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DIGITAL INDUSTRIAL
GE 2015 Annual Report

Table of contents

  • Page 1
    DIGITAL INDUSTRIAL GE 2015 Annual Report

  • Page 2
    We act. We learn. We get better. We insist on being more than we are today. Some companies are retreating; we are moving forward to become the Digital Industrial. - JEFF IMMELT GE's Global New Directions Team CEO Jeff Immelt's culture advisory group made up of promising GE employees from around the...

  • Page 3
    ... Year-over-year 2016 GOALS 1 Operating EPS: $1.45-1.55 (Industrial + Verticals) Organic growth of 2-4% Core margin expansion Corporate @ $2.0-2.2B Alstom ~$0.05; Appliances gain ~$0.20 Restructuring = gains FX impact ~$(0.02) at today's rates High-teens Industrial tax rate 2 Free Cash Flow...

  • Page 4
    ... global economy is long on volatility and short on economic leadership. But GE remains a good investment. In a complicated world, we are simpler and more competitive. In an uncertain world, we are skilled in managing through tough cycles. In a risky world, we have cultural strength and a lot of cash...

  • Page 5
    ... institutional, part of our leadership capability and embedded in our culture. In the midst of our transformation, we delivered good results. In 2015, we grew our Industrial earnings per share by 19%, expanded our segment margins by 80 basis points, and returned $33 billion of cash to our investors...

  • Page 6
    Long-Term Investment in China GE has been in China for 100 years, and is continuing to localize, partner and go digital with strategic investments in its talent and economy. 22,000 30+ 60+ 34 employees plants technology labs joint ventures Near-Term Goals: 10x10 $10B $10B in revenues in sourcing...

  • Page 7
    ... as a public company is valued 30% higher than it was in GE. We returned $20 billion to investors in the form of a share buyback. We are selling $200 billion of assets in 18 months, with 80% already signed. We are about one year ahead of our original plan. As we exit these GE 2015 ANNUAL REPORT 5

  • Page 8
    ... = NEW SERVICES Digital Twin + Controls + Predix P red x THE FUTURE OF SERVICES FOR GE Anim Animated with real-world data, the Digital Twin is a virtual replica of signed to help h p any product, and is designed GE predict and respond to customer problems. DIGITAL TWIN 6 GE 2015 ANNUAL REPORT

  • Page 9
    ... + steam turbine Plant operational data, weather forecasts Increased fuel efficiency Combined-cycle power plant PHYSICAL MODEL + DATA = OUTCOME S1 blade + coating Per-ï¬,ight data, environmental conditions, prior damage Optimized inspection schedule GE90 aircraft engine GE 2015 ANNUAL...

  • Page 10
    ...GE OFFERING • GE CONTRIBUTION • ALSTOM CONTRIBUTION POWER RENEWABLES GRID GAS ONSHORE WIND DISTRIBUTION STEAM HYDRO TRANSMISSION OFFSHORE WIND â†' ENHANCES RENEWABLES BUSINESS IN MULTIPLE WAYS â†' â†' $3.6B IN SYNERGIES GE2GE & GE4GE GROWTH OPPORTUNITIES DRIVES 8 GE 2015 ANNUAL...

  • Page 11
    ... promote industrial growth and generate returns above our cost of capital. At this size, we will apply to de-designate GE Capital as a "systemically important financial institution," greatly reducing the regulatory risk in GE. We completed the acquisition of Alstom that we had begun in 2014. Alstom...

  • Page 12
    ... to generate and model this data ourselves-both inside the Company and with our customers. This is what we mean by becoming a Digital Industrial. Our Digital Industrial capabilities will expand our growth rate, improve our margins and bring us closer to our customers. 10 GE 2015 ANNUAL REPORT

  • Page 13
    ... productivity for our customers Digital Thread Common systems strategy leveraging PredixTM Technical leadership Digital Twin combines physics & analytics Ecosystem approach Co-creating with customers, developers, partners Culture of simplification Act with speed & new business models GE 2015...

  • Page 14
    ... design on our New Product Introductions which allows us to develop and launch new products with reduced cycles, lower cost and higher quality. We can correlate material usage with product performance to change the work scope in a service agreement which drives productivity for GE and the customer...

  • Page 15
    ... SOLUTIONS SPREADING POWER RENEWABLE ENERGY CAPITAL APPLIANCES & LIGHTING GLOBAL SCALE DIGITAL CULTURE & SIMPLIFICATION TECHNOLOGY OIL & GAS TRANSPORTATION ENERGY MANAGEMENT HEALTHCARE AVIATION Outcomes Outcome â†' FASTER GROWTH â†' â†' EXPANDING MARGINS DEVELOPING LEADERS GE 2015...

  • Page 16
    ... have been created in all kinds of consumer Internet stocks; in the next 15 years, trillions in wealth will be generated across the Industrial Internet. My commitment to you is that GE will be better positioned than any rival to create that value and earn those rewards. 14 GE 2015 ANNUAL REPORT

  • Page 17
    ... systems and electrical transmission and distribution grids. Our team is completely centered on delivering in a digital world. We use Product Lifecycle Management tools to increase productivity and quality. 3D modeling and simulation tools compress the design cycle for new product development...

  • Page 18
    ...our share count, integrating Alstom and growing our core operating profit. We plan to return roughly $100 billion to you in buyback and dividends from 2015-2018. Further, as we execute our portfolio strategy and reduce the size of GE Capital, we plan to run GE with a more typical industrial balance...

  • Page 19
    ... market. LEADERSHIP MINDSET SHIFT INVESTING FOR GROWTH BETTER CUSTOMER OUTCOMES, FASTER CHANGING EVERYDAY BEHAVIORS LAUNCHING FLAGSHIP PRODUCTS GE Oil & Gas used FastWorks to create its new NovaLT16 turbine with its customers, launching in 30 months vs. ~5 years. SAVING NEWBORNS GE Healthcare...

  • Page 20
    ... on strategy and collaboration, not just equipment replacement. Using an outcomes-based approach, both Temple and GE are reward- ed by lowering costs and improving patient care. Together, we are targeting $40 million in operational savings, which will help fund new technology. As part of the plan...

  • Page 21
    ... locomotive GE Store contributes: Locomotive motor and control technology utilize developments from Energy Connections launched in 30 months versus ~5 years NovaLT16 New standard for 16MW-class turbines GE Store contributes: Aero-derivative components from Power & Aviation GE 2015 ANNUAL REPORT...

  • Page 22
    20 GE 2015 ANNUAL REPORT

  • Page 23
    ... local Indians $2.5B supply and maintenance contract; largest infrastructure deal ever closed by GE in India 500+ Transportation engineers working on design at GE's India Technology Centre in Bangalore GE investment to manufacture and service locomotives in India $200M GE 2015 ANNUAL REPORT 21

  • Page 24
    ... work internally, but make customers miserable. She has reorganized our commercial efforts to provide solutions, broken down functional barriers and leveraged digital tools to improve our service. A simpler company is good for investors. Good teams like the same things as good investors. Low-cost...

  • Page 25
    ... 2014. TURNING CAPEX TO OPEX GE helps its industrial customers transform capital expenditures into operating expenditures with innovative financing solutions. GE ENERGY FINANCIAL SERVICES PROVIDES: Financing to acquire Diamond Offshore assets FINANCING INNOVATIVE INDUSTRIAL DEALS GE's agreement...

  • Page 26
    ... said we would transform GE into a Digital Industrial company that offers superior customer outcomes...and we are doing it! Our GE recognizes that the global marketplace is changing fast and is ready for speed. It is willing to take more risk in new products, new markets and new technologies and is...

  • Page 27
    .... We are part of an economic ecosystem that is the most competitive in the world. We create great jobs through private enterprise and ingenuity. We give back competency and innovation directed at solving the world's toughest problems. We are all proud to work at GE, a purposeful company that makes...

  • Page 28
    ... Morgan Chase & Co., The Chase Manhattan Bank, and Morgan Guaranty Trust Company, investment banking, New York, New York. Director since 1992. A: Audit G: Governance & Public Affairs M: Management Development & Compensation R: Risk S: Science & Technology L: Lead Director 26 GE 2015 ANNUAL REPORT

  • Page 29
    ... year ended December 31, 2015 or Â... Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____to _____ Commission file number 001-00035 General Electric Company (Exact name of registrant as specified in charter) New York (State...

  • Page 30
    ... About General Electric Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Key Performance Indicators Consolidated Results GE Capital Segment Operations GE Corporate Items and Eliminations Discontinued Operations Other Consolidated Information Statement of...

