General Electric Co (GE) SEC Quarterly Report (10-Q) for Q3 2015

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

FORM 10-Q

(Mark One)   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2015 OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 001-00035 GENERAL ELECTRIC COMPANY (Exact name of registrant as specified in its charter)

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 10,109,239,000 shares of common stock with a par value of $0.06 per share outstanding at September 30, 2015.

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TABLE OF CONTENTS

FORWARD LOOKING STATEMENTS

This document contains "forward-looking statements" – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," or "target."

Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about our announced plan to reduce the size of our financial services businesses, including expected cash and non-cash charges associated with this plan; expected income; earnings per share; revenues; organic growth; margins; cost structure; restructuring charges; cash flows; return on capital; capital expenditures, capital allocation or capital structure; dividends; and the split between Industrial and GE Capital earnings.

For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:

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)

HOW WE TALK ABOUT OUR RESULTS

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

OTHER TERMS USED BY GE

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 Form 10-Q Report, to:

The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in Exhibit 99(a) to this Form 10-Q Report. Non-GAAP financial measures referred to in this Form 10-Q Report are designated with an asterisk (*).

OUR OPERATING SEGMENTS

We are one of the largest and most diversified infrastructure and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, oil and gas production equipment, and household appliances to medical imaging, business and consumer financing and industrial products.

OUR INDUSTRIAL OPERATING SEGMENTS

	Power & Water		Aviation		Transportation
	Oil & Gas		Healthcare		Appliances & Lighting
	Energy Management

OUR FINANCIAL SERVICES OPERATING SEGMENT

GE Capital

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

THE GE CAPITAL EXIT PLAN

On April 10, 2015, the Company announced its plan (the GE Capital Exit Plan) to reduce the size of its financial services businesses through the sale of most of the assets of GECC over the following 24 months, and to focus on continued investment and growth in the Company's industrial businesses. Under the GE Capital Exit Plan, which was approved on April 2, 2015 and aspects of which were approved on March 31, 2015, the Company will retain certain GECC businesses, principally its vertical financing businesses-GE Capital Aviation Services, Energy Financial Services and Healthcare Equipment Finance-that directly relate to the Company's core industrial domain and other operations, including Working Capital Solutions and our run-off insurance activities (together referred to as GE Capital Verticals or Verticals). The assets planned for disposition include Real Estate, most of Commercial Lending and Leasing (CLL) and all Consumer platforms (including all U.S. banking assets). The Company expects to execute this strategy using an efficient approach for exiting non-vertical assets that works for the Company's and GECC's debt holders and the Company's shareowners. An element of this approach involves a merger of GECC into the Company to assure compliance with debt covenants as GECC exits non-vertical assets, and the creation of a new intermediate holding company to hold GECC's businesses after the merger. The Company has discussed the GE Capital Exit Plan, aspects of which are subject to regulatory review and approval, with its regulators and staff of the Financial Stability Oversight Council (FSOC) and will work closely with these bodies to take the actions necessary over time to terminate the FSOC's designation of GECC (and the new intermediate holding company, as applicable) as a nonbank systemically important financial institution (nonbank SIFI).

REORGANIZATION AND EXCHANGE OFFERS

The merger and creation of a new intermediate holding company is part of a reorganization of GECC's businesses (the Reorganization) pursuant to which GE will also separate GECC's international and U.S. operations. GECC's international operations will be consolidated under a new international holding company (GE Capital International Holdings) and will have a separate capital structure and be supervised by the U.K. Prudential Regulation Authority. The Reorganization, Exchange Offers (as described below) and establishment of GE Capital International Holdings are intended, among other things, to establish an efficient and simplified capital structure that is satisfactory to GECC's regulators, a key step in terminating the nonbank systemically important financial institution designation for GECC. In addition, the Exchange Offers were designed to align the liabilities of GE Capital International Holdings to its assets from a maturity profile and liquidity standpoint, taking into consideration asset sales, and where appropriate, shortening the maturity profile of targeted liabilities.

As part of the GE Capital Exit Plan, on September 21, 2015 GE Capital commenced private offers to exchange (the Exchange Offers) 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, given the high level of participation, the offering was increased by $6 billion with the aggregate principal amount of $36 billion of outstanding notes being tendered for exchange and settled on October 26, 2015. The new notes that were issued at closing are composed of $15.3 billion of 0.964% Six Month Notes due 2016, £0.8 billion of 1.363% Six Month Notes due 2016, $6.1 billion of 2.342% Notes due 2020, $2.0 billion of 3.373% Notes due 2025 and $11.5 billion of 4.418% Notes due 2035. Of the $16.2 billion exchanged into the Six Month Notes, $1.3 billion is in short term borrowings at September 30, 2015. GECC will continue to evaluate the opportunity to repurchase debt while maintaining our liquidity at the levels communicated as part of the GE Capital Exit Plan. The new notes have been fully, irrevocably and unconditionally guaranteed by GE.

