions, dispositions and tax characteristics of our income. Our tax rates are also affected by tax incentives introduced in the U.S. and other countries in furtherance of policies to encourage and support certain types of activity. Our tax returns are routinely audited and settlements of issues raised in these audits sometimes affect our tax provisions.

GE and GECC file a consolidated U.S. federal income tax return. This enables GE to use GECC tax deductions and credits to reduce the tax that otherwise would have been payable by GE. The GECC effective tax rate for each period reflects the benefit of these tax reductions in the consolidated return. GE makes cash payments to GECC for these tax reductions at the time GE's tax payments are due.

CONSOLIDATED – THREE MONTHS ENDED MARCH 31
(Dollars in billions)

PROVISION FOR INCOME TAXES
   
 
2015 – 2014 COMMENTARY

·
The consolidated income tax rate (negative 130.5%) for the first quarter 2015 is not meaningful. The negative consolidated tax rate is caused by comparing the positive tax expense of $6.5 billion with the pre-tax loss of $4.9 billion resulting in a negative tax rate.
·
As discussed in Note 10, during the first quarter of 2015 in conjunction with the GE Capital Exit Plan, we incurred tax expense of $6.0 billion related to expected repatriation of foreign earnings and write-off of deferred tax assets.
·
The increase in the income tax expense from $0.6 billion for the first quarter of 2014 to $6.5 billion for the first quarter of 2015 is due to the tax expense incurred as part of the GE Capital Exit Plan.
·
The consolidated tax provision includes $0.3 billion for GE (excluding GECC) for both the first quarters of 2014 and 2015.

The effective tax rate in future periods is expected to increase as a result of changes in our income profile due to lower GE Capital earnings as we execute on the GE Capital Exit Plan.

BENEFITS FROM GLOBAL OPERATIONS

Absent the effects of the GE Capital Exit Plan, our consolidated income tax rate is lower than the U.S. statutory rate primarily because of benefits from lower-taxed global operations, including the use of global funding structures. There is a benefit from global operations as non-U.S. income is subject to local country tax rates that are significantly below the 35% U.S. statutory rate. These non-U.S. earnings have been indefinitely reinvested outside the U.S. and are not subject to current U.S. income tax. The rate of tax on our indefinitely reinvested non-U.S. earnings is below the 35% U.S. statutory rate because we have significant business operations subject to tax in countries where the tax on that income is lower than the U.S. statutory rate and because GE funds certain of its non-U.S. operations through foreign companies that are subject to low foreign taxes.

31 2015 1Q FORM 10-Q

Historically, the most significant portion of these benefits depends on the provision of U.S. law deferring the tax on active financial services income, which, as discussed below, is subject to expiration. A substantial portion of the remaining benefit related to business operations subject to tax in countries where the tax on that income is lower than the U.S. statutory rate is derived from our GECAS aircraft leasing operations located in Ireland. No other operation in any one country accounts for a material portion of the remaining balance of the benefit.

We expect our ability to benefit from non-U.S. income taxed at less than the U.S. rate to continue, subject to changes in our earnings profile due to the GE Capital Exit Plan and changes in U.S. or foreign law, including the expiration of the U.S. tax law provision deferring tax on active financial services income. In addition, since this benefit depends on management's intention to indefinitely reinvest amounts outside the U.S., our tax provision will increase to the extent we no longer indefinitely reinvest foreign earnings.


STATEMENT OF FINANCIAL POSITION

Because GE and GECC share certain significant elements of their Statements of Financial Position, the following discussion addresses significant captions in the consolidated statement. Within the following discussions, however, we distinguish between GE and GECC activities in order to permit meaningful analysis of each individual consolidating statement.

MAJOR CHANGES IN OUR FINANCIAL POSITION FOR THE THREE MONTHS ENDED MARCH 31, 2015

·
GECC Financing receivables-net decreased $139.3 billion. See the following Financing Receivables section for additional information.
·
GECC Financing receivables held for sale increased $91.1 billion. See the following Financing Receivables Held for Sale section for additional information.
·
Assets of businesses held for sale increased $50.2 billion, primarily as a result of the GE Capital Exit Plan, decreasing balances of our major asset categories, including: Investment securities; Financing receivables; Property, plant and equipment and Goodwill.
·
Borrowings decreased $13.0 billion. GECC had net repayments on borrowings of $3.9 billion, along with a $10.1 billion reduction in the balances driven by the strengthening of the U.S. dollar against all major currencies.
·
Accumulated other comprehensive income (loss) – currency translation adjustments decreased $5.3 billion driven by the strengthening U.S. dollar against all major currencies at March 31, 2015 compared with December 31, 2014. This decrease coincides with general decreases in balances of our major asset and liability categories, including: Financing receivables; Property, plant and equipment; Goodwill; Short-term borrowings and Long-term borrowings.


FINANCING RECEIVABLES

Financing receivables held for investment are those that we have the intent and ability to hold for the foreseeable future and are measured at the principal amount outstanding, net of the allowance for losses, write-offs, unamortized discounts and premiums, and net deferred loan fees or costs.

At March 31, 2015, our financing receivables portfolio primarily relates to GECAS, Energy Financial Services, Healthcare Equipment Finance (that directly relate to GE's core industrial businesses), Working Capital Solutions, a business that purchases GE customer receivables, and Synchrony Financial, our U.S. consumer business. The portfolios in our GECAS and Energy Financial Services businesses are collateralized by commercial aircraft and operating assets in the global energy and water industries, respectively. Our Healthcare Equipment Finance portfolio is collateralized by equipment used in the healthcare industry and the Working Capital Solutions portfolio is substantially recourse to GE or insured. Both the Healthcare Equipment Finance and Working Capital Solutions portfolios are reported in the CLL segment. Substantially all of the Synchrony Financial portfolio consists of U.S. consumer credit card and sales finance receivables.

32 2015 1Q FORM 10-Q

For purposes of the discussion that follows, "delinquent" receivables are those that are 30 days or more past due based on their contractual terms. Loans purchased at a discount are initially recorded at fair value and accrete interest income over their estimated lives based on reasonably estimable cash flows even if the underlying loans are contractually delinquent at acquisition. "Nonaccrual" financing receivables are those on which we have stopped accruing interest. We stop accruing interest at the earlier of the time at which collection of an account becomes doubtful or the account becomes 90 days past due, with the exception of consumer credit card accounts, for which we continue to accrue interest until the accounts are written off in the period that the account becomes 180 days past due. Recently restructured financing receivables are not considered delinquent when payments are brought current according to the restructured terms, but may remain classified as nonaccrual until there has been a period of satisfactory payment performance by the borrower and future payments are reasonably assured of collection.

Further information on the determination of the allowance for losses on financing receivables and the credit quality and categorization of our financing receivables is provided in Notes 5 and 18 to the consolidated financial statements.

FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES(a)
                         
(Dollars in millions)
       
March 31, 2015
 
December 31, 2014
 
                         
Financing receivables
           
$
81,413
 
$
222,296
 
Nonaccrual receivables
             
345
(b)
 
3,971
 
Allowance for losses
             
3,349
   
4,914
 
                         
Nonaccrual financing receivables as a percent of financing receivables
   
0.4
%
 
1.8
%
Allowance for losses as a percent of nonaccrual financing receivables
   
(c)
   
123.8
 
Allowance for losses as a percent of total financing receivables
   
4.1
   
2.2
 
                         

(a)
For additional information related to the portfolio of  financing receivables, refer to the GECC quarterly report on Form 10-Q for the three months ended March 31, 2015.
(b)
Substantially all of our $0.3 billion of nonaccrual loans at March 31, 2015, are currently paying in accordance with the contractual terms. We continue to accrue interest on consumer credit cards until the accounts are written off in the period the account becomes 180 days past due.
(c)
Not meaningful.

Financing receivables, before allowance for losses, decreased $140.9 billion from December 31, 2014, primarily as a result of reclassifications to financing receivables held for sale or assets of businesses held for sale (primarily CLL and Consumer) ($123.1 billion), the stronger U.S. dollar ($7.7 billion), write-offs ($6.2 billion) and collections (which includes sales) exceeding originations ($3.7 billion).

Nonaccrual receivables decreased $3.6 billion from December 31, 2014, primarily due to reclassifications to financing receivables held for sale (including write-offs) or assets of businesses held for sale (primarily CLL and Consumer).

Allowance for losses decreased $1.6 billion from December 31, 2014, primarily as a result of write-offs on financing receivables reclassified to financing receivables held for sale and the transfer of that portion of the allowance for losses related to financing receivables reclassified to assets of businesses held for sale. The allowance for losses as a percent of total financing receivables increased from 2.2% at December 31, 2014 to 4.1% at March 31, 2015 reflecting decreases in both the allowance for losses and the overall financing receivables balance related to the financing receivables reclassified to financing receivables held for sale and assets of businesses held for sale as part of the GE Capital Exit Plan.
33 2015 1Q FORM 10-Q

FINANCING RECEIVABLES HELD FOR SALE

Financing receivables held for sale are recorded at the lower of cost or fair value, less cost to sell, and represent those financing receivables that management does not intend to hold for the foreseeable future. Subsequent declines in fair value are recognized in the period in which they occur. Valuations are primarily performed on a portfolio basis, except for commercial financing receivables which may be performed on an individual financing receivable basis. Interest income on financing receivables held for sale is accrued and subject to the nonaccrual policies described above. Because financing receivables held for sale are recognized at the lower of cost or fair value, less cost to sell, the allowance for losses and write-off policies do not apply to these financing receivables.

During the three months ended March 31, 2015, we transferred most of our CLL and all non-U.S. Consumer financing receivables to financing receivables held for sale or assets of businesses held for sale as a result of the GE Capital Exit Plan and the signing of an agreement to sell our consumer finance business in ANZ. Also, in connection with the GE Capital Exit Plan, we announced the planned disposition of our Real Estate business, which is classified as discontinued operations for all years presented.

The transfer of financing receivables to financing receivables held for sale and assets of businesses held for sale totaled $93.1 billion and $30.0 billion, respectively. Prior to transferring the financing receivables to financing receivables held for sale we recognized a pre-tax provision for losses on financing receivables of $4.0 billion ($3.3 billion after-tax), to reduce the carrying value of the financing receivables to the lower of cost or fair value, less cost to sell, and wrote-off the associated balance of the allowance for losses of $5.1 billion to establish a new cost basis of the financing receivables held for sale at March 31, 2015.

For businesses held for sale, financing receivable balances of $30.0 billion and the related allowance for loan losses of $0.4 billion were reclassified to assets of businesses held for sale. The businesses held for sale were recorded at the lower of cost or fair value, less cost to sell, at March 31, 2015. The charge of $1.8 billion related to measuring the businesses held for sale, including goodwill allocation, at the lower of cost or fair value, less cost to sell, is recorded in other revenues.
A majority of the provision for losses on financing receivables recognized upon the transfer of financing receivables to financing receivables held for sale during the three months ended March 31, 2015 relates to our Consumer non-U.S. residential mortgage portfolios in the U.K., France, Poland and Spain, which primarily comprise variable rate mortgages with a remaining weighted average maturity of more than ten years. We estimate that the effect on the provision for losses is largely attributable to credit loss exposures that are not incurred losses recognizable under GAAP but nevertheless affect fair value that would be determined by a market participant when pricing the portfolio.
As a result of the GE Capital Exit Plan and transfer of financing receivables to financing receivables held for sale or assets of businesses held for sale, nonaccrual receivables and impaired loan balances at December 31, 2014 were reduced by $3.1 billion and $3.4 billion, respectively. Loans held for sale are not reported as impaired, as these loans are recorded at lower of cost or fair value, less cost to sell.

