10-Q 1 ge10q3q15.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 September 30, 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 10,109,239,000 shares of common stock with a par value of $0.06 per share outstanding at September 30, 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
11
    Consolidated Results
12
    Segment Operations
14
    Corporate Items and Eliminations
33
    Discontinued Operations
35
    Other Consolidated Information
36
    Statement of Financial Position
37
    Financial Resources and Liquidity
40
    Exposures
45
    Critical Accounting Estimates
47
    Other Items
48
Controls and Procedures
49
Other Financial Data
49
Regulations and Supervision
50
Legal Proceedings
51
Financial Statements and Notes
53
Exhibits
108
Form 10-Q Cross Reference Index
109
Signatures
110


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 that 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 our announced plan to reduce the size of our financial services businesses as well as other aspects of that 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 and Appliances and our announced plan and transactions to reduce the size of our financial services businesses, 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.
2015 3Q FORM 10-Q   PAGE 4

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.
GE Capital Verticals or Verticals – the adding together of GE Capital businesses that we expect to retain, principally its vertical financing businesses—GE Capital Aviation Services (GECAS), Energy Financial Services (EFS) and Healthcare Equipment Finance—that directly relate to the Company's core industrial domain and other operations, including Working Capital Solutions, our run-off insurance activities, and allocated corporate costs.

2015 3Q FORM 10-Q   PAGE 5


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.
Industrial segment services revenues – refers to the sales under product services agreements and sales of both goods (such as spare parts and equipment upgrades) and related services (such as monitoring, maintenance and repairs) as sales of "product services" or "services," which is an important part of our operations.
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 14 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
GE Industrial operating + Verticals EPS
Operating and non-operating pension costs
Industrial segment organic revenue growth
Oil & Gas organic revenue and operating profit growth
Industrial cash flows from operating activities (Industrial CFOA)
Adjusted Corporate Costs (Operating)
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 (*).

2015 3Q FORM 10-Q   PAGE 6


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 its 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 following 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 (together referred to as GE Capital Verticals or Verticals). 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). 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).

REORGANIZATION AND EXCHANGE OFFERS

The merger and creation of a new intermediate holding company is part of a reorganization of GECC's businesses (the Reorganization) pursuant to which GE will also separate GECC's international and U.S. operations. GECC's international operations will be consolidated under a new international holding company (GE Capital International Holdings) and will have a separate capital structure and be supervised by the U.K. Prudential Regulation Authority. The Reorganization, Exchange Offers (as described below) and establishment of GE Capital International Holdings are intended, among other things, to establish an efficient and simplified capital structure that is satisfactory to GECC's regulators, a key step in terminating the nonbank systemically important financial institution designation for GECC. In addition, the Exchange Offers were designed to align the liabilities of GE Capital International Holdings to its assets from a maturity profile and liquidity standpoint, taking into consideration asset sales, and where appropriate, shortening the maturity profile of targeted liabilities.

2015 3Q FORM 10-Q   PAGE 7


As part of the GE Capital Exit Plan, on September 21, 2015 GE Capital commenced private offers to exchange (the Exchange Offers) up to $30 billion of certain outstanding debt for new notes with maturities of six months, five years, ten years or twenty years. On October 19, 2015, given the high level of participation, the offering was increased by $6 billion with the aggregate principal amount of $36 billion of outstanding notes being tendered for exchange and settled on October 26, 2015. The new notes that were issued at closing are composed of $15.3 billion of 0.964% Six Month Notes due 2016, £0.8 billion of 1.363% Six Month Notes due 2016, $6.1 billion of 2.342% Notes due 2020, $2.0 billion of 3.373% Notes due 2025 and $11.5 billion of 4.418% Notes due 2035. Of the $16.2 billion exchanged into the Six Month Notes, $1.3 billion is in short term borrowings at September 30, 2015. GECC will continue to evaluate the opportunity to repurchase debt while maintaining our liquidity at the levels communicated as part of the GE Capital Exit Plan. The new notes have been fully, irrevocably and unconditionally guaranteed by GE.

SALES AGREEMENTS

During the first nine months of 2015, GE signed agreements to sell approximately $94 billion of ENI, excluding liquidity (as originally reported at December 31, 2014), of which approximately $45 billion and $33 billion related to the CLL and Real Estate businesses, respectively. CLL transactions signed in the third quarter 2015 included approximately $9.3 billion related to its Healthcare Financial Services U.S. lending business with Capital One, approximately $7.6 billion related to its Transportation Finance business in the U.S. and Canada with BMO Financial Group, and approximately $1.8 billion related to its Mubadala joint venture with MidCap Finco. Ltd., which is managed by Apollo Capital Management. Of the signed agreements, approximately $60 billion have closed, including approximately $30 billion and $21 billion related to Real Estate and CLL, respectively. The Real Estate transactions that have closed included the majority of GECC's Real Estate debt and equity portfolio sold to funds managed by The Blackstone Group (which, in turn, sold a portion of this portfolio to Wells Fargo & Company). In connection with The Blackstone Group transactions, GECC provided $3.2 billion of seller financing to The Blackstone Group, which GECC intends to syndicate by 2016. As of September 30, 2015, GECC has collected or sold approximately $0.4 billion of this seller financing. The CLL transactions that have closed included its U.S. and European Sponsor Finance businesses and the majority of its Global Fleet services business.

In addition, during October 2015, we signed agreements to sell approximately $32 billion of ENI, excluding liquidity (as originally reported at December 31, 2014) related to our CLL business. These signed CLL transactions included approximately $30 billion related to our global Commercial Distribution Finance, North American Vendor Finance and North American Corporate Finance businesses with Wells Fargo & Company and approximately $2 billion related to our Corporate Aircraft portfolio with Global Jet Capital.

AFTER-TAX CHARGES RELATED TO THE GE CAPITAL EXIT PLAN

In connection with the GE Capital Exit Plan announced on April 10, the Company estimated that it would 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 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).

In the nine months ended September 30, 2015, GE recorded $21.1 billion of after-tax charges related to the GE Capital Exit Plan, including $0.4 billion of after-tax charges recorded in the third quarter of 2015, primarily exit-related charges in our CLL business, partially offset by income associated with operations in CLL and Real Estate. A description of after-tax charges for the nine months ended September 30, 2015 is provided below.

$9.8 billion of net loss primarily related to the planned disposition of the Real Estate business and most of the CLL business, which is recorded in discontinued operations under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings.

$6.2 billion of tax expense related to expected repatriation of foreign earnings and write-off of deferred tax assets, of which $6.1 billion is reported in GECC's Corporate component and $0.2 billion is reported in our Consumer business all recorded in continuing operations under the caption "Benefit (provision) for income taxes" in the Statement of Earnings.

$4.7 billion of net asset impairments due to shortened hold periods, of which $3.2 billion is recorded in continuing operations in our Consumer business primarily under the captions "Provisions for losses on financing receivables" and "Revenues from services" in the Statement of Earnings and $1.5 billion is recorded in discontinued operations in our CLL business under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings.
2015 3Q FORM 10-Q   PAGE 8


$0.4 billion of restructuring and other charges, of which $0.3 billion is recorded in continuing operations in GECC's Corporate component under the caption "Other costs and expenses" in the Statement of Earnings and $0.1 billion is recorded in discontinued operations in our CLL business under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings.

GUARANTEE

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 $184 billion of GECC debt as of September 30, 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.

SYNCHRONY FINANCIAL EXCHANGE OFFER

On October 14, 2015, the Federal Reserve Board approved Synchrony Financial's application to operate as a publicly owned savings and loan holding company following completion of the exchange offer, conditioned on Synchrony Financial complying with certain conditions, including receipt of all required regulatory approvals, and on the commitments made in connection with Synchrony Financial's applications.

On October 19, 2015, GE commenced an offer to exchange GE common stock for common stock of GECC's approximately 84.6% owned subsidiary, Synchrony Financial. This exchange offer is in connection with the previously announced separation of Synchrony Financial and is expected to conclude the week of November 16, 2015. We estimate that the exchange will reduce the outstanding shares of GE common stock by approximately 6-7%. Following the completion of the share exchange, GECC expects the Federal Reserve Board to act in due course on its application to deregister as a savings and loan holding company but cannot predict the timing of the Federal Reserve Board's action. For further information about the Synchrony Financial transaction, see the Form S-4 filed by Synchrony Financial on October 19, 2015.

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 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.  Certain columns and rows within the tables may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers in millions.

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 nine months ended September 30, 2015.
2015 3Q FORM 10-Q   PAGE 9


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.
2015 3Q FORM 10-Q   PAGE 10

KEY PERFORMANCE INDICATORS

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

 
REVENUES PERFORMANCE
 
INDUSTRIAL SEGMENT PROFIT
 
INDUSTRIAL SEGMENT MARGIN
             
 
3Q 2015
YTD 2015
Industrial Segment
(1)%
(1)%
Industrial Segment Organic*
4%
4%
Financial Services
(1)%
(9)%
EARNINGS PER SHARE
 
INDUSTRIAL ORDERS
 
INDUSTRIAL BACKLOG
  Earnings     Operating Earnings*
 
 
 
 
 
 
 
 
Equipment
 
 
Services 
 
 
 
(a)          Prior period reflects an update for Oil & Gas services backlog.
 
 
Equipment
 
 
Services 
IND'L OPERATING + VERTICALS EPS*
 
SIGNIFICANT DEVELOPMENTS IN 2015
 
   
 
On October 19, 2015, we launched the Synchrony Financial share exchange, after the Federal Reserve Board approved Synchrony Financial's application to operate as a publicly owned savings and loan holding company.
At September 30, 2015, we had an agreement to sell our consumer finance business in Australia and New Zealand for approximately 6.0 billion Australian dollars and 1.4 billion New Zealand dollars, respectively.
We announced the GE Capital Exit Plan in April 2015 and GECC's Real Estate business and most of the CLL business have been classified as discontinued operations.
We acquired Milestone Aviation Group, a helicopter leasing business, for approximately $1.8 billion on January 30, 2015.
The effects of the stronger U.S. dollar in the nine months ended September 30, 2015, primarily related to the euro, decreased consolidated revenues by $3.9 billion.
GE returned $7.2 billion to shareowners in the nine months ended September 30, 2015 primarily through dividends.
 
Verticals include businesses expected to be retained (GECAS, EFS, Healthcare Equipment Finance, Working Capital Solutions, and run-off insurance), including allocated corporate costs.
 
