0000040545 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2019-12-31
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 June 30, 2020March 31, 2021
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 |
| 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 8,753,289,0008,778,641,000 shares of common stock with a par value of $0.06 per share outstanding at June 30, 2020.March 31, 2021.
TABLE OF CONTENTS
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. 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. 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 results of operations and 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). TheSee 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 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.
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. Since the latter part of the first quarter of 2020, these factors have 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. This section provides a brief overview of how we are responding to current and potential impacts related to COVID-19 on GE’s operations and financial condition and results, with additional details provided throughout the MD&A and other relevant sections of this report.
We have adopted operational and governance rhythms across the Company, and with our Board of Directors, to coordinate and oversee actions related to the COVID-19 pandemic, including an internal task force to protect the health and safety of our employees globally and maintain business continuity; the assessment of financial and operating impacts, financial planning and mitigating cost, cash, and other actions in response; funding and liquidity management and related treasury actions; enterprise risk management and other functional activities across our global commercial, supply chain, human resources, controllership, government affairs, and other organizations. In particular, we took a series of actions during the second quarter to enhance and extend our liquidity at both GE and GE Capital (as described under "Debt offerings and tenders" below), and we continue to evaluate market conditions as they evolve and take precautionary measures to strengthen our financial position. We ended the second quarter of 2020 with $41.4 billion of consolidated cash, cash equivalents and restricted cash, in addition to our available credit lines. See the Capital Resources and Liquidity section for further information.
While factors related directly and indirectly to the COVID-19 pandemic have been impacting operations and financial performance at varying levels across all our businesses, the most significant impact to date has been at our Aviation segment and our GE Capital Aviation Services (GECAS) aircraft leasing business within our Capital segment. The 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 service revenues within our Aviation segment directly impacting our profitability and cash flows during 2020. Our Healthcare segment experienced increased demand for certain types of products and services, including ventilators, monitoring solutions, x-ray, anesthesia and point-of-care ultrasound product lines, partially offset by decreased demand in other parts of the business as patients have postponed certain procedures and hospitals have deferred spending. 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 six months ended June 30, 2020. We anticipate many of these impacts experienced in the first half of 2020 related to demand, profitability and cash flows will continue in future periods depending on the severity and duration of the pandemic.discontinued operations. For additional details about impacts related to Aviationour businesses and GECAS, Healthcare and our other businesses,actions we have taken in response, as applicable, refer to the respective segment sections within MD&A.
Each of GE's businesses and Corporate are taking cost and cash actions to manage risk and proactively mitigate the financial impact from COVID-19, as supply and demand dynamics We also continue to shift. In 2020, we are targeting more than $2 billion in operational cost outevaluate market conditions as they evolve and more than $3 billion in cash preservation actions acrosstake precautionary measures to strengthen our financial position. We ended the company, including more than $1 billion in cost out and more than $2 billion in cash preservation actions in Aviation, to right-size its cost structure and preserve its ability to serve customers. To date, we have realized more than one-third of savings from actions at the total company level, with further results expected in the second half of 2020. During the six months ended June 30, 2020, excluding business dispositions, we reduced consolidated headcount by approximately 8,700, including 5,300 at Aviation and 1,500 at Power.
At this time, GE cannot forecast the full duration and magnitude of COVID-19 impacts, or the pace of recovery from the pandemic across our end markets, operations, and supply chains. See the Risk Factors section for further information about related risks and uncertainties.
BioPharma. On March 31, 2020, we completed the sale of our BioPharma business within our Healthcare segment to Danaher Corporation. See the Segment Operations - Healthcare section and Note 2 for further information.
Baker Hughes. We recognized a pre-tax unrealized gain of $1.8 billion ($1.6 billion after tax) and a pre-tax unrealized loss of $3.9 billion ($3.1 billion after tax) for the three and six months ended June 30, 2020, respectively, on our investment in Baker Hughes. See Notes 2, 3 and 21 for further information.
Goodwill impairments. In the secondfirst quarter of 2020, we recognized a non-cash pre-tax impairment charge2021 with $31.8 billion of $0.9 billion related to goodwill at our Additive reporting unit within our Aviation segment, that was recorded within earnings from continuing operations at Corporate. We also recognized a non-cash pre-tax impairment charge of $0.8 billion relatedconsolidated cash, cash equivalents and restricted cash, in addition to our GECAS reporting unit within our Capital segment.available credit lines of $20.2 billion. See Note 8 for further information.
Debt offerings and tenders.In the second quarter of 2020, we took a series of actions to enhance and extend our liquidity at both GE and GE Capital, issuing a total of $13.5 billion of longer-dated debt and reducing near-term debt maturities by $10.5 billion, with the remaining $3 billion to be leverage neutral by the end of 2021. The total pre-tax loss from these actions was $0.2 billion. Following these actions, GE Industrial has no remaining debt maturities in 2020 and 2021 and GE Capital has $5 billion of remaining debt maturities in 2020 and $3 billion in 2021.
We have also reduced debt by $9 billion year to date between GE and GE Capital, and we have cumulatively decreased our debt by approximately $22 billion between GE and GE Capital since the beginning of 2019. See the Borrowings section of Capital Resources and Liquidity and Note 11section for further information.
SECOND
GECAS. On March 9, 2021, we announced an agreement to combine GECAS with AerCap Holdings N.V. (AerCap), for which the Company expects to receive $23.9 billion in cash, subject 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 AerCap’s closing share price on March 31, 2021, and $1 billion in AerCap 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 discontinued operations in 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 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. In addition, we expect to sell our stake in an orderly fashion over time. The remainder of GE Capital, including Energy Financial Services (EFS) and our run-off insurance operations, will be reported within Corporate. This means we will move from three-column to one-column financial statement reporting.
FIRST QUARTER 20202021 RESULTS. Consolidated revenues were $17.7$17.1 billion, down $5.7$2.4 billion for the quarter, driven by decreased GE Industrial andrevenues partially offset by increased GE Capital revenues. GE Industrial revenues decreased $5.3$2.5 billion (25%(13%), driven primarily by decreases at our industrial segments.Aviation, Healthcare and Power, partially offset by an increase at Renewable Energy. GE Capital revenues increased 5%.
Continuing earnings (loss) per share was $(0.27).$0.00. Excluding realized and unrealized gains (losses), goodwill impairments, non-operating benefit costs, restructuring and other charges and debt extinguishment costs,a GE Capital tax loss, Adjusted earnings per share* was $(0.15).
For the three months ended June 30, 2020,March 31, 2021, GE Industrial profit was $(0.9)$0.4 billion and profit margins were (5.7)%2.3%, down $0.5$6.2 billion, driven primarily by decreasesthe nonrecurrence of the $12.3 billion gain on the sale of our BioPharma business and lower profit at our industrial segments,Aviation, partially offset by an unrealized gain in the quartera lower net loss on our investment in Baker Hughes of $1.8$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 adjusted Corporate operating costs*interest and other financial charges of $0.3$0.1 billion.Adjusted GE Industrial organic profit* decreased $2.0increased $0.1 billion, primarily as a result of the impacts of COVID-19, particularlyincreases at our Aviation segment, as well asHealthcare, Renewable Energy and Power, and lower adjusted total Corporate operating costs*, were partially offset by a decrease at Power.Aviation.
GE Industrial cash flows from operating activities (CFOA) was $(3.3)were $(0.5) billion and $(1.1)$(1.7) billion for the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively. GE CFOAIndustrial cash used for operating activities decreased primarily due to lower net income, primarily due to COVID-19 impacts, and highera decrease in cash used for working capital, partially offset by changesan increase in contract andcash used for All other deferred assets, increases in customer allowance accruals and lower cash paid for taxes.operating activities. GE Industrial free cash flows*flows (FCF)* were $(4.3)$(0.8) billion and $(2.2) billion for the sixthree months ended June 30,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 June 30 | | Six months ended June 30 | GE INDUSTRIAL ORDERS | Three months ended March 31 | |
| (In billions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| |
| | | 2021 | 2020 | |
| Equipment | $ | 7.1 |
| $ | 11.3 |
| | $ | 16.3 |
| $ | 21.3 |
| Equipment | $ | 8,208 | | $ | 9,211 | | |
| Services | 6.6 |
| 10.9 |
| | 16.9 |
| 21.5 |
| Services | 8,800 | | 10,274 | | |
| Total orders(a) | $ | 13.8 |
| $ | 22.2 |
| | $ | 33.3 |
| $ | 42.8 |
| Total orders(a) | $ | 17,008 | | $ | 19,485 | | |
| Total organic orders | $ | 13.9 |
| $ | 21.3 |
| | $ | 33.5 |
| $ | 41.4 |
| Total organic orders | $ | 16,720 | | $ | 18,247 | | |
(a) Included $0.8 billion related to BioPharmaOrders for the three months ended June 30, 2019, and $1.1 billion and $1.8 billion for the six months ended June 30,March 31, 2020 and 2019, respectively.included $1,136 million related to BioPharma.
For the three months ended June 30, 2020March 31, 2021, orders decreased $8.5$2.5 billion (38%(13%) on a reported basis and decreased $7.4$1.5 billion (35%(8%) organically primarily at Aviation, driven by declines in both commercial equipment and service orders due to COVID-19 and the 737 MAX grounding,decreases in services orders, and at Power, due to decreases in equipment orders.orders, partially offset by increases at Renewable Energy and Healthcare. Equipment orders were down $3.3$0.1 billion (31%(1%) organically and services orders were down $4.1$1.4 billion (38%(14%) organically.
For the six months ended June 30, 2020, orders decreased $9.6 billion (22%) on a reported basis and decreased $8.0 billion (19%) organically with declines at Aviation, primarily driven by declines in both commercial equipment and service orders due to COVID-19 and the 737 MAX grounding, at Power, due to decreases in equipment orders, and at Renewable Energy, partially offset by an increase at Healthcare. Equipment orders were down $3.6 billion (18%) organically and services orders were down $4.4 billion (21%) organically. Excluding BioPharma, orders decreased $8.1 billion (20%) 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) | June 30, 2020 |
| December 31, 2019 |
| June 30, 2019 |
|
| Equipment | $ | 73.3 |
| $ | 79.0 |
| $ | 79.4 |
|
| Services | 307.3 |
| 325.6 |
| 295.9 |
|
| Total backlog(a) | $ | 380.5 |
| $ | 404.6 |
| $ | 375.3 |
|
(a) Backlog as of June 30, 2020 excludes the BioPharma business due to its disposition in the first quarter of 2020. Backlog as of December 31, 2019 and June 30, 2019 included $1.2 billion and $1.1 billion, respectively, related to BioPharma.
As of June 30, 2020March 31, 2021, backlog decreased $24.0$3.1 billion (6%(1%) from December 31, 2019,2020, primarily driven byat Power, from sales outpacing new orders, and at Aviation, from cancellations of commercial engine and service orders. Renewable Energy decreased due to the effects of foreign currency fluctuations, and Healthcare decreased due to an increase in shorter cycle time products. Backlog decreased $17.7 billion (4%) from March 31, 2020, due to a decrease in equipment backlog of $4.6 billion (6%), primarily at Aviation, 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,, in addition and at Power, due to sales outpacing new orders. The reduction in Commercial Services at Aviation reflects the cancellation of equipment unit orders, lower anticipated engine utilization, customer fleet restructuring and contract modifications. Power and Renewable Energy decreased due to sales outpacing new orders, and Healthcare decreased with the disposition of the BioPharma business of $1.2 billion. Backlog increased $5.2 billion (1%) from June 30, 2019, due to an increase in services backlog of $11.4 billion (4%), primarily at Aviation, partially offset by Power, and a decrease in equipment backlog of $6.2 billion (8%), primarily at Power, Aviation and Healthcare. Excluding the BioPharma disposition, backlog increased $6.3 billion (2%) from June 30, 2019.
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. We planIn the second quarter of 2021, we expect to continue reportingreplace our quarterly disclosures of backlog with RPO as we believe that ita 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 a useful metric for investors, given its relevance to total orders.remote. See Note 9 for further information.
*Non-GAAP Financial Measure
2020 2Q2021 1Q FORM 10-Q 5
| | | | | | | | | | | |
| March 31, 2021 | Equipment | Services | Total |
| Backlog | $ | 72,272 | | $ | 311,134 | | $ | 383,405 | |
| Adjustments | (31,321) | | (125,122) | | (156,443) | |
| Remaining performance obligation | $ | 40,951 | | $ | 186,012 | | $ | 226,962 | |
|
| | | | | | | | | |
June 30, 2020 (In billions) | Equipment |
| Services |
| Total |
|
| Backlog | $ | 73.3 |
| $ | 307.3 |
| $ | 380.5 |
|
| Adjustments | (28.8 | ) | (124.1 | ) | (152.9 | ) |
| Remaining performance obligation | $ | 44.4 |
| $ | 183.2 |
| $ | 227.6 |
|
Adjustments to reported backlog, primarily related to long-term contracts in excess of $152.9one year, of $156.4 billion as of June 30, 2020March 31, 2021 are largely driven by adjustments of $142.6$145.9 billion in our Aviation segment: (1) backlog includes engine contracts for which we have received purchase orders that are 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 June 30 | | Six months ended June 30 |
| (In billions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Consolidated revenues | $ | 17.7 |
| $ | 23.4 |
| | $ | 38.3 |
| $ | 45.6 |
|
| | | | | | |
| Equipment | 8.3 |
| 10.3 |
| | 17.5 |
| 19.9 |
|
| Services | 7.8 |
| 11.1 |
| | 17.4 |
| 21.9 |
|
| GE Industrial revenues | $ | 16.1 |
| $ | 21.4 |
| | $ | 34.9 |
| $ | 41.7 |
|
| | | | | | |
| GE Capital revenues | $ | 1.8 |
| $ | 2.3 |
| | $ | 3.8 |
| $ | 4.5 |
|
For the three months ended June 30, 2020March 31, 2021, consolidatedConsolidated revenues were down $5.7$2.4 billion, driven by decreaseda decrease in GE Industrial revenues of $5.3$2.5 billion and decreasedpartially offset by an increase in GE Capital revenues of $0.5 billion.revenues.
GE Industrial revenues decreased $5.3$2.5 billion (25%(13%), with decreases in services and equipment. The decrease in services was primarily at Aviation; driven by commercial servicesAviation, due to lower commercial spare part shipments and decreased shop visits, andpartially offset by an increase at Power driven by Gas Power; due to declines in transactional and upgradesPower services revenues. The decrease in equipment was primarily at Aviation; Aviation, due to 403 fewer commercial install and spare engine unit shipments,shipments; at Healthcare;Healthcare, due to the disposition of the BioPharma business,business; and within Renewable Energy's Gridat Power, due to decreases in Steam Power and Hydro businesses,Gas Power; partially offset by increases in Gas Power equipment revenues related to an increase in Heavy-Duty gas turbine unit shipments. ThisRenewable Energy. The decrease in GE Industrial revenues included the net effects of dispositions of $0.9$1.1 billion and the effects of a stronger U.S. dollaran increase from foreign currency translation of $0.3 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* decreased $4.2$1.7 billion (20%(10%), with a decrease in services revenues of $3.2$1.4 billion (29%(14%) and equipment revenues of $0.9$0.4 billion (10%(5%). GE Industrial organic revenues* decreased at Aviation and Power, partially offset by an increase at Healthcare. Healthcare organic revenue* increased $0.3 billion (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 $0.5 billion (20%)increased 5%, primarily as a result of volume declines,lower marks and impairments primarily in Insurance, partially offset by lower revenue at GECAS relatedWorking Capital Solutions (WCS) due to lower interest income attributable to the sale of PK Air Finance and lower rental revenue,volume and lower gains partially offset by mark-to-market effects and impairments as a result of COVID-19 and related market impacts.
For the six months ended June 30, 2020, consolidatedproject revenues were down $7.3 billion, driven by decreased GE Industrial revenues of $6.8 billion and decreased GE Capital revenues of $0.8 billion.at EFS.
GE Industrial revenues decreased $6.8 billion (16%), with decreases in services and equipment. The decrease in services was primarily at Aviation; driven by commercial services due to lower part shipments and decreased shop visits, as well as Gas Power; due to declines in transactional and upgrades revenues. The decrease in equipment was primarily at Aviation; due to 682 fewer commercial install and spare engine unit shipments, at Healthcare; due to the disposition of the BioPharma business, and within Renewable Energy's Grid and Hydro businesses, partially offset by increases in Gas Power; due to equipment revenues related to an increase in Heavy-Duty gas turbine unit shipments and Renewable Energy's Onshore Wind from higher turbine shipments. This decrease included the net effects of dispositions of $1.3 billion and the effects of a stronger U.S. dollar of $0.4 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* decreased $5.1 billion (13%), with a decrease in services revenues of $4.2 billion (19%) and a decrease in equipment revenues of $1.0 billion (5%). Excluding the BioPharma disposition, GE Industrial organic revenues* decreased $5.2 billion (13%).
GE Capital revenues decreased $0.8 billion (17%), as a result of volume declines, primarily at GECAS related to lower interest income attributable to the sale of PK Air Finance and lower rental revenue, lower gains and mark-to-market effects and impairments as a result of COVID-19 and related market impacts. | | | | | | | | | | | |
| 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 | | | | |
|
| | | | | | | | | | | | | |
| EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | Three months ended June 30 | | Six months ended June 30 |
| (In billions; per-share in dollars and diluted) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Continuing earnings | $ | (2.2 | ) | $ | (0.3 | ) | | $ | 4.1 |
| $ | 0.6 |
|
| Continuing earnings per share | $ | (0.27 | ) | $ | (0.03 | ) | | $ | 0.46 |
| $ | 0.07 |
|
For the three months ended June 30, 2020March 31, 2021, consolidatedConsolidated continuing earnings decreased $1.9$6.2 billion due to a decrease in GE Industrial profit of $0.5 billion and a decrease in GE Capital earnings of $1.4 billion.profit.
*Non-GAAP Financial Measure
GE Industrial profit decreased $0.5$6.2 billion driven by decreasesthe nonrecurrence of the $12.3 billion gain on the sale of our BioPharma business and lower profit at our industrial segments and higher goodwill impairments,Aviation, partially offset by an unrealized gain in the quartera lower net loss on our investment in Baker Hughes of $1.8$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 Adjusted Corporate operating costs*interest and other financial charges of $0.3$0.1 billion. GE Industrial profit margin was (5.7)%2.3%, a decrease of 390 basis pointsfrom 34.9%, primarily due to the same net decreases as described above. Adjusted GE Industrial profit* was $(0.5)$0.8 billion, a decreasean increase of $2.0$0.1 billion organically*, due to decreasesincreases at our industrial segments, primarily in AviationHealthcare, Renewable Energy and Power, partially offset by a decrease in Adjusted Corporate operating costs*.at Aviation. Adjusted GE industrialIndustrial profit margin* was (3.2)%5.1%, a decreasean increase of 1,030110 basis points organically*, primarily due to the same net decreasesincreases as described above. At Aviation, the primary drivers were lower volume on commercial spare part and commercial spare engine shipments, decreased shop visits and a $0.6 billion pre-tax charge to reflect the cumulative impacts of changes to billing and cost assumptions for certain long-term service agreements, and expected future losses related to customer credit risk. At Power, the primary drivers were lower revenues and a charge of approximately $0.1 billion related to an under-performing joint venture (JV), partially offset by improved cost productivity.
GE Capital continuing earnings decreased $1.4 billion primarily due to an impairment of goodwill, mark-to-market effects and other impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts, volume declines, debt tender costs and lower gains. Gains were $0.1 billion and $0.2 billion in the second quarters of 2020 and 2019, respectively, which primarily related to sales of GECAS aircraft and engines resulting in gains of $0.1 billion in the second quarters of both 2020 and 2019, and the nonrecurrence of a sale of an equity method investment resulting in a gain of $0.1 billion in 2019 at EFS.
For the six months ended June 30, 2020, consolidated continuing earnings increased $3.5 billion due to an increase in GE Industrial profit of $5.0 billion and a decrease in GE Capital earnings of $1.6 billion.
GE Industrial profit increased $5.0 billion driven primarily by the gain on the sale of our BioPharma business of $12.3 billion and a decrease in Adjusted Corporate operating costs* of $0.3 billion, partially offset by an unrealized loss on our investment in Baker Hughes of $3.9 billion, decreases at our industrial segments and higher goodwill impairments.GE Industrial profit margin was 16.2%, an increase of 1,450 basis points, primarily due to the same net increases as described above. Adjusted GE Industrial profit* was $0.6 billion, a decrease of 84% organically*, primarily due to decreases at our Aviation, Power and Renewable Energy segments, partially offset by a decrease in Adjusted Corporate operating costs*. Adjusted GE industrial profit margin* was 1.6%, a decrease of 710 basis points organically*, primarily due to the same net decreases as described above. At Aviation, the primary drivers were lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits and a $0.8 billion pre-tax charge to reflect the cumulative impacts of changes to billing and cost assumptions for certain long-termin our service agreements, and expected future losses related to customer credit risk. agreements. At Power, the primary drivers were lowerincrease was driven by growth in Gas Power services revenues and a chargemargins, and continued efforts to streamline the business. At Healthcare, the increase was primarily due to cost reductions and increased demand for HCS products and increases in PDx volume, and at Renewable Energy, the increase was due to product cost deflation, the favorable impact of approximately $0.1 billion related to an under-performing JV,cost reduction measures and improved project execution.
GE Capital continuing losses decreased 8% as lower claims, improved investment performance and lower marks and impairments in Insurance were partially offset by improved cost productivity. At Renewable Energy, higher saleslower gains and project revenues at Onshore Wind were more than offset by lower sales volume at Grid and Hydro,EFS and the nonrecurrence of a $0.1 billion non-cash gain from the termination of two Offshore Wind contracts in the first quarter of 2019.
GE Capital continuing earnings decreased $1.6 billion primarily due to an impairment of goodwill, mark-to-market effects and other impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts, volume declines, debt tender costs, lower gains and the nonrecurrence of a 2019 tax reform enactment adjustment, partially offset by the tax benefit related to the BioPharma sale and lower excess interest cost. Gains were $0.3 billion and $0.4 billion in the first half of 2020 and 2019, respectively, which primarily related to sales of GECAS aircraft and engines resulting in gains of $0.2 billion in the first half of both 2020 and 2019, and the nonrecurrence of a sale of an equity method investment resulting in a gain of $0.1 billion in 2019 at EFS.
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. Aviation commercial equipment backlog as of June 30, 2020 includes over 10,000 LEAP-1A and 1B engines, including the impact of approximately 1,000 LEAP-1B unit order cancellations since year-end. See the Segment Operations - Aviation section for further information. During 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. In May 2020, Boeing resumed production of the 737 MAX. 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 June 30, 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 78 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 78 orders now remaining.
As of June 30, 2020, we had approximately $2.8 billion of net assets ($5.0 billion of assets and $2.2 billion of liabilities) related to the 737 MAX program that primarily comprised 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 450 engines for Boeing and Airbus platforms in the first half of 2020 and 3,840 engines since inception.
*Non-GAAP Financial Measure
2020 2Q2021 1Q FORM 10-Q 76
SEGMENT OPERATIONS. Refer 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 June 30 | | Six months ended June 30 | |
| (In millions) | 2020 |
| 2019 |
| V% |
| | | 2020 |
| 2019 |
| V% |
| |
| Power | $ | 4,156 |
| $ | 4,681 |
| (11 | ) | % | | $ | 8,181 |
| $ | 9,298 |
| (12 | ) | % |
| Renewable Energy | 3,505 |
| 3,627 |
| (3 | ) | % | | 6,698 |
| 6,165 |
| 9 |
| % |
| Aviation | 4,384 |
| 7,877 |
| (44 | ) | % | | 11,276 |
| 15,831 |
| (29 | ) | % |
| Healthcare | 3,893 |
| 4,934 |
| (21 | ) | % | | 8,620 |
| 9,616 |
| (10 | ) | % |
| Capital | 1,845 |
| 2,321 |
| (21 | ) | % | | 3,768 |
| 4,548 |
| (17 | ) | % |
| Total segment revenues | 17,783 |
| 23,439 |
| (24 | ) | % | | 38,544 |
| 45,458 |
| (15 | ) | % |
| Corporate items and eliminations | (33 | ) | (25 | ) | (32 | ) | % | | (271 | ) | 158 |
| U |
| |
| Consolidated revenues | $ | 17,750 |
| $ | 23,414 |
| (24 | ) | % | | $ | 38,273 |
| $ | 45,616 |
| (16 | ) | % |
|
|
|
|
| | | | | | |
| Power | $ | (40 | ) | $ | 117 |
| U |
| | | $ | (168 | ) | $ | 228 |
| U |
| |
| Renewable Energy | (195 | ) | (184 | ) | (6 | ) | % | | (498 | ) | (371 | ) | (34 | ) | % |
| Aviation | (680 | ) | 1,385 |
| U |
| | | 325 |
| 3,046 |
| (89 | ) | % |
| Healthcare | 550 |
| 958 |
| (43 | ) | % | | 1,446 |
| 1,740 |
| (17 | ) | % |
| Capital | (1,476 | ) | (89 | ) | U |
| | | (1,506 | ) | 46 |
| U |
| |
| Total segment profit (loss) | (1,842 | ) | 2,188 |
| U |
| | | (401 | ) | 4,688 |
| U |
| |
| Corporate items and eliminations | 1,459 |
| (976 | ) | F |
| | | 7,523 |
| (1,205 | ) | F |
| |
| GE goodwill impairments | (877 | ) | (744 | ) | (18 | ) | % | | (877 | ) | (744 | ) | (18 | ) | % |
| GE interest and other financial charges | (396 | ) | (382 | ) | (4 | ) | % | | (766 | ) | (902 | ) | 15 |
| % |
| GE non-operating benefit costs | (596 | ) | (558 | ) | (7 | ) | % | | (1,212 | ) | (1,122 | ) | (8 | ) | % |
| GE benefit (provision) for income taxes | 66 |
| 170 |
| (61 | ) | % | | (121 | ) | (97 | ) | (25 | ) | % |
| Earnings (loss) from continuing operations attributable to GE common shareholders | (2,186 | ) | (302 | ) | U |
| | | 4,146 |
| 618 |
| F |
| |
| Earnings (loss) from discontinued operations, net of taxes | 7 |
| 219 |
| (97 | ) | % | | (171 | ) | 2,881 |
| U |
| |
| Less net earnings attributable to noncontrolling interests, discontinued operations | — |
| (23 | ) | F |
| | | (2 | ) | 11 |
| U |
| |
| Earnings (loss) from discontinued operations, net of tax and noncontrolling interest | 7 |
| 241 |
| (97 | ) | % | | (168 | ) | 2,870 |
| U |
| |
| Consolidated net earnings (loss) attributable to the GE common shareholders | $ | (2,179 | ) | $ | (61 | ) | U |
| | | $ | 3,977 |
| $ | 3,488 |
| 14 |
| % |
POWER.We continue to monitor 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. Global electricity demand declined in the second quarter, however, both gas-based electricity generation and GE gas turbine utilization remained stable. As a result, our long-term service agreement billings increased compared with the prior year. Our ability to close transactions has been impacted by constrained customer budgets and access to financing due to oil prices and economic slowdown, especially in Gas Power. 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 market challenges in the near term, we believe the long-term outlook for the role of gas in the power market has not materially changed.
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 withensure we are securing deals that meet 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,financial hurdles and we have taken several measuresa high confidence to offset these pressures. In addition, we executed on a hiring freeze, accelerated planned employee reductions where possible,deliver for our customers.
Global electricity demand increased during the first quarter of 2021, driving increases in GE gas turbine utilization 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, andas well as the ongoing impactimpacts 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 $80$78 billion in backlog and a gas turbine installed base greater than 7,000 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. |
8 2020 2Q2021 1Q FORM 10-Q7
| | | | | | | | | | | |
| 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 June 30 | | Six months ended June 30 |
| | Orders | | Sales | | Orders | | Sales |
| (In units) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| GE Gas Turbines | 6 |
| 20 |
| | 25 |
| 11 |
| | 15 |
| 35 |
| | 32 |
| 20 |
|
| Heavy-Duty Gas Turbines(a) | 2 |
| 16 |
| | 15 |
| 4 |
| | 8 |
| 27 |
| | 20 |
| 11 |
|
| HA-Turbines(b) | — |
| 7 |
| | 5 |
| — |
| | 2 |
| 10 |
| | 9 |
| 1 |
|
| Aeroderivatives(a) | 4 |
| 4 |
| | 10 |
| 7 |
| | 7 |
| 8 |
| | 12 |
| 9 |
|
| GE Gas Turbine Gigawatts(c) | 0.4 |
| 4.6 |
| | | | | 2.6 |
| 6.7 |
| | | |
(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. |
|
| | | | | | | | | |
| (Dollars in billions) | June 30, 2020 |
| December 31, 2019 |
| June 30, 2019 |
|
| Equipment | $ | 17.1 |
| $ | 17.7 |
| $ | 19.6 |
|
| Services | 63.0 |
| 67.6 |
| 67.1 |
|
| Total backlog | $ | 80.2 |
| $ | 85.3 |
| $ | 86.7 |
|
|
| | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | | Six months ended June 30 |
| | 2020 |
| | 2019 |
| | | 2020 |
| | 2019 |
| |
| Equipment | $ | 0.3 |
| | $ | 2.1 |
| | | $ | 1.8 |
| | $ | 3.1 |
| |
| Services | 2.5 |
| | 2.8 |
| | | 5.1 |
| | 5.5 |
| |
| Total orders | $ | 2.9 |
| | $ | 4.9 |
| | | $ | 7.0 |
| | $ | 8.6 |
| |
| | | | | | | | | | |
| Gas Power | $ | 3.1 |
| | $ | 3.2 |
| | | $ | 5.9 |
| | $ | 6.5 |
| |
| Power Portfolio | 1.1 |
| | 1.4 |
| | | 2.2 |
| | 2.8 |
| |
| Total segment revenues | $ | 4.2 |
| | $ | 4.7 |
| | | $ | 8.2 |
| | $ | 9.3 |
| |
| | | | | | | | | | |
| Equipment | $ | 1.5 |
| | $ | 1.5 |
| | | $ | 3.0 |
| | $ | 3.0 |
| |
| Services | 2.7 |
| | 3.2 |
| | | 5.2 |
| | 6.3 |
| |
| Total segment revenues | $ | 4.2 |
| | $ | 4.7 |
| | | $ | 8.2 |
| | $ | 9.3 |
| |
| | | | | | | | | | |
| Segment profit (loss) | $ | — |
| | $ | 0.1 |
| | | $ | (0.2 | ) | | $ | 0.2 |
| |
| Segment profit margin | (1.0 | ) | % | 2.5 |
| % | | (2.1 | ) | % | 2.5 |
| % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 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 June 30, 2020,March 31, 2021, segment orders were down $2.0$0.5 billion (42%(12%), segment revenues were down $0.5$0.1 billion (11%(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 and March 31, 2020, respectively, primarily driven by sales outpacing new orders.
Orders decreased $2.0$0.5 billion (41%(12%) organically, primarily due to decreases in Gas Power Heavy-Duty Gas Turbine unitdriven by the nonrecurrence of a large turnkey order and services orders and Steam Power equipment orders.
Revenues decreased $0.4$0.2 billion (9%(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 Gas Power services revenues.
Profit increased 35% organically* due to growth in Gas Power services revenues primarily relatedand margins and continued efforts to delays in planned outagesstreamline the business across Gas Power and transactional part sales and upgrades,Power Portfolio, partially offset by increases in Gas Power equipment revenues related to 11 more Heavy-Duty gas turbine unit shipments. Steam equipment and service revenues also decreased.
Profit decreased $0.2 billion organically* due to lower revenues, a charge of approximately $0.1 billion related to an under-performing JV in China at Gas Power and a quality reserve in Power Portfolio on theunfavorable legacy product line that we have since exited in Power Conversion, partially offset by improved cost productivity driven by continued efforts to right size the business.
For the six months ended June 30, 2020, segment orders were down $1.6 billion (19%), segment revenues were down $1.1 billion (12%) and segment profit was down $0.4 billion.
Backlog as of June 30, 2020 decreased $5.1 billion (6%) and $6.5 billion (8%) from December 31, 2019 and June 30, 2019, respectively, primarily driven by sales outpacing new orders.
