UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

There were 8,961,233,000 shares of common stock with a par value of $0.06 per share outstanding at June 30, 2016.

TABLE OF CONTENTS

FORWARD LOOKING STATEMENTS

	the impact of potential information technology or data security breaches; and

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

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

PRESENTATION

The consolidated financial statements of General Electric Company (the Company) combine the industrial manufacturing and services businesses of General Electric Company (GE) with the financial services businesses of GE Capital Global Holdings, LLC, and its predecessor, General Electric Capital Corporation (GE Capital or Financial Services).

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

	General Electric or the Company – the parent company, General Electric Company.



GE – the adding together of all affiliates other than GE Capital, whose continuing operations are presented on a one-line basis, giving effect to the elimination of transactions among such affiliates. Transactions between GE and GE Capital have not been eliminated at the GE level. We present the results of GE in the center column of our consolidated statements of earnings, financial position and cash flows. An example of a GE metric is GE cash from operating activities (GE CFOA).

	General Electric Capital Corporation or GECC – the predecessor to GE Capital Global Holdings, LLC.

	GE Capital Global Holdings, LLC or GECGH – the adding together of all affiliates of GECGH, giving effect to the elimination of transactions among such affiliates.



GE Capital or Financial Services – refers to GECGH, or its predecessor GECC, and is the adding together of all affiliates of GE Capital giving effect to the elimination of transactions among such affiliates. We present the results of GE Capital in the right-side column of our consolidated statements of earnings, financial position and cash flows.

	GE consolidated – the adding together of GE and GE Capital, giving effect to the elimination of transactions between the two. We present the results of GE consolidated in the left-side column of our consolidated statements of earnings, financial position and cash flows.



Industrial – GE excluding the continuing operations of GE Capital. We believe that this provides investors with a view as to the results of our industrial businesses and corporate items. An example of an Industrial metric is Industrial CFOA, which is GE CFOA excluding the effects of dividends from GE Capital.



Industrial segment – the sum of our eight industrial reporting segments, without giving effect to the elimination of transactions among such segments. This provides investors with a view as to the results of our industrial segments, without inter-segment eliminations and corporate items. An example of an industrial segment metric is industrial segment revenue growth.



Total segment – the sum of our eight industrial segments and one financial services segment, without giving effect to the elimination of transactions among such segments. This provides investors with a view as to the results of all of our segments, without inter-segment eliminations and corporate items.



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.

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

Amounts reported in billions in graphs within this report are computed based on the amounts in millions. As a result, the sum of the components reported in billions may not equal the total amount reported in billions due to rounding. Certain columns and rows within the tables may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers in millions.

Discussions throughout this MD&A are based on continuing operations unless otherwise noted.

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

OTHER TERMS USED BY GE

	Backlog – unfilled customer orders for products and product services (expected life of contract sales for product services).

	Continuing earnings – unless otherwise indicated, we refer to captions such as "earnings from continuing operations attributable to 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 common shareowners".



Digital revenues – revenues related to software-enabled product upgrades, internally developed software (including Predix) and associated hardware, and software-enabled productivity solutions. These revenues are largely generated from our operating businesses and are included in their segment results.



Ending Net Investment (ENI) – the total capital we have invested in the Financial Services business. It is the sum of short-term borrowings, long-term borrowings and equity (excluding noncontrolling interests) adjusted for unrealized gains and losses on investment securities and hedging instruments. Alternatively, it is the amount of assets of continuing operations less the amount of non-interest-bearing liabilities.

	Equipment leased to others (ELTO) – rental equipment we own that is available to rent and is stated at cost less accumulated depreciation.

	GE Capital Exit Plan – our plan, announced on April 10, 2015, to reduce the size of our financial services businesses through the sale of most of the assets of GE Capital, and to focus on continued investment and growth in our industrial businesses.

