UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20212022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 001-00035
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
| 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) 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$0.01 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 8,778,641,0001,100,664,978 shares of common stock with a par value of $0.06$0.01 per share outstanding at March 31, 2021.2022.
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 global supply chain and 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,transactions, including our plan to combinepursue spin-offs of our GE Capital Aviation Services (GECAS)Healthcare business with AerCap Holdings N.V. (AerCap);and our combined Renewable Energy, Power and Digital businesses; 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'sour 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:
•our success in executing and completing asset dispositions or other transactions, including our plan to pursue spin-offs of our Healthcare business and our combined Renewable Energy, Power and Digital businesses, and our plans to exit our equity ownership positions in Baker Hughes and AerCap, the timing of closing for such transactions, the ability to satisfy closing conditions, and the expected proceeds, consideration and benefits to GE;
•the continuing severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and virus variants and resurgences; of businesses’ and governments’ responses to the pandemic, such as continued or new government-imposed lockdowns and travel restrictions; 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, including global supply chain disruptions and price inflation, will continue to adversely impact our business operations, financial performance, results of operations, cash flows, 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 inflation, supply chain constraints, interest rates, the value of securities and other financial assets (including our equity ownership positionpositions in Baker Hughes and AerCap, and expected equity interest in the equity ownership position that we will hold in AerCapHealthcare business after completing our announced plan to combine GECAS with AerCap)its spin-off), oil, natural gas and other commodity prices and exchange rates, and the impact of such changes and volatility on our financial position and businesses;performance;
•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’sour 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 associated with our financial services operations, including in connection with GE Capital’sour 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 impacts from the ongoing conflict between Russia and Ukraine and the related sanctions and other measures, 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,business; pricing, the timing of customer investment and other pressuresfactors in the renewable energy market, levels ofmarkets; demand for air travel and other dynamics related to the COVID-19 pandemic,pandemic; conditions in key geographic marketsmarkets; and other shifts in the competitive landscape for our products and services;
•operational execution by our businesses, including the operations and execution ofsuccess in improving operational performance at our Power and Renewable Energy businesses,business, and the performance of our Aviation business;business amidst the ongoing market recovery;
•changes in law, regulation or policy that may affect our businesses, such as trade policy and tariffs, regulation and incentives related to climate change (including extension of the U.S. wind Production Tax Credit), and the effects of tax law changes;
•our decisions about investments in research and development, and 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, 2020,2021, 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,Aviation, Healthcare, Renewable Energy, and Power. Our products include commercial and military aircraft engines and systems; healthcare systems and pharmaceutical diagnostics; wind and other renewable energy generation equipment and grid solutions; and gas, steam, nuclear and other power generation equipment. We have significant global installed bases of equipment across these sectors, and services to support these products are also an important part of our business alongside new equipment sales. In November 2021 we announced a strategic plan to form three industry-leading, global, investment-grade public companies from our (i) Aviation business, (ii) Healthcare business and Healthcare,(iii) combined Renewable Energy, Power and its financial services segment, Capital.Digital businesses. This section provides an overview of GE’s business at a consolidated level. See the Segment Operations section within Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) for segmentmore details about segment-level business descriptions, and product and service offerings.offerings and competitive, regulatory and other trends, dynamics and developments. See also the Consolidated Results section within MD&A and Results of Operations and Note 2 to the consolidated financial statements for information regarding our announced and recent business portfolio actions. Results of businesses 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).See Note 1 for a discussion of the basis of presentation for ourThe consolidated financial statements of General Electric Company are prepared in conformity with U.S. generally accepted accounting principles (GAAP). Unless otherwise noted, tables are presented in U.S. dollars in millions. Certain columns and rows within tables may not add due to the use of rounded numbers. Percentages presented in this MD&A.report are calculated from the underlying numbers in millions. Discussions throughout this MD&A are based on continuing operations unless otherwise noted. The MD&A should be read in conjunction with the Financial Statements and Notes to the consolidated financial statements. 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.
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) PandemicShare Buyback Authorization. . The COVID-19 pandemic has 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 ofIn the first quarter of 2020, these factors have had2022, GE’s Board of Directors authorized up to $3 billion of common share repurchases. GE expects to consider share repurchases as one of a material adverse impactnumber of potential capital allocation alternatives on our operationsan ongoing basis, along with organic and financial performance, as well as oninorganic investments. There were no share repurchases during the operations and financial performance of many of the customers and suppliers in industries that we serve. 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 discontinued operations. For details about impacts related to our businesses and actions we have taken in response, as applicable, refer to the respective segment sections within MD&A. We also continue to evaluate market conditions as they evolve and take precautionary measures to strengthen our financial position. Wethree months ended March 31, 2022.
Steam Power. In the first quarter of 2021 with $31.8 billion2022, we signed a non-binding memorandum of consolidated cash, cash equivalentsunderstanding for GE Steam Power to sell a portion of its business to Électricité de France S.A. (EDF), which resulted in a reclassification of that business to held for sale. A non-cash, pre-tax impairment charge was taken related to the remaining business intangible and restricted cash,fixed assets of approximately $0.8 billion. This charge was recorded in addition to our available credit lines of $20.2 billion. See the Capital Resources and Liquidity section for further information. We anticipate that ourcontinuing operations and financial performance will continueat Corporate. The sale transaction is expected to be impacted byfinalized in the COVID-19 pandemic in future periods. These impacts will ultimately depend on many factors that are not within our control, including the severity and durationfirst half of 2023, subject to completion of the pandemic; governmental, businessparties’ respective information and individuals’ actionsconsultation processes and satisfaction of certain conditions, and closing the transaction is expected to result in response to the pandemic; and the development, availability and public acceptance of effective treatments and vaccines.a significant gain.
GECASRussia and Ukraine.. 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 by2022, we recognized $0.2 billion of earnings,pre-tax charges primarily from impairments of receivables, inventory, contract assets and equity method investments directly resulting from the resultsconflict between Russia and Ukraine and sanctions primarily related to our Aviation and Power businesses. As of GECAS are now presented in discontinued operations. Given the economicsMarch 31, 2022, we have approximately $0.6 billion of GECAS accrueremaining assets, which relate 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 remainsactivity not subject to AerCap shareholder approval, regulatory approvals and other customary closing conditions.sanctions.
After completionFIRST QUARTER 2022 RESULTS. Total revenues were $17.0 billion, flat for the quarter, driven primarily by an increase at Aviation, offset by decreases at Power and Renewable Energy.
Continuing earnings (loss) per share was $(0.74). Excluding the Steam asset sale impairment, gains (losses) on equity securities, Russia and Ukraine charges, earnings from our run-off Insurance business, separation costs and non-operating benefit costs, Adjusted earnings per share* was $0.24. For the three months ended March 31, 2022, profit (loss) was $(0.5) billion and profit (loss) margins were (3.1)%, down $0.8 billion, primarily due to the Steam asset sale impairment of $0.8 billion, a net loss on the transaction, we will electvalue of equity securities of $0.6 billion compared to prospectively measure our investmentthe prior year gain, Russia and Ukraine charges of $0.2 billion and separation costs of $0.1 billion, partially offset by a decrease in AerCap at fair value and expect to have continuing involvement with AerCap, primarily through our ownershipnon-operating benefit costs of $0.6 billion, lower interest and ongoing sales or leasesother financial charges 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$0.1 billion, higher profit on our run-off insurance operations, will be reported within Corporate. This means we will move from three-column to one-column financial statement reporting.Insurance business of $0.1 billion and higher segment profit $0.1 billion. Adjusted organic profit* increased $0.2 billion (22%), driven primarily by increases at Aviation and Power, partially offset by decreases at Renewable Energy and Healthcare.
*Non-GAAP Financial Measure
FIRST QUARTER 2021 RESULTS. Consolidated revenues were $17.1 billion, down $2.4 billionWe continue to experience inflation pressure in our supply chain, as well as delays in sourcing key materials needed for our products. This has delayed our ability to convert remaining performance obligation (RPO) to revenue and negatively impacted our profit margins. While we are taking actions to limit this pressure, we may continue to experience impacts in future periods. Also, geopolitical uncertainties with the quarter, driven by decreased GE Industrial revenues partially offset by increased GE Capital revenues. GE Industrial revenues decreased $2.5 billion (13%), driven primarily by decreases at Aviation, Healthcareongoing Russia and Power, partially offset by an increase at Renewable Energy. GE Capital revenues increased 5%.Ukraine conflict, as well as recent COVID-19 impacts in China, are introducing additional challenges.
Continuing earnings (loss) per share was $0.00. Excluding realized and unrealized gains (losses), non-operating benefit costs, restructuring and other charges and a GE Capital tax loss, Adjusted earnings per share* was $0.03.
For the three months ended March 31, 2021, GE Industrial profit was $0.4 billion and profit margins were 2.3%, down $6.2 billion, driven primarily by the nonrecurrence of the $12.3 billion gain on the sale of our BioPharma business and lower profit at Aviation, partially offset by a lower net loss on our investment in Baker Hughes of $6.0 billion, a decrease in adjusted total Corporate operating costs* of $0.2 billion, a decrease in non-operating benefit cost of $0.2 billion, and a decrease in interest and other financial charges of $0.1 billion. Adjusted GE Industrial organic profit* increased $0.1 billion, as increases at Healthcare, Renewable Energy and Power, and lower adjusted total Corporate operating costs*, were partially offset by a decrease at Aviation.
GE Industrial cash flows fromCash used for operating activities (CFOA) werewas $(0.5) billion and $(1.7)$(2.6) billion for the three months ended March 31, 2022 and 2021, and 2020, respectively. GE Industrial cashCash used for operating activities decreased primarily due to a decrease in cash used for working capital,collateral paid net of settlements on derivative contracts and an increase in all other operating activities, partially offset by an increase in cash used for All other operating activities. GE Industrial freeworking capital. Free cash flowsflows* (FCF)* were $(0.8)$(0.9) billion and $(2.2)$(3.4) billion for the three months ended March 31, 2022 and 2021, and 2020, respectively. GE Industrial FCFFCF* increased primarily due to a decrease in cash used for working capital,collateral paid net of settlements on derivative contracts and a decreasean increase in additions to property, plant and equipment and internal-use software,all other operating activities, partially offset by an increase in cash used for All other operating activities.working capital (after adjusting for the impact from eliminations related to our receivables factoring and supply chain finance programs in 2021). 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.
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| GE INDUSTRIAL ORDERS | Three months ended March 31 | | |
| 2021 | 2020 | | | |
| Equipment | $ | 8,208 | | $ | 9,211 | | | | |
| Services | 8,800 | | 10,274 | | | | |
| Total orders(a) | $ | 17,008 | | $ | 19,485 | | | | |
| Total organic orders | $ | 16,720 | | $ | 18,247 | | | | |
(a) Orders for the three months ended March 31, 2020 included $1,136 million related to BioPharma.
For the three months ended March 31, 2021, orders decreased $2.5 billion (13%) on a reported basis and decreased $1.5 billion (8%) organically primarily at Aviation, due to decreases in services orders, and at Power, due to decreases in equipment orders, partially offset by increases at Renewable Energy and Healthcare. Equipment orders were down $0.1 billion (1%) organically and services orders were down $1.4 billion (14%) organically.
BacklogRPO is unfilled customer orders for products and product services (expected life of contract sales for product services).
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| 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 | |
As of March 31, 2021, backlog decreased $3.1 billion (1%) from December 31, 2020, primarily at 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, 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.
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. In the second quarter of 2021, we expect to replace our quarterly disclosures of backlog with RPO as a key metric, one commonly used across our industries, which will simplify our reporting. Our historical experience indicates the likelihood of cancellation of orders excluded from RPO is remote. See Note 98 for further information.
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| RPO | March 31, 2022 | December 31, 2021 | |
| Equipment | $ | 45,687 | | $ | 45,065 | | |
| Services | 195,053 | | 194,755 | | |
| Total RPO | $ | 240,740 | | $ | 239,820 | | |
*Non-GAAP Financial Measure
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| 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 | |
Adjustments to reported backlog, primarily related to long-term contracts in excess of one year, of $156.4 billion asAs of March 31, 2022, RPO increased $0.9 billion from December 31, 2021, are largely driven by adjustments of $145.9 billion in ourprimarily at 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 includesfrom engines contracted under long-term service agreements even if the enginesthat have not yetnow been put into service.service and contract modifications; partially offset by decreases at Power, from the continued wind down of the Steam Power new build coal business and sales outpacing new orders in Gas Power services; at Healthcare, from the impact of contract renewal timing in services; and at Renewable Energy, primarily from sales exceeding new orders at Onshore Wind and the impact of a stronger U.S. dollar at Offshore Wind.
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| REVENUES | Three months ended March 31 | | |
| 2021 | 2020 | | | |
| Consolidated revenues | $ | 17,118 | | $ | 19,490 | | | | |
| | | | | |
| Equipment | 7,971 | | 9,097 | | | | |
| Services | 8,358 | | 9,748 | | | | |
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| GE Industrial revenues | $ | 16,329 | | $ | 18,844 | | | | |
| | | | | |
| GE Capital revenues | $ | 878 | | $ | 837 | | | | |
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| REVENUES | | | Three months ended March 31 | |
| | | | 2022 | 2021 | |
| Equipment revenues | | | | $ | 6,864 | | $ | 7,971 | | |
| Services revenues | | | | 9,408 | | 8,345 | | |
| Insurance revenues | | | | 767 | | 755 | | |
| Total revenues | | | | $ | 17,040 | | $ | 17,071 | | |
For the three months ended March 31, 20212022, Consolidatedtotal revenues were down $2.4 billion, driven by a decrease in GE Industrial revenues of $2.5 billion partially offset by an increase in GE Capital revenues.
GE Industrial flat. Equipment revenues decreased, $2.5 billion (13%),primarily at Renewable Energy, due to fewer wind turbine deliveries at Onshore Wind and lower revenue at Grid; at Power, due to decreased Gas Power equipment revenues on fewer HA shipments and Steam Power equipment on the exit of new build coal; and at Aviation, due to lower GEnx engine production rates, supply chain constraints and product transition with decreases in services and equipment. The decrease in services wasfewer engine shipments on legacy programs. Services revenues increased, primarily at Aviation, due to lowerincreased shop visit volume and higher volume of commercial spare part shipments, reflecting the continued recovery of the commercial aviation market; and decreased shop visits,at Renewable Energy, primarily due to higher services revenue at Onshore Wind from a larger installed base and more repower unit deliveries; partially offset by an increase at Power driven by Gas Power services revenues. Thea decrease in equipment was primarily at Aviation, due to fewer commercial install and spare engine shipments; at Healthcare, due to the disposition of the BioPharma business; and at Power, due to decreases in Steam Power and Gas Power; partially offset by an increase in Renewable Energy. Thea decrease in GE IndustrialGas Power services. Insurance revenues increased 2%.
Total revenues included the net effects of acquisitions of $0.1 billion, the net effects of dispositions, and the effects of $1.1 billion and an increase from foreign currency translationa stronger U.S. dollar of $0.3$0.2 billion. Excluding Insurance revenues, the net effects of acquisitions, dispositions and foreign currency, translation, GE Industrial organic revenues* decreased $1.7increased $0.1 billion (10%(1%), with a decrease in servicesequipment revenues of $1.4down $1.1 billion (14%) and equipmentservices revenues of $0.4up $1.2 billion (5%(15%). GE Industrial organicOrganic revenues* decreasedincreased at Aviation and Power,Healthcare, partially offset by an increasedecreases at Healthcare. Healthcare organic revenue* increased $0.3 billion (7%) due to increased demand for Healthcare Systems (HCS) products,Renewable Energy and a return to pre-pandemic volume in Pharmaceutical Diagnostics (PDx).
GE Capital revenues increased 5%, primarily as a result of lower marks and impairments primarily in Insurance, partially offset by lower revenue at Working Capital Solutions (WCS) due to lower volume and lower gains and project revenues at EFS.Power.
| | | EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | Three months ended March 31 | | EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | Three months ended March 31 | |
| (Per-share in dollars and diluted) | (Per-share in dollars and diluted) | 2021 | 2020 | | (Per-share in dollars and diluted) | 2022 | 2021 | |
| Continuing earnings (loss) | $ | 20 | | $ | 6,175 | | | |
| Continuing earnings per share (loss) | $ | — | | $ | 0.70 | | | |
| Continuing earnings (loss) attributable to GE common shareholders | | Continuing earnings (loss) attributable to GE common shareholders | $ | (809) | | $ | 20 | | |
| Continuing earnings (loss) per share | | Continuing earnings (loss) per share | $ | (0.74) | | $ | 0.02 | | |
For the three months ended March 31, 20212022,Consolidated continuing earnings decreased $6.2$0.8 billion primarily due to a decrease in GE Industrial profit.
GE Industrial profit decreased $6.2the Steam asset sale impairment of $0.8 billion, driven by the nonrecurrence of the $12.3 billion gain on the sale of our BioPharma business and lower profit at Aviation, partially offset by a lower net loss on our investment in Baker Hughesthe value of $6.0equity securities of $0.6 billion a decrease in adjusted total Corporate operating costs*compared to the prior year gain, Russia and Ukraine charges of $0.2 billion and separation costs of $0.1 billion, partially offset by a decrease in non-operating benefit costcosts of $0.2$0.6 billion, and a decrease inlower interest and other financial charges of $0.1 billion, higher profit on our run-off Insurance business of $0.1 billion and higher segment profit $0.1 billion. GE Industrial profitAdjusted earnings* was $0.3 billion, an increase of $0.1 billion. Profit margin was 2.3%(3.1)%, a decrease from 34.9%1.4%, primarily due to the same net decreases as described above. Adjusted GE Industrial profit* was $0.8$0.9 billion, an increase of $0.1$0.2 billion organically*, due to increases at Healthcare, Renewable EnergyAviation and Power, partially offset by a decrease at Aviation.decreases Renewable Energy and Healthcare. Adjusted GE Industrial profit margin* was 5.1%5.8%, an increase of 110 basis points organically*, primarily due to the same net increases as described above. At Aviation, the primary drivers were lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits in our service agreements. At Power, the increase was driven by growth in Gas Power services revenues and margins, and continued efforts to streamline the business. At Healthcare, the increase was primarily due to cost 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 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 lower gains and project revenues at EFS and the nonrecurrence of the tax benefit related to the BioPharma sale in the first quarter of 2020.
*Non-GAAP Financial Measure
SEGMENT OPERATIONS. Refer to our Annual Report on Form 10-K for the year ended December 31, 2020,2021, 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 | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31 | | |
| SUMMARY OF REPORTABLE SEGMENTS | | | | | | 2022 | 2021 | V | % | |
| Aviation | | | | | | $ | 5,603 | | $ | 4,992 | | 12 | | % | |
| Healthcare | | | | | | 4,363 | | 4,308 | | 1 | | % | |
| Renewable Energy | | | | | | 2,871 | | 3,248 | | (12) | | % | |
| Power | | | | | | 3,501 | | 3,921 | | (11) | | % | |
| Total segment revenues | | | | | | 16,337 | | 16,468 | | (1) | | % | |
| Corporate | | | | | | 702 | | 603 | | 16 | | % | |
| Total revenues | | | | | | $ | 17,040 | | $ | 17,071 | | — | | % | |
| | | | | | | | | | |
| Aviation | | | | | | $ | 908 | | $ | 641 | | 42 | | % | |
| Healthcare | | | | | | 538 | | 698 | | (23) | | % | |
| Renewable Energy | | | | | | (434) | | (234) | | (85) | | % | |
| Power | | | | | | 63 | | (87) | | F | | |
| Total segment profit (loss) | | | | | | 1,075 | | 1,019 | | 5 | | % | |
| Corporate(a) | | | | | | (1,328) | | 160 | | U | | |
| | | | | | | | | | |
| Interest and other financial charges | | | | | | (390) | | (485) | | 20 | | % | |
| | | | | | | | | | |
| Non-operating benefit income (cost) | | | | | | 137 | | (430) | | F | | |
| Benefit (provision) for income taxes | | | | | | (251) | | (173) | | (45) | | % | |
| Preferred stock dividends | | | | | | (52) | | (72) | | 28 | | % | |
| Earnings (loss) from continuing operations attributable to GE common shareholders | | | | | | (809) | | 20 | | U | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Earnings (loss) from discontinued operations attributable to GE common shareholders | | | | | | (286) | | (2,894) | | 90 | | % | |
| Net earnings (loss) attributable to GE common shareholders | | | | | | $ | (1,094) | | $ | (2,874) | | 62 | | % | |
(a) Includes interest and other financial charges of $16 million and $15 million and benefit for income taxes of $47 million and $31 million related to EFS within Corporate for the three months ended March 31, 2022 and 2021, respectively.
AVIATION. Aviation’s results in first quarter 2022 reflect the continued recovery of the commercial market, although the global COVID-19 pandemic continues to have an adverse effect on the global airline industry, as well as on the global industrial supply chain with disruptions in material and labor. A key underlying driver of Aviation’s commercial engine and services business is global commercial air traffic, which in turn is driven by economic activity and consumer and business propensity to travel. Since the beginning of the pandemic in the first quarter of 2020, we have seen varied levels of recovery in global markets. Aviation regularly tracks global departures, which improved 39% during the first quarter of 2022 compared to the first quarter of 2021, and now stands at approximately 75% of 2019 levels as of March 31, 2022. However, government travel restrictions, public health advisories, individuals' propensity to travel and continued cases of the virus drive varied levels of recovery regionally, due in large part to the emergence of COVID-19 virus variants. Aviation remains confident in the recovery, while actively monitoring the impact of travel restrictions, quarantine requirements, and economic and industry forecasts. We are in frequent dialogue with our airline, airframe, and maintenance, repair and overhaul customers about the outlook for commercial air travel, new aircraft production, fleet retirements, and after-market services, including shop visit and spare parts demand. Current trends are in line with our recovery forecast, and we continue to expect domestic travel routes primarily served by single-aisle aircraft to recover before long-haul, international travel routes, which are primarily served by twin-aisle aircraft. Consistent with industry projections, Aviation continues to estimate single-aisle air traffic to recover to 2019 levels in early 2023, with twin-aisle air traffic recovering in early 2024, dependent on containing the spread of the virus, effective inoculation programs and government collaboration to encourage travel, particularly around reducing quarantine requirements.
Aviation has taken several actions to respond to the current environment and is actively monitoring the pace of demand recovery to ensure the business is appropriately sized for the future. In addition, we continue to partner with our airline and leasing customers and collaborate with our airframe partners on production rates for 2022 and beyond.
As it relates to the military environment, Aviation continues to forecast strong military demand creating future growth opportunities for our Military business unit 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 2022, Aviation achieved significant testing milestones on two future military engines. Aviation met the First Engine to Test milestone for the T901-GE-900 engine, the next-generation rotorcraft engine, and initiated Phase 2 testing of the XA100 adaptive cycle engine. Additionally, as a result of lean initiatives, Aviation saw improvement from the supply chain challenges impacting the delivery of military engines experienced in the prior year, and the business continues to actively address the issues and monitor progress to recovery.
Total engineering, comprising company, customer and partner-funded and nonrecurring engineering costs, increased compared to the prior year. Aviation continues to be committed to investment in developing and maturing technologies that enable a more sustainable future of flight. In February 2022, Airbus selected CFM International, Aviation’s joint venture with Safran Aircraft Engines, to collaborate on a program to develop and test direct hydrogen combustion engine technologies with flight tests expected in the middle of this decade. Additionally, during the first quarter of 2022, Aviation selected Boeing to support flight tests of its hybrid electric propulsion system using a modified Saab 340B aircraft and CT7-9B turboprop engines.
Aviation continues to take actions to protect its ability to serve its customers now and as the global airline industry recovers. Aviation’s deep history of innovation and technology leadership, commercial engine installed base of approximately 39,400 units, with approximately 10,900 units under long-term service agreements, and military engine installed base of approximately 26,200 units represents strong long-term fundamentals. Aviation expects to emerge from the current environment well-positioned to drive long-term profitable growth and cash generation over time.
| | | | | | | | | | | | | | | | | |
| Three months ended March 31 | | |
| | | | | | | |
| Sales in units, except where noted | 2022 | 2021 | | | | | | | | | |
| Commercial Engines(a) | 343 | | 359 | | | | | | | | | | |
| LEAP Engines(b) | 239 | | 188 | | | | | | | | | | |
| Military Engines | 184 | | 96 | | | | | | | | | | |
| Spare Parts Rate(c) | 22.8 | 13.2 | | | | | | | | | |
(a) Commercial Engines now includes Business 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. |
| | | | | | | | | |
| RPO | March 31, 2022 | December 31, 2021 | |
| Equipment | $ | 11,924 | | $ | 11,139 | | |
| Services | 115,576 | | 114,133 | | |
| Total RPO | $ | 127,501 | | $ | 125,272 | | |
| | | | | | | | | | | | | | | | | | | | | |
| SEGMENT REVENUES AND PROFIT | Three months ended March 31 | | | | | |
| 2022 | | 2021 | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Commercial Engines & Services | $ | 3,853 | | | $ | 3,354 | | | | | | | | | |
| Military | 1,036 | | | 956 | | | | | | | | | |
| Systems & Other | 714 | | | 682 | | | | | | | | | |
| Total segment revenues | $ | 5,603 | | | $ | 4,992 | | | | | | | | | |
| | | | | | | | | | | |
| Equipment | $ | 1,654 | | | $ | 1,847 | | | | | | | | | |
| Services | 3,949 | | | 3,145 | | | | | | | | | |
| Total segment revenues | $ | 5,603 | | | $ | 4,992 | | | | | | | | | |
| | | | | | | | | | | |
| Segment profit | $ | 908 | | | $ | 641 | | | | | | | | | |
| Segment profit margin | 16.2 | | % | 12.8 | | % | | | | | | | |
For the three months ended March 31, 2022, segment revenues were up $0.6 billion (12%) and segment profit was up $0.3 billion (42%).
RPO as of March 31, 2022 increased $2.2 billion (2%) from December 31, 2021, primarily due to increases in services. Services increased primarily as a result of engines contracted under long-term service agreements that have now been put into service and contract modifications.
Revenues increased $0.6 billion (12%) organically*. Commercial Services revenues increased, primarily due to increased shop visit volume and higher volume of commercial spare part shipments. Commercial Engines revenues decreased, primarily driven by lower GEnx engine production rates, supply chain constraints and product transition with fewer engine shipments on legacy programs, partially offset by more shipments on newer programs, including 51 more LEAP units versus the prior year. Military revenues increased, primarily due to 88 more engine shipments than the prior year, partially offset by product mix.
Profit increased $0.3 billion (39%) organically*, primarily due to increased shop visit volume and higher volume of commercial spare part shipments. These increases in profit were partially offset by lower profit on Commercial Engine shipments driven by product transition with fewer engine shipments on legacy programs and more shipments on newer programs, inflation in our supply chain and additional growth investment.
HEALTHCARE. U.S. healthcare market demand continues to be strong, however, Europe, the Middle East and Africa are still seeing the lingering effects of COVID-19, and China has seen impacts in certain regions during the first quarter of 2022. We continue to see growth in hospital spending to increase capacity and improve quality of care. Both Healthcare Systems (HCS) and Pharmaceutical Diagnostics (PDx) demand has recovered to at or above pre-pandemic levels. We are experiencing substantial inflation and delays in sourcing key materials needed for our products, such as electronics and resins, delaying our ability to convert RPO to revenue. We have proactively managed sourcing and logistics, material and design costs to partially mitigate supply chain impacts. Delivering for our customers remains a top priority. In response to the inflation pressures we are experiencing, we have continued to manage price and value for our customers, as well as discretionary and structural cost in our business, in order to invest in research and development to drive long-term growth.
*Non-GAAP Financial Measure
We continue to grow and invest in precision health, with a focus 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. We announced a partnership with AliveCor to deliver medical-grade electrocardiograms (ECGs) taken by patients on an AliveCor device outside of the hospital setting, which will connect directly into GE Healthcare’s MUSE Cardiac Management System so physicians can view and evaluate clinical readings remotely. We received U.S. Food and Drug Administration pre-market approval for our End-tidal (Et) Control software for general anesthesia delivery on the Aisys CS2 Anesthesia Delivery System. The Et Control software improves anesthesia delivery accuracy and simplifies workflows while reducing drug waste, lowering the cost of care and greenhouse gas emissions. We remain committed to innovate and invest to create more integrated, efficient, and personalized precision healthcare.
| | | | | | | | | |
| RPO | March 31, 2022 | December 31, 2021 | |
| Equipment | $ | 4,282 | | $ | 4,232 | | |
| Services | 10,118 | | 10,375 | | |
| Total RPO | $ | 14,399 | | $ | 14,606 | | |
| | | | | | | | | | | | | | | | | | | | | |
| SEGMENT REVENUES AND PROFIT | Three months ended March 31 | | | | |
| 2022 | | 2021 | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Healthcare Systems | $ | 3,875 | | | $ | 3,825 | | | | | | | | | |
| Pharmaceutical Diagnostics | 487 | | | 482 | | | | | | | | | |
| | | | | | | | | | | |
| Total segment revenues | $ | 4,363 | | | $ | 4,308 | | | | | | | | | |
| | | | | | | | | | | |
| Equipment | $ | 2,256 | | | $ | 2,227 | | | | | | | | | |
| Services | 2,107 | | | 2,081 | | | | | | | | | |
| Total segment revenues | $ | 4,363 | | | $ | 4,308 | | | | | | | | | |
| | | | | | | | | | | |
| Segment profit | $ | 538 | | | $ | 698 | | | | | | | | | |
| Segment profit margin | 12.3 | | % | 16.2 | | % | | | | | | | |
| | | | | | | | | | | |
| | |
| | |
For the three months ended March 31, 2022, segment revenues were up $0.1 billion (1%) and segment profit was down $0.2 billion (23%).