SALES AGREEMENTS

During the first nine months of 2015, GE signed agreements to sell approximately $94 billion of ENI, excluding liquidity (as originally reported at December 31, 2014), of which approximately $45 billion and $33 billion related to the CLL and Real Estate businesses, respectively. CLL transactions signed in the third quarter 2015 included approximately $9.3 billion related to its Healthcare Financial Services U.S. lending business with Capital One, approximately $7.6 billion related to its Transportation Finance business in the U.S. and Canada with BMO Financial Group, and approximately $1.8 billion related to its Mubadala joint venture with MidCap Finco. Ltd., which is managed by Apollo Capital Management. Of the signed agreements, approximately $60 billion have closed, including approximately $30 billion and $21 billion related to Real Estate and CLL, respectively. The Real Estate transactions that have closed included the majority of GECC's Real Estate debt and equity portfolio sold to funds managed by The Blackstone Group (which, in turn, sold a portion of this portfolio to Wells Fargo & Company). In connection with The Blackstone Group transactions, GECC provided $3.2 billion of seller financing to The Blackstone Group, which GECC intends to syndicate by 2016. As of September 30, 2015, GECC has collected or sold approximately $0.4 billion of this seller financing. The CLL transactions that have closed included its U.S. and European Sponsor Finance businesses and the majority of its Global Fleet services business.

In addition, during October 2015, we signed agreements to sell approximately $32 billion of ENI, excluding liquidity (as originally reported at December 31, 2014) related to our CLL business. These signed CLL transactions included approximately $30 billion related to our global Commercial Distribution Finance, North American Vendor Finance and North American Corporate Finance businesses with Wells Fargo & Company and approximately $2 billion related to our Corporate Aircraft portfolio with Global Jet Capital.

AFTER-TAX CHARGES RELATED TO THE GE CAPITAL EXIT PLAN

In connection with the GE Capital Exit Plan announced on April 10, the Company estimated that it would incur approximately $23 billion in after-tax charges through 2016, approximately $6 billion of which are expected to result in future net cash expenditures. These charges relate to: business dispositions, including goodwill allocations (approximately $13 billion), tax expense related to expected repatriation of foreign earnings and write-off of deferred tax assets (approximately $7 billion), and restructuring and other charges (approximately $3 billion).

In the nine months ended September 30, 2015, GE recorded $21.1 billion of after-tax charges related to the GE Capital Exit Plan, including $0.4 billion of after-tax charges recorded in the third quarter of 2015, primarily exit-related charges in our CLL business, partially offset by income associated with operations in CLL and Real Estate. A description of after-tax charges for the nine months ended September 30, 2015 is provided below.

GUARANTEE

As part of the GE Capital Exit Plan, on April 10, 2015, the Company and GECC entered into an amendment to their existing financial support agreement. Under this amendment (the Amendment), the Company has provided a full and unconditional guarantee (the Guarantee) of the payment of principal and interest on all tradable senior and subordinated outstanding long-term debt securities and all commercial paper issued or guaranteed by GECC identified in the Amendment. In the aggregate, the Guarantee applied to approximately $184 billion of GECC debt as of September 30, 2015. The Guarantee replaced the requirement that the Company make certain income maintenance payments to GECC in certain circumstances. GECC's U.S. public indentures were concurrently amended to provide the full and unconditional guarantee by the Company set forth in the Guarantee.

SYNCHRONY FINANCIAL EXCHANGE OFFER

On October 14, 2015, the Federal Reserve Board approved Synchrony Financial's application to operate as a publicly owned savings and loan holding company following completion of the exchange offer, conditioned on Synchrony Financial complying with certain conditions, including receipt of all required regulatory approvals, and on the commitments made in connection with Synchrony Financial's applications .

On October 19, 2015, GE commenced an offer to exchange GE common stock for common stock of GECC's approximately 84.6% owned subsidiary, Synchrony Financial. This exchange offer is in connection with the previously announced separation of Synchrony Financial and is expected to conclude the week of November 16, 2015. We estimate that the exchange will reduce the outstanding shares of GE common stock by approximately 6-7%. Following the completion of the share exchange, GECC expects the Federal Reserve Board to act in due course on its application to deregister as a savings and loan holding company but cannot predict the timing of the Federal Reserve Board's action. For further information about the Synchrony Financial transaction, see the Form S-4 filed by Synchrony Financial on October 19, 2015 .

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 General Electric Capital Corporation (GECC or financial services).

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

Amounts reported in billions in graphs within this Form 10-Q 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.

REFERENCES

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

For additional information related to the GE Capital Exit Plan, GE Capital segment operations and the credit quality of financing receivables, refer to the General Electric Capital Corporation quarterly report on Form 10-Q for the nine months ended September 30, 2015.

CORPORATE INFORMATION

GE's 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)

REVENUES PERFORMANCE					INDUSTRIAL SEGMENT PROFIT		INDUSTRIAL SEGMENT MARGIN
	3Q 2015		YTD 2015
Industrial Segment	(1)%		(1)%
Industrial Segment Organic*	4%		4%
Financial Services	(1)%		(9)%
EARNINGS PER SHARE					INDUSTRIAL ORDERS		INDUSTRIAL BACKLOG
  Earnings   Operating Earnings*						Equipment Services	(a) Prior period reflects an update for Oil & Gas services backlog.	Equipment Services
IND'L OPERATING + VERTICALS EPS*					SIGNIFICANT DEVELOPMENTS IN 2015
					On October 19, 2015, w e launched the Synchrony Financial share exchange, after the Federal Reserve Board approved Synchrony Financial's application to operate as a publicly owned savings and loan holding company. At September 30, 2015, we had an agreement to sell our consumer finance business in Australia and New Zealand for approximately 6.0 billion Australian dollars and 1.4 billion New Zealand dollars, respectively. We announced the GE Capital Exit Plan in April 2015 and GECC's Real Estate business and most of the CLL business have been classified as discontinued operations. We acquired Milestone Aviation Group, a helicopter leasing business, for approximately $1.8 billion on January 30, 2015. The effects of the stronger U.S. dollar in the nine months ended September 30, 2015, primarily related to the euro, decreased consolidated revenues by $3.9 billion. GE returned $7.2 billion to shareowners in the nine months ended September 30, 2015 primarily through dividends.
Verticals include businesses expected to be retained (GECAS, EFS, Healthcare Equipment Finance, Working Capital Solutions, and run-off insurance), including allocated corporate costs.
GE CFOA
		GECC Dividend Industrial CFOA*

