false--12-31Q3201900000405453530000001800000086000000137000000P3Y08738434000873843400087384340008747092000874709200087470920004890000003710000003360000008200000048000000260000001100000038000000300000005000000450000000780000002940000002200000074000000245000000810000002660000001980000005939875593987559398755939875593987559398759400000001830000004000000400000010000002390000000800000012000000247000000193000000765000000830000000<div class="ae2"><div class="ae3"><font class="ae4">NOTE 20. CASH FLOWS INFORMATION</font><font class="ae4"> </font></div><div class="ae5"><font class="ae6">All other operating activities reflect cash sources and uses as well as non-cash adjustments to net earnings (loss).</font></div><div class="ae5"><font class="ae6"><br clear="none"/></font></div><div class="ae5"><font class="ae6">Amounts reported in the Proceeds from sales of discontinued operations and Proceeds from principal business dispositions lines in our consolidated Statement of Cash Flows are net of cash transferred and included certain deal-related costs. Amounts reported in the Net cash from (payments for) principal businesses purchased line are net of cash acquired and included certain deal-related costs and debt assumed and immediately repaid in acquisitions.</font></div><div class="ae3"><div class="ae7"><table class="ae8"><tr><td colspan="7"></td></tr><tr><td class="ae9"></td><td class="aea"></td><td class="aeb"></td><td class="aea"></td><td class="aea"></td><td class="aeb"></td><td class="aea"></td></tr><tr><td class="aec"><div class="aed"><font class="aee">GE</font></div></td><td colspan="6" class="aef"><div class="aeg"><font class="aeh">Three months ended March 31</font></div></td></tr><tr><td class="aec"><div class="aed"><font class="aei">(In millions)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="aeh">2020</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="aeh">2019</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td><td colspan="3" class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td><td colspan="3" class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Increase (decrease) in employee benefit liabilities(a)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(371</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(489</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Restructuring and other charges(b)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">193</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">247</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Restructuring and other cash expenditures</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">(198</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">(266</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Baker Hughes Class B dividends received</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">&#8212;</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">94</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aet"><div class="aed"><font class="ae6">Other(c)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">294</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">78</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeu"><div class="aed"><font class="aee">All other operating activities</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(82</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(336</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Derivative settlements (net)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(74</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">22</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Other Investments (net)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">137</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">86</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Other(d)</font></div></td><td colspan="2" class="aef"><div class="aek"><font class="ae6">18</font></div></td><td class="aey"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aef"><div class="aek"><font class="ae6">(353</font></div></td><td class="aez"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeu"><div class="aed"><font class="aee">All other investing activities</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">81</font></div></td><td class="ae10"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(245</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td></tr></table></div></div><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(a)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Included non-cash adjustments for stock-based compensation expenses.</font></div></td></tr></table><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(b)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Excludes non-cash adjustments reflected as Depreciation and amortization of property, plant and equipment or Amortization of intangible assets in our consolidated Statement of Cash Flows.</font></div></td></tr></table><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(c)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Included other adjustments to net income, such as write-downs of assets and the impacts of acquisition accounting and changes in other assets and other liabilities classified as operating activities, such as the timing of payments of customer allowances.</font></div></td></tr></table><table class="ae17"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(d)</font></div></td><td class="ae18"><div class="ae5"><font class="ae6">Other primarily included net activity related to settlements between our continuing operations and discontinued operations.</font><font class="ae6"> </font></div></td></tr></table><div class="ae19"><font class="ae1a"><br clear="none"/></font></div><div class="ae5"><font class="ae6">The following investing and financing activities affected recognized assets or liabilities but did not result in cash receipts or payments in the three months ended March 31, 2020: additional non-cash deferred purchase price received by GE Capital related to sales of current receivables (see Note 4); and right-of-use assets obtained in operating leases.</font></div></div><div class="ae2"><div class="ae3"><div class="ae7"><table class="ae8"><tr><td colspan="7"></td></tr><tr><td class="ae9"></td><td class="aea"></td><td class="aeb"></td><td class="aea"></td><td class="aea"></td><td class="aeb"></td><td class="aea"></td></tr><tr><td class="aec"><div class="aed"><font class="aee">GE</font></div></td><td colspan="6" class="aef"><div class="aeg"><font class="aeh">Three months ended March 31</font></div></td></tr><tr><td class="aec"><div class="aed"><font class="aei">(In millions)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="aeh">2020</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="aeh">2019</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td><td colspan="3" class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td><td colspan="3" class="aeo"><div class="aep"><font class="aen">&#160;</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Increase (decrease) in employee benefit liabilities(a)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(371</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(489</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Restructuring and other charges(b)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">193</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">247</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Restructuring and other cash expenditures</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">(198</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">(266</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Baker Hughes Class B dividends received</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">&#8212;</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">94</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aet"><div class="aed"><font class="ae6">Other(c)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">294</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">78</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeu"><div class="aed"><font class="aee">All other operating activities</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(82</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(336</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Derivative settlements (net)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">(74</font></div></td><td class="aes"><div class="aed"><font class="ae6">)</font></div></td><td class="aej"><div class="aed"><font class="ae6">$</font></div></td><td class="aer"><div class="aek"><font class="ae6">22</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Other Investments (net)</font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">137</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aej"><div class="aek"><font class="ae6">86</font></div></td><td class="ael"><div class="aem"><font class="aen"><br clear="none"/></font></div></td></tr><tr><td class="aeq"><div class="aed"><font class="ae6">Other(d)</font></div></td><td colspan="2" class="aef"><div class="aek"><font class="ae6">18</font></div></td><td class="aey"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td colspan="2" class="aef"><div class="aek"><font class="ae6">(353</font></div></td><td class="aez"><div class="aed"><font class="ae6">)</font></div></td></tr><tr><td class="aeu"><div class="aed"><font class="aee">All other investing activities</font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">81</font></div></td><td class="ae10"><div class="aem"><font class="aen"><br clear="none"/></font></div></td><td class="aev"><div class="aed"><font class="ae6">$</font></div></td><td class="aew"><div class="aek"><font class="ae6">(245</font></div></td><td class="aex"><div class="aed"><font class="ae6">)</font></div></td></tr></table></div></div><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(a)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Included non-cash adjustments for stock-based compensation expenses.</font></div></td></tr></table><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(b)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Excludes non-cash adjustments reflected as Depreciation and amortization of property, plant and equipment or Amortization of intangible assets in our consolidated Statement of Cash Flows.</font></div></td></tr></table><table class="ae11"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(c)</font></div></td><td class="ae15"><div class="ae16"><font class="ae6">Included other adjustments to net income, such as write-downs of assets and the impacts of acquisition accounting and changes in other assets and other liabilities classified as operating activities, such as the timing of payments of customer allowances.</font></div></td></tr></table><table class="ae17"><tr><td class="ae12"></td><td></td></tr><tr><td class="ae13"><div class="ae14"><font class="ae6">(d)</font></div></td><td class="ae18"><div class="ae5"><font class="ae6">Other primarily included net activity related to settlements between our continuing operations and discontinued operations.</font><font class="ae6"> </font></div></td></tr></table></div>

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(Mark One)
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,September 30, 2020
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
ge-20200930_g1.jpg
GENERAL ELECTRIC COMPANYCOMPANY
(Exact name of registrant as specified in its charter)

New York14-0689340
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
5 Necco StreetBostonMA02210
(Address of principal executive offices)(Zip Code)
(Registrant’s telephone number, including area code) (617) (617) 443-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.06 per shareGENew York Stock Exchange
Floating Rate Notes due 2020GE 20ENew York Stock Exchange
0.375% Notes due 2022GE 22ANew York Stock Exchange
1.250% Notes due 2023GE 23ENew York Stock Exchange
0.875% Notes due 2025GE 25New York Stock Exchange
1.875% Notes due 2027GE 27ENew York Stock Exchange
1.500% Notes due 2029GE 29New York Stock Exchange
7 1/2% Guaranteed Subordinated Notes due 2035GE /35New York Stock Exchange
2.125% Notes due 2037GE 37New 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 filerAccelerated filer 
Non-accelerated filer Smaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
There were 8,747,092,0008,759,873,000 shares of common stock with a par value of $0.06 per share outstanding at March 31,September 30, 2020.





TABLE OF CONTENTS
Page
Page
Non-GAAP Financial Measures



MD&AABOUT GENERAL ELECTRIC


ABOUT GENERAL ELECTRIC
ELECTRIC.General Electric Company (General Electric or the Company) is a high-tech industrial company that operates worldwide through its four industrial segments, Power, Renewable Energy, Aviation and Healthcare, and its financial services segment, Capital. The Power segment offers technologies, solutions, and services related to energy production, including gas and steam turbines, generators, and power generation services. The Renewable Energy segment provides wind turbine platforms, hardware and software, offshore wind turbines, solutions, products and services to hydropower industry, blades for onshore and offshore wind turbines, and high voltage equipment. The Aviation segment provides jet engines and turboprops for commercial airframes, maintenance, component repair, and overhaul services, as well as replacement parts, additive machines and materials, and engineering services. The Healthcare segment provides healthcare technologies in medical imaging, digital solutions, patient monitoring, and diagnostics, drug discovery, and performance enhancement solutions. The Capital segment leases and finances aircraft, aircraft engines and helicopters, provides financial and underwriting solutions, and manages our run-off insurance operations. See the Consolidated Results section of Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2 to the consolidated financial statements for information regarding our results of operations and recent business portfolio actions. Results of segments reclassified to discontinued operations have been recast for all periods presented.

GE’s Internet address at www.ge.com, Investor Relations website at www.ge.com/investor-relations and our corporate blog at www.gereports.com, as well as GE’s Facebook page, Twitter accounts and other social media, including @GE_Reports, contain a significant amount of information about GE, including financial and other information for investors. GE encourages investors to visit these websites from time to time, as information is updated and new information is posted.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
.The consolidated financial statements of General Electric Company (the Company) combine the industrial manufacturing and services businesses of GE with the financial services businesses of GE Capital or Financial Services and are prepared in conformity with U.S. generally accepted accounting principles (GAAP). Certain columns and rows within tables may not add due to the use of rounded numbers. Percentages presented in this report are calculated from the underlying numbers in millions. Discussions throughout MD&A are based on continuing operations unless otherwise noted. The MD&A should be read in conjunction with the Financial Statements and Notes to the consolidated financial statements. For purposes of the financial statement display of sales and costs of sales in our consolidated Statement of Earnings (Loss), “goods” is required by SEC regulations to include all sales of tangible products, and "services" must include all other sales, including other services activities. Throughout MD&A we refer to sales under product services agreements and sales of both goods (such as spare parts and equipment upgrades) and related services (such as monitoring, maintenance and repairs) as sales of “services,” which is an important part of our operations.

We believe investors will gain a better understanding of our company if they understand how we measure and talk about our results. Because of the diversity in our businesses, we present our financial statements in a three-column format, which allows investors to see our GE Industrial operations separately from our GE Capital operations. We believe that this provides useful information to investors. When used in this report, unless otherwise indicated by the context, we use these terms to mean the following:

Consolidated – the adding together of GE and GE Capital, giving effect to the elimination of transactions between the two. We present consolidated results in the left-side column of our consolidated Statements of Earnings (Loss), Financial Position and Cash Flows.
GE – the adding together of all affiliates except GE Capital, whose continuing operations are presented on a one-line basis, giving effect to the elimination of transactions among such affiliates. As GE presents the continuing operations of GE Capital on a one-line basis, any intercompany profits resulting from transactions between GE and GE Capital are eliminated at the GE level. We present the results of GE in the center column of our consolidated Statements of Earnings (Loss), Financial Position and Cash Flows.
GE Capital – the adding together of all affiliates of GE Capital giving effect to the elimination of transactions among such affiliates. We present the results of GE Capital in the right-side column of our consolidated Statements of Earnings (Loss), Financial Position and Cash Flows.
GE Industrial – GE excluding the continuing operations of GE Capital. We believe that this provides investors with a view as to the results of our industrial businesses and corporate items.

This document contains “forward-looking statements” - for details about the uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements, see the Risk Factors and Forward-Looking Statements sections.section.

In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial data but not presented in our financial statements prepared in accordance with GAAP. Certain of these data are considered “non-GAAP financial measures” under SEC rules. See the Non-GAAP Financial Measures section for the reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures.

2020 1Q FORM 10-Q 3

MD&ACONSOLIDATED RESULTS

CONSOLIDATED RESULTS
SIGNIFICANT DEVELOPMENTS.
Coronavirus Disease 2019 (COVID-19) Pandemic.Pandemic. The COVID-19 pandemic has significantly impacted global economies, resulting in workforce and travel restrictions, supply chain and production disruptions and reduced demand and spending across many sectors. DuringSince the latter part of the first quarter, of 2020, these factors began havinghave had a material adverse impact on our operations, financial performance and prices of our securities, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve. This section provides a brief overview of how we are responding to current and potential impacts related to COVID-19 on GE’s operations and financial condition and results, with additional details provided throughout the MD&A and other relevant sections of this report.

2020 3Q FORM 10-Q 3

MD&ACONSOLIDATED RESULTS
We have adopted operational and governance rhythms across the Company, and with our Board of Directors, to coordinate and oversee actions related to the COVID-19 pandemic, including an internal task force to protect the health and safety of our employees globally and maintain business continuity; the assessment of financial and operating impacts, financial planning and mitigating cost, cash, and other actions in response; funding and liquidity management and related treasury actions; and enterprise risk management and other functional activities. Eachactivities across our global commercial, supply chain, human resources, controllership, government affairs, and other organizations. In particular, we took a series of GE’s businessesactions during the second quarter to enhance and Corporate are taking costextend our liquidity at both GE and liquidity actions to manage riskGE Capital (as described under "Debt offerings and aggressively mitigate financial impact as supplytenders" below), and demand dynamics in GE’s industries continue to shift. We alsowe continue to evaluate market conditions as they evolve and take precautionary measures to strengthen our financial position. We ended the firstthird quarter of 2020 with $47.3$39.2 billion of consolidated cash, cash equivalents and restricted cash, in addition to our available credit lines. See the Capital Resources and Liquidity section within MD&A for further information.

This section summarizes the most significant impacts related to the COVID-19 pandemic that we have experienced to date, and we have included additional details as applicable throughout other sections of this report. Given that many of these impacts did not begin to be felt broadly across our businesses until the latter part of the first quarter of 2020, in some instances we have identified an impact during the quarter that we would attribute primarily to COVID-19 developments rather than other business or market factors. However, in future periods, depending on the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences, we anticipate that it will become more difficult to distinguish specific aspects of our operational and financial performance that are most directly related to COVID-19 from those that are more broadly influenced by ongoing macroeconomic, market and industry dynamics that may also be, to varying degrees, related to the COVID-19 pandemic and its consequences.

While factors related directly and indirectly to the COVID-19 pandemic have begunbeen impacting operations and financial performance at varying levels across all our businesses, the most significant financial impact to date has been at our Aviation segment and our GE Capital Aviation Services (GECAS) aircraft leasing business within our Capital segment. The COVID-19 pandemic is having a material adverse effect on the global airline industry, resulting in reduced flight schedules worldwide, an increased number of idle aircraft, lower utilization, workforce reductions and declining financial performance within the airline industry, as well as requests for government financial assistance by various industry participants. This has decreased demand for higher margin servicesservice revenues within our Aviation segment directly impacting our profitability and cash flows during the three months ended March 31, 2020. Our Healthcare segment experienced increased demand for certain types of products and services, including respiratory, computed tomography (CT),ventilators, monitoring solutions, x-ray, anesthesia and point-of-care ultrasound product lines, partially offset by decreased demand in other parts of the business whereas patients have postponed certain procedures and hospitals and other customers have deferred services amidst the COVID-19 pandemic.spending. Our other businesses were also adversely impacted by market developments, including delays or cancellations of new projects, new orders and related down payments. In addition, workplace, travel and supply chain disruptions have caused delays of deliveries and the achievement of other billing milestones directly impacting our profitability and cash flows for the threenine months ended March 31,September 30, 2020. We anticipate many of these impacts experienced in the latter part of first quarter of 2020 related to demand, profitability and cash flows will continue in future periods depending on the severity and duration of the pandemic. For additional details about impacts related to Aviation and GECAS, Healthcare and our other businesses, refer to the respective segment sections within MD&A.

In addition, financial, oilEach of GE's businesses and gas and other commodity markets, including interest rates and credit spreads, have been experiencing significant volatility, which had a material adverse impact on the market values of certain assets, such as our remaining equity interest in Baker Hughes and the value of our investment portfolios supporting our long-term insurance liabilities and pension obligations. In accordance with GAAP, we remeasure the values of our investment portfolio supporting our pension liabilities, our associated pension liabilities and our long-term insurance liabilities only annually, and our financial statements at March 31, 2020 therefore do not reflect the impact of the recent market conditions on these assets and obligations.

During the three months ended March 31, 2020, COVID-19 factors described above negatively impacted GE cash from operating activities (CFOA) and Industrial free cash flows (FCF)* by approximately $1 billion, GE Industrial profit by approximately $0.8 billion and GE Capital earnings by approximately $0.1 billion. Excluding restructuring of $0.1 billion, adjusted GE Industrial profit* was negatively impacted by $0.7 billion.

See the Consolidated Results, and Critical Accounting Estimates sections within MD&A, as well as Notes 3, 10 and 12 to the consolidated financial statements for further information.

WeCorporate are taking cost and cash actions to manage risk and proactively mitigate the financial impactsimpact from COVID-19.COVID-19, as supply and demand dynamics continue to shift. In 2020, we are targeting more than $2 billion in operational cost out and more than $3 billion in cash preservation actions across the company, including more than $1 billion in cost out and more than $2 billion in cash preservation actions inat Aviation, to right-size its cost structure and preserve its ability to serve customers. To date, we have realized about 75% of savings from actions at the total company level. During the nine months ended September 30, 2020, excluding business dispositions, we reduced consolidated headcount by approximately 15,600, including 8,800 at Aviation and 2,100 at Power.

At this time, GE cannot forecast the full duration and magnitude of COVID-19 impacts, or the pace of recovery from the COVID-19 pandemic across our end markets, operations, and supply chains. See the Risk Factors section in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 for further information about related risks and uncertainties.
*Non-GAAP Financial Measure

4 2020 1Q FORM 10-Q

MD&ACONSOLIDATED RESULTS

BioPharma.BioPharma. On March 31, 2020, we completed the sale of our BioPharma business within our Healthcare segment to Danaher Corporation for consideration of $21.1 billion, subject to customary working capitalCorporation. See the Segment Operations - Healthcare section and other post-close adjustments, and recognized a pre-tax gain of $12.3 billion ($11.1 billion after tax) in our consolidated Statement of Earnings (Loss). See Note 2 to the consolidated financial statements for further information.

Baker Hughes. Asset impairments. In the third quarter of 2020, we recognized non-cash pre-tax impairment charges of $0.4 billion related to property, plant and equipment and intangible assets at our Steam business within our Power segment due to our recent announcement to exit the new build coal power market. We will continue to monitor the operating results and cash flow forecasts for the remaining business. In the second quarter of 2020, we recognized a non-cash pre-tax impairment charge of $0.9 billion related to goodwill at our Additive reporting unit within our Aviation segment. The Steam and Additive charges were recorded within earnings from continuing operations at Corporate. We recognized anon-cash pre-tax unrealized lossimpairments of $5.7$0.2 billion ($4.6and $0.5 billion after tax) forduring the three and nine months ended March 31,September 30, 2020, respectively, on our investmentGECAS leasing portfolio. In the second quarter of 2020, we also recognized a non-cash pre-tax impairment charge of $0.8 billion related to goodwill in Baker Hughes, based on a share price of $10.50.our GECAS reporting unit within our Capital segment. See Segment Operations - Capital and Notes 27 and 38 for further information.

Debt offeringofferings and tender.tenders On April 22,. In the second quarter of 2020, we issued $6took a series of actions to enhance and extend our liquidity at both GE and GE Capital, issuing a total of $13.5 billion of GE Companylonger-dated debt and used the proceeds to complete a tender offer to purchase $4.2reducing near-term debt maturities by $10.5 billion, of GE senior notes with maturities ranging from 2022 to 2024. We intend to use the remaining proceeds$3 billion to repurchase, redeem or repay GE’s outstanding debt obligations, including other notes or commercial paper. These transactions will be leverage neutral and liquidity enhancing by extending our near-term industrial debt maturities. Additionally, on April 23, 2020, GE Capital, using proceeds from the repaymentend of 2021. See the intercompany loan by GE, completed a tender for $5.4 billionBorrowings section of its 2020 maturities. See Capital Resources and Liquidity section within MD&Aand Note 11 for further information.

FIRSTSEC investigation. As previously reported, we have been cooperating with the staff of the SEC on its investigation of legacy matters related to long-term service agreements, GE Capital’s run-off insurance operations and the goodwill impairment charge in 2018 related to GE’s Power business. In the third quarter of 2020, the SEC staff issued a “Wells notice” in connection with the portion of its ongoing investigation related to GE Capital’s run-off insurance operations, advising GE that the staff is considering recommending to the commissioners that the SEC bring a civil action against GE for possible violations of the securities laws. We have recorded a reserve of $100 million as of September 30, 2020 related to the investigation in its entirety, encompassing all matters that are under investigation. See Note 19 for further information.

4 2020 3Q FORM 10-Q

MD&ACONSOLIDATED RESULTS
THIRD QUARTER 2020 RESULTS. Consolidated revenues were $20.5$19.4 billion, down $1.7$3.9 billion for the quarter, primarily driven by decreased GE Industrial and GE Capital revenues. GE Industrial revenues decreased $1.5$3.6 billion (7%(17%), driven primarily by ourdecreases at Aviation and Power segments,Healthcare, partially offset by ourincreases at Renewable Energy segment.and Power. GE Capital revenues decreased $0.4 billion.

Continuing earnings (loss) per share was $0.72.$(0.13). Excluding gains (losses) on business dispositions, unrealized gains (losses), Steam asset impairments, non-operating benefit costs, restructuring and other charges and BioPharmaU.S. tax benefit,reform, Adjusted earnings per share* was $0.05.$0.06.

For the three months ended March 31,September 30, 2020, GE Industrial profit was $6.6$(1.3) billion and profit margins were 34.9%(7.2)%, up $5.5down $0.8 billion, driven primarily by the gain on sale of our BioPharma business of $12.3 billion,decreases at Aviation and Healthcare, partially offset by anincreases at Power and Renewable Energy, a larger unrealized loss in the quarter on our investment in Baker Hughes of $5.7$0.6 billion and legal reserves associated with the SEC investigation (see Note 19 for further information), partially offset by a decrease in goodwill impairments of $0.7 billion and lower interest and other financial charges of $0.5 billion. Adjusted GE Industrial organic profit* decreased $1.0$0.8 billion, (47%), primarily as a result of the impacts of COVID-19, particularly at our Aviation segment, as well as decreasespartially offset by increases at Power and Renewable Energy.our other industrial segments.

GE CFOA of continuing operationscash flows from operating activities (CFOA) was $(1.7)$(3.2) billion and $(0.6)$0.1 billion for the threenine months ended March 31,September 30, 2020 and 2019, respectively. GE CFOA decreased primarily due to higher cash used for working capital and lower net income, primarily due to COVID-19 impacts, compared to 2019,higher cash used for working capital and higher cash paid for taxes, partially offset by lower cash used forchanges in contract &and other deferred assets.assets, and increases in equipment project cost accruals and deferred income. GE Industrial free cash flows*flows (FCF)* were $(2.2)$(3.8) billion and $(1.2)$(1.6) billion for the threenine months ended March 31,September 30, 2020 and 2019, respectively. The decrease wasGE Industrial FCF decreased primarily due to the same decreaseslower net income and higher cash used for working capital, partially offset by changes in GE CFOA as noted above.contract and other deferred assets, increases in equipment project cost accruals and deferred income and a decrease in additions to property, plant and equipment and internal-use software. See the Capital Resources and Liquidity - Statement of Cash Flows section for further information.

Orders are contractual commitments with customers to provide specified goods or services for an agreed upon price.
GE INDUSTRIAL ORDERSThree months ended March 31GE INDUSTRIAL ORDERSThree months ended September 30Nine months ended September 30
(In billions)2020
2019
 
(In millions)(In millions)2020201920202019
Equipment$9.2
$10.0
Equipment$7,510 $11,257 $23,847 $32,582 
Services10.3
10.6
Services7,984 11,262 24,899 32,771 
Total orders(a)$19.5
$20.6
Total orders(a)$15,494 $22,519 $48,745 $65,352 
Total organic orders$19.6
$20.2
Total organic orders$15,497 $21,531 $48,971 $62,978 
(a) Included $1.1 billion and $1.0$0.8 billion related to BioPharma for the three months ended March 31,September 30, 2019, and $1.1 billion and $2.6 billion for the nine months ended September 30, 2020 and 2019, respectively.

For the three months ended March 31,September 30, 2020, orders decreased $1.1$7.0 billion (5%(31%) on a reported basis and decreased $0.6$6.0 billion (3%(28%) organically with growth at Power and Healthcare more than offset by double-digit declinesprimarily at Aviation, driven by declines in both commercial equipment and service orders due to COVID-19 and the 737 MAX grounding, and the impact of COVID-19,at Renewable Energy, Power, and Renewable Energy.Healthcare primarily due to decreases in equipment orders. Equipment orders were down $0.3$2.8 billion (3%(27%) organically and services orders were down $0.3$3.2 billion (3%(29%) organically.

For the nine months ended September 30, 2020, orders decreased $16.6 billion (25%) on a reported basis and decreased $14.0 billion (22%) organically with declines at Aviation, primarily driven by declines in both commercial equipment and service orders due to COVID-19 and the 737 MAX grounding, and at Power and Renewable Energy primarily due to decreases in equipment orders, partially offset by an increase at Healthcare. Equipment orders were down $6.4 billion (21%) organically and services orders were down $7.6 billion (23%) organically. Excluding BioPharma, orders decreased $0.8$14.2 billion (4%(23%) organically.

Backlog is unfilled customer orders for products and product services (expected life of contract sales for product services).
GE INDUSTRIAL BACKLOG (In billions)
March 31, 2020
December 31, 2019
March 31, 2019
 
GE INDUSTRIAL BACKLOG (In millions)
GE INDUSTRIAL BACKLOG (In millions)
September 30, 2020December 31, 2019September 30, 2019
Equipment$76.9
$79.0
$79.0
Equipment$71,139 $78,968 $80,019 
Services324.2
325.6
274.3
Services312,470 325,605 305,989 
Total backlog(a)$401.1
$404.6
$353.3
Total backlog(a)$383,609 $404,572 $386,008 
(a) Backlog as of March 31,September 30, 2020 excludes the BioPharma business due to its disposition in the first quarter of 2020. Backlog as of both December 31, 2019 and September 30, 2019 included $1.2 billion related to BioPharma.

As of March 31,September 30, 2020, backlog decreased $3.5$21.0 billion (1%(5%) from December 31, 2019, primarily driven by currency movementAviation due to a stronger U.S. dollarreduction in our Commercial Services backlog and cancellations of $1.2 billion,commercial engine orders, in addition to sales outpacing new orders. The reduction in Commercial Services reflects the cancellation of equipment unit orders, lower anticipated engine utilization, customer fleet restructuring and contract modifications. Power and Renewable Energy decreased due to sales outpacing new orders, and Healthcare decreased with the disposition of ourthe BioPharma business of $1.2 billion. Backlog decreased $2.4 billion and reductions(1%) from September 30, 2019, due to a decrease in equipment backlog of backlog slightly exceeding new additions,$8.9 billion (11%), primarily at Renewable Energy. Backlog increased $47.8 billion (14%) from March 31, 2019, due toAviation, Power and Healthcare, partially offset by an increase in services backlog of $49.9$6.5 billion (18%(2%), primarily at Aviation, partially offset by a decrease in equipment backlog of $2.2 billion (3%), primarily at Power. Excluding the BioPharma disposition, backlog increased $48.9decreased $1.2 billion (14%) from March 31,September 30, 2019.


*Non-GAAP Financial Measure

2020 1Q3Q FORM 10-Q 5

MD&ACONSOLIDATED RESULTS

Remaining performance obligation (RPO), a defined term under GAAP, is backlog excluding any purchase order that provides the customer with the ability to cancel or terminate without incurring a substantive penalty, even if the likelihood of cancellation is remote based on historical experience.penalty. We plan to continue reporting backlog as we believe that it is a useful metric for investors, given its relevance to total orders. See Note 9 to the consolidated financial statements for further information.
September 30, 2020 (In millions)
EquipmentServicesTotal
Backlog$71,139 $312,470 $383,609 
Adjustments(26,505)(130,438)(156,943)
Remaining performance obligation$44,634 $182,032 $226,666 
March 31, 2020 (In billions)
Equipment
Services
Total

   
Backlog$76.9
$324.2
$401.1
Adjustments(31.7)(129.0)(160.7)
Remaining performance obligation$45.2
$195.2
$240.4

Adjustments to reported backlog of $160.7$156.9 billion as of March 31,September 30, 2020 are largely driven by adjustments of $149.9$148.4 billion in our Aviation segment: (1) backlog includes engine contracts for which we have received purchase orders that are cancelable. We have included these in backlog as our historical experience has shown no net cancellations, as any canceled engines are typically moved by the airframer to other program customers;cancelable; (2) our services backlog includes contracts that are cancelable without substantive penalty, primarily time and materials contracts; (3) backlog includes engines contracted under long-term service agreements, even if the engines have not yet been put into service. These adjustments to reported backlog are expected to be satisfied beyond one year.
REVENUESThree months ended September 30Nine months ended September 30
(In millions)2020201920202019
Consolidated revenues$19,417 $23,360 $57,690 $68,976 
Equipment9,625 10,996 26,928 30,873 
Services8,293 10,524 25,901 32,386 
GE Industrial revenues$17,918 $21,519 $52,828 $63,259 
GE Capital revenues$1,681 $2,097 $5,449 $6,645 
REVENUESThree months ended March 31
(In billions)2020
2019
   
Consolidated revenues$20.5
$22.2
   
Equipment9.2
9.6
Services9.7
10.7
GE Industrial revenues$18.8
$20.3
   
GE Capital revenues$1.9
$2.2

For the three months ended March 31,September 30, 2020, consolidatedConsolidated revenues were down $1.7$3.9 billion, primarily driven by decreased GE Industrial revenues of $1.5$3.6 billion and decreased GE Capital revenues of $0.3 billion. The overall foreign currency impact on consolidated revenues was a decrease of $0.2$0.4 billion.
GE Industrial revenues decreased $1.5$3.6 billion (7%(17%), aswith decreases at Aviationin services and Power were partially offset by an increase at Renewable Energy.equipment. The decrease in services was driven by the impact of COVID-19, resulting in a decrease in commercial servicesprimarily at Aviation, due to lower commercial spare part shipments, and decreased shop visits as well as aand the cumulative impact of changes in billing and cost assumptions in our long-term service agreements. The decrease in Gas Power servicesequipment was primarily at Aviation, due to declinesfewer commercial install and spare engine unit shipments; and at Healthcare, due to the disposition of the BioPharma business; partially offset by increases in transactionalPower related to higher extended scope shipments at Gas Power; and upgrades revenues. ThisRenewable Energy, from more wind turbine shipments. The decrease in industrial revenues included the net effects of dispositions of $0.4 billion and the effects of a stronger U.S. dollar of $0.2$1.1 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* decreased $1.0$2.5 billion (5%(12%), with equipment revenues flat and a decrease in services revenues of $1.0$2.1 billion (9%(20%) and equipment revenues of $0.4 billion (4%). GE Industrial organic revenues* decreased at Aviation, partially offset by increases at all other industrial segments. Healthcare organic revenue* increased $0.4 billion (10%) due to higher volume at Healthcare Systems (HCS).
GE Capital revenues decreased $0.4 billion (20%), as a result of volume declines, primarily at GECAS related to lower interest income attributable to the sale of PK Air Finance and lower rental revenue, and lower gains.

For the nine months ended September 30, 2020, Consolidated revenues were down $11.3 billion, driven by decreased GE Industrial revenues of $10.4 billion and decreased GE Capital revenues of $1.2 billion.
GE Industrial revenues decreased $10.4 billion (16%), with decreases in services and equipment. The decrease in services was primarily at Aviation, driven by lower commercial spare part shipments, decreased shop visits and the cumulative impact of changes in billing and cost assumptions in our long-term service agreements; as well as Power, due to declines in transactional part sales and upgrades at Gas Power. The decrease in equipment was primarily at Aviation, due to fewer commercial install and spare engine unit shipments; and at Healthcare, due to the disposition of the BioPharma business; partially offset by increases at Renewable Energy, primarily from Onshore Wind, with more wind turbine shipments than in the prior year; and Gas Power, due to an increase in Heavy-Duty gas turbine unit shipments. This decrease included the net effects of dispositions of $2.3 billion and the effects of a stronger U.S. dollar of $0.5 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* decreased $7.7 billion (13%), with a decrease in services revenues of $6.1 billion (19%) and a decrease in equipment revenues of $1.6 billion (5%). GE Industrial organic revenues* decreased at Aviation and Power, partially offset by increases at Renewable Energy and Healthcare. Excluding the BioPharma disposition, GE Industrial organic revenues* decreased $1.1$7.8 billion (6%(13%).
GE Capital revenues decreased $0.3$1.2 billion (14%(18%), primarily due toas a result of volume declines, primarily at GECAS related to lower interest income attributable to the sale of PK Air Finance and lower rental revenue, lower gains and higher mark-to-market effects and impairments as a result of COVID-19 and related market impacts.
EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHAREThree months ended September 30Nine months ended September 30
(In millions; per-share in dollars and diluted)2020201920202019
Continuing earnings (loss)$(1,155)$(1,325)$2,991 $(707)
Continuing earnings per share (loss)$(0.13)$(0.15)$0.32 $(0.08)



*Non-GAAP Financial Measure
6 2020 3Q FORM 10-Q

EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHAREThree months ended March 31
(In billions; per-share in dollars and diluted)2020
2019
   
Continuing earnings$6.3
$0.9
Continuing earnings per share$0.72
$0.10

MD&ACONSOLIDATED RESULTS
For the three months ended March 31,September 30, 2020, consolidatedConsolidated continuing earnings increased $5.4$0.2 billion due to a decrease in GE Industrial profit of $0.8 billion, more than offset by a decrease in GE Capital losses of $0.6 billion and a decrease in GE provision for income taxes of $0.4 billion.
GE Industrial profit decreased $0.8 billion driven by decreases at Aviation and Healthcare and increases at Power and Renewable Energy, a larger unrealized loss in the quarter on our investment in Baker Hughes of $0.6 billion, impairment charges of $0.4 billion related to property, plant and equipment and intangible assets at our Steam business and legal reserves associated with the SEC investigation (see Note 19 for further information), partially offset by lower goodwill impairments of $0.7 billion and lower interest and other financial charges of $0.5 billion. GE Industrial profit margin was (7.2)%, a decrease of 510 basis points primarily due to the same net decreases as described above. Adjusted GE Industrial profit* was $1.0 billion, a decrease of $0.8 billion organically*, due to a decrease at Aviation, partially offset by increases at Power, Healthcare, and Renewable Energy. Adjusted GE industrial profit margin* was 5.6%, a decrease of 310 basis points organically*, primarily due to the same net decreases as described above. At Aviation, the primary drivers were lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits in our service agreements. At Power, the primary drivers were higher equipment revenues and better project execution in equipment contracts in Gas Power and improved cost productivity. At Healthcare, the increase was primarily due to cost reductions and increases in HCS volume, and at Renewable Energy, the increase was due to improved pricing and cost deflation at Onshore Wind and lower cost across the segment.
GE Capital continuing losses decreased $0.6 billion primarily due to the nonrecurrence of a $1.0 billion pre-tax charge identified through the completion of our 2019 annual insurance premium deficiency review, higher tax benefits and lower excess interest costs, partially offset by volume declines, lower gains and higher mark-to-market effects and impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts. Gains were insignificant and $0.2 billion in the third quarters of 2020 and 2019, respectively, which primarily related to sales of GECAS aircraft and engines resulting in gains that were insignificant and $0.1 billion in the third quarters of 2020 and 2019, respectively.

For the nine months ended September 30, 2020, Consolidated continuing earnings increased $3.7 billion due to an increase in GE Industrial profit of $5.5$4.1 billion, partially offset byan increase in GE Capital losses of $1.0 billion and a decrease in GE Capital earningsprovision for income taxes of $0.2$0.3 billion.
GE Industrial profit increased $5.5$4.1 billion driven primarily by the gain on the sale of our BioPharma business of $12.3$12.4 billion, decreased goodwill impairments of $0.6 billion, and lower interest and other financial charges of $0.6 billion, partially offset by andecreases at our industrial segments, a larger unrealized loss on our investment in Baker Hughes of $5.7 billion.$4.5 billion, impairment charges of $0.4 billion related to property, plant and equipment and intangible assets at our Steam business, and legal reserves associated with the SEC investigation (see Note 19 for further information). GE Industrial profit margin was 8.3%, an increase of 790 basis points, primarily due to the same net increases as described above. Adjusted GE Industrial profit* was $1.1$1.6 billion, a decrease of 47%70% organically*, primarily due to decreases at our Aviation, Power and Renewable Energy segments. GE Industrial profit margin was 34.9%, an increase from 5.3%, driven primarily by the gain on the sale of our BioPharma business,segments, partially offset by an unrealized loss on our investmentincrease at Healthcare and a decrease in Baker Hughes described above.Adjusted corporate operating costs*. Adjusted GE industrial profit margin* was 5.8%3.0%, a decrease of 450570 basis points organically*, primarily due to declines at our Aviation, Power, and Renewable Energy segments.the same net decreases as described above. At Aviation, the primary drivers were lower volume on commercial services volumespare part and commercial spare parts demand as a resultengine shipments, and decreased shop visits and net unfavorable changes of COVID-19.$0.9 billion to the estimated profitability in its long-term service agreements. At Power, the primary drivers were supply chain constraintslower revenues and cost overruns on services agreements. Additionally, ata charge of approximately $0.1 billion related to an under-performing JV, partially offset by better equipment project execution in Gas Power. At Renewable Energy, declineshigher sales volume at Onshore Wind and the favorable impact of cost reduction measures were largely due to project fulfillment delays and execution challenges, as well asmore than offset by the nonrecurrence of a $0.1 billion non-cash gain from the termination of two Offshore Wind contracts in the first quarter of 2019. At Healthcare, the primary drivers were cost reductions and increased demand for HCS products used directly in response to COVID-19, partially offset by decreases in Pharmaceutical Diagnostics (PDx) volume.
GE Capitalcontinuing earnings decreased $0.2losses increased $1.0 billion primarily due to an impairment of goodwill, volume declines, higher mark-to-market effects and other impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts, lower gains, debt tender costs and the nonrecurrence of a 2019 tax reform enactment adjustment. These increased losses were partially offset by the nonrecurrence of a $1.0 billion pre-tax charge identified through the completion of our 2019 annual insurance premium deficiency review, higher tax benefits including the tax benefit related to the BioPharma sale and lower excess interest cost. Gains were $0.2$0.3 billion and $0.5 billion in the first quarters of bothnine months ended September 30, 2020 and 2019, respectively, which primarily related to sales of GECAS aircraft and engines resulting in gains of $0.2 billion and $0.3 billion in the nine months ended September 30, 2020 and 2019, respectively, and the nonrecurrence of a sale of an equity method investment resulting in a gain of $0.1 billion in both 2020 and 2019.2019 at Energy Financial Services (EFS).


*Non-GAAP Financial Measure

6 2020 1Q FORM 10-Q

MD&ACONSOLIDATED RESULTS

AVIATION AND GECAS 737 MAX. Aviation develops, produces, and sells LEAP aircraft engines to Boeing, Airbus and COMAC through CFM International (CFM), a company jointly owned by GE and Safran Aircraft Engines, a subsidiary of the Safran Group of France. The LEAP-1B engine is the exclusive engine for the Boeing 737 MAX. In March 2019, global regulatory authorities ordered a temporary fleet grounding of the Boeing 737 MAX. During the second quarter of 2019, Boeing announced a temporary reduction in the 737 MAX production rate, and CFM reduced its production rate for the LEAP-1B to meet Boeing's revised aircraft build rate. In December 2019, Boeing announced that it would temporarily suspend production of the 737 MAX beginning in January 2020. In MarchAviation commercial equipment backlog as of September 30, 2020 includes approximately 10,000 LEAP-1A and 1B engines, including the impact of approximately 1,100 LEAP-1B unit order cancellations since year-end. See the Segment Operations - Aviation section for further information. During 2020, CFM and Boeing reached an agreement to align production rates for 2020 and secure payment terms for engines delivered in 2019 and 2020, net of progress collections.collections, and accordingly received net payments of $0.2 billion during the three months ended September 30, 2020. In May 2020, Boeing resumed production of the 737 MAX. CFM and Boeing continue to work closely to ensure a successful reentry into service, with a strong commitment to safety while navigating near term industry disruption.

*Non-GAAP Financial Measure
2020 3Q FORM 10-Q 7

MD&ACONSOLIDATED RESULTS
As of March 31,September 30, 2020, GECAS owned 29 of these aircraft, 26 of which are contracted for lease to various airlines that remain obligated to make contractual rental payments. In addition, GECAS has made pre-delivery payments to Boeing related to 14377 of these aircraft on order and has made financing commitments to acquire a further 1817 aircraft under purchase and leaseback contracts with airlines. During April 2020, GECAS agreed with Boeing to restructure its 737 MAX orderbook including previously canceled positions, resulting in the cancellation of 69 orders with 8277 orders now remaining.

As of March 31,September 30, 2020, we havehad approximately $2.5 billion of net assets ($4.84.4 billion of assets and $2.3$1.8 billion of liabilities) related to the 737 MAX program that primarily comprisecomprised Aviation accounts receivable offset by progress collections and GECAS pre-delivery payments and owned aircraft subject to lease. No impairment charges were incurred related to the 737 MAX aircraft and related balances, as we continue to believe these assets are fully recoverable.recoverable over their contractual or useful lives. We continue to monitor 737 MAX return to service and return to delivery developments with our airline customers, lessees and Boeing.

LEAP continues to be a strong engine program for us, and we delivered 272622 engines for Boeing and Airbus platforms in the first quarter ofnine months ended September 30, 2020, and 3,662over 4,000 engines since inception.

SEGMENT OPERATIONS.Segment revenues include sales of products and services by segment. Industrial segment profit is determined based on performance measures used by our Chief Operating Decision Maker (CODM), who is our Chief Executive Officer (CEO), to assess the performance of each business in a given period.

Please referRefer to our Annual Report on Form 10-K for the year ended December 31, 2019, 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 SEGMENTSThree months ended September 30Nine months ended September 30
(In millions)20202019V%20202019V%
Power$4,025 $3,926 %$12,206 $13,224 (8)%
Renewable Energy4,525 4,425 %11,224 10,590 %
Aviation4,919 8,109 (39)%16,196 23,940 (32)%
Healthcare4,565 4,923 (7)%13,185 14,540 (9)%
Capital1,681 2,097 (20)%5,449 6,645 (18)%
Total segment revenues19,716 23,480 (16)%58,260 68,938 (15)%
Corporate items and eliminations(299)(120)U(570)39 U
Consolidated revenues$19,417 $23,360 (17)%$57,690 $68,976 (16)%
Power$150 $(144)F$(19)$84 U
Renewable Energy(98)F(493)(469)(5)%
Aviation356 1,718 (79)%681 4,764 (86)%
Healthcare765 974 (21)%2,212 2,714 (18)%
Capital(52)(645)92 %(1,558)(599)U
Total segment profit (loss)1,224 1,806 (32)%823 6,493 (87)%
Corporate items and eliminations(1,606)(808)(99)%5,917 (2,013)F
GE goodwill impairments(740)F(877)(1,484)41 %
GE interest and other financial charges(313)(791)60 %(1,079)(1,693)36 %
GE non-operating benefit costs(603)(562)(7)%(1,815)(1,684)(8)%
GE benefit (provision) for income taxes143 (229)F22 (327)F
Earnings (loss) from continuing operations attributable to GE common shareholders(1,155)(1,325)13 %2,991 (707)F
Earnings (loss) from discontinued operations, net of taxes(35)(8,093)100 %(206)(5,212)96 %
Less net earnings attributable to noncontrolling interests, discontinued operations46 U(2)58 U
Earnings (loss) from discontinued operations, net of tax and noncontrolling interest(35)(8,140)100 %(204)(5,270)96 %
Consolidated net earnings (loss) attributable to the GE common shareholders$(1,190)$(9,465)87 %$2,787 $(5,977)F
SUMMARY OF REPORTABLE SEGMENTSThree months ended March 31
(In millions)2020
2019
V%
 
     
Power$4,025
$4,617
(13)%
Renewable Energy3,194
2,538
26
%
Aviation6,892
7,954
(13)%
Healthcare4,727
4,683
1
%
Capital1,923
2,227
(14)%
      Total segment revenues20,761
22,019
(6)%
Corporate items and eliminations(237)183
U
 
Consolidated revenues$20,524
$22,202
(8)%





 
Power$(129)$110
U
 
Renewable Energy(302)(187)(61)%
Aviation1,005
1,660
(39)%
Healthcare896
781
15
%
Capital(30)135
U
 
      Total segment profit (loss)1,441
2,500
(42)%
Corporate items and eliminations6,064
(228)F
 
GE interest and other financial charges(370)(520)29
%
GE non-operating benefit costs(616)(564)(9)%
GE benefit (provision) for income taxes(187)(268)30
%
Earnings (loss) from continuing operations attributable to GE common shareholders6,332
920
F
 
Earnings (loss) from discontinued operations, net of taxes(178)2,663
U
 
Less net earnings attributable to noncontrolling interests, discontinued operations(2)34
U
 
Earnings (loss) from discontinued operations, net of tax and noncontrolling interest(176)2,629
U
 
Consolidated net earnings (loss) attributable to the GE common shareholders$6,156
$3,549
73
%



2020 1Q FORM 10-Q POWER.7

MD&ASEGMENT OPERATIONS

POWER
We continue to execute for our customers through COVID-19, prioritizing safety first and foremost. From an operations perspective, we are monitoring the impacts of COVID-19 on near-term demand and the impact it is having onworking within our operations, including the supply chain and with our abilitysuppliers to catch up on parts and project scope that were delayed as a result of COVID-19. Despite difficult travel and customer site restrictions, we continue to service our customers' installed base.base and expect to complete roughly 95% of all planned outages in the year. From a market perspective, both gas-based electricity generation and GE gas turbine utilization has remained stable. Our ability to close transactions, in the near term will become more challenging due to the impact of lower oil prices on certainparticularly services parts & upgrades, has been impacted by constrained customer budgets the payback of investments and upgrades at lower gas prices, and access to financing for new projects. We are seeing the impact on our suppliers and within our supply chain, which has resulted in delays in parts and equipment output. In addition, the servicing of our customers' assets has been delayed due to traveloil prices and country restrictions.economic slowdown, especially in Gas Power. Although there may be obstaclesmarket challenges in the near term, we believe the long-term outlook for thegas will play a critical role of gas in the powerenergy transition and our view of the market has not materially changed.

changed, albeit timing on new orders is harder to forecast.

