0000040545 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2019-12-31
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20202021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 001-00035
GENERAL ELECTRIC COMPANYCOMPANY
(Exact name of registrant as specified in its charter)
|
| | | | | | | | | | | | | |
| New York | | 14-0689340 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | | |
| 5 Necco Street | Boston | MA | | 02210 |
| (Address of principal executive offices) | | (Zip Code) |
(Registrant’s telephone number, including area code) (617) (617) 443-3000
Securities registered pursuant to Section 12(b) of the Act: |
| | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common stock, par value $0.06 per share | GE | New York Stock Exchange |
| 0.375% Notes due 2022 | GE 22A | New York Stock Exchange |
| 1.250% Notes due 2023 | GE 23E | New York Stock Exchange |
| 0.875% Notes due 2025 | GE 25 | New York Stock Exchange |
| 1.875% Notes due 2027 | GE 27E | New York Stock Exchange |
| 1.500% Notes due 2029 | GE 29 | New York Stock Exchange |
| 7 1/2% Guaranteed Subordinated Notes due 2035 | GE /35 | New York Stock Exchange |
| 2.125% Notes due 2037 | GE 37 | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): |
| | | | | | | | | | |
| Large accelerated filer | ☑ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
There were 8,753,289,0008,781,303,049 shares of common stock with a par value of $0.06 per share outstanding at June 30, 2020.2021.
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS. Our public communications and SEC filings may contain statements related to future, not past, events. These forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "estimate," "forecast," "target," "preliminary," or "range." Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the impacts of the COVID-19 pandemic on our business operations, financial results and financial position and on the world economy; our expected financial performance, including cash flows, revenues, organic growth, margins, earnings and earnings per share; macroeconomic and market conditions and volatility; planned and potential business or asset dispositions, including our plan to combine our GE Capital Aviation Services (GECAS) business with AerCap Holdings N.V. (AerCap); our de-leveraging plans, including leverage ratios and targets, the timing and nature of actions to reduce indebtedness and our credit ratings and outlooks; GE's and GE Capital's funding and liquidity; our businesses’ cost structures and plans to reduce costs; restructuring, goodwill impairment or other financial charges; or tax rates.
For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:
•the continuing severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic, of businesses’ and governments’ responses to the pandemic and of individual factors such as aviation passenger confidence on our operations and personnel, and on commercial activity and demand across our and our customers’ businesses, and on global supply chains;
•the extent to which the COVID-19 pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position, the prices of our securities and the achievement of our strategic objectives;
•our success in executing and completing asset dispositions or other transactions, including our plan to combine our GECAS business with AerCap and our plan to exit our equity ownership position in Baker Hughes, the timing of closing for such transactions, the ability to secure regulatory approvals and satisfy other closing conditions (as applicable), and the expected proceeds, consideration and benefits to GE;
•changes in macroeconomic and market conditions and market volatility (including developments and volatility arising from the COVID-19 pandemic), including inflation, interest rates, the value of securities and other financial assets (including our equity ownership position in Baker Hughes and the equity ownership position that we will hold in AerCap after completing our announced plan to combine GECAS with AerCap), oil, natural gas and other commodity prices and exchange rates, and the impact of such changes and volatility on our financial position and businesses;
•our de-leveraging and capital allocation plans, including with respect to actions to reduce our indebtedness, the timing and amount of GE dividends, organic investments, and other priorities;
•further downgrades of our current short- and long-term credit ratings or ratings outlooks, or changes in rating application or methodology, and the related impact on our liquidity, funding profile, costs and competitive position;
•GE’s liquidity and the amount and timing of our GE Industrial cash flows and earnings, which may be impacted by customer, supplier, competitive, contractual and other dynamics and conditions;
•GE Capital's capital and liquidity needs, including in connection with GE Capital’s run-off insurance operations and discontinued operations such as Bank BPH, the amount and timing of any required capital contributions and any strategic actions that we may pursue; the impact of conditions in the financial and credit markets on GE Capital's ability to sell financial assets; the availability and cost of funding; and GE Capital's exposure to particular counterparties and markets, including through GECAS to the aviation sector and adverse impacts related to COVID-19;
•global economic trends, competition and geopolitical risks, including changes in the rates of investment or economic growth in key markets we serve, or an escalation of sanctions, tariffs or other trade tensions between the U.S. and China or other countries, and related impacts on our businesses' global supply chains and strategies;
•market developments or customer actions that may affect levels of demand and the financial performance of the major industries and customers we serve, such as secular, cyclical and competitive pressures in our Power business, pricing and other pressures in the renewable energy market, levels of demand for air travel and other dynamics related to the COVID-19 pandemic, conditions in key geographic markets and other shifts in the competitive landscape for our products and services;
•operational execution by our businesses, including the operations and execution of our Power and Renewable Energy businesses, and the performance of our Aviation business;
•changes in law, regulation or policy that may affect our businesses, such as trade policy and tariffs, regulation related to climate change, and the effects of tax law changes;
•our decisions about investments in new products, services and platforms, and our ability to launch new products in a cost-effective manner;
•our ability to increase margins through implementation of operational changes, restructuring and other cost reduction measures;
•the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of Alstom and other investigative and legal proceedings;
•the impact of actual or potential failures of our products or third-party products with which our products are integrated, and related reputational effects;
•the impact of potential information technology, cybersecurity or data security breaches at GE or third parties; and
•the other factors that are described in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as such descriptions may be updated or amended in any future reports we file with the SEC.
These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements. This document includes certain forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materially.
ABOUT GENERAL ELECTRIC. General Electric Company (General Electric, GE or the Company) is a high-tech industrial company that operates worldwide through its four industrial segments, Power,Aviation, Healthcare, Renewable Energy, Aviation and Healthcare,Power, and its financial services segment, Capital. See the Consolidated ResultsSegment Operations section ofwithin Management’s Discussion and Analysis of Financial Condition (MD&A) for segment business descriptions and product and service offerings. See the Consolidated Results section within MD&A and Results of Operations and Note 2 to the consolidated financial statements for information regarding our results of operations and recent business portfolio actions. Results of segmentsbusinesses reclassified to discontinued operations have been recast for all periods presented.
GE’s Internet address at www.ge.com, Investor Relations website at www.ge.com/investor-relations and our corporate blog at www.gereports.com, as well as GE’s Facebook page, Twitter accounts and other social media, including @GE_Reports, contain a significant amount of information about GE, including financial and other information for investors. GE encourages investors to visit these websites from time to time, as information is updated and new information is posted.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A). TheSee Note 1 for a discussion of the basis of presentation for our consolidated financial statements of General Electric Company (the Company) combine the industrial manufacturing and services businesses of GE with the financial services businesses of GE Capital and are prepared in conformity with U.S. generally accepted accounting principles (GAAP). Certain columns and rows within tables may not add due to the use of rounded numbers. Percentages presented in this report are calculated from the underlying numbers in millions.MD&A. Discussions throughout MD&A are based on continuing operations unless otherwise noted. The MD&A should be read in conjunction with the Financial Statements and Notes to the consolidated financial statements. For purposes of the financial statement display of sales and costs of sales in our consolidated Statement of Earnings (Loss), “goods” is required by SEC regulations to include all sales of tangible products, and "services" must include all other sales, including other services activities. Throughout MD&A we refer to sales under product services agreements and sales of both goods (such as spare parts and equipment upgrades) and related services (such as monitoring, maintenance and repairs) as sales of “services,” which is an important part of our operations.
We believe investors will gain a better understanding of our company if they understand how we measure and talk about our results. Because of the diversity in our businesses, we present our financial statements in a three-column format, which allows investors to see our GE Industrial operations separately from our GE Capital operations. We believe that this provides useful information to investors. When used in this report, unless otherwise indicated by the context, we use these terms to mean the following:
Consolidated – the adding together of GE and GE Capital, giving effect to the elimination of transactions between the two. We present consolidated results in the left-side column of our consolidated Statements of Earnings (Loss), Financial Position and Cash Flows.
GE – the adding together of all affiliates except GE Capital, whose continuing operations are presented on a one-line basis, giving effect to the elimination of transactions among such affiliates. As GE presents the continuing operations of GE Capital on a one-line basis, any intercompany profits resulting from transactions between GE and GE Capital are eliminated at the GE level. We present the results of GE in the center column of our consolidated Statements of Earnings (Loss), Financial Position and Cash Flows.
GE Capital – the adding together of all affiliates of GE Capital giving effect to the elimination of transactions among such affiliates. We present the results of GE Capital in the right-side column of our consolidated Statements of Earnings (Loss), Financial Position and Cash Flows.
GE Industrial – GE excluding the continuing operations of GE Capital. We believe that this provides investors with a view as to the results of our industrial businesses and corporate items.
This document contains “forward-looking statements” - for details about the uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements, see the Risk Factors and Forward-Looking Statements sections.
In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial data but not presented in our financial statements prepared in accordance with GAAP. Certain of these data are considered “non-GAAP financial measures” under SEC rules. See the Non-GAAP Financial Measures section for the reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures.
CONSOLIDATED RESULTS
SIGNIFICANT DEVELOPMENTS.Coronavirus Disease 2019 (COVID-19) Pandemic.Pandemic. The COVID-19 pandemic has significantly impacted global economies, resulting in workforce and travel restrictions, supply chain and production disruptions and reduced demand and spending across many sectors. Since the latter part of the first quarter of 2020, these factors have had a material adverse impact on our operations and financial performance, and prices of our securities, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve. This section provides a brief overview of how we are responding to current and potential impacts related to COVID-19 on GE’s operations and financial condition and results, with additional details provided throughout the MD&A and other relevant sections of this report.
We have adopted operational and governance rhythms across the Company, and with our Board of Directors, to coordinate and oversee actions related to the COVID-19 pandemic, including an internal task force to protect the health and safety of our employees globally and maintain business continuity; the assessment of financial and operating impacts, financial planning and mitigating cost, cash, and other actions in response; funding and liquidity management and related treasury actions; enterprise risk management and other functional activities across our global commercial, supply chain, human resources, controllership, government affairs, and other organizations. In particular, we took a series of actions during the second quarter to enhance and extend our liquidity at both GE and GE Capital (as described under "Debt offerings and tenders" below), and we continue to evaluate market conditions as they evolve and take precautionary measures to strengthen our financial position. We ended the second quarter of 2020 with $41.4 billion of consolidated cash, cash equivalents and restricted cash, in addition to our available credit lines. See the Capital Resources and Liquidity section for further information.
While factors related directly and indirectly to the COVID-19 pandemic have been impacting operations and financial performance at varying levels across all our businesses, the most significant impact to date has been at our Aviation segment and our GE Capital Aviation Services (GECAS) aircraft leasing business within our Capital segment. The pandemic is having a material adverse effect on the global airline industry, resulting in reduced flight schedules worldwide, an increased number of idle aircraft, lower utilization, workforce reductions and declining financial performance within the airline industry, as well as requests for government financial assistance by various industry participants. This has decreased demand for higher margin service revenues within our Aviation segment directly impacting our profitability and cash flows during 2020. Our Healthcare segment experienced increased demand for certain types of products and services, including ventilators, monitoring solutions, x-ray, anesthesia and point-of-care ultrasound product lines, partially offset by decreased demand in other parts of the business as patients have postponed certain procedures and hospitals have deferred spending. Our other businesses were also adversely impacted by market developments, including delays or cancellations of new projects, new orders and related down payments. In addition, workplace, travel and supply chain disruptions have caused delays of deliveries and the achievement of other billing milestones directly impacting our profitability and cash flows for the six months ended June 30, 2020. We anticipate many of these impacts experienced in the first half of 2020 related to demand, profitability and cash flows will continue in future periods depending on the severity and duration of the pandemic.discontinued operations. For additional details about impacts related to Aviationour businesses and GECAS, Healthcare and our other businesses,actions we have taken in response, as applicable, refer to the respective segment sections within MD&A.
Each of GE's businesses and Corporate are taking cost and cash actions to manage risk and proactively mitigate the financial impact from COVID-19, as supply and demand dynamics We also continue to shift. In 2020,evaluate market conditions as they evolve and take precautionary measures to strengthen our financial position. We ended the second quarter of 2021 with $22.5 billion of consolidated cash, cash equivalents and restricted cash, in addition to our available credit lines of $14.9 billion. See the Capital Resources and Liquidity section for further information. We anticipate that our operations and financial performance will continue to be impacted by the COVID-19 pandemic in future periods. These impacts will ultimately depend on many factors that are not within our control, including the severity and duration of the pandemic; governmental, business and individuals’ actions in response to the pandemic; and the development, availability and public acceptance of effective treatments and vaccines.
GECAS. On March 9, 2021, we are targeting more than $2 billion in operational cost out and more than $3announced an agreement to combine GECAS with AerCap Holdings N.V. (AerCap), for which the Company expects to receive $23.9 billion in cash, preservation actions acrosssubject to contractual closing adjustments, 111.5 million shares of AerCap common stock (approximately 46% ownership interest) valued at approximately $5.7 billion based on the company, including more thanAerCap’s closing share price on June 30, 2021, and $1 billion in cost out and more than $2AerCap notes and/or cash upon closing. In connection with the signing of the transaction agreement, GE Capital recorded a non-cash after-tax charge of $3.9 billion in cash preservation actionsdiscontinued operations in Aviation, to right-size its cost structure and preserve its ability to serve customers. To date, we have realized more than one-thirdthe first half of savings from actions at the total company level, with further results expected2021, including $1.1 billion in the second halfquarter driven by the decline in AerCap's share price. This was partially offset by $0.7 billion of 2020. DuringGECAS earnings, including $0.5 billion of earnings in the six months ended June 30, 2020, excluding business dispositions, we reduced consolidated headcount by approximately 8,700, including 5,300 at Aviationsecond quarter of 2021. The results of GECAS are presented in discontinued operations. Given the economics of GECAS accrue to AerCap in conjunction with the transaction, the net impact of GECAS (loss on sale and 1,500 at Power.
At this time, GE cannot forecastoperations) could change materially, mainly due to fluctuations in AerCap's closing share price. While AerCap shareholders have approved the full durationtransaction, completion remains subject to regulatory approvals and magnitude of COVID-19 impacts, or the pace of recovery from the pandemic across our end markets, operations, and supply chains.other customary closing conditions. See the Risk Factors section for further information about related risks and uncertainties.
BioPharma. On March 31, 2020, we completed the sale of our BioPharma business within our Healthcare segment to Danaher Corporation. See the Segment Operations - Healthcare section and Note 2 for further information.
Baker Hughes. We recognized a pre-tax unrealized gainAfter completion of $1.8 billion ($1.6 billion after tax) and a pre-tax unrealized loss of $3.9 billion ($3.1 billion after tax) for the three and six months ended June 30, 2020, respectively, ontransaction, we will elect to prospectively measure our investment in Baker Hughes. See Notes 2, 3AerCap at fair value and 21 for further information.expect to have continuing involvement with AerCap, primarily through our ownership interest and ongoing sales or leases of products and services. In addition, we expect to sell our stake in an orderly fashion over time. The remainder of GE Capital, including Energy Financial Services (EFS) and our run-off insurance operations, will be reported within Corporate. This means we will move from three-column to one-column financial statement reporting.
Goodwill impairments. Liability Management Actions.In the second quarter of 2020,2021, we recognizedcompleted a non-cash pre-tax impairment chargedebt tender to repurchase a total of $0.9$7.3 billion related to goodwill at our Additive reporting unit within our Aviation segment, thatof debt, comprising $4.1 billion of GE Industrial and $3.2 billion of GE Capital debt. The total after-tax loss on the tender was recorded within earnings from continuing operations at Corporate. We also recognized a non-cash pre-tax impairment charge of $0.8$1.1 billion related to our GECAS reporting unit within our Capital segment. See Note 8 for further information.($1.4 billion pre-tax), comprising $0.5 billion in GE Industrial and $0.6 billion in GE Capital.
Debt offerings and tenders.Reverse Stock Split. In the second quarter of 2020,2021, we took a series of actions to enhance and extend our liquidity at both GE and GE Capital, issuing a total of $13.5 billion of longer-dated debt and reducing near-term debt maturities by $10.5 billion,announced that we will proceed with the remaining $3 billion1-for-8 reverse stock split, approved by shareholders, and plan to file an amendment to our certificate of incorporation to effectuate the reverse stock split after the close of trading on July 30, 2021. GE common stock will begin trading on a split-adjusted basis on August 2, 2021. Beginning in the third quarter, our earnings per share calculation will be leverage neutral byretroactively restated for all periods presented.
Factoring. Effective April 1, 2021, the endCompany discontinued the majority of 2021. The total pre-tax loss from these actions was $0.2 billion. Following these actions,its factoring programs. In the second quarter of 2021, the adverse impact to GE Industrial has no remaining debt maturitiesCFOA was $2.7 billion, which primarily represents the cash that GE Industrial would have otherwise collected in 2020the period had customer receivables not been previously sold and 2021 andis excluded from GE Capital has $5 billion of remaining debt maturities in 2020 and $3 billion in 2021.Industrial free cash flows*.
We have also reduced debt by $9 billion year to date between GE and GE Capital, and we have cumulatively decreased our debt by approximately $22 billion between GE and GE Capital since the beginning of 2019. See the Borrowings section of Capital Resources and Liquidity and Note 11 for further information.
SECOND QUARTER 20202021 RESULTS. Consolidated revenues were $17.7$18.3 billion, down $5.7up $1.5 billion for the quarter, driven by decreasedincreased GE Industrial and GE Capital revenues. GE Industrial revenues decreased $5.3increased $1.4 billion (25%(9%), driven primarily by decreasesincreases at each of our industrial segments. GE Capital revenues were flat.
Continuing earnings (loss) per share was $(0.27)$(0.07). Excluding debt extinguishment costs, realized and unrealized gains (losses), goodwill impairments, non-operating benefit costs, and restructuring and other charges, and debt extinguishment costs, Adjusted earnings per share* was $(0.15).
For the three months ended June 30, 2020,2021, GE Industrial profit was $(0.9)$(0.2) billion and profit margins were (5.7)(1.3)%, down $0.5up $0.7 billion, driven primarily by decreaseshigher profit at our industrial segments of $1.7 billion, decreased goodwill impairments of $0.9 billion and a decrease in non-operating benefit costs of $0.1 billion, partially offset by an unrealizeda lower net gain in the quarteron equity securities of $1.4 billion, primarily on our investment in Baker Hughes, and higher debt extinguishment costs of $1.8 billion and a decrease in adjusted Corporate operating costs* of $0.3$0.6 billion.Adjusted GE Industrial organic profit* decreased $2.0increased $1.6 billion, primarily as a resultdriven by increases at each of the impacts of COVID-19, particularly at our Aviation segment, as well as a decrease at Power.industrial segments.
GE Industrial cash flows from operating activities (CFOA) was $(3.3)were $(2.5) billion and $(1.1)$(3.3) billion for the six months ended June 30, 20202021 and 2019,2020, respectively. GE CFOAIndustrial cash used for operating activities decreased primarily due to loweran increase in net income primarily due(after adjusting for the gain on the sale of BioPharma, non-cash gains/losses related to COVID-19 impacts,our interest in Baker Hughes and highernon-operating debt extinguishment costs), a lower decrease in employee benefit liabilities and a decrease in cash used for working capital, partially offset by changesa decrease in contract and other deferred assets, increases inAviation-related customer allowance accrualsaccruals; and lower cash paid for taxes.principal pension plans cost. GE Industrial free cash flows*flows (FCF)* were $(4.3)$(0.5) billion and $(2.2)$(4.3) billion for the six months ended June 30, 2021 and 2020, and 2019, respectively. The decrease wasGE Industrial FCF increased primarily due to a decrease in cash used for operating activities and a decrease in additions to property, plant and equipment and internal-use software. In addition, effective April 1, 2021, the same decreasesCompany discontinued the majority of its factoring programs. In the second quarter of 2021, the adverse impact to GE Industrial CFOA was $2.7 billion, which primarily represents the cash that GE Industrial would have otherwise collected in the period had customer receivables not been previously sold and is excluded from GE CFOA as noted above.Industrial FCF*. See the Capital Resources and Liquidity - Statement of Cash Flows section for further information.
Orders are contractual commitments with customers to provide specified goods or services for an agreed upon price.
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| GE INDUSTRIAL ORDERS | Three months ended June 30 | | Six months ended June 30 |
| (In billions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Equipment | $ | 7.1 |
| $ | 11.3 |
| | $ | 16.3 |
| $ | 21.3 |
|
| Services | 6.6 |
| 10.9 |
| | 16.9 |
| 21.5 |
|
| Total orders(a) | $ | 13.8 |
| $ | 22.2 |
| | $ | 33.3 |
| $ | 42.8 |
|
| Total organic orders | $ | 13.9 |
| $ | 21.3 |
| | $ | 33.5 |
| $ | 41.4 |
|
(a) Included $0.8 billion related to BioPharma for the three months ended June 30, 2019, and $1.1 billion and $1.8 billion for the six months ended June 30, 2020 and 2019, respectively.
For the three months ended June 30, 2020, orders decreased $8.5 billion (38%) on a reported basis and decreased $7.4 billion (35%) organically primarily at Aviation, driven by declines in both commercial equipment and service orders due to COVID-19 and the 737 MAX grounding, and at Power due to decreases in equipment orders. Equipment orders were down $3.3 billion (31%) organically and services orders were down $4.1 billion (38%) organically.
For the six months ended June 30, 2020, orders decreased $9.6 billion (22%) on a reported basis and decreased $8.0 billion (19%) organically with declines at Aviation, primarily driven by declines in both commercial equipment and service orders due to COVID-19 and the 737 MAX grounding, at Power, due to decreases in equipment orders, and at Renewable Energy, partially offset by an increase at Healthcare. Equipment orders were down $3.6 billion (18%) organically and services orders were down $4.4 billion (21%) organically. Excluding BioPharma, orders decreased $8.1 billion (20%) organically.
BacklogRemaining performance obligation (RPO) is unfilled customer orders for products and product services (expected life of contract sales for product services).
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GE INDUSTRIAL BACKLOG (In billions) | June 30, 2020 |
| December 31, 2019 |
| June 30, 2019 |
|
| Equipment | $ | 73.3 |
| $ | 79.0 |
| $ | 79.4 |
|
| Services | 307.3 |
| 325.6 |
| 295.9 |
|
| Total backlog(a) | $ | 380.5 |
| $ | 404.6 |
| $ | 375.3 |
|
(a) Backlog as of June 30, 2020 excludes the BioPharma business due to its disposition in the first quarter of 2020. Backlog as of December 31, 2019 and June 30, 2019 included $1.2 billion and $1.1 billion, respectively, related to BioPharma.
As of June 30, 2020, backlog decreased $24.0 billion (6%) from December 31, 2019, primarily driven by Aviation due to a reduction in our Commercial Services backlog and cancellations of 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 the BioPharma business of $1.2 billion. Backlog increased $5.2 billion (1%) from June 30, 2019, due to an increase in services backlog of $11.4 billion (4%), primarily at Aviation, partially offset by Power, and a decrease in equipment backlog of $6.2 billion (8%), primarily at Power, Aviation and Healthcare. Excluding the BioPharma disposition, backlog increased $6.3 billion (2%) from June 30, 2019.
Remaining performance obligation (RPO), a defined term under GAAP, is backlog excluding any purchase order that provides the customer with the ability to cancel or terminate without incurring a substantive penalty. We planIn the second quarter of 2021, we have voluntarily replaced our quarterly disclosures of backlog with RPO as a key metric, one commonly used across our industries, in order to continuesimplify our reporting backlog as we believe that it is a useful metric for investors, given its relevance to total orders.and align with our peers. See Note 9 for further information.
| | | | | | | | | | | |
| RPO | June 30, 2021 | December 31, 2020 | June 30, 2020 |
| Equipment | $ | 44,097 | | $ | 45,991 | | $ | 44,411 | |
| Services | 183,368 | | 184,608 | | 183,188 | |
| Total RPO | $ | 227,465 | | $ | 230,600 | | $ | 227,598 | |
| | | | | | | | | | | | | | | | | |
| REVENUES | Three months ended June 30 | | Six months ended June 30 |
| 2021 | 2020 | | 2021 | 2020 |
| Consolidated revenues | $ | 18,279 | | $ | 16,805 | | | $ | 35,397 | | $ | 36,294 | |
| | | | | |
| Equipment | 8,302 | | 8,206 | | | 16,273 | | 17,303 | |
| Services | 9,185 | | 7,860 | | | 17,543 | | 17,608 | |
| | | | | |
| | | | | |
| GE Industrial revenues | $ | 17,487 | | $ | 16,066 | | | $ | 33,816 | | $ | 34,910 | |
| | | | | |
| GE Capital revenues | $ | 858 | | $ | 861 | | | $ | 1,736 | | $ | 1,698 | |
*Non-GAAP Financial Measure
|
| | | | | | | | | |
June 30, 2020 (In billions) | Equipment |
| Services |
| Total |
|
| Backlog | $ | 73.3 |
| $ | 307.3 |
| $ | 380.5 |
|
| Adjustments | (28.8 | ) | (124.1 | ) | (152.9 | ) |
| Remaining performance obligation | $ | 44.4 |
| $ | 183.2 |
| $ | 227.6 |
|
Adjustments to reported backlog of $152.9 billion as of June 30, 2020 are largely driven by adjustments of $142.6 billion in our Aviation segment: (1) backlog includes engine contracts for which we have received purchase orders that are cancelable; (2) our services backlog includes contracts that are cancelable without substantive penalty, primarily time and materials contracts; (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.
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| | | | | | | | | | | | | |
| REVENUES | Three months ended June 30 | | Six months ended June 30 |
| (In billions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Consolidated revenues | $ | 17.7 |
| $ | 23.4 |
| | $ | 38.3 |
| $ | 45.6 |
|
| | | | | | |
| Equipment | 8.3 |
| 10.3 |
| | 17.5 |
| 19.9 |
|
| Services | 7.8 |
| 11.1 |
| | 17.4 |
| 21.9 |
|
| GE Industrial revenues | $ | 16.1 |
| $ | 21.4 |
| | $ | 34.9 |
| $ | 41.7 |
|
| | | | | | |
| GE Capital revenues | $ | 1.8 |
| $ | 2.3 |
| | $ | 3.8 |
| $ | 4.5 |
|
For the three months ended June 30, 20202021, consolidatedConsolidated revenues were up $1.5 billion, driven by an increase in GE Industrial revenues.
GE Industrial revenues increased $1.4 billion (9%), with increases in services and equipment. The increase in services was primarily at Power, due to an increase in Steam Power and Gas Power services revenues; at Aviation, due to higher commercial spare part shipments and increased shop visits; and at Healthcare, due to increased volume in Healthcare Systems (HCS), partially offset by a decrease at Renewable Energy. The increase in equipment was primarily at Renewable Energy, due to more Onshore and Offshore Wind turbine sales; and Healthcare, due to increased volume in HCS products; partially offset by a decrease at Power, due to decreases in Steam Power and Gas Power on lower gas turbine shipments and turnkey sales. The increase in GE Industrial revenues included the net effects of dispositions of $0.2 billion and an increase from foreign currency translation of $0.6 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* increased $1.1 billion (7%), with an increase in services revenues of $1.2 billion (15%) and a decrease in equipment revenues of $0.1 billion (1%). GE Industrial organic revenues* increased at Aviation, Healthcare and Renewable Energy, while Power was flat.
GE Capital revenues were flat, as higher gains and lower marks and impairments in EFS were offset by lower EFS project revenues and Working Capital Solutions (WCS) factoring revenue.
For the six months ended June 30, 2021, Consolidated revenues were down $5.7$0.9 billion, driven by decreaseda decrease in GE Industrial revenues, of $5.3 billion and decreasedpartially offset by an increase in GE Capital revenues of $0.5 billion.revenues.
GE Industrial revenues decreased $5.3$1.1 billion (25%(3%), with decreases in services and equipment. The decrease in services was. Equipment revenues decreased primarily at Aviation; driven by commercial servicesPower, due to lower part shipments and decreased shop visits, and Gas Power;Power equipment revenues; at Aviation, due to declines in transactional and upgrades revenues. The decrease in equipment was primarily at Aviation; due to 403 fewer commercial install and spare engine unit shipments,shipments; and at Healthcare;Healthcare, due to the disposition of the BioPharma business, and within Renewable Energy's Grid and Hydro businesses,business; partially offset by increasesan increase in GasRenewable Energy from more Onshore and Offshore Wind turbine sales. Services revenues increased primarily at Power, equipment revenues relateddue to an increase in Heavy-Duty gas turbine unit shipments. ThisGas Power services revenues; and at Healthcare, due to increased volume in HCS products; partially offset by decreases at Aviation and Renewable Energy. The decrease in GE Industrial revenues included the net effects of dispositions of $0.9$1.3 billion and the effectsan increase from foreign currency translation of a stronger U.S. dollar of $0.3$0.9 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* decreased $4.2$0.7 billion (20%(2%), with a decrease in services revenues of $3.2down $0.2 billion (29%(1%) and equipment revenues of $0.9down $0.5 billion (10%(3%). GE Industrial organic revenues* decreased at Aviation and Power, partially offset by increases at Healthcare and Renewable Energy.
GE Capital revenues decreased $0.5 billion (20%)increased 2%, primarily as a result of volume declines, primarily at GECAS related to lower interest income attributable to the sale of PK Air Financemarks and lower rental revenue,impairments in Insurance and lower gains,EFS, partially offset by mark-to-market effectslower WCS factoring revenue and project revenues at EFS.
| | | | | | | | | | | | | | | | | |
| EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | Three months ended June 30 | | Six months ended June 30 |
| (Per-share in dollars and diluted) | 2021 | 2020 | | 2021 | 2020 |
| Continuing earnings (loss) | $ | (624) | | $ | (1,185) | | | $ | (604) | | $ | 4,989 | |
| Continuing earnings (loss) per share | $ | (0.07) | | $ | (0.15) | | | $ | (0.07) | | $ | 0.55 | |
For the three months ended June 30, 2021, Consolidated continuing earnings increased $0.6 billion due to an increase in GE Industrial profit, partially offset by an increase in GE Capital continuing losses.
GE Industrial profit increased $0.7 billion driven primarily by higher profit at our industrial segments of $1.7 billion, decreased goodwill impairments of $0.9 billion and a decrease in non-operating benefit costs of $0.1 billion, partially offset by a lower net gain on equity securities of $1.4 billion, primarily on our investment in Baker Hughes, and higher debt extinguishment costs of $0.6 billion. GE Industrial profit margin was (1.3)%, an increase from (5.7)%, primarily due to the same net increases as described above. Adjusted GE Industrial profit* was $0.9 billion, an increase of $1.6 billion organically*, due to increases at each of our industrial segments. Adjusted GE Industrial profit margin* was 5.3%, an increase of 1,000 basis points organically*. At Aviation, the primary drivers were higher volume on commercial spare part and commercial spare engine shipments, increased shop visits, and lower net unfavorable changes in estimated profitability in long-term service agreements. At Power, the primary drivers were growth in Gas Power and Steam Power services revenues and margins and continued efforts to streamline the business. At Healthcare, the primary drivers were increased volume for HCS products and Pharmaceutical Diagnostics (PDx). At Renewable Energy, the primary drivers were higher new unit volume and lower product cost at Onshore Wind and the favorable impact of cost reduction actions.
GE Capital continuing losses increased $0.1 billion (20%) primarily as a result of COVID-19higher debt extinguishment costs, partially offset by the discontinuation of preferred dividend payments to GE Industrial, higher gains and related market impacts.lower marks and impairments mainly at EFS, lower interest expense due to a lower debt balance, and lower claims and higher terminations in Insurance.
*Non-GAAP Financial Measure
For the six months ended June 30, 20202021, consolidated revenues were down $7.3 billion, driven by decreased GE Industrial revenues of $6.8 billion and decreased GE Capital revenues of $0.8 billion.
GE Industrial revenues decreased $6.8 billion (16%), with decreases in services and equipment. The decrease in services was primarily at Aviation; driven by commercial services due to lower part shipments and decreased shop visits, as well as Gas Power; due to declines in transactional and upgrades revenues. The decrease in equipment was primarily at Aviation; due to 682 fewer commercial install and spare engine unit shipments, at Healthcare; due to the disposition of the BioPharma business, and within Renewable Energy's Grid and Hydro businesses, partially offset by increases in Gas Power; due to equipment revenues related to an increase in Heavy-Duty gas turbine unit shipments and Renewable Energy's Onshore Wind from higher turbine shipments. This decrease included the net effects of dispositions of $1.3 billion and the effects of a stronger U.S. dollar of $0.4 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* decreased $5.1 billion (13%), with a decrease in services revenues of $4.2 billion (19%) and a decrease in equipment revenues of $1.0 billion (5%). Excluding the BioPharma disposition, GE Industrial organic revenues* decreased $5.2 billion (13%).
GE Capital revenues decreased $0.8 billion (17%), as a result of volume declines, primarily at GECAS related to lower interest income attributable to the sale of PK Air Finance and lower rental revenue, lower gains and mark-to-market effects and impairments as a result of COVID-19 and related market impacts.
|
| | | | | | | | | | | | | |
| EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | Three months ended June 30 | | Six months ended June 30 |
| (In billions; per-share in dollars and diluted) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Continuing earnings | $ | (2.2 | ) | $ | (0.3 | ) | | $ | 4.1 |
| $ | 0.6 |
|
| Continuing earnings per share | $ | (0.27 | ) | $ | (0.03 | ) | | $ | 0.46 |
| $ | 0.07 |
|
For the three months ended June 30, 2020, consolidatedConsolidated continuing earnings decreased $1.9$5.6 billion due to a decrease in GE Industrial profit of $0.5 billion and a decreasean increase in GE Capital earnings of $1.4 billion.continuing losses.
*Non-GAAP Financial Measure
GE Industrial profit decreased $0.5$5.5 billion driven primarily by decreasesthe nonrecurrence of the $12.3 billion gain on the sale of our BioPharma business and higher debt extinguishment costs of $0.6 billion, partially offset by a higher net gain on equity securities of $4.7 billion, higher profit at our industrial segments and higherof $1.3 billion, decreased goodwill impairments partially offset by an unrealized gainof $0.9 billion, a decrease in the quarter on our investment in Baker Hughesnon-operating benefit costs of $1.8$0.3 billion, and a decrease in Adjusted Corporate operating costs*interest and other financial charges of $0.3$0.2 billion. GE Industrial profit margin was (5.7)%0.5%, a decrease of 390 basis pointsfrom 16.2%, primarily due to the same net decreases as described above. Adjusted GE Industrial profit* was $(0.5)$1.8 billion, a decreasean increase of $2.0$1.8 billion organically*, due to decreasesincreases at each of our industrial segments, primarily in Aviation and Power, partially offset by a decrease in Adjusted Corporate operating costs*.segments. Adjusted GE industrialIndustrial profit margin* was (3.2)%5.2%, a decreasean increase of 1,030530 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, decreased shop visits and a $0.6 billion pre-tax charge to reflect the cumulative impacts ofnet unfavorable changes to billing and cost assumptions for certainin estimated profitability in long-term service agreements, operational cost reduction, and expected future lossesthe nonrecurrence of prior year charges related to customer credit risk.risk and lower commercial engine production volumes. At Power, the primary drivers were lowergrowth in Gas Power services revenues and a chargemargins and continued efforts to streamline the businesses. At Healthcare, the primary drivers were increased volume for HCS products and PDx. At Renewable Energy, the primary drivers were higher new unit volume and lower product cost at Onshore Wind, the favorable impact of approximately $0.1 billion related to an under-performing joint venture (JV), partially offset bycost reduction measures and improved cost productivity.project execution.
GE Capitalcontinuing earnings decreased $1.4losses increased $0.1 billion (12%) primarily due to an impairment of goodwill, mark-to-market effects and other impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts, volume declines,higher debt tenderextinguishment costs and lower gains. Gains were $0.1 billion and $0.2 billion in the second quarters of 2020 and 2019, respectively, which primarily related to sales of GECAS aircraft and engines resulting in gains of $0.1 billion in the second quarters of both 2020 and 2019, and the nonrecurrence of a sale of an equity method investment resulting in a gain of $0.1 billion in 2019 at EFS.
For the six months ended June 30, 2020, consolidated continuing earnings increased $3.5 billion due to an increase in GE Industrial profit of $5.0 billion and a decrease in GE Capital earnings of $1.6 billion.
GE Industrial profit increased $5.0 billion driven primarily by the gain on the sale of our BioPharma business of $12.3 billion and a decrease in Adjusted Corporate operating costs* of $0.3 billion, partially offset by an unrealized loss on our investment in Baker Hughes of $3.9 billion, decreases at our industrial segments and higher goodwill impairments.GE Industrial profit margin was 16.2%, an increase of 1,450 basis points, primarily due to the same net increases as described above. Adjusted GE Industrial profit* was $0.6 billion, a decrease of 84% organically*, primarily due to decreases at our Aviation, Power and Renewable Energy segments, partially offset by a decrease in Adjusted Corporate operating costs*. Adjusted GE industrial profit margin* was 1.6%, a decrease of 710 basis points organically*, primarily due to the same net decreases as described above. At Aviation, the primary drivers were lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits and a $0.8 billion pre-tax charge to reflect the cumulative impacts of changes to billing and cost assumptions for certain long-term service agreements, and expected future losses related to customer credit risk. At Power, the primary drivers were lower revenues and a charge of approximately $0.1 billion related to an under-performing JV, partially offset by improved cost productivity. At Renewable Energy, higher sales at Onshore Wind were more than offset by lower sales volume at Grid and Hydro, and the nonrecurrence of a $0.1 billion non-cash gain from the termination of two Offshore Wind contracts in the first quarter of 2019.
GE Capital continuing earnings decreased $1.6 billion primarily due to an impairment of goodwill, mark-to-market effects and other impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts, volume declines, debt tender costs, lower gains and the nonrecurrence of a 2019 tax reform enactment adjustment, partially offset by the tax benefit related to the BioPharma sale and lower excess interest cost. Gains were $0.3 billion and $0.4 billion in the first halfquarter of 2020, and 2019, respectively, which primarily related to salespartially offset by the discontinuation of GECAS aircraft and engines resulting in gains of $0.2 billion in the first half of both 2020 and 2019, and the nonrecurrence of a sale of an equity method investment resulting in a gain of $0.1 billion in 2019 at EFS.
AVIATION AND GECAS 737 MAX. Aviation develops, produces, and sells LEAP aircraft engines through CFM International (CFM), a company jointly owned by GE and Safran Aircraft Engines, a subsidiary of the Safran Group of France. The LEAP-1B engine is the exclusive engine for the Boeing 737 MAX. In March 2019, global regulatory authorities ordered a temporary fleet grounding of the Boeing 737 MAX. During the second quarter of 2019, Boeing announced a temporary reduction in the 737 MAX production rate, and CFM reduced its production rate for the LEAP-1B to meet Boeing's revised aircraft build rate. In December 2019, Boeing announced that it would temporarily suspend production of the 737 MAX beginning in January 2020. Aviation commercial equipment backlog as of June 30, 2020 includes over 10,000 LEAP-1A and 1B engines, including the impact of approximately 1,000 LEAP-1B unit order cancellations since year-end. See the Segment Operations - Aviation section for further information. During 2020, CFM and Boeing reached an agreement to align production rates for 2020 and secure payment terms for engines delivered in 2019 and 2020, net of progress collections. In May 2020, Boeing resumed production of the 737 MAX. CFM and Boeing continue to work closely to ensure a successful reentry into service, with a strong commitment to safety while navigating near term industry disruption.
As of June 30, 2020, GECAS owned 29 of these aircraft, 26 of which are contracted for lease to various airlines that remain obligated to make contractual rental payments. In addition, GECAS has made pre-deliverypreferred dividend payments to Boeing relatedGE Industrial, lower marks and impairments in Insurance and EFS, lower interest expense due to 78 of these aircraft on ordera lower debt balance, and has made financing commitments to acquire a further 18 aircraft under purchaselower claims and leaseback contracts with airlines. During April 2020, GECAS agreed with Boeing to restructure its 737 MAX orderbook including previously canceled positions, resultinghigher terminations in 78 orders now remaining.Insurance.
As of June 30, 2020, we had approximately $2.8 billion of net assets ($5.0 billion of assets and $2.2 billion of liabilities) related to the 737 MAX program that primarily comprised Aviation accounts receivable offset by progress collections and GECAS pre-delivery payments and owned aircraft subject to lease. No impairment charges were incurred related to the 737 MAX aircraft and related balances, as we continue to believe these assets are fully recoverable. We continue to monitor 737 MAX return to service and return to delivery developments with our airline customers, lessees and Boeing.
LEAP continues to be a strong engine program for us, and we delivered 450 engines for Boeing and Airbus platforms in the first half of 2020 and 3,840 engines since inception.
*Non-GAAP Financial Measure
SEGMENT OPERATIONS. Refer to our Annual Report on Form 10-K for the year ended December 31, 2019,2020, for further information regarding our determination of Industrial and Capital segment profit for continuing operations, and for our allocations of corporate costs to our segments.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SUMMARY OF REPORTABLE SEGMENTS | Three months ended June 30 | | Six months ended June 30 | |
| 2021 | 2020 | V | % | | 2021 | 2020 | V | % |
| Aviation | $ | 4,840 | | $ | 4,384 | | 10 | | % | | $ | 9,832 | | $ | 11,276 | | (13) | | % |
| Healthcare | 4,454 | | 3,893 | | 14 | | % | | 8,761 | | 8,620 | | 2 | | % |
| Renewable Energy | 4,049 | | 3,505 | | 16 | | % | | 7,297 | | 6,698 | | 9 | | % |
| Power | 4,295 | | 4,156 | | 3 | | % | | 8,216 | | 8,181 | | 0 | | % |
| Capital | 858 | | 861 | | 0 | | % | | 1,736 | | 1,698 | | 2 | | % |
| Total segment revenues | 18,496 | | 16,799 | | 10 | | % | | 35,842 | | 36,473 | | (2) | | % |
| Corporate items and eliminations | (217) | | 6 | | U | | | (445) | | (179) | | U | |
| Consolidated revenues | $ | 18,279 | | $ | 16,805 | | 9 | | % | | $ | 35,397 | | $ | 36,294 | | (2) | | % |
| | | | | | | | | |
| Aviation | $ | 176 | | $ | (687) | | F | | | $ | 818 | | $ | 316 | | F | |
| Healthcare | 801 | | 506 | | 58 | | % | | 1,500 | | 1,373 | | 9 | | % |
| Renewable Energy | (99) | | (251) | | 61 | | % | | (333) | | (578) | | 42 | | % |
| Power | 299 | | (50) | | F | | | 212 | | (180) | | F | |
| Capital | (573) | | (476) | | (20) | | % | | (745) | | (663) | | (12) | | % |
| Total segment profit (loss) | 604 | | (957) | | F | | | 1,451 | | 268 | | F | |
| Corporate items and eliminations | 23 | | 1,575 | | (99) | | % | | 75 | | 7,698 | | (99) | | % |
| GE Industrial goodwill impairments | 0 | | (877) | | F | | | 0 | | (877) | | F | |
| GE Industrial interest and other financial charges | (261) | | (333) | | 22 | | % | | (528) | | (703) | | 25 | | % |
| GE Industrial debt extinguishment costs | (645) | | (63) | | U | | | (645) | | (63) | | U | |
| GE Industrial non-operating benefit costs | (517) | | (596) | | 13 | | % | | (950) | | (1,212) | | 22 | | % |
| GE Industrial benefit (provision) for income taxes | 228 | | 66 | | F | | | 80 | | (121) | | F | |
| GE Industrial preferred stock dividends | (57) | | 0 | | U | | | (88) | | 0 | | U | |
| Earnings (loss) from continuing operations attributable to GE common shareholders | (624) | | (1,185) | | 47 | | % | | (604) | | 4,989 | | U | |
| Earnings (loss) from discontinued operations, net of taxes | (564) | | (993) | | 43 | | % | | (3,458) | | (1,015) | | U | |
| Less net earnings (loss) attributable to noncontrolling interests, discontinued operations | 0 | | 0 | | — | | % | | 0 | | (2) | | F | |
| Earnings (loss) from discontinued operations, net of tax and noncontrolling interest | (564) | | (993) | | 43 | | % | | (3,458) | | (1,012) | | U | |
| Consolidated net earnings (loss) attributable to the GE common shareholders | $ | (1,188) | | $ | (2,179) | | 45 | | % | | $ | (4,062) | | $ | 3,977 | | U | |
|
| | | | | | | | | | | | | | | | | | | |
| SUMMARY OF REPORTABLE SEGMENTS | Three months ended June 30 | | Six months ended June 30 | |
| (In millions) | 2020 |
| 2019 |
| V% |
| | | 2020 |
| 2019 |
| V% |
| |
| Power | $ | 4,156 |
| $ | 4,681 |
| (11 | ) | % | | $ | 8,181 |
| $ | 9,298 |
| (12 | ) | % |
| Renewable Energy | 3,505 |
| 3,627 |
| (3 | ) | % | | 6,698 |
| 6,165 |
| 9 |
| % |
| Aviation | 4,384 |
| 7,877 |
| (44 | ) | % | | 11,276 |
| 15,831 |
| (29 | ) | % |
| Healthcare | 3,893 |
| 4,934 |
| (21 | ) | % | | 8,620 |
| 9,616 |
| (10 | ) | % |
| Capital | 1,845 |
| 2,321 |
| (21 | ) | % | | 3,768 |
| 4,548 |
| (17 | ) | % |
| Total segment revenues | 17,783 |
| 23,439 |
| (24 | ) | % | | 38,544 |
| 45,458 |
| (15 | ) | % |
| Corporate items and eliminations | (33 | ) | (25 | ) | (32 | ) | % | | (271 | ) | 158 |
| U |
| |
| Consolidated revenues | $ | 17,750 |
| $ | 23,414 |
| (24 | ) | % | | $ | 38,273 |
| $ | 45,616 |
| (16 | ) | % |
|
|
|
|
| | | | | | |
| Power | $ | (40 | ) | $ | 117 |
| U |
| | | $ | (168 | ) | $ | 228 |
| U |
| |
| Renewable Energy | (195 | ) | (184 | ) | (6 | ) | % | | (498 | ) | (371 | ) | (34 | ) | % |
| Aviation | (680 | ) | 1,385 |
| U |
| | | 325 |
| 3,046 |
| (89 | ) | % |
| Healthcare | 550 |
| 958 |
| (43 | ) | % | | 1,446 |
| 1,740 |
| (17 | ) | % |
| Capital | (1,476 | ) | (89 | ) | U |
| | | (1,506 | ) | 46 |
| U |
| |
| Total segment profit (loss) | (1,842 | ) | 2,188 |
| U |
| | | (401 | ) | 4,688 |
| U |
| |
| Corporate items and eliminations | 1,459 |
| (976 | ) | F |
| | | 7,523 |
| (1,205 | ) | F |
| |
| GE goodwill impairments | (877 | ) | (744 | ) | (18 | ) | % | | (877 | ) | (744 | ) | (18 | ) | % |
| GE interest and other financial charges | (396 | ) | (382 | ) | (4 | ) | % | | (766 | ) | (902 | ) | 15 |
| % |
| GE non-operating benefit costs | (596 | ) | (558 | ) | (7 | ) | % | | (1,212 | ) | (1,122 | ) | (8 | ) | % |
| GE benefit (provision) for income taxes | 66 |
| 170 |
| (61 | ) | % | | (121 | ) | (97 | ) | (25 | ) | % |
| Earnings (loss) from continuing operations attributable to GE common shareholders | (2,186 | ) | (302 | ) | U |
| | | 4,146 |
| 618 |
| F |
| |
| Earnings (loss) from discontinued operations, net of taxes | 7 |
| 219 |
| (97 | ) | % | | (171 | ) | 2,881 |
| U |
| |
| Less net earnings attributable to noncontrolling interests, discontinued operations | — |
| (23 | ) | F |
| | | (2 | ) | 11 |
| U |
| |
| Earnings (loss) from discontinued operations, net of tax and noncontrolling interest | 7 |
| 241 |
| (97 | ) | % | | (168 | ) | 2,870 |
| U |
| |
| Consolidated net earnings (loss) attributable to the GE common shareholders | $ | (2,179 | ) | $ | (61 | ) | U |
| | | $ | 3,977 |
| $ | 3,488 |
| 14 |
| % |
POWER.AVIATIONWe continue. The global COVID-19 pandemic continues to monitorhave a material adverse effect on the impactsglobal airline industry. A key underlying driver of COVID-19 on near-term demandAviation’s commercial engine and services business is global commercial air traffic, which in turn is driven by economic activity and consumer and business propensity to travel. Since the impact it is having on our operations, includingbeginning of the supply chainpandemic in the first quarter of 2020, we have seen varied levels of recovery in global markets. Government travel restrictions, public health advisories, individuals' propensity to travel and our ability to service our installed base. Global electricity demand declinedcontinued cases of the virus have all impacted the level of air travel. Aviation regularly tracks global departures, which as of June 30, 2021, were approximately 33% below second quarter 2019. Broadly, global departures improved in the second quarter however, both gas-based electricity generation and GE gas turbine utilization remained stable. As a result, our long-term service agreement billings increasedof 2021 compared withto the prior year. Our ability to close transactions has been impacted by constrained customer budgets and access to financing due to oil pricesfirst quarter of 2021, but levels of recovery varied across regions. Aviation is closely monitoring government actions and economic slowdown, especiallyand industry forecasts. More broadly, we are in Gas Power. Wefrequent dialogue with our airline and airframe customers about the outlook for commercial air travel, new aircraft production, fleet retirements, and after-market services, including shop visit and spare parts demand. Given current trends, we expect domestic travel routes primarily served by narrowbody aircraft to recover before long-haul, international travel routes, which are seeingprimarily served by widebody aircraft. Consistent with industry projections, Aviation continues to estimate the impactduration of the market recovery to be prolonged over multiple years, dependent on our supplierscontaining the spread of the virus, effective inoculation programs and within our supply chain, whichgovernment collaboration to encourage travel, particularly around reducing quarantine requirements.
Aviation has resulted in delays in parts and equipment output.taken several business actions to respond to the current adverse environment. The business is actively monitoring the pace of demand recovery to ensure the business is appropriately sized for the future. In addition, the servicing of our customers' assets has been delayed due to travel and country restrictions. Although there may be market challenges in the near term, we believe the long-term outlook for the role of gas in the power market has not materially changed.
Power is continuing 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. We continue to partner with our airline and leasing customers working through field service travel disruptionsand collaborate with our airframe partners on production rates for 2021 and beyond.
As it relates to effectively servicethe military environment, Aviation continues to forecast strong military demand creating future growth opportunities for our Military business unit as the U.S. Department of Defense and foreign governments have continued flight operations, and have allocated budgets to upgrade and modernize their fleetsexisting fleets. During the second quarter of 2021, Aviation continued to maintain operability.As a result of expected volume declines from COVID-19 inexperience supply chain challenges, which the near term, we have taken several measuresbusiness is actively addressing.
Total engineering, comprising company, customer and partner-funded and nonrecurring engineering costs, decreased compared to offset these pressures. In addition, we executed on a hiring freeze, accelerated planned employee reductions where possible, and are initiating meaningful incremental headcount reduction plansprior year in line with the demand profile.
Looking ahead, we anticipatechanges in the power marketcommercial environment and due to continuethe timing of planned program expenditures. Aviation continues to be impacted by overcapacitycommitted to investment in developing and maturing technology that enables a more sustainable future of flight. In June 2021, Aviation and Safran announced Revolutionary Innovation for Sustainable Engines (RISE), a technology development program targeting more than 20% lower fuel consumption and CO2 emissions compared to today’s engines.
Aviation is taking actions to protect its ability to serve its customers now and as the global airline industry increased price pressure from competition on servicing therecovers. Aviation’s deep history of innovation and technology leadership, commercial engine installed base and the uncertain timing of deal closures due to financing and the complexities of working in emerging markets and the ongoing impact of COVID-19. Market factors such as increasing energy efficiency and renewable energy penetration continue to impact long-term demand.
While we navigate the near-term impacts of the COVID-19 pandemic, we will 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 strongapproximately 37,700 units, with approximately $80 billion in backlog and a gas turbine installed base greater than 7,000 units, including approximately 1,80012,800 units under long-term service agreements.agreements, and military engine installed base of approximately 26,500 units represents strong long-term fundamentals. Aviation expects to emerge from this crisis stronger and drive long-term cash and profitable growth over time.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended June 30 | | | Six months ended June 30 |
| | | | | | |
| Sales in units, except where noted | | | | 2021 | 2020 | | | | 2021 | 2020 |
| Commercial Engines(a) | | | | 383 | | 362 | | | | | 742 | | 892 | |
| LEAP Engines(b) | | | | 211 | | 178 | | | | | 399 | | 450 | |
| Military Engines | | | | 155 | | 204 | | | | | 251 | | 350 | |
| Spare Parts Rate(c) | | | | $ | 15.0 | | $ | 13.1 | | | | | $ | 14.1 | | $ | 20.0 | |
(a) Commercial Engines now includes Business and General Aviation and Aeroderivative units for all periods presented. (b) LEAP engines are subsets of commercial engines. (c) Commercial externally shipped spare parts and spare parts used in time and material shop visits in millions of dollars per day. |
| | | | | | | | | | | |
| June 30, 2021 | December 31, 2020 | June 30, 2020 |
| Equipment | $ | 10,548 | | $ | 10,597 | | $ | 11,496 | |
| Services | 103,236 | | 103,500 | | 104,190 | |
| Total RPO | $ | 113,784 | | $ | 114,097 | | $ | 115,686 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30 | | | Six months ended June 30 | |
| 2021 | | 2020 | | | 2021 | | 2020 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Commercial Engines & Services | $ | 3,115 | | | $ | 2,519 | | | | $ | 6,469 | | | $ | 7,631 | | |
| Military | 1,041 | | | 1,161 | | | | 1,997 | | | 2,121 | | |
| Systems & Other | 684 | | | 703 | | | | 1,366 | | | 1,524 | | |
| Total segment revenues | $ | 4,840 | | | $ | 4,384 | | | | $ | 9,832 | | | $ | 11,276 | | |
| | | | | | | | | |
| Equipment | $ | 1,865 | | | $ | 1,938 | | | | $ | 3,712 | | | $ | 4,302 | | |
| Services | 2,974 | | | 2,446 | | | | 6,120 | | | 6,975 | | |
| Total segment revenues | $ | 4,840 | | | $ | 4,384 | | | | $ | 9,832 | | | $ | 11,276 | | |
| | | | | | | | | |
| Segment profit | $ | 176 | | | $ | (687) | | | | $ | 818 | | | $ | 316 | | |
| Segment profit margin | 3.6 | | % | (15.7) | | % | | 8.3 | | % | 2.8 | | % |
|
| | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| | Orders | | Sales | | Orders | | Sales |
| (In units) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| GE Gas Turbines | 6 |
| 20 |
| | 25 |
| 11 |
| | 15 |
| 35 |
| | 32 |
| 20 |
|
| Heavy-Duty Gas Turbines(a) | 2 |
| 16 |
| | 15 |
| 4 |
| | 8 |
| 27 |
| | 20 |
| 11 |
|
| HA-Turbines(b) | — |
| 7 |
| | 5 |
| — |
| | 2 |
| 10 |
| | 9 |
| 1 |
|
| Aeroderivatives(a) | 4 |
| 4 |
| | 10 |
| 7 |
| | 7 |
| 8 |
| | 12 |
| 9 |
|
| GE Gas Turbine Gigawatts(c) | 0.4 |
| 4.6 |
| | | | | 2.6 |
| 6.7 |
| | | |
(a) Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines. (b) HA-Turbines are a subset of Heavy-Duty Gas Turbines. (c) Gigawatts reported associated with financial orders in the periods presented. |
|
| | | | | | | | | |
| (Dollars in billions) | June 30, 2020 |
| December 31, 2019 |
| June 30, 2019 |
|
| Equipment | $ | 17.1 |
| $ | 17.7 |
| $ | 19.6 |
|
| Services | 63.0 |
| 67.6 |
| 67.1 |
|
| Total backlog | $ | 80.2 |
| $ | 85.3 |
| $ | 86.7 |
|
|
| | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | | Six months ended June 30 |
| | 2020 |
| | 2019 |
| | | 2020 |
| | 2019 |
| |
| Equipment | $ | 0.3 |
| | $ | 2.1 |
| | | $ | 1.8 |
| | $ | 3.1 |
| |
| Services | 2.5 |
| | 2.8 |
| | | 5.1 |
| | 5.5 |
| |
| Total orders | $ | 2.9 |
| | $ | 4.9 |
| | | $ | 7.0 |
| | $ | 8.6 |
| |
| | | | | | | | | | |
| Gas Power | $ | 3.1 |
| | $ | 3.2 |
| | | $ | 5.9 |
| | $ | 6.5 |
| |
| Power Portfolio | 1.1 |
| | 1.4 |
| | | 2.2 |
| | 2.8 |
| |
| Total segment revenues | $ | 4.2 |
| | $ | 4.7 |
| | | $ | 8.2 |
| | $ | 9.3 |
| |
| | | | | | | | | | |
| Equipment | $ | 1.5 |
| | $ | 1.5 |
| | | $ | 3.0 |
| | $ | 3.0 |
| |
| Services | 2.7 |
| | 3.2 |
| | | 5.2 |
| | 6.3 |
| |
| Total segment revenues | $ | 4.2 |
| | $ | 4.7 |
| | | $ | 8.2 |
| | $ | 9.3 |
| |
| | | | | | | | | | |
| Segment profit (loss) | $ | — |
| | $ | 0.1 |
| | | $ | (0.2 | ) | | $ | 0.2 |
| |
| Segment profit margin | (1.0 | ) | % | 2.5 |
| % | | (2.1 | ) | % | 2.5 |
| % |
For the three months ended June 30, 2020, segment orders were down $2.0 billion (42%),2021, segment revenues were downup $0.5 billion (11%(10%) and segment profit was down $0.2up $0.9 billion.
Orders decreased $2.0Revenues increased $0.5 billion (41%(10%) organically,organically*. Commercial Engines revenues increased marginally due to 21 more commercial install and spare engine unit shipments, including 33 more LEAP units versus the prior year. Commercial Services revenues increased, primarily due to decreaseshigher commercial spare part shipments and increased shop visits. Commercial Services revenues for the three months ended June 30, 2021 included a net unfavorable change in Gas Power Heavy-Duty Gas Turbine unit and services orders and Steam equipment orders.estimated profitability of $0.3 billion for its long-term service agreements, including the revenue impact from a contract in a loss position, compared to a net unfavorable change of $0.6 billion for the same period in the prior year. Military revenues decreased with 49 fewer engine shipments due to continued supply chain challenges.
