2019Annual Report I N S I D E F R O N T C O V E R
Wysheka Austin, Senior Operations
Manager, works on a combustion unibody
for GE Gas Power’s 7HA gas turbine in
Greenville, South Carolina.
C O V E R
Kevin Jones, a Development Assembly
Mechanic, performs a perfection review on
the propulsor for GE Aviation’s GE9X engine
before it is shipped for certification testing.
FORWARD-LOOKING STATEMENTSSome of the information we provide in this document is forward-looking and therefore could change over time to reflect changes in the environment in which GE competes. For details on the uncertainties that may cause our actual results to be materially different than those expressed in our forward-looking statements, see https://www.ge.com/investor-relations/important-forward-looking-statement-information. We do not undertake to update our forward-looking statements.NON-GAAP FINANCIAL MEASURESWe sometimes use information derived from consolidated financial data but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). Certain of these data are considered “non-GAAP financial measures” under the U.S. Securities and Exchange Commission rules. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures can be found on pages 43-49 of the Management’s Discussion and Analysis within our Form 10-K and in GE’s fourth-quarter 2019 earnings materials posted to ge.com/investor, as applicable. Dear fellow shareholder,
Over 60 GE wind turbines work together at Meikle Wind Farm, the largest wind farm in Western Canada, to generate
enough energy to power over 54,000 homes in British Columbia. GE uses drones to safely inspect these turbines.
First, a sincere thank you for sharing
your ideas and counsel over the
last year. When I began as CEO,
it was critical for me to listen, not
just to replicate what’s worked
for me elsewhere. Your feedback
is playing an important role in our
efforts to make GE a stronger, more
valuable company.
As I laid out in my last letter, I want
this document to serve as a reference
point for how we run the company so
that we can all keep score together.
Looking back at 2019, I hope you see
a GE that diligently addressed its
most pressing issues with grit and
reset its foundation to drive long-term
profitable growth. I am proud of the
progress our team made together,
especially in how we operate. While
the impact of this work is only starting
to become visible to our investors, I’m
confident that the “game of inches”
we’re playing will become more
evident through our results over time.
From the outset, we focused
2019 on two strategic priorities:
1) improve our financial position and
2) strengthen our businesses. We’re
doing what we said we would do on
both fronts, and we’re on a positive
trajectory for 2020.
1 Improve our
financial position
Last year, I shared that GE had too
much debt and we needed to reduce it
thoughtfully and soon. Our work is by
no means finished, but we are on the
right path.
In 2019, we moved with speed on asset
sales to demonstrate that we are serious
about reducing both our Industrial and
Capital leverage. We began to put that
cash to work, including a tender offer for
$5 billion of outstanding Industrial debt.
GE Capital continued its efforts to shrink
both its asset base and risk exposure,
reducing assets by approximately
$27 billion over two years, exceeding its
plan. We also enhanced transparency
about the assumptions and sensitivities
related to GE Capital’s run-off long-term
care insurance operations for our investors.
Looking forward, we expect to achieve
our leverage targets in 2020. Closing the
sale of our BioPharma business and selling
our remaining 37-percent stake in Baker
Hughes over time will give us more cash
to further reduce our Industrial leverage,
including pre-funding our U.S. pension
and repaying GE’s loans from GE Capital.
This will also help GE Capital reduce its
external debt, including $16 billion that
matures in 2020.
2 0 1 9 D E L E V E R A G I N G A C T I O N S
% Reduced GE Industrial leverage: $7B net
debt* reduction, ending 2019 with 4.2x
net debt* to EBITDA* vs. 4.8x in 2018.
% Reduced GE Capital leverage: $7B debt
reduction, ending 2019 with 3.9x debt to
equity vs. 5.7x in 2018.
% Agreed to sell BioPharma, part of GE
Healthcare, to Danaher for ~$21 billion.
% Completed spin-off and subsequent
merger of GE Transportation with
Wabtec and exited stake for ~$6 billion
of total proceeds.
% Executed market’s largest secondary
offering in 2019 to reduce Baker Hughes
ownership and collected ~$3 billion of
net proceeds.
% Completed ~$5 billion debt tender.
% Announced multiple changes related to
U.S. pension benefits that are expected to
reduce Industrial net debt* by $5-6 billion.
% Completed majority of sale of GECAS’
PK AirFinance aviation lending platform
and $3.6 billion in receivables to Apollo
and Athene.
% Completed $27 billion total asset reduction
in GE Capital for 2018 and 2019, exceeding
$25 billion target.
2 0 2 0 L E V E R A G E T A R G E T S
Industrial
<2.5x
net debt*/EBITDA*
Capital
<4x
debt/equity
1
GE 2019 ANNUAL REPORT 2 Strengthen our
businesses
As we solidify our financial position,
it is our next priority—strengthen our
businesses—that will drive our long-term
transformation. We began with the
premise that the people closest to the
customer know best how to serve them,
so we shifted resources and accountability
from Corporate to empower our business
units and removed overhead layers in
Power and Renewable Energy. These
efforts will continue into 2020 and beyond.
We got back to basics in how we work,
standardizing common operating metrics
the course of 2019, we laid the foundation
to apply lean more systematically across
GE, driving better results and, in turn, a
better culture.
In my experience, lean transformations
succeed when the senior team leads by
example. So, in June, more than 100 of
our leaders and I spent five days at Power
in Greenville, South Carolina, for a Lean
Action Workout. We divided into 10 teams
focused on improving our gas turbine
manufacturing, repair, and services.
We failed a lot that week. We tried things
that didn’t work and went back to the
drawing board to attack the problem
differently. Doing this day after day, a
We’re doing what we said we would do, and
we’re on a positive trajectory for 2020
with safety always at the core and focusing
our attention on customers, operations,
and priority-setting. I’m also encouraged
by how our team is embracing candor,
transparency, and humility with each other.
We can solve just about any challenge we
encounter, but to do so, we need to put
the good and the bad on the table in equal
measure. While it takes discipline, we’re
fostering this at all levels of the company.
remarkable thing happened. Rather than
growing tired with each turn, the teams
became more energized. Vidya Ravishankar
from the materials planning team in
Greenville summed up the week perfectly
when she said: “The energy levels just kept
skyrocketing. The senior leadership at GE
cleared their calendars and focused—with
such respect—on the problem.” It was an
important moment. And a really fun week.
The best tool I know to drive this type
of positive change at a fundamental
level is lean management, in which
a relentless focus on customer value
helps leaders get to the root cause of
problems, continuously eliminate waste,
and ruthlessly prioritize their work. Over
After Greenville, we held lean events
almost every week across the company.
One of the most pleasant surprises for
me as the year went on was the flood
of people who began reaching out,
raising their hands, and looking to help.
Phil Lawrence, a welder at our Aviation
B U I L D I N G A W O R L D T H A T W O R K S
Component Service Center in Springdale,
Ohio, shared with me how he was hopeful
the changes they were making at his
site would stick. His site leaders were
unequivocal; if anything started to slide
back to the way it was, they told him,
he should call them immediately. Phil
shared that he had never experienced
that attitude before at GE—and
that improvements at the site were
only accelerating.
Across our businesses and around
the world, we’re using lean to make
real improvements in safety, quality,
delivery, and cost. For example, in 2018,
a different Aviation plant in Batesville,
Mississippi, was losing up to 15 percent
of its output due to production defects.
Using lean tools, the plant has been able
to reduce losses by more than 60 percent
so far, saving millions of dollars’ worth
of waste. And it applies well beyond
manufacturing; our Digital team uses
lean to shorten the time it takes for
our customers to install or update our
software while also creating software
for customers to map and eliminate
waste in their own processes. This is
resulting in significantly quicker turns; for
example, we reduced planned downtime
on a software upgrade for one major
manufacturer by 50 percent.
There are thousands of opportunities
like this within GE, each representing
untapped potential for customers
and investors. This is why prioritizing
the goals toward which we channel these
improvements is so important. Our new
series of operational, talent, strategic,
and budget reviews is helping our leaders
define what “game” we are playing in
each business and how we “win.” At the
Alex Saldana, the Executive Project Fulfillment
Leader in charge of commissioning and testing
the prototype of the world’s most powerful
offshore wind turbine, the Haliade-X. The
machine’s rotor and 12-megawatt generator
started supplying electricity to Dutch customers
for the first time in December of 2019.
2
Additive technologies are transforming
the world of manufacturing. A GE Additive
AddWorks team in Cincinnati, Ohio, review a
3D-printed helicopter engine frame designed
for a CT7.
Scott Strazik, CEO of GE Gas Power, with
leaders from GE’s customer Azito Energie S.A.
in Abidjan, Côte d’Ivoire. Upon completion of
its plant extension project, the Azito power
plant in Abidjan is expected to generate
up to 30 percent of Côte d’Ivoire’s grid-
connected power.
GE Healthcare’s Hino factory has been
Santhosh Kumar C from GE’s Edison
Alexis Conway, a Manufacturing Improvement
applying lean for decades, now using software
Engineering Development Program presents in
Specialist, works to lean out inspection
like GE Digital’s Proficy™ Operations Hub to
digitally transform its operations. The site
our ForGE Lab in Bangalore, India. Researchers
and technologists use this space to test ideas
processes on the GE9X, the world’s most
powerful commercial aircraft engine, at
was recognized by the World Economic Forum
and collaborate to create technologies like
GE Aviation’s Test Operation in Peebles, Ohio.
in 2020 as one of the world’s most advanced
Energy Management as a Service, featured here.
manufacturing sites.
GE 2019 ANNUAL REPORT simply “check the box.” We are changing
the way we run GE, business by business,
every day, from the bottom up.
we have a differentiated market position,
like medium voltage and complex
systems in Power Conversion.
same time, we’re consciously aligning our
incentives with yours, tying our business
teams’ compensation more closely to
their respective business’ results as well
as executive compensation more closely
to GE’s stock performance.
Additionally, I spent significant time
making sure we have the right leadership
in place. More than two-thirds of my
direct reports are new to GE or their role
since I began as CEO, and I’m looking
forward to welcoming our new CFO,
Carolina Dybeck Happe, to the team
in March. Our new, smaller Board is
also now in place, which today includes
10 directors, seven of whom are new to
the Board since 2017 and four of whom
are women—bringing fresh perspective,
Let me now take you through what our
progress looks like by business.
P O W E R
We focused much of our energy this year
on Power, and our progress illustrates
the type of improvements we can make
across the company over the long term.
Power drove tremendous change in 2019,
starting by separating Gas Power from
Power Portfolio to improve visibility
and accountability in these businesses.
In Gas Power, the team reduced fixed
costs by 10 percent* and narrowed
the perimeter of projects it goes after,
As I think about the thousands of employees and
customers I met with this year, each interaction has
only deepened my excitement about our work
diversity of thought, and the right
experience for GE. This is a board that
is dedicated to doing what is right for
the company and has tough, direct, and
substantive discussions. GE is becoming
a better company as a result.
Overall, as I think about the thousands of
employees and customers I met with this
year, each interaction has only deepened
my excitement about our work. Our
people are committed, capable, and
enthusiastically driving these changes,
and our customers are rooting for us.
As we move forward with our lean
transformation, we are not looking to
setting evaluation standards across
price, terms, and scope. Gas Power also
booked 13.6 gigawatts in gas turbine
orders during the year, including its 100th
HA turbine order, and launched its new
7HA.03, now the world’s largest and most
efficient gas turbine.
Power Portfolio, which includes Steam,
Power Conversion, and GE Hitachi
Nuclear, also improved its commercial
discipline and cost structure, applying
more rigorous daily management both in
our operations and at our job sites. The
team is focusing on subsegments where
Power’s focus on daily management,
particularly on the project side, is
creating a lower-risk, higher-margin
backlog for the future. I’m pleased with
the progress Power made in 2019 and
look forward to more in 2020.
R E N E W A B L E E N E R G Y
Renewable Energy is well positioned
to serve clean energy markets that are
expected to grow rapidly over the coming
decades.1 In 2019, we brought all of
GE’s renewable and grid assets into this
business, creating a differentiated offering
that can both produce renewable energy
and reliably and safely integrate it into
electrical grids. The team achieved record
unit volume for onshore wind turbines in
2019 while securing nearly 5 gigawatts of
commitments for its new offshore wind
turbine, the Haliade™-X.
Broadly, though, Renewable Energy’s
performance was mixed. I think about
the dynamics at play in Renewable
Energy in three parts. First, Onshore
Wind is our most established, profitable
business, and it is meeting high customer
demand and growing internationally.
Second, we’re placing technology bets
in fast-growing markets. In October, for
example, Offshore Wind successfully
installed the prototype for the Haliade™-X,
which already is breaking records for
power production by a wind turbine.
Third are our required turnarounds in
Grid Solutions and Hydro. Improving
project underwriting and daily execution
here will be a major focus for us in 2020.
B U I L D I N G A W O R L D T H A T W O R K S
Alex Saldana, the Executive Project Fulfillment
Leader in charge of commissioning and testing
the prototype of the world’s most powerful
offshore wind turbine, the Haliade-X. The
machine’s rotor and 12-megawatt generator
started supplying electricity to Dutch customers
for the first time in December of 2019.
Additive technologies are transforming
the world of manufacturing. A GE Additive
AddWorks team in Cincinnati, Ohio, review a
3D-printed helicopter engine frame designed
for a CT7.
Scott Strazik, CEO of GE Gas Power, with
leaders from GE’s customer Azito Energie S.A.
in Abidjan, Côte d’Ivoire. Upon completion of
its plant extension project, the Azito power
plant in Abidjan is expected to generate
up to 30 percent of Côte d’Ivoire’s grid-
connected power.
GE Healthcare’s Hino factory has been
applying lean for decades, now using software
like GE Digital’s Proficy™ Operations Hub to
digitally transform its operations. The site
was recognized by the World Economic Forum
in 2020 as one of the world’s most advanced
manufacturing sites.
Santhosh Kumar C from GE’s Edison
Engineering Development Program presents in
our ForGE Lab in Bangalore, India. Researchers
and technologists use this space to test ideas
and collaborate to create technologies like
Energy Management as a Service, featured here.
Alexis Conway, a Manufacturing Improvement
Specialist, works to lean out inspection
processes on the GE9X, the world’s most
powerful commercial aircraft engine, at
GE Aviation’s Test Operation in Peebles, Ohio.
3
GE 2019 ANNUAL REPORT A V I A T I O N
Aviation delivered strong performance,
closing its 100th year of operation with over
$270 billion in backlog and an installed
base of more than 64,0002 commercial and
military engines. This fleet is poised for
continued growth; for example, in our
commercial business, nearly 70 percent of
the CFM56 fleet has had one or fewer
shop visits. As these engines fly for
decades to come, they will continue to
produce predictable revenue.
and military markets. For example, in
commercial markets, Aviation’s newly
certified Passport™ engine powered
Bombardier’s record-breaking flight
between Sydney and Detroit in October,
and the GE9X™—the world’s largest,
most powerful jet engine—is on track for
certification in 2020. In military, Aviation’s
new T901 was selected for the U.S.
Army’s Improved Turbine Engine Program
to power its next-generation Apache &
Black Hawk helicopters. Finally, just like in
We are changing the way we run GE, business by
business, every day, from the bottom up
That said, 2019 wasn’t without its
challenges. Our team worked diligently
to support our customers following the
grounding of the Boeing 737 MAX, never
wavering in their commitment to safety
while navigating near-term industry
disruption. LEAP continues to be a strong
engine program for us, and we delivered
1,736 LEAP engines to Airbus and Boeing
platforms in the year.
Aviation’s long-term end-market
fundamentals remain attractive, and
the team is introducing advanced
technologies in growing commercial
Springdale and Batesville, teams across
Aviation are continuously identifying new
opportunities to improve their operations.
H E A LT H C A R E
Healthcare performed well in 2019,
growing its backlog to $18.5 billion and
segment profit margins to 19.5 percent.
The team is at the center of an ecosystem
striving for precision health. By bringing
together our machines with software,
analytics, and artificial intelligence (AI)
through our Edison software platform,
Healthcare is helping make care delivery
more efficient and personalized.
We launched seven new “mission control”
Command Centers with customers in
2019, which use predictive analytics and
AI to help hospitals coordinate patient
care more efficiently. Healthcare also
introduced on-device AI on equipment
like our Revolution™ Maxima CT, where AI
helps position the patient more precisely
to improve efficiency, accuracy, and
patient comfort during the scan.
We still see room for improvement in
Healthcare, particularly driving faster
growth and margin expansion in Healthcare
Systems. The business is embracing lean
throughout its operations; at one lean event
at our MR production facility in Florence,
South Carolina, the Healthcare team
identified $50 million of potential savings in
just four days. Even in this strong business,
we’re able to deliver further upside.
This is GE: four mission-critical, global
industrial businesses, each with
growing backlogs and sizable installed
bases where services represent more
than half of our revenue and give us daily
opportunities to serve our customers. GE
Capital’s financing capabilities, including
at GE Capital Aviation Services (GECAS)
and Energy Financial Services (EFS),
catalyze new growth and opportunity for
our Industrial businesses and customers,
enabling more than $6 billion in Industrial
orders in 2019.
Production Team Leader Milena Chapuis and Manufacturing Process Engineer Estelle Le conduct a quality check on GE Healthcare’s production line in Buc, France. The
team in Buc builds interventional imaging systems, pictured here, that are used in operating rooms as an alternative to open surgery. Buc is also a global center for
GE Healthcare’s advanced visualization software and mammography, including the recent development of Senographe Pristina with Dueta, which was named to TIME
Magazine’s “100 Best Inventions of 2019” for its patient-assisted mammography exam feature.
4
GE 2019 ANNUAL REPORT
We’ll continue to shift people, processes,
and accountability to the businesses to
be closer to customers and reduce cost at
Corporate. But if you look at what ties GE
together, our “mortar between the bricks”—
such as GE Research’s advanced work in
broadening access to electricity, healthcare,
and transport to enable a better quality
of life for their citizens. And we have the
long-standing knowledge of local markets,
deep expertise in technology and financing,
and the ability to manage complex global
We are doing it from a place of greater strength and with
a mission that matters—building a world that works
technology and material science, Digital’s
industrial software and services, and our
local capacity and global organization—is
helping our businesses serve their
customers better and set GE apart.
Path to growth
Our priorities looking forward are clear.
We are solidifying our financial position,
continuing to strengthen our businesses,
and driving long-term profitable growth.
As we execute, we can grow our revenues
profitably while improving our overall
cash generation—and we will.
GE’s mission also holds a larger purpose. It
always has. Communities around the world
want to generate more sustainable growth,
supply chains to help our customers execute
these critical infrastructure projects and be
a partner in their progress.
One of the most urgent challenges I’ve
heard from our customers is finding a
way to build all of this while reducing
their greenhouse gas emissions. Our
leadership and Board are focused on this,
too. Investing in efficient technology is
an important part of the solution, and
we’ve been working on this for decades—
from building the world’s most powerful
offshore wind turbine and most efficient
gas turbine, to creating jet engines that
are significantly more fuel-efficient
than their predecessors, to developing
grid-scale energy storage and enabling
combustion of carbon-free fuels like
hydrogen. While there’s more work ahead,
GE will continue to be at the center of the
energy transition in the years to come.
GE’s people rise to challenges like this
in every corner of the world every hour
of every day. Our leading technology,
global network, and exceptional team,
anchored in the service of others, are the
same strengths I shared with you in this
letter last year. I’m confident in our future,
even more now than a year ago, because
of them.
And atop this bedrock we are making real
progress. One Friday morning in October,
I drove up to Aviation’s plant in Lynn,
Massachusetts, where a lean event had
just taken place. What I observed there
gave me so much pride and hope. One
team, flush with excitement, described
how they’d significantly reduced
production time on an engine part. In
response, Barbara Colby, a material
handler, urged her supervisors to keep the
operators’ momentum going. “Don’t let
them off the hook,” she told her colleagues.
I know they won’t.
I hope you will hold us to this same level of
accountability as we transform GE, one day
at a time. We are doing it from a place of
greater strength and with a mission that
matters—building a world that works.
Thank you for joining us on this journey.
H . L AWRENCE CULP, JR .
Chairman of the Board and
Chief Executive Officer
February 24, 2020
Larry Culp with Joe Newkold, Combustors Repair
Operations Leader at GE’s Aviation Component
Service Center (ACSC) in Springdale, Ohio. Continued
improvement actions out of a December Lean Action
Workout at ACSC are driving toward a 50-percent
reduction in turnaround time at the site, positively
impacting both customers and GE’s bottom line.
*
1
2
Non-GAAP Financial Measure
IEA, Offshore Wind Outlook 2019, World Energy Outlook special report, November 2019 https://www.iea.org/reports/offshore-wind-outlook-2019
Including GE and its joint venture partners
G E 2 0 1 9 A N N U A L R E P O R T
5
How GE Performed in 2019
Dollars in millions; except per-share amounts
Total Company
GENERAL ELECTRIC COMPANY
PURPOSE
Building a world that works
CEO
H. Lawrence Culp, Jr.
EMPLOYEES
~205,000
GLOBAL OPERATIONS
170+ countries
G A A P
Total Revenues
GE Industrial Profit
GE Industrial Profit Margin
Continuing EPS
Net EPS
GE Cash from Operating
Activities (CFOA)
2 0 1 9
$95,214
$1,801
2.1%
$(0.01)
$(0.62)
$4,614
2 0 1 8
$97,012
$(20,612)
(23.1)%
$(2.47)
$(2.62)
$701
Y O Y
(2)%
F
F
100%
76%
F
Orders
Backlog
$90,254
$94,799
$404,572
$350,625
(5)%
15%
N O N - G A A P *
GE Industrial Segment
Organic Revenues
Adjusted GE
Industrial Profit
Adjusted GE
Industrial Profit Margin
Adjusted EPS
GE Industrial Free
Cash Flow (FCF)
2 0 1 9
2 0 1 8
$88,053
$83,432
Y O Y
5.5%
$8,743
$8,392
4%
2 0 1 9 O U T L O O K 1
Mid-single-digit
growth
N/A
10.0%
9.4%
60 bps
Flat to up ~100bps
$0.65
$2,322
$0.57
$4,341
14%
(47)%
$0.55-$0.65
$0-$2 billion
Segment Operations
P O W E R
MISSION Powering lives and making electricity
more affordable, reliable, accessible, and more
sustainable
UNITS Gas Power, Power Portfolio
INSTALLED BASE ~7,700 gas turbines
CEO Gas Power: Scott Strazik; Power Portfolio:
Russell Stokes
EMPLOYEES ~38,000
R E N E W A B L E
E N E R G Y
MISSION Making renewable power sources
more affordable, reliable, and accessible for the
benefit of people everywhere
UNITS Onshore Wind, Offshore Wind, Grid
Solutions Equipment and Services, Hydro
INSTALLED BASE ~45,000 onshore
wind turbines
CEO Jérôme Pécresse
EMPLOYEES ~43,000
A V I A T I O N
MISSION Providing customers with engines,
components, avionics and systems for
commercial, military and business & general
aviation aircraft and a global service network to
support these offerings
UNITS Commercial, Military, Systems & Other
INSTALLED BASE ~37,800 commercial
aircraft engines2 and ~26,600 military
aircraft engines
CEO David Joyce
EMPLOYEES ~52,000
2 0 1 9
$18,625
$386
2.1%
Revenues
Profit/(Loss)
Profit/(Loss)
Margin
Segment FCF* $(1,523)
Orders
Backlog
$16,899
$85,302
YOY
RE P O RTE D
(16)%
F
570 bps
YOY
ORGANIC*
(1)%
F
720 bps
2 0 1 9
$15,337
$(666)
(4.3)%
YOY
RE P O RTE D
7%
U
(630) bps
YOY
ORGANIC*
11%
U
(670) bps
Revenues
Profit/(Loss)
Profit/(Loss)
Margin
Revenues
Profit/(Loss)
Profit/(Loss)
Margin
2 0 1 9
$32,875
$6,820
20.7%
YOY
RE P O RTE D
8%
5%
(50) bps
YOY
ORGANIC*
9%
6%
(60) bps
$750
(25)%
-
N/A
Segment FCF*
$(980)
$(1,078)
(13)%
Orders
Backlog
$16,884
$27,530
10%
16%
N/A
12%
Segment FCF*
$4,415
Orders
Backlog
$36,738
$273,245
$185
3%
22%
N/A
4%
H E A LT H C A R E
C A P I T A L
MISSION Operating at the center of an
ecosystem working toward precision health –
digitizing healthcare, helping drive productivity
and improving outcomes across the health system
UNITS Healthcare Systems, Life Sciences
INSTALLED BASE 4M+ healthcare installations
MISSION Designing and delivering innovative
financial solutions for GE Industrial customers
in markets around the world
UNITS GE Capital Aviation Services (GECAS),
Energy Financial Services (EFS), Industrial
Finance (IF), Insurance
CEO Kieran Murphy
EMPLOYEES ~56,000
2 0 1 9
$19,942
$3,896
19.5%
YOY
RE P O RTE D
1%
5%
80 bps
YOY
ORGANIC*
3%
7%
70 bps
Revenues
Profit/(Loss)
Profit/(Loss)
Margin
Segment FCF*
$2,550
$(468)
Orders
Backlog
$21,172
$18,458
1%
6%
N/A
4%
CEO Alec Burger
EMPLOYEES ~2,000
Capital continuing
operations
Discontinued operations
GE Capital Earnings
In billions
Total Capital Assets
6
2 0 1 9
$(530)
192
$(338)
YOY
(8)%
F
84%
$121.5
(2.5)
*
1
2
U
F
Non-GAAP Financial Measure
As updated Oct. 30, 2019
Including GE and its joint venture partners
Unfavorable
Favorable
GE 2019 ANNUAL REPORT
United States Securities and Exchange Commission
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2019
Commission file number 001-00035
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation or organization)
14-0689340
(I.R.S. Employer Identification No.)
5 Necco Street, Boston MA
(Address of principal executive offices)
02210
(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 per share
Floating Rate Notes due 2020
0.375% Notes due 2022
1.250% Notes due 2023
0.875% Notes due 2025
1.875% Notes due 2027
1.500% Notes due 2029
7 1/2% Guaranteed Subordinated Notes due 2035
2.125% Notes due 2037
GE
GE 20E
GE 22A
GE 23E
GE 25
GE 27E
GE 29
GE /35
GE 37
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
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
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
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 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
Non-accelerated filer
Emerging growth company
Accelerated filer
Smaller reporting 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 Act). Yes
No
The aggregate market value of the outstanding common equity of the registrant not held by affiliates as of the last business day of the registrant’s most
recently completed second fiscal quarter was at least $90.1 billion. There were 8,740,232,000 shares of voting common stock with a par value of $0.06
outstanding at January 31, 2020.
The definitive proxy statement relating to the registrant’s Annual Meeting of Shareholders, to be held May 5, 2020, is incorporated by reference into Part
III to the extent described therein.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
About General Electric
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
Consolidated Results
Segment Operations
Corporate Items and Eliminations
Other Consolidated Information
Capital Resources and Liquidity
Critical Accounting Estimates
Other Items
Non-GAAP Financial Measures
Other Financial Data
Risk Factors
Legal Proceedings
Management and Auditor's Reports
Audited Financial Statements and Notes
Statement of Earnings (Loss)
Statement of Financial Position
Statement of Cash Flows
Statement of Comprehensive Income (Loss)
Statement of Changes in Shareholders' Equity
Note 1 Basis of Presentation and Summary of Significant Accounting Policies
Note 2 Businesses Held for Sale and Discontinued Operations
Note 3 Investment Securities
Note 4 Current and Long-term Receivables
Note 5 Financing Receivables and Allowances
Note 6 Inventories
Note 7 Property, Plant and Equipment and Operating Leases
Note 8 Goodwill and Other Intangible Assets
Note 9 Contract and Other Deferred Assets & Progress Collections and Deferred Income
Note 10 All Other Assets
Note 11 Borrowings
Note 12 Insurance Liabilities and Annuity Benefits
Note 13 Postretirement Benefit Plans
Note 14 Current and All Other Liabilities
Note 15 Income Taxes
Note 16 Shareholders’ Equity
Note 17 Share-Based Compensation
Note 18 Earnings Per Share Information
Note 19 Other Income
Note 20 Fair Value Measurements
Note 21 Financial Instruments
Note 22 Variable Interest Entities
Note 23 Commitments, Guarantees, Product Warranties and Other Loss Contingencies
Note 24 Cash Flows Information
Note 25 Intercompany Transactions
Note 26 Operating Segments
Note 27 Guarantor Financial Information
Note 28 Baker Hughes Summarized Financial Information
Note 29 Quarterly Information (unaudited)
Forward-Looking Statements
Directors, Executive Officers and Corporate Governance
Exhibits and Financial Statement Schedules
Form 10-K Cross Reference Index
Signatures
Page
3
4
4
8
20
22
25
34
37
43
49
50
57
58
62
62
64
66
68
68
69
74
77
78
80
81
81
82
84
85
86
87
89
94
94
98
99
100
100
101
102
104
105
110
112
113
115
119
120
121
122
123
126
127
ABOUT GENERAL ELECTRIC
ABOUT GENERAL ELECTRIC
General Electric Company (General Electric or the Company) is a high-tech industrial company that operates worldwide through its four
industrial segments, Power, Renewable Energy, Aviation and Healthcare, and its financial services segment, Capital. The Power
segment offers technologies, solutions, and services related to energy production, including gas and steam turbines, generators, and
power generation services. The Renewable Energy segment provides wind turbine platforms, hardware and software, offshore wind
turbines, solutions, products and services to hydropower industry, blades for onshore and offshore wind turbines, and high voltage
equipment. The Aviation segment provides jet engines and turboprops for commercial and military airframes, maintenance, component
repair, and overhaul services, as well as replacement parts, additive machines and materials, and engineering services. The Healthcare
segment provides healthcare technologies in medical imaging, digital solutions, patient monitoring and diagnostics, drug discovery,
biopharmaceutical manufacturing technologies and performance enhancement solutions. The Capital segment leases and finances
aircraft, aircraft engines and helicopters, provides financial and underwriting solutions, and manages our run-off insurance operations.
See the Consolidated Results section of Management’s Discussion and Analysis of Financial Condition and Results of Operations and
Note 2 to the consolidated financial statements for information regarding our recent business portfolio actions.
We serve customers in over 170 countries. Manufacturing and service operations are carried out at 94 manufacturing plants located in
30 states in the United States and Puerto Rico and at 190 manufacturing plants located in 37 other countries.
In all of our global business activities, we encounter aggressive and able competition. In many instances, the competitive climate is
characterized by changing technology that requires continuing research and development. With respect to manufacturing operations,
we believe that, in general, we are one of the leading firms in most of the major industries in which we participate. The businesses in
which GE Capital engages are subject to competition from various types of financial institutions.