GE CFOA
 
 
 
 
 
GECC Dividend
 
Industrial CFOA*
*Non-GAAP Financial Measure

2015 3Q FORM 10-Q   PAGE 11

CONSOLIDATED RESULTS

THREE AND NINE MONTHS ENDED SEPTEMBER 30
(Dollars in billions)

 
REVENUES
 
INDUSTRIAL SEGMENT EQUIPMENT
& SERVICES REVENUES
 
 
 
 
Equipment
 
 
Services
 
 
COMMENTARY: 2015 - 2014
   
 
THREE MONTHS ENDED
Consolidated revenues decreased $0.4 billion, or (1)%.
Industrial segment revenues decreased 1%, reflecting the unfavorable impact of foreign exchange of $1.2 billion. Industrial segment organic revenues* grew 4%.
Financial Services revenues decreased 1% as a result of higher impairments and the effects of currency exchange, partially offset by higher gains and the effects of acquisitions.
The effects of acquisitions increased consolidated revenues $0.1 billion and $0.3 billion in 2015 and 2014, respectively. The effects of dispositions decreased consolidated revenues $0.1 billion and $0.6 billion in 2015 and 2014, respectively.
 
 
 
NINE MONTHS ENDED
Consolidated revenues decreased $1.9 billion, or (2)%, primarily due to the impact of foreign exchange of $3.9 billion.
Industrial segment revenues decreased 1%, reflecting the unfavorable impact of foreign exchange of $3.5 billion. Industrial segment organic revenues* grew 4%.
Financial Services revenues decreased 9% primarily due to the effects of the GE Capital Exit Plan.
The effects of acquisitions increased consolidated revenues $0.5 billion and $1.5 billion in 2015 and 2014, respectively. Dispositions affected our ongoing results through lower revenues of $0.4 billion and $3.0 billion in 2015 and 2014, respectively.
 














*Non-GAAP Financial Measure
2015 3Q FORM 10-Q   PAGE 12




THREE AND NINE MONTHS ENDED SEPTEMBER 30
(Dollars in billions)

 
EARNINGS (LOSS)
 
INDUSTRIAL SELLING, GENERAL & ADMINISTRATIVE (SG&A) AS A % OF SALES
 
 
 
  Earnings     Operating Earnings*
 
 
 
 
COMMENTARY: 2015 - 2014
   
 
THREE MONTHS ENDED
Consolidated earnings increased 1% primarily due to:
Industrial segment profit increased 5% with five of seven segments growing earnings.
Industrial segment margin increased 100 basis points (bps) driven by higher productivity and volume, partially offset by the impact of the stronger U.S. dollar.
Financial Services earnings decreased 13% primarily due to core decreases, including charges associated with the GE Capital Exit Plan and higher impairments, partially offset by higher gains, the effects of dispositions and lower provisions for losses on financing receivables.
The effects of acquisitions on our consolidated net earnings were insignificant amounts for both 2015 and 2014, respectively. The effects of dispositions on net earnings and settlements were an insignificant amount in 2015 and a decrease of $0.1 billion in 2014.
Industrial SG&A as a percentage of total sales decreased to 13.9% primarily as a result of favorable impacts of global cost reduction initiatives and lower restructuring costs, partially offset by higher non-operating pension costs.
 
 
 
NINE MONTHS ENDED
Consolidated earnings decreased $10.1 billion primarily due to lower financial services income resulting from charges associated with the GE Capital Exit Plan of $9.7 billion, which consisted primarily of tax expense related to expected repatriation of foreign earnings and write-off of deferred tax assets and asset impairments due to shortened hold periods.
Industrial segment profit increased 6% with five of seven segments growing earnings.
Industrial segment margin increased 100 bps driven by higher productivity, volume and pricing, partially offset by the impact of the stronger U.S. dollar, the effects of inflation and negative business mix.
Financial Services earnings decreased significantly primarily due to charges associated with the GE Capital Exit Plan.
The effects of acquisitions on our consolidated net earnings were increases of $0.1 billion in 2015 and $0.2 billion in 2014. The effects of dispositions and settlements on net earnings were an increase of $0.3 billion in 2015 and a decrease of $1.5 billion in 2014.
Industrial SG&A as a percentage of total sales decreased to 14.6% primarily as a result of favorable impacts of global cost reduction initiatives, partially offset by higher non-operating pension costs and restructuring costs.
 

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
2015 3Q FORM 10-Q   PAGE 13

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 €12,350 million (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, 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 €2,400 million 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 €260 million 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.

In the second quarter of 2015, the European Commission indicated that it had competition concerns with the proposed transaction. In response, GE proposed remedies to address the concerns of the Commission and the U.S. Department of Justice while preserving the strategic and economic rationale of the proposed transaction. On September 8, 2015, the European Commission and the Department of Justice accepted GE's proposal and approved the transaction. In order to obtain approval, GE has pledged to sell certain of Alstom's gas-turbine assets and its Power Systems Mfg. subsidiary to Ansaldo Energia SpA after the close of the transaction for approximately €120 million. As a result of final negotiations, Alstom has agreed to contribute financially to the remedies through a €300 million reduction in the purchase price of the transaction. Further, GE and Alstom agreed to other purchase price amendments that resulted in a net increase of consideration of approximately €45 million and a reduction in the trademark licensing period of the Alstom name to five years. The transaction is targeted to close in November 2015.

2015 3Q FORM 10-Q   PAGE 14


The acquisition and alliances with Alstom will impact our Power & Water and Energy Management segments. The impact of 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 accordance with purchase accounting.

PLANNED SALE OF APPLIANCES

In the third quarter of 2014, we signed an agreement to sell our Appliances business to Electrolux for approximately $3.3 billion. On July 1, 2015, we were notified that the Department of Justice had initiated court proceedings seeking to enjoin the sale of Appliances to Electrolux. Electrolux and GE intend to defend the proposed transaction and a trial date has been set for November 9, 2015.

SEGMENT RESULTS

SUMMARY OF OPERATING SEGMENTS
                                   
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
 
2015
   
2014
   
V%
   
2015
   
2014
   
V%
                                   
Revenues
                                 
Power & Water
$
6,461
 
$
6,375
   
 1 %
 
$
18,978
 
$
18,176
   
 4 %
Oil & Gas
 
3,868
   
4,597
   
 (16)%
   
11,891
   
13,666
   
 (13)%
Energy Management
 
1,773
   
1,813
   
 (2)%
   
5,226
   
5,341
   
 (2)%
Aviation
 
6,001
   
5,698
   
 5 %
   
17,927
   
17,566
   
 2 %
Healthcare
 
4,255
   
4,485
   
 (5)%
   
12,666
   
13,166
   
 (4)%
Transportation
 
1,593
   
1,540
   
 3 %
   
4,322
   
4,073
   
 6 %
Appliances & Lighting
 
2,293
   
2,117
   
 8 %
   
6,469
   
6,094
   
 6 %
      Total industrial segment revenues
 
26,243
   
26,625
   
 (1)%
   
77,479
   
78,082
   
 (1)%
GE Capital
 
6,312
   
6,384
   
 (1)%
   
17,452
   
19,223
   
 (9)%
      Total segment revenues
 
32,555
   
33,009
   
 (1)%
   
94,931
   
97,305
   
 (2)%
Corporate items and eliminations
 
(875)
   
(902)
   
 (3)%
   
(2,201)
   
(2,710)
   
 (19)%
Consolidated revenues
$
31,680
 
$
32,107
   
 (1)%
 
$
92,731
 
$
94,595
   
 (2)%
                                   
Segment profit (loss)
                                 
Power & Water
$
1,270
 
$
1,191
   
 7 %
 
$
3,362
 
$
3,212
   
 5 %
Oil & Gas
 
584
   
660
   
 (12)%
   
1,599
   
1,771
   
 (10)%
Energy Management
 
127
   
59
   
F
   
237
   
133
   
 78 %
Aviation
 
1,353
   
1,264
   
 7 %
   
3,936
   
3,576
   
 10 %
Healthcare
 
652
   
727
   
 (10)%
   
1,944
   
2,027
   
 (4)%
Transportation
 
379
   
342
   
 11 %
   
934
   
814
   
 15 %
Appliances & Lighting
 
165
   
88
   
 88 %
   
432
   
243
   
 78 %
      Total industrial segment profit
 
4,530
   
4,331
   
 5 %
   
12,445
   
11,776
   
 6 %
GE Capital
 
734
   
843
   
 (13)%
   
(7,555)
   
3,091
   
U
      Total segment profit (loss)
 
5,264
   
5,174
   
 2 %
   
4,890
   
14,867
   
 (67)%
Corporate items and eliminations
 
(1,559)
   
(1,550)
   
 1 %
   
(4,436)
   
(4,566)
   
 (3)%
GE interest and other financial charges
 
(440)
   
(377)
   
 17 %
   
(1,243)
   
(1,142)
   
 9 %
GE provision for income taxes
 
(413)
   
(416)
   
 (1)%
   
(1,302)
   
(1,143)
   
 14 %
Earnings (loss) from continuing operations
                                 
   attributable to the Company
 
2,853
   
2,831
   
 1 %
   
(2,091)
   
8,016
   
U
Earnings (loss) from discontinued
                                 
   operations, net of taxes
 
(347)
   
706
   
U
   
(10,336)
   
2,065
   
U
Consolidated net earnings (loss)
                                 
   attributable to the Company
$
2,506
 
$
3,537
   
 (29)%
 
$
(12,427)
 
$
10,081
   
U
   
\
               
\
           
2015 3Q FORM 10-Q   PAGE 15

POWER & WATER

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (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
   
 
 

2015 3Q FORM 10-Q   PAGE 16




FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (Dollars in billions)

SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
  Revenue    Profit
 
     
SEGMENT REVENUES & PROFIT WALK:
COMMENTARY: 2015 - 2014
THREE MONTHS ENDED
   
Segment revenues up $0.1 billion or 1%;
Segment profit up $0.1 billion or 7% as a result of:
 
The increase in revenues was primarily due to higher volume, mainly driven by higher equipment sales at Renewable Energy and PGS upgrades, partially offset by the impact of the stronger U.S. dollar.
The increase in profit was mainly due to services growth and cost productivity. These increases were partially offset by an unfavorable business mix.
 
 
Revenues
Profit
September 30, 2014
$
 6.4
$
 1.2
Volume
 
 0.4
 
 0.1
Price
 
 -
 
 -
Foreign Exchange
 
 (0.4)
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 (0.1)
Productivity
 
N/A
 
 0.1
Other
 
 -
 
 -
September 30, 2015
$
 6.5
$
 1.3
         
     
   
NINE MONTHS ENDED
   
Segment revenues up $0.8 billion or 4%;
Segment profit up $0.2 billion or 5% as a result of:
 
The increase in revenues was primarily due to higher volume, mainly driven by higher equipment sales at PGP and Renewable Energy and service sales at PGS, higher price and other income, partially offset by the impact of the stronger U.S. dollar.
The increase in profit was mainly due to higher volume, price and other income, partially offset by unfavorable business mix and the impact of the stronger U.S. dollar.
 
 
Revenues
Profit
September 30, 2014
$
 18.2
$
 3.2
Volume
 
 1.6
 
 0.3
Price
 
 0.1
 
 0.1
Foreign Exchange
 
 (1.0)
 
 (0.1)
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 (0.2)
Productivity
 
N/A
 
 -
Other
 
 0.1
 
 0.1
September 30, 2015
$
 19.0
$
3.4
           

2015 3Q FORM 10-Q   PAGE 17

OIL & GAS

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (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 effective January 1, 2015. Accordingly, D&S is now Surface and Subsea Systems is now Subsea Systems & Drilling.
 