Revenues decreased $0.4Profit increased $0.9 billion (9%) organically*, primarily due to decreaseshigher volume on commercial spare part and commercial spare engine shipments, increased shop visits, and lower net unfavorable changes in Gas Power services revenues primarilyestimated profitability in long-term service agreements. Profit also increased due to operational cost reduction from the actions taken in 2020 and the first half of 2021, along with the nonrecurrence of prior year charges related to delays in planned outagescustomer credit risk and transactional part sales and upgrades, partially offset by increases in Gas Power equipment revenues related to 11 more Heavy-Duty gas turbine unit shipments. Steam equipment and service revenueslower commercial engine production volumes. During the three months ended June 30, 2021, Aviation also decreased.
Profit decreased $0.2 billion organically* due to lower revenues, a charge of approximatelyaccrued $0.1 billion related to an under-performing JVwithin cost of services sold for the aforementioned contract in China at Gas Power and a quality reserveloss position in Power Portfolio onits long-term service agreement portfolio. The impact of unfavorable contract margin reviews in the legacy product line that we have since exitedquarter totaled $0.4 billion, inclusive of $0.3 billion associated with the contract in Power Conversion, partially offset by improved cost productivity driven by continued efforts to right size the business.
For the six months ended June 30, 2020, segment orders were down $1.6 billion (19%),2021, segment revenues were down $1.1$1.4 billion (12%(13%) and segment profit was down $0.4up $0.5 billion.
BacklogRPO as of June 30, 20202021 decreased $5.1$0.3 billion (6%) and $6.5 billion (8%) from December 31, 2019 and June 30, 2019, respectively, primarily driven by sales outpacing new orders.
Orders decreased $1.5 billion (18%) organically, 2020, primarily due to decreasesa reduction in Gas Power Heavy-Duty Gas Turbine unitservices. RPO decreased $1.9 billion (2%) from June 30, 2020, primarily due to a reduction in equipment due to sales and a reduction in services orders and Steam equipment orders.to reflect estimates of lower engine utilization.
Revenues decreased $1.0$1.4 billion (10%(13%) organically*. Commercial Engines revenues decreased, primarily due to 150 fewer commercial install and spare engine unit shipments, including 51 fewer LEAP units versus the prior year. Commercial Services revenues decreased, primarily due to lower commercial spare part shipments and decreased shop visits. Commercial Services revenues for the six months ended June 30, 2021, included a net unfavorable change in estimated profitability of $0.3 billion for its long-term service agreements compared to a net unfavorable change of $0.8 billion for the same period in the prior year. Military revenues decreased with 99 fewer engine shipments due to continued supply chain challenges.
Profit increased $0.5 billion organically*, primarily due to decreaseslower net unfavorable changes in Gas Power services revenues primarilyestimated profitability in long-term service agreements, operational cost reduction from the actions taken in 2020 and the first half of 2021, and the nonrecurrence of prior year charges related to delayscustomer credit risk and lower commercial engine production volumes. These increases in planned outages and transactional part sales and upgrades,profit were partially offset by lower volume on commercial spare part shipments, decreased shop visits in our service agreements and an accrual for a contract in a loss position in the long-term service agreement portfolio.
HEALTHCARE. We continue to see an overall recovery in hospital spending and increases in Gas Power equipment revenuesprocedure volume; the expectation is that this will continue in line with the worldwide COVID-19 vaccine rollout. PDx demand has largely recovered to pre-COVID levels in line with increases in procedure volume. However, in some markets we expect capital expenditures to remain under pressure from revenue declines related to 9 more Heavy-Duty gas turbine unit shipments. Steam equipmentCOVID-19 impacts. Similar to many industries, we are experiencing some inflation in our supply chain as well as delays in sourcing key materials needed for our products. In response to continuing near-term volatility and service revenues also decreased.cost pressures, we have continued to execute on structural cost reductions and cash optimization actions, in order to invest in growth and research and development.
Profit decreased $0.4 billion organically* due
We continue to lower revenues,grow and invest in precision health, with focus on creating new products and digital solutions as well as expanding uses of existing offerings that are tailored to the different needs of our global customers. We recently announced that AIR Recon DL, the industry’s first deep learning image reconstruction technology that works across all anatomies, is now FDA 510(k) cleared on SIGNA 7.0T magnetic resonance imaging (MRI) scanners – the world’s most advanced FDA-cleared MRI device. GE Healthcare launched Xeleris V, an AI-enabled virtual processing radiology solution that provides clinicians with simplified workflows, better data access and more time with patients. We acquired Zionexa, a chargeFrench biotech company with an FDA-approved PET imaging agent called Cerianna. Cerianna is used in addition to a biopsy to help inform treatment in patients with recurrent or metastatic breast cancer. With this acquisition, we are building our pipeline of approximately $0.1 billion relatedoncology and neurology tracers to an under-performing JV in China at Gas Powerhelp physicians better personalize treatment. We remain committed to innovate and a quality reserve in Power Portfolio on the legacy product line that we have since exited in Power Conversion, partially offset by improved cost productivity driven by continued effortsinvest to right size the business.create more integrated, efficient, and personalized precision healthcare.
| | | | | | | | | | | |
| June 30, 2021 | December 31, 2020 | June 30, 2020 |
| Equipment | $ | 3,660 | | $ | 3,465 | | $ | 3,642 | |
| Services | 9,342 | | 9,458 | | 8,943 | |
| Total RPO | $ | 13,002 | | $ | 12,923 | | $ | 12,585 | |
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30 | | Six months ended June 30 |
| 2021 | | 2020 | | | 2021 | | 2020 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Healthcare Systems (HCS) | $ | 3,915 | | | $ | 3,523 | | | | $ | 7,740 | | | $ | 6,971 | | |
| Pharmaceutical Diagnostics (PDx) | 539 | | | 370 | | | | 1,021 | | | 820 | | |
| BioPharma | — | | | — | | | | — | | | 830 | | |
| Total segment revenues | $ | 4,454 | | | $ | 3,893 | | | | $ | 8,761 | | | $ | 8,620 | | |
| | | | | | | | | |
| Equipment | $ | 2,257 | | | $ | 2,050 | | | | $ | 4,484 | | | $ | 4,749 | | |
| Services | 2,197 | | | 1,843 | | | | 4,278 | | | 3,872 | | |
| Total segment revenues | $ | 4,454 | | | $ | 3,893 | | | | $ | 8,761 | | | $ | 8,620 | | |
| | | | | | | | | |
| Segment profit | $ | 801 | | | $ | 506 | | | | $ | 1,500 | | | $ | 1,373 | | |
| Segment profit margin | 18.0 | | % | 13.0 | | % | | 17.1 | | % | 15.9 | | % |
| | | | | | | | | |
|
|
For the three months ended June 30, 2021, segment revenues were up $0.6 billion (14%) and segment profit was up $0.3 billion (58%).
Revenues increased $0.4 billion (10%) organically*, driven by increased volume in Imaging and Ultrasound, partially offset by reductions in Life Care Solutions for HCS products, and a return to pre-pandemic volume in PDx.
Profit increased $0.3 billion (48%) organically*, driven by increased volume for HCS products, increases in PDx volume as well as continued cost reduction actions.
For the six months ended June 30, 2021, segment revenues were up $0.1 billion (2%) and segment profit was up $0.1 billion (9%).
RPO as of June 30, 2021 increased $0.1 billion (1%) from December 31, 2020 and $0.4 billion (3%) from June 30, 2020 primarily due to increases in orders of longer cycle time Imaging products, partially offset by decreases in Life Care Solutions products.
Revenues increased $0.7 billion (9%) organically*, driven by increased volume in Imaging and Ultrasound, partially offset by reductions in Life Care Solutions for HCS products, and a return to pre-pandemic volume in PDx.
Profit increased $0.4 billion (39%) organically*, driven by increased volume for HCS products, increases in PDx volume as well as continued cost reduction actions.
RENEWABLE ENERGY.During the second quarter of 2020, asRenewable Energy includes a result of the COVID-19 pandemic, many of our global manufacturing locations were temporarily closed or production reduced, and delays were observed across our long-term project sites. Accordingly, equipment revenues across the segment and most notably at our Grid and Hydro businesses were negatively impacted. Due to the importanceportfolio of business continuityunits comprising Onshore Wind (with our separate LM Wind blades business), Grid Solutions equipment and services, Hydro, and Offshore Wind and Hybrid Solutions. These businesses are uniquely positioned to lead the needs of our customers, we were able to continue maintaining customer assets. With the exception of certain operations in Brazil, all our manufacturing locations have since reopenedenergy transition with products, services and are returning to pre-COVID-19 capacity levels. While we do not believe the long-term outlook forintegrated solutions by growing new renewable energy productsgeneration, lowering the cost of electricity and services has materially changed,modernizing the grid.
We continue to observe strong demand in the international regions and slower demand in the U.S. onshore wind markets where we are monitoring the impact of the pandemic on the renewable energy industry, including electricity consumption forecasts and customer capital expenditure levels, supply chain, availability of financing and our ability to execute on equipment and long-term projects, including the impact of possible customer related delays. In response to volume declines, we implemented additional cost reduction measures, restructuring and cash preservation actions.
We continue to observe growth across the global onshore wind market together with a positive impact in the U.S. from theany further Production Tax Credit (PTC) cycle and customerextensions in the U.S. The offshore wind industry continues to experience strong global momentum. Customer preference is shifting to larger, more efficient units to drive down costs and compete with other power generation options. Despite the competitive nature of the market, onshore wind order pricing has stabilized globally. In the U.S., in response to COVID-19 related risks to project completion timing, the recent one-year extension of the phase-down further extended the deadline for projects expecting to complete in 2020 and 2021 by one year. Under the current legislation, the PTC phase-down concludes in 2024. We expect to continue high levels of production for 2020 deliveries at Onshore Wind and are closely monitoring our execution during this period including risks of possible project postponements, supply chain and project fulfillment disruptions due to COVID-19 or otherwise.
The grid market remains challenging as we continue to experience pricing pressure in the High Voltage Direct Current (HVDC) and High Voltage (HV) product lines. While we have experienced order declines in both these product lines, in July 2020, we announced Grid Solutions equipment and services (Grid) has been awarded HVDC scope for a 1.4GW offshore wind project in the United Kingdom. Both the Grid and Hydro businessesbusiness units are executing their turnaround plans.
New product introductions remain important to our onshore and offshore customers who are demonstrating the willingness to adopt the new technology of larger turbines that decrease the levelized cost of energy. We continue to focus on cost reduction initiatives of our products, in-sourcing blade production and developing larger, more efficient turbines like the Haliade-X (Offshore Wind) and Cypress (Onshore Wind), for which we have observed significant market interest. Wedemand for our Onshore 5-6 MW Cypress units and Offshore Haliade-X 12-13 MW units and are preparing for large scale production in response to this market demand. Reducing the cost of Haliade-Xthese new product platforms and expect it to receive fblade technologies remains a key priority.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended June 30 | | | Six months ended June 30 |
| | | | | | |
| Onshore and Offshore sales in units | | | | 2021 | 2020 | | | | 2021 | 2020 |
| Wind Turbines | | | | 887 | | 830 | | | | | 1,665 | | 1,561 | |
| Wind Turbine Gigawatts | | | | 2.9 | | 2.3 | | | | | 5.4 | | 4.4 | |
| Repower units | | | | 249 | | 357 | | | | | 249 | | 576 | |
inal certification in the second half of 2020.
| | | | | | | | | | | |
| June 30, 2021 | December 31, 2020 | June 30, 2020 |
| Equipment | $ | 16,116 | | $ | 18,273 | | $ | 16,764 | |
| Services | 13,192 | | 12,531 | | 10,444 | |
| Total RPO | $ | 29,308 | | $ | 30,804 | | $ | 27,208 | |
|
| | | | | | | | | | | | | | | | | | | | |
| | | Three months ended June 30 | | Six months ended June 30 |
| | | Orders | | Sales | | Orders | | Sales |
| (In units) | | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Onshore | Wind Turbines | 645 |
| 984 |
| | 830 |
| 804 |
| | 1,383 |
| 1,954 |
| | 1,561 |
| 1,157 |
|
| | Wind Turbine Megawatts | 2,167 |
| 2,670 |
| | 2,311 |
| 2,257 |
| | 4,500 |
| 5,334 |
| | 4,404 |
| 3,245 |
|
| | Repower | 118 |
| 494 |
| | 357 |
| 221 |
| | 124 |
| 594 |
| | 576 |
| 377 |
|
*Non-GAAP Financial Measure
|
| | | | | | | | | |
| (Dollars in billions) | June 30, 2020 |
| December 31, 2019 |
| June 30, 2019 |
|
| Equipment | $ | 15.5 |
| $ | 16.3 |
| $ | 15.3 |
|
| Services | 10.4 |
| 11.2 |
| 10.4 |
|
| Total backlog | $ | 25.9 |
| $ | 27.5 |
| $ | 25.7 |
|
|
| | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | | Six months ended June 30 | |
| | 2020 |
| | 2019 |
| | | 2020 |
| | 2019 |
| |
| Equipment | $ | 2.5 |
| | $ | 2.9 |
| | | $ | 5.1 |
| | $ | 5.9 |
| |
| Services | 0.5 |
| | 0.8 |
| | | 0.9 |
| | 1.3 |
| |
| Total orders | $ | 3.0 |
| | $ | 3.7 |
| | | $ | 6.1 |
| | $ | 7.2 |
| |
| | | | | | | | | | |
| Onshore Wind | $ | 2.5 |
| | $ | 2.4 |
| | | $ | 4.6 |
| | $ | 3.9 |
| |
| Grid Solutions equipment and services | 0.8 |
| | 0.9 |
| | | 1.7 |
| | 1.9 |
| |
| Hydro, Offshore Wind and other | 0.2 |
| | 0.2 |
| | | 0.4 |
| | 0.4 |
| |
| Total segment revenues | $ | 3.5 |
| | $ | 3.6 |
| | | $ | 6.7 |
| | $ | 6.2 |
| |
| | | | | | | | | | |
| Equipment | $ | 2.7 |
| | $ | 2.9 |
| | | $ | 5.3 |
| | $ | 4.8 |
| |
| Services | 0.8 |
| | 0.8 |
| | | 1.4 |
| | 1.3 |
| |
| Total segment revenues | $ | 3.5 |
| | $ | 3.6 |
| | | $ | 6.7 |
| | $ | 6.2 |
| |
| | | | | | | | | | |
| Segment profit (loss) | $ | (0.2 | ) | | $ | (0.2 | ) | | | $ | (0.5 | ) | | $ | (0.4 | ) | |
| Segment profit margin | (5.6 | ) | % | (5.1 | ) | % | | (7.4 | ) | % | (6.0 | ) | % |
10 20202021 2Q FORM 10-Q10
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30 | | | Six months ended June 30 | |
| 2021 | | 2020 | | | 2021 | | 2020 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Onshore Wind | $ | 2,883 | | | $ | 2,487 | | | | $ | 5,001 | | | $ | 4,612 | | |
| Grid Solutions equipment and services | 776 | | | 812 | | | | 1,571 | | | 1,652 | | |
| Hydro | 194 | | | 151 | | | | 359 | | | 330 | | |
| Offshore Wind and Hybrid Solutions | 196 | | | 54 | | | | 366 | | | 105 | | |
| Total segment revenues | $ | 4,049 | | | $ | 3,505 | | | | $ | 7,297 | | | $ | 6,698 | | |
| | | | | | | | | |
| Equipment | $ | 3,305 | | | $ | 2,722 | | | | $ | 6,148 | | | $ | 5,298 | | |
| Services | 745 | | | 783 | | | | 1,149 | | | 1,401 | | |
| Total segment revenues | $ | 4,049 | | | $ | 3,505 | | | | $ | 7,297 | | | $ | 6,698 | | |
| | | | | | | | | |
| Segment profit (loss) | $ | (99) | | | $ | (251) | | | | $ | (333) | | | $ | (578) | | |
| Segment profit margin | (2.4) | | % | (7.2) | | % | | (4.6) | | % | (8.6) | | % |
For the three months ended June 30, 2020, segment orders were down $0.7 billion (19%),2021, segment revenues were up $0.5 billion (16%) and segment losses were down $0.2 billion (61%).
Revenues increased $0.3 billion (9%) organically*, from 57 more Onshore and Offshore Wind turbine sales on a unit basis and 26% more on a gigawatt basis, partially offset by lower repower unit deliveries at Onshore Wind.
Segment losses decreased $0.2 billion (71%) organically*, primarily from higher new unit volume and lower product cost at Onshore Wind and the favorable impact of cost reduction actions, primarily at Grid. These improvements were partially offset by lower margins on new product introductions, lower repower units at Onshore Wind and higher restructuring costs.
For the six months ended June 30, 2021, segment revenues were up $0.6 billion (9%) and segment losses were down $0.2 billion (42%).
RPO as of June 30, 2021 decreased $1.5 billion (5%) from December 31, 2020 primarily from sales at Onshore Wind and Grid during the first half of 2021 exceeding new orders, partially offset by an increase in Onshore services, primarily due to higher repower units. RPO increased $2.1 billion (8%) from June 30, 2020 primarily at Offshore Wind from our first Haliade-X order for the Dogger Bank Wind Farm and higher services at Onshore and Offshore Wind, partially offset by sales exceeding new orders at Onshore Wind and Grid. The decrease at Onshore Wind is largely driven by the progressive PTC phase out, while at Grid is primarily due to increased commercial selectivity in certain product lines.
Revenues increased $0.3 billion (4%) organically*, from 104 more Onshore and Offshore Wind turbine sales on a unit basis and 22% more on a gigawatt basis, including higher revenue associated with Offshore Wind’s EDF 6MW project in Saint Nazaire, France. These increases were partially offset by lower repower unit deliveries at Onshore Wind and lower revenue at Grid, primarily due to increased commercial selectivity.
Segment losses decreased $0.3 billion (48%) organically*, primarily from higher new unit volume and lower product cost at Onshore Wind, the favorable impact of cost reduction actions, primarily at Grid and Hydro, and improved project execution. These improvements were partially offset by lower margins on new product introductions, lower repower units at Onshore Wind and higher restructuring costs.
POWER. Power continues to streamline its business to better align with market demand and drive its business units with an operational rigor and discipline that is focused on its customers’ lifecycle experience. We remain focused on our underwriting discipline, commercial selectivity and risk management to ensure we are securing deals that meet our financial hurdles and we have a high confidence to deliver for our customers.
Global electricity demand increased during the first half of 2021, driving increases in GE gas turbine utilization and long-term service agreement billings. Looking ahead, we anticipate the power market to continue to be impacted by overcapacity in the industry, continued price pressure from competition on servicing the installed base, and the uncertain timing of deal closures due to financing and the complexities of working in emerging markets, as well as the ongoing impacts of COVID-19. Market factors related to the energy transition such as greater renewable energy penetration and the adoption of climate change-related policies continue to impact long-term demand, to differing degrees across markets globally. We believe gas will play a critical role in the energy transition. We are encouraged by the growth in Gas Power Services, while at the same time, Steam Power continues to execute on the planned exit of new build coal.
We continue to invest in new product development, such as our HA-Turbines. Our fundamentals remain strong with approximately $71.8 billion in RPO and a gas turbine installed base greater than 7,000 units, including approximately 1,800 units under long-term service agreements.
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended June 30 | | | | Six months ended June 30 |
| | | | | | | |
| Sales in units | | | | 2021 | 2020 | | | | | 2021 | 2020 |
| GE Gas Turbines | | | | 14 | | 25 | | | | | | 25 | | 32 | |
| Heavy-Duty Gas Turbines(a) | | | | 9 | | 15 | | | | | | 20 | | 20 | |
| HA-Turbines(b) | | | | 1 | | 5 | | | | | | 6 | | 9 | |
| Aeroderivatives(a) | | | | 5 | | 10 | | | | | | 5 | | 12 | |
| | | | | | | | | | | |
(a) Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines.
(b) HA-Turbines are a subset of Heavy-Duty Gas Turbines. |
| | | | | | | | | | | |
| June 30, 2021 | December 31, 2020 | June 30, 2020 |
| Equipment | $ | 14,893 | | $ | 14,991 | | $ | 14,694 | |
| Services | 56,899 | | 58,318 | | 58,568 | |
| Total RPO | $ | 71,792 | | $ | 73,308 | | $ | 73,262 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30 | | | Six months ended June 30 |
| 2021 | | 2020 | | | 2021 | | 2020 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Gas Power | $ | 3,049 | | | $ | 3,077 | | | | $ | 5,878 | | | $ | 5,936 | | |
| Steam Power | 831 | | | 763 | | | | 1,537 | | | 1,571 | | |
| Power Conversion, Nuclear and other | 415 | | | 316 | | | | 800 | | | 674 | | |
| Total segment revenues | $ | 4,295 | | | $ | 4,156 | | | | $ | 8,216 | | | $ | 8,181 | | |
| | | | | | | | | |
| Equipment | $ | 1,071 | | | $ | 1,488 | | | | $ | 2,312 | | | $ | 2,994 | | |
| Services | 3,224 | | | 2,669 | | | | 5,904 | | | 5,187 | | |
| Total segment revenues | $ | 4,295 | | | $ | 4,156 | | | | $ | 8,216 | | | $ | 8,181 | | |
| | | | | | | | | |
| Segment profit (loss) | $ | 299 | | | $ | (50) | | | | $ | 212 | | | $ | (180) | | |
| Segment profit margin | 7.0 | | % | (1.2) | | % | | 2.6 | | % | (2.2) | | % |
For the three months ended June 30, 2021, segment revenues were up $0.1 billion (3%) and segment profit was flat.up $0.3 billion.
Orders decreased $0.6 billion (17%) organically, at Onshore Wind and Grid, partially offset by $0.1 billion higher orders at Hydro. The decline in equipment orders and repower units, included within services, was primarily a result of delays arising from COVID-19.
Revenues increased 1%were flat organically*, with higher revenue from 26 more wind turbine shipments, or 2% more megawatts shipped,primarily due to an increase in Steam Power services revenues and 136 more repower units thanGas Power services revenues, where there was an increase in the number of planned outages compared to the prior year at Onshore Wind,due to the impacts of COVID-19, offset by decreases in Steam Power equipment revenues and decreases in Gas Power equipment revenues on lower revenue at Hydrogas turbine shipments and Grid, primarilyturnkey sales.
Profit increased $0.4 billion organically* due to growth in Gas Power and Steam Power services revenues and margins, continued efforts to streamline the businesses, and a prior year charge related to COVID-19 fulfillment delaysan under-performing joint venture (JV) in China at Gas Power and execution challenges.
Profit decreased 15% organically*, asa quality reserve on the negative impact of supply chain and project fulfillment disruptions at Grid and Hydro and quality-related costs were partially offset by equipment pricing at Onshore Wind and lower project execution losses.
For the six months ended June 30, 2020, segment orders were down $1.1 billion (16%),2021, segment revenues were up $0.5 billion (9%)flat and segment profit was down $0.1 billion (34%).up $0.4 billion.
BacklogRPO as of June 30, 20202021 decreased $1.6$1.5 billion (6%(2%) and $1.5 billion (2%) from December 31, 2019 mainly2020 and June 30, 2020, respectively, primarily driven by Onshore Windsales outpacing new orders in North America givenGas Power contractual services and the phasecontinued wind down of the U.S. PTC cycle, foreign currency translationSteam Power new build coal business.
Revenues decreased $0.1 billion (2%) organically*, primarily due to decreased Gas Power equipment revenues on lower gas turbine shipments and lower orders at Grid and Hydro. Backlog increased $0.2 billion (1%) from June 30, 2019 driven by $1.0 billion higher services backlog associated with a larger Onshore Wind installed equipment base and higher equipment backlog at Onshore and Offshore Wind,turnkey sales, partially offset by $0.8an increase in Gas Power services revenues.
Profit increased $0.4 billion lower services backlog from Repower units given the phase down of the U.S. PTC cycle, foreign currency translation and lower orders at Grid and Hydro.
Orders decreased $1.0 billion (14%) organically, primarilyorganically* due to lower Onshore Wind turbinegrowth in Gas Power services revenues and repower unit orders, primarily frommargins, continued efforts to streamline the U.S. PTC cycle compared to thebusinesses, and a prior year charge related to an under-performing joint venture (JV) in China at Gas Power and a quality reserve on the nonrecurrence of a large Grid Automated Control Systems (ACS) order,legacy product line that we have since exited in Power Conversion that did not repeat, partially offset by $0.1 billion higher orders at Hydro.
Revenues increased $0.7 billion (12%) organically*, primarily from 404 more wind turbine shipments on a unit basis, or 36% more megawatts shipped,unfavorable legacy project arbitration resolutions and 199 more repower units than in the prior year at Onshore Wind, partially offset by lower Hydro and Grid revenues, primarily due to COVID-19 fulfillment delays and execution challenges.Steam Power project execution.
Profit decreased $0.1 billion (40%) organically*, as the impact of higher sales volume at Onshore Wind was more than offset by lower sales volume at Grid and Hydro due to supply chain and project fulfillment disruptions, and the nonrecurrence of a $0.1 billion non-cash gain from the termination of two Offshore Wind contracts in the first quarter of 2019.
AVIATION.The global COVID-19 pandemic continues to have a material adverse effect on the global airline industry. A key underlying driver of Aviation’s commercial engine and services businesses is global commercial air traffic, which in turn is driven by economic activity and consumer and business propensity to travel. The pandemic evolved rapidly in March 2020, and resulted in government travel restrictions, public health advisories, and related declines in economic activity. These factors caused a significant decline in commercial aircraft departures, which is a leading indicator for billings and revenue generating shop visits. In April, aircraft departures reduced to approximately 76% below a pre-COVID-19 baseline. As a result, airlines grounded their fleets and, in many cases, temporarily ceased passenger operations. Due to the global airline industry contraction, Aviation’s airline and airframe customers are taking measures to address reduced demand, which, in turn, is having a material adverse impact on Aviation’s business operations and financial performance. Aviation is closely monitoring government actions and economic and industry forecasts, although such forecasts continue to evolve and reflect the uncertainty about the severity and duration of the decline in commercial air traffic. Aviation continues to track global departures, which as of June 30, 2020, were approximately 60% below the pre-COVID-19 baseline and have since improved to approximately 43% below in July 2020. More broadly, we are in frequent dialogue with our airline and airframe customers about the outlook for commercial air travel, new aircraft production, and after-market services. Given the current trend, we expect domestic travel routes primarily served by narrowbody aircraft to recover before international travel routes which are primarily served by widebody aircraft. However, Aviation estimates the duration 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 economic conditions.
Aviation has and is continuing to take several business actions to respond to the current adverse environment, which is estimated to result in more than $1 billion in cost savings and $2 billion in cash preservation actions in 2020. We continue to partner with our airline and leasing customers and are working closely with our airframe customers to align production rates for 2020 and beyond. During the first half of 2020, Aviation took several measures including a hiring freeze, cancellation of salaried merit increases, and a reduction of all non-safety related discretionary spending, including capital expenditures and engineering and development efforts. Aviation also announced a plan for permanent reductions of approximately 25% of its total global employee workforce. During the second quarter of 2020, in addition to the planned permanent reductions, Aviation implemented a 90-day temporary furlough impacting approximately 50% of its U.S. maintenance, repair and overhaul employees and a four-week temporary furlough impacting its U.S. assembly operations and component manufacturing shops.
*Non-GAAP Financial Measure
20202021 2Q FORM 10-Q 1112
Aviation’s operational and financial performance is impacted by demand for commercial air traffic, oil prices, fleet retirements, and demand for new aircraft. We monitor and forecast each of these factors as part of Aviation’s long-term planning process, which may result in additional business restructuring actions. Given the uncertainty related to the severity and length of the global COVID-19 pandemic and the impact on these factors across the aviation sector, Aviation could be required to record additional charges, impairments, or other adverse financial impacts in future periods if actual results differ significantly from Aviation's current estimates.CAPITAL. In the secondfirst quarter of 2020,2021, we recognized a non-cash pre-tax impairment chargeannounced an agreement to combine GECAS with AerCap, for which the Company expects to receive $23.9 billion in cash, subject to contractual closing adjustments, 111.5 million shares of $0.9AerCap common stock (approximately 46% ownership interest) valued at approximately $5.7 billion related to goodwill at our Additive reporting unit within our Aviation segment that was recorded within earnings from continuing operations at Corporate.
As it relates tobased on the military environment, Aviation continues to forecast strong military demand creating future growth opportunities for our Military business as the U.S. DepartmentAerCap’s closing share price of Defense and foreign governments have continued flight operations, and have allocated budgets to upgrade and modernize their existing fleets.
Total engineering, comprised both company and customer funded spending, decreased compared to prior year in line with the changes in the commercial environment. Company-funded research and development spend decreased compared to the first half 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, continued to increase.
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$51.21 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 $258 billion backlog represents strong long-term fundamentals. Aviation is taking actions to strengthen its business and seeks to emerge from this crisis stronger and drive long-term cash and profitable growth over time.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| | Orders | | Sales | | Orders | | Sales |
| (In units, except where noted) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Commercial Engines | 58 |
| 899 |
| | 320 |
| 723 |
| | 203 |
| 1,698 |
| | 792 |
| 1,474 |
|
| LEAP Engines(a) | 24 |
| 693 |
| | 178 |
| 437 |
| | 30 |
| 1,329 |
| | 450 |
| 861 |
|
| Military Engines | 463 |
| 53 |
| | 204 |
| 143 |
| | 735 |
| 79 |
| | 350 |
| 304 |
|
| Spare Parts Rate(b) | | | | $ | 13.1 |
| $ | 27.0 |
| | | | | $ | 20.0 |
| $ | 28.5 |
|
(a) LEAP engines are subsets of commercial engines. (b) Commercial externally shipped spare parts and spare parts used in time and material shop visits in millions of dollars per day. |
|
| | | | | | | | | |
| (Dollars in billions) | June 30, 2020 |
| December 31, 2019 |
| June 30, 2019 |
|
| Equipment | $ | 36.7 |
| $ | 39.1 |
| $ | 38.2 |
|
| Services | 221.6 |
| 234.1 |
| 205.7 |
|
| Total backlog | $ | 258.3 |
| $ | 273.2 |
| $ | 243.9 |
|
|
| | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | | Six months ended June 30 | |
| | 2020 |
| | 2019 |
| | | 2020 |
| | 2019 |
| |
| Equipment | $ | 2.0 |
| | $ | 3.5 |
| | | $ | 4.3 |
| | $ | 6.7 |
| |
| Services | 1.7 |
| | 5.1 |
| | | 6.9 |
| | 10.6 |
| |
| Total orders | $ | 3.7 |
| | $ | 8.6 |
| | | $ | 11.2 |
| | $ | 17.3 |
| |
| | | | | | | | | | |
| Commercial Engines & Services | $ | 2.2 |
| | $ | 5.8 |
| | | $ | 7.0 |
| | $ | 11.8 |
| |
| Military | 1.2 |
| | 1.0 |
| | | 2.1 |
| | 2.0 |
| |
| Systems & Other | 1.0 |
| | 1.1 |
| | | 2.1 |
| | 2.0 |
| |
| Total segment revenues | $ | 4.4 |
| | $ | 7.9 |
| | | $ | 11.3 |
| | $ | 15.8 |
| |
| | | | | | | | | | |
| Equipment | $ | 2.0 |
| | $ | 3.0 |
| | | $ | 4.5 |
| | $ | 6.1 |
| |
| Services | 2.4 |
| | 4.8 |
| | | 6.8 |
| | 9.7 |
| |
| Total segment revenues | $ | 4.4 |
| | $ | 7.9 |
| | | $ | 11.3 |
| | $ | 15.8 |
| |
| | | | | | | | | | |
| Segment profit | $ | (0.7 | ) | | $ | 1.4 |
| | | $ | 0.3 |
| | $ | 3.0 |
| |
| Segment profit margin | (15.5 | ) | % | 17.6 |
| % | | 2.9 |
| % | 19.2 |
| % |
For the three months ended June 30, 2020, segment orders were down $4.82021, and $1 billion (56%), segment revenues were down $3.5 billion (44%)in AerCap notes and/or cash upon closing. The Company expects to transfer GECAS’ net assets, including its engine leasing and segment profit was down $2.1 billion (149%).
Orders decreased $4.8 billion (56%) organically, primarily driven by declines of more than 80% in both commercial equipment and service orders as airline customers have slowed or deferred new engine orders,Milestone helicopter leasing business units, as well as delayed maintenanceGECAS’ more than 400 employees and repair operations while existing fleets have been grounded. Military orders increased 60% comparedits current purchase obligations, to AerCap. In addition, upon the prior year primarily driven by equipment and new development orders.
Revenues decreased $3.4 billion (44%) organically*. Equipment revenues decreased primarily due to 403 fewer commercial install and spare engine unit shipments, including 259 fewer LEAP units and 74 fewer CFM56 units versusclosing of the prior year, in part due totransaction, 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 impactremainder of changes in billing and cost assumptions in our long-term service agreements. Military revenues increased primarily due to higher volume of engine shipments and increased revenues on development contracts.GE Capital will be reported within Corporate.
Profit decreased $2.1 billion organically*, primarily
due to lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits in our service agreements. During
In connection with the three months ended June 30, 2020, Aviation recorded expensessigning of $0.2 billion due to lower production volumes given decreases in demand primarily related to commercial engines. Aviation also recorded pre-tax charges totaling $0.2 billion due to expected future losses related primarily to customer credit risk given the current environment. In addition, Aviationtransaction agreement, GE Capital recorded a $0.4total non-cash after-tax charge of $3.9 billion pre-tax charge to reflect the cumulative impacts of changes to billing and cost assumptionsin discontinued operations for certain long-term service agreements, reflecting lower engine utilization, anticipated customer fleet restructuring and contract modifications. Additional adjustments could occur in future periods and could be material for certain long-term service agreements if actual customer operating behavior differs significantly from Aviation’s current estimates.
For the six months ended June 30, 2020, segment orders were down $6.1 billion (35%), segment revenues were down $4.6 billion (29%) and segment profit was down $2.7 billion (89%).
Backlog as of June 30, 2020 decreased $14.9 billion (5%) from December 31, 2019, primarily due to a reduction in our Commercial Services backlog and cancellations of commercial equipment orders, in addition to sales outpacing new orders. Commercial equipment cancellations included approximately 1,000 LEAP-1B unit order cancellations and 22 GE9X unit order cancellations since year-end. 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 June 30, 2020. Based on information currently available, the value of the announced but not canceled orders is less than $2 billion of total backlog. Backlog adjustments could be necessary in future periods for additional cancellations of new commercial engine orders, fleet retirements, or changes to customer aircraft utilization and operating behavior. Backlog increased $14.4 billion (6%) from June 30, 2019, primarily due to an increase in long-term service agreements, offset by decreases in commercial equipment orders.
Orders decreased $5.9 billion (34%) 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 60% compared to the prior year primarily driven by equipment and new development orders, including a significant order from the U.S. Department of Navy’s Naval Air Systems Command (NAVAIR) for F414 engines in the first quarter of 2020.
Revenues decreased $4.3 billion (28%) organically*. Equipment revenues decreased, primarily due to 682 fewer commercial install and spare engine unit shipments, including 411 fewer LEAP units and 172 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 visits2021, and the cumulative impact of changes in billing and cost assumptions in our long-term service agreements. Military revenues increased primarily due to higher volume of engine shipments and increased revenues on development contracts.
Profit decreased $2.7 billion (89%) organically*, primarily due to lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits in our service agreements. During the six months ended June 30, 2020, Aviation recorded expenses of $0.3 billion due to lower production volumes and initiated restructuring actions given decreases in demand primarily related to commercial engines. Aviation also recorded pre-tax charges totaling $0.3 billion due to expected future losses related primarily to customer credit risk given the current environment. In addition, Aviation recorded a $0.5 billion pre-tax charge to reflect the cumulative impacts of changes to billing and cost assumptions for certain long-term service agreements, reflecting lower engine utilization, anticipated customer fleet restructuring and contract modifications. Additional adjustments could occur in future periods and could be material for certain long-term service agreements if actual customer operating behavior differs significantly from Aviation's current estimates.
*Non-GAAP Financial Measure
HEALTHCARE.During the first half 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 ventilators, monitoring solutions, x-ray, anesthesia and point-of-care ultrasound product lines. However, we also saw reduction in demand and delays in procurement in other products and services that were not critical to the response efforts or where procedures could be postponed (magnetic resonance, contrast agents and nuclear tracers). The pandemic is driving uncertainty in our markets globally, as well as additional supply chain and logistics costs, and we expect this to continue. In response to expected near term volatility and cost pressures, 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. Growth in emerging markets is driven by long-term trends of expanding demand and access to healthcare. Developed markets are expected to remain steady in the near term driven by macro trends in the healthcare industry.
The impact of tariffs on certain types of medical equipment and components that we import from China resulted in increased product costs. We continue to take mitigating actions including moving our sourcing and manufacturing for these parts outside of China. There has been some moderation in tariffs in both U.S. and China, however, this is subject to changes in U.S.-China trade relations.
The Pharmaceutical Diagnostics (PDX) business is positioned in the contrast agent and nuclear tracer markets. This market is expected to grow over the long-term, driven by continued diagnostic imaging procedure growth and increasing 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, in the short-term the reduction in procedures not related to COVID-19 has temporarily reduced demand.
We continue focusing on creating new products and digital solutions as well as expanding uses of existing offerings that are tailored to the different needs of our global customers. In March 2020, we launched two new real-time applications in our Command Center software platform. The Infectious Disease Tile helps hospitals manage COVID-19 patient outcomes and staff safety. The Critical Resource Tile helps manage Intensive Care Units (ICUs), non-ICU beds and ventilators to help ensure resources are best deployed to meet patient needs. In addition, GE partnered with Microsoft to deploy its Mural Virtual Care Solution, which helps centrally manage the status of multiple ICU patients that have COVID-19. We also introduced Air Recon DL, the industry's first FDA 510(k)-cleared deep learning-based MR image reconstruction technology offering shorter scans and better image quality.
|
| | | | | | | | | |
| (Dollars in billions) | June 30, 2020 |
| December 31, 2019 |
| June 30, 2019 |
|
| Equipment | $ | 6.1 |
| $ | 7.0 |
| $ | 6.7 |
|
| Services | 11.1 |
| 11.5 |
| 11.5 |
|
| Total backlog(a) | $ | 17.2 |
| $ | 18.5 |
| $ | 18.2 |
|
|
| | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| | 2020 |
| | 2019 |
| | | 2020 |
| | 2019 |
| |
| Equipment | $ | 2.4 |
| | $ | 3.2 |
| | | $ | 5.8 |
| | $ | 6.1 |
| |
| Services | 1.8 |
| | 2.0 |
| | | 3.8 |
| | 4.0 |
| |
| Total orders(a) | $ | 4.2 |
| | $ | 5.2 |
| | | $ | 9.5 |
| | $ | 10.1 |
| |
| | | | | | | | | | |
| Healthcare Systems | $ | 3.5 |
| | $ | 3.6 |
| | | $ | 7.0 |
| | $ | 7.0 |
| |
| Pharmaceutical Diagnostics | 0.4 |
|
| 0.5 |
| | | 0.8 |
|
| 1.0 |
| |
| BioPharma | — |
|
| 0.8 |
| | | 0.8 |
|
| 1.6 |
| |
| Total segment revenues | $ | 3.9 |
| | $ | 4.9 |
| | | $ | 8.6 |
| | $ | 9.6 |
| |
| | | | | | | | | | |
| Equipment | $ | 2.0 |
| | $ | 2.8 |
| | | $ | 4.7 |
| | $ | 5.5 |
| |
| Services | 1.8 |
| | 2.1 |
| | | 3.9 |
| | 4.1 |
| |
| Total segment revenues | $ | 3.9 |
| | $ | 4.9 |
| | | $ | 8.6 |
| | $ | 9.6 |
| |
| | | | | | | | | | |
| Segment profit | $ | 0.5 |
| | $ | 1.0 |
| | | $ | 1.4 |
| | $ | 1.7 |
| |
| Segment profit margin | 14.1 |
| % | 19.4 |
| % | | 16.8 |
| % | 18.1 |
| % |
| | | | | | | | | | |
| (a) Backlog as of June 30, 2020 excluded the BioPharma business due to its disposition in the first quarter of 2020. Backlog as of December 31, 2019 and June 30, 2019 included $1.2 billion and $1.1 billion, respectively, related to BioPharma. Orders included $0.8 billion related to BioPharma for the three months ended June 30, 2019, and included $1.1 billion and $1.8 billion related to BioPharma for the six months ended June 30, 2020 and 2019, respectively. |
For the three months ended June 30, 2020, segment orders were down $1.0 billion (18%), segment revenues were down $1.0 billion (21%) and segment profit was down $0.4 billion (43%).
Orders were down 1% organically, driven by decreases in PDX, partially offset by HCS up 3% due to increases in demand, including a $0.3 billion order from the U.S. Department of Health and Human Services (HHS) to deliver 50,000 ventilators in partnership with Ford.
Revenues decreased $0.1 billion (4%) organically*, primarily driven by reduced volume in PDX from a decrease in non-essential routine procedures.
Profit was down 4% organically*, primarily due to decreases in PDX volume, partially offset by increases in HCS and cost reductions.
For the six months ended June 30, 2020, segment orders were down $0.6 billion (6%), segment revenues were down $1.0 billion (10%) and segment profit was down $0.3 billion (17%).
Backlog as of June 30, 2020 decreased $1.2 billion (7%) from December 31, 2019 and decreased $1.0 billion (5%) from June 30, 2019 primarily due to the BioPharma disposition. Excluding Biopharma, backlog increased $0.1 billion (1%) from June 30, 2019.
Orders increased $0.4 billion (4%) organically, driven by HCS up 5% due to increases in demand, including a $0.3 billion order from the HHS to deliver 50,000 ventilators in partnership with Ford, and BioPharma, partially offset by PDX. Excluding BioPharma, orders increased $0.2 billion (3%) organically.
Revenues were flat organically*, driven by increased demand in HCS products used directly in response to COVID-19 and BioPharma, offset by reduced volume in PDX from a decrease in non-essential routine procedures. Excluding BioPharma, revenues decreased $0.1 billion (1%) organically*.
Profit increased $0.1 billion (4%) organically*, primarily due to increases in HCS and BioPharma, and cost reductions offset by decreases in PDX volume. Excluding BioPharma, profits decreased (1%) organically*.
CAPITAL.We continue to evaluate strategic options to accelerate the further reduction in the size of GE Capital, some of which could result in material financial charges depending on the timing, negotiated terms and conditions of any ultimate arrangements.
At GE Capital, the primary effect of the COVID-19 pandemic pertains to its GECAS business. The pandemic has led to worldwide reduction of flight schedules and it is difficult to predict its longer-term impact. In the second quarter of 2020, the estimated fair value of the GECAS reporting unit declined below book value, reflecting downward revisions to internal forecasts and decreases in market multiples. As a result, we recorded a goodwill impairment of $0.8 billion. Of the $0.8 billionresults of GECAS goodwill, $0.7 billion arose from the acquisition of Milestone Aviation, our helicopter leasing business,are now presented in 2015. discontinued operations.
Additionally, the related market volatility resulted in higher credit spreads on the investment securities held by our run-off insurance business, which resulted in marks and impairments taken in the first quarter, which partially recovered in the second quarter of 2020.
As of June 30, 2020, GECAS owned 965 fixed-wing aircraft, of which 17 with a book value of $0.4 billion were available to lease to customers (aircraft on the ground). We test recoverability of each fixed-wing aircraft in our operating lease portfolio at least annually. Additionally, we perform quarterly evaluations in circumstances such as when assets are re-leased or current lease terms have changed.
We will perform our detailed annual portfolio review in the third quarter of 2020, which will incorporate third party appraisal data, updates to all cash flow assumptions as well as evolving market or customer dynamics that we are monitoring. Given the environment, we accelerated our review in the second quarter to focus on leases with higher risk of repossession based on our assessment of customer credit risk default and any unplaced leased assets rolling-off over the next 12 months, which represented approximately 20% of our fixed-wing aircraft operating lease portfolio. This analysis resulted in a pre-tax impairment of $0.3 billion during both the three and six months ended June 30, 2020, on our fixed-wing aircraft operating lease portfolio. Pre-tax impairments were insignificant for the three and six months ended June 30, 2019. The increase in pre-tax impairments was driven by declining cash flow projections of the future collectability of rents on aircraft and engines currently under contract related to market impacts resulting from the pandemic. We will analyze the remaining portfolio as part of our annual third quarter impairment review process. Continued deterioration in cash flow projections, including current rents, downtime, release rates and residual assumptions could result in future impairments in the operating lease portfolio.
Based on the resulting pressure on its airline customers, GECAS continues to see elevated deferral requests. As of June 30, 2020, we have received deferral requests (primarily short term in nature) from approximately 80% of our airline customers operating in approximately 64 countries, and have granted approximately 60% of requests. We expect to continue to receive requests for rent deferrals and/or lease restructures from our global airline customers as a result of COVID-19 and related market impacts. An extended disruption of regional or international travel could result in an increase in these types of requests in future periods, which could result in an increase to the trade receivable balance. As GECAS evaluates future lease restructures, there is a risk of lease modifications that could have a material adverse effect on GECAS operations, financial position and cash flows.
*Non-GAAP Financial Measure
|
| | | | | | |
| (Dollars in billions) | June 30, 2020 |
| December 31, 2019 |
|
| GECAS | $ | 36.0 |
| $ | 38.0 |
|
| Energy Financial Services (EFS) | 1.8 |
| 1.8 |
|
| Working Capital Solutions (WCS)(a) | 6.8 |
| 9.0 |
|
| Insurance | 49.6 |
| 46.3 |
|
| Other continuing operations(a) | 20.2 |
| 22.5 |
|
| Total segment assets | $ | 114.5 |
| $ | 117.5 |
|
| | | |
| GE Capital debt to equity ratio | 4.2:1 |
| 3.9:1 |
|
(a) In the first quarter of 20202021, we announced our intention to discontinue the remaining Industrial Finance assetsmajority of $0.3 billion were transferred to Other continuing operations.our factoring programs in WCS, which was effective April 1, 2021.
| | | | | | | | |
| June 30, 2021 | December 31, 2020 |
| | |
| Energy Financial Services (EFS) | $ | 2,554 | | $ | 2,385 | |
| Working Capital Solutions (WCS) | 1,869 | | 5,884 | |
| Insurance | 51,810 | | 50,824 | |
| Other continuing operations(a) | 11,693 | | 18,577 | |
| Total segment assets - continuing operations | $ | 67,926 | | $ | 77,670 | |
| | |
| | |
|
| | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| (In billions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| GECAS | $ | 1.0 |
| $ | 1.2 |
| | $ | 2.1 |
| $ | 2.5 |
|
| EFS | — |
| 0.1 |
| | 0.1 |
| 0.1 |
|
| WCS | 0.1 |
| 0.2 |
| | 0.2 |
| 0.5 |
|
| Insurance | 0.8 |
| 0.7 |
| | 1.4 |
| 1.4 |
|
| Other continuing operations | — |
| — |
| | — |
| — |
|
| Total segment revenues | $ | 1.8 |
| $ | 2.3 |
| | $ | 3.8 |
| $ | 4.5 |
|
| | | | | | |
| GECAS | $ | (1.0 | ) | $ | 0.3 |
| | $ | (0.9 | ) | $ | 0.6 |
|
| EFS | (0.1 | ) | 0.1 |
| | — |
| 0.1 |
|
| WCS | — |
| 0.1 |
| | — |
| 0.1 |
|
| Insurance | 0.1 |
| — |
| | — |
| — |
|
| Other continuing operations(a) | (0.5 | ) | (0.5 | ) | | (0.7 | ) | (0.8 | ) |
| Total segment profit | $ | (1.5 | ) | $ | (0.1 | ) | | $ | (1.5 | ) | $ | — |
|
| | | | | | | | | | | | | | | | | |
| Three months ended June 30 | | Six months ended June 30 |
| 2021 | 2020 | | 2021 | 2020 |
| | | | | |
| EFS | $ | 46 | | $ | (2) | | | $ | 43 | | $ | 62 | |
| WCS | 22 | | 82 | | | 77 | | 213 | |
| Insurance | 803 | | 786 | | | 1,578 | | 1,402 | |
| Other continuing operations | (14) | | (5) | | | 37 | | 21 | |
| Total segment revenues | $ | 858 | | $ | 861 | | | $ | 1,736 | | $ | 1,698 | |
| | | | | |
| | | | | |
| EFS | $ | 56 | | $ | (58) | | | $ | 51 | | $ | (5) | |
| WCS | (8) | | 12 | | | (6) | | 36 | |
| Insurance | 192 | | 114 | | | 308 | | 21 | |
| Other continuing operations(a) | (814) | | (543) | | | (1,099) | | (714) | |
| Total segment profit (loss) | $ | (573) | | $ | (476) | | | $ | (745) | | $ | (663) | |
(a) Other continuing operations primarily comprised excess interest costs from debt previously allocated to assets that have been sold, as part of the GE Capital Exit Plan, preferred stock dividend costs and interest costs not allocated to GE Capital segments,businesses, and preferred stock dividend costs prior to January 2021, at which are driven bytime these became a GE Capital’s interest allocation process.Industrial obligation (see Note 17 for further information). Interest costs are allocated to GE Capital segmentsbusinesses based on the tenor of their assets using the market rate at the time of origination, which differs from the asset profile when the debt was originated. As a result, actual interest expense is higher than interest expense allocated to the remaining GE Capital segments. Substantially all preferred stock dividend costs will become a GE obligation in January 2021. See Note 15 for further information. In addition, webusinesses. We anticipate unallocated interest costs to gradually decline as debt matures and/or is refinanced.
For the three months ended June 30, 2020,2021, segment revenues decreased $0.5were flat and segment losses increased $0.1 billion (20%) and segment earnings were down $1.4 billion..
Capital revenues decreased $0.5were flat, as higher gains and lower marks and impairments in EFS were offset by lower EFS project revenues and WCS factoring revenue. Capital losses increased $0.1 billion (20%), primarily 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,higher debt extinguishment costs, partially offset by mark-to-market effectsthe discontinuation of preferred dividend payments to GE Industrial, higher gains and lower marks and impairments as a result of COVID-19 and related market impacts. Capital earnings decreased $1.4 billion, primarilymainly at EFS, lower interest expense due to an impairment of goodwill, mark-to-market effects and other impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts, volume declines,lower debt tender costsbalance, and lower gains. Gains were $0.1 billionclaims and $0.2 billionhigher terminations in the second quarters of 2020 and 2019, respectively, which primarily related to sales of GECAS aircraft and engines resulting in gains of $0.1 billion in the second quarters of both 2020 and 2019, and the nonrecurrence of a sale of an equity method investment resulting in a gain of $0.1 billion in 2019 at EFS.
For the six months ended June 30, 2020,2021, segment revenues decreased $0.8 billion (17%)increased 2% and segment earnings were down $1.6 billion.losses increased $0.1 billion (12%).
Capital revenues decreased $0.8 billion (17%)increased 2%, primarily as a result of volume declines, primarily at GECAS related to lower interest income attributable to the sale of PK Air Finance and lower rental revenue, lower gains and mark-to-market effectsmarks and impairments in Insurance and EFS, partially offset by lower WCS factoring revenue and project revenues at EFS. Capital losses increased $0.1 billion (12%) primarily as a result of COVID-19 and related market impacts. Capital earnings decreased $1.6 billion, primarily due to an impairment of goodwill, mark-to-market effects and other impairments, including on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts, volume declines,higher debt tenderextinguishment costs lower gains and the nonrecurrence of a 2019 tax reform enactment adjustment, partially offset by the tax benefit related to the BioPharma sale and lower excess interest cost. Gains were $0.3 billion and $0.4 billion in the first halfquarter of 2020, partially offset by the discontinuation of preferred dividend payments to GE Industrial, lower marks and 2019, respectively, which primarily relatedimpairments in Insurance and EFS, lower interest expense due to sales of GECAS aircrafta lower debt balance, and engines resultinglower claims and higher terminations in gains of $0.2 billion in the first half of both 2020 and 2019, and the Insurance.
nonrecurrence of a sale of an equity method investment resulting in a gain of $0.1 billion in 2019 at EFS.
|
| | |
MD&A | CORPORATE ITEMS AND ELIMINATIONS |
CORPORATE ITEMS AND ELIMINATIONS. IncludesCorporate items and eliminations includes the results of our Lighting segment, through its disposition in the second quarter of 2020, and GE Digital business for all periods presented. |
| | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Revenues | | | | | |
| Corporate revenues | $ | 410 |
| $ | 408 |
| | $ | 788 |
| $ | 1,000 |
|
| Eliminations and other | (444 | ) | (433 | ) | | (1,058 | ) | (841 | ) |
| Total Corporate Items and Eliminations | $ | (33 | ) | $ | (25 | ) | | $ | (271 | ) | $ | 158 |
|
| | | | | | |
| Operating profit (cost) | | | | | |
| Gains (losses) on disposals and held for sale businesses | $ | 74 |
| $ | (116 | ) | | $ | 12,513 |
| $ | 250 |
|
| Restructuring and other charges | (433 | ) | (345 | ) | | (641 | ) | (602 | ) |
| Unrealized gains (losses) | 1,825 |
| (51 | ) | | (3,968 | ) | (38 | ) |
| Goodwill impairments(a) (Note 8) | (728 | ) | (744 | ) | | (728 | ) | (744 | ) |
| Adjusted total corporate operating costs (Non-GAAP) | (156 | ) | (465 | ) | | (530 | ) | (813 | ) |
| Total Corporate Items and Eliminations (GAAP) | $ | 582 |
| $ | (1,720 | ) | | $ | 6,646 |
| $ | (1,948 | ) |
| Less: gains (losses) and restructuring & other | 738 |
| (1,255 | ) | | 7,176 |
| (1,135 | ) |
| Adjusted total corporate operating costs (Non-GAAP) | $ | (156 | ) | $ | (465 | ) | | $ | (530 | ) | $ | (813 | ) |
| | | | | | |
| Functions & operations | $ | (163 | ) | $ | (331 | ) | | $ | (429 | ) | $ | (688 | ) |
| Eliminations | (32 | ) | (34 | ) | | (130 | ) | (28 | ) |
| Environmental, health and safety (EHS) and other items | 38 |
| (100 | ) | | 29 |
| (97 | ) |
| Adjusted total corporate operating costs (Non-GAAP) | $ | (156 | ) | $ | (465 | ) | | $ | (530 | ) | $ | (813 | ) |
| | | | | | | | | | | | | | | | | |
| Three months ended June 30 | | Six months ended June 30 |
| 2021 | 2020 | | 2021 | 2020 |
| Revenues | | | | | |
| Corporate revenues | $ | 229 | | $ | 410 | | | $ | 456 | | $ | 788 | |
| Eliminations and other | (446) | | (405) | | | (900) | | (967) | |
| Total Corporate Items and Eliminations | $ | (217) | | $ | 6 | | | $ | (445) | | $ | (179) | |
| | | | | |
| Operating profit (cost) | | | | | |
| Gains (losses) on purchases and sales of business interests | $ | (5) | | $ | 32 | | | $ | (2) | | $ | 12,403 | |
| Gains (losses) on equity securities | 497 | | 1,867 | | | 844 | | (3,859) | |
| Restructuring and other charges | (225) | | (289) | | | (331) | | (432) | |
| Goodwill impairments(a) (Note 8) | — | | (728) | | | — | | (728) | |
| Adjusted total corporate operating costs (Non-GAAP) | (243) | | (185) | | | (435) | | (564) | |
| Total Corporate Items and Eliminations (GAAP) | $ | 23 | | $ | 697 | | | $ | 75 | | $ | 6,820 | |
| Less: gains (losses) and restructuring & other | 266 | | 882 | | | 510 | | 7,384 | |
| Adjusted total corporate operating costs (Non-GAAP) | $ | (243) | | $ | (185) | | | $ | (435) | | $ | (564) | |
| | | | | |
| Functions & operations | $ | (164) | | $ | (191) | | | $ | (322) | | $ | (463) | |
| Environmental, health and safety (EHS) and other items | (28) | | 38 | | | (83) | | 29 | |
| Eliminations | (52) | | (32) | | | (29) | | (130) | |
| Adjusted total corporate operating costs (Non-GAAP) | $ | (243) | | $ | (185) | | | $ | (435) | | $ | (564) | |
(a) Included a non-cash pre-tax impairment charge of $877 million, net of $149 million attributable to noncontrolling interest, for our
Additive reporting unit within our Aviation segment for the three and six months ended June 30, 2020.
Adjusted total corporate operating costs* excludes gains (losses) on disposalspurchases and held for sale businesses, sales of business interests, significant higher-cost
restructuring and other charges including goodwill and unrealizedprograms, gains (losses). on equity securities and goodwill impairments. We believe that adjusting corporate costs*costs to exclude the effects of items that are not closely associated with ongoing corporate operations provides management and investors with a meaningful measure that increases the period-to-period comparability of our ongoing corporate costs.
Unrealized gains (losses) are primarily related to our mark-to-market impact on our Baker Hughes shares for the three and six months ended June 30, 2020, on our Ventures portfolio for the six months ended June 30, 2020, and on our Wabtec equity investment for the three months ended June 30, 2019.
For the three months ended June 30, 20202021, revenues remained relatively flat. Corporate costs decreased by $2.3$0.2 billion, primarily as a result of the sale of our Lighting business in June 2020. Corporate operating profit decreased by $0.7 billion primarily due to $1.9a $1.4 billion of higher net unrealized gains,change in gains/(loss) on equity securities primarily related to a $1.8 billion mark-to market gainmark-to-market activity on our Baker Hughes shares in the second quarter of 2020, as compared to $0.1 billion of net unrealized losses related to our equity investment in Wabtec in the second quarter of 2019. Corporate costs also decreased as the result of $0.2 billion of higher net realized gains, primarily due toshares. This decrease was partially offset by the nonrecurrence of a $0.1 billion realized loss in the second quarter of 2019, primarily related to our Wabtec investment. These decreases were partially offset by $0.1 billion of higher restructuring charges in the second quarter of 2020, primarily due to Aviation, partially offset by lower restructuring costs within Corporate. Goodwill charges were relatively flat year over year. Corporate recognized a $0.7 billion net goodwill impairment charge related to our Aviation segment in 2020, and $0.1 billion of lower restructuring and other charges due to lower restructuring in our Aviation segment, partially offset by higher restructuring in our Power segment, primarily related to our exit from the new build coal power market.