Power is continuingcontinues to right size its business to better align with market demand and driving its businesses with an operational rigor and discipline that is focused on its customers’ lifecycle experience. WeIn Gas Power, we continue to partner withsize the business for a 25-30 GW market, although acknowledge that the size any given year can vary. We remain focused on our customers, working through field service travel disruptionsunderwriting discipline and risk management to effectively service their fleets to maintain operability.As a result of expected volume declines from COVID-19 in the near term,ensure we are taking several measuressecuring deals that meet our financial hurdles and we have a high confidence to offset these pressures. During the first quarter ofdeliver for our customers.
8 2020 Power had approximately 700 headcount reductions and notified approximately 1,300 contractors. In addition, we executed on a hiring freeze, are accelerating planned employee reductions where possible, and are initiating meaningful incremental headcount reduction plans in line with the demand profile.3Q FORM 10-Q


MD&ASEGMENT OPERATIONS
Looking ahead, we anticipate the power market to continue to be impacted by overcapacity in the industry, increased 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. Market factors such as increasing energy efficiency and renewable energy penetration continue to impact long-term demand.

While As such, we navigate the near-term impacts of the COVID-19 pandemic,announced this quarter that we will be exiting the new build coal power market, while continuing to service our customers' installed base.

We continue to invest in new product development, such as our HA-Turbines, and upgrades as these are critical to our customers and the long-term strategy of the business. Our fundamentals remain strong with approximately $85$79 billion in backlog and a gas turbine installed base greater than 7,000 units.units, including approximately 1,800 units under long-term service agreements.
Three months ended September 30Nine months ended September 30
OrdersSalesOrdersSales
(In units)20202019202020192020201920202019
GE Gas Turbines17 17 11 12 32 52 43 32 
Heavy-Duty Gas Turbines(a)15 15 23 42 29 20 
HA-Turbines(b)15 12 
Aeroderivatives(a)10 14 12 
GE Gas Turbine Gigawatts(c)3.4 3.1 6.0 9.8 
(a) Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines.
(b) HA-Turbines are a subset of Heavy-Duty Gas Turbines.
(c) Gigawatts reported associated with financial orders in the periods presented.
 Three months ended March 31
 Orders Sales
(In units)2020
2019
 2020
2019
      
GE Gas Turbines9
15
 7
9
Heavy-Duty Gas Turbines(a)6
11
 5
7
HA-Turbines(b)2
3
 4
1
Aeroderivatives(a)3
4
 2
2
GE Gas Turbine Gigawatts(c)2.2
2.1
   
(a) Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines.
(b) HA-Turbines are a subset of Heavy-Duty Gas Turbines.
(c) Gigawatts reported associated with financial orders in the periods presented.
(Dollars in millions)September 30, 2020December 31, 2019September 30, 2019
Equipment$16,734 $17,661 $18,980 
Services62,562 67,640 67,806 
Total backlog$79,295 $85,302 $86,787 
Three months ended September 30Nine months ended September 30
2020201920202019
Equipment$814 $1,252 $2,658 $4,328 
Services2,574 2,612 7,712 8,113 
Total orders$3,388 $3,864 $10,370 $12,442 
Gas Power$2,940 $2,732 $8,876 $9,242 
Power Portfolio1,085 1,194 3,330 3,982 
Total segment revenues$4,025 $3,926 $12,206 $13,224 
Equipment$1,595 $1,434 $4,589 $4,473 
Services2,430 2,492 7,617 8,751 
Total segment revenues$4,025 $3,926 $12,206 $13,224 
Segment profit (loss)$150 $(144)$(19)$84 
Segment profit margin3.7 %(3.7)%(0.2)%0.6 %
(In billions)   March 31, 2020
March 31, 2019
      
Equipment   $18.2
$19.1
Services   66.9
66.8
Total backlog   $85.1
$85.9
    Three months ended March 31
( Dollars in billions)     2020
 2019
 
          
Equipment     $1.5
 $1.0
 
Services     2.6
 2.7
 
Total orders     $4.1
 $3.7
 
Gas Power     $2.9
 $3.3
 
Power Portfolio     1.2
 1.4
 
Total segment revenues     $4.0
 $4.6
 
Equipment     $1.5
 $1.6
 
Services     2.5
 3.0
 
Total segment revenues     $4.0
 $4.6
 
          
Segment profit (loss)     $(0.1) $0.1
 
          
Segment profit margin     (3.2)%2.4
%


8 2020 1Q FORM 10-Q

MD&ASEGMENT OPERATIONS

For the three months ended March 31,September 30, 2020, segment orders were up $0.4down $0.5 billion (12%), segment revenues were down $0.6up $0.1 billion (13%(3%) and segment profit was down $0.2up $0.3 billion.
Backlog as of March 31, 2020Orders decreased $0.7$0.4 billion (1%) due to a decrease in equipment backlog.
Orders increased $0.5 billion (14%(12%) organically, primarily due to an increasedecreases in SteamGas Power Heavy-Duty Gas Turbine equipment orders at Power Portfolio and services orders.
Revenues increased $0.1 billion (3%) organically*, primarily due to increases in Gas Power equipment orders duerevenues related to incremental power planthigher extended scope on unit orders,shipments in the quarter, partially offset by a decreasedecreases in Heavy-Duty Gas Turbine unit orders.
Revenues decreased $0.5 billion (12%) organically*, Power services primarily duerelated to decreases in servicesupgrades. Steam equipment revenues at Gas Power and Steam services at Power Portfolio. Services revenues at Gas Poweralso decreased due to delays in planned outages and transactional part sales due to COVID-19 and lower revenues on upgrades, primarily in the Middle East, where low oil prices are impacting customer budgets.driven by project timing.
Profit decreased $0.2increased $0.3 billion organically* due to lowerhigher Gas Power equipment revenues, as well as supply chain constraintsbetter equipment project execution in Gas Power equipment contracts, and cost overruns on service agreements, partially offset by improved cost productivity across Gas Power and Power Portfolio driven by continued efforts to right size the business.

For the nine months ended September 30, 2020, segment orders were down $2.1 billion (17%), segment revenues were down $1.0 billion (8%) and segment profit was down $0.1 billion.
Backlog as of September 30, 2020 decreased $6.0 billion (7%) and $7.5 billion (9%) from December 31, 2019 and September 30, 2019, respectively, primarily driven by sales outpacing new orders.
Orders decreased $1.9 billion (16%) organically, primarily due to decreases in Gas Power Heavy-Duty Gas Turbine unit and services orders and Steam equipment orders.


*Non-GAAP Financial Measure
2020 3Q FORM 10-Q 9

MD&ASEGMENT OPERATIONS
Revenues decreased $0.8 billion (6%) organically*, primarily due to decreases in Gas Power services revenues, primarily related to decreases in transactional part sales and upgrades, partially offset by increases in Gas Power equipment revenues related to 9 more Heavy-Duty gas turbine unit shipments. Steam equipment and service revenues also decreased.
Profit decreased $0.1 billion organically* due to lower revenues, a charge of approximately $0.1 billion related to an under-performing JV in China at Gas Power and a quality reserve at Power Portfolio on the legacy product line that we have since exited in Power Conversion, partially offset by better equipment project execution in Gas Power equipment contracts and continued efforts to right size the business across Gas Power and Power Portfolio.

RENEWABLE ENERGY
WeENERGY. During the third quarter of 2020, our manufacturing locations and long-term project sites returned to pre-COVID-19 capacity levels and operations, respectively. While we do not believe the long-term outlook for renewable energy products and services has materially changed, we are monitoring the impact of COVID-19the pandemic on the renewable energy industry, including electricity consumption forecasts and customer capital expenditure levels, supply chain, availability of financing and our ability to execute on equipment and long-term projects, including the impact of possible customer related delays. While we have observed delays in equipment output at several of our manufacturing facilities, we continue to service our customer assets absent any specific country or other restrictions. In response to expected near-term volume declines from COVID-19,in certain of our businesses, we initiatedimplemented additional cost reduction measures, restructuring and cash preservation actions.

TheOur businesses comprise Onshore Wind (including LM Wind), Grid Solutions equipment and services, Hydro, Offshore Wind and Hybrid Solutions. We continue to observe growth across the global onshore wind market together with a positive impact on deliveries and installations in the U.S. continues to see a positive impact from the Production Tax Credit (PTC) cycle and customer preference shifting to larger, more efficient units to drive down costs and compete with other power generation options. Despite the competitive nature of the market, onshore wind order pricing has stabilized dueglobally. In response to demand caused by the progressiverisk of COVID-19 impacting the timing of project completion, the phase-down of U.S. PTCs in the U.S., which has recently beenwas extended by onean additional year allowing installations in 2021 and 2022 to include projects meeting certain criteria by 2020 that will be completed throughqualify for a 100% and 80% PTC, respectively. Under the current legislation, the PTC phase-down concludes in 2024. We expect to continue high levels of production to continue for 2020 and 2021 deliveries at Onshore Wind and are closely monitoring our execution during this period including risks of delivery delays and possible project postponements due to COVID-19 or otherwise.period.

The grid market continues to beremains challenging as we continue to experience order declinespricing pressure in the High Voltage Direct Current (HVDC) and High Voltage (HV) product lines. While we have experienced order declines in both these product lines, we announced in the third quarter of 2020, that Grid has been awarded HVDC scope for a 1.4GW offshore wind project in the United Kingdom. Both the Grid Solutions equipment and services (Grid) and Hydro businesses are executing their turnaround plans.

New product introductions remain important to our onshore and offshore customers who are demonstrating the willingness to adopt the new technology of larger turbines that decrease the levelized cost of energy. We continue to focus on cost reduction initiatives of our products, in-sourcing blade production and developing larger, more efficient turbines like the Haliade-X (Offshore Wind) and the 5MW Cypress (Onshore Wind). Final, for which we have observed significant market interest, and cost reduction initiatives over these products and our broader portfolio. We are preparing for large scale production of Haliade-X and expect it to receive certification in the fourth quarter of 2020. During the third quarter of 2020, we completed delivery of the Haliade-X is expectedfirst Cypress units and have reported more than 700 of these units in the second half of 2020.backlog.
Three months ended September 30Nine months ended September 30
OrdersSalesOrdersSales
(In units)20202019202020192020201920202019
OnshoreWind Turbines953 1,104 1,170 1,128 2,336 3,058 2,731 2,285 
Wind Turbine Megawatts3,251 3,413 3,366 3,148 7,751 8,747 7,770 6,392 
Repower units75 318 300 266 199 912 876 643 
 Three months ended March 31
 Orders Sales
(In units)2020
2019
 2020
2019
      
Onshore     
Wind Turbines738
970
 731
353
Wind Turbine Megawatts2,333
2,664
 2,093
988
Repower6
100
 219
156
(Dollars in millions)September 30, 2020December 31, 2019September 30, 2019
Equipment$15,734 $16,297 $16,423 
Services10,767 11,233 10,940 
Total backlog$26,501 $27,530 $27,363 
Three months ended September 30Nine months ended September 30
2020201920202019
Equipment$3,488 $4,271 $8,631 $10,125 
Services493 745 1,404 2,079 
Total orders$3,981 $5,016 $10,036 $12,204 
Onshore Wind$3,303 $3,193 $7,914 $7,084 
Grid Solutions equipment and services936 991 2,587 2,843 
Hydro, Offshore Wind and other287 241 722 663 
Total segment revenues$4,525 $4,425 $11,224 $10,590 
Equipment$3,771 $3,609 $9,068 $8,457 
Services754 816 2,155 2,133 
Total segment revenues$4,525 $4,425 $11,224 $10,590 
Segment profit (loss)$$(98)$(493)$(469)
Segment profit margin0.1 %(2.2)%(4.4)%(4.4)%
(In billions)   March 31, 2020
March 31, 2019
      
Equipment   $15.8
$15.6
Services   10.7
9.6
Total backlog   $26.5
$25.2
    Three months ended March 31 
(In billions)     2020
 2019
 
          
Equipment     $2.7
 $3.0
 
Services     0.4
 0.5
 
Total orders     $3.1
 $3.5
 
Onshore Wind     $2.1
 $1.4
 
Grid Solutions equipment and services     0.8
 0.9
 
Hydro, Offshore Wind and other     0.2
 0.2
 
Total segment revenues     $3.2
 $2.5
 

*Non-GAAP Financial Measure

102020 1Q3Q FORM 10-Q9

MD&ASEGMENT OPERATIONS


   Three months ended March 31 
(Dollars in billions)     2020
 2019
 
          
Equipment     $2.6
 $2.0
 
Services     0.6
 0.6
 
Total segment revenues     $3.2
 $2.5
 
          
Segment profit (loss)     $(0.3) $(0.2) 
          
Segment profit margin     (9.5)%(7.4)%

For the three months ended March 31,September 30, 2020, segment orders were down $0.4$1.0 billion (13%(21%), segment revenues were up $0.7$0.1 billion (26%(2%) and segment profit was up $0.1 billion.
Orders decreased $0.9 billion (18%) organically. Onshore Wind decreased driven by the phase down of the U.S. PTC cycle and lower repower orders. Offshore Wind decreased primarily from the nonrecurrence of the Offshore EDF project.
Revenues increased $0.2 billion (4%) organically*, with higher revenue from 42 more wind turbine shipments, or 7% more megawatts shipped, and 34 more repower units than in the prior year at Onshore Wind. Revenue decreased at Hydro, primarily related to lower volume.
Profit increased $0.1 billion (61%organically*, primarily due to improved pricing and cost deflation at Onshore Wind and lower cost across the segment, partially offset by the impact of higher volume of lower margin products at Onshore Wind.

For the nine months ended September 30, 2020, segment orders were down $2.2 billion (18%), segment revenues were up $0.6 billion (6%) and segment profit was lower (5%).
Backlog as of MarchSeptember 30, 2020 decreased $1.0 billion (4%) and $0.9 billion (3%) from December 31, 2020 increased $1.3 billion (5%) driven by higher services backlog associated with a larger2019 and September 30, 2019, respectively. This decrease is primarily attributable to the phase down of the U.S. PTC cycle resulting in deliveries at Onshore Wind installed equipment base and increased equipment backlog at Onshore and Offshore Wind, partially offset by foreign currency translationin North America exceeding new orders and lower orders at Grid, primarily as a result of increased commercial selectivity in certain product lines. These decreases were partially offset by higher backlog in other Onshore regions driven primarily by orders for the new Cypress platform, and Hydro.Hydro, primarily in the U.S.
Orders decreased $0.4$1.9 billion (11%(16%) organically, primarily due to lower Onshore Wind turbine and repower unit orders associated with the nonrecurrence of a large Grid Automated Control Systems (ACS) order and lower Wind orders, primarily from the impact of U.S. PTCsPTC cycle compared to the prior year.year, the nonrecurrence of the Offshore EDF project in the prior year, and lower orders at Grid.
Revenues increased $0.7$0.9 billion (28%(9%) organically*, primarily from 378Onshore Wind with 446 more wind turbine shipments on a unit basis, or 112% more megawatts shipped, than in the prior year, partially offset by lower Grid revenues, primarily due to COVID-19.
Profit of $(0.3) billion decreased $0.1 billion (66%(11%) organically*, primarily due to as the impact of higher sales volume at Onshore Wind more thanand the favorable impact of cost reduction measures was offset by project execution losses, costs associated with new product introductions and lower sales volume, primarily at Grid due to supply chain and project fulfillment disruptions associated with COVID-19, as well as the nonrecurrence of a $0.1 billion non-cash gain from the termination of two Offshore Wind contracts in the first quarter of 2019.


AVIATION
AVIATION. The global COVID-19 pandemic is havingcontinues to have a material adverse effect on the global airline industry. A key underlying driver of Aviation’s commercial engine and services businesses is global passengercommercial air travel,traffic, which in turn is driven by economic activity and consumer and business propensity to travel. The COVID-19Since the beginning of the pandemic evolved rapidly in Marchthe first quarter of 2020, and resultedwe have seen varied levels of recovery in governmentglobal markets. Government travel restrictions, public health advisories, individuals' propensity to travel and related declinescontinued cases of the virus have all impacted the level of air travel. Due to the global airline industry contraction, Aviation’s airline and airframe customers are taking measures to address reduced demand, which, in economic activity. These factors caused a significant drop in passenger air traffic,turn, continue to materially impact Aviation’s business operations and asfinancial performance. As a result, airlines have grounded their fleets and, in many cases, completely ceased passenger operations.our long-term service agreement billings decreased approximately 50% from the prior year. Aviation is closely monitoring government actions and economic and industry forecasts, although such forecasts continue to evolve and reflect the uncertainty about the severity and duration of the decline in passengercommercial air traffic. For example,Aviation regularly tracks global departures, which as of September 30, 2020, were approximately 40% below the International Air Transport Association (IATA)pre-COVID-19 baseline and have remained relatively flat in April 2020 forecasted a 48% reduction in revenue passenger kilometers (RPK) for the full year 2020 compared to 2019, lowering a prior forecast from March 2020 of a 38% reduction based on updated assessments about the depth of the economic impact and speed of the recovery in passenger air traffic.October. More broadly, we are in frequent dialogue with our airline and airframe customers about the outlook for passengercommercial air travel, new aircraft production, and after-market services. DueGiven the current trend, we expect domestic travel routes primarily served by narrowbody aircraft to recover before long-haul, international travel routes which are primarily served by widebody aircraft. However, Aviation continues to estimate the global airline industry contraction, Aviation’s airlineduration of the market recovery to be prolonged over multiple years dependent on various factors, including travelers' safety concerns, containment of COVID-19, medical treatment progress, and airframe customers are taking measures to address reduced demand, which, in turn, is having a material adverse impact on Aviation’s business operations and financial performance.economic conditions.

Aviation has and is continuing to take several business actions to respond to the current adverse environment. Weenvironment, including a permanent reduction of approximately 25% of its total global employee workforce. These actions are estimated to result in more than $1 billion in cost savings and more than $2 billion in cash preservation actions in 2020. Through the third quarter of 2020, the business has completed around 70% of these actions, including workforce reductions of approximately 20%, and realized close to $1 billion in cost savings, 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 to respond to an increased number of requests for short-term payment deferrals and are working closely with our airframe customerspartners to align production rates for 2020. During the first quarter of 2020 Aviation took several measures including a hiring freeze, cancellation of salaried merit increases, and a reduction of all non-safety related discretionary spending, including capital expenditures and engineering and development efforts. Aviation also announced a reduction of approximately 10% of its total United States (U.S.) workforce and a temporary furlough impacting approximately 50% of its U.S. maintenance, repair and overhaul employees for 90 days. Additionally, Aviation announced a temporary furlough impacting its U.S. assembly operations and component manufacturing shops for approximately four weeks during the second quarter of 2020. Aviation is also working with the appropriate parties to properly address its global workforce.beyond.

Looking ahead, Aviation’s operational and financial performance is impacted by demand for passengercommercial air travel,traffic, shop visit demand, for freight, oil prices, fleet retirements, and demand for new aircraft. We monitor and forecast each of these factors as part of Aviation’s long-term planning process, which may result in additional business restructuring actions. Given the uncertainty related to the severity and length of the global COVID-19 pandemic and the impact on these factors across the aviation sector, Aviation could be required to record additional charges, impairments, or other adverse financial impacts in future periods.periods if actual results differ significantly from Aviation's current estimates.

As it relates to the military environment, Aviation continues to forecast strong military demand creating future growth opportunities for our Military business as the U.S. Department of Defense and foreign governments have continued flight operations, and have increasedallocated budgets to upgrade and modernize their existing fleets, creating future growth opportunities for our Military business.fleets.




*Non-GAAP Financial Measure
2020 3Q FORM 10-Q 11

MD&ASEGMENT OPERATIONS
Total engineering, comprised of both company and customer funded spending, decreased compared to prior year. Company-fundedyear in line with the changes in the commercial environment. For the nine months ended September 30, 2020, company-funded research and development spend decreased compared to the first quarter of 2019, and we expect the reduction to continue in line with the actions outlined above. However, customer-funded engineering efforts, primarily in our Military business, continuedincreased compared to increase.the prior year. On September 28, 2020, Aviation announced it received certification from the U.S. Federal Aviation Administration (FAA) for the GE9X engine, the world’s largest and most powerful commercial aircraft engine.


*Non-GAAP Financial Measure

10 2020 1Q FORM 10-Q

MD&ASEGMENT OPERATIONS

Aviation is taking actions to protect its ability to serve its customers now and as the global airline industry recovers. While its near-term focus remains on navigating the COVID-19 pandemic, Aviation’s deep history of innovation and technology leadership, commercial engine installed base of approximately 38,000 units, military engine installed base of approximately 27,000 units, with approximately 12,000 units under long-term service agreements, and $273$262 billion backlog represents strong long-term fundamentals. Aviation is actively taking actions to protect and strengthen its business and seeks to emerge from this crisis stronger and drive long-term cash and profitable growth over time.

Three months ended September 30Nine months ended September 30
OrdersSalesOrdersSales
(In units, except where noted)20202019202020192020201920202019
Commercial Engines88 297 329 714 291 1,995 1,121 2,188 
LEAP Engines(a)16 49 172 455 46 1,378 622 1,316 
Military Engines116 154 107 186 851 233 457 490 
Spare Parts Rate(b)$14.4 $30.0 $18.1 $29.0 
(a) LEAP engines are subsets of commercial engines.
(b) Commercial externally shipped spare parts and spare parts used in time and material shop visits in millions of dollars per day.
Refer to the Aviation and GECAS 737 MAX discussion in Consolidated Results for information regarding the Company's exposure related to the temporary fleet grounding of the Boeing 737 MAX.
(Dollars in millions)September 30, 2020December 31, 2019September 30, 2019
Equipment$34,778 $39,131 $38,212 
Services227,013 234,114 214,686 
Total backlog$261,791 $273,245 $252,898 
Three months ended September 30Nine months ended September 30
2020201920202019
Equipment$1,137 $2,971 $5,408 $9,687 
Services2,935 5,825 9,851 16,388 
Total orders$4,072 $8,796 $15,259 $26,074 
Commercial Engines & Services$2,696 $5,997 $9,705 $17,796 
Military1,137 1,061 3,258 3,073 
Systems & Other1,087 1,050 3,233 3,071 
Total segment revenues$4,919 $8,109 $16,196 $23,940 
Equipment$1,933 $3,149 $6,234 $9,295 
Services2,987 4,960 9,961 14,645 
Total segment revenues$4,919 $8,109 $16,196 $23,940 
Segment profit$356 $1,718 $681 $4,764 
Segment profit margin7.2 %21.2 %4.2 %19.9 %
 Three months ended March 31
 Orders Sales
(In units, except where noted)2020
2019
 2020
2019
      
Commercial Engines145
799
 472
751
LEAP Engines(a)6
636
 272
424
Military Engines272
26
 146
161
Spare Parts Rate(b)   $26.9
$30.1
(a) LEAP engines are subsets of commercial engines.
(b) Commercial externally shipped spare parts and spare parts used in time and material shop visits in millions of dollars per day.
(In billions)   March 31, 2020
March 31, 2019
      
Equipment   $39.2
$38.0
Services   234.1
185.4
Total backlog   $273.2
$223.5
    Three months ended March 31 
(Dollars in billions)     2020
 2019
 
          
Equipment     $2.2
 $3.2
 
Services     5.2
 5.5
 
Total orders     $7.4
 $8.7
 
Commercial Engines & Services     $4.8
 $5.9
 
Military     1.0
 1.0
 
Systems & Other     1.2
 1.0
 
Total segment revenues     $6.9
 $8.0
 
Equipment     $2.4
 $3.1
 
Services     4.4
 4.8
 
Total segment revenues     $6.9
 $8.0
 
          
Segment profit     $1.0
 $1.7
 
          
Segment profit margin     14.6
%20.9
%
For the three months ended March 31,September 30, 2020, segment orders were down $1.3$4.7 billion (14%(54%), segment revenues were down $1.1$3.2 billion (13%(39%) and segment profit was down $0.7$1.4 billion (39%(79%).
Backlog as of March 31, 2020 increased $49.8 billion (22%), primarily due to an increase in long-term service agreements. This included approximately 200 LEAP-1B unit order cancellations in the first quarter of 2020.
Orders decreased $1.1$4.7 billion (13%(53%) organically, primarily driven by lower declines of approximately 60% in both commercial equipment and service orders as airline customers have slowed or deferred new engine orders, as well as delayed maintenance and repair operations while existing fleets have been grounded.
Revenues decreased $3.1 billion (39%) organically*. Equipment revenues decreased primarily due to 385 fewer commercial install and spare engine unit shipments, including 283 fewer LEAP units versus the prior year, in part due to the 737 MAX grounding and the impact of COVID-19. Military equipment and service total orders increased 60% compared to the prior year, including a significant order from the U.S. Department of Navy’s Naval Air Systems Command (NAVAIR) for F414 engines.
Revenues decreased $0.9 billion (11%) organically*. Equipment revenues decreased, primarily due to 279 fewer commercial install and spare engine units, including 152 fewer LEAP units and 98 fewer CFM56 units versus the prior year.production slowdown. Commercial Services revenues also decreased primarily due to lower commercial spare part shipments, decreased shop visits and the cumulative impact of changes in billing and cost assumptions in our long-term service agreements. Military revenues increased primarily due to higher volume of spare part shipments and increased revenues on development contracts, partially offset by fewer engine shipments due to supply chain execution issues.
Profit decreased $1.4 billion (79%) organically*, primarily due to lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits in our service agreements, due to the impact of COVID-19. Military revenues decreased due to lower volume of engine and spare part shipments, partially offset by increased revenues on development contracts.
Profit decreased $0.6 billion (39%) organically*, primarily due to Services decreased after-market volume and lower volume of commercial spare engines.agreements. During the three months ended March 31,September 30, 2020, Aviation recorded period expenseexpenses of $0.1 billion due to lower production volumes given decreases in demand primarily related to abnormalcommercial engines. Aviation also recorded a pre-tax impairment charge of $0.1 billion in a joint venture in the systems business as a result of changes in the commercial aviation market. In addition, Aviation recorded a $0.1 billion pre-tax charge to reflect the cumulative impacts of changes to billing and cost assumptions for certain long-term service agreements. Additional adjustments could occur in future periods and could be material for certain long-term service agreements if actual customer operating behavior differs significantly from Aviation’s current estimates.
*Non-GAAP Financial Measure
12 2020 3Q FORM 10-Q

MD&ASEGMENT OPERATIONS
For the nine months ended September 30, 2020, segment orders were down $10.8 billion (41%), segment revenues were down $7.7 billion (32%) and segment profit was down $4.1 billion (86%).
Backlog as of September 30, 2020 decreased $11.5 billion (4%) from December 31, 2019, primarily due to a reduction in our Commercial Services backlog and cancellations of commercial equipment orders, which included approximately 1,100 LEAP 1-B unit order cancellations and 22 GE9x unit order cancellations, as well as sales outpacing new orders. The reduction to Commercial Services backlog reflects the partial cancellation of long-term service agreements related to the equipment unit order cancellations, estimates of lower engine utilization, and anticipated customer fleet restructuring and contract modifications. In addition to cancellations removed from backlog during 2020, there were several public customer announcements that indicate an intent to cancel, however, customer purchase orders with Aviation or the airframer have not been canceled as of September 30, 2020. Based on information currently available, the value of the announced but not canceled orders is less than $2 billion of total backlog. Backlog adjustments could be necessary in future periods for additional cancellations of new commercial engine orders, fleet retirements, or changes to customer aircraft utilization and operating behavior. Backlog increased $8.9 billion (4%) from September 30, 2019, primarily due to an increase in long-term service agreements and transactional services commitments, offset by decreases in commercial equipment orders.
Orders decreased $10.5 billion (41%) organically, primarily driven by lower commercial equipment and service orders as airline customers have slowed or deferred new engine orders, as well as delayed maintenance and repair operations while existing fleets have been grounded. Military orders increased 23% compared to the prior year primarily driven by equipment and new development orders.
Revenues decreased $7.5 billion (32%) organically*. Equipment revenues decreased, primarily due to 1,067 fewer commercial install and spare engine unit shipments, including 694 fewer LEAP units and 202 fewer CFM56 units versus the prior year, in part due to the 737 MAX grounding and production slowdown. Commercial Services revenues decreased, primarily due to lower commercial spare part shipments, decreased shop visits and the cumulative impact of changes in billing and cost assumptions in our long-term service agreements. Military revenues increased primarily due to higher volume of spare part shipments and increased revenues on development contracts, partially offset by fewer engine shipments due to supply chain execution issues in the third quarter.
Profit decreased $4.1 billion (86%) organically*, primarily due to lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits in our service agreements. During the nine months ended September 30, 2020, Aviation recorded expenses of $0.3 billion due to lower production volumes and initiated restructuring actions given decreases in customer demand primarily related to LEAP engines and COVID-19.commercial engines. Aviation also recorded pre-tax charges totaling $0.1$0.3 billion due to expected future losses related primarily to customer credit risk given the current environment. In addition, Aviation recorded net unfavorable changes of $0.9 billion to the estimated profitability in its long-term service agreements. This decrease includes a $0.1$0.5 billion non-cash, pre-tax charge (reduction in revenues and profit) to reflect the cumulative impacts of changes to billing and cost assumptions for certain long-term service agreements.agreements, reflecting lower engine utilization, anticipated customer fleet restructuring and contract modifications. Additional adjustments are likely tocould occur in future periods and could be material as conditions related to COVID-19 continue to evolve.for certain long-term service agreements if actual customer operating behavior differs significantly from Aviation's current estimates.

*Non-GAAP Financial Measure

2020 1Q FORM 10-QHEALTHCARE. 11

MD&ASEGMENT OPERATIONS

HEALTHCARE
During the first quarterhalf of 2020, there was an increase in demand for certain of our products that are highly correlated to the response to the COVID-19 pandemic, including respiratory, computed tomography (CT),ventilators, monitoring solutions, x-ray, anesthesia and point-of-care ultrasound product lines. However, we also saw reduction in demand and delays in procurement in other products and services that were not critical to the COVID-19 response efforts or where procedures could be postponed (magnetic resonance, contrast agents and nuclear tracers). We have experienced some moderation in COVID-19 related demand in the third quarter and have experienced some recovery in hospital spending on non-COVID-19 related products. The pandemic is still driving uncertainty in our markets globally, as well as additional supply chain and logistics costs, and we expect this to continue. We expect capital expenditures, particularly in private markets, to remain under pressure from financial constraints as they recover from procedure delays and revenue declines related to COVID-19. In response to expected near term volatility and cost pressures, from COVID-19, we have initiated additional cost reduction, restructuring and cash preservation actions.

The global healthcare market has continued to expand, driven by macro trends relating to growing and aging populations, increasing chronic and lifestyle-related diseases, accelerating demand for healthcare in emerging markets, and increasing use of diagnostic imaging. Technological innovation that makes it possible to address an increasing number of diseases, conditions and patients in a more cost-effective manner has also driven growth across each of our global markets.

The Healthcare Systems (HCS) equipment market over the long term continues to expand at low single-digit rates or better, while demand continues for services on new equipment as well as on our existing installed base. However, there is short-term variation driven by market-specific political, environmental and economic cycles. GrowthThere has been some moderation in tariffs in both U.S. and China, however, this is subject to changes in U.S.-China trade relations. Long-term growth in emerging markets is driven by long-term trends of expanding demand and access to healthcare. Developed markets are expected to remain steady in the near term driven by macro trends in the healthcare industry.

Dynamics related to tariffs tempered China's growth in 2019. The impact of tariffs on certain types of medical equipment and components that we import from China resulted in increased product costs. We continue to take mitigating actions including moving our sourcing and manufacturing for these parts outside of China. With softening in recent U.S.-China trade relations and continued mitigation actions there has been some moderation in tariffs in both U.S. and China.

The Life Sciences market, which encompasses Pharmaceutical Diagnostics and BioPharma, continues to be strong. The Pharmaceutical Diagnostics (PDx) business is positioned in the contrast agent and nuclear tracer markets. This market is expected to grow over the long-term, driven by continued diagnostic imaging procedure growth and increasing contrast and tracer-enhanced biomarkers of these same procedures, as these products help to increase the precision of the diagnostic information provided to clinicians. However,After we experienced reduced demand in the short-termfirst half of 2020, we saw increases in the reduction in procedures not related to COVID-19 has temporarily reduced demand. We disposed of the BioPharma business on March 31, 2020.third quarter for PDx products as procedure volume increased.




*Non-GAAP Financial Measure
2020 3Q FORM 10-Q 13

MD&ASEGMENT OPERATIONS
We continue focusing on creating new products and digital solutions as well as expanding uses of existing offerings that are tailored to the different needs of our global customers. In the first quarter of 2020, weGE Healthcare recently introduced the LOGIQ™ E10 Series ultrasound that is powered by advanced algorithms andVivid™ Ultra Edition, which brings the sameefficiency capabilities of artificial intelligence technology behind advanced gaming. It can process 10 times more data and generate images faster than our previous(AI) to its entire Vivid cardiovascular ultrasound systemsportfolio. We also partnered with Lunit to launch the Thoracic Care Suite on x-ray with Lunit INSIGHT CXR, which leverages AI to help clinicians bring fast, precise answers to their patients. We continue to ramp production of critical medical equipment used to diagnose and treat COVID-19 patients, respiratory, computed tomography (CT), monitoring solutions, x-ray, anesthesia and point-of-care ultrasound product lines.alleviate clinical strain on radiologists by automatically analyzing images.

(In billions) March 31, 2020
March 31, 2019
  
(Dollars in millions)(Dollars in millions)September 30, 2020December 31, 2019September 30, 2019
Equipment $6.0
$6.6
Equipment$5,476 $6,978 $6,674 
Services 11.4
11.3
Services11,546 11,480 11,422 
Total backlog(a) $17.4
$17.9
Total backlog(a)$17,022 $18,458 $18,096 
Three months ended September 30Nine months ended September 30
2020201920202019
Equipment$2,139 $3,078 $7,893 $9,179 
Services1,986 2,063 5,769 6,097 
Total orders(a)$4,125 $5,141 $13,662 $15,276 
Healthcare Systems$4,085 $3,642 $11,056 $10,664 
Pharmaceutical Diagnostics480 495 1,300 1,497 
BioPharma— 786 830 2,378 
Total segment revenues$4,565 $4,923 $13,185 $14,540 
Equipment$2,538 $2,828 $7,287 $8,320 
Services2,027 2,095 5,899 6,220 
Total segment revenues$4,565 $4,923 $13,185 $14,540 
Segment profit$765 $974 $2,212 $2,714 
Segment profit margin16.8 %19.8 %16.8 %18.7 %
(a) Backlog as of September 30, 2020 excluded the BioPharma business due to its disposition in the first quarter of 2020. Backlog as of both December 31, 2019 and September 30, 2019 included $1.2 billion related to BioPharma. Orders included $0.8 billion related to BioPharma for the three months ended September 30, 2019, and included $1.1 billion and $2.6 billion related to BioPharma for the nine months ended September 30, 2020 and 2019, respectively.
   Three months ended March 31
(In billions)     2020
 2019
 
          
Equipment     $3.3
 $2.9
 
Services     2.0
 2.0
 
Total orders(a)     $5.3
 $4.9
 
Healthcare Systems (HCS)     $3.4
 $3.4
 
Life Sciences(b)     1.3
 1.3
 
Total segment revenues     $4.7
 $4.7
 
          
(a) Backlog as of March 31, 2020 excluded the BioPharma business due to its disposition in the first quarter of 2020. Orders included $1.1 billion and $1.0 billion related to BioPharma for the three months ended March 31, 2020 and 2019, respectively.
(b) Included revenues of $0.8 billion and $0.8 billion from BioPharma for the three months ended March 31, 2020 and 2019, respectively.

12 2020 1Q FORM 10-Q

MD&ASEGMENT OPERATIONS

    Three months ended March 31 
(Dollars in billions)     2020
 2019
 
          
Equipment     $2.7
 $2.7
 
Services     2.0
 2.0
 
Total segment revenues     $4.7
 $4.7
 
          
Segment profit     $0.9
 $0.8
 
          
Segment profit margin     19.0
%16.7
%

For the three months ended March 31,September 30, 2020, segment orders were up $0.4down $1.0 billion (7%(20%), segment revenues were up (1%down $0.4 billion (7%) and segment profit was up $0.1down $0.2 billion (15%(21%).
Orders were down $0.2 billion (4%) organically, driven by decreases in HCS (5%) mainly due to lower equipment demand and in PDx (2%). The difference between reported and organic orders decreases was primarily driven by the BioPharma disposition.
Revenues increased $0.4 billion (10%) organically*, primarily driven by $0.3 billion from the U.S. Department of Health and Human Services (HHS) to deliver ventilators in partnership with Ford and increased volume from COVID-19 related products, partially offset by a decrease in PDx.
Profit was up $0.2 billion (30%) organically*, primarily due to cost reductions and increases in HCS volume.
Overall, backlog
For the nine months ended September 30, 2020, segment orders were down $1.6 billion (11%), segment revenues were down $1.4 billion (9%) and segment profit was down $0.5 billion (18%).
Backlog as of March 31,September 30, 2020 decreased $0.5$1.4 billion (3%(8%). HCS backlog was up $0.6 from December 31, 2019 and decreased $1.1 billion but was more than offset by the removal of BioPharma backlog of $1.1 billion(6%) from September 30, 2019 primarily due to the sale of the business on March 31, 2020.BioPharma disposition. Excluding Biopharma, backlog increased $0.6$0.1 billion (4%).from September 30, 2019.
Orders increased $0.2 billion (2%) organically, due to increases in demand for COVID-19 related products, including a $0.3 billion order from the HHS to deliver 50,000 ventilators in partnership with Ford, partially offset by PDx. Excluding BioPharma, orders were flat organically.
Revenues increased $0.4 billion (9%) organically, driven by HCS up 8% organically due to COVID-19 related increases in demand and Life Sciences up 10% organically, driven by BioPharma, partially offset by pressure in Pharmaceutical Diagnostics due to COVID-19. Excluding BioPharma, orders increased $0.3 billion (6%) organically.
Revenues increased $0.1 billion (2%(3%) organically*, driven by increased demand in HCS products used directly in response to COVID-19, and Life Sciences, driven by BioPharma, partially offset by pressurereduced volume in Pharmaceutical DiagnosticsPDx from a decrease in non-essential elective procedures due to COVID-19.routine procedures. Excluding BioPharma, revenues increased (1%$0.3 billion (2%) organically*.
Profit increased $0.1$0.2 billion (10%(12%) organically*, primarily driven by volume growth and cost productivity due to current year cost reductions and prior year restructuring actions, design engineering and service initiatives. These increases wereincreased demand for HCS products used directly in response to COVID-19, partially offset by inflation, logistics pressure from COVID-19, and investmentsdecreases in research and development, which includes digital product innovations and Healthcare Systems programs.PDx volume. Excluding BioPharma, profits increased (3%$0.2 billion (10%) organically*.

CAPITAL
CAPITAL. We continue to evaluate strategic options to accelerate the further reduction in the size of GE Capital, some of which could have aresult in material financial chargecharges depending on the timing, negotiated terms and conditions of any ultimate arrangements.

GE Capital made capital contributions to its insurance subsidiaries of $2.0 billion and $1.9 billion in the first quarters of 2020 and 2019, respectively, and expects to provide further capital contributions of approximately $7 billion through 2024. See the Critical Accounting Estimates section within MD&A for further information.

At GE Capital, the primary effect of the COVID-19 pandemic pertains to its GECAS business. The COVID-19 outbreakpandemic has led to worldwide reduction of flight schedules and it is difficult to predict its longer-term impact. The resulting pressure on its airline customers had led to GECAS preparing for redeployments and repossessions, as well as lease modifications in some cases, while continuing to respond to customer requests for short-term rent deferrals. Continued deterioration in cash flow projections, including current rents, downtime, release rates and residual assumptions could result in further impairments in the operating lease portfolio. Additionally, the COVID-19 market-relatedrelated market volatility resulted in higher credit spreads on the investment securities held by our run-off insurance business, which resulted in marks and impairments taken in the first quarter.quarter, which recovered in the second and third quarters of 2020.

*Non-GAAP Financial Measure
14 2020 3Q FORM 10-Q

MD&ASEGMENT OPERATIONS
As of March 31,September 30, 2020, GECAS owned 986952 fixed-wing aircraft, of which five29 with a book value of $0.1$0.6 billion were available to lease to customers (aircraft on the ground). We test recoverability of each fixed-wing aircraft in our operating lease portfolio at least annually. Additionally, we perform quarterly evaluations in circumstances such as when assets are re-leased or current lease terms have changed.

DuringGiven the threeenvironment, we accelerated our review in the second quarter to focus on leases with higher risk of repossession based on our assessment of customer credit risk default and any unplaced leased assets rolling-off over the next 12 months, ended March 31,which represented approximately 20% of our fixed-wing aircraft operating lease portfolio. In addition, we performed our detailed annual portfolio review in the third quarter of 2020, which incorporated third party appraisal data, updates to all cash flow assumptions as well as evolving market and 2019, GECAS recognizedcustomer dynamics that we are monitoring. These analyses resulted in pre-tax impairments of $45 million$0.2 billion and $3 million,$0.5 billion during the three and nine months ended September 30, 2020, respectively, in itsprimarily on our fixed-wing aircraft operating lease fixed-wing aircraft.portfolio. Pre-tax impairments were insignificant and $0.1 billion for the three and nine months ended September 30, 2019, respectively. The increase in pre-tax impairments was driven by declining cash flow projections forof the future collectability of rents on aircraft asand engines currently under contract related to market impacts resulting from the pandemic. Continued deterioration in cash flow projections, including current rents, downtime, release rates and residual assumptions could result in future impairments in the operating lease portfolio.

Based on the resulting pressure on its airline customers, GECAS continues to see deferral requests, which are primarily short term in nature. As a result of COVID-19 and related market impacts.

these requests, we have executed agreements with customers to reschedule certain lease payments. As of March 31,September 30, 2020, GECAS has received deferral requests (primarily short term in nature) from approximately 75%we have a contractually deferred balance of its airline customers operating in approximately 64 countries$408 million, we have invoiced $139 million under these agreements and expectscollected $119 million. We expect to continue to receive requests for rent deferrals and/or lease restructures from itsour global airline customers as a result of COVID-19 and related market impacts. An extended disruption of regional or international travel could result in an increase in these types of requests in future periods, which could result in an increase to the trade receivable balance. As GECAS evaluates future lease restructures, there is a risk of lease modifications that could have a material adverse effect on GECAS operations, financial position and cash flows. Additionally,

In October 2020, Pacific Investment Management Company (PIMCO), one of the world’s premier fixed income investment managers, and GECAS reached a preliminary agreement to develop an aviation leasing venture to support up to $3 billion in aircraft asset financings. The transaction is subject to definitive agreement, customary closing conditions and receipt of required regulatory approvals.

We annually perform premium deficiency testing in the aggregate across our run-off insurance portfolio utilization in our helicopter business was 86% asthe third quarter. As a result of March 31, 2020.

Referthe testing, we identified no premium deficiency. See the Other Items section and Note 12 to the Aviationconsolidated financial statements for further information.

GE Capital expects to receive approximately $2 billion of additional capital contributions from GE in the fourth quarter of 2020. See the Capital Resources and GECAS 737 MAX discussion in Consolidated ResultsLiquidity section for information regarding the Company's exposure related to the temporary fleet grounding of the Boeing 737 MAX.further information.



*Non-GAAP Financial Measure

2020 1Q FORM 10-Q 13

MD&ASEGMENT OPERATIONS

(Dollars in billions)March 31, 2020
December 31, 2019
   
GECAS$37.3
$38.0
EFS1.8
1.8
WCS(a)7.8
9.0
Insurance46.8
46.3
Other continuing operations(a)17.5
22.5
Total segment assets$111.1
$117.5
GE Capital debt to equity ratio3.6:13.9:1
(Dollars in millions)September 30, 2020December 31, 2019
GECAS$35,846 $37,979 
Energy Financial Services (EFS)1,6211,823
Working Capital Solutions (WCS)(a)6,7859,014
Insurance50,00746,266
Other continuing operations(a)(b)18,668 22,463 
Total segment assets$112,927 $117,546 
GE Capital debt to equity ratio4.1:13.9:1
(a) In the first quarter of 2020, the remaining Industrial Finance assets of $0.3 billion were transferred to Other continuing operations.
   Three months ended March 31
(In billions)   2020
2019
      
GECAS   $1.1
$1.2
EFS   0.1

WCS   0.1
0.3
Insurance   0.6
0.7
Other continuing operations   

Total segment revenues   $1.9
$2.2
(b) Included cash, cash equivalents and restricted cash of $13.9 billion as of September 30, 2020 and $17.6 billion as of December 31, 2019.
GECAS   $0.2
$0.3
EFS   0.1

WCS   
0.1
Insurance   (0.1)
Other continuing operations(a)   (0.2)(0.3)
Total segment profit   $
$0.1
2020 3Q FORM 10-Q 15

MD&ASEGMENT OPERATIONS
Three months ended September 30Nine months ended September 30
(In millions)2020201920202019
GECAS$923 $1,211 $2,994 $3,678 
EFS15 (44)77 100 
WCS57 195 270 683 
Insurance764 718 2,167 2,160 
Other continuing operations(78)17 (59)24 
Total segment revenues$1,681 $2,097 $5,449 $6,645 
GECAS$(38)$263 $(906)$815 
EFS18 (7)13 110 
WCS15 55 51 203 
Insurance57 (678)78 (677)
Other continuing operations(a)(104)(277)(794)(1,050)
Total segment profit (loss)$(52)$(645)$(1,558)$(599)
(a) Other continuing operations primarily comprisecomprised excess interest costs from debt previously allocated to assets that have been sold as part of the GE Capital Exit Plan, preferred stock dividend costs and interest costs not allocated to GE Capital segments, which are driven by GE Capital’s interest allocation process. Interest costs are allocated to GE Capital segments based on the tenor of their assets using the market rate at the time of origination, which differs from the asset profile when the debt was originated. As a result, actual interest expense is higher than interest expense allocated to the remaining GE Capital segments. Substantially all preferred stock dividend costs will become a GE obligation in January 2021. See Note 15 to the consolidated financial statements for further information. In addition, we anticipate unallocated interest costs to gradually decline as debt matures and/or is refinanced.

For the three months ended March 31,September 30, 2020, segment revenues decreased $0.3$0.4 billion (14%(20%) and segment earningslosses were down $0.6 billion.
Capital revenues decreased $0.4 billion (20%), as a result of volume declines, primarily at GECAS related to lower interest income attributable to the sale of PK Air Finance and lower rental revenue, and lower gains. Capital losses decreased $0.6 billion, primarily due to the nonrecurrence of a $1.0 billion pre-tax charge identified through the completion of our 2019 annual insurance premium deficiency review, higher tax benefits and lower excess interest costs, partially offset by volume declines, lower gains and higher mark-to-market effects and impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts. Gains were insignificant and $0.2 billion in the third quarters of 2020 and 2019, respectively, which primarily related to sales of GECAS aircraft and engines resulting in gains that were insignificant and $0.1 billion in the third quarters of 2020 and 2019, respectively.