RPO as of March 31, 2022 decreased $0.2 billion (1%) from December 31, 2021, primarily due to an increase in equipment orders, more than offset by the impact of contract renewal timing in services.
Revenues increased $0.1 billion (2%) organically*. Services revenues increased, driven by a return to pre-pandemic volume in PDx and the continued growth of HCS services. Equipment revenues were flat, driven by continued supply chain constraints, COVID-19 impacts in certain China regions and impacts from the Russia and Ukraine conflict.
Profit decreased $0.1 billion (15%) organically*, driven by decreased volume for LCS and Ultrasound products, and increased material inflation and logistics cost across all product lines. We also continued to make research and development and commercial investments.
RENEWABLE ENERGY. While we continue to expect long-term growth in U.S onshore wind, the expiry of U.S. Production Tax Credits (PTC) in 2021 and U.S. policy uncertainty, together with rising inflation has resulted in project delays and deferral of customer investments. The offshore wind industry continues to expect strong global growth through the decade and our Grid business is positioned to support grid modernization needs. We have experienced significant cost inflation in materials and logistics costs across the entire business that impact price and customer demand, and our financial results are dependent on U.S. tax credit policy, the inflationary environment, execution of cost reduction initiatives and improved pricing.
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 have observed significant market demand for our 5-6 MW Cypress and 3-4 MW Sierra Onshore units and our 12-14 MW Haliade-X Offshore units. Commissioned in 2019, our Haliade-X test unit is currently operating at 14 MW. We expect to start shipping units for commercial projects in the second half of this year. Preparing for large scale production, while reducing the cost of these new product platforms and blade technologies remains a key priority. At Grid Solutions, new technology such as flexible transformers and g³ switchgears are solving for a more resilient and efficient electric grid and lower greenhouse gas emissions, respectively.
| | | | | | | | | | | | | | | | | |
| | | | | Three months ended March 31 | |
| | | | | | | |
| Onshore and Offshore sales in units | | | | | | | | | 2022 | 2021 | |
| Wind Turbines | | | | | | | | | 502 | | 778 | | |
| Wind Turbine Gigawatts | | | | | | | | | 1.7 | | 2.4 | | |
| Repower units | | | | | | | | | 151 | | — | | |
*Non-GAAP Financial Measure
| | | | | | | | | |
| RPO | March 31, 2022 | December 31, 2021 | |
| Equipment | $ | 18,728 | | $ | 18,639 | | |
| Services | 12,682 | | 12,872 | | |
| Total RPO | $ | 31,410 | | $ | 31,511 | | |
| | | | | | | | | | | | | | | | | | | | | |
| SEGMENT REVENUES AND PROFIT | Three months ended March 31 | | | | | |
| 2022 | | 2021 | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Onshore Wind | $ | 1,906 | | | $ | 2,118 | | | | | | | | | |
| Grid Solutions equipment and services | 668 | | | 795 | | | | | | | | | |
| | | | | | | | | | | |
| Hydro, Offshore Wind and Hybrid Solutions | 297 | | | 335 | | | | | | | | | |
| Total segment revenues | $ | 2,871 | | | $ | 3,248 | | | | | | | | | |
| | | | | | | | | | | |
| Equipment | $ | 2,173 | | | $ | 2,844 | | | | | | | | | |
| Services | 698 | | | 404 | | | | | | | | | |
| Total segment revenues | $ | 2,871 | | | $ | 3,248 | | | | | | | | | |
| | | | | | | | | | | |
| Segment profit (loss) | $ | (434) | | | $ | (234) | | | | | | | | | |
| Segment profit margin | (15.1) | | % | (7.2) | | % | | | | | | | |
For the three months ended March 31, 2022, segment revenues were down $0.4 billion (12%) and segment losses were up $0.2 billion (86%).
RPO as of March 31, 2022 decreased $0.1 billion from December 31, 2021 primarily from sales exceeding new orders at Onshore Wind and the impact of a stronger U.S. dollar at Offshore Wind, partially offset by new orders at Grid and Onshore Services exceeding sales. The decline in new equipment orders at Onshore Wind is primarily attributable to the U.S. market decline and increased commercial selectivity internationally.
Revenues decreased $0.3 billion (10%) organically* across all businesses, primarily from 276 fewer wind turbine deliveries at Onshore Wind and lower revenue at Grid due to increased commercial selectivity, partially offset by higher services revenue at Onshore Wind from a larger installed base and 151 more repower unit deliveries.
Segment losses increased $0.2 billion (91%) organically*, primarily from lower volume at Onshore Wind in the U.S. and Grid, lower margins at Onshore Wind and cost inflation across all businesses, partially offset by the impact of cost reduction initiatives. Onshore Wind results were adversely impacted by execution of lower margin RPO in North America and the impact of transitioning to newer product offerings internationally.
POWER. Power continues to streamline its business to better align with market demandDuring the current period, global gas generation and drive its businesses with an operational rigor and discipline that is focused on its customers’ lifecycle experience. We remain focused on our underwriting discipline and risk management to ensure we are securing deals that meet our financial hurdles and we have a high confidence to deliver for our customers.
Global electricity demand increased during the first quarter of 2021, driving increases in GE gas turbine utilization were both up mid-single-digits due to retirements and long-term service agreement billings.availability of coal and nuclear units and weather in select markets, even as the market manages through the uncertainty and disruptions from the conflict in Ukraine. Looking ahead, we anticipate the power market to continue to be impacted by overcapacity in the industry, continued 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, as well as the ongoing impacts of COVID-19. MarketAlthough market factors related to the energy transition such as greater renewable energy penetration and the adoption of climate change-related policies continue to impact long-term demand (and related financing), to differing degrees across markets globally.globally, we expect the gas market to remain stable over the next decade with gas generation continuing to grow low-single-digits. We believe gas will play a critical role in the energy transition and our view of the market has not materially changed. Our businesses are executing on their turnarounds, including the planned exit of new build coal, and we are encouraged by the growth in Gas Power Services. We remain focused on our underwriting discipline and risk management to ensure we are securing deals that meet our financial hurdles and we have high confidence to deliver for our customers.
We continue to invest in new product development, such as our HA-Turbines.HA-Turbines and Nuclear small modular reactors. Our fundamentals remain strong with approximately $78$67.8 billion in backlogRPO and a gas turbine installed base greater than 7,000 units, including approximately 1,8001,750 units under long-term service agreements.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended March 31 |
| | | | | Orders | | Sales |
| (In units) | | | | | | | 2021 | 2020 | | 2021 | 2020 |
| GE Gas Turbines | | | | | | | 18 | | 9 | | | 11 | | 7 | |
| Heavy-Duty Gas Turbines(a) | | | | | | | 10 | | 6 | | | 11 | | 5 | |
| HA-Turbines(b) | | | | | | | 2 | | 2 | | | 5 | | 4 | |
| Aeroderivatives(a) | | | | | | | 8 | | 3 | | | — | | 2 | |
| GE Gas Turbine Gigawatts(c) | | | | | | | 1.7 | | 2.2 | | | | |
(a) Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines.
(b) HA-Turbines are a subset of Heavy-Duty Gas Turbines.
(c) Gigawatts reported associated with orders in the periods presented. |
| | | | | | | | | | | | | | | | | | |
| | | | | | Three months ended March 31 | |
| | | | | | | | |
| Sales in units | | | | | | | | | | 2022 | 2021 | |
| GE Gas Turbines | | | | | | | | | | 20 | | 11 | | |
| Heavy-Duty Gas Turbines(a) | | | | | | | | | | 13 | | 11 | | |
| HA-Turbines(b) | | | | | | | | | | 2 | | 5 | | |
| Aeroderivatives(a) | | | | | | | | | | 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. | |
| | | | | | | | | | | |
| March 31, 2021 | December 31, 2020 | March 31, 2020 |
| Equipment | $ | 16,563 | | $ | 17,127 | | $ | 18,187 | |
| Services | 61,468 | | 62,448 | | 66,921 | |
| Total backlog | $ | 78,032 | | $ | 79,575 | | $ | 85,108 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | Three months ended March 31 |
| | | | | | 2021 | | 2020 | |
| Equipment | | | | | | $ | 837 | | | $ | 1,498 | | |
| Services | | | | | | 2,796 | | | 2,612 | | |
| Total orders | | | | | | $ | 3,633 | | | $ | 4,111 | | |
| | | | | | | | | |
| Gas Power | | | | | | $ | 2,829 | | | $ | 2,859 | | |
| Power Portfolio | | | | | | 1,091 | | | 1,165 | | |
| Total segment revenues | | | | | | $ | 3,921 | | | $ | 4,025 | | |
| | | | | | | | | |
| Equipment | | | | | | $ | 1,241 | | | $ | 1,506 | | |
| Services | | | | | | 2,679 | | | 2,518 | | |
| Total segment revenues | | | | | | $ | 3,921 | | | $ | 4,025 | | |
| | | | | | | | | |
| Segment profit (loss) | | | | | | $ | (87) | | | $ | (131) | | |
| Segment profit margin | | | | | | (2.2) | | % | (3.3) | | % |
For the three months ended March 31, 2021, segment orders were down $0.5 billion (12%), segment revenues were down $0.1 billion (3%) and segment profit was 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 $0.5 billion (12%) organically, primarily due to decreases in Gas Power driven by the nonrecurrence of a large turnkey order and Steam Power equipment orders.
Revenues decreased $0.2 billion (4%) organically*, primarily due to decreased Steam Power equipment and services revenues and decreases in Gas Power equipment revenues, partially offset by an increase in Gas Power services revenues.
Profit increased 35% organically* due to growth in Gas Power services revenues and margins and continued efforts to streamline the business across Gas Power and Power Portfolio, partially offset by unfavorable legacy project arbitration resolutions and Steam project execution.
RENEWABLE ENERGY. Renewable Energy includes a portfolio of businesses comprising Onshore Wind (with our separate LM Wind blades business), Grid Solutions equipment and services, Hydro, Offshore Wind and Hybrid Solutions. These businesses are uniquely positioned to lead the energy transition with products and integrated solutions by growing new renewable energy generation, lowering the cost of electricity and modernizing the grid.
We continue to observe strong 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. The Grid and Hydro businesses are executing their turnaround plans and we are expecting improved operating results in 2021.
New product introductions remain important to our onshore and offshore customers who are demonstrating the willingness to adopt the new technology of larger turbines that decrease the levelized cost of energy. We have observed significant market demand for our Onshore 5-6 MW Cypress units and Offshore Haliade-X 12-13 MW units and are preparing for large scale production in response to this market demand.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended March 31 |
| | | | | Orders | | Sales |
Onshore and Offshore (In units) | | | | | | | 2021 | 2020 | | 2021 | 2020 |
| Wind Turbines | | | | | | | 728 | | 738 | | | 778 | | 731 | |
| Wind Turbine Gigawatts | | | | | | | 2.2 | | 2.3 | | | 2.4 | | 2.1 | |
| Repower units | | | | | | | 121 | | 6 | | | — | | 219 | |
| | | | | | | | | | | |
| 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 | |
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | | | | | | | | |
| | | | Three months ended March 31 | |
| | | | | | 2021 | | 2020 | |
| Equipment | | | | | | $ | 2,954 | | | $ | 2,669 | | |
| Services | | | | | | 561 | | | 399 | | |
| Total orders | | | | | | $ | 3,515 | | | $ | 3,068 | | |
| | | | | | | | | |
| Onshore Wind | | | | | | $ | 2,118 | | | $ | 2,124 | | |
| Grid Solutions equipment and services | | | | | | 795 | | | 839 | | |
| Hydro | | | | | | 165 | | | 179 | | |
| Offshore Wind and Hybrid Solutions | | | | | | 169 | | | 51 | | |
| Total segment revenues | | | | | | $ | 3,248 | | | $ | 3,194 | | |
| | | | | | | | | |
| Equipment | | | | | | $ | 2,844 | | | $ | 2,576 | | |
| Services | | | | | | 404 | | | 618 | | |
| Total segment revenues | | | | | | $ | 3,248 | | | $ | 3,194 | | |
| | | | | | | | | |
| Segment profit (loss) | | | | | | $ | (234) | | | $ | (327) | | |
| Segment profit margin | | | | | | (7.2) | | % | (10.2) | | % |
For the three months ended March 31, 2021, segment orders were up $0.4 billion (15%), segment revenues were up $0.1 billion (2%) and segment profit was up $0.1 billion (28%).
Backlog as of March 31, 2021 decreased $0.6 billion (2%) from December 31, 2020 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 Hydro. These increases were partially offset by sales exceeding new orders at Grid, primarily as a result of increased commercial selectivity in certain product lines.
Orders increased $0.4 billion (13%) organically, primarily due to the 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 deliveries at Onshore Wind and lower revenue at Grid.
Profit increased $0.1 billion (31%) organically*, primarily from improvement in Onshore Wind product cost, the favorable impact of cost reduction measures, primarily at Grid and Hydro, and improved project execution, partially offset by lower margins on new product introductions at Onshore Wind and higher restructuring costs.
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. Since the beginning of the pandemic in the first quarter of 2020, we have seen varied levels of recovery in global markets. Government travel restrictions, public health advisories, individuals' propensity to travel and continued 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 closely monitoring government actions and economic and 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, continue to materially impact Aviation’s business operations and financial performance. More broadly, we are in frequent dialogue with our airline and airframe customers about the outlook for commercial air travel, new aircraft production, fleet retirements, and after-market services, including shop visit and spare part demand. Given current trends, we expect domestic travel routes primarily served by narrowbody aircraft to recover before long-haul, international travel routes which are primarily served by widebody aircraft. Consistent with industry projections, Aviation continues to estimate the duration of the market recovery to be prolonged over multiple years dependent on containing the spread of the virus, effective inoculation programs and government collaboration to encourage travel, particularly around reducing quarantine requirements.
Aviation has taken several business actions to respond to the current adverse environment, including a reduction of approximately 25% of its total global workforce since year-end 2019. The business is actively monitoring the pace of demand recovery to ensure the business is appropriately sized for the future. In addition, we continue to partner with our airline and leasing customers and are aligned with our airframe partners on production rates for 2021 and beyond.
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 of company, customer and partner-funded and nonrecurring engineering costs, decreased compared to prior year in line with the changes in the commercial environment. During the first quarter of 2021, company-funded research and development spend decreased compared to the prior year. Customer and partner-funded engineering efforts, primarily in our Military business, decreased compared to 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. Aviation’s deep history of innovation and technology leadership, commercial engine installed base of approximately 37,700 units, with approximately 12,500 units under long-term service agreements, and military engine installed base of approximately 26,500 units represents strong long-term fundamentals. Aviation seeks to emerge from this crisis stronger and drive long-term cash and profitable growth over time.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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 |
| Equipment | $ | 34,333 | | $ | 34,486 | | $ | 39,154 | |
| Services | 225,032 | | 225,927 | | 234,078 | |
| Total backlog | $ | 259,365 | | $ | 260,412 | | $ | 273,232 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | Three months ended March 31 | |
| | | | | | 2021 | | 2020 | |
| Equipment | | | | | | $ | 2,004 | | | $ | 2,228 | | |
| Services | | | | | | 3,488 | | | 5,221 | | |
| Total orders | | | | | | $ | 5,491 | | | $ | 7,448 | | |
| | | | | | | | | |
| Commercial Engines & Services | | | | | | $ | 3,354 | | | $ | 5,113 | | |
| Military | | | | | | 956 | | | 960 | | |
| Systems & Other | | | | | | 682 | | | 820 | | |
| Total segment revenues | | | | | | $ | 4,992 | | | $ | 6,892 | | |
| | | | | | | | | |
| Equipment | | | | | | $ | 1,847 | | | $ | 2,364 | | |
| Services | | | | | | 3,145 | | | 4,529 | | |
| Total segment revenues | | | | | | $ | 4,992 | | | $ | 6,892 | | |
| | | | | | | | | |
| Segment profit | | | | | | $ | 641 | | | $ | 1,003 | | |
| Segment profit margin | | | | | | 12.8 | | % | 14.6 | | % |
For the three months ended March 31, 2021, segment orders were down $2.0 billion (26%), segment revenues were down $1.9 billion (28%) and segment profit was down $0.4 billion (36%).
Backlog as of March 31, 2021 decreased $1.0 billion from December 31, 2020, primarily due to approximately 400 LEAP-1B unit order cancellations. Backlog decreased $13.9 billion (5%) from March 31, 2020, primarily due to a reduction in our Commercial Services backlog and cancellations of commercial equipment orders, which included approximately 1,900 LEAP-1B unit order cancellations. The reduction to Commercial Services backlog reflects estimates of lower engine utilization, the partial cancellation of long-term service agreements related to the equipment unit order cancellations, and anticipated customer fleet restructuring and contract modifications.
Orders decreased $1.9 billion (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 decreased 8% compared to the prior year primarily driven by lower spare parts orders.
Revenues decreased $1.9 billion (27%) organically*. Equipment revenues decreased, primarily due to 171 fewer commercial install and spare engine unit shipments, including 84 fewer LEAP units versus the prior year. Commercial Services revenues decreased, primarily due to lower commercial spare part shipments and decreased shop visits. Military revenues were flat with 50 fewer engine shipments due to supply chain challenges, offset by favorable product mix.
Profit decreased $0.4 billion (37%) organically*, primarily due to lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits in our service agreements. These decreases in profit 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 customer
credit risk and declines in the estimated profitability in long-term service agreements not repeating in the current year.
*Non-GAAP Financial Measure
HEALTHCARE. We continue to see an overall recovery in hospital spend and increases in procedure volume; the expectation is that this will continue in line with the worldwide COVID-19 vaccine rollout. PDx demand has largely recovered to pre-COVID levels in line with increases in procedure volume. However, in some markets we expect capital expenditures to remain under pressure from revenue declines related to COVID-19 impacts. The pandemic is still driving additional supply chain and logistics costs, and we expect this to continue. In response to continuing near-term volatility and cost pressures, we have continued to execute on structural cost reductions and cash optimization actions, in order to prioritize spend on growth and research and 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. GE Healthcare introduced the latest member of the Venue™ point of care ultrasound family. We also introduced Vscan Air, 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 standard of interoperative imaging with precise 3D volumetric images for spine and orthopedic procedures combined with 2D imaging for greater everyday efficiency. We remain committed to innovate and invest to create more 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 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended March 31 |
| | | | | | 2021 | | 2020 | |
| Equipment | | | | | | $ | 2,445 | | | $ | 3,305 | | |
| Services | | | | | | 2,027 | | | 1,987 | | |
| Total orders(a) | | | | | | $ | 4,472 | | | $ | 5,292 | | |
| | | | | | | | | |
| Healthcare Systems (HCS) | | | | | | $ | 3,825 | | | $ | 3,448 | | |
| Pharmaceutical Diagnostics (PDx) | | | | | | 482 | | | 450 | | |
| BioPharma | | | | | | — | | | 830 | | |
| Total segment revenues | | | | | | $ | 4,308 | | | $ | 4,727 | | |
| | | | | | | | | |
| Equipment | | | | | | $ | 2,227 | | | $ | 2,699 | | |
| Services | | | | | | 2,081 | | | 2,029 | | |
| Total segment revenues | | | | | | $ | 4,308 | | | $ | 4,727 | | |
| | | | | | | | | |
| Segment profit | | | | | | $ | 698 | | | $ | 867 | | |
| Segment profit margin | | | | | | 16.2 | | % | 18.3 | | % |
| | | | | | | | | |
| (a) Orders for the three months ended March 31, 2020 included $1,136 million related to BioPharma. |
|
For the three months ended March 31, 2021, segment orders were down $0.8 billion (15%), segment revenues were down $0.4 billion (9%) and segment profit was down $0.2 billion (19%).
Backlog 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 increases in orders of longer cycle time imaging products.
Orders increased $0.2 billion (5%) organically, due to increases in Imaging and Ultrasound in HCS, and a return to pre-pandemic volume in PDx, partially offset by lower Life Care Solutions (LCS) orders in HCS as pandemic-related demand softened.
Revenues increased $0.3 billion (7%) organically*, driven by increased demand in Imaging, Ultrasound and Life Care Solutions for HCS products, and a return to pre-pandemic volume in PDx.
Profit increased $0.2 billion (30%) organically*, primarily due to cost reductions and increased demand for HCS products, and increases in PDx volume.
CAPITAL. In the first quarter of 2021, we announced an agreement to combine GECAS with AerCap, for which the Company expects to receive $23.9 billion in cash, subject to contractual closing adjustments, approximately $6.6 billion in shares representing a 46% stake in the combined 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 will be reported within Corporate.
In connection with the signing of the transaction agreement, GE Capital recorded a non-cash after-tax charge of $2.8 billion in discontinued operations in the first quarter of 2021, and the results of GECAS are now presented in discontinued operations.
In the first quarter of 2021, we announced our intention to discontinue the majority of our factoring programs, which was effective April 1, 2021.
GE Capital made capital contributions to its insurance subsidiaries of $2.0 billion in the first quarters of both 2021 and 2020, and expects to provide further capital contributions of approximately $5.5 billion through 2024.
*Non-GAAP Financial Measure
| | | | | | | | |
| 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 | |
| | |
| | |
| | | | | | | | | |
| RPO | March 31, 2022 | December 31, 2021 | |
| Equipment | $ | 11,812 | | $ | 12,169 | | |
| Services | 55,941 | | 56,569 | | |
| Total RPO | $ | 67,752 | | $ | 68,738 | | |
(a) Included cash, cash equivalents and restricted cash of $9,332 million as of 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) | |
(a) Other continuing operations primarily comprised excess interest costs from debt previously allocated to assets that have been sold, interest costs not allocated to GE Capital businesses, and preferred stock dividend costs prior to January 2021, at which time these became a GE Industrial obligation (see Note 17 for further information). Interest costs are allocated to GE Capital businesses 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 businesses. We anticipate unallocated interest costs to gradually decline as debt matures and/or is refinanced. | | | | | | | | | | | | | | | | | | | | | |
| SEGMENT REVENUES AND PROFIT | Three months ended March 31 | | | | |
| 2022 | | 2021 | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Gas Power | $ | 2,489 | | | $ | 2,829 | | | | | | | | | |
| Steam Power | 636 | | | 706 | | | | | | | | | |
| Power Conversion, Nuclear and other | 377 | | | 385 | | | | | | | | | |
| Total segment revenues | $ | 3,501 | | | $ | 3,921 | | | | | | | | | |
| | | | | | | | | | | |
| Equipment | $ | 965 | | | $ | 1,241 | | | | | | | | | |
| Services | 2,536 | | | 2,679 | | | | | | | | | |
| Total segment revenues | $ | 3,501 | | | $ | 3,921 | | | | | | | | | |
| | | | | | | | | | | |
| Segment profit (loss) | $ | 63 | | | $ | (87) | | | | | | | | | |
| Segment profit margin | 1.8 | | % | (2.2) | | % | | | | | | | |
For the three months ended March 31, 2021,2022, segment revenues increased 5%were down $0.4 billion (11%) and segment lossesprofit was up $0.1 billion.
RPO as of March 31, 2022 decreased 8%.$1.0 billion (1%) from December 31, 2021, primarily driven by the continued wind down of the Steam Power new build coal business, sales outpacing new orders in Gas Power contractual services and the impact of the Russia and Ukraine conflict at Power Conversion.
GE Capital revenues increased 5%Revenues decreased $0.2 billion (6%) organically*, primarily as a resultdue to decreased Gas Power equipment revenues on fewer HA shipments and Steam Power equipment on the exit of lower marks and impairments primarily in Insurance,new build coal, partially offset by lower revenue at WCShigher Gas Power Aeroderivative deliveries.
Profit increased $0.1 billion organically* due to lower volumeincreases in Steam Power from prior year project 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 lower gains and project revenues at EFS and the nonrecurrence of the tax benefit related to the BioPharma sale in the first quarter of 2020.legal charges that did not repeat.
CORPORATE ITEMS AND ELIMINATIONS.CORPORATE. The Corporate itemsamounts related to revenues and eliminations includedearnings include the results of disposed businesses, certain amounts not included in operating segment results because they are excluded from measurement of their operating performance for internal and external purposes and the elimination of intersegment activities. In addition, the Corporate amounts related to earnings include certain costs of our Lighting segment forprincipal retirement plans, significant, higher-cost restructuring programs, separation costs, and other costs reported in Corporate.
Corporate includes the three months ended March 31, 2020, and ourresults of the GE Digital business and our remaining GE Capital businesses including our run-off Insurance business (see Other Items - Insurance for all periods presented.further information).
| | REVENUES AND OPERATING PROFIT (COST) | | REVENUES AND OPERATING PROFIT (COST) | Three months ended March 31 | |
| | | 2022 | 2021 | |
| Corporate revenues | | Corporate revenues | $ | 220 | | $ | 227 | | |
| Insurance revenues | | Insurance revenues | 767 | | 755 | | |
| Eliminations and other | | Eliminations and other | (285) | | (379) | | |
| Total Corporate revenues | | Total Corporate revenues | $ | 702 | | $ | 603 | | |
| | Gains (losses) on purchases and sales of business interests | | Gains (losses) on purchases and sales of business interests | $ | 4 | | $ | 3 | | |
| Gains (losses) on equity securities | | Gains (losses) on equity securities | (219) | | 347 | | |
| Restructuring and other charges | | Restructuring and other charges | (35) | | (106) | | |
| Separation costs | | Separation costs | (119) | | — | | |
| Steam asset sale impairment (Notes 6 and 7) | | Steam asset sale impairment (Notes 6 and 7) | (824) | | — | | |
| Russia and Ukraine charges | | Russia and Ukraine charges | (230) | | — | | |
| | | 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) | | | |
| Insurance profit (loss) (Note 12) | | Insurance profit (loss) (Note 12) | 225 | | 138 | | |
| Adjusted total corporate operating costs (Non-GAAP) | Adjusted total corporate operating costs (Non-GAAP) | (192) | | (379) | | | Adjusted total corporate operating costs (Non-GAAP) | (129) | | (221) | | |
| Total Corporate Items and Eliminations (GAAP) | $ | 52 | | $ | 6,123 | | | |
| Less: gains (losses) and restructuring & other | 244 | | 6,502 | | | |
| Total Corporate operating profit (cost) (GAAP) | | Total Corporate operating profit (cost) (GAAP) | $ | (1,328) | | $ | 160 | | |
| Less: gains (losses), impairments, Insurance, and restructuring & other | | Less: gains (losses), impairments, Insurance, and restructuring & other | (1,199) | | 382 | | |
| Adjusted total corporate operating costs (Non-GAAP) | Adjusted total corporate operating costs (Non-GAAP) | $ | (192) | | $ | (379) | | | Adjusted total corporate operating costs (Non-GAAP) | $ | (129) | | $ | (221) | | |
| | Functions & operations | Functions & operations | $ | (159) | | $ | (272) | | | Functions & operations | $ | (78) | | $ | (188) | | |
| Environmental, health and safety (EHS) and other items | Environmental, health and safety (EHS) and other items | (55) | | (10) | | | Environmental, health and safety (EHS) and other items | (51) | | (55) | | |
| Eliminations | Eliminations | 23 | | (98) | | | Eliminations | (1) | | 23 | | |
| Adjusted total corporate operating costs (Non-GAAP) | Adjusted total corporate operating costs (Non-GAAP) | $ | (192) | | $ | (379) | | | Adjusted total corporate operating costs (Non-GAAP) | $ | (129) | | $ | (221) | | |
*Non-GAAP Financial Measure
Adjusted total corporate operating costs* excludes gains (losses) on disposalspurchases and held for sale businesses,sales of business interests, significant, higher-cost
restructuring programs, and unrealizedseparation costs, gains (losses). on equity securities, impairments and our run-off Insurance business profit. We believe that adjusting corporate costs to exclude the effects of items that are not closely associated with ongoing corporate operations provides management and investors with a meaningful measure that increases the period-to-period comparability of our ongoing corporate costs.
*Non-GAAP Financial Measure
For the three months ended March 31, 20212022, revenues remained relatively flat year over year primarilyincreased by $0.1 billion due to lower intersegment eliminations. Corporate operating profit decreased by $1.5 billion due to $0.8 billion of non-cash impairment charges related to property, plant and equipment and intangible assets as a result of reclassification of a portion of our Steam Power business to held for sale in the first quarter of 2022 (See Note 2). In addition, operating profit decreased due to a $0.6 billion change in gains (losses) on equity securities, primarily related to $1.7 billion of mark to market losses on our AerCap shares and note, partially offset by $1.2 billion of higher mark to market gains on our BKR shares. Operating profit decreased $0.2 billion from contracts and recoverability of assets in connection with the conflict between Russia and Ukraine and resulting sanctions, primarily within our Aviation and Power businesses, and $0.1 billion decrease in revenues dueof incurred expenses related to the sale of our Lighting business in June 2020,separation costs. These decreases were partially offset by $0.1 billion of lower inter-segment eliminations. Corporate operating profit decreased by $6.1 billion due to $12.6 billion of lower net gains, primarily driven by $12.3 billion of gains from the sale of our BioPharma business during the first three months of 2020, as compared to $0.2 billion of realized lossesrestructuring and other charges in 2022, primarily related to our Baker Hughes shares during the first three monthsAviation segment, and $0.1 billion of 2021. These decreases were partially offsethigher income in our run-off Insurance business, primarily driven by a $6.3 billion change in net unrealized gainslower claims and losses primarily related to mark-to-market activity on our Baker Hughes shares. Overall, restructuring and other charges remained relatively flat year over year.strong investment results.
Adjusted total corporate operating costs* decreased by $0.2$0.1 billion in the first quarter of 2021 primarily as the result of $0.1 billion of cost reductions primarily within our Corporate functions. Costs also decreased by $0.1 billion due to lower intercompany profit eliminations as the result of lower intercompany activity from our Aviation segment to our GECAS business, lower intercompany elimination activity from project financing investments associated with wind energy projectsfavorable operating results in our Renewable Energy segmentEFS and lower GE industrial inter-segment eliminations. Overall, costs associated with EHS matters remained relatively flat year over year.core reductions.