Orders decreased $1.5 billion (18%) organically, primarily due to decreases in Gas Power Heavy-Duty Gas Turbine unit and services ordersproject arbitration resolutions and Steam equipment ordersproject execution.
.
Revenues decreased $1.0 billion (10%) organically*, primarily due to decreases in Gas Power services revenues primarily related to delays in planned outages and transactional part sales and upgrades, partially offset by increases in Gas Power equipment revenues related to 9 more Heavy-Duty gas turbine unit shipments. Steam equipment and service revenues also decreased.
Profit decreased $0.4 billion organically* due to lower revenues, a charge of approximately $0.1 billion related to an under-performing JV in China at Gas Power and a quality reserve in Power Portfolio on the legacy product line that we have since exited in Power Conversion, partially offset by improved cost productivity driven by continued efforts to right size the business.
*Non-GAAP Financial Measure
RENEWABLE ENERGY.Renewable Energy includes a portfolio of businesses comprising DuringOnshore 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 lead the second quarter of 2020, as a result of the COVID-19 pandemic, many of our global manufacturing locations were temporarily closed or production reduced,energy transition with products and delays were observed across our long-term project sites. Accordingly, equipment revenues across the segment and most notably at our Grid and Hydro businesses were negatively impacted. Due to the importance of business continuity and the needs of our customers, we were able to continue maintaining customer assets. With the exception of certain operations in Brazil, all our manufacturing locations have since reopened and are returning to pre-COVID-19 capacity levels. While we do not believe the long-term outlook forintegrated solutions by growing new renewable energy productsgeneration, lowering the cost of electricity and services has materially changed, we are monitoringmodernizing the impact of the pandemic 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. In response to volume declines, we implemented additional cost reduction measures, restructuring and cash preservation actions.grid.
We continue to observe growthstrong demand across the global onshore wind market together with a positive impact on deliveries and installations in the U.S. 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 globally. In the U.S., in response to COVID-19 related risks to project completion timing, the recent one-year extension of the phase-down further extended the deadline for projects expecting to complete in 2020 and 2021 by one year. Under the current legislation, the PTC phase-down concludes in 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 possible project postponements, supply chain and project fulfillment disruptions due to COVID-19 or otherwise.
The grid market remains challenging as we continue to experience pricing pressure in the High Voltage Direct Current (HVDC) and High Voltage (HV) product lines. While we have experienced order declines in both these product lines, in July 2020, we announced Grid Solutions equipment and services (Grid) has been awarded HVDC scope for a 1.4GW offshore wind project in the United Kingdom. Both the Grid and Hydro businesses are executing their turnaround plans.
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 continue 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), for which we have observed significant market interest. Wedemand for our Onshore 5-6 MW Cypress units and Offshore Haliade-X 12-13 MW units and are preparing for large scale production of Haliade-X and expect itin response to receive fthis 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 | |
inal certification in the second half of 2020.
| | | | | | | | | | | |
| 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 | |
|
| | | | | | | | | | | | | | | | | | | | |
| | | Three months ended June 30 | | Six months ended June 30 |
| | | Orders | | Sales | | Orders | | Sales |
| (In units) | | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Onshore | Wind Turbines | 645 |
| 984 |
| | 830 |
| 804 |
| | 1,383 |
| 1,954 |
| | 1,561 |
| 1,157 |
|
| | Wind Turbine Megawatts | 2,167 |
| 2,670 |
| | 2,311 |
| 2,257 |
| | 4,500 |
| 5,334 |
| | 4,404 |
| 3,245 |
|
| | Repower | 118 |
| 494 |
| | 357 |
| 221 |
| | 124 |
| 594 |
| | 576 |
| 377 |
|
*Non-GAAP Financial Measure
|
| | | | | | | | | |
| (Dollars in billions) | June 30, 2020 |
| December 31, 2019 |
| June 30, 2019 |
|
| Equipment | $ | 15.5 |
| $ | 16.3 |
| $ | 15.3 |
|
| Services | 10.4 |
| 11.2 |
| 10.4 |
|
| Total backlog | $ | 25.9 |
| $ | 27.5 |
| $ | 25.7 |
|
|
| | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | | Six months ended June 30 | |
| | 2020 |
| | 2019 |
| | | 2020 |
| | 2019 |
| |
| Equipment | $ | 2.5 |
| | $ | 2.9 |
| | | $ | 5.1 |
| | $ | 5.9 |
| |
| Services | 0.5 |
| | 0.8 |
| | | 0.9 |
| | 1.3 |
| |
| Total orders | $ | 3.0 |
| | $ | 3.7 |
| | | $ | 6.1 |
| | $ | 7.2 |
| |
| | | | | | | | | | |
| Onshore Wind | $ | 2.5 |
| | $ | 2.4 |
| | | $ | 4.6 |
| | $ | 3.9 |
| |
| Grid Solutions equipment and services | 0.8 |
| | 0.9 |
| | | 1.7 |
| | 1.9 |
| |
| Hydro, Offshore Wind and other | 0.2 |
| | 0.2 |
| | | 0.4 |
| | 0.4 |
| |
| Total segment revenues | $ | 3.5 |
| | $ | 3.6 |
| | | $ | 6.7 |
| | $ | 6.2 |
| |
| | | | | | | | | | |
| Equipment | $ | 2.7 |
| | $ | 2.9 |
| | | $ | 5.3 |
| | $ | 4.8 |
| |
| Services | 0.8 |
| | 0.8 |
| | | 1.4 |
| | 1.3 |
| |
| Total segment revenues | $ | 3.5 |
| | $ | 3.6 |
| | | $ | 6.7 |
| | $ | 6.2 |
| |
| | | | | | | | | | |
| Segment profit (loss) | $ | (0.2 | ) | | $ | (0.2 | ) | | | $ | (0.5 | ) | | $ | (0.4 | ) | |
| Segment profit margin | (5.6 | ) | % | (5.1 | ) | % | | (7.4 | ) | % | (6.0 | ) | % |
10 2020 2Q2021 1Q FORM 10-Q8
| | | | | | | | | | | | | | | | | | | | | |
| | | | 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 June 30, 2020,March 31, 2021, segment orders were down $0.7up $0.4 billion (19%), segment revenues were down $0.1 billion (3%) and segment profit was flat.
Orders decreased $0.6 billion (17%) organically, at Onshore Wind and Grid, partially offset by $0.1 billion higher orders at Hydro. The decline in equipment orders and repower units, included within services, was primarily a result of delays arising from COVID-19.
Revenues increased 1% organically*, with higher revenue from 26 more wind turbine shipments, or 2% more megawatts shipped, and 136 more repower units than in the prior year at Onshore Wind, offset by lower revenue at Hydro and Grid, primarily related to COVID-19 fulfillment delays and execution challenges.
Profit decreased 15% organically*, as the negative impact of supply chain and project fulfillment disruptions at Grid and Hydro and quality-related costs were partially offset by equipment pricing at Onshore Wind and lower project execution losses.
For the six months ended June 30, 2020, segment orders were down $1.1 billion (16%(15%), segment revenues were up $0.5$0.1 billion (9%(2%) and segment profit was downup $0.1 billion (34%(28%).
Backlog as of June 30, 2020March 31, 2021 decreased $1.6$0.6 billion (6%(2%) from December 31, 2019 mainly2020 primarily driven by the effects of foreign currency fluctuations, partially offset by new 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 an increase in North America given the phase down of the U.S. PTC cycle, foreign currency translation and lowerHydro. These increases were partially offset by sales exceeding new orders at Grid, and Hydro. Backlogprimarily as a result of increased $0.2 billion (1%) from June 30, 2019 driven by $1.0 billion higher services backlog associated with a larger Onshore Wind installed equipment base and higher equipment backlog at Onshore and Offshore Wind, partially offset by $0.8 billion lower services backlog from Repower units given the phase down of the U.S. PTC cycle, foreign currency translation and lower orders at Grid and Hydro.commercial selectivity in certain product lines.
Orders decreased $1.0increased $0.4 billion (14%(13%) organically, primarily due to lowerthe Grid 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 unit basis and 11% more on a megawatt basis, were offset by lower repower unit orders, primarily from the U.S. PTC cycle compared to the prior yeardeliveries at Onshore Wind and the nonrecurrence of a large Grid Automated Control Systems (ACS) order, partially offset bylower revenue at Grid.
Profit increased $0.1 billion higher orders at Hydro.
Revenues increased $0.7 billion (12%(31%) organically*, primarily from 404 more wind turbine shipments on a unit basis, or 36% more megawatts shipped,improvement in Onshore Wind product cost, the favorable impact of cost reduction measures, primarily at Grid and 199 more repower units than in the prior year at Onshore Wind,Hydro, and improved project execution, partially offset by lower Hydro and Grid revenues, primarily due to COVID-19 fulfillment delays and execution challenges.
Profit decreased $0.1 billion (40%) organically*, as the impact of higher sales volumemargins on new product introductions at Onshore Wind was more than offset by lower sales volume at Grid and Hydro due to supply chain and project fulfillment disruptions, and 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 continues 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 commercial air traffic, which in turn is driven by economic activity and consumer and business propensity to travel. TheSince 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 declines in economic activity. These factors caused a significant decline in commercial aircraftcontinued 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 March 2021 compared to the first two months of the year, but levels of recovery varied across global regions. Aviation is a leading indicator for billingsclosely monitoring government actions and revenue generating shop visits. In April, aircraft departures reduced to approximately 76% below a pre-COVID-19 baseline. As a result, airlines grounded their fleetseconomic and in many cases, temporarily ceased passenger operations.industry 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. 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 commercial air traffic. Aviation continues to track global departures, which as of June 30, 2020, were approximately 60% below the pre-COVID-19 baseline and have since improved to approximately 43% below in July 2020. 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.services, including shop visit and spare part demand. Given the current trend,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. However,Consistent with industry projections, Aviation estimatescontinues to estimate the duration of the market recovery to be prolonged over multiple years dependent on various factors, including travelers' safety concerns, containmentcontaining the spread of COVID-19, medical treatment progress,the virus, effective inoculation programs and economic conditions.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, whichincluding a reduction of approximately 25% of its total global workforce since year-end 2019. The business is estimatedactively monitoring the pace of demand recovery to result in more than $1 billion in cost savings and $2 billion in cash preservation actions in 2020. Weensure the business is appropriately sized for the future. In addition, we continue to partner with our airline and leasing customers and are working closelyaligned with our airframe customers to alignpartners on production rates for 20202021 and beyond. During the first half of 2020, Aviation took several measures including a hiring freeze, cancellation of salaried merit increases, and a reduction of all non-safety related discretionary spending, including capital expenditures and engineering and development efforts. Aviation also announced a plan for permanent reductions of approximately 25% of its total global employee workforce. During the second quarter of 2020, in addition to the planned permanent reductions, Aviation implemented a 90-day temporary furlough impacting approximately 50% of its U.S. maintenance, repair and overhaul employees and a four-week temporary furlough impacting its U.S. assembly operations and component manufacturing shops.
*Non-GAAP Financial Measure
Aviation’s operational and financial performance is impacted by demand for commercial air traffic, 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 if actual results differ significantly from Aviation's current estimates.
In the second quarter of 2020, we recognized a non-cash pre-tax impairment charge of $0.9 billion related to goodwill at our Additive reporting unit within our Aviation segment that was recorded within earnings from continuing operations at Corporate.
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 allocated budgets to upgrade and modernize their existing fleets. During the first quarter of 2021, Aviation continued to experience supply chain challenges, which the business is actively addressing.
Total engineering, comprised bothof company, customer and customer funded spending,partner-funded and nonrecurring engineering costs, decreased compared to prior year in line with the changes in the commercial environment. Company-fundedDuring the first quarter of 2021, company-funded research and development spend decreased compared to the first half 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
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 with approximately 12,000 units under long-term service agreements, and $258 billion backlog represents strong long-term fundamentals. Aviation is taking actions to strengthen its business and seeks to emerge from this crisis stronger and drive long-term cash and profitable growth over time.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| | Orders | | Sales | | Orders | | Sales |
| (In units, except where noted) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Commercial Engines | 58 |
| 899 |
| | 320 |
| 723 |
| | 203 |
| 1,698 |
| | 792 |
| 1,474 |
|
| LEAP Engines(a) | 24 |
| 693 |
| | 178 |
| 437 |
| | 30 |
| 1,329 |
| | 450 |
| 861 |
|
| Military Engines | 463 |
| 53 |
| | 204 |
| 143 |
| | 735 |
| 79 |
| | 350 |
| 304 |
|
| Spare Parts Rate(b) | | | | $ | 13.1 |
| $ | 27.0 |
| | | | | $ | 20.0 |
| $ | 28.5 |
|
(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. |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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. |
| | | | | | | | | | March 31, 2021 | December 31, 2020 | March 31, 2020 |
| (Dollars in billions) | June 30, 2020 |
| December 31, 2019 |
| June 30, 2019 |
| |
| Equipment | $ | 36.7 |
| $ | 39.1 |
| $ | 38.2 |
| Equipment | $ | 34,333 | | $ | 34,486 | | $ | 39,154 | |
| Services | 221.6 |
| 234.1 |
| 205.7 |
| Services | 225,032 | | 225,927 | | 234,078 | |
| Total backlog | $ | 258.3 |
| $ | 273.2 |
| $ | 243.9 |
| 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 | | % |
|
| | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | | Six months ended June 30 | |
| | 2020 |
| | 2019 |
| | | 2020 |
| | 2019 |
| |
| Equipment | $ | 2.0 |
| | $ | 3.5 |
| | | $ | 4.3 |
| | $ | 6.7 |
| |
| Services | 1.7 |
| | 5.1 |
| | | 6.9 |
| | 10.6 |
| |
| Total orders | $ | 3.7 |
| | $ | 8.6 |
| | | $ | 11.2 |
| | $ | 17.3 |
| |
| | | | | | | | | | |
| Commercial Engines & Services | $ | 2.2 |
| | $ | 5.8 |
| | | $ | 7.0 |
| | $ | 11.8 |
| |
| Military | 1.2 |
| | 1.0 |
| | | 2.1 |
| | 2.0 |
| |
| Systems & Other | 1.0 |
| | 1.1 |
| | | 2.1 |
| | 2.0 |
| |
| Total segment revenues | $ | 4.4 |
| | $ | 7.9 |
| | | $ | 11.3 |
| | $ | 15.8 |
| |
| | | | | | | | | | |
| Equipment | $ | 2.0 |
| | $ | 3.0 |
| | | $ | 4.5 |
| | $ | 6.1 |
| |
| Services | 2.4 |
| | 4.8 |
| | | 6.8 |
| | 9.7 |
| |
| Total segment revenues | $ | 4.4 |
| | $ | 7.9 |
| | | $ | 11.3 |
| | $ | 15.8 |
| |
| | | | | | | | | | |
| Segment profit | $ | (0.7 | ) | | $ | 1.4 |
| | | $ | 0.3 |
| | $ | 3.0 |
| |
| Segment profit margin | (15.5 | ) | % | 17.6 |
| % | | 2.9 |
| % | 19.2 |
| % |
For the three months ended June 30, 2020,March 31, 2021, segment orders were down $4.8$2.0 billion (56%(26%), segment revenues were down $3.5$1.9 billion (44%(28%) and segment profit was down $2.1$0.4 billion (149%(36%).
OrdersBacklog as of March 31, 2021 decreased $4.8$1.0 billion (56%) organically, primarily driven by declines of more than 80% in both commercial equipment and service orders as airline customers have slowed or deferred new engine orders, as well as delayed maintenance and repair operations while existing fleets have been grounded. Military orders increased 60% compared to the prior year primarily driven by equipment and new development orders.
12from December 31, 2020, 2Q FORM 10-Q
Revenues decreased $3.4 billion (44%) organically*. Equipment revenues decreased primarily due to 403 fewer commercial install and spare engineapproximately 400 LEAP-1B unit shipments, including 259 fewer LEAP units and 74 fewer CFM56 units versus the prior year, in part due to the 737 MAX grounding and production slowdown. Commercial Services revenuesorder cancellations. Backlog decreased primarily due to lower commercial spare part shipments, decreased shop visits and the cumulative impact of changes in billing and cost assumptions in our long-term service agreements. Military revenues increased primarily due to higher volume of engine shipments and increased revenues on development contracts.
Profit decreased $2.1 billion organically*, primarily due to lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits in our service agreements. During the three months ended June 30, 2020, Aviation recorded expenses of $0.2 billion due to lower production volumes given decreases in demand primarily related to commercial engines. Aviation also recorded pre-tax charges totaling $0.2 billion due to expected future losses related primarily to customer credit risk given the current environment. In addition, Aviation recorded a $0.4 billion pre-tax charge to reflect the cumulative impacts of changes to billing and cost assumptions for certain long-term service agreements, reflecting lower engine utilization, anticipated customer fleet restructuring and contract modifications. Additional adjustments could occur in future periods and could be material for certain long-term service agreements if actual customer operating behavior differs significantly from Aviation’s current estimates.
For the six months ended June 30, 2020, segment orders were down $6.1 billion (35%), segment revenues were down $4.6 billion (29%) and segment profit was down $2.7 billion (89%).
Backlog as of June 30, 2020 decreased $14.9$13.9 billion (5%) from DecemberMarch 31, 2019, 2020, primarily due to a reduction in our Commercial Services backlog and cancellations of commercial equipment orders,, in addition to sales outpacing new orders. Commercial equipment cancellations which included approximately 1,0001,900 LEAP-1B unit order cancellations and 22 GE9X unit order cancellations since year-end.cancellations. The reduction to Commercial Services backlog reflects estimates of lower engine utilization, the partial cancellation of long-term service agreements related to the equipment unit order cancellations, estimates of lower engine utilization, and anticipated customer fleet restructuring and contract modifications. In addition to cancellations removed from backlog during 2020, there were several public customer announcements that indicate an intent to cancel, however, customer purchase orders with Aviation or the airframer have not been canceled as of June 30, 2020. Based on information currently available, the value of the announced but not canceled orders is less than $2 billion of total backlog. Backlog adjustments could be necessary in future periods for additional cancellations of new commercial engine orders, fleet retirements, or changes to customer aircraft utilization and operating behavior. Backlog increased $14.4 billion (6%) from June 30, 2019, primarily due to an increase in long-term service agreements, offset by decreases in commercial equipment orders.
Orders decreased $5.9$1.9 billion (34%(26%) organically, primarily driven by lower commercial equipment and service orders 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 increased 60%decreased 8% compared to the prior year primarily driven by equipment and new development orders, including a significant order from the U.S. Department of Navy’s Naval Air Systems Command (NAVAIR) for F414 engines in the first quarter of 2020.lower spare parts orders.
Revenues decreased $4.3$1.9 billion (28%(27%) organically*. Equipment revenues decreased, primarily due to 682171 fewer commercial install and spare engine unit shipments, including 41184 fewer LEAP units and 172 fewer CFM56 units versus the prior year, in part due to the 737 MAX grounding and production slowdown.year. Commercial Services revenues decreased, primarily due to lower commercial spare part shipments and decreased shop visits and the cumulative impact of changes in billing and cost assumptions in our long-term service agreements.visits. Military revenues increased primarilywere flat with 50 fewer engine shipments due to higher volume of engine shipments and increased revenues on development contracts.supply chain challenges, offset by favorable product mix.
Profit decreased $2.7$0.4 billion (89%(37%) organically*, primarily due to lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits in our service agreements. During the six months ended June 30, 2020, Aviation recorded expenses of $0.3 billion due to lower production volumes and initiated restructuring actions givenThese decreases in demand primarilyprofit were partially offset by operational cost reduction from the cost savings actions taken in 2020 and the first quarter of 2021, along with charges related to commercial engines. Aviation also recorded pre-tax charges totaling $0.3 billion due to expected future losses related primarily to customer
credit risk givenand declines in the current environment. In addition, Aviation recorded a $0.5 billion pre-tax charge to reflect the cumulative impacts of changes to billing and cost assumptions for certainestimated profitability in long-term service agreements reflecting lower engine utilization, anticipated customer fleet restructuring and contract modifications. Additional adjustments could occurnot repeating in future periods and could be material for certain long-term service agreements if actual customer operating behavior differs significantly from Aviation'sthe current estimates.year.
*Non-GAAP Financial Measure
2020 2Q2021 1Q FORM 10-Q 1310
HEALTHCARE.DuringWe continue to see an overall recovery in hospital spend and increases in procedure volume; the first half 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 theremain under pressure from revenue declines related to COVID-19 pandemic, including ventilators, 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 response efforts or where procedures could be postponed (magnetic resonance, contrast agents and nuclear tracers).impacts. 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, 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 (HCS) 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.
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. There has been some moderation in tariffs in both U.S. and China, however, this is subject to changes in U.S.-China trade relations.
The Pharmaceutical Diagnostics (PDX) 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.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 March 2020, we launched two new real-time applications in our Command Center software platform. The Infectious Disease Tile helps hospitals manage COVID-19 patient outcomes and staff safety. The Critical Resource Tile helps manage Intensive Care Units (ICUs), non-ICU beds and ventilators to help ensure resources are best deployed to meet patient needs. In addition, GE partnered with Microsoft to deploy its Mural Virtual Care Solution, which helps centrally manageHealthcare introduced the statuslatest member of multiple ICU patients that have COVID-19.the Venue™ point of care ultrasound family. We also introduced Vscan Air, Recon DL,a cutting edge wireless pocket-sized ultrasound that provides 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 industry's first FDA 510(k)-cleared deep learning-based MR image reconstruction technology offering shorter scansstandard of interoperative imaging with precise 3D volumetric images for spine and better image quality.orthopedic procedures combined with 2D imaging for greater everyday efficiency. We remain committed to innovate and invest to create more integrated, efficient, and 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 | |
|
| | | | | | | | | |
| (Dollars in billions) | June 30, 2020 |
| December 31, 2019 |
| June 30, 2019 |
|
| Equipment | $ | 6.1 |
| $ | 7.0 |
| $ | 6.7 |
|
| Services | 11.1 |
| 11.5 |
| 11.5 |
|
| Total backlog(a) | $ | 17.2 |
| $ | 18.5 |
| $ | 18.2 |
|
|
| | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| | 2020 |
| | 2019 |
| | | 2020 |
| | 2019 |
| |
| Equipment | $ | 2.4 |
| | $ | 3.2 |
| | | $ | 5.8 |
| | $ | 6.1 |
| |
| Services | 1.8 |
| | 2.0 |
| | | 3.8 |
| | 4.0 |
| |
| Total orders(a) | $ | 4.2 |
| | $ | 5.2 |
| | | $ | 9.5 |
| | $ | 10.1 |
| |
| | | | | | | | | | |
| Healthcare Systems | $ | 3.5 |
| | $ | 3.6 |
| | | $ | 7.0 |
| | $ | 7.0 |
| |
| Pharmaceutical Diagnostics | 0.4 |
|
| 0.5 |
| | | 0.8 |
|
| 1.0 |
| |
| BioPharma | — |
|
| 0.8 |
| | | 0.8 |
|
| 1.6 |
| |
| Total segment revenues | $ | 3.9 |
| | $ | 4.9 |
| | | $ | 8.6 |
| | $ | 9.6 |
| |
| | | | | | | | | | |
| Equipment | $ | 2.0 |
| | $ | 2.8 |
| | | $ | 4.7 |
| | $ | 5.5 |
| |
| Services | 1.8 |
| | 2.1 |
| | | 3.9 |
| | 4.1 |
| |
| Total segment revenues | $ | 3.9 |
| | $ | 4.9 |
| | | $ | 8.6 |
| | $ | 9.6 |
| |
| | | | | | | | | | |
| Segment profit | $ | 0.5 |
| | $ | 1.0 |
| | | $ | 1.4 |
| | $ | 1.7 |
| |
| Segment profit margin | 14.1 |
| % | 19.4 |
| % | | 16.8 |
| % | 18.1 |
| % |
| | | | | | | | | | |
| (a) Backlog as of June 30, 2020 excluded the BioPharma business due to its disposition in the first quarter of 2020. Backlog as of December 31, 2019 and June 30, 2019 included $1.2 billion and $1.1 billion, respectively, related to BioPharma. Orders included $0.8 billion related to BioPharma for the three months ended June 30, 2019, and included $1.1 billion and $1.8 billion related to BioPharma for the six months ended June 30, 2020 and 2019, respectively. |
| | | | | | | | | | | | | | | | | | | | | |
| | | 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 June 30, 2020,March 31, 2021, segment orders were down $1.0$0.8 billion (18%(15%), segment revenues were down $1.0$0.4 billion (21%(9%) and segment profit was down $0.4$0.2 billion (43%(19%).
Orders were down 1% organically, driven by decreases in PDX, partiallyBacklog as of March 31, 2021 decreased $0.1 billion from December 31, 2020 and $0.3 billion (2%) from March 31, 2020 primarily due to conversion to revenue of shorter cycle time LCS products, offset by HCS up 3%increases in orders of longer cycle time imaging products.
Orders increased $0.2 billion (5%) organically, due to increases in demand, includingImaging and Ultrasound in HCS, and a $0.3 billion order from the U.S. Department of Health and Human Services (HHS)return to deliver 50,000 ventilators in partnership with Ford.
Revenues decreased $0.1 billion (4%) organically*, primarily driven by reducedpre-pandemic volume in PDX from a decrease in non-essential routine procedures.
Profit was down 4% organically*, primarily due to decreases in PDX volume,PDx, partially offset by increaseslower Life Care Solutions (LCS) orders in HCS and cost reductions.as pandemic-related demand softened.
For the six months ended June 30, 2020, segment orders were down $0.6 billion (6%), segment revenues were down $1.0 billion (10%) and segment profit was downRevenues increased $0.3 billion (17%).
Backlog as of June 30, 2020 decreased $1.2 billion (7%) from December 31, 2019 and decreased $1.0 billion (5%) from June 30, 2019 primarily due to the BioPharma disposition. Excluding Biopharma, backlog increased $0.1 billion (1%) from June 30, 2019.
Orders increased $0.4 billion (4%) organically, driven by HCS up 5% due to increases in demand, including a $0.3 billion order from the HHS to deliver 50,000 ventilators in partnership with Ford, and BioPharma, partially offset by PDX. Excluding BioPharma, orders increased $0.2 billion (3%) organically.
Revenues were flat organically*, driven by increased demand in Imaging, Ultrasound and Life Care Solutions for HCS products, used directly in responseand a return to COVID-19 and BioPharma, offset by reducedpre-pandemic volume in PDX from a decrease in non-essential routine procedures. Excluding BioPharma, revenues decreased $0.1 billion (1%) organically*.PDx.
Profit increased $0.1$0.2 billion (4%(30%) organically*, primarily due to cost reductions and increased demand for HCS products, and increases in HCS and BioPharma, and cost reductions offset by decreases in PDX volumePDx volume.
. Excluding BioPharma, profits decreased (1%) organically*.
CAPITAL.We continueIn the first quarter of 2021, we announced an agreement to evaluate strategic optionscombine GECAS with AerCap, for which the Company expects to accelerate the further reductionreceive $23.9 billion in cash, subject to contractual 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 which could result in material financial charges depending on the timing, negotiated terms and conditions of any ultimate arrangements.
Attransaction agreement, GE Capital the primary effect of the COVID-19 pandemic pertains to its GECAS business. The pandemic has led to worldwide reduction of flight schedules and it is difficult to predict its longer-term impact. In the second quarter of 2020, the estimated fair value of the GECAS reporting unit declined below book value, reflecting downward revisions to internal forecasts and decreases in market multiples. As a result, we recorded a goodwill impairmentnon-cash after-tax charge of $0.8 billion. Of the $0.8$2.8 billion of GECAS goodwill, $0.7 billion arose from the acquisition of Milestone Aviation, our helicopter leasing business, in 2015. Additionally, the related market volatility resulted in higher credit spreads on the investment securities held by our run-off insurance business, which resulted in marks and impairments takendiscontinued 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 partially recoveredwas effective April 1, 2021.
GE Capital made capital contributions to its insurance subsidiaries of $2.0 billion in the second quarterfirst quarters of both 2021 and 2020,.
As and expects to provide further capital contributions of June 30, 2020, GECAS owned 965 fixed-wing aircraft, of which 17 with a book value of $0.4approximately $5.5 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.
We will perform our detailed annual portfolio review in the third quarter of 2020, which will incorporate third party appraisal data, updates to all cash flow assumptions as well as evolving market or customer dynamics that we are monitoring. Given the environment, we accelerated our review in the second quarter to focus on leases with higher risk of repossession based on our assessment of customer credit risk default and any unplaced leased assets rolling-off over the next 12 months, which represented approximately 20% of our fixed-wing aircraft operating lease portfolio. This analysis resulted in a pre-tax impairment of $0.3 billion d
uring both the three and six months ended June 30, 2020, on our fixed-wing aircraft operating lease portfolio. Pre-tax impairments were insignificant for the three and six months ended June 30, 2019. The increase in pre-tax impairments was driven by declining cash flow projections of the future collectability of rents on aircraft and engines currently under contract related to market impacts resulting from the pandemic. We will analyze the remaining portfolio as part of our annual third quarter impairment review process. Continued deterioration in cash flow projections, including current rents, downtime, release rates and residual assumptions could result in future impairments in the operating lease portfolio.
Based on the resulting pressure on its airline customers, GECAS continues to see elevated deferral requests. As of June 30, 2020, we have received deferral requests (primarily short term in nature) from approximately 80% of our airline customers operating in approximately 64 countries, and have granted approximately 60% of requests. We expect to continue to receive requests for rent deferrals and/or lease restructures from our 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.
*Non-GAAP Financial Measure
2020 2Q2021 1Q FORM 10-Q 1511
|
| | | | | | |
| (Dollars in billions) | June 30, 2020 |
| December 31, 2019 |
|
| GECAS | $ | 36.0 |
| $ | 38.0 |
|
| Energy Financial Services (EFS) | 1.8 |
| 1.8 |
|
| Working Capital Solutions (WCS)(a) | 6.8 |
| 9.0 |
|
| Insurance | 49.6 |
| 46.3 |
|
| Other continuing operations(a) | 20.2 |
| 22.5 |
|
| Total segment assets | $ | 114.5 |
| $ | 117.5 |
|
| | | |
| GE Capital debt to equity ratio | 4.2:1 |
| 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 |
| | | | 2021 | 2020 |
| | | | | |
| EFS | | | | $ | (3) | | $ | 64 | |
| WCS | | | | 55 | | 131 | |
| Insurance | | | | 775 | | 616 | |
| Other continuing operations | | | | 51 | | 25 | |
| Total segment revenues | | | | $ | 878 | | $ | 837 | |
| | | | | |
| | | | | |
| EFS | | | | $ | (5) | | $ | 53 | |
| WCS | | | | 2 | | 24 | |
| Insurance | | | | 116 | | (93) | |
| Other continuing operations(a) | | | | (285) | | (171) | |
| Total segment profit (loss) | | | | $ | (172) | | $ | (187) | |
|
| | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| (In billions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| GECAS | $ | 1.0 |
| $ | 1.2 |
| | $ | 2.1 |
| $ | 2.5 |
|
| EFS | — |
| 0.1 |
| | 0.1 |
| 0.1 |
|
| WCS | 0.1 |
| 0.2 |
| | 0.2 |
| 0.5 |
|
| Insurance | 0.8 |
| 0.7 |
| | 1.4 |
| 1.4 |
|
| Other continuing operations | — |
| — |
| | — |
| — |
|
| Total segment revenues | $ | 1.8 |
| $ | 2.3 |
| | $ | 3.8 |
| $ | 4.5 |
|
| | | | | | |
| GECAS | $ | (1.0 | ) | $ | 0.3 |
| | $ | (0.9 | ) | $ | 0.6 |
|
| EFS | (0.1 | ) | 0.1 |
| | — |
| 0.1 |
|
| WCS | — |
| 0.1 |
| | — |
| 0.1 |
|
| Insurance | 0.1 |
| — |
| | — |
| — |
|
| Other continuing operations(a) | (0.5 | ) | (0.5 | ) | | (0.7 | ) | (0.8 | ) |
| Total segment profit | $ | (1.5 | ) | $ | (0.1 | ) | | $ | (1.5 | ) | $ | — |
|
(a) Other continuing operations primarily comprised 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 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 June 30, 2020,March 31, 2021, segment revenues decreased $0.5 billion (20%)increased 5% and segment earnings were down $1.4 billion.losses decreased 8%.