For the nine months ended September 30, 2020, segment revenues decreased $1.2 billion (18%) and segment losses were up $1.0 billion.
Capital revenues decreased $0.3$1.2 billion (14%(18%), primarily due toas a result of volume declines, primarily at GECAS related to lower interest income attributable to the sale of PK Air Finance and lower rental revenue, lower gains and higher mark-to-market effects and impairments as a result of COVID-19 and related market impacts. Capital earnings decreased $0.2losses increased $1.0 billion, primarily due to an impairment of goodwill, volume declines, higher mark-to-market effects and other impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts, lower gains, debt tender costs and the nonrecurrence of a 2019 tax reform enactment adjustment. These increased losses were partially offset by the nonrecurrence of a $1.0 billion pre-tax charge identified through the completion of our 2019 annual insurance premium deficiency review, higher tax benefits including the tax benefit related to the BioPharma sale partially offset by the nonrecurrence of a 2019 tax reform enactment adjustment and lower excess interest cost. Gains were $0.2$0.3 billion and $0.5 billion in the first quarters of bothnine months ended September 30, 2020 and 2019, respectively, which primarily related to sales of GECAS aircraft and engines resulting in gains of $0.2 billion and $0.3 billion in the nine months ended September 30, 2020 and 2019, respectively, and the nonrecurrence of a sale of an equity method investment resulting in a gain of $0.1 billion in the first quarters of both2019 at EFS.

16 2020 and 2019.3Q FORM 10-Q


MD&ACORPORATE ITEMS AND ELIMINATIONS
CORPORATE ITEMS AND ELIMINATIONS
Corporate items and eliminations includesELIMINATIONS.Includes the results of our Lighting segment for the three and nine months of 2019, the nine months of 2020 as well as includes the results of our GE Digital business for all periods presented.
Three months ended September 30Nine months ended September 30
(In millions)2020201920202019
Revenues
Corporate revenues$251 $395 $1,039 $1,395 
Eliminations and other(550)(515)(1,608)(1,356)
Total Corporate Items and Eliminations$(299)$(120)$(570)$39 
Operating profit (cost)
Gains (losses) on disposals and held for sale businesses$119 $(97)$12,632 $153 
Restructuring and other charges(326)(322)(967)(924)
Steam asset impairments(a) (Notes 7 and 8)(363)— (363)— 
Unrealized gains (losses)(760)(86)(4,728)(125)
Goodwill impairments(b) (Note 8)— (740)(728)(1,484)
Adjusted total corporate operating costs (Non-GAAP)(275)(303)(806)(1,117)
Total Corporate Items and Eliminations (GAAP)$(1,606)$(1,548)$5,040 $(3,497)
Less: gains (losses) and restructuring & other(1,331)(1,245)5,845 (2,380)
Adjusted total corporate operating costs (Non-GAAP)$(275)$(303)$(806)$(1,117)
Functions & operations$(201)$(225)$(630)$(913)
Environmental, health and safety (EHS) and other items(21)(20)(117)
Eliminations(54)(58)(184)(86)
Adjusted total corporate operating costs (Non-GAAP)$(275)$(303)$(806)$(1,117)
 Three months ended March 31
(In millions)2020
2019
   
Revenues  
Corporate revenues$377
$592
Eliminations and other(615)(408)
Total Corporate Items and Eliminations$(237)$183
   
Operating profit (cost)  
Gains (losses) on disposals and held for sale businesses$12,439
$365
Restructuring and other charges(207)(258)
Unrealized gains (losses)(5,794)13
Adjusted total corporate operating costs (Non-GAAP)(374)(348)
Total Corporate Items and Eliminations (GAAP)$6,064
$(228)
Less: gains (losses) and restructuring & other6,438
120
Adjusted total corporate operating costs (Non-GAAP)$(374)$(348)
(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 for the three and nine months ended September 30, 2020.

(b) Included non-cash pre-tax impairment charge of $877 million, net of $149 million attributable to noncontrolling interests for the Additive reporting unit within our Aviation segment for the nine months ended September 30, 2020.
14
2020 1Q FORM 10-Q

MD&ACORPORATE ITEMS AND ELIMINATIONS

 Three months ended March 31
(In millions)2020
2019
   
Functions & operations$(266)$(357)
Eliminations(98)6
Environmental, health and safety (EHS) and other items(10)4
Adjusted total corporate operating costs (Non-GAAP)$(374)$(348)

Adjusted total corporate operating costs* excludes gains (losses) on disposals and held for sale businesses, restructuring and other charges including goodwill and unrealized gains (losses). 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.

Unrealized gains (losses) are primarily related to our mark-to-market impact on our Baker Hughes shares for the three and an impairmentnine months ended September 30, 2020, on our Ventures portfolio for the threenine months ended March 31,September 30, 2020, and toon our Wabtec equity investmentmark-to-market impact on our Baker Hughes shares for the three and nine months ended March 31,September 30, 2019.

For the three months ended March 31,September 30, 2020, revenues decreased by $0.4$0.2 billion primarily as a result of a $0.1 billion decrease in revenue due to the sale of our Lighting business in June 2020. Overall, Corporate costs increased $0.1 billion versus prior year. Corporate costs decreased due to the nonrecurrence of a $0.7 billion net goodwill impairment charge related to our Renewable Energy segment in 2019 and $0.2 billion of higher gains, primarily due to our Wabtec investment in the third quarter of 2019. Restructuring and other charges were flat year over year, with lower restructuring charges at Corporate, partially offset by higher restructuring at Aviation and legal reserves associated with the SEC investigation (see Note 19 for further information). These decreases were offset by $0.7 billion of higher net unrealized losses, primarily related to a $0.7 billion mark-to-market loss on our Baker Hughes shares in the third quarter of 2020, as compared to a $0.1 billion mark-to-market loss on our Baker Hughes shares in the third quarter of 2019. Corporate recognized $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 during the third quarter of 2020.

Adjusted corporate costs were down $28 million (9%) due to improvements in our functional costs and operations as GE Digital continues to optimize its cost structure, while EHS and other costs and eliminations remained relatively flat.

For the nine months ended September 30, 2020, revenues decreased by $0.6 billion, primarily as a result of a $0.3 billion decrease resulting fromin revenue due to the sale of our Current businessand Lighting businesses in April 2019 and a $0.2June 2020 respectively and $0.3 billion increase in inter-segmentof higher intersegment eliminations. Corporate costs decreased by $6.3$8.5 billion, primarily due to $12.1$12.5 billion of higher net gains, from disposed or held for sale businesses, which was primarily related to a $12.3 billion gain fromdriven by the sale of our BioPharma business in the first quarter of 2020, compared to gains in the first quarter of 2019 of $0.2 billion from the sale of our Digital ServiceMax business and $0.1 billion from a tax indemnity release related to our legacy NBCU business.2020. Corporate costs also decreased by $0.1$0.8 billion due to $1.5 billion of goodwill impairment charges related to our Renewable Energy segment during the nine months ended September 30, 2019 as compared to $0.7 billion of net goodwill impairment charges related to our Aviation segment during the second quarter of 2020. Restructuring and other charges were flat year over year, with lower restructuring costs within Healthcare, which wereand other charges at Corporate, partially offset by higher restructuring actions taken inat Aviation inand legal reserves associated with the first quarter of 2020.SEC investigation. These decreases were partially offset by $5.8$4.6 billion of higher net unrealized losses, primarily related to a $5.7$4.6 billion mark-to marketmark-to-market impact on our Baker Hughes shares and a $0.1 billion impairment on our Ventures portfolio.portfolio in the first nine months of 2020, as compared to a $0.1 billion mark-to-market impact on our Baker Hughes shares in the first nine months of 2019. Corporate recognized $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 during the third quarter of 2020.

*Non-GAAP Financial Measure
2020 3Q FORM 10-Q 17

MD&ACORPORATE ITEMS AND ELIMINATIONS
Adjusted total corporate operating costs* remained relatively flat. Intercompany profit eliminations increaseddecreased by $0.3 billion, primarily due to $0.2 billion of cost reductions in our Digital business, $0.1 billion including the resultsof lower costs associated with existing EHS matters and $0.1 billion of lower Corporate costs as a result of restructuring and cost reduction actions. These decreases were partially offset by $0.1 billion of higher intercompany elimination activity, primarily from project financing investments associated with wind energy projects in our Renewable Energy segment, higher GE industrial inter-segment eliminations, partially offset by lower spare engine sales from our Aviation segment to our GECAS business. This was mostly offset by a decrease in Functions and Operations of $0.1 billion (25%), driven by cost reductions in our Digital business.

Although there were no significant impacts in the firstthird quarter related to COVID-19, potential future impacts at Corporate may include, but are not limited to, the increase in our long-term liabilities, primarily for pension and certain environmental obligations, or decrease in asset returns subject to interest rate changes, additional asset impairments driven by overall market conditions, and lower revenue in our Digital and Lighting operations. See the Critical Accounting Estimates section for further information on pension assumptions.

RESTRUCTURING. Restructuring actions are an essential component of our cost improvement efforts to both existing operations and those recently acquired.efforts. 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 will continue to closely monitor the economic environment, including the impacts of COVID-19, and expect to undertake further restructuring actions to more closely align our cost structure with earnings and cost reduction goals.
Three months ended September 30Nine months ended September 30
(In millions)2020201920202019
Workforce reductions$122 $88 $609 $477 
Plant closures & associated costs and other asset write-downs93 194 201 326 
Acquisition/disposition net charges12 40 57 130 
Other100 — 100 (9)
Total restructuring and other charges$326 $322 $967 $924 
Cost of product/services$111 $69 $368 $243 
Selling, general and administrative expenses215 253 599 682 
Total restructuring and other charges$326 $322 $967 $924 
Power$30 $23 $147 $158 
Renewable Energy58 60 141 133 
Aviation58 300 
Healthcare25 45 97 143 
Corporate155 192 283 489 
Total restructuring and other charges$326 $322 $967 $924 
 Three months ended March 31
(In billions)2020
2019
   
Workforce reductions$0.2
$0.2
Plant closures & associated costs and other asset write-downs
0.1
Acquisition/disposition net charges

Total restructuring and other charges$0.2
$0.3
   
Cost of product/services$0.1
$0.1
Selling, general and administrative expenses0.1
0.2
Other income

Total restructuring and other charges$0.2
$0.3
   
Power$
$
Renewable Energy

Aviation0.1

Healthcare
0.1
Corporate0.1
0.1
Total restructuring and other charges$0.2
$0.3

Cash expenditures for restructuring and other charges were approximately $0.2$0.3 billion and $0.3$0.2 billion for the three months ended March 31,September 30, 2020 and 2019, respectively. Cash expenditures for restructuring and other charges were approximately $0.8 billion and $0.9 billion for the nine months ended September 30, 2020 and 2019, respectively.
*Non-GAAP Financial Measure

2020 1Q FORM 10-Q 15

MD&ACORPORATE ITEMS AND ELIMINATIONS

COSTS AND GAINS NOT INCLUDED IN SEGMENT RESULTS. As discussed in the Segment Operations section, within the MD&A, certain amounts are not included in industrial segment results because they are excluded from measurement of their operating performance for internal and external purposes. These costs relate primarily to restructuring, impairments and acquisition and disposition activities.
Three months ended September 30Nine months ended September 30
CostsGains (Losses)CostsGains (Losses)
(In millions)20202019202020192020201920202019
Power$393 $25 $$(2)$488 $154 $49 $(3)
Renewable Energy58 799 — — 141 1,616 — — 
Aviation58 15 1,013 14 (2)
Healthcare25 45 21 87 143 12,350 (1)
Total segments$533 $871 $24 $15 $1,728 $1,915 $12,413 $(7)
Corporate Items & Eliminations154 191 (665)(198)281 484 (4,510)35 
Total Industrial$687 $1,062 $(641)$(183)$2,009 $2,399 $7,904 $28 









*Non-GAAP Financial Measure
18 2020 3Q FORM 10-Q

 CostsGains (Losses)
 Three months ended March 31Three months ended March 31
(In billions)2020
2019
2020
2019
     
Power$
$
$
$
Renewable Energy



Aviation0.1



Healthcare
0.1
12.3

Total segments$0.1
$0.1
$12.4
$
Corporate Items & Eliminations0.1
0.1
(5.7)0.4
Total Industrial$0.2
$0.3
$6.6
$0.4

MD&AOTHER CONSOLIDATED INFORMATION
OTHER CONSOLIDATED INFORMATION
INTEREST AND OTHER FINANCIAL CHARGESThree months ended September 30Nine months ended September 30
(In millions)2020201920202019
GE$313 $791 $1,079 $1,693 
GE Capital486 590 1,647 1,913 
INTEREST AND OTHER FINANCIAL CHARGESThree months ended March 31
(In billions)2020
2019
   
GE$0.4
$0.5
GE Capital0.5
0.7

The decrease in GE interest and other financial charges for the three months ended March 31,September 30, 2020 was primarily due to lower interest expense on debt driven primarily by lower expenses on salesdebt balances and the nonrecurrence of GE current and long-term receivablesa $0.3 billion loss related to debt repurchases in the third quarter of 2019, as well as lower financing costs on sales of receivables. The decrease in GE interest on debtand other financial charges for the nine months ended September 30, 2020, was primarily due to lower average borrowings balances.interest expense on debt driven by lower debt balances and the nonrecurrence of a $0.3 billion loss related to debt repurchases in the third quarter of 2019, as well as lower financing costs on sales of receivables, partially offset by the nonrecurrence of the June 2019 reversal of accrued interest on tax liabilities due to the completion of the 2012-2013 IRS audit. The primary components of GE interest and other financial charges are interest on short- and long-term borrowings and financing costs on sales of receivables. Total GE interest and other financial charges of $0.2 billion and $0.3$0.6 billion was recorded at Corporate and $0.1 billion and $0.2 billion was recorded by Industrial segments for the three months ended March 31,September 30, 2020 and 2019.2019, respectively, and $0.7 billion and $1.1 billion was recorded at Corporate and $0.3 billion and $0.6 billion was recorded by Industrial segments for the nine months ended September 30, 2020 and 2019, respectively.

The decrease in GE Capital interest and other financial charges for the three months ended March 31,September 30, 2020 was primarily due to lower average borrowings balances due to maturities and debt purchases as well as lower average interest rates, partially offset by higher interest on assumed debt as a result of the repayments of intercompany loans by GE (effectively transferring that interest cost back to GE Capital). The decrease in GE Capital interest and other financial charges for the nine months ended September 30, 2020 was primarily due to lower average borrowings balances due to maturities and debt purchases as well as lower average interest rates due to changes in market rates.rates, partially offset by the loss resulting from the completion of tender offers to purchase debt, as well as higher interest on assumed debt as described above.

CONSOLIDATED INCOME TAXESTAXES.
For the three months ended March 31,September 30, 2020, the consolidated income tax rate was 1.0%30.2% compared to 12.5%(3.3)% for the three months ended March 31,September 30, 2019. The negative rate for 2019 reflects a tax expense on a pre-tax loss.

The consolidated provision (benefit) for income taxes was $(0.5) billion for the three months ended September 30, 2020 and an insignificant amount in the three months ended September 30, 2019. Income tax was a benefit compared to a provision primarily due to favorable effects of global activities including a $0.1 billion favorable impact on the carrying value of deferred tax assets due to a change in tax rate in the first quarter of 2020 and $0.1United Kingdom ($0.3) billion, in the first quarter of 2019. The provision was essentially unchanged as the tax benefit associated with the mark-to-market loss recorded in the third quarter on the remaining investmentinterest in Baker Hughes ($1.10.1) billion and a higher benefit to adjust the year-to-date tax rate to be in-line with the projected full-year rate ($0.1) billion.

The consolidated tax provision (benefit) includes $(0.1) billion and $0.2 billion for GE (excluding GE Capital) for the three months ended September 30, 2020 and 2019, respectively.

For the nine months ended September 30, 2020, the consolidated income tax rate was (25.7)% compared to 0.2% for the nine months ended September 30, 2019. The negative rate for 2020 reflects a tax benefit on pre-tax income.

The consolidated provision (benefit) for income taxes was $(0.6) billion for the nine months ended September 30, 2020 and an insignificant amount for the nine months ended September 30, 2019. The increase in tax benefit was primarily due to the decrease in pre-tax income excluding the gain from the sale of our BioPharma business and non-deductible goodwill impairment charges ($1.9 billion) waspartially offset by the tax expense associated with the disposition of the BioPharma business excluding the amount recognized on preparatory steps in 2019 ($1.1 billion).

The consolidated tax provision (benefit) includes $0.2 billionan insignificant amount and $0.3 billion for GE (excluding GE Capital) for the first quarters ofnine months ended September 30, 2020 and 2019, respectively.

DISCONTINUED OPERATIONS. Discontinued operations primarily include our Baker Hughes and Transportation segments, and certain businesses in our GE Capital segment (our mortgage portfolio in Poland and trailing liabilities associated with the sale of our GE Capital businesses). See Notes 2 and 19 for further financial information regarding our businesses in discontinued operations.

The mortgage portfolio in Poland (Bank BPH) comprises floating rate residential mortgages, 86%87% of which are indexed to or denominated in foreign currencies (primarily Swiss francs). At March 31,September 30, 2020, the total portfolio had a carrying value of $2.4$2.5 billion with a 1.46%1.53% 90-day delinquency rate and an average loan to value ratio of approximately 70.3%67.0%. The portfolio is recorded at the lower of cost or fair value, less cost to sell, which reflects market yields as well as our best estimate of the effects of ongoing litigation in Poland related to foreign currency-denominated mortgages. Discontinued operations income for the three months ended March 31, 2020, includes the recognition of a $0.1 billion valuation allowance on the carrying value of the portfolio, primarily driven by a higher discount rate as a result of COVID-19 and related market impacts. Future changes in the economic impact of COVID-19, market yields or changes in estimated legal liabilities could result in further losses related to these loans in future reporting periods.

See Notes 2 and 19 to the consolidated financial statements for further financial information regarding our businesses in discontinued operations.
FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONSThree months ended March 31
(In billions)2020
2019
   
Earnings (loss) of discontinued operations, net of taxes$(174)$109
Gain (loss) on disposal, net of taxes(4)2,553
Earnings (loss) from discontinued operations, net of taxes$(178)$2,663

16 2020 1Q FORM 10-Q

2020 3Q FORM 10-Q 19

MD&ACAPITAL RESOURCES AND LIQUIDITY

CAPITAL RESOURCES AND LIQUIDITY
FINANCIAL POLICY. We intend to maintain a disciplined financial policy, including maintaining a high cash balance. We are targeting a sustainable long-term credit rating in the Single-A range, withachieving a GE Industrial net debt*-to-EBITDA ratio of less than 2.5x and a dividend in line with our peers over time, as well as a less than 4-to-1 debt-to-equity ratio for GE Capital. In addition to net debt*-to-EBITDA, we also evaluate other leverage measures, including gross debt-to-EBITDA, and we will ultimately size our deleveraging actions across a range of measures to ensure we are operating the Company based on a strong balance sheet. We intend to continue to decrease our leverage over time as we navigate this period of uncertainty, although we now expect to achieve our prior targets over a longer period than previously announced.time.

LIQUIDITY POLICY. We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet our obligations under both normal and stressed conditions. We intend to maintain a high level of cash and maximize flexibility as we navigate the current environment. At both GE 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.

We believe that our consolidated liquidity and availability under our revolving credit facilities will be sufficient to meet our liquidity needs.needs.

CONSOLIDATED LIQUIDITY. Following is a summary of cash, cash equivalents and restricted cash at March 31,September 30, 2020.
(In millions)September 30, 2020September 30, 2020
GE$24,337 U.S.$21,211 
GE Capital14,825 Non-U.S.17,951 
Consolidated$39,162 Consolidated$39,162 
(In billions)March 31, 2020
  March 31, 2020
     
GE$33.8
 U.S.$31.7
GE Capital13.5
 Non-U.S.15.6
Consolidated$47.3
 Consolidated$47.3

With net proceeds of $20.3 billion received from the sale of our BioPharma business, we ended the first quarter of 2020 with $47.3 billion of consolidated cash, cash equivalents and restricted cash, in addition to our available credit lines. As described below, we have taken a number of actions to further de-risk and de-lever our balance sheet and prudently manage our liquidity amid a challenging external environment.

Cash held in non-U.S. entities has generally been reinvested in active foreign business operations; however, substantially all of our unrepatriated earnings were subject to U.S. federal tax and, if there is a change in reinvestment, we would expect to be able to repatriate available cash (excluding amounts held in countries with currency controls) without additional federal tax cost. Any foreign withholding tax on a repatriation to the U.S. would potentially be partially offset by a U.S. foreign tax credit.

GE LIQUIDITY. GE's primary sources of liquidity consist of cash and cash equivalents, free cash flows from our operating businesses, monetization of receivables, proceeds from dispositions, and short-term borrowing facilities, including revolving credit facilities. Cash generation can be subject to variability based on many factors, including seasonality, receipt of down payments on large equipment orders, timing of billings on long-term contracts, the effects of changes in end marketsmarket conditions and our ability to execute dispositions. Additionally, as previously reported, we launched a program in the third quarter of 2020 to fully monetize our Baker Hughes position over approximately three years. Consistent with the program’s design, we received initial proceeds of approximately $0.4 billion in October 2020.See Note 21 for further information.

GE also has available short-term borrowing facilities to fund its operations, including a commercial paper program, revolving credit facilities and short-term intercompany loans from GE Capital, which are generally repaid within the same quarter. See the Borrowings section for details of our credit facilities and borrowing activity in our external short-term borrowing facilities.

GE cash, cash equivalents and restricted cash totaled $33.8$24.3 billion at March 31,September 30, 2020, including $2.3 billion of cash held in countries with currency control restrictions and $0.5$0.8 billion of restricted use cash. Cash held in countries with currency controls represents amounts held in countries, which may restrict the transfer of funds to the U.S. or limit our ability to transfer funds to the U.S. without incurring substantial costs. Restricted use cash represents amounts that are not available to fund operations, and primarily comprised collateral for receivables sold and funds restricted in connection with certain ongoing litigation matters.

InGE plans to provide a capital contribution to GE Capital in the fourth quarter of 2020 of approximately $2.0 billion, in line with the first quarter 2020 insurance statutory funding. Capital contributions to GE Capital are determined by considering various metrics, including our internal economic capital framework. In 2021, GE expects to provide an additional contribution to GE Capital to meet the 2021 insurance statutory funding requirement of 2020,approximately $2.0 billion. Further capital contributions will depend on GE received $20.3 billion of net proceeds fromCapital’s performance, including GECAS operations and the sale of our BioPharma business within our Healthcare segment. On April 1, 2020, GE used $6.0 billion of these proceeds to repay a portionInsurance statutory asset adequacy testing results, in light of the intercompany loans from GE Capital. In addition, our ending commercial paper balance decreased by $1.1 billion compared to December 31, 2019. We intend to maintain a high level of cash and maximize flexibility as we evaluate the next steps over time that are needed to execute our deleveraging priorities throughout this period of uncertainty. Additionally, we continue to evaluate the timing of an orderly sale over time of our remaining stake in Baker Hughes.uncertain environment.

GE CAPITAL LIQUIDITY. GE Capital’s primary sources of liquidity consist of cash and cash equivalents, cash generated from asset     sales and cash flows from our businesses. We expect to maintain an adequate liquidity position to fund our insurance obligations and debt maturities primarilybusinesses, as a result of cash flows from our businesses,well as GE repayments of intercompany loans and capital contributions from GE. We expect to maintain a sufficient liquidity position to fund our insurance obligations and debt maturities. See the Segment Operations - Capital section within MD&A for further information regarding allocation of GE Capital interest expense to the GE Capital businesses.

GE Capital cash, cash equivalents and restricted cash totaled $13.5$14.8 billion at March 31,September 30, 2020, including $1.3$0.9 billion, which was subject to regulatory restrictions, primarily in insurance entities.



*Non-GAAP Financial Measure

2020 1Q FORM 10-Q 17

MD&ACAPITAL RESOURCES AND LIQUIDITY

GE Capital provided capital contributions to its insurance subsidiaries of $2.0 billion, $1.9 billion and $3.5 billion in the first quarters of 2020, 2019 and 2018, respectively, and expects to provide further capital contributions of approximately $7 billion through 2024. These contributions are subject to ongoing monitoring by Kansas Insurance Department (KID), and the total amount to be contributed could increase or decrease, or the timing could be accelerated, based upon the results of reserve adequacy testing or a decision by KID to modify the schedule of contributions set forth in January 2018. We will continue to monitor the volatile interest rate environment, including the impact of reinvestment rates and our investment portfolio performance, and other factors in determining the related effect on our expected future capital contributions. See the Critical Accounting Estimates section of MD&A for discussion of the sensitivity of interest rate changes to our insurance liabilities. GE maintains 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.
*Non-GAAP Financial Measure
20 2020 3Q FORM 10-Q


MD&ACAPITAL RESOURCES AND LIQUIDITY
BORROWINGS. Consolidated total borrowings were $85.2$79.5 billion and $90.9 billion at MarchSeptember 30, 2020 and December 31, 2019, respectively, a decrease of $11.4 billion ($11.7 billion excluding intercompany eliminations). See the following table for a summary of GE and GE Capital borrowings.
GE (In millions)
September 30, 2020December 31, 2019
GE Capital (In millions)
September 30, 2020December 31, 2019
Commercial paper$— $3,008 Senior and subordinated notes$34,391 $36,501 
GE senior notes18,820 15,488 Senior and subordinated notes assumed by GE24,134 31,368 
Intercompany loans from
GE Capital
4,726 12,226 Intercompany loans to GE(4,726)(12,226)
Other GE borrowings1,305 2,195 Other GE Capital borrowings1,589 3,358 
Total GETotal GE Capital
adjusted borrowings(a)$24,851 $32,917 adjusted borrowings(a)(b)$55,387 $59,001 
(a) Consolidated total borrowings of $79.5 billion and $90.9 billion at September 30, 2020 and December 31, 2019, respectively, are
net of intercompany eliminations of $0.8 billion and $1.0 billion, respectively, of other GE borrowings from GE Capital, primarily
related to timing of cash settlements associated with GE receivables monetization programs.
(b) Included $6.2 billion and $4.2 billion at September 30, 2020 and December 31, 2019, respectively, of fair value adjustments for debt
in fair value hedge relationships.

The reduction in GE adjusted borrowings at September 30, 2020 compared to December 31, 2019, was driven primarily by $7.5 billion of repayments of intercompany loans from GE Capital, debt repurchases of $4.2 billion, lower commercial paper of $3.0 billion (including a reduction of $0.5 billion in the third quarter of 2020), and net repayments and maturities of other debt of $1.2 billion, partially offset by issuances of new long-term debt of $7.5 billion and $0.4 billion related to changes in foreign exchange rates.

The reduction in GE Capital adjusted borrowings at September 30, 2020 compared to December 31, 2019, was driven primarily by debt
repurchases of $9.8 billion, debt maturities of $7.7 billion (including $2.3 billion in the third quarter of 2020) and lower nonrecourse borrowings of $1.2 billion, partially offset by repayments of intercompany loans from GE of $7.5 billion (which has the effect of increasing GE Capital borrowings), issuances of new long-term debt of $6.0 billion, and $2.0 billion of fair value adjustments for debt in fair value hedge relationships.

GE Industrial net debt* was $34.6 billion and $47.9 billion at September 30, 2020 and December 31, 2019, respectively. The reduction was driven primarily by net$7.5 billion of repayments of intercompany loans from GE Capital, debtan increase in the net cash deduction of $6.2$5.0 billion (including $4.7due to a higher cash balance, the repurchase of $4.2 billion of long-term debt, maturities), a reduction in GE commercial paper of $1.1$3.0 billion and $0.7net repayments and maturities of other debt of $1.2 billion, of foreign exchange due to strengthening US dollar against most currencies, partially offset by an increasenew issuances of $2.4 billion in fair value adjustments for GE Capitalnew long-term debt in fair value hedge relationships as a result of lower interest rates.

GE Industrial net debt* was $34.0$7.5 billion and $47.9$0.4 billion at March 31, 2020 and December 31, 2019, respectively. related to changes in foreign exchange rates.
The reduction was driven primarily by a higher ending cash balance mainly as a result of the proceeds from the sale of the BioPharma business.

In 2015, senior unsecured notes and commercial paper were assumed by GE upon its merger with GE Capital. Under the conditions of the 2015 assumed debt agreement, GE Capital agreed to continue making required principal and interest payments on behalf of GE, resulting in the establishment of an intercompany receivable and payable between GE and GE Capital. In addition, GE Capital has periodically made intercompany loans to GE with maturity terms that mirror the assumed debt. As these loans qualify for right-of-offset presentation, they reduce the assumed debt intercompany receivable and payable between GE and GE Capital, as noted in the table below.

The following table provides a reconciliation of total short- and long-term borrowings as reported on the respective GE and GE Capital Statements of Financial Position to borrowings adjusted for assumed debt and intercompany loans:
March 31, 2020 (In billions)
GE
GE Capital
Consolidated(a)
    
Total short- and long-term borrowings$48.1
$37.6
$85.2
    
Debt assumed by GE from GE Capital(29.1)29.1

Intercompany loans with right of offset12.2
(12.2)
Total intercompany payable (receivable) between GE and GE Capital(16.9)16.9

    
Total borrowings adjusted for assumed debt and intercompany loans$31.2
$54.5
$85.2
(a)
Included $0.6 billion of eliminations of other GE borrowings from GE Capital, primarily related to timing of cash settlements associated with GE receivables monetization programs.

September 30, 2020 (In millions)
GEGE CapitalConsolidated
Total short- and long-term borrowings$44,258 $35,980 $79,463 
Debt assumed by GE from GE Capital(a)(24,134)24,134 — 
Intercompany loans with right of offset(a)4,726 (4,726)— 
Total intercompany payable (receivable) between GE and GE Capital(19,407)19,407 — 
Total borrowings adjusted for assumed debt and intercompany loans$24,851 $55,387 $79,463 
When measuring(a) See the individual financial positionsCapital Resources and Liquidity section of GE and GE Capital, assumed debt should be considered a GE Capital debt obligation, andour Annual Report on Form 10-K for the intercompany loans with the right of offset mentioned above should be considered a GE debt obligation and a reduction of GE Capital’s total debt obligations. The following table illustrates the primary components of GE and GE Capital borrowings, adjustedyear ended December 31, 2019 for further details on assumed debt and intercompany loans.
loans with right of offset.
GE (In billions)
March 31, 2020
December 31,
2019

 
GE Capital (In billions)
March 31, 2020
December 31, 2019
Commercial paper$1.9
$3.0
 Senior and subordinated notes$35.8
$36.5
GE senior notes15.4
15.5
 Senior and subordinated notes assumed by GE29.1
31.4
Intercompany loans from
GE Capital
12.2
12.2
 Intercompany loans to GE(12.2)(12.2)
Other GE borrowings1.6
2.2
 Other GE Capital borrowings(a)1.8
3.4
    Total GE Capital  
Total GE adjusted borrowings$31.2
$32.9
 adjusted borrowings$54.5
$59.0
(a) Included $0.6 billion and $1.7 billion at March 31, 2020 and December 31, 2019, respectively, of non-recourse borrowings of consolidated securitization entities where GE Capital has securitized financial assets as an alternative source of funding.

The intercompany loans from GE Capital to GE bear the right of offset against amounts owed by GE Capital to GE under the assumed debt agreement and can be prepaid by GE at any time, in whole or in part, without premium or penalty. These loans are priced at market terms and have a collective weighted average interest rate of 3.5%3.4% and term of approximately 11.812.4 years at March 31,September 30, 2020. On April 1, 2020, GE repaid $6.0 billion of intercompany loans from GE Capital, decreasing GE borrowings with an offsetting increase to GE Capital borrowings.

*Non-GAAP Financial Measure

18 2020 1Q FORM 10-Q

MD&ACAPITAL RESOURCES AND LIQUIDITY

On April 22, 2020, GE issued $6.0 billion of senior notes, comprised of $1.0 billion due 2027, $1.25 billion due 2030, $1.5 billion due 2040, and $2.25 billion due 2050, and used the proceeds to complete a tender offer to purchase $4.2 billion of GE senior notes with maturities ranging from 2020 to 2024. We intend to use the remaining proceeds to repurchase, redeem or repay GE’s outstanding debt obligations, including other notes or commercial paper. These transactions will be leverage neutral and liquidity enhancing by extending our near-team industrial debt maturities.

On April 23, 2020, GE Capital completed a tender offer to purchase $5.4 billion of GE Capital senior notes with maturities during 2020 using the proceeds from the repayment of $6.0 billion of intercompany loans from GE.

GE has in place committed revolving credit lines. The following table provides a summary of committed and available credit lines.
GE COMMITTED AND AVAILABLE REVOLVING CREDIT FACILITIES (In millions)
September 30, 2020December 31, 2019
Unused back-up revolving syndicated credit facility$15,000 $20,000 
Unused revolving syndicated credit facility— 14,772 
Bilateral revolving credit facilities5,213 7,225 
Total committed revolving credit facilities$20,213 $41,997 
Less offset provisions— 6,700 
Total net available revolving credit facilities$20,213 $35,297 
*Non-GAAP Financial Measure
2020 3Q FORM 10-Q 21

GE COMMITTED AND AVAILABLE REVOLVING CREDIT FACILITIES (In billions)
March 31, 2020
December 31, 2019
   
Unused back-up revolving syndicated credit facility$20.0
$20.0
Unused revolving syndicated credit facility14.8
14.8
Bilateral revolving credit facilities7.2
7.2
Total committed revolving credit facilities$42.0
$42.0
Less offset provisions6.7
6.7
Total net available revolving credit facilities$35.3
$35.3

Included in our credit facilities at March 31, 2020, was an unused $20.0 billion back-up revolving syndicated credit facility extended by 36 banks, expiring in 2021, and an unused $14.8 billion revolving syndicated credit facility extended by six banks, expiring on December 31, 2020. The commitments under these syndicated credit facilities may be reduced by up to $6.7 billion due to offset provisions for any bank that holds a commitment to lend under both facilities.

As part of our ordinary course refinancing processes, on April 17, 2020, we refinanced unused back-up revolving syndicated credit facility. In connection with the refinancing, we terminated the unused $20.0 billion back-up revolving syndicated credit facility and entered into a new $15.0 billion back-up revolving syndicated credit facility, expiring in April 2023. This facility does not contain any offset provisions. The new back-up revolving credit facility includes a customary net debt-to-EBITDA financial covenant.

The closing of the new $15.0 billion facility also terminated the $14.8 billion unused revolving syndicated credit facility that was scheduled to mature in December 2020, which had an aggregate revolving commitment amount of $4.2 billion effective April 14, 2020, following the sale of the BioPharma business within our Healthcare segment.

MD&ACAPITAL RESOURCES AND LIQUIDITY
Under the terms of an agreement between GE Capital and GE, GE Capital has the right to compel GE to borrow under all credit facilities in place at March 31, 2020 except the $14.8$15.0 billion unused back-up revolving syndicated credit facility expiring on December 31, 2020.facility. Under this agreement, GE would transfer the proceeds to GE Capital as intercompany loans, which would be subject to the same terms and conditions as those between GE and the lending banks. GE Capital has not exercised this right.

The following table provides a summary of the activity in the primary external sources of short-term borrowings for GE in the firstthird quarters of 2020 and 2019. GE uses its bilateral revolving credit facilities from time to time to meet its short-term liquidity needs.
(In millions)GE Commercial PaperBilateral Revolving Credit FacilitiesTotal
2020Average borrowings during the third quarter$463 $508 $971 
Maximum borrowings outstanding during the third quarter508 1,094 1,601 
Ending balance at September 30— — — 
2019Average borrowings during the third quarter$2,952 $1,314 $4,266 
Maximum borrowings outstanding during the third quarter3,112 1,900 4,924 
Ending balance at September 302,985 — 2,985 
(In billions)GE Commercial Paper
Bilateral Revolving Credit Facilities
Total
    
2020   
Average borrowings during the first quarter$2.9
$1.2
$4.1
Maximum borrowings outstanding during the first quarter3.4
1.5
4.7
Ending balance at March 311.9

1.9
    
2019   
Average borrowings during the first quarter$3.2
$1.3
$4.4
Maximum borrowings outstanding during the first quarter3.6
1.5
4.8
Ending balance at March 313.0

3.0


In the third quarter of 2020, we reduced our ending commercial paper balance to zero. Total average and maximum borrowings in the table above are calculated based on the daily outstanding balance of the sum of commercial paper and revolving credit facilities.

GE’s ending commercial paper balance decreased to $1.9 billion at March 31, 2020 from $3.0 billion at December 31, 2019, primarily as a result of market conditions and our liquidity position.

In addition to these external sources of short-term borrowings, GE and GE Capital may from time to time enter into short-term intercompany loans to utilize excess cash as an efficient source of liquidity, which are typically repaid within the same quarter.


2020 1Q FORM 10-Q 19

MD&ACAPITAL RESOURCES AND LIQUIDITY

CREDIT RATINGS AND CONDITIONS. We have relied, and may continue to rely, on the short- and long-term debt capital markets to fund, among other things, a significant portion of our operations. The cost and availability of debt financing is influenced by our credit ratings. Moody’s Investors Service (Moody’s), Standard and Poor’s Global Ratings (S&P), and Fitch Ratings (Fitch) currently issue ratings on GE and GE Capital short- and long-term debt. The credit ratings of GE and GE Capital as of the date of this filing are set forth in the table below.
Moody'sS&PFitch
GEOutlookNegativeNegativeStable
Short termP-2A-2F3
Long termBaa1BBB+BBB
Moody'sS&PFitch
GE CapitalOutlookNegativeNegativeStable
GEShort termP-2A-2F3
OutlookNegativeNegativeStable
Short termP-2A-2F3
Long termBaa1BBB+BBB
GE Capital
OutlookNegativeNegativeStable
Short termP-2A-2F3
Long termBaa1BBB+BBB
On April 10, 2020, S&P affirmed the ratings of GE and GE Capital short- and long-term debt and changed its outlook from Stable to Negative.

On April 12, 2020, Fitch lowered the credit ratings of GE and GE Capital short- and long-term debt from F2 to F3 and BBB+ to BBB, respectively, with a Stable outlook.

On April 13, 2020, Moody’s affirmed the ratings of GE and GE Capital short- and long-term debt and changed its outlook from Stable to Negative.

We are disclosing our credit ratings and any current quarter updates to these ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds.funds and access to liquidity. Our ratings may be subject to a revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. For a description of some of the potential consequences of a reduction in our credit ratings, see the Financial Risks section of Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019.

The following table provides a summary of the estimated potential liquidity impact in the event of further downgrades with regards to the most significant contractual credit ratings conditions of the Company based on their proximity to our current ratings.
(In billions)Triggers BelowAt March 31, 2020
   
Derivatives  
TerminationsBBB/Baa2$(0.4)
Cash margin postingBBB/Baa2(0.9)
Receivables Sales Programs  
Loss of cash comminglingA-2/P-2/F2$(0.6)
Alternative funding sourcesA-2/P-2/F2(0.7)
Surety bond cash collateral postingBBB-/Baa3$(0.8)
(In millions)Triggers BelowAt September 30, 2020
Derivatives
TerminationsBBB/Baa2$(277)
Cash margin postingBBB/Baa2(217)
Receivables Sales Programs
Loss of cash comminglingA-3/P-3$(129)
Alternative funding sourcesA-2/P-2(306)
Surety bond cash collateral postingBBB-/Baa3$(843)
The timing within the quarter of the potential liquidity impact of these areas may differ, as described in the following sections, which provide additional details regarding the significant credit rating conditions of the Company.

DEBT CONDITIONS. Substantially all debt agreements in place at March 31,September 30, 2020 do not contain material credit rating covenants. If our short-termGE’s unused back-up revolving syndicated credit ratings were to fall below A-2/P-2/F2, it is possible that we would lose all or partfacility and certain of our access to the tier-2 commercial paper markets, which would reduce our borrowing capacity in those markets and may result in increased utilization of ourbilateral revolving credit facilities to fund our intra-quarter operations. As of the date of this filing, the Fitch downgrade has not interrupted our ability to access the tier-2 market.contain a customary net debt-to-EBITDA financial covenant, which GE satisfied at September 30, 2020.


22 2020 3Q FORM 10-Q

MD&ACAPITAL RESOURCES AND LIQUIDITY
DERIVATIVE CONDITIONS. Swap, forward and option contracts are executed under standard master agreements that typically contain mutual downgrade provisions that provide the ability of the counterparty to require termination if the credit ratings of the applicable GE entity were to fall below specified ratings levels agreed upon with the counterparty, primarily BBB/Baa2. Our master agreements also typically contain provisions that provide termination rights upon the occurrence of certain other events, such as a bankruptcy or events of default by one of the parties. If an agreement was terminated under any of these circumstances, the termination amount payable would be determined on a net basis and could also take into account any collateral posted. The net amount of our derivative liability subject to such termination provisions, after consideration of collateral posted by us and outstanding interest payments was $0.4$0.3 billion at March 31,September 30, 2020. This excludes exposure related to embedded derivatives, which are not subject to these provisions.

In addition, certain of our derivatives, primarily interest rate swaps, are subject to additional cash margin posting requirements if our credit ratings were to fall below BBB/Baa2. The amount of additional margin will vary based on, among other factors, market movements and changes in our positions. At March 31,September 30, 2020, the amount of additional margin that we could be required to post if we fell below these ratings levels was approximately $0.9$0.2 billion.

20 2020 1Q FORM 10-Q

MD&ACAPITAL RESOURCES AND LIQUIDITY

The Fitch downgrades did not result in a breach of any of our required ratings levels relating to derivatives.

See Note 17 to the consolidated financial statements for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.

OTHER CONDITIONS. Where we provide servicing for third-party investors under certainone of our receivable sales programs, GE is contractually permitted to commingle cash collected from customers on financing receivables sold to third-party investors with our own cash prior to payment to third-party investors, provided our short-term credit rating does not fall below A-2/P-2.A-3/P-3 (this program does not contain any Fitch ratings requirements). In the event any of our ratings were to fall below such levels, we may be required to segregate certain of these cash collections owed to third-party investors into restricted bank accounts and would lose the short-term liquidity benefit of commingling with respect to such collections. The financial impact to our intra-quarter liquidity would vary based on collections activity for a given quarter and may result in increased utilization of our revolving credit facilities. The loss of cash commingling would have resulted in an estimated maximum reduction of approximately $0.6$0.1 billion to GE intra-quarter liquidity during the firstthird quarter of 2020.

We have relied, and may continue to rely, on securitization programs to provide alternative funding for sales of GE receivables to third-party investors. If any ofIn the event our short-term credit ratings were to fall below A-2/P-2/F2,certain levels, we would not be permitted to commingle certain cash received related to sales of receivables at the timing or amountend of available liquidity generated by these programs could be adversely impacted. In the firstquarter. The Fitch downgrade in the second quarter of 2020 the estimated maximum reductionresulted in GE classifying $0.3 billion as restricted cash at September 30, 2020. The amount of cash that GE Capital would have been required to our ending available liquidity hadclassify as restricted cash if our credit ratings had fallen below these levelsA-2/P-2 was approximately $0.7 billion. In the event we fall below these ratings levels, these programs contain features that permit continued timely third-party funding subject to additional restrictions, which we do not expect to have a significant impact to the Company.$0.3 billion at September 30, 2020.

In conjunction with ordinary course commercial transactions and certain regulatory requirements, the Company may periodically enter into agreements that require us to post surety bonds to counterparties. In the first quarter of 2020, we entered into amendments to our agreements with certain of our surety bond providers that may require us to post cash collateral in the event our credit ratings were to fall below BBB-/Baa3. At March 31,September 30, 2020, the maximum amount of cash collateral we could be required to post if we fell below these levels was approximately $0.8 billion.

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 pound sterling, the Brazilian real and the Chinese renminbi, 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 the three and nine months ended March 31,September 30, 2020, and less than $0.1 billion for the three and nine months ended March 31,September 30, 2019. This analysis excludes any offsetting effect from the forecasted future transactions that are economically hedged.

See Note 17 to the consolidated financial statements for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.

STATEMENT OF CASH FLOWS – THREENINE MONTHS ENDED MARCH 31,SEPTEMBER 30, 2020 VERSUS 2019. We manage the cash flow performance of our industrial and financial services businesses separately, in order to enable us and our investors to evaluate the cash from operating activities of our industrial businesses separately from the cash flows of our financial services business.

See the Intercompany Transactions between GE and GE Capital section and Notes 4 and 20 to the consolidated financial statements for further information regarding certain transactions affecting our consolidated Statement of Cash Flows.

GE CASH FLOWS FROM CONTINUING OPERATIONS. The most significant source of cash in GE CFOA is from customer-related activities, the largest of which is collecting cash resulting from product or services sales. The most significant operating use of cash is to pay our suppliers, employees, tax authorities, contribute to post retirement plans and pay others for a wide range of material, services and taxes.


2020 3Q FORM 10-Q 23

MD&ACAPITAL RESOURCES AND LIQUIDITY
GE cash used for operating activities was $1.7$3.2 billion in 2020, an increase of $1.1$3.3 billion compared with 2019, primarily due to: an increase in cash used for working capital of $1.1 billion; and a general decrease in net income (after adjusting for the gain on the sale of BioPharma and the non-cash losslosses related to our interest in Baker Hughes), primarily due to COVID-19 impacts in our Aviation segment; partially offset by a decreasean increase in cash used for working capital of $0.6 billion; and an increase in cash paid for income taxes of $0.5 billion; partially offset by changes in contract &and other deferred assets of $0.7$0.9 billion, primarily due to higher billings on our long-term equipment contracts and an increaseda net unfavorable change in estimated profitability partially offset by higher revenue recognition, on our long-term service agreements.of $0.9 billion at Aviation (See Note 10); and an increase in cash from All other operating activities of $0.8 billion (primarily due to an increase in equipment project cost accruals of $0.3 billion and an increase in deferred income of $0.3 billion). Increases in Aviation-related customer allowance accruals (which is a component of All other operating activities) of $0.8 billion remained relatively flat compared with 2019.

We utilized the provision of the Coronavirus, Aid, Relief and Economic Security Act (CARES Act) which allows employers to defer the payment of Social Security taxes and, as a result, we deferred $0.2 billion as of September 30, 2020.