	Industrial 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 – Industrial segment profit plus corporate items and eliminations (excluding gains, restructuring, and pre-tax non-operating pension costs) divided by industrial segment revenues plus corporate items and eliminations (excluding gains and GE-GE Capital eliminations).

	Industrial segment gross margin – industrial segment sales less industrial segment cost of sales.

	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 – comprise the expected return on plan assets, interest cost on benefit obligations and net actuarial gain (loss) amortization for our principal pension plans.

	Operating earnings – GE earnings from continuing operations attributable to common shareowners excluding the impact of non-operating pension costs.

	Operating earnings per share – unless otherwise indicated, when we refer to operating earnings per share, it is the diluted per-share amount of "operating earnings".

	Operating pension costs – comprise the service cost of benefits earned, prior service cost amortization and curtailment gain or loss for our principal pension plans.

	Organic revenues – revenues excluding the effects of acquisitions, dispositions and foreign currency exchange.



Product services – for purposes of the financial statement display of sales and costs of sales in our Statement of Earnings, "goods" is required by SEC regulations to include all sales of tangible products, and "services" must include all other sales, including other services activities. In our MD&A section of this report, we refer to sales under product services agreements and sales of both goods (such as spare parts and equipment upgrades) and related services (such as monitoring, maintenance and repairs) as sales of "product services," which is an important part of our operations. We refer to "product services" simply as "services" within the MD&A.



Product services agreements – contractual commitments, with multiple-year terms, to provide specified services for products in our Power, Renewable Energy, Oil & Gas, Aviation and Transportation installed base – for example, monitoring, maintenance, service and spare parts for a gas turbine/generator set installed in a customer's power plant.

	Revenues – unless otherwise indicated, we refer to captions such as "revenues and other income" simply as revenues.

	Segment profit – refers to the operating profit of the industrial segments and the net earnings of the Financial Services segment. See the Segment Operations section within the MD&A for a description of the basis for segment profits.

NON-GAAP FINANCIAL MEASURES

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

	Industrial segment organic revenues

	Operating and non-operating pension costs

	Adjusted Corporate costs (operating)

	Industrial operating and GE Capital earnings (loss) from continuing operations and EPS

	Industrial operating + Verticals earnings and EPS

	Industrial operating profit and operating profit margin (excluding certain items)

	Industrial 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

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

OUR OPERATING SEGMENTS

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

OUR INDUSTRIAL OPERATING SEGMENTS

OUR FINANCIAL SERVICES OPERATING SEGMENT

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

CORPORATE INFORMATION

GE's Internet address at www.ge.com, Investor Relations website at www.ge.com/investor-relations and our corporate blog at www.gereports.com, as well as GE's Facebook page and Twitter accounts, including @GE_Reports, contain a significant amount of information about GE, including financial and other information for investors. GE encourages investors to visit these websites from time to time, as information is updated and new information is posted.

KEY PERFORMANCE INDICATORS

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

*Non-GAAP Financial Measure

KEY PERFORMANCE INDICATORS

(Per-share amounts in dollars)

*Non-GAAP Financial Measure

CONSOLIDATED RESULTS

THREE AND SIX MONTHS ENDED JUNE 30

(Dollars in billions)

*Non-GAAP Financial Measure

THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

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

*Non-GAAP Financial Measure

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 will retain certain GE Capital businesses, principally its vertical financing businesses—GE Capital Aviation Services (GECAS), Energy Financial Services (EFS) and Industrial Finance (which includes Healthcare Equipment Finance, 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 $11 billion in the first half of 2016. In July 2016, we received an additional $4 billion of common dividends from GE Capital bringing our year-to-date total to $15 billion. As of June 30, 2016, we are ahead of our plan, having signed agreements with buyers for $181 billion of ending net investment (ENI), excluding liquidity (as originally reported at December 31, 2014), of which $158 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 56% from $501 billion at December 31, 2014 to $219 billion at June 30, 2016. As of June 30, 2016, we incurred charges of $23.2 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 six months ended June 30, 2016, GE signed agreements to sell approximately $25 billion of ENI, excluding liquidity (as originally reported at December 31, 2014), of which approximately $8 billion, $16 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 $54 billion of ENI, excluding liquidity (as originally reported at December 31, 2014) have closed during the first half of 2016, including approximately $46 billion, $8 billion and less than $1 billion related to our CLL, Consumer and Real Estate businesses, respectively.

