UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
                                 (Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20162017
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
geform10q3qfinal1image1a02.jpg
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'sRegistrant’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 þ 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 þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” “smaller reporting company,” and "smaller reporting"emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
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 þ
There were 8,846,390,0008,657,946,000 shares of common stock with a par value of $0.06 per share outstanding at SeptemberJune 30, 2016.2017.



TABLE OF CONTENTS

 Page
  
Forward Looking Statements
3
Management's
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
4
Key Performance Indicators
8
Consolidated Results
11
10
Segment Operations
15
13
Corporate Items and Eliminations
34
32
    Discontinued Operations37
Other Consolidated Information
38
35
Statement of Financial Position
40
37
Financial Resources and Liquidity
41
38
    Exposures47
Critical Accounting Estimates
48
45
Other Items
49
46
Supplemental Information
51
49
Controls and Procedures
58
55
Other Financial Data
58
56
Regulations and Supervision
Legal Proceedings
59
57
Legal Proceedings60
Financial Statements and Notes
63
59
Exhibits
123
105
Form 10-Q Cross Reference Index
124
106
Signatures
125
107


FORWARD LOOKING STATEMENTS

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 structurecompletion of the proposed transaction; 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'sCapital Global Holdings, LLC’s (GE Capital) retained businesses (Verticals); expected income;income and Industrial operating profit; earnings per share;share, including our 2018 target and the impact of the new revenue recognition accounting standard; revenues; organic growth; growth and productivity associated with our Digital business;and Additive businesses; margins; cost structure;structure and plans to reduce costs; restructuring charges; transaction-related synergies;synergies and gains; cash flows;flows, including the impact of working capital, contract assets and pension funding contributions; returns on capital and investment; capital expenditures,expenditures; capital allocation, including dividends, share repurchases and acquisitions; or capital structure; and dividends.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:

the strategy and portfolio review being undertaken by our new chief executive officer;
our ability to complete incremental asset sales as part of our announced plan to reduce the size of our financial services businesses in a timely manner (or at all) and at the prices we have assumed;
our ability to reduce costs as we execute our announced plan to reduce the size of our financial services businesses;
our ability to reduce costs as we execute that plan;
changes in law, economic and financial conditions, including interest and exchange rate volatility, commodity and equity prices and the value of financial assets;
changes in law, economic and financial conditions, including interest and exchange rate volatility, commodity and equity prices and the value of financial assets, including the impact of these conditions on our ability to execute that plan;
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;
the impact of conditions in the financial and credit markets on the availability and cost of GE Capital Global Holdings, LLC's (GE Capital) funding, and GE Capital's exposure to counterparties;
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;
the impact of conditions in the housing market and unemployment rates on the level of commercial credit defaults;
our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so;
pending and future mortgage loan repurchase claims and other litigation claims and investigations in connection with WMC, which may affect our estimates of liability, including possible loss estimates;
our ability to convert Industrial earnings into cash and the amount and timing of our cash flows and earnings, which may be impacted by long-term services agreement dynamics, and other conditions, all of which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at planned levels;
our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so;
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, charges that may be required in connection with GE Capital’s run-off insurance operations, and other factors;
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;
our ability to launch new products in a cost-effective manner;
GE Capital's ability to pay dividends to GE at the planned level, which may be affected by GE Capital's cash flows and earnings, financial services regulation and oversight, and other factors;
our ability to 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 effectiveness of our risk management framework;
the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of Alstom investigative and legal proceedings;
the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation and litigation;
our capital allocation plans, as such plans may change including with respect to the timing and size of share repurchases, acquisitions, joint ventures, dispositions and other strategic actions;
our 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 reduce the size of our financial services businesses and to sell our Water and Industrial Solutions businesses;
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 and reduce the size of our financial services businesses;
our success in integrating acquired businesses and operating joint ventures, including Baker Hughes;
our success in integratingour ability to realize revenue and cost synergies from announced transactions, acquired businesses and operating joint ventures, including Alstom and Baker Hughes;
our ability to realize anticipated earnings and savings 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 “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.

the impact of potential information technology or data security breaches; and
the other factors that are described in "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015.

These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements.  We do not undertake to update our forward-looking statements. This document includes certain forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materiallymaterially.


2017 2Q FORM 10-Q .3

2016 3Q FORM 10-Q 3
MD&A

MANAGEMENT'S
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 (GE Capital or Financial Services).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 along with further disaggregation of our results into segments and GE Capital Verticals, provides useful information to investors. When used in this report, unless otherwise indicated by the context, we use the terms to mean the following:

General Electric or the Company – the parent company, General Electric Company.
General Electric or the 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. As GE presents the continuing operations of GE Capital on a one-line basis, certain intercompany profits resulting from transactions between GE and GE Capital have 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). – the parent company, General Electric Company.
General Electric Capital Corporation or GECC – predecessor to GE Capital Global Holdings, LLC. – 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
GE Capital Global Holdings, LLC or GECGH – successor of GECC.– the predecessor to GE Capital Global Holdings, LLC.
GE Capital or Financial Services – refers to GECGH, or its predecessor GECC, and is the adding together of all affiliates of 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. We present the results of GE Capital in the right-side column of our consolidated statements of earnings, financial position and cash flows.
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
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.
GE consolidated
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. – 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 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.– 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
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. – 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
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. – the sum of our seven industrial segments and one financial services segment, without giving effect to the elimination of transactions among such segments. This provides investors with a view as to the results of all of our segments, without inter-segment eliminations and corporate items.
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.
2016 3Q FORM 10-Q 4

Discussion of GE Capital'sCapital’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.

4 2017 2Q FORM 10-Q

MD&A


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”.
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 captions such as "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 software-enabled product upgrades, internally developed software (including Predix) and associated hardware, including PredixTMand software solutions that improve our customers’ asset performance. In 2016, we reassessed the span of our digital product offerings, which now excludes software-enabled productivity solutions.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.
Ending Net Investment (ENI) (Non-GAAP) – the total capital we have invested in the Financial Services business. It is the sum of short-term borrowings, long-term borrowings and equity (excluding noncontrolling interests) adjusted for unrealized gains and losses on investment securities and hedging instruments. Alternatively, it is the amount of assets of continuing operations less the amount of non-interest-bearing liabilities.
Equipment leased to others (ELTO) – rental equipment we own that is available to rent and is stated at cost less accumulated depreciation.
GE Capital Exit Plan – our plan, announced on April 10, 2015, to reduce the size of our financial services businesses through the sale of most of the assets of GE Capital, and to focus on continued investment and growth in our industrial businesses.
Industrial 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 pre-tax non-operating pension costs) divided by industrial segment revenues plus corporate items and eliminations (excluding gains and GE-GE Capital eliminations).
Net earnings – unless otherwise indicated, we refer to captions such as "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 costs (Non-GAAP) – comprise the expected return on plan assets, interest cost on benefit obligations and net actuarial gain (loss) amortization for our principal pension plans.
Operating earnings (Non-GAAP) – GE earnings from continuing operations attributable to GE 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 costs (Non-GAAP) – comprise the service cost of benefits earned, prior service cost amortization and curtailment gain or loss for our principal pension plans.
Organic revenues (Non-GAAP) – revenues excluding the effects of acquisitions, dispositions and foreign currency exchange.
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.
2016 3Q FORM 10-Q 5Industrial 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 divided by 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.
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.


2017 2Q 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“non-GAAP financial measures"measures” under the SECU.S. Securities and Exchange Commission (SEC) rules. Specifically, we have referred, in various sections of this report, to:

Industrial segment organic revenues
Operating and non-operating pension costs
Operating and non-operating pension cost
Adjusted corporate costs (operating)
Industrial operating earnings 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 segment operating profit and operating profit margin (excluding Alstom)
Industrial cash flows from operating activities (Industrial CFOA) and Industrial CFOA excluding taxes related to the Appliances business sale
Capital ending net investment (ENI), excluding liquidity

Industrial cash flows from operating activities (Industrial CFOA) and Industrial CFOA excluding deal taxes and GE Pension Plan funding
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 thisthe MD&A. Non-GAAP financial measures referred to in this report are either labeled as "non-GAAP"“non-GAAP” or designated as such with an asterisk (*).

2016 3Q6 2017 2Q FORM 10-Q 6

MD&A


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"“Segment Operations” section within this MD&A.


OUR INDUSTRIAL OPERATING SEGMENTS

Power
Transportation
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Power(a)
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Aviation
geiconsrgb06.jpg
Energy Connections & Lighting(a)
geiconsrgb04.jpg
Renewable Energy
Aviation
Oil & Gas
geiconsrgb09.jpg
Healthcare  
geiconsrgb07.jpg
Oil & Gas
geiconsrgb15.jpg
Transportation

OUR FINANCIAL SERVICES OPERATING SEGMENT
geiconsrgb10.jpg

Capital
Capital

(a)Beginning in the third quarter of 2016,2017, the former Energy Connections and Appliancesbusiness within the Energy Connections & Lighting segments aresegment is expected to be combined with the Power segment and presented as one reporting segment called Energy Connections & Lighting. This segment includes the historical results of the Appliances business prior to its sale.Power.

CORPORATE INFORMATION

GE'sGE’s Internet address aat twww.ge.com, Investor Relations website at www.ge.com/investor-relations and our corporate blog at www.gereports.com, as well as GE'sGE’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.

2016 3Q2017 2Q FORM 10-Q 7

MD&AKEY PERFORMANCE INDICATORS

KEY PERFORMANCE INDICATORS

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

 
REVENUES PERFORMANCE
 
 
INDUSTRIAL ORDERS
 
 
INDUSTRIAL BACKLOG
 
      
 
3Q
 2016
YTD 2016 
 
 
 
Equipment
 
 
 
Services
 
 
 
 
Equipment
 
 
Services
 
 
Industrial Segment4%6% 
Industrial Segment Organic*1%-% 
Capital(2)%-% 
    
    
(a) Included $5.2 billion related to Alstom
(b) Included $12.7 billion related to Alstom
 
(a) Included $31.9 billion related to Alstom
 
 
 
 
INDUSTRIAL MARGINS
 
 
INDUSTRIAL OPERATING PROFIT MARGINS (NON-GAAP)(a)
 
 
 
GE CFOA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GE Capital Dividend
 
 
 
 
 
Industrial
CFOA(b)*
  (a) Excluded gains, non-operating pension costs, restructuring and other, noncontrolling interests, GE Capital preferred stock dividends, as well as the results of Alstom 
(a) Included $(0.8) billion related to Alstom
(b) 2016 included deal taxes of $(1.1) billion related to the sale of our Appliances business
REVENUES PERFORMANCE
 2Q 2017YTD 2017
Industrial Segment(2)%(1)%
Industrial Segment Organic*2%4%
Capital(12)%(9)%
   
GE CFOA
ge2q201710_chart-15473.jpg
■ ■  Industrial CFOA(a)* ■■  GE Capital Dividend
(a) 2016 included deal taxes of $(0.7) billion related to the sale of our Appliances business and in 2017 included deal taxes of $(0.1) billion related to the Baker Hughes transaction and GE Pension Plan funding of $(0.2) billion.

INDUSTRIAL ORDERS
ge2q201710_chart-16502.jpg
INDUSTRIAL BACKLOG
ge2q201710_chart-17543.jpg

■■  Services ■■  Equipment
■■  Services ■■  Equipment

INDUSTRIAL PROFIT & MARGINS
ge2q201710_chart-18877.jpgge2q201710_chart-19609.jpg
INDUSTRIAL OPERATING PROFIT & MARGINS
(NON-GAAP)(a)
ge2q201710_chart-20359.jpgge2q201710_chart-21068.jpg
(a) Excluded gains on disposals, non-operating pension cost, restructuring and other charges and noncontrolling interests
*Non-GAAP Financial Measure

8 2017 2Q FORM 10-Q

MD&AKEY PERFORMANCE INDICATORS

KEY PERFORMANCE INDICATORS
(Dollars in billions; per-share amounts in dollars and diluted; attributable to GE common shareowners)

NET EARNINGS
ge2q201710_chart-22038.jpg
NET EARNINGS PER SHARE
ge2q201710_chart-22948.jpg

OPERATING EARNINGS (NON-GAAP)
ge2q201710_chart-23964.jpg
OPERATING EARNINGS PER SHARE (NON-GAAP)
ge2q201710_chart-24977.jpg

INDUSTRIAL OPERATING + VERTICALS EARNINGS(NON-GAAP)
ge2q201710_chart-26106.jpg
INDUSTRIAL OPERATING + VERTICALS EPS
(NON-GAAP)
ge2q201710_chart-27107.jpg


2017 2Q FORM 10-Q 9

MD&ACONSOLIDATED RESULTS

CONSOLIDATED RESULTS

2017 SIGNIFICANT DEVELOPMENTS

On June 12, 2017, we announced that Jeffrey R. Immelt will retire as Chief Executive Officer (CEO) on July 31, 2017 and that John L. Flannery has been appointed to succeed Mr. Immelt as CEO effective August 1, 2017. Mr. Flannery will also join the Board of Directors on that date. Mr. Immelt will remain Chairman of the Board for a transition period through December 31, 2017, at which point Mr. Flannery will succeed Mr. Immelt as Chairman, effective January 1, 2018.

During the second quarter of 2017, GE completed issuances of €8,000 million senior unsecured debt, composed of €1,750 million of 0.375% Notes due 2022, €2,000 million of 0.875% Notes due 2025, €2,250 million of 1.50% Notes due 2029 and €2,000 million of 2.125% Notes due 2037.

2017 SIGNIFICANT TRANSACTIONS
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 approximately $1.6 billion, net of cash acquired.

On July 3, 2017, we completed the transaction to create Baker Hughes, a GE company (BHGE). Under the terms of the deal, which we announced in October 2016, we combined our Oil & Gas business and Baker Hughes Incorporated (Baker Hughes) to create a new company in which GE holds a 62.5% interest and former Baker Hughes shareholders hold a 37.5% interest. Baker Hughes shareholders also received a cash dividend funded by a $7.4 billion cash contribution from GE. The completion of the transaction followed the approval of Baker Hughes shareholders, regulatory approvals and other customary closing conditions.

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 in the second half of 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 by the end of the first quarter of 2018.


10 2017 2Q FORM 10-Q

MD&ACONSOLIDATED RESULTS

CONSOLIDATED RESULTS

THREE AND SIX MONTHS ENDED JUNE 30
(Dollars in billions)

REVENUESINDUSTRIAL AND FINANCIAL SERVICES REVENUES
ge2q201710_chart-16235.jpgge2q201710_chart-17621.jpgge2q201710_chart-18572.jpg
COMMENTARY: 2017 - 2016

THREE MONTHS
Consolidated revenues decreased $3.9 billion, or 12%.
Industrial revenues decreased $3.6 billion, or 12%, due to a decrease at Corporate of $3.0 billion as the prior year included a pre-tax gain of $3.1 billion from the sale of our Appliances business to Haier in the second quarter of 2016. The additional decrease in industrial revenues was due to a decrease in industrial segment revenues of approximately $0.6 billion, or 2%, as the net effects of dispositions of $1.2 billion and the effects of a stronger U.S. dollar of $0.2 billion were partially offset by organic revenue* increases of $0.6 billion and the net effects of acquisitions of $0.2 billion.  In the second quarter of 2016, the net effects of acquisitions increased industrial revenues $3.2 billion while the net effects of dispositions and a stronger U.S. dollar decreased industrial revenues $1.1 billion and $0.1 billion, respectively.
Financial Services revenues decreased $0.3 billion, or 12%, primarily due to higher impairments, organic revenue declines and lower gains.

SIX MONTHS
Consolidated revenues decreased $4.1 billion, or 7%.
Industrial revenues decreased $3.6 billion, or 6%, due to a decrease at Corporate of $3.2 billion as the prior year included a pre-tax gain of $3.1 billion from the sale of our Appliances business to Haier in the second quarter of 2016. The additional decrease in industrial revenues was due to a decrease in industrial segment revenues of approximately $0.4 billion, or 1%, as the net effects of dispositions of $2.8 billion and the effects of a stronger U.S. dollar of $0.3 billion were partially offset by organic revenue* increases of $2.3 billion and the net effects of acquisitions of $0.3 billion.  In the first six months of 2016, the net effects of acquisitions increased industrial revenues $6.0 billion while the net effects of dispositions and a stronger U.S. dollar decreased industrial revenues $1.6 billion and $0.7 billion, respectively.
Financial Services revenues decreased $0.5 billion, or 9%, primarily due to organic revenue declines, lower gains and higher impairments.






*Non-GAAP Financial Measure





*Non-GAAP Financial Measure


2016 3Q2017 2Q FORM 10-Q 811

MD&ACONSOLIDATED RESULTS

KEY PERFORMANCE INDICATORS

THREE AND SIX MONTHS ENDED JUNE 30
(Dollars in billions; per-share amounts in dollars)attributable to GE common shareowners)


NET EARNINGS (LOSS)NET EARNINGS (LOSS) PER SHARE
OPERATINGCONTINUING EARNINGS (NON-GAAP) OPERATING EARNINGS PER SHARE (NON-GAAP)
INDUSTRIAL OPERATING + VERTICALS EARNINGS (NON-GAAP)INDUSTRIAL OPERATING + VERTICALS EPS (NON-GAAP)
EARNINGS*
2016 3Q FORM 10-Q 9
ge2q201710_chart-20181.jpg

SIGNIFICANT DEVELOPMENTS IN 2016
ge2q201710_chart-21179.jpg
During the first nine months of 2016, we returned $24.5 billion to shareholders including $18.1 billion through buyback of our common stock and $6.4 billion in dividends.
For the nine months ended September 30, 2016, Alstom contributed revenues of $9.2 billion and operating earnings of $0.5 billion, which included the effects of purchase accounting and acquisition related charges at Corporate of $0.7 billion. Including the effects of tax benefits of $0.6 billion, net earnings were less than $0.1 billion for the nine months ended September 30, 2016. In addition, Alstom used cash flow from operating activities of $0.8 billion for the nine months ended September 30, 2016.
On October 31, 2016, we announced an agreement with Baker Hughes Incorporated (Baker Hughes) to combine GE's Oil & Gas business and Baker Hughes to create a new company. The transaction will be executed using a partnership structure, pursuant to which GE Oil & Gas and Baker Hughes will each contribute their operating assets to a newly formed partnership. GE will have a 62.5% interest in this partnership and existing Baker Hughes shareholders will have a 37.5% interest through a newly NYSE listed corporation. Baker Hughes shareholders will also receive a special one-time cash dividend of $17.50 per share at closing. GE will contribute $7.4 billon to the new partnership to fund the cash dividend to existing Baker Hughes shareholders. The transaction is subject to the approval of Baker Hughes shareholders, regulatory approvals and other customary closing conditions.
On October 11, 2016, we announced a plan to acquire LM Wind Power, the Danish maker of rotor blades for $1.7 billion. LM Wind is one of the world's largest wind turbine blade manufacturers(a).
On September 14, 2016, we acquired the remaining 74% of the software developer Meridium Inc. for cash proceeds of $0.4 billion. The acquisition is expected to enhance and accelerate our asset performance-management capabilities across our Industrial businesses.
On September 6, 2016, we announced public tender offers to acquire two European 3-D printing companies, Arcam AB and SLM Solutions Group AG for a total of $1.4 billion. On October 26, 2016, we announced that the conditions for the acquisition of SLM Solutions were not satisfied at the expiration of the tender period and that the offer to acquire SLM Solutions had lapsed. On October 27, 2016, we announced that the tender period for Arcam would be extended to November 10, 2016. On October 27, 2016, we also announced an agreement to acquire a 75% interest in Concept Laser GmbH, another European 3-D printing company, for $0.6 billion(a). Both Arcam and Concept Laser make machines that can print metal parts used in aircraft components, tapping into manufacturers' growing demand for digital technologies.
On June 6, 2016, we completed the sale of our Appliances business to Qingdao Haier Co., Ltd. (Haier) 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 $1.9 billion in the nine months ended September 30, 2016.
On March 30, 2016, we announced an agreement to sell GE Asset Management (GEAM), GE's asset management arm with assets under management of approximately $100 billion, to State Street Corporation. On July 1, 2016, we completed the sale for proceeds of $0.4 billion and recognized an after-tax gain of $0.3 billion.
As of September 30, 2016, we have signed agreements with buyers for $193 billion of GE Capital ending net investment (ENI), excluding liquidity (as originally reported at December 31, 2014), of which $173 billion have closed.
On June 28, 2016, we received approval of our request to the Financial Stability Oversight Council (FSOC) for rescission of GE Capital's designation as a nonbank Systemically Important Financial Institution (SIFI).
GE Capital paid common dividends of $5.1 billion and $16.1 billion for the three and nine months ended September 30, 2016, respectively. In October 2016, we received an additional $2.0 billion of common dividends from GE Capital bringing our year-to-date total to $18.1 billion.
(a)     Subject to customary closing conditions.

2016 3Q FORM 10-Q 10
COMMENTARY: 2017 - 2016
CONSOLIDATED RESULTS

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

Consolidated continuing earnings decreased $2.0 billion.
REVENUES
INDUSTRIAL AND FINANCIAL SERVICES REVENUES
▪


(a)Included $3.2 billion related to Alstom
(b)Included $9.2 billion related to Alstom
(a)Included $3.2 billion related to Alstom
(b)   Included $9.2 billion related to Alstom
COMMENTARY: 2016 - 2015
THREE MONTHS
Consolidated revenues increased $1.2Industrial earnings decreased $2.7 billion, or 4%.
Industrial revenues increased $1.354%, due to decreased Corporate gains of $3.1 billion or 5%, mainly fromas the effectsprior year included a pre-tax gain of acquisitions of $3.3$3.1 billion primarily Alstom, and an increase in Industrial organic revenue* of $0.1 billion. These increases were partially offset by the effects of dispositions of $2.0 billion, primarily from the sale of our Appliances business to Haier in the second quarter of 2016.
In 2015, the effects of acquisitions and dispositions on Industrial revenues were an insignificant amount and a decrease of $0.1 billion, respectively.
Financial Services revenues decreased $0.1 billion, or 2%, as a result of the effects of dispositions and organic revenue declines, partially offset by higher gains and lower impairments.
NINE MONTHS
Consolidated revenues increased $7.1 billion, or 9%.
Industrial revenues increased $7.2 billion, or 9%, mainly from the effects of acquisitions of $9.3 billion, primarily Alstom. The increase was partially offset by the effects of dispositions of $0.9 billion, primarily from the sale of our Appliances business to Haier in the second quarter of 2016, partially offset by decreased restructuring and other costs of $0.6 billion. In addition, industrial segment profit decreased $0.2 billion, or 4%, due to the net effects of a stronger U.S. dollardispositions of $0.7$0.1 billion and a decrease in Industrial organic revenue*operating decreases of $0.5$0.1 billion.
▪
Interest and other financial charges decreased $In 2015,0.1 billion while the effectsprovision for income taxes increased $0.4 billion.
▪The net effect of acquisitions and dispositions on Industrial revenues wereour consolidated operating earnings was an increaseinsignificant amount in the second quarter of $0.2 billion2017 and a decrease of $0.1 billion respectively.
in the second quarter of 2016. The net effect of dispositions was a decrease of $2.4 billion in the second quarter of 2017 and a gain of $1.9 billion in the second quarter of 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.
▪Financial Services revenues increased less than $0.1losses decreased $0.4 billion, or 71%, primarily due to lower impairments, higher gainstreasury and headquarters operation expenses associated with the effects of acquisitions, partially offset by the effects of dispositions, organic revenue declines and the effects of currency exchange.
GE Capital Exit Plan.










*Non-GAAP Financial Measure
2016 3Q FORM 10-Q 11
THREE AND NINE MONTHS ENDED SEPTEMBER 30
 (Dollars in billions)

CONTINUING EARNINGS (LOSS)
CONTINUING EARNINGS (LOSS) PER SHARE
INDUSTRIAL SELLING, GENERAL & ADMINISTRATIVE (SG&A) AS A % OF SALES
▪
(a) 14.3% excluding $3.3 billion of Alstom sales and $0.5 billion of Alstom SG&A*
(b) 15.0% excluding $9.3 billion of Alstom sales and $1.6 billion of Alstom SG&A*
COMMENTARY: 2016 - 2015
THREE MONTHS
Consolidated continuing earnings increased $0.1 billion, or 7%.
Financial Services net loss decreased $0.2 billion, primarily due to lower impairments and higher gains, partially offset by the effects of dispositions and core decreases. Core decreases reflect excess interest expense, higher restructuring expenses and higher insurance reserve provisions, partially offset by increased tax benefits resulting from an IRS tax settlement and tax adjustments in the three months ended September 30, 2016, to bring Capital's nine-month tax rate in line with the projected full-year tax rate.
The effects of acquisitions on consolidated continuing earnings were a decrease of $0.1 billion in 2016 and an insignificant amount in 2015. The net effects of dispositions on consolidated continuing earnings were decreases of $0.1 billion in 2016 and an increase of $0.1 billion in 2015.
Earnings per share amounts for the thirdsecond quarter of 20162017 were positively impacted by the reduction in number of outstanding common shares compared to the thirdsecond quarter of 2015.2016. The average number of shares outstanding used to calculate thirdsecond quarter 20162017 earnings per share amounts was 11%5% lower than in the thirdsecond quarter of 20152016 as a result of previously disclosed actions, primarily the 2015 Synchrony Financial share exchange and ongoing share buyback activities over the last 12 months funded in large part by dividends from GE Capital.




SIX MONTHS
Consolidated continuing earnings decreased $1.4 billion.
▪
Industrial SG&A costs increased $0.3earnings decreased $2.9 billion, or 42%, due to decreased Corporate gains of $3.2 billion as the favorable impact of cost reductions at Corporate, lower SG&A relating to dispositions and non-operating pension costs were more than offset by increases in SG&A relating to Alstom and higher restructuring charges.
NINE MONTHS
Consolidated continuing earnings increased $6.5 billion.
Financial Services losses decreased $4.9 billion, or 77%, primarily due to the absence of the 2015 charges associated with the GE Capital Exit Plan.
The net effects of dispositions on consolidated continuing earnings were increases of $1.8 billion in 2016, primarily due to an after-taxprior year included a pre-tax gain of $1.9$3.1 billion from the sale of our Appliances business to Haier in the second quarter of 2016, partially offset by decreased restructuring and other costs of $0.3 billion and an increase in 2015. industrial segment profit of $0.1 billion, or 2%, as organic operating increases of $0.4 billion were partially offset by the net effects of dispositions of $0.2 billion.
▪
Interest and other financial charges decreased $0.2 billion while the provision for income taxes increased $0.4 billion.
▪The effectsnet effect of acquisitions on our consolidated continuingoperating earnings werewas a decrease of $0.2 billion in 2016 and an increase of $0.1 billion in 2015.
In addition to the effects2017 and $0.2 billion in 2016. The net effect of dispositions on consolidated net earnings described above,was a decrease of $2.6 billion in 2017 and a gain of $1.9 billion in 2016.
▪Foreign exchange adversely affected industrial operating earnings by $0.2 billion as a result of both translational and transactional impacts related to remeasurement and mark-to-market charges on open hedges.
▪Financial Services losses decreased $1.3 billion, or 85% primarily due to lower treasury and headquarters operation expenses, lower preferred dividend expenses associated with the January 2016 preferred equity exchange, and lower restructuring expenses associated with the GE Capital Exit Plan.
▪Earnings per share amounts for the first nine months of 20162017 were also positively impacted by the reduction in number of outstanding common shares compared to the first nine months of 2015.2016. The average number of shares outstanding used to calculate first nine-month 20162017 earnings per share amounts was 9%5% lower than in the first nine-month of 20152016 as a result of previously disclosed actions, primarily the 2015 Synchrony Financial share exchange and ongoing share buyback activities over the last 12 months funded in large part by dividends from GE Capital.
Industrial SG&A costs increased $1.1 billion as the favorable impact of cost reductions at Corporate and lower SG&A relating to dispositions and non-operating pension costs were more than offset by increases in SG&A relating to Alstom and higher restructuring charges.
See the "Other Consolidated Information" section within the MD&A for a discussion of income taxes.

*Non-GAAP Financial Measure

2016 3Q12 2017 2Q FORM 10-Q 12

MD&ASEGMENT OPERATIONS

GE CAPITAL

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

THE GE CAPITAL EXIT PLAN

On April 10, 2015, the Company announced a plan (the GE Capital Exit Plan) to create a simple, more valuable company by reducing the size of its financial services businesses through the sale of most of the assets of GE Capital over the following 24 months and aligning a smaller GE Capital with GE's industrial businesses.

Under the GE Capital Exit Plan, which was approved on April 2, 2015 and aspects of which were approved on March 31, 2015, the Company is retaining certain GE Capital businesses, principally its vertical financing businesses—GE Capital Aviation Services (GECAS), Energy Financial Services (EFS) and Industrial Finance (which includes Healthcare Equipment Finance, 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 (together referred to as GE Capital Verticals or Verticals).

We expect GE Capital to release approximately $35 billion in dividends to GE (subject to regulatory approval) as a result of the sale of GE Capital assets. We received $4.3 billion in dividends from GE Capital in 2015 and $16.1 billion in the first nine months of 2016. In October 2016, we received and additional $2.0 billion of common dividends from GE Capital bringing our year-to-date total to $18.1 billion. As of September 30, 2016, we are ahead of our plan, having signed agreements with buyers for $193 billion of ending net investment (ENI), excluding liquidity (as originally reported at December 31, 2014), of which $173 billion has closed. In addition, as part of our initiative to reduce the size of our financial services businesses, we completed the split-off of our remaining interest in GE Capital's North American Retail Finance business, Synchrony Financial, to holders of GE common stock, which resulted in a $20.4 billion buyback of GE common stock (671.4 million shares) in 2015. In connection with the GE Capital Exit Plan, we completed a legal reorganization of GE Capital that included a merger of GE Capital into GE, a guarantee by GE of GE Capital debt, and an exchange of $36 billion of GE Capital debt for new notes guaranteed by GE. The result of all these actions reduced GE Capital's total assets by 59% from $501 billion at December 31, 2014 to $203 billion at September 30, 2016. As of September 30, 2016, we incurred charges of $22.9 billion.  Due to anticipated tax benefits and gains, we do not expect total after-tax charges through the completion of the GE Capital Exit Plan to exceed our initial $23 billion estimate.

Given the progress of the GE Capital Exit Plan to date, we expect to largely complete that plan by the end of 2016. On March 31, 2016, GE filed its request to the Financial Stability Oversight Council (FSOC) for rescission of GE Capital's designation as a nonbank Systemically Important Financial Institution (SIFI). On June 28, 2016, we received approval of our request to the FSOC for rescission of GE Capital's designation as a nonbank SIFI.

SALES AGREEMENTS

During the nine months ended September 30, 2016, GE signed agreements to sell approximately $36 billion of ENI, excluding liquidity (as originally reported at December 31, 2014), of which approximately $16 billion, $20 billion and less than $1 billion related to our Commercial Lending and Leasing (CLL), Consumer and Real Estate businesses, respectively.

Of the signed agreements, sales representing approximately $69 billion of ENI, excluding liquidity (as originally reported at December 31, 2014) have closed during the first nine months of 2016, including approximately $60 billion, $9 billion and less than $1 billion related to our CLL, Consumer and Real Estate businesses, respectively.

2016 3Q FORM 10-Q 13

AFTER-TAX CHARGES RELATED TO THE GE CAPITAL EXIT PLAN

In the nine months ended September 30, 2016, GE recorded $0.9 billion of after-tax charges related to the GE Capital Exit Plan of which $0.1 billion was recorded in continuing operations and $0.8 billion was recorded in discontinued operations. Of these after-tax charges, $0.3 billion of net benefits were recorded in the third quarter of 2016. A description of these after-tax charges for the nine months ended September 30, 2016 is provided below.

$1.3 billion of net loss primarily related to the completed and planned dispositions of Consumer and most of the CLL businesses, which was recorded in discontinued operations under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings.
$0.3 billion of charges associated with the preferred equity exchange that was completed in January 2016, which was recorded in continuing operations and reported in GE Capital's corporate component under the caption "Preferred stock dividends" in the Statement of Earnings.
These charges were partially offset by tax benefits of $0.6 billion related to an IRS tax settlement. Of these benefits $0.3 billion was recorded in continuing operations and reported in GE Capital's corporate component under the captions "Benefit (provision) for income taxes" and "Interest and other financial charges" in the Statement of Earnings and $0.2 billion was recorded in discontinued operations under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings.

For additional information about the GE Capital Exit Plan 2015 sales agreements and after-tax charges, refer to our Form 8-K filed on June 3, 2016 related to the Annual Report on Form 10-K for the year ended December 31, 2015.

In addition to the above charges, during the nine months ended September 30, 2016, we have incurred other costs related to our ongoing liability management actions, including $0.6 billion of pre-tax losses related to the repurchase of $12.5 billion of long-term unsecured debt and subordinated debentures which were recorded in continuing operations. These charges will result in lower future interest costs, more than offsetting the initial charges. We expect to continue these actions when economically beneficial.
2016 3Q FORM 10-Q 14
SEGMENT OPERATIONS
SUMMARY OF OPERATING SEGMENTS
        
 Three months ended June 30 Six months ended June 30
(In millions)2017
2016
V%
 2017
2016
V%
        
Revenues       
Power$6,969
$6,639
5 % $13,058
$11,843
10 %
Renewable Energy2,457
2,094
17 % 4,501
3,763
20 %
Oil & Gas3,108
3,219
(3) % 6,110
6,533
(6)%
Aviation6,532
6,511
— % 13,336
12,774
4 %
Healthcare4,700
4,525
4 % 8,990
8,708
3 %
Transportation1,071
1,240
(14) % 2,110
2,222
(5)%
Energy Connections & Lighting(a)3,210
4,401
(27) % 5,957
8,657
(31)%
      Total industrial segment revenues28,047
28,630
(2) % 54,063
54,499
(1)%
Capital2,446
2,771
(12) % 5,127
5,656
(9)%
      Total segment revenues30,493
31,401
(3) % 59,190
60,155
(2)%
Corporate items and eliminations(935)2,093
  (1,972)1,184
 
Consolidated revenues$29,558
$33,494
(12) % $57,219
$61,339
(7)%
        
Segment profit (loss)       
Power$1,031
$1,140
(10) % $1,827
$1,714
7 %
Renewable Energy160
128
25 % 267
211
27 %
Oil & Gas155
320
(52) % 361
628
(43)%
Aviation1,492
1,348
11 % 3,176
2,872
11 %
Healthcare826
782
6 % 1,469
1,413
4 %
Transportation203
273
(26) % 359
437
(18)%
Energy Connections & Lighting(a)80
131
(39) % 109
162
(33)%
      Total industrial segment profit3,947
4,122
(4) % 7,568
7,437
2 %
Capital(172)(600)71 % (219)(1,492)85 %
      Total segment profit (loss)3,775
3,523
7 % 7,349
5,944
24 %
Corporate items and eliminations(1,583)974
  (3,592)(597) 
GE interest and other financial charges(637)(567)  (1,200)(1,007) 
GE provision for income taxes(218)(629)  (361)(793) 
Earnings (loss) from continuing operations attributable
   to GE common shareowners
1,338
3,300
(59) % 2,196
3,548
(38)%
Earnings (loss) from discontinued operations, net of taxes(146)(541)73 % (385)(849)55 %
   Less net earnings attributable to       
      noncontrolling interests, discontinued operations7
3
  7
3
 
Earnings (loss) from discontinued operations,       
   net of tax and noncontrolling interest(152)(544)72 % (392)(852)54 %
Consolidated net earnings (loss)
attributable to the GE common shareowners
$1,185
$2,756
(57) % $1,804
$2,695
(33)%

SUMMARY OF OPERATING SEGMENTS
                  
 Three months ended September 30 Nine months ended September 30
(In millions) 2016  2015  V%  2016  2015  V%
                  
Revenues                 
Power$6,506 $4,738   37 % $18,348 $14,405   27 %
Renewable Energy 2,770  1,666   66 %  6,533  4,335   51 %
Oil & Gas 2,964  3,938   (25)%  9,497  12,096   (21)%
Aviation 6,300  6,001   5 %  19,074  17,927   6 %
Healthcare 4,482  4,255   5 %  13,190  12,666   4 %
Transportation 1,249  1,593   (22)%  3,471  4,322   (20)%
Energy Connections & Lighting(a) 3,151  4,065   (22)%  11,808  11,695   1 %
      Total industrial segment revenues 27,421  26,256   4 %  81,920  77,445   6 %
Capital 2,600  2,660   (2)%  8,256  8,215   - %
      Total segment revenues 30,021  28,916   4 %  90,176  85,660   5 %
Corporate items and eliminations (755)  (888)     429  (2,166)   
Consolidated revenues$29,266 $28,028   4 % $90,604 $83,494   9 %
                  
Segment profit (loss)                 
Power$1,197 $1,071   12 % $2,910 $2,874   1 %
Renewable Energy 202  174   16 %  413  375   10 %
Oil & Gas 353  610   (42)%  981  1,712   (43)%
Aviation 1,494  1,353   10 %  4,366  3,936   11 %
Healthcare 717  652   10 %  2,130  1,944   10 %
Transportation 309  379   (18)%  747  934   (20)%
Energy Connections & Lighting(a) 48  292   (84)%  209  669   (69)%
      Total industrial segment profit 4,320  4,530   (5)%  11,756  12,445   (6)%
Capital 26  (154)  F  (1,466)  (6,368)   77 %
      Total segment profit (loss) 4,345  4,376   (1)%  10,290  6,076   69 %
Corporate items and eliminations (1,524)  (1,559)     (2,120)  (4,436)   
GE interest and other financial charges (483)  (440)     (1,490)  (1,243)   
GE provision for income taxes (241)  (413)     (1,034)  (1,302)   
Earnings (loss) from continuing operations                 
   attributable to GE common shareowners 2,097  1,965   7 %  5,645  (904)  F
Earnings (loss) from discontinued operations, net of tax (105)  629  U  (954)  (11,253)   92 %
   Less net earnings attributable to noncontrolling                 
      interests, discontinued operations (2)  89  U  2  270   (99)%
Earnings (loss) from discontinued operations,                 
   net of tax and noncontrolling interest (103)  541  U  (956)  (11,523)   92 %
Consolidated net earnings (loss)                 
   attributable to the GE common shareowners$1,994 $2,506   (20)% $4,689 $(12,427)  F
  \        \      
(a)Beginning in the third quarter of 2016,2017, the former Energy Connections and Appliancesbusiness within the Energy Connections & Lighting segments aresegment is expected to be combined with the Power segment and 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.Power.

2017 2Q FORM 10-Q 13

MD&ASEGMENT OPERATIONS

2016 3Q FORM 10-Q 15
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;restructuring, rationalization and other similar expenses;expenses, acquisition costs and other related charges;charges, technology and product development costs;costs, certain gains and losses from acquisitions or dispositions;dispositions, and litigation settlements or other charges, for which responsibility preceded the current management team. ForSee the Corporate Items and Eliminations section within this MD&A for additional information about costs excluded from segment profit, see Corporate Items and Eliminations section within this MD&A.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, and income taxes, and preferred stock dividends according to how a particular segment'ssegment’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"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"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'ssegment’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.

SEGMENT RESULTS – THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016

(Dollars in billions)
INDUSTRIAL SEGMENT EQUIPMENT
& SERVICES REVENUES
INDUSTRIAL SEGMENT PROFIT
Equipment(a)
Services(b)
(a)$12.9 billion, excluding $2.0 billion related to Alstom*, and $38.4 billion, excluding $5.7 billion related to Alstom* for the three and nine months ended September 30, 2016, respectively
(b)$11.3 billion, excluding $1.2 billion related to Alstom*, and $34.3 billion, excluding $3.5 billion related to Alstom* for the three and nine months ended September 30, 2016, respectively
*Non-GAAP Financial Measure
(a)$4.2 billion, excluding $0.1 billion related to Alstom*
(b)$11.5 billion, excluding $0.3 billion related to Alstom*
2016 3Q FORM 10-Q 16
2016 – 2015 COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30
Industrial segment revenues increased $1.2 billion (4%), driven by increases at Power and Renewable Energy, mainly as a result of the effects of acquisitions (primarily Alstom). This increase was partially offset by lower revenues at Oil & Gas and Energy Connections & Lighting (due to the sale of the Appliances business in the second quarter of 2016).
Industrial segment profit decreased $0.2 billion (5%), mainly driven by lower earnings at Oil & Gas, as well as an unfavorable impact of foreign exchange, partially offset by higher earnings at Power, Aviation and Healthcare.
Industrial segment margin decreased 150 bps primarily driven by the effects of Alstom results. Excluding Alstom, industrial segment margin was 17.3%*, compared with 17.3%* in the same period of 2015.
2016 – 2015 COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30
Industrial segment revenues increased $4.5 billion (6%), driven by increases at Power and Renewable Energy, mainly as a result of the effects of acquisitions (primarily Alstom). This increase was partially offset by lower revenues at Oil & Gas, as well as an unfavorable impact of foreign exchange.
Industrial segment profit decreased $0.6 billion (6%), mainly driven by lower earnings at Oil & Gas, Energy Connections & Lighting and Transportation, as well as an unfavorable impact of foreign exchange, partially offset by higher earnings at Aviation and Healthcare.
Industrial segment margin decreased 170 bps primarily driven by the effects of Alstom results. Excluding Alstom, industrial segment margin was 15.8%*, compared with 16.1%* in the same period of 2015 reflecting core decreases at Renewable Energy, Energy Connections & Lighting and Oil & Gas.
SIGNIFICANT SEGMENT DEVELOPMENTS

ALSTOM ACQUISITION

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

At year-end 2015, our preliminary allocation of purchase price resulted in recognition of approximately $13.5 billion of goodwill, $5.2 billion of intangible assets, and $1.1 billion of unfavorable customer contract liabilities. The preliminary fair value of the associated noncontrolling interest was approximately $3.6 billion. As of the end of the third quarter of 2016, the preliminary amount of goodwill, intangible assets and unfavorable customer contract liabilities recognized was adjusted to approximately $17.2 billion, $4.4 billion, and $2.4 billion, respectively. The adjustments reflected revisions in estimates primarily related to cash flow and other valuation assumptions for customer contracts, increases to legal reserves, and other fair value adjustments related to acquired assets and liabilities. Deferred taxes, unrecognized tax benefits and other tax uncertainties were also adjusted. We will finalize our purchase accounting analysis in the fourth quarter. See Note 7 to the consolidated financial statements for further information.

For the nine months ended September 30, 2016, Alstom contributed revenues of $9.2 billion and an operating loss of $0.5 billion, which included the effects of purchase accounting and acquisition related charges at Corporate of $0.7 billion. Including the effects of tax benefits of $0.6 billion, net earnings were less than $0.1 billion for the nine months ended September 30, 2016. In addition, Alstom used cash flow from operating activities of $0.8 billion for the nine months ended September 30, 2016. Alstom related revenues and operating profit are presented separately in the segment revenues and profit walks that follow.

SALE OF APPLIANCES

On January 15, 2016, we announced the signing of an agreement to sell our Appliances business to Qingdao Haier Co., Ltd. (Haier).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 $1.9$1.8 billion in 2016. For the ninethree and six months ended SeptemberJune 30, 2016. Beginning2016, Appliances contributed revenues of $1.1 billion and $2.6 billion and an operating profit of $0.1 billion and $0.3 billion, respectively.

14 2017 2Q FORM 10-Q

MD&ASEGMENT OPERATIONS

SEGMENT RESULTS – THREE AND SIX MONTHS ENDED JUNE 30

(Dollars in the third quarter of 2016, the former Energy Connections and Appliances & Lighting segments are presented as one reportingbillions)
INDUSTRIAL SEGMENT EQUIPMENT
& SERVICES REVENUES
ge2q201710_chart-14148.jpg


INDUSTRIAL SEGMENT PROFIT
ge2q201710_chart-15859.jpg
■ ■Services ■■ Equipment


2017 – 2016 COMMENTARY: THREE MONTHS ENDED JUNE 30

Industrial segment calledrevenues decreased $0.6 billion, or 2%, driven by decreases at Energy Connections & Lighting. This segment includesLighting primarily due to the historical resultssale of the Appliances business priorin the second quarter of 2016, Transportation, and Oil & Gas primarily due to its sale.market conditions, and an unfavorable foreign exchange impact, partially offset by increases at Renewable Energy, Power and Healthcare.

Industrial segment profit decreased $0.2 billion, or 4%, driven primarily by lower earnings at Oil & Gas, Power, and Transportation, as well as the effects of the sale of Appliances in the second quarter of 2016, partially offset by higher earnings at Aviation.
*Non-GAAP Financial MeasureIndustrial segment margin decreased 30 bps to 14.1% in 2017 from 14.4% in 2016 driven by the effects of price and business mix, partially offset by positive cost productivity. The decrease in industrial segment margin reflects decreases at Oil & Gas, Transportation, Power and the sale of Appliances in the second quarter of 2016, offset by increases at Aviation, Renewable Energy and Healthcare.

2017 – 2016 COMMENTARY: SIX MONTHS ENDED JUNE 30

Industrial segment revenues decreased $0.4 billion, or 1%, driven by decreases at Energy Connections & Lighting primarily due to the sale of the Appliances business in the second quarter of 2016, Oil & Gas primarily due to market conditions, and Transportation, and an unfavorable foreign exchange impact, partially offset by increases at Power, Renewable Energy, Aviation and Healthcare.
Industrial segment profit increased $0.1 billion, or 2%, driven primarily by higher earnings at Aviation and Power, partially offset by lower earnings at Oil & Gas as well as an unfavorable foreign exchange impact and the effects of the sale of Appliances in the second quarter of 2016.
Industrial segment margin increased 40 bps to 14.0% in 2017 from 13.6% in 2016 driven by positive cost productivity, partially offset by negative business mix. The increase in industrial segment margin reflects increases at Aviation, Renewable Energy and Healthcare, offset by decreases at Oil & Gas, Transportation, Power and the sale of Appliances in the second quarter of 2016.



2016 3Q2017 2Q FORM 10-Q 1715

MD&ASEGMENT OPERATIONS | POWER

geiconsrgb02.jpgPOWER

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

2016
2017 YTD SUB-SEGMENT REVENUES

ge2q201710_chart-16196.jpg
EQUIPMENT/SERVICES REVENUES
EQUIPMENT/SERVICES REVENUES

ge2q201710_chart-17695.jpg

(a) Includes Distributed Power
(b) Includes Water & Distributed PowerProcess Technologies and GE Hitachi Nuclear
                                Services           Equipment
ORDERS
■ ■Services ■■ Equipment


BACKLOG
ORDERS

ge2q201710_chart-18719.jpg
Equipment
Services
Equipment
Services
 
(a) Included $2.8 billion related to AlstomBACKLOG
(b) Included $7.1 billion related to Alstom

ge2q201710_chart-20067.jpg

(a) Included $17.7 billion related to Alstom
UNIT SALES■ ■Services ■■ Equipment
■ ■Services ■■ Equipment
UNIT SALES      



2Q 20162Q 2017VYTD 2016YTD 2017V
Gas Turbines2621(5)39412

2016 3Q16 2017 2Q FORM 10-Q 18

MD&ASEGMENT OPERATIONS | POWER



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

SEGMENT REVENUES
 
(a) $5.1 billion, excluding $1.4 billion related to Alstom*
(b) $14.0 billion, excluding $4.3 billion related to Alstom*
 
 
SEGMENT PROFIT
 
(a) $1.1 billion, excluding $0.1 billion related to Alstom*
(b) $2.7 billion, excluding $0.2 billion related to Alstom*
 
SEGMENT PROFIT MARGIN
 
(a) 21.9%, excluding 6.3% related to Alstom*
(b) 19.3%, excluding 4.8% related to Alstom*
Equipment
 
 
 
Services
 
SEGMENT REVENUES & PROFIT WALK: COMMENTARY: 2016 - 2015 
THREE MONTHS  
Segment revenues up $1.8 billion (37%);
Segment profit up $0.1 billion (12%) as a result of:
 
 The increase in revenues was primarily driven by the effects of Alstom. Revenues also increased due to higher equipment volume and prices at Gas Power Systems as a result of 14 more gas turbine shipments than in the prior year, as well as higher services volume at Power Services, partially offset by lower services volume at Water and Nuclear. The increase in revenues was partially offset by lower other income.
 The increase in profit was primarily driven by the effects of Alstom, higher volume, prices and cost productivity, partially offset by an unfavorable business mix, driven by 7 more H-Turbine shipments than in the prior year, and lower other income.
 
 
 RevenuesProfit 
September 30, 2015$ 4.7$ 1.1 
Volume  0.3  0.1 
Price  0.1  0.1 
Foreign Exchange  -  - 
(Inflation)/Deflation N/A  - 
Mix N/A  (0.1) 
Productivity N/A  0.1 
Other  (0.1)  (0.1) 
Alstom  1.4  0.1 
September 30, 2016$ 6.5$ 1.2 
      
   
NINE MONTHS  
Segment revenues up $3.9 billion (27%);
Segment profit up 1% as a result of:
 
 The increase in revenues was primarily driven by the effects of Alstom and increased services volume at Power Services, partially offset by lower equipment volume at Gas Power Systems as a result of 10 fewer gas turbine shipments than in the prior year. The increase was partially offset by lower other income, including negative foreign exchange transactional hedge impacts, as well as the effects of a stronger U.S. dollar.
 The increase in profit was primarily driven by the effects of Alstom, higher prices, material deflation and a favorable business mix. The increase was partially offset by lower other income, including negative foreign exchange transactional hedge impacts and lower cost productivity.
 
 
 RevenuesProfit 
September 30, 2015$ 14.4$ 2.9 
Volume  (0.1)  - 
Price  0.1  0.1 
Foreign Exchange  (0.1)  - 
(Inflation)/Deflation N/A  0.1 
Mix N/A  0.1 
Productivity N/A  (0.1) 
Other  (0.2)  (0.3) 
Alstom  4.3  0.2 
September 30, 2016$ 18.3$2.9 
       
*Non-GAAP Financial Measure
2016 3Q FORM 10-Q 19
RENEWABLE ENERGY

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

2016 YTD SUB-SEGMENT REVENUESEQUIPMENT/SERVICES REVENUES
ServicesEquipment
ORDERS
BACKLOG
Equipment
Services
Equipment
Services
(a) Included $1.0 billion related to Alstom
(b) Included $1.5 billion related to Alstom
(a) Included $5.7 billion related to Alstom
UNIT SALES

2016 3Q FORM 10-Q 20

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

SEGMENT REVENUES SEGMENT PROFIT SEGMENT PROFIT MARGIN
 
(a) $2.4 billion, excluding $0.4 billion related to Alstom*
(b) $5.6 billion, excluding $0.9 billion related to Alstom*
 
 
 
Equipment
 
 
 
Services
 
(a) $0.2 billion, excluding an insignificant amount related to Alstom*
(b) $0.4 billion, excluding an insignificant amount related to Alstom*
 
 
 
(a) 8.9%, excluding (3.1)% related to Alstom*
(b) 7.6%, excluding (2.1)% related to Alstom*
 
SEGMENT REVENUES & PROFIT WALK: COMMENTARY: 2016 - 2015 
THREE MONTHS  
Segment revenues up $1.1 billion (66%);
Segment profit up 16% as a result of:
 
 The increase in revenues was primarily due to higher volume, mainly driven by higher equipment sales in Onshore Wind as a result of shipping 235 more onshore wind turbines than in the prior year, as well as the effects of Alstom, partially offset by lower other income, including negative foreign exchange transactional hedge impacts.
 The increase in profit was mainly due to higher volume and material deflation, partially offset by lower other income, including negative foreign exchange transactional hedge impacts.
 
 
 RevenuesProfit 
September 30, 2015$ 1.7$ 0.2 
Volume  0.8  0.1 
Price  -  - 
Foreign Exchange  -  - 
(Inflation)/Deflation N/A  0.1 
Mix N/A  - 
Productivity N/A  - 
Other  (0.1)  (0.1) 
Alstom  0.4  - 
September 30, 2016$ 2.8$ 0.2 
      
   
NINE MONTHS  
Segment revenues up $2.2 billion (51%);
Segment profit up 10% as a result of:
 
 The increase in revenues was primarily due to higher volume, mainly driven by the increase in Onshore Wind turbine shipments, as a result of shipping 429 more units than in the prior year, and the effects of Alstom. The increase was partially offset by the effects of a stronger U.S. dollar and lower other income, including negative foreign exchange transactional hedge impacts.
 The increase in profit was primarily due to higher volume, material deflation and cost productivity, partially offset by an unfavorable business mix and lower other income, including negative foreign exchange transactional hedge impacts.
 
 
 RevenuesProfit 
September 30, 2015$ 4.3$ 0.4 
Volume  1.6  0.1 
Price  -  - 
Foreign Exchange  (0.1)  - 
(Inflation)/Deflation N/A  0.1 
Mix N/A  (0.1) 
Productivity N/A  0.1 
Other  (0.1)  (0.1) 
Alstom  0.9  - 
September 30, 2016$ 6.5$ 0.4 
       
*Non-GAAP Financial Measure
2016 3Q FORM 10-Q 21
 OIL & GAS

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

2016 YTD SUB-SEGMENT REVENUESEQUIPMENT/SERVICES REVENUES
(a) Previously referred to as Measurement & Controls (M&C)
                               Services           Equipment
ORDERS
BACKLOG
Equipment
Services
Equipment
Services
(a) Included an insignificant amount related to Alstom
(b) Included $0.1 billion related to Alstom
(a) Included $0.2 billion related to Alstom

2016 3Q FORM 10-Q 22


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

SEGMENT REVENUES SEGMENT PROFIT SEGMENT PROFIT MARGIN
 
(a) $2.9 billion, excluding an insignificant amount related to Alstom*
(b) $9.4 billion, excluding $0.1 billion related to Alstom*
 
 
Equipment
 
 
Services
 
(a) $0.4 billion, excluding an insignificant amount related to Alstom*
(b) $1.0 billion, excluding an insignificant amount related to Alstom*
 
 
 
(a) 11.9%, excluding 5.9% related to Alstom*
(b) 10.4%, excluding 3.8% related to Alstom*
SEGMENT REVENUES & PROFIT WALK: COMMENTARY: 2016 - 2015 
THREE MONTHS  
Segment revenues down $1.0 billion (25%);
Segment profit down $0.3 billion (42%) as a result of:
 
 The decrease in revenues was primarily driven by market conditions resulting in a decrease in equipment and services volume across all sub-segments, with the exception of increased equipment volume at DTS. Revenues also decreased due to lower prices at TMS and DTS, as well as lower other income, including negative foreign exchange transactional hedge impacts.
 The decrease in profit was also driven by negative market conditions, mainly due to lower volume and prices, which, despite the effects of restructuring actions, drove lower cost productivity. Profit also decreased due to lower other income, including negative foreign exchange transactional hedge impacts. These decreases were partially offset by material deflation.
 