 
 
                          Services           Equipment
 
 
ORDERS
 
 
BACKLOG
 
 
 
Equipment
 
 
Services
 
 
 
(a)Prior period reflects an update for Oil & Gas services backlog.
 
 
 
Equipment
 
 
Services
 

2015 3Q FORM 10-Q   PAGE 18




FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (Dollars in billions)

SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
  Revenues    Profit
 
 
     
SEGMENT REVENUES & PROFIT WALK:
COMMENTARY: 2015 - 2014
THREE MONTHS ENDED
   
Segment revenues down $0.7 billion or 16%;
Segment profit down $0.1 billion or 12% as a result of:
 
The decrease in revenues was primarily due to the impact of the stronger U.S. dollar and lower volume, partially offset by other income. Organic revenues* for the third quarter of 2015 were down 7% compared with the third quarter of 2014.
The decrease in profit was due to lower volume, the impact of the stronger U.S. dollar and lower productivity, partially offset by other income. Organic operating profit* was flat in the third quarter of 2015.
 
 
Revenues
Profit
September 30, 2014
$
 4.6
$
 0.7
Volume
 
 (0.4)
 
 (0.1)
Price
 
 -
 
 -
Foreign Exchange
 
 (0.4)
 
 (0.1)
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 (0.1)
Other
 
 0.1
 
 0.1
September 30, 2015
$
 3.9
$
 0.6
         
     
   
NINE MONTHS ENDED
   
Segment revenues down $1.8 billion or 13%;
Segment profit down $0.2 billion or 10% as a result of:
 
The decrease in revenues was primarily due to the impact of the stronger U.S. dollar and lower volume. Organic revenues* for the nine months ended September 30, 2015 were down 4% compared with the same period of 2014.
The decrease in profit is primarily due to the impact of the stronger U.S. dollar and lower volume, partially offset by cost deflation and higher productivity. Organic operating profit* grew 5% in the nine months ended September 30, 2015.
 
 
Revenues
Profit
September 30, 2014
$
 13.7
$
 1.8
Volume
 
 (0.5)
 
 (0.1)
Price
 
 -
 
 -
Foreign Exchange
 
 (1.2)
 
 (0.3)
(Inflation)/Deflation
 
N/A
 
 0.1
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 0.1
Other
 
 (0.1)
 
 -
September 30, 2015
$
 11.9
$
1.6
           


*Non-GAAP Financial Measure
2015 3Q FORM 10-Q   PAGE 19

ENERGY MANAGEMENT

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (Dollars in billions)

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

2015 3Q FORM 10-Q   PAGE 20




FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (Dollars in billions)

SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
 
 
 
 
 
 
  Revenue     Profit
 
     
 
COMMENTARY: 2015 - 2014
     
 
THREE MONTHS ENDED
Segment revenues down 2% as a result of:
 
 
NINE MONTHS ENDED
Segment revenues down $0.1 billion or 2% as a result of:
 
 
 
The impact of the stronger U.S. dollar ($0.1 billion), partially offset by higher sales volume ($0.1 billion).
 
 
 
The impact of the stronger U.S. dollar ($0.4 billion), partially offset by higher volume ($0.3 billion).
 
 
 
 
Segment profit up $0.1 billion as a result of:
 
 
Segment profit up $0.1 billion or 78% as a result of:
 
 
 
Improved productivity ($0.1 billion).
 
 
 
Improved productivity ($0.2 billion), partially offset by the impact of the stronger U.S. dollar ($0.1 billion).
 
 
 

2015 3Q FORM 10-Q   PAGE 21

            AVIATION

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
(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

2015 3Q FORM 10-Q   PAGE 22




FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (Dollars in billions)

SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
 
  Revenues     Profit
 
 
 
     
SEGMENT REVENUES & PROFIT WALK:
COMMENTARY: 2015 - 2014
THREE MONTHS ENDED
   
Segment revenues up $0.3 billion or 5%;
Segment profit up $0.1 billion or 7% as a result of:
 
The increase in revenues was primarily due to higher services volume and higher prices.
The increase in profit was mainly due to higher price as well as a favorable business mix, partially offset lower productivity.
 
 
Revenues
Profit
September 30, 2014
$
 5.7
$
 1.3
Volume
 
 0.2
 
 -
Price
 
 0.1
 
 0.1
Foreign Exchange
 
 -
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 0.1
Productivity
 
N/A
 
 (0.1)
Other
 
 -
 
 -
September 30, 2015
$
 6.0
$
 1.4
         
     
   
NINE MONTHS ENDED
   
Segment revenues up $0.4 billion or 2%;
Segment profit up $0.4 billion or 10% as a result of:
 
The increase in revenues was primarily due to higher prices, partially offset by lower volume.
The increase in profit was mainly due to higher price as well as a favorable business mix. These increases were partially offset by the effects of inflation.
 
 
Revenues
Profit
September 30, 2014
$
 17.6
$
 3.6
Volume
 
 (0.1)
 
 -
Price
 
 0.5
 
 0.5
Foreign Exchange
 
 -
 
 -
(Inflation)/Deflation
 
N/A
 
 (0.2)
Mix
 
N/A
 
 0.1
Productivity
 
N/A
 
 -
Other
 
 -
 
 -
September 30, 2015
$
 17.9
$
 3.9
           

2015 3Q FORM 10-Q   PAGE 23

HEALTHCARE

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
(Dollars in billions)

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

2015 3Q FORM 10-Q   PAGE 24




FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (Dollars in billions)

SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
  Revenue     Profit
 
     
SEGMENT REVENUES & PROFIT WALK:
COMMENTARY: 2015 - 2014
THREE MONTHS ENDED
   
Segment revenues down $0.2 billion or 5%;
Segment profit down $0.1 billion or 10% as a result of:
 
The decrease in revenues was due to the impact of the 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 decrease in profit was due to lower prices, mainly in Healthcare Systems, partially offset by higher productivity as increased R&D and related costs were more than offset by higher cost productivity.
 
 
Revenues
Profit
September 30, 2014
$
 4.5
$
 0.7
Volume
 
 0.2
 
 -
Price
 
 (0.1)
 
 (0.1)
Foreign Exchange
 
 (0.3)
 
 -
(Inflation)/Deflation
 
NA
 
 -
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 0.1
Other
 
 -
 
 -
September 30, 2015
$
 4.3
$
 0.7
         
     
   
NINE MONTHS ENDED
   
Segment revenues down $0.5 billion or 4%;
Segment profit down $0.1 billion or 4% as a result of:
 
The decrease in revenues was due to the impact of the 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 decrease in profit was due to lower prices, mainly in Healthcare Systems, the impact of the stronger U.S. dollar and the effects of inflation. These decreases were partially offset by higher volume and higher productivity as increased R&D and related costs were more than offset by higher cost productivity.
 
 
Revenues
Profit
September 30, 2014
$
 13.2
$
 2.0
Volume
 
 0.6
 
 0.1
Price
 
 (0.2)
 
 (0.2)
Foreign Exchange
 
 (0.8)
 
 (0.1)
(Inflation)/Deflation
 
N/A
 
 (0.1)
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 0.3
Other
 
 -
 
 -
September 30, 2015
$
 12.7
$
 1.9
           

2015 3Q FORM 10-Q   PAGE 25

            TRANSPORTATION

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (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
   

2015 3Q FORM 10-Q   PAGE 26




FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
(Dollars in billions)

SEGMENT REVENUES & PROFIT
 
SEGMENT PROFIT MARGIN
 
 
  Revenue     Profit
 
 
 
     
COMMENTARY: 2015 - 2014
 
THREE MONTHS ENDED
Segment revenues up $0.1 billion or 3% as a result of:
Higher volume, primarily due to higher locomotive and services sales.
 
Segment profit up 11% as a result of:
Cost productivity and deflation, partially offset by an unfavorable business mix.
 
NINE MONTHS ENDED
Segment revenues up $0.2 billion or 6% as a result of:
Higher volume ($0.2 billion), due to higher locomotive and services sales.
 
Segment profit up $0.1 billion or 15% as a result of:
Higher cost productivity ($0.1 billion), higher volume driven by locomotive and services sales and continued deflation, partially offset by an unfavorable business mix ($0.1 billion).
 

2015 3Q FORM 10-Q   PAGE 27

            APPLIANCES & LIGHTING

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (Dollar in billions)

2015 YTD SUB-SEGMENT REVENUES
     
     
 
 
FINANCIAL  OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
(Dollar in billions)
 
 
SEGMENT REVENUES & PROFIT
 
 
 
SEGMENT PROFIT MARGIN
 
  Revenue     Profit
 
 
 
COMMENTARY: 2015 - 2014
     
THREE MONTHS ENDED
Segment revenues up $0.2 billion or 8% as a result of:
Higher volume ($0.2 billion) driven by higher sales at Appliances.
 
Segment profit up $0.1 billion or 88% as a result of:
Improved productivity ($0.1 billion), including the effects of classifying Appliances as a business held for sale in the third quarter of 2014.
 
 
NINE MONTHS ENDED
Segment revenues up $0.4 billion or 6% as a result of:
Higher volume ($0.5 billion) driven by higher sales at Appliances, partially offset by lower prices ($0.1 billion) and the impact of the stronger U.S. dollar ($0.1 billion).
 
Segment profit up $0.2 billion or 78% as a result of:
Improved productivity ($0.2 billion), including the effects of classifying Appliances as a business held for sale and the effects of inflation ($0.1 billion), partially offset by lower prices ($0.1 billion).
 
 

2015 3Q FORM 10-Q   PAGE 28

GE CAPITAL

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (Dollars in billions)

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

The GE Capital Exit Plan - As previously discussed, on April 10, 2015, the Company announced its plan to reduce the size of the financial services businesses through the sale of most of the assets of GECC over the following 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* was $176 billion at September 30, 2015.
During the first nine months of 2015, GE signed agreements to sell approximately $94 billion of ENI, excluding liquidity (as originally reported at December 31, 2014), of which $45 billion and $33 billion related to the CLL and Real Estate businesses, respectively. CLL transactions signed in the third quarter 2015 included approximately $9.3 billion related to its Healthcare Financial Services U.S. lending business with Capital One, approximately $7.6 billion related to its Transportation Finance business in the U.S. and Canada with BMO Financial Group, and approximately $1.8 billion related to its Mubadala joint venture, with MidCap Finco Ltd., which is managed by Apollo Capital Management.
Of the signed agreements, approximately $60 billion have closed, including approximately $30 billion and $21 billion related to Real Estate and CLL, respectively. The Real Estate transactions that have closed included the majority of GECC's Real Estate debt and equity portfolio sold to funds managed by The Blackstone Group (which, in turn, sold a portion of this portfolio to Wells Fargo & Company). In connection with The Blackstone Group transactions, GECC provided $3.2 billion of seller financing to The Blackstone Group, which GECC intends to syndicate by 2016. As of September 30, 2015, GECC has collected or sold approximately $0.4 billion of this seller financing. The CLL transactions that have closed included its U.S. and European Sponsor Finance businesses and the majority of its Global Fleet services business.

