UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021March 31, 2022
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 $0.01 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 1,098,137,1281,100,664,978 shares of common stock with a par value of $0.01 per share outstanding at September 30, 2021.March 31, 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 satisfy closing conditions, 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 demand and the financial performance of major industries and customers we serve, such as secular, cyclical and competitive pressures in our Power business; pricing, the timing of customer investment and other factors in renewable energy markets; demand for air travel and other dynamics related to the COVID-19 pandemic; conditions in key geographic markets; and other shifts in the competitive landscape for our products and services;
•operational execution by our businesses, including the operations and execution 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 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 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.
2021 3Q2022 1Q FORM 10-Q 3
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, 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 (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.
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 had a material adverse impact on our operations and financial performance, as well as on the operations and financial performance2022, GE’s Board of many of the customers and suppliers in industries that we serve. While factors related directly and indirectlyDirectors authorized up 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. We ended the third quarter of 2021 with $25.0$3 billion of consolidated cash, cash equivalentscommon share repurchases. GE expects to consider share repurchases as one of a number of potential capital allocation alternatives on an ongoing basis, along with organic and restricted cash, in addition to our available credit lines of $14.5 billion. Seeinorganic investments. There were no share repurchases during the Capital Resources and Liquidity section for further information. We anticipate that our operations and financial performance will continue to be impacted by 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 duration of the pandemic; governmental, business and individuals’ actions in response to the pandemic; and the development, availability and public acceptance of effective treatments and vaccines.three months ended March 31, 2022.
GECASSteam Power. . On March 9, 2021,In the first quarter of 2022, we announced an agreementsigned a non-binding memorandum of understanding for GE Steam Power to combine GECAS with AerCap Holdings N.V. (AerCap)sell a portion of its business to Électricité de France S.A. (EDF), which resulted in a reclassification of that business to held for whichsale. A non-cash, pre-tax impairment charge was taken related to the Company expectsremaining business intangible and fixed assets of approximately $0.8 billion. This charge was recorded in continuing operations at Corporate. The sale transaction is expected to receive approximately $22.6 billion in cash, inclusive of estimated contractual closing adjustments, 111.5 million shares of AerCap common stock (approximately 46% ownership interest) valued at approximately $6.4 billion based on the AerCap’s closing share price on September 30, 2021, and $1 billion in AerCap notes (GECAS transaction). In connection with the signing of the transaction agreement, GE Capital recorded a non-cash after-tax charge of $3.6 billion in discontinued operations in 2021, including a $0.2 billion gainbe finalized in the third quarter driven by the increase in AerCap's share price. This was partially offset by $1.2 billionfirst half of GECAS earnings in 2021, including $0.5 billion of earnings in the third quarter. The results of GECAS are presented in discontinued operations. Given the economics of GECAS accrue2023, subject 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. In October 2021, we received final regulatory approvals and are now expecting the transaction to be completed on November 1, 2021. See Note 2 for further information.
After completion of the parties’ respective information and consultation processes and satisfaction of certain conditions, and closing the transaction we will electis expected to prospectively measure our investmentresult in AerCap at fair value and expect to have continuing involvement with AerCap, primarily through our ownership interest and ongoing sales or leases of products and services. In addition, we expect to sell our stake in an orderly fashion over time. The remainder of GE Capital, including Energy Financial Services (EFS) and our run-off insurance operations, will be reported within Corporate. Effective for our Annual Report on Form 10-K for the year ended December 31, 2021, we will move from three-column to one-column financial statement reporting. At that point, while we will continue to provide the same level of Insurance disclosures, the results of our Insurance business will be excluded from certain non-GAAP financial measures.
Liability Management Actions. In the second quarter of 2021, we completed a debt tender to repurchase a total of $7.3 billion of debt, comprising $4.1 billion of GE Industrial and $3.2 billion of GE Capital debt. The total after-tax loss on the tender was $1.1 billion ($1.4 billion pre-tax), comprising $0.5 billion in GE Industrial and $0.6 billion in GE Capital.
Factoring. Effective April 1, 2021, the Company discontinued the majority of its factoring programs. For the six months ended September 30, 2021, the adverse impact to GE Industrial CFOA was $3.1 billion, which primarily represents the cash that GE Industrial would have otherwise collected in the period had customer receivables not been previously sold and is excluded from GE Industrial free cash flows*.significant gain.
Reverse Stock Split.Russia and Ukraine. In the secondfirst quarter of 2021,2022, we announced that we would proceed withrecognized $0.2 billion of pre-tax charges primarily from impairments of receivables, inventory, contract assets and equity method investments directly resulting from the 1-for-8 reverse stock split, as approved by shareholders,conflict between Russia and filed an amendmentUkraine and sanctions primarily related to our certificateAviation and Power businesses. As of incorporationMarch 31, 2022, we have approximately $0.6 billion of remaining assets, which relate to effectuate the reverse stock split after the close of trading on July 30, 2021. GE common stock began trading on a split-adjusted basis on August 2, 2021. Effective this quarter, our shares of outstanding common stock and earnings per share calculation have been retroactively restated for all periods presented.activity not subject to sanctions.
BK Medical. In the third quarter of 2021, we entered into an agreement to acquire BK Medical, a leader in surgical ultrasound imaging and guidance, from Altaris Capital Partners for a cash purchase price of $1.45 billion. The parties expect the transaction to close inFIRST QUARTER 2022 subject to review by the relevant regulatory authorities.
THIRD QUARTER 2021 RESULTS. ConsolidatedTotal revenues were $18.4$17.0 billion, down $0.1 billionflat for the quarter, driven primarily by decreased GE Industrial and GE Capital revenues. GE Industrial revenues decreased $0.1 billion (1%), driven primarilyan increase at Aviation, offset by decreases at Power and Renewable Energy and Healthcare. GE Capital revenues decreased 3%.Energy.
Continuing earnings (loss) per share was $0.54.$(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, gains (losses) on purchases and sales of business interests, and restructuring and other charges, Adjusted earnings per share* was $0.57.
$0.24. For the three months ended September 30, 2021, GE IndustrialMarch 31, 2022, profit (loss) was $0.9$(0.5) billion and profit (loss) margins were 5.0%(3.1)%, up $2.2down $0.8 billion, driven primarily bydue to the Steam asset sale impairment of $0.8 billion, a higher net gainloss on the value of equity securities of $1.1$0.6 billion higher profit at our industrial segments of $0.4 billion,compared to the nonrecurrence of prior year asset impairments in Steamgain, Russia and Ukraine charges of $0.4$0.2 billion and separation costs of $0.1 billion, partially offset by a decrease in non-operating benefit costs of $0.2$0.6 billion, lower GE Industrial interest and other financial charges of $0.1 billion, higher profit on our run-off Insurance business of $0.1 billion and a decrease in adjusted corporate operating costs ofhigher segment profit $0.1 billion. Adjusted GE Industrial organic profit* increased $0.5$0.2 billion (22%), driven primarily by increases at Aviation and Power, partially offset by decreases at Renewable Energy and Healthcare. Additionally, we are starting
*Non-GAAP Financial Measure
We continue to experience inflation pressure in our supply chain, as well as delays in sourcing key materials needed for our products. The most significant impact to date has been at our Healthcare segment, whichThis has delayed our ability to convert remaining performance obligation (RPO) to revenue.revenue and negatively impacted our profit margins. While we are taking actions to limit this pressure, we may continue to experience a greater impact on our longer cycle businessesimpacts in future periods. Also, geopolitical uncertainties with the ongoing Russia and Ukraine conflict, as well as recent COVID-19 impacts in China, are introducing additional challenges.
GE Industrial cash flows fromCash used for operating activities (CFOA) were $(0.8)was $(0.5) billion and $(3.2)$(2.6) billion for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively. GE Industrial cashCash used for operating activities decreased primarily due to an increase in net income (after adjusting for the gain on the sale of BioPharma, non-cash gains/losses related to our interest in Baker Hughes, non-operating benefit costs and non-operating debt extinguishment costs), and a decrease in cash collateral paid for income taxes,net of settlements on derivative contracts and an increase in all other operating activities, partially offset by a decreasean increase in Aviation-related customer allowance accruals and the settlement of an Alstom legacy legal matter in 2021. GE Industrial free cash flowsused for working capital. Free cash flows* (FCF)* were $1.3$(0.9) billion and $(3.8)$(3.4) billion for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively. GE Industrial FCFFCF* increased primarily due to a decrease in cash 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 operating activitiesworking capital (after adjusting for the impact from eliminations related to our receivables factoring and a decreasesupply chain finance programs in additions to property, plant and equipment and internal-use software. In addition, effective April 1, 2021, the Company discontinued the majority of its factoring programs. In the second and third quarter of 2021, the adverse impact to GE Industrial CFOA was $3.1 billion, which primarily represents the cash that GE Industrial would have otherwise collected in the period had customer receivables not been previously sold and is excluded from GE Industrial FCF*2021). See the Capital Resources and Liquidity - Statement of Cash Flows section for further information.
RPO is unfilled customer orders for products and product services (expected life of contract sales for product services) excluding any purchase order that provides the customer with the ability to cancel or terminate without incurring a substantive penalty. Historical cancellations of customer orders have been limited prior to the COVID-19 pandemic. In the second quarter of 2021, we voluntarily replaced our quarterly disclosures of backlog with RPO as a key metric, one commonly used across our industries, in order to simplify our reporting and align with our peers. See Note 98 for further information.
| | | RPO | RPO | September 30, 2021 | December 31, 2020 | September 30, 2020 | RPO | March 31, 2022 | December 31, 2021 | |
| Equipment | Equipment | $ | 46,666 | | $ | 45,991 | | $ | 44,634 | | Equipment | $ | 45,687 | | $ | 45,065 | | |
| Services | Services | 191,839 | | 184,608 | | 182,032 | | Services | 195,053 | | 194,755 | | |
| Total RPO | Total RPO | $ | 238,505 | | $ | 230,600 | | $ | 226,666 | | Total RPO | $ | 240,740 | | $ | 239,820 | | |
As of September 30, 2021March 31, 2022, RPO increased $7.9$0.9 billion (3%) from December 31, 2020,2021, primarily at Aviation, from engines contracted under long-term service agreements that have now been put into service; at Healthcare, from new contractsservice and renewals with large customers; and at Renewable Energy, primarily at Offshore Wind;contract modifications; partially offset by a decreasedecreases at Power, from the continued wind down of the Steam Power new build coal business and sales outpacing new orders in Gas Power contractual servicesservices; 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 continued wind downimpact of new build coal business. RPO increased $11.8 billion (5%) from September 30, 2020, primarily due to the same net increases as described above.a stronger U.S. dollar at Offshore Wind.
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | | | | |
| REVENUES | Three months ended September 30 | | Nine months ended September 30 |
| 2021 | 2020 | | 2021 | 2020 |
| Consolidated revenues | $ | 18,429 | | $ | 18,529 | | | $ | 53,826 | | $ | 54,823 | |
| | | | | |
| Equipment | 8,905 | | 9,625 | | | 25,178 | | 26,928 | |
| Services | 8,916 | | 8,293 | | | 26,459 | | 25,901 | |
| | | | | |
| | | | | |
| GE Industrial revenues | $ | 17,821 | | $ | 17,918 | | | $ | 51,637 | | $ | 52,828 | |
| | | | | |
| GE Capital revenues | $ | 734 | | $ | 758 | | | $ | 2,470 | | $ | 2,455 | |
| | | | | | | | | | | | |
| 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 September 30, 2021March 31, 2022, Consolidatedtotal revenues were down $0.1 billion, driven by decreases in GE Industrial and GE Capital revenues.
GE Industrial revenues decreased $0.1 billion (1%).flat. Equipment revenues decreased, primarily at Healthcare, driven by the nonrecurrence of the prior year order from the U.S. Department of Health and Human Services to deliver ventilators in partnership with Ford and reductions in Life Care Solutions (LCS) for Healthcare Systems (HCS) products; and at Power,Renewable Energy, due to decreases in Steam Power and Gas Power equipment revenues. Services revenues increased primarily at Aviation, due to higher volume on commercial spare part shipments and increased shop visit volume; and at Power, due to increases in Steam Power services revenues and Gas Power services revenues on strong long-term service agreement volume; partially offset by a decrease at Renewable Energy, primarily from lower repower unitfewer wind turbine deliveries at Onshore Wind. The decrease in GE Industrial revenues included the net effects of dispositions of $0.1 billionWind and an increase from foreign currency translation of $0.2 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* decreased $0.2 billion (1%), with a decrease in equipment revenues of $0.9 billion (9%) and an increase in services revenues of $0.6 billion (7%). GE Industrial organic revenues* decreasedlower revenue at Renewable Energy, Healthcare and Power, partially offset by an increase at Aviation.
GE Capital revenues decreased 3%, as lower factoring revenue and EFS gains were partially offset by lower marks and impairments.
For the nine months ended September 30, 2021, Consolidated revenues were down $1.0 billion, driven by a decrease in GE Industrial revenues, partially offset by an increase in GE Capital revenues.
GE Industrial revenues decreased $1.2 billion (2%). Equipment revenues decreased primarilyGrid; at Power, due to decreased Gas Power equipment revenues on lower turnkey sales;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 fewer commercial install and spare engine unit shipments; and at Healthcare, due to the disposition of the BioPharma business; partially offset by an increase in Renewable Energy driven by more wind turbine deliveries and higher revenue at Offshore Wind.shipments on legacy programs. Services revenues increased, primarily at Power, due to an increase in Gas Power services revenues; and at Healthcare,Aviation, due to increased shop visit volume in Imaging and Ultrasoundhigher volume of commercial spare part shipments, reflecting the continued recovery of the commercial aviation market; and a return to pre-pandemic volume in PDx; partially offset by decreases at Renewable Energy, primarily due to lowerhigher services revenue at Onshore Wind from a larger installed base and more repower unit deliveriesdeliveries; partially offset by a decrease at Onshore Wind; and at Aviation, primarilyPower, due to our Military business. 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 $1.4 billion and an increase from foreign currency translationa stronger U.S. dollar of $1.0$0.2 billion. Excluding Insurance revenues, the net effects of acquisitions, dispositions and foreign currency, translation, GE Industrial organic revenues* decreased $0.9increased $0.1 billion (2%(1%), with equipment revenues down $1.3$1.1 billion (5%(14%) and services revenues up $0.4$1.2 billion (2%(15%). GE Industrial organicOrganic revenues* decreasedincreased at Aviation Power and Renewable Energy,Healthcare, partially offset by an increasedecreases at Healthcare.
GE Capital revenues increased 1%, primarily as a result of lower marksRenewable Energy and impairments primarily in Insurance, partially offset by lower WCS factoring revenue and project revenues at EFS.Power.
| | | EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | Three months ended September 30 | | Nine months ended September 30 | 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 | | 2021 | 2020 | (Per-share in dollars and diluted) | 2022 | 2021 | |
| Continuing earnings (loss) | $ | 603 | | $ | (1,132) | | | $ | (1) | | $ | 3,857 | | |
| 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 | $ | 0.54 | | $ | (1.04) | | | $ | (0.01) | | $ | 3.39 | | Continuing earnings (loss) per share | $ | (0.74) | | $ | 0.02 | | |
For the three months ended September 30, 2021March 31, 2022, Consolidatedcontinuing earnings increased $1.7decreased $0.8 billion primarily due to an increase in GE Industrial profit,the Steam asset sale impairment of $0.8 billion, a net loss on the value of equity securities of $0.6 billion compared to the prior year gain, Russia and Ukraine charges of $0.2 billion and separation costs of $0.1 billion, partially offset by an increase in GE Industrial provision for income taxes and an increase in GE Capital continuing losses.
GE Industrial profit increased $2.2 billion driven primarily by a higher net gain on equity securities of $1.1 billion, higher profit at our industrial segments of $0.4 billion, the nonrecurrence of prior year asset impairments in Steam of $0.4 billion, a decrease in non-operating benefit costs of $0.2$0.6 billion, lower GE Industrial interest and other financial charges of $0.1 billion, higher profit on our run-off Insurance business of $0.1 billion and a decrease in adjusted corporate operating costshigher segment profit $0.1 billion. Adjusted earnings* was $0.3 billion, an increase of $0.1 billion. GE Industrial profitProfit margin was 5.0%(3.1)%, an increasea decrease from (7.2)%1.4%, primarily due to the same net increasesdecreases as described above. Adjusted GE Industrial profit* was $1.3$0.9 billion, an increase of $0.5$0.2 billion organically*, due to increases at Aviation and Power, partially offset by decreases at Renewable Energy and Healthcare. Adjusted GE Industrial profit margin* was 7.5%5.8%, an increase of 270110 basis points organically*. At Aviation, the primary drivers were higher volume on commercial spare part shipments, increased shop visit volume, the nonrecurrence of prior year charges related to lower commercial engine production volume and an impairment charge in a joint venture in the Systems business. At Power, the primary drivers were increases in Gas Power services revenues and margins and aeroderivative sales. At Renewable Energy, the primary drivers were lower repower volume and lower margins on new product introductions. At Healthcare, the primary drivers were lower LCS equipment volume, and higher material, logistics and restructuring costs.
GE Capital continuing losses increased $0.1 billion primarily as a result of lower tax benefits, partially offset by the discontinuation of preferred dividend payments to GE Industrial.
*Non-GAAP Financial Measure
2021 3Q2022 1Q FORM 10-Q 65
For the nine months ended September 30, 2021, Consolidated continuing earnings decreased $3.9 billion primarily due to a decrease in GE Industrial profit and an increase in GE Capital continuing losses.
GE Industrial profit decreased $3.3 billion driven by the nonrecurrence of the prior year gain on the sale of our BioPharma business of $12.4 billion and higher debt extinguishment costs of $0.6 billion, partially offset by a higher net gain on equity securities of $5.8 billion, higher profit at our industrial segments of $1.7 billion, decreased GE Industrial goodwill impairments of $0.7 billion, the nonrecurrence of Steam asset impairments in the prior year of $0.4 billion, a decrease in non-operating benefit costs of $0.4 billion, lower GE Industrial interest and other financial charges of $0.3 billion, a decrease in adjusted corporate operating costs of $0.2 billion, lower restructuring and other charges of $0.1 billion and the nonrecurrence of the legal reserves associated with the SEC investigation in the prior year of $0.1 billion. GE Industrial profit margin was 2.0%, a decrease from 8.3%, primarily due to the same net decreases as described above. Adjusted GE Industrial profit* was $3.1 billion, an increase of $2.2 billion organically*, due to increases at each of our industrial segments. Adjusted GE Industrial profit margin* was 6.0%, an increase of 440 basis points organically*. At Aviation, the primary drivers were lower net unfavorable changes in estimated profitability in long-term service agreements, operational cost reduction from the actions taken in 2020 and the first half of 2021, and the nonrecurrence of prior year charges related to customer credit risk and lower commercial engine production volumes. At Power, the primary drivers were increases in Gas Power services revenues and margins and aeroderivative sales and continued efforts to streamline the businesses. At Healthcare, the primary drivers were increased volume for Imaging and Ultrasound products, increases in PDx volume as well as continued cost reduction actions. At Renewable Energy, the primary drivers were higher new unit volume at Onshore Wind, the favorable impact of cost reduction actions, and improved project execution.
GE Capital continuing losses increased $0.2 billion (28%) primarily as a result of higher debt extinguishment costs, lower tax benefits and the nonrecurrence of the tax benefit related to the BioPharma sale in the first quarter of 2020, partially offset by the discontinuation of preferred dividend payments to GE Industrial, lower marks and impairments in Insurance and EFS, lower interest expense due to a lower debt balance and lower claims and higher terminations in Insurance.
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 September 30 | | Nine months ended September 30 | |
| 2021 | 2020 | V | % | | 2021 | 2020 | | V | % |
| Aviation | $ | 5,398 | | $ | 4,919 | | 10 | | % | | $ | 15,230 | | $ | 16,196 | | | (6) | | % |
| Healthcare | 4,339 | | 4,565 | | (5) | | % | | 13,100 | | 13,185 | | | (1) | | % |
| Renewable Energy | 4,208 | | 4,525 | | (7) | | % | | 11,505 | | 11,224 | | | 3 | | % |
| Power | 4,026 | | 4,025 | | — | | % | | 12,242 | | 12,206 | | | — | | % |
| Capital | 734 | | 758 | | (3) | | % | | 2,470 | | 2,455 | | | 1 | | % |
| Total segment revenues | 18,704 | | 18,793 | | — | | % | | 54,546 | | 55,266 | | | (1) | | % |
| Corporate items and eliminations | (275) | | (264) | | (4) | | % | | (720) | | (443) | | | (63) | | % |
| Consolidated revenues | $ | 18,429 | | $ | 18,529 | | (1) | | % | | $ | 53,826 | | $ | 54,823 | | | (2) | | % |
| | | | | | | | | | |
| Aviation | $ | 846 | | $ | 350 | | F | | | $ | 1,664 | | $ | 665 | | | F | |
| Healthcare | 704 | | 738 | | (5) | | % | | 2,203 | | 2,111 | | | 4 | | % |
| Renewable Energy | (151) | | (51) | | U | | | (484) | | (628) | | | 23 | | % |
| Power | 204 | | 148 | | 38 | | % | | 416 | | (32) | | | F | |
| Capital | (142) | | (29) | | U | | | (887) | | (692) | | | (28) | | % |
| Total segment profit (loss) | 1,461 | | 1,156 | | 26 | | % | | 2,912 | | 1,424 | | | F | |
| Corporate items and eliminations | (74) | | (1,515) | | 95 | | % | | 2 | | 6,182 | | | U | |
| GE Industrial goodwill impairments | — | | — | | — | | % | | — | | (877) | | | F | |
| GE Industrial interest and other financial charges | (225) | | (313) | | 28 | | % | | (753) | | (1,016) | | | 26 | | % |
| GE Industrial debt extinguishment costs | — | | — | | — | | % | | (645) | | (63) | | | U | |
| GE Industrial non-operating benefit costs | (426) | | (603) | | 29 | | % | | (1,376) | | (1,815) | | | 24 | | % |
| GE Industrial benefit (provision) for income taxes | (81) | | 143 | | U | | | (1) | | 22 | | | U | |
| GE Industrial preferred stock dividends | (52) | | — | | U | | | (139) | | — | | | U | |
| Earnings (loss) from continuing operations attributable to GE common shareholders | 603 | | (1,132) | | F | | | (1) | | 3,857 | | | U | |
| | | | | | | | | | |
| | | | | | | | | | |
Earnings (loss) from discontinued operations attributable to GE common shareholders | 602 | | (58) | | F | | | (2,856) | | (1,070) | | | U | |
| Consolidated net earnings (loss) attributable to the GE common shareholders | $ | 1,205 | | $ | (1,190) | | F | | | $ | (2,857) | | $ | 2,787 | | | 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.
*Non-GAAP Financial Measure
AVIATION. TheAviation’s results in first quarter 2022 reflect the continued recovery of the commercial market, although the global COVID-19 pandemic continues to have a materialan adverse effect on the global airline industry, although Aviation’s resultsas well as on the global industrial supply chain with disruptions in the third quarter of 2021 reflect improvement in market fundamentals.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. GovernmentAviation 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 have all impacted the level of air travel. Aviation regularly tracks global departures, which as of September 30, 2021, were approximately 25% below third quarter 2019. Broadly, global departures improved in the third quarter of 2021 compared to the second quarter of 2021, butdrive varied levels of recovery varied across regionsregionally, due in large part to the emergence of COVID-19 virus variants. Aviation remains confident in the COVID-19 Delta variant. Aviation is closelyrecovery, while actively monitoring government actionsthe impact of travel restrictions, quarantine requirements, and economic and industry forecasts. We are in frequent dialogue with our airline, airframe, and airframemaintenance, 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. Given currentCurrent trends are in line with our recovery forecast, and we continue to expect domestic travel routes primarily served by narrowbodysingle-aisle aircraft to recover before long-haul, international travel routes, which are primarily served by widebodytwin-aisle aircraft. Consistent with industry projections, Aviation continues to estimate the duration of the market recoverysingle-aisle air traffic to be prolonged over multiple years,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 adverse environment. Aviationenvironment 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 20212022 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 thirdfirst quarter of 2021,2022, Aviation continuedachieved significant testing milestones on two future military engines. Aviation met the First Engine to experienceTest 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 whichimpacting the delivery of military engines experienced in the prior year, and the business iscontinues to actively addressing.address the issues and monitor progress to recovery.
Total engineering, comprising company, customer and partner-funded and nonrecurring engineering costs, decreasedincreased compared to the prior year in line with the changes in the commercial environment and due to the timing of planned program expenditures.year. Aviation continues to be committed to investment in developing and maturing technologytechnologies that enablesenable a more sustainable future of flight. In June 2021, AviationFebruary 2022, Airbus selected CFM International, Aviation’s joint venture with Safran Aircraft Engines, to collaborate on a program to develop and Safran announced Revolutionary Innovation for Sustainable Engines (RISE), a technology development program targeting more than 20% lower fuel consumption and CO2 emissions compared to today’s engines. In September 2021, Aviation’s Catalysttest direct hydrogen combustion engine technologies with flight tests expected in the middle of this decade. Additionally, during the first clean-sheetquarter 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 design entering the business and general aviation market in 50 years, completed its first flight.engines.
Aviation is takingcontinues 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 37,70039,400 units, with approximately 12,80010,900 units under long-term service agreements, and military engine installed base of approximately 26,50026,200 units represents strong long-term fundamentals. Aviation expects to emerge from this crisis stronger andthe current environment well-positioned to drive long-term cash and 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. |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended September 30 | | | Nine months ended September 30 |
| | | | | | |
| Sales in units, except where noted | | | | 2021 | 2020 | | | | 2021 | 2020 |
| Commercial Engines(a) | | | | 377 | | 391 | | | | | 1,119 | | 1,283 | |
| LEAP Engines(b) | | | | 226 | | 172 | | | | | 625 | | 622 | |
| Military Engines | | | | 154 | | 107 | | | | | 405 | | 457 | |
| Spare Parts Rate(c) | | | | $ | 19.3 | | $ | 14.4 | | | | | $ | 15.8 | | $ | 18.1 | |
(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. |
| | | | | | | | | |
| 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 | | SEGMENT REVENUES AND PROFIT | Three months ended March 31 | |
| | | 2022 | | 2021 | | |
| | Commercial Engines & Services | | Commercial Engines & Services | $ | 3,853 | | | $ | 3,354 | | | |
| Military | | Military | 1,036 | | | 956 | | | |
| Systems & Other | | Systems & Other | 714 | | | 682 | | | |
| Total segment revenues | | Total segment revenues | $ | 5,603 | | | $ | 4,992 | | | |
| | September 30, 2021 | December 31, 2020 | September 30, 2020 | | |
| Equipment | Equipment | $ | 11,523 | | $ | 10,597 | | $ | 10,373 | | Equipment | $ | 1,654 | | | $ | 1,847 | | | |
| Services | Services | 111,224 | | 103,500 | | 103,015 | | Services | 3,949 | | | 3,145 | | | |
| Total RPO | $ | 122,747 | | $ | 114,097 | | $ | 113,388 | | |
| Total segment revenues | | Total segment revenues | $ | 5,603 | | | $ | 4,992 | | | |
| | Segment profit | | Segment profit | $ | 908 | | | $ | 641 | | | |
| Segment profit margin | | Segment profit margin | 16.2 | | % | 12.8 | | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30 | | | Nine months ended September 30 | |
| 2021 | | 2020 | | | 2021 | | 2020 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Commercial Engines & Services | $ | 3,602 | | | $ | 3,087 | | | | $ | 10,071 | | | $ | 10,718 | | |
| Military | 1,107 | | | 1,137 | | | | 3,104 | | | 3,258 | | |
| Systems & Other | 689 | | | 696 | | | | 2,055 | | | 2,220 | | |
| Total segment revenues | $ | 5,398 | | | $ | 4,919 | | | | $ | 15,230 | | | $ | 16,196 | | |
| | | | | | | | | |
| Equipment | $ | 1,837 | | | $ | 1,933 | | | | $ | 5,549 | | | $ | 6,234 | | |
| Services | 3,562 | | | 2,987 | | | | 9,681 | | | 9,961 | | |
| Total segment revenues | $ | 5,398 | | | $ | 4,919 | | | | $ | 15,230 | | | $ | 16,196 | | |
| | | | | | | | | |
| Segment profit | $ | 846 | | | $ | 350 | | | | $ | 1,664 | | | $ | 665 | | |
| Segment profit margin | 15.7 | | % | 7.1 | | % | | 10.9 | | % | 4.1 | | % |
For the three months ended September 30, 2021,March 31, 2022, segment revenues were up $0.5$0.6 billion (10%(12%) and segment profit was up $0.5 billion.
Revenues increased $0.5$0.3 billion (10%(42%) organically*. Commercial Services revenues increased, primarily due to higher volume on commercial spare part shipments and increased shop visit volume. Commercial Engines revenues decreased due to 14 fewer commercial install and spare engine unit shipments, driven by fewer engine shipments on legacy programs, partially offset by 54 more LEAP units versus the prior year. Military revenues decreased marginally due to lower services, partially offset by 47 more engine shipments.
Profit increased $0.5 billion organically*, primarily due to higher volume on commercial spare part shipments, increased shop visit volume and the receipt of a payment from a partner associated with engine program activity. Profit also increased due to operational cost reduction from the actions taken in 2020 and the first half of 2021 and the nonrecurrence of prior year charges related to lower commercial engine production volume and an impairment charge in a joint venture in the Systems business.