 
 RevenuesProfit 
September 30, 2015$ 3.9$ 0.6 
Volume  (0.8)  (0.1) 
Price  (0.1)  (0.1) 
Foreign Exchange  -  - 
(Inflation)/Deflation N/A  0.1 
Mix N/A  - 
Productivity N/A  (0.1) 
Other  (0.1)  (0.1) 
Alstom  -  - 
September 30, 2016$ 3.0$ 0.4 
      
   
NINE MONTHS  
Segment revenues down $2.6 billion (21%);
Segment profit down $0.7 billion (43%) as a result of:
 
 The decrease in revenues was primarily due to lower equipment volume across all sub-segments, the effects of a stronger U.S. dollar, lower prices and lower other income, partially offset by the effects of Alstom.
 The decrease in profit was primarily market driven, mainly due to lower equipment volume and prices, which, despite the effects of restructuring actions, drove lower cost productivity. These decreases were partially offset by material deflation and lower other income, including negative foreign exchange transactional hedge impacts.
 
 
 RevenuesProfit 
September 30, 2015$ 12.1$ 1.7 
Volume  (2.2)  (0.3) 
Price  (0.2)  (0.2) 
Foreign Exchange  (0.3)  - 
(Inflation)/Deflation N/A  0.2 
Mix N/A  - 
Productivity N/A  (0.4) 
Other  (0.1)  - 
Alstom  0.1  - 
September 30, 2016$ 9.5$ 1.0 
       

*Non-GAAP Financial Measure
2016 3Q FORM 10-Q 23
 AVIATION

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30
(Dollars in billions; except where noted)billions)

2016 YTD SUB-SEGMENT REVENUESEQUIPMENT/SERVICES REVENUES
ServicesEquipment
ORDERS
BACKLOG
Equipment
Services
Equipment
Services
UNIT SALES
(a)GEnx and LEAP engines are a subset of commercial engines
(b)Commercial spares shipment rate in millions of dollars per day

2016 3Q FORM 10-Q 24


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

SEGMENT REVENUES SEGMENT PROFIT SEGMENT PROFIT MARGIN
ge2q201710_chart-21270.jpgge2q201710_chart-02570.jpgge2q201710_chart-23430.jpg
 
■ ■Services ■■ Equipment
Equipment
Services


SEGMENT REVENUES & PROFIT WALK: COMMENTARY: 2016 - 2015
THREE MONTHS  
Segment revenues up $0.3 billion (5%);
Segment profit up $0.1 billion (10%) as a result of:
 
 The increase in revenues was primarily due to higher services volume, partially offset by lower equipment volume driven by lower GEnx shipments and Military, despite an increase in Commercial Engines driven by LEAP engine shipments.
 The increase in profit was primarily due to higher services volume and higher cost productivity, partially offset by the effects of inflation.
 
 RevenuesProfit
September 30, 2015$ 6.0$ 1.4
Volume  0.2  0.1
Price  -  -
Foreign Exchange  -  -
(Inflation)/Deflation N/A  (0.1)
Mix N/A  -
Productivity N/A  0.1
Other  -  -
September 30, 2016$ 6.3$ 1.5
     
   
  
NINE MONTHS  
Segment revenues up $1.1 billion (6%);
Segment profit up $0.4 billion (11%) as a result of:
 
 The increase in revenues was primarily driven by higher services volume and prices, partially offset by lower equipment volume in Military.
 The increase in profit was primarily driven by higher cost productivity, higher services volume and prices, partially offset by the effects of inflation and lower other income.
 
 RevenuesProfit
September 30, 2015$ 17.9$ 3.9
Volume  1.1  0.2
Price  0.1  0.1
Foreign Exchange  -  -
(Inflation)/Deflation N/A  (0.1)
Mix N/A  -
Productivity N/A  0.3
Other  -  (0.1)
September 30, 2016$ 19.1$ 4.4
      

SEGMENT REVENUES & PROFIT WALK:
THREE MONTHS 
 Revenues
Profit
June 30, 2016$6.6
$1.1
Volume0.4
0.1
Price(0.1)(0.1)
Foreign Exchange—
—
(Inflation)/DeflationN/A
—
MixN/A
(0.1)
ProductivityN/A
—
Other—
—
June 30, 2017$7.0
$1.0
 
SIX MONTHS 
 Revenues
Profit
June 30, 2016$11.8
$1.7
Volume1.3
0.2
Price(0.1)(0.1)
Foreign Exchange(0.1)—
(Inflation)/DeflationN/A
—
MixN/A
(0.3)
ProductivityN/A
0.2
Other0.1
0.1
June 30, 2017$13.1
$1.8
COMMENTARY: 2017 - 2016
Segment revenues up $0.3 billion (5%);
Segment profit down $(0.1) billion (10%):
The increase in revenues was driven by higher equipment volume, primarily at Gas Power Systems as a result of extended scope including higher balance of plant as well as six more Heat Recovery Steam Generator shipments than in the prior year, partially offset by five fewer gas turbine shipments and lower prices.
The decrease in profit was due to lower prices, an unfavorable business mix due to higher equipment volume versus services volume and negative variable cost productivity, partially offset by positive base cost productivity and higher overall volume.

Segment revenues up $1.2 billion (10%);
Segment profit up $0.1 billion (7%):
The increase in revenues was driven by higher equipment volume, primarily at Gas Power Systems as a result of extended scope including higher balance of plant as well as two more gas turbine shipments and 29 more Heat Recovery Steam Generator shipments than in the prior year. Revenue also increased due to increased other income including a reduction in foreign exchange transactional losses, partially offset by lower prices and the effects of a stronger U.S. dollar versus the euro.
The increase in profit was due to positive base cost productivity on higher volume as well as increased other income including a reduction in foreign exchange transactional losses, partially offset by an unfavorable business mix due to higher equipment volume versus services volume, negative variable cost productivity and lower prices.


2016 3Q2017 2Q FORM 10-Q 2517

MD&ASEGMENT OPERATIONS | RENEWABLE ENERGY
HEALTHCARE
geiconsrgb05.jpgRENEWABLE ENERGY

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

2016
2017 YTD SUB-SEGMENT REVENUES

ge2q201710_chart-15877.jpg
EQUIPMENT/SERVICES REVENUES
EQUIPMENT/SERVICES REVENUES

ge2q201710_chart-17161.jpg

 Services         Equipment
ORDERS
■ ■Services ■■ Equipment

BACKLOG
ORDERS
Equipment
Services
Equipment
Services

ge2q201710_chart-18397.jpg
 
BACKLOG

ge2q201710_chart-19499.jpg

■ ■Services ■■ Equipment
■ ■Services ■■ Equipment

UNIT SALES      



2Q 20162Q 2017VYTD 2016YTD 2017V
Wind Turbines856757(99)1,5241,324(200)

2016 3Q18 2017 2Q FORM 10-Q 26

MD&ASEGMENT OPERATIONS | RENEWABLE ENERGY



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

SEGMENT REVENUES SEGMENT PROFIT SEGMENT PROFIT MARGIN
ge2q201710_chart-20619.jpgge2q201710_chart-21571.jpgge2q201710_chart-22746.jpg
■ ■Services ■■ Equipment
Equipment
Services


SEGMENT REVENUES & PROFIT WALK: COMMENTARY: 2016 - 2015
THREE MONTHS  
Segment revenues up $0.2 billion (5%);
Segment profit up $0.1 billion (10%) as a result of:
 
 The increase in revenues was primarily due to higher volume driven by Life Sciences and Healthcare Systems, partially offset by lower prices at Healthcare Systems.
 The increase in profit was primarily driven by higher cost productivity, including the effects of previous restructuring actions and volume growth, partially offset by lower prices at Healthcare Systems.
 
 RevenuesProfit
September 30, 2015$ 4.3$ 0.7
Volume  0.3  -
Price  (0.1)  (0.1)
Foreign Exchange  -  -
(Inflation)/Deflation N/A  -
Mix N/A  -
Productivity N/A  0.1
Other  -  -
September 30, 2016$ 4.5$ 0.7
     
   
  
NINE MONTHS  
Segment revenues up $0.5 billion (4%);
Segment profit up $0.2 billion (10%) as a result of:
 
 The increase in revenues was primarily due to higher volume driven by Life Sciences and Healthcare Systems, partially offset by lower prices at Healthcare Systems and the effects of a stronger U.S. dollar.
 The increase in profit was primarily driven by higher cost productivity, including the effects of previous restructuring actions and strong volume growth, partially offset by lower prices at Healthcare Systems.
 
 RevenuesProfit
September 30, 2015$ 12.7$ 1.9
Volume  0.8  0.1
Price  (0.2)  (0.2)
Foreign Exchange  (0.1)  -
(Inflation)/Deflation N/A  -
Mix N/A  -
Productivity N/A  0.3
Other  -  -
September 30, 2016$ 13.2$ 2.1
      

SEGMENT REVENUES & PROFIT WALK:
THREE MONTHS 
 Revenues
Profit
June 30, 2016$2.1
$0.1
Volume0.3
—
Price—
—
Foreign Exchange—
—
(Inflation)/DeflationN/A
—
MixN/A
—
ProductivityN/A
—
Other0.1
—
June 30, 2017$2.5
$0.2
 
SIX MONTHS 
 Revenues
Profit
June 30, 2016$3.8
$0.2
Volume0.6
—
Price(0.1)(0.1)
Foreign Exchange0.1
—
(Inflation)/DeflationN/A
0.1
MixN/A
—
ProductivityN/A
(0.2)
Other0.2
0.2
June 30, 2017$4.5
$0.3
COMMENTARY: 2017 - 2016
Segment revenues up $0.4 billion (17%);
Segment profit up 25%:
The increase in revenues was primarily driven by higher volume due to higher equipment sales at Hydro and increased repowering projects at Onshore Wind. In addition, while there were 99 fewer wind turbine shipments than in the prior year, megawatts shipped increased by 8%. Revenue also increased due to increased other income including a reduction in foreign exchange transactional losses.
The increase in profit was due to material deflation and increased other income including a reduction in foreign exchange transactional losses. These increases were partially offset by negative cost productivity.

Segment revenues up $0.7 billion (20%);
Segment profit up $0.1 billion (27%):
The increase in revenues was primarily driven by higher volume due to higher equipment sales at Hydro and increased repowering projects at Onshore Wind. In addition, while there were 200 fewer wind turbine shipments than in the prior year, megawatts shipped increased by 4%. Revenue also increased due to the effects of a weaker U.S. dollar versus the Brazilian real and increased other income including a reduction in foreign exchange transactional losses, partially offset by lower prices.
The increase in profit was due to material deflation and increased other income including a reduction in foreign exchange transactional losses. These increases were partially offset by negative cost productivity and lower prices.


2016 3Q2017 2Q FORM 10-Q 2719

MD&ASEGMENT OPERATIONS | OIL & GAS
 
geiconsrgb08.jpgTRANSPORTATIONOIL & GAS

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

2016
2017 YTD SUB-SEGMENT REVENUES

ge2q201710_chart-16025.jpg
EQUIPMENT/SERVICES REVENUES
EQUIPMENT/SERVICES REVENUES

ge2q201710_chart-17462.jpg
(a) Includes Marine, Stationary, Drilling and Digital                           Services                 Equipment
ORDERS
■ ■Services ■■ Equipment





BACKLOG
ORDERS

ge2q201710_chart-19276.jpg
Equipment
Services
Equipment
Services
 
UNIT SALES
BACKLOG

ge2q201710_chart-20622.jpg

■ ■Services ■■ Equipment
■ ■Services ■■ Equipment




2016 3Q20 2017 2Q FORM 10-Q 28

MD&ASEGMENT OPERATIONS | OIL & GAS




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

SEGMENT REVENUES SEGMENT PROFIT SEGMENT PROFIT MARGIN
ge2q201710_chart-22004.jpgge2q201710_chart-23433.jpgge2q201710_chart-24632.jpg
■ ■Services ■■Equipment
Services
SEGMENT REVENUES & PROFIT WALK:
THREE MONTHS 
 Revenues
Profit
June 30, 2016$3.2
$0.3
Volume(0.1)—
Price(0.1)(0.1)
Foreign Exchange—
—
(Inflation)/DeflationN/A
0.1
MixN/A
—
ProductivityN/A
(0.2)
Other0.1
0.1
June 30, 2017$3.1
$0.2
 
SIX MONTHS 
 Revenues
Profit
June 30, 2016$6.5
$0.6
Volume(0.3)—
Price(0.2)(0.2)
Foreign Exchange(0.1)—
(Inflation)/DeflationN/A
0.1
MixN/A
—
ProductivityN/A
(0.2)
Other0.1
0.1
June 30, 2017$6.1
$0.4
COMMENTARY: 2017 - 2016
Segment revenues down $0.1 billion (3%);
Segment profit down $0.2 billion (52%):
The decrease in revenues was primarily driven by negative market conditions which resulted in lower prices as well as lower equipment volume primarily in Subsea & Drilling.
The decrease in operating profit was primarily market driven resulting in lower prices. Despite the effects of restructuring actions, profit decreased due to negative variable cost productivity. These decreases were partially offset by material deflation and increased other income including a reduction in foreign exchange transactional losses.

SEGMENT REVENUES & PROFIT WALK: COMMENTARY: 2016 - 2015
THREE MONTHS 
Segment revenues down $0.3 billion (22%);
Segment profit down $0.1 billion (18%) as a result of:
 
 The decrease in revenues was primarily due to lower equipment volume driven by 59 fewer locomotive shipments than in the prior year. The decrease in revenues was also impacted by the Signaling business disposition in November 2015.
 The decrease in profit was driven by lower volume due to lower locomotive shipments and lower services volume, partially offset by the effects of previous restructuring actions.
 
 RevenuesProfit
September 30, 2015$ 1.6$ 0.4
Volume  (0.3)  (0.1)
Price  -  -
Foreign Exchange  -  -
(Inflation)/Deflation N/A  -
Mix N/A  -
Productivity N/A  -
Other  -  -
September 30, 2016$ 1.2$ 0.3
     
       
       
NINE MONTHS 
Segment revenues down $0.9 billion (20%);
Segment profit down $0.2 billion (20%) as a result of:
 
 The decrease in revenues was primarily driven by lower equipment volume, driven by 87 fewer locomotive shipments than in the prior year, as well as lower services volume due to higher parked locomotives. The decrease in revenues was also impacted by the Signaling business disposition in November 2015.
 The decrease in profit was primarily driven by lower equipment volume, partially offset by material deflation and the effects of previous restructuring actions.
 
 RevenuesProfit
September 30, 2015$ 4.3$ 0.9
Volume  (0.8)  (0.2)
Price  -  -
Foreign Exchange  -  -
(Inflation)/Deflation N/A  0.1
Mix N/A  -
Productivity N/A  -
Other  -  -
September 30, 2016$ 3.5$ 0.7
     
Segment revenues down $0.4 billion (6%);
Segment profit down $0.3 billion (43%):
The decrease in revenues was primarily driven by negative market conditions that resulted in lower equipment volume in Subsea & Drilling and Turbomachinery & Process Solutions. Revenues also decreased due to lower prices and the effects of a stronger U.S. dollar versus the euro and the pound sterling, partially offset by increased other income including a reduction in foreign exchange transactional losses.
The decrease in operating profit was primarily market driven resulting in lower prices. Despite the effects of restructuring actions and an increase in earnings in our long-term service contracts, profit decreased due to negative variable cost productivity. These decreases were partially offset by material deflation and increased other income including a reduction in foreign exchange transactional losses.

2016 3Q2017 2Q FORM 10-Q 2921

MD&ASEGMENT OPERATIONS | AVIATION
ENERGY CONNECTIONS & LIGHTING
geiconsrgb12.jpgAVIATION

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

2016
2017 YTD SUB-SEGMENT REVENUES

ge2q201710_chart-17257.jpg
EQUIPMENT/SERVICES REVENUES
EQUIPMENT/SERVICES REVENUES

ge2q201710_chart-18548.jpg
(a) Includes Current, powered by GE
(b) Reflects historical results of Appliances prior to its sale in June 2016
Services■ ■ Services ■■Equipment



ORDERS
ORDERS


ge2q201710_chart-19990.jpg
BACKLOG
BACKLOG


ge2q201710_chart-21241.jpg

Equipment
Services
Equipment
Services
(a) Included $1.4 billion related to Alstom■ ■Services ■■ Equipment
(b) Included $4.0 billion related to Alstom
(a) Included $8.3 billion related to Alstom
■ ■Services ■■ Equipment
UNIT SALES      
 2Q 20162Q 2017VYTD 2016YTD 2017V
Commercial Engines724
651
(73)1,401
1282
(119)
LEAP Engines(a)11
93
82
11
174
163
Military Engines151
137
(14)302
257
(45)
Spares Rate(b)$19.0
$21.6
$2.6
$18.1
$21.6
$3.5
(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

2016 3Q22 2017 2Q FORM 10-Q 30

MD&ASEGMENT OPERATIONS | AVIATION




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

SEGMENT REVENUES SEGMENT PROFIT (LOSS) SEGMENT PROFIT MARGIN
ge2q201710_chart-22502.jpgge2q201710_chart-23773.jpgge2q201710_chart-25139.jpg
■ ■Services ■■ Equipment

SEGMENT REVENUES & PROFIT WALK:
THREE MONTHS 
 Revenues
Profit
June 30, 2016$6.5
$1.3
Volume—
—
Price—
—
Foreign Exchange—
—
(Inflation)/DeflationN/A
—
MixN/A
—
ProductivityN/A
0.2
Other—
—
June 30, 2017$6.5
$1.5
 
SIX MONTHS 
 Revenues
Profit
June 30, 2016$12.8
$2.9
Volume0.5
0.1
Price0.1
0.1
Foreign Exchange—
—
(Inflation)/DeflationN/A
—
MixN/A
(0.1)
ProductivityN/A
0.3
Other—
—
June 30, 2017$13.3
$3.2
COMMENTARY: 2017 - 2016
Segment revenues flat;
Segment profit up $0.1 billion (11%):
Revenues remained flat as an increase in services volume including an increase in the commercial spares shipment rate, was offset by a decrease in equipment volume. Equipment volume decreased primarily due to 73 fewer Commercial engine shipments and 14 fewer Military engine shipments, partially offset by higher valued commercial shipments including 82 more LEAP engine shipments than in the prior year.
The increase in profit was mainly driven by positive cost productivity which more than offset negative LEAP margin impact.
Segment revenues up $0.6 billion (4%);
Segment profit up $0.3 billion (11%):
The increase in revenues was primarily due to higher services volume including an increase in the commercial spares shipment rate as well as military spare parts shipments, and higher prices. Equipment revenue decreased primarily due to 119 fewer Commercial engine shipments and 45 fewer Military engine shipments, partially offset by higher valued commercial shipments including 163 more LEAP engine shipments than in the prior year.
The increase in profit was mainly driven by positive cost productivity, higher services volume and higher prices for Commercial Engines & Services, partially offset by unfavorable business mix due to negative LEAP margin impact.

2017 2Q FORM 10-Q 23

MD&ASEGMENT OPERATIONS | HEALTHCARE

geiconsrgb13.jpgHEALTHCARE

OPERATIONAL OVERVIEW
(Dollars in billions)
2017 YTD SUB-SEGMENT REVENUES

ge2q201710_chart-15279.jpg

EQUIPMENT/SERVICES REVENUES
(a) $1.8 billion, excluding $1.4 billion related to Alstom*
ge2q201710_chart-16546.jpg
■ ■Services ■■ Equipment

ORDERS
(b) $7.9 billion, excluding $3.9 billion related to Alstom*
ge2q201710_chart-17793.jpg
BACKLOG

ge2q201710_chart-19038.jpg

■ ■Services ■■ Equipment
■ ■Services ■■ Equipment


24 2017 2Q FORM 10-Q

MD&ASEGMENT OPERATIONS | HEALTHCARE



FINANCIAL OVERVIEW
(Dollars in billions)
Equipment
Services
(a) Includes $0.1 billion related to Alstom*
(b) $(0.1) billion, excluding $0.1 billion related to Alstom*
SEGMENT REVENUES 
SEGMENT PROFIT
SEGMENT PROFIT MARGIN
ge2q201710_chart-20510.jpgge2q201710_chart-21633.jpgge2q201710_chart-22431.jpg
(a) (1.0)%, excluding 4.6% related to Alstom*
(b) 1.8%, excluding 1.8% related to Alstom*■ ■Services ■■ Equipment
SEGMENT REVENUES & PROFIT WALK:
THREE MONTHS 
 Revenues
Profit
June 30, 2016$4.5
$0.8
Volume0.3
0.1
Price(0.1)(0.1)
Foreign Exchange—
—
(Inflation)/DeflationN/A
—
MixN/A
—
ProductivityN/A
0.1
Other—
—
June 30, 2017$4.7
$0.8
 
SIX MONTHS 
 Revenues
Profit
June 30, 2016$8.7
$1.4
Volume0.5
0.1
Price(0.1)(0.1)
Foreign Exchange(0.1)—
(Inflation)/DeflationN/A
(0.1)
MixN/A
—
ProductivityN/A
0.3
Other—
—
June 30, 2017$9.0
$1.5

SEGMENT REVENUES & PROFIT WALK: COMMENTARY: 2016 - 2015
THREE MONTHS 
Segment revenues down $0.9 billion (22%);
Segment profit down $0.2 billion (84%) as a result of:
 
 The decrease in revenues was driven primarily by the Appliances disposition in June 2016, as well as lower Lighting revenues, as traditional lighting sales were partially offset by an increase in LED revenues and Current. The decrease in revenues was partially offset by the effects of Alstom, including higher equipment sales at Grid.
 The decrease in profit was due to lower core volume, lower cost productivity and the effects of the Appliances disposition, partially offset by the effects of Alstom, including higher equipment sales at Grid.
 
 RevenuesProfit
September 30, 2015$ 4.1$ 0.3
Volume  (2.2)  (0.2)
Price  -  -
Foreign Exchange  -  -
(Inflation)/Deflation N/A  -
Mix N/A  -
Productivity N/A  (0.1)
Other  -  -
Alstom  1.4  0.1
September 30, 2016$ 3.2$ -
     
   
NINE MONTHS 
Segment revenues up $0.1 billion (1%);
Segment profit down $0.5 billion (69%)as a result of:
 
 The increase in revenues was driven by the effects of Alstom, including higher equipment sales at Grid, partially offset by a decrease in core volume driven by Industrial Solutions and Power Conversion, the effects of the Appliances disposition and traditional lighting sales. The increase was also partially offset by lower prices, the effects of a stronger U.S. dollar and lower other income, including negative foreign exchange hedge impacts.
 The decrease in profit was due to lower cost productivity, driven by lower core volume and prices, as well as the effects of the Appliances disposition and lower other income, including negative foreign exchange transactional hedge impacts, partially offset by material deflation, a favorable business mix and the effects of Alstom.
 
 RevenuesProfit
September 30, 2015$ 11.7$ 0.7
Volume  (3.5)  (0.2)
Price  (0.1)  (0.1)
Foreign Exchange  (0.1)  -
(Inflation)/Deflation N/A  0.1
Mix N/A  -
Productivity N/A  (0.2)
Other  (0.1)  (0.1)
Alstom  3.9  0.1
September 30, 2016$ 11.8$ 0.2
*Non-GAAP Financial Measure
COMMENTARY: 2017 - 2016
Segment revenues up $0.2 billion (4%);
Segment profit up 6%:
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 positive cost productivity driven by cost savings resulting from previous restructuring actions, as well as higher volume, partially offset by lower prices at Healthcare Systems.


Segment revenues up $0.3 billion (3%);
Segment profit up $0.1 billion (4%):
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 and the effects of a stronger U.S. dollar versus the euro and the Chinese renminbi.
The increase in profit was mainly due to positive cost productivity driven by cost savings resulting from previous restructuring actions, as well as higher volume, partially offset by lower prices at Healthcare Systems and inflation.



2017 2Q FORM 10-Q 25

MD&ASEGMENT OPERATIONS | TRANSPORTATION

geiconsrgb16.jpgTRANSPORTATION

OPERATIONAL OVERVIEW
(Dollars in billions)
2017 YTD SUB-SEGMENT REVENUES

ge2q201710_chart-15231.jpg
EQUIPMENT/SERVICES REVENUES

ge2q201710_chart-16335.jpg

(a) Includes Marine, Stationary, Drilling and Digital
■ ■Services ■■ Equipment

ORDERS

ge2q201710_chart-17094.jpg
BACKLOG

ge2q201710_chart-18249.jpg

■ ■Services ■■ Equipment
■ ■Services ■■ Equipment

UNIT SALES      
 2Q 20162Q 2017VYTD 2016YTD 2017V
Locomotives222120(102)378277(101)


2016 3Q26 2017 2Q FORM 10-Q 31

MD&ASEGMENT OPERATIONS | TRANSPORTATION



FINANCIAL OVERVIEW
(Dollars in billions)
 
SEGMENT REVENUESSEGMENT PROFITSEGMENT PROFIT MARGIN
ge2q201710_chart-19249.jpgge2q201710_chart-20205.jpgge2q201710_chart-21008.jpg
■ ■Services ■■ Equipment
SEGMENT REVENUES & PROFIT WALK:
THREE MONTHS 
 Revenues
Profit
June 30, 2016$1.2
$0.3
Volume(0.2)—
Price—
—
Foreign Exchange—
—
(Inflation)/DeflationN/A
—
MixN/A
—
ProductivityN/A
—
Other—
—
June 30, 2017$1.1
$0.2
 
SIX MONTHS 
 Revenues
Profit
June 30, 2016$2.2
$0.4
Volume(0.1)—
Price—
—
Foreign Exchange—
—
(Inflation)/DeflationN/A
—
MixN/A
—
ProductivityN/A
(0.1)
Other—
—
June 30, 2017$2.1
$0.4
COMMENTARY: 2017 - 2016
Segment revenues down $0.2 billion (14%);
Segment profit down $0.1 billion (26%):
The decrease in revenues was due to lower locomotive equipment volume as a result of decreased North America shipments, partially offset by increased international shipments.
The decrease in profit was driven by lower volume and negative cost productivity.




Segment revenues down $0.1 billion (5%);
Segment profit down $0.1 billion (18%):
The decrease in revenues was due to lower locomotive equipment volume as a result of decreased North America shipments, partially offset by increased international shipments.
The decrease in profit was driven by negative cost productivity and lower volume, partially offset by a favorable business mix.




2017 2Q FORM 10-Q 27

MD&ASEGMENT OPERATIONS | ENERGY CONNECTIONS & LIGHTING

geiconsrgb14.jpgENERGY CONNECTIONS & LIGHTING

OPERATIONAL OVERVIEW
(Dollars in billions)
2017 YTD SUB-SEGMENT REVENUES


ge2q201710_chart-16048.jpg
EQUIPMENT/SERVICES REVENUES

ge2q201710_chart-17590.jpg

(a) Includes Current, powered by GE
■ ■Services ■■ Equipment

ORDERS

ge2q201710_chart-18832.jpg
BACKLOG

ge2q201710_chart-20047.jpg

■ ■Services ■■ Equipment
■ ■Services ■■ Equipment


28 2017 2Q FORM 10-Q

MD&ASEGMENT OPERATIONS | ENERGY CONNECTIONS & LIGHTING



FINANCIAL OVERVIEW
(Dollars in billions)
SEGMENT REVENUESSEGMENT PROFITSEGMENT PROFIT MARGIN
ge2q201710_chart-21017.jpgge2q201710_chart-21906.jpgge2q201710_chart-22888.jpg
■ ■Services ■■ Equipment

SEGMENT REVENUES & PROFIT WALK:
THREE MONTHS 
 Revenues
Profit
June 30, 2016$4.4
$0.1
Volume(1.1)(0.1)
Price—
—
Foreign Exchange(0.1)—
(Inflation)/DeflationN/A
—
MixN/A
—
ProductivityN/A
0.1
Other—
—
June 30, 2017$3.2
$0.1
 
SIX MONTHS 
 Revenues
Profit
June 30, 2016$8.7
$0.2
Volume(2.6)(0.2)
Price(0.1)(0.1)
Foreign Exchange(0.1)—
(Inflation)/DeflationN/A
—
MixN/A
—
ProductivityN/A
0.2
Other—
—
June 30, 2017$6.0
$0.1
COMMENTARY: 2017 - 2016
Segment revenues down $1.2 billion (27%);
Segment profit down $0.1 billion (39%):
The decrease in revenues was mainly due to the Appliances disposition in June 2016 as well as lower GE Lighting revenues driven by declines in traditional lighting product. Energy Connections revenues remained flat as increased volume at Grid Solutions was offset by a decrease at Power Conversion. Revenues also decreased due to the effects of a stronger U.S. dollar versus the pound sterling and the euro.
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 GE Lighting due to positive cost productivity including the effects of classifying Industrial Solutions as a business held for sale in the first quarter of 2017.

Segment revenues down $2.7 billion (31%);
Segment profit down $0.1 billion (33%):
The decrease in revenues was mainly due to the Appliances disposition in June 2016 as well as lower GE Lighting revenues driven by declines in traditional lighting product. Energy Connections remained flat as increased volume at Grid Solutions was offset by a decrease at Power Conversion. Revenues also decreased due to lower prices and the effects of a stronger U.S. dollar versus the pound sterling and the euro.
The decrease in profit was due to lower volume driven by the Appliances disposition in June 2016, as well as lower prices, partially offset by increases across Energy Connections, Current, and GE Lighting due to positive cost productivity including the effects of classifying Industrial Solutions as a business held for sale in the first quarter of 2017.


2017 2Q FORM 10-Q 29

MD&ASEGMENT OPERATIONS | CAPITAL

geiconsrgb17.jpgCAPITAL

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

2016
2017 YTD SUB-SEGMENT REVENUES
ENDING NET INVESTMENT, EXCLUDING LIQUIDITY*
(a) As originally reported; $271 billion including discontinued operations
(b) $103 billion including discontinued operations

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

SEGMENT REVENUES

ge2q201710_chart-15195.jpg
ge2q201710_chart-16360.jpg


SEGMENT PROFIT (LOSS)(a)
■■ Verticals ■■ Other Continuing


ge2q201710_chart-18143.jpg
■■ Verticals ■■ Other Continuing
Total Capital
Verticals
Other Continuing
Verticals
Other Continuing
Total Capital
(a) InterestIncludes interest and other financial charges and income taxes are included in determining segment profit (loss) for the Capital segment
SIGNIFICANT TRENDS & DEVELOPMENTS

* Non-GAAPAs 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 MeasureInstitution (SIFI) removed in June 2016.
GE Capital paid common dividends of $2.0 billion and $4.0 billion to GE in the three months and six months ended June 30, 2017, respectively.
We test future policy benefit reserves associated with our run-off insurance activities for premium deficiencies annually. We have recently experienced elevated claim experience for a portion of our long-term care insurance products, which may result in a deficiency in reserves plus future premiums compared to future benefit payments. Should such a deficiency exist, we would record a charge to earnings in the second half of 2017 upon completion of this review. See Note 11 of the consolidated financial statements for further information.


2016 3Q30 2017 2Q FORM 10-Q 32

MD&ASEGMENT OPERATIONS | CAPITAL

COMMENTARY: 2016 - 2015

COMMENTARY: 2017 - 2016

THREE MONTHS

Capital revenues decreased $0.1$0.3 billion, or 2%12%, as a result of the effects of dispositions andprimarily due to higher impairments, organic revenue declines, partially offset by higher gains and lower impairments.

Within Capital, Verticals revenues decreased by $0.1 billion as a result of the effects of dispositions ($0.2 billion) and organic revenue declines ($0.2 billion), partially offset by lower impairments ($0.2 billion) and higher gains ($0.1 billion).
Other Capital revenues increased less than $0.1 billion as a result of higher gains ($0.1 billion) and organic revenue growth ($0.1 billion), partially offset by higher impairments ($0.1 billion).
gains.

Capital net losslosses decreased $0.2$0.4 billion, or 71%, primarily due to lower impairmentstreasury and higher gains,headquarters operation expenses associated with the GE Capital Exit plan.
Within Capital, Verticals net earnings increased $0.1 billion, or 20%, due to core increases ($0.1 billion), partially offset by lower gains.
Other Capital losses decreased $0.3 billion, or 32%, primarily associated with the effectsGE Capital Exit Plan as follows:
Lower headquarters operation expenses of dispositions and core decreases. Core decreases reflect$0.2 billion
Lower treasury operation expenses of $0.1 billion reflecting lower excess interest expense, higher restructuring expenses and higher insurance reserve provisions, partially offset by increased tax benefits resulting from an IRS tax settlement and tax adjustments in the three months ended September 30, 2016, to bring Capital's nine-month tax rate in lineincluding costs associated with the projected full-year tax rate.May 2016 debt tender and derivative activities that reduce or eliminate interest rate, currency or market risk between financial assets and liabilities.

Within Capital, Verticals net earnings increased by $0.1 billion due to lower impairments ($0.2 billion) and higher gains, partially offset by the effects of dispositions ($0.1 billion) and core decreases ($0.1 billion).
SIX MONTHS
Other Capital net loss decreased by $0.1 billion primarily as a result of:
Increased tax benefits related to an IRS settlement of $0.3 billion.
Tax adjustments of $0.1 billion in the three months ended September 30, 2016, to bring Capital's nine-month tax rate in line with the projected full-year tax rate.
Higher treasury operation expenses of $0.3 billion reflecting excess interest expense and derivative activities that reduce or eliminate interest rate, currency or market risk between financial assets and liabilities. We expect to continue to have excess interest costs in 2016 as asset sales outpace our debt maturities. We may engage in liability management actions, such as buying back debt, based on market and economic conditions.
Higher restructuring expenses of $0.1 billion.
NINE MONTHS
Capital revenues increased less than $0.1decreased $0.5 billion, or 9%, primarily due to organic revenue declines, lower gains and higher impairments.

Capital losses decreased $1.3 billion, or 85%, primarily due to lower impairments, higher gainstreasury and the effects of acquisitions, partially offset by the effects of dispositions, organic revenue declinesheadquarters operation expenses, lower preferred dividend expenses, and the effects of currency exchange.

Within Capital, Verticals revenues decreased by $0.2 billion as a result of organic revenue declines ($0.5 billion) and the effects of dispositions ($0.2 billion), partially offset by higher gains ($0.3 billion), lower impairments ($0.1 billion) and the effects of acquisitions.
Other Capital revenues increased $0.3 billion as a result of organic revenue growth ($0.4 billion) and lower impairments ($0.1 billion), partially offset by lower gains ($0.2 billion) and the effects of currency exchange ($0.1 billion).

Capital net loss decreased by $4.9 billion, or 77%, primarily due to the absence of the 2015 chargeslower restructuring expenses associated with the GE Capital Exit Plan.
Within Capital, Verticals net earnings increased by $0.2 billion as a result of higherWithin Capital, Verticals net earnings increased $0.1 billion, or 14%, due to core increases ($0.2 billion) and lower impairments ($0.1 billion), partially offset by lower gains ($0.2 billion) and lower impairments ($0.1 billion), partially offset by the effects of dispositions ($0.1 billion) and core decreases ($0.1 billion).
Other Capital net loss decreased by $4.7 billion primarily as a result of:
Other Capital losses decreased $1.1 billion, or 47%, primarily associated with the GE Capital Exit Plan as follows:
Lower tax expenses of $6.1 billion primarily related to the absence of the 2015 charges for repatriation of foreign earnings and write-off of deferred tax assets related to the GE Capital Exit Plan.
Lower treasury operation expenses of $0.5 billion reflecting lower excess interest expense, including costs associated with the February and May 2016 debt tenders and derivative activities that reduce or eliminate interest rate, currency or market risk between financial assets and liabilities.
Tax adjustments of $0.5 billion in the nine months ended September 30, 2016, to bring Capital's nine-month tax rate in line with the projected full-year tax rate.
Lower headquarters operation expenses of $0.4 billion.
Increased tax benefits related to an IRS tax settlement of $0.3 billion.
Lower preferred dividend expenses of $0.2 billion associated with the January 2016 preferred equity exchange.
Higher treasury operation expenses of $1.6 billion reflecting excess interest expense, costs associated with the February and May 2016 debt tenders and derivative activities that reduce or eliminate interest rate, currency or market risk between financial assets and liabilities. We expect to continue to have excess interest costs in 2016 as asset sales outpace our debt maturities. We may engage in liability management actions, such as buying back debt, based on market and economic conditions.


2017 2Q FORM 10-Q 31

·
Charges of $0.3 billion associated with the preferred equity exchange that was completed in January 2016.
MD&ACORPORATE ITEMS AND ELIMINATIONS

CORPORATE ITEMS AND ELIMINATIONS   
       
       
REVENUES AND OPERATING PROFIT (COST)     
       
  Three months ended June 30 Six months ended June 30
(In millions)2017
2016
 2017
2016
       
Revenues     
 Gains (losses) on disposals$—
$3,129
 $2
$3,188
 Eliminations and other(935)(1,036) (1,973)(2,004)
Total Corporate Items and Eliminations$(935)$2,093
 $(1,972)$1,184
       
Operating profit (cost)     
 Gains (losses) on disposals$—
$3,129
 $2
$3,188
 Restructuring and other charges(709)(1,188) (1,728)(1,874)
 Principal retirement plans(a)(551)(479) (1,085)(947)
 Eliminations and other(323)(487) (780)(964)
Total Corporate Items and Eliminations$(1,583)$974
 $(3,592)$(597)
       
CORPORATE COSTS     
       
  Three months ended June 30 Six months ended June 30
(In millions)2017
2016
 2017
2016
       
Total Corporate Items and Eliminations$(1,583)$974
 $(3,592)$(597)
Less: non-operating pension cost(560)(511) (1,138)(1,023)
Total Corporate costs (operating)*
$(1,023)$1,485
 $(2,454)$426
Less: restructuring and other charges(709)(1,188) (1,728)(1,874)
Less: gains (losses) on disposals

$—
3,129
 2
3,188
Adjusted total corporate costs (operating)*$(314)$(456) $(728)$(887)
·Higher restructuring expenses of $0.3 billion.
2016 3Q FORM 10-Q 33
CORPORATE ITEMS AND ELIMINATIONS      
             
             
REVENUES AND OPERATING PROFIT (COST)           
             
  Three months ended September 30 Nine months ended September 30
(In millions) 2016  2015  2016  2015
             
Revenues           
 Gains (losses) on disposed and held for sale businesses$208 $- $3,395 $49
 NBCU settlement -  -  -  450
 Eliminations and other (963)  (888)  (2,966)  (2,665)
Total Corporate Items and Eliminations$(755) $(888) $429 $(2,166)
             
Operating profit (cost)           
 Gains (losses) on disposed and held for sale businesses$208 $- $3,395 $49
 NBCU settlement -  -  -  450
 Principal retirement plans(a) (542)  (659)  (1,489) $(2,121)
 Restructuring and other charges (683)  (346)  (2,557)  (1,167)
 Eliminations and other (507)  (554)  (1,469)  (1,647)
Total Corporate Items and Eliminations$(1,524) $(1,559) $(2,120) $(4,436)
             
CORPORATE COSTS           
             
  Three months ended September 30 Nine months ended September 30
(In millions) 2016 2015  2016 2015
             
Total Corporate Items and Eliminations$(1,524) $(1,559) $(2,120) $(4,436)
Less: non-operating pension cost (511)  (693)  (1,534)  (2,077)
Total Corporate costs (operating)*
$(1,012) $(866) $(586) $(2,359)
Less: restructuring and other charges, gains (losses) and settlement (475)  (346)  838  (668)
Adjusted total corporate costs (operating)*$(538) $(520) $(1,424) $(1,691)
             
(a)Included non-operating pension cost* of $0.5$0.6 billion and $0.7$0.5 billion in the three months ended SeptemberJune 30, 20162017 and 2015,2016, respectively, and $1.5$1.1 billion and $2.1$1.0 billion in the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively, which includes expected return on plan assets, interest costs and non-cash amortization of actuarial gains and losses.

2017 - 2016 – 2015 COMMENTARY: THREE MONTHS ENDED SEPTEMBERJUNE 30

Revenues and other income increased $0.1decreased $3.0 billion, primarily as a result of:
$0.2 billion of higher net gains from disposed and held for sale businesses, which included $0.4 billion gain from the sale of GE Asset Management to State Street Corporation, partially offset by a $0.2 billion charge related to the anticipated sale of a non-strategic platform in our Aviation business. This was partially offset by $0.1 billion of higher inter-segment eliminations.
$3.1 billion of lower gains due to the nonrecurrence of the sale of our Appliances business to Haier in the second quarter of 2016.

Operating costs were flat,increased $2.6 billion, primarily as a result of:
$0.2 billion of higher net gains from disposed$3.1 billion of lower gains due to the nonrecurrence of the sale of our Appliances business to Haier in the second quarter of 2016, and held for sale businesses, which included $0.4 billion gain from the sale of GE Asset Management to State Street Corporation, partially offset by a $0.2 billion charge related to the anticipated sale of a non-strategic platform in our Aviation business, and
$0.1 billion $0.1 billion of higher costs associated with our principal retirement plans, including the effects of lower costs associated with our principal retirement plans including the effects of higher discount rates.

These decreasesincreases to operating costs were partially offset by the following:
$0.30.5 billion higherof lower restructuring and other charges, which included $0.2and
$0.1 billion of higher restructuring charges associated with the Alstom acquisition.lower corporate structural costs.











*Non-GAAP Financial Measure

2016 3Q32 2017 2Q FORM 10-Q 34

MD&ACORPORATE ITEMS AND ELIMINATIONS

2017 - 2016 – 2015 COMMENTARY: NINESIX MONTHS ENDED SEPTEMBERJUNE 30

Revenues and other income increased $2.6 billion, primarily a result of:
$3.3 billion of higher net gains from disposed and held for sale businesses, which includeddecreased $3.2 billion gain from the sale of our Appliances business to Haier in the second quarter of 2016 and $0.4 billion gain from the sale of GE Asset Management to State Street Corporation, partially offset by a $0.2 billion charge related to the anticipated sale of a non-strategic platform in our Aviation business in the third quarter of 2016.

This increase to revenues and other income was partially offset by the following:
$0.5 billion lower other income from a settlement related to the NBCU transaction in the second quarter of 2015, and
$0.3 billion of higher inter-segment eliminations.

Operating costs decreased $2.3 billion, primarily as a result of:
$3.3 billion of higher net gains from disposed and held for sale businesses, which included $3.2 billion gain from the sale of our Appliances business to Haier in the second quarter of 2016 and $0.4 billion gain from the sale of GE Asset Management to State Street Corporation, partially offset by a $0.2 billion charge related to the anticipated sale of a non-strategic platform in our Aviation business in the third$3.2 billion of lower gains due to the nonrecurrence of a $3.1 billion gain from the sale of our Appliances business to Haier in the second quarter of 2016 and a $0.1 billion gain from the sale of two floors in 30 Rockefeller Plaza, New York City in the first quarter of 2016.
$0.6 billion of lower costs associated with our principal retirement plans including the effects of higher discount rates, and
$0.2 billion of lower costs under our long-term incentive plan.

Operating costs increased $3.0 billion, primarily as a result of:
$3.2 billion of lower gains due to the nonrecurrence of a $3.1 billion gain from the sale of our Appliances business to Haier in the second quarter of 2016 and a $0.1 billion gain from 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.

These decreasesincreases to operating costs were partially offset by the following:
$0.2 billion of lower corporate structural costs, and
$0.1 billion of lower restructuring and other charges.

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 and cost reduction goals.
RESTRUCTURING & OTHER CHARGES        
  Three months ended June 30 Six months ended June 30
(In billions) 2017
 2016
 2017
 2016
         
Workforce reductions $0.2
 $0.4
 $0.7
 $0.6
Plant closures & associated costs and other asset write-downs 0.3
 0.6
 0.5
 0.7
Acquisition/disposition net charges 0.2
 0.1
 0.4
 0.4
Other —
 0.1
 0.1
 0.2
Total $0.7

$1.2
 $1.7
 $1.9

2017 - 2016 COMMENTARY: THREE MONTHS ENDED JUNE 30

For the three months ended June 30, 2017, restructuring and other charges were $0.7 billion of which approximately $0.4 billion was reported in cost of products/services and $0.3 billion was reported in selling, general and administrative expenses (SG&A). These activities were primarily at Corporate, Oil & Gas and Renewable Energy. Cash expenditures for restructuring and other charges were approximately $0.4 billion for three months ended June 30, 2017.

For the three months ended June 30, 2016, restructuring and other charges were $1.2 billion of which approximately $0.8 billion was reported in cost of products/services and $0.4 billion was reported in SG&A. These activities were primarily at Oil & Gas, Power and Healthcare. Cash expenditures for restructuring and other charges were approximately $0.3 billion for the three months ended June 30, 2016.

2017 - 2016 COMMENTARY: SIX MONTHS ENDED JUNE 30

For the six months ended June 30, 2017, restructuring and other charges were $1.7 billion of which approximately $1.1 billion was reported in cost of products/services and $0.6 billion was reported in SG&A. These activities were primarily at Power, Corporate and Energy Connections & Lighting. Cash expenditures for restructuring and other charges were approximately $1.0 billion for six months ended June 30, 2017.

For the six months ended June 30, 2016, restructuring and other charges were $1.9 billion of which approximately $1.2 billion was reported in cost of products/services and $0.6 billion was reported in SG&A. These activities were primarily at Oil & Gas, Power and Healthcare. Cash expenditures for restructuring and other charges were approximately $0.7 billion for the six months ended June 30, 2016.


2017 2Q FORM 10-Q 33

$1.4 billion higher restructuring and other charges, which included $0.6 billion of higher restructuring charges associated with the Alstom acquisition, and
MD&ACORPORATE ITEMS AND ELIMINATIONS
$0.5 billion lower other income from a settlement related to the NBCU transaction in the second quarter of 2015.

COSTS NOT INCLUDED IN SEGMENT RESULTS

CertainAs 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. These amounts are included in GE Corporate Items & Eliminations and may include matters such as charges for restructuring; rationalization and other similar expenses; acquisition costs and related charges; technology and product development cost; certain gains and losses from acquisitions or dispositions; and litigation settlements or other charges, for which responsibility preceded the current management team. The amount of costs not included in segment results follows.
COSTS       
 Three months ended June 30 Six months ended June 30
(In billions)2017
 2016
 2017
 2016
        
Power$0.1
 $0.3
 $0.5
 $0.5
Renewable Energy0.1
 0.1
 0.2
 0.2
Oil & Gas0.1
 0.4
 0.2
 0.5
Aviation—
 —
 —
 0.1
Healthcare0.1
 0.1
 0.1
 0.3
Transportation—
 0.1
 0.1
 0.2
Energy Connections & Lighting0.1
 0.1
 0.3
 0.2
Total$0.6
 $1.2
 $1.4
 $1.9

COSTS           
            
 Three months ended September 30 Nine months ended September 30
(In billions) 2016  2015  2016  2015
            
Power$0.3(a)$0.1 $0.8(a)$0.2
Renewable Energy -  -  0.2  0.1
Oil & Gas 0.1(b) 0.2  0.7(b) 0.5
Aviation -  -  0.1  -
Healthcare 0.1(c) -  0.4(c) 0.1
Transportation -  -  0.2  -
Energy Connections & Lighting 0.1  -  0.3  0.2
Total$0.7 $0.3 $2.7 $1.1
            


34 2017 2Q FORM 10-Q

(a)
For the three and nine months ended September 30, 2016, Power's results excluded $0.3 billion and $0.8 billion of costs, primarily related to restructuring charges associated with the Alstom acquisition.
MD&AOTHER CONSOLIDATED INFORMATION

OTHER CONSOLIDATED INFORMATION

INCOME TAXES

GE pays the income taxes it owes in every country it does business. 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.

See Other Consolidated Information - Income Taxes section and Critical Accounting Estimates - Income Taxes section within MD&A in our Annual Report on Form 10-K for the year ended December 31, 2016 for further information on income taxes.

CONSOLIDATED – THREE AND SIX MONTHS ENDED JUNE 30
(Dollars in billions)
PROVISION (BENEFIT) FOR INCOME TAXES
(b)For the three and nine months ended September 30, 2016, Oil & Gas's results excluded $0.1 billion and $0.7 billion of costs, primarily related to ongoing restructuring activities.
ge2q201710_chart-14914.jpg
(c)For the three and nine months ended September2017 – 2016 COMMENTARY: THREE MONTHS ENDED JUNE 30 2016, Healthcare's results excluded $0.1 billion and $0.4 billion of costs, primarily related to restructuring charges.

The consolidated income tax rate was 1% and 12% for the quarters ended June 30, 2017 and 2016, 3Q FORM 10-Q 35respectively.
The second quarter 2017 consolidated tax rate reflects a 104% tax rate on $0.2 billion of pre-tax loss at GE Capital and a 13% tax rate on $1.7 billion of pre-tax income at GE.
GAINS (LOSSES)           
            
 Three months ended September 30 Nine months ended September 30
(In billions) 2016  2015  2016  2015
            
Power$- $- $- $-
Renewable Energy -  -  -  -
Oil & Gas -  -  -  -
Aviation (0.2)(a) -  (0.2)(a) -
Healthcare -  -  -  -
Transportation -  -  -  -
Energy Connections & Lighting -  -  3.2(b) -
Total$(0.2) $- $2.9 $-
            
(a)Related to the anticipated sale of a non-strategic platform in our Aviation business.
The second quarter 2016 consolidated tax rate reflects a 27% tax rate on $0.6 billion of pre-tax loss at GE Capital and a 14% tax rate on $4.4 billion of pre-tax income at GE.
(b)   Related toThe consolidated tax provision includes $0.2 billion and $0.6 billion for GE (excluding GE Capital) for the salesecond quarters of our Appliances business2017 and 2016, respectively.
Consolidated income tax expense was insignificant in the second quarter of 2017 and $0.5 billion for the second quarter of 2016. The decrease in tax expense is primarily due to the decrease in pre-tax income taxed at above the average tax rate primarily from the non-repeat of the Appliances disposition and a larger benefit from global activities, partially offset by a smaller adjustment in the second quarter of 2017 compared to the second quarter of 2016 to bring the tax rate in-line with the lower projected full-year rate and the non-repeat of deductible stock loss.



2016 3Q2017 2Q FORM 10-Q 3635

MD&AOTHER CONSOLIDATED INFORMATION

2017 – 2016 COMMENTARY: SIX MONTHS ENDED JUNE 30

The consolidated tax rate was 1% in the first six months of 2017 compared to 7% in the first six months of 2016.
The first six months of 2017 consolidated tax rate reflects a 99% tax rate on $0.3 billion of pre-tax loss at GE Capital and a 14% tax rate on $2.7 billion of pre-tax income at GE.
The first six months of 2016 consolidated tax rate reflects a 32% tax rate on $1.6 billion of pre-tax loss at GE Capital and a 14% tax rate on $5.6 billion of pre-tax income at GE.
The consolidated tax provision includes $0.4 billion and $0.8 billion for GE (excluding GE Capital) for the first six months of 2017 and 2016, respectively.
Consolidated income tax expense was insignificant for the first six months of 2017 compared to $0.3 billion for the first six months of 2016. The decrease in tax expense is primarily due to the decrease in pre-tax income taxed at above the average tax rate primarily from the non-repeat of the Appliances disposition and a larger benefit from global activities. This decrease was partially offset by the adjustment to increase the 2017 year-to-date rate to be in-line with the higher projected full-year rate compared to the decrease in the 2016 year-to-date rate to be in-line with the lower projected full-year rate and the non-repeat of deductible stock loss.

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 excluding GE Capital earnings to be approximately 10% for the full year of 2017.

See Note 13 to the consolidated financial statements for additional information related to income taxes.

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 where the earnings are taxed at 12.5%, from our Power operations located in Switzerland and Hungary where the earnings are taxed at between 9% and 18.6%, and our Healthcare operations in Europe where tax deductions are allowed for certain intangible assets and earnings are taxed below the U.S. statutory rate.

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.

DISCONTINUED OPERATIONS

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

We have entered into Transitional Service Agreements (TSA) withSee Notes 2 and provided certain indemnifications18 to buyers of GE Capital's assets. Under the TSAs, GE Capital provides various servicesconsolidated financial statements for terms generally between 12 and 24 months and receives a level of cost reimbursement from the buyers.

At September 30, 2016, specific indemnifications amounted to $1.6 billion, for which we have recognized related liabilities of $0.2 billion. In addition, we provided $0.1 billion of credit support, the majority on behalf of certain customers aligned with signed disposal transactions scheduled to close in 2016, and recognized an insignificant liability at September 30, 2016.

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

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

FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS
            
 Three months ended September 30 Nine months ended September 30
(In millions)2016 2015 2016 2015
            
Earnings (loss) from discontinued operations, net of taxes$(105) $629 $(954) $(11,253)
            
2016 – 2015 COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30

The third quarter 2016 loss from discontinued operations, net of taxes, primarily reflected the following:
$0.5 billion after-tax loss at our Consumer business (including $0.4 billion after-tax loss on planned disposals).
Third quarter 2016 losses were partially offset by a $0.2 billion tax benefit related to an IRS tax settlement in our discontinued insurance operations and $0.1 billion after-tax earnings at our CLL business.

The third quarter 2015 earnings from discontinued operations, net of taxes, primarily reflected the following:
$1.0 billion after-tax earnings at our Consumer business.
$0.1 billion after-tax earnings at our Real Estate business (including $0.2 billion after-tax gain on transactions closed in the quarter).
Third quarter 2015 earnings were partially offset by $0.5 billion after-tax loss at our CLL business (including $1.2 billion after-tax loss on planned disposals).

2016 – 2015 COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30

The 2016 loss from discontinued operations, net of taxes, primarily reflected the following:
$0.7 billion after-tax loss at our CLL business (including $0.8 billion after-tax loss on planned disposals).
$0.5 billion after-tax loss at our Consumer business (including $0.5 billion after-tax loss on planned disposals).
These 2016 losses were partially offset by a $0.2 billion tax benefit related to an IRS settlement in our discontinued insurance operations.

The 2015 loss from discontinued operations, net of taxes, primarily reflected the following:
$8.2 billion after-tax loss at our CLL business (including $8.4 billion after-tax loss on planned disposals).
$2.2 billion after-tax loss at our Real Estate business (including $2.2 billion after-tax loss on planned disposals).
$0.9 billion after-tax loss at our Consumer business.

For additional information related to discontinued operations, see Note 2 to the consolidated financial statements.
2016 3Q FORM 10-Q 37
OTHER CONSOLIDATED INFORMATIONoperations.