* Non-GAAP Financial Measure

CONSOLIDATED RESULTS

THREE AND NINE MONTHS ENDED SEPTEMBER 30

(Dollars in billions)

REVENUES		INDUSTRIAL SEGMENT EQUIPMENT & SERVICES REVENUES
			Equipment Services
COMMENTARY: 2015 - 2014
THREE MONTHS ENDED Consolidated revenues decreased $0.4 billion, or (1)%.  Industrial segment revenues decreased 1%, reflecting the unfavorable impact of foreign exchange of $1.2 billion. Industrial segment organic revenues* grew 4%.  Financial Services revenues decreased 1% as a result of higher impairments and the effects of currency exchange, partially offset by higher gains and the effects of acquisitions.  The effects of acquisitions increased consolidated revenues $0.1 billion and $0.3 billion in 2015 and 2014, respectively. The effects of dispositions decreased consolidated revenues $0.1 billion and $0.6 billion in 2015 and 2014, respectively.		NINE MONTHS ENDED Consolidated revenues decreased $1.9 billion, or (2)%, primarily due to the impact of foreign exchange of $3.9 billion.  Industrial segment revenues decreased 1%, reflecting the unfavorable impact of foreign exchange of $3.5 billion. Industrial segment organic revenues* grew 4%.  Financial Services revenues decreased 9% primarily due to the effects of the GE Capital Exit Plan.  The effects of acquisitions increased consolidated revenues $0.5 billion and $1.5 billion in 2015 and 2014, respectively. Dispositions affected our ongoing results through lower revenues of $0.4 billion and $3.0 billion in 2015 and 2014, respectively.

* Non-GAAP Financial Measure

THREE AND NINE MONTHS ENDED SEPTEMBER 30

(Dollars in billions)

EARNINGS (LOSS)		INDUSTRIAL SELLING, GENERAL & ADMINISTRATIVE (SG&A) AS A % OF SALES
  Earnings   Operating Earnings*
COMMENTARY: 2015 - 2014
THREE MONTHS ENDED Consolidated earnings increased 1% primarily due to:  Industrial segment profit increased 5% with five of seven segments growing earnings.  Industrial segment margin increased 100 basis points (bps) driven by higher productivity and volume, partially offset by the impact of the stronger U.S. dollar.  Financial Services earnings decreased 13% primarily due to core decreases, including charges associated with the GE Capital Exit Plan and higher impairments, partially offset by higher gains, the effects of dispositions and lower provisions for losses on financing receivables.  The effects of acquisitions on our consolidated net earnings were insignificant amounts for both 2015 and 2014, respectively. The effects of dispositions on net earnings and settlements were an insignificant amount in 2015 and a decrease of $0.1 billion in 2014.  Industrial SG&A as a percentage of total sales decreased to 13.9% primarily as a result of favorable impacts of global cost reduction initiatives and lower restructuring costs, partially offset by higher non-operating pension costs.		NINE MONTHS ENDED Consolidated earnings decreased $10.1 billion primarily due to lower financial services income resulting from charges associated with the GE Capital Exit Plan of $9.7 billion, which consisted primarily of tax expense related to expected repatriation of foreign earnings and write-off of deferred tax assets and asset impairments due to shortened hold periods.  Industrial segment profit increased 6% with five of seven segments growing earnings.  Industrial segment margin increased 100 bps driven by higher productivity, volume and pricing, partially offset by the impact of the stronger U.S. dollar, the effects of inflation and negative business mix.  Financial Services earnings decreased significantly primarily due to charges associated with the GE Capital Exit Plan.  The effects of acquisitions on our consolidated net earnings were increases of $0.1 billion in 2015 and $0.2 billion in 2014. The effects of dispositions and settlements on net earnings were an increase of $0.3 billion in 2015 and a decrease of $1.5 billion in 2014.  Industrial SG&A as a percentage of total sales decreased to 14.6% primarily as a result of favorable impacts of global cost reduction initiatives, partially offset by higher non-operating pension costs and restructuring costs.

See the "Other Consolidated Information" section within the MD&A of this Form 10-Q for a discussion of income taxes.

*Non-GAAP Financial Measure

SEGMENT OPERATIONS

SEGMENT REVENUES AND PROFIT

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

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

Segment profit excludes results reported as discontinued operations and 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:

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.

PLANNED ACQUISITION OF ALSTOM IMPACTS MULTIPLE SEGMENTS

During the second quarter of 2014, GE's offer to acquire the Thermal, Renewables and Grid businesses of Alstom for approximately €12,350 million (to be adjusted for the assumed net cash or liability at closing) was positively recommended by Alstom's board of directors. As part of the transaction, Alstom and the French Government signed a memorandum of understanding for the formation of three joint ventures in grid technology, renewable energy, and global nuclear and French steam power. Alstom will invest approximately €2,400 million in these joint ventures at the closing of the proposed transaction.

