UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,September 30, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 001-00035
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
| New York | | 14-0689340 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | | |
| 5 Necco Street | Boston | MA | | 02210 |
| (Address of principal executive offices) | | (Zip Code) |
(Registrant’s telephone number, including area code) (617) 443-3000
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock, par value $0.06$0.01 per share | GE | New York Stock Exchange |
| 0.375% Notes due 2022 | GE 22A | New York Stock Exchange |
| 1.250% Notes due 2023 | GE 23E | New York Stock Exchange |
| 0.875% Notes due 2025 | GE 25 | New York Stock Exchange |
| 1.875% Notes due 2027 | GE 27E | New York Stock Exchange |
| 1.500% Notes due 2029 | GE 29 | New York Stock Exchange |
| 7 1/2% Guaranteed Subordinated Notes due 2035 | GE /35 | New York Stock Exchange |
| 2.125% Notes due 2037 | GE 37 | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
| | | | | | | | | | | |
| Large accelerated filer | ☑ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
There were 8,778,641,0001,098,137,128 shares of common stock with a par value of $0.06$0.01 per share outstanding at March 31,September 30, 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, including global supply chain disruptions, 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,business; pricing, the timing of customer investment and other pressuresfactors in the renewable energy market, levels ofmarkets; demand for air travel and other dynamics related to the COVID-19 pandemic,pandemic; conditions in key geographic marketsmarkets; and other shifts in the competitive landscape for our products and services;
•operational execution by our businesses, including the operations and execution 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 and incentives related to climate change (including extension of the U.S. wind Production Tax Credit), and the effects of tax law changes;
•our decisions about investments in new products, services and platforms, and our ability to launch new products in a cost-effective manner;
•our ability to increase margins through implementation of operational changes, restructuring and other cost reduction measures;
•the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of Alstom and other investigative and legal proceedings;
•the impact of actual or potential failures of our products or third-party products with which our products are integrated, and related reputational effects;
•the impact of potential information technology, cybersecurity or data security breaches at GE or third parties; and
•the other factors that are described in the "Risk Factors" section of this report and of our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as such descriptions may be updated or amended in any future reports we file with the SEC.
These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements. This document includes certain forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materially.
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 Segment Operations section within 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 recent business portfolio actions. Results of businesses reclassified to discontinued operations have been recast for all periods presented.
GE’s Internet address at www.ge.com, Investor Relations website at www.ge.com/investor-relations and our corporate blog at www.gereports.com, as well as GE’s Facebook page, Twitter accounts and other social media, including @GE_Reports, contain a significant amount of information about GE, including financial and other information for investors. GE encourages investors to visit these websites from time to time, as information is updated and new information is posted.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A). See Note 1 for a discussion of the basis of presentation for our consolidated financial statements and this 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.
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. The COVID-19 pandemic has impacted global economies, resulting in workforce and travel restrictions, supply chain and production disruptions and reduced demand and spending across many sectors. Since the latter part of the first quarter of 2020, these factors have had a material adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve. While factors related directly and indirectly to the COVID-19 pandemic have been impacting operations and financial performance at varying levels across all our businesses, the most significant impact to date has been at our Aviation segment and our GE Capital Aviation Services (GECAS) aircraft leasing business within discontinued operations. For details about impacts related to our businesses and actions we have taken in response, as applicable, refer to the respective segment sections within MD&A. We also continue to evaluate market conditions as they evolve and take precautionary measures to strengthen our financial position. We ended the firstthird quarter of 2021 with $31.8$25.0 billion of consolidated cash, cash equivalents and restricted cash, in addition to our available credit lines of $20.2$14.5 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 announced an agreement to combine GECAS with AerCap Holdings N.V. (AerCap), for which the Company expects to receive $23.9approximately $22.6 billion in cash, subject toinclusive of estimated contractual closing adjustments, 111.5 million shares of AerCap common stock (approximately 46% ownership interest) valued at approximately $6.6$6.4 billion based on the AerCap’s closing share price on March 31,September 30, 2021, and $1 billion in AerCap notes and/or cash upon closing.(GECAS transaction). In connection with the signing of the transaction agreement, GE Capital recorded a non-cash after-tax charge of $2.8$3.6 billion in discontinued operations in 2021, including a $0.2 billion gain in the firstthird quarter of 2021,driven by the increase in AerCap's share price. This was partially offset by $0.2$1.2 billion of GECAS earnings in 2021, including $0.5 billion of earnings andin the third quarter. The results of GECAS are now presented in discontinued operations. Given the economics of GECAS accrue to AerCap in conjunction with the transaction, the net impact of GECAS (loss on sale and operations) could change materially, mainly due to fluctuations in AerCap's closing share price. Completion of the transaction remains subject to AerCap shareholder approval,In October 2021, we received final regulatory approvals and other customary closing conditions.are now expecting the transaction to be completed on November 1, 2021. See Note 2 for further information.
After completion of the transaction, we will elect to prospectively measure our investment in AerCap at fair value and expect to have continuing involvement with AerCap, primarily through our ownership interest and ongoing sales or leases of products and services. In addition, we expect to sell our stake in an orderly fashion over time. The remainder of GE Capital, including Energy Financial Services (EFS) and our run-off insurance operations, will be reported within Corporate. This meansEffective for our Annual Report on Form 10-K for the year ended December 31, 2021, we will move from three-column to one-column financial statement reporting. At that point, while we will continue to provide the same level of Insurance disclosures, the results of our Insurance business will be excluded from certain non-GAAP financial measures.
Liability Management Actions. In the second quarter of 2021, we completed a debt tender to repurchase a total of $7.3 billion of debt, comprising $4.1 billion of GE Industrial and $3.2 billion of GE Capital debt. The total after-tax loss on the tender was $1.1 billion ($1.4 billion pre-tax), comprising $0.5 billion in GE Industrial and $0.6 billion in GE Capital.
FIRSTFactoring. Effective April 1, 2021, the Company discontinued the majority of its factoring programs. For the six months ended September 30, 2021, the adverse impact to GE Industrial CFOA was $3.1 billion, which primarily represents the cash that GE Industrial would have otherwise collected in the period had customer receivables not been previously sold and is excluded from GE Industrial free cash flows*.
Reverse Stock Split. In the second quarter of 2021, we announced that we would proceed with the 1-for-8 reverse stock split, as approved by shareholders, and filed an amendment to our certificate of incorporation to effectuate the reverse stock split after the close of trading on July 30, 2021. GE common stock began trading on a split-adjusted basis on August 2, 2021. Effective this quarter, our shares of outstanding common stock and earnings per share calculation have been retroactively restated for all periods presented.
BK Medical. In the third quarter of 2021, we entered into an agreement to acquire BK Medical, a leader in surgical ultrasound imaging and guidance, from Altaris Capital Partners for a cash purchase price of $1.45 billion. The parties expect the transaction to close in 2022, subject to review by the relevant regulatory authorities.
THIRD QUARTER 2021 RESULTS. Consolidated revenues were $17.1$18.4 billion, down $2.4$0.1 billion for the quarter, driven by decreased GE Industrial revenues partially offset by increasedand GE Capital revenues. GE Industrial revenues decreased $2.5$0.1 billion (13%(1%), driven primarily by decreases at Aviation, HealthcareRenewable Energy and Power, partially offset by an increase at Renewable Energy.Healthcare. GE Capital revenues increased 5%decreased 3%.
Continuing earnings (loss) per share was $0.00.$0.54. Excluding realized and unrealized gains (losses), on equity securities, non-operating benefit costs, gains (losses) on purchases and sales of business interests, and restructuring and other charges, and a GE Capital tax loss, Adjusted earnings per share* was $0.03.$0.57.
For the three months ended March 31,September 30, 2021, GE Industrial profit was $0.4$0.9 billion and profit margins were 2.3%5.0%, down $6.2up $2.2 billion, driven primarily by a higher net gain on equity securities of $1.1 billion, higher profit at our industrial segments of $0.4 billion, the nonrecurrence of the $12.3 billion gain on the saleprior year asset impairments in Steam of our BioPharma business and lower profit at Aviation, partially offset by a lower net loss on our investment in Baker Hughes of $6.0 billion, a decrease in adjusted total Corporate operating costs* of $0.2$0.4 billion, a decrease in non-operating benefit costcosts of $0.2 billion, lower GE Industrial interest and other financial charges of $0.1 billion and a decrease in interest and other financial chargesadjusted corporate operating costs of $0.1 billion. Adjusted GE Industrial organic profit* increased $0.1$0.5 billion, asdriven primarily by increases at Healthcare,Aviation and Power, partially offset by decreases at Renewable Energy and Power, and lower adjusted total Corporate operating costs*, were partially offset byHealthcare. Additionally, we are starting to experience inflation pressure in our supply chain as well as delays in sourcing key materials needed for our products. The most significant impact to date has been at our Healthcare segment, which has delayed our ability to convert remaining performance obligation (RPO) to revenue. While we are taking actions to limit this pressure, we may experience a decrease at Aviation.greater impact on our longer cycle businesses in future periods.
GE Industrial cash flows from operating activities (CFOA) were $(0.5)$(0.8) billion and $(1.7)$(3.2) billion for the threenine months ended March 31,September 30, 2021 and 2020, respectively. GE Industrial cash used for operating activities decreased primarily due to an increase in net income (after adjusting for the gain on the sale of BioPharma, non-cash gains/losses related to our interest in Baker Hughes, non-operating benefit costs and non-operating debt extinguishment costs), and a decrease in cash usedpaid for working capital,income taxes, partially offset by a decrease in Aviation-related customer allowance accruals and the settlement of an increaseAlstom legacy legal matter in cash used for All other operating activities.2021. GE Industrial free cash flows (FCF)* were $(0.8)$1.3 billion and $(2.2)$(3.8) billion for the threenine months ended March 31,September 30, 2021 and 2020, respectively. GE Industrial FCF increased primarily due to a decrease in cash used for working capital,operating activities and a decrease in additions to property, plant and equipment and internal-use software, partially offset by an increasesoftware. In addition, effective April 1, 2021, the Company discontinued the majority of its factoring programs. In the second and third quarter of 2021, the adverse impact to GE Industrial CFOA was $3.1 billion, which primarily represents the cash that GE Industrial would have otherwise collected in cash used for All other operating activities.the period had customer receivables not been previously sold and is excluded from GE 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 March 31 | | |
| 2021 | 2020 | | | |
| Equipment | $ | 8,208 | | $ | 9,211 | | | | |
| Services | 8,800 | | 10,274 | | | | |
| Total orders(a) | $ | 17,008 | | $ | 19,485 | | | | |
| Total organic orders | $ | 16,720 | | $ | 18,247 | | | | |
(a) Orders for the three months ended March 31, 2020 included $1,136 million related to BioPharma.
For the three months ended March 31, 2021, orders decreased $2.5 billion (13%) on a reported basis and decreased $1.5 billion (8%) organically primarily at Aviation, due to decreases in services orders, and at Power, due to decreases in equipment orders, partially offset by increases at Renewable Energy and Healthcare. Equipment orders were down $0.1 billion (1%) organically and services orders were down $1.4 billion (14%) organically.
BacklogRPO is unfilled customer orders for products and product services (expected life of contract sales for product services).
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| GE INDUSTRIAL BACKLOG | March 31, 2021 | December 31, 2020 | March 31, 2020 |
| Equipment | $ | 72,272 | | $ | 73,286 | | $ | 76,854 | |
| Services | 311,134 | | 313,234 | | 324,216 | |
| Total backlog | $ | 383,405 | | $ | 386,520 | | $ | 401,070 | |
As of March 31, 2021, backlog decreased $3.1 billion (1%) from December 31, 2020, primarily at Power, from sales outpacing new orders, and at Aviation, from cancellations of commercial engine and service orders. Renewable Energy decreased due to the effects of foreign currency fluctuations, and Healthcare decreased due to an increase in shorter cycle time products. Backlog decreased $17.7 billion (4%) from March 31, 2020, due to a decrease in equipment backlog of $4.6 billion (6%), primarily at Aviation, Power and Healthcare, and a decrease in services backlog of $13.1 billion (4%), primarily at Aviation, due to a reduction in our Commercial Services backlog and cancellations of commercial engine orders, and at Power, due to sales outpacing new orders. The reduction in Commercial Services at Aviation reflects the cancellation of equipment unit orders, lower anticipated engine utilization, customer fleet restructuring and contract modifications.
Remaining performance obligation (RPO), a defined term under GAAP, is backlog excluding any purchase order that provides the customer with the ability to cancel or terminate without incurring a substantive penalty. Historical cancellations of customer orders have been limited prior to the COVID-19 pandemic. In the second quarter of 2021, we expect to replacevoluntarily replaced our quarterly disclosures of backlog with RPO as a key metric, one commonly used across our industries, which willin order to simplify our reporting. Our historical experience indicates the likelihood of cancellation of orders excluded from RPO is remote.reporting and align with our peers. See Note 9 for further information.
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| RPO | September 30, 2021 | December 31, 2020 | September 30, 2020 |
| Equipment | $ | 46,666 | | $ | 45,991 | | $ | 44,634 | |
| Services | 191,839 | | 184,608 | | 182,032 | |
| Total RPO | $ | 238,505 | | $ | 230,600 | | $ | 226,666 | |
*Non-GAAP Financial Measure
As of September 30, 2021 1Q FORM 10-Q 5
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| March 31, 2021 | Equipment | Services | Total |
| Backlog | $ | 72,272 | | $ | 311,134 | | $ | 383,405 | |
| Adjustments | (31,321) | | (125,122) | | (156,443) | |
| Remaining performance obligation | $ | 40,951 | | $ | 186,012 | | $ | 226,962 | |
Adjustments to reported backlog,, RPO increased $7.9 billion (3%) from December 31, 2020, primarily related to long-term contracts in excess of one year, of $156.4 billion as of March 31, 2021 are largely driven by adjustments of $145.9 billion in ourat Aviation, segment: (1) backlog includes engine contracts for which we have received purchase orders that are cancelable; (2) our services backlog includes contracts that are cancelable without substantive penalty, primarily time and materials contracts; and (3) backlog includesfrom engines contracted under long-term service agreements even if the enginesthat have not yetnow been put into service.
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| REVENUES | Three months ended March 31 | | |
| 2021 | 2020 | | | |
| Consolidated revenues | $ | 17,118 | | $ | 19,490 | | | | |
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| Equipment | 7,971 | | 9,097 | | | | |
| Services | 8,358 | | 9,748 | | | | |
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| GE Industrial revenues | $ | 16,329 | | $ | 18,844 | | | | |
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| GE Capital revenues | $ | 878 | | $ | 837 | | | | |
For the three months ended March 31, 2021, Consolidated revenues were down $2.4 billion, driven by a decrease in GE Industrial revenues of $2.5 billion partially offset by an increase in GE Capital revenues.
GE Industrial revenues decreased $2.5 billion (13%),service; at Healthcare, from new contracts and renewals with decreases in serviceslarge customers; and equipment. The decrease in services wasat Renewable Energy, primarily at Aviation, due to lower commercial spare part shipments and decreased shop visits, partially offset by an increase at Power driven by Gas Power services revenues. The decrease in equipment was primarily at Aviation, due to fewer commercial install and spare engine shipments; at Healthcare, due to the disposition of the BioPharma business; and at Power, due to decreases in Steam Power and Gas Power; partially offset by an increase in Renewable Energy. The decrease in GE Industrial revenues included the net effects of dispositions of $1.1 billion and an increase from foreign currency translation of $0.3 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* decreased $1.7 billion (10%), with a decrease in services revenues of $1.4 billion (14%) and equipment revenues of $0.4 billion (5%). GE Industrial organic revenues* decreased at Aviation and Power, partially offset by an increase at Healthcare. Healthcare organic revenue* increased $0.3 billion (7%) due to increased demand for Healthcare Systems (HCS) products, and a return to pre-pandemic volume in Pharmaceutical Diagnostics (PDx).
GE Capital revenues increased 5%, primarily as a result of lower marks and impairments primarily in Insurance, partially offset by lower revenue at Working Capital Solutions (WCS) due to lower volume and lower gains and project revenues at EFS.
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| EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | Three months ended March 31 | | |
| (Per-share in dollars and diluted) | 2021 | 2020 | | | |
| Continuing earnings (loss) | $ | 20 | | $ | 6,175 | | | | |
| Continuing earnings per share (loss) | $ | — | | $ | 0.70 | | | | |
For the three months ended March 31, 2021, Consolidated continuing earnings decreased $6.2 billion due to a decrease in GE Industrial profit.
GE Industrial profit decreased $6.2 billion driven by the nonrecurrence of the $12.3 billion gain on the sale of our BioPharma business and lower profit at Aviation, partially offset by a lower net loss on our investment in Baker Hughes of $6.0 billion, a decrease in adjusted total Corporate operating costs* of $0.2 billion, a decrease in non-operating benefit cost of $0.2 billion, and a decrease in interest and other financial charges of $0.1 billion. GE Industrial profit margin was 2.3%, a decrease from 34.9%, primarily due to the same net decreases as described above. Adjusted GE Industrial profit* was $0.8 billion, an increase of $0.1 billion organically*, due to increases at Healthcare, Renewable Energy and Power,Offshore Wind; partially offset by a decrease at Aviation. Adjusted GE Industrial profit margin* was 5.1%, an increasePower from sales outpacing new orders in Gas Power contractual services and the continued wind down of 110 basis points organically*,new build coal business. RPO increased $11.8 billion (5%) from September 30, 2020, primarily due to the same net increases as described above. At Aviation, the primary drivers were lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visits in our service agreements. At Power, the increase was driven by growth in Gas Power services revenues and margins, and continued efforts to streamline the business. At Healthcare, the increase was primarily due to cost reductions and increased demand for HCS products and increases in PDx volume, and at Renewable Energy, the increase was due to product cost deflation, the favorable impact of cost reduction measures and improved project execution.
GE Capital continuing losses decreased 8% as lower claims, improved investment performance and lower marks and impairments in Insurance were partially offset by lower gains and project revenues at EFS and the nonrecurrence of the tax benefit related to the BioPharma sale in the first quarter of 2020.
*Non-GAAP Financial Measure
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| REVENUES | Three months ended September 30 | | Nine months ended September 30 |
| 2021 | 2020 | | 2021 | 2020 |
| Consolidated revenues | $ | 18,429 | | $ | 18,529 | | | $ | 53,826 | | $ | 54,823 | |
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| Equipment | 8,905 | | 9,625 | | | 25,178 | | 26,928 | |
| Services | 8,916 | | 8,293 | | | 26,459 | | 25,901 | |
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| | | | | |
| GE Industrial revenues | $ | 17,821 | | $ | 17,918 | | | $ | 51,637 | | $ | 52,828 | |
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| GE Capital revenues | $ | 734 | | $ | 758 | | | $ | 2,470 | | $ | 2,455 | |
For the three months ended September 30, 2021, Consolidated revenues were down $0.1 billion, driven by decreases in GE Industrial and GE Capital revenues.
GE Industrial revenues decreased $0.1 billion (1%). Equipment revenues decreased primarily at Healthcare, driven by the nonrecurrence of the prior year order from the U.S. Department of Health and Human Services to deliver ventilators in partnership with Ford and reductions in Life Care Solutions (LCS) for Healthcare Systems (HCS) products; and at Power, due to decreases in Steam Power and Gas Power equipment revenues. Services revenues increased primarily at Aviation, due to higher volume on commercial spare part shipments and increased shop visit volume; and at Power, due to increases in Steam Power services revenues and Gas Power services revenues on strong long-term service agreement volume; partially offset by a decrease at Renewable Energy, primarily from lower repower unit deliveries at Onshore Wind. The decrease in GE Industrial revenues included the net effects of dispositions of $0.1 billion and an increase from foreign currency translation of $0.2 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* decreased $0.2 billion (1%), with a decrease in equipment revenues of $0.9 billion (9%) and an increase in services revenues of $0.6 billion (7%). GE Industrial organic revenues* decreased at Renewable Energy, Healthcare and Power, partially offset by an increase at Aviation.
GE Capital revenues decreased 3%, as lower factoring revenue and EFS gains were partially offset by lower marks and impairments.
For the nine months ended September 30, 2021, Consolidated revenues were down $1.0 billion, driven by a decrease in GE Industrial revenues, partially offset by an increase in GE Capital revenues.
GE Industrial revenues decreased $1.2 billion (2%). Equipment revenues decreased primarily at Power, due to decreased Gas Power equipment revenues on lower turnkey sales; at Aviation, due to fewer commercial install and spare engine unit shipments; and at Healthcare, due to the disposition of the BioPharma business; partially offset by an increase in Renewable Energy driven by more wind turbine deliveries and higher revenue at Offshore Wind. Services revenues increased primarily at Power, due to an increase in Gas Power services revenues; and at Healthcare, due to increased volume in Imaging and Ultrasound and a return to pre-pandemic volume in PDx; partially offset by decreases at Renewable Energy, primarily due to lower repower unit deliveries at Onshore Wind; and at Aviation, primarily due to our Military business. The decrease in GE Industrial revenues included the effects of acquisitions of $0.1 billion, the net effects of dispositions of $1.4 billion and an increase from foreign currency translation of $1.0 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, GE Industrial organic revenues* decreased $0.9 billion (2%), with equipment revenues down $1.3 billion (5%) and services revenues up $0.4 billion (2%). GE Industrial organic revenues* decreased at Aviation, Power and Renewable Energy, partially offset by an increase at Healthcare.
GE Capital revenues increased 1%, primarily as a result of lower marks and impairments primarily in Insurance, partially offset by lower WCS factoring revenue and project revenues at EFS.
| | | | | | | | | | | | | | | | | |
| EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE | Three months ended September 30 | | Nine months ended September 30 |
| (Per-share in dollars and diluted) | 2021 | 2020 | | 2021 | 2020 |
| Continuing earnings (loss) | $ | 603 | | $ | (1,132) | | | $ | (1) | | $ | 3,857 | |
| Continuing earnings (loss) per share | $ | 0.54 | | $ | (1.04) | | | $ | (0.01) | | $ | 3.39 | |
For the three months ended September 30, 2021, Consolidated continuing earnings increased $1.7 billion primarily due to an increase in GE Industrial profit, partially offset by an increase in GE Industrial provision for income taxes and an increase in GE Capital continuing losses.
GE Industrial profit increased $2.2 billion driven primarily by a higher net gain on equity securities of $1.1 billion, higher profit at our industrial segments of $0.4 billion, the nonrecurrence of prior year asset impairments in Steam of $0.4 billion, a decrease in non-operating benefit costs of $0.2 billion, lower GE Industrial interest and other financial charges of $0.1 billion and a decrease in adjusted corporate operating costs of $0.1 billion. GE Industrial profit margin was 5.0%, an increase from (7.2)%, primarily due to the same net increases as described above. Adjusted GE Industrial profit* was $1.3 billion, an increase of $0.5 billion organically*, due to increases at Aviation and Power, partially offset by decreases at Renewable Energy and Healthcare. Adjusted GE Industrial profit margin* was 7.5%, an increase of 270 basis points organically*. At Aviation, the primary drivers were higher volume on commercial spare part shipments, increased shop visit volume, the nonrecurrence of prior year charges related to lower commercial engine production volume and an impairment charge in a joint venture in the Systems business. At Power, the primary drivers were increases in Gas Power services revenues and margins and aeroderivative sales. At Renewable Energy, the primary drivers were lower repower volume and lower margins on new product introductions. At Healthcare, the primary drivers were lower LCS equipment volume, and higher material, logistics and restructuring costs.
GE Capital continuing losses increased $0.1 billion primarily as a result of lower tax benefits, partially offset by the discontinuation of preferred dividend payments to GE Industrial.
*Non-GAAP Financial Measure
For the nine months ended September 30, 2021, Consolidated continuing earnings decreased $3.9 billion primarily due to a decrease in GE Industrial profit and an increase in GE Capital continuing losses.
GE Industrial profit decreased $3.3 billion driven by the nonrecurrence of the prior year gain on the sale of our BioPharma business of $12.4 billion and higher debt extinguishment costs of $0.6 billion, partially offset by a higher net gain on equity securities of $5.8 billion, higher profit at our industrial segments of $1.7 billion, decreased GE Industrial goodwill impairments of $0.7 billion, the nonrecurrence of Steam asset impairments in the prior year of $0.4 billion, a decrease in non-operating benefit costs of $0.4 billion, lower GE Industrial interest and other financial charges of $0.3 billion, a decrease in adjusted corporate operating costs of $0.2 billion, lower restructuring and other charges of $0.1 billion and the nonrecurrence of the legal reserves associated with the SEC investigation in the prior year of $0.1 billion. GE Industrial profit margin was 2.0%, a decrease from 8.3%, primarily due to the same net decreases as described above. Adjusted GE Industrial profit* was $3.1 billion, an increase of $2.2 billion organically*, due to increases at each of our industrial segments. Adjusted GE Industrial profit margin* was 6.0%, an increase of 440 basis points organically*. At Aviation, the primary drivers were lower net unfavorable changes in estimated profitability in long-term service agreements, operational cost reduction from the actions taken in 2020 and the first half of 2021, and the nonrecurrence of prior year charges related to customer credit risk and lower commercial engine production volumes. At Power, the primary drivers were increases in Gas Power services revenues and margins and aeroderivative sales and continued efforts to streamline the businesses. At Healthcare, the primary drivers were increased volume for Imaging and Ultrasound products, increases in PDx volume as well as continued cost reduction actions. At Renewable Energy, the primary drivers were higher new unit volume at Onshore Wind, the favorable impact of cost reduction actions, and improved project execution.
GE Capital continuing losses increased $0.2 billion (28%) primarily as a result of higher debt extinguishment costs, lower tax benefits and the nonrecurrence of the tax benefit related to the BioPharma sale in the first quarter of 2020, partially offset by the discontinuation of preferred dividend payments to GE Industrial, lower marks and impairments in Insurance and EFS, lower interest expense due to a lower debt balance and lower claims and higher terminations in Insurance.
SEGMENT OPERATIONS. Refer to our Annual Report on Form 10-K for the year ended December 31, 2020, 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 | SUMMARY OF REPORTABLE SEGMENTS | Three months ended March 31 | | SUMMARY OF REPORTABLE SEGMENTS | Three months ended September 30 | | Nine months ended September 30 | |
| | 2021 | 2020 | V% | | | | 2021 | 2020 | V | % | | 2021 | 2020 | | V | % |
| Power | $ | 3,921 | | $ | 4,025 | | (3) | | % | | |
| Renewable Energy | 3,248 | | 3,194 | | 2 | | % | | |
| Aviation | Aviation | 4,992 | | 6,892 | | (28) | | % | | Aviation | $ | 5,398 | | $ | 4,919 | | 10 | | % | | $ | 15,230 | | $ | 16,196 | | | (6) | | % |
| Healthcare | Healthcare | 4,308 | | 4,727 | | (9) | | % | | Healthcare | 4,339 | | 4,565 | | (5) | | % | | 13,100 | | 13,185 | | | (1) | | % |
| | Renewable Energy | | Renewable Energy | 4,208 | | 4,525 | | (7) | | % | | 11,505 | | 11,224 | | | 3 | | % |
| Power | | Power | 4,026 | | 4,025 | | — | | % | | 12,242 | | 12,206 | | | — | | % |
| Capital | Capital | 878 | | 837 | | 5 | | % | | Capital | 734 | | 758 | | (3) | | % | | 2,470 | | 2,455 | | | 1 | | % |
| Total segment revenues | Total segment revenues | 17,346 | | 19,675 | | (12) | | % | | Total segment revenues | 18,704 | | 18,793 | | — | | % | | 54,546 | | 55,266 | | | (1) | | % |
| Corporate items and eliminations | Corporate items and eliminations | (228) | | (185) | | (23) | | % | | Corporate items and eliminations | (275) | | (264) | | (4) | | % | | (720) | | (443) | | | (63) | | % |
| Consolidated revenues | Consolidated revenues | $ | 17,118 | | $ | 19,490 | | (12) | | % | | Consolidated revenues | $ | 18,429 | | $ | 18,529 | | (1) | | % | | $ | 53,826 | | $ | 54,823 | | | (2) | | % |
| | Power | $ | (87) | | $ | (131) | | 34 | | % | | |
| Renewable Energy | (234) | | (327) | | 28 | | % | | |
| Aviation | Aviation | 641 | | 1,003 | | (36) | | % | | Aviation | $ | 846 | | $ | 350 | | F | | $ | 1,664 | | $ | 665 | | | F | |
| Healthcare | Healthcare | 698 | | 867 | | (19) | | % | | Healthcare | 704 | | 738 | | (5) | | % | | 2,203 | | 2,111 | | | 4 | | % |
| | Renewable Energy | | Renewable Energy | (151) | | (51) | | U | | (484) | | (628) | | | 23 | | % |
| Power | | Power | 204 | | 148 | | 38 | | % | | 416 | | (32) | | | F | |
| Capital | Capital | (172) | | (187) | | 8 | | % | | Capital | (142) | | (29) | | U | | (887) | | (692) | | | (28) | | % |
| Total segment profit (loss) | Total segment profit (loss) | 847 | | 1,224 | | (31) | | % | | Total segment profit (loss) | 1,461 | | 1,156 | | 26 | | % | | 2,912 | | 1,424 | | | F | |
| Corporate items and eliminations | Corporate items and eliminations | 52 | | 6,123 | | (99) | | % | | Corporate items and eliminations | (74) | | (1,515) | | 95 | | % | | 2 | | 6,182 | | | U | |
| | GE Industrial goodwill impairments | | GE Industrial goodwill impairments | — | | — | | — | | % | | — | | (877) | | | F | |
| GE Industrial interest and other financial charges | GE Industrial interest and other financial charges | (268) | | (370) | | 28 | | % | | GE Industrial interest and other financial charges | (225) | | (313) | | 28 | | % | | (753) | | (1,016) | | | 26 | | % |
| GE Industrial debt extinguishment costs | | GE Industrial debt extinguishment costs | — | | — | | — | | % | | (645) | | (63) | | | U | |
| GE Industrial non-operating benefit costs | GE Industrial non-operating benefit costs | (433) | | (616) | | 30 | | % | | GE Industrial non-operating benefit costs | (426) | | (603) | | 29 | | % | | (1,376) | | (1,815) | | | 24 | | % |
| GE Industrial benefit (provision) for income taxes | GE Industrial benefit (provision) for income taxes | (148) | | (187) | | 21 | | % | | GE Industrial benefit (provision) for income taxes | (81) | | 143 | | U | | (1) | | 22 | | | U | |
| GE Industrial preferred stock dividends | | GE Industrial preferred stock dividends | (52) | | — | | U | | (139) | | — | | | U | |
| Earnings (loss) from continuing operations attributable to GE common shareholders | Earnings (loss) from continuing operations attributable to GE common shareholders | 20 | | 6,175 | | U | | | Earnings (loss) from continuing operations attributable to GE common shareholders | 603 | | (1,132) | | F | | (1) | | 3,857 | | | U | |
| Earnings (loss) from discontinued operations, net of taxes | (2,894) | | (21) | | U | | | |
| Less net earnings (loss) attributable to noncontrolling interests, discontinued operations | 0 | | (2) | | F | | | |
| Earnings (loss) from discontinued operations, net of tax and noncontrolling interest | (2,894) | | (19) | | U | | | |
| Earnings (loss) from discontinued operations attributable to GE common shareholders | | Earnings (loss) from discontinued operations attributable to GE common shareholders | 602 | | (58) | | F | | (2,856) | | (1,070) | | | U | |
| Consolidated net earnings (loss) attributable to the GE common shareholders | Consolidated net earnings (loss) attributable to the GE common shareholders | $ | (2,874) | | $ | 6,156 | | U | | | Consolidated net earnings (loss) attributable to the GE common shareholders | $ | 1,205 | | $ | (1,190) | | F | | $ | (2,857) | | $ | 2,787 | | | U | |
POWER. Power continues to streamline its business to better align with market demand and drive its businesses with an operational rigor and discipline that is focused on its customers’ lifecycle experience. We remain focused on our underwriting discipline and risk management to ensure we are securing deals that meet our financial hurdles and we have a high confidence to deliver for our customers.
Global electricity demand increased during the first quarter of 2021, driving increases in GE gas turbine utilization 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 and our view of the market has not materially changed. Our businesses are executing on their turnarounds, including the planned exit of new build coal, and we are encouraged by the growth in Gas Power Services.
We continue to invest in new product development, such as our HA-Turbines. Our fundamentals remain strong with approximately $78 billion in backlog and a gas turbine installed base greater than 7,000 units, including approximately 1,800 units under long-term service agreements.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended March 31 |
| | | | | Orders | | Sales |
| (In units) | | | | | | | 2021 | 2020 | | 2021 | 2020 |
| GE Gas Turbines | | | | | | | 18 | | 9 | | | 11 | | 7 | |
| Heavy-Duty Gas Turbines(a) | | | | | | | 10 | | 6 | | | 11 | | 5 | |
| HA-Turbines(b) | | | | | | | 2 | | 2 | | | 5 | | 4 | |
| Aeroderivatives(a) | | | | | | | 8 | | 3 | | | — | | 2 | |
| GE Gas Turbine Gigawatts(c) | | | | | | | 1.7 | | 2.2 | | | | |
(a) Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines.
(b) HA-Turbines are a subset of Heavy-Duty Gas Turbines.
(c) Gigawatts reported associated with orders in the periods presented. |
| | | | | | | | | | | |
| March 31, 2021 | December 31, 2020 | March 31, 2020 |
| Equipment | $ | 16,563 | | $ | 17,127 | | $ | 18,187 | |
| Services | 61,468 | | 62,448 | | 66,921 | |
| Total backlog | $ | 78,032 | | $ | 79,575 | | $ | 85,108 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | Three months ended March 31 |
| | | | | | 2021 | | 2020 | |
| Equipment | | | | | | $ | 837 | | | $ | 1,498 | | |
| Services | | | | | | 2,796 | | | 2,612 | | |
| Total orders | | | | | | $ | 3,633 | | | $ | 4,111 | | |
| | | | | | | | | |
| Gas Power | | | | | | $ | 2,829 | | | $ | 2,859 | | |
| Power Portfolio | | | | | | 1,091 | | | 1,165 | | |
| Total segment revenues | | | | | | $ | 3,921 | | | $ | 4,025 | | |
| | | | | | | | | |
| Equipment | | | | | | $ | 1,241 | | | $ | 1,506 | | |
| Services | | | | | | 2,679 | | | 2,518 | | |
| Total segment revenues | | | | | | $ | 3,921 | | | $ | 4,025 | | |
| | | | | | | | | |
| Segment profit (loss) | | | | | | $ | (87) | | | $ | (131) | | |
| Segment profit margin | | | | | | (2.2) | | % | (3.3) | | % |
For the three months ended March 31, 2021, segment orders were down $0.5 billion (12%), segment revenues were down $0.1 billion (3%) and segment profit was up 34%.
Backlog as of March 31, 2021 decreased $1.5 billion (2%) and $7.1 billion (8%) from December 31, 2020 and March 31, 2020, respectively, primarily driven by sales outpacing new orders.
Orders decreased $0.5 billion (12%) organically, primarily due to decreases in Gas Power driven by the nonrecurrence of a large turnkey order and Steam Power equipment orders.
Revenues decreased $0.2 billion (4%) organically*, primarily due to decreased Steam Power equipment and services revenues and decreases in Gas Power equipment revenues, partially offset by an increase in Gas Power services revenues.
Profit increased 35% organically* due to growth in Gas Power services revenues and margins and continued efforts to streamline the business across Gas Power and Power Portfolio, partially offset by unfavorable legacy project arbitration resolutions and Steam project execution.
RENEWABLE ENERGY. Renewable Energy includes a portfolio of businesses comprising Onshore Wind (with our separate LM Wind blades business), Grid Solutions equipment and services, Hydro, Offshore Wind and Hybrid Solutions. These businesses are uniquely positioned to lead the energy transition with products and integrated solutions by growing new renewable energy generation, lowering the cost of electricity and modernizing the grid.
We continue to observe strong demand across the global onshore wind market together with a positive impact on deliveries and installations in the U.S. from the Production Tax Credit (PTC) cycle and customer preference shifting to larger, more efficient units to drive down costs and compete with other power generation options. The Grid and Hydro businesses are executing their turnaround plans and we are expecting improved operating results in 2021.
New product introductions remain important to our onshore and offshore customers who are demonstrating the willingness to adopt the new technology of larger turbines that decrease the levelized cost of energy. We have observed significant market demand for our Onshore 5-6 MW Cypress units and Offshore Haliade-X 12-13 MW units and are preparing for large scale production in response to this market demand.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended March 31 |
| | | | | Orders | | Sales |
Onshore and Offshore (In units) | | | | | | | 2021 | 2020 | | 2021 | 2020 |
| Wind Turbines | | | | | | | 728 | | 738 | | | 778 | | 731 | |
| Wind Turbine Gigawatts | | | | | | | 2.2 | | 2.3 | | | 2.4 | | 2.1 | |
| Repower units | | | | | | | 121 | | 6 | | | — | | 219 | |
| | | | | | | | | | | |
| March 31, 2021 | December 31, 2020 | March 31, 2020 |
| Equipment | $ | 16,987 | | $ | 17,470 | | $ | 15,799 | |
| Services | 12,461 | | 12,531 | | 10,712 | |
| Total backlog | $ | 29,448 | | $ | 30,001 | | $ | 26,511 | |
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | | | | | | | | |
| | | | Three months ended March 31 | |
| | | | | | 2021 | | 2020 | |
| Equipment | | | | | | $ | 2,954 | | | $ | 2,669 | | |
| Services | | | | | | 561 | | | 399 | | |
| Total orders | | | | | | $ | 3,515 | | | $ | 3,068 | | |
| | | | | | | | | |
| Onshore Wind | | | | | | $ | 2,118 | | | $ | 2,124 | | |
| Grid Solutions equipment and services | | | | | | 795 | | | 839 | | |
| Hydro | | | | | | 165 | | | 179 | | |
| Offshore Wind and Hybrid Solutions | | | | | | 169 | | | 51 | | |
| Total segment revenues | | | | | | $ | 3,248 | | | $ | 3,194 | | |
| | | | | | | | | |
| Equipment | | | | | | $ | 2,844 | | | $ | 2,576 | | |
| Services | | | | | | 404 | | | 618 | | |
| Total segment revenues | | | | | | $ | 3,248 | | | $ | 3,194 | | |
| | | | | | | | | |
| Segment profit (loss) | | | | | | $ | (234) | | | $ | (327) | | |
| Segment profit margin | | | | | | (7.2) | | % | (10.2) | | % |
For the three months ended March 31, 2021, segment orders were up $0.4 billion (15%), segment revenues were up $0.1 billion (2%) and segment profit was up $0.1 billion (28%).
Backlog as of March 31, 2021 decreased $0.6 billion (2%) from December 31, 2020 primarily driven by the effects of foreign currency fluctuations, partially offset by new orders outpacing sales. Backlog increased $2.9 billion (11%) from March 31, 2020 primarily from Offshore Wind due to our first Haliade-X order for the Dogger Bank Wind Farm, new Cypress platform orders in Onshore Wind and an increase in Hydro. These increases were partially offset by sales exceeding new orders at Grid, primarily as a result of increased commercial selectivity in certain product lines.
Orders increased $0.4 billion (13%) organically, primarily due to the Grid high voltage direct current (HVDC) project for the Sofia Offshore Wind Farm and higher services orders at Onshore Wind.
Revenues were flat organically*, as higher revenue at Offshore Wind associated with the EDF’s 6MW PBG project in Saint-Nazaire, France and 30 more Onshore Wind turbine sales on a unit basis and 11% more on a megawatt basis, were offset by lower repower unit deliveries at Onshore Wind and lower revenue at Grid.
Profit increased $0.1 billion (31%) organically*, primarily from improvement in Onshore Wind product cost, the favorable impact of cost reduction measures, primarily at Grid and Hydro, and improved project execution, partially offset by lower margins on new product introductions at Onshore Wind and higher restructuring costs.
AVIATION. The global COVID-19 pandemic continues to have a material adverse effect on the global airline industry.industry, although Aviation’s results in the third quarter of 2021 reflect improvement in market fundamentals. A key underlying driver of Aviation’s commercial engine and services businessesbusiness is global commercial air traffic, which in turn is driven by economic activity and consumer and business propensity to travel. Since the beginning of the pandemic in the first quarter of 2020, we have seen varied levels of recovery in global markets. Government travel restrictions, public health advisories, individuals' propensity to travel and continued cases of the virus have all impacted the level of air travel. Aviation regularly tracks global departures, which as of March 31,September 30, 2021, were approximately 40%25% below firstthird quarter 2020. Global2019. Broadly, global departures improved in Marchthe third quarter of 2021 compared to the first two monthssecond quarter of the year,2021, but levels of recovery varied across global regions.regions due in large part to the emergence of the COVID-19 Delta variant. Aviation is closely monitoring government actions and economic and industry forecasts. Due to the global airline industry contraction, Aviation’s airline and airframe customers are taking measures to address reduced demand, which, in turn, continue to materially impact Aviation’s business operations and financial performance. More broadly, weWe are in frequent dialogue with our airline and airframe customers about the outlook for commercial air travel, new aircraft production, fleet retirements, and after-market services, including shop visit and spare partparts demand. Given current trends, we expect domestic travel routes primarily served by narrowbody aircraft to recover before long-haul, international travel routes, which are primarily served by widebody aircraft. Consistent with industry projections, Aviation continues to estimate the duration of the market recovery to be prolonged over multiple years, dependent on containing the spread of the virus, effective inoculation programs and government collaboration to encourage travel, particularly around reducing quarantine requirements.
Aviation has taken several business actions to respond to the current adverse environment, including a reduction of approximately 25% of its total global workforce since year-end 2019. The businessenvironment. Aviation is actively monitoring the pace of demand recovery to ensure the business is appropriately sized for the future. In addition, we continue to partner with our airline and leasing customers and are alignedcollaborate with our airframe partners on production rates for 2021 and beyond.
As it relates to the military environment, Aviation continues to forecast strong military demand creating future growth opportunities for our Military business unit as the U.S. Department of Defense and foreign governments have continued flight operations, and have allocated budgets to upgrade and modernize their existing fleets. During the firstthird quarter of 2021, Aviation continued to experience supply chain challenges, which the business is actively addressing.
Total engineering, comprised ofcomprising company, customer and partner-funded and nonrecurring engineering costs, decreased compared to prior year in line with the changes in the commercial environment. During the first quarter of 2021, company-funded researchenvironment and development spend decreased compared to the prior year. Customer and partner-funded engineering efforts, primarily in our Military business, decreased compared to the prior year due to the timing of planned program expenditures. Aviation continues to be committed to investment in developing and maturing technology that enables a more sustainable future of flight.
*Non-GAAP Financial Measure
In June 2021, 1Q FORM 10-Q 9Aviation and Safran announced Revolutionary Innovation for Sustainable Engines (RISE), a technology development program targeting more than 20% lower fuel consumption and CO2 emissions compared to today’s engines. In September 2021, Aviation’s Catalyst engine, the first clean-sheet turboprop design entering the business and general aviation market in 50 years, completed its first flight.
Aviation is taking actions to protect its ability to serve its customers now and as the global airline industry recovers. Aviation’s deep history of innovation and technology leadership, commercial engine installed base of approximately 37,700 units, with approximately 12,50012,800 units under long-term service agreements, and military engine installed base of approximately 26,500 units represents strong long-term fundamentals. Aviation seeksexpects to emerge from this crisis stronger and drive long-term cash and profitable growth over time.
| | | | | Three months ended March 31 | | | Three months ended September 30 | | Nine months ended September 30 |
| | | | Orders | | Sales | |
| (In units, except where noted) | | | 2021 | 2020 | | 2021 | 2020 | |
| Sales in units, except where noted | | Sales in units, except where noted | | | 2021 | 2020 | | | 2021 | 2020 |
| Commercial Engines(a) | Commercial Engines(a) | | | 298 | | 168 | | | 359 | | 530 | | Commercial Engines(a) | | | 377 | | 391 | | | | 1,119 | | 1,283 | |
| LEAP Engines(b) | LEAP Engines(b) | | | 141 | | 6 | | | 188 | | 272 | | LEAP Engines(b) | | | 226 | | 172 | | | | 625 | | 622 | |
| Military Engines | Military Engines | | | 181 | | 272 | | | 96 | | 146 | | Military Engines | | | 154 | | 107 | | | | 405 | | 457 | |
| Spare Parts Rate(c) | Spare Parts Rate(c) | | | $ | 13.2 | | $ | 26.9 | | Spare Parts Rate(c) | | | $ | 19.3 | | $ | 14.4 | | | | $ | 15.8 | | $ | 18.1 | |
(a) Commercial Engines now includes Business and General Aviation and Aeroderivative units for all periods presented. (b) LEAP engines are subsets of commercial engines. (c) Commercial externally shipped spare parts and spare parts used in time and material shop visits in millions of dollars per day. | (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. | (a) Commercial Engines now includes Business and General Aviation and Aeroderivative units for all periods presented. (b) LEAP engines are subsets of commercial engines. (c) Commercial externally shipped spare parts and spare parts used in time and material shop visits in millions of dollars per day. |
| | | March 31, 2021 | December 31, 2020 | March 31, 2020 | | September 30, 2021 | December 31, 2020 | September 30, 2020 |
| Equipment | Equipment | $ | 34,333 | | $ | 34,486 | | $ | 39,154 | | Equipment | $ | 11,523 | | $ | 10,597 | | $ | 10,373 | |
| Services | Services | 225,032 | | 225,927 | | 234,078 | | Services | 111,224 | | 103,500 | | 103,015 | |
| Total backlog | $ | 259,365 | | $ | 260,412 | | $ | 273,232 | | |
| Total RPO | | Total RPO | $ | 122,747 | | $ | 114,097 | | $ | 113,388 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | Three months ended March 31 | |
| | | | | | 2021 | | 2020 | |
| Equipment | | | | | | $ | 2,004 | | | $ | 2,228 | | |
| Services | | | | | | 3,488 | | | 5,221 | | |
| Total orders | | | | | | $ | 5,491 | | | $ | 7,448 | | |
| | | | | | | | | |
| Commercial Engines & Services | | | | | | $ | 3,354 | | | $ | 5,113 | | |
| Military | | | | | | 956 | | | 960 | | |
| Systems & Other | | | | | | 682 | | | 820 | | |
| Total segment revenues | | | | | | $ | 4,992 | | | $ | 6,892 | | |
| | | | | | | | | |
| Equipment | | | | | | $ | 1,847 | | | $ | 2,364 | | |
| Services | | | | | | 3,145 | | | 4,529 | | |
| Total segment revenues | | | | | | $ | 4,992 | | | $ | 6,892 | | |
| | | | | | | | | |
| Segment profit | | | | | | $ | 641 | | | $ | 1,003 | | |
| Segment profit margin | | | | | | 12.8 | | % | 14.6 | | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30 | | | Nine months ended September 30 | |
| 2021 | | 2020 | | | 2021 | | 2020 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Commercial Engines & Services | $ | 3,602 | | | $ | 3,087 | | | | $ | 10,071 | | | $ | 10,718 | | |
| Military | 1,107 | | | 1,137 | | | | 3,104 | | | 3,258 | | |
| Systems & Other | 689 | | | 696 | | | | 2,055 | | | 2,220 | | |
| Total segment revenues | $ | 5,398 | | | $ | 4,919 | | | | $ | 15,230 | | | $ | 16,196 | | |
| | | | | | | | | |
| Equipment | $ | 1,837 | | | $ | 1,933 | | | | $ | 5,549 | | | $ | 6,234 | | |
| Services | 3,562 | | | 2,987 | | | | 9,681 | | | 9,961 | | |
| Total segment revenues | $ | 5,398 | | | $ | 4,919 | | | | $ | 15,230 | | | $ | 16,196 | | |
| | | | | | | | | |
| Segment profit | $ | 846 | | | $ | 350 | | | | $ | 1,664 | | | $ | 665 | | |
| Segment profit margin | 15.7 | | % | 7.1 | | % | | 10.9 | | % | 4.1 | | % |
For the three months ended March 31,September 30, 2021, segment orders were down $2.0 billion (26%), segment revenues were down $1.9up $0.5 billion (28%(10%) and segment profit was up $0.5 billion.
