10-Q 1 ge10q1q2016.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 (Mark One)
 
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2016
 
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 9,195,657,000 shares of common stock with a par value of $0.06 per share outstanding at March 31, 2016.





TABLE OF CONTENTS

 
Page
   
Forward Looking Statements
3
Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
4
    Key Performance Indicators
8
    Consolidated Results
10
    Segment Operations
14
    Corporate Items and Eliminations
34
    Discontinued Operations
36
    Other Consolidated Information
37
    Statement of Financial Position
38
    Financial Resources and Liquidity
39
    Exposures
45
    Critical Accounting Estimates
46
    Other Items
47
Controls and Procedures
48
Other Financial Data
48
Regulations and Supervision
49
Legal Proceedings
50
Financial Statements and Notes
53
Exhibits
102
Form 10-Q Cross Reference Index
103
Signatures
104


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 and earnings per share of GE Capital's retained businesses (Verticals); expected income; earnings per share; revenues; organic growth; growth of our Digital business; margins; cost structure; restructuring charges; cash flows; return on capital; capital expenditures, capital allocation or capital structure; dividends; and the split between Industrial and 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;
our ability to reduce costs as we execute that plan;
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 GE Capital Global Holdings, LLC's (GE Capital) funding, and GE Capital's exposure to counterparties;
the impact of conditions in the housing market and unemployment rates on the level of commercial credit defaults;
pending and future mortgage loan repurchase claims and other litigation claims and investigations 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;
GE Capital's ability to pay dividends to GE at the planned level, which may be affected by GE Capital's cash flows and earnings, financial services regulation and oversight, and other factors;
our ability to convert pre-order commitments/wins into orders/bookings;
the price we realize on orders/bookings 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;
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 Appliances disposition and our announced plan and transactions to reduce the size of our financial services businesses;
our success in integrating acquired businesses and operating joint ventures;
our ability to realize anticipated earnings and savings from announced transactions, acquired businesses and 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, 2015.

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.
2016 1Q FORM 10-Q 3

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


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 GE Capital Global Holdings, LLC, and its predecessor, General Electric Capital Corporation (GE Capital or Financial Services).

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, along with further disaggregation of our results into segments and GE Capital Verticals, 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 GE Capital, whose continuing operations are presented on a one-line basis, giving effect to the elimination of transactions among such affiliates. Transactions between GE and GE Capital have not been eliminated at the GE level. We present the results of GE in the center column 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 – the predecessor to GE Capital Global Holdings, LLC.
GE Capital Global Holdings, LLC or GECGH – the adding together of all affiliates of GECGH, giving effect to the elimination of transactions among such affiliates.
GE Capital or Financial Services – refers to GECGH, or its predecessor GECC, and is the adding together of all affiliates of GE Capital giving effect to the elimination of transactions among such affiliates. We present the results of GE Capital in the right-side column of our consolidated statements of earnings, financial position and cash flows.
GE consolidated – the adding together of GE and GE Capital, giving effect to the elimination of transactions between the two. We present the results of GE consolidated in the left-side column of our consolidated statements of earnings, financial position and cash flows.
Industrial – GE excluding the continuing operations of GE Capital. 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 GE Capital.
Industrial segment – the sum of our eight industrial reporting segments, without giving effect to the elimination of transactions among such segments. 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 eight industrial segments and one financial services segment, without giving effect to the elimination of transactions among such segments. 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 Industrial Finance (which includes Healthcare Equipment Finance and Working Capital Solutions)—that relate to the Company's core industrial domain and other operations, including our run-off insurance activities, and allocated corporate costs.

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

2016 1Q FORM 10-Q 4

Discussion of GE Capital's total assets includes deferred income tax liabilities, which are presented within assets for purposes of our consolidated statement of financial position presentations for this filing.

Amounts reported in billions in graphs within this 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.

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

OTHER TERMS USED BY GE

Backlog – unfilled customer orders for products and product services (expected life of contract sales for product services).
Digital revenues – revenues related to software-enabled product upgrades, internally developed software (including Predix) and associated hardware, and software-enabled productivity solutions. These revenues are largely generated from our operating businesses and are included in their segment results.
Earnings – unless otherwise indicated, we refer to captions such as "earnings from continuing operations attributable to common shareowners" simply as earnings.
Earnings per share (EPS) – unless otherwise indicated, when we refer to earnings per share, it is the diluted per-share amount of "earnings from continuing operations attributable to common shareowners".
Ending Net Investment (ENI) – the total capital we have invested in the Financial Services business. It is the sum of short-term borrowings, long-term borrowings and equity (excluding noncontrolling interests) adjusted for unrealized gains and losses on investment securities and hedging instruments. Alternatively, it is the amount of assets of continuing operations less the amount of non-interest-bearing liabilities.
Equipment leased to others (ELTO) – rental equipment we own that is available to rent and is stated at cost less accumulated depreciation.
GE Capital Exit Plan – our plan, announced on April 10, 2015, to reduce the size of our financial services businesses through the sale of most of the assets of GE Capital, and to focus on continued investment and growth in our industrial businesses.
Industrial operating profit margin – Industrial segment profit plus corporate items and eliminations (excluding gains, restructuring, and pre-tax non-operating pension costs) divided by industrial segment revenues plus corporate items and eliminations (excluding gains and GE-GE Capital eliminations).
Industrial segment gross margin – industrial segment sales less industrial segment cost of sales.
Non-operating pension costs – comprise the expected return on plan assets, interest cost on benefit obligations and net actuarial gain (loss) amortization for our principal pension plans.
Operating earnings – GE earnings from continuing operations attributable to common shareowners excluding the impact of non-operating pension costs.
Operating earnings per share – unless otherwise indicated, when we refer to operating earnings per share, it is the diluted per-share amount of "operating earnings".
Operating pension costs – comprise the service cost of benefits earned, prior service cost amortization and curtailment loss for our principal pension plans.
Organic revenues – revenues excluding the effects of acquisitions, dispositions and foreign currency exchange.
Product services – for purposes of the financial statement display of sales and costs of sales in our Statement of Earnings, "goods" is required by SEC regulations to include all sales of tangible products, and "services" must include all other sales, including other services activities. In our MD&A section of this report, we refer to 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," which is an important part of our operations. We refer to "product services" simply as "services" within the MD&A.
2016 1Q FORM 10-Q 5

Product services agreements – contractual commitments, with multiple-year terms, to provide specified services for products in our Power, Renewable Energy, Oil & Gas, Aviation and Transportation installed base – for example, monitoring, maintenance, service and spare parts for a gas turbine/generator set installed in a customer's power plant.
Revenues – unless otherwise indicated, we refer to captions such as "revenues and other income" simply as revenues.
Segment profit – refers to the operating profit of the industrial segments and the net earnings of the Financial Services segment. See the Segment Operations section within the MD&A for a description of the basis for segment profits.

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 report, to:

Industrial segment organic revenue growth
Operating and non-operating pension costs
Adjusted Corporate costs (operating)
Operating earnings, operating EPS and Industrial operating earnings
Industrial operating + Verticals earnings and EPS
Industrial operating profit and operating profit margin (excluding Alstom)
Industrial segment operating profit and operating profit margin (excluding Alstom)
Industrial cash flows from operating activities (Industrial CFOA)
Capital ending net investment (ENI), excluding liquidity

The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in the Supplemental Information section within this MD&A. Non-GAAP financial measures referred to in this report are designated with an asterisk (*).

2016 1Q FORM 10-Q 6


OUR OPERATING SEGMENTS

We are a global digital industrial company, transforming industry with software-defined machines and solutions that are connected, responsive and predictive. With products and services ranging from aircraft engines, locomotives, power generation and oil and gas production equipment to medical imaging, financing and industrial products.

OUR INDUSTRIAL OPERATING SEGMENTS

Power
Energy Connections
Transportation
Renewable Energy
Aviation
Appliances & Lighting
Oil & Gas
Healthcare
   

OUR FINANCIAL SERVICES OPERATING SEGMENT

Capital

Operational and financial overviews for our operating segments are provided in the Segment Operations section within this MD&A.


CORPORATE INFORMATION

GE's Internet address at www.ge.com, 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.
2016 1Q FORM 10-Q 7

KEY PERFORMANCE INDICATORS

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

 
REVENUES PERFORMANCE
 
INDUSTRIAL ORDERS
 
 
INDUSTRIAL BACKLOG
 
           
 
1Q 2016
   
 
 
 
 
 
 
Equipment
Services
 
 
 
 
 
 
Equipment
 
 
Services
 
 
Industrial Segment
6%
   
Industrial Segment Organic*
(1)%
   
Financial Services
1%
   
       
       
(a) Included $3.0 billion related to Alstom
 
(a) Included $28.8 billion related to Alstom
 
 
INDUSTRIAL SEGMENT PROFIT
 
INDUSTRIAL SEGMENT MARGIN
 
 
GE CFOA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GE Capital Dividend
 
 
 
Industrial
CFOA*
 
 
 
(a) Included an insignificant amount related to Alstom
 
(a) Included (0.7)% related to Alstom
 
 
(a) CFOA included $(0.4) billion related to Alstom
        
 
EARNINGS (LOSS) PER SHARE
 
OPERATING EPS*
 
 
INDUSTRIAL OPERATING + VERTICALS EPS*
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
*Non-GAAP Financial Measure
2016 1Q FORM 10-Q 8

SIGNIFICANT DEVELOPMENTS IN 2016
     
Our consolidated revenues were significantly affected by the U.S. dollar compared with various foreign currencies, and our operating earnings were significantly affected by transactional foreign exchange impacts as described in our consolidated results and segment operating results that follow.
 
     
During the first quarter of 2016, we returned $8.3 billion to shareholders including $6.1 billion through buyback of our common stock and $2.2 billion in dividends.
 
 
 
 
 
On January 15, 2016, we announced the signing of a definitive agreement to sell our Appliances business to Qingdao Haier Co., Ltd. (Haier) for approximately $5.4 billion. The transaction has been approved by our board of directors and Haier's board of directors and shareholders and remains subject to customary closing conditions, including regulatory approvals. The transaction is targeted to close in the second quarter of 2016.
 
 
 
 
 
In March 2016, we completed the previously announced sale of the majority of our North American commercial lending and leasing businesses to Wells Fargo & Co. The sale included GE Capital's global Commercial Distribution Finance (CDF) and North American Vendor Finance and Corporate Finance platforms. The total transaction represents ending net investment (ENI), excluding liquidity (as originally reported at December 31, 2014) of approximately $30 billion. The portion that closed in March represents approximately $28 billion of ENI, excluding liquidity (as originally reported at December 31, 2014) and does not include the sale to Wells Fargo of the CDF business outside North America that is expected to be completed later in 2016.
 
On March 31, 2016, GE filed its request to the Financial Stability Oversight Council (FSOC) for rescission of GE Capital's designation as a nonbank Systemically Important Financial Institution (SIFI).
 


2016 1Q FORM 10-Q 9

CONSOLIDATED RESULTS

THREE MONTHS ENDED MARCH 31
(Dollars in billions)

 
REVENUES
 
 
INDUSTRIAL AND FINANCIAL SERVICES REVENUES

 
 

 
(a)Included $2.8 billion related to Alstom
 
(a)Included $2.8 billion related to Alstom
 
COMMENTARY: 2016 - 2015
   
 
Consolidated revenues increased $1.6 billion, or 6%.
Industrial revenues increased $1.6 billion, or 7%, mainly as the effects of acquisitions, primarily Alstom ($2.8 billion) were partially offset by the effects of a stronger U.S. dollar ($0.5 billion), the prior year dispositions ($0.5 billion) and organic revenue decreases ($0.2 billion). The effects of acquisitions increased Industrial revenues $0.2 billion and dispositions decreased Industrial revenues $0.2 billion in 2015.
Financial services revenues increased 1% primarily as a result of the effects of acquisitions and organic revenue growth, partially offset by the effects of foreign currency exchange.
 
 
 
 



















*Non-GAAP Financial Measure
2016 1Q FORM 10-Q 10



THREE MONTHS ENDED MARCH 31
(Dollars in billions)

 
EARNINGS (LOSS)
 
 
OPERATING EARNINGS (LOSS)*
 
INDUSTRIAL SELLING, GENERAL & ADMINISTRATIVE (SG&A) AS A % OF SALES
 

 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
(a) 15.2% excluding $2.9 billion of Alstom sales and $0.6 billion of Alstom SG&A
 
COMMENTARY: 2016 - 2015
 
Consolidated earnings increased $4.8 billion.
Financial Services losses decreased 84% primarily due to the absence of the first quarter 2015 charges associated with the GE Capital Exit Plan.
The effects of acquisitions on our consolidated net earnings were a loss of $0.1 billion in 2016 (primarily Alstom) and an insignificant amount in 2015. The effects of dispositions on net earnings were insignificant amounts in both 2016 and 2015, respectively.
Foreign exchange had a significant impact on our first quarter 2016 earnings. Industrial operating profit was adversely affected by $0.3 billion, primarily as a result of foreign exchange transactional impacts related to remeasurement and mark-to-market charges on open hedges. This impact was larger than in previous quarters as a result of significant movements in certain currencies including the weakening of the pound sterling and strengthening of the Japanese yen and Brazilian real. The underlying transactions for which these hedges were put in place will be reflected in sales and cost of sales in future periods and we expect the net impact of the hedges and underlying transactions to be insignificant over the lives of the contracts.
Earnings per share amounts for the first quarter of 2016 were positively impacted by the reduction in number of outstanding common shares compared to the first quarter of 2015. The average number of shares outstanding used to calculate first quarter 2016 earnings per share was 8% lower than in the first quarter of 2015 as a result of previously disclosed actions, primarily the 2015 Synchrony Financial share exchange and ongoing share buyback activities over the last 12 months funded in large part by dividends from GE Capital.
Industrial SG&A as a percentage of sales decreased 30 basis points (bps) as the favorable impact of global cost reduction initiatives, primarily at Corporate, and lower non-operating pension costs were partially offset by higher restructuring and Alstom acquisition-related costs.
 