  • Page 31
    GE 2015 FORM 10-K 3

  • Page 32
    ...Management's Discussion & Analysis PAGE 23 Financial Resources & Liquidity PAGE Financial Statements PAGE 79 127 Index of frequently requested 10-K information Five-Year Financial Performance Graph Segment Operations Corporate Items and Eliminations Pension Costs Income Taxes Share Repurchase...

  • Page 33
    in 2015 Revenues Industrial Operating + GE Capital Verticals EPS1 GAAP EPS $117.4B Countries in Which We Compete $1.31 Employees $0.17 Reï¬,ects certain GE Capital exit-related charges (see Supplemental Information on page 95) ~180 M&A Alstom acquisition Organic Investment Launched Current, ...

  • Page 34
    ... Internet apps With a Portfolio of Businesses Connected Through the GE Store POWER CAPITAL RENEWABLE ENERGY APPLIANCES & LIGHTING Global Culture OIL & GAS Digital TRANSPORTATION Technology ENERGY MANAGEMENT And the Largest, Most Global Scale + HEALTHCARE AVIATION ~$120B REVENUES $315B...

  • Page 35
    ...SOLUTIONS SPREADING POWER RENEWABLE ENERGY CAPITAL APPLIANCES & LIGHTING GLOBAL SCALE DIGITAL CULTURE & SIMPLIFICATION TECHNOLOGY OIL & GAS TRANSPORTATION ENERGY MANAGEMENT HEALTHCARE AVIATION Outcome Outcomes â†' FASTER GROWTH â†' â†' EXPANDING MARGINS DEVELOPING LEADERS GE 2015 FORM...

  • Page 36
    ... of GE Digital's reporting, see Other Terms Used by GE on page 24. $4B $5B ++ $500M (2016 goal) Reshaping GE as a Digital Industrial Company A UNIFIED CORPORATE ORGANIZATION Consolidating existing digital functions into a new organization COMMERCIAL PRODUCT MANAGEMENT DEDICATED DIGITAL...

  • Page 37
    ...sales 2013 2014 2015 15.9% 14.0% 13.9%2 Industrial segment revenues from growth markets1 2010 2014 2015 $27B $43B $43B 12% average annual growth rate GLOBAL GROWTH ORGANIZATION SNAPSHOT SHARED SERVICES SNAPSHOT2 Working at the core of the GE Store to leverage scale & identify innovative solutions...

  • Page 38
    ...price $64B $71B $89B 2013 2014 2015 HOW CAPITAL VERTICALS INDUSTRIAL CALS CONNECT TO INDUSTRIA AL A Financing infrastructure investments vestments through Energy Financial Services, GE Capital Aviation Services & Industrial Finance, ce, including Healthcare Equipment Finance nce Segment Gross...

  • Page 39
    ... from oil prices, excess capacity & lower customer capital expenditures Outlook: Improving competitive position in a tough environment through cost reductions, value-focused solutions & strategic investments CONTRIBUTION TO GE STORE CONTRIBUTION TO GE STORE CONTRIBUTION TO GE STORE Advanced...

  • Page 40
    ... & general aviation aircraft & ship propulsion applications, global service network Digital solutions: Flight Efficiency Services, Fuel Management, Fleet Management MISSION: Developing transformational medical technologies & services that are shaping a new age of patient care Major products...

  • Page 41
    ... appliances market + Positive: Market receptivity to GE Capital dispositions & strong commercial air traffic - Negative: Decreased North America locomotive usage & global commodity price pressure Outlook: Navigating a highly dynamic industry environment by launching new products & transforming...

  • Page 42
    ..., Trade Payables Solutions Other (including our run-off insurance portfolio) Enhancing the competitiveness of our industrial businesses ≤$90B 2014 2015 2017 (targeted) Plan to apply for de-designation as a non-bank systemically important financial institution (SIFI) early 2016 Retaining GE...

  • Page 43
    ... investors via buyback 2 Sustain attractive dividend of $35B (yield > peers) 3 Reinvest in organic growth (plant & equipment, technology, global scale, digital) 4 Disciplined M&A (see framework below) GENERATING CAPITAL + + + + Cash from operating activities GE Capital Exit Plan Synchrony Financial...

  • Page 44
    ... sales1 Corporate operating costs as % of Industrial revenues3

  • Page 45
    ... Cash ï¬,ow metrics in compensation plans • Policy Compliance Review Board...8 compliance operating reviews in 2015 • Global Ombuds System • Deep culture of integrity (Spirit & Letter)...our leaders own it • Ethisphere Magazine...GE named one of the world's most ethical companies 10 years...

  • Page 46

  • Page 47
    ... are stated at list prices; customer actions or developments such as early aircraft retirements or reduced energy demand and other factors that may affect the level of demand and financial performance of the major industries and customers we serve; the effectiveness of our risk management framework...

  • Page 48
    ... 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. Combined with cash dividends of $4.3 billion, GE Capital returned about $25 billion to GE in 2015. In connection with the GE Capital Exit Plan, we completed...

  • Page 49
    ... MD&A. OUR EMPLOYEES AND EMPLOYEE RELATIONS At year-end 2015, General Electric Company and consolidated affiliates employed approximately 333,000 persons, of whom approximately 125,000 were employed in the United States. For further information about employees, see the Other Financial Data section...

  • Page 50
    ... and amendments to those reports are available, without charge, on our website, www.ge.com/investor-relations/investor-services/personal-investing/sec-filing, as soon as reasonably practicable after they are filed electronically with the U.S. Securities and Exchange Commission (SEC). Copies are also...

  • Page 51
    ... Energy Financial Services (EFS) and Healthcare Equipment Finance-that relate to the Company's core industrial domain and other operations, including Working Capital Solutions, our run-off insurance activities, and allocated corporate costs. x x x x x x x x GE 2015 FORM 10-K 23 GE 2015 FORM...

  • Page 52
    ... statements. OTHER TERMS USED BY GE x x Backlog - unfilled customer orders for products and product services (expected life of contract sales for product services). Borrowings as a percentage of total capital invested - for GE, the sum of borrowings and mandatorily redeemable preferred stock...

  • Page 53
    ... profits. Shared Services ± sharing of business processes in order to standardize and consolidate services to provide value to the businesses in the form of simplified processes, reduced overall costs and increased service performance. x x x x x x x x x x x x x GE 2015 FORM 10-K 25 GE 2015...

  • Page 54
    ...RSHUDWLRQV Industrial return on total capital (Industrial ROTC) Industrial cash flows from operating activities (Industrial CFOA) Free cash flow Ratio of adjusted debt to equity at GE Capital, net of liquidity Capital ending net investment (ENI), excluding liquidity GE Capital Tier 1 common ratio...

  • Page 55
    ...REVENUES PERFORMANCE INDUSTRIAL ORDERS INDUSTRIAL BACKLOG  Equipment Equipment Services Services  (a) Includes $2.5 billion related to Alstom.  (a) Includes $29.2 billion related to Alstom.   INDUSTRIAL SEGMENT PROFIT INDUSTRIAL SEGMENT MARGIN GE CFOA     GE Capital Dividend...

  • Page 56
    ... such investments would have had on December 31 for each year indicated. STOCK PRICE RANGE AND DIVIDENDS :LWKUHVSHFWWR³0DUNHW,QIRUPDWLRQ´LQWKH8QLWHG6WDWHV*HQHUDO(OHFWULF common stock is listed on the New York Stock Exchange (its principal market). General Electric common stock is...

  • Page 57
    ... GE Capital Exit Plan section within the MD&A for additional information. On November 17, 2015, we completed the split-off of Synchrony Financial through which the Company accepted 671,366,809 shares of GE common stock from its shareholders in exchange for 705,270,833 shares of Synchrony Financial...

  • Page 58
    ... to mainly the euro, Brazilian real, and Canadian dollar, decreased consolidated revenues by $4.9 billion. 2014 ± 2013 Consolidated revenues increased $3.9 billion, or 3%. x Industrial segment revenues increased 6%, reflecting organic growth* of 7% and the effects of acquisitions (primarily Lufkin...

  • Page 59
    ... and Healthcare. This was partially offset by higher acquisition-related costs. x x x x x x x See the Other Consolidated Information section within the MD&A for a discussion of postretirement benefit plans costs, income taxes and geographic data. *Non-GAAP Financial Measure GE 2015 FORM 10...

  • Page 60
    ... and Consumer businesses, respectively. Real Estate transactions that have closed included the majority of GE Capital's Real Estate debt and equity portfolio sold to funds managed by The Blackstone Group (which, in turn, sold a portion of this portfolio to Wells Fargo & Company). In connection with...

