10-Q 1 ge10q1q2017.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, 2017
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.)
 
   
41 Farnsworth Street, Boston, MA
 
02210
(Address of principal executive offices)
 
(Zip Code)
 
(Registrant's telephone number, including area code) (617) 443-3000
 
_______________________________________________
(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, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
Smaller reporting company 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
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 8,683,963,000 shares of common stock with a par value of $0.06 per share outstanding at March 31, 2017.

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
13
    Corporate Items and Eliminations
31
    Discontinued Operations
33
    Other Consolidated Information
34
    Statement of Financial Position
36
    Financial Resources and Liquidity
37
    Critical Accounting Estimates
44
    Other Items
45
    Supplemental Information
48
Controls and Procedures
55
Other Financial Data
56
Legal Proceedings
57
Financial Statements and Notes
59
Exhibits
109
Form 10-Q Cross Reference Index
110
Signatures
111
   


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," "estimate," "forecast" or "target."
Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about our announced plan to combine our Oil & Gas business with Baker Hughes, including projected revenue and cost synergies, impact on our earnings per share, and the timing and structure of the proposed transaction; the completion of 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 Global Holdings, LLC's (GE Capital) retained businesses (Verticals); expected income and Industrial operating profit; earnings per share, including our 2018 target; revenues; organic growth; growth and productivity associated with our Digital and Additive businesses; margins; cost structure and plans to reduce costs; restructuring charges; transaction-related synergies and gains; cash flows, including the impact of working capital, contract assets and pension funding contributions; returns on capital and investment; capital expenditures; capital allocation, including dividends, share repurchases and acquisitions; or capital structure, including leverage.
For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:

our ability to reduce costs as we execute our announced plan to reduce the size of our financial services businesses;
changes in law, economic and financial conditions, including interest and exchange rate volatility, commodity and equity prices and the value of financial assets;
the impact of conditions in the financial and credit markets on the availability and cost of GE Capital funding, and GE Capital's exposure to counterparties;
pending and future mortgage loan repurchase claims, other litigation claims and the U.S. Department of Justice's investigation under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and other 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;
our ability to convert Industrial earnings into cash and the amount and timing 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, claims and investigations relating to WMC and other factors;
our ability to launch new products in a cost-effective manner;
our ability to increase margins through restructuring and other cost reduction measures;
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, changes in economic conditions, including oil prices, and other factors that may affect the level of demand and financial performance of the major industries and customers we serve;
the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of Alstom investigative and legal proceedings;
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 and satisfying other closing conditions for, announced transactions, such as our announced plans and transactions to combine our Oil & Gas business with Baker Hughes, to reduce the size of our financial services businesses and to sell our Water and Industrial Solutions businesses;
our success in integrating acquired businesses and operating joint ventures, including Baker Hughes;
our ability to realize revenue and cost synergies from announced transactions, acquired businesses and joint ventures, including Alstom and Baker Hughes;
the impact of potential information technology or data security breaches; and
the other factors that are described in the Risk Factors section in our Annual Report on Form 10-K for the year ended December 31, 2016.

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.


2017 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 (GE Capital or Financial Services) and its predecessor, General Electric Capital Corporation.

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

General Electric or the Company – the parent company, General Electric Company.
GE – the adding together of all affiliates except 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 – 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 (Non-GAAP), which is GE CFOA excluding the effects of dividends from GE Capital.
Industrial segment – the sum of our seven industrial reporting segments, without giving effect to the elimination of transactions among such segments and between these segments and our Financial Services segment. This provides investors with a view as to the results of our industrial segments, without inter-segment eliminations and corporate items. An example of an industrial segment metric is industrial segment revenue growth.
Total segment – the sum of our seven industrial segments and one financial services segment, without giving effect to the elimination of transactions between such segments. This provides investors with a view as to the results of all of our segments, without inter-segment eliminations and corporate items.
Verticals or GE Capital 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, Working Capital Solutions and Industrial Financing 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.

2017 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).
Continuing earnings – unless otherwise indicated, we refer to the caption "earnings from continuing operations attributable to GE common shareowners" as continuing earnings or simply as earnings.
Continuing earnings per share (EPS) – unless otherwise indicated, when we refer to continuing earnings per share, it is the diluted per-share amount of "earnings from continuing operations attributable to GE common shareowners".
Digital revenues – revenues related to internally developed software and associated hardware, including PredixTM and software solutions that improve our customers' asset performance. In 2016, we reassessed the span of our digital product offerings, which now excludes software-enabled product upgrades. These revenues are largely generated from our operating businesses and are included in their segment results. Revenues of "Non-GE Verticals" refer to GE Digital revenues from customers operating in industries where GE does not have a presence.
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 margin – GE revenues and other income excluding GE Capital earnings (loss) from continuing operations (Industrial revenues) minus GE total costs and expenses less GE interest and other financial charges divided by Industrial revenues.
Industrial operating profit margin (Non-GAAP) – Industrial segment profit plus corporate items and eliminations (excluding gains, restructuring, and non-operating pension cost) 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.
Net earnings – unless otherwise indicated, we refer to the caption "net earnings attributable to GE common shareowners" as net earnings.
Net earnings per share (EPS) – unless otherwise indicated, when we refer to net earnings per share, it is the diluted per-share amount of "net earnings attributable to GE common shareowners".
Non-operating pension cost (Non-GAAP) – comprises the expected return on plan assets, interest cost on benefit obligations and net actuarial gain (loss) amortization for our principal pension plans.
Operating earnings (Non-GAAP) – GE earnings from continuing operations attributable to common shareowners excluding the impact of non-operating pension costs.
Operating earnings per share (Non-GAAP) – unless otherwise indicated, when we refer to operating earnings per share, it is the diluted per-share amount of "operating earnings".
Operating pension cost (Non-GAAP) – comprises the service cost of benefits earned, prior service cost amortization and curtailment gain (loss) for our principal pension plans.
Organic revenues (Non-GAAP) – revenues excluding the effects of acquisitions, dispositions and translational foreign currency exchange.
2017 1Q FORM 10-Q 5


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.
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 revenues
Operating and non-operating pension cost
Adjusted corporate costs (operating)
Industrial operating and GE Capital earnings (loss) from continuing operations and EPS
Industrial operating + Verticals earnings and EPS
Industrial operating profit and operating profit margin (excluding certain items)
Industrial cash flows from operating activities (Industrial CFOA)

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 the MD&A. Non-GAAP financial measures referred to in this report are either labeled as "non-GAAP" or designated as such with an asterisk (*).

2017 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. Operational and financial overviews for our operating segments are provided in the "Segment Operations" section within this MD&A.


OUR INDUSTRIAL OPERATING SEGMENTS

Power
Aviation
Energy Connections & Lighting(a)
Renewable Energy
Healthcare
   
Oil & Gas
Transportation
   

OUR FINANCIAL SERVICES OPERATING SEGMENT

Capital

(a)
Beginning in the third quarter of 2016, the former Energy Connections and Appliances & Lighting segments are presented as one reporting segment called Energy Connections & Lighting. This segment includes the historical results of the Appliances business prior to its sale.

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 and other social media, 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.
2017 1Q FORM 10-Q 7

KEY PERFORMANCE INDICATORS
(Dollars in billions; per-share amounts in dollars)
 
 
REVENUES PERFORMANCE
 
 
 
GE CFOA
 
 
 
 
 
 
 
GE Capital Dividend
 
 
Industrial CFOA*
     
 
 
INDUSTRIAL ORDERS
 
 
 
INDUSTRIAL BACKLOG
 
 
 
 
Equipment
 
Services
 
 
 
 
 
Equipment
 
 
Services
 
 
     
 
INDUSTRIAL PROFIT & MARGINS
 
INDUSTRIAL OPERATING PROFIT & MARGINS (NON-GAAP)(a)
 
 
 
 
 
   
(a) Excluded gains on disposals, non-operating pension cost, restructuring and other charges, and noncontrolling interests
*Non-GAAP Financial Measure
2017 1Q FORM 10-Q 8

KEY PERFORMANCE INDICATORS
(Dollars in billions; per-share amounts in dollars and diluted; attributable to GE common shareowners)
 
 
NET EARNINGS (LOSS)
 
 
 
NET EARNINGS (LOSS) PER SHARE
 
 
 
 
 
 
 
 
 
OPERATING EARNINGS (NON-GAAP)
 
 
 
OPERATING EARNINGS PER SHARE (NON-GAAP)
 
 
 
 
INDUSTRIAL OPERATING +
VERTICALS EARNINGS (NON-GAAP)
 
 
INDUSTRIAL OPERATING +
VERTICALS EPS (NON-GAAP)
 
 
 

2017 1Q FORM 10-Q 9

CONSOLIDATED RESULTS


SIGNIFICANT DEVELOPMENTS IN 2017
 
Our consolidated results for 2017 were significantly affected by recent portfolio changes, including the 2015 acquisition of Alstom, the disposal of financial services businesses under the GE Capital Exit Plan initiated in 2015 and the 2016 sale of our Appliances business.
 
2017 SIGNIFICANT TRANSACTIONS
Transactions completed in 2017 included the following:
 
 On January 10, 2017, we completed the acquisition of ServiceMax, a leader in cloud-based field service management (FSM) solutions, for $0.9 billion, net of cash acquired. This acquisition is expected to provide enhanced capabilities to advance our Industrial Internet vision, enabling customers to immediately gain more value from their assets and find greater efficiency in their field service processes.
 On April 20, 2017, we completed the acquisition of LM Wind Power, one of the world's largest wind turbine blade manufacturers for an estimated $1.7 billion.
 
PLANNED TRANSACTIONS
We also announced a number of strategic transactions that we expect to complete in 2017, including the following:
 
 In October 2016, we announced an agreement with Baker Hughes Incorporated (Baker Hughes) to combine our Oil & Gas business and Baker Hughes to create a new company in which GE will hold a 62.5% interest and existing Baker Hughes shareholders will hold a 37.5% interest. Baker Hughes shareholders will also receive a cash dividend funded by a $7.4 billion cash contribution from GE. The transaction is subject to the approval of Baker Hughes shareholders, regulatory approvals and other customary closing conditions. The deal is expected to close mid-2017.
 In October 2016, we announced our plan to sell our Water & Process Technologies business. In March 2017, we announced an agreement to sell the business for approximately $3.4 billion to Suez Environnement S.A. (Suez), a French-based utility company operating primarily in the water treatment and waste management sectors. The deal is expected to close mid-2017, subject to customary closing conditions and regulatory approval.
 In the first quarter of 2017, we classified our Industrial Solutions business within our Energy Connections & Lighting segment as held for sale. We expect to complete the sale of the business within the next twelve months.
 
 
 

2017 1Q FORM 10-Q 10

CONSOLIDATED RESULTS

THREE MONTHS ENDED MARCH 31
(Dollars in billions)

 
REVENUES
 
 
INDUSTRIAL AND FINANCIAL SERVICES REVENUES

 

 

 
COMMENTARY: 2017 - 2016
   
 
Consolidated revenues decreased $0.2 billion, or 1%.
 Industrial revenues remained flat due to an increase in industrial segment revenues of approximately $0.1 billion, offset by a decrease at Corporate of $0.1 billion.  Industrial segment revenues increased as organic revenue* increases ($1.7 billion) and the net effects of acquisitions ($0.1 billion) were partially offset by the net effects of dispositions ($1.5 billion) and the effects of a stronger U.S. dollar ($0.1 billion).  In the first quarter of 2016, the net effects of acquisitions increased industrial revenues $2.8 billion while the net effects of dispositions and a stronger U.S. dollar decreased industrial revenues $0.5 billion and $0.5 billion, respectively.
 Financial Services revenues decreased by $0.2 billion, or 7%, primarily due to organic revenue declines and lower gains, partially offset by lower impairments.
 
 
















*Non-GAAP Financial Measure
2017 1Q FORM 10-Q 11



THREE MONTHS ENDED MARCH 31
(Dollars in billions; attributable to GE common shareowners)

 
 
CONTINUING EARNINGS (LOSS)
 
 
 
OPERATING EARNINGS (LOSS)*
 

 
COMMENTARY: 2017 - 2016
 
Consolidated earnings increased $0.6 billion.
 Financial Services losses decreased $0.8 billion, or 95%, primarily due to lower treasury operation expenses, lower preferred dividend expenses, and lower restructuring expenses associated with the GE Capital Exit Plan.
 Industrial earnings decreased $0.1 billion, or 3%, due to increased Corporate restructuring charges of $0.3 billion and decreased gains of $0.1 billion, partially offset by an increase in industrial segment profit of $0.3 billion.
 Industrial segment profit increased $0.3 billion, or 9%, as organic operating increases ($0.5 billion) were partially offset by the net effects of dispositions ($0.1 billion).
 The net effect of acquisitions on our consolidated operating earnings was an insignificant amount in 2017 and 2016. The net effect of dispositions on consolidated net earnings was a loss of $0.1 billion in 2017 and an insignificant amount in 2016.
 Foreign exchange adversely affected industrial operating earnings by $0.1 billion as a result of both translational and transactional impacts related to remeasurement and mark-to-market charges on open hedges.
 Earnings per share amounts for the first quarter of 2017 were positively impacted by the reduction in number of outstanding common shares compared to the first quarter of 2016. The average number of shares outstanding used to calculate first quarter 2017 earnings per share was 6% lower than in the first quarter of 2016 as a result of previously disclosed actions, primarily ongoing share buyback activities over the last 12 months funded in large part by dividends from GE Capital.