See the Other Consolidated Information section within the MD&A for a discussion of income taxes.

*Non-GAAP Financial Measure
2016 1Q FORM 10-Q 11

GE CAPITAL

GE Capital results include continuing operations, which are reported in the Capital segment (see Segment discussion), and discontinued operations (see Discontinued Operations section and Note 2).

THE GE CAPITAL EXIT PLAN

On April 10, 2015, the Company announced a plan (the GE Capital Exit Plan) to create a simple, more valuable company by reducing the size of its financial services businesses through the sale of most of the assets of GE Capital and aligning a smaller GE Capital with GE's industrial businesses. We expect GE Capital to release approximately $35 billion in dividends to GE (subject to regulatory approval) as a result of the sale of GE Capital assets. We received $4.3 billion in dividends from GE Capital in 2015 and $7.5 billion in the first quarter of 2016. As of March 31, 2016, we are ahead of our plan, having signed agreements with buyers for $166 billion of ending net investment (ENI), excluding liquidity (as originally reported at December 31, 2014), of which $146 billion has closed. In addition, as part of our initiative to reduce the size of our financial services businesses, we completed the split-off of our remaining interest in GE Capital's North American Retail Finance business, Synchrony Financial, to holders of GE common stock, which resulted in a $20.4 billion buyback of GE common stock (671.4 million shares) in 2015. In connection with the GE Capital Exit Plan, we completed a legal reorganization of GE Capital that included a merger of GE Capital into GE, a guarantee by GE of GE Capital debt, and an exchange of $36 billion of GE Capital debt for new GE notes. The result of all these actions reduced GE Capital's total assets by 44% from $501 billion at December 31, 2014 to $281 billion at March 31, 2016. As of March 31, 2016, we incurred charges of $22.6 billion related to these actions and remain on track versus our $23 billion estimate.

Given the progress of the GE Capital Exit Plan to date, we expect to largely complete that plan by the end of 2016. On March 31, 2016, GE filed its request to the Financial Stability Oversight Council (FSOC) for rescission of GE Capital's designation as a nonbank Systemically Important Financial Institution (SIFI).

Further information on these activities is described below and in Note 1 to the consolidated financial statements.

SALES AGREEMENTS

During the three months ended March 31, 2016, GE signed agreements to sell approximately $9 billion of ENI, excluding liquidity (as originally reported at December 31, 2014), of which approximately $4 billion, $4 billion and less than $1 billion related to our Commercial Lending and Leasing (CLL), Consumer and Real Estate businesses, respectively.

Of the signed agreements, sales representing approximately $42 billion of ENI, excluding liquidity (as originally reported at December 31, 2014) have closed during the first quarter of 2016, including approximately $40 billion, $1 billion and less than $1 billion related to our CLL, Consumer and Real Estate businesses, respectively.

Real Estate transactions that have closed included the majority of GE Capital'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, GE Capital provided $3.2 billion of seller financing to The Blackstone Group, which GE Capital intends to collect or sell by the end of 2016. As of March 31, 2016, GE Capital has collected or sold approximately $2.3 billion of this seller financing.


2016 1Q FORM 10-Q 12


AFTER-TAX CHARGES RELATED TO THE GE CAPITAL EXIT PLAN

In the three months ended March 31, 2016, GE recorded $0.6 billion of after-tax charges related to the GE Capital Exit Plan of which $0.3 billion was recorded in continuing operations and $0.3 billion was recorded in discontinued operations. A description of these after-tax charges is provided below.

$0.3 billion of charges associated with the preferred equity exchange that was completed in January 2016, which was recorded in continuing operations and reported in GE Capital's corporate component under the caption "Preferred stock dividends" in the Statement of Earnings.
$0.3 billion of net loss primarily related to the completed and planned dispositions of most of the CLL businesses, which was recorded in discontinued operations under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings.
$0.1 billion of restructuring and other charges, of which an insignificant amount was recorded in discontinued operations under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings and $0.1 billion was recorded in continuing operations and reported in GE Capital's corporate component under the caption "Selling, general and administrative expenses" in the Statement of Earnings.

For additional information about the GE Capital Exit Plan, 2015 sales agreements and after-tax charges, refer to our Annual Report on Form 10-K for the year ended December 31, 2015.

In addition to the above charges, we have incurred other costs related to our ongoing liability management actions, including $0.4 billion pre-tax related to the repurchase of $4.9 billion of long-term unsecured debt and subordinated debentures. These charges will result in lower future interest costs, more than offsetting the initial charges. We expect to continue these actions when economically beneficial.
2016 1Q FORM 10-Q 13

SEGMENT OPERATIONS

SUMMARY OF OPERATING SEGMENTS
                 
 
Three months ended March 31
(In millions)
 
2016
   
2015
   
V%
                 
Revenues
               
Power
$
5,204
 
$
4,612
   
 13 %
Renewable Energy
 
1,669
   
1,028
   
 62 %
Oil & Gas
 
3,314
   
4,040
   
 (18)%
Energy Connections
 
2,260
   
1,685
   
 34 %
Aviation
 
6,262
   
5,674
   
 10 %
Healthcare
 
4,183
   
4,075
   
 3 %
Transportation
 
981
   
1,308
   
 (25)%
Appliances & Lighting
 
1,996
   
1,940
   
 3 %
      Total industrial segment revenues
 
25,869
   
24,362
   
 6 %
Capital
 
2,885
   
2,866
   
 1 %
      Total segment revenues
 
28,754
   
27,228
   
 6 %
Corporate items and eliminations
 
(909)
   
(988)
     
Consolidated revenues
$
27,845
 
$
26,239
   
 6 %
                 
Segment profit (loss)
               
Power
$
573
 
$
757
   
 (24)%
Renewable Energy
 
83
   
57
   
 46 %
Oil & Gas
 
308
   
489
   
 (37)%
Energy Connections
 
(85)
   
28
   
U
Aviation
 
1,524
   
1,314
   
 16 %
Healthcare
 
631
   
587
   
 7 %
Transportation
 
164
   
225
   
 (27)%
Appliances & Lighting
 
115
   
102
   
 13 %
      Total industrial segment profit
 
3,314
   
3,560
   
 (7)%
Capital
 
(893)
   
(5,721)
   
 84 %
      Total segment profit (loss)
 
2,421
   
(2,162)
   
F
Corporate items and eliminations
 
(1,571)
   
(1,691)
     
GE interest and other financial charges
 
(440)
   
(389)
     
GE provision for income taxes
 
(201)
   
(306)
     
Earnings (loss) from continuing operations attributable to GE common shareowners
 
210
   
(4,548)
   
F
Earnings (loss) from discontinued operations, net of taxes
 
(308)
   
(8,936)
   
 97 %
   Less net earnings attributable to
               
      noncontrolling interests, discontinued operations
 
-
   
89
   
U
Earnings (loss) from discontinued operations,
               
   net of tax and noncontrolling interest
 
(308)
   
(9,025)
   
 97 %
Consolidated net earnings (loss)
               
   attributable to GE common shareowners
$
(98)
 
$
(13,573)
   
 99 %
   
\
           
2016 1Q FORM 10-Q 14

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

With respect to the segment revenue and profit walks, the overall effect of foreign exchange is included within multiple captions.

The translational foreign exchange impact is included within Foreign Exchange.
The transactional impact of foreign exchange hedging is included in operating cost within Productivity and in other income within Other.

SEGMENT RESULTS – THREE MONTHS ENDED MARCH 31

(Dollars in billions)
INDUSTRIAL SEGMENT EQUIPMENT
& SERVICES REVENUES
 
 
INDUSTRIAL SEGMENT PROFIT
 
 
 
 
 
 
 
 
 
Equipment(a)
 
 
Services(b)
 
(a)   In 2016, $12.1 billion, excluding $1.7 billion related to Alstom
(b)   In 2016, $11.0 billion, excluding $1.2 billion related to Alstom
 
(a)   In 2016, $3.3 billion, excluding an insignificant amount related to Alstom

2016 1Q FORM 10-Q 15


COMMENTARY: 2016 - 2015
   
 
Industrial segment revenues increased 6%, mainly as a result of the effects of acquisitions (primarily Alstom), partially offset by $0.5 billion unfavorable impact of foreign exchange.
Industrial segment profit decreased 7% mainly driven by lower earnings at Power, Oil & Gas and Energy Connections, partially offset by higher earnings at Aviation. Industrial segment profit decreased $0.3 billion as a result of foreign exchange, primarily transactional impacts from remeasurement and mark-to-market on open hedges.
Industrial segment margin decreased 180 bps primarily driven by effects of Alstom results. Excluding Alstom, industrial segment margin was 14.5%, compared with 14.6% in the same period of 2015.
 

SIGNIFICANT SEGMENT DEVELOPMENTS

ALSTOM ACQUISITION

On November 2, 2015, we completed the acquisition of Alstom's Thermal, Renewables and Grid businesses. The completion of the transaction followed the regulatory approval of the deal in over 20 countries and regions including the EU, U.S., China, India, Japan and Brazil. The cash purchase price was €9.2 billion (approximately $10.1 billion) net of cash acquired. The acquisition and alliances with Alstom affected our Power, Energy Connections and Renewable Energy segments, and to a lesser extent our Oil & Gas segment.

Given the timing and complexity of the acquisition, the presentation of these businesses in our financial statements, including the preliminary allocation of the purchase price, is not final and is expected to change in future reporting periods.

At year-end 2015, we recognized approximately $13.5 billion of goodwill, $5.2 billion of intangible assets, and $1.1 billion of unfavorable customer contract liabilities. The preliminary fair value of the associated noncontrolling interest was approximately $3.6 billion. In the first quarter of 2016, the preliminary amount of goodwill, intangible assets and unfavorable customer contract liabilities recognized was adjusted to approximately $14.2 billion, $4.5 billion, and $1.1 billion, respectively. The adjustments reflected refinements in estimates in the first quarter of 2016, primarily related to updated revenue and cost assumptions for customer contracts, and other fair value adjustments related to acquired assets and liabilities. Further purchase accounting adjustments are expected. We will complete our post-closing procedures and purchase price allocation no later than the fourth quarter of 2016. See Note 7 to the consolidated financial statements for further information.

For the first quarter of 2016, Alstom contributed revenues of $2.8 billion and an operating loss of $0.2 billion ($0.1 billion after tax), which includes the effects of purchase accounting and acquisition related charges at Corporate. Alstom related revenues and operating profit are presented separately in the segment revenues and profit walks that follow.

PLANNED SALE OF APPLIANCES

On January 15, 2016, we announced the signing of a definitive agreement to sell our Appliances business to Qingdao Haier Co., Ltd. (Haier) for approximately $5.4 billion. The transaction has been approved by our board of directors and Haier's board of directors and shareholders and remains subject to customary closing conditions, including regulatory approvals. The transaction is targeted to close in the second quarter of 2016.
2016 1Q FORM 10-Q 16

POWER

OPERATIONAL OVERVIEW
(Dollars in billions)
(a) Includes Water & Distributed Power and GE Hitachi Nuclear

2016 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
 
 
 
 
                                Services  Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
 
 
Equipment
 
Services
 
 
 
 
 
Equipment
 
 
Services
 
(a) Included $1.5 billion related to Alstom
 
 
 
 
(a) Included $15.2 billion related to Alstom
UNIT SALES
   
 
   

2016 1Q FORM 10-Q 17



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
(a) $3.8 billion, excluding $1.4 billion related to Alstom*
 
 
 
 
 
 
 
Equipment
 
 
 
Services
 
 
(a) $0.5 billion, excluding an insignificant amount related to Alstom*
 
 
(a) 14.4%, excluding 1.9% related to Alstom*

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2016 - 2015
       
Segment revenues up $0.6 billion (13%);
Segment profit down $0.2 billion (24%) as a result of:
 
The increase in revenues was primarily driven by the effects of Alstom and increased service revenues, primarily at Power Services, that were partially offset by lower volume at Gas Power Systems as a result of 26 fewer gas turbine shipments than in the prior year. Revenues also decreased as a result of the effects of a stronger U.S. dollar and lower other income, including negative foreign exchange transactional hedge impacts.
The decrease in profit was mainly due to lower cost productivity on lower volume and lower other income, including negative foreign exchange transactional hedge impacts, partially offset by a favorable business mix.
 