In the fourth quarter of 2014, Alstom completed its review of the proposed transaction with the works council and obtained approval from its shareholders. Also in the fourth quarter of 2014, GE and Alstom entered into an amendment to the original agreement where GE has agreed to pay Alstom a net amount of approximately €260 million of additional consideration at closing. In exchange for this funding, Alstom has agreed to extend the trademark licensing of the Alstom name from 5 years to 25 years as well as other contractual amendments.

In the second quarter of 2015, the European Commission indicated that it had competition concerns with the proposed transaction. In response, GE proposed remedies to address the concerns of the Commission and the U.S. Department of Justice while preserving the strategic and economic rationale of the proposed transaction. On September 8, 2015, the European Commission and the Department of Justice accepted GE's proposal and approved the transaction. In order to obtain approval, GE has pledged to sell certain of Alstom's gas-turbine assets and its Power Systems Mfg. subsidiary to Ansaldo Energia SpA after the close of the transaction for approximately €120 million. As a result of final negotiations, Alstom has agreed to contribute financially to the remedies through a €300 million reduction in the purchase price of the transaction. Further, GE and Alstom agreed to other purchase price amendments that resulted in a net increase of consideration of approximately €45 million and a reduction in the trademark licensing period of the Alstom name to five years. The transaction is targeted to close in November 2015.

The acquisition and alliances with Alstom will impact our Power & Water and Energy Management segments. The impact of acquired businesses on individual segments will be affected by a number of variables, including operating performance, purchase accounting impacts and expected synergies. In addition, due to the amount of time between signing and closing, the operations of the businesses may fluctuate and impact the overall valuation of the acquired businesses at the time of close and, accordingly, may affect the amounts assigned to the assets and liabilities recorded in accordance with purchase accounting.

PLANNED SALE OF APPLIANCES

In the third quarter of 2014, we signed an agreement to sell our Appliances business to Electrolux for approximately $3.3 billion. On July 1, 2015, we were notified that the Department of Justice had initiated court proceedings seeking to enjoin the sale of Appliances to Electrolux. Electrolux and GE intend to defend the proposed transaction and a trial date has been set for November 9, 2015.

SEGMENT RESULTS

POWER & WATER

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES			EQUIPMENT/SERVICES REVENUES
(a) Includes Water Process Technologies and Nuclear
Services          Equipment
ORDERS			BACKLOG
	Equipment Services			Equipment Services
UNIT SALES

FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollars in billions)

SEGMENT REVENUES & PROFIT						SEGMENT PROFIT MARGIN
  Revenue   Profit
SEGMENT REVENUES & PROFIT WALK:					COMMENTARY: 2015 - 2014
THREE MONTHS ENDED						Segment revenues up $0.1 billion or 1%; Segment profit up $0.1 billion or 7% as a result of:  The increase in revenues was primarily due to higher volume, mainly driven by higher equipment sales at Renewable Energy and PGS upgrades, partially offset by the impact of the stronger U.S. dollar.  The increase in profit was mainly due to services growth and cost productivity. These increases were partially offset by an unfavorable business mix.
	Revenues		Profit
September 30, 2014	$	6.4	$	1.2
Volume		0.4		0.1
Price		-		-
Foreign Exchange		(0.4)		-
(Inflation)/Deflation		N/A		-
Mix		N/A		(0.1)
Productivity		N/A		0.1
Other		-		-
September 30, 2015	$	6.5	$	1.3
NINE MONTHS ENDED						Segment revenues up $0.8 billion or 4%; Segment profit up $0.2 billion or 5% as a result of:  The increase in revenues was primarily due to higher volume, mainly driven by higher equipment sales at PGP and Renewable Energy and service sales at PGS, higher price and other income, partially offset by the impact of the stronger U.S. dollar.  The increase in profit was mainly due to higher volume, price and other income, partially offset by unfavorable business mix and the impact of the stronger U.S. dollar.
	Revenues		Profit
September 30, 2014	$	18.2	$	3.2
Volume		1.6		0.3
Price		0.1		0.1
Foreign Exchange		(1.0)		(0.1)
(Inflation)/Deflation		N/A		-
Mix		N/A		(0.2)
Productivity		N/A		-
Other		0.1		0.1
September 30, 2015	$	19.0	$	3.4

OIL & GAS

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES			EQUIPMENT/SERVICES REVENUES
(a) Our drilling product line, previously part of Drilling & Surface (D&S), was realigned as part of Subsea Systems effective January 1, 2015. Accordingly, D&S is now Surface and Subsea Systems is now Subsea Systems & Drilling.			Services Equipment
ORDERS			BACKLOG
	Equipment Services		(a) Prior period reflects an update for Oil & Gas services backlog.	Equipment Services

FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollars in billions)