In July, we signed an additional $7.9 billion of ENI, excluding liquidity (as originally reported at December 31, 2014), which related to our CLL and Consumer businesses and closed $10.2 billion of ENI, excluding liquidity (as originally reported at December 31, 2014), which related to our CLL business.

AFTER-TAX CHARGES RELATED TO THE GE CAPITAL EXIT PLAN

In the six months ended June 30, 2016, GE recorded $1.2 billion of after-tax charges related to the GE Capital Exit Plan of which $0.4 billion was recorded in continuing operations and $0.8 billion was recorded in discontinued operations. Of these after-tax charges, $0.6 billion were recorded in the second quarter of 2016, primarily exit-related charges in our CLL business. A description of these after-tax charges for the six months ended June 30, 2016 is provided below.

	$0.7 billion of net loss primarily related to the completed and planned dispositions of most of the CLL businesses, which was recorded in discontinued operations under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings.

	$0.3 billion of charges associated with the preferred equity exchange that was completed in January 2016, which was recorded in continuing operations and reported in GE Capital's corporate component under the caption "Preferred stock dividends" in the Statement of Earnings.



$0.2 billion of restructuring and other charges, of which $0.1 billion was recorded in discontinued operations under the caption "Earnings (loss) from discontinued operations, net of taxes" in the Statement of Earnings and $0.1 billion was recorded in continuing operations and reported in GE Capital's corporate component under the captions "Selling, general and administrative expenses" and "Other costs and expenses" in the Statement of Earnings.

For additional information about the GE Capital Exit Plan 2015 sales agreements and after-tax charges, refer to our 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 six months ended June 30, 2016, we have incurred other costs related to our ongoing liability management actions, including $0.5 billion of pre-tax losses related to the repurchase of $10.2 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.

SEGMENT OPERATIONS

REVENUES AND PROFIT

Segment revenues include revenues and other income related to the segment.

Segment profit is determined based on internal performance measures used by the Chief Executive Officer (CEO) to assess the performance of each business in a given period. In connection with that assessment, the CEO may exclude matters such as charges for restructuring; rationalization and other similar expenses; acquisition costs and other related charges; technology and product development costs; certain gains and losses from acquisitions or dispositions; and litigation settlements or other charges, for which responsibility preceded the current management team. For additional information about costs excluded from segment profit, see Corporate Items and Eliminations section within this MD&A.

Segment profit excludes results reported as discontinued operations and material accounting changes. Segment profit also excludes the portion of earnings or loss attributable to noncontrolling interests of consolidated subsidiaries, and as such only includes the portion of earnings or loss attributable to our share of the consolidated earnings or loss of consolidated subsidiaries.

Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segment's management is measured:

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

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

Certain corporate costs, such as shared services, employee benefits and information technology are allocated to our segments based on usage. A portion of the remaining corporate costs is allocated based on each segment's relative net cost of operations.

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

	The translational foreign exchange impact is included within Foreign Exchange.

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

SEGMENT RESULTS – THREE AND SIX MONTHS ENDED JUNE 30

(Dollars in billions)

SIGNIFICANT SEGMENT DEVELOPMENTS

ALSTOM ACQUISITION

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

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 second quarter of 2016, the preliminary amount of goodwill, intangible assets and unfavorable customer contract liabilities recognized was adjusted to approximately $14.8 billion, $4.5 billion, and $1.2 billion, respectively. The adjustments reflected revisions in estimates primarily related to updated revenue and cost assumptions for customer contracts, and other fair value adjustments related to acquired assets and liabilities. Although we believe we have recorded a substantial majority of the purchase accounting adjustments, further adjustments are expected in the third quarter. We will complete our post-closing procedures and purchase price allocation no later than the fourth quarter of 2016. See Note 7 to the consolidated financial statements for further information.