The increase in cash used for working capital was due to: an increase in cash used for accounts payable of $1.5$3.5 billion, which was primarily as a result of lower volume in 2020 and higher disbursements related to purchases of materials in prior periods; and higher net utilizationsliquidations of progress collections of $0.3 billion.$1.2 billion, which included a partial offset due to early payments received at our Aviation Military equipment business of $0.7 billion in 2020 as part of the U.S. Department of Defense's efforts to support vendors in its supply chain during the pandemic. These increases in cash used for working capital were partially offset by an increasea decrease in cash generated fromused for current receivables of $0.5$2.3 billion, which was primarily driven by lower volume, partially offset byvolume; and a higher decrease in sales of receivables; and an decrease in cash used for inventories of $0.1$1.7 billion, which was primarily driven by lower build for anticipated volumes in the year, largelymaterial purchases, partially offset by lower liquidations.


2020 1Q FORM 10-Q 21

MD&ACAPITAL RESOURCES AND LIQUIDITY

As discussed in the Significant Developments section within the Consolidated Results section of MD&A, the COVID-19 pandemic negatively impacted GE CFOA and GE Industrial free cash flows* by approximately $1 billion in the first quarter of 2020, primarily as a result of decreased net income and working capital in our Aviation segment.

GE cash from investing activities was $20.0$19.3 billion in 2020, an increase of $17.8$12.4 billion compared with 2019, primarily due to: net proceeds from the sale of our BioPharma business of $20.3 billion; and lower cash usedthe nonrecurrence of a capital contribution from GE to GE Capital of $1.5 billion in relation to net settlements between our continuing operations and discontinued operations of $0.4 billion;2019; partially offset by the nonrecurrencenonrecurrences of proceeds from the 2019 spin-off of our Transportation business of $2.9$6.2 million (including the sale of our retained ownership interests in Wabtec) and the sale of a portion of our stake in Baker Hughes of $3.0 billion. Cash used for additions to property, plant and equipment and internal-use software, which is a component of GE Industrial free cash flows*, was $0.6$1.4 billion in both 2020, anddown $0.4 billion compared with 2019.

GE cash used for financing activities was $2.0$9.4 billion in 2020, an increase of $0.7$2.4 billion compared with 2019, primarily due toto: higher net repayments of borrowings.intercompany loans from GE Capital to GE of $7.0 billion; a reduction in commercial paper of $3.0 billion; lower repurchases of long-term debt of $0.6 billion; partially offset by new principal issuances of long-term debt of $7.5 billion in the second quarter of 2020.

GE CASH FLOWS FROM DISCONTINUED OPERATIONS.OPERATIONS. GE cash used for operatinginvesting activities of discontinued operations in 2019 was primarily reflects operating outflows relateddue to Transportation, prior tothe deconsolidation of Baker Hughes cash as a result of the reduction in our disposition ofownership interest in the segment in the firstthird quarter of 2019. GE cash used for financing activities of discontinued operations in 2019 primarily reflects payments of Baker Hughes dividends to noncontrolling interests.

GE CAPITAL CASH FLOWS FROM CONTINUING OPERATIONS. GE Capital cash from operating activities was $1.3$2.4 billion in 2020, an increase of $1.2$1.1 billion compared with 2019, primarily due to: a net increase in cash collateral received (standard market practice to minimize derivative counterparty exposures) and settlements paid from counterparties on derivative contracts of $0.9$0.7 billion and a general increase in cash generated from earnings (loss) from continuing operations.operations; partially offset by an increase in trade receivables due to short-term extensions of payment terms to customers of $0.3 billion driven primarily by COVID-19 and other market related effects.

GE Capital cash used forfrom investing activities was $0.1$7.5 billion in 2020, an increase of $3.9$4.8 billion compared with 2019, primarily due to: the repayment of GE Capital intercompany loans by GE of $7.0 billion and an increase in cash received related to net settlements between our continuing operations (primarily our Corporate function) and businesses in discontinued operations (primarily WMC) of $1.9 billion; partially offset by lower collections of financing receivables of $2.2$2.7 billion, a decrease of GECAS sales deposits of $0.8 billion primarily driven by COVID-19 and an increaseother market related effects and lower net sales of net purchases of investment securities of $1.7equity investments $0.5 billion.

GE Capital cash used for financing activities was $6.4$13.9 billion in 2020, an increase of $2.9$6.6 billion compared with 2019, primarily due to: higher net repayments of borrowings of $2.8$5.8 billion and higherthe nonrecurrence of a capital contribution from GE to GE Capital in 2019 of $1.5 billion; partially offset by lower cash settlements on derivatives hedging foreign currency debt of $0.2$0.9 billion.

INTERCOMPANY TRANSACTIONS BETWEEN GE AND GE CAPITAL.Transactions between related companies are made on arm's length terms and are reported in the GE and GE Capital columns of our financial statements, which we believe provide useful supplemental information to our consolidated financial statements. See Note 20 to the consolidated financial statements for further information.

WORKING CAPITAL TRANSACTIONS. Sales of Receivables. In order to manage short-term liquidity and credit exposure, GE may sell current customer receivables to GE Capital and other third parties. These transactions are made on arm's length terms and any discount related to time value of money is recognized within the respective GE Industrial business in the period these receivables were sold to GE Capital or third parties. See Note 4 to the consolidated financial statements for further information.

Supply Chain Finance Programs. GE facilitates voluntary supply chain finance programs with third parties, which provide participating GE suppliers the opportunity to sell their GE receivables to third parties at the sole discretion of both the suppliers and the third parties.

At March 31,September 30, 2020 and December 31, 2019, included in GE's accounts payable is $2.6was $2.5 billion and $2.4 billion, respectively, of supplier invoices that are subject to the third-party programs. Total GE supplier invoices paid through these third-party programs were $1.1$3.8 billion and $0.1$0.9 billion for the threenine months ended March 31,September 30, 2020 and 2019, respectively.

The GE liability associated with the funded participation in the GE Capital program is presented as accounts payable and amounted to $1.3$0.3 billion and $2.1 billion at March 31,September 30, 2020 and December 31, 2019, respectively.
*Non-GAAP Financial Measure
24 2020 3Q FORM 10-Q

MD&ACAPITAL RESOURCES AND LIQUIDITY
INTERCOMPANY TRANSACTIONS BETWEEN GE AND GE CAPITAL. Transactions between related companies are made on arm's length terms and are reported in the GE and GE Capital columns of our financial statements, which we believe provide useful supplemental information to our consolidated financial statements. See Note 20 for further information.

GE Capital Finance Transactions. During the threenine months ended March 31,September 30, 2020 and 2019, GE Capital acquired from third parties fiveeight aircraft with a list price totaling $0.6$0.8 billion and 1339 aircraft with a list price totaling $1.9$5.0 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 $0.1$0.2 billion and $0.1$0.3 billion, which included $0.1 billion and an insignificant amount$0.3 billion to CFM International during the threenine months ended March 31,September 30, 2020 and 2019, respectively. Additionally, GE Capital had $2.1 billion and $2.0 billion of net book value of engines, originally manufactured by GE Aviation and affiliates and subsequently leased back to GE Aviation and affiliates at March 31,September 30, 2020 and December 31, 2019, respectively. There were two spare engine sales from our Aviation segment to our GECAS business in the three months ended September 30, 2020.

Also, during the threenine months ended March 31,September 30, 2020 and 2019, GE recognized equipment revenues of $0.5$1.9 billion and $0.2$1.0 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.

For certain of these investments, in order to meet its underwriting criteria, GE Capital may obtain a direct guarantee from GE related to the performance of the third party. GE guarantees include direct performance or payment guarantees, return on investment guarantees and asset value guarantees. As of March 31,September 30, 2020, GE had outstanding guarantees to GE Capital on $1.0$0.9 billion of funded exposure and $0.8$0.5 billion of unfunded commitments, which included guarantees issued by industrial businesses. The recorded contingent liability for these guarantees was insignificant as of March 31,September 30, 2020 and is based on individual transaction level defaults, losses and/or returns.

*Non-GAAP Financial Measure

22 2020 1Q FORM 10-Q

MD&ACRITICAL ACCOUNTING ESTIMATES

CRITICAL ACCOUNTING ESTIMATES
ESTIMATES.Please refer to the Critical Accounting Estimates and Other Items sections within MD&A and Note 1 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2019, and Other Items within MD&A for a further discussion of our accounting policies and critical accounting estimates. COVID-19 related market events may have an effect on our Insurance business and pension assumptions.

INSURANCE AND INVESTMENT CONTRACTS.
At March 31, 2020, our insurance liabilities and annuity benefits of $38.2 billion are primarily supported by investment securities of $37.6 billion and commercial mortgage loans of $1.9 billion, net of their allowance for losses, respectively.

Future policy benefit reserves. Future changes in the discount rate assumption used in our annual premium deficiency testing performed in the third quarter across our run-off insurance portfolio may be required. A lower discount rate, holding all other assumptions constant, will result in an increase in our future policy benefit reserves on a GAAP basis. Furthermore, a lower discount rate may be required under statutory asset adequacy testing that is relevant for determining the amount of capital to be contributed to our insurance subsidiaries.

Our GAAP discount rate is based upon the actual yields on our investment portfolio and our forecasted reinvestment rates, which comprise the future rates at which we expect to invest proceeds from investment maturities, net of operating cash flows, and projected future capital contributions. Although the movement in market rates impacts the reinvestment rate, it does not materially impact the actual yield on our existing investments. While credit spreads on fixed-income securities widened during the quarter, benchmark interest rates in the U.S. have been lowered which may impact other discount rate assumptions, including the period over which the reinvestment rate increases to the expected long-term average investment yield and the expected long-term average investment yield (including changes to expected default rates). Furthermore, expected returns on higher yielding asset classes may change.

For further information on our overall discount rate, reinvestment rate and mortality assumptions, refer to the GAAP Reserve Sensitivities included in Other Items within MD&A of our Annual Report on Form 10-K for the year ended December 31, 2019.

Investments. Our investment security portfolio may experience higher gross unrealized losses, downgrades in credit ratings and higher default rates and result in an increase to the allowance for losses on assets supporting our insurance liabilities. See Note 3 to the consolidated financial statements for further information about our investment securities.

PENSION ASSUMPTIONS. As discussed in Critical Accounting Estimates in our Annual Report on Form 10-K for the year ended December 31, 2019, our defined benefit pension plans are accounted for on an actuarial basis and measured annually as of December 31. Accounting for defined benefit plans requires the selection of certain assumptions and actual results in any given year will often differ from actuarial assumptions because of economic or other factors.

annually. During the first quarternine months of 2020, financial markets and interest rates have experienced volatility, which could result in a change in the discount rate used to measure our pension benefit obligation or our pension assets may realize less than our expected long-term rate of return, either of which could result in a material change in the funded status of our pension plans when we measure them at December 31, 2020. Our discount rate is determined using the weighted average of market-observed yields for high-quality fixed income securities with maturities that correspond to the payments of benefits and while benchmark interest rates in the U.S. have been lowered credit spreads on high-quality fixed incomes securities have widened.

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, changes in key assumptions for our principal pension plans would have the following effects.
Discount rate - A 25 basis point decrease in the discount rate would increase pension cost in the following year by about $0.2 billion and would increase the pension benefit obligation by about $2.3 billion.
Expected return on assets - A 50 basis point decrease in the expected return on assets would increase pension cost in the following year by about $0.3 billion.

OTHER ITEMS
INSURANCE. At September 30, 2020, our insurance liabilities and annuity benefits of $41.5 billion were primarily supported by investment securities of $41.2 billion and commercial mortgage loans of $1.9 billion, net of their allowance for losses, respectively. 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.

For additional information, see Note 12 to the consolidated financial statements and Other Items - Insurance in our Annual Report on Form 10-K for the year ended December 31, 2019.

Critical Accounting Estimates. Our insurance reserves include the following key accounting estimates and assumptions described below.

Future policy benefit reserves. Future policy benefit reserves represent the present value of future policy benefits less the present value of future gross premiums based on actuarial assumptions including, but not limited to, morbidity (i.e., frequency and severity of claim, including claim termination rates and benefit utilization rates); morbidity improvement (i.e., assumed rate of improvement in morbidity in the future); mortality (i.e., life expectancy or longevity); mortality improvement (i.e., assumed rate that mortality is expected to reduce over time); policyholder persistency or lapses (i.e., the length of time a policy will remain in force); anticipated premium increases or benefit reductions associated with future in-force rate actions, including actions that are: (a) approved and not yet implemented, (b) filed but not yet approved, and (c) estimated on future filings through 2028, on long-term care insurance policies; and interest rates. Assumptions are locked-in throughout the remaining life of a contract unless a premium deficiency develops.
2020 3Q FORM 10-Q 25

MD&AOTHER ITEMS
Claim reserves. Claim reserves are established when a claim is incurred and represents our best estimate of the present value of the ultimate obligations for future claim payments and claim adjustment expenses. Key inputs include actual known facts about the claim, such as the benefits available and cause of disability of the claimant, as well as assumptions derived from our actual historical experience and expected future changes in experience factors. Claim reserves are evaluated periodically for potential changes in loss estimates with the support of qualified actuaries, and any changes are recorded in earnings in the period in which they are determined.

Reinsurance recoverables. We cede insurance risk to third-party reinsurers for a portion of our insurance contracts, primarily on long-term care insurance policies, and record receivables for estimated recoveries as we are not relieved from our primary obligation to policyholders or cedents. These receivables are estimated in a manner consistent with the future policy benefit reserves and claim reserves. Reserves ceded to reinsurers, net of allowance, were $2.5 billion and $2.4 billion at September 30, 2020 and December 31, 2019, respectively, and are included in the caption Other GE Capital receivables in our consolidated Statement of Financial Position.

Premium Deficiency Testing. We annually perform premium deficiency testing in the third quarter in the aggregate across our run-off insurance portfolio. The premium deficiency testing assesses the adequacy of future policy benefit reserves, net of unamortized capitalized acquisition costs, using current assumptions without provision for adverse deviation. A comprehensive review of premium deficiency assumptions is a complex process and depends on a number of factors, many of which are interdependent and require evaluation individually and in the aggregate across all insurance products. The vast majority of our run-off insurance operations consists of reinsurance from multiple ceding insurance entities pursuant to treaties having complex terms and conditions. Premium deficiency testing relies on claim and policy information provided by these ceding entities and considers the reinsurance treaties and underlying policies. In order to utilize that information for purposes of completing experience studies covering all key assumptions, we perform detailed procedures to conform and validate the data received from the ceding entities. Our long-term care insurance business includes coverage where credible claim experience for higher attained ages is still emerging, and to the extent future experience deviates from current expectations, new projections of claim costs extending over the expected life of the policies may be required. Significant uncertainties exist in making projections for these long-term care insurance contracts, which requires that we consider a wide range of possible outcomes.

The primary assumptions used in the premium deficiency tests include:

Morbidity. Morbidity assumptions used in estimating future policy benefit reserves are based on estimates of expected incidences of disability among policyholders and the costs associated with these policyholders asserting claims under their contracts, and these estimates account for any expected future morbidity improvement. For long-term care exposures, estimating expected future costs includes assessments of incidence (probability of a claim), utilization (amount of available benefits expected to be incurred) and continuance (how long the claim will last). Prior to 2017, premium deficiency assumptions considered the risk of anti-selection by including issue age adjustments to morbidity based on an actuarial assumption that long-term care policies issued to younger individuals would exhibit lower expected incidences and claim costs than those issued to older policyholders. Recent claim experience and the development of reconstructed claim cost curves indicated issue age differences had minimal impact on claim cost projections, and, accordingly, beginning in 2017, issue age adjustments were eliminated in developing morbidity assumptions. Higher morbidity increases, while lower morbidity decreases, the present value of expected future benefit payments.

Rate of Change in Morbidity. Our annual premium deficiency testing incorporates our best estimates of projected future changes in the morbidity rates reflected in our base claim cost curves. These estimates draw upon a number of inputs, some of which are subjective, and all of which are interpreted and applied in the exercise of professional actuarial judgment in the context of the characteristics specific to our portfolios. This exercise of judgment considers factors such as the work performed by internal and external independent actuarial experts engaged to advise us in our annual testing, the observed actual experience in our portfolios measured against our base projections, industry developments, and other trends, including advances in the state of medical care and health-care technology development. With respect to industry developments, we take into account that there are differences between and among industry peers in portfolio characteristics (such as demographic features of the insured populations), the aggregate effect of morbidity improvement or deterioration as applied to base claim cost projections, the extent to which such base cost projections reflect the most current experience, and the accepted diversity of practice in actuarial professional judgment. We assess the potential for any change in morbidity with reference to our existing base claim cost projections, reconstructed in 2017. Projected improvement or deterioration in morbidity can have a material impact on our future claim cost projections, both on a stand-alone basis and also by virtue of influencing other variables such as discount rate and premium rate increases.

Mortality. Mortality assumptions used in estimating future policy benefit reserves are based on published mortality tables as adjusted for the results of our experience studies and estimates of expected future mortality improvement. 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.

Discount rate. Interest rate assumptions used in estimating the present value of future policy benefit reserves are based on expected investment yields, net of related investment expenses and expected defaults. In estimating future investment yields, we consider the actual yields on our current investment securities held by our run-off insurance operations and the future rates at which we expect to reinvest any proceeds from investment security maturities, net of other operating cash flows, and the projected future capital contributions into our run-off insurance operations. Lower future investment yields result in a lower discount rate and a higher present value of future policy benefit reserves.


26 2020 3Q FORM 10-Q

MD&AOTHER ITEMS
Future long-term care premium rate increases. As a reinsurer, we rely upon the primary insurers that issued the underlying policies to file proposed premium rate increases on those policies with the relevant state insurance regulators. While we have no direct ability to seek or to institute such premium rate increases, we often collaborate with the primary insurers in accordance with reinsurance contractual terms to file proposed premium rate increases. We consider recent experience of rate increase filings made by our ceding companies along with state insurance regulatory processes and precedents in establishing our current expectations. Higher future premium rate increases lower the present value of future policy benefit reserves and lower future premium rate increases increase the present value of future policy benefit reserves.

Terminations. Terminations refers to the rate at which the underlying policies are cancelled due to either mortality, lapse (non-payment of premiums by a policyholder), or, in the case of long-term care insurance, benefit exhaustion. Termination rate assumptions used in estimating the present value of future policy benefit reserves are based on the results of our experience studies and reflect actuarial judgment. Lower termination rates increase, while higher termination rates decrease, the present value of expected future benefit payments.

In 2017, based on elevated claim experience for a portion of our long-term care insurance contracts, we initiated a comprehensive review of all premium deficiency testing assumptions across all insurance products, resulting in a reconstruction of our future claim cost projections for long-term care insurance products. While our long-term care insurance claim experience has shown some emerging modest favorable experience, it remains largely in-line with those reconstructed projections. However, the extent of actual experience since 2017 to date is limited in the context of a long-tailed, multi-decade portfolio.

2020 Premium Deficiency Testing. We completed our annual premium deficiency testing in the aggregate across our run-off insurance portfolio in the third quarter of 2020. These procedures included updating experience studies since our last test completed in the third quarter of 2019, independent actuarial analysis and review of industry benchmarks. As we experienced a premium deficiency in 2019, our 2020 premium deficiency testing started with a zero margin and, accordingly, any net adverse development would result in a future premium deficiency. Using our most recent future policy benefit reserve assumptions, including changes to our assumptions related to morbidity, future premium rate increases and discount rate, the 2020 premium deficiency testing results indicated there was a positive margin of less than 2% of the recorded future policy benefit reserves, excluding Other adjustments, at September 30, 2020. 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 increase in the premium deficiency testing margin from our 2019 testing was primarily attributable to modestly favorable emerging morbidity experience in our long-term care insurance portfolio, primarily at the older attained ages, in the period since the 2017 reconstruction of our future claim cost projections ($0.4 billion) and higher projected future premium rate increase approvals ($0.2 billion), partially offset by a decline in the overall discount rate to a weighted average rate of 5.70% compared to 5.74% in 2019 ($0.2 billion). This decline in the discount rate from 2019 to 2020 reflects a lower expected reinvestment rate, due to lower benchmark interest rates in the U.S, increasing to a lower expected long-term average investment yield over a longer period and slightly lower actual yields on our investment security portfolio, partially offset by increased allocations to higher yielding asset classes introduced with our 2018 strategic initiatives, which included a modest decline in expected yield compared to 2019 assumptions.

As noted above, while our observed long-term care insurance claim experience has shown some emerging modest favorable 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 improvement, mortality, mortality improvement, or terminations in 2020.
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 2019, we have implemented approximately $0.3 billion of previously approved rate increase actions and expect higher projected future premium rate increase approvals of approximately $0.2 billion. Our 2020 premium deficiency test includes approximately $1.9 billion of anticipated future premium increases or benefit reductions associated with future in-force rate actions. This represents a decrease of $0.1 billion from our 2019 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 2028 and includes the effects of the lower discount rate mentioned above and longer anticipated timing to achieve 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 is not reflected in the experience studies data used in our 2020 premium deficiency testing. However, we assessed certain scenarios to understand potential impacts associated with COVID-19 and, due to the insignificance and short-term nature of such uncertain future impacts, including the natural offsets from mortality in the aggregate across our run-off insurance products, 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 2020 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.
2020 3Q FORM 10-Q 27

MD&AOTHER ITEMS
GAAP Reserve Sensitivities. The results of our premium deficiency testing are sensitive to the assumptions described above. Considering the results of the 2020 premium deficiency test which resulted in a small 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 or the use of different factors could result in materially different outcomes from those reflected below.
2019 assumption2020 assumptionHypothetical change in 2020 assumption
Estimated increase to projected present value of future cash flows
(In millions, pre-tax)
Long-term care insurance morbidity improvement1.25% per year over 12 to 20 years1.25% per year over 12 to 20 years25 basis point reduction
No morbidity improvement
$600
$3,400
Long-term care insurance morbidityBased on company experienceBased on company experience5% increase in dollar amount of paid claims$1,000
Long-term care insurance mortality improvement0.5% per year for 10 years with annual improvement graded to 0% over next 10 years0.5% per year for 10 years with annual improvement graded to 0% over next 10 years1.0% per year for 10 years with annual improvement graded to 0% over next 10 years$400
Total terminations:
Long-term care insurance mortalityBased on company experienceBased on company experienceAny change in termination assumptions that reduce total terminations by 10%$1,100
Long-term care insurance lapse rateVaries 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 exhaustionBased on company experienceBased on company experience
Long-term care insurance future premium rate increasesVaries by block based on filing experienceVaries by block based on filing experience25% adverse change in premium rate increase success rate$500
Discount rate:
Overall discount rate5.74%5.70%25 basis point reduction$900
Reinvestment rate3.05%; grading to a long-term average investment yield of 5.9%2.70%; grading to a long-term average investment yield of 5.8%25 basis point reduction; grading to a long-term average investment yield of 5.8%Less than $100
Structured settlement annuity mortalityBased on company experienceBased on company experience5% decrease in mortality$100
Life insurance mortalityBased on company experienceBased on company experience5% 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 required statutory capital levels of our insurance legal entities. We annually perform statutory asset adequacy testing and expect our December 31, 2020 testing process to be completed in the first quarter of 2021, 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 and Note 12 to the consolidated financial statements and Other Items within MD&A in our Annual Report on Form 10-K for the year ended December 31, 2019 for further information.


28 2020 3Q FORM 10-Q

MD&AOTHER ITEMS
NEW ACCOUNTING STANDARDS. The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts with an effective date for periods beginning after December 31, 2021, with an election to adopt early. On September 30, 2020, the FASB directed the staff to draft a final ASU to defer the effective date for all insurance entities by one year and to allow the early application transition date to be either the beginning of the prior period or the earliest prior period presented. We are evaluating the effect of the standard on our consolidated financial statements and anticipate that its adoption will significantly change the accounting for measurements of our long-duration insurance liabilities. The ASU requires cash flow assumptions used in the measurement of various insurance liabilities to be reviewed at least annually and updated if actual experience or other evidence indicates previous assumptions need to be revised with any required changes recorded in earnings. Under the current accounting guidance, the discount rate is based on expected investment yields, while under the ASU the discount rate will be equivalent to the upper-medium grade (i.e., single A) fixed-income instrument yield reflecting the duration characteristics of the liability and is required to be updated in each reporting period with changes recorded in other comprehensive income. In measuring the insurance liabilities under the new standard, contracts shall not be grouped together from different issue years. These changes result in the elimination of premium deficiency testing and shadow adjustments. While we continue to evaluate the effect of the standard on our ongoing financial reporting, we anticipate that the adoption of the ASU will materially affect our financial statements. As the ASU is only applicable to the measurements of our long-duration insurance liabilities under GAAP, it will not affect the accounting for our insurance reserves or the levels of capital and surplus under statutory accounting practices.

2020 1Q FORM 10-Q 23

MD&ANON-GAAP FINANCIAL MEASURES

NON-GAAP FINANCIAL MEASURES
MEASURES.We believe that presenting non-GAAP financial measures provides management and investors useful measures to evaluate performance and trends of the total company and its businesses. This includes adjustments in recent periods to GAAP financial measures to increase period-to-period comparability following actions to strengthen our overall financial position and how we manage our business.

In addition, management recognizes that certain non-GAAP terms may be interpreted differently by other companies under different circumstances. In various sections of this report we have made reference to the following non-GAAP financial measures in describing our (1) revenues, specifically GE Industrial organic revenues by segment; BioPharma organic revenues, GE Industrial organic revenues, and GE Industrial equipment and services organic revenues (2) profit, specifically GE Industrial organic profit and profit margin by segment; BioPharma organic profit and profit margin, Adjusted GE Industrial profit and profit margin (excluding certain items); Adjusted GE Industrial organic profit and profit margin; Adjusted earnings (loss); and Adjusted earnings (loss) per share (EPS), (3) cash flows, specifically GE Industrial free cash flows (FCF), and (4) debt balances, specifically GE Industrial net debt.

The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow.
GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP)
(Dollars in millions)RevenuesSegment profit (loss)Profit margin
Three months ended September 3020202019V%20202019V%20202019V pts
Power (GAAP)$4,025 $3,926 %$150 $(144)F3.7 %(3.7)%7.4pts
Less: acquisitions— — — — 
Less: business dispositions— 25 — 
Less: foreign currency effect— — (5)— 
Power organic (Non-GAAP)$4,026 $3,901 %$155 $(147)F3.8 %(3.8)%7.6pts
Renewable Energy (GAAP)$4,525 $4,425 %$$(98)F0.1 %(2.2)%2.3pts
Less: acquisitions— — — — 
Less: business dispositions— 37 — (7)
Less: foreign currency effect(32)— (2)— 
Renewable Energy organic (Non-GAAP)$4,558 $4,388 %$$(91)F0.2 %(2.1)%2.3pts
Aviation (GAAP)$4,919 $8,109 (39)%$356 $1,718 (79)%7.2 %21.2 %(14.0)pts
Less: acquisitions— — — — 
Less: business dispositions— 73 — 
Less: foreign currency effect— (5)— 
Aviation organic (Non-GAAP)$4,913 $8,036 (39)%$361 $1,717 (79)%7.3 %21.4 %(14.1)pts
Healthcare (GAAP)$4,565 $4,923 (7)%$765 $974 (21)%16.8 %19.8 %(3.0)pts
Less: acquisitions14 — (6)— 
Less: business dispositions21 825 (2)373 
Less: foreign currency effect10 — (8)— 
Healthcare organic (Non-GAAP)$4,519 $4,098 10 %$781 $601 30 %17.3 %14.7 %2.6pts
Less: BioPharma organic (Non-GAAP)$— $— $— $— 
Healthcare excluding BioPharma organic (Non-GAAP)$4,519 $4,098 10 %$781 $601 30 %17.3 %14.7 %2.6pts
2020 3Q FORM 10-Q 29
GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP)
  Revenues Segment profit (loss) Profit margin
Three months ended March 31 (In millions)
 2020
 2019
 V%
 2020
 2019
 V%
 2020
 2019
V pts
                  
Power (GAAP) $4,025
 $4,617
 (13)% $(129) $110
 U
 (3.2)% 2.4 %(5.6)pts
Less: acquisitions 16
 
   2
 
       
Less: business dispositions 15
 35
   2
 
       
Less: foreign currency effect (46) 
   2
 
       
Power organic (Non-GAAP) $4,040
 $4,583
 (12)% $(135) $110
 U
 (3.3)% 2.4 %(5.7)pts
                  
Renewable Energy (GAAP) $3,194
 $2,538
 26 % $(302) $(187) (61)% (9.5)% (7.4)%(2.1)pts
Less: acquisitions 
 
   
 
       
Less: business dispositions 
 
   
 
       
Less: foreign currency effect (64) 
   7
 
       
Renewable Energy organic (Non-GAAP) $3,258
 $2,538
 28 % $(310) $(187) (66)% (9.5)% (7.4)%(2.1)pts
                  
Aviation (GAAP) $6,892
 $7,954
 (13)% $1,005
 $1,660
 (39)% 14.6 % 20.9 %(6.3)pts
Less: acquisitions 
 
   
 
       
Less: business dispositions 13
 180
   (2) 19
       
Less: foreign currency effect (2) 
   4
 
       
Aviation organic (Non-GAAP) $6,882
 $7,774
 (11)% $1,003
 $1,641
 (39)% 14.6 % 21.1 %(6.5)pts
                  
Healthcare (GAAP) $4,727
 $4,683
 1 % $896
 $781
 15 % 19.0 % 16.7 %2.3pts
Less: acquisitions 14
 21
   
 (4)       
Less: business dispositions 
 3
   
 (32)       
Less: foreign currency effect (52) 
   (5) 
       
Healthcare organic (Non-GAAP) $4,765
 $4,659
 2 % $901
 $817
 10 % 18.9 % 17.5 %1.4pts
                  
Less: BioPharma organic (Non-GAAP) 839
 762
   380
 311
       
Healthcare excluding BioPharma organic (Non-GAAP) $3,926
 $3,897
 1 % $521
 $506
 3 % 13.3 % 13.0 %0.3pts
                  
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. We also believe presenting organic revenues* and organic profit* separately for our industrial businesses provides management and investors with useful information about the trends of our industrial businesses and enables a more direct comparison to other non-financial companies.

BIOPHARMA ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN (NON-GAAP)
  Revenues Segment profit (loss) Profit margin
Three months ended March 31 (In millions)
 2020
 2019
 V%
 2020
 2019
 V%
 2020
 2019
V pts
                  
BioPharma (GAAP) $830
 $765
 9% $382
 $312
 22% 46.0% 40.8%5.2pts
Less: acquisitions 
 
   
 
       
Less: business dispositions 
 3
   
 1
       
Less: foreign currency effect (9) 
   2
 
       
BioPharma organic (Non-GAAP) $839
 $762
 10% $380
 $311
 22% 45.3% 40.8%4.5pts
MD&ANON-GAAP FINANCIAL MEASURES

RevenuesSegment profit (loss)Profit margin
Nine months ended September 3020202019V%20202019V%20202019V pts
Power (GAAP)$12,206 $13,224 (8)%$(19)$84 U(0.2)%0.6 %(0.8)pts
Less: acquisitions19 19 (3)(2)
Less: business dispositions15 81 
Less: foreign currency effect(111)— 16 — 
Power organic (Non-GAAP)$12,283 $13,124 (6)%$(34)$83 U(0.3)%0.6 %(0.9)pts
Renewable Energy (GAAP)$11,224 $10,590 %$(493)$(469)(5)%(4.4)%(4.4)%—pts
Less: acquisitions— — — — 
Less: business dispositions60 — (7)
Less: foreign currency effect(230)— 21 — 
Renewable Energy organic (Non-GAAP)$11,445 $10,530 %$(513)$(462)(11)%(4.5)%(4.4)%(0.1)pts
Aviation (GAAP)$16,196 $23,940 (32)%$681 $4,764 (86)%4.2 %19.9 %(15.7)pts
Less: acquisitions— — — — 
Less: business dispositions13 299 (2)16 
Less: foreign currency effect(1)— — 
Aviation organic (Non-GAAP)$16,184 $23,640 (32)%$681 $4,748 (86)%4.2 %20.1 %(15.9)pts
Healthcare (GAAP)$13,185 $14,540 (9)%$2,212 $2,714 (18)%16.8 %18.7 %(1.9)pts
Less: acquisitions36 21 (17)(4)
Less: business dispositions21 1,656 (2)702 
Less: foreign currency effect(114)— (28)— 
Healthcare organic (Non-GAAP)$13,243 $12,863 %$2,259 $2,015 12 %17.1 %15.7 %1.4pts
Less: BioPharma organic (Non-GAAP)$839 $762 $379 $311 
Healthcare excluding BioPharma organic (Non-GAAP)$12,404 $12,102 %$1,879 $1,705 10 %15.1 %14.1 %1.0pts
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. We also believe presenting organic revenues* and organic profit* separately for our industrial businesses provides management and investors with useful information about the trends of our industrial businesses and enables a more direct comparison to other non-financial companies.

BIOPHARMA ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN (NON-GAAP)
Three months ended September 30RevenuesSegment profit (loss)Profit margin
(Dollars in millions)20202019V%20202019V%20202019V pts
BioPharma (GAAP)$— $786 U$— $380 U— %48.3 %(48.3)pts
Less: acquisitions— — — — 
Less: business dispositions— 786 — 380 
Less: foreign currency effect— — — — 
BioPharma organic (Non-GAAP)$— $— — %$— $— — %— %— %— pts
Nine months ended September 3020202019V%20202019V%20202019V pts
BioPharma (GAAP)$830 $2,378 (65)%$382 $1,063 (64)%46.0 %44.7 %1.3 pts
Less: acquisitions— — — — 
Less: business dispositions— 1,616 — 752 
Less: foreign currency effect(9)— — 
BioPharma organic (Non-GAAP)$839 $762 10 %$379 $311 22 %45.2 %40.8 %4.4 pts










*Non-GAAP Financial Measure

2430 2020 1Q3Q FORM 10-Q

MD&ANON-GAAP FINANCIAL MEASURES

GE INDUSTRIAL ORGANIC REVENUES (NON-GAAP)Three months ended September 30Nine months ended September 30
(Dollars in millions)20202019V%20202019V%
GE Industrial revenues (GAAP)$17,918 $21,519 (16.7)%$52,828 $63,259 (16)%
Less: acquisitions35 103 45 
Less: business dispositions(a)21 1,104 58 2,403 
Less: foreign currency effect(b)(15)— (461)— 
GE Industrial organic revenues (Non-GAAP)$17,877 $20,410 (12.4)%$53,129 $60,811 (12.6)%
Less: BioPharma organic revenue (Non-GAAP)— — 839 762 
GE Industrial organic revenues excluding BioPharma organic revenues (Non-GAAP)$17,877 $20,410 (12.4)%$52,290 $60,049 (12.9)%
(a) Dispositions impact in 2019 primarily related to our BioPharma business, with revenues of $1,616 million, Middle River and Hamble site dispositions, with revenues of $125 million and $148 million, respectively, and Current and Lighting within our Corporate segment, with revenues of $155 million and $144 million, respectively.
(b) Foreign currency impact in 2020 is primarily driven by U.S. Dollar appreciation against Euro, Brazilian Real and Chinese Yen.
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends.

GE INDUSTRIAL ORGANIC REVENUES (NON-GAAP)Three months ended March 31
(In millions)2020
2019
V%
    
GE Industrial revenues (GAAP)$18,844
$20,324
(7)%
Adjustments:   
Less: acquisitions42
21
 
Less: business dispositions(a)28
380
 
Less: foreign currency effect(b)(166)
 
GE Industrial organic revenues (Non-GAAP)$18,941
$19,923
(5)%
    
Less: BioPharma organic revenue (Non-GAAP)839
762
 
GE Industrial organic revenues excluding BioPharma organic revenues (Non-GAAP)$18,101
$19,162
(6)%
    
(a) Dispositions impact in 2019 primarily related to our Aviation business including the Middle River and Hamble site dispositions, with revenues of $125 million and $55 million, respectively, and Current within our Corporate segment, with revenues of $155 million.
(b) Foreign currency impact primarily driven by U.S. Dollar appreciation against Euro, Brazilian Real and Chinese Yen.
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends.
GE INDUSTRIAL EQUIPMENT AND SERVICESThree months ended September 30Nine months ended September 30
ORGANIC REVENUES (NON-GAAP) (Dollars in millions)
20202019V%20202019V%
GE Industrial equipment revenues (GAAP)$9,625 $10,996 (12)%$26,928 $30,873 (13)%
Less: acquisitions— — 13 14 
Less: business dispositions— 968 19 2,112 
Less: foreign currency effect— (299)— 
GE Industrial equipment organic revenues (Non-GAAP)$9,616 $10,027 (4)%$27,194 $28,747 (5)%
GE Industrial services revenues (GAAP)$8,293 $10,524 (21)%$25,901 $32,386 (20)%
Less: acquisitions35 89 31 
Less: business dispositions21 136 39 291 
Less: foreign currency effect(24)— (162)— 
GE Industrial services organic revenues (Non-GAAP)$8,261 $10,383 (20)%$25,934 $32,064 (19)%
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends.
GE INDUSTRIAL EQUIPMENT AND SERVICES ORGANICThree months ended March 31
REVENUES (NON-GAAP)Equipment Services
(In millions)2020
2019
V%
 2020
2019
V%
        
GE Industrial revenues (GAAP)$9,177
$9,608
(4)% $9,668
$10,716
(10)%
Adjustments:       
Less: acquisitions11

  31
21
 
Less: business dispositions11
314
  18
66
 
Less: foreign currency effect(111)
  (55)
 
GE Industrial organic revenues (Non-GAAP)$9,266
$9,294
 % $9,674
$10,629
(9)%
        
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends.
ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGINThree months ended March 31
(EXCLUDING CERTAIN ITEMS) (NON-GAAP) (In millions)
2020
2019
   
GE total revenues (GAAP)$18,844
$20,324
   
Costs  
GE total costs and expenses (GAAP)$19,133
$20,101
Less: GE interest and other financial charges370
520
Less: non-operating benefit costs616
564
Less: restructuring & other(a)207
267
Add: noncontrolling interests36
23
Adjusted GE Industrial costs (Non-GAAP)$17,976
$18,773
   
Other Income  
GE other income (GAAP)$6,874
$852
Less: unrealized gains (losses)(b)(5,794)13
Less: restructuring & other
9
Less: gains (losses) and impairments for disposed or held for sale businesses(b)12,439
365
Adjusted GE other income (Non-GAAP)$228
$465
   
GE Industrial profit (GAAP)$6,585
$1,076
GE Industrial profit margin (GAAP)34.9%5.3%
   
Adjusted GE Industrial profit (Non-GAAP)$1,096
$2,017
Adjusted GE Industrial profit margin (Non-GAAP)5.8%9.9%
   
(a) See the Corporate Items and Eliminations - Restructuring section for further information.
(b) See the Corporate Items and Eliminations section for further information.
We believe these measures are meaningful because they increase the comparability of period-to-period results.



2020 1Q3Q FORM 10-Q 2531

MD&ANON-GAAP FINANCIAL MEASURES
ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGINThree months ended September 30Nine months ended September 30
(EXCLUDING CERTAIN ITEMS) (NON-GAAP) (Dollars in millions)
2020201920202019
GE total revenues (GAAP)$17,918 $21,519 $52,828 $63,259 
Costs
GE total costs and expenses (GAAP)$18,705 $22,128 $56,943 $64,201 
Less: GE interest and other financial charges313 791 1,079 1,693 
Less: non-operating benefit costs603 562 1,815 1,684 
Less: restructuring & other(a)326 322 967 933 
Less: Steam asset impairments(a)363 — 363 — 
Less: goodwill impairments(a)— 740 728 1,484 
Add: noncontrolling interests(51)(5)(161)17 
Adjusted GE Industrial costs (Non-GAAP)$17,049 $19,708 $51,829 $58,423 
Other Income
GE other income (GAAP)$(509)$153 $8,481 $1,177 
Less: unrealized gains (losses)(a)(760)(86)(4,728)(125)
Less: restructuring & other— — — 
Less: gains (losses) and impairments for disposed or held for sale businesses(a)119 (97)12,632 153 
Adjusted GE other income (Non-GAAP)$132 $336 $577 $1,140 
GE Industrial profit (GAAP)$(1,296)$(456)$4,366 $236 
GE Industrial profit margin (GAAP)(7.2)%(2.1)%8.3 %0.4 %
Adjusted GE Industrial profit (Non-GAAP)$1,001 $2,147 $1,576 $5,976 
Adjusted GE Industrial profit margin (Non-GAAP)5.6 %10.0 %3.0 %9.4 %
(a) See the Corporate Items and Eliminations section for further information.
We believe these measures are meaningful because they increase the comparability of period-to-period results.

ADJUSTED GE INDUSTRIAL ORGANIC PROFITThree months ended September 30Nine months ended September 30
 (NON-GAAP) (Dollars in millions)
20202019V%20202019V%
Adjusted GE Industrial profit (Non-GAAP)$1,001 $2,147 (53)%$1,576 $5,976 (74)%
Less: acquisitions— — (8)(6)
Less: business dispositions(2)360 (3)695 
Less: foreign currency effect(15)— 15 — 
Adjusted GE Industrial organic profit (Non-GAAP)$1,018 $1,787 (43)%$1,572 $5,286 (70)%
Adjusted GE Industrial profit margin (Non-GAAP)5.6 %10.0 %(4.4)pts3.0 %9.4 %(6.4)pts
Adjusted GE Industrial organic profit margin (Non-GAAP)5.7 %8.8 %(3.1)pts3.0 %8.7 %(5.7)pts
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends.
ADJUSTED GE INDUSTRIAL ORGANIC PROFITThree months ended March 31
 (NON-GAAP) (In millions)
2020
2019
V%
    
Adjusted GE Industrial profit (Non-GAAP)$1,096
$2,017
(46) %
Adjustments:   
Less: acquisitions2
(4)

Less: business dispositions(1)(21)

Less: foreign currency effect11



Adjusted GE Industrial organic profit (Non-GAAP)$1,084
$2,041
(47) %
    
Adjusted GE Industrial profit margin (Non-GAAP)5.8%9.9%(410) bps
Adjusted GE Industrial organic profit margin (Non-GAAP)5.7%10.2%(450) bps
    
We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends.
ADJUSTED EARNINGS (LOSS) (NON-GAAP)Three months ended March 31
(In millions)2020
2019
V%
    
Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)$6,332
$920
F
Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(30)135
 
GE Industrial earnings (loss) (Non-GAAP)6,362
785
F
Non-operating benefits costs (pre-tax) (GAAP)(616)(564) 
Tax effect on non-operating benefit costs129
118
 
Less: non-operating benefit costs (net of tax)(487)(446) 
Gains (losses) and impairments for disposed or held for sale businesses (pre-tax)(a)12,439
365
 
Tax effect on gains (losses) and impairments for disposed or held for sale businesses(1,265)35
 
Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax)11,174
400
 
Restructuring & other (pre-tax)(b)(207)(258) 
Tax effect on restructuring & other43
53
 
Less: restructuring & other (net of tax)(164)(205) 
Unrealized gains (losses)(a)(5,794)13
 
Tax on unrealized gains (losses)1,096
(3) 
Less: unrealized gains (losses)(4,697)10
 
BioPharma deal expense (pre-tax)

 
Tax on BioPharma deal expense
(14) 
Less: BioPharma deal expense (net of tax)
(14) 
Less: GE Industrial U.S. tax reform enactment adjustment
(101) 
Adjusted GE Industrial earnings (loss) (Non-GAAP)$536
$1,140
(53)%
    
GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(30)135
U
Less: GE Capital U.S. tax reform enactment adjustment
99
 
Less: GE Capital tax benefit related to BioPharma sale88

 
Adjusted GE Capital earnings (loss) (Non-GAAP)$(118)$36
U
    
Adjusted GE Industrial earnings (loss) (Non-GAAP)$536
$1,140
(53)%
Add: Adjusted GE Capital earnings (loss) (Non-GAAP)(118)36
U
Adjusted earnings (loss) (Non-GAAP)$418
$1,177
(64)%
    
(a) See the Corporate Items and Eliminations section for further information.
(b) See the Corporate Items and Eliminations - Restructuring section for further information.