GE Capital revenues decreased $0.5 billion (20%)increased 5%, primarily as a result of volume declines,lower marks and impairments primarily in Insurance, partially offset by lower revenue at GECAS relatedWCS due to lower interest income attributable to the sale of PK Air Finance and lower rental revenue,volume and lower gains and project revenues at EFS. GE Capital segment losses decreased 8% as lower claims, improved investment performance and lower marks and impairments in Insurance were partially offset by mark-to-market effects and impairments as a result of COVID-19 and related market impacts. Capital earnings decreased $1.4 billion, primarily due to an impairment of goodwill, mark-to-market effects and other impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts, volume declines, debt tender costs and lower gains. Gains were $0.1 billion and $0.2 billion in the second quarters of 2020 and 2019, respectively, which primarily related to sales of GECAS aircraft and engines resulting in gains of $0.1 billion in the second quarters of both 2020 and 2019, and the nonrecurrence of a sale of an equity method investment resulting in a gain of $0.1 billion in 2019 at EFS.
For the six months ended June 30, 2020, segment revenues decreased $0.8 billion (17%) and segment earnings were down $1.6 billion.
Capital revenues decreased $0.8 billion (17%), as a result of volume declines, primarily at GECAS related to lower interest income attributable to the sale of PK Air Finance and lower rental revenue, lower gains and mark-to-market effects and impairments as a result of COVID-19 and related market impacts. Capital earnings decreased $1.6 billion, primarily due to an impairment of goodwill, mark-to-market effects and other impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts, volume declines, debt tender costs, lower gainsproject revenues at EFS and the nonrecurrence of a 2019 tax reform enactment adjustment, partially offset by the tax benefit related to the BioPharma sale and lower excess interest cost. Gains were $0.3 billion and $0.4 billion in the first halfquarter of 2020 and 2019, respectively, which primarily related to sales of GECAS aircraft and engines resulting in gains of $0.2 billion in the first half of both 2020 and 2019, and the 2020.
nonrecurrence of a sale of an equity method investment resulting in a gain of $0.1 billion in 2019 at EFS.
|
| | |
MD&A | CORPORATE ITEMS AND ELIMINATIONS |
CORPORATE ITEMS AND ELIMINATIONS. IncludesCorporate items and eliminations included 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 June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Revenues | | | | | |
| Corporate revenues | $ | 410 |
| $ | 408 |
| | $ | 788 |
| $ | 1,000 |
|
| Eliminations and other | (444 | ) | (433 | ) | | (1,058 | ) | (841 | ) |
| Total Corporate Items and Eliminations | $ | (33 | ) | $ | (25 | ) | | $ | (271 | ) | $ | 158 |
|
| | | | | | |
| Operating profit (cost) | | | | | |
| Gains (losses) on disposals and held for sale businesses | $ | 74 |
| $ | (116 | ) | | $ | 12,513 |
| $ | 250 |
|
| Restructuring and other charges | (433 | ) | (345 | ) | | (641 | ) | (602 | ) |
| Unrealized gains (losses) | 1,825 |
| (51 | ) | | (3,968 | ) | (38 | ) |
| Goodwill impairments(a) (Note 8) | (728 | ) | (744 | ) | | (728 | ) | (744 | ) |
| Adjusted total corporate operating costs (Non-GAAP) | (156 | ) | (465 | ) | | (530 | ) | (813 | ) |
| Total Corporate Items and Eliminations (GAAP) | $ | 582 |
| $ | (1,720 | ) | | $ | 6,646 |
| $ | (1,948 | ) |
| Less: gains (losses) and restructuring & other | 738 |
| (1,255 | ) | | 7,176 |
| (1,135 | ) |
| Adjusted total corporate operating costs (Non-GAAP) | $ | (156 | ) | $ | (465 | ) | | $ | (530 | ) | $ | (813 | ) |
| | | | | | |
| Functions & operations | $ | (163 | ) | $ | (331 | ) | | $ | (429 | ) | $ | (688 | ) |
| Eliminations | (32 | ) | (34 | ) | | (130 | ) | (28 | ) |
| Environmental, health and safety (EHS) and other items | 38 |
| (100 | ) | | 29 |
| (97 | ) |
| Adjusted total corporate operating costs (Non-GAAP) | $ | (156 | ) | $ | (465 | ) | | $ | (530 | ) | $ | (813 | ) |
(a) Included non-cash pre-tax impairment charge of $877 million, net of $149 million attributable to noncontrolling interest for our Additive reporting unit within Aviation segment for the three and six months ended June 30, 2020.
| | | | | | | | | | | |
| 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 charges including goodwillprograms 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.
Unrealized gains (losses) are primarily related to our mark-to-market impact on our Baker Hughes shares for the three and six months ended June 30, 2020, on our Ventures portfolio for the six months ended June 30, 2020, and on our Wabtec equity investment for the three months ended June 30, 2019.
For the three months ended June 30, 2020March 31, 2021, revenues remained relatively flat.flat year over year primarily as a result of a $0.1 billion decrease in revenues due to the sale of our Lighting business in June 2020, offset by $0.1 billion of lower inter-segment eliminations. Corporate costsoperating profit decreased by $2.3$6.1 billion primarily due to $1.9$12.6 billion of higherlower net unrealized gains, primarily related to a $1.8driven by $12.3 billion mark-to market gain onof gains from the sale of our Baker Hughes shares inBioPharma business during the second quarterfirst three months of 2020, as compared to $0.1 billion of net unrealized losses related to our equity investment in Wabtec in the second quarter of 2019. Corporate costs also decreased as the result of $0.2 billion of higher net realized gains, primarily due to the nonrecurrence of a $0.1 billion realized loss in the second quarter of 2019,losses primarily related to our Wabtec investment.Baker Hughes shares during the first three months of 2021. These decreases were partially offset by $0.1a $6.3 billion of higherchange in net unrealized gains and losses primarily related to mark-to-market activity on our Baker Hughes shares. Overall, restructuring and other charges in the second quarter of 2020, primarily due to Aviation, partially offset by lower restructuring costs within Corporate. Goodwill charges wereremained relatively flat year over year. Corporate recognized a $0.7 billion net goodwill impairment charge related to our Aviation segment in the second quarter of 2020, as compared to a $0.7 billion goodwill impairment charge related to our Renewable Energy segment in the second quarter of 2019.
Adjusted total corporate operating costs* decreased by $0.3$0.2 billion in the first quarter of 2021 primarily due toas the result of $0.1 billion of cost reductions inprimarily within our Digital business,Corporate functions. Costs also decreased by $0.1 billion due to lower intercompany profit eliminations as the result of lower costs associated with existing EHS matters and $0.1 billion of lower Corporate costs as a result of restructuring and cost reductions actions. Intercompany eliminationintercompany activity remained flat, reflecting no spare engine sales from our Aviation segment to our GECAS business, during the second quarter of 2020.
For the six months ended June 30, 2020, revenues decreased by $0.4 billion, primarily as a result of a $0.2 billion decrease in revenue resulting from the sale of our Current business in April 2019, and a $0.2 billion increase in intersegment eliminations. Corporate costs decreased by $8.6 billion, primarily due to $12.3 billion of higher net gains from the sale of our BioPharma business in the first quarter of 2020. This decrease was partly offset by $3.9 billion of higher net unrealized losses primarily related to a $3.9 billion mark-to market impact on our Baker Hughes shares and a $0.1 billion impairment on our Ventures portfolio in the first six months of 2020. Goodwill charges were relatively flat year over year. Corporate recognized a $0.7 billion net goodwill impairment charge related to our Aviation segment in the second quarter of 2020, as compared to a $0.7 billion goodwill impairment charge related to our Renewable Energy segment in the second quarter of 2019.
Adjusted total corporate operating costs* decreased by $0.3 billion, primarily due to $0.2 billion of cost reductions in our Digital business, $0.1 billion of lower costs associated with existing EHS matters and $0.1 billion of lower Corporate costs as a result of restructuring and cost reductions actions, partially offset by $0.1 billion of higher intercompany elimination activity primarily from project financing investments associated with wind energy projects in our Renewable Energy segment.
*Non-GAAP Financial Measure
|
| | |
MD&A | CORPORATE ITEMS AND ELIMINATIONS |
Although there were no significant impacts in the second 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,segment and lower revenue in our Digital operations. See the Critical Accounting Estimates section for further information on pension assumptions.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.efforts for both existing operations and those 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 June 30 | | Six months ended June 30 |
| (In billions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Workforce reductions | $ | 0.3 |
| $ | 0.2 |
| | $ | 0.5 |
| $ | 0.4 |
|
| Plant closures & associated costs and other asset write-downs | 0.1 |
| 0.1 |
| | 0.1 |
| 0.1 |
|
| Acquisition/disposition net charges | — |
| 0.1 |
| | — |
| 0.1 |
|
| Total restructuring and other charges | $ | 0.4 |
| $ | 0.3 |
| | $ | 0.6 |
| $ | 0.6 |
|
| | | | | | |
| Cost of product/services | $ | 0.1 |
| $ | 0.1 |
| | $ | 0.3 |
| $ | 0.2 |
|
| Selling, general and administrative expenses | 0.3 |
| 0.3 |
| | 0.4 |
| 0.4 |
|
| Other income | — |
| — |
| | — |
| $ | — |
|
| Total restructuring and other charges | $ | 0.4 |
| $ | 0.3 |
| | $ | 0.6 |
| $ | 0.6 |
|
| | | | | | |
| Power | $ | 0.1 |
| $ | 0.1 |
| | $ | 0.1 |
| $ | 0.1 |
|
| Renewable Energy | 0.1 |
| — |
| | 0.1 |
| 0.1 |
|
| Aviation | 0.2 |
| — |
| | 0.2 |
| — |
|
| Healthcare | — |
| — |
| | 0.1 |
| 0.1 |
|
| Corporate | 0.1 |
| 0.2 |
| | 0.1 |
| 0.3 |
|
| Total restructuring and other charges | $ | 0.4 |
| $ | 0.3 |
| | $ | 0.6 |
| $ | 0.6 |
|
Cash expenditures forLiabilities associated with restructuring and other chargesactivities were approximately $0.3$1.3 billion, including actuarial determined post-employment severance benefits of $0.7 billion as of both March 31, 2021 and $0.3 billion for the three months ended June 30, 2020 and 2019, respectively. Cash expenditures for restructuring and other charges were approximately $0.5 billion and $0.6 billion for the six months ended June 30, 2020 and 2019, respectively.December 31, 2020.
| | | | | | | | | | | |
| 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, 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.
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| | Costs | Gains (Losses) | | Costs | Gains (Losses) |
| (In billions) | 2020 |
| 2019 |
| 2020 |
| 2019 |
| | 2020 |
| 2019 |
| 2020 |
| 2019 |
|
| Power | $ | 0.1 |
| $ | 0.1 |
| $ | — |
| $ | — |
| | $ | 0.1 |
| $ | 0.1 |
| $ | — |
| $ | — |
|
| Renewable Energy | 0.1 |
| 0.8 |
| — |
| — |
| | 0.1 |
| 0.8 |
| — |
| — |
|
| Aviation | 0.9 |
| — |
| — |
| — |
| | 1.0 |
| — |
| — |
| — |
|
| Healthcare | — |
| — |
| — |
| — |
| | 0.1 |
| 0.1 |
| 12.3 |
| — |
|
| Total segments | $ | 1.0 |
| $ | 0.9 |
| $ | — |
| $ | — |
| | $ | 1.2 |
| $ | 1.0 |
| $ | 12.4 |
| $ | — |
|
| Corporate Items & Eliminations | 0.1 |
| 0.2 |
| 1.9 |
| 0.1 |
| | 0.1 |
| 0.3 |
| (3.8 | ) | 0.2 |
|
| Total Industrial | $ | 1.1 |
| $ | 1.1 |
| $ | 1.9 |
| $ | 0.2 |
| | $ | 1.3 |
| $ | 1.3 |
| $ | 8.5 |
| $ | 0.2 |
|
|
| | |
MD&A | OTHER CONSOLIDATED INFORMATION |
OTHER CONSOLIDATED INFORMATION
|
| | | | | | | | | | | | | |
| INTEREST AND OTHER FINANCIAL CHARGES | Three months ended June 30 | | Six months ended June 30 |
| (In billions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| GE | $ | 0.4 |
| $ | 0.4 |
| | $ | 0.8 |
| $ | 0.9 |
|
| GE Capital | 0.7 |
| 0.6 |
| | 1.2 |
| 1.3 |
|
GE interest and other financial charges was unchanged for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, as lower debt expense and financing costs on sales of receivables were offset by the nonrecurrence of the June 2019 reversal of accrued interest on tax liabilities due to the completion of the 2012-2013 Internal Revenue Service (IRS) audit. The decrease in GE Industrial interest and other financial charges for the sixthree months ended June 30, 2020, March 31, 2021 was primarily due to lower interest expense on debt expensedriven by a lower intercompany loan balance and lower financing costs on sales of receivables, partially offset by the nonrecurrence of the June 2019 reversal of accrued interest on tax liabilities due to the completion of the 2012-2013 IRS audit.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 $0.3$0.2 billion and $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 June 30,March 31, 2021 and 2020, and 2019, respectively, and $0.5 billion and $0.5 billion was recorded at Corporate and $0.2 billion and $0.4 billion was recorded by Industrial segments for the six months ended June 30, 2020 and 2019, respectively.respectively.
The increase in GE Capital interest and other financial charges for the three months ended June 30, 2020March 31, 2021 was primarily due to the loss resulting from the completion of tender offers to purchase debthigher 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 debt purchases, as well as lower average interest rates due to changes in market rates. The decrease in GE Capital interest and other financial charges for the six months ended June 30, 2020 was primarily due to lower average borrowings balances due to maturities and debt purchases as well as lower average interest rates due to changes in market rates, partially offset by the loss resulting from the completion of tender offers to purchase debt, as well as higher interest on assumed debt as described above.purchases.
*Non-GAAP Financial Measure
CONSOLIDATED INCOME TAXES.
For the three months ended June 30, 2020March 31, 2021, the consolidated income tax rate was 8.5%59.7% compared to 61.1%0.9% for the three months ended June 30, 2019.March 31, 2020.
The consolidated provision (benefit) for income taxes was $(0.2)$0.1 billion infor both the three months ended June 30, 2020March 31, 2021 and $(0.2) billion2020. The provision increased slightly as there was a tax expense associated with the unrealized gain on our remaining interest in Baker Hughes in the three months ended June 30, 2019. The provision was essentially unchanged as the nonrecurrencefirst quarter of a 2019 benefit from the completion of the IRS audit of the 2012-2013 consolidated U.S. income tax returns ($0.4 billion) was offset by the decrease in pre-tax income excluding non-deductible impairment charges ($0.2 billion) and2021 compared to a tax benefit associated with the mark-to-market gainunrealized loss recorded in the secondfirst quarter onof 2020. This was largely offset by the remaining interest in Baker Hughes taxed at lower than 21% ($0.1 billion).
The consolidated tax provision (benefit) includes $(0.1) billion and $(0.2) billion for GE (excluding GE Capital) for the three months ended June 30, 2020 and 2019, respectively.
For the six months ended June 30, 2020, the consolidated income tax rate was (3.3)% compared to (5.0)% for the six months ended June 30, 2019. The negative tax rates for 2020 and 2019 reflect tax benefits on pre-tax income.
The consolidated provision (benefit) for income taxes was $(0.1) billion for the six months ended June 30, 2020 and an insignificant amount for the six months ended June 30, 2019. The decrease in tax provision was primarily due to the decrease in pre-tax income excluding the gain from the salenonrecurrence of our BioPharma business and non-deductible goodwill impairment charges ($1.7 billion) partially offset by the tax expense associated with the disposition of the BioPharma business excludingin the amount recognized on preparatory steps in 2019 ($1.1 billion) and the nonrecurrencefirst quarter of a 2019 benefit from the completion of the IRS audit of the 2012-2013 consolidated U.S. income tax returns ($0.4 billion).2020.
The consolidated tax provision (benefit) includes $0.1 billion and $0.1$0.2 billion for GE (excluding GE Capital)Industrial for the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively.
DISCONTINUED OPERATIONS.Discontinued operations primarily includePrimarily comprise our Baker Hughes and Transportation segments, and certain businesses inGECAS business, our GE Capital segment (our mortgage portfolio in Poland, and other trailing assets and liabilities associated with the saledispositions of ourcertain GE Capital businesses).and GE Industrial businesses. See NoteNotes 2 and 21 for further financial information regarding our businesses in discontinued operations.
The mortgage portfolio in Poland (Bank BPH) comprises floating rate residential mortgages, 87% of which are indexed to or denominated in foreign currencies (primarily Swiss francs). At June 30, 2020, the total portfolio had a carrying value of $2.4 billion with a 1.64% 90-day delinquency rate and an average loan to value ratio of approximately 67.5%. 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 income for the six months ended June 30, 2020, includes the recognition of an insignificant valuation allowance on the carrying value of the portfolio, primarily driven by a higher discount rate as a result of COVID-19 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.
|
| | |
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, achieving 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.needs.
CONSOLIDATED LIQUIDITY. Following is a summary of cash, cash equivalents and restricted cash at June 30, 2020.March 31, 2021. |
| | | | | | | | |
| (In billions) | June 30, 2020 |
| | | June 30, 2020 |
|
| GE | $ | 25.4 |
| | U.S. | $ | 23.9 |
|
| GE Capital | 16.0 |
| | Non-U.S. | 17.6 |
|
| Consolidated | $ | 41.4 |
| | Consolidated | $ | 41.4 |
|
| | | | | | | | | | | | | | |
| 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 a commercial paper program and 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, market 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 an orderly sale over timeto receive approximately $1.0 billion in the second quarter of our remaining stake in Baker Hughes.2021.
GE Industrial cash, cash equivalents and restricted cash totaled $25.4$22.4 billion at June 30, 2020,March 31, 2021, including $2.1 billion of cash held in countries with currency control restrictions and $0.9$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 2021, we announced our intention to discontinue the majority of our factoring programs, which was effective April 1, 2021. The estimated adverse impact to GE Industrial CFOA is expected to be approximately $3.5 to $4 billion primarily in the second quarter of 2021, 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 closing of the GECAS transaction, as well as GE Capital’s overall performance, to determine if additional capital contributions to GE Capital are necessary.
Additionally, we do 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 our $2.5 billion prefunding in 2020 and portfolio performance, as well as the 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, as well as GE Industrial repayments of intercompany loans and capital contributions from GE. Industrial. We expect to maintain a sufficient liquidity position to fund our insurance obligations, debt maturities and debt maturities.other obligations. See the Segment Operations - Capital section for further information regarding allocation of GE Capital interest expense to the GE Capital businesses.
GE Capital cash, cash equivalents and restricted cash totaled $16.0$9.4 billion at June 30, 2020, including $1.2March 31, 2021, excluding $1.7 billion of cash in Insurance, which was subject to regulatory restrictions, primarily in insurance entities.
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 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 $81.9$71.4 billion and $90.9$74.9 billion at June 30, 2020March 31, 2021 and December 31, 2019, respectively.2020, 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 borrowings.
| | | | | | | | | | | | | | | | | | | | |
| 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 | |
*Non-GAAP Financial Measure
|
| | |
MD&A | CAPITAL RESOURCES AND LIQUIDITY |
|
| | | | | | | | | | | | | | |
GE (In billions) | June 30, 2020 |
| December 31, 2019 |
| | GE Capital (In billions) | June 30, 2020 |
| December 31, 2019 |
|
| Commercial paper | $ | 0.5 |
| $ | 3.0 |
| | Senior and subordinated notes | $ | 35.2 |
| $ | 36.5 |
|
| GE senior notes | 18.4 |
| 15.5 |
| | Senior and subordinated notes assumed by GE | 25.4 |
| 31.4 |
|
Intercompany loans from GE Capital | 4.7 |
| 12.2 |
| | Intercompany loans to GE | (4.7 | ) | (12.2 | ) |
| Other GE borrowings | 1.5 |
| 2.2 |
| | Other GE Capital borrowings | 1.8 |
| 3.4 |
|
| Total GE | | | | Total GE Capital | | |
| adjusted borrowings(a) | $ | 25.1 |
| $ | 32.9 |
| | adjusted borrowings(a) | $ | 57.7 |
| $ | 59.0 |
|
(a) Consolidated total borrowings of $81.9 billion$71,358 million and $90.9 billion$74,902 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, includedare net of intercompany eliminations of $0.9 billion$277 million and $1.0 billion,$600 million, respectively, of other GE Industrial borrowings from GE Capital, primarily related to timing of cash settlements associated with GE Industrial receivables monetization programs.
(b) Included $3,826 million and $5,687 million at March 31, 2021 and December 31, 2020, respectively, of fair value adjustments for debt in fair value hedge relationships. See Note 19 for further information.
The reduction in GE Industrial adjusted borrowings at June 30, 2020March 31, 2021 compared to December 31, 20192020 was driven primarily by $7.5 billion of repayments of intercompany loans from GE Capital, debt repurchases of $4.2 billion, lower commercial paper of $2.5 billion, and net repayments and maturities of other debt of $1.1$0.4 billion partiallyand $0.2 billion related to changes in foreign exchange rates.
GE Industrial net debt* was $32.3 billion and $32.3 billion at March 31, 2021 and December 31, 2020, respectively, as debt reductions of $0.6 billion were offset by issuancesa decrease in the net cash deduction of new long-term debt of $7.5 billion.$0.6 billion due to a lower cash balance.
The reduction in GE Capital adjusted borrowings at June 30, 2020March 31, 2021 compared to December 31, 20192020 was driven primarily by debt repurchases of $9.8 billion,long-term debt maturities of $5.5$0.9 billion, lower non-recourse borrowings of $0.3 billion, lower short-term borrowings of $0.2 billion, and lower nonrecourse borrowings$1.9 billion of $1.3 billion, partially offset by repayments of intercompany loans from GE of $7.5 billion (which has the effect of increasing GE Capital borrowings), issuances of new long-term debt of $6.0 billion, and $1.8 billion primarily related to fair value adjustments for debt in fair value hedge relationships and changes in foreign exchange rates.
GE Industrial net debt* was $34.0 billion and $47.9 billion at June 30, 2020 and December 31, 2019, respectively. The reduction was driven primarily by $7.5 billion of repayments of intercompany loans from GE Capital, the repurchase of $4.2 billion of debt, a reduction in commercial paper of $2.5 billion, net repayments and maturities of other debt of $1.1 billion, and a higher ending cash balance, partially offset by new issuances of $7.5 billion of long-term debt.
Liability Management Actions. In the second quarter of 2020, we took a series of actions to enhance and extend our liquidity at both GE and GE Capital, issuing a total of $13.5 billion of longer-dated debt and reducing near-term debt maturities by $10.5 billion, with the remaining $3 billion to be leverage neutral by the end 2021. See below for details of these actions.
GE issued a total of $7.5 billion in aggregate principal amount of senior notes ($6.0 billion in April 2020 and $1.5 billion in June 2020), comprising $1.0 billion due 2027, $1.25 billion due 2030, $1.5 billion due 2040, and $3.75 billion due 2050. GE used these proceeds to complete a tender offer to purchase $4.2 billion of GE senior notes with maturities ranging from 2020 to 2024, to reduce commercial paper and other debt by $1.8 billion, and to repay $1.5 billion of intercompany loans to GE Capital in June 2020. These transactions were leverage neutral within the quarter and liquidity enhancing through the extension of our near-team industrial debt maturities.
GE Capital issued a total of $6.0 billion in aggregate principal amount of senior notes ($4.5 billion in May 2020 and $1.5 billion in June 2020) and used the proceeds to complete a tender offer to purchase a total of $4.4 billion of debt with maturities from 2021 through 2023. GE Capital also received an additional $1.5 billion of proceeds from repayments of intercompany loans from GE as part of the June debt issuance. GE Capital expects to use the remaining $3 billion of net proceeds from these actions primarily to fund long-term debt maturing in 2021, and accordingly these actions are expected to be leverage neutral by the end of 2021.
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: | | June 30, 2020 (In billions) | GE |
| GE Capital |
| Consolidated |
| |
| March 31, 2021 | | March 31, 2021 | GE Industrial | GE Capital | Consolidated |
| Total short- and long-term borrowings | $ | 45.8 |
| $ | 37.0 |
| $ | 81.9 |
| Total short- and long-term borrowings | $ | 41,247 | | $ | 30,388 | | $ | 71,358 | |
| | | |
| Debt assumed by GE from GE Capital(a) | (25.4 | ) | 25.4 |
| — |
| |
| Debt assumed by GE Industrial from GE Capital(a) | | Debt assumed by GE Industrial from GE Capital(a) | (21,538) | | 21,538 | | — | |
| Intercompany loans with right of offset(a) | 4.7 |
| (4.7 | ) | — |
| Intercompany loans with right of offset(a) | 3,177 | | (3,177) | | — | |
| Total intercompany payable (receivable) between GE and GE Capital | (20.7 | ) | 20.7 |
| — |
| |
| | | |
| Total intercompany payable (receivable) between GE Industrial and GE Capital | | Total intercompany payable (receivable) between GE Industrial and GE Capital | (18,361) | | 18,361 | | — | |
| Total borrowings adjusted for assumed debt and intercompany loans | $ | 25.1 |
| $ | 57.7 |
| $ | 81.9 |
| Total borrowings adjusted for assumed debt and intercompany loans | $ | 22,886 | | $ | 48,749 | | $ | 71,358 | |
(a) See the Capital Resources and Liquidity section of our Annual Report on Form 10-K for the year ended December 31, 20192020 for further details on the assumed debt and intercompany loans with right of offset.
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 3.4%3.7% and term of approximately 12.415.2 years at June 30, 2020.March 31, 2021.
*Non-GAAP Financial Measure
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MD&A | CAPITAL RESOURCES AND LIQUIDITY |
GE Industrial has in place committed revolving credit lines. The following table providesfacilities totaling $20.2 billion at March 31, 2021, comprised of a summary of committed and available credit lines.
|
| | | | | | |
GE COMMITTED AND AVAILABLE REVOLVING CREDIT FACILITIES (In billions) | June 30, 2020 |
| December 31, 2019 |
|
| Unused back-up revolving syndicated credit facility | $ | 15.0 |
| $ | 20.0 |
|
| Unused revolving syndicated credit facility | — |
| 14.8 |
|
| Bilateral revolving credit facilities | 5.2 |
| 7.2 |
|
| Total committed revolving credit facilities | $ | 20.2 |
| $ | 42.0 |
|
| Less offset provisions | — |
| 6.7 |
|
| Total net available revolving credit facilities | $ | 20.2 |
| $ | 35.3 |
|
As part of our ordinary course refinancing processes, on April 17, 2020, we refinanced our$15.0 billion 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-upof bilateral revolving syndicated credit facility, expiring in April 2023. This facility does not contain any offset provisions.facilities.
Under the terms of an agreement between GE Capital and GE Industrial, GE Capital has the right to compel GE Industrial to borrow under the $15.0 billion unused back-up revolving syndicated credit 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 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.
The following table provides a summary of the activity in the primary external sources of short-term borrowings for GE in the second quarters of 2020 and 2019. GE uses bilateral revolving credit facilities from time to time to meet its short-term liquidity needs.
|
| | | | | | | | | | |
| (In billions) | GE Commercial Paper |
| Bilateral Revolving Credit Facilities |
| Total |
|
| 2020 | Average borrowings during the second quarter | $ | 1.7 |
| $ | — |
| $ | 1.7 |
|
| | Maximum borrowings outstanding during the second quarter | 2.2 |
| — |
| 2.2 |
|
| | Ending balance at June 30 | 0.5 |
| — |
| 0.5 |
|
| | | | | |
| 2019 | Average borrowings during the second quarter | $ | 3.0 |
| $ | 1.3 |
| $ | 4.3 |
|
| | Maximum borrowings outstanding during the second quarter | 3.1 |
| 1.8 |
| 4.8 |
|
| | Ending balance at June 30 | 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.
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 |
| | | | |
| GE Capital | Outlook | Moody'sNegative | S&PCreditWatch Negative | FitchStable |
GE | OutlookShort term | NegativeP-2 | NegativeA-2 | StableF3 |
| 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.
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.
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MD&A | CAPITAL RESOURCES AND LIQUIDITY |
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 and access to liquidity.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.
The following table provides a summarySubstantially all of the estimated potential liquidity impact in the event of further downgrades with regards to the most significant contractual credit ratings conditions of the Company based on their proximity to our current ratings.
|
| | | | |
| (In billions) | Triggers Below | At June 30, 2020 |
|
| Derivatives | | |
| Terminations | BBB/Baa2 | $ | (0.3 | ) |
| Cash margin posting | BBB/Baa2 | (0.9 | ) |
| Receivables Sales Programs | | |
| Loss of cash commingling | A-2/P-2 | $ | (0.2 | ) |
| Alternative funding sources | A-2/P-2 | (0.5 | ) |
| Surety bond cash collateral posting | BBB-/Baa3 | $ | (0.8 | ) |
The timing within the quarter of the potential liquidity impact of these areas may differ, as described in the following sections which provide additional details regarding the significant credit rating conditions of the Company.
DEBT CONDITIONS. Substantially allCompany's debt agreements in place at June 30, 2020March 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 has metsatisfied at June 30, 2020.March 31, 2021.
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 $0.3 billion at June 30, 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 June 30, 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.
See Note 17 for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.
OTHER CONDITIONS.Where we provide servicing for third-party investors under one 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 (this program does not contain any Fitch ratings requirements). 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 $0.2 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. In the event our short-term credit ratings were to fall below certain levels, we would not be permitted to commingle certain cash received related to sales of receivables at the end of the quarter. The Fitch downgrade in the second quarter of 2020 resulted in GE classifying $0.4 billion as restricted cash at June 30, 2020. The amount of cash that GE Capital would have been required to classify as restricted cash if our credit ratings had fallen below A-2/P-2 was approximately $0.5 billion at June 30, 2020.
In conjunction with ordinary course commercial transactions and certain regulatory requirements, the Company may periodicallyfrom time to time enter into agreements that require us to post surety bonds to counterparties. Incontain minimum ratings requirements. The following table provides a summary of 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 collateralmaximum estimated liquidity impact in the event our creditof further downgrades below each stated ratings were to fall below BBB-/Baa3. At June 30, 2020, the maximum amount of cash collateral we could be required to post if we fell below these levels was approximately $0.8 billion.level.
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| | | | | |
MD&A | CAPITAL RESOURCES AND LIQUIDITYTriggers 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 ratings requirements are related to ordinary course commercial activities, our receivables sales programs, and our derivatives portfolio. The timing within the quarter of the potential liquidity impact of these areas may differ, as can the remedies to resolving any potential breaches of required ratings levels.
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 and six months ended June 30, 2020,March 31, 2021 and less than $0.1 billion for the three and six months ended June 30, 2019.2020. This analysis excludes any offsetting effect from the forecasted future transactions that are economically hedged.
See Note 1719 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 – SIXTHREE MONTHS ENDED JUNE 30, 2020MARCH 31, 2021 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 2022 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 $3.3$0.5 billion in 2020, an increase2021, a decrease of $2.2$1.2 billion compared with 2019,2020, primarily due to: a general decrease in net income (after adjusting for the gain on the sale of BioPharma and non-cash losses related to our interest in Baker Hughes), primarily due to COVID-19 impacts in our Aviation segment; and an increase in cash used for working capital of $1.8$1.6 billion; partially offset by changes in contract and other deferred assets of $1.0 billion, primarily due a net unfavorable change in estimated profitability of $0.8 billion at Aviation (See Note 10); an increase in cash fromused for All other operating activities of $1.2$0.2 billion (primarilyprimarily due to an increaseincreases in Aviation-related customer allowance accruals of $0.6$0.4 billion in 2020 and the settlement of an increaseAlstom legacy legal matter of $0.2 billion in equipment project cost accruals of $0.3 billion); and a decrease in2021, partially offset by lower net cash paid for income taxes of $0.4 billion.