Further information on financing receivables held for sale is provided in Note 2 to the consolidated financial statements.


34 2015 1Q FORM 10-Q

FINANCIAL RESOURCES AND LIQUIDITY

LIQUIDITY AND BORROWINGS

We maintain a strong focus on liquidity. At both GE and GECC we manage our liquidity to help provide access to sufficient funding to meet our business needs and financial obligations throughout business cycles.

Our liquidity and borrowing plans for GE and GECC are established within the context of our annual financial and strategic planning processes. At GE, our liquidity and funding plans take into account the liquidity necessary to fund our operating commitments, which include primarily purchase obligations for inventory and equipment, payroll and general expenses (including pension funding). We also take into account our capital allocation and growth objectives, including paying dividends, repurchasing shares, investing in research and development and acquiring industrial businesses. At GE, we rely primarily on cash generated through our operating activities, any dividend payments from GECC, and also have historically maintained a commercial paper program that we regularly use to fund operations in the U.S., principally within the quarters.

GECC's liquidity position is targeted to meet its obligations under both normal and stressed conditions. GECC establishes a funding plan annually that is based on the projected asset size and cash needs of the Company, which, over the past few years, has incorporated our strategy to reduce our ending net investment in GE Capital. In connection with the GE Capital Exit Plan, we do not intend to issue any incremental GECC unsecured term debt in the next five years. We expect to maintain an elevated liquidity position as we generate cash from asset sales, returning to more normalized levels in 2019. While we maintain elevated liquidity levels, we may engage in liability management actions, such as buying back debt, based on market and economic conditions. GECC relies on a diversified source of funding, including the unsecured term debt markets, the global commercial paper markets, deposits, secured funding, retail funding products, bank borrowings and securitizations to fund its balance sheet. We also rely on cash generated through collection of principal, interest and other payments on our existing portfolio of loans and leases to fund its operating and interest expense costs.

Our 2015 GECC funding plan anticipates repayment of principal on outstanding short-term borrowings, including the current portion of long-term debt ($37.7 billion at December 31, 2014), principally through dispositions, asset sales and cash on hand. Long-term maturities and early redemptions were $15.3 billion in the first quarter of 2015. Interest on borrowings is primarily repaid through interest earned on existing financing receivables, a trend we expect to change as GECC executes the GE Capital Exit Plan. During the first quarter of 2015, GECC earned interest income on financing receivables of $4.1 billion, which more than offset interest and other financial charges of $1.7 billion.

We maintain a detailed liquidity policy for GECC that requires GECC to maintain a contingency funding plan. The liquidity policy defines GECC's liquidity risk tolerance under different stress scenarios based on its liquidity sources and also establishes procedures to escalate potential issues. We actively monitor GECC's access to funding markets and its liquidity profile through tracking external indicators and testing various stress scenarios. The contingency funding plan provides a framework for handling market disruptions and establishes escalation procedures in the event that such events or circumstances arise. GECC will continue to evaluate the need to modify the existing contingency funding plan due to the GE Capital Exit Plan.

On April 10, 2015, Moody's Investors Service (Moody's) downgraded the senior unsecured debt rating for GE to A1 from Aa3 following GE's April 10th announcement of the GE Capital Exit Plan. GE's P-1 short-term rating was affirmed. Moody's affirmed GECC's A1/P-1 ratings. The rating outlook for GE and GECC remains stable.  On April 10, 2015, Standard & Poor's Rating Services (S&P) affirmed GE's AA+/A-1+ ratings and GECC's AA+/A-1+ ratings each with a stable outlook.

35 2015 1Q FORM 10-Q

LIQUIDITY SOURCES

We maintain liquidity sources that consist of cash and equivalents of $87.1 billion, committed unused credit lines of $45.9 billion and high-quality, liquid investments of $2.7 billion.

CONSOLIDATED CASH AND EQUIVALENTS
               
(In billions)
 
March 31, 2015
       
March 31, 2015
               
GE(a)
$
13.5
   
U.S.
$
34.8
GECC(b)
 
73.6
   
Non-U.S.(c)
 
52.3
Total
$
87.1
   
Total
$
87.1
               
(a)
At March 31, 2015, $2.9 billion of GE cash and equivalents was held in countries with currency controls that may restrict the transfer of funds to the U.S. or limit our ability to transfer funds to the U.S. without incurring substantial costs. These funds are available to fund operations and growth in these countries and we do not currently anticipate a need to transfer these funds to the U.S.
(b)
At March 31, 2015, GECC cash and equivalents of about $18.6 billion were in regulated banks and insurance entities and were subject to regulatory restrictions.
(c)
Of this amount at March 31, 2015, $6.4 billion was considered indefinitely reinvested. Indefinitely reinvested cash held outside of the U.S. is available to fund operations and other growth of non-U.S. subsidiaries; it is also available to fund our needs in the U.S. on a short-term basis through short-term loans, without being subject to U.S. tax. Under the Internal Revenue Code, these loans are permitted to be outstanding for 30 days or less and the total of all such loans is required to be outstanding for less than 60 days during the year. If we were to repatriate indefinitely reinvested cash held outside the U.S., we would be subject to additional U.S. income taxes and foreign withholding taxes.

COMMITTED UNUSED CREDIT LINES
     
(In billions)
March 31, 2015
     
Revolving credit agreements (exceeding one year)
$
25.1
Revolving credit agreements (364-day line)(a)
 
20.8
Total(b)
$
45.9
     
(a)
Included $20.3 billion that contains a term-out feature that allows us to extend borrowings for two years from the date on which such borrowings would otherwise be due.
(b)
Total committed unused credit lines were extended to us by 50 financial institutions. GECC can borrow up to $45.4 billion under these credit lines. GE can borrow up to $14.8 billion under certain of these credit lines.

FUNDING PLAN

We reduced our GE Capital ENI*, excluding liquidity, to $303 billion at March 31, 2015.

During the first three months of 2015, GECC completed issuances of $8.1 billion of senior unsecured debt (excluding securitizations described below) with maturities up to 10 years. In February 2015, Synchrony Financial issued an additional $1.0 billion of senior unsecured debt maturing in 2020.

COMMERCIAL PAPER
           
(In billions)
GE
 
GECC
           
Average commercial paper borrowings during the first quarter of 2015
$
6.9
 
$
25.1
Maximum commercial paper borrowings outstanding during the first quarter of 2015
 
10.8
   
25.2
           

GECC commercial paper maturities have historically been funded principally through new commercial paper issuances and at GE are substantially repaid before quarter-end using indefinitely reinvested overseas cash, which as discussed above, is available for use in the U.S. on a short-term basis without being subject to U.S. tax. As announced on April 10, 2015, GECC is targeting to reduce the outstanding commercial paper to approximately $5 billion by the end of 2015.





*Non-GAAP Financial Measure

36 2015 1Q FORM 10-Q

We securitize financial assets as an alternative source of funding. During the first three months of 2015, we completed $1.3 billion of non-recourse issuances and $2.2 billion of non-recourse borrowings matured. At March 31, 2015, consolidated non-recourse securitization borrowings were $29.0 billion.

We have ten deposit-taking banks outside of the U.S. and two deposit-taking banks in the U.S. – Synchrony Bank (formerly GE Capital Retail Bank), a Federal Savings Bank (FSB), and GE Capital Bank, an industrial bank (IB). The FSB and IB currently issue certificates of deposit (CDs) in maturity terms up to 10 years.

ALTERNATIVE FUNDING
   
       
(In billions)
 
       
Total alternative funding at December 31, 2014
$
117.3
Total alternative funding at March 31, 2015
 
112.9
 
Bank deposits
 
62.7
 
Non-recourse securitization borrowings
 
29.0
 
Funding secured by real estate, aircraft and other collateral
 
5.6
 
GE Interest Plus notes (including $0.1 billion of current long-term debt)
 
5.5
 
Bank unsecured
 
10.1
       

As a matter of general practice, we routinely evaluate the economic impact of calling debt instruments where GECC has the right to exercise a call. In determining whether to call debt, we consider the economic benefit to GECC of calling debt, the effect of calling debt on GECC's liquidity profile and other factors. During the first three months of 2015, we did not call any long-term debt.

INCOME MAINTENANCE AGREEMENT AND GE GUARANTEE OF CERTAIN GECC DEBT

GE provides implicit and explicit support to GECC through commitments, capital contributions and operating support. As part of the GE Capital Exit Plan, on April 10, 2015, GE and GECC entered into an amendment to their existing financial support agreement. Under this amendment (the Amendment), the Company has provided a full and unconditional guarantee (the Guarantee) of the payment of principal and interest on all tradable senior and subordinated outstanding long-term debt securities and all commercial paper issued or guaranteed by GECC identified in the Amendment. In the aggregate, the Guarantee applied to approximately $210 billion of GECC debt as of April 10, 2015. The Guarantee replaced the requirement that the Company make certain income maintenance payments to GECC in certain circumstances. GECC's U.S. public indentures were concurrently amended to provide the full and unconditional guarantee by the Company set forth in the Guarantee.
37 2015 1Q FORM 10-Q

STATEMENT OF CASH FLOWS – THREE MONTHS ENDED MARCH 31, 2015 VERSUS 2014

CONSOLIDATED CASH FLOWS

We evaluate our cash flow performance by reviewing our industrial (non-financial services) businesses and financial services businesses separately. Cash from operating activities (CFOA) is the principal source of cash generation for our industrial businesses. The industrial businesses also have liquidity available via the public capital markets. Our financial services businesses use a variety of financial resources to meet our capital needs. Cash for financial services businesses is primarily provided from the issuance of term debt and commercial paper in the public and private markets and deposits, as well as financing receivables collections, sales and securitizations.

GE CASH FLOWS – THREE MONTHS ENDED MARCH 31

OPERATING CASH FLOWS
 
INVESTING CASH FLOWS
 
FINANCING CASH FLOWS
                     
2014
 
  2015
 
2014
 
 2015
 
2014
 
 2015
 
 
 
 
With respect to GE CFOA, we believe that it is useful to supplement our GE Statement of Cash Flows and to examine in a broader context the business activities that provide and require cash.

The most significant source of cash in GE CFOA is customer-related activities, the largest of which is collecting cash resulting from product or services sales. See the Intercompany Transactions and Eliminations section for information related to transactions between GE and GECC. The most significant operating use of cash is to pay our suppliers, employees, tax authorities and others for a wide range of material and services. Dividends from GECC, including special dividends, represent the distribution of a portion of GECC retained earnings, and are distinct from cash from continuing operations within the financial services businesses. The amounts included in GE CFOA are the total dividends, including special dividends from excess capital.