Adjusted total corporate operating costs* increased by $0.1 billion in the second quarter of 2021 primarily as the result of $0.1 billion of higher costs primarily associated with EHS and other items. Costs associated with our Corporate functions and operations declined year over year.
For the six months ended June 30, 2021, revenues decreased by $0.3 billion, primarily due to the sale of our Lighting business in June 2020, as comparedpartially offset by $0.1 billion of lower inter-segment eliminations. Corporate operating profit decreased by $6.7 billion due to $12.4 billion of lower gains on purchases and sales of business interests primarily due to a $12.3 billion gain from the sale of our BioPharma business in 2020. This decrease was partially offset by a $4.7 billion change in gains (losses) on equity securities primarily related to mark-to-market activity on our Baker Hughes shares and the nonrecurrence of a $0.7 billion goodwill impairment charge related to our Renewable EnergyAviation segment in 2020. Restructuring and other charges decreased by $0.1 billion due to lower restructuring in Aviation and Corporate, partially offset by higher restructuring in our Power segment, primarily related to our exit from the second quarter of 2019.new build coal power market.
Adjusted total corporate operating costs* decreased by $0.3$0.1 billion primarily due toas the result of $0.1 billion of cost reductions in our Digital business,Corporate functions and operations. Costs also decreased due to $0.1 billion of lower costs associated with existing EHS matters and $0.1 billion of lower Corporate costs as a result of restructuring and cost reductions actions. Intercompany elimination activity remained flat, reflecting no spare engine sales from our Aviation segment to GECAS business during the second quarter of 2020.
For the six months ended June 30, 2020, revenues decreased by $0.4 billion,intercompany profit eliminations primarily as a result of a $0.2 billion decrease in revenue resulting from the sale of our Current business in April 2019, and a $0.2 billion increase in intersegment eliminations. Corporate costs decreased by $8.6 billion, primarily due to $12.3 billion of higher net gains from the sale of our BioPharma business in the first quarter of 2020. This decrease was partly offset by $3.9 billion of higher net unrealized losses primarily related to a $3.9 billion mark-to market impact on our Baker Hughes shares and a $0.1 billion impairment on our Ventures portfolio in the first six months of 2020. Goodwill charges were relatively flat year over year. Corporate recognized a $0.7 billion net goodwill impairment charge related to our Aviation segment in the second quarter of 2020, as compared to a $0.7 billion goodwill impairment charge related to our Renewable Energy segment in the second quarter of 2019.
Adjusted total corporate operating costs* decreased by $0.3 billion, primarily due to $0.2 billion of cost reductions in our Digital business, $0.1 billion of lower costs associated with existing EHS matters and $0.1 billion of lower Corporate costs as a result of restructuring and cost reductions actions, partially offset by $0.1 billion of higher intercompany elimination activity primarily from project financing investments associated with wind energy projects in our Renewable Energy segment. These decreases were partially offset by $0.1 billion of higher costs associated with EHS and other items.
*Non-GAAP Financial Measure
20202021 2Q FORM 10-Q 1714
|
| | |
MD&A | CORPORATE ITEMS AND ELIMINATIONS |
Although there were no significant impacts in the second quarter related to COVID-19, potential future impacts at Corporate may include, but are not limited to, the increase in our long-term liabilities, primarily for pension and certain environmental obligations, or decrease in asset returns subject to interest rate changes, additional asset impairments driven by overall market conditions, and lower revenue in our Digital operations. See the Critical Accounting Estimates section for further information on pension assumptions.
RESTRUCTURING. Restructuring actions are an essential component ofto our cost improvement efforts.efforts for both existing operations and those acquired. Restructuring and other charges relate primarily to workforce reductions, facility exit costs associated with the consolidation of sales, service and manufacturing facilities, the integration of acquisitions, and certain other asset write-downs such as those associated with product line exits. We willalso recognize an obligation for severance benefits that vest or accumulate with service. We continue to closely monitor the economic environment including the impacts of COVID-19, and expect to undertake further restructuring actions to more closely align our cost structure with earnings goals. This table is inclusive of all restructuring charges in our segments and cost reduction goals.
|
| | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| (In billions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Workforce reductions | $ | 0.3 |
| $ | 0.2 |
| | $ | 0.5 |
| $ | 0.4 |
|
| Plant closures & associated costs and other asset write-downs | 0.1 |
| 0.1 |
| | 0.1 |
| 0.1 |
|
| Acquisition/disposition net charges | — |
| 0.1 |
| | — |
| 0.1 |
|
| Total restructuring and other charges | $ | 0.4 |
| $ | 0.3 |
| | $ | 0.6 |
| $ | 0.6 |
|
| | | | | | |
| Cost of product/services | $ | 0.1 |
| $ | 0.1 |
| | $ | 0.3 |
| $ | 0.2 |
|
| Selling, general and administrative expenses | 0.3 |
| 0.3 |
| | 0.4 |
| 0.4 |
|
| Other income | — |
| — |
| | — |
| $ | — |
|
| Total restructuring and other charges | $ | 0.4 |
| $ | 0.3 |
| | $ | 0.6 |
| $ | 0.6 |
|
| | | | | | |
| Power | $ | 0.1 |
| $ | 0.1 |
| | $ | 0.1 |
| $ | 0.1 |
|
| Renewable Energy | 0.1 |
| — |
| | 0.1 |
| 0.1 |
|
| Aviation | 0.2 |
| — |
| | 0.2 |
| — |
|
| Healthcare | — |
| — |
| | 0.1 |
| 0.1 |
|
| Corporate | 0.1 |
| 0.2 |
| | 0.1 |
| 0.3 |
|
| Total restructuring and other charges | $ | 0.4 |
| $ | 0.3 |
| | $ | 0.6 |
| $ | 0.6 |
|
Cash expenditures for restructuringat Corporate, and otherthe charges were approximately $0.3 billion and $0.3 billionare shown below for the three months ended June 30, 2020 and 2019, respectively. Cash expenditures for restructuring and other charges were approximately $0.5 billion and $0.6 billion for the six months ended June 30, 2020 and 2019, respectively.
COSTS AND GAINS NOT INCLUDED IN SEGMENT RESULTS.As discussedbusiness where they originated. Separately, in the Segment Operations section, certain amounts are not included inour reported industrial segment results, because theysignificant, higher-cost restructuring programs are excluded from measurement of theirsegment operating performance for internal and external purposes. These costs relate primarily to restructuring and acquisition and disposition activities.
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| | Costs | Gains (Losses) | | Costs | Gains (Losses) |
| (In billions) | 2020 |
| 2019 |
| 2020 |
| 2019 |
| | 2020 |
| 2019 |
| 2020 |
| 2019 |
|
| Power | $ | 0.1 |
| $ | 0.1 |
| $ | — |
| $ | — |
| | $ | 0.1 |
| $ | 0.1 |
| $ | — |
| $ | — |
|
| Renewable Energy | 0.1 |
| 0.8 |
| — |
| — |
| | 0.1 |
| 0.8 |
| — |
| — |
|
| Aviation | 0.9 |
| — |
| — |
| — |
| | 1.0 |
| — |
| — |
| — |
|
| Healthcare | — |
| — |
| — |
| — |
| | 0.1 |
| 0.1 |
| 12.3 |
| — |
|
| Total segments | $ | 1.0 |
| $ | 0.9 |
| $ | — |
| $ | — |
| | $ | 1.2 |
| $ | 1.0 |
| $ | 12.4 |
| $ | — |
|
| Corporate Items & Eliminations | 0.1 |
| 0.2 |
| 1.9 |
| 0.1 |
| | 0.1 |
| 0.3 |
| (3.8 | ) | 0.2 |
|
| Total Industrial | $ | 1.1 |
| $ | 1.1 |
| $ | 1.9 |
| $ | 0.2 |
| | $ | 1.3 |
| $ | 1.3 |
| $ | 8.5 |
| $ | 0.2 |
|
|
| | |
MD&A | OTHER CONSOLIDATED INFORMATION |
OTHER CONSOLIDATED INFORMATION
|
| | | | | | | | | | | | | |
| INTEREST AND OTHER FINANCIAL CHARGES | Three months ended June 30 | | Six months ended June 30 |
| (In billions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| GE | $ | 0.4 |
| $ | 0.4 |
| | $ | 0.8 |
| $ | 0.9 |
|
| GE Capital | 0.7 |
| 0.6 |
| | 1.2 |
| 1.3 |
|
GE interestpurposes; those excluded amounts are reported in Restructuring and other financial charges was unchanged for Corporate (see the three months endedCorporate Items and Eliminations section).
| | | | | | | | | | | | | | | | | |
| Three months ended June 30 | | Six months ended June 30 |
| 2021 | 2020 | | 2021 | 2020 |
| Workforce reductions | $ | 290 | | $ | 338 | | | $ | 501 | | $ | 492 | |
| Plant closures & associated costs and other asset write-downs | 38 | | 79 | | | 64 | | 108 | |
| Acquisition/disposition net charges | 1 | | 19 | | | 6 | | 45 | |
| Total restructuring and other charges | $ | 330 | | $ | 436 | | | $ | 572 | | $ | 646 | |
| | | | | |
| Cost of product/services | $ | 188 | | $ | 141 | | | $ | 288 | | $ | 257 | |
| Selling, general and administrative expenses | 142 | | 295 | | | 290 | | 389 | |
| Other income | — | | — | | | (7) | | — | |
| Total restructuring and other charges | $ | 330 | | $ | 436 | | | $ | 572 | | $ | 646 | |
| | | | | |
| Aviation | $ | (2) | | $ | 176 | | | $ | 61 | | $ | 244 | |
| Healthcare | 20 | | 46 | | | 59 | | 76 | |
| Renewable Energy | 59 | | 57 | | | 135 | | 84 | |
| Power | 227 | | 95 | | | 276 | | 128 | |
| Corporate | 20 | | 58 | | | 30 | | 109 | |
| Total GE Industrial restructuring and other charges | $ | 324 | | $ | 433 | | | $ | 561 | | $ | 641 | |
| Capital | 6 | | 3 | | | 11 | | 5 | |
| Total restructuring and other charges | $ | 330 | | $ | 436 | | | $ | 572 | | $ | 646 | |
| Restructuring and other charges cash expenditures | $ | 190 | | $ | 324 | | | $ | 413 | | $ | 535 | |
Liabilities associated with restructuring activities were approximately $1.4 billion and $1.3 billion as of June 30, 2021 and December 31, 2020, compared to the three months ended June 30, 2019, as lower debt expense and financing costs on salesrespectively, including actuarial determined post-employment severance benefits of receivables were offset by the nonrecurrence of the June 2019 reversal of accrued interest on tax liabilities due to the completion of the 2012-2013 Internal Revenue Service (IRS) audit. $0.7 billion in both periods.
| | | | | | | | | | | | | | | | | |
| INTEREST AND OTHER FINANCIAL CHARGES | Three months ended June 30 | | Six months ended June 30 |
| 2021 | 2020 | | 2021 | 2020 |
| GE Industrial | $ | 261 | | $ | 333 | | | $ | 528 | | $ | 703 | |
| GE Capital | 250 | | 283 | | | 540 | | 554 | |
The decrease in GE Industrial interest and other financial charges for the three and six months ended June 30, 2020, 2021 was primarily due to a lower debt expenseintercompany loan balance and lower financing costs on sales of receivables, partially offset by the nonrecurrence of the June 2019 reversal of accrued interest on tax liabilities due to the completion of the 2012-2013 IRS audit. The primary components of GE interest and other financial charges are interest on short- anda higher long-term borrowings and financing costs on sales of receivables.debt balance. Total GE interest and other financial charges of $0.3$0.2 billion and $0.2 billion was recorded at Corporate and $0.1 billion and $0.1 billion was recorded by the industrial segments for the three months ended June 30, 2021 and 2020, respectively, and $0.4 billion and $0.5 billion was recorded at Corporate and $0.1 billion and $0.2 billion was recorded by Industrial segments for the three months ended June 30, 2020 and 2019, respectively, and $0.5 billion and $0.5 billion was recorded at Corporate and $0.2 billion and $0.4 billion was recorded by Industrialindustrial segments for the six months ended June 30, 2021 and 2020, and 2019, respectivelyrespectively.
.
The increase in GE Capital interest and other financial charges for the three months ended June 30, 2020 was primarily due to the loss resulting from the completion of tender offers to purchase debt and 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), partially offset by lower average borrowings balances due to maturities and debt purchases, as well as lower average interest rates due to changes in market rates. The decrease in GE Capital interest and other financial charges forduring the three and six months ended June 30, 20202021 was primarily due to lower average borrowingsborrowing balances due to maturities and debt purchases as well as lowerweighted average interest rates due to changes in market rates, partially offset by the loss resulting from the completiona lower allocation of tender offersinterest expense to purchase debt,discontinued operations as well as higher interest on assumed debt as described above.a result of lower market rates.
CONSOLIDATED INCOME TAXES.
For the three months ended June 30, 20202021, the consolidated income tax rate was 8.5%44.9% compared to 61.1%12.3% for the three months ended June 30, 2019.2020. In both periods, the tax rate reflects a tax benefit on a pre-tax loss.
The consolidated provision (benefit) for income taxes was $(0.2)$(0.5) billion infor the three months ended June 30, 20202021 and $(0.2) billion infor the three months ended June 30, 2019.2020. The income tax benefit increased due to a second quarter 2021 tax benefit associated with an internal restructuring to recognize historical losses due to the decrease in fair value, as well as a decrease in tax due to lower unrealized gain on our remaining interest in Baker Hughes in the second quarter of 2021 as compared to the second quarter of 2020. Partially offsetting these items was an increase in tax associated with the increase in income, excluding gain on Baker Hughes, in the second quarter of 2021 compared to the second quarter of 2020.
The consolidated tax provision (benefit) includes $(0.2) billion and $(0.1) billion for GE Industrial for the three months ended June 30, 2021 and 2020, respectively.
For the six months ended June 30, 2021, the consolidated income tax rate was essentially unchanged as40.7% compared to (2.1)% for the six months ended June 30, 2020. The tax rate for 2021 reflects a tax benefit on a pre-tax loss. The negative tax rate for 2020 reflects a tax benefit on pre-tax income.
The consolidated provision (benefit) for income taxes was $(0.3) billion for the six months ended June 30, 2021 and $(0.1) billion for the six months ended June 30, 2020. The benefit increased due to the nonrecurrence of a 2019 benefit from the completiontax expense associated with the disposition of the IRS auditBioPharma business in the first quarter of the 2012-2013 consolidated U.S. income2020, as well as a tax returns ($0.4 billion) was offset bybenefit associated with an internal restructuring to recognize historical losses due to the decrease in pre-tax income excluding non-deductible impairment charges ($0.2 billion) andfair value. Partially offsetting these items was a tax expense associated with the unrealized gain on our remaining interest in Baker Hughes for the six months ended June 30, 2021, compared to a tax benefit associated with the mark-to-market gainunrealized loss recorded for the six months ended June 30, 2020. Additionally, there was an increase in tax associated with the second quarterincrease in income, excluding gains on the remaining interest inBioPharma and Baker Hughes, taxed at lower than 21% ($0.1 billion).for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.
The consolidated tax provision (benefit) includes $(0.1) billion and $(0.2)$0.1 billion for GE (excluding GE Capital) for the three months ended June 30, 2020 and 2019, respectively.
For the six months ended June 30, 2020, the consolidated income tax rate was (3.3)% compared to (5.0)%Industrial for the six months ended June 30, 2019. The negative tax rates for2021 and 2020, and 2019 reflect tax benefits on pre-tax income.
The consolidated provision (benefit) for income taxes was $(0.1) billion for the six months ended June 30, 2020 and an insignificant amount for the six months ended June 30, 2019. The decrease in tax provision was primarily due to the decrease in pre-tax income excluding the gain from the sale of our BioPharma business and non-deductible goodwill impairment charges ($1.7 billion) partially offset by the tax expense associated with the disposition of the BioPharma
business excluding the amount recognized on preparatory steps in 2019 ($1.1 billion) and the nonrecurrence of a 2019 benefit from the completion of the IRS audit of the 2012-2013 consolidated U.S. income tax returns ($0.4 billion).
The consolidated tax provision (benefit) includes $0.1 billion and $0.1 billion for GE (excluding GE Capital) for the six months ended June 30, 2020 and 2019, respectively.
DISCONTINUED OPERATIONS.OPERATIONS Discontinued operations primarily includecomprise our Baker Hughes and Transportation segments, and certain businesses inGECAS business, our GE Capital segment (our mortgage portfolio in Poland, and other trailing assets and liabilities associated with the sale of our GE Capital businesses).prior dispositions. See NoteNotes 2 and 21 for further financial information regarding our businesses in discontinued operations.information.
The mortgage portfolio in Poland (Bank BPH) comprises floating rate residential mortgages, 87% of which are indexed to or denominated in foreign currencies (primarily Swiss francs). At June 30, 2020, the total portfolio had a carrying value of $2.4 billion with a 1.64% 90-day delinquency rate and an average loan to value ratio of approximately 67.5%. The portfolio is recorded at fair value less cost to sell, which reflects market yields as well as our best estimate of the effects of ongoing litigation in Poland related to foreign currency-denominated mortgages. Discontinued operations income for the six months ended June 30, 2020, includes the recognition of an insignificant valuation allowance on the carrying value of the portfolio, primarily driven by a higher discount rate as a result of COVID-19 and related market impacts. Future changes in the economic impact of COVID-19, market yields or changes in estimated legal liabilities could result in further losses related to these loans in future reporting periods.
|
| | |
MD&A | CAPITAL RESOURCES AND LIQUIDITY |
CAPITAL RESOURCES AND LIQUIDITY
FINANCIAL POLICY.POLICY. We intend to maintain a disciplined financial policy, including maintaining a high cash balance. We are targeting a sustainable long-term credit rating in the Single-A range, achieving a GE Industrial net debt*-to-EBITDA ratio of less than 2.5x over the next few years and a dividend in line with our peers over time, as well as a less than 4-to-1 debt-to-equity ratio for GE Capital.time. In addition to net debt*-to-EBITDA, we also evaluate other leverage measures, including gross debt-to-EBITDA, and we will ultimately size our deleveraging actions across a range of measures to ensure we are operating the Company based on a strong balance sheet. We intend
Following the closing of the GECAS transaction, the Company intends to continueuse the transaction proceeds and its existing cash sources 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.significantly reduce debt.
LIQUIDITY POLICY. We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet our obligations under both normal and stressed conditions. We intend to maintain a high level of cash and maximize flexibility as we navigate the current environment. At both GE Industrial and GE Capital, we manage our liquidity to provide access to sufficient funding to meet our business needs and financial obligations, as well as capital allocation and growth objectives, throughout business cycles.
At GE Capital, we continue to hold cash levels to cover at least 12 months of long-term debt maturities.
We believe that our consolidated liquidity and availability under our revolving credit facilities will be sufficient to meet our liquidity needsneeds.
.
*Non-GAAP Financial Measure
CONSOLIDATED LIQUIDITY. Following is a summary of cash, cash equivalents and restricted cash at June 30, 2020.2021. | | | | | | | | | | June 30, 2021 | | June 30, 2021 |
| (In billions) | June 30, 2020 |
| | June 30, 2020 |
| |
| GE | $ | 25.4 |
| | U.S. | $ | 23.9 |
| |
| GE Industrial | | GE Industrial | $ | 15,591 | | | U.S. | $ | 11,199 | |
| GE Capital | 16.0 |
| | Non-U.S. | 17.6 |
| GE Capital | 6,870 | | | Non-U.S. | 11,261 | |
| Consolidated | $ | 41.4 |
| | Consolidated | $ | 41.4 |
| Consolidated | $ | 22,460 | | | Consolidated | $ | 22,460 | |
Cash held in non-U.S. entities has generally been reinvested in active foreign business operations; however, substantially all of our unrepatriated earnings were subject to U.S. federal tax and, if there is a change in reinvestment, we would expect to be able to repatriate available cash (excluding amounts held in countries with currency controls) without additional federal tax cost. Any foreign withholding tax on a repatriation to the U.S. would potentially be partially offset by a U.S. foreign tax credit.
GE INDUSTRIAL LIQUIDITY.GE'sGE Industrial's primary sources of liquidity consist of cash and cash equivalents, free cash flows from our operating businesses, remaining receivable monetization of receivables, proceeds from dispositions,programs, and short-term borrowing facilities, including a commercial paper program and revolving credit facilities. Cash generation can be subject to variability based on many factors, including seasonality, receipt of down payments on large equipment orders, timing of billings on long-term contracts, market conditions and our ability to execute dispositions. Additionally, in connection with the program we launched in 2020 to fully monetize our Baker Hughes position over approximately three years, we received proceeds of $1.0 billion in the second quarter of 2021 and expect an orderly sale over timeto receive approximately $1.3 billion in the third quarter of our remaining stake in Baker Hughes.2021.
GE Industrial cash, cash equivalents and restricted cash totaled $25.4$15.6 billion at June 30, 2020,2021, including $2.1$2.2 billion of cash held in countries with currency control restrictions and $0.9$0.3 billion of restricted use cash. Cash held in countries with currency controls represents amounts held in countries whichthat may restrict the transfer of funds to the U.S. or limit our ability to transfer funds to the U.S. without incurring substantial costs. Restricted use cash represents amounts that are not available to fund operations, and primarily comprised collateral for receivables sold and funds restricted in connection with certain ongoing litigation matters.
In the first quarter of 2021, we announced our intention to discontinue the majority of our factoring programs, which was effective April 1, 2021. The estimated adverse impact to GE Industrial CFOA for 2021 is expected to be approximately $3.5 to $4 billion, including $2.7 billion in the second quarter of 2021, which primarily represents the cash that GE Industrial would have otherwise collected in the period had customer receivables not been previously sold and is excluded from GE Industrial free cash flows*.
During 2021, GE Capital’s liquidity and capital needs will be evaluated based on the anticipated timing of the closing of the GECAS transaction, as well as GE Capital’s overall performance, to determine if additional capital contributions to GE Capital are necessary.
GE CAPITAL LIQUIDITY. GE Capital’s primary sources of liquidity consist of cash and cash equivalents, cash generated from asset sales (including the expected proceeds from the GECAS transaction) and cash flows from our businesses, as well as GE Industrial repayments of intercompany loans and capital contributions from GE. Industrial. We expect to maintain a sufficient liquidity position to fund our insurance obligations, debt maturities and debt maturities.other obligations. See the Segment Operations - Capital section for further information regarding allocation of GE Capital interest expense to the GE Capital businesses.
GE Capital cash, cash equivalents and restricted cash totaled $16.0$6.9 billion at June 30, 2020, including $1.22021, excluding $1.0 billion of cash in Insurance, which was subject to regulatory restrictions, primarily in insurance entities.
GE Capital provided capital contributions to its insurance subsidiaries of $2.0 billion, $2.0 billion, $1.9 billion and $3.5 billion in the first quarters of 2021, 2020, 2019 and 2018, respectively, and expects to provide further capital contributions of approximately $7$5.5 billion through 2024. These contributions are subject to ongoing monitoring by Kansas Insurance Department (KID), and the total amount to be contributed could increase or decrease, or the timing could be accelerated, based upon the results of reserve adequacy testing or a decision by KID to modify the schedule of contributions set forth in January 2018. We will continueGE is required to monitor the volatile interest rate environment, including the impact of reinvestment rates and our investment portfolio performance, and other factors in determining the related effect on our expected future capital contributions. See the Critical Accounting Estimates section for discussion of the sensitivity of interest rate changes to our insurance liabilities. GE maintainsmaintain specified capital levels at these insurance subsidiaries under capital maintenance agreements. Going forward, we anticipate funding any capital needs for insuranceInsurance through a combination of GE Capital liquidity, GE Capital asset sales, GE Capital future earnings and capital contributions from GE.GE Industrial.
*Non-GAAP Financial Measure
BORROWINGS. Consolidated total borrowings were $81.9$63.5 billion and $90.9$74.9 billion at June 30, 20202021 and December 31, 2019, respectively.2020, respectively, a decrease of $11.4 billion ($11.8 billion excluding intercompany eliminations). See the following table for a summary of GE Industrial and GE Capital borrowings.
| | | | | | | | | | | | | | | | | | | | |
| GE Industrial | June 30, 2021 | December 31, 2020 | | GE Capital | June 30, 2021 | December 31, 2020 |
| GE Industrial senior notes | $ | 14,832 | | $ | 18,994 | | | Senior and subordinated notes | $ | 29,125 | | $ | 30,987 | |
| | | | Senior and subordinated notes assumed by GE Industrial | 18,173 | | 22,390 | |
Intercompany loans from
GE Capital | 3,177 | | 3,177 | | | Intercompany loans to
GE Industrial | (3,177) | | (3,177) | |
| Other GE Industrial borrowings | 799 | | 1,352 | | | Other GE Capital
borrowings | 738 | | 1,779 | |
| Total GE Industrial | | | | Total GE Capital | | |
| adjusted borrowings(a) | $ | 18,808 | | $ | 23,523 | | | adjusted borrowings(a)(b) | $ | 44,859 | | $ | 51,979 | |
*Non-GAAP Financial Measure
|
| | |
MD&A | CAPITAL RESOURCES AND LIQUIDITY |
|
| | | | | | | | | | | | | | |
GE (In billions) | June 30, 2020 |
| December 31, 2019 |
| | GE Capital (In billions) | June 30, 2020 |
| December 31, 2019 |
|
| Commercial paper | $ | 0.5 |
| $ | 3.0 |
| | Senior and subordinated notes | $ | 35.2 |
| $ | 36.5 |
|
| GE senior notes | 18.4 |
| 15.5 |
| | Senior and subordinated notes assumed by GE | 25.4 |
| 31.4 |
|
Intercompany loans from GE Capital | 4.7 |
| 12.2 |
| | Intercompany loans to GE | (4.7 | ) | (12.2 | ) |
| Other GE borrowings | 1.5 |
| 2.2 |
| | Other GE Capital borrowings | 1.8 |
| 3.4 |
|
| Total GE | | | | Total GE Capital | | |
| adjusted borrowings(a) | $ | 25.1 |
| $ | 32.9 |
| | adjusted borrowings(a) | $ | 57.7 |
| $ | 59.0 |
|
(a) Consolidated total borrowings of $81.9 billion$63,524 million and $90.9 billion$74,902 million at June 30, 20202021 and December 31, 2019,2020, respectively, includedare net of intercompany eliminations of $0.9 billion$143 million and $1.0 billion,$600 million, respectively, of other GE Industrial borrowings from GE Capital, primarily related to timing of cash settlements associated with GE Industrial receivables monetization programs.
(b) Included $4,038 million and $5,687 million at June 30, 2021 and December 31, 2020, respectively, of fair value adjustments for debt in fair value hedge relationships. See Note 19 for further information.
The reduction in GE Industrial adjusted borrowings at June 30, 20202021 compared to December 31, 20192020 was driven primarily by $7.5 billion of repayments of intercompany loans from GE Capital, debt repurchases of $4.2$4.1 billion, lower commercial paper of $2.5 billion, and net repayments and maturities of other debt of $1.1$0.6 billion and $0.1 billion related to changes in foreign exchange rates.
GE Industrial net debt* was $33.2 billion and $32.3 billion at June 30, 2021 and December 31, 2020, respectively. The increase was driven primarily by a decrease in the net cash deduction of $5.7 billion due to a lower cash balance, partially offset by issuancesa lower debt balance of new long-term$4.7 billion, mainly due to debt of $7.5 billion.repurchases.
The reduction in GE Capital adjusted borrowings at June 30, 20202021 compared to December 31, 20192020 was driven primarily by debt repurchases of $9.8$3.2 billion, long-term debt maturities of $5.5$1.8 billion, lower non-recourse borrowings of $0.8 billion, and lower nonrecourse borrowings of $1.3 billion partially offset by repayments of intercompany loans from GE of $7.5 billion (which has the effect of increasing GE Capital borrowings), issuances of new long-term debt of $6.0 billion, and $1.8 billion primarily related to fair value adjustments for debt in fair value hedge relationships and changes in foreign exchange rates.relationships.
GE Industrial net debt* was $34.0 billion and $47.9 billion at June 30, 2020 and December 31, 2019, respectively. The reduction was driven primarily by $7.5 billion of repayments of intercompany loans from GE Capital, the repurchase of $4.2 billion of debt, a reduction in commercial paper of $2.5 billion, net repayments and maturities of other debt of $1.1 billion, and a higher ending cash balance, partially offset by new issuances of $7.5 billion of long-term debt.
Liability Management Actions. In the second quarter of 2020,2021, we tookcompleted a series of actionsdebt tender to enhance and extend our liquidity at both GE and GE Capital, issuingrepurchase a total of $13.5$7.3 billion of longer-dated debt, and reducing near-term debt maturities by $10.5 billion, with the remaining $3 billion to be leverage neutral by the end 2021. See below for detailscomprised of these actions.
GE issued a total of $7.5 billion in aggregate principal amount of senior notes ($6.0 billion in April 2020 and $1.5 billion in June 2020), comprising $1.0 billion due 2027, $1.25 billion due 2030, $1.5 billion due 2040, and $3.75 billion due 2050. GE used these proceeds to complete a tender offer to purchase $4.2$4.1 billion of GE senior notesIndustrial debt with maturities ranging from 2020 to 2024, to reduce commercial paper2022 through 2050, and other debt by $1.8 billion, and to repay $1.5$3.2 billion of intercompany loans to GE Capital in June 2020. These transactions were leverage neutral within the quarter and liquidity enhancing through the extension of our near-team industrial debt maturities.
GE Capital issued a total of $6.0 billion in aggregate principal amount of senior notes ($4.5 billion in May 2020 and $1.5 billion in June 2020) and used the proceeds to complete a tender offer to purchase a total of $4.4 billion of debt with maturities ranging from 2021 through 2023. GE Capital also received an additional $1.5 billion of proceeds from repayments of intercompany loans from GE as part of the June debt issuance. GE Capital expects to use the remaining $3 billion of net proceeds from these actions primarily to fund long-term debt maturing in 2021, and accordingly these actions are expected to be leverage neutral by the end of 2021.
The following table provides a reconciliation of total short- and long-term borrowings as reported on the respective GE
Industrial and GE Capital Statements of Financial Position to borrowings adjusted for assumed debt and intercompany loans:
| | June 30, 2020 (In billions) | GE |
| GE Capital |
| Consolidated |
| |
| June 30, 2021 | | June 30, 2021 | GE Industrial | GE Capital | Consolidated |
| Total short- and long-term borrowings | $ | 45.8 |
| $ | 37.0 |
| $ | 81.9 |
| Total short- and long-term borrowings | $ | 33,804 | | $ | 29,863 | | $ | 63,524 | |
| | | |
| Debt assumed by GE from GE Capital(a) | (25.4 | ) | 25.4 |
| — |
| |
| Debt assumed by GE Industrial from GE Capital(a) | | Debt assumed by GE Industrial from GE Capital(a) | (18,173) | | 18,173 | | — | |
| Intercompany loans with right of offset(a) | 4.7 |
| (4.7 | ) | — |
| Intercompany loans with right of offset(a) | 3,177 | | (3,177) | | — | |
| Total intercompany payable (receivable) between GE and GE Capital | (20.7 | ) | 20.7 |
| — |
| |
| | | |
| Total intercompany payable (receivable) between GE Industrial and GE Capital | | Total intercompany payable (receivable) between GE Industrial and GE Capital | (14,996) | | 14,996 | | — | |
| Total borrowings adjusted for assumed debt and intercompany loans | $ | 25.1 |
| $ | 57.7 |
| $ | 81.9 |
| Total borrowings adjusted for assumed debt and intercompany loans | $ | 18,808 | | $ | 44,859 | | $ | 63,524 | |
(a) See the Capital Resources and Liquidity section of our Annual Report on Form 10-K for the year ended December 31, 20192020 for further details on the assumed debt and intercompany loans with right of offset.
The intercompany loans from GE Capital to GE Industrial bear the right of offset against amounts owed by GE Capital to GE Industrial under the assumed debt agreement and can be prepaid by GE Industrial at any time, in whole or in part, without premium or penalty. These loans are priced at market terms and have a collective weighted average interest rate of 3.4%3.7% and term of approximately 12.415.2 years at June 30, 2020.2021.
*Non-GAAP Financial Measure
|
| | |
MD&A | CAPITAL RESOURCES AND LIQUIDITY |
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 billions) | June 30, 2020 |
| December 31, 2019 |
|
| Unused back-up revolving syndicated credit facility | $ | 15.0 |
| $ | 20.0 |
|
| Unused revolving syndicated credit facility | — |
| 14.8 |
|
| Bilateral revolving credit facilities | 5.2 |
| 7.2 |
|
| Total committed revolving credit facilities | $ | 20.2 |
| $ | 42.0 |
|
| Less offset provisions | — |
| 6.7 |
|
| Total net available revolving credit facilities | $ | 20.2 |
| $ | 35.3 |
|
As part ofOn May 27, 2021, we entered into an amended agreement for our ordinary course refinancing processes, on April 17, 2020, we refinanced our 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, reducing the amount available under the former facility from $15 billion to $10 billion and entered intoextending the maturity date to May 2026. In addition to this facility, we have in place a new $15.0total of $4.9 billion back-upof bilateral revolving syndicated credit facility, expiringfacilities, resulting in April 2023. This facility does not contain any offset provisions.a total of $14.9 billion of committed revolving credit facilities.
Under the terms of an agreement between GE Capital and GE Industrial, GE Capital has the right to compel GE Industrial to borrow under the $15.0$10.0 billion unused back-up revolving syndicated credit facility. Under this agreement, GE Industrial would transfer the proceeds to GE Capital as intercompany loans, which would be subject to the same terms and conditions as those between GE Industrial and the lending banks. GE Capital has not exercised this right.
The closing of the new $15.0 billion facility also terminated the $14.8 billion unused revolving syndicated credit facility that was scheduled to mature in December 2020, which had an aggregate revolving commitment amount of $4.2 billion effective April 14, 2020, following the sale of the BioPharma business within our Healthcare segment.
The following table provides a summary of the activity in the primary external sources of short-term borrowings for GE in the second quarters of 2020 and 2019. GE uses bilateral revolving credit facilities from time to time to meet its short-term liquidity needs.*Non-GAAP Financial Measure
|
| | | | | | | | | | |
| (In billions) | GE Commercial Paper |
| Bilateral Revolving Credit Facilities |
| Total |
|
| 2020 | Average borrowings during the second quarter | $ | 1.7 |
| $ | — |
| $ | 1.7 |
|
| | Maximum borrowings outstanding during the second quarter | 2.2 |
| — |
| 2.2 |
|
| | Ending balance at June 30 | 0.5 |
| — |
| 0.5 |
|
| | | | | |
| 2019 | Average borrowings during the second quarter | $ | 3.0 |
| $ | 1.3 |
| $ | 4.3 |
|
| | Maximum borrowings outstanding during the second quarter | 3.1 |
| 1.8 |
| 4.8 |
|
| | Ending balance at June 30 | 3.0 |
| — |
| 3.0 |
|
Total average and maximum borrowings in the table above are calculated based on the daily outstanding balance of the sum of commercial paper and revolving credit facilities.
CREDIT RATINGS AND CONDITIONS. We have relied, and may continue to rely, on the short- and long-term debt capital markets to fund, among other things, a significant portion of our operations. The cost and availability of debt financing is influenced by our credit ratings. Moody’s Investors Service (Moody’s), Standard and Poor’s Global Ratings (S&P), and Fitch Ratings (Fitch) currently issue separate ratings on GE Industrial and GE Capital short- and long-term debt. The credit ratings of GE Industrial and GE Capital as of the date of this filing are set forth in the table below.
| | | | | | | | | | | | | | |
| | Moody's | S&P | Fitch |
| GE Industrial | Outlook | Negative | CreditWatch Negative | Stable |
| Short term | P-2 | A-2 | F3 |
| Long term | Baa1 | BBB+ | BBB |
| | | | |
| | Moody's | S&P | Fitch |
GE | Outlook | Negative | Negative | Stable |
| Short term | P-2 | A-2 | F3 |
| Long term | Baa1 | BBB+ | BBB |
| | | | |
| GE Capital | Outlook | Negative | CreditWatch Negative | Stable |
| Short term | P-2 | A-2 | F3 |
| Long term | Baa1 | BBB+ | BBB |
On 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.
|
| Short term | P-2 | A-2 | F3 |
MD&A | CAPITAL RESOURCES AND LIQUIDITYLong term | Baa1 | BBB+ | BBB |
We are disclosing our credit ratings and any current quarter updates to these ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds and access to liquidity.liquidity. Our ratings may be subject to a revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. For a description of some of the potential consequences of a reduction in our credit ratings, see the Financial Risks section of Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
The following table provides a summarySubstantially all of the estimated potential liquidity impact in the event of further downgrades with regards to the most significant contractual credit ratings conditions of the Company based on their proximity to our current ratings.
|
| | | | |
| (In billions) | Triggers Below | At June 30, 2020 |
|
| Derivatives | | |
| Terminations | BBB/Baa2 | $ | (0.3 | ) |
| Cash margin posting | BBB/Baa2 | (0.9 | ) |
| Receivables Sales Programs | | |
| Loss of cash commingling | A-2/P-2 | $ | (0.2 | ) |
| Alternative funding sources | A-2/P-2 | (0.5 | ) |
| Surety bond cash collateral posting | BBB-/Baa3 | $ | (0.8 | ) |
The timing within the quarter of the potential liquidity impact of these areas may differ, as described in the following sections which provide additional details regarding the significant credit rating conditions of the Company.
DEBT CONDITIONS. Substantially allCompany's debt agreements in place at June 30, 20202021 do not contain material credit rating covenants. GE’s unused back-up revolving syndicated credit facility and certain of our bilateral revolving credit facilities contain a customary net debt-to-EBITDA financial covenant, which GE has metsatisfied at June 30, 2020.2021.
DERIVATIVE CONDITIONS.Swap, forward and option contracts are executed under standard master agreements that typically contain mutual downgrade provisions that provide the ability of the counterparty to require termination if the credit ratings of the applicable GE entity were to fall below specified ratings levels agreed upon with the counterparty, primarily BBB/Baa2. Our master agreements also typically contain provisions that provide termination rights upon the occurrence of certain other events, such as a bankruptcy or events of default by one of the parties. If an agreement was terminated under any of these circumstances, the termination amount payable would be determined on a net basis and could also take into account any collateral posted. The net amount of our derivative liability subject to such termination provisions, after consideration of collateral posted by us and outstanding interest payments was $0.3 billion at June 30, 2020. This excludes exposure related to embedded derivatives, which are not subject to these provisions.
In addition, certain of our derivatives, primarily interest rate swaps, are subject to additional cash margin posting requirements if our credit ratings were to fall below BBB/Baa2. The amount of additional margin will vary based on, among other factors, market movements and changes in our positions. At June 30, 2020, the amount of additional margin that we could be required to post if we fell below these ratings levels was approximately $0.9 billion.
See Note 17 for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.
OTHER CONDITIONS.Where we provide servicing for third-party investors under one of our receivable sales programs, GE is contractually permitted to commingle cash collected from customers on financing receivables sold to third-party investors with our own cash prior to payment to third-party investors, provided our short-term credit rating does not fall below A-2/P-2 (this program does not contain any Fitch ratings requirements). In the event any of our ratings were to fall below such levels, we may be required to segregate certain of these cash collections owed to third-party investors into restricted bank accounts and would lose the short-term liquidity benefit of commingling with respect to such collections. The financial impact to our intra-quarter liquidity would vary based on collections activity for a given quarter and may result in increased utilization of our revolving credit facilities. The loss of cash commingling would have resulted in an estimated maximum reduction of approximately $0.2 billion to GE intra-quarter liquidity during the first quarter of 2020.
We have relied, and may continue to rely, on securitization programs to provide alternative funding for sales of GE receivables to third-party investors. In the event our short-term credit ratings were to fall below certain levels, we would not be permitted to commingle certain cash received related to sales of receivables at the end of the quarter. The Fitch downgrade in the second quarter of 2020 resulted in GE classifying $0.4 billion as restricted cash at June 30, 2020. The amount of cash that GE Capital would have been required to classify as restricted cash if our credit ratings had fallen below A-2/P-2 was approximately $0.5 billion at June 30, 2020.
In conjunction with ordinary course commercial transactions and certain regulatory requirements, the Company may periodicallyfrom time to time enter into agreements that require us to post surety bonds to counterparties. Incontain minimum ratings requirements. The following table provides a summary of the first quarter of 2020, we entered into amendments to our agreements with certain of our surety bond providers that may require us to post cash collateralmaximum estimated liquidity impact in the event our creditof further downgrades below each stated ratings were to fall below BBB-/Baa3. At June 30, 2020, the maximum amount of cash collateral we could be required to post if we fell below these levels was approximately $0.8 billion.level.
|
| | | | | |
MD&A | CAPITAL RESOURCES AND LIQUIDITYTriggers Below | At June 30, 2021 |
| BBB+/A-2/P-2 | $ | 320 | |
| BBB/A-3/P-3 | 665 | |
| BBB- | 1,279 | |
| BB+ and below | 448 | |
Our most significant contractual ratings requirements are related to ordinary course commercial activities, our receivables sales programs, and our derivatives portfolio. The timing within the quarter of the potential liquidity impact of these areas may differ, as can the remedies to resolving any potential breaches of required ratings levels.
FOREIGN EXCHANGE. As a result of our global operations, we generate and incur a significant portion of our revenues and expenses in currencies other than the U.S. dollar. Such principal currencies include the euro, the Chinese renminbi, the British pound sterling the Brazilian real and the Chinese renminbi,Indian rupee, among others. The effects of foreign currency fluctuations on earnings, excluding the earnings impact of the underlying hedged item, was less than $0.1 billion for both the three and six months ended June 30, 2020,2021 and less than $0.1 billion for the three and six months ended June 30, 2019.2020. This analysis excludes any offsetting effect from the forecasted future transactions that are economically hedged.
See Note 1719 for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.
STATEMENT OF CASH FLOWS – SIX MONTHS ENDED JUNE 30, 20202021 VERSUS 2019.2020. We manage the cash flow performance of our industrial and financial services businesses separately, in order to enable us and our investors to evaluate the cash from operating activities of our industrial businesses separately from the cash flows of our financial services business.
See the Intercompany Transactions between GE Industrial and GE Capital are reported in the respective columns of our Statement of Cash Flows, but are eliminated in deriving our consolidated Statement of Cash Flows. See the GE Industrial Working Capital Transactions section and Notes 4 and 2022 for further information regarding certain transactions affecting our consolidated Statement of Cash Flows.
GE INDUSTRIAL CASH FLOWS FROM CONTINUING OPERATIONS. The most significant source of cash in GE Industrial CFOA is customer-related activities, the largest of which is collecting cash resulting from product or services sales. The most significant operating use of cash is to pay our suppliers, employees, tax authorities, contribute to post retirement plans and pay others for a wide range of material, services and taxes.
GE Industrial cash used for operating activities was $3.3$2.5 billion in 2020, an increase2021, a decrease of $2.2$0.7 billion compared with 2019,2020, primarily due to: a general decreasean increase in net income (after adjusting for the gain on the sale of BioPharma, and non-cash losses related to our interest in Baker Hughes),Hughes and non-operating debt extinguishment costs) primarily due to COVID-19 impacts in our Aviation segment;segment in 2020; a lower decrease in employee benefit liabilities of $0.4 billion; and an increasea decrease in cash used for working capital of $1.8$0.3 billion; partially offset by changesincreases in contractAviation-related customer allowance accruals of $0.9 billion in 2020; and other deferred assetslower principal pension plans cost of $1.0$0.5 billion. There was a $0.1 billion primarily due a net unfavorable change in estimated profitability of $0.8 billion at Aviation (See Note 10); an increase in cash from All other operating activities of $1.2 billion (primarily due to an increase in Aviation-related customer allowance accruals in 2021.
Changes in working capital compared to prior year were as follows: current receivables of $0.6$(1.7) billion, driven by a higher decrease in sales of receivables to discontinued factoring programs of $(1.8) billion and an increase in equipment project cost accruals of $0.3 billion); andlower net collections, partially offset by a prior year decrease in cash paid for income taxessales of $0.4 billion.
Cash used for employee benefit liabilities (which is a component of All other operating activities)receivables to our continuing unconsolidated receivables facility of $0.8 billion during 2020 remained relatively flat compared with 2019. We also utilized the provisionwhich did not reoccur in 2021; inventories, including deferred inventory, of the Coronavirus, Aid, Relief and Economic Security Act (CARES Act) which allows employers to defer the payment$(0.5) billion, driven by lower liquidations partially offset by lower material purchases; current contract assets of Social Security taxes and, as a result, we deferred $0.1$(0.3) billion, driven by lower net unfavorable changes in the second quarter of 2020. We may choose to defer further Social Security taxes through the second half of 2020, in accordance with the CARES Act.
The increase in cash used for working capital was due to: an increase in cash used forestimated profitability at Aviation; accounts payable and equipment project accruals of $3.8$3.4 billion, which was primarily as a result ofdriven by lower volume in 2020 and disbursements related to purchases of materials in prior periods, partially offsetperiods; and progress collections and current deferred income of $(0.7) billion, driven by the deferral of some payables; and higher net utilizations of progressliquidations. Progress collections of $0.8 billion, whichand current deferred income included a partial offset due tolower early payments received at our Aviation Military equipment business of $0.3 billion from a foreign government in 2021 compared to $0.7 billion in the second quarter of 2020 as part offrom the U.S. Department of Defense's efforts to support vendorsDefense in its supply chain during the pandemic. These increases in cash used for working capital were partially offset by an increase in cash generated from current receivables of $1.7 billion, which was primarily driven by lower volume, partially offset by a higher decrease in sales of receivables; and a decrease in cash used for inventories of $1.1 billion, which was primarily driven by lower material purchases, partially offset by lower liquidations.2020.
GE Industrial cash from investing activities was $19.7$1.3 billion in 2020, an increase2021, a decrease of $17.1$18.4 billion compared with 2019,2020, primarily due to: netthe nonrecurrence of proceeds from the sale of our BioPharma business of $20.4$20.3 billion; the nonrecurrence of a capital contribution from GE to GE Capital of $1.5 billion in 2019; partially offset by the nonrecurrence of proceeds of $2.8 billion from the 2019 spin-offsales of our Transportation business and $1.8 billion from the salea portion of our retained ownership interestsinterest in Wabtec.Baker Hughes of $1.7 billion. Cash used for additions to property, plant and equipment and internal-use software, which is a componentare components of GE Industrial free cash flows*, was $1.1$0.6 billion in 2020,2021, down $0.2$0.5 billion compared with 2019.2020.
GE Industrial cash used for financing activities was $8.5$6.3 billion in 2020, an increase2021, a decrease of $7.2$2.1 billion compared with 2019,2020, primarily due to: the repaymentnonrecurrence of intercompany loans from GE Capital to GErepayments of $7.5 billion; completion of a tender offer to purchase GE long-term debt of $4.2 billion; a reduction in commercial paper of $2.5 billion;billion in 2020; partially offset by new principal issuancesan increase of long-term$0.5 billion in debt tender offers. GE Industrial paid cash to repurchase long term debt of $7.5$4.8 billion and $4.3 billion, including debt extinguishment costs of $0.6 billion and $0.1 billion (a component of All other financing activities) in the second quarter of 2020.2021 and 2020, respectively.
GE CASH FLOWS FROM DISCONTINUED OPERATIONS. GE cash used for investing activities of discontinued operations in 2019 primarily reflects investing outflows related to Baker Hugues, prior to our disposition of the segment in the third quarter of 2019. GE cash used for financing activities of discontinued operations in 2019 primarily reflects payments of Baker Hughes dividends to noncontrolling interests.
*Non-GAAP Financial Measure
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MD&A | CAPITAL RESOURCES AND LIQUIDITY |
GE CAPITAL CASH FLOWS FROM CONTINUING OPERATIONS. GE Capital cash fromused for operating activities was $1.0$2.6 billion in 2020, a decrease2021, an increase of $0.3$2.4 billion compared with 2019,2020, primarily due to: an increase in trade receivables due to short-term extensions of payment terms to customers of $0.3 billion driven primarily by COVID-19 and other market related effects and a general decrease in cash generated from earnings (loss) from continuing operations; partially offset by a net increase in cash collateral receivedpaid, which is a standard market practice to minimize derivative counterparty exposures, and settlements paid from counterpartiesreceived on derivative contracts (components of $0.5 billion.All other operating activities) of $1.3 billion in 2021, compared with collateral and settlements received of $1.4 billion in 2020.
GE Capital cash from investing activities was $7.5$3.4 billion in 2020, an increase2021, a decrease of $6.7$5.2 billion compared with 2019,2020, primarily due to: the nonrecurrence of the repayment of GE Capital intercompany loans by GE of $7.5 billion and an increaseby GE Industrial in 2020; a decrease in cash receivedof $0.7 billion related to net settlements between our continuing operations (primarily our Corporate function)current receivables and businesses in discontinued operations (primarily WMC) of $1.9 billion;supply chain finance programs with GE Industrial; partially offset by lowerhigher net collections of financing receivables of $2.0$3.0 billion and a decrease of GECAS sales deposits of $1.0 billion primarilymainly driven by COVID-19 and other market related effects.the discontinuation of certain factoring programs.
GE Capital cash used for financing activities was $11.3$6.8 billion in 2020, an increase2021, a decrease of $6.5$4.5 billion compared with 2019,2020, primarily due to: higherlower net repayments of borrowings of $5.4 billion and the nonrecurrence of a capital contribution from GE to GE Capital in 2019 of $1.5$4.9 billion; partially offset by lowerhigher cash settlements of $0.5 billion on derivatives hedging foreign currency debt; partially offset by higher debt tender incentive and fees of $0.9 billion. GE Capital paid cash to repurchase long term debt of $3.9 billion and $10.0 billion, including debt tender incentive and fees of $1.1 billion and $0.2 billion (a component of All other financing activities), excluding a non-cash debt basis adjustment of $0.3 billion and an insignificant amount in 2021 and 2020, respectively.
GE CAPITAL CASH FLOWS FROM DISCONTINUED OPERATIONS. GE Capital cash from operating activities relates primarily to cash generated from earnings (loss) from discontinued operations in our GECAS business. GE Capital cash used for investing activities increased $0.4 billion primarily due to an increase in net purchases of plant, property and equipment of $0.8 billion, partially offset by an increase in net collections of financing receivables of $0.4 billion.
*Non-GAAP Financial Measure
GE INDUSTRIAL WORKING CAPITAL TRANSACTIONS. Sales of Receivables. In order to manage short-term liquidity and credit exposure, GE Industrial may sell current customer receivables to GE Capital and other third parties. These transactions are made on arm's lengtharms-length terms and any discount related to time value of money is recognized within the respective GE Industrial business in the period these receivables were sold to GE Capital or third parties. See Note 4 for further information.
Supply Chain Finance Programs. GE Industrial facilitates voluntary supply chain finance programs with third parties, which provide participating GE Industrial suppliers the opportunity to sell their GE Industrial receivables to third parties at the sole discretion of both the suppliers and the third parties.
At June 30, 20202021 and December 31, 2019,2020, included in GE'sGE Industrial's accounts payable was $2.4$3.3 billion and $2.9 billion, respectively, of supplier invoices that are subject to the third-party programs. Total GE Industrial supplier invoices paid through these third-party programs were $2.5$3.0 billion and $0.4$2.5 billion for the six months ended June 30, 20202021 and 2019,2020, respectively.
The GE liability associated with the funded participation in the GE Capital program is presented as accounts payable and amounted to $0.7 billion and $2.1 billion at June 30, 2020 and December 31, 2019, respectively.
INTERCOMPANY TRANSACTIONS BETWEEN GE INDUSTRIAL AND GE CAPITAL. Transactions between related companies are made on arm's lengtharms-length terms and are reported in the GE Industrial and GE Capital columns of our financial statements, which we believe provide useful supplemental information to our consolidated financial statements. See Note 2022 for further information.
GE Capital Finance Transactions. During the six months ended June 30, 20202021 and 2019,2020, GE Capital acquired from third parties 13 aircraft with a list price totaling $1.0 billion and five aircraft with a list price totaling $0.6 billion and 28 aircraft with a list price totaling $3.5 billion, respectively, that will be leased to others and are powered by engines manufactured by GE Aviation and affiliates. GE Capital also made payments to GE Aviation and affiliates related to spare engines and engine parts of $0.1 billion and $0.2 billion, which included $0.1 billionan insignificant amount and $0.1 billion to CFM International during the six months ended June 30, 2021 and 2020, and 2019, respectively.respectively, all of which were made to CFM International. Additionally, GE Capital had $2.2$2.0 billion and $2.0$2.1 billion of net book value of engines, originally manufactured by GE Aviation and affiliates and subsequently leased back to GE Aviation and affiliates at June 30, 20202021 and December 31, 2019,2020, respectively. There were nofour spare engine sales from our Aviation segment to our GECAS business in the three months ended June 30, 2020.2021.
Also, during the six months ended June 30, 2021 and 2020, and 2019, GE Industrial recognized equipment revenues of $1.2$1.1 billion and $0.6$1.2 billion, respectively, from customers within our Power and Renewable Energy segments in which GE Capital is an investee or is committed to be an investee in the underlying projects. At June 30, 2021, GE Capital had funded related investments of $0.1 billion.
For certain of these investments, in order to meet its underwriting criteria, GE Capital may obtain a direct guarantee from GE Industrial related to the performance of the third party. GE Industrial guarantees include direct performance or payment guarantees, return on investment guarantees and asset value guarantees. As of June 30, 2020,2021, GE Industrial had outstanding guarantees to GE Capital on $0.9$0.8 billion of funded exposure and $0.8 billionan insignificant amount of unfunded commitments, which included guarantees issued by industrial businesses. The recorded contingent liability for these guarantees was insignificant as of June 30, 20202021 and is based on individual transaction level defaults, losses and/or returns.
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MD&A | CRITICAL ACCOUNTING ESTIMATES |
CRITICAL ACCOUNTING ESTIMATES. Please refer to the Critical Accounting Estimates and Other Items sections within MD&A and Note 1 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 20192020 for a further discussion of our accounting policies and critical accounting estimates. COVID-19 related market events may have an effect on our Insurance business and pension assumptions.
INSURANCE AND INVESTMENT CONTRACTS. At June 30, 2020, our insurance liabilities and annuity benefits of $41.0 billion are primarily supported by investment securities of $40.6 billion and commercial mortgage loans of $1.9 billion, net of their allowance for losses, respectively.
Future policy benefit reserves. Future changes in the discount rate assumption used in our annual premium deficiency testing performed in the third quarter across our run-off insurance portfolio may be required. A lower discount rate, holding all other assumptions constant, will result in an increase in our future policy benefit reserves on a GAAP basis. Furthermore, a lower discount rate may be required under statutory asset adequacy testing that is relevant for determining the amount of capital to be contributed to our insurance subsidiaries.
Our GAAP discount rate is based upon the actual yields on our investment portfolio and our forecasted reinvestment rates, which comprise the future rates at which we expect to invest proceeds from investment maturities, net of operating cash flows, and projected future capital contributions. Although the movement in market rates impacts the reinvestment rate, it does not materially impact the actual yield on our existing investments. While credit spreads on fixed-income securities widened during the first half of 2020, benchmark interest rates in the U.S. have declined which may impact other discount rate assumptions, including the period over which the reinvestment rate increases to the expected long-term average investment yield and the expected long-term average investment yield (including changes to expected default rates). Furthermore, expected returns on higher yielding asset classes may change.
For further information on our future policy benefit reserves assumptions, refer to the GAAP Reserve Sensitivities included in Other Items within MD&A of our Annual Report on Form 10-K for the year ended December 31, 2019.
Investments. Our investment security portfolio may experience higher gross unrealized losses, downgrades in credit ratings and higher default rates and result in an increase to the allowance for losses on assets supporting our insurance liabilities. See Note 3 for further information about our investment securities.
PENSION ASSUMPTIONS.As discussed in Critical Accounting Estimates in our Annual Report on Form 10-K for the year ended December 31, 2019, our defined benefit pension plans are accounted for on an actuarial basis and measured annually. During the first half of 2020, financial markets and interest rates have experienced volatility, which could result in a change in the discount rate used to measure our pension benefit obligation or our pension assets may realize less than our expected long-term rate of return, either of which could result in a material change in the funded status of our pension plans when we measure them at December 31, 2020. Our discount rate is determined using the weighted average of market-observed yields for high-quality fixed income securities with maturities that correspond to the payments of benefits and while benchmark interest rates in the U.S. have been lowered credit spreads on high-quality fixed incomes securities have widened.
As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, changes in key assumptions for our principal pension plans would have the following effects.
Discount rate - A 25 basis point decrease in the discount rate would increase pension cost in the following year by about $0.2 billion and would increase the pension benefit obligation by about $2.3 billion.
Expected return on assets - A 50 basis point decrease in the expected return on assets would increase pension cost in the following year by about $0.3 billion.
NEW ACCOUNTING STANDARDS. The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements tonew guidance on accounting for long-duration insurance contracts that is effective January 1, 2023. Early adoption is permitted, and if elected, the Accounting for Long-Duration Contracts with an effectivetransition date for periodscan be either the beginning after December 31, 2021, with an election to adopt early. In July 2020,of the FASB proposed, subject to comment, to delay adoption to periods beginning after December 15, 2022.prior period or the earliest prior period presented. We are evaluating the effect of the standardnew guidance on our consolidated financial statements and anticipate that its adoption will significantly change the accounting for measurements of our long-duration insurance liabilities. The ASUnew guidance requires cash flow assumptions used in the measurement of various insurance liabilities to be reviewed at least annually and updated if actual experience or other evidence indicates previous assumptions need to be revised with any required changes recorded in earnings. Under the current accounting guidance, the discount rate is based on expected investment yields, while under the ASUnew guidance the discount rate will be equivalent to the upper-medium grade (i.e., single A) fixed-income instrument yield reflecting the duration characteristics of the liability and is required to be updated in each reporting period with changes recorded in other comprehensive income. In measuring the insurance liabilities under the new standard,guidance, contracts shall not be grouped together from different issue years. These changes result in the elimination of premium deficiency testing and shadow adjustments. While we continue to evaluate the effect of the standardnew guidance on our ongoing financial reporting, we anticipate that theits adoption of the ASU will materially affect our financial statements. As the ASUnew guidance is only applicable to the measurements of our long-duration insurance liabilities under GAAP, it will not affect the accounting for our insurance reserves or the levels of capital and surplus under statutory accounting practices.