INCOME TAXES
36 2017 2Q FORM 10-Q

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

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

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

PROVISION FOR INCOME TAXES
2016 – 2015 COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30

MD&AThe consolidated income tax rate was 0.9% in the third quarter of 2016 compared to 6.6% in the third quarter of 2015.STATEMENT OF FINANCIAL POSITION
The consolidated tax provision decreased in the third quarter of 2016 compared to the third quarter of 2015 due to a larger adjustment to reduce the tax rate to the projected full-year tax rate and due to the final resolution of the IRS disallowance of the tax loss on the 2003 disposition of ERC Life Reinsurance Company, partially offset by lower benefits from lower-taxed global operations.
The first nine months of 2016 tax rate was adjusted to reflect the relatively large amount of pre-tax income through the third quarter of 2016 relative to tax benefits through the third quarter of 2016. Tax benefits incurred through the third quarter were relatively low as larger international tax benefits are projected for the fourth quarter of 2016.
The consolidated tax provision includes $0.2 billion and $0.4 billion for GE (excluding GE Capital) for the third quarters of 2016 and 2015, respectively.




2016 3Q FORM 10-Q 38



2016 – 2015 COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30

The consolidated tax rate was 4.9% in the first nine months of 2016 compared to 115.0% in the first nine months of 2015.  The tax rate for the first nine months of 2015 was in excess of 100% due to the tax expense of $6.2 billion in the first nine months of 2015 for the expected repatriation of foreign earnings and write-off of deferred tax assets incurred in connection with the GE Capital Exit Plan.
The consolidated income tax provision decreased from the first nine months of 2015 to the first nine months of 2016 due to the non-repeat of the GE Capital Exit Plan charge, a larger adjustment to reduce the tax rate to the projected full-year tax rate and the final resolution of the IRS disallowance of the tax loss on the 2003 disposition of ERC Life Reinsurance Company, partially offset by lower benefits from lower-taxed global operations.
The first nine months of 2016 tax rate was adjusted to reflect the relatively large amount of pre-tax income through the third quarter of 2016 including the gain on the sale of the Appliances business relative to tax benefits through the third quarter of 2016. Tax benefits incurred through the third quarter were also relatively low as larger international tax benefits are projected for the fourth quarter of 2016 and because of high taxes on the gain on the sale of the Appliances business.
The consolidated tax provision includes $1.0 billion and $1.3 billion for GE (excluding GE Capital) for the first nine months of 2016 and 2015, respectively.
BENEFITS FROM GLOBAL OPERATIONS

Absent the effects of the GE Capital Exit Plan, our consolidated income tax provision is lower 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.
2016 3Q FORM 10-Q 39
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 NINESIX MONTHS ENDED
SEPTEMBER
JUNE 30, 20162017

Cash and equivalents decreased $4.1 billion. GE Cash and equivalents increased $3.7 billion due to the issuance of long-term debt, primarily to fund acquisitions, of $8.6 billion, long-term intercompany loans from GE Capital of $4.1 billion and common dividends from GE Capital of $4.0 billion. The increase was partially offset by payments of dividends to shareowners of $4.2 billion, treasury stock net purchases of $2.7 billion (cash basis), business acquisitions of $2.6 billion, net PP&E additions of $1.4 billion, the settlement of the remaining portion of a 2016 short-term loan from GE Capital of $1.3 billion and cash used for industrial operating activities of $0.4 billion. GE Capital Cash and equivalents decreased $7.8 billion primarily driven by $13.0 billion net repayments of debt, $4.2 billion in payments of dividends to shareowners, long-term intercompany loans to GE of $4.1 billion, partially offset by $5.0 billion in maturities of liquidity investments, $2.8 billion in net collections of financing receivables, $2.2 billion related to cash collections from discontinued operations, $1.8 billion of proceeds from borrowings assumed by the buyer in a business disposition and $1.3 billion settlement of the remaining portion of a 2016 short-term loan to GE. See the Statement of Cash Flows section for additional information.
Investment securities decreased $4.3 billion, primarily due to maturities of liquidity portfolio investments at GE Capital. See Note 3 to the consolidated financial statements for additional information.
Contract assets increased $3.8 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 businesses held for sale increased $2.4 billion, primarily due to the classification of our Industrial Solutions business, within our Energy Connections & Lighting segment, as held for sale in the first quarter of 2017. See Note 2 to the consolidated financial statements for additional information.
Assets of discontinued operations decreased $7.0 billion, primarily due to the disposition of businesses at GE Capital. See Note 2 to the consolidated financial statements for additional information.
Borrowings decreased $1.8 billion, primarily due to net repayment of debt at GE Capital of $13.0 billion, partially offset by the issuance of long-term debt at GE of $8.6 billion, primarily to fund acquisitions, and the effects of currency exchange of $2.5 billion. See Note 10 to the consolidated financial statements for additional information.
Liabilities of discontinued operations decreased $3.2 billion, primarily driven by the disposition of businesses at GE Capital. See Note 2 to the consolidated financial statements for additional information.
Common stock held in treasury increased $2.6 billion, primarily due to treasury stock purchases of $3.6 billion (book basis), partially offset by treasury stock issuances of $1.0 billion.

2017 2Q FORM 10-Q 37

Cash and equivalents decreased $18.0 billion. GE Cash and equivalents increased $0.2 billion due to cash flows from operating activities of $18.3 billion (including common dividends from GE Capital of $16.1 billion), proceeds from the sale of our Appliances business of $4.8 billion and a short-term loan from GE Capital of $5.0 billion. This is partially offset by treasury stock purchases of $18.7 billion (cash basis), including $9.1 billion paid under ASR agreements, dividends of $6.4 billion, net PP&E additions of $2.1 billion and software spend of $0.6 billion. GE Capital Cash and equivalents decreased $18.2 billion primarily driven by $50.7 billion net repayments of debt, $16.2 billion in payments of dividends to shareowners and a short-term loan to GE of $5.0 billion, partially offset by $53.3 billion in proceeds from business dispositions and $0.8 billion in proceeds from the sale of receivables originated in our Appliances business and sold to Haier. See the Statement of Cash Flows section for additional information.
MD&AFINANCIAL RESOURCES AND LIQUIDITY
Investment securities increased $14.4 billion, primarily driven by investing excess cash in longer term investment to achieve higher yield. See Note 3 for additional information.
All other assets decreased $11.0 billion, primarily due to maturities of time deposits in line with debt maturities at GE Capital.
Assets of discontinued operations decreased $90.0 billion, primarily due to the disposition of CLL businesses of $81.5 billion. See Note 2 for additional information.
Borrowings decreased $48.2 billion, primarily due to a net decrease of GE Capital borrowings of $48.7 billion, partially offset by a net increase in borrowings by GE of $1.4 billion (excluding GE Capital debt assumption and short-term loan from GE Capital to GE).
Liabilities of discontinued operations decreased $36.7 billion, primarily driven by the disposition of CLL businesses of $33.6 billion. See Note 2 for additional information.
Common stock held in treasury increased $16.3 billion, primarily due to treasury stock purchases of $18.1 billion (book basis), including $9.1 billion repurchased under ASR agreements. This was partially offset by treasury stock issuances of $1.9 billion, primarily stock option exercises of $1.1 billion.
2016 3Q FORM 10-Q 40

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 billion at June 30, 2017, that we regularly use to fund operations in the U.S., principally within the quarters. In addition, as part of our liquidity management process, GE and GE Capital may periodically enter into short-term intercompany loans which are repaid within the same quarter.

As part of GE’s previously formulated and communicated plan to incur new long-term debt primarily to fund acquisitions, during the second quarter of 2017, GE completed issuances of €8,000 million senior unsecured debt, composed of €1,750 million of 0.375% Notes due 2022, €2,000 million of 0.875% Notes due 2025, €2,250 million of 1.50% Notes due 2029 and €2,000 million of 2.125% Notes due 2037. During the first quarter of 2017, GE and GE Capital has historically relied on theentered into a series of intercompany loans totaling $4.1 billion, which utilized a portion of GE Capital's excess unsecured term debt markets, the global commercial paper markets, deposits, secured funding, retail funding products, bank borrowingsdebt. Such intercompany loans collectively have a weighted average interest rate and securitizations to fund itsterm of 3.6% and approximately 15 years, respectively. The remaining $1.3 billion short-term intercompany loan balance sheet. Subsequent to April 10, 2015at December 31, 2016 was paid by GE in January 2017.

Based on asset and with the execution of theliability management actions we have taken, GE Capital Exit Plan, we dodoes not plan to issue any incremental GE Capital senior unsecured term debt for four years. Furthermore, we have reduced ouruntil 2019. GE Capital's global commercial paper from $25balance totaled $5.0 billion to $5 billion consistent with the Exit Plan. In addition, we have substantially reduced our reliance on deposits and securitization due to the Exit Plan. Today, weat June 30, 2017. GE Capital mainly relyrelies 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 ($17.8 billion at June 30, 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 outpacehave 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. For the nine months ended September 30, 2016, we repurchased $6.7 billion of long-term unsecured debt and $5.8 billion of subordinated debentures, resulting in a pre-tax loss of $0.6 billion.

Our 2016 GE Capital funding plan anticipates repayment of principal on outstanding short-term borrowings, including the current portion of long-term debt ($42.7 billion at December 31, 2015), principally through dispositions, asset sales and cash on hand. Long-term maturities and early redemptions were $6.0 billion in the third quarter of 2016.

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

On December 2,In 2015, $87.7 billion of senior unsecured notes and $4.9 billion of commercial paper waswere assumed by GE upon its merger with GE Capital resulting in an intercompany receivable and payable between GE and GE Capital. The amount ofOn 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 was $59.8 billion as of September 30, 2016, which includes a reduction for a $5.0 billion short-term loan in the second quarter of 2016within borrowings. The intercompany receivable and payable are further reduced by certain intercompany loans from GE Capital to GE, which bearsbear the right of offset against amounts owed under the assumed debt agreement. Seeagreement (see Note 9 to the consolidated financial statements.

On June 3, 2016,10 for additional information). The following table illustrates total GE commenced an offering to exchange $19.6 billion of all the outstanding, unregistered senior notes that were issuedand GE Capital external debt and debt assumed by GE Capital International Funding Company Unlimited Company in a private offering on October 26, 2015,  for identical, registered 2.342% Senior Notes due 2020, 3.373% Senior Notes due 2025 and 4.418% Senior Notes due 2035. The exchange offer was completed on July 8, 2016.as of June 30, 2017.

June 30, 2017 (in billions)GE
GE Capital
Consolidated(a)
    
External debt$81.9
$54.7
$134.4
    
   Debt assumed by GE from GE Capital(52.3)52.3
—
   Intercompany loans4.1
(4.1)—
Total intercompany payable (receivable) between GE and GE Capital(48.2)48.2
—
    
Debt adjusted for assumed debt and intercompany loans$33.7
$102.9
$134.4
(a)
Includes $2.2 billion elimination of other intercompany borrowings between GE and GE Capital.

2016 3Q38 2017 2Q FORM 10-Q 41

MD&AFINANCIAL RESOURCES AND LIQUIDITY

LIQUIDITY SOURCES

In addition to GE cash of $10.6$14.2 billion at SeptemberJune 30, 2016,2017, GE Capital maintained liquidity sources of $57.0$36.9 billion that consisted of cash and equivalents of $41.9$29.8 billion, high-quality investments of $12.2$6.5 billion and cash and equivalents of $2.9$0.5 billion classified as discontinued operations. Additionally, at SeptemberJune 30, 2016, we have2017, GE has $20.0 billion of committed unused credit lines extended by 36 banks in a syndicated credit facility agreement.agreement, as well as $5.2 billion of committed 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) September 30, 2016    September 30, 2016
        
GE(a)$10.6  U.S.$15.9
GE Capital(b) 41.9  Non-U.S.(c) 36.6
        
CASH AND EQUIVALENTS
(In billions)June 30, 2017
  June 30, 2017
     
GE(a)$14.2
 U.S.$9.8
GE Capital(b)29.8
 Non-U.S.(c)34.3
(a)At SeptemberJune 30, 2016, $3.12017, $4.4 billion of GE cash and equivalents was held in countries with currency controls that may restrict the transfer of funds to the U.S. or limit our ability to transfer funds to the U.S. without incurring substantial costs. These funds are available to fund operations and growth in these countries and we do not currently anticipate a need to transfer these funds to the U.S.
(b)At SeptemberJune 30, 2016,2017, GE Capital cash and equivalents of about $0.4 billion were primarily in insurance entities and were subject to regulatory restrictions.
(c)Of this amount at SeptemberJune 30, 2016, $4.72017, $4.8 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.

We reduced our Capital ENI, excluding liquidity*, to $79 billion at September 30, 2016.
COMMERCIAL PAPER
(In billions)GE
 GE Capital
    
Average commercial paper borrowings during the second quarter of 2017$16.0
 $5.0
Maximum commercial paper borrowings outstanding during the second quarter of 201719.6
 5.1

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

COMMERCIAL PAPER
      
(In billions)GE GE Capital
      
Average commercial paper borrowings during the third quarter of 2016$10.1 $5.0
Maximum commercial paper borrowings outstanding during the third quarter of 2016 17.0  5.1
      
GE Capital commercial paper maturities have historically been funded principally through new commercial paper issuances and at GE are substantially repaid before quarter-end using indefinitely reinvested overseas cash, which as discussed above, is available for use in the U.S. on a short-term basis without being subject to U.S. tax.

We securitize financial assets as an alternative source of funding. At SeptemberJune 30, 2016,2017, consolidated non-recourse securitization borrowings were $2.2 billion.

We have four deposit-taking banks outside of the U.S., which are classified as discontinued operations. On April 18, 2016, we completed the sale of the deposit-taking bank in the U.S., GE Capital Bank, an industrial bank.


*Non-GAAP Financial Measure
2016 3Q FORM 10-Q 42
GE GUARANTEE OF CERTAIN GE CAPITAL DEBT

GE provides implicit and explicit support to GE Capital through commitments, capital contributions and operating support. As part of the GE Capital Exit Plan, on April 10, 2015, GE and GE Capital entered into an amendment to their existing financial support agreement. Under this amendment (the Amendment), the Company has provided a full and unconditional guarantee (the Guarantee) of the payment of principal and interest on all tradable senior and subordinated outstanding long-term debt securities and all commercial paper issued or guaranteed by GE Capital identified in the Amendment. The Guarantee replaced the requirement that the Company make certain income maintenance payments to GE Capital in certain circumstances. GE Capital's U.S. public indentures were concurrently amended to provide the full and unconditional guarantee by the Company set forth in the Guarantee. At September 30, 2016, the balance of this debt that GE assumed was $64.8 billion, and the Guarantee applied to approximately $53.5 billion of GE Capital debt. See Note 18 to the consolidated financial statements for further information on the guarantor financial statements.

ACCELERATED SHARE REPURCHASE AGREEMENT

During the first nine months of 2016, we repurchased $18.1 billion of our common stock, including $9.1 billion repurchased under the accelerated share repurchase (ASR) agreements.

In September 2016, we entered into an ASR agreement with a financial institution which allowed us to repurchase GE common stock at a price below its volume weighted-average price during a given period. During the third quarter, we paid $2.5 billion and received and classified as treasury shares an initial delivery of 71,189,280 shares based on then-current market prices. The payment was recorded as a reduction to shareowners' equity, consisting of a $2.1 billion increase in treasury stock, which reflects the value of the shares received upon initial delivery, and a $0.4 billion decrease in other capital, which reflects the value of the stock held back pending final delivery. In the fourth quarter of 2016, we received the remaining 14,758,566 shares based on the final volume weighted-average price less the negotiated discount.

In the third quarter of 2016, we received the remaining 18,269,775 shares related to the ASR agreement entered in June 2016 based on the final volume weighted-average price less the negotiated discount.

2016 3Q FORM 10-Q 43
STATEMENT OF CASH FLOWS - NINE MONTHS ENDED SEPTEMBER 30, 2016 VERSUS 2015

CONSOLIDATED CASH FLOWS

We evaluate our cash flow performance by reviewing our industrial (non-GE Capital) businesses and GE Capital businesses separately. Cash from operating activities (CFOA) is the principal source of cash generation for our industrial businesses. The industrial businesses also have liquidity available via the public capital markets.

GE CASH FLOWS – NINE MONTHS ENDED SEPTEMBER 30
(Dollars in billions)

OPERATING CASH FLOWS INVESTING CASH FLOWS FINANCING CASH FLOWS
           
2015   2016 2015  2016 2015 2016
 
 
 
 
With respect to GE CFOA, we believe that it is useful to supplement our GE Statement of Cash Flows and to examine in a broader context the business activities that provide and require cash.

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

2016 – 2015 COMMENTARY

GE cash from operating activities increased $11.8 billion primarily due to the following:
GE Capital paid common dividends totaling $16.1 billion and $0.5 billion to GE in the nine months ended September 30, 2016 and 2015, respectively.
An increase of operating cash collections of $7.7 billion to $84.3 billion in 2016, primarily driven by an increase in progress collections of $1.5 billion and higher GE segment revenues from sales of goods and services due to the impact of the Alstom acquisition in the nine months ended September 30, 2016 compared with that of 2015.
These increases were partially offset by an increase in operating cash payments of $11.5 billion to $82.0 billion in 2016, primarily driven by $1.1 billion due to taxes on the sale of our Appliances business to Haier, $0.8 billion increased spend on inventory due to volume growth for end of year 2016 shipments, $0.5 billion incentive compensation payments due to long-term performance awards and higher costs and expenses mainly due to the impact of the Alstom acquisition in the nine months ended September 30, 2016 compared with that of 2015.

GE cash from investing activities increased $3.4 billion primarily due to the following:
The sale of our Appliances business to Haier for proceeds of $4.8 billion and the sale of GE Asset Management (GEAM)  to State Street Corporation for proceeds of $0.4 billion
This is partially offset by payments for principal businesses purchased of $0.9 billion in addition to funding of a joint venture at our Aviation business of $0.3 billion in the nine months ended September 30, 2016.

2016 3Q FORM 10-Q 44
GE cash used for financing activities increased $16.3 billion primarily due to the following:
An increase in payment for net repurchases of GE treasury shares of $18.6 billion, including $9.1 billion paid under ASR agreements.
This increase was partially offset by a net change in borrowings of $2.1 billion. The change is driven by a short-term loan from GE Capital to GE of $5.0 billion in the nine months ended September 30, 2016, partially offset by $3.4 billion of GE issued unsecured notes in the nine months ended September 30, 2015.


GE CAPITAL CASH FLOWS – NINE MONTHS ENDED SEPTEMBER 30
(Dollars in billions)

OPERATING CASH FLOWS INVESTING CASH FLOWS FINANCING CASH FLOWS
           
2015 2016      2015 2016   2015 2016
 
 
 
 
2016 – 2015 COMMENTARY-CONTINUING OPERATIONS:

GE Capital cash from operating activities-continuing operations increased $2.6 billion primarily due to the following:
An increase in net cash collateral activity with counterparties on derivative contracts of $3.4 billion in addition to an increase in cash generated from earnings and other activity.
These increases were partially offset by higher tax payments.

GE Capital cash from investing activities-continuing operations decreased $15.4 billion primarily due to the following:
A short-term loan from GE Capital to GE of $5.0 billion.
Higher net investments of $3.7 billion.
Lower net cash received from derivative settlements of $3.3 billion.
An increase in net financing receivables of $0.9 billion, representing a net increase of $1.7 billion partially offset by the sale of receivables purchased from our Appliances business and sold to Haier for proceeds of $0.8 billion.
The 2015 proceeds from principal business dispositions of $0.5 billion.
Other investing activities of $7.9 billion, primarily excess cash generated from 2015 collections of financing receivables and other investing assets by discontinued operations prior to disposition of the underlying business.
These decreases were partially offset by higher proceeds from the sale of certain of our CLL, Consumer and Real Estate businesses of $4.2 billion and the 2015 acquisition of Milestone Aviation Group resulting in net cash paid of $1.7 billion.

GE Capital cash used for financing activities-continuing operations increased $21.3 billion primarily due to the following:
GE Capital paid common dividends totaling $16.1 billion and $0.5 billion to GE in the nine months ended September 30, 2016 and 2015, respectively.
In addition, higher net repayments of borrowings of $6.8 billion were partially offset by lower net redemption of investment contracts of $0.7 billion.

2016 3Q FORM 10-Q 45
GE CAPITAL DISCONTINUED OPERATIONS CASH FLOWS – NINE MONTHS ENDED SEPTEMBER 30
(Dollars in billions)

OPERATING CASH FLOWS INVESTING CASH FLOWS FINANCING CASH FLOWS
           
2015 2016            2015 2016   2015  2016
 
 
 
2016 – 2015 COMMENTARY-DISCONTINUED OPERATIONS:

GE Capital cash from operating activities-discontinued operations decreased $13.4 billion primarily due to the following:
Lower cash generated as a result of certain dispositions in our CLL business of $11.7 billion, and Consumer business of $4.4 billion (primarily resulting from the 2015 split-off of Synchrony Financial) partially offset by our Real Estate business of $3.1 billion.  In connection with the GE Capital Exit Plan, we closed a vast majority of our CLL and Consumer businesses and substantially all of our Real Estate business dispositions in 2015 and 2016.
Included in the above were higher tax payments of $2.6 billion, primarily as a result of additional taxes generated by our business disposition activity.
GE Capital cash from investing activities-discontinued operations decreased $12.4 billion primarily due to the following:
The sale of bank deposits for $16.5 billion in net cash paid in conjunction with the sale of GE Capital Bank's U.S. online deposit platform to Goldman Sachs Bank USA during the first nine months of 2016.
Other investing activities of $2.9 billion, primarily cash generated from 2015 collections of financing receivables and other investing assets prior to disposition of the underlying business.
These decreases were partially offset by higher cash used of $7.0 billion resulting from the 2015 split-off of Synchrony Financial, primarily reflecting 2015 increases in financing receivables and investment securities.
GE Capital cash used for financing activities-discontinued operations decreased $2.5 billion primarily due to the following:
Lower repayment of borrowings of $7.7 billion as a result of certain dispositions in our Consumer (including $2.9 billion resulting from the 2015 split-off of Synchrony Financial), CLL and Real Estate businesses in connection with the GE Capital Exit Plan.
This decrease was partially offset by lower net cash proceeds from bank deposits of $5.4 billion resulting from the 2015 split-off of Synchrony Financial.

INTERCOMPANY TRANSACTIONS AND ELIMINATIONS

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

2016 3Q FORM 10-Q 46
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 expense in GE Capital's other continuing operations when they become probable and estimable. GE records a contra expense as GE Capital's additional funding obligations are recognized and GE's related pension obligations are paid by GE Capital. On a consolidated basis, the additional required funding obligations do not affect earnings but rather are reflected as a reduction of the pension liability when paid. In the three and nine months ended September 30, 2016, the additional funding obligations recognized by GE Capital were $0.1 billion and $0.3 billion, respectively. No such funding obligations were recognized in the three and nine months ended September 30, 2015. As of September 30, 2016, the total outstanding funding obligation was $0.2 billion.

GE sells customer receivables to GE Capital in the ordinary course of business to fund the growth of our industrial businesses. During any given period, GE receives cash from the sale of receivables to GE Capital. It also foregoes the future collection of cash on receivables sold as GE Capital will collect the cash from the customer. The incremental amount of cash received from sales of receivables in excess of the cash GE would have otherwise collected had those receivables not been sold, represents the cash generated or used in the period relating to this activity. The effect of cash generated in GE CFOA from selling these receivables to GE Capital increased GE's CFOA by $0.8 billion and decreased GE's CFOA by $0.4 billion for the nine months ended September 30, 2016 and 2015, respectively.

See Note 17 to the consolidated financial statements for additional information about the eliminations of intercompany transactions between GE and GE Capital.

EXPOSURES

FOREIGN CURRENCY

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, excluding the earnings impact of the underlying hedged item, decreased net earnings by $0.1 billionfor the three and ninesix months ended SeptemberJune 30, 2016 by $0.1 billion and $0.4 billion, respectively.2017.

On June 23, 2016, a referendum in the United Kingdom (U.K.) was approved to withdraw from the European Union. The referendum was advisorySee Notes 16 and the terms of any withdrawal are subject to a negotiation period that could last for two years after the U.K. government initiates the withdrawal process. The approval of the referendum had, and may continue to have, an impact on foreign currency exchange rates, among other things. We actively manage our exposure21 to the U.K. and do not anticipate a material economic impact from our currency exposure as a result of the recent decision by the U.K. to exit the European Union.

Forconsolidated financial statements for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.

2017 2Q FORM 10-Q 39

MD&AFINANCIAL RESOURCES AND LIQUIDITY

STATEMENT OF CASH FLOWS - SIX MONTHS ENDED JUNE 30, 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 – SIX MONTHS ENDED JUNE 30
(in billions)

OPERATING CASH FLOWS INVESTING CASH FLOWS FINANCING CASH FLOWS
        
20162017 20162017 20162017
ge2q201710_chart-14978.jpgge2q201710_chart-16003.jpgge2q201710_chart-16943.jpg
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 seefor further information.

See the Intercompany Transactions between GE and GE Capital section within the MD&A and Notes 154 and 19 to the consolidated financial statements.statements for further information regarding certain transactions affecting our consolidated Statement of Cash Flows.


40 2017 2Q FORM 10-Q

MD&AFINANCIAL RESOURCES AND LIQUIDITY

OIL & GAS INDUSTRY2017 – 2016 COMMENTARY

GE cash from operating activities decreased $7.2 billion primarily due to the following:
GE Capital paid common dividends to GE totaling $4.0 billion in 2017 compared to $11.0 billion in 2016.
Cash used for industrial operating activities amounted to $0.4 billion and $0.2 billion in 2017 and 2016, respectively, primarily due to the following:
Net income plus depreciation and deferred income taxes of $3.4 billion in 2017 compared to $6.6 billion in 2016, which included an after-tax gain of $1.8 billion from the sale of Appliances.
Cash used for working capital of $0.6 billion and $1.9 billion in 2017 and 2016, respectively. The decrease was primarily due to reduction in inventory build, partially offset by an increase in cash used for accounts payable.
An increase in contract assets of $3.2 billion and $2.4 billion in 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 $6.9 billion primarily due to the following:
Business acquisition activities of $2.6 billion, primarily driven by the acquisition of LM Wind Power for $1.6 billion (net of cash acquired) and ServiceMax for $0.9 billion (net of cash acquired) in 2017.
The sale of our Appliances business for proceeds of $4.8 billion in 2016.
This is partially offset by the funding of a joint venture at our Aviation business of $0.3 billion in 2016.

GE cash from financing activities increased $17.8 billion primarily due to the following:
Net repurchases of GE treasury shares of $2.7 billion and $14.3 billion in 2017 and 2016, respectively.
A net increase in borrowings of $11.7 billion in 2017, mainly driven by the issuance of long-term debt of $8.6 billion, primarily to fund acquisitions, and long-term loans from GE Capital to GE of $4.1 billion, partially offset by the settlement of the remaining portion of a 2016 short-term loan from GE Capital to GE of $1.3 billion, compared to a net increase in borrowings of $5.5 billion in 2016, primarily driven by a short-term loan from GE Capital to GE of $5.0 billion.

GE CAPITAL CASH FLOWS – SIX MONTHS ENDED JUNE 30
(Dollars in billions)
OPERATING CASH FLOWS INVESTING CASH FLOWS FINANCING CASH FLOWS
        
20162017 20162017 20162017
ge2q201710_chart-15745.jpgge2q201710_chart-17311.jpgge2q201710_chart-18730.jpg

2017 2Q FORM 10-Q 41

MD&AFINANCIAL RESOURCES AND LIQUIDITY

2017 – 2016 COMMENTARY-CONTINUING OPERATIONS:

GE Capital cash from operating activities-continuing operations increased $1.5 billion primarily due to the following:
Lower income tax payments of $1.1 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 $0.5 billion.

GE Capital cash from investing activities-continuing operations decreased $29.5 billion primarily due to the following:
Net proceeds from the sales of our discontinued operations of $0.8 billion in 2017 compared to $42.9 billion in 2016.
Investments and maturities of $6.8 billion related to interest bearing deposits reflecting maturities of $10.4 billion and investments of $3.6 billion in 2016.
Net cash received from derivative settlements of $0.1 billion in 2017 compared to $1.0 billion in 2016.
These decreases were partially offset by the following increases:
Investment securities of $10.7 billion related to investments of $5.7 billion in 2016 and maturities of $5.0 billion in 2017.
▪Long-term loans from GE Capital to GE of $4.1 billion, partially offset by the settlement of the remaining portion of a 2016 short-term loan from GE Capital to GE of $1.3 billion in 2017 compared to a short-term loan from GE Capital to GE of $5.0 billion in 2016.
Higher net collections of financing receivables of $1.6 billion in 2017.
A general reduction in funding related to discontinued operations.

GE Capital cash used for financing activities-continuing operations decreased $37.9 billion primarily due to the following:
Lower net repayments of borrowings of $13.0 billion compared to $44.5 billion in 2016.
GE Capital paid common dividends to GE totaling $4.0 billion compared to $11.0 billion in 2016.

GE CAPITAL DISCONTINUED OPERATIONS CASH FLOWS – SIX MONTHS ENDED JUNE 30
(Dollars in billions)
OPERATING CASH FLOWS INVESTING CASH FLOWS FINANCING CASH FLOWS
        
20162017 20162017 20162017
ge2q201710_chart-20095.jpgge2q201710_chart-22265.jpgge2q201710_chart-23770.jpg
2017 – 2016 COMMENTARY-DISCONTINUED OPERATIONS:

GE Capital cash used for operating activities-discontinued operations decreased $4.0 billion primarily due to the following:
Lower cash paid for income taxes in 2017.

GE Capital cash used for investing activities-discontinued operations decreased $8.7 billion primarily due to the following:
The oil and gas market remains challenging. While oil pricessale of bank deposits of $16.5 billion resulting in net cash paid in conjunction with the sale of GE Capital Bank's U.S. online deposit platform during 2016.
Reduction in funding from continuing operations (primarily our treasury operations).
Sale of bank deposits for $0.5 billion resulting in net cash paid related to our Consumer platform during 2017.


42 2017 2Q FORM 10-Q

MD&AFINANCIAL RESOURCES AND LIQUIDITY

GE Capital cash from financing activities-discontinued operations increased in$2.6 billion primarily due to the thirdfollowing:
Debt issued of $1.8 billion by a discontinued business sold during the first quarter of 2016,2017.
Lower repayment of borrowings and bank deposit activity remained subdued with U.S. onshore rig and well counts declining from both year-end 2015 and 2014 peak levels, and capital expenditures and investment decisions continuingof $0.7 billion.

INTERCOMPANY TRANSACTIONS BETWEEN GE AND GE CAPITAL

We are repositioning GE to be delayed. Asthe world’s best infrastructure and technology company, with a result,smaller financial services division. Our focus is on driving infrastructure leadership, investing in innovation and achieving a culture of simplification to better serve our Oil & Gas business has experienced declinescustomers around the world. Over the last decade, we have made significant strides in orders through the nine months ended September 30, 2016 of approximately 34%.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 Verticals are now focused on investing financial, human and intellectual capital to promote growth for our industrial businesses and their customers. GE Capital accomplishes this difficult marketin 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, renewable energy 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
Settlements of tax liabilities, and
Various investments, loans and allocations of GE corporate overhead costs.

CASH FLOWS

GE Capital paid $4.0 billion and $11.0 billion of common dividends to GE in the six months ended June 30, 2017 and 2016, respectively.

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 $2.5 billion and $2.0 billion in the six months ended June 30, 2017 and 2016, respectively.

As of June 30, 2017, GE Capital had approximately $10.6 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 six months ended June 30, 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 June 30, 2017. See Note 4 to the consolidated financial statements for further information.


2017 2Q FORM 10-Q 43

MD&AFINANCIAL RESOURCES AND LIQUIDITY

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 six months ended June 30, 2017 and 2016, GE Capital enabled $6.1 billion and $4.0 billion of GE industrial orders, respectively. 2017 orders are primarily with our Power ($2.7 billion), Renewable Energy ($1.9 billion), Healthcare ($0.6 billion) and Oil & Gas business($0.5 billion) and businesses.

AVIATION

During the six months ended June 30, 2017 and 2016, GE Capital acquired 22 aircraft (list price totaling $3.1 billion) and 19 aircraft (list price totaling $2.2 billion), respectively, from third parties that will continuebe leased to focusothers, which are powered by engines that were manufactured by GE Aviation and affiliates. Additionally, GE Capital had $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 both June 30, 2017 and December 31, 2016.

POWER, RENEWABLE ENERGY AND AVIATION

GE leverages GE Capital for its expertise in structuring long-term financing arrangements with certain Power, Renewable Energy and Aviation 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 items withinresults of our Power, Renewable Energy and Aviation segments. Any associated deferred income recorded by GE Capital is eliminated in our consolidated results. In relation to these arrangements, GE Capital had approximately $2.1 billion and $1.9 billion of long-term financing receivables outstanding, net of deferred income of approximately $0.3 billion and $0.3 billion reported on its control such as cost managementbalance sheet at June 30, 2017 and competitiveness. Our restructuring investment will likely increaseDecember 31, 2016, respectively. The effect of cash generated in GE CFOA from $0.4long-term financing arrangements with GE Capital increased GE's CFOA by $0.3 billion to approximatelyand $0.5 billion in the six months ended June 30, 2017 and 2016, respectively.

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 achieve our costthe 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 $0.3 billion for the three and six months ended June 30, 2017, respectively, and $0.1 billion and $0.3 billion for the three and six months ended June 30, 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. There was no cash transferred to GE for the assumption of these GE Capital funding obligations for the three and six months ended June 30, 2017. The total cash transferred for similar funding obligations assumed by GE from GE Capital for the three and six months ended June 30, 2016 were zero and $0.1 billion, respectively.

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 target of $0.7the 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 June 30, 2017, GE had outstanding guarantees to GE Capital on $1.3 billion to $0.8of funded exposure and $0.1 billion of unfunded commitments. The recorded amount of these contingent liabilities was $0.1 billion as lower volume will offset some of June 30, 2017 and is dependent upon individual transaction level defaults, losses and/or returns.

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 realization.merger of GE Capital into GE was $52.3 billion, and GE guaranteed $44.1 billion of GE Capital debt at June 30, 2017. See Notes 10 and 20 to the consolidated financial statements for additional information.


44 2017 2Q FORM 10-Q

MD&ACRITICAL ACCOUNTING ESTIMATES
2016 3Q FORM 10-Q 47

CRITICAL ACCOUNTING ESTIMATES

We utilized significant estimates in the preparation of the thirdsecond 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 8-K10-K Report filed on June 3, 2016 related to the 2015 Annual Report on Form 10-K 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 agreement;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.


2016 3Q2017 2Q FORM 10-Q 4845

MD&AOTHER ITEMS

OTHER ITEMS

NEW ACCOUNTING STANDARDS

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

In FebruaryOctober 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016- 02, 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 either sales-type, finance or operating, with classification affecting the pattern of income recognition. Classification for both lessees and lessors will be based on an assessment of whether risks and rewards as well as substantive control have been transferred through a lease contract. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. While we continue to evaluate the effect of the standard on our ongoing financial reporting, we anticipate that the adoption of the ASU 2016-02 may materially affect our statementStatement of financial position.Financial Position.

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

In May 2014, the FASB issued ASUa new comprehensive set of revenue recognition principles (ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace) that supersedes most existing U.S. GAAP revenue recognition guidance in GAAP(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 effectiveon a basis consistent with 2018.

Please refer to the Other Items - New Accounting Standards section within MD&A in our Annual Report on Form 10-K for us asthe year ended December 31, 2016, 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, 2018. The2016 retained earnings, the estimated change to our 2016 reported earnings per share and the expected impact to 2018 earnings per share. 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, permits the use of either the retrospective or modified retrospective (cumulative effect) transition method and we have not yet selected which transition method we will apply. In addition, we are evaluating recently issued guidance on practical expedients as part of our transition decision. Given the complexity of our commercial arrangements, we are continuingcontinue to assess the potential effect that the standard is expected to have on our consolidated financial statements. We believe the more significant effects on our existing accounting policies will be associated with our long-term product service agreements and commercial aircraft engine contracts as further discussed below.refine these initial estimates.

For our long-term product service agreements, we expect to continue to recognize revenue over time by applying contract-specific estimated margin rates to incurred costs. The standard provides new guidance in assessing what comprises the distinct service being provided to a customer that may have implications to our existing unit of account and the recognition of contract modifications.
46 2017 2Q FORM 10-Q

In addition, the revenue for our commercial aircraft engines will be recognized on a point-in-time basis, which is a change from our current long-term contract accounting process of applying contract-specific estimated margin rates to incurred costs.
MD&AOTHER ITEMS
2016 3Q FORM 10-Q 49

GE DIGITAL

In late 2015, we created GE Digital, whoseDigital's 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 software-enabled product upgrades, internally developed software (including PredixTM) and associated hardware, including Predix and software-enabled productivity solutions.software solutions that improve our customers’ asset performance. These revenues are reported in the financial results oflargely generated from our operating segments.businesses and are included in their segment results.

On September 14, 2016, we acquired the remaining 74% of the software developer Meridium Inc. for cash proceeds of $0.4 billion. The acquisition is expected to enhance and accelerate our asset performance management capabilities across our industrial businesses.

Digital revenues for the three and nine months ended September 30, 2016Revenues were $1.3 billion and $3.6 billion, respectively, compared with $1.2 billion and $3.4$1.0 billion for the three and nine months ended SeptemberJune 30, 2015, respectively, and2017, an increase of $0.1 billion or 12%, compared to revenues of $0.9 billion for the three months ended June 30, 2016. Revenues were $1.9 billion for the six months ended June 30, 2017, an increase of $0.2 billion or 14%, compared to revenues of $1.7 billion for the six months ended June 30, 2016. These increases were principally reported in ourdriven by Power and Healthcare segments.Non-GE Verticals.
Orders were $1.3 billion for the three months ended June 30, 2017, an increase of $0.4 billion or 39%, compared to orders of $1.0 billion for the three months ended June 30, 2016. Orders were $2.3 billion for the six months ended June 30, 2017, an increase of $0.4 billion or 24%, compared to orders of $1.9 billion for the six months ended June 30, 2016. These increases were principally driven by Power and Oil & Gas.


2017 2Q FORM 10-Q 47

MD&AOTHER ITEMS

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'sIran’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'sIran’s domestic production of refined petroleum products or Iran'sIran’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'sTreasury’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 Power business received a purchase order during the third quarter of 2016 for the sale of spare parts to an Iranian entity to provide electricity and steam to an area of Iran that includes certain oil refineries. The total value of the purchase order is €16.2 million ($18.1 million). The non-U.S. affiliate is still in the process of finalizing this transaction. As of September 30, 2016, no revenue has been recognized and no expenses have been incurred in the execution of the transaction contemplated by the purchase order. The non-U.S. affiliate intends to continue this activity.
Another non-U.S. affiliate of GE'sGE’s Oil & Gas business signed three contractsreceived five purchase orders during the second quarter of 2016 and two contracts during the third quarter of 20162017 for the sale of goods pursuant to General License H that could potentially enhance Iran'sIran’s ability to develop petroleum resources. These contracts are valued at under $20 million in the aggregate, but GE is reporting them during this quarter in conjunction with the report above. The contractspurchase orders cover the sale of pumps and spare parts for gas turbine equipment and associated services for ultimate end use by an Iranian companycompanies in aoil and gas production projectprojects in Iran. These contractspurchase orders are valued at approximately €11.4€5.0 million ($12.85.7 million), €1.8€1.6 million ($2.01.7 million),  €1.1€0.3 million ($1.30.4 million),  €408,000€0.2 million ($460,000)0.2 million), and €69,000€0.1 million ($78,000)0.1 million).  This non-US affiliate did not recognize any revenue or profit during the quarter ending June 30, 2017 for these or any previously reported transactions.

A second non-U.S. affiliate of GE’s Oil & Gas business also booked a modification of a previously reported contract to add additional scope valued at €0.1 million ($0.1 million).  The contract covered technical services related to the commissioning of centrifugal and gas compressors.  The non-US affiliate also received one purchase order during the second quarter of 2017 for the sale of spare parts that could potentially enhance Iran’s ability to develop petroleum resources valued at €0.3 million ($0.4 million). This non-US affiliate attributed €0.1 million ($0.1 million) in gross revenues and €0.1 million ($0.1 million) in net profits to these transactions during the quarter ending June 30, 2017.

A non-U.S. affiliate has just started operationalof GE’s Power business received four purchase orders pursuant to General License H valued at €6.0 million ($6.7 million), €2.5 million ($2.8 million), €0.1 million ($0.1 million), and less than €0.1 million (less than $0.1 million) during the second quarter of 2017. The purchase orders cover the sale of spare parts, rotors, and generators to an Iranian customer that could contribute to the maintenance or expansion of Iran’s domestic production of petrochemical products. This non-US affiliate did not recognize revenue or profit associated with these or previously reported transactions during the quarter ending June 30, 2017.

All of these non-U.S. affiliates intend to continue the activities described above.

For additional information on business activities related to these transactions. As of September 30, 2016, no revenue has been recognized and no expenses have been incurredIran, please refer to the Other Items section within MD&A in our our Form 10-Q for the execution of the transactions contemplated by these contracts. The non-U.S. affiliate intends to continue this activity.quarter ended March 31, 2017.

48 2017 2Q FORM 10-Q

2016 3Q FORM 10-Q 50
MD&ASUPPLEMENTAL INFORMATION

SUPPLEMENTAL INFORMATION


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

WeIn the accompanying analysis of financial information, we sometimes use information derived from consolidated financial informationdata but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP).GAAP. Certain of these data are considered "non-GAAP“non-GAAP financial measures"measures” under U.S. Securities and Exchange CommissionSEC rules. Specifically, we have referred, in various sections of this report, to:

Industrial segment organic revenues
Operating and non-operating pension costs
Operating and non-operating pension cost
Adjusted corporate costs (operating)
Industrial operating earnings 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 segment operating profit and operating profit margin (excluding Alstom)
Industrial cash flows from operating activities (Industrial CFOA) and Industrial CFOA excluding taxes related to the Appliances business sale
Capital ending net investment (ENI), excluding liquidity
Industrial cash flows from operating activities (Industrial CFOA) and Industrial CFOA excluding deal taxes and GE Pension Plan funding

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

2017 2Q FORM 10-Q 49

MD&ASUPPLEMENTAL INFORMATION

2016 3Q FORM 10-Q 51
INDUSTRIAL SEGMENT ORGANIC REVENUES
 Three months ended June 30 Six months ended June 30
(In millions)2017
2016
V% 2017
2016
V%
        
Industrial segment revenues (GAAP)$28,047
$28,630
(2)% $54,063
$54,499
(1)%
Adjustments:       
Acquisitions218
14
  349
16
 
Business dispositions—
1,239
  10
2,795
 
Currency exchange rates(162)—
  (270)—
 
Industrial segment organic revenues (Non-GAAP)$27,992
$27,376
2 % $53,973
$51,688
4 %
INDUSTRIAL SEGMENT ORGANIC REVENUES
                
 Three months ended September 30 Nine months ended September 30
(Dollars in millions) 2016  2015 V%  2016  2015 V%
                
Industrial segment revenues (GAAP)$27,421 $26,256 4% $81,920 $77,445  6 %
Adjustments:               
   Acquisitions 3,261  -    9,291  -  
   Business dispositions (other than dispositions of businesses               
     acquired for investment) -  2,219    1,133  4,962  
   Currency exchange rates (37)  -    (729)  -  
Industrial segment organic revenues (Non-GAAP)$24,198 $24,038 1% $72,224 $72,483 -

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.
trends.

OPERATING AND NON-OPERATING PENSION COSTS
            
 Three months ended September 30 Nine months ended September 30
(In millions)2016 2015 2016 2015
            
Service cost for benefits earned$307 $348 $913 $1,076
Prior service cost amortization 76  51  228  154
Curtailment loss (gain) -  -  (1)  71
Operating pension costs (Non-GAAP) 383  399  1,140  1,301
            
Expected return on plan assets (837)  (826)  (2,507)  (2,478)
Interest cost on benefit obligations 736  696  2,205  2,087
Net actuarial loss amortization 612  823  1,836  2,468
Non-operating pension costs (Non-GAAP) 511  693  1,534  2,077
Total principal pension plans costs (GAAP)$894 $1,092 $2,674 $3,378
            
OPERATING AND NON-OPERATING PENSION COST
 Three months ended June 30 Six months ended June 30
(In millions)2017
2016
 2017
2016
      
Service cost for benefits earned$254
$291
 $543
$606
Prior service cost amortization72
76
 145
152
Curtailment loss (gain)—
(1) 43
(1)
Operating pension cost (Non-GAAP)326
366
 731
757
      
Expected return on plan assets(849)(836) (1,698)(1,670)
Interest cost on benefit obligations712
735
 1,429
1,469
Net actuarial loss amortization697
612
 1,407
1,224
Non-operating pension cost (Non-GAAP)560
511
 1,138
1,023
Total principal pension plans cost (GAAP)$886
$877
 $1,869
$1,780

We have provided the operating and non-operating components of cost for our principal pension plans. Operating pension cost comprise the service cost of benefits earned, prior service cost amortization and curtailment loss (gain) for our principal pension plans. Non-operating pension cost comprise 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 reflects 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.

2016 3Q50 2017 2Q FORM 10-Q 52

MD&ASUPPLEMENTAL INFORMATION

ADJUSTED CORPORATE COSTS (OPERATING)ADJUSTED CORPORATE COSTS (OPERATING)           ADJUSTED CORPORATE COSTS (OPERATING)
            
 Three months ended September 30 Nine months ended September 30Three months ended June 30 Six months ended June 30
(In millions)(In millions) 2016 2015  2016 20152017
2016
 2017
2016
               
Total Corporate Items and Eliminations (GAAP)Total Corporate Items and Eliminations (GAAP)$(1,524) $(1,559) $(2,120) $(4,436)$(1,583)$974
 $(3,592)$(597)
Less: non-operating pension costs (Non-GAAP) (511)  (693)  (1,534)  (2,077)
Less: non-operating pension cost (Non-GAAP)(560)(511) (1,138)(1,023)
Total Corporate costs (operating) (Non-GAAP)Total Corporate costs (operating) (Non-GAAP)$(1,012) $(866) $(586) $(2,359)$(1,023)$1,485
 $(2,454)$426
Less: restructuring and other charges, gains (losses) and settlement (475)  (346)  838  (668)
Less: restructuring and other charges(709)(1,188) (1,728)(1,874)
Less: gains (losses) on disposals—
3,129
 2
3,188
Adjusted total corporate costs (operating) (Non-GAAP)Adjusted total corporate costs (operating) (Non-GAAP)$(538) $(520) $(1,424) $(1,691)$(314)$(456) $(728)$(887)
            

Operating corporate costs exclude non-service-related pension costs of our principal pension plans, which comprise interest costs, 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.
2016 3Q FORM 10-Q 53
INDUSTRIAL OPERATING EARNINGS AND GE CAPITAL EARNINGS (LOSS) FROM CONTINUING OPERATIONS AND EPS
 Three months ended June 30 Six months ended June 30
(Dollars in millions; except per-share amounts)2017
2016
V%
 2017
2016
V%
        
Consolidated earnings (loss) from continuing operations attributable to GE common shareowners (GAAP)$1,338
$3,300
(59)% $2,196
$3,548
(38)%
   Non-operating pension cost560
511
  1,138
1,023
 
   Tax effect on non-operating pension cost(a)(196)(179)  (398)(358) 
Adjustment: non-operating pension cost (net of tax)364
332
  740
665
 
Operating earnings (loss) (Non-GAAP)1,702
3,632
(53)% 2,936
4,213
(30)%
        
Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareowners(172)(600)  (219)(1,492) 
Industrial operating earnings (loss) (Non-GAAP)$1,873
$4,232
(56)% $3,155
$5,705
(45)%
        
Earnings (loss) per share (EPS) – diluted(b)       
Consolidated EPS from continuing operations attributable to GE common shareowners (GAAP)$0.15
$0.36
(58)% $0.25
$0.38
(34)%
Adjustment: non-operating pension cost (net of tax)0.04
0.04
  0.08
0.07
 
Operating EPS (Non-GAAP)0.19
0.39
(51)% 0.33
0.45
(27)%
Less: GE Capital EPS from continuing operations attributable to GE common shareowners (GAAP)(0.02)(0.07)71 % (0.02)(0.16)88 %
Industrial operating EPS (Non-GAAP)$0.21
$0.46
(54)% $0.36
$0.61
(41)%
INDUSTRIAL OPERATING EARNINGS AND GE CAPITAL EARNINGS (LOSS)
FROM CONTINUING OPERATIONS AND EPS
      
 Three months ended September 30 Nine months ended September 30
(Dollars in millions; except per share amounts) 2016  2015 V%  2016  2015 V%
                
Consolidated earnings (loss) from continuing operations               
   attributable to GE common shareowners (GAAP)$2,097 $1,965 7% $5,645 $(904) F
      Non-operating pension costs (pre-tax) 511  693    1,534  2,077  
      Tax effect on non-operating pension costs(a) (179)  (243)    (537)  (727)  
Adjustment: non-operating pension costs (net of tax) 332  450    997  1,350  
Operating earnings (loss) (Non-GAAP) 2,429  2,415 1%  6,642  448 F
                
Adjustment: GE Capital earnings (loss) from continuing operations               
   attributable to GE common shareowners 26  (154)    (1,466)  (6,368)  
Industrial operating earnings (loss) (Non-GAAP)$2,404 $2,569 (6)% $8,109 $6,814 19%
                
Earnings (loss) per share(EPS) – diluted(b)
               
Consolidated EPS from continuing operations attributable to               
   GE common shareowners (GAAP)$0.23 $0.19 21% $0.61 $(0.09) F
Adjustment: non-operating pension costs (net of tax) 0.04  0.04    0.11  0.13  
Operating EPS (Non-GAAP) 0.27  0.24 13%  0.72  0.04 F
GE Capital EPS from continuing operations attributable to               
   GE common shareowners (GAAP) -  (0.02) 100%  (0.16)  (0.63) 75%
Industrial operating EPS (Non-GAAP)$0.27 $0.25 8% $0.88 $0.68 29%
                
(a)The tax effect on non-operating pension costscost was calculated using a 35% U.S. federal statutory tax rate, based on its applicability to such cost.
(b)Earnings-per-shareEarnings 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 costscost of our principal pension plans, comprising interest cost, expected return on plan assets and amortization of actuarial gains/losses. The 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 costscost 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. Non-operatingNeither GAAP nor operating pension costscost are not necessarily indicative of the current or future cash flow requirements related to our pension plan.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 also believe that presenting operating earnings separately for our industrial businesses 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 2Q FORM 10-Q 51

MD&ASUPPLEMENTAL INFORMATION

2016 3Q FORM 10-Q 54
INDUSTRIAL OPERATING + VERTICALS EARNINGS AND EPS
 Three months ended June 30 Six months ended June 30
(Dollars in millions; except per-share amounts)2017
2016
V%
 2017
2016
V%
        
GE Capital earnings (loss) from continuing operations attributable to GE common shareowners (GAAP)$(172)$(600)71 % $(219)$(1,492)85 %
Less: GE Capital other continuing earnings (loss) (Other Capital)(a)(716)(1,051)  (1,298)(2,440) 
Verticals earnings(b)544
452
20 % 1,079
948
14 %
Industrial operating earnings (Non-GAAP)1,873
4,232
(56)% 3,155
5,705
(45)%
Industrial operating earnings + Verticals earnings (Non-GAAP)$2,418
$4,684
(48)% $4,234
$6,653
(36)%
        
Earnings (loss) per share (EPS) - diluted(c)       
GE Capital EPS from continuing operations attributable to GE common shareowners$(0.02)$(0.07)71 % $(0.02)$(0.16)88 %
Less: GE Capital other continuing EPS (Other Capital)(0.08)(0.11)  (0.15)(0.26) 
Verticals EPS$0.06
$0.05
20 % $0.12
$0.10
20 %
Industrial operating EPS (Non-GAAP)0.21
0.46
(54)% 0.36
0.61
(41)%
Industrial operating + Verticals EPS (Non-GAAP)$0.28
$0.51
(45)% $0.48
$0.72
(33)%
        
Consolidated EPS from continuing operations attributable to GE common shareowners (GAAP)

$0.15
$0.36
(58)% $0.25
$0.38
(34)%
Less: non-operating pension cost (net of tax)(0.04)(0.04)  (0.08)(0.07) 
Less: Other Capital(0.08)(0.11)  (0.15)(0.26) 
Industrial operating + Verticals EPS (Non-GAAP)$0.28
$0.51
(45)% $0.48
$0.71
(32)%
INDUSTRIAL OPERATING + VERTICALS EARNINGS AND EPS  
                
  Three months ended September 30  Nine months ended September 30
(Dollars in millions; except per share amounts) 2016  2015 V%  2016  2015 V%
                
GE Capital earnings (loss) from continuing operations               
   attributable to GE common shareowners (GAAP)$26 $(154) F $(1,466) $(6,368) 77%
Adjustment: GE Capital other continuing               
   earnings (loss) (Other Capital) (441)  (504)    (2,881)  (7,596)  
Verticals earnings(a)$466 $351 33%  1,414  1,228 15%
                
Industrial operating earnings (Non-GAAP)$2,404 $2,569 (6)% $8,109 $6,814 19%
Verticals earnings(a) 466  351    1,414  1,228  
Industrial operating earnings + Verticals earnings (Non-GAAP)$2,870 $2,920 (2)% $9,523 $8,042 18%
Adjustment: Non-operating pension costs and               
   other Capital (773)  (954)    (3,878)  (8,946)  
Earnings (loss) from continuing operations attributable to               
   GE common shareowners (GAAP)$2,097 $1,965 7% $5,645 $(904) F
                
Earnings (loss) per share (EPS) - diluted(b)
               
Industrial operating EPS (Non-GAAP)$0.27 $0.25 8% $0.88 $0.68 29%
Verticals EPS 0.05  0.03    0.15  0.12  
Industrial operating + Verticals EPS (Non-GAAP)$0.32 $0.29 10% $1.03 $0.80 29%
Adjustment: Non-operating pension costs and               
   other Capital (0.09)  (0.09)    (0.42)  (0.89)  
EPS from continuing operations (GAAP)$0.23 $0.19 21% $0.61 $(0.09) F
                
(a)Includes interest on non-Verticals borrowings, restructuring costs and allocations of GE and GE Capital headquarters costs in excess of those allocated to the Verticals.
(b)Verticals include businesses expected to be retained (GECAS, EFS,Energy Financial Services, Industrial Finance, and run-off Insurance)insurance activities), including allocated corporate after-tax costs of $25 million after tax in both the three months ended SeptemberJune 30, 2017 and 2016, and 2015, and $75$50 million and $108 million after tax in both the ninesix months ended SeptemberJune 30, 20162017 and 2015, respectively.2016.
(b)Earnings-per-share
(c)Earnings per share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total.


To supplement the table above, we have provided the following graphic presentation of the reconciliation between GAAP EPS from continuing operations to Industrial operating + Verticals EPS (Non-GAAP).