2015 – 2014 COMMENTARY

GE cash from operating activities decreased $0.4 billion primarily due to the following:
·
A decrease of operating cash collections of $0.5 billion to $25.1 billion in 2015. This decrease is consistent with comparable GE segment revenue decreases from sales of goods and services and lower progress collections. These decreases were partially offset by an increase in collections of current receivables.
·
This decrease is partially offset by lower operating cash payments of $0.2 billion to $24.2 billion in 2015 consistent with cost and expense decreases and decreased spend on inventory in first quarter of 2015 compared with that of 2014.
·
Further, GECC paid quarterly dividends totaling $0.5 billion to GE in both the three months ended March 31, 2015 and 2014.

GE cash used for investing activities decreased $1.3 billion primarily due to the following:
·
Lower business acquisition activity of $1.4 billion primarily driven by the 2014 acquisitions of certain Thermo Fisher Scientific Inc. life-science businesses for $1.1 billion and API Healthcare (API) for $0.3 billion.

GE cash used for financing activities increased $0.9 billion primarily due to the following:
·
The 2014 issuance of $3.0 billion of unsecured notes.
·
This is partially offset by a decrease in net repurchases of GE shares for treasury in accordance with our share repurchase program of $1.6 billion.
·
Further, net payments in borrowings (maturities of 90 day or less) decreased by $0.5 billion.
38 2015 1Q FORM 10-Q

GECC CASH FLOWS – THREE MONTHS ENDED MARCH 31

OPERATING CASH FLOWS
 
INVESTING CASH FLOWS
 
FINANCING CASH FLOWS
                     
2014
 
  2015
 
           2014
 
  2015
 
  2014
 
2015
 
 
2015 – 2014 COMMENTARY:

GECC cash from operating activities decreased $0.3 billion primarily due to the following:
·
A decrease in net cash collateral activity with counterparties on derivative contracts of $0.4 billion.

GECC cash from investing activities increased $1.5 billion primarily due to the following:
·
A net increase in financing receivables activity of $1.8 billion driven by higher net collections (which includes sales) of financing receivables.
·
The 2014 payment of our obligation to the buyer of GE Money Japan for $1.7 billion.
·
These increases were partially offset by the 2015 acquisition of Milestone Aviation Group, resulting in net cash paid of $1.7 billion.

GECC cash used for financing activities decreased $2.3 billion primarily due to the following:
·
Lower net repayments of borrowings of $2.7 billion driven primarily by issuances of senior unsecured notes.


INTERCOMPANY TRANSACTIONS AND ELIMINATIONS

Effects of transactions between related companies are made on an arms-length basis, are eliminated and consist primarily of GECC dividends to GE; GE customer receivables sold to GECC; GECC services for trade receivables management and material procurement; buildings and equipment (including automobiles) leased between GE and GECC; information technology (IT) and other services sold to GECC by GE; aircraft engines manufactured by GE that are installed on aircraft purchased by GECC from third-party producers for lease to others; and various investments, loans and allocations of GE corporate overhead costs.

GE sells customer receivables to GECC in part to fund the growth of our industrial businesses. These transactions can result in cash generation or cash use. During any given period, GE receives cash from the sale of receivables to GECC. It also foregoes collection of cash on receivables sold. The incremental amount of cash received from sales of receivables in excess of the cash GE would have otherwise collected had those receivables not been sold, represents the cash generated or used in the period relating to this activity. The incremental cash generated in GE CFOA from selling these receivables to GECC decreased GE's CFOA by $1.8 billion and $0.4 billion for the three months ended March 31, 2015 and 2014, respectively.

See Note 17 to the consolidated financial statements in this Form 10-Q Report for additional information about the eliminations of intercompany transactions between GE and GECC.

39 2015 1Q FORM 10-Q

EXPOSURES


GECC SELECTED EUROPEAN EXPOSURES

At March 31, 2015, we had $54.8 billion in financing receivables to consumer and commercial customers in Europe including, $49.0 billion classified as either financing receivables held for sale or assets of businesses held for sale. The GECC financing receivables portfolio in Europe is well diversified across European geographies and customers. Approximately 92% of the portfolio is secured by collateral. Several European countries, including Spain, Portugal, Ireland, Italy, Greece and Hungary (focus countries), have been subject to credit deterioration due to weaknesses in their economic and fiscal situations. The carrying value of GECC funded exposures in these focus countries and in the rest of Europe comprised the following at March 31, 2015.

                                     
 Rest of
 
 Total
March 31, 2015 (In millions)
 Spain
 
 Portugal
 
 Ireland
 
 Italy
 
 Greece
 
 Hungary
 
  Europe
 
 Europe
                                               
Financing receivables, net(a)(d)(j)
$
426
 
$
91
 
$
271
 
$
1,451
 
$
2
 
$
2,169
 
$
7,638
 
$
12,048
Financing receivables held for sale
 
593
   
89
   
46
   
3,281
   
-
   
7
   
38,737
   
42,753
Investments(b)(c)
 
2
   
-
   
-
   
65
   
-
   
-
   
1,327
   
1,394
Cost and equity method investments(d)
 
-
   
-
   
422
   
49
   
27
   
-
   
1,570
   
2,068
Derivatives, net of collateral(b)(e)
 
2
   
-
   
-
   
49
   
-
   
-
   
391
   
442
Equipment leased to others (ELTO)(f)(j)
 
468
   
198
   
496
   
668
   
252
   
228
   
10,044
   
12,354
                                               
Total funded exposures(g)(h)
$
1,491
 
$
378
 
$
1,235
 
$
5,563
 
$
281
 
$
2,404
 
$
59,707
 
$
71,059
                                               
Unfunded commitments(i)
$
56
 
$
8
 
$
96
 
$
184
 
$
4
 
$
660
 
$
3,844
 
$
4,852
                                               
(a)
Financing receivable amounts are classified based on the location or nature of the related obligor.
(b)
Investments and derivatives are classified based on the location of the parent of the obligor or issuer.
(c)
Included $0.2 billion related to financial institutions, $0.1 billion related to non-financial institutions and $1.0 billion related to sovereign issuers. Sovereign issuances totaled $0.1 billion related to Italy. We held no investments issued by sovereign entities in the other focus countries.
(d)
Substantially all is non-sovereign.
(e)
Net of cash collateral; entire amount is non-sovereign.
(f)
These assets are held under long-term investment and operating strategies, and our ELTO strategies contemplate an ability to redeploy assets under lease should default by the lessee occur. The values of these assets could be subject to decline or impairment in the current environment.
(g)
Excluded $28.1 billion of cash and equivalents, which is composed of $19.4 billion of cash on short-term placement with highly rated global financial institutions based in Europe, sovereign central banks and agencies or supranational entities, of which $0.7 billion is in focus countries, and $8.7 billion of cash and equivalents placed with highly rated European financial institutions on a short-term basis, secured by U.S. Treasury securities ($5.8 billion) and sovereign bonds of non-focus countries ($3.0 billion), where the value of our collateral exceeds the amount of our cash exposure.
(h)
Rest of Europe included $1.8 billion and $0.1 billion of exposure for Russia and Ukraine, respectively, substantially all ELTO and financing receivables related to commercial aircraft in our GECAS portfolio.
(i)
Includes ordinary course of business lending commitments, commercial and consumer unused revolving credit lines, inventory financing arrangements and investment commitments.
(j)
Includes financing receivables of $6.2 billion and ELTO of $2.2 billion classified as assets of businesses held for sale.

We manage counterparty exposure, including credit risk, on an individual counterparty basis. We place defined risk limits around each obligor and review our risk exposure on the basis of both the primary and parent obligor, as well as the issuer of securities held as collateral. These limits are adjusted on an ongoing basis based on our continuing assessment of the credit risk of the obligor or issuer. In setting our counterparty risk limits, we focus on high-quality credits and diversification through spread of risk in an effort to actively manage our overall exposure. We actively monitor each exposure against these limits and take appropriate action when we believe that risk limits have been exceeded or there are excess risk concentrations. Our collateral position and ability to work out problem accounts have historically mitigated our actual loss experience. Delinquency experience has been relatively stable in our European commercial and consumer platforms in the aggregate, and we actively monitor and take action to reduce exposures where appropriate. Uncertainties surrounding European markets could have an impact on the judgments and estimates used in determining the carrying value of these assets.
40 2015 1Q FORM 10-Q

VENEZUELA

The results of our Venezuelan businesses have been reported under highly inflationary accounting since the beginning of 2010, at which time the functional currency of our Venezuelan entities was changed from the bolivar to the U.S. dollar.

Our activities related to Venezuela generated revenues of less than one percent of consolidated revenues, consisting of both exports to and operations within the country. The majority of these revenues are denominated in U.S. dollars and euro but we also transact in bolivars for certain businesses.

For our operations in Venezuela, determining the appropriate exchange rate for remeasurement of bolivar-denominated net monetary assets into U.S. dollars continues to be subject to uncertainty. Through February 2015, the Venezuelan government operated three different exchange mechanisms: CENCOEX (the official exchange mechanism), SICAD1 and SICAD 2, subsequently it merged the SICAD mechanisms and introduced a new mechanism, the Marginal Currency System (SIMADI). This mechanism is intended to operate with fewer restrictions and its exchange rate on March 31, 2015 was approximately 193 bolivars per U.S. dollar compared to SICAD at 12 bolivars per U.S. dollar.

At the end of each period, we remeasure the net monetary assets of our Venezuela entities using the rate at which we expect them to be settled, including through the payment of dividends. During the period ended March 31, 2015, we did not access the SIMADI market and have continued to use the SICAD exchange rate to remeasure our net monetary assets.

Significant uncertainty persists regarding the exchange mechanisms in Venezuela, including the nature of transactions that are eligible to transact in the three recognized mechanisms that are currently available as well as the impact on non-bolivar credit exposures and recoverable amounts of bolivar denominated non-monetary assets. We continue to monitor developments closely and may determine in the future that rates other than the SICAD rate are appropriate for remeasurement of the net monetary assets of our Venezuelan entities.

Net monetary assets subject to remeasurement were approximately $89 million at March 31, 2015, including approximately $25 million in bolivar-denominated cash and cash equivalents and approximately $45 million related to a non-consolidated investment in our Appliances business, which is held for sale. In addition to our bolivar-denominated net monetary assets, we also have non-bolivar credit exposures of approximately $300 million at March 31, 2015 and recoverable amounts of non-monetary assets in Venezuela of approximately $110 million at March 31, 2015, which consists principally of inventory and property, plant and equipment.

OIL & GAS INDUSTRY

The sharp decline experienced in oil prices and the prospect of a continuation of prevailing oil prices could have mixed implications for the industries and countries in which we compete. In general, lower oil prices are expected to stimulate growth in oil importing countries while causing negative economic effects in many energy-exporting countries. Certain parts of our Oil & Gas business will experience declines in orders, project commencement delays and pricing pressures, while we expect that other parts will be less affected. In response to this uncertain industry outlook, we continue to execute cost actions with an increased focus on productivity. We expect that relatively low oil prices will benefit our other businesses through lower direct material and other variable costs as well as through the expected stimulus-effect on growth in the U.S. and in other economies that rely on energy imports, including Europe, Japan, and India.
41 2015 1Q FORM 10-Q

CRITICAL ACCOUNTING ESTIMATES

We utilized significant estimates in the preparation of the first quarter financial statements.

