false--12-31Q3201900000405453530000001800000086000000137000000P3Y08738434000873843400087384340008747092000874709200087470920004890000003710000003360000008200000048000000260000001100000038000000300000005000000450000000780000002940000002200000074000000245000000810000002660000001980000005939875593987559398755939875593987559398759400000001830000004000000400000010000002390000000800000012000000247000000193000000765000000830000000<div class="ae2"><div class="ae3"><font class="ae4">NOTE 20. CASH FLOWS INFORMATION</font><font class="ae4"> </font></div><div class="ae5"><font class="ae6">All other operating activities reflect cash sources and uses as well as non-cash adjustments to net earnings (loss).</font></div><div class="ae5"><font class="ae6"><br clear="none"/></font></div><div class="ae5"><font class="ae6">Amounts reported in the Proceeds from sales of discontinued operations and Proceeds from principal business dispositions lines in our consolidated Statement of Cash Flows are net of cash transferred and included certain deal-related costs. Amounts reported in the Net cash from (payments for) principal businesses purchased line are net of cash acquired and included certain deal-related costs and debt assumed and immediately repaid in acquisitions.</font></div><div class="ae3"><div class="ae7"><table class="ae8"><tr><td colspan="7"></td></tr><tr><td class="ae9"></td><td class="aea"></td><td class="aeb"></td><td class="aea"></td><td class="aea"></td><td class="aeb"></td><td class="aea"></td></tr><tr><td class="aec"><div class="aed"><font class="aee">GE</font></div></td><td colspan="6" class="aef"><div class="aeg"><font class="aeh">Three months ended March 31</font></div></td></tr><tr><td class="aec"><div class="aed"><font class="aei">(In millions)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="aeh">2020</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="aeh">2019</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td><td colspan="3" class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td><td colspan="3" class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Increase (decrease) in employee benefit liabilities(a)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(371</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(489</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Restructuring and other charges(b)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">193</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">247</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Restructuring and other cash expenditures</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">(198</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">(266</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Baker Hughes Class B dividends received</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">&#8212;</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">94</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aet"><div class="aed"><font class="ae6">Other(c)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">294</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">78</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeu"><div class="aed"><font class="aee">All other operating activities</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(82</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(336</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Derivative settlements (net)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(74</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">22</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Other Investments (net)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">137</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">86</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Other(d)</font></div></td><td colspan="2" class="aef"><div class="aek"><font class="ae6">18</font></div></td><td class="aey"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aef"><div class="aek"><font class="ae6">(353</font></div></td><td class="aez"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeu"><div class="aed"><font class="aee">All other investing activities</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">81</font></div></td><td class="ae10"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(245</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td></tr></table></div></div><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(a)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Included non-cash adjustments for stock-based compensation expenses.</font></div></td></tr></table><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(b)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Excludes non-cash adjustments reflected as Depreciation and amortization of property, plant and equipment or Amortization of intangible assets in our consolidated Statement of Cash Flows.</font></div></td></tr></table><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(c)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Included other adjustments to net income, such as write-downs of assets and the impacts of acquisition accounting and changes in other assets and other liabilities classified as operating activities, such as the timing of payments of customer allowances.</font></div></td></tr></table><table class="ae17"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(d)</font></div></td><td class="ae18"><div class="ae5"><font class="ae6">Other primarily included net activity related to settlements between our continuing operations and discontinued operations.</font><font class="ae6"> </font></div></td></tr></table><div class="ae19"><font class="ae1a"><br clear="none"/></font></div><div class="ae5"><font class="ae6">The following investing and financing activities affected recognized assets or liabilities but did not result in cash receipts or payments in the three months ended March 31, 2020: additional non-cash deferred purchase price received by GE Capital related to sales of current receivables (see Note 4); and right-of-use assets obtained in operating leases.</font></div></div><div class="ae2"><div class="ae3"><div class="ae7"><table class="ae8"><tr><td colspan="7"></td></tr><tr><td class="ae9"></td><td class="aea"></td><td class="aeb"></td><td class="aea"></td><td class="aea"></td><td class="aeb"></td><td class="aea"></td></tr><tr><td class="aec"><div class="aed"><font class="aee">GE</font></div></td><td colspan="6" class="aef"><div class="aeg"><font class="aeh">Three months ended March 31</font></div></td></tr><tr><td class="aec"><div class="aed"><font class="aei">(In millions)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="aeh">2020</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="aeh">2019</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td><td colspan="3" class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td><td colspan="3" class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Increase (decrease) in employee benefit liabilities(a)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(371</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(489</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Restructuring and other charges(b)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">193</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">247</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Restructuring and other cash expenditures</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">(198</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">(266</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Baker Hughes Class B dividends received</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">&#8212;</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">94</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aet"><div class="aed"><font class="ae6">Other(c)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">294</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">78</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeu"><div class="aed"><font class="aee">All other operating activities</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(82</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(336</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Derivative settlements (net)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(74</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">22</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Other Investments (net)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">137</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">86</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Other(d)</font></div></td><td colspan="2" class="aef"><div class="aek"><font class="ae6">18</font></div></td><td class="aey"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aef"><div class="aek"><font class="ae6">(353</font></div></td><td class="aez"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeu"><div class="aed"><font class="aee">All other investing activities</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">81</font></div></td><td class="ae10"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(245</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td></tr></table></div></div><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(a)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Included non-cash adjustments for stock-based compensation expenses.</font></div></td></tr></table><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(b)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Excludes non-cash adjustments reflected as Depreciation and amortization of property, plant and equipment or Amortization of intangible assets in our consolidated Statement of Cash Flows.</font></div></td></tr></table><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(c)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Included other adjustments to net income, such as write-downs of assets and the impacts of acquisition accounting and changes in other assets and other liabilities classified as operating activities, such as the timing of payments of customer allowances.</font></div></td></tr></table><table class="ae17"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(d)</font></div></td><td class="ae18"><div class="ae5"><font class="ae6">Other primarily included net activity related to settlements between our continuing operations and discontinued operations.</font><font class="ae6"> </font></div></td></tr></table></div>
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 March 31, 20202021
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 COMPANYCOMPANY
(Exact name of registrant as specified in its charter)
|
| | | | | | | | | | | | | |
New York | | 14-0689340 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | | |
5 Necco Street | Boston | MA | | 02210 |
(Address of principal executive offices) | | (Zip Code) |
(Registrant’s telephone number, including area code) (617) (617) 443-3000
Securities registered pursuant to Section 12(b) of the Act: |
| | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock, par value $0.06 per share | GE | New York Stock Exchange |
Floating Rate Notes due 2020 | GE 20E | New York Stock Exchange |
0.375% Notes due 2022 | GE 22A | New York Stock Exchange |
1.250% Notes due 2023 | GE 23E | New York Stock Exchange |
0.875% Notes due 2025 | GE 25 | New York Stock Exchange |
1.875% Notes due 2027 | GE 27E | New York Stock Exchange |
1.500% Notes due 2029 | GE 29 | New York Stock Exchange |
7 1/2% Guaranteed Subordinated Notes due 2035 | GE /35 | New York Stock Exchange |
2.125% Notes due 2037 | GE 37 | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): |
| | | | | | | | | | |
Large accelerated filer | ☑ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
There were 8,747,092,0008,778,641,000 shares of common stock with a par value of $0.06 per share outstanding at March 31, 2020.2021.
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS. Our public communications and SEC filings may contain statements related to future, not past, events. These forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "estimate," "forecast," "target," "preliminary," or "range." Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the impacts of the COVID-19 pandemic on our business operations, financial results and financial position and on the world economy; our expected financial performance, including cash flows, revenues, organic growth, margins, earnings and earnings per share; macroeconomic and market conditions and volatility; planned and potential business or asset dispositions, including our plan to combine our GE Capital Aviation Services (GECAS) business with AerCap Holdings N.V. (AerCap); our de-leveraging plans, including leverage ratios and targets, the timing and nature of actions to reduce indebtedness and our credit ratings and outlooks; GE's and GE Capital's funding and liquidity; our businesses’ cost structures and plans to reduce costs; restructuring, goodwill impairment or other financial charges; or tax rates.
For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:
•the continuing severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic, of businesses’ and governments’ responses to the pandemic and of individual factors such as aviation passenger confidence on our operations and personnel, and on commercial activity and demand across our and our customers’ businesses, and on global supply chains;
•the extent to which the COVID-19 pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position, the prices of our securities and the achievement of our strategic objectives;
•our success in executing and completing asset dispositions or other transactions, including our plan to combine our GECAS business with AerCap and our plan to exit our equity ownership position in Baker Hughes, the timing of closing for such transactions, the ability to secure regulatory approvals and satisfy other closing conditions (as applicable), and the expected proceeds, consideration and benefits to GE;
•changes in macroeconomic and market conditions and market volatility (including developments and volatility arising from the COVID-19 pandemic), including interest rates, the value of securities and other financial assets (including our equity ownership position in Baker Hughes and the equity ownership position that we will hold in AerCap after completing our announced plan to combine GECAS with AerCap), oil, natural gas and other commodity prices and exchange rates, and the impact of such changes and volatility on our financial position and businesses;
•our de-leveraging and capital allocation plans, including with respect to actions to reduce our indebtedness, the timing and amount of GE dividends, organic investments, and other priorities;
•further downgrades of our current short- and long-term credit ratings or ratings outlooks, or changes in rating application or methodology, and the related impact on our liquidity, funding profile, costs and competitive position;
•GE’s liquidity and the amount and timing of our GE Industrial cash flows and earnings, which may be impacted by customer, supplier, competitive, contractual and other dynamics and conditions;
•GE Capital's capital and liquidity needs, including in connection with GE Capital’s run-off insurance operations and discontinued operations such as Bank BPH, the amount and timing of any required capital contributions and any strategic actions that we may pursue; the impact of conditions in the financial and credit markets on GE Capital's ability to sell financial assets; the availability and cost of funding; and GE Capital's exposure to particular counterparties and markets, including through GECAS to the aviation sector and adverse impacts related to COVID-19;
•global economic trends, competition and geopolitical risks, including changes in the rates of investment or economic growth in key markets we serve, or an escalation of sanctions, tariffs or other trade tensions between the U.S. and China or other countries, and related impacts on our businesses' global supply chains and strategies;
•market developments or customer actions that may affect levels of demand and the financial performance of the major industries and customers we serve, such as secular, cyclical and competitive pressures in our Power business, pricing and other pressures in the renewable energy market, levels of demand for air travel and other dynamics related to the COVID-19 pandemic, conditions in key geographic markets and other shifts in the competitive landscape for our products and services;
•operational execution by our businesses, including the operations and execution of our Power and Renewable Energy businesses, and the performance of our Aviation business;
•changes in law, regulation or policy that may affect our businesses, such as trade policy and tariffs, regulation related to climate change, and the effects of tax law changes;
•our decisions about investments in new products, services and platforms, and our ability to launch new products in a cost-effective manner;
•our ability to increase margins through implementation of operational changes, restructuring and other cost reduction measures;
•the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of Alstom and other investigative and legal proceedings;
•the impact of actual or potential failures of our products or third-party products with which our products are integrated, and related reputational effects;
•the impact of potential information technology, cybersecurity or data security breaches at GE or third parties; and
•the other factors that are described in the "Risk Factors" section of this report and of our Annual Report on Form 10-K for the year ended December 31, 2020, as such descriptions may be updated or amended in any future reports we file with the SEC.
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.
ABOUT GENERAL ELECTRIC
ELECTRIC.General Electric Company (General Electric, GE or the Company) is a high-tech industrial company that operates worldwide through its four industrial segments, Power, Renewable Energy, Aviation and Healthcare, and its financial services segment, Capital. The Power segment offers technologies, solutions, and services related to energy production, including gas and steam turbines, generators, and power generation services. The Renewable Energy segment provides wind turbine platforms, hardware and software, offshore wind turbines, solutions, products and services to hydropower industry, blades for onshore and offshore wind turbines, and high voltage equipment. The Aviation segment provides jet engines and turboprops for commercial airframes, maintenance, component repair, and overhaul services, as well as replacement parts, additive machines and materials, and engineering services. The Healthcare segment provides healthcare technologies in medical imaging, digital solutions, patient monitoring, and diagnostics, drug discovery, and performance enhancement solutions. The Capital segment leases and finances aircraft, aircraft engines and helicopters, provides financial and underwriting solutions, and manages our run-off insurance operations. See the Consolidated ResultsSegment Operations section ofwithin Management’s Discussion and Analysis of Financial Condition (MD&A) for segment business descriptions and product and service offerings. See the Consolidated Results section within MD&A and Results of Operations and Note 2 to the consolidated financial statements for information regarding our recent business portfolio actions. Results of segmentsbusinesses reclassified to discontinued operations have been recast for all periods presented.
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, Twitter accounts and other social media, including @GE_Reports, contain a significant amount of information about GE, including financial and other information for investors. GE encourages investors to visit these websites from time to time, as information is updated and new information is posted.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
The.See Note 1 for a discussion of the basis of presentation for our consolidated financial statements of General Electric Company (the Company) combine the industrial manufacturing and services businesses of GE with the financial services businesses of GE Capital or Financial Services and are prepared in conformity with U.S. generally accepted accounting principles (GAAP). Certain columns and rows within tables may not add due to the use of rounded numbers. Percentages presented in this report are calculated from the underlying numbers in millions.MD&A. Discussions throughout 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. For purposes of the financial statement display of sales and costs of sales in our consolidated Statement of Earnings (Loss), “goods” is required by SEC regulations to include all sales of tangible products, and "services" must include all other sales, including other services activities. Throughout MD&A 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 “services,” which is an important part of our operations.
We believe 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 GE Industrial operations separately from our GE Capital operations. We believe that this provides useful information to investors. When used in this report, unless otherwise indicated by the context, we use these terms to mean the following:
Consolidated
– the adding together of GE and GE Capital, giving effect to the elimination of transactions between the two. We present consolidated results in the left-side column of our consolidated Statements of Earnings (Loss), Financial Position and Cash Flows.
GE – the adding together of all affiliates except GE Capital, whose continuing operations are presented on a one-line basis, giving effect to the elimination of transactions among such affiliates. As GE presents the continuing operations of GE Capital on a one-line basis, any intercompany profits resulting from transactions between GE and GE Capital are eliminated at the GE level. We present the results of GE in the center column of our consolidated Statements of Earnings (Loss), Financial Position and Cash Flows.
GE Capital – 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 (Loss), Financial Position and Cash Flows.
GE 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.
This document contains “forward-looking statements” - for details about the uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements, see the Risk Factors and Forward-Looking Statements sections.
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 GAAP. Certain of these data are considered “non-GAAP financial measures” under SEC rules. See the Non-GAAP Financial Measures section for the reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures.
2020 1Q FORM 10-Q 3
CONSOLIDATED RESULTS
SIGNIFICANT DEVELOPMENTS.
Coronavirus Disease 2019 (COVID-19) Pandemic.Pandemic. The COVID-19 pandemic has significantly impacted global economies, resulting in workforce and travel restrictions, supply chain and production disruptions and reduced demand and spending across many sectors. DuringSince the latter part of the first quarter of 2020, these factors began havinghave had a material adverse impact on our operations and financial performance, and prices of our securities, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve.
We have adopted operational While factors related directly and governance rhythms across the Company to coordinate actions relatedindirectly to the COVID-19 pandemic including an internal task forcehave been impacting operations and financial performance at varying levels across all our businesses, the most significant impact to protect the healthdate has been at our Aviation segment and safety of our employees globally and maintainGE Capital Aviation Services (GECAS) aircraft leasing business continuity; the assessment of financial and operatingwithin discontinued operations. For details about impacts and mitigating actions in response; funding and liquidity management and related treasury actions; and enterprise risk management and other functional activities. Each of GE’sto our businesses and Corporate are taking cost and liquidity actions we have taken in response, as applicable, refer to manage risk and aggressively mitigate financial impact as supply and demand dynamics in GE’s industries continue to shift.the respective segment sections within MD&A. We also continue to evaluate market conditions as they evolve and take precautionary measures to strengthen our financial position. We ended the first quarter of 20202021 with $47.3$31.8 billion of consolidated cash, cash equivalents and restricted cash, in addition to our available credit lines.lines of $20.2 billion. See the Capital Resources and Liquidity section within MD&A for further information.
This section summarizes the most significant impacts related to the COVID-19 pandemic that we have experienced to date, and we have included additional details as applicable throughout other sections of this report. Given that many of these impacts did not begin to be felt broadly across our businesses until the latter part of the first quarter of 2020, in some instances we have identified an impact during the quarter that we would attribute primarily to COVID-19 developments rather than other business or market factors. However, in future periods, depending on the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences, we We anticipate that it will become more difficult to distinguish specific aspects of our operational and financial performance that are most directly related to COVID-19 from those that are more broadly influenced by ongoing macroeconomic, market and industry dynamics that may also be, to varying degrees, related to the COVID-19 pandemic and its consequences.
While factors related directly and indirectly to the COVID-19 pandemic have begun impacting operations and financial performance at varying levels across all our businesses,will continue to be impacted by the most significant financial impact to date has been at our Aviation segment and our GE Capital Aviation Services (GECAS) aircraft leasing businessCOVID-19 pandemic in future periods. These impacts will ultimately depend on many factors that are not within our Capital segment. The COVID-19 pandemic is having a material adverse effect on the global airline industry, resulting in reduced flight schedules worldwide, an increased number of idle aircraft, lower utilization, workforce reductions and declining financial performance within the airline industry, as well as requests for government financial assistance by various industry participants. This has decreased demand for higher margin services revenues within our Aviation segment directly impacting our profitability and cash flows during the three months ended March 31, 2020. Our Healthcare segment experienced increased demand for certain types of products and services,control, including respiratory, computed tomography (CT), monitoring solutions, x-ray, anesthesia and point-of-care ultrasound product lines, partially offset by decreased demand in other parts of the business where hospitals and other customers have deferred services amidst the COVID-19 pandemic. Our other businesses were also adversely impacted by market developments, including delays or cancellations of new projects, new orders and related down payments. In addition, workplace, travel and supply chain disruptions have caused delays of deliveries and the achievement of other billing milestones directly impacting our profitability and cash flows for the three months ended March 31, 2020. We anticipate many of these impacts experienced in the latter part of first quarter of 2020 related to demand, profitability and cash flows will continue in future periods depending on the severity and duration of the pandemic. For additional details about impacts related to Aviationpandemic; governmental, business and GECAS, Healthcare and our other businesses, referindividuals’ actions in response to the respective segment sections within MD&A.
In addition, financial, oil and gas and other commodity markets, including interest rates and credit spreads, have been experiencing significant volatility, which had a material adverse impact on the market values of certain assets, such as our remaining equity interest in Baker Hughespandemic; and the valuedevelopment, availability and public acceptance of our investment portfolios supporting our long-term insurance liabilitieseffective treatments and pension obligations. In accordancevaccines.
GECAS. On March 9, 2021, we announced an agreement to combine GECAS with GAAP, we remeasureAerCap Holdings N.V. (AerCap), for which the values of our investment portfolio supporting our pension liabilities, our associated pension liabilities and our long-term insurance liabilities only annually, and our financial statements at March 31, 2020 therefore do not reflect the impact of the recent market conditions on these assets and obligations.
During the three months ended March 31, 2020, COVID-19 factors described above negatively impacted GE cash from operating activities (CFOA) and Industrial free cash flows (FCF)* by approximately $1 billion, GE Industrial profit by approximately $0.8 billion and GE Capital earnings by approximately $0.1 billion. Excluding restructuring of $0.1 billion, adjusted GE Industrial profit* was negatively impacted by $0.7 billion.
See the Consolidated Results, and Critical Accounting Estimates sections within MD&A, as well as Notes 3, 10 and 12Company expects to the consolidated financial statements for further information.
We are taking cost and cash actions to manage risk and proactively mitigate the financial impacts from COVID-19. In 2020, we are targeting more than $2 billion in operational cost out and more than $3receive $23.9 billion in cash, preservation actions acrosssubject to contractual closing adjustments, 111.5 million shares of AerCap common stock (approximately 46% ownership interest) valued at approximately $6.6 billion based on the company, including more thanAerCap’s closing share price on March 31, 2021, and $1 billion in cost out and more than $2AerCap notes and/or cash upon closing. In connection with the signing of the transaction agreement, GE Capital recorded a non-cash after-tax charge of $2.8 billion in cash preservation actionsdiscontinued operations in Aviation,the first quarter of 2021, partially offset by $0.2 billion of earnings, and the results of GECAS are now presented in discontinued operations. Given the economics of GECAS accrue to right-size its cost structureAerCap in conjunction with the transaction, the net impact of GECAS (loss on sale and preserve its abilityoperations) could change materially, mainly due to serve customers.
At this time, GE cannot forecastfluctuations in AerCap's closing share price. Completion of the full duration and magnitude of COVID-19 impacts, or the pace of recovery from the COVID-19 pandemic across our end markets, operations, and supply chains. See the Risk Factors section for further information about related risks and uncertainties.
*Non-GAAP Financial Measure
BioPharma. On March 31, 2020, we completed the sale of our BioPharma business within our Healthcare segment to Danaher Corporation for consideration of $21.1 billion,transaction remains subject to customary working capitalAerCap shareholder approval, regulatory approvals and other post-close adjustments, and recognized a pre-tax gaincustomary closing conditions.
After completion of $12.3 billion ($11.1 billion after tax) in our consolidated Statement of Earnings (Loss). See Note 2the transaction, we will elect to the consolidated financial statements for further information.
Baker Hughes. We recognized a pre-tax unrealized loss of $5.7 billion ($4.6 billion after tax) for the three months ended March 31, 2020, onprospectively measure our investment in Baker Hughes, based on a share priceAerCap at fair value and expect to have continuing involvement with AerCap, primarily through our ownership interest and ongoing sales or leases of $10.50. See Notes 2products and 3 for further information.
Debt offering and tender. On April 22, 2020,services. In addition, we issued $6 billionexpect to sell our stake in an orderly fashion over time. The remainder of GE Company debtCapital, including Energy Financial Services (EFS) and used the proceeds to complete a tender offer to purchase $4.2 billion of GE senior notes with maturities ranging from 2022 to 2024. We intend to use the remaining proceeds to repurchase, redeem or repay GE’s outstanding debt obligations, including other notes or commercial paper. These transactionsour run-off insurance operations, will be leverage neutral and liquidity enhancing by extending our near-term industrial debt maturities. Additionally, on April 23, 2020, GE Capital, using proceedsreported within Corporate. This means we will move from the repayment of the intercompany loan by GE, completed a tender for $5.4 billion of its 2020 maturities. See Capital Resources and Liquidity section within MD&A for further information.three-column to one-column financial statement reporting.
FIRST QUARTER 20202021 RESULTS. Consolidated revenues were $20.5$17.1 billion, down $1.7$2.4 billion for the quarter, primarily driven by decreased GE Industrial andrevenues partially offset by increased GE Capital revenues. GE Industrial revenues decreased $1.5$2.5 billion (7%(13%), driven primarily by ourdecreases at Aviation, Healthcare and Power, segments, partially offset by ouran increase at Renewable Energy segment.Energy. GE Capital revenues increased 5%.
Continuing earnings (loss) per share was $0.72.$0.00. Excluding gains (losses) on business dispositions,realized and unrealized gains (losses), non-operating benefit costs, restructuring and other charges and BioPharmaa GE Capital tax benefit,loss, Adjusted earnings per share* was $0.05.
$0.03.
For the three months ended March 31, 2020,2021, GE Industrial profit was $6.6$0.4 billion and profit margins were 34.9%2.3%, up $5.5down $6.2 billion, driven primarily by the nonrecurrence of the $12.3 billion gain on the sale of our BioPharma business of $12.3 billion,and lower profit at Aviation, partially offset by an unrealizeda lower net loss on our investment in Baker Hughes of $5.7$6.0 billion, a decrease in adjusted total Corporate operating costs* of $0.2 billion, a decrease in non-operating benefit cost of $0.2 billion, and a decrease in interest and other financial charges of $0.1 billion.Adjusted GE Industrial organic profit* decreased $1.0increased $0.1 billion, (47%), primarily as a result of the impacts of COVID-19, particularlyincreases at our Aviation segment, as well as decreases atHealthcare, Renewable Energy and Power, and Renewable Energy.lower adjusted total Corporate operating costs*, were partially offset by a decrease at Aviation.
GE CFOA of continuing operations was $(1.7)Industrial cash flows from operating activities (CFOA) were $(0.5) billion and $(0.6)$(1.7) billion for the three months ended March 31, 20202021 and 2019,2020, respectively. GE CFOAIndustrial cash used for operating activities decreased primarily due to highera decrease in cash used for working capital, and lower net income, primarily due to COVID-19 impacts, compared to 2019, partially offset by loweran increase in cash used for contract &All other deferred assets.operating activities. GE Industrial free cash flows*flows (FCF)* were $(2.2)$(0.8) billion and $(1.2)$(2.2) billion for the three months ended March 31, 2021 and 2020, and 2019, respectively. The decrease wasGE Industrial FCF increased primarily due to the same decreasesa decrease in GE CFOA as noted above.cash used for working capital, and a decrease in additions to property, plant and equipment and internal-use software, partially offset by an increase in cash used for All other operating activities. See the Capital Resources and Liquidity - Statement of Cash Flows section for further information.
Orders are contractual commitments with customers to provide specified goods or services for an agreed upon price.
| | GE INDUSTRIAL ORDERS | Three months ended March 31 | GE INDUSTRIAL ORDERS | Three months ended March 31 | |
(In billions) | 2020 |
| 2019 |
| |
| | | 2021 | 2020 | |
Equipment | $ | 9.2 |
| $ | 10.0 |
| Equipment | $ | 8,208 | | $ | 9,211 | | |
Services | 10.3 |
| 10.6 |
| Services | 8,800 | | 10,274 | | |
Total orders(a) | $ | 19.5 |
| $ | 20.6 |
| Total orders(a) | $ | 17,008 | | $ | 19,485 | | |
Total organic orders | $ | 19.6 |
| $ | 20.2 |
| Total organic orders | $ | 16,720 | | $ | 18,247 | | |
(a) Included $1.1 billion and $1.0 billion related to BioPharmaOrders for the three months ended March 31, 2020 and 2019, respectively.included $1,136 million related to BioPharma.
For the three months ended March 31, 20202021, orders decreased $1.1$2.5 billion (5%(13%) on a reported basis and decreased $0.6$1.5 billion (3%(8%) organically with growth at Power and Healthcare more than offset by double-digit declinesprimarily at Aviation, due to the 737 MAX groundingdecreases in services orders, and the impact of COVID-19,at Power, due to decreases in equipment orders, partially offset by increases at Renewable Energy and Renewable Energy.Healthcare. Equipment orders were down $0.3$0.1 billion (3%(1%) organically and services orders were down $0.3$1.4 billion (3%) organically. Excluding BioPharma, orders decreased $0.8 billion (4%(14%) organically.
Backlog is unfilled customer orders for products and product services (expected life of contract sales for product services).
| | | | | | | | | | | |
GE INDUSTRIAL BACKLOG | March 31, 2021 | December 31, 2020 | March 31, 2020 |
Equipment | $ | 72,272 | | $ | 73,286 | | $ | 76,854 | |
Services | 311,134 | | 313,234 | | 324,216 | |
Total backlog | $ | 383,405 | | $ | 386,520 | | $ | 401,070 | |
|
| | | | | | | | | |
GE INDUSTRIAL BACKLOG (In billions) | March 31, 2020 |
| December 31, 2019 |
| March 31, 2019 |
|
| | | |
Equipment | $ | 76.9 |
| $ | 79.0 |
| $ | 79.0 |
|
Services | 324.2 |
| 325.6 |
| 274.3 |
|
Total backlog(a) | $ | 401.1 |
| $ | 404.6 |
| $ | 353.3 |
|
(a) Backlog asAs of March 31, 2020 excludes the BioPharma business due to its disposition in the first quarter of 2020.
As of March 31, 20202021, backlog decreased $3.5$3.1 billion (1%) from December 31, 2019, driven by currency movement2020, primarily at Power, from sales outpacing new orders, and at Aviation, from cancellations of commercial engine and service orders. Renewable Energy decreased due to a stronger U.S. dollarthe effects of $1.2 billion, the disposition of our BioPharma business of $1.2 billionforeign currency fluctuations, and reductions of backlog slightly exceeding new additions, primarily at Renewable Energy. Backlog increased $47.8 billion (14%) from March 31, 2019,Healthcare decreased due to an increase in services backlog of $49.9shorter cycle time products. Backlog decreased $17.7 billion (18%(4%), primarily at Aviation, partially offset by from March 31, 2020, due to a decrease in equipment backlog of $2.2$4.6 billion (3%(6%), primarily at Power. ExcludingAviation, Power and Healthcare, and a decrease in services backlog of $13.1 billion (4%), primarily at Aviation, due to a reduction in our Commercial Services backlog and cancellations of commercial engine orders, and at Power, due to sales outpacing new orders. The reduction in Commercial Services at Aviation reflects the BioPharma disposition, backlog increased $48.9 billion (14%) from March 31, 2019.cancellation of equipment unit orders, lower anticipated engine utilization, customer fleet restructuring and contract modifications.
*Non-GAAP Financial Measure
Remaining performance obligation (RPO), a defined term under GAAP, is backlog excluding any purchase order that provides the customer with the ability to cancel or terminate without incurring a substantive penalty, even ifpenalty. In the second quarter of 2021, we expect to replace our quarterly disclosures of backlog with RPO as a key metric, one commonly used across our industries, which will simplify our reporting. Our historical experience indicates the likelihood of cancellation of orders excluded from RPO is remote based on historical experience. We plan to continue reporting backlog as we believe that it is a useful metric for investors, given its relevance to total orders.remote. See Note 9 to the consolidated financial statements for further information.
*Non-GAAP Financial Measure
| | March 31, 2020 (In billions) | Equipment |
| Services |
| Total |
| |
| | |
March 31, 2021 | | March 31, 2021 | Equipment | Services | Total |
Backlog | $ | 76.9 |
| $ | 324.2 |
| $ | 401.1 |
| Backlog | $ | 72,272 | | $ | 311,134 | | $ | 383,405 | |
Adjustments | (31.7 | ) | (129.0 | ) | (160.7 | ) | Adjustments | (31,321) | | (125,122) | | (156,443) | |
Remaining performance obligation | $ | 45.2 |
| $ | 195.2 |
| $ | 240.4 |
| Remaining performance obligation | $ | 40,951 | | $ | 186,012 | | $ | 226,962 | |
Adjustments to reported backlog, primarily related to long-term contracts in excess of $160.7one year, of $156.4 billion as of March 31, 20202021 are largely driven by adjustments of $149.9$145.9 billion in our Aviation segment: (1) backlog includes engine contracts for which we have received purchase orders that are cancelable. We have included these in backlog as our historical experience has shown no net cancellations, as any canceled engines are typically moved by the airframer to other program customers;cancelable; (2) our services backlog includes contracts that are cancelable without substantive penalty, primarily time and materials contracts; and (3) backlog includes engines contracted under long-term service agreements, even if the engines have not yet been put into service. These adjustments to reported backlog are expected to be satisfied beyond one year.
| | | | | | | | | | | |
REVENUES | Three months ended March 31 | | |
| 2021 | 2020 | | | |
Consolidated revenues | $ | 17,118 | | $ | 19,490 | | | | |
| | | | | |
Equipment | 7,971 | | 9,097 | | | | |
Services | 8,358 | | 9,748 | | | | |
| | | | | |
| | | | | |
GE Industrial revenues | $ | 16,329 | | $ | 18,844 | | | | |
| | | | | |
GE Capital revenues | $ | 878 | | $ | 837 | | | | |
|
| | | | | | |
REVENUES | Three months ended March 31 |
(In billions) | 2020 |
| 2019 |
|
| | |
Consolidated revenues | $ | 20.5 |
| $ | 22.2 |
|
| | |
Equipment | 9.2 |
| 9.6 |
|
Services | 9.7 |
| 10.7 |
|
GE Industrial revenues | $ | 18.8 |
| $ | 20.3 |
|
| | |
GE Capital revenues | $ | 1.9 |
| $ | 2.2 |
|
For the three months ended March 31, 20202021, consolidatedConsolidated revenues were down $1.7$2.4 billion, primarily driven by decreaseda decrease in GE Industrial revenues of $1.5$2.5 billion and decreasedpartially offset by an increase in GE Capital revenues of $0.3 billion. The overall foreign currency impact on consolidated revenues was a decrease of $0.2 billion.revenues.
GE Industrial revenues decreased $1.5$2.5 billion (7%(13%), aswith decreases in services and equipment. The decrease in services was primarily at Aviation, due to lower commercial spare part shipments and Power weredecreased shop visits, partially offset by an increase at Power driven by Gas Power services revenues. The decrease in equipment was primarily at Aviation, due to fewer commercial install and spare engine shipments; at Healthcare, due to the disposition of the BioPharma business; and at Power, due to decreases in Steam Power and Gas Power; partially offset by an increase in Renewable Energy. The decrease in services was driven by the impact of COVID-19, resulting in a decrease in commercial services at Aviation due to lower part shipments and decreased shop visits, as well as a decrease in Gas Power services due to declines in transactional and upgrades revenues. This decreaseGE Industrial revenues included the net effects of dispositions of $0.4$1.1 billion and the effectsan increase from foreign currency translation of a stronger U.S. dollar of $0.2$0.3 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* decreased $1.0$1.7 billion (5%(10%), with equipment revenues flat and a decrease in services revenues of $1.0$1.4 billion (9%(14%) and equipment revenues of $0.4 billion (5%). Excluding the BioPharma disposition, GE Industrial organic revenues* decreased $1.1at Aviation and Power, partially offset by an increase at Healthcare. Healthcare organic revenue* increased $0.3 billion (6%(7%) due to increased demand for Healthcare Systems (HCS) products, and a return to pre-pandemic volume in Pharmaceutical Diagnostics (PDx).
GE Capital revenues decreased $0.3 billion (14%)increased 5%, primarily due to volume declines, mark-to-market effects and impairments as a result of COVID-19lower marks and related market impacts.impairments primarily in Insurance, partially offset by lower revenue at Working Capital Solutions (WCS) due to lower volume and lower gains and project revenues at EFS.
|
| | | | | | |
EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | Three months ended March 31 |
(In billions; per-share in dollars and diluted) | 2020 |
| 2019 |
|
| | |
Continuing earnings | $ | 6.3 |
| $ | 0.9 |
|
Continuing earnings per share | $ | 0.72 |
| $ | 0.10 |
|
| | | | | | | | | | | |
EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | Three months ended March 31 | | |
(Per-share in dollars and diluted) | 2021 | 2020 | | | |
Continuing earnings (loss) | $ | 20 | | $ | 6,175 | | | | |
Continuing earnings per share (loss) | $ | — | | $ | 0.70 | | | | |
For the three months ended March 31, 20202021, consolidatedConsolidated continuing earnings increased $5.4decreased $6.2 billion due to an increase in GE Industrial profit of $5.5 billion, partially offset by a decrease in GE Capital earnings of $0.2 billion.Industrial profit.
GE Industrial profit increased $5.5decreased $6.2 billion driven primarily by the nonrecurrence of the $12.3 billion gain on the sale of our BioPharma business of $12.3 billion,and lower profit at Aviation, partially offset by an unrealizeda lower net loss on our investment in Baker Hughes of $5.7$6.0 billion, a decrease in adjusted total Corporate operating costs* of $0.2 billion, a decrease in non-operating benefit cost of $0.2 billion, and a decrease in interest and other financial charges of $0.1 billion. GE Industrial profit margin was 2.3%, a decrease from 34.9%, primarily due to the same net decreases as described above. Adjusted GE Industrial profit* was $1.1$0.8 billion, an increase of $0.1 billion organically*, due to increases at Healthcare, Renewable Energy and Power, partially offset by a decrease of 47% organically*, primarily due to decreases at our Aviation, Power and Renewable Energy segments.Aviation. Adjusted GE Industrial profit marginmargin* was 34.9%5.1%, an increase from 5.3%, driven primarily by the gain on the sale of our BioPharma business, partially offset by an unrealized loss on our investment in Baker Hughes described above. Adjusted GE industrial profit margin* was 5.8%, a decrease of 450110 basis points organically*, primarily due to declines at our Aviation, Power, and Renewable Energy segments.the same net increases as described above. At Aviation, the primary drivers were lower volume on commercial services volumespare part and commercial spare parts demand as a result of COVID-19.engine shipments, and decreased shop visits in our service agreements. At Power, the primary drivers were supply chain constraintsincrease was driven by growth in Gas Power services revenues and margins, and continued efforts to streamline the business. At Healthcare, the increase was primarily due to cost overruns on services agreements. Additionally,reductions and increased demand for HCS products and increases in PDx volume, and at Renewable Energy, declines were largelythe increase was due to product cost deflation, the favorable impact of cost reduction measures and improved project fulfillment delaysexecution.
GE Capital continuing losses decreased 8% as lower claims, improved investment performance and execution challenges, as well aslower marks and impairments in Insurance were partially offset by lower gains and project revenues at EFS and the nonrecurrence of a $0.1 billion non-cash gain from the termination of two Offshore Wind contractstax benefit related to the BioPharma sale in the first quarter of 2019.2020.
GE Capital continuing earnings decreased $0.2 billion primarily due volume declines, mark-to-market effects and impairments as a result of COVID-19 and related market impacts, partially offset by lower excess interest cost. Gains were $0.2 billion in the first quarters of both 2020 and 2019, which primarily related to sales of GECAS aircraft and engines resulting in gains of $0.1 billion in both 2020 and 2019.
*Non-GAAP Financial Measure
AVIATION AND GECAS 737 MAX. Aviation develops, produces, and sells LEAP aircraft engines through CFM International (CFM), a company jointly owned by GE and Safran Aircraft Engines, a subsidiary of the Safran Group of France. The LEAP-1B engine is the exclusive engine for the Boeing 737 MAX. In March 2019, global regulatory authorities ordered a temporary fleet grounding of the Boeing 737 MAX. During the second quarter of 2019, Boeing announced a temporary reduction in the 737 MAX production rate, and CFM reduced its production rate for the LEAP-1B to meet Boeing's revised aircraft build rate. In December 2019, Boeing announced that it would temporarily suspend production of the 737 MAX beginning in January 2020. In March 2020, CFM and Boeing reached an agreement to align production rates for 2020 and secure payment terms for engines delivered in 2019 and 2020, net of progress collections. CFM and Boeing continue to work closely to ensure a successful reentry into service, with a strong commitment to safety while navigating near term industry disruption.
As of March 31, 2020, GECAS owned 29 of these aircraft, 26 of which are contracted for lease to various airlines that remain obligated to make contractual rental payments. In addition, GECAS has made pre-delivery payments to Boeing related to 143 of these aircraft on order and has made financing commitments to acquire a further 18 aircraft under purchase and leaseback contracts with airlines. During April 2020, GECAS agreed with Boeing to restructure its 737 MAX orderbook including previously canceled positions, resulting in the cancellation of 69 orders with 82 orders now remaining.
As of March 31, 2020, we have approximately $2.5 billion of net assets ($4.8 billion of assets and $2.3 billion of liabilities) related to the 737 MAX program that primarily comprise Aviation accounts receivable offset by progress collections and GECAS pre-delivery payments and owned aircraft subject to lease. No impairment charges were incurred related to the 737 MAX aircraft and related balances, as we continue to believe these assets are fully recoverable. We continue to monitor 737 MAX return to service and return to delivery developments with our airline customers, lessees and Boeing.
LEAP continues to be a strong engine program for us, and we delivered 272 engines for Boeing and Airbus platforms in the first quarter of 2020 and 3,662 engines since inception.
SEGMENT OPERATIONS.Segment revenues include sales of products and services by segment. Industrial segment profit is determined based on performance measures used by our Chief Operating Decision Maker (CODM), who is our Chief Executive Officer (CEO), to assess the performance of each business in a given period.
Please referRefer to our Annual Report on Form 10-K for the year ended December 31, 2019,2020, for further information regarding our determination of Industrial and Capital segment profit for continuing operations, and for our allocations of corporate costs to our segments.
| | | | | | | | | | | | | | | | | | | |
SUMMARY OF REPORTABLE SEGMENTS | Three months ended March 31 | | | |
| 2021 | 2020 | V% | | | | | | |
Power | $ | 3,921 | | $ | 4,025 | | (3) | | % | | | | | |
Renewable Energy | 3,248 | | 3,194 | | 2 | | % | | | | | |
Aviation | 4,992 | | 6,892 | | (28) | | % | | | | | |
Healthcare | 4,308 | | 4,727 | | (9) | | % | | | | | |
| | | | | | | | | |
Capital | 878 | | 837 | | 5 | | % | | | | | |
Total segment revenues | 17,346 | | 19,675 | | (12) | | % | | | | | |
Corporate items and eliminations | (228) | | (185) | | (23) | | % | | | | | |
Consolidated revenues | $ | 17,118 | | $ | 19,490 | | (12) | | % | | | | | |
| | | | | | | | | |
Power | $ | (87) | | $ | (131) | | 34 | | % | | | | | |
Renewable Energy | (234) | | (327) | | 28 | | % | | | | | |
Aviation | 641 | | 1,003 | | (36) | | % | | | | | |
Healthcare | 698 | | 867 | | (19) | | % | | | | | |
| | | | | | | | | |
Capital | (172) | | (187) | | 8 | | % | | | | | |
Total segment profit (loss) | 847 | | 1,224 | | (31) | | % | | | | | |
Corporate items and eliminations | 52 | | 6,123 | | (99) | | % | | | | | |
| | | | | | | | | |
GE Industrial interest and other financial charges | (268) | | (370) | | 28 | | % | | | | | |
GE Industrial non-operating benefit costs | (433) | | (616) | | 30 | | % | | | | | |
GE Industrial benefit (provision) for income taxes | (148) | | (187) | | 21 | | % | | | | | |
Earnings (loss) from continuing operations attributable to GE common shareholders | 20 | | 6,175 | | U | | | | | | |
Earnings (loss) from discontinued operations, net of taxes | (2,894) | | (21) | | U | | | | | | |
Less net earnings (loss) attributable to noncontrolling interests, discontinued operations | 0 | | (2) | | F | | | | | | |
Earnings (loss) from discontinued operations, net of tax and noncontrolling interest | (2,894) | | (19) | | U | | | | | | |
Consolidated net earnings (loss) attributable to the GE common shareholders | $ | (2,874) | | $ | 6,156 | | U | | | | | | |
|
| | | | | | | | | |
SUMMARY OF REPORTABLE SEGMENTS | Three months ended March 31 |
(In millions) | 2020 |
| 2019 |
| V% |
| |
| | | | |
Power | $ | 4,025 |
| $ | 4,617 |
| (13 | ) | % |
Renewable Energy | 3,194 |
| 2,538 |
| 26 |
| % |
Aviation | 6,892 |
| 7,954 |
| (13 | ) | % |
Healthcare | 4,727 |
| 4,683 |
| 1 |
| % |
Capital | 1,923 |
| 2,227 |
| (14 | ) | % |
Total segment revenues | 20,761 |
| 22,019 |
| (6 | ) | % |
Corporate items and eliminations | (237 | ) | 183 |
| U |
| |
Consolidated revenues | $ | 20,524 |
| $ | 22,202 |
| (8 | ) | % |
|
|
|
|
| |
Power | $ | (129 | ) | $ | 110 |
| U |
| |
Renewable Energy | (302 | ) | (187 | ) | (61 | ) | % |
Aviation | 1,005 |
| 1,660 |
| (39 | ) | % |
Healthcare | 896 |
| 781 |
| 15 |
| % |
Capital | (30 | ) | 135 |
| U |
| |
Total segment profit (loss) | 1,441 |
| 2,500 |
| (42 | ) | % |
Corporate items and eliminations | 6,064 |
| (228 | ) | F |
| |
GE interest and other financial charges | (370 | ) | (520 | ) | 29 |
| % |
GE non-operating benefit costs | (616 | ) | (564 | ) | (9 | ) | % |
GE benefit (provision) for income taxes | (187 | ) | (268 | ) | 30 |
| % |
Earnings (loss) from continuing operations attributable to GE common shareholders | 6,332 |
| 920 |
| F |
| |
Earnings (loss) from discontinued operations, net of taxes | (178 | ) | 2,663 |
| U |
| |
Less net earnings attributable to noncontrolling interests, discontinued operations | (2 | ) | 34 |
| U |
| |
Earnings (loss) from discontinued operations, net of tax and noncontrolling interest | (176 | ) | 2,629 |
| U |
| |
Consolidated net earnings (loss) attributable to the GE common shareholders | $ | 6,156 |
| $ | 3,549 |
| 73 |
| % |
POWER
We are monitoring the impacts of COVID-19 on near-term demand and the impact it is having on our operations, including the supply chain and our ability to service our installed base. Our ability to close transactions in the near term will become more challenging due to the impact of lower oil prices on certain customer budgets, the payback of investments and upgrades at lower gas prices, and access to financing for new projects. We are seeing the impact on our suppliers and within our supply chain, which has resulted in delays in parts and equipment output. In addition, the servicing of our customers' assets has been delayed due to travel and country restrictions. Although there may be obstacles in the near term, we believe the long-term outlook for the role of gas in the power market has not materially changed.
POWER. Power is continuingcontinues to right sizestreamline its business to better align with market demand and drivingdrive its businesses with an operational rigor and discipline that is focused on its customers’ lifecycle experience. We continueremain focused on our underwriting discipline and risk management to partner with our customers, working through field service travel disruptions to effectively service their fleets to maintain operability.As a result of expected volume declines from COVID-19 in the near term,ensure we are taking several measuressecuring deals that meet our financial hurdles and we have a high confidence to offset these pressures. Duringdeliver for our customers.
Global electricity demand increased during the first quarter of 2020, Power had approximately 700 headcount reductions2021, driving increases in GE gas turbine utilization and notified approximately 1,300 contractors. In addition, we executed on a hiring freeze, are accelerating planned employee reductions where possible, and are initiating meaningful incremental headcount reduction plans in line with the demand profile.
long-term service agreement billings. Looking ahead, we anticipate the power market to continue to be impacted by overcapacity in the industry, increasedcontinued price pressure from competition on servicing the installed base, and the uncertain timing of deal closures due to financing and the complexities of working in emerging markets.markets, as well as the ongoing impacts of COVID-19. Market factors related to the energy transition such as increasing energy efficiency andgreater renewable energy penetration and the adoption of climate change-related policies continue to impact long-term demand.
While we navigatedemand, to differing degrees across markets globally. We believe gas will play a critical role in the near-term impactsenergy transition and our view of the COVID-19 pandemic,market has not materially changed. Our businesses are executing on their turnarounds, including the planned exit of new build coal, and we willare encouraged by the growth in Gas Power Services.
We continue to invest in new product development, such as our HA-Turbines, and upgrades as these are critical to our customers and the long-term strategy of the business.HA-Turbines. Our fundamentals remain strong with approximately $85$78 billion in backlog and a gas turbine installed base greater than 7,000 units.units, including approximately 1,800 units under long-term service agreements.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended March 31 |
| | | | | Orders | | Sales |
(In units) | | | | | | | 2021 | 2020 | | 2021 | 2020 |
GE Gas Turbines | | | | | | | 18 | | 9 | | | 11 | | 7 | |
Heavy-Duty Gas Turbines(a) | | | | | | | 10 | | 6 | | | 11 | | 5 | |
HA-Turbines(b) | | | | | | | 2 | | 2 | | | 5 | | 4 | |
Aeroderivatives(a) | | | | | | | 8 | | 3 | | | — | | 2 | |
GE Gas Turbine Gigawatts(c) | | | | | | | 1.7 | | 2.2 | | | | |
(a) Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines. (b) HA-Turbines are a subset of Heavy-Duty Gas Turbines. (c) Gigawatts reported associated with orders in the periods presented. |
|
| | | | | | | | | |
| Three months ended March 31 |
| Orders | | Sales |
(In units) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| | | | | |
GE Gas Turbines | 9 |
| 15 |
| | 7 |
| 9 |
|
Heavy-Duty Gas Turbines(a) | 6 |
| 11 |
| | 5 |
| 7 |
|
HA-Turbines(b) | 2 |
| 3 |
| | 4 |
| 1 |
|
Aeroderivatives(a) | 3 |
| 4 |
| | 2 |
| 2 |
|
GE Gas Turbine Gigawatts(c) | 2.2 |
| 2.1 |
| | | |
(a) Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines. (b) HA-Turbines are a subset of Heavy-Duty Gas Turbines. (c) Gigawatts reported associated with financial orders in the periods presented. |
|
| | | | | | | | | |
(In billions) | | | | March 31, 2020 |
| March 31, 2019 |
|
| | | | | |
Equipment | | | | $ | 18.2 |
| $ | 19.1 |
|
Services | | | | 66.9 |
| 66.8 |
|
Total backlog | | | | $ | 85.1 |
| $ | 85.9 |
|
|
| | | | | | | | | | | | | |
| | | | Three months ended March 31 |
( Dollars in billions) | | | | | | 2020 |
| | 2019 |
| |
| | | | | | | | | |
Equipment | | | | | | $ | 1.5 |
| | $ | 1.0 |
| |
Services | | | | | | 2.6 |
| | 2.7 |
| |
Total orders | | | | | | $ | 4.1 |
| | $ | 3.7 |
| |
|
| | | | | | | | | | | | | |
Gas Power | | | | | | $ | 2.9 |
| | $ | 3.3 |
| |
Power Portfolio | | | | | | 1.2 |
| | 1.4 |
| |
Total segment revenues | | | | | | $ | 4.0 |
| | $ | 4.6 |
| |
|
| | | | | | | | | | | | | |
Equipment | | | | | | $ | 1.5 |
| | $ | 1.6 |
| |
Services | | | | | | 2.5 |
| | 3.0 |
| |
Total segment revenues | | | | | | $ | 4.0 |
| | $ | 4.6 |
| |
| | | | | | | | | |
Segment profit (loss) | | | | | | $ | (0.1 | ) | | $ | 0.1 |
| |
| | | | | | | | | |
Segment profit margin | | | | | | (3.2 | ) | % | 2.4 |
| % |
| | | | | | | | | | | |
| March 31, 2021 | December 31, 2020 | March 31, 2020 |
Equipment | $ | 16,563 | | $ | 17,127 | | $ | 18,187 | |
Services | 61,468 | | 62,448 | | 66,921 | |
Total backlog | $ | 78,032 | | $ | 79,575 | | $ | 85,108 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | Three months ended March 31 |
| | | | | | 2021 | | 2020 | |
Equipment | | | | | | $ | 837 | | | $ | 1,498 | | |
Services | | | | | | 2,796 | | | 2,612 | | |
Total orders | | | | | | $ | 3,633 | | | $ | 4,111 | | |
| | | | | | | | | |
Gas Power | | | | | | $ | 2,829 | | | $ | 2,859 | | |
Power Portfolio | | | | | | 1,091 | | | 1,165 | | |
Total segment revenues | | | | | | $ | 3,921 | | | $ | 4,025 | | |
| | | | | | | | | |
Equipment | | | | | | $ | 1,241 | | | $ | 1,506 | | |
Services | | | | | | 2,679 | | | 2,518 | | |
Total segment revenues | | | | | | $ | 3,921 | | | $ | 4,025 | | |
| | | | | | | | | |
Segment profit (loss) | | | | | | $ | (87) | | | $ | (131) | | |
Segment profit margin | | | | | | (2.2) | | % | (3.3) | | % |
For the three months ended March 31, 2020,2021, segment orders were up $0.4down $0.5 billion (12%), segment revenues were down $0.6$0.1 billion (13%(3%) and segment profit was down $0.2 billion.up 34%.