OTHER CONSOLIDATED INFORMATION
RESTRUCTURING. Restructuring actions are essential to our cost improvement 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 also recognize an obligation for severance benefits that vest or accumulate with service. We continue to closely monitor the economic environment and expect to undertake further restructuring actions to more closely align our cost structure with earnings goals. This table is inclusive of all restructuring charges in our segments.segments and at Corporate, and the charges are shown below for the business where they originated. Separately, in our reported segment results, significant, higher-cost restructuring programs are excluded from measurement of segment operating performance for internal and external purposes; those excluded amounts are reported in Restructuring and other charges for Corporate (see the Corporate section).
| | | | | | | | | | | |
| 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 | | | | |
| | | | | | | | | | | | |
| RESTRUCTURING AND OTHER CHARGES | Three months ended March 31 | | | |
| 2022 | 2021 | | | | |
| Workforce reductions | $ | 23 | | $ | 211 | | | | | |
| Plant closures & associated costs and other asset write-downs | 29 | | 26 | | | | | |
| Acquisition/disposition net charges and other | 12 | | 5 | | | | | |
| Other | (3) | | — | | | | | |
| Total restructuring and other charges | $ | 61 | | $ | 242 | | | | | |
| | | | | | |
| Cost of equipment/services | $ | 31 | | $ | 101 | | | | | |
| Selling, general and administrative expenses | 33 | | 148 | | | | | |
| Other income | (3) | | (7) | | | | | |
| Total restructuring and other charges | $ | 61 | | $ | 242 | | | | | |
| | | | | | |
| Aviation | $ | 5 | | $ | 62 | | | | | |
| Healthcare | 13 | | 39 | | | | | |
| Renewable Energy | 6 | | 76 | | | | | |
| Power | 34 | | 49 | | | | | |
| Corporate | 3 | | 16 | | | | | |
| | | | | | |
| | | | | | |
| Total restructuring and other charges | $ | 61 | | $ | 242 | | | | | |
| Restructuring and other charges cash expenditures | $ | 154 | | $ | 223 | | | | | |
Liabilities associated with restructuring activities were approximately $1.3$0.9 billion and $1.0 billion, including actuarial determined post-employment severance benefits of $0.7$0.5 billion and $0.5 billion as of both March 31, 20212022 and December 31, 2020.
| | | | | | | | | | | |
| INTEREST AND OTHER FINANCIAL CHARGES | Three months ended March 31 | | |
| 2021 | 2020 | | | |
| GE Industrial | $ | 268 | | $ | 370 | | | | |
| GE Capital | 291 | | 271 | | | | |
The decrease in GE Industrial interestSEPARATION COSTS. In November 2021, the company announced its plan to form three industry-leading, global public companies focused on the growth sectors of aviation, healthcare, and other financial chargesenergy. Over the next two years, we expect to incur separation, transition, and operational costs of approximately $2 billion and net tax costs of less than $0.5 billion, which will depend on specifics of the transaction.
We incurred pre-tax separation costs of $119 million, primarily related to business separation and employee cost and $20 million of net tax expense, including taxes associated with planned legal entity restructuring and changes to indefinite reinvestment, for the three months ended March 31, 2022.
INTEREST AND OTHER FINANCIAL CHARGES were $0.4 billion and $0.5 billion for the three months ended March 31, 2022 and 2021, respectively. The decrease was primarily due to lower interest expense on debt drivenaverage borrowings balances, partially offset by a lower intercompany loan balanceallocation of interest expense to discontinued operations. Inclusive of interest expense in discontinued operations, total interest and lower financing costs on sales of receivables.other financial charges were $0.4 billion and $0.7 billion for the three months ended March 31, 2022 and 2021, respectively. The primary components of GE interest and other financial charges are interest on short- and long-term borrowings and financing costs on sales of receivables. Total GE Industrial interest and other financial charges of $0.2 billion and $0.2 billion was recorded at Corporate and $0.1 billion and $0.1 billion was recorded by Industrial segments for the three months ended March 31, 2021 and 2020, respectively.
The increase in GE Capital interest and other financial charges for the three months ended March 31, 2021 was primarily due to higher average market interest rates and higher interest on assumed debt as a result of the repayments of intercompany loans by GE Industrial (effectively transferring that interest cost back to GE Capital), partially offset by lower average borrowings balances due to maturities and debt purchases.
*Non-GAAP Financial Measure
20212022 1Q FORM 10-Q 1311
CONSOLIDATED POSTRETIREMENT BENEFIT PLANS. Refer to Note 13 for information about our pension and retiree benefit plans.
INCOME TAXES. For the three months ended March 31, 20212022, the consolidated income tax rate was 59.7%(38.8)% compared to 0.9%59.7% for the three months ended March 31, 2020.2021. The tax rate for 2022 reflects a tax provision on a pre-tax loss.
The consolidated provision (benefit) for income taxes was $0.2 billion for the three months ended March 31, 2022 and $0.1 billion for boththe three months ended March 31, 2021. The provision increased due to a decrease in favorable audit resolutions outside the U.S. and an increase in losses in foreign jurisdictions where they are not likely to be utilized. There was not a significant benefit associated with the change from pre-tax income for the three months ended March 31, 2021 to a pre-tax loss for the three months ended March 31, 2022 as the pre-tax loss for 2022 included asset impairments and a net loss on our interest in AerCap and Baker Hughes which included losses without tax benefit. Excluding these items, there was an increase in pre-tax income from the three months ended March 31, 2021 compared to the three months ended March 31, 2022.
For the three months ended March 31, 2021,the consolidated income tax provision was $0.1 billion compared to $0.1 billion for the three months ended March 31, 2020. The provision increased slightly as there was a tax expense associated with the unrealized gain on our remaining interest in Baker Hughes in the first quarter of 2021 compared to a tax benefit associated with the unrealized loss recorded in the first quarter of 2020. This was largely offset by the nonrecurrence of the tax expense associated with the disposition of the BioPharma business in the first quarter of 2020.
The consolidated tax provision (benefit) includes $0.1 billion and $0.2 billion for GE Industrial for the three months ended March 31, 2021 and 2020, respectively.
DISCONTINUED OPERATIONS.OPERATIONS Primarilyprimarily comprise our GECASGE Capital Aviation Services (GECAS) business, discontinued in 2021, our mortgage portfolio in Poland, and other trailing assets and liabilities associated with prior dispositions. Results of operations, financial position and cash flows for these businesses are reported as discontinued operations for all periods presented and the dispositions of certain GE Capital and GE Industrial businesses.notes to the financial statements have been adjusted on a retrospective basis. See NotesNote 2 and 21 for further financial information regarding our businesses in discontinued operations.
CAPITAL RESOURCES AND LIQUIDITY
FINANCIAL POLICY. We intend to maintain a disciplined financial policy including maintaining a high cash balance. We are targetingwith a sustainable investment-grade long-term credit rating inrating. In the Single-A range, achieving a GE Industrial net debt*-to-EBITDA ratiofourth quarter of less than 2.5x over the next few years and a dividend in line with our peers over 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 operating2021, the Company based on a strong balance sheet. We intendannounced plans to continue to decrease our GE Industrial leverage over time as we navigate this periodform three industry-leading, global, investment-grade companies, each of uncertainty.
Following the closing of the GECAS transaction, the Company intends to use the transaction proceedswhich will determine their own financial policies, including capital allocation, dividend, mergers and its existing cash sources to significantly reduce debt,acquisitions and will continue to target achieving a less than 2.5x net debt-to-EBITDA ratio over the next few years.buy back decisions.
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 business needs and financial obligations under both normal and stressed conditions. We intend to maintain a high level of cash and maximize flexibility as we navigate the current environment. At both GE Industrial and GE Capital, we manage our liquidity to provide access to sufficient funding to meet our business needs and financial obligations, as well as capital allocation and growth objectives, throughout business cycles.
GE Industrial has continued to enhance its cash management operations, targeting increased linear cash flow, lower factoring, and reducing restricted cash. As a result, GE Industrial's go-forward cash needs are expected to be below $13 billion. We intend to continue holding elevated cash levels through this period of uncertainty.
At GE Capital, we continue to hold cash levels to cover at least 12 months of long-term debt maturities.
We believe that our consolidated liquidity and availability under our revolving credit facilities will be sufficient to meet our liquidity needs.
CONSOLIDATED LIQUIDITY. Following is a summaryOur primary sources of liquidity consist of cash and cash equivalents, free cash flows* from our operating businesses, cash generated from asset sales and dispositions, and short-term borrowing facilities, including revolving credit facilities. Cash generation can be subject to variability based on many factors, including seasonality, receipt of down payments on large equipment orders, timing of billings on long-term contracts, timing of Aviation-related customer allowances, market conditions and our ability to execute dispositions. Total cash, cash equivalents and restricted cash was $12.8 billion at March 31, 2021.2022, of which $6.8 billion was held in the U.S. and $6.0 billion was held outside the U.S.
| | | | | | | | | | | | | | |
| 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. With regards to our announcement to form three public companies, we expect that planning for and execution of this separation will impact indefinite reinvestment. The impact of that change will be recorded when there is a specific change in ability and intent to reinvest earnings.
GE INDUSTRIAL LIQUIDITY. GE Industrial's primary sources of liquidity consist of cash and cash equivalents, free cash flows from our operating businesses, monetization of receivables, and short-term borrowing facilities, including revolving credit facilities. Cash, generation can be subject to variability based on many factors, including seasonality, receipt of down payments on large equipment orders, timing of billings on long-term contracts, 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 to receive approximately $1.0 billion in the second quarter of 2021.
GE Industrial cash, cash equivalents and restricted cash totaled $22.4 billion at March 31, 2021, including $2.12022 included $2.3 billion of cash held in countries with currency control restrictions (including a total of $0.1 billion in Russia and Ukraine) and $0.4 billion of restricted use cash. Cash held in countries with currency controls represents amounts held in countries that may restrict the transfer of funds to the U.S. or limit our ability to transfer funds to the U.S. without incurring substantial costs. Restricted use cash represents amounts that are not available to fund operations, and primarily comprised 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 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 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 $9.4 billion at March 31, 2021, excluding $1.7was $0.8 billion of cash in our run-off Insurance business, which was classified as All other assets onin the GE Capital Statement of Financial Position.
GE Capital provided capital contributionsIn connection with the program we launched in 2020 to its insurance subsidiariesfully monetize our Baker Hughes position over approximately three years, we received proceeds of $2.0 billion, $2.0 billion, $1.9 billion and $3.5$1.3 billion in the first quartersquarter of 2021, 2020, 20192022. In addition, we expect to fully monetize our stake in AerCap over time.
We provided a total of $11.4 billion of capital contributions to our insurance subsidiaries since 2018, including $2.0 billion in the first quarter of 2022, and 2018, respectively, and expectsexpect to provide further capital contributions of approximately $5.5$3.6 billion through 2024. These contributions are subject to ongoing monitoring by the 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. GE isWe are required to maintain specified capital levels at these insurance subsidiaries under capital maintenance agreements. Going forward, we anticipate funding any capital needs for Insurance through a combination of GE Capital liquidity, GE Capital asset sales, GE Capital future earnings and capital contributions from GE Industrial.
*Non-GAAP Financial Measure
BORROWINGS. Consolidated total borrowings were $71.4$33.6 billion and $74.9$35.2 billion at March 31, 20212022 and December 31, 2020,2021, 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 | |
(a) Consolidated total borrowings of $71,358 million and $74,902 million at March 31, 2021 and December 31, 2020, respectively, are net of intercompany eliminations of $277 million and $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.
$1.6 billion. The reduction in GE Industrial adjusted borrowings at March 31, 2021 compared to December 31, 2020 was driven primarily by net repayments and maturities of other debt of $0.4$1.2 billion and $0.2$0.3 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 a decrease in the net cash deduction of $0.6 billion due to a lower cash balance.
The reduction in GE Capital adjusted borrowings at March 31, 2021 compared to December 31, 2020 was driven primarily by long-term debt maturities of $0.9 billion, lower non-recourse borrowings of $0.3 billion, lower short-term borrowings of $0.2 billion, and $1.9 billion of fair value adjustments for debt in fair value hedge relationships.
The following table provides a reconciliation of total short- and long-term borrowings as reported on the respective GE Industrial and GE Capital Statements of Financial Position to borrowings adjusted for assumed debt and intercompany loans:
| | | | | | | | | | | |
| March 31, 2021 | GE Industrial | GE Capital | Consolidated |
| Total short- and long-term borrowings | $ | 41,247 | | $ | 30,388 | | $ | 71,358 | |
| Debt assumed by GE Industrial from GE Capital(a) | (21,538) | | 21,538 | | — | |
| Intercompany loans with right of offset(a) | 3,177 | | (3,177) | | — | |
| Total intercompany payable (receivable) between GE Industrial and GE Capital | (18,361) | | 18,361 | | — | |
| Total borrowings adjusted for assumed debt and intercompany loans | $ | 22,886 | | $ | 48,749 | | $ | 71,358 | |
(a) See the Capital Resources and Liquidity section of our Annual Report on Form 10-K for the year ended December 31, 2020 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 andWe have a collective weighted average interest rate of 3.7% and term of approximately 15.2 years at March 31, 2021.
GE Industrial has in place committed revolving credit facilities totaling $20.2$14.4 billion at March 31, 2021, comprised of2022, comprising a $15.0$10.0 billion unused back-up revolving syndicated credit facility and a total of $5.2$4.4 billion of bilateral revolving credit 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.
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 Capitalour short- and long-term debt. TheOur 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 | Negative | CreditWatch Negative | Stable |
| Short term | P-2 | A-2 | F3 |
| Long term | Baa1 | BBB+ | BBB |
On March 10, 2021, Moody’s and Fitch affirmed their 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 the GECAS transaction.
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. 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, 2020.this report.
Substantially all of the Company's debt agreements in place at March 31, 20212022 do not contain material credit rating covenants. GE’sOur 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 GEwe satisfied at March 31, 2021.2022.
The Company may from time to time enter into agreements that contain minimum ratings requirements. The following table provides a summary of the maximum estimated liquidity impact in the event of further downgrades below each stated ratings level.
| | | | | | |
| Triggers Below | At March 31, 20212022 |
| BBB+/A-2/P-2 | $ | 27741 | |
| BBB/A-3/P-3 | 621247 | |
| BBB- | 1,4291,093 | |
| BB+ and below | 468494 | |
Our most significant contractual ratings requirements are related to ordinary course commercial activities, our receivables sales programs, and our derivatives portfolio.activities. 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 sterlingIndian rupee and the Indian rupee,Japanese yen, among others. The effects of foreign currency fluctuations on earnings excluding the earnings impact of the underlying hedged item, was less than $0.1 billion for both the three months ended March 31, 20212022 and 2020. This analysis excludes any offsetting effect from the forecasted future transactions that are economically hedged.
2021. See Note 19 for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.
STATEMENT OF CASH FLOWS – THREE MONTHS ENDED MARCH 31, 2021 VERSUS 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.
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 22 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 toand post retirement plans and pay others for a wide range of material, services and taxes.plans.
GE Industrial cashCash used for operating activities was $0.5 billion in 2021,2022, a decrease of $1.2$2.1 billion compared with 2020,2021, primarily due to: a decrease in financial services-related cash used for working capitalcollateral paid net of settlements on derivative contracts of $1.6 billion; partially offset by an increasebillion, which is a standard market practice to minimize derivative counterparty exposures; a decrease in cash used for All other operating activities of $0.2 billion primarily due to increasesthe nonrecurrence of settlements of factoring related liabilities of $0.4 billion, an increase in Aviation-related customer allowance accruals of $0.4$0.3 billion (compared to an insignificant decrease in 20202021) and the nonrecurrence of the settlement of an Alstom legacy legal matter of $0.2 billion in 2021,2021; partially offset by lower net cash used for employee benefit liabilities of $0.3 billion. There was an insignificant decrease in Aviation-related customer allowance accruals in 2021.
The decreaseincrease in cash used for working capital was due to: a decreaseof $0.4 billion.
The cash impacts from changes in cash used forworking capital compared to prior year were as follows: current receivables of $(1.7) billion, driven by higher volume and lower collections, partially offset by decreases in sales of receivables to third parties in 2021; inventories, including deferred inventory, of $(0.3) billion, driven by lower liquidations; current contract assets of $0.5 billion, driven by higher billings on our long-term service agreements; accounts payable and equipment project accruals of $1.0$0.4 billion, which was primarily as a result ofdriven by lower disbursements related to purchases of materials in prior 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 lower liquidations; an increase in cash from current receivables of $0.2 billion, which was primarily driven by lower volume;periods and lower net liquidations of progress collections and current deferred income of $0.2$0.7 billion, which included a partial offset due to early payments received at our Aviation Military equipment business of $0.3 billion from a foreign government. These decreases were partially offsetdriven by changes in current contract assets of $0.2 billion, primarily due to a net unfavorable change in estimated profitability at Aviation in 2020.lower liquidations.
GE Industrial cash from2022 1Q FORM 10-Q 13
Cash used for investing activities was $0.5 billion in 2021, a decrease2022, an increase of $19.5$1.3 billion compared with 2020,2021, primarily due to: the nonrecurrencelower cash received related to net settlements between our continuing operations and businesses in discontinued operations (primarily GECAS) of proceeds from the sale our BioPharma business$0.9 billion (a component of $20.3All other investing activities); an increase in purchases of insurance investment securities of $0.6 billion; partially offset by an increase in proceeds of $0.6 billion from the sales of a portion of our retained ownership interest in Baker Hughes of $0.7 billion.Hughes. Cash used for additions to property, plant and equipment and internal-use software, which are components of GE Industrial free cash flows*, was $0.4 billion in 2021, down $0.2 billion compared with 2020.both 2022 and 2021.
GE Industrial cashCash used for financing activities was $0.8$1.5 billion in 2021,2022, a decrease of $1.2$0.1 billion compared with 2020, primarily due to the non-recurrence of repayments of commercial paper of $1.1 billion in 2020.
GE CAPITAL CASH FLOWS FROM CONTINUING OPERATIONS. GE Capital cash used for operating activities was $2.5 billion in 2021, an increase of $3.0 billion compared with 2020, primarily due to: cash collateral paid, which is a standard market practice to minimize derivative counterparty exposures, and settlements paid on derivative contracts (components of All other operating activities) of $1.7 billion in 2021, compared with collateral and settlements received on derivative contracts of $1.4 billion in 2020.
GE Capital cash from investing activities was $1.2 billion in 2021, an increase of $0.5 billion compared with 2020, primarily due to: higher net collections of financing receivables of $1.1 billion partially offset by a decrease in cash related to our current receivables and supply chain finance programs with GE Industrial of $0.6 billion.
GE Capital cash used for financing activities was $1.4 billion in 2021, a decrease of $5.1 billion compared with 2020, primarily due to: lower net repaymentsdebt maturities of borrowings of $4.8 billion and$0.3billion; partially offset by lower cash settlementsreceived on derivatives hedging foreign currency debt of $0.3$0.1 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 arms-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 ProgramsSUPPLY CHAIN FINANCE PROGRAMS. GE Industrial facilitatesWe facilitate voluntary supply chain finance programs with third parties, which provide participating GE Industrial suppliers the opportunity to sell their GE Industrial receivables to third parties at the sole discretion of both the suppliers and the third parties.
At March 31, 20212022 and December 31, 2020,2021, included in GE Industrial's accounts payable was $3.0$3.3 billion and $2.9$3.4 billion, respectively, of supplier invoices that are subject to the third-party programs. Total GE Industrial supplier invoices paid through these third-party programs were $1.6$1.9 billion and $1.1$1.6 billion for the three months ended March 31, 2022 and 2021, and 2020, respectively.
Previously, GE Capital operated a supply chain finance program for suppliers to GE's Industrial businesses. The remaining GE Industrial liability associated with the funded participation in the GE Capital program was insignificant at March 31, 2021.
INTERCOMPANY TRANSACTIONS BETWEEN GE INDUSTRIAL AND GE CAPITAL. Transactions between related companies are made on arms-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 22 for further information.
GE Capital Finance Transactions. During the three months ended March 31, 2021 and 2020, GE Capital acquired from third parties three aircraft with a list price totaling $0.2 billion and five aircraft with a list price totaling $0.6 billion, respectively, that will be leased to others and are powered by engines manufactured by GE Aviation and affiliates. GE Capital made no payments to GE Aviation and affiliates related to spare engines and engine parts during the three months ended March 31, 2021 and $0.1 billion during the three months ended March 31, 2020, which included $0.1 billion to CFM International. Additionally, GE Capital had $2.0 billion and $2.1 billion of net book value of engines, originally manufactured by GE Aviation and affiliates and subsequently leased back to GE Aviation and affiliates at March 31, 2021 and December 31, 2020, respectively.
Also, during the three months ended March 31, 2021 and 2020, GE Industrial recognized equipment revenues of $0.4 billion and $0.5 billion, respectively, from customers within our Power and Renewable Energy segments in which GE Capital is an investee or is committed to be an investee in the underlying projects. At March 31, 2021, GE Capital had funded related investments of $0.1 billion.
For certain of these investments, in order to meet its underwriting criteria, GE Capital may obtain a direct guarantee from GE Industrial related to the performance of the third party. GE Industrial guarantees include direct performance or payment guarantees, return on investment guarantees and asset value guarantees. As of March 31, 2021, GE Industrial had outstanding guarantees to GE Capital on $0.8 billion of funded exposure and an insignificant amount on unfunded commitments, which included guarantees issued by industrial businesses. The recorded contingent liability for these guarantees was insignificant as of March 31, 2021 and is based on individual transaction level defaults, losses and/or returns.
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, 20202021 for a discussion of our accounting policies and critical accounting estimates.
NEW ACCOUNTING STANDARDS. The Financial Accounting Standards Board issued new guidance on accounting for long-duration insurance contracts that is effective for our interim and annual periods beginning January 1, 2023. Early adoption is permitted,2023 and if elected,applied retrospectively to January 1, 2021 (i.e., the transition date can be eitherdate). We will adopt the beginning ofnew guidance using the prior period or the earliest prior period presented.modified retrospective transition method where permitted. We are evaluating the effectexpect adoption of the new guidance on our consolidated financial statements and anticipate that its adoption will significantly change the accounting for measurements of our long-duration insurance liabilities.liabilities and materially affect our consolidated financial statements and require changes to our actuarial, accounting and financial reporting processes; systems; and internal controls. The new 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 revisedwarrant revision with any required changes recorded in earnings. UnderThese changes will result in the current accounting guidance, the discount rate is based on expected investment yields, while underelimination of premium deficiency testing and shadow adjustments. Under the new 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 liabilityour insurance liabilities and is required to be updated in each reporting period with changes recorded in Accumulated other comprehensive income. In measuringincome (AOCI). At the transition date, we expect the most substantial impact to result in a material decrease to shareholders’ equity, primarily from a reduction in AOCI attributable to remeasuring our insurance liabilities using the single A rate, which is lower than our current locked-in discount rate, partially offset by the removal of shadow adjustments. This reduction to AOCI will be significantly greater than that derived by applying the overall discount rate sensitivity disclosed in the GAAP Reserve Sensitivities within the Other Items section of our Annual Report on Form 10-K for the year ended December 31, 2021.
In conjunction with adoption of the new guidance, we are in process of converting our long-term care insurance claim cost projection models to first principles models. Based on the lower level of grouping of contracts required under the new guidance, contracts shall not be grouped together from different issue years. These changes result incombined with the eliminationmore granular nature of premium deficiency testing and shadow adjustments. While we continue to evaluatefirst principles models, the effect ofon the transition adjustment related to the new guidance onmay be greater than under our ongoing financial reporting, we anticipate that its adoption will materially affect our financial statements. current claim cost models and may result in an additional decrease in Shareholders’ equity, primarily from a reduction in Retained earnings attributable to certain long-term care insurance groupings where the projected present value of future cash flows exceeds the reserves at the transition date.
As the new guidance is only applicable to the measurements of our long-duration insurance liabilities under GAAP it willand first principles models, in isolation, may result in some initial variances in assumptions that reduce our GAAP insurance premium deficiency margin, we expect to maintain a positive GAAP margin and do not affect the accounting for ourexpect changes to statutory insurance reserves, regulatory capital requirements or the levels of capital and surplus under statutory accounting practices.projected funding.
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; GE Industrial organic revenues, and GE Industrial equipment and services organic revenues (2) profit, specifically GE Industrial organic profit and profit margin by segment; Adjusted GE Industrial profit and profit margin (excluding certain items);margin; Adjusted GE Industrial organic profit and profit margin; Adjusted earnings (loss); and Adjusted earnings (loss) per share (EPS), and (3) cash flows, specifically GE Industrial free cash flows (FCF), and (4) debt balances, specifically GE Industrial net debt.
. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow.
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| GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) |
| | Revenues | | Segment profit (loss) | | Profit margin |
| Three months ended March 31 | | 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 |
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| 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 |
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| 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 |
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| Healthcare (GAAP) | | $ | 4,308 | | | $ | 4,727 | | | (9) | % | | $ | 698 | | | $ | 867 | | | (19) | % | | 16.2 | % | | 18.3 | % | (2.1)pts |
| Less: acquisitions | | 18 | | | (21) | | | | | 8 | | | (6) | | | | | | | | |
| Less: business dispositions | | — | | | 865 | | | | | — | | | 380 | | | | | | | | |
| Less: foreign currency effect | | 120 | | | — | | | | | 48 | | | — | | | | | | | | |
| Healthcare organic (Non-GAAP) | | $ | 4,170 | | | $ | 3,884 | | | 7 | % | | $ | 643 | | | $ | 493 | | | 30 | % | | 15.4 | % | | 12.7 | % | 2.7pts |
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| We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. We also believe presenting organic revenues* and organic profit* separately for our industrial businesses provides management and investors with useful information about the trends of our industrial businesses and enables a more direct comparison to other non-financial companies. |
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| GE INDUSTRIAL ORGANIC REVENUES (NON-GAAP) | Three months ended March 31 | | |
| 2021 | 2020 | V% | | | | |
| GE Industrial revenues (GAAP) | $ | 16,329 | | $ | 18,844 | | (13) | % | | | | |
| Less: acquisitions | 18 | | (21) | | | | | | |
| Less: business dispositions(a) | — | | 1,095 | | | | | | |
| Less: foreign currency effect(b) | 288 | | — | | | | | | |
| GE Industrial organic revenues (Non-GAAP) | $ | 16,023 | | $ | 17,770 | | (10) | % | | | | |
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(a) Dispositions impact in 2020 primarily related to our BioPharma business, with revenues of $830 million.