In addition to the discussion below on estimates used to determine the fair value of businesses and assets held for sale, please refer to the Critical Accounting Estimates section within MD&A and Note 1, Basis of Presentation and Summary of Significant Accounting Policies, to the consolidated financial statements of our 2014 Form 10-K Report for a discussion of our accounting policies and the critical accounting estimates we use to: assess the recoverability of assets such as financing receivables and goodwill; determine the fair value of financial assets; and determine our provision for income taxes and recoverability of deferred tax assets.

BUSINESSES AND ASSETS HELD FOR SALE

Businesses held for sale represent components that meet the accounting requirements to be classified as held for sale and are presented as single asset and liability amounts in our financial statements with a valuation allowance, if necessary, to recognize the net carrying amount at the lower of cost or fair value, less cost to sell. Financing receivables that no longer qualify to be presented as held for investment must be classified as held for sale and recognized in our financial statements at the lower of cost or fair value, less cost to sell, with that amount representing a new cost basis at the date of transfer.

As previously discussed, as a result of the GE Capital Exit Plan, management has committed to a plan to reduce the size of its financial services businesses through the sale of most of the assets of GECC over the next 24 months. As a result of the GE Capital Exit Plan, certain GECC businesses met the criteria to be classified as businesses held for sale and certain financing receivables were required to be recognized as held for sale at March 31, 2015.

The determination of fair value for businesses and portfolios of financing receivables involves significant judgments and assumptions. Development of estimates of fair values in this circumstance is complex and is dependent upon, among other factors, the nature of the potential sales transaction (for example, asset sale versus sale of legal entity), composition of assets and/or businesses in the disposal group, the comparability of the disposal group to market transactions, negotiations with third party purchasers, etc. Such factors bear directly on the range of potential fair values and the selection of the best estimates. Key assumptions were developed based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction as of March 31, 2015.

We will review all businesses and assets held for sale each reporting period to determine whether the existing carrying amounts are fully recoverable in comparison to estimated fair values.

Further information is provided in Notes 2 and 14 to the consolidated financial statements of this Form 10-Q Report.

42 2015 1Q FORM 10-Q

OTHER ITEMS


NEW ACCOUNTING STANDARDS

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is currently effective on January 1, 2017, subject to an additional one-year deferral as proposed by the FASB. Early application is not permitted. The standard permits the use of either the retrospective or modified retrospective (cumulative effect) transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis. The ASU amends the consolidation guidance for VIEs and general partners' investments in limited partnerships and modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities. The ASU is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. We are currently evaluating the effect of the ASU on our consolidated financial statements and related disclosures.
43 2015 1Q FORM 10-Q

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 our disclosure controls and procedures were effective as of March 31, 2015.

On April 10, 2015 we announced that, as part of the GE Capital Exit Plan, we plan to dispose of a substantial portion of GE Capital's operations over the 2015-2017 timeframe. This plan will affect the operation of GE Capital's framework of internal controls over financial reporting as dispositions and other restructuring activities are executed. During the transition period, we have put in place enhanced procedures and controls to monitor and maintain our system of internal controls over financial reporting. We will continue to assess the effect of the plan on GE Capital's control environment and will make adjustments as appropriate.

OTHER FINANCIAL DATA



 PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS          
           
Approximate
 
           
dollar value
 
       
Total number
 
of shares that
 
       
of shares
 
may yet be
 
       
purchased
 
purchased
 
       
as part of
 
under our
 
 
Total number
Average
 
our share
 
share
 
 
of shares
price paid
 
repurchase
 
repurchase
 
Period
purchased(a)
per share
 
program(b)
 
program(b)
 
(Shares in thousands)
                   
                     
2015
                   
January
 
673
$
24.19
 
619
       
February
 
726
$
24.88
 
662
       
March
 
973
$
25.35
 
891
       
Total
 
2,372
$
24.88
 
2,172
$
10.3
 billion
 
                     
(a) This category included 200 thousand shares repurchased from our various benefit plans.
(b) Shares were repurchased through the 2007 GE Share Repurchase Program (the 2007 Program). As of March 31, 2015, we were authorized to repurchase up to $35 billion of our common stock through 2015 and we had repurchased a total of approximately $24.7 billion under the 2007 Program. Effective April 10, 2015, the 2007 Program was terminated and replaced by a new 2015 GE Share Repurchase Program (the 2015 Program) under which we are authorized to repurchase up to $50 billion of our common stock through 2018. The 2015 Program is flexible and shares will be acquired with a combination of borrowings and free cash flow from the public markets and other sources, including GE Stock Direct, a stock purchase plan that is available to the public.

44 2015 1Q FORM 10-Q

REGULATIONS AND SUPERVISION


GECC is a regulated savings and loan holding company and in 2011 became subject to Federal Reserve Board (FRB) supervision under the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA). In 2013, the U.S. Financial Stability Oversight Council (FSOC) designated GECC as a nonbank systemically important financial institution (nonbank SIFI) under the DFA. As a result of this change in supervision and designation, stricter prudential regulatory standards and supervision apply to GECC. On November 25, 2014 the FRB proposed for comment enhanced prudential standards that would apply to GECC as a nonbank SIFI. This proposal would, among other items, require GECC to comply with rules on capital and liquidity adequacy that apply to large bank holding companies, market terms requirements for intercompany transactions and enhanced risk management and governance requirements. The proposed standards would also apply stress testing and capital planning requirements to GECC under the FRB's comprehensive capital analysis and review (CCAR) regulations. The comment period for the proposed standards closed on February 2, 2015, and the exact application of the proposed standards will not be known until after the final rule is published. We submitted comments on the proposed standards on February 2, 2015 and plan to submit additional comments conveying our views on the potential implications of the GE Capital Exit Plan for the proposed standards.

While the proposed enhanced prudential standards do not subject GECC to the Federal Reserve's capital plan rule applicable to large bank holding companies until the capital planning cycle beginning January 1, 2016, GECC does undertake an annual review of their capital adequacy prior to establishing a plan for dividends to us, the parent. This review is based on a forward-looking assessment of their material enterprise risks and involves the consideration of a number of factors. This analysis also includes an assessment of their capital and liquidity levels, as well as incorporating risk management and governance considerations. The most recent capital adequacy review was approved by the GECC board of directors and the GE Board of Directors Risk Committee in 2014. While a savings and loan holding company and nonbank SIFI like GECC is currently not required to obtain FRB approval to pay a dividend, it may not, under FRB regulations, conduct its operations in an unsafe or unsound manner. The FRB has articulated factors that it expects boards of directors of bank holding companies and savings and loan holding companies to consider in determining whether to pay a dividend.

In addition to the proposed enhanced prudential standards, as a nonbank SIFI GECC is also required to submit an annual resolution plan to the FRB and Federal Deposit Insurance Corporation (FDIC). GECC submitted its first resolution plan to the FRB and FDIC on June 30, 2014. GECC's resolution plan describes how they could be resolved under existing insolvency regimes in a manner that mitigates potential disruption to the U.S. financial system and the global financial markets without the use of government support or taxpayer funds. If the FRB and FDIC determine that their resolution plan is deficient, the Dodd-Frank Act authorizes the FRB and FDIC to impose more stringent capital, leverage or liquidity requirements on GECC or restrict their growth or activities until they submit a plan remedying the deficiencies. If the FRB and FDIC ultimately determine that GECC has not adequately addressed the deficiencies, they could order GECC to divest assets or operations in order to facilitate their orderly resolution in the event of their failure.

GECC is also subject to the Volcker Rule, which U.S. regulators finalized on December 10, 2013. The rule prohibits companies that are affiliated with U.S. insured depository institutions from engaging in "proprietary trading" or acquiring or retaining ownership interest in, or sponsoring or engaging in certain transactions with, a "hedge fund" or a "private equity fund." Proprietary trading and fund investing, as prohibited by the rule, are not core activities for GECC, but we are assessing the full impact of the rule, in anticipation of full conformance with the rule, as required by July 21, 2015.
 
As discussed in Management's Discussion and Analysis, on April 10, 2015, the Company announced a plan (the GE Capital Exit Plan) to reduce the size of its financial services businesses. The Company has discussed the GE Capital Exit Plan, aspects of which are subject to regulatory review and approval, with its regulators and staff of the Financial Stability Oversight Council (FSOC) and will work closely with these bodies to take the actions necessary over time to terminate the FSOC's designation of GECC (and the new intermediate holding company, as applicable) as a nonbank systemically important financial institution (nonbank SIFI).
45 2015 1Q FORM 10-Q

LEGAL PROCEEDINGS


The following information supplements and amends our discussion set forth under  "Legal Proceedings" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

There are 15 lawsuits relating to pending mortgage loan repurchase claims in which WMC, our U.S. mortgage business that we sold in 2007, is a party. The adverse parties in these cases are securitization trustees or parties claiming to act on their behalf. While the alleged claims for relief vary from case to case, the complaints and counterclaims in these actions generally assert claims for breach of contract, indemnification, and/or declaratory judgment, and seek specific performance (repurchase) and/or monetary damages. Beginning in the fourth quarter 2013, WMC entered into settlements that reduced its exposure on claims asserted in certain securitizations, and the claim amounts reported herein reflect the effect of these settlements.
 
Five WMC cases are pending in the United States District Court for the District of Connecticut. Four of these cases were initiated in 2012, and one was initiated in the third quarter 2013. Deutsche Bank National Trust Company (Deutsche Bank) is the adverse party in four cases, and Law Debenture Trust Company of New York (Law Debenture) is the adverse party in one case. The Deutsche Bank complaints assert claims on approximately $4,300 million of mortgage loans and seek to recover damages in excess of approximately $1,800 million. The Law Debenture complaint asserts claims on approximately $800 million of mortgage loans, and alleges losses on these loans in excess of approximately $425 million. On March 31, 2014, the District Court denied WMC's motions to dismiss these cases.
 
Four WMC cases are pending in the United States District Court for the District of Minnesota against US Bank National Association (US Bank), one of which was initiated by WMC seeking declaratory judgment. Three of these cases were filed in 2012, and one was filed in 2011. The Minnesota cases involve claims on approximately $800 million of mortgage loans and do not specify the amount of damages sought. In September 2013, the District Court granted in part and denied in part WMC's motions to dismiss or for summary judgment in these cases. On September 8, 2014, US Bank filed a petition for instructions in the administration of trusts in Minnesota state court seeking authorization and instruction for US Bank to implement the terms of a settlement agreement reached with WMC to compromise, settle, and release all claims arising out of the securitizations at issue in these four lawsuits. In February 2015, two bondholders filed to objections to the proposed settlement, and in response the court has scheduled an evidentiary hearing for June 2015. In light of the state court action seeking approval of the proposed settlement, the District Court entered orders in April 2015 staying further proceedings in the four cases until August 2015.