Backlog as of March 31, 2021 decreased $1.5 billion (2%) and $7.1 billion (8%) from December 31, 2020 decreased $0.7 billion (1%) due to a decrease in equipment backlog.and March 31, 2020, respectively, primarily driven by sales outpacing new orders.
Orders increaseddecreased $0.5 billion (14%(12%) organically, primarily due to decreases in Gas Power driven by the nonrecurrence of a large turnkey order and Steam Power equipment orders.
Revenues decreased $0.2 billion (4%) organically*, primarily due to decreased Steam Power equipment and services revenues and decreases in Gas Power equipment revenues, partially offset by an increase in Steam equipment orders at Power Portfolio and Gas Power equipment ordersservices revenues.
Profit increased 35% organically* due to incremental power plant scope on unit orders,growth in Gas Power services revenues and margins and continued efforts to streamline the business across Gas Power and Power Portfolio, partially offset by a decrease in Heavy-Duty Gas Turbine unit orders.
Revenues decreased $0.5 billion (12%) organically*, primarily due to decreases in services revenues at Gas Powerunfavorable legacy project arbitration resolutions and Steam services at Power Portfolioproject execution.
. Services revenues at Gas Power decreased due to delays in planned outages and transactional part sales due to COVID-19 and lower revenues on upgrades, primarily in the Middle East, where low oil prices are impacting customer budgets.
Profit decreased $0.2 billion organically* due
RENEWABLE ENERGY. Renewable Energy includes a portfolio of businesses comprising Onshore Wind (with our separate LM Wind blades business), Grid Solutions equipment and services, Hydro, Offshore Wind and Hybrid Solutions. These businesses are uniquely positioned to lower revenues, as well as supply chain constraintslead the energy transition with products and integrated solutions by growing new renewable energy generation, lowering the cost overruns on service agreements, partially offset by improved cost productivity driven by continued efforts to right sizeof electricity and modernizing the business.grid.
RENEWABLE ENERGY
We are monitoring the impact of COVID-19 on the renewable energy industry, including electricity consumption forecasts and customer capital expenditure levels, supply chain, availability of financing and our ability to execute on equipment and long-term projects, including the impact of possible customer related delays. While we have observed delays in equipment output at several of our manufacturing facilities, we continue to service our customer assets absent any specific country or other restrictions. In response to expected near-term volume declines from COVID-19, we initiated additional cost reduction measures, restructuring and cash preservation actions.
Theobserve strong demand across the global onshore wind market together with a positive impact on deliveries and installations in the U.S. continues to see a positive impact from the Production Tax Credit (PTC) cycle and customer preference shifting to larger, more efficient units to drive down costs and compete with other power generation options. Despite the competitive nature of the market, onshore wind order pricing has stabilized due to demand caused by the progressive phase-down of PTCs in the U.S., which has recently been extended by one year to include projects meeting certain criteria by 2020 that will be completed through 2024. We expect to continue high levels of production for 2020 deliveries at Onshore Wind and are closely monitoring our execution during this period including risks of delivery delays and possible project postponements due to COVID-19 or otherwise.
The grid market continues to be challenging as we continue to experience order declines in the High Voltage Direct Current (HVDC) and High Voltage (HV) product lines. Both the Grid Solutions equipment and services (Grid) and Hydro businesses are executing their turnaround plans.plans and we are expecting improved operating results in 2021.
New product introductions remain important to our onshore and offshore customers who are demonstrating the willingness to adopt the new technology of larger turbines that decrease the levelized cost of energy. We continuehave observed significant market demand for our Onshore 5-6 MW Cypress units and Offshore Haliade-X 12-13 MW units and are preparing for large scale production in response to focus on cost reduction initiatives of our products, in-sourcing blade production and developing larger, more efficient turbines like the Haliade-X (Offshore Wind) and Cypress (Onshore Wind). Final certification of the Haliade-X is expected in the second half of 2020.this market demand.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended March 31 |
| | | | | Orders | | Sales |
Onshore and Offshore (In units) | | | | | | | 2021 | 2020 | | 2021 | 2020 |
Wind Turbines | | | | | | | 728 | | 738 | | | 778 | | 731 | |
Wind Turbine Gigawatts | | | | | | | 2.2 | | 2.3 | | | 2.4 | | 2.1 | |
Repower units | | | | | | | 121 | | 6 | | | — | | 219 | |
|
| | | | | | | | | |
| Three months ended March 31 |
| Orders | | Sales |
(In units) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| | | | | |
Onshore | | | | | |
Wind Turbines | 738 |
| 970 |
| | 731 |
| 353 |
|
Wind Turbine Megawatts | 2,333 |
| 2,664 |
| | 2,093 |
| 988 |
|
Repower | 6 |
| 100 |
| | 219 |
| 156 |
|
| | | | | | | | | | | |
| March 31, 2021 | December 31, 2020 | March 31, 2020 |
Equipment | $ | 16,987 | | $ | 17,470 | | $ | 15,799 | |
Services | 12,461 | | 12,531 | | 10,712 | |
Total backlog | $ | 29,448 | | $ | 30,001 | | $ | 26,511 | |
|
| | | | | | | | | |
(In billions) | | | | March 31, 2020 |
| March 31, 2019 |
|
| | | | | |
Equipment | | | | $ | 15.8 |
| $ | 15.6 |
|
Services | | | | 10.7 |
| 9.6 |
|
Total backlog | | | | $ | 26.5 |
| $ | 25.2 |
|
|
| | | | | | | | | | | | | |
| | | | Three months ended March 31 | |
(In billions) | | | | | | 2020 |
| | 2019 |
| |
| | | | | | | | | |
Equipment | | | | | | $ | 2.7 |
| | $ | 3.0 |
| |
Services | | | | | | 0.4 |
| | 0.5 |
| |
Total orders | | | | | | $ | 3.1 |
| | $ | 3.5 |
| |
|
| | | | | | | | | | | | | |
Onshore Wind | | | | | | $ | 2.1 |
| | $ | 1.4 |
| |
Grid Solutions equipment and services | | | | | | 0.8 |
| | 0.9 |
| |
Hydro, Offshore Wind and other | | | | | | 0.2 |
| | 0.2 |
| |
Total segment revenues | | | | | | $ | 3.2 |
| | $ | 2.5 |
| |
*Non-GAAP Financial Measure
|
| | | | | | | | | | | | | |
| | | | Three months ended March 31 | |
(Dollars in billions) | | | | | | 2020 |
| | 2019 |
| |
| | | | | | | | | |
Equipment | | | | | | $ | 2.6 |
| | $ | 2.0 |
| |
Services | | | | | | 0.6 |
| | 0.6 |
| |
Total segment revenues | | | | | | $ | 3.2 |
| | $ | 2.5 |
| |
| | | | | | | | | |
Segment profit (loss) | | | | | | $ | (0.3 | ) | | $ | (0.2 | ) | |
| | | | | | | | | |
Segment profit margin | | | | | | (9.5 | ) | % | (7.4 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | Three months ended March 31 | |
| | | | | | 2021 | | 2020 | |
Equipment | | | | | | $ | 2,954 | | | $ | 2,669 | | |
Services | | | | | | 561 | | | 399 | | |
Total orders | | | | | | $ | 3,515 | | | $ | 3,068 | | |
| | | | | | | | | |
Onshore Wind | | | | | | $ | 2,118 | | | $ | 2,124 | | |
Grid Solutions equipment and services | | | | | | 795 | | | 839 | | |
Hydro | | | | | | 165 | | | 179 | | |
Offshore Wind and Hybrid Solutions | | | | | | 169 | | | 51 | | |
Total segment revenues | | | | | | $ | 3,248 | | | $ | 3,194 | | |
| | | | | | | | | |
Equipment | | | | | | $ | 2,844 | | | $ | 2,576 | | |
Services | | | | | | 404 | | | 618 | | |
Total segment revenues | | | | | | $ | 3,248 | | | $ | 3,194 | | |
| | | | | | | | | |
Segment profit (loss) | | | | | | $ | (234) | | | $ | (327) | | |
Segment profit margin | | | | | | (7.2) | | % | (10.2) | | % |
For the three months ended March 31, 2020,2021, segment orders were downup $0.4 billion (13%(15%), segment revenues were up $0.7$0.1 billion (26%(2%) and segment profit was downup $0.1 billion (61%(28%).
Backlog as of March 31, 2021 decreased $0.6 billion (2%) from December 31, 2020 increased $1.3 billion (5%)primarily driven by higher services backlog associated with a larger Onshore Wind installed equipment base and increased equipment backlog at Onshore and Offshore Wind,the effects of foreign currency fluctuations, partially offset by foreign currency translationnew orders outpacing sales. Backlog increased $2.9 billion (11%) from March 31, 2020 primarily from Offshore Wind due to our first Haliade-X order for the Dogger Bank Wind Farm, new Cypress platform orders in Onshore Wind and loweran increase in Hydro. These increases were partially offset by sales exceeding new orders at Grid, and Hydro.primarily as a result of increased commercial selectivity in certain product lines.
Orders decreasedincreased $0.4 billion (11%(13%) organically, primarily due to the nonrecurrence ofGrid high voltage direct current (HVDC) project for the Sofia Offshore Wind Farm and higher services orders at Onshore Wind.
Revenues were flat organically*, as higher revenue at Offshore Wind associated with the EDF’s 6MW PBG project in Saint-Nazaire, France and 30 more Onshore Wind turbine sales on a large Grid Automated Control Systems (ACS) orderunit basis and 11% more on a megawatt basis, were offset by lower repower unit deliveries at Onshore Wind and lower Wind orders, primarily from the impact of U.S. PTCs compared to the prior year.revenue at Grid.
RevenuesProfit increased $0.7$0.1 billion (28%(31%) organically*, primarily from 378 more wind turbine shipments on a unit basis, or 112% more megawatts shipped, thanimprovement in Onshore Wind product cost, the prior year,favorable impact of cost reduction measures, primarily at Grid and Hydro, and improved project execution, partially offset by lower Grid revenues, primarily due to COVID-19.
Profit of $(0.3) billion decreased $0.1 billion (66%) organically*, primarily due to the impact of higher sales volumemargins on new product introductions at Onshore Wind more than offset by project execution losses, costs associated with new product introductions and lower sales volume, primarily at Grid due to supply chain and project fulfillment disruptions associated with COVID-19, as well as the nonrecurrence of a $0.1 billion non-cash gain from the termination of two Offshore Wind contracts in the first quarter of 2019.higher restructuring costs.
AVIATION
AVIATION. The global COVID-19 pandemic is havingcontinues to have a material adverse effect on the global airline industry. A key underlying driver of Aviation’s commercial engine and services businesses is global passengercommercial air travel,traffic, which in turn is driven by economic activity and consumer and business propensity to travel. The COVID-19Since the beginning of the pandemic evolved rapidly in Marchthe first quarter of 2020, and resultedwe have seen varied levels of recovery in governmentglobal markets. Government travel restrictions, public health advisories, individuals' propensity to travel and related declinescontinued cases of the virus have all impacted the level of air travel. Aviation regularly tracks global departures, which as of March 31, 2021, were approximately 40% below first quarter 2020. Global departures improved in economic activity. These factors caused a significant drop in passenger air traffic, and as a result, airlines have grounded their fleets and, in many cases, completely ceased passenger operations.March 2021 compared to the first two months of the year, but levels of recovery varied across global regions. Aviation is closely monitoring government actions and economic and industry forecasts, although such forecasts continue to evolve and reflect the uncertainty about the severity and duration of the decline in passenger air traffic. For example, the International Air Transport Association (IATA) in April 2020 forecasted a 48% reduction in revenue passenger kilometers (RPK) for the full year 2020 compared to 2019, lowering a prior forecast from March 2020 of a 38% reduction based on updated assessments about the depth of the economic impact and speed of the recovery in passenger air traffic. More broadly, we are in frequent dialogue with our airline and airframe customers about the outlook for passenger air travel, new aircraft production, and after-market services.forecasts. Due to the global airline industry contraction, Aviation’s airline and airframe customers are taking measures to address reduced demand, which, in turn, is having a material adversecontinue to materially impact on Aviation’s business operations and financial performance. More broadly, we are in frequent dialogue with our airline and airframe customers about the outlook for commercial air travel, new aircraft production, fleet retirements, and after-market services, including shop visit and spare part demand. Given current trends, we expect domestic travel routes primarily served by narrowbody aircraft to recover before long-haul, international travel routes which are primarily served by widebody aircraft. Consistent with industry projections, Aviation continues to estimate the duration of the market recovery to be prolonged over multiple years dependent on containing the spread of the virus, effective inoculation programs and government collaboration to encourage travel, particularly around reducing quarantine requirements.
Aviation has and is continuing to taketaken several business actions to respond to the current adverse environment. Weenvironment, including a reduction of approximately 25% of its total global workforce since year-end 2019. The business is actively monitoring the pace of demand recovery to ensure the business is appropriately sized for the future. In addition, we continue to partner with our airline and leasing customers to respond to an increased number of requests for short-term payment deferrals and are working closelyaligned with our airframe customers to alignpartners on production rates for 2020. During the first quarter of 2020, Aviation took several measures including a hiring freeze, cancellation of salaried merit increases,2021 and a reduction of all non-safety related discretionary spending, including capital expenditures and engineering and development efforts. Aviation also announced a reduction of approximately 10% of its total United States (U.S.) workforce and a temporary furlough impacting approximately 50% of its U.S. maintenance, repair and overhaul employees for 90 days. Additionally, Aviation announced a temporary furlough impacting its U.S. assembly operations and component manufacturing shops for approximately four weeks during the second quarter of 2020. Aviation is also working with the appropriate parties to properly address its global workforce.beyond.
Looking ahead, Aviation’s operational and financial performance is impacted by demand for passenger air travel, demand for freight, oil prices, fleet retirements, and demand for new aircraft. We monitor and forecast each of these factors as part of Aviation’s long-term planning process, which may result in additional business restructuring actions. Given the uncertainty related to the severity and length of the global COVID-19 pandemic and the impact on these factors across the aviation sector, Aviation could be required to record additional charges, impairments, or other adverse financial impacts in future periods.
As it relates to the military environment, Aviation continues to forecast strong military demand creating future growth opportunities for our Military business as the U.S. Department of Defense and foreign governments have continued flight operations, and have increasedallocated budgets to upgrade and modernize their existing fleets, creating future growth opportunities for our Military business.fleets. During the first quarter of 2021, Aviation continued to experience supply chain challenges, which the business is actively addressing.
Total engineering, comprised of both company, customer and customer funded spending,partner-funded and nonrecurring engineering costs, decreased compared to prior year. Company-fundedyear in line with the changes in the commercial environment. During the first quarter of 2021, company-funded research and development spend decreased compared to the first quarter of 2019,prior year. Customer and we expect the reduction to continue in line with the actions outlined above. However, customer-fundedpartner-funded engineering efforts, primarily in our Military business, continueddecreased compared to increase.
the prior year due to the timing of planned program expenditures. Aviation continues to be committed to investment in developing and maturing technology that enables a more sustainable future of flight.
*Non-GAAP Financial Measure
10 20202021 1Q FORM 10-Q9
Aviation is taking actions to protect its ability to serve its customers now and as the global airline industry recovers. While its near-term focus remains on navigating the COVID-19 pandemic, Aviation’s deep history of innovation and technology leadership, commercial engine installed base of approximately 38,00037,700 units, with approximately 12,500 units under long-term service agreements, and military engine installed base of approximately 27,00026,500 units and $273 billion backlog represents strong long-term fundamentals. Aviation is actively taking actions to strengthen its business and seeks to emerge from this crisis stronger and drive long-term cash and profitable growth over time.
Refer to the Aviation and GECAS 737 MAX discussion in Consolidated Results for information regarding the Company's exposure related to the temporary fleet grounding of the Boeing 737 MAX. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended March 31 |
| | | | | Orders | | Sales |
(In units, except where noted) | | | | | | | 2021 | 2020 | | 2021 | 2020 |
Commercial Engines(a) | | | | | | | 298 | | 168 | | | 359 | | 530 | |
LEAP Engines(b) | | | | | | | 141 | | 6 | | | 188 | | 272 | |
Military Engines | | | | | | | 181 | | 272 | | | 96 | | 146 | |
Spare Parts Rate(c) | | | | | | | | | | $ | 13.2 | | $ | 26.9 | |
(a) Commercial Engines now includes Business and General Aviation and Aeroderivative units for all periods presented. (b) LEAP engines are subsets of commercial engines. (c) Commercial externally shipped spare parts and spare parts used in time and material shop visits in millions of dollars per day. |
|
| | | | | | | | | | | |
| Three months ended March 31 |
| Orders | | Sales |
(In units, except where noted) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| | | | | |
Commercial Engines | 145 |
| 799 |
| | 472 |
| 751 |
|
LEAP Engines(a) | 6 |
| 636 |
| | 272 |
| 424 |
|
Military Engines | 272 |
| 26 |
| | 146 |
| 161 |
|
Spare Parts Rate(b) | | | | $ | 26.9 |
| $ | 30.1 |
|
(a) LEAP engines are subsets of commercial engines. (b) Commercial externally shipped spare parts and spare parts used in time and material shop visits in millions of dollars per day. |
| | | | | | | | | | | |
| March 31, 2021 | December 31, 2020 | March 31, 2020 |
Equipment | $ | 34,333 | | $ | 34,486 | | $ | 39,154 | |
Services | 225,032 | | 225,927 | | 234,078 | |
Total backlog | $ | 259,365 | | $ | 260,412 | | $ | 273,232 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | Three months ended March 31 | |
| | | | | | 2021 | | 2020 | |
Equipment | | | | | | $ | 2,004 | | | $ | 2,228 | | |
Services | | | | | | 3,488 | | | 5,221 | | |
Total orders | | | | | | $ | 5,491 | | | $ | 7,448 | | |
| | | | | | | | | |
Commercial Engines & Services | | | | | | $ | 3,354 | | | $ | 5,113 | | |
Military | | | | | | 956 | | | 960 | | |
Systems & Other | | | | | | 682 | | | 820 | | |
Total segment revenues | | | | | | $ | 4,992 | | | $ | 6,892 | | |
| | | | | | | | | |
Equipment | | | | | | $ | 1,847 | | | $ | 2,364 | | |
Services | | | | | | 3,145 | | | 4,529 | | |
Total segment revenues | | | | | | $ | 4,992 | | | $ | 6,892 | | |
| | | | | | | | | |
Segment profit | | | | | | $ | 641 | | | $ | 1,003 | | |
Segment profit margin | | | | | | 12.8 | | % | 14.6 | | % |
|
| | | | | | | | | |
(In billions) | | | | March 31, 2020 |
| March 31, 2019 |
|
| | | | | |
Equipment | | | | $ | 39.2 |
| $ | 38.0 |
|
Services | | | | 234.1 |
| 185.4 |
|
Total backlog | | | | $ | 273.2 |
| $ | 223.5 |
|
|
| | | | | | | | | | | | | |
| | | | Three months ended March 31 | |
(Dollars in billions) | | | | | | 2020 |
| | 2019 |
| |
| | | | | | | | | |
Equipment | | | | | | $ | 2.2 |
| | $ | 3.2 |
| |
Services | | | | | | 5.2 |
| | 5.5 |
| |
Total orders | | | | | | $ | 7.4 |
| | $ | 8.7 |
| |
|
| | | | | | | | | | | | | |
Commercial Engines & Services | | | | | | $ | 4.8 |
| | $ | 5.9 |
| |
Military | | | | | | 1.0 |
| | 1.0 |
| |
Systems & Other | | | | | | 1.2 |
| | 1.0 |
| |
Total segment revenues | | | | | | $ | 6.9 |
| | $ | 8.0 |
| |
|
| | | | | | | | | | | | | |
Equipment | | | | | | $ | 2.4 |
| | $ | 3.1 |
| |
Services | | | | | | 4.4 |
| | 4.8 |
| |
Total segment revenues | | | | | | $ | 6.9 |
| | $ | 8.0 |
| |
| | | | | | | | | |
Segment profit | | | | | | $ | 1.0 |
| | $ | 1.7 |
| |
| | | | | | | | | |
Segment profit margin | | | | | | 14.6 |
| % | 20.9 |
| % |
For the three months ended March 31, 2020,2021, segment orders were down $1.3$2.0 billion (14%(26%), segment revenues were down $1.1$1.9 billion (13%(28%) and segment profit was down $0.7$0.4 billion (39%(36%).
Backlog as of March 31, 2020 increased $49.82021 decreased $1.0 billion (22%),from December 31, 2020, primarily due to an increase in long-term service agreements. This included approximately 200400 LEAP-1B unit order cancellations. Backlog decreased $13.9 billion (5%) from March 31, 2020, primarily due to a reduction in our Commercial Services backlog and cancellations inof commercial equipment orders, which included approximately 1,900 LEAP-1B unit order cancellations. The reduction to Commercial Services backlog reflects estimates of lower engine utilization, the first quarterpartial cancellation of 2020.long-term service agreements related to the equipment unit order cancellations, and anticipated customer fleet restructuring and contract modifications.
Orders decreased $1.1$1.9 billion (13%(26%) organically, primarily driven by lower commercial equipment orders due to the 737 MAX grounding and the impact of COVID-19. Military equipment and service total orders increased 60%as airline customers have slowed or deferred new engine orders, as well as delayed maintenance and repair operations while existing fleets have lower utilization or been grounded. Military orders decreased 8% compared to the prior year including a significant order from the U.S. Department of Navy’s Naval Air Systems Command (NAVAIR) for F414 engines.primarily driven by lower spare parts orders.
Revenues decreased $0.9$1.9 billion (11%(27%) organically*. Equipment revenues decreased, primarily due to 279171 fewer commercial install and spare engine units,unit shipments, including 15284 fewer LEAP units and 98 fewer CFM56 units versus the prior year. Commercial Services revenues also decreased, primarily due to lower commercial spare part shipments and decreased shop visits. Military revenues were flat with 50 fewer engine shipments due to supply chain challenges, offset by favorable product mix.
Profit decreased $0.4 billion (37%) organically*, primarily due to lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits in our service agreements, due to the impact of COVID-19. Military revenues decreased due to lower volume of engine and spare part shipments,agreements. These decreases in profit were partially offset by increased revenues on development contracts.
Profit decreased $0.6 billion (39%) organically*, primarily due to Services decreased after-market volumeoperational cost reduction from the cost savings actions taken in 2020 and lower volumethe first quarter of commercial spare engines. During the three months ended March 31, 2020, Aviation recorded period expense of $0.1 billion related to abnormal production volumes and initiated restructuring actions given decreases in customer demand primarily related to LEAP engines and COVID-19. Aviation also recorded pre-tax2021, along with charges totaling $0.1 billion due to expected future losses related to customer
credit risk givenand declines in the estimated profitability in long-term service agreements not repeating in the current environment. In addition, Aviation recorded a $0.1 billion non-cashyear.
,
pre-tax charge (reduction in revenues and profit) to reflect the cumulative impacts of changes to assumptions for certain long-term service agreements. Additional adjustments are likely to occur in future periods and could be material as conditions related to COVID-19 continue to evolve.
*Non-GAAP Financial Measure
20202021 1Q FORM 10-Q 1110
HEALTHCARE
DuringHEALTHCARE. We continue to see an overall recovery in hospital spend and increases in procedure volume; the first quarter of 2020, there was an increaseexpectation is that this will continue in line with the worldwide COVID-19 vaccine rollout. PDx demand for certain of our products that are highly correlatedhas largely recovered to the responsepre-COVID levels in line with increases in procedure volume. However, in some markets we expect capital expenditures to remain under pressure from revenue declines related to COVID-19 including respiratory, computed tomography (CT), monitoring solutions, x-ray, anesthesia and point-of-care ultrasound product lines. However, we also saw reduction in demand and delays in procurement in other products and services that were not critical to the COVID-19 response efforts or where procedures could be postponed (magnetic resonance, contrast agents and nuclear tracers). COVID-19impacts. The pandemic is still driving uncertainty in our markets globally, as well as additional supply chain and logistics costs, and we expect this to continue. In response to expected near termcontinuing near-term volatility and cost pressures, from COVID-19, we have initiated additionalcontinued to execute on structural cost reduction, restructuringreductions and cash preservation actions.
The global healthcare market has continuedoptimization actions, in order to expand, driven by macro trends relating to growing and aging populations, increasing chronic and lifestyle-related diseases, accelerating demand for healthcare in emerging markets, and increasing use of diagnostic imaging. Technological innovation that makes it possible to address an increasing number of diseases, conditions and patients in a more cost-effective manner has also driven growth across each of our global markets.
The Healthcare Systems equipment market over the long term continues to expand at low single-digit rates or better, while demand continues for servicesprioritize spend on new equipment as well as on our existing installed base. However, there is short-term variation driven by market-specific political, environmental and economic cycles. Growth in emerging markets is driven by long-term trends of expanding demand and access to healthcare. Developed markets are expected to remain steady in the near term driven by macro trends in the healthcare industry.
Dynamics related to tariffs tempered China's growth in 2019. The impact of tariffs on certain types of medical equipment and components that we import from China resulted in increased product costs. We continue to take mitigating actions including moving our sourcing and manufacturing for these parts outside of China. With softening in recent U.S.-China trade relations and continued mitigation actions there has been some moderation in tariffs in both U.S. and China.
The Life Sciences market, which encompasses Pharmaceutical Diagnostics and BioPharma, continues to be strong. The Pharmaceutical Diagnostics business is positioned in the contrast agent and nuclear tracer markets. This market is expected to grow over the long-term, driven by continued diagnostic imaging procedure growth and increasing contrastresearch and tracer-enhanced biomarkers of these same procedures, as these products help to increase the precision of the diagnostic information provided to clinicians. However, in the short-term the reduction in procedures not related to COVID-19 has temporarily reduced demand. We disposed of the BioPharma business on March 31, 2020.development.
We continue focusing on creating new products and digital solutions as well as expanding uses of existing offerings that are tailored to the different needs of our global customers. In the first quarter of 2020, weGE Healthcare introduced the LOGIQ™ E10 Serieslatest member of the Venue™ point of care ultrasound family. We also introduced Vscan Air, a cutting edge wireless pocket-sized ultrasound that is powered by advanced algorithmsprovides crystal clear image quality, whole-body scanning capabilities, and intuitive software. We received 510(k) clearance for OEC 3D surgical c-arm. OEC 3D sets the same artificial intelligence technology behind advanced gaming. It can process 10 timesstandard of interoperative imaging with precise 3D volumetric images for spine and orthopedic procedures combined with 2D imaging for greater everyday efficiency. We remain committed to innovate and invest to create more dataintegrated, efficient, and generate images faster than our previous ultrasound systems to help clinicians bring fast, precise answers to their patients. We continue to ramp production of critical medical equipment used to diagnose and treat COVID-19 patients, respiratory, computed tomography (CT), monitoring solutions, x-ray, anesthesia and point-of-care ultrasound product lines.personalized precision healthcare.
| | | | | | | | | | | |
| March 31, 2021 | December 31, 2020 | March 31, 2020 |
Equipment | $ | 5,564 | | $ | 5,538 | | $ | 5,957 | |
Services | 11,479 | | 11,562 | | 11,433 | |
Total backlog | $ | 17,044 | | $ | 17,100 | | $ | 17,389 | |
|
| | | | | | | | | |
(In billions) | | | | March 31, 2020 |
| March 31, 2019 |
|
| | | | | |
Equipment | | | | $ | 6.0 |
| $ | 6.6 |
|
Services | | | | 11.4 |
| 11.3 |
|
Total backlog(a) | | | | $ | 17.4 |
| $ | 17.9 |
|
|
| | | | | | | | | | | | | |
| | | Three months ended March 31 |
(In billions) | | | | | | 2020 |
| | 2019 |
| |
| | | | | | | | | |
Equipment | | | | | | $ | 3.3 |
| | $ | 2.9 |
| |
Services | | | | | | 2.0 |
| | 2.0 |
| |
Total orders(a) | | | | | | $ | 5.3 |
| | $ | 4.9 |
| |
|
| | | | | | | | | | | | | |
Healthcare Systems (HCS) | | | | | | $ | 3.4 |
| | $ | 3.4 |
| |
Life Sciences(b) | | | | | | 1.3 |
| | 1.3 |
| |
Total segment revenues | | | | | | $ | 4.7 |
| | $ | 4.7 |
| |
| | | | | | | | | |
(a) Backlog as of March 31, 2020 excluded the BioPharma business due to its disposition in the first quarter of 2020. Orders included $1.1 billion and $1.0 billion related to BioPharma for the three months ended March 31, 2020 and 2019, respectively. |
(b) Included revenues of $0.8 billion and $0.8 billion from BioPharma for the three months ended March 31, 2020 and 2019, respectively. |
|
| | | | | | | | | | | | | |
| | | | Three months ended March 31 | |
(Dollars in billions) | | | | | | 2020 |
| | 2019 |
| |
| | | | | | | | | |
Equipment | | | | | | $ | 2.7 |
| | $ | 2.7 |
| |
Services | | | | | | 2.0 |
| | 2.0 |
| |
Total segment revenues | | | | | | $ | 4.7 |
| | $ | 4.7 |
| |
| | | | | | | | | |
Segment profit | | | | | | $ | 0.9 |
| | $ | 0.8 |
| |
| | | | | | | | | |
Segment profit margin | | | | | | 19.0 |
| % | 16.7 |
| % |
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended March 31 |
| | | | | | 2021 | | 2020 | |
Equipment | | | | | | $ | 2,445 | | | $ | 3,305 | | |
Services | | | | | | 2,027 | | | 1,987 | | |
Total orders(a) | | | | | | $ | 4,472 | | | $ | 5,292 | | |
| | | | | | | | | |
Healthcare Systems (HCS) | | | | | | $ | 3,825 | | | $ | 3,448 | | |
Pharmaceutical Diagnostics (PDx) | | | | | | 482 | | | 450 | | |
BioPharma | | | | | | — | | | 830 | | |
Total segment revenues | | | | | | $ | 4,308 | | | $ | 4,727 | | |
| | | | | | | | | |
Equipment | | | | | | $ | 2,227 | | | $ | 2,699 | | |
Services | | | | | | 2,081 | | | 2,029 | | |
Total segment revenues | | | | | | $ | 4,308 | | | $ | 4,727 | | |
| | | | | | | | | |
Segment profit | | | | | | $ | 698 | | | $ | 867 | | |
Segment profit margin | | | | | | 16.2 | | % | 18.3 | | % |
| | | | | | | | | |
(a) Orders for the three months ended March 31, 2020 included $1,136 million related to BioPharma. |
|
For the three months ended March 31, 2020,2021, segment orders were up $0.4down $0.8 billion (7%(15%), segment revenues were up (1%down $0.4 billion (9%) and segment profit was up $0.1down $0.2 billion (15%(19%).
Overall, backlogBacklog as of March 31, 2021 decreased $0.1 billion from December 31, 2020 decreased $0.5and $0.3 billion (3%(2%). HCS backlog was up $0.6 billion, but was more than from March 31, 2020 primarily due to conversion to revenue of shorter cycle time LCS products, offset by the removalincreases in orders of BioPharma backlog of $1.1 billion due to the sale of the business on March 31, 2020. Excluding Biopharma, backlog increased $0.6 billion (4%).longer cycle time imaging products.
Orders increased $0.4$0.2 billion (9%(5%) organically, driven by HCS up 8% organically, due to COVID-19 related increases in demandImaging and Life Sciences up 10% organically, driven by BioPharma,Ultrasound in HCS, and a return to pre-pandemic volume in PDx, partially offset by pressurelower Life Care Solutions (LCS) orders in Pharmaceutical Diagnostics due to COVID-19. Excluding BioPharma, ordersHCS as pandemic-related demand softened.
Revenues increased $0.3 billion (6%) organically.
Revenues increased $0.1 billion (2%(7%) organically*, driven by increased demand in Imaging, Ultrasound and Life Care Solutions for HCS products, used directlyand a return to pre-pandemic volume in response to COVID-19 and Life Sciences, driven by BioPharma, partially offset by pressure in Pharmaceutical Diagnostics from a decrease in non-essential elective procedures due to COVID-19. Excluding BioPharma, revenues increased (1%) organically*.PDx.
Profit increased $0.1$0.2 billion (10%(30%) organically*, primarily driven by volume growth and cost productivity due to current year cost reductions and prior year restructuring actions, design engineeringincreased demand for HCS products, and service initiatives. These increases were partially offset by inflation, logistics pressure from COVID-19, and investments in research and development,PDx volume.
CAPITAL. In the first quarter of 2021, we announced an agreement to combine GECAS with AerCap, for which includes digital product innovations and Healthcare Systems programs. Excluding BioPharma, profits increased (3%) organically*.
CAPITAL
We continuethe Company expects to evaluate strategic optionsreceive $23.9 billion in cash, subject to accelerate the further reductioncontractual closing adjustments, approximately $6.6 billion in shares representing a 46% stake in the sizecombined company, and $1 billion in AerCap notes and/or cash upon closing. The Company expects to transfer GECAS’ net assets, including its engine leasing and Milestone helicopter leasing businesses, as well as GECAS’ more than 400 employees and its current purchase obligations, to AerCap. In addition, upon the closing of the transaction, the remainder of GE Capital somewill be reported within Corporate.
In connection with the signing of the transaction agreement, GE Capital recorded a non-cash after-tax charge of $2.8 billion in discontinued operations in the first quarter of 2021, and the results of GECAS are now presented in discontinued operations.
In the first quarter of 2021, we announced our intention to discontinue the majority of our factoring programs, which could have a material financial charge depending on the timing, negotiated terms and conditions of any ultimate arrangements.was effective April 1, 2021.
GE Capital made capital contributions to its insurance subsidiaries of $2.0 billion and $1.9 billion in the first quarters of 2020both 2021 and 2019, respectively,2020, and expects to provide further capital contributions of approximately $7$5.5 billion through 2024. See the Critical Accounting Estimates section within MD&A for further information.
At GE Capital, the primary effect of COVID-19 pertains to its GECAS business. The COVID-19 outbreak has led to worldwide reduction of flight schedules and it is difficult to predict its longer-term impact. The resulting pressure on its airline customers had led to GECAS preparing for redeployments and repossessions, as well as lease modifications in some cases, while continuing to respond to customer requests for short-term rent deferrals. Continued deterioration in cash flow projections, including current rents, downtime, release rates and residual assumptions could result in further impairments in the operating lease portfolio. Additionally, the COVID-19 market-related volatility resulted in higher credit spreads on the investment securities held by our run-off insurance business, which resulted in marks and impairments taken in the first quarter.
As of March 31, 2020, GECAS owned 986 fixed-wing aircraft, of which five with a book value of $0.1 billion were available to lease to customers (aircraft on the ground). We test recoverability of each fixed-wing aircraft in our operating lease portfolio at least annually. Additionally, we perform quarterly evaluations in circumstances such as when assets are re-leased or current lease terms have changed.
During the three months ended March 31, 2020 and 2019, GECAS recognized pre-tax impairments of $45 million and $3 million, respectively, in its operating lease fixed-wing aircraft. The increase in pre-tax impairments was driven by declining cash flow projections for aircraft as a result of COVID-19 and related market impacts.
As of March 31, 2020, GECAS has received deferral requests (primarily short term in nature) from approximately 75% of its airline customers operating in approximately 64 countries and expects to continue to receive requests for rent deferrals and/or lease restructures from its global airline customers as a result of COVID-19 and related market impacts. An extended disruption of regional or international travel could result in an increase in these types of requests in future periods, which could result in an increase to the trade receivable balance. As GECAS evaluates future lease restructures, there is a risk of lease modifications that could have a material adverse effect on GECAS operations, financial position and cash flows. Additionally, the portfolio utilization in our helicopter business was 86% as of March 31, 2020.
Refer to the Aviation and GECAS 737 MAX discussion in Consolidated Results for information regarding the Company's exposure related to the temporary fleet grounding of the Boeing 737 MAX.
*Non-GAAP Financial Measure
20202021 1Q FORM 10-Q 1311
|
| | | | | | |
(Dollars in billions) | March 31, 2020 |
| December 31, 2019 |
|
| | |
GECAS | $ | 37.3 |
| $ | 38.0 |
|
EFS | 1.8 |
| 1.8 |
|
WCS(a) | 7.8 |
| 9.0 |
|
Insurance | 46.8 |
| 46.3 |
|
Other continuing operations(a) | 17.5 |
| 22.5 |
|
Total segment assets | $ | 111.1 |
| $ | 117.5 |
|
|
| | |
GE Capital debt to equity ratio | 3.6:1 | 3.9:1 |
| | | | | | | | |
| March 31, 2021 | December 31, 2020 |
| | |
Energy Financial Services (EFS) | $ | 2,359 | | $ | 2,385 | |
Working Capital Solutions (WCS) | 4,567 | 5,884 |
Insurance | 50,353 | 50,824 |
Other continuing operations(a) | 14,429 | | 18,577 | |
Total segment assets - continuing operations | $ | 71,709 | | $ | 77,670 | |
| | |
| | |
(a) In the first quarterIncluded cash, cash equivalents and restricted cash of 2020 the remaining Industrial Finance assets$9,332 million as of $0.3 billion were transferred to Other continuing operations.March 31, 2021 and $13,245 million as of December 31, 2020.
| | | | | | | | | | | | Three months ended March 31 |
| | | Three months ended March 31 | | | | 2021 | 2020 |
(In billions) | | 2020 |
| 2019 |
| |
| | | | |
GECAS | | $ | 1.1 |
| $ | 1.2 |
| |
EFS | | 0.1 |
| — |
| EFS | | | $ | (3) | | $ | 64 | |
WCS | | 0.1 |
| 0.3 |
| WCS | | | 55 | | 131 | |
Insurance | | 0.6 |
| 0.7 |
| Insurance | | | 775 | | 616 | |
Other continuing operations | | — |
| — |
| Other continuing operations | | | 51 | | 25 | |
Total segment revenues | | $ | 1.9 |
| $ | 2.2 |
| Total segment revenues | | | $ | 878 | | $ | 837 | |
| | EFS | | EFS | | | $ | (5) | | $ | 53 | |
WCS | | WCS | | | 2 | | 24 | |
Insurance | | Insurance | | | 116 | | (93) | |
Other continuing operations(a) | | Other continuing operations(a) | | | (285) | | (171) | |
Total segment profit (loss) | | Total segment profit (loss) | | | $ | (172) | | $ | (187) | |
|
| | | | | | | | | |
GECAS | | | | $ | 0.2 |
| $ | 0.3 |
|
EFS | | | | 0.1 |
| — |
|
WCS | | | | — |
| 0.1 |
|
Insurance | | | | (0.1 | ) | — |
|
Other continuing operations(a) | | | | (0.2 | ) | (0.3 | ) |
Total segment profit | | | | $ | — |
| $ | 0.1 |
|
(a) Other continuing operations primarily comprisecomprised excess interest costs from debt previously allocated to assets that have been sold, as part of the GE Capital Exit Plan, preferred stock dividend costs and interest costs not allocated to GE Capital segments,businesses, and preferred stock dividend costs prior to January 2021, at which are driven bytime these became a GE Capital’s interest allocation process.Industrial obligation (see Note 17 for further information). Interest costs are allocated to GE Capital segmentsbusinesses based on the tenor of their assets using the market rate at the time of origination, which differs from the asset profile when the debt was originated. As a result, actual interest expense is higher than interest expense allocated to the remaining GE Capital segments. Substantially all preferred stock dividend costs will become a GE obligation in January 2021. See Note 15 to the consolidated financial statements for further information. In addition, webusinesses. We anticipate unallocated interest costs to gradually decline as debt matures and/or is refinanced.
For the three months ended March 31, 2020,2021, segment revenues decreased $0.3 billion (14%)increased 5% and segment earnings were down $0.2 billion.losses decreased 8%.
GE Capital revenues decreased $0.3 billion (14%)increased 5%, primarily due to volume declines, mark-to-market effects and impairments as a result of COVID-19 and related market impacts. Capital earnings decreased $0.2 billion, primarily due volume declines, mark-to-market effectslower marks and impairments primarily in Insurance, partially offset by lower revenue at WCS due to lower volume and lower gains and project revenues at EFS. GE Capital segment losses decreased 8% as a resultlower claims, improved investment performance and lower marks and impairments in Insurance were partially offset by lower gains and project revenues at EFS and the nonrecurrence of COVID-19 and related market impacts, and the tax benefit related to the BioPharma sale partially offset by the nonrecurrence of a 2019 tax reform enactment adjustment and lower excess interest cost. Gains were $0.2 billion in the first quartersquarter of both 2020 and 2019, which primarily related to sales of GECAS aircraft and engines resulting in gains of $0.1 billion in the first quarters of both 2020 and 2019.2020.
CORPORATE ITEMS AND ELIMINATIONS
ELIMINATIONS.Corporate items and eliminations includesincluded the results of our Lighting segment for the three months ended March 31, 2020, and our GE Digital business for all periods presented.
|
| | | | | | |
| Three months ended March 31 |
(In millions) | 2020 |
| 2019 |
|
| | |
Revenues | | |
Corporate revenues | $ | 377 |
| $ | 592 |
|
Eliminations and other | (615 | ) | (408 | ) |
Total Corporate Items and Eliminations | $ | (237 | ) | $ | 183 |
|
| | |
Operating profit (cost) | | |
Gains (losses) on disposals and held for sale businesses | $ | 12,439 |
| $ | 365 |
|
Restructuring and other charges | (207 | ) | (258 | ) |
Unrealized gains (losses) | (5,794 | ) | 13 |
|
Adjusted total corporate operating costs (Non-GAAP) | (374 | ) | (348 | ) |
Total Corporate Items and Eliminations (GAAP) | $ | 6,064 |
| $ | (228 | ) |
Less: gains (losses) and restructuring & other | 6,438 |
| 120 |
|
Adjusted total corporate operating costs (Non-GAAP) | $ | (374 | ) | $ | (348 | ) |
|
| | |
MD&A | CORPORATE ITEMS AND ELIMINATIONS |
|
| | | | | | |
| Three months ended March 31 |
(In millions) | 2020 |
| 2019 |
|
| | |
Functions & operations | $ | (266 | ) | $ | (357 | ) |
Eliminations | (98 | ) | 6 |
|
Environmental, health and safety (EHS) and other items | (10 | ) | 4 |
|
Adjusted total corporate operating costs (Non-GAAP) | $ | (374 | ) | $ | (348 | ) |
| | | | | | | | | | | |
| Three months ended March 31 | | |
| 2021 | 2020 | | | |
Revenues | | | | | |
Corporate revenues | $ | 227 | | $ | 377 | | | | |
Eliminations and other | (455) | | (562) | | | | |
Total Corporate Items and Eliminations | $ | (228) | | $ | (185) | | | | |
| | | | | |
Operating profit (cost) | | | | | |
Gains (losses) on disposals and held for sale businesses | $ | (159) | | $ | 12,439 | | | | |
Restructuring and other charges | (106) | | (143) | | | | |
Unrealized gains (losses) | 509 | | (5,794) | | | | |
Adjusted total corporate operating costs (Non-GAAP) | (192) | | (379) | | | | |
Total Corporate Items and Eliminations (GAAP) | $ | 52 | | $ | 6,123 | | | | |
Less: gains (losses) and restructuring & other | 244 | | 6,502 | | | | |
Adjusted total corporate operating costs (Non-GAAP) | $ | (192) | | $ | (379) | | | | |
| | | | | |
Functions & operations | $ | (159) | | $ | (272) | | | | |
Environmental, health and safety (EHS) and other items | (55) | | (10) | | | | |
Eliminations | 23 | | (98) | | | | |
Adjusted total corporate operating costs (Non-GAAP) | $ | (192) | | $ | (379) | | | | |
Adjusted total corporate operating costs* excludes gains (losses) on disposals and held for sale businesses, significant, higher-cost
restructuring and other chargesprograms and unrealized gains (losses). We believe that adjusting corporate costs*costs to exclude the effects of items that are not closely associated with ongoing corporate operations provides management and investors with a meaningful measure that increases the period-to-period comparability of our ongoing corporate costs.
*Non-GAAP Financial Measure
Unrealized gains (losses) are primarily related to our mark-to-market impact on our Baker Hughes shares and an impairment on our Ventures portfolio for the three months ended March 31, 2020, and to our Wabtec equity investment for the three months ended March 31, 2019.
For the three months ended March 31, 20202021, revenues decreased by $0.4 billion,remained relatively flat year over year primarily as a result of a $0.2$0.1 billion decrease resulting fromin revenues due to the sale of our CurrentLighting business in April 2019 and a $0.2June 2020, offset by $0.1 billion increase inof lower inter-segment eliminations. Corporate costsoperating profit decreased by $6.3$6.1 billion primarily due to $12.1$12.6 billion of higherlower net gains, from disposed or held for sale businesses, which was primarily related to adriven by $12.3 billion gainof gains from the sale of our BioPharma business during the first three months of 2020, as compared to $0.2 billion of realized losses primarily related to our Baker Hughes shares during the first three months of 2021. These decreases were partially offset by a $6.3 billion change in net unrealized gains and losses primarily related to mark-to-market activity on our Baker Hughes shares. Overall, restructuring and other charges remained relatively flat year over year.
Adjusted total corporate operating costs* decreased by $0.2 billion in the first quarter of 2020, compared to gains in2021 primarily as the first quarterresult of 2019 of $0.2 billion from the sale of our Digital ServiceMax business and $0.1 billion from a tax indemnity release related toof cost reductions primarily within our legacy NBCU business. Corporate costsfunctions. Costs also decreased by $0.1 billion due to lower restructuring costs within Healthcare, which were partially offset by higher restructuring actions taken in Aviation in the first quarter of 2020. These decreases were partially offset by $5.8 billion of higher net unrealized losses, primarily related to a $5.7 billion mark-to market impact on our Baker Hughes shares and a $0.1 billion impairment on our Ventures portfolio.
Adjusted total corporate operating costs* remained relatively flat. Intercompanyintercompany profit eliminations increased $0.1 billion, includingas the resultsresult of higherlower intercompany activity from our Aviation segment to our GECAS business. This was mostly offset by a decrease in Functions and Operations of $0.1 billion (25%), driven by cost reductionsbusiness, lower intercompany elimination activity from project financing investments associated with wind energy projects in our Digital business.
Although there were no significant impacts in the first quarter related to COVID-19, potential future impacts at Corporate may include, but are not limited to, the increase in our long-term liabilities, primarily for pension and certain environmental obligations, or decrease in asset returns subject to interest rate changes, additional asset impairments driven by overall market conditions,Renewable Energy segment and lower revenue in our Digital and Lighting operations.GE industrial inter-segment eliminations. Overall, costs associated with EHS matters remained relatively flat year over year.
OTHER CONSOLIDATED INFORMATION
RESTRUCTURING. Restructuring actions are an essential component ofto our cost improvement efforts tofor both existing operations and those recently acquired. Restructuring and other charges relate primarily to workforce reductions, facility exit costs associated with the consolidation of sales, service and manufacturing facilities, the integration of acquisitions, and certain other asset write-downs such as those associated with product line exits. We willalso recognize an obligation for severance benefits that vest or accumulate with service. We continue to closely monitor the economic environment including the impacts of COVID-19, and expect to undertake further restructuring actions to more closely align our cost structure with earnings and cost reduction goals. This table is inclusive of all restructuring charges in our segments.
| | | | | | | | | | | |
| Three months ended March 31 | | |
| 2021 | 2020 | | | |
Workforce reductions | $ | 211 | | $ | 154 | | | | |
Plant closures & associated costs and other asset write-downs | 26 | | 29 | | | | |
Acquisition/disposition net charges | 5 | | 27 | | | | |
Total restructuring and other charges | $ | 242 | | $ | 210 | | | | |
| | | | | |
Cost of product/services | $ | 101 | | $ | 116 | | | | |
Selling, general and administrative expenses | 148 | | 94 | | | | |
Other income | (7) | | — | | | | |
Total restructuring and other charges | $ | 242 | | $ | 210 | | | | |
| | | | | |
Power | $ | 49 | | $ | 33 | | | | |
Renewable Energy | 76 | | 26 | | | | |
Aviation | 62 | | 68 | | | | |
Healthcare | 39 | | 30 | | | | |
Corporate | 11 | | 50 | | | | |
Total GE Industrial restructuring and other charges | $ | 236 | | $ | 207 | | | | |
Capital | 5 | | 3 | | | | |
Total restructuring and other charges | $ | 242 | | $ | 210 | | | | |
Restructuring and other charges cash expenditures | $ | 223 | | $ | 210 | | | | |
|
| | | | | | |
| Three months ended March 31 |
(In billions) | 2020 |
| 2019 |
|
| | |
Workforce reductions | $ | 0.2 |
| $ | 0.2 |
|
Plant closures & associated costs and other asset write-downs | — |
| 0.1 |
|
Acquisition/disposition net charges | — |
| — |
|
Total restructuring and other charges | $ | 0.2 |
| $ | 0.3 |
|
| | |
Cost of product/services | $ | 0.1 |
| $ | 0.1 |
|
Selling, general and administrative expenses | 0.1 |
| 0.2 |
|
Other income | — |
| — |
|
Total restructuring and other charges | $ | 0.2 |
| $ | 0.3 |
|
| | |
Power | $ | — |
| $ | — |
|
Renewable Energy | — |
| — |
|
Aviation | 0.1 |
| — |
|
Healthcare | — |
| 0.1 |
|
Corporate | 0.1 |
| 0.1 |
|
Total restructuring and other charges | $ | 0.2 |
| $ | 0.3 |
|
Cash expenditures forLiabilities associated with restructuring and other chargesactivities were approximately $0.2$1.3 billion, and $0.3including actuarial determined post-employment severance benefits of $0.7 billion for the three months endedas of both March 31, 20202021 and 2019 respectively.December 31, 2020.
*Non-GAAP Financial Measure
|
| | |
MD&A | CORPORATE ITEMS AND ELIMINATIONS |
| | | | | | | | | | | |
INTEREST AND OTHER FINANCIAL CHARGES | Three months ended March 31 | | |
| 2021 | 2020 | | | |
GE Industrial | $ | 268 | | $ | 370 | | | | |
GE Capital | 291 | | 271 | | | | |
COSTS AND GAINS NOT INCLUDED IN SEGMENT RESULTS.