For the six months ended June 30, 2016, Alstom contributed revenues of $6.0 billion and an operating loss of $0.4 billion, which included the effects of purchase accounting and acquisition related charges at Corporate of $0.5 billion. Including the effects of tax benefits of $0.4 billion, net earnings was an insignificant amount for the six months ended June 30, 2016. In addition, Alstom used cash flow from operating activities of $0.9 billion for the six months ended June 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). On June 6, 2016, we completed the sale for proceeds of $5.6 billion and recognized an after-tax gain of $1.8 billion in the second quarter. Beginning in the third quarter, the Lighting business and Energy Connections will be presented as one reporting segment.

POWER

OPERATIONAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

FINANCIAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

*Non-GAAP Financial Measure

RENEWABLE ENERGY

OPERATIONAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

FINANCIAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

*Non-GAAP Financial Measure

OPERATIONAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

FINANCIAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

*Non-GAAP Financial Measure

ENERGY CONNECTIONS

OPERATIONAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

FINANCIAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

(Dollars in billions)

*Non-GAAP Financial Measure

OPERATIONAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

(Dollars in billions; except where noted)

FINANCIAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

HEALTHCARE

OPERATIONAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

(Dollars in billions)

FINANCIAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

OPERATIONAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

FINANCIAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

OPERATIONAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollar in billions)

OPERATIONAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)



The GE Capital Exit Plan - On April 10, 2015, the Company announced its plan to reduce the size of the financial services businesses through the sale of most of its assets over the following 24 months. Further information on the GE Capital Exit Plan is provided in the Consolidated Results section of the MD&A.

As the GE Capital Exit Plan progresses, we will continue to incur interest on non-Verticals borrowings, restructuring costs and GE and GE Capital headquarters costs that are in excess of those allocated to the Verticals. These costs are recorded within other continuing operations within Capital.

	Milestone Aviation Group – On January 30, 2015, we acquired Milestone Aviation Group, a helicopter leasing business, for approximately $1.8 billion.

	Dividends – GE Capital paid common dividends of $3.5 billion and $11.0 billion to GE in the three and six months ended June 30, 2016, respectively. In July 2016, GE Capital paid an additional $4.0 billion of common dividends to GE bringing the year-to-date total to $15.0 billion.

* Non-GAAP Financial Measure

FINANCIAL OVERVIEW - THREE AND SIX MONTHS ENDED JUNE 30

 (Dollars in billions)

THREE MONTHS

Capital revenues increased $0.1 billion as a result of lower impairments, partially offset by lower gains.

	Within Capital, Verticals revenues decreased by $0.2 billion as a result of organic revenue declines ($0.1 billion), lower gains ($0.1 billion) and higher impairments.

	Other Capital revenues increased $0.3 billion as a result of lower impairments ($0.2 billion) and organic revenue growth ($0.1 billion).

Capital net loss increased by $0.1 billion primarily due to core decreases, reflecting excess interest expense and higher insurance reserve provisions, partially offset by tax adjustments in the three months ended June 30, 2016, to bring Capital's six-month tax rate in line with the projected full-year tax rate.

	Within Capital, Verticals net earnings decreased by $0.1 billion due to higher insurance reserve provisions ($0.1 billion) and lower gains, partially offset by core increases.

	Other Capital net loss decreased by less than $0.1 billion primarily as a result of:



Higher treasury operation expenses of $0.4 billion reflecting excess interest expense, costs associated with the May 2016 debt tender and derivative activities that reduce or eliminate interest rate, currency or market risk between financial assets and liabilities. We expect to continue to have excess interest costs in 2016 as asset sales outpace our debt maturities. We may engage in liability management actions, such as buying back debt, based on market and economic conditions.