Revenues increased $0.5 billion (10%) organically*. Commercial Services revenues increased, primarily due to higher volume on commercial spare part shipments and increased shop visit volume. Commercial Engines revenues decreased due to 14 fewer commercial install and spare engine unit shipments, driven by fewer engine shipments on legacy programs, partially offset by 54 more LEAP units versus the prior year. Military revenues decreased marginally due to lower services, partially offset by 47 more engine shipments.
Profit increased $0.5 billion organically*, primarily due to higher volume on commercial spare part shipments, increased shop visit volume and the receipt of a payment from a partner associated with engine program activity. Profit also increased due to operational cost reduction from the actions taken in 2020 and the first half of 2021 and the nonrecurrence of prior year charges related to lower commercial engine production volume and an impairment charge in a joint venture in the Systems business.
For the nine months ended September 30, 2021, segment revenues were down $0.4$1.0 billion (36%(6%). and segment profit was up $1.0 billion.
BacklogRPO as of March 31,September 30, 2021 decreased $1.0increased $8.7 billion (8%) from December 31, 2020, due to increases in both equipment and services. Equipment increased primarily due to approximately 400 LEAP-1B unitan increase in Military orders in the third quarter of 2021, reflecting a large order cancellations. Backlog decreased $13.9 billion (5%) from March 31, 2020,Hindustan Aeronautics for 99 F404s, along with multiple other T700 orders. Services increased primarily due toas a reduction in our Commercial Services backlog and cancellationsresult of commercial equipment orders, which included approximately 1,900 LEAP-1B unit order cancellations. The reduction to Commercial Services backlog reflects estimates of lower engine utilization, the partial cancellation ofengines contracted under long-term service agreements relatedthat have now been put into service. RPO increased $9.4 billion (8%) from September 30, 2020, due to the equipment unit order cancellations, and anticipated customer fleet restructuring and contract modifications.
Orders decreased $1.9 billion (26%) organically, primarily driven by lower commercialincreases in both equipment and service orders as airline customers have slowed or deferred new engine orders, as well as delayed maintenance and repair operations while existing fleets have lower utilization or been grounded. Military orders decreased 8% compared to the prior year primarily driven by lower spare parts orders.services.
Revenues decreased $1.9$0.9 billion (27%(6%) organically*. EquipmentCommercial Engines revenues decreased, primarily due to 171164 fewer commercial install and spare engine unit shipments, including 84 fewer engine shipments on legacy programs, offset by three more LEAP units versus the prior year. Commercial Services revenues decreased,increased, primarily due to lowerhigher volume on commercial spare part shipments and decreasedincreased shop visits.visit volume. Commercial Services revenues for the nine months ended September 30, 2021, included a net unfavorable change in estimated profitability of $0.3 billion for its long-term service agreements compared to a net unfavorable change of $0.9 billion for the same period in the prior year. Military revenues were flatdecreased due to lower services, partially offset by product mix with 5052 fewer engine shipments due to supply chain challenges, offset by favorable product mix.shipments.
Profit decreased $0.4increased $1.0 billion (37%) organically*, primarily due to lower volume on commercial spare part and commercial spare engine shipments, and decreased shop visitsnet unfavorable changes in ourestimated profitability in long-term service agreements. These decreases in profit were partially offset byagreements, operational cost reduction from the cost savings actions taken in 2020 and the first quarterhalf of 2021, along withand the nonrecurrence of prior year charges related to customer
credit risk and declineslower commercial engine production volumes. These increases in profit were partially offset by lower volume on commercial spare part shipments and an accrual for a contract in a loss position in the estimated profitability in long-term service agreements not repeating in the current year.agreement portfolio.
*Non-GAAP Financial Measure
HEALTHCARE. We continue to see an overall recovery in hospital spend and increases in procedure volume;spending; the expectation is that this will continue in line with the worldwide COVID-19 vaccine rollout. Both HCS and PDx demand has largely recovered to pre-COVID levelslevels. Similar to many industries, we are experiencing inflation in line with increases in procedure volume. However, in some markets we expect capital expenditures to remain under pressure from revenue declines related to COVID-19 impacts. The pandemic is still driving additionalour supply chain as well as delays in sourcing key materials needed for our products, such as electronics and logistics costs, and we expect thisresins, delaying our ability to continue.convert RPO to revenue. In response to continuing near-term volatility and cost pressures, we have continued to execute on structural cost reductions and cash optimization actions, in order to prioritize spend oninvest in growth and research and development.
We continue focusingto 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. Healthcare recently launched CarestationTM Insights LIVE, a mobile application designed for anesthesiologists overseeing operating room patients, using data from GE Healthcare introduced the latest member of the Venue™ point of care ultrasound family.patient monitors and anesthesia Carestations to help clinicians view patient status and assess how therapy is being delivered in real time. We have also introduced Vscan Air,launched a cutting edge wireless pocket-sized ultrasound that provides crystal clear image quality, whole-body scanning capabilities,cloud based Edison True Picture Archive and intuitive software. We received 510(k) clearance for OEC 3D surgical c-arm. OEC 3D sets the standard of interoperative imaging with precise 3D volumetric images for spineCommunication System, which offers AI-enabled decision support to help radiologists adapt to higher workloads and orthopedic procedures combined with 2D imaging for greater everyday efficiency.increased exam complexity, and improve diagnostic accuracy. We remain committed to innovate and invest to create more integrated, efficient, and personalized precision healthcare.
| | | | | | | | | | | |
| March 31, 2021 | December 31, 2020 | March 31, 2020 |
| Equipment | $ | 5,564 | | $ | 5,538 | | $ | 5,957 | |
| Services | 11,479 | | 11,562 | | 11,433 | |
| Total backlog | $ | 17,044 | | $ | 17,100 | | $ | 17,389 | |
In the third quarter of 2021, we entered into an agreement to acquire BK Medical, a leader in surgical ultrasound imaging and guidance, from Altaris Capital Partners for a cash purchase price of $1.45 billion. The parties expect the transaction to close in 2022, subject to review by the relevant regulatory authorities.
| | | | | | | | | | | |
| September 30, 2021 | December 31, 2020 | September 30, 2020 |
| Equipment | $ | 3,827 | | $ | 3,465 | | $ | 3,489 | |
| Services | 10,425 | | 9,458 | | 9,419 | |
| Total RPO | $ | 14,252 | | $ | 12,923 | | $ | 12,908 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended March 31 |
| | | | | | 2021 | | 2020 | |
| Equipment | | | | | | $ | 2,445 | | | $ | 3,305 | | |
| Services | | | | | | 2,027 | | | 1,987 | | |
| Total orders(a) | | | | | | $ | 4,472 | | | $ | 5,292 | | |
| | | | | | | | | |
| Healthcare Systems (HCS) | | | | | | $ | 3,825 | | | $ | 3,448 | | |
| Pharmaceutical Diagnostics (PDx) | | | | | | 482 | | | 450 | | |
| BioPharma | | | | | | — | | | 830 | | |
| Total segment revenues | | | | | | $ | 4,308 | | | $ | 4,727 | | |
| | | | | | | | | |
| Equipment | | | | | | $ | 2,227 | | | $ | 2,699 | | |
| Services | | | | | | 2,081 | | | 2,029 | | |
| Total segment revenues | | | | | | $ | 4,308 | | | $ | 4,727 | | |
| | | | | | | | | |
| Segment profit | | | | | | $ | 698 | | | $ | 867 | | |
| Segment profit margin | | | | | | 16.2 | | % | 18.3 | | % |
| | | | | | | | | |
| (a) Orders for the three months ended March 31, 2020 included $1,136 million related to BioPharma. |
|
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30 | | Nine months ended September 30 |
| 2021 | | 2020 | | | 2021 | | 2020 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Healthcare Systems (HCS) | $ | 3,832 | | | $ | 4,085 | | | | $ | 11,572 | | | $ | 11,056 | | |
| Pharmaceutical Diagnostics (PDx) | 507 | | | 480 | | | | 1,528 | | | 1,300 | | |
| BioPharma | — | | | — | | | | — | | | 830 | | |
| Total segment revenues | $ | 4,339 | | | $ | 4,565 | | | | $ | 13,100 | | | $ | 13,185 | | |
| | | | | | | | | |
| Equipment | $ | 2,187 | | | $ | 2,538 | | | | $ | 6,671 | | | $ | 7,287 | | |
| Services | 2,151 | | | 2,027 | | | | 6,429 | | | 5,899 | | |
| Total segment revenues | $ | 4,339 | | | $ | 4,565 | | | | $ | 13,100 | | | $ | 13,185 | | |
| | | | | | | | | |
| Segment profit | $ | 704 | | | $ | 738 | | | | $ | 2,203 | | | $ | 2,111 | | |
| Segment profit margin | 16.2 | | % | 16.2 | | % | | 16.8 | | % | 16.0 | | % |
| | | | | | | | | |
|
|
For the three months ended March 31,September 30, 2021, segment orders were down $0.8 billion (15%), segment revenues were down $0.4$0.2 billion (9%(5%) and segment profit was down $0.25%.
Revenues decreased $0.3 billion (19%(6%). organically*, driven by the nonrecurrence of the prior year order from the U.S. Department of Health and Human Services to deliver ventilators in partnership with Ford and reductions in LCS for HCS products, partially offset by increased volume in Imaging and Ultrasound and a return to pre-pandemic volume in PDx.
Backlog as of March 31, 2021Profit decreased $0.1 billion (10%) organically*, driven by higher inflation, supply chain and restructuring costs and lower LCS equipment volume associated with the nonrecurrence of the prior year order from the U.S. Department of Health and Human Services to deliver ventilators in partnership with Ford, partially offset by productivity and higher PDx volume.
For the nine months ended September 30, 2021, segment revenues were down $0.1 billion (1%) and segment profit was up $0.1 billion (4%).
RPO as of September 30, 2021 increased $1.3 billion (10%) from December 31, 2020 and $0.3$1.3 billion (2%(10%) from March 31,September 30, 2020 primarily due to conversion to revenue of shorter cycle time LCS products, offsetservices on new contracts and renewals with large customers and from equipment on strong orders across all regions.
Revenues increased $0.4 billion (3%) organically*, driven by increases in orders of longer cycle time imaging products.
Orders increased $0.2 billion (5%) organically, due to increasesvolume in Imaging and Ultrasound in HCS, and a return to pre-pandemic volume in PDx, partially offset by lower Life Care Solutions (LCS) ordersreductions in LCS for HCS as pandemic-related demand softened.products.
RevenuesProfit increased $0.3 billion (7%(18%) organically*, driven by increased volume for Imaging and Ultrasound products, increases in PDx volume as well as continued cost reduction actions.
RENEWABLE ENERGY. Renewable Energy includes a portfolio of business units comprising Onshore Wind (with our separate LM Wind blades business), Grid Solutions equipment and services, Hydro Solutions, and Offshore Wind and Hybrid Solutions. These businesses are uniquely positioned to lead the energy transition with products, services and integrated solutions by growing new renewable energy generation, lowering the cost of electricity and modernizing the grid. Across our businesses, we have RPO of $31.4 billion together with an Onshore and Offshore Wind installed base of approximately 50,000 units, of which, approximately half are under service agreements.
While we expect long term growth in the U.S onshore wind market, pending modifications to and extension of the Production Tax Credit (PTC) has caused further deterioration in the market outlook and continues to drive customer uncertainty. The latest Wood Mackenzie market forecast expects the U.S onshore market to decline from 14 gigawatts of new installations in 2021 to approximately 10 gigawatts in 2022. In the international onshore wind markets, we continue to observe strong demand. The offshore wind industry continues to experience strong global market momentum. Customer preference continues to shift to larger, more efficient units to drive down costs and compete with other power generation options and we are monitoring the impact across the industry from rising inflationary costs of transportation and commodities. The Grid and Hydro business units are executing their turnaround plans and we are observing improved operating results. Underwriting discipline, risk management and commercial selectivity of new orders remains a key priority across each of our businesses.
New product introductions remain important to our onshore and offshore customers who are demonstrating the willingness to adopt the new technology of larger turbines that decrease the levelized cost of energy. We have observed significant market demand for our 5-6 MW Cypress and 3-4 MW Sierra Onshore units and our 12-14 MW Haliade-X Offshore units. Our Haliade-X prototype unit is currently operating at 14MW, a first in Imaging, Ultrasoundthe industry. Preparing for large scale production, while reducing the cost of these new product platforms and Life Careblade technologies remains a key priority. At Grid Solutions, new technology such as flexible transformers and g³ switchgears are solving for HCS products,a more resilient and efficient electric grid and lower emissions, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended September 30 | | | Nine months ended September 30 |
| | | | | | |
| Onshore and Offshore sales in units | | | | 2021 | 2020 | | | | 2021 | 2020 |
| Wind Turbines | | | | 1,083 | | 1,170 | | | | | 2,748 | | 2,731 | |
| Wind Turbine Gigawatts | | | | 3.6 | | 3.4 | | | | | 8.9 | | 7.8 | |
| Repower units | | | | 27 | | 300 | | | | | 276 | | 876 | |
| | | | | | | | | | | |
| September 30, 2021 | December 31, 2020 | September 30, 2020 |
| Equipment | $ | 18,211 | | $ | 18,273 | | $ | 17,579 | |
| Services | 13,214 | | 12,531 | | 10,767 | |
| Total RPO | $ | 31,425 | | $ | 30,804 | | $ | 28,346 | |
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30 | | | Nine months ended September 30 | |
| 2021 | | 2020 | | | 2021 | | 2020 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Onshore Wind | $ | 3,047 | | | $ | 3,303 | | | | $ | 8,048 | | | $ | 7,914 | | |
| Grid Solutions equipment and services | 759 | | | 936 | | | | 2,330 | | | 2,587 | | |
| Hydro | 190 | | | 160 | | | | 549 | | | 490 | | |
| Offshore Wind and Hybrid Solutions | 211 | | | 127 | | | | 577 | | | 232 | | |
| Total segment revenues | $ | 4,208 | | | $ | 4,525 | | | | $ | 11,505 | | | $ | 11,224 | | |
| | | | | | | | | |
| Equipment | $ | 3,695 | | | $ | 3,771 | | | | $ | 9,844 | | | $ | 9,068 | | |
| Services | 512 | | | 754 | | | | 1,661 | | | 2,155 | | |
| Total segment revenues | $ | 4,208 | | | $ | 4,525 | | | | $ | 11,505 | | | $ | 11,224 | | |
| | | | | | | | | |
| Segment profit (loss) | $ | (151) | | | $ | (51) | | | | $ | (484) | | | $ | (628) | | |
| Segment profit margin | (3.6) | | % | (1.1) | | % | | (4.2) | | % | (5.6) | | % |
For the three months ended September 30, 2021, segment revenues were down $0.3 billion (7%) and segment losses were up $0.1 billion.
Revenues decreased $0.4 billion (9%) organically*, primarily from 273 fewer U.S. repower unit deliveries and lower volumes in Grid Solutions due to continued commercial selectivity, in addition to 87 fewer wind turbine deliveries on a unit basis, which was largely driven by PTC uncertainty and customer site readiness in the U.S. These decreases were partially offset by higher core Onshore services revenue and higher revenue from the Offshore EDF 6 MW project in Saint Nazaire, France.
Segment losses increased $0.1 billion organically*, primarily from lower repower volume, lower margins on new product introductions and higher supply chain costs at Onshore, lower volumes at Grid and higher costs at Offshore Wind from legacy projects, partially offset by the favorable impact of cost reduction actions across our businesses and improved project execution at Grid and Hydro.
For the nine months ended September 30, 2021, segment revenues were up $0.3 billion (3%) and segment losses were down $0.1 billion (23%).
RPO as of September 30, 2021 increased $0.6 billion (2%) from December 31, 2020 primarily driven by the Offshore Vineyard Wind and Dogger Bank wind farms and from higher Onshore services, partially offset by equipment sales exceeding new orders at Onshore and Grid. The decrease at Onshore Wind is largely driven by PTC dynamics in North America, while at Grid is primarily due to increased commercial selectivity in certain product lines. RPO increased $3.1 billion (11%) from September 30, 2020, primarily driven by new Haliade-X orders at Offshore Wind.
Revenues decreased $0.1 billion (1%) organically*, primarily from lower repower unit deliveries at Onshore Wind and lower revenue at Grid due to increased commercial selectivity, partially offset by 17 more wind turbine deliveries and higher revenue at Offshore Wind’s EDF 6 MW project in Saint Nazaire, France.
Segment losses decreased $0.2 billion (29%) organically*, primarily from higher new unit volume at Onshore Wind, the favorable impact of cost reduction actions, 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.
During the current period, global gas generation was down high-single-digits due to price-driven gas-to-coal switching. However, GE gas turbine utilization continues to be resilient as megawatt hours grew low-single-digits. Looking ahead, we anticipate the power market to continue to be impacted by overcapacity in the industry, continued price pressure from competition on servicing the installed base, and the uncertain timing of deal closures due to financing and the complexities of working in emerging markets, as well as the ongoing impacts of COVID-19. Although market factors related to the energy transition such as greater renewable energy penetration and the adoption of climate change-related policies continue to impact long-term demand, to differing degrees across markets globally, we expect the gas market to remain stable through the next decade with gas generation continuing to grow low-single-digits. 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 exit of new build coal.
We continue to invest in new product development, such as our HA-Turbines. Our fundamentals remain strong with approximately $70.5 billion in RPO and a returngas turbine installed base greater than 7,000 units, including approximately 1,800 units under long-term service agreements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended September 30 | | | | Nine months ended September 30 |
| | | | | | | |
| Sales in units | | | | 2021 | 2020 | | | | | 2021 | 2020 |
| GE Gas Turbines | | | | 22 | | 11 | | | | | | 47 | | 43 | |
| Heavy-Duty Gas Turbines(a) | | | | 14 | | 9 | | | | | | 34 | | 29 | |
| HA-Turbines(b) | | | | 5 | | 3 | | | | | | 11 | | 12 | |
| Aeroderivatives(a) | | | | 8 | | 2 | | | | | | 13 | | 14 | |
| | | | | | | | | | | |
(a) Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines.
(b) HA-Turbines are a subset of Heavy-Duty Gas Turbines. |
*Non-GAAP Financial Measure
| | | | | | | | | | | |
| September 30, 2021 | December 31, 2020 | September 30, 2020 |
| Equipment | $ | 14,231 | | $ | 14,991 | | $ | 14,774 | |
| Services | 56,257 | | 58,318 | | 58,160 | |
| Total RPO | $ | 70,488 | | $ | 73,308 | | $ | 72,934 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30 | | | Nine months ended September 30 |
| 2021 | | 2020 | | | 2021 | | 2020 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Gas Power | $ | 2,861 | | | $ | 2,940 | | | | $ | 8,739 | | | $ | 8,876 | | |
| Steam Power | 790 | | | 769 | | | | 2,327 | | | 2,340 | | |
| Power Conversion, Nuclear and other | 376 | | | 316 | | | | 1,176 | | | 990 | | |
| Total segment revenues | $ | 4,026 | | | $ | 4,025 | | | | $ | 12,242 | | | $ | 12,206 | | |
| | | | | | | | | |
| Equipment | $ | 1,368 | | | $ | 1,595 | | | | $ | 3,680 | | | $ | 4,589 | | |
| Services | 2,658 | | | 2,430 | | | | 8,561 | | | 7,617 | | |
| Total segment revenues | $ | 4,026 | | | $ | 4,025 | | | | $ | 12,242 | | | $ | 12,206 | | |
| | | | | | | | | |
| Segment profit (loss) | $ | 204 | | | $ | 148 | | | | $ | 416 | | | $ | (32) | | |
| Segment profit margin | 5.1 | | % | 3.7 | | % | | 3.4 | | % | (0.3) | | % |
For the three months ended September 30, 2021, segment revenues were flat and segment profit was up $0.1 billion (38%).
Revenues decreased 1% organically*, primarily due to pre-pandemic volumedecreases in PDx.Steam Power equipment revenues and decreases in Gas Power equipment revenues on lower turnkey sales, partially offset by increases in Steam Power services revenues and Gas Power services revenues on strong long-term service agreement volume.
Profit increased 34% organically* due to increases in Gas Power services revenues and margins and aeroderivative sales.
For the nine months ended September 30, 2021, segment revenues were flat and segment profit was up $0.4 billion.
RPO as of September 30, 2021 decreased $2.8 billion (4%) and $2.4 billion (3%) from December 31, 2020 and September 30, 2020, respectively, primarily driven by sales outpacing new orders in Gas Power contractual services and the continued wind down of the Steam Power new build coal business.
Revenues decreased $0.2 billion (30%(2%) organically*, primarily due to cost reductions anddecreased Gas Power equipment revenues on lower turnkey sales, partially offset by an increase in Gas Power services revenues.
Profit increased demand for HCS products, and$0.5 billion organically* due to increases in PDx volume.Gas Power services revenues and margins and aeroderivative sales, continued efforts to streamline the businesses, and a prior year charge related to an under-performing joint venture (JV) in China at Gas Power and the nonrecurrence of a quality reserve on the legacy product line that we have since exited at Power Conversion, partially offset by unfavorable legacy project arbitration resolutions and Steam Power project execution.
CAPITAL. In the first quarter of 2021, we announced an agreement to combine GECAS with AerCap, for which the Company expects to receive $23.9approximately $22.6 billion in cash, subject toinclusive of estimated contractual closing adjustments, 111.5 million shares of AerCap common stock (approximately 46% ownership interest) valued at approximately $6.6$6.4 billion in shares representing a 46% stake inbased on the combined company,AerCap’s closing share price of $57.81 on September 30, 2021, and $1 billion in AerCap notes and/or cash upon closing.notes. The Company expects to transfer GECAS’ net assets, including its engine leasing and Milestone helicopter leasing businesses,business units, as well as GECAS’ more than 400 employees and its current purchase obligations, to AerCap. In addition, upon the closing of the transaction, the remainder of GE Capital will be reported within Corporate. In October 2021, we received final regulatory approvals and are now expecting the transaction to be completed on November 1, 2021.
In connection with the signing of the transaction agreement, GE Capital recorded a total non-cash after-tax charge of $2.8$3.6 billion in discontinued operations infor the first quarter ofnine months ended September 30, 2021, and the results of GECAS are now presented in discontinued operations.
In the first quarter of 2021, we announced our intention to discontinue the majority of our factoring programs in WCS, which was effective April 1, 2021.
GE Capital made capital contributions to its insurance subsidiaries of $2.0 billionWe annually perform premium deficiency testing in the first quartersaggregate across our run-off insurance portfolio in the third quarter. As a result of boththe testing, we identified no premium deficiency in the third quarter of 2021. See the Other Items section and Note 13 to the consolidated financial statements for further information.
| | | | | | | | |
| September 30, 2021 | December 31, 2020 |
| | |
| Energy Financial Services (EFS) | $ | 2,358 | | $ | 2,385 | |
| Working Capital Solutions (WCS) | 1,337 | | 5,884 | |
| Insurance | 50,839 | | 50,824 | |
| Other continuing operations(a) | 11,762 | | 18,577 | |
| Total segment assets - continuing operations | $ | 66,295 | | $ | 77,670 | |
| | |
| | |
(a) Included cash, cash equivalents and restricted cash of $6,834 million and $13,245 million and deferred income taxes of $3,595 million and $3,680 million as of September 30, 2021 and December 31, 2020, and expects to provide further capital contributions of approximately $5.5 billion through 2024.respectively.
*Non-GAAP Financial Measure
| | | | | | | | |
| March 31, 2021 | December 31, 2020 |
| | |
| Energy Financial Services (EFS) | $ | 2,359 | | $ | 2,385 | |
| Working Capital Solutions (WCS) | 4,567 | 5,884 |
| Insurance | 50,353 | 50,824 |
| Other continuing operations(a) | 14,429 | | 18,577 | |
| Total segment assets - continuing operations | $ | 71,709 | | $ | 77,670 | |
| | |
| | |
(a) Included cash, cash equivalents and restricted cash of $9,332 million as of March 31, 2021 and $13,245 million as of December 31, 2020.
| | | | | Three months ended March 31 | | Three months ended September 30 | | Nine months ended September 30 |
| | | | 2021 | 2020 | | 2021 | 2020 | | 2021 | 2020 |
| | EFS | EFS | | | $ | (3) | | $ | 64 | | EFS | $ | (75) | | $ | 15 | | | $ | (32) | | $ | 77 | |
| WCS | WCS | | | 55 | | 131 | | WCS | 28 | | 57 | | | 105 | | 270 | |
| Insurance | Insurance | | | 775 | | 616 | | Insurance | 770 | | 764 | | | 2,348 | | 2,167 | |
| Other continuing operations | Other continuing operations | | | 51 | | 25 | | Other continuing operations | 11 | | (78) | | | 49 | | (59) | |
| Total segment revenues | Total segment revenues | | | $ | 878 | | $ | 837 | | Total segment revenues | $ | 734 | | $ | 758 | | | $ | 2,470 | | $ | 2,455 | |
| | | EFS | EFS | | | $ | (5) | | $ | 53 | | EFS | $ | 18 | | $ | 18 | | | $ | 70 | | $ | 13 | |
| WCS | WCS | | | 2 | | 24 | | WCS | (2) | | 15 | | | (8) | | 51 | |
| Insurance | Insurance | | | 116 | | (93) | | Insurance | 52 | | 57 | | | 360 | | 78 | |
| Other continuing operations(a) | Other continuing operations(a) | | | (285) | | (171) | | Other continuing operations(a) | (211) | | (119) | | | (1,310) | | (834) | |
| Total segment profit (loss) | Total segment profit (loss) | | | $ | (172) | | $ | (187) | | Total segment profit (loss) | $ | (142) | | $ | (29) | | | $ | (887) | | $ | (692) | |
(a) Other continuing operations primarily comprised excess interest costs from debt previously allocated to assets that have been sold, interest costs not allocated to GE Capital businesses, and preferred stock dividend costs prior to January 2021, at which time these became a GE Industrial obligation (see Note 17 for further information). Interest costs are allocated to GE Capital businesses based on the tenor of their assets using the market rate at the time of origination, which differs from the asset profile when the debt was originated. As a result, actual interest expense is higher than interest expense allocated to the remaining GE Capital businesses. We anticipate unallocated interest costs to gradually decline as debt matures and/or is refinanced.
For the three months ended March 31,September 30, 2021, segment revenues decreased 3% and segment losses increased $0.1 billion.
Capital revenues decreased 3%, as lower factoring revenue and EFS gains were partially offset by lower marks and impairments.
Capital losses increased $0.1 billion primarily as a result of lower tax benefits, partially offset by the discontinuation of preferred dividend payments to GE Industrial.
For the nine months ended September 30, 2021, segment revenues increased 5%1% and segment losses decreased 8%increased $0.2 billion (28%).
GE Capital revenues increased 5%1%, primarily as a result of lower marks and impairments primarily in Insurance, partially offset by lower revenue at WCS due to lower volume and lower gainsfactoring revenue and project revenues at EFS. GE
Capital segment losses decreased 8%increased $0.2 billion (28%) primarily as a result of higher debt extinguishment costs, lower claims, improved investment performance and lower marks and impairments in Insurance were partially offset by lower gains and project revenues at EFStax benefits and the nonrecurrence of the tax benefit related to the BioPharma sale in the first quarter of 2020.2020, partially offset by the discontinuation of preferred dividend payments to GE Industrial, lower marks and impairments in Insurance and EFS, lower interest expense due to a lower debt balance and lower claims and higher terminations in Insurance.
CORPORATE ITEMS AND ELIMINATIONS. Corporate items and eliminations includedincludes the results of our Lighting segment, forthrough its disposition in the three months ended March 31,second quarter of 2020, and our GE Digital business for all periods presented.
| | | Three months ended March 31 | | | Three months ended September 30 | | Nine months ended September 30 | |
| | 2021 | 2020 | | | 2021 | 2020 | | 2021 | 2020 | |
| Revenues | Revenues | | | Revenues | | |
| Corporate revenues | Corporate revenues | $ | 227 | | $ | 377 | | | Corporate revenues | $ | 237 | | $ | 251 | | | $ | 693 | | $ | 1,039 | | |
| | Eliminations and other | Eliminations and other | (455) | | (562) | | | Eliminations and other | (512) | | (515) | | | (1,412) | | (1,482) | | |
| Total Corporate Items and Eliminations | Total Corporate Items and Eliminations | $ | (228) | | $ | (185) | | | Total Corporate Items and Eliminations | $ | (275) | | $ | (264) | | | $ | (720) | | $ | (443) | | |
| | Operating profit (cost) | Operating profit (cost) | | | Operating profit (cost) | | |
| Gains (losses) on disposals and held for sale businesses | $ | (159) | | $ | 12,439 | | | |
| Gains (losses) on purchases and sales of business interests | | Gains (losses) on purchases and sales of business interests | $ | (156) | | $ | 28 | | | $ | (159) | | $ | 12,431 | | |
| Gains (losses) on equity securities | | Gains (losses) on equity securities | 412 | | (669) | | | 1,256 | | (4,527) | | |
| Restructuring and other charges | Restructuring and other charges | (106) | | (143) | | | Restructuring and other charges | (64) | | (91) | | | (395) | | (523) | | |
| Unrealized gains (losses) | 509 | | (5,794) | | | |
| Steam asset impairments(a) (Notes 7 & 8) | | Steam asset impairments(a) (Notes 7 & 8) | — | | (363) | | | — | | (363) | | |
| SEC settlement charge(b) | | SEC settlement charge(b) | — | | (100) | | | — | | (100) | | |
| Goodwill impairments(c) (Note 8) | | Goodwill impairments(c) (Note 8) | — | | — | | | — | | (728) | | |
| | Adjusted total corporate operating costs (Non-GAAP) | Adjusted total corporate operating costs (Non-GAAP) | (192) | | (379) | | | Adjusted total corporate operating costs (Non-GAAP) | (266) | | (321) | | | (701) | | (885) | | |
| Total Corporate Items and Eliminations (GAAP) | Total Corporate Items and Eliminations (GAAP) | $ | 52 | | $ | 6,123 | | | Total Corporate Items and Eliminations (GAAP) | $ | (74) | | $ | (1,515) | | | $ | 2 | | $ | 5,305 | | |
| Less: gains (losses) and restructuring & other | Less: gains (losses) and restructuring & other | 244 | | 6,502 | | | Less: gains (losses) and restructuring & other | 192 | | (1,195) | | | 702 | | 6,190 | | |
| Adjusted total corporate operating costs (Non-GAAP) | Adjusted total corporate operating costs (Non-GAAP) | $ | (192) | | $ | (379) | | | Adjusted total corporate operating costs (Non-GAAP) | $ | (266) | | $ | (321) | | | $ | (701) | | $ | (885) | | |
| | Functions & operations | Functions & operations | $ | (159) | | $ | (272) | | | Functions & operations | $ | (152) | | $ | (246) | | | $ | (475) | | $ | (709) | | |
| Environmental, health and safety (EHS) and other items | Environmental, health and safety (EHS) and other items | (55) | | (10) | | | Environmental, health and safety (EHS) and other items | (100) | | (21) | | | (184) | | 8 | | |
| Eliminations | Eliminations | 23 | | (98) | | | Eliminations | (13) | | (54) | | | (42) | | (184) | | |
| Adjusted total corporate operating costs (Non-GAAP) | Adjusted total corporate operating costs (Non-GAAP) | $ | (192) | | $ | (379) | | | Adjusted total corporate operating costs (Non-GAAP) | $ | (266) | | $ | (321) | | | $ | (701) | | $ | (885) | | |
(a) Included non-cash pre-tax impairment charges of $429 million, net of $65 million attributable to noncontrolling interests for the Steam business within our Power segment in 2020.
(b) GE reached a settlement with the SEC and paid a civil penalty of $200 million in December 2020, of which $100 million was recorded and paid at Corporate and $100 million was recorded and paid at GE Capital.
(c) Included a non-cash pre-tax impairment charge of $877 million, net of $149 million attributable to noncontrolling interest, for our Additive reporting unit within our Aviation segment for the nine months ended September 30, 2020.
Adjusted total corporate operating costs* excludes gains (losses) on disposalspurchases and held for sale businesses,sales of business interests, significant higher-cost
restructuring programs, and unrealized gains (losses). on equity securities and goodwill impairments. We believe that adjusting corporate costs to exclude the effects of items that are not closely associated with ongoing corporate operations provides management and investors with a meaningful measure that increases the period-to-period comparability of our ongoing corporate costs.
*Non-GAAP Financial Measure
For the three months ended March 31,September 30, 2021, revenues remained relatively flat year over yearyear. Corporate operating profit increased by $1.4 billion primarily asdue to a result$1.1 billion change in gains/(losses) on equity securities primarily related to mark-to-market activity on our Baker Hughes shares. In addition, Corporate operating profit also increased due to the nonrecurrence of a$0.4 billion of non-cash impairment charges related to property, plant and equipment and intangible assets at our Steam business within our Power segment, and $0.1 billion decreaselegal reserves associated with the settlement of the SEC investigation in 2020. These increases were partially offset by $0.2 billion of higher losses on purchases and sales of business interests due to a $0.2 billion held for sale loss within our Power segment in 2021.
Adjusted total corporate operating costs* were down $0.1 billion due to lower costs associated with our Corporate functions and operations partially offset by higher costs associated with EHS and other items.
For the nine months ended September 30, 2021, revenues decreased by $0.3 billion, primarily due to the sale of our Lighting business in June 2020, partially offset by $0.1 billion of lower inter-segment eliminations. Corporate operating profit decreased by $6.1$5.3 billion due to $12.6 billion of lower net gains on purchases and sales of business interests primarily driven by $12.3due to a $12.4 billion of gainsgain from the sale of our BioPharma business during the first three months ofin 2020 as compared toand a $0.2 billion of realized losses primarily related toheld for sale loss within our Baker Hughes shares during the first three months ofPower segment in 2021. These decreases wereThis decrease was partially offset by a $6.3$5.8 billion change in net unrealized gains and losses(losses) on equity securities primarily related to mark-to-market activity on our Baker Hughes shares. Overall, restructuringIn addition, Corporate operating profit increased due to the nonrecurrence of a $0.7 billion non-cash goodwill impairment charge related to our Aviation segment, $0.4 billion of non-cash impairment charges related to property, plant and equipment and intangible assets at our Steam business within our Power segment, and $0.1 billion legal reserves associated with the settlement of the SEC investigation in 2020. Restructuring and other charges remained relatively flat year over year.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 new build coal power market.
Adjusted total corporate operating costs* decreased by $0.2 billion in the first quarter of 2021 primarily as the result of $0.1$0.2 billion of cost reductions primarily withinin our Corporate functions.functions and operations. Costs also decreased bydue to $0.1 billion due toof lower intercompany profit eliminations primarily as the result of lower intercompany activity from our Aviation segment to our GECAS business, lower intercompany elimination activity from project financing investments associated with wind energy projects in our Renewable Energy segment and lower GE industrial inter-segment eliminations. Overall, costs associated with EHS matters remained relatively flat year over year.segment.
OTHER CONSOLIDATED INFORMATION
RESTRUCTURING. Restructuring actions are essential to our cost improvement efforts for both existing operations and those acquired. Restructuring and other charges relate primarily to workforce reductions, facility exit costs associated with the consolidation of sales, service and manufacturing facilities, the integration of acquisitions, and certain other asset write-downs such as those associated with product line exits. We also recognize an obligation for severance benefits that vest or accumulate with service. We continue to closely monitor the economic environment and expect to undertake further restructuring actions to more closely align our cost structure with earnings goals. This table is inclusive of all restructuring charges in our segments.segments and at Corporate, and the charges are shown below for the business where they originated. Separately, in our reported industrial segment results, significant, higher-cost restructuring programs are excluded from measurement of segment operating performance for internal and external purposes; those excluded amounts are reported in Restructuring and other charges for Corporate (see the Corporate Items and Eliminations section).
| | | | | | | | | | | |
| Three months ended March 31 | | |
| 2021 | 2020 | | | |
| Workforce reductions | $ | 211 | | $ | 154 | | | | |
| Plant closures & associated costs and other asset write-downs | 26 | | 29 | | | | |
| Acquisition/disposition net charges | 5 | | 27 | | | | |
| Total restructuring and other charges | $ | 242 | | $ | 210 | | | | |
| | | | | |
| Cost of product/services | $ | 101 | | $ | 116 | | | | |
| Selling, general and administrative expenses | 148 | | 94 | | | | |
| Other income | (7) | | — | | | | |
| Total restructuring and other charges | $ | 242 | | $ | 210 | | | | |
| | | | | |
| Power | $ | 49 | | $ | 33 | | | | |
| Renewable Energy | 76 | | 26 | | | | |
| Aviation | 62 | | 68 | | | | |
| Healthcare | 39 | | 30 | | | | |
| Corporate | 11 | | 50 | | | | |
| Total GE Industrial restructuring and other charges | $ | 236 | | $ | 207 | | | | |
| Capital | 5 | | 3 | | | | |
| Total restructuring and other charges | $ | 242 | | $ | 210 | | | | |
| Restructuring and other charges cash expenditures | $ | 223 | | $ | 210 | | | | |
| | | | | | | | | | | | | | | | | |
| Three months ended September 30 | | Nine months ended September 30 |
| 2021 | 2020 | | 2021 | 2020 |
| Workforce reductions | $ | 132 | | $ | 137 | | | $ | 634 | | $ | 630 | |
| Plant closures & associated costs and other asset write-downs | 23 | | 93 | | | 87 | | 201 | |
| Acquisition/disposition net charges | 9 | | 12 | | | 16 | | 57 | |
| Total restructuring and other charges | $ | 164 | | $ | 242 | | | $ | 736 | | $ | 888 | |
| | | | | |
| Cost of product/services | $ | 61 | | $ | 111 | | | $ | 349 | | $ | 368 | |
| Selling, general and administrative expenses | 103 | | 131 | | | 393 | | 520 | |
| Other income | — | | — | | | (7) | | — | |
| Total restructuring and other charges | $ | 164 | | $ | 242 | | | $ | 736 | | $ | 888 | |
| | | | | |
| Aviation | $ | 3 | | $ | 65 | | | $ | 64 | | $ | 309 | |
| Healthcare | 68 | | 28 | | | 127 | | 104 | |
| Renewable Energy | 14 | | 58 | | | 149 | | 142 | |
| Power | 65 | | 31 | | | 341 | | 159 | |
| Corporate | 9 | | 45 | | | 39 | | 154 | |
| Total GE Industrial restructuring and other charges | $ | 160 | | $ | 226 | | | $ | 720 | | $ | 867 | |
| Capital | 4 | | 16 | | | 16 | | 21 | |
| Total restructuring and other charges | $ | 164 | | $ | 242 | | | $ | 736 | | $ | 888 | |
| Restructuring and other charges cash expenditures | $ | 152 | | $ | 321 | | | $ | 565 | | $ | 856 | |
*Non-GAAP Financial Measure
Liabilities associated with restructuring activities were approximately $1.4 billion and $1.3 billion as of September 30, 2021 and December 31, 2020, respectively, including actuarial determined post-employment severance benefits of $0.7 billion as ofin both March 31, 2021 and December 31, 2020.periods.
| | | | | | | | | | | |
| INTEREST AND OTHER FINANCIAL CHARGES | Three months ended March 31 | | |
| 2021 | 2020 | | | |
| GE Industrial | $ | 268 | | $ | 370 | | | | |
| GE Capital | 291 | | 271 | | | | |
| | | | | | | | | | | | | | | | | |
| INTEREST AND OTHER FINANCIAL CHARGES | Three months ended September 30 | | Nine months ended September 30 |
| 2021 | 2020 | | 2021 | 2020 |
| GE Industrial | $ | 225 | | $ | 313 | | | $ | 753 | | $ | 1,016 | |
| GE Capital | 259 | | 267 | | | 799 | | 821 | |
The decrease in GE Industrial interest and other financial charges for the three months ended March 31,September 30, 2021 was primarily due to lower interest expense on debt driven by a lower intercompany loandebt balance and lower financing costs on sales of receivables. The primary components ofdecrease in GE Industrial interest and other financial charges are interest on short-for the nine months ended September 30, 2021 was primarily due to a lower intercompany loan balance and long-term borrowings and financinglower financial costs on the sales of receivables.receivables, partially offset by a higher average interest rate on debt. Total GE Industrial interest and other financial charges of $0.2 billion and $0.2 billion was recorded at Corporate and $0.1 billion and $0.1 billion was recorded by Industrialthe industrial segments for the three months ended March 31,September 30, 2021 and 2020, respectively, and $0.5 billion and $0.7 billion was recorded at Corporate and $0.2 billion and $0.3 billion was recorded by the industrial segments for the nine months ended September 30, 2021 and 2020, respectively.
The increasedecrease in GE Capital interest and other financial charges forduring the three and nine months ended March 31,September 30, 2021 was primarily due to higherlower average marketborrowing balances and weighted average interest rates, and higher interest on assumed debt as a result of the repayments of intercompany loans by GE Industrial (effectively transferring that interest cost back to GE Capital), partially offset by a lower average borrowings balances dueallocation of interest expense to maturities and debt purchases.discontinued operations.
*Non-GAAP Financial Measure
CONSOLIDATED INCOME TAXES. For the three months ended March 31,September 30, 2021, the consolidated income tax rate was 59.7%0.3% compared to 0.9%29.8% for the three months ended March 31,September 30, 2020. The tax rate for 2020 reflects a tax benefit on a pre-tax loss.
The consolidated provision (benefit) for income taxes was $0.1 billionan insignificant provision for both the three months ended March 31,September 30, 2021 and $(0.5) billion for the three months ended September 30, 2020. The income tax provision increased slightly as there waswent from a benefit to an insignificant expense primarily due to an increase in tax associated with pre-tax income for the three months ended September 30, 2021 compared to a pre-tax loss for the three months ended September 30, 2020, including tax expense associated with the realized and unrealized gain on our remaining interest in Baker Hughes infor the first quarter ofthree months ended September 30, 2021, compared to a tax benefit associated with the unrealized loss recorded for the three months ended September 30, 2020. Additionally, there was a tax expense in the firstthird quarter of 2021 compared to a tax benefit in the third quarter of 2020 to adjust the year-to-date tax rate to be in-line with the projected full-year rate.
The consolidated tax provision (benefit) includes $0.1 billion and $(0.1) billion for GE Industrial for the three months ended September 30, 2021 and 2020, respectively.
For the nine months ended September 30, 2021, the consolidated income tax rate was 149.5% compared to (17.4)% for the nine months ended September 30, 2020. ThisThe tax rate for 2021 reflects a tax benefit on a pre-tax loss. The negative tax rate for 2020 reflects a tax benefit on pre-tax income.
The consolidated (benefit) for income taxes was largely offset by$(0.3) billion for the nine months ended September 30, 2021 and $(0.6) billion for the nine months ended September 30, 2020. The benefit decreased due to tax associated with the increase in pre-tax income, excluding gains on BioPharma for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The increase in pre-tax income includes realized and unrealized gain on our remaining interest in Baker Hughes for the nine months ended September 30, 2021, compared to unrealized loss for the nine months ended September 30, 2020. Partially offsetting these items was the nonrecurrence of the tax expense associated with the disposition of the BioPharma business in the first quarter of 2020.2020, as well as tax benefits associated with internal restructurings to recognize historical losses due to decreases in fair value.
The consolidated tax provision (benefit) includes $0.1 billion and $0.2 billionan insignificant amount for GE Industrial forin both the threenine months ended March 31,September 30, 2021 and 2020, respectively.
DISCONTINUED OPERATIONS.OPERATIONS Primarilyprimarily comprise our GECAS business, our mortgage portfolio in Poland, and other trailing assets and liabilities associated with the dispositions of certain GE Capital and GE Industrial businesses.prior dispositions. See Notes 2 and 21 for further financial information regarding our businesses in discontinued operations.information.
CAPITAL RESOURCES AND LIQUIDITY
FINANCIAL POLICY. We intend to maintain a disciplined financial policy, including maintaining a high cash balance. We are targeting a sustainable long-term credit rating in the Single-A range, 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. In addition to net debt*-to-EBITDA, we also evaluate other leverage measures, including gross debt-to-EBITDA, and we will ultimately size our deleveraging actions across a range of measures to ensure we are operating the Company based on a strong balance sheet. We intend to continue to decrease our GE Industrial leverage over time as we navigate this period of uncertainty.
Following the closing of the GECAS transaction, the Company intends to use the transaction proceeds and its existing cash sources to significantly reduce debt, and will continue to target achieving a less than 2.5x net debt-to-EBITDA ratio over the next few years.debt.
*Non-GAAP Financial Measure
LIQUIDITY POLICY. We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet our obligations under both normal and stressed conditions. We intend to maintain a high level of cash and maximize flexibility as we navigate the current environment. At both GE Industrial and GE Capital, we manage our liquidity to provide access to sufficient funding to meet our business needs and financial obligations, as well as capital allocation and growth objectives, throughout business cycles.
GE Industrial has continued to enhance its cash management operations, targeting increased linear cash flow, lower factoring, and reducing restricted cash. As a result, GE Industrial's go-forward cash needs are expected to be below $13 billion. We intend to continue holding elevated cash levels through this period of uncertainty.
At GE Capital, we continue to hold cash levels to cover at least 12 months of long-term debt maturities.
We believe that our consolidated liquidity and availability under our revolving credit facilities will be sufficient to meet our liquidity needs.