For the nine months ended September 30, 2021, segment revenues were down $1.0 billion (6%) and segment profit was up $1.0 billion.
RPO as of September 30, 2021March 31, 2022 increased $8.7$2.2 billion (8%(2%) from December 31, 2020,2021, primarily due to increases in both equipment and services. Equipment increased primarily due an increase in Military orders in the third quarter of 2021, reflecting a large order from Hindustan Aeronautics for 99 F404s, along with multiple other T700 orders. Services increased primarily as a result of engines contracted under long-term service agreements that have now been put into service. RPOservice and contract modifications.
Revenues increased $9.4$0.6 billion (8%(12%) from September 30, 2020,organically*. Commercial Services revenues increased, primarily due to increases in both equipmentincreased shop visit volume and services.
Revenues decreased $0.9 billion (6%) organically*.higher volume of commercial spare part shipments. Commercial Engines revenues decreased, due to 164 fewer commercial installprimarily driven by lower GEnx engine production rates, supply chain constraints and spare engine unit shipments, includingproduct transition with fewer engine shipments on legacy programs, partially offset by threemore shipments on newer programs, including 51 more LEAP units versus the prior year. Commercial ServicesMilitary revenues increased, primarily due to higher volume on commercial spare part88 more engine shipments and increased shop visit volume. Commercial Services revenues for the nine months ended September 30, 2021, included a net unfavorable change in estimated profitability of $0.3 billion for its long-term service agreements compared to a net unfavorable change of $0.9 billion for the same period inthan the prior year. Military revenues decreased due to lower services,year, partially offset by product mix with 52 fewer engine shipments.mix.
Profit increased $1.0$0.3 billion (39%) organically*, primarily due to lower net unfavorable changes in estimated profitability in long-term service agreements, operational cost reduction from the actions taken in 2020increased shop visit volume and the first halfhigher volume of 2021, and the nonrecurrence of prior year charges related to customer credit risk and lower commercial engine production volumes.spare part shipments. These increases in profit were partially offset by lower volumeprofit on commercial spare partCommercial Engine shipments driven by product transition with fewer engine shipments on legacy programs and an accrual for a contractmore shipments on newer programs, inflation in a loss position in the long-term service agreement portfolio.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 an overall recoverygrowth in hospital spending; the expectation is that this will continue in line with the worldwide COVID-19 vaccine rollout.spending to increase capacity and improve quality of care. Both HCSHealthcare Systems (HCS) and PDxPharmaceutical Diagnostics (PDx) demand has largely recovered to pre-COVIDat or above pre-pandemic levels. Similar to many industries, weWe are experiencing substantial inflation in our supply chain as well asand 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 near-term volatility and costthe inflation pressures we are experiencing, we have continued to execute onmanage price and value for our customers, as well as discretionary and structural cost reductions and cash optimization actions,in our business, in order to invest in growth and research and development.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. Healthcare recently launched CarestationTM Insights LIVE,We announced a mobile application designedpartnership 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 anesthesiologists overseeing operating room patients, using data from GE patient monitorsour 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 anesthesia Carestations to help clinicians view patient statussimplifies workflows while reducing drug waste, lowering the cost of care and assess how therapy is being delivered in real time. We have also launched a cloud based Edison True Picture Archive and Communication System, which offers AI-enabled decision support to help radiologists adapt to higher workloads and increased exam complexity, and improve diagnostic accuracy.greenhouse gas emissions. We remain committed to innovate and invest to create more integrated, efficient, and personalized precision healthcare.
In the third quarter of 2021, we entered into an agreement to acquire BK Medical, a leader in surgical ultrasound imaging and guidance, from Altaris Capital Partners for a cash purchase price of $1.45 billion. The parties expect the transaction to close in 2022, subject to review by the relevant regulatory authorities.
| | | | | | | | | | | |
| September 30, 2021 | December 31, 2020 | September 30, 2020 |
| Equipment | $ | 3,827 | | $ | 3,465 | | $ | 3,489 | |
| Services | 10,425 | | 9,458 | | 9,419 | |
| Total RPO | $ | 14,252 | | $ | 12,923 | | $ | 12,908 | |
| | | | | | | | | |
| 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 | | % | | | | | | | |
| | | | | | | | | | | |
| | |
| | |
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30 | | Nine months ended September 30 |
| 2021 | | 2020 | | | 2021 | | 2020 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Healthcare Systems (HCS) | $ | 3,832 | | | $ | 4,085 | | | | $ | 11,572 | | | $ | 11,056 | | |
| Pharmaceutical Diagnostics (PDx) | 507 | | | 480 | | | | 1,528 | | | 1,300 | | |
| BioPharma | — | | | — | | | | — | | | 830 | | |
| Total segment revenues | $ | 4,339 | | | $ | 4,565 | | | | $ | 13,100 | | | $ | 13,185 | | |
| | | | | | | | | |
| Equipment | $ | 2,187 | | | $ | 2,538 | | | | $ | 6,671 | | | $ | 7,287 | | |
| Services | 2,151 | | | 2,027 | | | | 6,429 | | | 5,899 | | |
| Total segment revenues | $ | 4,339 | | | $ | 4,565 | | | | $ | 13,100 | | | $ | 13,185 | | |
| | | | | | | | | |
| Segment profit | $ | 704 | | | $ | 738 | | | | $ | 2,203 | | | $ | 2,111 | | |
| Segment profit margin | 16.2 | | % | 16.2 | | % | | 16.8 | | % | 16.0 | | % |
| | | | | | | | | |
|
|
For the three months ended September 30, 2021,March 31, 2022, segment revenues were down $0.2 billion (5%) and segment profit was down 5%.
Revenues decreased $0.3 billion (6%) organically*, driven by the nonrecurrence of the prior year order from the U.S. Department of Health and Human Services to deliver ventilators in partnership with Ford and reductions in LCS for HCS products, partially offset by increased volume in Imaging and Ultrasound and a return to pre-pandemic volume in PDx.
Profit decreased $0.1 billion (10%) organically*, driven by higher inflation, supply chain and restructuring costs and lower LCS equipment volume associated with the nonrecurrence of the prior year order from the U.S. Department of Health and Human Services to deliver ventilators in partnership with Ford, partially offset by productivity and higher PDx volume.
For the nine months ended September 30, 2021, segment revenues were downup $0.1 billion (1%) and segment profit was up $0.1down $0.2 billion (4%(23%).
RPO as of September 30, 2021 increased $1.3March 31, 2022 decreased $0.2 billion (10%(1%) from December 31, 2020 and $1.3 billion (10%) from September 30, 20202021, primarily due to services on new contracts and renewals with large customers and froman increase in equipment on strong orders, across all regions.more than offset by the impact of contract renewal timing in services.
Revenues increased $0.4$0.1 billion (3%(2%) organically*,. Services revenues increased, driven by increased volume in Imaging and Ultrasound and a return to pre-pandemic volume in PDx partially offsetand the continued growth of HCS services. Equipment revenues were flat, driven by reductionscontinued supply chain constraints, COVID-19 impacts in LCS for HCS products.certain China regions and impacts from the Russia and Ukraine conflict.
Profit increased $0.3decreased $0.1 billion (18%(15%) organically*, driven by increaseddecreased volume for ImagingLCS and Ultrasound products, increases in PDx volume as well asand increased material inflation and logistics cost across all product lines. We also continued cost reduction actions.to make research and development and commercial investments.
RENEWABLE ENERGY. Renewable Energy includes a portfolio of business units comprising Onshore Wind (with our separate LM Wind blades business), Grid Solutions equipment and services, Hydro Solutions, and Offshore Wind and Hybrid Solutions. These businesses are uniquely positioned to lead the energy transition with products, services and integrated solutions by growing new renewable energy generation, lowering the cost of electricity and modernizing the grid. Across our businesses, we have RPO of $31.4 billion together with an Onshore and Offshore Wind installed base of approximately 50,000 units, of which, approximately half are under service agreements.
While we continue to expect long termlong-term growth in the U.S onshore wind, market, pending modifications to and extensionthe expiry of theU.S. Production Tax CreditCredits (PTC) has caused further deterioration in the market outlook and continues to drive customer uncertainty. The latest Wood Mackenzie market forecast expects the U.S onshore market to decline from 14 gigawatts of new installations in 2021 to approximately 10 gigawattsand U.S. policy uncertainty, together with rising inflation has resulted in 2022. In the international onshore wind markets, we continue to observe strong demand.project delays and deferral of customer investments. The offshore wind industry continues to experienceexpect strong global market momentum. Customer preference continuesgrowth through the decade and our Grid business is positioned to shift to larger, more efficient units to drive downsupport grid modernization needs. We have experienced significant cost inflation in materials and logistics costs and compete with other power generation options and we are monitoring the impact across the industry from risingentire business that impact price and customer demand, and our financial results are dependent on U.S. tax credit policy, the inflationary costsenvironment, execution of transportationcost reduction initiatives and commodities. The Grid and Hydro business units are executing their turnaround plans and we are observing improved operating results. Underwriting discipline, risk management and commercial selectivity of new orders remains a key priority across each of our businesses.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. OurCommissioned in 2019, our Haliade-X prototypetest unit is currently operating at 14MW, a first14 MW. We expect to start shipping units for commercial projects in the industry.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 September 30 | | Nine months ended September 30 | | | Three months ended March 31 | |
| | Onshore and Offshore sales in units | Onshore and Offshore sales in units | | | 2021 | 2020 | | | 2021 | 2020 | Onshore and Offshore sales in units | | 2022 | 2021 | |
| Wind Turbines | Wind Turbines | | | 1,083 | | 1,170 | | | | 2,748 | | 2,731 | | Wind Turbines | | 502 | | 778 | | |
| Wind Turbine Gigawatts | Wind Turbine Gigawatts | | | 3.6 | | 3.4 | | | | 8.9 | | 7.8 | | Wind Turbine Gigawatts | | 1.7 | | 2.4 | | |
| Repower units | Repower units | | | 27 | | 300 | | | | 276 | | 876 | | Repower units | | 151 | | — | | |
| | | | | | | | | | | |
| September 30, 2021 | December 31, 2020 | September 30, 2020 |
| Equipment | $ | 18,211 | | $ | 18,273 | | $ | 17,579 | |
| Services | 13,214 | | 12,531 | | 10,767 | |
| Total RPO | $ | 31,425 | | $ | 30,804 | | $ | 28,346 | |
*Non-GAAP Financial Measure
2021 3Q2022 1Q FORM 10-Q 108
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30 | | | Nine months ended September 30 | |
| 2021 | | 2020 | | | 2021 | | 2020 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Onshore Wind | $ | 3,047 | | | $ | 3,303 | | | | $ | 8,048 | | | $ | 7,914 | | |
| Grid Solutions equipment and services | 759 | | | 936 | | | | 2,330 | | | 2,587 | | |
| Hydro | 190 | | | 160 | | | | 549 | | | 490 | | |
| Offshore Wind and Hybrid Solutions | 211 | | | 127 | | | | 577 | | | 232 | | |
| Total segment revenues | $ | 4,208 | | | $ | 4,525 | | | | $ | 11,505 | | | $ | 11,224 | | |
| | | | | | | | | |
| Equipment | $ | 3,695 | | | $ | 3,771 | | | | $ | 9,844 | | | $ | 9,068 | | |
| Services | 512 | | | 754 | | | | 1,661 | | | 2,155 | | |
| Total segment revenues | $ | 4,208 | | | $ | 4,525 | | | | $ | 11,505 | | | $ | 11,224 | | |
| | | | | | | | | |
| Segment profit (loss) | $ | (151) | | | $ | (51) | | | | $ | (484) | | | $ | (628) | | |
| Segment profit margin | (3.6) | | % | (1.1) | | % | | (4.2) | | % | (5.6) | | % |
| | | | | | | | | |
| 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 September 30, 2021,March 31, 2022, segment revenues were down $0.3$0.4 billion (7%(12%) and segment losses were up $0.1 billion.
Revenues decreased $0.4$0.2 billion (9%) organically*, primarily from 273 fewer U.S. repower unit deliveries and lower volumes in Grid Solutions due to continued commercial selectivity, in addition to 87 fewer wind turbine deliveries on a unit basis, which was largely driven by PTC uncertainty and customer site readiness in the U.S. These decreases were partially offset by higher core Onshore services revenue and higher revenue from the Offshore EDF 6 MW project in Saint Nazaire, France.
Segment losses increased $0.1 billion organically*, primarily from lower repower volume, lower margins on new product introductions and higher supply chain costs at Onshore, lower volumes at Grid and higher costs at Offshore Wind from legacy projects, partially offset by the favorable impact of cost reduction actions across our businesses and improved project execution at Grid and Hydro.
For the nine months ended September 30, 2021, segment revenues were up $0.3 billion (3%) and segment losses were down $0.1 billion (23%(86%).
RPO as of September 30, 2021 increased $0.6March 31, 2022 decreased $0.1 billion (2%) from December 31, 20202021 primarily driven by the Offshore Vineyard Wind and Dogger Bank wind farms and from higher Onshore services, partially offset by equipment sales exceeding new orders at Onshore Wind and Grid. the impact of a stronger U.S. dollar at Offshore Wind, partially offset by new orders at Grid and Onshore Services exceeding sales. The decreasedecline in new equipment orders at Onshore Wind is largely driven by PTC dynamics in North America, while at Grid is primarily dueattributable to the U.S. market decline and increased commercial selectivity in certain product lines. RPO increased $3.1 billion (11%) from September 30, 2020, primarily driven by new Haliade-X orders at Offshore Wind.internationally.
Revenues decreased $0.1$0.3 billion (1%(10%) organically*, across all businesses, primarily from lower repower unit276 fewer wind turbine deliveries at Onshore Wind and lower revenue at Grid due to increased commercial selectivity, partially offset by 17 more wind turbine deliveries and higher services revenue at Offshore Wind’s EDF 6 MW project in Saint Nazaire, France.Onshore Wind from a larger installed base and 151 more repower unit deliveries.
Segment losses decreasedincreased $0.2 billion (29%(91%) organically*, primarily from higher new unitlower volume at Onshore Wind in the favorableU.S. and Grid, lower margins at Onshore Wind and cost inflation across all businesses, partially offset by the impact of cost reduction actions, and improved project execution. These improvements were partially offset by lower margins on new product introductions, lower repower units atinitiatives. Onshore Wind results were adversely impacted by execution of lower margin RPO in North America and higher restructuring costs.the impact of transitioning to newer product offerings internationally.
POWER. Power continues to streamline its business to better align with market demand and drive its business units with an operational rigor and discipline that is focused on its customers’ lifecycle experience. We remain focused on our underwriting discipline, commercial selectivity 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.
During the current period, global gas generation was down high-single-digits due to price-driven gas-to-coal switching. However, GEand gas turbine utilization continueswere both up mid-single-digits due to be resilientretirements and availability of coal and nuclear units and weather in select markets, even as megawatt hours grew low-single-digits.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. Although 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, we expect the gas market to remain stable throughover the next decade with gas generation continuing to grow low-single-digits. We believe gas will play a critical role in the energy transition. Wetransition and are encouraged by the growth in Gas Power Services, while at the same time, Steam Power continuesServices. We remain focused on our underwriting discipline and risk management to execute on the exit of new build coal.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 $70.5$67.8 billion in RPO 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 September 30 | | | | Nine months ended September 30 |
| | | | | | | |
| Sales in units | | | | 2021 | 2020 | | | | | 2021 | 2020 |
| GE Gas Turbines | | | | 22 | | 11 | | | | | | 47 | | 43 | |
| Heavy-Duty Gas Turbines(a) | | | | 14 | | 9 | | | | | | 34 | | 29 | |
| HA-Turbines(b) | | | | 5 | | 3 | | | | | | 11 | | 12 | |
| Aeroderivatives(a) | | | | 8 | | 2 | | | | | | 13 | | 14 | |
| | | | | | | | | | | |
(a) Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines.
(b) HA-Turbines are a subset of Heavy-Duty Gas Turbines. |
| | | | | | | | | | | | | | | | | | |
| | | | | | 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. | |
*Non-GAAP Financial Measure
2021 3Q2022 1Q FORM 10-Q 119
| | September 30, 2021 | December 31, 2020 | September 30, 2020 | |
| RPO | | RPO | March 31, 2022 | December 31, 2021 | |
| Equipment | Equipment | $ | 14,231 | | $ | 14,991 | | $ | 14,774 | | Equipment | $ | 11,812 | | $ | 12,169 | | |
| Services | Services | 56,257 | | 58,318 | | 58,160 | | Services | 55,941 | | 56,569 | | |
| Total RPO | Total RPO | $ | 70,488 | | $ | 73,308 | | $ | 72,934 | | Total RPO | $ | 67,752 | | $ | 68,738 | | |
| | Three months ended September 30 | | Nine months ended September 30 | |
| SEGMENT REVENUES AND PROFIT | | SEGMENT REVENUES AND PROFIT | Three months ended March 31 | |
| | 2021 | | 2020 | | | 2021 | | 2020 | | | 2022 | | 2021 | | |
| | Gas Power | Gas Power | $ | 2,861 | | | $ | 2,940 | | | $ | 8,739 | | | $ | 8,876 | | | Gas Power | $ | 2,489 | | | $ | 2,829 | | | |
| Steam Power | Steam Power | 790 | | | 769 | | | 2,327 | | | 2,340 | | | Steam Power | 636 | | | 706 | | | |
| Power Conversion, Nuclear and other | Power Conversion, Nuclear and other | 376 | | | 316 | | | 1,176 | | | 990 | | | Power Conversion, Nuclear and other | 377 | | | 385 | | | |
| Total segment revenues | Total segment revenues | $ | 4,026 | | | $ | 4,025 | | | $ | 12,242 | | | $ | 12,206 | | | Total segment revenues | $ | 3,501 | | | $ | 3,921 | | | |
| | Equipment | Equipment | $ | 1,368 | | | $ | 1,595 | | | $ | 3,680 | | | $ | 4,589 | | | Equipment | $ | 965 | | | $ | 1,241 | | | |
| Services | Services | 2,658 | | | 2,430 | | | 8,561 | | | 7,617 | | | Services | 2,536 | | | 2,679 | | | |
| Total segment revenues | Total segment revenues | $ | 4,026 | | | $ | 4,025 | | | $ | 12,242 | | | $ | 12,206 | | | Total segment revenues | $ | 3,501 | | | $ | 3,921 | | | |
| | Segment profit (loss) | Segment profit (loss) | $ | 204 | | | $ | 148 | | | $ | 416 | | | $ | (32) | | | Segment profit (loss) | $ | 63 | | | $ | (87) | | | |
| Segment profit margin | Segment profit margin | 5.1 | | % | 3.7 | | % | | 3.4 | | % | (0.3) | | % | Segment profit margin | 1.8 | | % | (2.2) | | % | |
For the three months ended September 30, 2021,March 31, 2022, segment revenues were flatdown $0.4 billion (11%) and segment profit was up $0.1 billion (38%).
Revenues decreased 1% organically*, primarily due to decreases in Steam Power equipment revenues and decreases in Gas Power equipment revenues on lower turnkey sales, partially offset by increases in Steam Power services revenues and Gas Power services revenues on strong long-term service agreement volume.
Profit increased 34% organically* due to increases in Gas Power services revenues and margins and aeroderivative sales.
For the nine months ended September 30, 2021, segment revenues were flat and segment profit was up $0.4 billion.
RPO as of September 30, 2021March 31, 2022 decreased $2.8$1.0 billion (4%) and $2.4 billion (3%(1%) from December 31, 2020 and September 30, 2020, respectively,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 continued wind downimpact of the SteamRussia and Ukraine conflict at Power new build coal business.Conversion.
Revenues decreased $0.2 billion (2%(6%) organically*, primarily due to decreased Gas Power equipment revenues on lower turnkey sales,fewer HA shipments and Steam Power equipment on the exit of new build coal, partially offset by an increase inhigher Gas Power services revenues.Aeroderivative deliveries.
Profit increased $0.5$0.1 billion organically* due to increases in GasSteam Power services revenues and margins and aeroderivative sales, continued efforts to streamline the businesses, and afrom prior year charge related to an under-performing joint venture (JV) in China at Gas Powerproject and the nonrecurrence of a quality reserve on the legacy product linelegal charges that we have since exited at Power Conversion, partially offset by unfavorable legacy project arbitration resolutions and Steam Power project execution.did not repeat.
CAPITAL. CORPORATE.InThe Corporate amounts related to revenues and earnings include the first quarterresults of 2021, we announced an agreement to combine GECAS with AerCap,disposed businesses, certain amounts not included in operating segment results because they are excluded from measurement of their operating performance for whichinternal and external purposes and the Company expects to receive approximately $22.6 billion in cash, inclusiveelimination of estimated contractual closing adjustments, 111.5 million shares of AerCap common stock (approximately 46% ownership interest) valued at approximately $6.4 billion based on the AerCap’s closing share price of $57.81 on September 30, 2021, and $1 billion in AerCap notes. The Company expects to transfer GECAS’ net assets, including its engine leasing and Milestone helicopter leasing business units, as well as GECAS’ more than 400 employees and its current purchase obligations, to AerCap.intersegment activities. In addition, upon the closingCorporate amounts related to earnings include certain costs of the transaction, the remainder of GE Capital will beour principal retirement plans, significant, higher-cost restructuring programs, separation costs, and other costs reported withinin Corporate. In October 2021, we received final regulatory approvals and are now expecting the transaction to be completed on November 1, 2021.
In connection with the signing of the transaction agreement, GE Capital recorded a total non-cash after-tax charge of $3.6 billion in discontinued operations for the nine months ended September 30, 2021, andCorporate includes the results of GECAS are now presented in discontinued operations.the GE Digital business and our remaining GE Capital businesses including our run-off Insurance business (see Other Items - Insurance for further information).
In the first quarter of 2021, we announced our intention to discontinue the majority of our factoring programs in WCS, which was effective April 1, 2021. | | | | | | | | | | | | | |
| REVENUES AND OPERATING PROFIT (COST) | Three months ended March 31 | | | | |
| 2022 | 2021 | | | | | |
| Corporate revenues | $ | 220 | | $ | 227 | | | | | | |
| Insurance revenues | 767 | | 755 | | | | | | |
| Eliminations and other | (285) | | (379) | | | | | | |
| Total Corporate revenues | $ | 702 | | $ | 603 | | | | | | |
| | | | | | | |
| Gains (losses) on purchases and sales of business interests | $ | 4 | | $ | 3 | | | | | | |
| Gains (losses) on equity securities | (219) | | 347 | | | | | | |
| Restructuring and other charges | (35) | | (106) | | | | | | |
| Separation costs | (119) | | — | | | | | | |
| Steam asset sale impairment (Notes 6 and 7) | (824) | | — | | | | | | |
| Russia and Ukraine charges | (230) | | — | | | | | | |
| | | | | | | |
| | | | | | | |
| Insurance profit (loss) (Note 12) | 225 | | 138 | | | | | | |
| Adjusted total corporate operating costs (Non-GAAP) | (129) | | (221) | | | | | | |
| Total Corporate operating profit (cost) (GAAP) | $ | (1,328) | | $ | 160 | | | | | | |
| Less: gains (losses), impairments, Insurance, and restructuring & other | (1,199) | | 382 | | | | | | |
| Adjusted total corporate operating costs (Non-GAAP) | $ | (129) | | $ | (221) | | | | | | |
| | | | | | | |
| Functions & operations | $ | (78) | | $ | (188) | | | | | | |
| Environmental, health and safety (EHS) and other items | (51) | | (55) | | | | | | |
| Eliminations | (1) | | 23 | | | | | | |
| Adjusted total corporate operating costs (Non-GAAP) | $ | (129) | | $ | (221) | | | | | | |
We annually perform premium deficiency testing in the aggregate across our run-off insurance portfolio in the third quarter. As a result of the testing, we identified no premium deficiency in the third quarter of 2021. See the Other Items section and Note 13 to the consolidated financial statements for further information.
| | | | | | | | |
| September 30, 2021 | December 31, 2020 |
| | |
| Energy Financial Services (EFS) | $ | 2,358 | | $ | 2,385 | |
| Working Capital Solutions (WCS) | 1,337 | | 5,884 | |
| Insurance | 50,839 | | 50,824 | |
| Other continuing operations(a) | 11,762 | | 18,577 | |
| Total segment assets - continuing operations | $ | 66,295 | | $ | 77,670 | |
| | |
| | |
(a) Included cash, cash equivalents and restricted cash of $6,834 million and $13,245 million and deferred income taxes of $3,595 million and $3,680 million as of September 30, 2021 and December 31, 2020, respectively.
*Non-GAAP Financial Measure
2021 3Q2022 1Q FORM 10-Q 12
| | | | | | | | | | | | | | | | | |
| Three months ended September 30 | | Nine months ended September 30 |
| 2021 | 2020 | | 2021 | 2020 |
| | | | | |
| EFS | $ | (75) | | $ | 15 | | | $ | (32) | | $ | 77 | |
| WCS | 28 | | 57 | | | 105 | | 270 | |
| Insurance | 770 | | 764 | | | 2,348 | | 2,167 | |
| Other continuing operations | 11 | | (78) | | | 49 | | (59) | |
| Total segment revenues | $ | 734 | | $ | 758 | | | $ | 2,470 | | $ | 2,455 | |
| | | | | |
| | | | | |
| EFS | $ | 18 | | $ | 18 | | | $ | 70 | | $ | 13 | |
| WCS | (2) | | 15 | | | (8) | | 51 | |
| Insurance | 52 | | 57 | | | 360 | | 78 | |
| Other continuing operations(a) | (211) | | (119) | | | (1,310) | | (834) | |
| Total segment profit (loss) | $ | (142) | | $ | (29) | | | $ | (887) | | $ | (692) | |
(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.
For the three months ended September 30, 2021, segment revenues decreased 3% and segment losses increased $0.1 billion.
Capital revenues decreased 3%, as lower factoring revenue and EFS gains were partially offset by lower marks and impairments.
Capital losses increased $0.1 billion primarily as a result of lower tax benefits, partially offset by the discontinuation of preferred dividend payments to GE Industrial.
For the nine months ended September 30, 2021, segment revenues increased 1% and segment losses increased $0.2 billion (28%).
Capital revenues increased 1%, primarily as a result of lower marks and impairments primarily in Insurance, partially offset by lower WCS factoring revenue and project revenues at EFS.
Capital losses increased $0.2 billion (28%) primarily as a result of higher debt extinguishment costs, lower tax benefits and the nonrecurrence of the tax benefit related to the BioPharma sale in the first quarter of 2020, partially offset by the discontinuation of preferred dividend payments to GE Industrial, lower marks and impairments in Insurance and EFS, lower interest expense due to a lower debt balance and lower claims and higher terminations in Insurance.
CORPORATE ITEMS AND ELIMINATIONS.Corporate items and eliminations includes the results of our Lighting segment, through its disposition in the second quarter of 2020, and GE Digital business for all periods presented.
| | | | | | | | | | | | | | | | | | |
| Three months ended September 30 | | Nine months ended September 30 | |
| 2021 | 2020 | | 2021 | 2020 | |
| Revenues | | | | | | |
| Corporate revenues | $ | 237 | | $ | 251 | | | $ | 693 | | $ | 1,039 | | |
| | | | | | |
| Eliminations and other | (512) | | (515) | | | (1,412) | | (1,482) | | |
| Total Corporate Items and Eliminations | $ | (275) | | $ | (264) | | | $ | (720) | | $ | (443) | | |
| | | | | | |
| Operating profit (cost) | | | | | | |
| Gains (losses) on purchases and sales of business interests | $ | (156) | | $ | 28 | | | $ | (159) | | $ | 12,431 | | |
| Gains (losses) on equity securities | 412 | | (669) | | | 1,256 | | (4,527) | | |
| Restructuring and other charges | (64) | | (91) | | | (395) | | (523) | | |
| Steam asset impairments(a) (Notes 7 & 8) | — | | (363) | | | — | | (363) | | |
| SEC settlement charge(b) | — | | (100) | | | — | | (100) | | |
| Goodwill impairments(c) (Note 8) | — | | — | | | — | | (728) | | |
| | | | | | |
| Adjusted total corporate operating costs (Non-GAAP) | (266) | | (321) | | | (701) | | (885) | | |
| Total Corporate Items and Eliminations (GAAP) | $ | (74) | | $ | (1,515) | | | $ | 2 | | $ | 5,305 | | |
| Less: gains (losses) and restructuring & other | 192 | | (1,195) | | | 702 | | 6,190 | | |
| Adjusted total corporate operating costs (Non-GAAP) | $ | (266) | | $ | (321) | | | $ | (701) | | $ | (885) | | |
| | | | | | |
| Functions & operations | $ | (152) | | $ | (246) | | | $ | (475) | | $ | (709) | | |
| Environmental, health and safety (EHS) and other items | (100) | | (21) | | | (184) | | 8 | | |
| Eliminations | (13) | | (54) | | | (42) | | (184) | | |
| Adjusted total corporate operating costs (Non-GAAP) | $ | (266) | | $ | (321) | | | $ | (701) | | $ | (885) | | |
(a) Included non-cash pre-tax impairment charges of $429 million, net of $65 million attributable to noncontrolling interests for the Steam business within our Power segment in 2020.
(b) GE reached a settlement with the SEC and paid a civil penalty of $200 million in December 2020, of which $100 million was recorded and paid at Corporate and $100 million was recorded and paid at GE Capital.
(c) Included a non-cash pre-tax impairment charge of $877 million, net of $149 million attributable to noncontrolling interest, for our Additive reporting unit within our Aviation segment for the nine months ended September 30, 2020.