Industrial operating &
Verticals (Non-GAAP)
Non-operating pension &
other Capital (Non-GAAP)
GAAP Continuing EPS
$ 0.32
$(0.09)
$0.23
Industrial operating &
Verticals (Non-GAAP)
Non-operating pension &
other Capital (Non-GAAP)
GAAP Continuing EPS
$0.29
$(0.09)
$0.19
Industrial operating &
Verticals (Non-GAAP)
Non-operating pension &
other Capital (Non-GAAP)
GAAP Continuing EPS
$1.03
$(0.42)
$0.61
Industrial operating &
Verticals (Non-GAAP)
Non-operating pension &
other Capital (Non-GAAP)
GAAP Continuing EPS
$0.80
$(0.89)
$(0.09)
As described above, Verticals represents the GE Capital businesses that we expect to retain. We believe that presenting Industrial operating + Verticals earnings-per-share (Non-GAAP) 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.


2016 3Q52 2017 2Q FORM 10-Q 55
INDUSTRIAL OPERATING PROFIT AND OPERATING PROFIT MARGIN (EXCLUDING CERTAIN ITEMS)
            
 Three months ended September 30 Nine months ended September 30
(Dollars in millions)2016  2015 2016  2015
            
Revenues           
   GE total revenues and other income$27,172 $25,659 $82,382 $70,408
      Less: GE Capital earnings (loss) from continuing operations 26  (154)  (1,466)  (6,207)
   GE revenues and other income           
      excluding GE Capital earnings (loss) (Industrial revenues) (GAAP)$27,146 $25,813 $83,848 $76,615
            
      Less: gains 208  -  3,395  499
      Less: Alstom revenues 3,226  -  9,210  -
   Adjusted Industrial revenues (Non-GAAP)$23,712 $25,813 $71,244 $76,115
            
Costs           
   GE total costs and expenses$24,909 $23,325 $75,977 $70,048
      Less: GE interest and other financial charges 483  440  1,490  1,243
   Industrial costs excluding interest and other financial charges (GAAP)$24,426 $22,885 $74,487 $68,805
            
      Less: Alstom costs and expenses 3,082  -  8,949  -
      Less: non-operating pension costs (pre-tax) 511  693  1,534  2,077
      Less: restructuring and other charges 683  346  2,557  1,167
      Less: noncontrolling interests and 2015 GE Capital preferred stock dividends 76  43  275  199
   Adjusted Industrial costs (Non-GAAP)$20,074 $21,803 $61,172 $65,362
            
   Industrial profit (GAAP)$2,720 $2,928 $9,361 $7,810
   Industrial margins (GAAP) 10.0%  11.3%  11.2%  10.2%
            
   Industrial operating profit (Non-GAAP)$3,638 $4,009 $10,070 $10,754
   Industrial operating profit margins (Non-GAAP) 15.3%  15.5%  14.1%  14.1%
  .     .   

MD&ASUPPLEMENTAL INFORMATION

INDUSTRIAL OPERATING PROFIT AND OPERATING PROFIT MARGIN (EXCLUDING CERTAIN ITEMS)
 Three months ended June 30 Six months ended June 30
(Dollars in millions)2017
2016
 2017
2016
      
Revenues     
   GE total revenues and other income$27,421
$30,604
 $52,902
$55,210
     Less: GE Capital earnings (loss) from continuing operations(172)(600) (219)(1,492)
   GE revenues and other income excluding GE Capital earnings (loss) (Industrial revenues) (GAAP)27,593
31,204
 53,121
56,702
      
     Less: gains on disposals—
3,129
 2
3,188
   Adjusted Industrial revenues (Non-GAAP)$27,593
$28,075
 $53,119
$53,515
      
Costs     
   GE total costs and expenses$25,883
$26,756
 $50,441
$51,069
     Less: GE interest and other financial charges637
567
 1,200
1,007
   Industrial costs excluding interest and other financial charges (GAAP)25,247
26,189
 49,241
50,062
      
     Less: non-operating pension cost560
511
 1,138
1,023
     Less: restructuring and other charges709
1,188
 1,728
1,874
     Less: noncontrolling interests18
82
 96
199
   Adjusted Industrial costs (Non-GAAP)$23,960
$24,408
 $46,278
$46,965
      
   Industrial profit (GAAP)2,346
5,015
 3,881
6,640
   Industrial margins (GAAP)8.5%16.1% 7.3%11.7%
      
   Industrial operating profit (Non-GAAP)$3,633
3,667
 $6,842
$6,550
   Industrial operating profit margins (Non-GAAP)13.2%13.1% 12.9%12.2%

We have presented our Industrial operating profit and operating profit margin excluding gains, non-operating pension costs (pre-tax),cost, restructuring and other charges and noncontrolling interests, GE Capital preferred stock dividends, as well as the results of Alstom.interests. 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 2Q FORM 10-Q 53

MD&ASUPPLEMENTAL INFORMATION

INDUSTRIAL SEGMENT OPERATING PROFIT AND OPERATING PROFIT MARGIN (EXCLUDING ALSTOM)
            
 Three months ended September 30 Nine months ended September 30
(Dollars in millions)2016  2015 2016  2015
            
Revenues           
   Total industrial segment revenues (GAAP)$27,421 $26,256 $81,920 $77,445
   Less: Alstom revenues 3,226  -  9,210  -
   Total industrial segment operating revenues excluding Alstom (Non-GAAP)$24,195 $26,256 $72,710 $77,445
            
Segment profit (loss)           
   Total industrial segment operating profit (GAAP)$4,320 $4,530 $11,756 $12,445
   Total industrial segment operating profit margin (GAAP) 15.8%  17.3%  14.4%  16.1%
            
   Less: Alstom profit (loss)$144 $- $261 $-
   Total industrial segment operating profit excluding Alstom (Non-GAAP)$4,176 $4,530 $11,494 $12,445
   Total industrial segment operating profit margin excluding Alstom (Non-GAAP) 17.3%  17.3%  15.8%  16.1%
  .     .   
INDUSTRIAL CASH FLOWS FROM OPERATING ACTIVITIES (INDUSTRIAL CFOA) AND INDUSTRIAL CFOA EXCLUDING DEAL TAXES AND GE PENSION PLAN FUNDING
 Six months ended June 30
(In millions)2017
2016
V%
    
Cash from GE's operating activities (continuing operations), as reported (GAAP)$3,585
$10,767
(67)%
Adjustments: dividends from GE Capital4,016
11,000
 
Industrial CFOA (Non-GAAP)$(431)$(233)(85)%
Adjustments:   
Deal taxes51
700
 
GE Pension Plan funding217
—
 
Industrial CFOA excluding deal taxes and GE Pension Plan funding (Non-GAAP)$(163)$467
U

We have presented our industrial segment operating profit and industrial segment operating profit margin excluding the results of Alstom power and grid. We believe that operating profit and operating profit margin adjusted for the Alstom impacts are meaningful measures because they increase the comparability of period-to-period results.
2016 3Q FORM 10-Q 56
INDUSTRIAL CASH FLOWS FROM OPERATING ACTIVITIES (INDUSTRIAL CFOA)
AND INDUSTRIAL CFOA EXCLUDING TAXES RELATED TO THE APPLIANCES BUSINESS SALE
        
 Nine months ended September 30
(Dollars in millions) 2016  2015 V%
        
Cash from GE's operating activities (continuing operations), as reported (GAAP)$18,342 $6,526 F
Adjustments: dividends from GE Capital 16,050  450  
Industrial CFOA (Non-GAAP)$2,292 $6,076 (62)%
Adjustment: taxes related to the Appliances business sale 1,076  -  
Industrial CFOA excluding deal taxes (Non-GAAP)$3,368 $6,076 (45)%
        

We define "Industrial CFOA"“Industrial CFOA” as GE'sGE’s cash from operating activities (continuing operations) less the amount of dividends received by GE from GE Capital. This includesreflects the effects of intercompany transactions, including GE customer receivables soldwhich include, but are not limited to, GE Capital;the following: GE Capital services for trade receivables managementworking capital solutions to optimize GE cash management; GE Capital enabled GE industrial orders; aircraft engines, power equipment, renewable energy equipment and material procurement;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 bybetween GE fromand GE Capital;Capital, including sale-leaseback transactions; information technology (IT) and other services sold to GE Capital by GE; aircraft engines manufactured by GE that are installed on aircraft purchased by GE Capital from third-party producers for lease to others; 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 periodperiod-to-period based upon the results of the financial services businesses. We also believe that investors may find it useful to compare Industrial CFOA excluding the effects of deal taxes paid related to the 2016 Appliances business sale.sale, the 2017 Baker Hughes transaction and contributions to our GE Pension Plan. 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 and Industrial CFOA excluding Appliances sale-relateddeal-related taxes and GE Pension Plan contributions 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.

54 2017 2Q FORM 10-Q

CAPITAL ENDING NET INVESTMENT (ENI), EXCLUDING LIQUIDITY
    
(In billions)September 30, 2016 September 30, 2015(b)
      
Financial Services (GE Capital) total assets (GAAP)$202.7 $433.8
Adjustment deferred income tax 6.0  -
GE Capital total assets$208.7 $433.8
   Less assets of discontinued operations 30.9  121.9
   Less non-interest bearing liabilities 44.6  50.3
Capital ENI (Non-GAAP)$133.2 $261.6
   Less liquidity(a) 54.1  85.5
Capital ENI, excluding liquidity (Non-GAAP)$79.1 $176.1
   Discontinued operations, excluding liquidity 24.0  94.5
Total ENI (excluding liquidity) including discontinued operations (Non-GAAP)$103.1 $270.6
      
(a)Liquidity includes cash and equivalents and $12.2 billion of high quality investments at September 30, 2016
(b)As originally reported

We use ENI to measure the size of our Capital segment. We believe that this measure is a useful indicator of the capital (debt or equity) required to fund a business as it adjusts for non-interest bearing current liabilities generated in the normal course of business that do not require a capital outlay. We also believe that by excluding liquidity, we provide a meaningful measure of assets requiring capital to fund our Capital segment as a substantial amount of liquidity resulted from debt issuances to pre-fund future debt maturities and will not be used to fund additional assets. Liquidity consists of cash and equivalents and certain high quality investments. As a general matter, investments included in liquidity are expected to be highly liquid, giving us the ability to readily convert them to cash. Providing this measure will help investors measure how we are performing against our previously communicated goal to reduce the size of our financial services segment.

OTHER
2016 3Q FORM 10-Q 57
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 SeptemberJune 30, 2016.2017, and (ii) no change in internal control over financial reporting occurred during the quarter ended June 30, 2017, that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

2017 2Q FORM 10-Q 55

On November 2, 2015, we closed the acquisition of Alstom's Thermal, Renewable, and Grid businesses. During 2016, we are continuing to perform the following activities with respect to these acquired businesses: (1) updating purchase price allocations, (2) transitioning acquired businesses to our accounting and reporting policies and processes, and (3) integrating their systems and processes into our framework of internal controls over financial reporting.  As part of this process, we have undertaken efforts to significantly enhance the internal controls of the acquired businesses, which were not subject to U.S. internal control requirements prior to our acquisition, to bring them in line with GE's internal controls over financial reporting and those efforts are ongoing.
OTHER FINANCIAL DATA


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 numberAverage our share share 
 of sharesprice paid repurchase repurchase 
Periodpurchased(a)per share program(b) program(b) 
(Shares in thousands)          
           
2016          
July 21,914$32.10 21,862    
August 5,763 31.16 5,720    
September(c) 111,838 31.63 111,796    
Total 139,515$31.68 139,378$28.5 billion 
           
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Period
Total number
of shares
purchased

Average
price paid
per share

Total number
of shares
purchased
as part of
our share
repurchase
program(a)

Approximate
dollar value
of shares that
may yet be
purchased
under our
share
repurchase
program(a)

(Shares in thousands)    
     
2017    
April32,144
$29.93
32,144
 
May5,036
27.91
5,036
 
June5,328
28.67
5,328
 
Total42,508
$29.53
42,508
$21.1 billion
(a)This category included 137 thousand shares repurchased from our various benefit plans.
(b)(a)Shares were repurchased through the 2015 GE Share Repurchase Program (the Program). As of SeptemberJune 30, 2016,2017, we were authorized to repurchase up to $50.0 billion of our common stock through 2018 and we had repurchased a total of approximately $21.5$28.9 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. The total amount remaining under our share repurchase program excludes an unsettled amount of $0.4 billion under an accelerated share repurchase (ASR) agreement.
(c)Includes 71,189 thousand shares repurchased at an average price of $29.85 per share pursuant to an ASR agreement.

2016 3Q FORM 10-Q 58
REGULATIONS AND SUPERVISION


As previously discussed, on April 10, 2015, the company announced the GE Capital Exit Plan to reduce the size of its financial services businesses. On March 31, 2016 GE filed its request to the FSOC for rescission of GE Capital's designation as a nonbank SIFI. On June 28, 2016 we received approval of our request to the FSOC for rescission of GE Capital's designation as a nonbank SIFI. 
56 2017 2Q FORM 10-Q



With the rescission of its designation as a nonbank SIFI, GE Capital's activities are no longer subject to the consolidated supervision of the Federal Reserve or subject to the enhanced prudential standards set forth in the Dodd Frank Wall Street Reform and Consumer Protection Act and its implementing regulations, including minimum regulatory capital and liquidity requirements, submission of annual resolution plans, the Volcker Rule and regulatory reporting requirements.
LEGAL PROCEEDINGS

GE Capital's international operations are consolidated under GE Capital International Holdings Limited, a wholly owned subsidiary of GE Capital. GE Capital International Holdings Limited continues to maintain its own capital structure and is supervised by the U.K. Prudential Regulation Authority (PRA). The PRA's supervision includes capital and liquidity standards that could impact the payment of dividends to GE Capital.


2016 3Q FORM 10-Q 59
LEGAL PROCEEDINGS


The following information supplements and amends our discussion set forth under "Legal Proceedings"“Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended December 31, 20152016 and our Quarterly ReportsReport on Form 10-Q for the quartersquarter ended March 31, 2016 and June 30, 2016.
2017.

WMC.There are 1011 lawsuits relating to pending mortgage loan repurchase claims in which WMC, our discontinued U.S. mortgage business, that we sold in 2007,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'sBank’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'strust’s governing documents.

At June 30, 2016, four WMC cases were pending No bondholder in the United States District Court for the District of Minnesota against US Bank National Association (US Bank). Following the July 2016 order of the Minnesota state court approving the settlementany of these casessecuritizations has objected to the proposed settlements. On July 17, 2017, the court entered a judgment and order granting Deutsche Bank’s petitions. The period to file an appeal will expire, at the expirationlatest, 120 days after entry of the appeal period in September 2016, the District Court entered orders on September 29 and 30, 2016, dismissing all four cases with prejudice.judgment.

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'sBank’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'strust’s governing documents. On March 30 and April 2, 2017, bondholders in these two securitizations filed objections to the proposed settlements. The court 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. In the second quarter, WMC and J.P. Morgan reached an agreement with the securitization trustee to settle this case, subject to court approval, and the trustee filed an action in Minnesota state court seeking such approval on July 11, 2017. The court has set an initial hearing in this matter for September 11, 2017. 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'defendants’ motion to dismiss this case on statute of limitations grounds, and the plaintiff filed a notice of appeal on October 21, 2015. On May 11, 2017, the intermediate appellate court affirmed the dismissal of WMC, and the plaintiff is seeking leave to appeal this decision to the New York Court of Appeals. 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. On September 7, 2016, the court granted WMC’s motion to dismiss this case on statute of limitations grounds, and an appeal from this decision is pending in the intermediate appellate court.

2016 3Q FORM 10-Q 60

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'sWMC’s motion to dismiss but, on its own motion, ordered re-briefing on several issues raised by WMC'sWMC’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'sBank’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'strust’s governing documents. No bondholder in this securitization has objected to the proposed settlement. On July 17, 2017, the court entered a judgment and order granting Deutsche Bank’s petition. The court has scheduledperiod to file an appeal will expire, at the initial hearing on this petition, and the other petitions filed by Deutsche Bank referenced above, for April 2017.latest, 120 days after entry of judgment.

2017 2Q FORM 10-Q 57

LEGAL PROCEEDINGS

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'sWMC’s reported claims at SeptemberJune 30, 2016.2017. See Note 218 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.Department’s investigation, including providing documents and witnesses for interviews.

As previously reported,Alstom legacy matters. In connection with our acquisition of Alstom’s Thermal, Renewables and Grid businesses in 2000,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.

EC merger notification objections. In July 2017, the European Commission (EC) issued a statement of objections with its preliminary conclusion that GE provided incorrect or misleading information about its research and development activities regarding high-power offshore wind turbines during the Environmental Protection Agency (EPA) entered into a consent decree relating to PCB cleanupEC’s review of GE’s planned acquisition of LM Wind.  If the EC concludes that GE’s alleged violation of the Housatonic River in Massachusetts. Followingmerger notification rules was intentional or negligent, it could impose a fine of up to 1% of GE’s annual revenues.  We are cooperating with the EPA's release in September 2015 of an intended final remediation decision, GE and the EPA engaged in mediation and the first step of the dispute resolution process contemplated by the consent decree. In October 2016, the EPA issued its final decision pursuant to the consent decree, commencing a 30-day period for GE and other interested parties to appeal the decision to the EPA's Environmental Appeals Board and ultimately to the United States Court of Appeals for the First Circuit. The EPA may not implement any remedy until all appeals are exhausted. As of September 30, 2016, and based on its assessment of current facts and circumstances and its defenses, GE believes that it has recorded adequate reserves to cover future obligations associated with an expected final remedy.
2016 3Q FORM 10-Q 61EC’s investigation.





58 2017 2Q FORM 10-Q




FINANCIAL STATEMENTS








[PAGE INTENTIONALLY LEFT BLANK]
2016 3Q FORM 10-Q 62
FINANCIAL STATEMENTS AND NOTES

Statement of Earnings (Loss)64
Consolidated Statement of Comprehensive Income (Loss)68
Consolidated Statement of Changes in Shareowners' Equity69
Statement of Financial Position70
Statement of Cash Flows72
Notes to Consolidated Financial Statements 
 1 Basis of Presentation and Summary of Significant Accounting Policies74
 2 Businesses Held for Sale and Discontinued Operations76
 3 Investment Securities81
 4 Inventories84
 5 GE Capital Financing Receivables and Allowance for Losses on Financing Receivables84
 6 Property, Plant and Equipment85
 7 Acquisitions, Goodwill and Other Intangible Assets85
 8 Contract Assets90
 9 Borrowings91
 10 Postretirement Benefit Plans93
 11 Income Taxes94
 12 Shareowners' Equity95
 13 Earnings Per Share Information99
 14 Fair Value Measurements101
 15 Financial Instruments106
 16 Variable Interest Entities112
 17 Intercompany Transactions114
 18 Guarantor Financial Information115
 19 Supplemental Information121
     
     
     
     
Statement of Earnings (Loss)
60
Consolidated Statement of Comprehensive Income (Loss)
64
Consolidated Statement of Changes in Shareowners’ Equity
65
Statement of Financial Position
66
Statement of Cash Flows
68
Notes to Consolidated Financial Statements
70
 1
Basis of Presentation and Summary of Significant Accounting Policies
70
 2
Businesses Held for Sale and Discontinued Operations
71
 3
Investment Securities
73
 4Current Receivables
74
 5
Inventories
75
 6
GE Capital Financing Receivables and Allowance for Losses on Financing Receivables
75
 7
Property, Plant and Equipment
76
 8
Acquisitions, Goodwill and Other Intangible Assets
76
 9
Contract Assets
78
 10
Borrowings
79
 11Investment contracts, insurance liabilities and insurance annuity benefits
80
 12
Postretirement Benefit Plans
81
 13
Income Taxes
82
 14
Shareowners’ Equity
83
 15
Earnings Per Share Information
86
 16
Financial Instruments
87
 17
Variable Interest Entities
90
 18Commitments, Guarantees, Product Warranties and Other Loss Contingencies
92
 19
Intercompany Transactions
95
 20
Guarantor Financial Information
96
 21
Supplemental Information
102

2016 3Q2017 2Q FORM 10-Q 6359

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

      
STATEMENT OF EARNINGS (LOSS)     
(UNAUDITED)     
 Three months ended September 30
 General Electric Company
 and consolidated affiliates
(In millions; per-share amounts in dollars)2016 2015
      
Revenues and other income     
Sales of goods$18,553 $17,860
Sales of services 8,261  7,667
Other income 227  169
GE Capital earnings (loss) from continuing operations -  -
GE Capital revenues from services 2,224  2,332
   Total revenues and other income 29,266  28,028
      
Costs and expenses     
Cost of goods sold 15,255  14,198
Cost of services sold 5,711  5,657
Selling, general and administrative expenses 4,343  4,258
Interest and other financial charges 961  897
Investment contracts, insurance losses and     
   insurance annuity benefits 684  673
Other costs and expenses 238  295
   Total costs and expenses 27,191  25,978
      
Earnings (loss) from continuing operations before income taxes 2,074  2,050
Benefit (provision) for income taxes (18)  (135)
Earnings (loss) from continuing operations 2,056  1,915
Earnings (loss) from discontinued operations, net of taxes (Note 2) (105)  629
Net earnings (loss) 1,951  2,545
Less net earnings (loss) attributable to noncontrolling interests (76)  39
Net earnings (loss) attributable to the Company 2,027  2,506
Preferred stock dividends (33)  -
Net earnings (loss) attributable to GE common shareowners$1,994 $2,506
      
Amounts attributable to GE common shareowners     
   Earnings (loss) from continuing operations$2,056 $1,915
   Less net earnings (loss) attributable to noncontrolling interests,     
      continuing operations (74)  (50)
   Earnings (loss) from continuing operations attributable to the Company 2,131  1,965
   Preferred stock dividends (33)  -
   Earnings (loss) from continuing operations attributable     
       to GE common shareowners 2,097  1,965
   Earnings (loss) from discontinued operations, net of taxes (105)  629
   Less net earnings (loss) attributable to     
       noncontrolling interests, discontinued operations (2)  89
Net earnings (loss) attributable to GE common shareowners$1,994 $2,506
      
Per-share amounts (Note 13)     
   Earnings (loss) from continuing operations     
      Diluted earnings (loss) per share$0.23 $0.19
      Basic earnings (loss) per share$0.24 $0.19
      
   Net earnings (loss)     
      Diluted earnings (loss) per share$0.22 $0.25
      Basic earnings (loss) per share$0.22 $0.25
      
Dividends declared per common share$0.23 $0.23
      
STATEMENT OF EARNINGS (LOSS)  
(UNAUDITED)  
 Three months ended June 30
 
General Electric Company
and consolidated affiliates
(In millions; per-share amounts in dollars)2017
2016
   
Revenues and other income  
Sales of goods$18,364
$18,865
Sales of services8,875
9,163
Other income298
3,150
GE Capital earnings (loss) from continuing operations—
—
GE Capital revenues from services2,022
2,316
   Total revenues and other income29,558
33,494
   
Costs and expenses  
Cost of goods sold15,501
15,690
Cost of services sold6,292
6,693
Selling, general and administrative expenses4,287
4,883
Interest and other financial charges1,174
1,326
Investment contracts, insurance losses and insurance annuity benefits657
776
Other costs and expenses133
303
   Total costs and expenses28,044
29,670
   
Earnings (loss) from continuing operations before income taxes1,515
3,824
Benefit (provision) for income taxes(15)(461)
Earnings (loss) from continuing operations1,499
3,363
Earnings (loss) from discontinued operations, net of taxes (Note 2)(146)(541)
Net earnings (loss)1,354
2,823
Less net earnings (loss) attributable to noncontrolling interests(14)(86)
Net earnings (loss) attributable to the Company1,367
2,908
Preferred stock dividends(182)(152)
Net earnings (loss) attributable to GE common shareowners$1,185
$2,756
   
Amounts attributable to GE common shareowners  
Earnings (loss) from continuing operations$1,499
$3,363
Less net earnings (loss) attributable to noncontrolling interests,  
   continuing operations(21)(89)
Earnings (loss) from continuing operations attributable to the Company1,520
3,452
Preferred stock dividends(182)(152)
Earnings (loss) from continuing operations attributable  
   to GE common shareowners1,338
3,300
Earnings (loss) from discontinued operations, net of taxes(146)(541)
Less net earnings (loss) attributable to  
   noncontrolling interests, discontinued operations7
3
Net earnings (loss) attributable to GE common shareowners$1,185
$2,756
   
Per-share amounts (Note 15)  
Earnings (loss) from continuing operations  
Diluted earnings (loss) per share$0.15
$0.36
Basic earnings (loss) per share$0.15
$0.36
   
Net earnings (loss)  
Diluted earnings (loss) per share$0.13
$0.30
Basic earnings (loss) per share$0.14
$0.30
   
Dividends declared per common share$0.24
$0.23
Amounts may not add due to rounding.
See Note 3 for other-than-temporary impairment amounts on investment securities.

See accompanying notes.

2016 3Q FORM 10-Q 64
            
            
            
STATEMENT OF EARNINGS (LOSS) (CONTINUED)
(UNAUDITED)           
            
 Three months ended September 30
 GE(a) Financial Services (GE Capital)
(In millions; per-share amounts in dollars)2016 2015 2016 2015
            
Revenues and other income           
Sales of goods$18,621 $17,874 $34 $21
Sales of services 8,313  7,738  -  -
Other income 213  201  -  -
GE Capital earnings (loss) from continuing operations 26  (154)  -  -
GE Capital revenues from services -  -  2,566  2,639
   Total revenues and other income 27,172  25,659  2,600  2,660
            
Costs and expenses           
Cost of goods sold 15,329  14,215  27  18
Cost of services sold 5,216  5,122  547  606
Selling, general and administrative expenses 3,880  3,549  631  861
Interest and other financial charges 483  440  617  586
Investment contracts, insurance losses and           
   insurance annuity benefits -  -  700  714
Other costs and expenses -  -  241  313
   Total costs and expenses 24,909  23,325  2,763  3,098
            
Earnings (loss) from continuing operations before income taxes 2,263  2,334  (163)  (438)
Benefit (provision) for income taxes (241)  (413)  223  278
Earnings (loss) from continuing operations 2,022  1,921  60  (160)
Earnings (loss) from discontinued operations, net of taxes (Note 2) (103)  541  (105)  630
Net earnings (loss) 1,918  2,462  (45)  470
Less net earnings (loss) attributable to noncontrolling interests (76)  (43)  -  83
Net earnings (loss) attributable to the Company 1,994  2,506  (45)  387
Preferred stock dividends -  -  (33)  -
Net earnings (loss) attributable to GE common shareowners$1,994 $2,506 $(78) $387
            
Amounts attributable to GE common shareowners:           
   Earnings (loss) from continuing operations$2,022 $1,921 $60 $(160)
   Less net earnings (loss) attributable to noncontrolling interests,           
       continuing operations (76)  (43)  1  (6)
   Earnings (loss) from continuing operations attributable to the Company 2,097  1,965  59  (154)
   Preferred stock dividends -  -  (33)  -
   Earnings (loss) from continuing operations attributable           
      to GE common shareowners 2,097  1,965  26  (154)
   Earnings (loss) from discontinued operations, net of taxes  (103)  541  (105)  630
   Less net earnings (loss) attributable to           
      noncontrolling interests, discontinued operations -  -  (2)  89
Net earnings (loss) attributable to GE common shareowners$1,994 $2,506 $(78) $387
            
(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.
60 2017 2Q FORM 10-Q

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.
FINANCIAL STATEMENTS


2016 3Q FORM 10-Q 65
STATEMENT OF EARNINGS (LOSS) (CONTINUED)
(UNAUDITED)     
      
 Three months ended June 30
 GE(a) Financial Services (GE Capital)
(In millions; per-share amounts in dollars)2017
2016
 2017
2016
      
Revenues and other income     
Sales of goods$18,426
$18,912
 $33
$29
Sales of services8,867
9,238
 —
—
Other income300
3,054
 —
—
GE Capital earnings (loss) from continuing operations(172)(600) —
—
GE Capital revenues from services—
—
 2,413
2,742
   Total revenues and other income27,421
30,604
 2,446
2,771
      
Costs and expenses     
Cost of goods sold15,571
15,742
 27
24
Cost of services sold5,757
6,216
 520
552
Selling, general and administrative expenses3,919
4,231
 498
733
Interest and other financial charges637
567
 771
958
Investment contracts, insurance losses and insurance annuity benefits—
—
 682
815
Other costs and expenses—
—
 144
313
   Total costs and expenses25,883
26,756
 2,641
3,394
      
Earnings (loss) from continuing operations before income taxes1,538
3,847
 (195)(623)
Benefit (provision) for income taxes(218)(629) 202
168
Earnings (loss) from continuing operations1,320
3,218
 7
(454)
Earnings (loss) from discontinued operations, net of taxes (Note 2)(152)(544) (146)(541)
Net earnings (loss)1,167
2,674
 (138)(995)
Less net earnings (loss) attributable to noncontrolling interests(18)(82) 4
(4)
Net earnings (loss) attributable to the Company1,185
2,756
 (142)(991)
Preferred stock dividends—
—
 (182)(152)
Net earnings (loss) attributable to GE common shareowners$1,185
$2,756
 $(324)$(1,143)
      
Amounts attributable to GE common shareowners:     
   Earnings (loss) from continuing operations$1,320
$3,218
 $7
$(454)
   Less net earnings (loss) attributable to noncontrolling interests,     
      continuing operations(18)(82) (3)(7)
   Earnings (loss) from continuing operations attributable to the Company1,338
3,300
 10
(448)
   Preferred stock dividends—
—
 (182)(152)
   Earnings (loss) from continuing operations attributable     
      to GE common shareowners1,338
3,300
 (172)(600)
   Earnings (loss) from discontinued operations, net of taxes(152)(544) (146)(541)
   Less net earnings (loss) attributable to     
      noncontrolling interests, discontinued operations—
—
 7
3
Net earnings (loss) attributable to GE common shareowners$1,185
$2,756
 $(324)$(1,143)
STATEMENT OF EARNINGS (LOSS)
(UNAUDITED)
 Nine months ended September 30
 General Electric Company
 and consolidated affiliates
(In millions; per-share amounts in dollars)2016 2015
      
Revenues and other income     
Sales of goods$54,626 $53,003
Sales of services 25,530  22,263
Other income 3,385  1,092
GE Capital earnings (loss) from continuing operations -  -
GE Capital revenues from services 7,063  7,136
   Total revenues and other income 90,604  83,494
      
Costs and expenses     
Cost of goods sold 45,533  42,748
Cost of services sold 18,177  16,362
Selling, general and administrative expenses 13,833  13,058
Interest and other financial charges 4,023  2,228
Investment contracts, insurance losses and     
   insurance annuity benefits 2,101  1,942
Other costs and expenses 801  873
   Total costs and expenses 84,467  77,211
      
Earnings (loss) from continuing operations before income taxes 6,137  6,283
Benefit (provision) for income taxes (302)  (7,227)
Earnings (loss) from continuing operations 5,835  (945)
Earnings (loss) from discontinued operations, net of taxes (Note 2) (954)  (11,253)
Net earnings (loss) 4,881  (12,198)
Less net earnings (loss) attributable to noncontrolling interests (283)  229
Net earnings (loss) attributable to the Company 5,164  (12,427)
Preferred stock dividends (474)  -
Net earnings (loss) attributable to GE common shareowners$4,689 $(12,427)
      
Amounts attributable to GE common shareowners     
   Earnings (loss) from continuing operations$5,835 $(945)
   Less net earnings (loss) attributable to noncontrolling interests,     
      continuing operations (285)  (41)
   Earnings (loss) from continuing operations attributable to the Company 6,120  (904)
   Preferred stock dividends (474)  -
   Earnings (loss) from continuing operations attributable     
      to GE common shareowners 5,645  (904)
   Earnings (loss) from discontinued operations, net of taxes (954)  (11,253)
   Less net earnings (loss) attributable to noncontrolling interests,     
      discontinued operations 2  270
Net earnings (loss) attributable to GE common shareowners$4,689 $(12,427)
      
Per-share amounts (Note 13)     
   Earnings (loss) from continuing operations     
      Diluted earnings (loss) per share$0.61 $(0.09)
      Basic earnings (loss) per share$0.62 $(0.09)
      
   Net earnings (loss)     
      Diluted earnings (loss) per share$0.51 $(1.23)
      Basic earnings (loss) per share$0.51 $(1.23)
      
Dividends declared per common share$0.69 $0.69
      
Amounts may not add due to rounding.
See Note 3 for other-than-temporary impairment amounts on investment securities.

See accompanying notes.

2016 3Q FORM 10-Q 66
STATEMENT OF EARNINGS (LOSS) (CONTINUED)
(UNAUDITED)
            
 Nine months ended September 30
 GE(a) Financial Services (GE Capital)
(In millions; per-share amounts in dollars)2016 2015 2016 2015
            
Revenues and other income           
Sales of goods$54,745 $53,071 $88 $64
Sales of services 25,745  22,521  -  -
Other income 3,359  1,023  -  -
GE Capital earnings (loss) from continuing operations (1,466)  (6,207)  -  -
GE Capital revenues from services -  -  8,168  8,152
   Total revenues and other income 82,382  70,408  8,256  8,215
            
Costs and expenses           
Cost of goods sold 45,669  42,821  71  58
Cost of services sold 16,725  14,948  1,667  1,672
Selling, general and administrative expenses 12,094  11,035  2,238  2,458
Interest and other financial charges 1,490  1,243  3,006  1,348
Investment contracts, insurance losses and           
   insurance annuity benefits -  -  2,186  2,061
Other costs and expenses -  -  822  903
   Total costs and expenses 75,977  70,048  9,990  8,500
            
Earnings (loss) from continuing operations before income taxes 6,405  360  (1,734)  (285)
Benefit (provision) for income taxes (1,034)  (1,302)  732  (5,925)
Earnings (loss) from continuing operations 5,370  (942)  (1,002)  (6,210)
Earnings (loss) from discontinued operations, net of taxes (Note 2) (956)  (11,523)  (954)  (11,249)
Net earnings (loss) 4,414  (12,465)  (1,956)  (17,459)
Less net earnings (loss) attributable to noncontrolling interests (275)  (38)  (8)  267
Net earnings (loss) attributable to the Company 4,689  (12,427)  (1,948)  (17,726)
Preferred stock dividends -  -  (474)  (161)
Net earnings (loss) attributable to GE common shareowners$4,689 $(12,427) $(2,422) $(17,887)
            
Amounts attributable to GE common shareowners:           
   Earnings (loss) from continuing operations$5,370 $(942) $(1,002) $(6,210)
   Less net earnings (loss) attributable to noncontrolling interests,           
     continuing operations (275)  (38)  (10)  (3)
   Earnings (loss) from continuing operations attributable to the Company 5,645  (904)  (992)  (6,207)
   Preferred stock dividends -  -  (474)  (161)
   Earnings (loss) from continuing operations attributable           
      to GE common shareowners 5,645  (904)  (1,466)  (6,368)
   Earnings (loss) from discontinued operations, net of taxes  (956)  (11,523)  (954)  (11,249)
   Less net earnings (loss) attributable to noncontrolling interests,           
     discontinued operations -  -  2  270
Net earnings (loss) attributable to GE common shareowners$4,689 $(12,427) $(2,422) $(17,887)
            
(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"“GE” means the basis of consolidation as described in Note 1 to the consolidated financial statements; "GE Capital"“GE Capital” means GE Capital Global Holdings, LLC (GECGH) andor its predecessor General Electric Capital Corporation (GECC) and all of their affiliates and associated companies. Separate information is shown for "GE"“GE” and "Financial“Financial Services (GE Capital)."” Transactions between GE and GE Capital have been eliminated from the "General“General Electric Company and consolidated affiliates"affiliates” columns on the prior page.


2016 3Q2017 2Q FORM 10-Q 6761

GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
            
 Three months ended September 30 Nine months ended September 30
(In millions) 2016  2015  2016  2015
            
Net earnings (loss)$1,951 $2,545 $4,881 $(12,198)
Less net earnings (loss) attributable to noncontrolling interests (76)  39  (283)  229
Net earnings (loss) attributable to the Company$2,027 $2,506 $5,164 $(12,427)
            
Other comprehensive income (loss)           
   Investment securities$97 $(3) $715 $(452)
   Currency translation adjustments (194)  624  (138)  (2,895)
   Cash flow hedges 30  (35)  60  6
   Benefit plans 548  627  1,481  4,486
Other comprehensive income (loss) 481  1,214  2,117  1,144
Less other comprehensive income (loss)           
   attributable to noncontrolling interests 5  (8)  10  (45)
Other comprehensive income (loss) attributable to the Company$477 $1,221 $2,107 $1,189
            
Comprehensive income (loss)$2,432 $3,759 $6,998 $(11,054)
Less comprehensive income (loss) attributable to noncontrolling interests (71)  31  (273)  184
Comprehensive income (loss) attributable to the Company$2,504 $3,727 $7,271 $(11,238)
            
MD&A


STATEMENT OF EARNINGS (LOSS)
(UNAUDITED)
 Six months ended June 30
 General Electric Company
 and consolidated affiliates
(In millions; per-share amounts in dollars)2017
2016
   
Revenues and other income  
Sales of goods$35,176
$36,073
Sales of services17,291
17,269
Other income465
3,158
GE Capital earnings (loss) from continuing operations—
—
GE Capital revenues from services4,286
4,838
   Total revenues and other income57,219
61,339
   
Costs and expenses  
Cost of goods sold29,991
30,278
Cost of services sold12,162
12,466
Selling, general and administrative expenses8,793
9,491
Interest and other financial charges2,313
3,062
Investment contracts, insurance losses and insurance annuity benefits1,291
1,417
Other costs and expenses323
562
   Total costs and expenses54,872
57,276
   
Earnings (loss) from continuing operations before income taxes2,346
4,063
Benefit (provision) for income taxes(31)(284)
Earnings (loss) from continuing operations2,315
3,779
Earnings (loss) from discontinued operations, net of taxes (Note 2)(385)(849)
Net earnings (loss)1,931
2,930
Less net earnings (loss) attributable to noncontrolling interests(90)(207)
Net earnings (loss) attributable to the Company2,020
3,137
Preferred stock dividends(216)(441)
Net earnings (loss) attributable to GE common shareowners$1,804
$2,695
   
Amounts attributable to GE common shareowners  
   Earnings (loss) from continuing operations$2,315
$3,779
   Less net earnings (loss) attributable to noncontrolling interests,  
     continuing operations(97)(210)
   Earnings (loss) from continuing operations attributable to the Company2,412
3,989
   Preferred stock dividends(216)(441)
   Earnings (loss) from continuing operations attributable  
     to GE common shareowners2,196
3,548
   Earnings (loss) from discontinued operations, net of taxes(385)(849)
   Less net earnings (loss) attributable to noncontrolling interests,  
     discontinued operations7
3
Net earnings (loss) attributable to GE common shareowners$1,804
$2,695
   
Per-share amounts (Note 15)  
   Earnings (loss) from continuing operations  
      Diluted earnings (loss) per share$0.25
$0.38
      Basic earnings (loss) per share$0.25
$0.39
   
   Net earnings (loss)  
      Diluted earnings (loss) per share$0.20
$0.29
      Basic earnings (loss) per share$0.21
$0.29
   
Dividends declared per common share$0.48
$0.46

Amounts may not add due to rounding.

Amounts presented net of taxes. See Note 12 for further information about other comprehensive income (loss) and noncontrolling interests.


See accompanying notes.

2016 3Q62 2017 2Q FORM 10-Q 68

GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES     
CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS' EQUITY
(UNAUDITED)
      
 Nine months ended September 30
(In millions) 2016  2015
      
Shareowners' equity balance at January 1$98,274 $128,159
Net earnings (loss) attributable to the Company 5,164  (12,427)
Dividends and other transactions with shareowners (6,770)  (6,972)
Redemption value adjustment for redeemable noncontrolling interests (178)  (1)
Other comprehensive income (loss) attributable to the Company 2,107  1,189
Net sales (purchases) of shares for treasury (16,310)  1,386
Changes in other capital (404)  (129)
Ending balance at September 30 81,882  111,204
Noncontrolling interests 1,663  8,788
Total equity balance at September 30$83,544 $119,993
      
MD&A


STATEMENT OF EARNINGS (LOSS)
(UNAUDITED)
      
 Six months ended June 30
 GE(a) Financial Services (GE Capital)
(In millions; per-share amounts in dollars)2017
2016
 2017
2016
      
Revenues and other income     
Sales of goods$35,264
$36,124
 $62
$54
Sales of services17,420
17,432
 —
—
Other income437
3,146
 —
—
GE Capital earnings (loss) from continuing operations(219)(1,492) —
—
GE Capital revenues from services—
—
 5,065
5,602
   Total revenues and other income52,902
55,210
 5,127
5,656
      
Costs and expenses     
Cost of goods sold30,092
30,339
 50
44
Cost of services sold11,210
11,509
 1,082
1,120
Selling, general and administrative expenses7,939
8,214
 1,073
1,607
Interest and other financial charges1,200
1,007
 1,582
2,389
Investment contracts, insurance losses and insurance annuity benefits—
—
 1,318
1,486
Other costs and expenses—
—
 358
581
   Total costs and expenses50,441
51,069
 5,461
7,227
      
Earnings (loss) from continuing operations before income taxes2,461
4,141
 (334)(1,571)
Benefit (provision) for income taxes(361)(793) 330
509
Earnings (loss) from continuing operations2,100
3,349
 (4)(1,062)
Earnings (loss) from discontinued operations, net of taxes (Note 2)(392)(852) (388)(849)
Net earnings (loss)1,708
2,496
 (392)(1,911)
Less net earnings (loss) attributable to noncontrolling interests(96)(199) 6
(8)
Net earnings (loss) attributable to the Company1,804
2,695
 (398)(1,903)
Preferred stock dividends—
—
 (216)(441)
Net earnings (loss) attributable to GE common shareowners$1,804
$2,695
 $(614)$(2,344)
      
Amounts attributable to GE common shareowners:     
   Earnings (loss) from continuing operations$2,100
$3,349
 $(4)$(1,062)
   Less net earnings (loss) attributable to noncontrolling interests,     
     continuing operations(96)(199) (1)(11)
   Earnings (loss) from continuing operations attributable to the Company2,196
3,548
 (3)(1,051)
   Preferred stock dividends—
—
 (216)(441)
   Earnings (loss) from continuing operations attributable     
     to GE common shareowners2,196
3,548
 (219)(1,492)
   Earnings (loss) from discontinued operations, net of taxes(392)(852) (388)(849)
   Less net earnings (loss) attributable to noncontrolling interests,     
     discontinued operations—
—
 7
3
Net earnings (loss) attributable to GE common shareowners$1,804
$2,695
 $(614)$(2,344)
(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.

SeeIn the consolidating data on this page, “GE” means the basis of consolidation as described in Note 121 to the consolidated financial statements; “GE Capital” means GE Capital Global Holdings, LLC (GECGH) or its predecessor General Electric Capital Corporation (GECC) and all of their affiliates and associated companies. Separate information is shown for further information about changes in shareowners' equity.“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 2Q FORM 10-Q 63

FINANCIAL STATEMENTS

GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
      
 Three months ended June 30 Six months ended June 30
(In millions)2017
2016
 2017
2016
      
Net earnings (loss)$1,354
$2,823
 $1,931
$2,930
Less net earnings (loss) attributable to noncontrolling interests(14)(86) (90)(207)
Net earnings (loss) attributable to the Company$1,367
$2,908
 $2,020
$3,137
      
Other comprehensive income (loss)     
   Investment securities$243
$397
 $191
$617
  Currency translation adjustments525
55
 1,341
57
   Cash flow hedges(10)(25) 9
30
   Benefit plans560
382
 1,610
933
Other comprehensive income (loss)1,318
810
 3,151
1,636
Less other comprehensive income (loss) attributable to noncontrolling interests1
3
 7
6
Other comprehensive income (loss) attributable to the Company$1,317
$807
 $3,144
$1,631
      
Comprehensive income (loss)$2,672
$3,633
 $5,082
$4,566
Less comprehensive income (loss) attributable to noncontrolling interests(13)(82) (83)(201)
Comprehensive income (loss) attributable to the Company$2,685
$3,715
 $5,164
$4,767

Amounts presented net of taxes.
Amounts may not add due to rounding.
See accompanying notes.

64 2017 2Q FORM 10-Q

FINANCIAL STATEMENTS

GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES   
CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS' EQUITY
(UNAUDITED)
    
 Six months ended June 30
(In millions)2017
 2016
    
Shareowners' equity balance at January 1$75,828
 $98,274
Net earnings (loss) attributable to the Company2,020
 3,137
Dividends and other transactions with shareowners(4,393) (4,680)
Redemption value adjustment for redeemable noncontrolling interests(114) (110)
Other comprehensive income (loss) attributable to the Company3,144
 1,631
Net sales (purchases) of shares for treasury(2,579) (12,585)
Changes in other capital244
 (674)
Ending balance at June 3074,148
 84,991
Noncontrolling interests1,634
 1,693
Total equity balance at June 30$75,783
 $86,684

Amounts may not add due to rounding.
See accompanying notes.

2016 3Q2017 2Q FORM 10-Q 6965

FINANCIAL STATEMENTS

STATEMENT OF FINANCIAL POSITION
General Electric Company
and consolidated affiliates
General Electric Company
and consolidated affiliates
(In millions, except share amounts)September 30, 2016 December 31, 2015June 30, 2017
December 31, 2016
 (Unaudited)   (Unaudited)
 
Assets      
Cash and equivalents$52,530 $70,483$44,049
$48,129
Investment securities (Note 3) 46,369  31,97339,968
44,313
Current receivables 25,187  27,022
Inventories (Note 4) 24,116  22,515
Financing receivables – net (Note 5) 11,863  12,052
Current receivables (Note 4)21,447
24,076
Inventories (Note 5)22,843
22,354
Financing receivables – net (Note 6)12,149
12,242
Other GE Capital receivables 6,301  6,7826,156
5,944
Property, plant and equipment – net (Note 6) 51,453  54,095
Property, plant and equipment – net (Note 7)50,167
50,518
Receivable from GE Capital (debt assumption) -  -—
—
Investment in GE Capital -  -—
—
Goodwill (Note 7) 69,988  65,526
Other intangible assets – net (Note 7) 16,779  17,797
Contract assets (Note 8) 24,354  21,156
Goodwill (Note 8)72,335
70,438
Other intangible assets – net (Note 8)16,929
16,436
Contract assets (Note 9)28,924
25,162
All other assets 25,749  36,79727,318
27,176
Deferred income taxes (Note 11) 1,463  3,105
Deferred income taxes (Note 13)1,241
1,833
Assets of businesses held for sale (Note 2) 611  2,8184,096
1,745
Assets of discontinued operations (Note 2) 30,930  120,9517,850
14,815
Total assets(a)$387,694 $493,071$355,473
$365,183
      
Liabilities and equity      
Short-term borrowings (Note 9)$31,571 $49,860
Short-term borrowings (Note 10)$30,044
$30,714
Accounts payable, principally trade accounts 13,067  13,68013,283
14,435
Progress collections and price adjustments accrued 15,760  15,77617,162
16,760
Dividends payable 2,062  2,1672,090
2,107
Other GE current liabilities 20,230  23,59716,755
17,564
Non-recourse borrowings of consolidated securitization entities (Note 9) 2,175  3,083
Long-term borrowings (Note 9) 115,686  144,659
Investment contracts, insurance liabilities and insurance annuity benefits 27,126  25,692
Non-recourse borrowings of consolidated securitization entities (Note 10)682
417
Long-term borrowings (Note 10)103,676
105,080
Investment contracts, insurance liabilities and insurance annuity benefits (Note 11)26,471
26,086
Non-current compensation and benefits 40,420  40,48742,621
43,780
All other liabilities 23,190  23,61121,607
22,912
Liabilities of businesses held for sale (Note 2) 28  8611,195
656
Liabilities of discontinued operations (Note 2) 9,782  46,487911
4,158
Total liabilities(a) 301,098  389,961276,498
284,668
      
Redeemable noncontrolling interests (Note 12) 3,051  2,972
Redeemable noncontrolling interests (Note 14)3,193
3,025
      
Preferred stock (5,944,250 shares outstanding at both September 30, 2016     
and December 31, 2015) 6  6
Common stock (8,846,390,000 and 9,379,288,000 shares outstanding     
at September 30, 2016 and December 31, 2015, respectively) 702  702
Preferred stock (5,944,250 shares outstanding at both June 30, 2017
and December 31, 2016)		6
6
Common stock (8,657,946,000 and 8,742,614,000 shares outstanding
at June 30, 2017 and December 31, 2016, respectively)		702
702
Accumulated other comprehensive income (loss) – net attributable to GE(b)      
Investment securities 1,176  460866
674
Currency translation adjustments (5,643)  (5,499)(5,481)(6,816)
Cash flow hedges (21)  (80)22
12
Benefit plans (9,934)  (11,410)(10,860)(12,469)
Other capital 37,209  37,61337,468
37,224
Retained earnings 138,236  140,020137,044
139,532
Less common stock held in treasury (79,849)  (63,539)(85,617)(83,038)
Total GE shareowners' equity 81,882  98,274
Noncontrolling interests(c) (Note 12) 1,663  1,864
Total equity (Note 12) 83,544  100,138
Total GE shareowners’ equity74,148
75,828
Noncontrolling interests(c) (Note 14)1,634
1,663
Total equity (Note 14)75,783
77,491
Total liabilities, redeemable noncontrolling interests and equity$387,694 $493,071$355,473
$365,183
     
(a)
Our consolidated assets at SeptemberJune 30, 20162017 included total assets of $7,962$5,851 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets included current receivables and net financing receivables of $4,155$1,445 million and investment securities of $1,450$1,004 million within continuing operations and assets of discontinued operations of $398$285 million. Our consolidated liabilities at SeptemberJune 30, 20162017 included liabilities of certain VIEs for which the VIE creditors do not have recourse to GE. These liabilities included non-recourse borrowings of consolidated securitization entities (CSEs) of $2,175$(682) million within continuing operations. See Note 16.
17.
(b)
The sum of accumulated other comprehensive income (loss) (AOCI) attributable to the Company was $(14,422)$(15,454) million and $(16,529)$(18,598) million at SeptemberJune 30, 20162017 and December 31, 2015,2016, respectively.
(c)
Included AOCI attributable to noncontrolling interests of $(254)$(271) million and $(264)$(278) million at SeptemberJune 30, 20162017 and December 31, 2015,2016, respectively.
Amounts may not add due to rounding.

See accompanying notes.

2016 3Q66 2017 2Q FORM 10-Q 70

FINANCIAL STATEMENTS

STATEMENT OF FINANCIAL POSITION (CONTINUED)
           
GE(a) Financial Services (GE Capital)GE(a) Financial Services (GE Capital)
(In millions, except share amounts)September 30, 2016 December 31, 2015 September 30, 2016 December 31, 2015June 30,
2017
December 31, 2016
 June 30,
2017
December 31, 2016
 (Unaudited)     (Unaudited)   (Unaudited)  (Unaudited) 
Assets              
Cash and equivalents$10,591 $10,372 $41,939 $60,111$14,220
$10,525
 $29,829
$37,604
Investment securities (Note 3) 257  151  46,116  31,827162
137
 39,809
44,180
Current receivables 13,384  14,707  -  -
Inventories (Note 4) 24,022  22,449  93  66
Financing receivables - net (Note 5) -  -  24,989  25,003
Current receivables (Note 4)11,697
12,715
 —
—
Inventories (Note 5)22,754
22,263
 89
91
Financing receivables - net (Note 6)—
—
 24,696
26,041
Other GE Capital receivables -  -  15,201  15,455—
—
 15,996
15,576
Property, plant and equipment – net (Note 6) 19,556  20,145  32,699  34,781
Property, plant and equipment – net (Note 7)19,593
19,103
 31,491
32,225
Receivable from GE Capital (debt assumption)(b) 59,798  84,704  -  -48,216
58,780
 —
—
Investment in GE Capital 28,958  46,227  -  -20,729
24,677
 —
—
Goodwill (Note 7) 67,618  63,157  2,369  2,370
Other intangible assets – net (Note 7) 16,448  17,365  332  435
Contract assets (Note 8) 24,354  21,156  -  -
Goodwill (Note 8)69,966
68,070
 2,369
2,368
Other intangible assets – net (Note 8)16,655
16,131
 275
305
Contract assets (Note 9)28,924
25,162
 —
—
All other assets 12,210  12,813  14,058  25,08113,411
12,007
 13,445
14,608
Deferred income taxes (Note 11) 7,434  7,666  (5,970)  (4,561)
Deferred income taxes (Note 13)6,638
6,666
 (5,398)(4,833)
Assets of businesses held for sale (Note 2) 611  2,818  -  -3,816
1,629
 —
—
Assets of discontinued operations (Note 2) 9  9  30,921  120,942—
9
 7,850
14,806
Total assets$285,249 $323,737 $202,747 $311,508$276,782
$277,874
 $160,452
$182,970
              
Liabilities and equity              
Short-term borrowings (Note 9)(b)$18,940 $19,792 $24,444 $48,617
Short-term borrowings (Note 10)(b)$20,331
$20,482
 $23,373
$23,443
Accounts payable, principally trade accounts 18,494  19,250  1,844  1,74519,384
20,876
 1,723
1,605
Progress collections and price adjustments accrued 15,861  15,776  -  -17,292
16,838
 —
—
Dividends payable 2,062  2,167  -  -2,090
2,107
 —
—
Other GE current liabilities 20,230  23,595  -  -16,755
17,564
 —
—
Non-recourse borrowings of consolidated securitization entities (Note 9) -  -  2,175  3,083
Long-term borrowings (Note9)(b) 65,683  83,309  99,828  128,478
Investment contracts, insurance liabilities and insurance annuity benefits -  -  27,642  26,155
Non-recourse borrowings of consolidated securitization entities (Note 10)—
—
 682
417
Long-term borrowings (Note 10)(b)61,611
58,810
 78,852
93,443
Investment contracts, insurance liabilities and insurance annuity benefits (Note 11)—
—
 27,016
26,546
Non-current compensation and benefits 39,370  39,472  1,040  1,00641,573
42,770
 1,040
1,001
All other liabilities 18,246  16,217  6,743  9,35117,838
17,506
 5,863
7,430
Liabilities of businesses held for sale (Note 2) 58  1,409  -  -1,195
656
 —
—
Liabilities of discontinued operations (Note 2) 128  128  9,654  46,35923
35
 888
4,123
Total liabilities 199,073  221,115  173,370  264,795198,091
197,644
 139,438
158,008
              
Redeemable noncontrolling interests (Note 12) 3,051  2,972  -  -
Redeemable noncontrolling interests (Note 14)3,193
3,025
 —
—
              
Preferred stock (5,944,250 shares outstanding at both September 30, 2016           
and December 31, 2015) 6  6  6  6
Common stock (8,846,390,000 and 9,379,288,000 shares outstanding           
at September 30, 2016 and December 31, 2015, respectively) 702  702  -  -
Preferred stock (5,944,250 shares outstanding at both June 30, 2017
and December 31, 2016)
6
6
 6
6
Common stock (8,657,946,000 and 8,742,614,000 shares outstanding
at June 30, 2017 and December 31, 2016, respectively)
702
702
 —
—
Accumulated other comprehensive income (loss) - net attributable to GE              
Investment securities 1,176  460  1,149  456866
674
 857
656
Currency translation adjustments (5,643)  (5,499)  (833)  (898)(5,481)(6,816) (270)(740)
Cash flow hedges (21)  (80)  (3)  (112)22
12
 10
43
Benefit plans (9,934)  (11,410)  (506)  (540)(10,860)(12,469) (556)(622)
Other capital 37,209  37,613  12,635  12,32637,468
37,224
 12,737
12,669
Retained earnings 138,236  140,020  16,510  34,988137,044
139,532
 7,945
12,664
Less common stock held in treasury (79,849)  (63,539)  -  -(85,617)(83,038) —
—
Total GE shareowners' equity 81,882  98,274  28,958  46,227
Noncontrolling interests (Note 12) 1,244  1,378  419  486
Total equity (Notes 12) 83,126  99,651  29,377  46,713
Total GE shareowners’ equity74,148
75,828
 20,729
24,677
Noncontrolling interests (Note 14)1,349
1,378
 285
285
Total equity (Note 14)75,498
77,205
 21,014
24,962
Total liabilities, redeemable noncontrolling interests and equity$285,249 $323,737 $202,747 $311,508$276,782
$277,874
 $160,452
$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)
On December 2,In 2015, senior unsecured notes and commercial paper waswere assumed by GE upon its merger with GE Capital, resulting in an intercompany receivable and payable to GE. The short-term borrowings were $10,074 million (which includes an offset of $5,002 million short-term loan frombetween GE Capital to GE) and $17,642 million and the long-term borrowings were $49,723 million and $67,062 million at September 30, 2016 and December 31, 2015, respectively.GE Capital. See Note 9 for additional information.
10.
Amounts may not add due to rounding.