Cash used for employee benefit liabilities (which is a component of All other operating activities) of $0.8 billion during 2020 remained relatively flat compared with 2019. We also utilized the provision of the Coronavirus, Aid, Relief and Economic Security Act (CARES Act) which allows employers to defer the payment of Social Security taxes and, as a result, we deferred $0.1 billion$0.3 billion. There was an insignificant decrease in the second quarter of 2020. We may choose to defer further Social Security taxes through the second half of 2020,Aviation-related customer allowance accruals in accordance with the CARES Act.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 $3.8$1.0 billion, which was primarily as a result of lower volume in 2020 and disbursements related to purchases of materials in prior periods,periods; a decrease in cash used for inventories, including deferred inventory, of $0.4 billion, which was primarily driven by lower material purchases, partially offset by the deferrallower liquidations; an increase in cash from current receivables of some payables;$0.2 billion, which was primarily driven by lower volume; and higherlower net utilizationsliquidations of progress collections and current deferred income of $0.8$0.2 billion, which included a partial offset due to early payments received at our Aviation Military equipment business of $0.7$0.3 billion in the second quarter of 2020 as part of the U.S. Department of Defense's efforts to support vendors in its supply chain during the pandemic.from a foreign government. These increases in cash used for working capitaldecreases were partially offset by an increasechanges in cash generated from current receivablescontract assets of $1.7$0.2 billion, which was primarily driven by lower volume, partially offset bydue to a higher decreasenet unfavorable change in sales of receivables; and a decreaseestimated profitability at Aviation in cash used for inventories of $1.1 billion, which was primarily driven by lower material purchases, partially offset by lower liquidations.2020.
GE Industrial cash from investing activities was $19.7$0.5 billion in 2020, an increase2021, a decrease of $17.1$19.5 billion compared with 2019,2020, primarily due to: netthe nonrecurrence of proceeds from the sale of our BioPharma business of $20.4$20.3 billion; the nonrecurrence of a capital contribution from GE to GE Capital of $1.5 billion in 2019; partially offset by the nonrecurrence of proceeds of $2.8 billion from the 2019 spin-offsales of our Transportation business and $1.8 billion from the salea portion of our retained ownership interestsinterest in Wabtec.Baker Hughes of $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 $1.1$0.4 billion in 2020,2021, down $0.2 billion compared with 2019.2020.
GE Industrial cash used for financing activities was $8.5$0.8 billion in 2020, an increase2021, a decrease of $7.2$1.2 billion compared with 2019,2020, primarily due to:to the repaymentnon-recurrence of intercompany loans from GE Capital to GErepayments of $7.5 billion; completion of a tender offer to purchase GE long-term debt of $4.2 billion; a reduction in commercial paper of $2.5 billion; partially offset by new principal issuances of long-term debt of $7.5$1.1 billion in the second quarter of 2020.
GE CASH FLOWS FROM DISCONTINUED OPERATIONS. GE cash used for investing activities of discontinued operations in 2019 primarily reflects investing outflows related to Baker Hugues, prior to our disposition of the segment in the third quarter of 2019. GE cash used for financing activities of discontinued operations in 2019 primarily reflects payments of Baker Hughes dividends to noncontrolling interests.
*Non-GAAP Financial Measure
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MD&A | CAPITAL RESOURCES AND LIQUIDITY |
GE CAPITAL CASH FLOWS FROM CONTINUING OPERATIONS. GE Capital cash fromused for operating activities was $1.0$2.5 billion in 2020, a decrease2021, an increase of $0.3$3.0 billion compared with 2019,2020, primarily due to: an increase in trade receivables due to short-term extensions of payment terms to customers of $0.3 billion driven primarily by COVID-19 and other market related effects and a general decrease in cash generated from earnings (loss) from continuing operations; partially offset by 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 $0.5 billion.$1.4 billion in 2020.
GE Capital cash from investing activities was $7.5$1.2 billion in 2020,2021, an increase of $6.7$0.5 billion compared with 2019,2020, primarily due to: the repayment of GE Capital intercompany loans by GE of $7.5 billion and an increase in cash received related tohigher net settlements between our continuing operations (primarily our Corporate function) and businesses in discontinued operations (primarily WMC) of $1.9 billion; partially offset by lower collections of financing receivables of $2.0$1.1 billion andpartially offset by a decrease in cash related to our current receivables and supply chain finance programs with GE Industrial of GECAS sales deposits of $1.0 billion primarily driven by COVID-19 and other market related effects.$0.6 billion.
GE Capital cash used for financing activities was $11.3$1.4 billion in 2020, an increase2021, a decrease of $6.5$5.1 billion compared with 2019,2020, primarily due to: higherlower net repayments of borrowings of $5.4$4.8 billion and the nonrecurrence of a capital contribution from GE to GE Capital in 2019 of $1.5 billion; partially offset by lower cash settlements on derivatives hedging foreign currency debt of $0.2$0.3 billion.
GE CAPITAL CASH FLOWS FROM DISCONTINUED OPERATIONS. GE Capital cash 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 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 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 June 30, 2020March 31, 2021 and December 31, 2019,2020, included in GE'sGE Industrial's accounts payable was $2.4$3.0 billion and $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 $2.5$1.6 billion and $0.4$1.1 billion for the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, 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 $0.7 billion and $2.1 billionwas insignificant at June 30, 2020 and DecemberMarch 31, 2019, respectively.2021.
INTERCOMPANY TRANSACTIONS BETWEEN GE INDUSTRIAL AND GE CAPITAL. Transactions between related companies are made on arm's lengtharms-length terms and 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 2022 for further information.
GE Capital Finance Transactions. During the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, 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 28 aircraft with a list price totaling $3.5 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 ofduring the three months ended March 31, 2021 and $0.1 billion and $0.2 billion,during the three months ended March 31, 2020, which included $0.1 billion and $0.1 billion to CFM International during the six months ended June 30, 2020 and 2019, respectively.International. Additionally, GE Capital had $2.2$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 June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. There were no spare engine sales from our Aviation segment to our GECAS business in
Also, during the three months ended June 30, 2020.
Also, during the six months ended June 30,March 31, 2021 and 2020, and 2019, GE Industrial recognized equipment revenues of $1.2$0.4 billion and $0.6$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 June 30, 2020,March 31, 2021, GE Industrial had outstanding guarantees to GE Capital on $0.9$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 June 30, 2020March 31, 2021 and is based on individual transaction level defaults, losses and/or returns.
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MD&A | CRITICAL ACCOUNTING ESTIMATES |
CRITICAL ACCOUNTING 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, 20192020 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 June 30, 2020, our insurance liabilities and annuity benefits of $41.0 billion are primarily supported by investment securities of $40.6 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 first half of 2020, benchmark interest rates in the U.S. have declined 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 future policy benefit reserves 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 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. During the first half 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.
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. In July 2020,of the FASB proposed, subject to comment, to delay adoption to periods beginning after December 15, 2022.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.
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
NON-GAAP FINANCIAL 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.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) |
| Three months ended June 30 |
| Revenues |
| Segment profit (loss) |
| Profit margin |
| (Dollars in millions) |
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
| V pts |
| Power (GAAP) |
| $ | 4,156 |
|
| $ | 4,681 |
|
| (11 | )% |
| $ | (40 | ) |
| $ | 117 |
|
| U |
|
| (1.0 | )% |
| 2.5 | % | (3.5)pts |
| Less: acquisitions |
| 4 |
|
| 19 |
|
|
|
|
| (5 | ) |
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 22 |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (65 | ) |
| — |
|
|
|
|
| 20 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Power organic (Non-GAAP) |
| $ | 4,218 |
|
| $ | 4,640 |
|
| (9 | )% |
| $ | (54 | ) |
| $ | 120 |
|
| U |
|
| (1.3 | )% |
| 2.6 | % | (3.9)pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Renewable Energy (GAAP) |
| $ | 3,505 |
|
| $ | 3,627 |
|
| (3 | )% |
| $ | (195 | ) |
| $ | (184 | ) |
| (6 | )% |
| (5.6 | )% |
| (5.1 | )% | (0.5)pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| 8 |
|
| 23 |
|
|
|
|
| — |
|
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (133 | ) |
| — |
|
|
|
|
| 15 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Renewable Energy organic (Non-GAAP) |
| $ | 3,630 |
|
| $ | 3,603 |
|
| 1 | % |
| $ | (210 | ) |
| $ | (183 | ) |
| (15 | )% |
| (5.8 | )% |
| (5.1 | )% | (0.7)pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Aviation (GAAP) |
| $ | 4,384 |
|
| $ | 7,877 |
|
| (44 | )% |
| $ | (680 | ) |
| $ | 1,385 |
|
| U |
|
| (15.5 | )% |
| 17.6 | % | (33.1)pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 46 |
|
|
|
|
| — |
|
| (4 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (5 | ) |
| — |
|
|
|
|
| 3 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Aviation organic (Non-GAAP) |
| $ | 4,389 |
|
| $ | 7,831 |
|
| (44 | )% |
| $ | (683 | ) |
| $ | 1,390 |
|
| U |
|
| (15.6 | )% |
| 17.7 | % | (33.3)pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Healthcare (GAAP) |
| $ | 3,893 |
|
| $ | 4,934 |
|
| (21 | )% |
| $ | 550 |
|
| $ | 958 |
|
| (43 | )% |
| 14.1 | % |
| 19.4 | % | (5.3)pts |
| Less: acquisitions |
| 7 |
|
| — |
|
|
|
|
| (11 | ) |
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 828 |
|
|
|
|
| — |
|
| 361 |
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (72 | ) |
| — |
|
|
|
|
| (15 | ) |
| — |
|
|
|
|
|
|
|
|
|
|
|
| Healthcare organic (Non-GAAP) |
| $ | 3,958 |
|
| $ | 4,106 |
|
| (4 | )% |
| $ | 577 |
|
| $ | 598 |
|
| (4 | )% |
| 14.6 | % |
| 14.6 | % | 0pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less: BioPharma organic (Non-GAAP) |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Healthcare excluding BioPharma organic (Non-GAAP) |
| $ | 3,958 |
|
| $ | 4,106 |
|
| (4 | )% |
| $ | 577 |
|
| $ | 598 |
|
| (4 | )% |
| 14.6 | % |
| 14.6 | % | 0pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
|
| | | | | | |
MD&A | NON-GAAP FINANCIAL MEASURES | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
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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) | % | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
(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. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30 |
| Revenues |
| Segment profit (loss) |
| Profit margin |
| (Dollars in millions) |
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
| V pts |
| Power (GAAP) |
| $ | 8,181 |
|
| $ | 9,298 |
|
| (12 | )% |
| $ | (168 | ) |
| $ | 228 |
|
| U |
|
| (2.1 | )% |
| 2.5 | % | (4.6)pts |
| Less: acquisitions |
| 19 |
|
| 19 |
|
|
|
|
| (3 | ) |
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| 15 |
|
| 56 |
|
|
|
|
| 2 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (111 | ) |
| — |
|
|
|
|
| 22 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Power organic (Non-GAAP) |
| $ | 8,257 |
|
| $ | 9,223 |
|
| (10 | )% |
| $ | (189 | ) |
| $ | 230 |
|
| U |
|
| (2.3 | )% |
| 2.5 | % | (4.8)pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Renewable Energy (GAAP) |
| $ | 6,698 |
|
| $ | 6,165 |
|
| 9 | % |
| $ | (498 | ) |
| $ | (371 | ) |
| (34 | )% |
| (7.4 | )% |
| (6.0 | )% | (1.4)pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| 8 |
|
| 23 |
|
|
|
|
| — |
|
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (197 | ) |
| — |
|
|
|
|
| 23 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Renewable Energy organic (Non-GAAP) |
| $ | 6,888 |
|
| $ | 6,142 |
|
| 12 | % |
| $ | (520 | ) |
| $ | (371 | ) |
| (40 | )% |
| (7.5 | )% |
| (6.0 | )% | (1.5)pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Aviation (GAAP) |
| $ | 11,276 |
|
| $ | 15,831 |
|
| (29 | )% |
| $ | 325 |
|
| $ | 3,046 |
|
| (89 | )% |
| 2.9 | % |
| 19.2 | % | (16.3)pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| 13 |
|
| 226 |
|
|
|
|
| (2 | ) |
| 15 |
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (7 | ) |
| — |
|
|
|
|
| 7 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Aviation organic (Non-GAAP) |
| $ | 11,270 |
|
| $ | 15,604 |
|
| (28 | )% |
| $ | 321 |
|
| $ | 3,031 |
|
| (89 | )% |
| 2.8 | % |
| 19.4 | % | (16.6)pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Healthcare (GAAP) |
| $ | 8,620 |
|
| $ | 9,616 |
|
| (10 | )% |
| $ | 1,446 |
|
| $ | 1,740 |
|
| (17 | )% |
| 16.8 | % |
| 18.1 | % | (1.3)pts |
| Less: acquisitions |
| 21 |
|
| 21 |
|
|
|
|
| (11 | ) |
| (4 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 831 |
|
|
|
|
| — |
|
| 329 |
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (125 | ) |
| — |
|
|
|
|
| (20 | ) |
| — |
|
|
|
|
|
|
|
|
|
|
|
| Healthcare organic (Non-GAAP) |
| $ | 8,723 |
|
| $ | 8,765 |
|
| — | % |
| $ | 1,477 |
|
| $ | 1,414 |
|
| 4 | % |
| 16.9 | % |
| 16.1 | % | 0.8pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less: BioPharma organic (Non-GAAP) |
| $ | 839 |
|
| 762 |
|
|
|
|
| $ | 380 |
|
| $ | 311 |
|
|
|
|
|
|
|
|
|
|
|
| Healthcare excluding BioPharma organic (Non-GAAP) |
| $ | 7,884 |
|
| $ | 8,003 |
|
| (1 | )% |
| $ | 1,098 |
|
| $ | 1,104 |
|
| (1 | )% |
| 13.9 | % |
| 13.8 | % | 0.1pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BIOPHARMA ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN (NON-GAAP) |
| Three months ended June 30 |
| Revenues |
| Segment profit (loss) |
| Profit margin |
| (Dollars in millions) |
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
| V pts |
|
| BioPharma (GAAP) |
| $ | — |
|
| $ | 828 |
|
| U |
|
| $ | — |
|
| $ | 371 |
|
| U |
|
| — | % |
| 44.8 | % | (44.8 | )pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 828 |
|
|
|
|
| — |
|
| 371 |
|
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| BioPharma organic (Non-GAAP) |
| $ | — |
|
| $ | — |
|
| — | % |
| $ | — |
|
| $ | — |
|
| — | % |
| — | % |
| — | % | 0.0pts |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30 |
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
| V pts |
|
| BioPharma (GAAP) |
| $ | 830 |
|
| $ | 1,593 |
|
| (48 | )% |
| $ | 382 |
|
| $ | 683 |
|
| (44 | )% |
| 46.0 | % |
| 42.9 | % | 3.1 | pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 831 |
|
|
|
|
| — |
|
| 372 |
|
|
|
|
|
|
|
|
|
|
|
|
| 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
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
|
| | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL ORGANIC REVENUES (NON-GAAP) | Three months ended June 30 |
| Six months ended June 30 |
| (Dollars in millions) | 2020 |
| 2019 |
| V% |
|
| 2020 |
| 2019 |
| V% |
|
| GE Industrial revenues (GAAP) | $ | 16,066 |
| $ | 21,416 |
| (25.0 | )% |
| $ | 34,910 |
| $ | 41,740 |
| (16.4 | )% |
| Less: acquisitions | 26 |
| 19 |
|
|
|
| 68 |
| 39 |
|
|
|
| Less: business dispositions(a) | 8 |
| 919 |
|
|
|
| 37 |
| 1,300 |
|
|
|
| Less: foreign currency effect(b) | (280 | ) | — |
|
|
|
| (446 | ) | — |
|
|
|
| GE Industrial organic revenues (Non-GAAP) | $ | 16,312 |
| $ | 20,478 |
| (20.3 | )% |
| $ | 35,252 |
| $ | 40,401 |
| (12.7 | )% |
| Less: BioPharma organic revenue (Non-GAAP) | — |
| — |
|
|
|
| 839 |
| 762 |
|
|
|
| GE Industrial organic revenues excluding BioPharma organic revenues (Non-GAAP) | $ | 16,312 |
| $ | 20,478 |
| (20.3 | )% |
| $ | 34,413 |
| $ | 39,639 |
| (13.2 | )% |
|
|
|
|
|
|
|
|
(a) Dispositions impact in 2019 primarily related to our BioPharma business, with revenues of $831 million, Middle River and Hamble site dispositions, with revenues of $125 million and $101 million, respectively, and Current within our Corporate segment, with revenues of $155 million. (b) Foreign currency impact in 2019 is 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 | Three months ended June 30 | | Six months ended June 30 |
ORGANIC REVENUES (NON-GAAP) (Dollars in millions) | 2020 |
| 2019 |
| V% |
| | 2020 |
| 2019 |
| V% |
|
| GE Industrial equipment revenues (GAAP) | $ | 8,299 |
| $ | 10,269 |
| (19.2 | )% | | $ | 17,476 |
| $ | 19,878 |
| (12.1 | )% |
| Less: acquisitions | 2 |
| 14 |
| | | 13 |
| 14 |
| |
| Less: business dispositions | 8 |
| 830 |
| | | 19 |
| 1,144 |
| |
| Less: foreign currency effect | (197 | ) | — |
| | | (309 | ) | — |
| |
| GE Industrial equipment organic revenues (Non-GAAP) | $ | 8,486 |
| $ | 9,425 |
| (10.0 | )% | | $ | 17,752 |
| $ | 18,720 |
| (5.2 | )% |
| | | | | | | | |
| GE Industrial services revenues (GAAP) | $ | 7,767 |
| $ | 11,147 |
| (30.3 | )% | | $ | 17,434 |
| $ | 21,863 |
| (20.3 | )% |
| Less: acquisitions | 24 |
| 4 |
| | | 55 |
| 25 |
| |
| Less: business dispositions | — |
| 90 |
| | | 18 |
| 156 |
| |
| Less: foreign currency effect | (83 | ) | — |
| | | (138 | ) | — |
| |
| GE Industrial services organic revenues (Non-GAAP) | $ | 7,826 |
| $ | 11,053 |
| (29.2 | )% | | $ | 17,500 |
| $ | 21,682 |
| (19.3 | )% |
| | | | | | | | |
| 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. |
2020 2Q2021 1Q FORM 10-Q 2919
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
| | | | | | | | | | | | | | | |
| 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) | % | | | | |
| | | | | | | |
| 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 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 | | | | | |
| | | | | | |
| | | | | | |
| Add: noncontrolling interests | 7 | | 36 | | | | | |
| | | | | | |
| 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 | | | |
| | | | | | |
| (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 | | | | |
| | | | | | | |
| 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 GE INDUSTRIAL PROFIT AND PROFIT MARGIN | Three months ended June 30 |
| Six months ended June 30 |
(EXCLUDING CERTAIN ITEMS) (NON-GAAP) (Dollars in millions) | 2020 |
| 2019 |
|
| 2020 |
| 2019 |
|
| GE total revenues (GAAP) | $ | 16,066 |
| $ | 21,416 |
|
| $ | 34,910 |
| $ | 41,740 |
|
|
|
|
|
|
|
| Costs |
|
|
|
|
|
| GE total costs and expenses (GAAP) | $ | 19,105 |
| $ | 21,972 |
|
| $ | 38,238 |
| $ | 42,073 |
|
| Less: GE interest and other financial charges | 396 |
| 382 |
|
| 766 |
| 902 |
|
| Less: non-operating benefit costs | 596 |
| 558 |
|
| 1,212 |
| 1,122 |
|
| Less: restructuring & other(a) | 433 |
| 345 |
|
| 641 |
| 611 |
|
| Less: goodwill impairments(b) | 728 |
| 744 |
|
| 728 |
| 744 |
|
| Add: noncontrolling interests | (147 | ) | (1 | ) |
| (110 | ) | 22 |
|
| Adjusted GE Industrial costs (Non-GAAP) | $ | 16,805 |
| $ | 19,943 |
|
| $ | 34,781 |
| $ | 38,715 |
|
|
|
|
|
|
|
| Other Income |
|
|
|
|
|
| GE other income (GAAP) | $ | 2,116 |
| $ | 172 |
|
| $ | 8,990 |
| $ | 1,024 |
|
| Less: unrealized gains (losses)(c) | 1,825 |
| (51 | ) |
| (3,968 | ) | (38 | ) |
| Less: restructuring & other | — |
| — |
|
| — |
| 9 |
|
| Less: gains (losses) and impairments for disposed or held for sale businesses(c) | 74 |
| (116 | ) |
| 12,513 |
| 250 |
|
| Adjusted GE other income (Non-GAAP) | $ | 217 |
| $ | 339 |
|
| 445 |
| 804 |
|
|
|
|
|
|
|
| GE Industrial profit (GAAP) | $ | (922 | ) | $ | (384 | ) |
| $ | 5,663 |
| $ | 692 |
|
| GE Industrial profit margin (GAAP) | (5.7 | )% | (1.8 | )% |
| 16.2 | % | 1.7 | % |
|
|
|
|
|
|
| Adjusted GE Industrial profit (Non-GAAP) | $ | (521 | ) | $ | 1,812 |
|
| $ | 575 |
| $ | 3,829 |
|
| Adjusted GE Industrial profit margin (Non-GAAP) | (3.2 | )% | 8.5 | % |
| 1.6 | % | 9.2 | % |
|
|
|
|
|
|
| (a) See the Corporate Items and Eliminations - Restructuring section for further information. |
|
|
|
| (b) Included non-cash pre-tax impairment charge of $877 million net of $149 million attributable to noncontrolling interest for our Additive reporting unit within Aviation segment for the three and six months ended June 30, 2020. See Note 8 for further information. |
| (c) 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. |
|
| | | | | | | | | | | | | | | | |
| ADJUSTED GE INDUSTRIAL ORGANIC PROFIT | Three months ended June 30 |
| Six months ended June 30 |
(NON-GAAP) (Dollars in millions) | 2020 |
| 2019 |
| V% |
| 2020 |
| 2019 |
| V% |
| Adjusted GE Industrial profit (Non-GAAP) | $ | (521 | ) | $ | 1,812 |
| U |
| $ | 575 |
| $ | 3,829 |
| (85 | )% |
| Less: acquisitions | (11 | ) | (2 | ) |
|
| (9 | ) | (6 | ) |
|
|
| Less: business dispositions | — |
| 356 |
|
|
| (1 | ) | 335 |
|
|
|
| Less: foreign currency effect | 20 |
| — |
|
|
| 30 |
| — |
|
|
|
| Adjusted GE Industrial organic profit (Non-GAAP) | $ | (529 | ) | $ | 1,459 |
| U |
| $ | 554 |
| $ | 3,499 |
| (84 | )% |
|
|
|
|
|
|
|
|
| Adjusted GE Industrial profit margin (Non-GAAP) | (3.2 | )% | 8.5 | % | (11.7)pts |
| 1.6 | % | 9.2 | % | (7.6)pts |
|
| Adjusted GE Industrial organic profit margin (Non-GAAP) | (3.2 | )% | 7.1 | % | (10.3)pts |
| 1.6 | % | 8.7 | % | (7.1)pts |
|
|
|
|
|
|
|
|
|
| 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. |
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
|
| | | | | | | | | | | | | | | |
| ADJUSTED EARNINGS (LOSS) (NON-GAAP) | Three months ended June 30 |
| Six months ended June 30 |
| (Dollars in millions) | 2020 |
| 2019 |
| V% |
| 2020 |
| 2019 |
| V% |
| Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(a) | $ | (2,186 | ) | $ | (302 | ) | U |
| $ | 4,135 |
| $ | 600 |
| F |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | (135 | ) | — |
|
|
| (135 | ) | — |
|
|
| Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (1,476 | ) | (89 | ) |
|
| (1,506 | ) | 46 |
|
|
| GE Industrial earnings (loss) (Non-GAAP) | (845 | ) | (213 | ) | U |
| 5,506 |
| 554 |
| F |
| Non-operating benefits costs (pre-tax) (GAAP) | (596 | ) | (558 | ) |
|
| (1,212 | ) | (1,122 | ) |
|
| Tax effect on non-operating benefit costs | 125 |
| 117 |
|
|
| 255 |
| 236 |
|
|
| Less: non-operating benefit costs (net of tax) | (471 | ) | (441 | ) |
|
| (957 | ) | (886 | ) |
|
| Gains (losses) and impairments for disposed or held for sale businesses (pre-tax)(b) | 74 |
| (116 | ) |
|
| 12,513 |
| 250 |
|
|
| Tax effect on gains (losses) and impairments for disposed or held for sale businesses | 30 |
| 2 |
|
|
| (1,235 | ) | 37 |
|
|
| Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | 104 |
| (114 | ) |
|
| 11,278 |
| 287 |
|
|
| Restructuring & other (pre-tax)(c) | (433 | ) | (345 | ) |
|
| (641 | ) | (602 | ) |
|
| Tax effect on restructuring & other | 91 |
| 71 |
|
|
| 134 |
| 124 |
|
|
| Less: restructuring & other (net of tax) | (342 | ) | (273 | ) |
|
| (507 | ) | (479 | ) |
|
| Goodwill impairments (pre-tax)(d) | (728 | ) | (744 | ) |
|
| (728 | ) | (744 | ) |
|
| Tax effect on goodwill impairments | (23 | ) | (55 | ) |
|
| (23 | ) | (55 | ) |
|
| Less: goodwill impairments (net of tax) | (751 | ) | (799 | ) |
|
| (751 | ) | (799 | ) |
|
| Unrealized gains (losses)(b) | 1,825 |
| (51 | ) |
|
| (3,968 | ) | (38 | ) |
|
| Tax on unrealized gains (losses) | (277 | ) | 11 |
|
|
| 819 |
| 8 |
|
|
| Less: unrealized gains (losses) | 1,548 |
| (40 | ) |
|
| (3,149 | ) | (30 | ) |
|
| Debt extinguishment costs | (63 | ) | — |
|
|
| (63 | ) | — |
|
|
| Tax effect on debt extinguishment costs | 13 |
| — |
|
|
| 13 |
| — |
|
|
| Less: debt extinguishment costs (net of tax) | (50 | ) | — |
|
|
| (50 | ) | — |
|
|
| BioPharma deal expense (pre-tax) | — |
| — |
|
|
| — |
| — |
|
|
| Tax on BioPharma deal expense | — |
| — |
|
|
| — |
| (14 | ) |
|
| Less: BioPharma deal expense (net of tax) | — |
| — |
|
|
| — |
| (14 | ) |
|
| Accretion of RNCI | (135 | ) | — |
|
|
| (135 | ) | — |
|
|
| Tax effect on accretion of RNCI | — |
| — |
|
|
| — |
| — |
|
|
| Less: Accretion of RNCI (net of tax) | (135 | ) | — |
|
|
| (135 | ) | — |
|
|
| Less: GE Industrial U.S. tax reform enactment adjustment | — |
| — |
|
|
| — |
| (101 | ) |
|
| Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | (748 | ) | $ | 1,454 |
| U |
| $ | (222 | ) | $ | 2,577 |
| U |
|
|
|
|
|
|
|
|
|
|
| GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (1,476 | ) | (89 | ) | U |
| (1,506 | ) | 46 |
| U |
| Goodwill impairments (pre-tax)(e) | (839 | ) | — |
|
|
| (839 | ) | — |
|
|
| Tax effect on goodwill impairments | 3 |
| — |
|
|
| 3 |
| — |
|
|
| Less: goodwill impairments (net of tax) | (836 | ) | — |
|
|
| (836 | ) | — |
|
|
| Debt extinguishment costs | (143 | ) | — |
|
|
| (143 | ) | — |
|
|
| Tax effect on debt extinguishment costs | 24 |
| — |
|
|
| 24 |
| — |
|
|
| Less: debt extinguishment costs (net of tax) | (119 | ) | — |
|
|
| (119 | ) | — |
|
|
| 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) | $ | (522 | ) | $ | (89 | ) | U |
| $ | (640 | ) | $ | (53 | ) | U |
|
|
|
|
|
|
|
|
|
|
| Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | (748 | ) | $ | 1,454 |
| U |
| $ | (222 | ) | $ | 2,577 |
| U |
| Add: Adjusted GE Capital earnings (loss) (Non-GAAP) | (522 | ) | (89 | ) | U |
| (640 | ) | (53 | ) | U |
| Adjusted earnings (loss) (Non-GAAP) | $ | (1,270 | ) | $ | 1,365 |
| U |
| $ | (862 | ) | $ | 2,524 |
| U |
|
|
|
|
|
|
|
|
|
|
| (a) Earnings for per-share calculation includes allocation of participating securities pursuant to the two-class method. See Note 16 for further information. |
| (b) See the Corporate Items and Eliminations section for further information. |
|
|
|
|
| (c) See the Corporate Items and Eliminations - Restructuring section for further information. |
|
|
|
|
| (d) Included non-cash pre-tax impairment charge of $877 million net of $149 million attributable to noncontrolling interest for our Additive reporting unit within Aviation segment for the three and six months ended June 30, 2020. See Note 8 for further information. |
| (e) See Note 8 for further information. |
2020 2Q2021 1Q FORM 10-Q 3120
| | | | | | | | | | | | | | | |
| 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) | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| 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) | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| 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 | % | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| 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 | % | | | | |
| | | | | | | |
| (a) See Note 18 for further information. |
| (b) See the Corporate Items and Eliminations section for further information. | | | | |
|
|
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
| | | ADJUSTED EARNINGS (LOSS) PER SHARE (EPS) | Three months ended June 30 |
| Six months ended June 30 | ADJUSTED EARNINGS (LOSS) PER SHARE (EPS) | Three months ended March 31 | |
| (NON-GAAP) | 2020 |
| 2019 |
| V% |
| 2020 |
| 2019 |
| V% | (NON-GAAP) | 2021 | 2020 | V% | |
| Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | (0.25 | ) | $ | (0.03 | ) | U |
| $ | 0.47 |
| $ | 0.07 |
| F | Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | — | | $ | 0.70 | | U | |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | (0.02 | ) | — |
|
|
| (0.02 | ) | — |
|
| Add: Accretion of redeemable noncontrolling interests (RNCI) | — | | — | | | |
| Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | (0.17 | ) | (0.01 | ) |
|
| (0.17 | ) | 0.01 |
|
| Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | (0.02) | | (0.02) | | | |
| GE Industrial EPS (Non-GAAP) | (0.10 | ) | (0.02 | ) | U |
| $ | 0.63 |
| $ | 0.06 |
| F | GE Industrial EPS (Non-GAAP) | $ | 0.02 | | $ | 0.73 | | (97) | % | |
| Non-operating benefits costs (pre-tax) (GAAP) | (0.07 | ) | (0.06 | ) |
|
| (0.14 | ) | (0.13 | ) |
| Non-operating benefits costs (pre-tax) (GAAP) | (0.05) | | (0.07) | | | |
| Tax effect on non-operating benefit costs | 0.01 |
| 0.01 |
|
|
| 0.03 |
| 0.03 |
|
| Tax effect on non-operating benefit costs | 0.01 | | 0.01 | | | |
| Less: non-operating benefit costs (net of tax) | (0.05 | ) | (0.05 | ) |
|
| (0.11 | ) | (0.10 | ) |
| 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) | 0.01 |
| (0.01 | ) |
|
| 1.43 |
| 0.03 |
|
| 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 | ) | — |
|
| 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 |
| (0.01 | ) |
|
| 1.29 |
| 0.03 |
|
| Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | (0.01) | | 1.28 | | | |
| Restructuring & other (pre-tax) | (0.05 | ) | (0.04 | ) |
|
| (0.07 | ) | (0.07 | ) |
| Restructuring & other (pre-tax) | (0.01) | | (0.02) | | | |
| Tax effect on restructuring & other | 0.01 |
| 0.01 |
|
|
| 0.02 |
| 0.01 |
|
| Tax effect on restructuring & other | — | | — | | | |
| Less: restructuring & other (net of tax) | (0.04 | ) | (0.03 | ) |
|
| (0.06 | ) | (0.05 | ) |
| Less: restructuring & other (net of tax) | (0.01) | | (0.01) | | | |
| Goodwill impairments (pre-tax) | (0.08 | ) | (0.09 | ) |
|
| (0.08 | ) | (0.09 | ) |
| |
| Tax effect on goodwill impairments | — |
| (0.01 | ) |
|
| — |
| (0.01 | ) |
| |
| Less: goodwill impairments (net of tax) | (0.09 | ) | (0.09 | ) |
|
| (0.09 | ) | (0.09 | ) |
| |
| Unrealized gains (losses) | 0.21 |
| (0.01 | ) |
|
| (0.45 | ) | — |
|
| |
| | Unrealized gains (losses) (pre-tax) | | Unrealized gains (losses) (pre-tax) | 0.06 | | (0.66) | | | |
| Tax on unrealized gains (losses) | (0.03 | ) | — |
|
|
| 0.09 |
| — |
|
| Tax on unrealized gains (losses) | (0.02) | | 0.13 | | | |
| Less: unrealized gains (losses) | 0.18 |
| — |
|
|
| (0.36 | ) | — |
|
| |
| Debt extinguishment costs | (0.01 | ) | — |
|
|
| (0.01 | ) | — |
|
| |
| Tax effect on debt extinguishment costs | — |
| — |
|
|
| — |
| — |
|
| |
| Less: debt extinguishment costs (net of tax) | (0.01 | ) | — |
|
|
| (0.01 | ) | — |
|
| |
| BioPharma deal expense (pre-tax) | — |
| — |
| | — |
| — |
| | |
| Tax on BioPharma deal expense | — |
| — |
| | — |
| — |
| | |
| Less: BioPharma deal expense (net of tax) | — |
| — |
| | — |
| — |
| | |
| Accretion of RNCI | (0.02 | ) | — |
|
|
| (0.02 | ) | — |
|
| |
| Less: unrealized gains (losses) (net of tax) | | Less: unrealized gains (losses) (net of tax) | 0.04 | | (0.54) | | | |
| | Accretion of RNCI (pre-tax) | | Accretion of RNCI (pre-tax) | — | | — | | | |
| Tax effect on accretion of RNCI | — |
| — |
|
|
| — |
| — |
|
| Tax effect on accretion of RNCI | — | | — | | | |
| Less: Accretion of RNCI (net of tax) | (0.02 | ) | — |
|
|
| (0.02 | ) | — |
|
| Less: Accretion of RNCI (net of tax) | — | | — | | | |
| Less: GE Industrial U.S. tax reform enactment adjustment | — |
| — |
|
|
| — |
| (0.01 | ) |
| Less: GE Industrial U.S. tax reform enactment adjustment | — | | — | | | |
| Adjusted GE Industrial EPS (Non-GAAP) | $ | (0.09 | ) | $ | 0.17 |
| U |
| $ | (0.03 | ) | $ | 0.30 |
| U | Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.04 | | $ | 0.05 | | (20) | % | |
|
|
|
|
|
|
|
|
| | |
| GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | (0.17 | ) | (0.01 | ) | U |
| (0.17 | ) | 0.01 |
| U | GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | (0.02) | | $ | (0.02) | | — | % | |
| Goodwill impairments (pre-tax) | (0.10 | ) | — |
|
|
| (0.10 | ) | — |
|
| |
| Tax effect on goodwill impairments | — |
| — |
|
|
| — |
| — |
|
| |
| Less: goodwill impairments (net of tax) | (0.10 | ) | — |
|
|
| (0.10 | ) | — |
|
| |
| Debt extinguishment costs | (0.02 | ) | — |
|
|
| (0.02 | ) | — |
|
| |
| Tax effect on debt extinguishment costs | — |
| — |
|
|
| — |
| — |
|
| |
| Less: debt extinguishment costs (net of tax) | (0.01 | ) | — |
|
|
| (0.01 | ) | — |
|
| |
| Less: GE Capital U.S. tax reform enactment adjustment | — |
| — |
|
|
| — |
| 0.01 |
|
| |
| | Less: GE Capital tax benefit related to BioPharma sale | — |
| — |
|
|
| 0.01 |
|
|
| Less: GE Capital tax benefit related to BioPharma sale | — | | 0.01 | | | |
| Less: GE Capital tax loss related to GECAS sale | | Less: GE Capital tax loss related to GECAS sale | — | | — | | | |
| Adjusted GE Capital EPS (Non-GAAP) | $ | (0.06 | ) | $ | (0.01 | ) | U |
| $ | (0.07 | ) | $ | (0.01 | ) | U | Adjusted GE Capital EPS (Non-GAAP) | $ | (0.01) | | $ | (0.03) | | 67 | % | |
|
|
|
|
|
|
|
|
| | |
| Adjusted GE Industrial EPS (Non-GAAP) | $ | (0.09 | ) | $ | 0.17 |
| U |
| $ | (0.03 | ) | $ | 0.30 |
| U | Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.04 | | $ | 0.05 | | (20) | % | |
| Add: Adjusted GE Capital EPS (Non-GAAP) | (0.06 | ) | (0.01 | ) | U |
| (0.07 | ) | (0.01 | ) | U | Add: Adjusted GE Capital EPS (Non-GAAP) | (0.01) | | (0.03) | | 67 | % | |
| Adjusted EPS (Non-GAAP) | $ | (0.15 | ) | $ | 0.16 |
| U |
| $ | (0.10 | ) | $ | 0.29 |
| U | 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. | Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total. | 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. | |
| 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. | | 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. |
| | | | | | | | |
| 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
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
|
| | | | | | |
| GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP) | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
|
| GE CFOA (GAAP) | $ | (3,266 | ) | $ | (1,068 | ) |
| Add: gross additions to property, plant and equipment | (1,002 | ) | (1,116 | ) |
| Add: gross additions to internal-use software | (95 | ) | (137 | ) |
| Less: taxes related to business sales | (88 | ) | (108 | ) |
| GE Industrial free cash flows (Non-GAAP) | $ | (4,275 | ) | $ | (2,212 | ) |
|
|
|
|
|
| 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. |
|
| | | | | | |
GE INDUSTRIAL NET DEBT (NON-GAAP) (In millions) | June 30, 2020 |
| December 31, 2019 |
|
| Total GE short- and long-term borrowings (GAAP) | $ | 45,814 |
| $ | 52,059 |
|
| Less: GE Capital short- and long-term debt assumed by GE | 25,398 |
| 31,368 |
|
| Add: intercompany loans from GE Capital | 4,726 |
| 12,226 |
|
| Total adjusted GE borrowings | $ | 25,142 |
| $ | 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 | 3,117 |
| 3,369 |
|
| GE preferred stock | 5,826 |
| 5,738 |
|
| Less: 50% of GE preferred stock | 2,913 |
| 2,869 |
|
| 50% of preferred stock | $ | 2,913 |
| $ | 2,869 |
|
| Deduction for total GE cash, cash equivalents and restricted cash | (25,428 | ) | (17,613 | ) |
| Less: 25% of GE cash, cash equivalents and restricted cash | (6,357 | ) | (4,403 | ) |
| Deduction for 75% of GE cash, cash equivalents and restricted cash | $ | (19,071 | ) | $ | (13,210 | ) |
| Total GE Industrial net debt (Non-GAAP) | $ | 34,041 |
| $ | 47,886 |
|
| | | |
| (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. |
*Non-GAAP Financial Measure
2020 2Q2021 1Q FORM 10-Q 3322
| | | | | | | | |
| 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. 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 June 30, 2020,March 31, 2021, and (ii) no change in internal control over financial reporting occurred during the quarter ended June 30, 2020,March 31, 2021, that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.