*Non-GAAP Financial Measure
2017 1Q FORM 10-Q 12

SEGMENT OPERATIONS

SUMMARY OF OPERATING SEGMENTS
                 
 
Three months ended March 31
(In millions)
 
2017
   
2016
   
V%
                 
Revenues
               
Power
$
6,089
 
$
5,204
   
 17 %
Renewable Energy
 
2,044
   
1,669
   
 22 %
Oil & Gas
 
3,001
   
3,314
   
 (9)%
Aviation
 
6,804
   
6,262
   
 9 %
Healthcare
 
4,291
   
4,183
   
 3 %
Transportation
 
1,039
   
981
   
 6 %
Energy Connections & Lighting(a)
 
2,747
   
4,256
   
 (35)%
      Total industrial segment revenues
 
26,016
   
25,869
   
 1 %
Capital
 
2,681
   
2,885
   
 (7)%
      Total segment revenues
 
28,697
   
28,754
   
 - %
Corporate items and eliminations
 
(1,037)
   
(909)
     
Consolidated revenues
$
27,660
 
$
27,845
   
 (1)%
                 
Segment profit (loss)
               
Power
$
797
 
$
573
   
 39 %
Renewable Energy
 
107
   
83
   
 29 %
Oil & Gas
 
207
   
308
   
 (33)%
Aviation
 
1,684
   
1,524
   
 10 %
Healthcare
 
643
   
631
   
 2 %
Transportation
 
156
   
164
   
 (5)%
Energy Connections & Lighting(a)
 
28
   
31
   
 (10)%
      Total industrial segment profit
 
3,622
   
3,314
   
 9 %
Capital
 
(47)
   
(892)
   
 95 %
      Total segment profit (loss)
 
3,575
   
2,422
   
 48 %
Corporate items and eliminations
 
(2,009)
   
(1,571)
     
GE interest and other financial charges
 
(564)
   
(440)
     
GE provision for income taxes
 
(143)
   
(164)
     
Earnings (loss) from continuing operations attributable to GE common shareowners
 
858
   
248
   
F
Earnings (loss) from discontinued operations, net of taxes
 
(239)
   
(308)
   
 22 %
   Less net earnings attributable to
               
      noncontrolling interests, discontinued operations
 
-
   
-
   
 - %
Earnings (loss) from discontinued operations,
               
   net of tax and noncontrolling interest
 
(239)
   
(309)
   
 23 %
Consolidated net earnings (loss)
               
   attributable to GE common shareowners
$
619
 
$
(61)
   
F
   
\
           
(a)
Beginning in the third quarter of 2016, the former Energy Connections and Appliances & Lighting segments are presented as one reporting segment called Energy Connections & Lighting. This segment includes the historical results of the Appliances business prior to its sale in June 2016.
2017 1Q FORM 10-Q 13

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. See the Corporate Items and Eliminations section within this MD&A for additional information about costs excluded from segment profit.

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, income taxes, and preferred stock dividends 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 as follows:

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.

SIGNIFICANT SEGMENT DEVELOPMENTS


SALE OF APPLIANCES

On January 15, 2016, we announced the signing of an agreement to sell our Appliances business to Haier. On June 6, 2016, we completed the sale for proceeds of $5.6 billion (including $0.8 billion from the sale of receivables originated in our Appliances business and sold from GE Capital to Haier) and recognized an after-tax gain of $1.8 billion in 2016. For the three months ended March 31, 2016, Appliances contributed revenues of $1.5 billion and an operating profit of $0.1 billion.









2017 1Q FORM 10-Q 14







SEGMENT RESULTS – THREE MONTHS ENDED MARCH 31

(Dollars in billions)
INDUSTRIAL SEGMENT EQUIPMENT
& SERVICES REVENUES
 
 
INDUSTRIAL SEGMENT PROFIT
 
 
 
Equipment
 
 
 
Services

2017 – 2016 COMMENTARY
 Industrial segment revenues increased $0.1 billion, or 1%, driven primarily by increases at Power, Renewable Energy and Aviation, partially offset by a decrease at Energy Connections & Lighting primarily due to the sale of the Appliances business in the second quarter of 2016, a decrease at Oil & Gas primarily due to market conditions, and an unfavorable foreign exchange impact.
 Industrial segment profit increased $0.3 billion, or 9%, driven primarily by higher earnings at Power and Aviation, partially offset by lower earnings at Oil & Gas as well as an unfavorable foreign exchange impact.
 Industrial segment margin increased 110 bps to 13.9% in 2017 from 12.8% in 2016 driven by higher cost productivity and simplification, partially offset by negative business mix and the effects of inflation. The increase in industrial segment margin reflects increases at Power, Aviation and Energy Connections & Lighting, offset by decreases at Oil & Gas and Transportation.

2017 1Q FORM 10-Q 15

POWER

OPERATIONAL OVERVIEW
(Dollars in billions)

2017 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
 
 (a) Includes Water & Process Technologies, Distributed Power and GE Hitachi Nuclear
                      Services  Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
 
Equipment
 
Services
 
 
 
 
 
Equipment
 
 
 
Services
 
UNIT SALES
   
 
   

2017 1Q FORM 10-Q 16



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
 
Equipment
 
 
 
Services
 
 

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2017 - 2016
       
Segment revenues up $0.9 billion (17%);
Segment profit up $0.2 billion (39%):
 
 The increase in revenues was driven by higher equipment volume, primarily at Gas Power Systems as a result of 7 more gas turbine shipments and 23 more Heat Recovery Steam Generator shipments than in the prior year. The increase in revenues was partially offset by the effects of a stronger U.S. dollar versus the Euro.
 The increase in profit was due to higher cost productivity on higher volume, partially offset by an unfavorable business mix due to higher equipment volume versus services volume.
 
Revenues
Profit
March 31, 2016
$
 5.2
$
 0.6
Volume
 
 0.9
 
 0.1
Price
 
 -
 
 -
Foreign Exchange
 
 (0.1)
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 (0.2)
Productivity
 
N/A
 
 0.3
Other
 
 -
 
 -
March 31, 2017
$
 6.1
$
 0.8
         
     


2017 1Q FORM 10-Q 17

RENEWABLE ENERGY

OPERATIONAL OVERVIEW
(Dollars in billions)

2017 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
 
 
 
 Services  Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
 
Equipment
 
Services
 
 
 
 
 
 
 
Equipment
 
 
 
Services
UNIT SALES
   
 
   

2017 1Q FORM 10-Q 18



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
 
 
 
 
Equipment
 
Services
 
 

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2017 - 2016
       
Segment revenues up $0.4 billion (22%);
Segment profit up 29%:
 
 The increase in revenues was primarily driven by higher volume due to higher equipment sales at Hydro and increased repowering projects at Onshore Wind, partially offset by 101 fewer wind turbine shipments than in the prior year. Revenue also increased due to the effects of a weaker U.S. dollar versus the Brazilian Real and increased other income including a favorable foreign exchange transactional impact.
 The increase in profit was due to material deflation and increased other income including a favorable foreign exchange transactional impact. These increases were partially offset by lower cost productivity.
 
 
Revenues
Profit
March 31, 2016
$
 1.7
$
 0.1
Volume
 
 0.3
 
 -
Price
 
 -
 
 -
Foreign Exchange
 
 0.1
 
 -
(Inflation)/Deflation
 
N/A
 
 0.1
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 (0.1)
Other
 
 0.1
 
 0.1
March 31, 2017
$
 2.0
$
 0.1
         
     



2017 1Q FORM 10-Q 19

OIL & GAS

OPERATIONAL OVERVIEW
(Dollars in billions)

2017 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
 
 
Services           Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
 
 
Equipment
Services
 
 
 
 
 
 
 
 
 
Equipment
 
 
Services

2017 1Q FORM 10-Q 20



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
 
 
 
Equipment
 
 
Services
 
 

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2017 - 2016
       
Segment revenues down $0.3 billion (9%);
Segment profit down $0.1 billion (33%):
 
 The decrease in revenues was primarily driven by negative market conditions which resulted in lower equipment volume across all sub-segments. Revenues also decreased due to lower prices.
 The decrease in operating profit was primarily market driven resulting in lower prices and volume. Despite the effects of restructuring actions and an increase in earnings in our long-term service contracts, profit also decreased due to lower cost productivity.
 
Revenues
Profit
March 31, 2016
$
 3.3
$
 0.3
Volume
 
 (0.2)
 
 -
Price
 
 (0.1)
 
 (0.1)
Foreign Exchange
 
 -
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 -
Other
 
 -
 
 -
March 31, 2017
$
 3.0
$
 0.2
         
     

2017 1Q FORM 10-Q 21

 AVIATION

OPERATIONAL OVERVIEW
(Dollars in billions)

2017 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
Services  Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
 
Equipment
Services
 
 
 
 
 
 
Equipment
 
 
Services
UNIT SALES
   
(a) LEAP engines are a subset of commercial engines
(b) Commercial externally shipped spares and spares used in time & material shop visits in millions of dollars per day
   

2017 1Q FORM 10-Q 22



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
 
 
 
Equipment
 
 
 
Services
 
 
 
 

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2017 - 2016
       
Segment revenues up $0.5 billion (9%);
Segment profit up $0.2 billion (10%):
 
 The increase in revenues was primarily due to higher services volume including an increase in the commercial spares shipment rate as well as military spares shipments. Equipment revenue decreased slightly due to 31 fewer Military engine shipments than in the prior year. This was partially offset by higher valued commercial shipments including 81 more LEAP and 16 more GEnx engine shipments than in the prior year.
 The increase in profit was mainly due to higher services volume and higher prices, partially offset by the unfavorable effects of inflation.
 
Revenues
Profit
March 31, 2016
$
 6.3
$
 1.5
Volume
 
 0.5
 
 0.1
Price
 
 0.1
 
 0.1
Foreign Exchange
 
 -
 
 -
(Inflation)/Deflation
 
N/A
 
 (0.1)
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 -
Other
 
 -
 
 -
March 31, 2017
$
 6.8
$
 1.7
     
     

2017 1Q FORM 10-Q 23

HEALTHCARE

OPERATIONAL OVERVIEW
(Dollars in billions)

2017 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
Services  Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
Equipment
Services
 
 
 
 
 
 
Equipment
 
 
Services

2017 1Q FORM 10-Q 24



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
 
 
 
Equipment
 
 
Services
 
 

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2017 - 2016
       
Segment revenues up $0.1 billion (3%);
Segment profit up 2%:
 
 The increase in revenues was due to higher services and equipment volume driven by Healthcare Systems and Life Sciences, partially offset by lower prices at Healthcare Systems.
 The increase in profit was mainly due to higher cost productivity driven by cost savings resulting from previous restructuring actions, partially offset by lower prices at Healthcare Systems.
 
Revenues
Profit
March 31, 2016
$
 4.2
$
 0.6
Volume
 
 0.2
 
 -
Price
 
 (0.1)
 
 (0.1)
Foreign Exchange
 
 -
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 0.1
Other
 
 -
 
 -
March 31, 2017
$
 4.3
$
 0.6
         
     

2017 1Q FORM 10-Q 25

 TRANSPORTATION

OPERATIONAL OVERVIEW
(Dollars in billions)

2017 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
(a) Includes Digital Solutions and Marine, Stationary & Drilling
Services  Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
Equipment
Services
 
 
 
 
 
Equipment
 
 
Services
UNIT SALES
   

2017 1Q FORM 10-Q 26



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT
 
SEGMENT PROFIT MARGIN
 
 
Equipment
 
 
 
Services
 
 

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2017 - 2016
       
Segment revenues up $0.1 billion (6%);
Segment profit down 5%:
 
 The increase in revenues was due to higher locomotive equipment volume as a result of increased international shipments, offset by decreased North America shipments. The increase in equipment volume was partially offset by lower services volume.
 The decrease in profit was due to unfavorable business mix and decreased other income including an unfavorable foreign exchange transactional impact. These decreases were partially offset by higher volume and higher cost productivity.
 
Revenues
Profit
March 31, 2016
$
 1.0
$
 0.2
Volume
 
 0.1
 
 -
Price
 
 -
 
 -
Foreign Exchange
 
 -
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
 -
Productivity
 
N/A
 
 -
Other
 
 -
 
 -
March 31, 2017
$
 1.0
$
 0.2
         
     

2017 1Q FORM 10-Q 27

ENERGY CONNECTIONS & LIGHTING

OPERATIONAL OVERVIEW
(Dollars in billions)

2017 YTD SUB-SEGMENT REVENUES
 
EQUIPMENT/SERVICES REVENUES
 
 
 
(a) Includes Current, powered by GE
                      Services  Equipment
 
ORDERS
 
BACKLOG
 
 
 
 
 
 
 
 
 
 
Equipment
Services
 
 
 
 
 
 
 
 
 
 
Equipment
 
 
 
Services

2017 1Q FORM 10-Q 28



FINANCIAL OVERVIEW
(Dollars in billions)

SEGMENT REVENUES
 
SEGMENT PROFIT (LOSS)
 
SEGMENT PROFIT MARGIN
 
 
 
 
 
Equipment
 
Services
 
 

SEGMENT REVENUES & PROFIT WALK:
 
COMMENTARY: 2017 - 2016
       
Segment revenues down $1.5 billion (35%);
Segment profit down 10%:
 
 The decrease in revenues was mainly due to the Appliances disposition in June 2016 as well as lower Lighting revenues driven by declines in traditional lighting, partially offset by increases in LED and Solar at Current. Energy Connections revenues increased primarily due to increased volume at Grid Solutions, partially offset by a decrease at Power Conversion.
 The decrease in profit was due to lower volume driven by the Appliances disposition in June 2016, partially offset by increases across Energy Connections, Current, and Lighting due to increased cost productivity.
 