(b) Foreign currency impact in 2021 was primarily driven by U.S. Dollar appreciation against euro, Brazilian real, and Chinese renminbi. |
| We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
*Non-GAAP Financial Measure
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| GE INDUSTRIAL EQUIPMENT AND SERVICES | Three months ended March 31 | | |
| ORGANIC REVENUES (NON-GAAP) | 2021 | 2020 | V% | | | | |
| GE Industrial equipment revenues (GAAP) | $ | 7,971 | | $ | 9,097 | | (12) | % | | | | |
| Less: acquisitions | — | | — | | | | | | |
| Less: business dispositions | — | | 948 | | | | | | |
| Less: foreign currency effect | 189 | | — | | | | | | |
| GE Industrial equipment organic revenues (Non-GAAP) | $ | 7,782 | | $ | 8,149 | | (5) | % | | | | |
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| GE Industrial services revenues (GAAP) | $ | 8,358 | | $ | 9,748 | | (14) | % | | | | |
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| Less: acquisitions | 18 | | (21) | | | | | | |
| Less: business dispositions | — | | 147 | | | | | | |
| Less: foreign currency effect | 99 | | — | | | | | | |
| GE Industrial services organic revenues (Non-GAAP) | $ | 8,241 | | $ | 9,622 | | (14) | % | | | | |
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| We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
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| ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGIN | Three months ended March 31 | | |
| (EXCLUDING CERTAIN ITEMS) (NON-GAAP) | 2021 | 2020 | V% | | | |
| GE Industrial total revenues (GAAP) | $ | 16,329 | | $ | 18,844 | | (13) | % | | | |
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| Costs | | | | | | |
| GE Industrial total costs and expenses (GAAP) | $ | 16,574 | | $ | 19,133 | | (13) | % | | | |
| Less: GE Industrial interest and other financial charges | 268 | | 370 | | | | | |
| Less: non-operating benefit costs | 433 | | 616 | | | | | |
| Less: restructuring & other(a) | 113 | | 143 | | | | | |
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| Add: noncontrolling interests | 7 | | 36 | | | | | |
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| Adjusted GE Industrial costs (Non-GAAP) | $ | 15,767 | | $ | 18,040 | | (13) | % | | | |
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| 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 | % | | | |
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| GE Industrial profit (GAAP) | $ | 378 | | $ | 6,585 | | (94) | % | | | |
| GE Industrial profit margin (GAAP) | 2.3 | % | 34.9 | % | (32.6)pts | | | |
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| Adjusted GE Industrial profit (Non-GAAP) | $ | 828 | | $ | 1,032 | | (20) | % | | | |
| Adjusted GE Industrial profit margin (Non-GAAP) | 5.1 | % | 5.5 | % | (0.4)pts | | | |
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| (a) See the Corporate Items and Eliminations section for further information. |
| We believe that adjusting industrial profit to exclude the effects of items that are not closely associated with ongoing operations provides management and investors with a meaningful measure that increases the period-to-period comparability. Gains (losses), unrealized gains (losses) and restructuring and other items are impacted by the timing and magnitude of gains associated with dispositions, and the timing and magnitude of costs associated with restructuring and other activities. |
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| 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 | % | | | | |
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| Adjusted GE Industrial profit margin (Non-GAAP) | 5.1 | % | 5.5 | % | (0.4)pts | | | | |
| Adjusted GE Industrial organic profit margin (Non-GAAP) | 4.8 | % | 3.7 | % | 1.1pts | | | | |
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| We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
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| ADJUSTED EARNINGS (LOSS) (NON-GAAP) | Three months ended March 31 | | |
| 2021 | 2020 | V% | | | | |
| Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(a) | $ | 18 | | $ | 6,158 | | (100) | % | | | | |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | 2 | | — | | | | | | |
| Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (172) | | (187) | | | | | | |
| GE Industrial earnings (loss) (Non-GAAP) | $ | 192 | | $ | 6,345 | | (97) | % | | | | |
| Non-operating benefits costs (pre-tax) (GAAP) | (433) | | (616) | | | | | | |
| Tax effect on non-operating benefit costs | 91 | | 129 | | | | | | |
| Less: non-operating benefit costs (net of tax) | (342) | | (487) | | | | | | |
| Gains (losses) and impairments for disposed or held for sale businesses (pre-tax)(b) | (159) | | 12,439 | | | | | | |
| Tax effect on gains (losses) and impairments for disposed or held for sale businesses | 33 | | (1,265) | | | | | | |
| Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | (126) | | 11,174 | | | | | | |
| Restructuring & other (pre-tax)(b) | (106) | | (143) | | | | | | |
| Tax effect on restructuring & other | 22 | | 30 | | | | | | |
| Less: restructuring & other (net of tax) | (84) | | (114) | | | | | | |
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| Unrealized gains (losses) (pre-tax)(b) | 509 | | (5,794) | | | | | | |
| Tax on unrealized gains (losses) | (152) | | 1,096 | | | | | | |
| Less: unrealized gains (losses) (net of tax) | 357 | | (4,697) | | | | | | |
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| Accretion of RNCI (pre-tax) | 2 | | — | | | | | | |
| Tax effect on accretion of RNCI | — | | — | | | | | | |
| Less: Accretion of RNCI (net of tax) | 2 | | — | | | | | | |
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| Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 384 | | $ | 469 | | (18) | % | | | | |
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| GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | $ | (172) | | $ | (187) | | 8 | % | | | | |
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| Less: GE Capital tax benefit related to BioPharma sale | — | | 88 | | | | | | |
| Less: GE Capital tax loss related to GECAS sale | (44) | | — | | | | | | |
| Adjusted GE Capital earnings (loss) (Non-GAAP) | $ | (129) | | $ | (275) | | 53 | % | | | | |
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| Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 384 | | $ | 469 | | (18) | % | | | | |
| Add: Adjusted GE Capital earnings (loss) (Non-GAAP) | (129) | | (275) | | 53 | % | | | | |
| Adjusted earnings (loss) (Non-GAAP) | $ | 256 | | $ | 194 | | 32 | % | | | | |
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| (a) See Note 18 for further information. |
| (b) See the Corporate Items and Eliminations section for further information. | | | | |
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| ADJUSTED EARNINGS (LOSS) PER SHARE (EPS) | Three months ended March 31 | | |
| (NON-GAAP) | 2021 | 2020 | V% | | | | |
| Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | — | | $ | 0.70 | | U | | | | |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | — | | — | | | | | | |
| Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | (0.02) | | (0.02) | | | | | | |
| GE Industrial EPS (Non-GAAP) | $ | 0.02 | | $ | 0.73 | | (97) | % | | | | |
| Non-operating benefits costs (pre-tax) (GAAP) | (0.05) | | (0.07) | | | | | | |
| Tax effect on non-operating benefit costs | 0.01 | | 0.01 | | | | | | |
| Less: non-operating benefit costs (net of tax) | (0.04) | | (0.06) | | | | | | |
| Gains (losses) and impairments for disposed or held for sale businesses (pre-tax) | (0.02) | | 1.42 | | | | | | |
| Tax effect on gains (losses) and impairments for disposed or held for sale businesses | — | | (0.14) | | | | | | |
| Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | (0.01) | | 1.28 | | | | | | |
| Restructuring & other (pre-tax) | (0.01) | | (0.02) | | | | | | |
| Tax effect on restructuring & other | — | | — | | | | | | |
| Less: restructuring & other (net of tax) | (0.01) | | (0.01) | | | | | | |
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| Unrealized gains (losses) (pre-tax) | 0.06 | | (0.66) | | | | | | |
| Tax on unrealized gains (losses) | (0.02) | | 0.13 | | | | | | |
| Less: unrealized gains (losses) (net of tax) | 0.04 | | (0.54) | | | | | | |
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| Accretion of RNCI (pre-tax) | — | | — | | | | | | |
| Tax effect on accretion of RNCI | — | | — | | | | | | |
| Less: Accretion of RNCI (net of tax) | — | | — | | | | | | |
| Less: GE Industrial U.S. tax reform enactment adjustment | — | | — | | | | | | |
| Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.04 | | $ | 0.05 | | (20) | % | | | | |
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| GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | (0.02) | | $ | (0.02) | | — | % | | | | |
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| Less: GE Capital tax benefit related to BioPharma sale | — | | 0.01 | | | | | | |
| Less: GE Capital tax loss related to GECAS sale | — | | — | | | | | | |
| Adjusted GE Capital EPS (Non-GAAP) | $ | (0.01) | | $ | (0.03) | | 67 | % | | | | |
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| Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.04 | | $ | 0.05 | | (20) | % | | | | |
| Add: Adjusted GE Capital EPS (Non-GAAP) | (0.01) | | (0.03) | | 67 | % | | | | |
| Adjusted EPS (Non-GAAP) | $ | 0.03 | | $ | 0.02 | | 50 | % | | | | |
| Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total. |
| The service cost of our pension and other benefit plans are included in adjusted earnings (loss)*, which represents the ongoing cost of providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance, and we manage these separately from the operational performance of our businesses. Gains (losses), unrealized gains (losses) and restructuring and other items are impacted by the timing and magnitude of gains associated with dispositions, and the timing and magnitude of costs associated with restructuring and other activities. We believe that the retained costs in Adjusted earnings (loss)* provides management and investors a useful measure to evaluate the performance of the total company, and increases period-to-period comparability. We believe that presenting Adjusted Industrial earnings (loss)* separately for our financial services businesses also provides management and investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company. |
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| GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP) | Three months ended March 31 |
| 2021 | 2020 |
| GE Industrial CFOA (GAAP) | $ | (491) | | $ | (1,662) | |
| Add: gross additions to property, plant and equipment | (332) | | (504) | |
| Add: gross additions to internal-use software | (23) | | (58) | |
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| Less: taxes related to business sales | — | | (17) | |
| GE Industrial free cash flows (Non-GAAP) | $ | (845) | | $ | (2,207) | |
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| 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
20212022 1Q FORM 10-Q 2214
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| GE INDUSTRIAL NET DEBT (NON-GAAP) | March 31, 2021 | December 31, 2020 |
| Total GE Industrial short- and long-term borrowings (GAAP) | $ | 41,247 | | $ | 42,736 | |
| Less: GE Capital short- and long-term debt assumed by GE Industrial | 21,538 | | 22,390 | |
| Add: intercompany loans from GE Capital | 3,177 | | 3,177 | |
| Total adjusted GE Industrial borrowings | $ | 22,886 | | $ | 23,523 | |
| Pension and principal retiree benefit plan liabilities (pre-tax)(a) | 25,492 | | 25,492 | |
| Less: taxes at 21% | 5,353 | | 5,353 | |
| Pension and principal retiree benefit plan liabilities (net of tax) | $ | 20,139 | | $ | 20,139 | |
| GE Industrial operating lease liabilities | 3,083 | | 3,133 | |
| GE Industrial preferred stock | 5,930 | | 5,918 | |
| Less: 50% of GE Industrial preferred stock | 2,965 | | 2,959 | |
| 50% of preferred stock | $ | 2,965 | | $ | 2,959 | |
| Deduction for total GE Industrial cash, cash equivalents and restricted cash | (22,361) | | (23,209) | |
| Less: 25% of GE Industrial cash, cash equivalents and restricted cash | (5,590) | | (5,802) | |
| Deduction for 75% of GE Industrial cash, cash equivalents and restricted cash | $ | (16,771) | | $ | (17,407) | |
| Total GE Industrial net debt (Non-GAAP) | $ | 32,302 | | $ | 32,347 | |
| (a) Represents the sum of the net deficit of principal pension, other pension, and principal retiree benefit plans at December 31, 2020. The funded status of our benefit plans is updated annually in the fourth quarter. |
| In this document we use GE Industrial net debt*, which is calculated based on rating agency methodologies. We are including the calculation of GE Industrial net debt* to provide investors more clarity regarding how the credit rating agencies measure GE Industrial leverage. |
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| ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) |
| Revenues | | Segment profit (loss) | | Profit margin |
| Three months ended March 31 | 2022 | 2021 | V% | | 2022 | 2021 | V% | | 2022 | 2021 | V pts |
| Aviation (GAAP) | $ | 5,603 | | $ | 4,992 | | 12 | % | | $ | 908 | | $ | 641 | | 42 | % | | 16.2 | % | 12.8 | % | 3.4pts |
| Less: acquisitions | — | | — | | | | — | | — | | | | | | |
| Less: business dispositions | — | | — | | | | — | | — | | | | | | |
| Less: foreign currency effect | (9) | | 1 | | | | 16 | | 1 | | | | | | |
| Aviation organic (Non-GAAP) | $ | 5,612 | | $ | 4,991 | | 12 | % | | $ | 892 | | $ | 640 | | 39 | % | | 15.9 | % | 12.8 | % | 3.1pts |
| | | | | | | | | | | |
| Healthcare (GAAP) | $ | 4,363 | | $ | 4,308 | | 1 | % | | $ | 538 | | $ | 698 | | (23) | % | | 12.3 | % | 16.2 | % | (3.9)pts |
| Less: acquisitions | 66 | | — | | | | (29) | | — | | | | | | |
| Less: business dispositions | — | | — | | | | — | | — | | | | | | |
| Less: foreign currency effect | (86) | | — | | | | (29) | | (1) | | | | | | |
| Healthcare organic (Non-GAAP) | $ | 4,383 | | $ | 4,308 | | 2 | % | | $ | 595 | | $ | 700 | | (15) | % | | 13.6 | % | 16.2 | % | (2.6)pts |
| | | | | | | | | | | |
| Renewable Energy (GAAP) | $ | 2,871 | | $ | 3,248 | | (12) | % | | $ | (434) | | $ | (234) | | (86) | % | | (15.1) | % | (7.2) | % | (7.9)pts |
| Less: acquisitions | — | | (11) | | | | — | | (4) | | | | | | |
| Less: business dispositions | — | | — | | | | — | | — | | | | | | |
| Less: foreign currency effect | (60) | | 1 | | | | 17 | | 7 | | | | | | |
| Renewable Energy organic (Non-GAAP) | $ | 2,931 | | $ | 3,258 | | (10) | % | | $ | (451) | | $ | (236) | | (91) | % | | (15.4) | % | (7.2) | % | (8.2)pts |
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| Power (GAAP) | $ | 3,501 | | $ | 3,921 | | (11) | % | | $ | 63 | | $ | (87) | | F | | 1.8 | % | (2.2) | % | 4.0pts |
| Less: acquisitions | — | | — | | | | — | | — | | | | | | |
| Less: business dispositions | — | | 155 | | | | — | | — | | | | | | |
| Less: foreign currency effect | (69) | | (17) | | | | (5) | | (23) | | | | | | |
| Power organic (Non-GAAP) | $ | 3,570 | | $ | 3,782 | | (6) | % | | $ | 68 | | $ | (64) | | F | | 1.9 | % | (1.7) | % | 3.6pts |
| | | | | | | | | | | |
| 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, which includes translational and transactional impacts, as these activities can obscure underlying trends. |
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| ORGANIC REVENUES (NON-GAAP) | Three months ended March 31 | | |
| 2022 | 2021 | V% | | | | |
| Total revenues (GAAP) | $ | 17,040 | | $ | 17,071 | | — | % | | | | |
| Less: Insurance revenues | 767 | | 755 | | | | | | |
| Adjusted revenues (Non-GAAP) | $ | 16,272 | | $ | 16,316 | | — | % | | | | |
| Less: acquisitions | 67 | | (11) | | | | | | |
| Less: business dispositions | — | | 46 | | | | | | |
| Less: foreign currency effect(a) | (227) | | (15) | | | | | | |
| Organic revenues (Non-GAAP) | $ | 16,433 | | $ | 16,295 | | 1 | % | | | | |
| | | | | | | |
| (a) Foreign currency impact in 2022 was primarily driven by U.S. Dollar depreciation against the euro, Japanese yen, and Indian rupee. |
| 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, which includes translational and transactional impacts, as these activities can obscure underlying trends. |
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| EQUIPMENT AND SERVICES ORGANIC REVENUES (NON-GAAP) | Three months ended March 31 | | |
| 2022 | 2021 | V% | | | | |
| Total equipment revenues (GAAP) | $ | 6,864 | | $ | 7,971 | | (14) | % | | | | |
| Less: acquisitions | 65 | | — | | | | | | |
| Less: business dispositions | — | | (62) | | | | | | |
| Less: foreign currency effect | (131) | | (7) | | | | | | |
| Equipment organic revenues (Non-GAAP) | $ | 6,931 | | $ | 8,040 | | (14) | % | | | | |
| | | | | | | |
| Total services revenues (GAAP) | $ | 9,408 | | $ | 8,345 | | 13 | % | | | | |
| Less: acquisitions | 1 | | (11) | | | | | | |
| Less: business dispositions | — | | 108 | | | | | | |
| Less: foreign currency effect | (96) | | (8) | | | | | | |
| Services organic revenues (Non-GAAP) | $ | 9,502 | | $ | 8,255 | | 15 | % | | | | |
| We believe this measure provides 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, which includes translational and transactional impacts, as these activities can obscure underlying trends. |
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| ADJUSTED PROFIT AND PROFIT MARGIN (NON-GAAP) | Three months ended March 31 | |
| 2022 | 2021 | V% | | | |
| Total revenues (GAAP) | $ | 17,040 | | $ | 17,071 | | — | % | | | |
| Less: Insurance revenues | 767 | | 755 | | | | | |
| Adjusted revenues (Non-GAAP) | $ | 16,272 | | $ | 16,316 | | — | % | | | |
| | | | | | |
| Total costs and expenses (GAAP) | $ | 17,638 | | $ | 17,506 | | 1 | % | | | |
| Less: Insurance cost and expenses | 543 | | 618 | | | | | |
| Less: interest and other financial charges | 390 | | 485 | | | | | |
| Less: non-operating benefit cost (income) | (137) | | 430 | | | | | |
| Less: restructuring & other(a) | 38 | | 113 | | | | | |
| Less: separation costs(a) | 119 | | — | | | | | |
| Less: Steam asset sale impairment(a) | 824 | | — | | | | | |
| Less: Russia and Ukraine charges(a) | 230 | | — | | | | | |
| Add: noncontrolling interests | 28 | | 5 | | | | | |
| Add: EFS benefit from taxes | (47) | | (31) | | | | | |
| Adjusted costs (Non-GAAP) | $ | 15,611 | | $ | 15,834 | | (1) | % | | | |
| | | | | | |
| Other income (GAAP) | $ | 73 | | $ | 673 | | (89) | % | | | |
| Less: gains (losses) on equity securities(a) | (219) | | 347 | | | | | |
| Less: restructuring & other(a) | 3 | | 7 | | | | | |
| Less: gains (losses) on purchases and sales of business interests(a) | 4 | | 3 | | | | | |
| Adjusted other income (Non-GAAP) | $ | 285 | | $ | 317 | | (10) | % | | | |
| | | | | | |
| Profit (loss) (GAAP) | $ | (525) | | $ | 238 | | U | | | |
| Profit (loss) margin (GAAP) | (3.1) | % | 1.4 | % | (4.5)pts | | | |
| | | | | | |
| Adjusted profit (loss) (Non-GAAP) | $ | 946 | | $ | 798 | | 19 | % | | | |
| Adjusted profit (loss) margin (Non-GAAP) | 5.8 | % | 4.9 | % | 0.9pts | | | |
| | | | | | |
| (a) See the Corporate and Other Consolidated Information sections for further information. |
| We believe that adjusting 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) 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. |
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| ADJUSTED ORGANIC PROFIT (NON-GAAP) | Three months ended March 31 | | |
| 2022 | 2021 | V% | | | | |
| Adjusted profit (loss) (Non-GAAP) | $ | 946 | | $ | 798 | | 19 | % | | | | |
| Less: acquisitions | (34) | | (4) | | | | | | |
| Less: business dispositions | — | | 4 | | | | | | |
| Less: foreign currency effect | 1 | | (5) | | | | | | |
| Adjusted organic profit (loss) (Non-GAAP) | $ | 979 | | $ | 803 | | 22 | % | | | | |
| | | | | | | |
| Adjusted profit (loss) margin (Non-GAAP) | 5.8 | % | 4.9 | % | 0.9 | pts | | | | |
| Adjusted organic profit (loss) margin (Non-GAAP) | 6.0 | % | 4.9 | % | 1.1 | pts | | | | |
| | | | | | | |
| We believe this measure provides 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, which includes translational and transactional impacts, as these activities can obscure underlying trends. |
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| ADJUSTED EARNINGS (LOSS) (NON-GAAP) | Three months ended March 31 | |
| 2022 | 2021 | V% | | | |
| Earnings (loss) from continuing operations (GAAP)(a) | $ | (809) | | $ | 20 | | U | | | |
| Insurance earnings (pre-tax) | 227 | | 142 | | | | | |
| Tax effect on Insurance earnings | (49) | | (31) | | | | | |
| Less: Insurance earnings (net of tax) | 178 | | 111 | | | | | |
| Earnings (loss) excluding Insurance (Non-GAAP) | $ | (987) | | $ | (91) | | U | | | |
| Non-operating benefit (cost) income (pre-tax) (GAAP) | 137 | | (430) | | | | | |
| Tax effect on non-operating benefit (cost) income | (29) | | 90 | | | | | |
| Less: non-operating benefit (cost) income (net of tax) | 108 | | (340) | | | | | |
| Gains (losses) on purchases and sales of business interests (pre-tax)(a) | 4 | | 3 | | | | | |
| Tax effect on gains (losses) on purchases and sales of business interests | (1) | | (1) | | | | | |
| Less: gains (losses) on purchases and sales of business interests (net of tax) | 3 | | 2 | | | | | |
| Gains (losses) on equity securities (pre-tax)(a) | (219) | | 347 | | | | | |
| Tax effect on gains (losses) on equity securities(b)(c) | (20) | | (118) | | | | | |
| Less: gains (losses) on equity securities (net of tax) | (239) | | 229 | | | | | |
| Restructuring & other (pre-tax)(a) | (35) | | (106) | | | | | |
| Tax effect on restructuring & other | 8 | | 22 | | | | | |
| Less: restructuring & other (net of tax) | (27) | | (84) | | | | | |
| Separation costs (pre-tax)(a) | (119) | | — | | | | | |
| Tax effect on separation costs | (20) | | — | | | | | |
| Less: separation costs (net of tax) | (139) | | — | | | | | |
| Steam asset sale impairment (pre-tax)(a) | (824) | | — | | | | | |
| Tax effect on Steam asset sale impairment | 84 | | — | | | | | |
| Less: Steam asset sale impairment (net of tax) | (740) | | — | | | | | |
| Russia and Ukraine charges (pre-tax)(a) | (230) | | — | | | | | |
| Tax effect on Russia and Ukraine charges | 15 | | — | | | | | |
| Less: Russia and Ukraine charges (net of tax) | (215) | | — | | | | | |
| Less: Accretion of redeemable noncontrolling interest (pre-tax and net of tax) | — | | 2 | | | | | |
| | | | | | |
| Less: Tax loss related to GECAS transaction | — | | (44) | | | | | |
| Adjusted earnings (loss) (Non-GAAP) | $ | 262 | | $ | 142 | | 85 | % | | | |
| | | | | | |
| (a) See the Corporate section for further information. | | | | |
| (b) Includes tax benefits available to offset the tax on gains in equity securities. | | | | |
| (c) Includes related tax valuation allowances. | | | | | | |
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| ADJUSTED EARNINGS (LOSS) PER SHARE (EPS) (NON-GAAP) | Three months ended March 31 | |
| (In dollars) | 2022 | 2021 | V% | | | |
| Earnings (loss) per share from continuing operations (GAAP)(a) | $ | (0.74) | | $ | 0.02 | | U | | | |
| Insurance earnings (pre-tax) | 0.21 | | 0.13 | | | | | |
| Tax effect on Insurance earnings | (0.04) | | (0.03) | | | | | |
| Less: Insurance earnings (net of tax) | 0.16 | | 0.10 | | | | | |
| Earnings (loss) per share excluding Insurance (Non-GAAP) | $ | (0.90) | | $ | (0.08) | | U | | | |
| Non-operating benefit (cost) income (pre-tax) (GAAP) | 0.12 | | (0.39) | | | | | |
| Tax effect on non-operating benefit (cost) income | (0.03) | | 0.08 | | | | | |
| Less: non-operating benefit (cost) income (net of tax) | 0.10 | | (0.31) | | | | | |
| Gains (losses) on purchases and sales of business interests (pre-tax)(a) | — | | — | | | | | |
| Tax effect on gains (losses) on purchases and sales of business interests | — | | — | | | | | |
| Less: gains (losses) on purchases and sales of business interests (net of tax) | — | | — | | | | | |
| Gains (losses) on equity securities (pre-tax)(a) | (0.20) | | 0.32 | | | | | |
| Tax effect on gains (losses) on equity securities(b)(c) | (0.02) | | (0.11) | | | | | |
| Less: gains (losses) on equity securities (net of tax) | (0.22) | | 0.21 | | | | | |
| Restructuring & other (pre-tax)(a) | (0.03) | | (0.10) | | | | | |
| Tax effect on restructuring & other | 0.01 | | 0.02 | | | | | |
| Less: restructuring & other (net of tax) | (0.02) | | (0.08) | | | | | |
| Separation costs (pre-tax)(a) | (0.11) | | — | | | | | |
| Tax effect on separation costs | (0.02) | | — | | | | | |
| Less: separation costs (net of tax) | (0.13) | | — | | | | | |
| Steam asset sale impairment (pre-tax)(a) | (0.75) | | — | | | | | |
| Tax effect on Steam asset sale impairment | 0.08 | | — | | | | | |
| Less: Steam asset sale impairment (net of tax) | (0.67) | | — | | | | | |
| Russia and Ukraine charges (pre-tax)(a) | (0.21) | | — | | | | | |
| Tax effect on Russia and Ukraine charges | 0.01 | | — | | | | | |
| Less: Russia and Ukraine charges (net of tax) | (0.20) | | — | | | | | |
| Less: Accretion of redeemable noncontrolling interest (pre-tax and net of tax) | — | | — | | | | | |
| | | | | | |
| Less: Tax loss related to GECAS transaction | — | | (0.04) | | | | | |
| Adjusted earnings (loss) per share (Non-GAAP) | $ | 0.24 | | $ | 0.13 | | 85 | % | | | |
| | | | | | |
| (a) See the Corporate section for further information. | | | | | |
| (b) Includes tax benefits available to offset the tax on gains in equity securities. | | | | |
| (c) Includes related tax valuation allowances. | | | | | | |
| | | | | | |
| 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 2022. |
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| FREE CASH FLOWS (FCF) (NON-GAAP) | Three months ended March 31 | | |
| 2022 | 2021 | | | | | |
| CFOA (GAAP) | $ | (535) | | $ | (2,640) | | | | | | |
| Less: Insurance CFOA | (15) | | 60 | | | | | | |
| CFOA excluding Insurance (Non-GAAP) | $ | (520) | | $ | (2,699) | | | | | | |
| Add: gross additions to property, plant and equipment | (340) | | (332) | | | | | | |
| Add: gross additions to internal-use software | (23) | | (24) | | | | | | |
| Less: separation costs cash expenditures | (3) | | — | | | | | | |
| | | | | | | |
| | | | | | | |
| Less: CFOA impact from receivables factoring and supply chain finance eliminations | — | | 306 | | | | | | |
| | | | | | | |
| Free cash flows (Non-GAAP) | $ | (880) | | $ | (3,361) | | | | | | |
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| We believe investors may find it useful to compare free cash flows* performance without the effects of cash used for operating activities related to our run-off Insurance business, separation costs cash expenditures and eliminations related to our receivables factoring and supply chain finance programs. We believe this measure will better allow management and investors to evaluate the capacity of our operations to generate free cash flows. The CFOA impact from receivables factoring and supply chain finance eliminations represents activity related to those internal programs previously facilitated for our industrial segments by our Working Capital Solutions business. We completed the exit from all internal factoring and supply chain finance programs in 2021. |
*Non-GAAP Financial Measure
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 March 31, 2021,2022, and (ii) no change in internal control over financial reporting occurred during the quarter ended March 31, 2021,2022, that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.
OTHER FINANCIAL DATA.DATA
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSGE did not repurchase any equity securities. On March 6, 2022, the Board of Directors authorized up to $3 billion of common share repurchases. There were no share repurchases during the three months ended March 31, 2021.2022.
RISK FACTORS.The risk factor set forth below updates the corresponding risk factorfactors in our Annual Report on Form 10-K for the year ended December 31, 2020. In addition to the2021. These risk factor below, you should carefully consider the risk factors discussed in our most recent Form 10-K report, which could have a material adverse effect on our business, reputation, financial position, results of operations, cash flows and 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 past several years we have been pursuing 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 combine our GECAS business with AerCap. The proceeds from dispositions have been an important source of cash flow for the Company as part of our strategic and financial planning. When we seek to sell certain businesses, equity interests or assets, we may encounter difficulties in finding buyers or in market conditions that could delay or prevent 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 preferred 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 accordingly there are risks that one or more closing conditions may not be satisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant 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 futurebusiness, financial results. With respect to acquisitions, joint venturesposition and business integrations, we may not achieve expected returns and other benefits on a timely basis or at all as a resultresults of changes in strategy or separation/integration challenges related to personnel, IT systems or other factors. Executing on all types of portfolio transactions can divert senior management time and resources from other pursuits. In addition, in connection with acquisitions over time, we have recorded significant goodwill and other intangible assets on our balance sheet, and if we are not able to realize the value of these assets, we may be required to incur charges relating to the impairment of these assets. We also participate in a number of joint 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 additional operational, financial, reputational, legal or compliance risks.operations.
Global macro-environment - Our growth is subject to global economic, political and geopolitical risks. We operate in virtually every part of the world, serve customers in over 175 countries and received 56% of our revenues for 2021 from outside the United States. Our operations and the execution of our business plans and strategies are subject to the effects of global economic trends, geopolitical risks and demand or supply shocks from events that could include war, a major terrorist attack, natural disasters or actual or threatened public health emergencies (such as COVID-19, including virus variants and resurgences and responses to those developments such as continued or new government-imposed lockdowns and travel restrictions). They are also affected by local and regional economic environments, supply chain constraints and policies in the U.S. and other markets that we serve, including interest rates, monetary policy, inflation, economic growth, recession, commodity prices, currency volatility, currency controls or other limitations on the ability to expatriate cash, sovereign debt levels and actual or anticipated defaults on sovereign debt. For example, the ongoing conflict between Russia and Ukraine and the related sanctions and other measures imposed by the European Union, the U.S. and other countries and organizations in response have led, and may continue to lead, to disruption and instability in global markets, supply chains and industries that could negatively impact our businesses, financial condition and results of operations. Additionally, changes in local economic conditions or outlooks, such as lower rates of investment or economic growth in China, Europe or other key markets, affect the demand for or profitability of our products and services outside the U.S., and the impact on the Company could be significant given the extent of our activities outside the United States. Political changes and trends such as populism, protectionism, economic nationalism and sentiment toward multinational companies and resulting tariffs, export controls or other trade barriers, or changes to tax or other laws and policies, have been and may continue to be disruptive and costly to our businesses, and these can interfere with our global operating model, supply chain, production costs, customer relationships and competitive position. Further escalation of specific trade tensions, including intensified decoupling between the U.S. and China, or in global trade conflict more broadly could be harmful to global economic growth or to our business in or with China or other countries, and related decreases in confidence or investment activity in the global markets would adversely affect our business performance. We also do business in many emerging market jurisdictions where economic, political and legal risks are heightened.