 
Revenues
Profit
March 31, 2015
$
 4.6
$
 0.8
Volume
 
 (0.7)
 
 (0.1)
Price
 
 -
 
 -
Foreign Exchange
 
 (0.1)
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 0.1
Productivity
 
N/A
 
 (0.2)
Other
 
 (0.1)
 
 (0.1)
Alstom
 
 1.4
 
 -
March 31, 2016
$
 5.2
$
 0.6
         
     


*Non-GAAP Financial Measure
2016 1Q FORM 10-Q 18

RENEWABLE ENERGY

OPERATIONAL OVERVIEW
(Dollars in billions)

2016 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
(a) Offshore Wind revenues were insignificant
 
 
 
                     Services  Equipment
 
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
 
Equipment
 
Services
 
 
 
 
 
 
 
 
Equipment
 
 
Services
(a) Included $0.2 billion related to Alstom
 
 
 
 
 
(a) Included $5.0 billion related to Alstom
UNIT SALES
   
 
   

2016 1Q FORM 10-Q 19



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
(a) $1.4 billion, excluding $0.3 billion related to Alstom*
 
 
 
 
 
 
 
Equipment
 
 
 
 
 
Services
 
 
(a) $0.1 billion, excluding an insignificant amount related to Alstom*
 
 
(a) 6.6%, excluding (2.7)% related to Alstom*

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2016 - 2015
       
Segment revenues up $0.6 billion (62%);
Segment profit up 46%:
 
The increase in revenues was driven by higher volume, primarily higher turbine sales at Onshore Wind and higher sales at Hydro, including the effects of the Alstom acquisition. These increases were partially offset by the effects of a stronger U.S. dollar.
The increase in profit was due to higher cost productivity, including the effects of a customer contract termination, and higher volume. These increases were partially offset by negative transactional foreign exchange impact.
 
 
Revenues
Profit
March 31, 2015
$
 1.0
$
 0.1
Volume
 
 0.5
 
 -
Price
 
 -
 
 -
Foreign Exchange
 
 (0.1)
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 0.1
Other
 
 -
 
 -
Alstom
 
 0.3
 
 -
March 31, 2016
$
 1.7
$
 0.1
         
     



*Non-GAAP Financial Measure
2016 1Q FORM 10-Q 20

OIL & GAS

OPERATIONAL OVERVIEW
(Dollars in billions)

2016 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
(a) Previously referred to as Measurement & Controls (M&C)
 
 
                     Services           Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
 
Equipment
 
Services
 
 
 
 
 
 
 
Equipment
 
 
Services
(a) Included an insignificant amount related to Alstom
 
(a) Included $0.1 billion related to Alstom

2016 1Q FORM 10-Q 21



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
(a) $3.3 billion, excluding an insignificant amount related to Alstom*
 
 
 
 
 
 
 
 
 
 
Equipment
 
 
 
Services
 
 
(a) $0.3 billion, excluding an insignificant amount related to Alstom*
 
 
(a) 9.4%, excluding an insignificant amount related to Alstom*

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2016 - 2015
       
Segment revenues down $0.7 billion (18%);
Segment profit down $0.2 billion (37%) as a result of:
 
The decrease in revenues was primarily market driven, mainly due to lower equipment volume, driven by SS&D and Surface, as well as the impact of a stronger U.S. dollar and lower price, partially offset by higher other income, including a favorable foreign exchange transactional hedge impact.
The decrease in operating profit was primarily market driven, due to lower volume at SS&D and Surface and lower prices at DTS and SS&D. The decrease in profit also resulted from lower productivity, which included the negative transactional impact of foreign exchange, partially offset by cost out actions, and higher other income resulting from lower foreign exchange mark-to-market charges than in 2015.
 
 
Revenues
Profit
March 31, 2015
$
 4.0
$
 0.5
Volume
 
 (0.6)
 
 (0.1)
Price
 
 (0.1)
 
 (0.1)
Foreign Exchange
 
 (0.2)
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 (0.2)
Other
 
 0.1
 
 0.1
Alstom
 
 -
 
 -
March 31, 2016
$
 3.3
$
 0.3
         
     
*Non-GAAP Financial Measure
2016 1Q FORM 10-Q 22

ENERGY CONNECTIONS

OPERATIONAL OVERVIEW
(Dollars in billions)

2016 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
 
 
                     Services  Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
 
 
Equipment
Services
 
 
 
 
 
 
 
 
 
Equipment
 
 
 
Services
(a) Included $1.2 billion related to Alstom
 
(a) Included $8.4 billion related to Alstom
     

2016 1Q FORM 10-Q 23



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT (LOSS)
 
SEGMENT PROFIT MARGIN
 
(a) $1.2 billion, excluding $1.1 billion related to Alstom*
 
 
 
 
 
Equipment
 
 
 
Services
 
 
(a) Includes an insignificant amount related to Alstom*
 
 
(a) (4.0)%, excluding (3.5)% related to Alstom*

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2016 - 2015
       
Segment revenues up $0.6 billion (34%);
Segment profit down $0.1 billion as a result of:
 
The increase in revenues was mainly due to higher volume driven by higher equipment sales at Grid, including the effects of Alstom, partially offset by a decrease in core volume driven by Industrial Solutions and Power Conversion. The decrease in revenues also reflects the effects of a stronger U.S. dollar.
The decrease in profit was due to lower cost productivity, driven by lower sales volume at Industrial Solutions and Power Conversion, as well as a negative transactional foreign exchange impact.
 
 
Revenues
Profit
March 31, 2015
$
 1.7
$
 -
Volume
 
 (0.4)
 
 -
Price
 
 -
 
 -
Foreign Exchange
 
 (0.1)
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 (0.1)
Other
 
 -
 
 -
Alstom
 
 1.1
 
 -
March 31, 2016
$
 2.3
$
 (0.1)
         
     



*Non-GAAP Financial Measure
2016 1Q FORM 10-Q 24

            AVIATION

OPERATIONAL OVERVIEW
(Dollars in billions)

2016 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
   

2016 1Q FORM 10-Q 25



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
 
 
 
 
 
 
 
 
 
 
Equipment
 
 
 
Services
 
 

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2016 - 2015
       
Segment revenues up $0.6 billion (10%);
Segment profit up $0.2 billion (16%) as a result of:
 
The increase in revenues was due to higher volume, primarily in services. Equipment sales also increased as higher Military sales more than offset decreases at Commercial Engines.
The increase in profit was mainly due to higher services volume, a favorable business mix and higher cost productivity.
 
 
Revenues
Profit
March 31, 2015
$
 5.7
$
 1.3
Volume
 
 0.6
 
 0.1
Price
 
 -
 
 -
Foreign Exchange
 
 -
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 0.1
Productivity
 
N/A
 
 0.1
Other
 
 -
 
 (0.1)
March 31, 2016
$
 6.3
$
 1.5
     
     

2016 1Q FORM 10-Q 26

HEALTHCARE

OPERATIONAL OVERVIEW
(Dollars in billions)

2016 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
                    Services  Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
Equipment
Services
 
 
 
 
 
Equipment
 
 
Services
     
   

2016 1Q FORM 10-Q 27



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
 
 
 
 
 
 
 
 
Equipment
 
 
 
Services
 
 

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2016 - 2015
       
Segment revenues up $0.1 billion (3%);
Segment profit up 7% as a result of:
 
The increase in revenues was due to higher volume driven by Life Sciences and Healthcare Systems, partially offset by lower prices at Healthcare Systems and the effects of a stronger U.S. dollar.
The increase in profit was mainly due to higher cost productivity, including a reduction in SG&A and volume growth, partially offset by lower prices.
 
 
Revenues
Profit
March 31, 2015
$
 4.1
$
 0.6
Volume
 
 0.3
 
 -
Price
 
 (0.1)
 
 (0.1)
Foreign Exchange
 
 (0.1)
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 0.1
Other
 
 -
 
 -
March 31, 2016
$
 4.2
$
 0.6
         
     

2016 1Q FORM 10-Q 28

            TRANSPORTATION

OPERATIONAL OVERVIEW
(Dollars in billions)

2016 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
 
(a) Includes Digital Solutions, Marine, Stationary & Drilling
 
 
 
                    Services  Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
 
 
 
 
Equipment
Services
 
 
 
 
 
Equipment
 
 
Services
UNIT SALES
   

2016 1Q FORM 10-Q 29



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
 
 
 
 
 
Equipment
 
 
 
Services
 
 
 
 
 
 
 
 

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2016 - 2015
       
Segment revenues down $0.3 billion (25%);
Segment profit down $0.1 billion (27%) as a result of:
 
The decrease in revenues was due to lower equipment volume, driven by 59 fewer locomotive shipments than in the prior year.
The decrease in profit was due to lower volume due to lower locomotive sales.
 
 
Revenues
Profit
March 31, 2015
$
 1.3
$
 0.2
Volume
 
 (0.3)
 
 (0.1)
Price
 
 -
 
 -
Foreign Exchange
 
 -
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 -
Other
 
 -
 
 -
March 31, 2016
$
 1.0
$
 0.2
         
     

2016 1Q FORM 10-Q 30

            APPLIANCES & LIGHTING

OPERATIONAL OVERVIEW
 (Dollar in billions)

2016 YTD SUB-SEGMENT REVENUES
   
(a) Includes Current, powered by GE
   

 
FINANCIAL OVERVIEW
 
(Dollar in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
 
 
 
 
 
Equipment
 
 
 
 
 
Services
 
 
 
 
 
 
 

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2016 - 2015
       
Segment revenues up $0.1 billion or 3%;
Segment profit up 13% as a result of:
 
The increase in revenues was due to higher volume at Appliances, partially offset by lower Lighting revenues as lower traditional lighting sales were partially offset by an increase in LED revenues.
The increase in profit was due to material deflation, partially offset by lower prices.
 
 
Revenues
Profit
March 31, 2015
$
 1.9
$
 0.1
Volume
 
 0.1
 
 -
Price
 
 -
 
 -
Foreign Exchange
 
 -
 
 -
(Inflation)/Deflation
 
N/A
 
 0.1
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 -
Other
 
 -
 
 -
March 31, 2016
$
 2.0
$
 0.1
         

2016 1Q FORM 10-Q 31

CAPITAL

OPERATIONAL OVERVIEW
(Dollars in billions)

2016 YTD SUB-SEGMENT REVENUES
   
 
   
 
ENDING NET INVESTMENT, EXCLUDING LIQUIDITY*
 
TIER 1 COMMON RATIO ESTIMATE
 
 
 
(a) As originally reported; $331 billion including discontinued operations
(b) $127 billion including discontinued operations
 
 
 
 
 
 

SIGNIFICANT TRENDS & DEVELOPMENTS

The GE Capital Exit Plan - On April 10, 2015, the Company announced its plan to reduce the size of the financial services businesses through the sale of most of its assets over the following 24 months. It is expected that as a result of the GE Capital Exit Plan, the Capital businesses that will remain with GE will account for about $90 billion in ending net investment (ENI), excluding liquidity, including approximately $40 billion in the U.S. ENI is a metric used to measure the total capital invested in the financial services businesses. Capital's ENI, excluding liquidity* was $81 billion at March 31, 2016. Further information on the GE Capital Exit Plan is provided in the Consolidated Results section of the MD&A and Note 1 to the consolidated financial statements.
As the GE Capital Exit Plan progresses, we will continue to incur interest on non-Verticals borrowings, restructuring costs and GE and GE Capital headquarters costs that are in excess of those allocated to the Verticals. These costs are recorded within other continuing operations within Capital.
Milestone Aviation Group – On January 30, 2015, we acquired Milestone Aviation Group, a helicopter leasing business, for approximately $1.8 billion.
Dividends – GE Capital paid common dividends of $7.5 and $0.5 billion to GE in the three months ended March 31, 2016 and 2015, respectively.


* Non-GAAP Financial Measure
2016 1Q FORM 10-Q 32

FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT (LOSS)(a)
 
 
 
 
 
 
 
 
 
 
Total Capital
 
Other Continuing
 
 
Verticals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Verticals
 
Other Continuing
Total Capital
   
 (a) Interest and other financial charges and income taxes are included in determining segment profit (loss) for the Capital segment.
 
 
COMMENTARY: 2016 - 2015
   

Capital revenues increased 1% primarily as a result of the effects of acquisitions and organic revenue growth, partially offset by the effects of foreign currency exchange.

Within Capital, Verticals revenues increased by $0.1 billion, or 3%, as a result of higher gains ($0.3 billion) and the effects of acquisitions, partially offset by organic revenue declines ($0.2 billion) and higher impairments ($0.1 billion)

Capital net loss decreased by $4.8 billion, or 84%, primarily due to the absence of the first quarter 2015 charges associated with the GE Capital Exit Plan.

Within Capital, Verticals net earnings increased by $0.2 billion, or 43%, as a result of higher gains ($0.2 billion), partially offset by higher impairments.
Other Capital net loss decreased by $4.7 billion, or 77%, primarily as a result of:
Lower tax expenses of $6.0 billion primarily related to the absence of the first quarter 2015 expected repatriation of foreign earnings and write-off of deferred tax assets related to the GE Capital Exit Plan.
Higher treasury operation expenses of $0.9 billion reflecting excess interest expense, including costs associated with the February 2016 hybrid tender and derivative activities that reduce or eliminate interest rate, currency or market risk between financial assets and liabilities. We expect to continue to have excess interest costs in 2016 as asset sales outpace our debt maturities. We may engage in liability management actions, such as buying back debt, based on market and economic conditions.
Charges of $0.3 billion associated with the preferred equity exchange that was completed in January 2016.
Higher restructuring expenses of $0.2 billion.