CONSOLIDATED LIQUIDITY. Following is a summary of cash, cash equivalents and restricted cash at March 31,September 30, 2021.
| | | March 31, 2021 | | March 31, 2021 | | September 30, 2021 | | September 30, 2021 |
| GE Industrial | GE Industrial | $ | 22,361 | | | U.S. | $ | 18,115 | | GE Industrial | $ | 17,995 | | | U.S. | $ | 12,801 | |
| GE Capital | GE Capital | 9,422 | | | Non-U.S. | 13,668 | | GE Capital | 6,960 | | | Non-U.S. | 12,154 | |
| Consolidated | Consolidated | $ | 31,783 | | | Consolidated | $ | 31,783 | | Consolidated | $ | 24,955 | | | Consolidated | $ | 24,955 | |
Cash held in non-U.S. entities has generally been reinvested in active foreign business operations; however, substantially all of our unrepatriated earnings were subject to U.S. federal tax and, if there is a change in reinvestment, we would expect to be able to repatriate available cash (excluding amounts held in countries with currency controls) without additional federal tax cost. Any foreign withholding tax on a repatriation to the U.S. would potentially be partially offset by a U.S. foreign tax credit.
GE INDUSTRIAL LIQUIDITY. GE Industrial's primary sources of liquidity consist of cash and cash equivalents, free cash flows from our operating businesses, remaining receivable monetization of receivables,programs, and short-term borrowing facilities, including revolving credit facilities. Cash generation can be subject to variability based on many factors, including seasonality, receipt of down payments on large equipment orders, timing of billings on long-term contracts, market conditions and our ability to execute dispositions. Additionally, in connection with the program we launched in 2020 to fully monetize our Baker Hughes position over approximately three years, we received proceeds of $0.7$1.3 billion in the firstthird quarter of 2021 and expect to receive approximately $1.0$1.2 billion in the secondfourth quarter of 2021.
GE Industrial cash, cash equivalents and restricted cash totaled $22.4$18.0 billion at March 31,September 30, 2021, including $2.1$2.2 billion of cash held in countries with currency control restrictions and $0.4$0.3 billion of restricted use cash. Cash held in countries with currency controls represents amounts held in countries that may restrict the transfer of funds to the U.S. or limit our ability to transfer funds to the U.S. without incurring substantial costs. Restricted use cash represents amounts that are not available to fund operations, and primarily comprised funds restricted in connection with certain ongoing litigation matters.
*Non-GAAP Financial Measure
In the first quarter of 2021, we announced our intention to discontinue the majority of our factoring programs, which was effective April 1, 2021. The estimated adverse impact to GE Industrial CFOA for 2021 is expected to be approximately $3.5 to $4 billion, primarilyincluding a total of $3.1 billion in the second quarterand third quarters of 2021, which will beprimarily 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.
Additionally, we do not anticipate any further funding requirements for the GE Pension Plan in the foreseeable future, potentially until the end of the decade. This is due to our $2.5 billion prefunding in 2020 and portfolio performance, as well as the recently enacted American Rescue Plan Act.
GE CAPITAL LIQUIDITY. GE Capital’s primary sources of liquidity consist of cash and cash equivalents, cash generated from asset sales (including the expected proceeds from the GECAS transaction) and cash flows from our businesses, as well as GE Industrial repayments of intercompany loans and capital contributions from GE Industrial. We expect to maintain a sufficient liquidity position to fund our insurance obligations, debt maturities and other obligations. See the Segment Operations - Capital section for further information regarding allocation of GE Capital interest expense to the GE Capital businesses.
GE Capital cash, cash equivalents and restricted cash totaled $9.4$7.0 billion at March 31,September 30, 2021, excluding $1.7$0.8 billion of cash in Insurance, which was classified as All other assets on the GE Capital Statement of Financial Position.
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 $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. GE is required to maintain specified capital levels at these insurance subsidiaries under capital maintenance agreements. Going forward, we anticipate funding any capital needs for Insurance through a combination of GE Capital liquidity, GE Capital asset sales, GE Capital future earnings and capital contributions from GE Industrial.
BORROWINGS. Consolidated total borrowings were $71.4$62.9 billion and $74.9 billion at March 31,September 30, 2021 and December 31, 2020, respectively, a decrease of $3.5$12.0 billion ($3.912.4 billion excluding intercompany eliminations). See the following table for a summary of GE Industrial and GE Capital borrowings.
| | | | | | | | | | | | | | | | | | | | |
| GE Industrial | March 31, 2021 | December 31, 2020 | | GE Capital | March 31, 2021 | December 31, 2020 |
| GE Industrial senior notes | $ | 18,753 | | $ | 18,994 | | | Senior and subordinated notes | $ | 29,144 | | $ | 30,987 | |
| | | | Senior and subordinated notes assumed by GE Industrial | 21,538 | | 22,390 | |
Intercompany loans from
GE Capital | 3,177 | | 3,177 | | | Intercompany loans to
GE Industrial | (3,177) | | (3,177) | |
| Other GE Industrial borrowings | 956 | | 1,352 | | | Other GE Capital
borrowings | 1,244 | | 1,779 | |
| Total GE Industrial | | | | Total GE Capital | | |
| adjusted borrowings(a) | $ | 22,886 | | $ | 23,523 | | | adjusted borrowings(a)(b) | $ | 48,749 | | $ | 51,979 | |
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | | | | | | | |
| GE Industrial | September 30, 2021 | December 31, 2020 | | GE Capital | September 30, 2021 | December 31, 2020 |
| GE Industrial senior notes | $ | 14,663 | | $ | 18,994 | | | Senior and subordinated notes | $ | 28,719 | | $ | 30,987 | |
| | | | Senior and subordinated notes assumed by GE Industrial | 18,106 | | 22,390 | |
Intercompany loans from
GE Capital | 3,177 | | 3,177 | | | Intercompany loans to
GE Industrial | (3,177) | | (3,177) | |
| Other GE Industrial borrowings | 898 | | 1,352 | | | Other GE Capital
borrowings | 717 | | 1,779 | |
| Total GE Industrial | | | | Total GE Capital | | |
| adjusted borrowings(a)(b) | $ | 18,738 | | $ | 23,523 | | | adjusted borrowings(a)(b) | $ | 44,366 | | $ | 51,979 | |
(a) Consolidated total borrowings of $71,358$62,888 million and $74,902 million at March 31,September 30, 2021 and December 31, 2020, respectively, are net of intercompany eliminations of $277$216 million and $600 million, respectively, of other GE Industrial borrowings from GE Capital, primarily related to timing of cash settlements associated with GE Industrial receivables monetization programs.
(b) Included $3,826$3,788 million and $5,687 million at March 31,September 30, 2021 and December 31, 2020, respectively, of fair value adjustments for debt in fair value hedge relationships. See Note 19 for further information.
The reduction in GE Industrial adjusted borrowings at March 31,September 30, 2021 compared to December 31, 2020 was driven by debt repurchases of $4.1 billion, net repayments and maturities of other debt of $0.4$0.5 billion and $0.2$0.3 billion related to changes in foreign exchange rates.
GE Industrial net debt* was $32.3$31.3 billion and $32.3 billion at March 31,September 30, 2021 and December 31, 2020, respectively, asrespectively. The decrease was driven primarily by a lower debt reductionsbalance of $0.6$4.8 billion, werepartially offset by a decrease in the net cash deduction of $0.6$3.9 billion due to a lower cash balance.balance, mainly due to debt repurchases.
The reduction in GE Capital adjusted borrowings at March 31,September 30, 2021 compared to December 31, 2020 was driven primarily by debt repurchases of $3.2 billion, long-term debt maturities of $0.9$1.8 billion, lower non-recourse borrowings of $0.3 billion, lower short-term borrowings of $0.2$0.9 billion, and $1.9$1.6 billion of fair value adjustments for debt in fair value hedge relationships.
The following table provides a reconciliation of total short- and long-term borrowings as reported on the respective GE Industrial and GE Capital Statements of Financial Position to borrowings adjusted for assumed debt and intercompany loans:
| | March 31, 2021 | GE Industrial | GE Capital | Consolidated | |
| September 30, 2021 | | September 30, 2021 | GE Industrial | GE Capital | Consolidated |
| Total short- and long-term borrowings | Total short- and long-term borrowings | $ | 41,247 | | $ | 30,388 | | $ | 71,358 | | Total short- and long-term borrowings | $ | 33,667 | | $ | 29,437 | | $ | 62,888 | |
| Debt assumed by GE Industrial from GE Capital(a) | Debt assumed by GE Industrial from GE Capital(a) | (21,538) | | 21,538 | | — | | Debt assumed by GE Industrial from GE Capital(a) | (18,106) | | 18,106 | | — | |
| Intercompany loans with right of offset(a) | Intercompany loans with right of offset(a) | 3,177 | | (3,177) | | — | | Intercompany loans with right of offset(a) | 3,177 | | (3,177) | | — | |
| Total intercompany payable (receivable) between GE Industrial and GE Capital | Total intercompany payable (receivable) between GE Industrial and GE Capital | (18,361) | | 18,361 | | — | | Total intercompany payable (receivable) between GE Industrial and GE Capital | (14,929) | | 14,929 | | — | |
| Total borrowings adjusted for assumed debt and intercompany loans | Total borrowings adjusted for assumed debt and intercompany loans | $ | 22,886 | | $ | 48,749 | | $ | 71,358 | | Total borrowings adjusted for assumed debt and intercompany loans | $ | 18,738 | | $ | 44,366 | | $ | 62,888 | |
(a) See the Capital Resources and Liquidity section of our Annual Report on Form 10-K for the year ended December 31, 2020 for further details on the assumed debt and intercompany loans with right of offset.
The intercompany loans from GE Capital to GE Industrial bear the right of offset against amounts owed by GE Capital to GE Industrial under the assumed debt agreement and can be prepaid by GE Industrial at any time, in whole or in part, without premium or penalty. These loans are priced at market terms and have a collective weighted average interest rate of 3.7% and term of approximately 15.2 years at March 31,September 30, 2021.
GE Industrial has in place committed revolving credit facilities totaling $20.2$14.5 billion at March 31,September 30, 2021, comprised ofcomprising a $15.0$10.0 billion unused back-up revolving syndicated credit facility and a total of $5.2$4.5 billion of bilateral revolving credit facilities.
Under the terms of an agreement between GE Capital and GE Industrial, GE Capital has the right to compel GE Industrial to borrow under the $15.0$10.0 billion unused back-up revolving syndicated credit facility. Under this agreement, GE Industrial would transfer the proceeds to GE Capital as intercompany loans, which would be subject to the same terms and conditions as those between GE Industrial and the lending banks. GE Capital has not exercised this right.
CREDIT RATINGS AND CONDITIONS. We have relied, and may continue to rely, on the short- and long-term debt capital markets to fund, among other things, a significant portion of our operations. The cost and availability of debt financing is influenced by our credit ratings. Moody’s Investors Service (Moody’s), Standard and Poor’s Global Ratings (S&P), and Fitch Ratings (Fitch) currently issue separate ratings on GE Industrial and GE 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.
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | |
| | Moody's | S&P | Fitch |
| GE Industrial | Outlook | Negative | CreditWatch Negative | Stable |
| Short term | P-2 | A-2 | F3 |
| Long term | Baa1 | BBB+ | BBB |
| | | | |
| GE Capital | Outlook | Negative | CreditWatch Negative | Stable |
| Short term | P-2 | A-2 | F3 |
| Long term | Baa1 | BBB+ | BBB |
On March 10,In the first quarter of 2021, Moody’s and Fitch affirmed their respective credit ratings, and S&P announced that they have placed us on CreditWatch with negative implications and currently expect to lower our credit ratings by one notch upon the closing of the GECAS transaction.
We are disclosing our credit ratings and any current quarter updates to these ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds and access to liquidity. Our ratings may be subject to a revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. For a description of some of the potential consequences of a reduction in our credit ratings, see the Financial Risks section of Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020.
Following the close of the GECAS transaction, we expect that GE Capital will no longer receive separate credit ratings on its short- or long-term debt, and as a result our credit ratings will be issued on a consolidated basis for the Company.
Substantially all of the Company's debt agreements in place at March 31,September 30, 2021 do not contain material credit rating covenants. GE’s unused back-up revolving syndicated credit facility and certain of our bilateral revolving credit facilities contain a customary net debt-to-EBITDA financial covenant, which GE satisfied at March 31,September 30, 2021.
The Company may from time to time enter into agreements that contain minimum ratings requirements. The following table provides a summary of the maximum estimated liquidity impact in the event of further downgrades below each stated ratings level.
| | | | | | |
| Triggers Below | At March 31,September 30, 2021 |
| BBB+/A-2/P-2 | $ | 27759 | |
| BBB/A-3/P-3 | 621576 | |
| BBB- | 1,429986 | |
| BB+ and below | 468457 | |
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 and the 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 nine months ended March 31,September 30, 2021 and 2020. This analysis excludes any offsetting effect from the forecasted future transactions that are economically hedged.
See Note 19 for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.
STATEMENT OF CASH FLOWS – THREENINE MONTHS ENDED MARCH 31,SEPTEMBER 30, 2021 VERSUS 2020. We manage the cash flow performance of our industrial and financial services businesses separately, in order to enable us and our investors to evaluate the cash from operating activities of our industrial businesses separately from the cash flows of our financial services business.
Transactions between GE Industrial and GE Capital are reported in the respective columns of our statementStatement of cash flows,Cash Flows, but are eliminated in deriving our consolidated statementStatement of cash flows.Cash Flows. See the GE Industrial working capital transactionsWorking Capital Transactions section and Notes 4 and 22 for further information regarding certain transactions affecting our consolidated Statement of Cash Flows.
GE INDUSTRIAL CASH FLOWS FROM CONTINUING OPERATIONS. The most significant source of cash in GE Industrial CFOA is customer-related activities, the largest of which is collecting cash resulting from product or services sales. The most significant operating use of cash is to pay our suppliers, employees, tax authorities, contribute to post retirement plans and pay others for a wide range of material, services and taxes.
GE Industrial cash used for operating activities was $0.5$0.8 billion in 2021, a decrease of $1.2$2.3 billion compared with 2020, primarily due to: an increase in net income (after adjusting for the gain on the sale of BioPharma, non-cash losses related to our interest in Baker Hughes, non-operating benefit costs and non-operating debt extinguishment costs, which are adjusted through All other operating activities) primarily due to COVID-19 impacts in our Aviation segment in 2020; a decrease in cash usedpaid for working capitalincome taxes of $1.6$0.7 billion; partially offset by ana lower increase in cash used for All other operating activities of $0.2 billion primarily due to increases in Aviation-relatedAviation related customer allowance accruals of $0.4$0.2 billion in 2020 and the settlement of an Alstom legacy legal matter of $0.2 billion in 2021 partially offset by lower net cash used for(components of All other operating activities). All other operating activities included $0.5 billion and $0.8 billion increase in Aviation related customer allowance accruals and decreases in employee benefit liabilities of $0.2 billion and $0.3 billion. There was an insignificantbillion in 2021 and 2020, respectively.
Changes in working capital compared to prior year were as follows: current receivables of $(1.4) billion, driven by a higher decrease in Aviation-related customer allowance accruals in 2021.
Thesales of receivables to discontinued factoring programs of $(2.8) billion, partially offset by a prior year decrease in cash used for working capital was due to: a decreasesales of receivables to our continuing unconsolidated receivables facility of $1.1 billion which did not reoccur in cash used for2021 and higher net collections; inventories, including deferred inventory, of $(0.7) billion, driven by lower liquidations; current contract assets of $(0.4) billion, driven by lower net unfavorable changes in estimated profitability at Aviation; accounts payable and equipment project accruals of $1.0$2.7 billion, which was primarily as a result ofdriven by lower disbursements related to purchases of materials in prior periods; a decrease in cash used for inventories, including deferred inventory, of $0.4 billion, which was primarily driven by lower material purchases, partially offset by lower liquidations; an increase in cash from current receivables of $0.2 billion, which was primarily driven by lower volume; and lower net liquidations of progress collections and current deferred income of $0.2$(0.2) billion, whichdriven by higher net liquidations. Progress collections and 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. These decreases were partially offset by changesgovernment in current contract assets2021 compared to $0.7 billion from the U.S. Department of $0.2 billion, primarily due to a net unfavorable change in estimated profitability at AviationDefense in 2020.
GE Industrial cash from investing activities was $0.5$2.2 billion in 2021, a decrease of $19.5$17.1 billion compared with 2020, primarily due to: the nonrecurrence of proceeds from the 2020 sale of our BioPharma business of $20.3 billion; partially offset by proceeds from the 2021 sales of a portion of our retained ownership interest in Baker Hughes of $0.7$3.0 billion. Cash used for additions to property, plant and equipment and internal-use software, which are components of GE Industrial free cash flows*, was $0.4$1.0 billion in 2021, down $0.2$0.5 billion compared with 2020.
GE Industrial cash used for financing activities was $0.8$6.5 billion in 2021, a decrease of $1.2$2.9 billion compared with 2020, primarily due toto: the non-recurrencenonrecurrence of repayments of commercial paper of $1.1$3.0 billion in 2020.2020; partially offset by an increase of $0.5 billion in debt tender offers. GE Industrial paid cash to repurchase long term debt of $4.8 billion and $4.3 billion, including debt extinguishment costs of $0.6 billion and $0.1 billion (a component of All other financing activities) in 2021 and 2020, respectively.
GE CAPITAL CASH FLOWS FROM CONTINUING OPERATIONS. GE Capital cash used for operating activities was $2.5$3.0 billion in 2021, an increase of $3.0$3.6 billion compared with 2020, primarily due to: cash collateral paid, which is a standard market practice to minimize derivative counterparty exposures, and settlements paidreceived on derivative contracts (components of All other operating activities) of $1.7$1.4 billion in 2021, compared with collateral and settlements received on derivative contracts of $1.4$2.2 billion in 2020.
GE Capital cash from investing activities was $1.2$4.0 billion in 2021, an increasea decrease of $0.5$5.2 billion compared with 2020, primarily due to: higher net collectionsthe nonrecurrence of financing receivablesthe repayment of $1.1GE Capital intercompany loans of $7.5 billion partially offset by GE Industrial in 2020; a decrease in cash of $1.3 billion related to our current receivables and supply chain finance programs with GE IndustrialIndustrial; partially offset by higher net collections of $0.6 billion.financing receivables of $3.7 billion, mainly driven by the discontinuation of certain factoring programs.
GE Capital cash used for financing activities was $1.4$7.0 billion in 2021, a decrease of $5.1$6.8 billion compared with 2020, primarily due to: lower net repayments of borrowings of $4.8$7.5 billion, 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 lower cash settlements on derivatives hedging foreign currency$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.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 fromused for investing activities increased by $0.2 billion primarily due to higheran increase in net purchases of plant, property and equipment, partially offset by an increase in net collections of financing receivables of $0.3 billion.receivables.
*Non-GAAP Financial Measure
GE INDUSTRIAL WORKING CAPITAL TRANSACTIONS. Sales of Receivables. In order to manage short-term liquidity and credit exposure, GE Industrial may sell current customer receivables to GE Capital and other third parties. These transactions are made on arms-length terms and any discount related to time value of money is recognized within the respective GE Industrial business in the period these receivables were sold to GE Capital or third parties. See Note 4 for further information.
Supply Chain Finance 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 March 31,September 30, 2021 and December 31, 2020, included in GE Industrial's accounts payable was $3.0$3.5 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 $1.6$4.9 billion and $1.1$3.8 billion for the threenine months ended March 31,September 30, 2021 and 2020, respectively.
Previously, GE Capital operated a supply chain finance program for suppliers to GE's Industrial businesses. The remaining GE Industrial liability associated with the funded participation in the GE Capital program was insignificant at March 31, 2021.
INTERCOMPANY TRANSACTIONS BETWEEN GE INDUSTRIAL AND GE CAPITAL. Transactions between related companies are made on arms-length terms and are reported in the GE Industrial and GE Capital columns of our financial statements, which we believe provide useful supplemental information to our consolidated financial statements. See Note 22 for further information.
GE Capital Finance Transactions. During the threenine months ended March 31,September 30, 2021 and 2020, GE Capital acquired from third parties three24 aircraft with a list price totaling $0.2$1.9 billion and fiveeight aircraft with a list price totaling $0.6$0.8 billion, respectively, that will be leased to others and are powered by engines manufactured by GE Aviation and affiliates. GE Capital also made no payments to GE Aviation and affiliates related to spare engines and engine parts during the three months ended March 31, 2021of an insignificant amount and $0.1$0.2 billion, during the three months ended March 31, 2020, which included an insignificant amount and $0.1 billion to CFM International.International during the nine months ended September 30, 2021 and 2020, respectively. Additionally, GE Capital had $2.0 billion and $2.1 billion of net book value of engines, originally manufactured by GE Aviation and affiliates and subsequently leased back to GE Aviation and affiliates at March 31,September 30, 2021 and December 31, 2020, respectively.
*Non-GAAP Financial Measure
Also, during the threenine months ended March 31,September 30, 2021 and 2020, GE Industrial recognized equipment revenues of $0.4$1.6 billion and $0.5$1.9 billion, respectively, from customers within our Power and Renewable Energy segments in which GE Capital is an investee or is committed to be an investee in the underlying projects. At March 31,September 30, 2021, GE Capital had funded related investments of $0.1$0.2 billion.
For certain of these investments, in order to meet its underwriting criteria, GE Capital may obtain a direct guarantee from GE Industrial related to the performance of the third party. GE Industrial guarantees include direct performance or payment guarantees, return on investment guarantees and asset value guarantees. As of March 31,September 30, 2021, GE Industrial had outstanding guarantees to GE Capital on $0.8$0.7 billion of funded exposure and an insignificant amount onof unfunded commitments, which included guarantees issued by industrial businesses. The recorded contingent liability for these guarantees was insignificant as of March 31,September 30, 2021 and is based on individual transaction level defaults, losses and/or returns.
CRITICAL ACCOUNTING ESTIMATES. Please refer to the Critical Accounting Estimates and Other Items sections within MD&A and Note 1 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of our accounting policies and critical accounting estimates.
OTHER ITEMS
INSURANCE. At September 30, 2021, our insurance liabilities and annuity benefits of $37.7 billion were primarily supported by investment securities of $41.7 billion, commercial mortgage loans of $1.8 billion, net of their allowance for losses, and equity method and other investments of $1.3 billion. The insurance liabilities and annuity benefits primarily comprise a liability for future policy benefits for those insurance contract claims not yet incurred and claim reserves for claims that have been incurred or are estimated to have been incurred but not yet reported.
2021 Premium Deficiency Testing. We completed our annual premium deficiency testing in the aggregate across our run-off insurance portfolio in the third quarter of 2021. These procedures included updating experience studies since our last test completed in the third quarter of 2020, independent actuarial analysis (principally on long-term care insurance exposures) and review of industry benchmarks. Our 2021 premium deficiency testing started with the positive margin of less than 2% of the recorded future policy benefit reserves that resulted from our 2020 premium deficiency testing. Using updated assumptions, the 2021 premium deficiency testing results indicated a significant increase in the positive margin to approximately 11% of the related future policy benefit reserves recorded at September 30, 2021. As a result, the assumptions updated in connection with the premium deficiency recognized in 2019 remain locked-in and will remain so unless another premium deficiency occurs in the future.
The significant increase in the premium deficiency testing margin resulting from our 2021 premium deficiency testing was largely attributable to an increase in the overall discount rate to a weighted average rate of 6.15% compared to 5.70% in 2020 ($2.2 billion). This increase in the discount rate from 2020 reflects further development of our previously communicated investment portfolio realignment strategy, that includes increased amounts allocated to growth assets, consisting of private equity, equity-like securities and select high yield credit strategies, from our current target of approximately 8% up to approximately 15%. These amounts are expected to be funded over the next 5 to 7 years from the remaining projected capital contribution of approximately $5.5 billion through 2024 and regular portfolio cash flows while maintaining an overall A-rated fixed income portfolio. The 2021 discount rate assumptions also reflect a lower expected reinvestment rate on fixed-income investments versus that applied in 2020, due to lower prevailing benchmark interest rates in the U.S, grading to a lower expected long-term average investment yield over a shorter period and slightly lower actual yields on our fixed-income investment security portfolio. As a result of this increased allocation to higher-yielding assets, our run-off insurance operations may experience future earnings volatility due to investments carried at fair value with changes in fair values reported in earnings and changes in the allowance for credit losses, and temporary elevated amounts of unfunded investment commitments.
While our observed long-term care insurance claim experience has shown some modest favorable emerging morbidity experience in the period since the 2017 reconstruction of our future claim cost projections, it remains largely in-line with those reconstructed projections. Based on the application of professional actuarial judgment to the factors discussed above, we have made no substantial change to our assumptions concerning morbidity, morbidity improvement, mortality, mortality improvement, terminations, or long-term care insurance premium rate increases in 2021. As with all assumptions underlying our premium deficiency testing, we will continue to monitor these factors, which may result in future changes in our assumptions.
Since our premium deficiency testing performed in 2020, we have implemented approximately $0.2 billion of previously approved long-term care insurance premium rate increase actions and made no substantial changes to the amount of projected future premium rate increase approvals. Our 2021 premium deficiency test includes approximately $1.7 billion of anticipated future premium increases or benefit reductions associated with future in-force rate actions, of which approximately $0.9 billion has been approved and not yet implemented. This represents a decrease of $0.2 billion from our 2020 premium deficiency test to account for actions that are: (a) approved and not yet implemented, (b) filed but not yet approved, and (c) estimated on future filings through 2030 and includes the effects of the higher discount rate mentioned above and longer anticipated timing to achieve and implement certain premium rate approvals.
As a result of exposure period cut-off dates to permit experience to develop and lags in ceding company data reporting from our ceding companies, the impact of COVID-19 was generally not reflected in the experience studies data used in our 2021 premium deficiency testing. However, we assessed certain scenarios to better understand potential impacts associated with COVID-19 and, due to the currently observed insignificance and perceived short-term nature of such uncertain future impacts, including the natural offsets from mortality in the aggregate across our run-off insurance products (i.e., for life insurance products, higher mortality increases the present value of expected future benefit payments, while for annuity and long-term care insurance contracts, higher mortality decreases the present value of expected future benefit payments), concluded adjustments to our primary assumptions used in the premium deficiency testing were not warranted.
When results of the premium deficiency testing indicate overall reserves are sufficient, we are also required to assess whether additional future policy benefit reserves are required to be accrued over time in the future. Such an accrual would be required if profits are projected in earlier future periods followed by losses projected in later future years (i.e., profits followed by losses). When this pattern of profits followed by losses is projected, we would be required to accrue a liability in the expected profitable years by the amount necessary to offset projected losses in later future years. We noted our projections as of third quarter 2021 indicate the present value of projected earnings in each future year to be positive, and therefore, no further adjustments to our future policy benefit reserves were required at this time.
GAAP Reserve Sensitivities. The results of our premium deficiency testing are sensitive to the assumptions described above. Considering the results of the 2021 premium deficiency test which resulted in a margin, any future net adverse changes in our assumptions, may reduce the margin or result in a premium deficiency requiring an increase to future policy benefit reserves. For example, adverse changes in key assumptions related to our future policy benefits reserves, holding all other assumptions constant, would have the following effects on the projected present value of future cash flows as presented in the table below. Any future net favorable changes to these assumptions could result in a lower projected present value of future cash flows and additional margin in our premium deficiency test and higher income over the remaining duration of the portfolio, including higher investment income. The assumptions within our future policy benefit reserves are subject to significant uncertainties, including those inherent in the complex nature of our reinsurance treaties. Many of our assumptions are interdependent and require evaluation individually and in the aggregate across all insurance products. Small changes in the amounts used in the sensitivities, the use of different factors or effect from converting to modeling future cash flow projections for our long-term insurance exposures to a "first principles" model based on more granular assumptions of expected future claim experience could result in materially different outcomes from those reflected below.
| | | | | | | | | | | | | | |
| 2020 assumption | 2021 assumption | Hypothetical change in 2021 assumption | Estimated increase to projected present value of future cash flows (In millions, pre-tax) |
| Long-term care insurance morbidity improvement | 1.25% per year over 12 to 20 years | 1.25% per year over 12 to 20 years | 25 basis point reduction
No morbidity improvement | $500
$2,700 |
| Long-term care insurance morbidity | Based on company experience | Based on company experience | 5% increase in dollar amount of paid claims | $900 |
| Long-term care insurance mortality improvement | 0.5% per year for 10 years with annual improvement graded to 0% over next 10 years | 0.5% per year for 10 years with annual improvement graded to 0% over next 10 years | 1.0% per year for 10 years with annual improvement graded to 0% over next 10 years | $400 |
| Total terminations: | | | | |
| Long-term care insurance mortality | Based on company experience | Based on company experience | Any change in termination assumptions that reduce total terminations by 10% | $900 |
| Long-term care insurance lapse rate | Varies by block, attained age and benefit period; average 0.5% - 1.15% | Varies by block, attained age and benefit period; average 0.5% -1.15% |
| Long-term care insurance benefit exhaustion | Based on company experience | Based on company experience |
| Long-term care insurance future premium rate increases | Varies by block based on filing experience | Varies by block based on filing experience | 25% adverse change in premium rate increase success rate | $400 |
| Discount rate: | | | | |
| Overall discount rate | 5.70% | 6.15% | 25 basis point reduction | $800 |
| Reinvestment rate | 2.70%; grading to a long-term average investment yield of 5.8% | 2.60%; grading to a long-term average investment yield of 5.1% | 25 basis point reduction; grading to a long-term average investment yield of 5.1% | Less than $100 |
| Structured settlement annuity mortality | Based on company experience | Based on company experience | 5% decrease in mortality | $100 |
| Life insurance mortality | Based on company experience | Based on company experience | 5% increase in mortality | $300 |
Statutory Considerations. Our run-off insurance subsidiaries are required to prepare statutory financial statements in accordance with statutory accounting practices. Statutory accounting practices, not GAAP, determine the minimum required statutory capital levels of our insurance legal entities. We annually perform statutory asset adequacy testing and expect our December 31, 2021 testing process to be completed in the first quarter of 2022, the results of which may affect the amount or timing of capital contributions from GE Capital to the insurance legal entities.
See Other Items - New Accounting Standards, Note 12 and Other Items within MD&A in our Annual Report on Form 10-K for the year ended December 31, 2020 for further information related to our run-off insurance operations.
NEW ACCOUNTING STANDARDS. The Financial Accounting Standards Board issued new guidance on accounting for long-duration insurance contracts that is effective for our interim and annual periods beginning January 1, 2023. Early adoption is permitted,2023, with an election to adopt early, and if elected,restatement of prior periods presented. We intend to adopt the new guidance effective January 1, 2023, using the modified retrospective transition date can be either the beginning of the prior period or the earliest prior period presented.method where permitted. We are evaluating the effect of the new guidance on our consolidated financial statements and anticipate that its adoption will significantly change the accounting for measurements of our long-duration insurance liabilities. The new guidance requires cash flow assumptions used in the measurement of various insurance liabilities to be reviewed at least annually and updated if actual experience or other evidence indicates previous assumptions need to be 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 new guidance the discount rate will be equivalent to the upper-medium grade (i.e., single A) fixed-income instrument yield reflecting the duration characteristics of the liability and is required to be updated in each reporting period with changes recorded in other comprehensive income. We expect that the single-A rate under the new guidance at the transition date will be lower than our current discount rate. In measuring the insurance liabilities under the new guidance, contracts shall not be grouped together from different issue years. These changes will result in the elimination of premium deficiency testing and shadow adjustments. While we continue to evaluate the effect of the new guidance on our ongoing financial reporting, we anticipate that its adoption will materially affect our financial statements.statements and require changes to certain of our processes, systems, and controls. As the new 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.
NON-GAAP FINANCIAL MEASURES. We believe that presenting non-GAAP financial measures provides management and investors useful measures to evaluate performance and trends of the total company and its businesses. This includes adjustments in recent periods to GAAP financial measures to increase period-to-period comparability following actions to strengthen our overall financial position and how we manage our business.
In addition, management recognizes that certain non-GAAP terms may be interpreted differently by other companies under different circumstances. In various sections of this report we have made reference to the following non-GAAP financial measures in describing our (1) revenues, specifically GE Industrial organic revenues by segment; GE Industrial organic revenues, and GE Industrial equipment and services organic revenues, (2) profit, specifically GE Industrial organic profit and profit margin by segment; Adjusted GE Industrial profit and profit margin (excluding certain items); Adjusted GE Industrial organic profit and profit margin; Adjusted earnings (loss); and Adjusted earnings (loss) per share (EPS), (3) cash flows, specifically GE Industrial free cash flows (FCF), and (4) debt balances, specifically GE Industrial net debt.
The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow.
| | GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) | GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) | GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) |
| | | Revenues | | Segment profit (loss) | | Profit margin | | Revenues | | Segment profit (loss) | | Profit margin |
| Three months ended March 31 | | 2021 | | 2020 | | V% | | 2021 | | 2020 | | V% | | 2021 | | 2020 | V pts | |
| Power (GAAP) | | $ | 3,921 | | | $ | 4,025 | | | (3) | % | | $ | (87) | | | $ | (131) | | | 34 | % | | (2.2) | % | | (3.3) | % | 1.1pts | |
| Less: acquisitions | | — | | | — | | | — | | | — | | | |
| Less: business dispositions | | — | | | 15 | | | — | | | 2 | | | |
| Less: foreign currency effect | | 63 | | | — | | | (1) | | | — | | | |
| Power organic (Non-GAAP) | | $ | 3,858 | | | $ | 4,009 | | | (4) | % | | $ | (86) | | | $ | (133) | | | 35 | % | | (2.2) | % | | (3.3) | % | 1.1pts | |
| | Renewable Energy (GAAP) | | $ | 3,248 | | | $ | 3,194 | | | 2 | % | | $ | (234) | | | $ | (327) | | | 28 | % | | (7.2) | % | | (10.2) | % | 3.0pts | |
| Less: acquisitions | | — | | | — | | | — | | | — | | | |
| Less: business dispositions | | — | | | 24 | | | — | | | (4) | | | |
| Less: foreign currency effect | | 90 | | | — | | | (10) | | | — | | | |
| Renewable Energy organic (Non-GAAP) | | $ | 3,157 | | | $ | 3,169 | | | — | % | | $ | (224) | | | $ | (323) | | | 31 | % | | (7.1) | % | | (10.2) | % | 3.1pts | |
| | Three months ended September 30 | | Three months ended September 30 | | 2021 | | 2020 | | V% | | 2021 | | 2020 | | V% | | 2021 | | 2020 | V pts |
| Aviation (GAAP) | Aviation (GAAP) | | $ | 4,992 | | | $ | 6,892 | | | (28) | % | | $ | 641 | | | $ | 1,003 | | | (36) | % | | 12.8 | % | | 14.6 | % | (1.8)pts | Aviation (GAAP) | | $ | 5,398 | | | $ | 4,919 | | | 10 | % | | $ | 846 | | | $ | 350 | | | F | | 15.7 | % | | 7.1 | % | 8.6pts |
| Less: acquisitions | Less: acquisitions | | — | | | — | | | — | | | — | | | Less: acquisitions | | — | | | — | | | — | | | — | | |
| Less: business dispositions | Less: business dispositions | | — | | | 25 | | | — | | | (17) | | | Less: business dispositions | | — | | | 12 | | | — | | | (12) | | |
| Less: foreign currency effect | Less: foreign currency effect | | 10 | | | — | | | — | | | — | | | Less: foreign currency effect | | (9) | | | — | | | (13) | | | — | | |
| Aviation organic (Non-GAAP) | Aviation organic (Non-GAAP) | | $ | 4,982 | | | $ | 6,868 | | | (27) | % | | $ | 641 | | | $ | 1,020 | | | (37) | % | | 12.9 | % | | 14.9 | % | (2.0)pts | Aviation organic (Non-GAAP) | | $ | 5,408 | | | $ | 4,908 | | | 10 | % | | $ | 858 | | | $ | 362 | | | F | | 15.9 | % | | 7.4 | % | 8.5pts |
| | Healthcare (GAAP) | Healthcare (GAAP) | | $ | 4,308 | | | $ | 4,727 | | | (9) | % | | $ | 698 | | | $ | 867 | | | (19) | % | | 16.2 | % | | 18.3 | % | (2.1)pts | Healthcare (GAAP) | | $ | 4,339 | | | $ | 4,565 | | | (5) | % | | $ | 704 | | | $ | 738 | | | (5) | % | | 16.2 | % | | 16.2 | % | —pts |
| Less: acquisitions | Less: acquisitions | | 18 | | | (21) | | | 8 | | | (6) | | | Less: acquisitions | | — | | | (23) | | | (9) | | | (13) | | |
| Less: business dispositions | Less: business dispositions | | — | | | 865 | | | — | | | 380 | | | Less: business dispositions | | — | | | 21 | | | — | | | (2) | | |
| Less: foreign currency effect | Less: foreign currency effect | | 120 | | | — | | | 48 | | | — | | | Less: foreign currency effect | | 49 | | | — | | | 31 | | | — | | |
| Healthcare organic (Non-GAAP) | Healthcare organic (Non-GAAP) | | $ | 4,170 | | | $ | 3,884 | | | 7 | % | | $ | 643 | | | $ | 493 | | | 30 | % | | 15.4 | % | | 12.7 | % | 2.7pts | Healthcare organic (Non-GAAP) | | $ | 4,289 | | | $ | 4,567 | | | (6) | % | | $ | 681 | | | $ | 753 | | | (10) | % | | 15.9 | % | | 16.5 | % | (0.6)pts |
| | Renewable Energy (GAAP) | | Renewable Energy (GAAP) | | $ | 4,208 | | | $ | 4,525 | | | (7) | % | | $ | (151) | | | $ | (51) | | | U | | (3.6) | % | | (1.1) | % | (2.5)pts |
| Less: acquisitions | | Less: acquisitions | | — | | | — | | | — | | | — | | |
| Less: business dispositions | | Less: business dispositions | | — | | | — | | | — | | | — | | |
| Less: foreign currency effect | | Less: foreign currency effect | | 101 | | | — | | | (4) | | | — | | |
| Renewable Energy organic (Non-GAAP) | | Renewable Energy organic (Non-GAAP) | | $ | 4,106 | | | $ | 4,525 | | | (9) | % | | $ | (147) | | | $ | (51) | | | U | | (3.6) | % | | (1.1) | % | (2.5)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. 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. | |
| Power (GAAP) | | Power (GAAP) | | $ | 4,026 | | | $ | 4,025 | | | — | % | | $ | 204 | | | $ | 148 | | | 38 | % | | 5.1 | % | | 3.7 | % | 1.4pts |
| Less: acquisitions | | Less: acquisitions | | — | | | — | | | — | | | — | | |
| Less: business dispositions | | Less: business dispositions | | — | | | — | | | — | | | — | | |
| Less: foreign currency effect | | Less: foreign currency effect | | 39 | | | — | | | 6 | | | — | | |
| Power organic (Non-GAAP) | | Power organic (Non-GAAP) | | $ | 3,988 | | | $ | 4,025 | | | (1) | % | | $ | 198 | | | $ | 148 | | | 34 | % | | 5.0 | % | | 3.7 | % | 1.3pts |
| | | | | | | | | | | | | | | |
| GE INDUSTRIAL ORGANIC REVENUES (NON-GAAP) | Three months ended March 31 | | |
| 2021 | 2020 | V% | | | | |
| GE Industrial revenues (GAAP) | $ | 16,329 | | $ | 18,844 | | (13) | % | | | | |
| Less: acquisitions | 18 | | (21) | | | | | | |
| Less: business dispositions(a) | — | | 1,095 | | | | | | |
| Less: foreign currency effect(b) | 288 | | — | | | | | | |
| GE Industrial organic revenues (Non-GAAP) | $ | 16,023 | | $ | 17,770 | | (10) | % | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
(a) Dispositions impact in 2020 primarily related to our BioPharma business, with revenues of $830 million.