*Non-GAAP Financial Measure
20212022 1Q FORM 10-Q 2319
| | STATEMENT OF EARNINGS (LOSS) | Three months ended March 31 | |
| (UNAUDITED) | Consolidated | |
| STATEMENT OF EARNINGS (LOSS) (UNAUDITED) | | STATEMENT OF EARNINGS (LOSS) (UNAUDITED) | Three months ended March 31 |
| (In millions; per-share amounts in dollars) | (In millions; per-share amounts in dollars) | 2021 | 2020 | (In millions; per-share amounts in dollars) | 2022 | 2021 |
| Sales of goods | $ | 10,349 | | $ | 12,339 | | |
| Sales of equipment | | Sales of equipment | $ | 6,864 | | $ | 7,971 | |
| Sales of services | Sales of services | 5,967 | | 6,452 | | Sales of services | 9,408 | | 8,345 | |
| GE Capital revenues from services | 803 | | 699 | | |
| Total revenues (Note 9) | 17,118 | | 19,490 | | |
| Insurance revenues | | Insurance revenues | 767 | | 755 | |
| Total revenues (Note 8) | | Total revenues (Note 8) | 17,040 | | 17,071 | |
| | Cost of goods sold | 8,679 | | 9,930 | | |
| Cost of equipment sold | | Cost of equipment sold | 6,749 | | 7,579 | |
| Cost of services sold | Cost of services sold | 3,859 | | 4,497 | | Cost of services sold | 5,704 | | 4,958 | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | 2,891 | | 3,061 | | Selling, general and administrative expenses | 3,651 | | 2,894 | |
| Separation costs | | Separation costs | 119 | | — | |
| Research and development | Research and development | 561 | | 723 | | Research and development | 641 | | 561 | |
| Interest and other financial charges | Interest and other financial charges | 500 | | 561 | | Interest and other financial charges | 406 | | 500 | |
| Insurance losses and annuity benefits | 555 | | 636 | | |
| | Non-operating benefit costs | 430 | | 618 | | |
| Other costs and expenses | 32 | | 25 | | |
| Insurance losses, annuity benefits and other costs (Note 12) | | Insurance losses, annuity benefits and other costs (Note 12) | 504 | | 583 | |
| | Non-operating benefit cost (income) | | Non-operating benefit cost (income) | (137) | | 430 | |
| | Total costs and expenses | Total costs and expenses | 17,506 | | 20,051 | | Total costs and expenses | 17,638 | | 17,506 | |
| | Other income (Note 23) | 626 | | 6,869 | | |
| Other income (Note 18) | | Other income (Note 18) | 73 | | 673 | |
| | Earnings (loss) from continuing operations before income taxes | Earnings (loss) from continuing operations before income taxes | 238 | | 6,308 | | Earnings (loss) from continuing operations before income taxes | (525) | | 238 | |
| Benefit (provision) for income taxes | Benefit (provision) for income taxes | (142) | | (54) | | Benefit (provision) for income taxes | (204) | | (142) | |
| Earnings (loss) from continuing operations | Earnings (loss) from continuing operations | 97 | | 6,254 | | Earnings (loss) from continuing operations | (729) | | 97 | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | Earnings (loss) from discontinued operations, net of taxes (Note 2) | (2,894) | | (21) | | Earnings (loss) from discontinued operations, net of taxes (Note 2) | (286) | | (2,894) | |
| Net earnings (loss) | Net earnings (loss) | (2,798) | | 6,233 | | Net earnings (loss) | (1,014) | | (2,798) | |
| Less net earnings (loss) attributable to noncontrolling interests | Less net earnings (loss) attributable to noncontrolling interests | 5 | | 34 | | Less net earnings (loss) attributable to noncontrolling interests | 28 | | 5 | |
| Net earnings (loss) attributable to the Company | Net earnings (loss) attributable to the Company | (2,802) | | 6,199 | | Net earnings (loss) attributable to the Company | (1,042) | | (2,802) | |
| Preferred stock dividends | Preferred stock dividends | (72) | | (43) | | Preferred stock dividends | (52) | | (72) | |
| Net earnings (loss) attributable to GE common shareholders | Net earnings (loss) attributable to GE common shareholders | $ | (2,874) | | $ | 6,156 | | Net earnings (loss) attributable to GE common shareholders | $ | (1,094) | | $ | (2,874) | |
| | Amounts attributable to GE common shareholders | Amounts attributable to GE common shareholders | | Amounts attributable to GE common shareholders | |
| Earnings (loss) from continuing operations | Earnings (loss) from continuing operations | $ | 97 | | $ | 6,254 | | Earnings (loss) from continuing operations | $ | (729) | | $ | 97 | |
| Less net earnings (loss) attributable to noncontrolling interests, | Less net earnings (loss) attributable to noncontrolling interests, | | Less net earnings (loss) attributable to noncontrolling interests, | |
| continuing operations | continuing operations | 5 | | 36 | | continuing operations | 28 | | 5 | |
| Earnings (loss) from continuing operations attributable to the Company | Earnings (loss) from continuing operations attributable to the Company | 92 | | 6,218 | | Earnings (loss) from continuing operations attributable to the Company | (757) | | 92 | |
| Preferred stock dividends | Preferred stock dividends | (72) | | (43) | | Preferred stock dividends | (52) | | (72) | |
| Earnings (loss) from continuing operations attributable | Earnings (loss) from continuing operations attributable | | Earnings (loss) from continuing operations attributable | |
| to GE common shareholders | to GE common shareholders | 20 | | 6,175 | | to GE common shareholders | (809) | | 20 | |
| Earnings (loss) from discontinued operations, net of taxes | (2,894) | | (21) | | |
| Less net earnings (loss) attributable to | | |
| noncontrolling interests, discontinued operations | 0 | | (2) | | |
| | Earnings (loss) from discontinued operations attributable | | Earnings (loss) from discontinued operations attributable | |
| to GE common shareholders | | to GE common shareholders | (286) | | (2,894) | |
| Net earnings (loss) attributable to GE common shareholders | Net earnings (loss) attributable to GE common shareholders | $ | (2,874) | | $ | 6,156 | | Net earnings (loss) attributable to GE common shareholders | $ | (1,094) | | $ | (2,874) | |
| | Earnings (loss) per share from continuing operations (Note 18) | | |
| Earnings (loss) per share from continuing operations (Note 17) | | Earnings (loss) per share from continuing operations (Note 17) | |
| Diluted earnings (loss) per share | Diluted earnings (loss) per share | $ | 0 | | $ | 0.70 | | Diluted earnings (loss) per share | $ | (0.74) | | $ | 0.02 | |
| Basic earnings (loss) per share | Basic earnings (loss) per share | $ | 0 | | $ | 0.70 | | Basic earnings (loss) per share | $ | (0.74) | | $ | 0.02 | |
| | Net earnings (loss) per share (Note 18) | | |
| Net earnings (loss) per share (Note 17) | | Net earnings (loss) per share (Note 17) | |
| Diluted earnings (loss) per share | Diluted earnings (loss) per share | $ | (0.33) | | $ | 0.70 | | Diluted earnings (loss) per share | $ | (0.99) | | $ | (2.61) | |
| Basic earnings (loss) per share | Basic earnings (loss) per share | $ | (0.33) | | $ | 0.70 | | Basic earnings (loss) per share | $ | (0.99) | | $ | (2.62) | |
|
| | | | | | | | | | | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Three months ended March 31 |
| (UNAUDITED) | GE Industrial | | GE Capital |
| (In millions) | 2021 | 2020 | | 2021 | 2020 |
| Sales of goods | $ | 10,349 | | $ | 12,359 | | | $ | 0 | | $ | 0 | |
| Sales of services | 5,980 | | 6,486 | | | 0 | | 0 | |
| GE Capital revenues from services | 0 | | 0 | | | 878 | | 837 | |
| Total revenues | 16,329 | | 18,844 | | | 878 | | 837 | |
| | | | | |
| Cost of goods sold | 8,679 | | 9,949 | | | 0 | | 0 | |
| Cost of services sold | 3,867 | | 4,526 | | | 5 | | 5 | |
| Selling, general and administrative expenses | 2,766 | | 2,949 | | | 116 | | 149 | |
| Research and development | 561 | | 723 | | | 0 | | 0 | |
| Interest and other financial charges | 268 | | 370 | | | 291 | | 271 | |
| Insurance losses and annuity benefits | 0 | | 0 | | | 567 | | 653 | |
| | | | | |
| Non-operating benefit costs | 433 | | 616 | | | (3) | | 2 | |
| Other costs and expenses | 0 | | 0 | | | 42 | | 33 | |
| Total costs and expenses | 16,574 | | 19,133 | | | 1,018 | | 1,113 | |
| | | | | |
| Other income (Note 23) | 623 | | 6,874 | | | 0 | | 0 | |
| | | | | |
| Earnings (loss) from continuing operations before income taxes | 378 | | 6,585 | | | (140) | | (277) | |
| Benefit (provision) for income taxes | (148) | | (187) | | | 6 | | 133 | |
| Earnings (loss) from continuing operations | 230 | | 6,398 | | | (134) | | (144) | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | 0 | | (14) | | | (2,894) | | (7) | |
| Net earnings (loss) | 230 | | 6,384 | | | (3,028) | | (151) | |
| Less net earnings (loss) attributable to noncontrolling interests | 7 | | 34 | | | (2) | | 0 | |
| Net earnings (loss) attributable to the Company | 223 | | 6,350 | | | (3,025) | | (151) | |
| Preferred stock dividends | (31) | | 0 | | | (41) | | (43) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 192 | | $ | 6,350 | | | $ | (3,066) | | $ | (194) | |
| | | | | |
| Amounts attributable to GE common shareholders: | | | | | |
| Earnings (loss) from continuing operations | $ | 230 | | $ | 6,398 | | | $ | (134) | | $ | (144) | |
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| continuing operations | 7 | | 36 | | | (2) | | 0 | |
| Earnings (loss) from continuing operations attributable to the Company | 223 | | 6,362 | | | (131) | | (144) | |
| Preferred stock dividends | (31) | | 0 | | | (41) | | (43) | |
| Earnings (loss) from continuing operations attributable | | | | | |
| to GE common shareholders | 192 | | 6,362 | | | (172) | | (187) | |
| Earnings (loss) from discontinued operations, net of taxes | 0 | | (14) | | | (2,894) | | (7) | |
| Less net earnings (loss) attributable to | | | | | |
| noncontrolling interests, discontinued operations | 0 | | (2) | | | 0 | | 0 | |
| Net earnings (loss) attributable to GE common shareholders | $ | 192 | | $ | 6,350 | | | $ | (3,066) | | $ | (194) | |
| | | | | | | | |
| STATEMENT OF FINANCIAL POSITION (UNAUDITED) | Consolidated |
| (In millions, except share amounts) | March 31, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash(a) | $ | 31,783 | | $ | 36,530 | |
| Investment securities (Note 3) | 6,741 | | 7,319 | |
| Current receivables (Note 4) | 15,381 | | 16,691 | |
| Financing receivables – net (Note 5) | 306 | | 326 | |
| Inventories, including deferred inventory costs (Note 6) | 16,530 | | 15,890 | |
| Other GE Capital receivables | 1,339 | | 1,549 | |
| Receivable from GE Capital | 0 | | 0 | |
| Current contract assets (Note 10) | 5,821 | | 5,764 | |
| All other current assets (Note 11) | 1,376 | | 1,109 | |
| Assets of discontinued operations (Note 2) | 33,922 | | 0 | |
| Current assets | 113,198 | | 85,180 | |
| | |
| Investment securities (Note 3) | 40,786 | | 42,549 | |
| Financing receivables – net (Note 5) | 0 | | 0 | |
| Other GE Capital receivables | 4,634 | | 4,661 | |
| Property, plant and equipment – net (Note 7) | 16,296 | | 16,699 | |
| Receivable from GE Capital | 0 | | 0 | |
| Goodwill (Note 8) | 25,320 | | 25,524 | |
| Other intangible assets – net (Note 8) | 9,395 | | 9,671 | |
| Contract and other deferred assets (Note 10) | 5,985 | | 5,888 | |
| All other assets (Note 11) | 12,308 | | 11,038 | |
| Deferred income taxes (Note 16) | 14,232 | | 14,253 | |
| Assets of discontinued operations (Note 2) | 3,009 | | 40,749 | |
| Total assets | $ | 245,164 | | $ | 256,211 | |
| | |
| Short-term borrowings (Note 12) | $ | 4,468 | | $ | 4,713 | |
| Short-term borrowings assumed by GE (Note 12) | 0 | | 0 | |
| Accounts payable and equipment project accruals | 16,090 | | 16,458 | |
| Progress collections and deferred income (Note 10) | 17,993 | | 18,371 | |
| All other current liabilities (Note 15) | 14,139 | | 15,071 | |
| Liabilities of discontinued operations (Note 2) | 4,991 | | 0 | |
| Current liabilities | 57,681 | | 54,613 | |
| | |
| Deferred income (Note 10) | 1,748 | | 1,801 | |
| Long-term borrowings (Note 12) | 66,890 | | 70,189 | |
| Long-term borrowings assumed by GE (Note 12) | 0 | | 0 | |
| Insurance liabilities and annuity benefits (Note 13) | 39,562 | | 42,191 | |
| Non-current compensation and benefits | 29,104 | | 29,677 | |
| All other liabilities (Note 15) | 14,821 | | 15,484 | |
| Liabilities of discontinued operations (Note 2) | 204 | | 5,182 | |
| Total liabilities | 210,011 | | 219,138 | |
| | |
Preferred stock (5,939,875 shares outstanding at both March 31, 2021
and December 31, 2020) | 6 | | 6 | |
Common stock (8,778,641,000 and 8,765,493,000 shares outstanding
at March 31, 2021 and December 31, 2020, respectively) | 702 | | 702 | |
| Accumulated other comprehensive income (loss) – net attributable to GE | (8,893) | | (9,749) | |
| Other capital | 34,042 | | 34,307 | |
| Retained earnings | 89,276 | | 92,247 | |
| Less common stock held in treasury | (81,548) | | (81,961) | |
| Total GE shareholders’ equity | 33,585 | | 35,552 | |
| Noncontrolling interests | 1,568 | | 1,522 | |
| Total equity | 35,153 | | 37,073 | |
| Total liabilities and equity | $ | 245,164 | | $ | 256,211 | |
| | | | | | | | |
| STATEMENT OF FINANCIAL POSITION (UNAUDITED) | |
| (In millions, except share amounts) | March 31, 2022 | December 31, 2021 |
| | |
| | |
| Cash, cash equivalents and restricted cash(a) | $ | 12,842 | | $ | 15,770 | |
| Investment securities (Note 3) | 10,779 | | 12,297 | |
| Current receivables (Note 4) | 16,050 | | 15,620 | |
| | |
| Inventories, including deferred inventory costs (Note 5) | 16,570 | | 15,847 | |
| | |
| | |
| Current contract assets (Note 9) | 4,246 | | 4,881 | |
| All other current assets (Note 10) | 2,065 | | 1,933 | |
| Assets of businesses held for sale (Note 2) | 747 | | — | |
| Current assets | 63,299 | | 66,348 | |
| | |
| Investment securities (Note 3) | 39,845 | | 42,209 | |
| | |
| | |
| Property, plant and equipment – net (Note 6) | 15,036 | | 15,609 | |
| | |
| Goodwill (Note 7) | 26,047 | | 26,182 | |
| Other intangible assets – net (Note 7) | 8,290 | | 9,330 | |
| Contract and other deferred assets (Note 9) | 6,159 | | 6,124 | |
| All other assets (Note 10) | 19,767 | | 19,040 | |
| Deferred income taxes (Note 15) | 10,583 | | 10,855 | |
| Assets of discontinued operations (Note 2) | 2,935 | | 3,177 | |
| Total assets | $ | 191,961 | | $ | 198,874 | |
| | |
| Short-term borrowings (Note 11) | $ | 4,985 | | $ | 4,361 | |
| | |
| Accounts payable and equipment project accruals | 16,206 | | 16,243 | |
| Progress collections and deferred income (Note 9) | 16,206 | | 17,372 | |
| All other current liabilities (Note 14) | 14,216 | | 13,977 | |
| Liabilities of businesses held for sale (Note 2) | 1,732 | | — | |
| Current liabilities | 53,344 | | 51,953 | |
| | |
| Deferred income (Note 9) | 1,953 | | 1,989 | |
| Long-term borrowings (Note 11) | 28,649 | | 30,824 | |
| | |
| Insurance liabilities and annuity benefits (Note 12) | 33,626 | | 37,166 | |
| Non-current compensation and benefits | 20,636 | | 21,202 | |
| All other liabilities (Note 14) | 12,477 | | 13,240 | |
| Liabilities of discontinued operations (Note 2) | 993 | | 887 | |
| Total liabilities | 151,678 | | 157,262 | |
| | |
Preferred stock (5,939,875 shares outstanding at both March 31, 2022
and December 31, 2021) | 6 | | 6 | |
Common stock (1,100,664,978 and 1,099,027,213 shares outstanding
at March 31, 2022 and December 31, 2021, respectively) | 15 | | 15 | |
| Accumulated other comprehensive income (loss) – net attributable to GE | 1,341 | | 1,582 | |
| Other capital | 34,391 | | 34,691 | |
| Retained earnings | 83,927 | | 85,110 | |
| Less common stock held in treasury | (80,673) | | (81,093) | |
| Total GE shareholders’ equity | 39,005 | | 40,310 | |
| Noncontrolling interests (Note 16) | 1,278 | | 1,302 | |
| Total equity | 40,283 | | 41,612 | |
| Total liabilities and equity | $ | 191,961 | | $ | 198,874 | |
(a) Excluded $1,707$795 million and $455$353 million at March 31, 20212022 and December 31, 2020,2021, respectively, in our run-off Insurance business, which is subject to regulatory restrictions. This balance is included in All other assets. See Note 1110 for further information.
| | | | | | | | | | | | | | | | | |
| STATEMENT OF FINANCIAL POSITION (CONTINUED) | GE Industrial | | GE Capital |
(UNAUDITED) (In millions, except share amounts) | March 31, 2021 | December 31, 2020 | | March 31, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash | $ | 22,361 | | $ | 23,209 | | | $ | 9,422 | | $ | 13,322 | |
| Investment securities (Note 3) | 6,741 | | 7,319 | | | 0 | | 0 | |
| Current receivables (Note 4) | 12,418 | | 13,442 | | | 0 | | 0 | |
| Financing receivables – net (Note 5) | 0 | | 0 | | | 3,738 | | 4,172 | |
| Inventories, including deferred inventory costs (Note 6) | 16,530 | | 15,890 | | | 0 | | 0 | |
| Other GE Capital receivables | 0 | | 0 | | | 2,260 | | 3,280 | |
| Receivable from GE Capital | 1,784 | | 2,432 | | | 0 | | 0 | |
| Current contract assets (Note 10) | 5,821 | | 5,764 | | | 0 | | 0 | |
| All other current assets (Note 11) | 1,062 | | 835 | | | 518 | | 543 | |
| Assets of discontinued operations (Note 2) | 0 | | 0 | | | 33,922 | | 0 | |
| Current assets | 66,716 | | 68,892 | | | 49,860 | | 21,317 | |
| | | | | |
| Investment securities (Note 3) | 32 | | 36 | | | 40,756 | | 42,515 | |
| Financing receivables – net (Note 5) | 0 | | 0 | | | 0 | | 0 | |
| Other GE Capital receivables | 0 | | 0 | | | 5,077 | | 5,076 | |
| Property, plant and equipment – net (Note 7) | 16,039 | | 16,433 | | | 261 | | 271 | |
| Receivable from GE Capital | 16,577 | | 16,780 | | | 0 | | 0 | |
| Goodwill (Note 8) | 25,320 | | 25,524 | | | 0 | | 0 | |
| Other intangible assets – net (Note 8) | 9,358 | | 9,632 | | | 37 | | 39 | |
| Contract and other deferred assets (Note 10) | 5,985 | | 5,921 | | | 0 | | 0 | |
| All other assets (Note 11) | 7,952 | | 7,948 | | | 4,617 | | 3,354 | |
| Deferred income taxes (Note 16) | 9,209 | | 9,154 | | | 5,023 | | 5,099 | |
| Assets of discontinued operations (Note 2) | 132 | | 144 | | | 2,876 | | 40,587 | |
| Total assets | $ | 157,321 | | $ | 160,462 | | | $ | 108,507 | | $ | 118,257 | |
| | | | | |
| Short-term borrowings (Note 12) | $ | 535 | | $ | 918 | | | $ | 2,426 | | $ | 1,963 | |
| Short-term borrowings assumed by GE (Note 12) | 1,784 | | 2,432 | | | 1,784 | | 2,432 | |
| Accounts payable and equipment project accruals | 15,839 | | 16,380 | | | 841 | | 918 | |
| Progress collections and deferred income (Note 10) | 17,993 | | 18,371 | | | 0 | | 0 | |
| All other current liabilities (Note 15) | 13,508 | | 14,131 | | | 1,507 | | 2,288 | |
| Liabilities of discontinued operations (Note 2) | 0 | | 0 | | | 4,991 | | 0 | |
| Current liabilities | 49,659 | | 52,232 | | | 11,549 | | 7,602 | |
| | | | | |
| Deferred income (Note 10) | 1,748 | | 1,801 | | | 0 | | 0 | |
| Long-term borrowings (Note 12) | 19,174 | | 19,428 | | | 27,962 | | 30,803 | |
| Long-term borrowings assumed by GE (Note 12) | 19,754 | | 19,957 | | | 16,577 | | 16,780 | |
| Insurance liabilities and annuity benefits (Note 13) | 0 | | 0 | | | 40,004 | | 42,565 | |
| Non-current compensation and benefits | 28,769 | | 29,291 | | | 327 | | 379 | |
| All other liabilities (Note 15) | 14,586 | | 15,072 | | | 363 | | 539 | |
| Liabilities of discontinued operations (Note 2) | 125 | | 139 | | | 79 | | 5,058 | |
| Total liabilities | 133,815 | | 137,921 | | | 96,861 | | 103,726 | |
| | | | | |
Preferred stock (5,939,875 shares outstanding at both March 31, 2021 and December 31, 2020) | 6 | | 6 | | | 0 | | 6 | |
Common stock (8,778,641,000 and 8,765,493,000 shares outstanding at March 31, 2021 and December 31, 2020, respectively) | 702 | | 702 | | | 5 | | 0 | |
| Accumulated other comprehensive income (loss) – net attributable to GE | (8,108) | | (8,945) | | | (786) | | (804) | |
| Other capital | 16,055 | | 16,466 | | | 17,982 | | 17,835 | |
| Retained earnings | 95,006 | | 94,910 | | | (5,730) | | (2,663) | |
| Less common stock held in treasury | (81,548) | | (81,961) | | | 0 | | 0 | |
| Total GE shareholders’ equity | 22,113 | | 21,179 | | | 11,472 | | 14,373 | |
| Noncontrolling interests | 1,393 | | 1,363 | | | 175 | | 159 | |
| Total equity | 23,506 | | 22,542 | | | 11,646 | | 14,531 | |
| Total liabilities and equity | $ | 157,321 | | $ | 160,462 | | | $ | 108,507 | | $ | 118,257 | |
| | | | | | | | |
| STATEMENT OF CASH FLOWS | Three months ended March 31 |
| (UNAUDITED) | Consolidated |
| (In millions) | 2021 | 2020 |
| Net earnings (loss) | $ | (2,798) | | $ | 6,233 | |
| | |
| | |
| (Earnings) loss from discontinued operations | 2,894 | | 21 | |
| Adjustments to reconcile net earnings (loss) | | |
| to cash provided from operating activities | | |
| Depreciation and amortization of property, plant and equipment (Note 7) | 452 | | 461 | |
| Amortization of intangible assets (Note 8) | 301 | | 318 | |
| | |
| | |
| (Gains) losses on purchases and sales of business interests (Note 23) | (3) | | (12,372) | |
| (Gains) losses on equity securities (Note 23) | (296) | | 5,873 | |
| Principal pension plans cost (Note 14) | 658 | | 877 | |
| Principal pension plans employer contributions | (74) | | (70) | |
| Other postretirement benefit plans (net) | (289) | | (254) | |
| Provision (benefit) for income taxes | 142 | | 54 | |
| Cash recovered (paid) during the year for income taxes | (322) | | (310) | |
| Changes in operating working capital: | | |
| Decrease (increase) in current receivables | 946 | | (503) | |
| Decrease (increase) in inventories, including deferred inventory costs | (722) | | (1,077) | |
| Decrease (increase) in current contract assets | (35) | | 145 | |
| Increase (decrease) in accounts payable and equipment project accruals | (349) | | (617) | |
| Increase (decrease) in progress collections and current deferred income | (425) | | (590) | |
| All other operating activities | (2,719) | | 892 | |
| Cash from (used for) operating activities – continuing operations | (2,640) | | (919) | |
| Cash from (used for) operating activities – discontinued operations | 680 | | 686 | |
| Cash from (used for) operating activities | (1,959) | | (233) | |
| | |
| Additions to property, plant and equipment | (332) | | (504) | |
| Dispositions of property, plant and equipment | 34 | | 28 | |
| Additions to internal-use software | (24) | | (60) | |
| Net decrease (increase) in financing receivables | 21 | | (103) | |
| | |
| Proceeds from principal business dispositions | 1 | | 20,505 | |
| Net cash from (payments for) principal businesses purchased | 0 | | (6) | |
| | |
| Sales of retained ownership interests | 735 | | 0 | |
| Net (purchases) dispositions of GE Capital investment securities | (709) | | (1,289) | |
| All other investing activities | 1,121 | | 1,455 | |
| Cash from (used for) investing activities – continuing operations | 847 | | 20,025 | |
| Cash from (used for) investing activities – discontinued operations | (646) | | (920) | |
| Cash from (used for) investing activities | 202 | | 19,105 | |
| | |
| Net increase (decrease) in borrowings (maturities of 90 days or less) | (319) | | (1,905) | |
| Newly issued debt (maturities longer than 90 days) | 314 | | 125 | |
| Repayments and other debt reductions (maturities longer than 90 days) | (1,513) | | (5,867) | |
| | |
| | |
| Dividends paid to shareholders | (148) | | (89) | |
| All other financing activities | 57 | | (226) | |
| Cash from (used for) financing activities – continuing operations | (1,608) | | (7,962) | |
| Cash from (used for) financing activities – discontinued operations | 3 | | 43 | |
| Cash from (used for) financing activities | (1,605) | | (7,919) | |
| Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (131) | | (256) | |
| Increase (decrease) in cash, cash equivalents and restricted cash | (3,494) | | 10,697 | |
| Cash, cash equivalents and restricted cash at beginning of year | 37,608 | | 37,077 | |
| Cash, cash equivalents and restricted cash at March 31 | 34,115 | | 47,774 | |
| Less cash, cash equivalents and restricted cash of discontinued operations at March 31 | 625 | | 584 | |
| Cash, cash equivalents and restricted cash of continuing operations at March 31 | $ | 33,490 | | $ | 47,190 | |
| | | | | | | | | | | | | | | | | |
| STATEMENT OF CASH FLOWS (CONTINUED) | Three months ended March 31 |
| (UNAUDITED) | GE Industrial | | GE Capital |
| (In millions) | 2021 | 2020 | | 2021 | 2020 |
| Net earnings (loss) | $ | 230 | | $ | 6,384 | | | $ | (3,028) | | $ | (151) | |
| | | | | |
| | | | | |
| (Earnings) loss from discontinued operations | 0 | | 14 | | | 2,894 | | 7 | |
| Adjustments to reconcile net earnings (loss) | | | | | |
| to cash provided from operating activities | | | | | |
| Depreciation and amortization of property, plant and equipment (Note 7) | 446 | | 453 | | | 6 | | 7 | |
| Amortization of intangible assets (Note 8) | 297 | | 315 | | | 3 | | 3 | |
| | | | | |
| | | | | |
| (Gains) losses on purchases and sales of business interests (Note 23) | (3) | | (12,372) | | | 0 | | 0 | |
| (Gains) losses on equity securities (Note 23) | (293) | | 5,789 | | | (4) | | 85 | |
| Principal pension plans cost (Note 14) | 658 | | 877 | | | 0 | | 0 | |
| Principal pension plans employer contributions | (74) | | (70) | | | 0 | | 0 | |
| Other postretirement benefit plans (net) | (275) | | (247) | | | (14) | | (8) | |
| Provision (benefit) for income taxes | 148 | | 187 | | | (6) | | (133) | |
| Cash recovered (paid) during the year for income taxes | (336) | | (278) | | | 14 | | (32) | |
| Changes in operating working capital: | | | | | |
| Decrease (increase) in current receivables | 691 | | 487 | | | 0 | | 0 | |
| Decrease (increase) in inventories, including deferred inventory costs | (681) | | (1,065) | | | 0 | | 0 | |
| Decrease (increase) in current contract assets | (35) | | 145 | | | 0 | | 0 | |
| Increase (decrease) in accounts payable and equipment project accruals | (449) | | (1,475) | | | 14 | | (18) | |
| Increase (decrease) in progress collections and current deferred income | (425) | | (590) | | | 0 | | 0 | |
| All other operating activities | (390) | | (215) | | | (2,359) | | 763 | |
| Cash from (used for) operating activities – continuing operations | (491) | | (1,662) | | | (2,479) | | 524 | |
| Cash from (used for) operating activities – discontinued operations | 0 | | 29 | | | 681 | | 658 | |
| Cash from (used for) operating activities | (491) | | (1,633) | | | (1,798) | | 1,181 | |
| | | | | |
| Additions to property, plant and equipment | (332) | | (504) | | | 0 | | 0 | |
| Dispositions of property, plant and equipment | 34 | | 29 | | | 0 | | 0 | |
| Additions to internal-use software | (23) | | (58) | | | (1) | | (1) | |
| Net decrease (increase) in financing receivables | 0 | | 0 | | | 575 | | (559) | |
| | | | | |
| Proceeds from principal business dispositions | 1 | | 20,505 | | | 0 | | 0 | |
| Net cash from (payments for) principal businesses purchased | 0 | | (6) | | | 0 | | 0 | |
| | | | | |
| Sales of retained ownership interests | 735 | | 0 | | | 0 | | 0 | |
| Net (purchases) dispositions of GE Capital investment securities | 0 | | 0 | | | (709) | | (1,289) | |
| All other investing activities | 133 | | 81 | | | 1,334 | | 2,579 | |
| Cash from (used for) investing activities – continuing operations | 548 | | 20,046 | | | 1,199 | | 730 | |
| Cash from (used for) investing activities – discontinued operations | 0 | | (33) | | | (646) | | (887) | |
| Cash from (used for) investing activities | 549 | | 20,013 | | | 553 | | (157) | |
| | | | | |
| Net increase (decrease) in borrowings (maturities of 90 days or less) | (655) | | (1,881) | | | (223) | | (514) | |
| Newly issued debt (maturities longer than 90 days) | 0 | | 1 | | | 315 | | 124 | |
| Repayments and other debt reductions (maturities longer than 90 days) | (20) | | (64) | | | (1,493) | | (5,804) | |
| | | | | |
| | | | | |
| Dividends paid to shareholders | (118) | | (89) | | | (41) | | (42) | |
| All other financing activities | (27) | | (12) | | | 84 | | (214) | |
| Cash from (used for) financing activities – continuing operations | (820) | | (2,045) | | | (1,358) | | (6,450) | |
| Cash from (used for) financing activities – discontinued operations | 0 | | 0 | | | 3 | | 43 | |
| Cash from (used for) financing activities | (820) | | (2,045) | | | (1,355) | | (6,406) | |
| Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (85) | | (143) | | | (46) | | (113) | |
| Increase (decrease) in cash, cash equivalents and restricted cash | (848) | | 16,193 | | | (2,646) | | (5,495) | |
| Cash, cash equivalents and restricted cash at beginning of year | 23,209 | | 17,617 | | | 14,400 | | 19,460 | |
| Cash, cash equivalents and restricted cash at March 31 | 22,361 | | 33,810 | | | 11,754 | | 13,964 | |
| Less cash, cash equivalents and restricted cash of discontinued operations at March 31 | 0 | | 0 | | | 625 | | 584 | |
| Cash, cash equivalents and restricted cash of continuing operations at March 31 | $ | 22,361 | | $ | 33,810 | | | $ | 11,129 | | $ | 13,380 | |
| | | | | | | | | | | |
| 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 | | | | |
| | | | | | | | | |
| | | |
| STATEMENT OF CASH FLOWS (UNAUDITED) | Three months ended March 31 | |
| | | |
| (In millions) | 2022 | 2021 | |
| Net earnings (loss) | $ | (1,014) | | $ | (2,798) | | |
| | | |
| | | |
| (Earnings) loss from discontinued operations | 286 | | 2,894 | | |
| Adjustments to reconcile net earnings (loss) | | | |
| to cash from (used for) operating activities | | | |
| Depreciation and amortization of property, plant and equipment | 460 | | 452 | | |
| Amortization of intangible assets (Note 7) | 1,025 | | 301 | | |
| | | |
| | | |
| (Gains) losses on purchases and sales of business interests (Note 18) | (15) | | (3) | | |
| (Gains) losses on equity securities (Note 18) | 214 | | (296) | | |
| | | |
| Principal pension plans cost (Note 13) | 143 | | 658 | | |
| Principal pension plans employer contributions (Note 13) | (79) | | (74) | | |
| Other postretirement benefit plans (net) (Note 13) | (329) | | (289) | | |
| Provision (benefit) for income taxes (Note 15) | 204 | | 142 | | |
| Cash recovered (paid) during the year for income taxes | (192) | | (322) | | |
| Changes in operating working capital: | | | |
| Decrease (increase) in current receivables | (749) | | 946 | | |
| Decrease (increase) in inventories, including deferred inventory costs | (990) | | (722) | | |
| Decrease (increase) in current contract assets | 442 | | (35) | | |
| Increase (decrease) in accounts payable and equipment project accruals | 75 | | (349) | | |
| Increase (decrease) in progress collections and current deferred income | 246 | | (425) | | |
| Financial services derivatives net collateral/settlement | (155) | | (1,737) | | |
| All other operating activities | (103) | | (982) | | |
| Cash from (used for) operating activities – continuing operations | (535) | | (2,640) | | |
| Cash from (used for) operating activities – discontinued operations | (21) | | 680 | | |
| Cash from (used for) operating activities | (556) | | (1,959) | | |
| | | |
| Additions to property, plant and equipment | (340) | | (332) | | |
| Dispositions of property, plant and equipment | 30 | | 34 | | |
| Additions to internal-use software | (23) | | (24) | | |
| | | |
| | | |
| Proceeds from principal business dispositions | — | | 1 | | |
| | | |
| | | |
| Sales of retained ownership interests | 1,302 | | 735 | | |
| Net (purchases) dispositions of insurance investment securities | (1,344) | | (712) | | |
| All other investing activities | (82) | | 1,144 | | |
| Cash from (used for) investing activities – continuing operations | (456) | | 847 | | |
| Cash from (used for) investing activities – discontinued operations | 12 | | (646) | | |
| Cash from (used for) investing activities | (444) | | 202 | | |
| | | |
| Net increase (decrease) in borrowings (maturities of 90 days or less) | 47 | | (319) | | |
| Newly issued debt (maturities longer than 90 days) | — | | 314 | | |
| Repayments and other debt reductions (maturities longer than 90 days) | (1,268) | | (1,513) | | |
| | | |
| | | |
| Dividends paid to shareholders | (140) | | (148) | | |
| | | |
| All other financing activities | (98) | | 57 | | |
| Cash from (used for) financing activities – continuing operations | (1,459) | | (1,608) | | |
| Cash from (used for) financing activities – discontinued operations | — | | 3 | | |
| Cash from (used for) financing activities | (1,459) | | (1,605) | | |
| Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (75) | | (131) | | |
| Increase (decrease) in cash, cash equivalents and restricted cash | (2,534) | | (3,494) | | |
| Cash, cash equivalents and restricted cash at beginning of year | 16,859 | | 37,608 | | |
| Cash, cash equivalents and restricted cash at March 31 | 14,325 | | 34,115 | | |
Less cash, cash equivalents and restricted cash of discontinued operations at March 31 | 688 | | 625 | | |
| Cash, cash equivalents and restricted cash of continuing operations at March 31 | $ | 13,636 | | $ | 33,490 | | |
| | | |
| | | |
| | | | | | | | | | | | |
| | | | | | |
| STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | | | Three months ended March 31 | |
| | | | | | |
| (In millions, net of tax) | | | | 2022 | 2021 | |
| Net earnings (loss) | | | | $ | (1,014) | | $ | (2,798) | | |
| Less net earnings (loss) attributable to noncontrolling interests | | | | 28 | | 5 | | |
| Net earnings (loss) attributable to the Company | | | | $ | (1,042) | | $ | (2,802) | | |
| | | | | | |
| Currency translation adjustments | | | | (166) | | 110 | | |
| Benefit plans | | | | 240 | | 705 | | |
| Investment securities and cash flow hedges | | | | (317) | | 44 | | |
| | | | | | |
| Less: other comprehensive income (loss) attributable to noncontrolling interests | | | | (2) | | 3 | | |
| Other comprehensive income (loss) attributable to the Company | | | | $ | (241) | | $ | 856 | | |
| | | | | | |
| Comprehensive income (loss) | | | | $ | (1,257) | | $ | (1,939) | | |
| Less: comprehensive income (loss) attributable to noncontrolling interests | | | | 26 | | 8 | | |
| Comprehensive income (loss) attributable to the Company | | | | $ | (1,283) | | $ | (1,947) | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | | | | | | | |
| | |
| STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) | | | Three months ended March 31 | |
| | | | | | |
| (In millions) | | | | 2022 | 2021 | |
| Preferred stock issued | | | | $ | 6 | | $ | 6 | | |
| Common stock issued | | | | $ | 15 | | $ | 702 | | |
| | | | | | |
| Beginning balance | | | | 1,582 | | (9,749) | | |
| | | | | | |
| Currency translation adjustments | | | | (162) | | 108 | | |
| Benefit plans | | | | 238 | | 704 | | |
| Investment securities and cash flow hedges | | | | (317) | | 44 | | |
| Accumulated other comprehensive income (loss) | | | | $ | 1,341 | | $ | (8,893) | | |
| Beginning balance | | | | 34,691 | | 34,307 | | |
| Gains (losses) on treasury stock dispositions | | | | (396) | | (384) | | |
| Stock-based compensation | | | | 91 | | 106 | | |
| Other changes | | | | 5 | | 14 | | |
| Other capital | | | | $ | 34,391 | | $ | 34,042 | | |
| Beginning balance | | | | 85,110 | | 92,247 | | |
| Net earnings (loss) attributable to the Company | | | | (1,042) | | (2,802) | | |
| Dividends and other transactions with shareholders | | | | (141) | | (168) | | |
| Changes in accounting | | | | — | | — | | |
| Retained earnings | | | | $ | 83,927 | | $ | 89,276 | | |
| Beginning balance | | | | (81,093) | | (81,961) | | |
| Purchases | | | | (39) | | (38) | | |
| Dispositions | | | | 459 | | 450 | | |
| Common stock held in treasury | | | | $ | (80,673) | | $ | (81,548) | | |
| GE shareholders' equity balance | | | | 39,005 | | 33,585 | | |
| Noncontrolling interests balance | | | | 1,278 | | 1,568 | | |
| Total equity balance at March 31 | | | | $ | 40,283 | | $ | 35,153 | | |
20212022 1Q FORM 10-Q 3023
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 arms-length terms, are reported in the respective columns of our financial statements and are eliminated in consolidation. See Note 22 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, financial position 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.cash flows. 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 decreasechange in the carrying amount of our tax assets and liabilities, or an increasea change 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-periodprior-year amounts to conform to the current-period’scurrent-year’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, 2020.2021.