  • Page 61
    ... OFFERS During December 2015, General Electric Capital Corporation merged into GE. The merger and creation of a new intermediate holding company was part of a reorganization of GE Capital's businesses (the Reorganization) pursuant to which GE separated GE Capital's international and U.S. operations...

  • Page 62
    ...,809 shares of GE common stock from its shareholders in exchange for 705,270,833 shares of Synchrony Financial common stock that it owned and recorded an after-tax gain of $3.4 billion within discontinued operations. In connection with the public offering and sale of Synchrony Financial, GE Capital...

  • Page 63
    ...and other financial charges, income taxes and GE Capital preferred stock dividends are included in determining segment profit (which wHVRPHWLPHVUHIHUWRDV³QHWHDUQLQJV´ IRUWKH&DSLWDOVHJPHQW Certain corporate costs, such as shared services, employee benefits and information technology are...

  • Page 64
    ... Consolidated revenues Segment profit Power Renewable Energy Oil & Gas Energy Management Aviation Healthcare Transportation Appliances & Lighting Total industrial segment profit Capital Total segment profit Corporate items and eliminations GE interest and other financial charges GE provision...

  • Page 65
    ... 20 years of service with General Electric Headquarters & Operations x x x x x x 18% of segment revenues in 2015 20% of industrial segment revenues 25% of industrial segment profit Headquarters: Schenectady, NY Serving customers in 150+ countries Employees: approximately 62,000 Products & Services...

  • Page 66
    ...technology, operations and geography to our business. We expect the integration to yield efficiencies in supply chain, service infrastructure, new product development and SG&A costs. The Wind business was transferred to a new segment, Renewable Energy. The business continues to invest in new product...

  • Page 67
    ... in profit was mainly due to the higher volume at Gas Power Systems, and higher productivity reflecting a reduction in SG&A cost, partially offset by negative business mix, driven by higher gas turbine shipments, and lower prices. x *Non-GAAP Financial Measure GE 2015 FORM 10-K 39 GE 2015 FORM 10...

  • Page 68
    ... in 2015 6% of industrial segment revenues 2% of industrial segment profit Headquarters: Paris, France Serving customers in 40+ countries Employees: approximately 11,000 Products & Services GE Renewable Energy makes renewable power sources affordable, accessible, and reliable for the benefit of...

  • Page 69
    ... in November 2015  (a) Includes $5.3 billion related to Alstom EQUIPMENT/SERVICES REVENUES UNIT SALES Services Equipment SIGNIFICANT TRENDS & DEVELOPMENTS x x x Renewable energy has experienced a surge of development in the last decade. Renewable energy capacity additions account for...

  • Page 70
    ... was driven by higher volume, partially offset by lower prices and the impact of a stronger U.S. dollar. The increase in profit was mainly due to higher cost productivity and higher volume, partially offset by lower prices. x *Non-GAAP Financial Measure 42 GE 2015 FORM 10-K 42 GE 2015 FORM 10-K

  • Page 71
    ..., GE Oil & Gas x 21 years of service with General Electric Headquarters & Operations x x x x x x 14% of segment revenues in 2015 15% of industrial segment revenues 14% of industrial segment profit Headquarters: London, UK Serving customers in 140+ countries Employees: approximately 39,000 Products...

  • Page 72
    ... business as well as long-term contracts denominated in multiple currencies. In November 2015, we completed the acquisition of Advantec group for $0.1 billion. The group, mainly based in Norway, provides subsea intervention equipment and services to the oil and gas industry. The Distributed Power...

  • Page 73
    ... PROFIT MARGIN Equipment Services SEGMENT REVENUES & PROFIT WALK: 2015 ± 2014 Revenues 2014 Volume Price Foreign Exchange (Inflation)/Deflation Mix Productivity Other 2015 $ $ 19.1 (1.0) (1.6) N/A N/A N/A 16.5 $ $ Profit 2.8 (0.1) (0.3) 0.1 0.1 2.4 COMMENTARY: 2015 ± 2014 Segment revenues...

  • Page 74
    ... General Electric Headquarters & Operations x x x x x x 6% of segment revenues in 2015 7% of industrial segment revenues 2% of industrial segment profit Headquarters: Atlanta, GA Serving customers in 150+ countries Employees: approximately 45,000 Products & Services GE Energy Management designs...

  • Page 75
    ...other parts of the developed world. The U.S. electrical grid capacity is high and load growth is expected to be slow in the near term; spending by utilities in the U.S. continues to be focused more heavily on sustaining operations versus capital investment. x x x GE 2015 FORM 10-K 47 GE 2015 FORM...

  • Page 76
    MD&A SEGMENT OPERATIONS | ENERGY MANAGEMENT FINANCIAL OVERVIEW (Dollars in billions) SEGMENT REVENUES SEGMENT PROFIT SEGMENT PROFIT MARGIN Equipment Services (a) $6.6 billion, excluding $1.0 billion related to Alstom* (a) $0.3 billion, excluding an insignificant amount related to Alstom* ...

  • Page 77
    ... with General Electric Headquarters & Operations x x x x x x 21% of segment revenues in 2015 23% of industrial segment revenues 31% of industrial segment profit Headquarters: Cincinnati, OH Serving customers in 120+ countries Employees: approximately 45,000 Products & Services Aviation designs and...

  • Page 78
    ... REVENUES UNIT SALES Services Equipment  GEnx engines are a subset of commercial engines Commercial spares shipment rate in millions of dollars per day SIGNIFICANT TRENDS & DEVELOPMENTS x Our digital industrial business is providing insights and operational value for our customers...

  • Page 79
    ...in Commercial Engines and higher services volume, partially offset by decreased equipment sales. The increase in profit was mainly due to higher prices, favorable business mix and higher cost productivity, partially offset by the effects of inflation and lower other income. x 2014 ± 2013 Revenues...

  • Page 80
    ... technologies and performance improvement solutions. Products and services are sold worldwide primarily to hospitals, medical facilities, pharmaceutical and biotechnology companies, and to the life science research market. x Healthcare Systems ± provides a wide range of technologies and services...

  • Page 81
    ... technology, services, and IT/cloud-based solutions as healthcare providers seek greater productivity and efficiency. The U.S. market is improving but uncertainty remains regarding the impact of the Affordable Care Act. Emerging markets are expected to grow long-term with short-term volatility. Life...

  • Page 82
    ... (0.2) 0.5 3.0 2014 ± 2013 Segment revenues up $0.1 billion (1%); Segment profit flat as a result of: x The increase in revenues was due to higher volume, driven by the higher sales in Life Sciences. This increase was partially offset by lower prices mainly at Healthcare Systems and the effects...

  • Page 83
    ... GE Transportation x 7 years of service with General Electric Headquarters & Operations x x x x x x 5% of segment revenues in 2015 5% of industrial segment revenues 7% of industrial segment profit Headquarters: Chicago, IL Serving customers in 60+ countries Employees: approximately 12,000 Products...

  • Page 84
    ..., driving a decline in the overall mining industry. The Signaling business was sold to Alstom on November 2, 2015 for approximately $0.8 billion. In 2015, we launched the new Tier 4 locomotive. A total of 756 Tier 4 compliant locomotives were shipped in 2015. 56 GE 2015 FORM 10-K 56 GE 2015 FORM...

  • Page 85
    ... weakness in the industry, partially offset by an increase in volume in the locomotive services business. The decrease in profit was due to lower volume, primarily in Mining as discussed above, was partially offset by deflation and cost productivity. x GE 2015 FORM 10-K 57 GE 2015 FORM 10-K 57

  • Page 86
    .... We offer one of the largest original equipment manufacturer (OEM) service organizations in the appliances industry, providing in-home repair and aftermarket parts. Lighting ± manufactures, sources and sells a variety of energy-efficient solutions for commercial, industrial, municipal and consumer...

  • Page 87
    ... to close in mid-2016. While the demand in the non-LED market segment is slowing, there is a strong global shift to energy efficient lighting including continued growth in LED products. Launched Current, powered by GE, a digital power service business to deliver integrated energy systems combining...

  • Page 88
    ...SEGMENT OPERATIONS | APPLIANCES & LIGHTING FINANCIAL OVERVIEW (Dollar in billions) SEGMENT REVENUES SEGMENT PROFIT SEGMENT PROFIT MARGIN Equipment Services SEGMENT REVENUES & PROFIT WALK: 2015 ± 2014 Revenues 2014 Volume Price Foreign Exchange (Inflation)/Deflation Mix Productivity Other 2015...