As discussed in the Segment Operations section within the MD&A, certain amounts are not included in industrial segment results because they are excluded from measurement of their operating performance for internal and external purposes. These costs relate primarily to restructuring and acquisition and disposition activities.
|
| | | | | | | | | | | | |
| Costs | Gains (Losses) |
| Three months ended March 31 | Three months ended March 31 |
(In billions) | 2020 |
| 2019 |
| 2020 |
| 2019 |
|
| | | | |
Power | $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Renewable Energy | — |
| — |
| — |
| — |
|
Aviation | 0.1 |
| — |
| — |
| — |
|
Healthcare | — |
| 0.1 |
| 12.3 |
| — |
|
Total segments | $ | 0.1 |
| $ | 0.1 |
| $ | 12.4 |
| $ | — |
|
Corporate Items & Eliminations | 0.1 |
| 0.1 |
| (5.7 | ) | 0.4 |
|
Total Industrial | $ | 0.2 |
| $ | 0.3 |
| $ | 6.6 |
| $ | 0.4 |
|
OTHER CONSOLIDATED INFORMATION
|
| | | | | | |
INTEREST AND OTHER FINANCIAL CHARGES | Three months ended March 31 |
(In billions) | 2020 |
| 2019 |
|
| | |
GE | $ | 0.4 |
| $ | 0.5 |
|
GE Capital | 0.5 |
| 0.7 |
|
The decrease in GE Industrial interest and other financial charges for the three months ended March 31, 2020,2021 was primarily due to lower interest expense on debt driven primarily by a lower expensesintercompany loan balance and lower financing costs on sales of GE current and long-term receivables as well as lower interest on debt due to lower average borrowings balances.receivables. The primary components of GE interest and other financial charges are interest on short- and long-term borrowings and financing costs on sales of receivables. Total GE Industrial interest and other financial charges of $0.2 billion and $0.3$0.2 billion was recorded at Corporate and $0.1 billion and $0.2$0.1 billion was recorded by Industrial segments for the three months ended March 31, 2021 and 2020, and 2019.respectively.
The decreaseincrease in GE Capital interest and other financial charges for the three months ended March 31, 20202021 was primarily due to higher average market interest rates and higher interest on assumed debt as a result of the repayments of intercompany loans by GE Industrial (effectively transferring that interest cost back to GE Capital), partially offset by lower average borrowings balances due to maturities and lower average interest rates due to changes in market rates.debt purchases.
*Non-GAAP Financial Measure
CONSOLIDATED INCOME TAXES
TAXES. For the three months ended March 31, 20202021, the consolidated income tax rate was 1.0%59.7% compared to 12.5%0.9% for the three months ended March 31, 2019.2020.
The consolidated provision (benefit) for income taxes was $0.1 billion for both the three months ended March 31, 2021 and 2020. The provision increased slightly as there was a tax expense associated with the unrealized gain on our remaining interest in Baker Hughes in the first quarter of 2020 and $0.1 billion2021 compared to a tax benefit associated with the unrealized loss recorded in the first quarter of 2019. The provision2020. This was essentially unchanged aslargely offset by the tax benefit associated with the mark-to-market loss on the remaining investment in Baker Hughes ($1.1 billion) was offset bynonrecurrence of the tax expense associated with the disposition of the BioPharma business excludingin the amount recognized on preparatory steps in 2019 ($1.1 billion).first quarter of 2020.
The consolidated tax provision (benefit) includes $0.2$0.1 billion and $0.3$0.2 billion for GE (excluding GE Capital) for the first quarters of 2020 and 2019, respectively.
DISCONTINUED OPERATIONS.Discontinued operations primarily include our Baker Hughes and Transportation segments, and certain businesses in our GE Capital segment (our mortgage portfolio in Poland and trailing liabilities associated with the sale of our GE Capital businesses).
The mortgage portfolio in Poland (Bank BPH) comprises floating rate residential mortgages, 86% of which are indexed to or denominated in foreign currencies (primarily Swiss francs). At March 31, 2020, the total portfolio had a carrying value of $2.4 billion with a 1.46% 90-day delinquency rate and an average loan to value ratio of approximately 70.3%. The portfolio is recorded at fair value less cost to sell, which reflects market yields as well as our best estimate of the effects of ongoing litigation in Poland related to foreign currency-denominated mortgages. Discontinued operations incomeIndustrial for the three months ended March 31, 2021 and 2020, includesrespectively.
DISCONTINUED OPERATIONS. Primarily comprise our GECAS business, our mortgage portfolio in Poland, and other trailing assets and liabilities associated with the recognitiondispositions of a $0.1 billion valuation allowance on the carrying value of the portfolio, primarily driven by a higher discount rate as a result of COVID-19certain GE Capital and related market impacts. Future changes in the economic impact of COVID-19, market yields or changes in estimated legal liabilities could result in further losses related to these loans in future reporting periods.
GE Industrial businesses. See Notes 2 and 19 to the consolidated financial statements21 for further financial information regarding our businesses in discontinued operations.
|
| | | | | | |
FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS | Three months ended March 31 |
(In billions) | 2020 |
| 2019 |
|
| | |
Earnings (loss) of discontinued operations, net of taxes | $ | (174 | ) | $ | 109 |
|
Gain (loss) on disposal, net of taxes | (4 | ) | 2,553 |
|
Earnings (loss) from discontinued operations, net of taxes | $ | (178 | ) | $ | 2,663 |
|
|
| | |
MD&A | CAPITAL RESOURCES AND LIQUIDITY |
CAPITAL RESOURCES AND LIQUIDITY
FINANCIAL POLICY.POLICY. We intend to maintain a disciplined financial policy, including maintaining a high cash balance. We are targeting a sustainable long-term credit rating in the Single-A range, withachieving a GE Industrial net debt*-to-EBITDA ratio of less than 2.5x over the next few years and a dividend in line with our peers over time, as well as a less than 4-to-1 debt-to-equity ratio for GE Capital.time. In addition to net debt*-to-EBITDA, we also evaluate other leverage measures, including gross debt-to-EBITDA, and we will ultimately size our deleveraging actions across a range of measures to ensure we are operating the Company based on a strong balance sheet. We intend to continue to decrease our GE Industrial leverage over time as we navigate this period of uncertainty, although we now expectuncertainty.
Following the closing of the GECAS transaction, the Company intends to achieve our prior targetsuse the transaction proceeds and its existing cash sources to significantly reduce debt, and will continue to target achieving a less than 2.5x net debt-to-EBITDA ratio over a longer period than previously announced.the next few years.
LIQUIDITY POLICY. We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet our obligations under both normal and stressed conditions. We intend to maintain a high level of cash and maximize flexibility as we navigate the current environment. At both GE Industrial and GE Capital, we manage our liquidity to provide access to sufficient funding to meet our business needs and financial obligations, as well as capital allocation and growth objectives, throughout business cycles.
GE Industrial has continued to enhance its cash management operations, targeting increased linear cash flow, lower factoring, and reducing restricted cash. As a result, GE Industrial's go-forward cash needs are expected to be below $13 billion. We intend to continue holding elevated cash levels through this period of uncertainty.
At GE Capital, we continue to hold cash levels to cover at least 12 months of long-term debt maturities.
We believe that our consolidated liquidity and availability under our revolving credit facilities will be sufficient to meet our liquidity needs.
CONSOLIDATED LIQUIDITY. Following is a summary of cash, cash equivalents and restricted cash at March 31, 2020.2021.
|
| | | | | | | | |
(In billions) | March 31, 2020 |
| | | March 31, 2020 |
|
| | | | |
GE | $ | 33.8 |
| | U.S. | $ | 31.7 |
|
GE Capital | 13.5 |
| | Non-U.S. | 15.6 |
|
Consolidated | $ | 47.3 |
| | Consolidated | $ | 47.3 |
|
With net proceeds of $20.3 billion received from the sale of our BioPharma business, we ended the first quarter of 2020 with $47.3 billion of consolidated cash, cash equivalents and restricted cash, in addition to our available credit lines. As described below, we have taken a number of actions to further de-risk and de-lever our balance sheet and prudently manage our liquidity amid a challenging external environment.
| | | | | | | | | | | | | | |
| March 31, 2021 | | | March 31, 2021 |
GE Industrial | $ | 22,361 | | | U.S. | $ | 18,115 | |
GE Capital | 9,422 | | | Non-U.S. | 13,668 | |
Consolidated | $ | 31,783 | | | Consolidated | $ | 31,783 | |
Cash held in non-U.S. entities has generally been reinvested in active foreign business operations; however, substantially all of our unrepatriated earnings were subject to U.S. federal tax and, if there is a change in reinvestment, we would expect to be able to repatriate available cash (excluding amounts held in countries with currency controls) without additional federal tax cost. Any foreign withholding tax on a repatriation to the U.S. would potentially be partially offset by a U.S. foreign tax credit.
GE INDUSTRIAL LIQUIDITY.GE'sGE Industrial's primary sources of liquidity consist of cash and cash equivalents, free cash flows from our operating businesses, monetization of receivables, proceeds from dispositions, and short-term borrowing facilities, including revolving credit facilities. Cash generation can be subject to variability based on many factors, including seasonality, receipt of down payments on large equipment orders, timing of billings on long-term contracts, the effects of changes in end marketsmarket conditions and our ability to execute dispositions. Additionally, in connection with the program we launched in 2020 to fully monetize our Baker Hughes position over approximately three years, we received proceeds of $0.7 billion in the first quarter of 2021 and expect to receive approximately $1.0 billion in the second quarter of 2021.
GE also has available short-term borrowing facilities to fund its operations, including a commercial paper program, revolving credit facilities and short-term intercompany loans from GE Capital, which are generally repaid within the same quarter. See the Borrowings section for details of our credit facilities and borrowing activity in our external short-term borrowing facilities.
GEIndustrial cash, cash equivalents and restricted cash totaled $33.8$22.4 billion at March 31, 2020,2021, including $2.3$2.1 billion of cash held in countries with currency control restrictions and $0.5$0.4 billion of restricted use cash. Cash held in countries with currency controls represents amounts held in countries whichthat 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. Restricted use cash represents amounts that are not available to fund operations, and primarily comprised collateral for receivables sold and funds restricted in connection with certain ongoing litigation matters.
*Non-GAAP Financial Measure
In the first quarter of 2020, GE received $20.3 billion of net proceeds from2021, we announced our intention to discontinue the salemajority of our BioPharma business within our Healthcare segment. Onfactoring programs, which was effective April 1, 2020,2021. The estimated adverse impact to GE used $6.0Industrial CFOA is expected to be approximately $3.5 to $4 billion primarily in the second quarter of these proceeds to repay a portion2021, which will be excluded from GE Industrial free cash flows*.
During 2021, GE Capital’s liquidity and capital needs will be evaluated based on the anticipated timing of the intercompany loans fromclosing of the GECAS transaction, as well as GE Capital. In addition, our ending commercial paper balance decreased by $1.1 billion comparedCapital’s overall performance, to December 31, 2019. We intenddetermine if additional capital contributions to maintain a high level of cash and maximize flexibility as we evaluate the next steps over time thatGE Capital are needed to execute our deleveraging priorities throughout this period of uncertainty. necessary.
Additionally, we continuedo not anticipate any further funding requirements for the GE Pension Plan in the foreseeable future, potentially until the end of the decade. This is due to evaluateour $2.5 billion prefunding in 2020 and portfolio performance, as well as the timing of an orderly sale over time of our remaining stake in Baker Hughes.recently enacted American Rescue Plan Act.
GE CAPITAL LIQUIDITY. GE Capital’s primary sources of liquidity consist of cash and cash equivalents, cash generated from asset sales (including the expected proceeds from the GECAS transaction) and cash flows from our businesses. We expect to maintain an adequate liquidity position to fund our insurance obligations and debt maturities primarilybusinesses, as a result of cash flows from our businesses,well as GE Industrial repayments of intercompany loans and capital contributions from GE.GE Industrial. We expect to maintain a sufficient liquidity position to fund our insurance obligations, debt maturities and other obligations. See the Segment Operations - Capital section within MD&A for further information regarding allocation of GE Capital interest expense to the GE Capital businesses.
GE Capital cash, cash equivalents and restricted cash totaled $13.5$9.4 billion at March 31, 2020, including $1.32021, excluding $1.7 billion of cash in Insurance, which was subject to regulatory restrictions, primarily in insurance entities.
*Non-GAAPclassified as All other assets on the GE Capital Statement of Financial Measure
|
| | |
MD&A | CAPITAL RESOURCES AND LIQUIDITY |
Position.
GE Capital provided capital contributions to its insurance subsidiaries of $2.0 billion, $2.0 billion, $1.9 billion and $3.5 billion in the first quarters of 2021, 2020, 2019 and 2018, respectively, and expects to provide further capital contributions of approximately $7$5.5 billion through 2024. These contributions are subject to ongoing monitoring by Kansas Insurance Department (KID), and the total amount to be contributed could increase or decrease, or the timing could be accelerated, based upon the results of reserve adequacy testing or a decision by KID to modify the schedule of contributions set forth in January 2018. We will continueGE is required to monitor the volatile interest rate environment, including the impact of reinvestment rates and our investment portfolio performance, and other factors in determining the related effect on our expected future capital contributions. See the Critical Accounting Estimates section of MD&A for discussion of the sensitivity of interest rate changes to our insurance liabilities. GE maintainsmaintain specified capital levels at these insurance subsidiaries under capital maintenance agreements. Going forward, we anticipate funding any capital needs for insuranceInsurance through a combination of GE Capital liquidity, GE Capital asset sales, GE Capital future earnings and capital contributions from GE.GE Industrial.
BORROWINGS. Consolidated total borrowings were $85.2$71.4 billion and $90.9$74.9 billion at March 31, 20202021 and December 31, 2019, respectively. The reduction was driven primarily by net repayments2020, respectively, a decrease of $3.5 billion ($3.9 billion excluding intercompany eliminations). See the following table for a summary of GE Industrial and GE Capital debtborrowings.
| | | | | | | | | | | | | | | | | | | | |
GE Industrial | March 31, 2021 | December 31, 2020 | | GE Capital | March 31, 2021 | December 31, 2020 |
GE Industrial senior notes | $ | 18,753 | | $ | 18,994 | | | Senior and subordinated notes | $ | 29,144 | | $ | 30,987 | |
| | | | Senior and subordinated notes assumed by GE Industrial | 21,538 | | 22,390 | |
Intercompany loans from GE Capital | 3,177 | | 3,177 | | | Intercompany loans to GE Industrial | (3,177) | | (3,177) | |
Other GE Industrial borrowings | 956 | | 1,352 | | | Other GE Capital borrowings | 1,244 | | 1,779 | |
Total GE Industrial | | | | Total GE Capital | | |
adjusted borrowings(a) | $ | 22,886 | | $ | 23,523 | | | adjusted borrowings(a)(b) | $ | 48,749 | | $ | 51,979 | |
(a) Consolidated total borrowings of $6.2 billion (including $4.7 billion$71,358 million and $74,902 million at March 31, 2021 and December 31, 2020, respectively, are net of long-term debt maturities), a reduction inintercompany eliminations of $277 million and $600 million, respectively, of other GE commercial paperIndustrial borrowings from GE Capital, primarily related to timing of $1.1 billion,cash settlements associated with GE Industrial receivables monetization programs.
(b) Included $3,826 million and $0.7 billion$5,687 million at March 31, 2021 and December 31, 2020, respectively, of foreign exchange due to strengthening US dollar against most currencies, partially offset by an increase of $2.4 billion in fair value adjustments for GE Capital debt in fair value hedge relationships as a resultrelationships. See Note 19 for further information.
The reduction in GE Industrial adjusted borrowings at March 31, 2021 compared to December 31, 2020 was driven by net repayments and maturities of lower interestother debt of $0.4 billion and $0.2 billion related to changes in foreign exchange rates.
GE Industrial net debt* was $34.0$32.3 billion and $47.9$32.3 billion at March 31, 20202021 and December 31, 2019, respectively. 2020, respectively, as debt reductions of $0.6 billion were offset by a decrease in the net cash deduction of $0.6 billion due to a lower cash balance.
The reduction in GE Capital adjusted borrowings at March 31, 2021 compared to December 31, 2020 was driven primarily by a higher ending cash balance mainly as a resultlong-term debt maturities of the proceeds from the sale$0.9 billion, lower non-recourse borrowings of the BioPharma business.$0.3 billion, lower short-term borrowings of $0.2 billion, and $1.9 billion of fair value adjustments for debt in fair value hedge relationships.
In 2015, senior unsecured notes and commercial paper were assumed by GE upon its merger with GE Capital. Under the conditions of the 2015 assumed debt agreement, GE Capital agreed to continue making required principal and interest payments on behalf of GE, resulting in the establishment of an intercompany receivable and payable between GE and GE Capital. In addition, GE Capital has periodically made intercompany loans to GE with maturity terms that mirror the assumed debt. As these loans qualify for right-of-offset presentation, they reduce the assumed debt intercompany receivable and payable between GE and GE Capital, as noted in the table below.
The following table provides a reconciliation of total short- and long-term borrowings as reported on the respective GE Industrial and GE Capital Statements of Financial Position to borrowings adjusted for assumed debt and intercompany loans: |
| | | | | | | | | |
March 31, 2020 (In billions) | GE |
| GE Capital |
| Consolidated(a) |
|
| | | |
Total short- and long-term borrowings | $ | 48.1 |
| $ | 37.6 |
| $ | 85.2 |
|
| | | |
Debt assumed by GE from GE Capital | (29.1 | ) | 29.1 |
| — |
|
Intercompany loans with right of offset | 12.2 |
| (12.2 | ) | — |
|
Total intercompany payable (receivable) between GE and GE Capital | (16.9 | ) | 16.9 |
| — |
|
| | | |
Total borrowings adjusted for assumed debt and intercompany loans | $ | 31.2 |
| $ | 54.5 |
| $ | 85.2 |
|
| |
(a) | Included $0.6 billion of eliminations of other GE borrowings from GE Capital, primarily related to timing of cash settlements associated with GE receivables monetization programs.
|
| | | | | | | | | | | |
March 31, 2021 | GE Industrial | GE Capital | Consolidated |
Total short- and long-term borrowings | $ | 41,247 | | $ | 30,388 | | $ | 71,358 | |
Debt assumed by GE Industrial from GE Capital(a) | (21,538) | | 21,538 | | — | |
Intercompany loans with right of offset(a) | 3,177 | | (3,177) | | — | |
Total intercompany payable (receivable) between GE Industrial and GE Capital | (18,361) | | 18,361 | | — | |
Total borrowings adjusted for assumed debt and intercompany loans | $ | 22,886 | | $ | 48,749 | | $ | 71,358 | |
When measuring(a) See the individual financial positionsCapital Resources and Liquidity section of GE and GE Capital, assumed debt should be considered a GE Capital debt obligation, andour Annual Report on Form 10-K for the intercompany loans withyear ended December 31, 2020 for further details on the right of offset mentioned above should be considered a GE debt obligation and a reduction of GE Capital’s total debt obligations. The following table illustrates the primary components of GE and GE Capital borrowings, adjusted for assumed debt and intercompany loans.loans with right of offset. |
| | | | | | | | | | | | | | |
GE (In billions) | March 31, 2020 |
| December 31, 2019 |
| | GE Capital (In billions) | March 31, 2020 |
| December 31, 2019 |
|
Commercial paper | $ | 1.9 |
| $ | 3.0 |
| | Senior and subordinated notes | $ | 35.8 |
| $ | 36.5 |
|
GE senior notes | 15.4 |
| 15.5 |
| | Senior and subordinated notes assumed by GE | 29.1 |
| 31.4 |
|
Intercompany loans from GE Capital | 12.2 |
| 12.2 |
| | Intercompany loans to GE | (12.2 | ) | (12.2 | ) |
Other GE borrowings | 1.6 |
| 2.2 |
| | Other GE Capital borrowings(a) | 1.8 |
| 3.4 |
|
| | | | Total GE Capital | | |
Total GE adjusted borrowings | $ | 31.2 |
| $ | 32.9 |
| | adjusted borrowings | $ | 54.5 |
| $ | 59.0 |
|
(a) Included $0.6 billion and $1.7 billion at March 31, 2020 and December 31, 2019, respectively, of non-recourse borrowings of consolidated securitization entities where GE Capital has securitized financial assets as an alternative source of funding.
The intercompany loans from GE Capital to GE Industrial bear the right of offset against amounts owed by GE Capital to GE Industrial under the assumed debt agreement and can be prepaid by GE Industrial at any time, in whole or in part, without premium or penalty. These loans are priced at market terms and have a collective weighted average interest rate of 3.5%3.7% and term of approximately 11.815.2 years at March 31, 2020. On April 1, 2020, GE repaid $6.0 billion of intercompany loans from GE Capital, decreasing GE borrowings with an offsetting increase to GE Capital borrowings.2021.
*Non-GAAP Financial Measure
|
| | |
MD&A | CAPITAL RESOURCES AND LIQUIDITY |
On April 22, 2020, GE issued $6.0 billion of senior notes, comprised of $1.0 billion due 2027, $1.25 billion due 2030, $1.5 billion due 2040, and $2.25 billion due 2050, and used the proceeds to complete a tender offer to purchase $4.2 billion of GE senior notes with maturities ranging from 2020 to 2024. We intend to use the remaining proceeds to repurchase, redeem or repay GE’s outstanding debt obligations, including other notes or commercial paper. These transactions will be leverage neutral and liquidity enhancing by extending our near-team industrial debt maturities.
On April 23, 2020, GE Capital completed a tender offer to purchase $5.4 billion of GE Capital senior notes with maturities during 2020 using the proceeds from the repayment of $6.0 billion of intercompany loans from GE.
GE Industrial has in place committed revolving credit lines. The following table provides a summary of committed and available credit lines.
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| | | | | | |
GE COMMITTED AND AVAILABLE REVOLVING CREDIT FACILITIES (In billions) | March 31, 2020 |
| December 31, 2019 |
|
| | |
Unused back-up revolving syndicated credit facility | $ | 20.0 |
| $ | 20.0 |
|
Unused revolving syndicated credit facility | 14.8 |
| 14.8 |
|
Bilateral revolving credit facilities | 7.2 |
| 7.2 |
|
Total committed revolving credit facilities | $ | 42.0 |
| $ | 42.0 |
|
Less offset provisions | 6.7 |
| 6.7 |
|
Total net available revolving credit facilities | $ | 35.3 |
| $ | 35.3 |
|
Included in our credit facilities totaling $20.2 billion at March 31, 2020, was an2021, comprised of a $15.0 billion unused $20.0 billion back-up revolving syndicated credit facility extended by 36 banks, expiring in 2021, and an unused $14.8 billion revolving syndicated credit facility extended by six banks, expiring on December 31, 2020. The commitments under these syndicated credit facilities may be reduced by up to $6.7 billion due to offset provisions for any bank that holds a commitment to lend under both facilities.
As part of our ordinary course refinancing processes, on April 17, 2020, we refinanced unused back-up revolving syndicated credit facility. In connection with the refinancing, we terminated the unused $20.0 billion back-up revolving syndicated credit facility and entered into a new $15.0total of $5.2 billion back-up revolving syndicated credit facility, expiring in April 2023. This facility does not contain any offset provisions. The new back-upof bilateral revolving credit facility includes a customary net debt-to-EBITDA financial covenant.facilities.
The closing of the new $15.0 billion facility also terminated the $14.8 billion unused revolving syndicated credit facility that was scheduled to mature in December 2020, which had an aggregate revolving commitment amount of $4.2 billion effective April 14, 2020, following the sale of the BioPharma business within our Healthcare segment.
Under the terms of an agreement between GE Capital and GE Industrial, GE Capital has the right to compel GE Industrial to borrow under all credit facilities in place at March 31, 2020 except the $14.8$15.0 billion unused back-up revolving syndicated credit facility expiring on December 31, 2020.facility. Under this agreement, GE Industrial would transfer the proceeds to GE Capital as intercompany loans, which would be subject to the same terms and conditions as those between GE Industrial and the lending banks. GE Capital has not exercised this right.
The following table provides a summary of the activity in the primary external sources of short-term borrowings for GE in the first quarters of 2020 and 2019. GE uses bilateral revolving credit facilities from time to time to meet its short-term liquidity needs.
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| | | | | | | | | |
(In billions) | GE Commercial Paper |
| Bilateral Revolving Credit Facilities |
| Total |
|
| | | |
2020 | | | |
Average borrowings during the first quarter | $ | 2.9 |
| $ | 1.2 |
| $ | 4.1 |
|
Maximum borrowings outstanding during the first quarter | 3.4 |
| 1.5 |
| 4.7 |
|
Ending balance at March 31 | 1.9 |
| — |
| 1.9 |
|
| | | |
2019 | | | |
Average borrowings during the first quarter | $ | 3.2 |
| $ | 1.3 |
| $ | 4.4 |
|
Maximum borrowings outstanding during the first quarter | 3.6 |
| 1.5 |
| 4.8 |
|
Ending balance at March 31 | 3.0 |
| — |
| 3.0 |
|
Total average and maximum borrowings in the table above are calculated based on the daily outstanding balance of the sum of commercial paper and revolving credit facilities.
GE’s ending commercial paper balance decreased to $1.9 billion at March 31, 2020 from $3.0 billion at December 31, 2019, primarily as a result of market conditions and our liquidity position.
In addition to these external sources of short-term borrowings, GE and GE Capital may from time to time enter into short-term intercompany loans to utilize excess cash as an efficient source of liquidity, which are typically repaid within the same quarter.
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MD&A | CAPITAL RESOURCES AND LIQUIDITY |
CREDIT RATINGS AND CONDITIONS. We have relied, and may continue to rely, on the short- and long-term debt capital markets to fund, among other things, a significant portion of our operations. The cost and availability of debt financing is influenced by our credit ratings. Moody’s Investors Service (Moody’s), Standard and Poor’s Global Ratings (S&P), and Fitch Ratings (Fitch) currently issue separate ratings on GE Industrial and GE Capital short- and long-term debt. The credit ratings of GE Industrial and GE Capital as of the date of this filing are set forth in the table below.
| | | | | | | | | | | | | | |
| | Moody's | S&P | Fitch |
GE Industrial | Outlook | Negative | CreditWatch Negative | Stable |
| Short term | P-2 | A-2 | F3 |
| Long term | Baa1 | BBB+ | BBB |
| | | |
| Moody's | S&P | Fitch |
GE Capital | Outlook | Negative | CreditWatch Negative | Stable |
GE | Short term | P-2 | A-2 | F3 |
Outlook | Negative | Negative | Stable |
Short term | P-2 | A-2 | F3 |
Long term | Baa1 | BBB+ | BBB |
GE Capital | | | |
Outlook | Negative | Negative | Stable |
Short term | P-2 | A-2 | F3 |
Long term | Baa1 | BBB+ | BBB |
On AprilMarch 10, 2020, S&P2021, Moody’s and Fitch affirmed the ratings of GE and GE Capital short- and long-term debt and changed its outlook from Stable to Negative.
On April 12, 2020, Fitch lowered thetheir respective credit ratings, and S&P announced that they have placed us on CreditWatch with negative implications and currently expect to lower our credit ratings by one notch upon the closing of GE and GE Capital short- and long-term debt from F2 to F3 and BBB+ to BBB, respectively, with a Stable outlook.the GECAS transaction.
On April 13, 2020, Moody’s affirmed the ratings of GE and GE Capital short- and long-term debt and changed its outlook from Stable to Negative.
We are disclosing our credit ratings and any current quarter updates to these ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds.funds and access to liquidity. Our ratings may be subject to a revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. For a description of some of the potential consequences of a reduction in our credit ratings, see the Financial Risks section of Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Substantially all of the Company's debt agreements in place at March 31, 2021 do not contain material credit rating covenants. GE’s unused back-up revolving syndicated credit facility and certain of our bilateral revolving credit facilities contain a customary net debt-to-EBITDA financial covenant, which GE satisfied at March 31, 2021.
The Company may from time to time enter into agreements that contain minimum ratings requirements. The following table provides a summary of the maximum estimated potential liquidity impact in the event of further downgrades with regards to thebelow each stated ratings level.
| | | | | | |
| Triggers Below | At March 31, 2021 |
| BBB+/A-2/P-2 | $ | 277 | |
| BBB/A-3/P-3 | 621 | |
| BBB- | 1,429 | |
| BB+ and below | 468 | |
Our most significant contractual credit ratings conditions of the Company based on their proximityrequirements are related to ordinary course commercial activities, our current ratings.
|
| | | | |
(In billions) | Triggers Below | At March 31, 2020 |
|
| | |
Derivatives | | |
Terminations | BBB/Baa2 | $ | (0.4 | ) |
Cash margin posting | BBB/Baa2 | (0.9 | ) |
Receivables Sales Programs | | |
Loss of cash commingling | A-2/P-2/F2 | $ | (0.6 | ) |
Alternative funding sources | A-2/P-2/F2 | (0.7 | ) |
Surety bond cash collateral posting | BBB-/Baa3 | $ | (0.8 | ) |
receivables sales programs, and our derivatives portfolio. The timing within the quarter of the potential liquidity impact of these areas may differ, as described incan the following sections which provide additional details regarding the significant credit rating conditionsremedies to resolving any potential breaches of the Company.
DEBT CONDITIONS. Substantially all debt agreements in place at March 31, 2020 do not contain material credit rating covenants. If our short-term credit ratings were to fall below A-2/P-2/F2, it is possible that we would lose all or part of our access to the tier-2 commercial paper markets, which would reduce our borrowing capacity in those markets and may result in increased utilization of our revolving credit facilities to fund our intra-quarter operations. As of the date of this filing, the Fitch downgrade has not interrupted our ability to access the tier-2 market.
DERIVATIVE CONDITIONS.Swap, forward and option contracts are executed under standard master agreements that typically contain mutual downgrade provisions that provide the ability of the counterparty to require termination if the credit ratings of the applicable GE entity were to fall below specified ratings levels agreed upon with the counterparty, primarily BBB/Baa2. Our master agreements also typically contain provisions that provide termination rights upon the occurrence of certain other events, such as a bankruptcy or events of default by one of the parties. If an agreement was terminated under any of these circumstances, the termination amount payable would be determined on a net basis and could also take into account any collateral posted. The net amount of our derivative liability subject to such termination provisions, after consideration of collateral posted by us and outstanding interest payments was $0.4 billion at March 31, 2020. This excludes exposure related to embedded derivatives, which are not subject to these provisions.
In addition, certain of our derivatives, primarily interest rate swaps, are subject to additional cash margin posting requirements if our credit ratings were to fall below BBB/Baa2. The amount of additional margin will vary based on, among other factors, market movements and changes in our positions. At March 31, 2020, the amount of additional margin that we could be required to post if we fell below these ratings levels was approximately $0.9 billion.
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MD&A | CAPITAL RESOURCES AND LIQUIDITY |
The Fitch downgrades did not result in a breach of any of our required ratings levels relating to derivatives.
See Note 17 to the consolidated financial statements for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.
levels.
OTHER CONDITIONS.
Where we provide servicing for third-party investors under certain of our receivable sales programs, GE is contractually permitted to commingle cash collected from customers on financing receivables sold to third-party investors with our own cash prior to payment to third-party investors, provided our short-term credit rating does not fall below A-2/P-2. In the event any of our ratings were to fall below such levels, we may be required to segregate certain of these cash collections owed to third-party investors into restricted bank accounts and would lose the short-term liquidity benefit of commingling with respect to such collections. The financial impact to our intra-quarter liquidity would vary based on collections activity for a given quarter and may result in increased utilization of our revolving credit facilities. The loss of cash commingling would have resulted in an estimated maximum reduction of approximately $0.6 billion to GE intra-quarter liquidity during the first quarter of 2020.
We have relied, and may continue to rely, on securitization programs to provide alternative funding for sales of GE receivables to third-party investors. If any of our short-term credit ratings were to fall below A-2/P-2/F2, the timing or amount of available liquidity generated by these programs could be adversely impacted. In the first quarter of 2020, the estimated maximum reduction to our ending available liquidity had our credit ratings fallen below these levels was approximately $0.7 billion. In the event we fall below these ratings levels, these programs contain features that permit continued timely third-party funding subject to additional restrictions, which we do not expect to have a significant impact to the Company.
In conjunction with ordinary course commercial transactions and certain regulatory requirements, the Company may periodically enter into agreements that require us to post surety bonds to counterparties. In the first quarter of 2020, we entered into amendments to our agreements with certain of our surety bond providers that may require us to post cash collateral in the event our credit ratings were to fall below BBB-/Baa3. At March 31, 2020, the maximum amount of cash collateral we could be required to post if we fell below these levels was approximately $0.8 billion.
FOREIGN EXCHANGE. As a result of our global operations, we generate and incur a significant portion of our revenues and expenses in currencies other than the U.S. dollar. Such principal currencies include the euro, the Chinese renminbi, the British pound sterling the Brazilian real and the Chinese renminbi,Indian rupee, among others. The effects of foreign currency fluctuations on earnings, excluding the earnings impact of the underlying hedged item, was less than $0.1 billion for both the three months ended March 31, 20202021 and less than $0.1 billion for the three months ended March 31, 2019.2020. This analysis excludes any offsetting effect from the forecasted future transactions that are economically hedged.
See Note 17 to the consolidated financial statements19 for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.
STATEMENT OF CASH FLOWS – THREE MONTHS ENDED MARCH 31, 20202021 VERSUS 2019.2020. We manage the cash flow performance of our industrial and financial services businesses separately, in order to enable us and our investors to evaluate the cash from operating activities of our industrial businesses separately from the cash flows of our financial services business.
See the Intercompany Transactions between GE Industrial and GE Capital are reported in the respective columns of our statement of cash flows, but are eliminated in deriving our consolidated statement of cash flows. See the GE Industrial working capital transactions section and Notes 4 and 20 to the consolidated financial statements22 for further information regarding certain transactions affecting our consolidated Statement of Cash Flows.
GE INDUSTRIAL CASH FLOWS FROM CONTINUING OPERATIONS. The most significant source of cash in GE Industrial 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, contribute to post retirement plans and pay others for a wide range of material, services and taxes.
GE Industrial cash used for operating activities was $1.7$0.5 billion in 2020, an increase2021, a decrease of $1.1$1.2 billion compared with 2019,2020, primarily due to: an increasea decrease in cash used for working capital of $1.1$1.6 billion; and a general decrease in net income (after adjusting for the gain on the sale of BioPharma and the non-cash loss related to our interest in Baker Hughes), primarily due to COVID-19 impacts in our Aviation segment; partially offset by a decreasean increase in cash used for contract &All other deferred assetsoperating activities of $0.7$0.2 billion primarily due to higher billings on our long-term equipment contractsincreases in Aviation-related customer allowance accruals of $0.4 billion in 2020 and the settlement of an increased net unfavorable changeAlstom legacy legal matter of $0.2 billion in estimated profitability,2021, partially offset by higher revenue recognition, on our long-term service agreements.lower net cash used for employee benefit liabilities of $0.3 billion. There was an insignificant decrease in Aviation-related customer allowance accruals in 2021.
The increasedecrease in cash used for working capital was due to: an increasea decrease in cash used for accounts payable and equipment project accruals of $1.5$1.0 billion, which was primarily as a result of lower volume in 2020 and higher disbursements related to purchases of materials in prior periods; and higher net utilizations of progress collections of $0.3 billion. These increasesa decrease in cash used for working capital were partially offset by an increase in cash generated from current receivablesinventories, including deferred inventory, of $0.5$0.4 billion, which was primarily driven by lower volume,material purchases, partially offset by a higher decrease in sales of receivables; andlower liquidations; an decreaseincrease in cash used for inventoriesfrom current receivables of $0.1$0.2 billion, which was primarily driven by lower build for anticipated volumes in the year, largelyvolume; and lower net liquidations of progress collections and current deferred income of $0.2 billion, which included a partial offset due to early payments received at our Aviation Military equipment business of $0.3 billion from a foreign government. These decreases were partially offset by lower liquidations.changes in current contract assets of $0.2 billion, primarily due to a net unfavorable change in estimated profitability at Aviation in 2020.
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MD&A | CAPITAL RESOURCES AND LIQUIDITY |
As discussed in the Significant Developments section within the Consolidated Results section of MD&A, the COVID-19 pandemic negatively impacted GE CFOA and GE Industrial free cash flows* by approximately $1 billion in the first quarter of 2020, primarily as a result of decreased net income and working capital in our Aviation segment.
GE Industrial cash from investing activities was $20.0$0.5 billion in 2020, an increase2021, a decrease of $17.8$19.5 billion compared with 2019,2020, primarily due to: netthe nonrecurrence of proceeds from the sale of our BioPharma business of $20.3 billion; and lower cash used in relation to net settlements between our continuing operations and discontinued operations of $0.4 billion; partially offset by the nonrecurrence of proceeds from the 2019 spin-offsales of a portion of our Transportation businessretained ownership interest in Baker Hughes of $2.9$0.7 billion. Cash used for additions to property, plant and equipment and internal-use software, which is a componentare components of GE Industrial free cash flows*, was $0.6$0.4 billion in both 2020 and 2019.2021, down $0.2 billion compared with 2020.
GE Industrial cash used for financing activities was $2.0$0.8 billion in 2020, an increase2021, a decrease of $0.7$1.2 billion compared with 2019,2020, primarily due to higher netthe non-recurrence of repayments of borrowings.commercial paper of $1.1 billion in 2020.
GE CASH FLOWS FROM DISCONTINUED OPERATIONS. GE cash used for operating activities of discontinued operations in 2019 primarily reflects operating outflows related to Transportation, prior to our disposition of the segment in the first quarter of 2019. GE cash used for financing activities of discontinued operations in 2019 primarily reflects payments of Baker Hughes dividends to noncontrolling interests.
GE CAPITAL CASH FLOWS FROM CONTINUING OPERATIONS. GE Capital cash fromused for operating activities was $1.3$2.5 billion in 2020,2021, an increase of $1.2$3.0 billion compared with 2019,2020, primarily due to: a net increase in cash collateral receivedpaid, which is a standard market practice to minimize derivative counterparty exposures, and settlements paid from counterpartieson derivative contracts (components of All other operating activities) of $1.7 billion in 2021, compared with collateral and settlements received on derivative contracts of $0.9$1.4 billion and a general increase in cash generated from earnings (loss) from continuing operations.2020.
GE Capital cash used forfrom investing activities was $0.1$1.2 billion in 2020,2021, an increase of $3.9$0.5 billion compared with 2019,2020, primarily due to: lowerhigher net collections of financing receivables of $2.2$1.1 billion partially offset by a decrease in cash related to our current receivables and an increasesupply chain finance programs with GE Industrial of net purchases of investment securities of $1.7$0.6 billion.
GE Capital cash used for financing activities was $6.4$1.4 billion in 2020, an increase2021, a decrease of $2.9$5.1 billion compared with 2019,2020, primarily due to: higherlower net repayments of borrowings of $2.8$4.8 billion and higherlower cash settlements on derivatives hedging foreign currency debt of $0.2$0.3 billion.
INTERCOMPANY TRANSACTIONS BETWEEN GE AND GE CAPITAL.CAPITAL CASH FLOWS FROM DISCONTINUED OPERATIONS. Transactions between related companies are made on arm's length terms and are reported in the GE and GE Capital columnscash from operating activities relates primarily to cash generated from earnings (loss) from discontinued operations in our GECAS business. GE Capital cash from investing activities increased by $0.2 billion primarily due to higher net collections of our financial statements, which we believe provide useful supplemental information to our consolidated financial statements. See Note 20 to the consolidated financial statements for further information.financing receivables of $0.3 billion.
*Non-GAAP Financial Measure
GE INDUSTRIAL WORKING CAPITAL TRANSACTIONS. Sales of Receivables. In order to manage short-term liquidity and credit exposure, GE Industrial may sell current customer receivables to GE Capital and other third parties. These transactions are made on arm's lengtharms-length terms and any discount related to time value of money is recognized within the respective GE Industrial business in the period these receivables were sold to GE Capital or third parties. See Note 4 to the consolidated financial statements for further information.
Supply Chain Finance Programs. GE Industrial facilitates voluntary supply chain finance programs with third parties, which provide participating GE Industrial suppliers the opportunity to sell their GE Industrial receivables to third parties at the sole discretion of both the suppliers and the third parties.
At March 31, 20202021 and December 31, 2019,2020, included in GE'sGE Industrial's accounts payable is $2.6was $3.0 billion and $2.4$2.9 billion, respectively, of supplier invoices that are subject to the third-party programs. Total GE Industrial supplier invoices paid through these third-party programs were $1.1$1.6 billion and $0.1$1.1 billion for the three months ended March 31, 20202021 and 2019,2020, respectively.
Previously, GE Capital operated a supply chain finance program for suppliers to GE's Industrial businesses. The remaining GE Industrial liability associated with the funded participation in the GE Capital program is presented as accounts payable and amounted to $1.3 billion and $2.1 billionwas insignificant at March 31, 20202021.
INTERCOMPANY TRANSACTIONS BETWEEN GE INDUSTRIAL AND GE CAPITAL. Transactions between related companies are made on arms-length terms and December 31, 2019, respectively.are reported in the GE Industrial and GE Capital columns of our financial statements, which we believe provide useful supplemental information to our consolidated financial statements. See Note 22 for further information.
GE Capital Finance Transactions. During the three months ended March 31, 20202021 and 2019,2020, GE Capital acquired from third parties three aircraft with a list price totaling $0.2 billion and five aircraft with a list price totaling $0.6 billion and 13 aircraft with a list price totaling $1.9 billion, respectively, that will be leased to others and are powered by engines manufactured by GE Aviation and affiliates. GE Capital also made no payments to GE Aviation and affiliates related to spare engines and engine parts of $0.1 billionduring the three months ended March 31, 2021 and $0.1 billion which included $0.1 billion and an insignificant amount to CFM International during the three months ended March 31, 2020, and 2019, respectively.which included $0.1 billion to CFM International. Additionally, GE Capital had $2.1$2.0 billion and $2.0$2.1 billion of net book value of engines, originally manufactured by GE Aviation and affiliates and subsequently leased back to GE Aviation and affiliates at March 31, 20202021 and December 31, 2019,2020, respectively.
Also, during the three months ended March 31, 2021 and 2020, and 2019, GE Industrial recognized equipment revenues of $0.5$0.4 billion and $0.2$0.5 billion, respectively, from customers within our Power and Renewable Energy segments in which GE Capital is an investee or is committed to be an investee in the underlying projects. At March 31, 2021, GE Capital had funded related investments of $0.1 billion.
For certain of these investments, in order to meet its underwriting criteria, GE Capital may obtain a direct guarantee from GE Industrial related to the performance of the third party. GE Industrial guarantees include direct performance or payment guarantees, return on investment guarantees and asset value guarantees. As of March 31, 2020,2021, GE Industrial had outstanding guarantees to GE Capital on $1.0$0.8 billion of funded exposure and $0.8 billion ofan insignificant amount on unfunded commitments, which included guarantees issued by industrial businesses. The recorded contingent liability for these guarantees was insignificant as of March 31, 20202021 and is based on individual transaction level defaults, losses and/or returns.
*Non-GAAP Financial Measure
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MD&A | CRITICAL ACCOUNTING ESTIMATES |
CRITICAL ACCOUNTING ESTIMATES
ESTIMATES.Please refer to the Critical Accounting Estimates and Other Items sections within MD&A and Note 1 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2019,2020 for a further discussion of our accounting policies and critical accounting estimates. COVID-19 related market events may have an effect on our Insurance business and pension assumptions.
INSURANCE AND INVESTMENT CONTRACTS. At March 31, 2020, our insurance liabilities and annuity benefits of $38.2 billion are primarily supported by investment securities of $37.6 billion and commercial mortgage loans of $1.9 billion, net of their allowance for losses, respectively.
Future policy benefit reserves. Future changes in the discount rate assumption used in our annual premium deficiency testing performed in the third quarter across our run-off insurance portfolio may be required. A lower discount rate, holding all other assumptions constant, will result in an increase in our future policy benefit reserves on a GAAP basis. Furthermore, a lower discount rate may be required under statutory asset adequacy testing that is relevant for determining the amount of capital to be contributed to our insurance subsidiaries.
Our GAAP discount rate is based upon the actual yields on our investment portfolio and our forecasted reinvestment rates, which comprise the future rates at which we expect to invest proceeds from investment maturities, net of operating cash flows, and projected future capital contributions. Although the movement in market rates impacts the reinvestment rate, it does not materially impact the actual yield on our existing investments. While credit spreads on fixed-income securities widened during the quarter, benchmark interest rates in the U.S. have been lowered which may impact other discount rate assumptions, including the period over which the reinvestment rate increases to the expected long-term average investment yield and the expected long-term average investment yield (including changes to expected default rates). Furthermore, expected returns on higher yielding asset classes may change.
For further information on our overall discount rate, reinvestment rate and mortality assumptions, refer to the GAAP Reserve Sensitivities included in Other Items within MD&A of our Annual Report on Form 10-K for the year ended December 31, 2019.
Investments. Our investment security portfolio may experience higher gross unrealized losses, downgrades in credit ratings and higher default rates and result in an increase to the allowance for losses on assets supporting our insurance liabilities. See Note 3 to the consolidated financial statements for further information about our investment securities.
PENSION ASSUMPTIONS.As discussed in Critical Accounting Estimates in our Annual Report on Form 10-K for the year ended December 31, 2019, our defined benefit pension plans are accounted for on an actuarial basis and measured annually as of December 31. Accounting for defined benefit plans requires the selection of certain assumptions and actual results in any given year will often differ from actuarial assumptions because of economic or other factors.
During the first quarter of 2020, financial markets and interest rates have experienced volatility, which could result in a change in the discount rate used to measure our pension benefit obligation or our pension assets may realize less than our expected long-term rate of return, either of which could result in a material change in the funded status of our pension plans when we measure them at December 31, 2020. Our discount rate is determined using the weighted average of market-observed yields for high-quality fixed income securities with maturities that correspond to the payments of benefits and while benchmark interest rates in the U.S. have been lowered credit spreads on high-quality fixed incomes securities have widened.
As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, changes in key assumptions for our principal pension plans would have the following effects.
Discount rate - A 25 basis point decrease in the discount rate would increase pension cost in the following year by about $0.2 billion and would increase the pension benefit obligation by about $2.3 billion.
Expected return on assets - A 50 basis point decrease in the expected return on assets would increase pension cost in the following year by about $0.3 billion.
OTHER ITEMS
NEW ACCOUNTING STANDARDS. The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements tonew guidance on accounting for long-duration insurance contracts that is effective January 1, 2023. Early adoption is permitted, and if elected, the Accounting for Long-Duration Contracts with an effectivetransition date for periodscan be either the beginning after December 31, 2021, with an election to adopt early.of the prior period or the earliest prior period presented. We are evaluating the effect of the standardnew guidance on our consolidated financial statements and anticipate that its adoption will significantly change the accounting for measurements of our long-duration insurance liabilities. The ASUnew guidance requires cash flow assumptions used in the measurement of various insurance liabilities to be reviewed at least annually and updated if actual experience or other evidence indicates previous assumptions need to be revised with any required changes recorded in earnings. Under the current accounting guidance, the discount rate is based on expected investment yields, while under the ASUnew guidance the discount rate will be equivalent to the upper-medium grade (i.e., single A) fixed-income instrument yield reflecting the duration characteristics of the liability and is required to be updated in each reporting period with changes recorded in other comprehensive income. In measuring the insurance liabilities under the new standard,guidance, contracts shall not be grouped together from different issue years. These changes result in the elimination of premium deficiency testing and shadow adjustments. While we continue to evaluate the effect of the standardnew guidance on our ongoing financial reporting, we anticipate that theits adoption of the ASU will materially affect our financial statements. As the ASUnew guidance is only applicable to the measurements of our long-duration insurance liabilities under GAAP, it will not affect the accounting for our insurance reserves or the levels of capital and surplus under statutory accounting practices.
20202021 1Q FORM 10-Q 2318
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MD&A | NON-GAAP FINANCIAL MEASURES |
NON-GAAP FINANCIAL MEASURES
MEASURES.We believe that presenting non-GAAP financial measures provides management and investors useful measures to evaluate performance and trends of the total company and its businesses. This includes adjustments in recent periods to GAAP financial measures to increase period-to-period comparability following actions to strengthen our overall financial position and how we manage our business.
In addition, management recognizes that certain non-GAAP terms may be interpreted differently by other companies under different circumstances. In various sections of this report we have made reference to the following non-GAAP financial measures in describing our (1) revenues, specifically GE Industrial organic revenues by segment; BioPharma organic revenues, GE Industrial organic revenues, and GE Industrial equipment and services organic revenues, (2) profit, specifically GE Industrial organic profit and profit margin by segment; BioPharma organic profit and profit margin, Adjusted GE Industrial profit and profit margin (excluding certain items); Adjusted GE Industrial organic profit and profit margin; Adjusted earnings (loss); and Adjusted earnings (loss) per share (EPS), (3) cash flows, specifically GE Industrial free cash flows (FCF), and (4) debt balances, specifically GE Industrial net debt.
The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow.