* Non-GAAP Financial Measure
2015 3Q FORM 10-Q   PAGE 29


In addition, during October 2015, we signed agreements to sell approximately $32 billion of ENI, excluding liquidity (as originally reported at December 31, 2014) related to our CLL business. These signed CLL transactions included approximately $30 billion related to our global Commercial Distribution Finance, North American Vendor Finance and North American Corporate Finance businesses with Wells Fargo & Company and approximately $2 billion related to our Corporate Aircraft portfolio with Global Jet Capital.
In the nine months ended September 30, 2015, GE recorded $21.1 billion of after-tax charges related to the GE Capital Exit Plan, including $0.4 billion of after-tax charges recorded in the third quarter of 2015, primarily exit-related charges in our CLL business, partially offset by income associated with operations in CLL and Real Estate. A description of after-tax charges for the nine months ended September 30, 2015 is provided below.
$9.8 billion of net loss primarily related to the planned disposition of the Real Estate business and most of the CLL business, which is recorded in discontinued operations under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings.
$6.2 billion of tax expense related to expected repatriation of foreign earnings and write-off of deferred tax assets, of which $6.1 billion is reported in GECC's Corporate component and $0.2 billion reported in our Consumer business all recorded in continuing operations under the caption "Benefit (provision) for income taxes" in the Statement of Earnings.
$4.7 billion of net asset impairments due to shortened hold periods, of which $3.2 billion is recorded in continuing operations in our Consumer business primarily under the captions "Provisions for losses on financing receivables" and "Revenues from services" in the Statement of Earnings and $1.5 billion is recorded in discontinued operations in our CLL business under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings.
$0.4 billion of restructuring and other charges, of which $0.3 billion is recorded in continuing operations in GECC's Corporate component under the caption "Other costs and expenses" in the Statement of Earnings and $0.1 billion is recorded in discontinued operations in our CLL business under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings.
Budapest Bank – On June 29, 2015 we closed the sale of Budapest Bank to Hungary's government.
Australia and New Zealand (ANZ) Consumer Lending – At September 30, 2015, we had 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 6.0 billion Australian dollars and 1.4 billion New Zealand dollars, respectively.
Milestone Aviation Group – On January 30, 2015, GECAS acquired Milestone Aviation Group, a helicopter leasing business, for approximately $1.8 billion.
Synchrony Financial On October 19, 2015, GE commenced an offer to exchange GE common stock for common stock of GECC's approximately 84.6% owned subsidiary, Synchrony Financial. This exchange offer is in connection with the previously announced separation of Synchrony Financial and is expected to conclude the week of November 16, 2015. We estimate that the exchange will reduce the outstanding shares of GE common stock by approximately 6-7%. Following the completion of the share exchange, GECC expects the Federal Reserve Board to act in due course on its application to deregister as a savings and loan holding company but cannot predict the timing of the Federal Reserve Board's action. For further information about the Synchrony Financial transaction, see the Form S-4 filed by Synchrony Financial on October 19, 2015.
Dividends - GECC paid no dividends and $0.5 billion of dividends to GE in the three and nine months ended September 30, 2015, respectively.



2015 3Q FORM 10-Q   PAGE 30


FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (Dollars in billions)

SEGMENT REVENUES & PROFIT (LOSS)(a)
   
 
  Revenue     Profit (Loss)
 
 
 
 
 
(a) Interest and other financial charges and income taxes are included in determining segment profit (loss) for the GE Capital segment.
 
 
     
COMMENTARY: 2015 - 2014

Segment revenues decreased 1% in the three months ended September 30, 2015 as a result of higher impairments and the effects of currency exchange, partially offset by higher gains and the effects of acquisitions. Net earnings decreased 13% in the three months ended September 30, 2015 primarily due to core decreases, including charges associated with the GE Capital Exit Plan and higher impairments, partially offset by higher gains, the effects of dispositions and lower provisions for losses on financing receivables.

Segment revenues decreased 9% and net earnings decreased significantly in the nine months ended September 30, 2015, primarily due to the effects of the GE Capital Exit Plan.

COMMERCIAL LENDING AND LEASING

During the second quarter of 2015, the majority of CLL's business met held for sale criteria and was classified as discontinued operations. See Note 2 for additional information. The discussion below relates solely to the portion of CLL's business classified as continuing operations, which include Healthcare Equipment Finance and Working Capital Solutions.

CLL 2015 revenues increased 14% and net earnings increased 23% in the three months ended September 30, 2015. Revenues increased primarily as a result of organic revenue growth. Net earnings increased reflecting core increases.

CLL 2015 revenues increased 6% and net earnings increased 13% in the nine months ended September 30, 2015. Revenues increased primarily as a result of organic revenue growth, partially offset by the effects of currency exchange. Net earnings increased reflecting core increases.
 

2015 3Q FORM 10-Q   PAGE 31

CONSUMER

Consumer 2015 revenues increased 1% and net earnings increased 28% in the three months ended September 30, 2015. Revenues increased reflecting higher gains ($0.2 billion), organic revenue growth ($0.1 billion) and the effects of acquisitions, partially offset by the effects of dispositions ($0.2 billion) and the effects of currency exchange ($0.1 billion). Net earnings increased as a result of higher gains ($0.1 billion) and lower provisions for financing receivables ($0.1 billion), partially offset by core decreases.

Consumer 2015 revenues decreased 15% and net earnings decreased unfavorably in the nine months ended September 30, 2015. Revenues decreased as a result of higher impairments ($1.4 billion), the effects of dispositions ($0.5 billion) and the effects of currency exchange ($0.4 billion), partially offset by higher gains ($0.4 billion), organic revenue growth ($0.3 billion) and the effects of acquisitions. Net earnings decreased as a result of higher provisions for losses on financing receivables ($2.0 billion), higher impairments ($1.2 billion) and core decreases ($0.4 billion), partially offset by higher gains ($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 ($2.2 billion), and asset impairments related to equity method investments in connection with the GE Capital Exit Plan ($1.2 billion).

ENERGY FINANCIAL SERVICES

Energy Financial Services 2015 revenues decreased 35% and net earnings decreased unfavorably in the three months ended September 30, 2015. Revenues decreased as a result of higher impairments ($0.2 billion), lower gains ($0.1 billion) and organic revenue declines, partially offset by the effects of dispositions ($0.2 billion). Net earnings decreased as a result of higher impairments ($0.1 billion) and lower gains, partially offset by the effects of dispositions ($0.1 billion).

Energy Financial Services 2015 revenues decreased 19% and net earnings decreased 63% in the nine months ended September 30, 2015. Revenues decreased as a result of organic revenue declines ($0.3 billion), higher impairments ($0.1 billion) and lower gains ($0.1 billion), partially offset by the effects of dispositions ($0.2 billion). Net earnings decreased as a result of core decreases ($0.2 billion), higher impairments ($0.1 billion) and lower gains, partially offset by the effects of dispositions ($0.1 billion).

GECAS

GECAS 2015 revenues increased 4% and net earnings increased favorably in the three months ended September 30, 2015. Revenues increased as a result of the effects of acquisitions ($0.1 billion), partially offset by organic revenue declines ($0.1 billion). Net earnings increased as a result of lower impairments ($0.1 billion), the effects of acquisitions and core increases.

GECAS 2015 revenues decreased slightly and net earnings increased 18% in the nine months ended September 30, 2015. Revenues decreased as a result of organic revenue declines ($0.4 billion), partially offset by the effects of acquisitions ($0.2 billion) and lower impairments ($0.1 billion). Net earnings increased as a result of lower impairments ($0.2 billion) and the effects of acquisitions ($0.1 billion), partially offset by core decreases ($0.1 billion).
2015 3Q FORM 10-Q   PAGE 32

CORPORATE ITEMS AND ELIMINATIONS
           
                         
                         
REVENUES AND OPERATING PROFIT (COST)
                     
                         
   
Three months ended September 30
 
Nine months ended September 30
(In millions)
 
2015
   
2014
   
2015
   
2014
                         
Revenues
                     
 
Gains on disposed or held for sale businesses
$
-
 
$
-
 
$
49
 
$
91
 
NBCU settlement
 
-
   
-
   
450
   
-
 
Eliminations and other
 
(875)
   
(902)
   
(2,700)
   
(2,801)
Total Corporate Items and Eliminations
$
(875)
 
$
(902)
 
$
(2,201)
 
$
(2,710)
                         
Operating profit (cost)
                     
 
Gains on disposed or held for sale businesses
$
-
 
$
-
 
$
49
 
$
91
 
NBCU settlement
 
-
   
-
   
450
   
-
 
Principal retirement plans(a)
 
(659)
   
(582)
   
(2,121)
 
$
(1,745)
 
Restructuring and other charges
 
(346)
   
(435)
   
(1,167)
   
(1,218)
 
Eliminations and other
 
(554)
   
(533)
   
(1,647)
   
(1,694)
Total Corporate Items and Eliminations
$
(1,559)
 
$
(1,550)
 
$
(4,436)
 
$
(4,566)
                         
CORPORATE COSTS
                     
                         
   
Three months ended September 30
 
Nine months ended September 30
(In millions)
 
2015
 
2014
   
2015
 
2014
                         
Total Corporate Items and Eliminations
$
(1,559)
 
$
(1,550)
 
$
(4,436)
 
$
(4,566)
Less non-operating pension cost
 
(693)
   
(537)
   
(2,077)
   
(1,592)
Total Corporate costs (operating)*
$
(866)
 
$
(1,013)
 
$
(2,359)
 
$
(2,974)
Less restructuring and other charges, gains and settlement
 
(346)
   
(435)
   
(668)
   
(1,127)
Adjusted total corporate costs (operating)*
$
(520)
 
$
(578)
 
$
(1,691)
 
$
(1,847)
                         
(a)
Included non-operating pension cost* of $(0.7) billion and  $(0.5) billion in the three months ended September 30, 2015 and 2014, respectively, and  $(2.1) billion and  $(1.6) billion in the nine months ended September 30, 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: THREE MONTHS ENDED SEPTEMBER 30

Revenues and other income were flat.

Operating costs were flat, primarily as a result of:
$0.1 billion lower restructuring and other charges offset by $0.1 billion higher costs associated with our principal retirement plans, including the effects of lower discount rates and updated mortality assumptions, and
Lower headquarter functional costs offset by higher investment in Information Technology (IT) growth initiatives.

2015 – 2014 COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30

Revenues and other income increased $0.5 billion, primarily a result of:
$0.5 billion higher other income from a settlement related to the NBCU transaction.

Operating costs decreased $0.1 billion, primarily as a result of:
$0.5 billion higher income from the NBCU transaction,
$0.1 billion of lower restructuring and other charges, and
Lower headquarter functional costs offset by higher investment in IT growth initiatives.