(b) Foreign currency impact in 2021 was primarily driven by U.S. Dollar appreciation against euro, Brazilian real, and Chinese renminbi. |
| We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP) |
| | Revenues | | Segment profit (loss) | | Profit margin |
| Nine months ended September 30 | | 2021 | | 2020 | | V% | | 2021 | | 2020 | | V% | | 2021 | | 2020 | V pts |
| Aviation (GAAP) | | $ | 15,230 | | | $ | 16,196 | | | (6) | % | | $ | 1,664 | | | $ | 665 | | | F | | 10.9 | % | | 4.1 | % | 6.8pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 48 | | | | | — | | | (48) | | | | | | | | |
| Less: foreign currency effect | | 13 | | | — | | | | | (28) | | | — | | | | | | | | |
| Aviation organic (Non-GAAP) | | $ | 15,217 | | | $ | 16,148 | | | (6) | % | | $ | 1,691 | | | $ | 713 | | | F | | 11.1 | % | | 4.4 | % | 6.7pts |
| | | | | | | | | | | | | | | | | |
| Healthcare (GAAP) | | $ | 13,100 | | | $ | 13,185 | | | (1) | % | | $ | 2,203 | | | $ | 2,111 | | | 4 | % | | 16.8 | % | | 16.0 | % | 0.8pts |
| Less: acquisitions | | 18 | | | (73) | | | | | (5) | | | (35) | | | | | | | | |
| Less: business dispositions | | — | | | 911 | | | | | — | | | 373 | | | | | | | | |
| Less: foreign currency effect | | 335 | | | — | | | | | 110 | | | — | | | | | | | | |
| Healthcare organic (Non-GAAP) | | $ | 12,747 | | | $ | 12,348 | | | 3 | % | | $ | 2,098 | | | $ | 1,773 | | | 18 | % | | 16.5 | % | | 14.4 | % | 2.1pts |
| | | | | | | | | | | | | | | | | |
| Renewable Energy (GAAP) | | $ | 11,505 | | | $ | 11,224 | | | 3 | % | | $ | (484) | | | $ | (628) | | | 23 | % | | (4.2) | % | | (5.6) | % | 1.4pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 33 | | | | | — | | | (4) | | | | | | | | |
| Less: foreign currency effect | | 438 | | | — | | | | | (41) | | | — | | | | | | | | |
| Renewable Energy organic (Non-GAAP) | | $ | 11,066 | | | $ | 11,191 | | | (1) | % | | $ | (443) | | | $ | (624) | | | 29 | % | | (4.0) | % | | (5.6) | % | 1.6pts |
| | | | | | | | | | | | | | | | | |
| Power (GAAP) | | $ | 12,242 | | | $ | 12,206 | | | — | % | | $ | 416 | | | $ | (32) | | | F | | 3.4 | % | | (0.3) | % | 3.7pts |
| Less: acquisitions | | — | | | — | | | | | — | | | — | | | | | | | | |
| Less: business dispositions | | — | | | 15 | | | | | — | | | 2 | | | | | | | | |
| Less: foreign currency effect | | 237 | | | — | | | | | (25) | | | — | | | | | | | | |
| Power organic (Non-GAAP) | | $ | 12,005 | | | $ | 12,191 | | | (2) | % | | $ | 441 | | | $ | (34) | | | F | | 3.7 | % | | (0.3) | % | 4pts |
| | | | | | | | | | | | | | | | | |
| 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 September 30 | | Nine months ended September 30 |
| 2021 | 2020 | V% | | 2021 | 2020 | V% |
| GE Industrial revenues (GAAP) | $ | 17,821 | | $ | 17,918 | | (1) | % | | $ | 51,637 | | $ | 52,828 | | (2) | % |
| Less: acquisitions | — | | (15) | | | | 18 | | (61) | | |
| Less: business dispositions(a) | — | | 57 | | | | — | | 1,393 | | |
| Less: foreign currency effect(b) | 185 | | — | | | | 1,042 | | — | | |
| GE Industrial organic revenues (Non-GAAP) | $ | 17,636 | | $ | 17,876 | | (1) | % | | $ | 50,577 | | $ | 51,496 | | (2) | % |
| | | | | | | |
(a) Dispositions impact in 2020 primarily related to our BioPharma business, with revenues of $830 million. (b) Foreign currency impact in 2021 was primarily driven by U.S. Dollar appreciation against euro, British pound, and Chinese renminbi. |
| | | | | | | | | | | | | | | | | | | | | | | |
| GE INDUSTRIAL EQUIPMENT AND SERVICES | Three months ended September 30 | | Nine months ended September 30 |
| ORGANIC REVENUES (NON-GAAP) | 2021 | 2020 | V% | | 2021 | 2020 | V% |
| GE Industrial equipment revenues (GAAP) | $ | 8,905 | | $ | 9,625 | | (7) | % | | $ | 25,178 | | $ | 26,928 | | (6) | % |
| Less: acquisitions | — | | — | | | | — | | — | | |
| Less: business dispositions | — | | — | | | | — | | 1,124 | | |
| Less: foreign currency effect | 133 | | — | | | | 702 | | — | | |
| GE Industrial equipment organic revenues (Non-GAAP) | $ | 8,772 | | $ | 9,625 | | (9) | % | | $ | 24,477 | | $ | 25,803 | | (5) | % |
| | | | | | | |
| GE Industrial services revenues (GAAP) | $ | 8,916 | | $ | 8,293 | | 8 | % | | $ | 26,459 | | $ | 25,901 | | 2 | % |
| Less: acquisitions | — | | (15) | | | | 18 | | (61) | | |
| Less: business dispositions | — | | 57 | | | | — | | 269 | | |
| Less: foreign currency effect | 51 | | — | | | | 340 | | — | | |
| GE Industrial services organic revenues (Non-GAAP) | $ | 8,865 | | $ | 8,251 | | 7 | % | | $ | 26,100 | | $ | 25,693 | | 2 | % |
| | | | | | | |
| We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
*Non-GAAP Financial Measure
| | | | | | | | | | | | | | | |
| GE INDUSTRIAL EQUIPMENT AND SERVICES | Three months ended March 31 | | |
| ORGANIC REVENUES (NON-GAAP) | 2021 | 2020 | V% | | | | |
| GE Industrial equipment revenues (GAAP) | $ | 7,971 | | $ | 9,097 | | (12) | % | | | | |
| Less: acquisitions | — | | — | | | | | | |
| Less: business dispositions | — | | 948 | | | | | | |
| Less: foreign currency effect | 189 | | — | | | | | | |
| GE Industrial equipment organic revenues (Non-GAAP) | $ | 7,782 | | $ | 8,149 | | (5) | % | | | | |
| | | | | | | |
| GE Industrial services revenues (GAAP) | $ | 8,358 | | $ | 9,748 | | (14) | % | | | | |
| | | | | | | |
| Less: acquisitions | 18 | | (21) | | | | | | |
| Less: business dispositions | — | | 147 | | | | | | |
| Less: foreign currency effect | 99 | | — | | | | | | |
| GE Industrial services organic revenues (Non-GAAP) | $ | 8,241 | | $ | 9,622 | | (14) | % | | | | |
| | | | | | | |
| We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGIN | Three months ended September 30 | | Nine months ended September 30 |
| (EXCLUDING CERTAIN ITEMS) (NON-GAAP) | 2021 | | 2020 | | V% | | 2021 | | 2020 | | V% |
| GE Industrial total revenues (GAAP) | $ | 17,821 | | | $ | 17,918 | | | (1) | % | | $ | 51,637 | | | $ | 52,828 | | | (2) | % |
| | | | | | | | | | | |
| Costs | | | | | | | | | | | |
| | | | | | | | | | | |
| GE Industrial total costs and expenses (GAAP) | $ | 17,347 | | | $ | 18,705 | | | (7) | % | | $ | 52,348 | | | $ | 56,943 | | | (8) | % |
| Less: GE Industrial interest and other financial charges | 225 | | | 313 | | | | | 753 | | | 1,016 | | | |
| Less: debt extinguishment costs | — | | | — | | | | | 645 | | | 63 | | | |
| Less: non-operating benefit costs | 426 | | | 603 | | | | | 1,376 | | | 1,815 | | | |
| Less: restructuring & other(a) | 64 | | | 91 | | | | | 402 | | | 523 | | | |
| Less: Steam asset impairment | — | | | 363 | | | | | — | | | 363 | | | |
| Less: SEC settlement charge | — | | | 100 | | | | | — | | | 100 | | | |
| Less: goodwill impairments | — | | | — | | | | | — | | | 728 | | | |
| Add: noncontrolling interests | 16 | | | (51) | | | | | 22 | | | (161) | | | |
| Adjusted GE Industrial costs (Non-GAAP) | $ | 16,648 | | | $ | 17,185 | | | (3) | % | | $ | 49,194 | | | $ | 52,174 | | | (6) | % |
| | | | | | | | | | | |
| Other Income | | | | | | | | | | | |
| GE Industrial other income (GAAP) | $ | 420 | | | $ | (509) | | | F | | $ | 1,760 | | | $ | 8,481 | | | (79) | % |
| Less: gains (losses) on equity securities(a) | 412 | | | (669) | | | | | 1,256 | | | (4,527) | | | |
| Less: restructuring & other | — | | | — | | | | | 7 | | | — | | | |
| Less: gains (losses) on purchases and sales of business interests(a) | (156) | | | 28 | | | | | (159) | | | 12,431 | | | |
| Adjusted GE Industrial other income (Non-GAAP) | $ | 165 | | | $ | 132 | | | 25 | % | | $ | 656 | | | $ | 577 | | | 14 | % |
| | | | | | | | | | | |
| GE Industrial profit (loss) (GAAP) | $ | 894 | | | $ | (1,296) | | | F | | $ | 1,048 | | | $ | 4,366 | | | (76) | % |
| GE Industrial profit (loss) margin (GAAP) | 5.0 | % | | (7.2) | % | | 12.2pts | | 2.0 | % | | 8.3 | % | | (6.3)pts |
| | | | | | | | | | | |
| Adjusted GE Industrial profit (loss) (Non-GAAP) | $ | 1,337 | | | $ | 865 | | | 55 | % | | $ | 3,099 | | | $ | 1,231 | | | F |
| Adjusted GE Industrial profit (loss) margin (Non-GAAP) | 7.5 | % | | 4.8 | % | | 2.7pts | | 6.0 | % | | 2.3 | % | | 3.7pts |
| | | | | | | | | | | |
| (a) See the Corporate Items and Eliminations section for further information. |
| We believe that adjusting industrial profit to exclude the effects of items that are not closely associated with ongoing operations provides management and investors with a meaningful measure that increases the period-to-period comparability. Gains (losses) and restructuring and other items are impacted by the timing and magnitude of gains associated with dispositions, and the timing and magnitude of costs associated with restructuring and other activities. |
| | | | | | | | | | | | | | |
| ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGIN | Three months ended March 31 | | |
| (EXCLUDING CERTAIN ITEMS) (NON-GAAP) | 2021 | 2020 | V% | | | |
| GE Industrial total revenues (GAAP) | $ | 16,329 | | $ | 18,844 | | (13) | % | | | |
| | | | | | |
| Costs | | | | | | |
| GE Industrial total costs and expenses (GAAP) | $ | 16,574 | | $ | 19,133 | | (13) | % | | | |
| Less: GE Industrial interest and other financial charges | 268 | | 370 | | | | | |
| Less: non-operating benefit costs | 433 | | 616 | | | | | |
| Less: restructuring & other(a) | 113 | | 143 | | | | | |
| | | | | | |
| | | | | | |
| Add: noncontrolling interests | 7 | | 36 | | | | | |
| | | | | | |
| Adjusted GE Industrial costs (Non-GAAP) | $ | 15,767 | | $ | 18,040 | | (13) | % | | | |
| | | | | | |
| Other Income | | | | | | |
| GE Industrial other income (GAAP) | $ | 623 | | $ | 6,874 | | (91) | % | | | |
| Less: unrealized gains (losses)(a) | 509 | | (5,794) | | | | | |
| Less: restructuring & other | 7 | | — | | | | | |
| Less: gains (losses) and impairments for disposed or held for sale businesses(a) | (159) | | 12,439 | | | | | |
| Adjusted GE Industrial other income (Non-GAAP) | $ | 266 | | $ | 228 | | 17 | % | | | |
| | | | | | |
| GE Industrial profit (GAAP) | $ | 378 | | $ | 6,585 | | (94) | % | | | |
| GE Industrial profit margin (GAAP) | 2.3 | % | 34.9 | % | (32.6)pts | | | |
| | | | | | |
| Adjusted GE Industrial profit (Non-GAAP) | $ | 828 | | $ | 1,032 | | (20) | % | | | |
| Adjusted GE Industrial profit margin (Non-GAAP) | 5.1 | % | 5.5 | % | (0.4)pts | | | |
| | | | | | |
| (a) See the Corporate Items and Eliminations section for further information. |
| We believe that adjusting industrial profit to exclude the effects of items that are not closely associated with ongoing operations provides management and investors with a meaningful measure that increases the period-to-period comparability. Gains (losses), unrealized gains (losses) and restructuring and other items are impacted by the timing and magnitude of gains associated with dispositions, and the timing and magnitude of costs associated with restructuring and other activities. |
| | ADJUSTED GE INDUSTRIAL ORGANIC PROFIT | ADJUSTED GE INDUSTRIAL ORGANIC PROFIT | Three months ended March 31 | | ADJUSTED GE INDUSTRIAL ORGANIC PROFIT | Three months ended September 30 | | Nine months ended September 30 |
| (NON-GAAP) | (NON-GAAP) | 2021 | 2020 | V% | | (NON-GAAP) | 2021 | 2020 | V% | | 2021 | 2020 | V% |
| Adjusted GE Industrial profit (Non-GAAP) | $ | 828 | | $ | 1,032 | | (20) | % | | |
| Adjusted GE Industrial profit (loss) (Non-GAAP) | | Adjusted GE Industrial profit (loss) (Non-GAAP) | $ | 1,337 | | $ | 865 | | 55 | % | | $ | 3,099 | | $ | 1,231 | | F |
| Less: acquisitions | Less: acquisitions | 8 | | 9 | | | | Less: acquisitions | (9) | | 5 | | | (5) | | 22 | | |
| Less: business dispositions | Less: business dispositions | — | | 366 | | | | Less: business dispositions | — | | (2) | | | — | | 354 | | |
| Less: foreign currency effect | Less: foreign currency effect | 43 | | — | | | | Less: foreign currency effect | 24 | | — | | | 30 | | — | | |
| Adjusted GE Industrial organic profit (Non-GAAP) | $ | 777 | | $ | 657 | | 18 | % | | |
| Adjusted GE Industrial organic profit (loss) (Non-GAAP) | | Adjusted GE Industrial organic profit (loss) (Non-GAAP) | $ | 1,322 | | $ | 861 | | 54 | % | | $ | 3,074 | | $ | 855 | | F |
| | Adjusted GE Industrial profit margin (Non-GAAP) | 5.1 | % | 5.5 | % | (0.4)pts | | |
| Adjusted GE Industrial organic profit margin (Non-GAAP) | 4.8 | % | 3.7 | % | 1.1pts | | |
| Adjusted GE Industrial profit (loss) margin (Non-GAAP) | | Adjusted GE Industrial profit (loss) margin (Non-GAAP) | 7.5 | % | 4.8 | % | 2.7pts | | 6.0 | % | 2.3 | % | 3.7pts |
Adjusted GE Industrial organic profit (loss) margin
(Non-GAAP) | | Adjusted GE Industrial organic profit (loss) margin
(Non-GAAP) | 7.5 | % | 4.8 | % | 2.7pts | | 6.1 | % | 1.7 | % | 4.4pts |
| | We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. | 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 believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities can obscure underlying trends. |
| | ADJUSTED EARNINGS (LOSS) (NON-GAAP) | ADJUSTED EARNINGS (LOSS) (NON-GAAP) | Three months ended March 31 | | ADJUSTED EARNINGS (LOSS) (NON-GAAP) | Three months ended September 30 | | Nine months ended September 30 |
| | | 2021 | 2020 | V% | | 2021 | 2020 | V% |
| | 2021 | 2020 | V% | | |
| Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(a) | Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(a) | $ | 18 | | $ | 6,158 | | (100) | % | | Consolidated earnings (loss) from continuing operations attributable to GE common shareholders (GAAP)(a) | $ | 603 | | $ | (1,132) | | F | | $ | (2) | | $ | 3,848 | | U |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | Add: Accretion of redeemable noncontrolling interests (RNCI) | 2 | | — | | | | Add: Accretion of redeemable noncontrolling interests (RNCI) | (9) | | (6) | | | (9) | | (141) | | |
| Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (172) | | (187) | | | | Less: GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | (142) | | (29) | | | (887) | | (692) | | |
| GE Industrial earnings (loss) (Non-GAAP) | GE Industrial earnings (loss) (Non-GAAP) | $ | 192 | | $ | 6,345 | | (97) | % | | GE Industrial earnings (loss) (Non-GAAP) | $ | 735 | | $ | (1,109) | | F | | $ | 877 | | $ | 4,399 | | (80) | % |
| Non-operating benefits costs (pre-tax) (GAAP) | Non-operating benefits costs (pre-tax) (GAAP) | (433) | | (616) | | | | Non-operating benefits costs (pre-tax) (GAAP) | (426) | | (603) | | | (1,376) | | (1,815) | | |
| Tax effect on non-operating benefit costs | Tax effect on non-operating benefit costs | 91 | | 129 | | | | Tax effect on non-operating benefit costs | 90 | | 127 | | | 289 | | 381 | | |
| Less: non-operating benefit costs (net of tax) | Less: non-operating benefit costs (net of tax) | (342) | | (487) | | | | Less: non-operating benefit costs (net of tax) | (337) | | (476) | | | (1,087) | | (1,434) | | |
| Gains (losses) and impairments for disposed or held for sale businesses (pre-tax)(b) | (159) | | 12,439 | | | | |
| Tax effect on gains (losses) and impairments for disposed or held for sale businesses | 33 | | (1,265) | | | | |
| Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | (126) | | 11,174 | | | | |
| Gains (losses) on purchases and sales of business interests (pre-tax)(b) | | Gains (losses) on purchases and sales of business interests (pre-tax)(b) | (156) | | 28 | | | (159) | | 12,431 | | |
| Tax effect on gains (losses) on purchases and sales of business interests | | Tax effect on gains (losses) on purchases and sales of business interests | 30 | | (25) | | | 31 | | (1,253) | | |
| Less: gains (losses) on purchases and sales of business interests (net of tax) | | Less: gains (losses) on purchases and sales of business interests (net of tax) | (126) | | 3 | | | (128) | | 11,178 | | |
| Restructuring & other (pre-tax)(b) | Restructuring & other (pre-tax)(b) | (106) | | (143) | | | | Restructuring & other (pre-tax)(b) | (64) | | (91) | | | (395) | | (523) | | |
| Tax effect on restructuring & other | Tax effect on restructuring & other | 22 | | 30 | | | | Tax effect on restructuring & other | 7 | | 27 | | | 36 | | 118 | | |
| Less: restructuring & other (net of tax) | Less: restructuring & other (net of tax) | (84) | | (114) | | | | Less: restructuring & other (net of tax) | (57) | | (63) | | | (359) | | (405) | | |
| Steam asset impairments (pre-tax) | | Steam asset impairments (pre-tax) | — | | (363) | | | — | | (363) | | |
| Tax effect on Steam asset impairments | | Tax effect on Steam asset impairments | — | | 37 | | | — | | 37 | | |
| Less: Steam asset impairments (net of tax) | | Less: Steam asset impairments (net of tax) | — | | (326) | | | — | | (326) | | |
| Gains (losses) on equity securities (pre-tax)(b) | | Gains (losses) on equity securities (pre-tax)(b) | 412 | | (669) | | | 1,256 | | (4,527) | | |
| Tax effect on gains (losses) on equity securities(c) | | Tax effect on gains (losses) on equity securities(c) | 78 | | 122 | | | 155 | | 934 | | |
| Less: gains (losses) on equity securities (net of tax) | | Less: gains (losses) on equity securities (net of tax) | 490 | | (547) | | | 1,411 | | (3,593) | | |
| Goodwill impairments (pre-tax)(b) | | Goodwill impairments (pre-tax)(b) | — | | — | | | — | | (728) | | |
| Tax effect on goodwill impairments | | Tax effect on goodwill impairments | — | | — | | | — | | (23) | | |
| Less: goodwill impairments (net of tax) | | Less: goodwill impairments (net of tax) | — | | — | | | — | | (751) | | |
| Debt extinguishment costs (pre-tax) | | Debt extinguishment costs (pre-tax) | — | | — | | | (645) | | (63) | | |
| Tax effect on debt extinguishment costs | | Tax effect on debt extinguishment costs | — | | — | | | 135 | | 13 | | |
| Less: debt extinguishment costs (net of tax) | | Less: debt extinguishment costs (net of tax) | — | | — | | | (510) | | (50) | | |
| | Less: SEC settlement charge (pre-tax and net of tax) | | Less: SEC settlement charge (pre-tax and net of tax) | — | | (100) | | | — | | (100) | | |
| | Unrealized gains (losses) (pre-tax)(b) | 509 | | (5,794) | | | | |
| Tax on unrealized gains (losses) | (152) | | 1,096 | | | | |
| Less: unrealized gains (losses) (net of tax) | 357 | | (4,697) | | | | |
| | Accretion of RNCI (pre-tax) | 2 | | — | | | | |
| Tax effect on accretion of RNCI | — | | — | | | | |
| Less: Accretion of RNCI (net of tax) | 2 | | — | | | | |
| | Less: Accretion of RNCI (pre-tax and net of tax) | | Less: Accretion of RNCI (pre-tax and net of tax) | (9) | | (6) | | | (9) | | (141) | | |
| Less: GE Industrial U.S. tax reform enactment adjustment | | Less: GE Industrial U.S. tax reform enactment adjustment | — | | (51) | | | — | | (51) | | |
| Adjusted GE Industrial earnings (loss) (Non-GAAP) | Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 384 | | $ | 469 | | (18) | % | | Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 775 | | $ | 458 | | 69 | % | | $ | 1,559 | | $ | 73 | | F |
| | GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | $ | (172) | | $ | (187) | | 8 | % | | GE Capital earnings (loss) from continuing operations attributable to GE common shareholders (GAAP) | $ | (142) | | $ | (29) | | U | | $ | (887) | | $ | (692) | | (28) | % |
| | Debt extinguishment costs (pre-tax) | | Debt extinguishment costs (pre-tax) | — | | — | | | (771) | | (143) | | |
| Tax effect on debt extinguishment costs | | Tax effect on debt extinguishment costs | — | | — | | | 162 | | 24 | | |
| Less: debt extinguishment costs (net of tax) | | Less: debt extinguishment costs (net of tax) | — | | — | | | (609) | | (119) | | |
| Less: GE Capital tax benefit related to BioPharma sale | | Less: GE Capital tax benefit related to BioPharma sale | — | | 8 | | | — | | 96 | | |
| Less: GE Capital tax loss related to GECAS sale | | Less: GE Capital tax loss related to GECAS sale | — | | — | | | (44) | | — | | |
| | Less: GE Capital tax benefit related to BioPharma sale | — | | 88 | | | | |
| Less: GE Capital tax loss related to GECAS sale | (44) | | — | | | | |
| Less: GE Capital U.S. tax reform enactment adjustment | | Less: GE Capital U.S. tax reform enactment adjustment | — | | 2 | | | 8 | | 2 | | |
| Adjusted GE Capital earnings (loss) (Non-GAAP) | Adjusted GE Capital earnings (loss) (Non-GAAP) | $ | (129) | | $ | (275) | | 53 | % | | Adjusted GE Capital earnings (loss) (Non-GAAP) | $ | (142) | | $ | (39) | | U | | $ | (243) | | $ | (671) | | 64 | % |
| | Adjusted GE Industrial earnings (loss) (Non-GAAP) | Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 384 | | $ | 469 | | (18) | % | | Adjusted GE Industrial earnings (loss) (Non-GAAP) | $ | 775 | | $ | 458 | | 69 | % | | $ | 1,559 | | $ | 73 | | F |
| Add: Adjusted GE Capital earnings (loss) (Non-GAAP) | Add: Adjusted GE Capital earnings (loss) (Non-GAAP) | (129) | | (275) | | 53 | % | | Add: Adjusted GE Capital earnings (loss) (Non-GAAP) | (142) | | (39) | | U | | (243) | | (671) | | 64 | % |
| Adjusted earnings (loss) (Non-GAAP) | Adjusted earnings (loss) (Non-GAAP) | $ | 256 | | $ | 194 | | 32 | % | | Adjusted earnings (loss) (Non-GAAP) | $ | 633 | | $ | 419 | | 51 | % | | $ | 1,316 | | $ | (598) | | F |
| | (a) See Note 18 for further information. | (a) See Note 18 for further information. | (a) See Note 18 for further information. | |
| (b) See the Corporate Items and Eliminations section for further information. | (b) See the Corporate Items and Eliminations section for further information. | | (b) See the Corporate Items and Eliminations section for further information. | |
| | (c) Included tax benefits available to offset the tax on gains in equity securities. | | (c) Included tax benefits available to offset the tax on gains in equity securities. | |
| | | | | | | | | | | | | | | |
| ADJUSTED EARNINGS (LOSS) PER SHARE (EPS) | Three months ended March 31 | | |
| (NON-GAAP) | 2021 | 2020 | V% | | | | |
| Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | — | | $ | 0.70 | | U | | | | |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | — | | — | | | | | | |
| Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | (0.02) | | (0.02) | | | | | | |
| GE Industrial EPS (Non-GAAP) | $ | 0.02 | | $ | 0.73 | | (97) | % | | | | |
| Non-operating benefits costs (pre-tax) (GAAP) | (0.05) | | (0.07) | | | | | | |
| Tax effect on non-operating benefit costs | 0.01 | | 0.01 | | | | | | |
| Less: non-operating benefit costs (net of tax) | (0.04) | | (0.06) | | | | | | |
| Gains (losses) and impairments for disposed or held for sale businesses (pre-tax) | (0.02) | | 1.42 | | | | | | |
| Tax effect on gains (losses) and impairments for disposed or held for sale businesses | — | | (0.14) | | | | | | |
| Less: gains (losses) and impairments for disposed or held for sale businesses (net of tax) | (0.01) | | 1.28 | | | | | | |
| Restructuring & other (pre-tax) | (0.01) | | (0.02) | | | | | | |
| Tax effect on restructuring & other | — | | — | | | | | | |
| Less: restructuring & other (net of tax) | (0.01) | | (0.01) | | | | | | |
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| Unrealized gains (losses) (pre-tax) | 0.06 | | (0.66) | | | | | | |
| Tax on unrealized gains (losses) | (0.02) | | 0.13 | | | | | | |
| Less: unrealized gains (losses) (net of tax) | 0.04 | | (0.54) | | | | | | |
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| Accretion of RNCI (pre-tax) | — | | — | | | | | | |
| Tax effect on accretion of RNCI | — | | — | | | | | | |
| Less: Accretion of RNCI (net of tax) | — | | — | | | | | | |
| Less: GE Industrial U.S. tax reform enactment adjustment | — | | — | | | | | | |
| Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.04 | | $ | 0.05 | | (20) | % | | | | |
| | | | | | | |
| GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | (0.02) | | $ | (0.02) | | — | % | | | | |
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| Less: GE Capital tax benefit related to BioPharma sale | — | | 0.01 | | | | | | |
| Less: GE Capital tax loss related to GECAS sale | — | | — | | | | | | |
| Adjusted GE Capital EPS (Non-GAAP) | $ | (0.01) | | $ | (0.03) | | 67 | % | | | | |
| | | | | | | |
| Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.04 | | $ | 0.05 | | (20) | % | | | | |
| Add: Adjusted GE Capital EPS (Non-GAAP) | (0.01) | | (0.03) | | 67 | % | | | | |
| Adjusted EPS (Non-GAAP) | $ | 0.03 | | $ | 0.02 | | 50 | % | | | | |
| Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total. |
| The service cost of our pension and other benefit plans are included in adjusted earnings (loss)*, which represents the ongoing cost of providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance, and we manage these separately from the operational performance of our businesses. Gains (losses), unrealized gains (losses) and restructuring and other items are impacted by the timing and magnitude of gains associated with dispositions, and the timing and magnitude of costs associated with restructuring and other activities. We believe that the retained costs in Adjusted earnings (loss)* provides management and investors a useful measure to evaluate the performance of the total company, and increases period-to-period comparability. We believe that presenting Adjusted Industrial earnings (loss)* separately for our financial services businesses also provides management and investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company. |
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| GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP) | Three months ended March 31 |
| 2021 | 2020 |
| GE Industrial CFOA (GAAP) | $ | (491) | | $ | (1,662) | |
| Add: gross additions to property, plant and equipment | (332) | | (504) | |
| Add: gross additions to internal-use software | (23) | | (58) | |
| | |
| | |
| Less: taxes related to business sales | — | | (17) | |
| GE Industrial free cash flows (Non-GAAP) | $ | (845) | | $ | (2,207) | |
| | |
| We believe investors may find it useful to compare GE's Industrial free cash flows* performance without the effects of cash used for taxes related to business sales. We believe this measure will better allow management and investors to evaluate the capacity of our industrial operations to generate free cash flows. |
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| ADJUSTED EARNINGS (LOSS) PER SHARE (EPS) | Three months ended September 30 | | Nine months ended September 30 |
(NON-GAAP) (In dollars) | 2021 | 2020 | V% | | 2021 | 2020 | V% |
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| Consolidated EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | 0.55 | | $ | (1.03) | | F | | $ | — | | $ | 3.52 | | U |
| Add: Accretion of redeemable noncontrolling interests (RNCI) | (0.01) | | (0.01) | | | | (0.01) | | (0.13) | | |
| Less: GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | (0.13) | | (0.03) | | | | (0.81) | | (0.63) | | |
| GE Industrial EPS (Non-GAAP) | $ | 0.67 | | $ | (1.01) | | F | | $ | 0.80 | | $ | 4.02 | | (80) | % |
| Non-operating benefits costs (pre-tax) (GAAP) | (0.39) | | (0.55) | | | | (1.25) | | (1.66) | | |
| Tax effect on non-operating benefit costs | 0.08 | | 0.12 | | | | 0.26 | | 0.35 | | |
| Less: non-operating benefit costs (net of tax) | (0.30) | | (0.43) | | | | (0.99) | | (1.31) | | |
| Gains (losses) on purchases and sales of business interests (pre-tax) | (0.14) | | 0.03 | | | | (0.14) | | 11.36 | | |
| Tax effect on gains (losses) on purchases and sales of business interests | 0.03 | | (0.02) | | | | 0.03 | | (1.14) | | |
| Less: gains (losses) on purchases and sales of business interests (net of tax) | (0.11) | | — | | | | (0.12) | | 10.21 | | |
| Restructuring & other (pre-tax) | (0.06) | | (0.08) | | | | (0.36) | | (0.48) | | |
| Tax effect on restructuring & other | 0.01 | | 0.03 | | | | 0.03 | | 0.11 | | |
| Less: restructuring & other (net of tax) | (0.05) | | (0.06) | | | | (0.33) | | (0.37) | | |
| Steam asset impairments (pre-tax) | — | | (0.33) | | | | — | | (0.33) | | |
| Tax effect on Steam asset impairments | — | | 0.03 | | | | — | | 0.03 | | |
| Less: Steam asset impairments (net of tax) | — | | (0.30) | | | | — | | (0.30) | | |
| Gains (losses) on equity securities (pre-tax) | 0.37 | | (0.61) | | | | 1.14 | | (4.14) | | |
| Tax effect on gains (losses) on equity securities | 0.07 | | 0.11 | | | | 0.14 | | 0.85 | | |
| Less: gains (losses) on equity securities (net of tax) | 0.44 | | (0.50) | | | | 1.29 | | (3.28) | | |
| Goodwill impairments (pre-tax) | — | | — | | | | — | | (0.67) | | |
| Tax effect on goodwill impairments | — | | — | | | | — | | (0.02) | | |
| Less: goodwill impairments (net of tax) | — | | — | | | | — | | (0.69) | | |
| Debt extinguishment costs (pre-tax) | — | | — | | | | (0.59) | | (0.06) | | |
| Tax effect on debt extinguishment costs | — | | — | | | | 0.12 | | 0.01 | | |
| Less: debt extinguishment costs (net of tax) | — | | — | | | | (0.46) | | (0.05) | | |
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| Less: SEC settlement charge (pre-tax and net of tax) | — | | (0.09) | | | | — | | (0.09) | | |
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| Less: Accretion of RNCI (pre-tax and net of tax) | (0.01) | | (0.01) | | | | (0.01) | | (0.13) | | |
| Less: GE Industrial U.S. tax reform enactment adjustment | — | | (0.05) | | | | — | | (0.05) | | |
| Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.70 | | $ | 0.42 | | 67 | % | | $ | 1.42 | | $ | 0.07 | | F |
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| GE Capital EPS from continuing operations attributable to GE common shareholders (GAAP) | $ | (0.13) | | $ | (0.03) | | U | | $ | (0.81) | | $ | (0.63) | | (29) | % |
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| Debt extinguishment costs (pre-tax) | — | | — | | | | (0.70) | | (0.13) | | |
| Tax effect on debt extinguishment costs | — | | — | | | | 0.15 | | 0.02 | | |
| Less: debt extinguishment costs (net of tax) | — | | — | | | | (0.55) | | (0.11) | | |
| Less: GE Capital tax benefit related to BioPharma sale | — | | 0.01 | | | | — | | 0.09 | | |
| Less: GE Capital tax loss related to GECAS sale | — | | — | | | | (0.04) | | — | | |
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| Less: GE Capital U.S. tax reform enactment adjustment | — | | — | | | | 0.01 | | — | | |
| Adjusted GE Capital EPS (Non-GAAP) | $ | (0.13) | | $ | (0.04) | | U | | $ | (0.22) | | $ | (0.61) | | 64 | % |
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| Adjusted GE Industrial EPS (Non-GAAP) | $ | 0.70 | | $ | 0.42 | | 67 | % | | $ | 1.42 | | $ | 0.07 | | F |
| Add: Adjusted GE Capital EPS (Non-GAAP) | (0.13) | | (0.04) | | U | | (0.22) | | (0.61) | | 64 | % |
| Adjusted EPS (Non-GAAP) | $ | 0.57 | | $ | 0.38 | | 50 | % | | $ | 1.20 | | $ | (0.55) | | F |
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| Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total. |
| The service cost of our pension and other benefit plans are included in adjusted earnings (loss)*, which represents the ongoing cost of providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance, and we manage these separately from the operational performance of our businesses. Gains (losses) and restructuring and other items are impacted by the timing and magnitude of gains associated with dispositions, and the timing and magnitude of costs associated with restructuring and other activities. We believe that the retained costs in Adjusted earnings (loss)* provides management and investors a useful measure to evaluate the performance of the total company, and increases period-to-period comparability. We believe that presenting Adjusted Industrial earnings (loss)* separately for our financial services businesses also provides management and investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company. |
*Non-GAAP Financial Measure
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| GE INDUSTRIAL NET DEBT (NON-GAAP) | March 31, 2021 | December 31, 2020 |
| Total GE Industrial short- and long-term borrowings (GAAP) | $ | 41,247 | | $ | 42,736 | |
| Less: GE Capital short- and long-term debt assumed by GE Industrial | 21,538 | | 22,390 | |
| Add: intercompany loans from GE Capital | 3,177 | | 3,177 | |
| Total adjusted GE Industrial borrowings | $ | 22,886 | | $ | 23,523 | |
| Pension and principal retiree benefit plan liabilities (pre-tax)(a) | 25,492 | | 25,492 | |
| Less: taxes at 21% | 5,353 | | 5,353 | |
| Pension and principal retiree benefit plan liabilities (net of tax) | $ | 20,139 | | $ | 20,139 | |
| GE Industrial operating lease liabilities | 3,083 | | 3,133 | |
| GE Industrial preferred stock | 5,930 | | 5,918 | |
| Less: 50% of GE Industrial preferred stock | 2,965 | | 2,959 | |
| 50% of preferred stock | $ | 2,965 | | $ | 2,959 | |
| Deduction for total GE Industrial cash, cash equivalents and restricted cash | (22,361) | | (23,209) | |
| Less: 25% of GE Industrial cash, cash equivalents and restricted cash | (5,590) | | (5,802) | |
| Deduction for 75% of GE Industrial cash, cash equivalents and restricted cash | $ | (16,771) | | $ | (17,407) | |
| Total GE Industrial net debt (Non-GAAP) | $ | 32,302 | | $ | 32,347 | |
| (a) Represents the sum of the net deficit of principal pension, other pension, and principal retiree benefit plans at December 31, 2020. The funded status of our benefit plans is updated annually in the fourth quarter. |
| In this document we use GE Industrial net debt*, which is calculated based on rating agency methodologies. We are including the calculation of GE Industrial net debt* to provide investors more clarity regarding how the credit rating agencies measure GE Industrial leverage. |
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| GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP) | Nine months ended September 30 |
| 2021 | 2020 |
| GE Industrial CFOA (GAAP) | $ | (832) | | $ | (3,175) | |
| Add: gross additions to property, plant and equipment | (896) | | (1,302) | |
| Add: gross additions to internal-use software | (76) | | (121) | |
| Less: CFOA impact from factoring programs discontinued as of April 1, 2021 | (3,067) | | — | |
| Less: taxes related to business sales | (6) | | (837) | |
| GE Industrial free cash flows (Non-GAAP) | $ | 1,270 | | $ | (3,761) | |
| | |
| We believe investors may find it useful to compare GE's Industrial free cash flows* performance without the effects of cash used for taxes related to business sales and the factoring program discontinuation. The CFOA impact from factoring programs discontinued as of April 1, 2021 of $(3,067) million represents the cash that GE Industrial would have otherwise collected in the six months ended September 30, 2021 had customer receivables not been previously sold to GE Capital or third parties in those discontinued programs. The CFOA impact associated with this activity in factoring programs that have now been discontinued was $(3,832) million and $(1,022) million in the nine months ended September 30, 2021 and 2020, respectively, an increase of $(2,810) million. The CFOA impact for the three months ended September 30, 2020 was $613 million. We believe this measure will better allow management and investors to evaluate the capacity of our industrial operations to generate free cash flows. |
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| GE INDUSTRIAL NET DEBT (NON-GAAP) | September 30, 2021 | December 31, 2020 |
| Total GE Industrial short- and long-term borrowings (GAAP) | $ | 33,667 | | $ | 42,736 | |
| Less: GE Capital short- and long-term debt assumed by GE Industrial | 18,106 | | 22,390 | |
| Add: intercompany loans from GE Capital | 3,177 | | 3,177 | |
| Total adjusted GE Industrial borrowings | $ | 18,738 | | $ | 23,523 | |
| Pension and principal retiree benefit plan liabilities (pre-tax)(a) | 25,492 | | 25,492 | |
| Less: taxes at 21% | 5,353 | | 5,353 | |
| Pension and principal retiree benefit plan liabilities (net of tax) | $ | 20,139 | | $ | 20,139 | |
| GE Industrial operating lease liabilities | 2,948 | | 3,133 | |
| GE Industrial preferred stock | 5,933 | | 5,918 | |
| Less: 50% of GE Industrial preferred stock | 2,966 | | 2,959 | |
| 50% of preferred stock | $ | 2,966 | | $ | 2,959 | |
| Deduction for total GE Industrial cash, cash equivalents and restricted cash | (17,995) | | (23,209) | |
| Less: 25% of GE Industrial cash, cash equivalents and restricted cash | (4,499) | | (5,802) | |
| Deduction for 75% of GE Industrial cash, cash equivalents and restricted cash | $ | (13,496) | | $ | (17,407) | |
| Total GE Industrial net debt (Non-GAAP) | $ | 31,295 | | $ | 32,347 | |
| (a) Represents the sum of the net deficit of principal pension, other pension and principal retiree benefit plans at December 31, 2020. The funded status of our benefit plans is updated annually in the fourth quarter. |
| In this document we use GE Industrial net debt*, which is calculated based on rating agency methodologies. We are including the calculation of GE Industrial net debt* to provide investors more clarity regarding how the credit rating agencies measure GE Industrial leverage. |
CONTROLS AND PROCEDURES. Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that (i) our disclosure controls and procedures were effective as of March 31,September 30, 2021, and (ii) no change in internal control over financial reporting occurred during the quarter ended March 31,September 30, 2021, that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.
OTHER FINANCIAL DATA. GE did not repurchase any equity securities during the three months ended March 31,September 30, 2021.
RISK FACTORS. The risk factor set forth below updates the corresponding risk factor in our Annual Report on Form 10-K for the year ended December 31, 2020. In addition to the risk factor below, you should carefully consider the risk factors discussed in our most recent Form 10-K report, which could have a material adverse effect on our business, reputation, financial position, results of operations, cash flows and stock price, and they could cause our future results to be materially different than we presently anticipate.
Business portfolio - Our success depends on achieving our strategic and financial objectives, including through dispositions, acquisitions, integrations and joint ventures. Over the past several years we have been pursuing a variety of dispositions, including the ongoing monetization of our remaining equity ownership position in Baker Hughes, and in March 2021 we announced a new plan to combine our GECAS business with AerCap. The proceeds from dispositions have been an important source of cash flow for the Company as part of our strategic and financial planning. When we seek to sell certain businesses, equity interests or assets, we may encounter difficulties in finding buyers or in market conditions that could delay or prevent the accomplishment of our objectives, and declines in the values of equity interests (such as our remaining interest in Baker Hughes, or the equity ownership position that we will hold in AerCap after completing our announced plan to combine GECAS with AerCap) or other assets that we sell can diminish the cash proceeds that we realize. We may dispose of businesses or assets at a price or on terms that are less favorable than we had anticipated, or with purchase price adjustments or the exclusion of assets or liabilities that must be divested, managed or run off separately. We can also be subject to limitations in the form of regulatory or governmental approvals that may prevent certain prospective counterparties from completing transactions with us or delay us from executing transactions on our preferred timeline, or arising from our debt or other contractual obligations that limit our ability to complete certain transactions. For example, the planned transaction to combine GECAS with AerCap is subject to closing conditions, including regulatory approvals in multiple jurisdictions, and accordingly there are risks that one or more closing conditions may not be satisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the proposed transaction, may require conditions, limitations or restrictions in connection with such approvals or that the required approval by the shareholders of AerCap may not be obtained. Moreover, dispositions have the effect of reducing the Company’s cash flow and earnings capacity, resulting in a less diversified portfolio of businesses and increasing our dependency on remaining businesses for our financial results from ongoing operations. Dispositions or other business separations also often involve continued financial involvement in the divested business, such as through continuing equity ownership, retained assets or liabilities, transition services agreements, commercial agreements, guarantees, indemnities or other current or contingent financial obligations or liabilities. Under these arrangements, performance by the divested businesses or other conditions outside our control could materially affect our future financial results. With respect to acquisitions, joint ventures and business integrations, we may not achieve expected returns and other benefits on a timely basis or at all as a result of changes in strategy or separation/integration challenges related to personnel, IT systems or other factors. Executing on all types of portfolio transactions can divert senior management time and resources from other pursuits. In addition, in connection with acquisitions over time, we have recorded significant goodwill and other intangible assets on our balance sheet, and if we are not able to realize the value of these assets, we may be required to incur charges relating to the impairment of these assets. We also participate in a number of joint ventures with other companies or government enterprises in various markets around the world, including joint ventures where we have a lesser degree of control over the business operations, which may expose us to additional operational, financial, reputational, legal or compliance risks.