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GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) |
| | Revenues | | Segment profit (loss) | | Profit margin |
Three months ended March 31 (In millions) | | 2020 |
| | 2019 |
| | V% |
| | 2020 |
| | 2019 |
| | V% |
| | 2020 |
| | 2019 |
| V pts |
| | | | | | | | | | | | | | | | | |
Power (GAAP) | | $ | 4,025 |
| | $ | 4,617 |
| | (13 | )% | | $ | (129 | ) | | $ | 110 |
| | U |
| | (3.2 | )% | | 2.4 | % | (5.6)pts |
Less: acquisitions | | 16 |
| | — |
| | | | 2 |
| | — |
| | | | | | | |
Less: business dispositions | | 15 |
| | 35 |
| | | | 2 |
| | — |
| | | | | | | |
Less: foreign currency effect | | (46 | ) | | — |
| | | | 2 |
| | — |
| | | | | | | |
Power organic (Non-GAAP) | | $ | 4,040 |
| | $ | 4,583 |
| | (12 | )% | | $ | (135 | ) | | $ | 110 |
| | U |
| | (3.3 | )% | | 2.4 | % | (5.7)pts |
| | | | | | | | | | | | | | | | | |
Renewable Energy (GAAP) | | $ | 3,194 |
| | $ | 2,538 |
| | 26 | % | | $ | (302 | ) | | $ | (187 | ) | | (61 | )% | | (9.5 | )% | | (7.4 | )% | (2.1)pts |
Less: acquisitions | | — |
| | — |
| | | | — |
| | — |
| | | | | | | |
Less: business dispositions | | — |
| | — |
| | | | — |
| | — |
| | | | | | | |
Less: foreign currency effect | | (64 | ) | | — |
| | | | 7 |
| | — |
| | | | | | | |
Renewable Energy organic (Non-GAAP) | | $ | 3,258 |
| | $ | 2,538 |
| | 28 | % | | $ | (310 | ) | | $ | (187 | ) | | (66 | )% | | (9.5 | )% | | (7.4 | )% | (2.1)pts |
| | | | | | | | | | | | | | | | | |
Aviation (GAAP) | | $ | 6,892 |
| | $ | 7,954 |
| | (13 | )% | | $ | 1,005 |
| | $ | 1,660 |
| | (39 | )% | | 14.6 | % | | 20.9 | % | (6.3)pts |
Less: acquisitions | | — |
| | — |
| | | | — |
| | — |
| | | | | | | |
Less: business dispositions | | 13 |
| | 180 |
| | | | (2 | ) | | 19 |
| | | | | | | |
Less: foreign currency effect | | (2 | ) | | — |
| | | | 4 |
| | — |
| | | | | | | |
Aviation organic (Non-GAAP) | | $ | 6,882 |
| | $ | 7,774 |
| | (11 | )% | | $ | 1,003 |
| | $ | 1,641 |
| | (39 | )% | | 14.6 | % | | 21.1 | % | (6.5)pts |
| | | | | | | | | | | | | | | | | |
Healthcare (GAAP) | | $ | 4,727 |
| | $ | 4,683 |
| | 1 | % | | $ | 896 |
| | $ | 781 |
| | 15 | % | | 19.0 | % | | 16.7 | % | 2.3pts |
Less: acquisitions | | 14 |
| | 21 |
| | | | — |
| | (4 | ) | | | | | | | |
Less: business dispositions | | — |
| | 3 |
| | | | — |
| | (32 | ) | | | | | | | |
Less: foreign currency effect | | (52 | ) | | — |
| | | | (5 | ) | | — |
| | | | | | | |
Healthcare organic (Non-GAAP) | | $ | 4,765 |
| | $ | 4,659 |
| | 2 | % | | $ | 901 |
| | $ | 817 |
| | 10 | % | | 18.9 | % | | 17.5 | % | 1.4pts |
| | | | | | | | | | | | | | | | | |
Less: BioPharma organic (Non-GAAP) | | 839 |
| | 762 |
| | | | 380 |
| | 311 |
| | | | | | | |
Healthcare excluding BioPharma organic (Non-GAAP) | | $ | 3,926 |
| | $ | 3,897 |
| | 1 | % | | $ | 521 |
| | $ | 506 |
| | 3 | % | | 13.3 | % | | 13.0 | % | 0.3pts |
| | | | | | | | | | | | | | | | | |
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. We also believe presenting organic revenues* and organic profit* separately for our industrial businesses provides management and investors with useful information about the trends of our industrial businesses and enables a more direct comparison to other non-financial companies. |
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BIOPHARMA ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN (NON-GAAP) |
| | Revenues | | Segment profit (loss) | | Profit margin |
Three months ended March 31 (In millions) | | 2020 |
| | 2019 |
| | V% |
| | 2020 |
| | 2019 |
| | V% |
| | 2020 |
| | 2019 |
| V pts |
|
| | | | | | | | | | | | | | | | | |
BioPharma (GAAP) | | $ | 830 |
| | $ | 765 |
| | 9 | % | | $ | 382 |
| | $ | 312 |
| | 22 | % | | 46.0 | % | | 40.8 | % | 5.2 | pts |
Less: acquisitions | | — |
| | — |
| | | | — |
| | — |
| | | | | | | |
Less: business dispositions | | — |
| | 3 |
| | | | — |
| | 1 |
| | | | | | | |
Less: foreign currency effect | | (9 | ) | | — |
| | | | 2 |
| | — |
| | | | | | | |
BioPharma organic (Non-GAAP) | | $ | 839 |
| | $ | 762 |
| | 10 | % | | $ | 380 |
| | $ | 311 |
| | 22 | % | | 45.3 | % | | 40.8 | % | 4.5 | pts |
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) |
| | Revenues | | Segment profit (loss) | | Profit margin |
Three months ended March 31 | | 2021 | | 2020 | | V% | | 2021 | | 2020 | | V% | | 2021 | | 2020 | V pts |
Power (GAAP) | | $ | 3,921 | | | $ | 4,025 | | | (3) | % | | $ | (87) | | | $ | (131) | | | 34 | % | | (2.2) | % | | (3.3) | % | 1.1pts |
Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
Less: business dispositions | | — | | | 15 | | | | | — | | | 2 | | | | | | | | |
Less: foreign currency effect | | 63 | | | — | | | | | (1) | | | — | | | | | | | | |
Power organic (Non-GAAP) | | $ | 3,858 | | | $ | 4,009 | | | (4) | % | | $ | (86) | | | $ | (133) | | | 35 | % | | (2.2) | % | | (3.3) | % | 1.1pts |
| | | | | | | | | | | | | | | | | |
Renewable Energy (GAAP) | | $ | 3,248 | | | $ | 3,194 | | | 2 | % | | $ | (234) | | | $ | (327) | | | 28 | % | | (7.2) | % | | (10.2) | % | 3.0pts |
Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
Less: business dispositions | | — | | | 24 | | | | | — | | | (4) | | | | | | | | |
Less: foreign currency effect | | 90 | | | — | | | | | (10) | | | — | | | | | | | | |
Renewable Energy organic (Non-GAAP) | | $ | 3,157 | | | $ | 3,169 | | | — | % | | $ | (224) | | | $ | (323) | | | 31 | % | | (7.1) | % | | (10.2) | % | 3.1pts |
| | | | | | | | | | | | | | | | | |
Aviation (GAAP) | | $ | 4,992 | | | $ | 6,892 | | | (28) | % | | $ | 641 | | | $ | 1,003 | | | (36) | % | | 12.8 | % | | 14.6 | % | (1.8)pts |
Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
Less: business dispositions | | — | | | 25 | | | | | — | | | (17) | | | | | | | | |
Less: foreign currency effect | | 10 | | | — | | | | | — | | | — | | | | | | | | |
Aviation organic (Non-GAAP) | | $ | 4,982 | | | $ | 6,868 | | | (27) | % | | $ | 641 | | | $ | 1,020 | | | (37) | % | | 12.9 | % | | 14.9 | % | (2.0)pts |
| | | | | | | | | | | | | | | | | |
Healthcare (GAAP) | | $ | 4,308 | | | $ | 4,727 | | | (9) | % | | $ | 698 | | | $ | 867 | | | (19) | % | | 16.2 | % | | 18.3 | % | (2.1)pts |
Less: acquisitions | | 18 | | | (21) | | | | | 8 | | | (6) | | | | | | | | |
Less: business dispositions | | — | | | 865 | | | | | — | | | 380 | | | | | | | | |
Less: foreign currency effect | | 120 | | | — | | | | | 48 | | | — | | | | | | | | |
Healthcare organic (Non-GAAP) | | $ | 4,170 | | | $ | 3,884 | | | 7 | % | | $ | 643 | | | $ | 493 | | | 30 | % | | 15.4 | % | | 12.7 | % | 2.7pts |
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|
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. We also believe presenting organic revenues* and organic profit* separately for our industrial businesses provides management and investors with useful information about the trends of our industrial businesses and enables a more direct comparison to other non-financial companies. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
|
| | | | | | | | |
GE INDUSTRIAL ORGANIC REVENUES (NON-GAAP) | Three months ended March 31 |
(In millions) | 2020 |
| 2019 |
| V% |
|
| | | |
GE Industrial revenues (GAAP) | $ | 18,844 |
| $ | 20,324 |
| (7 | )% |
Adjustments: | | | |
Less: acquisitions | 42 |
| 21 |
| |
Less: business dispositions(a) | 28 |
| 380 |
| |
Less: foreign currency effect(b) | (166 | ) | — |
| |
GE Industrial organic revenues (Non-GAAP) | $ | 18,941 |
| $ | 19,923 |
| (5 | )% |
| | | |
Less: BioPharma organic revenue (Non-GAAP) | 839 |
| 762 |
| |
GE Industrial organic revenues excluding BioPharma organic revenues (Non-GAAP) | $ | 18,101 |
| $ | 19,162 |
| (6 | )% |
| | | |
(a) Dispositions impact in 2019 primarily related to our Aviation business including the Middle River and Hamble site dispositions, with revenues of $125 million and $55 million, respectively, and Current within our Corporate segment, with revenues of $155 million. (b) Foreign currency impact primarily driven by U.S. Dollar appreciation against Euro, Brazilian Real and Chinese Yen. |
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
|
| | | | | | | | | | | | | | | | | |
GE INDUSTRIAL EQUIPMENT AND SERVICES ORGANIC | Three months ended March 31 |
REVENUES (NON-GAAP) | Equipment | | Services |
(In millions) | 2020 |
| 2019 |
| V% |
| | 2020 |
| 2019 |
| V% |
|
| | | | | | | |
GE Industrial revenues (GAAP) | $ | 9,177 |
| $ | 9,608 |
| (4 | )% | | $ | 9,668 |
| $ | 10,716 |
| (10 | )% |
Adjustments: | | | | | | | |
Less: acquisitions | 11 |
| — |
| | | 31 |
| 21 |
| |
Less: business dispositions | 11 |
| 314 |
| | | 18 |
| 66 |
| |
Less: foreign currency effect | (111 | ) | — |
| | | (55 | ) | — |
| |
GE Industrial organic revenues (Non-GAAP) | $ | 9,266 |
| $ | 9,294 |
| — | % | | $ | 9,674 |
| $ | 10,629 |
| (9 | )% |
| | | | | | | |
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
|
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ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGIN | Three months ended March 31 |
(EXCLUDING CERTAIN ITEMS) (NON-GAAP) (In millions) | 2020 |
| 2019 |
|
| | |
GE total revenues (GAAP) | $ | 18,844 |
| $ | 20,324 |
|
| | |
Costs | | |
GE total costs and expenses (GAAP) | $ | 19,133 |
| $ | 20,101 |
|
Less: GE interest and other financial charges | 370 |
| 520 |
|
Less: non-operating benefit costs | 616 |
| 564 |
|
Less: restructuring & other(a) | 207 |
| 267 |
|
Add: noncontrolling interests | 36 |
| 23 |
|
Adjusted GE Industrial costs (Non-GAAP) | $ | 17,976 |
| $ | 18,773 |
|
| | |
Other Income | | |
GE other income (GAAP) | $ | 6,874 |
| $ | 852 |
|
Less: unrealized gains (losses)(b) | (5,794 | ) | 13 |
|
Less: restructuring & other | — |
| 9 |
|
Less: gains (losses) and impairments for disposed or held for sale businesses(b) | 12,439 |
| 365 |
|
Adjusted GE other income (Non-GAAP) | $ | 228 |
| $ | 465 |
|
| | |
GE Industrial profit (GAAP) | $ | 6,585 |
| $ | 1,076 |
|
GE Industrial profit margin (GAAP) | 34.9 | % | 5.3 | % |
| | |
Adjusted GE Industrial profit (Non-GAAP) | $ | 1,096 |
| $ | 2,017 |
|
Adjusted GE Industrial profit margin (Non-GAAP) | 5.8 | % | 9.9 | % |
| | |
(a) See the Corporate Items and Eliminations - Restructuring section for further information. |
(b) See the Corporate Items and Eliminations section for further information. |
We believe these measures are meaningful because they increase the comparability of period-to-period results. |
| |
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
|
| | | | | | | | |
ADJUSTED GE INDUSTRIAL ORGANIC PROFIT | Three months ended March 31 |
(NON-GAAP) (In millions) | 2020 |
| 2019 |
| V% |
| | | |
Adjusted GE Industrial profit (Non-GAAP) | $ | 1,096 |
| $ | 2,017 |
| (46) | % |
Adjustments: | | | |
Less: acquisitions | 2 |
| (4 | ) |
|
|
Less: business dispositions | (1 | ) | (21 | ) |
|
|
Less: foreign currency effect | 11 |
| — |
|
|
|
Adjusted GE Industrial organic profit (Non-GAAP) | $ | 1,084 |
| $ | 2,041 |
| (47) | % |
| | | |
Adjusted GE Industrial profit margin (Non-GAAP) | 5.8 | % | 9.9 | % | (410) bps |
|
Adjusted GE Industrial organic profit margin (Non-GAAP) | 5.7 | % | 10.2 | % | (450) bps |
|
| | | |
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
|
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ADJUSTED EARNINGS (LOSS) (NON-GAAP) | Three months ended March 31 |
(In millions) | 2020 |
| 2019 |
| V% |
|
| | | |
Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | $ | 6,332 |
| $ | 920 |
| F |
|
Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (30 | ) | 135 |
| |
GE Industrial earnings (loss) (Non-GAAP) | 6,362 |
| 785 |
| F |
|
Non-operating benefits costs (pre-tax) (GAAP) | (616 | ) | (564 | ) | |
Tax effect on non-operating benefit costs | 129 |
| 118 |
| |
Less: non-operating benefit costs (net of tax) | (487 | ) | (446 | ) | |
Gains (losses) and impairments for disposed or held for sale businesses (pre-tax)(a) | 12,439 |
| 365 |
| |
Tax effect on gains (losses) and impairments for disposed or held for sale businesses | (1,265 | ) | 35 |
| |
Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | 11,174 |
| 400 |
| |
Restructuring & other (pre-tax)(b) | (207 | ) | (258 | ) | |
Tax effect on restructuring & other | 43 |
| 53 |
| |
Less: restructuring & other (net of tax) | (164 | ) | (205 | ) | |
Unrealized gains (losses)(a) | (5,794 | ) | 13 |
| |
Tax on unrealized gains (losses) | 1,096 |
| (3 | ) | |
Less: unrealized gains (losses) | (4,697 | ) | 10 |
| |
BioPharma deal expense (pre-tax) | — |
| — |
| |
Tax on BioPharma deal expense | — |
| (14 | ) | |
Less: BioPharma deal expense (net of tax) | — |
| (14 | ) | |
Less: GE Industrial U.S. tax reform enactment adjustment | — |
| (101 | ) | |
Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 536 |
| $ | 1,140 |
| (53 | )% |
| | | |
GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (30 | ) | 135 |
| U |
|
Less: GE Capital U.S. tax reform enactment adjustment | — |
| 99 |
| |
Less: GE Capital tax benefit related to BioPharma sale | 88 |
| — |
| |
Adjusted GE Capital earnings (loss) (Non-GAAP) | $ | (118 | ) | $ | 36 |
| U |
|
| | | |
Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 536 |
| $ | 1,140 |
| (53 | )% |
Add: Adjusted GE Capital earnings (loss) (Non-GAAP) | (118 | ) | 36 |
| U |
|
Adjusted earnings (loss) (Non-GAAP) | $ | 418 |
| $ | 1,177 |
| (64 | )% |
| | | |
(a) See the Corporate Items and Eliminations section for further information. |
(b) See the Corporate Items and Eliminations - Restructuring section for further information. |
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MD&A | NON-GAAP FINANCIAL MEASURES | | | | | | | | | | | | | | | | |
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GE INDUSTRIAL ORGANIC REVENUES (NON-GAAP) | Three months ended March 31 | | |
| 2021 | 2020 | V% | | | | |
GE Industrial revenues (GAAP) | $ | 16,329 | | $ | 18,844 | | (13) | % | | | | |
Less: acquisitions | 18 | | (21) | | | | | | |
Less: business dispositions(a) | — | | 1,095 | | | | | | |
Less: foreign currency effect(b) | 288 | | — | | | | | | |
GE Industrial organic revenues (Non-GAAP) | $ | 16,023 | | $ | 17,770 | | (10) | % | | | | |
| | | | | | | |
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| | | | | | | |
(a) Dispositions impact in 2020 primarily related to our BioPharma business, with revenues of $830 million. (b) Foreign currency impact in 2021 was primarily driven by U.S. Dollar appreciation against euro, Brazilian real, and Chinese renminbi. |
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
|
| | | | | | | | |
ADJUSTED EARNINGS (LOSS) PER SHARE (EPS) | Three months ended March 31 |
(NON-GAAP) | 2020 |
| 2019 |
| V% |
|
| | | |
Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | 0.72 |
| $ | 0.10 |
| F |
|
Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | — |
| 0.02 |
| |
GE Industrial EPS (Non-GAAP) | 0.73 |
| 0.09 |
| F |
|
Non-operating benefits costs (pre-tax) (GAAP) | (0.07 | ) | (0.06 | ) | |
Tax effect on non-operating benefit costs | 0.01 |
| 0.01 |
| |
Less: non-operating benefit costs (net of tax) | (0.06 | ) | (0.05 | ) | |
Gains (losses) and impairments for disposed or held for sale businesses (pre-tax)(a) | 1.42 |
| 0.04 |
| |
Tax effect on gains (losses) and impairments for disposed or held for sale businesses | (0.14 | ) | — |
| |
Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | 1.28 |
| 0.04 |
| |
Restructuring & other (pre-tax)(b) | (0.02 | ) | (0.03 | ) | |
Tax effect on restructuring & other | — |
| 0.01 |
| |
Less: restructuring & other (net of tax) | (0.02 | ) | (0.02 | ) | |
Unrealized gains (losses)(a) | (0.66 | ) | — |
| |
Tax on unrealized gains (losses) | 0.13 |
| — |
| |
Less: unrealized gains (losses) | (0.54 | ) | — |
| |
BioPharma deal expense (pre-tax) | — |
| — |
| |
Tax on BioPharma deal expense | — |
| — |
| |
Less: BioPharma deal expense (net of tax) | — |
| — |
| |
Less: GE Industrial U.S. tax reform enactment adjustment | — |
| (0.01 | ) | |
Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.06 |
| $ | 0.13 |
| (54 | )% |
| | | |
GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | — |
| 0.02 |
| (100 | )% |
Less: GE Capital U.S. tax reform enactment adjustment | — |
| 0.01 |
| |
Less: GE Capital tax benefit related to BioPharma sale | 0.01 |
| — |
| |
Adjusted GE Capital EPS (Non-GAAP) | $ | (0.01 | ) | $ | — |
| U |
|
| | | |
Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.06 |
| $ | 0.13 |
| (54 | )% |
Add: Adjusted GE Capital EPS (Non-GAAP) | (0.01 | ) | — |
| U |
|
Adjusted EPS (Non-GAAP) | $ | 0.05 |
| $ | 0.13 |
| (62 | )% |
| | | |
(a) See the Corporate Items and Eliminations section for further information. |
(b) See the Corporate Items and Eliminations - Restructuring section for further information. |
Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total. |
The service cost for our pension and other benefit plans are included in adjusted earnings*, which represents the ongoing cost of providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance. We believe the retained costs in Adjusted earnings* and Adjusted EPS* provides management and investors a useful measure to evaluate the performance of the total company, and increases period-to-period comparability. We also use Adjusted EPS* as a performance metric at the company level for our annual executive incentive plan for 2020. We believe presenting Adjusted Industrial earnings* and Adjusted Industrial EPS* separately for our financial services businesses also provides management and investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company. |
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GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP) | Three months ended March 31 |
(In millions) | 2020 |
| 2019 |
|
| | |
GE CFOA (GAAP) | $ | (1,662 | ) | $ | (607 | ) |
Add: gross additions to property, plant and equipment | (504 | ) | (552 | ) |
Add: gross additions to internal-use software | (58 | ) | (66 | ) |
Less: taxes related to business sales | (17 | ) | (8 | ) |
GE Industrial free cash flows (Non-GAAP) | $ | (2,207 | ) | $ | (1,216 | ) |
| | |
We believe investors may find it useful to compare GE's Industrial free cash flows* performance without the effects of cash used for taxes related to business sales. We believe this measure will better allow management and investors to evaluate the capacity of our industrial operations to generate free cash flows. |
*Non-GAAP Financial Measure
20202021 1Q FORM 10-Q 2719
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GE INDUSTRIAL EQUIPMENT AND SERVICES | Three months ended March 31 | | |
ORGANIC REVENUES (NON-GAAP) | 2021 | 2020 | V% | | | | |
GE Industrial equipment revenues (GAAP) | $ | 7,971 | | $ | 9,097 | | (12) | % | | | | |
Less: acquisitions | — | | — | | | | | | |
Less: business dispositions | — | | 948 | | | | | | |
Less: foreign currency effect | 189 | | — | | | | | | |
GE Industrial equipment organic revenues (Non-GAAP) | $ | 7,782 | | $ | 8,149 | | (5) | % | | | | |
| | | | | | | |
GE Industrial services revenues (GAAP) | $ | 8,358 | | $ | 9,748 | | (14) | % | | | | |
| | | | | | | |
Less: acquisitions | 18 | | (21) | | | | | | |
Less: business dispositions | — | | 147 | | | | | | |
Less: foreign currency effect | 99 | | — | | | | | | |
GE Industrial services organic revenues (Non-GAAP) | $ | 8,241 | | $ | 9,622 | | (14) | % | | | | |
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We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
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ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGIN | Three months ended March 31 | | |
(EXCLUDING CERTAIN ITEMS) (NON-GAAP) | 2021 | 2020 | V% | | | |
GE Industrial total revenues (GAAP) | $ | 16,329 | | $ | 18,844 | | (13) | % | | | |
| | | | | | |
Costs | | | | | | |
GE Industrial total costs and expenses (GAAP) | $ | 16,574 | | $ | 19,133 | | (13) | % | | | |
Less: GE Industrial interest and other financial charges | 268 | | 370 | | | | | |
Less: non-operating benefit costs | 433 | | 616 | | | | | |
Less: restructuring & other(a) | 113 | | 143 | | | | | |
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Add: noncontrolling interests | 7 | | 36 | | | | | |
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Adjusted GE Industrial costs (Non-GAAP) | $ | 15,767 | | $ | 18,040 | | (13) | % | | | |
| | | | | | |
Other Income | | | | | | |
GE Industrial other income (GAAP) | $ | 623 | | $ | 6,874 | | (91) | % | | | |
Less: unrealized gains (losses)(a) | 509 | | (5,794) | | | | | |
Less: restructuring & other | 7 | | — | | | | | |
Less: gains (losses) and impairments for disposed or held for sale businesses(a) | (159) | | 12,439 | | | | | |
Adjusted GE Industrial other income (Non-GAAP) | $ | 266 | | $ | 228 | | 17 | % | | | |
| | | | | | |
GE Industrial profit (GAAP) | $ | 378 | | $ | 6,585 | | (94) | % | | | |
GE Industrial profit margin (GAAP) | 2.3 | % | 34.9 | % | (32.6)pts | | | |
| | | | | | |
Adjusted GE Industrial profit (Non-GAAP) | $ | 828 | | $ | 1,032 | | (20) | % | | | |
Adjusted GE Industrial profit margin (Non-GAAP) | 5.1 | % | 5.5 | % | (0.4)pts | | | |
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(a) See the Corporate Items and Eliminations section for further information. |
We believe that adjusting industrial profit to exclude the effects of items that are not closely associated with ongoing operations provides management and investors with a meaningful measure that increases the period-to-period comparability. Gains (losses), unrealized gains (losses) and restructuring and other items are impacted by the timing and magnitude of gains associated with dispositions, and the timing and magnitude of costs associated with restructuring and other activities. |
| | | | | | | | | | | | | | | |
ADJUSTED GE INDUSTRIAL ORGANIC PROFIT | Three months ended March 31 | | |
(NON-GAAP) | 2021 | 2020 | V% | | | | |
Adjusted GE Industrial profit (Non-GAAP) | $ | 828 | | $ | 1,032 | | (20) | % | | | | |
Less: acquisitions | 8 | | 9 | | | | | | |
Less: business dispositions | — | | 366 | | | | | | |
Less: foreign currency effect | 43 | | — | | | | | | |
Adjusted GE Industrial organic profit (Non-GAAP) | $ | 777 | | $ | 657 | | 18 | % | | | | |
| | | | | | | |
Adjusted GE Industrial profit margin (Non-GAAP) | 5.1 | % | 5.5 | % | (0.4)pts | | | | |
Adjusted GE Industrial organic profit margin (Non-GAAP) | 4.8 | % | 3.7 | % | 1.1pts | | | | |
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We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
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MD&A | NON-GAAP FINANCIAL MEASURES |
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ADJUSTED EARNINGS (LOSS) (NON-GAAP) | Three months ended March 31 | | |
| 2021 | 2020 | V% | | | | |
Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(a) | $ | 18 | | $ | 6,158 | | (100) | % | | | | |
Add: Accretion of redeemable noncontrolling interests (RNCI) | 2 | | — | | | | | | |
Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (172) | | (187) | | | | | | |
GE Industrial earnings (loss) (Non-GAAP) | $ | 192 | | $ | 6,345 | | (97) | % | | | | |
Non-operating benefits costs (pre-tax) (GAAP) | (433) | | (616) | | | | | | |
Tax effect on non-operating benefit costs | 91 | | 129 | | | | | | |
Less: non-operating benefit costs (net of tax) | (342) | | (487) | | | | | | |
Gains (losses) and impairments for disposed or held for sale businesses (pre-tax)(b) | (159) | | 12,439 | | | | | | |
Tax effect on gains (losses) and impairments for disposed or held for sale businesses | 33 | | (1,265) | | | | | | |
Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | (126) | | 11,174 | | | | | | |
Restructuring & other (pre-tax)(b) | (106) | | (143) | | | | | | |
Tax effect on restructuring & other | 22 | | 30 | | | | | | |
Less: restructuring & other (net of tax) | (84) | | (114) | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
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Unrealized gains (losses) (pre-tax)(b) | 509 | | (5,794) | | | | | | |
Tax on unrealized gains (losses) | (152) | | 1,096 | | | | | | |
Less: unrealized gains (losses) (net of tax) | 357 | | (4,697) | | | | | | |
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| | | | | | | |
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Accretion of RNCI (pre-tax) | 2 | | — | | | | | | |
Tax effect on accretion of RNCI | — | | — | | | | | | |
Less: Accretion of RNCI (net of tax) | 2 | | — | | | | | | |
| | | | | | | |
Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 384 | | $ | 469 | | (18) | % | | | | |
| | | | | | | |
GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | $ | (172) | | $ | (187) | | 8 | % | | | | |
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Less: GE Capital tax benefit related to BioPharma sale | — | | 88 | | | | | | |
Less: GE Capital tax loss related to GECAS sale | (44) | | — | | | | | | |
Adjusted GE Capital earnings (loss) (Non-GAAP) | $ | (129) | | $ | (275) | | 53 | % | | | | |
| | | | | | | |
Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 384 | | $ | 469 | | (18) | % | | | | |
Add: Adjusted GE Capital earnings (loss) (Non-GAAP) | (129) | | (275) | | 53 | % | | | | |
Adjusted earnings (loss) (Non-GAAP) | $ | 256 | | $ | 194 | | 32 | % | | | | |
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(a) See Note 18 for further information. |
(b) See the Corporate Items and Eliminations section for further information. | | | | |
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GE INDUSTRIAL NET DEBT (NON-GAAP) (In millions) | March 31, 2020 |
| December 31, 2019 |
|
| | |
Total GE short- and long-term borrowings (GAAP) | $ | 48,132 |
| $ | 52,059 |
|
Less: GE Capital short- and long-term debt assumed by GE | 29,136 |
| 31,368 |
|
Add: intercompany loans from GE Capital | 12,226 |
| 12,226 |
|
Total adjusted GE borrowings | $ | 31,222 |
| $ | 32,917 |
|
Total pension and principal retiree benefit plan liabilities (pre-tax)(a) | 27,773 |
| 27,773 |
|
Less: taxes at 21% | 5,832 |
| 5,832 |
|
Total pension and principal retiree benefit plan liabilities (net of tax) | $ | 21,941 |
| $ | 21,941 |
|
GE operating lease liabilities | 3,266 |
| 3,369 |
|
GE preferred stock | 5,782 |
| 5,738 |
|
Less: 50% of GE preferred stock | 2,891 |
| 2,869 |
|
50% of preferred stock | $ | 2,891 |
| $ | 2,869 |
|
Deduction for total GE cash, cash equivalents and restricted cash | (33,810 | ) | (17,613 | ) |
Less: 25% of GE cash, cash equivalents and restricted cash | (8,453 | ) | (4,403 | ) |
Deduction for 75% of GE cash, cash equivalents and restricted cash | $ | (25,358 | ) | $ | (13,210 | ) |
Total GE Industrial net debt (Non-GAAP) | $ | 33,962 |
| $ | 47,886 |
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(a) Represents the total net deficit status of principal pension plans, other pension plans and retiree benefit plans at December 31, 2019. The funded status of our benefit plans is updated annually in the fourth quarter. |
|
In this document we use GE Industrial net debt*, which is calculated based on rating agency methodologies. We are including the calculation of GE industrial net debt* to provide investors more clarity regarding how the credit rating agencies measure GE Industrial leverage. |
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ADJUSTED EARNINGS (LOSS) PER SHARE (EPS) | Three months ended March 31 | | |
(NON-GAAP) | 2021 | 2020 | V% | | | | |
Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | — | | $ | 0.70 | | U | | | | |
Add: Accretion of redeemable noncontrolling interests (RNCI) | — | | — | | | | | | |
Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | (0.02) | | (0.02) | | | | | | |
GE Industrial EPS (Non-GAAP) | $ | 0.02 | | $ | 0.73 | | (97) | % | | | | |
Non-operating benefits costs (pre-tax) (GAAP) | (0.05) | | (0.07) | | | | | | |
Tax effect on non-operating benefit costs | 0.01 | | 0.01 | | | | | | |
Less: non-operating benefit costs (net of tax) | (0.04) | | (0.06) | | | | | | |
Gains (losses) and impairments for disposed or held for sale businesses (pre-tax) | (0.02) | | 1.42 | | | | | | |
Tax effect on gains (losses) and impairments for disposed or held for sale businesses | — | | (0.14) | | | | | | |
Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | (0.01) | | 1.28 | | | | | | |
Restructuring & other (pre-tax) | (0.01) | | (0.02) | | | | | | |
Tax effect on restructuring & other | — | | — | | | | | | |
Less: restructuring & other (net of tax) | (0.01) | | (0.01) | | | | | | |
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Unrealized gains (losses) (pre-tax) | 0.06 | | (0.66) | | | | | | |
Tax on unrealized gains (losses) | (0.02) | | 0.13 | | | | | | |
Less: unrealized gains (losses) (net of tax) | 0.04 | | (0.54) | | | | | | |
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Accretion of RNCI (pre-tax) | — | | — | | | | | | |
Tax effect on accretion of RNCI | — | | — | | | | | | |
Less: Accretion of RNCI (net of tax) | — | | — | | | | | | |
Less: GE Industrial U.S. tax reform enactment adjustment | — | | — | | | | | | |
Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.04 | | $ | 0.05 | | (20) | % | | | | |
| | | | | | | |
GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | (0.02) | | $ | (0.02) | | — | % | | | | |
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Less: GE Capital tax benefit related to BioPharma sale | — | | 0.01 | | | | | | |
Less: GE Capital tax loss related to GECAS sale | — | | — | | | | | | |
Adjusted GE Capital EPS (Non-GAAP) | $ | (0.01) | | $ | (0.03) | | 67 | % | | | | |
| | | | | | | |
Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.04 | | $ | 0.05 | | (20) | % | | | | |
Add: Adjusted GE Capital EPS (Non-GAAP) | (0.01) | | (0.03) | | 67 | % | | | | |
Adjusted EPS (Non-GAAP) | $ | 0.03 | | $ | 0.02 | | 50 | % | | | | |
Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total. |
The service cost of our pension and other benefit plans are included in adjusted earnings (loss)*, which represents the ongoing cost of providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance, and we manage these separately from the operational performance of our businesses. Gains (losses), unrealized gains (losses) and restructuring and other items are impacted by the timing and magnitude of gains associated with dispositions, and the timing and magnitude of costs associated with restructuring and other activities. We believe that the retained costs in Adjusted earnings (loss)* provides management and investors a useful measure to evaluate the performance of the total company, and increases period-to-period comparability. We believe that presenting Adjusted Industrial earnings (loss)* separately for our financial services businesses also provides management and investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company. |
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GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP) | Three months ended March 31 |
| 2021 | 2020 |
GE Industrial CFOA (GAAP) | $ | (491) | | $ | (1,662) | |
Add: gross additions to property, plant and equipment | (332) | | (504) | |
Add: gross additions to internal-use software | (23) | | (58) | |
| | |
| | |
Less: taxes related to business sales | — | | (17) | |
GE Industrial free cash flows (Non-GAAP) | $ | (845) | | $ | (2,207) | |
| | |
We believe investors may find it useful to compare GE's Industrial free cash flows* performance without the effects of cash used for taxes related to business sales. We believe this measure will better allow management and investors to evaluate the capacity of our industrial operations to generate free cash flows. |
*Non-GAAP Financial Measure
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GE INDUSTRIAL NET DEBT (NON-GAAP) | March 31, 2021 | December 31, 2020 |
Total GE Industrial short- and long-term borrowings (GAAP) | $ | 41,247 | | $ | 42,736 | |
Less: GE Capital short- and long-term debt assumed by GE Industrial | 21,538 | | 22,390 | |
Add: intercompany loans from GE Capital | 3,177 | | 3,177 | |
Total adjusted GE Industrial borrowings | $ | 22,886 | | $ | 23,523 | |
Pension and principal retiree benefit plan liabilities (pre-tax)(a) | 25,492 | | 25,492 | |
Less: taxes at 21% | 5,353 | | 5,353 | |
Pension and principal retiree benefit plan liabilities (net of tax) | $ | 20,139 | | $ | 20,139 | |
GE Industrial operating lease liabilities | 3,083 | | 3,133 | |
GE Industrial preferred stock | 5,930 | | 5,918 | |
Less: 50% of GE Industrial preferred stock | 2,965 | | 2,959 | |
50% of preferred stock | $ | 2,965 | | $ | 2,959 | |
Deduction for total GE Industrial cash, cash equivalents and restricted cash | (22,361) | | (23,209) | |
Less: 25% of GE Industrial cash, cash equivalents and restricted cash | (5,590) | | (5,802) | |
Deduction for 75% of GE Industrial cash, cash equivalents and restricted cash | $ | (16,771) | | $ | (17,407) | |
Total GE Industrial net debt (Non-GAAP) | $ | 32,302 | | $ | 32,347 | |
(a) Represents the sum of the net deficit of principal pension, other pension, and principal retiree benefit plans at December 31, 2020. The funded status of our benefit plans is updated annually in the fourth quarter. |
In this document we use GE Industrial net debt*, which is calculated based on rating agency methodologies. We are including the calculation of GE Industrial net debt* to provide investors more clarity regarding how the credit rating agencies measure GE Industrial leverage. |
CONTROLS AND PROCEDURES
PROCEDURES.Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that (i) our disclosure controls and procedures were effective as of
March 31, 2020,2021, and (ii) no change in internal control over financial reporting occurred during the quarter ended March 31, 2020,2021, that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.
OTHER FINANCIAL DATA.GE did not repurchase any equity securities during the three months ended March 31, 2021.
RISK FACTORS
FACTORS. The risk factor set forth below updates the corresponding risk factorsfactor in our Annual Report on Form 10-K for the year ended December 31, 2019. These2020. In addition to the risk factor below, you should carefully consider the risk factors discussed in our most recent Form 10-K report, which could materially affect our business, financial position and results of operations.
The global Coronavirus Disease 2019 (COVID-19) pandemic is having a material adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve. We are unable to predict the extent to which the pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives. Our operations and financial performance have been negatively impacted by the COVID-19 pandemic that has caused, and is expected to continue to cause, the global slowdown of economic activity (including the decrease in demand for a broad variety of goods and services), disruptions in global supply chains and significant volatility and disruption of financial markets. Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the pandemic’s impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. Further, the ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on travel and transport and workforce pressures); the impact of the pandemic and actions taken in response on global and regional economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subsides.
The COVID-19 pandemic has subjected our operations, financial performance and financial condition to a number of risks, including, but not limited to those discussed below:
Operations-related risks: Across all of our businesses, we are facing increased operational challenges from the need to protect employee health and safety, site shutdowns, workplace disruptions and restrictions on the movement of people, raw materials and goods, both at our own facilities and at customers and suppliers. We are also experiencing, and expect to continue experiencing, lower demand and volume for products and services, customer requests for potential payment deferrals or other contract modifications, supply chain under-liquidation, delays of deliveries and the achievement of other billing milestones, delays or cancellations of new projects and related down payments and other factors related directly and indirectly to the COVID-19 pandemic that adversely impact our businesses. We expect that the longer the period of economic and global supply chain and disruption continues, the more material the adverse impact will be on our business operations, financial performance and results of operations, and this could include additional charges, impairments and other adverse financial impacts in future periods.
*Non-GAAP Financial Measure
Customer-related risks: In particular, the interruption of regional and international air travel from COVID-19 has resulted in the loss of business and leisure traffic and is having a material adverse effect on our airlinebusiness, reputation, financial position, results of operations, cash flows and airframer customers,stock price, and they could cause our future results to be materially different than we presently anticipate.
Business portfolio - Our success depends on achieving our strategic and financial objectives, including through dispositions, acquisitions, integrations and joint ventures. Over the viability of their businesses and their demand for our services and products. Changes in passenger air travel trends arising from COVID-19 may continue to develop or persist over time and further contribute to this adverse effect. We are also observing a significant increase in the number of requests for payment deferrals, contract modifications, aircraft lease restructurings and similar actions across the aviation sector, and these trends may lead to additional charges, impairments and other adverse financial impacts at GE Aviation and GE Capital Aviation Services over time. We have depended on the strength of our Aviation business aspast several years we have been workingpursuing a variety of dispositions, including the ongoing monetization of our remaining equity ownership position in Baker Hughes, and in March 2021 we announced a new plan to improvecombine our GECAS business with AerCap. The proceeds from dispositions have been an important source of cash flow for the operationsCompany as part of our strategic and execution of other GEfinancial planning. When we seek to sell certain businesses, and strengthen the company’s balance sheet. As a result, disruption of the aviation industry, whichequity interests or assets, we may encounter difficulties in finding buyers or in market conditions that could continue for an uncertain period of time, is particularly significant for GE. Across our businesses, to varying degrees, we anticipate that some existing or potential customers will continue to delay or cancel plansprevent the accomplishment of our objectives, and declines in the values of equity interests (such as our remaining interest in Baker Hughes, or the equity ownership position that we will hold in AerCap after completing our announced plan to combine GECAS with AerCap) or other assets that we sell can diminish the cash proceeds that we realize. We may dispose of businesses or assets at a price or on terms that are less favorable than we had anticipated, or with purchase price adjustments or the exclusion of assets or liabilities that must be divested, managed or run off separately. We can also be subject to limitations in the form of regulatory or governmental approvals that may prevent certain prospective counterparties from completing transactions with us or delay us from executing transactions on our productspreferred timeline, or arising from our debt or other contractual obligations that limit our ability to complete certain transactions. For example, the planned transaction to combine GECAS with AerCap is subject to closing conditions, including regulatory approvals in multiple jurisdictions, and services,accordingly there are risks that one or more closing conditions may not be ablesatisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to fulfill prior obligationsgrant approval for the consummation of the proposed transaction, may require conditions, limitations or restrictions in connection with such approvals or that the required approval by the shareholders of AerCap may not be obtained. Moreover, dispositions have the effect of reducing the Company’s cash flow and earnings capacity, resulting in a less diversified portfolio of businesses and increasing our dependency on remaining businesses for our financial results from ongoing operations. Dispositions or other business separations also often involve continued financial involvement in the divested business, such as through continuing equity ownership, retained assets or liabilities, transition services agreements, commercial agreements, guarantees, indemnities or other current or contingent financial obligations or liabilities. Under these arrangements, performance by the divested businesses or other conditions outside our control could materially affect our future financial results. With respect to acquisitions, joint ventures and business integrations, we may not achieve expected returns and other benefits on a timely fashion,basis or at all as a result of ongoing effectschanges in strategy or separation/integration challenges related to the COVID-19 pandemicpersonnel, IT systems or other factors. Executing on all types of portfolio transactions can divert senior management time and adverse economic conditions more broadly.
Leverage- and market-related risks: The current financial market dynamics and volatility pose heightened risks to our timelines for decreasing our leverage, and we now expect to achieve our prior targets over a longer period than previously announced as we seek to maintain appropriate liquidity to compensate for lower cash flowsresources from operations or as variables impacting our leverage ratios fluctuate with extreme market volatility. For example, lower discount rates and lower asset valuations at the time of remeasurement can materially impact the calculation of long-term liabilities such as our pension deficit, GAAP insurance reserve and insurance statutory calculations.other pursuits. In addition, extreme volatility in financialconnection with acquisitions over time, we have recorded significant goodwill and commodities markets has hadother intangible assets on our balance sheet, and may continueif we are not able to have adverse impacts on other asset valuations such as the market value of our remaining equity interest in Baker Hughes andrealize the value of these assets, we may be required to incur charges relating to the investment portfolios supporting our pension and long-term insurance liabilities. Our long-term liabilities are sensitive to numerous factors and assumptions that can moveimpairment of these assets. We also participate in offsetting directions and should be considered as of the time of a relevant measurement event.
Liquidity- and funding-related risks: While we have significant sources of cash and liquidity and access to committed credit lines, a prolonged period of generating lower cash from operations could adversely affect our financial condition and the achievement of our strategic objectives. As described in the Capital Resources and Liquidity section of this report, in April 2020, Moody's and S&P changed their credit rating outlooks for GE and GE Capital from Stable to Negative, and Fitch lowered its credit ratings for GE and GE Capital. There can also be no assurance that we will not face additional credit rating downgrades as a result of weaker than anticipated performance of our businesses, slower progress in decreasing our leverage or other factors. Future downgrades could further adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets, and a significant downgrade could have an adverse commercial impact on our industrial businesses. Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding (including for receivables monetization or supply chain finance programs), which could adversely affect our business, financial position and results of operations. Although the U.S. federal and other governments have announced a number of funding programsjoint ventures with other companies or government enterprises in various markets around the world, including joint ventures where we have a lesser degree of control over the business operations, which may expose us to support businesses, our abilityadditional operational, financial, reputational, legal or willingness to access funding under such programs may be limited by regulations or other guidance, or by further change or uncertainty related to the terms of these programs.compliance risks.
As the COVID-19 pandemic continues to adversely affect our operating
*Non-GAAP Financial Measure
| | | | | | | | |
STATEMENT OF EARNINGS (LOSS) | Three months ended March 31 |
(UNAUDITED) | Consolidated |
(In millions; per-share amounts in dollars) | 2021 | 2020 |
Sales of goods | $ | 10,349 | | $ | 12,339 | |
Sales of services | 5,967 | | 6,452 | |
GE Capital revenues from services | 803 | | 699 | |
Total revenues (Note 9) | 17,118 | | 19,490 | |
| | |
Cost of goods sold | 8,679 | | 9,930 | |
Cost of services sold | 3,859 | | 4,497 | |
Selling, general and administrative expenses | 2,891 | | 3,061 | |
Research and development | 561 | | 723 | |
Interest and other financial charges | 500 | | 561 | |
Insurance losses and annuity benefits | 555 | | 636 | |
| | |
Non-operating benefit costs | 430 | | 618 | |
Other costs and expenses | 32 | | 25 | |
Total costs and expenses | 17,506 | | 20,051 | |
| | |
Other income (Note 23) | 626 | | 6,869 | |
| | |
Earnings (loss) from continuing operations before income taxes | 238 | | 6,308 | |
Benefit (provision) for income taxes | (142) | | (54) | |
Earnings (loss) from continuing operations | 97 | | 6,254 | |
Earnings (loss) from discontinued operations, net of taxes (Note 2) | (2,894) | | (21) | |
Net earnings (loss) | (2,798) | | 6,233 | |
Less net earnings (loss) attributable to noncontrolling interests | 5 | | 34 | |
Net earnings (loss) attributable to the Company | (2,802) | | 6,199 | |
Preferred stock dividends | (72) | | (43) | |
Net earnings (loss) attributable to GE common shareholders | $ | (2,874) | | $ | 6,156 | |
| | |
Amounts attributable to GE common shareholders | | |
Earnings (loss) from continuing operations | $ | 97 | | $ | 6,254 | |
Less net earnings (loss) attributable to noncontrolling interests, | | |
continuing operations | 5 | | 36 | |
Earnings (loss) from continuing operations attributable to the Company | 92 | | 6,218 | |
Preferred stock dividends | (72) | | (43) | |
Earnings (loss) from continuing operations attributable | | |
to GE common shareholders | 20 | | 6,175 | |
Earnings (loss) from discontinued operations, net of taxes | (2,894) | | (21) | |
Less net earnings (loss) attributable to | | |
noncontrolling interests, discontinued operations | 0 | | (2) | |
Net earnings (loss) attributable to GE common shareholders | $ | (2,874) | | $ | 6,156 | |
| | |
Earnings (loss) per share from continuing operations (Note 18) | | |
Diluted earnings (loss) per share | $ | 0 | | $ | 0.70 | |
Basic earnings (loss) per share | $ | 0 | | $ | 0.70 | |
| | |
Net earnings (loss) per share (Note 18) | | |
Diluted earnings (loss) per share | $ | (0.33) | | $ | 0.70 | |
Basic earnings (loss) per share | $ | (0.33) | | $ | 0.70 | |
| | |
| | |
| | | | | | | | | | | | | | | | | |
STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Three months ended March 31 |
(UNAUDITED) | GE Industrial | | GE Capital |
(In millions) | 2021 | 2020 | | 2021 | 2020 |
Sales of goods | $ | 10,349 | | $ | 12,359 | | | $ | 0 | | $ | 0 | |
Sales of services | 5,980 | | 6,486 | | | 0 | | 0 | |
GE Capital revenues from services | 0 | | 0 | | | 878 | | 837 | |
Total revenues | 16,329 | | 18,844 | | | 878 | | 837 | |
| | | | | |
Cost of goods sold | 8,679 | | 9,949 | | | 0 | | 0 | |
Cost of services sold | 3,867 | | 4,526 | | | 5 | | 5 | |
Selling, general and administrative expenses | 2,766 | | 2,949 | | | 116 | | 149 | |
Research and development | 561 | | 723 | | | 0 | | 0 | |
Interest and other financial charges | 268 | | 370 | | | 291 | | 271 | |
Insurance losses and annuity benefits | 0 | | 0 | | | 567 | | 653 | |
| | | | | |
Non-operating benefit costs | 433 | | 616 | | | (3) | | 2 | |
Other costs and expenses | 0 | | 0 | | | 42 | | 33 | |
Total costs and expenses | 16,574 | | 19,133 | | | 1,018 | | 1,113 | |
| | | | | |
Other income (Note 23) | 623 | | 6,874 | | | 0 | | 0 | |
| | | | | |
Earnings (loss) from continuing operations before income taxes | 378 | | 6,585 | | | (140) | | (277) | |
Benefit (provision) for income taxes | (148) | | (187) | | | 6 | | 133 | |
Earnings (loss) from continuing operations | 230 | | 6,398 | | | (134) | | (144) | |
Earnings (loss) from discontinued operations, net of taxes (Note 2) | 0 | | (14) | | | (2,894) | | (7) | |
Net earnings (loss) | 230 | | 6,384 | | | (3,028) | | (151) | |
Less net earnings (loss) attributable to noncontrolling interests | 7 | | 34 | | | (2) | | 0 | |
Net earnings (loss) attributable to the Company | 223 | | 6,350 | | | (3,025) | | (151) | |
Preferred stock dividends | (31) | | 0 | | | (41) | | (43) | |
Net earnings (loss) attributable to GE common shareholders | $ | 192 | | $ | 6,350 | | | $ | (3,066) | | $ | (194) | |
| | | | | |
Amounts attributable to GE common shareholders: | | | | | |
Earnings (loss) from continuing operations | $ | 230 | | $ | 6,398 | | | $ | (134) | | $ | (144) | |
Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
continuing operations | 7 | | 36 | | | (2) | | 0 | |
Earnings (loss) from continuing operations attributable to the Company | 223 | | 6,362 | | | (131) | | (144) | |
Preferred stock dividends | (31) | | 0 | | | (41) | | (43) | |
Earnings (loss) from continuing operations attributable | | | | | |
to GE common shareholders | 192 | | 6,362 | | | (172) | | (187) | |
Earnings (loss) from discontinued operations, net of taxes | 0 | | (14) | | | (2,894) | | (7) | |
Less net earnings (loss) attributable to | | | | | |
noncontrolling interests, discontinued operations | 0 | | (2) | | | 0 | | 0 | |
Net earnings (loss) attributable to GE common shareholders | $ | 192 | | $ | 6,350 | | | $ | (3,066) | | $ | (194) | |
| | | | | | | | |
STATEMENT OF FINANCIAL POSITION (UNAUDITED) | Consolidated |
(In millions, except share amounts) | March 31, 2021 | December 31, 2020 |
Cash, cash equivalents and restricted cash(a) | $ | 31,783 | | $ | 36,530 | |
Investment securities (Note 3) | 6,741 | | 7,319 | |
Current receivables (Note 4) | 15,381 | | 16,691 | |
Financing receivables – net (Note 5) | 306 | | 326 | |
Inventories, including deferred inventory costs (Note 6) | 16,530 | | 15,890 | |
Other GE Capital receivables | 1,339 | | 1,549 | |
Receivable from GE Capital | 0 | | 0 | |
Current contract assets (Note 10) | 5,821 | | 5,764 | |
All other current assets (Note 11) | 1,376 | | 1,109 | |
Assets of discontinued operations (Note 2) | 33,922 | | 0 | |
Current assets | 113,198 | | 85,180 | |
| | |
Investment securities (Note 3) | 40,786 | | 42,549 | |
Financing receivables – net (Note 5) | 0 | | 0 | |
Other GE Capital receivables | 4,634 | | 4,661 | |
Property, plant and equipment – net (Note 7) | 16,296 | | 16,699 | |
Receivable from GE Capital | 0 | | 0 | |
Goodwill (Note 8) | 25,320 | | 25,524 | |
Other intangible assets – net (Note 8) | 9,395 | | 9,671 | |
Contract and other deferred assets (Note 10) | 5,985 | | 5,888 | |
All other assets (Note 11) | 12,308 | | 11,038 | |
Deferred income taxes (Note 16) | 14,232 | | 14,253 | |
Assets of discontinued operations (Note 2) | 3,009 | | 40,749 | |
Total assets | $ | 245,164 | | $ | 256,211 | |
| | |
Short-term borrowings (Note 12) | $ | 4,468 | | $ | 4,713 | |
Short-term borrowings assumed by GE (Note 12) | 0 | | 0 | |
Accounts payable and equipment project accruals | 16,090 | | 16,458 | |
Progress collections and deferred income (Note 10) | 17,993 | | 18,371 | |
All other current liabilities (Note 15) | 14,139 | | 15,071 | |
Liabilities of discontinued operations (Note 2) | 4,991 | | 0 | |
Current liabilities | 57,681 | | 54,613 | |
| | |
Deferred income (Note 10) | 1,748 | | 1,801 | |
Long-term borrowings (Note 12) | 66,890 | | 70,189 | |
Long-term borrowings assumed by GE (Note 12) | 0 | | 0 | |
Insurance liabilities and annuity benefits (Note 13) | 39,562 | | 42,191 | |
Non-current compensation and benefits | 29,104 | | 29,677 | |
All other liabilities (Note 15) | 14,821 | | 15,484 | |
Liabilities of discontinued operations (Note 2) | 204 | | 5,182 | |
Total liabilities | 210,011 | | 219,138 | |
| | |
Preferred stock (5,939,875 shares outstanding at both March 31, 2021 and December 31, 2020) | 6 | | 6 | |
Common stock (8,778,641,000 and 8,765,493,000 shares outstanding at March 31, 2021 and December 31, 2020, respectively) | 702 | | 702 | |
Accumulated other comprehensive income (loss) – net attributable to GE | (8,893) | | (9,749) | |
Other capital | 34,042 | | 34,307 | |
Retained earnings | 89,276 | | 92,247 | |
Less common stock held in treasury | (81,548) | | (81,961) | |
Total GE shareholders’ equity | 33,585 | | 35,552 | |
Noncontrolling interests | 1,568 | | 1,522 | |
Total equity | 35,153 | | 37,073 | |
Total liabilities and equity | $ | 245,164 | | $ | 256,211 | |
(a) Excluded $1,707 million and financial results, it may also have the effect of heightening many of the other risks described in the risk factors in our Annual Report on Form 10-K for the year ended$455 million at March 31, 2021 and December 31, 2019. In particular, see the risk factors regarding “Global macro-environment,” “Supply chain,” “Leverage and borrowings,” “Liquidity” and “Economy, customers & counterparties," as updated by the information2020, respectively, in this risk factor. Refer alsoInsurance, which is subject to the Critical Accounting Estimates section of this reportregulatory restrictions. This balance is included in All other assets. See Note 11 for additional details about how COVID-19 related market events may affect our insurance business and pension assumptions. Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our operations or financial results.further information.