OTHER FINANCIAL DATA. DuringGE did not repurchase any equity securities during the three months ended June 30, 2020, GE repurchased 500 thousand shares of common stock at an average price of $30.61, in connection with the settlement of a hedging instrument related to the Company’s deferred incentive compensation program.March 31, 2021.
RISK 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 and our Quarterly Report on Form 10-Q for2020. In addition to the quarter ended March 31, 2020. Theserisk 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 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 or propensity to travel 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, the need to shut down sites, workplace disruptions and restrictions on the movement of people, raw materials and goods, both at our own facilities and at those of our customers and suppliers. We are also experiencing, and expect to continue experiencing, lower demand and volume for products and services contributing to decreases in orders and backlog, 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. While we have been taking a number of cost and cash management actions in response to these dynamics, our ability to offset or mitigate the adverse impacts related to COVID-19 is limited. 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, goodwill or other asset impairments and other adverse financial impacts in future periods.
Customer-related risks: In particular, the interruption of regional and international air travel from COVID-19 has resulted in a severe decline 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 future charges, goodwill or other asset impairments and other material adverse financial impacts at GE Aviation and GE Capital Aviation Services over time, in addition to the charges described in this report that we recognized during the second quarter of 2020. 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 (or negative) 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 (or negative) cash flows from operations could adversely affect our financial condition and the achievement of our strategic objectives. As previously reported, 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 lending 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 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 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 information in this risk factor. Refer also to the Critical Accounting Estimates section for additional details about how COVID-19 related market events may affect our insurance business and pension assumptions, and to Note 8 for additional details about goodwill and reporting units that we are continuing to monitor for impairment. 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.
2020 2Q2021 1Q FORM 10-Q 3523
|
| | | | | | |
| STATEMENT OF EARNINGS (LOSS) | Three months ended June 30 |
| (UNAUDITED) | Consolidated |
| (In millions; per-share amounts in dollars) | 2020 |
| 2019 |
|
| Sales of goods | $ | 10,732 |
| $ | 14,101 |
|
| Sales of services | 5,328 |
| 7,269 |
|
| GE Capital revenues from services | 1,690 |
| 2,043 |
|
| Total revenues (Note 9) | 17,750 |
| 23,414 |
|
| | | |
| Cost of goods sold | 10,306 |
| 11,646 |
|
| Cost of services sold | 4,777 |
| 5,766 |
|
| Selling, general and administrative expenses | 3,079 |
| 3,425 |
|
| Interest and other financial charges | 997 |
| 929 |
|
| Insurance losses and annuity benefits | 564 |
| 638 |
|
| Goodwill impairments (Note 8) | 1,717 |
| 744 |
|
| Non-operating benefit costs | 598 |
| 561 |
|
| Other costs and expenses | 129 |
| 166 |
|
| Total costs and expenses | 22,166 |
| 23,874 |
|
| | | |
| Other income (Note 22) | 2,078 |
| 164 |
|
| GE Capital earnings (loss) from continuing operations | — |
| — |
|
| | | |
| Earnings (loss) from continuing operations before income taxes | (2,339 | ) | (296 | ) |
| Benefit (provision) for income taxes | 199 |
| 181 |
|
| Earnings (loss) from continuing operations | (2,139 | ) | (115 | ) |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | 7 |
| 219 |
|
| Net earnings (loss) | (2,132 | ) | 104 |
|
| Less net earnings (loss) attributable to noncontrolling interests | (145 | ) | (23 | ) |
| Net earnings (loss) attributable to the Company | (1,987 | ) | 127 |
|
| Preferred stock dividends | (192 | ) | (188 | ) |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,179 | ) | $ | (61 | ) |
| | | |
| Amounts attributable to GE common shareholders | | |
| Earnings (loss) from continuing operations | $ | (2,139 | ) | $ | (115 | ) |
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| continuing operations | (145 | ) | (1 | ) |
| Earnings (loss) from continuing operations attributable to the Company | (1,995 | ) | (114 | ) |
| Preferred stock dividends | (192 | ) | (188 | ) |
| Earnings (loss) from continuing operations attributable | | |
| to GE common shareholders | (2,186 | ) | (302 | ) |
| Earnings (loss) from discontinued operations, net of taxes | 7 |
| 219 |
|
| Less net earnings (loss) attributable to | | |
| noncontrolling interests, discontinued operations | — |
| (23 | ) |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,179 | ) | $ | (61 | ) |
| | | |
| Earnings (loss) per share from continuing operations (Note 16) | | |
| Diluted earnings (loss) per share | $ | (0.27 | ) | $ | (0.03 | ) |
| Basic earnings (loss) per share | $ | (0.27 | ) | $ | (0.03 | ) |
| | | |
| Net earnings (loss) per share (Note 16) | | |
| Diluted earnings (loss) per share | $ | (0.26 | ) | $ | (0.01 | ) |
| Basic earnings (loss) per share | $ | (0.26 | ) | $ | (0.01 | ) |
| | | |
| Dividends declared per common share | $ | 0.01 |
| $ | 0.01 |
|
| | | | | | | | |
| 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 June 30 |
| (UNAUDITED) | GE(a) | | GE Capital |
| (In millions; per-share amounts in dollars) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Sales of goods | $ | 10,728 |
| $ | 14,117 |
| | $ | 13 |
| $ | 18 |
|
| Sales of services | 5,337 |
| 7,298 |
| | — |
| — |
|
| GE Capital revenues from services | — |
| — |
| | 1,833 |
| 2,303 |
|
| Total revenues | 16,066 |
| 21,416 |
| | 1,845 |
| 2,321 |
|
| | | | | | |
| Cost of goods sold | 10,305 |
| 11,666 |
| | 10 |
| 14 |
|
| Cost of services sold | 3,952 |
| 5,250 |
| | 835 |
| 512 |
|
| Selling, general and administrative expenses | 2,979 |
| 3,367 |
| | 162 |
| 211 |
|
| Interest and other financial charges | 396 |
| 382 |
| | 657 |
| 646 |
|
| Insurance losses and annuity benefits | — |
| — |
| | 577 |
| 668 |
|
| Goodwill impairments (Note 8) | 877 |
| 744 |
| | 839 |
| — |
|
| Non-operating benefit costs | 596 |
| 558 |
| | 2 |
| 3 |
|
| Other costs and expenses | — |
| 5 |
| | 178 |
| 178 |
|
| Total costs and expenses | 19,105 |
| 21,972 |
| | 3,262 |
| 2,233 |
|
| | | | | | |
| Other income (Note 22) | 2,116 |
| 172 |
| | — |
| — |
|
| GE Capital earnings (loss) from continuing operations | (1,476 | ) | (89 | ) | | — |
| — |
|
| | | | | | |
| Earnings (loss) from continuing operations before income taxes | (2,399 | ) | (473 | ) | | (1,416 | ) | 88 |
|
| Benefit (provision) for income taxes | 66 |
| 170 |
| | 133 |
| 11 |
|
| Earnings (loss) from continuing operations | (2,333 | ) | (303 | ) | | (1,283 | ) | 99 |
|
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | 7 |
| 219 |
| | 17 |
| 238 |
|
| Net earnings (loss) | (2,325 | ) | (84 | ) | | (1,266 | ) | 336 |
|
| Less net earnings (loss) attributable to noncontrolling interests | (147 | ) | (23 | ) | | 2 |
| — |
|
| Net earnings (loss) attributable to the Company | (2,179 | ) | (61 | ) | | (1,268 | ) | 336 |
|
| Preferred stock dividends | — |
| — |
| | (192 | ) | (188 | ) |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,179 | ) | $ | (61 | ) | | $ | (1,459 | ) | $ | 148 |
|
| | | | | | |
| Amounts attributable to GE common shareholders: | | | | | |
| Earnings (loss) from continuing operations | $ | (2,333 | ) | $ | (303 | ) | | $ | (1,283 | ) | $ | 99 |
|
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| continuing operations | (147 | ) | (1 | ) | | 2 |
| — |
|
| Earnings (loss) from continuing operations attributable to the Company | (2,186 | ) | (302 | ) | | (1,285 | ) | 99 |
|
| Preferred stock dividends | — |
| — |
| | (192 | ) | (188 | ) |
| Earnings (loss) from continuing operations attributable | | | | | |
| to GE common shareholders | (2,186 | ) | (302 | ) | | (1,476 | ) | (89 | ) |
| Earnings (loss) from discontinued operations, net of taxes | 7 |
| 219 |
| | 17 |
| 238 |
|
| Less net earnings (loss) attributable to | | | | | |
| noncontrolling interests, discontinued operations | — |
| (23 | ) | | — |
| — |
|
| Net earnings (loss) attributable to GE common shareholders | $ | (2,179 | ) | $ | (61 | ) | | $ | (1,459 | ) | $ | 148 |
|
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.
2020 2Q2021 1Q FORM 10-Q 3724
|
| | | | | | |
| STATEMENT OF EARNINGS (LOSS) | Six months ended June 30 |
| (UNAUDITED) | Consolidated |
| (In millions; per-share amounts in dollars) | 2020 |
| 2019 |
|
| Sales of goods | $ | 23,096 |
| $ | 27,351 |
|
| Sales of services | 11,778 |
| 14,277 |
|
| GE Capital revenues from services | 3,399 |
| 3,988 |
|
| Total revenues (Note 9) | 38,273 |
| 45,616 |
|
| | | |
| Cost of goods sold | 20,846 |
| 22,620 |
|
| Cost of services sold | 9,933 |
| 11,000 |
|
| Selling, general and administrative expenses | 6,144 |
| 6,827 |
|
| Interest and other financial charges | 1,791 |
| 1,993 |
|
| Insurance losses and annuity benefits | 1,199 |
| 1,249 |
|
| Goodwill impairments (Note 8) | 1,717 |
| 744 |
|
| Non-operating benefit costs | 1,216 |
| 1,129 |
|
| Other costs and expenses | 238 |
| 238 |
|
| Total costs and expenses | 43,084 |
| 45,801 |
|
| | | |
| Other income (Note 22) | 8,947 |
| 1,012 |
|
| GE Capital earnings (loss) from continuing operations | — |
| — |
|
| | | |
| Earnings (loss) from continuing operations before income taxes | 4,136 |
| 827 |
|
| Benefit (provision) for income taxes | 136 |
| 41 |
|
| Earnings (loss) from continuing operations | 4,272 |
| 868 |
|
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (171 | ) | 2,881 |
|
| Net earnings (loss) | 4,101 |
| 3,749 |
|
| Less net earnings (loss) attributable to noncontrolling interests | (111 | ) | 34 |
|
| Net earnings (loss) attributable to the Company | 4,212 |
| 3,716 |
|
| Preferred stock dividends | (235 | ) | (228 | ) |
| Net earnings (loss) attributable to GE common shareholders | $ | 3,977 |
| $ | 3,488 |
|
| | | |
| Amounts attributable to GE common shareholders | | |
| Earnings (loss) from continuing operations | $ | 4,272 |
| $ | 868 |
|
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| continuing operations | (108 | ) | 22 |
|
| Earnings (loss) from continuing operations attributable to the Company | 4,381 |
| 846 |
|
| Preferred stock dividends | (235 | ) | (228 | ) |
| Earnings (loss) from continuing operations attributable | | |
| to GE common shareholders | 4,146 |
| 618 |
|
| Earnings (loss) from discontinued operations, net of taxes | (171 | ) | 2,881 |
|
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| discontinued operations | (2 | ) | 11 |
|
| Net earnings (loss) attributable to GE common shareholders | $ | 3,977 |
| $ | 3,488 |
|
| | | |
| Earnings (loss) per share from continuing operations (Note 16) | | |
| Diluted earnings (loss) per share | $ | 0.46 |
| $ | 0.07 |
|
| Basic earnings (loss) per share | $ | 0.46 |
| $ | 0.07 |
|
| | | |
| Net earnings (loss) per share (Note 16) | | |
| Diluted earnings (loss) per share | $ | 0.44 |
| $ | 0.40 |
|
| Basic earnings (loss) per share | $ | 0.44 |
| $ | 0.40 |
|
| | | |
| Dividends declared per common share | $ | 0.02 |
| $ | 0.02 |
|
| | | | | | | | | | | | | | | | | |
| 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 EARNINGS (LOSS) (CONTINUED) | Six months ended June 30 |
| (UNAUDITED) | GE(a) | | GE Capital |
| (In millions; per-share amounts in dollars) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Sales of goods | $ | 23,087 |
| $ | 27,432 |
| | $ | 37 |
| $ | 34 |
|
| Sales of services | 11,823 |
| 14,308 |
| | — |
| — |
|
| GE Capital revenues from services | — |
| — |
| | 3,731 |
| 4,514 |
|
| Total revenues | 34,910 |
| 41,740 |
| | 3,768 |
| 4,548 |
|
| | | | | | |
| Cost of goods sold | 20,846 |
| 22,715 |
| | 28 |
| 27 |
|
| Cost of services sold | 8,608 |
| 10,031 |
| | 1,370 |
| 999 |
|
| Selling, general and administrative expenses | 5,928 |
| 6,562 |
| | 365 |
| 478 |
|
| Interest and other financial charges | 766 |
| 902 |
| | 1,161 |
| 1,323 |
|
| Insurance losses and annuity benefits | — |
| — |
| | 1,230 |
| 1,302 |
|
| Goodwill impairments (Note 8) | 877 |
| 744 |
| | 839 |
| — |
|
| Non-operating benefit costs | 1,212 |
| 1,122 |
| | 5 |
| 8 |
|
| Other costs and expenses | — |
| (4 | ) | | 297 |
| 277 |
|
| Total costs and expenses | 38,238 |
| 42,073 |
| | 5,295 |
| 4,413 |
|
| | | | | | |
| Other income (Note 22) | 8,990 |
| 1,024 |
| | — |
| — |
|
| GE Capital earnings (loss) from continuing operations | (1,506 | ) | 46 |
| | — |
| — |
|
| | | | | | |
| Earnings (loss) from continuing operations before income taxes | 4,156 |
| 738 |
| | (1,526 | ) | 135 |
|
| Benefit (provision) for income taxes | (121 | ) | (97 | ) | | 257 |
| 139 |
|
| Earnings (loss) from continuing operations | 4,035 |
| 640 |
| | (1,270 | ) | 273 |
|
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (171 | ) | 2,881 |
| | (147 | ) | 273 |
|
| Net earnings (loss) | 3,865 |
| 3,522 |
| | (1,417 | ) | 547 |
|
| Less net earnings (loss) attributable to noncontrolling interests | (113 | ) | 33 |
| | 2 |
| 0 |
|
| Net earnings (loss) attributable to the Company | 3,977 |
| 3,488 |
| | (1,418 | ) | 547 |
|
| Preferred stock dividends | — |
| — |
| | (235 | ) | (228 | ) |
| Net earnings (loss) attributable to GE common shareholders | $ | 3,977 |
| $ | 3,488 |
| | $ | (1,653 | ) | $ | 319 |
|
| | | | | | |
| Amounts attributable to GE common shareholders: | | | | | |
| Earnings (loss) from continuing operations | $ | 4,035 |
| $ | 640 |
| | $ | (1,270 | ) | $ | 273 |
|
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| continuing operations | (110 | ) | 22 |
| | 2 |
| 0 |
|
| Earnings (loss) from continuing operations attributable to the Company | 4,146 |
| 618 |
| | (1,272 | ) | 273 |
|
| Preferred stock dividends | — |
| — |
| | (235 | ) | (228 | ) |
| Earnings (loss) from continuing operations attributable | | | | | |
| to GE common shareholders | 4,146 |
| 618 |
| | (1,506 | ) | 46 |
|
| Earnings (loss) from discontinued operations, net of taxes | (171 | ) | 2,881 |
| | (147 | ) | 273 |
|
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| discontinued operations | (2 | ) | 11 |
| | — |
| — |
|
| Net earnings (loss) attributable to GE common shareholders | $ | 3,977 |
| $ | 3,488 |
| | $ | (1,653 | ) | $ | 319 |
|
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.
2020 2Q2021 1Q FORM 10-Q 3925
| | | | | | | | |
| 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 $455 million at March 31, 2021 and December 31, 2020, respectively, in Insurance, which is subject to regulatory restrictions. This balance is included in All other assets. See Note 11 for further information.
|
| | | | | | |
| STATEMENT OF FINANCIAL POSITION (UNAUDITED) | Consolidated |
| (In millions, except share amounts) | June 30, 2020 |
| December 31, 2019 |
|
| Cash, cash equivalents and restricted cash | $ | 41,431 |
| $ | 36,394 |
|
| Investment securities (Note 3) | 47,117 |
| 48,521 |
|
| Current receivables (Note 4) | 16,041 |
| 16,769 |
|
| Financing receivables – net (Note 5) | 3,095 |
| 3,134 |
|
| Inventories (Note 6) | 15,251 |
| 14,104 |
|
| Other GE Capital receivables | 7,578 |
| 7,144 |
|
| Property, plant and equipment – net (Note 7) | 45,503 |
| 46,186 |
|
| Receivable from GE Capital | — |
| — |
|
| Investment in GE Capital | — |
| — |
|
| Goodwill (Note 8) | 24,951 |
| 26,734 |
|
| Other intangible assets – net (Note 8) | 10,168 |
| 10,653 |
|
| Contract and other deferred assets (Note 10) | 15,555 |
| 16,801 |
|
| All other assets | 15,514 |
| 16,461 |
|
| Deferred income taxes (Note 14) | 10,665 |
| 9,889 |
|
| Assets of businesses held for sale (Note 2) | — |
| 9,149 |
|
| Assets of discontinued operations (Note 2) | 3,617 |
| 4,109 |
|
| Total assets | $ | 256,487 |
| $ | 266,048 |
|
| | | |
| Short-term borrowings (Note 11) | $ | 9,059 |
| $ | 22,072 |
|
| Short-term borrowings assumed by GE (Note 11) | — |
| — |
|
| Accounts payable, principally trade accounts | 13,469 |
| 15,926 |
|
| Progress collections and deferred income (Note 10) | 19,927 |
| 20,508 |
|
| Other GE current liabilities | 16,535 |
| 15,753 |
|
| Non-recourse borrowings of consolidated securitization entities (Note 11) | 396 |
| 1,655 |
|
| Long-term borrowings (Note 11) | 72,423 |
| 67,155 |
|
| Long-term borrowings assumed by GE (Note 11) | — |
| — |
|
| Insurance liabilities and annuity benefits (Note 12) | 40,954 |
| 39,826 |
|
| Non-current compensation and benefits | 30,906 |
| 31,687 |
|
| All other liabilities | 17,330 |
| 19,745 |
|
| Liabilities of businesses held for sale (Note 2) | — |
| 1,658 |
|
| Liabilities of discontinued operations (Note 2) | 235 |
| 203 |
|
| Total liabilities | 221,233 |
| 236,187 |
|
| | | |
Preferred stock (5,939,875 shares outstanding at both June 30, 2020
and December 31, 2019) | 6 |
| 6 |
|
Common stock (8,753,289,000 and 8,738,434,000 shares outstanding
at June 30, 2020 and December 31, 2019, respectively) | 702 |
| 702 |
|
| Accumulated other comprehensive income (loss) – net attributable to GE | (10,194 | ) | (11,732 | ) |
| Other capital | 34,292 |
| 34,405 |
|
| Retained earnings | 91,188 |
| 87,732 |
|
| Less common stock held in treasury | (82,320 | ) | (82,797 | ) |
| Total GE shareholders’ equity | 33,674 |
| 28,316 |
|
| Noncontrolling interests | 1,579 |
| 1,545 |
|
| Total equity | 35,254 |
| 29,861 |
|
| Total liabilities and equity | $ | 256,487 |
| $ | 266,048 |
|
|
| | | | | | | | | | | | | |
| STATEMENT OF FINANCIAL POSITION (CONTINUED) | GE(a) | | GE Capital |
(UNAUDITED) (In millions, except share amounts) | June 30,
2020 |
| December 31, 2019 |
| | June 30,
2020 |
| December 31, 2019 |
|
| Cash, cash equivalents and restricted cash | $ | 25,428 |
| $ | 17,613 |
| | $ | 16,003 |
| $ | 18,781 |
|
| Investment securities (Note 3) | 5,997 |
| 10,008 |
| | 41,121 |
| 38,514 |
|
| Current receivables (Note 4) | 12,744 |
| 13,883 |
| | — |
| — |
|
| Financing receivables - net (Note 5) | — |
| — |
| | 6,959 |
| 6,979 |
|
| Inventories (Note 6) | 15,251 |
| 14,104 |
| | — |
| — |
|
| Other GE Capital receivables | — |
| — |
| | 10,456 |
| 11,767 |
|
| Property, plant and equipment – net (Note 7) | 16,718 |
| 17,447 |
| | 29,923 |
| 29,886 |
|
| Receivable from GE Capital | 20,672 |
| 19,142 |
| | — |
| — |
|
| Investment in GE Capital | 13,587 |
| 15,299 |
| | — |
| — |
|
| Goodwill (Note 8) | 24,951 |
| 25,895 |
| | — |
| 839 |
|
| Other intangible assets – net (Note 8) | 10,009 |
| 10,461 |
| | 159 |
| 192 |
|
| Contract and other deferred assets (Note 10) | 15,587 |
| 16,833 |
| | — |
| — |
|
| All other assets | 8,419 |
| 8,399 |
| | 7,934 |
| 8,648 |
|
| Deferred income taxes (Note 14) | 8,765 |
| 8,189 |
| | 1,900 |
| 1,700 |
|
| Assets of businesses held for sale (Note 2) | — |
| 8,626 |
| | — |
| 241 |
|
| Assets of discontinued operations (Note 2) | 155 |
| 202 |
| | 3,462 |
| 3,907 |
|
| Total assets | $ | 178,283 |
| $ | 186,100 |
| | $ | 117,918 |
| $ | 121,454 |
|
| | | | | | |
| Short-term borrowings (Note 11) | $ | 1,737 |
| $ | 5,606 |
| | $ | 4,601 |
| $ | 12,030 |
|
| Short-term borrowings assumed by GE (Note 11) | 3,679 |
| 5,473 |
| | 3,237 |
| 2,104 |
|
| Accounts payable, principally trade accounts | 13,809 |
| 17,702 |
| | 1,010 |
| 886 |
|
| Progress collections and deferred income (Note 10) | 20,091 |
| 20,694 |
| | — |
| — |
|
| Other GE current liabilities | 17,300 |
| 16,833 |
| | — |
| — |
|
| Non-recourse borrowings of consolidated securitization entities (Note 11) | — |
| — |
| | 396 |
| 1,655 |
|
| Long-term borrowings (Note 11) | 18,679 |
| 15,085 |
| | 32,025 |
| 26,175 |
|
| Long-term borrowings assumed by GE (Note 11) | 21,719 |
| 25,895 |
| | 17,435 |
| 17,038 |
|
| Insurance liabilities and annuity benefits (Note 12) | — |
| — |
| | 41,416 |
| 40,232 |
|
| Non-current compensation and benefits | 30,460 |
| 31,208 |
| | 438 |
| 472 |
|
| All other liabilities | 15,562 |
| 16,156 |
| | 3,532 |
| 5,278 |
|
| Liabilities of businesses held for sale (Note 2) | — |
| 1,620 |
| | — |
| 52 |
|
| Liabilities of discontinued operations (Note 2) | 151 |
| 106 |
| | 84 |
| 97 |
|
| Total liabilities | 143,187 |
| 156,379 |
| | 104,174 |
| 106,016 |
|
| | | | | | |
Preferred stock (5,939,875 shares outstanding at both June 30, 2020
and December 31, 2019) | 6 |
| 6 |
| | 6 |
| 6 |
|
Common stock (8,753,289,000 and 8,738,434,000 shares outstanding
at June 30, 2020 and December 31, 2019, respectively) | 702 |
| 702 |
| | — |
| — |
|
| Accumulated other comprehensive income (loss) - net attributable to GE | (10,194 | ) | (11,732 | ) | | (906 | ) | (852 | ) |
| Other capital | 34,292 |
| 34,405 |
| | 17,004 |
| 17,001 |
|
| Retained earnings | 91,188 |
| 87,732 |
| | (2,517 | ) | (857 | ) |
| Less common stock held in treasury | (82,320 | ) | (82,797 | ) | | — |
| — |
|
| Total GE shareholders’ equity | 33,674 |
| 28,316 |
| | 13,587 |
| 15,299 |
|
| Noncontrolling interests | 1,421 |
| 1,406 |
| | 157 |
| 139 |
|
| Total equity | 35,096 |
| 29,721 |
| | 13,744 |
| 15,438 |
|
| Total liabilities and equity | $ | 178,283 |
| $ | 186,100 |
| | $ | 117,918 |
| $ | 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.