SEGMENT REVENUES & PROFIT						SEGMENT PROFIT MARGIN
  Revenues   Profit
SEGMENT REVENUES & PROFIT WALK:					COMMENTARY: 2015 - 2014
THREE MONTHS ENDED						Segment revenues down $0.7 billion or 16%; Segment profit down $0.1 billion or 12% as a result of:  The decrease in revenues was primarily due to the impact of the stronger U.S. dollar and lower volume, partially offset by other income. Organic revenues* for the third quarter of 2015 were down 7% compared with the third quarter of 2014.  The decrease in profit was due to lower volume, the impact of the stronger U.S. dollar and lower productivity, partially offset by other income. Organic operating profit* was flat in the third quarter of 2015.
	Revenues		Profit
September 30, 2014	$	4.6	$	0.7
Volume		(0.4)		(0.1)
Price		-		-
Foreign Exchange		(0.4)		(0.1)
(Inflation)/Deflation		N/A		-
Mix		N/A		-
Productivity		N/A		(0.1)
Other		0.1		0.1
September 30, 2015	$	3.9	$	0.6
NINE MONTHS ENDED						Segment revenues down $1.8 billion or 13%; Segment profit down $0.2 billion or 10% as a result of:  The decrease in revenues was primarily due to the impact of the stronger U.S. dollar and lower volume. Organic revenues* for the nine months ended September 30, 2015 were down 4% compared with the same period of 2014.  The decrease in profit is primarily due to the impact of the stronger U.S. dollar and lower volume, partially offset by cost deflation and higher productivity. Organic operating profit* grew 5% in the nine months ended September 30, 2015.
	Revenues		Profit
September 30, 2014	$	13.7	$	1.8
Volume		(0.5)		(0.1)
Price		-		-
Foreign Exchange		(1.2)		(0.3)
(Inflation)/Deflation		N/A		0.1
Mix		N/A		-
Productivity		N/A		0.1
Other		(0.1)		-
September 30, 2015	$	11.9	$	1.6

*Non-GAAP Financial Measure

ENERGY MANAGEMENT

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES			EQUIPMENT/SERVICES REVENUES
Services  Equipment
ORDERS			BACKLOG
	Equipment Services			Equipment Services

FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollars in billions)

SEGMENT REVENUES & PROFIT				SEGMENT PROFIT MARGIN
  Revenue     Profit
	COMMENTARY: 2015 - 2014
	THREE MONTHS ENDED Segment revenues down 2% as a result of:			NINE MONTHS ENDED Segment revenues down $0.1 billion or 2% as a result of:
	 The impact of the stronger U.S. dollar ($0.1 billion), partially offset by higher sales volume ($0.1 billion).			 The impact of the stronger U.S. dollar ($0.4 billion), partially offset by higher volume ($0.3 billion).
	Segment profit up $0.1 billion as a result of :			Segment profit up $0.1 billion or 78% as a result of :
	 Improved productivity ($0.1 billion).			 Improved productivity ($0.2 billion), partially offset by the impact of the stronger U.S. dollar ($0.1 billion).

AVIATION

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

(Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES			EQUIPMENT/SERVICES REVENUES
Services  Equipment
ORDERS			BACKLOG
	Equipment Services			Equipment Services
UNIT SALES
(a) GEnx engines are a subset of commercial engines (b) Commercial spares shipment rate in millions of dollars per day

FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollars in billions)

SEGMENT REVENUES & PROFIT						SEGMENT PROFIT MARGIN
  Revenues     Profit
SEGMENT REVENUES & PROFIT WALK:					COMMENTARY: 2015 - 2014
THREE MONTHS ENDED						Segment revenues up $0.3 billion or 5%; Segment profit up $0.1 billion or 7% as a result of:  The increase in revenues was primarily due to higher services volume and higher prices.  The increase in profit was mainly due to higher price as well as a favorable business mix, partially offset lower productivity.
	Revenues		Profit
September 30, 2014	$	5.7	$	1.3
Volume		0.2		-
Price		0.1		0.1
Foreign Exchange		-		-
(Inflation)/Deflation		N/A		-
Mix		N/A		0.1
Productivity		N/A		(0.1)
Other		-		-
September 30, 2015	$	6.0	$	1.4
NINE MONTHS ENDED						Segment revenues up $0.4 billion or 2%; Segment profit up $0.4 billion or 10% as a result of:  The increase in revenues was primarily due to higher prices, partially offset by lower volume.  The increase in profit was mainly due to higher price as well as a favorable business mix. These increases were partially offset by the effects of inflation.
	Revenues		Profit
September 30, 2014	$	17.6	$	3.6
Volume		(0.1)		-
Price		0.5		0.5
Foreign Exchange		-		-
(Inflation)/Deflation		N/A		(0.2)
Mix		N/A		0.1
Productivity		N/A		-
Other		-		-
September 30, 2015	$	17.9	$	3.9

HEALTHCARE

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

(Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES			EQUIPMENT/SERVICES REVENUES
			Services  Equipment
ORDERS			BACKLOG
	Equipment Services			Equipment Services

FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollars in billions)

SEGMENT REVENUES & PROFIT						SEGMENT PROFIT MARGIN
  Revenue     Profit
SEGMENT REVENUES & PROFIT WALK:					COMMENTARY: 2015 - 2014
THREE MONTHS ENDED						Segment revenues down $0.2 billion or 5%; Segment profit down $0.1 billion or 10% as a result of:  The decrease in revenues was due to the impact of the stronger U.S. dollar and lower prices, mainly in Healthcare Systems. These decreases were partially offset by higher volume, mainly driven by Life Sciences.  The decrease in profit was due to lower prices, mainly in Healthcare Systems, partially offset by higher productivity as increased R&D and related costs were more than offset by higher cost productivity.
	Revenues		Profit
September 30, 2014	$	4.5	$	0.7
Volume		0.2		-
Price		(0.1)		(0.1)
Foreign Exchange		(0.3)		-
(Inflation)/Deflation		NA		-
Mix		N/A		-
Productivity		N/A		0.1
Other		-		-
September 30, 2015	$	4.3	$	0.7
NINE MONTHS ENDED						Segment revenues down $0.5 billion or 4%; Segment profit down $0.1 billion or 4% as a result of:  The decrease in revenues was due to the impact of the stronger U.S. dollar and lower prices, mainly in Healthcare Systems. These decreases were partially offset by higher volume, mainly driven by Life Sciences.  The decrease in profit was due to lower prices, mainly in Healthcare Systems, the impact of the stronger U.S. dollar and the effects of inflation. These decreases were partially offset by higher volume and higher productivity as increased R&D and related costs were more than offset by higher cost productivity.
	Revenues		Profit
September 30, 2014	$	13.2	$	2.0
Volume		0.6		0.1
Price		(0.2)		(0.2)
Foreign Exchange		(0.8)		(0.1)
(Inflation)/Deflation		N/A		(0.1)
Mix		N/A		-
Productivity		N/A		0.3
Other		-		-
September 30, 2015	$	12.7	$	1.9