LEGAL PROCEEDINGS
Refer to Legal Matters and Environmental, Health and Safety Matters in Note 19 to the consolidated financial statements for information relating to legal proceedings. The information in those sections supplements and amends the discussion set forth in the corresponding sections of Note 23 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019.
| | | | | | | | | | | | | | | | | |
STATEMENT OF FINANCIAL POSITION (CONTINUED) | GE Industrial | | GE Capital |
(UNAUDITED) (In millions, except share amounts) | March 31, 2021 | December 31, 2020 | | March 31, 2021 | December 31, 2020 |
Cash, cash equivalents and restricted cash | $ | 22,361 | | $ | 23,209 | | | $ | 9,422 | | $ | 13,322 | |
Investment securities (Note 3) | 6,741 | | 7,319 | | | 0 | | 0 | |
Current receivables (Note 4) | 12,418 | | 13,442 | | | 0 | | 0 | |
Financing receivables – net (Note 5) | 0 | | 0 | | | 3,738 | | 4,172 | |
Inventories, including deferred inventory costs (Note 6) | 16,530 | | 15,890 | | | 0 | | 0 | |
Other GE Capital receivables | 0 | | 0 | | | 2,260 | | 3,280 | |
Receivable from GE Capital | 1,784 | | 2,432 | | | 0 | | 0 | |
Current contract assets (Note 10) | 5,821 | | 5,764 | | | 0 | | 0 | |
All other current assets (Note 11) | 1,062 | | 835 | | | 518 | | 543 | |
Assets of discontinued operations (Note 2) | 0 | | 0 | | | 33,922 | | 0 | |
Current assets | 66,716 | | 68,892 | | | 49,860 | | 21,317 | |
| | | | | |
Investment securities (Note 3) | 32 | | 36 | | | 40,756 | | 42,515 | |
Financing receivables – net (Note 5) | 0 | | 0 | | | 0 | | 0 | |
Other GE Capital receivables | 0 | | 0 | | | 5,077 | | 5,076 | |
Property, plant and equipment – net (Note 7) | 16,039 | | 16,433 | | | 261 | | 271 | |
Receivable from GE Capital | 16,577 | | 16,780 | | | 0 | | 0 | |
Goodwill (Note 8) | 25,320 | | 25,524 | | | 0 | | 0 | |
Other intangible assets – net (Note 8) | 9,358 | | 9,632 | | | 37 | | 39 | |
Contract and other deferred assets (Note 10) | 5,985 | | 5,921 | | | 0 | | 0 | |
All other assets (Note 11) | 7,952 | | 7,948 | | | 4,617 | | 3,354 | |
Deferred income taxes (Note 16) | 9,209 | | 9,154 | | | 5,023 | | 5,099 | |
Assets of discontinued operations (Note 2) | 132 | | 144 | | | 2,876 | | 40,587 | |
Total assets | $ | 157,321 | | $ | 160,462 | | | $ | 108,507 | | $ | 118,257 | |
| | | | | |
Short-term borrowings (Note 12) | $ | 535 | | $ | 918 | | | $ | 2,426 | | $ | 1,963 | |
Short-term borrowings assumed by GE (Note 12) | 1,784 | | 2,432 | | | 1,784 | | 2,432 | |
Accounts payable and equipment project accruals | 15,839 | | 16,380 | | | 841 | | 918 | |
Progress collections and deferred income (Note 10) | 17,993 | | 18,371 | | | 0 | | 0 | |
All other current liabilities (Note 15) | 13,508 | | 14,131 | | | 1,507 | | 2,288 | |
Liabilities of discontinued operations (Note 2) | 0 | | 0 | | | 4,991 | | 0 | |
Current liabilities | 49,659 | | 52,232 | | | 11,549 | | 7,602 | |
| | | | | |
Deferred income (Note 10) | 1,748 | | 1,801 | | | 0 | | 0 | |
Long-term borrowings (Note 12) | 19,174 | | 19,428 | | | 27,962 | | 30,803 | |
Long-term borrowings assumed by GE (Note 12) | 19,754 | | 19,957 | | | 16,577 | | 16,780 | |
Insurance liabilities and annuity benefits (Note 13) | 0 | | 0 | | | 40,004 | | 42,565 | |
Non-current compensation and benefits | 28,769 | | 29,291 | | | 327 | | 379 | |
All other liabilities (Note 15) | 14,586 | | 15,072 | | | 363 | | 539 | |
Liabilities of discontinued operations (Note 2) | 125 | | 139 | | | 79 | | 5,058 | |
Total liabilities | 133,815 | | 137,921 | | | 96,861 | | 103,726 | |
| | | | | |
Preferred stock (5,939,875 shares outstanding at both March 31, 2021 and December 31, 2020) | 6 | | 6 | | | 0 | | 6 | |
Common stock (8,778,641,000 and 8,765,493,000 shares outstanding at March 31, 2021 and December 31, 2020, respectively) | 702 | | 702 | | | 5 | | 0 | |
Accumulated other comprehensive income (loss) – net attributable to GE | (8,108) | | (8,945) | | | (786) | | (804) | |
Other capital | 16,055 | | 16,466 | | | 17,982 | | 17,835 | |
Retained earnings | 95,006 | | 94,910 | | | (5,730) | | (2,663) | |
Less common stock held in treasury | (81,548) | | (81,961) | | | 0 | | 0 | |
Total GE shareholders’ equity | 22,113 | | 21,179 | | | 11,472 | | 14,373 | |
Noncontrolling interests | 1,393 | | 1,363 | | | 175 | | 159 | |
Total equity | 23,506 | | 22,542 | | | 11,646 | | 14,531 | |
Total liabilities and equity | $ | 157,321 | | $ | 160,462 | | | $ | 108,507 | | $ | 118,257 | |
| | | | | | | | |
STATEMENT OF CASH FLOWS | Three months ended March 31 |
(UNAUDITED) | Consolidated |
(In millions) | 2021 | 2020 |
Net earnings (loss) | $ | (2,798) | | $ | 6,233 | |
| | |
| | |
(Earnings) loss from discontinued operations | 2,894 | | 21 | |
Adjustments to reconcile net earnings (loss) | | |
to cash provided from operating activities | | |
Depreciation and amortization of property, plant and equipment (Note 7) | 452 | | 461 | |
Amortization of intangible assets (Note 8) | 301 | | 318 | |
| | |
| | |
(Gains) losses on purchases and sales of business interests (Note 23) | (3) | | (12,372) | |
(Gains) losses on equity securities (Note 23) | (296) | | 5,873 | |
Principal pension plans cost (Note 14) | 658 | | 877 | |
Principal pension plans employer contributions | (74) | | (70) | |
Other postretirement benefit plans (net) | (289) | | (254) | |
Provision (benefit) for income taxes | 142 | | 54 | |
Cash recovered (paid) during the year for income taxes | (322) | | (310) | |
Changes in operating working capital: | | |
Decrease (increase) in current receivables | 946 | | (503) | |
Decrease (increase) in inventories, including deferred inventory costs | (722) | | (1,077) | |
Decrease (increase) in current contract assets | (35) | | 145 | |
Increase (decrease) in accounts payable and equipment project accruals | (349) | | (617) | |
Increase (decrease) in progress collections and current deferred income | (425) | | (590) | |
All other operating activities | (2,719) | | 892 | |
Cash from (used for) operating activities – continuing operations | (2,640) | | (919) | |
Cash from (used for) operating activities – discontinued operations | 680 | | 686 | |
Cash from (used for) operating activities | (1,959) | | (233) | |
| | |
Additions to property, plant and equipment | (332) | | (504) | |
Dispositions of property, plant and equipment | 34 | | 28 | |
Additions to internal-use software | (24) | | (60) | |
Net decrease (increase) in financing receivables | 21 | | (103) | |
| | |
Proceeds from principal business dispositions | 1 | | 20,505 | |
Net cash from (payments for) principal businesses purchased | 0 | | (6) | |
| | |
Sales of retained ownership interests | 735 | | 0 | |
Net (purchases) dispositions of GE Capital investment securities | (709) | | (1,289) | |
All other investing activities | 1,121 | | 1,455 | |
Cash from (used for) investing activities – continuing operations | 847 | | 20,025 | |
Cash from (used for) investing activities – discontinued operations | (646) | | (920) | |
Cash from (used for) investing activities | 202 | | 19,105 | |
| | |
Net increase (decrease) in borrowings (maturities of 90 days or less) | (319) | | (1,905) | |
Newly issued debt (maturities longer than 90 days) | 314 | | 125 | |
Repayments and other debt reductions (maturities longer than 90 days) | (1,513) | | (5,867) | |
| | |
| | |
Dividends paid to shareholders | (148) | | (89) | |
All other financing activities | 57 | | (226) | |
Cash from (used for) financing activities – continuing operations | (1,608) | | (7,962) | |
Cash from (used for) financing activities – discontinued operations | 3 | | 43 | |
Cash from (used for) financing activities | (1,605) | | (7,919) | |
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (131) | | (256) | |
Increase (decrease) in cash, cash equivalents and restricted cash | (3,494) | | 10,697 | |
Cash, cash equivalents and restricted cash at beginning of year | 37,608 | | 37,077 | |
Cash, cash equivalents and restricted cash at March 31 | 34,115 | | 47,774 | |
Less cash, cash equivalents and restricted cash of discontinued operations at March 31 | 625 | | 584 | |
Cash, cash equivalents and restricted cash of continuing operations at March 31 | $ | 33,490 | | $ | 47,190 | |
| | | | | | | | | | | | | | | | | |
STATEMENT OF CASH FLOWS (CONTINUED) | Three months ended March 31 |
(UNAUDITED) | GE Industrial | | GE Capital |
(In millions) | 2021 | 2020 | | 2021 | 2020 |
Net earnings (loss) | $ | 230 | | $ | 6,384 | | | $ | (3,028) | | $ | (151) | |
| | | | | |
| | | | | |
(Earnings) loss from discontinued operations | 0 | | 14 | | | 2,894 | | 7 | |
Adjustments to reconcile net earnings (loss) | | | | | |
to cash provided from operating activities | | | | | |
Depreciation and amortization of property, plant and equipment (Note 7) | 446 | | 453 | | | 6 | | 7 | |
Amortization of intangible assets (Note 8) | 297 | | 315 | | | 3 | | 3 | |
| | | | | |
| | | | | |
(Gains) losses on purchases and sales of business interests (Note 23) | (3) | | (12,372) | | | 0 | | 0 | |
(Gains) losses on equity securities (Note 23) | (293) | | 5,789 | | | (4) | | 85 | |
Principal pension plans cost (Note 14) | 658 | | 877 | | | 0 | | 0 | |
Principal pension plans employer contributions | (74) | | (70) | | | 0 | | 0 | |
Other postretirement benefit plans (net) | (275) | | (247) | | | (14) | | (8) | |
Provision (benefit) for income taxes | 148 | | 187 | | | (6) | | (133) | |
Cash recovered (paid) during the year for income taxes | (336) | | (278) | | | 14 | | (32) | |
Changes in operating working capital: | | | | | |
Decrease (increase) in current receivables | 691 | | 487 | | | 0 | | 0 | |
Decrease (increase) in inventories, including deferred inventory costs | (681) | | (1,065) | | | 0 | | 0 | |
Decrease (increase) in current contract assets | (35) | | 145 | | | 0 | | 0 | |
Increase (decrease) in accounts payable and equipment project accruals | (449) | | (1,475) | | | 14 | | (18) | |
Increase (decrease) in progress collections and current deferred income | (425) | | (590) | | | 0 | | 0 | |
All other operating activities | (390) | | (215) | | | (2,359) | | 763 | |
Cash from (used for) operating activities – continuing operations | (491) | | (1,662) | | | (2,479) | | 524 | |
Cash from (used for) operating activities – discontinued operations | 0 | | 29 | | | 681 | | 658 | |
Cash from (used for) operating activities | (491) | | (1,633) | | | (1,798) | | 1,181 | |
| | | | | |
Additions to property, plant and equipment | (332) | | (504) | | | 0 | | 0 | |
Dispositions of property, plant and equipment | 34 | | 29 | | | 0 | | 0 | |
Additions to internal-use software | (23) | | (58) | | | (1) | | (1) | |
Net decrease (increase) in financing receivables | 0 | | 0 | | | 575 | | (559) | |
| | | | | |
Proceeds from principal business dispositions | 1 | | 20,505 | | | 0 | | 0 | |
Net cash from (payments for) principal businesses purchased | 0 | | (6) | | | 0 | | 0 | |
| | | | | |
Sales of retained ownership interests | 735 | | 0 | | | 0 | | 0 | |
Net (purchases) dispositions of GE Capital investment securities | 0 | | 0 | | | (709) | | (1,289) | |
All other investing activities | 133 | | 81 | | | 1,334 | | 2,579 | |
Cash from (used for) investing activities – continuing operations | 548 | | 20,046 | | | 1,199 | | 730 | |
Cash from (used for) investing activities – discontinued operations | 0 | | (33) | | | (646) | | (887) | |
Cash from (used for) investing activities | 549 | | 20,013 | | | 553 | | (157) | |
| | | | | |
Net increase (decrease) in borrowings (maturities of 90 days or less) | (655) | | (1,881) | | | (223) | | (514) | |
Newly issued debt (maturities longer than 90 days) | 0 | | 1 | | | 315 | | 124 | |
Repayments and other debt reductions (maturities longer than 90 days) | (20) | | (64) | | | (1,493) | | (5,804) | |
| | | | | |
| | | | | |
Dividends paid to shareholders | (118) | | (89) | | | (41) | | (42) | |
All other financing activities | (27) | | (12) | | | 84 | | (214) | |
Cash from (used for) financing activities – continuing operations | (820) | | (2,045) | | | (1,358) | | (6,450) | |
Cash from (used for) financing activities – discontinued operations | 0 | | 0 | | | 3 | | 43 | |
Cash from (used for) financing activities | (820) | | (2,045) | | | (1,355) | | (6,406) | |
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (85) | | (143) | | | (46) | | (113) | |
Increase (decrease) in cash, cash equivalents and restricted cash | (848) | | 16,193 | | | (2,646) | | (5,495) | |
Cash, cash equivalents and restricted cash at beginning of year | 23,209 | | 17,617 | | | 14,400 | | 19,460 | |
Cash, cash equivalents and restricted cash at March 31 | 22,361 | | 33,810 | | | 11,754 | | 13,964 | |
Less cash, cash equivalents and restricted cash of discontinued operations at March 31 | 0 | | 0 | | | 625 | | 584 | |
Cash, cash equivalents and restricted cash of continuing operations at March 31 | $ | 22,361 | | $ | 33,810 | | | $ | 11,129 | | $ | 13,380 | |
FINANCIAL STATEMENTS
|
| | | | | | |
STATEMENT OF EARNINGS (LOSS) | Three months ended March 31 |
(UNAUDITED) | Consolidated |
(In millions; per-share amounts in dollars) | 2020 |
| 2019 |
|
| | |
Sales of goods | $ | 12,364 |
| $ | 13,249 |
|
Sales of services | 6,450 |
| 7,008 |
|
GE Capital revenues from services | 1,709 |
| 1,945 |
|
Total revenues (Note 9) | 20,524 |
| 22,202 |
|
| | |
Cost of goods sold | 10,540 |
| 10,974 |
|
Cost of services sold | 5,156 |
| 5,234 |
|
Selling, general and administrative expenses | 3,065 |
| 3,402 |
|
Interest and other financial charges | 794 |
| 1,065 |
|
Insurance losses and annuity benefits | 636 |
| 611 |
|
Non-operating benefit costs | 619 |
| 569 |
|
Other costs and expenses | 109 |
| 72 |
|
Total costs and expenses | 20,918 |
| 21,927 |
|
| | |
Other income (Note 23) | 6,869 |
| 847 |
|
GE Capital earnings (loss) from continuing operations | — |
| — |
|
| | |
Earnings (loss) from continuing operations before income taxes | 6,475 |
| 1,122 |
|
Benefit (provision) for income taxes | (63 | ) | (140 | ) |
Earnings (loss) from continuing operations | 6,412 |
| 983 |
|
Earnings (loss) from discontinued operations, net of taxes (Note 2) | (178 | ) | 2,663 |
|
Net earnings (loss) | 6,233 |
| 3,645 |
|
Less net earnings (loss) attributable to noncontrolling interests | 34 |
| 57 |
|
Net earnings (loss) attributable to the Company | 6,199 |
| 3,588 |
|
Preferred stock dividends | (43 | ) | (40 | ) |
Net earnings (loss) attributable to GE common shareholders | $ | 6,156 |
| $ | 3,549 |
|
| | |
Amounts attributable to GE common shareholders | | |
Earnings (loss) from continuing operations | $ | 6,412 |
| $ | 983 |
|
Less net earnings (loss) attributable to noncontrolling interests, | | |
continuing operations | 36 |
| 23 |
|
Earnings (loss) from continuing operations attributable to the Company | 6,375 |
| 960 |
|
Preferred stock dividends | (43 | ) | (40 | ) |
Earnings (loss) from continuing operations attributable | | |
to GE common shareholders | 6,332 |
| 920 |
|
Earnings (loss) from discontinued operations, net of taxes | (178 | ) | 2,663 |
|
Less net earnings (loss) attributable to | | |
noncontrolling interests, discontinued operations | (2 | ) | 34 |
|
Net earnings (loss) attributable to GE common shareholders | $ | 6,156 |
| $ | 3,549 |
|
| | |
Earnings (loss) per share from continuing operations (Note 16) | | |
Diluted earnings (loss) per share | $ | 0.72 |
| $ | 0.10 |
|
Basic earnings (loss) per share | $ | 0.72 |
| $ | 0.10 |
|
| | |
Net earnings (loss) per share (Note 16) | | |
Diluted earnings (loss) per share | $ | 0.70 |
| $ | 0.40 |
|
Basic earnings (loss) per share | $ | 0.70 |
| $ | 0.41 |
|
| | |
Dividends declared per common share | $ | 0.01 |
| $ | 0.01 |
|
| | | | | | | | | | | |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | Three months ended March 31 | | |
(In millions, net of tax) | 2021 | 2020 | | | |
Net earnings (loss) | $ | (2,798) | | $ | 6,233 | | | | |
Less net earnings (loss) attributable to noncontrolling interests | 5 | | 34 | | | | |
Net earnings (loss) attributable to the Company | $ | (2,802) | | $ | 6,199 | | | | |
| | | | | |
Investment securities | $ | (18) | | $ | (41) | | | | |
Currency translation adjustments | 110 | | 135 | | | | |
Cash flow hedges | 62 | | (211) | | | | |
Benefit plans | 705 | | 1,035 | | | | |
Other comprehensive income (loss) | 859 | | 918 | | | | |
Less: other comprehensive income (loss) attributable to noncontrolling interests | 3 | | 5 | | | | |
Other comprehensive income (loss) attributable to the Company | $ | 856 | | $ | 913 | | | | |
| | | | | |
Comprehensive income (loss) | $ | (1,939) | | $ | 7,152 | | | | |
Less: comprehensive income (loss) attributable to noncontrolling interests | 8 | | 39 | | | | |
Comprehensive income (loss) attributable to the Company | $ | (1,947) | | $ | 7,113 | | | | |
|
| | | | | | | | | | | | | |
STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Three months ended March 31 |
(UNAUDITED) | GE(a) | | GE Capital |
(In millions; per-share amounts in dollars) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| | | | | |
Sales of goods | $ | 12,359 |
| $ | 13,315 |
| | $ | 24 |
| $ | 16 |
|
Sales of services | 6,486 |
| 7,009 |
| | — |
| — |
|
GE Capital revenues from services | — |
| — |
| | 1,899 |
| 2,210 |
|
Total revenues | 18,844 |
| 20,324 |
| | 1,923 |
| 2,227 |
|
| | | | | |
Cost of goods sold | 10,541 |
| 11,049 |
| | 17 |
| 13 |
|
Cost of services sold | 4,657 |
| 4,781 |
| | 535 |
| 486 |
|
Selling, general and administrative expenses | 2,949 |
| 3,196 |
| | 203 |
| 267 |
|
Interest and other financial charges | 370 |
| 520 |
| | 504 |
| 677 |
|
Insurance losses and annuity benefits | — |
| — |
| | 653 |
| 633 |
|
Non-operating benefit costs | 616 |
| 564 |
| | 2 |
| 5 |
|
Other costs and expenses | — |
| (8 | ) | | 119 |
| 99 |
|
Total costs and expenses | 19,133 |
| 20,101 |
| | 2,033 |
| 2,180 |
|
| | | | | |
Other income (Note 23) | 6,874 |
| 852 |
| | — |
| — |
|
GE Capital earnings (loss) from continuing operations | (30 | ) | 135 |
| | — |
| — |
|
| | | | | |
Earnings (loss) from continuing operations before income taxes | 6,555 |
| 1,211 |
| | (110 | ) | 47 |
|
Benefit (provision) for income taxes | (187 | ) | (268 | ) | | 123 |
| 128 |
|
Earnings (loss) from continuing operations | 6,368 |
| 943 |
| | 13 |
| 175 |
|
Earnings (loss) from discontinued operations, net of taxes (Note 2) | (178 | ) | 2,663 |
| | (164 | ) | 35 |
|
Net earnings (loss) | 6,190 |
| 3,606 |
| | (151 | ) | 210 |
|
Less net earnings (loss) attributable to noncontrolling interests | 34 |
| 57 |
| | — |
| — |
|
Net earnings (loss) attributable to the Company | 6,156 |
| 3,549 |
| | (151 | ) | 210 |
|
Preferred stock dividends | — |
| — |
| | (43 | ) | (40 | ) |
Net earnings (loss) attributable to GE common shareholders | $ | 6,156 |
| $ | 3,549 |
| | $ | (194 | ) | $ | 171 |
|
| | | | | |
Amounts attributable to GE common shareholders: | | | | | |
Earnings (loss) from continuing operations | $ | 6,368 |
| $ | 943 |
| | $ | 13 |
| $ | 175 |
|
Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
continuing operations | 36 |
| 23 |
| | — |
| — |
|
Earnings (loss) from continuing operations attributable to the Company | 6,332 |
| 920 |
| | 13 |
| 175 |
|
Preferred stock dividends | — |
| — |
| | (43 | ) | (40 | ) |
Earnings (loss) from continuing operations attributable | | | | | |
to GE common shareholders | 6,332 |
| 920 |
| | (30 | ) | 135 |
|
Earnings (loss) from discontinued operations, net of taxes | (178 | ) | 2,663 |
| | (164 | ) | 35 |
|
Less net earnings (loss) attributable to | | | | | |
noncontrolling interests, discontinued operations | (2 | ) | 34 |
| | — |
| — |
|
Net earnings (loss) attributable to GE common shareholders | $ | 6,156 |
| $ | 3,549 |
| | $ | (194 | ) | $ | 171 |
|
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.
| | | | | | | | | | | |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) | Three months ended March 31 | | |
(In millions) | 2021 | 2020 | | | |
Preferred stock issued | $ | 6 | | $ | 6 | | | | |
Common stock issued | $ | 702 | | $ | 702 | | | | |
| | | | | |
Beginning balance | (9,749) | | (11,732) | | | | |
Investment securities | (18) | | (41) | | | | |
Currency translation adjustments | 108 | | 133 | | | | |
Cash flow hedges | 62 | | (211) | | | | |
Benefit plans | 704 | | 1,032 | | | | |
Accumulated other comprehensive income (loss) ending balance | $ | (8,893) | | $ | (10,819) | | | | |
Beginning balance | 34,307 | | 34,405 | | | | |
Gains (losses) on treasury stock dispositions | (384) | | (249) | | | | |
Stock-based compensation | 106 | | 105 | | | | |
Other changes | 14 | | 35 | | | | |
Other capital ending balance | $ | 34,042 | | $ | 34,296 | | | | |
Beginning balance | 92,247 | | 87,732 | | | | |
Net earnings (loss) attributable to the Company | (2,802) | | 6,199 | | | | |
Dividends and other transactions with shareholders | (168) | | (142) | | | | |
Changes in accounting (Note 1) | 0 | | (175) | | | | |
Retained earnings ending balance | $ | 89,276 | | $ | 93,615 | | | | |
Beginning balance | (81,961) | | (82,797) | | | | |
Purchases | (38) | | (14) | | | | |
Dispositions | 450 | | 295 | | | | |
Common stock held in treasury ending balance | $ | (81,548) | | $ | (82,516) | | | | |
GE shareholders' equity balance | 33,585 | | 35,284 | | | | |
Noncontrolling interests balance (Note 17) | 1,568 | | 1,575 | | | | |
Total equity balance at March 31 | $ | 35,153 | | $ | 36,859 | | | | |
20202021 1Q FORM 10-Q 3130
|
| | | | | | |
STATEMENT OF FINANCIAL POSITION (UNAUDITED) | Consolidated |
(In millions, except share amounts) | March 31, 2020 |
| December 31, 2019 |
|
|
|
| |
Cash, cash equivalents and restricted cash | $ | 47,286 |
| $ | 36,394 |
|
Investment securities (Note 3) | 42,299 |
| 48,521 |
|
Current receivables (Note 4) | 16,925 |
| 16,769 |
|
Financing receivables – net (Note 5) | 2,998 |
| 3,134 |
|
Inventories (Note 6) | 15,457 |
| 14,104 |
|
Other GE Capital receivables | 7,505 |
| 7,144 |
|
Property, plant and equipment – net (Note 7)(a) | 45,979 |
| 46,186 |
|
Receivable from GE Capital | — |
| — |
|
Investment in GE Capital | — |
| — |
|
Goodwill (Note 8) | 26,598 |
| 26,734 |
|
Other intangible assets – net (Note 8) | 10,381 |
| 10,653 |
|
Contract and other deferred assets (Note 10) | 16,136 |
| 16,801 |
|
All other assets | 15,841 |
| 16,461 |
|
Deferred income taxes (Note 14) | 10,457 |
| 9,889 |
|
Assets of businesses held for sale (Note 2) | 506 |
| 9,149 |
|
Assets of discontinued operations (Note 2) | 3,653 |
| 4,109 |
|
Total assets | $ | 262,021 |
| $ | 266,048 |
|
| | |
Short-term borrowings (Note 11) | $ | 18,122 |
| $ | 22,072 |
|
Short-term borrowings assumed by GE (Note 11) | — |
| — |
|
Accounts payable, principally trade accounts | 15,212 |
| 15,926 |
|
Progress collections and deferred income (Note 10) | 19,818 |
| 20,508 |
|
Other GE current liabilities | 16,290 |
| 15,753 |
|
Non-recourse borrowings of consolidated securitization entities (Note 11) | 644 |
| 1,655 |
|
Long-term borrowings (Note 11) | 66,388 |
| 67,155 |
|
Long-term borrowings assumed by GE (Note 11) | — |
| — |
|
Insurance liabilities and annuity benefits (Note 12) | 38,241 |
| 39,826 |
|
Non-current compensation and benefits | 31,104 |
| 31,687 |
|
All other liabilities(a) | 18,985 |
| 19,745 |
|
Liabilities of businesses held for sale (Note 2) | 219 |
| 1,658 |
|
Liabilities of discontinued operations (Note 2) | 139 |
| 203 |
|
Total liabilities | 225,162 |
| 236,187 |
|
| | |
Preferred stock (5,939,875 shares outstanding at both March 31, 2020 and December 31, 2019) | 6 |
| 6 |
|
Common stock (8,747,092,000 and 8,738,434,000 shares outstanding at March 31, 2020 and December 31, 2019, respectively) | 702 |
| 702 |
|
Accumulated other comprehensive income (loss) – net attributable to GE | (10,819 | ) | (11,732 | ) |
Other capital | 34,296 |
| 34,405 |
|
Retained earnings | 93,615 |
| 87,732 |
|
Less common stock held in treasury | (82,516 | ) | (82,797 | ) |
Total GE shareholders’ equity | 35,284 |
| 28,316 |
|
Noncontrolling interests | 1,575 |
| 1,545 |
|
Total equity | 36,859 |
| 29,861 |
|
Total liabilities and equity | $ | 262,021 |
| $ | 266,048 |
|
(a) Included operating lease right of use assets. The related liabilities are included in All Other Liabilities.
|
| | | | | | | | | | | | | |
STATEMENT OF FINANCIAL POSITION (CONTINUED) | GE(a) | | GE Capital |
(UNAUDITED) (In millions, except share amounts) | March 31, 2020 |
| December 31, 2019 |
| | March 31, 2020 |
| December 31, 2019 |
|
| | | | | |
Cash, cash equivalents and restricted cash | $ | 33,810 |
| $ | 17,613 |
| | $ | 13,475 |
| $ | 18,781 |
|
Investment securities (Note 3) | 4,184 |
| 10,008 |
| | 38,117 |
| 38,514 |
|
Current receivables (Note 4) | 13,076 |
| 13,883 |
| | — |
| — |
|
Financing receivables - net (Note 5) | — |
| — |
| | 7,457 |
| 6,979 |
|
Inventories (Note 6) | 15,457 |
| 14,104 |
| | — |
| — |
|
Other GE Capital receivables | — |
| — |
| | 10,764 |
| 11,767 |
|
Property, plant and equipment – net (Note 7)(b) | 17,088 |
| 17,447 |
| | 30,058 |
| 29,886 |
|
Receivable from GE Capital | 16,909 |
| 19,142 |
| | — |
| — |
|
Investment in GE Capital | 14,965 |
| 15,299 |
| | — |
| — |
|
Goodwill (Note 8) | 25,759 |
| 25,895 |
| | 839 |
| 839 |
|
Other intangible assets – net (Note 8) | 10,212 |
| 10,461 |
| | 169 |
| 192 |
|
Contract and other deferred assets (Note 10) | 16,168 |
| 16,833 |
| | — |
| — |
|
All other assets | 8,380 |
| 8,399 |
| | 8,200 |
| 8,648 |
|
Deferred income taxes (Note 14) | 8,654 |
| 8,189 |
| | 1,803 |
| 1,700 |
|
Assets of businesses held for sale (Note 2) | 43 |
| 8,626 |
| | 247 |
| 241 |
|
Assets of discontinued operations (Note 2) | 156 |
| 202 |
| | 3,497 |
| 3,907 |
|
Total assets | $ | 184,861 |
| $ | 186,100 |
| | $ | 114,626 |
| $ | 121,454 |
|
| | | | | |
Short-term borrowings (Note 11) | $ | 3,999 |
| $ | 5,606 |
| | $ | 8,833 |
| $ | 12,030 |
|
Short-term borrowings assumed by GE (Note 11) | 5,888 |
| 5,473 |
| | 2,519 |
| 2,104 |
|
Accounts payable, principally trade accounts | 16,004 |
| 17,702 |
| | 1,054 |
| 886 |
|
Progress collections and deferred income (Note 10) | 19,986 |
| 20,694 |
| | — |
| — |
|
Other GE current liabilities | 17,186 |
| 16,833 |
| | — |
| — |
|
Non-recourse borrowings of consolidated securitization entities (Note 11) | — |
| — |
| | 644 |
| 1,655 |
|
Long-term borrowings (Note 11) | 14,997 |
| 15,085 |
| | 28,144 |
| 26,175 |
|
Long-term borrowings assumed by GE (Note 11) | 23,247 |
| 25,895 |
| | 14,390 |
| 17,038 |
|
Insurance liabilities and annuity benefits (Note 12) | — |
| — |
| | 38,729 |
| 40,232 |
|
Non-current compensation and benefits | 30,649 |
| 31,208 |
| | 447 |
| 472 |
|
All other liabilities(b) | 15,911 |
| 16,156 |
| | 4,664 |
| 5,278 |
|
Liabilities of businesses held for sale (Note 2) | 181 |
| 1,620 |
| | 52 |
| 52 |
|
Liabilities of discontinued operations (Note 2) | 108 |
| 106 |
| | 31 |
| 97 |
|
Total liabilities | 148,157 |
| 156,379 |
| | 99,507 |
| 106,016 |
|
| | | | | |
Preferred stock (5,939,875 shares outstanding at both March 31, 2020 and December 31, 2019) | 6 |
| 6 |
| | 6 |
| 6 |
|
Common stock (8,747,092,000 and 8,738,434,000 shares outstanding at March 31, 2020 and December 31, 2019, respectively) | 702 |
| 702 |
| | — |
| — |
|
Accumulated other comprehensive income (loss) - net attributable to GE | (10,819 | ) | (11,732 | ) | | (986 | ) | (852 | ) |
Other capital | 34,296 |
| 34,405 |
| | 17,003 |
| 17,001 |
|
Retained earnings | 93,615 |
| 87,732 |
| | (1,058 | ) | (857 | ) |
Less common stock held in treasury | (82,516 | ) | (82,797 | ) | | — |
| — |
|
Total GE shareholders’ equity | 35,284 |
| 28,316 |
| | 14,965 |
| 15,299 |
|
Noncontrolling interests | 1,421 |
| 1,406 |
| | 154 |
| 139 |
|
Total equity | 36,705 |
| 29,721 |
| | 15,119 |
| 15,438 |
|
Total liabilities and equity | $ | 184,861 |
| $ | 186,100 |
| | $ | 114,626 |
| $ | 121,454 |
|
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.
(b) Included operating lease right of use assets. The related liabilities are included in All Other Liabilities.
|
| | | | | | |
STATEMENT OF CASH FLOWS | Three months ended March 31 |
(UNAUDITED) | Consolidated |
(In millions) | 2020 |
| 2019 |
|
| | |
Net earnings (loss) | $ | 6,233 |
| $ | 3,645 |
|
(Earnings) loss from discontinued operations | 178 |
| (2,663 | ) |
Adjustments to reconcile net earnings (loss) | | |
to cash provided from operating activities | | |
Depreciation and amortization of property, plant and equipment (Note 7) | 991 |
| 995 |
|
Amortization of intangible assets (Note 8) | 340 |
| 367 |
|
(Earnings) loss from continuing operations retained by GE Capital | — |
| — |
|
(Gains) losses on purchases and sales of business interests (Note 23) | (12,372 | ) | (253 | ) |
(Gains) losses on equity securities (Note 23) | 5,874 |
| (20 | ) |
Principal pension plans cost (Note 13) | 877 |
| 868 |
|
Principal pension plans employer contributions | (70 | ) | (65 | ) |
Other postretirement benefit plans (net) | (254 | ) | (289 | ) |
Provision (benefit) for income taxes | 63 |
| 140 |
|
Cash recovered (paid) during the year for income taxes | (310 | ) | (280 | ) |
Decrease (increase) in contract and other deferred assets | (12 | ) | (680 | ) |
Decrease (increase) in GE current receivables | (503 | ) | 545 |
|
Decrease (increase) in inventories | (978 | ) | (1,165 | ) |
Increase (decrease) in accounts payable | (601 | ) | 215 |
|
Increase (decrease) in GE progress collections | (655 | ) | (331 | ) |
All other operating activities | 1,050 |
| (609 | ) |
Cash from (used for) operating activities – continuing operations | (148 | ) | 420 |
|
Cash from (used for) operating activities – discontinued operations | (67 | ) | (298 | ) |
Cash from (used for) operating activities | (214 | ) | 122 |
|
| | |
Additions to property, plant and equipment | (1,027 | ) | (1,395 | ) |
Dispositions of property, plant and equipment | 731 |
| 1,068 |
|
Additions to internal-use software | (60 | ) | (69 | ) |
Net decrease (increase) in financing receivables | (50 | ) | 353 |
|
Proceeds from sale of discontinued operations | — |
| 2,865 |
|
Proceeds from principal business dispositions | 20,488 |
| 569 |
|
Net cash from (payments for) principal businesses purchased | (6 | ) | — |
|
All other investing activities | (856 | ) | 305 |
|
Cash from (used for) investing activities – continuing operations | 19,221 |
| 3,696 |
|
Cash from (used for) investing activities – discontinued operations | (134 | ) | (206 | ) |
Cash from (used for) investing activities | 19,086 |
| 3,490 |
|
| | |
Net increase (decrease) in borrowings (maturities of 90 days or less) | (1,905 | ) | (445 | ) |
Newly issued debt (maturities longer than 90 days) | 125 |
| 731 |
|
Repayments and other debt reductions (maturities longer than 90 days) | (5,903 | ) | (3,546 | ) |
Dividends paid to shareholders | (89 | ) | (88 | ) |
All other financing activities | (147 | ) | (113 | ) |
Cash from (used for) financing activities – continuing operations | (7,919 | ) | (3,461 | ) |
Cash from (used for) financing activities – discontinued operations | — |
| (274 | ) |
Cash from (used for) financing activities | (7,919 | ) | (3,735 | ) |
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (256 | ) | 78 |
|
Increase (decrease) in cash, cash equivalents and restricted cash | 10,697 |
| (45 | ) |
Cash, cash equivalents and restricted cash at beginning of year | 37,077 |
| 35,548 |
|
Cash, cash equivalents and restricted cash at March 31 | 47,774 |
| 35,503 |
|
Less cash, cash equivalents and restricted cash of discontinued operations at March 31 | 437 |
| 3,671 |
|
Cash, cash equivalents and restricted cash of continuing operations at March 31 | $ | 47,338 |
| $ | 31,832 |
|
|
| | | | | | | | | | | | | |
STATEMENT OF CASH FLOWS (CONTINUED) | Three months ended March 31 |
(UNAUDITED) | GE(a) | | GE Capital |
(In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| | | | | |
Net earnings (loss) | $ | 6,190 |
| $ | 3,606 |
| | $ | (151 | ) | $ | 210 |
|
(Earnings) loss from discontinued operations | 178 |
| (2,663 | ) | | 164 |
| (35 | ) |
Adjustments to reconcile net earnings (loss) | | | | | |
to cash provided from operating activities | | | | | |
Depreciation and amortization of property, plant and equipment (Note 7) | 453 |
| 505 |
| | 536 |
| 488 |
|
Amortization of intangible assets (Note 8) | 315 |
| 353 |
| | 25 |
| 13 |
|
(Earnings) loss from continuing operations retained by GE Capital | 30 |
| (135 | ) | | — |
| — |
|
(Gains) losses on purchases and sales of business interests (Note 23) | (12,372 | ) | (253 | ) | | — |
| — |
|
(Gains) losses on equity securities (Note 23) | 5,789 |
| (20 | ) | | 86 |
| (1 | ) |
Principal pension plans cost (Note 13) | 877 |
| 868 |
| | — |
| — |
|
Principal pension plans employer contributions | (70 | ) | (65 | ) | | — |
| — |
|
Other postretirement benefit plans (net) | (247 | ) | (292 | ) | | (8 | ) | 3 |
|
Provision (benefit) for income taxes | 187 |
| 268 |
| | (123 | ) | (128 | ) |
Cash recovered (paid) during the year for income taxes | (278 | ) | (272 | ) | | (32 | ) | (8 | ) |
Decrease (increase) in contract and other deferred assets | (12 | ) | (680 | ) | | — |
| — |
|
Decrease (increase) in GE current receivables | 487 |
| (57 | ) | | — |
| — |
|
Decrease (increase) in inventories | (966 | ) | (1,088 | ) | | — |
| — |
|
Increase (decrease) in accounts payable | (1,468 | ) | (2 | ) | | (5 | ) | (41 | ) |
Increase (decrease) in GE progress collections | (673 | ) | (343 | ) | | — |
| — |
|
All other operating activities | (82 | ) | (336 | ) | | 784 |
| (451 | ) |
Cash from (used for) operating activities – continuing operations | (1,662 | ) | (607 | ) | | 1,276 |
| 50 |
|
Cash from (used for) operating activities – discontinued operations | 29 |
| (528 | ) | | (95 | ) | (86 | ) |
Cash from (used for) operating activities | (1,633 | ) | (1,135 | ) | | 1,181 |
| (36 | ) |
| | | | | |
Additions to property, plant and equipment | (504 | ) | (552 | ) | | (541 | ) | (911 | ) |
Dispositions of property, plant and equipment | 29 |
| 79 |
| | 709 |
| 993 |
|
Additions to internal-use software | (58 | ) | (66 | ) | | (1 | ) | (3 | ) |
Net decrease (increase) in financing receivables | — |
| — |
| | (506 | ) | 1,673 |
|
Proceeds from sale of discontinued operations | — |
| 2,865 |
| | — |
| — |
|
Proceeds from principal business dispositions | 20,505 |
| 561 |
| | (16 | ) | 396 |
|
Net cash from (payments for) principal businesses purchased | (6 | ) | (396 | ) | | — |
| — |
|
All other investing activities | 81 |
| (245 | ) | | 300 |
| 1,655 |
|
Cash from (used for) investing activities – continuing operations | 20,046 |
| 2,246 |
| | (56 | ) | 3,802 |
|
Cash from (used for) investing activities – discontinued operations | (33 | ) | (42 | ) | | (101 | ) | 152 |
|
Cash from (used for) investing activities | 20,013 |
| 2,204 |
| | (157 | ) | 3,954 |
|
| | | | | |
Net increase (decrease) in borrowings (maturities of 90 days or less) | (1,881 | ) | (1,170 | ) | | (514 | ) | (612 | ) |
Newly issued debt (maturities longer than 90 days) | 1 |
| 248 |
| | 124 |
| 483 |
|
Repayments and other debt reductions (maturities longer than 90 days) | (64 | ) | (290 | ) | | (5,840 | ) | (3,255 | ) |
Dividends paid to shareholders | (89 | ) | (88 | ) | | (42 | ) | (38 | ) |
All other financing activities | (12 | ) | (18 | ) | | (135 | ) | (95 | ) |
Cash from (used for) financing activities – continuing operations | (2,045 | ) | (1,318 | ) | | (6,406 | ) | (3,518 | ) |
Cash from (used for) financing activities – discontinued operations | — |
| (273 | ) | | — |
| (1 | ) |
Cash from (used for) financing activities | (2,045 | ) | (1,592 | ) | | (6,406 | ) | (3,519 | ) |
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (143 | ) | 68 |
| | (113 | ) | 10 |
|
Increase (decrease) in cash, cash equivalents and restricted cash | 16,193 |
| (455 | ) | | (5,495 | ) | 409 |
|
Cash, cash equivalents and restricted cash at beginning of year | 17,617 |
| 20,528 |
| | 19,460 |
| 15,020 |
|
Cash, cash equivalents and restricted cash at March 31 | 33,810 |
| 20,073 |
| | 13,964 |
| 15,429 |
|
Less cash, cash equivalents and restricted cash of discontinued operations at March 31 | — |
| 3,078 |
| | 437 |
| 593 |
|
Cash, cash equivalents and restricted cash of continuing operations at March 31 | $ | 33,810 |
| $ | 16,996 |
| | $ | 13,527 |
| $ | 14,836 |
|
(a) Represents the adding together of all GE Industrial affiliates and the impact of GE Capital dividends on a one-line basis. See Note 1.
|
| | | | | | |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | Three months ended March 31 |
(In millions, net of tax) | 2020 |
| 2019 |
|
| | |
Net earnings (loss) | $ | 6,233 |
| $ | 3,645 |
|
Less net earnings (loss) attributable to noncontrolling interests | 34 |
| 57 |
|
Net earnings (loss) attributable to the Company | $ | 6,199 |
| $ | 3,588 |
|
| | |
Investment securities | $ | (41 | ) | $ | 24 |
|
Currency translation adjustments | 135 |
| 423 |
|
Cash flow hedges | (211 | ) | 38 |
|
Benefit plans | 1,035 |
| 545 |
|
Other comprehensive income (loss) | 918 |
| 1,031 |
|
Less: other comprehensive income (loss) attributable to noncontrolling interests | 5 |
| 101 |
|
Other comprehensive income (loss) attributable to the Company | $ | 913 |
| $ | 930 |
|
| | |
Comprehensive income (loss) | $ | 7,152 |
| $ | 4,675 |
|
Less: comprehensive income (loss) attributable to noncontrolling interests | 39 |
| 158 |
|
Comprehensive income (loss) attributable to the Company | $ | 7,113 |
| $ | 4,517 |
|
|
| | | | | | | |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) | Three months ended March 31 |
(In millions) | 2020 |
| | 2019 |
|
| | | |
Preferred stock issued | $ | 6 |
| | $ | 6 |
|
Common stock issued | $ | 702 |
| | $ | 702 |
|
| | | |
Beginning balance | (11,732 | ) | | (14,414 | ) |
Investment securities | (41 | ) | | 23 |
|
Currency translation adjustments | 133 |
| | 324 |
|
Cash flow hedges | (211 | ) | | 35 |
|
Benefit plans | 1,032 |
| | 547 |
|
Accumulated other comprehensive income (loss) ending balance | $ | (10,819 | ) | | $ | (13,485 | ) |
Beginning balance | 34,405 |
| | 35,504 |
|
Gains (losses) on treasury stock dispositions | (249 | ) | | (507 | ) |
Stock-based compensation | 105 |
| | 137 |
|
Other changes | 35 |
| | (788 | ) |
Other capital ending balance | $ | 34,296 |
| | $ | 34,345 |
|
Beginning balance | 87,732 |
| | 93,109 |
|
Net earnings (loss) attributable to the Company | 6,199 |
| | 3,588 |
|
Dividends and other transactions with shareholders | (142 | ) | | (145 | ) |
Changes in accounting (Note 1) | (175 | ) | | 368 |
|
Retained earnings ending balance | $ | 93,615 |
| | $ | 96,921 |
|
Beginning balance | (82,797 | ) | | (83,925 | ) |
Purchases | (14 | ) | | (38 | ) |
Dispositions | 295 |
| | 636 |
|
Common stock held in treasury ending balance | $ | (82,516 | ) | | $ | (83,328 | ) |
GE shareholders' equity balance | 35,284 |
| | 35,161 |
|
Noncontrolling interests balance (Note 15) | 1,575 |
| | 20,485 |
|
Total equity balance at March 31(a) | $ | 36,859 |
| | $ | 55,646 |
|
| |
(a) | Total equity balance decreased by $(18,787) million in the last twelve months from March 31, 2019, primarily due to reduction of non-controlling interest balance of $(19,271) million attributable to Baker Hughes Class A shareholders at March 31, 2019, after-tax loss of $(8,238) million in discontinued operations due to deconsolidation of Baker Hughes in the third quarter of 2019, after-tax change in unrealized loss on our remaining interest in Baker Hughes $(4,631) million, partially offset by after-tax gain of $11,145 million due to the sale of our BioPharma business within our Healthcare segment. See Notes 2 and 3 for further information.
|
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
POLICIES. We present our financial statements in a three-column format, which allows investors to see our GE industrial operations separately from our financial services operations. We believe that this provides useful supplemental information to our consolidated financial statements. To the extent that we have transactions between GE Industrial and GE Capital, these transactions are made on arm's lengtharms-length terms, are reported in the respective columns of our financial statements and are eliminated in consolidation. See Note 2022 for further information.
Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP), which requires us to make estimates based on assumptions about current and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in our financial statements. Although our current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by the ongoing Coronavirus Disease 2019 (COVID-19) pandemic. The severity, magnitude and duration, as well as the economic consequences, of the COVID-19 pandemic, are uncertain, rapidly changing and difficult to predict. As a result, our accounting estimates and assumptions may change over time in response to COVID-19. Such changes could result in future impairments of goodwill, intangibles, long-lived assets and investment securities, revisions to estimated profitability on long-term product service agreements, incremental credit losses on receivables and debt securities, a decrease in the carrying amount of our tax assets, or an increase in our insurance liabilities and pension obligations as of the time of a relevant measurement event.
In preparing our Statement of Cash Flows, we make certain adjustments to reflect cash flows that cannot otherwise be calculated by changes in our Statement of Financial Position. These adjustments may include, but are not limited to, the effects of currency exchange, acquisitions and dispositions of businesses, businesses classified as held for sale, the timing of settlements to suppliers for property, plant and equipment, non-cash gains/losses and other balance sheet reclassifications.
We have reclassified certain prior-period amounts to conform to the current-period’s presentation. Unless otherwise noted, tables are presented in U.S. dollars in millions. Certain columns and rows may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers in millions. Earnings per share amounts are computed independently for earnings from continuing operations, earnings from discontinued operations and net earnings. As a result, the sum of per-share amounts may not equal the total. Unless otherwise indicated, information in these notes to the consolidated financial statements relates to continuing operations. Certain of our operations have been presented as discontinued. We present businesses whose disposal represents a strategic shift that has, or will have, a major effect on our operations and financial results as discontinued operations when the components meet the criteria for held for sale, are sold, or spun-off. See Note 2 for further information.
The accompanying consolidated financial statements and notes are unaudited. The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. These consolidated financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Our significant accounting policies are described in Note 1 to the consolidated financial statements of our aforementioned Annual Report. We include herein certain updates to those policies.
Allowance for credit losses.
When we record customer receivables, contract assets and financing receivables arising from revenue transactions, as well as commercial mortgage loans and reinsurance recoveries in GE Capital’s run-off insurance operations, financial guarantees and certain commitments, we record an allowance for credit losses for the current expected credit losses (CECL) inherent in the asset over its expected life. The allowance for credit losses is a valuation account deducted from the amortized cost basis of the assets to present their net carrying value at the amount expected to be collected. Each period the allowance for credit losses is adjusted through earnings to reflect expected credit losses over the remaining lives of the assets.
We estimate expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. When measuring expected credit losses, we pool assets with similar country risk and credit risk characteristics. Changes in the relevant information may significantly affect the estimates of expected credit losses.
ACCOUNTING CHANGES. On January 1, 2020,2021, we adopted ASU No. 2016-13, Financial Instruments - Credit Losses (ASU 2016-13). ASU 2016-13 requires us to prospectively record an allowance for credit losses for the current expected credit losses inherent in the asset over its expected life, replacing the incurred loss model that recognized losses only when they became probable and estimable. We recorded a $221 million increase in our allowance for credit losses and a $175 million decrease to retained earnings, net of tax, reflecting the cumulative effect on retained earnings.
In the three months ended March 31, 2020, we increased our CECL reserves by recording a charge to earnings of $111 million to reflect higher expected credit losses in our Aviation and GE Capital segments.