In the consolidating data on this page, "GE"“GE” means the basis of consolidation as described in Note 1 to the consolidated financial statements; "GE Capital"“GE Capital” means GE Capital Global Holdings, LLC (GECGH) andor its predecessor General Electric Capital Corporation (GECC) and all of their affiliates and associated companies. Separate information is shown for "GE"“GE” and "Financial“Financial Services (GE Capital)."” Transactions between GE and GE Capital have been eliminated from the "General“General Electric Company and consolidated affiliates"affiliates” columns on the prior page.

2016 3Q2017 2Q FORM 10-Q 7167

FINANCIAL STATEMENTS

STATEMENT OF CASH FLOWS
(UNAUDITED)      
Nine months ended September 30
General Electric CompanySix months ended June 30
 and consolidated affiliates
General Electric Company
and consolidated affiliates
(In millions)2016 20152017
2016
      
Cash flows – operating activities      
Net earnings (loss)$4,881 $(12,198)$1,931
$2,930
Less net earnings (loss) attributable to noncontrolling interests (283)  229(90)(207)
Net earnings (loss) attributable to the Company 5,164  (12,427)2,020
3,137
(Earnings) loss from discontinued operations 954  11,253385
849
Adjustments to reconcile net earnings (loss) attributable to the      
Company to cash provided from operating activities      
Depreciation and amortization of property, plant and equipment 3,641  3,5542,318
2,505
(Earnings) loss from continuing operations retained by GE Capital -  -—
—
Deferred income taxes 1,244  2,400(170)672
Decrease (increase) in GE current receivables 763  9092,385
1,879
Decrease (increase) in inventories (2,594)  (1,766)(598)(2,629)
Increase (decrease) in accounts payable (49)  376(729)132
Increase (decrease) in GE progress collections 78  (1,265)(32)510
All other operating activities (5,356)  2,410(2,190)(5,040)
Cash from (used for) operating activities – continuing operations 3,846  5,4443,389
2,014
Cash from (used for) operating activities – discontinued operations (5,719)  7,702(895)(4,849)
Cash from (used for) operating activities (1,873)  13,1462,494
(2,835)
      
Cash flows – investing activities      
Additions to property, plant and equipment (5,109)  (4,807)(3,470)(3,052)
Dispositions of property, plant and equipment 3,403  2,4062,343
1,222
Net decrease (increase) in GE Capital financing receivables 293  7471,053
(1,146)
Proceeds from sale of discontinued operations 53,250  49,006789
42,874
Proceeds from principal business dispositions 5,273  754145
5,609
Net cash from (payments for) principal businesses purchased (930)  (1,738)(2,643)(206)
All other investing activities (2,621)  13,0985,866
(2,887)
Cash from (used for) investing activities – continuing operations 53,559  59,4664,083
42,414
Cash from (used for) investing activities – discontinued operations (12,056)  305(1,922)(10,646)
Cash from (used for) investing activities 41,503  59,7712,161
31,768
      
Cash flows – financing activities      
Net increase (decrease) in borrowings (maturities of 90 days or less) (1,021)  (16,619)812
758
Newly issued debt (maturities longer than 90 days) 1,178  12,9949,036
855
Repayments and other debt reductions (maturities longer than 90 days) (50,500)  (36,207)(13,905)(45,467)
Net dispositions (purchases) of GE shares for treasury (17,969)  635(2,732)(14,292)
Dividends paid to shareowners (6,611)  (6,961)(4,332)(4,508)
All other financing activities (266)  (1,399)(968)(109)
Cash from (used for) financing activities – continuing operations (75,188)  (47,556)(12,089)(62,763)
Cash from (used for) financing activities – discontinued operations 295  (2,250)1,909
(711)
Cash from (used for) financing activities (74,893)  (49,807)(10,181)(63,474)
Effect of currency exchange rate changes on cash and equivalents (169)  (3,516)538
(24)
Increase (decrease) in cash and equivalents (35,432)  19,594(4,988)(34,565)
Cash and equivalents at beginning of year 90,878  91,01649,558
90,878
Cash and equivalents at September 30 55,445  110,610
Less cash and equivalents of discontinued operations at September 30 2,915  26,743
Cash and equivalents of continuing operations at September 30$52,530 $83,867
     
Cash and equivalents at June 3044,571
56,313
Less cash and equivalents of discontinued operations at June 30522
4,190
Cash and equivalents of continuing operations at June 30$44,049
$52,123

Amounts may not add due to rounding.
See accompanying notes.

2016 3Q68 2017 2Q FORM 10-Q 72

STATEMENT OF CASH FLOWS (CONTINUED)      
(UNAUDITED)
            
 Nine months ended September 30
 GE(a) Financial Services (GE Capital)
(In millions)2016 2015 2016 2015
            
Cash flows – operating activities           
Net earnings (loss)$4,414 $(12,465) $(1,956) $(17,459)
Less net earnings (loss) attributable to noncontrolling interests (275)  (38)  (8)  267
Net earnings (loss) attributable to the Company 4,689  (12,427)  (1,948)  (17,726)
(Earnings) loss from discontinued operations 956  11,523  954  11,249
Adjustments to reconcile net earnings (loss) attributable to the           
   Company to cash provided from operating activities           
      Depreciation and amortization of property, plant and equipment 1,857  1,777  1,771  1,792
      (Earnings) loss from continuing operations retained by GE Capital(b) 17,518  6,927  -  -
      Deferred income taxes 81  (407)  1,164  2,806
      Decrease (increase) in GE current receivables 455  588  -  -
      Decrease (increase) in inventories (2,543)  (1,739)  (15)  (9)
      Increase (decrease) in accounts payable (38)  34  12  296
      Increase (decrease) in GE progress collections 179  (1,278)  -  -
      All other operating activities (4,812)  1,529  (35)  923
Cash from (used for) operating activities – continuing operations 18,342  6,526  1,903  (669)
Cash from (used for) operating activities – discontinued operations -  (11)  (5,719)  7,713
Cash from (used for) operating activities 18,342  6,515  (3,815)  7,044
            
Cash flows – investing activities           
Additions to property, plant and equipment (2,804)  (2,708)  (2,719)  (2,557)
Dispositions of property, plant and equipment 727  525  2,974  2,104
Net decrease (increase) in GE Capital financing receivables -  -  128  1,034
Proceeds from sale of discontinued operations -  -  53,250  49,006
Proceeds from principal business dispositions 5,273  222  -  532
Net cash from (payments for) principal businesses purchased (930)  (61)  -  (1,677)
All other investing activities (1,915)  (1,037)  (6,435)  14,137
Cash from (used for) investing activities – continuing operations 350  (3,058)  47,198  62,580
Cash from (used for) investing activities – discontinued operations -  10  (12,056)  295
Cash from (used for) investing activities 351  (3,048)  35,142  62,875
            
Cash flows – financing activities           
Net increase (decrease) in borrowings (maturities of 90 days or less) 1,732  716  (1,945)  (17,354)
Newly issued debt (maturities longer than 90 days) 5,180  3,537  987  9,457
Repayments and other debt reductions (maturities longer than 90 days) (755)  (153)  (49,745)  (36,054)
Net dispositions (purchases) of GE shares for treasury (17,969)  635  -  -
Dividends paid to shareowners (6,427)  (6,960)  (16,234)  (611)
All other financing activities (143)  132  (259)  (1,369)
Cash from (used for) financing activities – continuing operations (18,382)  (2,095)  (67,196)  (45,931)
Cash from (used for) financing activities – discontinued operations -  -  295  (2,250)
Cash from (used for) financing activities (18,382)  (2,095)  (66,900)  (48,181)
Effect of currency exchange rate changes on cash and equivalents (91)  (479)  (78)  (3,038)
Increase (decrease) in cash and equivalents 219  894  (35,652)  18,700
Cash and equivalents at beginning of year 10,372  15,916  80,506  75,100
Cash and equivalents at September 30 10,591  16,810  44,854  93,800
Less cash and equivalents of discontinued operations at September 30 -  -  2,915  26,743
Cash and equivalents of continuing operations at September 30$10,591 $16,810 $41,939 $67,057
            
FINANCIAL STATEMENTS

STATEMENT OF CASH FLOWS (CONTINUED)   
(UNAUDITED)
 Six months ended June 30
 GE(a) Financial Services (GE Capital)
(In millions)2017
2016
 2017
2016
      
Cash flows – operating activities     
Net earnings (loss)$1,708
$2,496
 $(392)$(1,911)
Less net earnings (loss) attributable to noncontrolling interests(96)(199) 6
(8)
Net earnings (loss) attributable to the Company1,804
2,695
 (398)(1,903)
(Earnings) loss from discontinued operations392
852
 388
849
Adjustments to reconcile net earnings (loss) attributable to the     
   Company to cash provided from operating activities     
      Depreciation and amortization of property, plant and equipment1,192
1,300
 1,127
1,191
     (Earnings) loss from continuing operations retained by GE Capital(b)4,242
12,496
 —
—
      Deferred income taxes(222)293
 52
379
      Decrease (increase) in GE current receivables929
280
 —
—
      Decrease (increase) in inventories(592)(2,623) (9)6
      Increase (decrease) in accounts payable(1,001)(30) (117)10
      Increase (decrease) in GE progress collections21
510
 —
—
       All other operating activities(3,180)(5,007) 921
(91)
Cash from (used for) operating activities – continuing operations3,585
10,767
 1,964
440
Cash from (used for) operating activities – discontinued operations—
—
 (894)(4,848)
Cash from (used for) operating activities3,585
10,767
 1,069
(4,408)
      
Cash flows – investing activities     
Additions to property, plant and equipment(2,135)(1,940) (1,704)(1,264)
Dispositions of property, plant and equipment749
539
 1,829
865
Net decrease (increase) in GE Capital financing receivables—
—
 2,824
1,191
Proceeds from sale of discontinued operations—
—
 789
42,874
Proceeds from principal business dispositions145
4,836
 —
—
Net cash from (payments for) principal businesses purchased(2,643)(206) —
—
All other investing activities(800)(1,054) 4,119
(6,345)
Cash from (used for) investing activities – continuing operations(4,684)2,175
 7,857
37,321
Cash from (used for) investing activities – discontinued operations—
—
 (1,922)(10,646)
Cash from (used for) investing activities(4,684)2,175
 5,935
26,675
      
Cash flows – financing activities     
Net increase (decrease) in borrowings (maturities of 90 days or less)469
601
 332
31
Newly issued debt (maturities longer than 90 days)12,780
5,126
 356
715
Repayments and other debt reductions (maturities longer than 90 days)(1,529)(179) (13,705)(45,288)
Net dispositions (purchases) of GE shares for treasury(2,732)(14,292) —
—
Dividends paid to shareowners(4,184)(4,324) (4,164)(11,184)
All other financing activities(271)(186) (692)(57)
Cash from (used for) financing activities – continuing operations4,533
(13,256) (17,872)(55,783)
Cash from (used for) financing activities – discontinued operations—
—
 1,909
(711)
Cash from (used for) financing activities4,533
(13,256) (15,964)(56,494)
Effect of currency exchange rate changes on cash and equivalents261
(127) 277
103
Increase (decrease) in cash and equivalents3,695
(440) (8,683)(34,124)
Cash and equivalents at beginning of year10,525
10,372
 39,033
80,506
Cash and equivalents at June 3014,220
9,931
 30,351
46,382
Less cash and equivalents of discontinued operations at June 30—
—
 522
4,190
Cash and equivalents of continuing operations at June 30$14,220
$9,931
 $29,829
$42,192
(a)
Represents the adding together of all affiliated companies except GE Capital, which is presented on a one-line basis.

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

Amounts may not add due to rounding.

In the consolidating data on this page, "GE"“GE” means the basis of consolidation as described in Note 1 to the consolidated financial statements; "GE Capital"“GE Capital” means GE Capital Global Holdings, LLC (GECGH) andor its predecessor General Electric Capital Corporation (GECC) and all of their affiliates and associated companies. Separate information is shown for "GE"“GE” and "Financial“Financial Services (GE Capital)."” Transactions between GE and GE Capital have been eliminated from the "Consolidated"“Consolidated” columns and are discussed in Note 17.19.

2016 3Q2017 2Q FORM 10-Q 7369

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

BASIS OF PRESENTATION

The accompanying consolidated financial statements represent the consolidation of General Electric Company (the Company) and all companies that we directly or indirectly control, either through majority ownership or otherwise. See Note 1 to the consolidated financial statements inour Form 8-K filed on June 3, 2016 related to the Annual Report on Form 10-K for the year ended December 31, 20152016 that discusses our consolidation and financial statement presentation. As used in this report on Form 10-Q (Report), "GE"“GE” represents the adding together of all affiliated companies except GE Capital (GE Capital or Financial Services), whose continuing operations are presented on a one-line basis; GE Capital consists of General Capital Global Holdings, LLC (GECGH) and all of its affiliates; and "Consolidated"“Consolidated” represents the adding together of GE and GE Capital with the effects of transactions between the two eliminated. Unless otherwise indicated, we refer to the caption revenues and other income simply as "revenues"“revenues” throughout this Form 10-Q.

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

INTERIM PERIOD PRESENTATION

The consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in our 2015 consolidated financial statements of our Form 8-K filed on June 3, 2016 related to the Annual Report on Form 10-K for the year ended December 31, 2015.2016.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Please refer to Note 1, Basis of Presentation and Summary of Significant Accounting Policies, to the consolidated financial statements of our 20152016 Form 10-K Report for the discussion of our significant accounting policies.

ACCOUNTING CHANGES

On January 1, 2017, we adopted ASU 2015-11, Simplifying the Measurement of Inventory, which was intended to simplify the subsequent measurement of inventory held by an entity not measured using last-in, first-out (LIFO) or retail inventory method. The amendments eliminated the requirement that entities consider the replacement cost of inventory and the net realizable value less a normal profit margin, which was historically used to establish a floor and ceiling for an assessment of market value. The adoption of this standard was immaterial to our financial statements.

On September 30, 2016, we adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which was intended to simplify several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.

We adopted the standard on a prospective basis with the effect of adoption reflected for the interim periods after the year beginning January 1, 2016 as required by the standard. The primary effects of adoption were the recognition of excess tax benefits in our provision for income taxes rather than paid-in capital and the reclassification of cash flows related to excess tax benefits from a financing activity to an operating activity for the periods beginning January 1, 2016. We will continue to estimate the number of awards that are expected to vest in our determination of the related periodic compensation cost.

As a result of the adoption, our provision for income taxes decreased by $41 million and $97 million for the three and nine months ended September 30, 2016, respectively for the excess tax benefits related to share-based payments in its provision for income taxes. Application of the cash flow presentation requirements from January 1, 2016, resulted in an increase toin cash from operating activities and aan offsetting decrease toin cash from financing activities of $59 million and $137 million for the three and nine months ended September 30, 2016, respectively.

2016 3Q FORM 10-Q 74
On January 1, 2016, we adopted ASU 2015-16, SimplifyingAdditionally, as the Accounting for Measurement-Period Adjustments, which eliminated the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. See Note 7 for further discussionadoption of the purchase accounting effectsstandard was reflected as of recent acquisitions.the beginning of 2016, the benefit for income taxes increased $19 million and $56 million for the three and six months ended June 30, 2016, respectively, and cash flow from operating activities increased by $78 million with an offsetting decrease in cash from financing activities for the six months ended June 30, 2016.

On January 1, 2016, we adopted ASU 2015-03,
Simplifying the Presentation of Debt Issuance Costs70, which requires that debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt premiums and discounts. ASU 2015-03 applies retrospectively and does not change the recognition and measurement requirements for debt issuance costs. The adoption of ASU 2015-03 resulted in the reclassification of $674 million of unamortized debt issuance costs related to the Company's borrowings from all other assets to short-term and long-term borrowings within our consolidated balance sheet as of December 31, 2015. 2017 2Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

ACCELERATED SHARE REPURCHASE AGREEMENTS

During 2016, we entered into accelerated share repurchase (ASR) agreements to repurchase shares of GE common stock. Under an ASR agreement, the Company pays a specified amount to a financial institution and receives an initial delivery of shares based on the terms of the agreement. Upon settlement of the agreement, the financial institution delivers additional shares, or the Company returns shares, with the final net number of shares calculated based on the volume-weighted average price of GE common stock over the term of the agreement, less an agreed upon discount. When certain conditions are met, the transaction is accounted for as an equity transaction and the shares are included in treasury stock when received, at which time there is an immediate reduction in the weighted- average number of common shares used in calculating earnings per share. See Note 12 for additional information.
2016 3Q FORM 10-Q 75
NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS

ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE

In the thirdfirst quarter of 2016,2017, we classified aour Industrial Solutions business at Aviationwithin our Energy Connections & Lighting segment with assets of $601$2,120 million and liabilities of $58$546 million, as held for sale. We have adjusted the carrying value of the business to fair value, which resulted in a $145 million after-tax loss (including a $120 million loss on the planned disposal) in the third quarter. We expect to complete athe sale of the business withinby the next twelve months.end of the first quarter of 2018.

On March 30,In the fourth quarter of 2016, we announcedclassified our Water business within our Power segment with assets of $1,696 million and liabilities of $648 million, as held for sale. In March 2017, we signed an agreement with Suez Environnement S.A. (Suez) to sell GE Asset Management (GEAM), GE's asset management arm with assets under managementthe business for $3,415 million. The deal is expected to close in the second half of approximately $100 billion,2017, subject to State Street Corporation. On July 1, 2016, we completed the sale for proceeds of $437 millioncustomary closing conditions and recognized an after-tax gain of $260 million. Net sale proceeds associated with U.S. pension plans will be deposited into the GE Pension Trust, increasing trust assets used to pay GE pension plan benefits. There is a potential to realize up to $48 million in additional proceeds if the management of assets for more pension plans transfers to the buyer.regulatory approval.

On January 15, 2016, we announced the signing of an agreement to sell our Appliances business to Qingdao Haier Co., Ltd. (Haier). On June 6, 2016, we completed the sale for proceeds of $5,568 million (including $773 million from sale of receivables originated in our Appliances business and sold from GE Capital to Haier) and recognized an after-tax gain of approximately $1,850 million in the nine months ended September 30, 2016.
FINANCIAL INFORMATION FOR ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE
(In millions)June 30, 2017
December 31, 2016
   
Assets  
Current receivables(a)$698
$366
Inventories579
211
Property, plant, and equipment – net1,034
632
Goodwill1,258
212
Other intangible assets – net237
123
Contract assets195
125
Other96
76
Assets of businesses held for sale$4,096
$1,745
   
Liabilities  
Accounts payable$394
$190
Progress collections and price adjustments accrued155
141
Other current liabilities264
133
Non-current compensation and benefits219
82
Other162
110
Liabilities of businesses held for sale$1,195
$656


FINANCIAL INFORMATION FOR ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE
    
(In millions)September 30, 2016 December 31, 2015
      
Assets     
Current receivables$10 $79
Inventories 130  583
Property, plant, and equipment – net 81  1,208
Goodwill 28  370
Other intangible assets – net 36  162
Contract assets 313  -
Other 13  416
Assets of businesses held for sale$611 $2,818
      
Liabilities     
Accounts payable(a)$17 $503
Other current liabilities 3  325
Other 8  33
Liabilities of businesses held for sale$28 $861
      
(a)Certain
(a)Included transactions in our Industrialindustrial businesses that were made on an arms-length basis with GE Capital, consisting primarily of GE customer receivables sold to GE Capital services for material procurement.of $280 million and $117 million at June 30, 2017 and December 31, 2016, respectively. These intercompany balances included within our held for sale businesses are reported in the GE and GE Capital columns of our financial statements, but are eliminated in deriving our consolidated financial statements.

2016 3Q FORM 10-Q 76
DISCONTINUED OPERATIONS

Discontinued operations primarily relate to our financial services businesses as a result of the GE Capital Exit Plan and include our Consumer business, most of our CLL business, our Real Estate business andincludes our U.S. mortgage business (WMC). All of these operations were previously reported in the Capital segment. Results of operations, financial position and cash flows for these businesses are separately reported as discontinued operations for all periods presented.

We have entered into Transitional Service Agreements (TSA) with and provided certain indemnifications to buyers of GE Capital'sCapital’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. See Note 18 for further information about indemnifications.

At September 30, 2016, specific indemnifications amounted to $1,556 million, for which we have recognized related liabilities of $171 million. In addition, we provided $92 million of credit support, the majority on behalf of certain customers aligned with signed disposal transactions scheduled to close in 2016, and recognized an insignificant liability at September 30, 2016.
2017 2Q FORM 10-Q 71

FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS
            
 Three months ended September 30 Nine months ended September 30
(In millions) 2016  2015  2016  2015
            
Operations           
Total revenues and other income (loss)$633 $6,483 $2,494 $18,772
            
Earnings (loss) from discontinued operations before income taxes   $6 $2,267 $(154) $(476)
Benefit (provision) for income taxes 278  (650)  460  (208)
Earnings (loss) from discontinued operations, net of taxes$284 $1,617 $306 $(684)
            
Disposal           
Gain (loss) on disposal before income taxes$(50) $(2,616) $(591) $(9,652)
Benefit (provision) for income taxes (339)  1,629  (670)  (916)
Gain (loss) on disposal, net of taxes$(389) $(987) $(1,261) $(10,568)
            
Earnings (loss) from discontinued operations, net of taxes(a)(b)$(105) $629 $(954) $(11,253)
            
FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS
 Three months ended June 30Six months ended June 30
(In millions)2017
2016
2017
2016
     
Operations    
Total revenues and other income (loss)$9
$568
$88
$1,861
     
Earnings (loss) from discontinued operations before income taxes$(216)$(240)$(412)$(160)
Benefit (provision) for income taxes (a)66
170
128
182
Earnings (loss) from discontinued operations, net of taxes$(150)$(70)$(284)$22
     
Disposal    
Gain (loss) on disposal before income taxes$8
$(295)$(19)$(540)
Benefit (provision) for income taxes (a)(3)(177)(81)(331)
Gain (loss) on disposal, net of taxes$4
$(472)$(100)$(871)
     
Earnings (loss) from discontinued operations, net of taxes(b)(c)$(146)$(541)$(385)$(849)
(a)GE Capital's total tax benefit (provision) for discontinued operations and disposals included current tax benefit (provision) of $253 million and $(47) million for the three months ended June 30, 2017 and 2016, respectively, and $(323) million and $(881) million for the six months ended June 30, 2017 and 2016, respectively, including current U.S. Federal tax benefit (provision) of $68 million and $29 million for the three months ended June 30, 2017 and 2016, respectively, and $(519) million and $(471) million for the six months ended June 30, 2017 and June 30, 2016, respectively. The deferred tax benefit (provision) was $(190) million and $40 million for the three months ended June 30, 2017 and 2016, respectively, and $370 million and $732 million for the six months ended June 30, 2017 and June 30, 2016, respectively.
(b)The sum of GE industrialIndustrial earnings (loss) from discontinued operations, net of taxes, and GE Capital earnings (loss) from discontinued operations, net of taxes, after adjusting for earnings (loss) attributable to noncontrolling interests related to discontinued operations, is reported within GE industrial earnings (loss) from discontinued operations, net of taxes, onin the GE Industrial column of the Consolidated Statement of Earnings (Loss).
(b)
(c)Earnings (loss) from discontinued operations attributable to the Company, before income taxes, was $(43)$(215) million and $(438)$(537) million for the three months ended SeptemberJune 30, 20162017 and 2015,2016, respectively, and $(746)$(438) million and $(10,398)$(703) million for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively.


(In millions)September 30, 2016 December 31, 2015
      
Assets   
Cash and equivalents$2,915 $20,395
Investment securities 5,096  8,478
Financing receivables – net 1,344  3,205
Other receivables 949  1,221
Property, plant and equipment – net 598  7,537
Goodwill 391  7,764
Other intangible assets - net 35  80
Deferred income taxes 1,746  2,447
Financing receivables held for sale 16,666  69,847
Valuation allowance on disposal group classified as discontinued operations (1,859)  (6,374)
Other 3,050  6,350
Assets of discontinued operations$30,930 $120,951
      
Liabilities     
Short-term borrowings$201 $739
Accounts payable 664  2,870
Non-recourse borrowings 877  3,994
Bank deposits 4,153  25,613
Long-term borrowings 583  730
All other liabilities 2,580  11,053
Deferred income taxes 675  1,437
Other 49  52
Liabilities of discontinued operations$9,782 $46,487
2016 3Q FORM 10-Q 77
CONSUMER
(In millions)June 30, 2017
December 31, 2016
   
Assets  
Cash and equivalents$522
$1,429
Investment securities1,729
2,626
Deferred income taxes950
487
Financing receivables held for sale3,711
8,547
Other assets938
1,727
Assets of discontinued operations$7,850
$14,815
   
Liabilities  
Accounts payable87
164
Borrowings—
2,076
Other liabilities825
1,918
Liabilities of discontinued operations$911
$4,158

In connection with the GE Capital Exit Plan, we announced the planned disposition of our Consumer business and classified the business as discontinued operations. We closed a vast majority of our Consumer business dispositions (including the split-off of Synchrony Financial) in 2015 and 2016.
72 2017 2Q FORM 10-Q

FINANCIAL INFORMATION FOR CONSUMER         
            
 Three months ended September 30 Nine months ended September 30
(In millions) 2016  2015  2016  2015
            
Operations           
Total revenues and other income (loss)$271 $3,652 $957 $9,237
            
Interest$(42) $(564) $(139) $(1,748)
Selling, general, and administrative expenses (245)  (1,045)  (580)  (3,216)
Cost of services sold -  -  -  -
Provision for losses on financing receivables 1  (727)  1  (4,596)
Investment contracts, insurance losses and insurance annuity benefits (1)  (3)  (2)  (10)
Other costs and expenses (25)  (105)  (89)  (345)
Earnings (loss) from discontinued operations, before income taxes    (39)  1,207  149  (679)
Benefit (provision) for income taxes (26)  (231)  (127)  (238)
Earnings (loss) from discontinued operations, net of taxes$(65) $976 $22 $(917)
            
Disposal           
Gain (loss) on disposal before income taxes$(29) $- $124 $-
Benefit (provision) for income taxes (360)  -  (599)  -
Gain (loss) on disposal, net of taxes$(389) $- $(475) $-
            
Earnings (loss) from discontinued operations, net of taxes(a)$(454) $976 $(453) $(917)
            
(a)
Earnings (loss) from discontinued operations attributable to the Company, before income taxes, was $(67) million and $1,119 million for the three months ended September 30, 2016 and 2015, respectively, and $273 million and $(943) million for the nine months ended September 30, 2016 and 2015, respectively.
FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS


COMMERCIAL LENDING AND LEASING

In connection with the GE Capital Exit Plan, we announced the planned disposition of most of our CLL business and classified this portion of the business as discontinued operations. We closed a vast majority of our CLL business dispositions in 2015 and 2016.

FINANCIAL INFORMATION FOR COMMERCIAL LENDING AND LEASING
            
 Three months ended September 30 Nine months ended September 30
(In millions) 2016  2015  2016  2015
            
Operations           
Total revenues and other income (loss)$334 $2,691 $1,535 $8,664
            
Interest$(74) $(576) $(476) $(1,919)
Selling, general and administrative expenses (176)  (893)  (1,222)  (2,834)
Cost of services sold -  -  -  (1,735)
Provision for losses on financing receivables -  13  (2)  (1,744)
Other costs and expenses (11)  (7)  (25)  (104)
Earnings (loss) from discontinued operations, before income taxes    74  1,228  (191)  328
Benefit (provision) for income taxes 40  (484)  254  (169)
Earnings (loss) from discontinued operations, net of taxes$114 $744 $63 $159
            
Disposal           
Gain (loss) on disposal before income taxes$(22) $(2,834) $(652) $(8,059)
Benefit (provision) for income taxes 21  1,629  (133)  (298)
Gain (loss) on disposal, net of taxes$(1) $(1,205) $(785) $(8,357)
            
Earnings (loss) from discontinued operations, net of taxes(a)$113 $(461) $(722) $(8,198)
            
(a)Earnings (loss) from discontinued operations attributable to the Company, before income taxes, was $52 million and $(1,608) million for the three months ended September 30, 2016 and 2015, respectively, and $(846) million and $(7,736) million for the nine months ended September 30, 2016 and 2015, respectively.

2016 3Q FORM 10-Q 78
REAL ESTATE

In connection with the GE Capital Exit Plan, we announced the planned disposition of our Real Estate business and classified the business as discontinued operations. We closed substantially all of our Real Estate business dispositions in 2015 and 2016.

FINANCIAL INFORMATION FOR REAL ESTATE         
            
 Three months ended September 30 Nine months ended September 30
(In millions) 2016  2015  2016  2015
            
Operations           
Total revenues and other income (loss)$21 $81 $47 $893
            
Interest$(4) $(64) $(40) $(437)
Selling, general and administrative (20)  (149)  (98)  (373)
Cost of services sold -  -  -  (5)
Provision for losses on financing receivables -  -  -  4
Other costs and expenses (1)  (7)  (7)  (147)
Earnings (loss) from discontinued operations, before income taxes  (5)  (139)  (98)  (65)
Benefit (provision) for income taxes 30  53  88  95
Earnings (loss) from discontinued operations, net of taxes$25 $(86) $(10) $30
            
Disposal           
Gain (loss) on disposal before income taxes$1 $218 $(62) $(1,593)
Benefit (provision) for income taxes -  -  62  (618)
Gain (loss) on disposal, net of taxes$1 $218 $- $(2,211)
            
Earnings (loss) from discontinued operations, net of taxes(a)$26 $132 $(10) $(2,181)
            
(a)Earnings (loss) from discontinued operations attributable to the Company, before income taxes, was $(4) million and $81 million for the three months ended September 30, 2016 and 2015, respectively, and $(160) million and $(1,658) million for the nine months ended September 30, 2016 and 2015, respectively.


WMC

During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In connection with the sale, WMC retained certain representation and warranty obligations related to loans sold to third parties prior to the disposal of the business and contractual obligations to repurchase previously sold loans that had an early payment default. All claims received by WMC for early payment default have either been resolved or are no longer being pursued.
The remaining active claims have been brought by securitization trustees or administrators seeking recovery from WMC for alleged breaches of representations and warranties on mortgage loans that serve as collateral for residential mortgage-backed securities (RMBS). At September 30, 2016, such claims consisted of $1,266 million of individual claims generally submitted before the filing of a lawsuit (compared to $2,887 million at December 31, 2015) and $5,628 million of additional claims asserted against WMC in litigation without making a prior claim (Litigation Claims) (compared to $8,047 million at December 31, 2015). The total amount of these claims, $6,894 million, reflects the purchase price or unpaid principal balances of the loans at the time of purchase and does not give effect to pay downs or potential recoveries based upon the underlying collateral, which in many cases are substantial, nor to accrued interest or fees. As of September 30, 2016, these amounts do not include approximately $110 million of repurchase claims relating to alleged breaches of representations that are not in litigation and that are beyond the applicable statute of limitations. WMC believes that repurchase claims brought based upon representations and warranties made more than six years before WMC was notified of the claim would be disallowed in legal proceedings under applicable law and the June 11, 2015 decision of the New York Court of Appeals in ACE Securities Corp. v. DB Structured Products, Inc., on the statute of limitations period governing such claims.

2016 3Q FORM 10-Q 79

Reserves related to repurchase claims made against WMC were $665 million at September 30, 2016, reflecting a net decrease to reserves in the three months ended September 30, 2016 of $195 million due to settlements during the quarter. The reserve estimate takes into account recent settlement activity and is based upon WMC's evaluation of the remaining exposures as a percentage of estimated lifetime mortgage loan losses within the pool of loans supporting each securitization for which timely claims have been asserted in litigation against WMC. Settlements in prior periods reduced WMC's exposure on claims asserted in certain securitizations and the claim amounts reported above give effect to these settlements.

ROLLFORWARD OF THE RESERVE           
            
 Three months ended September 30 Nine months ended September 30
(In millions) 2016  2015  2016  2015
            
Balance, beginning of period$860 $825 $875 $809
Provision -  28  84  46
Claim resolutions / rescissions (195)  (21)  (294)  (23)
Balance, end of period$665 $832 $665 $832
            
Given the significant litigation activity and WMC's continuing efforts to resolve the lawsuits involving claims made against WMC, it is difficult to assess whether future losses will be consistent with WMC's past experience. Adverse changes to WMC's assumptions supporting the reserve may result in an increase to these reserves. WMC estimates a range of reasonably possible loss from $0 to approximately $500 million over its recorded reserve at September 30, 2016. This estimate involves significant judgment and may not reflect the range of uncertainties and unpredictable outcomes inherent in litigation, including the matters discussed in Legal Proceedings and potential changes in WMC's legal strategy. This estimate excludes any possible loss associated with an adverse court decision on the applicable statute of limitations or an adverse outcome in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) investigation discussed in Legal Proceedings, as WMC is unable at this time to develop such a meaningful estimate.

At September 30, 2016, there were 10 lawsuits involving claims made against WMC arising from alleged breaches of representations and warranties on mortgage loans included in 11 securitizations. The adverse parties in these cases are securitization trustees or parties claiming to act on their behalf. Although 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 of defective mortgage loan) and/or money damages. Adverse court decisions, including in cases not involving WMC, could result in new claims and lawsuits on additional loans. However, WMC continues to believe that it has defenses to the claims asserted in litigation, including, for example, based on causation and materiality requirements and applicable statutes of limitations. It is not possible to predict the outcome or impact of these defenses and other factors, any of which could materially affect the amount of any loss ultimately incurred by WMC on these claims.

WMC has also received indemnification demands, nearly all of which are unspecified, from depositors/underwriters/sponsors of RMBS in connection with lawsuits brought by RMBS investors concerning alleged misrepresentations in the securitization offering documents to which WMC is not a party or, in two cases, involving mortgage loan repurchase claims made against RMBS sponsors. WMC believes that it has defenses to these demands.

To the extent WMC is required to repurchase loans, WMC's loss also would be affected by several factors, including pay downs, accrued interest and fees, and the value of the underlying collateral. The reserve and estimate of possible loss reflect judgment, based on currently available information, and a number of assumptions, including economic conditions, claim and settlement activity, pending and threatened litigation, court decisions regarding WMC's legal defenses, indemnification demands, government activity, and other variables in the mortgage industry. Actual losses arising from claims against WMC could exceed these amounts and additional claims and lawsuits could result if actual claim rates, governmental actions, litigation and indemnification activity, adverse court decisions, actual settlement rates or losses WMC incurs on repurchased loans differ from its assumptions.

FINANCIAL INFORMATION FOR WMC         
            
  Three months ended September 30  Nine months ended September 30
(In millions) 2016  2015  2016  2015
            
Total revenues and other income (loss)$19 $(22) $(38) $(26)
            
Earnings (loss) from discontinued operations, net of taxes$(8) $(21) $(60) $(37)
2016 3Q FORM 10-Q 80
NOTE 3. INVESTMENT SECURITIES

Substantially all of our investment securities are classified as available-for-sale. Theseavailable-for-sale and comprise mainly investment-grade debt securities supporting obligations to annuitants and policyholders in our run-off insurance operations. We do not have any securities classified as held-to-maturity.

 September 30, 2016 December 31, 2015
   Gross Gross     Gross Gross  
 Amortized unrealized unrealized Estimated Amortized unrealized unrealized Estimated
(In millions)cost gains losses fair value cost gains losses fair value
                        
GE                       
Debt                       
    U.S. corporate$2 $- $- $2 $2 $- $- $3
    Corporate – non-U.S. -  -  -  -  1  -  -  1
    U.S. government and federal                       
       agency 49  1  -  50  49  -  -  49
Equity 156  53  (5)  204  87  13  (2)  98
  208  54  (5)  257  139  14  (2)  151
                        
GE Capital                       
Debt                       
    U.S. corporate 20,865  4,264  (32)  25,097  19,971  2,669  (285)  22,355
    State and municipal 3,907  693  (44)  4,556  3,910  407  (73)  4,245
    Mortgage and asset-backed 2,798  184  (17)  2,966  2,995  157  (35)  3,116
    Corporate – non-U.S. 11,769  114  (10)  11,873  759  96  (9)  846
    Government – non-U.S. 592  161  (1)  752  279  136  -  415
    U.S. government and federal                       
       agency 656  91  -  747  623  104  -  727
Equity 105  20  -  125  112  16  (4)  123
  40,693  5,526  (103)  46,116  28,648  3,585  (407)  31,827
                        
Eliminations (4)  -  -  (4)  (4)  -  -  (4)
Total$40,897 $5,580 $(108) $46,369 $28,783 $3,599 $(409) $31,973
                        

Our corporate debt portfolio comprises securities issued by public and private corporations in various industries, mainly in the U.S. Substantially all of our corporate debt securities are rated investment grade by the major rating agencies.

Mortgage and asset-backed securities substantially comprises commercial and residential mortgage-backed securities.  Substantially all of these securities have investment-grade credit ratings. Our commercial mortgage-backed securities (CMBS) portfolio is collateralized by both diversified pools of mortgages that were originated for securitization (conduit CMBS) and pools of large loans backed by high-quality properties (large loan CMBS).  Our residential mortgage-backed securities (RMBS) portfolio is collateralized primarily by pools of individual, direct mortgage loans, of which substantially all are in a senior position in the capital structure of the deals, not other structured products such as collateralized debt obligations. Of the total RMBS held at September 30, 2016, $52 million was related to residential subprime credit securities, primarily supporting obligations to annuitants and policyholders in our run-off insurance operations. All of the subprime exposure is related to securities backed by mortgage loans originated in 2005 and prior and are investment grade.

 June 30, 2017 December 31, 2016
(In millions)
Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair value (a)

 Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Estimated
fair value (a)

          
Debt         
    U.S. corporate$20,129
$3,550
$(50)$23,629
 $20,049
$3,081
$(85)$23,046
    Non-U.S. corporate7,106
95
(19)7,182
 11,917
98
(27)11,987
    State and municipal3,934
504
(67)4,371
 3,916
412
(92)4,236
    Mortgage and asset-backed2,738
103
(20)2,821
 2,787
111
(37)2,861
    Government and agencies1,664
99
(2)1,761
 1,842
160
(26)1,976
Equity (b)171
34
(2)204
 154
55
(1)208
Total$35,743
$4,384
$(159)$39,968
 $40,665
$3,917
$(269)$44,313

The fair value
(a)
Includes $162 million and $137 million of investment securities increased to $46,369 million at September 30, 2016, from $31,973 million at December 31, 2015, primarily due to higher net purchases of Corporate – non-U.S. debt securities and higher net unrealized gains in U.S. Corporate and State and Municipal debt securities resulting from lower interest rates.


2016 3Q FORM 10-Q 81
ESTIMATED FAIR VALUE AND GROSS UNREALIZED LOSSES OF AVAILABLE-FOR-SALE INVESTMENT SECURITIES 
             
 In loss position for 
 Less than 12 months 12 months or more 
   Gross   Gross 
 Estimated unrealized Estimated unrealized 
(In millions)fair value(a) losses(a)(b) fair value losses(b) 
             
September 30, 2016            
Debt            
   U.S. corporate$148 $(2) $387 $(30) 
   State and municipal 31  (1)  157  (43) 
   Mortgage and asset-backed 167  (2)  112  (14) 
   Corporate – non-U.S. 4,088  (7)  31  (3) 
   Government - non-U.S. 256  (1)  -  - 
Equity 11  (5)  -  - 
Total$4,701 $(19) $686 $(90)(c)
             
December 31, 2015            
Debt            
   U.S. corporate$2,966 $(218) $433 $(67) 
   State and municipal 494  (20)  155  (53) 
   Mortgage and asset-backed 719  (20)  84  (16) 
   Corporate – non-U.S. 56  (4)  14  (4) 
Equity 36  (6)  -  - 
Total$4,273 $(269) $686 $(140) 
             
(a)Includes the estimated fair value of and gross unrealized losses on equity securities held by GE. At SeptemberGE at June 30, 2017 and December 31, 2016, the estimatedrespectively, of which $107 million and $86 million are equity securities.
(b)
Estimated fair valuevalues include $75 million and $17 million of trading securities at June 30, 2017 and grossDecember 31, 2016, respectively.  Net unrealized losses on equitygains (losses) recorded to earnings related to these securities were $11$29 million and $(5) million, respectively. At December 31, 2015,an insignificant amount for the estimated fair value ofthree months ended and gross unrealized losses on equity securities were $6$29 million and $(2) million for the six months ended June 30, 2017 and 2016, respectively.

(b)Included gross unrealized losses of $1 million related to securities that had other-than-temporary impairments previously recognized at September 30, 2016.
Investments with a fair value of $4,206 million and $4,406 million were classified within Level 3 (significant inputs to the valuation model are unobservable) at June 30, 2017 and December 31, 2016, respectively. The remaining investments are substantially all classified within Level 2 (determined based on significant observable inputs). During the six months ended June 30, 2017 and 2016, there were no significant transfers into or out of Level 3.
(c)Includes debt securities held to support obligations to holders of Guaranteed Investment Contracts (GICs) of which the majority are considered to be investment-grade by the major rating agencies at September 30, 2016.
ESTIMATED FAIR VALUE AND GROSS UNREALIZED LOSSES OF AVAILABLE-FOR-SALE INVESTMENT SECURITIES
 In loss position for
 Less than 12 months 12 months or more
(In millions)
Estimated
fair value

Gross
unrealized
losses

 Estimated
fair value
Gross
unrealized
losses
      
June 30, 2017     
Debt     
   U.S. corporate$957
$(39) $233
$(11)
 Non-U.S. corporate5,102
(15) 12
(4)
   State and municipal210
(15) 156
(52)
   Mortgage and asset-backed856
(18) 42
(2)
Government and agencies437
(2) —
—
Equity9
(2) —
—
Total$7,571
$(90) $443
$(69)
      
December 31, 2016     
Debt     
   U.S. corporate$1,692
$(55) $359
$(30)
   Non-U.S. corporate5,352
(26) 14
(1)
   State and municipal674
(27) 158
(64)
Mortgage and asset-backed822
(21) 132
(16)
Government and agencies549
(26) —
—
Equity9
(1) —
—
Total$9,098
$(157) $663
$(111)


Unrealized losses are not indicative of the amount of credit loss that would be recognized and at SeptemberJune 30, 20162017 are primarily due to increases in market yields subsequent to our purchase of the securities. We presently do not intend to sell the vast majority of our debt securities that are in an unrealized loss position and believe that it is not more likely than not that we will be required to sell the vast majority of these securities before anticipated recovery of our amortized cost. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during 20162017 have not changed.

PRE-TAX, OTHER-THAN-TEMPORARY IMPAIRMENTS ON INVESTMENT SECURITIES
            
 Three months ended September 30 Nine months ended September 30
(In millions)2016 2015 2016 2015
            
Total pre-tax, OTTI recognized$11 $3 $28 $35
Pre-tax, OTTI recognized in AOCI -  -  -  -
Pre-tax, OTTI recognized in earnings(a)$11 $3 $28 $35
            
2017 2Q FORM 10-Q 73

(a)
Included pre-tax, other-than-temporary impairments recorded in earnings related to equity securities of an immaterial amount and $1 million in the three months ended September 30, 2016 and 2015, respectively and $9 million and $1 million in the nine months ended September 30, 2016 and 2015, respectively.
FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total pre-tax, other-than-temporary impairments on investment securities recognized in earnings were an insignificant amount and $18 million for the six months ended June 30, 2017 and 2016, respectively.

2016 3Q FORM 10-Q 82
CONTRACTUAL MATURITIES OF INVESTMENT IN AVAILABLE-FOR-SALE DEBT SECURITIES
(EXCLUDING MORTGAGE AND ASSET-BACKED SECURITIES)
   
(In millions)
Amortized
cost

Estimated
fair value

   
Due  
Within one year$5,902
$5,900
After one year through five years4,255
4,449
After five years through ten years5,209
5,704
After ten years17,468
20,890

CONTRACTUAL MATURITIES OF INVESTMENT IN AVAILABLE-FOR-SALE DEBT SECURITIES
(EXCLUDING MORTGAGE AND ASSET-BACKED SECURITIES)
      
 Amortized Estimated
(In millions)cost fair value
      
Due     
  Within one year$11,653 $11,656
  After one year through five years 3,984  4,247
  After five years through ten years 4,605  5,168
  After ten years 17,600  22,007
      
We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.

GROSS REALIZED GAINS AND LOSSES ON AVAILABLE-FOR-SALE INVESTMENT SECURITIES
            
 Three months ended September 30 Nine months ended September 30
(In millions)2016 2015 2016 2015
            
GE           
Gains$4 $3 $10 $4
Losses, including impairments -  -  (10)  (14)
Net 4  3  -  (10)
            
GE Capital           
Gains 3  20  39  117
Losses, including impairments (12)  (5)  (43)  (40)
Net (10)  15  (3)  77
Total$(5) $18 $(4) $67
            
Although we generally do not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing our investment securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements and the funding of claims and obligations to policyholders.Gross realized gains on available-for-sale investment securities were $37 million and $36 million, and gross realized losses were $(2) million and $(11) million in the three months ended June 30, 2017 and 2016, respectively. Gross realized gains on available-for-sale investment securities were $143 million and $42 million, and gross realized losses were $(4) million and $(40) million in the six months ended June 30, 2017 and 2016, respectively.

Proceeds from investment securities sales and early redemptions by issuers totaled $416$701 million and $2,356$624 million in the three months ended SeptemberJune 30, 2017 and 2016, and 2015, respectively principallyprimarily from sales of U.S. government and federal agencyCorporate and Mortgage and asset-backed securities by Trinity and our run-off insurance operations.

Proceeds from investment securities sales and early redemptions by issuers totaled $1,283$1,774 million and $4,953$868 million in the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015, respectively principallyprimarily from sales of Government and agencies and U.S. government and federal agency and Mortgage and asset-backed securities by Trinity and our run-off insurance operations.corporate securities.

2016 3Q FORM 10-Q 83
NOTE 4. INVENTORIES
    
(In millions)September 30, 2016 December 31, 2015
      
Raw materials and work in process$13,917 $13,415
Finished goods 9,387  8,265
Unbilled shipments 500  628
  23,804  22,308
Revaluation to LIFO 312  207
Total inventories$24,116 $22,515



NOTE 4.CURRENT RECEIVABLES
 Consolidated(a)(b) GE(c)
(In millions)June 30, 2017
December 31, 2016
 June 30, 2017
December 31, 2016
      
Current receivables$22,407
$24,935
 $12,647
$13,562
Allowance for losses(960)(858) (949)(847)
Total$21,447
$24,076
 $11,697
$12,715
(a)Included GE industrial customer receivables sold to a GE Capital affiliate and recorded on GE Capital’s balance sheet of $10,599 million and $12,304 million at June 30, 2017 and December 31, 2016, respectively. The consolidated total included a deferred purchase price receivable of $374 million and $483 million at June 30, 2017 and December 31, 2016, respectively, related to our Receivables Facility.
(b)In order to manage the credit exposure, the Company sells additional current receivables to third parties outside the Receivables Facility, substantially all of which are serviced by the Company. The outstanding balance of these current receivables was $2,532 million and $3,821 million at June 30, 2017 and December 31, 2016, respectively. Of these balances, $1,187 million and $2,504 million was sold by GE to GE Capital prior to the sale to third parties at June 30, 2017 and December 31, 2016, respectively. At June 30, 2017 and December 31, 2016, our maximum exposure to loss under the limited recourse arrangements is $143 million and $215 million, respectively.
(c)GE current receivables balances at June 30, 2017 and December 31, 2016, before allowance for losses, included $7,955 million and $8,927 million, respectively, from sales of goods and services to customers. The remainder of the balances primarily relates to supplier advances, revenue sharing programs and other non-income based tax receivables.

RECEIVABLES FACILITY

The Company has a $3,000 million revolving Receivables Facility under which receivables are sold directly to third-party purchasers. The third-party purchasers have no recourse to other assets of the Company in the event of non-payment by the debtors. Where the purchasing entity is a bank multi-seller commercial paper conduit, assets transferred by other parties to that entity form a majority of the entity’s assets. Upon sale of the receivables, we receive proceeds of cash and a deferred purchase price (DPP). The DPP is an interest in specified assets of the purchasers (the receivables sold by GE Capital) that entitles GE Capital to the residual cash flows of those specified assets.


74 2017 2Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the six months ended June 30, 2017, GE Industrial sold current receivables of $9,667 million to GE Capital, which GE Capital sold immediately to third parties under the Receivables Facility. GE Capital continues to service the current receivables for the purchasers. The Company received total cash collections of $9,309 million on previously sold current receivables owed to the purchasing entities. The purchasing entities reinvested $8,036 million of those collections to purchase newly originated current receivables from the Company and paid $297 million to reduce their DPP obligation to the Company.

During the six months ended June 30, 2017, GE Industrial recognized a loss of $64 million resulting from time value discount on the sale of these receivables to GE Capital. GE Capital recovered substantially all of this loss on the sale of the receivables to third party purchasers.

At June 30, 2017, GE Capital, under the Receivables Facility, serviced $2,933 million of transferred receivables that remain outstanding.

Given the short-term nature of the underlying receivables, discount rates and prepayments are not factors in determining the value of the DPP. Collections on the DPP are presented within Cash flows from operating activities in the consolidated column in the Statement of Cash Flows. As the performance of the transferred current receivables is similar to the performance of our other current receivables, delinquencies are not expected to be significant.


NOTE 5. INVENTORIES
(In millions)June 30, 2017
December 31, 2016



Raw materials and work in process$12,830
$12,636
Finished goods9,110
8,798
Unbilled shipments427
536

22,367
21,971
Revaluation to LIFO476
383
Total inventories$22,843
$22,354


NOTE 6. GE CAPITAL FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES

FINANCING RECEIVABLES, NET
      
(In millions)September 30, 2016 December 31, 2015
      
Loans, net of deferred income$20,090 $20,115
Investment in financing leases, net of deferred income 4,963  4,969
  25,054  25,084
Allowance for losses (65)  (81)
Financing receivables – net(a)$24,989 $25,003
      
(a)Included $12,942 million and $12,892 million of receivables sold by GE to GE Capital at September 30, 2016 and December 31, 2015, respectively.
FINANCING RECEIVABLES, NET
(In millions)June 30, 2017
December 31, 2016
   
Loans, net of deferred income$19,790
$21,101
Investment in financing leases, net of deferred income4,973
4,998
 24,764
26,099
Allowance for losses(68)(58)
Financing receivables – net$24,696
$26,041


ALLOWANCE FOR LOSSES
      
(In millions) 2016  2015
      
Balance at January 1$81 $93
Provision 12  40
Net write-offs (28)  (48)
Other(a) -  -
Balance at September 30$65 $85
      
(a)            Other primarily includes the effects of currency exchange.


We manage our financing receivablereceivables portfolio using delinquency and nonaccrual data as key performance indicators. At SeptemberJune 30, 2016, $1,0612017, $752 million (4.2%(3.0%), $540$351 million (2.2%(1.4%) and $345$425 million (1.4%(1.7%) of financing receivables were over 30 days past due, over 90 days past due and on nonaccrual, respectively. Of the $345$425 million of nonaccrual financing receivables at SeptemberJune 30, 2016, primarily related to aviation financing, $902017, the vast majority are secured by collateral and $290 million are currently paying in accordance with the contractual terms. At December 31, 2015, $6222016, $811 million (2.5%(3.1%), $201$407 million (0.8%(1.6%) and $256$322 million (1.0%(1.2%) of financing receivables were over 30 days past due, over 90 days past due and on nonaccrual, respectively.

The recorded investment in impaired loans at SeptemberJune 30, 20162017 and December 31, 20152016 was $270$387 million and $175$262 million, respectively, and was primarily related to aviation financing.respectively. The method used to measure impairment for these loans is primarily based on collateral value. At SeptemberJune 30, 2016,2017, troubled debt restructurings included in impaired loans were $182 million, the vast majority related to aviation financing.$150 million.



2016 3Q2017 2Q FORM 10-Q 8475

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6.7. PROPERTY, PLANT AND EQUIPMENT

(In millions)September 30, 2016 December 31, 2015
      
Original cost$87,575 $90,023
Less accumulated depreciation and amortization (36,122)  (35,928)
Property, plant and equipment – net$51,453 $54,095
      
(In millions)June 30, 2017
December 31, 2016
   
Original cost$86,320
$85,875
Less accumulated depreciation and amortization(36,153)(35,356)
Property, plant and equipment – net$50,167
$50,518

Consolidated depreciation and amortization on property, plant and equipment was $1,136$1,125 million and $1,265$1,294 million in the three months ended SeptemberJune 30, 20162017 and 2015,2016, respectively and $3,641$2,318 million and $3,554$2,505 million million in the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively.