2632 2020 1Q3Q FORM 10-Q

MD&ANON-GAAP FINANCIAL MEASURES

ADJUSTED EARNINGS (LOSS) (NON-GAAP)Three months ended September 30Nine months ended September 30
(Dollars in millions)20202019V%20202019V%
Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(a)$(1,155)$(1,325)13 %$2,984 $(707)F
Add: Accretion of redeemable noncontrolling interests (RNCI)(6)— (141)— 
Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(52)(645)(1,558)(599)
GE Industrial earnings (loss) (Non-GAAP)$(1,109)$(680)(63)%$4,401 $(108)F
Non-operating benefits costs (pre-tax) (GAAP)(603)(562)(1,815)(1,684)
Tax effect on non-operating benefit costs127 118 381 354 
Less: non-operating benefit costs (net of tax)(476)(444)(1,434)(1,331)
Gains (losses) and impairments for disposed or held for sale businesses (pre-tax)(b)119 (97)12,632 153 
Tax effect on gains (losses) and impairments for disposed or held for sale businesses(35)(34)(1,270)
Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax)84 (130)11,362 156 
Restructuring & other (pre-tax)(b)(326)(322)(967)(924)
Tax effect on restructuring & other47 68 181 222 
Less: restructuring & other (net of tax)(279)(254)(786)(702)
Steam asset impairments (pre-tax)(b)(363)— (363)— 
Tax effect on Steam asset impairments37 — 37 — 
Less: Steam asset impairments (net of tax)(326)— (326)— 
Goodwill impairments (pre-tax)(b)— (740)(728)(1,484)
Tax effect on goodwill impairments— — (23)(55)
Less: goodwill impairments (net of tax)— (740)(751)(1,539)
Unrealized gains (losses) (pre-tax)(b)(760)(86)(4,728)(125)
Tax on unrealized gains (losses)132 18 951 26 
Less: unrealized gains (losses) (net of tax)(628)(68)(3,777)(98)
Debt extinguishment costs (pre-tax)— (255)(63)(255)
Tax effect on debt extinguishment costs— 53 (13)53 
Less: debt extinguishment costs (net of tax)— (201)(50)(201)
BioPharma deal expense (pre-tax)— — — — 
Tax on BioPharma deal expense— — — (14)
Less: BioPharma deal expense (net of tax)— — — (14)
Accretion of RNCI (pre-tax)(6)— (141)— 
Tax effect on accretion of RNCI— — — — 
Less: Accretion of RNCI (net of tax)(6)— (141)— 
Less: GE Industrial U.S. tax reform enactment adjustment(51)— (51)(101)
Adjusted GE Industrial earnings (loss) (Non-GAAP)$574 $1,158 (50)%$355 $3,722 (90)%
GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)$(52)$(645)92 %$(1,558)$(599)U
Insurance premium deficiency test charge (pre-tax)— (972)— (972)
Tax effect on insurance premium deficiency test charge— 204 — 204 
Less: Insurance premium deficiency test charge (net of tax)— (768)— (768)
Goodwill impairments (pre-tax)— — (839)— 
Tax effect on goodwill impairments— — — 
Less: goodwill impairments (net of tax)— — (836)— 
Debt extinguishment costs (pre-tax)— — (143)— 
Tax effect on debt extinguishment costs— — 24 — 
Less: debt extinguishment costs (net of tax)— — (119)— 
Less: GE Capital U.S. tax reform enactment adjustment— 99 
Less: GE Capital tax benefit related to BioPharma sale— 96 — 
Adjusted GE Capital earnings (loss) (Non-GAAP)$(61)$123 U$(701)$70 U
Adjusted GE Industrial earnings (loss) (Non-GAAP)$574 $1,158 (50)%$355 $3,722 (90)%
Add: Adjusted GE Capital earnings (loss) (Non-GAAP)(61)123 U(701)70 U
Adjusted earnings (loss) (Non-GAAP)$513 $1,282 (60)%$(346)$3,792 U
(a) Earnings for per-share calculation includes allocation of participating securities pursuant to the two-class method. See Note 16 for further information.
(b) See the Corporate Items and Eliminations section for further information.
ADJUSTED EARNINGS (LOSS) PER SHARE (EPS)Three months ended March 31
(NON-GAAP)2020
2019
V%
    
Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP)$0.72
$0.10
F
Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP)
0.02
 
GE Industrial EPS (Non-GAAP)0.73
0.09
F
Non-operating benefits costs (pre-tax) (GAAP)(0.07)(0.06) 
Tax effect on non-operating benefit costs0.01
0.01
 
Less: non-operating benefit costs (net of tax)(0.06)(0.05) 
Gains (losses) and impairments for disposed or held for sale businesses (pre-tax)(a)1.42
0.04
 
Tax effect on gains (losses) and impairments for disposed or held for sale businesses(0.14)
 
Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax)1.28
0.04
 
Restructuring & other (pre-tax)(b)(0.02)(0.03) 
Tax effect on restructuring & other
0.01
 
Less: restructuring & other (net of tax)(0.02)(0.02) 
Unrealized gains (losses)(a)(0.66)
 
Tax on unrealized gains (losses)0.13

 
Less: unrealized gains (losses)(0.54)
 
BioPharma deal expense (pre-tax)

 
Tax on BioPharma deal expense

 
Less: BioPharma deal expense (net of tax)

 
Less: GE Industrial U.S. tax reform enactment adjustment
(0.01) 
Adjusted GE Industrial EPS (Non-GAAP)$0.06
$0.13
(54)%
    
GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP)
0.02
(100)%
Less: GE Capital U.S. tax reform enactment adjustment
0.01
 
Less: GE Capital tax benefit related to BioPharma sale0.01

 
Adjusted GE Capital EPS (Non-GAAP)$(0.01)$
U
    
Adjusted GE Industrial EPS (Non-GAAP)$0.06
$0.13
(54)%
Add: Adjusted GE Capital EPS (Non-GAAP)(0.01)
U
Adjusted EPS (Non-GAAP)$0.05
$0.13
(62)%
    
(a) See the Corporate Items and Eliminations section for further information.
(b) See the Corporate Items and Eliminations - Restructuring section for further information.
Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total.
The service cost for our pension and other benefit plans are included in adjusted earnings*, which represents the ongoing cost of providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance. We believe the retained costs in Adjusted earnings* and Adjusted EPS* provides management and investors a useful measure to evaluate the performance of the total company, and increases period-to-period comparability. We also use Adjusted EPS* as a performance metric at the company level for our annual executive incentive plan for 2020. We believe presenting Adjusted Industrial earnings* and Adjusted Industrial EPS* separately for our financial services businesses also provides management and investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company.
GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP)Three months ended March 31
(In millions)2020
2019
   
GE CFOA (GAAP)$(1,662)$(607)
Add: gross additions to property, plant and equipment(504)(552)
Add: gross additions to internal-use software(58)(66)
Less: taxes related to business sales(17)(8)
GE Industrial free cash flows (Non-GAAP)$(2,207)$(1,216)
   
We believe investors may find it useful to compare GE's Industrial free cash flows* performance without the effects of cash used for taxes related to business sales. We believe this measure will better allow management and investors to evaluate the capacity of our industrial operations to generate free cash flows.








*Non-GAAP Financial Measure

2020 1Q3Q FORM 10-Q 2733

MD&ANON-GAAP FINANCIAL MEASURES

ADJUSTED EARNINGS (LOSS) PER SHARE (EPS)Three months ended September 30Nine months ended September 30
(NON-GAAP)20202019V%20202019V%
Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP)$(0.13)$(0.15)13 %$0.34 $(0.08)F
Add: Accretion of redeemable noncontrolling interests (RNCI)— — (0.02)— 
Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP)(0.01)(0.07)(0.18)(0.07)
GE Industrial EPS (Non-GAAP)$(0.13)$(0.08)(63)%$0.50 $(0.01)F
Non-operating benefits costs (pre-tax) (GAAP)(0.07)(0.06)(0.21)(0.19)
Tax effect on non-operating benefit costs0.01 0.01 0.04 0.04 
Less: non-operating benefit costs (net of tax)(0.05)(0.05)(0.16)(0.15)
Gains (losses) and impairments for disposed or held for sale businesses (pre-tax)0.01 (0.01)1.44 0.02 
Tax effect on gains (losses) and impairments for disposed or held for sale businesses— — (0.15)— 
Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax)0.01 (0.01)1.30 0.02 
Restructuring & other (pre-tax)(0.04)(0.04)(0.11)(0.11)
Tax effect on restructuring & other0.01 0.01 0.02 0.03 
Less: restructuring & other (net of tax)(0.03)(0.03)(0.09)(0.08)
Steam asset impairments (pre-tax)(0.04)— (0.04)— 
Tax effect on Steam asset impairments— — — — 
Less: Steam asset impairments (net of tax)(0.04)— (0.04)— 
Goodwill impairments (pre-tax)— (0.08)(0.08)(0.17)
Tax effect on goodwill impairments— — — (0.01)
Less: goodwill impairments (net of tax)— (0.08)(0.09)(0.18)
Unrealized gains (losses) (pre-tax)(0.09)(0.01)(0.54)(0.01)
Tax on unrealized gains (losses)0.02 — 0.11 — 
Less: unrealized gains (losses) (net of tax)(0.07)(0.01)(0.43)(0.01)
Debt extinguishment costs (pre-tax)— (0.03)(0.01)(0.03)
Tax effect on debt extinguishment costs— 0.01 — 0.01 
Less: debt extinguishment costs (net of tax)— (0.02)(0.01)(0.02)
BioPharma deal expense (pre-tax)— — — — 
Tax on BioPharma deal expense— — — — 
Less: BioPharma deal expense (net of tax)— — — — 
Accretion of RNCI (pre-tax)— — (0.02)— 
Tax effect on accretion of RNCI— — — — 
Less: Accretion of RNCI (net of tax)— — (0.02)— 
Less: GE Industrial U.S. tax reform enactment adjustment(0.01)— (0.01)(0.01)
Adjusted GE Industrial EPS (Non-GAAP)$0.07 $0.13 (46)%$0.04 $0.43 (91)%
GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP)$(0.01)$(0.07)86 %$(0.18)$(0.07)U
Insurance premium deficiency test charge (pre-tax)— (0.11)— (0.11)
Tax effect on insurance premium deficiency test charge— 0.02 — 0.02 
Less: Insurance premium deficiency test charge (net of tax)— (0.09)— (0.09)
Goodwill impairments (pre-tax)— — (0.10)— 
Tax effect on goodwill impairments— — — — 
Less: goodwill impairments (net of tax)— — (0.10)— 
Debt extinguishment costs (pre-tax)— — (0.02)— 
Tax effect on debt extinguishment costs— — — — 
Less: debt extinguishment costs (net of tax)— — (0.01)— 
Less: GE Capital U.S. tax reform enactment adjustment— — — 0.01 
Less: GE Capital tax benefit related to BioPharma sale— — 0.01 — 
Adjusted GE Capital EPS (Non-GAAP)$(0.01)$0.01 U$(0.08)$0.01 U
Adjusted GE Industrial EPS (Non-GAAP)$0.07 $0.13 (46)%$0.04 $0.43 (91)%
Add: Adjusted GE Capital EPS (Non-GAAP)(0.01)0.01 U(0.08)0.01 U
Adjusted EPS (Non-GAAP)$0.06 $0.15 (60)%$(0.04)$0.43 U
Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total.
34 2020 3Q FORM 10-Q

GE INDUSTRIAL NET DEBT (NON-GAAP) (In millions)
March 31, 2020
December 31, 2019
   
Total GE short- and long-term borrowings (GAAP)$48,132
$52,059
Less: GE Capital short- and long-term debt assumed by GE29,136
31,368
Add: intercompany loans from GE Capital12,226
12,226
Total adjusted GE borrowings$31,222
$32,917
Total pension and principal retiree benefit plan liabilities (pre-tax)(a)27,773
27,773
Less: taxes at 21%5,832
5,832
Total pension and principal retiree benefit plan liabilities (net of tax)$21,941
$21,941
GE operating lease liabilities3,266
3,369
GE preferred stock5,782
5,738
Less: 50% of GE preferred stock2,891
2,869
50% of preferred stock$2,891
$2,869
Deduction for total GE cash, cash equivalents and restricted cash(33,810)(17,613)
Less: 25% of GE cash, cash equivalents and restricted cash(8,453)(4,403)
Deduction for 75% of GE cash, cash equivalents and restricted cash$(25,358)$(13,210)
Total GE Industrial net debt (Non-GAAP)$33,962
$47,886
   
(a) Represents the total net deficit status of principal pension plans, other pension plans and retiree benefit plans at December 31, 2019. The funded status of our benefit plans is updated annually in the fourth quarter.
 
In this document we use GE Industrial net debt*, which is calculated based on rating agency methodologies. We are including the calculation of GE industrial net debt* to provide investors more clarity regarding how the credit rating agencies measure GE Industrial leverage.
MD&ANON-GAAP FINANCIAL MEASURES

The service cost for our pension and other benefit plans are included in adjusted earnings*, which represents the ongoing cost of providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance. We believe the retained costs in Adjusted earnings* and Adjusted EPS* provides management and investors a useful measure to evaluate the performance of the total company and increases period-to-period comparability. We also use Adjusted EPS* as a performance metric at the company level for our annual executive incentive plan for 2020. We believe presenting Adjusted Industrial earnings* and Adjusted Industrial EPS* separately for our financial services businesses also provides management and investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company.

GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP)Nine months ended September 30
(In millions)20202019
GE CFOA (GAAP)$(3,175)$77 
Add: gross additions to property, plant and equipment(1,302)(1,596)
Add: gross additions to internal-use software(121)(203)
Less: taxes related to business sales(837)(160)
GE Industrial free cash flows (Non-GAAP)$(3,761)$(1,562)
We believe investors may find it useful to compare GE's Industrial free cash flows* performance without the effects of cash used for taxes related to business sales. We believe this measure will better allow management and investors to evaluate the capacity of our industrial operations to generate free cash flows.

GE INDUSTRIAL NET DEBT (NON-GAAP) (In millions)
September 30, 2020December 31, 2019
Total GE short- and long-term borrowings (GAAP)$44,258 $52,059 
Less: GE Capital short- and long-term debt assumed by GE24,134 31,368 
Add: intercompany loans from GE Capital4,726 12,226 
Total adjusted GE borrowings$24,851 $32,917 
Total pension and principal retiree benefit plan liabilities (pre-tax)(a)27,773 27,773 
Less: taxes at 21%5,832 5,832 
Total pension and principal retiree benefit plan liabilities (net of tax)$21,941 $21,941 
GE operating lease liabilities3,117 3,369 
GE preferred stock5,871 5,738 
Less: 50% of GE preferred stock2,936 2,869 
50% of preferred stock$2,936 $2,869 
Deduction for total GE cash, cash equivalents and restricted cash(24,337)(17,613)
Less: 25% of GE cash, cash equivalents and restricted cash(6,084)(4,403)
Deduction for 75% of GE cash, cash equivalents and restricted cash$(18,252)$(13,210)
Total GE Industrial net debt (Non-GAAP)$34,592 $47,886 
(a) Represents the total net deficit status of principal pension plans, other pension plans and retiree benefit plans at December 31, 2019. The funded status of our benefit plans is updated annually in the fourth quarter.
In this document we use GE Industrial net debt*, which is calculated based on rating agency methodologies. We are including the calculation of GE industrial net debt* to provide investors more clarity regarding how the credit rating agencies measure GE Industrial leverage.

CONTROLS AND PROCEDURES
PROCEDURES.Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that (i) our disclosure controls and procedures were effective as of
March 31, September 30, 2020, and (ii) no change in internal control over financial reporting occurred during the quarter ended March 31,September 30, 2020, that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

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, 2019. These risk factors could materially affect our business, financial position and results of operations.

The global Coronavirus Disease 2019 (COVID-19) pandemic is having a material adverse impact on our operations and financial performance, as well as on
OTHER FINANCIAL DATA.GE did not repurchase any equity securities during the operations and financial performance of many of the customers and suppliers in industries that we serve. We are unable to predict the extent to which the pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives. Our operations and financial performance have been negatively impacted by the COVID-19 pandemic that has caused, and is expected to continue to cause, the global slowdown of economic activity (including the decrease in demand for a broad variety of goods and services), disruptions in global supply chains and significant volatility and disruption of financial markets. Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the pandemic’s impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. Further, the ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on travel and transport and workforce pressures); the impact of the pandemic and actions taken in response on global and regional economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subsides.three months ended September 30, 2020.

The COVID-19 pandemic has subjected our operations, financial performance and financial condition to a number of risks, including, but not limited to those discussed below:

Operations-related risks:
Across all of our businesses, we are facing increased operational challenges from the need to protect employee health and safety, site shutdowns, workplace disruptions and restrictions on the movement of people, raw materials and goods, both at our own facilities and at customers and suppliers. We are also experiencing, and expect to continue experiencing, lower demand and volume for products and services, customer requests for potential payment deferrals or other contract modifications, supply chain under-liquidation, delays of deliveries and the achievement of other billing milestones, delays or cancellations of new projects and related down payments and other factors related directly and indirectly to the COVID-19 pandemic that adversely impact our businesses. We expect that the longer the period of economic and global supply chain and disruption continues, the more material the adverse impact will be on our business operations, financial performance and results of operations, and this could include additional charges, impairments and other adverse financial impacts in future periods.





*Non-GAAP Financial Measure

282020 1Q3Q FORM 10-Q35

RISK FACTORSFINANCIAL STATEMENTS

STATEMENT OF EARNINGS (LOSS)Three months ended September 30
(UNAUDITED)Consolidated
(In millions; per-share amounts in dollars)20202019
Sales of goods$12,318 $14,869 
Sales of services5,558 6,635 
GE Capital revenues from services1,541 1,856 
Total revenues (Note 9)19,417 23,360 
Cost of goods sold10,833 12,503 
Cost of services sold4,442 4,825 
Selling, general and administrative expenses3,227 3,293 
Interest and other financial charges745 1,279 
Insurance losses and annuity benefits624 1,463 
Goodwill impairments (Note 8)740 
Non-operating benefit costs605 565 
Other costs and expenses84 99 
Total costs and expenses20,561 24,767 
Other income (Note 22)(517)158 
GE Capital earnings (loss) from continuing operations
Earnings (loss) from continuing operations before income taxes(1,660)(1,249)
Benefit (provision) for income taxes501 (41)
Earnings (loss) from continuing operations(1,160)(1,290)
Earnings (loss) from discontinued operations, net of taxes (Note 2)(35)(8,093)
Net earnings (loss)(1,195)(9,383)
Less net earnings (loss) attributable to noncontrolling interests(51)40 
Net earnings (loss) attributable to the Company(1,144)(9,423)
Preferred stock dividends(46)(42)
Net earnings (loss) attributable to GE common shareholders$(1,190)$(9,465)
Amounts attributable to GE common shareholders
Earnings (loss) from continuing operations$(1,160)$(1,290)
Less net earnings (loss) attributable to noncontrolling interests,
   continuing operations(51)(7)
Earnings (loss) from continuing operations attributable to the Company(1,109)(1,283)
Preferred stock dividends(46)(42)
Earnings (loss) from continuing operations attributable
   to GE common shareholders(1,155)(1,325)
Earnings (loss) from discontinued operations, net of taxes(35)(8,093)
Less net earnings (loss) attributable to
   noncontrolling interests, discontinued operations— 46 
Net earnings (loss) attributable to GE common shareholders$(1,190)$(9,465)
Earnings (loss) per share from continuing operations (Note 16)
Diluted earnings (loss) per share$(0.13)$(0.15)
Basic earnings (loss) per share$(0.13)$(0.15)
Net earnings (loss) per share (Note 16)
Diluted earnings (loss) per share$(0.14)$(1.08)
Basic earnings (loss) per share$(0.14)$(1.08)
Dividends declared per common share$0.01 $0.01 
Customer-related risks:






36 In particular, the interruption of regional and international air travel from COVID-19 has resulted in the loss of business and leisure traffic and is having a material adverse effect on our airline and airframer customers, the viability of their businesses and their demand for our services and products. Changes in passenger air travel trends arising from COVID-19 may continue to develop or persist over time and further contribute to this adverse effect. We are also observing a significant increase in the number of requests for payment deferrals, contract modifications, aircraft lease restructurings and similar actions across the aviation sector, and these trends may lead to additional charges, impairments and other adverse financial impacts at GE Aviation and GE Capital Aviation Services over time. We have depended on the strength of our Aviation business as we have been working to improve the operations and execution of other GE businesses and strengthen the company’s balance sheet. As a result, disruption of the aviation industry, which could continue for an uncertain period of time, is particularly significant for GE. Across our businesses, to varying degrees, we anticipate that some existing or potential customers will continue to delay or cancel plans to purchase our products and services, or may not be able to fulfill prior obligations in a timely fashion, as a result of ongoing effects related to the COVID-19 pandemic and adverse economic conditions more broadly.

Leverage- and market-related risks: The current financial market dynamics and volatility pose heightened risks to our timelines for decreasing our leverage, and we now expect to achieve our prior targets over a longer period than previously announced as we seek to maintain appropriate liquidity to compensate for lower cash flows from operations or as variables impacting our leverage ratios fluctuate with extreme market volatility. For example, lower discount rates and lower asset valuations at the time of remeasurement can materially impact the calculation of long-term liabilities such as our pension deficit, GAAP insurance reserve and insurance statutory calculations. In addition, extreme volatility in financial and commodities markets has had and may continue to have adverse impacts on other asset valuations such as the market value of our remaining equity interest in Baker Hughes and the value of the investment portfolios supporting our pension and long-term insurance liabilities. Our long-term liabilities are sensitive to numerous factors and assumptions that can move in offsetting directions and should be considered as of the time of a relevant measurement event.

Liquidity- and funding-related risks: While we have significant sources of cash and liquidity and access to committed credit lines, a prolonged period of generating lower cash from operations could adversely affect our financial condition and the achievement of our strategic objectives. As described in the Capital Resources and Liquidity section of this report, in April 2020 Moody's and S&P changed their credit rating outlooks for GE and GE Capital from Stable to Negative, and Fitch lowered its credit ratings for GE and GE Capital. There can also be no assurance that we will not face additional credit rating downgrades as a result of weaker than anticipated performance of our businesses, slower progress in decreasing our leverage or other factors. Future downgrades could further adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets, and a significant downgrade could have an adverse commercial impact on our industrial businesses. Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding (including for receivables monetization or supply chain finance programs), which could adversely affect our business, financial position and results of operations. Although the U.S. federal and other governments have announced a number of funding programs to support businesses, our ability or willingness to access funding under such programs may be limited by regulations or other guidance, or by further change or uncertainty related to the terms of these programs.

As the COVID-19 pandemic continues to adversely affect our operating and financial results, it may also have the effect of heightening many of the other risks described in the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2019. In particular, see the risk factors regarding “Global macro-environment,” “Supply chain,” “Leverage and borrowings,” “Liquidity” and “Economy, customers & counterparties," as updated by the information in this risk factor. Refer also to the Critical Accounting Estimates section of this report for additional details about how COVID-19 related market events may affect our insurance business and pension assumptions. Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our operations or financial results.

LEGAL PROCEEDINGS
Refer to Legal Matters and Environmental, Health and Safety Matters in Note 19 to the consolidated financial statements for information relating to legal proceedings. The information in those sections supplements and amends the discussion set forth in the corresponding sections of Note 23 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019.



2020 1Q3Q FORM 10-Q29

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS
STATEMENT OF EARNINGS (LOSS)Three months ended March 31
(UNAUDITED)Consolidated
(In millions; per-share amounts in dollars)2020
2019
   
Sales of goods$12,364
$13,249
Sales of services6,450
7,008
GE Capital revenues from services1,709
1,945
   Total revenues (Note 9)20,524
22,202
   
Cost of goods sold10,540
10,974
Cost of services sold5,156
5,234
Selling, general and administrative expenses3,065
3,402
Interest and other financial charges794
1,065
Insurance losses and annuity benefits636
611
Non-operating benefit costs619
569
Other costs and expenses109
72
   Total costs and expenses20,918
21,927
   
Other income (Note 23)6,869
847
GE Capital earnings (loss) from continuing operations

   
Earnings (loss) from continuing operations before income taxes6,475
1,122
Benefit (provision) for income taxes(63)(140)
Earnings (loss) from continuing operations6,412
983
Earnings (loss) from discontinued operations, net of taxes (Note 2)(178)2,663
Net earnings (loss)6,233
3,645
Less net earnings (loss) attributable to noncontrolling interests34
57
Net earnings (loss) attributable to the Company6,199
3,588
Preferred stock dividends(43)(40)
Net earnings (loss) attributable to GE common shareholders$6,156
$3,549
   
Amounts attributable to GE common shareholders  
Earnings (loss) from continuing operations$6,412
$983
Less net earnings (loss) attributable to noncontrolling interests,  
   continuing operations36
23
Earnings (loss) from continuing operations attributable to the Company6,375
960
Preferred stock dividends(43)(40)
Earnings (loss) from continuing operations attributable  
   to GE common shareholders6,332
920
Earnings (loss) from discontinued operations, net of taxes(178)2,663
Less net earnings (loss) attributable to  
   noncontrolling interests, discontinued operations(2)34
Net earnings (loss) attributable to GE common shareholders$6,156
$3,549
   
Earnings (loss) per share from continuing operations (Note 16)  
Diluted earnings (loss) per share$0.72
$0.10
Basic earnings (loss) per share$0.72
$0.10
   
Net earnings (loss) per share (Note 16)  
Diluted earnings (loss) per share$0.70
$0.40
Basic earnings (loss) per share$0.70
$0.41
   
Dividends declared per common share$0.01
$0.01








30 2020 1Q FORM 10-Q

FINANCIAL STATEMENTS


STATEMENT OF EARNINGS (LOSS) (CONTINUED)Three months ended March 31
(UNAUDITED)GE(a) GE Capital
(In millions; per-share amounts in dollars)2020
2019
 2020
2019
      
Sales of goods$12,359
$13,315
 $24
$16
Sales of services6,486
7,009
 

GE Capital revenues from services

 1,899
2,210
   Total revenues18,844
20,324
 1,923
2,227
      
Cost of goods sold10,541
11,049
 17
13
Cost of services sold4,657
4,781
 535
486
Selling, general and administrative expenses2,949
3,196
 203
267
Interest and other financial charges370
520
 504
677
Insurance losses and annuity benefits

 653
633
Non-operating benefit costs616
564
 2
5
Other costs and expenses
(8) 119
99
   Total costs and expenses19,133
20,101
 2,033
2,180
      
Other income (Note 23)6,874
852
 

GE Capital earnings (loss) from continuing operations(30)135
 

      
Earnings (loss) from continuing operations before income taxes6,555
1,211
 (110)47
Benefit (provision) for income taxes(187)(268) 123
128
Earnings (loss) from continuing operations6,368
943
 13
175
Earnings (loss) from discontinued operations, net of taxes (Note 2)(178)2,663
 (164)35
Net earnings (loss)6,190
3,606
 (151)210
Less net earnings (loss) attributable to noncontrolling interests34
57
 

Net earnings (loss) attributable to the Company6,156
3,549
 (151)210
Preferred stock dividends

 (43)(40)
Net earnings (loss) attributable to GE common shareholders$6,156
$3,549
 $(194)$171
      
Amounts attributable to GE common shareholders:     
   Earnings (loss) from continuing operations$6,368
$943
 $13
$175
   Less net earnings (loss) attributable to noncontrolling interests,     
      continuing operations36
23
 

   Earnings (loss) from continuing operations attributable to the Company6,332
920
 13
175
   Preferred stock dividends

 (43)(40)
   Earnings (loss) from continuing operations attributable     
      to GE common shareholders6,332
920
 (30)135
   Earnings (loss) from discontinued operations, net of taxes(178)2,663
 (164)35
   Less net earnings (loss) attributable to     
      noncontrolling interests, discontinued operations(2)34
 

Net earnings (loss) attributable to GE common shareholders$6,156
$3,549
 $(194)$171

STATEMENT OF EARNINGS (LOSS) (CONTINUED)Three months ended September 30
(UNAUDITED)GE(a)GE Capital
(In millions; per-share amounts in dollars)2020201920202019
Sales of goods$12,314 $14,879 $12 $22 
Sales of services5,604 6,640 
GE Capital revenues from services1,669 2,075 
Total revenues17,918 21,519 1,681 2,097 
Cost of goods sold10,831 12,519 11 17 
Cost of services sold3,853 4,341 635 510 
Selling, general and administrative expenses3,106 3,172 178 199 
Interest and other financial charges313 791 486 590 
Insurance losses and annuity benefits635 1,469 
Goodwill impairments (Note 8)740 
Non-operating benefit costs603 562 
Other costs and expenses98 103 
Total costs and expenses18,705 22,128 2,045 2,890 
Other income (Note 22)(509)153 
GE Capital earnings (loss) from continuing operations(52)(645)
Earnings (loss) from continuing operations before income taxes(1,348)(1,101)(364)(793)
Benefit (provision) for income taxes143 (229)357 188 
Earnings (loss) from continuing operations(1,205)(1,330)(6)(604)
Earnings (loss) from discontinued operations, net of taxes (Note 2)(35)(8,093)(26)(18)
Net earnings (loss)(1,241)(9,423)(32)(623)
Less net earnings (loss) attributable to noncontrolling interests(51)41 (2)
Net earnings (loss) attributable to the Company(1,190)(9,465)(32)(621)
Preferred stock dividends(46)(42)
Net earnings (loss) attributable to GE common shareholders$(1,190)$(9,465)$(78)$(663)
Amounts attributable to GE common shareholders:
   Earnings (loss) from continuing operations$(1,205)$(1,330)$(6)$(604)
   Less net earnings (loss) attributable to noncontrolling interests,
      continuing operations(51)(5)(2)
   Earnings (loss) from continuing operations attributable to the Company(1,155)(1,325)(6)(603)
   Preferred stock dividends(46)(42)
   Earnings (loss) from continuing operations attributable
      to GE common shareholders(1,155)(1,325)(52)(645)
   Earnings (loss) from discontinued operations, net of taxes(35)(8,093)(26)(18)
   Less net earnings (loss) attributable to
      noncontrolling interests, discontinued operations46 
Net earnings (loss) attributable to GE common shareholders$(1,190)$(9,465)$(78)$(663)
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.



2020 1Q3Q FORM 10-Q 3137

FINANCIAL STATEMENTS

STATEMENT OF EARNINGS (LOSS)Nine months ended September 30
(UNAUDITED)Consolidated
(In millions; per-share amounts in dollars)20202019
Sales of goods$35,414 $42,220 
Sales of services17,336 20,912 
GE Capital revenues from services4,940 5,845 
Total revenues (Note 9)57,690 68,976 
Cost of goods sold31,679 35,123 
Cost of services sold14,375 15,825 
Selling, general and administrative expenses9,371 10,120 
Interest and other financial charges2,536 3,272 
Insurance losses and annuity benefits1,824 2,712 
Goodwill impairments (Note 8)1,717 1,484 
Non-operating benefit costs1,821 1,694 
Other costs and expenses322 337 
Total costs and expenses63,645 70,568 
Other income (Note 22)8,430 1,170 
GE Capital earnings (loss) from continuing operations
Earnings (loss) from continuing operations before income taxes2,476 (422)
Benefit (provision) for income taxes637 
Earnings (loss) from continuing operations3,113 (421)
Earnings (loss) from discontinued operations, net of taxes (Note 2)(206)(5,212)
Net earnings (loss)2,907 (5,634)
Less net earnings (loss) attributable to noncontrolling interests(161)73 
Net earnings (loss) attributable to the Company3,068 (5,707)
Preferred stock dividends(280)(270)
Net earnings (loss) attributable to GE common shareholders$2,787 $(5,977)
Amounts attributable to GE common shareholders
   Earnings (loss) from continuing operations$3,113 $(421)
   Less net earnings (loss) attributable to noncontrolling interests,
     continuing operations(159)16 
   Earnings (loss) from continuing operations attributable to the Company3,271 (437)
   Preferred stock dividends(280)(270)
   Earnings (loss) from continuing operations attributable
     to GE common shareholders2,991 (707)
   Earnings (loss) from discontinued operations, net of taxes(206)(5,212)
   Less net earnings (loss) attributable to noncontrolling interests,
     discontinued operations(2)58 
Net earnings (loss) attributable to GE common shareholders$2,787 $(5,977)
   Earnings (loss) per share from continuing operations (Note 16)
      Diluted earnings (loss) per share$0.32 $(0.08)
      Basic earnings (loss) per share$0.32 $(0.08)
   Net earnings (loss) per share (Note 16)
      Diluted earnings (loss) per share$0.30 $(0.69)
      Basic earnings (loss) per share$0.30 $(0.69)
Dividends declared per common share$0.03 $0.03 
STATEMENT OF FINANCIAL POSITION (UNAUDITED)Consolidated
(In millions, except share amounts)March 31, 2020
December 31, 2019
 

 
Cash, cash equivalents and restricted cash$47,286
$36,394
Investment securities (Note 3)42,299
48,521
Current receivables (Note 4)16,925
16,769
Financing receivables – net (Note 5)2,998
3,134
Inventories (Note 6)15,457
14,104
Other GE Capital receivables7,505
7,144
Property, plant and equipment – net (Note 7)(a)45,979
46,186
Receivable from GE Capital

Investment in GE Capital

Goodwill (Note 8)26,598
26,734
Other intangible assets – net (Note 8)10,381
10,653
Contract and other deferred assets (Note 10)16,136
16,801
All other assets15,841
16,461
Deferred income taxes (Note 14)10,457
9,889
Assets of businesses held for sale (Note 2)506
9,149
Assets of discontinued operations (Note 2)3,653
4,109
Total assets$262,021
$266,048
   
Short-term borrowings (Note 11)$18,122
$22,072
Short-term borrowings assumed by GE (Note 11)

Accounts payable, principally trade accounts15,212
15,926
Progress collections and deferred income (Note 10)19,818
20,508
Other GE current liabilities16,290
15,753
Non-recourse borrowings of consolidated securitization entities (Note 11)644
1,655
Long-term borrowings (Note 11)66,388
67,155
Long-term borrowings assumed by GE (Note 11)

Insurance liabilities and annuity benefits (Note 12)38,241
39,826
Non-current compensation and benefits31,104
31,687
All other liabilities(a)18,985
19,745
Liabilities of businesses held for sale (Note 2)219
1,658
Liabilities of discontinued operations (Note 2)139
203
Total liabilities225,162
236,187
   
Preferred stock (5,939,875 shares outstanding at both March 31, 2020
and December 31, 2019)
6
6
Common stock (8,747,092,000 and 8,738,434,000 shares outstanding
at March 31, 2020 and December 31, 2019, respectively)
702
702
Accumulated other comprehensive income (loss) – net attributable to GE(10,819)(11,732)
Other capital34,296
34,405
Retained earnings93,615
87,732
Less common stock held in treasury(82,516)(82,797)
Total GE shareholders’ equity35,284
28,316
Noncontrolling interests1,575
1,545
Total equity36,859
29,861
Total liabilities and equity$262,021
$266,048

(a) Included operating lease right of use assets. The related liabilities are included in All Other Liabilities.


3238 2020 1Q3Q FORM 10-Q

FINANCIAL STATEMENTS

STATEMENT OF FINANCIAL POSITION (CONTINUED)GE(a) GE Capital
(UNAUDITED) (In millions, except share amounts)
March 31,
2020

December 31, 2019
 March 31,
2020

December 31, 2019
      
Cash, cash equivalents and restricted cash$33,810
$17,613
 $13,475
$18,781
Investment securities (Note 3)4,184
10,008
 38,117
38,514
Current receivables (Note 4)13,076
13,883
 

Financing receivables - net (Note 5)

 7,457
6,979
Inventories (Note 6)15,457
14,104
 

Other GE Capital receivables

 10,764
11,767
Property, plant and equipment – net (Note 7)(b)17,088
17,447
 30,058
29,886
Receivable from GE Capital16,909
19,142
 

Investment in GE Capital14,965
15,299
 

Goodwill (Note 8)25,759
25,895
 839
839
Other intangible assets – net (Note 8)10,212
10,461
 169
192
Contract and other deferred assets (Note 10)16,168
16,833
 

All other assets8,380
8,399
 8,200
8,648
Deferred income taxes (Note 14)8,654
8,189
 1,803
1,700
Assets of businesses held for sale (Note 2)43
8,626
 247
241
Assets of discontinued operations (Note 2)156
202
 3,497
3,907
Total assets$184,861
$186,100
 $114,626
$121,454
      
Short-term borrowings (Note 11)$3,999
$5,606
 $8,833
$12,030
Short-term borrowings assumed by GE (Note 11)5,888
5,473
 2,519
2,104
Accounts payable, principally trade accounts16,004
17,702
 1,054
886
Progress collections and deferred income (Note 10)19,986
20,694
 

Other GE current liabilities17,186
16,833
 

Non-recourse borrowings of consolidated securitization entities (Note 11)

 644
1,655
Long-term borrowings (Note 11)14,997
15,085
 28,144
26,175
Long-term borrowings assumed by GE (Note 11)23,247
25,895
 14,390
17,038
Insurance liabilities and annuity benefits (Note 12)

 38,729
40,232
Non-current compensation and benefits30,649
31,208
 447
472
All other liabilities(b)15,911
16,156
 4,664
5,278
Liabilities of businesses held for sale (Note 2)181
1,620
 52
52
Liabilities of discontinued operations (Note 2)108
106
 31
97
Total liabilities148,157
156,379
 99,507
106,016
      
Preferred stock (5,939,875 shares outstanding at both March 31, 2020
and December 31, 2019)
6
6
 6
6
Common stock (8,747,092,000 and 8,738,434,000 shares outstanding
at March 31, 2020 and December 31, 2019, respectively)
702
702
 

Accumulated other comprehensive income (loss) - net attributable to GE(10,819)(11,732) (986)(852)
Other capital34,296
34,405
 17,003
17,001
Retained earnings93,615
87,732
 (1,058)(857)
Less common stock held in treasury(82,516)(82,797) 

Total GE shareholders’ equity35,284
28,316
 14,965
15,299
Noncontrolling interests1,421
1,406
 154
139
Total equity36,705
29,721
 15,119
15,438
Total liabilities and equity$184,861
$186,100
 $114,626
$121,454

STATEMENT OF EARNINGS (LOSS) (CONTINUED)Nine months ended September 30
(UNAUDITED)GE(a)GE Capital
(In millions; per-share amounts in dollars)2020201920202019
Sales of goods$35,401 $42,312 $49 $56 
Sales of services17,427 20,948 
GE Capital revenues from services5,400 6,589 
Total revenues52,828 63,259 5,449 6,645 
Cost of goods sold31,677 35,233 38 44 
Cost of services sold12,461 14,372 2,005 1,508 
Selling, general and administrative expenses9,034 9,734 543 677 
Interest and other financial charges1,079 1,693 1,647 1,913 
Insurance losses and annuity benefits1,866 2,771 
Goodwill impairments (Note 8)877 1,484 839 
Non-operating benefit costs1,815 1,684 10 
Other costs and expenses395 380 
Total costs and expenses56,943 64,201 7,340 7,303 
Other income (Note 22)8,481 1,177 
GE Capital earnings (loss) from continuing operations(1,558)(599)
Earnings (loss) from continuing operations before income taxes2,808 (363)(1,890)(658)
Benefit (provision) for income taxes22 (327)614 327 
Earnings (loss) from continuing operations2,830 (690)(1,276)(331)
Earnings (loss) from discontinued operations, net of taxes (Note 2)(206)(5,212)(173)255 
Net earnings (loss)2,624 (5,902)(1,449)(76)
Less net earnings (loss) attributable to noncontrolling interests(163)75 (2)
Net earnings (loss) attributable to the Company2,787 (5,977)(1,451)(74)
Preferred stock dividends(280)(270)
Net earnings (loss) attributable to GE common shareholders$2,787 $(5,977)$(1,731)$(344)
Amounts attributable to GE common shareholders:
   Earnings (loss) from continuing operations$2,830 $(690)$(1,276)$(331)
   Less net earnings (loss) attributable to noncontrolling interests,
     continuing operations(161)17 (2)
Earnings (loss) from continuing operations attributable to the Company2,991 (707)(1,278)(329)
   Preferred stock dividends(280)(270)
   Earnings (loss) from continuing operations attributable
     to GE common shareholders2,991 (707)(1,558)(599)
   Earnings (loss) from discontinued operations, net of taxes(206)(5,212)(173)255 
   Less net earnings (loss) attributable to noncontrolling interests,
     discontinued operations(2)58 
Net earnings (loss) attributable to GE common shareholders$2,787 $(5,977)$(1,731)$(344)
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.
(b) Included operating lease right of use assets. The related liabilities are included in All Other Liabilities.



2020 1Q3Q FORM 10-Q 3339

FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION (UNAUDITED)Consolidated
(In millions, except share amounts)September 30, 2020December 31, 2019
Cash, cash equivalents and restricted cash$39,162 $36,394 
Investment securities (Note 3)46,881 48,521 
Current receivables (Note 4)17,302 16,769 
Financing receivables – net (Note 5)3,021 3,134 
Inventories (Note 6)14,925 14,104 
Other GE Capital receivables7,389 7,144 
Property, plant and equipment – net (Note 7)44,830 46,186 
Receivable from GE Capital
Investment in GE Capital
Goodwill (Note 8)25,278 26,734 
Other intangible assets – net (Note 8)9,909 10,653 
Contract and other deferred assets (Note 10)15,571 16,801 
All other assets15,094 16,461 
Deferred income taxes (Note 14)11,367 9,889 
Assets of businesses held for sale (Note 2)9,149 
Assets of discontinued operations (Note 2)3,587 4,109 
Total assets$254,315 $266,048 
Short-term borrowings (Note 11)$5,977 $22,072 
Short-term borrowings assumed by GE (Note 11)
Accounts payable, principally trade accounts13,941 15,926 
Progress collections and deferred income (Note 10)19,523 20,508 
Other GE current liabilities16,243 15,753 
Non-recourse borrowings of consolidated securitization entities (Note 11)452 1,655 
Long-term borrowings (Note 11)73,034 67,155 
Long-term borrowings assumed by GE (Note 11)
Insurance liabilities and annuity benefits (Note 12)41,452 39,826 
Non-current compensation and benefits30,809 31,687 
All other liabilities17,802 19,745 
Liabilities of businesses held for sale (Note 2)1,658 
Liabilities of discontinued operations (Note 2)288 203 
Total liabilities219,522 236,187 
Preferred stock (5,939,875 shares outstanding at both September 30, 2020
and December 31, 2019)
Common stock (8,759,873,000 and 8,738,434,000 shares outstanding
at September 30, 2020 and December 31, 2019, respectively)
702 702 
Accumulated other comprehensive income (loss) – net attributable to GE(9,498)(11,732)
Other capital34,279 34,405 
Retained earnings89,905 87,732 
Less common stock held in treasury(82,125)(82,797)
Total GE shareholders’ equity33,269 28,316 
Noncontrolling interests1,524 1,545 
Total equity34,793 29,861 
Total liabilities and equity$254,315 $266,048 

STATEMENT OF CASH FLOWSThree months ended March 31
(UNAUDITED)Consolidated
(In millions)2020
2019
   
Net earnings (loss)$6,233
$3,645
(Earnings) loss from discontinued operations178
(2,663)
Adjustments to reconcile net earnings (loss)  
   to cash provided from operating activities  
Depreciation and amortization of property, plant and equipment (Note 7)991
995
Amortization of intangible assets (Note 8)340
367
(Earnings) loss from continuing operations retained by GE Capital

(Gains) losses on purchases and sales of business interests (Note 23)(12,372)(253)
(Gains) losses on equity securities (Note 23)5,874
(20)
Principal pension plans cost (Note 13)877
868
Principal pension plans employer contributions(70)(65)
Other postretirement benefit plans (net)(254)(289)
Provision (benefit) for income taxes63
140
Cash recovered (paid) during the year for income taxes(310)(280)
Decrease (increase) in contract and other deferred assets(12)(680)
Decrease (increase) in GE current receivables(503)545
Decrease (increase) in inventories(978)(1,165)
Increase (decrease) in accounts payable(601)215
Increase (decrease) in GE progress collections(655)(331)
All other operating activities1,050
(609)
Cash from (used for) operating activities – continuing operations(148)420
Cash from (used for) operating activities – discontinued operations(67)(298)
Cash from (used for) operating activities(214)122
   
Additions to property, plant and equipment(1,027)(1,395)
Dispositions of property, plant and equipment731
1,068
Additions to internal-use software(60)(69)
Net decrease (increase) in financing receivables(50)353
Proceeds from sale of discontinued operations
2,865
Proceeds from principal business dispositions20,488
569
Net cash from (payments for) principal businesses purchased(6)
All other investing activities(856)305
Cash from (used for) investing activities – continuing operations19,221
3,696
Cash from (used for) investing activities – discontinued operations(134)(206)
Cash from (used for) investing activities19,086
3,490
   
Net increase (decrease) in borrowings (maturities of 90 days or less)(1,905)(445)
Newly issued debt (maturities longer than 90 days)125
731
Repayments and other debt reductions (maturities longer than 90 days)(5,903)(3,546)
Dividends paid to shareholders(89)(88)
All other financing activities(147)(113)
Cash from (used for) financing activities – continuing operations(7,919)(3,461)
Cash from (used for) financing activities – discontinued operations
(274)
Cash from (used for) financing activities(7,919)(3,735)
Effect of currency exchange rate changes on cash, cash equivalents and
restricted cash
(256)78
Increase (decrease) in cash, cash equivalents and restricted cash10,697
(45)
Cash, cash equivalents and restricted cash at beginning of year37,077
35,548
Cash, cash equivalents and restricted cash at March 3147,774
35,503
Less cash, cash equivalents and restricted cash of discontinued operations at March 31437
3,671
Cash, cash equivalents and restricted cash of continuing operations at March 31$47,338
$31,832


3440 2020 1Q3Q FORM 10-Q

FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION (CONTINUED)GE(a)GE Capital
(UNAUDITED) (In millions, except share amounts)
September 30, 2020December 31, 2019September 30, 2020December 31, 2019
Cash, cash equivalents and restricted cash$24,337 $17,613 $14,825 $18,781 
Investment securities (Note 3)5,176 10,008 41,705 38,514 
Current receivables (Note 4)13,151 13,883 
Financing receivables - net (Note 5)7,425 6,979 
Inventories (Note 6)14,925 14,104 
Other GE Capital receivables9,609 11,767 
Property, plant and equipment – net (Note 7)16,363 17,447 29,567 29,886 
Receivable from GE Capital19,407 19,142 
Investment in GE Capital13,547 15,299 
Goodwill (Note 8)25,278 25,895 839 
Other intangible assets – net (Note 8)9,759 10,461 149 192 
Contract and other deferred assets (Note 10)15,604 16,833 
All other assets8,398 8,399 7,612 8,648 
Deferred income taxes (Note 14)9,332 8,189 2,035 1,700 
Assets of businesses held for sale (Note 2)8,626 241 
Assets of discontinued operations (Note 2)153 202 3,434 3,907 
Total assets$175,430 $186,100 $116,362 $121,454 
Short-term borrowings (Note 11)$1,012 $5,606 $3,417 $12,030 
Short-term borrowings assumed by GE (Note 11)2,323 5,473 1,881 2,104 
Accounts payable, principally trade accounts13,984 17,702 887 886 
Progress collections and deferred income (Note 10)19,683 20,694 
Other GE current liabilities16,931 16,833 
Non-recourse borrowings of consolidated securitization entities (Note 11)452 1,655 
Long-term borrowings (Note 11)19,113 15,085 32,111 26,175 
Long-term borrowings assumed by GE (Note 11)21,811 25,895 17,526 17,038 
Insurance liabilities and annuity benefits (Note 12)41,876 40,232 
Non-current compensation and benefits30,384 31,208 418 472 
All other liabilities15,396 16,156 3,961 5,278 
Liabilities of businesses held for sale (Note 2)1,620 52 
Liabilities of discontinued operations (Note 2)159 106 129 97 
Total liabilities140,795 156,379 102,658 106,016 
Preferred stock (5,939,875 shares outstanding at both
     September 30, 2020 and December 31, 2019)
Common stock (8,759,873,000 and 8,738,434,000 shares outstanding at
     September 30, 2020 and December 31, 2019, respectively)
702 702 
Accumulated other comprehensive income (loss) - net attributable to GE(9,498)(11,732)(870)(852)
Other capital34,279 34,405 17,006 17,001 
Retained earnings89,905 87,732 (2,595)(857)
Less common stock held in treasury(82,125)(82,797)
Total GE shareholders’ equity33,269 28,316 13,547 15,299 
Noncontrolling interests1,366 1,406 157 139 
Total equity34,635 29,721 13,704 15,438 
Total liabilities and equity$175,430 $186,100 $116,362 $121,454 
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.