TRANSPORTATION

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES			EQUIPMENT/SERVICES REVENUES
(a) Includes Marine, Stationary & Drilling			Services  Equipment
ORDERS			BACKLOG
	Equipment Services			Equipment Services
UNIT SALES

FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

(Dollars in billions)

SEGMENT REVENUES & PROFIT		SEGMENT PROFIT MARGIN
  Revenue     Profit
COMMENTARY: 2015 - 2014
THREE MONTHS ENDED Segment revenues up $0.1 billion or 3% as a result of:  Higher volume, primarily due to higher locomotive and services sales. Segment profit up 11% as a result of:  Cost productivity and deflation, partially offset by an unfavorable business mix.		NINE MONTHS ENDED Segment revenues up $0.2 billion or 6% as a result of:  Higher volume ($0.2 billion), due to higher locomotive and services sales. Segment profit up $0.1 billion or 15% as a result of:  Higher cost productivity ($0.1 billion), higher volume driven by locomotive and services sales and continued deflation, partially offset by an unfavorable business mix ($0.1 billion).

APPLIANCES & LIGHTING

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollar in billions)

2015 YTD SUB-SEGMENT REVENUES
FINANCIAL  OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30 (Dollar in billions)
SEGMENT REVENUES & PROFIT		SEGMENT PROFIT MARGIN
  Revenue     Profit
COMMENTARY: 2015 - 2014
THREE MONTHS ENDED Segment revenues up $0.2 billion or 8% as a result of:  Higher volume ($0.2 billion) driven by higher sales at Appliances. Segment profit up $0.1 billion or 88% as a result of :  Improved productivity ($0.1 billion), including the effects of classifying Appliances as a business held for sale in the third quarter of 2014.		NINE MONTHS ENDED Segment revenues up $0.4 billion or 6% as a result of:  Higher volume ($0.5 billion) driven by higher sales at Appliances, partially offset by lower prices ($0.1 billion) and the impact of the stronger U.S. dollar ($0.1 billion). Segment profit up $0.2 billion or 78% as a result of :  Improved productivity ($0.2 billion), including the effects of classifying Appliances as a business held for sale and the effects of inflation ($0.1 billion), partially offset by lower prices ($0.1 billion).

GE CAPITAL

OPERATIONAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollars in billions)

2015 YTD SUB-SEGMENT REVENUES
ENDING NET INVESTMENT, EXCLUDING LIQUIDITY*		TIER 1 COMMON RATIO ESTIMATE*
SIGNIFICANT TRENDS & DEVELOPMENTS

During the first nine months of 2015, GE signed agreements to sell approximately $94 billion of ENI, excluding liquidity (as originally reported at December 31, 2014), of which $45 billion and $33 billion related to the CLL and Real Estate businesses, respectively. CLL transactions signed in the third quarter 2015 included approximately $9.3 billion related to its Healthcare Financial Services U.S. lending business with Capital One, approximately $7.6 billion related to its Transportation Finance business in the U.S. and Canada with BMO Financial Group, and approximately $1.8 billion related to its Mubadala joint venture, with MidCap Finco Ltd., which is managed by Apollo Capital Management .

Of the signed agreements, approximately $60 billion have closed, including approximately $30 billion and $21 billion related to Real Estate and CLL, respectively. The Real Estate transactions that have closed included the majority of GECC's Real Estate debt and equity portfolio sold to funds managed by The Blackstone Group (which, in turn, sold a portion of this portfolio to Wells Fargo & Company). In connection with The Blackstone Group transactions, GECC provided $3.2 billion of seller financing to The Blackstone Group, which GECC intends to syndicate by 2016. As of September 30, 2015, GECC has collected or sold approximately $0.4 billion of this seller financing. The CLL transactions that have closed included its U.S. and European Sponsor Finance businesses and the majority of its Global Fleet services business.

* Non-GAAP Financial Measure

In addition, during October 2015, we signed agreements to sell approximately $32 billion of ENI, excluding liquidity (as originally reported at December 31, 2014) related to our CLL business. These signed CLL transactions included approximately $30 billion related to our global Commercial Distribution Finance, North American Vendor Finance and North American Corporate Finance businesses with Wells Fargo & Company and approximately $2 billion related to our Corporate Aircraft portfolio with Global Jet Capital.

In the nine months ended September 30, 2015, GE recorded $21.1 billion of after-tax charges related to the GE Capital Exit Plan, including $0.4 billion of after-tax charges recorded in the third quarter of 2015, primarily exit-related charges in our CLL business, partially offset by income associated with operations in CLL and Real Estate. A description of after-tax charges for the nine months ended September 30, 2015 is provided below.