Adjusted total corporate operating costs* excludes gains (losses) on purchases and sales of business interests, significant, higher-cost restructuring programs, separation costs, gains (losses) on equity securities, impairments and goodwill impairments.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.
For the three months ended September 30, 2021March 31, 2022, revenues remained relatively flat year over year.increased by $0.1 billion due to lower intersegment eliminations. Corporate operating profit increaseddecreased by $1.4$1.5 billion primarily due to a $1.1 billion change in gains/(losses) on equity securities primarily related to mark-to-market activity on our Baker Hughes shares. In addition, Corporate operating profit also increased due to the nonrecurrence of $0.4$0.8 billion of non-cash impairment charges related to property, plant and equipment and intangible assets atas a result of reclassification of a portion of our Steam Power business within our Power segment, and $0.1 billion legal reserves associated withto held for sale in the settlementfirst quarter of the SEC investigation in 2020. These increases were partially offset by $0.2 billion of higher losses on purchases and sales of business interests2022 (See Note 2). In addition, operating profit decreased due to a $0.2 billion held for sale loss within our Power segment in 2021.
Adjusted total corporate operating costs* were down $0.1 billion due to lower costs associated with our Corporate functions and operations partially offset by higher costs associated with EHS and other items.
For the nine months ended September 30, 2021, revenues decreased by $0.3 billion, primarily due to the sale of our Lighting business in June 2020, partially offset by $0.1 billion of lower inter-segment eliminations. Corporate operating profit decreased by $5.3 billion due to $12.6 billion of lower gains on purchases and sales of business interests primarily due to a $12.4 billion gain from the sale of our BioPharma business in 2020 and a $0.2 billion held for sale loss within our Power segment in 2021. This decrease was partially offset by a $5.8$0.6 billion change in gains (losses) on equity securities, primarily related to mark-to-market activity$1.7 billion of mark to market losses on our Baker HughesAerCap shares and note, partially offset by $1.2 billion of higher mark to market gains on our BKR shares. In addition, Corporate operatingOperating profit increased duedecreased $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 of incurred expenses related to the nonrecurrencebusiness separation costs. These decreases were partially offset by $0.1 billion of a $0.7 billion non-cash goodwill impairment chargelower restructuring and other charges in 2022, primarily related to our Aviation segment, $0.4 billion of non-cash impairment charges related to property, plant and equipment and intangible assets at our Steam business within our Power segment, and $0.1 billion legal reserves associated with the settlement of the SEC investigation in 2020. Restructuring and other charges decreased by $0.1 billion due to lower restructuring in Aviation and Corporate, partially offset by higher restructuringincome in our Power segment,run-off Insurance business, primarily related to our exit from the new build coal power market.driven by lower claims and strong investment results.
Adjusted total corporate operating costs* decreased by $0.2$0.1 billion primarily as the result of $0.2 billion of cost reductionsfavorable operating results in our Corporate functionsEFS and operations. Costs also decreased due to $0.1 billion of lower intercompany profit eliminations primarily as the result of lower activity from project financing investments associated with wind energy projects in our Renewable Energy segment.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 and at Corporate, and the charges are shown below for the business where they originated. Separately, in our reported industrial 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 Items and Eliminations section).
| | Three months ended September 30 | | Nine months ended September 30 | |
| RESTRUCTURING AND OTHER CHARGES | | RESTRUCTURING AND OTHER CHARGES | Three months ended March 31 | |
| | 2021 | 2020 | | 2021 | 2020 | | 2022 | 2021 | |
| Workforce reductions | Workforce reductions | $ | 132 | | $ | 137 | | | $ | 634 | | $ | 630 | | Workforce reductions | $ | 23 | | $ | 211 | | |
| Plant closures & associated costs and other asset write-downs | Plant closures & associated costs and other asset write-downs | 23 | | 93 | | | 87 | | 201 | | Plant closures & associated costs and other asset write-downs | 29 | | 26 | | |
| Acquisition/disposition net charges | 9 | | 12 | | | 16 | | 57 | | |
| Acquisition/disposition net charges and other | | Acquisition/disposition net charges and other | 12 | | 5 | | |
| Other | | Other | (3) | | — | | |
| Total restructuring and other charges | Total restructuring and other charges | $ | 164 | | $ | 242 | | | $ | 736 | | $ | 888 | | Total restructuring and other charges | $ | 61 | | $ | 242 | | |
| | Cost of product/services | $ | 61 | | $ | 111 | | | $ | 349 | | $ | 368 | | |
| Cost of equipment/services | | Cost of equipment/services | $ | 31 | | $ | 101 | | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | 103 | | 131 | | | 393 | | 520 | | Selling, general and administrative expenses | 33 | | 148 | | |
| Other income | Other income | — | | — | | | (7) | | — | | Other income | (3) | | (7) | | |
| Total restructuring and other charges | Total restructuring and other charges | $ | 164 | | $ | 242 | | | $ | 736 | | $ | 888 | | Total restructuring and other charges | $ | 61 | | $ | 242 | | |
| | Aviation | Aviation | $ | 3 | | $ | 65 | | | $ | 64 | | $ | 309 | | Aviation | $ | 5 | | $ | 62 | | |
| Healthcare | Healthcare | 68 | | 28 | | | 127 | | 104 | | Healthcare | 13 | | 39 | | |
| Renewable Energy | Renewable Energy | 14 | | 58 | | | 149 | | 142 | | Renewable Energy | 6 | | 76 | | |
| Power | Power | 65 | | 31 | | | 341 | | 159 | | Power | 34 | | 49 | | |
| Corporate | Corporate | 9 | | 45 | | | 39 | | 154 | | Corporate | 3 | | 16 | | |
| Total GE Industrial restructuring and other charges | $ | 160 | | $ | 226 | | | $ | 720 | | $ | 867 | | |
| Capital | 4 | | 16 | | | 16 | | 21 | | |
| | Total restructuring and other charges | Total restructuring and other charges | $ | 164 | | $ | 242 | | | $ | 736 | | $ | 888 | | Total restructuring and other charges | $ | 61 | | $ | 242 | | |
| Restructuring and other charges cash expenditures | Restructuring and other charges cash expenditures | $ | 152 | | $ | 321 | | | $ | 565 | | $ | 856 | | Restructuring and other charges cash expenditures | $ | 154 | | $ | 223 | | |
*Non-GAAP Financial Measure
Liabilities associated with restructuring activities were approximately $1.4$0.9 billion and $1.3$1.0 billion, as of September 30, 2021 and December 31, 2020, respectively, including actuarial determined post-employment severance benefits of $0.7$0.5 billion in both periods.and $0.5 billion as of March 31, 2022 and December 31, 2021, respectively.
| | | | | | | | | | | | | | | | | |
| INTEREST AND OTHER FINANCIAL CHARGES | Three months ended September 30 | | Nine months ended September 30 |
| 2021 | 2020 | | 2021 | 2020 |
| GE Industrial | $ | 225 | | $ | 313 | | | $ | 753 | | $ | 1,016 | |
| GE Capital | 259 | | 267 | | | 799 | | 821 | |
The decrease in GE Industrial interestWe incurred pre-tax separation costs of $119 million, primarily related to business separation and other financial chargesemployee 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 September 30, 2021 was primarily due to a lower debt balance and lower financing costs on sales of receivables. The decrease in GE Industrial interest and other financial charges for the nine months ended September 30, 2021 was primarily due to a lower intercompany loan balance and lower financial costs on the sales of receivables, partially offset by a higher average interest rate on debt. Total GE interest and other financial charges of $0.2March 31, 2022.
INTEREST AND OTHER FINANCIAL CHARGES were $0.4 billion and $0.2$0.5 billion was recorded at Corporate and $0.1 billion and $0.1 billion was recorded by the industrial segments for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and $0.5 billion and $0.7 billion was recorded at Corporate and $0.2 billion and $0.3 billion was recorded by the industrial segments for the nine months ended September 30, 2021 and 2020, respectively.
The decrease in GE Capital interest and other financial charges during the three and nine months ended September 30, 2021 was primarily due to lower average borrowingborrowings balances, and weighted average interest rates, partially offset by a lower allocation of interest expense to discontinued operations. Inclusive of interest expense in discontinued operations, total interest and 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 interest and other financial charges are interest on short- and long-term borrowings.
*Non-GAAP Financial Measure
POSTRETIREMENT BENEFIT PLANS. Refer to Note 13 for information about our pension and retiree benefit plans.
CONSOLIDATED INCOME TAXES. For the three months ended September 30, 2021March 31, 2022, the consolidated income tax rate was 0.3%(38.8)% compared to 29.8%59.7% for the three months ended September 30, 2020.March 31, 2021. The tax rate for 20202022 reflects a tax benefitprovision on a pre-tax loss.
The consolidated provision (benefit) for income taxes was an insignificant provision for the three months ended September 30, 2021 and $(0.5)$0.2 billion for the three months ended September 30, 2020.March 31, 2022 and $0.1 billion for the three months ended March 31, 2021. The income tax provision went from a benefit to an insignificant expense primarilyincreased due to a decrease in favorable audit resolutions outside the U.S. and an increase in taxlosses 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 September 30,March 31, 2021 compared to a pre-tax loss for the three months ended September 30, 2020, includingMarch 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 realized and unrealized gain on our remaining interest in Baker Hughes forin the three months ended September 30,first quarter of 2021 compared to a tax benefit associated with the unrealized loss recorded for the three months ended September 30, 2020. Additionally, there was a tax expense in the thirdfirst quarter of 2021 compared to a tax benefit in the third quarter of 2020 to adjust the year-to-date tax rate to be in-line with the projected full-year rate.
The consolidated tax provision (benefit) includes $0.1 billion and $(0.1) billion for GE Industrial for the three months ended September 30, 2021 and 2020, respectively.
For the nine months ended September 30, 2021, the consolidated income tax rate2020. This was 149.5% compared to (17.4)% for the nine months ended September 30, 2020. The tax rate for 2021 reflects a tax benefit on a pre-tax loss. The negative tax rate for 2020 reflects a tax benefit on pre-tax income.
The consolidated (benefit) for income taxes was $(0.3) billion for the nine months ended September 30, 2021 and $(0.6) billion for the nine months ended September 30, 2020. The benefit decreased due to tax associated with the increase in pre-tax income, excluding gains on BioPharma for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase in pre-tax income includes realized and unrealized gain on our remaining interest in Baker Hughes for the nine months ended September 30, 2021, compared to unrealized loss for the nine months ended September 30, 2020. Partially offsetting these items waslargely offset by the nonrecurrence of the tax expense associated with the disposition of the BioPharma business in the first quarter of 2020, as well as tax benefits associated with internal restructurings to recognize historical losses due to decreases in fair value.
The consolidated tax provision (benefit) includes an insignificant amount for GE Industrial in both the nine months ended September 30, 2021 and 2020, respectively.
DISCONTINUED OPERATIONS primarily 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 notes to the financial statements have been adjusted on a retrospective basis. See NotesNote 2 and 21 for further financial information.information regarding our businesses in discontinued operations.
CAPITAL RESOURCES AND LIQUIDITY
FINANCIAL POLICY. We intend to maintain a disciplined financial policy 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.announced plans to form three industry-leading, global, investment-grade companies, each of which will determine their own financial policies, including capital allocation, dividend, mergers and acquisitions and buy back decisions.
Following the closing of the GECAS transaction, the Company intends to use the transaction proceeds and its existing cash sources to significantly reduce debt.
*Non-GAAP Financial Measure
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. 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.
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 September 30, 2021.March 31, 2022, of which $6.8 billion was held in the U.S. and $6.0 billion was held outside the U.S.
| | | | | | | | | | | | | | |
| September 30, 2021 | | | September 30, 2021 |
| GE Industrial | $ | 17,995 | | | U.S. | $ | 12,801 | |
| GE Capital | 6,960 | | | Non-U.S. | 12,154 | |
| Consolidated | $ | 24,955 | | | Consolidated | $ | 24,955 | |
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, remaining receivable monetization programs, 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 $1.3 billion in the third quarter of 2021 and expect to receive approximately $1.2 billion in the fourth quarter of 2021.
GE Industrial cash, cash equivalents and restricted cash totaled $18.0 billion at September 30, 2021, including $2.2March 31, 2022 included $2.3 billion of cash held in countries with currency control restrictions (including a total of $0.1 billion in Russia and $0.3Ukraine) 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.
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 for 2021 is expected to be approximately $3.5 billion, including a total of $3.1 billion in the second and third quarters of 2021, which primarily represents the cash that GE Industrial would have otherwise collected in the period had customer receivables not been previously sold and is excluded Excluded from GE Industrial free cash flows*.
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 $7.0 billion at September 30, 2021, excludingwas $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.
BORROWINGS. Consolidated total borrowings were $62.9 billion and $74.9 billion at September 30, 2021 and December 31, 2020, respectively, a decrease of $12.0 billion ($12.4 billion excluding intercompany eliminations). See the following table for a summary of GE Industrial and GE Capital borrowings.
*Non-GAAP Financial Measure
2021 3Q2022 1Q FORM 10-Q 1612
| | | | | | | | | | | | | | | | | | | | |
| GE Industrial | September 30, 2021 | December 31, 2020 | | GE Capital | September 30, 2021 | December 31, 2020 |
| GE Industrial senior notes | $ | 14,663 | | $ | 18,994 | | | Senior and subordinated notes | $ | 28,719 | | $ | 30,987 | |
| | | | Senior and subordinated notes assumed by GE Industrial | 18,106 | | 22,390 | |
Intercompany loans from
GE Capital | 3,177 | | 3,177 | | | Intercompany loans to
GE Industrial | (3,177) | | (3,177) | |
| Other GE Industrial borrowings | 898 | | 1,352 | | | Other GE Capital
borrowings | 717 | | 1,779 | |
| Total GE Industrial | | | | Total GE Capital | | |
| adjusted borrowings(a)(b) | $ | 18,738 | | $ | 23,523 | | | adjusted borrowings(a)(b) | $ | 44,366 | | $ | 51,979 | |
(a) BORROWINGS. Consolidated total borrowings of $62,888 millionwere $33.6 billion and $74,902 million$35.2 billion at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, are neta decrease of intercompany eliminations of $216 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 $3,788 million and $5,687 million at September 30, 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 September 30, 2021 compared to December 31, 2020 was driven primarily by debt repurchases of $4.1 billion, net repayments and maturities of other debt of $0.5$1.2 billion and $0.3 billion related to changes in foreign exchange rates.
GE Industrial net debt* was $31.3 billion and $32.3 billion at September 30, 2021 and December 31, 2020, respectively. The decrease was driven primarily by a lower debt balance of $4.8 billion, partially offset by a decrease in the net cash deduction of $3.9 billion due to a lower cash balance, mainly due to debt repurchases.
The reduction in GE Capital adjusted borrowings at September 30, 2021 compared to December 31, 2020 was driven primarily by debt repurchases of $3.2 billion, long-term debt maturities of $1.8 billion, lower non-recourse borrowings of $0.9 billion, and $1.6 billion of fair value adjustments for debt in fair value hedge relationships.
Liability Management Actions.In the second quarter of 2021, we completed a debt tender to repurchase a total of $7.3 billion of debt, comprising $4.1 billion of GE Industrial debt with maturities ranging from 2022 through 2050, and $3.2 billion of GE Capital debt with maturities ranging from 2021 through 2039.
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:
| | | | | | | | | | | |
| September 30, 2021 | GE Industrial | GE Capital | Consolidated |
| Total short- and long-term borrowings | $ | 33,667 | | $ | 29,437 | | $ | 62,888 | |
| Debt assumed by GE Industrial from GE Capital(a) | (18,106) | | 18,106 | | — | |
| Intercompany loans with right of offset(a) | 3,177 | | (3,177) | | — | |
| Total intercompany payable (receivable) between GE Industrial and GE Capital | (14,929) | | 14,929 | | — | |
| Total borrowings adjusted for assumed debt and intercompany loans | $ | 18,738 | | $ | 44,366 | | $ | 62,888 | |
(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 September 30, 2021.
GE Industrial has in place committed revolving credit facilities totaling $14.5$14.4 billion at September 30, 2021,March 31, 2022, comprising a $10.0 billion unused back-up revolving syndicated credit facility and a total of $4.5$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 $10.0 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.
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | |
| | 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 |
In the first quarter of 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.
Following the close of the GECAS transaction, we expect that GE Capital will no longer receive separate credit ratings on its short- or long-term debt, and as a result our credit ratings will be issued on a consolidated basis for the Company.this report.
Substantially all of the Company's debt agreements in place at September 30, 2021March 31, 2022 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 September 30, 2021.March 31, 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 September 30, 2021March 31, 2022 |
| BBB+/A-2/P-2 | $ | 5941 | |
| BBB/A-3/P-3 | 576247 | |
| BBB- | 9861,093 | |
| BB+ and below | 457494 | |
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 and nine months ended September 30, 2021March 31, 2022 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 – NINE MONTHS ENDED SEPTEMBER 30, 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 $0.8$0.5 billion in 2021,2022, a decrease of $2.3$2.1 billion compared with 2020,2021, primarily due to: an increasea decrease in financial services-related cash collateral paid net income (after adjusting for the gainof settlements on the salederivative contracts of BioPharma, non-cash losses related$1.6 billion, which is a standard market practice to our interest in Baker Hughes, non-operating benefit costs and non-operating debt extinguishment costs, which are adjusted through All other operating activities) primarily due to COVID-19 impacts in our Aviation segment in 2020;minimize derivative counterparty exposures; a decrease in cash paidused for income taxesAll other operating activities primarily due to the nonrecurrence of $0.7 billion; partially offset by a lowersettlements of factoring related liabilities of $0.4 billion, an increase in Aviation relatedAviation-related customer allowance accruals of $0.2$0.3 billion (compared to an insignificant decrease in 2021) and the nonrecurrence of the settlement of an Alstom legacy legal matter of $0.2 billion in 2021 (components of All other operating activities). All other operating activities included $0.5 billion and $0.8 billion2021; partially offset by an increase in Aviation related customer allowance accruals and decreases in employee benefit liabilitiescash used for working capital of $0.2 billion and $0.3 billion in 2021 and 2020, respectively.$0.4 billion.
ChangesThe cash impacts from changes in working capital compared to prior year were as follows: current receivables of $(1.4)$(1.7) billion, driven by a higher decreasevolume and lower collections, partially offset by decreases in sales of receivables to discontinued factoring programs of $(2.8) billion, partially offset by a prior year decreasethird parties in sales of receivables to our continuing unconsolidated receivables facility of $1.1 billion which did not reoccur in 2021 and higher net collections;2021; inventories, including deferred inventory, of $(0.7)$(0.3) billion, driven by lower liquidations; current contract assets of $(0.4)$0.5 billion, driven by lower net unfavorable changes in estimated profitability at Aviation;higher billings on our long-term service agreements; accounts payable and equipment project accruals of $2.7$0.4 billion, driven by lower disbursements related to purchases of materials in prior periods;periods and progress collections and current deferred income of $(0.2)$0.7 billion, driven by higher netlower liquidations. Progress collections and current deferred income included lower early payments received at our Aviation Military equipment business of $0.3 billion from a foreign government in 2021 compared to $0.7 billion from the U.S. Department of Defense in 2020.
GE Industrial cash from2022 1Q FORM 10-Q 13
Cash used for investing activities was $2.2$0.5 billion in 2021, a decrease2022, an increase of $17.1$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 2020 sale$0.9 billion (a component of our BioPharma businessAll other investing activities); an increase in purchases of $20.3insurance investment securities of $0.6 billion; partially offset by an increase in proceeds of $0.6 billion from the 2021 sales of a portion of our retained ownership interest in Baker Hughes of $3.0 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 $1.0$0.4 billion in 2021, down $0.5 billion compared with 2020.both 2022 and 2021.
GE Industrial cashCash used for financing activities was $6.5$1.5 billion in 2021,2022, a decrease of $2.9$0.1 billion compared with 2020, primarily due to: the nonrecurrence of repayments of commercial paper of $3.0 billion in 2020; partially offset by an increase of $0.5 billion in debt tender offers. GE Industrial paid cash to repurchase long term debt of $4.8 billion and $4.3 billion, including debt extinguishment costs of $0.6 billion and $0.1 billion (a component of All other financing activities) in 2021, and 2020, respectively.
GE CAPITAL CASH FLOWS FROM CONTINUING OPERATIONS. GE Capital cash used for operating activities was $3.0 billion in 2021, an increase of $3.6 billion compared with 2020, primarily due to: cash collateral paid, which is a standard market practice to minimize derivative counterparty exposures, and settlements received on derivative contracts (components of All other operating activities) of $1.4 billion in 2021, compared with collateral and settlements received of $2.2 billion in 2020.
GE Capital cash from investing activities was $4.0 billion in 2021, a decrease of $5.2 billion compared with 2020, primarily due to: the nonrecurrence of the repayment of GE Capital intercompany loans of $7.5 billion by GE Industrial in 2020; a decrease in cash of $1.3 billion related to our current receivables and supply chain finance programs with GE Industrial; partially offset by higher net collections of financing receivables of $3.7 billion, mainly driven by the discontinuation of certain factoring programs.
GE Capital cash used for financing activities was $7.0 billion in 2021, a decrease of $6.8 billion compared with 2020, primarily due to: lower net repaymentsdebt maturities of borrowings of $7.5 billion,$0.3billion; partially offset by higher debt tender incentive and fees of $0.9 billion. GE Capital paidlower cash to repurchase long termreceived on derivatives hedging foreign currency debt of $3.9 billion and $10.0 billion, including debt tender incentive and fees of $1.1 billion and $0.2 billion (a component of All other financing activities), excluding a non-cash debt basis adjustment of $0.3 billion and an insignificant amount in 2021 and 2020, respectively.$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 used for investing activities increased primarily due to an increase in net purchases of plant, property and equipment, partially offset by an increase in net collections of financing receivables.
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 September 30, 2021March 31, 2022 and December 31, 2020,2021, included in GE Industrial's accounts payable was $3.5$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 $4.9$1.9 billion and $3.8$1.6 billion for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
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 nine months ended September 30, 2021 and 2020, GE Capital acquired from third parties 24 aircraft with a list price totaling $1.9 billion and eight aircraft with a list price totaling $0.8 billion, respectively, that will be leased to others and are powered by engines manufactured by GE Aviation and affiliates. GE Capital also made payments to GE Aviation and affiliates related to spare engines and engine parts of an insignificant amount and $0.2 billion, which included an insignificant amount and $0.1 billion to CFM International during the nine months ended September 30, 2021 and 2020, respectively. 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 September 30, 2021 and December 31, 2020, respectively.
*Non-GAAP Financial Measure
Also, during the nine months ended September 30, 2021 and 2020, GE Industrial recognized equipment revenues of $1.6 billion and $1.9 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 September 30, 2021, GE Capital had funded related investments of $0.2 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 September 30, 2021, GE Industrial had outstanding guarantees to GE Capital on $0.7 billion of funded exposure and an insignificant amount of unfunded commitments, which included guarantees issued by industrial businesses. The recorded contingent liability for these guarantees was insignificant as of September 30, 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.
OTHER ITEMS
INSURANCE. At September 30, 2021, our insurance liabilities and annuity benefits of $37.7 billion were primarily supported by investment securities of $41.7 billion, commercial mortgage loans of $1.8 billion, net of their allowance for losses, and equity method and other investments of $1.3 billion. The insurance liabilities and annuity benefits primarily comprise a liability for future policy benefits for those insurance contract claims not yet incurred and claim reserves for claims that have been incurred or are estimated to have been incurred but not yet reported.
2021 Premium Deficiency Testing. We completed our annual premium deficiency testing in the aggregate across our run-off insurance portfolio in the third quarter of 2021. These procedures included updating experience studies since our last test completed in the third quarter of 2020, independent actuarial analysis (principally on long-term care insurance exposures) and review of industry benchmarks. Our 2021 premium deficiency testing started with the positive margin of less than 2% of the recorded future policy benefit reserves that resulted from our 2020 premium deficiency testing. Using updated assumptions, the 2021 premium deficiency testing results indicated a significant increase in the positive margin to approximately 11% of the related future policy benefit reserves recorded at September 30, 2021. As a result, the assumptions updated in connection with the premium deficiency recognized in 2019 remain locked-in and will remain so unless another premium deficiency occurs in the future.
The significant increase in the premium deficiency testing margin resulting from our 2021 premium deficiency testing was largely attributable to an increase in the overall discount rate to a weighted average rate of 6.15% compared to 5.70% in 2020 ($2.2 billion). This increase in the discount rate from 2020 reflects further development of our previously communicated investment portfolio realignment strategy, that includes increased amounts allocated to growth assets, consisting of private equity, equity-like securities and select high yield credit strategies, from our current target of approximately 8% up to approximately 15%. These amounts are expected to be funded over the next 5 to 7 years from the remaining projected capital contribution of approximately $5.5 billion through 2024 and regular portfolio cash flows while maintaining an overall A-rated fixed income portfolio. The 2021 discount rate assumptions also reflect a lower expected reinvestment rate on fixed-income investments versus that applied in 2020, due to lower prevailing benchmark interest rates in the U.S, grading to a lower expected long-term average investment yield over a shorter period and slightly lower actual yields on our fixed-income investment security portfolio. As a result of this increased allocation to higher-yielding assets, our run-off insurance operations may experience future earnings volatility due to investments carried at fair value with changes in fair values reported in earnings and changes in the allowance for credit losses, and temporary elevated amounts of unfunded investment commitments.
While our observed long-term care insurance claim experience has shown some modest favorable emerging morbidity experience in the period since the 2017 reconstruction of our future claim cost projections, it remains largely in-line with those reconstructed projections. Based on the application of professional actuarial judgment to the factors discussed above, we have made no substantial change to our assumptions concerning morbidity, morbidity improvement, mortality, mortality improvement, terminations, or long-term care insurance premium rate increases in 2021. As with all assumptions underlying our premium deficiency testing, we will continue to monitor these factors, which may result in future changes in our assumptions.
Since our premium deficiency testing performed in 2020, we have implemented approximately $0.2 billion of previously approved long-term care insurance premium rate increase actions and made no substantial changes to the amount of projected future premium rate increase approvals. Our 2021 premium deficiency test includes approximately $1.7 billion of anticipated future premium increases or benefit reductions associated with future in-force rate actions, of which approximately $0.9 billion has been approved and not yet implemented. This represents a decrease of $0.2 billion from our 2020 premium deficiency test to account for actions that are: (a) approved and not yet implemented, (b) filed but not yet approved, and (c) estimated on future filings through 2030 and includes the effects of the higher discount rate mentioned above and longer anticipated timing to achieve and implement certain premium rate approvals.
As a result of exposure period cut-off dates to permit experience to develop and lags in ceding company data reporting from our ceding companies, the impact of COVID-19 was generally not reflected in the experience studies data used in our 2021 premium deficiency testing. However, we assessed certain scenarios to better understand potential impacts associated with COVID-19 and, due to the currently observed insignificance and perceived short-term nature of such uncertain future impacts, including the natural offsets from mortality in the aggregate across our run-off insurance products (i.e., for life insurance products, higher mortality increases the present value of expected future benefit payments, while for annuity and long-term care insurance contracts, higher mortality decreases the present value of expected future benefit payments), concluded adjustments to our primary assumptions used in the premium deficiency testing were not warranted.
When results of the premium deficiency testing indicate overall reserves are sufficient, we are also required to assess whether additional future policy benefit reserves are required to be accrued over time in the future. Such an accrual would be required if profits are projected in earlier future periods followed by losses projected in later future years (i.e., profits followed by losses). When this pattern of profits followed by losses is projected, we would be required to accrue a liability in the expected profitable years by the amount necessary to offset projected losses in later future years. We noted our projections as of third quarter 2021 indicate the present value of projected earnings in each future year to be positive, and therefore, no further adjustments to our future policy benefit reserves were required at this time.
GAAP Reserve Sensitivities. The results of our premium deficiency testing are sensitive to the assumptions described above. Considering the results of the 2021 premium deficiency test which resulted in a margin, any future net adverse changes in our assumptions, may reduce the margin or result in a premium deficiency requiring an increase to future policy benefit reserves. For example, adverse changes in key assumptions related to our future policy benefits reserves, holding all other assumptions constant, would have the following effects on the projected present value of future cash flows as presented in the table below. Any future net favorable changes to these assumptions could result in a lower projected present value of future cash flows and additional margin in our premium deficiency test and higher income over the remaining duration of the portfolio, including higher investment income. The assumptions within our future policy benefit reserves are subject to significant uncertainties, including those inherent in the complex nature of our reinsurance treaties. Many of our assumptions are interdependent and require evaluation individually and in the aggregate across all insurance products. Small changes in the amounts used in the sensitivities, the use of different factors or effect from converting to modeling future cash flow projections for our long-term insurance exposures to a "first principles" model based on more granular assumptions of expected future claim experience could result in materially different outcomes from those reflected below.