STATEMENT OF CASH FLOWS (CONTINUED)Three months ended March 31
(UNAUDITED)GE(a) GE Capital
(In millions)2020
2019
 2020
2019
      
Net earnings (loss)$6,190
$3,606
 $(151)$210
(Earnings) loss from discontinued operations178
(2,663) 164
(35)
Adjustments to reconcile net earnings (loss)     
   to cash provided from operating activities     
Depreciation and amortization of property, plant and equipment (Note 7)453
505
 536
488
Amortization of intangible assets (Note 8)315
353
 25
13
(Earnings) loss from continuing operations retained by GE Capital30
(135) 

(Gains) losses on purchases and sales of business interests (Note 23)(12,372)(253) 

(Gains) losses on equity securities (Note 23)5,789
(20) 86
(1)
Principal pension plans cost (Note 13)877
868
 

Principal pension plans employer contributions(70)(65) 

Other postretirement benefit plans (net)(247)(292) (8)3
Provision (benefit) for income taxes187
268
 (123)(128)
Cash recovered (paid) during the year for income taxes(278)(272) (32)(8)
Decrease (increase) in contract and other deferred assets(12)(680) 

Decrease (increase) in GE current receivables487
(57) 

Decrease (increase) in inventories(966)(1,088) 

Increase (decrease) in accounts payable(1,468)(2) (5)(41)
Increase (decrease) in GE progress collections(673)(343) 

All other operating activities(82)(336) 784
(451)
Cash from (used for) operating activities – continuing operations(1,662)(607) 1,276
50
Cash from (used for) operating activities – discontinued operations29
(528) (95)(86)
Cash from (used for) operating activities(1,633)(1,135) 1,181
(36)
      
Additions to property, plant and equipment(504)(552) (541)(911)
Dispositions of property, plant and equipment29
79
 709
993
Additions to internal-use software(58)(66) (1)(3)
Net decrease (increase) in financing receivables

 (506)1,673
Proceeds from sale of discontinued operations
2,865
 

Proceeds from principal business dispositions20,505
561
 (16)396
Net cash from (payments for) principal businesses purchased(6)(396) 

All other investing activities81
(245) 300
1,655
Cash from (used for) investing activities – continuing operations20,046
2,246
 (56)3,802
Cash from (used for) investing activities – discontinued operations(33)(42) (101)152
Cash from (used for) investing activities20,013
2,204
 (157)3,954
      
Net increase (decrease) in borrowings (maturities of 90 days or less)(1,881)(1,170) (514)(612)
Newly issued debt (maturities longer than 90 days)1
248
 124
483
Repayments and other debt reductions (maturities longer than 90 days)(64)(290) (5,840)(3,255)
Dividends paid to shareholders(89)(88) (42)(38)
All other financing activities(12)(18) (135)(95)
Cash from (used for) financing activities – continuing operations(2,045)(1,318) (6,406)(3,518)
Cash from (used for) financing activities – discontinued operations
(273) 
(1)
Cash from (used for) financing activities(2,045)(1,592) (6,406)(3,519)
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash(143)68
 (113)10
Increase (decrease) in cash, cash equivalents and restricted cash16,193
(455) (5,495)409
Cash, cash equivalents and restricted cash at beginning of year17,617
20,528
 19,460
15,020
Cash, cash equivalents and restricted cash at March 3133,810
20,073
 13,964
15,429
Less cash, cash equivalents and restricted cash of discontinued operations
at March 31

3,078
 437
593
Cash, cash equivalents and restricted cash of continuing operations
at March 31
$33,810
$16,996
 $13,527
$14,836
2020 3Q FORM 10-Q 41

FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWSNine months ended September 30
(UNAUDITED)Consolidated
(In millions)20202019
Net earnings (loss)$2,907 $(5,634)
(Earnings) loss from discontinued operations206 5,212 
Adjustments to reconcile net earnings (loss)
   to cash provided from operating activities
Depreciation and amortization of property, plant and equipment (Note 7)3,655 2,969 
Amortization of intangible assets (Note 8)1,076 1,220 
Goodwill impairments (Note 8)1,717 1,484 
(Earnings) loss from continuing operations retained by GE Capital
(Gains) losses on purchases and sales of business interests (Note 22)(12,503)(260)
(Gains) losses on equity securities (Note 22)4,800 230 
Principal pension plans cost (Note 13)2,681 2,509 
Principal pension plans employer contributions(226)(202)
Other postretirement benefit plans (net)(712)(809)
Provision (benefit) for income taxes(637)(1)
Cash recovered (paid) during the year for income taxes(1,138)(1,427)
Decrease (increase) in contract and other deferred assets563 (321)
Decrease (increase) in GE current receivables(1,665)(1,857)
Decrease (increase) in inventories(258)(2,113)
Increase (decrease) in accounts payable(1,501)1,259 
Increase (decrease) in GE progress collections(1,397)(216)
All other operating activities2,320 1,376 
Cash from (used for) operating activities – continuing operations(112)3,423 
Cash from (used for) operating activities – discontinued operations75 (1,390)
Cash from (used for) operating activities(37)2,033 
Additions to property, plant and equipment(2,241)(4,175)
Dispositions of property, plant and equipment1,280 2,796 
Additions to internal-use software(125)(208)
Net decrease (increase) in financing receivables(37)523 
Proceeds from sale of discontinued operations5,864 
Proceeds from principal business dispositions20,610 1,124 
Net cash from (payments for) principal businesses purchased(10)
Capital contribution from GE to GE Capital
Sales of retained ownership interests in Wabtec3,383 
All other investing activities(1,582)(2,218)
Cash from (used for) investing activities – continuing operations17,895 7,087 
Cash from (used for) investing activities – discontinued operations(216)(2,037)
Cash from (used for) investing activities17,679 5,050 
Net increase (decrease) in borrowings (maturities of 90 days or less)(4,198)(185)
Newly issued debt (maturities longer than 90 days)14,452 1,449 
Repayments and other debt reductions (maturities longer than 90 days)(24,671)(13,476)
Capital contribution from GE to GE Capital
Dividends paid to shareholders(412)(411)
All other financing activities(208)(1,097)
Cash from (used for) financing activities – continuing operations(15,038)(13,721)
Cash from (used for) financing activities – discontinued operations(368)
Cash from (used for) financing activities(15,038)(14,089)
Effect of currency exchange rate changes on cash, cash equivalents and
restricted cash
(11)(131)
Increase (decrease) in cash, cash equivalents and restricted cash2,593 (7,136)
Cash, cash equivalents and restricted cash at beginning of year37,077 35,548 
Cash, cash equivalents and restricted cash at September 3039,670 28,412 
Less cash, cash equivalents and restricted cash of discontinued operations
   at September 30
508 602 
Cash, cash equivalents and restricted cash of continuing operations
   at September 30
$39,162 $27,810 

42
2020 3Q FORM 10-Q

FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS (CONTINUED)Nine months ended September 30
(UNAUDITED)GE(a)GE Capital
(In millions)2020201920202019
Net earnings (loss)$2,624 $(5,902)$(1,449)$(76)
(Earnings) loss from discontinued operations206 5,212 173 (255)
Adjustments to reconcile net earnings (loss)
   to cash provided from operating activities
Depreciation and amortization of property, plant and equipment (Note 7)1,664 1,453 2,010 1,513 
Amortization of intangible assets (Note 8)1,028 1,176 48 44 
Goodwill impairments (Note 8)877 1,484 839 
(Earnings) loss from continuing operations retained by GE Capital1,558 599 
(Gains) losses on purchases and sales of business interests (Note 22)(12,445)(260)(58)
(Gains) losses on equity securities (Note 22)4,761 232 40 (2)
Principal pension plans cost (Note 13)2,681 2,509 
Principal pension plans employer contributions(226)(202)
Other postretirement benefit plans (net)(675)(798)(37)(11)
Provision (benefit) for income taxes(22)327 (614)(327)
Cash recovered (paid) during the year for income taxes(1,805)(1,346)667 (81)
Decrease (increase) in contract and other deferred assets563 (321)
Decrease (increase) in GE current receivables(118)(2,370)
Decrease (increase) in inventories(211)(1,950)
Increase (decrease) in accounts payable(3,305)164 (32)(3)
Increase (decrease) in GE progress collections(1,424)(254)
All other operating activities1,092 322 766 433 
Cash from (used for) operating activities – continuing operations(3,175)77 2,353 1,235 
Cash from (used for) operating activities – discontinued operations34 (17)41 (1,700)
Cash from (used for) operating activities(3,141)60 2,394 (465)
Additions to property, plant and equipment(1,302)(1,596)(992)(2,795)
Dispositions of property, plant and equipment134 273 1,153 2,544 
Additions to internal-use software(121)(203)(5)(5)
Net decrease (increase) in financing receivables(297)2,399 
Proceeds from sale of discontinued operations5,864 
Proceeds from principal business dispositions20,408 1,083 34 380 
Net cash from (payments for) principal businesses purchased(10)(380)
Capital contribution from GE to GE Capital(1,500)
Sales of retained ownership interests in Wabtec3,383 
All other investing activities210 21 7,608 211 
Cash from (used for) investing activities – continuing operations19,318 6,946 7,501 2,734 
Cash from (used for) investing activities – discontinued operations(39)(3,480)(177)1,770 
Cash from (used for) investing activities19,279 3,466 7,324 4,504 
Net increase (decrease) in borrowings (maturities of 90 days or less)(4,323)(1,005)(460)(539)
Newly issued debt (maturities longer than 90 days)7,432 7,020 1,445 
Repayments and other debt reductions (maturities longer than 90 days)(12,129)(5,342)(20,043)(8,613)
Capital contribution from GE to GE Capital1,500 
Dividends paid to shareholders(265)(262)(276)(266)
All other financing activities(84)(317)(125)(805)
Cash from (used for) financing activities – continuing operations(9,369)(6,923)(13,883)(7,279)
Cash from (used for) financing activities – discontinued operations(368)(1)
Cash from (used for) financing activities(9,369)(7,290)(13,883)(7,279)
Effect of currency exchange rate changes on cash, cash equivalents and
restricted cash
(50)(103)38 (28)
Increase (decrease) in cash, cash equivalents and restricted cash6,719 (3,867)(4,126)(3,269)
Cash, cash equivalents and restricted cash at beginning of year17,617 20,528 19,460 15,020 
Cash, cash equivalents and restricted cash at September 3024,337 16,660 15,333 11,751 
Less cash, cash equivalents and restricted cash of discontinued operations
   at September 30
508 598 
Cash, cash equivalents and restricted cash of continuing operations
   at September 30
$24,337 $16,656 $14,825 $11,154 
(a) Represents the adding together of all GE Industrial affiliates and the impact of GE Capital dividends on a one-line basis. See Note 1.


2020 1Q3Q FORM 10-Q 3543

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)Three months ended September 30Nine months ended September 30
(In millions, net of tax)2020201920202019
Net earnings (loss)$(1,195)$(9,383)$2,907 $(5,634)
Less net earnings (loss) attributable to noncontrolling interests(51)40 (161)73 
Net earnings (loss) attributable to the Company$(1,144)$(9,423)$3,068 $(5,707)
Investment securities$$18 $(5)$116 
Currency translation adjustments55 762 133 1,044 
Cash flow hedges24 (2)(134)10 
Benefit plans609 655 2,248 1,838 
Other comprehensive income (loss)695 1,433 2,241 3,010 
Less: other comprehensive income (loss) attributable to noncontrolling interests(58)(43)
Other comprehensive income (loss) attributable to the Company$695 $1,491 $2,234 $3,053 
Comprehensive income (loss)$(499)$(7,950)$5,147 $(2,624)
Less: comprehensive income (loss) attributable to noncontrolling interests(50)(19)(154)30 
Comprehensive income (loss) attributable to the Company$(449)$(7,931)$5,302 $(2,654)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)Three months ended March 31
(In millions, net of tax)2020
2019
   
Net earnings (loss)$6,233
$3,645
Less net earnings (loss) attributable to noncontrolling interests34
57
Net earnings (loss) attributable to the Company$6,199
$3,588
   
Investment securities$(41)$24
Currency translation adjustments135
423
Cash flow hedges(211)38
Benefit plans1,035
545
Other comprehensive income (loss)918
1,031
Less: other comprehensive income (loss) attributable to noncontrolling interests5
101
Other comprehensive income (loss) attributable to the Company$913
$930
   
Comprehensive income (loss)$7,152
$4,675
Less: comprehensive income (loss) attributable to noncontrolling interests39
158
Comprehensive income (loss) attributable to the Company$7,113
$4,517

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)Three months ended March 31
(In millions)2020
 2019
    
Preferred stock issued$6
 $6
Common stock issued$702
 $702
    
Beginning balance(11,732) (14,414)
Investment securities(41) 23
Currency translation adjustments133
 324
Cash flow hedges(211) 35
Benefit plans1,032
 547
Accumulated other comprehensive income (loss) ending balance$(10,819) $(13,485)
Beginning balance34,405
 35,504
Gains (losses) on treasury stock dispositions(249) (507)
Stock-based compensation105
 137
Other changes35
 (788)
Other capital ending balance$34,296
 $34,345
Beginning balance87,732
 93,109
Net earnings (loss) attributable to the Company6,199
 3,588
Dividends and other transactions with shareholders(142) (145)
Changes in accounting (Note 1)(175) 368
Retained earnings ending balance$93,615
 $96,921
Beginning balance(82,797) (83,925)
Purchases(14) (38)
Dispositions295
 636
Common stock held in treasury ending balance$(82,516) $(83,328)
GE shareholders' equity balance35,284
 35,161
Noncontrolling interests balance (Note 15)1,575
 20,485
Total equity balance at March 31(a)$36,859
 $55,646

(a)
Total equity balance decreased by $(18,787) million in the last twelve months from March 31, 2019, primarily due to reduction of non-controlling interest balance of $(19,271) million attributable to Baker Hughes Class A shareholders at March 31, 2019, after-tax loss of $(8,238) million in discontinued operations due to deconsolidation of Baker Hughes in the third quarter of 2019, after-tax change in unrealized loss on our remaining interest in Baker Hughes $(4,631) million, partially offset by after-tax gain of $11,145 million due to the sale of our BioPharma business within our Healthcare segment. See Notes 2 and 3 for further information.


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)Three months ended September 30Nine months ended September 30
(In millions)2020201920202019
Preferred stock issued$$$$
Common stock issued$702 $702 $702 $702 
Beginning balance(10,194)(12,852)(11,732)(14,414)
Investment securities18 (5)116 
Currency translation adjustments55 824 129 1,084 
Cash flow hedges24 (2)(134)11 
Benefit plans609 650 2,245 1,842 
Accumulated other comprehensive income (loss) ending balance$(9,498)$(11,361)$(9,498)$(11,361)
Beginning balance34,292 34,324 34,405 35,504 
Gains (losses) on treasury stock dispositions(162)(160)(574)(817)
Stock-based compensation104 118 319 382 
Other changes46 33 129 (753)
Other capital ending balance$34,279 $34,315 $34,279 $34,315 
Beginning balance91,188 96,773 87,732 93,109 
Net earnings (loss) attributable to the Company(1,144)(9,423)3,068 (5,707)
Dividends and other transactions with shareholders(139)(138)(720)(557)
Changes in accounting (Note 1)(175)368 
Retained earnings ending balance$89,905 $87,213 $89,905 $87,213 
Beginning balance(82,320)(83,137)(82,797)(83,925)
Purchases(3)(8)(25)(53)
Dispositions198 204 697 1,038 
Common stock held in treasury ending balance$(82,125)$(82,940)$(82,125)$(82,940)
GE shareholders' equity balance33,269 27,935 33,269 27,935 
Noncontrolling interests balance (Note 15)1,524 1,219 1,524 1,219 
Total equity balance at September 30(a)$34,793 $29,153 $34,793 $29,153 

(a)Total equity balance increased by $5,639 in the last twelve months from September 30, 2019, primarily due to after-tax gain of $11,214 million due to the sale of our BioPharma business within our Healthcare segment, partially offset by after-tax change in unrealized loss on our remaining interest in Baker Hughes $(3,679) million in the nine months ended September 30, 2020. See Notes 2 and 21 for further information.



3644 2020 1Q3Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
POLICIES. We present our financial statements in a three-column format, which allows investors to see our GE industrial operations separately from our financial services operations. We believe that this provides useful supplemental information to our consolidated financial statements. To the extent that we have transactions between GE and GE Capital, these transactions are made on arm's length terms, are reported in the respective columns of our financial statements and are eliminated in consolidation. See Note 20 for further information.

Our financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP), which requires us to make estimates based on assumptions about current and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in our financial statements. Although our current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by the ongoing Coronavirus Disease 2019 (COVID-19) pandemic. The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly changing and difficult to predict. As a result, our accounting estimates and assumptions may change over time in response to COVID-19. Such changes could result in future impairments of goodwill, intangibles, long-lived assets and investment securities, revisions to estimated profitability on long-term product service agreements, incremental credit losses on receivables and debt securities, a decrease in the carrying amount of our tax assets, or an increase in our insurance liabilities and pension obligations as of the time of a relevant measurement event.

In preparing our Statement of Cash Flows, we make certain adjustments to reflect cash flows that cannot otherwise be calculated by changes in our Statement of Financial Position. These adjustments may include, but are not limited to, the effects of currency exchange, acquisitions and dispositions of businesses, businesses classified as held for sale, the timing of settlements to suppliers for property, plant and equipment, non-cash gains/losses and other balance sheet reclassifications.

We have reclassified certain prior-period amounts to conform to the current-period’s presentation. Certain columns and rows may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers in millions. Earnings per share amounts are computed independently for earnings from continuing operations, earnings from discontinued operations and net earnings. As a result, the sum of per-share amounts may not equal the total. Unless otherwise indicated, information in these notes to the consolidated financial statements relates to continuing operations. Certain of our operations have been presented as discontinued. We present businesses whose disposal represents a strategic shift that has, or will have, a major effect on our operations and financial results as discontinued operations when the components meet the criteria for held for sale, are sold, or spun-off. See Note 2 for further information.

The accompanying consolidated financial statements and notes are unaudited. The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. These consolidated financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Our significant accounting policies are described in Note 1 to the consolidated financial statements of our aforementioned Annual Report. We include herein certain updates to those policies.

Allowance for credit losses. When we record customer receivables, contract assets and financing receivables arising from revenue transactions, as well as commercial mortgage loans and reinsurance recoveriesrecoverables in GE Capital’s run-off insurance operations, financial guarantees and certain commitments, we record an allowance for credit losses for the current expected credit losses (CECL) inherent in the asset over its expected life. The allowance for credit losses is a valuation account deducted from the amortized cost basis of the assets to present their net carrying value at the amount expected to be collected. Each period the allowance for credit losses is adjusted through earnings to reflect expected credit losses over the remaining lives of the assets. We evaluate debt securities with unrealized losses to determine whether any of the losses arise from concerns about the issuer’s credit or the underlying collateral and record an allowance for credit losses, if required.

We estimate expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. When measuring expected credit losses, we pool assets with similar country risk and credit risk characteristics. Changes in the relevant information may significantly affect the estimates of expected credit losses.

ACCOUNTING CHANGES. On January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments - Credit Losses (ASU 2016-13). ASU 2016-13 requires us to prospectively record an allowance for credit losses for the current expected credit losses inherent in the asset over its expected life, replacing the incurred loss model that recognized losses only when they became probable and estimable. We recorded a $221 million increase in our allowance for credit losses and a $175 million decrease to retained earnings, net of tax, reflecting the cumulative effect on retained earnings.

In March 2020, the three monthsSEC issued a final rule amending disclosure requirements for guarantors and issuers of registered guaranteed securities under SEC Regulation S-X, Rule 3-10. The final rule is effective for filings on or after January 4, 2021, however early application is permitted. As a result of the simplification provided by this rule, beginning with our quarterly report on Form 10-Q for the period ended March 31,June 30, 2020, we increased our CECL reserves by recording a chargehave elected to earnings of $111 million to reflect higher expected credit losses in our Aviation and GE Capital segments.

early adopt the disclosure requirements.
On January 1, 2020 we adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU eliminates Step 2 of the goodwill impairment test and the qualitative assessment for any reporting unit with a zero or negative carrying amount. The ASU also requires an entity to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount. The adoption did not have an impact on our financial statements.

2020 1Q3Q FORM 10-Q 3745

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE. On March 31, 2020, we completed the sale of our BioPharma business within our Healthcare segment for total consideration of $21,141$21,112 million (after certain working capital adjustments). The consideration consisted of $20,724$20,695 million in cash and $417 million of pension liabilities that were assumed by Danaher. We received cash of $20,321 million on March 31st and an additional $403 million on April 1st. In addition, we expect to incur approximately $200incurred $185 million of cash payments directly associated with the transaction in the second quarter.transaction. As a result, we recognized a pretaxpre-tax gain of $12,292$12,362 million ($11,14511,214 million after tax)after-tax) in our consolidated Statement of Earnings (Loss).

Assets and liabilitiesIn the first half of 2020, we sold all our remaining businesses classified as held for sale, primarily compriseincluding the remaining Lighting business within our Corporate segment and the remaining PK AirFinance business within our Capital segment.
ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE (In millions)
March 31, 2020
December 31, 2019




Current receivables$217
$499
Inventories160
712
Financing receivables held for sale197
197
Property, plant, and equipment77
958
Goodwill and Other intangible assets - net169
6,286
Valuation allowance(412)(719)
Deferred income taxes
815
All other assets97
400
Assets of businesses held for sale$506
$9,149



Accounts payable & Progress collections and deferred income$135
$843
Non-current compensation and benefits
466
All other liabilities84
349
Liabilities of businesses held for sale$219
$1,658

DISCONTINUED OPERATIONS. Discontinued operations primarily include our Baker Hughes and Transportation segments, and certain businesses in our GE Capital segment (our mortgage portfolio in Poland and trailing liabilities associated with the sale of our GE Capital businesses). Results of operations, financial position and cash flows for these businesses are reported as discontinued operations for all periods presented.

In September 2019, we reduced our ownership interest in Baker Hughes from 50.2% to 36.8%. As a result, we deconsolidated our Baker Hughes segment and reclassified its results to discontinued operations for all periods presented.presented and recognized a loss of $8,715 million ($8,238 million after-tax).

We have continuing involvement with Baker Hughes (BKR) primarily through our remaining interest, ongoing purchases and sales of products and services, transition services that we provide to Baker HughesBKR, as well as an aeroderivative joint venture which(JV) we formed with Baker HughesBKR in the fourth quarter of 2019.

The JV is jointly controlled by GE and currently consolidate.BKR and is consolidated by GE due to the significance of our investment in BKR. Our Aviation segment sells products and services to the JV. In turn, the JV sells products and services primarily to BKR and our Power segment. Transactions between the JV and GE businesses are eliminated in consolidation. In the first quarternine months of 2020, we had sales of $432 million to BKR for products and services from the JV, and we collected cash of $389 million. If our investment in BKR is reduced to below 20%, we would no longer have significant influence in BKR and, as a result, we would not consolidate the JV. A potential deconsolidation of the JV is not expected to have a material impact on GE Industrial free cash flows.

In addition, in the first nine months of 2020, we had sales of $536 million and purchases of $167 million with BKR for products and services with Baker Hughes and affiliatesoutside of $290 million and $36 million, respectively.the JV. We have collected net cash of $415$593 million from Baker HughesBKR related to these activities, including $106sales, purchases and transition services. In addition, we received $147 million of repayments on the promissory note. In addition, in the first quarternote receivable from BKR and dividends of 2020 we received a dividend of $68$204 million from Baker Hughes.on our investment.

In February 2019, we completed the spin-off and subsequent merger of our Transportation business with Wabtec. As a result, we recorded a gain of $3,471 million ($2,508 million after-tax) in discontinued operations.

RESULTS OF DISCONTINUED OPERATIONS
(In millions)
Baker HughesTransportation GE CapitalTotal
Three months ended September 3020202019202020192020201920202019
Operations
Sales of goods and services$$4,478 $$$$$$4,478 
GE Capital revenues from services43 16 43 16 
Cost of goods and services sold(3,686)(3,686)
Other income, costs and expenses(618)(16)(63)(53)(57)(686)
Earnings (loss) of discontinued operations before
  income taxes
175 (16)(20)(37)(14)121 
Benefit (provision) for income taxes(5)(50)(8)29 (12)(14)
Earnings (loss) of discontinued operations,
  net of taxes(a)
$$125 $$(9)$(28)$(8)$(26)$107 
Disposal
Gain (loss) on disposal before income taxes(8,667)(12)(10)(8)(8,677)
Benefit (provision) for income taxes477 (1)(1)477 
Gain (loss) on disposal, net of taxes$$(8,190)$(12)$$$(10)$(9)$(8,201)
Earnings (loss) from discontinued operations,
  net of taxes
$$(8,066)$(10)$(9)$(26)$(18)$(35)$(8,093)
3846 2020 1Q3Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Baker HughesTransportation GE CapitalTotal
RESULTS OF DISCONTINUED OPERATIONS
(In millions)
Baker Hughes Transportation  GE Capital Total
Three months ended March 3120202019 20202019 20202019 20202019
       
Nine months ended September 30Nine months ended September 3020202019202020192020201920202019
Operations       Operations
Sales of goods and services$
$5,616
 $
$549
 $
$
 $
$6,165
Sales of goods and services$$16,047 $$549 $$$$16,596 
GE Capital revenues from services

 

 (76)39
 (76)39
GE Capital revenues from services38 38 
Cost of goods and services sold
(4,677) 
(478) 

 
(5,155)Cost of goods and services sold(13,317)(478)(13,795)
Other costs and expenses
(787) (4)(9) (85)(74) (89)(870)
Other income, costs and expensesOther income, costs and expenses(2,386)(1)(22)(209)(142)(209)(2,550)
       
Earnings (loss) of discontinued operations before income taxes
152
 (4)62
 (161)(35) (165)179
Earnings (loss) of discontinued operations before
income taxes
345 (1)49 (171)(136)(171)258 
Benefit (provision) for income taxes(13)(82) 7
(12) (3)25
 (9)(70)Benefit (provision) for income taxes(15)(165)(13)(4)356 (12)178 
Earnings (loss) of discontinued operations, net of taxes(a)$(13)$70
 $3
$50
 $(164)$(10) $(174)$109
Earnings (loss) of discontinued operations,
net of taxes(a)
$(14)$179 $$36 $(175)$220 $(184)$436 
       
Disposal       Disposal
Gain (loss) on disposal before income taxes(4)
 
3,471
 
47
 (4)3,518
Gain (loss) on disposal before income taxes(13)(8,667)(12)3,471 36 (22)(5,160)
Benefit (provision) for income taxes

 
(963) 
(2) 
(964)Benefit (provision) for income taxes477 (963)(1)(2)(1)(488)
Gain (loss) on disposal, net of taxes$(4)$
 $
$2,508
 $
$45
 $(4)$2,553
Gain (loss) on disposal, net of taxes$(13)$(8,190)$(12)$2,508 $$35 $(23)$(5,648)
       
Earnings (loss) from discontinued operations, net of taxes$(17)$70
 $3
$2,558
 $(164)$35
 $(178)$2,663
Earnings (loss) from discontinued operations,
net of taxes
$(27)$(8,011)$(6)$2,544 $(173)$255 $(206)$(5,212)
(a) Earnings (loss) of discontinued operations attributable to the Company after income taxes was $(172)$(26) million and $76$61 million for the three months ended March 31,September 30, 2020 and 2019, respectively. Earnings (loss) of discontinued operations attributable to the Company after income taxes was $(181) million and $378 million for the nine months ended September 30, 2020 and 2019, respectively.
ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS (In millions)
March 31, 2020
December 31, 2019



Cash, cash equivalents and restricted cash$437
$638
Investment securities170
202
Current receivables63
81
Financing receivables held for sale (Polish mortgage portfolio)2,371
2,485
 Property, plant, and equipment117
123
Deferred income taxes211
264
All other assets285
317
Assets of discontinued operations$3,653
$4,109



Accounts payable & Progress collections and deferred income$22
$40
All other liabilities (a)117
163
Liabilities of discontinued operations$139
$203

ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS (In millions)
September 30, 2020December 31, 2019
Cash, cash equivalents and restricted cash$508 $638 
Investment securities202 
Current receivables61 81 
Financing receivables held for sale (Polish mortgage portfolio)2,469 2,485 
 Property, plant, and equipment107 123 
Deferred income taxes226 264 
All other assets217 317 
Assets of discontinued operations(a)$3,587 $4,109 
Accounts payable & Progress collections and deferred income$15 $40 
All other liabilities(b)273 163 
Liabilities of discontinued operations(a)$288 $203 
(a)Assets and liabilities of discontinued operations included $3,434 million and $129 million related to GE Capital as of September 30, 2020, respectively.
(b) Included within All other liabilities of discontinued operations at March 31,September 30, 2020 and December 31, 2019 are intercompany tax receivables in the amount of $880$734 million and $839 million, respectively, primarily related to the financial services businesses that were part of the GE Capital Exit Plan, which are offset within All other liabilities of consolidated GE.eliminated upon consolidation.


NOTE 3. INVESTMENT SECURITIESSECURITIES.
All of our debt securities are classified as available-for-sale and substantially all are investment-grade debt securities supporting obligations to annuitants and policyholders in our run-off insurance operations. Changes in fair value of our debt securities are recorded in otherOther comprehensive income. Equity securities with readily determinable fair values are included within this caption and changes in their fair value are recorded in earnings.
September 30, 2020December 31, 2019
(In millions)Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Estimated
fair value
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Estimated
fair value
Debt
U.S. corporate$23,649 $6,090 $(83)$29,656 $23,037 $4,636 $(11)$27,661 
Non-U.S. corporate2,290 364 (2)2,652 2,161 260 (1)2,420 
State and municipal3,322 878 (18)4,182 3,086 598 (15)3,669 
Mortgage and asset-backed3,561 147 (100)3,609 3,117 116 (4)3,229 
Government and agencies1,266 198 1,464 1,391 126 1,516 
Equity5,318 — — 5,318 10,025 — — 10,025 
Total$39,406 $7,677 $(202)$46,881 $42,816 $5,736 $(31)$48,521 

March 31, 2020
December 31, 2019
(In millions)Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair value


Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair value











Debt








U.S. corporate$23,167
$3,795
$(493)$26,470

$23,037
$4,636
$(11)$27,661
Non-U.S. corporate2,155
150
(60)2,246

2,161
260
(1)2,420
State and municipal3,090
638
(21)3,708

3,086
598
(15)3,669
Mortgage and asset-backed3,296
51
(143)3,205

3,117
116
(4)3,229
Government and agencies1,269
157

1,427

1,391
126

1,516
Equity5,245


5,245

10,025


10,025
Total$38,223
$4,792
$(716)$42,299

$42,816
$5,736
$(31)$48,521


2020 1Q3Q FORM 10-Q 3947

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost of debt securities as of March 31,September 30, 2020, excludes accrued interest of $432$442 million,, which is reported in Other GE Capital receivables.


The estimated fair values of investment securities at March 31,September 30, 2020 decreased since December 31, 2019, primarily due to the mark-to-market effects on our remaining interest in Baker Hughes, as well as an increaseBKR, partially offset by a decrease in market interest rates as a result of a significant wideningyields and new investments in credit spreads, a significant decline in oil prices and a challenging liquidity environment.our insurance business. The fair value of the remaining Baker HughesBKR interestand promissory note receivable was $4,083$5,102 million at March 31,September 30, 2020.


Gross unrealized losses of $(685)$(169) million and $(31)$(33) million are associated with debt securities with a fair value of $6,253$2,413 million and $173$153 million that have been in a loss position for less than 12 months and 12 months or more, respectively, at March 31,September 30, 2020. Gross unrealized losses of $(11)$(11) million and $(20)$(20) million are associated with debt securities with a fair value of $724$724 million and $274$274 million that have been in a loss position for less than 12 months and 12 months or more, respectively, at December 31, 2019.


At March 31,As of September 30, 2020, gross unrealized losses of $(716)$(202) million included $(493)$(83) million related to U.S. corporate securities, primarily in the energy industry, and $(114)$(87) million related to commercial mortgage-backed securities (CMBS). Of the U.S. corporate securities in an unrealized loss position, $(313) million and $(57) million related to the energy and consumer industries, respectively. Substantially all of our CMBS in an unrealized loss position have received investment-grade credit ratings from the major rating agencies and are collateralized by pools of commercial mortgage loans on real estate.


With respect to our debt securities that are in an unrealized loss position at March 31, 2020, our current intention is to hold them at least until such time as their individual fair values exceed their amortized cost and based upon the long duration of our insurance liabilities, we have the ability to hold all such debt securities until their maturities. We assessed debt securities in an unrealized loss position for credit losses and recognized an allowance for credit losses on investment securities of $(24) million for the three months ending March 31, 2020. In addition to our qualitative and quantitative evaluation criteria, our credit loss assessment at March 31, 2020 considered the continuing market deterioration that resulted in the lack of liquidity and the historic levels of price volatility and credit spreads in the fixed income market. With respect to corporate bonds, we evaluated the credit quality of the issuers. With respect to CMBS, we evaluated the cash flows from the underlying collateral.

Net unrealized gains (losses) for equity securities with readily determinable fair values, which are recorded in Other income within continuing operations, were $(5,772)$(776) million and an insignificant amount$(89) million for the three months ended March 31,and $(4,619) million and $(131) million for the nine months ended September 30, 2020 and 2019, respectively. The amount recognized in the three months ended March 31, 2020 primarily included a loss of $(5,710) million related to our interest in Baker Hughes and $(85) million at GE Capital, predominantly from fixed income exchange traded funds supporting our insurance liabilities and annuity benefits.


Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the Baker HughesBKR promissory note totaled $1,250$833 million and $1,421$2,318 million for the three months ended March 31,and $3,538 million and $6,652 million for the nine months ended September 30, 2020 and 2019, respectively. Gross realized gains on investment securities were $46$17 million and $44 million and gross realized losses and impairments were $(17) million and $(39)$10 million for the three months ended March 31,and $145 million and $86 million for the nine months ended September 30, 2020 and 2019, respectively. Gross realized losses and impairments were $(10) million and $(75) million for the three months ended and $(95) million and $(181) million for the nine months ended September 30, 2020 and 2019, respectively.


Contractual maturities of investments in debt securities (excluding mortgage and asset-backed securities) at March 31,as of September 30, 2020 are due as follows:
(In millions)
Amortized
cost

Estimated
fair value

   
Due  
Within one year$610
$621
After one year through five years2,328
2,400
After five years through ten years6,616
7,226
After ten years20,128
23,603

(In millions)Amortized
cost
Estimated
fair value
Within one year$673 $684 
After one year through five years2,568 2,799 
After five years through ten years6,516 7,732 
After ten years20,771 26,739 
We expect actual maturities to differ from contractual maturities because issuers have the right to call or prepay certain obligations.

Substantially all our equity securities are classified within Level 1 and substantially all our debt securities are classified within Level 2, as their valuation is determined based on significant observable inputs. Investments with a fair value of $5,046$5,548 million and $5,210 million wereare classified within Level 3, as significant inputs to the valuation model are unobservable at March 31,September 30, 2020 and December 31, 2019, respectively. During the threenine months ended March 31,September 30, 2020 and 2019, there were no significant transfers into or out of Level 3.

In addition to the equity securities described above, we hold $429$258 million and $517 million of equity securities without readily determinable fair value at March 31,September 30, 2020 and December 31, 2019, respectively, that are classified within All other assets in our consolidated Statement of Financial Position. Fair value adjustments, including impairments, recorded in earnings were $(93) million and anboth insignificant amountamounts for the three months ended March 31,and $(163) million and $25 million for the nine months ended September 30, 2020 and 2019, respectively.


4048 2020 1Q3Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. CURRENT AND LONG-TERM RECEIVABLES
CURRENT RECEIVABLESConsolidated
GE
(In millions)March 31, 2020
December 31, 2019

March 31, 2020
December 31, 2019






Customer receivables(a)$12,877
$12,594

$8,920
$9,507
Sundry receivables(b)4,976
5,049
 5,082
5,247
Allowance for losses(929)(874)
(926)(872)
Total current receivables$16,925
$16,769

$13,076
$13,883

CURRENT RECEIVABLESConsolidatedGE
(In millions)September 30, 2020December 31, 2019September 30, 2020December 31, 2019
Customer receivables(a)$13,862 $12,594 $9,500 $9,507 
Sundry receivables(b)(c)4,652 5,049 4,861 5,247 
Allowance for credit losses(d)(1,212)(874)(1,210)(872)
Total current receivables$17,302 $16,769 $13,151 $13,883 
(a) Includes Aviation receivables from BoeingCFM International (CFM) due to 737 MAX temporary fleet grounding of $1,407$801 million and $1,397 million as of March 31,September 30, 2020 and December 31, 2019, respectively. During 2020, CFM and Boeing reached an agreement to secure payment terms for engines delivered in 2019 and 2020, net of progress collections. Based on the agreement, the receivable is expected to be collected from Boeing through the first quarter of 2021.
(b) Includes supplier advances, revenue sharing programs receivables in our Aviation business, other non-income based tax receivables, primarily value-added tax related to our operations in various countries outside of the U.S., receivables from disposed businesses, including receivables for transactional services agreements and certain intercompany balances that eliminate upon consolidationconsolidation. Revenue sharing program receivables in Aviation are amounts due from third parties who participate in engine programs by developing and supplying certain engine components through the life of the program. The participants share in program revenues, receive a share of customer progress payments and share costs related to discounts and warranties.
(c) Consolidated current receivables include deferred purchase price. The deferred purchase price which represents our retained risk with respect to current customer receivables sold to third parties through one of the receivable facilities. The balance of the deferred purchase price held by GE Capital at March 31,as of September 30, 2020 and December 31, 2019 was $502$480 million and $421 million, respectively.
(d) GE allowance for credit losses primarily increased due to net new provisions of $313 million, offset by write-offs and foreign currency impact.   

Sales of GE current customer receivables. When GE sells customer receivables to GE Capital or third parties, it accelerates the receipt of cash that would otherwise have been collected from customers. In any given period, the amount of cash received from sales of customer receivables compared to the cash GE 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 sales of customer receivables to GE Capital or third parties are made on arm's length terms and any discount related to time value of money is recognized by GE when the customer receivables are sold. As of March 31,September 30, 2020 and 2019, GE sold approximately 49%45% and 65%54%, respectively, of its gross customer receivables to GE Capital or third parties. Activity related to customer receivables sold by GE is as follows:
20202019
(In millions)2020
2019(In millions)GE CapitalThird PartiesGE CapitalThird Parties

GE Capital

Third Parties
GE Capital

Third Parties








Balance at January 1$3,087

$6,757

$4,386

$7,880
Balance at January 1$3,087 $6,757 $4,386 $7,880 
GE sales to GE Capital9,225



9,690


GE sales to GE Capital24,630 — 30,243 — 
GE sales to third parties

515



1,376
GE sales to third parties— 1,063 — 4,206 
GE Capital sales to third parties(5,253)
5,253

(6,591)
6,591
GE Capital sales to third parties(13,757)13,757 (20,505)20,505 
Collections and other(3,224)
(8,005)
(3,967)
(8,123)Collections and other(9,805)(18,119)(10,606)(26,209)
Reclassification from long-term customer receivables123



140


Reclassification from long-term customer receivables207 265 
Balance at March 31$3,958
(a)(b)$4,519

$3,657
(a)$7,724
Balance at September 30Balance at September 30$4,362 (a)$3,458 $3,782 (a)$6,382 
(a) At March 31,September 30, 2020 and 2019, $557$640 million and $1,248$707 million, respectively, of the current receivables purchased and retained by GE Capital had been sold by GE to GE Capital with recourse (i.e., GE retains all or some risk of default). The effect on GE CFOAcash flows from operating activities (CFOA) of claims by GE Capital on receivables sold with recourse was insignificant for the threenine months ended March 31,September 30, 2020 and 2019.

(b) The $871 million increase in GE current receivables purchased and retained by GE Capital in the quarter was driven by a plan to use excess liquidity in GE Capital to purchase and retain GE current receivables. GE Aviation receivables were substantially all of the increase and approximately $288 million of that increase can be attributed to lower third-party demand for certain GE Aviation receivables.

LONG-TERM RECEIVABLES. In certain circumstances, GE provides customers, primarily within our Power, Renewable Energy and Aviation businesses, with extended payment terms for the purchase of new equipment, purchases of upgrades and spare parts for our long-term service agreements. These long-term customer receivables are initially recorded at present value and have an average remaining duration of approximately three years and are included in All other assets in the consolidated Statement of Financial Position.
Consolidated GE
LONG-TERM RECEIVABLESLONG-TERM RECEIVABLESConsolidatedGE
(In millions)March 31, 2020
December 31, 2019
 March 31, 2020
December 31, 2019
(In millions)September 30, 2020December 31, 2019September 30, 2020December 31, 2019
   
Long-term customer receivables(a)$756
$906

$492
$506
Long-term customer receivables(a)$673 $906 $483 $506 
Long-term sundry receivables(b)1,437
1,504
 1,647
1,834
Long-term sundry receivables(b)1,525 1,504 1,726 1,834 
Allowance for losses(131)(128)
(131)(128)
Allowance for credit lossesAllowance for credit losses(140)(128)(140)(128)
Total long-term receivables$2,063
$2,282

$2,008
$2,212
Total long-term receivables$2,058 $2,282 $2,069 $2,212 
(a) At March 31,As of September 30, 2020 and December 31, 2019, GE Capital held $265$190 million and $400 million, respectively, of GE long-term customer receivables, of which $222$173 million and $312 million had been purchased with recourse (i.e., GE retains all or some risk of default). The effect on GE cash flows from operating activities (CFOA)sold an insignificant amount of claims on long-term customer receivables sold with recourse was insignificant forduring the threenine months ended March 31,September 30, 2020 and the year ended December 31, 2019.
(b) Includes supplier advances, revenue sharing programs receivables, other non-income based tax receivables and certain intercompany balances that eliminate upon consolidation.


Sales of GE long-term customer receivables. Similar to sales of current customer receivables, sales of long-term customer receivables can result in cash generation or use in our consolidated Statement of Cash Flows. During the three months ended March 31, 2020 and 2019, GE Capital did not purchase any GE long-term customer receivables. Reductions in GE Capital outstanding GE long-term customer receivables were attributable to collections and reclassification to short-term receivables.

2020 1Q3Q FORM 10-Q 4149

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNCONSOLIDATED RECEIVABLES FACILITIES. GE Capital has 2 revolving receivables facilities, under which customer receivables purchased from GE are sold to third parties. In the first facility, which has a program size of $3,100$2,500 million, upon the sale of receivables, we receive proceeds of cash and deferred purchase price and the Company’s remaining risk with respect to the sold receivables is limited to the balance of the deferred purchase price. In the second facility, which has a program size of $600$800 million, upon the sale of receivables, we receive proceeds of cash only and therefore the Company has no remaining risk with respect to the sold receivables. The program sizesizes of the first facility and the second facility reduced fromat December 31, 2019 were $3,100 million and $1,200 million, to $600 million in March 2020. Current receivables that would otherwise have been sold to third parties were retained by GE Capital to utilize available funding.respectively.

Activity related to these facilities is included in the GE Capital sales to third parties line in the sales of GE current customer receivables table above and is as follows:
Nine months ended September 30 (In millions)
20202019
Customer receivables sold to receivables facilities$10,570 $16,062 
Total cash purchase price for customer receivables10,060 15,702 
Cash collections re-invested to purchase customer receivables8,865 13,287 
Non-cash increases to deferred purchase price$446 $170 
Cash payments received on deferred purchase price388 270 
Three months ended March 31 (In millions)
2020
 2019
    
Customer receivables sold to receivables facilities$4,307
 $5,175
Total cash purchase price for customer receivables4,120
 5,071
Cash collections re-invested to purchase customer receivables3,723
 4,253
    
Non-cash increases to deferred purchase price$160
 $44
Cash payments received on deferred purchase price78
 61


CONSOLIDATED SECURITIZATION ENTITIES. GE Capital consolidates 3 variable interest entities (VIEs) that purchased customer receivables and long-term customer receivables from GE. At March 31,September 30, 2020 and December 31, 2019, these VIEs held current customer receivables of $1,619$1,646 million and $2,080 million and long-term customer receivables of $251$190 million and $375 million, respectively. At March 31,September 30, 2020 and December 31, 2019, the outstanding non-recourse debt under their respective debt facilities was $644$452 million and $1,655 million, respectively. 


NOTE 5. FINANCING RECEIVABLES AND ALLOWANCES
ConsolidatedGE Capital
(In millions)September 30, 2020December 31, 2019September 30, 2020December 31, 2019
Loans, net of deferred income$1,192 $1,098 $5,572 $4,927 
Investment in financing leases, net of deferred income1,914 2,070 1,914 2,070 
3,106 3,168 7,486 6,996 
Allowance for losses(85)(33)(61)(17)
Financing receivables – net$3,021 $3,134 $7,425 $6,979 

Consolidated
GE Capital
(In millions)March 31, 2020
December 31, 2019

March 31, 2020
December 31, 2019






Loans, net of deferred income$1,141
$1,098

$5,568
$4,927
Investment in financing leases, net of deferred income1,921
2,070

1,921
2,070

3,062
3,168

7,489
6,996
Allowance for losses(65)(33)
(33)(17)
Financing receivables – net$2,998
$3,134

$7,457
$6,979


Consolidated finance lease income was $43$33 million and $46$43 million in the three months ended March 31,September 30, 2020 and 2019, respectively, and $111 million and $135 million in the nine months ended September 30, 2020 and 2019, respectively.


We manage our GE Capital financing receivables portfolio using delinquency and nonaccrual data as key performance indicators. At March 31,September 30, 2020, 6.2%5.2%, 2.8%4.0% and 5.7%4.6% of financing receivables were over 30 days past due, over 90 days past due and on nonaccrual, respectively, with the vast majority of nonaccrual financing receivables secured by collateral. At December 31, 2019, 4.2%, 2.9% and 6.1% of financing receivables were over 30 days past due, over 90 days past due and on nonaccrual, respectively.


GE Capital financing receivables that comprise receivables purchased from GE are reclassified to either Current receivables or All other assets in theour consolidated Statement of Financial Position. To the extent these receivables are purchased with full or limited recourse, they are excluded from the delinquency and nonaccrual data above. See Note 4 for further information.


NOTE 6. INVENTORIES
(In millions)September 30, 2020December 31, 2019
Raw materials and work in process$8,819 $8,771 
Finished goods6,106 5,333 
Total inventories$14,925 $14,104 
(In millions)March 31, 2020
December 31, 2019
   
Raw materials and work in process$9,192
$8,771
Finished goods6,265
5,333
Total inventories$15,457
$14,104


NOTE 7. PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT (In millions)
March 31, 2020
December 31, 2019


(In millions)(In millions)September 30, 2020December 31, 2019
Original cost$75,619
$75,187
Original cost$76,885 $75,187 
Less accumulated depreciation and amortization(32,453)(31,897)Less accumulated depreciation and amortization(34,675)(31,897)
Property, plant and equipment – net$43,166
$43,290
Property, plant and equipment – net$42,211 $43,290 


50 2020 3Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated depreciation and amortization on property, plant and equipment was $991$1,374 million and $995$1,004 million for the three months ended March 31,September 30, 2020 and 2019, respectively, and $3,655 million and $2,969 million in the nine months ended September 30, 2020 and 2019, respectively.


In the third quarter of 2020, we recognized a non-cash pre-tax impairment charge of $316 million related to property, plant and equipment at our Steam business within our Power segment due to our recent announcement to exit the new build coal power market. We determined the fair value of these assets using an income approach. This charge was recorded by Corporate in Selling, general, and administrative expenses in our consolidated Statement of Earnings (Loss).