Revenues
Profit
March 31, 2016
$
 4.3
$
 -
Volume
 
 (1.5)
 
 (0.1)
Price
 
 -
 
-
Foreign Exchange
 
 -
 
 -
(Inflation)/Deflation
 
N/A
 
 -
Mix
 
N/A
 
-
Productivity
 
N/A
 
 0.1
Other
 
 -
 
-
March 31, 2017
$
 2.7
$
 -
         
     



2017 1Q FORM 10-Q 29

CAPITAL

OPERATIONAL AND FINANCIAL OVERVIEW
(Dollars in billions)

2017 YTD SUB-SEGMENT REVENUES
 
SEGMENT REVENUES
 
Total Capital
Other Continuing
 
Verticals
SEGMENT PROFIT (LOSS)(a)
 
 
 

Verticals
 
Other Continuing
 
Total Capital
 
(a) Includes interest and other financial charges and income taxes.

SIGNIFICANT TRENDS & DEVELOPMENTS
As of March 30, 2017, GE Capital's non-US activities are no longer subject to consolidated supervision by the U.K.'s Prudential Regulation Authority (PRA). This completes GE Capital's global exit from consolidated supervision, having had its designation as a Systemically Important Financial Institution (SIFI) removed in June 2016.

GE Capital paid common dividends of $2.0 billion and $7.5 billion to GE in the three months ended March 31, 2017 and 2016, respectively. In April 2017, GE received an additional $2.0 billion in common dividends from GE Capital.

COMMENTARY: 2017 - 2016
   
Capital revenues decreased by $0.2 billion, or 7%, primarily due to organic revenue declines and lower gains, partially offset by lower impairments.

Capital losses decreased $0.8 billion, or 95%, primarily due to lower treasury operation expenses, lower preferred dividend expenses and lower restructuring expenses associated with the GE Capital Exit Plan.
Within Capital, Verticals net earnings increased due to lower impairments ($0.1 billion) and core increases ($0.1 billion), partially offset by lower gains ($0.1 billion).
Other Capital losses decreased by $0.8 billion, or 58%, primarily associated with the GE Capital Exit Plan as follows:
·
Lower treasury operation expenses of $0.4 billion reflecting lower 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.
·
Lower preferred dividend expenses of $0.3 billion associated with the January 2016 preferred equity exchange.
·
Lower restructuring expenses of $0.1 billion.
 
 
2017 1Q FORM 10-Q 30

CORPORATE ITEMS AND ELIMINATIONS
             
             
REVENUES AND OPERATING PROFIT (COST)
         
             
   
Three months ended March 31
(In millions)
 
2017
   
2016
             
Revenues
         
 
Gains (losses) on disposals
$
2
 
$
59
 
Eliminations and other
 
(1,039)
   
(968)
Total Corporate Items and Eliminations
$
(1,037)
 
$
(909)
             
Operating profit (cost)
         
 
Gains (losses) on disposals
 
2
   
59
 
Restructuring and other charges
$
(1,020)
 
$
(686)
 
Principal retirement plans(a)
 
(534)
   
(468)
 
Eliminations and other
 
(457)
   
(476)
Total Corporate Items and Eliminations
$
(2,009)
 
$
(1,571)
             
CORPORATE COSTS
         
             
   
Three months ended March 31
(In millions)
 
2017
 
2016
             
Total Corporate Items and Eliminations
$
(2,009)
 
$
(1,571)
Less non-operating pension cost
 
(578)
   
(512)
Total Corporate costs (operating)*
$
(1,431)
 
$
(1,059)
Less restructuring and other charges
 
(1,020)
   
(686)
Less gains (losses) on disposals
 
2
   
59
Adjusted total corporate costs (operating)*
$
(414)
 
$
(431)
             
(a)
Included non-operating pension cost* of $0.6 billion and $0.5 billion in the three months ended March 31, 2017 and 2016, respectively, which includes expected return on plan assets, interest costs and non-cash amortization of actuarial gains and losses.

2017 – 2016 COMMENTARY

Revenues and other income decreased $0.1 billion, primarily as a result of:
$0.1 billion of lower gains due to the nonrecurrence of the sale of two floors in 30 Rockefeller Plaza, New York City in the first quarter of 2016, and
$0.1 billion increase in inter-segment eliminations.

Operating costs increased $0.4 billion, primarily as a result of:
$0.3 billion higher restructuring and other charges, which included $0.2 billion of increased restructuring and other charges associated with Alstom synergy investments,
$0.1 billion of lower gains due to the nonrecurrence of the sale of two floors in 30 Rockefeller Plaza, New York City in the first quarter of 2016, and
$0.1 billion of higher costs associated with our principal retirement plans, including the effects of lower discount rates







*Non-GAAP Financial Measure

2017 1Q FORM 10-Q 31


RESTRUCTURING

Restructuring actions are an essential component of our cost improvement efforts to both existing operations and those recently acquired. Restructuring and other charges relate primarily to workforce reductions, facility exit costs associated with the consolidation of sales, service and manufacturing facilities, the integration of recent acquisitions, including Alstom, and other asset write-downs. We continue to closely monitor the economic environment and may undertake further restructuring actions to more closely align our cost structure with earnings goals.

RESTRUCTURING & OTHER CHARGES
         
   
Three months ended March 31
(In billions)
 
2017
   
2016
           
Workforce reductions
$
0.5
 
$
0.2
Plant closures & associated costs and other asset write-downs
 
0.3
   
0.1
Acquisition/disposition net charges
 
0.2
   
0.2
Other
 
-
   
0.1
Total
$
1.0
 
$
0.7
           

For the three months ended March 31, 2017, restructuring and other charges were $1.0 billion of which approximately $0.7 billion was reported in cost of products/services and $0.4 billion was reported in other costs and expenses (SG&A). These activities were primarily at Power, Corporate and Energy Connections & Lighting. Cash expenditures for restructuring and other charges were approximately $0.6 billion for three months ended March 31, 2017.

For the three months ended March 31, 2016, restructuring and other charges were $0.7 billion of which approximately $0.4 billion was reported in cost of products/services and $0.2 billion was reported in other costs and expenses (SG&A). These activities were primarily at Oil & Gas, Power and Healthcare. Cash expenditures for restructuring and other charges were approximately $0.4 billion for the three months ended March 31, 2016.

COSTS NOT INCLUDED IN SEGMENT RESULTS

As discussed in the Segment Operations section within the MD&A, 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. The amount of costs not included in segment results follows.

COSTS
         
           
 
Three months ended March 31
(In billions)
 
2017
   
2016
           
Power
$
0.4
 
$
0.2
Renewable Energy
 
-
   
-
Oil & Gas
 
0.1
   
0.2
Aviation
 
-
   
-
Healthcare
 
0.1
   
0.1
Transportation
 
0.1
   
-
Energy Connections & Lighting
 
0.2
   
0.1
Total
$
0.8
 
$
0.7
           
2017 1Q FORM 10-Q 32

DISCONTINUED OPERATIONS

Discontinued operations primarily relate to our financial services businesses as a result of the GE Capital Exit Plan and includes our 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, 2017, we provided specific indemnifications to buyers of GE Capital's assets that amounted to $2.6 billion, for which we have recognized related liabilities of $0.3 billion. In addition, in connection with the 2015 public offering and sale of our North American Retail Finance business, Synchrony Financial, GE Capital indemnified Synchrony Financial and its directors, officers, and employees against the liabilities of GECC's businesses other than historical liabilities of the businesses that are part of Synchrony Financial's ongoing operations.

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

FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS
           
 
Three months ended March 31
(In millions)
2017
 
2016
           
Earnings (loss) from discontinued operations, net of taxes
$
(239)
 
$
(308)
           

The first quarter 2017 loss from discontinued operations, net of taxes, primarily reflected the following:
$0.1 billion after-tax loss from operations, and
$0.1 billion after-tax loss on disposals.

The first quarter 2016 loss from discontinued operations, net of taxes, primarily reflected the following:
$0.4 billion after-tax loss on disposals, and
$0.1 billion after-tax earnings from operations.

See Note 2 to the consolidated financial statements for additional information related to discontinued operations.
2017 1Q FORM 10-Q 33

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 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 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 (BENEFIT) FOR INCOME TAXES
2017 – 2016 COMMENTARY


The consolidated income tax rate was 2% and a negative 74% for the quarters ended March 31, 2017 and 2016, respectively.
The first quarter 2017 consolidated tax rate reflects a 92% tax rate on $0.1 billion of pre-tax loss at GE Capital and a 15% tax rate on $1.0 billion of pre-tax income at GE.
The first quarter 2016 consolidated tax rate reflects a 36% tax rate on $0.9 billion of pre-tax loss at GE Capital and a 14% tax rate on $1.2 billion of pre-tax income at GE.
Consolidated income tax expense was insignificant in the first quarter of 2017 and a tax benefit of $0.2 billion for the first quarter of 2016.  The increase in tax expense is primarily due to a larger adjustment to bring the first quarter rate in-line with the higher projected full-year rate, the increase in pretax income taxed at above the average tax rate, partially offset by a larger benefit from global activities.
The consolidated tax provision includes $0.1 billion and $0.2 billion for GE (excluding GE Capital) for the first quarters of 2017 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.  We expect the GE effective tax rate to be in the mid-teens for the full year of 2017.
2017 1Q FORM 10-Q 34


BENEFITS FROM GLOBAL OPERATIONS

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.
2017 1Q FORM 10-Q 35

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, 2017

Cash and equivalents decreased $6.6 billion. GE Cash and equivalents decreased $2.7 billion due to dividends of $2.1 billion, cash used for industrial operating activities of $1.6 billion, treasury stock net purchases of $1.6 billion (cash basis), settlement of the remaining portion of a short-term loan from GE Capital of $1.3 billion, business acquisitions of $1.0 billion and net PP&E additions of $0.6 billion. The decrease was partially offset by long-term intercompany loans from GE Capital of $4.1 billion and common dividends from GE Capital of $2.0 billion. GE Capital Cash and equivalents decreased $3.9 billion primarily driven by $8.2 billion net repayments of debt, long-term intercompany loans to GE of $4.1 billion and $2.0 billion in payments of dividends to shareowners, partially offset by $3.0 billion in net collections of financing receivables, $2.7 billion in maturities of liquidity investments, $1.8 billion of proceeds from borrowings assumed by the buyer in a business disposition, $1.5 billion related to cash collections from discontinued operations and $1.3 billion maturity of a short-term loan to GE. See the Statement of Cash Flows section for additional information.
Contract assets increased $2.2 billion, primarily due to adjustments driven by lower forecasted cost to complete the contracts and timing of billings relative to revenue recognition on our long-term equipment and service contracts.
Assets of discontinued operations decreased $5.0 billion, primarily due to the disposition of businesses. See Note 2 to the consolidated financial statements for additional information.
Borrowings decreased $7.8 billion, primarily due to net repayment of debt at GE Capital. See Note 10 to the consolidated financial statements for additional information.
Liabilities of discontinued operations decreased $2.4 billion, primarily driven by the disposition of businesses. See Note 2 to the consolidated financial statements for additional information.
Common stock held in treasury increased $1.8 billion, primarily due to treasury stock purchases of $2.3 billion (book basis), partially offset by treasury stock issuances of $0.6 billion.
2017 1Q FORM 10-Q 36

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, with a balance of $2.0 billion at March 31, 2017, that we regularly use to fund operations in the U.S., principally within the quarters.

During 2017, GE plans to incur new long-term debt to refinance existing unsecured term debt, finance the Baker Hughes transaction, and for other corporate purposes. This new debt may consist of new unsecured term debt issued by GE or intercompany arrangements between GE and GE Capital utilizing GE Capital's excess unsecured term debt. During the first quarter of 2017, GE and GE Capital entered into a series of intercompany loans totaling $4.1 billion, which utilized a portion of GE Capital's excess unsecured term debt.  Such intercompany loans collectively have a weighted average interest rate and term of 3.6% and approximately 15 years, respectively. The remaining $1.3 billion short-term intercompany loan balance at December 31, 2016 was paid by GE in January 2017.