2020 2Q2021 1Q FORM 10-Q 4126
|
| | | | | | |
| STATEMENT OF CASH FLOWS | Six months ended June 30 |
| (UNAUDITED) | Consolidated |
| (In millions) | 2020 |
| 2019 |
|
| Net earnings (loss) | $ | 4,101 |
| $ | 3,749 |
|
| (Earnings) loss from discontinued operations | 171 |
| (2,881 | ) |
| Adjustments to reconcile net earnings (loss) | | |
| to cash provided from operating activities | | |
| Depreciation and amortization of property, plant and equipment (Note 7) | 2,281 |
| 1,965 |
|
| Amortization of intangible assets (Note 8) | 648 |
| 724 |
|
| Goodwill impairments (Note 8) | 1,717 |
| 744 |
|
| (Earnings) loss from continuing operations retained by GE Capital | — |
| — |
|
| (Gains) losses on purchases and sales of business interests (Note 22) | (12,482 | ) | (214 | ) |
| (Gains) losses on equity securities (Note 22) | 4,031 |
| 54 |
|
| Principal pension plans cost (Note 13) | 1,798 |
| 1,693 |
|
| Principal pension plans employer contributions | (144 | ) | (133 | ) |
| Other postretirement benefit plans (net) | (488 | ) | (542 | ) |
| Provision (benefit) for income taxes | (136 | ) | (41 | ) |
| Cash recovered (paid) during the year for income taxes | (622 | ) | (1,067 | ) |
| Decrease (increase) in contract and other deferred assets | 501 |
| (548 | ) |
| Decrease (increase) in GE current receivables | (190 | ) | (696 | ) |
| Decrease (increase) in inventories | (730 | ) | (1,951 | ) |
| Increase (decrease) in accounts payable | (2,015 | ) | 828 |
|
| Increase (decrease) in GE progress collections | (670 | ) | 66 |
|
| All other operating activities | 911 |
| (223 | ) |
| Cash from (used for) operating activities – continuing operations | (1,319 | ) | 1,528 |
|
| Cash from (used for) operating activities – discontinued operations | (53 | ) | (1,336 | ) |
| Cash from (used for) operating activities | (1,372 | ) | 192 |
|
| | | |
| Additions to property, plant and equipment | (1,614 | ) | (2,946 | ) |
| Dispositions of property, plant and equipment | 1,054 |
| 1,912 |
|
| Additions to internal-use software | (98 | ) | (141 | ) |
| Net decrease (increase) in financing receivables | (164 | ) | 377 |
|
| Proceeds from sale of discontinued operations | — |
| 2,827 |
|
| Proceeds from principal business dispositions | 20,854 |
| 1,058 |
|
| Net cash from (payments for) principal businesses purchased | (7 | ) | — |
|
| Capital contribution from GE to GE Capital | — |
| — |
|
| Sales of retained ownership interests in Wabtec | — |
| 1,799 |
|
| All other investing activities | (1,516 | ) | (2,620 | ) |
| Cash from (used for) investing activities – continuing operations | 18,509 |
| 2,266 |
|
| Cash from (used for) investing activities – discontinued operations | (91 | ) | 1,115 |
|
| Cash from (used for) investing activities | 18,419 |
| 3,382 |
|
| | | |
| Net increase (decrease) in borrowings (maturities of 90 days or less) | (3,412 | ) | (434 | ) |
| Newly issued debt (maturities longer than 90 days) | 14,228 |
| 1,462 |
|
| Repayments and other debt reductions (maturities longer than 90 days) | (22,005 | ) | (6,168 | ) |
| Capital contribution from GE to GE Capital | — |
| — |
|
| Dividends paid to shareholders | (324 | ) | (324 | ) |
| All other financing activities | (486 | ) | (627 | ) |
| Cash from (used for) financing activities – continuing operations | (11,999 | ) | (6,092 | ) |
| Cash from (used for) financing activities – discontinued operations | 1 |
| (469 | ) |
| Cash from (used for) financing activities | (11,998 | ) | (6,561 | ) |
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (217 | ) | 1 |
|
| Increase (decrease) in cash, cash equivalents and restricted cash | 4,831 |
| (2,986 | ) |
| Cash, cash equivalents and restricted cash at beginning of year | 37,077 |
| 35,548 |
|
| Cash, cash equivalents and restricted cash at June 30 | 41,908 |
| 32,562 |
|
| Less cash, cash equivalents and restricted cash of discontinued operations at June 30 | 477 |
| 3,732 |
|
| Cash, cash equivalents and restricted cash of continuing operations at June 30 | $ | 41,431 |
| $ | 28,830 |
|
| | | | | | | | | | | | | | | | | |
| 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 (CONTINUED) | Six months ended June 30 |
| (UNAUDITED) | GE(a) | | GE Capital |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Net earnings (loss) | $ | 3,865 |
| $ | 3,522 |
| | $ | (1,417 | ) | $ | 547 |
|
| (Earnings) loss from discontinued operations | 171 |
| (2,881 | ) | | 147 |
| (273 | ) |
| Adjustments to reconcile net earnings (loss) | | | | | |
| to cash provided from operating activities | | | | | |
| Depreciation and amortization of property, plant and equipment (Note 7) | 916 |
| 961 |
| | 1,373 |
| 1,002 |
|
| Amortization of intangible assets (Note 8) | 611 |
| 693 |
| | 37 |
| 31 |
|
| Goodwill impairments (Note 8) | 877 |
| 744 |
| | 839 |
| — |
|
| (Earnings) loss from continuing operations retained by GE Capital | 1,506 |
| (46 | ) | | — |
| — |
|
| (Gains) losses on purchases and sales of business interests (Note 22) | (12,424 | ) | (214 | ) | | (58 | ) | — |
|
| (Gains) losses on equity securities (Note 22) | 3,986 |
| 57 |
| | 46 |
| (3 | ) |
| Principal pension plans cost (Note 13) | 1,798 |
| 1,693 |
| | — |
| — |
|
| Principal pension plans employer contributions | (144 | ) | (133 | ) | | — |
| — |
|
| Other postretirement benefit plans (net) | (471 | ) | (541 | ) | | (17 | ) | (1 | ) |
| Provision (benefit) for income taxes | 121 |
| 97 |
| | (257 | ) | (139 | ) |
| Cash recovered (paid) during the year for income taxes | (550 | ) | (970 | ) | | (72 | ) | (97 | ) |
| Decrease (increase) in contract and other deferred assets | 501 |
| (548 | ) | | — |
| — |
|
| Decrease (increase) in GE current receivables | 434 |
| (1,246 | ) | | — |
| — |
|
| Decrease (increase) in inventories | (692 | ) | (1,822 | ) | | — |
| — |
|
| Increase (decrease) in accounts payable | (3,462 | ) | 355 |
| | 4 |
| (1 | ) |
| Increase (decrease) in GE progress collections | (693 | ) | 61 |
| | — |
| — |
|
| All other operating activities | 386 |
| (849 | ) | | 340 |
| 214 |
|
| Cash from (used for) operating activities – continuing operations | (3,266 | ) | (1,068 | ) | | 967 |
| 1,279 |
|
| Cash from (used for) operating activities – discontinued operations | 26 |
| 38 |
| | (79 | ) | (1,702 | ) |
| Cash from (used for) operating activities | (3,240 | ) | (1,029 | ) | | 889 |
| (423 | ) |
| | | | | | |
| Additions to property, plant and equipment | (1,002 | ) | (1,116 | ) | | (655 | ) | (1,984 | ) |
| Dispositions of property, plant and equipment | 105 |
| 271 |
| | 954 |
| 1,645 |
|
| Additions to internal-use software | (95 | ) | (137 | ) | | (3 | ) | (4 | ) |
| Net decrease (increase) in financing receivables | — |
| — |
| | 45 |
| 2,067 |
|
| Proceeds from sale of discontinued operations | — |
| 2,827 |
| | — |
| — |
|
| Proceeds from principal business dispositions | 20,480 |
| 1,017 |
| | 34 |
| 417 |
|
| Net cash from (payments for) principal businesses purchased | (7 | ) | (417 | ) | | — |
| — |
|
| Capital contribution from GE to GE Capital | — |
| (1,500 | ) | | — |
| — |
|
| Sales of retained ownership interests in Wabtec | — |
| 1,799 |
| | — |
| — |
|
| All other investing activities | 207 |
| (111 | ) | | 7,143 |
| (1,280 | ) |
| Cash from (used for) investing activities – continuing operations | 19,689 |
| 2,634 |
| | 7,518 |
| 861 |
|
| Cash from (used for) investing activities – discontinued operations | (30 | ) | (322 | ) | | (60 | ) | 1,764 |
|
| Cash from (used for) investing activities | 19,659 |
| 2,312 |
| | 7,458 |
| 2,625 |
|
| | | | | | |
| Net increase (decrease) in borrowings (maturities of 90 days or less) | (3,512 | ) | (1,101 | ) | | (205 | ) | (656 | ) |
| Newly issued debt (maturities longer than 90 days) | 7,431 |
| 409 |
| | 6,797 |
| 1,053 |
|
| Repayments and other debt reductions (maturities longer than 90 days) | (12,113 | ) | (329 | ) | | (17,392 | ) | (5,840 | ) |
| Capital contribution from GE to GE Capital | — |
| — |
| | — |
| 1,500 |
|
| Dividends paid to shareholders | (176 | ) | (175 | ) | | (232 | ) | (225 | ) |
| All other financing activities | (83 | ) | (79 | ) | | (231 | ) | (561 | ) |
| Cash from (used for) financing activities – continuing operations | (8,453 | ) | (1,275 | ) | | (11,264 | ) | (4,728 | ) |
| Cash from (used for) financing activities – discontinued operations | 1 |
| (468 | ) | | — |
| (1 | ) |
| Cash from (used for) financing activities | (8,453 | ) | (1,743 | ) | | (11,264 | ) | (4,729 | ) |
| Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (155 | ) | (8 | ) | | (62 | ) | 9 |
|
| Increase (decrease) in cash, cash equivalents and restricted cash | 7,811 |
| (468 | ) | | (2,979 | ) | (2,518 | ) |
| 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 June 30 | 25,428 |
| 20,060 |
| | 16,480 |
| 12,502 |
|
Less cash, cash equivalents and restricted cash of discontinued operations
at June 30 | — |
| 3,143 |
| | 477 |
| 590 |
|
Cash, cash equivalents and restricted cash of continuing operations
at June 30 | $ | 25,428 |
| $ | 16,917 |
| | $ | 16,003 |
| $ | 11,913 |
|
(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.
2020 2Q2021 1Q FORM 10-Q 4327
| | | | | | | | |
| 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 | |
|
| | | | | | | | | | | | | |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | Three months ended June 30 | | Six months ended June 30 |
| (In millions, net of tax) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Net earnings (loss) | $ | (2,132 | ) | $ | 104 |
| | $ | 4,101 |
| $ | 3,749 |
|
| Less net earnings (loss) attributable to noncontrolling interests | (145 | ) | (23 | ) | | (111 | ) | 34 |
|
| Net earnings (loss) attributable to the Company | $ | (1,987 | ) | $ | 127 |
| | $ | 4,212 |
| $ | 3,716 |
|
| | | | | | |
| Investment securities | $ | 27 |
| $ | 76 |
| | $ | (14 | ) | $ | 99 |
|
| Currency translation adjustments | (57 | ) | (141 | ) | | 78 |
| 283 |
|
| Cash flow hedges | 53 |
| (25 | ) | | (158 | ) | 12 |
|
| Benefit plans | 604 |
| 639 |
| | 1,640 |
| 1,183 |
|
| Other comprehensive income (loss) | 627 |
| 547 |
| | 1,545 |
| 1,577 |
|
| Less: other comprehensive income (loss) attributable to noncontrolling interests | 2 |
| (85 | ) | | 7 |
| 15 |
|
| Other comprehensive income (loss) attributable to the Company | $ | 625 |
| $ | 633 |
| | $ | 1,539 |
| $ | 1,562 |
|
| | | | | | |
| Comprehensive income (loss) | $ | (1,505 | ) | $ | 651 |
| | $ | 5,647 |
| $ | 5,326 |
|
| Less: comprehensive income (loss) attributable to noncontrolling interests | (143 | ) | (109 | ) | | (104 | ) | 49 |
|
| Comprehensive income (loss) attributable to the Company | $ | (1,362 | ) | $ | 760 |
| | $ | 5,751 |
| $ | 5,277 |
|
|
| | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) | Three months ended June 30 | Six months ended June 30 |
| (In millions) | 2020 |
| | 2019 |
| 2020 |
| | 2019 |
|
| Preferred stock issued | $ | 6 |
| | $ | 6 |
| $ | 6 |
| | $ | 6 |
|
| Common stock issued | $ | 702 |
| | $ | 702 |
| $ | 702 |
| | $ | 702 |
|
| | | | | | | |
| Beginning balance | (10,819 | ) | | (13,485 | ) | (11,732 | ) | | (14,414 | ) |
| Investment securities | 27 |
| | 75 |
| (14 | ) | | 98 |
|
| Currency translation adjustments | (58 | ) | | (64 | ) | 75 |
| | 260 |
|
| Cash flow hedges | 53 |
| | (23 | ) | (158 | ) | | 12 |
|
| Benefit plans | 604 |
| | 645 |
| 1,636 |
| | 1,192 |
|
| Accumulated other comprehensive income (loss) ending balance | $ | (10,194 | ) | | $ | (12,852 | ) | $ | (10,194 | ) | | $ | (12,852 | ) |
| Beginning balance | 34,296 |
| | 34,345 |
| 34,405 |
| | 35,504 |
|
| Gains (losses) on treasury stock dispositions | (163 | ) | | (150 | ) | (412 | ) | | (657 | ) |
| Stock-based compensation | 111 |
| | 124 |
| 216 |
| | 264 |
|
| Other changes | 48 |
| | 6 |
| 83 |
| | (786 | ) |
| Other capital ending balance | $ | 34,292 |
| | $ | 34,324 |
| $ | 34,292 |
| | $ | 34,324 |
|
| Beginning balance | 93,615 |
| | 96,921 |
| 87,732 |
| | 93,109 |
|
| Net earnings (loss) attributable to the Company | (1,987 | ) | | 127 |
| 4,212 |
| | 3,716 |
|
| Dividends and other transactions with shareholders | (439 | ) | | (274 | ) | (581 | ) | | (419 | ) |
| Changes in accounting (Note 1) | — |
| | — |
| (175 | ) | | 368 |
|
| Retained earnings ending balance | $ | 91,188 |
| | $ | 96,773 |
| $ | 91,188 |
| | $ | 96,773 |
|
| Beginning balance | (82,516 | ) | | (83,328 | ) | (82,797 | ) | | (83,925 | ) |
| Purchases | (8 | ) | | (7 | ) | (22 | ) | | (45 | ) |
| Dispositions | 204 |
| | 198 |
| 498 |
| | 834 |
|
| Common stock held in treasury ending balance | $ | (82,320 | ) | | $ | (83,137 | ) | $ | (82,320 | ) | | $ | (83,137 | ) |
| GE shareholders' equity balance | 33,674 |
| | 35,816 |
| 33,674 |
| | 35,816 |
|
| Noncontrolling interests balance (Note 15) | 1,579 |
| | 20,312 |
| 1,579 |
| | 20,312 |
|
| Total equity balance at June 30(a) | $ | 35,254 |
| | $ | 56,129 |
| $ | 35,254 |
| | $ | 56,129 |
|
| |
(a) | Total equity balance decreased by $(20,875) million in the last twelve months from June 30, 2019, primarily due to reduction of non-controlling interest balance of $(19,095) million attributable to Baker Hughes Class A shareholders at June 30, 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 $(3,080) million, partially offset by after-tax gain of $11,199 million due to the sale of our BioPharma business within our Healthcare segment. See Notes 2 and 3 for further information.
|
| | | | | | | | | | | |
| 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 | | | | |
| | | | | | | | | | | |
| 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 | | | | |
44 2020 2Q FORM 10-Q
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING 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 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 recoverables 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 evaluate debt securities with unrealized losses to determine whether any of the losses arise from concerns about the issuer’s credit or the underlying collateral and record an allowance for credit losses, if required.
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).2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU 2016-13 requires usremoves certain exceptions from the guidance in ASC 740 related to prospectively record an allowanceintra-period tax allocations, interim calculations and the recognition of deferred tax liabilities for credit lossesoutside basis differences and clarifies and simplifies several other aspects of accounting for income taxes. Different transition methods apply to the current expected credit losses inherent invarious income tax simplifications. For the asset over its expected life, replacingchanges requiring a retrospective or modified retrospective transition, 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 March 2020, the SEC issued a final rule amending disclosure requirements for guarantors and issuers of registered guaranteed securities under SEC Regulation S-X, Rule 3-10. The final rule is effective for filings on or after January 4, 2021, however early application is permitted. As a resultadoption of the simplification provided by this rule, beginning with this quarterly report on Form 10-Q for the period ended June 30, 2020, wenew standard did not have electeda material impact to early adopt the disclosure requirements.our financial statements.
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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 $21,149$21,112 million (after certain working capital adjustments). The consideration consisted of $20,732 million in cash and $417 million of pension liabilities that were assumed by Danaher. In addition, we incurred $154$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 pre-tax gain of $12,341$12,292 million ($11,199 ($11,145 million after tax) after-tax) in our consolidated Statement of Earnings (Loss).
In the first half of 2020, we sold all our remaining businesses classified as held for sale, including the remaining Lighting business within our Corporate segment and the remaining PK AirFinance business within our Capital segment.
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.
GECAS.
In September 2019,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 Hughes (BKR)BKR primarily through our remaining interest, ongoing purchases and sales of products and services, transition services that we provide to BKR, as well as an aeroderivative joint venture (JV) we formed with BKR in the fourth quarter of 2019.
The JV is jointly controlled by GE and BKR and is consolidated by GE due to the significance of our investment in BKR. Our Aviation segment sells products and services to
For the JV. In turn, the JV sells products and services primarily to BKR and our Power segment. Transactions between the JV and GE businesses are eliminated in consolidation. In the first half of 2020,three months ended March 31, 2021, we had sales of $252 million to BKR for products and services from the JV and we collected cash of $225 million. If our investment in BKR is reduced to below 20%, we would no longer have significant influence in BKR and, as a result, we would not consolidate the JV. A potential deconsolidation of the JV is not expected to have a material impact on GE Industrial free cash flows.
In addition, in the first half of 2020, we had sales of $265$166 million and purchases of $101$61 million with BKR for products and services outside of the JV. We collected net cash of $451$131 million from BKR related to sales, purchases and transition services.
In the first quarter of 2021, we had sales of $119 million to BKR for products and services from the JV, and we collected cash of $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 operating activities (CFOA).
In addition, we received $130$28 million of repayments on the promissory note receivable from BKR and dividends of $136$56 million on our investment.
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| RESULTS OF DISCONTINUED OPERATIONS | | | | | | | | | | | | | Three months ended March 31 | | |
| | | | | | | | | | | | | | | | | | | 2021 | 2020 | | | |
| Operations | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| GE Capital revenues from services | | | | | | | | | | | | | | | | | | | $ | 633 | | $ | 1,010 | | | | |
| Cost of goods and services sold | | | | | | | | | | | | | | | | | | | (368) | | (547) | | | | |
| Other income, costs and expenses | | | | | | | | | | | | | | | | | | | (386) | | (462) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Earnings (loss) of discontinued operations before income taxes | | | | | | | | | | | | | | | | | | | (121) | | 2 | | | | |
| Benefit (provision) for income taxes | | | | | | | | | | | | | | | | | | | (29) | | (19) | | | | |
| Earnings (loss) of discontinued operations, net of taxes(a)(b) | | | | | | | | | | | | | | | | | | | $ | (149) | | $ | (17) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Disposal | | | | | | | | | | | | | | | | | | | | | | | |
| Gain (loss) on disposal before income taxes | | | | | | | | | | | | | | | | | | | (2,702) | | (4) | | | | |
| Benefit (provision) for income taxes | | | | | | | | | | | | | | | | | | | (43) | | 0 | | | | |
| Gain (loss) on disposal, net of taxes | | | | | | | | | | | | | | | | | | | $ | (2,745) | | $ | (4) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Earnings (loss) from discontinued operations, net of taxes | | | | | | | | | | | | | | | | | | | $ | (2,894) | | $ | (21) | | | | |
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.
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RESULTS OF DISCONTINUED OPERATIONS (In millions) | Baker Hughes | | Transportation | | GE Capital | | Total |
| Three months ended June 30 | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Operations | | | | | | | | | | | |
| Sales of goods and services | $ | — |
| $ | 5,953 |
| | $ | — |
| $ | — |
| | $ | — |
| $ | — |
| | $ | — |
| $ | 5,953 |
|
| GE Capital revenues from services | — |
| — |
| | — |
| — |
| | 71 |
| (48 | ) | | 71 |
| (48 | ) |
| Cost of goods and services sold | — |
| (4,954 | ) | | — |
| — |
| | — |
| — |
| | — |
| (4,954 | ) |
| Other income, costs and expenses | (3 | ) | (981 | ) | | 1 |
| 3 |
| | (62 | ) | (16 | ) | | (64 | ) | (993 | ) |
| | | | | | | | | | | | |
Earnings (loss) of discontinued operations before income taxes | (3 | ) | 18 |
| | 1 |
| 3 |
| | 10 |
| (64 | ) | | 8 |
| (42 | ) |
| Benefit (provision) for income taxes | 2 |
| (33 | ) | | — |
| (7 | ) | | 8 |
| 302 |
| | 9 |
| 261 |
|
Earnings (loss) of discontinued operations, net of taxes(a) | $ | (1 | ) | $ | (15 | ) | | $ | 1 |
| $ | (4 | ) | | $ | 17 |
| $ | 238 |
| | $ | 17 |
| $ | 219 |
|
| | | | | | | | | | | | |
| Disposal | | | | | | | | | | | |
| Gain (loss) on disposal before income taxes | (10 | ) | — |
| | — |
| — |
| | — |
| — |
| | (10 | ) | — |
|
| Benefit (provision) for income taxes | — |
| — |
| | — |
| — |
| | — |
| — |
| | — |
| — |
|
| Gain (loss) on disposal, net of taxes | $ | (10 | ) | $ | — |
| | $ | — |
| $ | — |
| | $ | — |
| $ | (1 | ) | | $ | (10 | ) | $ | (1 | ) |
| | | | | | | | | | | | |
Earnings (loss) from discontinued operations, net of taxes | $ | (11 | ) | $ | (15 | ) | | $ | 1 |
| $ | (4 | ) | | $ | 17 |
| $ | 238 |
| | $ | 7 |
| $ | 219 |
|
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Baker Hughes | | Transportation | | GE Capital | | Total |
| Six months ended June 30 | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Operations | | | | | | | | | | | |
| Sales of goods and services | $ | — |
| $ | 11,569 |
| | $ | — |
| $ | 549 |
| | $ | — |
| $ | — |
| | $ | — |
| $ | 12,118 |
|
| GE Capital revenues from services | — |
| — |
| | — |
| — |
| | (5 | ) | (9 | ) | | (5 | ) | (9 | ) |
| Cost of goods and services sold | — |
| (9,631 | ) | | — |
| (478 | ) | | — |
| — |
| | — |
| (10,109 | ) |
| Other income, costs and expenses | (3 | ) | (1,768 | ) | | (3 | ) | (6 | ) | | (146 | ) | (89 | ) | | (152 | ) | (1,863 | ) |
| | | | | | | | | | | | |
Earnings (loss) of discontinued operations before income taxes | (3 | ) | 170 |
| | (3 | ) | 65 |
| | (151 | ) | (98 | ) | | $ | (157 | ) | $ | 137 |
|
| Benefit (provision) for income taxes | (11 | ) | (116 | ) | | 6 |
| (19 | ) | | 4 |
| 327 |
| | — |
| 192 |
|
Earnings (loss) of discontinued operations, net of taxes(a) | $ | (14 | ) | $ | 55 |
| | $ | 4 |
| $ | 46 |
| | $ | (147 | ) | $ | 228 |
| | $ | (157 | ) | $ | 329 |
|
| | | | | | | | | | | | |
| Disposal | | | | | | | | | | | |
| Gain (loss) on disposal before income taxes | (13 | ) | — |
| | — |
| 3,471 |
| | — |
| 47 |
| | $ | (13 | ) | $ | 3,517 |
|
| Benefit (provision) for income taxes | — |
| — |
| | — |
| (963 | ) | | — |
| (2 | ) | | — |
| (964 | ) |
| Gain (loss) on disposal, net of taxes | $ | (13 | ) | $ | — |
| | $ | — |
| $ | 2,508 |
| | $ | — |
| $ | 45 |
| | $ | (13 | ) | $ | 2,553 |
|
| | | | | | | | | | | | |
Earnings (loss) from discontinued operations, net of taxes | $ | (27 | ) | $ | 55 |
| | $ | 4 |
| $ | 2,554 |
| | $ | (147 | ) | $ | 273 |
| | $ | (171 | ) | $ | 2,881 |
|
(a) Earnings (loss) of discontinued operations attributable to the Company after income taxes was $17$(149) million and $242$(15) million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively. Earnings (loss) of discontinued operations attributable to the Company after income taxes was $(155)
(b) Included $177 million and $317$155 million from GECAS operations, including $(359) million and $(545) million of depreciation and amortization, for the sixthree months ended June 30,March 31, 2021 and 2020, respectively. Depreciation and 2019, respectively. amortization ceased on March 10, 2021.
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ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS (In millions) | June 30, 2020 |
| December 31, 2019 |
|
| Cash, cash equivalents and restricted cash | $ | 477 |
| $ | 638 |
|
| Investment securities | 91 |
| 202 |
|
| Current receivables | 61 |
| 81 |
|
| Financing receivables held for sale (Polish mortgage portfolio) | 2,398 |
| 2,485 |
|
| Property, plant, and equipment | 112 |
| 123 |
|
| Deferred income taxes | 213 |
| 264 |
|
| All other assets | 265 |
| 317 |
|
| Assets of discontinued operations(a) | $ | 3,617 |
| $ | 4,109 |
|
|
|
|
| Accounts payable & Progress collections and deferred income | $ | 15 |
| $ | 40 |
|
| All other liabilities(b) | 220 |
| 163 |
|
| Liabilities of discontinued operations(a) | $ | 235 |
| $ | 203 |
|
2021 1Q FORM 10-Q 32
| | | | | | | | |
| 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) Assets and liabilities of discontinued operations included $3,462Included $33,922 million and $84$37,199 million related to GE Capitalof assets and $4,991 million and $4,997 million of liabilities for GECAS as of June 30,March 31, 2021 and December 31, 2020, respectively.
(b) Included within All other liabilities of discontinued operations at June 30, 2020March 31, 2021 and December 31, 2019,2020 are intercompany tax receivables in the amount of $829$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 SECURITIES.SECURITIES. 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.
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| 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 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 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 | $ | 23,540 |
| $ | 5,771 |
| $ | (136 | ) | $ | 29,175 |
|
| $ | 23,037 |
| $ | 4,636 |
| $ | (11 | ) | $ | 27,661 |
|
| Non-U.S. corporate | 2,185 |
| 337 |
| (5 | ) | 2,517 |
|
| 2,161 |
| 260 |
| (1 | ) | 2,420 |
|
| State and municipal | 3,235 |
| 826 |
| (22 | ) | 4,039 |
|
| 3,086 |
| 598 |
| (15 | ) | 3,669 |
|
| Mortgage and asset-backed | 3,497 |
| 97 |
| (136 | ) | 3,458 |
|
| 3,117 |
| 116 |
| (4 | ) | 3,229 |
|
| Government and agencies | 1,257 |
| 206 |
| — |
| 1,463 |
|
| 1,391 |
| 126 |
| — |
| 1,516 |
|
| Equity | 6,465 |
| — |
| — |
| 6,465 |
|
| 10,025 |
| — |
| — |
| 10,025 |
|
| Total | $ | 40,179 |
| $ | 7,237 |
| $ | (300 | ) | $ | 47,117 |
|
| $ | 42,816 |
| $ | 5,736 |
| $ | (31 | ) | $ | 48,521 |
|
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
The amortized cost of debt securities as of June 30, 2020,March 31, 2021 excludes accrued interest of $413$438 million,, which is reported in current Other GE Capital receivables.
The estimated fair valuesvalue of investment securities at June 30, 2020March 31, 2021 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 BKR, partially offset by a decrease in market yields and new investments in our insurance business. TheBKR.
Total estimated fair value of the remaining BKR interestdebt securities in an unrealized loss position were $3,732 million and promissory note receivable was $5,910$1,765 million, at June 30, 2020.
Grossof which $644 million and $165 million had gross unrealized losses of $(271)$(56) million and $(29) million are associated with debt securities with a fair value of $3,066$(20) million and $168 million that havehad been in a loss position for less than 12 months and 12 months or more respectively, at June 30, 2020.March 31, 2021 and December 31, 2020, respectively. Gross unrealized losses of $(11)$(168) million and $(20)at March 31, 2021 included $(79) 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 June 30, 2020, gross unrealized losses of $(300) million included $(136) million related to U.S. corporate securities primarily in the energy industry, and $(113)$(57) million related to commercial mortgage-backed securities (CMBS). 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.
Net unrealized gains (losses) for equity securities with readily determinable fair values, which are recorded in Other income within continuing operations, were $1,929$238 million and $(51)$(5,772) million for the three months ended March 31, 2021 and $(3,843) million and $(42) million for the six months ended June 30, 2020, and 2019, respectively. The amount recognized in the six months ended June 30, 2020 primarily included a loss of $3,865 million related to our interest in BKR.
Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the BKR promissory note totaled $1,450$1,333 million and $2,913$1,250 million for the three months ended March 31, 2021 and $2,705 million and $4,334 million for the six months ended June 30, 2020, and 2019, respectively. Gross realized gains on investment securities were $82$30 million and $32$46 million and gross realized losses and impairments were $(60) million and $(17) million for the three months ended March 31, 2021 and $128 million and $76 million for the six months ended June 30, 2020, and 2019, respectively. Gross realized losses and impairments were $(69) million and $(67) million for the three months ended and $(85) million and $(105) million for the six months ended June 30, 2020 and 2019, respectively.
Contractual maturities of investments inour debt securities (excluding mortgage and asset-backed securities) at June 30, 2020March 31, 2021 are due as follows:
|
| | | | | | |
| (In millions) | Amortized cost |
| Estimated fair value |
|
| | | |
| Within one year | $ | 643 |
| $ | 657 |
|
| After one year through five years | 2,483 |
| 2,676 |
|
| After five years through ten years | 6,516 |
| 7,599 |
|
| After ten years | 20,575 |
| 26,261 |
|
| | | | | | | | |
| 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 $5,453$5,641 million and $5,210$5,866 million are classified within Level 3, as significant inputs to the valuation model are unobservable at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. During the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, there were no significant transfers into or out of Level 3.
In addition to the equity securities described above, we hold $288$291 million and $517$274 million of equity securities without readily determinable fair valuevalues at June 30, 2020March 31, 2021 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 $(65) millionan insignificant amount and $29$(93) million for the three months ended March 31, 2021 and $(159) million and $23 million for the six months ended June 30, 2020, and 2019, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 4. CURRENT AND LONG-TERM RECEIVABLES
|
| | | | | | | | | | | | | |
| CURRENT RECEIVABLES | Consolidated |
| GE |
| (In millions) | June 30, 2020 |
| December 31, 2019 |
|
| June 30, 2020 |
| December 31, 2019 |
|
| Customer receivables(a) | $ | 12,361 |
| $ | 12,594 |
|
| $ | 8,879 |
| $ | 9,507 |
|
| Sundry receivables(b)(c) | 4,840 |
| 5,049 |
|
| 5,021 |
| 5,247 |
|
| Allowance for credit losses(d) | (1,160 | ) | (874 | ) |
| (1,157 | ) | (872 | ) |
| Total current receivables | $ | 16,041 |
| $ | 16,769 |
|
| $ | 12,744 |
| $ | 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 Aviation receivables from CFM due to 737 MAX temporary fleet grounding of $1,367 million and $1,397 million as of June 30, 2020 and December 31, 2019, respectively. During 2020, CFM and Boeing reached an agreement to secure payment terms for engines delivered in 2019 and 2020, net of progress collections. Based on the agreement, the receivable is expected to be collected from Boeing through the first quarter of 2021.
(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 consolidation. 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.
(c)(b) Consolidated current receivables includeincluded a 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 at June 30, 2020as of March 31, 2021 and December 31, 20192020 was $537$461 million and $421$413 million, respectively.