During the three and nine months ended September 30, 2020, our GE Capital Aviation Services (GECAS) business recognized pre-tax impairments of $160 million and $497 million, respectively, primarily on its fixed-wing aircraft operating lease portfolio. Pre-tax impairments were $28 million and $57 million for the three and nine months ended September 30, 2019, respectively. We determined the fair values of these assets using primarily the income approach. These charges are included in costs of services sold within the Statement of Earnings (Loss) and within our Capital segment.
42 2020 1Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating lease incomeIncome on our equipment leased to others,operating lease portfolio, primarily from our GECAS business, was $876$844 million and $932$935 million for the three months ended March 31,September 30, 2020 and 2019, respectively, and comprisescomprised fixed lease income of $705$713 million and $764$757 million and variable lease income of $171$131 million and $168$179 million, respectively. Income on our operating lease portfolio was $2,515 million and $2,885 million for the nine months ended September 30, 2020 and 2019, respectively, and comprised fixed lease income of $2,132 million and $2,296 million and variable lease income of $384 million and $589 million, respectively.

Operating Lease Assets and Liabilities. Our consolidated Right of use operating lease (ROU) assets, included within property, plant and equipment in our Statement of Financial Position were $2,813$2,619 million and $2,896 million, as of March 31,September 30, 2020 and December 31, 2019, respectively. Our consolidated operating lease liabilities, included in All other liabilities in our Statement of Financial Position, were $3,067$2,943 million and $3,162 million, as of March 31,September 30, 2020 and December 31, 2019, respectively, which included GE Industrial operating lease liabilities of $3,266$3,117 million and $3,369 million, respectively.
OPERATING LEASE EXPENSEThree months ended September 30Nine months ended September 30
(In millions)2020201920202019
Long-term (fixed)$170 $180 $529 $625 
Long-term (variable)47 40 92 111 
Short-term39 60 162 150 
Total operating lease expense$256 $281 $784 $887 
OPERATING LEASE EXPENSEThree months ended March 31
(In millions)2020
 2019
    
Long-term (fixed)$177
 $225
Long-term (variable)21
 44
Short-term68
 47
Total operating lease expense$266
 $317


NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
GOODWILL (In millions)
January 1, 2020ImpairmentsCurrency exchange
and other
Balance at September 30, 2020
Power$145 $$$145 
Renewable Energy3,290 48 3,338 
Aviation9,859 (877)191 9,172 
Healthcare11,728 20 11,748 
Capital839 (839)
Corporate873 874 
Total$26,734 $(1,717)$260 $25,278 
GOODWILL (In millions)
January 1, 2020
Dispositions and classification to held for sale
Currency exchange
and other

Balance at
March 31, 2020




 

Power$145
$
$
$145
Renewable Energy3,290

(74)3,216
Aviation9,859

(41)9,818
Healthcare11,728

(17)11,711
Capital839


839
Corporate873

(5)869
Total$26,734
$
$(136)$26,598


We test goodwill for impairment annually in the fourth quarter. In assessing the possibility that a reporting unit’s fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates, we consider all available evidence, including (i) the results of our impairment testing from the most recent testing date (in particular, the magnitude of the excess of fair value over carrying value observed), (ii) downward revisions to internal forecasts or decreases in market multiples (and the magnitude thereof), if any, and (iii) declines in market capitalization below book value (and the magnitude and duration of those declines), if any.

In Due to the firstimpact of recent events, including challenges from declines in current market conditions, we performed an interim impairment test at our Additive reporting unit within our Aviation segment and GECAS reporting unit within our Capital segment in the second quarter of 2020, both of which incorporated a combination of income and market valuation approaches. The results of the analysis indicated that carrying values of both reporting units were in excess of their respective fair values. Therefore, we recorded non-cash impairment losses of $877 million and $839 million for the Additive and GECAS reporting units, respectively, in the caption Goodwill impairments in our consolidated Statement of Earnings (Loss). All of the goodwill in Additive was the result of the Arcam AB and Concept Laser GmBH acquisitions in 2016. Of the $839 million of goodwill for GECAS, $729 million arose from the acquisition of Milestone Aviation, our helicopter leasing business, in 2015. After the impairment charges, there is $236 million goodwill remaining in our Additive reporting unit and 0 goodwill remaining in our GECAS reporting unit. In the third quarter, we performed an additional review of our Additive reporting unit and concluded an additional impairment test was not required.


2020 3Q FORM 10-Q 51

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Also in the third quarter, we performed an analysis of the impact of recent events, including business and industry specific considerations, on the fair valuesvalue of our Additive reporting unit in our Aviation segment, our GECAS reporting unit in our Capital segment, and our Grid Solutions software reporting unit in our Digital business within Corporate. We did not identify any reporting units that requiredCorporate, and concluded an interim impairment test.test was not required. While the goodwill of thesethis reporting unitsunit is not currently impaired there can be no assurances that goodwill will not be impaired in future periods. We will continue to monitor the operating results, cash flow forecasts and challenges from declines in current market conditions, as well as impacts of COVID-19 for thesethis reporting unitsunit as theirits fair values arevalue is not significantly in excess of their respectiveits carrying values.value. At March 31,September 30, 2020, goodwill in our Additive, GECAS, and Grid Solutions software reporting unitsunit was $1,091 million, $839 million and $869 million, respectively.$874 million.

OTHER INTANGIBLE ASSETS - NET (In millions)
March 31, 2020
December 31, 2019
   
Intangible assets subject to amortization$10,381
$10,653

OTHER INTANGIBLE ASSETS - NET (In millions)
September 30, 2020December 31, 2019
Intangible assets subject to amortization$9,909 $10,653 

Intangible assets decreased in the firstthird quarter of 2020, primarily as a result of amortization. Consolidated amortization expense was $340$428 million and $367$496 million in the three months ended March 31,September 30, 2020 and 2019, respectively, and $1,076 million and $1,220 million in the nine months ended September 30, 2020 and 2019, respectively. Included within consolidated amortization expense for the three and nine months ended September 30, 2020 and 2019, were non-cash pre-tax impairment charges of $113 million and $103 million, respectively.


In the third quarter of 2020, we recognized a non-cash pre-tax impairment charge of $113 million related to intangible assets at our Steam business within our Power segment due to our recent announcement to exit the new build coal power market. 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).
2020 1Q FORM 10-Q 43

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. REVENUESREVENUES.
The equipment and services revenues classification in the table below is consistent with our segment MD&A presentation.presentation.
EQUIPMENT & SERVICES REVENUES
Three months ended September 3020202019
(In millions)EquipmentServicesTotalEquipmentServicesTotal
Power$1,595 $2,430 $4,025 $1,434 $2,492 $3,926 
Renewable Energy3,771 754 4,525 3,609 816 4,425 
Aviation1,933 2,987 4,919 3,149 4,960 8,109 
Healthcare2,538 2,027 4,565 2,828 2,095 4,923 
Corporate items and industrial eliminations(212)95 (117)(24)161 137 
Total GE Industrial revenues$9,625 $8,293 $17,918 $10,996 $10,524 $21,519 
Nine months ended September 3020202019
(In millions)EquipmentServicesTotalEquipmentServicesTotal
Power$4,589 $7,617 $12,206 $4,473 $8,751 $13,224 
Renewable Energy9,068 2,155 11,224 8,457 2,133 10,590 
Aviation6,234 9,961 16,196 9,295 14,645 23,940 
Healthcare7,287 5,899 13,185 8,320 6,220 14,540 
Corporate items and industrial eliminations(251)268 17 328 638 967 
Total GE Industrial revenues$26,928 $25,901 $52,828 $30,873 $32,386 $63,259 
52 2020 3Q FORM 10-Q

EQUIPMENT & SERVICES REVENUESThree months ended March 31
(In millions)2020 2019
 EquipmentServicesTotal EquipmentServicesTotal
        
Power$1,506
$2,518
$4,025
 $1,576
$3,041
$4,617
Renewable Energy2,576
618
3,194
 1,982
557
2,538
Aviation2,444
4,449
6,892
 3,113
4,841
7,954
Healthcare2,699
2,029
4,727
 2,653
2,029
4,683
Corporate items and industrial eliminations(48)54
6
 284
248
532
Total GE Industrial revenues$9,177
$9,668
$18,844
 $9,608
$10,716
$20,324
FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVENUESThree months ended September 30Nine months ended September 30
(In millions)2020201920202019
Gas Power$2,940 $2,732 $8,876 $9,242 
Power Portfolio1,085 1,194 3,330 3,982 
Power$4,025 $3,926 $12,206 $13,224 
Onshore Wind$3,303 $3,193 $7,914 $7,084 
Grid Solutions equipment and services936 991 2,587 2,843 
Hydro, Offshore Wind and other287 241 722 663 
Renewable Energy$4,525 $4,425 $11,224 $10,590 
Commercial Engines & Services$2,696 $5,997 $9,705 $17,796 
Military1,137 1,061 3,258 3,073 
Systems & Other1,087 1,050 3,233 3,071 
Aviation$4,919 $8,109 $16,196 $23,940 
Healthcare Systems$4,085 $3,642 $11,056 $10,664 
Pharmaceutical Diagnostics480 495 1,300 1,497 
BioPharma786 830 2,378 
Healthcare$4,565 $4,923 $13,185 $14,540 
Corporate items and industrial eliminations(117)137 17 967 
Total GE Industrial revenues$17,918 $21,519 $52,828 $63,259 
Capital1,681 2,097 5,449 6,645 
GE Capital-GE eliminations$(181)$(256)$(587)$(928)
Consolidated revenues$19,417 $23,360 $57,690 $68,976 
REVENUESThree months ended March 31
(In millions)2020
 2019
    
Gas Power$2,859
 $3,263
Power Portfolio1,165
 1,355
Power$4,025
 $4,617
    
Onshore Wind$2,124
 $1,441
Grid Solutions equipment and services839
 917
Hydro, Offshore Wind and other230
 180
Renewable Energy$3,194
 $2,538
    
Commercial Engines & Services$4,777
 $5,949
Military960
 1,036
Systems & Other1,156
 969
Aviation$6,892
 $7,954
    
Healthcare Systems$3,448
 $3,433
Life Sciences(a)1,280
 1,251
Healthcare$4,727
 $4,683
    
Corporate items and industrial eliminations6
 532
Total GE Industrial revenues$18,844
 $20,324
Capital1,923
 2,227
GE Capital-GE eliminations$(244) $(349)
Consolidated revenues$20,524
 $22,202
    
(a) Includes revenues of $830 million and $765 million from BioPharma for the three months ended March 31, 2020 and 2019, respectively.


REMAINING PERFORMANCE OBLIGATION. As of March 31,September 30, 2020, the aggregate amount of the contracted revenues allocated to our unsatisfied (or partially unsatisfied) performance obligations was $240,381$226,666 million. We expect to recognize revenue as we satisfy our remaining performance obligations as follows: 1)(1) equipment-related remaining performance obligation of $45,171$44,634 million, of which 61%59%, 81%83% and 96%100% is expected to be satisfied within 1, 2 and 5 years, respectively,respectively; and the remaining thereafter; and 2)(2) services-related remaining performance obligation of $195,211$182,032 million, of which 12%11%, 44%42%, 71%66% and 82%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. CONTRACT AND OTHER DEFERRED ASSETS & PROGRESS COLLECTIONS AND DEFERRED INCOME
Contract and other deferred assets decreased $665$1,230 million in the nine months ended September 30, 2020. Our long-term service agreements decreased primarily due to billings of $2,544$6,373 million and a net unfavorable change in estimated profitability of $193$940 million at Aviation and $72$122 million at Power, offset by revenues recognized of $2,688$6,563 million. The changedecrease in estimated profitabilitylong-term service agreements at Aviation included a $100$536 million non-cash pre-tax charge (reduction in revenues and profit) to reflect the cumulative impacts of changes to billing and cost assumptions for certain long-term service agreements.agreements, reflecting lower engine utilization, anticipated customer fleet restructuring and contract modifications. Additional adjustments are likely tocould occur in future periods and could be material as conditions related to COVID-19 continue to evolve.for certain long-term service agreements if actual customer operating behavior differs significantly from Aviation's current estimates.

September 30, 2020 (In millions)
PowerAviationRenewable EnergyHealthcareOtherTotal
Revenues in excess of billings$5,282 $4,147 $$$$9,429 
Billings in excess of revenues(1,566)(3,754)(5,320)
Long-term service agreements(a)3,716 394 4,110 
Short-term and other service agreements138 300 94 182 30 744 
Equipment contract revenues(b)2,667 77 1,164 308 181 4,397 
Total contract assets6,521 770 1,259 490 211 9,251 
Deferred inventory costs898 496 1,001 353 2,748 
Nonrecurring engineering costs22 2,384 39 33 2,478 
Customer advances and other(c)1,127 (32)1,094 
Contract and other deferred assets$7,441 $4,776 $2,299 $876 $179 $15,571 
442020 1Q3Q FORM 10-Q53

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019 (In millions)
PowerAviationRenewable EnergyHealthcareOtherTotal
Revenues in excess of billings$5,342 $4,996 $$$$10,338 
Billings in excess of revenues(1,561)(3,719)(5,280)
Long-term service agreements(a)3,781 1,278 5,058 
Short-term and other service agreements190 316 43 169 717 
Equipment contract revenues(b)2,508 82 1,217 324 106 4,236 
Total contract assets6,478 1,675 1,260 492 106 10,011 
Deferred inventory costs943 287 1,677 359 3,267 
Nonrecurring engineering costs44 2,257 47 35 2,391 
Customer advances and other(c)1,165 (32)1,133 
Contract and other deferred assets$7,465 $5,384 $2,985 $886 $82 $16,801 
(a)Included amounts due from customers at Aviation for the sales of engines, spare parts and services, which we will collect through higher usage-based fees from servicing equipment under long-term service agreements, totaling $1,858 million and $1,712 million as of September 30, 2020 and December 31, 2019, respectively. The corresponding discount is recorded within liabilities as Deferred income and amounted to $294 million and $308 million as of September 30, 2020 and December 31, 2019, respectively. 
March 31, 2020 (In millions)
PowerAviationRenewable EnergyHealthcareOtherTotal
 





Revenues in excess of billings$5,197
$4,909
$
$
$
$10,106
Billings in excess of revenues(1,586)(3,660)


(5,247)
Long-term service agreements(a)3,611
1,248



4,859
Short-term and other service agreements155
389
33
174
45
795
Equipment contract revenues(b)2,425
60
1,185
278
133
4,081
Total contract assets6,191
1,696
1,217
452
178
9,735
       
Deferred inventory costs887
481
1,148
342
1
2,859
Nonrecurring engineering costs49
2,306
43
33

2,431
Customer advances and other(c)
1,143


(32)1,111
Contract and other deferred assets$7,127
$5,627
$2,409
$827
$146
$16,136
(b)Included are amounts due from customers at Power for the sale of services upgrades, which we collect through incremental fixed or usage-based fees from servicing the equipment under long-term service agreements, totaling $850 million and $909 million as of September 30, 2020 and December 31, 2019, respectively. 
(c)Included advances to and amounts due from customers at Aviation for the sale of engines, spare parts and services, which we will collect through incremental fees for goods and services to be delivered in future periods, totaling $947 million and $986 million as of September 30, 2020 and December 31, 2019, respectively. The corresponding discount is recorded within liabilities as Deferred income and amounted to $264 million and $256 million as of September 30, 2020 and December 31, 2019, respectively.
December 31, 2019 (In millions)
      
       
Revenues in excess of billings$5,342
$4,996
$
$
$
$10,338
Billings in excess of revenues(1,561)(3,719)


(5,280)
Long-term service agreements(a)3,781
1,278



5,058
Short-term and other service agreements190
316
43
169

717
Equipment contract revenues(b)2,508
82
1,217
324
106
4,236
Total contract assets6,478
1,675
1,260
492
106
10,011
 











Deferred inventory costs943
287
1,677
359

3,267
Nonrecurring engineering costs44
2,257
47
35
8
2,391
Customer advances and other(c)
1,165


(32)1,133
Contract and other deferred assets$7,465
$5,384
$2,985
$886
$82
$16,801
(a)Included amounts due from customers at Aviation for the sales of engines, spare parts and services, which we will collect through higher usage-based fees from servicing equipment under long-term service agreements, totaling $1,777 million and $1,712 million as of March 31, 2020 and December 31, 2019, respectively. The corresponding discount is recorded within liabilities as Deferred income and amounted to $332 million and $308 million as of March 31, 2020 and December 31, 2019, respectively. 
(b)Included are amounts due from customers at Power for the sale of services upgrades, which we collect through incremental fixed or usage-based fees from servicing the equipment under long-term service agreements, totaling $877 million and $909 million as of March 31, 2020 and December 31, 2019, respectively. 
(c)Included advances to and amounts due from customers at Aviation for the sale of engines, spare parts and services, which we will collect through incremental fees for goods and services to be delivered in future periods, totaling $961 million and $986 million as of March 31, 2020 and December 31, 2019, respectively. The corresponding discount is recorded within liabilities as Deferred income and amounted to $268 million and $256 million as of March 31, 2020 and December 31, 2019, respectively.

Progress collections and deferred income decreased $708$1,012 million in the first quarter of 2020 primarily due to the timing of revenue recognition in excess of new collections received, primarily at PowerRenewable Energy and Renewable Energy.Power. These decreases were partially offset by milestoneearly payments received primarily at Aviation.our Aviation Military equipment business of $708 million in the second quarter 2020 as part of the U.S. Department of Defense's efforts to support vendors in its supply chain during the pandemic.

Revenues recognized for contracts included in liability position at the beginning of the year were $3,898$10,383 million and $4,608$9,565 million for the threenine months ended March 31,September 30, 2020 and 2019, respectively.
September 30, 2020 (In millions)
PowerAviationRenewable EnergyHealthcareOtherTotal
Progress collections on equipment contracts$5,142 $157 $1,255 $$$6,554 
Other progress collections426 5,069 3,141 370 154 9,160 
Total progress collections5,568 5,226 4,396 370 154 15,714 
Deferred income(a)128 1,565 378 1,780 118 3,969 
GE Progress collections and deferred income$5,696 $6,791 $4,773 $2,150 $272 $19,683 
March 31, 2020 (In millions)
PowerAviationRenewable EnergyHealthcareOtherTotal


December 31, 2019 (In millions)
December 31, 2019 (In millions)
Progress collections on equipment contracts$5,418
$144
$1,146
$
$
$6,709
Progress collections on equipment contracts$5,857 $115 $1,268 $$$7,240 
Other progress collections317
4,791
3,999
312
170
9,589
Other progress collections413 4,748 4,193 305 189 9,849 
Total progress collections5,735
4,935
5,145
312
170
16,298
Total progress collections6,270 4,863 5,461 305 189 17,089 
Deferred income(a)41
1,569
316
1,654
109
3,689
Deferred income(a)49 1,528 284 1,647 98 3,606 
GE Progress collections and deferred income$5,776
$6,504
$5,461
$1,966
$279
$19,986
GE Progress collections and deferred income$6,319 $6,391 $5,745 $1,952 $287 $20,694 
(a)Included in this balance are finance discounts associated with customer advances at Aviation of $558 million and $564 million as of September 30, 2020 and December 31, 2019, respectively.
December 31, 2019 (In millions)
      

      
Progress collections on equipment contracts$5,857
$115
$1,268
$
$
$7,240
Other progress collections413
4,748
4,193
305
189
9,849
Total progress collections6,270
4,863
5,461
305
189
17,089
Deferred income(a)49
1,528
284
1,647
98
3,606
GE Progress collections and deferred income$6,319
$6,391
$5,745
$1,952
$287
$20,694

(a)Included in this balance are finance discounts associated with customer advances at Aviation of $600 million and $564 million as of March 31, 2020 and December 31, 2019, respectively.

542020 1Q3Q FORM 10-Q45

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. BORROWINGS
(In millions)September 30, 2020December 31, 2019
Commercial paper$— $3,008 
Current portion of long-term borrowings37 766 
Current portion of long-term borrowings assumed by GE2,323 5,473 
Other975 1,832 
Total GE short-term borrowings$3,335 $11,079 
Current portion of long-term borrowings$3,070 $11,226 
Intercompany payable to GE1,881 2,104 
Other347 804 
Total GE Capital short-term borrowings$5,298 $14,134 
Eliminations(2,656)(3,140)
Total short-term borrowings$5,977 $22,072 
Senior notes$18,820 $14,762 
Senior notes assumed by GE20,074 23,024 
Subordinated notes assumed by GE1,737 2,871 
Other294 324 
Total GE long-term borrowings$40,923 $40,980 
Senior notes$31,337 $25,371 
Subordinated notes186 178 
Intercompany payable to GE17,526 17,038 
Other588 626 
Total GE Capital long-term borrowings$49,637 $43,213 
Eliminations(17,526)(17,038)
Total long-term borrowings$73,034 $67,155 
Non-recourse borrowings of consolidated securitization entities452 1,655 
Total borrowings$79,463 $90,882 
(In millions)March 31, 2020
December 31, 2019
   
Short-term borrowings  
Commercial paper$1,946
$3,008
Current portion of long-term borrowings764
766
Current portion of long-term borrowings assumed by GE5,888
5,473
Other1,288
1,832
Total GE short-term borrowings$9,887
$11,079
   
Current portion of long-term borrowings$8,542
$11,226
Intercompany payable to GE2,519
2,104
Other292
804
Total GE Capital short-term borrowings$11,353
$14,134
   
Eliminations(3,118)(3,140)
Total short-term borrowings$18,122
$22,072
   
Long-term borrowings  
Senior notes$14,717
$14,762
Senior notes assumed by GE21,590
23,024
Subordinated notes assumed by GE1,658
2,871
Other281
324
Total GE long-term borrowings$38,244
$40,980
   
Senior notes$27,373
$25,371
Subordinated notes177
178
Intercompany payable to GE14,390
17,038
Other593
626
Total GE Capital long-term borrowings$42,534
$43,213
   
Eliminations(14,390)(17,038)
Total long-term borrowings$66,388
$67,155
Non-recourse borrowings of consolidated securitization entities644
1,655
Total borrowings$85,154
$90,882


At March 31,September 30, 2020, the outstanding GE Capital borrowings that had been assumed by GE as part of the GE Capital Exit Plan was $29,136$24,134 million ($5,8882,323 million short term and $23,247$21,811 million long term), for which GE has an offsetting Receivable from GE Capital of $16,909$19,407 million. The difference of $12,226$4,726 million ($3,369442 million in short-term borrowings and $8,857$4,284 million in long-term borrowings) represents the amount of borrowings GE Capital had funded with available cash to GE via intercompany loans in lieu of GE issuing borrowings externally. During the first quarterGE repaid a total of 2020, GE had not repaid any$7.5 billion of intercompany loans from GE Capital.Capital in the second quarter of 2020.

At March 31,September 30, 2020, total GE borrowings of $31,222$24,851 million comprised of GE-issued borrowings of $18,996$20,125 million and intercompany loans from GE Capital to GE of $12,226$4,726 million as described above.

GE has provided a full and unconditional guarantee on the payment of the principal and interest on all tradable senior and subordinated outstanding long-term debt securities issued by GE Capital. This guarantee appliesapplied to $33,077 $31,719 million and $34,683 million of GE Capital debt at March 31,September 30, 2020 and December 31, 2019, respectively.

Non-recourse borrowings of consolidated securitization entities included $644 millionan insignificant amount and $1,569 million of current portion of long-term borrowings at March 31,September 30, 2020 and December 31, 2019, respectively. See Notes 4 and 18 for further information.

On April 22,In the second quarter of 2020, GE issued a total of $6,000$7,500 million in aggregate principal amount of senior unsecured debt, comprised ofcomprising $1,000 million of 3.450% Notes due 2027, $1,250 million of 3.625% Notes due 2030, $1,500 million of 4.250% Notes due 2040, and $2,250$3,750 million of 4.350% Notes due 2050, and used these proceeds in addition to a portion of the proceeds from the BioPharma sale to repay a total of $7,500 million of intercompany loans to GE Capital and to complete a tender offer to purchase $4,237 million in aggregate principal amount of certain GE unsecured debt, comprising $2,046 million of 2.700% Notes due 2022, €934 million ($1,011 million equivalent) of 0.375% Notes due 2022, €425 million ($460 million equivalent) of 1.250% Notes due 2023, €376 million ($407 million equivalent) of floating-rate Notes due 2020, and $312 million of 3.375% Notes due 2024. The total cash consideration paid for these purchases was $4,282 million and the total carrying amount of the purchased notes was approximately $4,228 million. We intendmillion, resulting in a loss of $63 million (including $9 million of fees and other costs associated with the tender) which was recorded in Interest and other financial charges in the GE Statement of Earnings (Loss). In addition to use the remaining proceeds to repurchase, redeem or repay GE’s outstanding debt obligations, including otherpurchase price, GE paid any accrued and unpaid interest on the purchased notes or commercial paper.through the date of purchase.


462020 1Q3Q FORM 10-Q55

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 23,In the second quarter of 2020, GE Capital completedissued a total of $6,000 million in aggregate principal amount of senior unsecured debt with maturities ranging from 2025 to 2032, and used these proceeds in addition to the proceeds received from repayments of intercompany loans from GE to complete tender offeroffers to purchase $5,443a total of $9,787 million in aggregate principal amount of certain senior unsecured debt, comprising $3,858debt. The total cash consideration paid for these purchases was $9,950 million of 2.342% Notes due 2020, €575 million ($623 million equivalent) of 2.250% Notes due 2020, $460 million of 4.375% Notes due 2020, and £404 million ($503 million of 5.875% Notes due 2020. Thethe total carrying amount of the purchased notes was approximately $5,427 million.

$9,827 million, resulting in a total loss of $143 million (including $20 million of fees and other costs associated with the tender) which was recorded in Interest and other financial charges in the GE Capital Statement of Earnings (Loss). In addition to the purchase price, GE Capital paid any accrued and unpaid interest on the purchased notes through the date of purchase.

See Note 17 for further information about borrowings and associated interest rate swaps.


NOTE 12. INSURANCE LIABILITIES AND ANNUITY BENEFITSBENEFITS.
Insurance liabilities and annuity benefits comprise mainly obligations to annuitants and insureds in our run-off insurance activities.
September 30, 2020 (In millions)
Long-term care insurance contractsStructured settlement annuities & life insurance contractsOther
contracts
Other adjustments(a)Total
Future policy benefit reserves$16,866 $9,294 $178 $7,404 $33,742 
Claim reserves4,364 270 1,079 — 5,713 
Investment contracts1,060 1,034 — 2,094 
Unearned premiums and other20 189 118 — 327 
21,250 10,813 2,409 7,404 41,876 
Eliminations— — (424)— (424)
Total$21,250 $10,813 $1,985 $7,404 $41,452 
March 31, 2020 (In millions)
Long-term care insurance contractsStructured settlement annuities & life insurance contractsOther
contracts
Other adjustments(a)Total


December 31, 2019 (In millions)
December 31, 2019 (In millions)
Future policy benefit reserves$16,785
$9,491
$181
$4,051
$30,508
Future policy benefit reserves$16,755 $9,511 $183 $5,655 $32,104 
Claim reserves4,314
253
1,099

5,666
Claim reserves4,238 252 1,125 — 5,615 
Investment contracts
1,112
1,057

2,169
Investment contracts1,136 1,055 — 2,191 
Unearned premiums and other26
194
165

385
Unearned premiums and other30 196 96 — 322 

21,125
11,050
2,502
4,051
38,729
21,023 11,095 2,459 5,655 40,232 
Eliminations

(488)
(488)Eliminations— — (406)— (406)
Total$21,125
$11,050
$2,014
$4,051
$38,241
Total$21,023 $11,095 $2,053 $5,655 $39,826 
December 31, 2019 (In millions)











Future policy benefit reserves$16,755
$9,511
$183
$5,655
$32,104
Claim reserves4,238
252
1,125

5,615
Investment contracts
1,136
1,055

2,191
Unearned premiums and other30
196
96

322

21,023
11,095
2,459
5,655
40,232
Eliminations

(406)
(406)
Total$21,023
$11,095
$2,053
$5,655
$39,826
(a) To the extent that unrealized gains on specific investment securities supporting our insurance contracts would result in a premium deficiency should those gains be realized, an increase in future policy benefit reserves is recorded, with an after-tax reduction of net unrealized gains recognized through Accumulated other comprehensive income (loss) (AOCI) in our consolidated Statement of Earnings (Loss).

The decreaseincrease in insurance liabilities and annuity benefits of $1,586$1,626 million from December 31, 2019 to March 31,September 30, 2020 is primarily due to an adjustment of $1,604$1,749 million resulting from a decreasean increase in unrealized gains on investment securities that would result in a premium deficiency should those gains be realized.

Claim reserves included incurred claims of $507$1,390 million and $473$1,410 million, of which insignificant amounts related to the recognition of adjustments to prior year claim reserves arising from our periodic reserve evaluation for the threenine months ended March 31,September 30, 2020 and 2019, respectively. Paid claims were $405$1,328 million and $421$1,237 million in the threenine months ended March 31,September 30, 2020 and 2019, respectively.

Reinsurance recoverables are recorded when we cede insurance risk to third parties but are not relieved from our primary obligation to policyholders and cedents. These amounts, net of allowances of $1,374$1,485 million and $1,355 million, are included in Other GE Capital receivables in our consolidated Statement of Financial Position and amounted to $2,463$2,486 million and $2,416 million at March 31,September 30, 2020 and December 31, 2019, respectively.



2020 1QPremium Deficiency Testing. We completed our annual premium deficiency testing in the aggregate across our run-off insurance portfolio in the third quarter of 2020. These procedures included updating experience studies since our last test completed in the third quarter of 2019, independent actuarial analysis and review of industry benchmarks. As we experienced a premium deficiency in 2019, our 2020 premium deficiency testing started with a zero margin and, accordingly, any net adverse development would result in a future premium deficiency. Using our most recent future policy benefit reserve assumptions, including changes to our assumptions related to morbidity, future premium rate increases and discount rate, the 2020 premium deficiency testing results indicated there was a positive margin of less than 2% of the recorded future policy benefit reserves, excluding Other adjustments, at September 30, 2020. 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.


56 2020 3Q FORM 10-Q47

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The increase in the premium deficiency testing margin from our 2019 testing was primarily attributable to modestly favorable emerging morbidity experience in our long-term care insurance portfolio, primarily at the older attained ages, in the period since the 2017 reconstruction of our future claim cost projections ($412 million) and higher projected future premium rate increase approvals ($199 million), partially offset by a decline in the overall discount rate to a weighted average rate of 5.70% compared to 5.74% in 2019 ($218 million). This decline in the discount rate from 2019 to 2020 reflects a lower expected reinvestment rate, due to lower benchmark interest rates in the U.S, increasing to a lower expected long-term average investment yield over a longer period and slightly lower actual yields on our investment security portfolio, partially offset by increased allocations to higher yielding asset classes introduced with our 2018 strategic initiatives, which included a modest decline in expected yield compared to 2019 assumptions.

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 2020 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 13. POSTRETIREMENT BENEFIT PLANS
PLANS. We sponsor a number of pension and retiree health and life insurance benefit plans that we present in 3 categories, principal pension plans, other pension plans and principal retiree benefit plans. Principal pension plans represent the GE Pension Plan and the GE Supplementary Pension Plan. Other pension plans include U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million. Principal retiree benefit plans provide health and life insurance benefits to certain eligible participants and these participants share in the cost of the healthcare benefits. Smaller pension plans with pension assets or obligations less than $50 million and other retiree benefit plans are not presented.

EFFECT ON OPERATIONS OF BENEFIT PLANS. The components of benefit plans costs other than the service cost are included in the caption Non-operating benefit costs in our consolidated Statement of Earnings (Loss).
PRINCIPAL PENSION PLANSThree months ended September 30Nine months ended September 30
(In millions)2020201920202019
Service cost for benefits earned$156 $154 $501 $472 
Prior service cost amortization36 34 110 101 
Expected return on plan assets(747)(863)(2,243)(2,588)
Interest cost on benefit obligations588 724 1,764 2,173 
Net actuarial loss amortization850 767 2,549 2,300 
Curtailment/settlement loss (gain)51 
Benefit plans cost$883 $816 $2,681 $2,509 
 Principal pension plans Other pension plans
 Three months ended March 31 Three months ended March 31
(In millions)2020
2019
 2020
2019
      
Service cost for benefits earned$153
$158
 $65
$63
Prior service cost amortization37
33
 

Expected return on plan assets(748)(863) (274)(284)
Interest cost on benefit obligations587
726
 108
139
Net actuarial loss amortization848
763
 112
80
Curtailment/settlement loss (gain)
51
(a)(1)9
Benefit plans cost$877
$868
 $10
$7
(a) Curtailment loss in the three months ended March 31, 2019, resulted from the spin-off and subsequent merger of our Transportation segment with Wabtec, which is included in Earnings (loss) from discontinued operations in our consolidated Statement of Earnings (Loss).

Principal retiree benefit plans income was $32$31 million and $61$31 million for the three months ended March 31,September 30, 2020 and 2019, and $85 million and $122 million for the nine months ended September 30, 2020 and 2019, respectively, which includes a curtailment gain of $33 million in 2019 resulting from the Transportation transaction, which is included in Earnings (loss) from discontinued operations in our consolidated Statement of Earnings (Loss).transaction. Other pension plans cost were immaterial for the three months ended September 30, 2020 and 2019, and for the nine months ended September 30, 2020 and 2019.

We also have a defined contribution plan for eligible U.S. employees that provides discretionary contributions. Defined contribution plan costs were $95$71 million and $101$83 million for the three months ended March 31,September 30, 2020 and 2019, and $253 million and $274 million for the nine months ended September 30, 2020 and 2019, respectively.

NOTE 14. INCOME TAXES
TAXES. Our consolidated effective income tax rate was 1.0%(25.7)% and 12.5%0.2% during the threenine months ended March 31,September 30, 2020 and 2019, respectively. The negative rate in 2020 reflects a tax benefit on pre-tax income. The tax benefit for 2020 is lower than the U.S. statutory rate primarily due to the lower tax rate on the sale of our BioPharma business.business and U.S. business credits. The low tax rate on the BioPharma sale reflects gain outside the U.S. taxed at lower than 21% and because we recorded $633 million of the tax associated with preparatory steps for the transaction in the fourth quarter of 2019. The rate for 2019 is lower than the U.S. statutory rate primarily due to favorable audit resolutions, the benefit of the lower-taxed disposition of our Digital ServiceMax business and U.S. business credits. This was partially offset by the largely non-deductible goodwill impairment charges associated with our Additive business within our Aviation segment and our GECAS business within our Capital segment. The rate for 2019 benefited from favorable audit resolutions and U.S. business credits, partially offset by the cost of global activities, including the base erosion and global intangible low tax income provisions in excess of the benefitand from other global activities.largely non-deductible goodwill impairment charges associated with our Hydro and Grid Solutions equipment and services business within our Renewable Energy segment.

The Internal Revenue Service (IRS) is currently auditing our consolidated U.S. income tax returns for 2014-2015 and 2016-2018. It is possible the 2014-2015 audit will be completed in the next 12 months. The United Kingdom tax authorities disallowed interest deductions claimed by GE Capital for the years 2004-2015 that could result in a potential impact of approximately $1 billion, which includes a possible assessment of tax and reduction of deferred tax assets, not including interest and penalties. We are contesting the disallowance. We comply with all applicable tax laws and judicial doctrines of the United Kingdom and believe that the entire benefit is more likely than not to be sustained on its technical merits.


482020 1Q3Q FORM 10-Q57

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15. SHAREHOLDERS’ EQUITY
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)Three months ended March 31
(In millions)2020
 2019
    
Beginning balance$61
 $(39)
Other comprehensive income (loss) (OCI) before reclassifications – net of deferred taxes of $0 and $38(a)6
 28
Reclassifications from OCI – net of deferred taxes of $(12) and $(1)(47) (4)
Other comprehensive income (loss)(41) 24
Less OCI attributable to noncontrolling interests
 1
Investment securities ending balance$20
 $(16)
    
Beginning balance$(4,818) $(6,134)
OCI before reclassifications – net of deferred taxes of $(5) and $26(554) 307
Reclassifications from OCI – net of deferred taxes of $0 and $(4)(b)690
 117
Other comprehensive income (loss)135
 423
Less OCI attributable to noncontrolling interests2
 100
Currency translation adjustments ending balance$(4,685) $(5,810)
    
Beginning balance$49
 $13
OCI before reclassifications – net of deferred taxes of $(45) and $11(262) 34
Reclassifications from OCI – net of deferred taxes of $8 and $(4)(b)51
 3
Other comprehensive income (loss)(211) 38
Less OCI attributable to noncontrolling interests
 2
Cash flow hedges ending balance$(163) $49
    
Beginning balance$(7,024) $(8,254)
OCI before reclassifications – net of deferred taxes of $30 and $48219
 (116)
Reclassifications from OCI – net of deferred taxes of $239 and $183(b)817
 662
Other comprehensive income (loss)1,035
 545
Less OCI attributable to noncontrolling interests3
 (2)
Benefit plans ending balance$(5,991) $(7,708)
    
Accumulated other comprehensive income (loss) at March 31$(10,819) $(13,485)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)Three months ended September 30Nine months ended September 30
(In millions)2020201920202019
Beginning balance$47 $59 $61 $(39)
AOCI before reclasses – net of taxes of $0, $15, $7 and $30(a)30 44 151 
Reclasses from AOCI – net of taxes of $2, $(3), $(12) and $(9)(12)(50)(35)
AOCI18 (5)116 
Less AOCI attributable to noncontrolling interests
Investment securities AOCI ending balance$55 $77 $55 $77 
Beginning balance$(4,743)$(5,874)$(4,818)$(6,134)
AOCI before reclasses – net of taxes of $(59), $(12), $(39) and $2755 (189)(558)(191)
Reclasses from AOCI – net of taxes of $0, $(5), $0 and $(9)(b)951 691 1,234 
AOCI55 762 133 1,043 
Less AOCI attributable to noncontrolling interests(63)(41)
Currency translation adjustments AOCI ending balance$(4,689)$(5,050)$(4,689)$(5,050)
Beginning balance$(109)$26 $49 $13 
AOCI before reclasses – net of taxes of $62, $(4), $(7) and $(1)62 (30)(160)(43)
Reclasses from AOCI – net of taxes of $(13), $6, $(5) and $7(b)(38)28 26 56 
AOCI24 (2)(134)13 
Less AOCI attributable to noncontrolling interests
Cash flow hedges AOCI ending balance$(86)$24 $(86)$24 
Beginning balance$(5,387)$(7,063)$(7,024)$(8,254)
AOCI before reclasses – net of taxes of $(22), $1, $6 and $36(87)39 58 (72)
Reclasses from AOCI – net of taxes of $187, $170, $613 and $517(b)695 616 2,190 1,910 
AOCI609 655 2,248 1,838 
Less AOCI attributable to noncontrolling interests(4)
Benefit plans AOCI ending balance$(4,779)$(6,412)$(4,779)$(6,412)
AOCI at September 30$(9,498)$(11,361)$(9,498)$(11,361)
(a) Included adjustments of $1,267$(420) million and $(957)$(877) million for the three months ended March 31,September 30, 2020 and 2019, respectively and $(1,382) million and $(2,888) million for the nine months ended September 30, 2020 and 2019, respectively, related to insurance liabilities and annuity benefits in our run-off insurance operations to reflect the effects that would have been recognized had the related unrealized investment security gains been realized. See Note 12 for further information.
(b) IncludedThe total reclassification from AOCI included $836 million, including currency translation of $688 million, net of taxes, for the threenine months ended March 31,September 30, 2020, related to the sale of our BioPharma business within our Healthcare segment.

In 2016, we issued $5,694 million of GE Series D preferred stock, which are callable on January 21, 2021. In addition to Series D, $250 million of existing GE Series A, B and C preferred stock are also outstanding. The total carrying value of GE preferred stock at March 31,September 30, 2020 was $5,782$5,871 million and will increase to $5,944 million by the respective call dates through periodic accretion. See our Annual Report on Form 10-K for the year ended December 31, 2019 for further information.

Noncontrolling interests in equity of consolidated affiliates amounted to $1,575$1,524 million and $1,545 million at March 31,September 30, 2020 and December 31, 2019, respectively. Net earnings (loss) attributable to noncontrolling interests were $7 million and $30 million for the three months ended March 31, 2020 and 2019, respectively. Dividends attributable to noncontrolling interests were $(3) million and $(106) million for the three months ended March 31, 2020 and 2019, respectively.


Redeemable noncontrolling interests, presented within All other liabilities in our consolidated Statement of Financial Position, include common shares issued by our affiliates that are redeemable at the option of the holder of those interests and amounted to$470 $498 million and $439 million as of March 31,September 30, 2020 and December 31, 2019, respectively. Net earnings (loss) attributable to redeemable noncontrolling interests was $27 million and $27 million for the three months ended March 31, 2020 and 2019, respectively.


2020 1Q FORM 10-Q 49

58 2020 3Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16. EARNINGS PER SHARE INFORMATION
Three months ended September 3020202019
(Earnings for per-share calculation, in millions; per-share amounts in dollars)DilutedBasicDilutedBasic
Earnings from continuing operations$(1,109)$(1,109)$(1,283)$(1,283)
Preferred stock dividends(46)(46)(42)(42)
Accretion of redeemable noncontrolling interests, net of tax(a)(6)(6)
Earnings from continuing operations attributable to common shareholders(1,161)(1,161)(1,325)(1,325)
Earnings (loss) from discontinued operations(35)(35)(8,140)(8,140)
Net earnings (loss) attributable to GE common shareholders(1,196)(1,196)(9,465)(9,465)
Shares of GE common stock outstanding8,756 8,756 8,730 8,730 
Employee compensation-related shares (including stock options)— — 
Total average equivalent shares8,756 8,756 8,730 8,730 
Earnings per share from continuing operations$(0.13)$(0.13)$(0.15)$(0.15)
Earnings (loss) per share from discontinued operations(0.93)(0.93)
Net earnings (loss) per share(0.14)(0.14)(1.08)(1.08)
Potentially dilutive securities(b)486 453 
Three months ended March 312020 2019
(In millions; per-share amounts in dollars)Diluted
Basic
 Diluted
Basic
      
Earnings from continuing operations for per-share calculation$6,358
$6,358
 $936
$954
Preferred stock dividends(43)(43) (40)(40)
Earnings from continuing operations attributable to
common shareholders for per-share calculation
6,315
6,315
 897
915
Earnings (loss) from discontinued operations
for per-share calculation
(175)(175) 2,604
2,622
Net earnings (loss) attributable to GE common
shareholders for per-share calculation
$6,140
$6,140
 $3,519
$3,537
      
Shares of GE common stock outstanding8,742
8,742
 8,711
8,711
Employee compensation-related shares (including stock options)7

 15

Total average equivalent shares8,749
8,742
 8,726
8,711
      
Earnings per share from continuing operations$0.72
$0.72
 $0.10
$0.10
Earnings (loss) per share from discontinued operations(0.02)(0.02) 0.30
0.30
Net earnings (loss) per share0.70
0.70
 0.40
0.41
      
Potentially dilutive securities(a)422
  471
 
Nine months ended September 3020202019
(Earnings for per-share calculation; in millions; per-share amounts in dollars)DilutedBasicDilutedBasic
Earnings from continuing operations$3,264 $3,264 $(438)$(438)
Preferred stock dividends(280)(280)(270)(270)
Accretion of redeemable noncontrolling interests, net of tax(a)(141)(141)
Earnings from continuing operations attributable to common shareholders2,843 2,843 (708)(708)
Earnings (loss) from discontinued operations(203)(203)(5,270)(5,270)
Net earnings attributable to GE common shareholders2,639 2,639 (5,977)(5,977)
Shares of GE common stock outstanding8,749 8,749 8,721 8,721 
Employee compensation-related shares (including stock options)— — 
Total average equivalent shares8,755 8,749 8,721 8,721 
Earnings from continuing operations$0.32 $0.32 $(0.08)$(0.08)
Loss from discontinued operations(0.02)(0.02)(0.60)(0.60)
Net earnings0.30 0.30 (0.69)(0.69)
Potentially dilutive securities(b)454 462 
(a) Represents accretion adjustment of redeemable noncontrolling interests in our Additive business within our Aviation segment.
(b) Outstanding stock awards not included in the computation of diluted earnings per share because their effect was antidilutive.

Our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and, therefore, are included in the computation of earnings per share pursuant to the two-class method. For the three months ended March 31,September 30, 2020 and 2019, as a result of the loss from continuing operations, losses were not allocated to the participating securities. For the nine months ended September 30, 2020, application of this treatment had an insignificant effect.

Earnings per share amounts are computed independently for earnings For the nine months ended September 30, 2019, as a result of the loss from continuing operations, earnings from discontinued operations and net earnings. As a result,losses were not allocated to the sum of per-share amounts from continuing operations and discontinued operations may not equal the total per-share amounts for net earnings.participating securities.

NOTE 17. FINANCIAL INSTRUMENTS
INSTRUMENTS.The following table provides information about assets and liabilities not carried at fair value and excludes finance leases, equity securities without readily determinable fair value and non-financial assets and liabilities. Substantially all of these assets are considered to be Level 3 and the vast majority of our liabilities’ fair value are considered Level 2.
September 30, 2020December 31, 2019
(In millions)Carrying
amount
(net)
Estimated
fair value
Carrying
amount
(net)
Estimated
fair value
AssetsLoans and other receivables$3,895 $4,014 $4,113 $4,208 
LiabilitiesBorrowings (Note 11)79,463 83,122 90,882 97,754 
Investment contracts (Note 12)2,094 2,575 2,191 2,588 

March 31, 2020 December 31, 2019
(In millions)Carrying
amount
(net)

Estimated
fair value

 Carrying
amount
(net)

Estimated
fair value




 

Assets

 

Loans and other receivables$3,912
$3,777
 $4,113
$4,208
Liabilities

 

Borrowings (Note 11)85,154
85,033
 90,882
97,754
Investment contracts (Note 12)2,169
2,485
 2,191
2,588


The lower fair value in relation to carrying value for borrowings at March 31,September 30, 2020 compared to December 31, 2019 was driven primarily by widening GE credit spreads, partially offset by a decline in market interest rates. Unlike the carrying amount, estimated fair value of borrowings included $913$978 million and $1,106 million of accrued interest at March 31,September 30, 2020 and December 31, 2019, respectively.

2020 3Q FORM 10-Q 59

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets and liabilities that are reflected in the accompanying financial statements at fair value are not included in the above disclosures; such items include cash and equivalents, investment securities and derivative financial instruments.instruments.

DERIVATIVES AND HEDGING. Our policy requires that derivatives are used solely for managing risks and not for speculative purposes. Total gross notional was $101,209$92,529 million ($53,80844,010 million in GE Capital and $47,401$48,519 million in GE) and $98,018 million ($55,704 million in GE Capital and $42,314 million in GE) at March 31,September 30, 2020 and December 31, 2019, respectively. GE Capital notional relates primarily to managing interest rate and currency risk between financial assets and liabilities, and GE notional relates primarily to managing currency risk.