Based on asset and liability management actions we have taken, GE Capital does not plan to issue any incremental GE Capital senior unsecured term debt until 2019. GE Capital's global commercial paper balance totaled $5.0 billion at March 31, 2017. GE Capital mainly relies on excess cash positions, cash generated through dispositions, and the cash flow from our Verticals to fund our debt maturities, including the current portion of long-term debt ($16.3 billion at March 31, 2017), and our operating and interest 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 continue to have excess interest costs as asset sales have outpaced 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.

We maintain a detailed liquidity policy for GE Capital that defines GE Capital's liquidity risk tolerance under stress based on its liquidity sources, and a comprehensive framework for managing liquidity risk including metrics to identify and monitor liquidity risk and procedures to escalate and address potential issues.

In 2015, senior unsecured notes and commercial paper were assumed by GE upon its merger with GE Capital resulting in an intercompany receivable and payable between GE and GE Capital. On the GE balance sheet, assumed debt is presented within borrowings with an offsetting receivable from GE Capital and on the GE Capital balance sheet, this is reflected as an intercompany payable to GE within borrowings. The intercompany receivable and payable are further reduced by certain intercompany loans from GE Capital to GE, which bear the right of offset against amounts owed under the assumed debt agreement (see Note 10 for additional information). The following table illustrates total GE and GE Capital external debt and debt assumed by GE as of March 31, 2017.

March 31, 2017 (In billions)
   
GE
   
GE Capital
   
Consolidated(a)
                   
External debt
 
$
74.0
 
$
55.8
 
$
128.7
                   
   Debt assumed by GE from GE Capital
   
(54.4)
   
54.4
   
-
   Intercompany loans
   
4.1
   
(4.1)
   
-
Total intercompany payable (receivable) between GE and GE Capital
   
(50.3)
   
50.3
   
-
                   
Debt adjusted for assumed debt and intercompany loans
 
$
23.7
 
$
106.1
 
$
128.7
                   
(a) Includes $1.2 billion elimination of other intercompany borrowings between GE and GE Capital.

2017 1Q FORM 10-Q 37


LIQUIDITY SOURCES

In addition to GE cash of $7.9 billion at March 31, 2017, GE Capital maintained liquidity sources of $43.4 billion that consisted of cash and equivalents of $33.7 billion, high-quality investments of $8.9 billion and cash and equivalents of $0.8 billion classified as discontinued operations. Additionally, at March 31, 2017, GE has $20.0 billion of committed unused credit lines extended by 36 banks in a syndicated credit facility agreement, as well as $5.1 billion of committed unused operating lines extended by nine banks. GE Capital has the right to compel GE to borrow under these credit lines and transfer the proceeds as loans to GE Capital.

CASH AND EQUIVALENTS
               
(In billions)
 
March 31, 2017
       
March 31, 2017
               
GE(a)
$
7.9
   
U.S.
$
6.6
GE Capital(b)
 
33.7
   
Non-U.S.(c)
 
35.0
               
(a)
At March 31, 2017, $3.5 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, 2017, GE Capital cash and equivalents of about $0.3 billion was primarily in insurance entities and was subject to regulatory restrictions.
(c)
Of this amount at March 31, 2017, $0.7 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.

During the first quarter of 2017, there were no new senior unsecured debt issuances.

COMMERCIAL PAPER
           
(In billions)
GE
 
GE Capital
           
Average commercial paper borrowings during the first quarter of 2017
$
14.8
 
$
5.0
Maximum commercial paper borrowings outstanding during the first quarter of 2017
 
19.7
   
5.2
           
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. At March 31, 2017, consolidated non-recourse securitization borrowings were $0.7 billion.

GE GUARANTEE OF CERTAIN GE CAPITAL DEBT

GE provides implicit and explicit support to GE Capital through commitments, capital contributions and operating support. At March 31, 2017, debt assumed by GE from GE Capital in connection with the merger of GE Capital into GE was $54.4 billion, and GE guaranteed $45.3 billion of GE Capital debt. See Note 20 to the consolidated financial statements for further information on the guarantor financial statements.

FOREIGN CURRENCY EXPOSURE

As a result of our global operations, we generate and incur a significant portion of our revenues and expenses in currencies other than the U.S. dollar. Such principal currencies are euro, the pound sterling, the Brazilian real and the Chinese renminbi. The results of operating entities reported in currencies other than U.S. dollar are translated to the U.S. dollar at the applicable exchange rate for inclusion in the financial statements. We use a number of techniques to manage the effects of currency exchange, including selective borrowings in local currencies and selective hedging of significant cross-currency transactions. The foreign currency effect arising from operating activities outside of the U.S., including the remeasurement of derivatives, can result in significant transactional foreign currency fluctuations at points in time, but will generally be offset as the underlying hedged item is recognized in earnings. The effects of foreign currency fluctuations, decreased net earnings by $0.1 billion for the three months ended March 31, 2017.

2017 1Q FORM 10-Q 38

See Notes 16 and 21 to the consolidated financial statements for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.

STATEMENT OF CASH FLOWS - THREE MONTHS ENDED MARCH 31, 2017 VERSUS 2016

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.

GE CASH FLOWS – THREE MONTHS ENDED MARCH 31
(In billions)

OPERATING CASH FLOWS
 
INVESTING CASH FLOWS
 
FINANCING CASH FLOWS
                     
2016
 
  2017
 
2016
 
 2017
 
2016
 
2017
 
 
 
 
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.

All other operating activities reflect cash sources and uses as well as non-cash adjustments to net income including those related to taxes, interest, pension, contract assets and gains (losses) on principal business dispositions. See Note 21 to the consolidated financial statements for further information.

See the Intercompany Transactions between GE and GE Capital section within the MD&A and Notes 4 and 19 to the consolidated financial statements for further information regarding certain transactions affecting our consolidated Statement of Cash Flows.
2017 1Q FORM 10-Q 39

2017 – 2016 COMMENTARY

GE cash from operating activities decreased $7.5 billion primarily due to the following:
GE Capital paid common dividends totaling $2.0 billion and $7.5 billion to GE in the three months ended March 31, 2017 and 2016, respectively.
Cash used for industrial operating activities of $1.6 billion in the three months ended March 31, 2017, compared to cash generated of $0.4 billion in the three months ended March 31, 2016, primarily due to the following:
Net income plus depreciation of $1.5 billion and $1.8 billion in the three months ended March 31, 2017 and 2016, respectively.
Cash used for working capital of $1.3 billion and $1.1 billion in the three months ended March 31, 2017 and 2016, respectively. The increase in cash used for working capital was primarily due to decreases in progress collections, partially offset by a decrease in inventory build.
An increase in contract assets of $1.9 billion and $0.7 billion in the three months ended March 31, 2017 and 2016, respectively, primarily due to adjustments driven by lower forecasted cost to complete the contracts and timing of billings relative to revenue recognition on our long-term equipment and service contracts.
See Note 21 to the consolidated financial statements for further information regarding cash sources and uses as well as non-cash adjustments to net income reported as All other operating activities.

GE cash used for investing activities increased $0.5 billion primarily due to the following:
An increase in business acquisition activities of $1.0 billion, primarily driven by the acquisition of ServiceMax for $0.9 billion (net of cash acquired) in the three months ended March 31, 2017.
This is partially offset by the funding of a joint venture at our Aviation business of $0.3 billion in the three months ended March 31, 2016.

GE cash used for financing activities decreased $6.2 billion primarily due to the following:
Net repurchases of GE treasury shares of $1.6 billion and $6.3 billion (including $2.0 billion paid under ASR agreements) in the three months ended March 31, 2017 and 2016, respectively.
A net increase in borrowings of $1.4 billion, driven by long-term loans from GE Capital to GE of $4.1 billion in the three months ended March 31, 2017, partially offset by the settlement of the remaining balance of a short-term loan from GE Capital to GE of $1.3 billion and a decrease of GE issued unsecured notes of $0.5 billion.

GE CAPITAL CASH FLOWS – THREE MONTHS ENDED MARCH 31
(In billions)

OPERATING CASH FLOWS
 
INVESTING CASH FLOWS
 
FINANCING CASH FLOWS
                     
2016
 
2017
 
     2016
 
2017
 
  2016
 
2017
 
 
 
 
 

2017 1Q FORM 10-Q 40

2017 – 2016 COMMENTARY – CONTINUING OPERATIONS:

GE Capital cash from operating activities-continuing operations increased $0.5 billion primarily due to the following:
Lower income tax payments of $1.8 billion, lower assets originated as held for sale of $0.5 billion and a general increase in cash generated from earnings of continuing operations.
These increases were partially offset by a net decrease in cash collateral received from counterparties on derivative contracts of $2.0 billion.

GE Capital cash from investing activities-continuing operations decreased $21.1 billion primarily due to the following:
Net proceeds from the sales of our discontinued operations of $0.8 billion compared to $36.5 billion in 2016.
Loans originated from GE Capital to GE of $4.1 billion offset by a $1.3 billion settlement of the remaining portion of a 2016 short-term loan from GE Capital to GE.
Net cash received from derivative settlements of $0.2 billion compared to $0.7 billion in 2016.
These decreases were partially offset by the following increases:
Investment in interest bearing deposits of $3.6 billion in 2016.
Maturity of liquidity investments of $2.7 billion in 2017.
Higher net collections of financing receivables of $1.5 billion in 2017.
Reduction in funding related to discontinued operations.

GE Capital cash used for financing activities-continuing operations decreased $11.1 billion primarily due to the following:
GE Capital paid common dividends to GE totaling $2.0 billion compared to $7.5 billion in 2016.
Lower net repayments of borrowings of $8.2 billion compared to $14.0 billion in 2016.

GE CAPITAL DISCONTINUED OPERATIONS CASH FLOWS – THREE MONTHS ENDED
MARCH 31
(In billions)

OPERATING CASH FLOWS
 
INVESTING CASH FLOWS
 
FINANCING CASH FLOWS
                       
2016
 
2017
 
     2016
 
2017
 
  2016
2017
 
 
 
 
 
2017 – 2016 COMMENTARY – DISCONTINUED OPERATIONS:

GE Capital cash used for operating activities-discontinued operations decreased $0.6 billion primarily due to the following:
Lower cash paid for income taxes in 2017.

GE Capital cash from investing activities-discontinued operations decreased $9.0 billion primarily due to the following:
Lower cash of $5.6 billion primarily related to disposition proceeds retained in discontinued operations in 2016.
Reduction in funding from continuing operations (primarily our treasury operations).
Sale of bank deposits for $0.5 billion in net cash paid related to our Consumer platform during 2017.

GE Capital cash used for financing activities-discontinued operations decreased $2.0 billion primarily due to the following:
Debt issued of $1.8 billion by a discontinued business sold during the first quarter of 2017.
2017 1Q FORM 10-Q 41

INTERCOMPANY TRANSACTIONS BETWEEN GE AND GE CAPITAL

We are repositioning GE to be the world's best infrastructure and technology company, with a smaller financial services division. Our focus is on driving infrastructure leadership, investing in innovation and achieving a culture of simplification to better serve our customers around the world. Over the last decade, we have made significant strides in transforming our portfolio and focusing on our industrial leadership. We have grown our infrastructure platforms with major portfolio moves, investing in adjacencies and pursuing opportunities that are closely related to our core.

In parallel, we have made a concentrated effort to reduce the size of our GE Capital business and align its growth with Industrial earnings. As a result, GE Capital vertical businesses are now focused on investing financial, human and intellectual capital to promote growth for our industrial businesses and their customers. GE Capital accomplishes this in part through related party transactions with GE that are made on an arms-length basis and are reported in the respective GE and GE Capital columns of our financial statements, but are eliminated in deriving our consolidated financial statements. These transactions include, but are not limited to, the following:

GE Capital dividends to GE,
GE Capital working capital solutions to optimize GE cash management,
GE Capital enabled GE industrial orders, and
Aircraft engines, power equipment and healthcare equipment manufactured by GE that are installed on GE Capital investments, including leased equipment.

In addition to the above transactions that primarily enable growth for the GE businesses, there are routine related party transactions, which include, but are not limited to, the following:

Expenses related to parent-subsidiary pension plans,
Buildings and equipment leased between GE and GE Capital, including sale-leaseback transactions,
Information technology (IT) and other services sold to GE Capital by GE, and
Various investments, loans and allocations of GE corporate overhead costs.

CASH FLOWS

GE Capital paid $2.0 billion and $7.5 billion of common dividends to GE in the three months ended March 31, 2017 and 2016, respectively. In April 2017, GE received an additional $2.0 billion in common dividends from GE Capital.

In order to manage credit exposure, GE sells current receivables to GE Capital and other third parties 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 and other third parties. GE also leverages GE Capital for its expertise in receivables collection services and sales of receivables to GE Capital are made on an arm's length basis. The incremental amount of cash received from sales of receivables represents the cash generated or used in the period relating to this activity. The effect of cash generated in GE CFOA from current receivables sold to GE Capital, including current receivables subsequently sold to third parties, decreased GE's CFOA by $3.3 billion and $2.1 billion in the three months ended March 31, 2017 and 2016, respectively.

As of March 31, 2017, GE Capital had approximately $10.0 billion recorded on its balance sheet related to current receivables purchased from GE. Of these amounts, approximately half had been sold by GE to GE Capital with recourse (i.e., the GE business retains the risk of default). The evaluation of whether recourse transactions qualify for accounting derecognition is based, in part, upon the legal jurisdiction of the sale; as such, the majority of recourse transactions outside the U.S. qualify for sale treatment. Claims by GE Capital on receivables sold with recourse to GE have not been significant for the three months ended March 31, 2017 and 2016.