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MD&A | NON-GAAP FINANCIAL MEASURES |
NON-GAAP FINANCIAL MEASURES. We believe that presenting non-GAAP financial measures provides management and investors useful measures to evaluate performance and trends of the total company and its businesses. This includes adjustments in recent periods to GAAP financial measures to increase period-to-period comparability following actions to strengthen our overall financial position and how we manage our business.
In addition, management recognizes that certain non-GAAP terms may be interpreted differently by other companies under different circumstances. In various sections of this report we have made reference to the following non-GAAP financial measures in describing our (1) revenues, specifically GE Industrial organic revenues by segment; BioPharma organic revenues, GE Industrial organic revenues, and GE Industrial equipment and services organic revenues, (2) profit, specifically GE Industrial organic profit and profit margin by segment; BioPharma organic profit and profit margin, Adjusted GE Industrial profit and profit margin (excluding certain items); Adjusted GE Industrial organic profit and profit margin; Adjusted earnings (loss); and Adjusted earnings (loss) per share (EPS), (3) cash flows, specifically GE Industrial free cash flows (FCF), and (4) debt balances, specifically GE Industrial net debt.
The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) |
| Three months ended June 30 |
| Revenues |
| Segment profit (loss) |
| Profit margin |
| (Dollars in millions) |
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
| V pts |
| Power (GAAP) |
| $ | 4,156 |
|
| $ | 4,681 |
|
| (11 | )% |
| $ | (40 | ) |
| $ | 117 |
|
| U |
|
| (1.0 | )% |
| 2.5 | % | (3.5)pts |
| Less: acquisitions |
| 4 |
|
| 19 |
|
|
|
|
| (5 | ) |
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 22 |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (65 | ) |
| — |
|
|
|
|
| 20 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Power organic (Non-GAAP) |
| $ | 4,218 |
|
| $ | 4,640 |
|
| (9 | )% |
| $ | (54 | ) |
| $ | 120 |
|
| U |
|
| (1.3 | )% |
| 2.6 | % | (3.9)pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Renewable Energy (GAAP) |
| $ | 3,505 |
|
| $ | 3,627 |
|
| (3 | )% |
| $ | (195 | ) |
| $ | (184 | ) |
| (6 | )% |
| (5.6 | )% |
| (5.1 | )% | (0.5)pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| 8 |
|
| 23 |
|
|
|
|
| — |
|
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (133 | ) |
| — |
|
|
|
|
| 15 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Renewable Energy organic (Non-GAAP) |
| $ | 3,630 |
|
| $ | 3,603 |
|
| 1 | % |
| $ | (210 | ) |
| $ | (183 | ) |
| (15 | )% |
| (5.8 | )% |
| (5.1 | )% | (0.7)pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Aviation (GAAP) |
| $ | 4,384 |
|
| $ | 7,877 |
|
| (44 | )% |
| $ | (680 | ) |
| $ | 1,385 |
|
| U |
|
| (15.5 | )% |
| 17.6 | % | (33.1)pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 46 |
|
|
|
|
| — |
|
| (4 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (5 | ) |
| — |
|
|
|
|
| 3 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Aviation organic (Non-GAAP) |
| $ | 4,389 |
|
| $ | 7,831 |
|
| (44 | )% |
| $ | (683 | ) |
| $ | 1,390 |
|
| U |
|
| (15.6 | )% |
| 17.7 | % | (33.3)pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Healthcare (GAAP) |
| $ | 3,893 |
|
| $ | 4,934 |
|
| (21 | )% |
| $ | 550 |
|
| $ | 958 |
|
| (43 | )% |
| 14.1 | % |
| 19.4 | % | (5.3)pts |
| Less: acquisitions |
| 7 |
|
| — |
|
|
|
|
| (11 | ) |
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 828 |
|
|
|
|
| — |
|
| 361 |
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (72 | ) |
| — |
|
|
|
|
| (15 | ) |
| — |
|
|
|
|
|
|
|
|
|
|
|
| Healthcare organic (Non-GAAP) |
| $ | 3,958 |
|
| $ | 4,106 |
|
| (4 | )% |
| $ | 577 |
|
| $ | 598 |
|
| (4 | )% |
| 14.6 | % |
| 14.6 | % | 0pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less: BioPharma organic (Non-GAAP) |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Healthcare excluding BioPharma organic (Non-GAAP) |
| $ | 3,958 |
|
| $ | 4,106 |
|
| (4 | )% |
| $ | 577 |
|
| $ | 598 |
|
| (4 | )% |
| 14.6 | % |
| 14.6 | % | 0pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) |
| | Revenues | | Segment profit (loss) | | Profit margin |
| Three months ended June 30 | | 2021 | | 2020 | | V% | | 2021 | | 2020 | | V% | | 2021 | | 2020 | V pts |
| Aviation (GAAP) | | $ | 4,840 | | | $ | 4,384 | | | 10 | % | | $ | 176 | | | $ | (687) | | | F | | 3.6 | % | | (15.7) | % | 19.3pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 11 | | | | | — | | | (18) | | | | | | | | |
| Less: foreign currency effect | | 12 | | | — | | | | | (16) | | | — | | | | | | | | |
| Aviation organic (Non-GAAP) | | $ | 4,828 | | | $ | 4,372 | | | 10 | % | | $ | 192 | | | $ | (669) | | | F | | 4.0 | % | | (15.3) | % | 19.3pts |
| | | | | | | | | | | | | | | | | |
| Healthcare (GAAP) | | $ | 4,454 | | | $ | 3,893 | | | 14 | % | | $ | 801 | | | $ | 506 | | | 58 | % | | 18.0 | % | | 13.0 | % | 5.0pts |
| Less: acquisitions | | — | | | (29) | | | | | (4) | | | (16) | | | | | | | | |
| Less: business dispositions | | — | | | 25 | | | | | — | | | (5) | | | | | | | | |
| Less: foreign currency effect | | 165 | | | — | | | | | 31 | | | — | | | | | | | | |
| Healthcare organic (Non-GAAP) | | $ | 4,288 | | | $ | 3,897 | | | 10 | % | | $ | 775 | | | $ | 527 | | | 47 | % | | 18.1 | % | | 13.5 | % | 4.6pts |
| | | | | | | | | | | | | | | | | |
| Renewable Energy (GAAP) | | $ | 4,049 | | | $ | 3,505 | | | 16 | % | | $ | (99) | | | $ | (251) | | | 61 | % | | (2.4) | % | | (7.2) | % | 4.8pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 8 | | | | | — | | | — | | | | | | | | |
| Less: foreign currency effect | | 246 | | | — | | | | | (26) | | | — | | | | | | | | |
| Renewable Energy organic (Non-GAAP) | | $ | 3,803 | | | $ | 3,497 | | | 9 | % | | $ | (73) | | | $ | (250) | | | 71 | % | | (1.9) | % | | (7.1) | % | 5.2pts |
| | | | | | | | | | | | | | | | | |
| Power (GAAP) | | $ | 4,295 | | | $ | 4,156 | | | 3 | % | | $ | 299 | | | $ | (50) | | | F | | 7.0 | % | | (1.2) | % | 8.2pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: foreign currency effect | | 135 | | | — | | | | | (30) | | | — | | | | | | | | |
| Power organic (Non-GAAP) | | $ | 4,160 | | | $ | 4,156 | | | — | % | | $ | 329 | | | $ | (50) | | | F | | 7.9 | % | | (1.2) | % | 9.1pts |
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20202021 2Q FORM 10-Q 2722
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) |
| | Revenues | | Segment profit (loss) | | Profit margin |
| Six months ended June 30 | | 2021 | | 2020 | | V% | | 2021 | | 2020 | | V% | | 2021 | | 2020 | V pts |
| Aviation (GAAP) | | $ | 9,832 | | | $ | 11,276 | | | (13) | % | | $ | 818 | | | $ | 316 | | | F | | 8.3 | % | | 2.8 | % | 5.5pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 36 | | | | | — | | | (35) | | | | | | | | |
| Less: foreign currency effect | | 22 | | | — | | | | | (15) | | | — | | | | | | | | |
| Aviation organic (Non-GAAP) | | $ | 9,810 | | | $ | 11,240 | | | (13) | % | | $ | 833 | | | $ | 351 | | | F | | 8.5 | % | | 3.1 | % | 5.4pts |
| | | | | | | | | | | | | | | | | |
| Healthcare (GAAP) | | $ | 8,761 | | | $ | 8,620 | | | 2 | % | | $ | 1,500 | | | $ | 1,373 | | | 9 | % | | 17.1 | % | | 15.9 | % | 1.2pts |
| Less: acquisitions | | 18 | | | (50) | | | | | 4 | | | (22) | | | | | | | | |
| Less: business dispositions | | — | | | 890 | | | | | — | | | 375 | | | | | | | | |
| Less: foreign currency effect | | 285 | | | — | | | | | 79 | | | — | | | | | | | | |
| Healthcare organic (Non-GAAP) | | $ | 8,458 | | | $ | 7,780 | | | 9 | % | | $ | 1,417 | | | $ | 1,020 | | | 39 | % | | 16.8 | % | | 13.1 | % | 3.7pts |
| | | | | | | | | | | | | | | | | |
| Renewable Energy (GAAP) | | $ | 7,297 | | | $ | 6,698 | | | 9 | % | | $ | (333) | | | $ | (578) | | | 42 | % | | (4.6) | % | | (8.6) | % | 4.0pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 33 | | | | | — | | | (4) | | | | | | | | |
| Less: foreign currency effect | | 337 | | | — | | | | | (37) | | | — | | | | | | | | |
| Renewable Energy organic (Non-GAAP) | | $ | 6,960 | | | $ | 6,666 | | | 4 | % | | $ | (296) | | | $ | (574) | | | 48 | % | | (4.3) | % | | (8.6) | % | 4.3pts |
| | | | | | | | | | | | | | | | | |
| Power (GAAP) | | $ | 8,216 | | | $ | 8,181 | | | — | % | | $ | 212 | | | $ | (180) | | | F | | 2.6 | % | | (2.2) | % | 4.8pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 15 | | | | | — | | | 2 | | | | | | | | |
| Less: foreign currency effect | | 198 | | | — | | | | | (31) | | | — | | | | | | | | |
| Power organic (Non-GAAP) | | $ | 8,018 | | | $ | 8,165 | | | (2) | % | | $ | 243 | | | $ | (182) | | | F | | 3.0 | % | | (2.2) | % | 5.2pts |
| | | | | | | | | | | | | | | | | |
| 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. |
| | | | | | | | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL ORGANIC REVENUES (NON-GAAP) | Three months ended June 30 | | Six months ended June 30 |
| 2021 | 2020 | V% | | 2021 | 2020 | V% |
| GE Industrial revenues (GAAP) | $ | 17,487 | | $ | 16,066 | | 9 | % | | $ | 33,816 | | $ | 34,910 | | (3) | % |
| Less: acquisitions | — | | (24) | | | | 18 | | (46) | | |
| Less: business dispositions(a) | — | | 241 | | | | — | | 1,336 | | |
| Less: foreign currency effect(b) | 570 | | — | | | | 857 | | — | | |
| GE Industrial organic revenues (Non-GAAP) | $ | 16,917 | | $ | 15,850 | | 7 | % | | $ | 32,940 | | $ | 33,620 | | (2) | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
(a) Dispositions impact in 2020 primarily related to our BioPharma business, with revenues of $830 million. (b) Foreign currency impact in 2021 was primarily driven by U.S. Dollar appreciation against euro, Brazilian real, and Chinese renminbi. |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30 |
| Revenues |
| Segment profit (loss) |
| Profit margin |
| (Dollars in millions) |
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
| V pts |
| Power (GAAP) |
| $ | 8,181 |
|
| $ | 9,298 |
|
| (12 | )% |
| $ | (168 | ) |
| $ | 228 |
|
| U |
|
| (2.1 | )% |
| 2.5 | % | (4.6)pts |
| Less: acquisitions |
| 19 |
|
| 19 |
|
|
|
|
| (3 | ) |
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| 15 |
|
| 56 |
|
|
|
|
| 2 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (111 | ) |
| — |
|
|
|
|
| 22 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Power organic (Non-GAAP) |
| $ | 8,257 |
|
| $ | 9,223 |
|
| (10 | )% |
| $ | (189 | ) |
| $ | 230 |
|
| U |
|
| (2.3 | )% |
| 2.5 | % | (4.8)pts |
|
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| Renewable Energy (GAAP) |
| $ | 6,698 |
|
| $ | 6,165 |
|
| 9 | % |
| $ | (498 | ) |
| $ | (371 | ) |
| (34 | )% |
| (7.4 | )% |
| (6.0 | )% | (1.4)pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| 8 |
|
| 23 |
|
|
|
|
| — |
|
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (197 | ) |
| — |
|
|
|
|
| 23 |
|
| — |
|
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|
| Renewable Energy organic (Non-GAAP) |
| $ | 6,888 |
|
| $ | 6,142 |
|
| 12 | % |
| $ | (520 | ) |
| $ | (371 | ) |
| (40 | )% |
| (7.5 | )% |
| (6.0 | )% | (1.5)pts |
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| Aviation (GAAP) |
| $ | 11,276 |
|
| $ | 15,831 |
|
| (29 | )% |
| $ | 325 |
|
| $ | 3,046 |
|
| (89 | )% |
| 2.9 | % |
| 19.2 | % | (16.3)pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| 13 |
|
| 226 |
|
|
|
|
| (2 | ) |
| 15 |
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (7 | ) |
| — |
|
|
|
|
| 7 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| Aviation organic (Non-GAAP) |
| $ | 11,270 |
|
| $ | 15,604 |
|
| (28 | )% |
| $ | 321 |
|
| $ | 3,031 |
|
| (89 | )% |
| 2.8 | % |
| 19.4 | % | (16.6)pts |
|
|
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|
| Healthcare (GAAP) |
| $ | 8,620 |
|
| $ | 9,616 |
|
| (10 | )% |
| $ | 1,446 |
|
| $ | 1,740 |
|
| (17 | )% |
| 16.8 | % |
| 18.1 | % | (1.3)pts |
| Less: acquisitions |
| 21 |
|
| 21 |
|
|
|
|
| (11 | ) |
| (4 | ) |
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 831 |
|
|
|
|
| — |
|
| 329 |
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (125 | ) |
| — |
|
|
|
|
| (20 | ) |
| — |
|
|
|
|
|
|
|
|
|
|
|
| Healthcare organic (Non-GAAP) |
| $ | 8,723 |
|
| $ | 8,765 |
|
| — | % |
| $ | 1,477 |
|
| $ | 1,414 |
|
| 4 | % |
| 16.9 | % |
| 16.1 | % | 0.8pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less: BioPharma organic (Non-GAAP) |
| $ | 839 |
|
| 762 |
|
|
|
|
| $ | 380 |
|
| $ | 311 |
|
|
|
|
|
|
|
|
|
|
|
| Healthcare excluding BioPharma organic (Non-GAAP) |
| $ | 7,884 |
|
| $ | 8,003 |
|
| (1 | )% |
| $ | 1,098 |
|
| $ | 1,104 |
|
| (1 | )% |
| 13.9 | % |
| 13.8 | % | 0.1pts |
|
|
|
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|
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|
|
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|
|
|
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|
|
| We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. We also believe presenting organic revenues* and organic profit* separately for our industrial businesses provides management and investors with useful information about the trends of our industrial businesses and enables a more direct comparison to other non-financial companies. |
| | | | | | | | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL EQUIPMENT AND SERVICES | Three months ended June 30 | | Six months ended June 30 |
| ORGANIC REVENUES (NON-GAAP) | 2021 | 2020 | V% | | 2021 | 2020 | V% |
| GE Industrial equipment revenues (GAAP) | $ | 8,302 | | $ | 8,206 | | 1 | % | | $ | 16,273 | | $ | 17,303 | | (6) | % |
| Less: acquisitions | — | | — | | | | — | | — | | |
| Less: business dispositions | — | | 176 | | | | — | | 1,124 | | |
| Less: foreign currency effect | 380 | | — | | | | 568 | | — | | |
| GE Industrial equipment organic revenues (Non-GAAP) | $ | 7,923 | | $ | 8,030 | | (1) | % | | $ | 15,705 | | $ | 16,178 | | (3) | % |
| | | | | | | |
| GE Industrial services revenues (GAAP) | $ | 9,185 | | $ | 7,860 | | 17 | % | | $ | 17,543 | | $ | 17,608 | | — | % |
| | | | | | | |
| Less: acquisitions | — | | (24) | | | | 18 | | (46) | | |
| Less: business dispositions | — | | 65 | | | | — | | 212 | | |
| Less: foreign currency effect | 190 | | — | | | | 289 | | — | | |
| GE Industrial services organic revenues (Non-GAAP) | $ | 8,995 | | $ | 7,820 | | 15 | % | | $ | 17,236 | | $ | 17,441 | | (1) | % |
| | | | | | | |
| 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. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| BIOPHARMA ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN (NON-GAAP) |
| Three months ended June 30 |
| Revenues |
| Segment profit (loss) |
| Profit margin |
| (Dollars in millions) |
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
| V pts |
|
| BioPharma (GAAP) |
| $ | — |
|
| $ | 828 |
|
| U |
|
| $ | — |
|
| $ | 371 |
|
| U |
|
| — | % |
| 44.8 | % | (44.8 | )pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 828 |
|
|
|
|
| — |
|
| 371 |
|
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| BioPharma organic (Non-GAAP) |
| $ | — |
|
| $ | — |
|
| — | % |
| $ | — |
|
| $ | — |
|
| — | % |
| — | % |
| — | % | 0.0pts |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30 |
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
|
| V% |
|
| 2020 |
|
| 2019 |
| V pts |
|
| BioPharma (GAAP) |
| $ | 830 |
|
| $ | 1,593 |
|
| (48 | )% |
| $ | 382 |
|
| $ | 683 |
|
| (44 | )% |
| 46.0 | % |
| 42.9 | % | 3.1 | pts |
| Less: acquisitions |
| — |
|
| — |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| Less: business dispositions |
| — |
|
| 831 |
|
|
|
|
| — |
|
| 372 |
|
|
|
|
|
|
|
|
|
|
|
|
| Less: foreign currency effect |
| (9 | ) |
| — |
|
|
|
|
| 2 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| BioPharma organic (Non-GAAP) |
| $ | 839 |
|
| $ | 762 |
|
| 10 | % |
| $ | 380 |
|
| $ | 311 |
|
| 22 | % |
| 45.3 | % |
| 40.8 | % | 4.5 | pts |
*Non-GAAP Financial Measure
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
|
| | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL ORGANIC REVENUES (NON-GAAP) | Three months ended June 30 |
| Six months ended June 30 |
| (Dollars in millions) | 2020 |
| 2019 |
| V% |
|
| 2020 |
| 2019 |
| V% |
|
| GE Industrial revenues (GAAP) | $ | 16,066 |
| $ | 21,416 |
| (25.0 | )% |
| $ | 34,910 |
| $ | 41,740 |
| (16.4 | )% |
| Less: acquisitions | 26 |
| 19 |
|
|
|
| 68 |
| 39 |
|
|
|
| Less: business dispositions(a) | 8 |
| 919 |
|
|
|
| 37 |
| 1,300 |
|
|
|
| Less: foreign currency effect(b) | (280 | ) | — |
|
|
|
| (446 | ) | — |
|
|
|
| GE Industrial organic revenues (Non-GAAP) | $ | 16,312 |
| $ | 20,478 |
| (20.3 | )% |
| $ | 35,252 |
| $ | 40,401 |
| (12.7 | )% |
| Less: BioPharma organic revenue (Non-GAAP) | — |
| — |
|
|
|
| 839 |
| 762 |
|
|
|
| GE Industrial organic revenues excluding BioPharma organic revenues (Non-GAAP) | $ | 16,312 |
| $ | 20,478 |
| (20.3 | )% |
| $ | 34,413 |
| $ | 39,639 |
| (13.2 | )% |
|
|
|
|
|
|
|
|
(a) Dispositions impact in 2019 primarily related to our BioPharma business, with revenues of $831 million, Middle River and Hamble site dispositions, with revenues of $125 million and $101 million, respectively, and Current within our Corporate segment, with revenues of $155 million. (b) Foreign currency impact in 2019 is primarily driven by U.S. Dollar appreciation against Euro, Brazilian Real and Chinese Yen. |
| We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
|
| | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL EQUIPMENT AND SERVICES | Three months ended June 30 | | Six months ended June 30 |
ORGANIC REVENUES (NON-GAAP) (Dollars in millions) | 2020 |
| 2019 |
| V% |
| | 2020 |
| 2019 |
| V% |
|
| GE Industrial equipment revenues (GAAP) | $ | 8,299 |
| $ | 10,269 |
| (19.2 | )% | | $ | 17,476 |
| $ | 19,878 |
| (12.1 | )% |
| Less: acquisitions | 2 |
| 14 |
| | | 13 |
| 14 |
| |
| Less: business dispositions | 8 |
| 830 |
| | | 19 |
| 1,144 |
| |
| Less: foreign currency effect | (197 | ) | — |
| | | (309 | ) | — |
| |
| GE Industrial equipment organic revenues (Non-GAAP) | $ | 8,486 |
| $ | 9,425 |
| (10.0 | )% | | $ | 17,752 |
| $ | 18,720 |
| (5.2 | )% |
| | | | | | | | |
| GE Industrial services revenues (GAAP) | $ | 7,767 |
| $ | 11,147 |
| (30.3 | )% | | $ | 17,434 |
| $ | 21,863 |
| (20.3 | )% |
| Less: acquisitions | 24 |
| 4 |
| | | 55 |
| 25 |
| |
| Less: business dispositions | — |
| 90 |
| | | 18 |
| 156 |
| |
| Less: foreign currency effect | (83 | ) | — |
| | | (138 | ) | — |
| |
| GE Industrial services organic revenues (Non-GAAP) | $ | 7,826 |
| $ | 11,053 |
| (29.2 | )% | | $ | 17,500 |
| $ | 21,682 |
| (19.3 | )% |
| | | | | | | | |
| We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
20202021 2Q FORM 10-Q 2923
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
| | | | | | | | | | | | | | | | | | | | | | | |
| ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGIN | Three months ended June 30 | | Six months ended June 30 |
| (EXCLUDING CERTAIN ITEMS) (NON-GAAP) | 2021 | 2020 | V% | | 2021 | 2020 | V% |
| GE Industrial total revenues (GAAP) | $ | 17,487 | | $ | 16,066 | | 9 | % | | $ | 33,816 | | $ | 34,910 | | (3) | % |
| | | | | | | |
| Costs | | | | | | | |
| GE Industrial total costs and expenses (GAAP) | $ | 18,428 | | $ | 19,105 | | (4) | % | | $ | 35,001 | | $ | 38,238 | | (8) | % |
| Less: GE Industrial interest and other financial charges | 261 | | 333 | | | | 528 | | 703 | | |
| Less: GE Industrial debt extinguishment costs | 645 | | 63 | | | | 645 | | 63 | | |
| Less: non-operating benefit costs | 517 | | 596 | | | | 950 | | 1,212 | | |
| Less: restructuring & other(a) | 225 | | 289 | | | | 338 | | 432 | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Less: goodwill impairments | — | | 728 | | | | — | | 728 | | |
| Add: noncontrolling interests | (1) | | (147) | | | | 6 | | (110) | | |
| | | | | | | |
| Adjusted GE Industrial costs (Non-GAAP) | $ | 16,778 | | $ | 16,949 | | (1) | % | | $ | 32,545 | | $ | 34,989 | | (7) | % |
| | | | | | | |
| Other Income | | | | | | | |
| GE Industrial other income (GAAP) | $ | 717 | | $ | 2,116 | | (66) | % | | $ | 1,339 | | $ | 8,990 | | (85) | % |
| Less: gains (losses) on equity securities(a) | 497 | | 1,867 | | | | 844 | | (3,859) | | |
| Less: restructuring & other | — | | — | | | | 7 | | — | | |
| Less: gains (losses) on purchases and sales of business interests(a) | (5) | | 32 | | | | (2) | | 12,403 | | |
| Adjusted GE Industrial other income (Non-GAAP) | $ | 225 | | $ | 217 | | 4 | % | | $ | 491 | | $ | 445 | | 10 | % |
| | | | | | | |
| GE Industrial profit (loss) (GAAP) | $ | (224) | | $ | (922) | | 76 | % | | $ | 154 | | $ | 5,663 | | (97) | % |
| GE Industrial profit (loss) margin (GAAP) | (1.3) | % | (5.7) | % | 4.4pts | | 0.5 | % | 16.2 | % | (15.7)pts |
| | | | | | | |
| Adjusted GE Industrial profit (loss) (Non-GAAP) | $ | 934 | | $ | (666) | | F | | $ | 1,762 | | $ | 367 | | F |
| Adjusted GE Industrial profit (loss) margin (Non-GAAP) | 5.3 | % | (4.1) | % | 9.4pts | | 5.2 | % | 1.1 | % | 4.1pts |
| | | | | | | |
| (a) See the Corporate Items and Eliminations section for further information. |
| We believe that adjusting industrial profit to exclude the effects of items that are not closely associated with ongoing operations provides management and investors with a meaningful measure that increases the period-to-period comparability. Gains (losses) and restructuring and other items are impacted by the timing and magnitude of gains associated with dispositions, and the timing and magnitude of costs associated with restructuring and other activities. |
| | | | | | | | | | | | | | | | | | | | | | | |
| ADJUSTED GE INDUSTRIAL ORGANIC PROFIT | Three months ended June 30 | | Six months ended June 30 |
| (NON-GAAP) | 2021 | 2020 | V% | | 2021 | 2020 | V% |
| Adjusted GE Industrial profit (loss) (Non-GAAP) | $ | 934 | | $ | (666) | | F | | $ | 1,762 | | $ | 367 | | F |
| Less: acquisitions | (4) | | 8 | | | | 4 | | 17 | | |
| Less: business dispositions | — | | (10) | | | | — | | 356 | | |
| Less: foreign currency effect | (37) | | — | | | | 6 | | — | | |
| Adjusted GE Industrial organic profit (loss) (Non-GAAP) | $ | 976 | | $ | (664) | | F | | $ | 1,752 | | $ | (6) | | F |
| | | | | | | |
| Adjusted GE Industrial profit (loss) margin (Non-GAAP) | 5.3 | % | (4.1) | % | 9.4pts | | 5.2 | % | 1.1 | % | 4.1pts |
Adjusted GE Industrial organic profit (loss) margin
(Non-GAAP) | 5.8 | % | (4.2) | % | 10.0pts | | 5.3 | % | — | % | 5.3pts |
| | | | | | | |
| 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. |
|
| | | | | | | | | | | | | |
| ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGIN | Three months ended June 30 |
| Six months ended June 30 |
(EXCLUDING CERTAIN ITEMS) (NON-GAAP) (Dollars in millions) | 2020 |
| 2019 |
|
| 2020 |
| 2019 |
|
| GE total revenues (GAAP) | $ | 16,066 |
| $ | 21,416 |
|
| $ | 34,910 |
| $ | 41,740 |
|
|
|
|
|
|
|
| Costs |
|
|
|
|
|
| GE total costs and expenses (GAAP) | $ | 19,105 |
| $ | 21,972 |
|
| $ | 38,238 |
| $ | 42,073 |
|
| Less: GE interest and other financial charges | 396 |
| 382 |
|
| 766 |
| 902 |
|
| Less: non-operating benefit costs | 596 |
| 558 |
|
| 1,212 |
| 1,122 |
|
| Less: restructuring & other(a) | 433 |
| 345 |
|
| 641 |
| 611 |
|
| Less: goodwill impairments(b) | 728 |
| 744 |
|
| 728 |
| 744 |
|
| Add: noncontrolling interests | (147 | ) | (1 | ) |
| (110 | ) | 22 |
|
| Adjusted GE Industrial costs (Non-GAAP) | $ | 16,805 |
| $ | 19,943 |
|
| $ | 34,781 |
| $ | 38,715 |
|
|
|
|
|
|
|
| Other Income |
|
|
|
|
|
| GE other income (GAAP) | $ | 2,116 |
| $ | 172 |
|
| $ | 8,990 |
| $ | 1,024 |
|
| Less: unrealized gains (losses)(c) | 1,825 |
| (51 | ) |
| (3,968 | ) | (38 | ) |
| Less: restructuring & other | — |
| — |
|
| — |
| 9 |
|
| Less: gains (losses) and impairments for disposed or held for sale businesses(c) | 74 |
| (116 | ) |
| 12,513 |
| 250 |
|
| Adjusted GE other income (Non-GAAP) | $ | 217 |
| $ | 339 |
|
| 445 |
| 804 |
|
|
|
|
|
|
|
| GE Industrial profit (GAAP) | $ | (922 | ) | $ | (384 | ) |
| $ | 5,663 |
| $ | 692 |
|
| GE Industrial profit margin (GAAP) | (5.7 | )% | (1.8 | )% |
| 16.2 | % | 1.7 | % |
|
|
|
|
|
|
| Adjusted GE Industrial profit (Non-GAAP) | $ | (521 | ) | $ | 1,812 |
|
| $ | 575 |
| $ | 3,829 |
|
| Adjusted GE Industrial profit margin (Non-GAAP) | (3.2 | )% | 8.5 | % |
| 1.6 | % | 9.2 | % |
|
|
|
|
|
|
| (a) See the Corporate Items and Eliminations - Restructuring section for further information. |
|
|
|
| (b) Included non-cash pre-tax impairment charge of $877 million net of $149 million attributable to noncontrolling interest for our Additive reporting unit within Aviation segment for the three and six months ended June 30, 2020. See Note 8 for further information. |
| (c) See the Corporate Items and Eliminations section for further information. |
| We believe these measures are meaningful because they increase the comparability of period-to-period results. |
|
| | | | | | | | | | | | | | | | |
| ADJUSTED GE INDUSTRIAL ORGANIC PROFIT | Three months ended June 30 |
| Six months ended June 30 |
(NON-GAAP) (Dollars in millions) | 2020 |
| 2019 |
| V% |
| 2020 |
| 2019 |
| V% |
| Adjusted GE Industrial profit (Non-GAAP) | $ | (521 | ) | $ | 1,812 |
| U |
| $ | 575 |
| $ | 3,829 |
| (85 | )% |
| Less: acquisitions | (11 | ) | (2 | ) |
|
| (9 | ) | (6 | ) |
|
|
| Less: business dispositions | — |
| 356 |
|
|
| (1 | ) | 335 |
|
|
|
| Less: foreign currency effect | 20 |
| — |
|
|
| 30 |
| — |
|
|
|
| Adjusted GE Industrial organic profit (Non-GAAP) | $ | (529 | ) | $ | 1,459 |
| U |
| $ | 554 |
| $ | 3,499 |
| (84 | )% |
|
|
|
|
|
|
|
|
| Adjusted GE Industrial profit margin (Non-GAAP) | (3.2 | )% | 8.5 | % | (11.7)pts |
| 1.6 | % | 9.2 | % | (7.6)pts |
|
| Adjusted GE Industrial organic profit margin (Non-GAAP) | (3.2 | )% | 7.1 | % | (10.3)pts |
| 1.6 | % | 8.7 | % | (7.1)pts |
|
|
|
|
|
|
|
|
|
| We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
|
| | | | | | | | | | | | | | | |
| ADJUSTED EARNINGS (LOSS) (NON-GAAP) | Three months ended June 30 |
| Six months ended June 30 |
| (Dollars in millions) | 2020 |
| 2019 |
| V% |
| 2020 |
| 2019 |
| V% |
| Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(a) | $ | (2,186 | ) | $ | (302 | ) | U |
| $ | 4,135 |
| $ | 600 |
| F |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | (135 | ) | — |
|
|
| (135 | ) | — |
|
|
| Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (1,476 | ) | (89 | ) |
|
| (1,506 | ) | 46 |
|
|
| GE Industrial earnings (loss) (Non-GAAP) | (845 | ) | (213 | ) | U |
| 5,506 |
| 554 |
| F |
| Non-operating benefits costs (pre-tax) (GAAP) | (596 | ) | (558 | ) |
|
| (1,212 | ) | (1,122 | ) |
|
| Tax effect on non-operating benefit costs | 125 |
| 117 |
|
|
| 255 |
| 236 |
|
|
| Less: non-operating benefit costs (net of tax) | (471 | ) | (441 | ) |
|
| (957 | ) | (886 | ) |
|
| Gains (losses) and impairments for disposed or held for sale businesses (pre-tax)(b) | 74 |
| (116 | ) |
|
| 12,513 |
| 250 |
|
|
| Tax effect on gains (losses) and impairments for disposed or held for sale businesses | 30 |
| 2 |
|
|
| (1,235 | ) | 37 |
|
|
| Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | 104 |
| (114 | ) |
|
| 11,278 |
| 287 |
|
|
| Restructuring & other (pre-tax)(c) | (433 | ) | (345 | ) |
|
| (641 | ) | (602 | ) |
|
| Tax effect on restructuring & other | 91 |
| 71 |
|
|
| 134 |
| 124 |
|
|
| Less: restructuring & other (net of tax) | (342 | ) | (273 | ) |
|
| (507 | ) | (479 | ) |
|
| Goodwill impairments (pre-tax)(d) | (728 | ) | (744 | ) |
|
| (728 | ) | (744 | ) |
|
| Tax effect on goodwill impairments | (23 | ) | (55 | ) |
|
| (23 | ) | (55 | ) |
|
| Less: goodwill impairments (net of tax) | (751 | ) | (799 | ) |
|
| (751 | ) | (799 | ) |
|
| Unrealized gains (losses)(b) | 1,825 |
| (51 | ) |
|
| (3,968 | ) | (38 | ) |
|
| Tax on unrealized gains (losses) | (277 | ) | 11 |
|
|
| 819 |
| 8 |
|
|
| Less: unrealized gains (losses) | 1,548 |
| (40 | ) |
|
| (3,149 | ) | (30 | ) |
|
| Debt extinguishment costs | (63 | ) | — |
|
|
| (63 | ) | — |
|
|
| Tax effect on debt extinguishment costs | 13 |
| — |
|
|
| 13 |
| — |
|
|
| Less: debt extinguishment costs (net of tax) | (50 | ) | — |
|
|
| (50 | ) | — |
|
|
| BioPharma deal expense (pre-tax) | — |
| — |
|
|
| — |
| — |
|
|
| Tax on BioPharma deal expense | — |
| — |
|
|
| — |
| (14 | ) |
|
| Less: BioPharma deal expense (net of tax) | — |
| — |
|
|
| — |
| (14 | ) |
|
| Accretion of RNCI | (135 | ) | — |
|
|
| (135 | ) | — |
|
|
| Tax effect on accretion of RNCI | — |
| — |
|
|
| — |
| — |
|
|
| Less: Accretion of RNCI (net of tax) | (135 | ) | — |
|
|
| (135 | ) | — |
|
|
| Less: GE Industrial U.S. tax reform enactment adjustment | — |
| — |
|
|
| — |
| (101 | ) |
|
| Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | (748 | ) | $ | 1,454 |
| U |
| $ | (222 | ) | $ | 2,577 |
| U |
|
|
|
|
|
|
|
|
|
|
| GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (1,476 | ) | (89 | ) | U |
| (1,506 | ) | 46 |
| U |
| Goodwill impairments (pre-tax)(e) | (839 | ) | — |
|
|
| (839 | ) | — |
|
|
| Tax effect on goodwill impairments | 3 |
| — |
|
|
| 3 |
| — |
|
|
| Less: goodwill impairments (net of tax) | (836 | ) | — |
|
|
| (836 | ) | — |
|
|
| Debt extinguishment costs | (143 | ) | — |
|
|
| (143 | ) | — |
|
|
| Tax effect on debt extinguishment costs | 24 |
| — |
|
|
| 24 |
| — |
|
|
| Less: debt extinguishment costs (net of tax) | (119 | ) | — |
|
|
| (119 | ) | — |
|
|
| Less: GE Capital U.S. tax reform enactment adjustment | — |
| — |
|
|
| — |
| 99 |
|
|
| Less: GE Capital tax benefit related to BioPharma sale | — |
| — |
|
|
| 88 |
| — |
|
|
| Adjusted GE Capital earnings (loss) (Non-GAAP) | $ | (522 | ) | $ | (89 | ) | U |
| $ | (640 | ) | $ | (53 | ) | U |
|
|
|
|
|
|
|
|
|
|
| Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | (748 | ) | $ | 1,454 |
| U |
| $ | (222 | ) | $ | 2,577 |
| U |
| Add: Adjusted GE Capital earnings (loss) (Non-GAAP) | (522 | ) | (89 | ) | U |
| (640 | ) | (53 | ) | U |
| Adjusted earnings (loss) (Non-GAAP) | $ | (1,270 | ) | $ | 1,365 |
| U |
| $ | (862 | ) | $ | 2,524 |
| U |
|
|
|
|
|
|
|
|
|
|
| (a) Earnings for per-share calculation includes allocation of participating securities pursuant to the two-class method. See Note 16 for further information. |
| (b) See the Corporate Items and Eliminations section for further information. |
|
|
|
|
| (c) See the Corporate Items and Eliminations - Restructuring section for further information. |
|
|
|
|
| (d) Included non-cash pre-tax impairment charge of $877 million net of $149 million attributable to noncontrolling interest for our Additive reporting unit within Aviation segment for the three and six months ended June 30, 2020. See Note 8 for further information. |
| (e) See Note 8 for further information. |
20202021 2Q FORM 10-Q 3124
| | | | | | | | | | | | | | | | | | | | | | | |
| ADJUSTED EARNINGS (LOSS) (NON-GAAP) | Three months ended June 30 | | Six months ended June 30 |
| 2021 | 2020 | V% | | 2021 | 2020 | V% |
| Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(a) | $ | (624) | | $ | (1,186) | | 47 | % | | $ | (605) | | $ | 4,977 | | U |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | (2) | | (135) | | | | — | | (135) | | |
| Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (573) | | (476) | | | | (745) | | (663) | | |
| GE Industrial earnings (loss) (Non-GAAP) | $ | (53) | | $ | (845) | | 94 | % | | $ | 141 | | $ | 5,504 | | (97) | % |
| Non-operating benefits costs (pre-tax) (GAAP) | (517) | | (596) | | | | (950) | | (1,212) | | |
| Tax effect on non-operating benefit costs | 109 | | 125 | | | | 199 | | 255 | | |
| Less: non-operating benefit costs (net of tax) | (408) | | (471) | | | | (750) | | (957) | | |
| Gains (losses) on purchases and sales of business interests (pre-tax)(b) | (5) | | 32 | | | | (2) | | 12,403 | | |
| Tax effect on gains (losses) on purchases and sales of business interests | 1 | | 33 | | | | 1 | | (1,227) | | |
| Less: gains (losses) on purchases and sales of business interests (net of tax) | (4) | | 65 | | | | (2) | | 11,176 | | |
| Restructuring & other (pre-tax)(b) | (225) | | (289) | | | | (331) | | (432) | | |
| Tax effect on restructuring & other | 7 | | 61 | | | | 29 | | 90 | | |
| Less: restructuring & other (net of tax) | (218) | | (228) | | | | (302) | | (342) | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Goodwill impairments (pre-tax)(b) | — | | (728) | | | | — | | (728) | | |
| Tax effect on goodwill impairments | — | | (23) | | | | — | | (23) | | |
| Less: goodwill impairments (net of tax) | — | | (751) | | | | — | | (751) | | |
| Gains (losses) on equity securities (pre-tax)(b) | 497 | | 1,867 | | | | 844 | | (3,859) | | |
| Tax effect on gains (losses) on equity securities (losses)(c) | 195 | | (280) | | | | 77 | | 811 | | |
| Less: gains (losses) on equity securities (net of tax) | 692 | | 1,587 | | | | 921 | | (3,048) | | |
| Debt extinguishment costs (pre-tax) | (645) | | (63) | | | | (645) | | (63) | | |
| Tax effect on debt extinguishment costs | 136 | | 13 | | | | 136 | | 13 | | |
| Less: debt extinguishment costs (net of tax) | (510) | | (50) | | | | (510) | | (50) | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Accretion of RNCI (pre-tax) | (2) | | (135) | | | | — | | (135) | | |
| Tax effect on accretion of RNCI | — | | — | | | | — | | — | | |
| Less: Accretion of RNCI (net of tax) | (2) | | (135) | | | | — | | (135) | | |
| Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 398 | | $ | (862) | | F | | $ | 784 | | $ | (389) | | F |
| | | | | | | |
| GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | $ | (573) | | $ | (476) | | (20) | % | | $ | (745) | | $ | (663) | | (12) | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Debt extinguishment costs (pre-tax) | (771) | | (143) | | | | (771) | | (143) | | |
| Tax effect on debt extinguishment costs | 162 | | 24 | | | | 162 | | 24 | | |
| Less: debt extinguishment costs (net of tax) | (609) | | (119) | | | | (609) | | (119) | | |
| Less: GE Capital U.S. tax reform enactment adjustment | 8 | | — | | | | 8 | | — | | |
| Less: GE Capital tax benefit related to BioPharma sale | — | | — | | | | — | | 88 | | |
| Less: GE Capital tax loss related to GECAS sale | — | | — | | | | (44) | | — | | |
| Adjusted GE Capital earnings (loss) (Non-GAAP) | $ | 28 | | $ | (357) | | F | | $ | (101) | | $ | (632) | | 84 | % |
| | | | | | | |
| Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 398 | | $ | (862) | | F | | $ | 784 | | $ | (389) | | F |
| Add: Adjusted GE Capital earnings (loss) (Non-GAAP) | 28 | | (357) | | F | | (101) | | (632) | | 84 | % |
| Adjusted earnings (loss) (Non-GAAP) | $ | 425 | | $ | (1,219) | | F | | $ | 683 | | $ | (1,021) | | F |
| | | | | | | |
| (a) See Note 18 for further information. |
| (b) See the Corporate Items and Eliminations section for further information. | | | | |
| (c) Includes tax benefits available to offset the tax on gains in equity securities. |
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
| | | ADJUSTED EARNINGS (LOSS) PER SHARE (EPS) | Three months ended June 30 |
| Six months ended June 30 | ADJUSTED EARNINGS (LOSS) PER SHARE (EPS) | Three months ended June 30 | | Six months ended June 30 |
| (NON-GAAP) | 2020 |
| 2019 |
| V% |
| 2020 |
| 2019 |
| V% | |
(NON-GAAP) (In dollars) | | (NON-GAAP) (In dollars) | 2021 | 2020 | V% | | 2021 | 2020 | V% |
| Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | (0.25 | ) | $ | (0.03 | ) | U |
| $ | 0.47 |
| $ | 0.07 |
| F | Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | (0.07) | | $ | (0.14) | | 50 | % | | $ | (0.07) | | $ | 0.57 | | U |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | (0.02 | ) | — |
|
|
| (0.02 | ) | — |
|
| Add: Accretion of redeemable noncontrolling interests (RNCI) | — | | (0.02) | | | — | | (0.02) | | |
| Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | (0.17 | ) | (0.01 | ) |
|
| (0.17 | ) | 0.01 |
|
| Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | (0.07) | | (0.05) | | | (0.08) | | (0.08) | | |
| GE Industrial EPS (Non-GAAP) | (0.10 | ) | (0.02 | ) | U |
| $ | 0.63 |
| $ | 0.06 |
| F | GE Industrial EPS (Non-GAAP) | $ | (0.01) | | $ | (0.10) | | 90 | % | | $ | 0.02 | | $ | 0.63 | | (97) | % |
| Non-operating benefits costs (pre-tax) (GAAP) | (0.07 | ) | (0.06 | ) |
|
| (0.14 | ) | (0.13 | ) |
| Non-operating benefits costs (pre-tax) (GAAP) | (0.06) | | (0.07) | | | (0.11) | | (0.14) | | |
| Tax effect on non-operating benefit costs | 0.01 |
| 0.01 |
|
|
| 0.03 |
| 0.03 |
|
| Tax effect on non-operating benefit costs | 0.01 | | 0.01 | | | 0.02 | | 0.03 | | |
| Less: non-operating benefit costs (net of tax) | (0.05 | ) | (0.05 | ) |
|
| (0.11 | ) | (0.10 | ) |
| Less: non-operating benefit costs (net of tax) | (0.05) | | (0.05) | | | (0.09) | | (0.11) | | |
| Gains (losses) and impairments for disposed or held for sale businesses (pre-tax) | 0.01 |
| (0.01 | ) |
|
| 1.43 |
| 0.03 |
|
| |
| Tax effect on gains (losses) and impairments for disposed or held for sale businesses | — |
| — |
|
|
| (0.14 | ) | — |
|
| |
| Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | 0.01 |
| (0.01 | ) |
|
| 1.29 |
| 0.03 |
|
| |
| Gains (losses) on purchases and sales of business interests (pre-tax) | | Gains (losses) on purchases and sales of business interests (pre-tax) | — | | — | | | — | | 1.42 | | |
| Tax effect on gains (losses) on purchases and sales of business interests | | Tax effect on gains (losses) on purchases and sales of business interests | — | | — | | | — | | (0.14) | | |
| Less: gains (losses) on purchases and sales of business interests (net of tax) | | Less: gains (losses) on purchases and sales of business interests (net of tax) | — | | 0.01 | | | — | | 1.28 | | |
| Restructuring & other (pre-tax) | (0.05 | ) | (0.04 | ) |
|
| (0.07 | ) | (0.07 | ) |
| Restructuring & other (pre-tax) | (0.03) | | (0.03) | | | (0.04) | | (0.05) | | |
| Tax effect on restructuring & other | 0.01 |
| 0.01 |
|
|
| 0.02 |
| 0.01 |
|
| Tax effect on restructuring & other | — | | 0.01 | | | — | | 0.01 | | |
| Less: restructuring & other (net of tax) | (0.04 | ) | (0.03 | ) |
|
| (0.06 | ) | (0.05 | ) |
| Less: restructuring & other (net of tax) | (0.02) | | (0.03) | | | (0.03) | | (0.04) | | |
| | Goodwill impairments (pre-tax) | (0.08 | ) | (0.09 | ) |
|
| (0.08 | ) | (0.09 | ) |
| Goodwill impairments (pre-tax) | — | | (0.08) | | | — | | (0.08) | | |
| Tax effect on goodwill impairments | — |
| (0.01 | ) |
|
| — |
| (0.01 | ) |
| Tax effect on goodwill impairments | — | | — | | | — | | — | | |
| Less: goodwill impairments (net of tax) | (0.09 | ) | (0.09 | ) |
|
| (0.09 | ) | (0.09 | ) |
| Less: goodwill impairments (net of tax) | — | | (0.09) | | | — | | (0.09) | | |
| Unrealized gains (losses) | 0.21 |
| (0.01 | ) |
|
| (0.45 | ) | — |
|
| |
| Tax on unrealized gains (losses) | (0.03 | ) | — |
|
|
| 0.09 |
| — |
|
| |
| Less: unrealized gains (losses) | 0.18 |
| — |
|
|
| (0.36 | ) | — |
|
| |
| Debt extinguishment costs | (0.01 | ) | — |
|
|
| (0.01 | ) | — |
|
| |
| Gains (losses) on equity securities (pre-tax) | | Gains (losses) on equity securities (pre-tax) | 0.06 | | 0.21 | | | 0.10 | | (0.44) | | |
| Tax effect on gains (losses) on equity securities | | Tax effect on gains (losses) on equity securities | 0.02 | | (0.03) | | | 0.01 | | 0.09 | | |
| Less: gains (losses) on equity securities (net of tax) | | Less: gains (losses) on equity securities (net of tax) | 0.08 | | 0.18 | | | 0.10 | | (0.35) | | |
| Debt extinguishment costs (pre-tax) | | Debt extinguishment costs (pre-tax) | (0.07) | | (0.01) | | | (0.07) | | (0.01) | | |
| Tax effect on debt extinguishment costs | — |
| — |
|
|
| — |
| — |
|
| Tax effect on debt extinguishment costs | 0.02 | | — | | | 0.02 | | — | | |
| Less: debt extinguishment costs (net of tax) | (0.01 | ) | — |
|
|
| (0.01 | ) | — |
|
| Less: debt extinguishment costs (net of tax) | (0.06) | | (0.01) | | | (0.06) | | (0.01) | | |
| BioPharma deal expense (pre-tax) | — |
| — |
| | — |
| — |
| | |
| Tax on BioPharma deal expense | — |
| — |
| | — |
| — |
| | |
| Less: BioPharma deal expense (net of tax) | — |
| — |
| | — |
| — |
| | |
| Accretion of RNCI | (0.02 | ) | — |
|
|
| (0.02 | ) | — |
|
| |
| | Accretion of RNCI (pre-tax) | | Accretion of RNCI (pre-tax) | — | | (0.02) | | | — | | (0.02) | | |
| Tax effect on accretion of RNCI | — |
| — |
|
|
| — |
| — |
|
| Tax effect on accretion of RNCI | — | | — | | | — | | — | | |
| Less: Accretion of RNCI (net of tax) | (0.02 | ) | — |
|
|
| (0.02 | ) | — |
|
| Less: Accretion of RNCI (net of tax) | — | | (0.02) | | | — | | (0.02) | | |
| Less: GE Industrial U.S. tax reform enactment adjustment | — |
| — |
|
|
| — |
| (0.01 | ) |
| |
| Adjusted GE Industrial EPS (Non-GAAP) | $ | (0.09 | ) | $ | 0.17 |
| U |
| $ | (0.03 | ) | $ | 0.30 |
| U | Adjusted GE Industrial EPS (Non-GAAP) | 0.05 | | (0.10) | | F | | 0.09 | | (0.04) | | F |
|
|
|
|
|
|
|
|
| |
| GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | (0.17 | ) | (0.01 | ) | U |
| (0.17 | ) | 0.01 |
| U | GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | (0.07) | | $ | (0.05) | | (40) | % | | $ | (0.08) | | $ | (0.08) | | — | % |
| Goodwill impairments (pre-tax) | (0.10 | ) | — |
|
|
| (0.10 | ) | — |
|
| |
| Tax effect on goodwill impairments | — |
| — |
|
|
| — |
| — |
|
| |
| Less: goodwill impairments (net of tax) | (0.10 | ) | — |
|
|
| (0.10 | ) | — |
|
| |
| Debt extinguishment costs | (0.02 | ) | — |
|
|
| (0.02 | ) | — |
|
| |
| | Debt extinguishment costs (pre-tax) | | Debt extinguishment costs (pre-tax) | (0.09) | | (0.02) | | | (0.09) | | (0.02) | | |
| Tax effect on debt extinguishment costs | — |
| — |
|
|
| — |
| — |
|
| Tax effect on debt extinguishment costs | 0.02 | | — | | | 0.02 | | — | | |
| Less: debt extinguishment costs (net of tax) | (0.01 | ) | — |
|
|
| (0.01 | ) | — |
|
| Less: debt extinguishment costs (net of tax) | (0.07) | | (0.01) | | | (0.07) | | (0.01) | | |
| Less: GE Capital U.S. tax reform enactment adjustment | — |
| — |
|
|
| — |
| 0.01 |
|
| Less: GE Capital U.S. tax reform enactment adjustment | — | | — | | | — | | — | | |
| Less: GE Capital tax benefit related to BioPharma sale | — |
| — |
|
|
| 0.01 |
|
|
| Less: GE Capital tax benefit related to BioPharma sale | — | | — | | | — | | 0.01 | | |
| Less: GE Capital tax loss related to GECAS sale | | Less: GE Capital tax loss related to GECAS sale | — | | — | | | — | | — | | |
| Adjusted GE Capital EPS (Non-GAAP) | $ | (0.06 | ) | $ | (0.01 | ) | U |
| $ | (0.07 | ) | $ | (0.01 | ) | U | Adjusted GE Capital EPS (Non-GAAP) | $ | — | | $ | (0.04) | | F | | $ | (0.01) | | $ | (0.07) | | 86 | % |
|
|
|
|
|
|
|
|
| |
| Adjusted GE Industrial EPS (Non-GAAP) | $ | (0.09 | ) | $ | 0.17 |
| U |
| $ | (0.03 | ) | $ | 0.30 |
| U | Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.05 | | $ | (0.10) | | F | | $ | 0.09 | | $ | (0.04) | | F |
| Add: Adjusted GE Capital EPS (Non-GAAP) | (0.06 | ) | (0.01 | ) | U |
| (0.07 | ) | (0.01 | ) | U | Add: Adjusted GE Capital EPS (Non-GAAP) | — | | (0.04) | | F | | (0.01) | | (0.07) | | 86 | % |
| Adjusted EPS (Non-GAAP) | $ | (0.15 | ) | $ | 0.16 |
| U |
| $ | (0.10 | ) | $ | 0.29 |
| U | Adjusted EPS (Non-GAAP) | $ | 0.05 | | $ | (0.14) | | F | | $ | 0.08 | | $ | (0.12) | | F |
|
|
|
|
|
|
|
|
| |
| Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total. | Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total. | Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total. |
| The service cost for our pension and other benefit plans are included in adjusted earnings*, which represents the ongoing cost of providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance. We believe the retained costs in Adjusted earnings* and Adjusted EPS* provides management and investors a useful measure to evaluate the performance of the total company and increases period-to-period comparability. We also use Adjusted EPS* as a performance metric at the company level for our annual executive incentive plan for 2020. We believe presenting Adjusted Industrial earnings* and Adjusted Industrial EPS* separately for our financial services businesses also provides management and investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company. | |
| The service cost of our pension and other benefit plans are included in adjusted earnings (loss)*, which represents the ongoing cost of providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance, and we manage these separately from the operational performance of our businesses. Gains (losses) and restructuring and other items are impacted by the timing and magnitude of gains associated with dispositions, and the timing and magnitude of costs associated with restructuring and other activities. We believe that the retained costs in Adjusted earnings (loss)* provides management and investors a useful measure to evaluate the performance of the total company, and increases period-to-period comparability. We believe that presenting Adjusted Industrial earnings (loss)* separately for our financial services businesses also provides management and investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company. | | The service cost of our pension and other benefit plans are included in adjusted earnings (loss)*, which represents the ongoing cost of providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance, and we manage these separately from the operational performance of our businesses. Gains (losses) and restructuring and other items are impacted by the timing and magnitude of gains associated with dispositions, and the timing and magnitude of costs associated with restructuring and other activities. We believe that the retained costs in Adjusted earnings (loss)* provides management and investors a useful measure to evaluate the performance of the total company, and increases period-to-period comparability. We believe that presenting Adjusted Industrial earnings (loss)* separately for our financial services businesses also provides management and investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company. |
*Non-GAAP Financial Measure
|
| | |
MD&A | NON-GAAP FINANCIAL MEASURES |
|
| | | | | | |
| GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP) | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
|
| GE CFOA (GAAP) | $ | (3,266 | ) | $ | (1,068 | ) |
| Add: gross additions to property, plant and equipment | (1,002 | ) | (1,116 | ) |
| Add: gross additions to internal-use software | (95 | ) | (137 | ) |
| Less: taxes related to business sales | (88 | ) | (108 | ) |
| GE Industrial free cash flows (Non-GAAP) | $ | (4,275 | ) | $ | (2,212 | ) |
|
|
|
|
|
| We believe investors may find it useful to compare GE's Industrial free cash flows* performance without the effects of cash used for taxes related to business sales. We believe this measure will better allow management and investors to evaluate the capacity of our industrial operations to generate free cash flows. |
|
| | | | | | |
GE INDUSTRIAL NET DEBT (NON-GAAP) (In millions) | June 30, 2020 |
| December 31, 2019 |
|
| Total GE short- and long-term borrowings (GAAP) | $ | 45,814 |
| $ | 52,059 |
|
| Less: GE Capital short- and long-term debt assumed by GE | 25,398 |
| 31,368 |
|
| Add: intercompany loans from GE Capital | 4,726 |
| 12,226 |
|
| Total adjusted GE borrowings | $ | 25,142 |
| $ | 32,917 |
|
| Total pension and principal retiree benefit plan liabilities (pre-tax)(a) | 27,773 |
| 27,773 |
|
| Less: taxes at 21% | 5,832 |
| 5,832 |
|
| Total pension and principal retiree benefit plan liabilities (net of tax) | $ | 21,941 |
| $ | 21,941 |
|
| GE operating lease liabilities | 3,117 |
| 3,369 |
|
| GE preferred stock | 5,826 |
| 5,738 |
|
| Less: 50% of GE preferred stock | 2,913 |
| 2,869 |
|
| 50% of preferred stock | $ | 2,913 |
| $ | 2,869 |
|
| Deduction for total GE cash, cash equivalents and restricted cash | (25,428 | ) | (17,613 | ) |
| Less: 25% of GE cash, cash equivalents and restricted cash | (6,357 | ) | (4,403 | ) |
| Deduction for 75% of GE cash, cash equivalents and restricted cash | $ | (19,071 | ) | $ | (13,210 | ) |
| Total GE Industrial net debt (Non-GAAP) | $ | 34,041 |
| $ | 47,886 |
|
| | | |
| (a) Represents the total net deficit status of principal pension plans, other pension plans and retiree benefit plans at December 31, 2019. The funded status of our benefit plans is updated annually in the fourth quarter. |
| |
| In this document we use GE Industrial net debt*, which is calculated based on rating agency methodologies. We are including the calculation of GE industrial net debt* to provide investors more clarity regarding how the credit rating agencies measure GE Industrial leverage. |
*Non-GAAP Financial Measure
20202021 2Q FORM 10-Q 3326
| | | | | | | | |
| GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP) | Six months ended June 30 |
| 2021 | 2020 |
| GE Industrial CFOA (GAAP) | $ | (2,522) | | $ | (3,266) | |
| Add: gross additions to property, plant and equipment | (599) | | (1,002) | |
| Add: gross additions to internal-use software | (47) | | (95) | |
| Less: CFOA impact from factoring programs discontinued as of April 1, 2021 | (2,706) | | — | |
| | |
| | |
| Less: taxes related to business sales | (6) | | (88) | |
| GE Industrial free cash flows (Non-GAAP) | $ | (457) | | $ | (4,275) | |
| | |
| We believe investors may find it useful to compare GE's Industrial free cash flows* performance without the effects of cash used for taxes related to business sales and the factoring program discontinuation. The CFOA impact from factoring programs discontinued as of April 1, 2021 of $(2,706) million represents the cash that GE Industrial would have otherwise collected in the three months ended June 30, 2021 had customer receivables not been previously sold to GE Capital or third parties in those discontinued programs. The CFOA impact associated with this activity in factoring programs that have now been discontinued was $(3,470) million and $(1,635) million in the six months ended June 30, 2021 and 2020, respectively, an increase of $(1,836) million. The CFOA impact for the three months ended June 30, 2020 was $(472) million. We believe this measure will better allow management and investors to evaluate the capacity of our industrial operations to generate free cash flows. |
| | | | | | | | |
| GE INDUSTRIAL NET DEBT (NON-GAAP) | June 30, 2021 | December 31, 2020 |
| Total GE Industrial short- and long-term borrowings (GAAP) | $ | 33,804 | | $ | 42,736 | |
| Less: GE Capital short- and long-term debt assumed by GE Industrial | 18,173 | | 22,390 | |
| Add: intercompany loans from GE Capital | 3,177 | | 3,177 | |
| Total adjusted GE Industrial borrowings | $ | 18,808 | | $ | 23,523 | |
| Pension and principal retiree benefit plan liabilities (pre-tax)(a) | 25,492 | | 25,492 | |
| Less: taxes at 21% | 5,353 | | 5,353 | |
| Pension and principal retiree benefit plan liabilities (net of tax) | $ | 20,139 | | $ | 20,139 | |
| GE Industrial operating lease liabilities | 2,993 | | 3,133 | |
| GE Industrial preferred stock | 5,931 | | 5,918 | |
| Less: 50% of GE Industrial preferred stock | 2,966 | | 2,959 | |
| 50% of preferred stock | $ | 2,966 | | $ | 2,959 | |
| Deduction for total GE Industrial cash, cash equivalents and restricted cash | (15,591) | | (23,209) | |
| Less: 25% of GE Industrial cash, cash equivalents and restricted cash | (3,898) | | (5,802) | |
| Deduction for 75% of GE Industrial cash, cash equivalents and restricted cash | $ | (11,693) | | $ | (17,407) | |
| Total GE Industrial net debt (Non-GAAP) | $ | 33,213 | | $ | 32,347 | |
| (a) Represents the sum of the net deficit of principal pension, other pension, and principal retiree benefit plans at December 31, 2020. The funded status of our benefit plans is updated annually in the fourth quarter. |
| In this document we use GE Industrial net debt*, which is calculated based on rating agency methodologies. We are including the calculation of GE Industrial net debt* to provide investors more clarity regarding how the credit rating agencies measure GE Industrial leverage. |
CONTROLS AND PROCEDURES. Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that (i) our disclosure controls and procedures were effective as of June 30, 2020,2021, and (ii) there was no change in internal control over financial reporting occurred during the quarter ended June 30, 2020,2021, that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.