*Non-GAAP Financial Measure
| | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) | Three months ended March 31 |
| (UNAUDITED) | Consolidated |
| (In millions; per-share amounts in dollars) | 2021 | 2020 |
| Sales of goods | $ | 10,349 | | $ | 12,339 | |
| Sales of services | 5,967 | | 6,452 | |
| GE Capital revenues from services | 803 | | 699 | |
| Total revenues (Note 9) | 17,118 | | 19,490 | |
| | |
| Cost of goods sold | 8,679 | | 9,930 | |
| Cost of services sold | 3,859 | | 4,497 | |
| Selling, general and administrative expenses | 2,891 | | 3,061 | |
| Research and development | 561 | | 723 | |
| Interest and other financial charges | 500 | | 561 | |
| Insurance losses and annuity benefits | 555 | | 636 | |
| | |
| Non-operating benefit costs | 430 | | 618 | |
| Other costs and expenses | 32 | | 25 | |
| Total costs and expenses | 17,506 | | 20,051 | |
| | |
| Other income (Note 23) | 626 | | 6,869 | |
| | |
| Earnings (loss) from continuing operations before income taxes | 238 | | 6,308 | |
| Benefit (provision) for income taxes | (142) | | (54) | |
| Earnings (loss) from continuing operations | 97 | | 6,254 | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (2,894) | | (21) | |
| Net earnings (loss) | (2,798) | | 6,233 | |
| Less net earnings (loss) attributable to noncontrolling interests | 5 | | 34 | |
| Net earnings (loss) attributable to the Company | (2,802) | | 6,199 | |
| Preferred stock dividends | (72) | | (43) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,874) | | $ | 6,156 | |
| | |
| Amounts attributable to GE common shareholders | | |
| Earnings (loss) from continuing operations | $ | 97 | | $ | 6,254 | |
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| continuing operations | 5 | | 36 | |
| Earnings (loss) from continuing operations attributable to the Company | 92 | | 6,218 | |
| Preferred stock dividends | (72) | | (43) | |
| Earnings (loss) from continuing operations attributable | | |
| to GE common shareholders | 20 | | 6,175 | |
| Earnings (loss) from discontinued operations, net of taxes | (2,894) | | (21) | |
| Less net earnings (loss) attributable to | | |
| noncontrolling interests, discontinued operations | 0 | | (2) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,874) | | $ | 6,156 | |
| | |
| Earnings (loss) per share from continuing operations (Note 18) | | |
| Diluted earnings (loss) per share | $ | 0 | | $ | 0.70 | |
| Basic earnings (loss) per share | $ | 0 | | $ | 0.70 | |
| | |
| Net earnings (loss) per share (Note 18) | | |
| Diluted earnings (loss) per share | $ | (0.33) | | $ | 0.70 | |
| Basic earnings (loss) per share | $ | (0.33) | | $ | 0.70 | |
| | |
| | |
*Non-GAAP Financial Measure
| | STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Three months ended March 31 | |
| STATEMENT OF EARNINGS (LOSS) | | STATEMENT OF EARNINGS (LOSS) | Three months ended September 30 |
| (UNAUDITED) | (UNAUDITED) | GE Industrial | | GE Capital | (UNAUDITED) | Consolidated |
| (In millions) | 2021 | 2020 | | 2021 | 2020 | |
| (In millions; per-share amounts in dollars) | | (In millions; per-share amounts in dollars) | 2021 | 2020 |
| Sales of goods | Sales of goods | $ | 10,349 | | $ | 12,359 | | | $ | 0 | | $ | 0 | | Sales of goods | $ | 11,530 | | $ | 12,306 | |
| Sales of services | Sales of services | 5,980 | | 6,486 | | | 0 | | 0 | | Sales of services | 6,283 | | 5,560 | |
| GE Capital revenues from services | GE Capital revenues from services | 0 | | 0 | | | 878 | | 837 | | GE Capital revenues from services | 616 | | 663 | |
| Total revenues | 16,329 | | 18,844 | | | 878 | | 837 | | |
| Total revenues (Note 9) | | Total revenues (Note 9) | 18,429 | | 18,529 | |
| | Cost of goods sold | Cost of goods sold | 8,679 | | 9,949 | | | 0 | | 0 | | Cost of goods sold | 9,127 | | 10,555 | |
| Cost of services sold | Cost of services sold | 3,867 | | 4,526 | | | 5 | | 5 | | Cost of services sold | 4,275 | | 3,486 | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | 2,766 | | 2,949 | | | 116 | | 149 | | Selling, general and administrative expenses | 2,747 | | 3,215 | |
| Research and development | Research and development | 561 | | 723 | | | 0 | | 0 | | Research and development | 627 | | 595 | |
| Interest and other financial charges | Interest and other financial charges | 268 | | 370 | | | 291 | | 271 | | Interest and other financial charges | 462 | | 526 | |
| Debt extinguishment costs | | Debt extinguishment costs | — | | — | |
| Insurance losses and annuity benefits | Insurance losses and annuity benefits | 0 | | 0 | | | 567 | | 653 | | Insurance losses and annuity benefits | 643 | | 624 | |
| | Goodwill impairments (Note 8) | | Goodwill impairments (Note 8) | — | | — | |
| Non-operating benefit costs | Non-operating benefit costs | 433 | | 616 | | | (3) | | 2 | | Non-operating benefit costs | 427 | | 605 | |
| Other costs and expenses | Other costs and expenses | 0 | | 0 | | | 42 | | 33 | | Other costs and expenses | 28 | | 25 | |
| Total costs and expenses | Total costs and expenses | 16,574 | | 19,133 | | | 1,018 | | 1,113 | | Total costs and expenses | 18,337 | | 19,632 | |
| | Other income (Note 23) | Other income (Note 23) | 623 | | 6,874 | | | 0 | | 0 | | Other income (Note 23) | 491 | | (517) | |
| | Earnings (loss) from continuing operations before income taxes | Earnings (loss) from continuing operations before income taxes | 378 | | 6,585 | | | (140) | | (277) | | Earnings (loss) from continuing operations before income taxes | 584 | | (1,620) | |
| Benefit (provision) for income taxes | Benefit (provision) for income taxes | (148) | | (187) | | | 6 | | 133 | | Benefit (provision) for income taxes | (2) | | 483 | |
| Earnings (loss) from continuing operations | Earnings (loss) from continuing operations | 230 | | 6,398 | | | (134) | | (144) | | Earnings (loss) from continuing operations | 582 | | (1,137) | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | Earnings (loss) from discontinued operations, net of taxes (Note 2) | 0 | | (14) | | | (2,894) | | (7) | | Earnings (loss) from discontinued operations, net of taxes (Note 2) | 602 | | (58) | |
| Net earnings (loss) | Net earnings (loss) | 230 | | 6,384 | | | (3,028) | | (151) | | Net earnings (loss) | 1,184 | | (1,195) | |
| Less net earnings (loss) attributable to noncontrolling interests | Less net earnings (loss) attributable to noncontrolling interests | 7 | | 34 | | | (2) | | 0 | | Less net earnings (loss) attributable to noncontrolling interests | (73) | | (51) | |
| Net earnings (loss) attributable to the Company | Net earnings (loss) attributable to the Company | 223 | | 6,350 | | | (3,025) | | (151) | | Net earnings (loss) attributable to the Company | 1,257 | | (1,144) | |
| Preferred stock dividends | Preferred stock dividends | (31) | | 0 | | | (41) | | (43) | | Preferred stock dividends | (52) | | (46) | |
| Net earnings (loss) attributable to GE common shareholders | Net earnings (loss) attributable to GE common shareholders | $ | 192 | | $ | 6,350 | | | $ | (3,066) | | $ | (194) | | Net earnings (loss) attributable to GE common shareholders | $ | 1,205 | | $ | (1,190) | |
| | Amounts attributable to GE common shareholders: | | |
| Amounts attributable to GE common shareholders | | Amounts attributable to GE common shareholders | |
| Earnings (loss) from continuing operations | Earnings (loss) from continuing operations | $ | 230 | | $ | 6,398 | | | $ | (134) | | $ | (144) | | Earnings (loss) from continuing operations | $ | 582 | | $ | (1,137) | |
| Less net earnings (loss) attributable to noncontrolling interests, | Less net earnings (loss) attributable to noncontrolling interests, | | Less net earnings (loss) attributable to noncontrolling interests, | |
| continuing operations | continuing operations | 7 | | 36 | | | (2) | | 0 | | continuing operations | (73) | | (51) | |
| Earnings (loss) from continuing operations attributable to the Company | Earnings (loss) from continuing operations attributable to the Company | 223 | | 6,362 | | | (131) | | (144) | | Earnings (loss) from continuing operations attributable to the Company | 655 | | (1,087) | |
| Preferred stock dividends | Preferred stock dividends | (31) | | 0 | | | (41) | | (43) | | Preferred stock dividends | (52) | | (46) | |
| Earnings (loss) from continuing operations attributable | Earnings (loss) from continuing operations attributable | | Earnings (loss) from continuing operations attributable | |
| to GE common shareholders | to GE common shareholders | 192 | | 6,362 | | | (172) | | (187) | | to GE common shareholders | 603 | | (1,132) | |
| Earnings (loss) from discontinued operations, net of taxes | 0 | | (14) | | | (2,894) | | (7) | | |
| Less net earnings (loss) attributable to | | |
| noncontrolling interests, discontinued operations | 0 | | (2) | | | 0 | | 0 | | |
| | Earnings (loss) from discontinued operations attributable | | Earnings (loss) from discontinued operations attributable | |
| to GE common shareholders | | to GE common shareholders | 602 | | (58) | |
| Net earnings (loss) attributable to GE common shareholders | Net earnings (loss) attributable to GE common shareholders | $ | 192 | | $ | 6,350 | | | $ | (3,066) | | $ | (194) | | Net earnings (loss) attributable to GE common shareholders | $ | 1,205 | | $ | (1,190) | |
| | Earnings (loss) per share from continuing operations (Note 18) | | Earnings (loss) per share from continuing operations (Note 18) | |
| Diluted earnings (loss) per share | | Diluted earnings (loss) per share | $ | 0.54 | | $ | (1.04) | |
| Basic earnings (loss) per share | | Basic earnings (loss) per share | $ | 0.54 | | $ | (1.04) | |
| | Net earnings (loss) per share (Note 18) | | Net earnings (loss) per share (Note 18) | |
| Diluted earnings (loss) per share | | Diluted earnings (loss) per share | $ | 1.08 | | $ | (1.09) | |
| Basic earnings (loss) per share | | Basic earnings (loss) per share | $ | 1.09 | | $ | (1.09) | |
| | | | | | | | | | | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Three months ended September 30 |
| (UNAUDITED) | GE Industrial | | GE Capital |
| (In millions) | 2021 | 2020 | | 2021 | 2020 |
| Sales of goods | $ | 11,532 | | $ | 12,314 | | | $ | — | | $ | — | |
| Sales of services | 6,289 | | 5,604 | | | — | | — | |
| GE Capital revenues from services | — | | — | | | 734 | | 758 | |
| Total revenues | 17,821 | | 17,918 | | | 734 | | 758 | |
| | | | | |
| Cost of goods sold | 9,129 | | 10,564 | | | — | | — | |
| Cost of services sold | 4,276 | | 3,525 | | | 5 | | 5 | |
| Selling, general and administrative expenses | 2,665 | | 3,105 | | | 96 | | 133 | |
| Research and development | 627 | | 595 | | | — | | — | |
| Interest and other financial charges | 225 | | 313 | | | 259 | | 267 | |
| Debt extinguishment costs | — | | — | | | 1 | | — | |
| Insurance losses and annuity benefits | — | | — | | | 645 | | 635 | |
| Goodwill impairments (Note 8) | — | | — | | | — | | — | |
| Non-operating benefit costs | 426 | | 603 | | | — | | 2 | |
| Other costs and expenses | — | | — | | | 39 | | 38 | |
| Total costs and expenses | 17,347 | | 18,705 | | | 1,044 | | 1,081 | |
| | | | | |
| Other income (Note 23) | 420 | | (509) | | | — | | — | |
| | | | | |
| Earnings (loss) from continuing operations before income taxes | 894 | | (1,296) | | | (311) | | (323) | |
| Benefit (provision) for income taxes | (81) | | 143 | | | 79 | | 340 | |
| Earnings (loss) from continuing operations | 813 | | (1,153) | | | (231) | | 16 | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (8) | | (10) | | | 611 | | (48) | |
| Net earnings (loss) | 804 | | (1,163) | | | 380 | | (32) | |
| Less net earnings (loss) attributable to noncontrolling interests | 16 | | (51) | | | (89) | | — | |
| Net earnings (loss) attributable to the Company | 788 | | (1,112) | | | 469 | | (32) | |
| Preferred stock dividends | (52) | | — | | | — | | (46) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 737 | | $ | (1,112) | | | $ | 469 | | $ | (78) | |
| | | | | |
| Amounts attributable to GE common shareholders: | | | | | |
| Earnings (loss) from continuing operations | $ | 813 | | $ | (1,153) | | | $ | (231) | | $ | 16 | |
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| continuing operations | 16 | | (51) | | | (89) | | — | |
| Earnings (loss) from continuing operations attributable to the Company | 797 | | (1,103) | | | (142) | | 16 | |
| Preferred stock dividends | (52) | | — | | | — | | (46) | |
| Earnings (loss) from continuing operations attributable | | | | | |
| to GE common shareholders | 745 | | (1,103) | | | (142) | | (29) | |
| | | | | |
| | | | | |
| | | | | |
| Earnings (loss) from discontinued operations attributable | | | | | |
| to GE common shareholders | (8) | | (10) | | | 611 | | (48) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 737 | | $ | (1,112) | | | $ | 469 | | $ | (78) | |
| | | | | | | | |
| STATEMENT OF FINANCIAL POSITION (UNAUDITED) | Consolidated |
| (In millions, except share amounts) | March 31, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash(a) | $ | 31,783 | | $ | 36,530 | |
| Investment securities (Note 3) | 6,741 | | 7,319 | |
| Current receivables (Note 4) | 15,381 | | 16,691 | |
| Financing receivables – net (Note 5) | 306 | | 326 | |
| Inventories, including deferred inventory costs (Note 6) | 16,530 | | 15,890 | |
| Other GE Capital receivables | 1,339 | | 1,549 | |
| Receivable from GE Capital | 0 | | 0 | |
| Current contract assets (Note 10) | 5,821 | | 5,764 | |
| All other current assets (Note 11) | 1,376 | | 1,109 | |
| Assets of discontinued operations (Note 2) | 33,922 | | 0 | |
| Current assets | 113,198 | | 85,180 | |
| | |
| Investment securities (Note 3) | 40,786 | | 42,549 | |
| Financing receivables – net (Note 5) | 0 | | 0 | |
| Other GE Capital receivables | 4,634 | | 4,661 | |
| Property, plant and equipment – net (Note 7) | 16,296 | | 16,699 | |
| Receivable from GE Capital | 0 | | 0 | |
| Goodwill (Note 8) | 25,320 | | 25,524 | |
| Other intangible assets – net (Note 8) | 9,395 | | 9,671 | |
| Contract and other deferred assets (Note 10) | 5,985 | | 5,888 | |
| All other assets (Note 11) | 12,308 | | 11,038 | |
| Deferred income taxes (Note 16) | 14,232 | | 14,253 | |
| Assets of discontinued operations (Note 2) | 3,009 | | 40,749 | |
| Total assets | $ | 245,164 | | $ | 256,211 | |
| | |
| Short-term borrowings (Note 12) | $ | 4,468 | | $ | 4,713 | |
| Short-term borrowings assumed by GE (Note 12) | 0 | | 0 | |
| Accounts payable and equipment project accruals | 16,090 | | 16,458 | |
| Progress collections and deferred income (Note 10) | 17,993 | | 18,371 | |
| All other current liabilities (Note 15) | 14,139 | | 15,071 | |
| Liabilities of discontinued operations (Note 2) | 4,991 | | 0 | |
| Current liabilities | 57,681 | | 54,613 | |
| | |
| Deferred income (Note 10) | 1,748 | | 1,801 | |
| Long-term borrowings (Note 12) | 66,890 | | 70,189 | |
| Long-term borrowings assumed by GE (Note 12) | 0 | | 0 | |
| Insurance liabilities and annuity benefits (Note 13) | 39,562 | | 42,191 | |
| Non-current compensation and benefits | 29,104 | | 29,677 | |
| All other liabilities (Note 15) | 14,821 | | 15,484 | |
| Liabilities of discontinued operations (Note 2) | 204 | | 5,182 | |
| Total liabilities | 210,011 | | 219,138 | |
| | |
Preferred stock (5,939,875 shares outstanding at both March 31, 2021
and December 31, 2020) | 6 | | 6 | |
Common stock (8,778,641,000 and 8,765,493,000 shares outstanding
at March 31, 2021 and December 31, 2020, respectively) | 702 | | 702 | |
| Accumulated other comprehensive income (loss) – net attributable to GE | (8,893) | | (9,749) | |
| Other capital | 34,042 | | 34,307 | |
| Retained earnings | 89,276 | | 92,247 | |
| Less common stock held in treasury | (81,548) | | (81,961) | |
| Total GE shareholders’ equity | 33,585 | | 35,552 | |
| Noncontrolling interests | 1,568 | | 1,522 | |
| Total equity | 35,153 | | 37,073 | |
| Total liabilities and equity | $ | 245,164 | | $ | 256,211 | |
| | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) | Nine months ended September 30 |
| (UNAUDITED) | Consolidated |
| (In millions; per-share amounts in dollars) | 2021 | 2020 |
| Sales of goods | $ | 32,983 | | $ | 35,365 | |
| Sales of services | 18,615 | | 17,340 | |
| GE Capital revenues from services | 2,228 | | 2,118 | |
| Total revenues (Note 9) | 53,826 | | 54,823 | |
| | |
| Cost of goods sold | 26,892 | | 30,272 | |
| Cost of services sold | 12,666 | | 11,829 | |
| Selling, general and administrative expenses | 8,504 | | 9,344 | |
| Research and development | 1,792 | | 1,929 | |
| Interest and other financial charges | 1,450 | | 1,648 | |
| Debt extinguishment costs | 1,416 | | 206 | |
| Insurance losses and annuity benefits | 1,680 | | 1,824 | |
| Goodwill impairments (Note 8) | — | | 877 | |
| Non-operating benefit costs | 1,374 | | 1,821 | |
| Other costs and expenses | 91 | | 114 | |
| Total costs and expenses | 55,866 | | 59,863 | |
| | |
| Other income (Note 23) | 1,824 | | 8,430 | |
| | |
| Earnings (loss) from continuing operations before income taxes | (216) | | 3,390 | |
| Benefit (provision) for income taxes | 323 | | 589 | |
| Earnings (loss) from continuing operations | 107 | | 3,979 | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (2,856) | | (1,072) | |
| Net earnings (loss) | (2,748) | | 2,907 | |
| Less net earnings (loss) attributable to noncontrolling interests | (72) | | (161) | |
| Net earnings (loss) attributable to the Company | (2,677) | | 3,068 | |
| Preferred stock dividends | (180) | | (280) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,857) | | $ | 2,787 | |
| | |
| Amounts attributable to GE common shareholders | | |
| Earnings (loss) from continuing operations | $ | 107 | | $ | 3,979 | |
| Less net earnings (loss) attributable to noncontrolling interests, | | |
| continuing operations | (72) | | (159) | |
| Earnings (loss) from continuing operations attributable to the Company | 179 | | 4,138 | |
| Preferred stock dividends | (180) | | (280) | |
| Earnings (loss) from continuing operations attributable | | |
| to GE common shareholders | (1) | | 3,857 | |
| | |
| | |
| | |
| Earnings (loss) from discontinued operations attributable | | |
| to GE common shareholders | (2,856) | | (1,070) | |
| Net earnings (loss) attributable to GE common shareholders | $ | (2,857) | | $ | 2,787 | |
| | |
| Earnings (loss) per share from continuing operations (Note 18) | | |
| Diluted earnings (loss) per share | $ | (0.01) | | $ | 3.39 | |
| Basic earnings (loss) per share | $ | (0.01) | | $ | 3.39 | |
| | |
| Net earnings (loss) per share (Note 18) | | |
| Diluted earnings (loss) per share | $ | (2.61) | | $ | 2.41 | |
| Basic earnings (loss) per share | $ | (2.61) | | $ | 2.41 | |
| | | | | | | | | | | | | | | | | |
| STATEMENT OF EARNINGS (LOSS) (CONTINUED) | Nine months ended September 30 |
| (UNAUDITED) | GE Industrial | | GE Capital |
| (In millions; per-share amounts in dollars) | 2021 | 2020 | | 2021 | 2020 |
| Sales of goods | $ | 32,989 | | $ | 35,401 | | | $ | — | | $ | — | |
| Sales of services | 18,648 | | 17,427 | | | — | | — | |
| GE Capital revenues from services | — | | — | | | 2,470 | | 2,455 | |
| Total revenues | 51,637 | | 52,828 | | | 2,470 | | 2,455 | |
| | | | | |
| Cost of goods sold | 26,899 | | 30,308 | | | — | | — | |
| Cost of services sold | 12,683 | | 11,901 | | | 15 | | 15 | |
| Selling, general and administrative expenses | 8,200 | | 9,033 | | | 318 | | 396 | |
| Research and development | 1,792 | | 1,929 | | | — | | — | |
| Interest and other financial charges | 753 | | 1,016 | | | 799 | | 821 | |
| Debt extinguishment costs | 645 | | 63 | | | 771 | | 143 | |
| Insurance losses and annuity benefits | — | | — | | | 1,706 | | 1,866 | |
| Goodwill impairments (Note 8) | — | | 877 | | | — | | — | |
| Non-operating benefit costs | 1,376 | | 1,815 | | | (2) | | 6 | |
| Other costs and expenses | — | | — | | | 127 | | 185 | |
| Total costs and expenses | 52,348 | | 56,943 | | | 3,734 | | 3,432 | |
| | | | | |
| Other income (Note 23) | 1,760 | | 8,481 | | | — | | — | |
| | | | | |
| Earnings (loss) from continuing operations before income taxes | 1,048 | | 4,366 | | | (1,264) | | (976) | |
| Benefit (provision) for income taxes | (1) | | 22 | | | 324 | | 566 | |
| Earnings (loss) from continuing operations | 1,047 | | 4,389 | | | (940) | | (410) | |
| Earnings (loss) from discontinued operations, net of taxes (Note 2) | (4) | | (33) | | | (2,851) | | (1,039) | |
| Net earnings (loss) | 1,042 | | 4,355 | | | (3,791) | | (1,449) | |
| Less net earnings (loss) attributable to noncontrolling interests | 22 | | (163) | | | (94) | | 2 | |
| Net earnings (loss) attributable to the Company | 1,021 | | 4,518 | | | (3,698) | | (1,451) | |
| Preferred stock dividends | (139) | | — | | | (41) | | (280) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 882 | | $ | 4,518 | | | $ | (3,739) | | $ | (1,731) | |
| | | | | |
| Amounts attributable to GE common shareholders: | | | | | |
| Earnings (loss) from continuing operations | $ | 1,047 | | $ | 4,389 | | | $ | (940) | | $ | (410) | |
| Less net earnings (loss) attributable to noncontrolling interests, | | | | | |
| continuing operations | 22 | | (161) | | | (94) | | 2 | |
| Earnings (loss) from continuing operations attributable to the Company | 1,025 | | 4,549 | | | (846) | | (412) | |
| Preferred stock dividends | (139) | | — | | | (41) | | (280) | |
| Earnings (loss) from continuing operations attributable | | | | | |
| to GE common shareholders | 886 | | 4,549 | | | (887) | | (692) | |
| | | | | |
| | | | | |
| | | | | |
| Earnings (loss) from discontinued operations attributable | | | | | |
| to GE common shareholders | (4) | | (31) | | | (2,851) | | (1,039) | |
| Net earnings (loss) attributable to GE common shareholders | $ | 882 | | $ | 4,518 | | | $ | (3,739) | | $ | (1,731) | |
| | | | | | | | |
| STATEMENT OF FINANCIAL POSITION (UNAUDITED) | Consolidated |
| (In millions, except share amounts) | September 30, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash(a) | $ | 24,955 | | $ | 36,530 | |
| Investment securities (Note 3) | 5,300 | | 7,319 | |
| Current receivables (Note 4) | 14,874 | | 16,691 | |
| Financing receivables – net (Note 5) | 271 | | 326 | |
| Inventories, including deferred inventory costs (Note 6) | 16,790 | | 15,890 | |
| Other GE Capital receivables | 1,186 | | 1,549 | |
| Receivable from GE Capital | — | | — | |
| Current contract assets (Note 10) | 5,238 | | 5,764 | |
| All other current assets (Note 11) | 1,191 | | 1,109 | |
| Assets of discontinued operations (Note 2) | 33,782 | | — | |
| Current assets | 103,587 | | 85,180 | |
| | |
| Investment securities (Note 3) | 42,394 | | 42,549 | |
| | |
| Other GE Capital receivables | 4,668 | | 4,661 | |
| Property, plant and equipment – net (Note 7) | 15,873 | | 16,699 | |
| Receivable from GE Capital | — | | — | |
| Goodwill (Note 8) | 25,333 | | 25,524 | |
| Other intangible assets – net (Note 8) | 9,187 | | 9,671 | |
| Contract and other deferred assets (Note 10) | 6,119 | | 5,888 | |
| All other assets (Note 11) | 12,651 | | 11,038 | |
| Deferred income taxes (Note 16) | 14,466 | | 14,253 | |
| Assets of discontinued operations (Note 2) | 2,855 | | 40,749 | |
| Total assets | $ | 237,133 | | $ | 256,211 | |
| | |
| Short-term borrowings (Note 12) | $ | 5,459 | | $ | 4,713 | |
| Short-term borrowings assumed by GE (Note 12) | — | | — | |
| Accounts payable and equipment project accruals | 16,172 | | 16,458 | |
| Progress collections and deferred income (Note 10) | 16,909 | | 18,371 | |
| All other current liabilities (Note 15) | 14,349 | | 15,071 | |
| Liabilities of discontinued operations (Note 2) | 4,788 | | — | |
| Current liabilities | 57,676 | | 54,613 | |
| | |
| Deferred income (Note 10) | 1,839 | | 1,801 | |
| Long-term borrowings (Note 12) | 57,429 | | 70,189 | |
| Long-term borrowings assumed by GE (Note 12) | — | | — | |
| Insurance liabilities and annuity benefits (Note 13) | 37,705 | | 42,191 | |
| Non-current compensation and benefits | 28,415 | | 29,677 | |
| All other liabilities (Note 15) | 14,999 | | 15,484 | |
| Liabilities of discontinued operations (Note 2) | 109 | | 5,182 | |
| Total liabilities | 198,172 | | 219,138 | |
| | |
Preferred stock (5,939,875 shares outstanding at both September 30, 2021
and December 31, 2020) | 6 | | 6 | |
Common stock (1,098,137,128 and 1,095,686,581 shares outstanding
at September 30, 2021 and December 31, 2020, respectively)(b) | 15 | | 702 | |
| Accumulated other comprehensive income (loss) – net attributable to GE | (5,078) | | (9,749) | |
| Other capital | 34,751 | | 34,307 | |
| Retained earnings | 89,098 | | 92,247 | |
| Less common stock held in treasury | (81,314) | | (81,961) | |
| Total GE shareholders’ equity | 37,477 | | 35,552 | |
| Noncontrolling interests | 1,484 | | 1,522 | |
| Total equity | 38,961 | | 37,073 | |
| Total liabilities and equity | $ | 237,133 | | $ | 256,211 | |
(a) Excluded $1,707$807 million and $455 million at March 31,September 30, 2021 and December 31, 2020, respectively, in Insurance, which is subject to regulatory restrictions. This balance is included in All other assets. See Note 11 for further information.
| | STATEMENT OF FINANCIAL POSITION (CONTINUED) | STATEMENT OF FINANCIAL POSITION (CONTINUED) | GE Industrial | | GE Capital | STATEMENT OF FINANCIAL POSITION (CONTINUED) | GE Industrial | | GE Capital |
(UNAUDITED) (In millions, except share amounts) | (UNAUDITED) (In millions, except share amounts) | March 31, 2021 | December 31, 2020 | | March 31, 2021 | December 31, 2020 | (UNAUDITED) (In millions, except share amounts) | September 30, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash | Cash, cash equivalents and restricted cash | $ | 22,361 | | $ | 23,209 | | | $ | 9,422 | | $ | 13,322 | | Cash, cash equivalents and restricted cash | $ | 17,995 | | $ | 23,209 | | | $ | 6,960 | | $ | 13,322 | |
| Investment securities (Note 3) | Investment securities (Note 3) | 6,741 | | 7,319 | | | 0 | | 0 | | Investment securities (Note 3) | 5,300 | | 7,319 | | | — | | — | |
| Current receivables (Note 4) | Current receivables (Note 4) | 12,418 | | 13,442 | | | 0 | | 0 | | Current receivables (Note 4) | 14,368 | | 13,442 | | | — | | — | |
| Financing receivables – net (Note 5) | Financing receivables – net (Note 5) | 0 | | 0 | | | 3,738 | | 4,172 | | Financing receivables – net (Note 5) | — | | — | | | 1,300 | | 4,172 | |
| Inventories, including deferred inventory costs (Note 6) | Inventories, including deferred inventory costs (Note 6) | 16,530 | | 15,890 | | | 0 | | 0 | | Inventories, including deferred inventory costs (Note 6) | 16,790 | | 15,890 | | | — | | — | |
| Other GE Capital receivables | Other GE Capital receivables | 0 | | 0 | | | 2,260 | | 3,280 | | Other GE Capital receivables | — | | — | | | 1,544 | | 3,280 | |
| Receivable from GE Capital | Receivable from GE Capital | 1,784 | | 2,432 | | | 0 | | 0 | | Receivable from GE Capital | 2,346 | | 2,432 | | | — | | — | |
| Current contract assets (Note 10) | Current contract assets (Note 10) | 5,821 | | 5,764 | | | 0 | | 0 | | Current contract assets (Note 10) | 5,238 | | 5,764 | | | — | | — | |
| All other current assets (Note 11) | All other current assets (Note 11) | 1,062 | | 835 | | | 518 | | 543 | | All other current assets (Note 11) | 839 | | 835 | | | 362 | | 543 | |
| Assets of discontinued operations (Note 2) | Assets of discontinued operations (Note 2) | 0 | | 0 | | | 33,922 | | 0 | | Assets of discontinued operations (Note 2) | — | | — | | | 33,782 | | — | |
| Current assets | Current assets | 66,716 | | 68,892 | | | 49,860 | | 21,317 | | Current assets | 62,876 | | 68,892 | | | 43,948 | | 21,317 | |
| | Investment securities (Note 3) | Investment securities (Note 3) | 32 | | 36 | | | 40,756 | | 42,515 | | Investment securities (Note 3) | 150 | | 36 | | | 42,246 | | 42,515 | |
| Financing receivables – net (Note 5) | 0 | | 0 | | | 0 | | 0 | | |
| | Other GE Capital receivables | Other GE Capital receivables | 0 | | 0 | | | 5,077 | | 5,076 | | Other GE Capital receivables | — | | — | | | 5,056 | | 5,076 | |
| Property, plant and equipment – net (Note 7) | Property, plant and equipment – net (Note 7) | 16,039 | | 16,433 | | | 261 | | 271 | | Property, plant and equipment – net (Note 7) | 15,635 | | 16,433 | | | 241 | | 271 | |
| Receivable from GE Capital | Receivable from GE Capital | 16,577 | | 16,780 | | | 0 | | 0 | | Receivable from GE Capital | 12,583 | | 16,780 | | | — | | — | |
| Goodwill (Note 8) | Goodwill (Note 8) | 25,320 | | 25,524 | | | 0 | | 0 | | Goodwill (Note 8) | 25,333 | | 25,524 | | | — | | — | |
| Other intangible assets – net (Note 8) | Other intangible assets – net (Note 8) | 9,358 | | 9,632 | | | 37 | | 39 | | Other intangible assets – net (Note 8) | 9,155 | | 9,632 | | | 32 | | 39 | |
| Contract and other deferred assets (Note 10) | Contract and other deferred assets (Note 10) | 5,985 | | 5,921 | | | 0 | | 0 | | Contract and other deferred assets (Note 10) | 6,119 | | 5,921 | | | — | | — | |
| All other assets (Note 11) | All other assets (Note 11) | 7,952 | | 7,948 | | | 4,617 | | 3,354 | | All other assets (Note 11) | 8,709 | | 7,948 | | | 4,170 | | 3,354 | |
| Deferred income taxes (Note 16) | Deferred income taxes (Note 16) | 9,209 | | 9,154 | | | 5,023 | | 5,099 | | Deferred income taxes (Note 16) | 10,082 | | 9,154 | | | 4,384 | | 5,099 | |
| Assets of discontinued operations (Note 2) | Assets of discontinued operations (Note 2) | 132 | | 144 | | | 2,876 | | 40,587 | | Assets of discontinued operations (Note 2) | 123 | | 144 | | | 2,732 | | 40,587 | |
| Total assets | Total assets | $ | 157,321 | | $ | 160,462 | | | $ | 108,507 | | $ | 118,257 | | Total assets | $ | 150,765 | | $ | 160,462 | | | $ | 102,809 | | $ | 118,257 | |
| | Short-term borrowings (Note 12) | Short-term borrowings (Note 12) | $ | 535 | | $ | 918 | | | $ | 2,426 | | $ | 1,963 | | Short-term borrowings (Note 12) | $ | 1,468 | | $ | 918 | | | $ | 1,862 | | $ | 1,963 | |
| Short-term borrowings assumed by GE (Note 12) | Short-term borrowings assumed by GE (Note 12) | 1,784 | | 2,432 | | | 1,784 | | 2,432 | | Short-term borrowings assumed by GE (Note 12) | 2,346 | | 2,432 | | | 2,346 | | 2,432 | |
| Accounts payable and equipment project accruals | Accounts payable and equipment project accruals | 15,839 | | 16,380 | | | 841 | | 918 | | Accounts payable and equipment project accruals | 15,929 | | 16,380 | | | 760 | | 918 | |
| Progress collections and deferred income (Note 10) | Progress collections and deferred income (Note 10) | 17,993 | | 18,371 | | | 0 | | 0 | | Progress collections and deferred income (Note 10) | 16,936 | | 18,371 | | | — | | — | |
| All other current liabilities (Note 15) | All other current liabilities (Note 15) | 13,508 | | 14,131 | | | 1,507 | | 2,288 | | All other current liabilities (Note 15) | 13,385 | | 14,131 | | | 1,164 | | 2,288 | |
| Liabilities of discontinued operations (Note 2) | Liabilities of discontinued operations (Note 2) | 0 | | 0 | | | 4,991 | | 0 | | Liabilities of discontinued operations (Note 2) | — | | — | | | 4,788 | | — | |
| Current liabilities | Current liabilities | 49,659 | | 52,232 | | | 11,549 | | 7,602 | | Current liabilities | 50,064 | | 52,232 | | | 10,919 | | 7,602 | |
| | Deferred income (Note 10) | Deferred income (Note 10) | 1,748 | | 1,801 | | | 0 | | 0 | | Deferred income (Note 10) | 1,839 | | 1,801 | | | — | | — | |
| Long-term borrowings (Note 12) | Long-term borrowings (Note 12) | 19,174 | | 19,428 | | | 27,962 | | 30,803 | | Long-term borrowings (Note 12) | 14,093 | | 19,428 | | | 27,575 | | 30,803 | |
| Long-term borrowings assumed by GE (Note 12) | Long-term borrowings assumed by GE (Note 12) | 19,754 | | 19,957 | | | 16,577 | | 16,780 | | Long-term borrowings assumed by GE (Note 12) | 15,761 | | 19,957 | | | 12,583 | | 16,780 | |
| Insurance liabilities and annuity benefits (Note 13) | Insurance liabilities and annuity benefits (Note 13) | 0 | | 0 | | | 40,004 | | 42,565 | | Insurance liabilities and annuity benefits (Note 13) | — | | — | | | 38,090 | | 42,565 | |
| Non-current compensation and benefits | Non-current compensation and benefits | 28,769 | | 29,291 | | | 327 | | 379 | | Non-current compensation and benefits | 28,108 | | 29,291 | | | 299 | | 379 | |
| All other liabilities (Note 15) | All other liabilities (Note 15) | 14,586 | | 15,072 | | | 363 | | 539 | | All other liabilities (Note 15) | 14,794 | | 15,072 | | | 379 | | 539 | |
| Liabilities of discontinued operations (Note 2) | Liabilities of discontinued operations (Note 2) | 125 | | 139 | | | 79 | | 5,058 | | Liabilities of discontinued operations (Note 2) | 124 | | 139 | | | (15) | | 5,058 | |
| Total liabilities | Total liabilities | 133,815 | | 137,921 | | | 96,861 | | 103,726 | | Total liabilities | 124,784 | | 137,921 | | | 89,830 | | 103,726 | |
| Preferred stock (5,939,875 shares outstanding at both March 31, 2021 and December 31, 2020) | 6 | | 6 | | | 0 | | 6 | | |
Common stock (8,778,641,000 and 8,765,493,000 shares outstanding at March 31, 2021 and December 31, 2020, respectively) | 702 | | 702 | | | 5 | | 0 | | |
Preferred stock (5,939,875 shares outstanding at both September 30, 2021 and December 31, 2020) | | Preferred stock (5,939,875 shares outstanding at both September 30, 2021 and December 31, 2020) | 6 | | 6 | | | — | | 6 | |
Common stock (1,098,137,128 and 1,095,686,581 shares outstanding at September 30, 2021 and December 31, 2020, respectively) | | Common stock (1,098,137,128 and 1,095,686,581 shares outstanding at September 30, 2021 and December 31, 2020, respectively) | 15 | | 702 | | | 5 | | — | |
| Accumulated other comprehensive income (loss) – net attributable to GE | Accumulated other comprehensive income (loss) – net attributable to GE | (8,108) | | (8,945) | | | (786) | | (804) | | Accumulated other comprehensive income (loss) – net attributable to GE | (6,437) | | (8,945) | | | 1,359 | | (804) | |
| Other capital | Other capital | 16,055 | | 16,466 | | | 17,982 | | 17,835 | | Other capital | 16,827 | | 16,466 | | | 17,920 | | 17,835 | |
| Retained earnings | Retained earnings | 95,006 | | 94,910 | | | (5,730) | | (2,663) | | Retained earnings | 95,500 | | 94,910 | | | (6,402) | | (2,663) | |
| Less common stock held in treasury | Less common stock held in treasury | (81,548) | | (81,961) | | | 0 | | 0 | | Less common stock held in treasury | (81,314) | | (81,961) | | | — | | — | |
| Total GE shareholders’ equity | Total GE shareholders’ equity | 22,113 | | 21,179 | | | 11,472 | | 14,373 | | Total GE shareholders’ equity | 24,596 | | 21,179 | | | 12,881 | | 14,373 | |
| Noncontrolling interests | Noncontrolling interests | 1,393 | | 1,363 | | | 175 | | 159 | | Noncontrolling interests | 1,386 | | 1,363 | | | 97 | | 159 | |
| Total equity | Total equity | 23,506 | | 22,542 | | | 11,646 | | 14,531 | | Total equity | 25,982 | | 22,542 | | | 12,979 | | 14,531 | |
| Total liabilities and equity | Total liabilities and equity | $ | 157,321 | | $ | 160,462 | | | $ | 108,507 | | $ | 118,257 | | Total liabilities and equity | $ | 150,765 | | $ | 160,462 | | | $ | 102,809 | | $ | 118,257 | |
| | STATEMENT OF CASH FLOWS | STATEMENT OF CASH FLOWS | Three months ended March 31 | STATEMENT OF CASH FLOWS | Nine months ended September 30 |
| (UNAUDITED) | (UNAUDITED) | Consolidated | (UNAUDITED) | Consolidated |
| (In millions) | (In millions) | 2021 | 2020 | (In millions) | 2021 | 2020 |
| Net earnings (loss) | Net earnings (loss) | $ | (2,798) | | $ | 6,233 | | Net earnings (loss) | $ | (2,748) | | $ | 2,907 | |
| | (Earnings) loss from discontinued operations | (Earnings) loss from discontinued operations | 2,894 | | 21 | | (Earnings) loss from discontinued operations | 2,856 | | 1,072 | |
| Adjustments to reconcile net earnings (loss) | Adjustments to reconcile net earnings (loss) | | Adjustments to reconcile net earnings (loss) | |
| to cash provided from operating activities | to cash provided from operating activities | | to cash provided from operating activities | |
| Depreciation and amortization of property, plant and equipment (Note 7) | Depreciation and amortization of property, plant and equipment (Note 7) | 452 | | 461 | | Depreciation and amortization of property, plant and equipment (Note 7) | 1,390 | | 1,664 | |
| Amortization of intangible assets (Note 8) | Amortization of intangible assets (Note 8) | 301 | | 318 | | Amortization of intangible assets (Note 8) | 860 | | 1,036 | |
| | Goodwill impairments (Note 8) | | Goodwill impairments (Note 8) | — | | 877 | |
| | (Gains) losses on purchases and sales of business interests (Note 23) | (Gains) losses on purchases and sales of business interests (Note 23) | (3) | | (12,372) | | (Gains) losses on purchases and sales of business interests (Note 23) | 155 | | (12,446) | |
| (Gains) losses on equity securities (Note 23) | (Gains) losses on equity securities (Note 23) | (296) | | 5,873 | | (Gains) losses on equity securities (Note 23) | (1,035) | | 4,781 | |
| Principal pension plans cost (Note 14) | Principal pension plans cost (Note 14) | 658 | | 877 | | Principal pension plans cost (Note 14) | 1,990 | | 2,681 | |
| Principal pension plans employer contributions | Principal pension plans employer contributions | (74) | | (70) | | Principal pension plans employer contributions | (232) | | (226) | |
| Other postretirement benefit plans (net) | Other postretirement benefit plans (net) | (289) | | (254) | | Other postretirement benefit plans (net) | (772) | | (712) | |
| Provision (benefit) for income taxes | Provision (benefit) for income taxes | 142 | | 54 | | Provision (benefit) for income taxes | (323) | | (589) | |
| Cash recovered (paid) during the year for income taxes | Cash recovered (paid) during the year for income taxes | (322) | | (310) | | Cash recovered (paid) during the year for income taxes | (1,048) | | (1,138) | |
| Changes in operating working capital: | Changes in operating working capital: | | Changes in operating working capital: | |
| Decrease (increase) in current receivables | Decrease (increase) in current receivables | 946 | | (503) | | Decrease (increase) in current receivables | 874 | | (1,665) | |
| Decrease (increase) in inventories, including deferred inventory costs | Decrease (increase) in inventories, including deferred inventory costs | (722) | | (1,077) | | Decrease (increase) in inventories, including deferred inventory costs | (1,184) | | (432) | |
| Decrease (increase) in current contract assets | Decrease (increase) in current contract assets | (35) | | 145 | | Decrease (increase) in current contract assets | 498 | | 855 | |
| Increase (decrease) in accounts payable and equipment project accruals | Increase (decrease) in accounts payable and equipment project accruals | (349) | | (617) | | Increase (decrease) in accounts payable and equipment project accruals | (167) | | (1,208) | |
| Increase (decrease) in progress collections and current deferred income | Increase (decrease) in progress collections and current deferred income | (425) | | (590) | | Increase (decrease) in progress collections and current deferred income | (1,509) | | (1,247) | |
| All other operating activities | All other operating activities | (2,719) | | 892 | | All other operating activities | (1,132) | | 1,912 | |
| Cash from (used for) operating activities – continuing operations | Cash from (used for) operating activities – continuing operations | (2,640) | | (919) | | Cash from (used for) operating activities – continuing operations | (1,527) | | (1,876) | |
| Cash from (used for) operating activities – discontinued operations | Cash from (used for) operating activities – discontinued operations | 680 | | 686 | | Cash from (used for) operating activities – discontinued operations | 2,427 | | 1,816 | |
| Cash from (used for) operating activities | Cash from (used for) operating activities | (1,959) | | (233) | | Cash from (used for) operating activities | 900 | | (60) | |
| | Additions to property, plant and equipment | Additions to property, plant and equipment | (332) | | (504) | | Additions to property, plant and equipment | (895) | | (1,302) | |
| Dispositions of property, plant and equipment | Dispositions of property, plant and equipment | 34 | | 28 | | Dispositions of property, plant and equipment | 128 | | 134 | |
| Additions to internal-use software | Additions to internal-use software | (24) | | (60) | | Additions to internal-use software | (78) | | (125) | |
| Net decrease (increase) in financing receivables | Net decrease (increase) in financing receivables | 21 | | (103) | | Net decrease (increase) in financing receivables | 66 | | (32) | |
| | Proceeds from principal business dispositions | Proceeds from principal business dispositions | 1 | | 20,505 | | Proceeds from principal business dispositions | 1 | | 20,577 | |
| Net cash from (payments for) principal businesses purchased | Net cash from (payments for) principal businesses purchased | 0 | | (6) | | Net cash from (payments for) principal businesses purchased | (27) | | (10) | |
| | Sales of retained ownership interests | Sales of retained ownership interests | 735 | | 0 | | Sales of retained ownership interests | 2,961 | | — | |
| Net (purchases) dispositions of GE Capital investment securities | Net (purchases) dispositions of GE Capital investment securities | (709) | | (1,289) | | Net (purchases) dispositions of GE Capital investment securities | (1,158) | | (1,292) | |
| All other investing activities | All other investing activities | 1,121 | | 1,455 | | All other investing activities | 1,912 | | 1,719 | |
| Cash from (used for) investing activities – continuing operations | Cash from (used for) investing activities – continuing operations | 847 | | 20,025 | | Cash from (used for) investing activities – continuing operations | 2,909 | | 19,667 | |
| Cash from (used for) investing activities – discontinued operations | Cash from (used for) investing activities – discontinued operations | (646) | | (920) | | Cash from (used for) investing activities – discontinued operations | (2,683) | | (1,966) | |
| Cash from (used for) investing activities | Cash from (used for) investing activities | 202 | | 19,105 | | Cash from (used for) investing activities | 226 | | 17,702 | |
| | Net increase (decrease) in borrowings (maturities of 90 days or less) | Net increase (decrease) in borrowings (maturities of 90 days or less) | (319) | | (1,905) | | Net increase (decrease) in borrowings (maturities of 90 days or less) | (390) | | (4,198) | |
| Newly issued debt (maturities longer than 90 days) | Newly issued debt (maturities longer than 90 days) | 314 | | 125 | | Newly issued debt (maturities longer than 90 days) | 364 | | 14,452 | |
| Repayments and other debt reductions (maturities longer than 90 days) | Repayments and other debt reductions (maturities longer than 90 days) | (1,513) | | (5,867) | | Repayments and other debt reductions (maturities longer than 90 days) | (10,210) | | (24,486) | |
| | Dividends paid to shareholders | Dividends paid to shareholders | (148) | | (89) | | Dividends paid to shareholders | (431) | | (412) | |
| All other financing activities | All other financing activities | 57 | | (226) | | All other financing activities | (1,836) | | (369) | |
| Cash from (used for) financing activities – continuing operations | Cash from (used for) financing activities – continuing operations | (1,608) | | (7,962) | | Cash from (used for) financing activities – continuing operations | (12,502) | | (15,014) | |
| Cash from (used for) financing activities – discontinued operations | Cash from (used for) financing activities – discontinued operations | 3 | | 43 | | Cash from (used for) financing activities – discontinued operations | 101 | | (24) | |
| Cash from (used for) financing activities | Cash from (used for) financing activities | (1,605) | | (7,919) | | Cash from (used for) financing activities | (12,401) | | (15,038) | |
| Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (131) | | (256) | | Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (136) | | (11) | |
| Increase (decrease) in cash, cash equivalents and restricted cash | Increase (decrease) in cash, cash equivalents and restricted cash | (3,494) | | 10,697 | | Increase (decrease) in cash, cash equivalents and restricted cash | (11,412) | | 2,593 | |
| Cash, cash equivalents and restricted cash at beginning of year | Cash, cash equivalents and restricted cash at beginning of year | 37,608 | | 37,077 | | Cash, cash equivalents and restricted cash at beginning of year | 37,608 | | 37,077 | |
| Cash, cash equivalents and restricted cash at March 31 | 34,115 | | 47,774 | | |
| Less cash, cash equivalents and restricted cash of discontinued operations at March 31 | 625 | | 584 | | |
| Cash, cash equivalents and restricted cash of continuing operations at March 31 | $ | 33,490 | | $ | 47,190 | | |
| Cash, cash equivalents and restricted cash at September 30 | | Cash, cash equivalents and restricted cash at September 30 | 26,197 | | 39,670 | |
Less cash, cash equivalents and restricted cash of discontinued operations at September 30 | | Less cash, cash equivalents and restricted cash of discontinued operations at September 30 | 435 | | 612 | |
| Cash, cash equivalents and restricted cash of continuing operations at September 30 | | Cash, cash equivalents and restricted cash of continuing operations at September 30 | $ | 25,762 | | $ | 39,058 | |
| | STATEMENT OF CASH FLOWS (CONTINUED) | STATEMENT OF CASH FLOWS (CONTINUED) | Three months ended March 31 | STATEMENT OF CASH FLOWS (CONTINUED) | Nine months ended September 30 |
| (UNAUDITED) | (UNAUDITED) | GE Industrial | | GE Capital | (UNAUDITED) | GE Industrial | | GE Capital |
| (In millions) | (In millions) | 2021 | 2020 | | 2021 | 2020 | (In millions) | 2021 | 2020 | | 2021 | 2020 |
| Net earnings (loss) | Net earnings (loss) | $ | 230 | | $ | 6,384 | | | $ | (3,028) | | $ | (151) | | Net earnings (loss) | $ | 1,042 | | $ | 4,355 | | | $ | (3,791) | | $ | (1,449) | |
| | (Earnings) loss from discontinued operations | (Earnings) loss from discontinued operations | 0 | | 14 | | | 2,894 | | 7 | | (Earnings) loss from discontinued operations | 4 | | 33 | | | 2,851 | | 1,039 | |
| Adjustments to reconcile net earnings (loss) | Adjustments to reconcile net earnings (loss) | | Adjustments to reconcile net earnings (loss) | |
| to cash provided from operating activities | to cash provided from operating activities | | to cash provided from operating activities | |
| Depreciation and amortization of property, plant and equipment (Note 7) | Depreciation and amortization of property, plant and equipment (Note 7) | 446 | | 453 | | | 6 | | 7 | | Depreciation and amortization of property, plant and equipment (Note 7) | 1,372 | | 1,664 | | | 18 | | 20 | |
| Amortization of intangible assets (Note 8) | Amortization of intangible assets (Note 8) | 297 | | 315 | | | 3 | | 3 | | Amortization of intangible assets (Note 8) | 849 | | 1,028 | | | 11 | | 8 | |
| | Goodwill impairments (Note 8) | | Goodwill impairments (Note 8) | — | | 877 | | | — | | — | |
| | (Gains) losses on purchases and sales of business interests (Note 23) | (Gains) losses on purchases and sales of business interests (Note 23) | (3) | | (12,372) | | | 0 | | 0 | | (Gains) losses on purchases and sales of business interests (Note 23) | 155 | | (12,445) | | | — | | — | |
| (Gains) losses on equity securities (Note 23) | (Gains) losses on equity securities (Note 23) | (293) | | 5,789 | | | (4) | | 85 | | (Gains) losses on equity securities (Note 23) | (1,010) | | 4,761 | | | (26) | | 21 | |
| Principal pension plans cost (Note 14) | Principal pension plans cost (Note 14) | 658 | | 877 | | | 0 | | 0 | | Principal pension plans cost (Note 14) | 1,990 | | 2,681 | | | — | | — | |
| Principal pension plans employer contributions | Principal pension plans employer contributions | (74) | | (70) | | | 0 | | 0 | | Principal pension plans employer contributions | (232) | | (226) | | | — | | — | |
| Other postretirement benefit plans (net) | Other postretirement benefit plans (net) | (275) | | (247) | | | (14) | | (8) | | Other postretirement benefit plans (net) | (734) | | (675) | | | (39) | | (37) | |
| Provision (benefit) for income taxes | Provision (benefit) for income taxes | 148 | | 187 | | | (6) | | (133) | | Provision (benefit) for income taxes | 1 | | (22) | | | (324) | | (566) | |
| Cash recovered (paid) during the year for income taxes | Cash recovered (paid) during the year for income taxes | (336) | | (278) | | | 14 | | (32) | | Cash recovered (paid) during the year for income taxes | (1,113) | | (1,805) | | | 65 | | 667 | |
| Changes in operating working capital: | Changes in operating working capital: | | Changes in operating working capital: | |
| Decrease (increase) in current receivables | Decrease (increase) in current receivables | 691 | | 487 | | | 0 | | 0 | | Decrease (increase) in current receivables | (1,499) | | (118) | | | — | | — | |
| Decrease (increase) in inventories, including deferred inventory costs | Decrease (increase) in inventories, including deferred inventory costs | (681) | | (1,065) | | | 0 | | 0 | | Decrease (increase) in inventories, including deferred inventory costs | (1,120) | | (385) | | | — | | — | |
| Decrease (increase) in current contract assets | Decrease (increase) in current contract assets | (35) | | 145 | | | 0 | | 0 | | Decrease (increase) in current contract assets | 498 | | 855 | | | — | | — | |
| Increase (decrease) in accounts payable and equipment project accruals | Increase (decrease) in accounts payable and equipment project accruals | (449) | | (1,475) | | | 14 | | (18) | | Increase (decrease) in accounts payable and equipment project accruals | (287) | | (3,020) | | | 8 | | (26) | |
| Increase (decrease) in progress collections and current deferred income | Increase (decrease) in progress collections and current deferred income | (425) | | (590) | | | 0 | | 0 | | Increase (decrease) in progress collections and current deferred income | (1,471) | | (1,247) | | | — | | — | |
| All other operating activities | All other operating activities | (390) | | (215) | | | (2,359) | | 763 | | All other operating activities | 721 | | 513 | | | (1,738) | | 936 | |
| Cash from (used for) operating activities – continuing operations | Cash from (used for) operating activities – continuing operations | (491) | | (1,662) | | | (2,479) | | 524 | | Cash from (used for) operating activities – continuing operations | (832) | | (3,175) | | | (2,963) | | 612 | |
| Cash from (used for) operating activities – discontinued operations | Cash from (used for) operating activities – discontinued operations | 0 | | 29 | | | 681 | | 658 | | Cash from (used for) operating activities – discontinued operations | 5 | | 34 | | | 2,422 | | 1,782 | |
| Cash from (used for) operating activities | Cash from (used for) operating activities | (491) | | (1,633) | | | (1,798) | | 1,181 | | Cash from (used for) operating activities | (827) | | (3,141) | | | (541) | | 2,394 | |
| | Additions to property, plant and equipment | Additions to property, plant and equipment | (332) | | (504) | | | 0 | | 0 | | Additions to property, plant and equipment | (896) | | (1,302) | | | — | | — | |
| Dispositions of property, plant and equipment | Dispositions of property, plant and equipment | 34 | | 29 | | | 0 | | 0 | | Dispositions of property, plant and equipment | 128 | | 134 | | | — | | — | |
| Additions to internal-use software | Additions to internal-use software | (23) | | (58) | | | (1) | | (1) | | Additions to internal-use software | (76) | | (121) | | | (3) | | (5) | |
| Net decrease (increase) in financing receivables | Net decrease (increase) in financing receivables | 0 | | 0 | | | 575 | | (559) | | Net decrease (increase) in financing receivables | — | | — | | | 3,398 | | (292) | |
| | Proceeds from principal business dispositions | Proceeds from principal business dispositions | 1 | | 20,505 | | | 0 | | 0 | | Proceeds from principal business dispositions | 1 | | 20,408 | | | — | | — | |
| Net cash from (payments for) principal businesses purchased | Net cash from (payments for) principal businesses purchased | 0 | | (6) | | | 0 | | 0 | | Net cash from (payments for) principal businesses purchased | (27) | | (10) | | | — | | — | |
| | Sales of retained ownership interests | Sales of retained ownership interests | 735 | | 0 | | | 0 | | 0 | | Sales of retained ownership interests | 2,961 | | — | | | — | | — | |
| Net (purchases) dispositions of GE Capital investment securities | Net (purchases) dispositions of GE Capital investment securities | 0 | | 0 | | | (709) | | (1,289) | | Net (purchases) dispositions of GE Capital investment securities | — | | — | | | (1,158) | | (1,292) | |
| All other investing activities | All other investing activities | 133 | | 81 | | | 1,334 | | 2,579 | | All other investing activities | 124 | | 210 | | | 1,771 | | 10,840 | |
| Cash from (used for) investing activities – continuing operations | Cash from (used for) investing activities – continuing operations | 548 | | 20,046 | | | 1,199 | | 730 | | Cash from (used for) investing activities – continuing operations | 2,216 | | 19,318 | | | 4,008 | | 9,251 | |
| Cash from (used for) investing activities – discontinued operations | Cash from (used for) investing activities – discontinued operations | 0 | | (33) | | | (646) | | (887) | | Cash from (used for) investing activities – discontinued operations | (5) | | (39) | | | (2,678) | | (1,927) | |
| Cash from (used for) investing activities | Cash from (used for) investing activities | 549 | | 20,013 | | | 553 | | (157) | | Cash from (used for) investing activities | 2,211 | | 19,279 | | | 1,330 | | 7,324 | |
| | Net increase (decrease) in borrowings (maturities of 90 days or less) | Net increase (decrease) in borrowings (maturities of 90 days or less) | (655) | | (1,881) | | | (223) | | (514) | | Net increase (decrease) in borrowings (maturities of 90 days or less) | (1,304) | | (4,323) | | | (118) | | (460) | |
| Newly issued debt (maturities longer than 90 days) | Newly issued debt (maturities longer than 90 days) | 0 | | 1 | | | 315 | | 124 | | Newly issued debt (maturities longer than 90 days) | 5 | | 7,432 | | | 359 | | 7,020 | |
| Repayments and other debt reductions (maturities longer than 90 days) | Repayments and other debt reductions (maturities longer than 90 days) | (20) | | (64) | | | (1,493) | | (5,804) | | Repayments and other debt reductions (maturities longer than 90 days) | (4,156) | | (12,129) | | | (6,054) | | (19,857) | |
| | Dividends paid to shareholders | Dividends paid to shareholders | (118) | | (89) | | | (41) | | (42) | | Dividends paid to shareholders | (402) | | (265) | | | (41) | | (276) | |
| All other financing activities | All other financing activities | (27) | | (12) | | | 84 | | (214) | | All other financing activities | (658) | | (84) | | | (1,181) | | (286) | |
| Cash from (used for) financing activities – continuing operations | Cash from (used for) financing activities – continuing operations | (820) | | (2,045) | | | (1,358) | | (6,450) | | Cash from (used for) financing activities – continuing operations | (6,514) | | (9,369) | | | (7,035) | | (13,859) | |
| Cash from (used for) financing activities – discontinued operations | Cash from (used for) financing activities – discontinued operations | 0 | | 0 | | | 3 | | 43 | | Cash from (used for) financing activities – discontinued operations | — | | 1 | | | 101 | | (24) | |
| Cash from (used for) financing activities | Cash from (used for) financing activities | (820) | | (2,045) | | | (1,355) | | (6,406) | | Cash from (used for) financing activities | (6,514) | | (9,369) | | | (6,934) | | (13,883) | |
| Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (85) | | (143) | | | (46) | | (113) | | Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | (83) | | (50) | | | (53) | | 38 | |
| Increase (decrease) in cash, cash equivalents and restricted cash | Increase (decrease) in cash, cash equivalents and restricted cash | (848) | | 16,193 | | | (2,646) | | (5,495) | | Increase (decrease) in cash, cash equivalents and restricted cash | (5,214) | | 6,719 | | | (6,198) | | (4,126) | |
| Cash, cash equivalents and restricted cash at beginning of year | 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 beginning of year | 23,209 | | 17,617 | | | 14,400 | | 19,460 | |
| Cash, cash equivalents and restricted cash at March 31 | 22,361 | | 33,810 | | | 11,754 | | 13,964 | | |
| Less cash, cash equivalents and restricted cash of discontinued operations at March 31 | 0 | | 0 | | | 625 | | 584 | | |
| Cash, cash equivalents and restricted cash of continuing operations at March 31 | $ | 22,361 | | $ | 33,810 | | | $ | 11,129 | | $ | 13,380 | | |
| Cash, cash equivalents and restricted cash at September 30 | | Cash, cash equivalents and restricted cash at September 30 | 17,995 | | 24,337 | | | 8,202 | | 15,333 | |
Less cash, cash equivalents and restricted cash of discontinued operations at September 30 | | Less cash, cash equivalents and restricted cash of discontinued operations at September 30 | — | | — | | | 435 | | 612 | |
| Cash, cash equivalents and restricted cash of continuing operations at September 30 | | Cash, cash equivalents and restricted cash of continuing operations at September 30 | $ | 17,995 | | $ | 24,337 | | | $ | 7,767 | | $ | 14,721 | |
| | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | Three months ended March 31 | | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | Three months ended September 30 | | Nine months ended September 30 |
| (In millions, net of tax) | (In millions, net of tax) | 2021 | 2020 | | (In millions, net of tax) | 2021 | 2020 | | 2021 | 2020 |
| Net earnings (loss) | Net earnings (loss) | $ | (2,798) | | $ | 6,233 | | | Net earnings (loss) | $ | 1,184 | | $ | (1,195) | | | $ | (2,748) | | $ | 2,907 | |
| Less net earnings (loss) attributable to noncontrolling interests | Less net earnings (loss) attributable to noncontrolling interests | 5 | | 34 | | | Less net earnings (loss) attributable to noncontrolling interests | (73) | | (51) | | | (72) | | (161) | |
| Net earnings (loss) attributable to the Company | Net earnings (loss) attributable to the Company | $ | (2,802) | | $ | 6,199 | | | Net earnings (loss) attributable to the Company | $ | 1,257 | | $ | (1,144) | | | $ | (2,677) | | $ | 3,068 | |
| | Investment securities | $ | (18) | | $ | (41) | | | |
| Currency translation adjustments | Currency translation adjustments | 110 | | 135 | | | Currency translation adjustments | (158) | | 55 | | | 81 | | 133 | |
| Cash flow hedges | 62 | | (211) | | | |
| Benefit plans | Benefit plans | 705 | | 1,035 | | | Benefit plans | 753 | | 609 | | | 2,372 | | 2,248 | |
| Other comprehensive income (loss) | 859 | | 918 | | | |
| Investment securities and cash flow hedges | | Investment securities and cash flow hedges | 2,151 | | 32 | | | 2,222 | | (140) | |
| | Less: other comprehensive income (loss) attributable to noncontrolling interests | Less: other comprehensive income (loss) attributable to noncontrolling interests | 3 | | 5 | | | Less: other comprehensive income (loss) attributable to noncontrolling interests | 4 | | — | | | 5 | | 7 | |
| Other comprehensive income (loss) attributable to the Company | Other comprehensive income (loss) attributable to the Company | $ | 856 | | $ | 913 | | | Other comprehensive income (loss) attributable to the Company | $ | 2,742 | | $ | 695 | | | $ | 4,671 | | $ | 2,234 | |
| | Comprehensive income (loss) | Comprehensive income (loss) | $ | (1,939) | | $ | 7,152 | | | Comprehensive income (loss) | $ | 3,930 | | $ | (499) | | | $ | 1,927 | | $ | 5,147 | |
| Less: comprehensive income (loss) attributable to noncontrolling interests | Less: comprehensive income (loss) attributable to noncontrolling interests | 8 | | 39 | | | Less: comprehensive income (loss) attributable to noncontrolling interests | (69) | | (50) | | | (67) | | (154) | |
| Comprehensive income (loss) attributable to the Company | Comprehensive income (loss) attributable to the Company | $ | (1,947) | | $ | 7,113 | | | Comprehensive income (loss) attributable to the Company | $ | 3,999 | | $ | (449) | | | $ | 1,994 | | $ | 5,302 | |
| | CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) | CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) | Three months ended March 31 | | CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) | Three months ended September 30 | | Nine months ended September 30 |
| (In millions) | (In millions) | 2021 | 2020 | | (In millions) | 2021 | 2020 | | 2021 | 2020 |
| Preferred stock issued | Preferred stock issued | $ | 6 | | $ | 6 | | | Preferred stock issued | $ | 6 | | $ | 6 | | | $ | 6 | | $ | 6 | |
| Common stock issued | Common stock issued | $ | 702 | | $ | 702 | | | Common stock issued | $ | 15 | | $ | 702 | | | $ | 15 | | $ | 702 | |
| | Beginning balance | Beginning balance | (9,749) | | (11,732) | | | Beginning balance | (7,820) | | (10,194) | | | (9,749) | | (11,732) | |
| Investment securities | (18) | | (41) | | | |
| | Currency translation adjustments | Currency translation adjustments | 108 | | 133 | | | Currency translation adjustments | (160) | | 55 | | | 80 | | 129 | |
| Cash flow hedges | 62 | | (211) | | | |
| Benefit plans | Benefit plans | 704 | | 1,032 | | | Benefit plans | 751 | | 609 | | | 2,369 | | 2,245 | |
| Accumulated other comprehensive income (loss) ending balance | $ | (8,893) | | $ | (10,819) | | | |
| Investment securities and cash flow hedges | | Investment securities and cash flow hedges | 2,151 | | 32 | | | 2,222 | | (140) | |
| Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | $ | (5,078) | | $ | (9,498) | | | $ | (5,078) | | $ | (9,498) | |
| Beginning balance | Beginning balance | 34,307 | | 34,405 | | | Beginning balance | 34,032 | | 34,292 | | | 34,307 | | 34,405 | |
| Gains (losses) on treasury stock dispositions | Gains (losses) on treasury stock dispositions | (384) | | (249) | | | Gains (losses) on treasury stock dispositions | (78) | | (162) | | | (571) | | (574) | |
| Stock-based compensation | Stock-based compensation | 106 | | 105 | | | Stock-based compensation | 109 | | 104 | | | 322 | | 319 | |
| Other changes | Other changes | 14 | | 35 | | | Other changes | 689 | | 46 | | | 694 | | 129 | |
| Other capital ending balance | $ | 34,042 | | $ | 34,296 | | | |
| Other capital | | Other capital | $ | 34,751 | | $ | 34,279 | | | $ | 34,751 | | $ | 34,279 | |
| Beginning balance | Beginning balance | 92,247 | | 87,732 | | | Beginning balance | 87,993 | | 91,188 | | | 92,247 | | 87,732 | |
| Net earnings (loss) attributable to the Company | Net earnings (loss) attributable to the Company | (2,802) | | 6,199 | | | Net earnings (loss) attributable to the Company | 1,257 | | (1,144) | | | (2,677) | | 3,068 | |
| Dividends and other transactions with shareholders | Dividends and other transactions with shareholders | (168) | | (142) | | | Dividends and other transactions with shareholders | (152) | | (139) | | | (473) | | (720) | |
| Changes in accounting (Note 1) | 0 | | (175) | | | |
| Retained earnings ending balance | $ | 89,276 | | $ | 93,615 | | | |
| Changes in accounting | | Changes in accounting | — | | — | | | — | | (175) | |
| Retained earnings | | Retained earnings | $ | 89,098 | | $ | 89,905 | | | $ | 89,098 | | $ | 89,905 | |
| Beginning balance | Beginning balance | (81,961) | | (82,797) | | | Beginning balance | (81,425) | | (82,320) | | | (81,961) | | (82,797) | |
| Purchases | Purchases | (38) | | (14) | | | Purchases | (4) | | (3) | | | (87) | | (25) | |
| Dispositions | Dispositions | 450 | | 295 | | | Dispositions | 116 | | 198 | | | 733 | | 697 | |
| Common stock held in treasury ending balance | $ | (81,548) | | $ | (82,516) | | | |
| Common stock held in treasury | | Common stock held in treasury | $ | (81,314) | | $ | (82,125) | | | $ | (81,314) | | $ | (82,125) | |
| GE shareholders' equity balance | GE shareholders' equity balance | 33,585 | | 35,284 | | | GE shareholders' equity balance | 37,477 | | 33,269 | | | 37,477 | | 33,269 | |
| Noncontrolling interests balance (Note 17) | 1,568 | | 1,575 | | | |
| Total equity balance at March 31 | $ | 35,153 | | $ | 36,859 | | | |
| Noncontrolling interests balance | | Noncontrolling interests balance | 1,484 | | 1,524 | | | 1,484 | | 1,524 | |
| Total equity balance at September 30 | | Total equity balance at September 30 | $ | 38,961 | | $ | 34,793 | | | $ | 38,961 | | $ | 34,793 | |
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. We present our financial statements in a three-column format, which allows investors to see our GE industrial operations separately from our financial services operations. We believe that this provides useful supplemental information to our consolidated financial statements. To the extent that we have transactions between GE Industrial and GE Capital, these transactions are made on arms-length terms, are reported in the respective columns of our financial statements and are eliminated in consolidation. See Note 22 for further information.
Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP), which requires us to make estimates based on assumptions about current and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in our financial statements. Although our current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations 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, 2020.
Our significant accounting policies are described in Note 1 of our aforementioned Annual Report.
ACCOUNTING CHANGES. On January 1, 2021, we adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU removes certain exceptions from the guidance in ASC 740 related to intra-period tax allocations, interim calculations and the recognition of deferred tax liabilities for outside basis differences and clarifies and simplifies several other aspects of accounting for income taxes. Different transition methods apply to the various income tax simplifications. For the changes requiring a retrospective or modified retrospective transition, the adoption of the new standard did not have a material impact to our financial statements.
NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS. In September of 2021, we signed an agreement to exit GE's share of our boiler manufacturing business in China in our Power segment. In connection with the transaction, we recorded a loss on the planned disposal of this business of $172 million in Other income in our consolidated Statement of Earnings (Loss). We expect to complete the sale in the fourth quarter of 2021. See Note 23 for further information.
On March 31, 2020, we completed the sale of our BioPharma business within our Healthcare segment for total consideration of $21,112 million (after certain working capital adjustments) and incurred $185 million of cash payments directly associated with the transaction. In the first quarterthree quarters of 2020, we recognized a pre-tax gain of $12,292$12,362 million ($11,14511,214 million after-tax) in our consolidated Statement of Earnings (Loss).
DISCONTINUED OPERATIONS. Primarily primarily comprise our GE Capital Aviation Services (GECAS) business, our mortgage portfolio in Poland, and other trailing assets and liabilities associated with the dispositions of certain GE Capital and GE Industrial businesses.prior dispositions. Results of operations, financial position and cash flows for these businesses are reported as discontinued operations for all periods presented.
GECAS. On March 9, 2021 we entered into an agreement with AerCap Holdings N.V. (AerCap) to combine our GECAS business with AerCap.AerCap (GECAS transaction). GE will receive total consideration consisting of $23,905approximately $22,650 million cash, subject toinclusive of estimated contractual closing adjustments, 111.5 million shares of AerCap common stock (approximately 46% ownership interest) valued at $6,550$6,446 million based on the AerCap’s closing share price of $58.74$57.81 on March 31,September 30, 2021 and $1,000 million paid in AerCap notes and/or cash upon closing at AerCap's option.notes. As a result, we have reclassified GECAS' results to discontinued operations for all periods presented and recognized a non-cash after-tax loss of $2,755$3,638 million in discontinued operations infor the first quarter ofnine months ended September 30, 2021. Given the economics of GECAS accrue to AerCap in conjunction with the transaction, the net impact of GECAS (loss on sale and operations) could change materially, mainly due to fluctuations in AerCap's closing share price. Completion of the transaction remains subject to AerCap shareholder approval,In October 2021, we received final regulatory approvals and other customary closing conditions.are now expecting the transaction to be completed on November 1, 2021.
After completion of the transaction, we will elect to prospectively measure our investment in AerCap at fair value and expect to have continuing involvement with AerCap, primarily through our ownership interest and ongoing sales or leases of products and services.
Bank BPH. The mortgage portfolio in Poland (Bank BPH) comprises floating rate residential mortgages, 86% of which are indexed to or denominated in foreign currencies (primarily Swiss francs). At March 31,September 30, 2021, the total portfolio had a carrying value of $1,986$1,938 million with a 1.67%1.96% 90-day delinquency rate and an average loan to value ratio of approximately 61.6%61.1%. 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 threenine months ended March 31,September 30, 2021 included $282$289 million non-cash pre-tax charges, reflecting estimates with respect to ongoing litigation as well as market yields.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 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 bya 50-50 joint venture between GE and BKR and is consolidated by GE due to the significance of our investment in BKR.
For the threenine months ended March 31,September 30, 2021, we had sales of $166$439 million and purchases of $61$177 million with BKR for products and services outside of the JV. We collected net cash of $131$347 million from BKR related to sales, purchases and transition services.
InFor the first quarter ofnine months ended September 30, 2021, we had sales of $119$351 million to BKR for products and services from the JV, and we collected cash of $161$423 million. WhenWe expect to reduce our investment in BKR is reduced to below 20%, in the fourth quarter, at which point we will deconsolidate the JV. AThe deconsolidation of the JV is not expected to have a material impact on GE Industrial Cash from operating activities (CFOA).
In addition, for the nine months ended September 30, 2021, we received $28$31 million of repayments on the promissory note receivable from BKR and dividends of $56$143 million on our investment.
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| RESULTS OF DISCONTINUED OPERATIONS | | | | | | | | | | | | | Three months ended March 31 | | |
| | | | | | | | | | | | | | | | | | | 2021 | 2020 | | | |
| Operations | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| GE Capital revenues from services | | | | | | | | | | | | | | | | | | | $ | 633 | | $ | 1,010 | | | | |
| Cost of goods and services sold | | | | | | | | | | | | | | | | | | | (368) | | (547) | | | | |
| Other income, costs and expenses | | | | | | | | | | | | | | | | | | | (386) | | (462) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Earnings (loss) of discontinued operations before income taxes | | | | | | | | | | | | | | | | | | | (121) | | 2 | | | | |
| Benefit (provision) for income taxes | | | | | | | | | | | | | | | | | | | (29) | | (19) | | | | |
| Earnings (loss) of discontinued operations, net of taxes(a)(b) | | | | | | | | | | | | | | | | | | | $ | (149) | | $ | (17) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Disposal | | | | | | | | | | | | | | | | | | | | | | | |
| Gain (loss) on disposal before income taxes | | | | | | | | | | | | | | | | | | | (2,702) | | (4) | | | | |
| Benefit (provision) for income taxes | | | | | | | | | | | | | | | | | | | (43) | | 0 | | | | |
| Gain (loss) on disposal, net of taxes | | | | | | | | | | | | | | | | | | | $ | (2,745) | | $ | (4) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Earnings (loss) from discontinued operations, net of taxes | | | | | | | | | | | | | | | | | | | $ | (2,894) | | $ | (21) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| RESULTS OF DISCONTINUED OPERATIONS | | | | | | | | | | | | | Three months ended September 30 | | Nine months ended September 30 |
| | | | | | | | | | | | | | | | | | | 2021 | 2020 | | 2021 | 2020 |
| Operations | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| GE Capital revenues from services | | | | | | | | | | | | | | | | | | | $ | 933 | | $ | 966 | | | $ | 2,469 | | $ | 3,032 | |
| Cost of goods and services sold | | | | | | | | | | | | | | | | | | | (19) | | (640) | | | (394) | | (2,027) | |
| Other income, costs and expenses | | | | | | | | | | | | | | | | | | | (340) | | (380) | | | (1,037) | | (2,090) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Earnings (loss) of discontinued operations before income taxes | | | | | | | | | | | | | | | | | | | $ | 575 | | $ | (54) | | | $ | 1,037 | | $ | (1,085) | |
| Benefit (provision) for income taxes | | | | | | | | | | | | | | | | | | | (208) | | 6 | | | (287) | | 36 | |
| Earnings (loss) of discontinued operations, net of taxes(a) | | | | | | | | | | | | | | | | | | | $ | 367 | | $ | (49) | | | $ | 750 | | $ | (1,050) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Disposal | | | | | | | | | | | | | | | | | | | | | | | |
| Gain (loss) on disposal before income taxes | | | | | | | | | | | | | | | | | | | $ | 174 | | $ | (8) | | | $ | (3,661) | | $ | (22) | |
| Benefit (provision) for income taxes | | | | | | | | | | | | | | | | | | | 62 | | (1) | | | 55 | | (1) | |
| Gain (loss) on disposal, net of taxes(b) | | | | | | | | | | | | | | | | | | | $ | 236 | | $ | (9) | | | $ | (3,606) | | $ | (23) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Earnings (loss) from discontinued operations, net of taxes | | | | | | | | | | | | | | | | | | | $ | 602 | | $ | (58) | | | $ | (2,856) | | $ | (1,072) | |
(a) Earnings (loss) of discontinued operations attributable to the Company after income taxes was $(149)Included $490 million and $(15) million for the three months ended March 31, 2021 and 2020, respectively.
(b) Included $177 million and $155$(38) million from GECAS operations, including $(359) million0 and $(545)$637 million of depreciation and amortization, for the three months ended March 31,September 30, 2021 and 2020, respectively. Included $1,163 million and $(906) million from GECAS operations, including $359 million and $2,020 million of depreciation and amortization, for the nine months ended September 30, 2021 and 2020, respectively. Depreciation and amortization ceased on March 10, 2021.
(b) Gain for the three months ended September 30, 2021 was primarily driven by GECAS due to an increase in fair value of AerCap common stock to be received of $736 million, partially offset by an increase in GECAS net assets of $475 million attributable to income from operations.
| | ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS | ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS | March 31, 2021 | December 31, 2020 | ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS | September 30, 2021 | December 31, 2020 |
| Cash, cash equivalents and restricted cash | Cash, cash equivalents and restricted cash | $ | 142 | | $ | 0 | | Cash, cash equivalents and restricted cash | $ | 31 | | $ | — | |
| Financing receivables - net | Financing receivables - net | 2,095 | | 0 | | Financing receivables - net | 1,985 | | — | |
| Other GE Capital receivables | Other GE Capital receivables | 2,122 | | 0 | | Other GE Capital receivables | 1,928 | | — | |
| Property, plant, and equipment - net | Property, plant, and equipment - net | 28,143 | | 0 | | Property, plant, and equipment - net | 29,369 | | — | |
| Valuation allowance on disposal group classified as discontinued operations | Valuation allowance on disposal group classified as discontinued operations | (2,536) | | 0 | | Valuation allowance on disposal group classified as discontinued operations | (3,560) | | — | |
| All other current assets | All other current assets | 3,957 | | 0 | | All other current assets | 4,029 | | — | |
| Total current assets of discontinued operations | Total current assets of discontinued operations | 33,922 | | 0 | | Total current assets of discontinued operations | 33,782 | | — | |
| Cash, cash equivalents and restricted cash | Cash, cash equivalents and restricted cash | 483 | | 623 | | Cash, cash equivalents and restricted cash | 404 | | 623 | |
| Financing receivables - net | Financing receivables - net | 0 | | 2,710 | | Financing receivables - net | — | | 2,710 | |
| Other GE Capital receivables | Other GE Capital receivables | 49 | | 1,844 | | Other GE Capital receivables | 50 | | 1,844 | |
| Financing receivables held for sale (Polish mortgage portfolio) | Financing receivables held for sale (Polish mortgage portfolio) | 1,986 | | 2,461 | | Financing receivables held for sale (Polish mortgage portfolio) | 1,938 | | 2,461 | |
| Property, plant, and equipment - net | Property, plant, and equipment - net | 102 | | 28,429 | | Property, plant, and equipment - net | 92 | | 28,429 | |
| All other assets | All other assets | 389 | | 4,683 | | All other assets | 370 | | 4,683 | |
| Assets of discontinued operations(a) | Assets of discontinued operations(a) | $ | 36,931 | | $ | 40,749 | | Assets of discontinued operations(a) | $ | 36,637 | | $ | 40,749 | |
| | Deferred income taxes | Deferred income taxes | $ | 2,268 | | $ | 0 | | Deferred income taxes | $ | 2,242 | | $ | — | |
| Accounts payable and all other liabilities | Accounts payable and all other liabilities | 2,723 | | 0 | | Accounts payable and all other liabilities | 2,546 | | — | |
| Total current liabilities of discontinued operations | Total current liabilities of discontinued operations | 4,991 | | 0 | | Total current liabilities of discontinued operations | 4,788 | | — | |
| Deferred income taxes | Deferred income taxes | 0 | | 2,172 | | Deferred income taxes | 2 | | 2,172 | |
| Accounts payable and all other liabilities(b) | Accounts payable and all other liabilities(b) | 204 | | 3,010 | | Accounts payable and all other liabilities(b) | 107 | | 3,010 | |
| Liabilities of discontinued operations(a) | Liabilities of discontinued operations(a) | $ | 5,195 | | $ | 5,182 | | Liabilities of discontinued operations(a) | $ | 4,896 | | $ | 5,182 | |
(a) Included $33,922$33,782 million and $37,199 million of assets and $4,991$4,788 million and $4,997 million of liabilities for GECAS as of March 31,September 30, 2021 and December 31, 2020, respectively.
(b) Included within All other liabilities of discontinued operations at March 31,September 30, 2021 and December 31, 2020 are intercompany tax receivables in the amount of $657$715 million and $704 million, respectively, primarily related to previously disposed financial services businesses, which are eliminated upon consolidation.
NOTE 3. INVESTMENT SECURITIES. All of our debt securities are classified as available-for-sale and substantially all are investment-grade supporting obligations to annuitants and policyholders in our run-off insurance operations. We have adopted the fair value option for our investment in BKR (comprising 311.4214.0 million shares with approximately 30%20.5% ownership and a promissory note receivable as of March 31,September 30, 2021), which is recorded as Equity securities with readily determinable fair values. We classify investment securities as current or non-current based on our intent regarding the usage of proceeds from those investments. Investment securities held within insurance entities are classified as non-current as they support the long-duration insurance liabilities.
| | | March 31, 2021 | | December 31, 2020 | | September 30, 2021 | | December 31, 2020 |
| | Amortized
cost | Gross
unrealized
gains | Gross
unrealized
losses | Estimated
fair value | | Amortized
cost | Gross
unrealized
gains | Gross
unrealized
losses | Estimated
fair value | | 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) | Equity (Baker Hughes) | $ | 6,741 | | $ | — | | $ | — | | $ | 6,741 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | | Equity (Baker Hughes) | $ | 5,300 | | $ | — | | $ | — | | $ | 5,300 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | |
| Current investment securities | Current investment securities | $ | 6,741 | | $ | — | | $ | — | | $ | 6,741 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | | Current investment securities | $ | 5,300 | | $ | — | | $ | — | | $ | 5,300 | | | $ | 7,319 | | $ | — | | $ | — | | $ | 7,319 | |
| Debt | Debt | | Debt | |
| U.S. corporate | U.S. corporate | $ | 24,159 | | $ | 4,616 | | $ | (79) | | $ | 28,695 | | | $ | 23,604 | | $ | 6,651 | | $ | (26) | | $ | 30,230 | | U.S. corporate | $ | 24,995 | | $ | 5,536 | | $ | (38) | | $ | 30,493 | | | $ | 23,604 | | $ | 6,651 | | $ | (26) | | $ | 30,230 | |
| Non-U.S. corporate | Non-U.S. corporate | 2,456 | | 273 | | (5) | | 2,724 | | | 2,283 | | 458 | | (1) | | 2,740 | | Non-U.S. corporate | 2,489 | | 349 | | (3) | | 2,835 | | | 2,283 | | 458 | | (1) | | 2,740 | |
| State and municipal | State and municipal | 3,409 | | 648 | | (19) | | 4,038 | | | 3,387 | | 878 | | (9) | | 4,256 | | State and municipal | 2,848 | | 643 | | (5) | | 3,486 | | | 3,387 | | 878 | | (9) | | 4,256 | |
| Mortgage and asset-backed | Mortgage and asset-backed | 3,725 | | 153 | | (63) | | 3,815 | | | 3,652 | | 171 | | (71) | | 3,752 | | Mortgage and asset-backed | 3,771 | | 159 | | (34) | | 3,896 | | | 3,652 | | 171 | | (71) | | 3,752 | |
| Government and agencies | Government and agencies | 1,166 | | 112 | | (3) | | 1,275 | | | 1,169 | | 184 | | 0 | | 1,353 | | Government and agencies | 1,102 | | 120 | | (2) | | 1,221 | | | 1,169 | | 184 | | — | | 1,353 | |
| Other equity | Other equity | 239 | | — | | — | | 239 | | | 218 | | — | | — | | 218 | | Other equity | 465 | | — | | — | | 465 | | | 218 | | — | | — | | 218 | |
| Non-current investment securities | Non-current investment securities | $ | 35,152 | | $ | 5,801 | | $ | (168) | | $ | 40,786 | | | $ | 34,313 | | $ | 8,342 | | $ | (106) | | $ | 42,549 | | Non-current investment securities | $ | 35,669 | | $ | 6,808 | | $ | (82) | | $ | 42,394 | | | $ | 34,313 | | $ | 8,342 | | $ | (106) | | $ | 42,549 | |
| Total | Total | $ | 41,893 | | $ | 5,801 | | $ | (168) | | $ | 47,527 | | | $ | 41,632 | | $ | 8,342 | | $ | (106) | | $ | 49,868 | | Total | $ | 40,970 | | $ | 6,808 | | $ | (82) | | $ | 47,695 | | | $ | 41,632 | | $ | 8,342 | | $ | (106) | | $ | 49,868 | |
The amortized cost of debt securities as of March 31,September 30, 2021 excludes accrued interest of $438$437 million, which is reported in current Other GE Capital receivables.
The estimated fair value of investment securities at March 31,September 30, 2021 decreased since December 31, 2020, primarily due to higher market yields and the sale of BKR shares and higher market yields, partially offset by new investments in our Insurance business and the mark-to-market effect on our remaining interest in BKR.
Total estimated fair value of debt securities in an unrealized loss position were $3,732$2,764 million and $1,765 million, of which $644$488 million and $165 million had gross unrealized losses of $(56)$(32) million and $(20) million and had been in a loss position for 12 months or more at March 31,September 30, 2021 and December 31, 2020, respectively. Gross unrealized losses of $(168)$(82) million at March 31,September 30, 2021 included $(79)$(38) million related to U.S. corporate securities and $(57)$(31) million related to commercial mortgage-backed securities (CMBS). Primarily 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 $238$405 million and $(5,772)$(776) million for the three months ended March 31,and $1,051 million and $(4,619) million for the nine months ended September 30, 2021 and 2020, respectively.
Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the BKR promissory note totaled $1,333$1,745 million and $1,250$833 million for the three months ended March 31,and $4,695 million and $3,538 million for the nine months ended September 30, 2021 and 2020, respectively. Gross realized gains on investmentdebt securities were $30$16 million and $46 million and gross realized losses and impairments were $(60) million and $(17)$15 million for the three months ended March 31,and $59 million and $143 million for the nine months ended September 30, 2021 and 2020, respectively. Gross realized losses and impairments on debt securities were both insignificant for the three months ended September 30, 2021 and 2020. Gross realized losses and impairments on debt securities were $(10) million and $(49) million for the nine months ended September 30, 2021 and 2020, respectively.
Contractual maturities of our debt securities (excluding mortgage and asset-backed securities) at March 31,September 30, 2021 are as follows:
| | | Amortized
cost | Estimated
fair value | | Amortized
cost | Estimated
fair value |
| Within one year | Within one year | $ | 613 | | $ | 622 | | Within one year | $ | 638 | | $ | 647 | |
| After one year through five years | After one year through five years | 3,111 | | 3,396 | | After one year through five years | 3,290 | | 3,596 | |
| After five years through ten years | After five years through ten years | 6,579 | | 7,626 | | After five years through ten years | 6,264 | | 7,336 | |
| After ten years | After ten years | 20,886 | | 25,088 | | After ten years | 21,241 | | 26,455 | |
We expect actual maturities to differ from contractual maturities because borrowers 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 $5,641$5,845 million and $5,866 million are classified within Level 3, as significant inputs to the valuation model are unobservable at March 31,September 30, 2021 and December 31, 2020, respectively. During the threenine months ended March 31,September 30, 2021 and 2020, there were no significant transfers into or out of Level 3.
In addition to the equity securities described above, we hold $291$366 million and $274 million of equity securities without readily determinable fair values at March 31,September 30, 2021 and December 31, 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 anboth insignificant amount and $(93) million for the three months ended March 31,and $34 million and $(144) million for the nine months ended September 30, 2021 and 2020, respectively.
NOTE 4. CURRENT AND LONG-TERM RECEIVABLES
| | CURRENT RECEIVABLES | CURRENT RECEIVABLES | Consolidated | | GE Industrial | CURRENT RECEIVABLES | Consolidated | | GE Industrial |
| | March 31, 2021 | December 31, 2020 | | March 31, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 |
| Customer receivables | Customer receivables | $ | 12,441 | | $ | 13,459 | | | $ | 9,307 | | $ | 9,841 | | Customer receivables | $ | 11,890 | | $ | 13,459 | | | $ | 11,359 | | $ | 9,841 | |
| Sundry receivables(a)(b) | Sundry receivables(a)(b) | 4,106 | | 4,395 | | | 4,274 | | 4,763 | | Sundry receivables(a)(b) | 4,098 | | 4,395 | | | 4,121 | | 4,763 | |
| Allowance for credit losses(c) | Allowance for credit losses(c) | (1,165) | | (1,164) | | | (1,163) | | (1,161) | | Allowance for credit losses(c) | (1,113) | | (1,164) | | | (1,112) | | (1,161) | |
| Total current receivables | Total current receivables | $ | 15,381 | | $ | 16,691 | | | $ | 12,418 | | $ | 13,442 | | Total current receivables | $ | 14,874 | | $ | 16,691 | | | $ | 14,368 | | $ | 13,442 | |
(a) Includes supplier advances, revenue sharing programs receivables in our Aviation business, other non-income based tax receivables, primarily value-added tax related to our operations in various countries outside of the U.S., receivables from disposed businesses, including receivables for transactional services agreements and certain intercompany balances that eliminate upon consolidation. Revenue sharing program receivables in Aviation are amounts due from third parties who participate in engine programs by developing and supplying certain engine components through the life of the program. The participants share in program revenues, receive a share of customer progress payments and share costs related to discounts and warranties.
(b) Consolidated current receivables included a deferred purchase price receivable, which represents our retained risk with respect to current customer receivables sold to third parties through one of the receivableour active receivables facilities. The balance of the deferred purchase price held by GE Capital as of March 31,September 30, 2021 and December 31, 2020 was $461$484 million and $413 million, respectively.
(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 $39 million offset by write-offs and foreign currency impact.$132 million.
Sales of GE Industrial current customer receivables. Effective April 1, 2021, the Company discontinued the majority of its factoring programs. The remaining balance related to these discontinued programs was $720 million as of September 30, 2021, including $530 million retained by GE Capital. Sales to GE Capital occurring after March 31, 2021 are only in connection with our remaining unconsolidated receivables facility described below. Customer receivables held by GE Capital and third parties were $3,134 million and $2,582 million, respectively, at March 31, 2021. When GE Industrial sells customer receivables to GE Capital or third parties, it 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 arms-length terms and any discount related to time value of money is recognized by GE Industrial when the customer receivables are sold. In our Statement of Cash Flows, receivables purchased and retained by GE Capital are reflected as cash from operating activities at GE Industrial, primarily as cash used for investing activities at GE Capital and are eliminated in consolidation. Collections on receivables purchased by GE Capital are reflected primarily as cash from investing activities at GE Capital and are reclassified to cash from operating activities in consolidation. As of March 31,September 30, 2021 and 2020, GE Industrial sold approximately 38%19% and 49%45%, respectively, of its gross customer receivables to GE Capital or third parties. Effective April 1, 2021, the Company discontinued the majority of its factoring programs. Activity related to customer receivables sold by GE Industrial is as follows:
| | | 2021 | | 2020 | | 2021 | | 2020 |
| | GE Capital | | Third Parties | | GE Capital | | Third Parties | | GE Capital | | Third Parties | | GE Capital | | Third Parties |
| Balance at January 1 | Balance at January 1 | $ | 3,618 | | | $ | 2,992 | | | $ | 3,087 | | | $ | 6,757 | | Balance at January 1 | $ | 3,618 | | | $ | 2,992 | | | $ | 3,087 | | | $ | 6,757 | |
| GE Industrial sales to GE Capital | GE Industrial sales to GE Capital | 7,044 | | | — | | | 9,225 | | | — | | GE Industrial sales to GE Capital | 12,890 | | | — | | | 24,630 | | | — | |
| GE Industrial sales to third parties | GE Industrial sales to third parties | — | | | 124 | | | — | | | 307 | | GE Industrial sales to third parties | — | | | 765 | | | — | | | 699 | |
| GE Capital sales to third parties | GE Capital sales to third parties | (3,826) | | | 3,826 | | | (5,253) | | | 5,253 | | GE Capital sales to third parties | (9,933) | | | 9,933 | | | (13,757) | | | 13,757 | |
| Collections and other | Collections and other | (3,765) | | | (4,360) | | | (3,224) | | | (7,797) | | Collections and other | (6,144) | | | (11,538) | | | (9,805) | | | (17,755) | |
| Reclassification from long-term customer receivables | Reclassification from long-term customer receivables | 63 | | | 0 | | | 123 | | | 0 | | Reclassification from long-term customer receivables | 99 | | | — | | | 207 | | | — | |
| Balance at March 31 | $ | 3,134 | | (a) | $ | 2,582 | | (b) | $ | 3,958 | | (a) | $ | 4,519 | | |
| Balance at September 30 | | Balance at September 30 | $ | 530 | | (a) | $ | 2,152 | | (b) | $ | 4,362 | | (a) | $ | 3,458 | |
(a) At March 31,September 30, 2021 and 2020, $526$240 million and $557$640 million, respectively, of the current receivables purchased and retained by GE Capital had been sold by GE Industrial to GE Capital with recourse (i.e., GE Industrial retains all or some risk of default). The effect on GE Industrial CFOA of claims by GE Capital on receivables sold with recourse was insignificant for the threenine months ended March 31,September 30, 2021 and 2020.
(b) Included $1,863$1,962 million in our active unconsolidated receivables facility at September 30, 2021, ($1,936 million at June 30, 2021 and $1,863 million at March 31, 2021,2021) under which we currently expect to continue sales of GE Industrial receivables in the future.receivables.
| | LONG-TERM RECEIVABLES | LONG-TERM RECEIVABLES | Consolidated | | GE Industrial | LONG-TERM RECEIVABLES | Consolidated | | GE Industrial |
| | March 31, 2021 | December 31, 2020 | | March 31, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 |
| Long-term customer receivables(a) | Long-term customer receivables(a) | $ | 638 | | $ | 585 | | | $ | 601 | | $ | 474 | | Long-term customer receivables(a) | $ | 741 | | $ | 585 | | | $ | 739 | | $ | 474 | |
| Long-term sundry receivables(b) | Long-term sundry receivables(b) | 1,656 | | 1,748 | | | 1,928 | | 2,097 | | Long-term sundry receivables(b) | 1,611 | | 1,748 | | | 1,795 | | 2,097 | |
| Allowance for credit losses | Allowance for credit losses | (136) | | (142) | | | (136) | | (142) | | Allowance for credit losses | (133) | | (142) | | | (133) | | (142) | |
| Total long-term receivables | Total long-term receivables | $ | 2,158 | | $ | 2,191 | | | $ | 2,392 | | $ | 2,430 | | Total long-term receivables | $ | 2,218 | | $ | 2,191 | | | $ | 2,401 | | $ | 2,430 | |
(a) As of March 31,September 30, 2021 and December 31, 2020, GE Capital held $37 millionan insignificant amount and $111 million, respectively, of GE Industrial long-term customer receivables, substantially all of which are with recourse (i.e. GE Industrial retains all or some risk of default).receivables.
(b) Includes supplier advances, revenue sharing programs receivables, other non-income based tax receivables and certain intercompany balances that eliminate upon consolidation.
UNCONSOLIDATED RECEIVABLES FACILITIES. GE Capital has 1 active revolving receivables facility, under which customer receivables purchased from GE Industrial are sold to third parties. In thisThe facility which has a program size of $2,000 million as of March 31, 2021, uponSeptember 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.
Activity related to our unconsolidated receivables facilities is included in the GE Capital sales to third parties line in the sales of GE Industrial current customer receivables table above and is as follows:
| | Three months ended March 31 | 2021 | | 2020 | |
| Nine months ended September 30 | | Nine months ended September 30 | 2021 | | 2020 |
| Customer receivables sold to receivables facilities | Customer receivables sold to receivables facilities | $ | 2,605 | | | $ | 4,307 | | Customer receivables sold to receivables facilities | $ | 8,442 | | | $ | 10,570 | |
| Collections and other on receivables sold to receivables facilities | | Collections and other on receivables sold to receivables facilities | 8,523 | | | 12,146 | |
| Total cash purchase price for customer receivables | Total cash purchase price for customer receivables | 2,479 | | | 4,120 | | Total cash purchase price for customer receivables | 7,966 | | | 10,060 | |
| Cash collections re-invested to purchase customer receivables | Cash collections re-invested to purchase customer receivables | 2,274 | | | 3,723 | | Cash collections re-invested to purchase customer receivables | 7,203 | | | 8,865 | |
| | Non-cash increases to deferred purchase price | Non-cash increases to deferred purchase price | $ | 116 | | | $ | 160 | | Non-cash increases to deferred purchase price | $ | 432 | | | $ | 446 | |
| Cash payments received on deferred purchase price | Cash payments received on deferred purchase price | 68 | | | 78 | | Cash payments received on deferred purchase price | 362 | | | 388 | |
CONSOLIDATED SECURITIZATION ENTITIES. GE Capital consolidates 32 variable interest entities (VIEs) that purchased customer receivables and long-term customer receivables from GE Industrial.Industrial prior to the April 1, 2021 discontinuation of the majority of the Company's factoring programs. At March 31,September 30, 2021 and December 31, 2020, these VIEs held current customer receivables of $1,133$198 million and $1,489 million and long-term customer receivables of $29 millionzero and $93 million, respectively. At March 31,September 30, 2021 and December 31, 2020, the outstanding non-recourse debt under their respective debt facilities was $624 millionzero and $892 million, respectively.
NOTE 5. FINANCING RECEIVABLES AND ALLOWANCES
| | | Consolidated | | GE Capital | | Consolidated | | GE Capital |
| | March 31, 2021 | December 31, 2020 | | March 31, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 |
| Loans, net of deferred income | Loans, net of deferred income | $ | 337 | | $ | 359 | | | $ | 3,749 | | $ | 4,182 | | Loans, net of deferred income | $ | 300 | | $ | 359 | | | $ | 1,311 | | $ | 4,182 | |
| Allowance for losses | Allowance for losses | (31) | | (32) | | | (11) | | (10) | | Allowance for losses | (29) | | (32) | | | (11) | | (10) | |
| Current financing receivables - net | $ | 306 | | $ | 326 | | | $ | 3,738 | | $ | 4,172 | | |
| Current financing receivables – net | | Current financing receivables – net | $ | 271 | | $ | 326 | | | $ | 1,300 | | $ | 4,172 | |
We manage our GE Capital financing receivables portfolio using delinquency data as key performance indicators. At March 31,September 30, 2021 and December 31, 2020, financing receivables over 30 days past due were 3.7%0.2% and 2.8% and 90 days past due were 1.6%0.2% and 1.7%, respectively.
GE Capital financing receivables that comprise receivables purchased from GE Industrial are reclassified to either Current receivables or All other assets in our consolidated Statement of Financial Position. To the extent these receivables are purchased with full or limited recourse, they are excluded from the delinquency above. See Note 4 for further information.
NOTE 6. INVENTORIES, INCLUDING DEFERRED INVENTORY COSTS
| | | March 31, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 |
| Raw materials and work in process | Raw materials and work in process | $ | 8,013 | | $ | 7,937 | | Raw materials and work in process | $ | 8,682 | | $ | 7,937 | |
| Finished goods | Finished goods | 6,057 | | 5,654 | | Finished goods | 5,583 | | 5,654 | |
| Deferred inventory costs(a) | Deferred inventory costs(a) | 2,460 | | 2,299 | | Deferred inventory costs(a) | 2,525 | | 2,299 | |
| Inventories, including deferred inventory costs | Inventories, including deferred inventory costs | $ | 16,530 | | $ | 15,890 | | Inventories, including deferred inventory costs | $ | 16,790 | | $ | 15,890 | |
(a) Represents cost deferral for shipped goods (such as components for wind turbine assemblies within our Renewable Energy segment) and labor and overhead costs on time and material service contracts (primarily originating in Power and Aviation) and other costs for which the criteria for revenue recognition has not yet been met.
NOTE 7. PROPERTY, PLANT AND EQUIPMENT
| | | March 31, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 |
| Original cost | Original cost | $ | 31,893 | | $ | 32,098 | | Original cost | $ | 32,121 | | $ | 32,098 | |
| Less accumulated depreciation and amortization | Less accumulated depreciation and amortization | (18,405) | | (18,251) | | Less accumulated depreciation and amortization | (18,968) | | (18,251) | |
| Right-of-use operating lease assets | Right-of-use operating lease assets | 2,808 | | 2,852 | | Right-of-use operating lease assets | 2,720 | | 2,852 | |
| Property, plant and equipment – net | Property, plant and equipment – net | $ | 16,296 | | $ | 16,699 | | Property, plant and equipment – net | $ | 15,873 | | $ | 16,699 | |
Consolidated depreciation and amortization on property, plant and equipment was $452$455 million and $461$744 million for the three months ended March 31,September 30, 2021 and 2020, respectively, and $1,390 million and $1,664 million for the nine months ended September 30, 2021 and 2020, respectively.
In the third quarter of 2020, we recognized a non-cash pre-tax impairment charge of $316 million related to property, plant and equipment at our Steam business within our Power segment due to our announcement to exit the new build coal power market. We determined the fair value of these assets using an income approach. This charge was recorded by Corporate in Selling, general, and administrative expenses in our consolidated Statement of Earnings (Loss).
Operating Lease Liabilities. Our consolidated operating lease liabilities, included in All other liabilities in our Statement of Financial Position, were $3,143$3,004 million and $3,195 million, as of March 31,September 30, 2021 and December 31, 2020, respectively, which included GE Industrial operating lease liabilities of $3,083$2,948 million and $3,133 million, respectively. Expense on our operating lease portfolio, primarily from our long-term fixed leases, was $281$287 million and $294$278 million for the three months ended March 31,September 30, 2021 and 2020, respectively, and $826 million and $857 million for the nine months ended September 30, 2021 and 2020, respectively.
NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
| | GOODWILL | GOODWILL | January 1, 2021 | | Currency exchange
and other | Balance at
March 31, 2021 | GOODWILL | January 1, 2021 | Acquisitions | | Currency exchange
and other | Balance at September 30, 2021 |
| Power | $ | 146 | | | $ | 0 | | $ | 145 | | |
| Renewable Energy | 3,401 | | | (88) | | 3,313 | | |
| Aviation | Aviation | 9,247 | | | (103) | | 9,144 | | Aviation | $ | 9,247 | | $ | — | | | $ | (126) | | $ | 9,121 | |
| Healthcare | Healthcare | 11,855 | | | (15) | | 11,840 | | Healthcare | 11,855 | | 45 | | | (19) | | 11,880 | |
| Renewable Energy | | Renewable Energy | 3,401 | | — | | | (88) | | 3,313 | |
| Power | | Power | 146 | | — | | | — | | 145 | |
| | Corporate | Corporate | 876 | | | 1 | | 877 | | Corporate | 876 | | — | | | (1) | | 875 | |
| Total | Total | $ | 25,524 | | | $ | (204) | | $ | 25,320 | | Total | $ | 25,524 | | $ | 45 | | | $ | (235) | | $ | 25,333 | |
In assessing the possibility that a reporting unit’s fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates, we consider all available evidence, including (i) the results of our impairment testing from the most recent testing date, (ii) downward revisions to internal forecasts or decreases in market multiples, if any, and (iii) declines in market capitalization. In the firstthird quarter of 2021, we did not identify any reporting units that required an interim impairment test. However, we continue to monitor the operating results and cash flow forecasts of our Additive reporting unit in our Aviation segment as the fair value of this reporting unit was not significantly in excess of its carrying value. At March 31,September 30, 2021, our Additive reporting unit had goodwill of $236$235 million.
AllSubstantially all other intangible assets of $9,395 million and $9,671 million at March 31, 2021 and December 31, 2020, respectively, are subject to amortization. Intangible assets decreased in$484 million during the first quarter ofnine months ended September 30, 2021, primarily as a result of amortization.amortization partially offset by the acquisition of patents and technology and capitalized software mainly at Aviation and Healthcare of $502 million. Consolidated amortization expense was $301$272 million and $318$420 million in the three months ended, March 31,and $860 million and $1,036 million in the nine months ended, September 30, 2021 and 2020, respectively.