2016 1Q FORM 10-Q 33

CORPORATE ITEMS AND ELIMINATIONS
             
             
REVENUES AND OPERATING PROFIT (COST)
         
             
   
Three months ended March 31
(In millions)
 
2016
   
2015
             
Revenues
         
 
Gains (losses) on disposals
$
59
 
$
-
 
Eliminations and other
 
(968)
   
(988)
Total Corporate Items and Eliminations
$
(909)
 
$
(988)
             
Operating profit (cost)
         
 
Gains (losses) on disposals
 
59
   
-
 
Restructuring and other charges
$
(686)
 
$
(422)
 
Principal retirement plans(a)
 
(468)
   
(789)
 
Eliminations and other
 
(476)
   
(480)
Total Corporate Items and Eliminations
$
(1,571)
 
$
(1,691)
             
CORPORATE COSTS
         
             
   
Three months ended March 31
(In millions)
 
2016
 
2015
             
Total Corporate Items and Eliminations
$
(1,571)
 
$
(1,691)
Less non-operating pension cost
 
(512)
   
(695)
Total Corporate costs (operating)*
$
(1,059)
 
$
(996)
Less restructuring and other charges
 
(686)
   
(422)
Less gains (losses) on disposals
 
59
   
-
Adjusted total corporate costs (operating)*
$
(431)
 
$
(574)
             
(a)
Included non-operating pension cost* of $0.5 billion and $0.7 billion in the three months ended March 31, 2016 and 2015, respectively, which includes expected return on plan assets, interest costs and non-cash amortization of actuarial gains and losses.

2016 – 2015 COMMENTARY

Revenues and other income increased $0.1 billion, primarily a result of:
$0.1 billion of higher gains from the sale of two floors in 30 Rockefeller Plaza, New York City.

Operating costs decreased $0.1 billion, primarily as a result of:
$0.3 billion lower costs associated with our principal retirement plans including the effects of lower discount rates, and
$0.1 billion of higher gains from the sale of two floors in 30 Rockefeller Plaza, New York City.

These decreases to operating costs were partially offset by $0.3 billion higher restructuring and other charges, which included $0.1 billion of acquisition related charges.




*Non-GAAP Financial Measure
2016 1Q FORM 10-Q 34


COSTS NOT INCLUDED IN SEGMENT RESULTS

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

COSTS
         
           
 
Three months ended March 31
(In billions)
 
2016
   
2015
           
Power
$
0.2
 
$
0.1
Renewable Energy
 
-
   
-
Oil & Gas
 
0.2
   
0.1
Energy Connections
 
-
   
0.1
Aviation
 
-
   
-
Healthcare
 
0.1
   
-
Transportation
 
-
   
-
Appliances & Lighting
 
-
   
-
Total
$
0.7
 
$
0.4
           
2016 1Q FORM 10-Q 35

DISCONTINUED OPERATIONS

Discontinued operations primarily relate to our financial services businesses as a result of the GE Capital Exit Plan and include our Consumer business, most of our CLL business, our Real Estate business and U.S. mortgage business (WMC). All of these operations were previously reported in the Capital segment.

We have entered into Transitional Service Agreements (TSA) with and provided certain indemnifications to buyers of GE Capital's assets. Under the TSAs, GE Capital provides various services for terms generally between 12 and 24 months and receives a level of cost reimbursement from the buyers.

At March 31, 2016, indemnifications amounted to $1.5 billion, for which we have recognized related liabilities of $0.1 billion. In addition, we provided $0.4 billion of credit support, the vast majority on behalf of certain commercial customers aligned with signed disposal transactions scheduled to close in 2016, and recognized an insignificant liability at March 31, 2016.

As part of the GE Capital Exit Plan, we entered into hedges (on an after-tax basis) of our net investment in businesses that we plan to dispose. These derivatives are treated as standalone hedges and the mark to market valuation changes on the derivatives are recorded in earnings of discontinued operations.

Results of operations, financial position and cash flows for these businesses are separately reported as discontinued operations for all periods presented.

FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS
           
 
Three months ended March 31
(In millions)
2016
 
2015
           
Earnings (loss) from discontinued operations, net of taxes
$
(308)
 
$
(8,936)
           

The first quarter 2016 loss from discontinued operations, net of taxes, primarily reflected the following:
$0.2 billion after-tax loss at our CLL business (including $0.3 billion after-tax loss on disposals).

The first quarter 2015 loss from discontinued operations, net of taxes, primarily reflected the following:
$4.0 billion after-tax loss at our CLL business (including $2.8 billion after-tax loss on disposals),
$2.7 billion after-tax loss at our Consumer business,
$2.3 billion after-tax loss at our CRE business (including $2.4 billion after-tax loss on disposals).

For additional information related to discontinued operations, see Note 2 to the consolidated financial statements of this Form 10-Q Report.
2016 1Q FORM 10-Q 36

OTHER CONSOLIDATED INFORMATION

INCOME TAXES

GE pays the income taxes it owes in every country it does business. While GE and GE Capital file a consolidated U.S. federal income tax return, many factors impact our income tax expense and cash tax payments. The most significant factor is that we conduct business in approximately 180 countries and more than half of our revenue is earned outside the U.S., often in countries with lower tax rates than in the U.S. We reinvest most of our foreign earnings overseas to be able to fund our active non-U.S. business operations. Our tax liability is also affected by U.S. and foreign tax incentives designed to encourage certain investments, such as research and development, and is also affected by acquisitions, dispositions and tax law changes. Finally, our tax returns are routinely audited, and settlements of issues raised in these audits sometimes affect our tax rates.

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

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

PROVISION FOR INCOME TAXES
   
 
 
 
 
 
2016 – 2015 COMMENTARY

The consolidated income tax rates of 388% for the first quarter 2015 and negative 58% for the first quarter 2016 are not meaningful.
The first quarter 2015 rate is caused by comparing positive tax expense of $6.3 billion with pre-tax income of $1.6 billion. During the first quarter of 2015 in conjunction with the GE Capital Exit Plan, we incurred tax expense of $6.0 billion related to expected repatriation of foreign earnings and write-off of deferred tax assets.
The first quarter 2016 consolidated tax rate is caused by comparing a small tax benefit ($0.1 billion) to a small pre-tax income ($0.2 billion), reflecting a 36% tax rate on $0.9 billion of pre-tax loss at GE Capital and a 17% tax rate on $1.2 billion of pre-tax income at GE.
The decrease in the consolidated income tax expense from $6.3 billion for the first quarter of 2015 to negative $0.1 billion for the first quarter of 2016 is due to the non-repeat of the tax expense incurred as part of the GE Capital Exit Plan in 2015 and the effect of lower pre-tax income.
The consolidated tax provision includes $0.3 billion and $0.2 billion for GE (excluding GE Capital) for the first quarters of 2015 and 2016, respectively.

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

2016 1Q FORM 10-Q 37


BENEFITS FROM GLOBAL OPERATIONS

Absent the effects of the GE Capital Exit Plan, our consolidated income tax provision is reduced because of the benefits of lower-taxed global operations. 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. Most of these earnings have been reinvested in active non-U.S. business operations and we do not intend to repatriate these earnings to fund U.S. operations. The rate of tax on our indefinitely reinvested non-U.S. earnings is below the 35% U.S. statutory tax 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 non-U.S. operations through foreign companies that are subject to low foreign taxes.

A substantial portion of the 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, from our Power operations located in Switzerland and Hungary, and our Healthcare operations in Europe.

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 U.S. or foreign law. In addition, since this benefit depends on management's intention to indefinitely reinvest amounts outside the U.S., our tax provision will increase to the extent we no longer indefinitely reinvest foreign earnings.

STATEMENT OF FINANCIAL POSITION

Because GE and GE Capital 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 GE Capital activities in order to permit meaningful analysis of each individual consolidating statement.

MAJOR CHANGES IN OUR FINANCIAL POSITION FOR THE THREE MONTHS ENDED
MARCH 31, 2016

Cash and equivalents increased $4.6 billion. GE Cash and equivalents decreased $1.1 billion due to cash flows from operating activities of $7.9 billion (including common dividends from GE Capital of $7.5 billion), more than offset by buyback of treasury stock of $6.7 billion (cash basis), including $2.0 billion paid under an ASR agreement, and dividends of $2.2 billion. GE Capital Cash and equivalents increased $5.7 billion primarily driven by $36.5 billion in proceeds from business dispositions, partially offset by $14.0 billion net repayments of debt and $7.6 billion in payments of dividends to shareowners. See the Statement of Cash Flows section for additional information.
All other assets increased $2.8 billion, primarily due to purchases of time deposits at GE Capital of $3.6 billion.
Assets of discontinued operations decreased $39.3 billion, primarily due to the disposition of CLL businesses of $38.6 billion. See Note 2 for additional information.
Borrowings decreased $11.6 billion, primarily due to a net decrease of GE Capital borrowings of $12.4 billion, partially offset by a net increase in borrowings by GE of $1.0 billion (excluding debt assumption).
Liabilities of discontinued operations decreased $9.5 billion, primarily driven by the disposition of CLL businesses of $9.7 billion. See Note 2 for additional information.
Common stock held in treasury increased $5.5 billion, primarily due to buyback of treasury stock of $6.1 billion (book basis), including $1.7 billion repurchased under a $2.0 billion ASR agreement. This was partially offset by treasury stock dispositions of $0.6 billion, primarily stock option exercises of $0.4 billion.
2016 1Q FORM 10-Q 38

FINANCIAL RESOURCES AND LIQUIDITY

LIQUIDITY AND BORROWINGS

We maintain a strong focus on liquidity. At both GE and GE Capital 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 GE Capital 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 GE Capital, and also have historically maintained a commercial paper program that we regularly use to fund operations in the U.S., principally within the quarters.

GE Capital has historically relied on 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. Subsequent to April 10, 2015 and with the execution of the GE Capital Exit Plan, we do not plan to issue any incremental GE Capital senior unsecured term debt for four years. Furthermore we have reduced our commercial paper from $25 billion to $5 billion consistent with the Exit Plan. In addition, we have substantially reduced our reliance on deposits and securitization due to the Exit Plan. Today, we mainly rely on excess cash positions, cash generated through dispositions, and the cash flow from our Verticals business to fund our debt maturities and our operating and interest expense costs. GE Capital's liquidity position is targeted to meet its obligations under both normal and stressed conditions. We expect to maintain an elevated liquidity position as we generate cash from asset sales, returning to more normalized levels in 2019. During this period we expect to have excess interest costs as asset sales outpace our debt maturities. While we maintain elevated liquidity levels, we may engage in liability management actions, such as buying back debt, based on market and economic conditions in order to reduce our excess interest costs. During the first quarter of 2016, we repurchased $0.7 billion of long-term unsecured debt and $4.2 billion of subordinated debentures, resulting in a loss of $414 million.

Our 2016 GE Capital funding plan anticipates repayment of principal on outstanding short-term borrowings, including the current portion of long-term debt ($42.7 billion at December 31, 2015), principally through dispositions, asset sales and cash on hand. Long-term maturities and early redemptions were $13.6 billion in the first quarter of 2016. Additionally, $18.9 billion of senior unsecured notes matured as of May 6, 2016.

We maintain a detailed liquidity policy for GE Capital that requires GE Capital to maintain a contingency funding plan. The liquidity policy defines GE Capital's liquidity risk tolerance under different stress scenarios based on its liquidity sources and also establishes procedures to escalate potential issues. We actively monitor GE Capital'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. GE Capital will continue to evaluate the need to modify the existing contingency funding plan due to the GE Capital Exit Plan.

On December 2, 2015, $87.7 billion of senior unsecured notes and $4.9 billion of commercial paper was assumed by GE upon its merger with GE Capital. The amount of GE Capital debt assumed by GE was $73.6 billion as of March 31, 2016. See Note 9 to the consolidated financial statements.

LIQUIDITY SOURCES

In addition to GE cash of $9.3 billion at March 31, 2016, GE Capital maintained liquidity sources of $105.8 billion that consisted of cash and equivalents of $65.8 billion, high-quality, liquid investments of $13.9 billion and cash and equivalents of $26.1 billion classified as discontinued operations and businesses held for sale. Additionally, we have $41.8 billion of committed unused credit lines.
2016 1Q FORM 10-Q 39

CASH AND EQUIVALENTS
               
(In billions)
 
March 31, 2016
       
March 31, 2016
               
GE(a)
$
9.3
   
U.S.
$
22.2
GE Capital(b)
 
65.8
   
Non-U.S.(c)
 
52.9
               
(a)
At March 31, 2016, $3.0 billion of GE cash and equivalents was held in countries with currency controls that may restrict the transfer of funds to the U.S. or limit our ability to transfer funds to the U.S. without incurring substantial costs. These funds are available to fund operations and growth in these countries and we do not currently anticipate a need to transfer these funds to the U.S.
(b)
At March 31, 2016, GE Capital cash and equivalents of about $0.7 billion were primarily in insurance entities and were subject to regulatory restrictions.
(c)
Of this amount at March 31, 2016, $3.1 billion is held outside of the U.S. and 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 this cash, we would be subject to additional U.S. income taxes and foreign withholding taxes.