In December 2016, GE Capital entered into a Receivables Facility with members of a bank group, designed to provide extra liquidity to GE. The Receivables Facility allows us to sell eligible current receivables on a non-recourse basis for cash and a deferred purchase price to members of the bank group. The purchase commitment of the bank group remains at $3.0 billion at March 31, 2017. See Note 4 to the consolidated financial statements for further information.

2017 1Q FORM 10-Q 42


ENABLED ORDERS

Enabled orders represent the act of introducing, elevating and influencing customers and prospects that result in an industrial sale, potentially coupled with programmatic captive financing or driving incremental products or services across the GE Store. During the three months ended March 31, 2017 and 2016, GE Capital enabled $2.2 billion and $1.6 billion of GE industrial orders, respectively. March 31, 2017 orders are primarily with our Power ($0.9 billion), Renewable Energy ($0.7 billion) and Healthcare ($0.2 billion) businesses.

AVIATION

During the three months ended March 31, 2017 and 2016, GE Capital acquired 9 aircraft (list price totaling $1.1 billion) and 10 aircraft (list price totaling $1.0 billion), respectively, from third parties that will be leased to others, which are powered by engines that were manufactured by GE Aviation and affiliates. Additionally, GE Capital had $1.6 billion and $1.5 billion of net book value of engines, originally manufactured by GE Aviation and affiliates and subsequently leased back to GE Aviation and affiliates at March 31, 2017 and December 31, 2016, respectively.

POWER AND RENEWABLE ENERGY

GE leverages GE Capital for its expertise in structuring long-term financing arrangements with certain Power and Renewable Energy customers for the purchase of equipment, upgrades and long-term service contracts. These arrangements are made on an arm's length basis and fair value adjustments are recognized within the results of our Power and Renewable Energy segments. Any associated deferred income recorded by GE Capital is eliminated in our consolidated results. In relation to these arrangements, GE Capital had approximately $1.9 billion of long-term financing receivables outstanding, net of deferred income of approximately $0.3 billion reported on its balance sheet at March 31, 2017.

PENSIONS

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. The additional funding obligations recognized by GE Capital were $0.1 billion and $0.2 billion for the three months ended March 31, 2017 and 2016, respectively.

Certain of this additional funding is recorded as a contra pension expense for GE because GE's related future pension obligations will be paid by GE Capital. For certain other pension plan funding obligations triggered by the GE Capital Exit Plan, GE agreed to assume the funding obligation that would have been triggered by GE Capital at the date of exit from the plan in exchange for an assumption fee that GE recorded as Other income. The total cash transferred to GE for the assumption of these GE Capital funding obligations was $0.1 billion for the three months ended March 31, 2016. There were no similar funding obligations assumed by GE from GE Capital in the three months ended March 31, 2017.

On a consolidated basis, the additional required pension funding and any related assumption fees do not affect current period earnings. Any additional required pension funding will be reflected as a reduction of the pension liability when paid.

GE GUARANTEE OF GE CAPITAL THIRD-PARTY TRANSACTIONS

In certain instances, GE provides guarantees to GE Capital transactions with third parties primarily in connection with enabled orders. In order to meet its underwriting criteria, GE Capital may obtain a direct guarantee from GE related to the performance of the third party. GE guarantees can take many forms and may include, but not be limited to, direct performance or payment guarantees, return on investment guarantees, asset value guarantees and loss pool arrangements. As of March 31, 2017, GE had outstanding guarantees to GE Capital on $1.8 billion of funded exposure and $0.5 billion of unfunded commitments. The recorded amount of these contingent liabilities was $0.1 billion as of March 31, 2017 and is dependent upon individual transaction level defaults, losses and/or returns.

2017 1Q FORM 10-Q 43


GE GUARANTEE OF CERTAIN GE CAPITAL DEBT

GE provides implicit and explicit support to GE Capital through commitments, capital contributions and operating support. As previously discussed, debt assumed by GE from GE Capital in connection with the merger of GE Capital into GE was $54.4 billion, and GE guaranteed $45.3 billion of GE Capital debt at March 31, 2017. See Notes 10 and 19 to the consolidated financial statements for additional information.

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 24, 2017, for a discussion of our accounting policies and the critical accounting estimates we use to: recognize revenue on long-term product services agreements; 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.
2017 1Q FORM 10-Q 44

OTHER ITEMS

NEW ACCOUNTING STANDARDS

ASU NO. 2016-16, ACCOUNTING FOR INCOME TAXES: INTRA-ENTITY ASSET TRANSFERS OF ASSETS OTHER THAN INVENTORY

In October 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The ASU eliminates the deferral of the tax effects of intra-entity asset transfers other than inventory. As a result, the tax expense from the intercompany sale of assets, other than inventory, and associated changes to deferred taxes will be recognized when the sale occurs even though the pre-tax effects of the transaction have not been recognized. The effect of the adoption of the standard will depend on the nature and amount of future transactions.

ASU NO. 2016-02, LEASES

In February 2016, the FASB issued 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 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 the ASU may materially affect our Statement of Financial Position.

ASU NO. 2014-09, REVENUE FROM CONTRACTS WITH CUSTOMERS

In May 2014, the FASB issued a new comprehensive set of revenue recognition principles (ASU No. 2014-09, Revenue from Contracts with Customers) that supersedes most existing U.S. GAAP revenue recognition guidance (including ASC 605-35, Revenue Recognition- Construction-Type and Production-Type Contracts). The new standard will become effective for annual reporting periods beginning after December 15, 2017. We will adopt the standard on January 1, 2018, will apply it retrospectively to all periods presented and will elect the practical expedient for contract modifications. We chose to adopt retrospectively because we believe that it is the most helpful to our investors. When we adopt the standard in 2018 we will provide investors with a consistent view of historical trends, as 2016 and 2017 will be on a basis consistent with 2018.

Please refer to our 2016 10-K filing for incremental discussion of the expected financial statement effects of the adoption of the standard, including an initial estimate of the non-cash charge to our January 1, 2016 retained earnings, the estimated change to our 2016 reported earnings per share and the expected impact to 2018 earnings per share. As described in our 2016 10-K, these estimates are based on many variables, which are subject to change. As we continue to work through the implementation effort required to adopt the standard, we will continue to refine these initial estimates.
2017 1Q FORM 10-Q 45

GE DIGITAL

In late 2015, we created GE Digital, whose activities are focused on assisting in the market development of our digital product offerings through software design, fulfillment and product management, while also interfacing with our customers. Digital revenues include internally developed software and associated hardware, including Predix and software solutions that improve our customers' asset performance. These revenues are largely generated from our operating businesses and are included in their segment results.

GE Digital revenues were $0.9 billion for the three months ended March 31, 2017, an increase of $0.1 billion, or 16%, compared to revenues of $0.8 billion for the three months ended March 31, 2016 and were principally driven by expansion of our Digital offerings in GE's Power, Oil & Gas and Energy Connections & Lighting segments and non-GE Verticals.

GE Digital orders were $0.9 billion for both the three months ended March 31, 2017 and 2016, respectively. Digital orders increased for GE's Power, Oil & Gas, Renewable Energy and Healthcare segments and for non-GE Verticals. These increases were largely offset by decreases at Transportation and Energy Connections & Lighting.

In addition, on January 10, 2017, we completed the acquisition of ServiceMax, a leader in cloud-based field service management (FSM) solutions, for $0.9 billion, net of cash acquired. This acquisition is expected to provide enhanced capabilities to advance our Industrial Internet vision, enabling customers to immediately gain more value from their assets and find greater efficiency in their field service processes.
.
2017 1Q FORM 10-Q 46

IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT OF 2012

The Company is making the following disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934.

Under Section 13(r) of the Securities Exchange Act of 1934, enacted in 2012, GE is required to disclose in its periodic reports if it or any of its affiliates knowingly engaged in business activities relating to Iran, even if those activities are conducted in accordance with authorizations subsequently issued by the U.S. Government. Reportable activities include investments that significantly enhance Iran's ability to develop petroleum resources valued at $20 million or more in the aggregate during a twelve-month period. Reporting is also required for transactions related to Iran's domestic production of refined petroleum products or Iran's ability to import refined petroleum products valued at $5 million or more in the aggregate during a twelve-month period.

In January 2016, the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) issued General License H authorizing U.S.-owned or controlled foreign entities to engage in transactions with Iran if these entities meet the requirements of the general license. Pursuant to this authorization, a non-U.S. affiliate of GE's Oil & Gas business received two sets of purchase orders during the first quarter of 2017 for the sale of goods pursuant to General License H that could potentially enhance Iran's ability to develop petroleum resources. The purchase orders cover the sale of spare parts for gas turbine equipment for ultimate end use by Iranian companies in gas production projects in Iran.   These purchase orders are valued at €10.0 million ($10.6 million) and €6.4 million ($6.8 million).  The non-US affiliate also booked a modification of a previously reported contract to add additional scope valued at €2.0 million ($2.2 million).  The non-US affiliate booked three purchase orders during the first quarter of 2017 for which it had received incomplete documentation during prior quarters.  These three purchase orders are valued at €0.2 million ($0.2 million), €0.1 million ($0.1 million), and less than €0.1 million (less than $0.1 million).  This non-US affiliate has not recognized any revenue as of March 31, 2017 for these or any previously reported transactions, but has incurred €2.7 million ($2.9 million) in costs.  

A second non-U.S. affiliate of GE's Oil & Gas business received a purchase order pursuant to General License H valued at €0.3 million ($0.3 million) during the first quarter of 2017 for the sale of services associated with the commissioning of gas compressors in Iran.  As of March 31, 2017, gross revenues attributable to this purchase order was €0.3 million ($0.3 million), and net profits attributable to this purchase order was €0.2 million ($0.2 million).  This non-U.S. affiliate also attributed gross revenues of €0.2 million ($0.2 million) and net profits of €0.1 million ($0.1 million) during the first quarter of 2017 to a previously reported transaction.
 
A third non-U.S. affiliate of GE's Oil & Gas business received purchase orders pursuant to General License H valued at €0.3 million ($0.3 million) during the first quarter of 2017 for the sale of production logging equipment and spare parts to an Iranian customer.  As of March 31, 2017, the non-US affiliate has not yet recognized revenue or profit associated with this transaction.
  
All of these non-U.S. affiliates intend to continue the activities described above.

For additional information on business activities related to Iran, please refer to the Other Items section within MD&A in our Annual Report on Form 10-K for the year ended December 31, 2016.
2017 1Q FORM 10-Q 47

SUPPLEMENTAL INFORMATION


FINANCIAL MEASURES THAT SUPPLEMENT U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES MEASURES (NON-GAAP FINANCIAL MEASURES)

We sometimes use information derived from consolidated financial information 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 U.S. Securities and Exchange Commission rules. Specifically, we have referred to:

Industrial segment organic revenues
Operating and non-operating pension cost
Adjusted corporate costs (operating)
Industrial operating and GE Capital earnings (loss) from continuing operations and EPS
Industrial operating + Verticals earnings and EPS
Industrial operating profit and operating profit margin (excluding certain items)
Industrial cash flows from operating activities (Industrial CFOA)

The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow.

2017 1Q FORM 10-Q 48

INDUSTRIAL SEGMENT ORGANIC REVENUES
                 
 
Three months ended March 31
(Dollars in millions)
 
2017
   
2016
   
V%
                 
Industrial segment revenues (GAAP)
 
26,016
   
25,869
   
 1 %
Less adjustments:
               
   Acquisitions
 
132
   
1
     
   Business dispositions (other than dispositions of businesses acquired for investment)
 
10
   
1,556
     
   Currency exchange rates
 
(108)
   
-
     
Industrial segment organic revenues (Non-GAAP)
$
25,981
 
$
24,312
   
 7 %
                 

Organic revenue growth measures revenue growth excluding the effects of acquisitions, business dispositions and currency exchange rates. We believe that this measure provides management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and currency exchange, which activities are subject to volatility and can obscure underlying trends. We also believe that presenting organic revenue growth separately for our industrial businesses provides management and investors with useful information about the trends of our industrial businesses and enables a more direct comparison to other non-financial businesses and companies. Management recognizes that the term "organic revenue growth" may be interpreted differently by other companies and under different circumstances. Although this may have an effect on comparability of absolute percentage growth from company to company, we believe that these measures are useful in assessing trends of the respective businesses or companies and may therefore be a useful tool in assessing period-to-period performance trends.
2017 1Q FORM 10-Q 49

OPERATING AND NON-OPERATING PENSION COST
           
 
Three months ended March 31
(In millions)
2017
 
2016
           
Service cost for benefits earned
$
289
 
$
315
Prior service cost amortization
 
73
   
76
Curtailment loss
 
43
   
-
Operating pension cost (Non-GAAP)
 
405
   
391
           
Expected return on plan assets
 
(849)
   
(834)
Interest cost on benefit obligations
 
717
   
734
Net actuarial loss amortization
 
710
   
612
Non-operating pension cost (Non-GAAP)
 
578
   
512
Total principal pension plans cost (GAAP)
$
983
 
$
903
           

We have provided the operating and non-operating components of cost for our principal pension plans. Operating pension cost comprises the service cost of benefits earned, prior service cost amortization and curtailment loss for our principal pension plans. Non-operating pension cost comprises the expected return on plan assets, interest cost on benefit obligations and net actuarial loss amortization for our principal pension plans. We believe that the operating components of pension cost better reflect the ongoing service-related cost of providing pension benefits to our employees. We believe that the operating and non-operating components of cost for our principal pension plans, considered along with the corresponding GAAP measure, provide management and investors with additional information for comparison of our pension plan cost and operating results with the pension plan cost and operating results of other companies.