These decreases to operating costs were partially offset by $0.4 billion higher costs associated with our principal retirement plans including the effects of lower discount rates and updated mortality assumptions.


*Non-GAAP Financial Measure
2015 3Q FORM 10-Q   PAGE 33


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 September 30
 
Nine months ended September 30
(In billions)
 
2015
   
2014
   
2015
   
2014
                       
Power & Water
$
0.1
 
$
0.1
 
$
0.2
 
$
0.3
Oil & Gas
 
0.2
   
0.1
   
0.5
   
0.2
Energy Management
 
-
   
0.1
   
0.1
   
0.2
Aviation
 
-
   
0.1
   
-
   
0.2
Healthcare
 
-
   
0.1
   
0.1
   
0.4
Transportation
 
-
   
-
   
-
   
-
Appliances & Lighting
 
-
   
-
   
-
   
0.1
Total
$
0.3
 
$
0.5
 
$
1.1
 
$
1.4
                       
                       
For the nine months ended September 30, 2014, a gain of $0.1 billion related to a fuel dispenser business disposition was excluded from Oil & Gas results.
2015 3Q FORM 10-Q   PAGE 34

DISCONTINUED OPERATIONS

Discontinued operations primarily included most of our CLL business, our Real Estate business and our U.S. mortgage business (WMC). All of 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 September 30
 
Nine months ended September 30
(In millions)
2015
 
2014
 
2015
 
2014
                       
Earnings (loss) from discontinued operations, net of taxes
$
(347)
 
$
706
 
$
(10,336)
 
$
2,065
                       

2015 – 2014 COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30

The third quarter 2015 loss from discontinued operations, net of taxes, primarily reflected the following:
$0.5 billion after-tax loss at our CLL business (including $1.2 billion after-tax impairment charges on planned disposals).
Third quarter 2015 losses were partially offset by $0.1 billion after-tax earnings at our Real Estate business, including a $0.2 billion after-tax gain on transactions closed in the quarter.

The third quarter 2014 earnings from discontinued operations, net of taxes, primarily reflected the following:
$0.5 billion of after-tax earnings from operations at our CLL business, and
$0.2 billion of after-tax earnings from operations at our Real Estate business.

2015 – 2014 COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30

The 2015 loss from discontinued operations, net of taxes, primarily reflected the following:
$8.2 billion after-tax loss at our CLL business (including a $8.4 billion after-tax loss on planned disposals), and
$2.2 billion after-tax loss at our Real Estate business primarily loss on planned disposals.

The 2014 earnings from discontinued operations, net of taxes, primarily reflected the following:
$1.4 billion of after-tax earnings from operations at our CLL business, and
$0.7 billion of after-tax earnings from operations at our Real Estate business.

For additional information related to discontinued operations, see Note 2 to the consolidated financial statements.
2015 3Q FORM 10-Q   PAGE 35

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 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 AND NINE MONTHS ENDED SEPTEMBER 30
(Dollars in billions)

PROVISION FOR INCOME TAXES
   
 
2015 – 2014 COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30


The consolidated income tax provision was slightly lower as tax benefits associated with the GE Capital Exit Plan were largely offset by lower tax benefits from lower-taxed global operations.
The consolidated tax provision includes $0.4 billion for GE (excluding GECC) for the third quarters of both 2014 and 2015.

2015 – 2014 COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30


The consolidated income tax rate for the nine months ended September 30, 2015 was greater than 100% as the positive tax expense of $7.5 billion exceeded pre-tax income of $5.6 billion due to charges associated with GE Capital Exit Plan.
As discussed in Note 10 to the consolidated financial statements, during the first nine months ended September 30, 2015 in conjunction with the GE Capital Exit Plan, we incurred tax expense of $6.2 billion related to expected repatriation of foreign earnings and write-off of deferred tax assets.
The increase in the income tax expense is primarily due to the tax expense incurred as part of the GE Capital Exit Plan, lower tax benefits from lower-taxed global operations and an increase in pre-tax income taxed at above the average tax rate.
The consolidated tax provision includes $1.3 billion and $1.1 billion for GE (excluding GECC) for the first nine months of 2015 and 2014, respectively. The increase is related primarily to higher pre-tax income taxed at above the average tax rate.
2015 3Q FORM 10-Q   PAGE 36

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.

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 intend to 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 NINE MONTHS ENDED SEPTEMBER 30, 2015

Cash and equivalents increased $14.2 billion. See the following Liquidity Sources and Statement of Cash Flows sections for additional information.
GECC Financing receivables-net decreased $38.7 billion. See the following GECC Financing Receivables section for additional information.
GECC Financing receivables held for sale increased $22.9 billion. See the following GECC Financing Receivables Held for Sale section for additional information.
Deferred income taxes decreased $5.2 billion primarily due to deferred tax asset write-offs resulting from the GE Capital Exit Plan, along with the remeasurement of postretirement benefit plans.
Assets of discontinued operations decreased $65.0 billion, primarily due to the disposition of CLL businesses of $35.0 billion and Real Estate of $29.1 billion. See Note 2 for additional information.   
Borrowings decreased $46.5 billion, primarily due to net repayments on GECC borrowings of $43.4 billion, along with a $7.3 billion reduction in the balances driven by the strengthening of the U.S. dollar against all major currencies, partially offset by new debt issuances by GE of $3.5 billion.
Bank deposits increased $4.8 billion, primarily due to an increase in U.S. bank deposits of $5.4 billion at Synchrony Financial, offset by a $0.7 billion reduction driven by the strengthening of the U.S. dollar in non-U.S. bank deposits.
Liabilities of discontinued operations decreased $5.0 billion, primarily due to the disposition of CLL businesses of $3.3 billion and Real Estate of $1.7 billion. See Note 2 for additional information.
2015 3Q FORM 10-Q   PAGE 37

GECC 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 September 30, 2015, our financing receivables portfolio primarily relates to Synchrony Financial (our U.S. consumer business), Working Capital Solutions, which purchases GE customer receivables and GECAS, Energy Financial Services and Healthcare Equipment Finance (that directly relate to GE's core industrial businesses). 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 and are reported in the Consumer segment.

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.


GECC FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES(a)
             
(Dollars in millions)
September 30, 2015
 
December 31, 2014
             
Financing receivables
$
87,204
 
$
126,561
 
Nonaccrual receivables
 
306
(b)
 
1,996
 
Allowance for losses
 
3,457
   
4,104
 
             
Nonaccrual financing receivables as a percent of financing receivables
 
0.4
%
 
1.6
%
Allowance for losses as a percent of nonaccrual financing receivables
 
(c)
   
205.6
 
Allowance for losses as a percent of total financing receivables
 
4.0
   
3.2
 
             
(a)
For additional information related to the portfolio of financing receivables, refer to the GECC quarterly report on Form 10-Q for the nine months ended September 30, 2015.
(b)
The majority of our $0.3 billion of nonaccrual loans at September 30, 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.
2015 3Q FORM 10-Q   PAGE 38


Financing receivables, before allowance for losses, decreased $39.4 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 Consumer) ($34.5 billion), write-offs ($5.6 billion) and the stronger U.S. dollar ($4.0 billion), partially offset by originations exceeding collections (which includes sales) ($5.8 billion).

Nonaccrual receivables decreased $1.7 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 Consumer).

Allowance for losses decreased $0.6 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 (primarily Consumer). The allowance for losses as a percent of total financing receivables increased from 3.2% at December 31, 2014 to 4.0% at September 30, 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.

GECC 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 first quarter of 2015, we transferred all of our 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 Australia and New Zealand.

The transfer of financing receivables to financing receivables held for sale and assets of businesses held for sale in the nine months ended September 30, 2015, totaled $29.0 billion and $5.5 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 $2.4 billion ($2.2 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 $2.9 billion to establish a new cost basis of the financing receivables held for sale at September 30, 2015.

For businesses held for sale, financing receivable balances of $5.5 billion and the related allowance for loan losses of $0.2 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.

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 nine months ended September 30, 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 $1.2 billion and $1.0 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.


2015 3Q FORM 10-Q   PAGE 39
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 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 as well as dispositions to fund our operating and interest expense costs. 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.

Our 2015 GECC funding plan anticipates repayment of principal on outstanding short-term borrowings, including the current portion of long-term debt ($37.0 billion at December 31, 2014), principally through dispositions, asset sales and cash on hand. Long-term maturities and early redemptions were $12.9 billion in the third quarter of 2015.

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 10 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. On October 7, 2015, S&P revised its outlook on GE's credit rating to negative from stable. S&P affirmed GE's AA+/A-1+ ratings.

As part of the GE Capital Exit Plan, on September 21, 2015 GE Capital commenced private offers to exchange up to $30 billion of certain outstanding debt for new notes with maturities of six months, five years, ten years or twenty years. On October 19, 2015, given the high level of participation, the offering was increased by $6 billion with the aggregate principal amount of $36 billion of outstanding notes being tendered for exchange and settled on October 26, 2015. The new notes that were issued at closing are composed of $15.3 billion of 0.964% Six Month Notes due 2016, £0.8 billion of 1.363% Six Month Notes due 2016, $6.1 billion of 2.342% Notes due 2020, $2.0 billion of 3.373% Notes due 2025 and $11.5 billion of 4.418% Notes due 2035. Of the $16.2 billion exchanged into the Six Month Notes, $1.3 billion is in short term borrowings at September 30, 2015. GECC will continue to evaluate the opportunity to repurchase debt while maintaining our liquidity at the levels communicated as part of the GE Capital Exit Plan. The new notes have been fully, irrevocably and unconditionally guaranteed by GE.

On May 28, 2015, GE issued €3,150 million senior unsecured debt, composed of €650 million of Floating Rate Notes due 2020, €1,250 million of 1.250% Notes due 2023 and €1,250 million of 1.875% Notes due 2027. On October 9, 2015, $2.0 billion of long-term debt issued by GE matured.
2015 3Q FORM 10-Q   PAGE 40


LIQUIDITY SOURCES

In addition to GE cash of $16.8 billion at September 30, 2015, GECC maintained liquidity sources of $97.0 billion that consisted of cash and equivalents of $82.3 billion, high-quality, liquid investments of $3.2 billion and cash and equivalents of $11.5 billion classified as discontinued operations and businesses held for sale. Additionally, we have $46.0 billion of committed unused credit lines.


CASH AND EQUIVALENTS
               
(In billions)
 
September 30, 2015
       
September 30, 2015
               
GE(a)
$
16.8
   
U.S.
$
37.1
GECC(b)
 
82.3
   
Non-U.S.(c)
 
62.0
               
(a)
At September 30, 2015, $2.4 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 September 30, 2015, GECC cash and equivalents of about $17.0 billion were in regulated banks and insurance entities and were subject to regulatory restrictions.
(c)
Of this amount at September 30, 2015, $11.3 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)
September 30, 2015
     
Revolving credit agreements (exceeding one year)
$
24.5
Revolving credit agreements (364-day line)(a)
 
21.6
Total(b)
$
46.0
     
(a)
Included $20.8 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 48 financial institutions. GECC can borrow up to $45.3 billion under these credit lines. GE can borrow up to $15.6 billion under certain of these credit lines.