  • Page 89
    ... invests in long-lived, capital intensive energy projects and companies by providing structured equity, debt, leasing, partnership financing, project finance and broad-based commercial finance. GE Capital Aviation Services (GECAS) ± offers commercial aircraft financing and leasing for a wide range...

  • Page 90
    ...AS OF DECEMBER 31, 2015 (a) As originally reported (b) $167 billion including discontinued operations SIGNIFICANT TRENDS & DEVELOPMENTS x The GE Capital Exit Plan - On April 10, 2015, the Company announced its plan to reduce the size of the financial services businesses through the sale of most of...

  • Page 91
    ...with the GE Capital Exit Plan. x Within Capital, Verticals net earnings increased by $0.1 billion, or 4%, as a result of lower equipment leased to others (ELTO) impairments ($0.1 billion) related to our operating lease portfolio of commercial aircraft and the effects of acquisitions and dispositions...

  • Page 92
    ...tax assets related to the GE Capital Exit Plan. Higher treasury operation expenses of $1.0 billion reflecting excess interest expense, including costs associated with the debt exchange completed in October 2015 and derivative activities that reduce or eliminate interest rate, currency or market risk...

  • Page 93
    ...non-operating pension cost* of $2.8 billion, $2.1 billion and $2.6 billion in 2015, 2014 and 2013, respectively, which includes expected return on plan assets, interest costs and non-cash amortization of actuarial gains and losses. . *Non-GAAP Financial Measure GE 2015 FORM 10-K 65 GE 2015 FORM 10...

  • Page 94
    ... income was a $0.2 billion impairment related to an investment security in 2014 compared with a $0.1 billion impairment of an investment in a Brazilian company in 2013. Operating costs increased $0.2 billion, primarily as a result of: x $1.5 billion lower NBCU LLC related income, and x $0.4 billion...

  • Page 95
    ... 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...

  • Page 96
    ... position and cash flows for these businesses are separately reported as discontinued operations for all periods presented. FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS (In millions) Earnings (loss) from discontinued operations, net of taxes $ 2015 (7,495) $ 2014 5,855 $ 2013 5,475 The 2015...

  • Page 97
    ... obligations to repurchase previously sold loans on the 2007 sale of WMC, and $0.2 billion after-tax loss on the disposal of Consumer Russia. For additional information related to discontinued operations, see Note 2 to the consolidated financial statements. GE 2015 FORM 10-K 69 GE 2015 FORM 10...

  • Page 98
    ... rate risk management. It is our policy to allocate Capital interest expense that is either directly attributable or related to discontinued operations. The allocation is based on a market based leverage ratio, taking into consideration the underlying characteristics of the assets for the specific...

  • Page 99
    ... pension plans' cost Non-GAAP operating pension cost* $ 2015 4.5 1.7 $ 2014 3.6 1.5 $ 2013 4.4 1.8 Our operating pension cost for our principal pension plans includes only those components that relate to benefits earned by active employees during the period (service cost, prior service cost...

  • Page 100
    ... billion in both 2015 and 2014. The funded status of our postretirement benefit plans and future effects on operating results depend on economic conditions and investment performance. For further information about our benefit plans and the effects of this activity on our financial statements see the...

  • Page 101
    ...of lower foreign tax rate on indefinitely reinvested non-U.S. earnings GE Capital Exit Plan Benefit of audit resolutions Other Total $ 2015 1.1 (6.1) 0.2 0.4 (4.4) $ 2014 1.2 0.1 0.5 1.8 $ 2013 0.8 0.2 1.0 $ $ $ 2015 ± 2014 COMMENTARY Our benefits from lower-taxed global operations decreased in...

  • Page 102
    ...see the Supplemental Information section within the MD&A. GE ETR, EXCLUDING GE CAPITAL EARNINGS* GE PROVISION (BENEFIT) FOR INCOME TAXES 2015 ± 2014 COMMENTARY x x x The GE provision for income taxes decreased in 2015 because of increased benefits from lower taxed global operations ($0.2 ELOOLRQ...

  • Page 103
    ..., discussed in Note 14 to the consolidated financial statements, related to the GE Capital Exit Plan. 2014 ± 2013 COMMENTARY x The increase in tax benefit of $0.5 billion from 2013 to 2014 was primarily due to increased benefits from lower tax global operations ($0.2 billion), non-repeat of an...

  • Page 104
    ... things, expansion of industrial activities through purchases of companies or assets at reduced prices and lower U.S. debt financing costs. Financial results of our non-U.S. activities reported in U.S. dollars are affected by currency exchange. We use a number of techniques to manage the effects...

  • Page 105
    ...159.6 331.4 $ $ The increase in total assets of non-U.S. operations on a continuing basis reflected an increase primarily in Europe driven by the Alstom acquisition, partially offset by the strengthening of the U.S. dollar against most major currencies. GE 2015 FORM 10-K 77 GE 2015 FORM 10-K 77

  • Page 106
    ... between GE and GE Capital activities in order to permit meaningful analysis of each individual consolidating statement. MAJOR CHANGES IN OUR FINANCIAL POSITION DURING 2015 x Cash and equivalents increased $0.5 billion. GE Cash and equivalents decreased $5.5 billion due to cash flows from operating...

  • Page 107
    ... 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...

  • Page 108
    ... for use in the U.S. on a short-term basis without being subject to U.S. tax. As of December 31, 2015, GE Capital reduced the outstanding commercial paper to $5 billion, consistent with the announced GE Capital Exit Plan. We securitize financial assets as an alternative source of funding. During the...

  • Page 109
    ..., 2015, *(¶V and GE Capital¶V long-term unsecured debt ratings from Standard and 3RRU¶V Ratings Service (S&P) were AA+ and the short-term funding rating from S&P were A-1+. The rating outlook for GE was downgraded from stable to negative on October 7, 2015, while the rating outlook for GE Capital...

  • Page 110
    ...of GE Capital debt. STATEMENT OF CASH FLOWS ± OVERVIEW FROM 2013 THROUGH 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...

  • Page 111
    ... of payments made in 2013, including NBCU LLC deal-related tax payments, and payouts under our long-term incentive plan. Further, GE Capital paid dividends totaling $3.0 billion and $6.0 billion to GE in 2014 and 2013, respectively. x GE cash used for investing activities decreased $10.7 billion...

  • Page 112
    ...$25.7 billion driven primarily by an increase in short-term and long-term debt maturities. x Higher dividends paid to GE totaling $4.3 billion and $3.0 billion in 2015 and 2014, respectively. 2014±2013 COMMENTARY GE Capital cash from operating activities increased $1.0 billion primarily due to the...

  • Page 113
    ... relating to this activity. The incremental cash generated in GE CFOA from selling these receivables to GE Capital increased *(¶V CFOA by $1.6 billion, $2.2 billion and $0.1 billion in 2015, 2014 and 2013, respectively. See Note 23 to the consolidated financial statements for additional information...

  • Page 114
    ...oil prices will provide some benefit to our businesses through lower direct material and other variable costs as well as through the expected stimulus-effect on growth in the U.S. and in other economies that rely on energy imports, including Europe, Japan and India. 86 GE 2015 FORM 10-K 86 GE 2015...

  • Page 115
    ... 1 to the consolidated financial statements, which discusses the determination of fair value of investment securities. Further information about actual and potential impairment losses is provided in Notes 1 and 3 to the consolidated financial statements. GE 2015 FORM 10-K 87 GE 2015 FORM 10-K 87

  • Page 116
    ...plans. To determine fair value, we use quoted market prices when available, our internal cash flow estimates discounted at an appropriate discount rate and independent appraisals, as appropriate. Our operating lease portfolio of commercial aircraft is a significant concentration of assets in Capital...

  • Page 117
    ...continuing operations, we periodically test for impairment our deferred acquisition costs and present value of future profits. Further information is provided in Notes 1 and 8 to the consolidated financial statements. BUSINESSES AND ASSETS HELD FOR SALE Businesses held for sale represent components...

  • Page 118
    ...pension cost in the following year by $0.2 billion. Further information on our pension plans is provided in the Other Consolidated Information ± Postretirement Benefit Plans section within the MD&A and in Note 12 and 27 to the consolidated financial statements. INCOME TAXES Our annual tax rate is...