ADJUSTED CORPORATE COSTS (OPERATING)
         
             
   
Three months ended March 31
(In millions)
 
2017
 
2016
             
Total Corporate Items and Eliminations (GAAP)
$
(2,009)
 
$
(1,571)
Less: non-operating pension cost (Non-GAAP)
 
(578)
   
(512)
Total Corporate costs (operating) (Non-GAAP)
$
(1,431)
 
$
(1,059)
Less: restructuring and other charges, and gains (losses) on disposals
 
(1,018)
   
(627)
Adjusted total corporate costs (operating) (Non-GAAP)
$
(414)
 
$
(431)
             
Operating corporate costs exclude non-service-related pension cost of our principal pension plans, which comprise interest cost, expected return on plan assets and amortization of actuarial gains/losses. Service cost, prior service cost and curtailment loss components of our principal pension plans are included in operating corporate costs. We believe that these components of pension cost better reflect the ongoing service-related costs of providing pension benefits to our employees. Accordingly, we believe that our measure of operating corporate costs provides management and investors with a useful measure of the operational costs incurred outside of our businesses. We believe that this measure, considered along with the corresponding GAAP measure, provides management and investors with additional information for comparison of our operating corporate costs to the operating corporate costs of other companies.

We also believe that adjusting operating corporate costs to exclude the effects of items that are not closely associated with ongoing corporate operations, such as earnings of previously divested businesses, gains and losses on disposed and held for sale businesses, and restructuring and other charges, provides management and investors with a meaningful measure that increases the period-to-period comparability of our ongoing corporate costs.
2017 1Q FORM 10-Q 50

INDUSTRIAL OPERATING AND GE CAPITAL EARNINGS (LOSS) FROM CONTINUING OPERATIONS AND EPS
     
 
Three months ended March 31
(Dollars in millions; except per share amounts)
 
2017
   
2016
 
V%
               
Consolidated earnings (loss) from continuing operations attributable to GE common shareowners (GAAP)
$
858
 
$
248
 
F
   Non-operating pension cost
 
578
   
512
   
   Tax effect on non-operating pension cost(a)
 
(202)
   
(179)
   
Adjustment: non-operating pension cost (net of tax)
 
376
   
333
 
13%
Operating earnings (loss) (Non-GAAP)
 
1,234
   
581
   
               
Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareowners
 
(47)
   
(892)
   
Industrial operating earnings (loss) (Non-GAAP)
$
1,281
 
$
1,473
 
(13)%
               
Earnings (loss) per share – diluted(b)
             
Consolidated EPS from continuing operations attributable to GE common shareowners (GAAP)
$
0.10
 
$
0.03
 
F
Adjustment: non-operating pension cost (net of tax)
 
0.04
   
0.04
   
Operating EPS (Non-GAAP)
 
0.14
   
0.06
 
F
Less: GE Capital EPS from continuing operations attributable to GE common shareowners (GAAP)
 
(0.01)
   
(0.10)
 
90%
Industrial operating EPS (Non-GAAP)
$
0.14
 
$
0.16
 
(13)%
               
(a)
The tax effect of non-operating pension cost was calculated using a 35% U.S. federal statutory tax rate, based on its applicability to such cost.
(b)
Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total.

Operating earnings (loss) excludes non-service related pension costs of our principal pension plans, which comprise interest cost, expected return on plan assets and amortization of actuarial gains/losses. Service cost, prior service cost and curtailment loss components of our principal pension plans are included in operating earnings. We believe that these components of pension cost better reflect the ongoing service-related costs of providing pension benefits to our employees. As such, we believe that our measure of operating earnings (loss) provides management and investors with a useful measure of the operational results of our business. Other components of GAAP pension cost are mainly driven by capital allocation decisions and market performance, and we manage these separately from the operational performance of our businesses. Neither GAAP nor operating pension cost are necessarily indicative of the current or future cash flow requirements related to our pension plans. We also believe that this measure, considered along with the corresponding GAAP measure, provides management and investors with additional information for comparison of our operating results to the operating results of other companies. We believe that presenting operating earnings separately for our industrial businesses also provides management and investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company.
2017 1Q FORM 10-Q 51

INDUSTRIAL OPERATING + VERTICALS EARNINGS AND EPS
   
               
   
Three months ended March 31
(Dollars in millions; except per share amounts)
 
2017
   
2016
 
V%
               
GE Capital earnings (loss) from continuing operations attributable to GE common shareowners (GAAP)
$
(47)
 
$
(892)
 
95%
Less: GE Capital other continuing earnings (loss) (Other Capital)
 
(582)
   
(1,389)
   
Verticals earnings(a)
 
535
   
496
 
8%
Industrial operating earnings (Non-GAAP)
 
1,281
 
 
1,473
 
(13)%
Industrial operating earnings + Verticals earnings (Non-GAAP)
$
1,816
 
$
1,970
 
(8)%
               
Earnings (loss) per share - diluted(b)
             
GE Capital EPS from continuing operations attributable to GE common shareowners (GAAP)
$
(0.01)
 
$
(0.10)
 
90%
Less: GE Capital other continuing EPS (Other Capital)
 
(0.07)
   
(0.15)
   
Verticals EPS
 
0.06
   
0.05
 
20%
Industrial operating EPS (Non-GAAP)
 
0.14
   
0.16
 
(13)%
Industrial operating + Verticals EPS (Non-GAAP)
$
0.21
  $
0.21
 
0%
               
(a)
Verticals include businesses expected to be retained (GECAS, Energy Financial Services, Industrial Finance, and run-off insurance activities), including allocated corporate after-tax costs of $25 million in both the three months ended March 31, 2017 and 2016.
(b)
Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total.

As described above, Verticals represents the GE Capital businesses that we expect to retain. We believe that presenting Industrial operating + Verticals earnings-per-share amounts provides management and investors with a useful measure to evaluate the performance of the businesses we expect to retain after the disposition of most of our financial services business.

See below for a graphic presentation of the reconciliation between GAAP EPS from continuing operations to the Industrial operating + Verticals EPS.


INDUSTRIAL OPERATING + VERTICALS EARNINGS AND EPS(a)
 
 
 
 
 
 
 
 
 
 
Industrial operating & Verticals
$0.21
 
Non-operating pension & other Capital
$(0.11)
 
 
 
 
 
 
 
 
Industrial operating & Verticals
$0.21
 
 
Non-operating pension & other Capital
$(0.18)
GAAP Continuing EPS
 
 $0.10    $0.03

(a)
Earnings-per-share amounts are computed independently. As a result, the sum of per share amounts may not equal the total.

2017 1Q FORM 10-Q 52

INDUSTRIAL OPERATING PROFIT AND OPERATING PROFIT MARGIN (EXCLUDING CERTAIN ITEMS)
           
 
Three months ended March 31
(Dollars in millions)
2017
   
2016
           
Revenues
         
   GE total revenues and other income
$
25,481
 
$
24,607
     Less: GE Capital earnings (loss) from continuing operations
 
(47)
   
(892)
   GE revenues and other income excluding GE Capital earnings (Industrial revenues) (GAAP)
$
25,528
 
$
25,499
           
      Less: gains on disposals
 
2
   
59
   Adjusted Industrial revenues (Non-GAAP)
 
25,526
   
25,440
           
Costs
         
   GE total costs and expenses
$
24,558
 
$
24,313
     Less: GE interest and other financial charges
 
564
   
440
   Industrial costs excluding interest and other financial charges (GAAP)
$
23,994
 
$
23,873
           
      Less: non-operating pension cost
 
578
   
512
      Less: restructuring and other charges
 
1,020
   
686
      Less: noncontrolling interests
 
78
   
117
   Adjusted Industrial costs (Non-GAAP)
$
22,318
 
$
22,558
           
   Industrial profit (GAAP)
$
1,534
 
$
1,626
   Industrial margins (GAAP)
 
6.0%
   
6.4%
           
   Industrial operating profit (Non-GAAP)
$
3,208
 
$
2,883
   Industrial operating profit margins (Non-GAAP)
 
12.6%
   
11.3%
   
.
     

We have presented our Industrial operating profit and operating profit margin excluding gains, non-operating pension cost, restructuring and other, noncontrolling interests, GE Capital preferred stock dividends. We believe that Industrial operating profit and operating profit margin adjusted for these items are meaningful measures because they increase the comparability of period-to-period results.

2017 1Q FORM 10-Q 53

INDUSTRIAL CASH FLOWS FROM OPERATING ACTIVITIES (INDUSTRIAL CFOA)
               
 
Three months ended March 31
(Dollars in millions)
 
2017
   
2016
 
V%
               
Cash from GE's operating activities (continuing operations), as reported (GAAP)
$
370
 
$
7,902
 
(95)%
Adjustments: dividends from GE Capital
 
2,000
   
7,500
   
Industrial CFOA (Non-GAAP)
$
(1,630)
 
$
402
 
U
               

We define "Industrial CFOA" as GE's cash from operating activities (continuing operations) less the amount of dividends received by GE from GE Capital. This reflects the effects of intercompany transactions, which include, but are not limited to, the following: GE Capital working capital solutions to optimize GE cash management; GE Capital enabled GE industrial orders; aircraft engines, power equipment and healthcare equipment manufactured by GE that are installed on GE Capital investments, including leased equipment; expenses related to parent-subsidiary pension plans; buildings and equipment leased between GE and GE Capital, including sale-leaseback transactions; information technology (IT) and other services sold to GE Capital by GE; and various investments, loans and allocations of GE corporate overhead costs.

We believe that investors may find it useful to compare GE's operating cash flows without the effect of GE Capital dividends, since these dividends are not representative of the operating cash flows of our industrial businesses and can vary from period to period based upon the results of the financial services businesses. Management recognizes that these measures may not be comparable to cash flow results of companies which contain both industrial and financial services businesses, but believes that this comparison is aided by the provision of additional information about the amounts of dividends paid by our financial services business and the separate presentation in our financial statements of the GE Capital cash flows. We believe that our measure of Industrial CFOA provides management and investors with useful measures to compare the capacity of our industrial operations to generate operating cash flow with the operating cash flow of other non-financial businesses and companies and as such provides useful measures to supplement the reported GAAP CFOA measure.

2017 1Q FORM 10-Q 54

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 (i) our disclosure controls and procedures were effective as of March 31, 2017, and (ii) no change in internal control over financial reporting occurred during the quarter ended March 31, 2017, that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

2017 1Q FORM 10-Q 55

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
per share
 
program(a)
 
program(a)
 
(Shares in thousands)
                   
                     
2017
                   
January(b)
 
28,507
$
30.61
 
28,507
       
February
 
23,399
 
29.81
 
23,399
       
March
 
26,070
 
29.76
 
26,070
       
Total
 
77,976
$
30.09
 
77,976
$
22.3
 billion
 
                     
 (a)
Shares were repurchased through the 2015 GE Share Repurchase Program (the Program). As of March 31, 2017, we were authorized to repurchase up to $50.0 billion of our common stock through 2018 and we had repurchased a total of approximately $27.7 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.
(b)
Includes 10,773 thousand shares repurchased at an average price of $31.45 per share pursuant to an ASR agreement we entered in the fourth quarter of 2016. For further discussion on ASRs, see Note 15 to the consolidated financial statements of our 2016 annual report on Form 10-K.

2017 1Q FORM 10-Q 56

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, 2016.

WMC. There are 11 lawsuits in which our discontinued U.S. mortgage business, WMC, is a party. The adverse parties in 10 of 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. In September 2016, WMC and Deutsche Bank agreed to settle all claims arising out of the four securitizations at issue in the Connecticut lawsuits, subject to judicial approvals.  In October 2016, Deutsche Bank filed petitions for instruction in California state court seeking judicial instructions that Deutsche Bank's entry into the settlement agreements was a reasonable exercise of its discretion and approving the distribution of settlement proceeds pursuant to the terms of each trust's governing documents. No bondholder in any of these securitizations has objected to the proposed settlements.

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. In September 2016, WMC and Deutsche Bank agreed to settle all claims arising out of the two securitizations at issue in this lawsuit, subject to judicial approvals. In October 2016, Deutsche Bank filed petitions for instruction in California state court seeking judicial instructions that Deutsche Bank's entry into the settlement agreements was a reasonable exercise of its discretion and approving the distribution of settlement proceeds pursuant to the terms of each trust's governing documents. On March 30 and April 2, 2017, bondholders in these two securitizations filed objections to the proposed settlements. The court has set an initial hearing on these objections for July 27, 2017. 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.