OTHER FINANCIAL DATA. During the three months ended June 30, 2020, 2021, GE repurchased 5002,939 thousand shares of common stock at an average price of $30.61,$8.61, in connection with the settlement of a hedging instrumentinstruments related to the Company’s deferred incentive compensation program.
RISK FACTORS.
*Non-GAAP Financial Measure
| | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) | Three months ended June 30 |
| (UNAUDITED) | Consolidated |
| (In millions; per-share amounts in dollars) | 2021 | 2020 |
| Sales of goods | $ | 11,105 | | $ | 10,720 | |
| Sales of services | 6,365 | | 5,329 | |
| GE Capital revenues from services | 810 | | 756 | |
| Total revenues (Note 9) | 18,279 | | 16,805 | |
| | |
| Cost of goods sold | 9,086 | | 9,787 | |
| Cost of services sold | 4,532 | | 3,846 | |
| Selling, general and administrative expenses | 2,866 | | 3,068 | |
| Research and development | 604 | | 611 | |
| Interest and other financial charges | 488 | | 561 | |
| Debt extinguishment costs | 1,416 | | 205 | |
| Insurance losses and annuity benefits | 483 | | 564 | |
| Goodwill impairments (Note 8) | 0 | | 877 | |
| Non-operating benefit costs | 517 | | 598 | |
| Other costs and expenses | 30 | | 65 | |
| Total costs and expenses | 20,023 | | 20,181 | |
| | |
| Other income (Note 23) | 706 | | 2,078 | |
| | |
| Earnings (loss) from continuing operations before income taxes | (1,037) | | (1,298) | |
| Benefit (provision) for income taxes | 466 | | 160 | |
| Earnings (loss) from continuing operations | (571) | | (1,138) | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (564) | | (993) | |
| Net earnings (loss) | (1,135) | | (2,132) | |
| Less net earnings (loss) attributable to noncontrolling interests | (3) | | (145) | |
| Net earnings (loss) attributable to the Company | (1,131) | | (1,987) | |
| Preferred stock dividends | (57) | | (192) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (1,188) | | $ | (2,179) | |
| | |
| Amounts attributable to GE common shareholders | | |
| Earnings (loss) from continuing operations | $ | (571) | | $ | (1,138) | |
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| continuing operations | (3) | | (145) | |
| Earnings (loss) from continuing operations attributable to the Company | (568) | | (994) | |
| Preferred stock dividends | (57) | | (192) | |
| Earnings (loss) from continuing operations attributable | | |
| to GE common shareholders | (624) | | (1,185) | |
| Earnings (loss) from discontinued operations, net of taxes | (564) | | (993) | |
| Less net earnings (loss) attributable to | | |
| noncontrolling interests, discontinued operations | 0 | | 0 | |
| Net earnings (loss) attributable to GE common shareholders | $ | (1,188) | | $ | (2,179) | |
| | |
| Earnings (loss) per share from continuing operations (Note 18) | | |
| Diluted earnings (loss) per share | $ | (0.07) | | $ | (0.15) | |
| Basic earnings (loss) per share | $ | (0.07) | | $ | (0.15) | |
| | |
| Net earnings (loss) per share (Note 18) | | |
| Diluted earnings (loss) per share | $ | (0.14) | | $ | (0.26) | |
| Basic earnings (loss) per share | $ | (0.14) | | $ | (0.26) | |
2021 2Q FORM 10-Q The risk factor set forth below updates the risk factors in our Annual Report on Form 10-K for the year ended28
| | | | | | | | | | | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Three months ended June 30 |
| (UNAUDITED) | GE Industrial | | GE Capital |
| (In millions) | 2021 | 2020 | | 2021 | 2020 |
| Sales of goods | $ | 11,109 | | $ | 10,728 | | | $ | 0 | | $ | 0 | |
| Sales of services | 6,378 | | 5,337 | | | 0 | | 0 | |
| GE Capital revenues from services | 0 | | 0 | | | 858 | | 861 | |
| Total revenues | 17,487 | | 16,066 | | | 858 | | 861 | |
| | | | | |
| Cost of goods sold | 9,091 | | 9,796 | | | 0 | | 0 | |
| Cost of services sold | 4,540 | | 3,849 | | | 5 | | 5 | |
| Selling, general and administrative expenses | 2,770 | | 2,979 | | | 106 | | 114 | |
| Research and development | 604 | | 611 | | | 0 | | 0 | |
| Interest and other financial charges | 261 | | 333 | | | 250 | | 283 | |
| Debt extinguishment costs | 645 | | 63 | | | 771 | | 143 | |
| Insurance losses and annuity benefits | 0 | | 0 | | | 494 | | 577 | |
| Goodwill impairments (Note 8) | 0 | | 877 | | | 0 | | 0 | |
| Non-operating benefit costs | 517 | | 596 | | | 0 | | 2 | |
| Other costs and expenses | 0 | | 0 | | | 46 | | 113 | |
| Total costs and expenses | 18,428 | | 19,105 | | | 1,672 | | 1,237 | |
| | | | | |
| Other income (Note 23) | 717 | | 2,116 | | | 0 | | 0 | |
| | | | | |
| Earnings (loss) from continuing operations before income taxes | (224) | | (922) | | | (814) | | (376) | |
| Benefit (provision) for income taxes | 228 | | 66 | | | 238 | | 94 | |
| Earnings (loss) from continuing operations | 4 | | (856) | | | (575) | | (282) | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | 4 | | (10) | | | (568) | | (983) | |
| Net earnings (loss) | 8 | | (866) | | | (1,143) | | (1,266) | |
| Less net earnings (loss) attributable to noncontrolling interests | (1) | | (147) | | | (2) | | 2 | |
| Net earnings (loss) attributable to the Company | 9 | | (720) | | | (1,141) | | (1,268) | |
| Preferred stock dividends | (57) | | 0 | | | 0 | | (192) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (47) | | $ | (720) | | | $ | (1,141) | | $ | (1,459) | |
| | | | | |
| Amounts attributable to GE common shareholders: | | | | | |
| Earnings (loss) from continuing operations | $ | 4 | | $ | (856) | | | $ | (575) | | $ | (282) | |
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| continuing operations | (1) | | (147) | | | (2) | | 2 | |
| Earnings (loss) from continuing operations attributable to the Company | 5 | | (710) | | | (573) | | (284) | |
| Preferred stock dividends | (57) | | 0 | | | 0 | | (192) | |
| Earnings (loss) from continuing operations attributable | | | | | |
| to GE common shareholders | (51) | | (710) | | | (573) | | (476) | |
| Earnings (loss) from discontinued operations, net of taxes | 4 | | (10) | | | (568) | | (983) | |
| Less net earnings (loss) attributable to | | | | | |
| noncontrolling interests, discontinued operations | 0 | | 0 | | | 0 | | 0 | |
| Net earnings (loss) attributable to GE common shareholders | $ | (47) | | $ | (720) | | | $ | (1,141) | | $ | (1,459) | |
| | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) | Six months ended June 30 |
| (UNAUDITED) | Consolidated |
| (In millions; per-share amounts in dollars) | 2021 | 2020 |
| Sales of goods | $ | 21,453 | | $ | 23,059 | |
| Sales of services | 12,332 | | 11,780 | |
| GE Capital revenues from services | 1,612 | | 1,455 | |
| Total revenues (Note 9) | 35,397 | | 36,294 | |
| | |
| Cost of goods sold | 17,765 | | 19,717 | |
| Cost of services sold | 8,391 | | 8,342 | |
| Selling, general and administrative expenses | 5,757 | | 6,129 | |
| Research and development | 1,165 | | 1,335 | |
| Interest and other financial charges | 987 | | 1,122 | |
| Debt extinguishment costs | 1,416 | | 205 | |
| Insurance losses and annuity benefits | 1,038 | | 1,199 | |
| Goodwill impairments (Note 8) | 0 | | 877 | |
| Non-operating benefit costs | 947 | | 1,216 | |
| Other costs and expenses | 62 | | 90 | |
| Total costs and expenses | 37,529 | | 40,232 | |
| | |
| Other income (Note 23) | 1,332 | | 8,947 | |
| | |
| Earnings (loss) from continuing operations before income taxes | (799) | | 5,010 | |
| Benefit (provision) for income taxes | 325 | | 106 | |
| Earnings (loss) from continuing operations | (474) | | 5,116 | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (3,458) | | (1,015) | |
| Net earnings (loss) | (3,933) | | 4,101 | |
| Less net earnings (loss) attributable to noncontrolling interests | 1 | | (111) | |
| Net earnings (loss) attributable to the Company | (3,934) | | 4,212 | |
| Preferred stock dividends | (129) | | (235) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (4,062) | | $ | 3,977 | |
| | |
| Amounts attributable to GE common shareholders | | |
| Earnings (loss) from continuing operations | $ | (474) | | $ | 5,116 | |
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| continuing operations | 1 | | (108) | |
| Earnings (loss) from continuing operations attributable to the Company | (476) | | 5,224 | |
| Preferred stock dividends | (129) | | (235) | |
| Earnings (loss) from continuing operations attributable | | |
| to GE common shareholders | (604) | | 4,989 | |
| Earnings (loss) from discontinued operations, net of taxes | (3,458) | | (1,015) | |
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| discontinued operations | 0 | | (2) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (4,062) | | $ | 3,977 | |
| | |
| Earnings (loss) per share from continuing operations (Note 18) | | |
| Diluted earnings (loss) per share | $ | (0.07) | | $ | 0.55 | |
| Basic earnings (loss) per share | $ | (0.07) | | $ | 0.55 | |
| | |
| Net earnings (loss) per share (Note 18) | | |
| Diluted earnings (loss) per share | $ | (0.46) | | $ | 0.44 | |
| Basic earnings (loss) per share | $ | (0.46) | | $ | 0.44 | |
| | | | | | | | | | | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Six months ended June 30 |
| (UNAUDITED) | GE Industrial | | GE Capital |
| (In millions; per-share amounts in dollars) | 2021 | 2020 | | 2021 | 2020 |
| Sales of goods | $ | 21,458 | | $ | 23,087 | | | $ | 0 | | $ | 0 | |
| Sales of services | 12,358 | | 11,823 | | | 0 | | 0 | |
| GE Capital revenues from services | 0 | | 0 | | | 1,736 | | 1,698 | |
| Total revenues | 33,816 | | 34,910 | | | 1,736 | | 1,698 | |
| | | | | |
| Cost of goods sold | 17,770 | | 19,745 | | | 0 | | 0 | |
| Cost of services sold | 8,407 | | 8,375 | | | 10 | | 10 | |
| Selling, general and administrative expenses | 5,536 | | 5,928 | | | 222 | | 263 | |
| Research and development | 1,165 | | 1,335 | | | 0 | | 0 | |
| Interest and other financial charges | 528 | | 703 | | | 540 | | 554 | |
| Debt extinguishment costs | 645 | | 63 | | | 771 | | 143 | |
| Insurance losses and annuity benefits | 0 | | 0 | | | 1,061 | | 1,230 | |
| Goodwill impairments (Note 8) | 0 | | 877 | | | 0 | | 0 | |
| Non-operating benefit costs | 950 | | 1,212 | | | (3) | | 4 | |
| Other costs and expenses | 0 | | 0 | | | 88 | | 146 | |
| Total costs and expenses | 35,001 | | 38,238 | | | 2,689 | | 2,351 | |
| | | | | |
| Other income (Note 23) | 1,339 | | 8,990 | | | 0 | | 0 | |
| | | | | |
| Earnings (loss) from continuing operations before income taxes | 154 | | 5,663 | | | (953) | | (653) | |
| Benefit (provision) for income taxes | 80 | | (121) | | | 245 | | 227 | |
| Earnings (loss) from continuing operations | 234 | | 5,542 | | | (709) | | (426) | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | 4 | | (24) | | | (3,462) | | (991) | |
| Net earnings (loss) | 238 | | 5,518 | | | (4,171) | | (1,417) | |
| Less net earnings (loss) attributable to noncontrolling interests | 6 | | (113) | | | (4) | | 2 | |
| Net earnings (loss) attributable to the Company | 232 | | 5,631 | | | (4,166) | | (1,418) | |
| Preferred stock dividends | (88) | | 0 | | | (41) | | (235) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 145 | | $ | 5,631 | | | $ | (4,207) | | $ | (1,653) | |
| | | | | |
| Amounts attributable to GE common shareholders: | | | | | |
| Earnings (loss) from continuing operations | $ | 234 | | $ | 5,542 | | | $ | (709) | | $ | (426) | |
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| continuing operations | 6 | | (110) | | | (4) | | 2 | |
| Earnings (loss) from continuing operations attributable to the Company | 229 | | 5,652 | | | (704) | | (428) | |
| Preferred stock dividends | (88) | | 0 | | | (41) | | (235) | |
| Earnings (loss) from continuing operations attributable | | | | | |
| to GE common shareholders | 141 | | 5,652 | | | (745) | | (663) | |
| Earnings (loss) from discontinued operations, net of taxes | 4 | | (24) | | | (3,462) | | (991) | |
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| discontinued operations | 0 | | (2) | | | 0 | | 0 | |
| Net earnings (loss) attributable to GE common shareholders | $ | 145 | | $ | 5,631 | | | $ | (4,207) | | $ | (1,653) | |
| | | | | | | | |
| STATEMENT OF FINANCIAL POSITION (UNAUDITED) | Consolidated |
| (In millions, except share amounts) | June 30, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash(a) | $ | 22,460 | | $ | 36,530 | |
| Investment securities (Note 3) | 6,134 | | 7,319 | |
| Current receivables (Note 4) | 15,190 | | 16,691 | |
| Financing receivables – net (Note 5) | 316 | | 326 | |
| Inventories, including deferred inventory costs (Note 6) | 17,016 | | 15,890 | |
| Other GE Capital receivables | 1,363 | | 1,549 | |
| Receivable from GE Capital | 0 | | 0 | |
| Current contract assets (Note 10) | 5,431 | | 5,764 | |
| All other current assets (Note 11) | 1,315 | | 1,109 | |
| Assets of discontinued operations (Note 2) | 33,186 | | 0 | |
| Current assets | 102,411 | | 85,180 | |
| | |
| Investment securities (Note 3) | 42,665 | | 42,549 | |
| | |
| Other GE Capital receivables | 4,672 | | 4,661 | |
| Property, plant and equipment – net (Note 7) | 16,169 | | 16,699 | |
| Receivable from GE Capital | 0 | | 0 | |
| Goodwill (Note 8) | 25,491 | | 25,524 | |
| Other intangible assets – net (Note 8) | 9,460 | | 9,671 | |
| Contract and other deferred assets (Note 10) | 6,131 | | 5,888 | |
| All other assets (Note 11) | 12,640 | | 11,038 | |
| Deferred income taxes (Note 16) | 14,864 | | 14,253 | |
| Assets of discontinued operations (Note 2) | 3,057 | | 40,749 | |
| Total assets | $ | 237,559 | | $ | 256,211 | |
| | |
| Short-term borrowings (Note 12) | $ | 4,293 | | $ | 4,713 | |
| Short-term borrowings assumed by GE (Note 12) | 0 | | 0 | |
| Accounts payable and equipment project accruals | 16,653 | | 16,458 | |
| Progress collections and deferred income (Note 10) | 17,201 | | 18,371 | |
| All other current liabilities (Note 15) | 13,569 | | 15,071 | |
| Liabilities of discontinued operations (Note 2) | 4,922 | | 0 | |
| Current liabilities | 56,639 | | 54,613 | |
| | |
| Deferred income (Note 10) | 1,779 | | 1,801 | |
| Long-term borrowings (Note 12) | 59,231 | | 70,189 | |
| Long-term borrowings assumed by GE (Note 12) | 0 | | 0 | |
| Insurance liabilities and annuity benefits (Note 13) | 40,795 | | 42,191 | |
| Non-current compensation and benefits | 28,805 | | 29,677 | |
| All other liabilities (Note 15) | 15,245 | | 15,484 | |
| Liabilities of discontinued operations (Note 2) | 17 | | 5,182 | |
| Total liabilities | 202,512 | | 219,138 | |
| | |
Preferred stock (5,939,875 shares outstanding at both June 30, 2021
and December 31, 2020) | 6 | | 6 | |
Common stock (8,781,303,049 and 8,765,492,645 shares outstanding
at June 30, 2021 and December 31, 2020, respectively) | 702 | | 702 | |
| Accumulated other comprehensive income (loss) – net attributable to GE | (7,820) | | (9,749) | |
| Other capital | 34,032 | | 34,307 | |
| Retained earnings | 87,993 | | 92,247 | |
| Less common stock held in treasury | (81,425) | | (81,961) | |
| Total GE shareholders’ equity | 33,487 | | 35,552 | |
| Noncontrolling interests | 1,560 | | 1,522 | |
| Total equity | 35,047 | | 37,073 | |
| Total liabilities and equity | $ | 237,559 | | $ | 256,211 | |
(a) Excluded $1,020 million and $455 million at June 30, 2021 and December 31, 2019 and our Quarterly Report on Form 10-Q2020, respectively, in Insurance, which is subject to regulatory restrictions. This balance is included in All other assets. See Note 11 for the quarter ended March 31, 2020. These risk factors could materially affect our business, financial position and results of operations.further information.
The global COVID-19 pandemic is having a material adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve. We are unable to predict the extent to which the pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives. Our operations and financial performance have been negatively impacted by the COVID-19 pandemic that has caused, and is expected to continue to cause, the global slowdown of economic activity (including the decrease in demand for a broad variety of goods and services), disruptions in global supply chains and significant volatility and disruption of financial markets. Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the pandemic’s impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. Further, the ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on or propensity to travel and workforce pressures); the impact of the pandemic and actions taken in response on global and regional economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subsides.
The COVID-19 pandemic has subjected our operations, financial performance and financial condition to a number of risks, including, but not limited to those discussed below:
Operations-related risks: Across all of our businesses, we are facing increased operational challenges from the need to protect employee health and safety, the need to shut down sites, workplace disruptions and restrictions on the movement of people, raw materials and goods, both at our own facilities and at those of our customers and suppliers. We are also experiencing, and expect to continue experiencing, lower demand and volume for products and services contributing to decreases in orders and backlog, customer requests for potential payment deferrals or other contract modifications, supply chain under-liquidation, delays of deliveries and the achievement of other billing milestones, delays or cancellations of new projects and related down payments and other factors related directly and indirectly to the COVID-19 pandemic that adversely impact our businesses. While we have been taking a number of cost and cash management actions in response to these dynamics, our ability to offset or mitigate the adverse impacts related to COVID-19 is limited. We expect that the longer the period of economic and global supply chain and disruption continues, the more material the adverse impact will be on our business operations, financial performance and results of operations, and this could include additional charges, goodwill or other asset impairments and other adverse financial impacts in future periods.
Customer-related risks: In particular, the interruption of regional and international air travel from COVID-19 has resulted in a severe decline of business and leisure traffic and is having a material adverse effect on our 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 future charges, goodwill or other asset impairments and other material adverse financial impacts at GE Aviation and GE Capital Aviation Services over time, in addition to the charges described in this report that we recognized during the second quarter of 2020. We have depended on the strength of our Aviation business 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.
34 20202021 2Q FORM 10-Q32
| | | | | | | | | | | | | | | | | |
| STATEMENT OF FINANCIAL POSITION (CONTINUED) | GE Industrial | | GE Capital |
(UNAUDITED) (In millions, except share amounts) | June 30, 2021 | December 31, 2020 | | June 30, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash | $ | 15,591 | | $ | 23,209 | | | $ | 6,870 | | $ | 13,322 | |
| Investment securities (Note 3) | 6,134 | | 7,319 | | | 0 | | 0 | |
| Current receivables (Note 4) | 14,324 | | 13,442 | | | 0 | | 0 | |
| Financing receivables – net (Note 5) | 0 | | 0 | | | 1,632 | | 4,172 | |
| Inventories, including deferred inventory costs (Note 6) | 17,016 | | 15,890 | | | 0 | | 0 | |
| Other GE Capital receivables | 0 | | 0 | | | 1,706 | | 3,280 | |
| Receivable from GE Capital | 1,495 | | 2,432 | | | 0 | | 0 | |
| Current contract assets (Note 10) | 5,431 | | 5,764 | | | 0 | | 0 | |
| All other current assets (Note 11) | 1,024 | | 835 | | | 360 | | 543 | |
| Assets of discontinued operations (Note 2) | 0 | | 0 | | | 33,186 | | 0 | |
| Current assets | 61,015 | | 68,892 | | | 43,754 | | 21,317 | |
| | | | | |
| Investment securities (Note 3) | 112 | | 36 | | | 42,555 | | 42,515 | |
| | | | | |
| Other GE Capital receivables | 0 | | 0 | | | 5,091 | | 5,076 | |
| Property, plant and equipment – net (Note 7) | 15,921 | | 16,433 | | | 251 | | 271 | |
| Receivable from GE Capital | 13,500 | | 16,780 | | | 0 | | 0 | |
| Goodwill (Note 8) | 25,491 | | 25,524 | | | 0 | | 0 | |
| Other intangible assets – net (Note 8) | 9,425 | | 9,632 | | | 35 | | 39 | |
| Contract and other deferred assets (Note 10) | 6,131 | | 5,921 | | | 0 | | 0 | |
| All other assets (Note 11) | 8,604 | | 7,948 | | | 4,375 | | 3,354 | |
| Deferred income taxes (Note 16) | 9,813 | | 9,154 | | | 5,051 | | 5,099 | |
| Assets of discontinued operations (Note 2) | 131 | | 144 | | | 2,926 | | 40,587 | |
| Total assets | $ | 150,143 | | $ | 160,462 | | | $ | 104,038 | | $ | 118,257 | |
| | | | | |
| Short-term borrowings (Note 12) | $ | 1,373 | | $ | 918 | | | $ | 1,568 | | $ | 1,963 | |
| Short-term borrowings assumed by GE (Note 12) | 1,495 | | 2,432 | | | 1,495 | | 2,432 | |
| Accounts payable and equipment project accruals | 16,358 | | 16,380 | | | 778 | | 918 | |
| Progress collections and deferred income (Note 10) | 17,228 | | 18,371 | | | 0 | | 0 | |
| All other current liabilities (Note 15) | 12,790 | | 14,131 | | | 1,243 | | 2,288 | |
| Liabilities of discontinued operations (Note 2) | 0 | | 0 | | | 4,922 | | 0 | |
| Current liabilities | 49,245 | | 52,232 | | | 10,006 | | 7,602 | |
| | | | | |
| Deferred income (Note 10) | 1,779 | | 1,801 | | | 0 | | 0 | |
| Long-term borrowings (Note 12) | 14,258 | | 19,428 | | | 28,295 | | 30,803 | |
| Long-term borrowings assumed by GE (Note 12) | 16,678 | | 19,957 | | | 13,500 | | 16,780 | |
| Insurance liabilities and annuity benefits (Note 13) | 0 | | 0 | | | 41,212 | | 42,565 | |
| Non-current compensation and benefits | 28,491 | | 29,291 | | | 307 | | 379 | |
| All other liabilities (Note 15) | 14,984 | | 15,072 | | | 362 | | 539 | |
| Liabilities of discontinued operations (Note 2) | 123 | | 139 | | | (106) | | 5,058 | |
| Total liabilities | 125,557 | | 137,921 | | | 93,578 | | 103,726 | |
| | | | | |
Preferred stock (5,939,875 shares outstanding at both June 30, 2021 and December 31, 2020) | 6 | | 6 | | | 0 | | 6 | |
Common stock (8,781,303,049 and 8,765,492,645 shares outstanding at June 30, 2021 and December 31, 2020, respectively) | 702 | | 702 | | | 5 | | 0 | |
| Accumulated other comprehensive income (loss) – net attributable to GE | (7,019) | | (8,945) | | | (801) | | (804) | |
| Other capital | 16,083 | | 16,466 | | | 17,944 | | 17,835 | |
| Retained earnings | 94,863 | | 94,910 | | | (6,870) | | (2,663) | |
| Less common stock held in treasury | (81,425) | | (81,961) | | | 0 | | 0 | |
| Total GE shareholders’ equity | 23,210 | | 21,179 | | | 10,277 | | 14,373 | |
| Noncontrolling interests | 1,376 | | 1,363 | | | 183 | | 159 | |
| Total equity | 24,586 | | 22,542 | | | 10,460 | | 14,531 | |
| Total liabilities and equity | $ | 150,143 | | $ | 160,462 | | | $ | 104,038 | | $ | 118,257 | |
Leverage- and market-related risks: The current financial market dynamics and volatility pose heightened risks to our timelines for decreasing our leverage, and we now expect to achieve our prior targets over a longer period than previously announced as we seek to maintain appropriate liquidity to compensate for lower (or negative) cash 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 (or negative) cash flows from operations could adversely affect our financial condition and the achievement of our strategic objectives. As previously reported, in April 2020, Moody's and S&P changed their credit rating outlooks for GE and GE Capital from Stable to Negative, and Fitch lowered its credit ratings for GE and GE Capital. There can also be no assurance that we will not face additional credit rating downgrades as a result of weaker than anticipated performance of our businesses, slower progress in decreasing our leverage or other factors. Future downgrades could further adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets, and a significant downgrade could have an adverse commercial impact on our industrial businesses. Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding (including for receivables monetization or supply chain finance programs), which could adversely affect our business, financial position and results of operations. Although the U.S. federal and other governments have announced a number of lending 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 for additional details about how COVID-19 related market events may affect our insurance business and pension assumptions, and to Note 8 for additional details about goodwill and reporting units that we are continuing to monitor for impairment. Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our operations or financial results.
| | | | | | | | |
| STATEMENT OF CASH FLOWS | Six months ended June 30 |
| (UNAUDITED) | Consolidated |
| (In millions) | 2021 | 2020 |
| Net earnings (loss) | $ | (3,933) | | $ | 4,101 | |
| | |
| | |
| (Earnings) loss from discontinued operations | 3,458 | | 1,015 | |
| Adjustments to reconcile net earnings (loss) | | |
| to cash provided from operating activities | | |
| Depreciation and amortization of property, plant and equipment (Note 7) | 935 | | 921 | |
| Amortization of intangible assets (Note 8) | 589 | | 617 | |
| Goodwill impairments (Note 8) | 0 | | 877 | |
| | |
| (Gains) losses on purchases and sales of business interests (Note 23) | 2 | | (12,425) | |
| (Gains) losses on equity securities (Note 23) | (694) | | 4,018 | |
| Principal pension plans cost (Note 14) | 1,329 | | 1,798 | |
| Principal pension plans employer contributions | (154) | | (144) | |
| Other postretirement benefit plans (net) | (497) | | (488) | |
| Provision (benefit) for income taxes | (325) | | (106) | |
| Cash recovered (paid) during the year for income taxes | (837) | | (622) | |
| Changes in operating working capital: | | |
| Decrease (increase) in current receivables | 942 | | (190) | |
| Decrease (increase) in inventories, including deferred inventory costs | (1,330) | | (838) | |
| Decrease (increase) in current contract assets | 307 | | 647 | |
| Increase (decrease) in accounts payable and equipment project accruals | 200 | | (1,912) | |
| Increase (decrease) in progress collections and current deferred income | (1,321) | | (575) | |
| All other operating activities | (1,664) | | 886 | |
| Cash from (used for) operating activities – continuing operations | (2,991) | | (2,421) | |
| Cash from (used for) operating activities – discontinued operations | 1,550 | | 1,026 | |
| Cash from (used for) operating activities | (1,441) | | (1,395) | |
| | |
| Additions to property, plant and equipment | (599) | | (1,002) | |
| Dispositions of property, plant and equipment | 105 | | 105 | |
| Additions to internal-use software | (49) | | (98) | |
| Net decrease (increase) in financing receivables | 21 | | (160) | |
| | |
| Proceeds from principal business dispositions | 1 | | 20,821 | |
| Net cash from (payments for) principal businesses purchased | (27) | | (7) | |
| | |
| Sales of retained ownership interests | 1,706 | | 0 | |
| Net (purchases) dispositions of GE Capital investment securities | (1,109) | | (1,334) | |
| All other investing activities | 1,468 | | 1,355 | |
| Cash from (used for) investing activities – continuing operations | 1,517 | | 19,680 | |
| Cash from (used for) investing activities – discontinued operations | (1,623) | | (1,238) | |
| Cash from (used for) investing activities | (106) | | 18,442 | |
| | |
| Net increase (decrease) in borrowings (maturities of 90 days or less) | (359) | | (3,412) | |
| Newly issued debt (maturities longer than 90 days) | 358 | | 14,228 | |
| Repayments and other debt reductions (maturities longer than 90 days) | (10,106) | | (21,909) | |
| | |
| | |
| Dividends paid to shareholders | (292) | | (324) | |
| All other financing activities | (1,610) | | (623) | |
| Cash from (used for) financing activities – continuing operations | (12,008) | | (12,040) | |
| Cash from (used for) financing activities – discontinued operations | 2 | | 41 | |
| Cash from (used for) financing activities | (12,006) | | (11,998) | |
| Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (37) | | (217) | |
| Increase (decrease) in cash, cash equivalents and restricted cash | (13,591) | | 4,831 | |
| Cash, cash equivalents and restricted cash at beginning of year | 37,608 | | 37,077 | |
| Cash, cash equivalents and restricted cash at June 30 | 24,018 | | 41,908 | |
| Less cash, cash equivalents and restricted cash of discontinued operations at June 30 | 537 | | 587 | |
| Cash, cash equivalents and restricted cash of continuing operations at June 30 | $ | 23,480 | | $ | 41,322 | |
| | | | | | | | | | | | | | | | | |
| STATEMENT OF CASH FLOWS (CONTINUED) | Six months ended June 30 |
| (UNAUDITED) | GE Industrial | | GE Capital |
| (In millions) | 2021 | 2020 | | 2021 | 2020 |
| Net earnings (loss) | $ | 238 | | $ | 5,518 | | | $ | (4,171) | | $ | (1,417) | |
| | | | | |
| | | | | |
| (Earnings) loss from discontinued operations | (4) | | 24 | | | 3,462 | | 991 | |
| Adjustments to reconcile net earnings (loss) | | | | | |
| to cash provided from operating activities | | | | | |
| Depreciation and amortization of property, plant and equipment (Note 7) | 922 | | 916 | | | 13 | | 13 | |
| Amortization of intangible assets (Note 8) | 581 | | 611 | | | 8 | | 5 | |
| Goodwill impairments (Note 8) | 0 | | 877 | | | 0 | | 0 | |
| | | | | |
| (Gains) losses on purchases and sales of business interests (Note 23) | 2 | | (12,424) | | | 0 | | 0 | |
| (Gains) losses on equity securities (Note 23) | (680) | | 3,986 | | | (14) | | 33 | |
| Principal pension plans cost (Note 14) | 1,329 | | 1,798 | | | 0 | | 0 | |
| Principal pension plans employer contributions | (154) | | (144) | | | 0 | | 0 | |
| Other postretirement benefit plans (net) | (468) | | (471) | | | (29) | | (17) | |
| Provision (benefit) for income taxes | (80) | | 121 | | | (245) | | (227) | |
| Cash recovered (paid) during the year for income taxes | (815) | | (550) | | | (21) | | (72) | |
| Changes in operating working capital: | | | | | |
| Decrease (increase) in current receivables | (1,217) | | 434 | | | 0 | | 0 | |
| Decrease (increase) in inventories, including deferred inventory costs | (1,273) | | (799) | | | 0 | | 0 | |
| Decrease (increase) in current contract assets | 307 | | 647 | | | 0 | | 0 | |
| Increase (decrease) in accounts payable and equipment project accruals | 77 | | (3,353) | | | (3) | | 1 | |
| Increase (decrease) in progress collections and current deferred income | (1,283) | | (575) | | | 0 | | 0 | |
| All other operating activities | (5) | | 121 | | | (1,552) | | 578 | |
| Cash from (used for) operating activities – continuing operations | (2,522) | | (3,266) | | | (2,553) | | (111) | |
| Cash from (used for) operating activities – discontinued operations | 5 | | 26 | | | 1,545 | | 1,000 | |
| Cash from (used for) operating activities | (2,517) | | (3,240) | | | (1,008) | | 889 | |
| | | | | |
| Additions to property, plant and equipment | (599) | | (1,002) | | | 0 | | 0 | |
| Dispositions of property, plant and equipment | 105 | | 105 | | | 0 | | 0 | |
| Additions to internal-use software | (47) | | (95) | | | (2) | | (3) | |
| Net decrease (increase) in financing receivables | 0 | | 0 | | | 3,057 | | 49 | |
| | | | | |
| Proceeds from principal business dispositions | 1 | | 20,480 | | | 0 | | 0 | |
| Net cash from (payments for) principal businesses purchased | (27) | | (7) | | | 0 | | 0 | |
| | | | | |
| Sales of retained ownership interests | 1,706 | | 0 | | | 0 | | 0 | |
| Net (purchases) dispositions of GE Capital investment securities | 0 | | 0 | | | (1,109) | | (1,334) | |
| All other investing activities | 127 | | 207 | | | 1,498 | | 9,953 | |
| Cash from (used for) investing activities – continuing operations | 1,266 | | 19,689 | | | 3,444 | | 8,665 | |
| Cash from (used for) investing activities – discontinued operations | (5) | | (30) | | | (1,618) | | (1,207) | |
| Cash from (used for) investing activities | 1,261 | | 19,659 | | | 1,826 | | 7,458 | |
| | | | | |
| Net increase (decrease) in borrowings (maturities of 90 days or less) | (1,276) | | (3,512) | | | (177) | | (205) | |
| Newly issued debt (maturities longer than 90 days) | 0 | | 7,431 | | | 359 | | 6,797 | |
| Repayments and other debt reductions (maturities longer than 90 days) | (4,139) | | (12,113) | | | (5,967) | | (17,296) | |
| | | | | |
| | | | | |
| Dividends paid to shareholders | (263) | | (176) | | | (41) | | (232) | |
| All other financing activities | (661) | | (83) | | | (953) | | (368) | |
| Cash from (used for) financing activities – continuing operations | (6,339) | | (8,453) | | | (6,778) | | (11,305) | |
| Cash from (used for) financing activities – discontinued operations | 0 | | 1 | | | 2 | | 41 | |
| Cash from (used for) financing activities | (6,339) | | (8,453) | | | (6,776) | | (11,264) | |
| Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (23) | | (155) | | | (15) | | (62) | |
| Increase (decrease) in cash, cash equivalents and restricted cash | (7,618) | | 7,811 | | | (5,972) | | (2,979) | |
| Cash, cash equivalents and restricted cash at beginning of year | 23,209 | | 17,617 | | | 14,400 | | 19,460 | |
| Cash, cash equivalents and restricted cash at June 30 | 15,591 | | 25,428 | | | 8,427 | | 16,480 | |
| Less cash, cash equivalents and restricted cash of discontinued operations at June 30 | 0 | | 0 | | | 537 | | 587 | |
| Cash, cash equivalents and restricted cash of continuing operations at June 30 | $ | 15,591 | | $ | 25,428 | | | $ | 7,890 | | $ | 15,893 | |
|
| | | | | | |
| STATEMENT OF EARNINGS (LOSS) | Three months ended June 30 |
| (UNAUDITED) | Consolidated |
| (In millions; per-share amounts in dollars) | 2020 |
| 2019 |
|
| Sales of goods | $ | 10,732 |
| $ | 14,101 |
|
| Sales of services | 5,328 |
| 7,269 |
|
| GE Capital revenues from services | 1,690 |
| 2,043 |
|
| Total revenues (Note 9) | 17,750 |
| 23,414 |
|
| | | |
| Cost of goods sold | 10,306 |
| 11,646 |
|
| Cost of services sold | 4,777 |
| 5,766 |
|
| Selling, general and administrative expenses | 3,079 |
| 3,425 |
|
| Interest and other financial charges | 997 |
| 929 |
|
| Insurance losses and annuity benefits | 564 |
| 638 |
|
| Goodwill impairments (Note 8) | 1,717 |
| 744 |
|
| Non-operating benefit costs | 598 |
| 561 |
|
| Other costs and expenses | 129 |
| 166 |
|
| Total costs and expenses | 22,166 |
| 23,874 |
|
| | | |
| Other income (Note 22) | 2,078 |
| 164 |
|
| GE Capital earnings (loss) from continuing operations | — |
| — |
|
| | | |
| Earnings (loss) from continuing operations before income taxes | (2,339 | ) | (296 | ) |
| Benefit (provision) for income taxes | 199 |
| 181 |
|
| Earnings (loss) from continuing operations | (2,139 | ) | (115 | ) |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | 7 |
| 219 |
|
| Net earnings (loss) | (2,132 | ) | 104 |
|
| Less net earnings (loss) attributable to noncontrolling interests | (145 | ) | (23 | ) |
| Net earnings (loss) attributable to the Company | (1,987 | ) | 127 |
|
| Preferred stock dividends | (192 | ) | (188 | ) |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,179 | ) | $ | (61 | ) |
| | | |
| Amounts attributable to GE common shareholders | | |
| Earnings (loss) from continuing operations | $ | (2,139 | ) | $ | (115 | ) |
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| continuing operations | (145 | ) | (1 | ) |
| Earnings (loss) from continuing operations attributable to the Company | (1,995 | ) | (114 | ) |
| Preferred stock dividends | (192 | ) | (188 | ) |
| Earnings (loss) from continuing operations attributable | | |
| to GE common shareholders | (2,186 | ) | (302 | ) |
| Earnings (loss) from discontinued operations, net of taxes | 7 |
| 219 |
|
| Less net earnings (loss) attributable to | | |
| noncontrolling interests, discontinued operations | — |
| (23 | ) |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,179 | ) | $ | (61 | ) |
| | | |
| Earnings (loss) per share from continuing operations (Note 16) | | |
| Diluted earnings (loss) per share | $ | (0.27 | ) | $ | (0.03 | ) |
| Basic earnings (loss) per share | $ | (0.27 | ) | $ | (0.03 | ) |
| | | |
| Net earnings (loss) per share (Note 16) | | |
| Diluted earnings (loss) per share | $ | (0.26 | ) | $ | (0.01 | ) |
| Basic earnings (loss) per share | $ | (0.26 | ) | $ | (0.01 | ) |
| | | |
| Dividends declared per common share | $ | 0.01 |
| $ | 0.01 |
|
| | | | | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | Three months ended June 30 | | Six months ended June 30 |
| (In millions, net of tax) | 2021 | 2020 | | 2021 | 2020 |
| Net earnings (loss) | $ | (1,135) | | $ | (2,132) | | | $ | (3,933) | | $ | 4,101 | |
| Less net earnings (loss) attributable to noncontrolling interests | (3) | | (145) | | | 1 | | (111) | |
| Net earnings (loss) attributable to the Company | $ | (1,131) | | $ | (1,987) | | | $ | (3,934) | | $ | 4,212 | |
| | | | | |
| Investment securities | $ | (1) | | $ | 27 | | | $ | (19) | | $ | (14) | |
| Currency translation adjustments | 130 | | (57) | | | 240 | | 78 | |
| Cash flow hedges | 27 | | 53 | | | 90 | | (158) | |
| Benefit plans | 914 | | 604 | | | 1,619 | | 1,640 | |
| | | | | |
| Less: other comprehensive income (loss) attributable to noncontrolling interests | (2) | | 2 | | | 1 | | 7 | |
| Other comprehensive income (loss) attributable to the Company | $ | 1,073 | | $ | 625 | | | $ | 1,929 | | $ | 1,539 | |
| | | | | |
| Comprehensive income (loss) | $ | (64) | | $ | (1,505) | | | $ | (2,003) | | $ | 5,647 | |
| Less: comprehensive income (loss) attributable to noncontrolling interests | (5) | | (143) | | | 2 | | (104) | |
| Comprehensive income (loss) attributable to the Company | $ | (58) | | $ | (1,362) | | | $ | (2,005) | | $ | 5,751 | |
|
| | | | | | | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Three months ended June 30 |
| (UNAUDITED) | GE(a) | | GE Capital |
| (In millions; per-share amounts in dollars) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Sales of goods | $ | 10,728 |
| $ | 14,117 |
| | $ | 13 |
| $ | 18 |
|
| Sales of services | 5,337 |
| 7,298 |
| | — |
| — |
|
| GE Capital revenues from services | — |
| — |
| | 1,833 |
| 2,303 |
|
| Total revenues | 16,066 |
| 21,416 |
| | 1,845 |
| 2,321 |
|
| | | | | | |
| Cost of goods sold | 10,305 |
| 11,666 |
| | 10 |
| 14 |
|
| Cost of services sold | 3,952 |
| 5,250 |
| | 835 |
| 512 |
|
| Selling, general and administrative expenses | 2,979 |
| 3,367 |
| | 162 |
| 211 |
|
| Interest and other financial charges | 396 |
| 382 |
| | 657 |
| 646 |
|
| Insurance losses and annuity benefits | — |
| — |
| | 577 |
| 668 |
|
| Goodwill impairments (Note 8) | 877 |
| 744 |
| | 839 |
| — |
|
| Non-operating benefit costs | 596 |
| 558 |
| | 2 |
| 3 |
|
| Other costs and expenses | — |
| 5 |
| | 178 |
| 178 |
|
| Total costs and expenses | 19,105 |
| 21,972 |
| | 3,262 |
| 2,233 |
|
| | | | | | |
| Other income (Note 22) | 2,116 |
| 172 |
| | — |
| — |
|
| GE Capital earnings (loss) from continuing operations | (1,476 | ) | (89 | ) | | — |
| — |
|
| | | | | | |
| Earnings (loss) from continuing operations before income taxes | (2,399 | ) | (473 | ) | | (1,416 | ) | 88 |
|
| Benefit (provision) for income taxes | 66 |
| 170 |
| | 133 |
| 11 |
|
| Earnings (loss) from continuing operations | (2,333 | ) | (303 | ) | | (1,283 | ) | 99 |
|
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | 7 |
| 219 |
| | 17 |
| 238 |
|
| Net earnings (loss) | (2,325 | ) | (84 | ) | | (1,266 | ) | 336 |
|
| Less net earnings (loss) attributable to noncontrolling interests | (147 | ) | (23 | ) | | 2 |
| — |
|
| Net earnings (loss) attributable to the Company | (2,179 | ) | (61 | ) | | (1,268 | ) | 336 |
|
| Preferred stock dividends | — |
| — |
| | (192 | ) | (188 | ) |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,179 | ) | $ | (61 | ) | | $ | (1,459 | ) | $ | 148 |
|
| | | | | | |
| Amounts attributable to GE common shareholders: | | | | | |
| Earnings (loss) from continuing operations | $ | (2,333 | ) | $ | (303 | ) | | $ | (1,283 | ) | $ | 99 |
|
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| continuing operations | (147 | ) | (1 | ) | | 2 |
| — |
|
| Earnings (loss) from continuing operations attributable to the Company | (2,186 | ) | (302 | ) | | (1,285 | ) | 99 |
|
| Preferred stock dividends | — |
| — |
| | (192 | ) | (188 | ) |
| Earnings (loss) from continuing operations attributable | | | | | |
| to GE common shareholders | (2,186 | ) | (302 | ) | | (1,476 | ) | (89 | ) |
| Earnings (loss) from discontinued operations, net of taxes | 7 |
| 219 |
| | 17 |
| 238 |
|
| Less net earnings (loss) attributable to | | | | | |
| noncontrolling interests, discontinued operations | — |
| (23 | ) | | — |
| — |
|
| Net earnings (loss) attributable to GE common shareholders | $ | (2,179 | ) | $ | (61 | ) | | $ | (1,459 | ) | $ | 148 |
|
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.
| | | | | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) | Three months ended June 30 | | Six months ended June 30 |
| (In millions) | 2021 | 2020 | | 2021 | 2020 |
| Preferred stock issued | $ | 6 | | $ | 6 | | | $ | 6 | | $ | 6 | |
| Common stock issued | $ | 702 | | $ | 702 | | | $ | 702 | | $ | 702 | |
| | | | | |
| Beginning balance | (8,893) | | (10,819) | | | (9,749) | | (11,732) | |
| Investment securities | (1) | | 27 | | | (19) | | (14) | |
| Currency translation adjustments | 132 | | (58) | | | 240 | | 75 | |
| Cash flow hedges | 27 | | 53 | | | 90 | | (158) | |
| Benefit plans | 914 | | 604 | | | 1,618 | | 1,636 | |
| Accumulated other comprehensive income (loss) ending balance | $ | (7,820) | | $ | (10,194) | | | $ | (7,820) | | $ | (10,194) | |
| Beginning balance | 34,042 | | 34,296 | | | 34,307 | | 34,405 | |
| Gains (losses) on treasury stock dispositions | (110) | | (163) | | | (493) | | (412) | |
| Stock-based compensation | 107 | | 111 | | | 213 | | 216 | |
| Other changes | (8) | | 48 | | | 5 | | 83 | |
| Other capital ending balance | $ | 34,032 | | $ | 34,292 | | | $ | 34,032 | | $ | 34,292 | |
| Beginning balance | 89,276 | | 93,615 | | | 92,247 | | 87,732 | |
| Net earnings (loss) attributable to the Company | (1,131) | | (1,987) | | | (3,934) | | 4,212 | |
| Dividends and other transactions with shareholders | (152) | | (439) | | | (320) | | (581) | |
| Changes in accounting (Note 1) | 0 | | 0 | | | 0 | | (175) | |
| Retained earnings ending balance | $ | 87,993 | | $ | 91,188 | | | $ | 87,993 | | $ | 91,188 | |
| Beginning balance | (81,548) | | (82,516) | | | (81,961) | | (82,797) | |
| Purchases | (45) | | (8) | | | (82) | | (22) | |
| Dispositions | 168 | | 204 | | | 618 | | 498 | |
| Common stock held in treasury ending balance | $ | (81,425) | | $ | (82,320) | | | $ | (81,425) | | $ | (82,320) | |
| GE shareholders' equity balance | 33,487 | | 33,674 | | | 33,487 | | 33,674 | |
| Noncontrolling interests balance (Note 17) | 1,560 | | 1,579 | | | 1,560 | | 1,579 | |
| Total equity balance at June 30 | $ | 35,047 | | $ | 35,254 | | | $ | 35,047 | | $ | 35,254 | |
20202021 2Q FORM 10-Q 3736
|
| | | | | | |
| STATEMENT OF EARNINGS (LOSS) | Six months ended June 30 |
| (UNAUDITED) | Consolidated |
| (In millions; per-share amounts in dollars) | 2020 |
| 2019 |
|
| Sales of goods | $ | 23,096 |
| $ | 27,351 |
|
| Sales of services | 11,778 |
| 14,277 |
|
| GE Capital revenues from services | 3,399 |
| 3,988 |
|
| Total revenues (Note 9) | 38,273 |
| 45,616 |
|
| | | |
| Cost of goods sold | 20,846 |
| 22,620 |
|
| Cost of services sold | 9,933 |
| 11,000 |
|
| Selling, general and administrative expenses | 6,144 |
| 6,827 |
|
| Interest and other financial charges | 1,791 |
| 1,993 |
|
| Insurance losses and annuity benefits | 1,199 |
| 1,249 |
|
| Goodwill impairments (Note 8) | 1,717 |
| 744 |
|
| Non-operating benefit costs | 1,216 |
| 1,129 |
|
| Other costs and expenses | 238 |
| 238 |
|
| Total costs and expenses | 43,084 |
| 45,801 |
|
| | | |
| Other income (Note 22) | 8,947 |
| 1,012 |
|
| GE Capital earnings (loss) from continuing operations | — |
| — |
|
| | | |
| Earnings (loss) from continuing operations before income taxes | 4,136 |
| 827 |
|
| Benefit (provision) for income taxes | 136 |
| 41 |
|
| Earnings (loss) from continuing operations | 4,272 |
| 868 |
|
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (171 | ) | 2,881 |
|
| Net earnings (loss) | 4,101 |
| 3,749 |
|
| Less net earnings (loss) attributable to noncontrolling interests | (111 | ) | 34 |
|
| Net earnings (loss) attributable to the Company | 4,212 |
| 3,716 |
|
| Preferred stock dividends | (235 | ) | (228 | ) |
| Net earnings (loss) attributable to GE common shareholders | $ | 3,977 |
| $ | 3,488 |
|
| | | |
| Amounts attributable to GE common shareholders | | |
| Earnings (loss) from continuing operations | $ | 4,272 |
| $ | 868 |
|
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| continuing operations | (108 | ) | 22 |
|
| Earnings (loss) from continuing operations attributable to the Company | 4,381 |
| 846 |
|
| Preferred stock dividends | (235 | ) | (228 | ) |
| Earnings (loss) from continuing operations attributable | | |
| to GE common shareholders | 4,146 |
| 618 |
|
| Earnings (loss) from discontinued operations, net of taxes | (171 | ) | 2,881 |
|
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| discontinued operations | (2 | ) | 11 |
|
| Net earnings (loss) attributable to GE common shareholders | $ | 3,977 |
| $ | 3,488 |
|
| | | |
| Earnings (loss) per share from continuing operations (Note 16) | | |
| Diluted earnings (loss) per share | $ | 0.46 |
| $ | 0.07 |
|
| Basic earnings (loss) per share | $ | 0.46 |
| $ | 0.07 |
|
| | | |
| Net earnings (loss) per share (Note 16) | | |
| Diluted earnings (loss) per share | $ | 0.44 |
| $ | 0.40 |
|
| Basic earnings (loss) per share | $ | 0.44 |
| $ | 0.40 |
|
| | | |
| Dividends declared per common share | $ | 0.02 |
| $ | 0.02 |
|
|
| | | | | | | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Six months ended June 30 |
| (UNAUDITED) | GE(a) | | GE Capital |
| (In millions; per-share amounts in dollars) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Sales of goods | $ | 23,087 |
| $ | 27,432 |
| | $ | 37 |
| $ | 34 |
|
| Sales of services | 11,823 |
| 14,308 |
| | — |
| — |
|
| GE Capital revenues from services | — |
| — |
| | 3,731 |
| 4,514 |
|
| Total revenues | 34,910 |
| 41,740 |
| | 3,768 |
| 4,548 |
|
| | | | | | |
| Cost of goods sold | 20,846 |
| 22,715 |
| | 28 |
| 27 |
|
| Cost of services sold | 8,608 |
| 10,031 |
| | 1,370 |
| 999 |
|
| Selling, general and administrative expenses | 5,928 |
| 6,562 |
| | 365 |
| 478 |
|
| Interest and other financial charges | 766 |
| 902 |
| | 1,161 |
| 1,323 |
|
| Insurance losses and annuity benefits | — |
| — |
| | 1,230 |
| 1,302 |
|
| Goodwill impairments (Note 8) | 877 |
| 744 |
| | 839 |
| — |
|
| Non-operating benefit costs | 1,212 |
| 1,122 |
| | 5 |
| 8 |
|
| Other costs and expenses | — |
| (4 | ) | | 297 |
| 277 |
|
| Total costs and expenses | 38,238 |
| 42,073 |
| | 5,295 |
| 4,413 |
|
| | | | | | |
| Other income (Note 22) | 8,990 |
| 1,024 |
| | — |
| — |
|
| GE Capital earnings (loss) from continuing operations | (1,506 | ) | 46 |
| | — |
| — |
|
| | | | | | |
| Earnings (loss) from continuing operations before income taxes | 4,156 |
| 738 |
| | (1,526 | ) | 135 |
|
| Benefit (provision) for income taxes | (121 | ) | (97 | ) | | 257 |
| 139 |
|
| Earnings (loss) from continuing operations | 4,035 |
| 640 |
| | (1,270 | ) | 273 |
|
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (171 | ) | 2,881 |
| | (147 | ) | 273 |
|
| Net earnings (loss) | 3,865 |
| 3,522 |
| | (1,417 | ) | 547 |
|
| Less net earnings (loss) attributable to noncontrolling interests | (113 | ) | 33 |
| | 2 |
| 0 |
|
| Net earnings (loss) attributable to the Company | 3,977 |
| 3,488 |
| | (1,418 | ) | 547 |
|
| Preferred stock dividends | — |
| — |
| | (235 | ) | (228 | ) |
| Net earnings (loss) attributable to GE common shareholders | $ | 3,977 |
| $ | 3,488 |
| | $ | (1,653 | ) | $ | 319 |
|
| | | | | | |
| Amounts attributable to GE common shareholders: | | | | | |
| Earnings (loss) from continuing operations | $ | 4,035 |
| $ | 640 |
| | $ | (1,270 | ) | $ | 273 |
|
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| continuing operations | (110 | ) | 22 |
| | 2 |
| 0 |
|
| Earnings (loss) from continuing operations attributable to the Company | 4,146 |
| 618 |
| | (1,272 | ) | 273 |
|
| Preferred stock dividends | — |
| — |
| | (235 | ) | (228 | ) |
| Earnings (loss) from continuing operations attributable | | | | | |
| to GE common shareholders | 4,146 |
| 618 |
| | (1,506 | ) | 46 |
|
| Earnings (loss) from discontinued operations, net of taxes | (171 | ) | 2,881 |
| | (147 | ) | 273 |
|
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| discontinued operations | (2 | ) | 11 |
| | — |
| — |
|
| Net earnings (loss) attributable to GE common shareholders | $ | 3,977 |
| $ | 3,488 |
| | $ | (1,653 | ) | $ | 319 |
|
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.