COMMITTED UNUSED CREDIT LINES
     
(In billions)
March 31, 2016
     
Revolving credit agreements (exceeding one year)
$
24.5
Revolving credit agreements (364-day line)(a)
 
17.3
Total(b)
$
41.8
     
(a)
Included $17.1 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 44 financial institutions but can be drawn on and lent to GE Capital.

In conjunction with the GE Capital Exit Plan, we are currently evaluating the amount of credit lines we require in the future.

FUNDING PLAN

We reduced our Capital ENI, excluding liquidity*, to $81 billion at March 31, 2016.

During the first quarter of 2016, there were no new senior unsecured debt issuances.

COMMERCIAL PAPER
           
(In billions)
GE
 
GE Capital
           
Average commercial paper borrowings during the first quarter of 2016
$
12.7
 
$
5.0
Maximum commercial paper borrowings outstanding during the first quarter of 2016
 
17.4
   
5.1
           
GE Capital 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.

We securitize financial assets as an alternative source of funding. During the first three months of 2016, we completed $0.2 billion of non-recourse issuances and $0.5 billion of non-recourse borrowings matured. At March 31, 2016, consolidated non-recourse securitization borrowings were $2.8 billion.

We have seven deposit-taking banks outside of the U.S., which are classified as discontinued operations, and one deposit-taking bank in the U.S., GE Capital Bank, an industrial bank (IB), which is also classified as discontinued operations. On April 18, 2016, we completed the sale of the IB.


*Non-GAAP Financial Measure
2016 1Q FORM 10-Q 40

GE GUARANTEE OF CERTAIN GE CAPITAL DEBT

GE provides implicit and explicit support to GE Capital through commitments, capital contributions and operating support. As part of the GE Capital Exit Plan, on April 10, 2015, GE and GE Capital 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 GE Capital identified in the Amendment. The Guarantee replaced the requirement that the Company make certain income maintenance payments to GE Capital in certain circumstances. GE Capital's U.S. public indentures were concurrently amended to provide the full and unconditional guarantee by the Company set forth in the Guarantee. At March 31, 2016, the balance of this debt that GE assumed was $73.6 billion, and the Guarantee applied to approximately $81.9 billion of GE Capital debt.

ACCELERATED SHARE REPURCHASE AGREEMENT

During the first quarter of 2016, we repurchased $6.1 billion of our common stock, including shares repurchased under an accelerated share repurchase (ASR) agreement.

In March 2016, we entered into an ASR agreement with a financial institution which allowed us to repurchase our common stock at a price below its volume weighted-average price during a given period. During the quarter, we paid $2.0 billion and received and classified as treasury shares an initial delivery of 54,732,775 shares based on then-current market prices. The payment was recorded as a reduction to shareowners' equity, consisting of a $1.7 billion increase in treasury stock, which reflects the value of the shares received upon initial delivery, and a $0.3 billion decrease in other capital, which reflects the value of the stock held back pending final settlement of the ASR agreement.




2016 1Q FORM 10-Q 41

STATEMENT OF CASH FLOWS - THREE MONTHS ENDED MARCH 31, 2016 VERSUS 2015

CONSOLIDATED CASH FLOWS

We evaluate our cash flow performance by reviewing our industrial (non-GE Capital) businesses and GE Capital 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.

GE CASH FLOWS – THREE MONTHS ENDED MARCH 31

OPERATING CASH FLOWS
 
INVESTING CASH FLOWS
 
FINANCING CASH FLOWS
                     
2015
 
  2016
 
2015
 
 2016
 
2015
 
2016
 
 
 
 
 
 
 
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. 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 GE Capital represent the distribution of a portion of GE Capital retained earnings, and are distinct from cash from continuing operations within the GE Capital businesses. See the Intercompany Transactions and Eliminations section for information related to transactions between GE and GE Capital.

2016 – 2015 COMMENTARY

GE cash from operating activities increased $6.5 billion primarily due to the following:
An increase of operating cash collections of $2.3 billion to $27.4 billion in 2016, primarily driven by progress collections of $1.6 billion and Alstom related activities, partially offset by an increase in customer receivables of $0.7 billion.
An increase in operating cash payments of $2.9 billion to $27.1 billion in 2016. This increase is primarily driven by increased spend on inventory, purchasing volume timing, payment of income taxes and Alstom related activities in the three months ended March 31, 2016 compared with that of 2015.
Further, GE Capital paid common dividends totaling $7.5 billion and $0.5 billion to GE in the three months ended March 31, 2016 and 2015, respectively.

GE cash used for investing activities increased $0.2 billion primarily due to the following:
Funding of a joint venture at our Aviation business in the three months ended March 31, 2016.

GE cash used for financing activities increased $5.3 billion primarily due to the following:
An increase in net repurchases of GE shares for treasury of $6.6 billion, including $2.0 billion paid under an ASR agreement.
This increase was partially offset by a net change in borrowings of $1.4 billion.


2016 1Q FORM 10-Q 42

GE CAPITAL CASH FLOWS – THREE MONTHS ENDED MARCH 31

OPERATING CASH FLOWS
 
INVESTING CASH FLOWS
 
FINANCING CASH FLOWS
                     
2015
 
2016
 
           2015
 
2016
 
  2015
 
2016
 
 
2016 – 2015 COMMENTARY:

GE Capital cash used for operating activities increased $0.2 billion primarily due to the following:
An increase in net cash collateral activity with counterparties on derivative contracts of $2.8 billion.
An increase in accounts payable of $0.2 billion in addition to an increase in cash generated from earnings and other activity.
These increases were partially offset by a net decrease in tax activity of $3.8 billion driven by net tax payments in the three months ended March 31, 2016 compared with net tax refunds for the same period in 2015.

GE Capital cash from investing activities increased $18.0 billion primarily due to the following:
In 2016, we closed the sale of certain of our CLL, Consumer and Real Estate businesses for proceeds of $35.5 billion, $0.8 billion and $0.2 billion, respectively.
The 2015 acquisition of Milestone Aviation Group, resulting in net cash paid of $1.7 billion.
These increases were partially offset by a decrease in cash resulting from the investment in high quality interest bearing deposits that mature in July 2016 of $3.6 billion and other activity.

GE Capital cash used for financing activities increased $17.1 billion primarily due to the following:
Higher net repayments of borrowings of $9.8 billion driven primarily by a decrease in issuances of senior unsecured notes and an increase in long-term debt maturities and repurchases.
GE Capital paid common dividends totaling $7.5 billion and $0.5 billion to GE in the three months ended March 31, 2016 and 2015, respectively.

INTERCOMPANY TRANSACTIONS AND ELIMINATIONS

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

GE Capital is a member of certain GE pension plans. As a result of the GE Capital Exit Plan, GE Capital will have additional funding obligations for these pension plans. These obligations do not relate to the Verticals and are recognized as an expense in GE Capital's other continuing operations when they become probable and estimable. In the three months ended March 31, 2016, the additional funding obligation recognized by GE Capital was $0.1 billion. This additional funding is recorded as a contra expense for GE and GE's future pension obligations will be paid by GE Capital. On a consolidated basis, the additional required pension funding does not affect current period earnings but rather will be reflected as a reduction of the pension liability when paid.

2016 1Q FORM 10-Q 43

GE sells customer receivables to GE Capital 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 GE Capital. 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 effect of cash generated in GE CFOA from selling these receivables to GE Capital decreased GE's CFOA by $1.1 billion and $1.8 billion for the three months ended March 31, 2016 and 2015, 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 GE Capital.
2016 1Q FORM 10-Q 44

EXPOSURES

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.

During the first quarter of 2016, the Venezuelan government replaced its CENCOEX and SICAD foreign exchange mechanisms with the DIPRO system, which will be made available for priority food and medicine sectors at a rate of 10 bolivars per U.S. dollar. It also replaced its SIMADI mechanism with the DICOM system, which similar to the SIMADI mechanism, is intended to operate with fewer restrictions and will fluctuate based on market supply and demand. The DICOM opened at an initial rate of 207 bolivars per dollar compared to its rate at March 31, 2016 of 272 bolivars per U.S. dollar.

Net monetary assets subject to remeasurement at the DICOM rate were insignificant at March 31, 2016. In addition to our bolivar-denominated net monetary assets, we also have non-bolivar credit exposures of approximately $305 million at March 31, 2016 and recoverable amounts of non-monetary assets in Venezuela of approximately $84 million at March 31, 2016, which consists principally of inventory and property, plant and equipment.

OIL & GAS INDUSTRY

We are operating in a very challenging oil & gas market as a result of prevailing lower oil prices. Activity slowed in the first quarter of 2016 as U.S. onshore rig and well counts were down significantly from both year-end 2015 and 2014 peak levels, and capital expenditures and investment decisions continue to be delayed. As a result, each of our Oil & Gas businesses and our Power Conversion business within our Energy Connections segment experienced declines in equipment and services orders in the first quarter.

In this difficult market our Oil & Gas business will continue to focus on the items within its control such as cost management and competitiveness. Our restructuring investment will likely increase from $350 million to approximately $500 million to achieve our $800 million cost target, as lower volume will offset some of the realization. Given the difficult market and the level of first quarter orders, we are now expecting that Oil & Gas operating profit will be down approximately 30% in 2016.
2016 1Q FORM 10-Q 45

CRITICAL ACCOUNTING ESTIMATES

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

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 10-K Report filed on February 26, 2016 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.


2016 1Q FORM 10-Q 46

OTHER ITEMS

NEW ACCOUNTING STANDARDS

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016- 02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. Similarly, lessors will be required to classify leases as either sales-type, finance or operating, with classification affecting the pattern of income recognition. Classification for both lessees and lessors will be based on an assessment of whether risks and rewards as well as substantive control have been transferred through a lease contract. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. While we continue to evaluate the effect of the standard on our ongoing financial reporting, we anticipate that the adoption of ASU 2016-02 may materially impact our statement of financial position.

In May 2014, the FASB issued 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.
2016 1Q FORM 10-Q 47

CONTROLS AND PROCEDURES

Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that our disclosure controls and procedures were effective as of March 31, 2016.

On November 2, 2015, we closed the acquisition of Alstom's Thermal, Renewable, and Grid businesses. During 2016, we are continuing to perform the following activities with respect to these acquired businesses: (1) updating purchase price allocations, (2) transitioning acquired businesses to our accounting and reporting policies and processes, and (3) integrating their systems and processes into our framework of internal controls over financial reporting. We continue to monitor these activities and will make adjustments to processes or controls 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)
                   
                     
2016
                   
January
 
58,441
$
28.77
 
58,392
       
February
 
49,312
$
28.60
 
49,286
       
March (c)
 
98,921
$
30.88
 
98,850
       
Total
 
206,674
$
29.74
 
206,528
$
40.5
 billion
 
                     
(a) This category included 146 thousand shares repurchased from our various benefit plans.
(b) Shares were repurchased through the 2015 GE Share Repurchase Program (the Program). As of March 31, 2016, we were authorized to repurchase up to $50 billion of our common stock through 2018 and we had repurchased a total of approximately $9.5 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. Total amount remaining under our share repurchase program excludes an unsettled amount of $0.3 billion under an accelerated share repurchase (ASR) agreement.
(c) Includes 54,733 thousand shares repurchased at an average price of $31.06 per share pursuant to an ASR agreement.

2016 1Q FORM 10-Q 48

REGULATIONS AND SUPERVISION

GE Capital is a nonbank SIFI and as a result subject to FRB supervision. With the completion of the Synchrony Financial split-off, and the FRB's subsequent approval of GE Capital's application to deregister as a saving and loan holding company, GE Capital is no longer a savings and loan holding company.

On July 20, 2015 the Federal Reserve published a final order applying enhanced prudential standards to GE Capital 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 became applicable on January 1, 2018. Under the standards applicable on January 1, 2016 GE Capital became subject to the FRB's capital adequacy framework using the standardized approach to calculate risk weighted assets. GE Capital also became subject to a liquidity coverage ratio (LCR) of 90% until December 31, 2016. After December 31, 2016, GE Capital will need to maintain 100% LCR coverage.

If GE Capital is still a nonbank SIFI on January 1, 2018 the second set of enhanced prudential standards will apply. These standards include stress testing and capital planning requirements under the FRB's more formal comprehensive capital analysis and review (CCAR) regulations, enhanced leverage ratio requirements, enhanced governance requirements, daily liquidity calculations, additional reporting requirements and a market terms requirement for transactions between GE and GE Capital.

While the enhanced prudential standards do not subject GE Capital to the Federal Reserve's capital plan rule applicable to large bank holding companies until the capital planning cycle beginning January 1, 2018, GE Capital conducts at a minimum 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 GE Capital Committee of the GE Board and the GE Capital Board of Managers in April 2016. While a nonbank SIFI like GE Capital 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.