As a diverse global company, we are affected by world economies, instability in certain regions, commodity prices, foreign currency
volatility and policies regarding trade and imports. See the Segment Operations section within Management's Discussion and Analysis
(MD&A) for further information. Other factors impacting our business include:
•
product development cycles for many of our products are long and product quality and efficiency are critical to success,
research and development expenditures are important to our business,
•
• many of our products are subject to a number of regulatory standards and
•
changing end markets, including shifts in energy sources and demand and the impact of technology changes.
At year-end 2019, General Electric Company and consolidated affiliates employed approximately 205,000 people, of whom
approximately 70,000 were employed in the United States. Our Power, Renewable Energy, Aviation, Healthcare, and Capital segments
employed approximately 38,000, 43,000, 52,000, 56,000 and 2,000 people, respectively. Our Corporate business employed
approximately 13,000 employees.
Approximately 6,750 GE and GE affiliate manufacturing and service employees in the United States (U.S.)are represented for collective
bargaining purposes by a union. A majority of such employees are represented by union locals that are affiliated with the IUE-CWA, The
Industrial Division of the Communication Workers of America, AFL-CIO, CLC. In August 2019, most of GE's U.S. unions, including the
IUE-CWA, ratified new four-year labor agreements to replace the current agreements.
General Electric’s address is 1 River Road, Schenectady, NY 12345-6999; we also maintain executive offices at 5 Necco Street,
Boston, MA 02210.
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. Additional information on non-financial
matters, including environmental and social matters and our integrity policies, is available at www.ge.com/sustainability. Website
references in this report are provided as a convenience and do not constitute, and should not be viewed as, incorporation by reference
of the information contained on, or available through, the websites. Therefore, such information should not be considered part of this
report.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are
available, without charge, on our website, www.ge.com/investor-relations/events-reports, as soon as reasonably practicable after they
are filed electronically with the U.S. Securities and Exchange Commission (SEC). Copies are also available, without charge, from GE
Corporate Investor Communications. Reports filed with the SEC may be viewed at www.sec.gov.
GE 2019 FORM 10-K 3
MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (MD&A)
The consolidated financial statements of General Electric Company combine the industrial manufacturing and services businesses of
GE with the financial services businesses of GE Capital and are prepared in conformity with U.S. generally accepted accounting
principles (GAAP). Certain columns and rows within tables may not add due to the use of rounded numbers. Percentages presented in
this report are calculated from the underlying numbers in millions. Discussions throughout this MD&A are based on continuing
operations unless otherwise noted. The MD&A should be read in conjunction with the Financial Statements and Notes to the
consolidated financial statements. For purposes of the financial statement display of sales and costs of sales in our consolidated
Statement of Earnings (Loss), “goods” is required by SEC regulations to include all sales of tangible products, and "services" must
include all other sales, including other services activities. In our MD&A section of this report, 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 financial services operations. We believe that this provides useful information to
investors. When used in this report, unless otherwise indicated by the context, we use these terms to mean the following:
• Consolidated – the adding together of GE and GE Capital, giving effect to the elimination of transactions between the two. We
present consolidated results in the left-side column of our consolidated Statements of Earnings (Loss), Financial Position and Cash
Flows.
• GE – the adding together of all affiliates except GE Capital, whose continuing operations are presented on a one-line basis, giving
effect to the elimination of transactions among such affiliates. As GE presents the continuing operations of GE Capital on a one-line
basis, any intercompany profits resulting from transactions between GE and GE Capital are eliminated at the GE level. We present
the results of GE in the center column of our consolidated Statements of Earnings (Loss), Financial Position and Cash Flows.
• GE Capital – the adding together of all affiliates of GE Capital giving effect to the elimination of transactions among such affiliates.
We present the results of GE Capital in the right-side column of our consolidated Statements of Earnings (Loss), Financial Position
and Cash Flows.
• GE Industrial – GE excluding the continuing operations of GE Capital. We believe that this provides investors with a view as to the
results of our industrial businesses and corporate items.
•
Industrial segment – the sum of our four industrial reportable segments, without giving effect to the elimination of transactions
among such segments or between these segments and our financial services segment. This provides investors with a view as to
the results of our industrial segments, without inter-segment eliminations and corporate items.
This document contains “forward-looking statements” - for details about the uncertainties that could cause our actual results to be
materially different than those expressed in our forward-looking statements, see the Risk Factors and Forward-Looking Statements
sections.
CONSOLIDATED RESULTS
2019 SIGNIFICANT DEVELOPMENTS. In October 2019, we announced changes to the U.S. GE Pension Plan and the U.S. GE
Supplementary Plan. As a result of these actions, we recognized a pre-tax increase in non-operating benefit costs of $0.6 billion in the
fourth quarter of 2019. See Note 13 to the consolidated financial statements for further information.
We performed this year’s premium deficiency testing in the aggregate across our run-off insurance portfolio in the third quarter of 2019.
As a result of our testing, we identified a premium deficiency resulting in a $1.0 billion pre-tax ($0.8 billion after-tax) charge to earnings.
See the Other Items - Insurance section within MD&A and Note 12 to the consolidated financial statements for further information.
In the third quarter of 2019, we completed a tender offer to purchase $4.8 billion of GE senior unsecured debt. The total cash
consideration paid for these purchases was $5.0 billion, resulting in a pre-tax loss of $0.3 billion (including fees and other costs
associated with the tender). See Note 11 to the consolidated financial statements for further information.
In September 2019, we sold a total of 144.1 million shares in Baker Hughes for $3.0 billion in cash (net of certain deal related costs)
which reduced our ownership interest from 50.2% to 36.8%. As a result, we have deconsolidated our Baker Hughes segment and
reclassified its results to discontinued operations for all periods presented, and recorded a loss of $8.7 billion ($8.2 billion after-tax) in
discontinued operations. See Notes 2 and 3 to the consolidated financial statements for further information.
In the second and third quarters of 2019, we recognized non-cash pre-tax impairment charges of $0.7 billion and $0.7 billion related to
goodwill at our Grid Solutions equipment and services reporting unit and at our Hydro reporting unit, respectively, both within our
Renewable Energy segment. These charges were recorded within earnings from continuing operations at Corporate. See Note 8 to the
consolidated financial statements for further information.
GE 2019 FORM 10-K 4
MD&A
CONSOLIDATED RESULTS
In February 2019, we completed the spin-off and subsequent merger of our Transportation segment with Wabtec Corporation, a U.S.
rail equipment manufacturer. As a result, we reclassified our Transportation segment to discontinued operations in the first quarter of
2019, for all periods presented, and recorded a gain of $3.5 billion ($2.5 billion after-tax) in discontinued operations. Total proceeds
from the sale of the business, including the sale of Wabtec common stock during 2019 were $6.2 billion. See Notes 2 and 3 to the
consolidated financial statements for further information.
Also in February 2019, we announced an agreement to sell our BioPharma business within our Healthcare segment to Danaher
Corporation for total consideration of approximately $21.4 billion subject to certain adjustments. Correspondingly, we classified
BioPharma as a business held for sale. We expect to complete the sale in the first quarter of 2020, subject to regulatory approval,
providing us flexibility and optionality with respect to our remaining Healthcare businesses. See Note 2 to the consolidated financial
statements for further information.
SUMMARY OF 2019 RESULTS. Consolidated revenues were $95.2 billion, down $1.8 billion (2%) for the year primarily driven by
decreased Corporate revenues of $1.0 billion, largely attributable to the sale of our Current business in November 2018 and decreased
GE Capital revenues of $0.8 billion. The overall foreign currency impact on consolidated revenues was a decrease of $1.4 billion.
Industrial segment organic revenues* increased $4.6 billion (5.5%) driven by our Aviation, Renewable Energy and Healthcare
segments, partially offset by our Power segment.
Continuing earnings per share was $(0.01). Excluding non-operating benefit costs, gains (losses) on business dispositions,
restructuring and other charges, goodwill impairments, unrealized gains (losses) on investments, BioPharma deal taxes, debt
extinguishment costs, U.S. tax reform enactment and an insurance premium deficiency test charge, Adjusted earnings per share* was
$0.65.
For the year ended December 31, 2019, GE Industrial profit was $1.8 billion and profit margins were 2.1%, up $22.4 billion, driven by
decreased non-cash goodwill impairment charges of $20.6 billion, decreased restructuring and other costs of $1.5 billion and decreased
interest and other financial charges of $0.3 billion, partially offset by increased non-operating benefit costs of $0.1 billion. Industrial
segment profit increased $0.8 billion (8%) primarily due to higher results within our Power, Healthcare and Aviation segments, partially
offset by the performance of our Renewable Energy segment. Industrial segment organic profit* increased $1.0 billion (11%).
GE cash flows from operating activities (CFOA) from continuing operations was $4.6 billion and $0.7 billion for the years ended
December 31, 2019 and 2018, respectively. GE CFOA increased primarily due to no GE Pension Plan contributions in 2019 compared
to $6.0 billion in 2018 and lower net disbursements for equipment project costs, partially offset by higher cash used for working capital
compared to 2018. GE Industrial free cash flows (FCF)* were $2.3 billion and $4.3 billion for the years ended December 31, 2019 and
2018, respectively. The decrease was primarily due to higher cash used for working capital compared to 2018, partially offset by lower
net disbursements for equipment project costs compared to 2018. 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. Backlog is unfilled
customer orders for products and product services (expected life of contract sales for product services).
(In billions)
Equipment
Services
Total backlog
Equipment
Services
Total orders
2019
2018
$
$
$
$
79.0 $
325.6
404.6 $
45.0 $
45.3
90.3 $
77.1 $
273.5
350.6 $
49.3 $
45.5
94.8 $
2017
75.1
256.8
331.9
48.8
46.5
95.3
As of December 31, 2019, backlog increased $53.9 billion (15%) from the prior year due to an increase in services backlog of $48.4
billion at Aviation and $1.9 billion at Renewable Energy and an increase in equipment backlog of $1.9 billion at Renewable Energy.
For the year ended December 31, 2019, orders decreased $4.5 billion (5%) on a reported basis and increased $0.6 billion (1%)
organically driven by an increase in services orders of $1.5 billion primarily at Aviation, partially offset by Renewable Energy, and a
decrease in equipment orders of $0.9 billion, primarily at Power and Aviation, partially offset by Renewable Energy.
As of December 31, 2018, backlog increased $18.8 billion (6%), primarily due to an increase in services backlog of $16.7 billion
primarily at Aviation and an increase in equipment backlog of $2.1 billion, also primarily at Aviation.
For the year ended December 31, 2018, orders decreased $0.5 billion (1%) on a reported basis and increased $2.9 billion (3%)
organically driven by an increase in equipment orders of $2.5 billion, primarily at Aviation, partially offset by Power and Renewable
Energy, and an increase in services orders of $0.5 billion, primarily at Aviation and Renewable Energy, partially offset by Power.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 5
MD&A
CONSOLIDATED RESULTS
Remaining performance obligation (RPO), a defined term under GAAP, is backlog excluding any purchase order that provides the
customer with the ability to cancel or terminate without incurring a substantive penalty, even if the likelihood of cancellation is remote
based on historical experience. We plan to continue reporting backlog as we believe that it is a useful metric for investors, given its
relevance to total orders. See Note 26 to the consolidated financial statements for further information.
December 31, 2019 (In billions)
Backlog
Adjustments
Remaining performance obligation
Equipment
Services
$
$
79.0 $
(30.5)
48.5 $
325.6 $
(128.7)
196.9 $
Total
404.6
(159.1)
245.4
Adjustments to reported backlog of $159.1 billion as of December 31, 2019 are largely driven by adjustments of $149.5 billion in our
Aviation segment: (1) backlog includes engine contracts for which we have received purchase orders that are cancelable. We have
included these in backlog as our historical experience has shown no net cancellations, as any canceled engines are typically moved by
the airframer to other program customers; (2) our services backlog includes contracts that are cancelable without substantive penalty,
primarily time and materials contracts; (3) backlog includes engines contracted under long-term service agreements, even if the
engines have not yet been put into service. These adjustments to reported backlog are expected to be satisfied beyond one year.
(In billions)
Consolidated revenues
Equipment
Services
Industrial segment revenues
Corporate items and Industrial eliminations
GE Industrial revenues
GE Capital revenues
2019
95.2 $
42.9
43.9
86.8 $
0.9
87.7 $
8.7 $
$
$
$
$
2018
97.0 $
42.4
44.4
86.8 $
2.3
89.0 $
9.6 $
2017
99.3
48.0
41.7
89.8
2.5
92.2
9.1
For the year ended December 31, 2019, consolidated revenues decreased $1.8 billion (2%) primarily driven by decreased Corporate
revenues of $1.0 billion, largely attributable to the sale of our Current business in November 2018, and decreased GE Capital revenues
of $0.8 billion. The overall foreign currency impact on consolidated revenues was a decrease of $1.4 billion.
Industrial segment revenues remained flat as a decrease at Power was offset by increases at Aviation, Renewable Energy and
Healthcare. This was driven by the net effects of dispositions of $3.3 billion, primarily attributable to the sales of Industrial Solutions,
Value-Based Care and Distributed Power in 2018 and the effects of a stronger U.S. dollar of $1.4 billion, partially offset by the net
effects of acquisitions of $0.1 billion. Industrial segment organic revenues* (excluding the effects of acquisitions, dispositions and
foreign currency) increased $4.6 billion (5.5%).
GE Capital revenues decreased $0.8 billion (8%), primarily due to volume declines and lower gains, partially offset by lower
impairments.
For the year ended December 31, 2018, consolidated revenues decreased $2.3 billion (2%), primarily driven by decreased industrial
segment revenues of $3.0 billion, partially offset by increased GE Capital revenues of $0.5 billion. The overall foreign currency impact
on consolidated revenues was $0.5 billion.
Industrial segment revenues decreased $3.0 billion (3%) as a decrease at Power was partially offset by increases at Healthcare and
Aviation. This decrease was driven in part by the net effects of dispositions of $3.5 billion, partially offset by the effects of a weaker U.S.
dollar of $0.5 billion. Industrial segment organic revenues* remained flat.
GE Capital revenues increased $0.5 billion (5%) primarily due to lower impairments and volume growth, partially offset by lower gains.
(In billions; per-share amounts in dollars and diluted)
Continuing earnings (loss) attributable to GE common shareholders
Continuing earnings (loss) per share
2019
— $
(0.01) $
2018
(21.4) $
(2.47) $
2017
(8.7)
(1.00)
$
$
For the year ended December 31, 2019, consolidated continuing losses decreased $21.4 billion, due to decreased GE goodwill
impairment charges of $20.6 billion, increased GE Industrial segment profit of $0.8 billion, decreased corporate items and eliminations
of $0.6 billion and decreased GE interest and other financial charges of $0.3 billion, partially offset by increased provision for GE
Industrial income taxes of $0.8 billion and increased GE non-operating benefit costs of $0.1 billion.
GE Industrial segment profit increased $0.8 billion (8%) with higher profit at Power, Aviation and Healthcare partially offset by lower
profit at Renewable Energy. Industrial segment profit was also driven in part by the net effects of dispositions of $0.3 billion, primarily
associated with the sales of Industrial Solutions, Value-Based Care and Distributed Power in 2018, offset by the effects of a weaker
U.S. dollar of $0.1 billion. Excluding the effects of acquisitions, dispositions and foreign currency translation, industrial segment organic
profit* increased $1.0 billion (11%). Corporate items and eliminations decreased $0.6 billion primarily attributable to decreased
restructuring and other costs of $1.6 billion, increased net unrealized gains on investments of $0.8 billion, partially offset by decreased
net gains from disposed or held for sale businesses of $1.4 billion and increased adjusted Corporate operating costs* of $0.4 billion.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 6
MD&A
CONSOLIDATED RESULTS
GE Capital continuing losses were flat primarily due to a $1.0 billion pre-tax charge identified through the completion of our annual
insurance premium deficiency review, lower gains, lower tax benefits and volume declines, offset by lower impairments, lower excess
interest costs and tax law changes. Gains were $0.7 billion and $0.8 billion in 2019 and 2018, respectively, which primarily related to
sales of GE Capital Aviation Services (GECAS) aircraft and engines resulting in gains of $0.4 billion and $0.3 billion in 2019 and 2018,
respectively, as well as the sale of equity method investments resulting in gains of $0.2 billion in 2019 at Energy Financial Services
(EFS) and the sale of EFS’ debt origination business and equity investments resulting in gains of $0.4 billion in 2018.
For the year ended December 31, 2018, consolidated continuing losses increased $12.7 billion driven by increased GE goodwill
impairment charges of $21.0 billion, decreased GE Industrial segment profit of $1.8 billion and increased GE non-operating benefit
costs of $0.3 billion, partially offset by decreased GE Capital losses of $6.3 billion, decreased provision for GE Industrial income taxes
of $3.0 billion, decreased corporate items and eliminations of $1.0 billion and decreased GE interest and other financial charges of $0.1
billion.
GE Industrial segment profit decreased $1.8 billion (16%) with decreases at Power and Renewable Energy, partially offset by higher
earnings at Aviation and Healthcare. Industrial segment profit was also driven in part by the net effects of dispositions of $0.4 billion,
primarily associated with the absence of Water following its sale in the third quarter of 2017 and Industrial Solutions following its sale in
the second quarter of 2018. Excluding the effects of acquisitions, dispositions and foreign currency translation, industrial segment
organic profit* decreased $1.4 billion. Corporate items and eliminations decreased $1.0 billion primarily attributable to higher net gains
from disposed or held for sale businesses of $0.4 billion, decreased adjusted Corporate operating costs* of $0.4 billion and decreased
restructuring and other costs of $0.1 billion.
GE Capital continuing losses decreased $6.3 billion (93%) primarily due to the nonrecurrence of the 2017 charges associated with the
GE Capital insurance premium deficiency review and EFS strategic actions, partially offset by the nonrecurrence of 2017 tax benefits.
GEOGRAPHIC INFORMATION. Our global activities span all geographic regions and primarily encompass manufacturing for local and
export markets, import and sale of products produced in other regions, leasing of aircraft, sourcing for our plants domiciled in other
global regions and provisioning of financial services within these regional economies. Thus, when countries or regions experience
currency and/or economic stress, we often have increased exposure to certain risks, but also often have new opportunities that include,
among other things, expansion of industrial activities through purchases of companies or assets at reduced prices and lower U.S. debt
financing costs.
Financial results of our non-U.S. activities reported in U.S. dollars are affected by currency exchange. We use a number of techniques
to manage the effects of currency exchange, including selective borrowings in local currencies and selective hedging of significant
cross-currency transactions. Such principal currencies are the euro, the pound sterling, the Brazilian real and the Chinese renminbi.
Revenues are classified according to the region to which products and services are sold. For purposes of this analysis, the U.S. is
presented separately from the remainder of the Americas.
(Dollars in billions)
U.S.
Non-U.S.
Europe
Asia
Americas
Middle East and Africa
Total Non-U.S.
Total geographic revenues
Non-U.S. revenues as a % of consolidated revenues
2019
2018
2017
2019-2018
2018-2017
$
39.4
$
40.0
$
41.5
(2) %
(4) %
V%
19.1
20.2
6.3
10.3
55.8
95.2
$
$
19.8
19.3
7.9
10.1
57.1
97.0
$
$
18.7
18.3
7.8
13.0
57.8
99.3
59%
59%
58%
$
$
(2) %
(2) %
(1) %
(2) %
The decrease in non-U.S. revenues in 2019 was primarily due to a decrease of 20% in Americas, partially offset by an increase of 4% in
Asia.
The decrease in non-U.S. revenues in 2018 was primarily due to a decrease of 22% in Middle East and Africa, partially offset by
increases of 6% in Europe and 5% in Asia.
The effects of currency fluctuations on reported results were as follows:
• Decreased revenues by $1.4 billion in 2019, primarily driven by the euro ($0.7 billion), the Chinese renminbi ($0.2 billion), the
Brazilian real ($0.1 billion), the pound sterling ($0.1 billion), and the Australian dollar ($0.1 billion).
•
Increased revenues by $0.5 billion in 2018, primarily driven by the euro ($0.3 billion).
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 7
MD&A
CONSOLIDATED RESULTS
AVIATION AND GECAS 737 MAX. Aviation develops, produces, and sells LEAP aircraft engines through CFM International (CFM), a
company jointly owned by GE and Safran Aircraft Engines, a subsidiary of the Safran Group of France. The LEAP-1B engine is the
exclusive engine for the Boeing 737 MAX. In March 2019, global regulatory authorities ordered a temporary fleet grounding of the
Boeing 737 MAX. During the second quarter of 2019, Boeing announced a temporary reduction in the 737 MAX production rate, and
CFM reduced its production rate for the LEAP-1B to meet Boeing's revised aircraft build rate. In December 2019, Boeing announced
that it would temporarily suspend production of the 737 MAX beginning in January 2020. CFM is working closely with Boeing to align
production rates for 2020 and ensure a successful reentry into service, with a strong commitment to safety while navigating near-term
industry disruption. As a result of the 737 MAX grounding, GE CFOA was adversely affected by approximately $1.4 billion for the year
ended December 31, 2019, which primarily represents the growth in receivables, net of progress collections, and lower collections on
new purchase orders. Within Aviation, this effect was more than offset by: higher commercial aftermarket earnings and higher long-term
service agreement billings of $0.6 billion; cash receipts from contract modifications of $0.3 billion; a new spare parts distribution deal for
a legacy engine program of $0.3 billion; and lower customer allowance payments of $0.4 billion. Other Aviation working capital cash
flows, excluding the impact of the 737 MAX grounding, largely offset. Any impact to GE CFOA in 2020 is dependent on the timing of the
737 MAX return to service and engine production rates.
At December 31, 2019, GECAS owned 29 737 MAX aircraft, 26 of which are contracted for lease to airlines that remain obligated to
make contractual rental payments. In addition, GECAS has made pre-delivery payments to Boeing related to 144 of these aircraft on
order and has made financing commitments to acquire a further 18 aircraft under purchase and leaseback contracts with airlines.
As of December 31, 2019, we have approximately $2.5 billion of net assets ($4.8 billion of assets and $2.3 billion of liabilities) related to
the 737 MAX program that primarily comprise accounts receivable, pre-delivery payments and owned aircraft subject to lease offset by
progress collections. No impairment charges were incurred related to the 737 MAX aircraft and related balances in 2019 as we continue
to believe these assets are fully recoverable. We continue to monitor these developments with our airline customers, lessees and
Boeing.
LEAP continues to be a strong engine program for us, and we delivered 1,736 LEAP engines for Boeing and Airbus platforms in the
year.
SEGMENT OPERATIONS. Segment revenues include sales of products and services by the segment. Industrial segment profit is
determined based on performance measures used by our Chief Operating Decision Maker (CODM), who is our Chief Executive Officer
(CEO), to assess the performance of each business in a given period. In connection with that assessment, the CEO may exclude
matters, such as charges for impairments, restructuring, rationalization and other similar expenses, acquisition costs and other related
charges, certain gains and losses from acquisitions or dispositions, and certain litigation settlements. See the GE Corporate Items and
Eliminations section within MD&A for additional information about costs excluded from segment profit.
Segment profit excludes results reported as discontinued operations and the portion of earnings or loss attributable to noncontrolling
interests of consolidated subsidiaries, and as such only includes the portion of earnings or loss attributable to our share of the
consolidated earnings or loss of consolidated subsidiaries.
Interest and other financial charges, income taxes and non-operating benefit costs are excluded in determining segment profit for the
industrial segments. Interest and other financial charges, income taxes, non-operating benefit costs and GE Capital preferred stock
dividends are included in determining segment profit (which we sometimes refer to as net earnings) for the Capital segment. Other
income is included in segment profit for the industrial segments.
Certain corporate costs, such as those related to shared services, employee benefits, and information technology, are allocated to our
segments based on usage. A portion of the remaining corporate costs is allocated based on each segment’s relative net cost of
operations.
GE 2019 FORM 10-K 8
MD&A
SEGMENT OPERATIONS
SUMMARY OF REPORTABLE SEGMENTS (In millions)
2019
2018
Power
Renewable Energy
Aviation
Healthcare
Total industrial segment revenues
Capital
Total segment revenues
Corporate items and eliminations
Consolidated revenues
Power
Renewable Energy
Aviation
Healthcare
Total industrial segment profit
Capital
Total segment profit
Corporate items and eliminations
GE goodwill impairments
GE interest and other financial charges
GE non-operating benefit costs
GE benefit (provision) for income taxes
Earnings (loss) from continuing operations attributable to GE common shareholders
Earnings (loss) from discontinued operations, net of taxes
Less net earnings (loss) attributable to noncontrolling interests, discontinued operations
Earnings (loss) from discontinued operations, net of taxes and noncontrolling interests
Consolidated net earnings (loss) attributable to GE common shareholders
$
$
$
$
18,625 $
15,337
32,875
19,942
86,778
8,741
95,519
(305)
95,214 $
386 $
(666)
6,820
3,896
10,436
(530)
9,906
(2,212)
(1,486)
(2,115)
(2,828)
(1,309)
(44)
(5,335)
60
(5,395)
(5,439) $
22,150 $
14,288
30,566
19,784
86,789
9,551
96,339
673
97,012 $
(808) $
292
6,466
3,698
9,647
(489)
9,158
(2,837)
(22,136)
(2,415)
(2,740)
(467)
(21,438)
(1,363)
1
(1,364)
(22,802) $
2017
29,426
14,321
27,013
19,017
89,776
9,070
98,847
433
99,279
1,894
728
5,370
3,488
11,479
(6,765)
4,714
(3,798)
(1,165)
(2,538)
(2,409)
(3,493)
(8,689)
(312)
(81)
(231)
(8,920)
POWER
Products & Services. Power serves power generation, industrial, government and other customers worldwide with products and
services related to energy production. Our products and technologies harness resources such as oil, gas, fossil, diesel, nuclear and
water to produce electric power and include gas and steam turbines, full balance of plant, upgrade and service solutions, as well as
data-leveraging software.
In 2019, we reorganized the businesses within our Power segment into Gas Power and Power Portfolio, and we completed the
reorganization of our Grid Solutions equipment and services business into our Renewable Energy segment and our Grid Solutions
software and Power Digital businesses into Corporate for all periods presented. Power Portfolio's 2018 and 2017 results also include
our former Industrial Solutions and Distributed Power businesses which were sold in June 2018 and November 2018, respectively.
Gas Power – offers a wide spectrum of heavy-duty and aeroderivative gas turbines for utilities, independent power producers and
numerous industrial applications, ranging from small, mobile power to utility scale power plants. Gas Power also delivers maintenance,
service and upgrade solutions across total plant assets and over their operational lifecycle. Our gas turbine installed base was
approximately 7,700 units as of December 31, 2019.
Power Portfolio – offers steam power technology for fossil and nuclear applications including boilers, generators, steam turbines and
Air Quality Control Systems (AQCS) to help efficiently produce power and provide performance over the life of a power plant. Power
Portfolio also applies the science and systems of power conversion to provide motors, generators, automation and control equipment
and drives for energy intensive industries such as marine, oil and gas, renewable energy, mining, rail, metals, test systems and water. It
also offers advanced reactor technologies solutions, including reactors, fuels and support services for boiling water reactors, through
joint ventures with Hitachi and Toshiba for nuclear fleets.
Competition & Regulation. Worldwide competition for power generation products and services is intense. Demand for power
generation is global, and as a result, is sensitive to the economic and political environments of each country in which we do business.
Our products and services sold to end customers are often subject to many regulatory requirements and performance standards under
different federal, state, foreign and energy industry standards.
Significant Trends & Developments. The power market as well as its operating environment continue to be challenging. Over the
past several quarters, our outlook for Power was driven by the significant overcapacity in the industry, increased price pressure from
competition on servicing the installed base, and the uncertain timing of deal closures due to financing and the complexities of working in
emerging markets. Market factors such as increasing energy efficiency and renewable energy penetration, the growth in global supply
of liquefied natural gas, as well as the cost-competitiveness of different sources of power generation continue to impact how we
evaluate long-term market demand.
GE 2019 FORM 10-K 9
MD&A
SEGMENT OPERATIONS
We have and will continue to take actions to right size our business for the current market conditions and our long-term outlook,
including restructuring our operations to dispose of non-core businesses, resizing our remaining businesses to better align with market
demand and driving these businesses with an operational rigor and discipline that is focused on our customers’ lifecycle experience.
We are building a cost structure to support an average 25 to 30 gigawatt new unit gas turbine market; however, actual orders in a given
year can vary. As a result of these actions and overall market conditions, we believe the business is showing early signs of stabilization.
We expect incremental improvements in 2020 with further acceleration in 2021 and beyond.
We continue to invest in new product development, such as our HA-Turbines, including upgrades, as these are critical to our customers
and the long-term strategy of the business.
(In units)
GE Gas Turbines
Heavy-Duty Gas Turbines(a)
HA-Turbines(b)
Aeroderivatives(a)
GE Gas Turbine Gigawatts(c)
(a) Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines.
(b) HA-Turbines are a subset of Heavy-Duty Gas Turbines.
(c) Gigawatts reported associated with financial orders in the periods presented.
Orders
2019
74
63
18
11
13.6
2018
52
43
10
9
8.0
Sales
2019
53
38
11
15
2018
18.8 $
66.2
85.0 $
9.3 $
13.3
22.6 $
13.3 $
8.9
22.1 $
2018
59
42
12
17
2017
19.3
70.4
89.7
13.0
17.0
30.0
17.1
12.3
29.4
2019
17.7 $
67.6
85.3 $
5.2 $
11.7
16.9 $
13.1 $
5.5
18.6 $
$
$
$
$
$
$
$
6.0
$
7.5
$
9.9
3.1
4.0
1.9
3.6
12.6
18.6
68%
6.2
12.4
18.6
0.4
2.1%
$
$
$
$
$
4.5
4.1
2.5
3.5
14.7
22.1
66%
8.1
14.1
22.1
(0.8)
(3.6)%
$
$
$
$
$
5.1
5.0
2.6
6.8
19.5
29.4
66%
12.9
16.5
29.4
1.9
6.4%
$
$
$
$
$
(Dollars in billions)
Equipment
Services
Total backlog
Equipment
Services
Total orders
Gas Power
Power Portfolio
Total segment revenues
U.S.
Non-U.S.
Europe
Asia
Americas
Middle East and Africa
Total Non-U.S.
Total segment revenues
Non-U.S. revenues as a % of segment revenues
Equipment
Services
Total segment revenues(a)
Segment profit(b)
Segment profit margin
(a) Power segment revenues represent 21% and 19% of total industrial segment revenues and total segment revenues, respectively,
for the year ended December 31, 2019.
(b) Power segment profit represents 4% of total industrial segment profit for the year ended December 31, 2019.
GE 2019 FORM 10-K 10
MD&A
SEGMENT OPERATIONS
For the year ended December 31, 2019, segment orders were down $5.7 billion (25%), segment revenues were down $3.5
billion (16%) and segment profit was up $1.2 billion.