NOTE 7.8. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

ACQUISITIONS

On October 31,11, 2016, we announced an agreement with Baker Hughes Incorporated (Baker Hughes)a plan to combine GE's Oil & Gas business and Baker Hughes to create a new company.acquire LM Wind Power, the Danish maker of rotor blades for approximately $1,700 million. The transaction closed on April 20, 2017. The preliminary purchase price allocation resulted in goodwill of approximately $1,200 million and amortizable intangible assets of approximately $200 million. The allocation of the purchase price will be executed using a partnership structure, pursuant to which GE Oil & Gas and Baker Hughes will each contribute their operating assets to a newly formed partnership. GE will have a 62.5% interest in this partnership and existing Baker Hughes shareholders will have a 37.5% interest through a newly NYSE listed corporation. Baker Hughes shareholders will also receive a special one-time cash dividendfinalized upon completion of $17.50 per share at closing. GE will contribute $7.4 billon to the new partnership to fund the cash dividend to existing Baker Hughes shareholders. The transaction is subject to the approval of Baker Hughes shareholders, regulatory approvals and other customary closing conditions.post-closing procedures.

On September 14, 2016,In the first quarter of 2017, we acquired the remaining 74%96% of the software developer Meridium Inc.ServiceMax, a leader in cloud-based field service management solutions, for $866 million, net of cash proceedsacquired of $370$91 million. Upon gaining control, we fair valued the business including our previously held 26%4% equity interest. The preliminary purchase price allocation resulted in goodwill of approximately $350$670 million and amortizable intangible assets of approximately $165$280 million. The allocation of the purchase price will be finalized upon completion of post-closing procedures.

On May 10, 2016, we announced the pending acquisition of the heat recovery steam generator ("HRSG")(HRSG) business from Doosan Engineering & Construction ("Doosan")(Doosan) for $250 million. On August 16, 2016, we acquiredclosed on 80% of the HRSG business for proceeds of approximately $220 million. On May 23, 2017, we closed an additional 15% of the remaining HRSG business for approximately $35 million. The remaining 20%5% of the HRSG business continues to be subject to local regulatory requirements and we expect a staggered close beginning in the fourth quarter of 2016 through the first half of 2017.requirements. The preliminary purchase price allocation resulted in goodwill of approximately $170 million and amortizable intangible assets of approximately $35 million. The allocation of the purchase price will be finalized upon completion of post-closing procedures.

BAKER HUGHES

On November 2, 2015, we acquiredJuly 3, 2017, GE completed the Thermal, Renewables and Grid businesses from Alstom. The purchase price was €9,200 million ($10,124 million), netpreviously announced combination of cash acquired of approximately €1,600 million ($1,765 million)GE’s Oil & Gas business (GE Oil & Gas) with Baker Hughes Incorporated (Baker Hughes). In order to obtain approval by the European Commission and the Department of Justice, GE pledged to sell certain of Alstom's gas-turbine assets and its Power Systems Manufacturing subsidiary to Ansaldo Energia SpA (Ansaldo) after the closeAs part of the transaction, for approximately €120 million. The purchase price will be paid by Ansaldo over a period of five years. The transaction closed on February 25, 2016.

We formed three consolidated joint ventures with Alstom in grid technology, renewable energy, and global nuclear and French steam power. In addition, GE contributed its Digital Energy business toGE Oil & Gas and $7,400 million in cash in exchange for 62.5% of the grid technology joint venture.

Alstom holds redemption rights with respect to itsownership interest in the grid technology and renewable energy joint ventures, which, if exercised, would require us to purchase all of their interest during September 2018 or September 2019. Alstom also holds similar redemption rights for the global nuclear and French steam power joint venture that are exercisable during the first full calendar quarter immediately following the fifth or sixth anniversarynew combined company. The operating assets of the acquisition date. The redemption price would generally be equal to Alstom's initial investment plus annual accretion of 3% for the grid technology and renewable energy joint ventures and plus annual accretion of 2% for the nuclear and French steam power joint venture, with potential upside sharing based on an EBITDA multiple. Alstom also holds additional redemption rights in other limited circumstances as well asnew combined company are held through a call option to requirepartnership named Baker Hughes, a GE to sell all of its interests in the renewable energy joint venture at the higher of fair value or Alstom's initial investment plus annual accretion of 3% during the month of May in the years 2016 through 2019 and also upon a decision to IPO the joint venture.

2016 3Q FORM 10-Q 85
company, LLC (BHGE LLC). GE holds a call option on Alstom's62.5% economic interest in this partnership, and Baker Hughes’ former shareholders hold a 37.5% interest through a newly NYSE listed corporation, Baker Hughes, a GE company (BHGE), which controls the global nuclear and French steam power joint venture at the same amount as Alstom's redemption price in the event that Alstom exercises its put option in the grid technology or renewable energy joint ventures.partnership. In turn, GE also has call options on Alstom'sholds a controlling, 62.5% voting interest in BHGE through Class B Common Stock in BHGE, which grants voting rights but no economic rights. Baker Hughes’ former shareholders received one share of BHGE Class A Common Stock and a special one-time cash dividend of $17.50 per share at closing. Total consideration was $24,778 million, including the three joint ventures in other limited circumstances. In addition, the French Government holds a preferred interest in the global nuclear and French steam power joint venture, giving it certain protective rights.$7,400 million cash contribution.

The Baker Hughes transaction will be accounted for as a business combination, using the acquisition method. The net assets of Baker Hughes’ contributed businesses will be recorded at their estimated fair value, and alliances with Alstom will have a significant effect on our Power, Energy Connections and Renewable Energy segments, and to a lesser extent ourGE Oil & Gas segment. The financial impact of acquired businesses on individual segments will be affected by a number of variables, including operating performance, purchase accounting effects and realized synergies. In addition, due tocontinue at its historical or carryover basis. We will record noncontrolling interest for the amount of time that elapsed between signing and closing,37.5% interest in the commercial operationscombined company of the businesses were negatively affected primarily as a resultholders of uncertainty among Alstom customers regarding the execution of the transaction. This affected the overall valuation of the acquired businesses at the time of close and, accordingly, is reflected among the initial and adjusted amounts assigned to the assets and liabilities recorded in purchase accounting.

ALSTOM ACQUISITION ACCOUNTING UPDATE

The total consideration for the acquired businesses, at the time of close included our purchase price of $10,124 million (net of cash acquired) and a preliminary valuation of noncontrolling interests, of approximately $3,600 million for a total of approximately $13,700 million. In the fourth quarter of 2015, the preliminary allocation of purchase price resulted in goodwill, intangible assets and unfavorable customer contract liabilities of approximately $13,500 million, $5,200 million, and $1,100 million respectively. The amount of goodwill recognized compared with identifiable intangible assets is affected by estimated GE-specific synergies, which are not permitted to be included in the measurement of identifiable intangibles. Such synergies include additional revenue from cross-selling complementary product lines. The preliminary fair value of the associated noncontrolling interests consisted of approximately $2,900 million for Alstom's redeemable noncontrolling interests in the three joint ventures (presented separately from total equity in the consolidated balance sheet) and $700 million for all other noncontrolling interests.

Through the third quarter of 2016, we adjusted the preliminary allocation of purchase price, which has now resulted in goodwill, intangible assets, and unfavorable customer contract liabilities, of approximately $17,200 million, $4,400 million, and $2,350 million respectively as of the acquisitions date. These adjustments, which are necessary to reflect acquired assets and liabilities of the acquired businessesBHGE’s Class A Common Stock at fair value reflected revisions in estimates infor the first, secondportion attributable to the net assets we acquired, and third quarters of 2016, primarily relatedat our historical cost for the portion attributable to cash flow and other valuation assumptions for customer contracts, increasesGE Oil & Gas.

Due to legal reserves, and other fair value adjustments related to acquired assets and liabilities. The approximate amounts of significant purchase accounting adjustments recordedthe limited time since the acquisition date of acquisition include a reduction in the book value of assets sold to Ansaldo of $450 million, adjustments to the fair value of derivative contracts of $350 million, decreases in inventory balances of $115 million, increases to legal reserves of $1,000 million, increases to property, plant and equipment of $50 million, a reduction in the book value of aged accounts receivable of $200 million and other project related costs such as warranty provisions and liquidating damages of $625 million. In addition, the preliminary fair value of Alstom's redeemable noncontrolling interests was increased by $100 million to approximately $3,000 million and all other noncontrolling interests decreased by $100 million to approximately $600 million.  We will finalize our purchase accounting analysis in the fourth quarter.

With respect to legal reserves, the amounts we have recorded relate to legacy legal and compliance matters of the Alstom businesses that existed before the date of our acquisition, which matters we have been independently assessing since that time. As previously reported, these include Alstom legacy matters in a number of jurisdictions that involve alleged anti-competitive activities or alleged improper payments. While we believe that the amounts recorded in connection with our purchase accounting reviews of the identified matters are appropriate, such legal and compliance matters are inherently uncertain, and future payments that may be necessary to resolve them could vary from the liability amounts recorded.

In addition to purchase price allocation basedlimitations on the fair value of acquired assetsaccess to Baker Hughes information prior to close, the initial accounting for the business combination is not yet complete, and liabilities, other adjustmentswe are necessarynot yet able to reflect differences between IFRS and US GAAP, as applied to differences in facts and circumstances between those businesses as part of Alstom and as part of GE post acquisition. The table below presents approximate consideration paid,provide amounts of assets acquired and liabilities assumedrecognized as of the acquisition date inclusivefor major classes of assets and liabilities acquired or the supplemental pro forma revenue and earnings of the purchase accounting adjustments and IFRS to US GAAP adjustments recorded ascombined entity. We will include disclosure of our preliminary estimates in our Quarterly Report on Form 10-Q for the nine months ended September 30, 2016,2017.

During the three and the fair valuesix months ended June 30, 2017, acquisition costs of the non-controlling interest.$59 million and $110 million, respectively, were expensed as incurred and were reported as selling, general and administrative expenses.


2016 3Q76 2017 2Q FORM 10-Q 86

ASSETS ACQUIRED AND LIABILITIES ASSUMED AT THE ACQUISITION DATE  
   
 Approximate
 balance at
(in millions)September 30, 2016
   
Assets  
Cash and equivalents$1,750
Current receivables 4,050
Inventories 4,700
Property, plant and equipment 2,850
Goodwill 17,200
Other intangible assets 4,400
All other assets, net(a) 3,750
Total Assets$38,700
   
Liabilities  
Accounts payable$1,900
Progress collections 2,900
Accrued contract liabilities 10,500
All other liabilities(b) 7,850
Total Liabilities 23,200
   
Redeemable noncontrolling interests 3,000
   
Noncontrolling interest 600
   
Total purchase price 11,900
Cash acquired 1,750
Total purchase price, net of cash acquired$10,100
   
(a)
Includes approximately $350 million of net deferred tax assets, including approximately $50 million of non-U.S. loss carry forwards net of valuation allowances and offsetting liabilities for unrecognized benefits. Also includes approximately $200 million of indemnification receivables for liabilities for unrecognized income tax benefits and other tax uncertainties.
FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(b)Includes approximately $950 million of liabilities for unrecognized income tax benefits and other uncertain taxes and approximately $750 million of pension and other employee related costs.


CHANGES IN GOODWILL BALANCES
            
            
      Dispositions,  
     currency  
 Balance at   exchange Balance at
(In millions)January 1, 2016 Acquisitions (a) and other September 30, 2016
            
Power$16,736 $3,648 $(4) $20,381
Renewable Energy 2,580  314  (8)  2,886
Oil & Gas 10,594  1  (80)  10,515
Aviation 8,567  -  26  8,593
Healthcare 17,353  162  (47)  17,467
Transportation 851  25  10  885
Energy Connections & Lighting 6,441  63  (211)  6,293
Capital 2,370  -  -  2,369
Corporate 34  346  218  598
Total$65,526 $4,559 $(97) $69,988
            
GOODWILL
(a)Goodwill balances associated with Alstom and their allocations to segments are preliminary.

CHANGES IN GOODWILL BALANCES
(In millions)
Balance at
January 1, 2017

Acquisitions (a)
Dispositions,
currency
exchange
and other

Balance at
June 30, 2017
     
Power$19,816
$50
$237
$20,103
Renewable Energy2,507
1,165
126
3,799
Oil & Gas10,363
—
93
10,457
Aviation9,455
16
269
9,739
Healthcare17,424
47
38
17,509
Transportation899
—
7
906
Energy Connections & Lighting6,868
—
(859)6,009
Capital2,368
—
1
2,369
Corporate739
688
19
1,446
Total$70,438
$1,965
$(69)$72,335
Goodwill balances increased by $4,461$1,897 million in 2016,2017, primarily as a result of the Alstom acquisition purchase accounting adjustmentsof LM Wind Power and ServiceMax and the currency exchange effects of a weaker U.S. dollar against other acquisitions.

We test goodwill for impairment annually inmajor currencies, partially offset by the third quarterreclassification of each year using data as of July 1 of that year. The impairment test consists of two steps: in step one, the carrying value of the reporting unit is compared with its fair value; in step two, which is applied when the carrying value is more than its fair value, the amount of goodwill impairment, if any, is derived by deducting the fair value of the reporting unit's assets and liabilities from the fair value of its equity, and comparing that amount with the carrying amount of goodwill. We determined fair values for each of the reporting units using the market approach, when available and appropriate, or the income approach, or a combination of both. We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation. If multiple valuation methodologies are used, the results are weighted appropriately.
2016 3Q FORM 10-Q 87
Valuations using the market approach are derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. A market approach is limited to reporting units for which there are publicly traded companies that have the characteristics similar to our businesses.

Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in our forecasts. We derive our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Discount rates used in our reporting unit valuations ranged from 9.5% to 16.5%.

During the third quarter of 2016, we performed our annual impairment test of goodwill for all of our reporting units. Based on the results of our step one testing, the fair values of each of the GE reporting units exceeded their carrying values; therefore, the second step of the impairment test was not required to be performed for any of our reporting units and no goodwill impairment was recognized.

While all of our reporting units passed step one of our annual impairment testing in 2016, we identified four reporting units for which the fair value was not substantially in excess of its carrying value. Due to the continuation of depressed oil and natural gas prices, the fair value of our Energy Financial Services reporting unit, within our Capital operating segment, continues to be impacted and was in excess of its carrying value by approximately 2%. The goodwill associated with our Energy Financial Services reporting unit was $1,386 million at September 30, 2016, representing approximately 2%Industrial Solutions to assets of our total goodwill. The estimated fair value of the Energy Financial Services reporting unit is based on a number of assumptions about future business performance and investment, including the performance of our renewable investment portfolio and the expected proceeds and timing of non-strategic investment divestitures. Our assumed discount rate was 10% and was derived by applying a capital asset pricing model and corroborated using equity analyst research reports and implied cost of equity based on forecasted price to earnings per share multiplesbusinesses held for similar companies. Based on the results of the step 1 testing, we further substantiated our Energy Financial Services goodwill balance by performing the second step analysis in which the implied fair value of goodwill exceeded its carrying value by approximately $670 million. While we have seen some stabilization in the oil and gas environment, there continues to be uncertainty about a number of assumptions upon which the estimated implied fair value of goodwill is based. While all reporting units within our Oil & Gas operating segment are significantly in excess of their carrying value, the business continues to experience declines in orders, project commencement delays and pricing pressures, which affect their fair value. While the goodwill of the Energy Financial Services and Oil & Gas reporting units are not currently impaired, we will continue to monitor the oil & gas industry and the impact it may have on these businesses.sale.

In addition, the fair value of the Power Conversion reporting unit, within our Energy Connections operating segment, was in excess of its carrying value by approximately 9%. The goodwill associated with our Power Conversion reporting unit was $1,154 million at September 30, 2016, representing approximately 2% of our total goodwill. Our Power Conversion reporting unit has experienced a decline in order growth and an increase in the order to cash cycle, which has caused the reduction in value over the prior year. While the goodwill of the reporting unit is not currently impaired, there could be an impairment in the future as a result of changes in certain assumptions.  For example, the reporting unit's fair value could be adversely affected and result in an impairment of goodwill if actual cash flows are below estimated cash flows, the estimated cash flows are discounted at a higher risk-adjusted rate or market multiples decrease.

Finally, two reporting unit fair values were impacted as a result of the Alstom transaction. Subsequent to the close of the acquisition of Alstom, we formed two new reporting units, Grid Solutions and Hydro. The Alstom Grid business was combined with our Digital Energy business, within our Energy Connections operating segment, to create the new Grid Solutions reporting unit and the Alstom Hydro business is a newly created reporting unit within our Renewable Energy operating segment. Since fair value equals carrying value at the time of acquisition, this caused the fair value of these reporting units not to be significantly in excess of its carrying value. The fair value of the Hydro reporting unit approximated its carrying value and the excess of fair value over carrying value of the Grid Solutions reporting unit is approximately 3%. The goodwill associated with our Hydro and Grid Solutions reporting units was $756 million and $3,586 million, respectively, representing approximately 1% and 5% of our total goodwill at September 30, 2016. While the goodwill of these reporting units are not currently impaired, there could be an impairment in the future as a result of changes in certain assumptions. For example, the fair value of these reporting units could be adversely affected and result in an impairment of goodwill if expected synergies of the acquisition with Alstom are not realized or if the reporting units were not able to execute on customer opportunities, the estimated cash flows are discounted at a higher risk-adjusted rate or market multiples decrease.
2016 3Q FORM 10-Q 88
As of September 30, 2016, we believe that the goodwill is recoverable for all of the reporting units; however, there can be no assurances that the goodwill will not be impaired in future periods.

In 2015, we identified one reporting unit for which the fair value was not substantially in excess of its carrying value. Due to the sharp decline experienced in oil prices and the prospect of a continuation of prevailing oil prices, the fair value of our Energy Financial Services reporting unit, within our Capital operating segment, had been impacted and was in excess of its carrying value by approximately 13%. Due to the continued decline in oil prices, we performed an impairment test in the fourth quarter using data as of December 31, 2015, which resulted in the fair value of our Energy Financial Services reporting unit being in excess of its carrying value by approximately 12%. In the current year, the fair value of the Energy Financial Services reporting unit continues to be impacted by the market conditions within the oil & gas industry as discussed above.

In 2015, although not impaired, our Oil & Gas business had also experienced declines in orders, project commencement delays and pricing pressures, which affected the fair value of our Oil & Gas reporting units. Our Oil & Gas business continues to be affected by the overall market conditions as discussed above.

Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is reasonably possible that the judgments and estimates described above could change in future periods.
2016 3Q FORM 10-Q 89
OTHER INTANGIBLE ASSETS

OTHER INTANGIBLE ASSETS - NET 
    
(In millions)September 30, 2016 December 31, 2015
      
Intangible assets subject to amortization$16,679 $17,688
Indefinite-lived intangible assets(a) 101  109
Total$16,779 $17,797
      
OTHER INTANGIBLE ASSETS - NET 
(In millions)June 30, 2017
December 31, 2016
   
Intangible assets subject to amortization$16,839
$16,336
Indefinite-lived intangible assets(a)90
100
Total$16,929
$16,436
(a)Indefinite-lived intangible assets principally comprise trademarks and in-process research and development.

INTANGIBLE ASSETS SUBJECT TO AMORTIZATION
                  
 September 30, 2016 December 31, 2015
 Gross     Gross    
 carrying Accumulated   carrying Accumulated  
(In millions)amount amortization Net amount amortization Net
                  
Customer-related$9,393 $(2,400) $6,993 $9,758 $(2,113) $7,645
Patents and technology 8,813  (3,459)  5,354  8,543  (3,096)  5,447
Capitalized software 7,710  (4,529)  3,181  7,375  (4,136)  3,239
Trademarks 1,246  (337)  910  1,337  (282)  1,055
Lease valuations 132  (55)  77  167  (22)  145
Present value of future profits(a) 676  (676)  -  651  (651)  -
All other 312  (147)  165  267  (108)  159
Total$28,282 $(11,602) $16,679 $28,098 $(10,408) $17,688
                  
INTANGIBLE ASSETS SUBJECT TO AMORTIZATION
 June 30, 2017 December 31, 2016
(In millions)
Gross
carrying
amount

Accumulated
amortization

Net
 
Gross
carrying
amount

Accumulated
amortization

Net
        
Customer-related$9,446
$(2,742)$6,704
 $9,172
$(2,408)$6,764
Patents and technology9,461
(3,502)5,959
 8,693
(3,325)5,368
Capitalized software7,939
(4,806)3,135
 7,652
(4,538)3,114
Trademarks1,209
(365)843
 1,165
(307)858
Lease valuations129
(69)59
 143
(59)84
Present value of future profits(a)701
(701)—
 684
(684)—
All other239
(99)140
 273
(124)149
Total$29,124
$(12,284)$16,839
 $27,781
$(11,444)$16,336
(a)Balances at SeptemberJune 30, 20162017 and December 31, 2015 reflect2016 include adjustments of $247$227 million and $266$241 million, respectively, to the present value of future profits in our run-off insurance operationactivities to reflect the effects that would have been recognized had the related unrealized investment securities holding net gains and losses actually been realized.

Intangible assets subject to amortization decreasedincreased by $1,009$503 million in the ninesix months ended SeptemberJune 30, 2016,2017, primarily as a result of changes in the fair valueacquisition of the acquired Alstom intangible assetsLM Wind Power and amortization,ServiceMax, partially offset by acquisitions, capitalized software and patents across all business platforms.amortization.

GE amortization expense related to intangible assets subject to amortization was $363$407 million and $362$450 million in the three months ended SeptemberJune 30, 20162017 and 2015,2016, respectively, and $1,258$811 million and $1,055$896 million for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively. GE Capital amortization expense related to intangible assets subject to amortization was $33$14 million and $21$37 million in the three months ended SeptemberJune 30, 20162017 and 2015,2016, respectively, and $103$34 million and $78$70 million for the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015, respectively.

2017 2Q FORM 10-Q 77

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 8.9. CONTRACT ASSETS

(In millions) September 30, 2016  December 31, 2015
      
GE     
Contract assets$24,354 $21,156
      
      
Contract assets reflect revenues earned in excess of billings on our long-term contracts to construct technically complex equipment (such as gas power systems and aircraft engines), long-term product maintenance or extended warranty arrangements and other deferred contract related costs. Long-term product maintenance amounts are presented net of related billings in excess of revenues of $2,970 million and $2,602 million at September 30, 2016 and December 31, 2015, respectively.
2016 3Q FORM 10-Q 90
NOTE 9. BORROWINGS
(In millions)June 30, 2017
December 31, 2016
   
GE  
Revenues in excess of billings  
     Long-term product service agreements(a)$14,764
$12,752
     Long-term equipment contract revenues(b)6,774
5,859
Total revenues in excess of billings21,538
18,611
   
Deferred inventory costs(c)4,040
3,349
Non-recurring engineering costs(d)2,295
2,185
Other1,051
1,018
Contract assets$28,924
$25,162

(In millions)September 30, 2016 December 31, 2015
      
Short-term borrowings     
GE     
Commercial paper$1,500 $500
Current portion of long-term borrowings 15,212  17,770
Other 2,229  1,522
Total GE short-term borrowings(a) 18,940  19,792
      
GE Capital     
Commercial paper     
   U.S. 5,002  650
   Non-U.S. -  4,351
Current portion of long-term borrowings(c) 9,356  24,969
Intercompany payable to GE(b) 10,074  17,642
Other 12  1,005
Total GE Capital short-term borrowings 24,444  48,617
      
Eliminations(b) (11,813)  (18,549)
Total short-term borrowings$31,571 $49,860
      
Long-term borrowings     
GE     
Senior notes$61,160 $72,471
Subordinated notes 2,864  2,940
Subordinated debentures(d) 744  6,600
Other 915  1,298
Total GE long-term borrowings(a) 65,683  83,309
      
GE Capital     
Senior notes 47,993  59,107
Subordinated notes 313  251
Intercompany payable to GE(b) 49,723  67,062
Other(c) 1,798  2,058
Total GE Capital long-term borrowings 99,828  128,478
      
Eliminations(b) (49,825)  (67,128)
Total long-term borrowings$115,686 $144,659
Non-recourse borrowings of consolidated securitization entities(e)$2,175 $3,083
Total borrowings$149,432 $197,602
      
(a)Long-term product service agreement balances are presented net of related billings in excess of revenues of $2,679 million and $3,750 million at June 30, 2017 and December 31, 2016, respectively.
(b)Reflects revenues earned in excess of billings on our long-term contracts to construct technically complex equipment (such as gas power systems).
(c)Represents cost deferral for shipped goods (such as components for wind turbine assembly within our Renewable Energy segment) and other costs for which the revenue recognition criteria has not yet been met.
(d)Includes costs incurred prior to production (such as requisition engineering) for long-term equipment production contracts, primarily within our Aviation segment, which are allocated ratably to each unit produced.

78 2017 2Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. BORROWINGS
(In millions)June 30, 2017December 31, 2016
   
Short-term borrowings  
GE  
Commercial paper$2,000
$1,500
Current portion of long-term borrowings16,120
17,109
Other2,211
1,874
Total GE short-term borrowings(a)20,331
20,482
   
GE Capital  
U.S. Commercial paper5,012
5,002
Current portion of long-term borrowings(b)5,869
6,517
Intercompany payable to GE(c)11,923
11,696
Other569
229
Total GE Capital short-term borrowings23,373
23,443
   
Eliminations(c)(13,660)(13,212)
Total short-term borrowings$30,044
$30,714
   
Long-term borrowings  
GE  
Senior notes$56,699
$54,396
Subordinated notes2,835
2,768
Subordinated debentures(e)740
719
Other1,337
928
Total GE long-term borrowings(a)61,611
58,810
   
GE Capital  
Senior notes40,927
44,131
Subordinated notes218
236
Intercompany payable to GE(d)36,293
47,084
Other(b)1,414
1,992
Total GE Capital long-term borrowings78,852
93,443
   
Eliminations(d)(36,786)(47,173)
Total long-term borrowings$103,676
$105,080
Non-recourse borrowings of consolidated securitization entities(f)$682
$417
Total borrowings$134,402
$136,210
(a)Excluding assumed debt of GE Capital, the total amount of GE total borrowings is $19,823 million.was $33,725 million and $20,512 million at June 30, 2017 and December 31, 2016, respectively.
(b)The amountIncluded $1,781 million and $2,665 million of the intercompany payablefunding secured by aircraft and other collateral at June 30, 2017 and December 31, 2016, respectively, of which $591 million and $1,419 million is non-recourse to GE was $59,798 million as of SeptemberCapital at June 30, 2017 and December 31, 2016, which includesrespectively.
(c)
Included a reduction in theof zero and $1,329 million for short-term intercompany payable to GE for a $(5,002) million loan in the second quarter of 2016loans from GE Capital to GE at June 30, 2017 and December 31, 2016, respectively, which bearsbear the right of offset against amounts owed under the assumed debt agreement.
(c)Included $2,468 Excluding intercompany loans, total short-term assumed debt was $11,923 million and $2,679$13,024 million of funding secured by aircraft and other collateral at SeptemberJune 30, 20162017 and December 31, 2015, respectively,2016, respectively. The remaining short-term loan balance was paid in January 2017.
(d)Included a reduction of which $1,425$4,075 million and $1,534 million is non-recoursezero for long-term intercompany loans from GE Capital to GE Capital at SeptemberJune 30, 20162017 and December 31, 2015, respectively.
(d)Included $7442016, respectively, which bear the right of offset against amounts owed under the assumed debt agreement. Excluding intercompany loans, total long-term assumed debt was $40,368 million and $2,587$47,084 million of subordinated debentures at SeptemberJune 30, 20162017 and December 31, 2015, respectively,2016, respectively. The $4,075 million of intercompany loans collectively have a weighted average interest rate of 3.6% and term of approximately 15 years.
(e)Comprises subordinated debentures which constitute the sole assets of trusts that have issued trust preferred securities and where GE owns 100% of the common securities of the trusts. Obligations associated with these trusts are unconditionally guaranteed by GE.
(e)
(f)Included $1,843$528 million and $918$320 million of current portion of long-term borrowings at SeptemberJune 30, 20162017 and December 31, 2015,2016, respectively. See Note 16.17.

During the second quarter of 2017, GE completed issuances of €8,000 million senior unsecured debt, composed of €1,750 million of 0.375% Notes due 2022, €2,000 million of 0.875% Notes due 2025, €2,250 million of 1.50% Notes due 2029 and €2,000 million of 2.125% Notes due 2037.


2017 2Q FORM 10-Q 79

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2016 3Q FORM 10-Q 91
As discussed in Note 1, the adoption of ASU 2015-03 resulted in the reclassification of $674 million of unamortized debt issuance costs related to the Company's borrowings, of which $641 million was reclassified in long-term borrowings and $33 million was reclassified in short-term borrowings, within our consolidated balance sheet as of December 31, 2015.

On April 10, 2015, GE provided a full and unconditional guarantee on the payment of the principal and interest on all tradable senior and subordinated outstanding long-term debt securities and all commercial paper issued or guaranteed by GE Capital. $92,537$92,537 million of such debt was assumed by GE on December 2, 2015 upon its merger with GE Capital resulting in an intercompany payable to GE. At SeptemberJune 30, 2016,2017, the amount of the intercompany payable to GE was $59,798 million, including $64,800 million of borrowings assumed by GE and a reduction for a $5,002 million short-term loan in the second quarter of 2016 from GE Capital to GE, which bears the right of offset against amounts owed under the assumed debt agreement. The Guarantee applies to approximately $53,527$44,077 million of GE Capital debt. Prior to the merger $35,999 million (representing $31,154 million of outstanding principal

See Notes 16 and $4,846 million of premium) of GE Capital debt was exchanged into a new GE Capital international entity, including $16,372 million, which matured on April 15, 2016.
Additional21 for additional information about borrowings and associated swaps can be found in Notes 15 and 19.swaps.


NOTE 11. INVESTMENT CONTRACTS, INSURANCE LIABILITIES AND INSURANCE ANNUITY BENEFITS

Insurance and investment contract liabilities comprise mainly obligations to policyholders and annuitants in our run-off insurance activities.

(In millions)June 30, 2017
December 31, 2016



Future policy benefit reserves(a)$19,105
$18,741
Investment contracts2,671
2,813
Other(b)5,241
4,992
 27,016
26,546
Eliminations(545)
(460)
Total$26,471
$26,086
(a)The future policy benefit reserve is subject to an annual review to determine its adequacy. Should the liability for future policy benefits plus the present value of expected future gross premiums be insufficient to provide for the present value of expected future policy benefits and expenses, a premium deficiency would be recorded.
(b)Substantially all unpaid claims and claims adjustment expenses and unearned premiums.

See Notes 1 and 11 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016 for further information.


2016 3Q80 2017 2Q FORM 10-Q 92

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10.12. POSTRETIREMENT BENEFIT PLANS

We sponsor a number of pension and retiree health and life insurance benefit plans. Principal pension plans are the GE Pension Plan and the GE Supplementary Pension Plan. Principal retiree benefit plans provide health and life insurance benefits to certain eligible participants and these participants share in the cost of the healthcare benefits. Other pension plans include the U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million. Smaller pension plans and other retiree benefit plans are not material individually or in the aggregate.
EFFECT ON OPERATIONS OF PENSION PLANS
 Principal pension plans
 Three months ended June 30 Six months ended June 30 
(In millions)2017
 2016
 2017
 2016
 
         
Service cost for benefits earned$254
 $291
��$543
 $606
 
Prior service cost amortization72
 76
 145
 152
 
Expected return on plan assets(849) (836) (1,698) (1,670) 
Interest cost on benefit obligations712
 735
 1,429
 1,469
 
Net actuarial loss amortization697
 612
 1,407
 1,224
 
Curtailment loss (gain)—
 (1) 43
(a)(1) 
Pension plans cost$886
 $877
 $1,869
 $1,780
 
(a)Curtailment loss resulting from our intent to sell the Industrial Solutions business within our Energy Connections & Lighting segment.
 Other pension plans
 Three months ended June 30 Six months ended June 30 
(In millions)2017
 2016
 2017
 2016
 
         
Service cost for benefits earned$123
 $118
 $274
 $231
 
Prior service credit amortization(1) —
 (2) (1) 
Expected return on plan assets(301) (259) (595) (522) 
Interest cost on benefit obligations145
 168
 287
 340
 
Net actuarial loss amortization107
 65
 210
 129
 
Pension plans cost$73
 $92
 $174
 $177
 
EFFECT ON OPERATIONS OF PRINCIPAL RETIREE BENEFIT PLANS
 Principal retiree benefit plans
 Three months ended June 30 Six months ended June 30 
(In millions)2017
 2016
 2017
 2016
 
         
Service cost for benefits earned$26
 $27
 $52
 $52
 
Prior service credit amortization(43) (41) (86) (82) 
Expected return on plan assets(9) (11) (18) (22) 
Interest cost on benefit obligations56
 63
 113
 126
 
Net actuarial gain amortization(20) (14) (41) (27) 
Curtailment loss—
 —
 3
(a)—
 
Retiree benefit plans cost$10
 $24
 $23
 $47
 
(a)Curtailment loss resulting from our intent to sell the Industrial Solutions business within our Energy Connections & Lighting segment.

EFFECT ON OPERATIONS OF PENSION PLANS            
             
 Principal pension plans 
 Three months ended September 30 Nine months ended September 30 
(In millions) 2016  2015  2016  2015 
             
Service cost for benefits earned$307 $348 $913 $1,076 
Prior service cost amortization 76  51  228  154 
Expected return on plan assets (837)  (826)  (2,507)  (2,478) 
Interest cost on benefit obligations 736  696  2,205  2,087 
Net actuarial loss amortization 612  823  1,836  2,468 
Curtailment loss (gain) -  -  (1)  71(a)
Pension plans cost$894 $1,092 $2,674 $3,378 
             
2017 2Q FORM 10-Q 81
(a)Curtailment loss resulting from GE Capital Exit Plan.

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 Other pension plans 
 Three months ended September 30 Nine months ended September 30 
(In millions) 2016  2015  2016  2015 
             
Service cost for benefits earned$106 $99 $337 $299 
Prior service cost (credit) amortization -  1  (1)  1 
Expected return on plan assets (264)  (211)  (786)  (625) 
Interest cost on benefit obligations 172  133  512  396 
Net actuarial loss amortization 68  72  197  217 
Pension plans cost$82 $94 $259 $288 
             

EFFECT ON OPERATIONS OF PRINCIPAL RETIREE BENEFIT PLANS   
             
 Principal retiree benefit plans 
 Three months ended September 30 Nine months ended September 30 
(In millions) 2016  2015  2016  2015 
             
Service cost for benefits earned$32 $27 $84 $119 
Prior service cost (credit) amortization (41)  (38)  (123)  29 
Expected return on plan assets (11)  (12)  (33)  (36) 
Interest cost on benefit obligations 62  67  188  268 
Net actuarial gain amortization (12)  (14)  (39)  (11) 
Curtailment gain, net -  -  -  (192)(a)
Retiree benefit plans cost$30 $30 $77 $177 
             
 (a)Gain principally resulting from life insurance amendment.

2016 3Q FORM 10-Q 93
NOTE 11.13. INCOME TAXES

UNRECOGNIZED TAX BENEFITS 
    
(In millions)September 30, 2016 December 31, 2015
      
Unrecognized tax benefits$5,605 $6,778
Portion that, if recognized, would reduce tax expense and effective tax rate(a) 3,260  4,723
Accrued interest on unrecognized tax benefits 709  805
Accrued penalties on unrecognized tax benefits 144  98
Reasonably possible reduction to the balance of unrecognized tax benefits     
   in succeeding 12 months 0-800  0-700
Portion that, if recognized, would reduce tax expense and effective tax rate(a) 0-200  0-200
      
Our effective income tax rates were 1.3% and 7.0% during the six months ended 2017 and 2016, respectively. The rate for 2017 benefited from the tax difference on global activities and U.S. business credits and for 2016 from a deductible stock loss and U.S. business credits. In the six months ended 2017, these decreases were partially offset by an adjustment to bring the six-month tax rate in line with the higher expected full-year rate. In the six months ended 2016, there was a further decrease to bring the six-month tax rate in line with the lower expected full-year rate.

In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date.
UNRECOGNIZED TAX BENEFITS 
(In millions)June 30, 2017
December 31, 2016
   
Unrecognized tax benefits$4,760
$4,692
Portion that, if recognized, would reduce tax expense and effective tax rate(a)2,894
2,886
Accrued interest on unrecognized tax benefits682
615
Accrued penalties on unrecognized tax benefits119
118
Reasonably possible reduction to the balance of unrecognized tax benefits  
  in succeeding 12 months0-600
0-600
Portion that, if recognized, would reduce tax expense and effective tax rate(a)0-500
0-500
(a)Some portion of such reduction may be reported as discontinued operations.


The Internal Revenue Service (IRS) is currently auditing our consolidated U.S. income tax returns for 2012-2013. In addition, certain other U.S. tax deficiency issues and refund claims for previous years are still unresolved. The IRS had disallowed the tax loss on our 2003 disposition of ERC Life Reinsurance Corporation. We contested the disallowance of this loss. In August 2016, the government approvedIt is reasonably possible that a final settlementportion of the caseunresolved items could be resolved during the next 12 months, which could result in a decrease in our balance of "unrecognized tax benefits" - that is, the aggregate tax effect of differences between tax return positions and the balance of unrecognized tax benefits and associated interest was adjustedrecognized in the quarter to reflect the final agreed settlement.our financial statements. We believe that there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties.
2016 3Q FORM 10-Q 94
NOTE 12. SHAREOWNERS' EQUITY

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)      
            
 Three months ended September 30 Nine months ended September 30
(In millions)2016 2015 2016 2015
            
Investment securities           
Beginning balance$1,077 $564 $460 $1,013
Other comprehensive income (loss) (OCI) before reclassifications –           
    net of deferred taxes of $48, $14, $352 and $(196) 97  22  675  (382)
Reclassifications from OCI – net of deferred taxes           
    of $5, $(20), $36 and $(45) 1  (26)  40  (70)
Other comprehensive income (loss)(a) 97  (3)  715  (452)
Less OCI attributable to noncontrolling interests (2)  -  (1)  -
Ending balance$1,176 $561 $1,176 $561
            
Currency translation adjustments (CTA)           
Beginning balance$(5,448) $(5,913) $(5,499) $(2,428)
OCI before reclassifications – net of deferred taxes           
    of $5, $(185), $222 and $1,158 (280)  (108)  (138)  (3,936)
Reclassifications from OCI – net of deferred taxes           
    of $(6), $(628), $74 and $(779) 85  733  1  1,039
Other comprehensive income (loss)(a) (194)  624  (138)  (2,895)
Less OCI attributable to noncontrolling interests -  (8)  6  (43)
Ending balance$(5,643) $(5,281) $(5,643) $(5,281)
            
Cash flow hedges           
Beginning balance$(51) $(140) $(80) $(180)
OCI before reclassifications – net of deferred taxes           
    of $(12), $(28), $(17) and $(24) (21)  (133)  (61)  (626)
Reclassifications from OCI – net of deferred taxes           
    of $6, $11, $7 and $59 52  98  121  632
Other comprehensive income (loss)(a) 30  (35)  60  6
Less OCI attributable to noncontrolling interests -  -  -  -
Ending balance$(21) $(174) $(21) $(174)
            
Benefit plans           
Beginning balance$(10,476) $(12,716) $(11,410) $(16,578)
Prior service credit (costs) - net of deferred taxes           
    of $0, $0, $5 and $1,194 -  -  23  2,090
Net actuarial gain (loss) – net of deferred taxes           
    of $49, $0, $6 and $269 83  43  71  602
Net curtailment/settlement - net of deferred taxes           
    of $0, $0, $0 and $(44) -  -  (1)  (77)
Prior service cost amortization – net of deferred taxes           
    of $22, $17, $63 and $92 12  -  45  101
Net actuarial loss amortization – net of deferred taxes           
    of $216, $297, $649 and $902 453  584  1,343  1,771
Other comprehensive income (loss)(a) 548  627  1,481  4,486
Less OCI attributable to noncontrolling interests 6  -  5  (2)
Ending balance$(9,934) $(12,089) $(9,934) $(12,089)
            
Accumulated other comprehensive income (loss) at September 30$(14,422) $(16,983) $(14,422) $(16,983)
            
82 2017 2Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. SHAREOWNERS’ EQUITY
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)  
 Three months ended June 30Six months ended June 30
(In millions)2017
2016
2017
2016
     
Investment securities    
Beginning balance$622
$680
$674
$460
Other comprehensive income (loss) (OCI) before reclassifications – net of deferred taxes of $146, $222, $159 and $304291
419
309
578
Reclassifications from OCI – net of deferred taxes of $(25), $(9), $(61) and $31(48)(21)(118)39
Other comprehensive income (loss)(a)243
397
191
617
Less OCI attributable to noncontrolling interests—
—
—
—
Ending balance$866
$1,077
$866
$1,077
     
Currency translation adjustments (CTA)    
Beginning balance$(6,004)$(5,500)$(6,816)$(5,499)
OCI before reclassifications – net of deferred taxes of $(207), $(50), $(241) and $217491
26
753
141
Reclassifications from OCI – net of deferred taxes of $(1), $(39), $(541) and $8034
29
588
(85)
Other comprehensive income (loss)(a)525
55
1,341
57
Less OCI attributable to noncontrolling interests2
3
6
6
Ending balance$(5,481)$(5,448)$(5,481)$(5,448)
     
Cash flow hedges    
Beginning balance$32
$(26)$12
$(80)
OCI before reclassifications – net of deferred taxes of $(8), $2, $(2) and $(5)44
(15)64
(40)
Reclassifications from OCI – net of deferred taxes of $(10), $(4), $(9) and $1(54)(10)(55)69
Other comprehensive income (loss)(a)(10)(25)9
30
Less OCI attributable to noncontrolling interests—
—
—
—
Ending balance$22
$(51)$22
$(51)
     
Benefit plans    
Beginning balance$(11,421)$(10,859)$(12,469)$(11,410)
Prior service credit (costs) - net of deferred taxes of $0, $0, $0 and $5—
—
—
23
Net actuarial gain (loss) – net of deferred taxes of $32, $(65), $133 and $(43)24
(80)500
(12)
Net curtailment/settlement - net of deferred taxes of $0, $0, $16 and $0—
(1)30
(1)
Prior service cost amortization – net of deferred taxes of $19, $20, $38 and $4110
17
21
33
Net actuarial loss amortization – net of deferred taxes of $251, $217, $504 and $433526
447
1,059
890
Other comprehensive income (loss)(a)560
382
1,610
933
Less OCI attributable to noncontrolling interests(1)—
1
(1)
Ending balance$(10,860)$(10,476)$(10,860)$(10,476)
     
Accumulated other comprehensive income (loss) at June 30$(15,454)$(14,898)$(15,454)$(14,898)
(a)Total other comprehensive income (loss) was $481$1,318 million and $1,214$810 million in the three months ended SeptemberJune 30, 20162017 and 2015,2016, respectively, and $2,117$3,151 million and $1,144$1,636 million in the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016 respectively.

2017 2Q FORM 10-Q 83

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2016 3Q FORM 10-Q 95
RECLASSIFICATION OUT OF AOCI      
 Three months ended Six months ended 
 June 30 June 30 
(In millions)2017
2016
 2017
2016
Statement of Earnings caption
       
Available-for-sale securities      
Gains (losses) on securities$73
$30
 $178
$(70)Total revenues and other income(a)
Income taxes(25)(9) (61)31
Benefit (provision) for income taxes(b)
Net of tax$48
$21
 $118
$(39) 
Currency translation adjustments      
Gains (losses) on dispositions$(33)$10
 $(47)$5
Total revenues and other income(c)
Income taxes(1)(39) (541)80
Benefit (provision) for income taxes(d)
Net of tax$(34)$(29) $(588)$85
 
Cash flow hedges      
Gains (losses) on interest rate derivatives$(15)$(26) $(15)$(55)Interest and other financial charges
Foreign exchange contracts78
37
 78
(5)(e)
Other1
2
 1
(11)(f)
    Total before tax65
14
 64
(71) 
Income taxes(10)(4) (9)1
Benefit (provision) for income taxes
    Net of tax$54
$10
 $55
$(69) 
Benefit plan items      
Curtailment gain (loss)$—
$1
 $(46)$1
(g)
Amortization of prior service costs(29)(37) (59)(74)(g)
Amortization of actuarial gains (losses)(777)(664) (1,563)(1,323)(g)
    Total before tax(806)(700) (1,668)(1,396) 
Income taxes270
237
 558
474
Benefit (provision) for income taxes
    Net of tax$(536)$(463) $(1,110)$(922) 
       
Total reclassification adjustments (net of tax)$(467)$(461) $(1,525)$(946) 
RECLASSIFICATION OUT OF AOCI             
              
 Three months ended Nine months ended  
 September 30 September 30  
(In millions)2016 2015 2016 2015 Statement of earnings caption
              
Available-for-sale securities             
   Realized gains (losses) on             
      sale/impairment of securities$(6) $45 $(76) $116 Total revenues and other income(a)
   Income taxes 5  (20)  36  (45) Benefit (provision) for income taxes(b)
   Net of tax$(1) $26 $(40) $70  
Currency translation adjustments             
   Gains (losses) on dispositions$(79) $(104) $(74) $(260) Total revenues and other income(c)
   Income taxes (6)  (628)  74  (779) Benefit (provision) for income taxes(d)
   Net of tax$(85) $(733) $(1) $(1,039)  
Cash flow hedges             
  Gains (losses) on interest rate             
     derivatives$(12) $(39) $(67) $(100) Interest and other financial charges
  Foreign exchange contracts (43)  (72)  (47)  (600) (e)
  Other (3)  2  (14)  9 (f)
   Total before tax (57)  (109)  (128)  (691)  
   Income taxes 6  11  7  59 Benefit (provision) for income taxes
   Net of tax$(52) $(98) $(121) $(632)  
Benefit plan items             
  Curtailment gain (loss)$- $- $1 $121 (g)
  Amortization of prior service costs (34)  (17)  (108)  (193) (g)
  Amortization of actuarial gains (losses) (669)  (881)  (1,992)  (2,673) (g)
   Total before tax (703)  (898)  (2,099)  (2,745)  
   Income taxes 238  314  712  950 Benefit (provision) for income taxes
   Net of tax$(465) $(584) $(1,387) $(1,795)  
              
Total reclassification adjustments (net of tax)$(602) $(1,389) $(1,548) $(3,396)  
              
(a)
Included an insignificant amount and $29$6 million for the three months ended SeptemberJune 30, 2017 and 2016, and 2015,an insignificant amount and $(72)million and $49 million for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively in earnings (loss) from discontinued operations, net of taxes.
(b)
Included $3 millionan insignificant amount and $(15)$(1) million for the three months ended SeptemberJune 30, 2017 and 2016, and 2015,an insignificant amount and $34 $31 million and $(21) million for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016 respectively in earnings (loss) from discontinued operations, net of taxes.
(c)
Included $(79)$3 million and $(104)$77 million for the three months ended SeptemberJune 30, 2017 and 2016, and 2015,$32 million and $(8)$71 million and $(261) million for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016 respectively in earnings (loss) from discontinued operations, net of taxes.
(d)
Included $(7)$(1) million and $(628)$(39) million for the three months ended SeptemberJune 30, 2017 and 2016, and 2015,$(541) million and $73$80 million and $(779) million for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016 respectively in earnings (loss) from discontinued operations, net of taxes
(e)Included $(30)
Primarily includes $76 million and $(47)$53 million in GE Capital revenues from services and $(13)$(10) million and $(25)$(17) million in interest and other financial charges in the three months ended SeptemberJune 30, 20162017 and 2015,2016, respectively and $1$101 million and $(587)$31 million in GE Capital revenues from services and $(48)$(23) million and $(13)$(36) million in interest and other financial charges in the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015, respectively.
(f)Primarily recorded in costs and expenses.
(g)Curtailment gain (loss), amortization of prior service costs and actuarial gains and losses out of AOCI are included in the computation of net periodic pension costs. See Note 1012 for further information.
















2016 3Q84 2017 2Q FORM 10-Q 96

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SHARES OF GE PREFERRED STOCK

At December 31, 2014 GECC had outstanding 50,000 shares of non-cumulative A, B and C Series perpetual preferred stock at an average dividend rate of 6.44% with a face value of $5,000 million. In connection with the GE Capital Exit Plan, on December 3, 2015, these shares were converted into a corresponding Series A, B, and C of fixed-to-floating rate non-cumulative perpetual preferred stock issued by GE with face value of $2,778 million, $2,073 million, $1,094 million, respectively, for a cumulative face value of $5,944 million and an initial average fixed dividend rate of 4.07%. The incremental shares were issued in order to compensate preferred holders for the lower dividend rate. Subsequent to the issuance of the preferred stock on December 3, 2015, in response to investor feedback, GE launched an exchange offer on December 18, 2015 that allowed GE preferred stock investors to exchange their existing Series A, B and C preferred stock into a Series D GE preferred stock. These Series D instruments bear an initial fixed interest rate of 5.00% through January 21, 2021, will bear a floating rate equal to three-month LIBOR plus 3.33% thereafter and are callable on January 21, 2021. On January 20, 2016, $2,687 million of Series A, $2,008 million of Series B and $999 million of Series C were exchanged into $5,694 million Series D GE preferred stock. In addition to interim dividends and accretion of $122 million, a deemed dividend of $232 million was recorded in the nine months ended September 30, 2016, $195 million for the amount by which the fair value of the Series D GE preferred stock exceeded the fair value of the original GECC Series A, B and C preferred stock, and a cash payment of $37 million paid to the GE Series A and B preferred stockholders who exchanged into the Series D GE preferred stock. Post exchange, $91 million of Series A, $64 million of Series B and $95 million of Series C GE preferred stock remain outstanding. The carrying value of the GE preferred stock at September 30, 2016 was $5,250 million and will increase to $5,944 million through periodic accretion to the respective call dates of each series. Principal and accretion for the preferred stock is recorded in other capital in the consolidated Statement of Financial Position and dividends and accretion are presented under the caption "Preferred stock dividends" in the Statement of Earnings (Loss). Dividends on GE preferred stock are payable semi-annually, in June and December and accretion is recorded on a quarterly basis.

In conjunction with the exchange of the GE Capital preferred stock into GE preferred stock and the exchange of Series A, B and C preferred stock into Series D preferred stock, GE Capital issued preferred stock to GE for which the amount and terms mirror the GE preferred stock held by external investors ($5,250 million carrying value at September 30, 2016).

NONCONTROLLING INTERESTS

Noncontrolling interests in equity of consolidated affiliates includesinclude common shares in consolidated affiliates and preferred stock issued by our affiliates.

CHANGES TO NONCONTROLLING INTERESTS
            
 Three months ended September 30 Nine months ended September 30
(In millions) 2016  2015  2016  2015
            
Beginning balance$1,693 $8,776 $1,864 $8,674
Net earnings (loss) 6  39  (62)  232
GECC preferred stock dividend -  -  -  (161)
Dividends (25)  (18)  (47)  (36)
Dispositions (53)  (3)  (94)  (9)
Other (including AOCI)(a)(b) 42  (6)  1  88
Ending balance$1,663 $8,788 $1,663 $8,788
            
(a)   Includes research & development partner funding arrangements, acquisitions and eliminations.

CHANGES TO NONCONTROLLING INTERESTS   
 Three months ended June 30 Six months ended June 30
(In millions)2017
2016
 2017
2016
      
Beginning balance$1,639
$1,667
 $1,663
$1,864
Net earnings (loss)14
1
 20
(68)
Dividends(22)(14) (31)(21)
Dispositions5
—
 (8)(42)
Other (including AOCI)(a)(b)(3)39
 (10)(40)
Ending balance at June 30$1,634
$1,693
 $1,634
$1,693
(a)Includes research & development partner funding arrangements and acquisitions.
(b)
Includes2016 included $(123) million for deconsolidation of investment funds managed by GE Asset Management (GEAM) upon the adoption of ASU 2015-02, Amendments to the Consolidation Analysis,. See Note 1.and prior to the July 1, 2016 sale of GEAM.

The ending balance for the period ended September 30, 2015 included $4,949 million related to GECC Series A, B and C preferred stock. In connection with the reorganization of the GE Capital businesses, original GECC preferred stock was converted to preferred stock issued by GE in the fourth quarter of 2015, and accordingly GE preferred stock is reflected in shareowners' equity in the consolidated Statement of Financial Position. There was no dividend on GECC preferred stock in the three months ended September 30, 2015. The dividend on GECC preferred stock was $161 million in the nine months ended September 30, 2015. In addition, the ending balance for the period ended September 30, 2015 also included $2,790 million related to Synchrony Financial, which was eliminated as part of the split-off of Synchrony Financial from GE in the fourth quarter of 2015.
2016 3Q FORM 10-Q 97

REDEEMABLE NONCONTROLLING INTERESTINTERESTS

Redeemable noncontrolling interestinterests presented in our statement of financial position includesinclude common shares issued by our affiliates that are redeemable at the option of the holder of those interests.

As part of the Alstom acquisition, we formed three joint ventures with Alstom in which the noncontrollinggrid technology, renewable energy, and global nuclear and French steam power. Noncontrolling interests in these joint ventures hold certain redemption rights. These joint ventures and the associated redemption rights are discussed in Note 7.8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Our retained earnings will beis adjusted for subsequent changes in the redemption value of the noncontrolling interest in these entities to the extent that the redemption value exceeds the carrying amount of the noncontrolling interest.

 Three months ended September 30 Nine months ended September 30
(In millions) 2016  2015  2016  2015
            
Beginning balance$3,070 $79 $2,972 $98
Net earnings (loss) (82)  -  (221)  (3)
Dividends (8)  -  (17)  (11)
Redemption value adjustment 68  -  178  1
Other 3  3  138  (4)
Ending balance$3,051 $82 $3,051 $82
            

CHANGES TO REDEEMABLE NONCONTROLLING INTERESTS    
 Three months ended June 30 Six months ended June 30
(In millions)2017
2016
 2017
2016
      
Beginning balance$3,054
$3,036
 $3,025
$2,972
Net earnings (loss)(28)(86) (109)(139)
Dividends—
—
 (11)(9)
Redemption value adjustment43
79
 114
110
Other125
42
 173
135
Ending balance at June 30(a)$3,193
$3,070
 $3,193
$3,070
(a)Included $2,894 million and $2,950 million related to the Alstom joint ventures at June 30, 2017 and 2016, respectively.

OTHER

During the first nine months of 2016, we repurchased $18,144 million of our common stock, including $9,125 million repurchased under the accelerated share repurchase (ASR) agreements.

In September 2016, we entered into an ASR agreement with a financial institution which allowed us to repurchase GE common stock at a price below its volume weighted-average price during a given period. During the third quarter, we paid $2,500 million and received and classified as treasury shares an initial delivery of 71,189,280 shares based on then-current market prices. The payment was recorded as a reduction to shareowners' equity, consisting of a $2,125 million increase in treasury stock, which reflects the value of the shares received upon initial delivery, and a $375 million decrease in other capital, which reflects the value of the stock held back pending final delivery. In the fourth quarter of 2016, we received the remaining 14,758,566 shares based on the final volume weighted-average price less the negotiated discount.