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| 2020 assumption | 2021 assumption | Hypothetical change in 2021 assumption | Estimated increase to projected present value of future cash flows (In millions, pre-tax) |
| Long-term care insurance morbidity improvement | 1.25% per year over 12 to 20 years | 1.25% per year over 12 to 20 years | 25 basis point reduction
No morbidity improvement | $500
$2,700 |
| Long-term care insurance morbidity | Based on company experience | Based on company experience | 5% increase in dollar amount of paid claims | $900 |
| Long-term care insurance mortality improvement | 0.5% per year for 10 years with annual improvement graded to 0% over next 10 years | 0.5% per year for 10 years with annual improvement graded to 0% over next 10 years | 1.0% per year for 10 years with annual improvement graded to 0% over next 10 years | $400 |
| Total terminations: | | | | |
| Long-term care insurance mortality | Based on company experience | Based on company experience | Any change in termination assumptions that reduce total terminations by 10% | $900 |
| Long-term care insurance lapse rate | Varies by block, attained age and benefit period; average 0.5% - 1.15% | Varies by block, attained age and benefit period; average 0.5% -1.15% |
| Long-term care insurance benefit exhaustion | Based on company experience | Based on company experience |
| Long-term care insurance future premium rate increases | Varies by block based on filing experience | Varies by block based on filing experience | 25% adverse change in premium rate increase success rate | $400 |
| Discount rate: | | | | |
| Overall discount rate | 5.70% | 6.15% | 25 basis point reduction | $800 |
| Reinvestment rate | 2.70%; grading to a long-term average investment yield of 5.8% | 2.60%; grading to a long-term average investment yield of 5.1% | 25 basis point reduction; grading to a long-term average investment yield of 5.1% | Less than $100 |
| Structured settlement annuity mortality | Based on company experience | Based on company experience | 5% decrease in mortality | $100 |
| Life insurance mortality | Based on company experience | Based on company experience | 5% increase in mortality | $300 |
Statutory Considerations. Our run-off insurance subsidiaries are required to prepare statutory financial statements in accordance with statutory accounting practices. Statutory accounting practices, not GAAP, determine the minimum required statutory capital levels of our insurance legal entities. We annually perform statutory asset adequacy testing and expect our December 31, 2021 testing process to be completed in the first quarter of 2022, the results of which may affect the amount or timing of capital contributions from GE Capital to the insurance legal entities.
See Other Items - New Accounting Standards, Note 12 and Other Items within MD&A in our Annual Report on Form 10-K for the year ended December 31, 2020 for further information related to our run-off insurance operations.
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 with an electionand applied retrospectively to adopt early, and restatement of prior periods presented.January 1, 2021 (i.e., the transition date). We intend towill adopt the new guidance effective January 1, 2023, using the 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. Weincome (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 single-Aoverall 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, combined with the more granular nature of first principles models, the effect on the transition adjustment related to the new guidance may be greater than under our 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 will be lower than our current discount rate. In measuring the insurance liabilities under the new guidance, contracts shall not be grouped together from different issue years. These changes will result in the elimination of premium deficiency testing and shadow adjustments. While we continue to evaluate the effect of the new guidance on our ongoing financial reporting, we anticipate that its adoption will materially affect our financial statements and require changes to certain of our processes, systems, and controls. 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 September 30 | | 2021 | | 2020 | | V% | | 2021 | | 2020 | | V% | | 2021 | | 2020 | V pts |
| Aviation (GAAP) | | $ | 5,398 | | | $ | 4,919 | | | 10 | % | | $ | 846 | | | $ | 350 | | | F | | 15.7 | % | | 7.1 | % | 8.6pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 12 | | | | | — | | | (12) | | | | | | | | |
| Less: foreign currency effect | | (9) | | | — | | | | | (13) | | | — | | | | | | | | |
| Aviation organic (Non-GAAP) | | $ | 5,408 | | | $ | 4,908 | | | 10 | % | | $ | 858 | | | $ | 362 | | | F | | 15.9 | % | | 7.4 | % | 8.5pts |
| | | | | | | | | | | | | | | | | |
| Healthcare (GAAP) | | $ | 4,339 | | | $ | 4,565 | | | (5) | % | | $ | 704 | | | $ | 738 | | | (5) | % | | 16.2 | % | | 16.2 | % | —pts |
| Less: acquisitions | | — | | | (23) | | | | | (9) | | | (13) | | | | | | | | |
| Less: business dispositions | | — | | | 21 | | | | | — | | | (2) | | | | | | | | |
| Less: foreign currency effect | | 49 | | | — | | | | | 31 | | | — | | | | | | | | |
| Healthcare organic (Non-GAAP) | | $ | 4,289 | | | $ | 4,567 | | | (6) | % | | $ | 681 | | | $ | 753 | | | (10) | % | | 15.9 | % | | 16.5 | % | (0.6)pts |
| | | | | | | | | | | | | | | | | |
| Renewable Energy (GAAP) | | $ | 4,208 | | | $ | 4,525 | | | (7) | % | | $ | (151) | | | $ | (51) | | | U | | (3.6) | % | | (1.1) | % | (2.5)pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: foreign currency effect | | 101 | | | — | | | | | (4) | | | — | | | | | | | | |
| Renewable Energy organic (Non-GAAP) | | $ | 4,106 | | | $ | 4,525 | | | (9) | % | | $ | (147) | | | $ | (51) | | | U | | (3.6) | % | | (1.1) | % | (2.5)pts |
| | | | | | | | | | | | | | | | | |
| Power (GAAP) | | $ | 4,026 | | | $ | 4,025 | | | — | % | | $ | 204 | | | $ | 148 | | | 38 | % | | 5.1 | % | | 3.7 | % | 1.4pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: foreign currency effect | | 39 | | | — | | | | | 6 | | | — | | | | | | | | |
| Power organic (Non-GAAP) | | $ | 3,988 | | | $ | 4,025 | | | (1) | % | | $ | 198 | | | $ | 148 | | | 34 | % | | 5.0 | % | | 3.7 | % | 1.3pts |
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| GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) |
| | Revenues | | Segment profit (loss) | | Profit margin |
| Nine months ended September 30 | | 2021 | | 2020 | | V% | | 2021 | | 2020 | | V% | | 2021 | | 2020 | V pts |
| Aviation (GAAP) | | $ | 15,230 | | | $ | 16,196 | | | (6) | % | | $ | 1,664 | | | $ | 665 | | | F | | 10.9 | % | | 4.1 | % | 6.8pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 48 | | | | | — | | | (48) | | | | | | | | |
| Less: foreign currency effect | | 13 | | | — | | | | | (28) | | | — | | | | | | | | |
| Aviation organic (Non-GAAP) | | $ | 15,217 | | | $ | 16,148 | | | (6) | % | | $ | 1,691 | | | $ | 713 | | | F | | 11.1 | % | | 4.4 | % | 6.7pts |
| | | | | | | | | | | | | | | | | |
| Healthcare (GAAP) | | $ | 13,100 | | | $ | 13,185 | | | (1) | % | | $ | 2,203 | | | $ | 2,111 | | | 4 | % | | 16.8 | % | | 16.0 | % | 0.8pts |
| Less: acquisitions | | 18 | | | (73) | | | | | (5) | | | (35) | | | | | | | | |
| Less: business dispositions | | — | | | 911 | | | | | — | | | 373 | | | | | | | | |
| Less: foreign currency effect | | 335 | | | — | | | | | 110 | | | — | | | | | | | | |
| Healthcare organic (Non-GAAP) | | $ | 12,747 | | | $ | 12,348 | | | 3 | % | | $ | 2,098 | | | $ | 1,773 | | | 18 | % | | 16.5 | % | | 14.4 | % | 2.1pts |
| | | | | | | | | | | | | | | | | |
| Renewable Energy (GAAP) | | $ | 11,505 | | | $ | 11,224 | | | 3 | % | | $ | (484) | | | $ | (628) | | | 23 | % | | (4.2) | % | | (5.6) | % | 1.4pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 33 | | | | | — | | | (4) | | | | | | | | |
| Less: foreign currency effect | | 438 | | | — | | | | | (41) | | | — | | | | | | | | |
| Renewable Energy organic (Non-GAAP) | | $ | 11,066 | | | $ | 11,191 | | | (1) | % | | $ | (443) | | | $ | (624) | | | 29 | % | | (4.0) | % | | (5.6) | % | 1.6pts |
| | | | | | | | | | | | | | | | | |
| Power (GAAP) | | $ | 12,242 | | | $ | 12,206 | | | — | % | | $ | 416 | | | $ | (32) | | | F | | 3.4 | % | | (0.3) | % | 3.7pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 15 | | | | | — | | | 2 | | | | | | | | |
| Less: foreign currency effect | | 237 | | | — | | | | | (25) | | | — | | | | | | | | |
| Power organic (Non-GAAP) | | $ | 12,005 | | | $ | 12,191 | | | (2) | % | | $ | 441 | | | $ | (34) | | | F | | 3.7 | % | | (0.3) | % | 4pts |
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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 September 30 | | Nine months ended September 30 |
| 2021 | 2020 | V% | | 2021 | 2020 | V% |
| GE Industrial revenues (GAAP) | $ | 17,821 | | $ | 17,918 | | (1) | % | | $ | 51,637 | | $ | 52,828 | | (2) | % |
| Less: acquisitions | — | | (15) | | | | 18 | | (61) | | |
| Less: business dispositions(a) | — | | 57 | | | | — | | 1,393 | | |
| Less: foreign currency effect(b) | 185 | | — | | | | 1,042 | | — | | |
| GE Industrial organic revenues (Non-GAAP) | $ | 17,636 | | $ | 17,876 | | (1) | % | | $ | 50,577 | | $ | 51,496 | | (2) | % |
| | | | | | | |
(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, British pound, and Chinese renminbi. |
| | | | | | | | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL EQUIPMENT AND SERVICES | Three months ended September 30 | | Nine months ended September 30 |
| ORGANIC REVENUES (NON-GAAP) | 2021 | 2020 | V% | | 2021 | 2020 | V% |
| GE Industrial equipment revenues (GAAP) | $ | 8,905 | | $ | 9,625 | | (7) | % | | $ | 25,178 | | $ | 26,928 | | (6) | % |
| Less: acquisitions | — | | — | | | | — | | — | | |
| Less: business dispositions | — | | — | | | | — | | 1,124 | | |
| Less: foreign currency effect | 133 | | — | | | | 702 | | — | | |
| GE Industrial equipment organic revenues (Non-GAAP) | $ | 8,772 | | $ | 9,625 | | (9) | % | | $ | 24,477 | | $ | 25,803 | | (5) | % |
| | | | | | | |
| GE Industrial services revenues (GAAP) | $ | 8,916 | | $ | 8,293 | | 8 | % | | $ | 26,459 | | $ | 25,901 | | 2 | % |
| Less: acquisitions | — | | (15) | | | | 18 | | (61) | | |
| Less: business dispositions | — | | 57 | | | | — | | 269 | | |
| Less: foreign currency effect | 51 | | — | | | | 340 | | — | | |
| GE Industrial services organic revenues (Non-GAAP) | $ | 8,865 | | $ | 8,251 | | 7 | % | | $ | 26,100 | | $ | 25,693 | | 2 | % |
| | | | | | | |
| 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
2021 3Q2022 1Q FORM 10-Q 2314
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGIN | Three months ended September 30 | | Nine months ended September 30 |
| (EXCLUDING CERTAIN ITEMS) (NON-GAAP) | 2021 | | 2020 | | V% | | 2021 | | 2020 | | V% |
| GE Industrial total revenues (GAAP) | $ | 17,821 | | | $ | 17,918 | | | (1) | % | | $ | 51,637 | | | $ | 52,828 | | | (2) | % |
| | | | | | | | | | | |
| Costs | | | | | | | | | | | |
| | | | | | | | | | | |
| GE Industrial total costs and expenses (GAAP) | $ | 17,347 | | | $ | 18,705 | | | (7) | % | | $ | 52,348 | | | $ | 56,943 | | | (8) | % |
| Less: GE Industrial interest and other financial charges | 225 | | | 313 | | | | | 753 | | | 1,016 | | | |
| Less: debt extinguishment costs | — | | | — | | | | | 645 | | | 63 | | | |
| Less: non-operating benefit costs | 426 | | | 603 | | | | | 1,376 | | | 1,815 | | | |
| Less: restructuring & other(a) | 64 | | | 91 | | | | | 402 | | | 523 | | | |
| Less: Steam asset impairment | — | | | 363 | | | | | — | | | 363 | | | |
| Less: SEC settlement charge | — | | | 100 | | | | | — | | | 100 | | | |
| Less: goodwill impairments | — | | | — | | | | | — | | | 728 | | | |
| Add: noncontrolling interests | 16 | | | (51) | | | | | 22 | | | (161) | | | |
| Adjusted GE Industrial costs (Non-GAAP) | $ | 16,648 | | | $ | 17,185 | | | (3) | % | | $ | 49,194 | | | $ | 52,174 | | | (6) | % |
| | | | | | | | | | | |
| Other Income | | | | | | | | | | | |
| GE Industrial other income (GAAP) | $ | 420 | | | $ | (509) | | | F | | $ | 1,760 | | | $ | 8,481 | | | (79) | % |
| Less: gains (losses) on equity securities(a) | 412 | | | (669) | | | | | 1,256 | | | (4,527) | | | |
| Less: restructuring & other | — | | | — | | | | | 7 | | | — | | | |
| Less: gains (losses) on purchases and sales of business interests(a) | (156) | | | 28 | | | | | (159) | | | 12,431 | | | |
| Adjusted GE Industrial other income (Non-GAAP) | $ | 165 | | | $ | 132 | | | 25 | % | | $ | 656 | | | $ | 577 | | | 14 | % |
| | | | | | | | | | | |
| GE Industrial profit (loss) (GAAP) | $ | 894 | | | $ | (1,296) | | | F | | $ | 1,048 | | | $ | 4,366 | | | (76) | % |
| GE Industrial profit (loss) margin (GAAP) | 5.0 | % | | (7.2) | % | | 12.2pts | | 2.0 | % | | 8.3 | % | | (6.3)pts |
| | | | | | | | | | | |
| Adjusted GE Industrial profit (loss) (Non-GAAP) | $ | 1,337 | | | $ | 865 | | | 55 | % | | $ | 3,099 | | | $ | 1,231 | | | F |
| Adjusted GE Industrial profit (loss) margin (Non-GAAP) | 7.5 | % | | 4.8 | % | | 2.7pts | | 6.0 | % | | 2.3 | % | | 3.7pts |
| | | | | | | | | | | |
| (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) 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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| 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 |
| | | | | | | | | | | |
| 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. |
| | | | | | | | | | | | | | | | | | | | | | | |
| ADJUSTED GE INDUSTRIAL ORGANIC PROFIT | Three months ended September 30 | | Nine months ended September 30 |
| (NON-GAAP) | 2021 | 2020 | V% | | 2021 | 2020 | V% |
| Adjusted GE Industrial profit (loss) (Non-GAAP) | $ | 1,337 | | $ | 865 | | 55 | % | | $ | 3,099 | | $ | 1,231 | | F |
| Less: acquisitions | (9) | | 5 | | | | (5) | | 22 | | |
| Less: business dispositions | — | | (2) | | | | — | | 354 | | |
| Less: foreign currency effect | 24 | | — | | | | 30 | | — | | |
| Adjusted GE Industrial organic profit (loss) (Non-GAAP) | $ | 1,322 | | $ | 861 | | 54 | % | | $ | 3,074 | | $ | 855 | | F |
| | | | | | | |
| Adjusted GE Industrial profit (loss) margin (Non-GAAP) | 7.5 | % | 4.8 | % | 2.7pts | | 6.0 | % | 2.3 | % | 3.7pts |
Adjusted GE Industrial organic profit (loss) margin
(Non-GAAP) | 7.5 | % | 4.8 | % | 2.7pts | | 6.1 | % | 1.7 | % | 4.4pts |
| | | | | | | |
| 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. |
| | | | | | | | | | | | | | | |
| 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. |
| | | | | | | | | | | | | | | |
| 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. |
2021 3Q2022 1Q FORM 10-Q 2415
| | | | | | | | | | | | | | | | | | | | | | | |
| ADJUSTED EARNINGS (LOSS) (NON-GAAP) | Three months ended September 30 | | Nine months ended September 30 |
| 2021 | 2020 | V% | | 2021 | 2020 | V% |
| | | | | | | |
| Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(a) | $ | 603 | | $ | (1,132) | | F | | $ | (2) | | $ | 3,848 | | U |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | (9) | | (6) | | | | (9) | | (141) | | |
| Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (142) | | (29) | | | | (887) | | (692) | | |
| GE Industrial earnings (loss) (Non-GAAP) | $ | 735 | | $ | (1,109) | | F | | $ | 877 | | $ | 4,399 | | (80) | % |
| Non-operating benefits costs (pre-tax) (GAAP) | (426) | | (603) | | | | (1,376) | | (1,815) | | |
| Tax effect on non-operating benefit costs | 90 | | 127 | | | | 289 | | 381 | | |
| Less: non-operating benefit costs (net of tax) | (337) | | (476) | | | | (1,087) | | (1,434) | | |
| Gains (losses) on purchases and sales of business interests (pre-tax)(b) | (156) | | 28 | | | | (159) | | 12,431 | | |
| Tax effect on gains (losses) on purchases and sales of business interests | 30 | | (25) | | | | 31 | | (1,253) | | |
| Less: gains (losses) on purchases and sales of business interests (net of tax) | (126) | | 3 | | | | (128) | | 11,178 | | |
| Restructuring & other (pre-tax)(b) | (64) | | (91) | | | | (395) | | (523) | | |
| Tax effect on restructuring & other | 7 | | 27 | | | | 36 | | 118 | | |
| Less: restructuring & other (net of tax) | (57) | | (63) | | | | (359) | | (405) | | |
| Steam asset impairments (pre-tax) | — | | (363) | | | | — | | (363) | | |
| Tax effect on Steam asset impairments | — | | 37 | | | | — | | 37 | | |
| Less: Steam asset impairments (net of tax) | — | | (326) | | | | — | | (326) | | |
| Gains (losses) on equity securities (pre-tax)(b) | 412 | | (669) | | | | 1,256 | | (4,527) | | |
| Tax effect on gains (losses) on equity securities(c) | 78 | | 122 | | | | 155 | | 934 | | |
| Less: gains (losses) on equity securities (net of tax) | 490 | | (547) | | | | 1,411 | | (3,593) | | |
| Goodwill impairments (pre-tax)(b) | — | | — | | | | — | | (728) | | |
| Tax effect on goodwill impairments | — | | — | | | | — | | (23) | | |
| Less: goodwill impairments (net of tax) | — | | — | | | | — | | (751) | | |
| Debt extinguishment costs (pre-tax) | — | | — | | | | (645) | | (63) | | |
| Tax effect on debt extinguishment costs | — | | — | | | | 135 | | 13 | | |
| Less: debt extinguishment costs (net of tax) | — | | — | | | | (510) | | (50) | | |
| | | | | | | |
| | | | | | | |
| Less: SEC settlement charge (pre-tax and net of tax) | — | | (100) | | | | — | | (100) | | |
| | | | | | | |
| | | | | | | |
| Less: Accretion of RNCI (pre-tax and net of tax) | (9) | | (6) | | | | (9) | | (141) | | |
| Less: GE Industrial U.S. tax reform enactment adjustment | — | | (51) | | | | — | | (51) | | |
| Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 775 | | $ | 458 | | 69 | % | | $ | 1,559 | | $ | 73 | | F |
| | | | | | | |
| GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | $ | (142) | | $ | (29) | | U | | $ | (887) | | $ | (692) | | (28) | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Debt extinguishment costs (pre-tax) | — | | — | | | | (771) | | (143) | | |
| Tax effect on debt extinguishment costs | — | | — | | | | 162 | | 24 | | |
| Less: debt extinguishment costs (net of tax) | — | | — | | | | (609) | | (119) | | |
| Less: GE Capital tax benefit related to BioPharma sale | — | | 8 | | | | — | | 96 | | |
| Less: GE Capital tax loss related to GECAS sale | — | | — | | | | (44) | | — | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Less: GE Capital U.S. tax reform enactment adjustment | — | | 2 | | | | 8 | | 2 | | |
| Adjusted GE Capital earnings (loss) (Non-GAAP) | $ | (142) | | $ | (39) | | U | | $ | (243) | | $ | (671) | | 64 | % |
| | | | | | | |
| Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 775 | | $ | 458 | | 69 | % | | $ | 1,559 | | $ | 73 | | F |
| Add: Adjusted GE Capital earnings (loss) (Non-GAAP) | (142) | | (39) | | U | | (243) | | (671) | | 64 | % |
| Adjusted earnings (loss) (Non-GAAP) | $ | 633 | | $ | 419 | | 51 | % | | $ | 1,316 | | $ | (598) | | F |
| | | | | | | |
| (a) See Note 18 for further information. | | | | |
| (b) See the Corporate Items and Eliminations section for further information. | | | | |
| (c) Included tax benefits available to offset the tax on gains in equity securities. | | | | |
| | | | | | | | | | | | | | |
| 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. |
| | | | | | | | | | | | | | | |
| 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. |
2021 3Q2022 1Q FORM 10-Q 2516
| | | | | | | | | | | | | | | | | | | | | | | |
| ADJUSTED EARNINGS (LOSS) PER SHARE (EPS) | Three months ended September 30 | | Nine months ended September 30 |
(NON-GAAP) (In dollars) | 2021 | 2020 | V% | | 2021 | 2020 | V% |
| | | | | | | |
| Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | 0.55 | | $ | (1.03) | | F | | $ | — | | $ | 3.52 | | U |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | (0.01) | | (0.01) | | | | (0.01) | | (0.13) | | |
| Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | (0.13) | | (0.03) | | | | (0.81) | | (0.63) | | |
| GE Industrial EPS (Non-GAAP) | $ | 0.67 | | $ | (1.01) | | F | | $ | 0.80 | | $ | 4.02 | | (80) | % |
| Non-operating benefits costs (pre-tax) (GAAP) | (0.39) | | (0.55) | | | | (1.25) | | (1.66) | | |
| Tax effect on non-operating benefit costs | 0.08 | | 0.12 | | | | 0.26 | | 0.35 | | |
| Less: non-operating benefit costs (net of tax) | (0.30) | | (0.43) | | | | (0.99) | | (1.31) | | |
| Gains (losses) on purchases and sales of business interests (pre-tax) | (0.14) | | 0.03 | | | | (0.14) | | 11.36 | | |
| Tax effect on gains (losses) on purchases and sales of business interests | 0.03 | | (0.02) | | | | 0.03 | | (1.14) | | |
| Less: gains (losses) on purchases and sales of business interests (net of tax) | (0.11) | | — | | | | (0.12) | | 10.21 | | |
| Restructuring & other (pre-tax) | (0.06) | | (0.08) | | | | (0.36) | | (0.48) | | |
| Tax effect on restructuring & other | 0.01 | | 0.03 | | | | 0.03 | | 0.11 | | |
| Less: restructuring & other (net of tax) | (0.05) | | (0.06) | | | | (0.33) | | (0.37) | | |
| Steam asset impairments (pre-tax) | — | | (0.33) | | | | — | | (0.33) | | |
| Tax effect on Steam asset impairments | — | | 0.03 | | | | — | | 0.03 | | |
| Less: Steam asset impairments (net of tax) | — | | (0.30) | | | | — | | (0.30) | | |
| Gains (losses) on equity securities (pre-tax) | 0.37 | | (0.61) | | | | 1.14 | | (4.14) | | |
| Tax effect on gains (losses) on equity securities | 0.07 | | 0.11 | | | | 0.14 | | 0.85 | | |
| Less: gains (losses) on equity securities (net of tax) | 0.44 | | (0.50) | | | | 1.29 | | (3.28) | | |
| Goodwill impairments (pre-tax) | — | | — | | | | — | | (0.67) | | |
| Tax effect on goodwill impairments | — | | — | | | | — | | (0.02) | | |
| Less: goodwill impairments (net of tax) | — | | — | | | | — | | (0.69) | | |
| Debt extinguishment costs (pre-tax) | — | | — | | | | (0.59) | | (0.06) | | |
| Tax effect on debt extinguishment costs | — | | — | | | | 0.12 | | 0.01 | | |
| Less: debt extinguishment costs (net of tax) | — | | — | | | | (0.46) | | (0.05) | | |
| | | | | | | |
| | | | | | | |
| Less: SEC settlement charge (pre-tax and net of tax) | — | | (0.09) | | | | — | | (0.09) | | |
| | | | | | | |
| | | | | | | |
| Less: Accretion of RNCI (pre-tax and net of tax) | (0.01) | | (0.01) | | | | (0.01) | | (0.13) | | |
| Less: GE Industrial U.S. tax reform enactment adjustment | — | | (0.05) | | | | — | | (0.05) | | |
| Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.70 | | $ | 0.42 | | 67 | % | | $ | 1.42 | | $ | 0.07 | | F |
| | | | | | | |
| GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | (0.13) | | $ | (0.03) | | U | | $ | (0.81) | | $ | (0.63) | | (29) | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Debt extinguishment costs (pre-tax) | — | | — | | | | (0.70) | | (0.13) | | |
| Tax effect on debt extinguishment costs | — | | — | | | | 0.15 | | 0.02 | | |
| Less: debt extinguishment costs (net of tax) | — | | — | | | | (0.55) | | (0.11) | | |
| Less: GE Capital tax benefit related to BioPharma sale | — | | 0.01 | | | | — | | 0.09 | | |
| Less: GE Capital tax loss related to GECAS sale | — | | — | | | | (0.04) | | — | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Less: GE Capital U.S. tax reform enactment adjustment | — | | — | | | | 0.01 | | — | | |
| Adjusted GE Capital EPS (Non-GAAP) | $ | (0.13) | | $ | (0.04) | | U | | $ | (0.22) | | $ | (0.61) | | 64 | % |
| | | | | | | |
| Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.70 | | $ | 0.42 | | 67 | % | | $ | 1.42 | | $ | 0.07 | | F |
| Add: Adjusted GE Capital EPS (Non-GAAP) | (0.13) | | (0.04) | | U | | (0.22) | | (0.61) | | 64 | % |
| Adjusted EPS (Non-GAAP) | $ | 0.57 | | $ | 0.38 | | 50 | % | | $ | 1.20 | | $ | (0.55) | | F |
| | | | | | | |
| 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) 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. |
| | | | | | | | | | | | | | |
| 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. | | | | | | |
| | | | | | |
| | | | | | | | | | | | | | |
| 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. |
| | | | | | | | | | | | | |
| 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) | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
|
| 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
2021 3Q2022 1Q FORM 10-Q 2618
| | | | | | | | |
| GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP) | Nine months ended September 30 |
| 2021 | 2020 |
| GE Industrial CFOA (GAAP) | $ | (832) | | $ | (3,175) | |
| Add: gross additions to property, plant and equipment | (896) | | (1,302) | |
| Add: gross additions to internal-use software | (76) | | (121) | |
| Less: CFOA impact from factoring programs discontinued as of April 1, 2021 | (3,067) | | — | |
| Less: taxes related to business sales | (6) | | (837) | |
| GE Industrial free cash flows (Non-GAAP) | $ | 1,270 | | $ | (3,761) | |
| | |
| 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 and the factoring program discontinuation. The CFOA impact from factoring programs discontinued as of April 1, 2021 of $(3,067) million represents the cash that GE Industrial would have otherwise collected in the six months ended September 30, 2021 had customer receivables not been previously sold to GE Capital or third parties in those discontinued programs. The CFOA impact associated with this activity in factoring programs that have now been discontinued was $(3,832) million and $(1,022) million in the nine months ended September 30, 2021 and 2020, respectively, an increase of $(2,810) million. The CFOA impact for the three months ended September 30, 2020 was $613 million. We believe this measure will better allow management and investors to evaluate the capacity of our industrial operations to generate free cash flows. |
| | | | | | | | |
| GE INDUSTRIAL NET DEBT (NON-GAAP) | September 30, 2021 | December 31, 2020 |
| Total GE Industrial short- and long-term borrowings (GAAP) | $ | 33,667 | | $ | 42,736 | |
| Less: GE Capital short- and long-term debt assumed by GE Industrial | 18,106 | | 22,390 | |
| Add: intercompany loans from GE Capital | 3,177 | | 3,177 | |
| Total adjusted GE Industrial borrowings | $ | 18,738 | | $ | 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 | 2,948 | | 3,133 | |
| GE Industrial preferred stock | 5,933 | | 5,918 | |
| Less: 50% of GE Industrial preferred stock | 2,966 | | 2,959 | |
| 50% of preferred stock | $ | 2,966 | | $ | 2,959 | |
| Deduction for total GE Industrial cash, cash equivalents and restricted cash | (17,995) | | (23,209) | |
| Less: 25% of GE Industrial cash, cash equivalents and restricted cash | (4,499) | | (5,802) | |
| Deduction for 75% of GE Industrial cash, cash equivalents and restricted cash | $ | (13,496) | | $ | (17,407) | |
| Total GE Industrial net debt (Non-GAAP) | $ | 31,295 | | $ | 32,347 | |
| (a) Represents the sum of the net deficit of principal pension, other pension and principal retiree benefit plans at December 31, 2020. The funded status of our benefit plans is updated annually in the fourth quarter. |
| In this document we use GE Industrial net debt*, which is calculated based on rating agency methodologies. We are including the calculation of GE Industrial net debt* to provide investors more clarity regarding how the credit rating agencies measure GE Industrial leverage. |
CONTROLS AND PROCEDURES. Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that (i) our disclosure controls and procedures were effective as of September 30, 2021,March 31, 2022, and (ii) no change in internal control over financial reporting occurred during the quarter ended September 30, 2021,March 31, 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 September 30,March 31, 2022.