Four cases are pending against WMC in New York State Supreme Court, all of which were initiated by securitization trustees or securities administrators. These cases involve, in the aggregate, claims involving approximately $4,559 million of mortgage loans. One of these lawsuits was initiated by Deutsche Bank in the second quarter 2013 and names as defendants WMC and Barclays Bank PLC. It involves claims against WMC on approximately $1,000 million of mortgage loans and does not specify the amount of damages sought. The second case, in which the plaintiff is The Bank of New York Mellon (BNY), was initiated in the fourth quarter 2012 and names as defendants WMC, J.P. Morgan Mortgage Acquisition Corporation and JPMorgan Chase Bank, N.A. BNY asserts claims on approximately $1,300 million of mortgage loans, and seeks to recover damages in excess of $650 million. The third case was initiated by BNY in November 2013 and names as defendants WMC, J.P. Morgan Mortgage Acquisition Corporation and JPMorgan Chase Bank, N.A. In this case, BNY asserts claims on approximately $1,300 million of mortgage loans, and seeks to recover damages in excess of $600 million. The fourth case was filed in October 2014 and names as defendants WMC, J.P. Morgan Mortgage Acquisition Corporation and JPMorgan Chase Bank, N.A. The plaintiff, BNY, asserts claims on approximately $959 million of mortgage loans and seeks to recover damages in excess of $475 million.
 
46 2015 1Q FORM 10-Q

Two cases are pending against WMC in the United States District Court for the Southern District of New York. One case, in which the plaintiff is BNY, was filed in the third quarter 2012. In the second quarter 2013, BNY filed an amended complaint in which it asserts claims on approximately $900 million of mortgage loans, and seeks to recover damages in excess of $378 million. In September 2013, the District Court denied WMC's motion to dismiss. On September 18, 2014, the District Court issued an order directing the parties to participate in settlement discussions before a private mediator or the assigned magistrate judge. Following this mediation, the parties reached a settlement in principle on the claims arising from a portion of the loans held in the trust (the "Group1" loans), and, as a result, on February 9, 2015 the District Court stayed the case as to these claims. The second case was initiated by the Federal Housing Finance Agency (FHFA), which filed a summons with notice in the fourth quarter 2012. In the second quarter 2013, Deutsche Bank, in its role as securitization trustee of the trust at issue in the case, intervened as a plaintiff and filed a complaint relating to approximately $1,300 million of loans and alleging losses in excess of approximately $100 million. In December 2013, the District Court issued an order denying WMC's motion to dismiss. In February 2015, the District Court on its own motion requested that the parties re-brief several issues raised by WMC's motion to dismiss.
 
The amounts of the claims at issue in these cases (discussed above) reflect the purchase price or unpaid principal balances of the mortgage loans at issue at the time of purchase and do not give effect to pay downs, accrued interest or fees, or potential recoveries based upon the underlying collateral. All of the mortgage loans involved in these lawsuits are included in WMC's reported claims at March 31, 2015. See Note 2 to the consolidated financial statements for additional information.

The company is reporting the following matter in compliance with SEC requirements to disclose environmental proceedings where the government is a party potentially involving monetary sanctions of $100,000 or greater. In October 2014, the U.S. Federal Government informed the company that it was seeking penalties under the Clean Air and Resource and Conservation Recovery Acts in connection with a facility sold to Momentive Performance Materials, Inc. in 2006. The allegations relate to improper operation of pollution control monitoring equipment by incinerator operators.
47 2015 1Q FORM 10-Q


















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48 2015 1Q FORM 10-Q

FINANCIAL STATEMENTS AND NOTES

Statement of Earnings (Loss)
50
Consolidated Statement of Comprehensive Income (Loss)
52
Consolidated Statement of Changes in Shareowners' Equity
53
Statement of Financial Position
54
Statement of Cash Flows
56
Notes to Consolidated Financial Statements
 
 
1
 
Basis of Presentation and Summary of Significant Accounting Policies
58
 
2
 
Businesses Held for Sale, Financing Receivables Held for Sale and Discontinued Operations
60
 
3
 
Investment Securities
65
 
4
 
Inventories
69
 
5
 
GECC Financing Receivables and Allowance for Losses
69
 
6
 
Property, Plant and Equipment
70
 
7
 
Acquisitions, Goodwill and Other Intangible Assets
71
 
8
 
Borrowings and Bank Deposits
74
 
9
 
Postretirement Benefit Plans
75
 
10
 
Income Taxes
76
 
11
 
Shareowners' Equity
77
 
12
 
GECC Revenues from Services
79
 
13
 
Earnings Per Share Information
80
 
14
 
Fair Value Measurements
80
 
15
 
Financial Instruments
85
 
16
 
Variable Interest Entities
90
 
17
 
Intercompany Transactions
93
 
18
 
Supplemental Information About the Credit Quality of Financing Receivables and Allowance for Losses
94
         
         
         

49 2015 1Q FORM 10-Q

FINANCIAL STATEMENTS

           
STATEMENT OF EARNINGS (LOSS)
         
(UNAUDITED)
         
 
Three months ended March 31
 
General Electric Company
 
and consolidated affiliates
(In millions; per-share amounts in dollars)
2015
 
2014
           
Revenues and other income
         
Sales of goods
$
16,600
 
$
16,941
Sales of services
 
7,084
   
6,909
Other income
 
142
   
196
GECC earnings from continuing operations
 
-
   
-
GECC revenues from services (Note 12)
 
5,530
   
9,502
   Total revenues and other income
 
29,356
   
33,548
           
Costs and expenses
         
Cost of goods sold
 
13,261
   
13,713
Cost of services sold
 
4,905
   
4,809
Interest and other financial charges
 
1,930
   
2,141
Investment contracts, insurance losses and
         
   insurance annuity benefits
 
616
   
620
Provision for losses on financing receivables (Note 5)
 
4,859
   
984
Other costs and expenses
 
8,733
   
7,962
   Total costs and expenses
 
34,304
   
30,229
           
Earnings (loss) from continuing operations
         
   before income taxes
 
(4,948)
   
3,319
Benefit (provision) for income taxes
 
(6,458)
   
(619)
Earnings (loss) from continuing operations
 
(11,406)
   
2,700
Earnings (loss) from discontinued operations,
         
   net of taxes (Note 2)
 
(2,202)
   
252
Net earnings (loss)
 
(13,608)
   
2,952
Less net earnings (loss) attributable to noncontrolling interests
 
(35)
   
(47)
Net earnings (loss) attributable to the Company
 
(13,573)
   
2,999
Net earnings (loss) attributable to GE common shareowners
$
(13,573)
 
$
2,999
           
Amounts attributable to GE common shareowners
         
   Earnings (loss) from continuing operations
$
(11,406)
 
$
2,700
   Less net earnings (loss) attributable to
         
      noncontrolling interests
 
(35)
   
(47)
   Earnings (loss) from continuing operations attributable to the Company
 
(11,371)
   
2,747
   Earnings (loss) from continuing operations attributable
         
      to GE common shareowners
 
(11,371)
   
2,747
   Earnings (loss) from discontinued operations, net of taxes
 
(2,202)
   
252
Net earnings (loss) attributable to GE common shareowners
$
(13,573)
 
$
2,999
           
Per-share amounts
         
   Earnings (loss) from continuing operations
         
      Diluted earnings (loss) per share
$
(1.13)
 
$
0.27
      Basic earnings (loss) per share
$
(1.13)
 
$
0.27
           
   Net earnings (loss)
         
      Diluted earnings (loss) per share
$
(1.35)
 
$
0.30
      Basic earnings (loss) per share
$
(1.35)
 
$
0.30
           
Dividends declared per common share
$
0.23
 
$
0.22
           
See Note 3 for other-than-temporary impairment amounts.

See accompanying notes.


50 2015 1Q FORM 10-Q

 
                       
STATEMENT OF EARNINGS (LOSS) (CONTINUED)
(UNAUDITED)
                     
 
Three months ended March 31
                       
 
GE(a)
 
Financial Services (GECC)
(In millions; per-share amounts in dollars)
2015
 
2014
 
2015
 
2014
                       
Revenues and other income
                     
Sales of goods
$
16,648
 
$
16,988
 
$
21
 
$
27
Sales of services
 
7,192
   
7,023
   
-
   
-
Other income
 
52
   
161
   
-
   
-
GECC earnings (loss) from continuing operations
 
(12,544)
   
1,693
   
-
   
-
GECC revenues from services (Note 12)
 
-
   
-
   
5,961
   
9,858
   Total revenues and other income
 
11,348
   
25,865
   
5,982
   
9,885
                       
Costs and expenses
                     
Cost of goods sold
 
13,312
   
13,762
   
18
   
25
Cost of services sold
 
5,013
   
4,923
   
-
   
-
Interest and other financial charges
 
389
   
365
   
1,651
   
1,887
Investment contracts, insurance losses and
                     
   insurance annuity benefits
 
-
   
-
   
644
   
643
Provision for losses on financing receivables(Note 5)
 
-
   
-
   
4,859
   
984
Other costs and expenses
 
3,825
   
3,808
   
5,111
   
4,341
   Total costs and expenses
 
22,539
   
22,858
   
12,283
   
7,880
                       
Earnings (loss) from continuing operations
                     
   before income taxes
 
(11,191)
   
3,007
   
(6,301)
   
2,005
Benefit (provision) for income taxes
 
(306)
   
(318)
   
(6,152)
   
(301)
Earnings (loss) from continuing operations
 
(11,497)
   
2,689
   
(12,453)
   
1,704
Earnings (loss) from discontinued operations,
                     
   net of taxes (Note 2)
 
(2,202)
   
252
   
(2,201)
   
252
Net earnings (loss)
 
(13,699)
   
2,941
   
(14,654)
   
1,956
Less net earnings (loss) attributable to noncontrolling interests
 
(126)
   
(58)
   
91
   
11
Net earnings (loss) attributable to the Company
 
(13,573)
   
2,999
   
(14,745)
   
1,945
Net earnings (loss) attributable to GE common shareowners
$
(13,573)
 
$
2,999
 
$
(14,745)
 
$
1,945
                       
Amounts attributable to GE common shareowners:
                     
   Earnings (loss) from continuing operations
$
(11,497)
 
$
2,689
 
$
(12,453)
 
$
1,704
   Less net earnings (loss) attributable to
                     
      noncontrolling interests
 
(126)
   
(58)
   
91
   
11
   Earnings (loss) from continuing operations attributable to the Company
 
(11,371)
   
2,747
   
(12,544)
   
1,693
   Earnings (loss) from continuing operations attributable
                     
      to GE common shareowners
 
(11,371)
   
2,747
   
(12,544)
   
1,693
   Earnings (loss) from discontinued operations, net of taxes 
 
(2,202)
   
252
   
(2,201)
   
252
Net earnings (loss) attributable to GE common shareowners
$
(13,573)
 
$
2,999
 
$
(14,745)
 
$
1,945
                       
(a)
Represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), which is presented on a one-line basis. See Note 1.

See Note 3 for other-than-temporary impairment amounts.