|
| | | | | | |
| STATEMENT OF FINANCIAL POSITION (UNAUDITED) | Consolidated |
| (In millions, except share amounts) | June 30, 2020 |
| December 31, 2019 |
|
| Cash, cash equivalents and restricted cash | $ | 41,431 |
| $ | 36,394 |
|
| Investment securities (Note 3) | 47,117 |
| 48,521 |
|
| Current receivables (Note 4) | 16,041 |
| 16,769 |
|
| Financing receivables – net (Note 5) | 3,095 |
| 3,134 |
|
| Inventories (Note 6) | 15,251 |
| 14,104 |
|
| Other GE Capital receivables | 7,578 |
| 7,144 |
|
| Property, plant and equipment – net (Note 7) | 45,503 |
| 46,186 |
|
| Receivable from GE Capital | — |
| — |
|
| Investment in GE Capital | — |
| — |
|
| Goodwill (Note 8) | 24,951 |
| 26,734 |
|
| Other intangible assets – net (Note 8) | 10,168 |
| 10,653 |
|
| Contract and other deferred assets (Note 10) | 15,555 |
| 16,801 |
|
| All other assets | 15,514 |
| 16,461 |
|
| Deferred income taxes (Note 14) | 10,665 |
| 9,889 |
|
| Assets of businesses held for sale (Note 2) | — |
| 9,149 |
|
| Assets of discontinued operations (Note 2) | 3,617 |
| 4,109 |
|
| Total assets | $ | 256,487 |
| $ | 266,048 |
|
| | | |
| Short-term borrowings (Note 11) | $ | 9,059 |
| $ | 22,072 |
|
| Short-term borrowings assumed by GE (Note 11) | — |
| — |
|
| Accounts payable, principally trade accounts | 13,469 |
| 15,926 |
|
| Progress collections and deferred income (Note 10) | 19,927 |
| 20,508 |
|
| Other GE current liabilities | 16,535 |
| 15,753 |
|
| Non-recourse borrowings of consolidated securitization entities (Note 11) | 396 |
| 1,655 |
|
| Long-term borrowings (Note 11) | 72,423 |
| 67,155 |
|
| Long-term borrowings assumed by GE (Note 11) | — |
| — |
|
| Insurance liabilities and annuity benefits (Note 12) | 40,954 |
| 39,826 |
|
| Non-current compensation and benefits | 30,906 |
| 31,687 |
|
| All other liabilities | 17,330 |
| 19,745 |
|
| Liabilities of businesses held for sale (Note 2) | — |
| 1,658 |
|
| Liabilities of discontinued operations (Note 2) | 235 |
| 203 |
|
| Total liabilities | 221,233 |
| 236,187 |
|
| | | |
Preferred stock (5,939,875 shares outstanding at both June 30, 2020
and December 31, 2019) | 6 |
| 6 |
|
Common stock (8,753,289,000 and 8,738,434,000 shares outstanding
at June 30, 2020 and December 31, 2019, respectively) | 702 |
| 702 |
|
| Accumulated other comprehensive income (loss) – net attributable to GE | (10,194 | ) | (11,732 | ) |
| Other capital | 34,292 |
| 34,405 |
|
| Retained earnings | 91,188 |
| 87,732 |
|
| Less common stock held in treasury | (82,320 | ) | (82,797 | ) |
| Total GE shareholders’ equity | 33,674 |
| 28,316 |
|
| Noncontrolling interests | 1,579 |
| 1,545 |
|
| Total equity | 35,254 |
| 29,861 |
|
| Total liabilities and equity | $ | 256,487 |
| $ | 266,048 |
|
|
| | | | | | | | | | | | | |
| STATEMENT OF FINANCIAL POSITION (CONTINUED) | GE(a) | | GE Capital |
(UNAUDITED) (In millions, except share amounts) | June 30,
2020 |
| December 31, 2019 |
| | June 30,
2020 |
| December 31, 2019 |
|
| Cash, cash equivalents and restricted cash | $ | 25,428 |
| $ | 17,613 |
| | $ | 16,003 |
| $ | 18,781 |
|
| Investment securities (Note 3) | 5,997 |
| 10,008 |
| | 41,121 |
| 38,514 |
|
| Current receivables (Note 4) | 12,744 |
| 13,883 |
| | — |
| — |
|
| Financing receivables - net (Note 5) | — |
| — |
| | 6,959 |
| 6,979 |
|
| Inventories (Note 6) | 15,251 |
| 14,104 |
| | — |
| — |
|
| Other GE Capital receivables | — |
| — |
| | 10,456 |
| 11,767 |
|
| Property, plant and equipment – net (Note 7) | 16,718 |
| 17,447 |
| | 29,923 |
| 29,886 |
|
| Receivable from GE Capital | 20,672 |
| 19,142 |
| | — |
| — |
|
| Investment in GE Capital | 13,587 |
| 15,299 |
| | — |
| — |
|
| Goodwill (Note 8) | 24,951 |
| 25,895 |
| | — |
| 839 |
|
| Other intangible assets – net (Note 8) | 10,009 |
| 10,461 |
| | 159 |
| 192 |
|
| Contract and other deferred assets (Note 10) | 15,587 |
| 16,833 |
| | — |
| — |
|
| All other assets | 8,419 |
| 8,399 |
| | 7,934 |
| 8,648 |
|
| Deferred income taxes (Note 14) | 8,765 |
| 8,189 |
| | 1,900 |
| 1,700 |
|
| Assets of businesses held for sale (Note 2) | — |
| 8,626 |
| | — |
| 241 |
|
| Assets of discontinued operations (Note 2) | 155 |
| 202 |
| | 3,462 |
| 3,907 |
|
| Total assets | $ | 178,283 |
| $ | 186,100 |
| | $ | 117,918 |
| $ | 121,454 |
|
| | | | | | |
| Short-term borrowings (Note 11) | $ | 1,737 |
| $ | 5,606 |
| | $ | 4,601 |
| $ | 12,030 |
|
| Short-term borrowings assumed by GE (Note 11) | 3,679 |
| 5,473 |
| | 3,237 |
| 2,104 |
|
| Accounts payable, principally trade accounts | 13,809 |
| 17,702 |
| | 1,010 |
| 886 |
|
| Progress collections and deferred income (Note 10) | 20,091 |
| 20,694 |
| | — |
| — |
|
| Other GE current liabilities | 17,300 |
| 16,833 |
| | — |
| — |
|
| Non-recourse borrowings of consolidated securitization entities (Note 11) | — |
| — |
| | 396 |
| 1,655 |
|
| Long-term borrowings (Note 11) | 18,679 |
| 15,085 |
| | 32,025 |
| 26,175 |
|
| Long-term borrowings assumed by GE (Note 11) | 21,719 |
| 25,895 |
| | 17,435 |
| 17,038 |
|
| Insurance liabilities and annuity benefits (Note 12) | — |
| — |
| | 41,416 |
| 40,232 |
|
| Non-current compensation and benefits | 30,460 |
| 31,208 |
| | 438 |
| 472 |
|
| All other liabilities | 15,562 |
| 16,156 |
| | 3,532 |
| 5,278 |
|
| Liabilities of businesses held for sale (Note 2) | — |
| 1,620 |
| | — |
| 52 |
|
| Liabilities of discontinued operations (Note 2) | 151 |
| 106 |
| | 84 |
| 97 |
|
| Total liabilities | 143,187 |
| 156,379 |
| | 104,174 |
| 106,016 |
|
| | | | | | |
Preferred stock (5,939,875 shares outstanding at both June 30, 2020
and December 31, 2019) | 6 |
| 6 |
| | 6 |
| 6 |
|
Common stock (8,753,289,000 and 8,738,434,000 shares outstanding
at June 30, 2020 and December 31, 2019, respectively) | 702 |
| 702 |
| | — |
| — |
|
| Accumulated other comprehensive income (loss) - net attributable to GE | (10,194 | ) | (11,732 | ) | | (906 | ) | (852 | ) |
| Other capital | 34,292 |
| 34,405 |
| | 17,004 |
| 17,001 |
|
| Retained earnings | 91,188 |
| 87,732 |
| | (2,517 | ) | (857 | ) |
| Less common stock held in treasury | (82,320 | ) | (82,797 | ) | | — |
| — |
|
| Total GE shareholders’ equity | 33,674 |
| 28,316 |
| | 13,587 |
| 15,299 |
|
| Noncontrolling interests | 1,421 |
| 1,406 |
| | 157 |
| 139 |
|
| Total equity | 35,096 |
| 29,721 |
| | 13,744 |
| 15,438 |
|
| Total liabilities and equity | $ | 178,283 |
| $ | 186,100 |
| | $ | 117,918 |
| $ | 121,454 |
|
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.
|
| | | | | | |
| STATEMENT OF CASH FLOWS | Six months ended June 30 |
| (UNAUDITED) | Consolidated |
| (In millions) | 2020 |
| 2019 |
|
| Net earnings (loss) | $ | 4,101 |
| $ | 3,749 |
|
| (Earnings) loss from discontinued operations | 171 |
| (2,881 | ) |
| Adjustments to reconcile net earnings (loss) | | |
| to cash provided from operating activities | | |
| Depreciation and amortization of property, plant and equipment (Note 7) | 2,281 |
| 1,965 |
|
| Amortization of intangible assets (Note 8) | 648 |
| 724 |
|
| Goodwill impairments (Note 8) | 1,717 |
| 744 |
|
| (Earnings) loss from continuing operations retained by GE Capital | — |
| — |
|
| (Gains) losses on purchases and sales of business interests (Note 22) | (12,482 | ) | (214 | ) |
| (Gains) losses on equity securities (Note 22) | 4,031 |
| 54 |
|
| Principal pension plans cost (Note 13) | 1,798 |
| 1,693 |
|
| Principal pension plans employer contributions | (144 | ) | (133 | ) |
| Other postretirement benefit plans (net) | (488 | ) | (542 | ) |
| Provision (benefit) for income taxes | (136 | ) | (41 | ) |
| Cash recovered (paid) during the year for income taxes | (622 | ) | (1,067 | ) |
| Decrease (increase) in contract and other deferred assets | 501 |
| (548 | ) |
| Decrease (increase) in GE current receivables | (190 | ) | (696 | ) |
| Decrease (increase) in inventories | (730 | ) | (1,951 | ) |
| Increase (decrease) in accounts payable | (2,015 | ) | 828 |
|
| Increase (decrease) in GE progress collections | (670 | ) | 66 |
|
| All other operating activities | 911 |
| (223 | ) |
| Cash from (used for) operating activities – continuing operations | (1,319 | ) | 1,528 |
|
| Cash from (used for) operating activities – discontinued operations | (53 | ) | (1,336 | ) |
| Cash from (used for) operating activities | (1,372 | ) | 192 |
|
| | | |
| Additions to property, plant and equipment | (1,614 | ) | (2,946 | ) |
| Dispositions of property, plant and equipment | 1,054 |
| 1,912 |
|
| Additions to internal-use software | (98 | ) | (141 | ) |
| Net decrease (increase) in financing receivables | (164 | ) | 377 |
|
| Proceeds from sale of discontinued operations | — |
| 2,827 |
|
| Proceeds from principal business dispositions | 20,854 |
| 1,058 |
|
| Net cash from (payments for) principal businesses purchased | (7 | ) | — |
|
| Capital contribution from GE to GE Capital | — |
| — |
|
| Sales of retained ownership interests in Wabtec | — |
| 1,799 |
|
| All other investing activities | (1,516 | ) | (2,620 | ) |
| Cash from (used for) investing activities – continuing operations | 18,509 |
| 2,266 |
|
| Cash from (used for) investing activities – discontinued operations | (91 | ) | 1,115 |
|
| Cash from (used for) investing activities | 18,419 |
| 3,382 |
|
| | | |
| Net increase (decrease) in borrowings (maturities of 90 days or less) | (3,412 | ) | (434 | ) |
| Newly issued debt (maturities longer than 90 days) | 14,228 |
| 1,462 |
|
| Repayments and other debt reductions (maturities longer than 90 days) | (22,005 | ) | (6,168 | ) |
| Capital contribution from GE to GE Capital | — |
| — |
|
| Dividends paid to shareholders | (324 | ) | (324 | ) |
| All other financing activities | (486 | ) | (627 | ) |
| Cash from (used for) financing activities – continuing operations | (11,999 | ) | (6,092 | ) |
| Cash from (used for) financing activities – discontinued operations | 1 |
| (469 | ) |
| Cash from (used for) financing activities | (11,998 | ) | (6,561 | ) |
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (217 | ) | 1 |
|
| Increase (decrease) in cash, cash equivalents and restricted cash | 4,831 |
| (2,986 | ) |
| Cash, cash equivalents and restricted cash at beginning of year | 37,077 |
| 35,548 |
|
| Cash, cash equivalents and restricted cash at June 30 | 41,908 |
| 32,562 |
|
| Less cash, cash equivalents and restricted cash of discontinued operations at June 30 | 477 |
| 3,732 |
|
| Cash, cash equivalents and restricted cash of continuing operations at June 30 | $ | 41,431 |
| $ | 28,830 |
|
|
| | | | | | | | | | | | | |
| STATEMENT OF CASH FLOWS (CONTINUED) | Six months ended June 30 |
| (UNAUDITED) | GE(a) | | GE Capital |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Net earnings (loss) | $ | 3,865 |
| $ | 3,522 |
| | $ | (1,417 | ) | $ | 547 |
|
| (Earnings) loss from discontinued operations | 171 |
| (2,881 | ) | | 147 |
| (273 | ) |
| Adjustments to reconcile net earnings (loss) | | | | | |
| to cash provided from operating activities | | | | | |
| Depreciation and amortization of property, plant and equipment (Note 7) | 916 |
| 961 |
| | 1,373 |
| 1,002 |
|
| Amortization of intangible assets (Note 8) | 611 |
| 693 |
| | 37 |
| 31 |
|
| Goodwill impairments (Note 8) | 877 |
| 744 |
| | 839 |
| — |
|
| (Earnings) loss from continuing operations retained by GE Capital | 1,506 |
| (46 | ) | | — |
| — |
|
| (Gains) losses on purchases and sales of business interests (Note 22) | (12,424 | ) | (214 | ) | | (58 | ) | — |
|
| (Gains) losses on equity securities (Note 22) | 3,986 |
| 57 |
| | 46 |
| (3 | ) |
| Principal pension plans cost (Note 13) | 1,798 |
| 1,693 |
| | — |
| — |
|
| Principal pension plans employer contributions | (144 | ) | (133 | ) | | — |
| — |
|
| Other postretirement benefit plans (net) | (471 | ) | (541 | ) | | (17 | ) | (1 | ) |
| Provision (benefit) for income taxes | 121 |
| 97 |
| | (257 | ) | (139 | ) |
| Cash recovered (paid) during the year for income taxes | (550 | ) | (970 | ) | | (72 | ) | (97 | ) |
| Decrease (increase) in contract and other deferred assets | 501 |
| (548 | ) | | — |
| — |
|
| Decrease (increase) in GE current receivables | 434 |
| (1,246 | ) | | — |
| — |
|
| Decrease (increase) in inventories | (692 | ) | (1,822 | ) | | — |
| — |
|
| Increase (decrease) in accounts payable | (3,462 | ) | 355 |
| | 4 |
| (1 | ) |
| Increase (decrease) in GE progress collections | (693 | ) | 61 |
| | — |
| — |
|
| All other operating activities | 386 |
| (849 | ) | | 340 |
| 214 |
|
| Cash from (used for) operating activities – continuing operations | (3,266 | ) | (1,068 | ) | | 967 |
| 1,279 |
|
| Cash from (used for) operating activities – discontinued operations | 26 |
| 38 |
| | (79 | ) | (1,702 | ) |
| Cash from (used for) operating activities | (3,240 | ) | (1,029 | ) | | 889 |
| (423 | ) |
| | | | | | |
| Additions to property, plant and equipment | (1,002 | ) | (1,116 | ) | | (655 | ) | (1,984 | ) |
| Dispositions of property, plant and equipment | 105 |
| 271 |
| | 954 |
| 1,645 |
|
| Additions to internal-use software | (95 | ) | (137 | ) | | (3 | ) | (4 | ) |
| Net decrease (increase) in financing receivables | — |
| — |
| | 45 |
| 2,067 |
|
| Proceeds from sale of discontinued operations | — |
| 2,827 |
| | — |
| — |
|
| Proceeds from principal business dispositions | 20,480 |
| 1,017 |
| | 34 |
| 417 |
|
| Net cash from (payments for) principal businesses purchased | (7 | ) | (417 | ) | | — |
| — |
|
| Capital contribution from GE to GE Capital | — |
| (1,500 | ) | | — |
| — |
|
| Sales of retained ownership interests in Wabtec | — |
| 1,799 |
| | — |
| — |
|
| All other investing activities | 207 |
| (111 | ) | | 7,143 |
| (1,280 | ) |
| Cash from (used for) investing activities – continuing operations | 19,689 |
| 2,634 |
| | 7,518 |
| 861 |
|
| Cash from (used for) investing activities – discontinued operations | (30 | ) | (322 | ) | | (60 | ) | 1,764 |
|
| Cash from (used for) investing activities | 19,659 |
| 2,312 |
| | 7,458 |
| 2,625 |
|
| | | | | | |
| Net increase (decrease) in borrowings (maturities of 90 days or less) | (3,512 | ) | (1,101 | ) | | (205 | ) | (656 | ) |
| Newly issued debt (maturities longer than 90 days) | 7,431 |
| 409 |
| | 6,797 |
| 1,053 |
|
| Repayments and other debt reductions (maturities longer than 90 days) | (12,113 | ) | (329 | ) | | (17,392 | ) | (5,840 | ) |
| Capital contribution from GE to GE Capital | — |
| — |
| | — |
| 1,500 |
|
| Dividends paid to shareholders | (176 | ) | (175 | ) | | (232 | ) | (225 | ) |
| All other financing activities | (83 | ) | (79 | ) | | (231 | ) | (561 | ) |
| Cash from (used for) financing activities – continuing operations | (8,453 | ) | (1,275 | ) | | (11,264 | ) | (4,728 | ) |
| Cash from (used for) financing activities – discontinued operations | 1 |
| (468 | ) | | — |
| (1 | ) |
| Cash from (used for) financing activities | (8,453 | ) | (1,743 | ) | | (11,264 | ) | (4,729 | ) |
| Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (155 | ) | (8 | ) | | (62 | ) | 9 |
|
| Increase (decrease) in cash, cash equivalents and restricted cash | 7,811 |
| (468 | ) | | (2,979 | ) | (2,518 | ) |
| Cash, cash equivalents and restricted cash at beginning of year | 17,617 |
| 20,528 |
| | 19,460 |
| 15,020 |
|
| Cash, cash equivalents and restricted cash at June 30 | 25,428 |
| 20,060 |
| | 16,480 |
| 12,502 |
|
Less cash, cash equivalents and restricted cash of discontinued operations
at June 30 | — |
| 3,143 |
| | 477 |
| 590 |
|
Cash, cash equivalents and restricted cash of continuing operations
at June 30 | $ | 25,428 |
| $ | 16,917 |
| | $ | 16,003 |
| $ | 11,913 |
|
(a) Represents the adding together of all GE Industrial affiliates and the impact of GE Capital dividends on a one-line basis. See Note 1.
|
| | | | | | | | | | | | | |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | Three months ended June 30 | | Six months ended June 30 |
| (In millions, net of tax) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Net earnings (loss) | $ | (2,132 | ) | $ | 104 |
| | $ | 4,101 |
| $ | 3,749 |
|
| Less net earnings (loss) attributable to noncontrolling interests | (145 | ) | (23 | ) | | (111 | ) | 34 |
|
| Net earnings (loss) attributable to the Company | $ | (1,987 | ) | $ | 127 |
| | $ | 4,212 |
| $ | 3,716 |
|
| | | | | | |
| Investment securities | $ | 27 |
| $ | 76 |
| | $ | (14 | ) | $ | 99 |
|
| Currency translation adjustments | (57 | ) | (141 | ) | | 78 |
| 283 |
|
| Cash flow hedges | 53 |
| (25 | ) | | (158 | ) | 12 |
|
| Benefit plans | 604 |
| 639 |
| | 1,640 |
| 1,183 |
|
| Other comprehensive income (loss) | 627 |
| 547 |
| | 1,545 |
| 1,577 |
|
| Less: other comprehensive income (loss) attributable to noncontrolling interests | 2 |
| (85 | ) | | 7 |
| 15 |
|
| Other comprehensive income (loss) attributable to the Company | $ | 625 |
| $ | 633 |
| | $ | 1,539 |
| $ | 1,562 |
|
| | | | | | |
| Comprehensive income (loss) | $ | (1,505 | ) | $ | 651 |
| | $ | 5,647 |
| $ | 5,326 |
|
| Less: comprehensive income (loss) attributable to noncontrolling interests | (143 | ) | (109 | ) | | (104 | ) | 49 |
|
| Comprehensive income (loss) attributable to the Company | $ | (1,362 | ) | $ | 760 |
| | $ | 5,751 |
| $ | 5,277 |
|
|
| | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) | Three months ended June 30 | Six months ended June 30 |
| (In millions) | 2020 |
| | 2019 |
| 2020 |
| | 2019 |
|
| Preferred stock issued | $ | 6 |
| | $ | 6 |
| $ | 6 |
| | $ | 6 |
|
| Common stock issued | $ | 702 |
| | $ | 702 |
| $ | 702 |
| | $ | 702 |
|
| | | | | | | |
| Beginning balance | (10,819 | ) | | (13,485 | ) | (11,732 | ) | | (14,414 | ) |
| Investment securities | 27 |
| | 75 |
| (14 | ) | | 98 |
|
| Currency translation adjustments | (58 | ) | | (64 | ) | 75 |
| | 260 |
|
| Cash flow hedges | 53 |
| | (23 | ) | (158 | ) | | 12 |
|
| Benefit plans | 604 |
| | 645 |
| 1,636 |
| | 1,192 |
|
| Accumulated other comprehensive income (loss) ending balance | $ | (10,194 | ) | | $ | (12,852 | ) | $ | (10,194 | ) | | $ | (12,852 | ) |
| Beginning balance | 34,296 |
| | 34,345 |
| 34,405 |
| | 35,504 |
|
| Gains (losses) on treasury stock dispositions | (163 | ) | | (150 | ) | (412 | ) | | (657 | ) |
| Stock-based compensation | 111 |
| | 124 |
| 216 |
| | 264 |
|
| Other changes | 48 |
| | 6 |
| 83 |
| | (786 | ) |
| Other capital ending balance | $ | 34,292 |
| | $ | 34,324 |
| $ | 34,292 |
| | $ | 34,324 |
|
| Beginning balance | 93,615 |
| | 96,921 |
| 87,732 |
| | 93,109 |
|
| Net earnings (loss) attributable to the Company | (1,987 | ) | | 127 |
| 4,212 |
| | 3,716 |
|
| Dividends and other transactions with shareholders | (439 | ) | | (274 | ) | (581 | ) | | (419 | ) |
| Changes in accounting (Note 1) | — |
| | — |
| (175 | ) | | 368 |
|
| Retained earnings ending balance | $ | 91,188 |
| | $ | 96,773 |
| $ | 91,188 |
| | $ | 96,773 |
|
| Beginning balance | (82,516 | ) | | (83,328 | ) | (82,797 | ) | | (83,925 | ) |
| Purchases | (8 | ) | | (7 | ) | (22 | ) | | (45 | ) |
| Dispositions | 204 |
| | 198 |
| 498 |
| | 834 |
|
| Common stock held in treasury ending balance | $ | (82,320 | ) | | $ | (83,137 | ) | $ | (82,320 | ) | | $ | (83,137 | ) |
| GE shareholders' equity balance | 33,674 |
| | 35,816 |
| 33,674 |
| | 35,816 |
|
| Noncontrolling interests balance (Note 15) | 1,579 |
| | 20,312 |
| 1,579 |
| | 20,312 |
|
| Total equity balance at June 30(a) | $ | 35,254 |
| | $ | 56,129 |
| $ | 35,254 |
| | $ | 56,129 |
|
| |
(a) | Total equity balance decreased by $(20,875) million in the last twelve months from June 30, 2019, primarily due to reduction of non-controlling interest balance of $(19,095) million attributable to Baker Hughes Class A shareholders at June 30, 2019, after-tax loss of $(8,238) million in discontinued operations due to deconsolidation of Baker Hughes in the third quarter of 2019, after-tax change in unrealized loss on our remaining interest in Baker Hughes $(3,080) million, partially offset by after-tax gain of $11,199 million due to the sale of our BioPharma business within our Healthcare segment. See Notes 2 and 3 for further information.
|
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. We present our financial statements in a three-column format, which allows investors to see our GE industrial operations separately from our financial services operations. We believe that this provides useful supplemental information to our consolidated financial statements. To the extent that we have transactions between GE Industrial and GE Capital, these transactions are made on arm's lengtharms-length terms, are reported in the respective columns of our financial statements and are eliminated in consolidation. See Note 2022 for further information.
Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP), which requires us to make estimates based on assumptions about current and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in our financial statements. Although our current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by the ongoing Coronavirus Disease 2019 (COVID-19) pandemic. The severity, magnitude and duration, as well as the economic consequences, of the COVID-19 pandemic, are uncertain, rapidly changing and difficult to predict. As a result, our accounting estimates and assumptions may change over time in response to COVID-19. Such changes could result in future impairments of goodwill, intangibles, long-lived assets and investment securities, revisions to estimated profitability on long-term product service agreements, incremental credit losses on receivables and debt securities, a decrease in the carrying amount of our tax assets, or an increase in our insurance liabilities and pension obligations as of the time of a relevant measurement event.
In preparing our Statement of Cash Flows, we make certain adjustments to reflect cash flows that cannot otherwise be calculated by changes in our Statement of Financial Position. These adjustments may include, but are not limited to, the effects of currency exchange, acquisitions and dispositions of businesses, businesses classified as held for sale, the timing of settlements to suppliers for property, plant and equipment, non-cash gains/losses and other balance sheet reclassifications.
We have reclassified certain prior-period amounts to conform to the current-period’s presentation. Unless otherwise noted, tables are presented in U.S. dollars in millions. Certain columns and rows may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers in millions. Earnings per share amounts are computed independently for earnings from continuing operations, earnings from discontinued operations and net earnings. As a result, the sum of per-share amounts may not equal the total. Unless otherwise indicated, information in these notes to the consolidated financial statements relates to continuing operations. Certain of our operations have been presented as discontinued. We present businesses whose disposal represents a strategic shift that has, or will have, a major effect on our operations and financial results as discontinued operations when the components meet the criteria for held for sale, are sold, or spun-off. See Note 2 for further information.
The accompanying consolidated financial statements and notes are unaudited. The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. These consolidated financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Our significant accounting policies are described in Note 1 of our aforementioned Annual Report. We include herein certain updates to those policies.
Allowance for credit losses. When we record customer receivables, contract assets and financing receivables arising from revenue transactions, as well as commercial mortgage loans and reinsurance recoverables in GE Capital’s run-off insurance operations, financial guarantees and certain commitments, we record an allowance for credit losses for the current expected credit losses (CECL) inherent in the asset over its expected life. The allowance for credit losses is a valuation account deducted from the amortized cost basis of the assets to present their net carrying value at the amount expected to be collected. Each period the allowance for credit losses is adjusted through earnings to reflect expected credit losses over the remaining lives of the assets. We evaluate debt securities with unrealized losses to determine whether any of the losses arise from concerns about the issuer’s credit or the underlying collateral and record an allowance for credit losses, if required.
We estimate expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. When measuring expected credit losses, we pool assets with similar country risk and credit risk characteristics. Changes in the relevant information may significantly affect the estimates of expected credit losses.
ACCOUNTING CHANGES. On January 1, 2020, 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 SEC issued a final rule amending disclosure requirements for guarantors and issuers of registered guaranteed securities under SEC Regulation S-X, Rule 3-10. The final rule is effective for filings on or after January 4, 2021, however early application is permitted. As a result of the simplification provided by this rule, beginning with this quarterly report on Form 10-Q for the period ended June 30, 2020, we have elected to early adopt the disclosure requirements.
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE.OPERATIONS. On March 31, 2020, we completed the sale of our BioPharma business within our Healthcare segment for total consideration of $21,149$21,112 million (after certain working capital adjustments). The consideration consisted of $20,732 million in cash and $417 million of pension liabilities that were assumed by Danaher. In addition, we incurred $154$185 million of cash payments directly associated with the transaction intransaction. In the second quarter. As a result,first half of 2020, we recognized a pre-tax gain of $12,341$12,341 million ($ ($11,199 million after tax) after-tax) in our consolidated Statement of Earnings (Loss).
In the first half of 2020, we sold all our remaining businesses classified as held for sale, including the remaining Lighting business within our Corporate segment and the remaining PK AirFinance business within our Capital segment.
DISCONTINUED OPERATIONS. Discontinued operations primarily include our Baker Hughes and Transportation segments, and certain businesses incomprise our GE Capital segment (ourAviation Services (GECAS) business, our mortgage portfolio in Poland, and other trailing assets and liabilities associated with the saledispositions of ourcertain GE Capital businesses).and GE Industrial businesses. Results of operations, financial position and cash flows for these businesses are reported as discontinued operations for all periods presented.
GECAS.
In September 2019,On March 9, 2021 we reducedentered into an agreement with AerCap Holdings N.V. (AerCap) to combine our GECAS business with AerCap. GE will receive total consideration consisting of $23,905 million cash subject to contractual closing adjustments, 111.5 million shares of AerCap common stock (approximately 46% ownership interestinterest) valued at $5,710 million based on AerCap’s closing share price of $51.21 on June 30, 2021 and $1,000 million paid in Baker Hughes from 50.2% to 36.8% andAerCap notes and/or cash upon closing at AerCap's option. As a result, we have reclassified itsGECAS' results to discontinued operations for all periods presented.presented and recognized a non-cash after-tax loss of $3,869 million in discontinued operations in the first half of 2021. Given the economics of GECAS accrue to AerCap in conjunction with the transaction, the net impact of GECAS (loss on sale and operations) could change materially, mainly due to fluctuations in AerCap's closing share price. While AerCap shareholders have approved the transaction, completion remains subject to regulatory approvals and other customary closing conditions.
After completion of the transaction, we will elect to prospectively measure our investment in AerCap at fair value and expect to have continuing involvement with AerCap, primarily through our ownership interest and ongoing sales or leases of products and services.
Bank BPH. The mortgage portfolio in Poland (Bank BPH) comprises floating rate residential mortgages, 86% of which are indexed to or denominated in foreign currencies (primarily Swiss francs). At June 30, 2021, the total portfolio had a carrying value of $1,991 million with a 1.86% 90-day delinquency rate and an average loan to value ratio of approximately 59.7%. The portfolio is recorded at the lower of cost or fair value, less cost to sell, which reflects market yields as well as estimates with respect to ongoing litigation in Poland related to foreign currency-denominated mortgages and other factors. Earnings from discontinued operations for the six months ended June 30, 2021 included $278 million non-cash pre-tax charges, reflecting estimates with respect to ongoing litigation as well as market yields, primarily in the first quarter of 2021. Future changes in the estimated legal liabilities or market yields could result in further losses related to these loans in future reporting periods. See Note 21 for further information.
Baker Hughes (BKR).We have continuing involvement with Baker Hughes (BKR)BKR primarily through our remaining interest, ongoing purchases and sales of products and services, transition services that we provide to BKR, as well as an aeroderivative joint venture (JV) we formed with BKR in the fourth quarter of 2019.
The JV is jointly controlled by GE and BKR and is consolidated by GE due to the significance of our investment in BKR. Our Aviation segment sells products and services to
For the JV. In turn, the JV sells products and services primarily to BKR and our Power segment. Transactions between the JV and GE businesses are eliminated in consolidation. In the first half of 2020,six months ended June 30, 2021, we had sales of $252 million to BKR for products and services from the JV and we collected cash of $225 million. If our investment in BKR is reduced to below 20%, we would no longer have significant influence in BKR and, as a result, we would not consolidate the JV. A potential deconsolidation of the JV is not expected to have a material impact on GE Industrial free cash flows.
In addition, in the first half of 2020, we had sales of $265$331 million and purchases of $101$130 million with BKR for products and services outside of the JV. We collected net cash of $451$206 million from BKR related to sales, purchases and transition services.
In the first half of 2021, we had sales of $237 million to BKR for products and services from the JV, and we collected cash of $300 million. When our investment in BKR is reduced to below 20%, we will deconsolidate the JV. A deconsolidation of the JV is not expected to have a material impact on GE Industrial Cash from operating activities (CFOA).
In addition, in the first half of 2021, we received $130$28 million of repayments on the promissory note receivable from BKR and dividends of $136$104 million 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 | | | | | | | | | | | | | Three months ended June 30 | | Six months ended June 30 |
| | | | | | | | | | | | | | | | | | | 2021 | 2020 | | 2021 | 2020 |
| Operations | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| GE Capital revenues from services | | | | | | | | | | | | | | | | | | | $ | 902 | | $ | 1,055 | | | $ | 1,535 | | $ | 2,065 | |
| Cost of goods and services sold | | | | | | | | | | | | | | | | | | | (8) | | (840) | | | (376) | | (1,387) | |
| Other income, costs and expenses | | | | | | | | | | | | | | | | | | | (311) | | (1,248) | | | (697) | | (1,709) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Earnings (loss) of discontinued operations before income taxes | | | | | | | | | | | | | | | | | | | $ | 583 | | $ | (1,033) | | | $ | 462 | | $ | (1,031) | |
| Benefit (provision) for income taxes | | | | | | | | | | | | | | | | | | | (50) | | 49 | | | (79) | | 30 | |
| Earnings (loss) of discontinued operations, net of taxes(a) | | | | | | | | | | | | | | | | | | | $ | 533 | | $ | (984) | | | $ | 384 | | $ | (1,001) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Disposal | | | | | | | | | | | | | | | | | | | | | | | |
| Gain (loss) on disposal before income taxes | | | | | | | | | | | | | | | | | | | $ | (1,133) | | $ | (10) | | | $ | (3,835) | | $ | (13) | |
| Benefit (provision) for income taxes | | | | | | | | | | | | | | | | | | | 37 | | 0 | | | (7) | | 0 | |
| Gain (loss) on disposal, net of taxes(b) | | | | | | | | | | | | | | | | | | | $ | (1,097) | | $ | (10) | | | $ | (3,842) | | $ | (13) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Earnings (loss) from discontinued operations, net of taxes | | | | | | | | | | | | | | | | | | | $ | (564) | | $ | (993) | | | $ | (3,458) | | $ | (1,015) | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
RESULTS OF DISCONTINUED OPERATIONS (In millions) | Baker Hughes | | Transportation | | GE Capital | | Total |
| Three months ended June 30 | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Operations | | | | | | | | | | | |
| Sales of goods and services | $ | — |
| $ | 5,953 |
| | $ | — |
| $ | — |
| | $ | — |
| $ | — |
| | $ | — |
| $ | 5,953 |
|
| GE Capital revenues from services | — |
| — |
| | — |
| — |
| | 71 |
| (48 | ) | | 71 |
| (48 | ) |
| Cost of goods and services sold | — |
| (4,954 | ) | | — |
| — |
| | — |
| — |
| | — |
| (4,954 | ) |
| Other income, costs and expenses | (3 | ) | (981 | ) | | 1 |
| 3 |
| | (62 | ) | (16 | ) | | (64 | ) | (993 | ) |
| | | | | | | | | | | | |
Earnings (loss) of discontinued operations before income taxes | (3 | ) | 18 |
| | 1 |
| 3 |
| | 10 |
| (64 | ) | | 8 |
| (42 | ) |
| Benefit (provision) for income taxes | 2 |
| (33 | ) | | — |
| (7 | ) | | 8 |
| 302 |
| | 9 |
| 261 |
|
Earnings (loss) of discontinued operations, net of taxes(a) | $ | (1 | ) | $ | (15 | ) | | $ | 1 |
| $ | (4 | ) | | $ | 17 |
| $ | 238 |
| | $ | 17 |
| $ | 219 |
|
| | | | | | | | | | | | |
| Disposal | | | | | | | | | | | |
| Gain (loss) on disposal before income taxes | (10 | ) | — |
| | — |
| — |
| | — |
| — |
| | (10 | ) | — |
|
| Benefit (provision) for income taxes | — |
| — |
| | — |
| — |
| | — |
| — |
| | — |
| — |
|
| Gain (loss) on disposal, net of taxes | $ | (10 | ) | $ | — |
| | $ | — |
| $ | — |
| | $ | — |
| $ | (1 | ) | | $ | (10 | ) | $ | (1 | ) |
| | | | | | | | | | | | |
Earnings (loss) from discontinued operations, net of taxes | $ | (11 | ) | $ | (15 | ) | | $ | 1 |
| $ | (4 | ) | | $ | 17 |
| $ | 238 |
| | $ | 7 |
| $ | 219 |
|
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Baker Hughes | | Transportation | | GE Capital | | Total |
| Six months ended June 30 | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Operations | | | | | | | | | | | |
| Sales of goods and services | $ | — |
| $ | 11,569 |
| | $ | — |
| $ | 549 |
| | $ | — |
| $ | — |
| | $ | — |
| $ | 12,118 |
|
| GE Capital revenues from services | — |
| — |
| | — |
| — |
| | (5 | ) | (9 | ) | | (5 | ) | (9 | ) |
| Cost of goods and services sold | — |
| (9,631 | ) | | — |
| (478 | ) | | — |
| — |
| | — |
| (10,109 | ) |
| Other income, costs and expenses | (3 | ) | (1,768 | ) | | (3 | ) | (6 | ) | | (146 | ) | (89 | ) | | (152 | ) | (1,863 | ) |
| | | | | | | | | | | | |
Earnings (loss) of discontinued operations before income taxes | (3 | ) | 170 |
| | (3 | ) | 65 |
| | (151 | ) | (98 | ) | | $ | (157 | ) | $ | 137 |
|
| Benefit (provision) for income taxes | (11 | ) | (116 | ) | | 6 |
| (19 | ) | | 4 |
| 327 |
| | — |
| 192 |
|
Earnings (loss) of discontinued operations, net of taxes(a) | $ | (14 | ) | $ | 55 |
| | $ | 4 |
| $ | 46 |
| | $ | (147 | ) | $ | 228 |
| | $ | (157 | ) | $ | 329 |
|
| | | | | | | | | | | | |
| Disposal | | | | | | | | | | | |
| Gain (loss) on disposal before income taxes | (13 | ) | — |
| | — |
| 3,471 |
| | — |
| 47 |
| | $ | (13 | ) | $ | 3,517 |
|
| Benefit (provision) for income taxes | — |
| — |
| | — |
| (963 | ) | | — |
| (2 | ) | | — |
| (964 | ) |
| Gain (loss) on disposal, net of taxes | $ | (13 | ) | $ | — |
| | $ | — |
| $ | 2,508 |
| | $ | — |
| $ | 45 |
| | $ | (13 | ) | $ | 2,553 |
|
| | | | | | | | | | | | |
Earnings (loss) from discontinued operations, net of taxes | $ | (27 | ) | $ | 55 |
| | $ | 4 |
| $ | 2,554 |
| | $ | (147 | ) | $ | 273 |
| | $ | (171 | ) | $ | 2,881 |
|
(a) Earnings (loss) of discontinued operations attributable to the Company after income taxes was $17Included $496 million and $242$(1,024) million from GECAS operations, including 0 and $838 million of depreciation and amortization, for the three months ended June 30, 2021 and 2020, and 2019, respectively. Earnings (loss) of discontinued operations attributable to the Company after income taxes was $(155)Included $673 million and $317$(869) million from GECAS operations, including $359 million and $1,384 million of depreciation and amortization, for the six months ended June 30, 2021 and 2020, respectively. Depreciation and 2019, respectively. amortization ceased on March 10, 2021.
(b) Loss for the three months ended June 30, 2021 was primarily driven by GECAS due to a decrease in fair value of AerCap common stock to be received of $840 million and an increase in GECAS net assets of $440 million attributable to income from operations, partially offset by associated income tax benefit.
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ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS (In millions) | June 30, 2020 |
| December 31, 2019 |
|
| Cash, cash equivalents and restricted cash | $ | 477 |
| $ | 638 |
|
| Investment securities | 91 |
| 202 |
|
| Current receivables | 61 |
| 81 |
|
| Financing receivables held for sale (Polish mortgage portfolio) | 2,398 |
| 2,485 |
|
| Property, plant, and equipment | 112 |
| 123 |
|
| Deferred income taxes | 213 |
| 264 |
|
| All other assets | 265 |
| 317 |
|
| Assets of discontinued operations(a) | $ | 3,617 |
| $ | 4,109 |
|
|
|
|
| Accounts payable & Progress collections and deferred income | $ | 15 |
| $ | 40 |
|
| All other liabilities(b) | 220 |
| 163 |
|
| Liabilities of discontinued operations(a) | $ | 235 |
| $ | 203 |
|
2021 2Q FORM 10-Q 38
| | | | | | | | |
| ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS | June 30, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash | $ | 31 | | $ | 0 | |
| Financing receivables - net | 2,102 | | 0 | |
| Other GE Capital receivables | 1,989 | | 0 | |
| Property, plant, and equipment - net | 28,407 | | 0 | |
| Valuation allowance on disposal group classified as discontinued operations | (3,709) | | 0 | |
| All other current assets | 4,366 | | 0 | |
| Total current assets of discontinued operations | 33,186 | | 0 | |
| Cash, cash equivalents and restricted cash | 506 | | 623 | |
| Financing receivables - net | 0 | | 2,710 | |
| Other GE Capital receivables | 57 | | 1,844 | |
| Financing receivables held for sale (Polish mortgage portfolio) | 1,991 | | 2,461 | |
| Property, plant, and equipment - net | 96 | | 28,429 | |
| All other assets | 405 | | 4,683 | |
| Assets of discontinued operations(a) | $ | 36,244 | | $ | 40,749 | |
| | |
| Deferred income taxes | $ | 2,274 | | $ | 0 | |
| Accounts payable and all other liabilities | 2,648 | | 0 | |
| Total current liabilities of discontinued operations | 4,922 | | 0 | |
| Deferred income taxes | 0 | | 2,172 | |
| Accounts payable and all other liabilities(b) | 17 | | 3,010 | |
| Liabilities of discontinued operations(a) | $ | 4,939 | | $ | 5,182 | |
(a) Assets and liabilities of discontinued operations included $3,462Included $33,186 million and $84$37,199 million related to GE Capitalof assets and $4,922 million and $4,997 million of liabilities for GECAS as of June 30, 2021 and December 31, 2020, respectively.
(b) Included within All other liabilities of discontinued operations at June 30, 20202021 and December 31, 2019,2020 are intercompany tax receivables in the amount of $829$817 million and $839$704 million, respectively, primarily related to thepreviously disposed financial services businesses, that were part of the GE Capital Exit Plan, which are offset within All other liabilities of Consolidated GE.eliminated upon consolidation.
NOTE 3. INVESTMENT SECURITIES.SECURITIES. All of our debt securities are classified as available-for-sale and substantially all are investment-grade debt securities supporting obligations to annuitants and policyholders in our run-off insurance operations. Changes inWe have adopted the fair value option for our investment in BKR (comprising 267.7 million shares with approximately 26% ownership and a promissory note receivable as of our debt securities areJune 30, 2021), which is recorded in Other comprehensive income.as Equity securities with readily determinable fair valuesvalues. We classify investment securities as current or non-current based on our intent regarding the usage of proceeds from those investments. Investment securities held within insurance entities are included within this caption and changes in their fair value are recorded in earnings.classified as non-current as they support the long-duration insurance liabilities.
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| June 30, 2021 | | December 31, 2020 |
| Amortized
cost | Gross
unrealized
gains | Gross
unrealized
losses | Estimated
fair value | | Amortized
cost | Gross
unrealized
gains | Gross
unrealized
losses | Estimated
fair value |
| Equity (Baker Hughes) | $ | 6,134 | | $ | — | | $ | — | | $ | 6,134 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | |
| Current investment securities | $ | 6,134 | | $ | — | | $ | — | | $ | 6,134 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | |
| Debt | | | | | | | | | |
| U.S. corporate | $ | 24,455 | | $ | 5,703 | | $ | (26) | | $ | 30,133 | | | $ | 23,604 | | $ | 6,651 | | $ | (26) | | $ | 30,230 | |
| Non-U.S. corporate | 2,631 | | 372 | | (2) | | 3,001 | | | 2,283 | | 458 | | (1) | | 2,740 | |
| State and municipal | 3,316 | | 780 | | (4) | | 4,091 | | | 3,387 | | 878 | | (9) | | 4,256 | |
| Mortgage and asset-backed | 3,685 | | 161 | | (38) | | 3,808 | | | 3,652 | | 171 | | (71) | | 3,752 | |
| Government and agencies | 1,137 | | 137 | | (2) | | 1,273 | | | 1,169 | | 184 | | 0 | | 1,353 | |
| Other equity | 360 | | — | | — | | 360 | | | 218 | | — | | — | | 218 | |
| Non-current investment securities | $ | 35,583 | | $ | 7,153 | | $ | (71) | | $ | 42,665 | | | $ | 34,313 | | $ | 8,342 | | $ | (106) | | $ | 42,549 | |
| Total | $ | 41,717 | | $ | 7,153 | | $ | (71) | | $ | 48,800 | | | $ | 41,632 | | $ | 8,342 | | $ | (106) | | $ | 49,868 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2020 |
| December 31, 2019 |
| (In millions) | Amortized
cost |
| Gross
unrealized
gains |
| Gross
unrealized
losses |
| Estimated
fair value |
|
| Amortized
cost |
| Gross
unrealized
gains |
| Gross
unrealized
losses |
| Estimated
fair value |
|
| Debt |
|
|
|
|
|
|
|
|
|
| U.S. corporate | $ | 23,540 |
| $ | 5,771 |
| $ | (136 | ) | $ | 29,175 |
|
| $ | 23,037 |
| $ | 4,636 |
| $ | (11 | ) | $ | 27,661 |
|
| Non-U.S. corporate | 2,185 |
| 337 |
| (5 | ) | 2,517 |
|
| 2,161 |
| 260 |
| (1 | ) | 2,420 |
|
| State and municipal | 3,235 |
| 826 |
| (22 | ) | 4,039 |
|
| 3,086 |
| 598 |
| (15 | ) | 3,669 |
|
| Mortgage and asset-backed | 3,497 |
| 97 |
| (136 | ) | 3,458 |
|
| 3,117 |
| 116 |
| (4 | ) | 3,229 |
|
| Government and agencies | 1,257 |
| 206 |
| — |
| 1,463 |
|
| 1,391 |
| 126 |
| — |
| 1,516 |
|
| Equity | 6,465 |
| — |
| — |
| 6,465 |
|
| 10,025 |
| — |
| — |
| 10,025 |
|
| Total | $ | 40,179 |
| $ | 7,237 |
| $ | (300 | ) | $ | 47,117 |
|
| $ | 42,816 |
| $ | 5,736 |
| $ | (31 | ) | $ | 48,521 |
|
|
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
The amortized cost of debt securities as of June 30, 2020,2021 excludes accrued interest of $413$416 million,, which is reported in current Other GE Capital receivables.
The estimated fair valuesvalue of investment securities at June 30, 20202021 decreased since December 31, 2019,2020, primarily due to higher market yields and the sale of BKR shares, partially offset by new investments in our Insurance business and the mark-to-market effectseffect on our remaining interest in BKR, partially offset by a decrease in market yields and new investments in our insurance business. TheBKR.
Total estimated fair value of the remaining BKR interestdebt securities in an unrealized loss position were $2,336 million and promissory note receivable was $5,910$1,765 million, at June 30, 2020.
Grossof which $495 million and $165 million had gross unrealized losses of $(271)$(38) million and $(29) million are associated with debt securities with a fair value of $3,066$(20) million and $168 million that havehad been in a loss position for less than 12 months and 12 months or more respectively, at June 30, 2020.2021 and December 31, 2020, respectively. Gross unrealized losses of $(11)$(71) million and $(20) million are associated with debt securities with a fair value of $724 million and $274 million that have been in a loss position for less than 12 months and 12 months or more, respectively, at December 31, 2019.
At June 30, 2020, gross unrealized losses of $(300)2021 included $(26) million included $(136) million related to U.S. corporate securities primarily in the energy industry, and $(113)$(35) million related to commercial mortgage-backed securities (CMBS). Substantially allThe majority of our CMBS in an unrealized loss position have received investment-grade credit ratings from the major rating agencies and are collateralized by pools of commercial mortgage loans on real estate.
Net unrealized gains (losses) for equity securities with readily determinable fair values, which are recorded in Other income within continuing operations, were $1,929$408 million and $(51)$1,929 million for the three months ended and $(3,843)$646 million and $(42)$(3,843) million for the six months ended June 30, 2021 and 2020, and 2019, respectively. The amount recognized in the six months ended June 30, 2020 primarily included a loss of $3,865 million related to our interest in BKR.
Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the BKR promissory note totaled $1,450$1,618 million and $2,913$1,450 million for the three months ended and $2,705$2,951 million and $4,334$2,705 million for the six months ended June 30, 20202021 and 2019,2020, respectively. Gross realized gains on investmentdebt securities were $82$14 million and $32$82 million for the three months ended and $128$43 million and $76$128 million for the six months ended June 30, 20202021 and 2019,2020, respectively. Gross realized losses and impairments on debt securities were $(69) millioninsignificant and $(67)$(34) million for the three months ended and $(85) millioninsignificant and $(105)$(44) million for the six months ended June 30, 2021 and 2020, and 2019, respectively.
Contractual maturities of investments inour debt securities (excluding mortgage and asset-backed securities) at June 30, 20202021 are due as follows:
|
| | | | | | |
| (In millions) | Amortized cost |
| Estimated fair value |
|
| | | |
| Within one year | $ | 643 |
| $ | 657 |
|
| After one year through five years | 2,483 |
| 2,676 |
|
| After five years through ten years | 6,516 |
| 7,599 |
|
| After ten years | 20,575 |
| 26,261 |
|
| | | | | | | | |
| Amortized
cost | Estimated
fair value |
| Within one year | $ | 745 | | $ | 755 | |
| After one year through five years | 3,236 | | 3,544 | |
| After five years through ten years | 6,410 | | 7,557 | |
| After ten years | 21,147 | | 26,642 | |
We expect actual maturities to differ from contractual maturities because issuersborrowers have the right to call or prepay certain obligations.
Substantially all our equity securities are classified within Level 1 and substantially all our debt securities are primarily classified within Level 2, as their valuation is determined based on significant observable inputs. Investments with a fair value of $5,453$5,718 million and $5,210$5,866 million are classified within Level 3, as significant inputs to the valuation model are unobservable at June 30, 20202021 and December 31, 2019,2020, respectively. During the six months ended June 30, 20202021 and 2019,2020, there were no significant transfers into or out of Level 3.
In addition to the equity securities described above, we hold $288$329 million and $517$274 million of equity securities without readily determinable fair valuevalues at June 30, 20202021 and December 31, 2019,2020, respectively, that are classified within non-current All other assets in our consolidated Statement of Financial Position. Fair value adjustments, including impairments, recorded in earnings were $(65)$28 million and $29$(53) million for the three months ended and $(159)$31 million and $23$(145) million for the six months ended June 30, 2021 and 2020, and 2019, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 4. CURRENT AND LONG-TERM RECEIVABLES
|
| | | | | | | | | | | | | |
| CURRENT RECEIVABLES | Consolidated |
| GE |
| (In millions) | June 30, 2020 |
| December 31, 2019 |
|
| June 30, 2020 |
| December 31, 2019 |
|
| Customer receivables(a) | $ | 12,361 |
| $ | 12,594 |
|
| $ | 8,879 |
| $ | 9,507 |
|
| Sundry receivables(b)(c) | 4,840 |
| 5,049 |
|
| 5,021 |
| 5,247 |
|
| Allowance for credit losses(d) | (1,160 | ) | (874 | ) |
| (1,157 | ) | (872 | ) |
| Total current receivables | $ | 16,041 |
| $ | 16,769 |
|
| $ | 12,744 |
| $ | 13,883 |
|
| | | | | | | | | | | | | | | | | |
| CURRENT RECEIVABLES | Consolidated | | GE Industrial |
| June 30, 2021 | December 31, 2020 | | June 30, 2021 | December 31, 2020 |
| Customer receivables | $ | 12,188 | | $ | 13,459 | | | $ | 11,323 | | $ | 9,841 | |
| Sundry receivables(a)(b) | 4,115 | | 4,395 | | | 4,112 | | 4,763 | |
| Allowance for credit losses(c) | (1,113) | | (1,164) | | | (1,110) | | (1,161) | |
| Total current receivables | $ | 15,190 | | $ | 16,691 | | | $ | 14,324 | | $ | 13,442 | |
(a) Includes Aviation receivables from CFM due to 737 MAX temporary fleet grounding of $1,367 million and $1,397 million as of June 30, 2020 and December 31, 2019, respectively. During 2020, CFM and Boeing reached an agreement to secure payment terms for engines delivered in 2019 and 2020, net of progress collections. Based on the agreement, the receivable is expected to be collected from Boeing through the first quarter of 2021.
(b) Includes supplier advances, revenue sharing programs receivables in our Aviation business, other non-income based tax receivables, primarily value-added tax related to our operations in various countries outside of the U.S., receivables from disposed businesses, including receivables for transactional services agreements and certain intercompany balances that eliminate upon consolidation. Revenue sharing program receivables in Aviation are amounts due from third parties who participate in engine programs by developing and supplying certain engine components through the life of the program. The participants share in program revenues, receive a share of customer progress payments and share costs related to discounts and warranties.
(c)(b) Consolidated current receivables includeincluded a deferred purchase price receivable, which represents our retained risk with respect to current customer receivables sold to third parties through one of the receivableour active receivables facilities. The balance of the deferred purchase price held by GE Capital atas of June 30, 20202021 and December 31, 20192020 was $537$485 million and $421$413 million, respectively.
(d)(c) GE Industrial allowance for credit losses decreased primarily increased due to write-offs and foreign currency impact, partially offset by net new provisions of $272 million, offset by write-offs and foreign currency impact.$102 million.
Sales of GE Industrial current customer receivables. Effective April 1, 2021, the Company discontinued the majority of its factoring programs. Sales to GE Capital occurring after March 31, 2021 are only in connection with our remaining unconsolidated receivables facility described below. Customer receivables held by GE Capital and third parties were $3,134 million and $2,582 million, respectively, at March 31, 2021. When GE Industrial sells customer receivables to GE Capital or third parties, it accelerates the receipt of cash that would otherwise have been collected from customers. In any given period, the amount of cash received from sales of customer receivables compared to the cash GE Industrial would have otherwise collected had those customer receivables not been sold represents the cash generated or used in the period relating to this activity. GE Industrial sales of customer receivables to GE Capital or third parties are made on arm's lengtharms-length terms and any discount related to time value of money is recognized by GE Industrial when the customer receivables are sold. In our Statement of Cash Flows, receivables purchased and retained by GE Capital are reflected as cash from operating activities at GE Industrial, primarily as cash used for investing activities at GE Capital and are eliminated in consolidation. Collections on receivables purchased by GE Capital are reflected primarily as cash from investing activities at GE Capital and are reclassified to cash from operating activities in consolidation. As of June 30, 2021 and 2020, and 2019, GE Industrial sold approximately 45%21% and 59%45%, respectively, of its gross customer receivables to GE Capital or third parties. Activity related to customer receivables sold by GE Industrial is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 |
| GE Capital | | Third Parties | | GE Capital | | Third Parties |
| Balance at January 1 | $ | 3,618 | | | $ | 2,992 | | | $ | 3,087 | | | $ | 6,757 | |
| GE Industrial sales to GE Capital | 9,783 | | | — | | | 16,964 | | | — | |
| GE Industrial sales to third parties | — | | | 453 | | | — | | | 515 | |
| GE Capital sales to third parties | (6,763) | | | 6,763 | | | (9,914) | | | 9,914 | |
| Collections and other | (5,859) | | | (8,077) | | | (6,825) | | | (13,289) | |
| Reclassification from long-term customer receivables | 86 | | | 0 | | | 170 | | | 0 | |
| Balance at June 30 | $ | 865 | | (a) | $ | 2,131 | | (b) | $ | 3,482 | | (a) | $ | 3,897 | |
|
| | | | | | | | | | | | | | | |
| (In millions) | 2020 |
| 2019 |
| GE Capital |
|
| Third Parties |
| GE Capital |
|
| Third Parties |
| Balance at January 1 | $ | 3,087 |
|
| $ | 6,757 |
|
| $ | 4,386 |
|
| $ | 7,880 |
|
| GE sales to GE Capital | 16,964 |
|
| — |
|
| 20,009 |
|
| — |
|
| GE sales to third parties |
|
|
| 773 |
|
| — |
|
| 2,760 |
|
| GE Capital sales to third parties | (9,931 | ) |
| 9,931 |
|
| (13,836 | ) |
| 13,836 |
|
| Collections and other | (6,807 | ) |
| (13,565 | ) |
| (7,140 | ) |
| (17,644 | ) |
| Reclassification from long-term customer receivables | 170 |
|
| — |
|
| 209 |
|
| — |
|
| Balance at June 30 | $ | 3,482 |
| (a) | $ | 3,897 |
|
| $ | 3,627 |
| (a) | $ | 6,831 |
|
(a) At June 30, 2021 and 2020, and 2019, $661$439 million and $964$661 million, respectively, of the current receivables purchased and retained by GE Capital had been sold by GE Industrial to GE Capital with recourse (i.e., GE Industrial retains all or some risk of default). The effect on GE cash flows from operating activities (CFOA)Industrial CFOA of claims by GE Capital on receivables sold with recourse was insignificant for the six months ended June 30, 20202021 and 2019. 2020.
|
| | | | | | | | | | | | | |
| LONG-TERM RECEIVABLES | Consolidated | | GE |
| (In millions) | June 30, 2020 |
| December 31, 2019 |
| | June 30, 2020 |
| December 31, 2019 |
|
| Long-term customer receivables(a) | $ | 688 |
| $ | 906 |
|
| $ | 465 |
| $ | 506 |
|
| Long-term sundry receivables(b) | 1,399 |
| 1,504 |
| | 1,792 |
| 1,834 |
|
| Allowance for credit losses | (127 | ) | (128 | ) |
| (127 | ) | (128 | ) |
| Total long-term receivables | $ | 1,960 |
| $ | 2,282 |
|
| $ | 2,130 |
| $ | 2,212 |
|
(a) At(b) Included $1,936 million in our active unconsolidated receivables facility at June 30, 20202021, under which we currently expect to continue sales of GE Industrial receivables in the future.
| | | | | | | | | | | | | | | | | |
| LONG-TERM RECEIVABLES | Consolidated | | GE Industrial |
| June 30, 2021 | December 31, 2020 | | June 30, 2021 | December 31, 2020 |
| Long-term customer receivables(a) | $ | 593 | | $ | 585 | | | $ | 579 | | $ | 474 | |
| Long-term sundry receivables(b) | 1,675 | | 1,748 | | | 1,979 | | 2,097 | |
| Allowance for credit losses | (138) | | (142) | | | (138) | | (142) | |
| Total long-term receivables | $ | 2,130 | | $ | 2,191 | | | $ | 2,420 | | $ | 2,430 | |
(a) As of June 30, 2021 and December 31, 2019,2020, GE Capital held $223$14 million and $400$111 million, respectively, of GE Industrial long-term customer receivables, substantially all of which $197 million and $312 million had been purchasedare with recourse (i.e., GE Industrial retains all or some risk of default).GE sold an insignificant amount of long-term customer receivables during the six months ended June 30, 2020 and 2019.
(b) Includes supplier advances, revenue sharing programs receivables, other non-income based tax receivables and certain intercompany balances that eliminate upon consolidation.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
UNCONSOLIDATED RECEIVABLES FACILITIES. GE Capital has two1 active revolving receivables facilities,facility, under which customer receivables purchased from GE Industrial are sold to third parties. In the firstthis facility, which has a program size of $3,000$2,000 million as of June 30, 2021, upon the sale of receivables, we receive proceeds of cash and deferred purchase price and the Company’s remaining risk with respect to the sold receivables is limited to the balance of the deferred purchase price. In the second facility, which has a program size of $800 million, upon the sale of receivables, we receive proceeds of cash only and therefore the Company has no remaining risk with respect to the sold receivables. The program size of the second facility decreased from $1,200 million to $800 million during the six months ended June 30, 2020.
Activity related to theseour unconsolidated receivables facilities is included in the GE Capital sales to third parties line in the sales of GE Industrial current customer receivables table above and is as follows:
| | | | | | | | | | | |
| Six months ended June 30 | 2021 | | 2020 |
| Customer receivables sold to receivables facilities | $ | 5,334 | | | $ | 7,662 | |
| Total cash purchase price for customer receivables | 5,011 | | | 7,222 | |
| Cash collections re-invested to purchase customer receivables | 4,468 | | | 6,435 | |
| | | |
| Non-cash increases to deferred purchase price | $ | 288 | | | $ | 390 | |
| Cash payments received on deferred purchase price | 217 | | | 274 | |
|
| | | | | | | |
Six months ended June 30 (In millions) | 2020 |
| | 2019 |
|
| Customer receivables sold to receivables facilities | $ | 7,679 |
| | $ | 10,786 |
|
| Total cash purchase price for customer receivables | 7,240 |
| | 10,497 |
|
| Cash collections re-invested to purchase customer receivables | 6,453 |
| | 8,830 |
|
| | | | |
| Non-cash increases to deferred purchase price | $ | 390 |
| | $ | 137 |
|
| Cash payments received on deferred purchase price | 274 |
| | 220 |
|
CONSOLIDATED SECURITIZATION ENTITIES. GE Capital consolidates 32 variable interest entities (VIEs) that purchased customer receivables and long-term customer receivables from GE.GE Industrial prior to the April 1, 2021 discontinuation of the majority of the Company's factoring programs. At June 30, 20202021 and December 31, 2019,2020, these VIEs held current customer receivables of $1,386$384 million and $2,080$1,489 million and long-term customer receivables of $217$9 million and $375$93 million, respectively. At June 30, 20202021 and December 31, 2019,2020, the outstanding non-recourse debt under their respective debt facilities was $396$68 million and $1,655$892 million, respectively.