RISK FACTORS. The risk factor set forth below updates the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2021. These risk factors could materially affect our business, financial position and results of operations.
| | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) (UNAUDITED) | Three months ended March 31 |
| (In millions; per-share amounts in dollars) | 2022 | 2021 |
| Sales of equipment | $ | 6,864 | | $ | 7,971 | |
| Sales of services | 9,408 | | 8,345 | |
| Insurance revenues | 767 | | 755 | |
| Total revenues (Note 8) | 17,040 | | 17,071 | |
| | |
| Cost of equipment sold | 6,749 | | 7,579 | |
| Cost of services sold | 5,704 | | 4,958 | |
| Selling, general and administrative expenses | 3,651 | | 2,894 | |
| Separation costs | 119 | | — | |
| Research and development | 641 | | 561 | |
| Interest and other financial charges | 406 | | 500 | |
| | |
| Insurance losses, annuity benefits and other costs (Note 12) | 504 | | 583 | |
| | |
| Non-operating benefit cost (income) | (137) | | 430 | |
| | |
| Total costs and expenses | 17,638 | | 17,506 | |
| | |
| Other income (Note 18) | 73 | | 673 | |
| | |
| Earnings (loss) from continuing operations before income taxes | (525) | | 238 | |
| Benefit (provision) for income taxes | (204) | | (142) | |
| Earnings (loss) from continuing operations | (729) | | 97 | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (286) | | (2,894) | |
| 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) | |
| Preferred stock dividends | (52) | | (72) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (1,094) | | $ | (2,874) | |
| | |
| Amounts attributable to GE common shareholders | | |
| Earnings (loss) from continuing operations | $ | (729) | | $ | 97 | |
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| continuing operations | 28 | | 5 | |
| Earnings (loss) from continuing operations attributable to the Company | (757) | | 92 | |
| Preferred stock dividends | (52) | | (72) | |
| Earnings (loss) from continuing operations attributable | | |
| to GE common shareholders | (809) | | 20 | |
| | |
| | |
| | |
| Earnings (loss) from discontinued operations attributable | | |
| to GE common shareholders | (286) | | (2,894) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (1,094) | | $ | (2,874) | |
| | |
| Earnings (loss) per share from continuing operations (Note 17) | | |
| Diluted earnings (loss) per share | $ | (0.74) | | $ | 0.02 | |
| Basic earnings (loss) per share | $ | (0.74) | | $ | 0.02 | |
| | |
| Net earnings (loss) per share (Note 17) | | |
| Diluted earnings (loss) per share | $ | (0.99) | | $ | (2.61) | |
| Basic earnings (loss) per share | $ | (0.99) | | $ | (2.62) | |
*Non-GAAP Financial Measure
2021 3Q2022 1Q FORM 10-Q 2720
| | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) | Three months ended September 30 |
| (UNAUDITED) | Consolidated |
| (In millions; per-share amounts in dollars) | 2021 | 2020 |
| Sales of goods | $ | 11,530 | | $ | 12,306 | |
| Sales of services | 6,283 | | 5,560 | |
| GE Capital revenues from services | 616 | | 663 | |
| Total revenues (Note 9) | 18,429 | | 18,529 | |
| | |
| Cost of goods sold | 9,127 | | 10,555 | |
| Cost of services sold | 4,275 | | 3,486 | |
| Selling, general and administrative expenses | 2,747 | | 3,215 | |
| Research and development | 627 | | 595 | |
| Interest and other financial charges | 462 | | 526 | |
| Debt extinguishment costs | — | | — | |
| Insurance losses and annuity benefits | 643 | | 624 | |
| Goodwill impairments (Note 8) | — | | — | |
| Non-operating benefit costs | 427 | | 605 | |
| Other costs and expenses | 28 | | 25 | |
| Total costs and expenses | 18,337 | | 19,632 | |
| | |
| Other income (Note 23) | 491 | | (517) | |
| | |
| Earnings (loss) from continuing operations before income taxes | 584 | | (1,620) | |
| Benefit (provision) for income taxes | (2) | | 483 | |
| Earnings (loss) from continuing operations | 582 | | (1,137) | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | 602 | | (58) | |
| Net earnings (loss) | 1,184 | | (1,195) | |
| Less net earnings (loss) attributable to noncontrolling interests | (73) | | (51) | |
| Net earnings (loss) attributable to the Company | 1,257 | | (1,144) | |
| Preferred stock dividends | (52) | | (46) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 1,205 | | $ | (1,190) | |
| | |
| Amounts attributable to GE common shareholders | | |
| Earnings (loss) from continuing operations | $ | 582 | | $ | (1,137) | |
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| continuing operations | (73) | | (51) | |
| Earnings (loss) from continuing operations attributable to the Company | 655 | | (1,087) | |
| Preferred stock dividends | (52) | | (46) | |
| Earnings (loss) from continuing operations attributable | | |
| to GE common shareholders | 603 | | (1,132) | |
| | |
| | |
| | |
| Earnings (loss) from discontinued operations attributable | | |
| to GE common shareholders | 602 | | (58) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 1,205 | | $ | (1,190) | |
| | |
| Earnings (loss) per share from continuing operations (Note 18) | | |
| Diluted earnings (loss) per share | $ | 0.54 | | $ | (1.04) | |
| Basic earnings (loss) per share | $ | 0.54 | | $ | (1.04) | |
| | |
| Net earnings (loss) per share (Note 18) | | |
| Diluted earnings (loss) per share | $ | 1.08 | | $ | (1.09) | |
| Basic earnings (loss) per share | $ | 1.09 | | $ | (1.09) | |
| | | | | | | | | | | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Three months ended September 30 |
| (UNAUDITED) | GE Industrial | | GE Capital |
| (In millions) | 2021 | 2020 | | 2021 | 2020 |
| Sales of goods | $ | 11,532 | | $ | 12,314 | | | $ | — | | $ | — | |
| Sales of services | 6,289 | | 5,604 | | | — | | — | |
| GE Capital revenues from services | — | | — | | | 734 | | 758 | |
| Total revenues | 17,821 | | 17,918 | | | 734 | | 758 | |
| | | | | |
| Cost of goods sold | 9,129 | | 10,564 | | | — | | — | |
| Cost of services sold | 4,276 | | 3,525 | | | 5 | | 5 | |
| Selling, general and administrative expenses | 2,665 | | 3,105 | | | 96 | | 133 | |
| Research and development | 627 | | 595 | | | — | | — | |
| Interest and other financial charges | 225 | | 313 | | | 259 | | 267 | |
| Debt extinguishment costs | — | | — | | | 1 | | — | |
| Insurance losses and annuity benefits | — | | — | | | 645 | | 635 | |
| Goodwill impairments (Note 8) | — | | — | | | — | | — | |
| Non-operating benefit costs | 426 | | 603 | | | — | | 2 | |
| Other costs and expenses | — | | — | | | 39 | | 38 | |
| Total costs and expenses | 17,347 | | 18,705 | | | 1,044 | | 1,081 | |
| | | | | |
| Other income (Note 23) | 420 | | (509) | | | — | | — | |
| | | | | |
| Earnings (loss) from continuing operations before income taxes | 894 | | (1,296) | | | (311) | | (323) | |
| Benefit (provision) for income taxes | (81) | | 143 | | | 79 | | 340 | |
| Earnings (loss) from continuing operations | 813 | | (1,153) | | | (231) | | 16 | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (8) | | (10) | | | 611 | | (48) | |
| Net earnings (loss) | 804 | | (1,163) | | | 380 | | (32) | |
| Less net earnings (loss) attributable to noncontrolling interests | 16 | | (51) | | | (89) | | — | |
| Net earnings (loss) attributable to the Company | 788 | | (1,112) | | | 469 | | (32) | |
| Preferred stock dividends | (52) | | — | | | — | | (46) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 737 | | $ | (1,112) | | | $ | 469 | | $ | (78) | |
| | | | | |
| Amounts attributable to GE common shareholders: | | | | | |
| Earnings (loss) from continuing operations | $ | 813 | | $ | (1,153) | | | $ | (231) | | $ | 16 | |
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| continuing operations | 16 | | (51) | | | (89) | | — | |
| Earnings (loss) from continuing operations attributable to the Company | 797 | | (1,103) | | | (142) | | 16 | |
| Preferred stock dividends | (52) | | — | | | — | | (46) | |
| Earnings (loss) from continuing operations attributable | | | | | |
| to GE common shareholders | 745 | | (1,103) | | | (142) | | (29) | |
| | | | | |
| | | | | |
| | | | | |
| Earnings (loss) from discontinued operations attributable | | | | | |
| to GE common shareholders | (8) | | (10) | | | 611 | | (48) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 737 | | $ | (1,112) | | | $ | 469 | | $ | (78) | |
| | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) | Nine months ended September 30 |
| (UNAUDITED) | Consolidated |
| (In millions; per-share amounts in dollars) | 2021 | 2020 |
| Sales of goods | $ | 32,983 | | $ | 35,365 | |
| Sales of services | 18,615 | | 17,340 | |
| GE Capital revenues from services | 2,228 | | 2,118 | |
| Total revenues (Note 9) | 53,826 | | 54,823 | |
| | |
| Cost of goods sold | 26,892 | | 30,272 | |
| Cost of services sold | 12,666 | | 11,829 | |
| Selling, general and administrative expenses | 8,504 | | 9,344 | |
| Research and development | 1,792 | | 1,929 | |
| Interest and other financial charges | 1,450 | | 1,648 | |
| Debt extinguishment costs | 1,416 | | 206 | |
| Insurance losses and annuity benefits | 1,680 | | 1,824 | |
| Goodwill impairments (Note 8) | — | | 877 | |
| Non-operating benefit costs | 1,374 | | 1,821 | |
| Other costs and expenses | 91 | | 114 | |
| Total costs and expenses | 55,866 | | 59,863 | |
| | |
| Other income (Note 23) | 1,824 | | 8,430 | |
| | |
| Earnings (loss) from continuing operations before income taxes | (216) | | 3,390 | |
| Benefit (provision) for income taxes | 323 | | 589 | |
| Earnings (loss) from continuing operations | 107 | | 3,979 | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (2,856) | | (1,072) | |
| Net earnings (loss) | (2,748) | | 2,907 | |
| Less net earnings (loss) attributable to noncontrolling interests | (72) | | (161) | |
| Net earnings (loss) attributable to the Company | (2,677) | | 3,068 | |
| Preferred stock dividends | (180) | | (280) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,857) | | $ | 2,787 | |
| | |
| Amounts attributable to GE common shareholders | | |
| Earnings (loss) from continuing operations | $ | 107 | | $ | 3,979 | |
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| continuing operations | (72) | | (159) | |
| Earnings (loss) from continuing operations attributable to the Company | 179 | | 4,138 | |
| Preferred stock dividends | (180) | | (280) | |
| Earnings (loss) from continuing operations attributable | | |
| to GE common shareholders | (1) | | 3,857 | |
| | |
| | |
| | |
| Earnings (loss) from discontinued operations attributable | | |
| to GE common shareholders | (2,856) | | (1,070) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,857) | | $ | 2,787 | |
| | |
| Earnings (loss) per share from continuing operations (Note 18) | | |
| Diluted earnings (loss) per share | $ | (0.01) | | $ | 3.39 | |
| Basic earnings (loss) per share | $ | (0.01) | | $ | 3.39 | |
| | |
| Net earnings (loss) per share (Note 18) | | |
| Diluted earnings (loss) per share | $ | (2.61) | | $ | 2.41 | |
| Basic earnings (loss) per share | $ | (2.61) | | $ | 2.41 | |
| | | | | | | | | | | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Nine months ended September 30 |
| (UNAUDITED) | GE Industrial | | GE Capital |
| (In millions; per-share amounts in dollars) | 2021 | 2020 | | 2021 | 2020 |
| Sales of goods | $ | 32,989 | | $ | 35,401 | | | $ | — | | $ | — | |
| Sales of services | 18,648 | | 17,427 | | | — | | — | |
| GE Capital revenues from services | — | | — | | | 2,470 | | 2,455 | |
| Total revenues | 51,637 | | 52,828 | | | 2,470 | | 2,455 | |
| | | | | |
| Cost of goods sold | 26,899 | | 30,308 | | | — | | — | |
| Cost of services sold | 12,683 | | 11,901 | | | 15 | | 15 | |
| Selling, general and administrative expenses | 8,200 | | 9,033 | | | 318 | | 396 | |
| Research and development | 1,792 | | 1,929 | | | — | | — | |
| Interest and other financial charges | 753 | | 1,016 | | | 799 | | 821 | |
| Debt extinguishment costs | 645 | | 63 | | | 771 | | 143 | |
| Insurance losses and annuity benefits | — | | — | | | 1,706 | | 1,866 | |
| Goodwill impairments (Note 8) | — | | 877 | | | — | | — | |
| Non-operating benefit costs | 1,376 | | 1,815 | | | (2) | | 6 | |
| Other costs and expenses | — | | — | | | 127 | | 185 | |
| Total costs and expenses | 52,348 | | 56,943 | | | 3,734 | | 3,432 | |
| | | | | |
| Other income (Note 23) | 1,760 | | 8,481 | | | — | | — | |
| | | | | |
| Earnings (loss) from continuing operations before income taxes | 1,048 | | 4,366 | | | (1,264) | | (976) | |
| Benefit (provision) for income taxes | (1) | | 22 | | | 324 | | 566 | |
| Earnings (loss) from continuing operations | 1,047 | | 4,389 | | | (940) | | (410) | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (4) | | (33) | | | (2,851) | | (1,039) | |
| Net earnings (loss) | 1,042 | | 4,355 | | | (3,791) | | (1,449) | |
| Less net earnings (loss) attributable to noncontrolling interests | 22 | | (163) | | | (94) | | 2 | |
| Net earnings (loss) attributable to the Company | 1,021 | | 4,518 | | | (3,698) | | (1,451) | |
| Preferred stock dividends | (139) | | — | | | (41) | | (280) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 882 | | $ | 4,518 | | | $ | (3,739) | | $ | (1,731) | |
| | | | | |
| Amounts attributable to GE common shareholders: | | | | | |
| Earnings (loss) from continuing operations | $ | 1,047 | | $ | 4,389 | | | $ | (940) | | $ | (410) | |
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| continuing operations | 22 | | (161) | | | (94) | | 2 | |
| Earnings (loss) from continuing operations attributable to the Company | 1,025 | | 4,549 | | | (846) | | (412) | |
| Preferred stock dividends | (139) | | — | | | (41) | | (280) | |
| Earnings (loss) from continuing operations attributable | | | | | |
| to GE common shareholders | 886 | | 4,549 | | | (887) | | (692) | |
| | | | | |
| | | | | |
| | | | | |
| Earnings (loss) from discontinued operations attributable | | | | | |
| to GE common shareholders | (4) | | (31) | | | (2,851) | | (1,039) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 882 | | $ | 4,518 | | | $ | (3,739) | | $ | (1,731) | |
| | | | | | | | |
| STATEMENT OF FINANCIAL POSITION (UNAUDITED) | Consolidated |
| (In millions, except share amounts) | September 30, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash(a) | $ | 24,955 | | $ | 36,530 | |
| Investment securities (Note 3) | 5,300 | | 7,319 | |
| Current receivables (Note 4) | 14,874 | | 16,691 | |
| Financing receivables – net (Note 5) | 271 | | 326 | |
| Inventories, including deferred inventory costs (Note 6) | 16,790 | | 15,890 | |
| Other GE Capital receivables | 1,186 | | 1,549 | |
| Receivable from GE Capital | — | | — | |
| Current contract assets (Note 10) | 5,238 | | 5,764 | |
| All other current assets (Note 11) | 1,191 | | 1,109 | |
| Assets of discontinued operations (Note 2) | 33,782 | | — | |
| Current assets | 103,587 | | 85,180 | |
| | |
| Investment securities (Note 3) | 42,394 | | 42,549 | |
| | |
| Other GE Capital receivables | 4,668 | | 4,661 | |
| Property, plant and equipment – net (Note 7) | 15,873 | | 16,699 | |
| Receivable from GE Capital | — | | — | |
| Goodwill (Note 8) | 25,333 | | 25,524 | |
| Other intangible assets – net (Note 8) | 9,187 | | 9,671 | |
| Contract and other deferred assets (Note 10) | 6,119 | | 5,888 | |
| All other assets (Note 11) | 12,651 | | 11,038 | |
| Deferred income taxes (Note 16) | 14,466 | | 14,253 | |
| Assets of discontinued operations (Note 2) | 2,855 | | 40,749 | |
| Total assets | $ | 237,133 | | $ | 256,211 | |
| | |
| Short-term borrowings (Note 12) | $ | 5,459 | | $ | 4,713 | |
| Short-term borrowings assumed by GE (Note 12) | — | | — | |
| Accounts payable and equipment project accruals | 16,172 | | 16,458 | |
| Progress collections and deferred income (Note 10) | 16,909 | | 18,371 | |
| All other current liabilities (Note 15) | 14,349 | | 15,071 | |
| Liabilities of discontinued operations (Note 2) | 4,788 | | — | |
| Current liabilities | 57,676 | | 54,613 | |
| | |
| Deferred income (Note 10) | 1,839 | | 1,801 | |
| Long-term borrowings (Note 12) | 57,429 | | 70,189 | |
| Long-term borrowings assumed by GE (Note 12) | — | | — | |
| Insurance liabilities and annuity benefits (Note 13) | 37,705 | | 42,191 | |
| Non-current compensation and benefits | 28,415 | | 29,677 | |
| All other liabilities (Note 15) | 14,999 | | 15,484 | |
| Liabilities of discontinued operations (Note 2) | 109 | | 5,182 | |
| Total liabilities | 198,172 | | 219,138 | |
| | |
Preferred stock (5,939,875 shares outstanding at both September 30, 2021
and December 31, 2020) | 6 | | 6 | |
Common stock (1,098,137,128 and 1,095,686,581 shares outstanding
at September 30, 2021 and December 31, 2020, respectively)(b) | 15 | | 702 | |
| Accumulated other comprehensive income (loss) – net attributable to GE | (5,078) | | (9,749) | |
| Other capital | 34,751 | | 34,307 | |
| Retained earnings | 89,098 | | 92,247 | |
| Less common stock held in treasury | (81,314) | | (81,961) | |
| Total GE shareholders’ equity | 37,477 | | 35,552 | |
| Noncontrolling interests | 1,484 | | 1,522 | |
| Total equity | 38,961 | | 37,073 | |
| Total liabilities and equity | $ | 237,133 | | $ | 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 $807$795 million and $455$353 million at September 30, 2021March 31, 2022 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.
(b) Reduction of $687 million in common stock represents the change in par value of issued shares from $0.06 to $0.01 with the offsetting change in Other capital.
| | | | | | | | | | | | | | | | | |
| STATEMENT OF FINANCIAL POSITION (CONTINUED) | GE Industrial | | GE Capital |
(UNAUDITED) (In millions, except share amounts) | September 30, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash | $ | 17,995 | | $ | 23,209 | | | $ | 6,960 | | $ | 13,322 | |
| Investment securities (Note 3) | 5,300 | | 7,319 | | | — | | — | |
| Current receivables (Note 4) | 14,368 | | 13,442 | | | — | | — | |
| Financing receivables – net (Note 5) | — | | — | | | 1,300 | | 4,172 | |
| Inventories, including deferred inventory costs (Note 6) | 16,790 | | 15,890 | | | — | | — | |
| Other GE Capital receivables | — | | — | | | 1,544 | | 3,280 | |
| Receivable from GE Capital | 2,346 | | 2,432 | | | — | | — | |
| Current contract assets (Note 10) | 5,238 | | 5,764 | | | — | | — | |
| All other current assets (Note 11) | 839 | | 835 | | | 362 | | 543 | |
| Assets of discontinued operations (Note 2) | — | | — | | | 33,782 | | — | |
| Current assets | 62,876 | | 68,892 | | | 43,948 | | 21,317 | |
| | | | | |
| Investment securities (Note 3) | 150 | | 36 | | | 42,246 | | 42,515 | |
| | | | | |
| Other GE Capital receivables | — | | — | | | 5,056 | | 5,076 | |
| Property, plant and equipment – net (Note 7) | 15,635 | | 16,433 | | | 241 | | 271 | |
| Receivable from GE Capital | 12,583 | | 16,780 | | | — | | — | |
| Goodwill (Note 8) | 25,333 | | 25,524 | | | — | | — | |
| Other intangible assets – net (Note 8) | 9,155 | | 9,632 | | | 32 | | 39 | |
| Contract and other deferred assets (Note 10) | 6,119 | | 5,921 | | | — | | — | |
| All other assets (Note 11) | 8,709 | | 7,948 | | | 4,170 | | 3,354 | |
| Deferred income taxes (Note 16) | 10,082 | | 9,154 | | | 4,384 | | 5,099 | |
| Assets of discontinued operations (Note 2) | 123 | | 144 | | | 2,732 | | 40,587 | |
| Total assets | $ | 150,765 | | $ | 160,462 | | | $ | 102,809 | | $ | 118,257 | |
| | | | | |
| Short-term borrowings (Note 12) | $ | 1,468 | | $ | 918 | | | $ | 1,862 | | $ | 1,963 | |
| Short-term borrowings assumed by GE (Note 12) | 2,346 | | 2,432 | | | 2,346 | | 2,432 | |
| Accounts payable and equipment project accruals | 15,929 | | 16,380 | | | 760 | | 918 | |
| Progress collections and deferred income (Note 10) | 16,936 | | 18,371 | | | — | | — | |
| All other current liabilities (Note 15) | 13,385 | | 14,131 | | | 1,164 | | 2,288 | |
| Liabilities of discontinued operations (Note 2) | — | | — | | | 4,788 | | — | |
| Current liabilities | 50,064 | | 52,232 | | | 10,919 | | 7,602 | |
| | | | | |
| Deferred income (Note 10) | 1,839 | | 1,801 | | | — | | — | |
| Long-term borrowings (Note 12) | 14,093 | | 19,428 | | | 27,575 | | 30,803 | |
| Long-term borrowings assumed by GE (Note 12) | 15,761 | | 19,957 | | | 12,583 | | 16,780 | |
| Insurance liabilities and annuity benefits (Note 13) | — | | — | | | 38,090 | | 42,565 | |
| Non-current compensation and benefits | 28,108 | | 29,291 | | | 299 | | 379 | |
| All other liabilities (Note 15) | 14,794 | | 15,072 | | | 379 | | 539 | |
| Liabilities of discontinued operations (Note 2) | 124 | | 139 | | | (15) | | 5,058 | |
| Total liabilities | 124,784 | | 137,921 | | | 89,830 | | 103,726 | |
| | | | | |
Preferred stock (5,939,875 shares outstanding at both September 30, 2021 and December 31, 2020) | 6 | | 6 | | | — | | 6 | |
Common stock (1,098,137,128 and 1,095,686,581 shares outstanding at September 30, 2021 and December 31, 2020, respectively) | 15 | | 702 | | | 5 | | — | |
| Accumulated other comprehensive income (loss) – net attributable to GE | (6,437) | | (8,945) | | | 1,359 | | (804) | |
| Other capital | 16,827 | | 16,466 | | | 17,920 | | 17,835 | |
| Retained earnings | 95,500 | | 94,910 | | | (6,402) | | (2,663) | |
| Less common stock held in treasury | (81,314) | | (81,961) | | | — | | — | |
| Total GE shareholders’ equity | 24,596 | | 21,179 | | | 12,881 | | 14,373 | |
| Noncontrolling interests | 1,386 | | 1,363 | | | 97 | | 159 | |
| Total equity | 25,982 | | 22,542 | | | 12,979 | | 14,531 | |
| Total liabilities and equity | $ | 150,765 | | $ | 160,462 | | | $ | 102,809 | | $ | 118,257 | |
| | | | | | | | |
| STATEMENT OF CASH FLOWS | Nine months ended September 30 |
| (UNAUDITED) | Consolidated |
| (In millions) | 2021 | 2020 |
| Net earnings (loss) | $ | (2,748) | | $ | 2,907 | |
| | |
| | |
| (Earnings) loss from discontinued operations | 2,856 | | 1,072 | |
| Adjustments to reconcile net earnings (loss) | | |
| to cash provided from operating activities | | |
| Depreciation and amortization of property, plant and equipment (Note 7) | 1,390 | | 1,664 | |
| Amortization of intangible assets (Note 8) | 860 | | 1,036 | |
| Goodwill impairments (Note 8) | — | | 877 | |
| | |
| (Gains) losses on purchases and sales of business interests (Note 23) | 155 | | (12,446) | |
| (Gains) losses on equity securities (Note 23) | (1,035) | | 4,781 | |
| Principal pension plans cost (Note 14) | 1,990 | | 2,681 | |
| Principal pension plans employer contributions | (232) | | (226) | |
| Other postretirement benefit plans (net) | (772) | | (712) | |
| Provision (benefit) for income taxes | (323) | | (589) | |
| Cash recovered (paid) during the year for income taxes | (1,048) | | (1,138) | |
| Changes in operating working capital: | | |
| Decrease (increase) in current receivables | 874 | | (1,665) | |
| Decrease (increase) in inventories, including deferred inventory costs | (1,184) | | (432) | |
| Decrease (increase) in current contract assets | 498 | | 855 | |
| Increase (decrease) in accounts payable and equipment project accruals | (167) | | (1,208) | |
| Increase (decrease) in progress collections and current deferred income | (1,509) | | (1,247) | |
| All other operating activities | (1,132) | | 1,912 | |
| Cash from (used for) operating activities – continuing operations | (1,527) | | (1,876) | |
| Cash from (used for) operating activities – discontinued operations | 2,427 | | 1,816 | |
| Cash from (used for) operating activities | 900 | | (60) | |
| | |
| Additions to property, plant and equipment | (895) | | (1,302) | |
| Dispositions of property, plant and equipment | 128 | | 134 | |
| Additions to internal-use software | (78) | | (125) | |
| Net decrease (increase) in financing receivables | 66 | | (32) | |
| | |
| Proceeds from principal business dispositions | 1 | | 20,577 | |
| Net cash from (payments for) principal businesses purchased | (27) | | (10) | |
| | |
| Sales of retained ownership interests | 2,961 | | — | |
| Net (purchases) dispositions of GE Capital investment securities | (1,158) | | (1,292) | |
| All other investing activities | 1,912 | | 1,719 | |
| Cash from (used for) investing activities – continuing operations | 2,909 | | 19,667 | |
| Cash from (used for) investing activities – discontinued operations | (2,683) | | (1,966) | |
| Cash from (used for) investing activities | 226 | | 17,702 | |
| | |
| Net increase (decrease) in borrowings (maturities of 90 days or less) | (390) | | (4,198) | |
| Newly issued debt (maturities longer than 90 days) | 364 | | 14,452 | |
| Repayments and other debt reductions (maturities longer than 90 days) | (10,210) | | (24,486) | |
| | |
| | |
| Dividends paid to shareholders | (431) | | (412) | |
| All other financing activities | (1,836) | | (369) | |
| Cash from (used for) financing activities – continuing operations | (12,502) | | (15,014) | |
| Cash from (used for) financing activities – discontinued operations | 101 | | (24) | |
| Cash from (used for) financing activities | (12,401) | | (15,038) | |
| Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (136) | | (11) | |
| Increase (decrease) in cash, cash equivalents and restricted cash | (11,412) | | 2,593 | |
| Cash, cash equivalents and restricted cash at beginning of year | 37,608 | | 37,077 | |
| Cash, cash equivalents and restricted cash at September 30 | 26,197 | | 39,670 | |
Less cash, cash equivalents and restricted cash of discontinued operations at September 30 | 435 | | 612 | |
| Cash, cash equivalents and restricted cash of continuing operations at September 30 | $ | 25,762 | | $ | 39,058 | |
| | | | | | | | | | | | | | | | | |
| STATEMENT OF CASH FLOWS (CONTINUED) | Nine months ended September 30 |
| (UNAUDITED) | GE Industrial | | GE Capital |
| (In millions) | 2021 | 2020 | | 2021 | 2020 |
| Net earnings (loss) | $ | 1,042 | | $ | 4,355 | | | $ | (3,791) | | $ | (1,449) | |
| | | | | |
| | | | | |
| (Earnings) loss from discontinued operations | 4 | | 33 | | | 2,851 | | 1,039 | |
| Adjustments to reconcile net earnings (loss) | | | | | |
| to cash provided from operating activities | | | | | |
| Depreciation and amortization of property, plant and equipment (Note 7) | 1,372 | | 1,664 | | | 18 | | 20 | |
| Amortization of intangible assets (Note 8) | 849 | | 1,028 | | | 11 | | 8 | |
| Goodwill impairments (Note 8) | — | | 877 | | | — | | — | |
| | | | | |
| (Gains) losses on purchases and sales of business interests (Note 23) | 155 | | (12,445) | | | — | | — | |
| (Gains) losses on equity securities (Note 23) | (1,010) | | 4,761 | | | (26) | | 21 | |
| Principal pension plans cost (Note 14) | 1,990 | | 2,681 | | | — | | — | |
| Principal pension plans employer contributions | (232) | | (226) | | | — | | — | |
| Other postretirement benefit plans (net) | (734) | | (675) | | | (39) | | (37) | |
| Provision (benefit) for income taxes | 1 | | (22) | | | (324) | | (566) | |
| Cash recovered (paid) during the year for income taxes | (1,113) | | (1,805) | | | 65 | | 667 | |
| Changes in operating working capital: | | | | | |
| Decrease (increase) in current receivables | (1,499) | | (118) | | | — | | — | |
| Decrease (increase) in inventories, including deferred inventory costs | (1,120) | | (385) | | | — | | — | |
| Decrease (increase) in current contract assets | 498 | | 855 | | | — | | — | |
| Increase (decrease) in accounts payable and equipment project accruals | (287) | | (3,020) | | | 8 | | (26) | |
| Increase (decrease) in progress collections and current deferred income | (1,471) | | (1,247) | | | — | | — | |
| All other operating activities | 721 | | 513 | | | (1,738) | | 936 | |
| Cash from (used for) operating activities – continuing operations | (832) | | (3,175) | | | (2,963) | | 612 | |
| Cash from (used for) operating activities – discontinued operations | 5 | | 34 | | | 2,422 | | 1,782 | |
| Cash from (used for) operating activities | (827) | | (3,141) | | | (541) | | 2,394 | |
| | | | | |
| Additions to property, plant and equipment | (896) | | (1,302) | | | — | | — | |
| Dispositions of property, plant and equipment | 128 | | 134 | | | — | | — | |
| Additions to internal-use software | (76) | | (121) | | | (3) | | (5) | |
| Net decrease (increase) in financing receivables | — | | — | | | 3,398 | | (292) | |
| | | | | |
| Proceeds from principal business dispositions | 1 | | 20,408 | | | — | | — | |
| Net cash from (payments for) principal businesses purchased | (27) | | (10) | | | — | | — | |
| | | | | |
| Sales of retained ownership interests | 2,961 | | — | | | — | | — | |
| Net (purchases) dispositions of GE Capital investment securities | — | | — | | | (1,158) | | (1,292) | |
| All other investing activities | 124 | | 210 | | | 1,771 | | 10,840 | |
| Cash from (used for) investing activities – continuing operations | 2,216 | | 19,318 | | | 4,008 | | 9,251 | |
| Cash from (used for) investing activities – discontinued operations | (5) | | (39) | | | (2,678) | | (1,927) | |
| Cash from (used for) investing activities | 2,211 | | 19,279 | | | 1,330 | | 7,324 | |
| | | | | |
| Net increase (decrease) in borrowings (maturities of 90 days or less) | (1,304) | | (4,323) | | | (118) | | (460) | |
| Newly issued debt (maturities longer than 90 days) | 5 | | 7,432 | | | 359 | | 7,020 | |
| Repayments and other debt reductions (maturities longer than 90 days) | (4,156) | | (12,129) | | | (6,054) | | (19,857) | |
| | | | | |
| | | | | |
| Dividends paid to shareholders | (402) | | (265) | | | (41) | | (276) | |
| All other financing activities | (658) | | (84) | | | (1,181) | | (286) | |
| Cash from (used for) financing activities – continuing operations | (6,514) | | (9,369) | | | (7,035) | | (13,859) | |
| Cash from (used for) financing activities – discontinued operations | — | | 1 | | | 101 | | (24) | |
| Cash from (used for) financing activities | (6,514) | | (9,369) | | | (6,934) | | (13,883) | |
| Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (83) | | (50) | | | (53) | | 38 | |
| Increase (decrease) in cash, cash equivalents and restricted cash | (5,214) | | 6,719 | | | (6,198) | | (4,126) | |
| 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 September 30 | 17,995 | | 24,337 | | | 8,202 | | 15,333 | |
Less cash, cash equivalents and restricted cash of discontinued operations at September 30 | — | | — | | | 435 | | 612 | |
| Cash, cash equivalents and restricted cash of continuing operations at September 30 | $ | 17,995 | | $ | 24,337 | | | $ | 7,767 | | $ | 14,721 | |
| | | | | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | Three months ended September 30 | | Nine months ended September 30 |
| (In millions, net of tax) | 2021 | 2020 | | 2021 | 2020 |
| Net earnings (loss) | $ | 1,184 | | $ | (1,195) | | | $ | (2,748) | | $ | 2,907 | |
| Less net earnings (loss) attributable to noncontrolling interests | (73) | | (51) | | | (72) | | (161) | |
| Net earnings (loss) attributable to the Company | $ | 1,257 | | $ | (1,144) | | | $ | (2,677) | | $ | 3,068 | |
| | | | | |
| Currency translation adjustments | (158) | | 55 | | | 81 | | 133 | |
| Benefit plans | 753 | | 609 | | | 2,372 | | 2,248 | |
| Investment securities and cash flow hedges | 2,151 | | 32 | | | 2,222 | | (140) | |
| | | | | |
| Less: other comprehensive income (loss) attributable to noncontrolling interests | 4 | | — | | | 5 | | 7 | |
| Other comprehensive income (loss) attributable to the Company | $ | 2,742 | | $ | 695 | | | $ | 4,671 | | $ | 2,234 | |
| | | | | |
| Comprehensive income (loss) | $ | 3,930 | | $ | (499) | | | $ | 1,927 | | $ | 5,147 | |
| Less: comprehensive income (loss) attributable to noncontrolling interests | (69) | | (50) | | | (67) | | (154) | |
| Comprehensive income (loss) attributable to the Company | $ | 3,999 | | $ | (449) | | | $ | 1,994 | | $ | 5,302 | |
| | | | | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) | Three months ended September 30 | | Nine months ended September 30 |
| (In millions) | 2021 | 2020 | | 2021 | 2020 |
| Preferred stock issued | $ | 6 | | $ | 6 | | | $ | 6 | | $ | 6 | |
| Common stock issued | $ | 15 | | $ | 702 | | | $ | 15 | | $ | 702 | |
| | | | | |
| Beginning balance | (7,820) | | (10,194) | | | (9,749) | | (11,732) | |
| | | | | |
| Currency translation adjustments | (160) | | 55 | | | 80 | | 129 | |
| Benefit plans | 751 | | 609 | | | 2,369 | | 2,245 | |
| Investment securities and cash flow hedges | 2,151 | | 32 | | | 2,222 | | (140) | |
| Accumulated other comprehensive income (loss) | $ | (5,078) | | $ | (9,498) | | | $ | (5,078) | | $ | (9,498) | |
| Beginning balance | 34,032 | | 34,292 | | | 34,307 | | 34,405 | |
| Gains (losses) on treasury stock dispositions | (78) | | (162) | | | (571) | | (574) | |
| Stock-based compensation | 109 | | 104 | | | 322 | | 319 | |
| Other changes | 689 | | 46 | | | 694 | | 129 | |
| Other capital | $ | 34,751 | | $ | 34,279 | | | $ | 34,751 | | $ | 34,279 | |
| Beginning balance | 87,993 | | 91,188 | | | 92,247 | | 87,732 | |
| Net earnings (loss) attributable to the Company | 1,257 | | (1,144) | | | (2,677) | | 3,068 | |
| Dividends and other transactions with shareholders | (152) | | (139) | | | (473) | | (720) | |
| Changes in accounting | — | | — | | | — | | (175) | |
| Retained earnings | $ | 89,098 | | $ | 89,905 | | | $ | 89,098 | | $ | 89,905 | |
| Beginning balance | (81,425) | | (82,320) | | | (81,961) | | (82,797) | |
| Purchases | (4) | | (3) | | | (87) | | (25) | |
| Dispositions | 116 | | 198 | | | 733 | | 697 | |
| Common stock held in treasury | $ | (81,314) | | $ | (82,125) | | | $ | (81,314) | | $ | (82,125) | |
| GE shareholders' equity balance | 37,477 | | 33,269 | | | 37,477 | | 33,269 | |
| Noncontrolling interests balance | 1,484 | | 1,524 | | | 1,484 | | 1,524 | |
| Total equity balance at September 30 | $ | 38,961 | | $ | 34,793 | | | $ | 38,961 | | $ | 34,793 | |
| | | | | | | | | |
| | | |
| 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 | | |
2021 3Q2022 1Q FORM 10-Q 3623
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.
NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS.In Septemberthe first quarter of 2021,2022, we signed an agreementa non-binding memorandum of understanding to exit GE's sharesell a portion of our boiler manufacturingSteam business in China inwithin our Power segment. In connection with the transaction, we recorded a loss on the planned disposal of this business of $172 million in Other income in our consolidated Statement of Earnings (Loss)segment to Électricité de France S.A. (EDF). We expect to complete the sale, subject to regulatory approval, in the fourth quarterfirst half of 2021. See Note 23 for further information.2023.
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 three quarters of 2020, we recognized a pre-tax gain of $12,362 million ($11,214 million after-tax) in our consolidated Statement of Earnings (Loss). | | | | | | | | |
| 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 comprise our GE 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.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 agreement with AerCap Holdings N.V. (AerCap) to combinecompleted the combination of our GECAS business with AerCap (GECAS transaction)Holdings N.V. (AerCap). GE will receive total consideration consisting of approximately $22,650 million cash, inclusive of estimated contractual closing adjustments, 111.5 million shares of AerCap common stock (approximately 46% ownership interest) valued at $6,446 million based on AerCap’s closing share price of $57.81 on September 30, 2021 and $1,000 million in AerCap notes. As a result, we haveWe deconsolidated this business, reclassified GECAS'its results to discontinued operations for all periods presented and recognized a non-cash after-tax loss of $3,638$2,755 million in discontinued operations forin the nine months ended September 30, 2021. Given the economicsfirst quarter 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. In October 2021, we received final regulatory approvals and are now expecting the transaction to be completed on November 1, 2021.
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.
2021 3Q2022 1Q FORM 10-Q 3724
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 September 30, 2021,March 31, 2022, the total portfolio had a carrying value, net of $1,938reserves, of $1,592 million with a 1.96%2.12% 90-day delinquency rate and an average loan to value ratio of approximately 61.1%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 ninethree months ended September 30, 2021March 31, 2022 included $289$233 million non-cash pre-tax charges, reflecting estimates with respect to ongoing litigation as well as market yields, primarily in the first quarter of 2021.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 a 50-50 joint venture between GE and BKR and is consolidated by GE due to the significance of our investment in BKR.
For the nine months ended September 30, 2021, we had sales of $439 million and purchases of $177 million with BKR for products and services outside of the JV. We collected net cash of $347 million from BKR related to sales, purchases and transition services.
For the nine months ended September 30, 2021, we had sales of $351 million to BKR for products and services from the JV, and we collected cash of $423 million. We expect to reduce our investment in BKR to below 20% in the fourth quarter, at which point we will deconsolidate the JV. The deconsolidation of the JV is not expected to have a material impact on GE Industrial Cash from operating activities (CFOA).
In addition, for the nine months ended September 30, 2021, we received $31 million of repayments on the promissory note receivable from BKR and dividends of $143 million on our investment.
| | RESULTS OF DISCONTINUED OPERATIONS | RESULTS OF DISCONTINUED OPERATIONS | | Three months ended September 30 | | Nine months ended September 30 | RESULTS OF DISCONTINUED OPERATIONS | | Three months ended March 31 | |
| | | 2021 | 2020 | | 2021 | 2020 | | 2022 | 2021 | |
| Operations | Operations | | | Operations | | |
| | GE Capital revenues from services | | $ | 933 | | $ | 966 | | | $ | 2,469 | | $ | 3,032 | | |
| Cost of goods and services sold | | (19) | | (640) | | | (394) | | (2,027) | | |
| Cost of equipment and services sold | | Cost of equipment and services sold | | $ | — | | $ | (368) | | |
| Other income, costs and expenses | Other income, costs and expenses | | (340) | | (380) | | | (1,037) | | (2,090) | | Other income, costs and expenses | | (250) | | 247 | | |
| | Earnings (loss) of discontinued operations before income taxes | Earnings (loss) of discontinued operations before income taxes | | $ | 575 | | $ | (54) | | | $ | 1,037 | | $ | (1,085) | | Earnings (loss) of discontinued operations before income taxes | | $ | (250) | | $ | (121) | | |
| Benefit (provision) for income taxes | Benefit (provision) for income taxes | | (208) | | 6 | | | (287) | | 36 | | Benefit (provision) for income taxes | | (18) | | (29) | | |
| Earnings (loss) of discontinued operations, net of taxes(a) | Earnings (loss) of discontinued operations, net of taxes(a) | | $ | 367 | | $ | (49) | | | $ | 750 | | $ | (1,050) | | 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 | | $ | 174 | | $ | (8) | | | $ | (3,661) | | $ | (22) | | Gain (loss) on disposal before income taxes | | $ | (23) | | $ | (2,702) | | |
| Benefit (provision) for income taxes | Benefit (provision) for income taxes | | 62 | | (1) | | | 55 | | (1) | | Benefit (provision) for income taxes | | 5 | | (43) | | |
| Gain (loss) on disposal, net of taxes(b) | | $ | 236 | | $ | (9) | | | $ | (3,606) | | $ | (23) | | |
| Gain (loss) on disposal, net of taxes | | 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 | | $ | 602 | | $ | (58) | | | $ | (2,856) | | $ | (1,072) | | Earnings (loss) from discontinued operations, net of taxes | | $ | (286) | | $ | (2,894) | | |
(a) Included $490 million0 and $(38)$177 million from GECAS operations, including 0 and $637$359 million of depreciation and amortization, for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively. Included $1,163 million and $(906) million from GECAS operations, including $359 million and $2,020 million of depreciation and amortization, for the nine months ended September 30, 2021 and 2020, respectively. Depreciation and amortization ceased on March 10, 2021.
(b) Gain for the three months ended September 30, 2021 was primarily driven by GECAS due to an increase in fair value of AerCap common stock to be received of $736 million, partially offset by an increase in GECAS net assets of $475 million attributable to income from operations.
| | | | | | | | |
| ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS | September 30, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash | $ | 31 | | $ | — | |
| Financing receivables - net | 1,985 | | — | |
| Other GE Capital receivables | 1,928 | | — | |
| Property, plant, and equipment - net | 29,369 | | — | |
| Valuation allowance on disposal group classified as discontinued operations | (3,560) | | — | |
| All other current assets | 4,029 | | — | |
| Total current assets of discontinued operations | 33,782 | | — | |
| Cash, cash equivalents and restricted cash | 404 | | 623 | |
| Financing receivables - net | — | | 2,710 | |
| Other GE Capital receivables | 50 | | 1,844 | |
| Financing receivables held for sale (Polish mortgage portfolio) | 1,938 | | 2,461 | |
| Property, plant, and equipment - net | 92 | | 28,429 | |
| All other assets | 370 | | 4,683 | |
| Assets of discontinued operations(a) | $ | 36,637 | | $ | 40,749 | |
| | |
| Deferred income taxes | $ | 2,242 | | $ | — | |
| Accounts payable and all other liabilities | 2,546 | | — | |
| Total current liabilities of discontinued operations | 4,788 | | — | |
| Deferred income taxes | 2 | | 2,172 | |
| Accounts payable and all other liabilities(b) | 107 | | 3,010 | |
| Liabilities of discontinued operations(a) | $ | 4,896 | | $ | 5,182 | |
(a) Included $33,782 million and $37,199 million of assets and $4,788 million and $4,997 million of liabilities for GECAS as of September 30, 2021 and December 31, 2020, respectively.
(b) Included within All other liabilities of discontinued operations at September 30, 2021 and December 31, 2020 are intercompany tax receivables in the amount of $715 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 214.0comprises 116.5 million shares with approximately 20.5%(approximately 11% ownership and a promissory note receivableinterest) as of September 30, 2021), which isMarch 31, 2022. 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 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) | $ | 5,300 | | $ | — | | $ | — | | $ | 5,300 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | |
| Current investment securities | $ | 5,300 | | $ | — | | $ | — | | $ | 5,300 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | |
| Debt | | | | | | | | | |
| U.S. corporate | $ | 24,995 | | $ | 5,536 | | $ | (38) | | $ | 30,493 | | | $ | 23,604 | | $ | 6,651 | | $ | (26) | | $ | 30,230 | |
| Non-U.S. corporate | 2,489 | | 349 | | (3) | | 2,835 | | | 2,283 | | 458 | | (1) | | 2,740 | |
| State and municipal | 2,848 | | 643 | | (5) | | 3,486 | | | 3,387 | | 878 | | (9) | | 4,256 | |
| Mortgage and asset-backed | 3,771 | | 159 | | (34) | | 3,896 | | | 3,652 | | 171 | | (71) | | 3,752 | |
| Government and agencies | 1,102 | | 120 | | (2) | | 1,221 | | | 1,169 | | 184 | | — | | 1,353 | |
| Other equity | 465 | | — | | — | | 465 | | | 218 | | — | | — | | 218 | |
| Non-current investment securities | $ | 35,669 | | $ | 6,808 | | $ | (82) | | $ | 42,394 | | | $ | 34,313 | | $ | 8,342 | | $ | (106) | | $ | 42,549 | |
| Total | $ | 40,970 | | $ | 6,808 | | $ | (82) | | $ | 47,695 | | | $ | 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 as of September 30, 2021 excludes accrued interest of $437$446 million and $415 million as of March 31, 2022 and December 31, 2021, respectively, which is reported in All other current Other GE Capital receivables.assets.
The estimated fair value of investment securities at September 30, 2021March 31, 2022 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, and higher market yields, 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 $2,764$10,889 million and $1,765$3,446 million, of which $488$814 million and $165$644 million had gross unrealized losses of $(32)$(86) million and $(20)$(42) million and had been in a loss position for 12 months or more at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. Gross unrealized losses of $(82)$(626) million at September 30, 2021March 31, 2022 included $(38)$(370) million related to U.S. corporate securities, and $(31)$(60) million related to commercial mortgage-backed securities (CMBS). The majority 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 $405$(377) million and $(776)$238 million for the three months ended March 31, 2022 and $1,051 million and $(4,619) million for the nine months ended September 30, 2021, and 2020, respectively.
Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the BKR promissory note totaled $1,745$1,949 million and $833$1,333 million for the three months ended March 31, 2022 and $4,695 million and $3,538 million for the nine months ended September 30, 2021, and 2020, respectively. Gross realized gains on debt securities were $16$24 million and $15$28 million for the three months ended March 31, 2022 and $59 million and $143 million for the nine months ended September 30, 2021, and 2020, respectively. Gross realized losses and impairments on debt securities were both insignificant for the three months ended September 30, 2021March 31, 2022 and 2020. Gross realized losses and impairments on debt securities were $(10) million and $(49) million for the nine months ended September 30, 2021 and 2020, respectively.2021.
Contractual maturities of our debt securities (excluding mortgage and asset-backed securities) at September 30, 2021March 31, 2022 are as follows:
| | | | | | | | |
| Amortized
cost | Estimated
fair value |
| Within one year | $ | 638 | | $ | 647 | |
| After one year through five years | 3,290 | | 3,596 | |
| After five years through ten years | 6,264 | | 7,336 | |
| After ten years | 21,241 | | 26,455 | |
| | | | | | | | |
| 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 primarily all our debt securities are primarily classified within Level 2, as their valuation is determined based on significant observable inputs. Investments with a fair value of $5,845$6,676 million and $5,866$7,222 million are classified within Level 3, as significant inputs to thetheir valuation modelmodels are unobservable at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. During the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, there were no significant transfers into or out of Level 3.
In addition to the equity securities described above, we hold $366$528 million and $274$441 million of equity securities without readily determinable fair values at September 30, 2021March 31, 2022 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 both$17 million and an insignificant amount for the three months ended March 31, 2022 and $34 million and $(144) million for the nine months ended September 30, 2021, and 2020, respectively.
NOTE 4. CURRENT AND LONG-TERM RECEIVABLES
| | | | CURRENT RECEIVABLES | CURRENT RECEIVABLES | Consolidated | | GE Industrial | CURRENT RECEIVABLES | March 31, 2022 | December 31, 2021 |
| | September 30, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 | |
| | Customer receivables | Customer receivables | $ | 11,890 | | $ | 13,459 | | | $ | 11,359 | | $ | 9,841 | | Customer receivables | $ | 13,505 | | $ | 13,079 | |
| Sundry receivables(a)(b) | 4,098 | | 4,395 | | | 4,121 | | 4,763 | | |
| Allowance for credit losses(c) | (1,113) | | (1,164) | | | (1,112) | | (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 | $ | 14,874 | | $ | 16,691 | | | $ | 14,368 | | $ | 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) ConsolidatedAllowance for credit losses increased primarily due to net new provisions of $45 million, partially offset by write-offs and foreign currency impact.
Sales of customer receivables. Previously, GE businesses sold customer receivables to our Working Capital Solutions (WCS) business. These programs were discontinued in 2021. Separately, the Company from time to time sells current or long-term receivables included a deferred purchase price receivable, which represents our retainedto third parties in response to customer-sponsored requests or programs, to facilitate sales, or for risk with respectmitigation purposes. Activity related to current customer receivables sold to third parties through our active receivables facilities. The balance of the deferred purchase price held by GE Capitalbusinesses is as of September 30, 2021 and December 31, 2020 was $484 million and $413 million, respectively.
(c) GE Industrial allowance for credit losses decreased primarily due to write-offs and foreign currency impact, partially offset by net new provisions of $132 million.
2021 3Q2022 1Q FORM 10-Q 4026
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. Effective April 1, 2021, the Company discontinued the majority of its factoring programs. The remaining balance related to these discontinued programs was $720 million as of September 30, 2021, including $530 million retained by GE Capital. Sales to GE Capital occurring after March 31, 2021 are only in connection with our remaining unconsolidated receivables facility described below. Customer receivables held by GE Capital and third parties were $3,134 million and $2,582 million, respectively, at March 31, 2021. 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 whenin 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 September 30, 2021 and 2020, GE Industrial sold approximately 19% and 45%, respectively, of its gross customer receivables to GE Capital or third parties. 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 | 12,890 | | | — | | | 24,630 | | | — | |
| GE Industrial sales to third parties | — | | | 765 | | | — | | | 699 | |
| GE Capital sales to third parties | (9,933) | | | 9,933 | | | (13,757) | | | 13,757 | |
| Collections and other | (6,144) | | | (11,538) | | | (9,805) | | | (17,755) | |
| Reclassification from long-term customer receivables | 99 | | | — | | | 207 | | | — | |
| Balance at September 30 | $ | 530 | | (a) | $ | 2,152 | | (b) | $ | 4,362 | | (a) | $ | 3,458 | |
(a) At September 30, 2021 and 2020, $240 million and $640 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 ninethree months ended September 30,March 31, 2022 and 2021, and 2020.
(b) Included $1,962 millionrespectively, primarily in our active unconsolidated receivables facility at September 30, 2021, ($1,936 million at June 30, 2021 and $1,863 million at March 31, 2021) under which we currently expect to continue sales of GE Industrial receivables.
| | | | | | | | | | | | | | | | | |
| LONG-TERM RECEIVABLES | Consolidated | | GE Industrial |
| September 30, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 |
| Long-term customer receivables(a) | $ | 741 | | $ | 585 | | | $ | 739 | | $ | 474 | |
| Long-term sundry receivables(b) | 1,611 | | 1,748 | | | 1,795 | | 2,097 | |
| Allowance for credit losses | (133) | | (142) | | | (133) | | (142) | |
| Total long-term receivables | $ | 2,218 | | $ | 2,191 | | | $ | 2,401 | | $ | 2,430 | |
(a) As of September 30, 2021 and December 31, 2020, GE Capital held an insignificant amount and $111 million, respectively, of GE Industrial long-term customer receivables.
(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. The facility has a program size of $2,000 million as of September 30, 2021. Upon the sale of receivables, we receive proceeds of cash and deferred purchase price and the Company’s remainingGas Power business for 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:
| | | | | | | | | | | |
| Nine months ended September 30 | 2021 | | 2020 |
| Customer receivables sold to receivables facilities | $ | 8,442 | | | $ | 10,570 | |
| Collections and other on receivables sold to receivables facilities | 8,523 | | | 12,146 | |
| Total cash purchase price for customer receivables | 7,966 | | | 10,060 | |
| Cash collections re-invested to purchase customer receivables | 7,203 | | | 8,865 | |
| | | |
| Non-cash increases to deferred purchase price | $ | 432 | | | $ | 446 | |
| Cash payments received on deferred purchase price | 362 | | | 388 | |
CONSOLIDATED SECURITIZATION ENTITIES. GE Capital consolidates 2 variable interest entities (VIEs) that purchased customer receivables and long-term customer receivables from GE Industrial prior to the April 1, 2021 discontinuation of the majority of the Company's factoring programs. At September 30, 2021 and December 31, 2020, these VIEs held current customer receivables of $198 million and $1,489 million and long-term customer receivables of zero and $93 million, respectively. At September 30, 2021 and December 31, 2020, the outstanding non-recourse debt under their respective debt facilities was zero and $892 million, respectively. mitigation purposes.
NOTE 5. FINANCING RECEIVABLES AND ALLOWANCES
| | | | | | | | | | | | | | | | | |
| Consolidated | | GE Capital |
| September 30, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 |
| Loans, net of deferred income | $ | 300 | | $ | 359 | | | $ | 1,311 | | $ | 4,182 | |
| Allowance for losses | (29) | | (32) | | | (11) | | (10) | |
| Current financing receivables – net | $ | 271 | | $ | 326 | | | $ | 1,300 | | $ | 4,172 | |
We manage our GE Capital financing receivables portfolio using delinquency data as key performance indicators. At September 30, 2021 and December 31, 2020, financing receivables over 30 days past due were 0.2% and 2.8% and 90 days past due were 0.2% 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.
NOTE 6. INVENTORIES, INCLUDING DEFERRED INVENTORY COSTS
| | | September 30, 2021 | December 31, 2020 | | March 31, 2022 | December 31, 2021 |
| Raw materials and work in process | Raw materials and work in process | $ | 8,682 | | $ | 7,937 | | Raw materials and work in process | $ | 9,155 | | $ | 8,710 | |
| Finished goods | Finished goods | 5,583 | | 5,654 | | Finished goods | 5,307 | | 4,927 | |
| Deferred inventory costs(a) | Deferred inventory costs(a) | 2,525 | | 2,299 | | Deferred inventory costs(a) | 2,108 | | 2,210 | |
| Inventories, including deferred inventory costs | Inventories, including deferred inventory costs | $ | 16,790 | | $ | 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
| | | | | | | | |
| September 30, 2021 | December 31, 2020 |
| Original cost | $ | 32,121 | | $ | 32,098 | |
| Less accumulated depreciation and amortization | (18,968) | | (18,251) | |
| Right-of-use operating lease assets | 2,720 | | 2,852 | |
| Property, plant and equipment – net | $ | 15,873 | | $ | 16,699 | |
Consolidated depreciation and amortization on property, plant and equipment was $455 million and $744 million for the three months ended September 30, 2021 and 2020, respectively, and $1,390 million and $1,664 million for the nine months ended September 30, 2021 and 2020, respectively. | | | | | | | | |
| March 31, 2022 | December 31, 2021 |
| Original cost | $ | 31,531 | | $ | 31,904 | |
| Less accumulated depreciation and amortization | (18,935) | | (18,901) | |
| Right-of-use operating lease assets | 2,440 | | 2,606 | |
| Property, plant and equipment – net | $ | 15,036 | | $ | 15,609 | |
In the thirdfirst quarter of 2020,2022, 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 $316$59 million related to property, plant and equipment at our remaining Steam business within our Power segment due to our announcement to exit the new build coal power market. We determined the fair value of these assets using an income approach.segment. This charge was recorded by Corporate in Selling, general, and 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 $3,004was $2,679 million and $3,195$2,848 million, as of September 30, 2021March 31, 2022 and December 31, 2020, respectively, which included GE Industrial operating lease liabilities of $2,948 million and $3,133 million,2021, respectively. Expense on our operating lease portfolio, primarily from our long-term fixed leases, was $287$272 million and $278$281 million for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and $826 million and $857 million for the nine months ended September 30, 2021 and 2020, respectively.
2021 3Q2022 1Q FORM 10-Q 4227
NOTE 8.7. GOODWILL AND OTHER INTANGIBLE ASSETS
| | | | | | | | | | | | | | | | |
| GOODWILL | January 1, 2021 | Acquisitions | | | Currency exchange
and other | Balance at September 30, 2021 |
| Aviation | $ | 9,247 | | $ | — | | | | $ | (126) | | $ | 9,121 | |
| Healthcare | 11,855 | | 45 | | | | (19) | | 11,880 | |
| Renewable Energy | 3,401 | | — | | | | (88) | | 3,313 | |
| Power | 146 | | — | | | | — | | 145 | |
| | | | | | |
| Corporate | 876 | | — | | | | (1) | | 875 | |
| Total | $ | 25,524 | | $ | 45 | | | | $ | (235) | | $ | 25,333 | |
| | | | | | | | | | | | | | |
| 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 thirdfirst 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 September 30, 2021, our Additive reporting unit had goodwill of $235 million.
Substantially all other intangible assets are subject to amortization. Intangible assets decreased $484$1,040 million during the ninethree months ended September 30, 2021,March 31, 2022, primarily as a result of amortization partially offset by the acquisitionadditions of patents and technology and capitalized software mainly at Aviation and Healthcare of $502$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 $272$1,025 million and $420$301 million in the three months ended March 31, 2022 and $860 million and $1,036 million in the nine months ended, September 30, 2021, and 2020, respectively.