Our significant accounting policies are described in Note 1 of our aforementioned Annual Report.
ACCOUNTING CHANGES. On January 1, 2021, we adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU removes certain exceptions from the guidance in ASC 740 related to intra-period tax allocations, interim calculations and the recognition of deferred tax liabilities for outside basis differences and clarifies and simplifies several other aspects of accounting for income taxes. Different transition methods apply to the various income tax simplifications. For the changes requiring a retrospective or modified retrospective transition, the adoption of the new standard did not have a material impact to our financial statements.
NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS.On March 31, 2020, we completed the sale of our BioPharma business within our Healthcare segment for total consideration of $21,112 million (after certain working capital adjustments) and incurred $185 million of cash payments directly associated with the transaction. In the first quarter of 2020,2022, we recognizedsigned a pre-tax gainnon-binding memorandum of $12,292 million ($11,145 million after-tax)understanding to sell a portion of our Steam business within our Power segment to Électricité de France S.A. (EDF). We expect to complete the sale, subject to regulatory approval, in our consolidated Statementthe first half of Earnings (Loss).2023.
| | | | | | | | |
| ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE | March 31, 2022 | December 31, 2021 |
| Current receivables, inventories and contract assets | $ | 516 | | $ | — | |
| Property, plant and equipment and intangible assets - net | 186 | | — | |
| All other assets | 45 | | — | |
| Assets of businesses held for sale | $ | 747 | | $ | — | |
| | |
| Progress collections and deferred income | $ | 1,280 | | $ | — | |
| Accounts payable and equipment project accruals and all other liabilities | 452 | | — | |
| Liabilities of businesses held for sale | $ | 1,732 | | $ | — | |
DISCONTINUED OPERATIONS. Primarily primarily comprise our GE Capital Aviation Services (GECAS) business, discontinued in 2021, our mortgage portfolio in Poland, and other trailing assets and liabilities associated with the dispositions of certain GE Capital and GE Industrial businesses.prior dispositions. Results of operations, financial position and cash flows for these businesses are reported as discontinued operations for all periods presented.presented and the notes to the financial statements have been adjusted on a retrospective basis.
GECAS.GECAS/AerCap. On March 9,November 1, 2021 we entered into an agreementcompleted the combination of our GECAS business with AerCap Holdings N.V. (AerCap) to combine our GECAS. We deconsolidated this 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 interest) 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 AerCap notes and/or cash upon closing at AerCap's option. As a result, we have reclassified GECAS'its results to discontinued operations for all periods 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 toWe have continuing involvement with AerCap, primarily through our ownership interest, and ongoing sales or leases of products and services.services, and transition services that we provide to AerCap. For the three months ended March 31, 2022, we had direct and indirect sales of $14 million to and purchases of $35 million from AerCap, primarily related to engine sales through airframers and engine leases, respectively. We collected net cash of $44 million from AerCap related to this activity.
Bank BPH. The mortgage portfolio in Poland (Bank BPH) comprises floating rate residential mortgages, 86%87% of which are indexed to or denominated in foreign currencies (primarily Swiss francs). At March 31, 2021,2022, the total portfolio had a carrying value, net of $1,986reserves, of $1,592 million with a 1.67%2.12% 90-day delinquency rate and an average loan to value ratio of approximately 61.6%58.3%. 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. EarningsLoss from discontinued operations for the three months ended March 31, 20212022 included $282$233 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 and capital contributions related to these loans in future reporting periods. See Note 21 for further information.
Baker Hughes (BKR). We have continuing involvement with 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.
For the three months ended March 31, 2021, we had sales of $166 million and purchases of $61 million with BKR for products and services outside of the JV. We collected net cash of $131 million from BKR related to sales, purchases and transition services.
In the first quarter of 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 $28 million of repayments on the promissory note receivable from BKR and dividends of $56 million on our investment.
| | RESULTS OF DISCONTINUED OPERATIONS | RESULTS OF DISCONTINUED OPERATIONS | | Three months ended March 31 | | RESULTS OF DISCONTINUED OPERATIONS | | Three months ended March 31 | |
| | | 2021 | 2020 | | | 2022 | 2021 | |
| Operations | Operations | | | | Operations | | |
| | GE Capital revenues from services | | $ | 633 | | $ | 1,010 | | | |
| Cost of goods and services sold | | (368) | | (547) | | | |
| Cost of equipment and services sold | | Cost of equipment and services sold | | $ | — | | $ | (368) | | |
| Other income, costs and expenses | Other income, costs and expenses | | (386) | | (462) | | | Other income, costs and expenses | | (250) | | 247 | | |
| | Earnings (loss) of discontinued operations before income taxes | Earnings (loss) of discontinued operations before income taxes | | (121) | | 2 | | | Earnings (loss) of discontinued operations before income taxes | | $ | (250) | | $ | (121) | | |
| Benefit (provision) for income taxes | Benefit (provision) for income taxes | | (29) | | (19) | | | Benefit (provision) for income taxes | | (18) | | (29) | | |
| Earnings (loss) of discontinued operations, net of taxes(a)(b) | | $ | (149) | | $ | (17) | | | |
| Earnings (loss) of discontinued operations, net of taxes(a) | | Earnings (loss) of discontinued operations, net of taxes(a) | | $ | (268) | | $ | (149) | | |
| | Disposal | Disposal | | | | Disposal | | |
| Gain (loss) on disposal before income taxes | Gain (loss) on disposal before income taxes | | (2,702) | | (4) | | | Gain (loss) on disposal before income taxes | | $ | (23) | | $ | (2,702) | | |
| Benefit (provision) for income taxes | Benefit (provision) for income taxes | | (43) | | 0 | | | Benefit (provision) for income taxes | | 5 | | (43) | | |
| Gain (loss) on disposal, net of taxes | Gain (loss) on disposal, net of taxes | | $ | (2,745) | | $ | (4) | | | Gain (loss) on disposal, net of taxes | | $ | (18) | | $ | (2,745) | | |
| | Earnings (loss) from discontinued operations, net of taxes | Earnings (loss) from discontinued operations, net of taxes | | $ | (2,894) | | $ | (21) | | | Earnings (loss) from discontinued operations, net of taxes | | $ | (286) | | $ | (2,894) | | |
(a) Earnings (loss) of discontinued operations attributable to the Company after income taxes was $(149) millionIncluded 0 and $(15) million for the three months ended March 31, 2021 and 2020, respectively.
(b) Included $177 million and $155 million from GECAS operations, including $(359) million0 and $(545)$359 million of depreciation and amortization, for the three months ended March 31, 20212022 and 2020,2021, respectively. Depreciation and amortization ceased on March 10, 2021.
| | | | | | | | |
| ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS | March 31, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash | $ | 142 | | $ | 0 | |
| Financing receivables - net | 2,095 | | 0 | |
| Other GE Capital receivables | 2,122 | | 0 | |
| Property, plant, and equipment - net | 28,143 | | 0 | |
| Valuation allowance on disposal group classified as discontinued operations | (2,536) | | 0 | |
| All other current assets | 3,957 | | 0 | |
| Total current assets of discontinued operations | 33,922 | | 0 | |
| Cash, cash equivalents and restricted cash | 483 | | 623 | |
| Financing receivables - net | 0 | | 2,710 | |
| Other GE Capital receivables | 49 | | 1,844 | |
| Financing receivables held for sale (Polish mortgage portfolio) | 1,986 | | 2,461 | |
| Property, plant, and equipment - net | 102 | | 28,429 | |
| All other assets | 389 | | 4,683 | |
| Assets of discontinued operations(a) | $ | 36,931 | | $ | 40,749 | |
| | |
| Deferred income taxes | $ | 2,268 | | $ | 0 | |
| Accounts payable and all other liabilities | 2,723 | | 0 | |
| Total current liabilities of discontinued operations | 4,991 | | 0 | |
| Deferred income taxes | 0 | | 2,172 | |
| Accounts payable and all other liabilities(b) | 204 | | 3,010 | |
| Liabilities of discontinued operations(a) | $ | 5,195 | | $ | 5,182 | |
(a) Included $33,922 million and $37,199 million of assets and $4,991 million and $4,997 million of liabilities for GECAS as of March 31, 2021 and December 31, 2020, respectively.
(b) Included within All other liabilities of discontinued operations at March 31, 2021 and December 31, 2020 are intercompany tax receivables in the amount of $657 million and $704 million, respectively, primarily related to previously disposed financial services businesses, which are eliminated upon consolidation. | | | | | | | | |
| ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS | March 31, 2022 | December 31, 2021 |
| Cash, cash equivalents and restricted cash | $ | 688 | | $ | 736 | |
| Financing receivables held for sale (Polish mortgage portfolio) | 1,592 | | 1,799 | |
| Property, plant, and equipment - net | 84 | | 88 | |
| All other assets | 571 | | 554 | |
| Assets of discontinued operations | $ | 2,935 | | $ | 3,177 | |
| | |
| Accounts payable and all other liabilities | $ | 993 | | $ | 887 | |
| Liabilities of discontinued operations | $ | 993 | | $ | 887 | |
NOTE 3. INVESTMENT SECURITIES. All of our debt securities are classified as available-for-sale and substantially all are investment-grade supporting obligations to annuitants and policyholders in our run-off insurance operations. WeOn November 1, 2021, we received 111.5 million ordinary shares of AerCap (approximately 46% ownership interest) and an AerCap senior note as partial consideration in conjunction with the GECAS transaction, for which we have adopted the fair value option for ouroption. Our investment in BKR (comprising 311.4comprises 116.5 million shares with approximately 30%(approximately 11% ownership and a promissory note receivableinterest) as of March 31, 2021), which is2022. Both our AerCap and BKR investments are recorded as Equity securities with readily determinable fair values. 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 classified as non-current as they support the long-duration insurance liabilities.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Amortized
cost | Gross
unrealized
gains | Gross
unrealized
losses | Estimated
fair value | | Amortized
cost | Gross
unrealized
gains | Gross
unrealized
losses | Estimated
fair value |
| Equity (Baker Hughes) | $ | 6,741 | | $ | — | | $ | — | | $ | 6,741 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | |
| Current investment securities | $ | 6,741 | | $ | — | | $ | — | | $ | 6,741 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | |
| Debt | | | | | | | | | |
| U.S. corporate | $ | 24,159 | | $ | 4,616 | | $ | (79) | | $ | 28,695 | | | $ | 23,604 | | $ | 6,651 | | $ | (26) | | $ | 30,230 | |
| Non-U.S. corporate | 2,456 | | 273 | | (5) | | 2,724 | | | 2,283 | | 458 | | (1) | | 2,740 | |
| State and municipal | 3,409 | | 648 | | (19) | | 4,038 | | | 3,387 | | 878 | | (9) | | 4,256 | |
| Mortgage and asset-backed | 3,725 | | 153 | | (63) | | 3,815 | | | 3,652 | | 171 | | (71) | | 3,752 | |
| Government and agencies | 1,166 | | 112 | | (3) | | 1,275 | | | 1,169 | | 184 | | 0 | | 1,353 | |
| Other equity | 239 | | — | | — | | 239 | | | 218 | | — | | — | | 218 | |
| Non-current investment securities | $ | 35,152 | | $ | 5,801 | | $ | (168) | | $ | 40,786 | | | $ | 34,313 | | $ | 8,342 | | $ | (106) | | $ | 42,549 | |
| Total | $ | 41,893 | | $ | 5,801 | | $ | (168) | | $ | 47,527 | | | $ | 41,632 | | $ | 8,342 | | $ | (106) | | $ | 49,868 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Amortized
cost | Gross
unrealized
gains | Gross
unrealized
losses | Estimated
fair value | | Amortized
cost | Gross
unrealized
gains | Gross
unrealized
losses | Estimated
fair value |
| Equity and note (AerCap) | $ | — | | $ | — | | $ | — | | $ | 6,536 | | | $ | — | | $ | — | | $ | — | | $ | 8,287 | |
| Equity (Baker Hughes) | — | | — | | — | | 4,244 | | | — | | — | | — | | 4,010 | |
| Current investment securities | $ | — | | $ | — | | $ | — | | $ | 10,779 | | | $ | — | | $ | — | | $ | — | | $ | 12,297 | |
| Debt | | | | | | | | | |
| U.S. corporate | $ | 26,073 | | $ | 2,838 | | $ | (370) | | $ | 28,541 | | | $ | 25,182 | | $ | 5,502 | | $ | (33) | | $ | 30,652 | |
| Non-U.S. corporate | 2,423 | | 113 | | (39) | | 2,497 | | | 2,361 | | 343 | | (4) | | 2,701 | |
| State and municipal | 2,654 | | 326 | | (49) | | 2,930 | | | 2,639 | | 573 | | (6) | | 3,205 | |
| Mortgage and asset-backed | 4,098 | | 35 | | (121) | | 4,012 | | | 3,950 | | 117 | | (47) | | 4,019 | |
| Government and agencies | 1,487 | | 46 | | (47) | | 1,486 | | | 1,086 | | 104 | | (2) | | 1,188 | |
| Other equity | 379 | | — | | — | | 379 | | | 443 | | — | | — | | 443 | |
| Non-current investment securities | $ | 37,114 | | $ | 3,357 | | $ | (626) | | $ | 39,845 | | | $ | 35,662 | | $ | 6,639 | | $ | (92) | | $ | 42,209 | |
| | | | | | | | | |
The amortized cost of debt securities excludes accrued interest of $446 million and $415 million as of March 31, 2022 and December 31, 2021, excludes accrued interest of $438 million,respectively, which is reported in All other current Other GE Capital receivables.assets.
The estimated fair value of investment securities at March 31, 20212022 decreased since December 31, 2020,2021, primarily due to higher market yields, the mark-to-market effect on our equity interest in AerCap, and the sale of BKR shares, partially offset by new insurance investments in our Insurance business and the mark-to-market effect on our remainingequity interest in BKR.
Total estimated fair value of debt securities in an unrealized loss position were $3,732$10,889 million and $1,765$3,446 million, of which $644$814 million and $165$644 million had gross unrealized losses of $(56)$(86) million and $(20)$(42) million and had been in a loss position for 12 months or more at March 31, 20212022 and December 31, 2020,2021, respectively. Gross unrealized losses of $(168)$(626) million at March 31, 20212022 included $(79)$(370) million related to U.S. corporate securities, and $(57)$(60) million related to commercial mortgage-backed securities (CMBS). collateralized by pools of commercial mortgage loans on real estate, and $(58) million related to Asset-backed securities. Of the U.S. corporate securities unrealized losses, $(85) million related to the consumer industry. Primarily all of our CMBS and Asset-backed securities 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.agencies.
Net unrealized gains (losses) for equity securities with readily determinable fair values, which are recorded in Other income within continuing operations, were $238$(377) million and $(5,772)$238 million for the three months ended March 31, 20212022 and 2020,2021, respectively.
Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the BKR promissory note totaled $1,333$1,949 million and $1,250$1,333 million for the three months ended March 31, 20212022 and 2020,2021, respectively. Gross realized gains on investmentdebt securities were $30$24 million and $46 million and gross realized losses and impairments were $(60) million and $(17)$28 million for the three months ended March 31, 2022 and 2021, respectively. Gross realized losses and 2020, respectively.impairments on debt securities were both insignificant for the three months ended March 31, 2022 and 2021.
Contractual maturities of our debt securities (excluding mortgage and asset-backed securities) at March 31, 20212022 are as follows:
| | | | | | | | |
| 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 | |
| | | | | | | | |
| Amortized cost | Estimated fair value |
| Within one year | $ | 827 | | $ | 832 | |
| After one year through five years | 3,856 | | 4,006 | |
| After five years through ten years | 6,323 | | 6,853 | |
| After ten years | 21,631 | | 23,763 | |
We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.
SubstantiallyPrimarily all our equity securities are classified within Level 1 and substantiallyprimarily 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 $5,641$6,676 million and $5,866$7,222 million are classified within Level 3, as significant inputs to thetheir valuation modelmodels are unobservable at March 31, 20212022 and December 31, 2020,2021, respectively. During the three months ended March 31, 20212022 and 2020,2021, there were no significant transfers into or out of Level 3.
In addition to the equity securities described above, we hold $291$528 million and $274$441 million of equity securities without readily determinable fair values at March 31, 20212022 and December 31, 2020,2021, 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 $17 million and an insignificant amount and $(93) million for the three months ended March 31, 20212022 and 2020,2021, respectively.
NOTE 4. CURRENT AND LONG-TERM RECEIVABLES
| | | | CURRENT RECEIVABLES | CURRENT RECEIVABLES | Consolidated | | GE Industrial | CURRENT RECEIVABLES | March 31, 2022 | December 31, 2021 |
| | March 31, 2021 | December 31, 2020 | | March 31, 2021 | December 31, 2020 | |
| | Customer receivables | Customer receivables | $ | 12,441 | | $ | 13,459 | | | $ | 9,307 | | $ | 9,841 | | Customer receivables | $ | 13,505 | | $ | 13,079 | |
| 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) | | |
| Non-income based tax receivables | | Non-income based tax receivables | 1,311 | | 1,222 | |
| Revenue sharing program receivables(a) | | Revenue sharing program receivables(a) | 1,256 | | 1,166 | |
| Supplier advances | | Supplier advances | 441 | | 596 | |
| | Receivables from disposed businesses | | Receivables from disposed businesses | 148 | | 148 | |
| Other sundry receivables | | Other sundry receivables | 488 | | 483 | |
| | Allowance for credit losses(b) | | Allowance for credit losses(b) | (1,099) | | (1,074) | |
| Total current receivables | Total current receivables | $ | 15,381 | | $ | 16,691 | | | $ | 12,418 | | $ | 13,442 | | Total current receivables | $ | 16,050 | | $ | 15,620 | |
(a) 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.
(b) Consolidated current receivables included 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 as of March 31, 2021 and December 31, 2020 was $461 million and $413 million, respectively.
(c) GE Industrial allowanceAllowance for credit losses increased primarily increased due to net new provisions of $39$45 million, partially offset by write-offs and foreign currency impact.
20212022 1Q FORM 10-Q 3426
Sales of GE Industrial | | | | | | | | | | | | | | | | | | | |
| | | 2022 | | 2021 |
| | | Third Parties | | WCS | | Third Parties |
| Balance at January 1 | | | $ | 161 | | | $ | 3,618 | | | $ | 2,992 | |
| GE businesses sales to WCS | | | — | | | 7,044 | | | — | |
| GE businesses sales to third parties(a) | | | 351 | | | — | | | 124 | |
| WCS sales to third parties | | | — | | | (3,826) | | | 3,826 | |
| Collections and other | | | (367) | | | (3,765) | | | (4,360) | |
| Reclassification from long-term customer receivables | | | 36 | | | 63 | | | — | |
| Balance at March 31 | | | $ | 181 | | | $ | 3,134 | | | $ | 2,582 | |
(a) The Company sold current customer receivables. When GE Industrial sells customer receivables to GE Capital or third parties it acceleratesrelated primarily to our participation in customer-sponsored supply chain finance programs. Within these programs, the receiptCompany has no continuing involvement, fees associated with the transferred receivables are covered by the customer and cash is received at the original invoice due date.
| | | | | | | | | | | |
| | | |
| LONG-TERM RECEIVABLES | March 31, 2022 | December 31, 2021 | | | |
| | | | | |
| Long-term customer receivables(a) | $ | 433 | | $ | 521 | | | | |
| Financing receivables | 559 | | 592 | | | | |
| Supplier advances | 289 | | 309 | | | | |
| Non-income based tax receivables | 272 | | 245 | | | | |
| Receivables from disposed businesses | 150 | | 150 | | | | |
| Sundry receivables | 441 | | 440 | | | | |
| | | | | |
| Allowance for credit losses | (172) | | (160) | | | | |
| Total long-term receivables | $ | 1,973 | | $ | 2,097 | | | | |
(a) The Company sold $79 million and $31 million 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 oflong-term customer receivables to GE Capital or third parties are made on arms-length terms and any discount related to time value of money is recognized by GE Industrial when the customer receivables are sold. In our Statement of Cash Flows, receivables purchased and retained by GE Capital are reflected as cash from operating activities at GE Industrial, primarily as cash used for investing activities at GE Capital and are eliminated in consolidation. Collections on receivables purchased by GE Capital are reflected primarily as cash from investing activities at GE Capital and are reclassified to cash from operating activities in consolidation. As of March 31, 2021 and 2020, GE Industrial sold approximately 38% and 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 | |
(a) At March 31, 2021 and 2020, $526 million and $557 million, respectively, of the current receivables purchased and retained by GE Capital had been sold by GE Industrial to GE Capital with recourse (i.e., GE Industrial retains all or some risk of default). The effect on GE Industrial CFOA of claims by GE Capital on receivables sold with recourse was insignificant for the three months ended March 31, 2022 and 2021, and 2020.
(b) Included $1,863 millionrespectively, primarily 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 | |
(a) As of March 31, 2021 and December 31, 2020, GE Capital held $37 million and $111 million, respectively, of GE Industrial long-term customer receivables, substantially all of which are with recourse (i.e. GE Industrial retains all or someGas Power business for risk of default).
(b) Includes supplier advances, revenue sharing programs receivables, other non-income based tax receivables and certain intercompany balances that eliminate upon consolidation.