As a nonbank SIFI, GE Capital is also required to submit an annual resolution plan to the FRB and Federal Deposit Insurance Corporation (FDIC). GE Capital's second Resolution Plan was submitted to the FRB and FDIC on December 31, 2015. GE Capital's resolution plan describes how GE Capital 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 GE Capital or restrict their growth or activities until they submit a plan remedying the deficiencies. If the FRB and FDIC ultimately determine that GE Capital has not adequately addressed the deficiencies, they could order GE Capital to divest assets or operations in order to facilitate their orderly resolution in the event of their failure.

GE Capital has been 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." With the sale of the last deposit platform and extinguishing GE Capital Bank's charter GE Capital will no longer be subject to the Volcker prohibitions, but could be subject to capital charges for Volcker activities as long as it remains a SIFI.

As previously discussed, 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, with its regulators and staff of the FSOC. On March 31, 2016 GE filed its request to the FSOC for rescission of GE Capital's designation as a nonbank SIFI.

In addition, in connection with the December 2015 reorganization described in The GE Capital Exit Plan section of the 2015 GE Form 10-K report, GE Capital's international operations were consolidated under a new international holding company, GE Capital International Holdings Limited, which is a wholly owned subsidiary of GE Capital with its own capital structure, and is supervised by the U.K. Prudential Regulation Authority (PRA). The PRA's supervision includes capital and liquidity standards that could impact the payment of dividends to GE Capital, and GE Capital International Holdings Limited will remain subject to such supervision even if GE Capital's designation as a nonbank SIFI is terminated.
2016 1Q FORM 10-Q 49

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, 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.
 
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. 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 held an evidentiary hearing on February 1, 2016. In light of the state court action seeking approval of the proposed settlement, the District Court has stayed further proceedings in the four cases.

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.
 
One case is pending against WMC in the United States District Court for the Southern District of New York. The case was initiated by the Federal Housing Finance Agency (FHFA) in the fourth quarter 2012. In the second quarter 2013, Deutsche Bank, in its role as securitization trustee, 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 but, on its own motion, ordered re-briefing on several issues raised by WMC's motion to dismiss in February 2015. 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.
 
2016 1Q FORM 10-Q 50


The amounts of the claims at issue in these cases (discussed above) reflect the purchase price or unpaid principal balances of the mortgage loans at issue at the time of purchase and do not give effect to pay downs, accrued interest or fees, or potential recoveries based upon the underlying collateral. All of the mortgage loans involved in these lawsuits are included in WMC's reported claims at March 31, 2016. See Note 2 to the consolidated financial statements for additional information.

In December 2015, we learned that, as part of continuing industry-wide investigation of subprime mortgages, the Civil Division of the U.S. Department of Justice is investigating potential violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) by WMC and its affiliates arising out of the origination, purchase or sale of residential mortgage loans between January 1, 2005 and December 31, 2007. The Justice Department subsequently issued subpoenas for documents to WMC and GE Capital in January 2016. We are cooperating with the Justice Department's investigation, which is at an early stage.
2016 1Q FORM 10-Q 51


















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2016 1Q FORM 10-Q 52

FINANCIAL STATEMENTS AND NOTES

Statement of Earnings (Loss)
54
Consolidated Statement of Comprehensive Income (Loss)
56
Consolidated Statement of Changes in Shareowners' Equity
57
Statement of Financial Position
58
Statement of Cash Flows
60
Notes to Consolidated Financial Statements
 
 
1
 
Basis of Presentation and Summary of Significant Accounting Policies
62
 
2
 
Businesses Held for Sale and Discontinued Operations
64
 
3
 
Investment Securities
69
 
4
 
Inventories
72
 
5
 
GE Capital Financing Receivables and Allowance for Losses on Financing Receivables
72
 
6
 
Property, Plant and Equipment
73
 
7
 
Acquisitions, Goodwill and Other Intangible Assets
74
 
8
 
Contract Assets
76
 
9
 
Borrowings
77
 
10
 
Postretirement Benefit Plans
79
 
11
 
Income Taxes
80
 
12
 
Shareowners' Equity
81
 
13
 
Earnings Per Share Information
85
 
14
 
Fair Value Measurements
86
 
15
 
Financial Instruments
90
 
16
 
Variable Interest Entities
96
 
17
 
Intercompany Transactions
99
 
18
 
Supplemental Information
100
         
         
         
         

2016 1Q FORM 10-Q 53

FINANCIAL STATEMENTS

           
STATEMENT OF EARNINGS (LOSS)
         
(UNAUDITED)
         
 
Three months ended March 31
 
General Electric Company
 
and consolidated affiliates
(In millions; per-share amounts in dollars)
2016
 
2015
           
Revenues and other income
         
Sales of goods
$
17,208
 
$
16,599
Sales of services
 
8,106
   
7,084
Other income
 
9
   
142
GE Capital earnings (loss) from continuing operations
 
-
   
-
GE Capital revenues from services
 
2,522
   
2,414
   Total revenues and other income
 
27,845
   
26,239
           
Costs and expenses
         
Cost of goods sold
 
14,588
   
13,520
Cost of services sold
 
5,773
   
5,162
Selling, general and administrative expenses
 
4,608
   
4,415
Interest and other financial charges
 
1,736
   
618
Investment contracts, insurance losses and
         
   insurance annuity benefits
 
642
   
613
Other costs and expenses
 
259
   
291
   Total costs and expenses
 
27,606
   
24,619
           
Earnings (loss) from continuing operations before income taxes
 
238
   
1,621
Benefit (provision) for income taxes
 
139
   
(6,294)
Earnings (loss) from continuing operations
 
378
   
(4,673)
Earnings (loss) from discontinued operations, net of taxes (Note 2)
 
(308)
   
(8,936)
Net earnings (loss)
 
69
   
(13,608)
Less net earnings (loss) attributable to noncontrolling interests
 
(121)
   
(35)
Net earnings (loss) attributable to the Company
 
191
   
(13,573)
Preferred stock dividends
 
(289)
   
-
Net earnings (loss) attributable to GE common shareowners
$
(98)
 
$
(13,573)
           
Amounts attributable to GE common shareowners
         
   Earnings (loss) from continuing operations
$
378
 
$
(4,673)
   Less net earnings (loss) attributable to noncontrolling interests, continuing
         
      operations
 
(121)
   
(124)
   Earnings (loss) from continuing operations attributable to the Company
 
499
   
(4,548)
   Preferred stock dividends
 
(289)
   
-
   Earnings (loss) from continuing operations attributable
         
      to GE common shareowners
 
210
   
(4,548)
   Earnings (loss) from discontinued operations, net of taxes
 
(308)
   
(8,936)
   Less net earnings (loss) attributable to
         
      noncontrolling interests, discontinued operations
 
-
   
89
Net earnings (loss) attributable to GE common shareowners
$
(98)
 
$
(13,573)
           
Per-share amounts (Note 13)
         
   Earnings (loss) from continuing operations
         
      Diluted earnings (loss) per share
$
0.02
 
$
(0.45)
      Basic earnings (loss) per share
$
0.02
 
$
(0.45)
           
   Net earnings (loss)
         
      Diluted earnings (loss) per share
$
(0.01)
 
$
(1.35)
      Basic earnings (loss) per share
$
(0.01)
 
$
(1.35)
           
Dividends declared per common share
$
0.23
 
$
0.23
           
Amounts may not add due to rounding.
See Note 3 for other-than-temporary impairment amounts on investment securities.

See accompanying notes.

2016 1Q FORM 10-Q 54

                       
                       
                       
STATEMENT OF EARNINGS (LOSS) (CONTINUED)
(UNAUDITED)
                     
                       
 
Three months ended March 31
 
GE(a)
 
Financial Services (GE Capital)
(In millions; per-share amounts in dollars)
2016
 
2015
 
2016
 
2015
                       
Revenues and other income
                     
Sales of goods
$
17,213
 
$
16,648
 
$
25
 
$
21
Sales of services
 
8,194
   
7,192
   
-
   
-
Other income
 
92
   
52
   
-
   
-
GE Capital earnings (loss) from continuing operations
 
(893)
   
(5,721)
   
-
   
-
GE Capital revenues from services
 
-
   
-
   
2,860
   
2,845
   Total revenues and other income
 
24,606
   
18,171
   
2,885
   
2,866
                       
Costs and expenses
                     
Cost of goods sold(b)
 
14,597
   
13,571
   
20
   
18
Cost of services sold(b)
 
5,293
   
4,754
   
568
   
516
Selling, general and administrative expenses
 
3,982
   
3,825
   
874
   
792
Interest and other financial charges
 
440
   
389
   
1,430
   
339
Investment contracts, insurance losses and
                     
   insurance annuity benefits
 
-
   
-
   
671
   
642
Other costs and expenses
 
-
   
-
   
268
   
290
   Total costs and expenses
 
24,313
   
22,540
   
3,833
   
2,597
                       
Earnings (loss) from continuing operations before income taxes
 
294
   
(4,369)
   
(948)
   
269
Benefit (provision) for income taxes
 
(201)
   
(306)
   
341
   
(5,988)
Earnings (loss) from continuing operations
 
92
   
(4,675)
   
(608)
   
(5,719)
Earnings (loss) from discontinued operations, net of taxes (Note 2)
 
(308)
   
(9,025)
   
(308)
   
(8,935)
Net earnings (loss)
 
(216)
   
(13,700)
   
(916)
   
(14,654)
Less net earnings (loss) attributable to noncontrolling interests
 
(117)
   
(127)
   
(4)
   
91
Net earnings (loss) attributable to the Company
 
(98)
   
(13,573)
   
(912)
   
(14,745)
Preferred stock dividends
 
-
   
-
   
(289)
   
-
Net earnings (loss) attributable to GE common shareowners
$
(98)
 
$
(13,573)
 
$
(1,201)
 
$
(14,745)
                       
Amounts attributable to GE common shareowners:
                     
   Earnings (loss) from continuing operations
$
92
 
$
(4,675)
 
$
(608)
 
$
(5,719)
   Less net earnings (loss) attributable to noncontrolling interests, continuing
                     
      operations
 
(117)
   
(127)
   
(4)
   
2
   Earnings (loss) from continuing operations attributable to the Company
 
210
   
(4,548)
   
(604)
   
(5,721)
   Preferred stock dividends
 
-
   
-
   
(289)
   
-
   Earnings (loss) from continuing operations attributable
                     
      to GE common shareowners
 
210
   
(4,548)
   
(893)
   
(5,721)
   Earnings (loss) from discontinued operations, net of taxes 
 
(308)
   
(9,025)
   
(308)
   
(8,935)
   Less net earnings (loss) attributable to
                     
      noncontrolling interests, discontinued operations
 
-
   
-
   
-
   
89
Net earnings (loss) attributable to GE common shareowners
$
(98)
 
$
(13,573)
 
$
(1,201)
 
$
(14,745)
                       
(a)
Represents the adding together of all affiliated companies except GE Capital, which is presented on a one-line basis. See Note 1.
(b)
Includes revisions to previously reported amounts, which increased GE cost of goods sold and decreased GE cost of services sold by $259 million for the three months ended March 31, 2015.
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; "GE Capital" means GE Capital Global Holdings, LLC (GECGH) and its predecessor General Electric Capital Corporation (GECC) and all of their affiliates and associated companies. Separate information is shown for "GE" and "Financial Services (GE Capital)." Transactions between GE and GE Capital have been eliminated from the "General Electric Company and consolidated affiliates" columns on the prior page.
2016 1Q FORM 10-Q 55

GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
         
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
           
 
Three months ended March 31
(In millions)
 
2016
   
2015
           
Net earnings (loss)
$
69
 
$
(13,608)
Less net earnings (loss) attributable to noncontrolling interests
 
(121)
   
(35)
Net earnings (loss) attributable to the Company
$
191
 
$
(13,573)
           
Other comprehensive income (loss)
         
   Investment securities
$
220
 
$
233
  Currency translation adjustments
 
1
   
(5,335)
   Cash flow hedges
 
55
   
(46)
   Benefit plans
 
550
   
909
Other comprehensive income (loss)
 
826
   
(4,240)
Less other comprehensive income (loss) attributable to noncontrolling interests
 
2
   
(49)
Other comprehensive income (loss) attributable to the Company
$
824
 
$
(4,191)
           
Comprehensive income (loss)
$
896
 
$
(17,848)
Less comprehensive income (loss) attributable to noncontrolling interests
 
(119)
   
(85)
Comprehensive income (loss) attributable to the Company
$
1,015
 
$
(17,764)
           
Amounts presented net of taxes. See Note 12 for further information about other comprehensive income (loss) and noncontrolling interests.
Amounts may not add due to rounding.
See accompanying notes.

2016 1Q FORM 10-Q 56

GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
         
CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS' EQUITY
(UNAUDITED)
           
 
Three months ended March 31
(In millions)
 
2016
   
2015
           
Shareowners' equity balance at January 1
$
98,274
 
$
128,159
Net earnings (loss) attributable to the Company
 
191
   
(13,573)
Dividends and other transactions with shareowners
 
(2,429)
   
(2,319)
Redemption value adjustment for redeemable noncontrolling interests
 
(32)
   
-
Other comprehensive income (loss) attributable to the Company
 
824
   
(4,191)
Net sales (purchases) of shares for treasury
 
(5,503)
   
499
Changes in other capital
 
(236)
   
(15)
Ending balance at March 31
 
91,088
   
108,560
Noncontrolling interests
 
1,667
   
8,738
Total equity balance at March 31
$
92,755
 
$
117,298
           
Amounts may not add due to rounding.