NOTE 5. FINANCING RECEIVABLES AND ALLOWANCES
| | | | | | | | | | | | | | | | | |
| Consolidated | | GE Capital |
| June 30, 2021 | December 31, 2020 | | June 30, 2021 | December 31, 2020 |
| Loans, net of deferred income | $ | 347 | | $ | 359 | | | $ | 1,645 | | $ | 4,182 | |
| Allowance for losses | (31) | | (32) | | | (12) | | (10) | |
| Current financing receivables – net | $ | 316 | | $ | 326 | | | $ | 1,632 | | $ | 4,172 | |
|
| | | | | | | | | | | | | |
| Consolidated |
| GE Capital |
| (In millions) | June 30, 2020 |
| December 31, 2019 |
|
| June 30, 2020 |
| December 31, 2019 |
|
| Loans, net of deferred income | $ | 1,212 |
| $ | 1,098 |
|
| $ | 5,049 |
| $ | 4,927 |
|
| Investment in financing leases, net of deferred income | 1,955 |
| 2,070 |
|
| 1,955 |
| 2,070 |
|
| 3,167 |
| 3,168 |
|
| 7,004 |
| 6,996 |
|
| Allowance for losses | (72 | ) | (33 | ) |
| (45 | ) | (17 | ) |
| Financing receivables – net | $ | 3,095 |
| $ | 3,134 |
|
| $ | 6,959 |
| $ | 6,979 |
|
Consolidated finance lease income was $34 million and $45 million in the three months ended June 30, 2020 and 2019, respectively,and $78 million and $91 million in the six months ended June 30, 2020 and 2019, respectively.
We manage our GE Capital financing receivables portfolio using delinquency and nonaccrual data as key performance indicators. At June 30, 2020, 8.5%, 4.7%2021 and 4.6% ofDecember 31, 2020, financing receivables were over 30 days past due overwere 3.1% and 2.8% and 90 days past due were 2.2% and on nonaccrual, respectively, with the vast majority of nonaccrual financing receivables secured by collateral. At December 31, 2019, 4.2%1.7%, 2.9% and 6.1% of financing receivables were over 30 days past due, over 90 days past due and on nonaccrual, respectively.
GE Capital financing receivables that comprise receivables purchased from GE Industrial are reclassified to either Current receivables or All other assets in our consolidated Statement of Financial Position. To the extent these receivables are purchased with full or limited recourse, they are excluded from the delinquency and nonaccrual data above. See Note 4 for further information.
NOTE 6. INVENTORIES, INCLUDING DEFERRED INVENTORY COSTS
| | | | | | | | |
| June 30, 2021 | December 31, 2020 |
| Raw materials and work in process | $ | 8,393 | | $ | 7,937 | |
| Finished goods | 6,184 | | 5,654 | |
| Deferred inventory costs(a) | 2,439 | | 2,299 | |
| Inventories, including deferred inventory costs | $ | 17,016 | | $ | 15,890 | |
|
| | | | | | |
| (In millions) | June 30, 2020 |
| December 31, 2019 |
|
| Raw materials and work in process | $ | 8,976 |
| $ | 8,771 |
|
| Finished goods | 6,275 |
| 5,333 |
|
| Total inventories | $ | 15,251 |
| $ | 14,104 |
|
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 7. PROPERTY, PLANT AND EQUIPMENT
| | | | | | | | June 30, 2021 | December 31, 2020 |
| (In millions) | June 30, 2020 |
| December 31, 2019 |
| |
| Original cost | $ | 76,137 |
| $ | 75,187 |
| Original cost | $ | 32,274 | | $ | 32,098 | |
| Less accumulated depreciation and amortization | (33,317 | ) | (31,897 | ) | Less accumulated depreciation and amortization | (18,858) | | (18,251) | |
| Right-of-use operating lease assets | | Right-of-use operating lease assets | 2,753 | | 2,852 | |
| Property, plant and equipment – net | $ | 42,821 |
| $ | 43,290 |
| Property, plant and equipment – net | $ | 16,169 | | $ | 16,699 | |
Consolidated depreciation and amortization on property, plant and equipment was $1,290$483 million and $970$460 million for the three months ended June 30, 20202021 and 2019,2020, respectively, and $2,281$935 million and $1,965 million in the six months ended June 30, 2020 and 2019, respectively.
During the three and six months ended June 30, 2020, our GECAS business recognized pre-tax impairments of $292 million and $337 million, respectively, on its fixed-wing aircraft operating lease portfolio. Pre-tax impairments were insignificant for the three and six months ended June 30, 2019. We determined the fair values of these assets using primarily the income approach. These charges are included in costs of services sold within the Statement of Earnings (Loss) and within our Capital segment.
Income on our operating lease portfolio, primarily from our GECAS business, was $795 million and $1,017 million for the three months ended June 30, 2020 and 2019, respectively, and comprised fixed lease income of $714 million and $774 million and variable lease income of $82 million and $243 million, respectively. Income on our operating lease portfolio was $1,672 million and $1,949$921 million for the six months ended June 30, 20202021 and 2019, respectively, and comprises fixed lease income of $1,419 million and $1,539 million and variable lease income of $253 million and $411 million,2020, respectively.
Operating Lease Assets and Liabilities. Our consolidated Right of use operating lease (ROU) assets, included within property, plant and equipment in our Statement of Financial Position were $2,683 million and $2,896 million, as of June 30, 2020 and December 31, 2019, respectively. Our consolidated operating lease liabilities, included in All other liabilities in our Statement of Financial Position, were $2,930$3,051 million and $3,162$3,195 million, as of June 30, 20202021 and December 31, 2019,2020, respectively, which included GE Industrial operating lease liabilities of $3,117$2,993 million and $3,369$3,133 million, respectively. Expense on our operating lease portfolio, primarily from our long-term fixed leases, was $258 million and $285 million for the three months ended June 30, 2021 and 2020, respectively, and $539 million and $579 million for the six months ended June 30, 2021 and 2020, respectively.
|
| | | | | | | | | | | | | |
| OPERATING LEASE EXPENSE | Three months ended June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Long-term (fixed) | $ | 183 |
| $ | 219 |
| | $ | 360 |
| $ | 445 |
|
| Long-term (variable) | 24 |
| 27 |
| | 45 |
| 71 |
|
| Short-term | 54 |
| 43 |
| | 123 |
| 90 |
|
| Total operating lease expense | $ | 261 |
| $ | 289 |
| | $ | 528 |
| $ | 606 |
|
NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
| | | | | | | | | | | | | | | | |
| GOODWILL | January 1, 2021 | Acquisitions | | | Currency exchange
and other | Balance at
June 30, 2021 |
| Aviation | $ | 9,247 | | $ | 0 | | | | $ | (52) | | $ | 9,195 | |
| Healthcare | 11,855 | | 45 | | | | (5) | | 11,894 | |
| Renewable Energy | 3,401 | | 0 | | | | (22) | | 3,379 | |
| Power | 146 | | 0 | | | | 0 | | 145 | |
| | | | | | |
| Corporate | 876 | | 0 | | | | 2 | | 877 | |
| Total | $ | 25,524 | | $ | 45 | | | | $ | (78) | | $ | 25,491 | |
|
| | | | | | | | | | | | |
GOODWILL (In millions) | January 1, 2020 |
| Impairments |
| Currency exchange
and other |
| Balance at
June 30, 2020 |
|
| Power | $ | 145 |
| $ | — |
| $ | — |
| $ | 145 |
|
| Renewable Energy | 3,290 |
| — |
| (67 | ) | 3,223 |
|
| Aviation | 9,859 |
| (877 | ) | 8 |
| 8,989 |
|
| Healthcare | 11,728 |
| — |
| (4 | ) | 11,723 |
|
| Capital | 839 |
| (839 | ) | — |
| — |
|
| Corporate | 873 |
| — |
| (3 | ) | 871 |
|
| Total | $ | 26,734 |
| $ | (1,717 | ) | $ | (66 | ) | $ | 24,951 |
|
We test goodwill for impairment annually in the fourth quarter. In assessing the possibility that a reporting unit’s fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates, we consider all available evidence, including (i) the results of our impairment testing from the most recent testing date, (in particular, the magnitude of the excess of fair value over carrying value observed), (ii) downward revisions to internal forecasts or decreases in market multiples, (and the magnitude thereof), if any, and (iii) declines in market capitalization below book value (andcapitalization. In the magnitude and durationfirst half of those declines), if any. Due to the impact of recent events, including challenges from declines in current market conditions,2021, we performeddid not identify any reporting units that required an interim impairment test at our Additive reporting unit within our Aviation segment and GECAS reporting unit within our Capital segment in the second quarter of 2020, both of which incorporated a combination of income and market valuation approaches. The results of the analysis indicated that carrying values of both reporting units were in excess of their respective fair values. Therefore,test. However, we recorded non-cash impairment losses of $877 million and $839 million for the Additive and GECAS reporting units, respectively, in the caption Goodwill impairments in our consolidated Statement of Earnings (Loss). All of the goodwill in Additive was the result of the Arcam AB and Concept Laser GmBH acquisitions in 2016. Of the $839 million of goodwill for GECAS, $729 million arose from the acquisition of Milestone Aviation, our helicopter leasing business, in 2015. After the impairment charges, there is $222 million goodwill remaining in our Additive reporting unit and 0 goodwill remaining in our GECAS reporting unit. Since the fair value of our Additive reporting unit now equals its carrying value, we will continue to monitor the remaining goodwill in this reporting unit for impairment in future periods.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Also, in the second quarter of 2020, we performed an analysis of the impact of recent events, including business and industry specific considerations, on the fair value of our Grid Solutions software reporting unit in our Digital business within Corporate and concluded an interim impairment test was not required. While the goodwill of this reporting unit is not currently impaired there can be no assurances that goodwill will not be impaired in future periods. We will continue to monitor the operating results and cash flow forecasts and challenges from declinesof our Additive reporting unit in current market conditions,our Aviation segment as well as impactsthe fair value of COVID-19 for this reporting unit as its fair value iswas not significantly in excess of its carrying value. At June 30, 2020, goodwill in2021, our Grid Solutions softwareAdditive reporting unit was $871had goodwill of $240 million.
|
| | | | | | |
OTHER INTANGIBLE ASSETS - NET (In millions) | June 30, 2020 |
| December 31, 2019 |
|
| Intangible assets subject to amortization | $ | 10,168 |
| $ | 10,653 |
|
2021 2Q FORM 10-Q 42
Substantially all other intangible assets of $9,460 million and $9,671 million at June 30, 2021 and December 31, 2020, respectively, are subject to amortization. Intangible assets decreased in the second quarterfirst half of 2020,2021, primarily as a result of amortization.amortization partially offset by the acquisition of patents and technology at Aviation and Healthcare of $304 million. Consolidated amortization expense was $308$288 million and $357$299 million in the three months ended, June 30, 2020 and 2019, respectively, and $648$589 million and $724$617 million in the six months ended, June 30, 20202021 and 2019,2020, respectively.
NOTE 9. REVENUES. The equipment and services revenues classification in the table below is consistent with our segment MD&A presentation.
| | | EQUIPMENT & SERVICES REVENUES | | EQUIPMENT & SERVICES REVENUES | |
Three months ended June 30 (In millions) | 2020 | | 2019 | |
| Three months ended June 30 | | Three months ended June 30 | 2021 | | 2020 |
| | Equipment | Services | Total | | Equipment | Services | Total | | Equipment | Services | Total | | Equipment | Services | Total |
| Power | $ | 1,488 |
| $ | 2,669 |
| $ | 4,156 |
| | $ | 1,463 |
| $ | 3,218 |
| $ | 4,681 |
| |
| Renewable Energy | 2,722 |
| 783 |
| 3,505 |
| | 2,867 |
| 760 |
| 3,627 |
| |
| Aviation | 2,031 |
| 2,352 |
| 4,384 |
| | 3,033 |
| 4,844 |
| 7,877 |
| Aviation | $ | 1,865 | | $ | 2,974 | | $ | 4,840 | | | $ | 1,938 | | $ | 2,446 | | $ | 4,384 | |
| Healthcare | 2,050 |
| 1,843 |
| 3,893 |
| | 2,838 |
| 2,095 |
| 4,934 |
| Healthcare | 2,257 | | 2,197 | | 4,454 | | | 2,050 | | 1,843 | | 3,893 | |
| Renewable Energy | | Renewable Energy | 3,305 | | 745 | | 4,049 | | | 2,722 | | 783 | | 3,505 | |
| Power | | Power | 1,071 | | 3,224 | | 4,295 | | | 1,488 | | 2,669 | | 4,156 | |
| Corporate items and industrial eliminations | 9 |
| 120 |
| 129 |
| | 69 |
| 229 |
| 298 |
| Corporate items and industrial eliminations | (195) | | 44 | | (151) | | | 9 | | 120 | | 129 | |
| Total GE Industrial revenues | $ | 8,299 |
| $ | 7,767 |
| $ | 16,066 |
| | $ | 10,269 |
| $ | 11,147 |
| $ | 21,416 |
| Total GE Industrial revenues | $ | 8,302 | | $ | 9,185 | | $ | 17,487 | | | $ | 8,206 | | $ | 7,860 | | $ | 16,066 | |
| | Six months ended June 30 | | Six months ended June 30 | 2021 | | 2020 |
| | | | | | | | | | | | | | | | | Equipment | Services | Total | | Equipment | Services | Total |
Six months ended June 30 (In millions) | 2020 | | 2019 | |
| | Equipment | Services | Total | | Equipment | Services | Total | |
| Power | $ | 2,994 |
| $ | 5,187 |
| $ | 8,181 |
| | $ | 3,039 |
| $ | 6,259 |
| $ | 9,298 |
| |
| Renewable Energy | 5,298 |
| 1,401 |
| 6,698 |
| | 4,848 |
| 1,317 |
| 6,165 |
| |
| Aviation | 4,475 |
| 6,801 |
| 11,276 |
| | 6,146 |
| 9,685 |
| 15,831 |
| Aviation | $ | 3,712 | | $ | 6,120 | | $ | 9,832 | | | $ | 4,302 | | $ | 6,975 | | $ | 11,276 | |
| Healthcare | 4,749 |
| 3,872 |
| 8,620 |
| | 5,492 |
| 4,125 |
| 9,616 |
| Healthcare | 4,484 | | 4,278 | | 8,761 | | | 4,749 | | 3,872 | | 8,620 | |
| Renewable Energy | | Renewable Energy | 6,148 | | 1,149 | | 7,297 | | | 5,298 | | 1,401 | | 6,698 | |
| Power | | Power | 2,312 | | 5,904 | | 8,216 | | | 2,994 | | 5,187 | | 8,181 | |
| Corporate items and industrial eliminations | (39 | ) | 174 |
| 135 |
| | 352 |
| 478 |
| 830 |
| Corporate items and industrial eliminations | (383) | | 93 | | (290) | | | (39) | | 174 | | 135 | |
| Total GE Industrial revenues | $ | 17,476 |
| $ | 17,434 |
| $ | 34,910 |
| | $ | 19,878 |
| $ | 21,863 |
| $ | 41,740 |
| Total GE Industrial revenues | $ | 16,273 | | $ | 17,543 | | $ | 33,816 | | | $ | 17,303 | | $ | 17,608 | | $ | 34,910 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| REVENUES | Three months ended June 30 | | Six months ended June 30 |
| 2021 | | 2020 | | 2021 | | 2020 |
| Commercial Engines & Services | $ | 3,115 | | | $ | 2,519 | | | $ | 6,469 | | | $ | 7,631 | |
| Military | 1,041 | | | 1,161 | | | 1,997 | | | 2,121 | |
| Systems & Other | 684 | | | 703 | | | 1,366 | | | 1,524 | |
| Aviation | $ | 4,840 | | | $ | 4,384 | | | $ | 9,832 | | | $ | 11,276 | |
| | | | | | | |
| Healthcare Systems | $ | 3,915 | | | $ | 3,523 | | | $ | 7,740 | | | $ | 6,971 | |
| Pharmaceutical Diagnostics | 539 | | | 370 | | | 1,021 | | | 820 | |
| BioPharma | 0 | | | 0 | | | 0 | | | 830 | |
| Healthcare | $ | 4,454 | | | $ | 3,893 | | | $ | 8,761 | | | $ | 8,620 | |
| | | | | | | |
| Onshore Wind | $ | 2,883 | | | $ | 2,487 | | | $ | 5,001 | | | $ | 4,612 | |
| Grid Solutions equipment and services | 776 | | | 812 | | | 1,571 | | | 1,652 | |
| Hydro | 194 | | | 151 | | | 359 | | | 330 | |
| Offshore Wind and Hybrid Solutions | 196 | | | 54 | | | 366 | | | 105 | |
| Renewable Energy | $ | 4,049 | | | $ | 3,505 | | | $ | 7,297 | | | $ | 6,698 | |
| | | | | | | |
| Gas Power | $ | 3,049 | | | $ | 3,077 | | | $ | 5,878 | | | $ | 5,936 | |
| Steam Power | 831 | | | 763 | | | 1,537 | | | 1,571 | |
| Power Conversion, Nuclear and other | 415 | | | 316 | | | 800 | | | 674 | |
| Power | $ | 4,295 | | | $ | 4,156 | | | $ | 8,216 | | | $ | 8,181 | |
| | | | | | | |
| Corporate items and industrial eliminations | (151) | | | 129 | | | (290) | | | 135 | |
| Total GE Industrial revenues | $ | 17,487 | | | $ | 16,066 | | | $ | 33,816 | | | $ | 34,910 | |
| Capital | 858 | | | 861 | | | 1,736 | | | 1,698 | |
| GE Capital-GE Industrial eliminations | $ | (66) | | | $ | (123) | | | $ | (154) | | | $ | (314) | |
| Consolidated revenues | $ | 18,279 | | | $ | 16,805 | | | $ | 35,397 | | | $ | 36,294 | |
| | | | | | | |
|
|
| | | | | | | | | | | | | | | |
| REVENUES | Three months ended June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| | 2019 |
| | 2020 |
| | 2019 |
|
| Gas Power | $ | 3,077 |
| | $ | 3,246 |
| | $ | 5,936 |
| | $ | 6,510 |
|
| Power Portfolio | 1,079 |
| | 1,434 |
| | 2,244 |
| | 2,788 |
|
| Power | $ | 4,156 |
| | $ | 4,681 |
| | $ | 8,181 |
| | $ | 9,298 |
|
| | | | | | | | |
| Onshore Wind | $ | 2,487 |
| | $ | 2,450 |
| | $ | 4,612 |
| | $ | 3,891 |
|
| Grid Solutions equipment and services | 812 |
| | 935 |
| | 1,652 |
| | 1,852 |
|
| Hydro, Offshore Wind and other | 205 |
| | 242 |
| | 435 |
| | 422 |
|
| Renewable Energy | $ | 3,505 |
| | $ | 3,627 |
| | $ | 6,698 |
| | $ | 6,165 |
|
| | | | | | | | |
| Commercial Engines & Services | $ | 2,232 |
| | $ | 5,848 |
| | $ | 7,009 |
| | $ | 11,797 |
|
| Military | 1,161 |
| | 976 |
| | 2,121 |
| | 2,013 |
|
| Systems & Other | 990 |
| | 1,052 |
| | 2,146 |
| | 2,021 |
|
| Aviation | $ | 4,384 |
| | $ | 7,877 |
| | $ | 11,276 |
| | $ | 15,831 |
|
| | | | | | | | |
| Healthcare Systems | $ | 3,523 |
| | $ | 3,589 |
| | $ | 6,971 |
| | $ | 7,021 |
|
| Pharmaceutical Diagnostics | 370 |
| | 517 |
| | 820 |
| | 1,003 |
|
| BioPharma | — |
| | 828 |
| | 830 |
| | 1,593 |
|
| Healthcare | $ | 3,893 |
| | $ | 4,934 |
| | $ | 8,620 |
| | $ | 9,616 |
|
| | | | | | | | |
| Corporate items and industrial eliminations | 129 |
| | 298 |
| | 135 |
| | 830 |
|
| Total GE Industrial revenues | $ | 16,066 |
| | $ | 21,416 |
| | $ | 34,910 |
| | $ | 41,740 |
|
| Capital | 1,845 |
| | 2,321 |
| | 3,768 |
| | 4,548 |
|
| GE Capital-GE eliminations | $ | (162 | ) | | $ | (323 | ) | | $ | (406 | ) | | $ | (672 | ) |
| Consolidated revenues | $ | 17,750 |
| | $ | 23,414 |
| | $ | 38,273 |
| | $ | 45,616 |
|
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
REMAINING PERFORMANCE OBLIGATION. As of June 30, 2020,2021, the aggregate amount of the contracted revenues allocated to our unsatisfied (or partially unsatisfied) performance obligations was $227,598$227,465 million. We expect to recognize revenue as we satisfy our remaining performance obligations as follows: (1) equipment-related remaining performance obligation of $44,411$44,097 million, of which 63%56%, 83% and 97% is expected to be satisfied within 1, 2 and 5 years, respectively, and the remaining thereafter;respectively; and (2) services-related remaining performance obligation of $183,188$183,368 million, of which 11%13%, 43%44%, 67%66% and 82% is expected to be recognized within 1, 5, 10 and 15 years, respectively, and the remaining thereafter. Contract modifications could affect both the timing to complete as well as the amount to be received as we fulfill the related remaining performance obligations.
NOTE 10. CONTRACT AND OTHER DEFERRED ASSETS & PROGRESS COLLECTIONS AND DEFERRED INCOME
Contract and other deferred assets decreased $1,246$91 million in the first halfsix months ended June 30, 2021 primarily due to increases in customer advances and other and the timing of 2020.revenue recognition ahead of billing milestones on long-term equipment contracts, partially offset by a decrease in long-term service agreements. Our long-term service agreements decreased primarily due to billings of $4,527$4,719 million, andoffset by revenues recognized of $4,472 million, a net unfavorable change in estimated profitability of $791$251 million at Aviation and $22a net favorable change in estimated profitability of $56 million at Power, offset by revenues recognized of $4,670 million. The decrease in long-term service agreements at Aviation included a $536 million pre-tax charge to reflect the cumulative impacts of changes to billing and cost assumptions for certain long-term service agreements, reflecting lower engine utilization, anticipated customer fleet restructuring and contract modifications. Additional adjustments could occur in future periods and could be material for certain long-term service agreements if actual customer operating behavior differs significantly from Aviation's current estimates.Power.
|
| | | | | | | | | | | | | | | | | | |
June 30, 2020 (In millions) | Power | Aviation | Renewable Energy | Healthcare | Other | Total |
| Revenues in excess of billings | $ | 5,323 |
| $ | 4,404 |
| $ | — |
| $ | — |
| $ | — |
| $ | 9,728 |
|
| Billings in excess of revenues | (1,505 | ) | (3,910 | ) | — |
| — |
| — |
| (5,415 | ) |
| Long-term service agreements(a) | 3,818 |
| 494 |
| — |
| — |
| — |
| 4,312 |
|
| Short-term and other service agreements | 152 |
| 343 |
| 41 |
| 187 |
| 37 |
| 759 |
|
| Equipment contract revenues(b) | 2,415 |
| 76 |
| 1,249 |
| 307 |
| 155 |
| 4,202 |
|
| Total contract assets | 6,385 |
| 913 |
| 1,290 |
| 494 |
| 192 |
| 9,273 |
|
| | | | | | | |
| Deferred inventory costs | 933 |
| 475 |
| 982 |
| 339 |
| — |
| 2,730 |
|
| Nonrecurring engineering costs | 24 |
| 2,355 |
| 41 |
| 32 |
| — |
| 2,452 |
|
| Customer advances and other(c) | — |
| 1,132 |
| — |
| — |
| (32 | ) | 1,100 |
|
| Contract and other deferred assets | $ | 7,342 |
| $ | 4,875 |
| $ | 2,313 |
| $ | 865 |
| $ | 160 |
| $ | 15,555 |
|
| | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | Aviation | Healthcare | Renewable Energy | Power | Other | Total |
| Revenues in excess of billings | $ | 2,397 | | $ | 0 | | $ | 0 | | $ | 5,433 | | $ | 0 | | $ | 7,829 | |
| Billings in excess of revenues | (5,528) | | 0 | | 0 | | (1,404) | | 0 | | (6,931) | |
| Long-term service agreements | $ | (3,131) | | $ | 0 | | $ | 0 | | $ | 4,029 | | $ | 0 | | $ | 898 | |
| Short-term and other service agreements | 315 | | 179 | | 97 | | 117 | | 20 | | 729 | |
| Equipment contract revenues | 45 | | 287 | | 1,341 | | 1,897 | | 233 | | 3,804 | |
| Current contract assets | $ | (2,771) | | $ | 466 | | $ | 1,438 | | $ | 6,043 | | $ | 253 | | $ | 5,431 | |
| | | | | | |
| Nonrecurring engineering costs | 2,460 | | 33 | | 33 | | 18 | | 0 | | 2,544 | |
| Customer advances and other | 2,611 | | 127 | | 0 | | 848 | | 0 | | 3,587 | |
| Non-current contract and other deferred assets | $ | 5,071 | | $ | 160 | | $ | 33 | | $ | 867 | | $ | 0 | | $ | 6,131 | |
| Total contract and other deferred assets | $ | 2,300 | | $ | 626 | | $ | 1,471 | | $ | 6,910 | | $ | 254 | | $ | 11,561 | |
|
| | | | | | | | | | | | | | | | | | |
| December 31, 2019 (In millions) | | | | | | |
| Revenues in excess of billings | $ | 5,342 |
| $ | 4,996 |
| $ | — |
| $ | — |
| $ | — |
| $ | 10,338 |
|
| Billings in excess of revenues | (1,561 | ) | (3,719 | ) | — |
| — |
| — |
| (5,280 | ) |
| Long-term service agreements(a) | 3,781 |
| 1,278 |
| — |
| — |
| — |
| 5,058 |
|
| Short-term and other service agreements | 190 |
| 316 |
| 43 |
| 169 |
| — |
| 717 |
|
| Equipment contract revenues(b) | 2,508 |
| 82 |
| 1,217 |
| 324 |
| 106 |
| 4,236 |
|
| Total contract assets | 6,478 |
| 1,675 |
| 1,260 |
| 492 |
| 106 |
| 10,011 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Deferred inventory costs | 943 |
| 287 |
| 1,677 |
| 359 |
| — |
| 3,267 |
|
| Nonrecurring engineering costs | 44 |
| 2,257 |
| 47 |
| 35 |
| 8 |
| 2,391 |
|
| Customer advances and other(c) | — |
| 1,165 |
| — |
| — |
| (32 | ) | 1,133 |
|
| Contract and other deferred assets | $ | 7,465 |
| $ | 5,384 |
| $ | 2,985 |
| $ | 886 |
| $ | 82 |
| $ | 16,801 |
|
| | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | | | | | |
| Revenues in excess of billings | $ | 3,072 | | $ | 0 | | $ | 0 | | $ | 5,282 | | $ | 0 | | $ | 8,354 | |
| Billings in excess of revenues | (5,375) | | 0 | | 0 | | (1,640) | | 0 | | (7,015) | |
| Long-term service agreements | $ | (2,304) | | $ | 0 | | $ | 0 | | $ | 3,642 | | $ | 0 | | $ | 1,338 | |
| Short-term and other service agreements | 282 | | 173 | | 106 | | 129 | | 29 | | 719 | |
| Equipment contract revenues | 59 | | 306 | | 1,127 | | 2,015 | | 201 | | 3,707 | |
| Current contract assets | $ | (1,963) | | $ | 479 | | $ | 1,233 | | $ | 5,786 | | $ | 229 | | $ | 5,764 | |
| | | | | | |
| Nonrecurring engineering costs | 2,409 | | 31 | | 34 | | 16 | | 0 | | 2,490 | |
| Customer advances and other | 2,481 | | 128 | | 0 | | 822 | | (32) | | 3,398 | |
| Non-current contract and other deferred assets | $ | 4,889 | | $ | 159 | | $ | 34 | | $ | 838 | | $ | (32) | | $ | 5,888 | |
| Total contract and other deferred assets | $ | 2,927 | | $ | 638 | | $ | 1,268 | | $ | 6,623 | | $ | 197 | | $ | 11,653 | |
| |
(a) | Included amounts due from customers at Aviation for the sales of engines, spare parts and services, which we will collect through higher usage-based fees from servicing equipment under long-term service agreements, totaling $1,791 million and $1,712 million as of June 30, 2020 and December 31, 2019, respectively. The corresponding discount is recorded within liabilities as Deferred income and amounted to $297 million and $308 million as of June 30, 2020 and December 31, 2019, respectively. |
| |
(b) | Included are amounts due from customers at Power for the sale of services upgrades, which we collect through incremental fixed or usage-based fees from servicing the equipment under long-term service agreements, totaling $862 million and $909 million as of June 30, 2020 and December 31, 2019, respectively. |
| |
(c) | Included advances to and amounts due from customers at Aviation for the sale of engines, spare parts and services, which we will collect through incremental fees for goods and services to be delivered in future periods, totaling $955 million and $986 million as of June 30, 2020 and December 31, 2019, respectively. The corresponding discount is recorded within liabilities as Deferred income and amounted to $262 million and $256 million as of June 30, 2020 and December 31, 2019, respectively. |
Progress collections and deferred income decreased $604$1,191 million in the first half of 2020 primarily due to the timing of revenue recognition in excess of new collections received, primarily at PowerRenewable Energy and Renewable Energy. These decreases were partially offset by early payments received at our Aviation Military equipment business of $708 million in the second quarter of 2020 as part of the U.S. Department of Defense's efforts to support vendors in its supply chain during the pandemic.
Aviation. Revenues recognized for contracts included in a liability position at the beginning of the year were $6,585$9,778 million and $7,498$6,870 million for the six months ended June 30, 2021 and 2020, and 2019, respectively.respectively.
| | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | Aviation | Healthcare | Renewable Energy | Power | Other | Total |
| Progress collections on equipment contracts | $ | 181 | | $ | 0 | | $ | 1,607 | | $ | 5,085 | | $ | 0 | | $ | 6,873 | |
| Other progress collections | 4,234 | | 443 | | 3,341 | | 373 | | 83 | | 8,475 | |
| | | | | | |
| Current deferred income | 141 | | 1,385 | | 212 | | 24 | | 91 | | 1,853 | |
| Progress collections and deferred income | $ | 4,557 | | $ | 1,828 | | $ | 5,160 | | $ | 5,483 | | $ | 174 | | $ | 17,201 | |
| Non-current deferred income | 874 | | 568 | | 203 | | 125 | | 9 | | 1,779 | |
| Total Progress collections and deferred income | $ | 5,431 | | $ | 2,396 | | $ | 5,363 | | $ | 5,607 | | $ | 184 | | $ | 18,981 | |
| | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | | | | | |
| Progress collections on equipment contracts | $ | 214 | | $ | 0 | | $ | 1,229 | | $ | 4,918 | | $ | 0 | | $ | 6,362 | |
| Other progress collections | 4,623 | | 414 | | 4,604 | | 458 | | 152 | | 10,252 | |
| | | | | | |
| Current deferred income | 132 | | 1,309 | | 194 | | 17 | | 105 | | 1,757 | |
| Progress collections and deferred income | $ | 4,969 | | $ | 1,724 | | $ | 6,028 | | $ | 5,393 | | $ | 257 | | $ | 18,371 | |
| Non-current deferred income | 898 | | 564 | | 214 | | 116 | | 10 | | 1,801 | |
| Total Progress collections and deferred income | $ | 5,867 | | $ | 2,288 | | $ | 6,241 | | $ | 5,509 | | $ | 267 | | $ | 20,172 | |
NOTE 11. ALL OTHER ASSETS.All other current assets and All other assets primarily include equity method and other investments, long-term customer and sundry receivables (see Note 4), cash and cash equivalents in our run-off insurance operations and prepaid taxes and other deferred charges. Consolidated All other non-current assets increased $1,602 million in the six months ended June 30, 2021, primarily due to increases in pension surplus of $732 million driven primarily by remeasurement related to freezing the UK pension plans, Insurance cash and cash equivalents of $565 million (see Note 13) and equity method and other investments of $306 million.
20202021 2Q FORM 10-Q 5344
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
| | | | | | | | | | | | | | | | | | |
June 30, 2020 (In millions) | Power | Aviation | Renewable Energy | Healthcare | Other | Total |
| Progress collections on equipment contracts | $ | 5,011 |
| $ | 152 |
| $ | 1,184 |
| $ | — |
| $ | — |
| $ | 6,347 |
|
| Other progress collections | 431 |
| 5,324 |
| 3,716 |
| 343 |
| 171 |
| 9,985 |
|
| Total progress collections | 5,441 |
| 5,476 |
| 4,901 |
| 343 |
| 171 |
| 16,332 |
|
| Deferred income(a) | 48 |
| 1,569 |
| 329 |
| 1,691 |
| 121 |
| 3,759 |
|
| GE Progress collections and deferred income | $ | 5,489 |
| $ | 7,046 |
| $ | 5,230 |
| $ | 2,034 |
| $ | 292 |
| $ | 20,091 |
|
|
| | | | | | | | | | | | | | | | | | |
December 31, 2019 (In millions) | | | | | | |
| Progress collections on equipment contracts | $ | 5,857 |
| $ | 115 |
| $ | 1,268 |
| $ | — |
| $ | — |
| $ | 7,240 |
|
| Other progress collections | 413 |
| 4,748 |
| 4,193 |
| 305 |
| 189 |
| 9,849 |
|
| Total progress collections | 6,270 |
| 4,863 |
| 5,461 |
| 305 |
| 189 |
| 17,089 |
|
| Deferred income(a) | 49 |
| 1,528 |
| 284 |
| 1,647 |
| 98 |
| 3,606 |
|
| GE Progress collections and deferred income | $ | 6,319 |
| $ | 6,391 |
| $ | 5,745 |
| $ | 1,952 |
| $ | 287 |
| $ | 20,694 |
|
| |
(a) | Included in this balance are finance discounts associated with customer advances at Aviation of $560 million and $564 million as of June 30, 2020 and December 31, 2019, respectively. |
NOTE 11.12. BORROWINGS
| | | | | | | | |
| June 30, 2021 | December 31, 2020 |
| | |
| Current portion of long-term borrowings | $ | 1,021 | | $ | 36 | |
| Current portion of long-term borrowings assumed by GE Industrial | 1,495 | | 2,432 | |
| Other | 352 | | 882 | |
| Total GE Industrial short-term borrowings | $ | 2,869 | | $ | 3,350 | |
| | |
| Current portion of long-term borrowings | $ | 1,394 | | $ | 788 | |
| Intercompany payable to GE Industrial | 1,495 | | 2,432 | |
| Non-recourse borrowings of consolidated securitization entities | 68 | | 892 | |
| Other | 107 | | 283 | |
| Total GE Capital short-term borrowings | $ | 3,063 | | $ | 4,395 | |
| | |
| Eliminations | (1,638) | | (3,033) | |
| Total short-term borrowings | $ | 4,293 | | $ | 4,713 | |
| | |
| Senior notes | $ | 13,858 | | $ | 18,994 | |
| Senior notes assumed by GE Industrial | 14,884 | | 18,178 | |
| Subordinated notes assumed by GE Industrial | 1,793 | | 1,779 | |
| Other | 401 | | 435 | |
| Total GE Industrial long-term borrowings | $ | 30,935 | | $ | 39,386 | |
| | |
| Senior notes | $ | 27,611 | | $ | 30,132 | |
| Subordinated notes | 160 | | 189 | |
| Intercompany payable to GE Industrial | 13,500 | | 16,780 | |
| Other | 524 | | 483 | |
| Total GE Capital long-term borrowings | $ | 41,796 | | $ | 47,584 | |
| | |
| Eliminations | (13,500) | | (16,780) | |
| Total long-term borrowings | $ | 59,231 | | $ | 70,189 | |
| Total borrowings | $ | 63,524 | | $ | 74,902 | |
|
| | | | | | |
| (In millions) | June 30, 2020 |
| December 31, 2019 |
|
| Commercial paper | $ | 505 |
| $ | 3,008 |
|
| Current portion of long-term borrowings | 38 |
| 766 |
|
| Current portion of long-term borrowings assumed by GE | 3,679 |
| 5,473 |
|
| Other | 1,194 |
| 1,832 |
|
| Total GE short-term borrowings | $ | 5,416 |
| $ | 11,079 |
|
| | | |
| Current portion of long-term borrowings | $ | 4,000 |
| $ | 11,226 |
|
| Intercompany payable to GE | 3,237 |
| 2,104 |
|
| Other | 601 |
| 804 |
|
| Total GE Capital short-term borrowings | $ | 7,837 |
| $ | 14,134 |
|
| | | |
| Eliminations | (4,195 | ) | (3,140 | ) |
| Total short-term borrowings | $ | 9,059 |
| $ | 22,072 |
|
| | | |
| Senior notes | $ | 18,387 |
| $ | 14,762 |
|
| Senior notes assumed by GE | 20,046 |
| 23,024 |
|
| Subordinated notes assumed by GE | 1,673 |
| 2,871 |
|
| Other | 293 |
| 324 |
|
| Total GE long-term borrowings | $ | 40,398 |
| $ | 40,980 |
|
| | | |
| Senior notes | $ | 31,253 |
| $ | 25,371 |
|
| Subordinated notes | 188 |
| 178 |
|
| Intercompany payable to GE | 17,435 |
| 17,038 |
|
| Other | 584 |
| 626 |
|
| Total GE Capital long-term borrowings | $ | 49,460 |
| $ | 43,213 |
|
| | | |
| Eliminations | (17,435 | ) | (17,038 | ) |
| Total long-term borrowings | $ | 72,423 |
| $ | 67,155 |
|
| Non-recourse borrowings of consolidated securitization entities | 396 |
| 1,655 |
|
| Total borrowings | $ | 81,878 |
| $ | 90,882 |
|
At June 30, 2020,2021, the outstanding GE Capital borrowings that had been assumed by GE Industrial as part of the GE Capital Exit Plan was $25,398$18,173 million ($3,6791,495 million short termshort-term and $21,719$16,678 million long term)long-term), for which GE Industrial has an offsetting Receivable from GE Capital of $20,672$14,996 million. The difference of $4,726 million ($442 million in short-term borrowings and $4,284$3,177 million in long-term borrowings)borrowings represents the amount of borrowings GE Capital had funded with available cash to GE Industrial via intercompany loans in lieu of GE Industrial issuing borrowings externally. GE repaid a total of $7.5 billion of intercompany loans from GE Capital in the second quarter of 2020.
At June 30, 2020,2021, total GE Industrial borrowings of $25,142$18,808 million comprised GE-issuedGE Industrial-issued borrowings of $20,416$15,631 million and intercompany loans from GE Capital to GE Industrial of $4,726$3,177 million as described above.
GE Industrial has provided a full and unconditional guarantee on the payment of the principal and interest on all tradable senior and subordinated outstanding long-term debt securities issued by GE Capital. This guarantee appliesapplied to $32,426 $27,518 million and $34,683$28,503 million of GE Capital debt at June 30, 20202021 and December 31, 2019,2020, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Non-recourse borrowings of consolidated securitization entities included an insignificant amount and $1,569 million of current portion of long-term borrowings at June 30, 2020 and December 31, 2019, respectively. See Notes 4 and 18 for further information.
In the second quarter of 2020,2021, GE issued a total of $7,500 million in aggregate principal amount of senior unsecured debt, comprising $1,000 million of 3.450% Notes due 2027, $1,250 million of 3.625% Notes due 2030, $1,500 million of 4.250% Notes due 2040, and $3,750 million of 4.350% Notes due 2050, and used these proceeds in addition to a portion of the proceeds from the BioPharma sale to repay a total of $7,500 million of intercompany loans to GE Capital and to completeIndustrial completed a tender offer to purchase $4,237$4,114 million in aggregate principal amount of certain GE Industrial unsecured debt, comprising $2,046$201 million of 2.700% Notes due 2022, €934$752 million ($1,011 million equivalent) of 0.375%4.250% Notes due 2022, €4252040, $377 million ($460 million equivalent) of 1.250%4.125% Notes due 2023, €3762042, $311 million ($407 million equivalent) of floating-rate4.500% Notes due 2020,2044 and $312$2,473 million of 3.375%4.350% Notes due 2024.2050. The total cash consideration paid for these purchases was $4,282$4,756 million and the total carrying amount of the purchased notes was $4,228$4,084 million,, resulting in a total pre-tax 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).$645 million. In addition to the purchase price, GE Industrial paid any accrued and unpaid interest on the purchased notes through the date of purchase.
In the second quarter of 2020,2021, GE Capital issuedcompleted 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 offersoffer to purchase a total of $9,787$2,879 million in aggregate principal amount of certain senior unsecured debt. debt, comprising $23 million of 4.650% Notes due 2021, $56 million of 3.150% Notes due 2022, $75 million of 3.100% Notes due 2023, $503 million of 6.150% Notes due 2037, $1,400 million of 5.875% Notes due 2038 and $823 million of 6.875% Notes due 2039. The total cash consideration paid for these purchases was $9,950$3,940 million and the total carrying amount of the purchased notes was $9,827$3,191 million, resulting in a total pre-tax 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).$771 million. In addition to the purchase price, GE Capital paid any accrued and unpaid interest on the purchased notes through the date of purchase.
See Note 1719 for further information about borrowings and associated interest rate swaps.
NOTE 12.13. INSURANCE LIABILITIES AND ANNUITY BENEFITS.Insurance liabilities and annuity benefits comprise mainlysubstantially all obligations to annuitants and insureds in our run-off insurance activities.operations. Our insurance operations generated revenues of $803 million and $786 million and profit (loss) of $192 million and $114 million for the three months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021 and 2020, revenues were $1,578 million and $1,402 million and profit (loss) was $308 million and $21 million, respectively. These operations were supported by assets of $51,810 million and $50,824 million at June 30, 2021 and December 31, 2020, respectively. A summary of our insurance contracts is presented below:
| | June 30, 2020 (In millions) | Long-term care insurance contracts | Structured settlement annuities & life insurance contracts | Other
contracts | Other adjustments(a) | Total | |
| June 30, 2021 | | June 30, 2021 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total |
| Future policy benefit reserves | $ | 16,794 |
| $ | 9,385 |
| $ | 179 |
| $ | 6,873 |
| $ | 33,231 |
| Future policy benefit reserves | $ | 17,042 | | $ | 9,013 | | $ | 188 | | $ | 7,028 | | $ | 33,271 | |
| Claim reserves | 4,330 |
| 282 |
| 1,087 |
| — |
| 5,699 |
| Claim reserves | 4,368 | | 270 | | 990 | | — | | 5,628 | |
| Investment contracts | — |
| 1,085 |
| 1,044 |
| — |
| 2,129 |
| Investment contracts | 0 | | 999 | | 982 | | — | | 1,981 | |
| Unearned premiums and other | 27 |
| 187 |
| 143 |
| — |
| 357 |
| Unearned premiums and other | 15 | | 189 | | 127 | | — | | 332 | |
| 21,151 |
| 10,939 |
| 2,453 |
| 6,873 |
| 41,416 |
| | 21,426 | | 10,472 | | 2,287 | | 7,028 | | 41,212 | |
| Eliminations | — |
| — |
| (462 | ) | — |
| (462 | ) | Eliminations | — | | — | | (417) | | — | | (417) | |
| Total | $ | 21,151 |
| $ | 10,939 |
| $ | 1,991 |
| $ | 6,873 |
| $ | 40,954 |
| Total | $ | 21,426 | | $ | 10,472 | | $ | 1,870 | | $ | 7,028 | | $ | 40,795 | |
| | December 31, 2019 (In millions) |
| |
| December 31, 2020 | | December 31, 2020 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total |
| Future policy benefit reserves | $ | 16,755 |
| $ | 9,511 |
| $ | 183 |
| $ | 5,655 |
| $ | 32,104 |
| Future policy benefit reserves | $ | 16,934 | | $ | 9,207 | | $ | 181 | | $ | 8,160 | | $ | 34,482 | |
| Claim reserves | 4,238 |
| 252 |
| 1,125 |
| — |
| 5,615 |
| Claim reserves | 4,393 | | 275 | | 1,068 | | — | | 5,736 | |
| Investment contracts | — |
| 1,136 |
| 1,055 |
| — |
| 2,191 |
| Investment contracts | 0 | | 1,034 | | 1,016 | | — | | 2,049 | |
| Unearned premiums and other | 30 |
| 196 |
| 96 |
| — |
| 322 |
| Unearned premiums and other | 19 | | 189 | | 89 | | — | | 298 | |
| 21,023 |
| 11,095 |
| 2,459 |
| 5,655 |
| 40,232 |
| | 21,346 | | 10,705 | | 2,354 | | 8,160 | | 42,565 | |
| Eliminations | — |
| — |
| (406 | ) | — |
| (406 | ) | Eliminations | — | | — | | (374) | | — | | (374) | |
| Total | $ | 21,023 |
| $ | 11,095 |
| $ | 2,053 |
| $ | 5,655 |
| $ | 39,826 |
| Total | $ | 21,346 | | $ | 10,705 | | $ | 1,980 | | $ | 8,160 | | $ | 42,191 | |
(a) To the extent that unrealized gains on specific investment securities supporting our insurance contracts would result in a premium deficiency should those gains be realized, an increase in future policy benefit reserves is recorded, with an after-tax reduction of net unrealized gains recognized through Accumulated other comprehensive income (loss) (AOCI) in our consolidated Statement of Earnings (Loss).
The increasedecrease in insurance liabilities and annuity benefitsOther adjustments of $1,128$1,132 million from December 31, 2019 to June 30, 2020, is primarily due to an adjustmenta result of $1,218 million resulting from an increasethe decline in unrealized gains on investment securities that would result in a premium deficiency should those gains be realized.securities.
Claim reserves included incurred claims of $945$799 million and $981$945 million, of which insignificant amounts related to the recognition of adjustments to prior year claim reserves arising from our periodic reserve evaluation for the six months ended June 30, 20202021 and 2019,2020, respectively. Paid claims were $888$866 million and $824$888 million in the six months ended June 30, 20202021 and 2019,2020, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Reinsurance recoverables, are recorded when we cede insurance risk to third parties but are not relieved from our primary obligation to policyholders and cedents. These amounts, net of allowances of $1,430$1,566 million and $1,355$1,510 million, are included in non-current Other GE Capital receivables in our consolidated Statement of Financial Position, and amounted to $2,465$2,596 million and $2,416$2,552 million at June 30, 20202021 and December 31, 2019,2020, respectively. The vast majority of our remaining net reinsurance recoverables are secured by assets held in a trust for which we are the beneficiary.
NOTE 13.14. POSTRETIREMENT BENEFIT PLANS. We sponsor a number of pension and retiree health and life insurance benefit plans that we present in 3 categories, principal pension plans, other pension plans and principal retiree benefit plans. Principal pension plans representPlease refer to Note 13 to the GE Pension Plan andconsolidated financial statements of our Annual Report on Form 10-K for the GE Supplementary Pension Plan. Other pension plans include U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million. Principal retireeyear ended December 31, 2020 for a discussion of our postretirement benefit plans provide health and life insurance benefits to certain eligible participants and these participants share in the cost of the healthcare benefits. Smaller pension plans with pension assets or obligations less than $50 million and other retiree benefit plans are not presented.plans.
EFFECT ON OPERATIONS OF BENEFIT PLANS.The components of benefit plans costscost other than the service cost are included in the caption Non-operating benefit costs in our consolidated Statement of Earnings (Loss).
| | | | | | | | | | | | | | | | | |
| PRINCIPAL PENSION PLANS | Three months ended June 30 | | Six months ended June 30 |
| 2021 | 2020 | | 2021 | 2020 |
| Service cost for benefits earned | $ | 58 | | $ | 192 | | | $ | 122 | | $ | 345 | |
| Prior service cost amortization | 7 | | 37 | | | 14 | | 74 | |
| Expected return on plan assets | (762) | | (748) | | | (1,525) | | (1,496) | |
| Interest cost on benefit obligations | 490 | | 589 | | | 976 | | 1,176 | |
| Net actuarial loss amortization | 878 | | 851 | | | 1,742 | | 1,699 | |
| | | | | |
| Benefit plans cost | $ | 671 | | $ | 921 | | | $ | 1,329 | | $ | 1,798 | |
|
| | | | | | | | | | | | | |
| Principal pension plans | Three months ended June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Service cost for benefits earned | $ | 192 |
| $ | 160 |
| | $ | 345 |
| $ | 318 |
|
| Prior service cost amortization | 37 |
| 34 |
| | 74 |
| 67 |
|
| Expected return on plan assets | (748 | ) | (862 | ) | | (1,496 | ) | (1,725 | ) |
| Interest cost on benefit obligations | 589 |
| 723 |
| | 1,176 |
| 1,449 |
|
| Net actuarial loss amortization | 851 |
| 770 |
| | 1,699 |
| 1,533 |
|
| Curtailment/settlement loss (gain) | — |
| — |
| | — |
| 51 |
|
| Benefit plans cost | $ | 921 |
| $ | 825 |
| | $ | 1,798 |
| $ | 1,693 |
|
Principal retiree benefit plans income was $22$42 million and $30$22 million for the three months ended June 30, 2021 and 2020, and 2019,$82 million and $54 million and $91 million for the six months ended June 30, 2021 and 2020, and 2019, respectively, which includes a curtailment gain of $33 million in 2019 resulting from the Transportation transaction.respectively. Other pension plans cost were immaterialwas $37 million and $2 million for the three months ended June 30, 2021 and 2020 and 2019,$13 million and $9 million for the six months ended June 30, 2021 and 2020, and 2019.respectively, which includes a curtailment loss of $77 million in 2021 resulting from freezing the UK pension plans, as announced on June 10, 2021.
We also have a defined contribution plan for eligible U.S. employees that provides discretionaryemployer contributions. Defined contribution plan costs were $87$113 million and $90$87 million for the three months ended June 30, 2021 and 2020 and 2019,$221 million and $182 million and $191 million for the six months ended June 30, 20202021 and 2019,2020, respectively.
NOTE 14.15. CURRENT AND ALL OTHER LIABILITIES. All other current liabilities and All other liabilities primarily includes liabilities for customer sales allowances, equipment project and commercial liabilities, loss contracts, employee compensation and benefits, income taxes payable and uncertain tax positions, operating lease liabilities (see Note 7), environmental, health and safety remediations and product warranties (see Note 21). GE Industrial All other current liabilities decreased $1,341 million in the six months ended June 30, 2021, primarily due to decreases in liabilities due to GE Capital of $813 million, employee compensation and benefit liabilities of $214 million and taxes payable of $200 million.
NOTE 16. INCOME TAXES. Our consolidated effective income tax rate was (3.3)%40.7% and (5.0)(2.1)% during the six months ended June 30, 20202021 and 2019,2020, respectively. The tax rate for 2021 reflects a tax benefit on a pre-tax loss. The negative ratesrate for 2020 and 2019 reflectreflects a tax benefitsbenefit on pre-tax income. The rate for 2021 is higher than the U.S. statutory rate on the loss primarily due to a tax benefit associated with an internal restructuring to recognize historical losses due to the decrease in fair value. This was partially offset by the cost of global activities, including the base erosion and global intangible minimum tax provisions. During the second quarter of 2021, the United Kingdom enacted changes to tax law including an increase in tax rates. This resulted in an increase in the value of the company's deferred tax assets. However, as a result of changes in the new tax law, the company is restructuring operations resulting in incremental tax liabilities that largely offset the increase in deferred tax assets. The rate for 2020 is lower than the U.S. statutory rate primarily due to the lower tax rate on the sale of our BioPharma business. The low tax rate on the BioPharma sale reflectswas low because the gain outside the U.S. was taxed at lower than 21% and because we recorded $633 million of the tax associated with preparatory steps for the transaction in the fourth quarter of 2019. This was partially offset by the largelya non-deductible goodwill impairment chargescharge associated with our Additive business within our Aviation segment and our GECAS business within our Capital segment. The rate for 2019 benefited from favorable audit resolutions, U.S. business credits and the lower-taxed disposition of our Digital ServiceMax business. This was partially offset by the cost of global activities, including the base erosion and global intangible lowminimum tax income provisions and from a largely non-deductible goodwill impairment charge associated with our Grid Solutions equipment and services business within our Renewable Energy segment.provisions.
The Internal Revenue Service (IRS) is currently auditing our consolidated U.S. income tax returns for 2014-2015 and 2016-2018. It is possible the 2014-2015 audit will be completed in the next 12 months.
The United Kingdom tax authoritiesauthority (the UK Government) disallowed interest deductions claimed by GE Capital for the years 2004-2015 that could result in a potential impact of approximately $1$1.1 billion, which includes a possible assessment of tax and reduction of deferred tax assets, not including interest and penalties. We are contesting the disallowance. The UK Government is seeking to set aside a 2005 tax settlement agreement, alleging that GE misstated or omitted relevant facts. In October 2019, the UK Government asserted three new claims of fraudulent misrepresentation, only one of which the Business and Property Court allowed to go forward. In April 2021, the UK Court of Appeal ruled that the equitable portion of that claim was time barred. The UK Government has petitioned the UK Supreme Court to hear an appeal related to the time barred decision, which the UK Supreme Court granted in July 2021. The main case remains scheduled for trial this fall in the Business and Property Court and may (depending on the outcome of the trial) be subject to further proceedings in the UK tax tribunal. We comply with all applicable tax laws and judicial doctrines of the United Kingdom and believe that the entire benefit is more likely than not to be sustained on its technical merits.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 15.17. SHAREHOLDERS’ EQUITY
|
| | | | | | | | | | | | | |
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | Three months ended June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Beginning balance | $ | 20 |
| $ | (16 | ) | | $ | 61 |
| $ | (39 | ) |
| AOCI before reclasses – net of taxes of $8, $(23), $7 and $15(a) | 34 |
| 94 |
| | 41 |
| 121 |
|
| Reclasses from AOCI – net of taxes of $(2), $(5), $(14) and $(6) | (7 | ) | (18 | ) | | (55 | ) | (22 | ) |
| AOCI | 27 |
| 76 |
| | (14 | ) | 99 |
|
| Less AOCI attributable to noncontrolling interests | — |
| — |
| | — |
| 1 |
|
| Investment securities AOCI ending balance | $ | 47 |
| $ | 60 |
| | $ | 47 |
| $ | 60 |
|
| | | | | | |
| Beginning balance | $ | (4,685 | ) | $ | (5,810 | ) | | $ | (4,818 | ) | $ | (6,134 | ) |
| AOCI before reclasses – net of taxes of $25, $13, $20 and $39 | (58 | ) | (308 | ) | | (613 | ) | (1 | ) |
| Reclasses from AOCI – net of taxes of $0, $0, $0 and $(4)(b) | 1 |
| 167 |
| | 691 |
| 284 |
|
| AOCI | (57 | ) | (141 | ) | | 78 |
| 283 |
|
| Less AOCI attributable to noncontrolling interests | 1 |
| (77 | ) | | 3 |
| 22 |
|
| Currency translation adjustments AOCI ending balance | $ | (4,743 | ) | $ | (5,874 | ) | | $ | (4,743 | ) | $ | (5,874 | ) |
| | | | | | |
| Beginning balance | $ | (163 | ) | $ | 49 |
| | $ | 49 |
| $ | 13 |
|
| AOCI before reclasses – net of taxes of $(24), $(8), $(69) and $3 | 40 |
| (50 | ) | | (222 | ) | (16 | ) |
| Reclasses from AOCI – net of taxes of $(1), $4, $8 and $1(b) | 13 |
| 25 |
| | 64 |
| 28 |
|
| AOCI | 53 |
| (25 | ) | | (158 | ) | 12 |
|
| Less AOCI attributable to noncontrolling interests | — |
| (1 | ) | | — |
| 1 |
|
| Cash flow hedges AOCI ending balance | $ | (109 | ) | $ | 26 |
| | $ | (109 | ) | $ | 26 |
|
| | | | | | |
| Beginning balance | $ | (5,991 | ) | $ | (7,708 | ) | | $ | (7,024 | ) | $ | (8,254 | ) |
| AOCI before reclasses – net of taxes of $(2), $13, $28 and $(35) | (74 | ) | 7 |
| | 145 |
| (111 | ) |
| Reclasses from AOCI – net of taxes of $187, $164, $426 and $347(b) | 678 |
| 632 |
| | 1,495 |
| 1,294 |
|
| AOCI | 604 |
| 639 |
| | 1,640 |
| 1,183 |
|
| Less AOCI attributable to noncontrolling interests | — |
| (6 | ) | | 3 |
| (8 | ) |
| Benefit plans AOCI ending balance | $ | (5,387 | ) | $ | (7,063 | ) | | $ | (5,387 | ) | $ | (7,063 | ) |
| | | | | | |
| AOCI at June 30 | $ | (10,194 | ) | $ | (12,852 | ) | | $ | (10,194 | ) | $ | (12,852 | ) |
| | | | | | | | | | | | | | | | | |
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | Three months ended June 30 | | Six months ended June 30 |
| 2021 | 2020 | | 2021 | 2020 |
| Beginning balance | $ | 42 | | $ | 20 | | | $ | 60 | | $ | 61 | |
| AOCI before reclasses – net of taxes of $2, $8, $(4) and $7(a) | 7 | | 34 | | | (22) | | 41 | |
| Reclasses from AOCI – net of taxes of $(2), $(2) $2 and $(14) | (8) | | (7) | | | 3 | | (55) | |
| AOCI | (1) | | 27 | | | (19) | | (14) | |
| Less AOCI attributable to noncontrolling interests | 0 | | 0 | | | 0 | | 0 | |
| Investment securities AOCI ending balance | $ | 41 | | $ | 47 | | | $ | 41 | | $ | 47 | |
| | | | | |
| Beginning balance | $ | (4,278) | | $ | (4,685) | | | $ | (4,386) | | $ | (4,818) | |
| AOCI before reclasses – net of taxes of $1, $25, $(56) and $20 | 130 | | (58) | | | 240 | | (613) | |
| Reclasses from AOCI – net of taxes of $0, $0, $0 and $0(b) | 0 | | 1 | | | 0 | | 691 | |
| AOCI | 130 | | (57) | | | 240 | | 78 | |
| Less AOCI attributable to noncontrolling interests | (2) | | 1 | | | 0 | | 3 | |
| Currency translation adjustments AOCI ending balance | $ | (4,146) | | $ | (4,743) | | | $ | (4,146) | | $ | (4,743) | |
| | | | | |
| Beginning balance | $ | 34 | | $ | (163) | | | $ | (28) | | $ | 49 | |
| AOCI before reclasses – net of taxes of $(10), $(24), $(6) and $(69) | 32 | | 40 | | | 71 | | (222) | |
| Reclasses from AOCI – net of taxes of $(1), $(1), $9 and $8(b) | (5) | | 13 | | | 18 | | 64 | |
| AOCI | 27 | | 53 | | | 90 | | (158) | |
| Less AOCI attributable to noncontrolling interests | 0 | | 0 | | | 0 | | 0 | |
| Cash flow hedges AOCI ending balance | $ | 62 | | $ | (109) | | | $ | 62 | | $ | (109) | |
| | | | | |
| Beginning balance | $ | (4,691) | | $ | (5,991) | | | $ | (5,395) | | $ | (7,024) | |
| AOCI before reclasses – net of taxes of $26, $(2), $(21) and $28 | 157 | | (74) | | | 173 | | 145 | |
| Reclasses from AOCI – net of taxes of $206, $187, $400 and $426(b) | 757 | | 678 | | | 1,446 | | 1,495 | |
| AOCI | 914 | | 604 | | | 1,619 | | 1,640 | |
| Less AOCI attributable to noncontrolling interests | 0 | | 0 | | | 1 | | 3 | |
| Benefit plans AOCI ending balance | $ | (3,777) | | $ | (5,387) | | | $ | (3,777) | | $ | (5,387) | |
| | | | | |
| AOCI at June 30 | $ | (7,820) | | $ | (10,194) | | | $ | (7,820) | | $ | (10,194) | |
| | | | | |
| Dividends declared per common share | $ | 0.01 | | $ | 0.01 | | | $ | 0.02 | | $ | 0.02 | |
(a) Included adjustments of $(2,229)$(1,144) million and $(1,054)$(2,229) million for the three months ended June 30, 20202021 and 2019,2020, respectively and $(962)
$894 million and $(2,011)$(962) million for the six months ended June 30, 20202021 and 2019,2020, respectively, related to insurance liabilities and annuity benefits in our run-off insurance operations to reflect the effects that would have been recognized had the related unrealized investment security gains been realized. See Note 1213 for further information.