FINANCIAL OVERVIEW - THREE AND NINE MONTHS ENDED SEPTEMBER 30

 (Dollars in billions)

SEGMENT REVENUES & PROFIT (LOSS) (a)
  Revenue     Profit (Loss)	(a) Interest and other financial charges and income taxes are included in determining segment profit (loss) for the GE Capital segment.
COMMENTARY: 2015 - 2014

Segment revenues decreased 1% in the three months ended September 30, 2015 as a result of higher impairments and the effects of currency exchange, partially offset by higher gains and the effects of acquisitions. Net earnings decreased 13% in the three months ended September 30, 2015 primarily due to core decreases, including charges associated with the GE Capital Exit Plan and higher impairments, partially offset by higher gains, the effects of dispositions and lower provisions for losses on financing receivables.

Segment revenues decreased 9% and net earnings decreased significantly in the nine months ended September 30, 2015, primarily due to the effects of the GE Capital Exit Plan.

CONSUMER

2015 – 2014 COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30

Revenues and other income were flat.

Operating costs were flat, primarily as a result of:

2015 – 2014 COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30

Revenues and other income increased $0.5 billion, primarily a result of:

Operating costs decreased $0.1 billion, primarily as a result of:

These decreases to operating costs were partially offset by $0.4 billion higher costs associated with our principal retirement plans including the effects of lower discount rates and updated mortality assumptions.

*Non-GAAP Financial Measure

COSTS NOT INCLUDED IN SEGMENT RESULTS

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

For the nine months ended September 30, 2014, a gain of $0.1 billion related to a fuel dispenser business disposition was excluded from Oil & Gas results.

DISCONTINUED OPERATIONS

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

2015 – 2014 COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30

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

The third quarter 2014 earnings from discontinued operations, net of taxes, primarily reflected the following:

2015 – 2014 COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30

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

The 2014 earnings from discontinued operations, net of taxes, primarily reflected the following:

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

OTHER CONSOLIDATED INFORMATION

INCOME TAXES

Income taxes have a significant effect on our net earnings. As a global commercial enterprise, our tax rates are affected by many factors, including our global mix of earnings, the extent to which those global earnings are indefinitely reinvested outside the United States, legislation, acquisitions, dispositions and tax characteristics of our income. Our tax rates are also affected by tax incentives introduced in the U.S. and other countries in furtherance of policies to encourage and support certain types of activity. Our tax returns are routinely audited and settlements of issues raised in these audits sometimes affect our tax provisions.

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

CONSOLIDATED – THREE AND NINE MONTHS ENDED SEPTEMBER 30

(Dollars in billions)

PROVISION FOR INCOME TAXES

2015 – 2014 COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30

2015 – 2014 COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30

BENEFITS FROM GLOBAL OPERATIONS

Absent the effects of the GE Capital Exit Plan, our consolidated income tax rate is lower than the U.S. statutory rate primarily because of benefits from lower-taxed global operations, including the use of global funding structures. 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. The rate of tax on our indefinitely reinvested non-U.S. earnings is below the 35% U.S. statutory 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 of its non-U.S. operations through foreign companies that are subject to low foreign taxes.

Historically, the most significant portion of these benefits depends on the provision of U.S. law deferring the tax on active financial services income, which, as discussed below, is subject to expiration. A substantial portion of the remaining 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. No other operation in any one country accounts for a material portion of the remaining balance of the benefit.

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 our earnings profile due to the GE Capital Exit Plan and changes in U.S. or foreign law, including the expiration of the U.S. tax law provision deferring tax on active financial services income. 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 intend to indefinitely reinvest foreign earnings.

STATEMENT OF FINANCIAL POSITION

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

MAJOR CHANGES IN OUR FINANCIAL POSITION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015

GECC FINANCING RECEIVABLES

For purposes of the discussion that follows, "delinquent" receivables are those that are 30 days or more past due based on their contractual terms. Loans purchased at a discount are initially recorded at fair value and accrete interest income over their estimated lives based on reasonably estimable cash flows even if the underlying loans are contractually delinquent at acquisition. "Nonaccrual" financing receivables are those on which we have stopped accruing interest. We stop accruing interest at the earlier of the time at which collection of an account becomes doubtful or the account becomes 90 days past due, with the exception of consumer credit card accounts, for which we continue to accrue interest until the accounts are written off in the period that the account becomes 180 days past due. Recently restructured financing receivables are not considered delinquent when payments are brought current according to the restructured terms, but may remain classified as nonaccrual until there has been a period of satisfactory payment performance by the borrower and future payments are reasonably assured of collection.

FINANCIAL RESOURCES AND LIQUIDITY

Our 2015 GECC funding plan anticipates repayment of principal on outstanding short-term borrowings, including the current portion of long-term debt ($37.0 billion at December 31, 2014), principally through dispositions, asset sales and cash on hand. Long-term maturities and early redemptions were $12.9 billion in the third quarter of 2015.

LIQUIDITY SOURCES

FUNDING PLAN

GECC 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. GECC commercial paper borrowings as of September 30, 2015 were $12.9 billion. As announced on April 10, 2015, GECC is targeting to reduce the outstanding commercial paper to approximately $5 billion by the end of 2015.

As a matter of general practice, we routinely evaluate the economic impact of calling debt instruments where GECC has the right to exercise a call. In determining whether to call debt, we consider the economic benefit to GECC of calling debt, the effect of calling debt on GECC's liquidity profile and other factors. During 2015, we called $0.6 billion of long-term debt.