Backlog as of December 31, 2019 increased $0.3 billion from December 31, 2018, primarily due to an increase in services backlog of
$1.4 billion attributable to Gas Power, partially offset by a decrease in equipment backlog of $1.1 billion from both Gas Power and
Power Portfolio.
Orders decreased $2.5 billion (13%) organically mainly due to a decrease in Steam orders at Power Portfolio, partially offset by 20
more heavy duty gas turbine orders.
Revenues decreased $0.2 billion (1%) organically* primarily due to a decrease in services revenue at Power Portfolio.
Profit increased $1.4 billion organically* due to improved variable cost productivity driven by the absence of significant warranty and
project cost updates, as well as liquidated damages recognized in 2018.
For the year ended December 31, 2018, segment orders were down $7.4 billion (25%), segment revenues were down $7.3
billion (25%) and segment profit was down $2.7 billion.
Backlog as of December 31, 2018 decreased $4.7 billion (5%) primarily due to a reduction in services backlog of $4.2 billion attributable
to Gas Power and due to the absence of our Distributed Power and Industrial Solutions businesses in Power Portfolio.
Orders decreased $4.0 billion (15%) organically mainly due to Gas Power lower gas turbine and services orders.
Revenues decreased $4.5 billion (17%) organically*. Equipment revenues decreased primarily at Gas Power, due to lower unit sales,
including 60 fewer gas turbines, 26 fewer Heat Recovery Steam Generators and 23 fewer aeroderivative units. Services revenues also
decreased primarily due to 27 fewer AGP upgrades.
Profit decreased $2.4 billion organically* due to negative variable cost productivity driven by warranty, project cost updates as well as
liquidated damages, and various assumption updates for unfavorable pricing, lower utilization, and cost updates on our long-term
service agreements recognized by Gas Power.
RENEWABLE ENERGY
Products & Services. Renewable Energy engineers and manufactures energy equipment and projects, grid solutions and digital
services that create industry-leading value for our customers globally. Combining onshore and offshore wind, blades, hydro and grid
solutions, as well as hybrid renewables and digital services offerings, we have installed more than 400 gigawatts of clean renewable
energy equipment and more than 90 percent of utilities worldwide with our grid solutions.
Onshore Wind – delivers technology and services for the onshore wind power industry by providing smart turbines that are uniquely
situated for a variety of wind environments. Wind services help customers improve availability and value of their assets over the lifetime
of the fleet. The Digital Wind Farm is a site level solution, creating a dynamic, connected and adaptable ecosystem that improves our
customers’ fleet operations. Our Onshore Wind turbine installed base was approximately 45,000 units as of December 31, 2019.
Offshore Wind – leads the industry in offshore wind power technologies to be used in offshore wind farm development with the Haliade
X-12MW prototype, the most powerful offshore wind turbine in the world.
Grid Solutions Equipment and Services (Grid) – equips power utilities and industries worldwide to bring power reliably and efficiently
from the point of generation to end customers through offering products, such as high voltage equipment, power electronics,
automation and protection equipment, and servicing the generation, transmission, distribution, oil and gas, telecommunication, mining
and water industries. In the second quarter of 2019, we completed the reorganization of our Grid business into our Renewable Energy
segment for all periods presented.
Hydro – represents more than 25 percent of the total installed hydropower capacity worldwide through a portfolio of solutions and
services, including the design, management, construction, installation, maintenance and operation of both large hydropower plants and
small hydropower solutions, as well as offering a comprehensive asset management program to hydro power plant operators.
Competition & Regulation. While many factors, including government incentives and specific market rules, affect how renewable
energy can deliver outcomes for customers in a given region, renewable energy is increasingly able to compete with fossil fuels in
terms of levelized cost of electricity. However, continued competitive pressure from other wind and hydro turbine manufacturers as well
as from other energy sources, such as solar photovoltaic, reinforced by a general move to electricity auction mechanisms, have
increased price pressure and the need for innovation.
We continue to invest in exploring new ways of further improving the efficiency and flexibility of our hydropower technology with digital
solutions and in generating wind turbine product improvements, including larger rotors, taller towers and higher nameplate ratings that
continue to drive down the cost of wind energy. As industry models continue to evolve, our digital strategy and investments in technical
innovation will position us to add value for customers looking for clean, renewable energy.
Significant Trends & Developments. Renewable energy is in a rapid transition period and now competing in the marketplace against
existing and new conventional energy sources. Wind energy is currently the second-largest contributor to renewable capacity growth
with hydropower projected to remain the largest renewable electricity source through 2023.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 11
MD&A
SEGMENT OPERATIONS
During 2019, the onshore wind market in the U.S. continued to see the positive impact from the Production Tax Credit (PTC) cycle and
customer preference shifting to larger, more efficient units to drive down costs and compete with other power generation options.
Despite the competitive nature of the market, onshore wind order pricing stabilized in 2019 due to demand caused by the progressive
phase-down of PTCs in the U.S. starting in 2020 and auction stabilization in international markets. The phase-down of PTCs in the U.S.
has recently been extended by a year such that certain projects completed through 2024 could qualify for these credits and we expect
to continue high levels of production for 2020 deliveries at Onshore Wind. We will continue to closely monitor our execution during this
period including risks of delivery delays due to customer site readiness issues and possible project postponements.
We expect additional opportunities to repower existing wind turbines. Repowering allows customers to increase the annual energy
output of their installed base, provides more competitively priced energy and extends the life of their assets. The repower market
remains robust, and we expect continued strong demand in 2020 and beyond.
The grid market continues to be challenging as we have experienced current year order declines in the High Voltage Direct Current
(HVDC) and High Voltage (HV) product lines. Given price pressure, the need for grid flexibility to accommodate more renewable
energy, and the diversification of energy players, the hydropower industry continues to maximize value with new small-scale and
pumped storage projects to support both wind and solar expansion. The Grid and Hydro businesses are executing their turnaround
plans and we are expecting improvements in contribution margin in 2020.
New product introductions continue to be important to our customers who are demonstrating the willingness to adopt the new
technology of larger turbines that decrease the levelized cost of energy. We continue to focus on cost reduction initiatives of our
products, in-sourcing blade production and developing larger, more efficient turbines like the Haliade-X (Offshore Wind) and Cypress
(Onshore Wind). During 2019, we signed our largest Cypress order to date, and were selected as the preferred supplier for two
Offshore wind projects in the U.S. and United Kingdom (U.K.), an important commercial milestone for the Haliade-X. In October 2019,
the prototype for the Haliade-X was successfully installed with final certification expected by the middle of 2020.
Orders
Sales
2019
4,325
12,758
1,269
2018
3,198
8,591
1,621
2019
3,424
9,525
1,057
2018
2,491
6,823
1,160
2017
15.0
7.4
22.5
12.8
2.6
15.4
8.1
5.1
1.1
14.3
2019
16.3 $
11.2
27.5 $
14.0 $
2.9
16.9 $
10.4 $
4.1
0.9
15.3 $
2018
14.4 $
9.3
23.7 $
11.8 $
3.5
15.3 $
8.2 $
4.8
1.3
14.3 $
7.4
$
4.9
$
5.6
2.9
2.7
1.1
1.2
7.9
15.3
$
$
3.2
2.9
2.2
1.1
9.4
14.3
$
$
3.0
2.1
2.4
1.2
8.7
14.3
52%
66%
61%
$
$
$
$
$
$
$
$
$
(In units)
Wind Turbines
Wind Turbine Megawatts
Repower
(Dollars in billions)
Equipment
Services
Total backlog
Equipment
Services
Total orders
Onshore Wind
Grid Solutions equipment and services
Other
Total segment revenues
U.S.
Non-U.S.
Europe
Asia
Americas
Middle East and Africa
Total Non-U.S.
Total segment revenues
Non-U.S. revenues as a % of segment revenues
GE 2019 FORM 10-K 12
SEGMENT OPERATIONS
MD&A
(Dollars in billions)
Equipment
Services
Total segment revenues(a)
Segment profit(b)
Segment profit margin
2019
2018
$
$
$
$
$
$
12.3
3.1
15.3
(0.7)
(4.3)%
$
$
$
11.4
2.9
14.3
0.3
2.0%
2017
14.0
0.4
14.3
0.7
5.1%
(a) Renewable Energy segment revenues represent 18% and 16% of total industrial segment revenues and total segment revenues,
respectively, for the year ended December 31, 2019.
(b) Renewable Energy segment profit represents (6)% of total industrial segment profit for the year ended December 31, 2019.
For the year ended December 31, 2019, segment orders were up $1.6 billion (10%), segment revenues were up $1.0 billion (7%)
and segment profit was down $1.0 billion.
Backlog as of December 31, 2019 increased $3.9 billion (16%) primarily driven by increases at Onshore Wind of $3.0 billion due to
increased demand in anticipation of the U.S. PTC phase-down, increased services backlog due to the larger installed equipment base
and a large scale 6MW turbine order in Offshore Wind.
Orders increased $1.9 billion (12%) organically due to increased demand in domestic and international Onshore Wind markets, partially
offset by lower repower unit orders and lower orders at Grid and Hydro.
Revenues increased $1.6 billion (11%) organically*. Equipment revenues increased due to 933 more wind turbine units shipped, or 40%
more megawatts, than in the prior year, partially offset by decreases in Offshore Wind due to the nonrecurrence of a project completed
in the prior year and due to lower HVDC and Automated Control Systems (ACS) project revenues and HV product shipments at Grid.
Services revenues increased primarily due to an increase in repower units pricing and volume at Onshore Wind.
Profit decreased $1.0 billion organically* due to $0.3 billion higher losses in Grid, Hydro and Offshore Wind resulting from no longer
allocating losses to noncontrolling interest holders following the buy-out of those joint venture interests from Alstom in the fourth quarter
of 2018. The lower profit was also due to $0.2 billion related to project execution challenges, primarily on legacy contracts as well as
price pressure and execution challenges at Grid, increased research and development spend, depreciation on capitalized expenditures
for Haliade-X and Cypress and the impact of U.S.-China tariffs.
For the year ended December 31, 2018, segment orders were down $0.1 billion (1%), segment revenues were flat and segment
profit was down $0.4 billion (60%).
Backlog increased $1.2 billion (5%) primarily driven by Onshore Wind due to increased demand associated with U.S. PTCs, partially
offset by a decrease in Grid ACS and HVDC and non-repeat of a 6MW turbine order in Offshore Wind.
Orders decreased $0.2 billion (1%) organically due to lower ACS and HVDC orders at Grid, partially offset by an increase in Onshore
Wind due to the U.S. PTC cycle compared to the prior year.
Revenues were flat organically*. Services volume increased due to a larger installed base and more repower units than in the prior
year. Equipment volume decreased driven by lower Grid ACS and HVDC activity.
Profit decreased $0.4 billion (60%) organically* due to pricing pressure, unfavorable business mix as well as liquidated damages related
to partner execution and project delays, and higher losses in Hydro and Offshore as we began fully consolidating these entities in the
fourth quarter, partially offset by materials deflation and positive base cost productivity.
AVIATION
Products & Services. Aviation designs and produces commercial and military aircraft engines, integrated digital components, electric
power and mechanical aircraft systems. We also provide aftermarket services to support our products.
Commercial – manufactures jet engines for commercial airframes. Our commercial engines power aircraft in all categories; regional,
narrowbody and widebody. We also produce and market engines through joint ventures with Safran Group of France and United
Technologies Corporation. Commercial provides maintenance, component repair and overhaul services (MRO), including sales of
replacement parts. Our commercial engine installed base was approximately 37,800 units as of December 31, 2019.
Military – manufactures jet engines for military airframes. Our military engines power a wide variety of military aircraft including fighters,
bombers, tankers, helicopters and surveillance aircraft, as well as marine applications. We provide maintenance, component repair and
overhaul services, including sales of replacement parts. Our military engine installed base was approximately 26,600 units as of
December 31, 2019.
Systems & Other – provides engines components, systems and services for commercial and military segments. This includes engines
and components for business and general aviation segments, along with avionics systems, aviation electric power systems, flight
efficiency and intelligent operation services, aircraft structures and Avio Aero. Additionally, we provide a wide variety of products and
services including additive machines from Concept Laser and Arcam EBM, additive materials (including metal powders from AP&C),
and additive engineering services through our consultancy brand AddWorksTM.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 13
MD&A
SEGMENT OPERATIONS
Competition & Regulation. The global businesses for aircraft jet engines, maintenance component repair and overhaul services
(including parts sales) are highly competitive. Both U.S. and non-U.S. markets are important to the growth and success of the business.
Product development cycles are long and product quality and efficiency are critical to success. Research and development
expenditures are important in this business, as are focused intellectual property strategies and protection of key aircraft engine design,
manufacture, repair and product upgrade technologies. Aircraft engine orders and systems tend to follow civil air travel and demand
and military procurement cycles.
Our product, services and activities are subject to a number of regulators such as the U.S. Federal Aviation Administration (FAA),
European Aviation Safety Agency (EASA) and other regulatory bodies.
Significant Trends & Developments. Global passenger air travel continued to grow (measured in revenue passenger kilometers
(RPK)) at 4.2%* in the current year. Oil prices remained stable, and global traffic growth was broad-based across global regions. We
expect this trend to drive continued demand in the installed base of commercial engines and increased focus on newer, more fuel-
efficient aircraft. Industry-load factors for airlines remain at all-time high levels above 80%*. Air freight volume decreased, particularly in
international markets driven by economic conditions and slowing global trade.
As it relates to the military environment, the U.S. Department of Defense has increased its budget and foreign governments have
increased spending to upgrade and modernize their existing fleets, creating future opportunities. Military shipments grew to 717 engines
in 2019 from 674 engines in 2018. In 2019, the United States Army awarded Aviation a contract for its T901 engine as the replacement
engine for the Army's Apache and Black Hawk helicopters, and in 2018 the United States Air Force selected Boeing as the contractor to
produce 351 new advanced T-7A Red Hawk trainer aircraft powered by Aviation's F404 engine.
The installed base continues to grow with new product launches. We announced record commercial wins at the Paris Air Show in June
2019, some of which contributed to backlog growth of 22% from December 31, 2018. We continue to expect future orders as a result of
these wins. In 2018, we shipped the first Passport engines, powering the Bombardier Global 7000 business jet. We are also continuing
development on the Advanced Turbo Prop program and the GE9X engine, incorporating the latest technologies for application in the
widebody aircraft space.
Total engineering, comprised of both company and customer funded spending, remained consistent with 2018. Company funded
research and development spend has decreased compared to prior year. However, customer funded engineering efforts, primarily in
our Military business, continue to increase. Our digital initiatives, including analytics on flight operations, technical operations, and
advanced manufacturing, are enabling our customers, internal operations and suppliers to reduce costs, cycle time and improve quality.
LEAP continues to be a strong engine program for us, and we delivered 1,736 LEAP engines for Boeing and Airbus platforms in the
year.
Refer to the Aviation and GECAS 737 MAX discussion in Consolidated Results for information regarding the Company's exposure
related to the temporary fleet grounding of the Boeing 737 MAX.
(In units, except where noted)
Orders
2019
2018
Sales
2019
Commercial Engines
GEnx Engines(a)
LEAP Engines(a)
Military Engines
Spares Rate(b)
(a) GEnx and LEAP engines are subsets of Commercial Engines
(b) Commercial externally shipped spares and spares used in time & material shop visits in millions of dollars per day.
4,772
407
3,637
751
2,390
164
1,568
801
$
2,863
296
1,736
717
31.0 $
(In billions)
Equipment
Services
Total backlog
Equipment
Services
Total orders
Commercial
Military
Systems & Other
Total segment revenues
* Based on the latest available information from the International Air Transport Association
GE 2019 FORM 10-K 14
2019
2018
39.1 $
234.1
273.2 $
37.8 $
185.7
223.5 $
14.5 $
22.3
36.7 $
24.2 $
4.4
4.3
32.9 $
15.3 $
20.2
35.5 $
22.7 $
4.1
3.7
30.6 $
$
$
$
$
$
$
2018
2,825
251
1,118
674
27.5
2017
34.1
166.1
200.2
10.6
18.5
29.1
19.7
4.0
3.3
27.0
MD&A
SEGMENT OPERATIONS
(Dollars in billions)
U.S.
Non-U.S.
Europe
Asia
Americas
Middle East and Africa
Total Non-U.S.
Total segment revenues
Non-U.S. revenues as a % of segment revenues
Equipment
Services
Total segment revenues(a)
Segment profit(b)
Segment profit margin
2019
2018
2017
$
13.4
$
12.5
$
10.8
7.5
6.6
1.6
3.8
19.5
32.9
59%
12.8
20.1
32.9
6.8
20.7%
$
$
$
$
$
7.0
5.8
1.5
3.8
18.0
30.6
59%
11.5
19.1
30.6
6.5
21.2%
$
$
$
$
$
6.3
5.2
1.1
3.6
16.3
27.0
60%
10.2
16.8
27.0
5.4
19.9%
$
$
$
$
$
(a) Aviation segment revenues represent 38% and 34% of total industrial segment revenues and total segment revenues, respectively,
for the year ended December 31, 2019.
(b) Aviation segment profit represents 65% of total industrial segment profit for the year ended December 31, 2019.
For the year ended December 31, 2019, segment orders were up $1.2 billion (3%), segment revenues were up $2.3 billion (8%)
and segment profit was up $0.4 billion (5%).
Backlog as of December 31, 2019 increased $49.7 billion (22%) primarily due to an increase in long-term service agreements.
Orders increased $1.4 billion (4%) organically primarily driven by $1.9 billion of orders in the fourth quarter of 2019 for our newly formed
Aeroderivatives joint venture between GE Power and Baker Hughes. Excluding the Aeroderivatives orders, total orders decreased $0.9
billion mainly due to a decline in LEAP engine orders as a result of the 737 MAX grounding, partially offset by services orders with
continued strength in materials.
Revenues increased $2.6 billion (9%) organically*. Equipment revenues increased primarily due to 43 more military engine shipments
and 38 more commercial units, including 618 more LEAP units, versus the prior year, partially offset by lower legacy commercial output
in the CFM product line. Services revenues also increased primarily due to increased price, a higher commercial spare parts shipment
rate and increased revenues on long-term service agreements.
Profit increased $0.4 billion (6%) organically* mainly due to services increased volume and increased price on commercial spare parts,
and increased profitability on long-term service agreements. Profit also increased due to higher volume of commercial spares engines,
including LEAP 1-B spare engines sold to our GECAS business to have an appropriate level of spare engines available in the market to
meet customer needs in anticipation of the Boeing 737 MAX aircraft recertification, partially offset by continued negative mix from
commercial engines, primarily the CFM to LEAP engine transition and Passport engine shipments. Additionally, we recorded a charge
during the year related to the uncertainty of collection for an airline customer in a challenging financial position.
For the year ended December 31, 2018, segment orders were up $6.4 billion (22%), segment revenues were up $3.6 billion
(13%) and segment profit was up $1.1 billion (20%).
Backlog as of December 31, 2018 increased $23.4 billion (12%) primarily due to an increase in services backlog of $19.6 billion.
Orders increased $6.4 billion (22%) organically mainly due to an increase in commercial and military equipment orders of $4.7 billion.
Revenues increased $3.5 billion (13%) organically*. Services revenues increased primarily due to a higher commercial spares shipment
rate, as well as increased price. Equipment revenues increased primarily due to 57 more military engine shipments and 195 more
commercial units, including 659 more LEAP units, versus the prior year, partially offset by lower legacy commercial output in the CFM
and GE90 product lines.
Profit increased $1.1 billion (21%) organically* mainly due to increased price, increased volume, higher spare engine shipments and
product and base cost productivity. These increases were partially offset by an unfavorable business mix driven by negative LEAP
margin as well as higher overhaul shop costs due to increased volume and mix.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 15
MD&A
HEALTHCARE
SEGMENT OPERATIONS
Products & Services. Healthcare provides essential healthcare technologies to developed and emerging markets and has expertise in
medical imaging, digital solutions, patient monitoring and diagnostics, drug discovery, biopharmaceutical manufacturing technologies
and performance improvement solutions that are the building blocks of precision health. Products and services are sold worldwide
primarily to hospitals, medical facilities, pharmaceutical and biotechnology companies, and to the life science research market.
Healthcare Systems – develops, manufactures, markets and services a broad suite of products and solutions used in the diagnosis,
treatment and monitoring of patients that is encompassed in imaging, ultrasound, life care solutions and enterprise software and
solutions. Imaging includes magnetic resonance, computed tomography, molecular imaging, x-ray systems and complementary
software and services, for use in general diagnostics, Women’s Health and image-guided therapies. Ultrasound includes high-frequency
soundwave systems, and complementary software and services, for use in diagnostics tailored to a wide range of clinical settings. Life
Care Solutions (LCS) includes clinical monitoring and acute care systems, and complementary software and services, for use in
intensive care, anesthesia delivery, diagnostic cardiology and perinatal care. Enterprise Software & Solutions (ESS) includes enterprise
digital, consulting and healthcare technology management offerings designed to improve efficiency in healthcare delivery and expand
global access to advanced health care.
Life Sciences – delivers products, services and manufacturing solutions for drug discovery, the biopharmaceutical industry, and cellular
and gene therapy technologies, so that scientists and specialists can discover new ways to predict, diagnose and treat disease. It also
researches, manufactures and markets innovative imaging agents used during medical scanning procedures to highlight organs, tissue
and functions inside the human body, to aid physicians in the early detection, diagnosis and management of disease through advanced
in-vivo diagnostics.
Competition & Regulation. Healthcare competes with a variety of U.S. and non-U.S. manufacturers and services providers.
Customers require products and services that allow them to provide better access to healthcare, improve the affordability of care and
improve the quality of patient outcomes. Technology and solution innovation to provide products that meet these customer requirements
and competitive pricing are among the key factors affecting competition for these products and services. New technologies and
solutions could make our products and services obsolete unless we continue to develop new and improved offerings.
Our products are subject to regulation by numerous government agencies, as well as laws and regulations that apply to various
reimbursement schemes or other government funded healthcare programs.
Significant Trends & Developments. In February 2019, we announced an agreement to sell our BioPharma business to Danaher
Corporation for total consideration of approximately $21.4 billion subject to certain adjustments. In the first quarter of 2019, we
classified BioPharma as a business held for sale. We expect to complete the sale in the first quarter of 2020, subject to regulatory
approval, providing us flexibility and optionality with respect to our remaining Healthcare businesses.
Effective January 1, 2019, the Healthcare Equipment Finance (HEF) financing business within our Capital segment was transferred to
our Healthcare segment and is presented within Healthcare Systems.
The global healthcare market has continued to expand, driven by macro trends relating to growing and aging populations, increasing
chronic and lifestyle-related disease, accelerating demand for healthcare in emerging markets, increasing demand for biologic drugs
and insulin, and increasing use of diagnostic imaging. Technological innovation that makes it possible to address an increasing number
of diseases, conditions and patients in a more cost-effective manner has also driven growth across each of our global markets.
The China market was a source of growth in 2018 in both the public market and private markets. Dynamics related to tariffs tempered
this growth in 2019. The impact of tariffs on certain types of medical equipment and components that we import from China resulted in
increased product costs. We continue to take mitigating actions including moving our sourcing and manufacturing for these parts
outside of China. In the U.S., the underlying market remains stable, with a trend toward customers looking for more complete solutions
that offer greater capacity and productivity. However, the market continues to face uncertainties driven by the increasing cost of
providing healthcare that has led to a trend of increasing hospital and provider consolidation.
The Healthcare Systems equipment market continues to expand at low single-digit rates or better, while demand continues for services
on new equipment as well as on our existing installed base. However, there is short-term variation driven by market-specific political
and economic cycles. Growth in emerging markets is driven by long-term trends of expanding demand and access to healthcare.
Developed markets are expected to remain steady in the near term driven by macro trends in the healthcare industry.
The Life Sciences market, which encompasses Bioprocess and Pharmaceutical diagnostics, continues to be strong. The Bioprocess
market is growing at a high single-digit rate, driven by growth in biologic drugs. The Pharmaceutical diagnostics business is positioned
in the contrast agent and nuclear tracer markets. This market is expected to grow, driven by continued diagnostic imaging procedure
growth and increasing contrast and tracer-enhancement of these same procedures, as these products help to increase the precision of
the diagnostic information provided to clinicians.
GE 2019 FORM 10-K 16
MD&A
SEGMENT OPERATIONS
We continue focusing on creating new products and solutions as well as expanding uses of existing offerings that are tailored to the
different needs of our global customers. We strive to introduce technology innovation that enables our customers to improve their
patient and operational outcomes as they diagnose, treat and monitor an increasing number of medical conditions and patients. GE
Senographe Pristina with Dueta was named to TIME magazine’s list of 2019’s Best Inventions for its patient-assisted mammography
exam feature. Additionally, we launched Revolution Maxima CT, the latest addition to the GE Revolution family of intelligent CT
scanners during the quarter. Designed to maximize productivity in the CT workflow, Revolution Maxima offers a variety of applications
and services to improve efficiency, including its new, AI-based Auto Positioning solution (cleared for sale in all planned major worldwide
markets in January 2020).
(Dollars in billions)
Equipment
Services
Total backlog
Equipment
Services
Total orders
Healthcare Systems
Life Sciences
Total segment revenues
U.S.
Non-U.S.
Europe
Asia
Americas
Middle East and Africa
Total Non-U.S.
Total segment revenues
Non-U.S. revenues as a % of segment revenues
Equipment
Services
Total segment revenues(a)
Segment profit(b)
Segment profit margin
$
$
$
$
$
$
$
$
$
$
$
$
2019
7.0 $
11.5
18.5 $
13.0 $
8.2
21.2 $
14.6 $
5.3
19.9 $
2018
6.3 $
11.2
17.4 $
12.6 $
8.3
20.9 $
14.9 $
4.9
19.8 $
2017
6.4
11.7
18.1
12.2
8.2
20.4
14.5
4.6
19.0
8.5
$
8.6
$
8.4
4.1
5.4
1.1
0.8
11.4
19.9
57%
11.6
8.4
19.9
3.9
19.5%
$
$
$
$
$
4.2
5.2
1.0
0.8
11.2
19.8
$
$
3.9
4.9
1.0
0.9
10.6
19.0
57%
56%
$
$
$
11.4
8.4
19.8
3.7
18.7%
10.8
8.2
19.0
3.5
18.3%
(a) Healthcare segment revenues represent 23% and 21% of total industrial segment revenues and total segment revenues,
respectively, for the year ended December 31, 2019.
(b) Healthcare segment profit represents 37% of total industrial segment profit for the year ended December 31, 2019.
For the year ended December 31, 2019, segment orders were up $0.3 billion (1%), segment revenues were up $0.2 billion (1%)
and segment profit was up $0.2 billion (5%).
Backlog as of December 31, 2019 increased $1.0 billion (6%) primarily due to an increase in equipment backlog of $0.7 billion primarily
driven by Healthcare Systems.
Orders increased $0.9 billion (4%) organically, primarily attributable to continued strength in Life Sciences.
Revenues increased $0.7 billion (3%) organically* due to higher volume in Life Sciences, driven by BioPharma and Pharmaceutical
Diagnostics, as well as higher volume in Healthcare Systems.
Profit increased $0.3 billion (7%) organically* primarily driven by volume growth and cost productivity due to cost reduction actions,
including sourcing and logistic initiatives, design engineering and restructuring actions. These increases were partially offset by inflation,
the impact of U.S.-China tariffs, and investments in programs including digital product innovations and Healthcare Systems new product
introductions.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 17
MD&A
SEGMENT OPERATIONS
For the year ended December 31, 2018, segment orders were up $0.5 billion (2%), segment revenues were up $0.8 billion (4%)
and segment profit was up $0.2 billion (6%).
Backlog as of December 31, 2018 decreased $0.7 billion (4%), primarily due to a decrease in services backlog of $0.5 billion.
Orders increased $0.6 billion (3%) organically, primarily due to Life Sciences up 8%, while Healthcare Systems was up 1%.
Revenues increased $0.9 billion (5%) organically* due to higher volume in Healthcare Systems, attributable to global growth in Imaging
and Ultrasound in both developed regions such as the U.S. and Europe as well as developing regions such as China and emerging
markets. Volume also increased in Life Sciences, driven by Bioprocess and Pharmaceutical Diagnostics, partially offset by price
pressure at Healthcare Systems.
Profit increased $0.3 billion (8%) organically*, primarily driven by volume growth and cost productivity due to cost reduction actions,
including sourcing and logistic initiatives, design engineering and restructuring actions. These increases were partially offset by price
pressure at Healthcare Systems, inflation, investments in programs including digital product innovations and Healthcare Systems new
product introductions and the nonrecurrence of a small gain on the disposition of a non-strategic operation in Life Sciences.
CAPITAL
Products & Services. Capital is the financial services division of GE focused on customers and markets aligned with GE’s industrial
businesses across developed and emerging markets. We provide financial products and services around the globe that build on GE’s
industry specific expertise in aviation, power, renewables, healthcare and other activities to capitalize on market-specific opportunities.
While there are customer benefits and knowledge sharing advantages linking GE’s industrial and capital businesses, the financial and
operational relationships are maintained with arms-length terms as though the businesses were independent.
GE Capital Aviation Services (GECAS) - is an aviation lessor and financier with over 50 years of experience. GECAS provides a wide
range of assets including narrow- or widebody aircraft, regional jets, turboprops, freighters, engines, helicopters, financing and
materials. GECAS offers a broad array of financing products and services on these assets including operating leases, sale-leasebacks,
asset trading and servicing, and airframe parts management. GECAS owns, services or has on order more than 1,700 aircraft and
serves approximately 225 customers in 75 countries from a network of 20 offices around the world.
Energy Financial Services (EFS) - a global energy investor that provides financial solutions and underwriting capabilities for Power
and Renewable Energy to meet rising demand and sustainability imperatives.
Industrial Finance (IF) - its Working Capital Solutions (WCS) business provides working capital services to GE and through December
31, 2018, it also provided healthcare equipment financing.
Insurance - Refer to the Other Items - Insurance section within MD&A for a detailed business description.
Competition & Regulation. The businesses in which we engage are highly competitive and are subject to competition from various
types of financial institutions including banks, equity investors, leasing companies, finance companies associated with manufacturers
and insurance and reinsurance companies. For our GECAS operations, competition is based on lease rate financing terms, aircraft
delivery dates, condition and availability, as well as available capital demand for financing. For our EFS operations, competition is
primarily based on deal structure and terms. As we compete globally, EFS’ success is sensitive to project execution and merchant
electricity prices, as well as the economic and political environment of each country in which we do business.
The businesses in which we engage are subject to a variety of U.S. federal and state laws and regulations. Our insurance operations
are regulated by the insurance departments in the states in which they are domiciled or licensed, with the Kansas Insurance
Department (KID) being our primary state regulator.