We accounted for the ASR as two separate transactions: (i) 71,189,280 shares of common stock initially delivered to GE and $2,125 million was accounted for as a treasury stock transaction and (ii) the unsettled contract of $375 million was determined to be a forward contract indexed to GE's own common stock. The initial delivery of 71,189,280 shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share. GE has determined that the forward contract, indexed to its own common stock, met all the criteria for equity classification.

In the third quarter of 2016, we received the remaining 18,269,775 shares related to the ASR agreement entered in June 2016 based on the final volume weighted-average price less the negotiated discount.

Common dividendsDividends from GE Capital to GE totaled $5,050$2,105 million, including cash dividends of $2,016 million, and $16,050$3,500 million to GE in the three months ended SeptemberJune 30, 2017 and 2016, respectively and $4,105 million, including cash dividends of $4,016 million, and $11,000 million in the ninesix months ended SeptemberJune 30, 2016, respectively. GE Capital did not pay any common dividends to GE in the three months ended September 30, 20152017 and paid common dividends of $450 million to GE in the nine months ended September 30, 2015,2016, respectively. Dividends on GE preferred stock totaled $33 million and $474$182 million, including cash dividends of $184$147 million to GEand $152 million, including cash dividends of $120 million in the three months ended SeptemberJune 30, 2017 and 2016, respectively, and $216 million, including cash dividends of $147 million and $441 million, including cash dividends of $185 million in the ninesix months ended SeptemberJune 30, 2017 and 2016, respectively. There were no dividendsDividends on GE preferred stock are payable semi-annually, in the three months endedJune and in the nine months ended September 30, 2015.December, and accretion is recorded on a quarterly basis.


2016 3Q2017 2Q FORM 10-Q 9885

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13.15. EARNINGS PER SHARE INFORMATION

 Three months ended September 30
 2016 2015
(In millions; per-share amounts in dollars)Diluted Basic Diluted Basic
            
Amounts attributable to the Company:           
Consolidated           
Earnings from continuing operations for           
   per-share calculation(a)(b)$2,127 $2,127 $1,962 $1,962
Preferred stock dividends (33)  (33)  -  -
Earnings from continuing operations attributable to           
   common shareowners for per-share calculation(a)(b)$2,094 $2,094 $1,962 $1,962
Earnings (loss) from discontinued operations           
   for per-share calculation(a)(b) (100)  (100)  540  540
Net earnings attributable to GE common           
   shareowners for per-share calculation(a)(b)$1,991 $1,991 $2,502 $2,502
            
Average equivalent shares           
Shares of GE common stock outstanding 8,904  8,904  10,103  10,103
Employee compensation-related shares (including           
   stock options) 112  -  70  -
Total average equivalent shares 9,016  8,904  10,173  10,103
            
Per-share amounts           
Earnings from continuing operations$0.23 $0.24 $0.19 $0.19
Earnings (loss) from discontinued operations (0.01)  (0.01)  0.05  0.05
Net earnings 0.22  0.22  0.25  0.25
            

 Three months ended June 30
 2017 2016
(In millions; per-share amounts in dollars)Diluted
Basic
 Diluted
Basic
      
Amounts attributable to the Company:     
Consolidated     
Earnings from continuing operations
   for per-share calculation(a)(b)
$1,514
$1,514
 $3,446
$3,449
Preferred stock dividends(182)(182) (152)(152)
Earnings from continuing operations attributable to
   common shareowners for per-share calculation(a)(b)
$1,332
$1,332
 $3,294
$3,297
Loss from discontinued operations
   for per-share calculation(a)(b)
(157)(157) (546)(543)
Net earnings attributable to GE common
   shareowners for per-share calculation(a)(b)
$1,179
$1,179
 $2,751
$2,753
      
Average equivalent shares     
Shares of GE common stock outstanding8,671
8,671
 9,079
9,079
Employee compensation-related shares (including stock options)89
—
 108
—
Total average equivalent shares8,760
8,671
 9,187
9,079
      
Per-share amounts     
Earnings from continuing operations$0.15
$0.15
 $0.36
$0.36
Loss from discontinued operations(0.02)(0.02) (0.06)(0.06)
Net earnings0.13
0.14
 0.30
0.30
 Nine months ended September 30
 2016 2015
(In millions; per-share amounts in dollars)Diluted Basic Diluted Basic
            
Amounts attributable to the Company:           
Consolidated           
Earnings (loss) from continuing operations for           
   per-share calculation(a)(b)$6,110 $6,110 $(913) $(913)
Preferred stock dividends (474)  (474)  -  -
Earnings (loss) from continuing operations attributable to           
   common shareowners for per-share calculation(a)(b)$5,636 $5,636 $(913) $(913)
Loss from discontinued operations           
   for per-share calculation(a)(b) (956)  (956)  (11,532)  (11,532)
Net earnings (loss) attributable to GE common           
   shareowners for per-share calculation(a)(b)$4,680 $4,680 $(12,436) $(12,436)
            
Average equivalent shares           
Shares of GE common stock outstanding 9,096  9,096  10,085  10,085
Employee compensation-related shares (including           
   stock options) 105  -  -  -
Total average equivalent shares 9,201  9,096  10,085  10,085
            
Per-share amounts           
Earnings (loss) from continuing operations$0.61 $0.62 $(0.09) $(0.09)
Earnings (loss) from discontinued operations (0.10)  (0.11)  (1.14)  (1.14)
Net earnings (loss) 0.51  0.51  (1.23)  (1.23)
            
      
 Six months ended June 30
 2017 2016
(In millions; per-share amounts in dollars)Diluted
Basic
 Diluted
Basic
      
Amounts attributable to the Company:     
Consolidated     
Earnings from continuing operations
   for per-share calculation(a)(b)
$2,401
$2,400
 $3,981
$3,983
Preferred stock dividends(216)(216) (441)(441)
Earnings from continuing operations attributable to
   common shareowners for per-share calculation(a)(b)
$2,185
$2,184
 $3,540
$3,542
Loss from discontinued operations
   for per-share calculation(a)(b)
(399)(400) (861)(858)
Net earnings attributable to GE common
   shareowners for per-share calculation(a)(b)
$1,793
$1,793
 $2,687
$2,690
      
Average equivalent shares     
Shares of GE common stock outstanding8,695
8,695
 9,179
9,179
Employee compensation-related shares (including stock options)94
—
 101
—
Total average equivalent shares8,789
8,695
 9,281
9,179
      
Per-share amounts     
Earnings from continuing operations$0.25
$0.25
 $0.38
$0.39
Loss from discontinued operations(0.05)(0.05) (0.09)(0.09)
Net earnings0.20
0.21
 0.29
0.29
(a)
Our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities. For the three months ended SeptemberJune 30, 2017 pursuant to the two-class method, as a result of excess dividends in respect to the current period earnings, losses were not allocated to the participating securities. For the three months ended June 30, 2016, and 2015, participating securities are included in the computation of earnings (loss) per share pursuant to the two-class method and the application of this treatment had an insignificant effect. For the nine month periodsix months ended SeptemberJune 30, 2017 and 2016, pursuant to the two-class method, as a result of the excess of dividends in respect to the current period earnings, losses were not allocated to the participating securities.  For the nine month period ended September 30, 2015, pursuant to the two-class method, as a result of the net loss from continuing operations, losses were not allocated to the participating securities.
(b)Included an insignificant amount of dividend equivalents in each of the periods presented.


2016 3Q86 2017 2Q FORM 10-Q 99

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ForFor the three months ended SeptemberJune 30, 2017 and 2016, and 2015, approximately 1533 million and 8925 million respectively,and of outstanding stock awards were not included in the computation of diluted earnings (loss) per share because their effect was antidilutive. ForFor the ninesix months ended SeptemberJune 30, 2017 and 2016, approximately 2426 million and 28 million of outstanding stock awards were not included in the computation of diluted earnings per share because their effect was antidilutive. As a result of the loss from continuing operations for the nine months ended September 30, 2015, outstanding stock awards of approximately 398 million, were not included in the computation of diluted earnings per share because their effect was antidilutive.

In September 2016, we entered into an ASR agreement to repurchase shares of GE common stock. See Note 12 for additional information. The initial delivery of 71,189,280 shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share. GE has determined that the forward contract, indexed to its own common stock, met all the criteria for equity classification. There was no dilutive impact on earnings per share related to the forward contract.

Earnings per share amounts are computed independently asfor earnings from continuing operations, loss from discontinued operations and net earnings. As a result, the sum of per-share amounts from continuing operations and discontinued operations may not equal the total per shareper-share amounts for net earnings (loss).
2016 3Q FORM 10-Q 100
NOTE 14. FAIR VALUE MEASUREMENTS

RECURRING FAIR VALUE MEASUREMENTS

Our assets and liabilities measured at fair value on a recurring basis include investment securities primarily supporting obligations to annuitants and policyholders in our run-off insurance operations.

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS      
               
       Netting  
(In millions)Level 1(a)Level 2(a)Level 3 adjustment(b)Net balance
September 30, 2016              
Assets              
Investment securities              
   Debt              
      U.S. corporate$- $21,600 $3,499 $- $25,099
      State and municipal -  4,502  55  -  4,556
      Mortgage and asset-backed -  2,958  8  -  2,966
      Corporate – non-U.S. -  11,636  237  -  11,873
      Government – non-U.S. -  752  -  -  752
      U.S. government and federal agency -  492  305  -  797
   Equity 301  14  10  -  325
Derivatives(c) -  6,947  27  (6,521)  454
Total$301 $48,902 $4,141 $(6,521) $46,823
               
Liabilities              
Derivatives$- $3,987 $1 $(3,289) $699
Other(e) -  1,107  -  -  1,107
Total$- $5,094 $1 $(3,289) $1,806
               
December 31, 2015              
Assets              
Investment securities              
   Debt              
      U.S. corporate$- $19,351 $3,006 $- $22,358
      State and municipal -  4,215  30  -  4,245
      Mortgage and asset-backed -  3,084  32  -  3,116
      Corporate – non-U.S. 12  544  290  -  847
      Government – non-U.S. 5  410  -  -  415
      U.S. government and federal agency 49  404  323  -  776
   Equity 194  9  13  -  217
Derivatives(c) -  7,312  79  (6,110)  1,281
Other(d) -  -  259  -  259
Total$260 $35,331 $4,033 $(6,110) $33,512
Liabilities              
Derivatives$- $5,677 $4 $(4,968) $713
Other(e) -  1,182  -  -  1,182
Total$- $6,860 $4 $(4,968) $1,895
               
(a)There were $12 million of Corporate – non-U.S. securities and $50 million of U.S. Treasuries and federal agency securities transferred from Level 1 to Level 2 in the nine months ended September 30, 2016 primarily attributable to changes in approach. There were no securities transferred between Level 1 and Level 2 in the year ended December 31, 2015.
(b)The netting of derivative receivables and payables (including the effects of any collateral posted or received) is permitted when a legally enforceable master netting agreement exists.
(c)The fair value of derivatives includes an adjustment for non-performance risk. At September 30, 2016 and December 31, 2015, the cumulative adjustment for non-performance risk was $(9) million and insignificant, respectively. See Notes 15 and 19 for additional information on the composition of our derivative portfolio.
(d)Includes private equity investments.
(e)Primarily represents the liabilities associated with certain of our deferred incentive compensation plans.
earnings.


2016 3Q FORM 10-Q 101
LEVEL 3 INSTRUMENTS

The majority of our Level 3 balances consist of investment securities classified as available-for-sale with changes in fair value recorded in shareowners' equity.

CHANGES IN LEVEL 3 INSTRUMENTS FOR THE THREE MONTHS ENDED
                   Net
                   change in
   Net Net              unrealized
  realized/  realized/              gains
  unrealizedunrealized              (losses)
   gains gains              relating to
   (losses) (losses)        Transfers Transfers   instruments
 Balance atincluded in included        into out of Balance at still held at
(In millions)July 1 earnings(a) in AOCI Purchases Sales Settlements Level 3(b) Level 3(b) September 30 September 30(c)
2016                           
Investment securities                              
  Debt                           
    U.S. corporate$3,422$(6)$19 $139 $(23) $(43) $- $(10) $3,499 $-
    State and municipal 32 - 1  22  -  -  -  -  55  -
    Mortgage and                           
       asset-backed 8 - -  -  -  -  -  -  8  -
    Corporate – non-U.S. 244 - -  -  -  -  3  (10)  237  -
    U.S. government and                           
       federal agency 307 - (2)  -  -  -  -  -  305  -
  Equity 8 (1) 3  -  -  -  -  -  10  -
Derivatives(d)(e) 37 9 -  -  -  (19)  -  -  27  (1)
Total$4,057$3$21 $161 $(23) $(62) $3 $(20) $4,141 $(1)
2015                           
Investment securities                              
  Debt                           
    U.S. corporate$3,024$5$(7) $74 $(28) $(37) $35 $(15) $3,050 $-
    State and municipal 47 - -  -  -  -  -  (17)  30  -
    Mortgage and                           
       asset-backed 78 (2) -  -  -  -  33  (70)  40  -
    Corporate – non-U.S. 283 - -  1  -  (1)  -  -  283  -
    Government – non-U.S. 2 - -  -  -  -  -  (2)  -  -
    U.S. government and                           
       federal agency 293 - 16  -  -  -  -  -  309  -
  Equity 6 - (1)  -  -  -  6  -  10  -
Derivatives(d)(e) 65 15 -  -  -  (1)  -  -  79  (27)
Other 222 10 -  -  -  -  -  -  233  -
Total$4,020$29$8 $74 $(28) $(40) $74 $(103) $4,034 $(27)
                            
(a)
Earnings effects are primarily included in the "GE Capital revenues from services" and "Interest and other financial charges" captions in the Statement of Earnings.
(b)Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were primarily a result of increased use of quotes from independent pricing vendors based on recent trading activity.
(c)Represents the amount of unrealized gains or losses for the period included in earnings.
(d)Represents derivative assets net of derivative liabilities and includes cash accruals of none and $12 million not reflected in the fair value hierarchy table for the three months ended September 30, 2016 and 2015, respectively.
(e)Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Notes 15 and 19.
2016 3Q FORM 10-Q 102
CHANGES IN LEVEL 3 INSTRUMENTS FOR THE NINE MONTHS ENDED
                   Net
                   change in
   Net Net              unrealized
  realized/  realized/              gains
  unrealizedunrealized              (losses)
   gains gains              relating to
   (losses) (losses)        Transfers Transfers   instruments
 Balance atincluded in included        into out of Balance at still held at
(In millions)January 1earnings(a) in AOCI Purchases Sales Settlements Level 3(b) Level 3(b) September 30 September 30(c)
2016                           
Investment securities                              
  Debt                           
    U.S. corporate$3,006$3$251 $372 $(28) $(86) $8 $(28) $3,499 $-
    State and municipal 30 - 3  22  -  (1)  -  -  55  -
    Mortgage and                           
       asset-backed 32 (19) -  -  -  (6)  -  -  8  -
    Corporate – non-U.S. 290 28 -  9  (82)  -  2  (10)  237  -
    U.S. government and                           
       federal agency 323 - (16)  -  -  (1)  -  -  305  -
  Equity 13 (7) 4  -  -  -  -  -  10  -
Derivatives(d)(e) 88 (13) -  -  -  (58)  -  10  27  (21)
Other 259 - -  -  -  -  -  (259)  -  -
Total$4,042$(8)$241 $404 $(110) $(152) $10 $(287) $4,141 $(21)
2015                           
Investment securities                              
  Debt                           
    U.S. corporate$3,053$(1)$(93) $255 $(78) $(93) $35 $(28) $3,050 $-
    State and municipal 58 - (2)  -  -  (8)  -  (17)  30  -
    Mortgage and                           
       asset-backed 145 (11) (9)  -  (32)  (3)  33  (83)  40  -
    Corporate – non-U.S. 337 - (4)  1  (49)  (1)  -  -  283  -
    Government – non-U.S. 2 - -  -  -  -  -  (2)  -  -
    U.S. government and                           
       federal agency 266 - 44  -  -  (1)  -  -  309  -
  Equity 9 2 (3)  6  (6)  (4)  6  -  10  -
Derivatives(d)(e) 29 19 -  -  -  (9)  40  -  79  13
Other 277 (24) -  -  (20)  -  -  -  233  (37)
Total$4,175$(15)$(66) $261 $(185) $(120) $115 $(130) $4,034 $(24)
                            
(a)
Earnings effects are primarily included in the "GE Capital revenues from services" and "Interest and other financial charges" captions in the Statement of Earnings.
(b)
Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 for the nine months ended September 30, 2016 were primarily a result of the adoption of ASU 2015-02, Amendments to the Consolidation Analysis. See Note 1.
(c)Represents the amount of unrealized gains or losses for the period included in earnings.
(d)Represents derivative assets net of derivative liabilities and includes cash accruals of none and $12 million not reflected in the fair value hierarchy table for the nine months ended September 30, 2016 and 2015, respectively.
(e)
Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Notes 15 and 19.
2016 3Q FORM 10-Q 103

The following table represents non-recurring fair value amounts (as measured at the time of the adjustment) for those assets remeasured to fair value on a non-recurring basis during the fiscal year and still held at September 30, 2016 and December 31, 2015.


 Remeasured during Remeasured during
 the nine months ended  the year ended
 September 30, 2016 December 31, 2015
(In millions)Level 2 Level 3 Level 2 Level 3
            
Financing receivables and financing receivables held for sale$- $31 $- $154
Cost and equity method investments -  230  1  436
Long-lived assets 27  681  2  882
Total$27 $942 $3 $1,471
            

The following table represents the fair value adjustments to assets measured at fair value on a non-recurring basis and still held at September 30, 2016 and 2015.

 Three months ended September 30 Nine months ended September 30
(In millions)2016 2015 2016 2015
            
Financing receivables and financing receivables held for sale$- $(10) $(14) $(46)
Cost and equity method investments (2)  (280)  (95)  (370)
Long-lived assets (21)  (89)  (161)  (142)
Total$(24) $(380) $(270) $(558)
            
2016 3Q FORM 10-Q 104
LEVEL 3 MEASUREMENTS - SIGNIFICANT UNOBSERVABLE INPUTS
          
        Range
(Dollars in millions) Fair value Valuation technique Unobservable inputs (weighted-average)
          
September 30, 2016         
Recurring fair value measurements         
Investment securities – Debt         
      U.S. corporate $885 Income approach Discount rate(a) 1.4%-17.4% (7.6%)
      Mortgage and asset-backed  8 Income approach Discount rate(a) 2.8%-7.0% (4.9%)
          
Non-recurring fair value measurements
Financing receivables and         
   financing receivables held for sale $31 Income approach Discount rate(a) 9.0%-30.0% (20.4%)
          
Cost and equity method investments  132 Income approach Discount rate(a) 9.0%-20.0% (13.3%)
          
Long-lived assets  620 Income approach Discount rate(a) 2.5%-11.6% (10.4%)
        Market comparables    
          
December 31, 2015         
Recurring fair value measurements         
Investment securities – Debt         
      U.S. corporate $834 Income approach Discount rate(a) 1.7%-14.1% (8.6%)
      Mortgage and asset-backed  31 Income approach Discount rate(a) 5.0%-12.0% (10.5%)
      Corporate – non-U.S.  236 Income approach Discount rate(a) 6.5%-14.0% (7.5%)
Other financial assets  259 Income approach, EBITDA multiple 6.1X-15.0X (9.9X)
        Market comparables Capitalization rate 7.8%-7.8% (7.8%)
          
Non-recurring fair value measurements
Financing receivables and         
   financing receivables held for sale $146 Income approach Discount rate(a) 6.5%-30.0% (10.7%)
          
Cost and equity method investments  293 Income approach, Discount rate(a) 9.5%-35.0% (14.4%)
          
Long-lived assets  830 Income approach Discount rate(a) 1.8%-11.7% (10.5%)
          
(a)Discount rates are determined based on inputs that market participants would use when pricing investments, including credit and liquidity risk. An increase in the discount rate would result in a decrease in the fair value.


At September 30, 2016 and December 31, 2015, other Level 3 recurring fair value measurements of $3,244 million and $2,637 million, respectively, and non-recurring measurements of $148 million and $122 million, respectively, are valued using non-binding broker quotes or other third-party sources. At September 30, 2016 and December 31, 2015, other recurring fair value measurements of $4 million and $32 million, respectively, and non-recurring fair value measurements of $11 million and $80 million, respectively, were individually insignificant and utilize a number of different unobservable inputs not subject to meaningful aggregation.
2016 3Q FORM 10-Q 105
NOTE 15.16. FINANCIAL INSTRUMENTS

The following table provides information about assets and liabilities not carried at fair value. The table excludes finance leases and non-financial assets and liabilities. Substantially all of the assets discussed below are considered to be Level 3. The vast majority of our liabilities'liabilities’ fair value can be determined based on significant observable inputs and thus considered Level 2. Few of the instruments are actively traded and their fair values must often be determined using financial models. Realization of the fair value of these instruments depends upon market forces beyond our control, including marketplace liquidity.

  September 30, 2016 December 31, 2015
  Carrying   Carrying  
  amount Estimated amount Estimated
(In millions) (net) fair value (net) fair value
             
GE            
Assets            
   Investments and notes receivable $1,388 $1,458 $1,104 $1,174
Liabilities            
   Borrowings(a)(b)  19,823  21,363  18,397  18,954
   Borrowings (debt assumed)(a)(c)  64,800  73,879  84,704  92,231
             
GE Capital            
Assets            
   Loans  20,047  19,836  20,061  19,774
   Time deposits(d)  -  -  10,386  10,386
   Other commercial mortgages  1,417  1,536  1,381  1,447
   Loans held for sale  497  497  342  342
   Other financial instruments(e)  102  125  94  110
Liabilities            
   Borrowings(a)(f)(g)(h)  66,649  69,839  95,474  99,396
   Investment contracts  2,822  3,420  2,955  3,441
             
(a)     See Note 9.

(b)           Included $166 million and $116 million of accrued interest in estimated fair value at September 30, 2016 and December 31, 2015, respectively.
 June 30, 2017 December 31, 2016
(In millions)
Carrying
amount
(net)

Estimated
fair value

 
Carrying
amount
(net)

Estimated
fair value

      
GE     
Assets     
Investments and notes receivable$1,305
$1,355
 $1,526
$1,595
Liabilities     
Borrowings(a)(b)29,650
30,455
 19,184
19,923
Borrowings (debt assumed)(a)(c)52,291
59,603
 60,109
66,998
      
GE Capital     
Assets     
Loans19,740
19,774
 21,060
20,830
Other commercial mortgages1,471
1,554
 1,410
1,472
Loans held for sale604
604
 473
473
Other financial instruments(d)116
149
 121
150
Liabilities     
Borrowings(a)(e)(f)(g)54,691
58,752
 58,523
62,024
Investment contracts2,671
3,130
 2,813
3,277
(c)
(a)See Note 10.
(b)Included $682$107 million and $1,006$115 million of accrued interest in estimated fair value at SeptemberJune 30, 20162017 and December 31, 2015,2016, respectively.
(d)Balances
(c)Included $553 million and $803 million of accrued interest in estimated fair value at June 30, 2017 and December 31, 2015 comprised high quality interest bearing deposits of global banks that matured in April and July 2016.2016, respectively.
(e)
(d)Principally comprises cost method investments.
(f)
(e)Fair values exclude interest rate and currency derivatives designated as hedges of borrowings. Had they been included, the fair value of borrowings at SeptemberJune 30, 20162017 and December 31, 20152016 would have been reduced by $5,060$2,478 million and $3,001$2,397 million, respectively.
(g)
(f)Included $878$808 million and $1,103$775 million of accrued interest in estimated fair value at SeptemberJune 30, 20162017 and December 31, 2015,2016, respectively.

(h)
(g)Excluded $59,798$48,216 million and $84,704$58,780 million of net intercompany payable to GE at SeptemberJune 30, 20162017 and December 31, 2015 respectively, which includes a reduction for a $5,002 million short-term loan in second quarter of 2016, from GE Capital to GE, which bears the right of offset against amounts owed under the assumed debt agreement.respectively.

NOTIONAL AMOUNTS OF LOAN COMMITMENTS     
      
(In millions)September 30, 2016 December 31, 2015
     
Ordinary course of business lending commitments(a)$529 $531
Unused revolving credit lines 200  279
      
NOTIONAL AMOUNTS OF LOAN COMMITMENTS  
   
(In millions)June 30, 2017
December 31, 2016
   
Ordinary course of business lending commitments(a)$789
$687
Unused revolving credit lines229
238
(a)Excluded investment commitments of $800$259 million and $782$522 million at SeptemberJune 30, 20162017 and December 31, 2015,2016, respectively.



2016 3Q2017 2Q FORM 10-Q 10687

SECURITIES REPURCHASE AND REVERSE REPURCHASE ARRANGEMENTS
FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our issuances of securities repurchase agreements are insignificant. No repurchase agreements were accounted for as off-book financing and we do not engage in securities lending transactions. At September 30, 2016, we were party to no repurchase agreements.

We also enter into reverse securities repurchase agreements, primarily for short-term investment with maturities of 90 days or less. At September 30, 2016, we were party to reverse repurchase agreements totaling $7.1 billion, which were reported in cash and equivalents on the financial statements. Under these reverse securities repurchase agreements, we typically lend available cash at a specified rate of interest and hold U.S. or highly-rated European government securities as collateral during the term of the agreement. Collateral value is in excess of amounts loaned under the agreements.

DERIVATIVES AND HEDGING

In this section, we explain how we use derivatives to manage our risks and how these financial instruments are reflected in our financial statements. Our use of derivatives relates solely to risk management; we do not use derivatives for speculation. As discussed elsewhere in this report, we are executing a plan to reduce the size and scope of our financial services business, with the intention of principally retaining those activities that support our industrial businesses. The affected businesses have either been sold or are held for sale and are presented as discontinued operations in our financial statements as of September 30, 2016. As a result of these actions, the significance of financial services hedging activity will diminish significantly in the future.

RISK MANAGEMENT STRATEGY

In our industrial businesses, we buy, manufacture and sell components and products across global markets. These activities expose us to changes in foreign currency exchange rates and commodity prices, which can adversely affect revenues earned and costs of operating our industrial businesses. When the currency in which we sell equipment differs from the primary currency of one of our industrial businesses (known as its functional currency) and the exchange rate fluctuates, it will affect the revenue we earn on the sale. These sales and purchase transactions also create receivables and payables denominated in foreign currencies, which expose us to foreign currency gains and losses based on changes in exchange rates. Changes in the price of a raw material that we use in manufacturing can affect the cost of manufacturing. We use derivatives to mitigate or eliminate these exposures.

With respect to our ongoing financial services activities, our key exposures relate to interest rate and currency risk. To the extent feasible, we seek to ensure that the characteristics of the debt we have issued align with the assets being funded. The form (fixed rate or floating rate) and currency denomination of the debt we issue depends on a number of considerations, the most important of which are market factors (demand, pricing, etc.) that affect the economics of the issuance. If the form and currency denomination of the debt does not match the assets being funded, we typically execute derivatives to meet this objective within defined limits.

2016 3Q FORM 10-Q 107

FORMS OF HEDGING

In this section we explain the hedging methods we use and their effects on our financial statements.

Cash flow hedges – We use cash flow hedging primarily to reduce or eliminate the effects of foreign exchange rate changes on purchase and sale contracts in our industrial businesses and to convert foreign currency debt that we have issued in our financial services business back to our functional currency. Accordingly, the vast majority of our derivative activity in this category consists of currency exchange contracts. As a result of acquisitions in our industrial businesses, we expect to significantly expand our foreign currency hedging activity related to long-term contracts. We also use commodity derivatives to reduce or eliminate price risk on raw materials purchased for use in manufacturing.

Under hedge accounting, the derivative carrying amount is measured at fair value each period and any resulting gain or loss is recorded in a separate component of shareowners' equity. Differences between the derivative and the hedged item may cause changes in their fair values to not offset completely, which is referred to as ineffectiveness. When the hedged transaction occurs, these amounts are released from shareowners' equity, in order that the transaction will be reflected in earnings at the rate locked in by the derivative. The effect of the hedge is reported in the same financial statement line item as the earnings effects of the hedged transaction. The table below summarizes how the derivative is reflected in the balance sheet and in earnings under hedge accounting. The effect of the hedged forecasted transaction is not presented in this table but offsets the earnings effect of the derivative.

As part of our ongoing effort to reduce borrowings, we may repurchase debt that was in a cash flow hedge accounting relationship. At the time of determining that the debt cash flows are probable of not occurring any related OCI will be released to earnings.

FINANCIAL STATEMENT EFFECTS - CASH FLOW HEDGES
            
 Three months ended September 30 Nine months ended September 30
(In millions)2016 2015 2016 2015
            
Balance sheet changes           
   Fair value of derivatives increase (decrease)$2 $(123) $(43) $(760)
   Shareowners' equity (increase) decrease (2)  124  43  761
            
Earnings (loss) related to ineffectiveness -  1  -  1
Earnings (loss) effect of derivatives(a) (57)  (109)  (128)  (691)
            
(a)            Offsets earnings effect of the hedged forecasted transaction           

The following table explains the effect of changes in market rates on the fair value of derivatives we use most commonly in cash flow hedging arrangements.

FINANCIAL STATEMENT EFFECTS - CASH FLOW HEDGES
 Three months ended June 30 Six months ended June 30
(In millions)2017
2016
 2017
2016
      
Balance sheet changes     
Fair value of derivatives increase (decrease)$34
$11
 $56
$(45)
Shareowners' equity (increase) decrease(34)(12) (56)45
      
Earnings (loss) related to ineffectiveness—
—
 —
1
Earnings (loss) effect of derivatives(a)65
14
 64
(71)
Interest rate forwards/swapsInterest rate increasesInterest rate decreases
   Pay fixed rate/receive floating rate(a)Fair value increasesFair value decreases
Currency forwards/swapsU.S. dollar strengthensU.S. dollar weakens
   Pay U.S. dollars/receive foreign currencyFair value decreasesFair value increases
Commodity derivativesPrice increasesPrice decreases
   Receive commodity/ pay fixed priceFair value increasesFair value decreases
Offsets earnings effect of the hedged forecasted transaction

Fair value hedges – These derivatives are used to hedge the effects of interest rate and currency exchange rate changes on debt that we have issued. We have issued mostly fixed rate debt that is used to fund both fixed and floating rate assets. In instances where fixed rate debt is funding floating rate assets, we have an exposure to changes in interest rates. We enter into interest rate swaps that receive a fixed rate and pay a floating rate of interest to align with that portion of our debt which funds floating rate assets. These swaps typically match the maturity of the associated debt being hedged.
FINANCIAL STATEMENT EFFECTS - FAIR VALUE HEDGES    
     
 Three months ended June 30Six months ended June 30
(In millions)2017
2016
2017
2016
     
Balance sheet changes    
Fair value of derivative increase (decrease)$(57)$888
$(282)$2,610
Adjustment to carrying amount of hedged debt (increase) decrease2
(933)164
(2,688)
     
Earnings (loss) related to hedge ineffectiveness(56)(46)(118)(77)

2016 3Q FORM 10-Q 108
Under hedge accounting, the derivative is measured at fair value and the carrying amount of the hedged debt is adjusted for the change in value related to the exposure being hedged, with both adjustments offset to earnings as interest expense. For example, the earnings effect of an increase in the fair value of the derivative will be largely offset by the earnings effect of an increase in the carrying amount of the hedged debt. Differences between the terms of the derivative and the hedged debt may cause changes in their fair values to not offset completely, which is referred to as ineffectiveness. The table below summarizes how the derivative and the hedged debt are reflected in the balance sheet and in earnings under hedge accounting. The effect on interest expense of changing from the fixed rate on the debt to the floating rate on the swap is not shown in this table.

FINANCIAL STATEMENT EFFECTS - FAIR VALUE HEDGES           
            
 Three months ended September 30 Nine months ended September 30
(In millions)2016 2015 2016 2015
            
Balance sheet changes           
   Fair value of derivative increase (decrease)$(116) $1,383 $2,494 $510
   Adjustment to carrying amount of hedged debt (increase) decrease 37  (1,379)  (2,651)  (590)
            
Earnings (loss) related to hedge ineffectiveness (79)  4  (156)  (80)
            

The effect of changes in market interest rates on the fair value of derivatives we use most commonly in fair value hedging arrangements is presented below.

Interest rate forwards/swapsInterest rate increasesInterest rate decreases
   Pay floating rate/receive fixed rateFair value decreasesFair value increases

Net investment hedges – We invest in foreign operations that conduct their financial services activities in currencies other than the US dollar. We hedge the currency risk associated with those investments primarily using short-term currency exchange contracts under which we receive US dollars and pay foreign currency and non-derivativesnon-derivative instruments such as debt denominated in a foreign currency.

Under hedge accounting, the portion of the fair value change of the derivative or debt instrument that relates to changes in spot currency exchange rates is offset in a separate component of shareowners' equity. For example, an increase in the fair value of the derivative related to changes in spot exchange rates will be offset by a corresponding increase in the currency translation component of shareowners' equity. The portion of the fair value change of the derivative related to differences between spot and forward rates, which primarily relates to the interest component, is recorded in earnings each period as interest expense. As a result of this hedging strategy, the investments in foreign operations of our financial services business are largely unaffected by changes in currency exchange rates. The amounts recorded in shareowners' equity only affect earnings if the hedged investment is sold, substantially liquidated, or control is lost.
FINANCIAL STATEMENT EFFECTS - NET INVESTMENT HEDGES
 Three months ended June 30Six months ended June 30
(In millions)2017
2016
2017
2016
     
Balance sheet changes    
Fair value of derivatives increase (decrease)$(98)$(282)$(191)$47
Fair value of non-derivative instruments (increase) decrease(389)(322)(859)(49)
Shareowners' equity (increase) decrease490
609
1,063
40
     
Earnings (loss) related to    
spot-forward differences and ineffectiveness3
5
13
37
Earnings (loss) related to    
reclassification upon sale or liquidation(a)—
(380)59
(1,072)

FINANCIAL STATEMENT EFFECTS - NET INVESTMENT HEDGES
            
 Three months ended September 30 Nine months ended September 30
(In millions)2016 2015 2016 2015
            
Balance sheet changes           
   Fair value of derivatives increase (decrease)$107 $1,260 $154 $4,627
   Fair value of non-derivatives (increase) decrease 450  -  330  -
   Shareowners' equity (increase) decrease (552)  (1,297)  (513)  (4,720)
 ��          
Earnings (loss) related to           
   spot-forward differences and ineffectiveness 5  (37)  (28)  (93)
Earnings (loss) related to           
   reclassification upon sale or liquidation(a) 47  1,935  (1,025)  2,524
            
(a)Included $47 millionzero and $1,935$(380) million recorded in discontinued operations in the three months ended SeptemberJune 30, 2017 and 2016 and 2015, and $(1,026)$59 million and $2,527$(1,072) million recorded in discontinued operations in the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively.



88 2017 2Q FORM 10-Q

The effect of changes in currency exchange rates on the fair value of derivatives we use in net investment hedging arrangements is presented below.
FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Currency forwards/swapsU.S. dollar strengthensU.S. dollar weakens
   Receive U.S. dollars/pay foreign currencyFair value increasesFair value decreases
2016 3Q FORM 10-Q 109
Economic Hedges - These derivatives are not designated as hedges from an accounting standpoint (and therefore we do not apply hedge accounting to the relationship) but otherwise serve the same economic purpose as other hedging arrangements. EconomicWe use economic hedges when we have exposures to currency exchange risk for which we are usedunable to meet the requirements for hedge accounting or when changes in the carrying amount of the hedged item are already recorded in earnings in the same period as the derivative making hedge accounting unnecessary. For example, in our industrial businesses we record the effects of spot exchange rate changes on our foreign currency payables and receivables in earnings each period along with the fair value changes on the foreign currency forward contracts used as economic hedges. In these cases, the earnings effects of the derivative and hedged item largely offset. We also use economic hedges when we have exposures to currency exchange risk for which we are unable to meet the requirements for hedge accounting. For example, we use currency forwards as an economic hedge of forecasted foreign currency cash flows under long-term contracts. In this case, the forecast period is so long that it is difficult to meet the hedge accounting requirement that the occurrence of the hedged transactions is probable. For these types of economic hedges, changes in the fair value of the derivative are recorded in earnings currently but changes in the value of the forecasted foreign currency cash flows are only recognized in earnings when they occur. As a result, evenEven though the derivative is an effective economic hedge, there ismay be a net effect on earnings in each period due to differences in the timing of earnings recognition between the derivative and the hedged item.

The table below provides information about the earnings effects of all derivatives that serve as economic hedges. These derivatives are marked to fair value through earnings each period. For our financial services business, these gains and losses are reported in "GE Capital revenues from services". For our industrial businesses, the effects are reported in "Other income" or "Other costs and expenses". The offsetting earnings effects associated with hedged assets and liabilities are also displayed in the table below. In general, the earnings effects of the hedged item are recorded in the same financial statement line as the derivative. The earnings effect of economic hedges, after considering offsets related to earnings effects of hedged assets and liabilities, is substantially offset by changes in the fair value of forecasted transactions that have not yet affected earnings.

FINANCIAL STATEMENT EFFECTS - ECONOMIC HEDGES    
 Three months ended June 30Six months ended June 30
(In millions)2017
2016
2017
2016
     
Balance sheet changes    
Change in fair value of economic hedge increase (decrease)$979
$157
$641
$(122)
Change in carrying amount of item being hedged increase (decrease)(1,180)(286)(956)(198)
     
Earnings (loss) effect of economic hedges(a)(200)(130)(315)(321)
FINANCIAL STATEMENT EFFECTS - ECONOMIC HEDGES           
            
 Three months ended September 30 Nine months ended September 30
(In millions)2016 2015 2016 2015
            
Balance sheet changes           
   Change in fair value of economic hedge increase (decrease)$(692) $(486) $(835) $(2,729)
   Change in carrying amount of item being hedged increase (decrease) 386  483  209  2,631
            
Earnings (loss) effect of economic hedges(a) (306)  (3)  (626)  (98)
            
(a)
(a)Offset by the future earnings effects of economically hedged item.

The table below explains the effects of market rate changes on the fair value of derivatives we use most commonly as economic hedges.

Interest rate forwards/swaps interest rateInterest rate increasesInterest rate decreases
   Pay floating rate/receive fixed rateFair value decreasesFair value increases
Currency forwards/swapsU.S. dollar strengthensU.S. dollar weakens
   Pay U.S. dollars/receive foreign currencyFair value decreasesFair value increases
   Receive U.S. dollars/pay foreign currencyFair value increasesFair value decreases
Commodity derivativesPrice increasesPrice decreases
   Receive commodity/ pay fixed priceFair value increasesFair value decreases

NOTIONAL AMOUNT OF DERIVATIVES

The notional amount of a derivative is the number of units of the underlying (for example, the notional principal amount of the debt in an interest rate swap). The notional amount is used to compute interest or other payment streams to be made under the contract and is a measure of our level of activity. We generally disclose derivative notional amounts on a gross basis. A substantial majority of the outstanding notional amount of $192$173 billion at SeptemberJune 30, 20162017 is related to managing interest rate and currency risk between financial assets and liabilities in our financial services business. The remaining derivative notional amount primarily relates to hedges of anticipated sales and purchases in foreign currency, commodity purchases and contractual terms in contracts that are considered embedded derivatives.

2016 3Q FORM 10-Q 110
The table below provides additional information about how derivatives are reflected in our financial statements. Derivative assets and liabilities are recorded at fair value exclusive of interest earned or owed on interest rate derivatives, which is presented separately on our balance sheet. Cash collateral and securities held as collateral represent assets that have been provided by our derivative counterparties as security for amounts they owe us (derivatives that are in an asset position).
CARRYING AMOUNTS RELATED TO DERIVATIVES  
(In millions)June 30, 2017December 31, 2016
   
Derivative assets$4,077
$5,467
Derivative liabilities(2,511)(4,883)
Accrued interest484
792
Cash collateral & credit valuation adjustment(1,599)(672)
Net Derivatives451
703
Securities held as collateral(432)(442)
Net amount$19
$262

CARRYING AMOUNTS RELATED TO DERIVATIVES     
      
(In millions)September 30, 2016 December 31, 2015
      
Derivative assets$6,976 $7,391
Derivative liabilities (3,988)  (5,681)
Accrued interest 740  1,014
Cash collateral & credit valuation adjustment (3,232)  (1,141)
Net Derivatives 496  1,583
Securities held as collateral (741)  (1,277)
Net amount$(245) $306
      











2017 2Q FORM 10-Q 89

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EFFECTS OF DERIVATIVES ON EARNINGS

All derivatives are marked to fair value on our balance sheet, whether they are designated in a hedging relationship for accounting purposes or are used as economic hedges. As discussed in the previous sections, each type of hedge affects the financial statements differently. In fair value and economic hedges, both the hedged item and the hedging derivative largely offset in earnings each period. In cash flow and net investment hedges, the effective portion of the hedging derivative is offset in separate components of shareowners' equity and ineffectiveness is recognized in earnings. The table below summarizes these offsets and the net effect on pre-tax earnings.
 Three months ended June 30Six months ended June 30
(In millions)
Effect on
hedging instrument
Effect on
underlying
Effect on
earnings
Effect on
hedging instrument
Effect on
underlying
Effect on
earnings
       
2017      
Cash flow hedges$34
$(34)$—
$56
$(56)$—
Fair value hedges(57)2
(56)(282)164
(118)
Net investment hedges(a)(487)490
3
(1,050)1,063
13
Economic hedges(b)979
(1,180)(200)641
(956)(315)
Total

$(253)

$(420)
       
2016      
Cash flow hedges$11
$(12)$—
$(45)$45
$1
Fair value hedges888
(933)(46)2,610
(2,688)(77)
Net investment hedges(a)(604)609
5
(2)40
37
Economic hedges(b)157
(286)(130)(122)(198)(321)
Total

$(171)

$(360)

  Three months ended September 30Nine months ended September 30
  Effect on  Effect on  Effect on  Effect on  Effect on  Effect on
(In millions) hedging instrument  underlying earnings  hedging instrument  underlying earnings
                  
2016                 
Cash flow hedges$2 $(2) $- $(43) $43 $-
Fair value hedges (116)  37  (79)  2,494  (2,651)  (156)
Net investment hedges(a) 557  (552)  5  484  (513)  (28)
Economic hedges(b) (692)  386  (306)  (835)  209  (626)
Total      $(380)       $(810)
                  

2015                 
Cash flow hedges$(123) $124 $1 $(760) $761 $1
Fair value hedges 1,383  (1,379)  4  510  (590)  (80)
Net investment hedges(a) 1,260  (1,297)  (37)  4,627  (4,720)  (93)
Economic hedges(b) (486)  483  (3)  (2,729)  2,631  (98)
Total      $(35)       $(270)
                  
The amounts in the table above generally do not include associated derivative accruals in income or expense.

(a)                Both derivatives and non-derivatives hedging instruments are included.
(b)                Net effect is substantially offset by the change in fair value of the hedged item that will affect earnings in future periods.

(a)Both derivatives and non-derivatives hedging instruments are included.
(b)Net effect is substantially offset by the change in fair value of the hedged item that will affect earnings in future periods.

See Note 12 provides14 for additional information about changes in shareowners' equity related to hedging and amounts released to earnings. Other

See Note 21 for other supplemental information about derivatives and hedging can be found in Note 19.
hedging.

2016 3Q FORM 10-Q 111

NOTE 16.17. VARIABLE INTEREST ENTITIES
We use variable interest entities in
A VIE is an entity that has one of three characteristics: (1) it is controlled by someone other than its shareowners or partners, (2) its shareowners or partners are not economically exposed to the ordinaryentity's earnings (for example, they are protected against losses), or (3) it was thinly capitalized when it was formed.

In the normal course of business to operate joint ventures towe become involved with VIEs either because we help create them or we invest in them. Our VIEs either provide goods and services to our customers or provide financing to third parties for the purchase of GE goods and services. If we control the VIE, we consolidate it and provide disclosure below. However, if the VIE is a business and use of its assets is not limited to arrange asset backed financing, including securitizations.  Investors in these entities only have recourse to the assets owned by the entity andsettling its liabilities, ongoing disclosures are not to our general credit. We do not have implicit support arrangements with any VIE. We did not provide non-contractual support for previously transferred financing receivables to any VIE in 2016 or 2015.required.

CONSOLIDATED VARIABLE INTEREST ENTITIES

Our most significant consolidated VIEs are the three joint ventures wethat were formed with Alstom to facilitateas part of the Alstom acquisition. These joint ventures include grid technology, renewable energy, and global nuclear and French steam power. Thepower and have combined assets, liabilities and redeemable non-controlling interest in the joint ventures as of SeptemberJune 30, 2017 and December 31, 2016 was $15,335of $16,193 million, $6,898$9,006 million and $2,942$2,894 million and $14,460 million, $9,922 million and $2,709 million, respectively. Further information about the formation of the Alstom joint ventures is provided in Note 7. These joint ventures are considered VIEs due tobecause the nature of the exit mechanismsequity held by Alstom and are consolidated by GEdoes not participate fully in the earnings of the ventures due to contractual features allowing Alstom to sell their interests back to GE. We consolidate these ventures because we control all their significant activities of the joint ventures. As theseactivities. These joint ventures are in all other respects regular businesses would otherwise beand are therefore exempt from ongoing disclosure requirements for consolidated under the voting model and their assets can be used for purposes other than settlement of the joint ventures' obligations, there is no continuing VIE disclosure requirement for these consolidated joint ventures.VIEs provided below.

The Consolidatedtable below provides information about consolidated VIEs for which we have continuingthat are subject to ongoing disclosure requirements fall into two main groups. We consolidate VIEs because we have the power to direct the activities that significantly affect the VIE's economic performance, typically because of our role as either servicer or manager for the VIE, which are further described below:

GE Capital Consolidated Securitization Entities (CSEs) were created to facilitate securitization of financial assets and other forms of asset-backed financing that serve as an alternative funding source by providing access to variable funding notes and term markets. The securitization transactions executed with these entities are similar to those used by many financial institutions andrequirements. Substantially all are non-recourse. We provide servicing for all of the assets in these entities.
The financing receivables in these entities have similar risks and characteristics to our other financing receivables and were underwritten to the same standard. Accordingly, the performance of these assets has been similar to our other financing receivables; however, the blended performance of the pools of receivables in these entities reflects the eligibility criteria that we apply to determine which receivables are selected for transfer. Contractually the cash flows from these financing receivables must first be used to pay third-party debt holders as well as other expenses of the entity. Excess cash flows are available to GE and GE Capital. The creditors of these entities were created to help our customers finance the purchase of GE goods and services or to purchase GE customer notes receivable arising from sales of GE goods and services. These entities have no claim on otherfeatures that could expose us to losses that could significantly exceed the difference between the consolidated assets of GE or GE Capital.and liabilities.

90 2017 2Q FORM 10-Q

Other remaining assets and liabilities of consolidated VIEs within GE and GE Capital relate primarily to three categories of entities: (1) joint ventures that lease equipment with $812 million of assets and $716 million of liabilities; (2) other entities that are involved in power generating and leasing activities with $337 million of assets and $131 million of liabilities; and (3) insurance entities that, among other lines of business, provide property and casualty and workers' compensation coverage for GE with $1,605 million of assets and $1,053 million of liabilities.
FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2016 3Q FORM 10-Q 112
ASSETS AND LIABILITIES OF CONSOLIDATED VIEs
  GE Capital 
(In millions)GECustomer Notes receivables(a)OtherTotal
     
June 30, 2017    
Assets    
Financing receivables, net$—
$—
$881
$881
Current receivables56
560
—
616
Investment securities—
—
1,004
1,004
Other assets587
1,320
2,101
4,008
Total$643
$1,880
$3,986
$6,509
     
Liabilities    
Borrowings$38
$—
$1,134
$1,172
Non-recourse borrowings—
667
16
683
Other liabilities494
1,185
1,555
3,234
Total$532
$1,852
$2,705
$5,089
     
December 31, 2016    
Assets    
Financing receivables, net$—
$—
$1,035
$1,035
Current receivables57
670
—
727
Investment securities—
—
982
982
Other assets492
1,122
1,747
3,361
Total$549
$1,792
$3,764
$6,105
     
Liabilities    
Borrowings$1
$—
$818
$819
Non-recourse borrowings—
401
16
417
Other liabilities457
1,378
1,482
3,317
Total$458
$1,779
$2,316
$4,553
ASSETS AND LIABILITIES OF CONSOLIDATED VIEs
               
     GE Capital  
    Trade receivables  Other    
(In millions)GE  securitization(a)  securitization(a)  Other Total
               
September 30, 2016              
Assets              
Financing receivables, net$- $- $- $716 $716
Current receivables 69  2,650(b) 772  -  3,491
Investment securities -  -  -  1,450  1,450
Other assets 256  -  754  1,060  2,070
Total$325 $2,650 $1,526 $3,226 $7,727
               
Liabilities              
Borrowings$8 $- $1,271 $802 $2,081
Non-recourse borrowings -  1,970  205  -  2,175
Other liabilities 243  32  35  1,273  1,583
Total$251 $2,002 $1,511 $2,075 $5,839
               
December 31, 2015              
Assets              
Financing receivables, net$- $- $- $882 $882
Current receivables 385  3,506(b) -  -  3,891
Investment securities -  -  -  1,404  1,404
Other assets 2,482  24  -  1,068  3,574
Total$2,867 $3,530 $- $3,354 $9,751
               
Liabilities              
Borrowings$221 $- $- $960 $1,181
Non-recourse borrowings -  3,022  -  61  3,083
Other liabilities 2,289  34  -  1,234  3,557
Total$2,510 $3,056 $- $2,255 $7,821
               
(a)
We provide servicingTwo funding vehicles established to the CSEs and are contractually permitted to commingle cash collectedpurchase customer notes receivable from customers on financing receivables sold to CSE investors with our own cash prior to payment to a CSE, provided our short-term credit rating does not fall below A-1/P-1. These CSEs also owe us amounts for purchased financial assets and scheduled interest and principal payments. At September 30, 2016 and December 31, 2015, the amountsGE, one of commingled cash owed to the CSEs were $969 million and $1,093 million, respectively, and the amounts owed to uswhich is partially funded by CSEs were an insignificant amount and $7 million, respectively.
third-party debt.
(b)In June 2016, we completed the sale of our Appliances business to Haier and sold all of the Appliances receivables purchased by the securitization trust to Haier for $773 million. Further information about the sale is provided in Note 2. At December 31, 2015, included $737 million of receivables purchased from Appliances.

Total revenues from our consolidated VIEs were $211$256 million and $714$439 million infor the three months ended SeptemberJune 30, 20162017 and 2015,2016, respectively and $881$508 million and $1,428$794 million in the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively. Related expenses consisted primarily of cost of goods and services of $112$83 million and $242$257 million infor the three months ended SeptemberJune 30, 20162017 and 2015,2016, respectively and $610$178 million and $966$601 million in the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015, respectively.

INVESTMENTS IN Where we provide servicing for third-party investors, we are contractually permitted to commingle cash collected from customers on financing receivables sold to third-party investors with our own cash prior to payment to third-party investors, provided our short-term credit rating does not fall below A-1/P1. These third-party investors also owe us amounts for purchased financial assets and scheduled interest and principal payments, At June 30, 2017 and December 31, 2016, the amounts of commingled cash owed to the third-party investors were $1,123 million and $1,117 million, respectively, and the amounts owed to us by third-party investors were $10 million and $5 million, respectively.

UNCONSOLIDATED VARIABLE INTEREST ENTITIES

Our involvementWe become involved with unconsolidated VIEs primarily consists ofthrough assisting in the formation and financing of the entity. We aredo not required to consolidate these entities because the nature of our involvement with the activities of the VIEs doeswe do not give ushave power over decisions that significantly affect their economic performance. Our investments in unconsolidated VIEs, at June 30, 2017 and December 31, 2016 were $6,210 million and $6,346 million, respectively. Substantially all of these investments are held by Energy Financial Services. Obligations to make additional investments in these entities are not significant.

2017 2Q FORM 10-Q 91

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIES

COMMITMENTS

The GE Capital Aviation Services (GECAS) business in GE Capital had placed multiple-year orders for various Boeing, Airbus and other aircraft manufacturers with list prices approximating $39,374 million and secondary orders with airlines for used aircraft of approximately $1,894 million at June 30, 2017. In our Aviation segment, we had committed to provide financing assistance of $1,911 million of future customer acquisitions of aircraft equipped with our engines.

GUARANTEES

Our largest exposureguarantees are provided in the ordinary course of business. We underwrite these guarantees considering economic, liquidity and credit risk of the counterparty. We believe that the likelihood is remote that any such arrangements could have a significant adverse effect on our financial position, results of operations or liquidity. We record liabilities for guarantees at estimated fair value, generally the amount of the premium received, or if we do not receive a premium, the amount based on appraisal, observed market values or discounted cash flows. Any associated expected recoveries from third parties are recorded as other receivables, not netted against the liabilities.

At June 30, 2017, we were committed under the following guarantee arrangements beyond those provided on behalf of VIEs. See Note 17.

Credit Support. We have provided $2,282 million of credit support on behalf of certain customers or associated companies, predominantly joint ventures and partnerships, using arrangements such as standby letters of credit and performance guarantees. These arrangements enable these customers and associated companies to unconsolidated VIEs consistsexecute transactions or obtain desired financing arrangements with third parties. Should the customer or associated company fail to perform under the terms of investments in long-lived, capital intensive energy projects and companies ($5,899 million).the transaction or financing arrangement, we would be required to perform on their behalf. Under most such arrangements, our guarantee is secured, usually by the asset being purchased or financed, or possibly by certain other assets of the customer or associated company. The classificationlength of these credit support arrangements parallels the length of the related financing arrangements or transactions. The liability for such credit support was $44 million at June 30, 2017.

Indemnification Agreements – Continuing Operations. We have agreements that require us to fund up to $210 million at June 30, 2017 under residual value guarantees on a variety of leased equipment. Under most of our variable interestsresidual value guarantees, our commitment is secured by the leased asset. The liability for these indemnification agreements was $7 million at June 30, 2017.

At June 30, 2017, we also had $1,051 million of other indemnification commitments, substantially all of which relate to representations and warranties in sales of businesses or assets. The liability for these entitiesindemnification commitments was $234 million at June 30, 2017.

Indemnification Agreements – Discontinued Operations. At June 30, 2017, we provided specific indemnifications to buyers of GE Capital’s assets that amounted to $2,611 million, for which we have recognized related liabilities of $305 million. In addition, in connection with the 2015 public offering and sale of our financial statements isNorth 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.

Contingent Consideration. These are agreements to provide additional consideration to a buyer or seller in a business combination if contractually specified conditions related to the acquisition or disposition are achieved. Amount of contingent consideration was insignificant at June 30, 2017.

PRODUCT WARRANTIES

We provide for estimated product warranty expenses when we sell the related products. Because warranty estimates are forecasts that are based on the naturebest available information – mostly historical claims experience – claims costs may differ from amounts provided. An analysis of changes in the entity and the characteristics of the investment we hold.liability for product warranties follows.