See Note 12 for further information about changes in shareowners' equity.

See accompanying notes.



2016 1Q FORM 10-Q 57

STATEMENT OF FINANCIAL POSITION
 
General Electric Company
 
 
and consolidated affiliates
 (In millions, except share amounts)
March 31, 2016
 
December 31, 2015
   
(Unaudited)
     
Assets
         
Cash and equivalents
$
75,075
 
$
70,483
Investment securities (Note 3)
 
32,974
   
31,973
Current receivables
 
25,918
   
27,022
Inventories (Note 4)
 
23,907
   
22,515
Financing receivables – net (Note 5)
 
11,903
   
12,052
Other GE Capital receivables
 
6,409
   
6,782
Property, plant and equipment – net (Note 6)
 
53,786
   
54,095
Receivable from GE Capital (debt assumption)
 
-
   
-
Investment in GE Capital
 
-
   
-
Goodwill (Note 7)
 
66,212
   
65,526
Other intangible assets – net (Note 7)
 
16,890
   
17,798
Contract assets (Note 8)
 
21,654
   
21,156
All other assets
 
39,625
   
36,797
Deferred income taxes (Note 11)
 
3,214
   
3,105
Assets of businesses held for sale (Note 2)
 
3,013
   
2,818
Assets of discontinued operations (Note 2)
 
81,615
   
120,951
Total assets(a)
$
462,193
 
$
493,072
           
Liabilities and equity
         
Short-term borrowings (Note 9)
$
51,082
 
$
49,860
Accounts payable, principally trade accounts
 
13,150
   
13,680
Progress collections and price adjustments accrued
 
16,342
   
15,776
Dividends payable
 
2,153
   
2,167
Other GE current liabilities
 
21,552
   
23,597
Non-recourse borrowings of consolidated securitization entities (Note 9)
 
2,780
   
3,083
Long-term borrowings (Note 9)
 
132,187
   
144,659
Investment contracts, insurance liabilities and insurance annuity benefits
 
26,318
   
25,692
Non-current compensation and benefits
 
40,415
   
40,487
All other liabilities
 
22,459
   
23,612
Liabilities of businesses held for sale (Note 2)
 
1,020
   
861
Liabilities of discontinued operations (Note 2)
 
36,944
   
46,487
Total liabilities(a)
 
366,403
   
389,962
           
Redeemable noncontrolling interests (Note 12)
 
3,036
   
2,972
           
Preferred stock (5,944,250 shares outstanding at both March 31, 2016
         
   and December 31, 2015)
 
6
   
6
Common stock (9,195,657,000 and 9,379,288,000 shares outstanding
         
   at March 31, 2016 and December 31, 2015, respectively)
 
702
   
702
Accumulated other comprehensive income (loss) – net attributable to GE(b)
         
   Investment securities
 
680
   
460
   Currency translation adjustments
 
(5,500)
   
(5,499)
   Cash flow hedges
 
(26)
   
(80)
   Benefit plans
 
(10,859)
   
(11,410)
Other capital
 
37,377
   
37,613
Retained earnings
 
137,750
   
140,020
Less common stock held in treasury
 
(69,042)
   
(63,539)
Total GE shareowners' equity
 
91,088
   
98,274
Noncontrolling interests(c) (Note 12)
 
1,667
   
1,864
Total equity (Note 12)
 
92,755
   
100,138
Total liabilities, redeemable noncontrolling interests and equity
$
462,193
 
$
493,072
           
(a) Our consolidated assets at March 31, 2016 included total assets of $7,295 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets included current receivables and net financing receivables of $4,590 million and investment securities of $1,493 million within continuing operations and assets of discontinued operations of $468 million. Our consolidated liabilities at March 31, 2016 included liabilities of certain VIEs for which the VIE creditors do not have recourse to GE. These liabilities included non-recourse borrowings of consolidated securitization entities (CSEs) of $2,780 million within continuing operations and non-recourse borrowings of CSEs within discontinued operations of $41 million. See Note 16.
(b) The sum of accumulated other comprehensive income (loss) (AOCI) attributable to the Company was $(15,705) million and $(16,529) million at March 31, 2016 and December 31, 2015, respectively.

(c) Included AOCI attributable to noncontrolling interests of $(262) million and $(264) million at March 31, 2016 and December 31, 2015, respectively.

Amounts may not add due to rounding.


See accompanying notes.

2016 1Q FORM 10-Q 58

STATEMENT OF FINANCIAL POSITION (CONTINUED)
                       
 
GE(a)
 
Financial Services (GE Capital)
(In millions, except share amounts)
March 31, 2016
 
December 31, 2015
 
March 31, 2016
 
December 31, 2015
   
(Unaudited)
         
(Unaudited)
     
Assets
                     
Cash and equivalents
$
9,297
 
$
10,372
 
$
65,778
 
$
60,111
Investment securities (Note 3)
 
97
   
151
   
32,882
   
31,827
Current receivables
 
14,420
   
14,707
   
-
   
-
Inventories (Note 4)
 
23,839
   
22,449
   
68
   
66
Financing receivables - net (Note 5)
 
-
   
-
   
23,715
   
25,003
Other GE Capital receivables
 
-
   
-
   
15,109
   
15,455
Property, plant and equipment – net (Note 6)
 
19,659
   
20,145
   
34,892
   
34,781
Receivable from GE Capital (debt assumption)(b)
 
73,623
   
84,704
   
-
   
-
Investment in GE Capital
 
38,213
   
46,227
   
-
   
-
Goodwill (Note 7)
 
63,841
   
63,157
   
2,370
   
2,370
Other intangible assets – net (Note 7)
 
16,493
   
17,366
   
399
   
435
Contract assets (Note 8)
 
21,654
   
21,156
   
-
   
-
All other assets
 
12,537
   
12,813
   
28,607
   
25,081
Deferred income taxes (Note 11)
 
7,467
   
7,666
   
(4,253)
   
(4,561)
Assets of businesses held for sale (Note 2)
 
3,013
   
2,818
   
-
   
-
Assets of discontinued operations (Note 2)
 
9
   
9
   
81,606
   
120,942
Total assets
$
304,163
 
$
323,738
 
$
281,172
 
$
311,508
                       
Liabilities and equity
                     
Short-term borrowings (Note 9)(b)
$
20,659
 
$
19,792
 
$
48,736
 
$
48,617
Accounts payable, principally trade accounts
 
18,297
   
19,250
   
2,082
   
1,745
Progress collections and price adjustments accrued
 
16,342
   
15,776
   
-
   
-
Dividends payable
 
2,153
   
2,167
   
-
   
-
Other GE current liabilities
 
21,549
   
23,595
   
-
   
-
Non-recourse borrowings of consolidated securitization entities (Note 9)
 
-
   
-
   
2,780
   
3,083
Long-term borrowings (Note9)(b)
 
72,353
   
83,309
   
116,257
   
128,478
Investment contracts, insurance liabilities and insurance annuity benefits
 
-
   
-
   
26,955
   
26,155
Non-current compensation and benefits
 
39,588
   
39,472
   
818
   
1,006
All other liabilities
 
16,239
   
16,217
   
8,073
   
9,351
Liabilities of businesses held for sale (Note 2)
 
1,506
   
1,409
   
-
   
-
Liabilities of discontinued operations (Note 2)
 
127
   
128
   
36,817
   
46,359
Total liabilities
 
208,813
   
221,115
   
242,518
   
264,795
                       
Redeemable noncontrolling interests (Note 12)
 
3,036
   
2,972
   
-
   
-
                       
Preferred stock (5,944,250 shares outstanding at both March 31, 2016
                     
   and December 31, 2015)
 
6
   
6
   
6
   
6
Common stock (9,195,657,000 and 9,379,288,000 shares outstanding
                     
   at March 31, 2016 and December 31, 2015, respectively)
 
702
   
702
   
-
   
-
Accumulated other comprehensive income (loss) - net attributable to GE
                     
   Investment securities
 
680
   
460
   
683
   
456
   Currency translation adjustments
 
(5,500)
   
(5,499)
   
(773)
   
(898)
   Cash flow hedges
 
(26)
   
(80)
   
(24)
   
(112)
   Benefit plans
 
(10,859)
   
(11,410)
   
(534)
   
(540)
Other capital
 
37,377
   
37,613
   
12,570
   
12,326
Retained earnings
 
137,750
   
140,020
   
26,286
   
34,988
Less common stock held in treasury
 
(69,042)
   
(63,539)
   
-
   
-
Total GE shareowners' equity
 
91,088
   
98,274
   
38,213
   
46,227
Noncontrolling interests (Note 12)
 
1,226
   
1,378
   
441
   
486
Total equity (Notes 12)
 
92,314
   
99,651
   
38,655
   
46,713
Total liabilities, redeemable noncontrolling interests and equity
$
304,163
 
$
323,738
 
$
281,172
 
$
311,508
                       
(a)
Represents the adding together of all affiliated companies except GE Capital, which is presented on a one-line basis. See Note 1.
(b)
On December 2, 2015, senior unsecured notes and commercial paper was assumed by GE upon its merger with GE Capital resulting in an intercompany payable to GE. The short-term borrowings were $17,268 million and $17,642 million and the long-term borrowings were $56,355 million and $67,062 million at March 31, 2016 and December 31, 2015, respectively. See Note 9 for additional information.
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; "GE Capital" means GE Capital Global Holdings, LLC (GECGH) and its predecessor General Electric Capital Corporation (GECC) and all of their affiliates and associated companies. Separate information is shown for "GE" and "Financial Services (GE Capital)." Transactions between GE and GE Capital have been eliminated from the "General Electric Company and consolidated affiliates" columns on the prior page.

2016 1Q FORM 10-Q 59

STATEMENT OF CASH FLOWS
(UNAUDITED)
         
 
Three months ended March 31
 
General Electric Company
 
 and consolidated affiliates
(In millions)
2016
 
2015
           
Cash flows – operating activities
         
Net earnings (loss)
$
69
 
$
(13,608)
Less net earnings (loss) attributable to noncontrolling interests
 
(121)
   
(35)
Net earnings (loss) attributable to the Company
 
191
   
(13,573)
(Earnings) loss from discontinued operations
 
308
   
8,936
Adjustments to reconcile net earnings (loss) attributable to the
         
   Company to cash provided from operating activities
         
      Depreciation and amortization of property, plant and equipment
 
1,210
   
1,101
      (Earnings) loss from continuing operations retained by GE Capital
 
-
   
-
      Deferred income taxes
 
(165)
   
2,264
      Decrease (increase) in GE current receivables
 
1,013
   
2,601
      Decrease (increase) in inventories
 
(1,491)
   
(265)
      Increase (decrease) in accounts payable
 
258
   
(271)
      Increase (decrease) in GE progress collections
 
632
   
(1,000)
      All other operating activities
 
(100)
   
2,209
Cash from (used for) operating activities – continuing operations
 
1,852
   
2,002
Cash from (used for) operating activities – discontinued operations
 
(1,252)
   
4,088
Cash from (used for) operating activities
 
599
   
6,090
           
Cash flows – investing activities
         
Additions to property, plant and equipment
 
(1,556)
   
(1,496)
Dispositions of property, plant and equipment
 
316
   
367
Net decrease (increase) in GE Capital financing receivables
 
(11)
   
194
Proceeds from sale of discontinued operations
 
36,478
   
1,289
Proceeds from principal business dispositions
 
39
   
22
Net cash from (payments for) principal businesses purchased
 
-
   
(1,723)
All other investing activities
 
(10,594)
   
8,240
Cash from (used for) investing activities – continuing operations
 
24,671
   
6,894
Cash from (used for) investing activities – discontinued operations
 
7,112
   
(3,055)
Cash from (used for) investing activities
 
31,783
   
3,839
           
Cash flows – financing activities
         
Net increase (decrease) in borrowings (maturities of 90 days or less)
 
983
   
189
Newly issued debt (maturities longer than 90 days)
 
459
   
8,362
Repayments and other debt reductions (maturities longer than 90 days)
 
(14,381)
   
(12,788)
Net dispositions (purchases) of GE shares for treasury
 
(6,326)
   
239
Dividends paid to shareowners
 
(2,234)
   
(2,319)
All other financing activities
 
(462)
   
(43)
Cash from (used for) financing activities – continuing operations
 
(21,961)
   
(6,361)
Cash from (used for) financing activities – discontinued operations
 
(112)
   
(1,886)
Cash from (used for) financing activities
 
(22,073)
   
(8,246)
Effect of currency exchange rate changes on cash and equivalents
 
31
   
(3,826)
Increase (decrease) in cash and equivalents
 
10,340
   
(2,143)
Cash and equivalents at beginning of year
 
90,878
   
91,017
Cash and equivalents at March 31
 
101,218
   
88,874
Less cash and equivalents of discontinued operations at March 31
 
26,143
   
20,137
Cash and equivalents of continuing operations at March 31
$
75,075
 
$
68,736
           
Amounts may not add due to rounding.
See accompanying notes.