Significant Trends & Developments. In 2018, we announced plans to take actions to make GE Capital smaller and more focused,
including a substantial reduction in the size of GE Capital’s EFS and IF businesses. With respect to this announcement, we completed
$15 billion of asset reductions during 2018 and approximately $12 billion of asset reductions during 2019, including approximately $8
billion during the fourth quarter of 2019. In August 2019, we announced that we entered into a definitive agreement for Apollo Global
Management, LLC and Athene Holding Ltd. to purchase PK AirFinance, an aviation lending business, from GECAS and we completed
the sale of a substantial portion of the business for a small premium in the fourth quarter of 2019. We expect to complete the sale of the
remaining assets in the first half of 2020. We continue to evaluate strategic options to accelerate the further reduction in the size of GE
Capital, some of which could have a material financial charge depending on the timing, negotiated terms and conditions of any ultimate
arrangements.
GE Capital received $1.5 billion and $2.5 billion in capital contributions from GE in the second quarter and fourth quarter of 2019,
respectively.
We annually perform premium deficiency testing in the aggregate across our run-off insurance portfolio. We performed this year's
testing in the third quarter of 2019, and, as a result, identified a premium deficiency resulting in a $1.0 billion pre-tax ($0.8 billion after-
tax) charge to earnings. See the Other Items - Insurance section within MD&A and Note 12 to the consolidated financial statements for
further information.
GE Capital made capital contributions to its insurance subsidiaries of $2.0 billion and $1.9 billion in the first quarters of 2020 and 2019,
respectively, and expects to provide further capital contributions of approximately $7 billion through 2024. See the Capital Resources
and Liquidity section within MD&A for further information.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 18
MD&A
SEGMENT OPERATIONS
Effective January 1, 2019, the HEF business was transferred from our Capital segment to our Healthcare segment.
Refer to the Aviation and GECAS 737 MAX discussion in Consolidated Results within MD&A for information regarding the Company's
exposure related to the temporary fleet grounding of the Boeing 737 MAX.
(Dollars in billions)
GECAS
EFS
IF and WCS
Insurance
Other continuing operations
Total segment assets
GE Capital debt to equity ratio
(In billions)
GECAS
EFS
IF and WCS
Insurance
Other continuing operations
Total segment revenues(a)
GECAS
EFS
IF and WCS
Insurance
Other continuing operations(b)
Total segment profit
$
$
2019
38.0 $
1.8
9.0
46.3
22.5
117.5 $
2018
41.7
3.0
15.8
40.3
18.6
119.3
3.86:1
5.74:1
2019
2018
4.9 $
0.1
0.8
2.9
—
8.7 $
1.0 $
0.1
0.2
(0.6)
(1.3)
(0.5) $
4.9 $
0.1
1.5
2.9
0.1
9.6 $
1.2 $
0.1
0.3
(0.2)
(1.9)
(0.5) $
2017
5.1
(0.5)
1.5
2.9
—
9.1
2.1
(1.5)
0.5
(7.2)
(0.7)
(6.8)
$
$
$
$
(a) Capital segment revenues represent 9% of total segment revenues for the year ended December 31, 2019.
(b) Other continuing operations primarily comprised excess interest costs from debt previously allocated to assets that have been sold
as part of the GE Capital Exit Plan, preferred stock dividend costs and interest costs not allocated to GE Capital segments, which
are driven by GE Capital’s interest allocation process. Interest costs are allocated to GE Capital segments based on the tenor of
their assets using the market rate at the time of origination, which differs from the asset profile when the debt was originated. As a
result, actual interest expense is higher than interest expense allocated to the remaining GE Capital segments. Substantially all
preferred stock dividend costs will become a GE obligation in January 2021. See Note 16 to the consolidated financial statements
for further information. The excess interest costs from debt previously allocated to assets that have been sold are expected to run off
by 2020. In addition, we anticipate unallocated interest costs to gradually decline as debt matures and/or is refinanced.
(Dollars in billions)
U.S.
Non-U.S.
Europe
Asia
Americas
Middle East and Africa
Total Non-U.S.
Total segment revenues
2019
2018
$
4.1
$
5.3
$
1.6
1.5
0.7
0.8
4.6
8.7
$
1.4
1.4
0.6
0.9
4.3
9.6
$
$
2017
4.4
1.5
1.4
0.8
1.0
4.7
9.1
Non-U.S. revenues as a % of segment revenues
53%
45%
52%
For the year ended December 31, 2019, segment revenues decreased $0.8 billion (8%) and segment losses were flat.
Capital revenues decreased primarily due to volume declines and lower gains, partially offset by lower impairments. Capital losses were
flat primarily due to a $1.0 billion pre-tax charge identified through the completion of our annual insurance premium deficiency review,
lower gains, lower tax benefits and volume declines, offset by lower impairments, lower excess interest costs and tax law changes.
Gains were $0.7 billion and $0.8 billion in 2019 and 2018, respectively, which primarily related to sales of certain GECAS aircraft and
engines resulting in gains of $0.4 billion and $0.3 billion in 2019 and 2018, respectively, as well as the sale of equity method
investments resulting in gains of $0.2 billion in 2019 at EFS and the sale of EFS’ debt origination business and equity investments
resulting in gains of $0.4 billion in 2018.
GE 2019 FORM 10-K 19
MD&A
SEGMENT OPERATIONS
For the year ended December 31, 2018, segment revenues increased $0.5 billion (5%) and segment losses decreased $6.3
billion (93%).
Capital revenues increased primarily due to lower impairments and volume growth, partially offset by lower gains. Capital losses
decreased primarily due to the nonrecurrence of the 2017 charges associated with the GE Capital insurance premium deficiency review
and EFS strategic actions, partially offset by the nonrecurrence of 2017 tax benefits.
CORPORATE ITEMS AND ELIMINATIONS. Corporate Items and Eliminations is a caption used in the Segment Operations –
Summary of Reportable Segments table to reconcile the aggregated results of our segments to the consolidated results of the
Company. The Corporate Items and Eliminations amounts related to revenues and earnings include the results of disposed businesses,
certain amounts not included in industrial operating segment results because they are excluded from measurement of their operating
performance for internal and external purposes and the elimination of inter-segment activities. In addition, the Corporate Items and
Eliminations amounts related to earnings include certain costs of our principal retirement plans, restructuring and other costs reported in
Corporate, and the unallocated portion of certain corporate costs (such as research and development spending and costs related to our
Global Growth Organization).
Corporate items and eliminations includes the results of our Lighting segment and GE Digital business for all periods presented.
(In millions)
Revenues
Corporate revenues
Eliminations and other
Total Corporate Items and Eliminations
Operating profit (cost)
Gains (losses) on disposals and held for sale businesses
Restructuring and other charges
Unrealized gains (losses)(a)
Goodwill impairments (Note 8)
Adjusted total corporate operating costs (Non-GAAP)
Total Corporate Items and Eliminations (GAAP)
Less: gains (losses), impairments and restructuring & other
Adjusted total corporate operating costs (Non-GAAP)
2019
2018
2017
$
$
$
$
$
1,791 $
(2,096)
(305) $
2,783 $
(2,110)
673 $
4 $
(1,315)
793
(1,486)
(1,693)
(3,698) $
(2,004)
(1,693) $
1,370 $
(2,952)
—
(22,136)
(1,255)
(24,973) $
(23,719)
(1,255) $
2,897
(2,464)
433
926
(3,023)
—
(1,165)
(1,701)
(4,963)
(3,262)
(1,701)
(a) Related to mark-to-market impact on our Baker Hughes shares for 2019. See Notes 2, 3 and 19 to the consolidated financial
statements for further information.
Functions & operations
Eliminations
Environmental, health & safety (EHS) and other items
Adjusted total corporate operating costs (Non-GAAP)
$
$
(1,252) $
(184)
(258) $
(1,693) $
(1,362) $
(61)
169 $
(1,255) $
(2,007)
9
297
(1,701)
Adjusted total corporate operating costs* excludes gains (losses) on disposals and held for sale businesses, restructuring and other
charges, unrealized gains (losses) 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.
For the year ended December 31, 2019, revenues decreased by $1.0 billion, primarily as the result of the sale of our Current business
in April 2019.
Corporate costs decreased by $21.3 billion primarily as the result of $20.6 billion lower goodwill impairment charges (see Note 8 to the
consolidated financial statements). Corporate costs also decreased due to $0.8 billion of higher net unrealized gains primarily due to
our mark-to-market impact on our Baker Hughes shares in 2019 and $1.6 billion of lower restructuring costs in 2019. These decreases
were partially offset by $1.4 billion of lower net gains from disposed or held for sale businesses, which was primarily related to a $0.7
billion gain from the sale of our Value-Based Care business in 2018, a $0.7 billion gain from the sale of our Distributed Power business
in 2018, $0.3 billion gain from the sale of our Industrial Solutions business in 2018 and a $0.2 billion gain from the sale of our Pivotal
Software investment in 2018. These realized gains were partially offset by $0.3 billion of lower held for sale losses in 2019 primarily
related to our Lighting and Aviation segments and a $0.2 billion gain from the sale of our Digital ServiceMax business in 2019.
Adjusted total corporate operating costs* increased by $0.4 billion in 2019 primarily as a result of a $0.2 billion increase in costs
associated with existing environmental, health and safety matters in 2019 and $0.2 billion due to the non-recurrence of gains
associated with the sale of intangible assets in 2018. In addition, there was $0.1 billion of higher intercompany profit eliminations
primarily as the result of $0.2 billion higher volume of spare LEAP 1-B engines sold from our Aviation segment to our GECAS business
to provide an appropriate level of spare engines available in the market to meet customer needs in anticipation of the Boeing 737 MAX
aircraft recertification. These increases were partially offset by $0.1 billion of lower costs due to restructuring and cost out actions in our
functions and operating businesses.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 20
MD&A
CORPORATE ITEMS AND ELIMINATIONS
For the year ended December 31, 2018, revenues increased by $0.2 billion, primarily as a result of a $0.4 billion decrease in inter-
segment eliminations partially offset by a $0.1 billion decrease in Corporate revenues primarily related to our Current & Lighting
segment.
Corporate costs increased by $20.0 billion, primarily as a result of $21.0 billion of higher goodwill impairment charges (see Note 8 to the
consolidated financial statements). These increases were partially offset by $0.4 billion of higher net gains from disposed or held for
sale businesses, which is primarily related to the $0.7 billion gain from the sale of our Distributed Power business in 2018, a $0.7 billion
gain from the sale of our Value-Based Care business in 2018, a $0.3 billion gain from the sale of our Industrial Solutions business in
2018, a $0.2 billion gain from the sale of our Pivotal Software investment in 2018 and $0.4 billion of lower held for sales losses in 2018
primarily related to our Lighting and Aviation segments. These realized gains were partially offset by a $1.9 billion gain from the sale of
our Water business in 2017. Corporate costs further decreased due to $0.1 billion of lower restructuring and other charges.
Adjusted total corporate operating costs* decreased by $0.4 billion primarily as the result of $0.6 billion of lower costs due to
restructuring and cost out actions in our functions and operating businesses. These decreases were partly offset by $0.1 billion of
higher intercompany profit eliminations and $0.1 billion of higher EHS and other items in 2018.
RESTRUCTURING. Restructuring actions are essential to our cost improvement efforts for both existing operations and those recently
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 continue to closely monitor the economic environment and expect to undertake further restructuring actions
to more closely align our cost structure with earnings goals.
(In billions)
2019
2018
Workforce reductions
Plant closures & associated costs and other asset write-downs
Acquisition/disposition net charges
Other
Total restructuring and other charges
Cost of product/services
Selling, general and administrative expenses
Other income
Total restructuring and other charges
Power
Renewable Energy
Aviation
Healthcare
Corporate
Total restructuring and other charges by business
$
$
$
$
$
$
0.8 $
0.3
0.2
—
1.3 $
0.4 $
1.0
—
1.3 $
0.4 $
0.2
—
0.2
0.6
1.3 $
0.9 $
1.4
0.6
—
3.0 $
1.1 $
1.7
0.1
3.0 $
1.3 $
0.3
—
0.2
1.1
3.0 $
2017
1.0
1.5
0.5
0.1
3.0
1.8
1.2
0.1
3.0
0.9
0.3
0.1
0.3
1.5
3.0
Cash expenditures for restructuring and other charges were approximately $1.2 billion, $1.5 billion and $1.5 billion for the years ended
December 31, 2019, 2018 and 2017, respectively.
COSTS AND GAINS NOT INCLUDED IN SEGMENT RESULTS. As discussed in the Segment Operations section within MD&A,
certain amounts are not included in industrial segment results because they are excluded from measurement of their operating
performance for internal and external purposes. These costs relate primarily to goodwill impairment charges, restructuring and
acquisition and disposition activities.
(In billions)
2019
2018
2017
2019
Costs
Gains (Losses)
2018
Power
Renewable Energy
Aviation
Healthcare
Total segments
Corporate Items and Eliminations
Total Industrial
$
$
$
0.4
1.7
—
0.2
2.2
0.6
2.8
$
$
$
20.5
3.3
—
0.2
24.0
1.1
25.1
$
$
$
2.0
0.3
0.1
0.3
2.7
1.5
4.2
$
$
$
— $
—
—
—
— $
0.8
0.8
$
1.0
—
(0.1)
0.8
1.7
(0.3 )
1.4
$
$
$
2017
1.9
—
(0.3)
—
1.6
(0.7 )
0.9
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 21
MD&A
OTHER CONSOLIDATED INFORMATION
OTHER CONSOLIDATED INFORMATION
INTEREST AND OTHER FINANCIAL CHARGES (In billions)
GE
GE Capital
Consolidated
2019
2018
$
$
2.1 $
2.5
4.2 $
2.4 $
3.0
4.8 $
2017
2.5
3.1
4.7
The decrease in GE interest and other financial charges for the year ended December 31, 2019 was driven primarily by lower expenses
on sales of GE current and long-term receivables as well as the reversal of $0.1 billion of accrued interest on tax liabilities due to the
completion of the 2012-2013 Internal Revenue Service (IRS) audit in June 2019, partially offset by the $0.3 billion loss resulting from
the completion of a tender offer to purchase GE senior notes (including fees and other costs associated with the tender). The primary
components of GE interest and other financial charges are interest on short- and long-term borrowings and financing costs on sales of
receivables. Total GE interest and other financial charges of $1.3 billion and $1.5 billion were recorded at Corporate and $0.8 billion and
$0.9 billion were recorded by GE segments for the years ended December 31, 2019 and 2018, respectively.
The decrease in GE Capital interest and other financial charges for the year ended December 31, 2019 were primarily due to lower
average borrowings balances due to maturities and lower net interest on assumed debt resulting from an increase in intercompany
loans to GE which bear the right of offset (see the Borrowings section of Capital Resources and Liquidity within MD&A for an
explanation of assumed debt and right-of-offset loans), partially offset by an increase in average interest rates due to changes in market
rates. GE Capital average borrowings were $61.8 billion, $78.7 billion and $103.8 billion in 2019, 2018 and 2017, respectively. The GE
Capital average composite effective interest rate (including interest allocated to discontinued operations) was 4.2%, 3.9% and 3.1% in
2019, 2018 and 2017, respectively.
POSTRETIREMENT BENEFIT PLANS. The Employee Retirement Income Security Act (ERISA) determines minimum pension funding
requirements in the U.S. We made $6.0 billion in contributions to the GE Pension Plan in 2018. On an ERISA basis, our preliminary
estimate is that the GE Pension Plan was approximately 93% funded at January 1, 2020. The ERISA funded status is higher than the
GAAP funded status (81% funded) primarily because the ERISA prescribed interest rate is calculated using an average interest rate. As
a result, the ERISA interest rate is higher than the year-end GAAP discount rate. The higher ERISA interest rate lowers pension
liabilities for ERISA funding purposes. Our 2018 contributions satisfied our minimum ERISA funding requirement of $1.5 billion and the
remaining $4.5 billion was a voluntary contribution to the plan. This voluntary contribution is sufficient to satisfy our minimum ERISA
funding requirement for 2019 and 2020. In October 2019, we announced our intent to contribute approximately $4 to $5 billion to the
GE Pension Plan in 2020. We expect this amount to equal our estimated future minimum ERISA funding requirements at least through
2022.
We expect 2020 postretirement benefit plans cost to be about $3.2 billion, which is a decrease of approximately $0.6 billion from 2019.
We expect to contribute in 2020 approximately $0.5 billion and $0.4 billion to our other pension plans and principal retiree benefit plans,
respectively.
The funded status of our postretirement benefit plans and future effects on operating results depend on economic conditions, interest
rates and investment performance. See the Critical Accounting Estimates section within MD&A and Note 13 to the consolidated
financial statements for further information about our benefit plans, pension actions and the effects of this activity on our financial
statements.
INCOME TAXES
CONSOLIDATED (Dollars in billions)
Effective tax rate (ETR)
Provision (benefit) for income taxes
Cash income taxes paid(a)
(a) Included taxes paid related to discontinued operations.
2019
2018
$
63.2%
0.7
2.2
$
(0.4)%
0.1
1.9
$
2017
24.8%
(2.8)
2.4
For the year ended December 31, 2019, the consolidated income tax provision was $0.7 billion. The increase in the tax provision for
2019 was primarily due to tax expense associated with the preparatory internal restructuring for the planned BioPharma sale and the
effect of higher pre-tax income excluding non-deductible impairment charges, partially offset by the benefit from the completion of the
IRS audit of the 2012-2013 consolidated U.S. income tax returns.
In June 2019, the IRS completed the audit of our consolidated U.S. income tax returns for 2012-2013, which resulted in a decrease in
our balance of unrecognized tax benefits (i.e., the aggregate tax effect of differences between tax return positions and the benefits
recognized in our financial statements). The Company recognized a resulting non-cash continuing operations tax benefit of $0.4 billion
plus an additional net interest benefit of $0.1 billion. Of these amounts, GE recorded $0.4 billion of tax benefits and $0.1 billion of net
interest benefits, and GE Capital recorded insignificant amounts of tax and net interest benefits. GE Capital also recorded a non-cash
benefit in discontinued operations of $0.3 billion of tax benefits and an insignificant amount of net interest benefits. See Notes 2 and 15
to the consolidated financial statements for further information.
GE 2019 FORM 10-K 22
MD&A
OTHER CONSOLIDATED INFORMATION
For the year ended December 31, 2018, the consolidated income tax provision was $0.1 billion. The effective tax rate was negative for
2018 reflecting a tax expense on a consolidated pre-tax loss. The increase in the consolidated provision for income taxes for 2018 was
primarily attributable to the decrease in benefit from global operations including an increase in valuation allowances on non-U.S.
deferred tax assets and the decrease in pre-tax loss (excluding non-deductible goodwill impairments) with a tax benefit above the
average tax rate. Partially offsetting this increase was the decrease in the consolidated provision for income taxes attributable to an
insignificant charge in 2018 to adjust the provisional estimate of the impact of the 2017 enactment of U.S. tax reform compared to the
$4.5 billion charge in 2017 for the estimated impact of enactment.
Absent the effects of U.S. tax reform and non-U.S. losses without a tax benefit, our consolidated income tax provision is generally
reduced because of the benefits of lower-taxed global operations. The benefit from non-U.S. rates below the U.S. statutory rate was
significant prior to the decrease in the U.S. statutory rate to 21% beginning in 2018. While reduced, there is still generally a benefit as
certain non-U.S. income is subject to local country tax rates that are below the new U.S. statutory tax rate.
The rate of tax on our profitable non-U.S. earnings is below the U.S. statutory tax rate because we have significant business operations
subject to tax in countries where the tax on that income is lower than the U.S. statutory rate and because GE funds certain non-U.S.
operations through foreign companies that are subject to low foreign taxes. Most of these earnings have been reinvested in active non-
U.S. business operations and as of December 31, 2019, we have not decided to repatriate these earnings to the U.S. Given U.S. tax
reform, substantially all of our prior unrepatriated earnings were subject to U.S. tax and accordingly we expect to have the ability to
repatriate available non-U.S. cash without additional U.S. federal tax cost and any foreign withholding taxes on a repatriation to the U.S.
would potentially be partially offset by a U.S. foreign tax credit.
A substantial portion of the benefit for lower-taxed non-U.S. earnings related to business operations subject to tax in countries where
the tax on that income is lower than the U.S. statutory rate is derived from our GECAS aircraft leasing operations located in Ireland
where the earnings are taxed at 12.5%, from our Power operations located in Switzerland where the earnings are taxed at between 9%
and 18.6%, and our Healthcare operations in Europe where tax deductions are allowed for certain intangible assets and earnings are
taxed below the historic U.S. statutory rate.
The rate of tax on non-U.S. operations is increased, however, because we also incur losses in foreign jurisdictions where it is not likely
that the losses can be utilized and no tax benefit is provided for those losses and valuation allowances against loss carryforwards are
provided when it is no longer likely that the losses can be utilized. In addition, as part of U.S. tax reform, the U.S. has enacted a tax on
“base eroding” payments from the U.S. We are continuing to undertake restructuring actions to mitigate the impact from this provision.
The U.S. has also enacted a minimum tax on foreign earnings (global intangible low tax income). Because we have tangible assets
outside the U.S. and pay significant foreign taxes, we generally do not expect a significant increase in tax liability from this new U.S.
minimum tax. Overall, these newly enacted provisions increase the rate of tax on our non-U.S. operations.
BENEFIT/(EXPENSE) FROM GLOBAL OPERATIONS (In billions)
Benefit/(expense) of foreign tax rate difference on non-U.S. earnings
Benefit of audit resolutions
Other
Total benefit/(expense)
2019
— $
0.1
(1.1)
(1.0) $
2018
(0.3) $
0.2
(0.9)
(1.0) $
2017
0.5
—
2.9
3.4
$
$
The amounts reported above exclude the impact of U.S. tax reform which is reported as a separate line in the reconciliation of the U.S.
federal statutory income tax rate to the actual tax rate in Note 15 to the consolidated financial statements.
For the year ended December 31, 2019, the increase in expense from global operations reflects the tax expense associated with the
preparatory internal restructuring for the planned BioPharma sale and an increase in valuation allowances on non-U.S. deferred tax
assets offset by a benefit from change in foreign rate and by a tax benefit from additional guidance on provisions enacted as part of
U.S. tax reform.
For the year ended December 31, 2018, the decrease in benefit from lower-taxed global operations reflects the lower U.S. statutory
tax rate and losses without tax benefit. The decrease in other benefits reflects increases in incremental valuation allowances on non-
U.S. deferred tax assets and for 2018 newly enacted taxes on non-U.S. earnings and the nonrecurrence of 2017 benefits associated
with repatriation of foreign earnings.
A more detailed analysis of differences between the U.S. federal statutory rate and the consolidated effective rate, as well as other
information about our income tax provisions, is provided in the Critical Accounting Estimates section within MD&A and Note 15 to the
consolidated financial statements. The nature of business activities and associated income taxes differ for GE and for GE Capital;
therefore, a separate analysis of each is presented in the paragraphs that follow.
GE 2019 FORM 10-K 23
MD&A
OTHER CONSOLIDATED INFORMATION
GE EFFECTIVE TAX RATE (EXCLUDING GE CAPITAL EARNINGS) (Dollars in billions)
2019
2018
2017
GE ETR, excluding GE Capital earnings*
GE provision for income taxes
72.7%
1.3
$
(2.3)%
0.5
$
271.0%
3.5
$
For the year ended December 31, 2019, the GE provision for income taxes increased compared to 2018 primarily due to tax expense
associated with the preparatory internal restructuring for the planned BioPharma sale and the effect of higher pre-tax income excluding
non-deductible impairment charges, partially offset by the benefit from the completion of the IRS audit of the 2012-2013 consolidated
U.S. income tax returns.
For the year ended December 31, 2018, the GE provision for income taxes decreased compared to 2017 because of the
nonrecurrence of the $4.9 billion charge for the provisional charge associated with the enactment of U.S. tax reform. Excluding the
2017 charge associated with U.S. tax reform, the GE tax provision increased by $1.9 billion. The increase was primarily due to the
decrease in benefit from global operations including an increase in valuation allowances on non-U.S. deferred tax assets partially offset
by the effect of lower pretax income excluding non-deductible impairment charges.
GE CAPITAL EFFECTIVE TAX RATE (Dollars in billions)
GE Capital ETR
GE Capital provision (benefit) for income taxes
2019
2018
89.3%
(0.6) $
99.7%
(0.4) $
$
2017
49.9%
(6.3)
For the year ended December 31, 2019, the increase in the tax benefit at GE Capital from a benefit of $0.4 billion in 2018 to a benefit
of $0.6 billion in 2019 is primarily due to a benefit from additional guidance on the transition tax on historic foreign earnings enacted as
part of U.S. tax reform, compared to a charge associated with the enactment of U.S. tax reform during 2018.
For the year ended December 31, 2018, the decrease in the tax benefit at GE Capital from a benefit of $6.3 billion in 2017 to a
benefit of $0.4 billion in 2018 is primarily due to the decrease in the pre-tax loss with a tax benefit above the average tax rate including
the nonrecurrence of the one-time charge to revalue insurance reserves.
RESEARCH AND DEVELOPMENT. We conduct research and development (R&D) activities to continually enhance our existing
products and services, develop new products and services to meet our customers’ changing needs and requirements, and address new
market opportunities. R&D expenses are classified in cost of goods and services sold in our consolidated Statement of Earnings
(Loss). In addition, R&D funding from customers, principally the U.S. government, is recorded as an offset to such costs.
(In millions)
Power
Renewable Energy
Aviation
Healthcare
Corporate(a)
Total
GE funded
2018
2019
Customer and Partner funded(b)
2017
2019
2018
2017
2019
Total R&D
2018
$
$
310 $
522
906
994
382
3,115 $
407 $
413
950
968
675
3,414 $
641 $
448
907
908
1,271
4,175 $
16 $
9
911
25
89
1,049 $
7 $
11
564
23
48
652 $
35 $
3
586
26
65
715 $
327 $
531
1,817
1,019
471
4,164 $
414 $
424
1,514
991
722
4,065 $
2017
676
451
1,492
934
1,336
4,890
(a) Includes Global Research Center and Digital.
(b) Customer funded is principally U.S. Government funded in our Aviation segment. R&D funded through consolidated partnerships
was immaterial for all periods presented.
DISCONTINUED OPERATIONS. Discontinued operations primarily include our Baker Hughes and Transportation segments, our
mortgage portfolio in Poland, residual assets and liabilities related to our exited U.S. mortgage business (WMC), as discussed in Notes
2 and 23 to the consolidated financial statements, and trailing liabilities associated with the sale of our GE Capital businesses.
In September 2019, we sold a total of 144.1 million shares in Baker Hughes for $3.0 billion in cash (net of certain deal related costs)
which reduced our ownership interest from 50.2% to 36.8%. As a result, we have deconsolidated our Baker Hughes segment and
reclassified its results to discontinued operations for all periods presented. In addition, as disclosed in prior filings, including our 2018
Form 10-K, we expected to record a significant loss upon deconsolidation. In 2019, we recorded a loss of $8.7 billion ($8.2 billion after-
tax) in discontinued operations.
In February 2019, as a result of the spin-off and subsequent merger of our Transportation business with Wabtec, we reclassified our
Transportation segment to discontinued operations for all periods presented. In the first quarter of 2019, we recorded a gain of $3.5
billion ($2.5 billion after-tax) in discontinued operations. See Notes 2 and 3 to the consolidated financial statements for further
information.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 24
MD&A
OTHER CONSOLIDATED INFORMATION
In June 2019, GE Capital recorded $0.3 billion of tax benefits and an insignificant amount of net interest benefits due to a decrease in
our balance of unrecognized tax benefits. See the Consolidated Income Tax section above and Note 15 to the consolidated financial
statements for further information.
In January 2019, we announced an agreement in principle with the United States to settle the investigation by the U.S. Department of
Justice (DOJ) regarding potential violations of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by
WMC and GE Capital, and in April 2019, the parties entered into a definitive settlement agreement. Under the agreement, which
concludes this investigation, GE, without admitting liability or wrongdoing, paid the United States a civil penalty of $1.5 billion. See Note
23 to the consolidated financial statements for further information.
The mortgage portfolio in Poland (Bank BPH) comprises floating rate residential mortgages, with approximately 86% of the portfolio
indexed to or denominated in foreign currencies (primarily Swiss francs) and the remaining 14% denominated in the local currency in
Poland. At December 31, 2019, the total portfolio had a carrying value of $2.5 billion with a 1.4% 90-day delinquency rate and an
average loan to value ratio of approximately 65%. The portfolio is recorded at fair value less cost to sell and includes a $0.3 billion
impairment, which reflects our best estimate of the effects of potential legislative relief to borrowers and of ongoing litigation in Poland
related to foreign currency-denominated mortgages. Future adverse developments in the potential for legislative relief or in litigation
across the Polish banking industry could result in further impairment or other losses related to these loans in future reporting periods.
See Note 23 to the consolidated financial statements for further information.
FINANCIAL INFORMATION FOR DISCONTINUED OPERATIONS (In billions)
Earnings (loss) of discontinued operations, net of taxes
Gain (loss) on disposal, net of taxes
Earnings (loss) from discontinued operations, net of taxes
2019
0.3 $
(5.7)
(5.3) $
2018
(1.4) $
—
(1.4) $
2017
(0.4)
0.1
(0.3)
$
$
See Note 2 to the consolidated financial statements for further information for our businesses in discontinued operations.
CAPITAL RESOURCES AND LIQUIDITY
FINANCIAL POLICY. We intend to maintain a disciplined financial policy, targeting a sustainable long-term credit rating in the Single-A
range with a GE Industrial net debt*-to-EBITDA ratio of less than 2.5x and a dividend in line with our peers over time, as well as a less
than 4-to-1 debt-to-equity ratio for GE Capital. Both GE and GE Capital are on track to meet their respective leverage goals in 2020. In
addition to net debt*-to-EBITDA, we also evaluate other 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 will
evaluate additional potential actions based on deleveraging impact, economics, risk mitigation and target capital structure while also
monitoring key risks.
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. At both GE and GE Capital,
we manage our liquidity to provide access to sufficient funding to meet our business needs and financial obligations, as well as capital
allocation and growth objectives, throughout business cycles.
CONSOLIDATED LIQUIDITY. Following is a summary of cash, cash equivalents and restricted cash at December 31, 2019.
(In billions)
GE
GE Capital
Consolidated
December 31, 2019
$
$
17.6
18.8
36.4
U.S.
Non-U.S.
Consolidated
December 31, 2019
$
$
14.9
21.4
36.4
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.
Following is an overview of the primary sources of liquidity for GE and GE Capital. See the Statement of Cash Flows section within
MD&A for information regarding GE and GE Capital cash flow results.
GE LIQUIDITY. GE's primary sources of liquidity consist of cash and cash equivalents, free cash flows from our operating businesses,
monetization of receivables, proceeds from announced dispositions, and short-term borrowing facilities. Cash generation can be subject
to variability based on many factors, including seasonality, receipt of down payments on large equipment orders, timing of billings on
long-term contracts, the effects of changes in end markets and our ability to execute dispositions.