UNCONSOLIDATED RECEIVABLES FACILITIES. GE Capital has 1 active revolving receivables facility, under which customer receivables purchased from GE Industrial are sold to third parties. In this facility, which has a program size of $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.
Activity related to our 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 | |
CONSOLIDATED SECURITIZATION ENTITIES. GE Capital consolidates 3 variable interest entities (VIEs) that purchased customer receivables and long-term customer receivables from GE Industrial. At March 31, 2021 and December 31, 2020, these VIEs held current customer receivables of $1,133 million and $1,489 million and long-term customer receivables of $29 million and $93 million, respectively. At March 31, 2021 and December 31, 2020, the outstanding non-recourse debt under their respective debt facilities was $624 million and $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 | |
We manage our GE Capital financing receivables portfolio using delinquency data as key performance indicators. At March 31, 2021 and December 31, 2020, financing receivables over 30 days past due were 3.7% and 2.8% and 90 days past due were 1.6% and 1.7%, 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 above. See Note 4 for further information.mitigation purposes.
NOTE 6.5. INVENTORIES, INCLUDING DEFERRED INVENTORY COSTS
| | | March 31, 2021 | December 31, 2020 | | March 31, 2022 | December 31, 2021 |
| Raw materials and work in process | Raw materials and work in process | $ | 8,013 | | $ | 7,937 | | Raw materials and work in process | $ | 9,155 | | $ | 8,710 | |
| Finished goods | Finished goods | 6,057 | | 5,654 | | Finished goods | 5,307 | | 4,927 | |
| Deferred inventory costs(a) | Deferred inventory costs(a) | 2,460 | | 2,299 | | Deferred inventory costs(a) | 2,108 | | 2,210 | |
| Inventories, including deferred inventory costs | Inventories, including deferred inventory costs | $ | 16,530 | | $ | 15,890 | | Inventories, including deferred inventory costs | $ | 16,570 | | $ | 15,847 | |
(a) Represents cost deferral for shipped goods (such as components for wind turbine assemblies within our Renewable Energy segment) and labor and overhead costs on time and material service contracts (primarily originating in Power and Aviation) and other costs for which the criteria for revenue recognition has not yet been met.
NOTE 7.6. PROPERTY, PLANT AND EQUIPMENT AND OPERATING LEASES
| | | March 31, 2021 | December 31, 2020 | | March 31, 2022 | December 31, 2021 |
| Original cost | Original cost | $ | 31,893 | | $ | 32,098 | | Original cost | $ | 31,531 | | $ | 31,904 | |
| Less accumulated depreciation and amortization | Less accumulated depreciation and amortization | (18,405) | | (18,251) | | Less accumulated depreciation and amortization | (18,935) | | (18,901) | |
| Right-of-use operating lease assets | Right-of-use operating lease assets | 2,808 | | 2,852 | | Right-of-use operating lease assets | 2,440 | | 2,606 | |
| Property, plant and equipment – net | Property, plant and equipment – net | $ | 16,296 | | $ | 16,699 | | Property, plant and equipment – net | $ | 15,036 | | $ | 15,609 | |
Consolidated depreciation and amortization onIn the first quarter of 2022, we signed a non-binding memorandum of understanding for GE Steam Power to sell a portion of its business to EDF, which resulted in a reclassification of that business to held for sale. As a result, we recognized a non-cash pre-tax impairment charge of $59 million related to property, plant and equipment at our remaining Steam business within our Power segment. This charge was $452 millionrecorded by Corporate in Selling, general, and $461 million for the three months ended March 31, 2021 and 2020, respectively.administrative expenses in our consolidated Statement of Earnings (Loss).
Operating Lease Liabilities. Our consolidated operating lease liabilities, included in All other liabilities in our Statement of Financial Position, were $3,143was $2,679 million and $3,195$2,848 million, as of March 31, 20212022 and December 31, 2020, respectively, which included GE Industrial operating lease liabilities of $3,083 million and $3,133 million,2021, respectively. Expense on our operating lease portfolio, primarily from our long-term fixed leases, was $281$272 million and $294$281 million for the three months ended March 31, 20212022 and 2020,2021, respectively.
NOTE 8.7. 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 | January 1, 2022 | | | | Currency exchange
and other | Balance at March 31, 2022 |
| Aviation | $ | 9,013 | | | | | $ | (71) | | $ | 8,942 | |
| Healthcare | 12,879 | | | | | (39) | | 12,840 | |
| Renewable Energy | 3,231 | | | | | 62 | | 3,294 | |
| Power | 145 | | | | | — | | 144 | |
| | | | | | |
| Corporate(a) | 914 | | | | | (87) | | 827 | |
| Total | $ | 26,182 | | | | | $ | (135) | | $ | 26,047 | |
(a) Corporate balance comprises our Digital business.
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, (ii) downward revisions to internal forecasts or decreases in market multiples, if any, and (iii) declines in market capitalization. In the first quarter of 2021,2022, we did not identify any reporting units that required an interim impairment test. However, we continue to monitor the operating results and cash flow forecasts of our Additive reporting unit in our Aviation segment as the fair value of this reporting unit was not significantly in excess of its carrying value. At March 31, 2021, our Additive reporting unit had goodwill of $236 million.
AllSubstantially 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$1,040 million during the first quarter of 2021,three months ended March 31, 2022, primarily as a result of amortization.amortization partially offset by additions of capitalized software mainly at Aviation and Healthcare of $48 million. Included within consolidated amortization expense for the three months ended March 31, 2022, was non-cash pre-tax impairment charge of $765 million. Consolidated amortization expense was $301$1,025 million and $318$301 million in the three months ended March 31, 20212022 and 2020,2021, respectively.
In the first quarter of 2022, we signed a non-binding memorandum of understanding for GE Steam Power to sell a portion of its business to EDF, which resulted in a reclassification of that business to held for sale. As a result, we recognized a non-cash pre-tax impairment charge of $765 million related to intangible assets at our remaining Steam business within our Power segment. We determined the fair value of these intangible assets using an income approach. This charge was recorded by Corporate in Selling, general, and administrative expenses in our consolidated Statement of Earnings (Loss).
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 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 | |
| | | | | | | | | | | | | | | |
| 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 | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| EQUIPMENT & SERVICES REVENUES | |
| Three months ended March 31 | 2022 | | 2021 |
| Equipment | Services | Total | | Equipment | Services | Total |
| Aviation | $ | 1,654 | | $ | 3,949 | | $ | 5,603 | | | $ | 1,847 | | $ | 3,145 | | $ | 4,992 | |
| Healthcare | 2,256 | | 2,107 | | 4,363 | | | 2,227 | | 2,081 | | 4,308 | |
| Renewable Energy | 2,173 | | 698 | | 2,871 | | | 2,844 | | 404 | | 3,248 | |
| Power | 965 | | 2,536 | | 3,501 | | | 1,241 | | 2,679 | | 3,921 | |
| | | | | | | |
| Total segment revenues | $ | 7,048 | | $ | 9,290 | | $ | 16,337 | | | $ | 8,159 | | $ | 8,309 | | $ | 16,468 | |
| | | | | | | | | | | | | | | |
| REVENUES | Three months ended March 31 | | |
| 2022 | | 2021 | | | | |
| Commercial Engines & Services | $ | 3,853 | | | $ | 3,354 | | | | | |
| Military | 1,036 | | | 956 | | | | | |
| Systems & Other | 714 | | | 682 | | | | | |
| Aviation | $ | 5,603 | | | $ | 4,992 | | | | | |
| | | | | | | |
| Healthcare Systems | $ | 3,875 | | | $ | 3,825 | | | | | |
| Pharmaceutical Diagnostics | 487 | | | 482 | | | | | |
| Healthcare | $ | 4,363 | | | $ | 4,308 | | | | | |
| | | | | | | |
| Onshore Wind | $ | 1,906 | | | $ | 2,118 | | | | | |
| Grid Solutions equipment and services | 668 | | | 795 | | | | | |
| | | | | | | |
| Hydro, Offshore Wind and Hybrid Solutions | 297 | | | 335 | | | | | |
| Renewable Energy | $ | 2,871 | | | $ | 3,248 | | | | | |
| | | | | | | |
| Gas Power | $ | 2,489 | | | $ | 2,829 | | | | | |
| Steam Power | 636 | | | 706 | | | | | |
| Power Conversion, Nuclear and other | 377 | | | 385 | | | | | |
| Power | $ | 3,501 | | | $ | 3,921 | | | | | |
| | | | | | | |
| Total segment revenues | 16,337 | | | 16,468 | | | | | |
| | | | | | | |
| Corporate | 702 | | | 603 | | | | | |
| | | | | | | |
| Total revenues | $ | 17,040 | | | $ | 17,071 | | | | | |
| | | | | | | |
|
REMAINING PERFORMANCE OBLIGATION. As of March 31, 2021,2022, the aggregate amount of the contracted revenues allocated to our unsatisfied (or partially unsatisfied) performance obligations was $226,962$240,740 million. We expect to recognize revenue as we satisfy our remaining performance obligations as follows: (1) equipment-related remaining performance obligation of $40,951$45,687 million, of which 62%56%, 82% and 97%98% is expected to be satisfied within 1, 2 and 5 years, respectively; and (2) services-related remaining performance obligation of $186,012$195,053 million, of which 15%11%, 47%41%, 67%63% and 83%81% 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 10.9. CONTRACT AND OTHER DEFERRED ASSETS & PROGRESS COLLECTIONS AND DEFERRED INCOME
Contract and other deferred assets increased $153decreased $600 million in the three months ended March 31, 20212022 primarily due to decreased long-term service agreements and the timing of billing milestones ahead of revenue recognition ahead of billing milestones on our long-term equipment contracts. Our long-term service agreements decreased primarily due to billings of $2,232$2,772 million and net unfavorable changes in estimated profitability of $16 million at Aviation and $20 million at Power, partially 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 $8 million at Power.$2,329 million.
| | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | Power | Aviation | Renewable Energy | Healthcare | Other | Total |
| Revenues in excess of billings | $ | 5,223 | | $ | 2,911 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 8,134 | |
| Billings in excess of revenues | (1,541) | | (5,347) | | 0 | | 0 | | 0 | | (6,888) | |
| Long-term service agreements | $ | 3,682 | | $ | (2,436) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1,246 | |
| Short-term and other service agreements | 139 | | 342 | | 109 | | 164 | | 16 | | 769 | |
| Equipment contract revenues | 2,024 | | 36 | | 1,239 | | 289 | | 217 | | 3,805 | |
| Current contract assets | $ | 5,845 | | $ | (2,058) | | $ | 1,348 | | $ | 454 | | $ | 232 | | $ | 5,821 | |
| | | | | | |
| Nonrecurring engineering costs | 13 | | 2,436 | | 33 | | 29 | | 0 | | 2,511 | |
| Customer advances and other | 783 | | 2,570 | | 0 | | 122 | | 0 | | 3,474 | |
| Non-current contract and other deferred assets | $ | 796 | | $ | 5,005 | | $ | 33 | | $ | 151 | | $ | 0 | | $ | 5,985 | |
| Total contract and other deferred assets | $ | 6,641 | | $ | 2,948 | | $ | 1,381 | | $ | 604 | | $ | 233 | | $ | 11,806 | |
| | December 31, 2020 | | |
| March 31, 2022 | | March 31, 2022 | Aviation | Healthcare | Renewable Energy | Power | Corporate | Total |
| Revenues in excess of billings | Revenues in excess of billings | $ | 5,282 | | $ | 3,072 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 8,354 | | Revenues in excess of billings | $ | 2,289 | | $ | — | | $ | — | | $ | 5,394 | | $ | — | | $ | 7,683 | |
| Billings in excess of revenues | Billings in excess of revenues | (1,640) | | (5,375) | | 0 | | 0 | | 0 | | (7,015) | | Billings in excess of revenues | (5,852) | | — | | — | | (1,662) | | — | | (7,514) | |
| Long-term service agreements | Long-term service agreements | $ | 3,642 | | $ | (2,304) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1,338 | | Long-term service agreements | $ | (3,564) | | $ | — | | $ | — | | $ | 3,732 | | $ | — | | $ | 168 | |
| Short-term and other service agreements | Short-term and other service agreements | 129 | | 282 | | 106 | | 173 | | 29 | | 719 | | Short-term and other service agreements | 383 | | 172 | | 112 | | 94 | | 16 | | 778 | |
| Equipment contract revenues | Equipment contract revenues | 2,015 | | 59 | | 1,127 | | 306 | | 201 | | 3,707 | | Equipment contract revenues | 35 | | 303 | | 1,231 | | 1,513 | | 217 | | 3,300 | |
| Current contract assets | Current contract assets | $ | 5,786 | | $ | (1,963) | | $ | 1,233 | | $ | 479 | | $ | 229 | | $ | 5,764 | | Current contract assets | $ | (3,145) | | $ | 475 | | $ | 1,343 | | $ | 5,339 | | $ | 233 | | $ | 4,246 | |
| | Nonrecurring engineering costs | Nonrecurring engineering costs | 16 | | 2,409 | | 34 | | 31 | | 0 | | 2,490 | | Nonrecurring engineering costs | 2,516 | | 30 | | 24 | | 10 | | — | | 2,580 | |
| Customer advances and other | Customer advances and other | 822 | | 2,481 | | 0 | | 128 | | (32) | | 3,398 | | Customer advances and other | 2,625 | | 158 | | — | | 796 | | — | | 3,579 | |
| Non-current contract and other deferred assets | Non-current contract and other deferred assets | $ | 838 | | $ | 4,889 | | $ | 34 | | $ | 159 | | $ | (32) | | $ | 5,888 | | Non-current contract and other deferred assets | $ | 5,141 | | $ | 189 | | $ | 24 | | $ | 806 | | $ | — | | $ | 6,159 | |
| Total contract and other deferred assets | Total contract and other deferred assets | $ | 6,623 | | $ | 2,927 | | $ | 1,268 | | $ | 638 | | $ | 197 | | $ | 11,653 | | Total contract and other deferred assets | $ | 1,996 | | $ | 664 | | $ | 1,367 | | $ | 6,145 | | $ | 233 | | $ | 10,405 | |
| | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | Aviation | Healthcare | Renewable Energy | Power | Corporate | Total |
| Revenues in excess of billings | $ | 2,478 | | $ | — | | $ | — | | $ | 5,495 | | $ | — | | $ | 7,972 | |
| Billings in excess of revenues | (5,731) | | — | | — | | (1,614) | | — | | (7,346) | |
| Long-term service agreements | $ | (3,253) | | $ | — | | $ | — | | $ | 3,880 | | $ | — | | $ | 627 | |
| Short-term and other service agreements | 340 | | 166 | | 87 | | 80 | | 20 | | 692 | |
| Equipment contract revenues | 33 | | 287 | | 1,297 | | 1,709 | | 236 | | 3,562 | |
| Current contract assets | $ | (2,881) | | $ | 453 | | $ | 1,384 | | $ | 5,669 | | $ | 256 | | $ | 4,881 | |
| | | | | | |
| Nonrecurring engineering costs | 2,479 | | 31 | | 28 | | 12 | | — | | 2,550 | |
| Customer advances and other | 2,620 | | 154 | | — | | 801 | | — | | 3,574 | |
| Non-current contract and other deferred assets | $ | 5,099 | | $ | 184 | | $ | 28 | | $ | 813 | | $ | — | | $ | 6,124 | |
| Total contract and other deferred assets | $ | 2,218 | | $ | 637 | | $ | 1,412 | | $ | 6,482 | | $ | 256 | | $ | 11,005 | |
Progress collections and deferred income decreased $431$1,201 million primarily due to the timingreclassification of revenue recognition in excessa portion of our GE Steam Power business to held for sale, partially offset by the timing of new collections received in excess of revenue recognition, primarily at Aviation and Power.Aviation. Revenues recognized for contracts included in a liability position at the beginning of the year were $5,909$4,638 million and $4,137$5,984 million for the three months ended March 31, 20212022 and 2020,2021, 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 | | |
| March 31, 2022 | | March 31, 2022 | Aviation | Healthcare | Renewable Energy | Power | Corporate | Total |
| Progress collections on equipment contracts | Progress collections on equipment contracts | $ | 4,918 | | $ | 214 | | $ | 1,229 | | $ | 0 | | $ | 0 | | $ | 6,362 | | Progress collections on equipment contracts | $ | 112 | | $ | — | | $ | 1,921 | | $ | 3,785 | | $ | — | | $ | 5,818 | |
| Other progress collections | Other progress collections | 458 | | 4,623 | | 4,604 | | 414 | | 152 | | 10,252 | | Other progress collections | 4,654 | | 538 | | 2,795 | | 386 | | 129 | | 8,502 | |
| | Current deferred income | Current deferred income | 17 | | 132 | | 194 | | 1,309 | | 105 | | 1,757 | | Current deferred income | 144 | | 1,396 | | 226 | | 12 | | 107 | | 1,886 | |
| Progress collections and deferred income | Progress collections and deferred income | $ | 5,393 | | $ | 4,969 | | $ | 6,028 | | $ | 1,724 | | $ | 257 | | $ | 18,371 | | Progress collections and deferred income | $ | 4,910 | | $ | 1,934 | | $ | 4,943 | | $ | 4,184 | | $ | 236 | | $ | 16,206 | |
| Non-current deferred income | Non-current deferred income | 116 | | 898 | | 214 | | 564 | | 10 | | 1,801 | | Non-current deferred income | 1,099 | | 585 | | 169 | | 99 | | 2 | | 1,953 | |
| Total Progress collections and deferred income | Total Progress collections and deferred income | $ | 5,509 | | $ | 5,867 | | $ | 6,241 | | $ | 2,288 | | $ | 267 | | $ | 20,172 | | Total Progress collections and deferred income | $ | 6,009 | | $ | 2,519 | | $ | 5,112 | | $ | 4,283 | | $ | 237 | | $ | 18,159 | |
| | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | | | | | |
| Progress collections on equipment contracts | $ | 142 | | $ | — | | $ | 1,843 | | $ | 5,198 | | $ | — | | $ | 7,183 | |
| Other progress collections | 4,469 | | 522 | | 2,866 | | 385 | | 111 | | 8,354 | |
| | | | | | |
| Current deferred income | 170 | | 1,336 | | 198 | | 33 | | 99 | | 1,835 | |
| Progress collections and deferred income | $ | 4,782 | | $ | 1,858 | | $ | 4,907 | | $ | 5,615 | | $ | 210 | | $ | 17,372 | |
| Non-current deferred income | 1,090 | | 592 | | 194 | | 110 | | 3 | | 1,989 | |
| Total Progress collections and deferred income | $ | 5,871 | | $ | 2,450 | | $ | 5,101 | | $ | 5,725 | | $ | 213 | | $ | 19,361 | |
NOTE 11.10. ALL OTHER ASSETS. All other current assets and All other assets primarily includesinclude equity method and other investments, long-term customer and sundry receivables (see Note 4), cash and cash equivalents and receivables in our run-off insurance operations and prepaid taxes and other deferred charges. Consolidated All other non-current assets increased $1,270$727 million in the three months ended March 31, 2021,2022, primarily due to an increaseincreases in Insurance cash and cash equivalents of $1,252$441 million, equity method and other investments of $187 million and pension surplus of $183 million.
NOTE 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 | |
At March 31, 2021, the outstanding GE Capital borrowings that had been assumed by GE Industrial as part of the GE Capital Exit Plan was $21,538 million ($1,784 million short-term and $19,754 million long-term), for which GE Industrial has an offsetting Receivable from GE Capital of $18,361 million. The difference of $3,177 million in long-term 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.
NOTE 11. BORROWINGS
| | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 | |
| | | | | |
| | | | | |
| Current portion of long-term borrowings | | | | | |
| Senior notes issued by GE | | $ | 1,228 | | | $ | 1,249 | | |
| Senior and subordinated notes assumed by GE | | 2,516 | | | 1,645 | | |
| Senior notes issued by GE Capital | | 1,099 | | | 1,370 | | |
| Other | | 142 | | | 97 | | |
| Total short-term borrowings | | $ | 4,985 | | | $ | 4,361 | | |
| | | | | |
| | | | | |
| Senior notes issued by GE | | $ | 5,232 | | | $ | 5,373 | | |
| Senior and subordinated notes assumed by GE | | 10,196 | | | 11,306 | | |
| Senior notes issued by GE Capital | | 12,348 | | | 13,274 | | |
| Other | | 873 | | | 870 | | |
| Total long-term borrowings | | $ | 28,649 | | | $ | 30,824 | | |
| Total borrowings | | $ | 33,633 | | | $ | 35,186 | | |
At March 31, 2021, total GE Industrial borrowings of $22,886 million comprised GE Industrial-issued borrowings of $19,709 million and intercompany loans from GE Capital to GE Industrial of $3,177 million as described above.
GE IndustrialThe Company 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 subsidiaries of GE Capital. This guarantee applied to $27,332$12,547 million and $28,503$13,719 million of senior notes and other debt issued by GE Capital debt at March 31, 20212022 and December 31, 2020,2021, respectively.
See Note 19 for further information about borrowings and associated interest rate swaps.
NOTE 13.12. INSURANCE LIABILITIES AND ANNUITY BENEFITS.Insurance liabilities and annuity benefits comprise substantially all obligations to annuitants and insureds in our run-off insurance operations. Our insurance operations (net of eliminations) generated revenues of $775$767 million and $616$755 million, profit of $225 million and profit (loss) of $116$138 million, and $(93)net earnings of $178 million and $111 million for the three months ended March 31, 20212022 and 2020,2021, respectively. These operations were supported by assets of $50,353$48,378 million and $50,824$49,894 million at March 31, 20212022 and December 31, 2020,2021, respectively. A summary of our insurance contracts is presented below:
| | March 31, 2021 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total | |
| March 31, 2022 | | March 31, 2022 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total |
| Future policy benefit reserves | Future policy benefit reserves | $ | 16,997 | | $ | 9,105 | | $ | 183 | | $ | 5,580 | | $ | 31,864 | | Future policy benefit reserves | $ | 17,112 | | $ | 8,811 | | $ | 191 | | $ | — | | $ | 26,114 | |
| Claim reserves | Claim reserves | 4,397 | | 306 | | 1,062 | | — | | 5,765 | | Claim reserves | 4,526 | | 267 | | 551 | | — | | 5,344 | |
| Investment contracts | Investment contracts | 0 | | 1,018 | | 1,003 | | — | | 2,021 | | Investment contracts | — | | 933 | | 950 | | — | | 1,883 | |
| Unearned premiums and other | Unearned premiums and other | 16 | | 191 | | 147 | | — | | 353 | | Unearned premiums and other | 12 | | 187 | | 86 | | — | | 285 | |
| | 21,409 | | 10,620 | | 2,395 | | 5,580 | | 40,004 | | |
| Eliminations | — | | — | | (442) | | — | | (442) | | |
| | Total | Total | $ | 21,409 | | $ | 10,620 | | $ | 1,953 | | $ | 5,580 | | $ | 39,562 | | Total | $ | 21,650 | | $ | 10,198 | | $ | 1,778 | | $ | — | | $ | 33,626 | |
| | December 31, 2020 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total | |
| December 31, 2021 | | December 31, 2021 | |
| Future policy benefit reserves | Future policy benefit reserves | $ | 16,934 | | $ | 9,207 | | $ | 181 | | $ | 8,160 | | $ | 34,482 | | Future policy benefit reserves | $ | 17,097 | | $ | 8,902 | | $ | 188 | | $ | 3,394 | | $ | 29,581 | |
| Claim reserves | Claim reserves | 4,393 | | 275 | | 1,068 | | — | | 5,736 | | Claim reserves | 4,546 | | 258 | | 585 | | — | | 5,389 | |
| Investment contracts | Investment contracts | 0 | | 1,034 | | 1,016 | | — | | 2,049 | | Investment contracts | — | | 955 | | 954 | | — | | 1,909 | |
| Unearned premiums and other | Unearned premiums and other | 19 | | 189 | | 89 | | — | | 298 | | Unearned premiums and other | 15 | | 184 | | 89 | | — | | 287 | |
| | 21,346 | | 10,705 | | 2,354 | | 8,160 | | 42,565 | | |
| Eliminations | — | | — | | (374) | | — | | (374) | | |
| | Total | Total | $ | 21,346 | | $ | 10,705 | | $ | 1,980 | | $ | 8,160 | | $ | 42,191 | | Total | $ | 21,658 | | $ | 10,299 | | $ | 1,815 | | $ | 3,394 | | $ | 37,166 | |
(a) To the extent that unrealized gains on specific investment securities supporting our insurance contracts would result in a premium deficiency should those gains be realized, an increase in future policy benefit reserves is recorded, with an after-tax reduction of net unrealized gains recognized through Accumulated other comprehensive income (loss) (AOCI) in our consolidated Statement of Earnings (Loss). The decrease in Other adjustments of $2,580$3,394 million is a result of the decline in unrealized gains on investment securities.
Claim reservesreserve activity included incurred claims of $454$387 million and $507$454 million, of which insignificant amounts related to the recognition of adjustments to prior year claim reserves arising from our periodic reserve evaluation forin the three months ended March 31, 20212022 and 2020,2021, respectively. Paid claims were $424$443 million and $405$424 million in the three months ended March 31, 20212022 and 2020,2021, respectively.
Reinsurance recoverables, net of allowances of $1,540$1,685 million and $1,510$1,654 million, are included in non-current Other GE Capital receivablesAll other assets in our consolidated Statement of Financial Position, and amounted to $2,592$2,674 million and $2,552$2,651 million at March 31, 20212022 and December 31, 2020,2021, 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 14.13. 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. Please refer to Note 1312 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 20202021 for a discussion of our postretirement benefit plans.
The components of benefit plans cost other than the service cost are included in the caption Non-operating benefit costs in our consolidated Statement of Earnings (Loss).
| | PRINCIPAL PENSION PLANS | PRINCIPAL PENSION PLANS | Three months ended March 31 | | PRINCIPAL PENSION PLANS | Three months ended March 31 | |
| | 2021 | 2020 | | | 2022 | 2021 | |
| Service cost for benefits earned | Service cost for benefits earned | $ | 64 | | $ | 153 | | | Service cost for benefits earned | $ | 49 | | $ | 64 | | |
| Prior service cost amortization | Prior service cost amortization | 7 | | 37 | | | Prior service cost amortization | 2 | | 7 | | |
| Expected return on plan assets | Expected return on plan assets | (763) | | (748) | | | Expected return on plan assets | (786) | | (763) | | |
| Interest cost on benefit obligations | Interest cost on benefit obligations | 486 | | 587 | | | Interest cost on benefit obligations | 517 | | 486 | | |
| Net actuarial loss amortization | Net actuarial loss amortization | 864 | | 848 | | | Net actuarial loss amortization | 361 | | 864 | | |
| | Benefit plans cost | Benefit plans cost | $ | 658 | | $ | 877 | | | Benefit plans cost | $ | 143 | | $ | 658 | | |
Principal retiree benefit plans income was $40$52 million and $32$40 million for the three months ended March 31, 20212022 and 2020,2021, respectively. Other pension plans income was $117 million and $24 million income and $7 million cost for the three months ended March 31, 20212022 and 2020,2021, respectively.
We also have a defined contribution plan for eligible U.S. employees that provides employer contributions. Defined contribution plan costs were $108$110 million and $95$108 million for the three months ended March 31, 20212022 and 2020,2021, respectively.
NOTE 15.14. CURRENT AND ALL OTHER LIABILITIES. All other current liabilities and All other liabilities primarily includes liabilities for customer sales allowances, equipment project and commercial liabilities, loss contracts, employee compensation and benefits, income taxes payable and uncertain tax positions, operating lease liabilities (see Note 7)6), environmental, health and safety remediations and product warranties (see Note 21). GE Industrial All other current liabilities decreased $486increased $239 million in the three months ended March 31, 2021,2022, primarily due to increases in sales allowances of $277 million and taxes payable of $278 million partially offset by a decrease in Alstom legacy legal mattersemployee compensation and benefit liabilities of $199$432 million. All other liabilities decreased $763 million (see Note 21)in the three months ended March 31. 2022, primarily due to decreases in uncertain and a decrease in interest accruals on assumed debtother income taxes and related liabilities of $132$369 million and operating lease liabilities of $169 million.
NOTE 16.15. INCOME TAXES. Our consolidated effective income tax rate was (38.8)% and 59.7% and 0.9% duringfor the three months ended March 31, 2022 and 2021, respectively. The tax rate for 2022 reflects a tax provision on a pre-tax loss. The rate was negative primarily due to losses in foreign jurisdictions where they are not likely to be utilized and 2020, respectively.the global intangible minimum tax provisions, non-tax benefited asset impairment charges and the net unrealized loss on our interest in AerCap and Baker Hughes for which the loss could not be tax benefited. The rate for 2021 is higher than the U.S. statutory rate primarily due to the cost of global activities, including the base erosion and global intangible minimum tax provisions and from tax expense associated with the unrealized gain in our remaining interest in Baker Hughes. This was partially offset by an adjustment to decrease the 2021 three-month tax rate to be in linein-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 tax rate on the BioPharma sale was low because the gain outside the U.S. was taxed at lower than 21% and because we recorded $633 million of the tax associated with preparatory steps for the transaction in the fourth quarter of 2019.
The Internal Revenue Service (IRS) is currently auditing our consolidated U.S. income tax returns for 2016-2018. The United Kingdom tax authority (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 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.