On January 1, 2020 we adopted ASU 2017-04, Intangibles - Goodwill and Other2019-12, Income Taxes (Topic 350)740): Simplifying the TestAccounting for Goodwill Impairment.Income Taxes. The ASU eliminates Step 2removes certain exceptions from the guidance in ASC 740 related to intra-period tax allocations, interim calculations and the recognition of deferred tax liabilities for outside basis differences and clarifies and simplifies several other aspects of accounting for income taxes. Different transition methods apply to the various income tax simplifications. For the changes requiring a retrospective or modified retrospective transition, the adoption of the goodwill impairment test and the qualitative assessment for any reporting unit with a zero or negative carrying amount. The ASU also requires an entity to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount. The adoptionnew standard did not have ana material impact onto our financial statements.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE.OPERATIONS. On March 31, 2020, we completed the sale of our BioPharma business within our Healthcare segment for total consideration of $21,141$21,112 million (after certain working capital adjustments). The consideration consisted of $20,724 million in cash and $417 million of pension liabilities that were assumed by Danaher. We received cash of $20,321 million on March 31st and an additional $403 million on April 1st. In addition, we expect to incur approximately $200incurred $185 million of cash payments directly associated with the transaction intransaction. In the second quarter. As a result,first quarter of 2020, we recognized a pretaxpre-tax gain of $12,292 million ($11,145 million after tax)after-tax) in our consolidated Statement of Earnings (Loss).
Assets and liabilities of businesses held for sale primarily comprise the remaining Lighting business within Corporate and the remaining PK AirFinance business within our Capital segment.
|
| | | | | | |
ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE (In millions) | March 31, 2020 |
| December 31, 2019 |
|
|
|
|
|
Current receivables | $ | 217 |
| $ | 499 |
|
Inventories | 160 |
| 712 |
|
Financing receivables held for sale | 197 |
| 197 |
|
Property, plant, and equipment | 77 |
| 958 |
|
Goodwill and Other intangible assets - net | 169 |
| 6,286 |
|
Valuation allowance | (412 | ) | (719 | ) |
Deferred income taxes | — |
| 815 |
|
All other assets | 97 |
| 400 |
|
Assets of businesses held for sale | $ | 506 |
| $ | 9,149 |
|
|
|
|
Accounts payable & Progress collections and deferred income | $ | 135 |
| $ | 843 |
|
Non-current compensation and benefits | — |
| 466 |
|
All other liabilities | 84 |
| 349 |
|
Liabilities of businesses held for sale | $ | 219 |
| $ | 1,658 |
|
DISCONTINUED OPERATIONS. Discontinued operations primarily include our Baker Hughes and Transportation segments, and certain businesses inPrimarily comprise our GE Capital segment (ourAviation Services (GECAS) business, our mortgage portfolio in Poland, and other trailing assets and liabilities associated with the saledispositions of ourcertain GE Capital businesses).and GE Industrial businesses. Results of operations, financial position and cash flows for these businesses are reported as discontinued operations for all periods presented.
In September 2019,GECAS. On March 9, 2021 we reducedentered into an agreement with AerCap Holdings N.V. (AerCap) to combine our GECAS business with AerCap. GE will receive total consideration consisting of $23,905 million cash subject to contractual closing adjustments, 111.5 million shares of AerCap common stock (approximately 46% ownership interestinterest) valued at $6,550 million based on the AerCap’s closing share price of $58.74 on March 31, 2021 and $1,000 million paid in Baker Hughes from 50.2% to 36.8% andAerCap notes and/or cash upon closing at AerCap's option. As a result, we have reclassified itsGECAS' results to discontinued operations for all periods presented.presented and recognized a non-cash after-tax loss of $2,755 million in discontinued operations in the first quarter of 2021. Given the economics of GECAS accrue to AerCap in conjunction with the transaction, the net impact of GECAS (loss on sale and operations) could change materially, mainly due to fluctuations in AerCap's closing share price. Completion of the transaction remains subject to AerCap shareholder approval, regulatory approvals and other customary closing conditions.
After completion of the transaction, we will elect to prospectively measure our investment in AerCap at fair value and expect to have continuing involvement with AerCap, primarily through our ownership interest and ongoing sales or leases of products and services.
Bank BPH. The mortgage portfolio in Poland (Bank BPH) comprises floating rate residential mortgages, 86% of which are indexed to or denominated in foreign currencies (primarily Swiss francs). At March 31, 2021, the total portfolio had a carrying value of $1,986 million with a 1.67% 90-day delinquency rate and an average loan to value ratio of approximately 61.6%. The portfolio is recorded at the lower of cost or fair value, less cost to sell, which reflects market yields as well as estimates with respect to ongoing litigation in Poland related to foreign currency-denominated mortgages and other factors. Earnings from discontinued operations for the three months ended March 31, 2021 included $282 million non-cash pre-tax charges, reflecting estimates with respect to ongoing litigation as well as market yields. Future changes in the estimated legal liabilities or market yields could result in further losses related to these loans in future reporting periods. See Note 21 for further information.
Baker Hughes (BKR).We have continuing involvement with Baker HughesBKR primarily through our remaining interest, ongoing purchases and sales of products and services, transition services that we provide to Baker HughesBKR, as well as an aeroderivative joint venture which(JV) we formed with Baker HughesBKR in the fourth quarter of 2019. The JV is jointly controlled by GE and currently consolidate. BKR and is consolidated by GE due to the significance of our investment in BKR.
For the three months ended March 31, 2021, we had sales of $166 million and purchases of $61 million with BKR for products and services outside of the JV. We collected net cash of $131 million from BKR related to sales, purchases and transition services.
In the first quarter of 2020,2021, we had sales and purchases of $119 million to BKR for products and services with Baker Hughesfrom the JV, and affiliates of $290 million and $36 million, respectively. We havewe collected net cash of $415 million$161 million. When our investment in BKR is reduced to below 20%, we will deconsolidate the JV. A deconsolidation of the JV is not expected to have a material impact on GE Industrial Cash from Baker Hughes related to theseoperating activities including $106(CFOA).
In addition, we received $28 million of repayments on the promissory note. In addition, in the first quarternote receivable from BKR and dividends of 2020 we received a dividend of $68$56 million from Baker Hughes.on our investment.
In February 2019, we completed the spin-off and subsequent merger of our Transportation business with Wabtec. As a result, we recorded a gain of $3,471 million ($2,508 million after-tax) in discontinued operations.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| | RESULTS OF DISCONTINUED OPERATIONS (In millions) | Baker Hughes | | Transportation | | GE Capital | | Total | |
Three months ended March 31 | 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 | |
RESULTS OF DISCONTINUED OPERATIONS | | RESULTS OF DISCONTINUED OPERATIONS | | Three months ended March 31 | |
| | | | | | | | | | 2021 | 2020 | |
Operations | | | | | | | | Operations | | | |
Sales of goods and services | $ | — |
| $ | 5,616 |
| | $ | — |
| $ | 549 |
| | $ | — |
| $ | — |
| | $ | — |
| $ | 6,165 |
| |
| GE Capital revenues from services | — |
| — |
| | — |
| — |
| | (76 | ) | 39 |
| | (76 | ) | 39 |
| GE Capital revenues from services | | $ | 633 | | $ | 1,010 | | |
Cost of goods and services sold | — |
| (4,677 | ) | | — |
| (478 | ) | | — |
| — |
| | — |
| (5,155 | ) | Cost of goods and services sold | | (368) | | (547) | | |
Other costs and expenses | — |
| (787 | ) | | (4 | ) | (9 | ) | | (85 | ) | (74 | ) | | (89 | ) | (870 | ) | |
Other income, costs and expenses | | Other income, costs and expenses | | (386) | | (462) | | |
| | | | | | | | | | | |
Earnings (loss) of discontinued operations before income taxes | — |
| 152 |
| | (4 | ) | 62 |
| | (161 | ) | (35 | ) | | (165 | ) | 179 |
| Earnings (loss) of discontinued operations before income taxes | | (121) | | 2 | | |
Benefit (provision) for income taxes | (13 | ) | (82 | ) | | 7 |
| (12 | ) | | (3 | ) | 25 |
| | (9 | ) | (70 | ) | Benefit (provision) for income taxes | | (29) | | (19) | | |
Earnings (loss) of discontinued operations, net of taxes(a) | $ | (13 | ) | $ | 70 |
| | $ | 3 |
| $ | 50 |
| | $ | (164 | ) | $ | (10 | ) | | $ | (174 | ) | $ | 109 |
| |
Earnings (loss) of discontinued operations, net of taxes(a)(b) | | Earnings (loss) of discontinued operations, net of taxes(a)(b) | | $ | (149) | | $ | (17) | | |
| | | | | | | | | | | |
Disposal | | | | | | | | Disposal | | | |
Gain (loss) on disposal before income taxes | (4 | ) | — |
| | — |
| 3,471 |
| | — |
| 47 |
| | (4 | ) | 3,518 |
| Gain (loss) on disposal before income taxes | | (2,702) | | (4) | | |
Benefit (provision) for income taxes | — |
| — |
| | — |
| (963 | ) | | — |
| (2 | ) | | — |
| (964 | ) | Benefit (provision) for income taxes | | (43) | | 0 | | |
Gain (loss) on disposal, net of taxes | $ | (4 | ) | $ | — |
| | $ | — |
| $ | 2,508 |
| | $ | — |
| $ | 45 |
| | $ | (4 | ) | $ | 2,553 |
| Gain (loss) on disposal, net of taxes | | $ | (2,745) | | $ | (4) | | |
| | | | | | | | | | | |
Earnings (loss) from discontinued operations, net of taxes | $ | (17 | ) | $ | 70 |
| | $ | 3 |
| $ | 2,558 |
| | $ | (164 | ) | $ | 35 |
| | $ | (178 | ) | $ | 2,663 |
| Earnings (loss) from discontinued operations, net of taxes | | $ | (2,894) | | $ | (21) | | |
(a) Earnings (loss) of discontinued operations attributable to the Company after income taxes was $(172)$(149) million and $76$(15) million for the three months ended March 31, 20202021 and 20192020, respectively.
(b) Included $177 million and $155 million from GECAS operations, including $(359) million and $(545) million of depreciation and amortization, for the three months ended March 31, 2021 and 2020, respectively. Depreciation and amortization ceased on March 10, 2021.
|
| | | | | | |
ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS (In millions) | March 31, 2020 |
| December 31, 2019 |
|
|
|
|
Cash, cash equivalents and restricted cash | $ | 437 |
| $ | 638 |
|
Investment securities | 170 |
| 202 |
|
Current receivables | 63 |
| 81 |
|
Financing receivables held for sale (Polish mortgage portfolio) | 2,371 |
| 2,485 |
|
Property, plant, and equipment | 117 |
| 123 |
|
Deferred income taxes | 211 |
| 264 |
|
All other assets | 285 |
| 317 |
|
Assets of discontinued operations | $ | 3,653 |
| $ | 4,109 |
|
|
|
|
Accounts payable & Progress collections and deferred income | $ | 22 |
| $ | 40 |
|
All other liabilities (a) | 117 |
| 163 |
|
Liabilities of discontinued operations | $ | 139 |
| $ | 203 |
|
| | | | | | | | |
ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS | March 31, 2021 | December 31, 2020 |
Cash, cash equivalents and restricted cash | $ | 142 | | $ | 0 | |
Financing receivables - net | 2,095 | | 0 | |
Other GE Capital receivables | 2,122 | | 0 | |
Property, plant, and equipment - net | 28,143 | | 0 | |
Valuation allowance on disposal group classified as discontinued operations | (2,536) | | 0 | |
All other current assets | 3,957 | | 0 | |
Total current assets of discontinued operations | 33,922 | | 0 | |
Cash, cash equivalents and restricted cash | 483 | | 623 | |
Financing receivables - net | 0 | | 2,710 | |
Other GE Capital receivables | 49 | | 1,844 | |
Financing receivables held for sale (Polish mortgage portfolio) | 1,986 | | 2,461 | |
Property, plant, and equipment - net | 102 | | 28,429 | |
All other assets | 389 | | 4,683 | |
Assets of discontinued operations(a) | $ | 36,931 | | $ | 40,749 | |
| | |
Deferred income taxes | $ | 2,268 | | $ | 0 | |
Accounts payable and all other liabilities | 2,723 | | 0 | |
Total current liabilities of discontinued operations | 4,991 | | 0 | |
Deferred income taxes | 0 | | 2,172 | |
Accounts payable and all other liabilities(b) | 204 | | 3,010 | |
Liabilities of discontinued operations(a) | $ | 5,195 | | $ | 5,182 | |
(a) Included $33,922 million and $37,199 million of assets and $4,991 million and $4,997 million of liabilities for GECAS as of March 31, 2021 and December 31, 2020, respectively.
(b) Included within All other liabilities of discontinued operations at March 31, 20202021 and December 31, 20192020 are intercompany tax receivables in the amount of $880$657 million and $839$704 million, respectively, primarily related to thepreviously disposed financial services businesses, that were part of the GE Capital Exit Plan, which are offset within All other liabilities of consolidated GE.eliminated upon consolidation.
NOTE 3. INVESTMENT SECURITIESSECURITIES.
All of our debt securities are classified as available-for-sale and substantially all are investment-grade debt securities supporting obligations to annuitants and policyholders in our run-off insurance operations. Changes inWe have adopted the fair value option for our investment in BKR (comprising 311.4 million shares with approximately 30% ownership and a promissory note receivable as of our debt securities areMarch 31, 2021), which is recorded in other comprehensive income.as Equity securities with readily determinable fair valuesvalues. We classify investment securities as current or non-current based on our intent regarding the usage of proceeds from those investments. Investment securities held within insurance entities are included within this caption and changes in their fair value are recorded in earnings.classified as non-current as they support the long-duration insurance liabilities.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair value | | Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair value |
Equity (Baker Hughes) | $ | 6,741 | | $ | — | | $ | — | | $ | 6,741 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | |
Current investment securities | $ | 6,741 | | $ | — | | $ | — | | $ | 6,741 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | |
Debt | | | | | | | | | |
U.S. corporate | $ | 24,159 | | $ | 4,616 | | $ | (79) | | $ | 28,695 | | | $ | 23,604 | | $ | 6,651 | | $ | (26) | | $ | 30,230 | |
Non-U.S. corporate | 2,456 | | 273 | | (5) | | 2,724 | | | 2,283 | | 458 | | (1) | | 2,740 | |
State and municipal | 3,409 | | 648 | | (19) | | 4,038 | | | 3,387 | | 878 | | (9) | | 4,256 | |
Mortgage and asset-backed | 3,725 | | 153 | | (63) | | 3,815 | | | 3,652 | | 171 | | (71) | | 3,752 | |
Government and agencies | 1,166 | | 112 | | (3) | | 1,275 | | | 1,169 | | 184 | | 0 | | 1,353 | |
Other equity | 239 | | — | | — | | 239 | | | 218 | | — | | — | | 218 | |
Non-current investment securities | $ | 35,152 | | $ | 5,801 | | $ | (168) | | $ | 40,786 | | | $ | 34,313 | | $ | 8,342 | | $ | (106) | | $ | 42,549 | |
Total | $ | 41,893 | | $ | 5,801 | | $ | (168) | | $ | 47,527 | | | $ | 41,632 | | $ | 8,342 | | $ | (106) | | $ | 49,868 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2020 |
| December 31, 2019 |
(In millions) | Amortized cost |
| Gross unrealized gains |
| Gross unrealized losses |
| Estimated fair value |
|
| Amortized cost |
| Gross unrealized gains |
| Gross unrealized losses |
| Estimated fair value |
|
|
|
|
|
|
|
|
|
|
|
Debt |
|
|
|
|
|
|
|
|
|
U.S. corporate | $ | 23,167 |
| $ | 3,795 |
| $ | (493 | ) | $ | 26,470 |
|
| $ | 23,037 |
| $ | 4,636 |
| $ | (11 | ) | $ | 27,661 |
|
Non-U.S. corporate | 2,155 |
| 150 |
| (60 | ) | 2,246 |
|
| 2,161 |
| 260 |
| (1 | ) | 2,420 |
|
State and municipal | 3,090 |
| 638 |
| (21 | ) | 3,708 |
|
| 3,086 |
| 598 |
| (15 | ) | 3,669 |
|
Mortgage and asset-backed | 3,296 |
| 51 |
| (143 | ) | 3,205 |
|
| 3,117 |
| 116 |
| (4 | ) | 3,229 |
|
Government and agencies | 1,269 |
| 157 |
| — |
| 1,427 |
|
| 1,391 |
| 126 |
| — |
| 1,516 |
|
Equity | 5,245 |
| — |
| — |
| 5,245 |
|
| 10,025 |
| — |
| — |
| 10,025 |
|
Total | $ | 38,223 |
| $ | 4,792 |
| $ | (716 | ) | $ | 42,299 |
|
| $ | 42,816 |
| $ | 5,736 |
| $ | (31 | ) | $ | 48,521 |
|
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
The amortized cost of debt securities as of March 31, 20202021 excludes accrued interest of $432$438 million,, which is reported in current Other GE Capital receivables.
The estimated fair valuesvalue of investment securities at March 31, 20202021 decreased since December 31, 2019,2020, primarily due to higher market yields and the sale of BKR shares, partially offset by new investments in our Insurance business and the mark-to-market effectseffect on our remaining interest in Baker Hughes, as well as an increase in market interest rates as a result of a significant widening in credit spreads, a significant decline in oil prices and a challenging liquidity environment. TheBKR.
Total estimated fair value of remaining Baker Hughes interestdebt securities in an unrealized loss position were $3,732 million and promissory note receivable was $4,083$1,765 million, at March 31, 2020.
Grossof which $644 million and $165 million had gross unrealized losses of $(685)$(56) million and $(31)$(20) million are associated with debt securities with a fair value of $6,253 million and $173 million that havehad been in a loss position for less than 12 months and 12 months or more respectively, at March 31, 2020.2021 and December 31, 2020, respectively. Gross unrealized losses of $(11)$(168) million and $(20) million are associated with debt securities with a fair value of $724 million and $274 million that have been in a loss position for less than 12 months and 12 months or more, respectively, at December 31, 2019.
At March 31, 2020, gross unrealized losses of $(716) million2021 included $(493)$(79) million related to U.S. corporate securities and $(114)$(57) million related to commercial mortgage-backed securities (CMBS). Of the U.S. corporate securities in an unrealized loss position, $(313) million and $(57) million related to the energy and consumer industries, respectively. SubstantiallyPrimarily all of our CMBS in an unrealized loss position have received investment-grade credit ratings from the major rating agencies and are collateralized by pools of commercial mortgage loans on real estate.
With respect to our debt securities that are in an unrealized loss position at March 31, 2020, our current intention is to hold them at least until such time as their individual fair values exceed their amortized cost and based upon the long duration of our insurance liabilities, we have the ability to hold all such debt securities until their maturities. We assessed debt securities in an unrealized loss position for credit losses and recognized an allowance for credit losses on investment securities of $(24) million for the three months ending March 31, 2020. In addition to our qualitative and quantitative evaluation criteria, our credit loss assessment at March 31, 2020 considered the continuing market deterioration that resulted in the lack of liquidity and the historic levels of price volatility and credit spreads in the fixed income market. With respect to corporate bonds, we evaluated the credit quality of the issuers. With respect to CMBS, we evaluated the cash flows from the underlying collateral.
Net unrealized gains (losses) for equity securities with readily determinable fair values, which are recorded in Other income within continuing operations, were $(5,772)$238 million and an insignificant amount$(5,772) million for the three months ended March 31, 2021 and 2020, and 2019, respectively. The amount recognized in the three months ended March 31, 2020 primarily included a loss of $(5,710) million related to our interest in Baker Hughes and $(85) million at GE Capital, predominantly from fixed income exchange traded funds supporting our insurance liabilities and annuity benefits.
Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the Baker HughesBKR promissory note totaled $1,250$1,333 million and $1,421$1,250 million for the three months ended March 31, 20202021 and 2019,2020, respectively. Gross realized gains on investment securities were $46$30 million and $44$46 million and gross realized losses and impairments were $(17)$(60) million and $(39)$(17) million for the three months ended March 31, 2021 and 2020, and 2019, respectively.
Contractual maturities of investments inour debt securities (excluding mortgage and asset-backed securities) at March 31, 20202021 are as follows:
|
| | | | | | |
(In millions) | Amortized cost |
| Estimated fair value |
|
| | |
Due | | |
Within one year | $ | 610 |
| $ | 621 |
|
After one year through five years | 2,328 |
| 2,400 |
|
After five years through ten years | 6,616 |
| 7,226 |
|
After ten years | 20,128 |
| 23,603 |
|
| | | | | | | | |
| Amortized cost | Estimated fair value |
Within one year | $ | 613 | | $ | 622 | |
After one year through five years | 3,111 | | 3,396 | |
After five years through ten years | 6,579 | | 7,626 | |
After ten years | 20,886 | | 25,088 | |
We expect actual maturities to differ from contractual maturities because issuersborrowers have the right to call or prepay certain obligations.
Substantially all our equity securities are classified within Level 1 and substantially all our debt securities are classified within Level 2, as their valuation is determined based on significant observable inputs. Investments with a fair value of $5,046$5,641 million and $5,210$5,866 million wereare classified within Level 3, as significant inputs to the valuation model are unobservable at March 31, 20202021 and December 31, 2019,2020, respectively. During the three months ended March 31, 20202021 and 2019,2020, there were no significant transfers into or out of Level 3.
In addition to the equity securities described above, we hold $429$291 million and $517$274 million of equity securities without readily determinable fair valuevalues at March 31, 20202021 and December 31, 2019,2020, respectively, that are classified within non-current All other assets in our consolidated Statement of Financial Position. Fair value adjustments, including impairments, recorded in earnings were $(93) million and an insignificant amount and $(93) million for the three months ended March 31, 20202021 and 2019,2020, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 4. CURRENT AND LONG-TERM RECEIVABLES
|
| | | | | | | | | | | | | |
CURRENT RECEIVABLES | Consolidated |
| GE |
(In millions) | March 31, 2020 |
| December 31, 2019 |
|
| March 31, 2020 |
| December 31, 2019 |
|
|
|
|
|
|
|
Customer receivables(a) | $ | 12,877 |
| $ | 12,594 |
|
| $ | 8,920 |
| $ | 9,507 |
|
Sundry receivables(b) | 4,976 |
| 5,049 |
| | 5,082 |
| 5,247 |
|
Allowance for losses | (929 | ) | (874 | ) |
| (926 | ) | (872 | ) |
Total current receivables | $ | 16,925 |
| $ | 16,769 |
|
| $ | 13,076 |
| $ | 13,883 |
|
| | | | | | | | | | | | | | | | | |
CURRENT RECEIVABLES | Consolidated | | GE Industrial |
| March 31, 2021 | December 31, 2020 | | March 31, 2021 | December 31, 2020 |
Customer receivables | $ | 12,441 | | $ | 13,459 | | | $ | 9,307 | | $ | 9,841 | |
Sundry receivables(a)(b) | 4,106 | | 4,395 | | | 4,274 | | 4,763 | |
Allowance for credit losses(c) | (1,165) | | (1,164) | | | (1,163) | | (1,161) | |
Total current receivables | $ | 15,381 | | $ | 16,691 | | | $ | 12,418 | | $ | 13,442 | |
(a) Includes receivables from Boeing due to 737 MAX temporary fleet grounding of $1,407 million and $1,397 million as of March 31, 2020 and December 31, 2019, respectively.
(b) Includes supplier advances, revenue sharing programs receivables in our Aviation business, other non-income based tax receivables, primarily value-added tax related to our operations in various countries outside of the U.S., receivables from disposed businesses, including receivables for transactional services agreements and certain intercompany balances that eliminate upon consolidationconsolidation. Revenue sharing program receivables in Aviation are amounts due from third parties who participate in engine programs by developing and supplying certain engine components through the life of the program. The participants share in program revenues, receive a share of customer progress payments and share costs related to discounts and warranties.
(b) Consolidated current receivables included a deferred purchase price. The deferred purchase price receivable, which represents our retained risk with respect to current customer receivables sold to third parties through one of the receivable facilities. The balance of the deferred purchase price held by GE Capital atas of March 31, 20202021 and December 31, 20192020 was $502$461 million and $421$413 million, respectively.
(c) GE Industrial allowance for credit losses primarily increased due to net new provisions of $39 million offset by write-offs and foreign currency impact.
Sales of GE Industrial current customer receivables. When GE Industrial sells customer receivables to GE Capital or third parties, it accelerates the receipt of cash that would otherwise have been collected from customers. In any given period, the amount of cash received from sales of customer receivables compared to the cash GE Industrial would have otherwise collected had those customer receivables not been sold represents the cash generated or used in the period relating to this activity. GE Industrial sales of customer receivables to GE Capital or third parties are made on arm's lengtharms-length terms and any discount related to time value of money is recognized by GE Industrial when the customer receivables are sold. In our Statement of Cash Flows, receivables purchased and retained by GE Capital are reflected as cash from operating activities at GE Industrial, primarily as cash used for investing activities at GE Capital and are eliminated in consolidation. Collections on receivables purchased by GE Capital are reflected primarily as cash from investing activities at GE Capital and are reclassified to cash from operating activities in consolidation. As of March 31, 2021 and 2020, and 2019, GE Industrial sold approximately 49%38% and 65%49%, respectively, of its gross customer receivables to GE Capital or third parties. Effective April 1, 2021, the Company discontinued the majority of its factoring programs. Activity related to customer receivables sold by GE Industrial is as follows: | | (In millions) | 2020 |
| 2019 | |
| GE Capital |
|
| Third Parties |
| GE Capital |
|
| Third Parties | | 2021 | | 2020 |
|
|
|
|
|
|
|
| | GE Capital | | Third Parties | | GE Capital | | Third Parties |
Balance at January 1 | $ | 3,087 |
|
| $ | 6,757 |
|
| $ | 4,386 |
|
| $ | 7,880 |
| Balance at January 1 | $ | 3,618 | | | $ | 2,992 | | | $ | 3,087 | | | $ | 6,757 | |
GE sales to GE Capital | 9,225 |
|
| — |
|
| 9,690 |
|
| — |
| |
GE sales to third parties | — |
|
| 515 |
|
| — |
|
| 1,376 |
| |
GE Industrial sales to GE Capital | | GE Industrial sales to GE Capital | 7,044 | | | — | | | 9,225 | | | — | |
GE Industrial sales to third parties | | GE Industrial sales to third parties | — | | | 124 | | | — | | | 307 | |
GE Capital sales to third parties | (5,253 | ) |
| 5,253 |
|
| (6,591 | ) |
| 6,591 |
| GE Capital sales to third parties | (3,826) | | | 3,826 | | | (5,253) | | | 5,253 | |
Collections and other | (3,224 | ) |
| (8,005 | ) |
| (3,967 | ) |
| (8,123 | ) | Collections and other | (3,765) | | | (4,360) | | | (3,224) | | | (7,797) | |
Reclassification from long-term customer receivables | 123 |
|
| — |
|
| 140 |
|
| — |
| Reclassification from long-term customer receivables | 63 | | | 0 | | | 123 | | | 0 | |
Balance at March 31 | $ | 3,958 |
| (a)(b) | $ | 4,519 |
|
| $ | 3,657 |
| (a) | $ | 7,724 |
| Balance at March 31 | $ | 3,134 | | (a) | $ | 2,582 | | (b) | $ | 3,958 | | (a) | $ | 4,519 | |
(a) At March 31, 2021 and 2020, and 2019, $557$526 million and $1,248$557 million, respectively, of the current receivables purchased and retained by GE Capital had been sold by GE Industrial to GE Capital with recourse (i.e., GE Industrial retains all or some risk of default). The effect on GE Industrial CFOA of claims by GE Capital on receivables sold with recourse was insignificant for the three months ended March 31, 20202021 and 2019. 2020.
(b) The $871Included $1,863 million increase in our active unconsolidated receivables facility at March 31, 2021, under which we currently expect to continue sales of GE currentIndustrial receivables purchased and retained by GE Capital in the quarter was driven by a plan to use excess liquidity in GE Capital to purchase and retain GE current receivables. GE Aviation receivables were substantially all of the increase and approximately $288 million of that increase can be attributed to lower third-party demand for certain GE Aviation receivables.future.
LONG-TERM RECEIVABLES. In certain circumstances, GE provides customers, primarily within our Power, Renewable Energy and Aviation businesses, with extended payment terms for the purchase of new equipment, purchases of upgrades and spare parts for our long-term service agreements. These long-term customer receivables are initially recorded at present value and have an average remaining duration of approximately three years and are included in All other assets in the consolidated Statement of Financial Position.
| | | Consolidated | | GE | |
(In millions) | March 31, 2020 |
| December 31, 2019 |
| | March 31, 2020 |
| December 31, 2019 |
| |
LONG-TERM RECEIVABLES | | LONG-TERM RECEIVABLES | Consolidated | | GE Industrial |
| | | | | March 31, 2021 | December 31, 2020 | | March 31, 2021 | December 31, 2020 |
Long-term customer receivables(a) | $ | 756 |
| $ | 906 |
|
| $ | 492 |
| $ | 506 |
| Long-term customer receivables(a) | $ | 638 | | $ | 585 | | | $ | 601 | | $ | 474 | |
Long-term sundry receivables(b) | 1,437 |
| 1,504 |
| | 1,647 |
| 1,834 |
| Long-term sundry receivables(b) | 1,656 | | 1,748 | | | 1,928 | | 2,097 | |
Allowance for losses | (131 | ) | (128 | ) |
| (131 | ) | (128 | ) | |
Allowance for credit losses | | Allowance for credit losses | (136) | | (142) | | | (136) | | (142) | |
Total long-term receivables | $ | 2,063 |
| $ | 2,282 |
|
| $ | 2,008 |
| $ | 2,212 |
| Total long-term receivables | $ | 2,158 | | $ | 2,191 | | | $ | 2,392 | | $ | 2,430 | |
(a) AtAs of March 31, 20202021 and December 31, 2019,2020, GE Capital held $265$37 million and $400$111 million, respectively, of GE Industrial long-term customer receivables, substantially all of which $222 million and $312 million had been purchasedare with recourse (i.e., GE Industrial retains all or some risk of default). The effect on GE cash flows from operating activities (CFOA) of claims on long-term receivables sold with recourse was insignificant for the three months ended March 31, 2020 and the year ended December 31, 2019.
(b) Includes supplier advances, revenue sharing programs receivables, other non-income based tax receivables and certain intercompany balances that eliminate upon consolidation.
Sales of GE long-term customer receivables.
Similar to sales of current customer receivables, sales of long-term customer receivables can result in cash generation or use in our consolidated Statement of Cash Flows. During the three months ended March 31, 2020 and 2019, GE Capital did not purchase any GE long-term customer receivables. Reductions in GE Capital outstanding GE long-term customer receivables were attributable to collections and reclassification to short-term receivables.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
UNCONSOLIDATED RECEIVABLES FACILITIES. GE Capital has 21 active revolving receivables facilities,facility, under which customer receivables purchased from GE Industrial are sold to third parties. In the firstthis facility, which has a program size of $3,100$2,000 million as of March 31, 2021, upon the sale of receivables, we receive proceeds of cash and deferred purchase price and the Company’s remaining risk with respect to the sold receivables is limited to the balance of the deferred purchase price. In the second facility, which has a program size of $600 million, upon the sale of receivables, we receive proceeds of cash only and therefore the Company has no remaining risk with respect to the sold receivables. The program size of the second facility reduced from $1,200 million to $600 million in March 2020. Current receivables that would otherwise have been sold to third parties were retained by GE Capital to utilize available funding.
Activity related to theseour unconsolidated receivables facilities is included in the GE Capital sales to third parties line in the sales of GE Industrial current customer receivables table above and is as follows:
| | | | | | | | | | | |
Three months ended March 31 | 2021 | | 2020 |
Customer receivables sold to receivables facilities | $ | 2,605 | | | $ | 4,307 | |
Total cash purchase price for customer receivables | 2,479 | | | 4,120 | |
Cash collections re-invested to purchase customer receivables | 2,274 | | | 3,723 | |
| | | |
Non-cash increases to deferred purchase price | $ | 116 | | | $ | 160 | |
Cash payments received on deferred purchase price | 68 | | | 78 | |
|
| | | | | | | |
Three months ended March 31 (In millions) | 2020 |
| | 2019 |
|
| | | |
Customer receivables sold to receivables facilities | $ | 4,307 |
| | $ | 5,175 |
|
Total cash purchase price for customer receivables | 4,120 |
| | 5,071 |
|
Cash collections re-invested to purchase customer receivables | 3,723 |
| | 4,253 |
|
| | | |
Non-cash increases to deferred purchase price | $ | 160 |
| | $ | 44 |
|
Cash payments received on deferred purchase price | 78 |
| | 61 |
|
CONSOLIDATED SECURITIZATION ENTITIES. GE Capital consolidates 3 variable interest entities (VIEs) that purchased customer receivables and long-term customer receivables from GE.GE Industrial. At March 31, 20202021 and December 31, 20192020, these VIEs held current customer receivables of $1,619$1,133 million and $2,080$1,489 million and long-term customer receivables of $251$29 million and $375$93 million, respectively. At March 31, 20202021 and December 31, 2019,2020, the outstanding non-recourse debt under their respective debt facilities was $644$624 million and $1,655$892 million, respectively.
NOTE 5. FINANCING RECEIVABLES AND ALLOWANCES
| | | | | | | | | | | | | | | | | |
| Consolidated | | GE Capital |
| March 31, 2021 | December 31, 2020 | | March 31, 2021 | December 31, 2020 |
Loans, net of deferred income | $ | 337 | | $ | 359 | | | $ | 3,749 | | $ | 4,182 | |
Allowance for losses | (31) | | (32) | | | (11) | | (10) | |
Current financing receivables - net | $ | 306 | | $ | 326 | | | $ | 3,738 | | $ | 4,172 | |
|
| | | | | | | | | | | | | |
| Consolidated |
| GE Capital |
(In millions) | March 31, 2020 |
| December 31, 2019 |
|
| March 31, 2020 |
| December 31, 2019 |
|
|
|
|
|
|
|
Loans, net of deferred income | $ | 1,141 |
| $ | 1,098 |
|
| $ | 5,568 |
| $ | 4,927 |
|
Investment in financing leases, net of deferred income | 1,921 |
| 2,070 |
|
| 1,921 |
| 2,070 |
|
| 3,062 |
| 3,168 |
|
| 7,489 |
| 6,996 |
|
Allowance for losses | (65 | ) | (33 | ) |
| (33 | ) | (17 | ) |
Financing receivables – net | $ | 2,998 |
| $ | 3,134 |
|
| $ | 7,457 |
| $ | 6,979 |
|
Consolidated finance lease income was $43 million and $46 million in the three months ended March 31, 2020 and 2019, respectively.
We manage our GE Capital financing receivables portfolio using delinquency and nonaccrual data as key performance indicators. At March 31, 2020, 6.2%, 2.8%2021 and 5.7% ofDecember 31, 2020, financing receivables were over 30 days past due overwere 3.7% and 2.8% and 90 days past due were 1.6% and on nonaccrual, respectively, with the vast majority of nonaccrual financing receivables secured by collateral. At December 31, 2019, 4.2%1.7%, 2.9% and 6.1% of financing receivables were over 30 days past due, over 90 days past due and on nonaccrual, respectively.
GE Capital financing receivables that comprise receivables purchased from GE Industrial are reclassified to either Current receivables or All other assets in theour consolidated Statement of Financial Position. To the extent these receivables are purchased with full or limited recourse, they are excluded from the delinquency and nonaccrual data above. See Note 4 for further information.
NOTE 6. INVENTORIES, INCLUDING DEFERRED INVENTORY COSTS
| | | | | | | | |
| March 31, 2021 | December 31, 2020 |
Raw materials and work in process | $ | 8,013 | | $ | 7,937 | |
Finished goods | 6,057 | | 5,654 | |
Deferred inventory costs(a) | 2,460 | | 2,299 | |
Inventories, including deferred inventory costs | $ | 16,530 | | $ | 15,890 | |
|
| | | | | | |
(In millions) | March 31, 2020 |
| December 31, 2019 |
|
| | |
Raw materials and work in process | $ | 9,192 |
| $ | 8,771 |
|
Finished goods | 6,265 |
| 5,333 |
|
Total inventories | $ | 15,457 |
| $ | 14,104 |
|
(a) Represents cost deferral for shipped goods (such as components for wind turbine assemblies within our Renewable Energy segment) and labor and overhead costs on time and material service contracts (primarily originating in Power and Aviation) and other costs for which the criteria for revenue recognition has not yet been met.
NOTE 7. PROPERTY, PLANT AND EQUIPMENT
| | PROPERTY, PLANT AND EQUIPMENT (In millions) | March 31, 2020 |
| December 31, 2019 |
| |
|
| | March 31, 2021 | December 31, 2020 |
Original cost | $ | 75,619 |
| $ | 75,187 |
| Original cost | $ | 31,893 | | $ | 32,098 | |
Less accumulated depreciation and amortization | (32,453 | ) | (31,897 | ) | Less accumulated depreciation and amortization | (18,405) | | (18,251) | |
Right-of-use operating lease assets | | Right-of-use operating lease assets | 2,808 | | 2,852 | |
Property, plant and equipment – net | $ | 43,166 |
| $ | 43,290 |
| Property, plant and equipment – net | $ | 16,296 | | $ | 16,699 | |
Consolidated depreciation and amortization on property, plant and equipment was $991$452 million and $995$461 million for the three months ended March 31, 20202021 and 2019, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Operating lease income on our equipment leased to others, primarily from our GECAS business, was $876 million and $932 million for the three months ended March 31, 2020 and 2019, respectively, and comprises fixed lease income of $705 million and $764 million and variable lease income of $171 million and $168 million, respectively.
Operating Lease Assets and Liabilities. Our consolidated Right of use operating lease (ROU) assets, included within property, plant and equipment in our Statement of Financial Position were $2,813 million and $2,896 million, as of March 31, 2020 and December 31, 2019, respectively. Our consolidated operating lease liabilities, included in All other liabilities in our Statement of Financial Position, were $3,067$3,143 million and $3,162$3,195 million, as of March 31, 20202021 and December 31, 2019,2020, respectively, which included GE Industrial operating lease liabilities of $3,266$3,083 million and $3,369$3,133 million, respectively. Expense on our operating lease portfolio, primarily from our long-term fixed leases, was $281 million and $294 million for the three months ended March 31, 2021 and 2020, respectively.
|
| | | | | | | |
OPERATING LEASE EXPENSE | Three months ended March 31 |
(In millions) | 2020 |
| | 2019 |
|
| | | |
Long-term (fixed) | $ | 177 |
| | $ | 225 |
|
Long-term (variable) | 21 |
| | 44 |
|
Short-term | 68 |
| | 47 |
|
Total operating lease expense | $ | 266 |
| | $ | 317 |
|
NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
| | | | | | | | | | | | | |
GOODWILL | January 1, 2021 | | | Currency exchange and other | Balance at March 31, 2021 |
Power | $ | 146 | | | | $ | 0 | | $ | 145 | |
Renewable Energy | 3,401 | | | | (88) | | 3,313 | |
Aviation | 9,247 | | | | (103) | | 9,144 | |
Healthcare | 11,855 | | | | (15) | | 11,840 | |
| | | | | |
Corporate | 876 | | | | 1 | | 877 | |
Total | $ | 25,524 | | | | $ | (204) | | $ | 25,320 | |
|
| | | | | | | | | | | | |
GOODWILL (In millions) | January 1, 2020 |
| Dispositions and classification to held for sale |
| Currency exchange and other |
| Balance at March 31, 2020 |
|
|
|
| |
|
|
Power | $ | 145 |
| $ | — |
| $ | — |
| $ | 145 |
|
Renewable Energy | 3,290 |
| — |
| (74 | ) | 3,216 |
|
Aviation | 9,859 |
| — |
| (41 | ) | 9,818 |
|
Healthcare | 11,728 |
| — |
| (17 | ) | 11,711 |
|
Capital | 839 |
| — |
| — |
| 839 |
|
Corporate | 873 |
| — |
| (5 | ) | 869 |
|
Total | $ | 26,734 |
| $ | — |
| $ | (136 | ) | $ | 26,598 |
|
In assessing the possibility that a reporting unit’s fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates, we consider all available evidence, including (i) the results of our impairment testing from the most recent testing date, (in particular, the magnitude of the excess of fair value over carrying value observed), (ii) downward revisions to internal forecasts or decreases in market multiples, (and the magnitude thereof), if any, and (iii) declines in market capitalization below book value (and the magnitude and duration of those declines), if any.
capitalization. In the first quarter of 2020,2021, we performed an analysis of the impact of recent events, including business and industry specific considerations, on the fair values of our Additive reporting unit in our Aviation segment, our GECAS reporting unit in our Capital segment, and our Grid Solutions software reporting unit in our Digital business within Corporate. We did not identify any reporting units that required an interim impairment test. While the goodwill of these reporting units is not currently impaired there can be no assurances that goodwill will not be impaired in future periods. We willHowever, we continue to monitor the operating results and cash flow forecasts and challenges from declinesof our Additive reporting unit in current market conditions,our Aviation segment as well as impactsthe fair value of COVID-19 for thesethis reporting units as their fair values areunit was not significantly in excess of their respectiveits carrying values.value. At March 31, 2020, goodwill in2021, our Additive GECAS, and Grid Solutions software reporting units was $1,091 million, $839unit had goodwill of $236 million.
All other intangible assets of $9,395 million and $869$9,671 million respectively.
|
| | | | | | |
OTHER INTANGIBLE ASSETS - NET (In millions) | March 31, 2020 |
| December 31, 2019 |
|
| | |
Intangible assets subject to amortization | $ | 10,381 |
| $ | 10,653 |
|
at March 31, 2021 and December 31, 2020, respectively, are subject to amortization. Intangible assets decreased in the first quarter of 2020,2021, primarily as a result of amortization. Consolidated amortization expense was $340$301 million and $367$318 million in the three months ended March 31, 20202021 and 2019,2020, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 9. REVENUESREVENUES.
The equipment and services revenues classification in the table below is consistent with our segment MD&A presentation.
| | | | | | | | | | | | | | | | | | | | | | | |
EQUIPMENT & SERVICES REVENUES | |
Three months ended March 31 | 2021 | | 2020 |
| Equipment | Services | Total | | Equipment | Services | Total |
Power | $ | 1,241 | | $ | 2,679 | | $ | 3,921 | | | $ | 1,506 | | $ | 2,518 | | $ | 4,025 | |
Renewable Energy | 2,844 | | 404 | | 3,248 | | | 2,576 | | 618 | | 3,194 | |
Aviation | 1,847 | | 3,145 | | 4,992 | | | 2,364 | | 4,529 | | 6,892 | |
Healthcare | 2,227 | | 2,081 | | 4,308 | | | 2,699 | | 2,029 | | 4,727 | |
Corporate items and industrial eliminations | (188) | | 49 | | (139) | | | (48) | | 54 | | 6 | |
Total GE Industrial revenues | $ | 7,971 | | $ | 8,358 | | $ | 16,329 | | | $ | 9,097 | | $ | 9,748 | | $ | 18,844 | |
|
| | | | | | | | | | | | | | | | | | | |
EQUIPMENT & SERVICES REVENUES | Three months ended March 31 |
(In millions) | 2020 | | 2019 |
| Equipment | Services | Total | | Equipment | Services | Total |
| | | | | | | |
Power | $ | 1,506 |
| $ | 2,518 |
| $ | 4,025 |
| | $ | 1,576 |
| $ | 3,041 |
| $ | 4,617 |
|
Renewable Energy | 2,576 |
| 618 |
| 3,194 |
| | 1,982 |
| 557 |
| 2,538 |
|
Aviation | 2,444 |
| 4,449 |
| 6,892 |
| | 3,113 |
| 4,841 |
| 7,954 |
|
Healthcare | 2,699 |
| 2,029 |
| 4,727 |
| | 2,653 |
| 2,029 |
| 4,683 |
|
Corporate items and industrial eliminations | (48 | ) | 54 |
| 6 |
| | 284 |
| 248 |
| 532 |
|
Total GE Industrial revenues | $ | 9,177 |
| $ | 9,668 |
| $ | 18,844 |
| | $ | 9,608 |
| $ | 10,716 |
| $ | 20,324 |
|
| | | | | | | | | | | | | | | |
REVENUES | Three months ended March 31 | | |
| 2021 | | 2020 | | | | |
Gas Power | $ | 2,829 | | | $ | 2,859 | | | | | |
Power Portfolio | 1,091 | | | 1,165 | | | | | |
Power | $ | 3,921 | | | $ | 4,025 | | | | | |
| | | | | | | |
Onshore Wind | $ | 2,118 | | | $ | 2,124 | | | | | |
Grid Solutions equipment and services | 795 | | | 839 | | | | | |
Hydro | 165 | | | 179 | | | | | |
Offshore Wind and Hybrid Solutions | 169 | | | 51 | | | | | |
Renewable Energy | $ | 3,248 | | | $ | 3,194 | | | | | |
| | | | | | | |
Commercial Engines & Services | $ | 3,354 | | | $ | 5,113 | | | | | |
Military | 956 | | | 960 | | | | | |
Systems & Other | 682 | | | 820 | | | | | |
Aviation | $ | 4,992 | | | $ | 6,892 | | | | | |
| | | | | | | |
Healthcare Systems | $ | 3,825 | | | $ | 3,448 | | | | | |
Pharmaceutical Diagnostics | 482 | | | 450 | | | | | |
BioPharma | 0 | | | 830 | | | | | |
Healthcare | $ | 4,308 | | | $ | 4,727 | | | | | |
| | | | | | | |
Corporate items and industrial eliminations | (139) | | | 6 | | | | | |
Total GE Industrial revenues | $ | 16,329 | | | $ | 18,844 | | | | | |
Capital | 878 | | | 837 | | | | | |
GE Capital-GE Industrial eliminations | $ | (89) | | | $ | (191) | | | | | |
Consolidated revenues | $ | 17,118 | | | $ | 19,490 | | | | | |
| | | | | | | |
|
|
| | | | | | | |
REVENUES | Three months ended March 31 |
(In millions) | 2020 |
| | 2019 |
|
| | | |
Gas Power | $ | 2,859 |
| | $ | 3,263 |
|
Power Portfolio | 1,165 |
| | 1,355 |
|
Power | $ | 4,025 |
| | $ | 4,617 |
|
| | | |
Onshore Wind | $ | 2,124 |
| | $ | 1,441 |
|
Grid Solutions equipment and services | 839 |
| | 917 |
|
Hydro, Offshore Wind and other | 230 |
| | 180 |
|
Renewable Energy | $ | 3,194 |
| | $ | 2,538 |
|
| | | |
Commercial Engines & Services | $ | 4,777 |
| | $ | 5,949 |
|
Military | 960 |
| | 1,036 |
|
Systems & Other | 1,156 |
| | 969 |
|
Aviation | $ | 6,892 |
| | $ | 7,954 |
|
| | | |
Healthcare Systems | $ | 3,448 |
| | $ | 3,433 |
|
Life Sciences(a) | 1,280 |
| | 1,251 |
|
Healthcare | $ | 4,727 |
| | $ | 4,683 |
|
| | | |
Corporate items and industrial eliminations | 6 |
| | 532 |
|
Total GE Industrial revenues | $ | 18,844 |
| | $ | 20,324 |
|
Capital | 1,923 |
| | 2,227 |
|
GE Capital-GE eliminations | $ | (244 | ) | | $ | (349 | ) |
Consolidated revenues | $ | 20,524 |
| | $ | 22,202 |
|
| | | |
(a) Includes revenues of $830 million and $765 million from BioPharma for the three months ended March 31, 2020 and 2019, respectively. |
REMAINING PERFORMANCE OBLIGATION. As of March 31, 2020,2021, the aggregate amount of the contracted revenues allocated to our unsatisfied (or partially unsatisfied) performance obligations was $240,381$226,962 million. We expect to recognize revenue as we satisfy our remaining performance obligations as follows: 1)(1) equipment-related remaining performance obligation of $45,171$40,951 million, of which 61%62%, 81%82% and 96%97% is expected to be satisfied within 1, 2 and 5 years, respectively,respectively; and the remaining thereafter; and 2)(2) services-related remaining performance obligation of $195,211$186,012 million, of which 12%15%, 44%47%, 71%67% and 82%83% is expected to be recognized within 1, 5, 10 and 15 years, respectively, and the remaining thereafter. Contract modifications could affect both the timing to complete as well as the amount to be received as we fulfill the related remaining performance obligations.