GE also has available short-term borrowing facilities to fund its operations, including a commercial paper program, revolving credit
facilities and short-term intercompany loans from GE Capital, which are generally repaid within the same quarter. See the Borrowings
section for details of our credit facilities and borrowing activity in our external short-term borrowing facilities.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 25
MD&A
CAPITAL RESOURCES AND LIQUIDITY
GE cash, cash equivalents and restricted cash totaled $17.6 billion at December 31, 2019, including $2.6 billion of cash held in
countries with currency control restrictions and $0.5 billion of restricted use cash. Cash held in countries with currency controls
represents amounts held in countries which may restrict the transfer of funds to the U.S. or limit our ability to transfer funds to the U.S.
without incurring substantial costs. Restricted use cash represents amounts that are not available to fund operations, and primarily
comprised collateral for receivables sold and funds restricted in connection with certain ongoing litigation matters.
GE realized a total of approximately $10.3 billion of disposition proceeds for the year ended December 31, 2019, comprising $4.7 billion
in the third quarter of 2019, primarily from the sale of a portion of our stake in Baker Hughes and our remaining stake in Wabtec, $2.2
billion in the second quarter of 2019 primarily from the sale of a portion of our stake in Wabtec, and $3.4 billion in the first quarter of
2019 primarily from the completion of the merger of our Transportation business with Wabtec and the sale of our Digital ServiceMax
business.
In the first quarter of 2020, GE expects to receive approximately $20 billion of proceeds from the sale of our BioPharma business within
our Healthcare segment, subject to regulatory approval. GE expects to use these proceeds as well as existing liquidity to repay the
remaining $12.2 billion of intercompany loans from GE Capital, to contribute approximately $4 to $5 billion to the GE Pension Plan,
which will equal our future minimum ERISA funding requirements through at least 2022, and to execute additional deleveraging actions
of approximately $5 billion. Additionally, GE expects to receive proceeds from an orderly sale of our remaining stake in Baker Hughes.
GE CAPITAL LIQUIDITY. GE Capital’s primary sources of liquidity consist of cash and cash equivalents, cash generated from asset
sales and cash flows from our businesses. Based on asset and liability management actions we have taken, GE Capital does not plan
to issue any incremental GE Capital senior unsecured term debt until at least 2021. We expect to maintain an adequate liquidity
position to fund our insurance obligations and debt maturities primarily as a result of cash flows from our businesses, GE repayments of
intercompany loans and capital contributions from GE. See the Segment Operations - Capital section within MD&A for further
information regarding allocation of GE Capital interest expense to the GE Capital businesses.
GE Capital cash, cash equivalents and restricted cash totaled $18.8 billion at December 31, 2019, including $0.9 billion which was
subject to regulatory restrictions, primarily in insurance entities.
GE Capital generated proceeds of approximately $12 billion from asset reductions for the year ended December 31, 2019, including
$3.6 billion from the sale of a substantial portion of the assets and liabilities of PK AirFinance in the fourth quarter of 2019, exceeding
our plan to execute total asset reductions of approximately $10 billion in 2019 and our overall $25 billion target, and completing our
asset reduction plan. GE Capital also received an additional capital contribution of $2.5 billion from GE in the fourth quarter of 2019,
totaling $4.0 billion for 2019.
GE Capital provided capital contributions to its insurance subsidiaries of $2.0 billion, $1.9 billion and $3.5 billion in the first quarters of
2020, 2019 and 2018, respectively, and expects to provide further capital contributions of approximately $7 billion through 2024. These
contributions are subject to ongoing monitoring by 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 maintains specified capital levels at these insurance subsidiaries under capital maintenance agreements.
Going forward, we anticipate funding any capital needs for insurance through a combination of GE Capital liquidity, GE Capital asset
sales, GE Capital future earnings and capital contributions from GE.
BORROWINGS. Consolidated total borrowings were $90.9 billion and $103.6 billion at December 31, 2019 and December 31, 2018,
respectively. The reduction was driven primarily by completion of a tender offer to purchase GE long-term debt of $4.8 billion and net
repayments of GE Capital debt of $9.5 billion (including $9.3 billion of long-term debt maturities), partially offset by an increase of $0.8
billion in fair value adjustments for GE Capital debt in fair value hedge relationships as a result of lower interest rates.
GE Industrial net debt* was $47.9 billion and $55.1 billion at December 31, 2019 and 2018, respectively. The reduction was driven
primarily by the completion of a tender offer to purchase GE long-term debt of $4.8 billion in the third quarter of 2019 and total
repayments of $1.5 billion of intercompany loans from GE Capital, as well as a higher ending cash balance.
In 2015, senior unsecured notes and commercial paper were assumed by GE upon its merger with GE Capital. Under the conditions of
the 2015 assumed debt agreement, GE Capital agreed to continue making required principal and interest payments on behalf of GE,
resulting in the establishment of an intercompany receivable and payable between GE and GE Capital. In addition, GE Capital has
periodically made intercompany loans to GE with maturity terms that mirror the assumed debt. As these loans qualify for right-of-offset
presentation, they reduce the assumed debt intercompany receivable and payable between GE and GE Capital, as noted in the table
below.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 26
MD&A
CAPITAL RESOURCES AND LIQUIDITY
The following table provides a reconciliation of total short- and long-term borrowings as reported on the respective GE and GE Capital
Statements of Financial Position to borrowings adjusted for assumed debt and intercompany loans:
December 31, 2019 (In billions)
Total short- and long-term borrowings
Debt assumed by GE from GE Capital
Intercompany loans with right of offset
Total intercompany payable (receivable) between GE and GE Capital
GE
GE Capital Consolidated(a)
$
52.1 $
39.9 $
90.9
(31.4)
12.2
(19.1)
31.4
(12.2)
19.1
—
—
—
Total borrowings adjusted for assumed debt and intercompany loans
$
32.9 $
59.0 $
90.9
(a) Included elimination of other GE borrowings from GE Capital, primarily related to timing of cash settlements associated with GE
receivables monetization programs.
When measuring the individual financial positions of GE and GE Capital, assumed debt should be considered a GE Capital debt
obligation, and the intercompany loans with the right of offset mentioned above should be considered a GE debt obligation and a
reduction of GE Capital’s total debt obligations. The following table illustrates the primary components of GE and GE Capital
borrowings, adjusted for assumed debt and intercompany loans.
GE (In billions)
Commercial paper
GE senior notes
Intercompany loans from
GE Capital
Other GE borrowings
December 31,
2019
3.0 $
$
December 31,
2018 GE Capital (In billions)
3.0 Commercial paper
$
15.5
12.2
2.2
13.7
2.6
20.4 Senior and subordinated notes
Senior and subordinated notes
assumed by GE
Intercompany loans to GE
Other GE Capital borrowings(a)
Total GE Capital
adjusted borrowings
39.7
December 31,
2019
— $
36.5
31.4
(12.2)
3.4
December 31,
2018
—
39.1
36.3
(13.7)
3.9
Total GE adjusted borrowings
$
32.9 $
$
59.0 $
65.5
(a) Included $1.7 billion and $1.9 billion at December 31, 2019 and December 31, 2018, respectively, of non-recourse borrowings of
consolidated securitization entities where GE Capital has securitized financial assets as an alternative source of funding.
The intercompany loans from GE Capital to GE bear the right of offset against amounts owed by GE Capital to GE under the assumed
debt agreement and can be prepaid by GE at any time, in whole or in part, without premium or penalty. These loans are priced at
market terms and have a collective weighted average interest rate of 3.5% and term of approximately 11.7 years at December 31,
2019. In 2019, GE repaid a total of $1.5 billion of intercompany loans from GE Capital.
GE has in place committed credit lines which it may use from time to time to meet its short-term liquidity needs. The following table
provides a summary of committed and available credit lines.
GE COMMITTED AND AVAILABLE CREDIT FACILITIES (In billions)
December 31, 2019 December 31, 2018
Unused back-up revolving credit facility
Revolving credit facilities (exceeding one year)
Bilateral revolving credit facilities (364-day)
Total committed credit facilities
Less offset provisions
Total net available credit facilities
$
$
$
20.0 $
18.9
3.1
42.0 $
6.7
35.3 $
20.0
23.9
3.6
47.5
6.7
40.8
Included in our credit facilities is an unused $20.0 billion back-up revolving syndicated credit facility extended by 36 banks, expiring in
2021, and an unused $14.8 billion revolving syndicated credit facility extended by six banks, expiring on December 31, 2020. The
commitments under these syndicated credit facilities may be reduced by up to $6.7 billion due to offset provisions for any bank that
holds a commitment to lend under both facilities.
GE 2019 FORM 10-K 27
MD&A
CAPITAL RESOURCES AND LIQUIDITY
The amount committed and available under the syndicated credit facility expiring on December 31, 2020 will periodically be reduced by
the greater of specified contractual commitment reductions or calculated commitment reductions, which is determined based on any
potential specified issuances of equity and incurrences of incremental debt by GE or its subsidiaries, as well as a portion of industrial
business disposition proceeds. In the first quarter of 2019, the amount committed and available under this facility was reduced by the
calculated commitment reduction of $5.0 billion to $14.8 billion. Pursuant to an amendment entered into in the first quarter 2019, further
commitment reductions (other than those related to incremental debt issuances or equity issuances) are deferred until the earlier of the
closing of the BioPharma transaction or September 30, 2020. If the BioPharma transaction closes prior to June 30, 2020, the
commitments under the facility are reduced by the greater of $7.4 billion or the calculated commitment reductions through the
BioPharma closing date (including all deferred reductions). If the BioPharma transaction closes on or after June 30, 2020, the
commitments under the facility are reduced by the greater of $9.9 billion or the calculated commitment reductions through the
BioPharma closing date (including all deferred reductions). The $20.0 billion syndicated back-up revolving credit facility expiring in 2021
does not contain any contractual commitment reduction features.
Under the terms of an agreement between GE Capital and GE, GE Capital has the right to compel GE to borrow under all credit
facilities except the syndicated facility expiring on December 31, 2020 and transfer the proceeds to GE Capital as intercompany loans,
which would be subject to the same terms and conditions as those between GE and the lending banks. GE Capital has not exercised
this right.
The following table provides a summary of the activity in the primary external sources of short-term borrowings for GE in the fourth
quarters of 2019 and 2018.
(In billions)
2019
Average borrowings during the fourth quarter
Maximum borrowings outstanding during the fourth quarter
Ending balance at December 31
2018
Average borrowings during the fourth quarter
Maximum borrowings outstanding during the fourth quarter
Ending balance at December 31
GE Commercial
Paper
Revolving Credit
Facilities
$
$
3.0 $
3.2
3.0
7.9 $
10.7
3.0
1.3 $
1.5
—
2.5 $
5.1
—
Total
4.3
4.7
3.0
10.4
14.8
3.0
Total average and maximum borrowings in the table above are calculated based on the daily outstanding balance of the sum of
commercial paper and revolving credit facilities.
The reduction in total GE average and maximum short-term borrowings during the fourth quarter of 2019 compared to the fourth quarter
of 2018 was driven by holding higher cash balances and improvements in our global funding and cash management operations.
In addition to its external liquidity sources, GE may from time to time enter into short-term intercompany loans from GE Capital to utilize
GE Capital’s excess cash as an efficient source of liquidity. These loans are repaid within the same quarter. No such loans were made
in 2019. GE Capital did not issue any commercial paper or draw on any revolving credit facilities in 2019.
CREDIT RATINGS AND CONDITIONS. We have relied, and may continue to rely, on the short- and long-term debt capital markets to
fund, among other things, a significant portion of our operations. The cost and availability of debt financing is influenced by our credit
ratings. Moody’s Investors Service (Moody’s), Standard and Poor’s Global Ratings (S&P), and Fitch Ratings (Fitch) currently issue
ratings on GE and GE Capital short- and long-term debt. The credit ratings of GE and GE Capital as of the date of this filing are set
forth in the table below.
GE
Outlook
Short term
Long term
GE Capital
Outlook
Short term
Long term
Moody's
S&P
Fitch
Stable
P-2
Baa1
Stable
P-2
Baa1
Stable
A-2
BBB+
Stable
A-2
BBB+
Negative
F2
BBB+
Negative
F2
BBB+
There were no changes in GE or GE Capital ratings from the end of the first quarter of 2019 through the date of this filing.
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. 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 this report.
GE 2019 FORM 10-K 28
MD&A
CAPITAL RESOURCES AND LIQUIDITY
The following table provides a summary of the estimated potential liquidity impact in the event of further downgrades with regards to the
most significant contractual credit ratings conditions of the Company based on their proximity to our current ratings.
(In billions)
Derivatives
Terminations
Cash margin posting
Receivables Sales Programs
Loss of cash commingling
Alternative funding sources
Triggers Below
At December 31, 2019
BBB/Baa2 $
BBB/Baa2
A-2/P-2/F2 $
A-2/P-2/F2
(0.2)
(0.5)
(0.3)
(1.1)
The timing within the quarter of the potential liquidity impact of these areas may differ, as described in the following sections which
provide additional details regarding the significant credit rating conditions of the Company.
DEBT CONDITIONS. Substantially all of our debt agreements do not contain material credit rating covenants. If our short-term credit
ratings were to fall below A-2/P-2/F2, it is possible that we would lose all or part of our access to the tier-2 commercial paper markets,
which would reduce our borrowing capacity in those markets. This may result in increased utilization of our revolving credit facilities to
fund our intra-quarter operations.
DERIVATIVE CONDITIONS. Swap, forward and option contracts are executed under standard master agreements that typically contain
mutual downgrade provisions that provide the ability of the counterparty to require termination if the credit ratings of the applicable GE
entity were to fall below specified ratings levels agreed upon with the counterparty, primarily BBB/Baa2. Our master agreements also
typically contain provisions that provide termination rights upon the occurrence of certain other events, such as a bankruptcy or events
of default by one of the parties. If an agreement was terminated under any of these circumstances, the termination amount payable
would be determined on a net basis and could also take into account any collateral posted. The net amount of our derivative liability
subject to such termination provisions, after consideration of collateral posted by us and outstanding interest payments was $0.2 billion
at December 31, 2019. This excludes exposure related to embedded derivatives, which are not subject to these provisions.
In addition, certain of our derivatives, primarily interest rate swaps, are subject to additional cash margin posting requirements if our
credit ratings were to fall below BBB/Baa2. The amount of additional margin will vary based on, among other factors, market
movements and changes in our positions. At December 31, 2019, the amount of additional margin that we could be required to post if
we fell below these ratings levels was approximately $0.5 billion.
See Note 21 to the consolidated financial statements for further information about our risk exposures, our use of derivatives, and the
effects of this activity on our financial statements.
OTHER CONDITIONS. Where we provide servicing for third-party investors under certain of our receivable sales programs, GE is
contractually permitted to commingle cash collected from customers on financing receivables sold to third-party investors with our own
cash prior to payment to third-party investors, provided our short-term credit rating does not fall below A-2/P-2/F2. In the event any of
our ratings were to fall below such levels, we may be required to segregate certain of these cash collections owed to third-party
investors into restricted bank accounts and would lose the short-term liquidity benefit of commingling with respect to such collections.
The financial impact to our intra-quarter liquidity would vary based on collections activity for a given quarter and may result in increased
utilization of our revolving credit facilities. The loss of cash commingling would have resulted in an estimated maximum reduction of
approximately $0.3 billion to GE intra-quarter liquidity during the fourth quarter of 2019.
In addition, we have relied, and may continue to rely, on securitization programs to provide alternative funding for sales of GE
receivables to third-party investors. If any of our short-term credit ratings were to fall below A-2/P-2/F2, the timing or amount of liquidity
generated by these programs could be adversely impacted. In the fourth quarter of 2019, the estimated maximum reduction to our
ending liquidity had our credit ratings fallen below these levels was approximately $1.1 billion.
FOREIGN EXCHANGE AND INTEREST RATE RISKS. 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 Australian dollar,
the Brazilian real and the Chinese renminbi, among others. The effects of foreign currency fluctuations on earnings, excluding the
earnings impact of the underlying hedged item, was less than $0.1 billion, $0.3 billion, and $0.1 billion for the years ended December
31, 2019, 2018 and 2017, respectively. This analysis excludes any offsetting effect from the forecasted future transactions that are
economically hedged.
GE 2019 FORM 10-K 29
MD&A
CAPITAL RESOURCES AND LIQUIDITY
Exchange rate and interest rate risks are managed with a variety of techniques, including selective use of derivatives. We apply policies
to manage each of these risks, including prohibitions on speculative activities. Following is an analysis of the potential effects of
changes in interest rates and currency exchange rates.
•
It is our policy to minimize exposure to interest rate changes and their impact to interest and other financial charges. We fund our
financial investments using a combination of debt and hedging instruments so that the interest rates of our borrowings match the
expected interest rate profile on our assets. It is our policy to minimize currency exposures and to conduct operations either within
functional currencies or using the protection of hedge strategies. To test the effectiveness of our hedging actions, for interest rate
risk we assumed that, on January 1, 2020, interest rates decreased by 100 basis points and the decrease remained in place for the
next 12 months and for currency risk of assets and liabilities denominated in other than their functional currencies, we evaluated
the effect of a 10% shift in exchange rates against the U.S. dollar. The analyses indicated that our 2019 consolidated net earnings
would decline by less than $0.1 billion for interest rate risk and approximately $0.1 billion for foreign exchange risk.
LIBOR REFORM. In connection with the potential transition away from the use of the London interbank offered rate (LIBOR) as an
interest rate benchmark, we are currently in the process of identifying and managing the potential impact to the Company. The majority
of the Company’s exposure to LIBOR relates to debt securities issued by GE Capital, for which contractual fallback language exists, as
well as preferred stock issued by GE, substantially all of which converts to LIBOR in January 2021. Additionally, with respect to our
derivatives portfolio, we will review industry-wide LIBOR reform efforts and expect that such efforts will provide guidance on how to
manage the transition from LIBOR for derivatives.
STATEMENT OF CASH FLOWS – OVERVIEW FROM 2017 THROUGH 2019. We manage the cash flow performance of our industrial
and financial services businesses separately. We therefore believe it is useful to report separate GE and GE Capital columns in our
Statement of Cash Flows because it enables us and our investors to evaluate the cash from operating activities of our industrial
businesses (the principal source of cash generation for our industrial businesses) separately from the cash flows of our financial
services business, as well as to evaluate the cash flows between our industrial businesses and GE Capital.
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.
All other operating activities reflect cash sources and uses as well as non-cash adjustments to net earnings (loss). See Note 24 to the
consolidated financial statements for further information regarding All other operating activities, All other investing activities and All other
financing activities for both GE and GE Capital.
The following investing and financing activities affected recognized assets or liabilities but did not result in cash receipts or payments in
2019: the ownership interest received and tax benefits receivable as a result of the spin-off and subsequent merger of our
Transportation segment with Wabtec; our retained ownership interest in Baker Hughes; additional non-cash deferred purchase price
received by GE Capital related to sales of current receivables; and right-of-use assets obtained in operating leases. See Notes 2, 4 and
7, respectively, to the consolidated financial statements.
See the Intercompany Transactions between GE and GE Capital section within MD&A and Notes 4 and 25 to the consolidated financial
statements for further information regarding certain transactions affecting our consolidated Statement of Cash Flows.
GE CASH FLOWS FROM CONTINUING OPERATIONS. The most significant source of cash in GE CFOA is 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 measures itself on a GE Industrial free cash flows* basis. This metric includes GE CFOA plus investments in property, plant and
equipment and additions to internal-use software; this metric excludes any dividends received from GE Capital and any cash received
from dispositions of property, plant and equipment. We believe that investors may also 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 contributions to the GE Pension Plan.
We believe that this measure better allows management and investors to evaluate the capacity of our industrial operations to generate
free cash flows.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 30
MD&A
CAPITAL RESOURCES AND LIQUIDITY
2019 CFOA (GAAP) AND FREE CASH FLOWS (FCF) BY SEGMENT (NON-GAAP)
(In millions)
CFOA (GAAP)
Add: gross additions to property, plant
and equipment
Add: gross additions to internal-use
software
Less: GE Pension Plan funding
Less: taxes related to business sales
Free cash flows (Non-GAAP)
$
$
Power
Renewable
Energy
Aviation
Healthcare
Corporate &
Eliminations
GE Industrial
(1,200) $
(277)
(512) $
(455)
$
5,552
(1,031)
$
3,024
(395)
(2,250) $
(59)
4,614
(2,216)
(46)
(14)
(107)
(79)
(28)
—
—
(1,523) $
—
—
(980) $
—
—
4,415
$
—
—
2,550
$
—
(198)
(2,139) $
(274)
—
(198)
2,322
2018 CFOA (GAAP) AND FREE CASH FLOWS (FCF) BY SEGMENT (NON-GAAP)
(In millions)
CFOA (GAAP)
Add: gross additions to property, plant
and equipment
Add: gross additions to internal-use
software
Less: GE Pension Plan funding
Less: taxes related to business sales
Free cash flows (Non-GAAP)
$
$
Power
Renewable
Energy
Aviation
Healthcare
Corporate &
Eliminations
GE Industrial
(1,849) $
(358)
$
406
(297)
$
5,373
(1,070)
$
3,485
(378)
(6,714) $
(131)
701
(2,234)
(66)
—
—
(2,273) $
(11)
—
—
98
$
(73)
(90)
(67)
(306)
—
—
4,230
$
—
—
3,018
$
(6,000)
(180)
(731) $
(6,000)
(180)
4,341
GE cash from operating activities was $4.6 billion in 2019 compared with $0.7 billion in 2018 (including $0.3 billion and $0.5 billion
cash received for Baker Hughes Class B shareholder dividends in 2019 and 2018, respectively). The $3.9 billion increase was primarily
due to: the nonrecurrence of GE Pension Plan contributions of $6.0 billion in 2018 (which are excluded from GE Industrial free cash
flows*); a decrease in payments of equipment project cost accruals of $0.6 billion; a net decrease in payments of Aviation-related
customer allowance accruals of $0.4 billion; and an increase in cash generated from contract & other deferred assets of $0.1 billion,
primarily due to higher billings on our long-term service agreements, partially offset by lower liquidations of deferred inventory.
These increases in cash were partially offset by: an increase in cash used for working capital of $2.6 billion; and an increase in cash
paid for income taxes of $0.6 billion.
The increase in cash used for working capital was due to: an increase in cash used for current receivables of $2.9 billion, primarily
driven by lower sales of receivables and receivables growth resulting from the 737 MAX grounding; a decrease in cash from accounts
payable of $0.9 billion; and higher inventory build of $0.5 billion, mainly as a result of the expected timing of deliveries in 2020. These
increases in cash used for working capital were partially offset by higher progress collections of $1.8 billion, mainly as a result of higher
utilization of collections in 2018, including the impact of the timing of progress collections received in the fourth quarter of 2017.
As discussed in the Aviation and GECAS 737 MAX section within the Consolidated Results section of MD&A, the 737 MAX grounding
had an adverse net effect on GE CFOA of approximately $1.4 billion in 2019. Within Aviation, this effect was more than offset by: higher
commercial aftermarket earnings and higher long-term service agreement billings of $0.6 billion; cash receipts from contract
modifications of $0.3 billion; a new spare parts distribution deal for a legacy engine program of $0.3 billion; and lower customer
allowance payments of $0.4 billion as discussed above. Other Aviation working capital cash flows, excluding the impact of the 737 MAX
grounding, largely offset.
GE cash from investing activities was $4.1 billion in 2019 compared with $3.1 billion in 2018. The $0.9 billion increase was primarily
due to: proceeds from the spin-off of our Transportation business of $6.2 billion (including the secondary offerings of Wabtec common
stock shares in the second and third quarters of 2019), the sale of a portion of our stake in Baker Hughes of $3.0 billion and from other
business dispositions in Aviation, Corporate and Power (net of cash transferred) of $1.1 billion in 2019, compared with total proceeds of
$6.0 billion in 2018, primarily from the sale of businesses at Power and Healthcare; a decrease in net cash paid for settlements of
derivative hedges of $0.9 billion; the nonrecurrence of the purchase of an aviation technology joint venture of $0.6 billion in 2018;
partially offset by the 2019 capital contribution to GE Capital of $4.0 billion; business acquisitions of $0.4 billion, primarily related to the
transfer of the HEF business from GE Capital to our Healthcare segment in 2019; and an increase in cash used related to net
settlements between our continuing operations and discontinued operations of $0.4 billion. Cash used for additions to property, plant
and equipment and internal-use software, which is a component of GE Industrial free cash flows*, was $2.5 billion in both 2019 and
2018.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 31
MD&A
CAPITAL RESOURCES AND LIQUIDITY
GE cash used for financing activities was $7.7 billion in 2019 compared with cash from financing activities of $1.5 billion in 2018.
The $9.1 billion increase in cash used was primarily due to: the nonrecurrence of intercompany loans from GE Capital to GE of $6.5
billion in 2018 (including $6.0 billion to fund contributions to the GE Pension Plan); completion of a tender offer to purchase GE long-
term debt of $4.8 billion in 2019; the nonrecurrence of dispositions of noncontrolling interests in Baker Hughes of $4.4 billion in 2018;
the repayment of GE Capital intercompany loans by GE of $1.5 billion in 2019; partially offset by a decrease in common dividends paid
to shareholders of $3.8 billion; and the nonrecurrence of the acquisition of Alstom's interest in grid technology, renewable energy, and
global nuclear and French steam power joint ventures for $3.1 billion in 2018.
GE cash from operating activities was $0.7 billion in 2018 compared with $11.5 billion in 2017 (including $0.5 billion and $0.3 billion
cash received for Baker Hughes Class B shareholder dividends in 2018 and 2017, respectively). The $10.8 billion decrease was
primarily due to: an increase in GE Pension Plan contributions (which are excluded from GE Industrial free cash flows*) of $4.3 billion;
the nonrecurrence of common dividends received from GE Capital (which are excluded from GE Industrial free cash flows*) of $4.0
billion in 2017; an increase in cash used for working capital of $3.4 billion; and an increase in payments of equipment project cost
accruals of $0.7 billion.
These decreases in cash were partially offset by: a decrease in cash used for contract & other deferred assets of $1.2 billion, primarily
due to the timing of revenue recognized relative to the timing of billings and collections on our long-term equipment agreements and
lower cash used for deferred inventory; and a decrease in cash paid for income taxes of $0.8 billion.
The increase in cash used for working capital was due to: lower progress collections of $2.4 billion, mainly as a result of net utilization in
2018, including the impact of the timing of progress collections received in the fourth quarter of 2017; an increase in cash used for
current receivables of $2.0 billion, primarily driven by lower sales of receivables; and higher inventory build of $0.7 billion, mainly as a
result of expected deliveries in 2019. These increases in cash used for working capital were partially offset by an increase in cash from
accounts payable of $1.6 billion, primarily driven by inventory build and improved payment terms.
GE cash from investing activities was $3.1 billion in 2018 compared with cash used for investing activities of $11.7 billion in 2017.
The increase in cash of $14.9 billion was primarily due to: a decrease in cash used related to net settlements between our continuing
operations and discontinued operations of $6.6 billion, primarily related to funding in the first half of 2017 in order to complete the Baker
Hughes acquisition; an increase in proceeds from business dispositions (net of cash transferred) of $3.0 billion, primarily from the sale
of businesses at Power and Healthcare; a decrease in cash used for business acquisitions (net of cash acquired) of $2.7 billion,
primarily driven by the acquisitions of LM Wind Power and ServiceMax in 2017; lower cash used for additions to property, plant and
equipment and internal-use software (which is a component of GE Industrial free cash flows*) of $1.3 billion; and the provision of a
promissory note to Baker Hughes in the third quarter of 2017 of $1.1 billion; partially offset by the purchase of an aviation technology
joint venture of $0.6 billion in 2018.
GE cash from financing activities was $1.5 billion in 2018 compared with $1.9 billion in 2017. The $0.4 billion decrease was primarily
due to: a decrease in net borrowings of $7.9 billion, mainly as a result of the issuance of long-term euro debt, primarily to fund
acquisitions in 2017; and the acquisition of Alstom's interest in grid technology, renewable energy, and global nuclear and French steam
power joint ventures for $3.1 billion in 2018. These decreases in cash were partially offset by: a decrease in common dividends paid to
shareholders of $4.2 billion; an increase in dispositions of noncontrolling interests in Baker Hughes of $4.1 billion; and a decrease in net
repurchases of GE treasury shares of $2.5 billion.
GE CASH FLOWS FROM DISCONTINUED OPERATIONS. GE cash used for operating activities of discontinued operations was
an insignificant amount in 2019 compared with cash generated of $2.1 billion in 2018. The $2.1 billion decrease was primarily as a
result of the dispositions of Baker Hughes in the third quarter of 2019 and our Transportation segment in the first quarter of 2019, due to
the nonrecurrence of operating cash generated in 2018, primarily in the fourth quarter.
GE cash used for investing activities of discontinued operations was $3.4 billion in 2019 compared with $0.7 billion in 2018. The
$2.8 billion increase in cash used was primarily due to the deconsolidation of Baker Hughes cash of $3.1 billion as a result of the
reduction in our ownership interest in the third quarter of 2019.
GE cash used for financing activities of discontinued operations was $0.4 billion in 2019 compared with $4.5 billion in 2018. The
$4.1 billion decrease of cash used was primarily due to: the nonrecurrence of Baker Hughes share repurchases of $2.5 billion in 2018;
and an increase in Baker Hughes borrowings of $0.3 billion in 2019 compared with net repayments of Baker Hughes borrowings of $1.1
billion in 2018.
GE cash from operating activities of discontinued operations was $2.1 billion in 2018 compared with cash used of $0.2 billion in
2017. The $2.2 billion increase in cash was primarily as a result of better operating performance at Baker Hughes.
GE cash used for investing activities of discontinued operations was $0.7 billion in 2018 compared with cash generated of $2.3
billion in 2017. The $3.0 billion increase in cash used was primarily due to: a decrease in net cash received from continuing operations
of $6.6 billion, primarily related to funding in the first half of 2017 in order to complete the Baker Hughes acquisition; partially offset by
the nonrecurrence of net cash paid for the Baker Hughes acquisition of $3.4 billion in 2017.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 32
MD&A
CAPITAL RESOURCES AND LIQUIDITY
GE cash used for financing activities of discontinued operations was $4.5 billion in 2018 compared with cash generated of $3.5
billion in 2017. The $8.0 billion increase in cash used was primarily due to: net repayments of Baker Hughes borrowings of $1.1 billion
in 2018 compared with net new debt of $4.7 billion in 2017, including the issuance of long-term debt of $4.0 billion and a promissory
note received from GE of $1.1 billion; and an increase in Baker Hughes share repurchases of $2.0 billion.