2017 1Q FORM 10-Q 57


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, and the United States Court of Appeals for the Second Circuit heard oral argument on June 10, 2016. In September 2016, WMC and Deutsche Bank agreed to settle all claims arising out of the securitization at issue in this lawsuit, subject to judicial approval.  In October 2016, Deutsche Bank filed a petition for instruction in California state court seeking judicial instructions that Deutsche Bank's entry into the settlement agreement was a reasonable exercise of its discretion and approving the distribution of settlement proceeds pursuant to the terms of the trust's governing documents. No bondholder in this securitization has objected to the proposed settlement. The court has set a hearing on this petition, and the other petitions filed by Deutsche Bank referenced above to which no objection has been filed, for June 16, 2017.

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, 2017. See Note 18 to the consolidated financial statements for additional information.

On January 23, 2017, the ResCap Liquidating Trust, as successor to Residential Funding Company, LLC (RFC), filed a lawsuit seeking unspecified damages against WMC in the United States District Court for the District of Minnesota arising from alleged breaches in representations and warranties made by WMC in connection with the sale of approximately $840 million in loans to RFC over a period of time preceding RFC's filing for bankruptcy protection in May 2012.

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 to WMC and GE Capital, and we are cooperating with the Justice Department's investigation, including providing documents and witnesses for interviews.

Alstom legacy matters. In connection with our acquisition of Alstom's Thermal, Renewables and Grid businesses in November 2015, we are subject to legacy legal proceedings and legal compliance risks that relate to claimed anti-competitive conduct or improper payments by Alstom in the pre-acquisition period.  See Note 18 to the consolidated financial statements for additional information. These include legacy matters related to alleged improper payments by Alstom in connection with contracts won in 2006 and 2008 for work on a state-owned power plant in Šoštanj, Slovenia. In January and February 2017, respectively, the power plant owner filed an arbitration claim for damages of approximately $430 million before the International Chamber of Commerce Court of Arbitration in Vienna, Austria, and a government investigation in Slovenia of the same underlying conduct proceeded to an investigative phase overseen by a judge of the Celje District Court.

2017 1Q FORM 10-Q 58

FINANCIAL STATEMENTS AND NOTES

Statement of Earnings (Loss)
60
Consolidated Statement of Comprehensive Income (Loss)
62
Consolidated Statement of Changes in Shareowners' Equity
63
Statement of Financial Position
64
Statement of Cash Flows
66
Notes to Consolidated Financial Statements
 
 
1
 
Basis of Presentation and Summary of Significant Accounting Policies
68
 
2
 
Businesses Held for Sale and Discontinued Operations
69
 
3
 
Investment Securities
71
 
4
 
Current Receivables
72
 
5
 
Inventories
73
 
6
 
GE Capital Financing Receivables and Allowance for Losses on Financing Receivables
73
 
7
 
Property, Plant and Equipment
74
 
8
 
Acquisitions, Goodwill and Other Intangible Assets
74
 
9
 
Contract Assets
76
 
10
 
Borrowings
77
 
11
 
Postretirement Benefit Plans
78
 
12
 
Income Taxes
79
 
13
 
Shareowners' Equity
80
 
14
 
Earnings Per Share Information
84
 
15
 
Fair Value Measurements
85
 
16
 
Financial Instruments
88
 
17
 
Variable Interest Entities
94
 
18
 
Commitments, Guarantees, Product Warranties and Other Loss Contingencies
96
 
19
 
Intercompany Transactions
99
 
20
 
Guarantor Financial Information
101
 
21
 
Supplemental Information
106
         
         
         
         

2017 1Q FORM 10-Q 59

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)
2017
 
2016
           
Revenues and other income
         
Sales of goods
$
16,812
 
$
17,208
Sales of services
 
8,416
   
8,106
Other income
 
168
   
9
GE Capital earnings (loss) from continuing operations
 
-
   
-
GE Capital revenues from services
 
2,264
   
2,522
   Total revenues and other income
 
27,660
   
27,845
           
Costs and expenses
         
Cost of goods sold
 
14,490
   
14,588
Cost of services sold
 
5,869
   
5,773
Selling, general and administrative expenses
 
4,506
   
4,608
Interest and other financial charges
 
1,139
   
1,736
Investment contracts, insurance losses and
         
   insurance annuity benefits
 
634
   
642
Other costs and expenses
 
190
   
259
   Total costs and expenses
 
26,829
   
27,606
           
Earnings (loss) from continuing operations before income taxes
 
832
   
238
Benefit (provision) for income taxes
 
(16)
   
177
Earnings (loss) from continuing operations
 
816
   
415
Earnings (loss) from discontinued operations, net of taxes (Note 2)
 
(239)
   
(308)
Net earnings (loss)
 
577
   
107
Less net earnings (loss) attributable to noncontrolling interests
 
(76)
   
(121)
Net earnings (loss) attributable to the Company
 
653
   
228
Preferred stock dividends
 
(34)
   
(289)
Net earnings (loss) attributable to GE common shareowners
$
619
 
$
(61)
           
Amounts attributable to GE common shareowners
         
   Earnings (loss) from continuing operations
$
816
 
$
415
   Less net earnings (loss) attributable to noncontrolling interests,
         
      continuing operations
 
(76)
   
(122)
   Earnings (loss) from continuing operations attributable to the Company
 
892
   
537
   Preferred stock dividends
 
(34)
   
(289)
   Earnings (loss) from continuing operations attributable
         
       to GE common shareowners
 
858
   
248
   Earnings (loss) from discontinued operations, net of taxes
 
(239)
   
(308)
   Less net earnings (loss) attributable to
         
       noncontrolling interests, discontinued operations
 
-
   
-
Net earnings (loss) attributable to GE common shareowners
$
619
 
$
(61)
           
Per-share amounts (Note 14)
         
   Earnings (loss) from continuing operations
         
      Diluted earnings (loss) per share
$
0.10
 
$
0.03
      Basic earnings (loss) per share
$
0.10
 
$
0.03
           
   Net earnings (loss)
         
      Diluted earnings (loss) per share
$
0.07
 
$
(0.01)
      Basic earnings (loss) per share
$
0.07
 
$
(0.01)
           
Dividends declared per common share
$
0.24
 
$
0.23
           
Amounts may not add due to rounding.

See accompanying notes.

2017 1Q FORM 10-Q 60

                       
                       
                       
STATEMENT OF EARNINGS (LOSS) (CONTINUED)
(UNAUDITED)
                     
                       
 
Three months ended March 31
 
GE(a)
 
Financial Services (GE Capital)
(In millions; per-share amounts in dollars)
2017
 
2016
 
2017
 
2016
                       
Revenues and other income
                     
Sales of goods
$
16,838
 
$
17,213
 
$
29
 
$
25
Sales of services
 
8,554
   
8,194
   
-
   
-
Other income
 
137
   
92
   
-
   
-
GE Capital earnings (loss) from continuing operations
 
(47)
   
(892)
   
-
   
-
GE Capital revenues from services
 
-
   
-
   
2,652
   
2,860
   Total revenues and other income
 
25,481
   
24,607
   
2,681
   
2,885
                       
Costs and expenses
                     
Cost of goods sold
 
14,522
   
14,597
   
23
   
20
Cost of services sold
 
5,452
   
5,293
   
562
   
568
Selling, general and administrative expenses
 
4,020
   
3,982
   
574
   
874
Interest and other financial charges
 
564
   
440
   
812
   
1,430
Investment contracts, insurance losses and
                     
   insurance annuity benefits
 
-
   
-
   
636
   
671
Other costs and expenses
 
-
   
-
   
214
   
268
   Total costs and expenses
 
24,558
   
24,313
   
2,820
   
3,833
                       
Earnings (loss) from continuing operations before income taxes
 
923
   
294
   
(139)
   
(948)
Benefit (provision) for income taxes
 
(143)
   
(164)
   
128
   
341
Earnings (loss) from continuing operations
 
780
   
130
   
(11)
   
(608)
Earnings (loss) from discontinued operations, net of taxes (Note 2)
 
(239)
   
(309)
   
(242)
   
(308)
Net earnings (loss)
 
541
   
(178)
   
(253)
   
(916)
Less net earnings (loss) attributable to noncontrolling interests
 
(78)
   
(117)
   
2
   
(4)
Net earnings (loss) attributable to the Company
 
619
   
(61)
   
(256)
   
(912)
Preferred stock dividends
 
-
   
-
   
(34)
   
(289)
Net earnings (loss) attributable to GE common shareowners
$
619
 
$
(61)
 
$
(290)
 
$
(1,201)
                       
Amounts attributable to GE common shareowners:
                     
   Earnings (loss) from continuing operations
$
780
 
$
130
 
$
(11)
 
$
(608)
   Less net earnings (loss) attributable to noncontrolling interests,
                     
       continuing operations
 
(78)
   
(117)
   
2
   
(4)
   Earnings (loss) from continuing operations attributable to the Company
 
858
   
248
   
(13)
   
(603)
   Preferred stock dividends
 
-
   
-
   
(34)
   
(289)
   Earnings (loss) from continuing operations attributable
                     
      to GE common shareowners
 
858
   
248
   
(47)
   
(892)
   Earnings (loss) from discontinued operations, net of taxes 
 
(239)
   
(309)
   
(242)
   
(308)
   Less net earnings (loss) attributable to
                     
      noncontrolling interests, discontinued operations
 
-
   
-
   
-
   
-
Net earnings (loss) attributable to GE common shareowners
$
619
 
$
(61)
 
$
(290)
 
$
(1,201)
                       
(a)
Represents the adding together of all affiliated companies except GE Capital, which is presented on a one-line basis. See Note 1.

Amounts may not add due to rounding.
In the consolidating data on this page, "GE" means the basis of consolidation as described in Note 1 to the consolidated financial statements; "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.
2017 1Q FORM 10-Q 61

GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
         
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
           
 
Three months ended March 31
(In millions)
 
2017
   
2016
           
Net earnings (loss)
$
577
 
$
107
Less net earnings (loss) attributable to noncontrolling interests
 
(76)
   
(121)
Net earnings (loss) attributable to the Company
$
653
 
$
228
           
Other comprehensive income (loss)
         
   Investment securities
$
(52)
 
$
220
   Currency translation adjustments
 
815
   
1
   Cash flow hedges
 
20
   
55
   Benefit plans
 
1,049
   
550
Other comprehensive income (loss)
 
1,833
   
826
Less other comprehensive income (loss) attributable to noncontrolling interests
 
6
   
2
Other comprehensive income (loss) attributable to the Company
$
1,827
 
$
824
           
Comprehensive income (loss)
$
2,410
 
$
933
Less comprehensive income (loss) attributable to noncontrolling interests
 
(70)
   
(119)
Comprehensive income (loss) attributable to the Company
$
2,479
 
$
1,052
           
Amounts presented net of taxes.
Amounts may not add due to rounding.
See accompanying notes.

2017 1Q FORM 10-Q 62

GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
         
CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS' EQUITY
(UNAUDITED)
           
 
Three months ended March 31
(In millions)
 
2017
   
2016
           
Shareowners' equity balance at January 1
$
75,828
 
$
98,274
Net earnings (loss) attributable to the Company
 
653
   
228
Dividends and other transactions with shareowners
 
(2,128)
   
(2,429)
Redemption value adjustment for redeemable noncontrolling interests
 
(73)
   
(32)
Other comprehensive income (loss) attributable to the Company
 
1,827
   
824
Net sales (purchases) of shares for treasury
 
(1,795)
   
(5,503)
Changes in other capital
 
224
   
(274)
Ending balance at March 31
 
74,534
   
91,088
Noncontrolling interests
 
1,639
   
1,667
Total equity balance at March 31
$
76,173
 
$
92,755
           

Amounts may not add due to rounding.

See accompanying notes.