In the thirdfirst quarter of 2020,2022, 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 $113$765 million related to intangible assets at our remaining Steam business within our Power segment due to our announcement to exit the new build coal power market.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 9.8. REVENUES.The equipment and services revenues classification in the table below is consistent with our segment Management's Discussion and Analysis presentation.
| | | | | | | | | | | | | | | | | | | | | | | |
| EQUIPMENT & SERVICES REVENUES | |
| Three months ended September 30 | 2021 | | 2020 |
| Equipment | Services | Total | | Equipment | Services | Total |
| Aviation | $ | 1,837 | | $ | 3,562 | | $ | 5,398 | | | $ | 1,933 | | $ | 2,987 | | $ | 4,919 | |
| Healthcare | 2,187 | | 2,151 | | 4,339 | | | 2,538 | | 2,027 | | 4,565 | |
| Renewable Energy | 3,695 | | 512 | | 4,208 | | | 3,771 | | 754 | | 4,525 | |
| Power | 1,368 | | 2,658 | | 4,026 | | | 1,595 | | 2,430 | | 4,025 | |
| Corporate items and industrial eliminations | (182) | | 33 | | (149) | | | (212) | | 95 | | (117) | |
| Total GE Industrial revenues | $ | 8,905 | | $ | 8,916 | | $ | 17,821 | | | $ | 9,625 | | $ | 8,293 | | $ | 17,918 | |
| | Nine months ended September 30 | 2021 | | 2020 | |
| EQUIPMENT & SERVICES REVENUES | | EQUIPMENT & SERVICES REVENUES | |
| Three months ended March 31 | | Three months ended March 31 | 2022 | | 2021 |
| | Equipment | Services | Total | | Equipment | Services | Total | | Equipment | Services | Total | | Equipment | Services | Total |
| Aviation | Aviation | $ | 5,549 | | $ | 9,681 | | $ | 15,230 | | | $ | 6,234 | | $ | 9,961 | | $ | 16,196 | | Aviation | $ | 1,654 | | $ | 3,949 | | $ | 5,603 | | | $ | 1,847 | | $ | 3,145 | | $ | 4,992 | |
| Healthcare | Healthcare | 6,671 | | 6,429 | | 13,100 | | | 7,287 | | 5,899 | | 13,185 | | Healthcare | 2,256 | | 2,107 | | 4,363 | | | 2,227 | | 2,081 | | 4,308 | |
| Renewable Energy | Renewable Energy | 9,844 | | 1,661 | | 11,505 | | | 9,068 | | 2,155 | | 11,224 | | Renewable Energy | 2,173 | | 698 | | 2,871 | | | 2,844 | | 404 | | 3,248 | |
| Power | Power | 3,680 | | 8,561 | | 12,242 | | | 4,589 | | 7,617 | | 12,206 | | Power | 965 | | 2,536 | | 3,501 | | | 1,241 | | 2,679 | | 3,921 | |
| Corporate items and industrial eliminations | (566) | | 126 | | (439) | | | (251) | | 268 | | 17 | | |
| Total GE Industrial revenues | $ | 25,178 | | $ | 26,459 | | $ | 51,637 | | | $ | 26,928 | | $ | 25,901 | | $ | 52,828 | | |
| | Total segment revenues | | Total segment revenues | $ | 7,048 | | $ | 9,290 | | $ | 16,337 | | | $ | 8,159 | | $ | 8,309 | | $ | 16,468 | |
2021 3Q2022 1Q FORM 10-Q 4328
| | REVENUES | REVENUES | Three months ended September 30 | | Nine months ended September 30 | REVENUES | Three months ended March 31 | |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | |
| Commercial Engines & Services | Commercial Engines & Services | $ | 3,602 | | | $ | 3,087 | | | $ | 10,071 | | | $ | 10,718 | | Commercial Engines & Services | $ | 3,853 | | | $ | 3,354 | | |
| Military | Military | 1,107 | | | 1,137 | | | 3,104 | | | 3,258 | | Military | 1,036 | | | 956 | | |
| Systems & Other | Systems & Other | 689 | | | 696 | | | 2,055 | | | 2,220 | | Systems & Other | 714 | | | 682 | | |
| Aviation | Aviation | $ | 5,398 | | | $ | 4,919 | | | $ | 15,230 | | | $ | 16,196 | | Aviation | $ | 5,603 | | | $ | 4,992 | | |
| | Healthcare Systems | Healthcare Systems | $ | 3,832 | | | $ | 4,085 | | | $ | 11,572 | | | $ | 11,056 | | Healthcare Systems | $ | 3,875 | | | $ | 3,825 | | |
| Pharmaceutical Diagnostics | Pharmaceutical Diagnostics | 507 | | | 480 | | | 1,528 | | | 1,300 | | Pharmaceutical Diagnostics | 487 | | | 482 | | |
| BioPharma | — | | | — | | | — | | | 830 | | |
| Healthcare | Healthcare | $ | 4,339 | | | $ | 4,565 | | | $ | 13,100 | | | $ | 13,185 | | Healthcare | $ | 4,363 | | | $ | 4,308 | | |
| | Onshore Wind | Onshore Wind | $ | 3,047 | | | $ | 3,303 | | | $ | 8,048 | | | $ | 7,914 | | Onshore Wind | $ | 1,906 | | | $ | 2,118 | | |
| Grid Solutions equipment and services | Grid Solutions equipment and services | 759 | | | 936 | | | 2,330 | | | 2,587 | | Grid Solutions equipment and services | 668 | | | 795 | | |
| Hydro | 190 | | | 160 | | | 549 | | | 490 | | |
| Offshore Wind and Hybrid Solutions | 211 | | | 127 | | | 577 | | | 232 | | |
| | Hydro, Offshore Wind and Hybrid Solutions | | Hydro, Offshore Wind and Hybrid Solutions | 297 | | | 335 | | |
| Renewable Energy | Renewable Energy | $ | 4,208 | | | $ | 4,525 | | | $ | 11,505 | | | $ | 11,224 | | Renewable Energy | $ | 2,871 | | | $ | 3,248 | | |
| | Gas Power | Gas Power | $ | 2,861 | | | $ | 2,940 | | | $ | 8,739 | | | $ | 8,876 | | Gas Power | $ | 2,489 | | | $ | 2,829 | | |
| Steam Power | Steam Power | 790 | | | 769 | | | 2,327 | | | 2,340 | | Steam Power | 636 | | | 706 | | |
| Power Conversion, Nuclear and other | Power Conversion, Nuclear and other | 376 | | | 316 | | | 1,176 | | | 990 | | Power Conversion, Nuclear and other | 377 | | | 385 | | |
| Power | Power | $ | 4,026 | | | $ | 4,025 | | | $ | 12,242 | | | $ | 12,206 | | Power | $ | 3,501 | | | $ | 3,921 | | |
| | Corporate items and industrial eliminations | (149) | | | (117) | | | (439) | | | 17 | | |
| Total GE Industrial revenues | $ | 17,821 | | | $ | 17,918 | | | $ | 51,637 | | | $ | 52,828 | | |
| Capital | 734 | | | 758 | | | 2,470 | | | 2,455 | | |
| GE Capital-GE Industrial eliminations | $ | (126) | | | $ | (147) | | | $ | (280) | | | $ | (461) | | |
| Consolidated revenues | $ | 18,429 | | | $ | 18,529 | | | $ | 53,826 | | | $ | 54,823 | | |
| Total segment revenues | | Total segment revenues | 16,337 | | | 16,468 | | |
| | Corporate | | Corporate | 702 | | | 603 | | |
| | Total revenues | | Total revenues | $ | 17,040 | | | $ | 17,071 | | |
| |
REMAINING PERFORMANCE OBLIGATION. As of September 30, 2021,March 31, 2022, the aggregate amount of the contracted revenues allocated to our unsatisfied (or partially unsatisfied) performance obligations was $238,505$240,740 million. We expect to recognize revenue as we satisfy our remaining performance obligations as follows: (1) equipment-related remaining performance obligation of $46,666$45,687 million, of which 52%56%, 72%82% and 97%98% is expected to be satisfied within 1, 2 and 5 years, respectively; and (2) services-related remaining performance obligation of $191,839$195,053 million, of which 11%, 42%41%, 64%63% and 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 decreased $296$600 million in the ninethree months ended September 30, 2021March 31, 2022 primarily due to decreased long-term service agreements partially offset by increased customer advances and other and the timing of revenue recognitionbilling milestones ahead of billing milestonesrevenue recognition on long-term equipment contracts. Our long-term service agreements decreased primarily due to billings of $7,258$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 $6,810 million, a net unfavorable change in estimated profitability of $325 million at Aviation and a net favorable change in estimated profitability of $37 million at Power.$2,329 million.
| | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | Aviation | Healthcare | Renewable Energy | Power | Other | Total |
| Revenues in excess of billings | $ | 2,714 | | $ | — | | $ | — | | $ | 5,480 | | $ | — | | $ | 8,195 | |
| Billings in excess of revenues | (6,188) | | — | | — | | (1,406) | | — | | (7,594) | |
| Long-term service agreements | $ | (3,473) | | $ | — | | $ | — | | $ | 4,074 | | $ | — | | $ | 601 | |
| Short-term and other service agreements | 341 | | 177 | | 97 | | 91 | | 20 | | 725 | |
| Equipment contract revenues | 40 | | 315 | | 1,349 | | 1,963 | | 244 | | 3,912 | |
| Current contract assets | $ | (3,092) | | $ | 492 | | $ | 1,446 | | $ | 6,128 | | $ | 264 | | $ | 5,238 | |
| | | | | | |
| Nonrecurring engineering costs | 2,467 | | 31 | | 30 | | 14 | | — | | 2,543 | |
| Customer advances and other | 2,596 | | 135 | | — | | 846 | | — | | 3,576 | |
| Non-current contract and other deferred assets | $ | 5,063 | | $ | 166 | | $ | 30 | | $ | 860 | | $ | — | | $ | 6,119 | |
| Total contract and other deferred assets | $ | 1,971 | | $ | 658 | | $ | 1,476 | | $ | 6,988 | | $ | 264 | | $ | 11,357 | |
| | 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 | $ | 3,072 | | $ | — | | $ | — | | $ | 5,282 | | $ | — | | $ | 8,354 | | Revenues in excess of billings | $ | 2,289 | | $ | — | | $ | — | | $ | 5,394 | | $ | — | | $ | 7,683 | |
| Billings in excess of revenues | Billings in excess of revenues | (5,375) | | — | | — | | (1,640) | | — | | (7,015) | | Billings in excess of revenues | (5,852) | | — | | — | | (1,662) | | — | | (7,514) | |
| Long-term service agreements | Long-term service agreements | $ | (2,304) | | $ | — | | $ | — | | $ | 3,642 | | $ | — | | $ | 1,338 | | Long-term service agreements | $ | (3,564) | | $ | — | | $ | — | | $ | 3,732 | | $ | — | | $ | 168 | |
| Short-term and other service agreements | Short-term and other service agreements | 282 | | 173 | | 106 | | 129 | | 29 | | 719 | | Short-term and other service agreements | 383 | | 172 | | 112 | | 94 | | 16 | | 778 | |
| Equipment contract revenues | Equipment contract revenues | 59 | | 306 | | 1,127 | | 2,015 | | 201 | | 3,707 | | Equipment contract revenues | 35 | | 303 | | 1,231 | | 1,513 | | 217 | | 3,300 | |
| Current contract assets | Current contract assets | $ | (1,963) | | $ | 479 | | $ | 1,233 | | $ | 5,786 | | $ | 229 | | $ | 5,764 | | Current contract assets | $ | (3,145) | | $ | 475 | | $ | 1,343 | | $ | 5,339 | | $ | 233 | | $ | 4,246 | |
| | Nonrecurring engineering costs | Nonrecurring engineering costs | 2,409 | | 31 | | 34 | | 16 | | — | | 2,490 | | Nonrecurring engineering costs | 2,516 | | 30 | | 24 | | 10 | | — | | 2,580 | |
| Customer advances and other | Customer advances and other | 2,481 | | 128 | | — | | 822 | | (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 | $ | 4,889 | | $ | 159 | | $ | 34 | | $ | 838 | | $ | (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 | $ | 2,927 | | $ | 638 | | $ | 1,268 | | $ | 6,623 | | $ | 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 $1,424$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 Renewable Energy and Aviation. Revenues recognized for contracts included in a liability position at the beginning of the year were $12,602$4,638 million and $10,762$5,984 million for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
| | September 30, 2021 | Aviation | Healthcare | Renewable Energy | Power | Other | Total | |
| March 31, 2022 | | March 31, 2022 | Aviation | Healthcare | Renewable Energy | Power | Corporate | Total |
| Progress collections on equipment contracts | Progress collections on equipment contracts | $ | 155 | | $ | — | | $ | 1,862 | | $ | 5,227 | | $ | — | | $ | 7,244 | | Progress collections on equipment contracts | $ | 112 | | $ | — | | $ | 1,921 | | $ | 3,785 | | $ | — | | $ | 5,818 | |
| Other progress collections | Other progress collections | 4,245 | | 480 | | 2,750 | | 292 | | 83 | | 7,849 | | Other progress collections | 4,654 | | 538 | | 2,795 | | 386 | | 129 | | 8,502 | |
| | Current deferred income | Current deferred income | 151 | | 1,346 | | 216 | | 22 | | 81 | | 1,816 | | Current deferred income | 144 | | 1,396 | | 226 | | 12 | | 107 | | 1,886 | |
| Progress collections and deferred income | Progress collections and deferred income | $ | 4,551 | | $ | 1,825 | | $ | 4,828 | | $ | 5,541 | | $ | 163 | | $ | 16,909 | | Progress collections and deferred income | $ | 4,910 | | $ | 1,934 | | $ | 4,943 | | $ | 4,184 | | $ | 236 | | $ | 16,206 | |
| Non-current deferred income | Non-current deferred income | 963 | | 564 | | 188 | | 118 | | 6 | | 1,839 | | Non-current deferred income | 1,099 | | 585 | | 169 | | 99 | | 2 | | 1,953 | |
| Total Progress collections and deferred income | Total Progress collections and deferred income | $ | 5,514 | | $ | 2,389 | | $ | 5,015 | | $ | 5,659 | | $ | 170 | | $ | 18,748 | | Total Progress collections and deferred income | $ | 6,009 | | $ | 2,519 | | $ | 5,112 | | $ | 4,283 | | $ | 237 | | $ | 18,159 | |
| | December 31, 2020 | | |
| December 31, 2021 | | December 31, 2021 | |
| Progress collections on equipment contracts | Progress collections on equipment contracts | $ | 214 | | $ | — | | $ | 1,229 | | $ | 4,918 | | $ | — | | $ | 6,362 | | Progress collections on equipment contracts | $ | 142 | | $ | — | | $ | 1,843 | | $ | 5,198 | | $ | — | | $ | 7,183 | |
| Other progress collections | Other progress collections | 4,623 | | 414 | | 4,604 | | 458 | | 152 | | 10,252 | | Other progress collections | 4,469 | | 522 | | 2,866 | | 385 | | 111 | | 8,354 | |
| | Current deferred income | Current deferred income | 132 | | 1,309 | | 194 | | 17 | | 105 | | 1,757 | | Current deferred income | 170 | | 1,336 | | 198 | | 33 | | 99 | | 1,835 | |
| Progress collections and deferred income | Progress collections and deferred income | $ | 4,969 | | $ | 1,724 | | $ | 6,028 | | $ | 5,393 | | $ | 257 | | $ | 18,371 | | Progress collections and deferred income | $ | 4,782 | | $ | 1,858 | | $ | 4,907 | | $ | 5,615 | | $ | 210 | | $ | 17,372 | |
| Non-current deferred income | Non-current deferred income | 898 | | 564 | | 214 | | 116 | | 10 | | 1,801 | | Non-current deferred income | 1,090 | | 592 | | 194 | | 110 | | 3 | | 1,989 | |
| Total Progress collections and deferred income | Total Progress collections and deferred income | $ | 5,867 | | $ | 2,288 | | $ | 6,241 | | $ | 5,509 | | $ | 267 | | $ | 20,172 | | 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 include 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 $1,614$727 million in the ninethree months ended September 30, 2021,March 31, 2022, primarily due to increases in pension surplusInsurance cash and cash equivalents of $854$441 million, driven primarily by remeasurement related to freezing the UK pension plans, equity method and other investments of $365$187 million and Insurance cash and cash equivalentspension surplus of $352$183 million.
NOTE 12. BORROWINGS
| | | | | | | | |
| September 30, 2021 | December 31, 2020 |
| | |
| Current portion of long-term borrowings | $ | 1,002 | | $ | 36 | |
| Current portion of long-term borrowings assumed by GE Industrial | 2,346 | | 2,432 | |
| Other | 465 | | 882 | |
| Total GE Industrial short-term borrowings | $ | 3,813 | | $ | 3,350 | |
| | |
| Current portion of long-term borrowings | $ | 1,696 | | $ | 788 | |
| Intercompany payable to GE Industrial | 2,346 | | 2,432 | |
| Non-recourse borrowings of consolidated securitization entities | — | | 892 | |
| Other | 166 | | 283 | |
| Total GE Capital short-term borrowings | $ | 4,207 | | $ | 4,395 | |
| | |
| Eliminations | (2,562) | | (3,033) | |
| Total short-term borrowings | $ | 5,459 | | $ | 4,713 | |
| | |
| Senior notes | $ | 13,709 | | $ | 18,994 | |
| Senior notes assumed by GE Industrial | 13,996 | | 18,178 | |
| Subordinated notes assumed by GE Industrial | 1,765 | | 1,779 | |
| Other | 384 | | 435 | |
| Total GE Industrial long-term borrowings | $ | 29,854 | | $ | 39,386 | |
| | |
| Senior notes | $ | 26,918 | | $ | 30,132 | |
| Subordinated notes | 146 | | 189 | |
| Intercompany payable to GE Industrial | 12,583 | | 16,780 | |
| Other | 511 | | 483 | |
| Total GE Capital long-term borrowings | $ | 40,158 | | $ | 47,584 | |
| | |
| Eliminations | (12,583) | | (16,780) | |
| Total long-term borrowings | $ | 57,429 | | $ | 70,189 | |
| Total borrowings | $ | 62,888 | | $ | 74,902 | |
At September 30, 2021, the outstanding GE Capital borrowings that had been assumed by GE Industrial as part of the GE Capital Exit Plan was $18,106 million ($2,346 million short-term and $15,761 million long-term), for which GE Industrial has an offsetting Receivable from GE Capital of $14,929 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 September 30, 2021, total GE Industrial borrowings of $18,738 million comprised GE Industrial-issued borrowings of $15,561 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 $27,202$12,547 million and $28,503$13,719 million of senior notes and other debt issued by GE Capital debt at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.
In the second quarter of 2021, GE Industrial completed a tender offer to purchase $4,114 million in aggregate principal amount of certain GE Industrial unsecured debt, comprising $201 million of 2.700% Notes due 2022 $752 million of 4.250% Notes due 2040, $377 million of 4.125% Notes due 2042, $311 million of 4.500% Notes due 2044 and $2,473 million of 4.350% Notes due 2050. The total cash consideration paid for these purchases was $4,756 million and the total carrying amount of the purchased notes was $4,084 million, resulting in a total pre-tax loss of $645 million. In addition to the purchase price, GE Industrial paid any accrued and unpaid interest on the purchased notes through the date of purchase.1Q FORM 10-Q 30
In the second quarter of 2021, GE Capital completed a tender offer to purchase a total of $2,879 million in aggregate principal amount of certain senior unsecured debt, comprising $23 million of 4.650% Notes due 2021, $56 million of 3.150% Notes due 2022, $75 million of 3.100% Notes due 2023, $503 million of 6.150% Notes due 2037, $1,400 million of 5.875% Notes due 2038 and $823 million of 6.875% Notes due 2039. The total cash consideration paid for these purchases was $3,940 million and the carrying amount of the purchased notes was $3,191 million, resulting in a total pre-tax loss of $771 million. In addition to the purchase price, GE Capital paid any accrued and unpaid interest on the purchased notes through the date of purchase.
See Note 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 $770$767 million and $764$755 million, profit of $225 million and profit (loss) of $52$138 million, and $57net earnings of $178 million and $111 million for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively. For the nine months ended September 30, 2021 and 2020, revenues were $2,348 million and $2,167 million and profit (loss) was $360 million and $78 million, respectively. These operations were supported by assets of $50,839$48,378 million and $50,824$49,894 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. A summary of our insurance contracts is presented below:
| | September 30, 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 | $ | 17,078 | | $ | 8,969 | | $ | 187 | | $ | 3,919 | | $ | 30,153 | | Future policy benefit reserves | $ | 17,112 | | $ | 8,811 | | $ | 191 | | $ | — | | $ | 26,114 | |
| Claim reserves | Claim reserves | 4,445 | | 265 | | 966 | | — | | 5,677 | | Claim reserves | 4,526 | | 267 | | 551 | | — | | 5,344 | |
| Investment contracts | Investment contracts | — | | 974 | | 971 | | — | | 1,945 | | Investment contracts | — | | 933 | | 950 | | — | | 1,883 | |
| Unearned premiums and other | Unearned premiums and other | 14 | | 190 | | 110 | | — | | 315 | | Unearned premiums and other | 12 | | 187 | | 86 | | — | | 285 | |
| | 21,538 | | 10,397 | | 2,235 | | 3,919 | | 38,090 | | |
| Eliminations | — | | — | | (385) | | — | | (385) | | |
| | Total | Total | $ | 21,538 | | $ | 10,397 | | $ | 1,851 | | $ | 3,919 | | $ | 37,705 | | 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 | — | | 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 $4,241$3,394 million is a result of the decline in unrealized gains on investment securities and the higher margin resulting from the 2021 premium deficiency test.securities.
Claim reservesreserve activity included incurred claims of $1,264$387 million and $1,390$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 ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively. Paid claims were $1,290$443 million and $1,328$424 million in the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
Reinsurance recoverables, net of allowances of $1,609$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 $2,613$2,674 million and $2,552$2,651 million at September 30, 2021March 31, 2022 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.
2021 Premium Deficiency Testing. We completed our annual premium deficiency testing in the aggregate across our run-off insurance portfolio in the third quarter of 2021. These procedures included updating experience studies since our last test completed in the third quarter of 2020, independent actuarial analysis (principally on long-term care exposures) and review of industry benchmarks. Our 2021 premium deficiency testing started with the positive margin of less than 2% of the recorded future policy benefit reserves that resulted from our 2020 premium deficiency testing. Using updated assumptions, the 2021 premium deficiency testing results indicated a significant increase in the positive margin to approximately 11% of the related future policy benefit reserves recorded at September 30, 2021. As a result, the assumptions updated in connection with the premium deficiency recognized in 2019 remain locked-in and will remain so unless another premium deficiency occurs in the future.
The significant increase in the premium deficiency testing margin resulting from our 2021 premium deficiency testing was largely attributable to an increase in the overall discount rate to a weighted average rate of 6.15% compared to 5.70% in 2020 ($2,216 million). This increase in the discount rate from 2020 reflects further development of our previously communicated investment portfolio realignment strategy, that includes increased amounts allocated to growth assets, consisting of private equity, equity-like securities and select high yield credit strategies, from our current target of approximately 8% up to approximately 15%. These amounts are expected to be funded over the next 5 to 7 years from the remaining projected capital contribution of approximately $5,500 million through 2024 and regular portfolio cash flows while maintaining an overall A-rated fixed income portfolio. The 2021 discount rate assumptions also reflect a lower expected reinvestment rate on fixed-income investments versus that applied in 2020, due to lower prevailing benchmark interest rates in the U.S, grading to a lower expected long-term average investment yield over a shorter period and slightly lower actual yields on our fixed-income investment security portfolio. As a result of this increased allocation to higher-yielding assets, our run-off insurance operations may experience future earnings volatility due to investments carried at fair value with changes in fair values reported in earnings and changes in the allowance for credit losses and temporary elevated amounts of unfunded investment commitments.
When results of the premium deficiency testing indicate overall reserves are sufficient, we are also required to assess whether additional future policy benefit reserves are required to be accrued over time in the future. Such an accrual would be required if profits are projected in earlier future periods followed by losses projected in later future years (i.e., profits followed by losses). When this pattern of profits followed by losses is projected, we would be required to accrue a liability in the expected profitable years by the amount necessary to offset projected losses in later future years. We noted our projections as of third quarter 2021 indicate the present value of projected earnings in each future year to be positive, and therefore, no further adjustments to our future policy benefit reserves were required at this time.
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 September 30 | | Nine months ended September 30 | PRINCIPAL PENSION PLANS | Three months ended March 31 | |
| | 2021 | 2020 | | 2021 | 2020 | | 2022 | 2021 | |
| Service cost for benefits earned | Service cost for benefits earned | $ | 57 | | $ | 156 | | | $ | 179 | | $ | 501 | | Service cost for benefits earned | $ | 49 | | $ | 64 | | |
| Prior service cost amortization | Prior service cost amortization | 8 | | 36 | | | 22 | | 110 | | Prior service cost amortization | 2 | | 7 | | |
| Expected return on plan assets | Expected return on plan assets | (763) | | (747) | | | (2,288) | | (2,243) | | Expected return on plan assets | (786) | | (763) | | |
| Interest cost on benefit obligations | Interest cost on benefit obligations | 488 | | 588 | | | 1,464 | | 1,764 | | Interest cost on benefit obligations | 517 | | 486 | | |
| Net actuarial loss amortization | Net actuarial loss amortization | 871 | | 850 | | | 2,613 | | 2,549 | | Net actuarial loss amortization | 361 | | 864 | | |
| | Benefit plans cost | Benefit plans cost | $ | 661 | | $ | 883 | | | $ | 1,990 | | $ | 2,681 | | Benefit plans cost | $ | 143 | | $ | 658 | | |
Principal retiree benefit plans income was $43$52 million and $31$40 million for the three months ended September 30,March 31, 2022 and 2021, and 2020, and $125 million and $85 million for the nine months ended September 30, 2021 and 2020, respectively. Other pension plans income was $57$117 million income and $2$24 million cost for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively and $44 million income and $12 million cost for the nine months ended September 30, 2021,and 2020, respectively, which includes a curtailment loss of $77 million in 2021 resulting from the freeze of the UK pension plans announced on June 10, 2021.respectively.
We also have a defined contribution plan for eligible U.S. employees that provides employer contributions. Defined contribution plan costs were $99$110 million and $71$108 million for the three months ended September 30,March 31, 2022 and 2021, and 2020 and $321 million and $253 million for the nine months ended September 30, 2021 and 2020, 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 $746increased $239 million in the ninethree months ended September 30, 2021,March 31, 2022, primarily due to decreasesincreases in liabilities due to GE Capitalsales allowances of $957$277 million and taxes payable of $278 million partially offset by a decrease in employee compensation and benefit liabilities of $274$432 million. All other liabilities decreased $763 million in the three months ended March 31. 2022, primarily due to decreases in uncertain and other income taxes and related liabilities of $369 million and taxes payable of $220 million. These decreases were partially offset by increased sales allowances, equipment project and other commercialoperating lease liabilities of $420 million and the conversion of a redeemable noncontrolling interest of $297 million, in our Aviation segment, into a mandatorily redeemable instrument and reclassified to All other current liabilities.$169 million.
NOTE 16.15. INCOME TAXES. Our consolidated effective income tax rate was 149.5%(38.8)% and (17.4)% during59.7% for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively. The tax rate for 20212022 reflects a tax benefitprovision on a pre-tax loss. The rate was negative rateprimarily due to losses in foreign jurisdictions where they are not likely to be utilized and 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 2020 reflects awhich the loss could not be tax benefit on pre-tax income.benefited. The rate for 2021 is higher than the U.S. statutory rate on the loss primarily due to tax benefits associated with internal restructurings to recognize historical losses as a result of decreases in fair value. This was partially offset by 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 increasedecrease the 2021 nine-monththree-month tax rate to be in-line with the lower expected full-year rate. The tax benefit for 2020 is 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 theand by U.S. was taxed at lower than 21% and because we recorded $633 million of the tax associated with preparatory steps for the transaction in the fourth quarter of 2019. This was partially offset by a non-deductible goodwill impairment charge associated with our Additive business within our Aviation segment.credits.
The Internal Revenue Service (IRS) is currently auditing our consolidated U.S. income tax returns for 2016-2018.
GE has resolved its dispute with the United Kingdom tax authority, HM Revenue & Customs (HMRC) in connection with interest deductions claimed by GE Capital for the years 2004-2015. As previously disclosed, HMRC had proposed to disallow interest deductions with a potential impact of approximately $1,100 million, which included a possible assessment of tax and reduction of deferred tax assets, not including interest and penalties. As part of the settlement, GE and HMRC agreed that a portion of the interest deductions claimed were disallowed, with no fault or blame attributed to either party. The resolution concluded the dispute in its entirety without interest or penalties. The adjustments result in no current tax payment to HMRC, but a deferred tax charge of $112 million as part of discontinued operations as a result of a reduction of available tax attributes, which had previously been recorded as deferred tax assets.