	Higher restructuring expenses of $0.1 billion.

	Tax adjustments of $0.3 billion in the three months ended June 30, 2016, to bring Capital's six-month tax rate in line with the projected full year tax rate.

	Lower tax expenses of $0.1 billion primarily related to the absence of the second quarter 2015 expected repatriation of foreign earnings related to the GE Capital Exit Plan.

SIX MONTHS

Capital revenues increased $0.1 billion primarily due to lower impairments, organic revenue growth and the effects of acquisitions, partially offset by lower gains and the effects of currency exchange.

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

	Other Capital revenues increased $0.2 billion as a result of organic revenue growth ($0.3 billion) and lower impairments ($0.2 billion), partially offset by lower gains ($0.3 billion).

Capital net loss decreased by $4.7 billion primarily due to the absence of the 2015 charges associated with the GE Capital Exit Plan.

	Within Capital, Verticals net earnings increased by $0.1 billion as a result of higher gains ($0.2 billion), partially offset by higher impairments ($0.1 billion).

	Other Capital net loss decreased by $4.7 billion primarily as a result of:

	Lower tax expenses of $6.1 billion primarily related to the absence of the 2015 expected repatriation of foreign earnings and write-off of deferred tax assets related to the GE Capital Exit Plan.

	Tax adjustments of $0.4 billion in the six months ended June 30, 2016, to bring Capital's six-month tax rate in line with the projected full year tax rate.



Higher treasury operation expenses of $1.2 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.

	Charges of $0.3 billion associated with the preferred equity exchange that was completed in January 2016. Higher restructuring expenses of $0.2 billion.

 

(a)

Included non-operating pension cost* of $0.5 billion and $0.7 billion in the three months ended June 30, 2016 and 2015, respectively, and $1.0 billion and $1.4 billion in the six months ended June 30, 2016 and 2015, respectively, which includes expected return on plan assets, interest costs and non-cash amortization of actuarial gains and losses.

2016 – 2015 COMMENTARY: THREE MONTHS ENDED JUNE 30

Revenues and other income increased $2.4 billion, primarily as a result of:

	$3.1 billion of higher gains from the sale of our Appliances business to Haier.

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

	$0.2 billion of higher inter-segment eliminations.

Operating costs decreased $2.2 billion, primarily as a result of:

	$3.1 billion of higher gains from the sale of our Appliances business to Haier,

	$0.2 billion of lower costs associated with our principal retirement plans including the effects of higher discount rates, and

	$0.1 billion of lower costs under our long-term incentive plan.

These decreases to operating costs were partially offset by the following:

	$0.8 billion higher restructuring and other charges, which included $0.3 billion of restructuring charges associated with the Alstom acquisition, and

	$0.5 billion lower other income from a settlement related to the NBCU transaction in the second quarter of 2015.

*Non-GAAP Financial Measure

2016 – 2015 COMMENTARY: SIX MONTHS ENDED JUNE 30

Revenues and other income increased $2.5 billion, primarily a result of:

	$3.1 billion of higher gains from the sale of our Appliances business to Haier.

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

	$0.2 billion of higher inter-segment eliminations.

Operating costs decreased $2.3 billion, primarily as a result of:

	$3.1 billion of higher gains from the sale of our Appliances business to Haier,

	$0.5 billion of lower costs associated with our principal retirement plans including the effects of higher discount rates, and

	$0.1 billion of lower costs under our long-term incentive plan.

These decreases to operating costs were partially offset by the following:

	$1.0 billion higher restructuring and other charges, which included $0.5 billion of restructuring charges associated with the Alstom acquisition, and

	$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

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.

(a)	For the three and six months ended June 30, 2016, Power's results excluded $0.3 billion and $0.5 billion of costs, primarily related to restructuring charges associated with the Alstom acquisition.

(b)	For the three and six months ended June 30, 2016, Oil & Gas's results excluded $0.4 billion and $0.5 billion of costs, primarily related to ongoing restructuring activities.