  • Page 119
    ... adjustments to those market transactions to reflect the risks specific to our asset being valued. Further information on fair value measurements and related matters is provided in Notes 1, 8, 19, 20 and 27 to the consolidated financial statements. GE 2015 FORM 10-K 91 GE 2015 FORM 10-K 91

  • Page 120
    ... court system and other interested parties. Such factors bear directly on whether it is possible to reasonably estimate a range of potential loss and boundaries of high and low estimates. Further information is provided in Notes 2, 13 and 22 to the consolidated financial statements. 92 GE 2015 FORM...

  • Page 121
    ... the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method and continue to evaluate the effect of the standard on our ongoing financial reporting. In February 2015, the FASB issued ASU 2015-02, Amendments to...

  • Page 122
    ... by the inability to obtain raw materials. Sales of goods and services to agencies of the U.S. Government as a percentage of revenues follow. 2015 Total sales to U.S. Government agencies Aviation segment defense-related sales 3% 2 2014 3% 3 2013 4% 3 94 GE 2015 FORM 10-K 94 GE 2015 FORM 10-K

  • Page 123
    ...RSHUDWLRQV Industrial return on total capital (Industrial ROTC) Industrial cash flows from operating activities (Industrial CFOA) Free cash flow Ratio of adjusted debt to equity at GE Capital, net of liquidity Capital ending net investment (ENI), excluding liquidity GE Capital Tier 1 common ratio...

  • Page 124
    ... 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...

  • Page 125
    ...739 1% Organic revenue and operating profit growth measure revenue and profit excluding the effects of acquisitions, business dispositions and currency exchange rates. We believe that these measures provide management and investors with a more complete understanding of underlying operating results...

  • Page 126
    ... 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...

  • Page 127
    ...continuing operations, as GE tax expense does not include taxes on GE Capital earnings. Management believes that in addition to the Consolidated and GE Capital tax rates shown in Note 14 to the consolidated financial statements, this supplemental measure provides investors with useful information as...

  • Page 128
    ... GE Capital preferred stock dividends (Industrial operating earnings) $ $ 2015 1,663 1,797 3,460 (7,654) (330) 11,443 $ $ 2014 9,535 1,378 10,913 1,532 (322) 9,705 $ $ 2013 7,618 1,705 9,323 699 (298) 8,922 Operating earnings excludes non-service-related pension costs of our principal pension plans...

  • Page 129
    ... equal the total. As described above, Verticals represents the GE Capital businesses that we expect to retain. We believe that presenting Industrial operating + Verticals earnings-per-share amounts provides management and investors with a useful measure to evaluate the performance of the businesses...

  • Page 130
    ... quarter 2015 Alstom power and grid acquisition. We believe that industrial segment operating profit and operating profit margin adjusted for the Alstom impacts are meaningful measures because they increase the comparability of period-to-period results. 102 GE 2015 FORM 10-K 102 GE 2015 FORM 10...

  • Page 131
    ... operations(b) (a) (b) $ 2015 111,140 27,910 $ 83,230 $ $ 2014 131,914 45,455 86,459 $ $ 2013 124,501 44,948 79,553 $ $ 2012 120,401 41,399 79,002 $ $ 2011 122,289 38,130 84,159 On an annual basis, calculated using a five-point average. Used for computing Industrial return on total capital...

  • Page 132
    ...the return on Industrial capital may not be directly comparable to similarly titled measures reported by other companies. We believe that the adjustments described above result in a more relevant measure for management and investors to evaluate performance of our Industrial continuing operations, on...

  • Page 133
    ... of additional information about the amounts of dividends paid by our financial services business and the separate presentation in our financial statements of the Financial Services (GE Capital) cash flows. We believe that our measures of Industrial CFOA provide management and investors with useful...

  • Page 134
    ... operations Adjusted GE Capital debt Less liquidity(a) Less cash of businesses held for sale and discontinued operations GE Capital equity Ratio (a) $ 2015 180,795 31,075 211,870 70,497 $ $ 20,395 120,978 46,227 2.62:1 $ $ $ 2014 245,992 105,923 351,915 55,361 20,991 275,563 87,499 3.15:1 $ $ $ 2013...

  • Page 135
    ... this capital ratio is considered a non-GAAP financial measure. We believe that this estimated capital ratio is a useful measure to investors because it is widely used by analysts and regulators to assess the capital position of financial services companies. GE 2015 FORM 10-K 107 GE 2015 FORM 10...

  • Page 136
    ... ± basic Dividends declared Stock price range Year-end closing stock price Cash and equivalents Total assets of continuing operations Total assets Long-term borrowings Common shares outstanding ± average (in thousands) Common shareowner accounts ± average Employees at year end United States Other...

  • Page 137
    ... a total of approximately $3.3 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. GE 2015 FORM...

  • Page 138
    ...62&¶V designation of GE Capital as a nonbank SIFI. In addition, in connection with the December 2015 reorganization described in The GE Capital Exit Plan section of the MD&A, GE &DSLWDO¶V international operations were consolidated under a new international holding company, GE Capital International...

  • Page 139
    RISK MANAGEMENT RISK MANAGEMENT Refer to *(¶V 2016 Proxy Statement for Board committee changes effective March 1, 2016. GE 2015 FORM 10-K 111 GE 2015 FORM 10-K 111

  • Page 140
    ... position. The Science & Technology Committee assists the Board in overseeing *(¶V investments and initiatives in science, technology and software and reviews science and technology trends that could significantly affect the Company and the industries in which it operates. 112 GE 2015 FORM...

  • Page 141
    RISK MANAGEMENT SENIOR MANAGEMENT The GE %RDUG¶V risk oversight process builds upon PDQDJHPHQW¶V risk assessment and mitigation processes, which include standardized reviews of long-term strategic and operational planning; executive development and evaluation; code of conduct compliance under the...

  • Page 142
    ... risk universe, which includes the following risks: strategic, liquidity, credit and investment, market, compliance and operational (including financial, information technology, human resources and legal). Reputational risk is considered and managed across each of the categories. GE Capital...

  • Page 143
    ... current portfolio levels, strategic planning, and regulatory and rating agency expectations. The Enterprise Risk Appetite Statement is presented to the GE Risk Committee and the GE Capital Board for review and approval at least annually. On a quarterly basis, the status of GE &DSLWDO¶V performance...

  • Page 144
    ... Annual Report on Form 10-K or elsewhere. The following information should be read in conjunction with the Management¶V Discussion and Analysis of Financial Condition and Results of Operations (MD&A) section and the consolidated financial statements and related notes. GE's Corporate Risk Function...

  • Page 145
    ... terms. OPERATIONAL RISKS Operational risk relates to risks arising from systems, processes, people and external events that affect the operation of our businesses. It includes product life cycle and execution; product safety and performance; information management and data protection and security...

  • Page 146
    ... financial institutions in the form of cash on deposit and unsecured debt instruments held in its investment portfolios. GE Capital has policies relating to credit rating requirements and to exposure limits to counterparties (as described in Notes 20 and 27to the consolidated financial statements...

  • Page 147
    ...those relating to financial reporting, environmental health and safety. Government and regulatory risk includes the risk that the government or regulatory actions will impose additional cost on us or cause us to have to change our business models or practices. GE 2015 FORM 10-K 119 GE 2015 FORM 10...

  • Page 148
    ... of operations, financial position and cash flows. Dodd-Frank - Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are subject to prudential oversight by the Federal Reserve, as a result of GE Capital¶V designation as a nonbank systemically important financial institution...

  • Page 149
    ...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. GE 2015 FORM 10-K 121 GE...

  • Page 150
    ... control monitoring equipment by incinerator operators. The matter was resolved through a consent decree with the U.S. federal government and the state of New York that was filed December 4, 2015, and pursuant to the agreement GE paid a penalty of $2.3 million on January 4, 2016. 122 GE 2015 FORM...

  • Page 151
    ... accounting firm, KPMG LLP, engaged by and reporting directly to the Audit Committee. U.S. legislation requires management to report on internal control over financial reporting and for auditors to render an opinion on such controls. Our report and the KPMG LLP report for 2015 follow. GE 2015 FORM...

  • Page 152
    ... represent total assets and total revenues of 3.5 percent and 1.7 percent, respectively, of the related consolidated financial statement amounts as of and for the year-ended December 31, 2015. Our independent registered public accounting firm has issued an audit report on our internal control...

  • Page 153
    ... reporting of the Acquired Businesses. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of General Electric Company and consolidated affiliates as of December 31, 2015 and 2014, and the results of their operations and their cash...