In the third quarter of 2020, we recognized a non-cash pre-tax impairment charge of $113 million related to intangible assets at our Steam business within our Power segment due to our announcement to exit the new build coal power market. We determined the fair value of these intangible assets using an income approach. This charge was recorded by Corporate in Selling, general, and administrative expenses in our consolidated Statement of Earnings (Loss).
NOTE 9. REVENUES. The equipment and services revenues classification in the table below is consistent with our segment MD&AManagement's Discussion and Analysis presentation.
| | EQUIPMENT & SERVICES REVENUES | EQUIPMENT & SERVICES REVENUES | | EQUIPMENT & SERVICES REVENUES | |
| Three months ended March 31 | 2021 | | 2020 | |
| Three months ended September 30 | | Three months ended September 30 | 2021 | | 2020 |
| | Equipment | Services | Total | | Equipment | Services | Total | | Equipment | Services | Total | | Equipment | Services | Total |
| Power | $ | 1,241 | | $ | 2,679 | | $ | 3,921 | | | $ | 1,506 | | $ | 2,518 | | $ | 4,025 | | |
| Renewable Energy | 2,844 | | 404 | | 3,248 | | | 2,576 | | 618 | | 3,194 | | |
| Aviation | Aviation | 1,847 | | 3,145 | | 4,992 | | | 2,364 | | 4,529 | | 6,892 | | Aviation | $ | 1,837 | | $ | 3,562 | | $ | 5,398 | | | $ | 1,933 | | $ | 2,987 | | $ | 4,919 | |
| Healthcare | Healthcare | 2,227 | | 2,081 | | 4,308 | | | 2,699 | | 2,029 | | 4,727 | | Healthcare | 2,187 | | 2,151 | | 4,339 | | | 2,538 | | 2,027 | | 4,565 | |
| Renewable Energy | | Renewable Energy | 3,695 | | 512 | | 4,208 | | | 3,771 | | 754 | | 4,525 | |
| Power | | Power | 1,368 | | 2,658 | | 4,026 | | | 1,595 | | 2,430 | | 4,025 | |
| Corporate items and industrial eliminations | Corporate items and industrial eliminations | (188) | | 49 | | (139) | | | (48) | | 54 | | 6 | | Corporate items and industrial eliminations | (182) | | 33 | | (149) | | | (212) | | 95 | | (117) | |
| Total GE Industrial revenues | Total GE Industrial revenues | $ | 7,971 | | $ | 8,358 | | $ | 16,329 | | | $ | 9,097 | | $ | 9,748 | | $ | 18,844 | | Total GE Industrial revenues | $ | 8,905 | | $ | 8,916 | | $ | 17,821 | | | $ | 9,625 | | $ | 8,293 | | $ | 17,918 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30 | 2021 | | 2020 |
| Equipment | Services | Total | | Equipment | Services | Total |
| Aviation | $ | 5,549 | | $ | 9,681 | | $ | 15,230 | | | $ | 6,234 | | $ | 9,961 | | $ | 16,196 | |
| Healthcare | 6,671 | | 6,429 | | 13,100 | | | 7,287 | | 5,899 | | 13,185 | |
| Renewable Energy | 9,844 | | 1,661 | | 11,505 | | | 9,068 | | 2,155 | | 11,224 | |
| Power | 3,680 | | 8,561 | | 12,242 | | | 4,589 | | 7,617 | | 12,206 | |
| Corporate items and industrial eliminations | (566) | | 126 | | (439) | | | (251) | | 268 | | 17 | |
| Total GE Industrial revenues | $ | 25,178 | | $ | 26,459 | | $ | 51,637 | | | $ | 26,928 | | $ | 25,901 | | $ | 52,828 | |
| | | | | | | | | | | | | | | |
| REVENUES | Three months ended March 31 | | |
| 2021 | | 2020 | | | | |
| Gas Power | $ | 2,829 | | | $ | 2,859 | | | | | |
| Power Portfolio | 1,091 | | | 1,165 | | | | | |
| Power | $ | 3,921 | | | $ | 4,025 | | | | | |
| | | | | | | |
| Onshore Wind | $ | 2,118 | | | $ | 2,124 | | | | | |
| Grid Solutions equipment and services | 795 | | | 839 | | | | | |
| Hydro | 165 | | | 179 | | | | | |
| Offshore Wind and Hybrid Solutions | 169 | | | 51 | | | | | |
| Renewable Energy | $ | 3,248 | | | $ | 3,194 | | | | | |
| | | | | | | |
| Commercial Engines & Services | $ | 3,354 | | | $ | 5,113 | | | | | |
| Military | 956 | | | 960 | | | | | |
| Systems & Other | 682 | | | 820 | | | | | |
| Aviation | $ | 4,992 | | | $ | 6,892 | | | | | |
| | | | | | | |
| Healthcare Systems | $ | 3,825 | | | $ | 3,448 | | | | | |
| Pharmaceutical Diagnostics | 482 | | | 450 | | | | | |
| BioPharma | 0 | | | 830 | | | | | |
| Healthcare | $ | 4,308 | | | $ | 4,727 | | | | | |
| | | | | | | |
| Corporate items and industrial eliminations | (139) | | | 6 | | | | | |
| Total GE Industrial revenues | $ | 16,329 | | | $ | 18,844 | | | | | |
| Capital | 878 | | | 837 | | | | | |
| GE Capital-GE Industrial eliminations | $ | (89) | | | $ | (191) | | | | | |
| Consolidated revenues | $ | 17,118 | | | $ | 19,490 | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| REVENUES | Three months ended September 30 | | Nine months ended September 30 |
| 2021 | | 2020 | | 2021 | | 2020 |
| Commercial Engines & Services | $ | 3,602 | | | $ | 3,087 | | | $ | 10,071 | | | $ | 10,718 | |
| Military | 1,107 | | | 1,137 | | | 3,104 | | | 3,258 | |
| Systems & Other | 689 | | | 696 | | | 2,055 | | | 2,220 | |
| Aviation | $ | 5,398 | | | $ | 4,919 | | | $ | 15,230 | | | $ | 16,196 | |
| | | | | | | |
| Healthcare Systems | $ | 3,832 | | | $ | 4,085 | | | $ | 11,572 | | | $ | 11,056 | |
| Pharmaceutical Diagnostics | 507 | | | 480 | | | 1,528 | | | 1,300 | |
| BioPharma | — | | | — | | | — | | | 830 | |
| Healthcare | $ | 4,339 | | | $ | 4,565 | | | $ | 13,100 | | | $ | 13,185 | |
| | | | | | | |
| Onshore Wind | $ | 3,047 | | | $ | 3,303 | | | $ | 8,048 | | | $ | 7,914 | |
| Grid Solutions equipment and services | 759 | | | 936 | | | 2,330 | | | 2,587 | |
| Hydro | 190 | | | 160 | | | 549 | | | 490 | |
| Offshore Wind and Hybrid Solutions | 211 | | | 127 | | | 577 | | | 232 | |
| Renewable Energy | $ | 4,208 | | | $ | 4,525 | | | $ | 11,505 | | | $ | 11,224 | |
| | | | | | | |
| Gas Power | $ | 2,861 | | | $ | 2,940 | | | $ | 8,739 | | | $ | 8,876 | |
| Steam Power | 790 | | | 769 | | | 2,327 | | | 2,340 | |
| Power Conversion, Nuclear and other | 376 | | | 316 | | | 1,176 | | | 990 | |
| Power | $ | 4,026 | | | $ | 4,025 | | | $ | 12,242 | | | $ | 12,206 | |
| | | | | | | |
| Corporate items and industrial eliminations | (149) | | | (117) | | | (439) | | | 17 | |
| Total GE Industrial revenues | $ | 17,821 | | | $ | 17,918 | | | $ | 51,637 | | | $ | 52,828 | |
| Capital | 734 | | | 758 | | | 2,470 | | | 2,455 | |
| GE Capital-GE Industrial eliminations | $ | (126) | | | $ | (147) | | | $ | (280) | | | $ | (461) | |
| Consolidated revenues | $ | 18,429 | | | $ | 18,529 | | | $ | 53,826 | | | $ | 54,823 | |
| | | | | | | |
|
REMAINING PERFORMANCE OBLIGATION. As of March 31,September 30, 2021, the aggregate amount of the contracted revenues allocated to our unsatisfied (or partially unsatisfied) performance obligations was $226,962$238,505 million. We expect to recognize revenue as we satisfy our remaining performance obligations as follows: (1) equipment-related remaining performance obligation of $40,951$46,666 million, of which 62%52%, 82%72% and 97% is expected to be satisfied within 1, 2 and 5 years, respectively; and (2) services-related remaining performance obligation of $186,012$191,839 million, of which 15%11%, 47%42%, 67%64% and 83%81% is expected to be recognized within 1, 5, 10 and 15 years, respectively, and the remaining thereafter. Contract modifications could affect both the timing to complete as well as the amount to be received as we fulfill the related remaining performance obligations.
NOTE 10. CONTRACT AND OTHER DEFERRED ASSETS & PROGRESS COLLECTIONS AND DEFERRED INCOME
Contract and other deferred assets increased $153decreased $296 million in the threenine months ended March 31,September 30, 2021 primarily due to decreased long-term service agreements, partially offset by increased customer advances and other and the timing of revenue recognition ahead of billing milestones on our long-term equipment contracts. Our long-term service agreements decreased primarily due to billings of $2,232$7,258 million, offset by revenues recognized of $2,118$6,810 million, a net unfavorable change in estimated profitability of $325 million at Aviation and a net favorable change in estimated profitability of $31 million at Aviation and a net unfavorable change in estimated profitability of $8$37 million at Power.
| | March 31, 2021 | Power | Aviation | Renewable Energy | Healthcare | Other | Total | |
| September 30, 2021 | | September 30, 2021 | Aviation | Healthcare | Renewable Energy | Power | Other | Total |
| Revenues in excess of billings | Revenues in excess of billings | $ | 5,223 | | $ | 2,911 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 8,134 | | Revenues in excess of billings | $ | 2,714 | | $ | — | | $ | — | | $ | 5,480 | | $ | — | | $ | 8,195 | |
| Billings in excess of revenues | Billings in excess of revenues | (1,541) | | (5,347) | | 0 | | 0 | | 0 | | (6,888) | | Billings in excess of revenues | (6,188) | | — | | — | | (1,406) | | — | | (7,594) | |
| Long-term service agreements | Long-term service agreements | $ | 3,682 | | $ | (2,436) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1,246 | | Long-term service agreements | $ | (3,473) | | $ | — | | $ | — | | $ | 4,074 | | $ | — | | $ | 601 | |
| Short-term and other service agreements | Short-term and other service agreements | 139 | | 342 | | 109 | | 164 | | 16 | | 769 | | Short-term and other service agreements | 341 | | 177 | | 97 | | 91 | | 20 | | 725 | |
| Equipment contract revenues | Equipment contract revenues | 2,024 | | 36 | | 1,239 | | 289 | | 217 | | 3,805 | | Equipment contract revenues | 40 | | 315 | | 1,349 | | 1,963 | | 244 | | 3,912 | |
| Current contract assets | Current contract assets | $ | 5,845 | | $ | (2,058) | | $ | 1,348 | | $ | 454 | | $ | 232 | | $ | 5,821 | | Current contract assets | $ | (3,092) | | $ | 492 | | $ | 1,446 | | $ | 6,128 | | $ | 264 | | $ | 5,238 | |
| | Nonrecurring engineering costs | Nonrecurring engineering costs | 13 | | 2,436 | | 33 | | 29 | | 0 | | 2,511 | | Nonrecurring engineering costs | 2,467 | | 31 | | 30 | | 14 | | — | | 2,543 | |
| Customer advances and other | Customer advances and other | 783 | | 2,570 | | 0 | | 122 | | 0 | | 3,474 | | Customer advances and other | 2,596 | | 135 | | — | | 846 | | — | | 3,576 | |
| Non-current contract and other deferred assets | Non-current contract and other deferred assets | $ | 796 | | $ | 5,005 | | $ | 33 | | $ | 151 | | $ | 0 | | $ | 5,985 | | Non-current contract and other deferred assets | $ | 5,063 | | $ | 166 | | $ | 30 | | $ | 860 | | $ | — | | $ | 6,119 | |
| Total contract and other deferred assets | Total contract and other deferred assets | $ | 6,641 | | $ | 2,948 | | $ | 1,381 | | $ | 604 | | $ | 233 | | $ | 11,806 | | Total contract and other deferred assets | $ | 1,971 | | $ | 658 | | $ | 1,476 | | $ | 6,988 | | $ | 264 | | $ | 11,357 | |
| | December 31, 2020 | December 31, 2020 | | December 31, 2020 | |
| Revenues in excess of billings | Revenues in excess of billings | $ | 5,282 | | $ | 3,072 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 8,354 | | Revenues in excess of billings | $ | 3,072 | | $ | — | | $ | — | | $ | 5,282 | | $ | — | | $ | 8,354 | |
| Billings in excess of revenues | Billings in excess of revenues | (1,640) | | (5,375) | | 0 | | 0 | | 0 | | (7,015) | | Billings in excess of revenues | (5,375) | | — | | — | | (1,640) | | — | | (7,015) | |
| Long-term service agreements | Long-term service agreements | $ | 3,642 | | $ | (2,304) | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 1,338 | | Long-term service agreements | $ | (2,304) | | $ | — | | $ | — | | $ | 3,642 | | $ | — | | $ | 1,338 | |
| Short-term and other service agreements | Short-term and other service agreements | 129 | | 282 | | 106 | | 173 | | 29 | | 719 | | Short-term and other service agreements | 282 | | 173 | | 106 | | 129 | | 29 | | 719 | |
| Equipment contract revenues | Equipment contract revenues | 2,015 | | 59 | | 1,127 | | 306 | | 201 | | 3,707 | | Equipment contract revenues | 59 | | 306 | | 1,127 | | 2,015 | | 201 | | 3,707 | |
| Current contract assets | Current contract assets | $ | 5,786 | | $ | (1,963) | | $ | 1,233 | | $ | 479 | | $ | 229 | | $ | 5,764 | | Current contract assets | $ | (1,963) | | $ | 479 | | $ | 1,233 | | $ | 5,786 | | $ | 229 | | $ | 5,764 | |
| | Nonrecurring engineering costs | Nonrecurring engineering costs | 16 | | 2,409 | | 34 | | 31 | | 0 | | 2,490 | | Nonrecurring engineering costs | 2,409 | | 31 | | 34 | | 16 | | — | | 2,490 | |
| Customer advances and other | Customer advances and other | 822 | | 2,481 | | 0 | | 128 | | (32) | | 3,398 | | Customer advances and other | 2,481 | | 128 | | — | | 822 | | (32) | | 3,398 | |
| Non-current contract and other deferred assets | Non-current contract and other deferred assets | $ | 838 | | $ | 4,889 | | $ | 34 | | $ | 159 | | $ | (32) | | $ | 5,888 | | Non-current contract and other deferred assets | $ | 4,889 | | $ | 159 | | $ | 34 | | $ | 838 | | $ | (32) | | $ | 5,888 | |
| Total contract and other deferred assets | Total contract and other deferred assets | $ | 6,623 | | $ | 2,927 | | $ | 1,268 | | $ | 638 | | $ | 197 | | $ | 11,653 | | Total contract and other deferred assets | $ | 2,927 | | $ | 638 | | $ | 1,268 | | $ | 6,623 | | $ | 197 | | $ | 11,653 | |
Progress collections and deferred income decreased $431$1,424 million primarily due to the timing of revenue recognition in excess of new collections received, primarily at AviationRenewable Energy and Power.Aviation. Revenues recognized for contracts included in a liability position at the beginning of the year were $5,909$12,602 million and $4,137$10,762 million for the threenine months ended March 31,September 30, 2021 and 2020, respectively.
| | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | Power | Aviation | Renewable Energy | Healthcare | Other | Total |
| Progress collections on equipment contracts | $ | 4,829 | | $ | 197 | | $ | 1,388 | | $ | 0 | | $ | 0 | | $ | 6,414 | |
| Other progress collections | 371 | | 4,483 | | 4,343 | | 416 | | 121 | | 9,735 | |
| | | | | | |
| Current deferred income | 16 | | 122 | | 219 | | 1,392 | | 95 | | 1,844 | |
| Progress collections and deferred income | $ | 5,217 | | $ | 4,802 | | $ | 5,949 | | $ | 1,808 | | $ | 217 | | $ | 17,993 | |
| Non-current deferred income | 118 | | 855 | | 211 | | 555 | | 9 | | 1,748 | |
| Total Progress collections and deferred income | $ | 5,335 | | $ | 5,657 | | $ | 6,160 | | $ | 2,363 | | $ | 226 | | $ | 19,741 | |
| | December 31, 2020 | | |
| September 30, 2021 | | September 30, 2021 | Aviation | Healthcare | Renewable Energy | Power | Other | Total |
| Progress collections on equipment contracts | Progress collections on equipment contracts | $ | 4,918 | | $ | 214 | | $ | 1,229 | | $ | 0 | | $ | 0 | | $ | 6,362 | | Progress collections on equipment contracts | $ | 155 | | $ | — | | $ | 1,862 | | $ | 5,227 | | $ | — | | $ | 7,244 | |
| Other progress collections | Other progress collections | 458 | | 4,623 | | 4,604 | | 414 | | 152 | | 10,252 | | Other progress collections | 4,245 | | 480 | | 2,750 | | 292 | | 83 | | 7,849 | |
| | Current deferred income | Current deferred income | 17 | | 132 | | 194 | | 1,309 | | 105 | | 1,757 | | Current deferred income | 151 | | 1,346 | | 216 | | 22 | | 81 | | 1,816 | |
| Progress collections and deferred income | Progress collections and deferred income | $ | 5,393 | | $ | 4,969 | | $ | 6,028 | | $ | 1,724 | | $ | 257 | | $ | 18,371 | | Progress collections and deferred income | $ | 4,551 | | $ | 1,825 | | $ | 4,828 | | $ | 5,541 | | $ | 163 | | $ | 16,909 | |
| Non-current deferred income | Non-current deferred income | 116 | | 898 | | 214 | | 564 | | 10 | | 1,801 | | Non-current deferred income | 963 | | 564 | | 188 | | 118 | | 6 | | 1,839 | |
| Total Progress collections and deferred income | Total Progress collections and deferred income | $ | 5,509 | | $ | 5,867 | | $ | 6,241 | | $ | 2,288 | | $ | 267 | | $ | 20,172 | | Total Progress collections and deferred income | $ | 5,514 | | $ | 2,389 | | $ | 5,015 | | $ | 5,659 | | $ | 170 | | $ | 18,748 | |
| | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | | | | | |
| Progress collections on equipment contracts | $ | 214 | | $ | — | | $ | 1,229 | | $ | 4,918 | | $ | — | | $ | 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 includesinclude equity method and other investments, long-term customer and sundry receivables (see Note 4), cash and cash equivalents in our run-off insurance operations and prepaid taxes and other deferred charges. Consolidated All other non-current assets increased $1,270$1,614 million in the threenine months ended March 31,September 30, 2021, primarily due to an increaseincreases in pension surplus of $854 million driven primarily by remeasurement related to freezing the UK pension plans, equity method and other investments of $365 million and Insurance cash and cash equivalents of $1,252$352 million.
NOTE 12. BORROWINGS
| | | March 31, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 |
| | Current portion of long-term borrowings | Current portion of long-term borrowings | $ | 47 | | $ | 36 | | Current portion of long-term borrowings | $ | 1,002 | | $ | 36 | |
| Current portion of long-term borrowings assumed by GE Industrial | Current portion of long-term borrowings assumed by GE Industrial | 1,784 | | 2,432 | | Current portion of long-term borrowings assumed by GE Industrial | 2,346 | | 2,432 | |
| Other | Other | 488 | | 882 | | Other | 465 | | 882 | |
| Total GE Industrial short-term borrowings | Total GE Industrial short-term borrowings | $ | 2,318 | | $ | 3,350 | | Total GE Industrial short-term borrowings | $ | 3,813 | | $ | 3,350 | |
| | Current portion of long-term borrowings | Current portion of long-term borrowings | $ | 1,743 | | $ | 788 | | Current portion of long-term borrowings | $ | 1,696 | | $ | 788 | |
| Intercompany payable to GE Industrial | Intercompany payable to GE Industrial | 1,784 | | 2,432 | | Intercompany payable to GE Industrial | 2,346 | | 2,432 | |
| Non-recourse borrowings of consolidated securitization entities | Non-recourse borrowings of consolidated securitization entities | 624 | | 892 | | Non-recourse borrowings of consolidated securitization entities | — | | 892 | |
| Other | Other | 59 | | 283 | | Other | 166 | | 283 | |
| Total GE Capital short-term borrowings | Total GE Capital short-term borrowings | $ | 4,210 | | $ | 4,395 | | Total GE Capital short-term borrowings | $ | 4,207 | | $ | 4,395 | |
| | Eliminations | Eliminations | (2,061) | | (3,033) | | Eliminations | (2,562) | | (3,033) | |
| Total short-term borrowings | Total short-term borrowings | $ | 4,468 | | $ | 4,713 | | Total short-term borrowings | $ | 5,459 | | $ | 4,713 | |
| | Senior notes | Senior notes | $ | 18,753 | | $ | 18,994 | | Senior notes | $ | 13,709 | | $ | 18,994 | |
| Senior notes assumed by GE Industrial | Senior notes assumed by GE Industrial | 17,981 | | 18,178 | | Senior notes assumed by GE Industrial | 13,996 | | 18,178 | |
| Subordinated notes assumed by GE Industrial | Subordinated notes assumed by GE Industrial | 1,774 | | 1,779 | | Subordinated notes assumed by GE Industrial | 1,765 | | 1,779 | |
| Other | Other | 422 | | 435 | | Other | 384 | | 435 | |
| Total GE Industrial long-term borrowings | Total GE Industrial long-term borrowings | $ | 38,929 | | $ | 39,386 | | Total GE Industrial long-term borrowings | $ | 29,854 | | $ | 39,386 | |
| | Senior notes | Senior notes | $ | 27,292 | | $ | 30,132 | | Senior notes | $ | 26,918 | | $ | 30,132 | |
| Subordinated notes | Subordinated notes | 148 | | 189 | | Subordinated notes | 146 | | 189 | |
| Intercompany payable to GE Industrial | Intercompany payable to GE Industrial | 16,577 | | 16,780 | | Intercompany payable to GE Industrial | 12,583 | | 16,780 | |
| Non-recourse borrowings of consolidated securitization entities | 0 | | 0 | | |
| Other | Other | 521 | | 483 | | Other | 511 | | 483 | |
| Total GE Capital long-term borrowings | Total GE Capital long-term borrowings | $ | 44,539 | | $ | 47,584 | | Total GE Capital long-term borrowings | $ | 40,158 | | $ | 47,584 | |
| | Eliminations | Eliminations | (16,577) | | (16,780) | | Eliminations | (12,583) | | (16,780) | |
| Total long-term borrowings | Total long-term borrowings | $ | 66,890 | | $ | 70,189 | | Total long-term borrowings | $ | 57,429 | | $ | 70,189 | |
| Total borrowings | Total borrowings | $ | 71,358 | | $ | 74,902 | | Total borrowings | $ | 62,888 | | $ | 74,902 | |
At March 31,September 30, 2021, the outstanding GE Capital borrowings that had been assumed by GE Industrial as part of the GE Capital Exit Plan was $21,538$18,106 million ($1,7842,346 million short-term and $19,754$15,761 million long-term), for which GE Industrial has an offsetting Receivable from GE Capital of $18,361$14,929 million. The difference of $3,177 million in long-term borrowings represents the amount of borrowings GE Capital had funded with available cash to GE Industrial via intercompany loans in lieu of GE Industrial issuing borrowings externally.
At March 31,September 30, 2021, total GE Industrial borrowings of $22,886$18,738 million comprised GE Industrial-issued borrowings of $19,709$15,561 million and intercompany loans from GE Capital to GE Industrial of $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 applied to $27,332$27,202 million and $28,503 million of GE Capital debt at March 31,September 30, 2021 and December 31, 2020, respectively.
In the second quarter of 2021, GE Industrial completed a tender offer to purchase $4,114 million in aggregate principal amount of certain GE Industrial unsecured debt, comprising $201 million of 2.700% Notes due 2022, $752 million of 4.250% Notes due 2040, $377 million of 4.125% Notes due 2042, $311 million of 4.500% Notes due 2044 and $2,473 million of 4.350% Notes due 2050. The total cash consideration paid for these purchases was $4,756 million and the total carrying amount of the purchased notes was $4,084 million, resulting in a total pre-tax loss of $645 million. In addition to the purchase price, GE Industrial paid any accrued and unpaid interest on the purchased notes through the date of purchase.
In the second quarter of 2021, GE Capital completed a tender offer to purchase a total of $2,879 million in aggregate principal amount of certain senior unsecured debt, comprising $23 million of 4.650% Notes due 2021, $56 million of 3.150% Notes due 2022, $75 million of 3.100% Notes due 2023, $503 million of 6.150% Notes due 2037, $1,400 million of 5.875% Notes due 2038 and $823 million of 6.875% Notes due 2039. The total cash consideration paid for these purchases was $3,940 million and the carrying amount of the purchased notes was $3,191 million, resulting in a total pre-tax loss of $771 million. In addition to the purchase price, GE Capital paid any accrued and unpaid interest on the purchased notes through the date of purchase.
See Note 19 for further information about borrowings and associated interest rate swaps.
NOTE 13. INSURANCE LIABILITIES AND ANNUITY BENEFITS.Insurance liabilities and annuity benefits comprise substantially all obligations to annuitants and insureds in our run-off insurance operations. Our insurance operations generated revenues of $775$770 million and $616$764 million and profit (loss) of $116$52 million and $(93)$57 million for the three months ended March 31,September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021 and 2020, revenues were $2,348 million and $2,167 million and profit (loss) was $360 million and $78 million, respectively. These operations were supported by assets of $50,353$50,839 million and $50,824 million at March 31,September 30, 2021 and December 31, 2020, respectively. A summary of our insurance contracts is presented below:
| | March 31, 2021 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total | |
| September 30, 2021 | | September 30, 2021 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total |
| Future policy benefit reserves | Future policy benefit reserves | $ | 16,997 | | $ | 9,105 | | $ | 183 | | $ | 5,580 | | $ | 31,864 | | Future policy benefit reserves | $ | 17,078 | | $ | 8,969 | | $ | 187 | | $ | 3,919 | | $ | 30,153 | |
| Claim reserves | Claim reserves | 4,397 | | 306 | | 1,062 | | — | | 5,765 | | Claim reserves | 4,445 | | 265 | | 966 | | — | | 5,677 | |
| Investment contracts | Investment contracts | 0 | | 1,018 | | 1,003 | | — | | 2,021 | | Investment contracts | — | | 974 | | 971 | | — | | 1,945 | |
| Unearned premiums and other | Unearned premiums and other | 16 | | 191 | | 147 | | — | | 353 | | Unearned premiums and other | 14 | | 190 | | 110 | | — | | 315 | |
| | 21,409 | | 10,620 | | 2,395 | | 5,580 | | 40,004 | | | 21,538 | | 10,397 | | 2,235 | | 3,919 | | 38,090 | |
| Eliminations | Eliminations | — | | — | | (442) | | — | | (442) | | Eliminations | — | | — | | (385) | | — | | (385) | |
| Total | Total | $ | 21,409 | | $ | 10,620 | | $ | 1,953 | | $ | 5,580 | | $ | 39,562 | | Total | $ | 21,538 | | $ | 10,397 | | $ | 1,851 | | $ | 3,919 | | $ | 37,705 | |
| | December 31, 2020 | December 31, 2020 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total | December 31, 2020 | Long-term care | Structured settlement annuities & life | Other contracts | Other adjustments(a) | Total |
| Future policy benefit reserves | Future policy benefit reserves | $ | 16,934 | | $ | 9,207 | | $ | 181 | | $ | 8,160 | | $ | 34,482 | | Future policy benefit reserves | $ | 16,934 | | $ | 9,207 | | $ | 181 | | $ | 8,160 | | $ | 34,482 | |
| Claim reserves | Claim reserves | 4,393 | | 275 | | 1,068 | | — | | 5,736 | | Claim reserves | 4,393 | | 275 | | 1,068 | | — | | 5,736 | |
| Investment contracts | Investment contracts | 0 | | 1,034 | | 1,016 | | — | | 2,049 | | Investment contracts | — | | 1,034 | | 1,016 | | — | | 2,049 | |
| Unearned premiums and other | Unearned premiums and other | 19 | | 189 | | 89 | | — | | 298 | | Unearned premiums and other | 19 | | 189 | | 89 | | — | | 298 | |
| | 21,346 | | 10,705 | | 2,354 | | 8,160 | | 42,565 | | | 21,346 | | 10,705 | | 2,354 | | 8,160 | | 42,565 | |
| Eliminations | Eliminations | — | | — | | (374) | | — | | (374) | | Eliminations | — | | — | | (374) | | — | | (374) | |
| Total | Total | $ | 21,346 | | $ | 10,705 | | $ | 1,980 | | $ | 8,160 | | $ | 42,191 | | 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 decrease in Other adjustments of $2,580$4,241 million is a result of the decline in unrealized gains on investment securities.securities and the higher margin resulting from the 2021 premium deficiency test.
Claim reserves included incurred claims of $454$1,264 million and $507$1,390 million, of which insignificant amounts related to the recognition of adjustments to prior year claim reserves arising from our periodic reserve evaluation for the threenine months ended March 31,September 30, 2021 and 2020, respectively. Paid claims were $424$1,290 million and $405$1,328 million in the threenine months ended March 31,September 30, 2021 and 2020, respectively.
Reinsurance recoverables, net of allowances of $1,540$1,609 million and $1,510 million, are included in non-current Other GE Capital receivables in our consolidated Statement of Financial Position, and amounted to $2,592$2,613 million and $2,552 million at March 31,September 30, 2021 and December 31, 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.
2021 Premium Deficiency Testing. We completed our annual premium deficiency testing in the aggregate across our run-off insurance portfolio in the third quarter of 2021. These procedures included updating experience studies since our last test completed in the third quarter of 2020, independent actuarial analysis (principally on long-term care exposures) and review of industry benchmarks. Our 2021 premium deficiency testing started with the positive margin of less than 2% of the recorded future policy benefit reserves that resulted from our 2020 premium deficiency testing. Using updated assumptions, the 2021 premium deficiency testing results indicated a significant increase in the positive margin to approximately 11% of the related future policy benefit reserves recorded at September 30, 2021. As a result, the assumptions updated in connection with the premium deficiency recognized in 2019 remain locked-in and will remain so unless another premium deficiency occurs in the future.
The significant increase in the premium deficiency testing margin resulting from our 2021 premium deficiency testing was largely attributable to an increase in the overall discount rate to a weighted average rate of 6.15% compared to 5.70% in 2020 ($2,216 million). This increase in the discount rate from 2020 reflects further development of our previously communicated investment portfolio realignment strategy, that includes increased amounts allocated to growth assets, consisting of private equity, equity-like securities and select high yield credit strategies, from our current target of approximately 8% up to approximately 15%. These amounts are expected to be funded over the next 5 to 7 years from the remaining projected capital contribution of approximately $5,500 million through 2024 and regular portfolio cash flows while maintaining an overall A-rated fixed income portfolio. The 2021 discount rate assumptions also reflect a lower expected reinvestment rate on fixed-income investments versus that applied in 2020, due to lower prevailing benchmark interest rates in the U.S, grading to a lower expected long-term average investment yield over a shorter period and slightly lower actual yields on our fixed-income investment security portfolio. As a result of this increased allocation to higher-yielding assets, our run-off insurance operations may experience future earnings volatility due to investments carried at fair value with changes in fair values reported in earnings and changes in the allowance for credit losses and temporary elevated amounts of unfunded investment commitments.
When results of the premium deficiency testing indicate overall reserves are sufficient, we are also required to assess whether additional future policy benefit reserves are required to be accrued over time in the future. Such an accrual would be required if profits are projected in earlier future periods followed by losses projected in later future years (i.e., profits followed by losses). When this pattern of profits followed by losses is projected, we would be required to accrue a liability in the expected profitable years by the amount necessary to offset projected losses in later future years. We noted our projections as of third quarter 2021 indicate the present value of projected earnings in each future year to be positive, and therefore, no further adjustments to our future policy benefit reserves were required at this time.
NOTE 14. POSTRETIREMENT BENEFIT PLANS. We sponsor a number of pension and retiree health and life insurance benefit plans that we present in 3 categories, principal pension plans, other pension plans and principal retiree benefit plans. Please refer to Note 13 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of our postretirement benefit plans.
The components of benefit plans cost other than the service cost are included in the caption Non-operating benefit costs in our consolidated Statement of Earnings (Loss).
| | PRINCIPAL PENSION PLANS | PRINCIPAL PENSION PLANS | Three months ended March 31 | | PRINCIPAL PENSION PLANS | Three months ended September 30 | | Nine months ended September 30 |
| | 2021 | 2020 | | | 2021 | 2020 | | 2021 | 2020 |
| Service cost for benefits earned | Service cost for benefits earned | $ | 64 | | $ | 153 | | | Service cost for benefits earned | $ | 57 | | $ | 156 | | | $ | 179 | | $ | 501 | |
| Prior service cost amortization | Prior service cost amortization | 7 | | 37 | | | Prior service cost amortization | 8 | | 36 | | | 22 | | 110 | |
| Expected return on plan assets | Expected return on plan assets | (763) | | (748) | | | Expected return on plan assets | (763) | | (747) | | | (2,288) | | (2,243) | |
| Interest cost on benefit obligations | Interest cost on benefit obligations | 486 | | 587 | | | Interest cost on benefit obligations | 488 | | 588 | | | 1,464 | | 1,764 | |
| Net actuarial loss amortization | Net actuarial loss amortization | 864 | | 848 | | | Net actuarial loss amortization | 871 | | 850 | | | 2,613 | | 2,549 | |
| | Benefit plans cost | Benefit plans cost | $ | 658 | | $ | 877 | | | Benefit plans cost | $ | 661 | | $ | 883 | | | $ | 1,990 | | $ | 2,681 | |
Principal retiree benefit plans income was $40$43 million and $32$31 million for the three months ended March 31,September 30, 2021 and 2020, and $125 million and $85 million for the nine months ended September 30, 2021 and 2020, respectively. Other pension plans was $24$57 million income and $7$2 million cost for the three months ended March 31,September 30, 2021 and 2020, respectively.respectively and $44 million income and $12 million cost for the nine months ended September 30, 2021,and 2020, respectively, which includes a curtailment loss of $77 million in 2021 resulting from the freeze of the UK pension plans announced on June 10, 2021.
We also have a defined contribution plan for eligible U.S. employees that provides employer contributions. Defined contribution plan costs were $108$99 million and $95$71 million for the three months ended March 31,September 30, 2021 and 2020 and $321 million and $253 million for the nine months ended September 30, 2021 and 2020, respectively.
NOTE 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 $486$746 million in the threenine months ended March 31,September 30, 2021, primarily due to decreases in liabilities due to GE Capital of $957 million, employee compensation and benefit liabilities of $274 million and taxes payable of $220 million. These decreases were partially offset by increased sales allowances, equipment project and other commercial liabilities of $420 million and the conversion of a decreaseredeemable noncontrolling interest of $297 million, in Alstom legacy legal matters of $199 million (see Note 21)our Aviation segment, into a mandatorily redeemable instrument and a decrease in interest accruals on assumed debt of $132 million.reclassified to All other current liabilities.
NOTE 16. INCOME TAXES. Our consolidated effective income tax rate was 59.7%149.5% and 0.9%(17.4)% during the threenine months ended March 31,September 30, 2021 and 2020, respectively. The tax rate for 2021 reflects a tax benefit on a pre-tax loss. The negative rate for 2020 reflects a tax benefit on pre-tax income. The rate for 2021 is higher than the U.S. statutory rate on the loss primarily due to tax benefits associated with internal restructurings to recognize historical losses as a result of decreases in fair value. This was partially offset by the cost of global activities, including the base erosion and global intangible minimum tax provisions and from tax expense associated with the unrealized gain in our remaining interest in Baker Hughes. This was partially offset by an adjustment to decreaseincrease the 2021 three-monthnine-month tax rate to be in linein-line with the lower expected full-year rate and by U.S. business credits.rate. The ratetax benefit for 2020 is lower than the U.S. statutory rate primarily due to the lower tax rate on the sale of our BioPharma business. The tax rate on the BioPharma sale was low because the gain outside the U.S. was taxed at lower than 21% and because we recorded $633 million of the tax associated with preparatory steps for the transaction in the fourth quarter of 2019. This was partially offset by a non-deductible goodwill impairment charge associated with our Additive business within our Aviation segment.
The Internal Revenue Service (IRS) is currently auditing our consolidated U.S. income tax returns for 2016-2018. The
GE has resolved its dispute with the United Kingdom tax authority, (the UK Government) disallowedHM Revenue & Customs (HMRC) in connection with interest deductions claimed by GE Capital for the years 2004-2015 that could result in2004-2015. As previously disclosed, HMRC had proposed to disallow interest deductions with a potential impact of approximately $1.1 billion,$1,100 million, which includesincluded a possible assessment of tax and reduction of deferred tax assets, not including interest and penalties. We are contestingAs part of the disallowance. The UK Government is seeking to set asidesettlement, GE and HMRC agreed that a 2005 tax settlement agreement, alleging that GE misstated or omitted relevant facts. In October 2019, the UK Government asserted three new claims of fraudulent misrepresentation, one of which the Business and Property Court allowed in a July 2020 decision to go forward. In April 2021, the UK Court of Appeal reversed, holding that the equitable portion of that claim was time barred.the interest deductions claimed were disallowed, with no fault or blame attributed to either party. The UK Government has petitionedresolution concluded the UK Supreme Courtdispute in its entirety without interest or penalties. The adjustments result in no current tax payment to hear an appeal, and the case remains scheduled for trial this fall in the Business and Property Court and may (depending on the outcomeHMRC, but a deferred tax charge of the trial) be subject to further proceedings in the UK$112 million as part of discontinued operations as a result of a reduction of available tax tribunal. We comply with all applicableattributes, which had previously been recorded as deferred 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.assets.
NOTE 17. SHAREHOLDERS’ EQUITY
| | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | Three months ended March 31 | | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | Three months ended September 30 | | Nine months ended September 30 | |
| | 2021 | 2020 | | | 2021 | 2020 | | 2021 | 2020 | |
| | Beginning balance | Beginning balance | $ | 60 | | $ | 61 | | | Beginning balance | $ | (4,146) | | $ | (4,743) | | | $ | (4,386) | | $ | (4,818) | | |
| AOCI before reclasses – net of taxes of $(7) and $0(a) | (29) | | 6 | | | |
| Reclasses from AOCI – net of taxes of $4 and $(12) | 11 | | (47) | | | |
| AOCI before reclasses – net of taxes of $5, $(59), $(51) and $(39) | | AOCI before reclasses – net of taxes of $5, $(59), $(51) and $(39) | (158) | | 55 | | | 82 | | (558) | | |
| Reclasses from AOCI – net of taxes of $0, $0, $0 and $0(a) | | Reclasses from AOCI – net of taxes of $0, $0, $0 and $0(a) | — | | — | | | — | | 691 | | |
| AOCI | AOCI | (18) | | (41) | | | AOCI | (158) | | 55 | | | 81 | | 133 | | |
| Less AOCI attributable to noncontrolling interests | Less AOCI attributable to noncontrolling interests | 0 | | 0 | | | Less AOCI attributable to noncontrolling interests | 1 | | — | | | 1 | | 3 | | |
| Investment securities AOCI ending balance | $ | 42 | | $ | 20 | | | |
| Currency translation adjustments AOCI | | Currency translation adjustments AOCI | $ | (4,305) | | $ | (4,689) | | | $ | (4,305) | | $ | (4,689) | | |
| | Beginning balance | Beginning balance | $ | (4,386) | | $ | (4,818) | | | Beginning balance | $ | (3,777) | | $ | (5,387) | | | $ | (5,395) | | $ | (7,024) | | |
| AOCI before reclasses – net of taxes of $(57) and $(5) | 110 | | (554) | | | |
| Reclasses from AOCI – net of taxes of $0 and $0(b) | 0 | | 690 | | | |
| AOCI before reclasses – net of taxes of $16, $(22), $(5) and $6 | | AOCI before reclasses – net of taxes of $16, $(22), $(5) and $6 | 91 | | (87) | | | 264 | | 58 | | |
| Reclasses from AOCI – net of taxes of $192, $187, $592 and $613(a) | | Reclasses from AOCI – net of taxes of $192, $187, $592 and $613(a) | 662 | | 695 | | | 2,108 | | 2,190 | | |
| AOCI | AOCI | 110 | | 135 | | | AOCI | 753 | | 609 | | | 2,372 | | 2,248 | | |
| Less AOCI attributable to noncontrolling interests | Less AOCI attributable to noncontrolling interests | 2 | | 2 | | | Less AOCI attributable to noncontrolling interests | 2 | | — | | | 4 | | 3 | | |
| Currency translation adjustments AOCI ending balance | $ | (4,278) | | $ | (4,685) | | | |
| Benefit plans AOCI | | Benefit plans AOCI | $ | (3,026) | | $ | (4,779) | | | $ | (3,026) | | $ | (4,779) | | |
| | Beginning balance | Beginning balance | $ | (28) | | $ | 49 | | | Beginning balance | $ | 103 | | $ | (63) | | | $ | 32 | | $ | 109 | | |
| AOCI before reclasses – net of taxes of $4 and $(45) | 39 | | (262) | | | |
| Reclasses from AOCI – net of taxes of $10 and $8(b) | 23 | | 51 | | | |
AOCI before reclasses – net of taxes of $576, $62, $566 and $0(b) | | AOCI before reclasses – net of taxes of $576, $62, $566 and $0(b) | 2,152 | | 65 | | | 2,201 | | (116) | | |
| Reclasses from AOCI – net of taxes of $3, $(11), $13 and $(17)(a) | | Reclasses from AOCI – net of taxes of $3, $(11), $13 and $(17)(a) | (1) | | (33) | | | 21 | | (24) | | |
| AOCI | AOCI | 62 | | (211) | | | AOCI | 2,151 | | 32 | | | 2,222 | | (140) | | |
| Less AOCI attributable to noncontrolling interests | 0 | | 0 | | | |
| Cash flow hedges AOCI ending balance | $ | 34 | | $ | (163) | | | |
| | Beginning balance | $ | (5,395) | | $ | (7,024) | | | |
| AOCI before reclasses – net of taxes of $(47) and $30 | 16 | | 219 | | | |
| Reclasses from AOCI – net of taxes of $194 and $239(b) | 689 | | 817 | | | |
| AOCI | 705 | | 1,035 | | | |
| Less AOCI attributable to noncontrolling interests | 1 | | 3 | | | |
| Benefit plans AOCI ending balance | $ | (4,691) | | $ | (5,991) | | | |
| Investment securities and cash flow hedges AOCI | | Investment securities and cash flow hedges AOCI | $ | 2,254 | | $ | (30) | | | $ | 2,254 | | $ | (30) | | |
| | AOCI at March 31 | $ | (8,893) | | $ | (10,819) | | | |
| AOCI at September 30 | | AOCI at September 30 | $ | (5,078) | | $ | (9,498) | | | $ | (5,078) | | $ | (9,498) | | |
| | Dividends declared per common share | Dividends declared per common share | $ | 0.01 | | $ | 0.01 | | | Dividends declared per common share | $ | 0.08 | | $ | 0.08 | | | $ | 0.24 | | $ | 0.24 | | |
(a) The total reclassification from AOCI included $836 million, including currency translation of $688 million, net of taxes, for the nine months ended September 30, 2020, related to the sale of our BioPharma business within our Healthcare segment.
(b) Included adjustments of $2,038$2,456 million and $1,267$(420) million for the three months ended March 31,September 30, 2021 and 2020, respectively and $3,350 million and $(1,382) million for the nine months ended September 30, 2021 and 2020, respectively, related to insurance liabilities and annuity benefits in our run-off insurance operations to reflect the effects that would have been recognized had the related unrealized investment security gains been realized. See Note 13 for further information.
(b) The total reclassification from AOCI included $836 million, including currency translation of $688 million, net of taxes, for the three months ended March 31, 2020, related to the sale of our BioPharma business within our Healthcare segment.
On January 21, 2021, GE Capital Series DFor information on our preferred stock issuedissuances, please refer to GE Industrial was converted to GE Capital common stock and GE Capital and GE Industrial also agreed to retire the Series A, B and C GE Capital preferred stock. As a result of these actions, there is no remaining preferred stock between GE Industrial and GE Capital, and accordingly GE Capital will no longer pay preferred dividends to GE Industrial and all preferred stock dividend costs have become a GE Industrial obligation effective January 21, 2021. The exchange of GE Capital Series D preferred stock has no impact on the GE Series D preferred stock, which, effective January 21, 2021 became callable for $5,694 million on dividend payment dates and which dividends converted from 5% fixed rate to 3-month LIBOR plus 3.33%, payable quarterly. Similarly, there were no changes to the GE Series A, B or C preferred stock, which become callable at various dates in 2022 and 2023. The total carrying value of GE preferred stock at March 31, 2021 was $5,930 million and will increase to $5,940 million by the respective call dates through periodic accretion. See our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Report on Form 10-Q for further information.the quarter ended March 31, 2021.
Redeemable noncontrolling interests, presented within All other liabilities in our consolidated Statement of Financial Position, include common shares issued by our affiliates that are redeemable at the option of the holder of those interests and amounted to $451$171 million and $487 million as of March 31,September 30, 2021 and December 31, 2020, respectively. The decrease of $316 million was primarily due to a redeemable noncontrolling interest in our Aviation segment, which was converted into a mandatorily redeemable instrument and reclassified to All other current liabilities.