GE CAPITAL CASH FLOWS FROM CONTINUING OPERATIONS. GE Capital cash from operating activities was $1.9 billion in
2019 compared with $1.6 billion in 2018. The increase of $0.3 billion was primarily due to: a net increase in cash collateral received and
settlements paid from counterparties on derivative contracts of $2.0 billion; partially offset by a general decrease in cash generated
from earnings (loss) from continuing operations.
GE Capital cash from investing activities was $9.5 billion in 2019 compared with $11.8 billion in 2018. The decrease of $2.3 billion
was primarily due to: lower collections of financing receivables of $6.6 billion; an increase of net purchases of investment securities of
$4.2 billion; lower net sales of equity investments of $3.1 billion; and an increase in cash used related to net settlements between our
continuing operations (primarily our Corporate function) and businesses in discontinued operations (primarily WMC) of $2.4 billion;
partially offset by the nonrecurrence of intercompany loans from GE Capital to GE of $6.5 billion in 2018; an increase in cash related to
our current receivables and supply chain finance programs with GE of $4.4 billion; higher proceeds from business dispositions $1.9
billion; and the repayment of GE Capital intercompany loans by GE of $1.5 billion in 2019.
GE Capital cash used for financing activities was $7.0 billion in 2019 compared with $23.9 billion in 2018. The decrease of $16.9
billion was primarily due to lower net repayments of borrowings of $11.4 billion; a capital contribution from GE to GE Capital of $4.0
billion; and lower cash settlements on derivatives hedging foreign currency debt of $1.4 billion.
GE Capital cash from operating activities was $1.6 billion in 2018 compared with $2.4 billion in 2017. The decrease of $0.8 billion
was primarily due to: a net increase in cash collateral and settlements paid to counterparties on derivative contracts of $1.5 billion;
partially offset by a general increase in cash generated from earnings (loss) from continuing operations.
GE Capital cash from investing activities was $11.8 billion in 2018 compared with $8.2 billion in 2017. The increase of $3.5 billion
was primarily due to: higher collections of financing receivables of $7.1 billion and proceeds from the sales of EFS' debt origination
business and EFS equity investments of $6.1 billion in 2018; partially offset by a decrease in net investment securities of $4.6 billion:
$2.5 billion in 2018 compared with $7.1 billion in 2017; an increase in net additions to property, plant and equipment of $1.6 billion; net
proceeds from sales of discontinued operations of an insignificant amount in 2018 compared with $1.5 billion in 2017; an increase in net
intercompany loans from GE Capital to GE of $6.5 billion in 2018 compared with $5.9 billion in 2017 and a general reduction in funding
related to discontinued operations.
GE Capital cash used for financing activities was $23.9 billion in 2018 compared with $23.6 billion in 2017. The increase of $0.3
billion was primarily due to: higher net repayments of borrowings of $21.1 billion in 2018 compared with $19.0 billion in 2017 and a net
increase in derivative cash settlements paid of $2.0 billion partially offset by no GE Capital common dividends paid to GE in 2018
compared with $4.0 billion in 2017.
INTERCOMPANY TRANSACTIONS BETWEEN GE AND GE CAPITAL. Transactions between related companies are made on arm's
length terms and are reported in the GE and GE Capital columns of our financial statements, which we believe provide useful
supplemental information to our consolidated financial statements. See Note 25 to the consolidated financial statements for further
information.
Sales of Receivables. In order to manage short-term liquidity and credit exposure, GE may sell current customer receivables to GE
Capital and other third parties. These transactions are made on arm's length terms and any discount related to time value of money, is
recognized within the respective GE Industrial business in the period these receivables were sold to GE Capital or third parties. See
Note 4 to the consolidated financial statements for further information.
Supply Chain Finance Programs. GE facilitates voluntary supply chain finance programs with third parties which provide participating
GE suppliers the opportunity to sell their GE receivables to third parties at the sole discretion of both the suppliers and the third parties.
The terms of these programs do not alter GE’s obligations to its suppliers which arise from independently negotiated contractual supply
agreements. GE's obligation remains limited to making payment on its supplier invoices on the terms originally negotiated with its
suppliers, regardless of whether the supplier sells its receivable to a third party. GE has guaranteed the program providers that its
participating affiliates will pay their supplier invoices on the terms originally negotiated with their suppliers.
At December 31, 2019 and 2018, included in GE's accounts payable is $2.4 billion and $0.4 billion, respectively, of supplier invoices
that are subject to the third-party programs. GE accounts for all payments made under the programs as reductions to CFOA. Total GE
supplier invoices paid through these third-party programs were $1.4 billion and an insignificant amount for the years ended December
31, 2019 and 2018, respectively.
GE 2019 FORM 10-K 33
MD&A
CAPITAL RESOURCES AND LIQUIDITY
Previously, GE Capital operated a supply chain finance program for suppliers to GE’s industrial businesses. Under that program, GE
Capital may settle GE’s industrial businesses supplier invoices early in return for early pay discounts. In turn, GE settled invoices with
GE Capital in accordance with the original supplier payment terms. On February 28, 2019, GE Capital sold the program platform to
MUFG Union Bank, N.A. (MUFG) and is transitioning GE’s suppliers to a MUFG supply chain finance program. Information for suppliers
which have already transitioned from GE Capital to MUFG is included within the third-party supply chain finance program data
presented above. For the year ended December 31, 2019, there was not a significant effect on GE CFOA related to the MUFG
transition.
The GE funded participation in the GE Capital program will continue to be settled following the original invoice payment terms with an
expectation that the transition be completed by the end of 2020. The GE liability associated with the funded participation in the program
is presented as accounts payable and amounted to $2.1 billion and $4.4 billion at December 31, 2019 and 2018, respectively.
GE Capital Finance Transactions. During the years ended December 31, 2019 and 2018, GE Capital acquired from third parties 51
aircraft with a list price totaling $6.4 billion and 64 aircraft with a list price totaling $7.8 billion, respectively, that will be leased to others
and are powered by engines manufactured by GE Aviation and affiliates. GE Capital also made payments to GE Aviation and affiliates
related to spare engines and engine parts of $0.7 billion and $0.4 billion, which included $0.6 billion and $0.2 billion to CFM
International, during the years ended December 31, 2019 and 2018, respectively. Additionally, GE Capital had $2.0 billion and $1.2
billion of net book value of engines, originally manufactured by GE Aviation and affiliates and subsequently leased back to GE Aviation
and affiliates at December 31, 2019 and 2018, respectively.
Also, during the years ended December 31, 2019 and 2018, GE recognized equipment revenues of $1.6 billion and $1.0 billion,
respectively, from customers within our Power and Renewable Energy segments in which GE Capital has been an investee or is
committed to be an investee in the underlying projects.
For certain of these investments, in order to meet its underwriting criteria, GE Capital may obtain a direct guarantee from GE related to
the performance of the third party. GE guarantees include direct performance or payment guarantees, return on investment guarantees
and asset value guarantees. As of December 31, 2019, GE had outstanding guarantees to GE Capital on $0.9 billion of funded
exposure and $1.0 billion of unfunded commitments, which included guarantees issued by industrial businesses. The recorded
contingent liability for these guarantees was insignificant as of December 31, 2019 and is based on individual transaction level defaults,
losses and/or returns.
CONTRACTUAL OBLIGATIONS. As defined by reporting regulations, our contractual obligations for estimated future payments as of
December 31, 2019, follow.
(In billions)
Borrowings (Note 11)
Interest on borrowings
Purchase obligations(a)(b)
Insurance liabilities (Note 12)
Operating lease obligations (Note 7)
Other liabilities(c)
Contractual obligations of discontinued operations(d)
$
Total
90.9 $
24.8
57.8
39.7
3.7
45.3
0.6
2020
2021-2022
2023-2024
Thereafter
23.6 $
2.5
18.4
2.4
0.8
10.1
0.3
15.9 $
3.9
20.2
4.1
1.2
6.7
0.1
8.4 $
3.1
15.1
4.1
0.8
5.1
0.1
42.9
15.3
4.2
29.0
0.9
23.4
0.1
(a) Included all take-or-pay arrangements, capital expenditures, contractual commitments to purchase equipment that will be leased to
others, software acquisition/license commitments, and other purchase commitments.
(b) Excluded funding commitments entered into in the ordinary course of business. See Notes 23 to the consolidated financial
statements for further information on these commitments and other guarantees.
(c) Included an estimate of future expected funding requirements related to our postretirement benefit plans and included liabilities for
unrecognized tax benefits. Because their future cash outflows are uncertain, the following non-current liabilities are excluded from
the table above: derivatives, deferred income and other sundry items. See Notes 13, 15 and 21 to the consolidated financial
statements for further information on certain of these items.
(d) Included payments for other liabilities.
CRITICAL ACCOUNTING ESTIMATES. Accounting estimates and assumptions discussed in this section are those that we
consider to be the most critical to an understanding of our financial statements because they involve significant judgments and
uncertainties. See Note 1 to the consolidated financial statements for further information on our most significant accounting policies.
REVENUE RECOGNITION ON LONG-TERM SERVICES AGREEMENTS. We have long-term service agreements with our customers
predominately within our Power and Aviation segments that require us to maintain the customers’ assets over the contract terms, which
generally range from 5 to 25 years. However, contract modifications that extend or revise contracts are not uncommon. We recognize
revenue as we perform under the arrangements using the percentage of completion method which is based on our costs incurred to
date relative to our estimate of total expected costs. This requires us to make estimates of customer payments expected to be received
over the contract term as well as the costs to perform required maintenance services.
GE 2019 FORM 10-K 34
MD&A
CRITICAL ACCOUNTING ESTIMATES
Customers generally pay us based on the utilization of the asset (per hour of usage for example) or upon the occurrence of a major
event within the contract such as an overhaul. As a result, a significant estimate in determining expected revenues of a contract is
estimating how customers will utilize their assets over the term of the agreement. The estimate of utilization, which can change over the
contract life, impacts both the amount of customer payments we expect to receive and our estimate of future contract costs. Customers’
asset utilization will influence the timing and extent of overhauls and other service events over the life of the contract. We generally use
a combination of both historical utilization trends as well as forward-looking information such as market conditions and potential asset
retirements in developing our revenue estimates.
To develop our cost estimates, we consider the timing and extent of future maintenance and overhaul events, including the amount and
cost of labor, spare parts and other resources required to perform the services. In developing our cost estimates, we utilize a
combination of our historical cost experience and expected cost improvements. Cost improvements are only included in future cost
estimates after savings have been observed in actual results or proven effective through an extensive regulatory or engineering
approval process.
We routinely review estimates under long-term services agreements and regularly revise them to adjust for changes in outlook. These
revisions are based on objectively verifiable information that is available at the time of the review. Contract modifications that change
the rights and obligations, as well as the nature, timing and extent of future cash flows, are evaluated for potential price concessions,
contract asset impairments and significant financing to determine if adjustments of earnings are required before effectively accounting
for modified contract as a new contract.
We regularly assess expected billings adjustments and customer credit risk inherent in the carrying amounts of receivables and
contract assets, including the risk that contractual penalties may not be sufficient to offset our accumulated investment in the event of
customer termination. We gain insight into future utilization and cost trends, as well as credit risk, through our knowledge of the installed
base of equipment and the close interaction with our customers that comes with supplying critical services and parts over extended
periods. Revisions may affect a long-term services agreement’s total estimated profitability resulting in an adjustment of earnings.
On December 31, 2019, our net long-term service agreements balance of $5.1 billion represents approximately 2.9% of our total
estimated life of contract billings of $176.7 billion. Our contracts (on average) are approximately 22.2% complete based on costs
incurred to date and our estimate of future costs. Revisions to our estimates of future billings or costs that increase or decrease total
estimated contract profitability by one percentage point would increase or decrease the long-term service agreements balance by $0.4
billion. Cash billings collected on these contracts were $11.5 billion and $10.2 billion during the years ended December 31, 2019 and
2018, respectively.
See Notes 1 and 9 to the consolidated financial statements for further information.
IMPAIRMENT OF GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS. During 2019, and in order to improve alignment of
our annual goodwill impairment testing and strategic planning process, we changed our annual testing date from the third quarter to the
fourth quarter. We determine fair value for each of the reporting units using the market approach, when available and appropriate, or
the income approach, or a combination of both. We assess the valuation methodology based upon the relevance and availability of the
data at the time we perform the valuation. If multiple valuation methodologies are used, the results are weighted appropriately.
Valuations using the market approach are derived from metrics of publicly traded companies or historically completed transactions of
comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate giving
consideration to risk profiles, size, geography, and diversity of products and services. A market approach is limited to reporting units for
which there are publicly traded companies that have the characteristics similar to our businesses.
Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an
appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future
growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed
in our forecasts. We derive our discount rates using a capital asset pricing model and analyzing published rates for industries relevant
to our reporting units to estimate the cost of equity financing. We use discount rates that are commensurate with the risks and
uncertainty inherent in the respective businesses and in our internally developed forecasts. Discount rates used in our annual reporting
unit valuations ranged from 8.9% to 22.0%.
Estimating the fair value of reporting units requires the use of significant judgments that are based on a number of factors including
actual operating results, internal forecasts, market observable pricing multiples of similar businesses and comparable transactions,
possible control premiums, determining the appropriate discount rate and long-term growth rate assumptions, and, if multiple
approaches are being used, determining the appropriate weighting applied to each approach. It is reasonably possible that the
judgments and estimates described above could change in future periods.
We review identified intangible assets with defined useful lives and subject to amortization for impairment whenever events or changes
in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment loss has
occurred requires the use of our internal forecast to estimate future cash flows and the useful life over which these cash flows will occur.
To determine fair value, we use our internal cash flow estimates discounted at an appropriate discount rate.
See Notes 1 and 8 to the consolidated financial statements for further information.
GE 2019 FORM 10-K 35
MD&A
CRITICAL ACCOUNTING ESTIMATES
INSURANCE AND INVESTMENT CONTRACTS. Refer to the Other Items - Insurance section within MD&A for further discussion of the
accounting estimates and assumptions in our insurance reserves and their sensitivity to change. Also see Notes 1 and 12 to the
consolidated financial statements for further information.
PENSION ASSUMPTIONS. Our defined benefit pension plans are accounted for on an actuarial basis, which requires the selection of
various assumptions, including a discount rate, an expected return on assets, mortality rates of participants and expectation of mortality
improvement. We evaluate these critical assumptions at least annually on a plan and country-specific basis. We periodically evaluate
other assumptions involving demographic factors such as retirement age and turnover, and update them to reflect our experience and
expectations for the future. Actual results in any given year will often differ from actuarial assumptions because of economic and other
factors.
Projected benefit obligations are measured as the present value of expected payments. We discount those cash payments using the
weighted average of market-observed yields for high-quality fixed-income securities with maturities that correspond to the payment of
benefits. Lower discount rates increase present values and generally increase subsequent-year pension expense; higher discount rates
decrease present values and generally reduce subsequent-year pension expense.
Our discount rates for principal pension plans at December 31, 2019, 2018 and 2017 were 3.36%, 4.34% and 3.64%, respectively,
reflecting market interest rates.
To determine the expected long-term rate of return on pension plan assets, we consider our asset allocation, as well as historical and
expected returns on various categories of plan assets. In developing future long-term return expectations for our principal benefit plans’
assets, we formulate views on the future economic environment, both in the U.S. and abroad. We evaluate general market trends and
historical relationships among a number of key variables that impact asset class returns such as expected earnings growth, inflation,
valuations, yields and spreads, using both internal and external sources. We also take into account expected volatility by asset class
and diversification across classes to determine expected overall portfolio results given our asset allocation. Assets in our principal
pension plans earned 17.8% in 2019, and had annualized returns of 6.3%, 7.7% and 8.2% in the 5-, 10- and 25-year periods ended
December 31, 2019, respectively. Based on our analysis of future expectations of asset performance, past return results, and our asset
allocation, we have assumed a 6.25% long-term expected return on those assets for cost recognition in 2020, as compared to 6.75% in
2019 and 2018.
The Society of Actuaries issued new base and improvement mortality tables in 2019 and we updated mortality assumptions in the U.S.
accordingly. These changes in assumptions decreased the December 31, 2019 U.S. pension and retiree benefit plans' obligations by
$0.5 billion.
Changes in key assumptions for our principal pension plans would have the following effects.
• Discount rate – A 25 basis point decrease in discount rate would increase pension cost in the following year by about $0.2 billion
and would increase the pension benefit obligation at year-end by about $2.3 billion.
•
Expected return on assets – A 50 basis point decrease in the expected return on assets would increase pension cost in the
following year by about $0.3 billion.
See Other Consolidated Information – Postretirement Benefit Plans section within MD&A and Note 13 to the consolidated financial
statements for further information.
INCOME TAXES. Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the
various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective
governmental taxing authorities. Significant judgment is required in determining our tax expense and in evaluating our tax positions,
including evaluating uncertainties. We review our tax positions quarterly and adjust the balances as new information becomes
available. Our income tax rate is significantly affected by the tax rate on our global operations. In addition to local country tax laws and
regulations, this rate can depend on the extent earnings are indefinitely reinvested outside the U.S. Historically U.S. taxes were due
upon repatriation of foreign earnings. Due to the enactment of U.S. tax reform, most repatriations of foreign earnings will be free of U.S.
federal income tax but may incur withholding or state taxes. Indefinite reinvestment is determined by management’s judgment about
and intentions concerning the future operations of the Company. Most of these earnings have been reinvested in active non-U.S.
business operations. At December 31, 2019, we have not changed our indefinite reinvestment decision as a result of tax reform but will
reassess this on an ongoing basis.
GE 2019 FORM 10-K 36
MD&A
CRITICAL ACCOUNTING ESTIMATES
Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such
assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from
net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing
the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted
operating earnings and available tax planning strategies. These sources of income rely heavily on estimates. We use our historical
experience and our short- and long-range business forecasts to provide insight. Further, our global and diversified business portfolio
gives us the opportunity to employ various prudent and feasible tax planning strategies to facilitate the recoverability of future
deductions. Amounts recorded for deferred tax assets related to non-U.S. net operating losses, net of valuation allowances, were $2.2
billion and $3.1 billion at December 31, 2019 and 2018, including $0.2 billion related to held for sale assets at December 31, 2019 and
$0.2 billion and $0.5 billion at December 31, 2019 and 2018, respectively, associated with losses reported in discontinued operations,
primarily related to our legacy financial services businesses and for 2018, our Baker Hughes segment. Such year-end 2019 amounts
are expected to be fully recoverable within the applicable statutory expiration periods. To the extent we consider it more likely than not
that a deferred tax asset will not be recovered, a valuation allowance is established.
See Other Consolidated Information – Income Taxes section within MD&A and Note 15 to the consolidated financial statements for
further information.
LOSS CONTINGENCIES. Loss contingencies are uncertain and unresolved matters that arise in the ordinary course of business and
result from events or actions by others that have the potential to result in a future loss. Such contingencies include, but are not limited
to, environmental obligations, litigation, regulatory investigations and proceedings, product quality and losses resulting from other
events and developments. When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best
estimate for the ultimate loss. When there appears to be a range of possible costs with equal likelihood, liabilities are based on the low-
end of such range. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a
meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of
future events and negotiations with or decisions by third parties that will determine the ultimate resolution of the contingency. Moreover,
it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information
must be continuously evaluated to determine both the likelihood of potential loss and whether it is possible to reasonably estimate a
range of possible loss. Disclosure is provided for material loss contingencies when a loss is probable but a reasonable estimate cannot
be made, and when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will
exceed the recorded provision. We regularly review contingencies to determine whether the likelihood of loss has changed and to
assess whether a reasonable estimate of the loss or range of loss can be made. See Note 23 to the consolidated financial statements
for further information.
OTHER ITEMS
INSURANCE. The run-off insurance operations of North American Life and Health (NALH) primarily include Employers Reassurance
Corporation (ERAC) and Union Fidelity Life Insurance Company (UFLIC). ERAC was formerly part of Employers Reinsurance
Corporation (ERC) until the sale of ERC to Swiss Re in 2006. UFLIC was formerly part of Genworth Financial Inc. (Genworth) but was
retained by GE after Genworth’s initial public offering in 2004.
ERAC primarily assumes long-term care insurance and life insurance from numerous cedents under various types of reinsurance
treaties and stopped accepting new policies after 2008. UFLIC primarily assumes long-term care insurance, structured settlement
annuities with and without life contingencies and variable annuities from Genworth and has been closed to new business since 2004.
The vast majority of NALH’s reinsurance exposures are long-duration arrangements that still involve substantial levels of premium
collections and benefit payments even though ERAC and UFLIC have not entered into new reinsurance treaties in about a decade.
These long-duration arrangements involve a number of direct writers and contain a range of risk transfer provisions and other
contractual elements. In many instances, these arrangements do not transfer to ERAC or to UFLIC 100 percent of the risk embodied in
the encompassed underlying policies issued by the direct writers. Furthermore, we cede insurance risk to third-party reinsurers for a
portion of our insurance contracts, primarily on long-term care insurance policies.
Our run-off 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. The insurance liabilities and annuity benefits amounted to $39.8 billion and $35.6 billion and primarily relate to individual long-
term care insurance reserves of $21.0 billion and $20.0 billion and structured settlement annuities and life insurance reserves of $11.1
billion and $11.2 billion, at December 31, 2019 and December 31, 2018, respectively. The increase in insurance liabilities and annuity
benefits of $4.2 billion from December 31, 2018 to December 31, 2019, is primarily due to an adjustment of $3.4 billion resulting from
an increase in unrealized gains on investment securities that would result in a premium deficiency should those gains be realized and a
$1.0 billion adjustment arising from the annual premium deficiency testing completed in third quarter 2019, as discussed further below.
In addition to NALH, Electric Insurance Company (EIC) is a property and casualty insurance company primarily providing insurance to
GE and its employees with net claim reserves of $0.3 billion at December 31, 2019.
GE 2019 FORM 10-K 37
MD&A
OTHER ITEMS
We regularly monitor emerging experience in our run-off insurance operations and industry developments to identify trends that may
help us refine our reserve assumptions and evaluate opportunities to reduce our insurance risk profile and improve the results of our
run-off insurance operations. These opportunities may include the pursuit of future premium rate increases and benefit reductions on
long-term care insurance contracts with our ceding companies; recapture and reinsurance transactions to reduce risk where
economically justified; investment strategies to improve asset and liability matching and enhance investment portfolio yields; and
managing our expense levels.
Key Portfolio Characteristics
Long-term care insurance contracts. The long-term care insurance contracts we reinsure provide coverage at varying levels of benefits
to policyholders and may include attributes that could result in claimants being on claim for longer periods or at higher daily claim costs,
or alternatively limiting the premium paying period, compared to contracts with a lower level of benefits. For example, policyholders with
a lifetime benefit period could receive coverage up to the specified daily maximum as long as the policyholder is claim eligible and
receives care for covered services; inflation protection options increase the daily maximums to protect the policyholder from the rising
cost of care with some options providing automatic annual increases of 3% to 5% or policyholder elected inflation-indexed increases for
increased premium; joint life policies provide coverage for two lives which permit either life under a single contract to receive benefits at
the same time or separately; and premium payment options may limit the period over which the policyholder pays premiums while still
receiving coverage after premium payments cease, which may limit the impact of our benefit from future premium rate increases.
The ERAC long-term care insurance portfolio comprises more than two-thirds of our total long-term care insurance reserves and is
assumed from approximately 30 ceding companies through various types of reinsurance and retrocession contracts having complex
terms and conditions. Compared to the overall long-term care insurance block, it has a lower average attained age with a larger number
of policies (and covered lives, as over one-third of the policies are joint life policies), with lifetime benefit periods and/or with inflation
protection options which may result in a higher potential for future claims.
The UFLIC long-term care insurance block comprises the remainder of our total long-term care insurance reserves and is more mature
with policies that are more uniform, as it is assumed from a single ceding company, Genworth, and has fewer policies with lifetime
benefit periods, no joint life policies and slightly more policies with inflation protection options.
Long-term care insurance policies allow the issuing insurance entity to increase premiums, or alternatively allow the policyholder the
option to decrease benefits, with approval by state regulators, should actual experience emerge worse than what was projected when
such policies were initially underwritten. As a reinsurer, we are unable to directly or unilaterally pursue long-term care insurance
premium rate increases. However, we engage actively with our ceding company clients in pursuing allowed long-term care insurance
premium rate increases. The amount of times that rate increases have occurred varies by ceding company.
As further described within the Premium Deficiency Testing section below, we reconstructed our future claim cost projections in 2017
utilizing trends observed in our emerging experience for older claimant ages and later duration policies. Also described within that
section are key assumption changes in 2019.
Presented in the table below are GAAP and statutory reserve balances and key attributes of our long-term care insurance portfolio.
December 31, 2019 (Dollars in billions, except where noted)
ERAC
UFLIC
Total
Gross GAAP future policy benefit reserves and claim reserves
Gross statutory future policy benefit reserves and claim reserves(a)
Number of policies in force
Number of covered lives in force
Average policyholder attained age
Gross GAAP future policy benefit reserve per policy (in actual dollars)
Gross GAAP future policy benefit reserve per covered life (in actual dollars)
Gross statutory future policy benefit reserve per policy (in actual dollars)(a)
Gross statutory future policy benefit reserve per covered life (in actual dollars)(a)
Percentage of policies with:
$
$
Lifetime benefit period
Inflation protection option
Joint lives
Percentage of policies that are premium paying
Policies on claim
$
$
15.2
23.7
196,000
261,000
75
66,500
50,000
109,000
81,000
70%
81%
34%
73%
$
$
5.8
7.1
67,000
67,000
83
56,000
56,000
74,000
74,000
35%
91%
—%
82%
21.0
30.8
263,000
328,000
77
64,000
51,000
100,000
80,000
61%
84%
25%
75%
10,700
9,300
20,000
(a) Statutory balances reflect recognition of the estimated remaining statutory increase in reserves of approximately $7 billion through
2023 under the permitted accounting practice discussed further below and in Note 12 to our consolidated financial statements.
GE 2019 FORM 10-K 38
MD&A
OTHER ITEMS
Structured settlement annuities and life insurance contracts.We reinsure approximately 31,000 structured settlement annuities with an
average attained age of 52. These structured settlement annuities were primarily underwritten on impaired lives (i.e., shorter-than-
average life expectancies) at origination and have projected payments extending decades into the future. Our primary risks associated
with these contracts include mortality (i.e., life expectancy or longevity), mortality improvement (i.e., assumed rate that mortality is
expected to reduce over time), which may extend the duration of payments on life contingent contracts beyond our estimates, and
reinvestment risk (i.e., a low interest rate environment may reduce our ability to achieve our targeted investment margins). Unlike long-
term care insurance, structured settlement annuities offer no ability to require additional premiums or reduce benefits.
Our life reinsurance business typically covers the mortality risk associated with various types of life insurance policies that we reinsure
from approximately 150 ceding company relationships where we pay a benefit based on the death of a covered life. Across our U.S.
and Canadian life insurance blocks, we reinsure approximately $100 billion of net amount at risk (i.e., difference between the death
benefit and any accrued cash value) from approximately 2.2 million policies with an average attained age of 58. In 2019, our incurred
claims were approximately $0.5 billion with an average individual claim of approximately $48,000. The largest product types covered
are 20-year level term policies which represent approximately 40% of the net amount at risk and are anticipated to lapse (i.e., the length
of time a policy will remain in force) over the next 2 to 4 years as the policies reach the end of their 20-year level premium period.
Investment portfolio and other adjustments. Our insurance liabilities and annuity benefits are primarily supported by investment
securities of $38.0 billion and $32.9 billion and commercial mortgage loans of $1.9 billion and $1.7 billion at December 31, 2019 and
2018, respectively. Additionally, we expect to purchase approximately $9 billion of new assets through 2024 in conjunction with
expected capital contributions from GE Capital to our insurance subsidiaries, of which $2.0 billion was received in the first quarter of
2020. Our investment securities are classified as available-for-sale and comprise mainly investment-grade debt securities. The portfolio
includes $5.7 billion of net unrealized gains that are recorded within Other comprehensive income, net of applicable taxes and other
adjustments.
In calculating our future policy benefit reserves, we are required to consider the impact of net unrealized gains and losses on our
available-for-sale investment securities supporting our insurance contracts as if those unrealized amounts were realized. To the extent
that the realization of gains would result in a premium deficiency, an adjustment is recorded to increase future policy benefit reserves
with an after-tax offset to Other comprehensive income. At December 31, 2019, the entire $5.7 billion balance of net unrealized gains
on our investment securities required a related increase to future policy benefit reserves. This adjustment increased from $2.2 billion in
2018 to $5.7 billion in 2019 primarily from higher unrealized gains within the investment security portfolio supporting our insurance
contracts in response to decreased market yields. See Note 3 to our consolidated financial statements for further information about our
investment securities.
We manage the investments in our run-off insurance operations under strict investment guidelines, including limitations on asset class
concentration, single issuer exposures, asset-liability duration variances, and other factors to meet credit quality, yield, liquidity and
diversification requirements associated with servicing our insurance liabilities under reasonable circumstances. Investing in these
assets exposes us to both credit risk (i.e., debtor’s ability to make timely payments of principal and interest) and interest rate risk (i.e.,
market price, cash flow variability, and reinvestment risk due to changes in market interest rates). We regularly review investment
securities for impairment using both quantitative and qualitative criteria.
Additionally, our run-off insurance operations have approximately $0.7 billion of assets held by states or other regulatory bodies in
statutorily required deposit accounts, and approximately $28.6 billion of assets held in trust accounts associated with reinsurance
contracts in place between either ERAC or UFLIC as the reinsuring entity and a number of ceding insurers. Assets in these reinsurance
trusts are held by an independent trustee for the benefit of the ceding insurer, and are subject to various investment guidelines as set
forth in the respective reinsurance contacts.
We have studied and analyzed various options, along with several external investment advisors, to improve our investment yield
subject to maintaining our ability to satisfy insurance liabilities when due, as well as considering our risk-based capital requirements,
regulatory constraints, and tolerance for surplus volatility. With the expected capital contributions from GE Capital through 2024, we
intend to add new asset classes to further diversify our portfolio, including private equity, senior secured loans and infrastructure debt,
among others. We also hired a new Chief Investment Officer in 2018 to oversee our entire investment process and will be adding
further investment managers.
Critical Accounting Estimates. Our insurance reserves include the following key accounting estimates and assumptions described
below.
Future policy benefit reserves. Future policy benefit reserves represent the present value of future policy benefits less the present value
of future gross premiums based on actuarial assumptions including, but not limited to, morbidity (i.e., frequency and severity of claim,
including claim termination rates and benefit utilization rates); morbidity improvement (i.e., assumed rate of improvement in morbidity in
the future); mortality (i.e., life expectancy or longevity); mortality improvement (i.e., assumed rate that mortality is expected to reduce
over time); policyholder persistency or lapses (i.e., the length of time a policy will remain in force); anticipated premium increases or
benefit reductions associated with future in-force rate actions, including actions that are: (a) approved and not yet implemented, (b) filed
but not yet approved, and (c) estimated on future filings through 2028, on long-term care insurance policies; and interest rates.