  • Page 154
    [PAGE INTENTIONALLY LEFT BLANK] 126 GE 2015 FORM 10-K 126 GE 2015 FORM 10-K

  • Page 155
    ... Taxes 6KDUHRZQHUV¶(TXLW\ Other Stock-related Information Other Income Earnings Per Share Information Fair Value Measurements Financial Instruments Variable Interest Entities Commitments, Guarantees and Product Warranties Intercompany Transactions Operating Segments Cash Flows Information Cost...

  • Page 156
    ... (loss) per share Basic earnings (loss) per share Dividends declared per common share Amounts may not add due to rounding. See Note 3 for other-than-temporary impairment amounts on investment securities. See accompanying notes. $ General Electric Company and consolidated affiliates 2015 2014 74,510...

  • Page 157
    ...and other income Sales of goods Sales of services Other income (Note 17) GE Capital earnings from continuing operations GE Capital revenues from services Total revenues and other income Costs and expenses (Note 26) Cost of goods sold Cost of services sold Selling, general and administrative expenses...

  • Page 158
    ... years ended December 31 (In millions) Net earnings (loss) Less net earnings (loss) attributable to noncontrolling interests Net earnings (loss) attributable to the Company Other comprehensive income (loss) Investment securities Currency translation adjustments Cash flow hedges Benefit plans Other...

  • Page 159
    ...S t  GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS' EQUITY (In millions) GE shareowners' equity balance at January 1 Net earnings (loss) attributable to the Company Dividends and other transactions with shareowners Redemption value adjustment...

  • Page 160
    ... at year-end 2014) Common stock (9,379,288,000 and 10,057,380,000 shares outstanding at year-end 2015 and 2014, respectively) Accumulated other comprehensive income (loss) ± net attributable to GE(b) Investment securities Currency translation adjustments Cash flow hedges Benefit plans Other capital...

  • Page 161
    ...380,000 shares outstanding at year-end 2015 and 2014, respectively) Accumulated other comprehensive income (loss) - net attributable to GE Investment securities Currency translation adjustments Cash flow hedges Benefit plans Other capital Retained earnings Less common stock held in treasury Total GE...

  • Page 162
    ... operations at end of year Supplemental disclosure of cash flows information Cash paid during the year for interest Cash recovered (paid) during the year for income taxes Amounts may not add due to rounding. See accompanying notes. $ General Electric Company and consolidated affiliates 2015 2014...

  • Page 163
    ... operations attributable to the Company, net of GE Capital dividends paid to GE. Amounts may not add due to rounding. In the consolidating data on this page, "GE" means the basis of consolidation as described in Note 1 to the consolidated financial statements; "GE Capital" means General Electric...

  • Page 164
    .... Consolidated. This represents the adding together of GE and GE Capital, giving effect to the elimination of transactions between GE and GE Capital. Operating Segments. These comprise our nine businesses, focused on the broad markets they serve: Power, Renewable Energy, Oil & Gas, Energy Management...

  • Page 165
    ... fair value marks on businesses and assets held for sale carried at lower of cost or market, and increased tax liabilities. THE GE CAPITAL EXIT PLAN On April 10, 2015, the Company announced its plan (the GE Capital Exit Plan) to reduce the size of its financial services businesses through the sale...

  • Page 166
    ...discontinued operations, neWRIWD[HV´LQWKH6WDWHPHQWRI(DUQLQJV REORGANIZATION AND EXCHANGE OFFERS During December 2015, General Electric Capital Corporation merged into GE. The merger and creation of a new intermediate holding company was part of a reorganization of GE Capit DO¶VEXVLQHVVHV...

  • Page 167
    ... the pricing strategy of the business and considers product configuration, geography, customer type, and other market specific factors. Except for goods sold under long-term agreements, we recognize sales of goods under the provisions of U.S. Securities and Exchange Commission (SEC) Staff Accounting...

  • Page 168
    ...military development contracts and locomotive production contracts, we recognize sales as we complete major contract-specified deliverables, most often when customers receive title to the goods or accept the services as performed. For larger oil drilling equipment projects and long-term construction...

  • Page 169
    ... observable data, including present economic conditions such as delinquency rates, financial health of specific customers and market sectors, collateral values, and the present and expected future levels of interest rates. The underlying assumptions, estimates and assessments we use to provide for...

  • Page 170
    ..., payment history, collateral value, industry conditions and guarantor support related to specific customers. Any delinquencies or bankruptcies are indications of potential impairment requiring further assessment of collectability. We routinely receive financial as well as rating agency reports on...

  • Page 171
    ... discounted cash flows or appraised values. Intangible assets with indefinite lives are tested annually for impairment and written down to fair value as required. The cost of individually significant customer relationships is amortized in proportion to estimated total related sales; cost of other...

  • Page 172
    ... such risks. For short-duration insurance contracts, including accident and health insurance, we report premiums as earned income over the terms of the related agreements, generally on a pro-rata basis. For traditional long-duration insurance contracts, including long-term care, term, whole life and...

  • Page 173
    ...case with our primary pricing vendor, third-party brokers and other third-party pricing services do not provide access to their proprietary valuation models, inputs and assumptions. Accordingly, our risk management personnel conduct reviews of vendors, as applicable, similar to the reviews performed...

  • Page 174
    ... collateral values (see Long-Lived Assets below). Cost and Equity Method Investments. Cost and equity method investments are valued using market observable data such as quoted prices when available. When market observable data is unavailable, investments are valued using a discounted cash flow model...

  • Page 175
    ... an agreement to sell our Intelligent Platforms Embedded Systems Products business within our Energy Management segment to Veritas Capital. The sale was completed on December 7, 2015 for proceeds of $515 million. In the fourth quarter of 2014, we signed an agreement to sell our Signaling business...

  • Page 176
    ... of credit support, the vast majority on behalf of certain CLL customers aligned with signed disposal transactions scheduled to close in 2016, and recognized an insignificant liability at December 31, 2015. FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS (In millions) Operations Total revenues and...

  • Page 177
    ... operations. On November 17, 2015, we completed the split-off of Synchrony Financial through which GE accepted 671,366,809 shares of GE common stock from its shareholders in exchange for 705,270,833 shares of Synchrony Financial common stock that it owned. We closed certain of our other Consumer...

  • Page 178
    ... the year ended December 31, 2015. We expect to dispose of substantially all of the remaining CLL business in 2016. FINANCIAL INFORMATION FOR COMMERCIAL LENDING AND LEASING (In millions) Operations Total revenues and other income (loss) Interest Selling, general and administrative expenses Cost of...

  • Page 179
    ...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 $875 million at December 31, 2015, reflecting a net increase to reserves in the year December...

  • Page 180
    .... We completed the sale in the fourth quarter of 2013 for proceeds of $528 million. FINANCIAL INFORMATION FOR OTHER FINANCIAL SERVICES (In millions) Total revenues and other income (loss) Gain (loss) on disposal, net of taxes Earnings (loss) from discontinued operations, net of taxes (a) $ $ $ 2015...

  • Page 181
    ...-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. 2015 Gross Gross unrealized unrealized gains losses 2014 Gross Gross unrealized...

  • Page 182
    ... 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...

  • Page 183
    ..., including impairments Net GE Capital Gains Losses, including impairments Net Total $ 2015 7 (36) (29) 121 (51) 70 41 $ 2014 3 (218) (215) 87 (104) (16) (231) $ 2013 1 (20) (19) 128 (156) (28) (47) $ $ $ Although we generally do not have the intent to sell any specific securities at the end of...

  • Page 184
    ... relates to supplier advances, revenue sharing programs and other non-income based tax receivables. NOTE 5. INVENTORIES December 31 (In millions) GE Raw materials and work in process Finished goods Unbilled shipments Revaluation to LIFO Total GE GE Capital Finished goods Total consolidated $ 2015...

  • Page 185
    ...incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables. Other primarily includes effects of currency exchange. (b) GE 2015 FORM 10-K 157 GE 2015 FORM 10-K 157

  • Page 186
    ... at GECAS. NOTE 7. PROPERTY, PLANT AND EQUIPMENT Depreciable lives-new (in years) Original Cost 2015 Net Carrying Value 2015 2014 December 31 (Dollars in millions) GE Land and improvements Buildings, structures and related equipment Machinery and equipment Leasehold costs and manufacturing plant...

  • Page 187
    ... will complete our post-closing procedures and purchase price allocation no later than the fourth quarter of 2016. As noted above, 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...

  • Page 188
    ... 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. 160 GE 2015 FORM 10-K 160 GE 2015...

  • Page 189
    ... with our Energy Financial Services reporting unit was $1,386 million at December 31, 2015, representing approximately 2% of our total goodwill. Our Oil & Gas business has also experienced declines in orders, project commencement delays and pricing pressures, which affect the fair value of our...