NOTE 10. CONTRACT AND OTHER DEFERRED ASSETS & PROGRESS COLLECTIONS AND DEFERRED INCOME
Contract and other deferred assets decreased $665increased $153 million in 2020.the three months ended March 31, 2021 primarily due to the timing of revenue recognition ahead of billing milestones on our long-term equipment contracts. Our long-term service agreements decreased primarily due to billings of $2,544$2,232 million, offset by revenues recognized of $2,118 million, a net favorable change in estimated profitability of $31 million at Aviation and a net unfavorable change in estimated profitability of $193$8 million at Aviation and $72 million at Power, offset by revenues recognized of $2,688 million. The change in estimated profitability at Aviation included a $100 million non-cash pre-tax charge (reduction in revenues and profit) to reflect the cumulative impacts of changes to assumptions for certain long-term service agreements. Additional adjustments are likely to occur in future periods and could be material as conditions related to COVID-19 continue to evolve.Power.
| | | | | | | | | | | | | | | | | | | | |
March 31, 2021 | Power | Aviation | Renewable Energy | Healthcare | Other | Total |
Revenues in excess of billings | $ | 5,223 | | $ | 2,911 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 8,134 | |
Billings in excess of revenues | (1,541) | | (5,347) | | 0 | | 0 | | 0 | | (6,888) | |
Long-term service agreements | $ | 3,682 | | $ | (2,436) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1,246 | |
Short-term and other service agreements | 139 | | 342 | | 109 | | 164 | | 16 | | 769 | |
Equipment contract revenues | 2,024 | | 36 | | 1,239 | | 289 | | 217 | | 3,805 | |
Current contract assets | $ | 5,845 | | $ | (2,058) | | $ | 1,348 | | $ | 454 | | $ | 232 | | $ | 5,821 | |
| | | | | | |
Nonrecurring engineering costs | 13 | | 2,436 | | 33 | | 29 | | 0 | | 2,511 | |
Customer advances and other | 783 | | 2,570 | | 0 | | 122 | | 0 | | 3,474 | |
Non-current contract and other deferred assets | $ | 796 | | $ | 5,005 | | $ | 33 | | $ | 151 | | $ | 0 | | $ | 5,985 | |
Total contract and other deferred assets | $ | 6,641 | | $ | 2,948 | | $ | 1,381 | | $ | 604 | | $ | 233 | | $ | 11,806 | |
| | | | | | | | | | | | | | | | | | | | |
December 31, 2020 | | | | | | |
Revenues in excess of billings | $ | 5,282 | | $ | 3,072 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 8,354 | |
Billings in excess of revenues | (1,640) | | (5,375) | | 0 | | 0 | | 0 | | (7,015) | |
Long-term service agreements | $ | 3,642 | | $ | (2,304) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1,338 | |
Short-term and other service agreements | 129 | | 282 | | 106 | | 173 | | 29 | | 719 | |
Equipment contract revenues | 2,015 | | 59 | | 1,127 | | 306 | | 201 | | 3,707 | |
Current contract assets | $ | 5,786 | | $ | (1,963) | | $ | 1,233 | | $ | 479 | | $ | 229 | | $ | 5,764 | |
| | | | | | |
Nonrecurring engineering costs | 16 | | 2,409 | | 34 | | 31 | | 0 | | 2,490 | |
Customer advances and other | 822 | | 2,481 | | 0 | | 128 | | (32) | | 3,398 | |
Non-current contract and other deferred assets | $ | 838 | | $ | 4,889 | | $ | 34 | | $ | 159 | | $ | (32) | | $ | 5,888 | |
Total contract and other deferred assets | $ | 6,623 | | $ | 2,927 | | $ | 1,268 | | $ | 638 | | $ | 197 | | $ | 11,653 | |
44
2020 1Q FORM 10-Q
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
| | | | | | | | | | | | | | | | | | |
March 31, 2020 (In millions) | Power | Aviation | Renewable Energy | Healthcare | Other | Total |
|
|
|
|
|
|
|
Revenues in excess of billings | $ | 5,197 |
| $ | 4,909 |
| $ | — |
| $ | — |
| $ | — |
| $ | 10,106 |
|
Billings in excess of revenues | (1,586 | ) | (3,660 | ) | — |
| — |
| — |
| (5,247 | ) |
Long-term service agreements(a) | 3,611 |
| 1,248 |
| — |
| — |
| — |
| 4,859 |
|
Short-term and other service agreements | 155 |
| 389 |
| 33 |
| 174 |
| 45 |
| 795 |
|
Equipment contract revenues(b) | 2,425 |
| 60 |
| 1,185 |
| 278 |
| 133 |
| 4,081 |
|
Total contract assets | 6,191 |
| 1,696 |
| 1,217 |
| 452 |
| 178 |
| 9,735 |
|
| | | | | | |
Deferred inventory costs | 887 |
| 481 |
| 1,148 |
| 342 |
| 1 |
| 2,859 |
|
Nonrecurring engineering costs | 49 |
| 2,306 |
| 43 |
| 33 |
| — |
| 2,431 |
|
Customer advances and other(c) | — |
| 1,143 |
| — |
| — |
| (32 | ) | 1,111 |
|
Contract and other deferred assets | $ | 7,127 |
| $ | 5,627 |
| $ | 2,409 |
| $ | 827 |
| $ | 146 |
| $ | 16,136 |
|
|
| | | | | | | | | | | | | | | | | | |
December 31, 2019 (In millions) | | | | | | |
| | | | | | |
Revenues in excess of billings | $ | 5,342 |
| $ | 4,996 |
| $ | — |
| $ | — |
| $ | — |
| $ | 10,338 |
|
Billings in excess of revenues | (1,561 | ) | (3,719 | ) | — |
| — |
| — |
| (5,280 | ) |
Long-term service agreements(a) | 3,781 |
| 1,278 |
| — |
| — |
| — |
| 5,058 |
|
Short-term and other service agreements | 190 |
| 316 |
| 43 |
| 169 |
| — |
| 717 |
|
Equipment contract revenues(b) | 2,508 |
| 82 |
| 1,217 |
| 324 |
| 106 |
| 4,236 |
|
Total contract assets | 6,478 |
| 1,675 |
| 1,260 |
| 492 |
| 106 |
| 10,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred inventory costs | 943 |
| 287 |
| 1,677 |
| 359 |
| — |
| 3,267 |
|
Nonrecurring engineering costs | 44 |
| 2,257 |
| 47 |
| 35 |
| 8 |
| 2,391 |
|
Customer advances and other(c) | — |
| 1,165 |
| — |
| — |
| (32 | ) | 1,133 |
|
Contract and other deferred assets | $ | 7,465 |
| $ | 5,384 |
| $ | 2,985 |
| $ | 886 |
| $ | 82 |
| $ | 16,801 |
|
| |
(a) | Included amounts due from customers at Aviation for the sales of engines, spare parts and services, which we will collect through higher usage-based fees from servicing equipment under long-term service agreements, totaling $1,777 million and $1,712 million as of March 31, 2020 and December 31, 2019, respectively. The corresponding discount is recorded within liabilities as Deferred income and amounted to $332 million and $308 million as of March 31, 2020 and December 31, 2019, respectively. |
| |
(b) | Included are amounts due from customers at Power for the sale of services upgrades, which we collect through incremental fixed or usage-based fees from servicing the equipment under long-term service agreements, totaling $877 million and $909 million as of March 31, 2020 and December 31, 2019, respectively. |
| |
(c) | Included advances to and amounts due from customers at Aviation for the sale of engines, spare parts and services, which we will collect through incremental fees for goods and services to be delivered in future periods, totaling $961 million and $986 million as of March 31, 2020 and December 31, 2019, respectively. The corresponding discount is recorded within liabilities as Deferred income and amounted to $268 million and $256 million as of March 31, 2020 and December 31, 2019, respectively. |
Progress collections and deferred income decreased $708$431 million in the first quarter of 2020 primarily due to the timing of revenue recognition in excess of new collections received, primarily at PowerAviation and Renewable Energy. These decreases were partially offset by milestone payments received, primarily at Aviation.
Power. Revenues recognized for contracts included in a liability position at the beginning of the year were $3,898$5,909 million and $4,608$4,137 million for the three months ended March 31, 2021 and 2020, respectively.
| | | | | | | | | | | | | | | | | | | | |
March 31, 2021 | Power | Aviation | Renewable Energy | Healthcare | Other | Total |
Progress collections on equipment contracts | $ | 4,829 | | $ | 197 | | $ | 1,388 | | $ | 0 | | $ | 0 | | $ | 6,414 | |
Other progress collections | 371 | | 4,483 | | 4,343 | | 416 | | 121 | | 9,735 | |
| | | | | | |
Current deferred income | 16 | | 122 | | 219 | | 1,392 | | 95 | | 1,844 | |
Progress collections and deferred income | $ | 5,217 | | $ | 4,802 | | $ | 5,949 | | $ | 1,808 | | $ | 217 | | $ | 17,993 | |
Non-current deferred income | 118 | | 855 | | 211 | | 555 | | 9 | | 1,748 | |
Total Progress collections and deferred income | $ | 5,335 | | $ | 5,657 | | $ | 6,160 | | $ | 2,363 | | $ | 226 | | $ | 19,741 | |
| | | | | | | | | | | | | | | | | | | | |
December 31, 2020 | | | | | | |
Progress collections on equipment contracts | $ | 4,918 | | $ | 214 | | $ | 1,229 | | $ | 0 | | $ | 0 | | $ | 6,362 | |
Other progress collections | 458 | | 4,623 | | 4,604 | | 414 | | 152 | | 10,252 | |
| | | | | | |
Current deferred income | 17 | | 132 | | 194 | | 1,309 | | 105 | | 1,757 | |
Progress collections and deferred income | $ | 5,393 | | $ | 4,969 | | $ | 6,028 | | $ | 1,724 | | $ | 257 | | $ | 18,371 | |
Non-current deferred income | 116 | | 898 | | 214 | | 564 | | 10 | | 1,801 | |
Total Progress collections and deferred income | $ | 5,509 | | $ | 5,867 | | $ | 6,241 | | $ | 2,288 | | $ | 267 | | $ | 20,172 | |
NOTE 11. ALL OTHER ASSETS.All other current assets and 2019, respectively.All other assets primarily includes equity method and other investments, long-term customer and sundry receivables (see Note 4), cash and cash equivalents in our run-off insurance operations and prepaid taxes and other deferred charges. Consolidated All other non-current assets increased $1,270 million in the three months ended March 31, 2021, primarily due to an increase in Insurance cash and cash equivalents of $1,252 million.
|
| | | | | | | | | | | | | | | | | | |
March 31, 2020 (In millions) | Power | Aviation | Renewable Energy | Healthcare | Other | Total |
|
|
|
|
|
|
|
Progress collections on equipment contracts | $ | 5,418 |
| $ | 144 |
| $ | 1,146 |
| $ | — |
| $ | — |
| $ | 6,709 |
|
Other progress collections | 317 |
| 4,791 |
| 3,999 |
| 312 |
| 170 |
| 9,589 |
|
Total progress collections | 5,735 |
| 4,935 |
| 5,145 |
| 312 |
| 170 |
| 16,298 |
|
Deferred income(a) | 41 |
| 1,569 |
| 316 |
| 1,654 |
| 109 |
| 3,689 |
|
GE Progress collections and deferred income | $ | 5,776 |
| $ | 6,504 |
| $ | 5,461 |
| $ | 1,966 |
| $ | 279 |
| $ | 19,986 |
|
|
| | | | | | | | | | | | | | | | | | |
December 31, 2019 (In millions) | | | | | | |
| | | | | | |
Progress collections on equipment contracts | $ | 5,857 |
| $ | 115 |
| $ | 1,268 |
| $ | — |
| $ | — |
| $ | 7,240 |
|
Other progress collections | 413 |
| 4,748 |
| 4,193 |
| 305 |
| 189 |
| 9,849 |
|
Total progress collections | 6,270 |
| 4,863 |
| 5,461 |
| 305 |
| 189 |
| 17,089 |
|
Deferred income(a) | 49 |
| 1,528 |
| 284 |
| 1,647 |
| 98 |
| 3,606 |
|
GE Progress collections and deferred income | $ | 6,319 |
| $ | 6,391 |
| $ | 5,745 |
| $ | 1,952 |
| $ | 287 |
| $ | 20,694 |
|
| |
(a) | Included in this balance are finance discounts associated with customer advances at Aviation of $600 million and $564 million as of March 31, 2020 and December 31, 2019, respectively. |
20202021 1Q FORM 10-Q 4538
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 11.12. BORROWINGS
| | | | | | | | |
| March 31, 2021 | December 31, 2020 |
| | |
Current portion of long-term borrowings | $ | 47 | | $ | 36 | |
Current portion of long-term borrowings assumed by GE Industrial | 1,784 | | 2,432 | |
Other | 488 | | 882 | |
Total GE Industrial short-term borrowings | $ | 2,318 | | $ | 3,350 | |
| | |
Current portion of long-term borrowings | $ | 1,743 | | $ | 788 | |
Intercompany payable to GE Industrial | 1,784 | | 2,432 | |
Non-recourse borrowings of consolidated securitization entities | 624 | | 892 | |
Other | 59 | | 283 | |
Total GE Capital short-term borrowings | $ | 4,210 | | $ | 4,395 | |
| | |
Eliminations | (2,061) | | (3,033) | |
Total short-term borrowings | $ | 4,468 | | $ | 4,713 | |
| | |
Senior notes | $ | 18,753 | | $ | 18,994 | |
Senior notes assumed by GE Industrial | 17,981 | | 18,178 | |
Subordinated notes assumed by GE Industrial | 1,774 | | 1,779 | |
Other | 422 | | 435 | |
Total GE Industrial long-term borrowings | $ | 38,929 | | $ | 39,386 | |
| | |
Senior notes | $ | 27,292 | | $ | 30,132 | |
Subordinated notes | 148 | | 189 | |
Intercompany payable to GE Industrial | 16,577 | | 16,780 | |
Non-recourse borrowings of consolidated securitization entities | 0 | | 0 | |
Other | 521 | | 483 | |
Total GE Capital long-term borrowings | $ | 44,539 | | $ | 47,584 | |
| | |
Eliminations | (16,577) | | (16,780) | |
Total long-term borrowings | $ | 66,890 | | $ | 70,189 | |
Total borrowings | $ | 71,358 | | $ | 74,902 | |
|
| | | | | | |
(In millions) | March 31, 2020 |
| December 31, 2019 |
|
| | |
Short-term borrowings | | |
Commercial paper | $ | 1,946 |
| $ | 3,008 |
|
Current portion of long-term borrowings | 764 |
| 766 |
|
Current portion of long-term borrowings assumed by GE | 5,888 |
| 5,473 |
|
Other | 1,288 |
| 1,832 |
|
Total GE short-term borrowings | $ | 9,887 |
| $ | 11,079 |
|
| | |
Current portion of long-term borrowings | $ | 8,542 |
| $ | 11,226 |
|
Intercompany payable to GE | 2,519 |
| 2,104 |
|
Other | 292 |
| 804 |
|
Total GE Capital short-term borrowings | $ | 11,353 |
| $ | 14,134 |
|
| | |
Eliminations | (3,118 | ) | (3,140 | ) |
Total short-term borrowings | $ | 18,122 |
| $ | 22,072 |
|
| | |
Long-term borrowings | | |
Senior notes | $ | 14,717 |
| $ | 14,762 |
|
Senior notes assumed by GE | 21,590 |
| 23,024 |
|
Subordinated notes assumed by GE | 1,658 |
| 2,871 |
|
Other | 281 |
| 324 |
|
Total GE long-term borrowings | $ | 38,244 |
| $ | 40,980 |
|
| | |
Senior notes | $ | 27,373 |
| $ | 25,371 |
|
Subordinated notes | 177 |
| 178 |
|
Intercompany payable to GE | 14,390 |
| 17,038 |
|
Other | 593 |
| 626 |
|
Total GE Capital long-term borrowings | $ | 42,534 |
| $ | 43,213 |
|
| | |
Eliminations | (14,390 | ) | (17,038 | ) |
Total long-term borrowings | $ | 66,388 |
| $ | 67,155 |
|
Non-recourse borrowings of consolidated securitization entities | 644 |
| 1,655 |
|
Total borrowings | $ | 85,154 |
| $ | 90,882 |
|
At March 31, 2020,2021, the outstanding GE Capital borrowings that had been assumed by GE Industrial as part of the GE Capital Exit Plan was $29,136$21,538 million ($5,8881,784 million short termshort-term and $23,247$19,754 million long term)long-term), for which GE Industrial has an offsetting Receivable from GE Capital of $16,909$18,361 million. The difference of $12,226 million ($3,369 million in short-term borrowings and $8,857$3,177 million in long-term borrowings)borrowings represents the amount of borrowings GE Capital had funded with available cash to GE Industrial via intercompany loans in lieu of GE Industrial issuing borrowings externally. During the first quarter of 2020, GE had not repaid any intercompany loans from GE Capital.
At March 31, 2020,2021, total GE Industrial borrowings of $31,222$22,886 million comprised of GE-issuedGE Industrial-issued borrowings of $18,996$19,709 million and intercompany loans from GE Capital to GE Industrial of $12,226$3,177 million as described above.
GE Industrial has provided a full and unconditional guarantee on the payment of the principal and interest on all tradable senior and subordinated outstanding long-term debt securities issued by GE Capital. This guarantee appliesapplied to $33,077 $27,332 million and $34,683$28,503 million of GE Capital debt at March 31, 20202021 and December 31, 2019,2020, respectively.
Non-recourse borrowings of consolidated securitization entities included $644 million and $1,569 million of current portion of long-term borrowings at March 31, 2020 and December 31, 2019, respectively. See Notes 4 and 18 for further information.
On April 22, 2020, GE issued a total of $6,000 million in aggregate principal amount of senior unsecured debt, comprised of $1,000 million of 3.450% Notes due 2027, $1,250 million of 3.625% Notes due 2030, $1,500 million of 4.250% Notes due 2040, and $2,250 million of 4.350% Notes due 2050, and used the proceeds to complete a tender offer to purchase $4,237 million in aggregate principal amount of certain GE unsecured debt, comprising $2,046 million of 2.700% Notes due 2022, €934 million ($1,011 million equivalent) of 0.375% Notes due 2022, €425 million ($460 million equivalent) of 1.250% Notes due 2023, €376 million ($407 million equivalent) of floating-rate Notes due 2020, and $312 million of 3.375% Notes due 2024. The total carrying amount of the purchased notes was approximately $4,228 million. We intend to use the remaining proceeds to repurchase, redeem or repay GE’s outstanding debt obligations, including other notes or commercial paper.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
On April 23, 2020, GE Capital completed a tender offer to purchase $5,443 million in aggregate principal amount of certain senior unsecured debt, comprising $3,858 million of 2.342% Notes due 2020, €575 million ($623 million equivalent) of 2.250% Notes due 2020, $460 million of 4.375% Notes due 2020, and £404 million ($503 million of 5.875% Notes due 2020. The total carrying amount of the purchased notes was approximately $5,427 million.
See Note 1719 for further information about borrowings and associated interest rate swaps.
NOTE 12.13. INSURANCE LIABILITIES AND ANNUITY BENEFITSBENEFITS.
Insurance liabilities and annuity benefits comprise mainlysubstantially all obligations to annuitants and insureds in our run-off insurance activities.operations. Our insurance operations generated revenues of $775 million and $616 million and profit (loss) of $116 million and $(93) million for the three months ended March 31, 2021 and 2020, respectively. These operations were supported by assets of $50,353 million and $50,824 million at March 31, 2021 and December 31, 2020, respectively. A summary of our insurance contracts is presented below:
| | | | | | | | | | | | | | | | | |
March 31, 2021 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total |
Future policy benefit reserves | $ | 16,997 | | $ | 9,105 | | $ | 183 | | $ | 5,580 | | $ | 31,864 | |
Claim reserves | 4,397 | | 306 | | 1,062 | | — | | 5,765 | |
Investment contracts | 0 | | 1,018 | | 1,003 | | — | | 2,021 | |
Unearned premiums and other | 16 | | 191 | | 147 | | — | | 353 | |
| 21,409 | | 10,620 | | 2,395 | | 5,580 | | 40,004 | |
Eliminations | — | | — | | (442) | | — | | (442) | |
Total | $ | 21,409 | | $ | 10,620 | | $ | 1,953 | | $ | 5,580 | | $ | 39,562 | |
| | March 31, 2020 (In millions) | Long-term care insurance contracts | Structured settlement annuities & life insurance contracts | Other contracts | Other adjustments(a) | Total | |
|
| |
December 31, 2020 | | December 31, 2020 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total |
Future policy benefit reserves | $ | 16,785 |
| $ | 9,491 |
| $ | 181 |
| $ | 4,051 |
| $ | 30,508 |
| Future policy benefit reserves | $ | 16,934 | | $ | 9,207 | | $ | 181 | | $ | 8,160 | | $ | 34,482 | |
Claim reserves | 4,314 |
| 253 |
| 1,099 |
| — |
| 5,666 |
| Claim reserves | 4,393 | | 275 | | 1,068 | | — | | 5,736 | |
Investment contracts | — |
| 1,112 |
| 1,057 |
| — |
| 2,169 |
| Investment contracts | 0 | | 1,034 | | 1,016 | | — | | 2,049 | |
Unearned premiums and other | 26 |
| 194 |
| 165 |
| — |
| 385 |
| Unearned premiums and other | 19 | | 189 | | 89 | | — | | 298 | |
| 21,125 |
| 11,050 |
| 2,502 |
| 4,051 |
| 38,729 |
| | 21,346 | | 10,705 | | 2,354 | | 8,160 | | 42,565 | |
Eliminations | — |
| — |
| (488 | ) | — |
| (488 | ) | Eliminations | — | | — | | (374) | | — | | (374) | |
Total | $ | 21,125 |
| $ | 11,050 |
| $ | 2,014 |
| $ | 4,051 |
| $ | 38,241 |
| Total | $ | 21,346 | | $ | 10,705 | | $ | 1,980 | | $ | 8,160 | | $ | 42,191 | |
|
| | | | | | | | | | | | | | | |
December 31, 2019 (In millions) |
|
|
|
|
|
|
|
|
|
|
|
Future policy benefit reserves | $ | 16,755 |
| $ | 9,511 |
| $ | 183 |
| $ | 5,655 |
| $ | 32,104 |
|
Claim reserves | 4,238 |
| 252 |
| 1,125 |
| — |
| 5,615 |
|
Investment contracts | — |
| 1,136 |
| 1,055 |
| — |
| 2,191 |
|
Unearned premiums and other | 30 |
| 196 |
| 96 |
| — |
| 322 |
|
| 21,023 |
| 11,095 |
| 2,459 |
| 5,655 |
| 40,232 |
|
Eliminations | — |
| — |
| (406 | ) | — |
| (406 | ) |
Total | $ | 21,023 |
| $ | 11,095 |
| $ | 2,053 |
| $ | 5,655 |
| $ | 39,826 |
|
(a) To the extent that unrealized gains on specific investment securities supporting our insurance contracts would result in a premium deficiency should those gains be realized, an increase in future policy benefit reserves is recorded, with an after-tax reduction of net unrealized gains recognized through Accumulated other comprehensive income (loss) (AOCI) in our consolidated Statement of Earnings (Loss).
The decrease in insurance liabilities and annuity benefitsOther adjustments of $1,586$2,580 million from December 31, 2019 to March 31, 2020, is primarily due to an adjustmenta result of $1,604 million resulting from a decreasethe decline in unrealized gains on investment securities that would result in a premium deficiency should those gains be realized.securities.
Claim reserves included incurred claims of $507$454 million and $473$507 million, of which insignificant amounts related to the recognition of adjustments to prior year claim reserves arising from our periodic reserve evaluation for the three months ended March 31, 20202021 and 2019,2020, respectively. Paid claims were $405$424 million and $421$405 million in the three months ended March 31, 20202021 and 2019,2020, respectively.
Reinsurance recoverables, are recorded when we cede insurance risk to third parties but are not relieved from our primary obligation to policyholders and cedents. These amounts, net of allowances of $1,374$1,540 million and $1,355$1,510 million, are included in non-current Other GE Capital receivables in our consolidated Statement of Financial Position, and amounted to $2,463$2,592 million and $2,416$2,552 million at March 31, 20202021 and December 31, 2019,2020, respectively. The vast majority of our remaining net reinsurance recoverables are secured by assets held in a trust for which we are the beneficiary.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 13.14. POSTRETIREMENT BENEFIT PLANS
PLANS. We sponsor a number of pension and retiree health and life insurance benefit plans that we present in 3 categories, principal pension plans, other pension plans and principal retiree benefit plans. Principal pension plans representPlease refer to Note 13 to the GE Pension Plan andconsolidated financial statements of our Annual Report on Form 10-K for the GE Supplementary Pension Plan. Other pension plans include U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million. Principal retireeyear ended December 31, 2020 for a discussion of our postretirement benefit plans provide health and life insurance benefits to certain eligible participants and these participants share in the cost of the healthcare benefits. Smaller pension plans with pension assets or obligations less than $50 million and other retiree benefit plans are not presented.
plans.
EFFECT ON OPERATIONS OF BENEFIT PLANS.
The components of benefit plans costscost other than the service cost are included in the caption Non-operating benefit costs in our consolidated Statement of Earnings (Loss).
| | | | | | | | | | | |
PRINCIPAL PENSION PLANS | Three months ended March 31 | | |
| 2021 | 2020 | | | |
Service cost for benefits earned | $ | 64 | | $ | 153 | | | | |
Prior service cost amortization | 7 | | 37 | | | | |
Expected return on plan assets | (763) | | (748) | | | | |
Interest cost on benefit obligations | 486 | | 587 | | | | |
Net actuarial loss amortization | 864 | | 848 | | | | |
| | | | | |
Benefit plans cost | $ | 658 | | $ | 877 | | | | |
|
| | | | | | | | | | | | | |
| Principal pension plans | | Other pension plans |
| Three months ended March 31 | | Three months ended March 31 |
(In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| | | | | |
Service cost for benefits earned | $ | 153 |
| $ | 158 |
| | $ | 65 |
| $ | 63 |
|
Prior service cost amortization | 37 |
| 33 |
| | — |
| — |
|
Expected return on plan assets | (748 | ) | (863 | ) | | (274 | ) | (284 | ) |
Interest cost on benefit obligations | 587 |
| 726 |
| | 108 |
| 139 |
|
Net actuarial loss amortization | 848 |
| 763 |
| | 112 |
| 80 |
|
Curtailment/settlement loss (gain) | — |
| 51 |
| (a) | (1 | ) | 9 |
|
Benefit plans cost | $ | 877 |
| $ | 868 |
| | $ | 10 |
| $ | 7 |
|
(a) Curtailment loss in the three months ended March 31, 2019, resulted from the spin-off and subsequent merger of our Transportation segment with Wabtec, which is included in Earnings (loss) from discontinued operations in our consolidated Statement of Earnings (Loss).
Principal retiree benefit plans income was $32$40 million and $61$32 million for the three months ended March 31, 2021 and 2020, respectively. Other pension plans was $24 million income and 2019, respectively, which includes a curtailment gain of $33$7 million in 2019 resulting fromcost for the Transportation transaction, which is included in Earnings (loss) from discontinued operations in our consolidated Statement of Earnings (Loss).three months ended March 31, 2021 and 2020, respectively.
We also have a defined contribution plan for eligible U.S. employees that provides discretionaryemployer contributions. Defined contribution plan costs were $95$108 million and $101$95 million for the three months ended March 31, 20202021 and 2019,2020, respectively.
NOTE 14.15. CURRENT AND ALL OTHER LIABILITIES. All other current liabilities and All other liabilities primarily includes liabilities for customer sales allowances, equipment project and commercial liabilities, employee compensation and benefits, income taxes payable and uncertain tax positions, operating lease liabilities (see Note 7), environmental, health and safety remediations and product warranties (see Note 21). GE Industrial All other liabilities decreased $486 million in the three months ended March 31, 2021, primarily due to a decrease in Alstom legacy legal matters of $199 million (see Note 21) and a decrease in interest accruals on assumed debt of $132 million.
NOTE 16. INCOME TAXES
TAXES. Our consolidated effective income tax rate was 1.0%59.7% and 12.5%0.9% during the three months ended March 31, 2021 and 2020, respectively. The rate for 2021 is higher than the U.S. statutory rate primarily due to the cost of global activities, including the base erosion and 2019, respectively.global intangible minimum tax provisions and from tax expense associated with the unrealized gain in our remaining interest in Baker Hughes. This was partially offset by an adjustment to decrease the 2021 three-month tax rate to be in line with the lower expected full-year rate and by U.S. business credits. The rate for 2020 is lower than the U.S. statutory rate primarily due to the lower tax rate on the sale of our BioPharma business. The low tax rate on the BioPharma sale reflectswas low because the gain outside the U.S. was taxed at lower than 21% and because we recorded $633 million of the tax associated with preparatory steps for the transaction in the fourth quarter of 2019. The rate for 2019 is lower than the U.S. statutory rate primarily due to favorable audit resolutions, the benefit of the lower-taxed disposition of our Digital ServiceMax business and U.S. business credits. This was partially offset by the cost of the base erosion and global intangible low tax income provisions in excess of the benefit from other global activities.
The Internal Revenue Service (IRS) is currently auditing our consolidated U.S. income tax returns for 2014-2015 and 2016-2018. It is possible the 2014-2015 audit will be completed in the next 12 months. The United Kingdom tax authoritiesauthority (the UK Government) disallowed interest deductions claimed by GE Capital for the years 2004-2015 that could result in a potential impact of approximately $1$1.1 billion, which includes a possible assessment of tax and reduction of deferred tax assets, not including interest and penalties. We are contesting the disallowance. The UK Government is seeking to set aside a 2005 tax settlement agreement, alleging that GE misstated or omitted relevant facts. In October 2019, the UK Government asserted three new claims of fraudulent misrepresentation, one of which the Business and Property Court allowed in a July 2020 decision to go forward. In April 2021, the UK Court of Appeal reversed, holding that the equitable portion of that claim was time barred. The UK Government has petitioned the UK Supreme Court to hear an appeal, and the case remains scheduled for trial this fall in the Business and Property Court and may (depending on the outcome of the trial) be subject to further proceedings in the UK tax tribunal. We comply with all applicable tax laws and judicial doctrines of the United Kingdom and believe that the entire benefit is more likely than not to be sustained on its technical merits.
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 15.17. SHAREHOLDERS’ EQUITY
|
| | | | | | | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | Three months ended March 31 |
(In millions) | 2020 |
| | 2019 |
|
| | | |
Beginning balance | $ | 61 |
| | $ | (39 | ) |
Other comprehensive income (loss) (OCI) before reclassifications – net of deferred taxes of $0 and $38(a) | 6 |
| | 28 |
|
Reclassifications from OCI – net of deferred taxes of $(12) and $(1) | (47 | ) | | (4 | ) |
Other comprehensive income (loss) | (41 | ) | | 24 |
|
Less OCI attributable to noncontrolling interests | — |
| | 1 |
|
Investment securities ending balance | $ | 20 |
| | $ | (16 | ) |
| | | |
Beginning balance | $ | (4,818 | ) | | $ | (6,134 | ) |
OCI before reclassifications – net of deferred taxes of $(5) and $26 | (554 | ) | | 307 |
|
Reclassifications from OCI – net of deferred taxes of $0 and $(4)(b) | 690 |
| | 117 |
|
Other comprehensive income (loss) | 135 |
| | 423 |
|
Less OCI attributable to noncontrolling interests | 2 |
| | 100 |
|
Currency translation adjustments ending balance | $ | (4,685 | ) | | $ | (5,810 | ) |
| | | |
Beginning balance | $ | 49 |
| | $ | 13 |
|
OCI before reclassifications – net of deferred taxes of $(45) and $11 | (262 | ) | | 34 |
|
Reclassifications from OCI – net of deferred taxes of $8 and $(4)(b) | 51 |
| | 3 |
|
Other comprehensive income (loss) | (211 | ) | | 38 |
|
Less OCI attributable to noncontrolling interests | — |
| | 2 |
|
Cash flow hedges ending balance | $ | (163 | ) | | $ | 49 |
|
| | | |
Beginning balance | $ | (7,024 | ) | | $ | (8,254 | ) |
OCI before reclassifications – net of deferred taxes of $30 and $48 | 219 |
| | (116 | ) |
Reclassifications from OCI – net of deferred taxes of $239 and $183(b) | 817 |
| | 662 |
|
Other comprehensive income (loss) | 1,035 |
| | 545 |
|
Less OCI attributable to noncontrolling interests | 3 |
| | (2 | ) |
Benefit plans ending balance | $ | (5,991 | ) | | $ | (7,708 | ) |
| | | |
Accumulated other comprehensive income (loss) at March 31 | $ | (10,819 | ) | | $ | (13,485 | ) |
| | | | | | | | | | | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | Three months ended March 31 | | |
| 2021 | 2020 | | | |
Beginning balance | $ | 60 | | $ | 61 | | | | |
AOCI before reclasses – net of taxes of $(7) and $0(a) | (29) | | 6 | | | | |
Reclasses from AOCI – net of taxes of $4 and $(12) | 11 | | (47) | | | | |
AOCI | (18) | | (41) | | | | |
Less AOCI attributable to noncontrolling interests | 0 | | 0 | | | | |
Investment securities AOCI ending balance | $ | 42 | | $ | 20 | | | | |
| | | | | |
Beginning balance | $ | (4,386) | | $ | (4,818) | | | | |
AOCI before reclasses – net of taxes of $(57) and $(5) | 110 | | (554) | | | | |
Reclasses from AOCI – net of taxes of $0 and $0(b) | 0 | | 690 | | | | |
AOCI | 110 | | 135 | | | | |
Less AOCI attributable to noncontrolling interests | 2 | | 2 | | | | |
Currency translation adjustments AOCI ending balance | $ | (4,278) | | $ | (4,685) | | | | |
| | | | | |
Beginning balance | $ | (28) | | $ | 49 | | | | |
AOCI before reclasses – net of taxes of $4 and $(45) | 39 | | (262) | | | | |
Reclasses from AOCI – net of taxes of $10 and $8(b) | 23 | | 51 | | | | |
AOCI | 62 | | (211) | | | | |
Less AOCI attributable to noncontrolling interests | 0 | | 0 | | | | |
Cash flow hedges AOCI ending balance | $ | 34 | | $ | (163) | | | | |
| | | | | |
Beginning balance | $ | (5,395) | | $ | (7,024) | | | | |
AOCI before reclasses – net of taxes of $(47) and $30 | 16 | | 219 | | | | |
Reclasses from AOCI – net of taxes of $194 and $239(b) | 689 | | 817 | | | | |
AOCI | 705 | | 1,035 | | | | |
Less AOCI attributable to noncontrolling interests | 1 | | 3 | | | | |
Benefit plans AOCI ending balance | $ | (4,691) | | $ | (5,991) | | | | |
| | | | | |
AOCI at March 31 | $ | (8,893) | | $ | (10,819) | | | | |
| | | | | |
Dividends declared per common share | $ | 0.01 | | $ | 0.01 | | | | |
(a) Included adjustments of $1,267$2,038 million and $(957)$1,267 million for the three months ended March 31, 20202021 and 2019,2020, respectively, related to insurance liabilities and annuity benefits in our run-off insurance operations to reflect the effects that would have been recognized had the related unrealized investment security gains been realized. See Note 1213 for further information.
(b) IncludedThe total reclassification from AOCI included $836 million, including currency translation of $688 million, net of taxes, for the three months ended March 31, 2020, related to the sale of our BioPharma business within our Healthcare segment.
In 2016, weOn January 21, 2021, GE Capital Series D preferred stock issued $5,694 millionto GE Industrial was converted to GE Capital common stock and GE Capital and GE Industrial also agreed to retire the Series A, B and C GE Capital preferred stock. As a result of these actions, there is no remaining preferred stock between GE Industrial and GE Capital, and accordingly GE Capital will no longer pay preferred dividends to GE Industrial and all preferred stock dividend costs have become a GE Industrial obligation effective January 21, 2021. The exchange of GE Capital Series D preferred stock has no impact on the GE Series D preferred stock, which, are callable oneffective January 21, 2021. In addition2021 became callable for $5,694 million on dividend payment dates and which dividends converted from 5% fixed rate to Series D, $250 million of existing3-month LIBOR plus 3.33%, payable quarterly. Similarly, there were no changes to the GE Series A, B andor C preferred stock, are also outstanding.which become callable at various dates in 2022 and 2023. The total carrying value of GE preferred stock at March 31, 20202021 was $5,782$5,930 million and will increase to $5,944$5,940 million by the respective call dates through periodic accretion. See our Annual Report on Form 10-K for the year ended December 31, 20192020 for further information.
Noncontrolling interests in equity of consolidated affiliates amounted to $1,575 million and $1,545 million at March 31, 2020 and December 31, 2019, respectively. Net earnings (loss) attributable to noncontrolling interests were $7 million and $30 million for the three months ended March 31, 2020 and 2019, respectively. Dividends attributable to noncontrolling interests were $(3) million and $(106) million for the three months ended March 31, 2020 and 2019, respectively.
Redeemable noncontrolling interests, presented within All other liabilities in our consolidated Statement of Financial Position, include common shares issued by our affiliates that are redeemable at the option of the holder of those interests and amounted to$470 $451 million and $439$487 million as of March 31, 20202021 and December 31, 2019,2020, respectively. Net earnings (loss) attributable to
NOTE 18. EARNINGS PER SHARE INFORMATION
| | | | | | | | | | | | | | | | | |
Three months ended March 31 | 2021 | | 2020 |
(Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | Diluted | Basic | | Diluted | Basic |
Earnings from continuing operations | $ | 90 | | $ | 92 | | | $ | 6,202 | | $ | 6,202 | |
Preferred stock dividends | (72) | | (72) | | | (43) | | (43) | |
Accretion of redeemable noncontrolling interests, net of tax(a) | 2 | | 2 | | | 0 | | 0 | |
Earnings from continuing operations attributable to common shareholders | 20 | | 22 | | | 6,158 | | 6,158 | |
Earnings (loss) from discontinued operations | (2,897) | | (2,894) | | | (19) | | (19) | |
Net earnings (loss) attributable to GE common shareholders | (2,874) | | (2,872) | | | 6,140 | | 6,140 | |
| | | | | |
Shares of GE common stock outstanding | 8,772 | | 8,772 | | | 8,742 | | 8,742 | |
Employee compensation-related shares (including stock options) | 35 | | — | | | 7 | | — | |
Total average equivalent shares | 8,807 | | 8,772 | | | 8,749 | | 8,742 | |
| | | | | |
Earnings per share from continuing operations | $ | 0 | | $ | 0 | | | $ | 0.70 | | $ | 0.70 | |
Earnings (loss) per share from discontinued operations | (0.33) | | (0.33) | | | 0.00 | | 0.00 | |
Net earnings (loss) per share | (0.33) | | (0.33) | | | 0.70 | | 0.70 | |
| | | | | |
Potentially dilutive securities(b) | 370 | | | | 422 | | |
(a) Represents accretion adjustment of redeemable noncontrolling interests was $27 million and $27 million for the three months ended March 31, 2020 and 2019, respectively.in our Additive business within our Aviation segment.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 16. EARNINGS PER SHARE INFORMATION
|
| | | | | | | | | | | | | |
Three months ended March 31 | 2020 | | 2019 |
(In millions; per-share amounts in dollars) | Diluted |
| Basic |
| | Diluted |
| Basic |
|
| | | | | |
Earnings from continuing operations for per-share calculation | $ | 6,358 |
| $ | 6,358 |
| | $ | 936 |
| $ | 954 |
|
Preferred stock dividends | (43 | ) | (43 | ) | | (40 | ) | (40 | ) |
Earnings from continuing operations attributable to common shareholders for per-share calculation | 6,315 |
| 6,315 |
| | 897 |
| 915 |
|
Earnings (loss) from discontinued operations for per-share calculation | (175 | ) | (175 | ) | | 2,604 |
| 2,622 |
|
Net earnings (loss) attributable to GE common shareholders for per-share calculation | $ | 6,140 |
| $ | 6,140 |
| | $ | 3,519 |
| $ | 3,537 |
|
| | | | | |
Shares of GE common stock outstanding | 8,742 |
| 8,742 |
| | 8,711 |
| 8,711 |
|
Employee compensation-related shares (including stock options) | 7 |
| — |
| | 15 |
| — |
|
Total average equivalent shares | 8,749 |
| 8,742 |
| | 8,726 |
| 8,711 |
|
| | | | | |
Earnings per share from continuing operations | $ | 0.72 |
| $ | 0.72 |
| | $ | 0.10 |
| $ | 0.10 |
|
Earnings (loss) per share from discontinued operations | (0.02 | ) | (0.02 | ) | | 0.30 |
| 0.30 |
|
Net earnings (loss) per share | 0.70 |
| 0.70 |
| | 0.40 |
| 0.41 |
|
| | | | | |
Potentially dilutive securities(a) | 422 |
| | | 471 |
| |
(a)(b) Outstanding stock awards not included in the computation of diluted earnings per share because their effect was antidilutive.Our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and, therefore, are included in the computation of earnings per share pursuant to the two-class method. For the three months ended March 31, 2021, as a result of excess dividends in respect to the current period earnings, losses were not allocated to the participating securities. For the three months ended March 31, 2020, and 2019, application of this treatment had an insignificant effect.
Earnings per share amounts are computed independently for earnings from continuing operations, earnings from discontinued operations and net earnings. As a result, the sum of per-share amounts from continuing operations and discontinued operations may not equal the total per-share amounts for net earnings.
NOTE 17.19. FINANCIAL INSTRUMENTS
INSTRUMENTS.The following table provides information about assets and liabilities not carried at fair value and excludes finance leases, equity securities without readily determinable fair value and non-financial assets and liabilities. Substantially all of these assets are considered to be Level 3 and the vast majority of our liabilities’ fair value are considered Level 2.
| | | | | | | | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 |
| Carrying amount (net) | Estimated fair value | | Carrying amount (net) | Estimated fair value |
Assets | Loans and other receivables | $ | 2,901 | | $ | 3,066 | | | $ | 2,904 | | $ | 3,125 | |
| | | | | | |
Liabilities | Borrowings (Note 12) | 71,358 | | 81,967 | | | 74,902 | | 86,001 | |
| Investment contracts (Note 13) | 2,021 | | 2,402 | | | 2,049 | | 2,547 | |
|
| | | | | | | | | | | | | |
| March 31, 2020 | | December 31, 2019 |
(In millions) | Carrying amount (net) |
| Estimated fair value |
| | Carrying amount (net) |
| Estimated fair value |
|
|
|
| |
|
|
Assets |
|
| |
|
|
Loans and other receivables | $ | 3,912 |
| $ | 3,777 |
| | $ | 4,113 |
| $ | 4,208 |
|
Liabilities |
|
| |
|
|
Borrowings (Note 11) | 85,154 |
| 85,033 |
| | 90,882 |
| 97,754 |
|
Investment contracts (Note 12) | 2,169 |
| 2,485 |
| | 2,191 |
| 2,588 |
|
The lower fair value in relation to carrying value for borrowings at March 31, 20202021 compared to December 31, 20192020 was driven primarilyunchanged, as an increase in market interest rates was offset by wideningnarrowing GE Industrial credit spreads partially offset byand a decline in market interest rates.fair value adjustments for debt in fair value hedge relationships. Unlike the carrying amount, estimated fair value of borrowings included $913$1,178 million and $1,106$898 million of accrued interest at March 31, 20202021 and December 31, 2019,2020, respectively.
Assets and liabilities that are reflected in the accompanying financial statements at fair value are not included in the above disclosures; such items include cash and equivalents, investment securities and derivative financial instruments.instruments.
DERIVATIVES AND HEDGING. Our policy requires that derivatives are used solely for managing risks and not for speculative purposes. Total gross notional was $101,209$91,921 million ($53,80843,768 million in GE Capital and $47,401$48,153 million in GE)GE Industrial) and $98,018$95,647 million ($55,70445,445 million in GE Capital and $42,314$50,202 million in GE)GE Industrial) at March 31, 20202021 and December 31, 2019,2020, respectively. GE Capital notional relates primarily to managing interest rate and currency risk between financial assets and liabilities, and GE Industrial notional relates primarily to managing currency risk.
50 20202021 1Q FORM 10-Q42
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| | | | | | | | | | | | | | | | | | | | | | | |
FAIR VALUE OF DERIVATIVES | March 31, 2021 | | December 31, 2020 |
| Gross Notional | All other assets | All other liabilities | | Gross Notional | All other assets | All other liabilities |
Interest rate contracts | $ | 20,395 | | $ | 1,404 | | $ | 16 | | | $ | 20,500 | | $ | 1,912 | | $ | 7 | |
Currency exchange contracts | 6,701 | | 193 | | 65 | | | 7,387 | | 164 | | 125 | |
| | | | | | | |
Derivatives accounted for as hedges | $ | 27,096 | | $ | 1,597 | | $ | 81 | | | $ | 27,886 | | $ | 2,076 | | $ | 132 | |
| | | | | | | |
Interest rate contracts | $ | 361 | | $ | 14 | | $ | 7 | | | $ | 346 | | $ | 8 | | $ | (1) | |
Currency exchange contracts | 62,369 | | 967 | | 911 | | | 65,379 | | 767 | | 918 | |
Other contracts | 2,095 | | 322 | | 7 | | | 2,036 | | 218 | | 71 | |
Derivatives not accounted for as hedges | $ | 64,825 | | $ | 1,302 | | $ | 926 | | | $ | 67,761 | | $ | 993 | | $ | 989 | |
| | | | | | | |
Gross derivatives | $ | 91,921 | | $ | 2,899 | | $ | 1,007 | | | $ | 95,647 | | $ | 3,069 | | $ | 1,121 | |
| | | | | | | |
Netting and credit adjustments | | $ | (729) | | $ | (729) | | | | $ | (647) | | $ | (647) | |
Cash collateral adjustments | | (1,497) | | (6) | | | | (1,935) | | (104) | |
Net derivatives recognized in statement of financial position | | $ | 673 | | $ | 271 | | | | $ | 487 | | $ | 369 | |
| | | | | | | |
Net accrued interest | | $ | 24 | | $ | (19) | | | | $ | 0 | | $ | 0 | |
Securities held as collateral | | (174) | | 0 | | | | (2) | | 0 | |
Net amount | | $ | 522 | | $ | 252 | | | | $ | 484 | | $ | 369 | |
|
| | | | | | | | | | | | | | | | | | | |
FAIR VALUE OF DERIVATIVES | March 31, 2020 | | December 31, 2019 |
(In millions) | Gross Notional |
| All other assets |
| All other liabilities |
| | Gross Notional |
| All other assets |
| All other liabilities |
|
| | | | | | | |
Interest rate contracts | $ | 23,617 |
| $ | 2,191 |
| $ | 9 |
| | $ | 23,918 |
| $ | 1,636 |
| $ | 11 |
|
Currency exchange contracts | 7,307 |
| 170 |
| 277 |
| | 7,044 |
| 99 |
| 46 |
|
Derivatives accounted for as hedges | $ | 30,924 |
| $ | 2,361 |
| $ | 287 |
| | $ | 30,961 |
| $ | 1,734 |
| $ | 57 |
|
| | | | | | | |
Interest rate contracts | $ | 2,447 |
| $ | 29 |
| $ | 7 |
| | $ | 3,185 |
| $ | 18 |
| $ | 12 |
|
Currency exchange contracts | 66,240 |
| 1,105 |
| 1,477 |
| | 62,165 |
| 697 |
| 744 |
|
Other contracts | 1,598 |
| 5 |
| 103 |
| | 1,706 |
| 123 |
| 40 |
|
Derivatives not accounted for as hedges | $ | 70,285 |
| $ | 1,139 |
| $ | 1,587 |
| | $ | 67,056 |
| $ | 838 |
| $ | 796 |
|
| | | | | | | |
Gross derivatives | $ | 101,209 |
| $ | 3,500 |
| $ | 1,874 |
| | $ | 98,018 |
| $ | 2,572 |
| $ | 853 |
|
| | | | | | | |
Netting and credit adjustments | | $ | (1,145 | ) | $ | (1,155 | ) | | | $ | (546 | ) | $ | (546 | ) |
Cash collateral adjustments | | (1,297 | ) | (198 | ) | | | (1,286 | ) | (105 | ) |
Net derivatives recognized in statement of financial position | | $ | 1,058 |
| $ | 520 |
| | | $ | 740 |
| $ | 202 |
|
| | | | | | | |
Net accrued interest | | $ | 71 |
| $ | 1 |
| | | $ | 182 |
| $ | 1 |
|
Securities held as collateral | | (693 | ) | — |
| | | (469 | ) | — |
|
Net amount | | $ | 436 |
| $ | 521 |
| | | $ | 452 |
| $ | 203 |
|
It is standard market practice to post or receive cash collateral with our derivative counterparties in order to minimize counterparty exposure. Included in GE Capital Cash, cash equivalents and restricted cash was total net cash collateral received on derivatives of $1,542 million (comprising $2,313 million received and $771 million posted) at March 31, 2021 and $3,289 million (comprising $4,203 million received and $914 million posted) at December 31, 2020. Of these amounts, $584 million and $1,968 million at March 31, 2021 and December 31, 2020, respectively, were received on interest rate derivatives traded through clearing houses, which are recorded as a reduction of derivative assets and net accrued interest.
Also included in total net cash collateral received are amounts presented as cash collateral adjustments in the table above, amounts related to accrued interest on interest rate derivatives presented as a reduction of Net accrued interest of $159 million and $292 million at March 31, 2021 and December 31, 2020, respectively, and excess net cash collateral posted of $693 million (comprising $31 million received and $723 million posted) at March 31, 2021, and $802 million (comprising $3 million received and $805 million posted) at December 31, 2020, which are excluded from cash collateral adjustments in the table above.
Securities held as collateral excluded excess collateral received of $15 million and 0 at March 31, 2021 and December 31, 2020, respectively.
Fair value of derivatives in our consolidated Statement of Financial Position excludedexcludes accrued interest. Cash collateral adjustments excluded excess collateral received and posted of $198 million and $995 million at March 31, 2020, respectively, and $104 million and $603 million at December 31, 2019, respectively. Securities held as collateral excluded excess collateral received of $45 million and $27 million at March 31, 2020 and December 31, 2019 respectively.
FAIR VALUE HEDGES. We use derivatives to hedge the effects of interest rate and currency exchange rate changes on our borrowings. At March 31, 2021, the cumulative amount of hedging adjustments of $3,826 million (including $2,330 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $26,926 million. At March 31, 2020, the cumulative amount of hedging adjustments of $6,527 million (including $2,348 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $53,272 million. At March 31, 2019, the cumulative amount of hedging adjustments of $3,712 million (including $2,685 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $58,885$41,735 million. The cumulative amount of hedging adjustments was primarily recorded in long-term borrowings.
CASH FLOW HEDGES. Changes in the fair value of cash flow hedges are recorded in Accumulated Other Comprehensive Income (AOCI)AOCI and recorded in earnings in the period in which the hedged transaction occurs. The gain (loss) recognized in AOCI was $(313)$36 million and $47$(313) million for the three months ended March 31, 20202021 and 2019, respectively. The gain (loss) reclassified from AOCI to earnings was $(59) million and 0 for the three months ended March 31, 2020, and 2019, respectively. These amounts were primarily related to currency exchange and interest rate contracts.
The total amount in AOCI related to cash flow hedges of forecasted transactions was a $183$62 million lossgain at March 31, 2020.2021. We expect to reclassify $125$4 million of lossgain to earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. For the three months ended March 31, 20202021 and 2019,2020, we recognized an immaterial amount and $18 million of loss primarily(primarily as a result of the disposition of BioPharma, and insignificant gains and losses,BioPharma), respectively, related to hedged forecasted transactions and firm commitments that did not occur by the end of the originally specified period. At March 31, 20202021 and 2019,2020, the maximum term of derivative instruments that hedge forecasted transactions was 1514 years and 1415 years, respectively.
NET INVESTMENT HEDGES. For these hedges, the portion of the fair value changes of the derivatives or debt instruments that relates to changes in spot currency exchange rates is recorded in a separate component of AOCI. The portion of the fair value changes of the derivatives related to differences between spot and forward rates is recorded in earnings each period. The amounts recorded in AOCI affect earnings if the hedged investment is sold, substantially liquidated, or control is lost.
The total gain (loss) recognized in AOCI on hedging instruments for the three months ended March 31, 2021 and 2020 was $272 million and 2019 was $158 million, and $(68) million, respectively, comprising $109 million and $(27) million on currency exchange contracts and $48 million and $(41) million onpredominantly from foreign currency debt, respectively. The total gain (loss)debt. For all periods presented we recognized an immaterial amount excluded from assessment and recognized in earnings was $2 million and $8 million for the three months ended March 31, 2020 and 2019, respectively.earnings.
The carrying value of foreign currency debt designated as net investment hedges was $8,106 million and $9,145 million and $12,502 million at
March 31, 2021 and 2020, and 2019, respectively. The gain (loss)NaN amount was reclassified from AOCI into earningswas 0 and $6 million for the three months ended March 31, 2021 and 2020, and 2019, respectively.