In the consolidating data on this page, "GE" means the basis of consolidation as described in Note 1 to the consolidated financial statements; "GECC" means General Electric Capital Corporation and all of its affiliates and associated companies. Separate information is shown for "GE" and "GECC." Transactions between GE and GECC have been eliminated from the "General Electric Company and consolidated affiliates" columns on the prior page.
51 2015 1Q FORM 10-Q

GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
         
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
           
 
Three months ended March 31
(In millions)
 
2015
   
2014
           
Net earnings (loss)
$
(13,608)
 
$
2,952
Less net earnings (loss) attributable to noncontrolling interests
 
(35)
   
(47)
Net earnings (loss) attributable to the Company
$
(13,573)
 
$
2,999
           
Other comprehensive income (loss)
         
   Investment securities
$
233
 
$
457
   Currency translation adjustments
 
(5,336)
   
49
   Cash flow hedges
 
(46)
   
68
   Benefit plans
 
909
   
695
Other comprehensive income (loss)
 
(4,240)
   
1,269
Less other comprehensive income (loss) attributable to noncontrolling interests
 
(48)
   
(2)
Other comprehensive income (loss) attributable to the Company
$
(4,192)
 
$
1,271
           
Comprehensive income (loss)
$
(17,848)
 
$
4,221
Less comprehensive income (loss) attributable to noncontrolling interests
 
(83)
   
(49)
Comprehensive income (loss) attributable to the Company
$
(17,765)
 
$
4,270
           
Amounts presented net of taxes. See Note 11 for further information about other comprehensive income (loss) and noncontrolling interests.


See accompanying notes.
52 2015 1Q FORM 10-Q

GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
         
CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS' EQUITY
(UNAUDITED)
           
 
Three months ended March 31
(In millions)
 
2015
   
2014
           
Shareowners' equity balance at January 1
$
128,159
 
$
130,566
Increases (decreases) from net earnings (loss) attributable to the Company
 
(13,573)
   
2,999
Dividends and other transactions with shareowners
 
(2,319)
   
(2,210)
Other comprehensive income (loss) attributable to the Company
 
(4,192)
   
1,271
Net sales (purchases) of shares for treasury
 
499
   
(840)
Changes in other capital
 
(14)
   
50
Ending balance at March 31
 
108,560
   
131,836
Noncontrolling interests
 
8,738
   
6,183
Total equity balance at March 31
$
117,298
 
$
138,019
           
See Note 11 for further information about changes in shareowners' equity.


See accompanying notes.

53 2015 1Q FORM 10-Q

STATEMENT OF FINANCIAL POSITION
 
General Electric Company
 
and consolidated affiliates
(In millions, except share amounts)
March 31, 2015
 
December 31, 2014
 
(Unaudited)
   
Assets
         
Cash and equivalents
$
87,055
 
$
90,021
Investment securities (Note 3)
 
41,992
   
47,558
Current receivables
 
20,547
   
23,237
Inventories (Note 4)
 
17,830
   
17,689
Financing receivables – net (Note 5 and 18)
 
68,040
   
205,180
Other GECC receivables
 
6,814
   
8,690
Property, plant and equipment – net (Note 6)
 
61,219
   
66,246
Investment in GECC
 
-
   
-
Goodwill (Note 7)
 
69,604
   
76,016
Other intangible assets – net (Note 7)
 
13,533
   
14,047
All other assets
 
50,228
   
53,388
Financing receivables held for sale (Note 2)
 
92,959
   
1,830
Assets of businesses held for sale (Note 2)
 
56,549
   
6,300
Assets of discontinued operations (Note 2)
 
31,261
   
36,795
Total assets(a)
$
617,631
 
$
646,997
           
Liabilities and equity
         
Short-term borrowings (Note 8)
$
69,211
 
$
71,525
Accounts payable, principally trade accounts
 
14,392
   
15,793
Progress collections and price adjustments accrued
 
11,498
   
12,537
Dividends payable
 
2,315
   
2,317
Other GE current liabilities
 
12,393
   
12,682
Non-recourse borrowings of consolidated securitization entities (Note 8)
 
29,035
   
29,938
Bank deposits (Note 8)
 
62,691
   
62,839
Long-term borrowings (Note 8)
 
190,420
   
200,172
Investment contracts, insurance liabilities and insurance annuity benefits
 
27,622
   
27,578
All other liabilities
 
68,414
   
70,485
Deferred income taxes
 
2,901
   
(1,353)
Liabilities of businesses held for sale (Note 2)
 
7,368
   
3,375
Liabilities of discontinued operations (Note 2)
 
2,073
   
2,276
Total liabilities(a)
 
500,333
   
510,164
           
GECC preferred stock (50,000 shares outstanding
         
  at both March 31, 2015 and December 31, 2014)
 
-
   
-
Common stock (10,075,929,000 and 10,057,380,000 shares outstanding
         
   at both March 31, 2015 and December 31, 2014, respectively)
 
702
   
702
Accumulated other comprehensive income (loss) – net attributable to GE(b)
         
   Investment securities
 
1,245
   
1,013
   Currency translation adjustments
 
(7,716)
   
(2,427)
   Cash flow hedges
 
(226)
   
(180)
   Benefit plans
 
(15,667)
   
(16,578)
Other capital
 
32,875
   
32,889
Retained earnings
 
139,441
   
155,333
Less common stock held in treasury
 
(42,094)
   
(42,593)
Total GE shareowners' equity
 
108,560
   
128,159
Noncontrolling interests(c) (Note 11)
 
8,738
   
8,674
Total equity
 
117,298
   
136,833
Total liabilities and equity
$
617,631
 
$
646,997
           
(a) Our consolidated assets at March 31, 2015 included total assets of $48,076 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets included net financing receivables of $27,831 million, financing receivables held for sale of $14,171 million and investment securities of $3,290 million. Our consolidated liabilities at March 31, 2015 included liabilities of certain VIEs for which the VIE creditors do not have recourse to GE. These liabilities included non-recourse borrowings of consolidated securitization entities (CSEs) of $27,561 million. See Note 16.
(b) The sum of accumulated other comprehensive income (loss) (AOCI) attributable to the Company was $(22,364) million and $(18,172) million at March 31, 2015 and December 31, 2014, respectively.

(c) Included AOCI attributable to noncontrolling interests of $(243) million and $(194) million at March 31, 2015 and December 31, 2014, respectively.

See accompanying notes.

54 2015 1Q FORM 10-Q

STATEMENT OF FINANCIAL POSITION (CONTINUED)
                       
 
GE(a)
 
Financial Services (GECC)
(In millions, except share amounts)
March 31, 2015
 
December 31, 2014
 
March 31, 2015
 
December 31, 2014
 
(Unaudited)
     
(Unaudited)
   
Assets
                     
Cash and equivalents
$
13,423
 
$
15,916
 
$
73,632
 
$
74,105
Investment securities (Note 3)
 
143
   
84
   
41,853
   
47,478
Current receivables
 
10,783
   
11,513
   
-
   
-
Inventories (Note 4)
 
17,781
   
17,639
   
49
   
50
Financing receivables – net (Note 5 and 18)
 
-
   
-
   
78,064
   
217,382
Other GECC receivables
 
-
   
-
   
14,149
   
16,278
Property, plant and equipment – net (Note 6)
 
16,516
   
17,207
   
45,130
   
49,429
Investment in GECC
 
65,762
   
82,549
   
-
   
-
Goodwill (Note 7)
 
49,965
   
51,527
   
19,639
   
24,489
Other intangible assets – net (Note 7)
 
12,420
   
12,984
   
1,116
   
1,067
All other assets
 
25,473
   
24,680
   
25,019
   
29,038
Financing receivables held for sale (Note 2)
 
-
   
-
   
92,959
   
1,830
Assets of businesses held for sale (Note 2)
 
2,940
   
2,805
   
53,598
   
3,474
Assets of discontinued operations (Note 2)
 
9
   
10
   
31,252
   
36,785
Total assets
$
215,215
 
$
236,914
 
$
476,460
 
$
501,405
                       
Liabilities and equity
                     
Short-term borrowings (Note 8)
$
3,839
 
$
3,872
 
$
66,178
 
$
68,515
Accounts payable, principally trade accounts
 
15,213
   
16,511
   
4,960
   
5,632
Progress collections and price adjustments accrued
 
11,498
   
12,550
   
-
   
-
Dividends payable
 
2,315
   
2,317
   
-
   
-
Other GE current liabilities
 
12,391
   
12,681
   
-
   
-
Non-recourse borrowings of consolidated securitization entities (Note 8)
 
-
   
-
   
29,035
   
29,938
Bank deposits (Note 8)
 
-
   
-
   
62,691
   
62,839
Long-term borrowings (Note 8)
 
12,419
   
12,468
   
178,037
   
187,749
Investment contracts, insurance liabilities and insurance annuity benefits
 
-
   
-
   
28,222
   
28,027
All other liabilities
 
54,670
   
54,662
   
14,292
   
16,315
Deferred income taxes
 
(8,160)
   
(8,772)
   
11,061
   
7,419
Liabilities of businesses held for sale (Note 2)
 
1,547
   
1,504
   
6,334
   
2,434
Liabilities of discontinued operations (Note 2)
 
122
   
137
   
1,951
   
2,139
Total liabilities
 
105,854
   
107,930
   
402,761
   
411,007
                       
GECC preferred stock (50,000 shares outstanding
 
-
   
-
   
-
   
-
   at both March 31, 2015 and December 31, 2014)
                     
Common stock (10,075,929,000 and 10,057,380,000 shares outstanding
                     
   at both March 31, 2015 and December 31, 2014, respectively)
 
702
   
702
   
-
   
-
Accumulated other comprehensive income (loss) - net attributable to GE
                     
   Investment securities
 
1,245
   
1,013
   
1,207
   
1,010
   Currency translation adjustments
 
(7,716)
   
(2,427)
   
(2,653)
   
(838)
   Cash flow hedges
 
(226)
   
(180)
   
(162)
   
(172)
   Benefit plans
 
(15,667)
   
(16,578)
   
(567)
   
(577)
Other capital
 
32,875
   
32,889
   
33,005
   
32,999
Retained earnings
 
139,441
   
155,333
   
39,882
   
55,077
Less common stock held in treasury
 
(42,094)
   
(42,593)
   
-
   
-
Total GE shareowners' equity
 
108,560
   
128,159
   
70,712
   
87,499
Noncontrolling interests (Note 11)
 
801
   
825
   
2,987
   
2,899
Total equity
 
109,361
   
128,984
   
73,699
   
90,398
Total liabilities and equity
$
215,215
 
$
236,914
 
$
476,460
 
$
501,405
                       
(a)
Represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), which is presented on a one-line basis. See Note 1.

In the consolidating data on this page, "GE" means the basis of consolidation as described in Note 1 to the consolidated financial statements; "GECC" means General Electric Capital Corporation and all of its affiliates and associated companies. Separate information is shown for "GE" and "GECC." Transactions between GE and GECC have been eliminated from the "General Electric Company and consolidated affiliates" columns on the prior page.