(d)(c) GE Industrial allowance for credit losses primarily increased due to net new provisions of $272$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 June 30,March 31, 2021 and 2020, and 2019, GE Industrial sold approximately 45%38% and 59%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:
| | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 |
| GE Capital | | Third Parties | | GE Capital | | Third Parties |
| Balance at January 1 | $ | 3,618 | | | $ | 2,992 | | | $ | 3,087 | | | $ | 6,757 | |
| GE Industrial sales to GE Capital | 7,044 | | | — | | | 9,225 | | | — | |
| GE Industrial sales to third parties | — | | | 124 | | | — | | | 307 | |
| GE Capital sales to third parties | (3,826) | | | 3,826 | | | (5,253) | | | 5,253 | |
| Collections and other | (3,765) | | | (4,360) | | | (3,224) | | | (7,797) | |
| Reclassification from long-term customer receivables | 63 | | | 0 | | | 123 | | | 0 | |
| Balance at March 31 | $ | 3,134 | | (a) | $ | 2,582 | | (b) | $ | 3,958 | | (a) | $ | 4,519 | |
|
| | | | | | | | | | | | | | | |
| (In millions) | 2020 |
| 2019 |
| GE Capital |
|
| Third Parties |
| GE Capital |
|
| Third Parties |
| Balance at January 1 | $ | 3,087 |
|
| $ | 6,757 |
|
| $ | 4,386 |
|
| $ | 7,880 |
|
| GE sales to GE Capital | 16,964 |
|
| — |
|
| 20,009 |
|
| — |
|
| GE sales to third parties |
|
|
| 773 |
|
| — |
|
| 2,760 |
|
| GE Capital sales to third parties | (9,931 | ) |
| 9,931 |
|
| (13,836 | ) |
| 13,836 |
|
| Collections and other | (6,807 | ) |
| (13,565 | ) |
| (7,140 | ) |
| (17,644 | ) |
| Reclassification from long-term customer receivables | 170 |
|
| — |
|
| 209 |
|
| — |
|
| Balance at June 30 | $ | 3,482 |
| (a) | $ | 3,897 |
|
| $ | 3,627 |
| (a) | $ | 6,831 |
|
(a) At June 30,March 31, 2021 and 2020, and 2019, $661$526 million and $964$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 cash flows from operating activities (CFOA)Industrial CFOA of claims by GE Capital on receivables sold with recourse was insignificant for the sixthree months ended June 30, 2020March 31, 2021 and 2019. 2020.
(b) Included $1,863 million in our active unconsolidated receivables facility at March 31, 2021, under which we currently expect to continue sales of GE Industrial receivables in the future.
| | | | | | | | | | | | | | | | | |
| LONG-TERM RECEIVABLES | Consolidated | | GE Industrial |
| March 31, 2021 | December 31, 2020 | | March 31, 2021 | December 31, 2020 |
| Long-term customer receivables(a) | $ | 638 | | $ | 585 | | | $ | 601 | | $ | 474 | |
| Long-term sundry receivables(b) | 1,656 | | 1,748 | | | 1,928 | | 2,097 | |
| Allowance for credit losses | (136) | | (142) | | | (136) | | (142) | |
| Total long-term receivables | $ | 2,158 | | $ | 2,191 | | | $ | 2,392 | | $ | 2,430 | |
|
| | | | | | | | | | | | | |
| LONG-TERM RECEIVABLES | Consolidated | | GE |
| (In millions) | June 30, 2020 |
| December 31, 2019 |
| | June 30, 2020 |
| December 31, 2019 |
|
| Long-term customer receivables(a) | $ | 688 |
| $ | 906 |
|
| $ | 465 |
| $ | 506 |
|
| Long-term sundry receivables(b) | 1,399 |
| 1,504 |
| | 1,792 |
| 1,834 |
|
| Allowance for credit losses | (127 | ) | (128 | ) |
| (127 | ) | (128 | ) |
| Total long-term receivables | $ | 1,960 |
| $ | 2,282 |
|
| $ | 2,130 |
| $ | 2,212 |
|
(a) At June 30, 2020As of March 31, 2021 and December 31, 2019,2020, GE Capital held $223$37 million and $400$111 million, respectively, of GE Industrial long-term customer receivables, substantially all of which $197 million and $312 million had been purchasedare with recourse (i.e., GE Industrial retains all or some risk of default).GE sold an insignificant amount of long-term customer receivables during the six months ended June 30, 2020 and 2019.
(b) Includes supplier advances, revenue sharing programs receivables, other non-income based tax receivables and certain intercompany balances that eliminate upon consolidation.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
UNCONSOLIDATED RECEIVABLES FACILITIES. GE Capital has two1 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 $3,000$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 $800 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 decreased from $1,200 million to $800 million during the six months ended June 30, 2020.
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 | |
|
| | | | | | | |
Six months ended June 30 (In millions) | 2020 |
| | 2019 |
|
| Customer receivables sold to receivables facilities | $ | 7,679 |
| | $ | 10,786 |
|
| Total cash purchase price for customer receivables | 7,240 |
| | 10,497 |
|
| Cash collections re-invested to purchase customer receivables | 6,453 |
| | 8,830 |
|
| | | | |
| Non-cash increases to deferred purchase price | $ | 390 |
| | $ | 137 |
|
| Cash payments received on deferred purchase price | 274 |
| | 220 |
|
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 June 30, 2020March 31, 2021 and December 31, 2019,2020, these VIEs held current customer receivables of $1,386$1,133 million and $2,080$1,489 million and long-term customer receivables of $217$29 million and $375$93 million, respectively. At June 30, 2020March 31, 2021 and December 31, 2019,2020, the outstanding non-recourse debt under their respective debt facilities was $396$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) | June 30, 2020 |
| December 31, 2019 |
|
| June 30, 2020 |
| December 31, 2019 |
|
| Loans, net of deferred income | $ | 1,212 |
| $ | 1,098 |
|
| $ | 5,049 |
| $ | 4,927 |
|
| Investment in financing leases, net of deferred income | 1,955 |
| 2,070 |
|
| 1,955 |
| 2,070 |
|
| 3,167 |
| 3,168 |
|
| 7,004 |
| 6,996 |
|
| Allowance for losses | (72 | ) | (33 | ) |
| (45 | ) | (17 | ) |
| Financing receivables – net | $ | 3,095 |
| $ | 3,134 |
|
| $ | 6,959 |
| $ | 6,979 |
|
Consolidated finance lease income was $34 million and $45 million in the three months ended June 30, 2020 and 2019, respectively,and $78 million and $91 million in the six months ended June 30, 2020 and 2019, respectively.
We manage our GE Capital financing receivables portfolio using delinquency and nonaccrual data as key performance indicators. At June 30,March 31, 2021 and December 31, 2020, 8.5%, 4.7% and 4.6% of 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 our 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) | June 30, 2020 |
| December 31, 2019 |
|
| Raw materials and work in process | $ | 8,976 |
| $ | 8,771 |
|
| Finished goods | 6,275 |
| 5,333 |
|
| Total inventories | $ | 15,251 |
| $ | 14,104 |
|
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 7. PROPERTY, PLANT AND EQUIPMENT
| | | | | | | | March 31, 2021 | December 31, 2020 |
| (In millions) | June 30, 2020 |
| December 31, 2019 |
| |
| Original cost | $ | 76,137 |
| $ | 75,187 |
| Original cost | $ | 31,893 | | $ | 32,098 | |
| Less accumulated depreciation and amortization | (33,317 | ) | (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 | $ | 42,821 |
| $ | 43,290 |
| Property, plant and equipment – net | $ | 16,296 | | $ | 16,699 | |
Consolidated depreciation and amortization on property, plant and equipment was $1,290$452 million and $970$461 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $2,281 million and $1,965 million in the six months ended June 30, 2020 and 2019, respectively.
During the three and six months ended June 30, 2020, our GECAS business recognized pre-tax impairments of $292 million and $337 million, respectively, on its fixed-wing aircraft operating lease portfolio. Pre-tax impairments were insignificant for the three and six months ended June 30, 2019. We determined the fair values of these assets using primarily the income approach. These charges are included in costs of services sold within the Statement of Earnings (Loss) and within our Capital segment.
Income on our operating lease portfolio, primarily from our GECAS business, was $795 million and $1,017 million for the three months ended June 30, 2020 and 2019, respectively, and comprised fixed lease income of $714 million and $774 million and variable lease income of $82 million and $243 million, respectively. Income on our operating lease portfolio was $1,672 million and $1,949 million for the six months ended June 30, 2020 and 2019, respectively, and comprises fixed lease income of $1,419 million and $1,539 million and variable lease income of $253 million and $411 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 $2,683 million and $2,896 million, as of June 30, 2020 and December 31, 2019, respectively. Our consolidated operating lease liabilities, included in All other liabilities in our Statement of Financial Position, were $2,930$3,143 million and $3,162$3,195 million, as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, which included GE Industrial operating lease liabilities of $3,117$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 June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Long-term (fixed) | $ | 183 |
| $ | 219 |
| | $ | 360 |
| $ | 445 |
|
| Long-term (variable) | 24 |
| 27 |
| | 45 |
| 71 |
|
| Short-term | 54 |
| 43 |
| | 123 |
| 90 |
|
| Total operating lease expense | $ | 261 |
| $ | 289 |
| | $ | 528 |
| $ | 606 |
|
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 |
| Impairments |
| Currency exchange
and other |
| Balance at
June 30, 2020 |
|
| Power | $ | 145 |
| $ | — |
| $ | — |
| $ | 145 |
|
| Renewable Energy | 3,290 |
| — |
| (67 | ) | 3,223 |
|
| Aviation | 9,859 |
| (877 | ) | 8 |
| 8,989 |
|
| Healthcare | 11,728 |
| — |
| (4 | ) | 11,723 |
|
| Capital | 839 |
| (839 | ) | — |
| — |
|
| Corporate | 873 |
| — |
| (3 | ) | 871 |
|
| Total | $ | 26,734 |
| $ | (1,717 | ) | $ | (66 | ) | $ | 24,951 |
|
We test goodwill for impairment annually in the fourth quarter. 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 (andcapitalization. In the magnitude and durationfirst quarter of those declines), if any. Due to the impact of recent events, including challenges from declines in current market conditions,2021, we performeddid not identify any reporting units that required an interim impairment test at our Additive reporting unit within our Aviation segment and GECAS reporting unit within our Capital segment in the second quarter of 2020, both of which incorporated a combination of income and market valuation approaches. The results of the analysis indicated that carrying values of both reporting units were in excess of their respective fair values. Therefore,test. However, we recorded non-cash impairment losses of $877 million and $839 million for the Additive and GECAS reporting units, respectively, in the caption Goodwill impairments in our consolidated Statement of Earnings (Loss). All of the goodwill in Additive was the result of the Arcam AB and Concept Laser GmBH acquisitions in 2016. Of the $839 million of goodwill for GECAS, $729 million arose from the acquisition of Milestone Aviation, our helicopter leasing business, in 2015. After the impairment charges, there is $222 million goodwill remaining in our Additive reporting unit and 0 goodwill remaining in our GECAS reporting unit. Since the fair value of our Additive reporting unit now equals its carrying value, we will continue to monitor the remaining goodwill in this reporting unit for impairment in future periods.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Also, in the second quarter of 2020, we performed an analysis of the impact of recent events, including business and industry specific considerations, on the fair value of our Grid Solutions software reporting unit in our Digital business within Corporate and concluded an interim impairment test was not required. While the goodwill of this reporting unit is not currently impaired there can be no assurances that goodwill will not be impaired in future periods. We will 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 this reporting unit as its fair value iswas not significantly in excess of its carrying value. At June 30, 2020, goodwill inMarch 31, 2021, our Grid Solutions softwareAdditive reporting unit was $871had goodwill of $236 million.
|
| | | | | | |
OTHER INTANGIBLE ASSETS - NET (In millions) | June 30, 2020 |
| December 31, 2019 |
|
| Intangible assets subject to amortization | $ | 10,168 |
| $ | 10,653 |
|
All other intangible assets of $9,395 million and $9,671 million at March 31, 2021 and December 31, 2020, respectively, are subject to amortization. Intangible assets decreased in the secondfirst quarter of 2020,2021, primarily as a result of amortization. Consolidated amortization expense was $308$301 million and $357$318 million in the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $648 million and $724 million in the six months ended June 30, 2020 and 2019, respectively.
NOTE 9. REVENUES. The equipment and services revenues classification in the table below is consistent with our segment MD&A presentation.
|
| | | | | | | | | | | | | | | | | | | |
| EQUIPMENT & SERVICES REVENUES | |
Three months ended June 30 (In millions) | 2020 | | 2019 |
| | Equipment | Services | Total | | Equipment | Services | Total |
| Power | $ | 1,488 |
| $ | 2,669 |
| $ | 4,156 |
| | $ | 1,463 |
| $ | 3,218 |
| $ | 4,681 |
|
| Renewable Energy | 2,722 |
| 783 |
| 3,505 |
| | 2,867 |
| 760 |
| 3,627 |
|
| Aviation | 2,031 |
| 2,352 |
| 4,384 |
| | 3,033 |
| 4,844 |
| 7,877 |
|
| Healthcare | 2,050 |
| 1,843 |
| 3,893 |
| | 2,838 |
| 2,095 |
| 4,934 |
|
| Corporate items and industrial eliminations | 9 |
| 120 |
| 129 |
| | 69 |
| 229 |
| 298 |
|
| Total GE Industrial revenues | $ | 8,299 |
| $ | 7,767 |
| $ | 16,066 |
| | $ | 10,269 |
| $ | 11,147 |
| $ | 21,416 |
|
|
| | | | | | | | | | | | | | | | | | | |
Six months ended June 30 (In millions) | 2020 | | 2019 |
| | Equipment | Services | Total | | Equipment | Services | Total |
| Power | $ | 2,994 |
| $ | 5,187 |
| $ | 8,181 |
| | $ | 3,039 |
| $ | 6,259 |
| $ | 9,298 |
|
| Renewable Energy | 5,298 |
| 1,401 |
| 6,698 |
| | 4,848 |
| 1,317 |
| 6,165 |
|
| Aviation | 4,475 |
| 6,801 |
| 11,276 |
| | 6,146 |
| 9,685 |
| 15,831 |
|
| Healthcare | 4,749 |
| 3,872 |
| 8,620 |
| | 5,492 |
| 4,125 |
| 9,616 |
|
| Corporate items and industrial eliminations | (39 | ) | 174 |
| 135 |
| | 352 |
| 478 |
| 830 |
|
| Total GE Industrial revenues | $ | 17,476 |
| $ | 17,434 |
| $ | 34,910 |
| | $ | 19,878 |
| $ | 21,863 |
| $ | 41,740 |
|
|
| | | | | | | | | | | | | | | |
| REVENUES | Three months ended June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
| Gas Power | $ | 3,077 |
| | $ | 3,246 |
| | $ | 5,936 |
| | $ | 6,510 |
|
| Power Portfolio | 1,079 |
| | 1,434 |
| | 2,244 |
| | 2,788 |
|
| Power | $ | 4,156 |
| | $ | 4,681 |
| | $ | 8,181 |
| | $ | 9,298 |
|
| | | | | | | | |
| Onshore Wind | $ | 2,487 |
| | $ | 2,450 |
| | $ | 4,612 |
| | $ | 3,891 |
|
| Grid Solutions equipment and services | 812 |
| | 935 |
| | 1,652 |
| | 1,852 |
|
| Hydro, Offshore Wind and other | 205 |
| | 242 |
| | 435 |
| | 422 |
|
| Renewable Energy | $ | 3,505 |
| | $ | 3,627 |
| | $ | 6,698 |
| | $ | 6,165 |
|
| | | | | | | | |
| Commercial Engines & Services | $ | 2,232 |
| | $ | 5,848 |
| | $ | 7,009 |
| | $ | 11,797 |
|
| Military | 1,161 |
| | 976 |
| | 2,121 |
| | 2,013 |
|
| Systems & Other | 990 |
| | 1,052 |
| | 2,146 |
| | 2,021 |
|
| Aviation | $ | 4,384 |
| | $ | 7,877 |
| | $ | 11,276 |
| | $ | 15,831 |
|
| | | | | | | | |
| Healthcare Systems | $ | 3,523 |
| | $ | 3,589 |
| | $ | 6,971 |
| | $ | 7,021 |
|
| Pharmaceutical Diagnostics | 370 |
| | 517 |
| | 820 |
| | 1,003 |
|
| BioPharma | — |
| | 828 |
| | 830 |
| | 1,593 |
|
| Healthcare | $ | 3,893 |
| | $ | 4,934 |
| | $ | 8,620 |
| | $ | 9,616 |
|
| | | | | | | | |
| Corporate items and industrial eliminations | 129 |
| | 298 |
| | 135 |
| | 830 |
|
| Total GE Industrial revenues | $ | 16,066 |
| | $ | 21,416 |
| | $ | 34,910 |
| | $ | 41,740 |
|
| Capital | 1,845 |
| | 2,321 |
| | 3,768 |
| | 4,548 |
|
| GE Capital-GE eliminations | $ | (162 | ) | | $ | (323 | ) | | $ | (406 | ) | | $ | (672 | ) |
| Consolidated revenues | $ | 17,750 |
| | $ | 23,414 |
| | $ | 38,273 |
| | $ | 45,616 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | |
| 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 | | | | | |
| | | | | | | |
|
REMAINING PERFORMANCE OBLIGATION. As of June 30, 2020,March 31, 2021, the aggregate amount of the contracted revenues allocated to our unsatisfied (or partially unsatisfied) performance obligations was $227,598$226,962 million. We expect to recognize revenue as we satisfy our remaining performance obligations as follows: (1) equipment-related remaining performance obligation of $44,411$40,951 million, of which 63%62%, 83%82% and 97% is expected to be satisfied within 1, 2 and 5 years, respectively, and the remaining thereafter;respectively; and (2) services-related remaining performance obligation of $183,188$186,012 million, of which 11%15%, 43%47%, 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 $1,246increased $153 million in the first halfthree months ended March 31, 2021 primarily due to the timing of 2020.revenue recognition ahead of billing milestones on our long-term equipment contracts. Our long-term service agreements decreased primarily due to billings of $4,527$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 $791$8 million at Aviation and $22 million at Power, offset by revenues recognized of $4,670 million. The decrease in long-term service agreements at Aviation included a $536 million pre-tax charge to reflect the cumulative impacts of changes to billing and cost assumptions for certain long-term service agreements, reflecting lower engine utilization, anticipated customer fleet restructuring and contract modifications. Additional adjustments could occur in future periods and could be material for certain long-term service agreements if actual customer operating behavior differs significantly from Aviation's current estimates.Power.
|
| | | | | | | | | | | | | | | | | | |
June 30, 2020 (In millions) | Power | Aviation | Renewable Energy | Healthcare | Other | Total |
| Revenues in excess of billings | $ | 5,323 |
| $ | 4,404 |
| $ | — |
| $ | — |
| $ | — |
| $ | 9,728 |
|
| Billings in excess of revenues | (1,505 | ) | (3,910 | ) | — |
| — |
| — |
| (5,415 | ) |
| Long-term service agreements(a) | 3,818 |
| 494 |
| — |
| — |
| — |
| 4,312 |
|
| Short-term and other service agreements | 152 |
| 343 |
| 41 |
| 187 |
| 37 |
| 759 |
|
| Equipment contract revenues(b) | 2,415 |
| 76 |
| 1,249 |
| 307 |
| 155 |
| 4,202 |
|
| Total contract assets | 6,385 |
| 913 |
| 1,290 |
| 494 |
| 192 |
| 9,273 |
|
| | | | | | | |
| Deferred inventory costs | 933 |
| 475 |
| 982 |
| 339 |
| — |
| 2,730 |
|
| Nonrecurring engineering costs | 24 |
| 2,355 |
| 41 |
| 32 |
| — |
| 2,452 |
|
| Customer advances and other(c) | — |
| 1,132 |
| — |
| — |
| (32 | ) | 1,100 |
|
| Contract and other deferred assets | $ | 7,342 |
| $ | 4,875 |
| $ | 2,313 |
| $ | 865 |
| $ | 160 |
| $ | 15,555 |
|
| | | | | | | | | | | | | | | | | | | | |
| 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, 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 |
|
| | | | | | | | | | | | | | | | | | | | |
| 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 | |
| |
(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 $1,791 million and $1,712 million as of June 30, 2020 and December 31, 2019, respectively. The corresponding discount is recorded within liabilities as Deferred income and amounted to $297 million and $308 million as of June 30, 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 $862 million and $909 million as of June 30, 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 $955 million and $986 million as of June 30, 2020 and December 31, 2019, respectively. The corresponding discount is recorded within liabilities as Deferred income and amounted to $262 million and $256 million as of June 30, 2020 and December 31, 2019, respectively. |
Progress collections and deferred income decreased $604$431 million in the first half 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 early payments received at our Aviation Military equipment business of $708 million in the second quarter of 2020 as part of the U.S. Department of Defense's efforts to support vendors in its supply chain during the pandemic.
Power. Revenues recognized for contracts included in a liability position at the beginning of the year were $6,585$5,909 million and $7,498$4,137 million for the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively.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 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.
2020 2Q2021 1Q FORM 10-Q 5338
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
| | | | | | | | | | | | | | | | | | |
June 30, 2020 (In millions) | Power | Aviation | Renewable Energy | Healthcare | Other | Total |
| Progress collections on equipment contracts | $ | 5,011 |
| $ | 152 |
| $ | 1,184 |
| $ | — |
| $ | — |
| $ | 6,347 |
|
| Other progress collections | 431 |
| 5,324 |
| 3,716 |
| 343 |
| 171 |
| 9,985 |
|
| Total progress collections | 5,441 |
| 5,476 |
| 4,901 |
| 343 |
| 171 |
| 16,332 |
|
| Deferred income(a) | 48 |
| 1,569 |
| 329 |
| 1,691 |
| 121 |
| 3,759 |
|
| GE Progress collections and deferred income | $ | 5,489 |
| $ | 7,046 |
| $ | 5,230 |
| $ | 2,034 |
| $ | 292 |
| $ | 20,091 |
|
|
| | | | | | | | | | | | | | | | | | |
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 $560 million and $564 million as of June 30, 2020 and December 31, 2019, respectively. |
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) | June 30, 2020 |
| December 31, 2019 |
|
| Commercial paper | $ | 505 |
| $ | 3,008 |
|
| Current portion of long-term borrowings | 38 |
| 766 |
|
| Current portion of long-term borrowings assumed by GE | 3,679 |
| 5,473 |
|
| Other | 1,194 |
| 1,832 |
|
| Total GE short-term borrowings | $ | 5,416 |
| $ | 11,079 |
|
| | | |
| Current portion of long-term borrowings | $ | 4,000 |
| $ | 11,226 |
|
| Intercompany payable to GE | 3,237 |
| 2,104 |
|
| Other | 601 |
| 804 |
|
| Total GE Capital short-term borrowings | $ | 7,837 |
| $ | 14,134 |
|
| | | |
| Eliminations | (4,195 | ) | (3,140 | ) |
| Total short-term borrowings | $ | 9,059 |
| $ | 22,072 |
|
| | | |
| Senior notes | $ | 18,387 |
| $ | 14,762 |
|
| Senior notes assumed by GE | 20,046 |
| 23,024 |
|
| Subordinated notes assumed by GE | 1,673 |
| 2,871 |
|
| Other | 293 |
| 324 |
|
| Total GE long-term borrowings | $ | 40,398 |
| $ | 40,980 |
|
| | | |
| Senior notes | $ | 31,253 |
| $ | 25,371 |
|
| Subordinated notes | 188 |
| 178 |
|
| Intercompany payable to GE | 17,435 |
| 17,038 |
|
| Other | 584 |
| 626 |
|
| Total GE Capital long-term borrowings | $ | 49,460 |
| $ | 43,213 |
|
| | | |
| Eliminations | (17,435 | ) | (17,038 | ) |
| Total long-term borrowings | $ | 72,423 |
| $ | 67,155 |
|
| Non-recourse borrowings of consolidated securitization entities | 396 |
| 1,655 |
|
| Total borrowings | $ | 81,878 |
| $ | 90,882 |
|
At June 30, 2020,March 31, 2021, the outstanding GE Capital borrowings that had been assumed by GE Industrial as part of the GE Capital Exit Plan was $25,398$21,538 million ($3,6791,784 million short termshort-term and $21,719$19,754 million long term)long-term), for which GE Industrial has an offsetting Receivable from GE Capital of $20,672$18,361 million. The difference of $4,726 million ($442 million in short-term borrowings and $4,284$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. GE repaid a total of $7.5 billion of intercompany loans from GE Capital in the second quarter of 2020.
At June 30, 2020,March 31, 2021, total GE Industrial borrowings of $25,142$22,886 million comprised GE-issuedGE Industrial-issued borrowings of $20,416$19,709 million and intercompany loans from GE Capital to GE Industrial of $4,726$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 $32,426 $27,332 million and $34,683$28,503 million of GE Capital debt at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Non-recourse borrowings of consolidated securitization entities included an insignificant amount and $1,569 million of current portion of long-term borrowings at June 30, 2020 and December 31, 2019, respectively. See Notes 4 and 18 for further information.
In the second quarter of 2020, GE issued a total of $7,500 million in aggregate principal amount of senior unsecured debt, comprising $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 $3,750 million of 4.350% Notes due 2050, and used these proceeds in addition to a portion of the proceeds from the BioPharma sale to repay a total of $7,500 million of intercompany loans to GE Capital and 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 cash consideration paid for these purchases was $4,282 million and the total carrying amount of the purchased notes was $4,228 million, resulting in a loss of $63 million (including $9 million of fees and other costs associated with the tender) which was recorded in Interest and other financial charges in the GE Statement of Earnings (Loss). In addition to the purchase price, GE paid any accrued and unpaid interest on the purchased notes through the date of purchase.
In the second quarter of 2020, GE Capital issued a total of $6,000 million in aggregate principal amount of senior unsecured debt with maturities ranging from 2025 to 2032, and used these proceeds in addition to the proceeds received from repayments of intercompany loans from GE to complete tender offers to purchase a total of $9,787 million in aggregate principal amount of certain senior unsecured debt. The total cash consideration paid for these purchases was $9,950 million and the total carrying amount of the purchased notes was $9,827 million, resulting in a total loss of $143 million (including $20 million of fees and other costs associated with the tender) which was recorded in Interest and other financial charges in the GE Capital Statement of Earnings (Loss). In addition to the purchase price, GE Capital paid any accrued and unpaid interest on the purchased notes through the date of purchase.
See Note 1719 for further information about borrowings and associated interest rate swaps.
NOTE 12.13. INSURANCE LIABILITIES AND ANNUITY BENEFITS. 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:
| | June 30, 2020 (In millions) | Long-term care insurance contracts | Structured settlement annuities & life insurance contracts | Other
contracts | Other adjustments(a) | Total | |
| March 31, 2021 | | March 31, 2021 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total |
| Future policy benefit reserves | $ | 16,794 |
| $ | 9,385 |
| $ | 179 |
| $ | 6,873 |
| $ | 33,231 |
| Future policy benefit reserves | $ | 16,997 | | $ | 9,105 | | $ | 183 | | $ | 5,580 | | $ | 31,864 | |
| Claim reserves | 4,330 |
| 282 |
| 1,087 |
| — |
| 5,699 |
| Claim reserves | 4,397 | | 306 | | 1,062 | | — | | 5,765 | |
| Investment contracts | — |
| 1,085 |
| 1,044 |
| — |
| 2,129 |
| Investment contracts | 0 | | 1,018 | | 1,003 | | — | | 2,021 | |
| Unearned premiums and other | 27 |
| 187 |
| 143 |
| — |
| 357 |
| Unearned premiums and other | 16 | | 191 | | 147 | | — | | 353 | |
| 21,151 |
| 10,939 |
| 2,453 |
| 6,873 |
| 41,416 |
| | 21,409 | | 10,620 | | 2,395 | | 5,580 | | 40,004 | |
| Eliminations | — |
| — |
| (462 | ) | — |
| (462 | ) | Eliminations | — | | — | | (442) | | — | | (442) | |
| Total | $ | 21,151 |
| $ | 10,939 |
| $ | 1,991 |
| $ | 6,873 |
| $ | 40,954 |
| Total | $ | 21,409 | | $ | 10,620 | | $ | 1,953 | | $ | 5,580 | | $ | 39,562 | |
|
| | | | | | | | | | | | | | | |
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 |
|
| | | | | | | | | | | | | | | | | |
| December 31, 2020 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total |
| Future policy benefit reserves | $ | 16,934 | | $ | 9,207 | | $ | 181 | | $ | 8,160 | | $ | 34,482 | |
| Claim reserves | 4,393 | | 275 | | 1,068 | | — | | 5,736 | |
| Investment contracts | 0 | | 1,034 | | 1,016 | | — | | 2,049 | |
| Unearned premiums and other | 19 | | 189 | | 89 | | — | | 298 | |
| 21,346 | | 10,705 | | 2,354 | | 8,160 | | 42,565 | |
| Eliminations | — | | — | | (374) | | — | | (374) | |
| Total | $ | 21,346 | | $ | 10,705 | | $ | 1,980 | | $ | 8,160 | | $ | 42,191 | |
(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 increasedecrease in insurance liabilities and annuity benefitsOther adjustments of $1,128$2,580 million from December 31, 2019 to June 30, 2020, is primarily due to an adjustmenta result of $1,218 million resulting from an increasethe 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 $945$454 million and $981$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 sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively. Paid claims were $888$424 million and $824$405 million in the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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 $1,430$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 $2,465$2,592 million and $2,416$2,552 million at June 30, 2020March 31, 2021 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.
NOTE 13.14. POSTRETIREMENT BENEFIT 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 | Three months ended June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Service cost for benefits earned | $ | 192 |
| $ | 160 |
| | $ | 345 |
| $ | 318 |
|
| Prior service cost amortization | 37 |
| 34 |
| | 74 |
| 67 |
|
| Expected return on plan assets | (748 | ) | (862 | ) | | (1,496 | ) | (1,725 | ) |
| Interest cost on benefit obligations | 589 |
| 723 |
| | 1,176 |
| 1,449 |
|
| Net actuarial loss amortization | 851 |
| 770 |
| | 1,699 |
| 1,533 |
|
| Curtailment/settlement loss (gain) | — |
| — |
| | — |
| 51 |
|
| Benefit plans cost | $ | 921 |
| $ | 825 |
| | $ | 1,798 |
| $ | 1,693 |
|
Principal retiree benefit plans income was $22$40 million and $30$32 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, and $54 million and $91 million for the six months ended June 30, 2020 and 2019, respectively, which includes a curtailment gain of $33 million in 2019 resulting from the Transportation transaction.respectively. Other pension plans was $24 million income and $7 million cost were immaterial for the three months ended June 30,March 31, 2021 and 2020, and 2019, and for the six months ended June 30, 2020 and 2019.respectively.
We also have a defined contribution plan for eligible U.S. employees that provides discretionaryemployer contributions. Defined contribution plan costs were $87$108 million and $90$95 million for the three months ended June 30,March 31, 2021 and 2020, respectively.
NOTE 15. CURRENT AND ALL OTHER LIABILITIES. All other current liabilities and 2019,All other liabilities primarily includes liabilities for customer sales allowances, equipment project and $182commercial 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 and $191 million forin the sixthree months ended June 30, 2020March 31, 2021, primarily due to a decrease in Alstom legacy legal matters of $199 million (see Note 21) and 2019, respectively.a decrease in interest accruals on assumed debt of $132 million.
NOTE 14.16. INCOME TAXES. Our consolidated effective income tax rate was (3.3)%59.7% and (5.0)%0.9% during the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively. The negative ratesrate for 20202021 is higher than the U.S. statutory rate primarily due to the cost of global activities, including the base erosion and 2019 reflectglobal intangible minimum tax benefits on pre-tax income.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. This was partially offset by the largely non-deductible goodwill impairment charges associated with our Additive business within our Aviation segment and our GECAS business within our Capital segment. The rate for 2019 benefited from favorable audit resolutions, U.S. business credits and the lower-taxed disposition of our Digital ServiceMax business. This was partially offset by the cost of global activities, including the base erosion and global intangible low tax income provisions and from a largely non-deductible goodwill impairment charge associated with our Grid Solutions equipment and services business within our Renewable Energy segment.