(b) The total reclassification from AOCI included $836 million, including currency translation of $688 million, net of taxes, for the six months ended June 30, 2020, related to the sale of our BioPharma business within our Healthcare segment.
In 2016, we issued $5,694 million of GE Series DFor information on our preferred stock which are callable on January 21, 2021. In additionissuances, please refer 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 June 30, 2020 was $5,826 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 $1,579 million and $1,545 million at June 30, 2020 and Decemberour Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, respectively.
Redeemable noncontrolling interests, presented within All other liabilities in our consolidated Statement of Financial Position, include common shares issued by our affiliates that are redeemable at the option of the holder of those interests and amounted to$474 $457 million and $439$487 million as of June 30, 20202021 and December 31, 2019,2020, respectively.
20202021 2Q FORM 10-Q 5748
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 16.18. EARNINGS PER SHARE INFORMATION
| | | Three months ended June 30 | 2020 | | 2019 | Three months ended June 30 | 2021 | | 2020 |
| (Earnings for per-share calculation, in millions; per-share amounts in dollars) | Diluted |
| Basic |
| | Diluted |
| Basic |
| |
| (Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | | (Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | Diluted | Basic | | Diluted | Basic |
| Earnings from continuing operations | $ | (1,995 | ) | $ | (1,995 | ) | | $ | (114 | ) | $ | (114 | ) | Earnings from continuing operations | $ | (568) | | $ | (568) | | | $ | (994) | | $ | (994) | |
| Preferred stock dividends | (192 | ) | (192 | ) | | (188 | ) | (188 | ) | Preferred stock dividends | (57) | | (57) | | | (192) | | (192) | |
| Accretion of redeemable noncontrolling interests, net of tax(a) | (135 | ) | (135 | ) | | — |
| — |
| Accretion of redeemable noncontrolling interests, net of tax(a) | (2) | | (2) | | | (135) | | (135) | |
| Earnings from continuing operations attributable to common shareholders | (2,322 | ) | (2,322 | ) | | (302 | ) | (302 | ) | Earnings from continuing operations attributable to common shareholders | (626) | | (626) | | | (1,321) | | (1,321) | |
| Earnings (loss) from discontinued operations | 7 |
| 7 |
| | 241 |
| 241 |
| Earnings (loss) from discontinued operations | (564) | | (564) | | | (994) | | (994) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,314 | ) | $ | (2,314 | ) | | $ | (61 | ) | $ | (61 | ) | Net earnings (loss) attributable to GE common shareholders | (1,190) | | (1,190) | | | (2,314) | | (2,314) | |
| | | | | |
| Shares of GE common stock outstanding | 8,750 |
| 8,750 |
| | 8,724 |
| 8,724 |
| Shares of GE common stock outstanding | 8,780 | | 8,780 | | | 8,750 | | 8,750 | |
| Employee compensation-related shares (including stock options) | — |
| — |
| | — |
| — |
| Employee compensation-related shares (including stock options) | 0 | | — | | | 0 | | — | |
| Total average equivalent shares | 8,750 |
| 8,750 |
| | 8,724 |
| 8,724 |
| Total average equivalent shares | 8,780 | | 8,780 | | | 8,750 | | 8,750 | |
| | | | | |
| Earnings per share from continuing operations | $ | (0.27 | ) | $ | (0.27 | ) | | $ | (0.03 | ) | $ | (0.03 | ) | Earnings per share from continuing operations | $ | (0.07) | | $ | (0.07) | | | $ | (0.15) | | $ | (0.15) | |
| Earnings (loss) per share from discontinued operations | — |
| — |
| | 0.03 |
| 0.03 |
| Earnings (loss) per share from discontinued operations | (0.06) | | (0.06) | | | (0.11) | | (0.11) | |
| Net earnings (loss) per share | (0.26 | ) | (0.26 | ) | | (0.01 | ) | (0.01 | ) | Net earnings (loss) per share | (0.14) | | (0.14) | | | (0.26) | | (0.26) | |
| | | | | |
| Potentially dilutive securities(b) | 459 |
| | | 486 |
| | Potentially dilutive securities(b) | 324 | | | 459 | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30 | 2020 | | 2019 | Six months ended June 30 | 2021 | | 2020 |
| (Earnings for per-share calculation; in millions; per-share amounts in dollars) | Diluted |
| Basic |
| | Diluted |
| Basic |
| |
| (Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | | (Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | Diluted | Basic | | Diluted | Basic |
| Earnings from continuing operations | $ | 4,370 |
| $ | 4,370 |
| | $ | 828 |
| $ | 843 |
| Earnings from continuing operations | $ | (476) | | $ | (476) | | | $ | 5,212 | | $ | 5,212 | |
| Preferred stock dividends | (235 | ) | (235 | ) | | (228 | ) | (228 | ) | Preferred stock dividends | (129) | | (129) | | | (235) | | (235) | |
| Accretion of redeemable noncontrolling interests, net of tax(a) | $ | (135 | ) | $ | (135 | ) | | — |
| — |
| Accretion of redeemable noncontrolling interests, net of tax(a) | 0 | | 0 | | | (135) | | (135) | |
| Earnings from continuing operations attributable to common shareholders | $ | 4,000 |
| $ | 4,000 |
| | $ | 600 |
| $ | 616 |
| Earnings from continuing operations attributable to common shareholders | (604) | | (604) | | | 4,841 | | 4,841 | |
| Earnings (loss) from discontinued operations | (168 | ) | (168 | ) | | 2,845 |
| 2,861 |
| Earnings (loss) from discontinued operations | (3,458) | | (3,458) | | | (1,009) | | (1,009) | |
| Net earnings attributable to GE common shareholders | $ | 3,832 |
| $ | 3,832 |
| | $ | 3,461 |
| $ | 3,476 |
| Net earnings attributable to GE common shareholders | (4,062) | | (4,062) | | | 3,832 | | 3,832 | |
| | | | | |
| Shares of GE common stock outstanding | 8,746 |
| 8,746 |
| | 8,716 |
| 8,716 |
| Shares of GE common stock outstanding | 8,775 | | 8,775 | | | 8,746 | | 8,746 | |
| Employee compensation-related shares (including stock options) | 6 |
| — |
| | 13 |
| — |
| Employee compensation-related shares (including stock options) | 0 | | — | | | 6 | | — | |
| Total average equivalent shares | 8,752 |
| 8,746 |
| | 8,730 |
| 8,716 |
| Total average equivalent shares | 8,775 | | 8,775 | | | 8,752 | | 8,746 | |
| | | | | |
| Earnings from continuing operations | $ | 0.46 |
| $ | 0.46 |
| | $ | 0.07 |
| $ | 0.07 |
| Earnings from continuing operations | $ | (0.07) | | $ | (0.07) | | | $ | 0.55 | | $ | 0.55 | |
| Loss from discontinued operations | (0.02 | ) | (0.02 | ) | | 0.33 |
| 0.33 |
| Loss from discontinued operations | (0.39) | | (0.39) | | | (0.12) | | (0.12) | |
| Net earnings | 0.44 |
| 0.44 |
| | 0.40 |
| 0.40 |
| Net earnings | (0.46) | | (0.46) | | | 0.44 | | 0.44 | |
| | | | | |
| Potentially dilutive securities(b) | 440 |
| | | 468 |
| | Potentially dilutive securities(b) | 351 | | | 440 | | |
(a) Represents accretion adjustment of redeemable noncontrolling interests in our Additive business within our Aviation segment.
(b) Outstanding stock awards not included in the computation of diluted earnings per share because their effect was antidilutive.
Our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and, therefore, are included in the computation of earnings per share pursuant to the two-class method. For the three months ended June 30, 2021 and 2020, and 2019,as a result of the loss from continuing operations, losses were not allocated to the participating securities. For the six months ended June 30, 2021, as a result of the loss from continuing operations, losses were not allocated to the participating securities. For the six months ended June 30, 2020, and 2019, application of this treatment had an insignificant effect.
NOTE 17.19. FINANCIAL INSTRUMENTS. The following table provides information about assets and liabilities not carried at fair value and excludes finance leases, equity securities without readily determinable fair value and non-financial assets and liabilities. Substantially all of these assets are considered to be Level 3 and the vast majority of our liabilities’ fair value are considered Level 2.
| | | | | | | | | | | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 |
| Carrying
amount
(net) | Estimated
fair value | | Carrying
amount
(net) | Estimated
fair value |
| Assets | Loans and other receivables | $ | 2,897 | | $ | 3,088 | | | $ | 2,904 | | $ | 3,125 | |
| | | | | | |
| Liabilities | Borrowings (Note 12) | 63,524 | | 74,087 | | | 74,902 | | 86,001 | |
| Investment contracts (Note 13) | 1,981 | | 2,402 | | | 2,049 | | 2,547 | |
|
| | | | | | | | | | | | | | |
| |
| June 30, 2020 | | December 31, 2019 |
| (In millions) | Carrying
amount
(net) |
| Estimated
fair value |
| | Carrying
amount
(net) |
| Estimated
fair value |
|
| Assets | Loans and other receivables | $ | 3,668 |
| $ | 3,722 |
| | $ | 4,113 |
| $ | 4,208 |
|
| Liabilities | Borrowings (Note 11) | 81,878 |
| 83,054 |
| | 90,882 |
| 97,754 |
|
| | Investment contracts (Note 12) | 2,129 |
| 2,597 |
| | 2,191 |
| 2,588 |
|
The lower fair value in relation to carrying value for borrowings at June 30, 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 $863 million and $1,106 million of accrued interest at June 30, 2020 and December 31, 2019, respectively.
Assets and liabilities that are reflected in the accompanying financial statements at fair value are not included in the above disclosures; such items include cash and equivalents, investment securities and derivative financial instrumentsinstruments.
.
58 20202021 2Q FORM 10-Q49
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
DERIVATIVES AND HEDGING. Our policy requires that derivatives are used solely for managing risks and not for speculative purposes. Total gross notional was $89,801$99,270 million ($44,76044,300 million in GE Capital and $45,041$54,970 million in GE)GE Industrial) and $98,018$95,647 million ($55,70445,445 million in GE Capital and $42,314$50,202 million in GE)GE Industrial) at June 30, 20202021 and December 31, 2019,2020, respectively. GE Capital notional relates primarily to managing interest rate and currency risk between financial assets and liabilities, and GE Industrial notional relates primarily to managing currency risk.
| | | | | | | | | | | | | | | | | | | | | | | |
| FAIR VALUE OF DERIVATIVES | June 30, 2021 | | December 31, 2020 |
| Gross Notional | All other assets | All other liabilities | | Gross Notional | All other assets | All other liabilities |
| Interest rate contracts | $ | 26,643 | | $ | 1,413 | | $ | 22 | | | $ | 20,500 | | $ | 1,912 | | $ | 7 | |
| Currency exchange contracts | 6,637 | | 156 | | 53 | | | 7,387 | | 164 | | 125 | |
| | | | | | | |
| Derivatives accounted for as hedges | $ | 33,280 | | $ | 1,568 | | $ | 75 | | | $ | 27,886 | | $ | 2,076 | | $ | 132 | |
| | | | | | | |
| Interest rate contracts | $ | 272 | | $ | 6 | | $ | 0 | | | $ | 346 | | $ | 8 | | $ | (1) | |
| Currency exchange contracts | 63,498 | | 680 | | 802 | | | 65,379 | | 767 | | 918 | |
| Other contracts | 2,219 | | 361 | | 7 | | | 2,036 | | 218 | | 71 | |
| Derivatives not accounted for as hedges | $ | 65,990 | | $ | 1,048 | | $ | 809 | | | $ | 67,761 | | $ | 993 | | $ | 989 | |
| | | | | | | |
| Gross derivatives | $ | 99,270 | | $ | 2,616 | | $ | 884 | | | $ | 95,647 | | $ | 3,069 | | $ | 1,121 | |
| | | | | | | |
| Netting and credit adjustments | | $ | (576) | | $ | (571) | | | | $ | (647) | | $ | (647) | |
| Cash collateral adjustments | | (1,342) | | (62) | | | | (1,935) | | (104) | |
| Net derivatives recognized in statement of financial position | | $ | 698 | | $ | 251 | | | | $ | 487 | | $ | 369 | |
| | | | | | | |
| Net accrued interest | | $ | 88 | | $ | (2) | | | | $ | 0 | | $ | 0 | |
| Securities held as collateral | | (2) | | 0 | | | | (2) | | 0 | |
| Net amount | | $ | 783 | | $ | 249 | | | | $ | 484 | | $ | 369 | |
|
| | | | | | | | | | | | | | | | | | | |
| FAIR VALUE OF DERIVATIVES | June 30, 2020 | | December 31, 2019 |
| (In millions) | Gross Notional |
| All other assets |
| All other liabilities |
| | Gross Notional |
| All other assets |
| All other liabilities |
|
| Interest rate contracts | $ | 20,790 |
| $ | 2,081 |
| $ | 9 |
| | $ | 23,918 |
| $ | 1,636 |
| $ | 11 |
|
| Currency exchange contracts | 6,457 |
| 58 |
| 194 |
| | 7,044 |
| 99 |
| 46 |
|
| Derivatives accounted for as hedges | $ | 27,247 |
| $ | 2,139 |
| $ | 203 |
| | $ | 30,961 |
| $ | 1,734 |
| $ | 57 |
|
| | | | | | | | |
| Interest rate contracts | $ | 717 |
| $ | 9 |
| $ | 7 |
| | $ | 3,185 |
| $ | 18 |
| $ | 12 |
|
| Currency exchange contracts | 60,356 |
| 750 |
| 1,018 |
| | 62,165 |
| 697 |
| 744 |
|
| Other contracts | 1,482 |
| 87 |
| 30 |
| | 1,706 |
| 123 |
| 40 |
|
| Derivatives not accounted for as hedges | $ | 62,554 |
| $ | 846 |
| $ | 1,055 |
| | $ | 67,056 |
| $ | 838 |
| $ | 796 |
|
| | | | | | | | |
| Gross derivatives | $ | 89,801 |
| $ | 2,985 |
| $ | 1,257 |
| | $ | 98,018 |
| $ | 2,572 |
| $ | 853 |
|
| | | | | | | | |
| Netting and credit adjustments | | $ | (704 | ) | $ | (710 | ) | | | $ | (546 | ) | $ | (546 | ) |
| Cash collateral adjustments | | (1,212 | ) | (149 | ) | | | (1,286 | ) | (105 | ) |
| Net derivatives recognized in statement of financial position | | $ | 1,069 |
| $ | 398 |
| | | $ | 740 |
| $ | 202 |
|
| | | | | | | | |
| Net accrued interest | | $ | 118 |
| $ | 15 |
| | | $ | 182 |
| $ | 1 |
|
| Securities held as collateral | | (720 | ) | — |
| | | (469 | ) | — |
|
| Net amount | | $ | 467 |
| $ | 413 |
| | | $ | 452 |
| $ | 203 |
|
It is standard market practice to post or receive cash collateral with our derivative counterparties in order to minimize counterparty exposure. Included in GE Capital Cash, cash equivalents and restricted cash was total net cash collateral received on derivatives of $1,551 million (comprising $2,198 million received and $647 million posted) at June 30, 2021 and $3,289 million (comprising $4,203 million received and $914 million posted) at December 31, 2020. Of these amounts, $773 million and $1,968 million at June 30, 2021 and December 31, 2020, respectively, were received on interest rate derivatives traded through clearing houses, which are recorded as a reduction of derivative assets.
Also included in total net cash collateral received are amounts presented as cash collateral adjustments in the table above, amounts related to accrued interest on interest rate derivatives presented as a reduction of Net accrued interest of $58 million and $292 million at June 30, 2021 and December 31, 2020, respectively, and excess net cash collateral posted of $560 million (comprising $8 million received and $568 million posted) at June 30, 2021, and $802 million (comprising $3 million received and $805 million posted) at December 31, 2020, which are excluded from cash collateral adjustments in the table above.
Fair value of derivatives in our consolidated Statement of Financial Position excludes accrued interest. Cash collateral adjustments excluded excess collateral received and posted of $104 million and $998 million at June 30, 2020, respectively, and $104 million and $603 million at December 31, 2019, respectively. Securities held as collateral excluded excess collateral received of $37 million and $27 million at June 30, 2020 and December 31, 2019, respectively.
FAIR VALUE HEDGES. We use derivatives to hedge the effects of interest rate and currency exchange rate changes on our borrowings. Interest rate risk on our borrowings relates to ongoing interest payments on our debt and interest rate risk associated with future debt tenders. At June 30, 2021, the cumulative amount of hedging adjustments of $4,038 million (including $2,341 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $29,121 million. At June 30, 2020, the cumulative amount of hedging adjustments of $6,503 million (including $2,342 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $46,255 million. At June 30, 2019, the cumulative amount of hedging adjustments of $4,221 million (including $2,568 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $58,344$34,983 million. The cumulative amount of hedging adjustments was primarily recorded in long-term borrowings.
CASH FLOW HEDGES. Changes in the fair value of cash flow hedges are recorded in AOCI and recorded in earnings in the period in which the hedged transaction occurs. The gain (loss) recognized in AOCI was $53$(5) million and $(49)$53 million for the three months ended June 30, 20202021 and 2019,2020, respectively and $(260)$31 million and $(2)$(260) million for the six months ended June 30, 20202021 and 2019,2020, respectively. These amounts were primarily related to currency exchange and interest rate contracts.
The total amount in AOCI related to cash flow hedges of forecasted transactions was a $118$51 million lossgain at June 30, 2020.2021. We expect to reclassify $85$12 million of lossgain to earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. For all periods presented we recognized an immaterial amount related to hedged forecasted transactions and firm commitments that did not occur by the end of the originally specified period. At June 30, 20202021 and 2019,2020, the maximum term of derivative instruments that hedge forecasted transactions was 1514 years and 1315 years, respectively.
NET INVESTMENT HEDGES. For these hedges, the portion of the fair value changes of the derivatives or debt instruments that relates to changes in spot currency exchange rates is recorded in a separate component of AOCI. The portion of the fair value changes of the derivatives related to differences between spot and forward rates is recorded in earnings each period. The amounts recorded in AOCI affect earnings if the hedged investment is sold, substantially liquidated, or control is lost.
The total gain (loss) recognized in AOCI on hedging instruments for the three months ended June 30, 2021 and 2020 and 2019 was $(90)$(173) million and $86$(90) million, and for the six months ended June 30, 2021 and 2020 and 2019 was $68$99 million and $18$68 million, respectively, predominantly from foreign currency debt. For all periods presented we recognized an immaterial amount excluded from assessment and recognized in earnings.
The carrying value of foreign currency debt designated as net investment hedges was $7,743$8,226 million and $12,421$7,743 million at June 30, 2021 and 2020, and 2019, respectively. The gain (loss)NaN amount was reclassified from AOCI into earnings was immaterial for both the three and six months ended June 30, 20202021 and 2019,2020, respectively.
|
| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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.
The table below presents the effect of our derivative financial instruments in the consolidated Statement of Earnings:Earnings (Loss):
| | | | | | | | | | | | | | | | | | | | | | | | Three months ended June 30, 2021 | | Three months ended June 30, 2020 |
| | Three months ended June 30, 2020 | | Three months ended June 30, 2019 | | Revenues | Cost of sales | Interest Expense | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense | SG&A | Other Income |
| (In millions) | Revenues | Cost of sales | Interest Expense | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense | SG&A | Other Income | |
| Total amounts presented in the consolidated Statement of Earnings | $ | 17,750 |
| $ | 15,083 |
| $ | 997 |
| $ | 3,079 |
| $ | 2,078 |
| | $ | 23,414 |
| $ | 17,412 |
| $ | 929 |
| $ | 3,425 |
| $ | 164 |
| |
| Total amounts presented in the consolidated Statement of Earnings (Loss) | | Total amounts presented in the consolidated Statement of Earnings (Loss) | $ | 18,279 | | $ | 13,618 | | $ | 488 | | $ | 2,866 | | $ | 706 | | | $ | 16,805 | | $ | 13,633 | | $ | 561 | | $ | 3,068 | | $ | 2,078 | |
| | | | | |
| Total effect of cash flow hedges | $ | 15 |
| $ | (13 | ) | $ | (12 | ) | $ | (2 | ) | $ | — |
| | $ | (15 | ) | $ | (5 | ) | $ | (9 | ) | $ | — |
| $ | — |
| Total effect of cash flow hedges | $ | 22 | | $ | (3) | | $ | (14) | | $ | 0 | | $ | 0 | | | $ | 15 | | $ | (13) | | $ | (12) | | $ | (2) | | $ | 0 | |
| | | | | |
| Hedged items | | $ | (122 | ) | | | | $ | (659 | ) | | Hedged items | | $ | (658) | | | $ | (122) | | |
| Derivatives designated as hedging instruments | | 109 |
| | | | 646 |
| | Derivatives designated as hedging instruments | | 630 | | | 109 | | |
| Total effect of fair value hedges | | $ | (12 | ) | | | | $ | (14 | ) | | Total effect of fair value hedges | | $ | (27) | | | $ | (12) | | |
| | | | | |
| Interest rate contracts | $ | (12 | ) | $ | — |
| $ | (4 | ) | $ | — |
| $ | — |
| | $ | (14 | ) | $ | — |
| $ | (14 | ) | $ | — |
| $ | — |
| Interest rate contracts | $ | 1 | | $ | 0 | | $ | 55 | | $ | 0 | | $ | 0 | | | $ | (2) | | $ | 0 | | $ | (4) | | $ | 0 | | $ | 0 | |
| Currency exchange contracts | (95 | ) | 16 |
| — |
| 104 |
| (32 | ) | | (433 | ) | (31 | ) | — |
| (17 | ) | (27 | ) | Currency exchange contracts | 99 | | 5 | | 0 | | 55 | | (51) | | | (95) | | 16 | | 0 | | 104 | | (32) | |
| Other | — |
| — |
| — |
| 97 |
| 11 |
| | — |
| — |
| 27 |
| — |
| (12 | ) | Other | 0 | | 0 | | 0 | | 57 | | 102 | | | 0 | | 0 | | 0 | | 97 | | 11 | |
| Total effect of derivatives not designated as hedges | $ | (107 | ) | $ | 16 |
| $ | (4 | ) | $ | 201 |
| $ | (21 | ) | | $ | (447 | ) | $ | (31 | ) | $ | 13 |
| $ | (17 | ) | $ | (39 | ) | Total effect of derivatives not designated as hedges | $ | 100 | | $ | 5 | | $ | 55 | | $ | 112 | | $ | 51 | | | $ | (97) | | $ | 16 | | $ | (4) | | $ | 201 | | $ | (21) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, 2021 | | Six months ended June 30, 2020 |
| Revenues | Cost of sales | Interest Expense | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense | SG&A | Other Income |
| Total amounts presented in the consolidated Statement of Earnings (Loss) | $ | 35,397 | | $ | 26,156 | | $ | 987 | | $ | 5,757 | | $ | 1,332 | | | $ | 36,294 | | $ | 28,059 | | $ | 1,122 | | $ | 6,129 | | $ | 8,947 | |
| | | | | | | | | | | |
| Total effect of cash flow hedges | $ | 0 | | $ | (6) | | $ | (22) | | $ | 1 | | $ | 0 | | | $ | (6) | | $ | (38) | | $ | (23) | | $ | (5) | | $ | 0 | |
| | | | | | | | | | | |
| Hedged items | | | $ | 1,186 | | | | | | | $ | (2,601) | | | |
| Derivatives designated as hedging instruments | | | (1,269) | | | | | | | 2,620 | | | |
| Total effect of fair value hedges | | | $ | (83) | | | | | | | $ | 19 | | | |
| | | | | | | | | | | |
| Interest rate contracts | $ | 2 | | $ | 0 | | $ | 46 | | $ | 0 | | $ | (1) | | | $ | (28) | | $ | 0 | | $ | (13) | | $ | 0 | | $ | 0 | |
| Currency exchange contracts | 403 | | 4 | | 0 | | 114 | | (12) | | | (616) | | 29 | | 0 | | 159 | | (21) | |
| Other | 0 | | 0 | | 0 | | 112 | | 121 | | | 0 | | 0 | | 0 | | (63) | | (11) | |
| Total effect of derivatives not designated as hedges | $ | 405 | | $ | 4 | | $ | 46 | | $ | 226 | | $ | 108 | | | $ | (644) | | $ | 29 | | $ | (13) | | $ | 95 | | $ | (32) | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended June 30, 2020 | | Six months ended June 30, 2019 |
| (In millions) | Revenues | Cost of sales | Interest Expense | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense | SG&A | Other Income |
| Total amounts presented in the consolidated Statement of Earnings | $ | 38,273 |
| $ | 30,778 |
| $ | 1,791 |
| $ | 6,144 |
| $ | 8,947 |
| | $ | 45,616 |
| $ | 33,620 |
| $ | 1,993 |
| $ | 6,827 |
| $ | 1,012 |
|
| | | | | | | | | | | | |
| Total effect of cash flow hedges | $ | (6 | ) | $ | (38 | ) | $ | (23 | ) | $ | (5 | ) | $ | — |
| | $ | 5 |
| $ | (14 | ) | $ | (19 | ) | $ | (1 | ) | $ | — |
|
| | | | | | | | | | | | |
| Hedged items | | | $ | (2,601 | ) | | | | | | $ | (1,186 | ) | | |
| Derivatives designated as hedging instruments | | | 2,620 |
| | | | | | 1,161 |
| | |
| Total effect of fair value hedges | | | $ | 19 |
| | | | | | $ | (25 | ) | | |
| | | | | | | | | | | | |
| Interest rate contracts | $ | (35 | ) | $ | — |
| $ | (13 | ) | $ | — |
| $ | — |
| | $ | (18 | ) | $ | — |
| $ | (29 | ) | $ | — |
| $ | — |
|
| Currency exchange contracts | (616 | ) | 29 |
| — |
| 159 |
| (21 | ) | | (43 | ) | (22 | ) | — |
| (62 | ) | (25 | ) |
| Other | — |
| — |
| — |
| (63 | ) | (11 | ) | | — |
| — |
| 123 |
| — |
| 1 |
|
| Total effect of derivatives not designated as hedges | $ | (652 | ) | $ | 29 |
| $ | (13 | ) | $ | 95 |
| $ | (32 | ) | | $ | (62 | ) | $ | (22 | ) | $ | 94 |
| $ | (62 | ) | $ | (24 | ) |
The gain (loss) of amount excluded for cash flow hedges was $7$10 million and 0$7 million for the three months ended June 30, 20202021 and 2019,2020, respectively, and $22$(6) million and 0$22 million for the six months ended June 30, 20202021 and 2019,2020, respectively. This amount is recognized primarily in Revenues in our consolidated Statement of Earnings (Loss).
COUNTERPARTY CREDIT RISK. We manage the risk that counterparties will default and not make payments to us according to the terms of our agreements on an individual counterparty basis. Where we have agreed to netting of derivative exposures with a counterparty, we net our exposures with that counterparty and apply the value of collateral posted to us to determine the exposure. We actively monitor these net exposures against defined limits and take appropriate actions in response, including requiring additional collateral. Our exposures to counterparties (including accrued interest), net of collateral we held, was $317$682 million and $368$392 million at June 30, 20202021 and December 31, 2019,2020, respectively. Counterparties' exposures to our derivative liability (including accrued interest), net of collateral posted by us, was $375$182 million and $159$307 million at June 30, 20202021 and December 31, 2019,2020, respectively.
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| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 18.20. VARIABLE INTEREST ENTITIES. In addition to the 32 VIEs detailed in Note 4, in our consolidated Statement of Financial Position, we have assets of $2,621$1,849 million and $2,134$1,733 million and liabilities of $1,553$521 million and $1,233$657 million, inclusive of intercompany eliminations, at June 30, 2020,2021 and December 31, 2019,2020, respectively, from other consolidated VIEs. These entities were created to help our customers facilitate or finance the purchase of GE goods and services. These entitiesservices and have no features that could expose us to losses that would significantly exceed the difference between the consolidated assets and liabilities. Substantially all the assets of our consolidated VIEs at June 30, 2020,2021 can only be used to settle the liabilities of those VIEs.
Our investments in unconsolidated VIEs were $2,194$3,910 million and $1,937$3,230 million at June 30, 2020,2021 and December 31, 2019,2020, respectively. These investments are primarily owned by GE Capital businesses $589of which $1,334 million and $621$1,141 million of which were owned by Energy Financial Services,EFS, comprising equity method investments, primarily renewable energy tax equity investments, at June 30, 2021 and $1,222December 31, 2020, respectively. In addition, $2,350 million and $896$1,833 million of which were owned by our run-off insurance operations, primarily comprising investment securities at June 30, 20202021 and December 31, 2019,2020, respectively. The increase in investments in unconsolidated VIEs in our run-off insurance operations reflects implementation of our revised reinvestment plan, which incorporates the introduction of strategic initiatives to invest in higher-yielding asset classes. Our maximum exposure to loss in respect of unconsolidated VIEs is increased by our commitments to make additional investments in these entities described in Note 19.21.
NOTE 19.21. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIES
COMMITMENTS. GE Capital had total investment commitments of $3,047 million at June 30, 2021. The commitments primarily comprise project financing investments in thermal and wind energy projects of $571 million and investments by our run-off insurance operations in investment securities and other assets of $2,476 million, and included within these commitments are obligations to make investments in unconsolidated VIEs of $413 million and $2,339 million, respectively. See Note 20 for further information.
As of June 30, 2021, in our Aviation segment, we have committed to provide financing assistance of $2,276 million of future customer acquisitions of aircraft equipped with our engines.
Commitments - Discontinued Operations.The GECAS business within the Capital segmentdiscontinued operations has placed multiple-year orders for various Boeing, Airbus and other aircraft manufacturers with list prices approximating $27,836$25,676 million, excluding pre-delivery payments made in advance (including 292261 new aircraft with estimated delivery dates of 15% in 2021, 14% in 2020, 22%2022 and 71% in 2021 and 64% in 20222023 through 2026)2027) and secondary orders with airlines for used aircraft approximating $2,292$1,270 million (including 5327 used aircraft with estimated delivery dates of 29%52% in 2020, 60%2021, 37% in 20212022 and 11% in 2022)2023) at June 30, 2020.2021. When we purchaseGECAS purchases aircraft, it is at a contractual price, which is usually less than the aircraft manufacturer’smanufacturer's list price and excludes any pre-delivery payments made in advance.price. As of June 30, 2020, we have2021, GECAS has made $3,424$2,633 million of pre-delivery payments to aircraft manufacturers.
During April 2020, GECAS agreed with Boeing to restructure its 737 MAX orderbook including previously canceled positions, resulting in 78 orders now remaining.
GE Capital had total investment commitments of $2,722 million at June 30, 2020. The commitments primarily comprise project financing investments in thermal and wind energy projects of $1,114 million and investments by our run-off insurance operations in investment securities and other assets of $1,581 million, included within these commitments are obligations to make additional investments in unconsolidated VIEs of $248 million and $1,298 million, respectively. See Note 18 for further information.
As of June 30, 2020, in our Aviation segment, we have committed to provide financing assistance of $2,010 million for future customer acquisitions of aircraft equipped with our engines.
GUARANTEES. Credit Support and Indemnification Agreements - Continuing Operations. For further information on credit support and indemnification agreements for continuing operations, see our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Indemnification agreements - Discontinued Operations. At June 30, 2021, we have provided specific indemnities to buyers of GE Capital's assets that, in the aggregate, represent a maximum potential claim of $581 million with related reserves of $70 million.
PRODUCT WARRANTIES. We provide for estimated product warranty expenses when we sell the related products. Because warranty estimates are forecasts that are based on the best available information, mostly historical claims experience, claims costs may differ from amounts provided. The liability for product warranties was $2,036$1,933 million and $2,165$2,054 million at June 30, 20202021 and December 31, 2019,2020, respectively.
LEGAL MATTERS. The following information supplements and amends the discussion of Legal Matters in Note 23 in our Annual Report on Form 10-K for the year ended December 31, 20192020 and in Note 1921 in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020;2021; refer to those discussions for information about previously reported legal matters that are not updated below. In the normal course of our business, we are involved from time to time in various arbitrations, class actions, commercial litigation, investigations and other legal, regulatory or governmental actions, including the significant matters described below that could have a material impact on our results of operations. In many proceedings, including the specific matters described below, it is inherently difficult to determine whether any loss is probable or even reasonably possible or to estimate the size or range of the possible loss, and accruals for legal matters are not recorded until a loss for a particular matter is considered probable and reasonably estimable. Given the nature of legal matters and the complexities involved, it is often difficult to predict and determine a meaningful estimate of loss or range of loss until we know, among other factors, the particular claims involved, the likelihood of success of our defenses to those claims, the damages or other relief sought, how discovery or other procedural considerations will affect the outcome, the settlement posture of other parties and other factors that may have a material effect on the outcome. For these matters, unless otherwise specified, we do not believe it is possible to provide a meaningful estimate of loss at this time. Moreover, it is not uncommon for legal matters to be resolved over many years, during which time relevant developments and new information must be continuously evaluated.
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Alstom legacy matters. InOn November 2015, we acquired the Thermal, Renewables and Grid businesses from Alstom. Prior to the acquisition, the seller was the subject of 2 significant cases involving anti-competitive activities and improper payments: (1) in January 2007, Alstom was fined €65 million by the European Commission for participating in a gas insulated switchgear cartel that operated from 1988 to 2004 (that fine was later reduced to €59 million), and (2) in December 2014, Alstom pled guilty in the United States to multiple violations of the Foreign Corrupt Practices Act and paid a criminal penalty of $772 million. As part of GE’s accounting for the acquisition, we established a reserve amounting to $858 million for legal and compliance matters related to the legacy business practices that were the subject of these and related cases in various jurisdictions, including the previously reported legal proceedings in IsraelSlovenia that are described below. The reserve balance was $856$673 million and $875$858 million at June 30, 20202021 and December 31, 2019, respectively.2020, respectively, with the reduction driven primarily by cash payment in connection with the Šoštanj settlement described below.
Regardless of jurisdiction, the allegations relate to claimed anti-competitive conduct or improper payments in the pre-acquisition period as the source of legal violations and/or damages. Given the significant litigation and compliance activity related to these matters and our ongoing efforts to resolve them, it is difficult to assess whether the disbursements will ultimately be consistent with the reserve established. The estimation of this reserve involved significant judgment and may not reflect the full range of uncertainties and unpredictable outcomes inherent in litigation and investigations of this nature, and at this time we are unable to develop a meaningful estimate of the range of reasonably possible additional losses beyond the amount of this reserve. Damages sought may include disgorgement of profits on the underlying business transactions, fines and/or penalties, interest, or other forms of resolution. Factors that can affect the ultimate amount of losses associated with these and related matters include the way cooperation is assessed and valued, prosecutorial discretion in the determination of damages, formulas for determining fines and penalties, the duration and amount of legal and investigative resources applied, political and social influences within each jurisdiction, and tax consequences of any settlements or previous deductions, among other considerations. Actual losses arising from claims in these and related matters could exceed the amount provided.
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 before the International Chamber of Commerce Court of Arbitration in Vienna, Austria. In February 2017, a government investigation in Slovenia of the same underlying conduct proceeded to an investigative phase overseen by a judge of the Celje District Court. In September 2020, the relevant Alstom legacy entity was served with an indictment, which we had anticipated as we are working with the parties to resolve these matters. In March 2021, GE reached a settlement of the arbitration claim with the power plant owner for a mix of cash and $600 million, respectively, relatedservices valued by the plant owner at approximately $307 million. In June 2021, GE entered a plea agreement with a judge of the Celje District Court with respect to the alleged conduct underlyingindictment of the decision that were pending before the Central District Court in Israel. The court in March 2020 approvedrelevant Alstom legacy entity, including a settlement agreement among the parties that became final in June, and GE is payingfine of approximately $47 million in the conclusion of these matters.$27 million.
Shareholder and related lawsuits. lawsuits. Since February 2018, multiple shareholder derivative lawsuits have been filed against current and former GE executive officers and members of GE’s Board of Directors and GE (as nominal defendant). NaN shareholder derivative lawsuits are currently pending: the Bennett case, which was filed in Massachusetts state court; and the Cuker, Lindsey and Priest/Tola cases, which were filed in New York state court. These lawsuits have alleged violations of securities laws, breaches of fiduciary duties, unjust enrichment, waste of corporate assets, abuse of control and gross mismanagement, although the specific matters underlying the allegations in the lawsuits have varied. The allegations in the Bennett, Lindsey and Priest/Tola cases relate to substantially the same facts as those underlying the Hachem securities class action described in our Annual Report on Form 10-K for the year ended December 31, 2020, and the allegations in the Cuker case relate to alleged corruption in China. The plaintiffs seek unspecified damages and improvements in GE’s corporate governance and internal procedures. The Bennett case has been stayed pending final resolution of another shareholder derivative lawsuit (the Gammel case) that was previously dismissed. In July 2021, the court granted GE's motion to dismiss the Cuker complaint. The Lindsey case has been stayed by agreement of the parties. GE filed a motion to dismiss the Priest/Tola complaint in March 2021.
In October 2018, a putative class action (the Houston case) was filed in New York state court naming as defendants GE, certain GE subsidiaries and current and former GE executive officers and employees. It alleges violations of Sections 11, 12 and 15 of the Securities Act of 1933 and seeks damages on behalf of purchasers of senior notes issued in 2016 and rescission of transactions involving those notes. This case was stayed pending resolution of the motion to dismiss the Hachem case. In April 2021, the plaintiffs filed an amended complaint, and GE in June 2021 filed a motion to dismiss that complaint.
In February 2019, two putative class actionsa securities action (the Birnbaum case and the Sheet Metal Workers Local 17 Trust FundsTouchstone case) werewas filed in the U.S. District Court for the Southern District of New York naming as defendants GE and current and former GE executive officers. In April 2019, the court issued an order consolidating these two actions. In June 2019, the lead plaintiff filed an amended consolidated complaint. It alleges violations of SectionSections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Section 1707.43 of the Ohio Securities Act and common law fraud based on alleged misstatements regarding GE's H-class turbines and goodwillinsurance reserves, GE Power’s revenue recognition practices related to GE's Power business.long-term service agreements, GE’s acquisition of Alstom, and the goodwill recognized in connection with that transaction. The lawsuit seeks damages on behalf of shareholderssix institutional investors who acquiredpurchased GE common stock between December 4, 2017August 1, 2014 and December 6, 2018. In August 2019,October 30, 2018 and rescission of those purchases. This case was stayed pending resolution of the lead plaintiff filed a second amended complaint. In May 2020 the court granted GE's motion to dismiss the case, and in June 2020Hachem case. In May 2021, the plaintiffs filed an appealamended complaint, and GE in June 2021 filed a motion to dismiss that complaint.
Bank BPH. As previously reported, GE Capital’s subsidiary Bank BPH, along with other Polish banks, has been subject to ongoing litigation in Poland related to its portfolio of floating rate residential mortgage loans, with cases brought by individual borrowers seeking relief related to their foreign currency denominated mortgage loans in various courts throughout Poland. At June 30, 2021, approximately 86% of the Second Circuit.Bank BPH portfolio is indexed to or denominated in foreign currencies (primarily Swiss francs), and the total portfolio had a carrying value of $1,991 million. We continue to observe an increase in the number of lawsuits being brought against Bank BPH and other banks in Poland, and we expect this to continue in future reporting periods.
We estimate potential losses for Bank BPH in connection with borrower litigation cases that are pending by recording legal reserves, as well as in connection with potential future cases or other adverse developments as part of our ongoing valuation of the Bank BPH portfolio, which we record at the lower of cost or fair value, less cost to sell. At June 30, 2021, the total amount of such estimated losses was $490 million. We update our assumptions underlying the amount of estimated losses based primarily on the number of lawsuits filed and estimated to be filed in the future, whether liability will be established in lawsuits and the nature of the remedy ordered by courts if liability is established. We expect the trends we have previously reported of an increasing number of lawsuits being filed, more findings of liability and more severe remedies being ordered against Polish banks (including Bank BPH) to continue in future reporting periods, although Bank BPH is unable at this time to develop a meaningful estimate of reasonably possible losses associated with active and inactive Bank BPH mortgage loans beyond the amounts currently recorded. Additional factors may also affect our estimated losses over time, including: potentially significant judicial decisions or binding resolutions by the European Court of Justice (ECJ) or the Polish Supreme Court, including a binding resolution anticipated to be considered by the Polish Supreme Court later this year; the impact of any of these or other future or recent decisions or resolutions (including the ECJ decision in April 2021 on a case involving a Bank BPH mortgage loan, and the Polish Supreme Court binding resolution delivered verbally in May 2021 with written reasoning issued in July 2021) on how Polish courts will interpret and apply the law in particular cases and how borrower behavior may change in response, neither of which are known immediately upon the issuance of a decision or resolution; uncertainty related to a proposal by the Chairman of the Polish Financial Supervisory Authority in December 2020 that banks voluntarily offer borrowers an opportunity to convert their foreign currency denominated mortgage loans to Polish zlotys using an exchange rate applicable at the date of loan origination, and about the approaches that other Polish banks, regulators and other government authorities are adopting or will adopt in response to this proposal; uncertainty arising from investigations of the Polish Office of Competition and Consumer Protection (UOKiK), including a UOKiK decision in December 2020 which found that certain foreign exchange clauses that appear in certain of Bank BPH’s mortgage loan agreements are unfair contractual terms under Polish law. Future adverse developments related to any of the foregoing, or other developments such as actions by regulators or other governmental authorities could have a material adverse effect on Bank BPH and the carrying value of its mortgage loan portfolio and could result in significant losses beyond the amount that we currently estimate.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. For further information about environmental, health and safety matters, see our Annual Report on Form 10-K for the year ended December 31, 2019.2020 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
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FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 20.22. INTERCOMPANY TRANSACTIONS.TRANSACTIONS. Presented below is a walk of intercompany eliminations from the combined GE Industrial and GE Capital totals to the consolidated cash flows.flows for continuing operations.
|
| | | | | | |
| | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
|
| Combined GE and GE Capital cash from (used for) operating activities - continuing operations | $ | (2,298 | ) | $ | 211 |
|
| GE current receivables sold to GE Capital(a) | (452 | ) | 560 |
|
| GE long-term receivables sold to GE Capital(b) | 177 |
| 269 |
|
| Supply chain finance programs(c) | 1,457 |
| 473 |
|
| Other reclassifications and eliminations | (202 | ) | 14 |
|
| Consolidated cash from (used for) operating activities - continuing operations | $ | (1,319 | ) | $ | 1,528 |
|
| | | |
| Combined GE and GE Capital cash from (used for) investing activities - continuing operations | $ | 27,207 |
| $ | 3,495 |
|
| GE current receivables sold to GE Capital | 270 |
| (1,297 | ) |
| GE long-term receivables sold to GE Capital(b) | (177 | ) | (269 | ) |
| Supply chain finance programs(c) | (1,457 | ) | (473 | ) |
| GE Capital long-term loans to GE | (7,500 | ) | — |
|
| Capital contribution from GE to GE Capital | — |
| 1,500 |
|
| Other reclassifications and eliminations | 167 |
| (689 | ) |
| Consolidated cash from (used for) investing activities - continuing operations | $ | 18,509 |
| $ | 2,266 |
|
| | | |
| Combined GE and GE Capital cash from (used for) financing activities - continuing operations | $ | (19,717 | ) | $ | (6,004 | ) |
| GE current receivables sold to GE Capital | 183 |
| 737 |
|
| GE Capital long-term loans to GE | 7,500 |
| — |
|
| Capital contribution from GE to GE Capital | — |
| (1,500 | ) |
| Other reclassifications and eliminations | 36 |
| 674 |
|
| Consolidated cash from (used for) financing activities - continuing operations | $ | (11,999 | ) | $ | (6,092 | ) |
| |
(a) | Included the elimination of $7,494 million payments to GE for current receivables purchased and retained by GE Capital and the related reclassification to CFOA of $7,042 million due to GE Capital collections and other activity in our consolidated statement of cash flows for the six months ended June 30, 2020. Included the elimination of $7,165 million payments and the reclassification to CFOA of $7,725 million collections and other activity for the six months ended June 30, 2019. | | | | | | | | | | | | | | | | | | | | | | Six months ended June 30, 2021 | Six months ended June 30, 2020 | | Cash from (used for): | Operating activities | Investing activities | Financing activities | Operating activities | Investing activities | Financing activities | | Combined GE Industrial and GE Capital cash flows | $ | (5,075) | | $ | 4,710 | | $ | (13,117) | | $ | (3,377) | | $ | 28,354 | | $ | (19,758) | | | GE Industrial current receivables sold to GE Capital(a) | 2,210 | | (2,845) | | 635 | | (452) | | 270 | | 183 | | | GE Industrial long-term receivables sold to GE Capital | 83 | | (83) | | 0 | | 177 | | (177) | | 0 | | | | | | | | | | Supply chain finance programs | 135 | | (135) | | 0 | | 1,457 | | (1,457) | | 0 | | | Repayment of GE Capital loans by GE Industrial | 0 | | 0 | | 0 | | 0 | | (7,500) | | 7,500 | | | Other reclassifications and eliminations | (344) | | (131) | | 474 | | (225) | | 190 | | 36 | | | | | | | | | | Consolidated cash flows | $ | (2,991) | | $ | 1,517 | | $ | (12,008) | | $ | (2,421) | | $ | 19,680 | | $ | (12,040) | |
(a)Included the elimination of $3,020 million and $7,512 million payments to GE Industrial for receivables purchased and retained by GE Capital and the related reclassification to CFOA of $5,230 million and $7,060 million due to GE Capital collections and other activity in our consolidated statement of cash flows for the six months ended June 30, 2021 and 2020, respectively.
|
| |
(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.
|
Cash payments received on the Receivable facility deferred purchase price are reflected as Cash from investing activities in the GE Capital and Consolidated columns of our consolidated Statement of Cash Flows. Sales of customer receivables from GE Industrial to GE Capital are classified as Cash from operating activities in the GE Industrial column of our Statement of Cash Flows. See Note 4 for further information.
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| | |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| | | | | | | | | | | | | | | | | |
| Three months ended June 30 | | Six months ended June 30 |
| 2021 | 2020 | | 2021 | 2020 |
| Purchases and sales of business interests(a) | $ | (5) | | $ | 52 | | | $ | (2) | | $ | 12,424 | |
| Licensing and royalty income | 39 | | 31 | | | 87 | | 73 | |
| Equity method income | 38 | | 31 | | | 54 | | 69 | |
| Net interest and investment income (loss)(b) | 602 | | 1,955 | | | 1,041 | | (3,677) | |
| Other items | 43 | | 48 | | | 159 | | 101 | |
| GE Industrial | $ | 717 | | $ | 2,116 | | | $ | 1,339 | | $ | 8,990 | |
| Eliminations | (10) | | (38) | | | (7) | | (43) | |
| Total | $ | 706 | | $ | 2,078 | | | $ | 1,332 | | $ | 8,947 | |
NOTE 21. BAKER HUGHES SUMMARIZED FINANCIAL INFORMATION. (a)We accountIncluded a pre-tax gain of $12,341 million ($11,199 million after-tax) on the sale of BioPharma for our remaining interest in Baker Hughes (comprising 377.4 million shares and a promissory note receivable) at fair value. Atthe six months ended June 30, 2020, the fair value2020. See Note 2 for further information.
(b)Included a pre-tax realized and unrealized gain of our interest in Baker Hughes was $5,910 million. Since the date of deconsolidation, we have not sold any shares of Baker Hughes$373 million ($298 million after-tax) and recognized a pre-tax unrealized gain of $1,846 million ($1,552 million after-tax) for the three months ended June 30, 2021 and 2020, respectively, and a pre-tax realized and unrealized gain of $668 million ($485 million after-tax) and a pre-tax unrealized loss of $3,865 million ($3,080 million after-tax) for the three and six months ended June 30, 2021 and 2020, respectively, based on a share price of $15.39. See Notes 2 and 3 for further information.related to our interest in Baker Hughes.
Summarized financial information of Baker Hughes is as follows.
|
| | | | | | |
| | Three months ended June 30, 2020 |
| Six months ended June 30, 2020 |
|
| Revenues | $ | 4,736 |
| $ | 10,160 |
|
| Gross profit | 678 |
| 1,433 |
|
| Net income (loss) | (355 | ) | (16,453 | ) |
| Net income (loss) attributable to the entity | (201 | ) | (10,411 | ) |
Baker Hughes is a SEC registrant with separate filing requirements, and its financial information can be obtained from www.sec.gov or www.bakerhughes.com.
NOTE 22. OTHER INCOME
|
| | | | | | | | | | | | | |
| | Three months ended June 30 | | Six months ended June 30 |
| (In millions) | 2020 |
| 2019 |
| | 2020 |
| 2019 |
|
| Purchases and sales of business interests(a) | $ | 52 |
| $ | (39 | ) | | $ | 12,424 |
| $ | 214 |
|
| Licensing and royalty income | 31 |
| 80 |
| | 73 |
| 120 |
|
| Associated companies | 31 |
| 82 |
| | 69 |
| 121 |
|
| Net interest and investment income(b) | 1,955 |
| 23 |
| | (3,677 | ) | 160 |
|
| Other items | 48 |
| 26 |
| | 101 |
| 410 |
|
| GE | $ | 2,116 |
| $ | 172 |
| | $ | 8,990 |
| $ | 1,024 |
|
| Eliminations | (38 | ) | (8 | ) | | (43 | ) | (13 | ) |
| Total | $ | 2,078 |
| $ | 164 |
| | $ | 8,947 |
| $ | 1,012 |
|
| |
(a) | Included a pre-tax gain of $12,341 million on the sale of BioPharma for the six months ended June 30, 2020. Included a pre-tax gain of $223 million on the sale of ServiceMax for the six months ended June 30, 2019. See Note 2 for further information. |
| |
(b) | Included a pre-tax unrealized gain of $1,846 million and a pre-tax unrealized loss of $3,865 million for the three and six months ended June 30, 2020, respectively, related to our interest in Baker Hughes in 2020. See Note 3 for further information. |
FORWARD-LOOKING STATEMENTS
Our public communications and SEC filings may contain statements related to future, not past, events. These forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "estimate," "forecast," "target," "preliminary," or "range." Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and on the world economy; our expected financial performance, including cash flows, revenues, organic growth, margins, earnings and earnings per share; macroeconomic and market conditions and volatility; planned and potential business or asset dispositions; our de-leveraging plans, including leverage ratios and targets, the timing and nature of actions to reduce indebtedness and our credit ratings and outlooks; GE's and GE Capital's funding and liquidity; our businesses’ cost structures and plans to reduce costs; restructuring, goodwill impairment or other financial charges; or tax rates.
For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:
the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on our operations and personnel, and on commercial activity and demand across our and our customers’ businesses, and on global supply chains;
our inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position, the prices of our securities and the achievement of our strategic objectives;
changes in macroeconomic and market conditions and market volatility (including developments and volatility arising from the COVID-19 pandemic), including interest rates, the value of securities and other financial assets (including our equity ownership position in Baker Hughes), oil and other commodity prices and exchange rates, and the impact of such changes and volatility on our financial position;
our de-leveraging and capital allocation plans, including with respect to actions to reduce our indebtedness, the timing and amount of GE dividends, organic investments, and other priorities;
further downgrades of our current short- and long-term credit ratings or ratings outlooks, or changes in rating application or methodology, and the related impact on our liquidity, funding profile, costs and competitive position;
GE’s liquidity and the amount and timing of our GE Industrial cash flows and earnings, which may be impacted by customer, supplier, competitive, contractual and other dynamics and conditions;
GE Capital's capital and liquidity needs, including in connection with GE Capital’s run-off insurance operations and discontinued operations, the amount and timing of required capital contributions to the insurance operations and any strategic actions that we may pursue; the impact of conditions in the financial and credit markets on GE Capital's ability to sell financial assets; the availability and cost of funding; and GE Capital's exposure to particular counterparties and markets;
our success in executing and completing asset dispositions or other transactions, including our plan to exit our equity ownership position in Baker Hughes, the timing of closing for such transactions and the expected proceeds and benefits to GE;
global economic trends, competition and geopolitical risks, including changes in the rates of investment or economic growth in key markets we serve, or an escalation of trade tensions such as those between the U.S. and China;
market developments or customer actions that may affect levels of demand and the financial performance of the major industries and customers we serve, such as secular, cyclical and competitive pressures in our Power business, pricing and other pressures in the renewable energy market, levels of demand for air travel and other customer dynamics such as early aircraft retirements, conditions in key geographic markets and other shifts in the competitive landscape for our products and services;
operational execution by our businesses, including our ability to improve the operations and execution of our Power and Renewable Energy businesses, and the performance of our Aviation business;
changes in law, regulation or policy that may affect our businesses, such as trade policy and tariffs, regulation related to climate change, and the effects of U.S. tax reform and other tax law changes;
our decisions about investments in new products, services and platforms, and our ability to launch new products in a cost-effective manner;
our ability to increase margins through implementation of operational changes, restructuring and other cost reduction measures;
the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of Alstom, SEC and other investigative and legal proceedings;
the impact of actual or potential failures of our products or third-party products with which our products are integrated, such as the fleet grounding of the Boeing 737 MAX, and the timing of its return to service and return to delivery, and related reputational effects;
the impact of potential information technology, cybersecurity or data security breaches; and
the other factors that are described in the "Risk Factors" section of this report and of our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as such descriptions may be updated or amended in any future reports we file with the SEC.
These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements. This document includes certain forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materially.
20202021 2Q FORM 10-Q 6555
EXHIBITS
EXHIBITS
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| Indenture, among GE Capital Funding, LLC,Amended and Restated Credit Agreement, dated as Issuer,of May 27, 2021, among General Electric Company, as guarantor,the borrower, JPMorgan Chase Bank, N.A., as Administrative Agent, and The Bank of New York Mellon, as trustee, dated May 18, 2020the lenders party thereto (Incorporated by reference to Exhibit 4.110 to General Electric Company'sGE’s Current Report on Form 8-K, dated May 18, 202027, 2021 (Commission file number 001-00035)). |
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| Exhibit 101 | The following materials from General Electric Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020,2021, formatted in XBRL (eXtensible Business Reporting Language); (i) Statement of Earnings (Loss) for the three and six months ended June 30, 20202021 and 2019,2020, (ii) Statement of Financial Position at June 30, 20202021 and December 31, 2019,2020, (iii) Statement of Cash Flows for the six months ended June 30, 20202021 and 2019,2020, (iv) Consolidated Statement of Comprehensive Income (Loss) for the three and six months ended June 30, 20202021 and 2019,2020, (v) Statement of Changes in Shareholders' Equity for the three and six months ended June 30, 20202021 and 2019,2020, and (vi) Notes to Consolidated Financial Statements. |
| Exhibit 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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FORM 10-Q CROSS REFERENCE INDEX
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| Item Number | | Page(s) |
| Part I – FINANCIAL INFORMATION |
| Item 1. | | Financial Statements | | 36-6428-55 |
| Item 2. | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 3-334-27 |
| Item 3. | | Quantitative and Qualitative Disclosures About Market Risk | | 22-24, 59-6019, 50-52 |
| Item 4. | | Controls and Procedures | | 3427 |
Part II – OTHER INFORMATION |
| Item 1. | | Legal Proceedings | | 61-6253-54 |
| Item 1A. | | Risk Factors | | 34-35Not applicable(a) |
| Item 2. | | Unregistered Sales of Equity Securities and Use of Proceeds | | 3427 |
| Item 3. | | Defaults Upon Senior Securities | | Not applicable |
| Item 4. | | Mine Safety Disclosures | | Not applicable |
| Item 5. | | Other Information | | Not applicable |
| Item 6. | | Exhibits | | 6656 |
| Signatures | | 6656 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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July 29, 202027, 2021 | | /s/ Thomas S. Timko |
| Date | | Thomas S. Timko Vice President, Chief Accounting Officer and Controller Principal Accounting Officer |
66 20202021 2Q FORM 10-Q56
