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BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
6 Months Ended
Jun. 30, 2019
Discontinued Operations and Disposal Groups [Abstract]  
BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE. On June 30, 2019, we signed an agreement to sell our high-speed Reciprocating Compression business within our Oil & Gas segment and recorded a pre-tax loss of $160 million in the caption “Other income” in our consolidated Statement of Earnings (Loss). We expect to close the transaction in the second half of 2019.

On February 25, 2019, we announced an agreement to sell our BioPharma business within our Healthcare segment to Danaher Corporation for total consideration of approximately $21,400 million. As of the second quarter of 2019, we had assets of $8,429 million (including goodwill of $5,523) and liabilities of $1,182 million for this business classified as held for sale. We expect to complete the sale of the business in the fourth quarter of 2019.

On November 13, 2017, the Company announced its intention to exit approximately $20 billion of assets over the next one to two years. Since this announcement, GE has classified various businesses across our Power, Aviation, and Healthcare segments, and Corporate as held for sale. In the first half of 2019, we closed certain of these transactions within Corporate and our Power and Aviation segments for total net proceeds of $1,049 million, recognized a pre-tax gain of $217 million in the caption “Other income” in our consolidated Statement of Earnings (Loss) and liquidated $548 million of our previously recorded valuation allowance. These transactions are subject to customary working capital and other post-close adjustments. As of June 30, 2019, we have closed the sale of substantially all of these assets in accordance with the plan.

While we previously announced an orderly separation of our ownership of BHGE over time, this business has not met the accounting criteria for held for sale classification as of June 30, 2019. That classification will depend on the nature and timing of the disposal transactions.
ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE (In millions)
June 30, 2019

December 31, 2018





Current receivables
$
512

$
184

Inventories
784

529

Property, plant, and equipment – net and Operating leases
895

423

Goodwill and Other intangible assets - net
6,344

884

Valuation allowance
(647
)
(1,013
)
Deferred tax asset
880


Other assets
438

623

Assets of businesses held for sale
$
9,206

$
1,630




Accounts payable & Progress collections and deferred income
$
850

$
428

Non-current compensation and benefits
367

152

Other liabilities
261

128

Liabilities of businesses held for sale
$
1,478

$
708


DISCONTINUED OPERATIONS. Discontinued operations primarily relate to our Transportation segment and certain financial services businesses.

On February 25, 2019, we completed the spin-off and subsequent merger of our Transportation business with Wabtec, a U.S. rail equipment manufacturer. In the transaction, GE shareholders received shares of Wabtec common stock representing an approximate 24.3% ownership interest in Wabtec common stock. GE received $2,827 million in cash (net of certain deal related costs) as well as shares of Wabtec common stock and Wabtec non-voting convertible preferred stock that, together, represent approximately 24.9% ownership interest in Wabtec. In addition, GE is entitled to additional cash consideration up to $470 million for tax benefits that Wabtec realizes from the transaction. We reclassified our Transportation segment to discontinued operations in the first quarter of 2019.

As part of the transaction, we recorded a gain of $3,471 million ($2,508 million after-tax) in discontinued operations and a net after-tax decrease of $852 million in additional paid in capital in connection with the spin-off of approximately 49.4% of Transportation to our shareholders. The fair value of our interest in Wabtec’s common and preferred shares was $3,513 million based on the opening share price of $73.45 at the date of the transaction and was recorded in the caption “Investment securities” in our consolidated Statement of Financial Position.

Discontinued operations for our financial services businesses primarily relate to the GE Capital Exit Plan (our plan announced in 2015 to reduce the size of our financial services businesses) and were previously reported in the Capital segment. These discontinued operations primarily comprise residual assets and liabilities related to our exited U.S. mortgage business (WMC), our mortgage portfolio in Poland, and trailing liabilities associated with the sale of our GE Capital businesses.

In January 2019, we announced an agreement in principle with the United States to settle the investigation by the U.S. Department of Justice (DOJ) regarding potential violations of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by WMC and GE Capital, and in April 2019, the parties entered into a definitive settlement agreement. Under the agreement, which concludes this investigation, GE, without admitting liability or wrongdoing, paid the United States a civil penalty of $1,500 million.

In June 2019, GE Capital recorded in the caption "Earnings (loss) from discontinued operations, net of taxes" in our consolidated Statement of Earnings (Loss), $332 million of tax benefits and $46 million of net interest benefits due to a decrease in our balance of unrecognized tax benefits. See Note 14 for further information.

Results of operations, financial position and cash flows for these businesses are reported as discontinued operations for all periods presented.
RESULTS OF DISCONTINUED OPERATIONS (In millions)
Three months ended June 30

Six months ended June 30

2019

2018


2019

2018








Sales of goods and services
$

$
942


$
549

$
1,814

GE Capital revenues and other income (loss)
(48
)
4


(9
)
(1,468
)
Cost of goods and services sold

(675
)

(478
)
(1,290
)
Other costs and expenses
(15
)
(332
)

(99
)
(556
)






Earnings (loss) of discontinued operations before income taxes
$
(64
)
$
(60
)

$
(37
)
$
(1,499
)
Benefit (provision) for income taxes
295

(3
)

308

(7
)
Earnings (loss) of discontinued operations, net of taxes
$
231

$
(63
)

$
270

$
(1,507
)






Gain (loss) on disposal before income taxes
$

$


$
3,517

$
4

Benefit (provision) for income taxes



(964
)
(1
)
Gain (loss) on disposal, net of taxes
$

$


$
2,553

$
3







Earnings (loss) from discontinued operations, net of taxes
$
231

$
(63
)

$
2,823

$
(1,504
)






Gains (loss) on disposals, net of taxes - Transportation and other Industrial


 
2,508


Gains (loss) on disposals, net of taxes - Capital


 
45

3

Earnings (loss) from discontinued operations, net of taxes - Transportation and other Industrial
(7
)
3


2,550

115

Earnings (loss) from discontinued operations, net of taxes - Capital
238

(66
)

273

(1,618
)
ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS (In millions)
June 30, 2019

December 31, 2018




Cash, cash equivalents and restricted cash
$
594

$
701

Investment securities
206

195

Current receivables
84

389

Inventories

832

Financing receivables held for sale
2,599

2,745

Property, plant and equipment - net and Operating leases
147

910

Goodwill and intangible assets - net

1,146

Deferred income taxes
346

1,175

All other assets
215

1,163

Assets of discontinued operations
$
4,191

$
9,257




Accounts payable and Progress collections and deferred income
$
31

$
1,248

Operating lease liabilities
227


Other GE current liabilities
98

590

All other liabilities
27

1,909

Liabilities of discontinued operations
$
382

$
3,747



Assets and liabilities of discontinued operations included $4,573 million of assets and $1,871 million of liabilities, respectively, related to our Transportation business as of December 31, 2018, which we classified as discontinued operations in the first quarter of 2019.

Included within all other liabilities of discontinued operations at June 30, 2019 and December 31, 2018 are intercompany tax receivables in the amount of $804 million and $1,141 million, respectively, primarily related to the financial services businesses that were part of the GE Capital Exit Plan, that are offset within all other liabilities of consolidated GE.