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.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 15.17. SHAREHOLDERS’ EQUITY
|
| | | | | | | | | | | | | |
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | Three months ended June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Beginning balance | $ | 20 |
| $ | (16 | ) | | $ | 61 |
| $ | (39 | ) |
| AOCI before reclasses – net of taxes of $8, $(23), $7 and $15(a) | 34 |
| 94 |
| | 41 |
| 121 |
|
| Reclasses from AOCI – net of taxes of $(2), $(5), $(14) and $(6) | (7 | ) | (18 | ) | | (55 | ) | (22 | ) |
| AOCI | 27 |
| 76 |
| | (14 | ) | 99 |
|
| Less AOCI attributable to noncontrolling interests | — |
| — |
| | — |
| 1 |
|
| Investment securities AOCI ending balance | $ | 47 |
| $ | 60 |
| | $ | 47 |
| $ | 60 |
|
| | | | | | |
| Beginning balance | $ | (4,685 | ) | $ | (5,810 | ) | | $ | (4,818 | ) | $ | (6,134 | ) |
| AOCI before reclasses – net of taxes of $25, $13, $20 and $39 | (58 | ) | (308 | ) | | (613 | ) | (1 | ) |
| Reclasses from AOCI – net of taxes of $0, $0, $0 and $(4)(b) | 1 |
| 167 |
| | 691 |
| 284 |
|
| AOCI | (57 | ) | (141 | ) | | 78 |
| 283 |
|
| Less AOCI attributable to noncontrolling interests | 1 |
| (77 | ) | | 3 |
| 22 |
|
| Currency translation adjustments AOCI ending balance | $ | (4,743 | ) | $ | (5,874 | ) | | $ | (4,743 | ) | $ | (5,874 | ) |
| | | | | | |
| Beginning balance | $ | (163 | ) | $ | 49 |
| | $ | 49 |
| $ | 13 |
|
| AOCI before reclasses – net of taxes of $(24), $(8), $(69) and $3 | 40 |
| (50 | ) | | (222 | ) | (16 | ) |
| Reclasses from AOCI – net of taxes of $(1), $4, $8 and $1(b) | 13 |
| 25 |
| | 64 |
| 28 |
|
| AOCI | 53 |
| (25 | ) | | (158 | ) | 12 |
|
| Less AOCI attributable to noncontrolling interests | — |
| (1 | ) | | — |
| 1 |
|
| Cash flow hedges AOCI ending balance | $ | (109 | ) | $ | 26 |
| | $ | (109 | ) | $ | 26 |
|
| | | | | | |
| Beginning balance | $ | (5,991 | ) | $ | (7,708 | ) | | $ | (7,024 | ) | $ | (8,254 | ) |
| AOCI before reclasses – net of taxes of $(2), $13, $28 and $(35) | (74 | ) | 7 |
| | 145 |
| (111 | ) |
| Reclasses from AOCI – net of taxes of $187, $164, $426 and $347(b) | 678 |
| 632 |
| | 1,495 |
| 1,294 |
|
| AOCI | 604 |
| 639 |
| | 1,640 |
| 1,183 |
|
| Less AOCI attributable to noncontrolling interests | — |
| (6 | ) | | 3 |
| (8 | ) |
| Benefit plans AOCI ending balance | $ | (5,387 | ) | $ | (7,063 | ) | | $ | (5,387 | ) | $ | (7,063 | ) |
| | | | | | |
| AOCI at June 30 | $ | (10,194 | ) | $ | (12,852 | ) | | $ | (10,194 | ) | $ | (12,852 | ) |
| | | | | | | | | | | |
| 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 $(2,229)$2,038 million and $(1,054)$1,267 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively and $(962) million and $(2,011) million for the six months ended June 30, 2020 and 2019, 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) The total reclassification from AOCI included $836 million, including currency translation of $688 million, net of taxes, for the sixthree months ended June 30,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 June 30, 2020March 31, 2021 was $5,826$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 $1,579 million and $1,545 million at June 30, 2020 and December 31, 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$474 $451 million and $439$487 million as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 16.18. EARNINGS PER SHARE INFORMATION
|
| | | | | | | | | | | | | |
| Three months ended June 30 | 2020 | | 2019 |
| (Earnings for per-share calculation, in millions; per-share amounts in dollars) | Diluted |
| Basic |
| | Diluted |
| Basic |
|
| Earnings from continuing operations | $ | (1,995 | ) | $ | (1,995 | ) | | $ | (114 | ) | $ | (114 | ) |
| Preferred stock dividends | (192 | ) | (192 | ) | | (188 | ) | (188 | ) |
| Accretion of redeemable noncontrolling interests, net of tax(a) | (135 | ) | (135 | ) | | — |
| — |
|
| Earnings from continuing operations attributable to common shareholders | (2,322 | ) | (2,322 | ) | | (302 | ) | (302 | ) |
| Earnings (loss) from discontinued operations | 7 |
| 7 |
| | 241 |
| 241 |
|
| Net earnings (loss) attributable to GE common shareholders | $ | (2,314 | ) | $ | (2,314 | ) | | $ | (61 | ) | $ | (61 | ) |
| | | | | | |
| Shares of GE common stock outstanding | 8,750 |
| 8,750 |
| | 8,724 |
| 8,724 |
|
| Employee compensation-related shares (including stock options) | — |
| — |
| | — |
| — |
|
| Total average equivalent shares | 8,750 |
| 8,750 |
| | 8,724 |
| 8,724 |
|
| | | | | | |
| Earnings per share from continuing operations | $ | (0.27 | ) | $ | (0.27 | ) | | $ | (0.03 | ) | $ | (0.03 | ) |
| Earnings (loss) per share from discontinued operations | — |
| — |
| | 0.03 |
| 0.03 |
|
| Net earnings (loss) per share | (0.26 | ) | (0.26 | ) | | (0.01 | ) | (0.01 | ) |
| | | | | | |
| Potentially dilutive securities(b) | 459 |
| | | 486 |
| |
| | | | | | | |
| Six months ended June 30 | 2020 | | 2019 | |
| (Earnings for per-share calculation; in millions; per-share amounts in dollars) | Diluted |
| Basic |
| | Diluted |
| Basic |
| |
| Three months ended March 31 | | Three months ended March 31 | 2021 | | 2020 |
| (Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | | (Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | Diluted | Basic | | Diluted | Basic |
| Earnings from continuing operations | $ | 4,370 |
| $ | 4,370 |
| | $ | 828 |
| $ | 843 |
| Earnings from continuing operations | $ | 90 | | $ | 92 | | | $ | 6,202 | | $ | 6,202 | |
| Preferred stock dividends | (235 | ) | (235 | ) | | (228 | ) | (228 | ) | Preferred stock dividends | (72) | | (72) | | | (43) | | (43) | |
| Accretion of redeemable noncontrolling interests, net of tax(a) | $ | (135 | ) | $ | (135 | ) | | — |
| — |
| Accretion of redeemable noncontrolling interests, net of tax(a) | 2 | | 2 | | | 0 | | 0 | |
| Earnings from continuing operations attributable to common shareholders | $ | 4,000 |
| $ | 4,000 |
| | $ | 600 |
| $ | 616 |
| Earnings from continuing operations attributable to common shareholders | 20 | | 22 | | | 6,158 | | 6,158 | |
| Earnings (loss) from discontinued operations | (168 | ) | (168 | ) | | 2,845 |
| 2,861 |
| Earnings (loss) from discontinued operations | (2,897) | | (2,894) | | | (19) | | (19) | |
| Net earnings attributable to GE common shareholders | $ | 3,832 |
| $ | 3,832 |
| | $ | 3,461 |
| $ | 3,476 |
| |
| Net earnings (loss) attributable to GE common shareholders | | Net earnings (loss) attributable to GE common shareholders | (2,874) | | (2,872) | | | 6,140 | | 6,140 | |
| | | | | |
| Shares of GE common stock outstanding | 8,746 |
| 8,746 |
| | 8,716 |
| 8,716 |
| Shares of GE common stock outstanding | 8,772 | | 8,772 | | | 8,742 | | 8,742 | |
| Employee compensation-related shares (including stock options) | 6 |
| — |
| | 13 |
| — |
| Employee compensation-related shares (including stock options) | 35 | | — | | | 7 | | — | |
| Total average equivalent shares | 8,752 |
| 8,746 |
| | 8,730 |
| 8,716 |
| Total average equivalent shares | 8,807 | | 8,772 | | | 8,749 | | 8,742 | |
| | | | | |
| Earnings from continuing operations | $ | 0.46 |
| $ | 0.46 |
| | $ | 0.07 |
| $ | 0.07 |
| |
| Loss from discontinued operations | (0.02 | ) | (0.02 | ) | | 0.33 |
| 0.33 |
| |
| Net earnings | 0.44 |
| 0.44 |
| | 0.40 |
| 0.40 |
| |
| Earnings per share from continuing operations | | Earnings per share from continuing operations | $ | 0 | | $ | 0 | | | $ | 0.70 | | $ | 0.70 | |
| Earnings (loss) per share from discontinued operations | | Earnings (loss) per share from discontinued operations | (0.33) | | (0.33) | | | 0.00 | | 0.00 | |
| Net earnings (loss) per share | | Net earnings (loss) per share | (0.33) | | (0.33) | | | 0.70 | | 0.70 | |
| | | | | |
| Potentially dilutive securities(b) | 440 |
| | | 468 |
| | Potentially dilutive securities(b) | 370 | | | 422 | | |
(a) Represents accretion adjustment of redeemable noncontrolling interests in our Additive business within our Aviation segment.
(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 June 30, 2020 and 2019,March 31, 2021, as a result of excess dividends in respect to the loss from continuing operations,current period earnings, losses were not allocated to the participating securities. For the sixthree months ended June 30,March 31, 2020, and 2019, application of this treatment had an insignificant effect.
NOTE 17.19. FINANCIAL 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 | |
|
| | | | | | | | | | | | | | |
| |
| June 30, 2020 | | December 31, 2019 |
| (In millions) | Carrying
amount
(net) |
| Estimated
fair value |
| | Carrying
amount
(net) |
| Estimated
fair value |
|
| Assets | Loans and other receivables | $ | 3,668 |
| $ | 3,722 |
| | $ | 4,113 |
| $ | 4,208 |
|
| Liabilities | Borrowings (Note 11) | 81,878 |
| 83,054 |
| | 90,882 |
| 97,754 |
|
| | Investment contracts (Note 12) | 2,129 |
| 2,597 |
| | 2,191 |
| 2,588 |
|
The lower fair value in relation to carrying value for borrowings at June 30, 2020March 31, 2021 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 $863$1,178 million and $1,106$898 million of accrued interest at June 30, 2020March 31, 2021 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.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
DERIVATIVES AND HEDGING. Our policy requires that derivatives are used solely for managing risks and not for speculative purposes. Total gross notional was $89,801$91,921 million ($44,76043,768 million in GE Capital and $45,041$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 June 30, 2020March 31, 2021 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.
|
| | | | | | | | | | | | | | | | | | | |
| FAIR VALUE OF DERIVATIVES | June 30, 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 | $ | 20,790 |
| $ | 2,081 |
| $ | 9 |
| | $ | 23,918 |
| $ | 1,636 |
| $ | 11 |
|
| Currency exchange contracts | 6,457 |
| 58 |
| 194 |
| | 7,044 |
| 99 |
| 46 |
|
| Derivatives accounted for as hedges | $ | 27,247 |
| $ | 2,139 |
| $ | 203 |
| | $ | 30,961 |
| $ | 1,734 |
| $ | 57 |
|
| | | | | | | | |
| Interest rate contracts | $ | 717 |
| $ | 9 |
| $ | 7 |
| | $ | 3,185 |
| $ | 18 |
| $ | 12 |
|
| Currency exchange contracts | 60,356 |
| 750 |
| 1,018 |
| | 62,165 |
| 697 |
| 744 |
|
| Other contracts | 1,482 |
| 87 |
| 30 |
| | 1,706 |
| 123 |
| 40 |
|
| Derivatives not accounted for as hedges | $ | 62,554 |
| $ | 846 |
| $ | 1,055 |
| | $ | 67,056 |
| $ | 838 |
| $ | 796 |
|
| | | | | | | | |
| Gross derivatives | $ | 89,801 |
| $ | 2,985 |
| $ | 1,257 |
| | $ | 98,018 |
| $ | 2,572 |
| $ | 853 |
|
| | | | | | | | |
| Netting and credit adjustments | | $ | (704 | ) | $ | (710 | ) | | | $ | (546 | ) | $ | (546 | ) |
| Cash collateral adjustments | | (1,212 | ) | (149 | ) | | | (1,286 | ) | (105 | ) |
| Net derivatives recognized in statement of financial position | | $ | 1,069 |
| $ | 398 |
| | | $ | 740 |
| $ | 202 |
|
| | | | | | | | |
| Net accrued interest | | $ | 118 |
| $ | 15 |
| | | $ | 182 |
| $ | 1 |
|
| Securities held as collateral | | (720 | ) | — |
| | | (469 | ) | — |
|
| Net amount | | $ | 467 |
| $ | 413 |
| | | $ | 452 |
| $ | 203 |
|
2021 1Q FORM 10-Q 42
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
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 excludes accrued interest. Cash collateral adjustments excluded excess collateral received and posted of $104 million and $998 million at June 30, 2020, respectively, and $104 million and $603 million at December 31, 2019, respectively. Securities held as collateral excluded excess collateral received of $37 million and $27 million at June 30, 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 June 30, 2020,March 31, 2021, the cumulative amount of hedging adjustments of $6,503$3,826 million (including $2,342$2,330 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $46,255$26,926 million. At June 30, 2019,March 31, 2020, the cumulative amount of hedging adjustments of $4,221$6,527 million (including $2,568$2,348 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $58,344$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 AOCI and recorded in earnings in the period in which the hedged transaction occurs. The gain (loss) recognized in AOCI was $53$36 million and $(49)$(313) million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $(260) million and $(2) million for the six months ended June 30, 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 $118$62 million lossgain at June 30, 2020.March 31, 2021. We expect to reclassify $85$4 million of lossgain to earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. For all periods presentedthe three months ended March 31, 2021 and 2020, we recognized an immaterial amount and $18 million of loss (primarily as a result of the disposition of BioPharma), respectively, related to hedged forecasted transactions and firm commitments that did not occur by the end of the originally specified period. At June 30,March 31, 2021 and 2020, and 2019, the maximum term of derivative instruments that hedge forecasted transactions was 1514 years and 1315 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 June 30,March 31, 2021 and 2020 and 2019 was $(90)$272 million and $86 million, and for the six months ended June 30, 2020 and 2019 was $68 million and $18$158 million, respectively, predominantly from foreign currency debt. For all periods presented we recognized an immaterial amount excluded from assessment and recognized in earnings.
The carrying value of foreign currency debt designated as net investment hedges was $7,743$8,106 million and $12,421$9,145 million at June 30,March 31, 2021 and 2020, and 2019, respectively. The gain (loss)NaN amount was reclassified from AOCI into earnings was immaterial for both the three and six months ended June 30,March 31, 2021 and 2020, and 2019, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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.
The table below presents the effect of our derivative financial instruments in the consolidated Statement of
Earnings: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, 2020 | | Three months ended June 30, 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 | $ | 17,750 |
| $ | 15,083 |
| $ | 997 |
| $ | 3,079 |
| $ | 2,078 |
| | $ | 23,414 |
| $ | 17,412 |
| $ | 929 |
| $ | 3,425 |
| $ | 164 |
|
| | | | | | | | | | | | |
| Total effect of cash flow hedges | $ | 15 |
| $ | (13 | ) | $ | (12 | ) | $ | (2 | ) | $ | — |
| | $ | (15 | ) | $ | (5 | ) | $ | (9 | ) | $ | — |
| $ | — |
|
| | | | | | | | | | | | |
| Hedged items | | | $ | (122 | ) | | | | | | $ | (659 | ) | | |
| Derivatives designated as hedging instruments | | | 109 |
| | | | | | 646 |
| | |
| Total effect of fair value hedges | | | $ | (12 | ) | | | | | | $ | (14 | ) | | |
| | | | | | | | | | | | |
| Interest rate contracts | $ | (12 | ) | $ | — |
| $ | (4 | ) | $ | — |
| $ | — |
| | $ | (14 | ) | $ | — |
| $ | (14 | ) | $ | — |
| $ | — |
|
| Currency exchange contracts | (95 | ) | 16 |
| — |
| 104 |
| (32 | ) | | (433 | ) | (31 | ) | — |
| (17 | ) | (27 | ) |
| Other | — |
| — |
| — |
| 97 |
| 11 |
| | — |
| — |
| 27 |
| — |
| (12 | ) |
| Total effect of derivatives not designated as hedges | $ | (107 | ) | $ | 16 |
| $ | (4 | ) | $ | 201 |
| $ | (21 | ) | | $ | (447 | ) | $ | (31 | ) | $ | 13 |
| $ | (17 | ) | $ | (39 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended June 30, 2020 | | Six months ended June 30, 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 | $ | 38,273 |
| $ | 30,778 |
| $ | 1,791 |
| $ | 6,144 |
| $ | 8,947 |
| | $ | 45,616 |
| $ | 33,620 |
| $ | 1,993 |
| $ | 6,827 |
| $ | 1,012 |
|
| | | | | | | | | | | | |
| Total effect of cash flow hedges | $ | (6 | ) | $ | (38 | ) | $ | (23 | ) | $ | (5 | ) | $ | — |
| | $ | 5 |
| $ | (14 | ) | $ | (19 | ) | $ | (1 | ) | $ | — |
|
| | | | | | | | | | | | |
| Hedged items | | | $ | (2,601 | ) | | | | | | $ | (1,186 | ) | | |
| Derivatives designated as hedging instruments | | | 2,620 |
| | | | | | 1,161 |
| | |
| Total effect of fair value hedges | | | $ | 19 |
| | | | | | $ | (25 | ) | | |
| | | | | | | | | | | | |
| Interest rate contracts | $ | (35 | ) | $ | — |
| $ | (13 | ) | $ | — |
| $ | — |
| | $ | (18 | ) | $ | — |
| $ | (29 | ) | $ | — |
| $ | — |
|
| Currency exchange contracts | (616 | ) | 29 |
| — |
| 159 |
| (21 | ) | | (43 | ) | (22 | ) | — |
| (62 | ) | (25 | ) |
| Other | — |
| — |
| — |
| (63 | ) | (11 | ) | | — |
| — |
| 123 |
| — |
| 1 |
|
| Total effect of derivatives not designated as hedges | $ | (652 | ) | $ | 29 |
| $ | (13 | ) | $ | 95 |
| $ | (32 | ) | | $ | (62 | ) | $ | (22 | ) | $ | 94 |
| $ | (62 | ) | $ | (24 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 was $7$(16) million and 0$15 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $22 million and 0 for the six months ended June 30, 2020 and 2019, respectively. This amount is recognized primarily in Revenues in our consolidated Statement of Earnings (Loss).
COUNTERPARTY CREDIT RISK. We manage the risk that counterparties will default and not make payments to us according to the terms of our 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 $317$404 million and $368$392 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. Counterparties' exposures to our derivative liability (including accrued interest), net of collateral posted by us, was $375$186 million and $159$307 million at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 18.20. VARIABLE INTEREST ENTITIES. In addition to the 3 VIEs detailed in Note 4, in our consolidated Statement of Financial Position, we have assets of $2,621$1,712 million and $2,134$1,733 million and liabilities of $1,553$454 million and $1,233$657 million, inclusive of intercompany eliminations, at June 30, 2020,March 31, 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 June 30, 2020,March 31, 2021 can only be used to settle the liabilities of those VIEs.
Our investments in unconsolidated VIEs were $2,194$3,371 million and $1,937$3,230 million at June 30, 2020,March 31, 2021 and December 31, 2019,2020, respectively. These investments are primarily owned by GE Capital businesses $589of 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 $1,222December 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 June 30, 2020March 31, 2021 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 $27,836$26,118 million, excluding pre-delivery payments made in advance (including 292269 new aircraft with estimated delivery dates of 14%18% in 2020, 22%2021, 18% in 20212022 and 64% in 20222023 through 2026) and secondary orders with airlines for used aircraft approximating $2,292$1,146 million (including 5326 used aircraft with estimated delivery dates of 29%62% in 2020, 60%2021, 27% in 20212022 and 11% in 2022)2023) at June 30, 2020.March 31, 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 June 30, 2020, we haveMarch 31, 2021, GECAS has made $3,424$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 78 orders now remaining.
GE Capital had total investment commitments of $2,722 million at June 30, 2020. The commitments primarily comprise project financing investments in thermal and wind energy projects of $1,114 million and investments by our run-off insurance operations in investment securities and other assets of $1,581 million, included within these commitments are obligations to make additional investments in unconsolidated VIEs of $248 million and $1,298 million, respectively. See Note 18 for further information.
As of June 30, 2020, in our Aviation segment, we have committed to provide financing assistance of $2,010 million for future customer acquisitions of aircraft equipped with our engines.
GUARANTEES. Credit Support and Indemnification Agreements - Continuing Operations. For further information on credit support and indemnification agreements for continuing operations, see our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Indemnification agreements - Discontinued Operations. At March 31, 2021, we have provided specific indemnities to buyers of GE Capital's assets that, in the aggregate, represent a maximum potential claim of $597 million with related reserves of $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 $2,036$1,975 million and $2,165$2,054 million at June 30, 2020March 31, 2021 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 and in Note 19 in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020; refer to those 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.
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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 $856$659 million and $875$858 million at June 30, 2020March 31, 2021 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.
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 were 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 amongof the parties that became final in June,arbitration claim with the power plant owner for a mix of cash and GE is payingservices valued by the plant owner at approximately $47 million in the conclusion of these matters.$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 August 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 Mahar 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, twothis 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 actionsaction (the BirnbaumHouston 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 andwas stayed pending resolution of the Sheet Metal Workers Local 17 Trust Fundsmotion to dismiss the Hachem case. In April 2021, the plaintiffs filed an amended complaint.
In February 2019, a securities action (the Touchstone case) werewas filed in the U.S. District Court for the Southern District of New York naming as defendants GE and current and former GE executive officers. In April 2019, the court issued an order consolidating these two actions. In June 2019, the lead plaintiff filed an amended consolidated complaint. It alleges violations of SectionSections 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 GE's H-class turbines and goodwillinsurance reserves, GE Power’s revenue recognition practices related to GE's Power business.long term service agreements, GE’s acquisition of Alstom, and the goodwill recognized in connection with that transaction. The lawsuit seeks damages on behalf of shareholders6 institutional investors who acquiredpurchased GE common stock between December 4, 2017August 1, 2014 and December 6, 2018. In August 2019,October 30, 2018 and rescission of those purchases. This case was stayed pending resolution of the lead plaintiff filed a second amended complaint. In May 2020 the court granted GE's motion to dismiss the case, and in June 2020Hachem case. In March 2021, the plaintiffs filed an appealamended complaint.
As previously reported by Baker Hughes, in March 2019, 2 derivative lawsuits were filed in the Delaware Court of Chancery naming as defendants GE, directors of Baker Hughes (including former members of GE’s Board of Directors and current and former GE executive officers) and Baker Hughes (as nominal defendant), and the court issued an order consolidating these 2 actions (the Schippnick case). The complaint as amended in May 2019 alleges, among other things, that GE and 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 Baker Hughes director. In October 2019, the Court 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 the 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 report with the Second Circuit.Court recommending that the derivative action be terminated. In January 2021, the special committee filed a motion to terminate the action.
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 mortgage loans, with cases brought by individual borrowers seeking relief related to their foreign currency denominated mortgage loans in various courts throughout Poland. At 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 $1,986 million. We continue to observe an increase in the number of lawsuits being brought against Bank BPH and other banks in Poland, and 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 previously reported of an increasing number of lawsuits being filed, more findings of liability and more severe remedies being ordered against Polish banks (including Bank BPH) to continue in future reporting periods, although Bank BPH is unable at this time to develop a meaningful estimate of reasonably possible losses associated with active and inactive Bank BPH mortgage loans beyond the amounts 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 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 related to any of the foregoing, or other developments such as actions by regulators or other governmental authorities could have a material adverse effect on Bank BPH and the carrying value of its mortgage loan portfolio and could result in significant losses beyond the amount that we currently estimate.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. As previously reported, in 2000, GE and the Environmental Protection Agency (EPA) entered into a consent decree relating to PCB cleanup of the Housatonic River in Massachusetts. Following the EPA’s release in September 2015 of an intended final remediation decision, GE and the EPA engaged in mediation and the first 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 several other interested parties appealed to the EPA’s Environmental Appeals Board (EAB). The EAB issued its decision in January 2018, affirming parts of the 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 advocacy groups filed a joint petition to the EAB challenging portions of the revised permit, and EPA and GE are defending 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 cover future obligations associated with the 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 TRANSACTIONS.TRANSACTIONS. 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.
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| | | | | | |
| | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
|
| Combined GE and GE Capital cash from (used for) operating activities - continuing operations | $ | (2,298 | ) | $ | 211 |
|
| GE current receivables sold to GE Capital(a) | (452 | ) | 560 |
|
| GE long-term receivables sold to GE Capital(b) | 177 |
| 269 |
|
| Supply chain finance programs(c) | 1,457 |
| 473 |
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| Other reclassifications and eliminations | (202 | ) | 14 |
|
| Consolidated cash from (used for) operating activities - continuing operations | $ | (1,319 | ) | $ | 1,528 |
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| | | |
| Combined GE and GE Capital cash from (used for) investing activities - continuing operations | $ | 27,207 |
| $ | 3,495 |
|
| GE current receivables sold to GE Capital | 270 |
| (1,297 | ) |
| GE long-term receivables sold to GE Capital(b) | (177 | ) | (269 | ) |
| Supply chain finance programs(c) | (1,457 | ) | (473 | ) |
| GE Capital long-term loans to GE | (7,500 | ) | — |
|
| Capital contribution from GE to GE Capital | — |
| 1,500 |
|
| Other reclassifications and eliminations | 167 |
| (689 | ) |
| Consolidated cash from (used for) investing activities - continuing operations | $ | 18,509 |
| $ | 2,266 |
|
| | | |
| Combined GE and GE Capital cash from (used for) financing activities - continuing operations | $ | (19,717 | ) | $ | (6,004 | ) |
| GE current receivables sold to GE Capital | 183 |
| 737 |
|
| GE Capital long-term loans to GE | 7,500 |
| — |
|
| Capital contribution from GE to GE Capital | — |
| (1,500 | ) |
| Other reclassifications and eliminations | 36 |
| 674 |
|
| Consolidated cash from (used for) financing activities - continuing operations | $ | (11,999 | ) | $ | (6,092 | ) |
| |
(a) | Included the elimination of $7,494 million payments to GE for current receivables purchased and retained by GE Capital and the related reclassification to CFOA of $7,042 million due to GE Capital collections and other activity in our consolidated statement of cash flows for the six months ended June 30, 2020. Included the elimination of $7,165 million payments and the reclassification to CFOA of $7,725 million collections and other activity for the six months ended June 30, 2019. | | | | | | | | | | | | | | | | | | | | | | 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.
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(b) | Primarily included the reclassification of long-term receivables purchased and retained by GE Capital to current receivables.
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(c) | Represents the elimination of net payments from GE to GE Capital related to the funded participation in a supply chain finance program with GE Capital. The reduction of the GE liability associated with this program is 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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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.
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| | | | | | | | | | | |
| 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 | | | | |
NOTE 21. BAKER HUGHES SUMMARIZED FINANCIAL INFORMATION. (a)We account for our remaining interest in Baker Hughes (comprising 377.4 million shares and a promissory note receivable) at fair value. At June 30, 2020, the fair value of our interest in Baker Hughes was $5,910 million. Since the date of deconsolidation, we have not sold any shares of Baker Hughes and recognizedIncluded a pre-tax gain of $12,292 million ($11,145 million after-tax) on the sale of BioPharma for the three months ended March 31, 2020. See Note 2 for further information.
(b)Included a pre-tax realized and unrealized gain of $1,846$296 million ($1,552188 million after-tax) and a pre-tax unrealized loss of $3,865$5,710 million ($3,0804,631 million after-tax) related to our interest in Baker Hughes for the three and six months ended June 30,March 31, 2021 and 2020, respectively, based on a share price of $15.39. See Notes 2 and 3 for further information.respectively.
Summarized financial information of Baker Hughes is as follows.
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| | | | | | |
| | Three months ended June 30, 2020 |
| Six months ended June 30, 2020 |
|
| Revenues | $ | 4,736 |
| $ | 10,160 |
|
| Gross profit | 678 |
| 1,433 |
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| Net income (loss) | (355 | ) | (16,453 | ) |
| Net income (loss) attributable to the entity | (201 | ) | (10,411 | ) |
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 22. OTHER INCOME
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| | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Purchases and sales of business interests(a) | $ | 52 |
| $ | (39 | ) | | $ | 12,424 |
| $ | 214 |
|
| Licensing and royalty income | 31 |
| 80 |
| | 73 |
| 120 |
|
| Associated companies | 31 |
| 82 |
| | 69 |
| 121 |
|
| Net interest and investment income(b) | 1,955 |
| 23 |
| | (3,677 | ) | 160 |
|
| Other items | 48 |
| 26 |
| | 101 |
| 410 |
|
| GE | $ | 2,116 |
| $ | 172 |
| | $ | 8,990 |
| $ | 1,024 |
|
| Eliminations | (38 | ) | (8 | ) | | (43 | ) | (13 | ) |
| Total | $ | 2,078 |
| $ | 164 |
| | $ | 8,947 |
| $ | 1,012 |
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(a) | Included a pre-tax gain of $12,341 million on the sale of BioPharma for the six months ended June 30, 2020. Included a pre-tax gain of $223 million on the sale of ServiceMax for the six months ended June 30, 2019. See Note 2 for further information. |
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(b) | Included a pre-tax unrealized gain of $1,846 million and a pre-tax unrealized loss of $3,865 million for the three and six months ended June 30, 2020, respectively, related to our interest in Baker Hughes in 2020. See Note 3 for further information. |
64 2020 2Q2021 1Q FORM 10-Q
EXHIBITS
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 and our Quarterly Report on Form 10-Q for the quarter ended March 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.
EXHIBITS
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| Indenture,Transaction Agreement, dated as of March 9, 2021, by and among GE Ireland USD Holdings ULC, GE Financial Holdings ULC, GE Capital Funding, LLC, as Issuer,US Holdings, Inc., General Electric Company, as guarantor,AerCap Holdings N.V., AerCap US Aviation LLC and The Bank of New York Mellon, as trustee, dated May 18, 2020AerCap Aviation Leasing Limited (Incorporated by reference to Exhibit 4.12.1 to General Electric Company'sGE’s Current Report on Form 8-K, dated May 18, 2020March 12, 2021 (Commission file number 001-00035)). |
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| Exhibit 101 | The following materials from General Electric Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020,March 31, 2021, formatted in XBRL (eXtensible Business Reporting Language); (i) Statement of Earnings (Loss) for the three and six months ended June 30,March 31, 2021 and 2020, and 2019, (ii) Statement of Financial Position at June 30, 2020March 31, 2021 and December 31, 2019,2020, (iii) Statement of Cash Flows for the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, (iv) Consolidated Statement of Comprehensive Income (Loss) for the three and six months ended June 30,March 31, 2021 and 2020, and 2019, (v) Statement of Changes in Shareholders' Equity for the three and six months ended June 30,March 31, 2021 and 2020, and 2019, and (vi) Notes to Consolidated Financial Statements. |
| Exhibit 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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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 | | 36-6424-48 |
| Item 2. | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 3-334-23 |
| Item 3. | | Quantitative and Qualitative Disclosures About Market Risk | | 22-24, 59-6016-17, 42-44 |
| Item 4. | | Controls and Procedures | | 3423 |
Part II – OTHER INFORMATION |
| Item 1. | | Legal Proceedings | | 61-6245-47 |
| Item 1A. | | Risk Factors | | 34-3523 |
| Item 2. | | Unregistered Sales of Equity Securities and Use of Proceeds | | 3423 |
| Item 3. | | Defaults Upon Senior Securities | | Not applicable |
| Item 4. | | Mine Safety Disclosures | | Not applicable |
| Item 5. | | Other Information | | Not applicable |
| Item 6. | | Exhibits | | 6649 |
| Signatures | | 6649 |
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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July 29, 2020April 27, 2021 | | /s/ Thomas S. Timko |
| Date | | Thomas S. Timko Vice President, Chief Accounting Officer and Controller Principal Accounting Officer |
66 2020 2Q2021 1Q FORM 10-Q49