FUNDING PLAN

We reduced our GE Capital ENI, excluding liquidity*, to $176 billion at September 30, 2015.

During the first nine 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 addition, Synchrony Financial completed issuances of $2.0 billion of senior unsecured debt, including $1.0 billion in February 2015, maturing in 2020 and $1.0 billion in July 2015, maturing in 2025.

COMMERCIAL PAPER
           
(In billions)
GE
 
GECC
           
Average commercial paper borrowings during the third quarter of 2015
$
7.8
 
$
22.5
Maximum commercial paper borrowings outstanding during the third quarter of 2015
 
11.0
   
25.1
           
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. GECC commercial paper borrowings as of September 30, 2015 were $12.9 billion. As announced on April 10, 2015, GECC is targeting to reduce the outstanding commercial paper to approximately $5 billion by the end of 2015.

We securitize financial assets as an alternative source of funding. During the first nine months of 2015, we completed $2.1 billion of non-recourse issuances and $5.2 billion of non-recourse borrowings matured. At September 30, 2015, consolidated non-recourse securitization borrowings were $16.2 billion.

*Non-GAAP Financial Measure
2015 3Q FORM 10-Q   PAGE 41


We have nine deposit-taking banks outside of the U.S., five of which are classified as discontinued operations, 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), which is also classified as discontinued operations. 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
$
86.4
 
Total alternative funding at September 30, 2015, as follows:
 
75.3
 
Bank deposits
 
48.7
 
Non-recourse securitization borrowings
 
16.2
 
Funding secured by real estate, aircraft and other collateral
 
5.0
 
Bank unsecured
 
5.4
       

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 2015, we called $0.6 billion of 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 $184 billion of GECC debt as of September 30, 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.

2015 3Q FORM 10-Q   PAGE 42

STATEMENT OF CASH FLOWS - NINE MONTHS ENDED SEPTEMBER 30, 2015

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 – NINE MONTHS ENDED SEPTEMBER 30

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 $0.6 billion primarily due to the following:
A decrease in operating cash collections of $0.1 billion to $76.6 billion in 2015. This decrease is consistent with comparable GE segment revenue decreases from sales of goods and services of $0.7 billion and lower progress collections of $0.5 billion. The decreases were partially offset by a $0.5 billion payment from a settlement related to the NBCU transaction and prepayments on service contracts of $0.2 billion.
A decrease in operating cash payments of $1.1 billion to $70.6 billion in 2015. This decrease is primarily driven by decreased spend on inventory in the nine months ended September 30, 2015 compared with that of 2014.
Further, GECC paid quarterly dividends of $0.5 billion and no special dividends to GE in the nine months ended September 30, 2015. GECC paid quarterly dividends of $1.5 billion and special dividends of $0.7 billion to GE in the nine months ended September 30, 2014.

GE cash used for investing activities decreased $1.5 billion primarily due to the following:
Lower business acquisition activity of $2.0 billion primarily driven by the 2014 acquisitions of certain Thermo Fisher Scientific Inc. life-science businesses for $1.1 billion, Cameron's Reciprocating Compression Division for $0.6 billion and API Healthcare (API) for $0.3 billion.
This is partially offset by $0.4 billion lower proceeds from principal business dispositions.
2015 3Q FORM 10-Q   PAGE 43


GE cash used for financing activities decreased $3.5 billion primarily due to the following:
A decrease in net repurchases of GE shares for treasury in accordance with our share repurchase program of $2.0 billion.
A decrease in net change in borrowings (maturities of 90 days or less) of $1.4 billion.
Further, GE issued $3.4 billion and $3.0 billion of unsecured notes in the nine months ended September 30, 2015 and 2014.
These decreases were partially offset by an increase in the dividends paid to shareowners of $0.3 billion.

GECC CASH FLOWS – NINE MONTHS ENDED SEPTEMBER 30

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

GECC cash from operating activities decreased $2.8 billion primarily due to the following:
A decrease in net cash collateral activity with counterparties on derivative contracts of $2.2 billion.

GECC cash from investing activities increased $48.6 billion primarily due to the following:
In 2015, we closed the sale of certain of our Real Estate businesses and CLL businesses for proceeds of $25.6 billion and $16.8 billion, respectively.
A net increase in financing receivables activity of $6.1 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 increased $33.1 billion primarily due to the following:
Higher net repayments of borrowings of $29.4 billion driven primarily by a decrease in issuances of senior unsecured notes and an increase in short-term debt maturities.
A decrease in deposits at our banks of $1.6 billion.
Proceeds received from the initial public offering of Synchrony Financial of $2.8 billion in 2014.
These increases were partially offset by GECC paying quarterly dividends of $0.5 billion and no special dividends to GE in the nine months ended September 30, 2015. GECC paid quarterly dividends of $1.5 billion and special dividends of $0.7 billion to GE in the nine months ended September 30, 2014.

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.

2015 3Q FORM 10-Q   PAGE 44


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 $0.4 billion and increased GE's CFOA by $0.2 billion for the nine months ended September 30, 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.


EXPOSURES


GECC SELECTED EUROPEAN EXPOSURES

At September 30, 2015, we had $28.1 billion in financing receivables to consumer and commercial customers in Europe, including $22.1 billion classified as financing receivables held for sale, and $6.0 billion classified as assets held for investment. The GECC financing receivables portfolio in Europe is well diversified across European geographies and customers. Approximately 88% 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 September 30, 2015.

                                     
Rest of
 
Total
(In millions)
Spain
 
Portugal
 
Ireland
 
Italy
 
Greece
 
Hungary
 
Europe
 
Europe
                                               
Financing receivables - net (a)(d)
$
339
 
$
74
 
$
251
 
$
1,422
 
$
-
 
$
377
 
$
3,525
 
$
5,988
Financing receivables held for sale
 
332
   
33
   
14
   
-
   
-
   
-
   
21,742
   
22,121
Investments(b)(c)
 
3
   
-
   
-
   
-
   
-
   
-
   
1,244
   
1,247
Cost and equity method investments(d)
 
-
   
-
   
443
   
-
   
-
   
-
   
292
   
735
Derivatives, net of collateral(b)(e)
 
-
   
-
   
-
   
-
   
-
   
-
   
318
   
318
Equipment leased to others (ELTO)(f)
 
368
   
250
   
562
   
452
   
266
   
195
   
7,081
   
9,174
                                               
Total funded exposures(g)(h)
$
1,042
 
$
357
 
$
1,270
 
$
1,874
 
$
266
 
$
572
 
$
34,202
 
$
39,583
                                               
Unfunded commitments(i)
$
-
 
$
-
 
$
31
 
$
-
 
$
-
 
$
-
 
$
2,066
 
$
2,097
                                               
(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 $0.4 billion related to financial institutions, $47.5 million related to non-financial institutions and $0.8 billion related to sovereign issuers. We held no investments issued by sovereign entities in the countries of focus.
(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 $29.6 billion of cash and equivalents, which is composed of $21.7 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 $0.5 billion is in focus countries, and $7.9 billion of cash and equivalents placed with highly rated European financial institutions on a short-term basis, secured by U.S. Treasury securities ($4.5 billion) and sovereign bonds of non-focus countries ($3.4 billion), where the value of our collateral exceeds the amount of our cash exposure.
(h)
Rest of Europe included $1.5 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.

2015 3Q FORM 10-Q   PAGE 45


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.

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 September 30, 2015 was approximately 199 bolivars per U.S. dollar compared to SICAD at 13.5 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 September 30, 2015, we did not access the SIMADI market to obtain U.S. dollars and have continued to use the SICAD exchange rate to measure 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 are continuing to evaluate rates other than SICAD for use in remeasurement of our Venezuelan net monetary assets as well as the implications of economic and exchange-related conditions for our business activities in Venezuela.

Net monetary assets subject to remeasurement were approximately $82 million at September 30, 2015, including approximately $10 million in bolivar-denominated cash and cash equivalents and approximately $41 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 $325 million at September 30, 2015 and recoverable amounts of non-monetary assets in Venezuela of approximately $31 million at September 30, 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. Our Oil & Gas business has experienced declines in orders, project commencement delays and pricing pressures. In response to this uncertain industry outlook, we continue to execute cost actions with an increased focus on execution and 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.
2015 3Q FORM 10-Q   PAGE 46

CRITICAL ACCOUNTING ESTIMATES

We utilized significant estimates in the preparation of the third 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 Form 8-K Report filed on August 7, 2015 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 reduce the size of its financial services businesses through the sale of most of the assets of GECC over the following 24 months. As a result, 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 September 30, 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 September 30, 2015.

We 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.

2015 3Q FORM 10-Q   PAGE 47

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. In July 2015, the FASB approved a one-year deferral of this standard, with a revised effective date for fiscal years beginning after December 15, 2017. Early adoption is permitted, although not prior to fiscal years beginning after December 15, 2016. 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 and continue to evaluate 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. While we anticipate additional disclosures, we do not expect the ASU to have a significant impact on our consolidated financial statements.
2015 3Q FORM 10-Q   PAGE 48

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 September 30, 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
                   
July
 
751
$
26.48
 
705
       
August
 
766
$
25.26
 
666
       
September
 
648
$
24.86
 
582
       
Total
 
2,165
$
25.56
 
1,953
$
49.8
 billion
 
                     
(a) This category included 212 thousand shares repurchased from our various benefit plans.
(b) Shares were repurchased through the 2015 GE Share Repurchase Program (the Program). As of September 30, 2015, we were authorized to repurchase up to $50 billion of our common stock through 2018 and we had repurchased a total of approximately $0.2 billion under the Program. The 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.

2015 3Q FORM 10-Q   PAGE 49

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 July 20, 2015 the Federal Reserve published a final order applying enhanced prudential standards to GECC as a nonbank SIFI.

The final order staggers the application of the enhanced prudential standards with the first set of standards becoming applicable on January 1, 2016 and the second set becoming applicable on January 1, 2018. Beginning on January 1, 2016 GECC will be subject to the standardized approach for calculating capital adequacy. GECC will also be subject to a Liquidity Coverage Ratio (LCR) of 90% until December 31, 2016 at which time GECC will be subject to a 100% LCR coverage.

If GECC is still a nonbank SIFI on January 1, 2018 the second set of enhanced prudential standards will apply. These standards include the application of the Federal Reserve's capital plan rule, stress testing rules, enhanced leverage ratio requirements, enhanced governance requirements, daily liquidity calculations, additional reporting requirements and a market terms requirement for transactions between GE and GECC.

While the 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, 2018, GECC conducts, among others, 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, which contemplated the GE Capital Exit Plan, was approved by the GECC board of directors and the GE Board of Directors Risk Committee in October 2015. 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.