  • Page 190
    ...at December 31, 2015 and 2014 reflect adjustments of $266 million and $293 million, respectively, to the present value of future profits in our run-off insurance operation to reflect the effects that would have been recognized had the related unrealized investment securities holding gains and losses...

  • Page 191
    ...624 million, respectively, to deferred acquisition costs in our run-off insurance operations to reflect the effects that would have been recognized had the related unrealized investment securities holding gains and losses actually been realized. (b) (c) GE 2015 FORM 10-K 163 GE 2015 FORM 10-K 163

  • Page 192
    ...(e) Total GE Capital long-term borrowings Eliminations(d) Total long-term borrowings Non-recourse borrowings of consolidated securitization entities(h) Total borrowings (a) (b) (c) Maturities 2017-2055 $ 2021-2037 2066-2067 $ 2015 Amount $ 500 17,777 1,522 19,799 Average Rate(a) 0.15 % 2.10 $ 2014...

  • Page 193
    ... in long-term borrowings prior to exchange. As part of the GE Capital Exit Plan, on September 21, 2015 GE Capital commenced private offers to exchange up to $30 billion of certain outstanding debt for new notes with maturities of six months, five years, ten years or twenty years. On October 19, 2015...

  • Page 194
    ... insurance benefits(a) Investment contracts Other(b) Eliminations Total (a) (b) $ 2015 19,978 2,955 3,223 26,155 (463) 25,692 $ 2014 20,688 3,970 3,224 27,881 (449) 27,432 $ $ Life insurance benefits are accounted for mainly by a net-level-premium method using estimated yields generally ranging...

  • Page 195
    ... earned Prior service cost amortization Expected return on plan assets Interest cost on benefit obligations Net actuarial loss amortization Curtailment loss Pension cost $ 2015 1,424 205 (3,302) 2,778 3,288 105 4,498 Principal pension plans 2014 $ 1,205 214 (3,190) 2,745 2,565 65 3,604 $ 2013 1,535...

  • Page 196
    ... of Financial Condition and Results of Operations (MD&A). FUNDED STATUS December 31 (in millions) Projected benefit obligations Fair value of plan assets Underfunded $ $ Principal pension plans 2015 68,722 45,720 23,002 $ $ 2014 70,735 48,280 22,455 168 GE 2015 FORM 10-K 168 GE 2015 FORM 10...

  • Page 197
    ... and cash investment funds U.S. corporate(b) Other debt securities(c) Private equities(a) Real estate(a) Other investments(d) Total plan assets (a) (b) (c) (d) 2014 12,956 9,153 4,500 5,155 5,729 5,249 3,129 2,409 48,280 $ $ Included direct investments and investment funds. Primarily represented...

  • Page 198
    ... individual Medicare coverage purchased through a private exchange. Also, in June 2015, we amended our company-provided retiree life insurance so that it will be closed to production employees who retire after June 23, 2019. These plan amendments reduced our principal retiree benefit obligations by...

  • Page 199
    ... in future reporting periods follow. Principal retiree benefit plans 2015 2014 (3,132) $ (464) (3,596) $ (24) (71) (95) December 31 (In millions) Prior service cost (credit) Net actuarial loss (gain) Total $ $ Other pension plans 2015 2014 (29) 3,080 3,051 $ $ (23) $ 3,533 3,510 $ In 2016, we...

  • Page 200
    ... relates to our Treasury operations in Ireland where the tax benefits will no longer be apparent to be realized upon implementation of the GE Capital Exit Plan. These charges, which increase the 2015 Consolidated effective tax rate by 77.3 percentage points, are reported in the lines ³7D[ on global...

  • Page 201
    ... income tax returns in over 300 global taxing jurisdictions. We are under examination or engaged in tax litigation in many of these jurisdictions. During 2015, the Internal Revenue Service (IRS) completed the audit of our consolidated U.S. income tax returns for 2010-2011, except for certain issues...

  • Page 202
    ... tax rate(a) (a) Some portion of such reduction may be reported as discontinued operations. $ 2015 6,778 4,723 805 98 0-700 0-200 $ 2014 5,619 4,059 807 103 0-900 0-300 UNRECOGNIZED TAX BENEFITS RECONCILIATION (In millions) Balance at January 1 Additions for tax positions of the current year...

  • Page 203
    ...In millions) GE Principal pension plans Other non-current compensation and benefits Provision for expenses Retiree insurance plans Non-U.S. loss carryforwards(a) Contract assets Intangible assets Depreciation Investment in global subsidiaries Other ± net GE Capital Operating leases Financing leases...

  • Page 204
    ...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...

  • Page 205
    ... in other capital in the consolidated Statement of Financial Position. On October 16, 2008, we issued 30,000 shares of 10% cumulative perpetual preferred stock and warrants to purchase 134,831,460 shares of common stock to Berkshire Hathaway Inc. (Berkshire Hathaway). On October 16, 2013, Berkshire...

  • Page 206
    ...to deferred acquisition costs, present value of future profits, and investment contracts, insurance liabilities and insurance annuity benefits in our run-off insurance operations to reflect the effects that would have been recognized had the related unrealized investment securities holding gains and...

  • Page 207
    ... affiliates includes common shares in consolidated affiliates and preferred stock issued by our affiliates. Prior to the fourth quarter of 2015, the preferred stock issued by GECC was classified as noncontrolling interests in our consolidated Statement of Financial Position, with dividends presented...

  • Page 208
    ... by GE and Alstom as part of the Alstom acquisition. OTHER Common dividends from GE Capital totaled $4,311 million, $2,000 million and $1,930 million to GE during 2015, 2014 and 2013, respectively. GE Capital did not pay any special dividends to GE during 2015. GE Capital paid special dividends of...

  • Page 209
    ...average grant-date fair value of stock options Stock Option Valuation Assumptions: Risk-free interest rate Dividend yield Expected volatility Expected option life (in years) Other pricing model inputs: Weighted average grant-date market price of GE stock (strike price) $ 4.64 $ 2014 5.26 $ 2013 4.52...

  • Page 210
    ... stock is converted into GE common stock on a one for one basis using treasury stock shares. The expense to be recognized on restricted stock is based upon the market price on the grant date (which is its fair value) times the number of units expected to vest. Accordingly, total expense related...

  • Page 211
    ...statement of cash flows. The table below provides information about tax benefits related to all share-based compensation arrangements. (In millions) Income tax benefit recognized in earnings $ Excess of actual tax deductions over amounts assumed recognized in equity 2015 148 167 $ 2014 147 86 $ 2013...

  • Page 212
    ... Shares of GE common stock outstanding Employee compensation-related shares (including stock options) and warrants Total average equivalent shares Per-share amounts Earnings (loss) from continuing operations Earnings (loss) from discontinued operations Net earnings (loss) $ 2015 Diluted Basic 2014...

  • Page 213
    ..., respectively. See Notes 20 and 27 for additional information on the composition of our derivative portfolio. Includes private equity investments. Primarily represented the liability associated with certain of our deferred incentive compensation plans. GE 2015 FORM 10-K 185 GE 2015 FORM 10-K 185

  • Page 214
    ... Derivatives(d)(e) Other Total 2014 Investment securities Debt U.S. corporate State and municipal Mortgage and asset-backed Corporate ± non-U.S. Government ± nonU.S. government and federal agency Equity Derivatives(d)(e) Other Total (a) (b) (c) (d) (e) Purchases Sales Settlements Transfers into...

  • Page 215
    ... held for sale Cost and equity method investments Long-lived assets Total $ Level 2 1 2 3 Remeasured during the years ended December 31 2015 2014 Level 3 Level 2 $ 154 436 882 1,471 $ 1 102 103 $ Level 3 8 346 689 1,044 $ $ $ $ The following table represents the fair value adjustments to...

  • Page 216
    ... held for sale Cost and equity method investments Long-lived assets December 31, 2014 Recurring fair value measurements Investment securities ± Debt U.S. corporate State and municipal Mortgage and asset-backed Corporate ± non-U.S. Other financial assets $ 146 Income approach Discount rate...

  • Page 217
    ...to market quotes adjusted for our non-performance risk. Investment contracts. Based on expected future cash flows, discounted at currently offered rates for immediate annuity contracts or the income approach for single premium deferred annuities. Time deposits. Carrying value approximates fair value...

  • Page 218
    .... 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...

  • Page 219
    ...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...

  • Page 220
    ... Interest rate decreases Fair 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...

  • Page 221
    ... 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 ³*( Capital revenues from VHUYLFHV´ For our industrial...