Assumptions are locked-in throughout the remaining life of a contract unless a premium deficiency develops.
GE 2019 FORM 10-K 39
MD&A
OTHER ITEMS
Claim reserves. Claim reserves are established when a claim is incurred or is estimated to have been incurred and represents our best
estimate of the present value of the ultimate obligations for future claim payments and claim adjustment expenses. Key inputs include
actual known facts about the claim, such as the benefits available and cause of disability of the claimant, as well as assumptions
derived from our actual historical experience and expected future changes in experience factors. Claim reserves are evaluated
periodically for potential changes in loss estimates with the support of qualified actuaries, and any changes are recorded in earnings in
the period in which they are determined.
Reinsurance recoverables. We cede insurance risk to third-party reinsurers for a portion of our insurance contracts, primarily on long-
term care insurance policies, and record receivables as we are not relieved from our primary obligation to policyholders or cedents.
These receivables are estimated in a manner consistent with the future policy benefit reserves and claim reserves. Reserves ceded to
reinsurers, net of allowance, were $2.4 billion and $2.3 billion at December 31, 2019 and December 31, 2018, respectively, and are
included in the caption “Other GE Capital receivables” on our consolidated Statement of Financial Position.
Premium Deficiency Testing. We annually perform premium deficiency testing in the third quarter in the aggregate across our run-off
insurance portfolio. The premium deficiency testing assesses the adequacy of future policy benefit reserves, net of unamortized
capitalized acquisition costs, using current assumptions without provision for adverse deviation. A comprehensive review of premium
deficiency assumptions is a complex process and depends on a number of factors, many of which are interdependent and require
evaluation individually and in the aggregate across all insurance products. The vast majority of our run-off insurance operations consists
of reinsurance from multiple ceding insurance entities pursuant to treaties having complex terms and conditions. Premium deficiency
testing relies on claim and policy information provided by these ceding entities and considers the reinsurance treaties and underlying
policies. In order to utilize that information for purposes of completing experience studies covering all key assumptions, we perform
detailed procedures to conform and validate the data received from the ceding entities. Our long-term care insurance business includes
coverage where credible claim experience for higher attained ages is still emerging, and to the extent future experience deviates from
current expectations, new projections of claim costs extending over the expected life of the policies may be required. Significant
uncertainties exist in making projections for these long-term care insurance contracts, which requires that we consider a wide range of
possible outcomes.
The primary assumptions used in the premium deficiency tests include:
Morbidity. Morbidity assumptions used in estimating future policy benefit reserves are based on estimates of expected incidences of
disability among policyholders and the costs associated with these policyholders asserting claims under their contracts, and these
estimates account for any expected future morbidity improvement. For long-term care exposures, estimating expected future costs
includes assessments of incidence (probability of a claim), utilization (amount of available benefits expected to be incurred) and
continuance (how long the claim will last). Prior to 2017, premium deficiency assumptions considered the risk of anti-selection by
including issue age adjustments to morbidity based on an actuarial assumption that long-term care policies issued to younger
individuals would exhibit lower expected incidences and claim costs than those issued to older policyholders. Recent claim experience
and the development of reconstructed claim cost curves indicated issue age differences had minimal impact on claim cost projections,
and, accordingly, beginning in 2017, issue age adjustments were eliminated in developing morbidity assumptions. Higher morbidity
increases, while lower morbidity decreases, the present value of expected future benefit payments.
Rate of Change in Morbidity. Our annual premium deficiency testing incorporates our best estimates of projected future changes in the
morbidity rates reflected in our base cost curves. These estimates draw upon a number of inputs, some of which are subjective, and all
of which are interpreted and applied in the exercise of professional actuarial judgment in the context of the characteristics specific to our
portfolios. This exercise of judgment considers factors such as the work performed by internal and external independent actuarial
experts engaged to advise us in our annual testing, the observed actual experience in our portfolios measured against our base
projections, industry developments, and other trends, including advances in the state of medical care and health-care technology
development. With respect to industry developments, we take into account that there are differences between and among industry
peers in portfolio characteristics (such as demographic features of the insured populations), the aggregate effect of improvement or
deterioration as applied to base claim cost projections, the extent to which such base cost projections reflect the most current
experience, and the accepted diversity of practice in actuarial professional judgment. We assess the potential for any change in
morbidity with reference to our existing base claim cost projections, reconstructed in 2017. Projected improvement or deterioration in
morbidity can have a material impact on our future claim cost projections, both on a stand-alone basis and also by virtue of influencing
other variables such as discount rate and premium rate increases.
Mortality. Mortality assumptions used in estimating future policy benefit reserves are based on published mortality tables as adjusted for
the results of our experience studies and estimates of expected future mortality improvement. For life insurance products, higher
mortality increases the present value of expected future benefit payments, while for annuity and long-term care insurance contracts,
higher mortality decreases the present value of expected future benefit payments.
Discount rate. Interest rate assumptions used in estimating the present value of future policy benefit reserves are based on expected
investment yields, net of related investment expenses and expected defaults. In estimating future yields, we consider the actual yields
on our current investment securities held by our run-off insurance operations and the future rates at which we expect to reinvest any
proceeds from investment security maturities, net of other operating cash flows, and the projected future capital contributions into our
run-off insurance operations. Lower future yields result in a lower discount rate and a higher present value of future policy benefit
reserves.
GE 2019 FORM 10-K 40
MD&A
OTHER ITEMS
Future long-term care premium rate increases. As a reinsurer, we rely upon the primary insurers that issued the underlying policies to
file proposed premium rate increases on those policies with the relevant state insurance regulators, as we have no ability to seek or to
institute such premium rate increases. We consider recent experience of rate increase filings made by our ceding companies along with
state insurance regulatory processes and precedents in establishing our current expectations. Higher future premium rate increases
lower the present value of future policy benefit reserves.
Terminations. Terminations refers to the rate at which the underlying policy is canceled due to either mortality, lapse (non-payment of
premiums by a policyholder), or, in the case of long-term care insurance, benefit exhaustion. Termination rate assumptions used in
estimating the present value of future policy benefit reserves are based on the results of our experience studies and reflect actuarial
judgment. Lower termination rates increase, while higher termination rates decrease, the present value of expected future benefit
payments.
In 2017, based on elevated claim experience for a portion of our long-term care insurance contracts, we initiated a comprehensive
review of all premium deficiency testing assumptions across all insurance products, resulting in a reconstruction of our future claim cost
projections for long-term care insurance products. Our internal claim experience has been consistent with those reconstructed
projections, although the extent of actual experience since 2017 to date is limited in the context of a long-tailed, multi-decade portfolio.
2019 Premium Deficiency Testing. We annually perform premium deficiency testing in the aggregate across our run-off insurance
portfolio. We performed this year’s testing in the third quarter of 2019, consistent with our historical practice prior to 2017 when we
reconstructed our claim cost curves. These procedures included updating experience studies since our last test completed in the fourth
quarter of 2018, independent actuarial analysis and review of industry benchmarks. As we experienced a premium deficiency in 2018,
our 2019 premium deficiency testing started with a zero margin and, accordingly, any net adverse development would result in a future
charge to earnings. Using our most recent future policy benefit reserve assumptions, including changes to our assumptions related to
discount rate and future premium rate increases, we identified a premium deficiency resulting in a $1.0 billion pre-tax charge to
earnings in the third quarter 2019. The increase to future policy benefit reserves resulting from our 2019 testing was primarily
attributable to the significant decline in market interest rates we observed this year, which has resulted in a lower discount rate and
adversely impacted our reserve margin by $1.3 billion, and higher levels of projected long-term care premium rate increases due to
larger rate filings by some ceding companies than previously planned, which favorably impacted our reserve margin by $0.3 billion.
Our discount rate assumption for purposes of performing the premium deficiency assessment resulted in a weighted average rate of
5.74% compared to 6.04% in 2018. This decline in the discount rate from 2018 to 2019 reflected a lower reinvestment rate increasing to
an expected long-term average investment yield over a longer period, lower prospective expected returns on higher yielding assets
classes introduced with our 2018 strategic initiatives, and slightly lower actual yields on our investment security portfolio.
As noted above, our observed claim experience in the period since the 2017 reconstruction of our future long-term care claim cost
projections has been consistent with those 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, or terminations in 2019.
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. See Note 12 to the consolidated financial statements for further information on the results of our 2019
premium deficiency testing.
GAAP Reserve Sensitivities. The results of our premium deficiency testing are sensitive to the assumptions described above. Certain
future adverse changes in our assumptions could result in the unlocking of reserves, resetting of actuarial assumptions to current
assumptions, an increase to future policy benefit reserves and a charge to earnings. Considering the results of the 2019 premium
deficiency test which reset our margin to zero, any future net adverse changes in our assumptions will result in an increase to future
policy benefit reserves. For example, adverse changes in key assumptions to our future policy benefits reserves, holding all other
assumptions constant, would have the following effects as presented in the table below. Any favorable changes to these assumptions
could result in additional margin in our premium deficiency test and higher income over the remaining duration of the portfolio, including
higher investment income. The assumptions within our future policy benefit reserves are subject to significant uncertainties, including
those inherent in the complex nature of our reinsurance treaties. Many of our assumptions are interdependent and require evaluation
individually and in the aggregate across all insurance products. Small changes in the amounts used in the sensitivities or the use of
different factors could result in materially different outcomes from those reflected below.
GE 2019 FORM 10-K 41
MD&A
OTHER ITEMS
2018 assumption
2019 assumption
Long-term care insurance
morbidity improvement
1.25% per year over 12
to 20 years
1.25% per year over 12
to 20 years
Hypothetical change in 2019
assumption
Estimated increase to future
policy benefit reserves
(In billions, pre-tax)
Long-term care insurance
morbidity
Long-term care insurance
mortality improvement
Total terminations:
Long-term care
insurance mortality
Long-term care
insurance lapse rate
Long-term care
insurance benefit
exhaustion
Long-term care insurance
future premium rate
increases
Discount rate:
Overall discount rate
Reinvestment rate
Structured settlement
annuity mortality
Life insurance mortality
25 basis point reduction
No morbidity
improvement
5% increase in dollar
amount of paid claims
1.0% per year for 10
years with annual
improvement graded to
0% over next 10 years
Any change in termination
assumptions that reduce
total terminations by 10%
Based on company
experience
0.5% per year for 10
years with annual
improvement graded to
0% over next 10 years
Based on company
experience
0.5% per year for 10
years with annual
improvement graded to
0% over next 10 years
Based on company
experience
Varies by block, attained
age and benefit period;
average 0.5 - 1.15%
Based on company
experience
Based on company
experience
Varies by block, attained
age and benefit period;
average 0.5 - 1.15%
Based on company
experience
$0.7
$3.7
$1.1
$0.4
$1.0
$0.5
Varies by block based
on filing experience
Varies by block based
on filing experience
25% adverse change in
premium rate increase
success rate
6.04%
4.35%; grading to a
long-term average
investment yield of 6.0%
Based on company
experience
Based on company
experience
5.74%
3.05%; grading to a
long-term average
investment yield of 5.9%
Based on company
experience
Based on company
experience
25 basis point reduction
25 basis point reduction;
grading to long-term
investment yield of 5.9%
5% decrease in mortality
5% increase in mortality
$1.0
Less than $0.1
$0.1
$0.3
Statutory Considerations. Our run-off insurance subsidiaries are required to prepare statutory financial statements in accordance with
statutory accounting practices. Statutory accounting practices, not GAAP, determine the required statutory capital levels of our
insurance legal entities.
Statutory accounting practices are set forth by the National Association of Insurance Commissioners (NAIC) as well as state laws,
regulation and general administrative rules and differ in certain respects from GAAP. Under statutory accounting practices, base
formulaic reserve assumptions typically do not change unless approved by our primary regulator, KID. In addition to base reserves,
statutory accounting practices require additional actuarial reserves (AAR) be established based on results of asset adequacy testing
reflecting moderately adverse conditions (i.e., assumptions include a provision for adverse deviation (PAD) rather than current
assumptions without a PAD as required for premium deficiency testing under GAAP). As a result, our statutory asset adequacy testing
assumptions reflect less long-term care insurance morbidity improvement and for shorter durations, restrictions on future long-term care
insurance premium rate increases, no life insurance mortality improvement and a lower discount rate. As a result, several of the
sensitivities described in the table above would be less impactful on our statutory reserves.
The adverse impact on our statutory AAR arising from our revised assumptions in 2017, including the collectability of reinsurance
recoverables, is expected to require GE Capital to contribute approximately $14.5 billion additional capital, to its run-off insurance
operations in 2018-2024. For statutory accounting purposes, KID approved our request for a permitted accounting practice to recognize
the 2017 AAR increase over a seven-year period. GE Capital provided capital contributions to its insurance subsidiaries of $2.0 billion,
$1.9 billion and $3.5 billion in the first quarter of 2020, 2019 and 2018, respectively. GE Capital expects to provide further capital
contributions of approximately $7 billion through 2024, subject to ongoing monitoring by KID. GE is a party to capital maintenance
agreements with ERAC and UFLIC whereby GE will maintain their minimum statutory capital levels at 300% of their year-end
Authorized Control Level risk-based capital requirements as defined from time to time by the NAIC.
If our future policy benefit reserves established under GAAP are realized over the estimated remaining life of our run-off insurance
obligations, we would expect the $14.5 billion of capital contributed to the run-off insurance operations over the 2018 to 2024 period to
be considered statutory capital surplus at the end of the period with no additional charge to GAAP earnings. However, should the more
conservative statutory assumptions be realized, we would be required to record the difference between GAAP assumptions and
statutory assumptions as a charge to GAAP earnings in the future periods.
GE 2019 FORM 10-K 42
MD&A
OTHER ITEMS
See Other Items - New Accounting Standards within MD&A and Notes 1 and 12 to the consolidated financial statements for further
information.
NEW ACCOUNTING STANDARDS. In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) No. 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration
Contracts. In October 2019, the FASB affirmed its decision to defer the effective date to periods beginning after December 31, 2021,
with an election to adopt early. We are evaluating the effect of the standard on our consolidated financial statements and anticipate that
its adoption will significantly change the accounting for measurements of our long-duration insurance liabilities. The ASU requires cash
flow assumptions used in the measurement of various insurance liabilities to be reviewed at least annually and updated if actual
experience or other evidence indicates previous assumptions need to be revised with any required changes recorded in earnings.
Under the current accounting guidance, the discount rate is based on expected investment yields, while under the ASU the discount
rate will be equivalent to the upper-medium grade (e.g., single A) fixed-income instrument yield reflecting the duration characteristics of
the liability and is required to be updated in each reporting period with changes recorded in other comprehensive income. In measuring
the insurance liabilities under the new standard, contracts shall not be grouped together from different issue years. These changes
result in the elimination of premium deficiency testing and shadow adjustments. While we continue to evaluate the effect of the standard
on our ongoing financial reporting, we anticipate that the adoption of the ASU will materially affect our financial statements. As the ASU
is only applicable to the measurements of our long-duration insurance liabilities under GAAP, it will not affect the accounting for our
insurance reserves or the levels of capital and surplus under statutory accounting practices.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments. The ASU introduces a new accounting model, the Current Expected Credit Losses model (CECL), which
requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected
credit loss measurement objective for the recognition of credit losses for loans and other receivables at the time the financial asset is
originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model
replaces the multiple existing impairment models in current GAAP, which generally require that a loss be incurred before it is
recognized. The new standard also applies to receivables arising from revenue transactions such as contract assets and accounts
receivables, as well as reinsurance recoverables at GE Capital's run-off insurance operations and is effective for fiscal years beginning
after December 15, 2019. The standard will be applied prospectively with an adjustment to retained earnings. As we finalize our
process, we expect the adoption of the ASU to have an effect of approximately $0.2 billion to retained earnings.
OTHER. We own, or hold licenses to use, numerous patents. New patents are continuously being obtained through our research and
development activities as existing patents expire. Patented inventions are used both within the Company and are licensed to others. GE
is a trademark and service mark of General Electric Company.
Because of the diversity of our products and services, as well as the wide geographic dispersion of our production facilities, we use
numerous sources for the wide variety of raw materials needed for our operations. We have not been adversely affected by our inability
to obtain raw materials.
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 segment organic revenues; and GE Industrial organic revenues, (2) profit, specifically GE
Industrial segment organic profit; Adjusted GE Industrial profit and profit margin; Adjusted GE Industrial organic profit and profit margin;
Adjusted earnings (loss); and Adjusted earnings (loss) per share (EPS), (3) taxes, specifically GE effective tax rates, excluding GE
Capital earnings; and reconciliation of U.S. federal statutory income tax rate to GE effective tax rate excluding GE Capital earnings, (4)
cash flows, specifically GE Industrial free cash flows (FCF), and (5) 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 2019 FORM 10-K 43
MD&A
NON-GAAP FINANCIAL MEASURES
GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP)
Revenues
2018
Segment profit (loss)
2019
(Dollars in millions)
2019
2018
2019
V%
V%
Profit margin
2018
V pts
Power (GAAP)
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
Power organic (Non-GAAP)
Renewable Energy (GAAP)
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
Renewable Energy organic (Non-GAAP)
Aviation (GAAP)
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
Aviation organic (Non-GAAP)
Healthcare (GAAP)
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
Healthcare organic (Non-GAAP)
GE Industrial segment (GAAP)
Less: acquisitions
Less: business dispositions(a)
Less: foreign currency effect(b)
GE Industrial segment organic
(Non-GAAP)
$ 18,625 $ 22,150
—
2,805
—
$ 19,098 $ 19,345
25
10
(508)
$ 15,337 $ 14,288
—
—
—
$ 15,866 $ 14,288
3
—
(532)
$ 32,875 $ 30,566
—
317
—
$ 32,874 $ 30,250
—
25
(24)
$ 19,942 $ 19,784
—
235
—
$ 20,216 $ 19,549
83
2
(359)
$ 86,778 $ 86,789
—
3,357
—
111
38
(1,424)
(16)% $
(1)% $
7 % $
11 % $
386 $
(1)
(2)
47
(808)
—
237
—
342 $ (1,046)
(666) $
6
—
60
(731) $
292
—
(2)
—
294
8 % $ 6,820 $ 6,466
—
—
39
6
—
30
9 % $ 6,784 $ 6,427
1 % $ 3,896 $ 3,698
(19)
—
22
(27)
—
(1)
3 % $ 3,944 $ 3,676
— % $ 10,436 $ 9,647
—
295
—
(15)
(24)
136
F
2.1 % (3.6)% 5.7pts
F
U
1.8 % (5.4)% 7.2pts
(4.3)%
2.0 % (6.3)pts
U
(4.6)%
2.1 % (6.7)pts
5% 20.7 % 21.2 % (0.5)pts
6% 20.6 % 21.2 % (0.6)pts
5% 19.5 % 18.7 % 0.8pts
7% 19.5 % 18.8 % 0.7pts
8% 12.0 % 11.1 % 0.9pts
$ 88,053 $ 83,432
5.5 % $ 10,338 $ 9,351
11% 11.7 % 11.2 % 0.5pts
(a) Dispositions impact in 2018 primarily related to our Industrial Solutions and Distributed Power businesses within our Power
segment, with revenues of $1,257 million and $1,274 million, respectively, and Value-Based Care within our Healthcare segment, with
revenues of $222 million.
(b) Primarily the euro, Japanese yen and Brazilian real.
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.
When comparing revenues and profit growth between periods excluding the effects of acquisitions, business dispositions and
currency exchange rates, those effects are different when comparing results for different periods. Revenues and profit from
acquisitions are considered inorganic from the date we complete an acquisition through the end of the fourth quarter following the
acquisition and are therefore reflected as adjustments to reported revenues and profit to derive organic revenues* and organic profit*
for the period following the acquisition. In subsequent periods, the revenues and profit from the acquisition become organic as these
revenues and profit are included for all periods presented.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 44
MD&A
NON-GAAP FINANCIAL MEASURES
GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP)
Revenues
Segment profit (loss)
Profit margin
(Dollars in millions)
Power (GAAP)
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
Power organic (Non-GAAP)
Renewable Energy (GAAP)
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
Renewable Energy organic (Non-GAAP)
Aviation (GAAP)
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
Aviation organic (Non-GAAP)
Healthcare (GAAP)
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
Healthcare organic (Non-GAAP)
GE Industrial segment (GAAP)
Less: acquisitions(a)
Less: business dispositions(b)
Less: foreign currency effect(c)
GE Industrial segment organic
(Non-GAAP)
2018
2017
V%
2018
2017
$ 22,150 $ 29,426
9
3,359
—
$ 21,587 $ 26,058
70
125
368
$ 14,288 $ 14,321
80
—
—
$ 14,220 $ 14,242
143
—
(75)
$ 30,566 $ 27,013
2
—
—
$ 30,534 $ 27,010
4
—
28
$ 19,784 $ 19,017
1
267
—
$ 19,613 $ 18,748
6
13
152
$ 86,789 $ 89,776
92
3,626
—
224
138
473
(25)% $
(17)% $
— % $
— % $
(808) $ 1,894
—
291
—
(799) $ 1,602
(2)
4
(11)
292 $
45
—
(41)
288 $
728
1
—
—
727
13 % $ 6,466 $ 5,370
—
—
—
13 % $ 6,496 $ 5,370
(1)
—
(29)
4 % $ 3,698 $ 3,488
(2)
(4)
123
(1)
—
52
5 % $ 3,650 $ 3,367
(3)% $ 9,647 $ 11,479
(1)
414
—
38
3
(29)
V%
U
2018
2017
V pts
(3.6)%
6.4% (10)pts
U
(3.7)%
6.1% (9.8)pts
(60)%
2.0 %
5.1% (3.1)pts
(60)%
2.0 %
5.1% (3.1)pts
20 % 21.2 % 19.9% 1.3pts
21 % 21.3 % 19.9% 1.4pts
6 % 18.7 % 18.3% 0.4pts
8 % 18.6 % 18.0% 0.6pts
(16)% 11.1 % 12.8% (1.7)pts
$ 85,955 $ 86,059
— % $ 9,634 $ 11,066
(13)% 11.2 % 12.9% (1.7)pts
(a) Acquisition impact primarily related to LM Wind within our Renewable Energy segment, with $142 million and $80 million of
revenues in 2018 and 2017, respectively.
(b) Dispositions impact in 2017 primarily related to Industrial Solutions, Distributed Power and Water businesses within our Power
segment, with $1,368 million, $408 million and $1,516 million of revenues, respectively, and Value-Based Care within our Healthcare
segment, with $213 million of revenues.
(c) Primarily the Brazilian real and the Euro.
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.
When comparing revenues and profit growth between periods excluding the effects of acquisitions, business dispositions and
currency exchange rates, those effects are different when comparing results for different periods. Revenues and profit from
acquisitions are considered inorganic from the date we complete an acquisition through the end of the fourth quarter following the
acquisition and are therefore reflected as adjustments to reported revenues and profit to derive organic revenues* and organic profit*
for the period following the acquisition. In subsequent periods, the revenues and profit from the acquisition become organic as these
revenues and profit are included for all periods presented.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 45
MD&A
NON-GAAP FINANCIAL MEASURES
ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGIN (Dollars in millions)
2019
2018
2017
GE total revenues (GAAP)
GE total costs and expenses (GAAP)
Less: GE interest and other financial charges
Less: non-operating benefit costs
Less: restructuring & other(a)
Less: goodwill impairments(b)
Add: noncontrolling interests
Adjusted GE Industrial costs (Non-GAAP)
GE other income (GAAP)
Less: unrealized gains (losses)(c)
Less: restructuring & other
Less: gains (losses) and impairments for disposed or held for sale businesses(c)
Adjusted GE other income (Non-GAAP)
GE Industrial profit (GAAP)
GE Industrial profit margin (GAAP)
Adjusted GE Industrial profit (Non-GAAP)
Adjusted GE Industrial profit margin (Non-GAAP)
$
87,719
$
89,038
$
92,229
88,118
2,115
2,828
1,351
1,486
6
80,343
2,200
793
36
4
1,367
1,801
2.1%
8,743
10.0%
$
$
111,967
2,415
2,740
2,832
22,136
(130)
81,714
2,317
—
(120)
1,370
1,068
$
$
(20,612)
(23.1)%
8,392
9.4 %
$
$
92,834
2,538
2,409
2,914
1,165
(280)
83,527
1,893
—
(109)
926
1,076
1,288
1.4%
9,778
10.6%
(a) See the GE Corporate Items and Eliminations - Restructuring section within MD&A for further information.
(b) Related to our Renewable Energy segment in 2019, Power and Renewable Energy segments in 2018 and our Power segment in
2017. See Note 8 to the consolidated financial statements for further information.
(c) See the Corporate Items and Eliminations section within MD&A for further information.
We believe GE Industrial profit and profit margins adjusted for the items included in the above reconciliation are meaningful measures
because they increase the comparability of period-to-period results.
GE INDUSTRIAL ORGANIC REVENUES (NON-GAAP) (Dollars in millions)
2019
2018
GE total revenues (GAAP)
Adjustments:
Less: acquisitions
Less: business dispositions(a)
Less: foreign currency effect(b)
GE Industrial organic revenues (Non-GAAP)
GE total revenues (GAAP)
Adjustments:
Less: acquisitions(c)
Less: business dispositions(d)
Less: foreign currency effect(e)
GE Industrial organic revenues (Non-GAAP)
$
87,719 $
89,038
111
45
(1,442)
89,004 $
2018
—
4,233
—
84,805
2017
89,038 $
92,229
245
138
479
88,177 $
106
3,815
—
88,308
$
$
$
V%
(1)%
5 %
V%
(3)%
— %
(a) Dispositions impact in 2018 primarily related to our Industrial Solutions and Distributed Power businesses within our Power
segment, with revenues of $1,257 million and $1,274 million, respectively, and Value-Based Care within our Healthcare segment, with
revenues of $222 million, and Current with revenues of $727 million.
(b) Primarily the euro, Japanese yen and Brazilian real.
(c) Acquisitions in 2018 primarily related to LM Wind within our Renewable Energy segment, which was acquired in 2017 and
contributed $142 million in revenues.
(d) Dispositions impact in 2017 primarily related to Industrial Solutions, Distributed Power and Water businesses within our Power
segment, with $1,368 million, $408 million and $1,516 million of revenues, respectively, Value-Based Care within our Healthcare
segment with $213 million of revenues, and Current with $189 million of revenues.
(e) Primarily the Brazilian real and the Euro.
We believe this measure provides management and investors with a more complete understanding of underlying operating results
and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these
activities can obscure underlying trends.
GE 2019 FORM 10-K 46
MD&A
NON-GAAP FINANCIAL MEASURES
ADJUSTED GE INDUSTRIAL ORGANIC PROFIT (NON-GAAP) (Dollars in millions)
2019
2018
Adjusted GE Industrial organic profit (Non-GAAP)
$
Adjusted GE Industrial profit margin (Non-GAAP)
Adjusted GE Industrial organic profit margin (Non-GAAP)
Adjusted GE Industrial profit (Non-GAAP)
Adjustments:
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
Adjusted GE Industrial profit (Non-GAAP)
Adjustments:
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
$
8,743
$
8,392
$
8,392
$
9,778
(15)
(32)
144
8,646
$
10.0%
9.7%
2018
—
284
—
8,107
9.4%
9.6%
2017
49
(3)
(64)
8,410
$
9.4%
9.5%
(19)
420
—
9,377
10.6%
10.6%
V%
4 %
7 %
0.6pts
0.1pts
V%
(14 )%
(10 )%
(1.2)pts
(1.1)pts
Adjusted GE Industrial organic profit (Non-GAAP)
$
Adjusted GE Industrial profit margin (Non-GAAP)
Adjusted GE Industrial organic profit margin (Non-GAAP)
We believe this measure provides management and investors with a more complete understanding of underlying operating results
and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these
activities can obscure underlying trends.
GE EFFECTIVE TAX RATES, EXCLUDING GE CAPITAL EARNINGS (NON-GAAP)
(Dollars in millions)
2019
2018
2017
GE earnings (loss) from continuing operations before income taxes (GAAP)
Less: GE Capital earnings (loss) from continuing operations
Total
GE provision for income taxes (GAAP)
GE effective tax rate, excluding GE Capital earnings (Non-GAAP)
$
$
$
1,271
(530)
1,801
1,309
72.7 %
$
$
$
RECONCILIATION OF U.S. FEDERAL STATUTORY INCOME TAX RATE TO
GE EFFECTIVE TAX RATE EXCLUDING GE CAPITAL EARNINGS (NON-GAAP)
U.S. federal statutory income tax rate
Reduction in rate resulting from:
Tax on global activities including exports
U.S. business credits
Goodwill impairments
Tax Cuts and Jobs Acts enactment
All other – net
GE effective tax rate, excluding GE Capital earnings (Non-GAAP)
2019
21.0 %
61.0
(6.4)
16.6
5.6
(25.1)
51.7
72.7 %
$
$
$
(21,101)
(489)
(20,612)
467
(2.3) %
2018
21.0 %
(5.1)
0.4
(21.9)
0.5
2.8
(23.3)
(2.3) %
(5,476)
(6,765)
1,289
3,493
271.0 %
2017
35.0 %
(146.9)
(6.4)
31.1
380.5
(22.3)
236.0
271.0 %
We believe the GE effective tax rate, excluding GE Capital earnings*, is best analyzed in relation to GE earnings before income taxes
excluding the GE Capital net earnings from continuing operations, as GE tax expense does not include taxes on GE Capital earnings.