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 and feedback was provided on July 28, 2015. GECC's second Resolution Plan is due December 31, 2015, and we will work to address the July 28, 2015 feedback. GECC's resolution plan describes how GECC 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 DFA 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. Once GE no longer controls GE Capital Bank or Synchrony Bank, and GECC’s designation by the FSOC as a nonbank SIFI has been rescinded, the Volcker Rule will no longer apply to GECC or its affiliates.
As discussed in Management's Discussion and Analysis, on April 10, 2015, the company announced the GE Capital Exit Plan to reduce the size of its financial services businesses. GE has discussed the GE Capital Exit Plan, aspects of which are subject to regulatory review and approval, with its regulators and staff of the 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 SIFI.
2015 3Q FORM 10-Q   PAGE 50

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 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.

At October 29, 2015, there are 14 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 objections to the proposed settlement, and in response the court has scheduled an evidentiary hearing for November 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. On September 18, 2015, the court granted defendants' motion to dismiss this case on statute of limitations grounds, and the plaintiff filed a notice of appeal on October 21, 2015. 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.
 
2015 3Q FORM 10-Q   PAGE 51


At September 30, 2015, two cases were 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, and, as a result, on February 9, 2015 the District Court stayed the case as to these claims. This settlement became effective September 16, 2015. On September 18, 2015, following a court-ordered mediation before the assigned magistrate judge, the parties reached a settlement in principle on the remaining claims in the case, and the securitization trustee declared this settlement effective October 20, 2015. 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.  On July 10, 2015, the District Court entered an order dismissing the lawsuit as time-barred under the applicable statute of limitations. Deutsche Bank filed a notice of appeal from this order of dismissal on August 13, 2015.
 
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 September 30, 2015. See Note 2 to the consolidated financial statements for additional information.
 
As previously reported, in 2000, GE and the Environmental Protection Agency (EPA) entered into a consent decree relating to PCB cleanup of the Housatonic River (the "River") in Massachusetts. In 2012, the EPA issued a status report describing potential conceptual approaches to a 10-mile stretch of the river downstream from a previously remediated area. In September 2015, the EPA released an intended final decision for the so called "Rest of River". This is not the EPA's final decision, rather, the consent decree provides for discussions and a detailed dispute resolution process between GE and EPA, after which the EPA will issue its final decision. As of September 30, 2015, and based on its assessment of current facts and circumstances, GE believes it has recorded adequate reserves to cover future obligations associated with an expected final remedy.
2015 3Q FORM 10-Q   PAGE 52

FINANCIAL STATEMENTS AND NOTES

Statement of Earnings (Loss)
54
Consolidated Statement of Comprehensive Income (Loss)
58
Consolidated Statement of Changes in Shareowners' Equity
59
Statement of Financial Position
60
Statement of Cash Flows
62
Notes to Consolidated Financial Statements
 
 
1
 
Basis of Presentation and Summary of Significant Accounting Policies
64
 
2
 
Businesses Held for Sale, Financing Receivables Held for Sale and Discontinued Operations
66
 
3
 
Investment Securities
72
 
4
 
Inventories
76
 
5
 
GECC Financing Receivables and Allowance for Losses
76
 
6
 
Property, Plant and Equipment
77
 
7
 
Acquisitions, Goodwill and Other Intangible Assets
78
 
8
 
Borrowings and Bank Deposits
81
 
9
 
Postretirement Benefit Plans
82
 
10
 
Income Taxes
83
 
11
 
Shareowners' Equity
84
 
12
 
GECC Revenues from Services
86
 
13
 
Earnings Per Share Information
87
 
14
 
Fair Value Measurements
88
 
15
 
Financial Instruments
93
 
16
 
Variable Interest Entities
99
 
17
 
Intercompany Transactions
102
 
18
 
Supplemental Information About the Credit Quality of Financing Receivables and Allowance for Losses
103
         
         
         

2015 3Q FORM 10-Q   PAGE 53

FINANCIAL STATEMENTS

           
STATEMENT OF EARNINGS (LOSS)
         
(UNAUDITED)
         
 
Three months ended September 30
 
General Electric Company
 
and consolidated affiliates
(In millions; per-share amounts in dollars)
2015
 
2014
           
Revenues and other income
         
Sales of goods
$
17,860
 
$
18,723
Sales of services
 
7,667
   
7,167
Other income
 
169
   
258
GECC earnings from continuing operations
 
-
   
-
GECC revenues from services (Note 12)
 
5,984
   
5,959
   Total revenues and other income
 
31,680
   
32,107
           
Costs and expenses
         
Cost of goods sold
 
14,199
   
15,232
Cost of services sold
 
5,050
   
4,508
Interest and other financial charges
 
1,462
   
1,325
Investment contracts, insurance losses and
         
   insurance annuity benefits
 
676
   
662
Provision for losses on financing receivables (Note 5)
 
738
   
858
Other costs and expenses
 
6,298
   
6,318
   Total costs and expenses
 
28,423
   
28,903
           
Earnings (loss) from continuing operations before income taxes
 
3,257
   
3,204
Benefit (provision) for income taxes
 
(365)
   
(401)
Earnings (loss) from continuing operations
 
2,892
   
2,803
Earnings (loss) from discontinued operations, net of taxes (Note 2)
 
(347)
   
706
Net earnings (loss)
 
2,545
   
3,509
Less net earnings (loss) attributable to noncontrolling interests
 
39
   
(28)
Net earnings (loss) attributable to the Company
 
2,506
   
3,537
Preferred stock dividends declared
 
-
   
-
Net earnings (loss) attributable to GE common shareowners
$
2,506
 
$
3,537
           
Amounts attributable to GE common shareowners
         
   Earnings (loss) from continuing operations
$
2,892
 
$
2,803
   Less net earnings (loss) attributable to noncontrolling interests
 
39
   
(28)
   Earnings (loss) from continuing operations attributable to the Company
 
2,853
   
2,831
   GECC preferred stock dividends declared
 
-
   
-
   Earnings (loss) from continuing operations attributable
         
      to GE common shareowners
 
2,853
   
2,831
   Earnings (loss) from discontinued operations, net of taxes
 
(347)
   
706
Net earnings (loss) attributable to GE common shareowners
$
2,506
 
$
3,537
           
Per-share amounts
         
   Earnings (loss) from continuing operations
         
      Diluted earnings (loss) per share
$
0.28
 
$
0.28
      Basic earnings (loss) per share
$
0.28
 
$
0.28
           
   Net earnings (loss)
         
      Diluted earnings (loss) per share
$
0.25
 
$
0.35
      Basic earnings (loss) per share
$
0.25
 
$
0.35
           
Dividends declared per common share
$
0.23
 
$
0.22
           
Amounts may not add due to rounding.

See Note 3 for other-than-temporary impairment amounts on investment securities.


See accompanying notes.

2015 3Q FORM 10-Q   PAGE 54


                       
                       
                       
STATEMENT OF EARNINGS (LOSS) (CONTINUED)
(UNAUDITED)
                     
                       
 
Three months ended September 30
 
GE(a)
 
Financial Services (GECC)
(In millions; per-share amounts in dollars)
2015
 
2014
 
2015
 
2014
                       
Revenues and other income
                     
Sales of goods
$
17,874
 
$
18,764
 
$
21
 
$
28
Sales of services
 
7,738
   
7,261
   
-
   
-
Other income
 
201
   
236
   
-
   
-
GECC earnings (loss) from continuing operations
 
734
   
843
   
-
   
-
GECC revenues from services (Note 12)
 
-
   
-
   
6,290
   
6,356
   Total revenues and other income
 
26,547
   
27,104
   
6,312
   
6,384
                       
Costs and expenses
                     
Cost of goods sold
 
14,215
   
15,274
   
18
   
25
Cost of services sold
 
5,121
   
4,603
   
-
   
-
Interest and other financial charges
 
440
   
377
   
1,151
   
1,061
Investment contracts, insurance losses and
                     
   insurance annuity benefits
 
-
   
-
   
717
   
700
Provision for losses on financing receivables (Note 5)
 
-
   
-
   
738
   
858
Other costs and expenses
 
3,549
   
3,686
   
2,918
   
2,857
   Total costs and expenses
 
23,325
   
23,940
   
5,542
   
5,501
                       
Earnings (loss) from continuing operations before income taxes
 
3,222
   
3,164
   
769
   
883
Benefit (provision) for income taxes
 
(413)
   
(416)
   
48
   
15
Earnings (loss) from continuing operations
 
2,809
   
2,748
   
817
   
898
Earnings (loss) from discontinued operations, net of taxes (Note 2)
 
(347)
   
706
   
(347)
   
706
Net earnings (loss)
 
2,462
   
3,454
   
470
   
1,604
Less net earnings (loss) attributable to noncontrolling interests
 
(43)
   
(83)
   
83
   
55
Net earnings (loss) attributable to the Company
 
2,506
   
3,537
   
387
   
1,549
Preferred stock dividends declared
 
-
   
-
   
-
   
-
Net earnings (loss) attributable to GE common shareowners
$
2,506
 
$
3,537
 
$
387
 
$
1,549
                       
Amounts attributable to GE common shareowners:
                     
   Earnings (loss) from continuing operations
$
2,809
 
$
2,748
 
$
817
 
$
898
   Less net earnings (loss) attributable to noncontrolling interests
 
(43)
   
(83)
   
83
   
55
   Earnings (loss) from continuing operations attributable to the Company
 
2,853
   
2,831
   
734
   
843
   GECC preferred stock dividends declared
 
-
   
-
   
-
   
-
   Earnings (loss) from continuing operations attributable
                     
      to GE common shareowners
 
2,853
   
2,831
   
734
   
843
   Earnings (loss) from discontinued operations, net of taxes 
 
(347)
   
706
   
(347)
   
706
Net earnings (loss) attributable to GE common shareowners
$
2,506
 
$
3,537
 
$
387
 
$
1,549
                       
(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.

Amounts may not add due to rounding.