55 2015 1Q FORM 10-Q

STATEMENT OF CASH FLOWS
(UNAUDITED)
         
 
Three months ended March 31
 
General Electric Company
 
 and consolidated affiliates
(In millions)
2015
 
2014
           
Cash flows – operating activities
         
Net earnings (loss)
$
(13,608)
 
$
2,952
Less net earnings (loss) attributable to noncontrolling interests
 
(35)
   
(47)
Net earnings (loss) attributable to the Company
 
(13,573)
   
2,999
(Earnings) loss from discontinued operations
 
2,202
   
(252)
Adjustments to reconcile net earnings (loss) attributable to the
         
   Company to cash provided from operating activities
         
      Depreciation and amortization of property,
         
         plant and equipment
 
2,466
   
2,189
      (Earnings) loss from continuing operations retained by GECC
 
-
   
-
      Deferred income taxes
 
1,951
   
(2,029)
      Decrease (increase) in GE current receivables
 
2,601
   
482
      Decrease (increase) in inventories
 
(265)
   
(1,445)
      Increase (decrease) in accounts payable
 
312
   
971
      Increase (decrease) in GE progress collections
 
(1,000)
   
(334)
      Provision for losses on GECC financing receivables
 
4,859
   
984
      All other operating activities
 
5,453
   
1,044
Cash from (used for) operating activities – continuing operations
 
5,006
   
4,609
Cash from (used for) operating activities – discontinued operations
 
1,084
   
352
Cash from (used for) operating activities
 
6,090
   
4,961
           
Cash flows – investing activities
         
Additions to property, plant and equipment
 
(3,011)
   
(3,361)
Dispositions of property, plant and equipment
 
1,108
   
1,264
Net decrease (increase) in GECC financing receivables
 
4,345
   
3,488
Proceeds from sale of discontinued operations
 
-
   
232
Proceeds from principal business dispositions
 
22
   
20
Net cash from (payments for) principal businesses purchased
 
(1,723)
   
(1,454)
All other investing activities
 
3,979
   
1,850
Cash from (used for) investing activities – continuing operations
 
4,720
   
2,039
Cash from (used for) investing activities – discontinued operations
 
(881)
   
(247)
Cash from (used for) investing activities
 
3,839
   
1,792
           
Cash flows – financing activities
         
Net increase (decrease) in borrowings (maturities of
         
   90 days or less)
 
238
   
(3,330)
Net increase (decrease) in bank deposits
 
1,042
   
1,175
Newly issued debt (maturities longer than 90 days)
 
12,038
   
8,775
Repayments and other debt reductions (maturities longer than 90 days)
 
(19,114)
   
(11,524)
Net dispositions (purchases) of GE shares for treasury
 
239
   
(1,337)
Dividends paid to shareowners
 
(2,319)
   
(2,223)
All other financing activities
 
(106)
   
66
Cash from (used for) financing activities – continuing operations
 
(7,982)
   
(8,398)
Cash from (used for) financing activities – discontinued operations
 
(264)
   
(103)
Cash from (used for) financing activities
 
(8,246)
   
(8,501)
Effect of currency exchange rate changes on cash and equivalents
 
(3,826)
   
73
Increase (decrease) in cash and equivalents
 
(2,143)
   
(1,675)
Cash and equivalents at beginning of year
 
91,017
   
88,787
Cash and equivalents at March 31
 
88,874
   
87,112
Less cash and equivalents of discontinued operations at March 31
 
259
   
378
Cash and equivalents of continuing operations at March 31
$
88,615
 
$
86,734
           

See accompanying notes.
56 2015 1Q FORM 10-Q

STATEMENT OF CASH FLOWS (CONTINUED)
           
(UNAUDITED)
                     
                       
 
Three months ended March 31
 
GE(a)
 
Financial Services (GECC)
(In millions)
2015
 
2014
 
2015
 
2014
                       
Cash flows – operating activities
                     
Net earnings (loss)
$
(13,699)
 
$
2,941
 
$
(14,654)
 
$
1,956
Less net earnings (loss) attributable to noncontrolling interests
 
(126)
   
(58)
   
91
   
11
Net earnings (loss) attributable to the Company
 
(13,573)
   
2,999
   
(14,745)
   
1,945
(Earnings) loss from discontinued operations
 
2,202
   
(252)
   
2,201
   
(252)
Adjustments to reconcile net earnings (loss) attributable to the
                     
   Company to cash provided from operating activities
                     
      Depreciation and amortization of property,
                     
         plant and equipment
 
554
   
659
   
1,917
   
1,530
      (Earnings) loss from continuing operations retained by GECC(b)
 
12,994
   
(1,193)
   
-
   
-
      Deferred income taxes
 
(129)
   
(341)
   
2,080
   
(1,688)
      Decrease (increase) in GE current receivables
 
662
   
(143)
   
-
   
-
      Decrease (increase) in inventories
 
(262)
   
(1,453)
   
1
   
13
      Increase (decrease) in accounts payable
 
(452)
   
165
   
562
   
851
      Increase (decrease) in GE progress collections
 
(1,013)
   
(347)
   
-
   
-
      Provision for losses on GECC financing receivables
 
-
   
-
   
4,859
   
984
      All other operating activities
 
357
   
1,656
   
5,599
   
(580)
Cash from (used for) operating activities – continuing operations
 
1,340
   
1,750
   
2,474
   
2,803
Cash from (used for) operating activities – discontinued operations
 
(4)
   
-
   
1,088
   
352
Cash from (used for) operating activities
 
1,336
   
1,750
   
3,562
   
3,155
                       
Cash flows – investing activities
                     
Additions to property, plant and equipment
 
(1,013)
   
(1,090)
   
(2,202)
   
(2,361)
Dispositions of property, plant and equipment
 
139
   
72
   
948
   
1,192
Net decrease (increase) in GECC financing receivables
 
-
   
-
   
6,096
   
4,302
Proceeds from sale of discontinued operations
 
-
   
-
   
-
   
232
Proceeds from principal business dispositions
 
22
   
20
   
-
   
-
Net cash from (payments for) principal businesses purchased
 
(46)
   
(1,454)
   
(1,677)
   
-
All other investing activities
 
(270)
   
9
   
4,548
   
2,847
Cash from (used for) investing activities – continuing operations
 
(1,168)
   
(2,443)
   
7,713
   
6,212
Cash from (used for) investing activities – discontinued operations
 
4
   
-
   
(885)
   
(247)
Cash from (used for) investing activities
 
(1,164)
   
(2,443)
   
6,828
   
5,965
                       
Cash flows – financing activities
                     
Net increase (decrease) in borrowings (maturities of
                     
   90 days or less)
 
(232)
   
(756)
   
287
   
(3,750)
Net increase (decrease) in bank deposits
 
-
   
-
   
1,042
   
1,175
Newly issued debt (maturities longer than 90 days)
 
93
   
3,034
   
11,945
   
5,743
Repayments and other debt reductions (maturities longer than 90 days)
 
(94)
   
(35)
   
(19,020)
   
(11,489)
Net dispositions (purchases) of GE shares for treasury
 
239
   
(1,337)
   
-
   
-
Dividends paid to shareowners
 
(2,319)
   
(2,223)
   
(450)
   
(500)
All other financing activities
 
177
   
37
   
(283)
   
29
Cash from (used for) financing activities – continuing operations
 
(2,136)
   
(1,280)
   
(6,479)
   
(8,792)
Cash from (used for) financing activities – discontinued operations
 
-
   
-
   
(264)
   
(103)
Cash from (used for) financing activities
 
(2,136)
   
(1,280)
   
(6,743)
   
(8,895)
Effect of currency exchange rate changes on cash and equivalents
 
(529)
   
(19)
   
(3,297)
   
92
Increase (decrease) in cash and equivalents
 
(2,493)
   
(1,992)
   
350
   
317
Cash and equivalents at beginning of year
 
15,916
   
13,682
   
75,101
   
75,105
Cash and equivalents at March 31
 
13,423
   
11,690
   
75,451
   
75,422
Less cash and equivalents of discontinued operations at March 31
 
-
   
-
   
259
   
378
Cash and equivalents of continuing operations at March 31
$
13,423
 
$
11,690
 
$
75,192
 
$
75,044
                       
(a) Represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), which is presented on a one-line basis.

(b) Represents GECC earnings/loss from continuing operations attributable to the Company, net of GECC dividends paid to GE.


See accompanying notes. Separate information is shown for "GE" and "Financial Services (GECC)." Transactions between GE and GECC have been eliminated from the "Consolidated" columns and are discussed in Note 17.
57 2015 1Q FORM 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements represent the consolidation of General Electric Company (the Company) and all companies that we directly or indirectly control, either through majority ownership or otherwise. See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (2014 consolidated financial statements), which discusses our consolidation and financial statement presentation. As used in this report on Form 10-Q (Report), "GE" represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), whose continuing operations are presented on a one-line basis; GECC consists of General Electric Capital Corporation and all of its affiliates; and "Consolidated" represents the adding together of GE and GECC with the effects of transactions between the two eliminated. Unless otherwise indicated, we refer to the caption revenues and other income simply as "revenues" throughout this Form 10-Q.

We have reclassified certain prior-period amounts to conform to the current-period presentation. Unless otherwise indicated, information in these notes to the consolidated financial statements relates to continuing operations.

THE GE CAPITAL EXIT PLAN

On April 10, 2015, the Company announced a plan (the GE Capital Exit Plan) to reduce the size of its financial services businesses through the sale of most of the assets of GECC over the next 24 months, and to focus on continued investment and growth in the Company's industrial businesses. Under the GE Capital Exit Plan, which was approved on April 2, 2015 and aspects of which were approved on March 31, 2015, the Company will retain certain GECC businesses, principally its vertical financing businesses – GE Capital Aviation Services, Energy Financial Services and Healthcare Equipment Finance – that directly relate to the Company's core industrial domain and other operations including Working Capital Solutions and our run-off insurance activities. The assets planned for disposition include Real Estate, most of Commercial Lending and Leasing (CLL) and all Consumer platforms (including all U.S. banking assets).

As part of the GE Capital Exit Plan, the Company and GECC entered into an amendment to their existing financial support agreement. Under this amendment (the Amendment), the Company has provided a full and unconditional guarantee (the Guarantee) of the payment of principal and interest on all tradable senior and subordinated outstanding long-term debt securities and all commercial paper issued or guaranteed by GECC identified in the Amendment. In the aggregate, the Guarantee applied to $210,107 million of GECC debt as of April 10, 2015. See Note 8. The Guarantee replaced the requirement that the Company make certain income maintenance payments to GECC in certain circumstances. GECC's U.S. public indentures were concurrently amended to provide the full and unconditional guarantee by the Company set forth in the Guarantee.

We recorded $16,118 million of after-tax charges ($13,764 million of which is attributable to continuing operations and $2,354 million of which is attributable to discontinued operations) in the first quarter of 2015 related to the GE Capital Exit Plan. The first quarter charges recorded in continuing operations include tax expense related to expected repatriation of foreign earnings and write-off of deferred tax assets ($5,980 million), asset impairments due to shortened hold periods ($4,962 million), and charges on businesses held for sale ($2,822 million), including goodwill allocation.

See Notes 2 and 7 to the consolidated financial statements for additional information.