INCOME MAINTENANCE AGREEMENT AND GE GUARANTEE OF CERTAIN GECC DEBT

STATEMENT OF CASH FLOWS - NINE MONTHS ENDED SEPTEMBER 30, 2015

CONSOLIDATED CASH FLOWS

We evaluate our cash flow performance by reviewing our industrial (non-financial services) businesses and financial services 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. Our financial services businesses use a variety of financial resources to meet our capital needs. Cash for financial services businesses is primarily provided from the issuance of term debt and commercial paper in the public and private markets and deposits, as well as financing receivables collections, sales and securitizations.

GE CASH FLOWS – NINE MONTHS ENDED SEPTEMBER 30

OPERATING CASH FLOWS				INVESTING CASH FLOWS				FINANCING CASH FLOWS
2014		2015		2014		2015		2014		2015

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. See the Intercompany Transactions and Eliminations section for information related to transactions between GE and GECC. 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 GECC, including special dividends, represent the distribution of a portion of GECC retained earnings, and are distinct from cash from continuing operations within the financial services businesses. The amounts included in GE CFOA are the total dividends, including special dividends from excess capital.

2015 – 2014 COMMENTARY

GE cash from operating activities decreased $0.6 billion primarily due to the following:

GE cash used for investing activities decreased $1.5 billion primarily due to the following:

GE cash used for financing activities decreased $3.5 billion primarily due to the following:

GECC CASH FLOWS – NINE MONTHS ENDED SEPTEMBER 30

OPERATING CASH FLOWS				INVESTING CASH FLOWS				FINANCING CASH FLOWS
2014		2015		2014		2015		2014		2015

2015 – 2014 COMMENTARY:

GECC cash from operating activities decreased $2.8 billion primarily due to the following:

GECC cash from investing activities increased $48.6 billion primarily due to the following:

GECC cash used for financing activities increased $33.1 billion primarily due to the following:

INTERCOMPANY TRANSACTIONS AND ELIMINATIONS

EXPOSURES

At September 30, 2015, we had $28.1 billion in financing receivables to consumer and commercial customers in Europe, including $22.1 billion classified as financing receivables held for sale, and $6.0 billion classified as assets held for investment. The GECC financing receivables portfolio in Europe is well diversified across European geographies and customers. Approximately 88% of the portfolio is secured by collateral. Several European countries, including Spain, Portugal, Ireland, Italy, Greece and Hungary (focus countries), have been subject to credit deterioration due to weaknesses in their economic and fiscal situations. The carrying value of GECC funded exposures in these focus countries and in the rest of Europe comprised the following at September 30, 2015.

We manage counterparty exposure, including credit risk, on an individual counterparty basis. We place defined risk limits around each obligor and review our risk exposure on the basis of both the primary and parent obligor, as well as the issuer of securities held as collateral. These limits are adjusted on an ongoing basis based on our continuing assessment of the credit risk of the obligor or issuer. In setting our counterparty risk limits, we focus on high-quality credits and diversification through spread of risk in an effort to actively manage our overall exposure. We actively monitor each exposure against these limits and take appropriate action when we believe that risk limits have been exceeded or there are excess risk concentrations. Our collateral position and ability to work out problem accounts have historically mitigated our actual loss experience. Delinquency experience has been relatively stable in our European commercial and consumer platforms in the aggregate, and we actively monitor and take action to reduce exposures where appropriate. Uncertainties surrounding European markets could have an impact on the judgments and estimates used in determining the carrying value of these assets.

VENEZUELA

OIL & GAS INDUSTRY

CRITICAL ACCOUNTING ESTIMATES

OTHER ITEMS

CONTROLS AND PROCEDURES

OTHER FINANCIAL DATA

REGULATIONS AND SUPERVISION

LEGAL PROCEEDINGS

At September 30, 2015, two cases were pending against WMC in the United States District Court for the Southern District of New York. One case, in which the plaintiff is BNY, was filed in the third quarter 2012. In the second quarter 2013, BNY filed an amended complaint in which it asserts claims on approximately $900 million of mortgage loans, and seeks to recover damages in excess of $378 million. In September 2013, the District Court denied WMC's motion to dismiss. On September 18, 2014, the District Court issued an order directing the parties to participate in settlement discussions before a private mediator or the assigned magistrate judge . Following this mediation, the parties reached a settlement in principle on the claims arising from a portion of the loans held in the trust, and, as a result, on February 9, 2015 the District Court stayed the case as to these claims. This settlement became effective September 16, 2015. On September 18, 2015, following a court-ordered mediation before the assigned magistrate judge, the parties reached a settlement in principle on the remaining claims in the case, and the securitization trustee declared this settlement effective October 20, 2015. The second case was initiated by the Federal Housing Finance Agency (FHFA), which filed a summons with notice in the fourth quarter 2012. In the second quarter 2013, Deutsche Bank, in its role as securitization trustee of the trust at issue in the case, intervened as a plaintiff and filed a complaint relating to approximately $1,300 million of loans and alleging losses in excess of approximately $100 million. In December 2013, the District Court issued an order denying WMC's motion to dismiss. In February 2015, the District Court on its own motion requested that the parties re-brief several issues raised by WMC's motion to dismiss.  On July 10, 2015, the District Court entered an order dismissing the lawsuit as time-barred under the applicable statute of limitations. Deutsche Bank filed a notice of appeal from this order of dismissal on August 13, 2015.

FINANCIAL STATEMENTS AND NOTES

FINANCIAL STATEMENTS