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.
2015 3Q FORM 10-Q   PAGE 55


STATEMENT OF EARNINGS (LOSS)
(UNAUDITED)
 
Nine months ended September 30
 
General Electric Company
 
and consolidated affiliates
(In millions; per-share amounts in dollars)
2015
 
2014
           
Revenues and other income
         
Sales of goods
$
53,003
 
$
53,894
Sales of services
 
22,263
   
21,945
Other income
 
1,092
   
792
GECC earnings from continuing operations
 
-
   
-
GECC revenues from services (Note 12)
 
16,373
   
17,964
   Total revenues and other income
 
92,731
   
94,595
           
Costs and expenses
         
Cost of goods sold(a)
 
42,748
   
43,600
Cost of services sold(a)
 
14,690
   
14,668
Interest and other financial charges
 
3,976
   
3,975
Investment contracts, insurance losses and
       
 
   insurance annuity benefits
 
1,952
   
1,940
Provision for losses on financing receivables (Note 5)
 
4,636
   
2,693
Other costs and expenses
 
19,125
   
18,744
   Total costs and expenses
 
87,127
   
85,620
           
Earnings (loss) from continuing operations before income taxes
 
5,604
   
8,975
Benefit (provision) for income taxes
 
(7,466)
   
(1,034)
Earnings (loss) from continuing operations
 
(1,862)
   
7,941
Earnings (loss) from discontinued operations, net of taxes (Note 2)
 
(10,336)
   
2,065
Net earnings (loss)
 
(12,198)
   
10,006
Less net earnings (loss) attributable to noncontrolling interests
 
229
   
(75)
Net earnings (loss) attributable to the Company
 
(12,427)
   
10,081
Preferred stock dividends declared
 
-
   
-
Net earnings (loss) attributable to GE common shareowners
$
(12,427)
 
$
10,081
           
Amounts attributable to GE common shareowners
         
   Earnings (loss) from continuing operations
$
(1,862)
 
$
7,941
   Less net earnings (loss) attributable to noncontrolling interests
 
229
   
(75)
   Earnings (loss) from continuing operations attributable to the Company
 
(2,091)
   
8,016
   GECC preferred stock dividends declared
 
-
   
-
   Earnings (loss) from continuing operations attributable
         
      to GE common shareowners
 
(2,091)
   
8,016
   Earnings (loss) from discontinued operations, net of taxes
 
(10,336)
   
2,065
Net earnings (loss) attributable to GE common shareowners
$
(12,427)
 
$
10,081
           
Per-share amounts
         
   Earnings (loss) from continuing operations
         
      Diluted earnings (loss) per share
$
(0.21)
 
$
0.79
      Basic earnings (loss) per share
$
(0.21)
 
$
0.80
           
   Net earnings (loss)
         
      Diluted earnings (loss) per share
$
(1.23)
 
$
0.99
      Basic earnings (loss) per share
$
(1.23)
 
$
1.00
           
Dividends declared per common share
$
0.69
 
$
0.66
           
(a)  Includes revisions to previously reported amounts which increased cost of goods sold and decreased cost of services sold by $401million and $728 million for the three months ended March 31, 2015 and June 30, 2015, respectively.
 
Amounts may not add due to rounding.

See Note 3 for other-than-temporary impairment amounts on investment securities.


See accompanying notes.


2015 3Q FORM 10-Q   PAGE 56


STATEMENT OF EARNINGS (LOSS) (CONTINUED)
(UNAUDITED)
                       
 
Nine months ended September 30
 
GE(a)
 
Financial Services (GECC)
(In millions; per-share amounts in dollars)
2015
 
2014
 
2015
 
2014
                       
Revenues and other income
                     
Sales of goods
$
53,071
 
$
54,017
 
$
64
 
$
89
Sales of services
 
22,521
   
22,245
   
-
   
-
Other income
 
1,023
   
689
   
-
   
-
GECC earnings (loss) from continuing operations
 
(7,394)
   
3,252
   
-
   
-
GECC revenues from services (Note 12)
 
-
   
-
   
17,388
   
19,134
   Total revenues and other income
 
69,221
   
80,203
   
17,452
   
19,223
                       
Costs and expenses
                     
Cost of goods sold(b)
 
42,821
   
43,729
   
58
   
81
Cost of services sold(b)
 
14,948
   
14,969
   
-
   
-
Interest and other financial charges
 
1,243
   
1,142
   
3,096
   
3,184
Investment contracts, insurance losses and
                     
   insurance annuity benefits
 
-
   
-
   
2,070
   
2,041
Provision for losses on financing receivables (Note 5)
 
-
   
-
   
4,636
   
2,693
Other costs and expenses
 
11,035
   
11,355
   
8,555
   
8,005
   Total costs and expenses
 
70,048
   
71,195
   
18,415
   
16,004
                       
Earnings (loss) from continuing operations before income taxes
 
(827)
   
9,008
   
(963)
   
3,219
Benefit (provision) for income taxes
 
(1,302)
   
(1,143)
   
(6,164)
   
109
Earnings (loss) from continuing operations
 
(2,129)
   
7,865
   
(7,127)
   
3,328
Earnings (loss) from discontinued operations, net of taxes (Note 2)
 
(10,336)
   
2,065
   
(10,332)
   
2,070
Net earnings (loss)
 
(12,465)
   
9,930
   
(17,459)
   
5,398
Less net earnings (loss) attributable to noncontrolling interests
 
(38)
   
(151)
   
267
   
76
Net earnings (loss) attributable to the Company
 
(12,427)
   
10,081
   
(17,726)
   
5,322
Preferred stock dividends declared
 
-
   
-
   
(161)
   
(161)
Net earnings (loss) attributable to GE common shareowners
$
(12,427)
 
$
10,081
 
$
(17,887)
 
$
5,161
                       
Amounts attributable to GE common shareowners:
                     
   Earnings (loss) from continuing operations
$
(2,129)
 
$
7,865
 
$
(7,127)
 
$
3,328
   Less net earnings (loss) attributable to noncontrolling interests
 
(38)
   
(151)
   
267
   
76
   Earnings (loss) from continuing operations attributable to the Company
 
(2,091)
   
8,016
   
(7,394)
   
3,252
   GECC preferred stock dividends declared
 
-
   
-
   
(161)
   
(161)
   Earnings (loss) from continuing operations attributable
                     
      to GE common shareowners
 
(2,091)
   
8,016
   
(7,555)
   
3,091
   Earnings (loss) from discontinued operations, net of taxes 
 
(10,336)
   
2,065
   
(10,332)
   
2,070
Net earnings (loss) attributable to GE common shareowners
$
(12,427)
 
$
10,081
 
$
(17,887)
 
$
5,161
                       
(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.
(b)  Includes revisions to previously reported amounts which increased cost of goods sold and decreased cost of services sold by $401million and $728 million for the three months ended March 31, 2015 and June 30, 2015, respectively.

Amounts may not add due to rounding.

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.



2015 3Q FORM 10-Q   PAGE 57


GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
                       
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
 
2015
   
2014
   
2015
   
2014
                       
Net earnings (loss)
$
2,545
 
$
3,509
 
$
(12,198)
 
$
10,006
Less net earnings (loss) attributable to noncontrolling interests
 
39
   
(28)
   
229
   
(75)
Net earnings (loss) attributable to the Company
$
2,506
 
$
3,537
 
$
(12,427)
 
$
10,081
                       
Other comprehensive income (loss)
                     
   Investment securities
$
(3)
 
$
(284)
 
$
(452)
 
$
450
  Currency translation adjustments
 
624
   
(1,590)
   
(2,896)
   
(1,649)
   Cash flow hedges
 
(35)
   
55
   
6
   
136
   Benefit plans
 
627
   
859
   
4,486
   
2,072
Other comprehensive income (loss)
 
1,214
   
(960)
   
1,144
   
1,009
Less other comprehensive income (loss)
                     
   attributable to noncontrolling interests
 
(8)
   
(8)
   
(45)
   
(1)
Other comprehensive income (loss) attributable to the Company
 
$
1,221
 
$
(952)
 
$
1,189
 
$
1,010
                       
Comprehensive income (loss)
$
3,759
 
$
2,549
 
$
(11,054)
 
$
11,015
Less comprehensive income (loss) attributable to noncontrolling interests
 
31
   
(36)
   
184
   
(76)
Comprehensive income (loss) attributable to the Company
$
3,727
 
$
2,585
 
$
(11,238)
 
$
11,091
                       
Amounts may not add due to rounding.

Amounts presented net of taxes. See Note 11 for further information about other comprehensive income (loss) and noncontrolling interests.


See accompanying notes.
2015 3Q FORM 10-Q   PAGE 58


GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
         
CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS' EQUITY
(UNAUDITED)
           
 
Nine months ended September 30
(In millions)
 
2015
   
2014
           
Shareowners' equity balance at January 1
$
128,159
 
$
130,566
Increases (decreases) from net earnings (loss) attributable to the Company
 
(12,427)
   
10,081
Dividends and other transactions with shareowners
 
(6,973)
   
(6,635)
Other comprehensive income (loss) attributable to the Company
 
1,189
   
1,010
Net sales (purchases) of shares for treasury
 
1,386
   
(444)
Changes in other capital
 
(129)
   
420
Ending balance at September 30
 
111,204
   
134,998
Noncontrolling interests
 
8,788
   
8,513
Total equity balance at September 30
$
119,993
 
$
143,511
           
Amounts may not add due to rounding.

See Note 11 for further information about changes in shareowners' equity.


See accompanying notes.

2015 3Q FORM 10-Q   PAGE 59


STATEMENT OF FINANCIAL POSITION
 
General Electric Company
 
 
and consolidated affiliates
(In millions, except share amounts)
September 30, 2015
 
December 31, 2014
 
(Unaudited)
   
Assets
         
Cash and equivalents
$
99,086
 
$
84,927
Investment securities (Note 3)
 
36,933
   
38,400
Current receivables
 
22,332
   
23,237
Inventories (Note 4)
 
19,285
   
17,689
Financing receivables – net (Note 5 and 18)
 
72,353
   
110,255
Other GECC receivables
 
6,280
   
6,920
Property, plant and equipment – net (Note 6)
 
50,704
   
48,336
Investment in GECC
 
-
   
-
Goodwill (Note 7)
 
61,660
   
62,983
Other intangible assets – net (Note 7)
 
13,618
   
13,855
All other assets
 
45,793
   
47,905
Financing receivables held for sale (Note 2)
 
22,832
   
421
Deferred income taxes
 
176
   
5,352
Assets of businesses held for sale (Note 2)
 
8,309
   
6,300
Assets of discontinued operations (Note 2)
 
121,949
   
186,934
Total assets(a)
$
581,310
   
653,514
           
Liabilities and equity
         
Short-term borrowings (Note 8)
$
46,495
 
$
70,714
Accounts payable, principally trade accounts
 
11,762
   
12,572
Progress collections and price adjustments accrued
 
11,247
   
12,537
Dividends payable
 
2,324
   
2,317
Other GE current liabilities
 
12,624
   
12,682
Non-recourse borrowings of consolidated securitization entities (Note 8)
 
16,225
   
19,369
Bank deposits (Note 8)
 
48,656
   
43,841
Long-term borrowings (Note 8)
 
180,011
   
199,182
Investment contracts, insurance liabilities and insurance annuity benefits
 
26,135
   
27,578
All other liabilities
 
60,685
   
63,720
Liabilities of businesses held for sale (Note 2)
 
1,384
   
3,375
Liabilities of discontinued operations (Note 2)
 
43,768
   
48,794
Total liabilities(a)
 
461,317
   
516,681
           
GECC preferred stock (50,000 shares outstanding at both September 30, 2015 and December 31, 2014)
 
-
   
-
Common stock (10,109,239,000 and 10,057,380,000 shares outstanding
         
   at both September 30, 2015 and December 31, 2014, respectively)
 
702
   
702
Accumulated other comprehensive income (loss) – net attributable to GE(b)