NOTE 18. EARNINGS PER SHARE INFORMATIONINFORMATION. In the second quarter of 2021, we announced that we would proceed with the 1-for-8 reverse stock split, as approved by shareholders, and filed an amendment to our certificate of incorporation to effectuate the reverse stock split after the close of trading on July 30, 2021. GE common stock began trading on a split-adjusted basis on August 2, 2021. Effective this quarter, our shares of outstanding common stock and earnings per share calculation have been retroactively restated for all periods presented.
| | Three months ended March 31 | 2021 | | 2020 | |
| Three months ended September 30 | | Three months ended September 30 | 2021 | | 2020 |
| (Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | (Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | Diluted | Basic | | Diluted | Basic | (Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | Diluted | Basic | | Diluted | Basic |
| Earnings from continuing operations | Earnings from continuing operations | $ | 90 | | $ | 92 | | | $ | 6,202 | | $ | 6,202 | | Earnings from continuing operations | $ | 654 | | $ | 654 | | | $ | (1,087) | | $ | (1,087) | |
| Preferred stock dividends | Preferred stock dividends | (72) | | (72) | | | (43) | | (43) | | Preferred stock dividends | (52) | | (52) | | | (46) | | (46) | |
| Accretion of redeemable noncontrolling interests, net of tax(a) | Accretion of redeemable noncontrolling interests, net of tax(a) | 2 | | 2 | | | 0 | | 0 | | Accretion of redeemable noncontrolling interests, net of tax(a) | (9) | | (9) | | | (6) | | (6) | |
| Earnings from continuing operations attributable to common shareholders | Earnings from continuing operations attributable to common shareholders | 20 | | 22 | | | 6,158 | | 6,158 | | Earnings from continuing operations attributable to common shareholders | 593 | | 593 | | | (1,138) | | (1,138) | |
| Earnings (loss) from discontinued operations | Earnings (loss) from discontinued operations | (2,897) | | (2,894) | | | (19) | | (19) | | Earnings (loss) from discontinued operations | 602 | | 602 | | | (58) | | (58) | |
| Net earnings (loss) attributable to GE common shareholders | Net earnings (loss) attributable to GE common shareholders | (2,874) | | (2,872) | | | 6,140 | | 6,140 | | Net earnings (loss) attributable to GE common shareholders | 1,195 | | 1,195 | | | (1,196) | | (1,196) | |
| | Shares of GE common stock outstanding | Shares of GE common stock outstanding | 8,772 | | 8,772 | | | 8,742 | | 8,742 | | Shares of GE common stock outstanding | 1,098 | | 1,098 | | | 1,095 | | 1,095 | |
| Employee compensation-related shares (including stock options) | Employee compensation-related shares (including stock options) | 35 | | — | | | 7 | | — | | Employee compensation-related shares (including stock options) | 7 | | — | | | — | | — | |
| Total average equivalent shares | Total average equivalent shares | 8,807 | | 8,772 | | | 8,749 | | 8,742 | | Total average equivalent shares | 1,105 | | 1,098 | | | 1,095 | | 1,095 | |
| | Earnings per share from continuing operations | Earnings per share from continuing operations | $ | 0 | | $ | 0 | | | $ | 0.70 | | $ | 0.70 | | Earnings per share from continuing operations | $ | 0.54 | | $ | 0.54 | | | $ | (1.04) | | $ | (1.04) | |
| Earnings (loss) per share from discontinued operations | Earnings (loss) per share from discontinued operations | (0.33) | | (0.33) | | | 0.00 | | 0.00 | | Earnings (loss) per share from discontinued operations | 0.54 | | 0.55 | | | (0.05) | | (0.05) | |
| Net earnings (loss) per share | Net earnings (loss) per share | (0.33) | | (0.33) | | | 0.70 | | 0.70 | | Net earnings (loss) per share | 1.08 | | 1.09 | | | (1.09) | | (1.09) | |
| | Potentially dilutive securities(b) | Potentially dilutive securities(b) | 370 | | | 422 | | | Potentially dilutive securities(b) | 37 | | | 61 | | |
| | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30 | 2021 | | 2020 | | |
| (Earnings for per-share calculation, shares in millions, per-share amounts in dollars) | Diluted | Basic | | Diluted | Basic | | | |
| Earnings from continuing operations | $ | 179 | | $ | 179 | | | $ | 4,129 | | $ | 4,129 | | | | |
| Preferred stock dividends | (180) | | (180) | | | (280) | | (280) | | | | |
| Accretion of redeemable noncontrolling interests, net of tax(a) | (9) | | (9) | | | (141) | | (141) | | | | |
| Earnings from continuing operations attributable to common shareholders | (11) | | (11) | | | 3,707 | | 3,707 | | | | |
| Earnings (loss) from discontinued operations | (2,856) | | (2,856) | | | (1,067) | | (1,067) | | | | |
| Net earnings attributable to GE common shareholders | (2,866) | | (2,866) | | | 2,639 | | 2,639 | | | | |
| | | | | | | | |
| Shares of GE common stock outstanding | 1,097 | | 1,097 | | | 1,094 | | 1,094 | | | | |
| Employee compensation-related shares (including stock options) | — | | — | | | 1 | | — | | | | |
| Total average equivalent shares | 1,097 | | 1,097 | | | 1,094 | | 1,094 | | | | |
| | | | | | | | |
| Earnings from continuing operations | $ | (0.01) | | $ | (0.01) | | | $ | 3.39 | | $ | 3.39 | | | | |
| Loss from discontinued operations | (2.60) | | (2.60) | | | (0.98) | | (0.98) | | | | |
| Net earnings | (2.61) | | (2.61) | | | 2.41 | | 2.41 | | | | |
| | | | | | | | |
| Potentially dilutive securities(b) | 42 | | | | 57 | | | | | |
(a) Represents accretion adjustment of redeemable noncontrolling interests in our Additive business within our Aviation segment.(b) Outstanding stock awards not included in the computation of diluted earnings per share because their effect was antidilutive.
Our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and, therefore, are included in the computation of earnings per share pursuant to the two-class method. For the three months ended March 31,September 30, 2021, application of this treatment had an insignificant effect. For the three months ended September 30, 2020, as a result of excess dividends in respect to the current period earnings,loss from continuing operations, losses were not allocated to the participating securities. For the threenine months ended March 31,September 30, 2021, as a result of the loss from continuing operations, losses were not allocated to the participating securities. For the nine months ended September 30, 2020, application of this treatment had an insignificant effect.
NOTE 19. FINANCIAL INSTRUMENTS. The following table provides information about assets and liabilities not carried at fair value and excludes finance leases, equity securities without readily determinable fair value and non-financial assets and liabilities. Substantially all of these assets are considered to be Level 3 and the vast majority of our liabilities’ fair value are considered Level 2.
| | | | | | | | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 |
| Carrying
amount
(net) | Estimated
fair value | | Carrying
amount
(net) | Estimated
fair value |
| Assets | Loans and other receivables | $ | 2,901 | | $ | 3,066 | | | $ | 2,904 | | $ | 3,125 | |
| | | | | | |
| Liabilities | Borrowings (Note 12) | 71,358 | | 81,967 | | | 74,902 | | 86,001 | |
| Investment contracts (Note 13) | 2,021 | | 2,402 | | | 2,049 | | 2,547 | |
The fair value in relation to carrying value for borrowings at March 31, 2021 compared to December 31, 2020 was unchanged, as an increase in market interest rates was offset by narrowing GE Industrial credit spreads and a decline in fair value adjustments for debt in fair value hedge relationships. Unlike the carrying amount, estimated fair value of borrowings included $1,178 million and $898 million of accrued interest at March 31, 2021 and December 31, 2020, respectively. | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2021 | | December 31, 2020 |
| Carrying
amount
(net) | Estimated
fair value | | Carrying
amount
(net) | Estimated
fair value |
| Assets | Loans and other receivables | $ | 2,960 | | $ | 3,136 | | | $ | 2,904 | | $ | 3,125 | |
| | | | | | |
| Liabilities | Borrowings (Note 12) | 62,888 | | 73,476 | | | 74,902 | | 86,001 | |
| Investment contracts (Note 13) | 1,945 | | 2,344 | | | 2,049 | | 2,547 | |
Assets and liabilities that are reflected in the accompanying financial statements at fair value are not included in the above disclosures; such items include cash and equivalents, investment securities and derivative financial instruments.
DERIVATIVES AND HEDGING. Our policy requires that derivatives are used solely for managing risks and not for speculative purposes. Total gross notional was $91,921 million ($43,768 million in GE Capital and $48,153 million in GE Industrial) and $95,647 million ($45,445 million in GE Capital and $50,202 million in GE Industrial) at March 31, 2021 and December 31, 2020, respectively. GE Capital notional relates primarily to managing interest rate and currency risk between financial assets and liabilities, and GE Industrial notional relates primarily to managing currency risk.
| | | | | | | | | | | | | | | | | | | | | | | |
| FAIR VALUE OF DERIVATIVES | September 30, 2021 | | December 31, 2020 |
| Gross Notional | All other assets | All other liabilities | | Gross Notional | All other assets | All other liabilities |
| Interest rate contracts | $ | 25,697 | | $ | 900 | | $ | 44 | | | $ | 20,500 | | $ | 1,912 | | $ | 7 | |
| Currency exchange contracts | 7,343 | | 152 | | 36 | | | 7,387 | | 164 | | 125 | |
| | | | | | | |
| Derivatives accounted for as hedges | $ | 33,040 | | $ | 1,052 | | $ | 81 | | | $ | 27,886 | | $ | 2,076 | | $ | 132 | |
| | | | | | | |
| Interest rate contracts | $ | 270 | | $ | 6 | | $ | — | | | $ | 346 | | $ | 8 | | $ | (1) | |
| Currency exchange contracts | 70,072 | | 677 | | 798 | | | 65,379 | | 767 | | 918 | |
| Other contracts | 1,738 | | 296 | | 21 | | | 2,036 | | 218 | | 71 | |
| Derivatives not accounted for as hedges | $ | 72,080 | | $ | 978 | | $ | 819 | | | $ | 67,761 | | $ | 993 | | $ | 989 | |
| | | | | | | |
| Gross derivatives(a) | $ | 105,120 | | $ | 2,030 | | $ | 899 | | | $ | 95,647 | | $ | 3,069 | | $ | 1,121 | |
| | | | | | | |
| Netting and credit adjustments | | $ | (615) | | $ | (614) | | | | $ | (647) | | $ | (647) | |
| Cash collateral adjustments | | (773) | | (66) | | | | (1,935) | | (104) | |
| Net derivatives recognized in statement of financial position | | $ | 642 | | $ | 220 | | | | $ | 487 | | $ | 369 | |
| | | | | | | |
| Net accrued interest | | $ | 35 | | $ | (19) | | | | $ | — | | $ | — | |
| Securities held as collateral | | (2) | | — | | | | (2) | | — | |
| Net amount | | $ | 675 | | $ | 201 | | | | $ | 484 | | $ | 369 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| FAIR VALUE OF DERIVATIVES | March 31, 2021 | | December 31, 2020 |
| Gross Notional | All other assets | All other liabilities | | Gross Notional | All other assets | All other liabilities |
| Interest rate contracts | $ | 20,395 | | $ | 1,404 | | $ | 16 | | | $ | 20,500 | | $ | 1,912 | | $ | 7 | |
| Currency exchange contracts | 6,701 | | 193 | | 65 | | | 7,387 | | 164 | | 125 | |
| | | | | | | |
| Derivatives accounted for as hedges | $ | 27,096 | | $ | 1,597 | | $ | 81 | | | $ | 27,886 | | $ | 2,076 | | $ | 132 | |
| | | | | | | |
| Interest rate contracts | $ | 361 | | $ | 14 | | $ | 7 | | | $ | 346 | | $ | 8 | | $ | (1) | |
| Currency exchange contracts | 62,369 | | 967 | | 911 | | | 65,379 | | 767 | | 918 | |
| Other contracts | 2,095 | | 322 | | 7 | | | 2,036 | | 218 | | 71 | |
| Derivatives not accounted for as hedges | $ | 64,825 | | $ | 1,302 | | $ | 926 | | | $ | 67,761 | | $ | 993 | | $ | 989 | |
| | | | | | | |
| Gross derivatives | $ | 91,921 | | $ | 2,899 | | $ | 1,007 | | | $ | 95,647 | | $ | 3,069 | | $ | 1,121 | |
| | | | | | | |
| Netting and credit adjustments | | $ | (729) | | $ | (729) | | | | $ | (647) | | $ | (647) | |
| Cash collateral adjustments | | (1,497) | | (6) | | | | (1,935) | | (104) | |
| Net derivatives recognized in statement of financial position | | $ | 673 | | $ | 271 | | | | $ | 487 | | $ | 369 | |
| | | | | | | |
| Net accrued interest | | $ | 24 | | $ | (19) | | | | $ | 0 | | $ | 0 | |
| Securities held as collateral | | (174) | | 0 | | | | (2) | | 0 | |
| Net amount | | $ | 522 | | $ | 252 | | | | $ | 484 | | $ | 369 | |
It is standard market practice to post or receive cash collateral with our derivative counterparties in order to minimize counterparty exposure. Included in GE Capital Cash, cash equivalents and restricted cash was total net cash collateral received on derivatives of $1,542$1,330 million (comprising $2,313$1,963 million received and $771$633 million posted) at March 31,September 30, 2021 and $3,289 million (comprising $4,203 million received and $914 million posted) at December 31, 2020. Of these amounts, $584$959 million and $1,968 million at March 31,September 30, 2021 and December 31, 2020, respectively, were received on interest rate derivatives traded through clearing houses, which are recorded as a reduction of derivative assets and net accrued interest.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 $159$180 million and $292 million at March 31,September 30, 2021 and December 31, 2020, respectively, and excess net cash collateral posted of $693$517 million (comprising $31$38 million received and $723$555 million posted) at March 31,September 30, 2021, and $802 million (comprising $3 million received and $805 million posted) at December 31, 2020, which are excluded from cash collateral adjustments in the table above.
Securities held as collateral excluded excess collateral received of $15 million and 0 at March 31, 2021 and December 31, 2020, respectively.
Fair value of derivatives in our consolidated Statement of Financial Position excludes accrued interest.
FAIR VALUE HEDGES. We use derivatives to hedge the effects of interest rate and currency exchange rate changes on our borrowings. At March 31,September 30, 2021, the cumulative amount of hedging adjustments of $3,826$3,788 million (including $2,330$2,579 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $26,926$32,679 million. At March 31,September 30, 2020, the cumulative amount of hedging adjustments of $6,527$6,203 million (including $2,348$2,346 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $41,735$33,434 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 $36 million and $(313) million for the three months ended March 31, 2021 and 2020, respectively. These amounts were primarilyAND NET INVESTMENT HEDGES
| | | | | | | | | | | | | | | | | | | | |
| Gain (loss) recognized in AOCI for the three months ended September 30 | | | | Gain (loss) recognized in AOCI for the nine months ended September 30 |
| 2021 | 2020 | | | | | 2021 | 2020 |
| Cash flow hedges(a) | $ | (30) | | $ | 121 | | | | | | $ | 1 | | $ | (139) | |
| Net investment hedges(b) | 191 | | (529) | | | | | | 290 | | (461) | |
(a) Primarily related to currency exchange and interest rate contracts.
(b) The carrying value of foreign currency debt designated as net investment hedges was $4,449 million and $8,175 million at September 30, 2021 and 2020, respectively. No significant amount was reclassified from AOCI into earnings for both the three and nine months ended September 30, 2021 and 2020, respectively.
The total amount in AOCI related to cash flow hedges of forecasted transactions was a $62$39 million gain at March 31,September 30, 2021. We expect to reclassify $4$24 million of gain to earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. For the three months ended March 31,At September 30, 2021, and 2020, we recognized an immaterial amount and $18 million of loss (primarily as a result of the disposition of BioPharma), respectively, related to hedged forecasted transactions and firm commitments that did not occur by the end of the originally specified period. At March 31, 2021 and 2020, the maximum term of derivative instruments that hedge forecasted transactions was approximately 14 years and 15 years, respectively.years.
NET INVESTMENT HEDGES. For these hedges, the portion of the fair value changes of the derivatives or debt instruments that relates to changes in spot currency exchange rates is recorded in a separate component of AOCI. The portion of the fair value changes of the derivatives related to differences between spot and forward rates is recorded in earnings each period. The amounts recorded in AOCI affect earnings if the hedged investment is sold, substantially liquidated, or control is lost.
The total gain (loss) recognized in AOCI on hedging instruments for the three months ended March 31, 2021 and 2020 was $272 million and $158 million, respectively, predominantly from foreign currency debt. For all periods presented we recognized an immaterial amount excluded from assessment and recognized in earnings.
The carrying value of foreign currency debt designated as net investment hedges was $8,106 million and $9,145 million at March 31, 2021 and 2020, respectively. NaN amount was reclassified from AOCI into earnings for the three months ended March 31, 2021 and 2020, respectively.
EFFECTS OF DERIVATIVES ON EARNINGS. All derivatives are marked to fair value on our consolidated Statement of Financial Position, whether they are designated in a hedging relationship for accounting purposes or are used as economic hedges. For derivatives not designated as hedging instruments, substantially all of the gain or loss recognized in earnings is offset by either the current period change in value of underlying exposures, which is recorded in earnings in the current period or a future period when the recording of the exposures occur.
The table below presents the effect of our derivative financial instruments in the consolidated Statement of Earnings (Loss):
| | | Three months ended March 31, 2021 | | Three months ended March 31, 2020 | | Three months ended September 30, 2021 | | Three months ended September 30, 2020 |
| | Revenues | Cost of sales | Interest Expense | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense(a) | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense(a) | SG&A | Other Income |
| Total amounts presented in the consolidated Statement of Earnings (Loss) | $ | 17,118 | | $ | 12,538 | | $ | 500 | | $ | 2,891 | | $ | 626 | | | $ | 19,490 | | $ | 14,426 | | $ | 561 | | $ | 3,061 | | $ | 6,869 | | |
| | | $ | 18,429 | | $ | 13,401 | | $ | 463 | | $ | 2,747 | | $ | 491 | | | $ | 18,529 | | $ | 14,042 | | $ | 526 | | $ | 3,215 | | $ | (517) | |
| Total effect of cash flow hedges | $ | (21) | | $ | (4) | | $ | (8) | | $ | 0 | | $ | 0 | | | $ | (21) | | $ | (25) | | $ | (10) | | $ | (3) | | $ | 0 | | |
| | Effect of cash flow hedges | | Effect of cash flow hedges | $ | (14) | | $ | 2 | | $ | (7) | | $ | — | | $ | — | | | $ | 68 | | $ | (14) | | $ | (9) | | $ | 6 | | $ | — | |
| | Hedged items | Hedged items | | $ | 1,843 | | | $ | (2,480) | | | Hedged items | | $ | 190 | | | $ | 311 | | |
| Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | (1,899) | | | 2,511 | | | Derivatives designated as hedging instruments | | (241) | | | (330) | | |
| Total effect of fair value hedges | | $ | (56) | | | $ | 31 | | | |
| Effect of fair value hedges | | Effect of fair value hedges | | $ | (52) | | | $ | (19) | | |
| Interest rate contracts | Interest rate contracts | $ | 1 | | $ | 0 | | $ | (9) | | $ | 0 | | $ | (1) | | | $ | (26) | | $ | 0 | | $ | (9) | | $ | 0 | | $ | 0 | | Interest rate contracts | $ | — | | $ | — | | $ | 2 | | $ | — | | $ | — | | | $ | 8 | | $ | — | | $ | (3) | | $ | — | | $ | — | |
| Currency exchange contracts | Currency exchange contracts | 303 | | 0 | | 0 | | 59 | | 38 | | | (521) | | 13 | | 0 | | 54 | | 11 | | Currency exchange contracts | (177) | | (11) | | (18) | | (66) | | 40 | | | 174 | | 10 | | — | | (130) | | 35 | |
| Other | Other | 0 | | 0 | | 0 | | 55 | | 19 | | | 0 | | 0 | | 0 | | (160) | | (22) | | Other | — | | — | | — | | 1 | | 41 | | | — | | — | | — | | 48 | | 50 | |
| Total effect of derivatives not designated as hedges | $ | 305 | | $ | 0 | | $ | (9) | | $ | 114 | | $ | 56 | | | $ | (547) | | $ | 13 | | $ | (9) | | $ | (106) | | $ | (12) | | |
| Effect of derivatives not designated as hedges | | Effect of derivatives not designated as hedges | $ | (177) | | $ | (11) | | $ | (17) | | $ | (65) | | $ | 81 | | | $ | 181 | | $ | 10 | | $ | (3) | | $ | (81) | | $ | 85 | |
The gain (loss)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, 2021 | | Nine months ended September 30, 2020 |
| Revenues | Cost of sales | Interest Expense(a) | SG&A | Other Income | | Revenues | Cost of sales | Interest Expense(a) | SG&A | Other Income |
| $ | 53,826 | | $ | 39,558 | | $ | 2,866 | | $ | 8,504 | | $ | 1,824 | | | $ | 54,823 | | $ | 42,101 | | $ | 1,853 | | $ | 9,344 | | $ | 8,430 | |
| | | | | | | | | | | |
| Effect of cash flow hedges | $ | (14) | | $ | (4) | | $ | (29) | | $ | 1 | | $ | — | | | $ | 62 | | $ | (52) | | $ | (31) | | $ | 1 | | $ | — | |
| | | | | | | | | | | |
| Hedged items | | | $ | 1,375 | | | | | | | $ | (2,290) | | | |
| Derivatives designated as hedging instruments | | | (1,510) | | | | | | | 2,290 | | | |
| Effect of fair value hedges | | | $ | (135) | | | | | | | $ | — | | | |
| | | | | | | | | | | |
| Interest rate contracts(a) | $ | 2 | | $ | — | | $ | 48 | | $ | — | | $ | (1) | | | $ | (28) | | $ | — | | $ | (16) | | $ | — | | $ | — | |
| Currency exchange contracts | 226 | | (6) | | (18) | | 48 | | 28 | | | (443) | | 39 | | — | | 29 | | 14 | |
| Other | — | | — | | — | | 113 | | 162 | | | — | | — | | — | | (15) | | 39 | |
| Effect of derivatives not designated as hedges | $ | 228 | | $ | (6) | | $ | 30 | | $ | 161 | | $ | 188 | | | $ | (470) | | $ | 39 | | $ | (16) | | $ | 14 | | $ | 53 | |
(a) Amounts are inclusive of amount excluded for cash flow hedges was $(16)debt extinguishment costs, the derivative components of which (included in interest rate contracts at total effect of derivatives not designated as hedges) totaled $48 million and $15 millionzero for the nine months ended September 30, 2021 and 2020, respectively. There were no debt extinguishment costs related to derivative components for the three months ended March 31,September 30, 2021 and 2020, respectively. This amount is recognized primarily in Revenues in our consolidated Statement of Earnings (Loss).2020.
COUNTERPARTY CREDIT RISK. We manage the risk that counterparties will default and not make payments to us according to the terms of our agreements on an individual counterparty basis. Where we have agreed to netting of derivative exposures with a counterparty, we net our exposures with that counterparty and apply the value of collateral posted to us to determine the exposure. We actively monitor these net exposures against defined limits and take appropriate actions in response, including requiring additional collateral. Our exposures to counterparties (including accrued interest), net of collateral we held, was $404$572 million and $392 million at March 31,September 30, 2021 and December 31, 2020, respectively. Counterparties' exposures to our derivative liability (including accrued interest), net of collateral posted by us, was $186$138 million and $307 million at March 31,September 30, 2021 and December 31, 2020, respectively.
NOTE 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 $1,712$1,841 million and $1,733 million and liabilities of $454$580 million and $657 million, inclusive of intercompany eliminations, at March 31,September 30, 2021 and December 31, 2020, respectively, from other consolidated VIEs. These entities were created to help our customers facilitate or finance the purchase of GE goods and services and have no features that could expose us to losses that would significantly exceed the difference between the consolidated assets and liabilities. Substantially all the assets of our consolidated VIEs at March 31,September 30, 2021 can only be used to settle the liabilities of those VIEs.
Our investments in unconsolidated VIEs were $3,371$4,239 million and $3,230 million at March 31,September 30, 2021 and December 31, 2020, respectively. These investments are primarily owned by GE Capital businesses of which $1,120$1,280 million and $1,141 million were owned by EFS, comprising equity method investments, primarily renewable energy tax equity investments, at March 31,September 30, 2021 and December 31, 2020, respectively. In addition, $2,024$2,739 million and $1,833 million were owned by our run-off insurance operations, primarily comprising investment securities at March 31,September 30, 2021 and December 31, 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 21.
NOTE 21. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIES
COMMITMENTS. GE Capital had total investment commitments of $2,551$3,449 million at March 31,September 30, 2021. The commitments primarily comprise project financing investments in thermal and wind energy projects of $769$532 million and investments by our run-off insurance operations in investment securities and other assets of $1,782$2,917 million, and included within these commitments are obligations to make additional investments in unconsolidated VIEs of $447$429 million and $1,632$2,834 million, respectively. See Note 20 for further information.
As of March 31,September 30, 2021, in our Aviation segment, we have committed to provide financing assistance of $2,241$2,072 million of future customer acquisitions of aircraft equipped with our engines.
Commitments - Discontinued Operations. The GECAS business within discontinued operations has placed multiple-year orders for various Boeing, Airbus and other aircraft manufacturers with list prices approximating $26,118$24,675 million, excluding pre-delivery payments made in advance (including 269249 new aircraft with estimated delivery dates of 18%11% in 2021, 18%15% in 2022 and 64%74% in 2023 through 2026)2027) and secondary orders with airlines for used aircraft approximating $1,146$1,035 million (including 2622 used aircraft with estimated delivery dates of 62%41% in 2021, 27%45% in 2022 and 11%14% in 2023) at March 31,September 30, 2021. When GECAS purchases aircraft, it is at contractual price, which is usually less than the aircraft manufacturer's list price. As of March 31,September 30, 2021, GECAS has made $2,647$2,615 million of pre-delivery payments to aircraft manufacturers.
GUARANTEES. Credit Support and Indemnification Agreements - Continuing Operations. For further information on credit support and indemnification agreements for continuing operations, see our Annual Report on Form 10-K for the year ended December 31, 2020.
Indemnification agreements - Discontinued Operations. At March 31,September 30, 2021, we have provided specific indemnities to buyers of GE Capital's assets that, in the aggregate, represent a maximum potential claim of $597$551 million with related reserves of $86$64 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 $1,975$1,914 million and $2,054 million at March 31,September 30, 2021 and December 31, 2020, respectively.
LEGAL MATTERS. The following information supplements and amends the discussion of Legal Matters in Note 23 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020;2020 and Note 21 in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021; refer to those discussions for information about previously reported legal matters that are not updated below. In the normal course of our business, we are involved from time to time in various arbitrations, class actions, commercial litigation, investigations and other legal, regulatory or governmental actions, including the significant matters described below that could have a material impact on our results of operations. In many proceedings, including the specific matters described below, it is inherently difficult to determine whether any loss is probable or even reasonably possible or to estimate the size or range of the possible loss, and accruals for legal matters are not recorded until a loss for a particular matter is considered probable and reasonably estimable. Given the nature of legal matters and the complexities involved, it is often difficult to predict and determine a meaningful estimate of loss or range of loss until we know, among other factors, the particular claims involved, the likelihood of success of our defenses to those claims, the damages or other relief sought, how discovery or other procedural considerations will affect the outcome, the settlement posture of other parties and other factors that may have a material effect on the outcome. For these matters, unless otherwise specified, we do not believe it is possible to provide a meaningful estimate of loss at this time. Moreover, it is not uncommon for legal matters to be resolved over many years, during which time relevant developments and new information must be continuously evaluated.
Alstom legacy matters. OnIn 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 Slovenia that are described below.jurisdictions. The reserve balance was $659$653 million and $858 million at March 31,September 30, 2021 and December 31, 2020, respectively, with the reduction driven primarily by cash payment in connection with the Šoštanj settlement described below.respectively.
Regardless of jurisdiction, the allegations relate to claimed anti-competitive conduct or improper payments in the pre-acquisition period as the source of legal violations and/or damages. Given the significant litigation and compliance activity related to these matters and our ongoing efforts to resolve them, it is difficult to assess whether the disbursements will ultimately be consistent with the reserve established. The estimation of this reserve involved significant judgment and may not reflect the full range of uncertainties and unpredictable outcomes inherent in litigation and investigations of this nature, and at this time we are unable to develop a meaningful estimate of the range of reasonably possible additional losses beyond the amount of this reserve. Damages sought may include disgorgement of profits on the underlying business transactions, fines and/or penalties, interest, or other forms of resolution. Factors that can affect the ultimate amount of losses associated with these and related matters include the way cooperation is assessed and valued, prosecutorial discretion in the determination of damages, formulas for determining fines and penalties, the duration and amount of legal and investigative resources applied, political and social influences within each jurisdiction, and tax consequences of any settlements or previous deductions, among other considerations. Actual losses arising from claims in these and related matters could exceed the amount provided.
In connection with alleged improper payments by Alstom relating to contracts won in 2006 and 2008 for work on a state-owned power plant in Šoštanj, Slovenia, the power plant owner in January 2017 filed an arbitration claim for damages of approximately $430 million before the International Chamber of Commerce Court of Arbitration in Vienna, Austria. In February 2017, a government investigation in Slovenia of the same underlying conduct proceeded to an investigative phase overseen by a judge of the Celje District Court. In September 2020, the relevant Alstom legacy entity was served with an indictment, which we had anticipated as we are working with the parties to resolve these matters. In March 2021, GE reached a settlement of the arbitration claim with the power plant owner for a mix of cash and services valued by the plant owner at approximately $307 million.
Shareholder and related lawsuits. Since February 2018, multiple shareholder derivative lawsuits have been filed against current and former GE executive officers and members of GE’s Board of Directors and GE (as nominal defendant). NaN shareholder derivative lawsuits are currently pending: the Bennett case, which was filed in Massachusetts state court; and the Cuker, Lindsey and Priest/Tola cases, which were filed in New York state court. The Priest and Tola cases were initially filed as separate actions but have now been consolidated into one lawsuit. The Burden case, which was filed in the U.S. District Court for the Southern District of New York, was voluntarily dismissed by the plaintiffs in February 2021. These lawsuits have alleged violations of securities laws, breaches of fiduciary duties, unjust enrichment, waste of corporate assets, abuse of control and gross mismanagement, although the specific matters underlying the allegations in the lawsuits have varied. The allegations in the Bennett, Lindsey and Priest/Tola cases relate to substantially the same facts as those underlying the Hachem securities class action described in our Annual Report on Form 10-K for the year ended December 31, 2020, and the allegations in the Cuker case relate to alleged corruption in China. The plaintiffs seek unspecified damages and improvements in GE’s corporate governance and internal procedures. The Bennett case has been stayed pending final resolution of another shareholder derivative lawsuit (the Gammel case) that was previously dismissed. In August 2019, the Cuker plaintiffs filed an amended complaint, and GE in September 2019 filed a motion to dismiss the amended complaint. The Lindsey case has been stayed by agreement of the parties. GE filed a motion to dismiss the Priest/Tola complaint in March 2021.
In July 2018, a putative class action (the Mahar case) was filed in New York state2021, the court naming as defendants GE, former GE executive officers, a former member of GE’s Board of Directors and KPMG. It alleged violations of Sections 11, 12 and 15 of the Securities Act of 1933 based on alleged misstatements related to insurance reserves and performance of GE’s business segments in GE Stock Direct Plan registration statements and documents incorporated therein by reference and seeks damages on behalf of shareholders who acquired GE stock between July 20, 2015 and July 19, 2018 through the GE Stock Direct Plan. In February 2019, this case was dismissed. In March 2019, plaintiffs filed an amended derivative complaint naming the same defendants. In April 2019, GE filed agranted GE's motion to dismiss the amendedCuker complaint. In October 2019,2021, the court denied GE's motion to dismiss and stayedBennett case was voluntarily dismissed by the case pending the outcome of the Hachem case. In November 2019, the plaintiffs moved to re-argue to challenge the stay, and GE cross-moved to re-argue the denial of the motion to dismiss and filed a notice of appeal. The court denied both motions for re-argument, and in November 2020, the Appellate Division First Department affirmed the court's denial of GE's motion to dismiss. In January 2021, GE filed a motion for leave to appeal to the New York Court of Appeals, and that motion was denied in March 2021.plaintiff.
In October 2018, a putative class action (the Houston case) was filed in New York state court naming as defendants GE, certain GE subsidiaries and current and former GE executive officers and employees. It alleges violations of Sections 11, 12 and 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 AprilSeptember 2021, following the plaintiffs filed an amended complaint.
In February 2019,filing by GE of a securities action (the Touchstone case) was 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. It alleges violations of Sections 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 insurance reserves, GE Power’s revenue recognition practices related to long term service agreements, GE’s acquisition of Alstom, and the goodwill recognized in connection with that transaction. The lawsuit seeks damages on behalf of 6 institutional investors who purchased GE common stock between August 1, 2014 and October 30, 2018 and rescission of those purchases. This case was stayed pending resolution of the motion to dismiss the Hachemcomplaint, the court granted plaintiff’s motion to discontinue the case. In March 2021, the plaintiffs filed an amended complaint.
As previously reported by Baker Hughes, in March 2019, 2 derivative lawsuits were filed in the Delaware Court of Chancery naming as defendants GE, directors of Baker Hughes (including former members of GE’s Board of Directors and current and former GE executive officers) and Baker Hughes (as nominal defendant), and the court issued an order consolidating these 2 actions (the Schippnick case). The complaint as amended in May 2019 alleges, among other things, that GE and the Baker Hughes directors breached their fiduciary duties and that GE was unjustly enriched by entering into transactions and agreements related to GE's sales of approximately 12% of its ownership interest in Baker Hughes in November 2018. The complaint seeks declaratory relief, disgorgement of profits, an award of damages, pre- and post-judgment interest and attorneys’ fees and costs. In May 2019, the plaintiffs voluntarily dismissed their claims against the directors who were members of the Baker Hughes Conflicts Committee and a former Baker Hughes director. In October 2019, the Court denied the remaining defendants’ motions to dismiss, except with respect to the unjust enrichment claim against GE, which has been dismissed. In November 2019, the defendants filed their answer to the complaint, and a special litigation committee of the Baker Hughes Board of Directors moved for an order staying all proceedings in this action pending completion of the committee's investigation of the allegations and claims asserted in the complaint. In October 2020, the special litigation committee filed a report with the Court recommending that the derivative action be terminated. In January 2021, the special committee filed a motion to terminate the action.
Bank BPH. As previously reported, GE Capital’s subsidiary Bank BPH, along with other Polish banks, has been subject to ongoing litigation in Poland related to its portfolio of floating rate residential mortgage loans, with cases brought by individual borrowers seeking relief related to their foreign currency denominated mortgage loans in various courts throughout Poland. At March 31,September 30, 2021, approximately 86% of the Bank BPH portfolio is indexed to or denominated in foreign currencies (primarily Swiss francs), and the total portfolio had a carrying value of $1,986$1,938 million. We continue to observe an increase in the number of lawsuits being brought against Bank BPH and other banks in Poland, and we expect this to continue in future reporting periods.
We estimate potential losses for Bank BPH in connection with borrower litigation cases that are pending by recording legal reserves, as well as in connection with potential future cases or other adverse developments as part of our ongoing valuation of the Bank BPH portfolio, which we record at the lower of cost or fair value, less cost to sell. At March 31,September 30, 2021, the total amount of such estimated losses was $465$565 million. We update our assumptions underlying the amount of estimated losses based primarily on the number of lawsuits filed and estimated to be filed in the future, whether liability will be established in lawsuits and the nature of the remedy ordered by courts if liability is established. The increase in the amount of estimated losses during the firstthird quarter of 2021 was driven primarily by increases in the numberacross each of lawsuits filed and estimated to be filed in the future.these factors. We expect the trends we have previously reported of an increasing number of lawsuits being filed, more findings of liability and more severe remedies being ordered against Polish banks (including Bank BPH) to continue in future reporting periods, although Bank BPH is unable at this time to develop a meaningful estimate of reasonably possible losses associated with active and inactive Bank BPH mortgage loans beyond the amounts currently recorded. Additional factors may also affect our estimated losses over time, including: potentially significant judicial decisions scheduled to be issued in the second quarter of 2021, including a decisionor binding resolutions by the European Court of Justice (ECJ) on the case involving a Bank BPH mortgage loan that was referred to the ECJ in January 2020 and one or more binding resolutions from the Polish Supreme Court;Court, including a new binding resolution anticipated to be considered by the Polish Supreme Court in the coming months; the impact of any of these or other future or recent decisions or resolutions (including the ECJ decision in April 2021 on a case involving a Bank BPH mortgage loan, and the Polish Supreme Court binding resolutionsresolution delivered verbally in May 2021 with written reasoning issued in July 2021) on how Polish courts will interpret and apply the law in particular cases and how borrower behavior may change in response, neither orof which will beare known immediately upon the issuance of a decision or resolution; 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 settlement strategies or other approaches that other Polish banks regulators and other government authorities are adopting or will adopt in response to this proposal;proposal or other factors, and the approaches that regulators and other government authorities will adopt in response; uncertainty arising from investigations of the Polish Office of Competition and Consumer Protection (UOKiK), including a UOKiK decision in December 2020 which found that certain foreign exchange clauses that appear in certain of Bank BPH’s mortgage loan agreements are unfair contractual terms under Polish law. Future adverse developments related to any of the foregoing, or other developments such as actions by regulators or other governmental authorities could have a material adverse effect on Bank BPH and the carrying value of its mortgage loan portfolio and could result in significant losses beyond the amount that we currently estimate.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. As previously reported, in 2000, GE and the Environmental Protection Agency (EPA) entered into a consent decree relating to PCB cleanup of the Housatonic River in Massachusetts. Following the EPA’s release in September 2015 of an intended final remediation decision, GE and the EPA engaged in mediation and the first step of the dispute resolution process contemplated by the consent decree. In October 2016, the EPA issued its final decision pursuant to the consent decree, which GE and several other interested parties appealed to the EPA’s Environmental Appeals Board (EAB). The EAB issued its decision in January 2018, affirming parts of the EPA’s decision and granting relief to GE on certain significant elements of its challenge. The EAB remanded the decision back to the EPA to address those elements and reissue a revised final remedy, and the EPA convened a mediation process with GE and interested stakeholders. In February 2020, the EPA announced an agreement between the EPA and many of the mediation stakeholders, including GE, concerning a revised Housatonic River remedy. Based on the mediated resolution, the EPA solicited public comment on a draft permit in July 2020 and issued the final revised permit effective January 4, 2021. In March 2021, two local environmental advocacy groups filed a joint petition to the EAB challenging portions of the revised permit, and EPA and GE are defending that appeal. As of March 31, 2021, and based on its assessment of current facts and circumstances and its defenses, GE believes that it has recorded adequate reserves to cover future obligations associated with the proposed final remedy.
For further information about environmental, health and safety matters, see our Annual Report on Form 10-K for the year ended December 31, 2020.2020 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
NOTE 22. INTERCOMPANY TRANSACTIONS. Presented below is a walk of intercompany eliminations from the combined GE Industrial and GE Capital totals to the consolidated cash flows for continuing operations.
| | | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | Nine months ended September 30, 2021 | Nine months ended September 30, 2020 |
| Cash from (used for): | Cash from (used for): | Operating activities | Investing activities | Financing activities | Operating activities | Investing activities | Financing activities | Cash from (used for): | Operating activities | Investing activities | Financing activities | Operating activities | Investing activities | Financing activities |
| Combined GE Industrial and GE Capital cash flows | Combined GE Industrial and GE Capital cash flows | $ | (2,970) | | $ | 1,747 | | $ | (2,178) | | $ | (1,138) | | $ | 20,776 | | $ | (8,494) | | Combined GE Industrial and GE Capital cash flows | $ | (3,795) | | $ | 6,224 | | $ | (13,550) | | $ | (2,563) | | $ | 28,568 | | $ | (23,228) | |
| GE Industrial current receivables sold to GE Capital(a) | GE Industrial current receivables sold to GE Capital(a) | 211 | | (448) | | 237 | | (997) | | 945 | | 52 | | GE Industrial current receivables sold to GE Capital(a) | 2,423 | | (3,069) | | 646 | | (1,361) | | 1,086 | | 276 | |
| GE Industrial long-term receivables sold to GE Capital | GE Industrial long-term receivables sold to GE Capital | 67 | | (67) | | 0 | | 135 | | (135) | | 0 | | GE Industrial long-term receivables sold to GE Capital | 93 | | (93) | | — | | 210 | | (210) | | — | |
| | Supply chain finance programs | Supply chain finance programs | 120 | | (120) | | 0 | | 884 | | (884) | | 0 | | Supply chain finance programs | 135 | | (135) | | — | | 1,853 | | (1,853) | | — | |
| Repayment of GE Capital loans by GE Industrial | | Repayment of GE Capital loans by GE Industrial | — | | — | | — | | — | | (7,500) | | 7,500 | |
| Other reclassifications and eliminations | Other reclassifications and eliminations | (68) | | (265) | | 333 | | 197 | | (677) | | 480 | | Other reclassifications and eliminations | (384) | | (18) | | 401 | | (15) | | (423) | | 438 | |
| | Consolidated cash flows | Consolidated cash flows | $ | (2,640) | | $ | 847 | | $ | (1,608) | | $ | (919) | | $ | 20,025 | | $ | (7,962) | | Consolidated cash flows | $ | (1,527) | | $ | 2,909 | | $ | (12,502) | | $ | (1,876) | | $ | 19,667 | | $ | (15,014) | |
(a)Included the elimination of $3,218$2,957 million and $3,972$11,335 million payments to GE Industrial for current receivables purchased and retained by GE Capital and the related reclassification to CFOA of $3,429$5,380 million and $2,975$9,974 million due to GE Capital collections and other activity in our consolidated statement of cash flows for the threenine months ended March 31,September 30, 2021 and 2020, respectively.
Cash payments received on the Receivable facility deferred purchase price are reflected as Cash from investing activities in the GE Capital and Consolidated columns of our consolidated Statement of Cash Flows. Sales of customer receivables from GE Industrial to GE Capital are classified as Cash from operating activities in the GE Industrial column of our Statement of Cash Flows. See Note 4 for further information.
NOTE 23. OTHER INCOME
| | | Three months ended March 31 | | | Three months ended September 30 | | Nine months ended September 30 | |
| | 2021 | 2020 | | | 2021 | 2020 | | 2021 | 2020 | |
| Purchases and sales of business interests(a) | Purchases and sales of business interests(a) | $ | 3 | | $ | 12,372 | | | Purchases and sales of business interests(a) | $ | (153) | | $ | 21 | | | $ | (155) | | $ | 12,445 | | |
| Licensing and royalty income | Licensing and royalty income | 48 | | 42 | | | Licensing and royalty income | 54 | | 44 | | | 141 | | 117 | | |
| Associated companies | 16 | | 39 | | | |
| Equity method income | | Equity method income | 42 | | (78) | | | 96 | | (9) | | |
| Net interest and investment income (loss)(b) | Net interest and investment income (loss)(b) | 439 | | (5,632) | | | Net interest and investment income (loss)(b) | 482 | | (582) | | | 1,523 | | (4,259) | | |
| Other items | Other items | 116 | | 53 | | | Other items | (5) | | 86 | | | 154 | | 187 | | |
| GE Industrial | GE Industrial | $ | 623 | | $ | 6,874 | | | GE Industrial | $ | 420 | | $ | (509) | | | $ | 1,760 | | $ | 8,481 | | |
| Eliminations | Eliminations | 3 | | (4) | | | Eliminations | 71 | | (8) | | | 64 | | (50) | | |
| Total | Total | $ | 626 | | $ | 6,869 | | | Total | $ | 491 | | $ | (517) | | | $ | 1,824 | | $ | 8,430 | | |
(a)Included a pre-tax and after-tax loss of $172 million related to the planned sale of our boiler manufacturing business in China in our Power segment for the three and nine months ended September 30, 2021. Included a pre-tax gain of $12,292$12,362 million ($11,14511,214 million after-tax) on the sale of BioPharma for the threenine months ended March 31,September 30, 2020. See Note 2 for further information.
(b)Included a pre-tax realized and unrealized gain of $296$359 million ($188282 million after-tax) and a pre-tax unrealized loss of $5,710$748 million ($4,631618 million after-tax) for the three months ended September 30, 2021 and 2020, respectively, and a pre-tax realized and unrealized gain of $1,028 million ($767 million after-tax) and a pre-tax unrealized loss of $4,613 million ($3,679 million after-tax) for the nine months ended September 30, 2021 and 2020, respectively, related to our interest in Baker Hughes for the three months ended March 31, 2021 and 2020, respectively.Hughes.
EXHIBITS
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| Transaction Agreement, dated asExhibit 3. The Restated Certificate of March 9, 2021, by and among GE Ireland USD Holdings ULC, GE Financial Holdings ULC, GE Capital US Holdings, Inc.,Incorporation of General Electric Company AerCap Holdings N.V., AerCap US Aviation LLC and AerCap Aviation Leasing Limited (Incorporated(Incorporated by reference to Exhibit 2.13(i) to GE’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013), as amended by the Certificate of Amendment, dated December 2, 2015 (Incorporated by reference to Exhibit 3.1 to GE’s Current Report on Form 8-K, dated March 12,December 3, 2015), as further amended by the Certificate of Amendment, dated January 19, 2016 (Incorporated by reference to Exhibit 3.1 to GE’s Current Report on Form 8-K, dated January 20, 2016), as further amended by the Certificate of Change of General Electric Company (Incorporated by reference to Exhibit 3(1) to GE’s Current Report on Form 8-K, dated September 1, 2016), as further amended by the Certificate of Amendment, dated May 13, 2019 (Incorporated by reference to Exhibit 3.1 to GE’s Current Report on Form 8-K, dated May 13, 2019), as further amended by the Certificate of Change of General Electric Company (Incorporated by reference to Exhibit 3.1 to GE’s Current Report on Form 8-K, dated December 9, 2019), as further amended by the Certificate of Amendment, dated July 30, 2021 (Commission(Incorporated by reference to Exhibit 3.1 to GE's Current Report on Form 8-K, dated July 30, 2021) (in each case, under Commission file number 001-00035)). |
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| Exhibit 101 | 101. The following materials from General Electric Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,September 30, 2021, formatted in XBRL (eXtensible Business Reporting Language); (i) Statement of Earnings (Loss) for the three and nine months ended March 31,September 30, 2021 and 2020, (ii) Statement of Financial Position at March 31,September 30, 2021 and December 31, 2020, (iii) Statement of Cash Flows for the threenine months ended March 31,September 30, 2021 and 2020, (iv) Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended March 31,September 30, 2021 and 2020, (v) Statement of Changes in Shareholders' Equity for the three and nine months ended March 31,September 30, 2021 and 2020, and (vi) Notes to Consolidated Financial Statements. |
| Exhibit 104 | 104. Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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FORM 10-Q CROSS REFERENCE INDEX
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Item NumberFORM 10-Q CROSS REFERENCE INDEX | | Page(s) |
| Part I – FINANCIAL INFORMATION |
| Item 1. | | Financial Statements | | 24-4828-55 |
| Item 2. | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 4-234-27 |
| Item 3. | | Quantitative and Qualitative Disclosures About Market Risk | | 16-17, 42-4417-18, 50-52 |
| Item 4. | | Controls and Procedures | | 2327 |
Part II – OTHER INFORMATION |
| Item 1. | | Legal Proceedings | | 45-4753-54 |
| Item 1A. | | Risk Factors | | 23Not applicable(a) |
| Item 2. | | Unregistered Sales of Equity Securities and Use of Proceeds | | 2327 |
| Item 3. | | Defaults Upon Senior Securities | | Not applicable |
| Item 4. | | Mine Safety Disclosures | | Not applicable |
| Item 5. | | Other Information | | Not applicable |
| Item 6. | | Exhibits | | 4956 |
| Signatures | | 4956 |
(a) There have been no material changes to our risk factors since March 31, 2021. For a discussion of our risk factors, refer to our Annual Report on Form 10-K for the year ended December 31, 2020, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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April 27,October 26, 2021 | | /s/ Thomas S. Timko |
| Date | | Thomas S. Timko Vice President, Chief Accounting Officer and Controller Principal Accounting Officer |