(c)	For the three and six months ended June 30, 2016, Healthcare's results excluded $0.1 billion and $0.3 billion of costs, primarily related to restructuring charges.

DISCONTINUED OPERATIONS

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

2016 – 2015 COMMENTARY: THREE MONTHS ENDED JUNE 30

The second quarter 2016 loss from discontinued operations, net of taxes, primarily reflected the following:

	$0.6 billion after-tax loss at our CLL business (including $0.5 billion after-tax loss on planned disposals).

The second quarter 2015 loss from discontinued operations, net of taxes, primarily reflected the following:

	$3.7 billion after-tax loss at our CLL business (including $4.3 billion after-tax loss on planned disposals), and

	Second quarter 2015 losses were partially offset by $0.8 billion after-tax earnings at our Consumer business.

2016 – 2015 COMMENTARY: SIX MONTHS ENDED JUNE 30

The 2016 loss from discontinued operations, net of taxes, primarily reflected the following:

	$0.8 billion after-tax loss at our CLL business (including $0.8 billion after-tax loss on planned disposals).

The 2015 loss from discontinued operations, net of taxes, primarily reflected the following:

	$7.7 billion after-tax loss at our CLL business (including $7.2 billion after-tax loss on planned disposals),

	$2.3 billion after-tax loss at our Real Estate business (including $2.4 billion after-tax loss on planned disposals), and

	$1.9 billion after-tax loss at our Consumer business.

For additional information related to discontinued operations, see Note 2 to the consolidated financial statements.

OTHER CONSOLIDATED INFORMATION

INCOME TAXES

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

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

CONSOLIDATED – THREE AND SIX MONTHS ENDED JUNE 30

(Dollars in billions)

 

 

2016 – 2015 COMMENTARY: THREE MONTHS ENDED JUNE 30

	The consolidated income tax rate was 30.6% in the second quarter of 2015 compared to 12.5% in the second quarter of 2016.

	The consolidated income tax provision decreased due to a larger adjustment to reduce the tax rate to the projected full-year tax rate, partially offset by the impact of higher pre-tax income.

	The consolidated tax provision includes $0.6 billion for GE (excluding GE Capital) for the second quarters of both 2015 and 2016.

2016 – 2015 COMMENTARY: SIX MONTHS ENDED JUNE 30



The consolidated income tax rate was 167.6% in the first six months of 2015 compared to 8.4% in the first six months of 2016. The tax rate for the first six months of 2015 was in excess of 100% due to tax expense of $6.2 billion in the first six 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 six months of 2015 to the first six months of 2016 due to the non-repeat of the GE Capital Exit Plan charges and due to a larger adjustment to reduce the tax rate to the projected full-year tax rate, partially offset by lower benefit from lower taxed global operations.

	The consolidated tax provision includes $0.9 billion and $0.8 billion for GE (excluding GE Capital) for the first six months of 2015 and 2016, 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.

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 SIX MONTHS ENDED

JUNE 30, 2016



Cash and equivalents decreased $18.4 billion. GE Cash and equivalents decreased $0.4 billion due to cash flows from operating activities of $10.7 billion (including common dividends from GE Capital of $11.0 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 more than offset by treasury stock purchases of $15.3 billion (cash basis), including $7.0 billion paid under ASR agreements, dividends of $4.3 billion and net PP&E additions of $1.4 billion. GE Capital Cash and equivalents decreased $17.9 billion primarily driven by $44.5 billion net repayments of debt, $11.2 billion in payments of dividends to shareowners and a short-term loan to GE of $5.0 billion, partially offset by $42.9 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.

	Assets of discontinued operations decreased $71.1 billion, primarily due to the disposition of CLL businesses of $63.5 billion. See Note 2 for additional information.