58 2015 1Q FORM 10-Q

INTERIM PERIOD PRESENTATION

The consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in our 2014 consolidated financial statements. Effective for the first quarter of 2015, the Company is following a calendar quarter. Previously, we established interim quarterly closing dates using a fiscal calendar, which required our businesses to close their books on either a Saturday or Sunday, depending on the business. 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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

We utilized significant estimates in the preparation of the first quarter financial statements.

In addition to the discussion below on estimates used to determine the fair value of businesses and assets held for sale, please refer to the Critical Accounting Estimates section within MD&A and Note 1, Basis of Presentation and Summary of Significant Accounting Policies, to the consolidated financial statements of our 2014 Form 10-K Report for a summary of our significant accounting policies and the critical accounting estimates we use to: assess the recoverability of assets such as financing receivables and goodwill; determine the fair value of financial assets; and  determine our provision for income taxes and recoverability of deferred tax assets.

BUSINESSES AND ASSETS HELD FOR SALE

Businesses held for sale represent components that meet accounting requirements to be classified as held for sale and are presented as single asset and liability amounts in our financial statements with a valuation allowance, if necessary, to recognize the net carrying amount at the lower of cost or fair value, less cost to sell. Financing receivables that no longer qualify to be presented as held for investment must be classified as held for sale and recognized in our financial statements at the lower of cost or fair value, less cost to sell, with that amount representing a new cost basis at the date of transfer.

As a result of the GE Capital Exit Plan, certain GECC businesses met the criteria to be classified as businesses held for sale and certain financing receivables were required to be recognized as held for sale at March 31, 2015.

The determination of fair value for businesses and portfolios of financing receivables involves significant judgments and assumptions. Development of estimates of fair values in this circumstance is complex and is dependent upon, among other factors, the nature of the potential sales transaction (for example, asset sale versus sale of legal entity), composition of assets and/or businesses in the disposal group, the comparability of the disposal group to market transactions, negotiations with third party purchasers etc. Such factors bear directly on the range of potential fair values and the selection of the best estimates. Key assumptions were developed based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction as of March 31, 2015.

We will review all businesses and assets held for sale each reporting period to determine whether the existing carrying amounts are fully recoverable in comparison to estimated fair values.
59 2015 1Q FORM 10-Q

NOTE 2. BUSINESSES HELD FOR SALE, FINANCING RECEIVABLES HELD FOR SALE AND DISCONTINUED OPERATIONS

ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE

In the first quarter of 2015, in connection with the GE Capital Exit Plan, we committed to sell certain businesses within our CLL business, with assets of $44,398 million and liabilities of $3,871 million. Upon classification as held for sale, we recorded an estimated loss on disposal of $1,845 million ($2,822 million after tax) in revenues. In addition, we signed an agreement to sell our consumer finance business in Australia and New Zealand (ANZ Consumer Lending), with assets of $6,093 million and liabilities of $286 million, to a consortium including KKR, Varde Partners and Deutsche Bank for approximately 6,800 million Australian dollars and 1,400 million New Zealand dollars, respectively, and is targeted to close in 2015. The transactions remain subject to customary closing conditions and regulatory approvals.

In the fourth quarter of 2014, we signed an agreement to sell our Signaling business at Transportation, with assets of $236 million and liabilities of $130 million to Alstom for approximately $800 million, and our consumer finance business Budapest Bank, with assets of $3,107 million and liabilities of $2,177 million to Hungary's government. The transactions remain subject to customary closing conditions and regulatory approvals, and are targeted to close in 2015.

In the third quarter of 2014, we signed an agreement to sell our Appliances business with assets of $2,704 million and liabilities of $1,417 million to Electrolux for approximately $3,300 million. The transaction remains subject to customary closing conditions and regulatory approvals, and is targeted to close in mid-2015.

FINANCIAL INFORMATION FOR ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE
       
(In millions)
March 31, 2015
 
December 31, 2014
 
         
Assets
         
Cash and equivalents
$
1,560
 
$
676
Investment securities
 
7,720
   
448
Current receivables(a)
 
178
   
180
Inventories
 
703
   
588
Financing receivables – net
 
31,318
 
 
2,144
Property, plant, and equipment – net
 
8,149
   
1,015
Goodwill
 
5,406
   
539
Other intangible assets – net
 
310
   
170
Other
 
3,050
 
 
540
Valuation allowance on disposal group classified as held for sale
 
(1,845)
   
-
Assets of businesses held for sale
$
56,549
 
$
6,300
 
 
 
 
 
 
Liabilities
 
 
 
 
 
Short-term borrowings
$
840
   
441
Accounts payable(a)
 
1,378
   
510
Other current liabilities
 
1,233
   
348
Bank deposits
 
1,711
   
1,931
Long-term borrowings
 
230
   
-
Deferred income taxes
 
255
   
(33)
Other
 
1,721
   
178
Liabilities of businesses held for sale
$
7,368
 
$
3,375
           
(a) Certain transactions at our Appliances and Signaling businesses are made on an arms-length basis with GECC, consisting primarily of GE customer receivables sold to GECC and GECC services for material procurement. These intercompany balances included within our held for sale businesses are reported in the GE and GECC columns of our financial statements, but are eliminated in deriving our consolidated financial statements.


Other assets at March 31, 2015 primarily comprised equity investments and real estate investments.


60 2015 1Q FORM 10-Q

FINANCING RECEIVABLES HELD FOR SALE

In the first quarter of 2015, in connection with the GE Capital Exit Plan, we committed to sell most of our CLL and all of our non-U.S. Consumer financing receivables. As a result, we transferred these financing receivables to held for sale and recognized a pre-tax provision for losses on financing receivables of $3,955 million ($3,341 million after tax) and wrote-off the associated balance of the allowance for loan losses of $5,072 million to reduce the carrying value of the financing receivables to the lower of cost or fair value, less cost to sell.

FINANCING RECEIVABLES HELD FOR SALE
             
(in millions)
March 31, 2015
   
December 31, 2014
             
Commercial
           
  CLL
$
65,974
   
$
1,409
  Energy Financial Services
 
-
     
35
  GE Capital Aviation Services (GECAS)
 
259
     
27
Total Commercial
 
66,233
(a)
   
1,471
Consumer
 
26,726
(b)
   
359
Total financing receivables held for sale
$
92,959
   
$
1,830
             
(a)
Over 30 days past due and nonaccrual financing receivables related to commercial financing receivables held for sale were $993 million and $1,401 million respectively.
(b)
Over 30 days past due and nonaccrual financing receivables related to consumer financing receivables held for sale were $1,757 million and $1,109 million, respectively.


DISCONTINUED OPERATIONS

Discontinued operations primarily comprised our Real Estate business and our U.S. mortgage business (WMC). These operations were previously reported in the GE Capital segment. Results of operations, financial position and cash flows for these businesses are separately reported as discontinued operations for all periods presented.

FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS
     
                 
       
Three months ended March 31
(In millions)
       
2015
   
2014
                 
Operations
               
Total revenues and other income (loss)
     
$
499
 
$
660
                 
Earnings (loss) from discontinued operations before income taxes   
     
$
30
 
$
123
Benefit (provision) for income taxes
       
122
   
110
Earnings (loss) from discontinued operations, net of taxes
     
$
152
 
$
233
                 
Disposal
               
Gain (loss) on disposal before income taxes
     
$
(1,808)
 
$
18
Benefit (provision) for income taxes
       
(546)
   
1
Gain (loss) on disposal, net of taxes
     
$
(2,354)
 
$
19
                 
Earnings (loss) from discontinued operations, net of taxes(a)
     
$
(2,202)
 
$
252
                 
(a) The sum of GE industrial earnings (loss) from discontinued operations, net of taxes, and GECC earnings (loss) from discontinued operations, net of taxes, is reported as GE industrial earnings (loss) from discontinued operations, net of taxes, on the Consolidated Statement of Earnings (Loss).

61 2015 1Q FORM 10-Q




(In millions)
 
March 31, 2015
 
December 31, 2014
             
Assets
       
Cash and equivalents
 
$
259
 
$
320
Investment securities
   
799
   
848
Financing receivables – net
   
19,348
   
19,636
Other receivables
   
420
   
422
Property, plant and equipment – net
   
137
   
141
Goodwill
   
440
   
537
Other intangible assets – net
   
93
   
109
Deferred income taxes
   
1,425
   
1,755
Other
   
10,148
   
13,027
Valuation allowance on disposal group classified as discontinued operations
   
(1,808)
   
-
Assets of discontinued operations
 
$
31,261
 
$
36,795
             
Liabilities
           
Short-term borrowings
 
$
20
 
$
273
Accounts payable
   
465
   
549
Other current liabilities
   
111
   
28
Long-term borrowings
   
188
   
234
Deferred income taxes
   
183
   
237
Other
   
1,106
   
955
Liabilities of discontinued operations
 
$
2,073
 
$
2,276
             

Other assets at March 31, 2015 and December 31, 2014 primarily comprised real estate investments at our Real Estate business.

REAL ESTATE

In connection with the GE Capital Exit Plan, we announced the planned disposition of our Real Estate business and classified the business as discontinued operations and recorded an estimated loss on disposal of $1,808 million ($2,354 million after tax). We expect to complete the disposal by the end of 2015.

FINANCIAL INFORMATION FOR REAL ESTATE
     
                 
       
Three months ended March 31
(In millions)
       
2015
   
2014
                 
Operations
               
Total revenues and other income (loss)
     
$
499
 
$
630
                 
Interest
     
$
(237)
 
$
(273)
Operating and administrative
       
(164)
   
(149)
Depreciation and amortization
       
(60)
   
(86)
Provision for losses on financing receivables
       
4
   
15
Earnings (loss) from discontinued operations, before income taxes   
       
42
   
137
Benefit (provision) for income taxes
       
30
   
103
Earnings (loss) from discontinued operations, net of taxes
     
$
72
 
$
240
                 
Disposal
               
Gain (loss) on disposal before income taxes
     
$
(1,808)
 
$
-
Benefit (provision) for income taxes
       
(546)
   
-
Gain (loss) on disposal, net of taxes
     
$
(2,354)
 
$
-
                 
Earnings (loss) from discontinued operations, net of taxes(a)
     
$
(2,282)
 
$
240
                 
(a) Earnings (loss) from discontinued operations attributable to the Company, before income taxes, was $(1,765) million and $138 million for the three months ended March 31, 2015 and 2014, respectively.

62 2015 1Q FORM 10-Q




WMC

During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In connection with the sale, WMC retained certain representation and warranty obligations related to loans sold to third parties prior to the disposal of the business and contractual obligations to repurchase previously sold loans that had an early payment default. All claims received by WMC for early payment default have either been resolved or are no longer being pursued.
 
The remaining active claims have been brought by securitization trustees or administrators seeking recovery from WMC for alleged breaches of representations and warranties on mortgage loans that serve as collateral for residential mortgage-backed securities (RMBS). At March 31, 2015, such claims consisted of $3,689 million of individual claims generally submitted before the filing of a lawsuit (compared to $3,694 million at December 31, 2014) and $8,982 million of additional claims asserted against WMC in litigation without making a prior claim (Litigation Claims