NOTE 17.16. SHAREHOLDERS’ EQUITY
| | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | Three months ended March 31 | | |
| | | Three months ended March 31 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Dividends per share in dollars) | | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Dividends per share in dollars) | 2022 | 2021 | |
| | | 2021 | 2020 | | |
| Beginning balance | Beginning balance | $ | 60 | | $ | 61 | | | Beginning balance | $ | (4,562) | | $ | (4,386) | | |
| 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 before reclasses – net of taxes of $94 and $(57) | | AOCI before reclasses – net of taxes of $94 and $(57) | (166) | | 110 | | |
| Reclasses from AOCI – net of taxes of $— and $— | | Reclasses from AOCI – net of taxes of $— and $— | — | | — | | |
| AOCI | AOCI | (18) | | (41) | | | AOCI | (166) | | 110 | | |
| Less AOCI attributable to noncontrolling interests | Less AOCI attributable to noncontrolling interests | 0 | | 0 | | | Less AOCI attributable to noncontrolling interests | (4) | | 2 | | |
| Investment securities AOCI ending balance | $ | 42 | | $ | 20 | | | |
| Currency translation adjustments AOCI | | Currency translation adjustments AOCI | $ | (4,724) | | $ | (4,278) | | |
| | Beginning balance | Beginning balance | $ | (4,386) | | $ | (4,818) | | | Beginning balance | $ | 3,646 | | $ | (5,395) | | |
| 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 before reclasses – net of taxes of $25 and $(47) | | AOCI before reclasses – net of taxes of $25 and $(47) | 54 | | 16 | | |
| Reclasses from AOCI – net of taxes of $55 and $194 | | Reclasses from AOCI – net of taxes of $55 and $194 | 186 | | 689 | | |
| AOCI | AOCI | 110 | | 135 | | | AOCI | 240 | | 705 | | |
| Less AOCI attributable to noncontrolling interests | Less AOCI attributable to noncontrolling interests | 2 | | 2 | | | Less AOCI attributable to noncontrolling interests | 2 | | 1 | | |
| Currency translation adjustments AOCI ending balance | $ | (4,278) | | $ | (4,685) | | | |
| Benefit plans AOCI | | Benefit plans AOCI | $ | 3,884 | | $ | (4,691) | | |
| | Beginning balance | Beginning balance | $ | (28) | | $ | 49 | | | Beginning balance | $ | 2,498 | | $ | 32 | | |
| 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 before reclasses – net of taxes of $(88) and $(3)(a) | | AOCI before reclasses – net of taxes of $(88) and $(3)(a) | (312) | | 10 | | |
| Reclasses from AOCI – net of taxes of $1 and $14 | | Reclasses from AOCI – net of taxes of $1 and $14 | (5) | | 34 | | |
| AOCI | AOCI | 62 | | (211) | | | AOCI | (317) | | 44 | | |
| 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) | | | |
| Investment securities and cash flow hedges AOCI | | Investment securities and cash flow hedges AOCI | $ | 2,181 | | $ | 76 | | |
| | AOCI at March 31 | AOCI at March 31 | $ | (8,893) | | $ | (10,819) | | | AOCI at March 31 | $ | 1,341 | | $ | (8,893) | | |
| | Dividends declared per common share | Dividends declared per common share | $ | 0.01 | | $ | 0.01 | | | Dividends declared per common share | $ | 0.08 | | $ | 0.08 | | |
(a) Included adjustments of $2,038$2,681 million and $1,267$2,038 million for the three months ended March 31, 20212022 and 2020,2021, 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 1312 for further information.
(b) The total reclassification from AOCI included $836 million, including currency translation of $688 million, net of taxes, for the three months ended March 31, 2020, related to the sale of our BioPharma business within our Healthcare segment.
On January 21, 2021, GE Capital Series DFor information on our common and preferred stock issuedissuances andredeemable noncontrolling interests, please refer to 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, effective January 21, 2021 became callable for $5,694 million on dividend payment dates and which dividends converted from 5% fixed rate to 3-month LIBOR plus 3.33%, payable quarterly. Similarly, there were no changes to the GE Series A, B or C preferred stock, which become callable at various dates in 2022 and 2023. The total carrying value of GE preferred stock at March 31, 2021 was $5,930 million and will increase to $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, 2020 for further information.2021.
20212022 1Q FORM 10-Q 4132
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 $451 million and $487 million as of March 31, 2021 and December 31, 2020, respectively.
NOTE 18.17. EARNINGS PER SHARE INFORMATION
| | Three months ended March 31 | Three months ended March 31 | 2021 | | 2020 | Three months ended March 31 | 2022 | | 2021 |
| (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 for per-share calculation, shares in millions, per-share amounts in dollars) | Diluted | Basic | | Diluted | Basic |
| Earnings from continuing operations | $ | 90 | | $ | 92 | | | $ | 6,202 | | $ | 6,202 | | |
| Earnings (loss) from continuing operations | | Earnings (loss) from continuing operations | $ | (757) | | $ | (757) | | | $ | 90 | | $ | 92 | |
| Preferred stock dividends | Preferred stock dividends | (72) | | (72) | | | (43) | | (43) | | Preferred stock dividends | (52) | | (52) | | | (72) | | (72) | |
| Accretion of redeemable noncontrolling interests, net of tax(a) | Accretion of redeemable noncontrolling interests, net of tax(a) | 2 | | 2 | | | 0 | | 0 | | Accretion of redeemable noncontrolling interests, net of tax(a) | — | | — | | | 2 | | 2 | |
| Earnings from continuing operations attributable to common shareholders | 20 | | 22 | | | 6,158 | | 6,158 | | |
| Earnings (loss) from continuing operations attributable to common shareholders | | Earnings (loss) from continuing operations attributable to common shareholders | (809) | | (809) | | | 20 | | 22 | |
| Earnings (loss) from discontinued operations | Earnings (loss) from discontinued operations | (2,897) | | (2,894) | | | (19) | | (19) | | Earnings (loss) from discontinued operations | (286) | | (286) | | | (2,897) | | (2,894) | |
| Net earnings (loss) attributable to GE common shareholders | Net earnings (loss) attributable to GE common shareholders | (2,874) | | (2,872) | | | 6,140 | | 6,140 | | Net earnings (loss) attributable to GE common shareholders | (1,094) | | (1,094) | | | (2,874) | | (2,872) | |
| | Shares of GE common stock outstanding | Shares of GE common stock outstanding | 8,772 | | 8,772 | | | 8,742 | | 8,742 | | Shares of GE common stock outstanding | 1,100 | | 1,100 | | | 1,096 | | 1,096 | |
| Employee compensation-related shares (including stock options) | Employee compensation-related shares (including stock options) | 35 | | — | | | 7 | | — | | Employee compensation-related shares (including stock options) | — | | — | | | 4 | | — | |
| Total average equivalent shares | Total average equivalent shares | 8,807 | | 8,772 | | | 8,749 | | 8,742 | | Total average equivalent shares | 1,100 | | 1,100 | | | 1,101 | | 1,096 | |
| | Earnings per share from continuing operations | Earnings per share from continuing operations | $ | 0 | | $ | 0 | | | $ | 0.70 | | $ | 0.70 | | Earnings per share from continuing operations | $ | (0.74) | | $ | (0.74) | | | $ | 0.02 | | $ | 0.02 | |
| Earnings (loss) per share from discontinued operations | Earnings (loss) per share from discontinued operations | (0.33) | | (0.33) | | | 0.00 | | 0.00 | | Earnings (loss) per share from discontinued operations | (0.26) | | (0.26) | | | (2.63) | | (2.64) | |
| Net earnings (loss) per share | Net earnings (loss) per share | (0.33) | | (0.33) | | | 0.70 | | 0.70 | | Net earnings (loss) per share | (0.99) | | (0.99) | | | (2.61) | | (2.62) | |
| | Potentially dilutive securities(b) | Potentially dilutive securities(b) | 370 | | | 422 | | | Potentially dilutive securities(b) | 43 | | | 48 | | |
(b) Outstanding stock awards not included in the computation of diluted earnings per share because their effect was antidilutive.
Our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and, therefore, are included in the computation of earnings per share pursuant to the two-class method. For the three months ended March 31, 2022, as a result of the loss from continuing operations, losses were not allocated to the participating securities. For the three months ended March 31, 2021, as a result of excess dividends in respect to the current period earnings, losses were not allocated to the participating securities. For
NOTE 18. OTHER INCOME
| | | | | | | | |
| |
| Three months ended March 31 |
| 2022 | 2021 |
| Purchases and sales of business interests | $ | 15 | | $ | 3 | |
| Licensing and royalty income | 64 | | 48 | |
| Equity method income | 41 | | (20) | |
| Net interest and investment income (loss)(a) | (132) | | 446 | |
| Other items | 84 | | 196 | |
| Total other income | $ | 73 | | $ | 673 | |
(a)Included a pre-tax realized and unrealized gain of $1,515 million and $296 million related to our interest in Baker Hughes in the three months ended March 31, 2020, application2022 and 2021, respectively. Included a pre-tax unrealized loss of this treatment had an insignificant effect.$1,736 million related to our interest in and note with AerCap in the three months ended March 31, 2022. See Note 3 for further information.
NOTE 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 | |
The fair value in relation to carrying value for borrowings at March 31, 2021 compared to December 31, 2020 was unchanged, as an increase in market interest rates was offset by narrowing GE Industrial credit spreads and a decline in fair value adjustments for debt in fair value hedge relationships. Unlike the carrying amount, estimated fair value of borrowings included $1,178 million and $898 million of accrued interest at March 31, 2021 and December 31, 2020, respectively. | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| Carrying
amount
(net) | Estimated
fair value | | Carrying
amount
(net) | Estimated
fair value |
| Assets | Loans and other receivables | $ | 2,561 | | $ | 2,598 | | | $ | 2,706 | | $ | 2,853 | |
| | | | | | |
| Liabilities | Borrowings (Note 11) | $ | 33,633 | | $ | 36,586 | | | $ | 35,186 | | $ | 41,207 | |
| Investment contracts (Note 12) | 1,883 | | 2,122 | | | 1,909 | | 2,282 | |
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.
DERIVATIVES AND HEDGING. Our policy requires that derivatives are used solely for managing risks and not for speculative purposes. Total gross notional was $91,921 million ($43,768 million in GE CapitalWe use derivatives to manage currency risks related to foreign exchange, and $48,153 million in GE Industrial) and $95,647 million ($45,445 million in GE Capital and $50,202 million in GE Industrial) at March 31, 2021 and December 31, 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.certain equity investments and commodity prices.
20212022 1Q FORM 10-Q 4233
| | | | | | | | | | | | | | | | | | | | | | | |
| 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. | | | | | | | | | | | | | | | | | | | | | | | |
| FAIR VALUE OF DERIVATIVES | March 31, 2022 | | December 31, 2021 |
| Gross Notional | All other assets | All other liabilities | | Gross Notional | All other assets | All other liabilities |
| Interest rate contracts | $ | 1,473 | | $ | 47 | | $ | 3 | | | $ | 2,071 | | $ | 75 | | $ | 4 | |
| Currency exchange contracts | 6,420 | | 139 | | 192 | | | 7,214 | | 114 | | 122 | |
| Derivatives accounted for as hedges | $ | 7,893 | | $ | 186 | | $ | 195 | | | $ | 9,285 | | $ | 188 | | $ | 126 | |
| | | | | | | |
| Interest rate contracts | $ | 155 | | $ | 6 | | $ | — | | | $ | 1,369 | | $ | 5 | | $ | 1 | |
| Currency exchange contracts | 63,817 | | 1,123 | | 1,236 | | | 64,097 | | 794 | | 756 | |
| Other contracts | 2,239 | | 389 | | 28 | | | 1,674 | | 387 | | 10 | |
| Derivatives not accounted for as hedges | $ | 66,211 | | $ | 1,518 | | $ | 1,264 | | | $ | 67,140 | | $ | 1,186 | | $ | 767 | |
| | | | | | | |
| Gross derivatives | $ | 74,104 | | $ | 1,704 | | $ | 1,459 | | | $ | 76,425 | | $ | 1,374 | | $ | 893 | |
| | | | | | | |
| Netting and credit adjustments | | $ | (975) | | $ | (978) | | | | $ | (637) | | $ | (639) | |
| Cash collateral adjustments | | — | | (87) | | | | (54) | | (42) | |
| Net derivatives recognized in statement of financial position | | $ | 729 | | $ | 394 | | | | $ | 684 | | $ | 212 | |
| | | | | | | |
| Net accrued interest | | $ | 3 | | $ | 10 | | | | $ | 10 | | $ | 5 | |
| Securities held as collateral | | (2) | | — | | | | (2) | | — | |
| Net amount | | $ | 731 | | $ | 403 | | | | $ | 691 | | $ | 217 | |
FAIR VALUE HEDGES. We use derivatives to hedgeAt March 31, 2022, the effectscumulative amount of interest rate and currency exchange rate changeshedging adjustments of $1,931 million (including $2,011 million on our borrowings.discontinued hedging relationships) was included in the carrying amount of the hedged liability of $15,636 million. At March 31, 2021, the cumulative amount of hedging adjustments of $3,826 million (including $2,330 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $26,926 million. At March 31, 2020, the cumulative amount of hedging adjustments of $6,527 million (including $2,348 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $41,735 million. The cumulative amount of hedging adjustments was primarily recorded in long-term borrowings.
CASH FLOW HEDGES.HEDGES AND NET INVESTMENT 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 $36 million and $(313) million for the three months ended March 31, 2021 and 2020, respectively. These amounts were primarily | | | | | | | | | | | | |
| Gain (loss) recognized in AOCI for the three months ended March 31 | | |
| 2022 | 2021 | | | | |
| Cash flow hedges(a) | $ | (5) | | $ | 36 | | | | | |
| Net investment hedges(b) | 112 | | 272 | | | | | |
(a) Primarily related to currency exchange and interest rate contracts.
(b) The carrying value of foreign currency debt designated as net investment hedges was $3,934 million and $8,106 million at March 31, 2022 and 2021, respectively. The total reclassified from AOCI into earnings was zero for both the three months ended March 31, 2022 and 2021.
The total amount in AOCI related to cash flow hedges of forecasted transactions was a $62$35 million gain at March 31, 2021.2022. We expect to reclassify $4$21 million of gain to earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. ForThe total reclassified from AOCI into earnings was $(24) million and $(33) million for the three months ended March 31, 2022 and 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.respectively. At March 31, 2021 and 2020,2022, the maximum term of derivative instruments that hedge forecasted transactions was 14 years and 15 years, respectively.
NET INVESTMENT HEDGES. For these hedges, the portion of the fair value changes of the derivatives or debt instruments that relates to changes in spot currency exchange rates is recorded in a separate component of AOCI. The portion of the fair value changes of the derivatives related to differences between spot and forward rates is recorded in earnings each period. The amounts recorded in AOCI affect earnings if the hedged investment is sold, substantially liquidated, or control is lost.
The total gain (loss) recognized in AOCI on hedging instruments for the three months ended March 31, 2021 and 2020 was $272 million and $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 $8,106 million and $9,145 million at March 31, 2021 and 2020, respectively. NaN amount was reclassified from AOCI into earnings for the three months ended March 31, 2021 and 2020, respectively.
EFFECTS OF DERIVATIVES ON EARNINGS. All derivatives are marked to fair value on our 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.approximately 13 years.
The table below presents the effectgains (losses) of our derivative financial instruments in the consolidated Statement of Earnings (Loss):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Three months ended March 31, 2022 | | Three months ended March 31, 2021 |
| Revenues | | Interest Expense | SG&A | Other(a) | | Revenues | | Interest Expense | SG&A | Other(a) |
| $ | 17,040 | | | $ | 406 | | $ | 3,651 | | $ | 12,526 | | | $ | 17,071 | | | $ | 500 | | $ | 2,894 | | $ | 13,211 | |
| | | | | | | | | | | |
| Effect of cash flow hedges | $ | 3 | | | $ | (7) | | $ | — | | $ | (21) | | | $ | 7 | | | $ | (8) | | $ | — | | $ | (32) | |
| | | | | | | | | | | |
| Hedged items | | | 78 | | | | | | | 1,843 | | | |
| Derivatives designated as hedging instruments | | | (87) | | | | | | | (1,899) | | | |
| Effect of fair value hedges | | | $ | (9) | | | | | | | $ | (56) | | | |
| | | | | | | | | | | |
| Interest rate contracts(b) | $ | 1 | | | 0 | 0 | $ | 20 | | | $ | 1 | | | $ | (9) | | 0 | $ | (1) | |
| Currency exchange contracts | 1 | | | 0 | (68) | | (79) | | | 0 | | 0 | 59 | | 342 | |
| Other | 0 | | 0 | (37) | | 4 | | | 0 | | 0 | 55 | | 19 | |
| Effect of derivatives not designated as hedges | $ | 1 | | | $ | — | | $ | (105) | | $ | (55) | | | $ | 1 | | | $ | (9) | | $ | 114 | | $ | 359 | |
(a) Amounts are inclusive of cost of sales and other income.
(b) The gain (loss)total of amount excludeddebt extinguishment costs was zero for cash flow hedges was $(16) million and $15 million forboth the three months ended March 31, 20212022 and 2020, respectively. This amount is recognized primarily in Revenues in our consolidated Statement of Earnings (Loss).2021.
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 $404$561 million and $392$564 million at March 31, 20212022 and December 31, 2020,2021, respectively. Counterparties' exposures to our derivative liability (including accrued interest), net of collateral posted by us, was $186$299 million and $307$159 million at March 31, 20212022 and December 31, 2020,2021, respectively.
NOTE 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 $1,712$443 million and $1,733$491 million and liabilities of $454$192 million and $657$206 million, inclusive of intercompany eliminations, at March 31, 20212022 and December 31, 2020,2021, respectively, from otherin consolidated VIEs. These entities were created to help our customers facilitate or finance the purchase of GE goodsequipment and services and have no features that could expose us to losses that would significantly exceed the difference between the consolidated assets and liabilities. Substantially all the assets of our consolidated VIEs at March 31, 2021 can only be used to settle the liabilities of those VIEs.
Our investments in unconsolidated VIEs were $3,371$5,310 million and $3,230$5,034 million at March 31, 20212022 and December 31, 2020,2021, respectively. TheseOf these investments, are primarily owned by GE Capital businesses of which $1,120$1,479 million and $1,141$1,481 million were owned by EFS, comprising equity method investments, primarily renewable energy tax equity investments, at March 31, 20212022 and December 31, 2020,2021, respectively. In addition, $2,024$3,608 million and $1,833$3,333 million were owned by our run-off insurance operations, primarily comprising investment securities at March 31, 20212022 and December 31, 2020,2021, 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 21.
NOTE 21. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIES
COMMITMENTS. GE CapitalWe had total investment commitments of $2,551$3,509 million at March 31, 2021.2022. 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$3,302 million and included within these commitments are obligations to make additional investments in unconsolidated VIEs of $447 million and $1,632 million, respectively.$3,149 million. See Note 20 for further information.
As of March 31, 2021,2022, in our Aviation segment, we have committed to provide financing assistance of $2,241$2,000 million of future customer acquisitions of aircraft equipped with our engines.
Commitments - Discontinued Operations. The GECAS business within discontinued operations has placed multiple-year orders for various Boeing, Airbus and other aircraft manufacturers with list prices approximating $26,118 million, excluding pre-delivery payments made in advance (including 269 new aircraft with estimated delivery dates of 18% in 2021, 18% in 2022 and 64% in 2023 through 2026) and secondary orders with airlines for used aircraft approximating $1,146 million (including 26 used aircraft with estimated delivery dates of 62% in 2021, 27% in 2022 and 11% in 2023) at March 31, 2021. When GECAS purchases aircraft, it is at contractual price, which is usually less than the aircraft manufacturer's list price. As of March 31, 2021, GECAS has made $2,647 million of pre-delivery payments to aircraft manufacturers.
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, 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.2021.
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 $1,975$1,846 million and $2,054$1,891 million at March 31, 20212022 and December 31, 2020,2021, respectively.
LEGAL MATTERS. The following information supplements and amends the discussion of Legal Matters in Note 2322 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020;2021; 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.
Alstom legacy legal matters. OnIn November 2015, we acquired the Thermal, Renewables and Grid businesses from Alstom. PriorAlstom, which 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.payments. 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 Slovenia that are described below. The reserve balance was $659$544 million and $858$567 million at March 31, 20212022 and December 31, 2020, respectively, with the reduction driven primarily by cash payment2021, respectively. Allegations in connection with the Šoštanj settlement described below.
Regardless of jurisdiction, the allegationsthese cases 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 disgorgement, fines andand/or 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.
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In connection with alleged improper payments by Alstom relating to contracts won in 2006 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 $430 million before the International 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 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 2021, GE reached a settlement of the arbitration claim with the power plant owner for a mix of cash and services valued by the plant owner at approximately $307 million.
Shareholder and related lawsuitslawsuits. . Since February 2018, multipleNovember 2017, several putative shareholder derivative lawsuitsclass actions under the federal securities laws have been filed against currentGE and former GE executive officerscertain affiliated individuals 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 fileda single action currently pending 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(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, this case was dismissed. In March 2019, plaintiffs filed an amended derivative complaint naming the same defendants. In April 2019, GE filed a motion to dismiss the amended complaint.. In October 2019, the court denied GE's motion to dismiss and stayed the case pending the outcome of the Hachem case. In November 2019, the plaintiffs moved to re-argue to challenge the stay, and GE cross-moved to re-argue the denial of the motion to dismiss andlead plaintiff 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 putativefifth amended consolidated class action (the Houston case) was filed in New York state court naming as defendants GE, certain GE subsidiaries and current and former GE executive officers and employees. It alleges violations of Sections 11, 12 and 15 of the Securities Act of 1933 and seeks damages on behalf of purchasers of senior notes issued in 2016 and rescission of transactions involving those notes. This case was stayed pending resolution of the motion to dismiss the Hachem case. In April 2021, the plaintiffs filed an amended complaint.
In February 2019, a securities action (the Touchstone case) was filed in the U.S. District Court for the Southern District of New Yorkcomplaint naming as defendants GE and current and former GE executive officers. It alleges violations of Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 and Section 1707.43 of the Ohio Securities Act and common law fraud based on alleged misstatements regardingrelated to insurance reserves GE Power’s revenue recognition practices related to long termand accounting for 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 6 institutional investorsshareholders who purchasedacquired GE common stock between August 1, 2014February 27, 2013 and October 30, 2018 and rescission of those purchases. This case was stayed pending resolution of theJanuary 23, 2018. GE filed a motion to dismiss the Hachem case. In March 2021, the plaintiffs filed an amended 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 Court recommending that the derivative action be terminated.December 2019. In January 2021, the special committee filed acourt granted defendants’ motion to terminatedismiss as to the action.majority of the claims. Specifically, the court dismissed all claims related to insurance reserves, as well as all claims related to accounting for long-term service agreements, with the exception of certain claims about historic disclosures related to factoring in the Power business that survive as to GE and its former CFO Jeffrey S. Bornstein. All other individual defendants have been dismissed from the case. In April 2022, the court granted the plaintiff’s motion for class certification for shareholders who acquired stock between February 26, 2016 and January 23, 2018, and granted the plaintiffs’ request to amend their complaint.
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, 2021,2022, approximately 86%87% of the Bank BPH portfolio is indexed to or denominated in foreign currencies (primarily Swiss francs), and the total portfolio had a carrying value, net of $1,986reserves, of $1,592 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, 2021,2022 the total amount of such estimated losses was $465$920 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 20212022 was driven primarily by increases in the numberacross each of lawsuits filed and estimated to be filed in the future.these factors. 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 decisionor binding resolutions 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 future or recent decisions or resolutions (including the ECJ decision in April 2021 on a case involving a Bank BPH mortgage loan, and the Polish Supreme Court binding resolutionsresolution delivered verbally in May 2021 with written reasoning issued in July 2021) on how Polish courts will interpret and apply the law in particular cases and how borrower behavior may change in response, neither orof which will beare known immediately upon the issuance of a decision or resolution; and 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 various settlement strategies or other approaches that other Polish banks have adopted or will adopt, or that Bank BPH may adopt in the future, in response to this proposal or other factors, and the approaches that regulators and other government authorities are adopting or will adopt in response to this proposal;response. In addition, there is uncertainty arising from investigations of the Polish Office of Competition and Consumer Protection (UOKiK), including aexisting or anticipated UOKiK decision in December 2020 which found that certaindecisions resulting from those investigations, particularly UOKiK's investigation into the adequacy of disclosure of foreign exchange clauses that appear in certain of Bank BPH’s mortgage loan agreements are unfair contractual termsrisk by banks (including BPH) and the legality under Polish law.law of unlimited foreign exchange risk on customers. Future adverse developments related to any of the foregoing, or other adverse developments such as actions by regulators or other governmental authorities could(including UOKiK), likely would have a material adverse effect on Bank BPH and the carrying value of its mortgage loan portfolio and couldas well as result in additional required capital contributions to Bank BPH or significant losses beyond the amountamounts that we currently estimate.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. 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 in 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.in February 2022 the EAB denied the petition. As of March 31, 2021,2022, 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, 2020.2021.
20212022 1Q FORM 10-Q 4736
NOTE 22. INTERCOMPANY TRANSACTIONS. Presented below is a walk of intercompany eliminations from the combined GE Industrial and GE Capital totals to the consolidated cash flows for continuing operations.
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| Three months ended March 31, 2021 | Three months ended March 31, 2020 |
| Cash from (used for): | Operating activities | Investing activities | Financing activities | Operating activities | Investing activities | Financing activities |
| Combined GE Industrial and GE Capital cash flows | $ | (2,970) | | $ | 1,747 | | $ | (2,178) | | $ | (1,138) | | $ | 20,776 | | $ | (8,494) | |
| GE Industrial current receivables sold to GE Capital(a) | 211 | | (448) | | 237 | | (997) | | 945 | | 52 | |
| GE Industrial long-term receivables sold to GE Capital | 67 | | (67) | | 0 | | 135 | | (135) | | 0 | |
| | | | | | |
| Supply chain finance programs | 120 | | (120) | | 0 | | 884 | | (884) | | 0 | |
| Other reclassifications and eliminations | (68) | | (265) | | 333 | | 197 | | (677) | | 480 | |
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| Consolidated cash flows | $ | (2,640) | | $ | 847 | | $ | (1,608) | | $ | (919) | | $ | 20,025 | | $ | (7,962) | |
(a)Included the elimination of $3,218 million and $3,972 million payments to GE Industrial for current receivables purchased and retained by GE Capital and the related reclassification to CFOA of $3,429 million and $2,975 million due to GE Capital collections and other activity in our consolidated statement of cash flows for the three months ended March 31, 2021 and 2020, respectively.
Cash payments received on the Receivable facility deferred purchase price are reflected as Cash from investing activities in the GE Capital and Consolidated columns of our consolidated Statement of Cash Flows. Sales of customer receivables from GE Industrial to GE Capital are classified as Cash from operating activities in the GE Industrial column of our Statement of Cash Flows. See Note 4 for further information.
NOTE 23. OTHER INCOME
| | | | | | | | | | | |
| Three months ended March 31 | | |
| 2021 | 2020 | | | |
| Purchases and sales of business interests(a) | $ | 3 | | $ | 12,372 | | | | |
| Licensing and royalty income | 48 | | 42 | | | | |
| Associated companies | 16 | | 39 | | | | |
| Net interest and investment income (loss)(b) | 439 | | (5,632) | | | | |
| Other items | 116 | | 53 | | | | |
| GE Industrial | $ | 623 | | $ | 6,874 | | | | |
| Eliminations | 3 | | (4) | | | | |
| Total | $ | 626 | | $ | 6,869 | | | | |
(a)Included a pre-tax gain of $12,292 million ($11,145 million after-tax) on the sale of BioPharma for the three months ended March 31, 2020. See Note 2 for further information.
(b)Included a pre-tax realized and unrealized gain of $296 million ($188 million after-tax) and a pre-tax unrealized loss of $5,710 million ($4,631 million after-tax) related to our interest in Baker Hughes for the three months ended March 31, 2021 and 2020, respectively.
EXHIBITS
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| Transaction Agreement, dated as of March 9, 2021, by and among GE Ireland USD Holdings ULC, GE Financial Holdings ULC, GE Capital US Holdings, Inc., General Electric Company, AerCap Holdings N.V., AerCap US Aviation LLC and AerCap Aviation Leasing Limited (Incorporated by reference to Exhibit 2.1 to GE’s Current Report on Form 8-K, dated March 12, 2021 (Commission file number 001-00035)). |
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| Exhibit 101 | 101. The following materials from General Electric Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021,2022, formatted in XBRL (eXtensible Business Reporting Language); (i) Statement of Earnings (Loss) for the three months ended March 31, 20212022 and 2020,2021, (ii) Statement of Financial Position at March 31, 20212022 and December 31, 2020,2021, (iii) Statement of Cash Flows for the three months ended March 31, 20212022 and 2020,2021, (iv) Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 20212022 and 2020,2021, (v) Statement of Changes in Shareholders' Equity for the three months ended March 31, 20212022 and 2020,2021, and (vi) Notes to Consolidated Financial Statements. |
| Exhibit 104 | 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 NumberFORM 10-Q CROSS REFERENCE INDEX | | Page(s) |
| Part I – FINANCIAL INFORMATION |
| Item 1. | | Financial Statements | | |
| Item 2. | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | |
| Item 3. | | Quantitative and Qualitative Disclosures About Market Risk | | 16-17, 42-4413, 35 |
| Item 4. | | Controls and Procedures | | |
Part II – OTHER INFORMATION |
| Item 1. | | Legal Proceedings | | 45-4735-36 |
| Item 1A. | | Risk Factors | | |
| Item 2. | | Unregistered Sales of Equity Securities and Use of Proceeds | | |
| Item 3. | | Defaults Upon Senior Securities | | Not applicable |
| Item 4. | | Mine Safety Disclosures | | Not applicable |
| Item 5. | | Other Information | | Not applicable |
| Item 6. | | Exhibits | | |
| Signatures | | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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April 27, 202126, 2022 | | /s/ Thomas S. Timko |
| Date | | Thomas S. Timko Vice President, Chief Accounting Officer and Controller Principal Accounting Officer |
20212022 1Q FORM 10-Q 4937