	Borrowings decreased $41.2 billion, primarily due to a net decrease of GE Capital borrowings of $41.9 billion, partially offset by a net increase in borrowings by GE of $0.9 billion (excluding GE Capital debt assumption and short-term loan from GE Capital to GE).

	Liabilities of discontinued operations decreased $32.1 billion, primarily driven by the disposition of CLL businesses of $27.1 billion. See Note 2 for additional information.



Common stock held in treasury increased $12.6 billion, primarily due to treasury stock purchases of $13.7 billion (book basis), including $6.3 billion repurchased under ASR agreements. This was partially offset by treasury stock issuances of $1.2 billion, primarily stock option exercises of $0.7 billion.

FINANCIAL RESOURCES AND LIQUIDITY

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 $28.9 billion in the second quarter of 2016.

On June 3, 2016, GE commenced an offering to exchange $19.6 billion of all the outstanding, unregistered senior notes that were issued 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.

LIQUIDITY SOURCES

In addition to GE cash of $9.9 billion at June 30, 2016, GE Capital maintained liquidity sources of $55.6 billion that consisted of cash and equivalents of $42.2 billion, high-quality investments of $9.2 billion and cash and equivalents of $4.2 billion classified as discontinued operations. Additionally, we have $20.0 billion of committed unused credit lines.

(a)

At June 30, 2016, $3.2 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 June 30, 2016, GE Capital cash and equivalents of about $0.9 billion were primarily in insurance entities and were subject to regulatory restrictions.

(c)

Of this amount at June 30, 2016, $3.7 billion is held outside of the U.S. and is available to fund operations and other growth of non-U.S. subsidiaries; it is also available to fund our needs in the U.S. on a short-term basis through short-term loans, without being subject to U.S. tax. Under the Internal Revenue Code, these loans are permitted to be outstanding for 30 days or less and the total of all such loans is required to be outstanding for less than 60 days during the year. If we were to repatriate this cash, we would be subject to additional U.S. income taxes and foreign withholding taxes.

FUNDING PLAN

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 have six 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.

GE GUARANTEE OF CERTAIN GE CAPITAL DEBT

ACCELERATED SHARE REPURCHASE AGREEMENT

In the second quarter of 2016, we received the remaining 10,222,022 shares related to the ASR agreement entered in March 2016 based on the final volume weighted-average price less the negotiated discount.

STATEMENT OF CASH FLOWS - SIX MONTHS ENDED JUNE 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 – SIX MONTHS ENDED JUNE 30

(Dollars in billions)

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

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

2016 – 2015 COMMENTARY

GE cash from operating activities increased $6.7 billion primarily due to the following:

	GE Capital paid common dividends totaling $11.0 billion and $0.5 billion to GE in the six months ended June 30, 2016 and 2015, respectively.

	An increase of operating cash collections of $5.0 billion to $56.0 billion in 2016, primarily driven by progress collections of $1.6 billion and higher GE segment revenues from sales of goods and services.



These increases were partially offset by an increase in operating cash payments of $8.8 billion to $56.3 billion in 2016. This increase is primarily driven by increased spend on inventory, purchasing volume timing, payment of income taxes and incentive compensation payments in the six months ended June 30, 2016 compared with that of 2015.

GE cash from investing activities increased $4.3 billion primarily due to the following:

	The sale of our Appliances business to Haier for proceeds of $4.8 billion.

	This is partially offset by funding of a joint venture at our Aviation business in the six months ended June 30, 2016.

GE cash used for financing activities increased $13.0 billion primarily due to the following:

	An increase in net repurchases of GE treasury shares of $14.8 billion, including $7.0 billion paid under ASR agreements.



This increase was partially offset by a net change in borrowings of $1.8 billion. The change is driven by a short-term loan from GE Capital to GE of $5.0 billion in the six months ended June 30, 2016, partially offset by $3.4 billion of GE issued unsecured notes in the six months ended June 30, 2015.

 

GE CAPITAL CASH FLOWS – SIX MONTHS ENDED JUNE 30

(Dollars in billions)