FAIR VALUE OF DERIVATIVESSeptember 30, 2020December 31, 2019
(In millions)Gross NotionalAll other assetsAll other liabilitiesGross NotionalAll other assetsAll other liabilities
Interest rate contracts$20,974 $2,019 $$23,918 $1,636 $11 
Currency exchange contracts6,968 73 113 7,044 99 46 
Derivatives accounted for as hedges$27,942 $2,091 $121 $30,961 $1,734 $57 
Interest rate contracts$446 $$$3,185 $18 $12 
Currency exchange contracts62,340 877 1,107 62,165 697 744 
Other contracts1,801 187 30 1,706 123 40 
Derivatives not accounted for as hedges$64,586 $1,070 $1,144 $67,056 $838 $796 
Gross derivatives$92,529 $3,162 $1,265 $98,018 $2,572 $853 
Netting and credit adjustments$(740)$(745)$(546)$(546)
Cash collateral adjustments(1,934)(133)(1,286)(105)
Net derivatives recognized in statement of financial position$488 $387 $740 $202 
Net accrued interest$74 $$182 $
Securities held as collateral(2)(469)
Net amount$560 $388 $452 $203 
50 2020 1Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUE OF DERIVATIVESMarch 31, 2020 December 31, 2019
(In millions)Gross Notional
All other assets
All other liabilities
 Gross Notional
All other assets
All other liabilities
        
Interest rate contracts$23,617
$2,191
$9
 $23,918
$1,636
$11
Currency exchange contracts7,307
170
277
 7,044
99
46
Derivatives accounted for as hedges$30,924
$2,361
$287
 $30,961
$1,734
$57
        
Interest rate contracts$2,447
$29
$7
 $3,185
$18
$12
Currency exchange contracts66,240
1,105
1,477
 62,165
697
744
Other contracts1,598
5
103
 1,706
123
40
Derivatives not accounted for as hedges$70,285
$1,139
$1,587
 $67,056
$838
$796
        
Gross derivatives$101,209
$3,500
$1,874
 $98,018
$2,572
$853
        
Netting and credit adjustments $(1,145)$(1,155)  $(546)$(546)
Cash collateral adjustments (1,297)(198)  (1,286)(105)
Net derivatives recognized in statement of financial position $1,058
$520
  $740
$202
        
Net accrued interest $71
$1
  $182
$1
Securities held as collateral (693)
  (469)
Net amount $436
$521
  $452
$203

It is standard market practice to post or receive cash collateral with our derivative counterparties in order to minimize counterparty exposure. Included in GE Capital cash, cash equivalents and restricted cash was total net cash collateral received on derivatives of $3,603 million (comprising $4,620 million received and $1,017 million posted) at September 30, 2020, and $1,584 million (comprising $2,294 million received and $710 million posted) at December 31, 2019. Of these amounts, $2,595 million and $902 million at September 30, 2020 and December 31, 2019, respectively, were received on interest rate derivatives traded through clearing houses, which are recorded as a reduction of derivative assets and net accrued interest.

Also included in total net cash collateral received are amounts presented as cash collateral adjustments in the table above, as well as
excess net cash collateral posted of $792 million (comprising $90 million received and $882 million posted) at September 30, 2020, and $499 million (comprising $104 million received and $603 million posted) at December 31, 2019, which are excluded from cash collateral adjustments in the table above.

Securities held as collateral excluded excess collateral received of 0 and $27 million at September 30, 2020 and December 31, 2019, respectively. In the third quarter of 2020, one of our counterparties converted its collateral from securities to cash, which is in line with our other derivative counterparties.

Fair value of derivatives in our consolidated Statement of Financial Position excludedexcludes accrued interest. Cash collateral adjustments excluded excess collateral received and posted of $198 million and $995 million at March 31, 2020, respectively, and $104 million and $603 million at December 31, 2019, respectively. Securities held as collateral excluded excess collateral received of $45 million and $27 million at March 31, 2020 and December 31, 2019 respectively.

FAIR VALUE HEDGES. We use derivatives to hedge the effects of interest rate and currency exchange rate changes on our borrowings. At March 31,September 30, 2020, the cumulative amount of hedging adjustments of $6,527$6,203 million (including $2,348$2,346 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $53,272$33,434 million. At March 31,September 30, 2019, the cumulative amount of hedging adjustments of $3,712$5,118 million (including $2,685$2,484 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $58,885$44,558 million. The cumulative amount of hedging adjustments was primarily recorded in long-term borrowings.

CASH FLOW HEDGES. Changes in the fair value of cash flow hedges are recorded in Accumulated Other Comprehensive Income (AOCI)AOCI and recorded in earnings in the period in which the hedged transaction occurs. The gain (loss) recognized in AOCI was $(313)$121 million and $47$(21) million for the three months ended March 31,September 30, 2020 and 2019, respectively. The gain (loss) reclassified from AOCI to earnings was $(59)respectively, and $(139) million and 0$(24) million for the threenine months ended March 31,September 30, 2020 and 2019, respectively. These amounts were primarily related to currency exchange and interest rate contracts.

The total amount in AOCI related to cash flow hedges of forecasted transactions was a $183$48 million loss at March 31,September 30, 2020. We expect to reclassify $125$39 million of loss to earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. For the three months ended March 31, 2020 and 2019,all periods presented we recognized $18 million of loss, primarily as a result of the disposition of BioPharma, and insignificant gains and losses, respectively,an immaterial amount related to hedged forecasted transactions and firm commitments that did not occur by the end of the originally specified period. At March 31,September 30, 2020 and 2019, the maximum term of derivative instruments that hedge forecasted transactions was 15 years and 1413 years, respectively.

60 2020 3Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NET INVESTMENT HEDGES. For these hedges, the portion of the fair value changes of the derivatives or debt instruments that relates to changes in spot currency exchange rates is recorded in a separate component of AOCI. The portion of the fair value changes of the derivatives related to differences between spot and forward rates is recorded in earnings each period. The amounts recorded in AOCI affect earnings if the hedged investment is sold, substantially liquidated, or control is lost.

The total gain (loss) recognized in AOCI on hedging instruments for the three months ended March 31,September 30, 2020 and 2019 was $158$(529) million and $(68)$213 million, and for the nine months ended September 30, 2020 and 2019 was $(461) million and $231 million, respectively, comprising $109 million and $(27) million on currency exchange contracts and $48 million and $(41) million onpredominantly from foreign currency debt, respectively. The total gain (loss)debt. For all periods presented we recognized an immaterial amount excluded from assessment and recognized in earnings was $2 million and $8 million for the three months ended March 31, 2020 and 2019, respectively.earnings.

The carrying value of foreign currency debt designated as net investment hedges was $9,145$8,175 million and $12,502$9,119 million at
March 31, September 30, 2020 and 2019, respectively. The gain (loss)total reclassified from AOCI into earnings was 0 and $6$338 million for the three months ended March 31,September 30, 2020 and 2019, respectively. The total reclassified from AOCI into earnings was 0 and $344 million for the nine months ended September 30, 2020 and 2019, respectively.

EFFECTS OF DERIVATIVES ON EARNINGS. All derivatives are marked to fair value on our balance sheet, whether they are designated in a hedging relationship for accounting purposes or are used as economic hedges. For derivatives not designated as     hedging instruments, substantially all of the gain or loss recognized in earnings is offset by either the current period change in value of underlying exposures, which is recorded in earnings in the current period or a future period when the recording of the exposures occur.

2020 1Q FORM 10-Q 51

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below presents the effect of our derivative financial instruments in the consolidated Statement of Earnings:
Earnings (Loss):
Three months ended March 31, 2020 Three months ended March 31, 2019Three months ended September 30, 2020Three months ended September 30, 2019
(In millions)RevenuesCost of salesInterest ExpenseSG&AOther Income RevenuesCost of salesInterest ExpenseSG&AOther Income(In millions)RevenuesCost of salesInterest ExpenseSG&AOther IncomeRevenuesCost of salesInterest ExpenseSG&AOther Income
   
Total amounts presented in the consolidated Statement of Earnings$20,524
$15,695
$794
$3,065
$6,869
 $22,202
$16,208
$1,065
$3,402
$847
Total amounts presented in the consolidated Statement of Earnings (Loss)Total amounts presented in the consolidated Statement of Earnings (Loss)$19,417 $15,275 $745 $3,227 $(517)$23,360 $17,328 $1,279 $3,293 $158 
   
Total effect of cash flow hedges$(21)$(25)$(10)$(3)$
 $20
$(9)$(10)$(1)$
Total effect of cash flow hedges$68 $(14)$(9)$$$(24)$(1)$(8)$(2)$
   
Hedged items $(2,480)   $(527) Hedged items$311 $(1,000)
Derivatives designated as hedging instruments 2,511
   515
 Derivatives designated as hedging instruments(330)1,011 
Total effect of fair value hedges $31
   $(11) Total effect of fair value hedges$(19)$10 
   
Interest rate contracts$(23)$
$(9)$
$
 $(4)$
$(16)$
$
Interest rate contracts$$$(3)$$$(7)$$(10)$$
Currency exchange contracts(521)13

54
11
 390
9

(45)3
Currency exchange contracts174 10 (130)35 (165)(8)60 (28)
Other


(160)(22) 

96

13
Other48 50 (1)
Total effect of derivatives not designated as hedges$(545)$13
$(9)$(106)$(12) $386
$9
$80
$(45)$16
Total effect of derivatives not designated as hedges$174 $10 $(3)$(81)$85 $(172)$(8)$(11)$60 $(18)
Nine months ended September 30, 2020Nine months ended September 30, 2019
(In millions)RevenuesCost of salesInterest ExpenseSG&AOther IncomeRevenuesCost of salesInterest ExpenseSG&AOther Income
Total amounts presented in the consolidated Statement of Earnings (Loss)$57,690 $46,054 $2,536 $9,371 $8,430 $68,976 $50,949 $3,272 $10,120 $1,170 
Total effect of cash flow hedges$62 $(52)$(31)$$$(18)$(14)$(27)$(3)$
Hedged items$(2,290)$(2,186)
Derivatives designated as hedging instruments2,290 2,172 
Total effect of fair value hedges$$(14)
Interest rate contracts$(35)$$(16)$$$(25)$$(40)$$
Currency exchange contracts(443)39 29 14 (208)(29)(2)(52)
Other(15)39 (1)123 10 
Total effect of derivatives not designated as hedges$(478)$39 $(16)$14 $53 $(234)$(29)$83 $(2)$(42)

The gain (loss) of amount excluded for cash flow hedges which is recognized in earnings was $15$8 million and 0 for the three months ended March 31,September 30, 2020 and 2019, respectively, and $30 million and 0 for the nine months ended September 30, 2020 and 2019, respectively. This amount is recognized primarily in Revenues in our consolidated Statement of Earnings (Loss).


2020 3Q FORM 10-Q 61

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COUNTERPARTY CREDIT RISK. Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. We manage counterparty credit risk (thethe risk that counterparties will default and not make payments to us according to the terms of our agreements)agreements on an individual counterparty basis. Where we have agreed to netting of derivative exposures with a counterparty, we net our exposures with that counterparty and apply the value of collateral posted to us to determine the exposure. We actively monitor these net exposures against defined limits and take appropriate actions in response, including requiring additional collateral. Our exposures to counterparties (including accrued interest), net of collateral we held, was $270$440 million and $368 million at March 31,September 30, 2020 and December 31, 2019, respectively. Counterparties' exposures to our derivative liability (including accrued interest), net of collateral posted by us, was $463$332 million and $159 million at March 31,September 30, 2020 and December 31, 2019, respectively.

NOTE 18. VARIABLE INTEREST ENTITIESENTITIES.
In addition to the 3 VIEs detailed in Note 4, in our consolidated Statement of Financial Position, we have assets of $2,106$2,268 million and $2,134 million and liabilities of $1,103$1,196 million and $1,233 million at March 31,September 30, 2020 and December 31, 2019, respectively, from other consolidated VIEs. These entities were created to help our customers facilitate or finance the purchase of GE goods and services. These entities have no features that could expose us to losses that would significantly exceed the difference between the consolidated assets and liabilities. Substantially all the assets of our consolidated VIEs at March 31,September 30, 2020 can only be used to settle the liabilities of those VIEs.

Our investments in unconsolidated VIEs were $1,939$2,291 million and $1,937 million at March 31,September 30, 2020, and December 31, 2019, respectively. These investments are primarily owned by GE Capital businesses, $506$421 million and $621 million of which were owned by Energy Financial Services, comprising equity method investments, and $1,040$1,469 million and $896 million of which were owned by our run-off insurance operations, primarily comprising investment securities at March 31,September 30, 2020 and December 31, 2019, respectively. The increase in investments in unconsolidated VIEs in our run-off insurance operations reflects implementation of our revised reinvestment plan, which incorporates the introduction of strategic initiatives to invest in higher-yielding asset classes. Our maximum exposure to loss in respect of unconsolidated VIEs is increased by our commitments to make additional investments in these entities described in Note 19.


NOTE 19. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIES
COMMITMENTS. The GECAS business within the Capital segment has placed multiple-year orders for various Boeing, Airbus and other aircraft manufacturers with list prices approximating $35,772$27,455 million (including 358295 new aircraft with estimated delivery dates of 10%5% in 2020, 18%25% in 2021 and 72%70% in 2022 through 2026) and secondary orders with airlines for used aircraft approximating $2,297$2,301 million (including 53 used aircraft with estimated delivery dates of 21%17% in 2020, 64%60% in 2021 and 15%23% in 2022)2022 through 2023) at March 31,September 30, 2020. When we purchase aircraft, it is at a contractual price, which is usually less than the aircraft manufacturer’s list price and excludes any pre-delivery payments made in advance. As of March 31,September 30, 2020, we have made $2,963$3,596 million of pre-delivery payments to aircraft manufacturers.

During April 2020, GECAS agreed with Boeing to restructure its 737 MAX orderbook including previously canceled positions, resulting in the cancellation of 69 orders with 8277 orders now remaining.


52 2020 1Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GE Capital had total investment commitments of $2,786$2,628 million at March 31,September 30, 2020. The commitments primarily comprise project financing investments in thermal and wind energy projects of $1,149$1,190 million and investments by our run-off insurance operations in investment securities and other assets of $1,608$1,411 million, included within these commitments are obligations to make additional investments in unconsolidated VIEs of $260$334 million and $1,090$1,171 million, respectively. See Note 18 for further information.

As of March 31,September 30, 2020, in our Aviation segment, we have committed to provide financing assistance of $2,072$1,977 million for future customer acquisitions of aircraft equipped with our engines.

GUARANTEES. At March 31, 2020, we were committed under the following guarantee arrangements:

Credit Support.Support and Indemnification Agreements - Continuing Operations. At March 31, 2020, we have provided $1,483 million ofFor further information on credit support and indemnification agreements for continuing operations, see our Annual Report on behalf of certain customers' predominantly joint ventures and partnerships, such as standby letters of credit and performance guarantees. The liability was $33 million at MarchForm 10-K for the year ended December 31, 2020.2019.

Indemnification Agreements – Continuing Operations. At March 31, 2020, we have $1,544 million of indemnifications, including representations and warranties in sales of businesses or assets, for which we recorded a liability of $144 million.

Indemnification Agreements –agreements - Discontinued Operations. At March 31,September 30, 2020, we have provided specific indemnities to buyers of GE Capital’sCapital's assets that, in the aggregate, represent a maximum potential claim of $1,019$648 million with related reserves of $139$103 million.

PRODUCT WARRANTIES. We provide for estimated product warranty expenses when we sell the related products. Because warranty estimates are forecasts that are based on the best available information, mostly historical claims experience, claims costs may differ from amounts provided. The liability for product warranties was $2,081$2,022 million and $2,165 million at March 31,September 30, 2020 and December 31, 2019, respectively.


62 2020 3Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LEGAL MATTERS. The following information supplements and amends the discussion of Legal Matters in Note 23 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019;2019 and in Note 19 in our Quarterly Report on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020; refer to that discussionthose discussions for information about previously reported legal matters that are not updated below. In the normal course of our business, we are involved from time to time in various arbitrations, class actions, commercial litigation, investigations and other legal, regulatory or governmental actions, including the significant matters described below that could have a material impact on our results of operations. In many proceedings, including the specific matters described below, it is inherently difficult to determine whether any loss is probable or even reasonably possible or to estimate the size or range of the possible loss, and accruals for legal matters are not recorded until a loss for a particular matter is considered probable and reasonably estimable. Given the nature of legal matters and the complexities involved, it is often difficult to predict and determine a meaningful estimate of loss or range of loss until we know, among other factors, the particular claims involved, the likelihood of success of our defenses to those claims, the damages or other relief sought, how discovery or other procedural considerations will affect the outcome, the settlement posture of other parties and other factors that may have a material effect on the outcome. For these matters, unless otherwise specified, we do not believe it is possible to provide a meaningful estimate of loss at this time. Moreover, it is not uncommon for legal matters to be resolved over many years, during which time relevant developments and new information must be continuously evaluated.

Alstom legacy matters. In November 2015, we acquired the Thermal, Renewables and Grid businesses from Alstom. Prior to the acquisition, the seller was the subject of 2 significant cases involving anti-competitive activities and improper payments: (1) in January 2007, Alstom was fined €65 million by the European Commission for participating in a gas insulated switchgear cartel that operated from 1988 to 2004 (that fine was later reduced to €59 million), and (2) in December 2014, Alstom pled guilty in the United States to multiple violations of the Foreign Corrupt Practices Act and paid a criminal penalty of $772 million. As part of GE’s accounting for the acquisition, we established a reserve amounting to $858 million for legal and compliance matters related to the legacy business practices that were the subject of these and related cases in various jurisdictions, including the previously reported legal proceedings in IsraelSlovenia that are described below. The reserve balance was $846$863 million and $875 million at March 31,September 30, 2020 and December 31, 2019, respectively.

Regardless of jurisdiction, the allegations relate to claimed anti-competitive conduct or improper payments in the pre-acquisition period as the source of legal violations and/or damages. Given the significant litigation and compliance activity related to these matters and our ongoing efforts to resolve them, it is difficult to assess whether the disbursements will ultimately be consistent with the reserve established. The estimation of this reserve involved significant judgment and may not reflect the full range of uncertainties and unpredictable outcomes inherent in litigation and investigations of this nature, and at this time we are unable to develop a meaningful estimate of the range of reasonably possible additional losses beyond the amount of this reserve. Damages sought may include disgorgement of profits on the underlying business transactions, fines and/or penalties, interest, or other forms of resolution. Factors that can affect the ultimate amount of losses associated with these and related matters include the way cooperation is assessed and valued, prosecutorial discretion in the determination of damages, formulas for determining fines and penalties, the duration and amount of legal and investigative resources applied, political and social influences within each jurisdiction, and tax consequences of any settlements or previous deductions, among other considerations. Actual losses arising from claims in these and related matters could exceed the amount provided.


2020 1Q FORM 10-Q 53

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In September 2013, the Israeli Antitrust Authority issued a decision whereby Alstom, Siemens AG and ABB Ltd. were held liable for an alleged anti-competitive arrangement in the gas-insulated switchgears market in Israel. While there was no fine in connection with that decision, claimants brought two civil actionsalleged improper payments by Alstom relating to contracts won in 2013 seeking2006 and 2008 for work on a state-owned power plant in Šoštanj, Slovenia, the power plant owner in January 2017 filed an arbitration claim for damages of approximately $950$430 million and $600 million, respectively, related to the alleged conduct underlying the decision that are pending before the CentralInternational Chamber of Commerce Court of Arbitration in Vienna, Austria. In February 2017, a government investigation in Slovenia of the same underlying conduct proceeded to an investigative phase overseen by a judge of the Celje District Court in Israel. The court in MarchCourt. In September 2020, approved a settlement agreement reached bythe relevant Alstom legacy entity was served with an indictment, which we have anticipated as we are working with the parties but the settlement remains subject to appeal to the Supreme Court of Israel.resolve these matters.

Shareholder and related lawsuits. lawsuits. Since February 2018, as previously reported, multiple shareholder derivative lawsuits have been filed against current and former GE executive officers and members of GE's Board of Directors and GE (as nominal defendant). In December 2018,July 2020, a putative class actionnew shareholder derivative lawsuit (the VargaLindsey case) was filed in the U.S. District Court for the Northern District of New York naming GE and astate court against former GE executive officer as defendantsofficers and GE (as nominal defendant). The lawsuit alleges breaches of fiduciary duties, based on alleged misstatements regarding accounting practices, and the plaintiff seeks unspecified damages and improvements in connection with the oversightGE’s corporate governance and internal procedures. The case has been stayed by agreement of the GE RSP. It alleges that the defendants breached fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA)parties.

As previously reported by failing to advise GE RSP participants that GE Capital insurance subsidiariesBaker Hughes, in March 2019, 2 derivative lawsuits were allegedly under-reserved and continued to retain a GE stock fund as an investment option in the GE RSP. The plaintiffs seek unspecified damages on behalf of a class of GE RSP participants and beneficiaries from January 1, 2010 through January 19, 2018 or later. In March 2020 the court granted GE’s motion to dismiss the case, and in April 2020 the plaintiffs filed an appeal with the Second Circuit.

In August 2019, a putative class action (the Tri-State case) was filed in the Delaware Court of Chancery naming as defendants GE, and thedirectors of Baker Hughes (including former members of GE’s Board of Directors ofand current and former GE executive officers) and Baker Hughes Incorporated (BHI)(as nominal defendant), and the court issued an order consolidating these two actions (the Schippnick case). ItThe complaint as amended in May 2019 alleges, fraud, aiding and abetting breaches of fiduciary duty, and aiding and abetting breaches of duty of disclosure by GE based on allegations regarding financial statementsamong other things, that GE providedand the Baker Hughes directors breached their fiduciary duties and that GE was unjustly enriched by entering into transactions and agreements related to GE's sales of approximately 12% of its ownership interest in Baker Hughes in November 2018. The complaint seeks declaratory relief, disgorgement of profits, an award of damages, pre- and post-judgment interest and attorneys’ fees and costs. In May 2019, the plaintiffs voluntarily dismissed their claims against the directors who were members of the Baker Hughes Conflicts Committee and a former BHI board, management and shareholders in connection with BHI’s merger with GE’s Oil and Gas Business in July 2017. The plaintiff seeks damages on behalf of BHI shareholders during the period between October 7, 2016 and July 5, 2017.Baker Hughes director. In October 2019, the CityCourt denied the remaining defendants’ motions to dismiss, except with respect to the unjust enrichment claim against GE, which has been dismissed. In November 2019, the defendants filed their answer to the complaint, and a special litigation committee of Providencethe Baker Hughes Board of Directors moved for an order staying all proceedings in this action pending completion of the committee's investigation of the allegations and claims asserted in the complaint. In October 2020, the special litigation committee filed a complaint containing allegations substantially similarreport with the Court recommending that the derivative action be terminated.
2020 3Q FORM 10-Q 63

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEC investigation. As previously reported, the staff of the U.S. Securities and Exchange Commission (SEC) has notified GE that they are conducting an investigation of GE’s legacy revenue recognition practices and internal controls over financial reporting related to long-term service agreements. Following GE’s investor update in January 2018 about the increase in future policy benefit reserves for GE Capital’s run-off insurance operations, the SEC staff expanded the scope of its investigation to encompass the reserve increase and the process leading to the reserve increase. Following GE’s announcement in October 2018 about the expected non-cash goodwill impairment charge related to GE’s Power business, the SEC staff expanded the scope of its investigation to include that charge as well. We are providing documents and other information requested by the SEC staff, and we are cooperating with the ongoing investigation.

We reported in a Form 8-K filing on October 6, 2020 that the SEC staff issued a “Wells notice” advising GE that the staff is considering recommending to the commissioners that the SEC bring a civil action against GE for possible violations of the securities laws. GE has been informed that the issues the SEC staff may recommend that the SEC pursue relate to the historical premium deficiency testing for GE Capital’s run-off insurance operations, as well as GE’s disclosures relating to such run-off insurance operations. The staff has not made a preliminary decision whether to recommend any action with respect to the matters other than GE Capital's run-off insurance operations that are under investigation. The Wells notice is neither a formal allegation nor a finding of wrongdoing. GE disagrees with the SEC staff with respect to this recommendation and is responding through the Wells notice process.

We have recorded a reserve of $100 million as of September 30, 2020 related to the SEC investigation in its entirety, encompassing all matters that are under investigation. We are also exploring whether an appropriate settlement can be reached to fully resolve all matters that are under investigation. In the event that an appropriate settlement cannot be reached, we believe the SEC staff is likely to recommend that the commissioners authorize a civil action against GE with respect to issues involving GE Capital’s run-off insurance operations, as those issues are farthest along in the Tri-State complaint. The cases were consolidated in November 2019,SEC staff's investigation and in December 2019,have already been the plaintiffs filedsubject of a Wells notice. That civil action could seek an amended consolidated complaint whichinjunction against future violations of provisions of the federal securities laws, the imposition of civil monetary penalties, and other relief within the SEC’s authority. In the event that such an action is similar to the prior complaints but does not include fraud claims against GE. In February 2020,brought, GE and the other defendants filed a motion to dismiss the amended consolidated complaint.

These cases are at an early stage; we believe webelieves it would have strong defenses to the claimsproposed charges and are responding accordingly.

Bank BPH.As previously reported, GE Capital’s subsidiary Bank BPH, along with other Polish banks, has been subject to ongoing litigation in Poland related to its portfolio of floating rate residential mortgages, with cases brought by individual borrowers seeking relief related to their foreign currency-denominated mortgages in various courts throughout Poland. Approximately 86%would vigorously defend the case. The results of the Bank BPH portfolioSEC investigation (including the continued investigation of matters other than the run-off insurance operations if an appropriate settlement cannot be reached), the Wells notice, and any enforcement action are unknown at this time, and it is indexed to or denominated in foreign currencies (primarily Swiss francs), andpossible that the total portfolio had a carrying valueultimate amount of $2.4 billion at March 31, 2020. In October 2019, the European Court of Justice (ECJ) issued a decision about the approach to remedy in a case involving another Polish bank’s foreign currency loans, and in January 2020, a pending case involving a Bank BPH loan was referred to the ECJ. While there remains significant uncertainty as to how the prior ECJ decision, or a future decision on the Bank BPH case, will influence the Polish courts as they consider individual cases, we are observing an increase in the number of lawsuits brought against Bank BPH and other banks in Poland with similar portfolios that may continue in future reporting periods. We have observed more findings ofGE's liability and more severe remedies being ordered against Polish banks. We also believe there is a potential for unifying rules of decision to emerge regarding both the finding of liability and approach to remedy that could changebe higher than our estimate of the potential effects of borrower litigation. Future adverse developments in the potential for legislative relief or in litigation across the Polish banking industry as a result of ECJ decisions or otherwise could result in losses related to these loans in future reporting periods.current reserve.

ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. Our operations, like operations of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws and nuclear decommissioning regulations. Additionally, like many other industrial companies, we and our subsidiaries are defendants in various lawsuits related to alleged worker exposure to asbestos or other hazardous materials. Liabilities for environmental remediation, nuclear decommissioning and worker exposure claims exclude possible insurance recoveries. It is reasonably possible that our exposure will exceed amounts accrued. However, due to uncertainties about the status of laws, regulations, technology and information related to individual sites and lawsuits, such amounts are not reasonably estimable. For further information, see our Annual Report on Form 10-K for the year ended December 31, 2019.


54 2020 1Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20. INTERCOMPANY TRANSACTIONSTRANSACTIONS.
Presented below is a walk of intercompany eliminations from the combined GE and GE Capital totals to the consolidated cash flows.
Nine months ended September 30
(In millions)20202019
Combined GE and GE Capital cash from (used for) operating activities - continuing operations$(822)$1,311 
  GE current receivables sold to GE Capital(a)(1,361)508 
  GE long-term receivables sold to GE Capital(b)210 340 
Supply chain finance programs(c)1,853 1,062 
  Other reclassifications and eliminations201 
Consolidated cash from (used for) operating activities - continuing operations$(112)$3,423 
Combined GE and GE Capital cash from (used for) investing activities - continuing operations$26,819 $9,680 
  GE current receivables sold to GE Capital1,086 (1,167)
  GE long-term receivables sold to GE Capital(b)(210)(340)
Supply chain finance programs(c)(1,853)(1,062)
  GE Capital long-term loans to GE(7,500)(480)
  Capital contribution from GE to GE Capital1,500 
  Other reclassifications and eliminations(446)(1,043)
Consolidated cash from (used for) investing activities - continuing operations$17,895 $7,087 
Combined GE and GE Capital cash from (used for) financing activities - continuing operations$(23,252)$(14,201)
  GE current receivables sold to GE Capital276 659 
  GE Capital long-term loans to GE7,500 480 
Capital contribution from GE to GE Capital(1,500)
  Other reclassifications and eliminations438 842 
Consolidated cash from (used for) financing activities - continuing operations$(15,038)$(13,721)
(a)Included the elimination of $11,335 million payments to GE for current receivables purchased and retained by GE Capital and the related reclassification to CFOA of $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, 2020. Included the elimination of $11,038 million payments and the reclassification to CFOA of $11,546 million collections and other activity for the nine months ended September 30, 2019.
(b)Primarily included the reclassification of long-term receivables purchased and retained by GE Capital to current receivables.
(c)Represents the elimination of net payments from GE to GE Capital related to the funded participation in a supply chain finance program with GE Capital. The reduction of the GE liability associated with this program is primarily as a result of GE Capital's sale of the program platform to MUFG Union Bank, N.A. (MUFG) in 2019.
 Three months ended March 31
(In millions)2020
2019





Combined GE and GE Capital cash from (used for) operating activities - continuing operations$(385)$(557)
  GE current receivables sold to GE Capital(997)538
  GE long-term receivables sold to GE Capital135
174
Supply chain finance programs(a)884
310
  Other reclassifications and eliminations216
(45)
Consolidated cash from (used for) operating activities - continuing operations$(148)$420
Combined GE and GE Capital cash from (used for) investing activities - continuing operations$19,991
$6,048
  GE current receivables sold to GE Capital945
(1,306)
  GE long-term receivables sold to GE Capital(135)(174)
Supply chain finance programs(a)(884)(310)
  Other reclassifications and eliminations(695)(562)
Consolidated cash from (used for) investing activities - continuing operations$19,221
$3,696
Combined GE and GE Capital cash from (used for) financing activities - continuing operations$(8,451)$(4,837)
  GE current receivables sold to GE Capital52
768
  Other reclassifications and eliminations480
607
Consolidated cash from (used for) financing activities - continuing operations$(7,919)$(3,461)

64
2020 3Q FORM 10-Q

(a)FINANCIAL STATEMENTS
Represents the reduction of the GE liability associated with the funded participation in a supply chain finance program with GE Capital, primarily as a result of GE Capital's sale of the program platform to MUFG Union Bank, N.A. (MUFG) in 2019.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 to GE Capital are classified as Cash from operating activities in the GE column of our Statement of Cash Flows. See Note 4 for further information.

NOTE 21. GUARANTOR FINANCIAL INFORMATION
GE Capital International Funding Company Unlimited Company (the Issuer) previously issued senior unsecured registered notes that are fully and unconditionally, jointly and severally guaranteed by both the Company and GE Capital International Holdings Limited (each a Guarantor, and together, the Guarantors).
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2020 (UNAUDITED)
 
(In millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Sales of goods and services$6,217
$
$
$29,404
$(16,806)$18,814
GE Capital revenues from services
238
2
1,983
(513)1,709
Total revenues6,217
238
2
31,386
(17,319)20,524
       
Interest and other financial charges295
258
313
337
(409)794
Other costs and expenses6,898


32,294
(19,068)20,124
Total costs and expenses7,192
258
313
32,631
(19,477)20,918
Other income (loss)705


18,294
(12,129)6,869
Equity in earnings (loss) of affiliates6,615

278
17,098
(23,991)
Earnings (loss) from continuing operations before income taxes6,344
(20)(34)34,148
(33,963)6,475
Benefit (provision) for income taxes20
2

421
(506)(63)
Earnings (loss) from continuing operations6,363
(17)(34)34,568
(34,469)6,412
Earnings (loss) from discontinued operations, net of taxes(164)
(15)
1
(178)
Net earnings (loss)6,199
(17)(49)34,568
(34,468)6,233
Less net earnings (loss) attributable to noncontrolling interests


1
33
34
Net earnings (loss) attributable to the Company6,199
(17)(49)34,567
(34,501)6,199
Other comprehensive income (loss)913

(12)(823)835
913
Comprehensive income (loss) attributable to the Company$7,113
$(17)$(61)$33,744
$(33,666)$7,113

2020 1Q FORM 10-Q 55

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 (UNAUDITED)
 
(In millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Sales of goods and services$4,580
$
$
$38,456
$(22,779)$20,257
GE Capital revenues from services
233
75
2,580
(943)1,945
Total revenues4,580
233
75
41,035
(23,722)22,202
       
Interest and other financial charges379
231
379
577
(501)1,065
Other costs and expenses8,494


38,880
(26,512)20,862
Total costs and expenses8,873
231
380
39,457
(27,013)21,927
Other income (loss)(6,743)

16,963
(9,372)847
Equity in earnings (loss) of affiliates14,929

375
11,013
(26,318)
Earnings (loss) from continuing operations before income taxes3,893
3
71
29,555
(32,399)1,122
Benefit (provision) for income taxes(335)

(658)854
(140)
Earnings (loss) from continuing operations3,558
2
71
28,896
(31,545)983
Earnings (loss) from discontinued operations, net of taxes30



2,632
2,663
Net earnings (loss)3,588
2
71
28,896
(28,912)3,645
Less net earnings (loss) attributable to noncontrolling interests


(1)58
57
Net earnings (loss) attributable to the Company3,588
2
71
28,897
(28,970)3,588
Other comprehensive income (loss)929

(1,082)(443)1,524
930
Comprehensive income (loss) attributable to the Company$4,517
$2
$(1,011)$28,454
$(27,446)$4,517

CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION MARCH 31, 2020 (UNAUDITED)
 
(In millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Cash, cash equivalents and restricted cash$27,463
$
$
$20,390
$(567)$47,286
Receivables - net41,752
17,970
84
56,003
(88,382)27,427
Investment in subsidiaries198,819

40,645
441,860
(681,324)
All other assets27,445
1,431

304,108
(145,676)187,308
Total assets$295,479
$19,401
$40,729
$822,360
$(915,949)$262,021
       
Short-term borrowings$150,985
$6,024
$3,598
$6,511
$(148,996)$18,122
Long-term and non-recourse borrowings37,967
12,028
23,954
31,336
(38,255)67,032
All other liabilities64,455
337
68
138,217
(63,069)140,008
Total liabilities253,408
18,390
27,620
176,064
(250,320)225,162
       
Total liabilities and equity$295,479
$19,401
$40,729
$822,360
$(915,949)$262,021

CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2019
(In millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Cash, cash equivalents and restricted cash$10,591
$
$
$26,438
$(636)$36,394
Receivables - net47,170
17,726
230
61,026
(99,104)27,047
Investment in subsidiaries147,397

40,408
421,613
(609,418)
All other assets28,377
236

291,995
(118,000)202,607
Total assets$233,535
$17,961
$40,638
$801,071
$(827,158)$266,048
       
Short-term borrowings$135,172
$5,991
$2,981
$9,712
$(131,783)$22,072
Long-term and non-recourse borrowings40,660
10,780
24,417
34,262
(41,310)68,809
All other liabilities66,808
161
70
146,972
(68,705)145,306
Total liabilities242,640
16,932
27,468
190,946
(241,799)236,187
       
Total liabilities and equity$233,535
$17,961
$40,638
$801,071
$(827,158)$266,048


56 2020 1Q FORM 10-Q

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2020 (UNAUDITED)
(In millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Cash from (used for)
  operating activities
$2,339
$558
$(819)$30,587
$(32,879)$(214)
       
Cash from (used for) investing activities$(584)$(558)$14
$(21,387)$41,601
$19,086
       
Cash from (used for) financing activities$15,117
$
$805
$(15,188)$(8,653)$(7,919)
       
Effect of currency exchange rate changes on
  cash, cash equivalents and restricted cash



(256)
(256)
Increase (decrease) in cash, cash
  equivalents and restricted cash
16,872


(6,243)69
10,697
Cash, cash equivalents and restricted cash
  at beginning of year
10,591


27,121
(636)37,077
Cash, cash equivalents and restricted cash
at March 31
27,463


20,878
(567)47,774
Less cash, cash equivalents and restricted
  cash of discontinued operations at
  March 31



437

437
Cash, cash equivalents and restricted cash
  of continuing operations at March 31
$27,463
$
$
$20,441
$(567)$47,338
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2019 (UNAUDITED)
(In millions)
Parent
Company
Guarantor

Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated
       
Cash from (used for)
  operating activities(a)
$(6,665)$611
$(1,063)$(22,734)$29,973
$122
       
Cash from (used for) investing activities$7,201
$(611)$(61)$48,313
$(51,352)$3,490
       
Cash from (used for) financing activities$(555)$
$1,124
$(26,436)$22,133
$(3,735)
       
Effect of currency exchange rate changes on
  cash, cash equivalents and restricted cash



78

78
Increase (decrease) in cash, cash equivalents and restricted cash(20)

(779)753
(45)
Cash, cash equivalents and restricted cash
  at beginning of year
9,561

1
30,398
(4,412)35,548
Cash, cash equivalents and restricted cash
at March 31
9,541


29,620
(3,658)35,503
Less cash, cash equivalents and restricted
  cash of discontinued operations at
  March 31



3,671

3,671
Cash, cash equivalents and restricted cash
  of continuing operations at March 31
$9,541
$
$
$25,949
$(3,658)$31,832

(a)Parent Company Guarantor cash flows included cash from (used for) operating activities of discontinued operations of $(2,984) million.


2020 1Q FORM 10-Q 57

FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 22.21. BAKER HUGHES SUMMARIZED FINANCIAL INFORMATION
INFORMATION. We account for our remaining interest in Baker Hughes (comprising 377.4 million shares and a promissory note receivable) at fair value. At March 31,September 30, 2020, the fair value of our interest in Baker Hughes was $4,083$5,102 million. Since the date of deconsolidation, we have not sold any shares of Baker Hughes andWe recognized ana net pre-tax unrealized loss of $5,710$748 million ($4,631618 million after-tax) and a pre-tax unrealized loss of $4,613 million ($3,679 million after-tax) for the three and nine months ended March 31,September 30, 2020, respectively, based on a share price of $10.50.$13.29. These losses were recorded net of a $45 million derivative gain associated with a forward sale of up to approximately 28 million Baker Hughes shares pursuant to our previously announced program to monetize our Baker Hughes position. In October 2020, we completed this initial forward sale and received proceeds of $417 million. We recognized a pre-tax unrealized loss of $125 million ($98 million after-tax) for the three and nine months ended September 30, 2019. See Notes 2 and 3 for further information.

Summarized financial information of Baker Hughes is as follows.
Three months ended September 30Nine months ended September 30
(In millions)20202019(a)20202019(a)
Revenues$5,049 $1,404 $15,210 $1,404 
Gross Profit757 263 2,190 263 
Net income (loss)(270)25 (16,712)25 
Net income (loss) attributable to the entity(170)12 (10,592)12 
For the three months ended March 31, 2020 (In millions)
 
  
Revenues$5,425
Gross profit755
Net income (loss)(16,098)
Net income (loss) attributable to the entity(10,210)
(a) Financial information is from September 16, 2019 (date of deconsolidation) to September 30, 2019.


Baker Hughes is a SEC registrant with separate filing requirements, and its financial information can be obtained from www.sec.gov or www.bakerhughes.com.

NOTE 23.22. OTHER INCOME
Three months ended September 30Nine months ended September 30
(In millions)2020201920202019
Purchases and sales of business interests(a)$21 $46 $12,445 $260 
Licensing and royalty income44 56 117 176 
Associated companies(78)42 (9)163 
Net interest and investment income(b)(582)(29)(4,259)131 
Other items86 37 187 447 
GE$(509)$153 $8,481 $1,177 
Eliminations(8)(50)(7)
Total$(517)$158 $8,430 $1,170 
 Three months ended March 31
(In millions)2020
2019
   
Purchases and sales of business interests(a)$12,372
$253
Licensing and royalty income42
40
Associated companies39
39
Net interest and investment income(b)(5,632)137
Other items53
384
GE6,874
852
Eliminations(4)(5)
Total$6,869
$847
(a)Included a pre-tax gain of $12,292 million on the sale of BioPharma in 2020. Included a pre-tax gain of $224 million on the sale of ServiceMax in 2019. See Note 2 for further information.
(b)Included unrealized loss of $(5,710) million related to our interest in Baker Hughes in 2020. See Note 3 for further information.

(a)Included a pre-tax gain of $12,362 million on the sale of BioPharma for the nine months ended September 30, 2020. Included a pre-tax gain of $224 million on the sale of ServiceMax for the nine months ended September 30, 2019. See Note 2 for further information.

(b)Included a net pre-tax unrealized loss of $748 million and a pre-tax unrealized loss of $4,613 million for the three and nine months ended September 30, 2020, respectively, related to our interest in Baker Hughes in 2020. Included a pre-tax unrealized loss of $125 million for the three and nine months ended September 30, 2019, related to our interest in Baker Hughes in 2019. See Notes 3 and 21 for further information.
58
2020 1Q FORM 10-Q

2020 3Q FORM 10-Q 65

FORWARD LOOKING STATEMENTSOTHER ITEMS

FORWARD-LOOKING STATEMENTS
Our public communications and SEC filings may contain statements related to future, not past, events. These forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "estimate," "forecast," "target," "preliminary," or "range." Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and on the world economy; our expected financial performance, including cash flows, revenues, organic growth, margins, earnings and earnings per share; macroeconomic and market conditions and volatility; planned and potential business or asset dispositions; our de-leveraging plans, including leverage ratios and targets, the timing and nature of actions to reduce indebtedness and our credit ratings and outlooks; GE's and GE Capital's funding and liquidity; our businesses’ cost structures and plans to reduce costs; restructuring, goodwill impairment or other financial charges; or tax rates.

For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:
the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic, and of businesses’ and governments’ responses to the pandemic 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;
our inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position, the prices of our securities and the achievement of our strategic objectives;
changes in macroeconomic and market conditions and market volatility (including developments and volatility arising from the COVID-19 pandemic), including interest rates, the value of securities and other financial assets (including our equity ownership position in Baker Hughes), oil, natural gas and other commodity prices and exchange rates, and the impact of such changes and volatility on our financial position;position and businesses;
our de-leveraging and capital allocation plans, including with respect to actions to reduce our indebtedness, the timing and amount of GE dividends, organic investments, and other priorities;
further downgrades of our current short- and long-term credit ratings or ratings outlooks, or changes in rating application or methodology, and the related impact on our liquidity, funding profile, costs and competitive position;
GE’s liquidity and the amount and timing of our GE Industrial cash flows and earnings, which may be impacted by customer, supplier, competitive, contractual and other dynamics and conditions;
GE Capital's capital and liquidity needs, including in connection with GE Capital’s run-off insurance operations and discontinued operations, the amount and timing of required capital contributions to the insurance operations and any strategic actions that we may pursue; the impact of conditions in the financial and credit markets on GE Capital's ability to sell financial assets; the availability and cost of funding; and GE Capital's exposure to particular counterparties and markets;markets, including through GECAS to the aviation sector and adverse impacts related to COVID-19;
our success in executing and completing asset dispositions or other transactions, including our plan to exit our equity ownership position in Baker Hughes, the timing of closing for such transactions and the expected proceeds and benefits to GE;
global economic trends, competition and geopolitical risks, including changes in the rates of investment or economic growth in key markets we serve, or an escalation of sanctions, tariffs or other trade tensions such as those between the U.S. and China;China or other countries, and related impacts on our businesses' global supply chains and strategies;
market developments or customer actions that may affect levels of demand and the financial performance of the major industries and customers we serve, such as secular, cyclical and competitive pressures in our Power business, pricing and other pressures in the renewable energy market, levels of demand for air travel and other customer dynamics such as early aircraft retirements, conditions in key geographic markets and other shifts in the competitive landscape for our products and services;
operational execution by our businesses, including our ability to improve the operations and execution of our Power and Renewable Energy businesses, and the performance of our Aviation business;
changes in law, regulation or policy that may affect our businesses, such as trade policy and tariffs, regulation related to climate change, and the effects of U.S. tax reform and other tax law changes;
our decisions about investments in new products, services and platforms, and our ability to launch new products in a cost-effective manner;
our ability to increase margins through implementation of operational changes, restructuring and other cost reduction measures;
the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of Alstom, SEC and other investigative and legal proceedings;
the impact of actual or potential failures of our products or third-party products with which our products are integrated, such as the fleet grounding of the Boeing 737 MAX, and the timing of its return to service and return to delivery, and related reputational effects;
the impact of potential information technology, cybersecurity or data security breaches; and
the other factors that are described in the "Risk Factors" section of this report and of our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, as such descriptions may be updated or amended in any future reports we file with the SEC.

These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements. This document includes certain forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materially.


662020 1Q3Q FORM 10-Q59

OTHER ITEMS

EXHIBITS
Exhibit 10(d)
Computation of Per Share Earnings.* Data is provided in Note 16 of this Report.
Exhibit 101The following materials from General Electric Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,September 30, 2020, formatted in XBRL (eXtensible Business Reporting Language); (i) Statement of Earnings (Loss) for the three and nine months ended March 31,September 30, 2020 and 2019, (ii) Statement of Financial Position at March 31,September 30, 2020 and December 31, 2019, (iii) Statement of Cash Flows for the threenine months ended March 31,September 30, 2020 and 2019, (iv) Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended March 31,September 30, 2020 and 2019, (v) Statement of Changes in Shareholders' Equity for the three and nine months ended March 31,September 30, 2020 and 2019, and (vi) Notes to Consolidated Financial Statements.
Exhibit 104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*
Data required by Financial Accounting Standards Board Accounting Standards Codification 260, Earnings Per Share, is provided in Note 16 to the Consolidated Financial Statements in this Report.

FORM 10-Q CROSS REFERENCE INDEX
Item NumberPage(s)
Part I – FINANCIAL INFORMATION
Item 1.Financial Statements30-5836-65
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations3-283-35
Item 3.Quantitative and Qualitative Disclosures About Market Risk20-21, 50-5222-23, 60-62
Item 4.Controls and Procedures2835
Part II – OTHER INFORMATION 
Item 1.Legal Proceedings2963-64
Item 1A.Risk Factors28Not applicable(a)
Item 2.Unregistered Sales of Equity Securities and Use of ProceedsNot applicable(a)35
Item 3.Defaults Upon Senior SecuritiesNot applicable
Item 4.Mine Safety DisclosuresNot applicable
Item 5.Other InformationNot applicable
Item 6.Exhibits6067
Signatures6167
(a) GE did not repurchase any equity securities duringThere have been no material changes to our risk factors since June 30, 2020. For a discussion of our risk factors, refer to our Annual Report on Form 10-K for the three monthsyear ended MarchDecember 31, 2020,2019, and no repurchase program has been authorized.our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.



60 2020 1Q FORM 10-Q


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.

April 29,October 28, 2020/s/ Thomas S. Timko
Date
Thomas S. Timko
Vice President, Chief Accounting Officer and Controller
Principal Accounting Officer



2020 1Q3Q FORM 10-Q 6167