  • Page 222
    ... these offsets and the net effect on earnings. (In millions) 2015 Cash flow hedges Fair value hedges Net investment hedges(a) Economic hedges(b) Total 2014 Cash flow hedges Fair value hedges Net investment hedges(a) Economic hedges(b) Total   $ Effect on hedging instrument (911) (151) 4,022 (2,720...

  • Page 223
    ...LQ investment contracts, insurance liabilities and insurance annuity benefits. A Securitization Entity was created to facilitate securitization of trade receivables that serve as an alternative funding source by providing access to variable funding notes and term markets. The securitization...

  • Page 224
    ... assets of businesses held for sale when the consent is received. (c) (d) Total revenues from our consolidated VIEs were $1,638 million, $1,457 million and $994 million in 2015, 2014 and 2013, respectively. Related expenses consisted primarily of cost of goods and services of $1,232 million, $823...

  • Page 225
    ... investors. Further information about such investments is provided in Note 3. NOTE 22. COMMITMENTS, GUARANTEES AND PRODUCT WARRANTIES COMMITMENTS The GECAS business in Capital had placed multiple-year orders for various Boeing, Airbus and other aircraft manufacturers with list prices approximating...

  • Page 226
    ... 1 Current-year provisions Expenditures Other changes (a) Balance at December 31 (a) 2015 included $634 million related to Alstom acquisition. $ 2015 1,199 649 (718) 593 1,723 $ 2014 1,370 593 (714) (50) 1,199 $ 2013 1,429 798 (867) 10 1,370 $ $ $ 198 GE 2015 FORM 10-K 198 GE 2015 FORM 10-K

  • Page 227
    ... of GE corporate overhead costs. These intercompany transactions are reported in the GE and GE Capital columns of our financial statements, but are eliminated in deriving our consolidated financial statements. Effects of these eliminations on our consolidated cash flows from operating, investing and...

  • Page 228
    ..., motion control, operator interfaces and industrial computers are also provided by Energy Management. AVIATION Aviation products and services include jet engines, aerospace systems and equipment, replacement parts and repair and maintenance services for all categories of commercial aircraft; for...

  • Page 229
    ...signaling and communications systems, underground mining equipment, motorized drive systems for mining trucks, information technology solutions, high-quality replacement parts and value added services. APPLIANCES & LIGHTING Products include major appliances and related services for products such as...

  • Page 230
    ... profit excludes interest and other financial charges and income taxes. Property, plant and equipment ± net associated with operations based in the United States were $14,273 million, $9,868 million and $10,065 million at year-end 2015, 2014 and 2013, respectively. Property, plant and equipment...

  • Page 231
    ... supplemental information related to our cash flows is shown below. For the years ended December 31 (In millions) GE Net dispositions (purchases) of GE shares for treasury Open market purchases under share repurchase program Other purchases Dispositions GE Capital All other operating activities Cash...

  • Page 232
    ... engines, under which GE and these participants share in risks and rewards of these product programs. *(¶V payments to participants are recorded as cost of services sold ($788 million, $873 million and $820 million for the years 2015, 2014 and 2013, respectively) or as cost of goods sold ($2,736...

  • Page 233
    ... plan has a fixed subsidy and therefore is not subject to healthcare inflation. The discount rate used to measure the benefit obligation at the end of the year is also used to measure benefit cost in the following year. The assumptions used to measure benefit cost follow. GE 2015 FORM 10-K 205 GE...

  • Page 234
    ...retiree benefit plans 2015 2014 2013 3.89% (a) 7.00 4.61% (a) 7.00 3.74% (a) 7.00 Weighted average discount rates of 3.92%, 4.47% and 3.77% were used for determination of costs in 2015, 2014 and 2013, respectively. The Society of Actuaries issued new mortality tables in 2014 projecting longer life...

  • Page 235
    ...GE common stock) and qualifying employer real property may not exceed 10% of the fair value of trust assets at the time of purchase. GE securities represented 3.7% and 3.8% of the GE Pension Trust assets at year-end 2015 and 2014, respectively. The GE Pension Plan has a broadly diversified portfolio...

  • Page 236
    ... $ 905 560 2021 2025 20,145 4,835 2,500 2015 COST OF POSTRETIREMENT BENEFIT PLANS AND CHANGES IN OTHER COMPREHENSIVE INCOME    (In millions) Cost of postretirement benefit plans Changes in other comprehensive income Prior service cost (credit) ± current year Net actuarial loss (gain) ± current...

  • Page 237
    ... Gross accrued interest Amounts offset in statement of financial position Netting adjustments(a) Cash collateral(b) Net derivatives recognized in statement of financial position Net derivatives Amounts not offset in statement of financial position Securities held as collateral(c) Net amount $ $ 2015...

  • Page 238
    ... earnings 2015 (130) (784) (4) (918) $ 2014 (234) (641) (3) (878) $ $ $ $ Gain (loss) is recorded in GE Capital revenues from services, interest and other financial charges, and other costs and expenses when reclassified to earnings. The total pre-tax amount in AOCI related to cash flow hedges...

  • Page 239
    ... earnings (loss) per share Basic earnings (loss) per share Selected data GE Sales of goods and services Gross profit from sales GE Capital Total revenues Earnings (loss) from continuing attributable to the Company First quarter 2015 (4,673) $ (8,936) (13,608) (35) (13,573) $ 2014 1,491 1,461 2,952...

  • Page 240
    ... Accounting Officer Senior Vice President, Human Resources Vice Chairman of General Electric Company; President & CEO, Global Growth Organization Vice Chairman of General Electric Company; CEO, GE Capital Age 59 50 55 57 56 62 59 57 Officer Position January 1997 July 2013 April 2013 November 2015...

  • Page 241
    ... required information is shown in the consolidated financial statements or notes thereto. (a)3. Exhibit Index Exhibit Number 2(a) Description Master Agreement dated as of December 3, 2009 by and among General Electric Company, NBC Universal, Inc., Comcast Corporation and Navy, LLC. (Incorporated by...

  • Page 242
    ...). General Electric Leadership Life Insurance Program, effective January 1, 1994 (Incorporated by reference to Exhibit 10(r) to General Electric Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 1993). General Electric Supplementary Pension Plan, as...

  • Page 243
    ...International Employee Stock Purchase Plan effective May 1, 2002 (Incorporated by reference to Exhibit 4.1 to General Electric's Registration Statement on Form S-8, File No. 333163106 (Commission file number 001-00035)). Time Sharing Agreement dated November 22, 2010 between General Electric Company...

  • Page 244
    ... December 31, 2015, 2014 and 2013, (iv) Statement of Financial Position at December 31, 2015 and 2014, (v) Statement of Cash Flows for the years ended December 31, 2015, 2014 and 2013, and (vi) the Notes to Consolidated Financial Statements.* Filed electronically herewith. Information required to be...

  • Page 245
    ... Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Exhibits and Financial Statement Schedules 212...

  • Page 246
    ... annual report on Form 10-K for the fiscal year ended December 31, 2015, to be signed on its behalf by the undersigned, and in the capacities indicated, thereunto duly authorized in the Town of Fairfield and State of Connecticut on the 26th day of February 2016. General Electric Company (Registrant...

  • Page 247
    ... under the Securities Exchange Act of 1934, as Amended I, Jeffrey R. Immelt, certify that: 1. I have reviewed this annual report on Form 10-K of General Electric Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact...

  • Page 248
    ...under the Securities Exchange Act of 1934, as Amended I, Jeffrey S. Bornstein, certify that: 1. I have reviewed this annual report on Form 10-K of General Electric Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact...

  • Page 249
    ...report fairly presents, in all material respects, the financial condition and results of operations of the registrant. February 26, 2016 /s/ Jeffrey R. Immelt Jeffrey R. Immelt Chief Executive Officer /s/ Jeffrey S. Bornstein Jeffrey S. Bornstein Chief Financial Officer GE 2015 FORM 10-K 221 GE...

  • Page 250
    ... and Imagination at Work are trademarks and service marks of the General Electric Company. Other marks used throughout are trademarks and service marks of their respective owners. In 2015, patent applications and other applications protecting the Company's technology were filed by GE in 78 countries...

  • Page 251
    ...Companies Design by Addison www.addison.com The paper used in this report was supplied by participants of the Responsible Initiative Programs. The majority of the power utilized to manufacture this paper was renewable energy, produced with GE's wind and biogas technologies, and powered by GE steam...

  • Page 252
    General Electric Company Fairfield, Connecticut 06828 www.ge.com 3.EPC055148101A.105