2017 1Q FORM 10-Q 63

STATEMENT OF FINANCIAL POSITION
 
General Electric Company
 
and consolidated affiliates
(In millions, except share amounts)
March 31, 2017
 
December 31, 2016
   
(Unaudited)
     
Assets
         
Cash and equivalents
$
41,564
 
$
48,129
Investment securities (Note 3)
 
41,949
   
44,313
Current receivables (Note 4)
 
21,675
   
24,076
Inventories (Note 5)
 
22,701
   
22,354
Financing receivables – net (Note 6)
 
12,243
   
12,242
Other GE Capital receivables
 
5,804
   
5,944
Property, plant and equipment – net (Note 7)
 
49,016
   
50,518
Receivable from GE Capital (debt assumption)
 
-
   
-
Investment in GE Capital
 
-
   
-
Goodwill (Note 8)
 
70,313
   
70,438
Other intangible assets – net (Note 8)
 
16,515
   
16,436
Contract assets (Note 9)
 
27,382
   
25,162
All other assets
 
27,668
   
27,176
Deferred income taxes (Note 12)
 
953
   
1,833
Assets of businesses held for sale (Note 2)
 
4,076
   
1,745
Assets of discontinued operations (Note 2)
 
9,786
   
14,815
Total assets(a)
$
351,643
 
$
365,183
           
Liabilities and equity
         
Short-term borrowings (Note 10)
$
28,324
 
$
30,714
Accounts payable, principally trade accounts
 
13,698
   
14,435
Progress collections and price adjustments accrued
 
16,583
   
16,760
Dividends payable
 
2,109
   
2,107
Other GE current liabilities
 
17,097
   
17,564
Non-recourse borrowings of consolidated securitization entities (Note 10)
 
668
   
417
Long-term borrowings (Note 10)
 
99,674
   
105,080
Investment contracts, insurance liabilities and insurance annuity benefits
 
26,301
   
26,086
Non-current compensation and benefits
 
43,035
   
43,780
All other liabilities
 
22,041
   
22,912
Liabilities of businesses held for sale (Note 2)
 
1,144
   
656
Liabilities of discontinued operations (Note 2)
 
1,741
   
4,158
Total liabilities(a)
 
272,416
   
284,668
           
Redeemable noncontrolling interests (Note 13)
 
3,054
   
3,025
           
Preferred stock (5,944,250 shares outstanding at both March 31, 2017
         
   and December 31, 2016)
 
6
   
6
Common stock (8,683,963,000 and 8,742,614,000 shares outstanding
         
   at March 31, 2017 and December 31, 2016, respectively)
 
702
   
702
Accumulated other comprehensive income (loss) – net attributable to GE(b)
         
   Investment securities
 
622
   
674
   Currency translation adjustments
 
(6,004)
   
(6,816)
   Cash flow hedges
 
32
   
12
   Benefit plans
 
(11,421)
   
(12,469)
Other capital
 
37,448
   
37,224
Retained earnings
 
137,983
   
139,532
Less common stock held in treasury
 
(84,833)
   
(83,038)
Total GE shareowners' equity
 
74,534
   
75,828
Noncontrolling interests(c) (Note 13)
 
1,639
   
1,663
Total equity (Note 13)
 
76,173
   
77,491
Total liabilities, redeemable noncontrolling interests and equity
$
351,643
 
$
365,183
           
(a)
Our consolidated assets at March 31, 2017 included total assets of $5,917 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 $1,512 million and investment securities of $976 million within continuing operations and assets of discontinued operations of $677 million. Our consolidated liabilities at March 31, 2017 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 $(668) million within continuing operations. See Note 17.
(b)
The sum of accumulated other comprehensive income (loss) (AOCI) attributable to the Company was $(16,771) million and $(18,598) million at March 31, 2017 and December 31, 2016, respectively.
(c)
Included AOCI attributable to noncontrolling interests of $(272) million and $(278) million at March 31, 2017 and December 31, 2016, respectively.
Amounts may not add due to rounding.

See accompanying notes.

2017 1Q FORM 10-Q 64

STATEMENT OF FINANCIAL POSITION (CONTINUED)
                       
 
GE(a)
 
Financial Services (GE Capital)
(In millions, except share amounts)
March 31, 2017
 
December 31, 2016
 
March 31, 2017
 
December 31, 2016
   
(Unaudited)
         
(Unaudited)
     
Assets
                     
Cash and equivalents
$
7,875
 
$
10,525
 
$
33,689
 
$
37,604
Investment securities (Note 3)
 
200
   
137
   
41,754
   
44,180
Current receivables (Note 4)
 
12,646
   
12,715
   
-
   
-
Inventories (Note 5)
 
22,615
   
22,263
   
86
   
91
Financing receivables – net (Note 6)
 
-
   
-
   
23,853
   
26,041
Other GE Capital receivables
 
-
   
-
   
14,825
   
15,576
Property, plant and equipment – net (Note 7)
 
18,955
   
19,103
   
30,962
   
32,225
Receivable from GE Capital (debt assumption) (b)
 
50,317
   
58,780
   
-
   
-
Investment in GE Capital
 
22,792
   
24,677
   
-
   
-
Goodwill (Note 8)
 
67,946
   
68,070
   
2,368
   
2,368
Other intangible assets – net (Note 8)
 
16,225
   
16,131
   
290
   
305
Contract assets (Note 9)
 
27,382
   
25,162
   
-
   
-
All other assets
 
12,049
   
12,007
   
15,202
   
14,608
Deferred income taxes (Note 12)
 
6,426
   
6,666
   
(5,473)
   
(4,833)
Assets of businesses held for sale (Note 2)
 
3,812
   
1,629
   
-
   
-
Assets of discontinued operations (Note 2)
 
-
   
9
   
9,786
   
14,806
Total assets
$
269,240
 
$
277,874
 
$
167,341
 
$
182,970
                       
Liabilities and equity
                     
Short-term borrowings(b) (Note 10)
$
16,860
 
$
20,482
 
$
21,654
 
$
23,443
Accounts payable, principally trade accounts
 
19,766
   
20,876
   
2,047
   
1,605
Progress collections and price adjustments accrued
 
16,657
   
16,838
   
-
   
-
Dividends payable
 
2,109
   
2,107
   
-
   
-
Other GE current liabilities
 
17,097
   
17,564
   
-
   
-
Non-recourse borrowings of consolidated securitization entities (Note 10)
 
-
   
-
   
668
   
417
Long-term borrowings(b) (Note 10)
 
57,142
   
58,810
   
83,824
   
93,443
Investment contracts, insurance liabilities and insurance annuity benefits
 
-
   
-
   
26,880
   
26,546
Non-current compensation and benefits
 
42,053
   
42,770
   
973
   
1,001
All other liabilities
 
17,446
   
17,506
   
6,500
   
7,430
Liabilities of businesses held for sale (Note 2)
 
1,144
   
656
   
-
   
-
Liabilities of discontinued operations (Note 2)
 
23
   
35
   
1,718
   
4,123
Total liabilities
 
190,298
   
197,644
   
144,264
   
158,008
                       
Redeemable noncontrolling interests (Note 13)
 
3,054
   
3,025
   
-
   
-
                       
Preferred stock (5,944,250 shares outstanding at both December 31, 2016
                     
   and December 31, 2015)
 
6
   
6
   
6
   
6
Common stock (8,683,963,000 and 8,742,614,000 shares outstanding
                     
   at March 31, 2017 and December 31, 2016, respectively)
 
702
   
702
   
-
   
-
Accumulated other comprehensive income (loss) – net attributable to GE
                     
   Investment securities
 
622
   
674
   
577
   
656
   Currency translation adjustments
 
(6,004)
   
(6,816)
   
(338)
   
(740)
   Cash flow hedges
 
32
   
12
   
30
   
43
   Benefit plans
 
(11,421)
   
(12,469)
   
(560)
   
(622)
Other capital
 
37,448
   
37,224
   
12,703
   
12,669
Retained earnings
 
137,983
   
139,532
   
10,375
   
12,664
Less common stock held in treasury
 
(84,833)
   
(83,038)
   
-
   
-
Total GE shareowners' equity
 
74,534
   
75,828
   
22,792
   
24,677
Noncontrolling interests (Note 13)
 
1,354
   
1,378
   
285
   
285
Total equity (Note 13)
 
75,888
   
77,205
   
23,077
   
24,962
Total liabilities, redeemable noncontrolling interests and equity
$
269,240
 
$
277,874
 
$
167,341
 
$
182,970
                       
(a)
Represents the adding together of all affiliated companies except GE Capital, which is presented on a one-line basis. See Note 1.
(b)
In 2015, senior unsecured notes and commercial paper were assumed by GE upon its merger with GE Capital, resulting in an intercompany receivable and payable between GE and GE Capital. See Note 10.
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.

2017 1Q FORM 10-Q 65

STATEMENT OF CASH FLOWS
(UNAUDITED)
         
 
Three months ended March 31
 
General Electric Company
 
 and consolidated affiliates
(In millions)
2017
 
2016
           
Cash flows – operating activities
         
Net earnings (loss)
$
577
 
$
107
Less net earnings (loss) attributable to noncontrolling interests
 
(76)
   
(121)
Net earnings (loss) attributable to the Company
 
653
   
228
(Earnings) loss from discontinued operations
 
239
   
308
Adjustments to reconcile net earnings (loss) attributable to the
         
   Company to cash provided from operating activities
         
      Depreciation and amortization of property, plant and equipment
 
1,193
   
1,210
      (Earnings) loss from continuing operations retained by GE Capital
 
-
   
-
      Deferred income taxes
 
(29)
   
(158)
      Decrease (increase) in GE current receivables
 
2,356
   
1,013
      Decrease (increase) in inventories
 
(818)
   
(1,491)
      Increase (decrease) in accounts payable
 
(292)
   
258
      Increase (decrease) in GE progress collections
 
(276)
   
632
      All other operating activities
 
(2,060)
   
(103)
Cash from (used for) operating activities – continuing operations
 
967
   
1,897
Cash from (used for) operating activities – discontinued operations
 
(658)
   
(1,252)
Cash from (used for) operating activities
 
309
   
644
           
Cash flows – investing activities
         
Additions to property, plant and equipment
 
(1,470)
   
(1,556)
Dispositions of property, plant and equipment
 
812
   
316
Net decrease (increase) in GE Capital financing receivables
 
306
   
(11)
Proceeds from sale of discontinued operations
 
789
   
36,478
Proceeds from principal business dispositions
 
81
   
39
Net cash from (payments for) principal businesses purchased
 
(967)
   
-
All other investing activities
 
4,970
   
(10,593)
Cash from (used for) investing activities – continuing operations
 
4,520
   
24,672
Cash from (used for) investing activities – discontinued operations
 
(1,871)
   
7,112
Cash from (used for) investing activities
 
2,649
   
31,783
           
Cash flows – financing activities
         
Net increase (decrease) in borrowings (maturities of 90 days or less)
 
777
   
983
Newly issued debt (maturities longer than 90 days)
 
326
   
459
Repayments and other debt reductions (maturities longer than 90 days)
 
(8,666)
   
(14,381)
Net dispositions (purchases) of GE shares for treasury
 
(1,578)
   
(6,326)
Dividends paid to shareowners
 
(2,084)
   
(2,234)
All other financing activities
 
(959)
   
(508)
Cash from (used for) financing activities – continuing operations
 
(12,185)
   
(22,007)
Cash from (used for) financing activities – discontinued operations
 
1,907
   
(112)
Cash from (used for) financing activities
 
(10,278)
   
(22,119)
Effect of currency exchange rate changes on cash and equivalents
 
133
   
31
Increase (decrease) in cash and equivalents
 
(7,187)
   
10,340
Cash and equivalents at beginning of year
 
49,558
   
90,878
Cash and equivalents at March 31
 
42,372
   
101,217
Less cash and equivalents of discontinued operations at March 31
 
808
   
26,143
Cash and equivalents of continuing operations at March 31
$
41,564
 
$
75,075
           
Amounts may not add due to rounding.
See accompanying notes.

2017 1Q FORM 10-Q 66

STATEMENT OF CASH FLOWS (CONTINUED)
           
(UNAUDITED)
                       
 
Three months ended March 31
 
GE(a)
 
Financial Services (GE Capital)
(In millions)
2017
 
2016
 
2017
 
2016
                       
Cash flows – operating activities
                     
Net earnings (loss)
$
541
 
$
(178)
 
$
(253)
 
$
(916)
Less net earnings (loss) attributable to noncontrolling interests
 
(78)
   
(117)
   
2
   
(4)
Net earnings (loss) attributable to the Company
 
619
   
(61)
   
(256)
   
(912)
(Earnings) loss from discontinued operations
 
239
   
309
   
242
   
308
Adjustments to reconcile net earnings (loss) attributable to the
                     
   Company to cash provided from operating activities
                     
      Depreciation and amortization of property, plant and equipment
 
589
   
626
   
595
   
602
      (Earnings) loss from continuing operations retained by GE Capital(b)
 
2,047
   
8,393
   
-
   
-
      Deferred income taxes
 
(116)
   
229
   
87
   
(387)
      Decrease (increase) in GE current receivables
 
157
   
(39)
   
-
   
-
      Decrease (increase) in inventories
 
(822)
   
(1,486)
   
5
   
7
      Increase (decrease) in accounts payable
 
(394)
   
(200)
   
8
   
207
      Increase (decrease) in GE progress collections
 
(280)
   
632
   
-
   
-
      All other operating activities
 
(1,669)
   
(502)
   
(562)
   
(176)
Cash from (used for) operating activities – continuing operations
 
370
   
7,902
   
119
   
(351)
Cash from (used for) operating activities – discontinued operations
 
-
   
-
   
(658)
   
(1,252)
Cash from (used for) operating activities
 
369
   
7,901
   
(538)
   
(1,603)
                       
Cash flows – investing activities
                     
Additions to property, plant and equipment
 
(992)
   
(1,041)
   
(688)
   
(647)
Dispositions of property, plant and equipment
 
355
   
257
   
619
   
170
Net decrease (increase) in GE Capital financing receivables
 
-
   
-
   
2,967
   
1,466
Proceeds from sale of discontinued operations
 
-
   
-
   
789
   
36,478
Proceeds from principal business dispositions
 
81
   
39
   
-
   
-
Net cash from (payments for) principal businesses purchased
 
(967)
   
-
   
-
   
-
All other investing activities
 
(309)
   
(614)
   
3,124
   
(9,592)
Cash from (used for) investing activities – continuing operations