2016 3Q92 2017 2Q FORM 10-Q 113

INVESTMENTS IN UNCONSOLIDATED VIEs
      
(In millions)September 30, 2016 December 31, 2015
      
Other assets and investment securities$5,495 $745
Financing receivables – net 13  13
Total investments 5,508  758
Contractual obligations to fund investments, guarantees or revolving lines of credit 704  29
Total exposure(a)$6,212 $787
      
(a)
The increase in the unconsolidated VIE disclosure above is a result of adoption of ASU 2015-02 on January 1, 2016. These investments, prior to the adoption of ASU 2015-02, were not considered VIEs. Further information is provided in Note 1.
FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 Six months ended June 30
(In millions)2017
2016
   
Balance at January 1$1,920
$1,723
Current-year provisions354
339
Expenditures(414)(343)
Other changes(a)109
113
Balance as of June 30$1,969
$1,832
(a)    Primarily includes effect of currency exchange and acquisitions.

OTHER LOSS CONTINGENCIES

LEGAL MATTERS

WMC. During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In additionconnection with the sale, WMC retained certain representation and warranty obligations related to loans sold to third parties prior to the entitiesdisposal of the business and contractual obligations to repurchase previously sold loans that had an early payment default. All claims received by WMC for early payment default have either been resolved or are no longer being pursued.
The remaining active claims have been brought by securitization trustees or administrators seeking recovery from WMC for alleged breaches of representations and warranties on mortgage loans that serve as collateral for residential mortgage-backed securities (RMBS). At June 30, 2017, such claims consisted of $1,019 million of individual claims generally submitted before the filing of a lawsuit (compared to $1,060 million at December 31, 2016) and $5,435 million of additional claims asserted against WMC in litigation without making a prior claim (Litigation Claims) (compared to $5,456 million at December 31, 2016). The total amount of these claims, $6,454 million, reflects the purchase price or unpaid principal balances of the loans at the time of purchase and does not give effect to pay downs or potential recoveries based upon the underlying collateral, which in many cases are substantial, nor to accrued interest or fees. WMC believes that repurchase claims brought based upon representations and warranties made more than six years before WMC was notified of the claim would be disallowed in legal proceedings under applicable law and the June 11, 2015 decision of the New York Court of Appeals in ACE Securities Corp. v. DB Structured Products, Inc., on the statute of limitations period governing such claims.

Reserves related to repurchase claims made against WMC were $636 million at June 30, 2017, reflecting a net increase to reserves in the six months ended June 30, 2017 of $10 million. The reserve estimate takes into account recent settlement activity and is based upon WMC’s evaluation of the remaining exposures as a percentage of estimated lifetime mortgage loan losses within the pool of loans supporting each securitization for which timely claims have been asserted in litigation against WMC. Settlements in prior periods reduced WMC’s exposure on claims asserted in certain securitizations and the claim amounts reported above give effect to these settlements.

ROLLFORWARD OF THE RESERVE           
            
 Three months ended June 30  Six months ended June 30
(In millions) 2017
  2016
  2017
  2016
            
Balance, beginning of period$626
 $833
 $626
 $875
Provision 10
  27
  10
  84
Claim resolutions / rescissions —
  —
  —
  (99)
Balance, end of period$636
 $860
 $636
 $860

Given the significant litigation activity and WMC’s continuing efforts to resolve the lawsuits involving claims made against WMC, it is difficult to assess whether future losses will be consistent with WMC’s past experience. Adverse changes to WMC’s assumptions supporting the reserve may result in an increase to these reserves. WMC estimates a range of reasonably possible loss from $0 to approximately $500 million over its recorded reserve at June 30, 2017. This estimate involves significant judgment and may not reflect the range of uncertainties and unpredictable outcomes inherent in litigation, including the matters discussed in Legal Proceedings and potential changes in WMC’s legal strategy. This estimate excludes any possible loss associated with an adverse court decision on the applicable statute of limitations or an adverse outcome in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) investigation discussed in Legal Proceedings, as WMC is unable at this time to develop such a meaningful estimate.


2017 2Q FORM 10-Q 93

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At June 30, 2017, there were 10 lawsuits involving claims made against WMC arising from alleged breaches of representations and warranties on mortgage loans included in 11 securitizations. The adverse parties in these cases are securitization trustees or parties claiming to act on their behalf. As discussed in Legal Proceedings, five of these lawsuits are the table above, we also hold passive investments in investment securities issued by VIEs. Such investments were, by design, investment-grade at issuance and heldsubject of settlement agreements approved by a diverse groupCalifornia state court. On January 23, 2017, the ResCap Liquidating Trust, as successor to Residential Funding Company, LLC (RFC), filed a lawsuit against WMC in the United States District Court for the District of investors. FurtherMinnesota 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. Although 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 of defective mortgage loan) and/or money damages. Adverse court decisions, including in cases not involving WMC, could result in new claims and lawsuits on additional loans. However, WMC continues to believe that it has defenses to the claims asserted in litigation, including, for example, based on causation and materiality requirements and applicable statutes of limitations. It is not possible to predict the outcome or impact of these defenses and other factors, any of which could materially affect the amount of any loss ultimately incurred by WMC on these claims.

WMC has also received indemnification demands, nearly all of which are unspecified, from depositors/underwriters/sponsors of RMBS or securitization trustees in connection with actual or potential claims concerning alleged misrepresentations in the securitization offering documents to which WMC is not a party, mortgage loan repurchase claims made against RMBS sponsors or other claims involving alleged defects in loans sold by WMC. WMC believes that it has defenses to these demands.

To the extent WMC is required to repurchase loans, WMC’s loss also would be affected by several factors, including pay downs, accrued interest and fees, and the value of the underlying collateral. The reserve and estimate of possible loss reflect judgment, based on currently available information, about such investments is providedand a number of assumptions, including economic conditions, claim and settlement activity, pending and threatened litigation, court decisions regarding WMC’s legal defenses, indemnification demands, government activity, and other variables in Note 3.the mortgage industry. Actual losses arising from claims against WMC could exceed these amounts and additional claims and lawsuits could result if actual claim rates, governmental actions, litigation and indemnification activity, adverse court decisions, actual settlement rates or losses WMC incurs on repurchased loans differ from its assumptions.

Alstom legacy matters. On November 2, 2015, we acquired the Thermal, Renewables and Grid businesses from Alstom. Prior to the acquisition, the seller was the subject of two significant cases involving anti-competitive activities and improper payments: (1) in January 2007, Alstom was fined €65 million by the European Commission for participating in a gas insulated switchgear cartel that operated from 1988 to 2004 (that fine was later reduced to €59 million), and (2) in December 2014, Alstom pled guilty in the United States to multiple violations of the Foreign Corrupt Practices Act and paid a criminal penalty of $772 million. As part of GE’s accounting for the acquisition, we established a reserve amounting to $858 million for legal and compliance matters related to the legacy business practices that were the subject of these and related cases in various jurisdictions.

Regardless of jurisdiction, the allegations relate to claimed anti-competitive conduct or improper payments in the pre-acquisition period as the source of legal violations and/or damages. Given the significant litigation and compliance activity related to these matters and our ongoing efforts to resolve them, it is difficult to assess whether the disbursements will ultimately be consistent with the reserve established. The estimation of this reserve involved significant judgment and may not reflect the full range of uncertainties and unpredictable outcomes inherent in litigation and investigations of this nature. Damages sought may include disgorgement of profits on the underlying business transactions, fines and/or penalties, interest, or other forms of resolution. Factors that can affect the ultimate amount of losses associated with these matters include the way cooperation is assessed and valued, prosecutorial discretion in the determination of damages, formulas for determining fines and penalties, the duration and amount of legal and investigative resources applied, and political and social influences within each jurisdiction, among other considerations. Actual losses arising from claims in these matters could exceed the amount provided. At this time, we are unable to develop a meaningful estimate of the range of reasonably possible additional losses for this exposure.

ENVIRONMENTAL MATTERS

Our operations, like operations of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws. We are involved in numerous remediation actions to clean up hazardous wastes as required by federal and state laws. Liabilities for remediation costs exclude possible insurance recoveries and, when dates and amounts of such costs are not known, are not discounted. When there appears to be a range of possible costs with equal likelihood, liabilities are based on the low end of such range. It is reasonably possible that our environmental remediation exposure will exceed amounts accrued. However, due to uncertainties about the status of laws, regulations, technology and information related to individual sites, such amounts are not reasonably estimable. For further information, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.



94 2017 2Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17.19. INTERCOMPANY TRANSACTIONS

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

These intercompany transactions are reported in the respective GE and GE Capital columns of our financial statements, but are eliminated in deriving our consolidated financial statements. EffectsThrese 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, renewable energy 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
Settlements of thesetax liabilities, and
Various investments, loans and allocations of GE corporate overhead costs.

Presented below is a walk of intercompany eliminations on ourfrom the combined GE and GE Capital totals to the consolidated cash flows from operating, investing and financing activities are $(16,399) million, $6,011 million and $10,390 million in the nine months ended September 30continuing operations.
 Six months ended June 30
(In millions)2017
2016
   
Cash from (used for) operating activities-continuing operations  
Combined$5,549
$11,207
  GE current receivables sold to GE Capital1,598
1,313
  GE Capital dividends to GE(4,016)(11,000)
  Other reclassifications and eliminations(a)258
494
Total cash from (used for) operating activities-continuing operations$3,389
$2,014
Cash from (used for) investing activities-continuing operations  
Combined$3,173
$39,495
  GE current receivables sold to GE Capital(1,760)(1,643)
  GE Capital long-term loans to GE4,075
—
  GE Capital short-term loan to GE(1,329)5,002
  Other reclassifications and eliminations(a)(76)(441)
Total cash from (used for) investing activities-continuing operations$4,083
$42,414
Cash from (used for) financing activities-continuing operations  
Combined$(13,339)$(69,038)
  GE current receivables sold to GE Capital162
330
  GE Capital dividends to GE4,016
11,000
  GE Capital long-term loans to GE(4,075)—
  GE Capital short-term loan to GE1,329
(5,002)
  Other reclassifications and eliminations(a)(182)(52)
Total cash from (used for) financing activities-continuing operations$(12,089)$(62,763)
(a)Includes eliminations of other cash flows activities including those related to GE Capital enabled GE industrial orders, various investments, loans and allocations of GE corporate overhead costs.

,2017 2Q FORM 10-Q 2016, and $(413) million, $(56) million and $469 million in the nine months ended September 30,95 2015, respectively. Details of these eliminations are shown below.

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 Nine months ended September 30
(In millions)2016 2015
      
Cash from (used for) operating activities-continuing operations     
Combined$20,245 $5,857
   GE customer receivables sold to GE Capital 37  162
   GE Capital dividends to GE (16,050)  (450)
   Other reclassifications and eliminations (386)  (125)
Total cash from (used for) operating activities-continuing operations$3,846 $5,444
Cash from (used for) investing activities-continuing operations     
Combined$47,548 $59,522
   GE customer receivables sold to GE Capital 767  (243)
GE Capital short-term loan to GE 5,002  -
   Other reclassifications and eliminations 242  187
Total cash from (used for) investing activities-continuing operations$53,559 $59,466
Cash from (used for) financing activities-continuing operations     
Combined$(85,578) $(48,026)
   GE customer receivables sold to GE Capital (804)  81
   GE Capital dividends to GE 16,050  450
GE Capital short-term loan to GE (5,002)  -
   Other reclassifications and eliminations 146  (62)
Total cash from (used for) financing activities-continuing operations$(75,188) $(47,556)
      
2016 3Q FORM 10-Q 114
NOTE 18.20. GUARANTOR FINANCIAL INFORMATION

GUARANTOR AND NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL INFORMATION

On October 26, 2015, GE Capital International Funding Company Unlimited Company, formerly GE Capital International Funding Company (the Issuer), then a finance subsidiary of General Electric Capital Corporation, settled its previously announced private offers to exchange (the Exchange Offers) the Issuer'sIssuer’s new senior unsecured notes for certain outstanding debt securities of General Electric Capital Corporation.

The new notes that were issued were composed of $15.3 billion of 0.964% Six Month Notes due April 2016 (which have subsequently been repaid upon maturity), £0.8 billion of 1.363% Six Month Notes due April 2016 (which have subsequently been repaid upon maturity), $6.1 billion of 2.342% Notes due 2020, $2.0 billion of 3.373% Notes due 2025 and $11.5 billion of 4.418% Notes due 2035. These notes were fully and unconditionally, jointly and severally guaranteed by both the Company and GE Capital International Holdings Limited (GECIHL) (each a Guarantor, and together, the Guarantors).

Under the terms of a registration rights agreement entered into in connection with the Exchange Offers, the Issuer and the Company agreed to file a registration statement with the U.S. Securities and Exchange Commission (SEC) for an offer to exchange new senior notes of the Issuer registered with the SEC and guaranteed by the Guarantors for certain of the Issuer'sIssuer’s outstanding unregistered senior notes. This exchange was completed in July 2016.

PRESENTATION

In connection with the registration of the senior notes, the Company is required to provide certain financial information regarding the Issuer and the Guarantors of the registered securities. Included are the Condensed Consolidating Statements of Earnings and Comprehensive Income for the three months ended SeptemberJune 30, 2017 and 2016 and 2015 and ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, Condensed Consolidating Statements of Financial Position as of SeptemberJune 30, 20162017 and December 31, 20152016 and Condensed Consolidating Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20162017 and 20152016 for:

General Electric Company (the Parent Company Guarantor) - prepared with investments in subsidiaries accounted for under the equity method of accounting and excluding any inter-segment eliminations;
GE Capital International Funding Company Unlimited Company (the Subsidiary Issuer) – finance subsidiary for debt;
GE Capital International Holdings Limited (GECIHL)(the Subsidiary Guarantor)- prepared with investments in non-guarantor subsidiaries accounted for under the equity method of accounting;
Non-Guarantor Subsidiaries- prepared on an aggregated basis excluding any elimination or consolidation adjustments and includes predominantly all non-cash adjustments for cash flows;
Consolidating Adjustments - adjusting entries necessary to consolidate the Parent Company Guarantor with the Subsidiary Issuer, the Subsidiary Guarantor and Non-Guarantor Subsidiaries; and
Consolidated - prepared on a consolidated basis.

96 2017 2Q FORM 10-Q

General Electric Company (the Parent Company Guarantor) - prepared with investments in subsidiaries accounted for under the equity method of accounting and excluding any inter-segment eliminations. The equity basis earnings (losses) of subsidiaries are reflected in the captions "Equity in earnings (losses) of affiliates" and "Earnings (loss) from discontinued operations, net of tax";
FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GE Capital International Funding Company Unlimited Company (the Subsidiary Issuer) – incorporated in May 2015 as a finance subsidiary for debt and reflects activity subsequent to the issuance of new notes on October 26, 2015;
GE Capital International Holdings Limited (GECIHL) (the Subsidiary Guarantor) - prepared with investments in non-guarantor subsidiaries accounted for under the equity method of accounting and reflects activity subsequent to the GE Capital Reorganization on December 3, 2015. The equity basis earnings (losses) of subsidiaries are reflected in the captions "Equity in earnings (losses) of affiliates" and "Earnings (loss) from discontinued operations, net of tax";
Non-Guarantor Subsidiaries - prepared on an aggregated basis excluding any elimination or consolidation adjustments and includes predominantly all non-cash adjustments for cash flows;
Consolidating Adjustments - adjusting entries necessary to consolidate the Parent Company Guarantor with the Subsidiary Issuer, the Subsidiary Guarantor and Non-Guarantor Subsidiaries; and
Consolidated - prepared on a consolidated basis.
2016 3Q FORM 10-Q 115
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)
 
  Parent     Non-    
  Company Subsidiary Subsidiary Guarantor Consolidating  
(in millions) Guarantor Issuer Guarantor Subsidiaries Adjustments Consolidated
             
Revenues and other income            
Sales of goods and services$8,194$-$-$36,082$(17,462)$26,814
Other income 883 - - 35,578 (36,234) 227
Equity in earnings (loss) of affiliates 1,788 - 428 29,804 (32,019) -
GE Capital revenues from services - 166 243 2,838 (1,023) 2,224
   Total revenues and other income 10,865 166 671 104,302 (86,738) 29,266
             
Costs and expenses            
Interest and other financial charges 1,166 138 525 856 (1,724) 961
Investment contracts, insurance losses and            
   insurance annuity benefits - - - 701 (17) 684
Other costs and expenses 8,498 - 16 35,400 (18,367) 25,547
   Total costs and expenses 9,664 138 541 36,957 (20,109) 27,191
Earnings (loss) from continuing            
    operations before income taxes 1,201 28 130 67,345 (66,630) 2,074
Benefit (provision) for income taxes 932 (3) (11) (951) 16 (18)
Earnings (loss) from continuing operations 2,132 24 119 66,395 (66,614) 2,056
Earnings (loss) from discontinued            
    operations, net of taxes (105) - (552) 224 328 (105)
Net earnings (loss) 2,027 24 (433) 66,619 (66,286) 1,951
Less net earnings (loss) attributable to            
    noncontrolling interests - - - (51) (25) (76)
Net earnings (loss) attributable to            
   the Company 2,027 24 (433) 66,670 (66,262) 2,027
Other comprehensive income (loss) 477 - 51 (711) 661 477
Comprehensive income (loss) attributable            
   to the Company$2,504$24$(382)$65,959$(65,601)$2,504
             

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED JUNE 30, 2017 (UNAUDITED)
 
(in millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Revenues and other income      
Sales of goods and services$8,080
$—
$—
$37,615
$(18,456)$27,239
Other income27,632
—
—
28,005
(55,339)298
Equity in earnings (loss) of affiliates(25,246)—
450
13,982
10,813
—
GE Capital revenues from services—
173
188
2,589
(928)2,022
Total revenues and other income10,467
173
638
82,191
(63,910)29,558
       
Costs and expenses      
Interest and other financial charges767
159
489
1,221
(1,463)1,174
Other costs and expenses8,557
—
9
37,570
(19,265)26,870
Total costs and expenses9,324
159
497
38,791
(20,728)28,044
Earnings (loss) from continuing operations before income taxes1,143
14
141
43,400
(43,183)1,515
Benefit (provision) for income taxes370
(2)—
(230)(154)(15)
Earnings (loss) from continuing operations1,513
12
141
43,170
(43,336)1,499
Earnings (loss) from discontinued operations, net of taxes(146)—
(5)3
2
(146)
Net earnings (loss)1,367
12
136
43,172
(43,334)1,354
Less net earnings (loss) attributable to noncontrolling interests—
—
—
16
(30)(14)
Net earnings (loss) attributable to the Company1,367
12
136
43,156
(43,304)1,367
Other comprehensive income (loss)1,317
—
32
(25,537)25,505
1,317
Comprehensive income (loss) attributable to the Company$2,685
$12
$168
$17,619
$(17,799)$2,685
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED)
 Parent     Non-    
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED JUNE 30, 2016 (UNAUDITED)FOR THE THREE MONTHS ENDED JUNE 30, 2016 (UNAUDITED)
 Company Subsidiary Subsidiary Guarantor Consolidating  
(in millions) Guarantor Issuer Guarantor Subsidiaries Adjustments Consolidated
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
             
Revenues and other income             
Sales of goods and services$11,175$-$-$33,206$(18,854)$25,527$10,664
$—
$—
$38,202
$(20,838)$28,028
Other income 353 - - 2,367 (2,550) 169(264)—
—
16,043
(12,629)3,150
Equity in earnings (loss) of affiliates 2,152 - - 126,207 (128,359) -5,228
—
(5)15,305
(20,528)0
GE Capital revenues from services - - - 7,376 (5,044) 2,3320
200
722
1,760
(365)2,316
Total revenues and other income 13,680 - - 169,155 (154,806) 28,02815,628
200
717
71,310
(54,359)33,494
             
Costs and expenses             
Interest and other financial charges 805 - - 2,251 (2,159) 897851
175
677
1,412
(1,790)1,326
Investment contracts, insurance losses and            
insurance annuity benefits - - - 717 (44) 673
Other costs and expenses 11,155 - - 37,487 (24,233) 24,40811,601
—
19
38,786
(22,062)28,344
Total costs and expenses 11,960 - - 40,455 (26,436) 25,97812,453
175
695
40,198
(23,852)29,670
Earnings (loss) from continuing            
operations before income taxes 1,720 - - 128,700 (128,370) 2,050
Earnings (loss) from continuing operations before income taxes3,175
25
21
31,111
(30,508)3,824
Benefit (provision) for income taxes 156 - - 661 (952) (135)312
(3)(43)(473)(254)(461)
Earnings (loss) from continuing operations 1,876 - - 129,362 (129,322) 1,9153,486
22
(22)30,639
(30,762)3,363
Earnings (loss) from discontinued            
operations, net of taxes 629 - - 1,466 (1,466) 629
Earnings (loss) from discontinued operations, net of taxes(541)—
(521)600
(80)(541)
Net earnings (loss) 2,506 - - 130,828 (130,789) 2,5452,946
22
(542)31,239
(30,841)2,823
Less net earnings (loss) attributable to            
noncontrolling interests - - - 88 (49) 39
Net earnings (loss) attributable to            
the Company 2,506 - - 130,740 (130,740) 2,506
Less net earnings (loss) attributable to noncontrolling interests—
—
—
(66)(20)(86)
Net earnings (loss) attributable to the Company2,946
22
(542)31,305
(30,822)2,908
Other comprehensive income (loss) 1,221 - - 175 (175) 1,221807
—
246
579
(825)807
Comprehensive income (loss) attributable            
to the Company$3,727$-$-$130,915$(130,915)$3,727
            
Comprehensive income (loss) attributable to the Company$3,753
$22
$(297)$31,884
$(31,646)$3,715


2016 3Q2017 2Q FORM 10-Q 11697

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)
 
  Parent     Non-    
  Company Subsidiary Subsidiary Guarantor Consolidating  
(in millions) Guarantor Issuer Guarantor Subsidiaries Adjustments Consolidated
             
Revenues and other income            
Sales of goods and services$28,870$-$-$108,043$(56,757)$80,156
Other income 845 - - 55,062 (52,522) 3,385
Equity in earnings (loss) of affiliates 7,923 - 1,093 58,732 (67,747) -
GE Capital revenues from services - 762 1,262 9,182 (4,144) 7,063
   Total revenues and other income 37,638 762 2,355 231,019 (181,170) 90,604
             
Costs and expenses            
Interest and other financial charges 2,828 685 2,133 4,027 (5,651) 4,023
Investment contracts, insurance losses and            
   insurance annuity benefits - - - 2,188 (87) 2,101
Other costs and expenses 30,555 - 71 108,537 (60,819) 78,344
   Total costs and expenses 33,383 686 2,204 114,752 (66,558) 84,467
Earnings (loss) from continuing            
    operations before income taxes 4,255 76 150 116,267 (114,612) 6,137
Benefit (provision) for income taxes 1,862 (10) (58) (1,908) (189) (302)
Earnings (loss) from continuing operations 6,118 67 93 114,359 (114,801) 5,835
Earnings (loss) from discontinued            
    operations, net of taxes (954) - (1,547) 398 1,149 (954)
Net earnings (loss) 5,164 67 (1,455) 114,757 (113,652) 4,881
Less net earnings (loss) attributable to            
    noncontrolling interests - - - (143) (140) (283)
Net earnings (loss) attributable to            
   the Company 5,164 67 (1,455) 114,900 (113,512) 5,164
Other comprehensive income (loss) 2,107 (12) 114 136 (238) 2,107
Comprehensive income (loss) attributable            
   to the Company$7,271$55$(1,341)$115,036$(113,750)$7,271
             

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED)
 
  Parent     Non-    
  Company Subsidiary Subsidiary Guarantor Consolidating  
(in millions) Guarantor Issuer Guarantor Subsidiaries Adjustments Consolidated
             
Revenues and other income            
Sales of goods and services$32,310$-$-$97,982$(55,026)$75,266
Other income 765 - - 6,766 (6,439) 1,092
Equity in earnings (loss) of affiliates 1,068 - - 141,183 (142,251) -
GE Capital revenues from services - - - 25,000 (17,863) 7,136
   Total revenues and other income
 34,143 - - 270,930 (221,579) 83,494
             
Costs and expenses            
Interest and other financial charges 2,374 - - 6,898 (7,045) 2,228
Investment contracts, insurance losses and            
   insurance annuity benefits
 - - - 2,070 (128) 1,942
Other costs and expenses 34,174 - - 116,287 (77,420) 73,041
   Total costs and expenses
 36,549 - - 125,255 (84,592) 77,211
Earnings (loss) from continuing            
    operations before income taxes (2,406) - - 145,675 (136,987) 6,283
Benefit (provision) for income taxes 1,228 - - (9,266) 811 (7,227)
Earnings (loss) from continuing operations (1,178) - - 136,409 (136,176) (945)
Earnings (loss) from discontinued            
    operations, net of taxes (11,249) - - (1,226) 1,222 (11,253)
Net earnings (loss) (12,427) - - 135,182 (134,953) (12,198)
Less net earnings (loss) attributable to            
    noncontrolling interests - - - 285 (56) 229
Net earnings (loss) attributable to            
   the Company (12,427) - - 134,897 (134,897) (12,427)
Other comprehensive income (loss) 1,189 - - (3,610) 3,610 1,189
Comprehensive income (loss) attributable            
   to the Company$(11,238)$-$-$131,288$(131,288)$(11,238)
             
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE SIX MONTHS ENDED JUNE 30, 2017 (UNAUDITED)
 
(in millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Revenues and other income      
Sales of goods and services$16,872
$—
$—
$73,705
$(38,110)$52,467
Other income27,686
—
—
32,625
(59,845)465
Equity in earnings (loss) of affiliates(22,802)—
692
50,664
(28,555)—
GE Capital revenues from services—
329
374
4,859
(1,275)4,286
Total revenues and other income21,756
329
1,066
161,853
(127,786)57,219
       
Costs and expenses      
Interest and other financial charges1,677
309
943
2,303
(2,920)2,313
Other costs and expenses18,186
—
22
73,511
(39,159)52,560
Total costs and expenses19,862
309
965
75,814
(42,078)54,872
Earnings (loss) from continuing operations before income taxes1,894
20
101
86,039
(85,707)2,346
Benefit (provision) for income taxes514
(2)115
(699)41
(31)
Earnings (loss) from continuing operations2,408
17
215
85,341
(85,666)2,315
Earnings (loss) from discontinued operations, net of taxes(388)—
278
3
(278)(385)
Net earnings (loss)2,020
17
493
85,344
(85,944)1,931
Less net earnings (loss) attributable to noncontrolling interests—
—
—
(32)(57)(90)
Net earnings (loss) attributable to the Company2,020
17
493
85,376
(85,887)2,020
Other comprehensive income (loss)3,144
—
649
(26,994)26,345
3,144
Comprehensive income (loss) attributable to the Company$5,164
$17
$1,142
$58,382
$(59,542)$5,164
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE SIX MONTHS ENDED JUNE 30, 2016 (UNAUDITED)
 
(in millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Revenues and other income      
Sales of goods and services$20,676
$—
$—
$71,961
$(39,295)$53,342
Other income(38)—
—
19,484
(16,288)3,158
Equity in earnings (loss) of affiliates6,135
—
665
28,928
(35,728)0
GE Capital revenues from services0
596
1,019
6,344
(3,121)4,838
Total revenues and other income26,774
596
1,683
126,717
(94,431)61,339
       
Costs and expenses      
Interest and other financial charges1,662
547
1,608
3,171
(3,927)3,062
Other costs and expenses22,057
—
55
74,624
(42,522)54,214
Total costs and expenses23,719
548
1,663
77,795
(46,449)57,276
Earnings (loss) from continuing operations before income taxes3,055
48
20
48,922
(47,983)4,063
Benefit (provision) for income taxes931
(6)(46)(958)(205)(284)
Earnings (loss) from continuing operations3,986
42
(26)47,964
(48,187)3,779
Earnings (loss) from discontinued operations, net of taxes(849)—
(996)174
821
(849)
Net earnings (loss)3,137
42
(1,022)48,138
(47,366)2,930
Less net earnings (loss) attributable to noncontrolling interests—
—
—
(91)(116)(207)
Net earnings (loss) attributable to the Company3,137
42
(1,022)48,230
(47,250)3,137
Other comprehensive income (loss)1,631
(12)63
847
(898)1,631
Comprehensive income (loss) attributable to the Company$4,767
$30
$(958)$49,076
$(48,148)$4,767

98 2017 2Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
JUNE 30, 2017 (UNAUDITED)
 
(In millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Assets      
Cash and equivalents$4,420
$—
$3
$40,174
$(547)$44,049
Investment securities1
—
—
42,065
(2,098)39,968
Receivables - net54,549
17,233
31,020
80,421
(143,470)39,753
Inventories5,265
—
—
22,111
(4,533)22,843
Property, plant and equipment - net5,891
—
—
46,284
(2,007)50,167
Investment in subsidiaries(a)284,471
—
80,491
472,477
(837,439)0
Goodwill and intangible assets7,207
—
—
50,518
31,539
89,264
All other assets15,238
44
79
205,041
(158,823)61,579
Assets of discontinued operations—
—
—
—
7,850
7,850
Total assets$377,041
$17,278
$111,593
$959,089
$(1,109,528)$355,473
       
Liabilities and equity      
Short-term borrowings$177,190
$—
$45,994
$25,300
$(218,441)$30,044
Accounts payable(1,380)—
—
56,038
(41,375)13,283
Other current liabilities11,732
34
3
24,489
(251)36,007
Long-term and non-recourse borrowings71,784
16,703
34,601
53,234
(71,963)104,359
All other liabilities43,567
352
279
55,363
(7,667)91,894
Liabilities of discontinued operations—
—
—
—
911
911
Total Liabilities302,893
17,089
80,878
214,424
(338,786)276,498
       
Redeemable noncontrolling interests—
—
—
2,433
760
3,193
       
GE shareowners' equity74,148
189
30,716
740,746
(771,651)74,148
Noncontrolling interests—
—
—
1,486
148
1,634
Total equity74,148
189
30,716
742,232
(771,503)75,783
Total liabilities, redeemable noncontrolling interests and equity$377,041
$17,278
$111,593
$959,089
$(1,109,528)$355,473
(a)Included within the subsidiaries of the Subsidiary Guarantor are cash and cash equivalent balances of $25.9 billion$21,419 million and net assets of discontinued operations of $21.6 billion.$3,711 million.



2017 2Q FORM 10-Q 99

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2016 3Q FORM 10-Q 117
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 2016
 
(In millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Assets      
Cash and equivalents$2,558
$—
$3
$46,994
$(1,426)$48,129
Investment securities1
—
—
47,394
(3,082)44,313
Receivables - net63,620
17,157
30,470
79,401
(148,385)42,263
Inventories4,654
—
—
21,076
(3,377)22,354
Property, plant and equipment - net5,768
—
—
46,366
(1,615)50,518
Investment in subsidiaries(a)272,685
—
80,481
492,674
(845,840)—
Goodwill and intangible assets8,128
—
—
42,074
36,673
86,875
All other assets14,692
44
39
201,276
(160,134)55,917
Assets of discontinued operations—
—
—
—
14,815
14,815
Total assets$372,107
$17,202
$110,992
$977,255
$(1,112,372)$365,183
       
Liabilities and equity      
Short-term borrowings$167,089
$1
$46,432
$25,919
$(208,727)$30,714
Accounts payable5,412
—
—
47,366
(38,343)14,435
Other current liabilities11,072
33
117
25,095
114
36,431
Long-term and non-recourse borrowings68,983
16,486
34,389
68,912
(83,273)105,496
All other liabilities43,722
511
481
58,376
(9,656)93,434
Liabilities of discontinued operations—
—
—
—
4,158
4,158
Total Liabilities296,279
17,030
81,419
225,667
(335,727)284,668
       
Redeemable noncontrolling interests—
—
—
2,223
802
3,025
       
GE shareowners' equity75,828
171
29,573
747,719
(777,463)75,828
Noncontrolling interests—
—
—
1,647
16
1,663
Total equity75,828
171
29,573
749,366
(777,447)77,491
Total liabilities, redeemable noncontrolling interests and equity$372,107
$17,202
$110,992
$977,255
$(1,112,372)$365,183
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 2015
 
  Parent     Non-    
  Company Subsidiary Subsidiary Guarantor Consolidating  
(In millions) Guarantor Issuer Guarantor Subsidiaries AdjustmentsConsolidated
       
Assets   ��        
Cash and equivalents$4,137$-$-$86,955$(20,609)$70,483
Investment securities 14 - - 40,886 (8,927) 31,973
Receivables - net 88,696 33,232 69,306 75,909 (221,286) 45,856
Inventories 5,447 - - 19,762 (2,694) 22,515
Property, plant and equipment - net 6,540 - - 56,808 (9,253) 54,095
Investment in subsidiaries(a) 274,471 - 78,505 405,686 (758,662) -
Goodwill and intangible assets 7,793 - - 61,412 14,118 83,323
All other assets 15,732 11 915 247,611 (200,392) 63,876
Assets of discontinued operations - - - - 120,951 120,951
Total assets$402,828$33,242$148,725$995,029$(1,086,754)$493,071
             
Liabilities and equity            
Short-term borrowings$145,051$16,204$71,862$60,601$(243,858)$49,860
Accounts payable 6,096 - - 37,636 (30,052) 13,680
Other current liabilities 14,482 (1) 17 34,903 (7,860) 41,540
Long-term and non-recourse borrowings 97,471 16,423 46,392 105,801 (118,345) 147,742
All other liabilities 41,455 489 224 57,996 (9,514) 90,651
Liabilities of discontinued operations - - - - 46,487 46,487
Total Liabilities 304,555 33,115 118,495 296,937 (363,141) 389,961
             
Redeemable noncontrolling interests - - - 2,888 84 2,972
             
GE shareowners' equity 98,274 127 30,230 693,589 (723,946) 98,274
Noncontrolling interests - - - 1,616 248 1,864
Total equity 98,274 127 30,230 695,204 (723,697) 100,138
Total liabilities, redeemable            
   noncontrolling interests and equity$402,828$33,242$148,725$995,029$(1,086,754)$493,071
             
(a)Included within the subsidiaries of the Subsidiary Guarantor are cash and cash equivalent balances of $40.1 billion$28,516 million and net assets of discontinued operations of $58.6 billion.$6,012 million.
2016 3Q FORM 10-Q 118
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2016 (UNAUDITED)
             
  Parent     Non-    
  Company Subsidiary Subsidiary Guarantor Consolidating  
(In millions) Guarantor Issuer Guarantor Subsidiaries adjustments Consolidated
             
Cash flows – operating activities            
Cash from (used for) operating activities -            
   continuing operations$(14,847)$175$(121)$83,404$(64,766)$3,846
Cash from (used for) operating activities -            
   discontinued operations (954) - - (4,366) (399) (5,719)
Cash from (used for) operating activities (15,801) 175 (121) 79,038 (65,165) (1,873)
             
Cash flows – investing activities            
Cash from (used for) investing activities –            
   continuing operations 20,902 16,080 36,317 32,000 (51,740) 53,559
Cash from (used for) investing activities –            
   discontinued operations - - - (12,056) - (12,056)
Cash from (used for) investing activities 20,902 16,080 36,317 19,944 (51,740) 41,503
             
Cash flows – financing activities            
Cash from (used for) financing activities –            
   continuing operations (6,894) (16,255) (36,194) (150,446) 134,601 (75,188)
Cash from (used for) financing activities –            
   discontinued operations - - - 295 - 295
Cash from (used for) financing activities (6,894) (16,255) (36,194) (150,151) 134,601 (74,893)
Effect of currency exchange rate changes            
   on cash and equivalents - - - (169) - (169)
Increase (decrease) in cash and equivalents (1,792) - 3 (51,339) 17,696 (35,432)
     Cash and equivalents at beginning of year 4,137 - - 107,350 (20,609) 90,878
Cash and equivalents at September 30 2,344 - 3 56,011 (2,913) 55,445
Less cash and equivalents of discontinued            
     operations at September 30 - - - 2,915 - 2,915
Cash and equivalents of continuing operations            
   at September 30$2,344$-$3$53,095$(2,913)$52,530

2016 3Q100 2017 2Q FORM 10-Q 119

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED)
             
  Parent     Non-    
  Company Subsidiary Subsidiary Guarantor Consolidating  
(In millions) Guarantor Issuer Guarantor Subsidiaries adjustments Consolidated
             
Cash flows – operating activities            
Cash from (used for) operating activities -            
   continuing operations$(5,898)$-$-$176,052$(164,710)$5,444
Cash from (used for) operating activities -            
   discontinued operations (11,249) - - 17,729 1,222 7,702
Cash from (used for) operating activities (17,147) - - 193,781 (163,488) 13,146
             
Cash flows – investing activities            
Cash from (used for) investing activities –            
   continuing operations 24,884 - - (93,930) 128,512 59,466
Cash from (used for) investing activities –            
   discontinued operations - - - 305 - 305
Cash from (used for) investing activities 24,884 - - (93,625) 128,512 59,771
             
Cash flows – financing activities            
Cash from (used for) financing activities –            
   continuing operations (9,693) - - (46,188) 8,324 (47,556)
Cash from (used for) financing activities –            
   discontinued operations - - - (2,250) - (2,250)
Cash from (used for) financing activities (9,693) - - (48,438) 8,324 (49,807)
Effect of currency exchange rate changes            
   on cash and equivalents - - - (3,516) - (3,516)
Increase (decrease) in cash and equivalents (1,956) - - 48,201 (26,651) 19,594
     Cash and equivalents at beginning of year 4,820 - - 88,216 (2,020) 91,016
Cash and equivalents at September 30 2,864 - - 136,417 (28,671) 110,610
Less cash and equivalents of discontinued            
     operations at September 30 - - - 26,743 - 26,743
Cash and equivalents of continuing operations            
   at September 30$2,864$-$-$109,674$(28,671)$83,867

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2017 (UNAUDITED)
       
(In millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Cash flows – operating activities      
Cash from (used for) operating activities - continuing operations$12,674
$25
$225
$113,799
$(123,335)$3,389
Cash from (used for) operating activities - discontinued operations(388)—
—
(507)—
(895)
Cash from (used for) operating activities12,286
25
225
113,292
(123,335)2,494
       
Cash flows – investing activities      
Cash from (used for) investing activities – continuing operations(26,871)(25)608
(60,997)91,369
4,083
Cash from (used for) investing activities – discontinued operations—
—
—
(1,922)—
(1,922)
Cash from (used for) investing activities(26,871)(25)608
(62,919)91,369
2,161
       
Cash flows – financing activities      
Cash from (used for) financing activities – continuing operations16,446
—
(833)(60,547)32,845
(12,089)
Cash from (used for) financing activities – discontinued operations—
—
—
1,909
—
1,909
Cash from (used for) financing activities16,446
—
(833)(58,639)32,845
(10,181)
Effect of currency exchange rate changes on cash and equivalents—
—
—
538
—
538
Increase (decrease) in cash and equivalents1,861
—
—
(7,728)879
(4,988)
Cash and equivalents at beginning of year2,558
—
3
48,423
(1,426)49,558
Cash and equivalents at June 304,420
—
3
40,696
(547)44,571
Less cash and equivalents of discontinued operations at June 30—
—
—
522
—
522
Cash and equivalents of continuing operations at June 30$4,420
$—
$3
$40,174
$(547)$44,049
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2016 (UNAUDITED)
       
(In millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Cash flows – operating activities      
Cash from (used for) operating activities - continuing operations$(21,014)$182
$1,032
$10,275
$11,539
$2,014
Cash from (used for) operating activities - discontinued operations(849)—
(996)(3,826)821
(4,849)
Cash from (used for) operating activities(21,863)182
37
6,449
12,361
(2,835)
       
Cash flows – investing activities      
Cash from (used for) investing activities – continuing operations17,416
16,084
7,995
97,631
(96,712)42,414
Cash from (used for) investing activities – discontinued operations—
—
—
(10,646)—
(10,646)
Cash from (used for) investing activities17,416
16,084
7,995
86,985
(96,712)31,768
       
Cash flows – financing activities      
Cash from (used for) financing activities – continuing operations3,174
(16,265)(7,995)(142,451)100,775
(62,763)
Cash from (used for) financing activities – discontinued operations—
—
—
(711)—
(711)
Cash from (used for) financing activities3,174
(16,265)(7,995)(143,162)100,775
(63,474)
Effect of currency exchange rate changes on cash and equivalents—
—
—
(24)—
(24)
Increase (decrease) in cash and equivalents(1,274)—
37
(49,752)16,424
(34,565)
Cash and equivalents at beginning of year4,137
—
—
107,350
(20,609)90,878
Cash and equivalents at June 302,863
—
37
57,598
(4,185)56,313
Less cash and equivalents of discontinued operations at June 30—
—
—
4,190
—
4,190
Cash and equivalents of continuing operations at June 30$2,863
$—
$37
$53,408
$(4,185)$52,123

2016 3Q2017 2Q FORM 10-Q 120101

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19.21. SUPPLEMENTAL INFORMATION

CASH FLOWS INFORMATION

Amounts reported in the "All other operating activities" line in the Statement of Cash Flows 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. Certain supplemental information related to our cash flows is shown below.
 Six months ended June 30
(In millions)2017
2016
   
GE  
All other operating activities  
(Gains) losses on purchases and sales of business interests$(42)$(3,140)
Contract assets (net)(a)(3,202)(2,431)
Income taxes(b)(709)(1,184)
Interest charges(c)353
182
Principal pension plans(d)1,542
1,680
Other(1,122)(114)
 $(3,180)$(5,007)
Net dispositions (purchases) of GE shares for treasury  
Open market purchases under share repurchase program$(3,344)$(14,244)
Other purchases—
(776)
Dispositions612
726
 $(2,732)$(14,292)
(a)Contract assets are presented net of related billings in excess of revenues on our long-term product service agreements. See Note 9.
(b)Reflected the effects of current tax expense (benefit) of $583 million and $500 million and net cash paid during the year for income taxes of $(1,292) million and $(1,684) million for the six months ended June 30, 2017 and 2016, respectively. Cash flows effects of deferred tax provisions (benefits) are shown separately within cash flows from operating activities.
(c)Reflected the effects of interest expense of $1,200 million and $1,007 million and cash paid for interest of $(848) million and $(825) million for the six months ended June 30, 2017 and 2016, respectively.
(d)Reflected the effects of pension costs of $1,869 million and $1,780 million and employer contributions of $(327) million and $(100) million for the six months ended June 30, 2017 and 2016, respectively. See Note 12.

DERIVATIVES AND HEDGING

See Note 15 provides16 for the primary information related to our derivatives and hedging activity. This section provides certain supplemental information about this topic.

Changes in the fair value of derivatives are recorded in a separate component of equity (referred to below as Accumulated Other Comprehensive Income, or AOCI) and are recorded in earnings in the period in which the hedged transaction occurs. The table below summarizes this activity by hedging instrument.


FAIR VALUE OF DERIVATIVES 
            
 September 30, 2016 December 31, 2015
(In millions) Assets  Liabilities  Assets  Liabilities
            
Derivatives accounted for as hedges           
     Interest rate contracts$5,411 $23 $4,132 $158
     Currency exchange contracts 231  414  1,109  1,383
     Other contracts -  -  -  -
  5,642  437  5,241  1,541
            
Derivatives not accounted for as hedges           
     Interest rate contracts 128  23  119  44
     Currency exchange contracts 1,111  3,506  1,715  4,048
     Other contracts 96  22  315  49
  1,334  3,550  2,149  4,141
            
Gross derivatives recognized in statement of           
  financial position           
     Gross derivatives 6,976  3,988  7,391  5,681
     Gross accrued interest 764  24  1,001  (13)
  7,740  4,012  8,392  5,668
            
Amounts offset in statement of financial position           
     Netting adjustments(a) (2,367)  (2,358)  (4,326)  (4,326)
     Cash collateral(b) (4,154)  (931)  (1,784)  (642)
  (6,521)  (3,289)  (6,110)  (4,968)
            
Net derivatives recognized in statement of           
  financial position           
     Net derivatives 1,219  723  2,282  700
            
Amounts not offset in statement of           
  financial position           
     Securities held as collateral(c) (741)  -  (1,277)  -
            
Net amount$478 $723 $1,005 $700
            
102 2017 2Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUE OF DERIVATIVES 
      
 June 30, 2017 December 31, 2016
(In millions)Assets
Liabilities
 Assets
Liabilities
      
Derivatives accounted for as hedges     
Interest rate contracts$2,728
$109
 $3,106
$210
Currency exchange contracts62
160
 402
624
Other contracts—
—
 —
—
 2,790
269
 3,508
834
      
Derivatives not accounted for as hedges     
Interest rate contracts58
10
 62
20
Currency exchange contracts1,132
2,199
 1,778
4,011
Other contracts97
34
 119
17
 1,287
2,242
 1,958
4,048
      
Gross derivatives recognized in statement of financial position     
Gross derivatives4,077
2,511
 5,467
4,883
Gross accrued interest470
(13) 768
(24)
 4,547
2,497
 6,234
4,859
      
Amounts offset in statement of financial position     
Netting adjustments(a)(1,606)(1,605) (3,097)(3,094)
Cash collateral(b)(2,059)(462) (2,025)(1,355)
 (3,665)(2,066) (5,121)(4,449)
      
Net derivatives recognized in statement of financial position     
Net derivatives882
431
 1,113
410
      
Amounts not offset in statement of financial position     
Securities held as collateral(c)(432)—
 (442)—
      
Net amount$450
$431
 $671
$410

Derivatives are classified in the captions "All other assets" and "All other liabilities" and the related accrued interest is classified in "Other GE Capital receivables" and "All other liabilities" in our financial statements.Statement of Financial Position.

(a)The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Amounts include fair value adjustments related to our own and counterparty non-performance risk. At June 30, 2017 and December 31, 2016, the cumulative adjustment for non-performance risk was $(1) million and $(3) million, respectively.
(b)Excluded excess cash collateral received and posted of $284 million and $142 million at June 30, 2017, respectively, and $6 million and $177 million at December 31, 2016, respectively.
(c)Excluded excess securities collateral received of $68 million and zero at June 30, 2017 and December 31, 2016, respectively.


(a)           The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Amounts include2017 2Q FORM 10-Q fair value adjustments related to our own and counterparty non-performance risk. At September 30, 2016 and December 31, 2015, the cumulative adjustment for non-performance risk was $(9) million and insignificant, respectively.103

(b)            Excluded excess cash collateral received and posted of $188 million and none at September 30, 2016, respectively, and $48 million and $379 million at December 31, 2015, respectively.
FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(c)            Excluded excess securities collateral received of $47 million and $107 million at September 30, 2016 and December 31, 2015, respectively.


2016 3Q FORM 10-Q 121
CASH FLOW HEDGE ACTIVITY     
 Gain (loss) recognized in AOCI Gain (loss) reclassified
from AOCI into earnings
 for the three months ended June 30 for the three months ended June 30
(In millions)2017
2016
 2017
2016
      
Interest rate contracts$3
$12
 $(6)$(26)
Currency exchange contracts32
1
 71
40
Commodity contracts(2)(1) —
(1)
Total(a)$34
$12
 $65
$14
CASH FLOW HEDGE ACTIVITY           
       Gain (loss) reclassified
 Gain (loss) recognized in AOCI from AOCI into earnings
 for the three months ended September 30 for the three months ended September 30
(In millions)2016 2015 2016 2015
            
Interest rate contracts$1 $10 $(12) $(39)
Currency exchange contracts -  (132)  (46)  (69)
Commodity contracts 1  (2)  -  (1)
Total(a)$2 $(124) $(57) $(109)
            

      
CASH FLOW HEDGE ACTIVITY     
 Gain (loss) recognized in AOCI Gain (loss) reclassified
from AOCI into earnings
 for the six months ended June 30 for the six months ended June 30
(In millions)2017
2016
 2017
2016
      
Interest rate contracts$2
$31
 $(15)$(55)
Currency exchange contracts54
(77) 79
(13)
Commodity contracts—
—
 —
(3)
Total(a)$56
$(45) $64
$(71)
CASH FLOW HEDGE ACTIVITY           
       Gain (loss) reclassified
 Gain (loss) recognized in AOCI from AOCI into earnings
 for the nine months ended September 30 for the nine months ended September 30
(In millions)2016 2015 2016 2015
            
Interest rate contracts$32 $- $(67) $(100)
Currency exchange contracts (76)  (757)  (59)  (589)
Commodity contracts 1  (4)  (3)  (2)
Total(a)$(43) $(761) $(128) $(691)
            
(a)Gain (loss) is recorded in GE"GE Capital revenues from services, interestservices", "Interest and other financial charges,charges", and other"Other costs and expensesexpenses" in our Statement of Earnings when reclassified to earnings.reclassified.

The total pre-tax amount in AOCI related to cash flow hedges of forecasted transactions was a $1$41 million gain at SeptemberJune 30, 2016.2017. We expect to transfer $86$18 million loss to earnings as an expense in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. In both the ninesix months ended 20162017 and 2015,2016, we recognized insignificant gains and losses related to hedged forecasted transactions and firm commitments that did not occur by the end of the originally specified period. At SeptemberJune 30, 20162017 and 2015,2016, the maximum term of derivative instruments that hedge forecasted transactions was 1615 years and 1716 years, respectively. See Note12Note 14 for additional information about reclassifications out of AOCI.

For cash flow hedges, the amount of ineffectiveness in the hedging relationship and amount of the changes in fair value of the derivatives that are not included in the measurement of ineffectiveness were insignificant for each reporting period.

COUNTERPARTY CREDIT RISK

Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. We manage counterparty credit risk (the risk that counterparties will default and not make payments to us according to the terms of our agreements) on an individual counterparty basis. Where we have agreed to netting of derivative exposures with a counterparty, we net our exposures with that counterparty and apply the value of collateral posted to us to determine the exposure. We actively monitor these net exposures against defined limits and take appropriate actions in response, including requiring additional collateral.

As discussed above, we have provisions in certain of our master agreements that require counterparties to post collateral (typically, cash or U.S. Treasury securities) when our receivable due from the counterparty,counterparties, measured at current market value, exceeds a specified limit. The fair value of such collateral was $4,895$2,491 million at SeptemberJune 30, 2016,2017, of which $4,154$2,059 million was cash and $741$432 million was in the form of securities held by a custodian for our benefit. Under certain of these same agreements, we post collateral to our counterparties for our derivative obligations, the fair value of which was $931$462 million at SeptemberJune 30, 2016.2017. At SeptemberJune 30, 2016,2017, our exposure to counterparties (including accrued interest), net of collateral we hold, was $363$320 million. This excludes exposure related to embedded derivatives.

Additionally, our master agreements typically contain mutual downgrade provisions that provide the ability of each party to require termination if the long-term credit rating of the counterparty were to fall below A-/A3 or other ratings levels agreed upon with the counterparty. In certain of these master agreements, each party also has the ability to require termination if the short-term rating of the counterparty were to fall below A-1/P-1. Our master agreements also typically contain provisions that provide termination rights upon the occurrence of certain other events, such as a bankruptcy or events of default by one of the parties. If an agreement was terminated under any of these circumstances, the termination amount payable would be determined on a net basis and could also take into account any collateral posted. The net amount of our derivative liability, after consideration of collateral posted by us and outstanding interest payments was $728$367 million at SeptemberJune 30, 2016.2017. This excludes exposure related to embedded derivatives.

2016 3Q104 2017 2Q FORM 10-Q 122

OTHER ITEMS

EXHIBITS

Exhibit 3(a)
3.1
Certificate of ChangeThe By-Laws of General Electric Company, as amended and restated on June 9, 2017 (Incorporated by reference to Exhibit 3(1)3.1 to General Electric'sGE’s Current Report on Form 8-K dated September 1, 2016June 9, 2017 (Commission file number 001-00035)).
Exhibit 10(a)
General Electric 2003 Non-Employee Director Compensation Plan, Amended and Restated as of September 9, 2016.
http://www.sec.gov/Archives/edgar/data/40545/000004054517000035/ge8k06122017ex31.htm
Exhibit 11
Exhibit 12(a)
Exhibit 12(b)
Computation of Per Share Earnings.*

Computation of Ratio of Earnings to Fixed Charges.
Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
Exhibit 31(a)
Certification Pursuant to Rules 13a14(a)13a-14(a) or 15d14(a)15d-14(a) under the Securities Exchange Act of 1934, as Amended.
Exhibit 31(b)
Certification Pursuant to Rules 13a14(a)13a-14(a) or 15d14(a)15d-14(a) under the Securities Exchange Act of 1934, as Amended.
Exhibit 32
Certification Pursuant to 18 U.S.C. Section 1350.
Exhibit 101
The following materials from General Electric Company'sCompany’s Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2016,2017, formatted in XBRL (eXtensible Business Reporting Language); (i) Statement of Earnings (Loss) for the three and six months ended SeptemberJune 30, 20162017 and 2015,2016, (ii) Consolidated Statement of Comprehensive Income (Loss) for the three and six months ended SeptemberJune 30, 20162017 and 2015,2016, (iii) Consolidated Statement of Changes in Shareowners'Shareowners’ Equity for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, (iv) Statement of Financial Position at SeptemberJune 30, 20162017 and December 31, 2015,2016, (v) Statement of Cash Flows for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, and (vi) Notes to Consolidated Financial Statements.
   
 *
Data required by Financial Accounting Standards Board Accounting Standards Codification 260, Earnings Per Share, is provided in Note 1315 to the Consolidated Financial Statements in this Report.


2016 3Q2017 2Q FORM 10-Q 123105

OTHER ITEMS

FORM 10-Q CROSS REFERENCE INDEX

Item Number Page(s)
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements 63-12259-104
     
Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations 4-57,594-54
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable(a)
     
Item 4. Controls and Procedures 5855
     
Part II – OTHER INFORMATION
Item 1. Legal Proceedings 60-6157-58
     
Item 1A. Risk Factors Not applicable(b)
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 5856
     
Item 3. Defaults Upon Senior Securities Not applicable
     
Item 4. Mine Safety Disclosures Not applicable
     
Item 5. Other Information Not applicable
     
Item 6. Exhibits 123105
     
Signatures  125107

(a)There have been no significant changes to our market risk since December 31, 2015.2016. For a discussion of our exposure to market risk, refer to our Annual Report on Form 10-K for the year ended December 31, 2015.2016.
(b)There have been no significant changes to our risk factors since December 31, 2015.2016. For a discussion of our risk factors, refer to our Annual Report on Form 10-K for the year ended December 31, 2015.2016.


2016 3Q106 2017 2Q FORM 10-Q 124

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  
General Electric Company
(Registrant)

November 2, 2016July 28, 2017 /s/ Jan R. Hauser
Date 
Jan R. Hauser
Vice President and Controller
Duly Authorized Officer and Principal Accounting Officer


2016 3Q2017 2Q FORM 10-Q 125107