NOTE 17.16. SHAREHOLDERS’ EQUITY
| | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | Three months ended September 30 | | Nine months ended September 30 | | |
| | 2021 | 2020 | | 2021 | 2020 | | | 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 | |
| | Beginning balance | Beginning balance | $ | (4,146) | | $ | (4,743) | | | $ | (4,386) | | $ | (4,818) | | | Beginning balance | $ | (4,562) | | $ | (4,386) | | |
| AOCI before reclasses – net of taxes of $5, $(59), $(51) and $(39) | (158) | | 55 | | | 82 | | (558) | | | |
| Reclasses from AOCI – net of taxes of $0, $0, $0 and $0(a) | — | | — | | | — | | 691 | | | |
| 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 | (158) | | 55 | | | 81 | | 133 | | | AOCI | (166) | | 110 | | |
| Less AOCI attributable to noncontrolling interests | Less AOCI attributable to noncontrolling interests | 1 | | — | | | 1 | | 3 | | | Less AOCI attributable to noncontrolling interests | (4) | | 2 | | |
| Currency translation adjustments AOCI | Currency translation adjustments AOCI | $ | (4,305) | | $ | (4,689) | | | $ | (4,305) | | $ | (4,689) | | | Currency translation adjustments AOCI | $ | (4,724) | | $ | (4,278) | | |
| | Beginning balance | Beginning balance | $ | (3,777) | | $ | (5,387) | | | $ | (5,395) | | $ | (7,024) | | | Beginning balance | $ | 3,646 | | $ | (5,395) | | |
| AOCI before reclasses – net of taxes of $16, $(22), $(5) and $6 | 91 | | (87) | | | 264 | | 58 | | | |
| Reclasses from AOCI – net of taxes of $192, $187, $592 and $613(a) | 662 | | 695 | | | 2,108 | | 2,190 | | | |
| 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 | 753 | | 609 | | | 2,372 | | 2,248 | | | AOCI | 240 | | 705 | | |
| Less AOCI attributable to noncontrolling interests | Less AOCI attributable to noncontrolling interests | 2 | | — | | | 4 | | 3 | | | Less AOCI attributable to noncontrolling interests | 2 | | 1 | | |
| Benefit plans AOCI | Benefit plans AOCI | $ | (3,026) | | $ | (4,779) | | | $ | (3,026) | | $ | (4,779) | | | Benefit plans AOCI | $ | 3,884 | | $ | (4,691) | | |
| | Beginning balance | Beginning balance | $ | 103 | | $ | (63) | | | $ | 32 | | $ | 109 | | | Beginning balance | $ | 2,498 | | $ | 32 | | |
AOCI before reclasses – net of taxes of $576, $62, $566 and $0(b) | 2,152 | | 65 | | | 2,201 | | (116) | | | |
| Reclasses from AOCI – net of taxes of $3, $(11), $13 and $(17)(a) | (1) | | (33) | | | 21 | | (24) | | | |
| 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 | 2,151 | | 32 | | | 2,222 | | (140) | | | AOCI | (317) | | 44 | | |
| | Investment securities and cash flow hedges AOCI | Investment securities and cash flow hedges AOCI | $ | 2,254 | | $ | (30) | | | $ | 2,254 | | $ | (30) | | | Investment securities and cash flow hedges AOCI | $ | 2,181 | | $ | 76 | | |
| | AOCI at September 30 | $ | (5,078) | | $ | (9,498) | | | $ | (5,078) | | $ | (9,498) | | | |
| AOCI at March 31 | | AOCI at March 31 | $ | 1,341 | | $ | (8,893) | | |
| | Dividends declared per common share | Dividends declared per common share | $ | 0.08 | | $ | 0.08 | | | $ | 0.24 | | $ | 0.24 | | | Dividends declared per common share | $ | 0.08 | | $ | 0.08 | | |
(a) The total reclassification from AOCI included $836 million, including currency translation of $688 million, net of taxes, for the nine months ended September 30, 2020, related to the sale of our BioPharma business within our Healthcare segment.
(b) Included adjustments of $2,456$2,681 million and $(420)$2,038 million for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively and $3,350 million and $(1,382) million for the nine months ended September 30, 2021 and 2020, respectively related to insurance liabilities and annuity benefits in our run-off insurance operations to reflect the effects that would have been recognized had the related unrealized investment security gains been realized. See Note 1312 for further information.
For information on our common and preferred stock issuances andredeemable noncontrolling interests, please refer to our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
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 $171 million and $487 million as of September 30, 2021 and December 31, 2020, respectively. The decrease of $316 million was primarily due to a redeemable noncontrolling interest in our Aviation segment, which was converted into a mandatorily redeemable instrument and reclassified to All other current liabilities.
2021 3Q2022 1Q FORM 10-Q 4932
NOTE 18.17. EARNINGS PER SHARE INFORMATION. In the second quarter of 2021, we announced that we would proceed with the 1-for-8 reverse stock split, as approved by shareholders, and filed an amendment to our certificate of incorporation to effectuate the reverse stock split after the close of trading on July 30, 2021. GE common stock began trading on a split-adjusted basis on August 2, 2021. Effective this quarter, our shares of outstanding common stock and earnings per share calculation have been retroactively restated for all periods presented.INFORMATION
| | | | | | | | | | | | | | | | | |
| Three months ended September 30 | 2021 | | 2020 |
| (Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | Diluted | Basic | | Diluted | Basic |
| Earnings from continuing operations | $ | 654 | | $ | 654 | | | $ | (1,087) | | $ | (1,087) | |
| Preferred stock dividends | (52) | | (52) | | | (46) | | (46) | |
| Accretion of redeemable noncontrolling interests, net of tax(a) | (9) | | (9) | | | (6) | | (6) | |
| Earnings from continuing operations attributable to common shareholders | 593 | | 593 | | | (1,138) | | (1,138) | |
| Earnings (loss) from discontinued operations | 602 | | 602 | | | (58) | | (58) | |
| Net earnings (loss) attributable to GE common shareholders | 1,195 | | 1,195 | | | (1,196) | | (1,196) | |
| | | | | |
| Shares of GE common stock outstanding | 1,098 | | 1,098 | | | 1,095 | | 1,095 | |
| Employee compensation-related shares (including stock options) | 7 | | — | | | — | | — | |
| Total average equivalent shares | 1,105 | | 1,098 | | | 1,095 | | 1,095 | |
| | | | | |
| Earnings per share from continuing operations | $ | 0.54 | | $ | 0.54 | | | $ | (1.04) | | $ | (1.04) | |
| Earnings (loss) per share from discontinued operations | 0.54 | | 0.55 | | | (0.05) | | (0.05) | |
| Net earnings (loss) per share | 1.08 | | 1.09 | | | (1.09) | | (1.09) | |
| | | | | |
| Potentially dilutive securities(b) | 37 | | | | 61 | | |
| | Nine months ended September 30 | 2021 | | 2020 | | |
| Three months ended March 31 | | 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 | $ | 179 | | $ | 179 | | | $ | 4,129 | | $ | 4,129 | | | |
| Earnings (loss) from continuing operations | | Earnings (loss) from continuing operations | $ | (757) | | $ | (757) | | | $ | 90 | | $ | 92 | |
| Preferred stock dividends | Preferred stock dividends | (180) | | (180) | | | (280) | | (280) | | | 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) | (9) | | (9) | | | (141) | | (141) | | | Accretion of redeemable noncontrolling interests, net of tax(a) | — | | — | | | 2 | | 2 | |
| Earnings from continuing operations attributable to common shareholders | (11) | | (11) | | | 3,707 | | 3,707 | | | |
| 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 | (2,856) | | (2,856) | | | (1,067) | | (1,067) | | | Earnings (loss) from discontinued operations | (286) | | (286) | | | (2,897) | | (2,894) | |
| Net earnings attributable to GE common shareholders | (2,866) | | (2,866) | | | 2,639 | | 2,639 | | | |
| Net earnings (loss) attributable to GE common shareholders | | 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 | 1,097 | | 1,097 | | | 1,094 | | 1,094 | | | 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) | — | | — | | | 1 | | — | | | Employee compensation-related shares (including stock options) | — | | — | | | 4 | | — | |
| Total average equivalent shares | Total average equivalent shares | 1,097 | | 1,097 | | | 1,094 | | 1,094 | | | Total average equivalent shares | 1,100 | | 1,100 | | | 1,101 | | 1,096 | |
| | Earnings from continuing operations | $ | (0.01) | | $ | (0.01) | | | $ | 3.39 | | $ | 3.39 | | | |
| Loss from discontinued operations | (2.60) | | (2.60) | | | (0.98) | | (0.98) | | | |
| Net earnings | (2.61) | | (2.61) | | | 2.41 | | 2.41 | | | |
| Earnings per share from continuing operations | | 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 | (0.26) | | (0.26) | | | (2.63) | | (2.64) | |
| Net earnings (loss) per share | | Net earnings (loss) per share | (0.99) | | (0.99) | | | (2.61) | | (2.62) | |
| | Potentially dilutive securities(b) | Potentially dilutive securities(b) | 42 | | | 57 | | | | 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 September 30, 2021, application of this treatment had an insignificant effect. For the three months ended September 30, 2020,March 31, 2022, as a result of the loss from continuing operations, losses were not allocated to the participating securities. For the ninethree months ended September 30,March 31, 2021, as a result of excess dividends in respect to the loss from continuing operations,current period earnings, losses were not allocated to the participating securities. For
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 ninethree months ended September 30, 2020, applicationMarch 31, 2022 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.
| | | September 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | Carrying
amount
(net) | Estimated
fair value | | Carrying
amount
(net) | Estimated
fair value | | Carrying
amount
(net) | Estimated
fair value | | Carrying
amount
(net) | Estimated
fair value |
| Assets | Assets | Loans and other receivables | $ | 2,960 | | $ | 3,136 | | | $ | 2,904 | | $ | 3,125 | | Assets | Loans and other receivables | $ | 2,561 | | $ | 2,598 | | | $ | 2,706 | | $ | 2,853 | |
| | Liabilities | Liabilities | Borrowings (Note 12) | 62,888 | | 73,476 | | | 74,902 | | 86,001 | | Liabilities | Borrowings (Note 11) | $ | 33,633 | | $ | 36,586 | | | $ | 35,186 | | $ | 41,207 | |
| | Investment contracts (Note 13) | 1,945 | | 2,344 | | | 2,049 | | 2,547 | | | 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. GE Capital notional relates primarilyWe use derivatives to managingmanage currency risks related to foreign exchange, and 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.
| | | | | | | | | | | | | | | | | | | | | | | |
| FAIR VALUE OF DERIVATIVES | September 30, 2021 | | December 31, 2020 |
| Gross Notional | All other assets | All other liabilities | | Gross Notional | All other assets | All other liabilities |
| Interest rate contracts | $ | 25,697 | | $ | 900 | | $ | 44 | | | $ | 20,500 | | $ | 1,912 | | $ | 7 | |
| Currency exchange contracts | 7,343 | | 152 | | 36 | | | 7,387 | | 164 | | 125 | |
| | | | | | | |
| Derivatives accounted for as hedges | $ | 33,040 | | $ | 1,052 | | $ | 81 | | | $ | 27,886 | | $ | 2,076 | | $ | 132 | |
| | | | | | | |
| Interest rate contracts | $ | 270 | | $ | 6 | | $ | — | | | $ | 346 | | $ | 8 | | $ | (1) | |
| Currency exchange contracts | 70,072 | | 677 | | 798 | | | 65,379 | | 767 | | 918 | |
| Other contracts | 1,738 | | 296 | | 21 | | | 2,036 | | 218 | | 71 | |
| Derivatives not accounted for as hedges | $ | 72,080 | | $ | 978 | | $ | 819 | | | $ | 67,761 | | $ | 993 | | $ | 989 | |
| | | | | | | |
| Gross derivatives(a) | $ | 105,120 | | $ | 2,030 | | $ | 899 | | | $ | 95,647 | | $ | 3,069 | | $ | 1,121 | |
| | | | | | | |
| Netting and credit adjustments | | $ | (615) | | $ | (614) | | | | $ | (647) | | $ | (647) | |
| Cash collateral adjustments | | (773) | | (66) | | | | (1,935) | | (104) | |
| Net derivatives recognized in statement of financial position | | $ | 642 | | $ | 220 | | | | $ | 487 | | $ | 369 | |
| | | | | | | |
| Net accrued interest | | $ | 35 | | $ | (19) | | | | $ | — | | $ | — | |
| Securities held as collateral | | (2) | | — | | | | (2) | | — | |
| Net amount | | $ | 675 | | $ | 201 | | | | $ | 484 | | $ | 369 | |
(a) Gross notional includes $43,731 million in GE Capital and $61,389 million in GE Industrial, and $45,445 million in GE Capital and $50,202 million in GE Industrial at September 30, 2021 and December 31, 2020, respectively
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 $1,330 million (comprising $1,963 million received and $633 million posted) at September 30, 2021 and $3,289 million (comprising $4,203 million received and $914 million posted) at December 31, 2020. Of these amounts, $959 million and $1,968 million at September 30, 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.
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 $180 million and $292 million at September 30, 2021 and December 31, 2020, respectively, and excess net cash collateral posted of $517 million (comprising $38 million received and $555 million posted) at September 30, 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. | | | | | | | | | | | | | | | | | | | | | | | |
| 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. At September 30, 2021,March 31, 2022, the cumulative amount of hedging adjustments of $3,788$1,931 million (including $2,579$2,011 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $32,679$15,636 million. At September 30, 2020,March 31, 2021, the cumulative amount of hedging adjustments of $6,203$3,826 million (including $2,346$2,330 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $33,434$26,926 million. The cumulative amount of hedging adjustments was primarily recorded in long-term borrowings.
CASH FLOW HEDGES AND NET INVESTMENT HEDGES
| | | | | | | | | | | | | | | | | | | | |
| Gain (loss) recognized in AOCI for the three months ended September 30 | | | | Gain (loss) recognized in AOCI for the nine months ended September 30 |
| 2021 | 2020 | | | | | 2021 | 2020 |
| Cash flow hedges(a) | $ | (30) | | $ | 121 | | | | | | $ | 1 | | $ | (139) | |
| Net investment hedges(b) | 191 | | (529) | | | | | | 290 | | (461) | |
| | | | | | | | | | | | |
| 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 $4,449$3,934 million and $8,175$8,106 million at September 30,March 31, 2022 and 2021, and 2020, respectively. No significant amount wasThe total reclassified from AOCI into earnings was zero for both the three and nine months ended September 30, 2021March 31, 2022 and 2020, respectively.2021.
The total amount in AOCI related to cash flow hedges of forecasted transactions was a $39$35 million gain at September 30, 2021.March 31, 2022. We expect to reclassify $24$21 million of gain to earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. The total reclassified from AOCI into earnings was $(24) million and $(33) million for the three months ended March 31, 2022 and 2021, respectively. At September 30, 2021,March 31, 2022, the maximum term of derivative instruments that hedge forecasted transactions was approximately 1413 years.
The table below presents the effectgains (losses) of our derivative financial instruments in the consolidated Statement of Earnings (Loss):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, 2021 | | Three months ended September 30, 2020 |
| Revenues | Cost of sales | Interest Expense(a) | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense(a) | SG&A | Other Income |
| $ | 18,429 | | $ | 13,401 | | $ | 463 | | $ | 2,747 | | $ | 491 | | | $ | 18,529 | | $ | 14,042 | | $ | 526 | | $ | 3,215 | | $ | (517) | |
| | | | | | | | | | | |
| Effect of cash flow hedges | $ | (14) | | $ | 2 | | $ | (7) | | $ | — | | $ | — | | | $ | 68 | | $ | (14) | | $ | (9) | | $ | 6 | | $ | — | |
| | | | | | | | | | | |
| Hedged items | | | $ | 190 | | | | | | | $ | 311 | | | |
| Derivatives designated as hedging instruments | | | (241) | | | | | | | (330) | | | |
| Effect of fair value hedges | | | $ | (52) | | | | | | | $ | (19) | | | |
| | | | | | | | | | | |
| Interest rate contracts (a) | $ | — | | $ | — | | $ | 2 | | $ | — | | $ | — | | | $ | 8 | | $ | — | | $ | (3) | | $ | — | | $ | — | |
| Currency exchange contracts | (177) | | (11) | | (18) | | (66) | | 40 | | | 174 | | 10 | | — | | (130) | | 35 | |
| Other | — | | — | | — | | 1 | | 41 | | | — | | — | | — | | 48 | | 50 | |
| Effect of derivatives not designated as hedges | $ | (177) | | $ | (11) | | $ | (17) | | $ | (65) | | $ | 81 | | | $ | 181 | | $ | 10 | | $ | (3) | | $ | (81) | | $ | 85 | |
| | | | Nine months ended September 30, 2021 | | Nine months ended September 30, 2020 | | Three months ended March 31, 2022 | | Three months ended March 31, 2021 |
| | Revenues | Cost of sales | Interest Expense(a) | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense(a) | SG&A | Other Income | | Revenues | | Interest Expense | SG&A | Other(a) | | Revenues | | Interest Expense | SG&A | Other(a) |
| | $ | 53,826 | | $ | 39,558 | | $ | 2,866 | | $ | 8,504 | | $ | 1,824 | | | $ | 54,823 | | $ | 42,101 | | $ | 1,853 | | $ | 9,344 | | $ | 8,430 | | | $ | 17,040 | | | $ | 406 | | $ | 3,651 | | $ | 12,526 | | | $ | 17,071 | | | $ | 500 | | $ | 2,894 | | $ | 13,211 | |
| | Effect of cash flow hedges | Effect of cash flow hedges | $ | (14) | | $ | (4) | | $ | (29) | | $ | 1 | | $ | — | | | $ | 62 | | $ | (52) | | $ | (31) | | $ | 1 | | $ | — | | Effect of cash flow hedges | $ | 3 | | | $ | (7) | | $ | — | | $ | (21) | | | $ | 7 | | | $ | (8) | | $ | — | | $ | (32) | |
| | Hedged items | Hedged items | | $ | 1,375 | | | $ | (2,290) | | | Hedged items | | | 78 | | | | 1,843 | | |
| Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | (1,510) | | | 2,290 | | | Derivatives designated as hedging instruments | | | (87) | | | | (1,899) | | |
| Effect of fair value hedges | Effect of fair value hedges | | $ | (135) | | | $ | — | | | Effect of fair value hedges | | | $ | (9) | | | | $ | (56) | | |
| | Interest rate contracts(a) | $ | 2 | | $ | — | | $ | 48 | | $ | — | | $ | (1) | | | $ | (28) | | $ | — | | $ | (16) | | $ | — | | $ | — | | |
| Interest rate contracts(b) | | Interest rate contracts(b) | $ | 1 | | | 0 | $ | 20 | | | $ | 1 | | | $ | (9) | | 0 | $ | (1) | |
| Currency exchange contracts | Currency exchange contracts | 226 | | (6) | | (18) | | 48 | | 28 | | | (443) | | 39 | | — | | 29 | | 14 | | Currency exchange contracts | 1 | | | 0 | (68) | | (79) | | | 0 | | 0 | 59 | | 342 | |
| Other | Other | — | | — | | — | | 113 | | 162 | | | — | | — | | — | | (15) | | 39 | | Other | 0 | | 0 | (37) | | 4 | | | 0 | | 0 | 55 | | 19 | |
| Effect of derivatives not designated as hedges | Effect of derivatives not designated as hedges | $ | 228 | | $ | (6) | | $ | 30 | | $ | 161 | | $ | 188 | | | $ | (470) | | $ | 39 | | $ | (16) | | $ | 14 | | $ | 53 | | 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 total of debt extinguishment costs the derivative components of which (included in interest rate contracts at total effect of derivatives not designated as hedges) totaled $48 million andwas zero for the nine months ended September 30, 2021 and 2020, respectively. There were no debt extinguishment costs related to derivative components forboth the three months ended September 30, 2021March 31, 2022 and 2020.2021.
COUNTERPARTY CREDIT RISK. Our exposures to counterparties (including accrued interest), net of collateral we held, was $572$561 million and $392$564 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. Counterparties' exposures to our derivative liability (including accrued interest), net of collateral posted by us, was $138$299 million and $307$159 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.
NOTE 20. VARIABLE INTEREST ENTITIES. In addition to the 2 VIEs detailed in Note 4, in our consolidated Statement of Financial Position, we have assets of $1,841$443 million and $1,733$491 million and liabilities of $580$192 million and $657$206 million, inclusive of intercompany eliminations, at September 30, 2021March 31, 2022 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 September 30, 2021 can only be used to settle the liabilities of those VIEs.
Our investments in unconsolidated VIEs were $4,239$5,310 million and $3,230$5,034 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. TheseOf these investments, are primarily owned by GE Capital businesses of which $1,280$1,479 million and $1,141$1,481 million were owned by EFS, comprising equity method investments, primarily renewable energy tax equity investments, at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. In addition, $2,739$3,608 million and $1,833$3,333 million were owned by our run-off insurance operations, primarily comprising investment securities at September 30, 2021March 31, 2022 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 $3,449$3,509 million at September 30, 2021.March 31, 2022. The commitments primarily comprise project financing investments in thermal and wind energy projects of $532 million and investments by our run-off insurance operations in investment securities and other assets of $2,917$3,302 million and included within these commitments are obligations to make investments in unconsolidated VIEs of $429 million and $2,834 million, respectively.$3,149 million. See Note 20 for further information.
As of September 30, 2021,March 31, 2022, in our Aviation segment, we have committed to provide financing assistance of $2,072$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 $24,675 million, excluding pre-delivery payments made in advance (including 249 new aircraft with estimated delivery dates of 11% in 2021, 15% in 2022 and 74% in 2023 through 2027) and secondary orders with airlines for used aircraft approximating $1,035 million (including 22 used aircraft with estimated delivery dates of 41% in 2021, 45% in 2022 and 14% in 2023) at September 30, 2021. When GECAS purchases aircraft, it is at contractual price, which is usually less than the aircraft manufacturer's list price. As of September 30, 2021, GECAS has made $2,615 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 September 30, 2021, we have provided specific indemnities to buyers of GE Capital's assets that, in the aggregate, represent a maximum potential claim of $551 million with related reserves of $64 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 $1,914$1,846 million and $2,054$1,891 million at September 30, 2021March 31, 2022 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 and Note 21 in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 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. In 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.jurisdictions, including the previously reported legal proceedings in Slovenia that are described below. The reserve balance was $653$544 million and $858$567 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.
Regardless of jurisdiction, the allegations Allegations in these 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.
Shareholder and related lawsuitslawsuits. . Since February 2018, multipleNovember 2017, several putative shareholder derivative lawsuitsclass actions under the federal securities laws have been filed against GE and certain affiliated individuals and consolidated into a single action currently pending in the U.S. District Court for the Southern District of New York (the Hachem case). In October 2019, the lead plaintiff filed a fifth amended consolidated class action complaint naming as defendants GE and current and former GE executive officers and members of GE’s Board of Directors and GE (as nominal defendant). NaN shareholder derivative lawsuits are currently pending: the Lindsey and Priest/Tola cases, which were filed in New York state court. These lawsuits have allegedofficers. It alleges violations of securities laws, breaches of fiduciary duties, unjust enrichment, waste of corporate assets, abuse of controlSections 10(b) and gross mismanagement, although the specific matters underlying the allegations in the lawsuits have varied. The allegations in the Bennett, Lindsey20(a) and Priest/Tola cases relate to substantially the same facts as those underlying the Hachem securities class action described in our Annual Report on Form 10-K for the year ended December 31, 2020, and the allegations in the Cuker case relate to alleged corruption in China. The plaintiffs seek unspecified damages and improvements in GE’s corporate governance and internal procedures. The Lindsey case has been stayed by agreementRule 10b-5 of the parties.Securities Exchange Act of 1934 related to insurance reserves and accounting for long-term service agreements and seeks damages on behalf of shareholders who acquired GE stock between February 27, 2013 and January 23, 2018. GE filed a motion to dismiss the Priest/Tola complaint in March 2021.December 2019. In JulyJanuary 2021, the court granted GE'sdefendants’ motion to dismiss as to the Cuker complaint. In October 2021, the Bennett case was voluntarily dismissed by the plaintiff.
In October 2018, a putative class action (the Houston case) was filed in New York state court naming as defendants GE, certain GE subsidiaries and current and former GE executive officers and employees. It alleges violations of Sections 11, 12 and 15majority of the Securities Actclaims. 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 1933certain claims about historic disclosures related to factoring in the Power business that survive as to GE 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 ofits former CFO Jeffrey S. Bornstein. All other individual defendants have been dismissed from the motion to dismiss the Hachem case. In September 2021, following the filing by GE of a motion to dismiss the complaint,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 discontinue the case.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 September 30, 2021,March 31, 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 $1,938reserves, 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 September 30, 2021,March 31, 2022 the total amount of such estimated losses was $565$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 thirdfirst quarter of 20212022 was driven by increases across each of 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 or binding resolutions by the European Court of Justice (ECJ) or the Polish Supreme Court, including a new binding resolution anticipated to be considered by the Polish Supreme Court in the coming months;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 resolution 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 of which are 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 Polish banks are adoptinghave 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 will adopt in response;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 and issued the final revised permit effective in January 2021. In March 2021, two local environmental advocacy groups filed a joint petition to the EAB challenging portions of the revised permit, and in February 2022 the EAB denied the petition. As of March 31, 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 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
2021 3Q2022 1Q FORM 10-Q 5436
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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| Nine months ended September 30, 2021 | Nine months ended September 30, 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 | $ | (3,795) | | $ | 6,224 | | $ | (13,550) | | $ | (2,563) | | $ | 28,568 | | $ | (23,228) | |
| GE Industrial current receivables sold to GE Capital(a) | 2,423 | | (3,069) | | 646 | | (1,361) | | 1,086 | | 276 | |
| GE Industrial long-term receivables sold to GE Capital | 93 | | (93) | | — | | 210 | | (210) | | — | |
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| Supply chain finance programs | 135 | | (135) | | — | | 1,853 | | (1,853) | | — | |
| Repayment of GE Capital loans by GE Industrial | — | | — | | — | | — | | (7,500) | | 7,500 | |
| Other reclassifications and eliminations | (384) | | (18) | | 401 | | (15) | | (423) | | 438 | |
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| Consolidated cash flows | $ | (1,527) | | $ | 2,909 | | $ | (12,502) | | $ | (1,876) | | $ | 19,667 | | $ | (15,014) | |
(a)Included the elimination of $2,957 million and $11,335 million payments to GE Industrial for receivables purchased and retained by GE Capital and the related reclassification to CFOA of $5,380 million and $9,974 million due to GE Capital collections and other activity in our consolidated statement of cash flows for the nine months ended September 30, 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
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| Three months ended September 30 | | Nine months ended September 30 | | |
| 2021 | 2020 | | 2021 | 2020 | | |
| Purchases and sales of business interests(a) | $ | (153) | | $ | 21 | | | $ | (155) | | $ | 12,445 | | | |
| Licensing and royalty income | 54 | | 44 | | | 141 | | 117 | | | |
| Equity method income | 42 | | (78) | | | 96 | | (9) | | | |
| Net interest and investment income (loss)(b) | 482 | | (582) | | | 1,523 | | (4,259) | | | |
| Other items | (5) | | 86 | | | 154 | | 187 | | | |
| GE Industrial | $ | 420 | | $ | (509) | | | $ | 1,760 | | $ | 8,481 | | | |
| Eliminations | 71 | | (8) | | | 64 | | (50) | | | |
| Total | $ | 491 | | $ | (517) | | | $ | 1,824 | | $ | 8,430 | | | |
(a)Included a pre-tax and after-tax loss of $172 million related to the planned sale of our boiler manufacturing business in China in our Power segment for the three and nine months ended September 30, 2021. Included a pre-tax gain of $12,362 million ($11,214 million after-tax) on the sale of BioPharma for the nine months ended September 30, 2020. See Note 2 for further information.
(b)Included a pre-tax realized and unrealized gain of $359 million ($282 million after-tax) and a pre-tax unrealized loss of $748 million ($618 million after-tax) for the three months ended September 30, 2021 and 2020, respectively, and a pre-tax realized and unrealized gain of $1,028 million ($767 million after-tax) and a pre-tax unrealized loss of $4,613 million ($3,679 million after-tax) for the nine months ended September 30, 2021 and 2020, respectively, related to our interest in Baker Hughes.
EXHIBITS
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| Exhibit 10(d). Amendment No. 2, dated as of March 15, 2022, to the Employment Agreement by and between H. Lawrence Culp, Jr. and General Electric Company, dated as of October 1, 2018 (Incorporated by reference to Exhibit 3(i) to GE’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013), as amended by the Certificate of Amendment, dated December 2, 2015 (Incorporated by reference to Exhibit 3.1 to GE’s Current Report on Form 8-K, dated December 3, 2015), as further amended by the Certificate of Amendment, dated January 19, 2016 (Incorporated by reference to Exhibit 3.1 to GE’s Current Report on Form 8-K, dated January 20, 2016), as further amended by the Certificate of Change of General Electric Company (Incorporated by reference to Exhibit 3(1) to GE’s Current Report on Form 8-K, dated September 1, 2016), as further amended by the Certificate of Amendment, dated May 13, 2019 (Incorporated by reference to Exhibit 3.1 to GE’s Current Report on Form 8-K, dated May 13, 2019), as further amended by the Certificate of Change of General Electric Company (Incorporated by reference to Exhibit 3.1 to GE’s Current Report on Form 8-K, dated December 9, 2019), as further amended by the Certificate of Amendment, dated July 30, 2021 (Incorporated by reference to Exhibit 3.110.1 to GE's Current Report on Form 8-K, dated July 30, 2021) (in each case, under CommissionMarch 17, 2022 (Commission file number 001-00035). |
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| Exhibit 101. The following materials from General Electric Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021,March 31, 2022, formatted in XBRL (eXtensible Business Reporting Language); (i) Statement of Earnings (Loss) for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, (ii) Statement of Financial Position at September 30, 2021March 31, 2022 and December 31, 2020,2021, (iii) Statement of Cash Flows for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, (iv) Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, (v) Statement of Changes in Shareholders' Equity for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, and (vi) Notes to Consolidated Financial Statements. |
| Exhibit 104. Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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| FORM 10-Q CROSS REFERENCE INDEX | | 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 | | 17-18, 50-5213, 35 |
| Item 4. | | Controls and Procedures | | |
Part II – OTHER INFORMATION |
| Item 1. | | Legal Proceedings | | 53-5435-36 |
| 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 | | |
(a) There have been no material changes to our risk factors since March 31, 2021. For a discussion of our risk factors, refer to our Annual Report on Form 10-K for the year ended December 31, 2020, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
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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OctoberApril 26, 20212022 | | /s/ Thomas S. Timko |
| Date | | Thomas S. Timko Vice President, Chief Accounting Officer and Controller Principal Accounting Officer |
2021 3Q2022 1Q FORM 10-Q 5637