2016 1Q FORM 10-Q 60

STATEMENT OF CASH FLOWS (CONTINUED)
           
(UNAUDITED)
                       
 
Three months ended March 31
 
GE(a)
 
Financial Services (GE Capital)
(In millions)
2016
 
2015
 
2016
 
2015
                       
Cash flows – operating activities
                     
Net earnings (loss)
$
(216)
 
$
(13,700)
 
$
(916)
 
$
(14,654)
Less net earnings (loss) attributable to noncontrolling interests
 
(117)
   
(127)
   
(4)
   
91
Net earnings (loss) attributable to the Company
 
(98)
   
(13,573)
   
(912)
   
(14,745)
(Earnings) loss from discontinued operations
 
308
   
9,025
   
308
   
8,935
Adjustments to reconcile net earnings (loss) attributable to the
                     
   Company to cash provided from operating activities
                     
      Depreciation and amortization of property, plant and equipment
 
626
   
554
   
602
   
552
     (Earnings) loss from continuing operations retained by GE Capital(b)
 
8,393
   
6,260
   
-
   
-
      Deferred income taxes
 
223
   
(129)
   
(387)
   
2,393
      Decrease (increase) in GE current receivables
 
(39)
   
662
   
-
   
-
      Decrease (increase) in inventories
 
 
(1,486)
   
(262)
   
7
   
1
      Increase (decrease) in accounts payable
 
(200)
   
(452)
   
207
   
(21)
      Increase (decrease) in GE progress collections
 
632
   
(1,013)
   
-
   
-
      All other operating activities
 
(499)
   
269
   
(176)
   
2,355
Cash from (used for) operating activities – continuing operations
 
7,856
   
1,340
   
(351)
   
(530)
Cash from (used for) operating activities – discontinued operations
 
-
   
(4)
   
(1,252)
   
4,093
Cash from (used for) operating activities
 
7,856
   
1,336
   
(1,603)
   
3,563
                       
Cash flows – investing activities
                     
Additions to property, plant and equipment
 
(1,041)
   
(1,013)
   
(647)
   
(687)
Dispositions of property, plant and equipment
 
257
   
155
   
170
   
192
Net decrease (increase) in GE Capital financing receivables
 
-
   
-
   
1,466
   
1,945
Proceeds from sale of discontinued operations
 
-
   
-
   
36,478
   
1,289
Proceeds from principal business dispositions
 
39
   
22
   
-
   
-
Net cash from (payments for) principal businesses purchased
 
-
   
(46)
   
-
   
(1,677)
All other investing activities
 
(614)
   
(287)
   
(9,592)
   
8,825
Cash from (used for) investing activities – continuing operations
 
(1,360)
   
(1,168)
   
27,875
   
9,887
Cash from (used for) investing activities – discontinued operations
 
-
   
4
   
7,111
   
(3,059)
Cash from (used for) investing activities
 
(1,359)
   
(1,164)
   
34,987
   
6,828
                       
Cash flows – financing activities
                     
Net increase (decrease) in borrowings (maturities of 90 days or less)
 
1,289
   
(232)
   
(169)
   
238
Newly issued debt (maturities longer than 90 days)
 
76
   
93
   
384
   
8,269
Repayments and other debt reductions (maturities longer than 90 days)
 
(150)
   
(94)
   
(14,231)
   
(12,694)
Net dispositions (purchases) of GE shares for treasury
 
(6,326)
   
239
   
-
   
-
Dividends paid to shareowners
 
(2,170)
   
(2,319)
   
(7,565)
   
(450)
All other financing activities
 
(182)
   
177
   
(415)
   
(221)
Cash from (used for) financing activities – continuing operations
 
(7,463)
   
(2,136)
   
(21,996)
   
(4,858)
Cash from (used for) financing activities – discontinued operations
 
-
   
-
   
(112)
   
(1,886)
Cash from (used for) financing activities
 
(7,463)
   
(2,136)
   
(22,108)
   
(6,744)
Effect of currency exchange rate changes on cash and equivalents
 
(108)
   
(529)
   
139
   
(3,297)
Increase (decrease) in cash and equivalents
 
(1,075)
   
(2,493)
   
11,415
   
350
Cash and equivalents at beginning of year
 
10,372
   
15,916
   
80,506
   
75,100
Cash and equivalents at March 31
 
9,297
   
13,423
   
91,921
   
75,451
Less cash and equivalents of discontinued operations at March 31
 
-
   
-
   
26,143
   
20,137
Cash and equivalents of continuing operations at March 31
$
9,297
 
$
13,423
 
$
65,778
 
$
55,314
                       
(a) Represents the adding together of all affiliated companies except GE Capital, which is presented on a one-line basis.

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

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; "GE Capital" means GE Capital Global Holdings, LLC (GECGH) and its predecessor General Electric Capital Corporation (GECC) and all of their affiliates and associated companies. Separate information is shown for "GE" and "Financial Services (GE Capital)." Transactions between GE and GE Capital have been eliminated from the "Consolidated" columns and are discussed in Note 17.

2016 1Q FORM 10-Q 61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

BASIS OF PRESENTATION

The accompanying consolidated financial statements represent the consolidation of General Electric Company (the Company) and all companies that we directly or indirectly control, either through majority ownership or otherwise. See Note 1 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2015 that discusses our consolidation and financial statement presentation. As used in this report on Form 10-Q (Report), "GE" represents the adding together of all affiliated companies except other than GE Capital (GE Capital or Financial Services), whose continuing operations are presented on a one-line basis; GE Capital consists of General Capital Global Holdings, LLC (GECGH) and all of its affiliates; and "Consolidated" represents the adding together of GE and GE Capital with the effects of transactions between the two eliminated. Unless otherwise indicated, we refer to the caption revenues and other income simply as "revenues" throughout this Form 10-Q.

We have reclassified certain prior-period amounts to conform to the current-period presentation. Certain columns and rows may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers in millions. Unless otherwise indicated, information in these notes to the consolidated financial statements relates to continuing operations.

THE GE CAPITAL EXIT PLAN

On April 10, 2015, the Company announced 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 GE Capital 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 GE Capital businesses, principally its vertical financing businesses—GE Capital Aviation Services (GECAS), Energy Financial Services (EFS) and Industrial Finance (which includes Healthcare Equipment Finance and Working Capital Solutions)—that relate to the Company's core industrial domain and other operations, including our run-off insurance activities, and allocated corporate costs (together referred to as GE Capital Verticals or Verticals). As of March 31, 2016, we have incurred $22,630 million in after-tax charges related to the GE Capital Exit Plan.

In the three months ended March 31, 2016, GE recorded $600 million of after-tax charges related to the GE Capital Exit Plan, of which $342 million was recorded in continuing operations and $258 million was recorded in discontinued operations. A description of these after-tax charges is provided below.

$289 million of charges associated with the preferred equity exchange that was completed in January 2016, which was recorded in continuing operations and reported in GE Capital's corporate component under the caption "Preferred stock dividends" in the Statement of Earnings.
$255 million of net loss primarily related to the completed and planned dispositions of most of the CLL businesses, which was recorded in discontinued operations under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings.
$56 million of restructuring and other charges, of which $4 million was recorded in discontinued operations under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings and $52 million was recorded in continuing operations and reported in GE Capital's corporate component under the caption "Selling, general and administrative expenses" in the Statement of Earnings.

For additional information about the GE Capital Exit Plan 2015 sales agreements and after-tax charges, refer to the 2015 GE Form 10-K report.

See Note 2 to the consolidated financial statements for additional information.
2016 1Q FORM 10-Q 62

INTERIM PERIOD PRESENTATION

The consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in our 2015 consolidated financial statements of our Annual Report on Form 10-K.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Please refer to Note 1, Basis of Presentation and Summary of Significant Accounting Policies, to the consolidated financial statements of our 2015 Form 10-K Report for the discussion of our significant accounting policies.

ACCOUNTING CHANGES

On January 1, 2016, we adopted ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which eliminated the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. The adoption of ASU 2015-16 did not have a material impact on the financial results reported for the period ended March 31, 2016. See Note 7 for further discussion of the purchase accounting impact of recent acquisitions.

On January 1, 2016, we adopted ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt premiums and discounts. ASU 2015-03 applies retrospectively and does not change the recognition and measurement requirements for debt issuance costs. The adoption of ASU 2015-03 resulted in the reclassification of $674 million of unamortized debt issuance costs related to the Company's borrowings from all other assets to short-term and long-term borrowings within our consolidated balance sheet as of December 31, 2015.

On January 1, 2016, we adopted ASU 2015-02, Amendments to the Consolidation Analysis. The ASU amended the consolidation guidance for VIEs and general partners' investment in limited partnerships and modified the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities.

Upon adoption, we deconsolidated three investment funds managed by GE Asset Management (GEAM) that had been accounted for under the guidance prior to the issuance of ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, by virtue of the deferral provided by ASU 2010-10, Amendments for Certain Investment Funds. We concluded that GEAM's management contracts were no longer variable interests in the three investment funds and therefore continued consolidation was not appropriate. We deconsolidated net assets and noncontrolling interests of $123 million, respectively.

In addition, many of the limited partnerships in which EFS invests became VIEs because the limited partners have no participating rights or substantive removal rights over the general partners. The general partners continue to control these limited partnerships, however, our disclosed exposure to unconsolidated VIEs in Note 16 increased by $6,110 million as a result.

ACCELERATED SHARE REPURCHASE AGREEMENTS

In March 2016, we entered into an accelerated share repurchase (ASR) agreement to repurchase shares of GE common stock. Under an ASR agreement, the Company pays a specified amount to a financial institution and receives an initial delivery of shares based on the terms of the agreement. Upon settlement of the agreement, the financial institution delivers additional shares, or the Company returns shares, with the final net number of shares calculated based on the volume-weighted average price of GE common stock over the term of the agreement, less an agreed upon discount. When certain conditions are met, the transaction is accounted for as an equity transaction and the shares are included in treasury stock when received, at which time there is an immediate reduction in the weighted average number of common shares used in calculating earnings per share.


2016 1Q FORM 10-Q 63

NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS

ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE

On January 15, 2016, we announced the signing of a definitive agreement to sell our Appliances business with assets of $2,956 million and liabilities of $1,431 million, to Qingdao Haier Co., Ltd. (Haier) for approximately $5,400 million. The transaction has been approved by our board of directors and Haier's board of directors and shareholders and remains subject to customary closing conditions, including regulatory approvals. The transaction is targeted to close in the second quarter of 2016.

On March 30, 2016, we announced an agreement to sell GE Asset Management (GEAM), GE's asset management arm with assets under management of approximately $100 billion, to State Street Corporation, for up to $485 million, subject to adjustments. The transaction remains subject to customary closing conditions and regulatory approvals, and is targeted to close in mid-2016.

FINANCIAL INFORMATION FOR ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE
       
(In millions)
March 31, 2016
 
December 31, 2015
 
         
Assets
         
Current receivables(a)
$
86
 
$
79
Inventories
 
711
   
583
Property, plant, and equipment – net
 
1,258
   
1,208
Goodwill
 
370
   
370
Other intangible assets – net
 
174
   
162
Other
 
414
 
 
416
Assets of businesses held for sale
$
3,013
 
$
2,818
 
 
 
 
 
 
Liabilities
 
 
 
 
 
Accounts payable(a)
$
615
 
$
503
Other current liabilities
 
355
   
325
Other
 
50
   
33
Liabilities of businesses held for sale
$
1,020
 
$
861
           
(a) Certain transactions at our Appliances business are made on an arms-length basis with GE Capital, consisting primarily of GE customer receivables sold to GE Capital and GE Capital services for material procurement. These intercompany balances included within our held for sale businesses are reported in the GE and GE Capital columns of our financial statements, but are eliminated in deriving our consolidated financial statements.


In November 2015, in connection with the Alstom acquisition, we sold our Transportation Signaling business to Alstom for proceeds of $800 million and recognized a pre-tax gain of $623 million. The sale transaction is subject to certain post-closing adjustments related to working capital and net debt that we expect to be finalized in 2016, but which we do not expect to have a material effect on our consolidated financial results.

DISCONTINUED OPERATIONS

Discontinued operations primarily relate to our financial services businesses as a result of the GE Capital Exit Plan and include our Consumer business, 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 Capital segment. Results of operations, financial position and cash flows for these businesses are separately reported as discontinued operations for all periods presented.

We have entered into Transitional Service Agreements (TSA) with and provided certain indemnifications to buyers of GE Capital's assets. Under the TSAs, GE Capital provides various services for terms generally between 12 and 24 months and receives a level of cost reimbursement from the buyers.

At March 31, 2016, indemnifications amounted to $1,473 million, for which we have recognized related liabilities of $135 million. In addition, we provided $434 million of credit support, the vast majority on behalf of certain commercial customers aligned with signed disposal transactions scheduled to close in 2016, and recognized an insignificant liability at March 31, 2016.
2016 1Q FORM 10-Q 64

FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS
     
                 
       
Three months ended March 31
(In millions)
       
2016
   
2015
                 
Operations
               
Total revenues and other income (loss)
     
$
1,292
 
$
5,460
                 
Earnings (loss) from discontinued operations before income taxes   
     
$
80
 
$
(4,694)
Benefit (provision) for income taxes
       
12
   
935
Earnings (loss) from discontinued operations, net of taxes