EFFECTS OF DERIVATIVES ON EARNINGS. All derivatives are marked to fair value on our balance sheet,consolidated Statement of Financial Position, whether they are designated in a hedging relationship for accounting purposes or are used as economic hedges. For derivatives not designated as hedging instruments, substantially all of the gain or loss recognized in earnings is offset by either the current period change in value of underlying exposures, which is recorded in earnings in the current period or a future period when the recording of the exposures occur.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
The table below presents the effect of our derivative financial instruments in the consolidated Statement of Earnings:Earnings (Loss): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2020 | | Three months ended March 31, 2019 |
(In millions) | Revenues | Cost of sales | Interest Expense | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense | SG&A | Other Income |
| | | | | | | | | | | |
Total amounts presented in the consolidated Statement of Earnings | $ | 20,524 |
| $ | 15,695 |
| $ | 794 |
| $ | 3,065 |
| $ | 6,869 |
| | $ | 22,202 |
| $ | 16,208 |
| $ | 1,065 |
| $ | 3,402 |
| $ | 847 |
|
| | | | | | | | | | | |
Total effect of cash flow hedges | $ | (21 | ) | $ | (25 | ) | $ | (10 | ) | $ | (3 | ) | $ | — |
| | $ | 20 |
| $ | (9 | ) | $ | (10 | ) | $ | (1 | ) | $ | — |
|
| | | | | | | | | | | |
Hedged items | | | $ | (2,480 | ) | | | | | | $ | (527 | ) | | |
Derivatives designated as hedging instruments | | | 2,511 |
| | | | | | 515 |
| | |
Total effect of fair value hedges | | | $ | 31 |
| | | | | | $ | (11 | ) | | |
| | | | | | | | | | | |
Interest rate contracts | $ | (23 | ) | $ | — |
| $ | (9 | ) | $ | — |
| $ | — |
| | $ | (4 | ) | $ | — |
| $ | (16 | ) | $ | — |
| $ | — |
|
Currency exchange contracts | (521 | ) | 13 |
| — |
| 54 |
| 11 |
| | 390 |
| 9 |
| — |
| (45 | ) | 3 |
|
Other | — |
| — |
| — |
| (160 | ) | (22 | ) | | — |
| — |
| 96 |
| — |
| 13 |
|
Total effect of derivatives not designated as hedges | $ | (545 | ) | $ | 13 |
| $ | (9 | ) | $ | (106 | ) | $ | (12 | ) | | $ | 386 |
| $ | 9 |
| $ | 80 |
| $ | (45 | ) | $ | 16 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2021 | | Three months ended March 31, 2020 |
| Revenues | Cost of sales | Interest Expense | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense | SG&A | Other Income |
Total amounts presented in the consolidated Statement of Earnings (Loss) | $ | 17,118 | | $ | 12,538 | | $ | 500 | | $ | 2,891 | | $ | 626 | | | $ | 19,490 | | $ | 14,426 | | $ | 561 | | $ | 3,061 | | $ | 6,869 | |
| | | | | | | | | | | |
Total effect of cash flow hedges | $ | (21) | | $ | (4) | | $ | (8) | | $ | 0 | | $ | 0 | | | $ | (21) | | $ | (25) | | $ | (10) | | $ | (3) | | $ | 0 | |
| | | | | | | | | | | |
Hedged items | | | $ | 1,843 | | | | | | | $ | (2,480) | | | |
Derivatives designated as hedging instruments | | | (1,899) | | | | | | | 2,511 | | | |
Total effect of fair value hedges | | | $ | (56) | | | | | | | $ | 31 | | | |
| | | | | | | | | | | |
Interest rate contracts | $ | 1 | | $ | 0 | | $ | (9) | | $ | 0 | | $ | (1) | | | $ | (26) | | $ | 0 | | $ | (9) | | $ | 0 | | $ | 0 | |
Currency exchange contracts | 303 | | 0 | | 0 | | 59 | | 38 | | | (521) | | 13 | | 0 | | 54 | | 11 | |
Other | 0 | | 0 | | 0 | | 55 | | 19 | | | 0 | | 0 | | 0 | | (160) | | (22) | |
Total effect of derivatives not designated as hedges | $ | 305 | | $ | 0 | | $ | (9) | | $ | 114 | | $ | 56 | | | $ | (547) | | $ | 13 | | $ | (9) | | $ | (106) | | $ | (12) | |
The gain (loss) of amount excluded for cash flow hedges which is recognized in earnings was $(16) million and $15 million and 0 for the three months ended March 31, 2021 and 2020, and 2019, respectively. This amount is recognized primarily in Revenues in our consolidated Statement of Earnings (Loss).
COUNTERPARTY CREDIT RISK. Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. We manage counterparty credit risk (thethe risk that counterparties will default and not make payments to us according to the terms of our agreements)agreements on an individual counterparty basis. Where we have agreed to netting of derivative exposures with a counterparty, we net our exposures with that counterparty and apply the value of collateral posted to us to determine the exposure. We actively monitor these net exposures against defined limits and take appropriate actions in response, including requiring additional collateral. Our exposures to counterparties (including accrued interest), net of collateral we held, was $270$404 million and $368$392 million at March 31, 20202021 and December 31, 2019,2020, respectively. Counterparties' exposures to our derivative liability (including accrued interest), net of collateral posted by us, was $463$186 million and $159$307 million at March 31, 20202021 and December 31, 2019,2020, respectively.
NOTE 18.20. VARIABLE INTEREST ENTITIESENTITIES.
In addition to the 3 VIEs detailed in Note 4, in our consolidated Statement of Financial Position, we have assets of $2,106$1,712 million and $2,134$1,733 million and liabilities of $1,103$454 million and $1,233$657 million, inclusive of intercompany eliminations, at March 31, 2020,2021 and December 31, 2019,2020, respectively, from other consolidated VIEs. These entities were created to help our customers facilitate or finance the purchase of GE goods and services. These entitiesservices and have no features that could expose us to losses that would significantly exceed the difference between the consolidated assets and liabilities. Substantially all the assets of our consolidated VIEs at March 31, 2020,2021 can only be used to settle the liabilities of those VIEs.
Our investments in unconsolidated VIEs were $1,939$3,371 million and $1,937$3,230 million at March 31, 2020,2021 and December 31, 2019,2020, respectively. These investments are primarily owned by GE Capital businesses $506of which $1,120 million and $621$1,141 million of which were owned by Energy Financial Services,EFS, comprising equity method investments, primarily renewable energy tax equity investments, at March 31, 2021 and $1,040December 31, 2020, respectively. In addition, $2,024 million and $896$1,833 million of which were owned by our run-off insurance operations, primarily comprising investment securities at March 31, 20202021 and December 31, 2019,2020, respectively. The increase in investments in unconsolidated VIEs in our run-off insurance operations reflects implementation of our revised reinvestment plan, which incorporates the introduction of strategic initiatives to invest in higher-yielding asset classes. Our maximum exposure to loss in respect of unconsolidated VIEs is increased by our commitments to make additional investments in these entities described in Note 19.21.
NOTE 19.21. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIES
COMMITMENTS. GE Capital had total investment commitments of $2,551 million at March 31, 2021. The commitments primarily comprise project financing investments in thermal and wind energy projects of $769 million and investments by our run-off insurance operations in investment securities and other assets of $1,782 million, and included within these commitments are obligations to make additional investments in unconsolidated VIEs of $447 million and $1,632 million, respectively. See Note 20 for further information.
As of March 31, 2021, in our Aviation segment, we have committed to provide financing assistance of $2,241 million of future customer acquisitions of aircraft equipped with our engines.
Commitments - Discontinued Operations.The GECAS business within the Capital segmentdiscontinued operations has placed multiple-year orders for various Boeing, Airbus and other aircraft manufacturers with list prices approximating $35,772$26,118 million, excluding pre-delivery payments made in advance (including 358269 new aircraft with estimated delivery dates of 10% in 2020, 18% in 2021, and 72%18% in 2022 and 64% in 2023 through 2026) and secondary orders with airlines for used aircraft approximating $2,297$1,146 million (including 5326 used aircraft with estimated delivery dates of 21% in 2020, 64%62% in 2021, 27% in 2022 and 15%11% in 2022)2023) at March 31, 2020.2021. When we purchaseGECAS purchases aircraft, it is at a contractual price, which is usually less than the aircraft manufacturer’smanufacturer's list price and excludes any pre-delivery payments made in advance.price. As of March 31, 2020, we have2021, GECAS has made $2,963$2,647 million of pre-delivery payments to aircraft manufacturers.
During April 2020, GECAS agreed with Boeing to restructure its 737 MAX orderbook including previously canceled positions, resulting in the cancellation of 69 orders with 82 orders now remaining.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
GE Capital had total investment commitments of $2,786 million at March 31, 2020. The commitments primarily comprise project financing investments in thermal and wind energy projects of $1,149 million and investments by our run-off insurance operations in investment securities and other assets of $1,608 million, included within these commitments are obligations to make additional investments in unconsolidated VIEs of $260 million and $1,090 million, respectively. See Note 18 for further information.
As of March 31, 2020, in our Aviation segment, we have committed to provide financing assistance of $2,072 million for future customer acquisitions of aircraft equipped with our engines.
GUARANTEES. At March 31, 2020, we were committed under the following guarantee arrangements:
Credit Support.Support and Indemnification Agreements - Continuing Operations. At March 31, 2020, we have provided $1,483 million ofFor further information on credit support and indemnification agreements for continuing operations, see our Annual Report on behalf of certain customers' predominantly joint ventures and partnerships, such as standby letters of credit and performance guarantees. The liability was $33 million at MarchForm 10-K for the year ended December 31, 2020.
Indemnification Agreements – Continuing Operations. At March 31, 2020, we have $1,544 million of indemnifications, including representations and warranties in sales of businesses or assets, for which we recorded a liability of $144 million.
Indemnification Agreements –agreements - Discontinued Operations. At March 31, 2020,2021, we have provided specific indemnities to buyers of GE Capital’sCapital's assets that, in the aggregate, represent a maximum potential claim of $1,019$597 million with related reserves of $139$86 million.
PRODUCT WARRANTIES. We provide for estimated product warranty expenses when we sell the related products. Because warranty estimates are forecasts that are based on the best available information, mostly historical claims experience, claims costs may differ from amounts provided. The liability for product warranties was $2,081$1,975 million and $2,165$2,054 million at March 31, 20202021 and December 31, 2019,2020, respectively.
LEGAL MATTERS. The following information supplements and amends the discussion of Legal Matters in Note 23 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019;2020; refer to that discussionthose discussions for information about previously reported legal matters that are not updated below. In the normal course of our business, we are involved from time to time in various arbitrations, class actions, commercial litigation, investigations and other legal, regulatory or governmental actions, including the significant matters described below that could have a material impact on our results of operations. In many proceedings, including the specific matters described below, it is inherently difficult to determine whether any loss is probable or even reasonably possible or to estimate the size or range of the possible loss, and accruals for legal matters are not recorded until a loss for a particular matter is considered probable and reasonably estimable. Given the nature of legal matters and the complexities involved, it is often difficult to predict and determine a meaningful estimate of loss or range of loss until we know, among other factors, the particular claims involved, the likelihood of success of our defenses to those claims, the damages or other relief sought, how discovery or other procedural considerations will affect the outcome, the settlement posture of other parties and other factors that may have a material effect on the outcome. For these matters, unless otherwise specified, we do not believe it is possible to provide a meaningful estimate of loss at this time. Moreover, it is not uncommon for legal matters to be resolved over many years, during which time relevant developments and new information must be continuously evaluated.
Alstom legacy matters. InOn November 2015, we acquired the Thermal, Renewables and Grid businesses from Alstom. Prior to the acquisition, the seller was the subject of 2 significant cases involving anti-competitive activities and improper payments: (1) in January 2007, Alstom was fined €65 million by the European Commission for participating in a gas insulated switchgear cartel that operated from 1988 to 2004 (that fine was later reduced to €59 million), and (2) in December 2014, Alstom pled guilty in the United States to multiple violations of the Foreign Corrupt Practices Act and paid a criminal penalty of $772 million. As part of GE’s accounting for the acquisition, we established a reserve amounting to $858 million for legal and compliance matters related to the legacy business practices that were the subject of these and related cases in various jurisdictions, including the previously reported legal proceedings in IsraelSlovenia that are described below. The reserve balance was $846$659 million and $875$858 million at March 31, 20202021 and December 31, 2019, respectively.2020, respectively, with the reduction driven primarily by cash payment in connection with the Šoštanj settlement described below.
Regardless of jurisdiction, the allegations relate to claimed anti-competitive conduct or improper payments in the pre-acquisition period as the source of legal violations and/or damages. Given the significant litigation and compliance activity related to these matters and our ongoing efforts to resolve them, it is difficult to assess whether the disbursements will ultimately be consistent with the reserve established. The estimation of this reserve involved significant judgment and may not reflect the full range of uncertainties and unpredictable outcomes inherent in litigation and investigations of this nature, and at this time we are unable to develop a meaningful estimate of the range of reasonably possible additional losses beyond the amount of this reserve. Damages sought may include disgorgement of profits on the underlying business transactions, fines and/or penalties, interest, or other forms of resolution. Factors that can affect the ultimate amount of losses associated with these and related matters include the way cooperation is assessed and valued, prosecutorial discretion in the determination of damages, formulas for determining fines and penalties, the duration and amount of legal and investigative resources applied, political and social influences within each jurisdiction, and tax consequences of any settlements or previous deductions, among other considerations. Actual losses arising from claims in these and related matters could exceed the amount provided.
20202021 1Q FORM 10-Q 5345
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
In September 2013, the Israeli Antitrust Authority issued a decision whereby Alstom, Siemens AG and ABB Ltd. were held liable for an alleged anti-competitive arrangement in the gas-insulated switchgears market in Israel. While there was no fine in connection with that decision, claimants brought two civil actionsalleged improper payments by Alstom relating to contracts won in 2013 seeking2006 and 2008 for work on a state-owned power plant in Šoštanj, Slovenia, the power plant owner in January 2017 filed an arbitration claim for damages of approximately $950$430 million and $600 million, respectively, related to the alleged conduct underlying the decision that are pending before the CentralInternational Chamber of Commerce Court of Arbitration in Vienna, Austria. In February 2017, a government investigation in Slovenia of the same underlying conduct proceeded to an investigative phase overseen by a judge of the Celje District Court in Israel. The court inCourt. In September 2020, the relevant Alstom legacy entity was served with an indictment, which we had anticipated as we are working with the parties to resolve these matters. In March 2020 approved2021, GE reached a settlement agreement reachedof the arbitration claim with the power plant owner for a mix of cash and services valued by the parties, but the settlement remains subject to appeal to the Supreme Court of Israel.plant owner at approximately $307 million.
Shareholder and related lawsuits. lawsuits. Since February 2018, multiple shareholder derivative lawsuits have been filed against current and former GE executive officers and members of GE’s Board of Directors and GE (as nominal defendant). NaN shareholder derivative lawsuits are currently pending: the Bennett case, which was filed in Massachusetts state court; and the Cuker, Lindsey and Priest/Tola cases, which were filed in New York state court. The Priest and Tola cases were initially filed as separate actions but have now been consolidated into one lawsuit. The Burden case, which was filed in the U.S. District Court for the Southern District of New York, was voluntarily dismissed by the plaintiffs in February 2021. These lawsuits have alleged violations of securities laws, breaches of fiduciary duties, unjust enrichment, waste of corporate assets, abuse of control and gross mismanagement, although the specific matters underlying the allegations in the lawsuits have varied. The allegations in the Bennett, Lindsey and Priest/Tola cases relate to substantially the same facts as those underlying the Hachem securities class action described in our Annual Report on Form 10-K for the year ended December 31, 2020, and the allegations in the Cuker case relate to alleged corruption in China. The plaintiffs seek unspecified damages and improvements in GE’s corporate governance and internal procedures. The Bennett case has been stayed pending final resolution of another shareholder derivative lawsuit (the Gammel case) that was previously dismissed. In DecemberAugust 2019, the Cuker plaintiffs filed an amended complaint, and GE in September 2019 filed a motion to dismiss the amended complaint. The Lindsey case has been stayed by agreement of the parties. GE filed a motion to dismiss the Priest/Tola complaint in March 2021.
In July 2018, a putative class action (the VargaMahar case) was filed in New York state court naming as defendants GE, former GE executive officers, a former member of GE’s Board of Directors and KPMG. It alleged violations of Sections 11, 12 and 15 of the Securities Act of 1933 based on alleged misstatements related to insurance reserves and performance of GE’s business segments in GE Stock Direct Plan registration statements and documents incorporated therein by reference and seeks damages on behalf of shareholders who acquired GE stock between July 20, 2015 and July 19, 2018 through the GE Stock Direct Plan. In February 2019, this case was dismissed. In March 2019, plaintiffs filed an amended derivative complaint naming the same defendants. In April 2019, GE filed a motion to dismiss the amended complaint. In October 2019, the court denied GE's motion to dismiss and stayed the case pending the outcome of the Hachem case. In November 2019, the plaintiffs moved to re-argue to challenge the stay, and GE cross-moved to re-argue the denial of the motion to dismiss and filed a notice of appeal. The court denied both motions for re-argument, and in November 2020, the Appellate Division First Department affirmed the court's denial of GE's motion to dismiss. In January 2021, GE filed a motion for leave to appeal to the New York Court of Appeals, and that motion was denied in March 2021.
In October 2018, a putative class action (the Houston case) was filed in New York state court naming as defendants GE, certain GE subsidiaries and current and former GE executive officers and employees. It alleges violations of Sections 11, 12 and 15 of the Securities Act of 1933 and seeks damages on behalf of purchasers of senior notes issued in 2016 and rescission of transactions involving those notes. This case was stayed pending resolution of the motion to dismiss the Hachem case. In April 2021, the plaintiffs filed an amended complaint.
In February 2019, a securities action (the Touchstone case) was filed in the U.S. District Court for the NorthernSouthern District of New York naming as defendants GE and acurrent and former GE executive officer as defendantsofficers. It alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Section 1707.43 of the Ohio Securities Act and common law fraud based on alleged misstatements regarding insurance reserves, GE Power’s revenue recognition practices related to long term service agreements, GE’s acquisition of Alstom, and the goodwill recognized in connection with the oversight of the GE RSP. It alleges that the defendants breached fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) by failing to advise GE RSP participants that GE Capital insurance subsidiaries were allegedly under-reserved and continued to retain a GE stock fund as an investment option in the GE RSP.transaction. The plaintiffs seek unspecifiedlawsuit seeks damages on behalf of a class6 institutional investors who purchased GE common stock between August 1, 2014 and October 30, 2018 and rescission of GE RSP participants and beneficiaries from January 1, 2010 through January 19, 2018 or later. In March 2020those purchases. This case was stayed pending resolution of the court granted GE’s motion to dismiss the case, and in April 2020Hachem case. In March 2021, the plaintiffs filed an appeal with the Second Circuitamended complaint.
.
In AugustAs previously reported by Baker Hughes, in March 2019, a putative class action (the Tri-State case) was2 derivative lawsuits were filed in the Delaware Court of Chancery naming as defendants GE, and thedirectors of Baker Hughes (including former members of GE’s Board of Directors ofand current and former GE executive officers) and Baker Hughes Incorporated (BHI)(as nominal defendant), and the court issued an order consolidating these 2 actions (the Schippnick case). ItThe complaint as amended in May 2019 alleges, fraud, aiding and abetting breaches of fiduciary duty, and aiding and abetting breaches of duty of disclosure by GE based on allegations regarding financial statementsamong other things, that GE providedand the Baker Hughes directors breached their fiduciary duties and that GE was unjustly enriched by entering into transactions and agreements related to GE's sales of approximately 12% of its ownership interest in Baker Hughes in November 2018. The complaint seeks declaratory relief, disgorgement of profits, an award of damages, pre- and post-judgment interest and attorneys’ fees and costs. In May 2019, the plaintiffs voluntarily dismissed their claims against the directors who were members of the Baker Hughes Conflicts Committee and a former BHI board, management and shareholders in connection with BHI’s merger with GE’s Oil and Gas Business in July 2017. The plaintiff seeks damages on behalf of BHI shareholders during the period between October 7, 2016 and July 5, 2017.Baker Hughes director. In October 2019, the CityCourt denied the remaining defendants’ motions to dismiss, except with respect to the unjust enrichment claim against GE, which has been dismissed. In November 2019, the defendants filed their answer to the complaint, and a special litigation committee of Providencethe Baker Hughes Board of Directors moved for an order staying all proceedings in this action pending completion of the committee's investigation of the allegations and claims asserted in the complaint. In October 2020, the special litigation committee filed a complaint containing allegations substantially similar to those inreport with the Tri-State complaint. The cases were consolidated in November 2019, and in December 2019,Court recommending that the plaintiffs filed an amended consolidated complaint which is similar toderivative action be terminated. In January 2021, the prior complaints but does not include fraud claims against GE. In February 2020, GE and the other defendantsspecial committee filed a motion to dismissterminate the amended consolidated complaint.action.
These cases are at an early stage; we believe we have defenses to the claims and are responding accordingly.
Bank BPH. As previously reported, GE Capital’s subsidiary Bank BPH, along with other Polish banks, has been subject to ongoing litigation in Poland related to its portfolio of floating rate residential mortgages,mortgage loans, with cases brought by individual borrowers seeking relief related to their foreign currency-denominated mortgagescurrency denominated mortgage loans in various courts throughout Poland. ApproximatelyAt March 31, 2021, approximately 86% of the Bank BPH portfolio is indexed to or denominated in foreign currencies (primarily Swiss francs), and the total portfolio had a carrying value of $2.4 billion at March 31, 2020. In October 2019, the European Court of Justice (ECJ) issued a decision about the approach$1,986 million. We continue to remedy in a case involving another Polish bank’s foreign currency loans, and in January 2020, a pending case involving a Bank BPH loan was referred to the ECJ. While there remains significant uncertainty as to how the prior ECJ decision, or a future decision on the Bank BPH case, will influence the Polish courts as they consider individual cases, we are observingobserve an increase in the number of lawsuits being brought against Bank BPH and other banks in Poland, with similar portfolios that mayand we expect this to continue in future reporting periods.
We estimate potential losses for Bank BPH in connection with borrower litigation cases that are pending by recording legal reserves, as well as in connection with potential future cases or other adverse developments as part of our ongoing valuation of the Bank BPH portfolio, which we record at the lower of cost or fair value, less cost to sell. At March 31, 2021, the total amount of such estimated losses was $465 million. We update our assumptions underlying the amount of estimated losses based primarily on the number of lawsuits filed and estimated to be filed in the future, whether liability will be established in lawsuits and the nature of the remedy ordered by courts if liability is established. The increase in the amount of estimated losses during the first quarter of 2021 was driven primarily by increases in the number of lawsuits filed and estimated to be filed in the future. We expect the trends we have observedpreviously reported of an increasing number of lawsuits being filed, more findings of liability and more severe remedies being ordered against Polish banks. We also believe therebanks (including Bank BPH) to continue in future reporting periods, although Bank BPH is unable at this time to develop a potential for unifying rules of decision to emerge regarding both the finding of liability and approach to remedy that could change ourmeaningful estimate of reasonably possible losses associated with active and inactive Bank BPH mortgage loans beyond the potential effectsamounts currently recorded. Additional factors may also affect our estimated losses over time, including: potentially significant judicial decisions scheduled to be issued in the second quarter of 2021, including a decision by the European Court of Justice (ECJ) on the case involving a Bank BPH mortgage loan that was referred to the ECJ in January 2020 and one or more binding resolutions from the Polish Supreme Court; the impact of any of these or other decisions or binding resolutions on how Polish courts will interpret and apply the law in particular cases and how borrower litigation.behavior may change in response, neither or which will be known immediately upon the issuance of a decision or resolution; uncertainty related to a proposal by the Chairman of the Polish Financial Supervisory Authority in December 2020 that banks voluntarily offer borrowers an opportunity to convert their foreign currency denominated mortgage loans to Polish zlotys using an exchange rate applicable at the date of loan origination, and about the approaches that other Polish banks, regulators and other government authorities are adopting or will adopt in response to this proposal; uncertainty arising from investigations of the Polish Office of Competition and Consumer Protection (UOKiK), including a UOKiK decision in December 2020 which found that certain foreign exchange clauses that appear in certain of Bank BPH’s mortgage loan agreements are unfair contractual terms under Polish law. Future adverse developments inrelated to any of the potential for legislative reliefforegoing, or in litigation acrossother developments such as actions by regulators or other governmental authorities could have a material adverse effect on Bank BPH and the Polish banking industry as a resultcarrying value of ECJ decisions or otherwiseits mortgage loan portfolio and could result in significant losses related to these loans in future reporting periods.beyond the amount that we currently estimate.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. Our operations, like operationsAs previously reported, in 2000, GE and the Environmental Protection Agency (EPA) entered into a consent decree relating to PCB cleanup of other companiesthe Housatonic River in Massachusetts. Following the EPA’s release in September 2015 of an intended final remediation decision, GE and the EPA engaged in similar businesses, involvemediation and the use, disposalfirst step of the dispute resolution process contemplated by the consent decree. In October 2016, the EPA issued its final decision pursuant to the consent decree, which GE and cleanupseveral other interested parties appealed to the EPA’s Environmental Appeals Board (EAB). The EAB issued its decision in January 2018, affirming parts of substances regulated underthe EPA’s decision and granting relief to GE on certain significant elements of its challenge. The EAB remanded the decision back to the EPA to address those elements and reissue a revised final remedy, and the EPA convened a mediation process with GE and interested stakeholders. In February 2020, the EPA announced an agreement between the EPA and many of the mediation stakeholders, including GE, concerning a revised Housatonic River remedy. Based on the mediated resolution, the EPA solicited public comment on a draft permit in July 2020 and issued the final revised permit effective January 4, 2021. In March 2021, two local environmental protection lawsadvocacy groups filed a joint petition to the EAB challenging portions of the revised permit, and nuclear decommissioning regulations. Additionally, like many other industrial companies, weEPA and our subsidiariesGE are defendants in various lawsuits relateddefending that appeal. As of March 31, 2021, and based on its assessment of current facts and circumstances and its defenses, GE believes that it has recorded adequate reserves to alleged worker exposure to asbestos or other hazardous materials. Liabilities for environmental remediation, nuclear decommissioning and worker exposure claims exclude possible insurance recoveries. It is reasonably possible that our exposure will exceed amounts accrued. However, due to uncertainties aboutcover future obligations associated with the status of laws, regulations, technology and information related to individual sites and lawsuits, such amounts are not reasonably estimable. proposed final remedy.
For further information about environmental, health and safety matters, see our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 20.22. INTERCOMPANY TRANSACTIONSTRANSACTIONS.
Presented below is a walk of intercompany eliminations from the combined GE Industrial and GE Capital totals to the consolidated cash flows.flows for continuing operations.
|
| | | | | | |
| Three months ended March 31 |
(In millions) | 2020 |
| 2019 |
|
|
|
|
|
|
Combined GE and GE Capital cash from (used for) operating activities - continuing operations | $ | (385 | ) | $ | (557 | ) |
GE current receivables sold to GE Capital | (997 | ) | 538 |
|
GE long-term receivables sold to GE Capital | 135 |
| 174 |
|
Supply chain finance programs(a) | 884 |
| 310 |
|
Other reclassifications and eliminations | 216 |
| (45 | ) |
Consolidated cash from (used for) operating activities - continuing operations | $ | (148 | ) | $ | 420 |
|
Combined GE and GE Capital cash from (used for) investing activities - continuing operations | $ | 19,991 |
| $ | 6,048 |
|
GE current receivables sold to GE Capital | 945 |
| (1,306 | ) |
GE long-term receivables sold to GE Capital | (135 | ) | (174 | ) |
Supply chain finance programs(a) | (884 | ) | (310 | ) |
Other reclassifications and eliminations | (695 | ) | (562 | ) |
Consolidated cash from (used for) investing activities - continuing operations | $ | 19,221 |
| $ | 3,696 |
|
Combined GE and GE Capital cash from (used for) financing activities - continuing operations | $ | (8,451 | ) | $ | (4,837 | ) |
GE current receivables sold to GE Capital | 52 |
| 768 |
|
Other reclassifications and eliminations | 480 |
| 607 |
|
Consolidated cash from (used for) financing activities - continuing operations | $ | (7,919 | ) | $ | (3,461 | ) |
| |
(a) | Represents the reduction of the GE liability associated with the funded participation in a supply chain finance program with GE Capital, primarily as a result of GE Capital's sale of the program platform to MUFG Union Bank, N.A. (MUFG) in 2019.
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| | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2021 | Three months ended March 31, 2020 |
Cash from (used for): | Operating activities | Investing activities | Financing activities | Operating activities | Investing activities | Financing activities |
Combined GE Industrial and GE Capital cash flows | $ | (2,970) | | $ | 1,747 | | $ | (2,178) | | $ | (1,138) | | $ | 20,776 | | $ | (8,494) | |
GE Industrial current receivables sold to GE Capital(a) | 211 | | (448) | | 237 | | (997) | | 945 | | 52 | |
GE Industrial long-term receivables sold to GE Capital | 67 | | (67) | | 0 | | 135 | | (135) | | 0 | |
| | | | | | |
Supply chain finance programs | 120 | | (120) | | 0 | | 884 | | (884) | | 0 | |
Other reclassifications and eliminations | (68) | | (265) | | 333 | | 197 | | (677) | | 480 | |
| | | | | | |
Consolidated cash flows | $ | (2,640) | | $ | 847 | | $ | (1,608) | | $ | (919) | | $ | 20,025 | | $ | (7,962) | |
(a)Included the elimination of $3,218 million and $3,972 million payments to GE Industrial for current receivables purchased and retained by GE Capital and the related reclassification to CFOA of $3,429 million and $2,975 million due to GE Capital collections and other activity in our consolidated statement of cash flows for the three months ended March 31, 2021 and 2020, respectively.
Cash payments received on the Receivable facility deferred purchase price are reflected as Cash from investing activities in the GE Capital and Consolidated columns of our consolidated Statement of Cash Flows. Sales of customer receivables from GE Industrial to GE Capital are classified as Cash from operating activities in the GE Industrial column of our Statement of Cash Flows. See Note 4 for further information.
NOTE 21. GUARANTOR FINANCIAL INFORMATION
GE Capital International Funding Company Unlimited Company (the Issuer) previously issued senior unsecured registered notes that are fully and unconditionally, jointly and severally guaranteed by both the Company and GE Capital International Holdings Limited (each a Guarantor, and together, the Guarantors).
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CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS) |
FOR THE THREE MONTHS ENDED MARCH 31, 2020 (UNAUDITED) |
|
(In millions) | Parent Company Guarantor |
| Subsidiary Issuer |
| Subsidiary Guarantor |
| Non- Guarantor Subsidiaries |
| Consolidating Adjustments |
| Consolidated |
|
| | | | | | |
Sales of goods and services | $ | 6,217 |
| $ | — |
| $ | — |
| $ | 29,404 |
| $ | (16,806 | ) | $ | 18,814 |
|
GE Capital revenues from services | — |
| 238 |
| 2 |
| 1,983 |
| (513 | ) | 1,709 |
|
Total revenues | 6,217 |
| 238 |
| 2 |
| 31,386 |
| (17,319 | ) | 20,524 |
|
| | | | | | |
Interest and other financial charges | 295 |
| 258 |
| 313 |
| 337 |
| (409 | ) | 794 |
|
Other costs and expenses | 6,898 |
| — |
| — |
| 32,294 |
| (19,068 | ) | 20,124 |
|
Total costs and expenses | 7,192 |
| 258 |
| 313 |
| 32,631 |
| (19,477 | ) | 20,918 |
|
Other income (loss) | 705 |
| — |
| — |
| 18,294 |
| (12,129 | ) | 6,869 |
|
Equity in earnings (loss) of affiliates | 6,615 |
| — |
| 278 |
| 17,098 |
| (23,991 | ) | — |
|
Earnings (loss) from continuing operations before income taxes | 6,344 |
| (20 | ) | (34 | ) | 34,148 |
| (33,963 | ) | 6,475 |
|
Benefit (provision) for income taxes | 20 |
| 2 |
| — |
| 421 |
| (506 | ) | (63 | ) |
Earnings (loss) from continuing operations | 6,363 |
| (17 | ) | (34 | ) | 34,568 |
| (34,469 | ) | 6,412 |
|
Earnings (loss) from discontinued operations, net of taxes | (164 | ) | — |
| (15 | ) | — |
| 1 |
| (178 | ) |
Net earnings (loss) | 6,199 |
| (17 | ) | (49 | ) | 34,568 |
| (34,468 | ) | 6,233 |
|
Less net earnings (loss) attributable to noncontrolling interests | — |
| — |
| — |
| 1 |
| 33 |
| 34 |
|
Net earnings (loss) attributable to the Company | 6,199 |
| (17 | ) | (49 | ) | 34,567 |
| (34,501 | ) | 6,199 |
|
Other comprehensive income (loss) | 913 |
| — |
| (12 | ) | (823 | ) | 835 |
| 913 |
|
Comprehensive income (loss) attributable to the Company | $ | 7,113 |
| $ | (17 | ) | $ | (61 | ) | $ | 33,744 |
| $ | (33,666 | ) | $ | 7,113 |
|
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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| | | | | | | | | | | | | | | | | | |
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS) |
FOR THE THREE MONTHS ENDED MARCH 31, 2019 (UNAUDITED) |
|
(In millions) | Parent Company Guarantor |
| Subsidiary Issuer |
| Subsidiary Guarantor |
| Non- Guarantor Subsidiaries |
| Consolidating Adjustments |
| Consolidated |
|
| | | | | | |
Sales of goods and services | $ | 4,580 |
| $ | — |
| $ | — |
| $ | 38,456 |
| $ | (22,779 | ) | $ | 20,257 |
|
GE Capital revenues from services | — |
| 233 |
| 75 |
| 2,580 |
| (943 | ) | 1,945 |
|
Total revenues | 4,580 |
| 233 |
| 75 |
| 41,035 |
| (23,722 | ) | 22,202 |
|
| | | | | | |
Interest and other financial charges | 379 |
| 231 |
| 379 |
| 577 |
| (501 | ) | 1,065 |
|
Other costs and expenses | 8,494 |
| — |
| — |
| 38,880 |
| (26,512 | ) | 20,862 |
|
Total costs and expenses | 8,873 |
| 231 |
| 380 |
| 39,457 |
| (27,013 | ) | 21,927 |
|
Other income (loss) | (6,743 | ) | — |
| — |
| 16,963 |
| (9,372 | ) | 847 |
|
Equity in earnings (loss) of affiliates | 14,929 |
| — |
| 375 |
| 11,013 |
| (26,318 | ) | — |
|
Earnings (loss) from continuing operations before income taxes | 3,893 |
| 3 |
| 71 |
| 29,555 |
| (32,399 | ) | 1,122 |
|
Benefit (provision) for income taxes | (335 | ) | — |
| — |
| (658 | ) | 854 |
| (140 | ) |
Earnings (loss) from continuing operations | 3,558 |
| 2 |
| 71 |
| 28,896 |
| (31,545 | ) | 983 |
|
Earnings (loss) from discontinued operations, net of taxes | 30 |
| — |
| — |
| — |
| 2,632 |
| 2,663 |
|
Net earnings (loss) | 3,588 |
| 2 |
| 71 |
| 28,896 |
| (28,912 | ) | 3,645 |
|
Less net earnings (loss) attributable to noncontrolling interests | — |
| — |
| — |
| (1 | ) | 58 |
| 57 |
|
Net earnings (loss) attributable to the Company | 3,588 |
| 2 |
| 71 |
| 28,897 |
| (28,970 | ) | 3,588 |
|
Other comprehensive income (loss) | 929 |
| — |
| (1,082 | ) | (443 | ) | 1,524 |
| 930 |
|
Comprehensive income (loss) attributable to the Company | $ | 4,517 |
| $ | 2 |
| $ | (1,011 | ) | $ | 28,454 |
| $ | (27,446 | ) | $ | 4,517 |
|
|
| | | | | | | | | | | | | | | | | | |
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION MARCH 31, 2020 (UNAUDITED) |
|
(In millions) | Parent Company Guarantor |
| Subsidiary Issuer |
| Subsidiary Guarantor |
| Non- Guarantor Subsidiaries |
| Consolidating Adjustments |
| Consolidated |
|
| | | | | | |
Cash, cash equivalents and restricted cash | $ | 27,463 |
| $ | — |
| $ | — |
| $ | 20,390 |
| $ | (567 | ) | $ | 47,286 |
|
Receivables - net | 41,752 |
| 17,970 |
| 84 |
| 56,003 |
| (88,382 | ) | 27,427 |
|
Investment in subsidiaries | 198,819 |
| — |
| 40,645 |
| 441,860 |
| (681,324 | ) | — |
|
All other assets | 27,445 |
| 1,431 |
| — |
| 304,108 |
| (145,676 | ) | 187,308 |
|
Total assets | $ | 295,479 |
| $ | 19,401 |
| $ | 40,729 |
| $ | 822,360 |
| $ | (915,949 | ) | $ | 262,021 |
|
| | | | | | |
Short-term borrowings | $ | 150,985 |
| $ | 6,024 |
| $ | 3,598 |
| $ | 6,511 |
| $ | (148,996 | ) | $ | 18,122 |
|
Long-term and non-recourse borrowings | 37,967 |
| 12,028 |
| 23,954 |
| 31,336 |
| (38,255 | ) | 67,032 |
|
All other liabilities | 64,455 |
| 337 |
| 68 |
| 138,217 |
| (63,069 | ) | 140,008 |
|
Total liabilities | 253,408 |
| 18,390 |
| 27,620 |
| 176,064 |
| (250,320 | ) | 225,162 |
|
| | | | | | |
Total liabilities and equity | $ | 295,479 |
| $ | 19,401 |
| $ | 40,729 |
| $ | 822,360 |
| $ | (915,949 | ) | $ | 262,021 |
|
|
| | | | | | | | | | | | | | | | | | |
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2019 |
(In millions) | Parent Company Guarantor |
| Subsidiary Issuer |
| Subsidiary Guarantor |
| Non- Guarantor Subsidiaries |
| Consolidating Adjustments |
| Consolidated |
|
| | | | | | |
Cash, cash equivalents and restricted cash | $ | 10,591 |
| $ | — |
| $ | — |
| $ | 26,438 |
| $ | (636 | ) | $ | 36,394 |
|
Receivables - net | 47,170 |
| 17,726 |
| 230 |
| 61,026 |
| (99,104 | ) | 27,047 |
|
Investment in subsidiaries | 147,397 |
| — |
| 40,408 |
| 421,613 |
| (609,418 | ) | — |
|
All other assets | 28,377 |
| 236 |
| — |
| 291,995 |
| (118,000 | ) | 202,607 |
|
Total assets | $ | 233,535 |
| $ | 17,961 |
| $ | 40,638 |
| $ | 801,071 |
| $ | (827,158 | ) | $ | 266,048 |
|
| | | | | | |
Short-term borrowings | $ | 135,172 |
| $ | 5,991 |
| $ | 2,981 |
| $ | 9,712 |
| $ | (131,783 | ) | $ | 22,072 |
|
Long-term and non-recourse borrowings | 40,660 |
| 10,780 |
| 24,417 |
| 34,262 |
| (41,310 | ) | 68,809 |
|
All other liabilities | 66,808 |
| 161 |
| 70 |
| 146,972 |
| (68,705 | ) | 145,306 |
|
Total liabilities | 242,640 |
| 16,932 |
| 27,468 |
| 190,946 |
| (241,799 | ) | 236,187 |
|
| | | | | | |
Total liabilities and equity | $ | 233,535 |
| $ | 17,961 |
| $ | 40,638 |
| $ | 801,071 |
| $ | (827,158 | ) | $ | 266,048 |
|
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
| | | | | | | | | | | | | | | | | | |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2020 (UNAUDITED) |
(In millions) | Parent Company Guarantor |
| Subsidiary Issuer |
| Subsidiary Guarantor |
| Non- Guarantor Subsidiaries |
| Consolidating Adjustments |
| Consolidated |
|
| | | | | | |
Cash from (used for) operating activities | $ | 2,339 |
| $ | 558 |
| $ | (819 | ) | $ | 30,587 |
| $ | (32,879 | ) | $ | (214 | ) |
| | | | | | |
Cash from (used for) investing activities | $ | (584 | ) | $ | (558 | ) | $ | 14 |
| $ | (21,387 | ) | $ | 41,601 |
| $ | 19,086 |
|
| | | | | | |
Cash from (used for) financing activities | $ | 15,117 |
| $ | — |
| $ | 805 |
| $ | (15,188 | ) | $ | (8,653 | ) | $ | (7,919 | ) |
| | | | | | |
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | — |
| — |
| — |
| (256 | ) | — |
| (256 | ) |
Increase (decrease) in cash, cash equivalents and restricted cash | 16,872 |
| — |
| — |
| (6,243 | ) | 69 |
| 10,697 |
|
Cash, cash equivalents and restricted cash at beginning of year | 10,591 |
| — |
| — |
| 27,121 |
| (636 | ) | 37,077 |
|
Cash, cash equivalents and restricted cash at March 31 | 27,463 |
| — |
| — |
| 20,878 |
| (567 | ) | 47,774 |
|
Less cash, cash equivalents and restricted cash of discontinued operations at March 31 | — |
| — |
| — |
| 437 |
| — |
| 437 |
|
Cash, cash equivalents and restricted cash of continuing operations at March 31 | $ | 27,463 |
| $ | — |
| $ | — |
| $ | 20,441 |
| $ | (567 | ) | $ | 47,338 |
|
|
| | | | | | | | | | | | | | | | | | |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2019 (UNAUDITED) |
(In millions) | Parent Company Guarantor |
| Subsidiary Issuer |
| Subsidiary Guarantor |
| Non- Guarantor Subsidiaries |
| Consolidating Adjustments |
| Consolidated |
|
| | | | | | |
Cash from (used for) operating activities(a) | $ | (6,665 | ) | $ | 611 |
| $ | (1,063 | ) | $ | (22,734 | ) | $ | 29,973 |
| $ | 122 |
|
| | | | | | |
Cash from (used for) investing activities | $ | 7,201 |
| $ | (611 | ) | $ | (61 | ) | $ | 48,313 |
| $ | (51,352 | ) | $ | 3,490 |
|
| | | | | | |
Cash from (used for) financing activities | $ | (555 | ) | $ | — |
| $ | 1,124 |
| $ | (26,436 | ) | $ | 22,133 |
| $ | (3,735 | ) |
| | | | | | |
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | — |
| — |
| — |
| 78 |
| — |
| 78 |
|
Increase (decrease) in cash, cash equivalents and restricted cash | (20 | ) | — |
| — |
| (779 | ) | 753 |
| (45 | ) |
Cash, cash equivalents and restricted cash at beginning of year | 9,561 |
| — |
| 1 |
| 30,398 |
| (4,412 | ) | 35,548 |
|
Cash, cash equivalents and restricted cash at March 31 | 9,541 |
| — |
| — |
| 29,620 |
| (3,658 | ) | 35,503 |
|
Less cash, cash equivalents and restricted cash of discontinued operations at March 31 | — |
| — |
| — |
| 3,671 |
| — |
| 3,671 |
|
Cash, cash equivalents and restricted cash of continuing operations at March 31 | $ | 9,541 |
| $ | — |
| $ | — |
| $ | 25,949 |
| $ | (3,658 | ) | $ | 31,832 |
|
| |
(a) | Parent Company Guarantor cash flows included cash from (used for) operating activities of discontinued operations of $(2,984) million. |
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 22. BAKER HUGHES SUMMARIZED FINANCIAL INFORMATION23. OTHER INCOME
We account | | | | | | | | | | | |
| Three months ended March 31 | | |
| 2021 | 2020 | | | |
Purchases and sales of business interests(a) | $ | 3 | | $ | 12,372 | | | | |
Licensing and royalty income | 48 | | 42 | | | | |
Associated companies | 16 | | 39 | | | | |
Net interest and investment income (loss)(b) | 439 | | (5,632) | | | | |
Other items | 116 | | 53 | | | | |
GE Industrial | $ | 623 | | $ | 6,874 | | | | |
Eliminations | 3 | | (4) | | | | |
Total | $ | 626 | | $ | 6,869 | | | | |
(a)Included a pre-tax gain of $12,292 million ($11,145 million after-tax) on the sale of BioPharma for our remaining interest in Baker Hughes (comprising 377.4the three months ended March 31, 2020. See Note 2 for further information.
(b)Included a pre-tax realized and unrealized gain of $296 million shares($188 million after-tax) and a promissory note receivable) at fair value. At March 31, 2020, the fair value of our interest in Baker Hughes was $4,083 million. Since the date of deconsolidation, we have not sold any shares of Baker Hughes and recognized anpre-tax unrealized loss of $5,710 million ($4,631 million after-tax) related to our interest in Baker Hughes for the three months ended March 31, 2021 and 2020, based on a share price of $10.50. See Notes 2 and 3 for further information.respectively.
Summarized financial information of Baker Hughes is as follows.
|
| | | |
For the three months ended March 31, 2020 (In millions) | |
| |
Revenues | $ | 5,425 |
|
Gross profit | 755 |
|
Net income (loss) | (16,098 | ) |
Net income (loss) attributable to the entity | (10,210 | ) |
Baker Hughes is a SEC registrant with separate filing requirements, and its financial information can be obtained from www.sec.gov or www.bakerhughes.com.
NOTE 23. OTHER INCOME
|
| | | | | | |
| Three months ended March 31 |
(In millions) | 2020 |
| 2019 |
|
| | |
Purchases and sales of business interests(a) | $ | 12,372 |
| $ | 253 |
|
Licensing and royalty income | 42 |
| 40 |
|
Associated companies | 39 |
| 39 |
|
Net interest and investment income(b) | (5,632 | ) | 137 |
|
Other items | 53 |
| 384 |
|
GE | 6,874 |
| 852 |
|
Eliminations | (4 | ) | (5 | ) |
Total | $ | 6,869 |
| $ | 847 |
|
| |
(a) | Included a pre-tax gain of $12,292 million on the sale of BioPharma in 2020. Included a pre-tax gain of $224 million on the sale of ServiceMax in 2019. See Note 2 for further information. |
| |
(b) | Included unrealized loss of $(5,710) million related to our interest in Baker Hughes in 2020. See Note 3 for further information. |
|
| | |
FORWARD LOOKING STATEMENTS | | |
FORWARD-LOOKING STATEMENTS
Our public communications and SEC filings may contain statements related to future, not past, events. These forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "estimate," "forecast," "target," "preliminary," or "range." Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and on the world economy; our expected financial performance, including cash flows, revenues, organic growth, margins, earnings and earnings per share; macroeconomic and market conditions and volatility; planned and potential business or asset dispositions; our de-leveraging plans, including leverage ratios and targets, the timing and nature of actions to reduce indebtedness and our credit ratings and outlooks; GE's and GE Capital's funding and liquidity; our businesses’ cost structures and plans to reduce costs; restructuring, goodwill impairment or other financial charges; or tax rates.
For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:
the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on our operations and personnel, and on commercial activity and demand across our and our customers’ businesses, and on global supply chains;
our inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position, the prices of our securities and the achievement of our strategic objectives;
changes in macroeconomic and market conditions and market volatility (including developments and volatility arising from the COVID-19 pandemic), including interest rates, the value of securities and other financial assets (including our equity ownership position in Baker Hughes), oil and other commodity prices and exchange rates, and the impact of such changes and volatility on our financial position;
our de-leveraging and capital allocation plans, including with respect to actions to reduce our indebtedness, the timing and amount of GE dividends, organic investments, and other priorities;
further downgrades of our current short- and long-term credit ratings or ratings outlooks, or changes in rating application or methodology, and the related impact on our liquidity, funding profile, costs and competitive position;
GE’s liquidity and the amount and timing of our GE Industrial cash flows and earnings, which may be impacted by customer, supplier, competitive, contractual and other dynamics and conditions;
GE Capital's capital and liquidity needs, including in connection with GE Capital’s run-off insurance operations and discontinued operations, the amount and timing of required capital contributions to the insurance operations and any strategic actions that we may pursue; the impact of conditions in the financial and credit markets on GE Capital's ability to sell financial assets; the availability and cost of funding; and GE Capital's exposure to particular counterparties and markets;
our success in executing and completing asset dispositions or other transactions, including our plan to exit our equity ownership position in Baker Hughes, the timing of closing for such transactions and the expected proceeds and benefits to GE;
global economic trends, competition and geopolitical risks, including changes in the rates of investment or economic growth in key markets we serve, or an escalation of trade tensions such as those between the U.S. and China;
market developments or customer actions that may affect levels of demand and the financial performance of the major industries and customers we serve, such as secular, cyclical and competitive pressures in our Power business, pricing and other pressures in the renewable energy market, levels of demand for air travel and other customer dynamics such as early aircraft retirements, conditions in key geographic markets and other shifts in the competitive landscape for our products and services;
operational execution by our businesses, including our ability to improve the operations and execution of our Power and Renewable Energy businesses, and the performance of our Aviation business;
changes in law, regulation or policy that may affect our businesses, such as trade policy and tariffs, regulation related to climate change, and the effects of U.S. tax reform and other tax law changes;
our decisions about investments in new products, services and platforms, and our ability to launch new products in a cost-effective manner;
our ability to increase margins through implementation of operational changes, restructuring and other cost reduction measures;
the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of Alstom, SEC and other investigative and legal proceedings;
the impact of actual or potential failures of our products or third-party products with which our products are integrated, such as the fleet grounding of the Boeing 737 MAX, and the timing of its return to service and return to delivery, and related reputational effects;
the impact of potential information technology, cybersecurity or data security breaches; and
the other factors that are described in the "Risk Factors" section of this report and of our Annual Report on Form 10-K for the year ended December 31, 2019, as such descriptions may be updated or amended in any future reports we file with the SEC.
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.
20202021 1Q FORM 10-Q 5948
EXHIBITS
EXHIBITS
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| Transaction Agreement, dated as of March 9, 2021, by and among GE Ireland USD Holdings ULC, GE Financial Holdings ULC, GE Capital US Holdings, Inc., General Electric Company, Annual Executive Incentive Plan, effective January 1, 2020. |
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Exhibit 101 | The following materials from General Electric Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020,2021, formatted in XBRL (eXtensible Business Reporting Language); (i) Statement of Earnings (Loss) for the three months ended March 31, 20202021 and 2019,2020, (ii) Statement of Financial Position at March 31, 20202021 and December 31, 2019,2020, (iii) Statement of Cash Flows for the three months ended March 31, 20202021 and 2019,2020, (iv) Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 20202021 and 2019,2020, (v) Statement of Changes in Shareholders' Equity for the three months ended March 31, 20202021 and 2019,2020, and (vi) Notes to Consolidated Financial Statements. |
Exhibit 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Data required by Financial Accounting Standards Board Accounting Standards Codification 260, Earnings Per Share, is provided in Note 16 to the Consolidated Financial Statements in this Report.
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FORM 10-Q CROSS REFERENCE INDEX
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Item Number | | Page(s) |
Part I – FINANCIAL INFORMATION |
Item 1. | | Financial Statements | | 30-5824-48 |
Item 2. | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 3-284-23 |
Item 3. | | Quantitative and Qualitative Disclosures About Market Risk | | 20-21, 50-5216-17, 42-44 |
Item 4. | | Controls and Procedures | | 2823 |
Part II – OTHER INFORMATION |
Item 1. | | Legal Proceedings | | 2945-47 |
Item 1A. | | Risk Factors | | 2823 |
Item 2. | | Unregistered Sales of Equity Securities and Use of Proceeds | | Not applicable(a)23 |
Item 3. | | Defaults Upon Senior Securities | | Not applicable |
Item 4. | | Mine Safety Disclosures | | Not applicable |
Item 5. | | Other Information | | Not applicable |
Item 6. | | Exhibits | | 6049 |
Signatures | | 6149 |
(a) GE did not repurchase any equity securities during the three months ended March 31, 2020, and no repurchase program has been authorized.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | | | | | | |
April 29, 202027, 2021 | | /s/ Thomas S. Timko |
Date | | Thomas S. Timko Vice President, Chief Accounting Officer and Controller Principal Accounting Officer |
20202021 1Q FORM 10-Q 6149