Management believes in addition to the Consolidated and GE Capital tax rates shown in Note 15 to the consolidated financial
statements, this supplemental measure provides investors with useful information as it presents the GE effective tax rate that can be
used in comparing the GE results to other non-financial services businesses.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 47
MD&A
NON-GAAP FINANCIAL MEASURES
ADJUSTED EARNINGS (LOSS) AND ADJUSTED EPS
2019
2018
2017
(NON-GAAP) (In millions, per-share amounts in dollars)
Earnings
EPS
Earnings
EPS
Earnings
EPS
Consolidated 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)
GE Industrial earnings (loss) (Non-GAAP)
Non-operating benefits costs (pre-tax) (GAAP)
Tax effect on non-operating benefit costs
Less: non-operating benefit costs (net of tax)
Gains (losses) and impairments for disposed or held for sale
businesses (pre-tax)(a)
Tax effect on gains (losses) and impairments for disposed or
held for sale businesses
Less: gains (losses) and impairments for disposed or held for sale
businesses (net of tax)
Restructuring & other (pre-tax)(b)
Tax effect on restructuring & other
Less: restructuring & other (net of tax)
Goodwill impairments (pre-tax)(c)
Tax effect on goodwill impairments
Less: goodwill impairments (net of tax)
Unrealized gains (losses) (pre-tax)
Tax effect on unrealized gains (losses)
Less: unrealized gains (losses) (net of tax)
Debt extinguishment costs
Tax effect on debt extinguishment costs
Less: Debt extinguishment costs (net of tax)
BioPharma deal expense (pre-tax)
Tax on BioPharma deal expense
Less: BioPharma deal expense (net of tax)
Less: GE Industrial U.S. tax reform enactment adjustment
Adjusted GE Industrial earnings (loss) (Non-GAAP)
GE Capital earnings (loss) from continuing operations attributable
to GE common shareholders (GAAP)
Insurance charges and EFS impairments (pre-tax)
Tax effect on insurance charges and EFS impairments
Less: Insurance charges and EFS impairments (net of tax)
Less: GE Capital U.S. tax reform enactment adjustment
Adjusted GE Capital earnings (loss) (Non-GAAP)
Adjusted GE Industrial earnings (loss) (Non-GAAP)
Add: Adjusted GE Capital earnings (loss) (Non-GAAP)
Adjusted earnings (loss) (Non-GAAP)
$
$
$
$
$
(44) $
(0.01) $ (21,438) $
(2.47) $ (8,689) $ (1.00)
(530)
486
(2,828)
594
(2,234)
4
34
39
(1,315)
277
(1,039)
(1,486)
(55)
(1,541)
793
(114)
679
(255)
53
(201)
—
(647)
(647)
(101)
5,531 $
(530)
(972)
204
(768)
99
139 $
5,531 $
139
5,671 $
(0.06)
0.06
(0.32)
0.07
(0.26)
(489)
(20,949)
(2,740)
575
(2,165)
(0.06)
(2.41)
(0.32)
0.07
(0.25)
(6,765)
(1,924)
(2,409)
843
(1,566)
(0.78)
(0.22)
(0.28)
0.10
(0.18)
—
—
—
(0.15)
0.03
(0.12)
(0.17)
(0.01)
(0.18)
0.09
(0.01)
0.08
(0.03)
0.01
(0.02)
—
(0.07)
(0.07)
(0.01)
0.63 $
(0.06)
(0.11)
0.02
(0.09)
0.01
0.02 $
0.63 $
0.02
0.65 $
1,370
0.16
926
0.11
(380)
(0.04)
(62)
(0.01)
990
(2,952)
338
(2,614)
(22,136)
(235)
(22,371)
—
—
—
—
—
—
—
—
—
(38)
5,249 $
(489)
—
—
—
(173)
(316) $
864
0.11
(3,024)
(0.34)
893
0.04
(2,131)
(0.30)
(1,165)
(2.55)
9
(0.03)
(1,156)
(2.57)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— (4,905)
0.60 $ 6,970
(0.06)
(6,765)
— (11,444)
—
3,501
— (7,943)
206
972
(0.02)
(0.04) $
5,249 $
(316)
4,933 $
0.60 $ 6,970
972
(0.04)
0.57 $ 7,942
0.10
(0.35)
0.10
(0.25)
(0.13)
—
(0.13)
—
—
—
—
—
—
—
—
—
(0.56)
0.80
(0.78)
(1.32)
0.40
(0.91)
0.02
0.11
0.80
0.11
0.91
$
$
$
$
(a) See the Corporate Items and Eliminations section within MD&A for further information.
(b) See the GE Corporate Items and Eliminations - Restructuring section within MD&A for further information.
(c) Related to our Renewable Energy segment in 2019, Power and Renewable Energy segments in 2018 and our Power segment in
2017. See Note 8 to the consolidated financial statements for further information.
The service cost for our pension and other benefit plans are included in adjusted earnings*, which represents the ongoing cost of
providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation
decisions and market performance. We believe the retained costs in Adjusted earnings* and Adjusted EPS* provides management
and investors a useful measure to evaluate the performance of the total company, and increases period-to-period comparability. We
also use Adjusted EPS* as a performance metric at the company level for our annual executive incentive plan for 2019. We believe
presenting Adjusted Industrial earnings* and Adjusted Industrial EPS* separately for our financial services businesses also provides
management and investors with useful information about the relative size of our industrial and financial services businesses in relation
to the total company.
*Non-GAAP Financial Measure
GE 2019 FORM 10-K 48
MD&A
NON-GAAP FINANCIAL MEASURES
GE INDUSTRIAL FREE CASH FLOWS (FCF) (NON-GAAP) (In millions)
2019
2018
GE CFOA (GAAP)
Add: gross additions to property, plant and equipment
Add: gross additions to internal-use software
Less: common dividends from GE Capital
Less: GE Pension Plan funding
Less: taxes related to business sales
GE Industrial free cash flows (Non-GAAP)
$
$
4,614 $
(2,216)
(274)
—
—
(198)
2,322 $
701 $
(2,234)
(306)
—
(6,000)
(180)
4,341 $
2017
11,479
(3,403)
(423)
4,016
(1,717)
(229)
5,582
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 contributions to the GE Pension Plan. We believe this measure will better allow management and
investors to evaluate the capacity of our industrial operations to generate free cash flows.
GE INDUSTRIAL NET DEBT (NON-GAAP) (In millions)
December 31, 2019
December 31, 2018
Total GE short- and long-term borrowings (GAAP)
Less: GE Capital short- and long-term debt assumed by GE
Add: intercompany loans from GE Capital
Total adjusted GE borrowings
Total pension and principal retiree benefit plan liabilities (pre-tax)(a)
Less: taxes at 21%
Total pension and principal retiree benefit plan liabilities (net of tax)
GE operating lease liabilities
GE preferred stock
Less: 50% of GE preferred stock
50% of preferred stock
Deduction for total GE cash, cash equivalents and restricted cash
Less: 25% of GE cash, cash equivalents and restricted cash
Deduction for 75% of GE cash, cash equivalents and restricted cash
Total GE Industrial net debt (Non-GAAP)
$
$
$
$
$
$
52,059 $
31,368
12,226
32,917 $
27,773
5,832
21,941 $
3,369
5,738
2,869
2,869 $
(17,613)
(4,403)
(13,210) $
47,886 $
62,212
36,262
13,749
39,700
26,836
5,636
21,200
3,868
5,573
2,787
2,787
(16,632)
(4,158)
(12,474)
55,081
(a) Represents the total net deficit status of principal pension plans, other pension plans and retiree benefit plans. See Note 13 to the
consolidated financial statements for further information.
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.
OTHER FINANCIAL DATA
General Electric Company (In millions; per-share amounts in dollars)
2019
2018
2017
2016
2015
Revenues
Earnings (loss) from continuing operations attributable to the Company
Earnings (loss) from discontinued operations, net of taxes, attributable to
the Company
Net earnings (loss) attributable to the Company
Dividends declared
Preferred stocks dividends
Per common share:
Earnings (loss) from continuing operations – diluted
Earnings (loss) from discontinued operations – diluted
Net earnings (loss) – diluted
Earnings (loss) from continuing operations – basic
Earnings (loss) from discontinued operations – basic
Net earnings (loss) – basic
Dividends declared
Total assets
Short-term borrowings
Non-recourse borrowings of consolidated securitization entities
Long-term borrowings
*Non-GAAP Financial Measure
$ 95,214
416
$ 97,012
(20,991)
$ 99,279
(8,253)
$103,297
7,454
$ 94,494
(7)
(5,395)
(4,979)
810
460
(1,364)
(22,355)
3,669
447
(231)
(8,484)
7,741
436
47
7,500
9,054
656
(5,068)
(5,074)
9,161
18
$
(0.01)
(0.62)
(0.62)
(0.01)
(0.62)
(0.62)
0.04
266,048
22,072
1,655
67,155
$
(2.47) $
(0.16)
(2.62)
(2.47)
(0.16)
(2.62)
0.37
311,072
12,776
1,875
88,949
(1.00) $
(0.03)
(1.03)
(1.00)
(0.03)
(1.03)
0.84
371,099
23,087
1,980
102,263
0.74
—
0.75
0.75
0.01
0.76
0.93
361,014
30,519
417
105,192
$
(0.13)
(0.51)
(0.64)
(0.13)
(0.51)
(0.64)
0.92
491,109
49,540
3,083
144,594
GE 2019 FORM 10-K 49
OTHER FINANCIAL DATA
FIVE-YEAR PERFORMANCE GRAPH
The annual changes for the five-year period shown in the above graph are based on the assumption that $100 had been invested in
General Electric common stock, the Standard & Poor’s 500 Stock Index (S&P 500) and the Dow Jones Industrial Average (DJIA) on
December 31, 2014, and that all quarterly dividends were reinvested. The cumulative dollar returns shown on the graph represent the
value that such investments would have had on December 31 for each year indicated.
With respect to “Market Information,” in the United States, General Electric common stock is listed on the New York Stock Exchange
under the ticker symbol "GE" (its principal market). General Electric common stock is also listed on the London Stock Exchange,
Euronext Paris, the SIX Swiss Exchange and the Frankfurt Stock Exchange.
As of January 31, 2020, there were approximately 379,000 shareholder accounts of record.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. GE did not repurchase any equity
securities during the three months ended December 31, 2019, and no repurchase program has been authorized.
RISK FACTORS
The following discussion of risk factors contains "forward-looking statements," as discussed in the Forward-Looking Statements section.
These risk factors may be important to understanding any statement in this Form 10-K report or elsewhere. The risks described below
should not be considered a complete list of potential risks that we may face. The following information should be read in conjunction
with the MD&A section and the consolidated financial statements and related notes. The risks we describe in this Form 10-K report or in
our other SEC filings could have a material adverse effect on our business, reputation, financial position and results of operations, and
they could cause our future results to be materially different than we presently anticipate.
STRATEGIC RISKS. Strategic risk relates to the Company's future business plans and strategies, including the risks associated with:
the global macro-environment; our portfolio of businesses and capital allocation decisions; dispositions, acquisitions, joint ventures and
restructuring activity; competitive threats, the demand for our products and services and the success of our investments in technology
and innovation; intellectual property; and other risks.
Global macro-environment - Our growth is subject to global economic, political and geopolitical risks. We operate in virtually
every part of the world, serve customers in over 170 countries and received 59% of our revenues for 2019 from outside the United
States. Our operations and the execution of our business plans and strategies are subject to the effects of global economic trends,
competition and geopolitical risks and demand or supply shocks from war, natural disaster, a health pandemic or other events. They are
also affected by local and regional economic environments and policies in the U.S. and other markets that we serve, including interest
rates, monetary policy, inflation, economic growth, recession, commodity prices, currency volatility, currency controls or other limitations
on the ability to expatriate cash, debt levels and actual or anticipated defaults on sovereign debt. For example, changes in local
economic conditions or outlooks, such as lower rates of investment or economic growth in China, Europe or other key markets, affect
the demand for or profitability of our products and services outside the U.S., and the impact on the Company could be significant given
the extent of our activities outside the United States. Political changes and trends such as populism, protectionism, economic
nationalism and sentiment toward multinational companies and resulting changes to trade, tax or other laws and policies (including
tariffs) have been and may continue to be disruptive and costly to our businesses, and can interfere with our global operating model,
supply chain, production costs, customer relationships and competitive position. Further escalation of specific trade tensions, such as
those between the U.S. and China, or in global trade conflict more broadly could lead to a significant deterioration of global growth, and
related decreases in confidence or investment activity in the global markets would adversely affect our business performance. We also
do business in many emerging market jurisdictions where economic, political and legal risks are heightened. While some types of these
economic risks can be hedged using derivatives or other financial instruments and some are insurable, such attempts to mitigate these
risks are costly and not always successful.
GE 2019 FORM 10-K 50
RISK FACTORS
Portfolio strategy execution - Our success depends on achieving our strategic and financial objectives, including through
dispositions. We are pursuing a variety of dispositions, including the planned sale of our BioPharma business within our Healthcare
segment and exiting our remaining equity ownership position in Baker Hughes. The proceeds that we expect to receive from such
actions are an important source of cash flow for the Company as part of our strategic and financial planning. As we seek to sell certain
businesses, equity interests or assets, we may encounter difficulty in finding buyers, managing interdependencies across multiple
transactions and other Company initiatives or implementing separation plans, which could delay or prevent the accomplishment of our
strategic and financial objectives, including our goal of reducing the Company’s leverage to targeted levels over time. In particular,
some of the disposition strategies that we are considering or may consider depend on favorable conditions in the capital markets or
private acquisition financing markets for execution, and declines in the values of equity interests (such as our remaining interest in
Baker Hughes) 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 are also subject to limitations in the form of regulatory or
governmental approvals that may prevent certain prospective purchasers 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 business or asset dispositions. Moreover, recent and planned dispositions have the effects 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. Executing on these transactions can divert senior management time and resources from
other pursuits. 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 as a
result of changes in strategy or separation/integration challenges related to personnel, IT systems or other factors. 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, legal or compliance risks.
Competitive environment - We are dependent on the maintenance of existing product lines and service relationships, market
acceptance of new product and service introductions and technology and innovation leadership for revenue and earnings
growth. The markets in which we operate are highly competitive in terms of pricing, product and service quality, product development
and introduction time, customer service, financing terms and shifts in market demand, and competitors are increasingly offering
services for our installed base. Our long-term operating results and competitive position depend substantially upon our ability to
continually develop, introduce, and market new and innovative products, services and platforms, to modify existing products and
services, to customize products and services, to increase our productivity as we perform on long-term service agreements, and to
anticipate and respond to market and technological changes driven by trends such as increased digitization or automation or by
developments such as climate change that present both risks and opportunities for our businesses. A failure to appropriately plan for
future customer demand and industry trends may adversely affect our delivery of products, services and outcomes in line with our
projected financial performance or cost estimates, and ultimately may result in excess costs, build-up of inventory that becomes
obsolete, lower profit margins and an erosion of our competitive position. For example, the significant decreases in recent years in the
levelized cost of renewable sources of power generation (such as wind and solar), along with ongoing changes in investor and
consumer preferences and considerations related to climate change, affect the demand for and the competitiveness of our products
and services related to fossil fuel-based power generation and further changes over time could have a material adverse effect on the
performance of those businesses and our consolidated results. These trends and the relative competitiveness of different types of
product and service offerings will continue to be impacted in ways that are uncertain by factors such as the pace of technological
developments and related cost considerations, the levels of economic growth in different markets around the world and the adoption of
climate change-related policies (such as carbon taxes, cap and trade regimes, increased efficiency standards or incentives or
mandates for particular types of energy) at the national and sub-national levels or by private actors.
Our businesses are also subject to technological change and require us to continually attract and retain skilled talent. The introduction
of innovative and disruptive technologies in the markets in which we operate also poses risks in the form of new competitors (including
new entrants from outside our traditional industries), market consolidation, substitutions of existing products, services or solutions,
niche players, new business models and competitors that are faster to market with new or more cost-effective products or services.
Because the research and development cycle involved in bringing products in our businesses to market is often lengthy, it is inherently
difficult to predict the economic conditions and competitive dynamics that will exist when any new product is complete, and our
investments may generate weaker returns than we anticipated at the outset. Our capacity to invest in research and development efforts
to pursue advancement in a wide range of technologies, products and services also depends on the financial resources that we have
available for such investment relative to other capital allocation priorities, and under-investment could lead to the loss of sales of our
products and services. The amounts that we do invest in research and development divert resources from other potential investments
in our businesses, and our efforts may not lead to the development of new technologies or products on a timely basis or meet the
needs of our customers as fully as competitive offerings.
GE 2019 FORM 10-K 51
RISK FACTORS
Restructuring & personnel - We have been undertaking extensive cost reduction and restructuring efforts; these efforts may
have adverse effects on our operations, employee retention, results and reputation and may not achieve the expected
benefits. We continue undertaking restructuring actions that include workforce reductions, global facility consolidations and other cost
reduction initiatives. These actions are a central component of our ongoing efforts to improve operational and financial performance.
The extent of change across our organizational structure, senior leadership, culture, functional alignment, outsourcing and other areas
poses risks in the form of personnel capacity constraints and institutional knowledge loss that could lead to missed performance or
financial targets, loss of key personnel and harm to our reputation. The risk of capacity constraints is also heightened with the number
of interdependent and transformational business portfolio and internal actions that we have been undertaking during a period of
significant restructuring and cost reduction across the Company. Moreover, if we do not successfully manage our restructuring and
other transformational activities, the anticipated operational improvements, efficiencies and other benefits might be delayed or not
realized, and our operations and business could be disrupted. Risks associated with these actions include unforeseen delays in
implementation of workforce reductions, additional unexpected costs, adverse effects on employee morale, loss of key employees or
other retention issues, inability to attract and hire talented professionals or the failure to meet operational targets due to the loss of
employees or work stoppages, any of which may impair our ability to achieve anticipated cost reductions or may otherwise harm our
business or reputation and have an adverse effect on our competitive position or financial performance.
Intellectual property - Our intellectual property portfolio may not prevent competitors from independently developing
products and services similar to or duplicative to ours, and the value of our intellectual property may be negatively impacted
by external dependencies. Our patents and other intellectual property may not prevent competitors from independently developing or
selling products and services similar to or duplicative of ours, and there can be no assurance that the resources invested by us to
protect our intellectual property will be sufficient or that our intellectual property portfolio will adequately deter misappropriation or
improper use of our technology. Trademark licenses of the GE brand in connection with dispositions may negatively impact the overall
value of the brand in the future. As a result of increased numbers of employee exits due to restructuring activities or otherwise, we also
face heightened risks related to the loss or unauthorized use of the Company’s intellectual property or other protected data. We also
face competition in some countries where we have not invested in an intellectual property portfolio. If we are not able to protect our
intellectual property, the value of our brand and other intangible assets may be diminished, and our business may be adversely
affected. We also face attempts to gain unauthorized access to our IT systems or products for the purpose of improperly acquiring our
trade secrets or confidential business information. The theft or unauthorized use or publication of our trade secrets and other
confidential business information as a result of such an incident could adversely affect our competitive position and the value of our
investment in research and development. In addition, we are subject to the enforcement of patents or other intellectual property by third
parties, including aggressive and opportunistic enforcement claims by non-practicing entities. Regardless of the merit of such claims,
responding to infringement claims can be expensive and time-consuming. If GE is found to infringe any third-party rights, we could be
required to pay substantial damages or we could be enjoined from offering some of our products and services. The value of, or our
ability to use, our intellectual property may also be negatively impacted by dependencies on third parties, such as our ability to obtain or
renew on reasonable terms licenses that we need in the future, or our ability to secure or retain ownership or rights to use data in
certain software analytics or services offerings.
OPERATIONAL RISKS. Operational risk relates to risks arising from systems, processes, people and external events that affect the
operation of our businesses. It includes risks related to product and service lifecycle and execution; product safety and performance;
information management and data protection and security, including cybersecurity; and supply chain and business disruption.
Operational execution - Operational challenges could have a material adverse effect on our business, reputation, financial
position and results of operations. The Company’s financial results depend on the successful execution of our businesses’ operating
plans across all steps of the product and service lifecycle. For example, we continue working to improve the operations and execution
of our Power and Renewable Energy businesses, and our ability to effect the desired operational turnarounds will be a significant factor
in determining the financial performance of the Company as a whole. In addition, we have dependency on the continued strength and
successful operating plan execution of our other businesses, particularly Aviation, during this period of operational improvement.
Operational failures that result in quality problems or potential product, environmental, health or safety risks, could have a material
adverse effect on our business, reputation, financial position and results of operations. In addition, a portion of our business, particularly
within our Power and Renewable Energy businesses, involves large projects where we take on, or are members of a consortium
responsible for, the full scope of engineering, procurement, construction or other services. These types of projects often pose unique
risks related to their location, scale, complexity, duration and pricing or payment structure. Performance issues or schedule delays can
arise due to inadequate technical expertise, unanticipated project modifications, developments at project sites, environmental, health
and safety issues, execution by or coordination with suppliers, subcontractors or consortium partners, financial difficulties of our
customers or significant partners or compliance with government regulations, and these can lead to cost overruns, contractual
penalties, liquidated damages and other adverse consequences. Where GE is a member of a consortium, we are typically subject to
claims based on joint and several liability, and claims can extend to aspects of the project or costs that are not directly related or limited
to GE’s scope of work. Operational, quality or other issues at large projects, or across our projects portfolio more broadly, can adversely
affect GE’s business, reputation or results of operations.
GE 2019 FORM 10-K 52
RISK FACTORS
Product safety - Our products and services are highly sophisticated and specialized, and a major failure or similar event
affecting our products or third-party products with which our products are integrated can adversely affect our business,
reputation, financial position and results of operations. We produce highly sophisticated products and provide specialized services
for both our own and third-party products that incorporate or use complex or leading-edge technology, including both hardware and
software. Many of our products and services involve complex industrial machinery or infrastructure projects, such as commercial jet
engines, gas turbines, onshore and offshore wind turbines or nuclear power generation, and accordingly the impact of a catastrophic
product failure or similar event could be significant. In particular, actual or perceived design or production issues related to new product
introductions or relatively new product lines can result in significant reputational harm to our businesses, in addition to direct warranty,
maintenance and other costs that may arise. A significant product issue resulting in injuries or death, widespread outages, a fleet
grounding or similar systemic consequences could have a material adverse effect on our business, reputation, financial position and
results of operations. We may also incur increased costs, delayed payments or lost equipment or services revenue in connection with a
significant issue with a third party’s product with which our products are integrated. For example, the LEAP-1B engine that our Aviation
business develops, produces and sells through CFM is the exclusive engine for the Boeing 737 MAX, which has been subject to a
global fleet grounding since March 2019 following two fatal crashes that were unrelated to the LEAP engine. The 737 MAX grounding
had an adverse effect on GE CFOA in 2019, and uncertainties related to the timing for the 737 MAX return to service and future engine
production rates pose material risk for our Aviation business and GE’s overall financial outlook and results. For further information
regarding the effect of the 737 MAX grounding on GE CFOA, see the Aviation and GECAS 737 MAX section in Consolidated Results
within MD&A. While we have built operational processes to ensure that our product design, manufacture, performance and servicing
meet rigorous quality standards, there can be no assurance that we or our customers or other third parties will not experience
operational process or product failures and other problems, including through manufacturing or design defects, process or other failures
of contractors or third-party suppliers, cyber-attacks or other intentional acts, that could result in potential product, safety, quality,
regulatory or environmental risks.
Cybersecurity - Increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted computer
crime pose a risk to our systems, networks, products, solutions, services and data. Increased global cybersecurity vulnerabilities,
threats, computer viruses and more sophisticated and targeted cyber-related attacks, as well as cybersecurity failures resulting from
human error and technological errors, pose a risk to the security of GE's and its customers', partners', suppliers' and third-party service
providers' infrastructure, products, systems and networks and the confidentiality, availability and integrity of GE's and its customers'
data. As the perpetrators of such attacks become more capable (including sophisticated state or state-affiliated actors), and as critical
infrastructure is increasingly becoming digitized, the risks in this area continue to grow. While we attempt to mitigate these risks by
employing a number of measures, including employee training, monitoring and testing, and maintenance of protective systems and
contingency plans, we remain vulnerable to known or unknown threats, and there is no assurance that the impact from such threats will
not be material. In addition to existing risks, the adoption of new technologies in the future may also increase our exposure to
cybersecurity breaches and failures. We also have access to sensitive, confidential or personal data or information in certain of our
businesses that is subject to privacy and security laws, regulations or customer-imposed controls. Despite our use of reasonable and
appropriate controls to protect our systems and sensitive, confidential or personal data or information, we have vulnerability to security
breaches, theft, misplaced, lost or corrupted data, programming errors, employee errors and/or malfeasance (including
misappropriation by departing employees) that could potentially lead to material compromising of sensitive, confidential or personal
data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or
destruction of information, defective products, production downtimes and operational disruptions. Data privacy and protection laws are
evolving, can vary significantly by country and present increasing compliance challenges, which increase our costs, affect our
competitiveness and can expose us to substantial fines or other penalties. In addition, a significant cyber-related attack could result in
other negative consequences, including damage to our reputation or competitiveness, remediation or increased protection costs,
litigation or regulatory action.
Supply chain - Significant raw material shortages, supplier capacity constraints, supplier or customer production disruptions,
supplier quality and sourcing issues or price increases can increase our operating costs and adversely impact the
competitive positions of our products. Our reliance on third-party suppliers, contract manufacturers and service providers, and
commodity markets to secure raw materials, parts, components and sub-systems used in our products exposes us to volatility in the
prices and availability of these materials, parts, components, systems and services. As our supply chains extend into many different
countries and regions around the world, we are also subject to global economic and geopolitical dynamics and risks associated with
exporting components manufactured in particular countries for incorporation into finished products completed in other countries. In
addition, some of our suppliers or their sub-suppliers are limited- or sole-source suppliers. We also have internal dependencies on
certain key GE manufacturing or other facilities. Disruptions in deliveries from a key GE facility or from our third-party suppliers, contract
manufacturers or outsourced or other service providers, capacity constraints, production disruptions up- or down-stream, price
increases, or decreased availability of raw materials or commodities, including as a result of war, natural disaster, health pandemic or
other business continuity events, adversely affect our operations and, depending on the length and severity of the disruption, can limit
our ability to meet our commitments to customers or significantly impact our operating profit or cash flows. For example, we are
monitoring the impact across our businesses of the recent coronavirus outbreak, which has already caused disruption to production
facilities and activities in China, and the severity of the operational and financial impact will depend on how long and widespread the
disruption proves to be. Quality, capability, compliance and sourcing issues experienced by third-party providers can also adversely
affect our costs, margin rates and the quality and effectiveness of our products and services and result in liability and reputational harm.
In addition, while we require our suppliers to implement and maintain reasonable and appropriate controls to protect information we
provide to them, they may be the victim of a cyber-related attack that could lead to the compromise of the Company’s intellectual
property, personal data or other confidential information, or to production downtimes and operational disruptions that could have an
adverse effect on our ability to meet our commitments to customers.
GE 2019 FORM 10-K 53
RISK FACTORS
FINANCIAL RISKS. Financial risk relates to our ability to meet financial obligations and mitigate exposure to broad market risks,
including funding and liquidity risks, such as risk related to our credit ratings and our availability and cost of funding; credit risk; and
volatility in foreign currency exchange rates, interest rates and commodity prices. Liquidity risk refers to the potential inability to meet
contractual or contingent financial obligations (whether on- or off-balance sheet) as they arise, and could potentially impact an
institution's financial condition or overall safety and soundness. Credit risk is the risk of financial loss arising from a customer or
counterparty failure to meet its contractual obligations, and we face credit risk arising from both our industrial businesses and from GE
Capital.
Leverage & borrowings - Our indebtedness levels could limit the flexibility of our businesses, and we could face further
constraints as a result of failing to decrease our leverage over time, further downgrades of our credit ratings or adverse
market conditions. Our ability to decrease our leverage as planned is dependent on the proceeds that we generate from business
and asset dispositions, as well as our cash flows from operations. De-leveraging and servicing our debt will require a significant amount
of cash, and if we are unable to generate cash flows in accordance with our plans we may be required to adopt one or more
alternatives such as increasing borrowing under credit lines, further reducing or delaying investments or capital expenditures, selling
other businesses or assets, refinancing debt or raising additional equity capital. In particular, we have significant pension and run-off
insurance liabilities that are sensitive to numerous factors and assumptions that we use in our pension liability, GAAP insurance reserve
and insurance statutory calculations. For example, the impact of low or declining market interest rates on the discount rates that we use
to calculate these long-term liabilities (holding other variables constant) can adversely affect our earnings and cash flows, as well as the
pace of progress toward our leverage goals for GE and for GE Capital. Lower than expected disposition proceeds or cash generation
by our businesses over time could also adversely affect our progress toward our leverage goals. Our indebtedness could put us at a
competitive disadvantage compared to competitors with lower debt levels that may have greater financial flexibility to secure additional
funding for their operations, pursue strategic acquisitions, finance long-term projects or take other actions. Continuing to have
substantial indebtedness could also have the consequence of increasing our vulnerability to general economic conditions, such as
slowing economic growth or recession. It could also increase our vulnerability to adverse industry-specific conditions or to increases in
the capital or liquidity needs at the GE or GE Capital levels, and it could limit our flexibility in planning for, or reacting to, changes in the
economy and the industries in which we compete.
In addition, our existing levels of indebtedness may impair our ability to obtain additional debt financing on favorable terms in the future,
particularly if coupled with further downgrades of our credit ratings or a deterioration of capital markets conditions more generally.
External conditions in the financial and credit markets may limit the availability of funding at particular times or increase the cost of
funding, which could adversely affect our business, financial position and results of operations. Factors that may affect the availability of
funding or cause an increase in our funding costs include market disruptions arising in the United States, Europe, China, emerging
markets or other markets, currency movements or other factors.
Liquidity - Failure to meet our cash flow targets, or additional credit downgrades, could adversely affect our liquidity, funding
costs and related margins. We rely on cash from operations and proceeds from business and asset dispositions, as well as access to
the short- and long-term debt markets, to fund our operations, maintain a contingency buffer of liquidity and meet our financial
obligations and capital allocation priorities. If we do not meet our cash flow objectives, through both improved cash performance in our
businesses or successful execution of business and asset dispositions, our financial condition could be adversely affected. Our access
to the debt markets, and to the commercial paper markets in particular, depends on our credit ratings. As a result of ratings actions by
Moody’s, S&P and Fitch in 2018, GE transitioned to a tier-2 commercial paper issuer, which reduced our borrowing capacity in the
commercial paper markets that we historically relied on significantly to fund our operations on an intra-quarter basis. To accommodate
GE’s short-term liquidity needs, we have been increasing utilization of our revolving credit facilities as a substitute for commercial paper
borrowings, which results in an overall increase to our cost of funds.
GE 2019 FORM 10-K 54
RISK FACTORS
There can also be no assurance that we will not face additional credit downgrades as a result of factors such as our progress in
decreasing our leverage, the performance of our businesses, the failure to execute on dispositions or changes in rating application or
methodology. Future downgrades could further adversely affect our cost of funds and related margins, liquidity, competitive position and
access to capital markets, and a significant downgrade could have an adverse commercial impact on our industrial businesses. For
example, if our short-term credit ratings were to fall below A-2/P-2/F2, it is possible that we would lose all or part of our access to the
tier-2 commercial paper markets, and therefore our borrowing capacity in the commercial paper markets would likely be further
reduced. Further, we have relied, and may continue to rely, on securitization programs to provide alternative funding for sales of GE
receivables to third-party investors. If any of our short-term credit ratings were to fall below A-2/P-2/F2, the timing or amount of liquidity
generated by these programs could be adversely affected. In addition, in certain securitization transactions where we provide servicing
for third-party investors, we are contractually permitted to commingle cash collected from customers on financing receivables sold or
pledged to third-party investors with our own cash prior to making required payments to third-party investors, provided our short-term
credit rating does not fall below A-2/P-2/F2. In the event our ratings were to fall below such levels, we would be required to segregate
certain of these cash collections owed to third-party investors into restricted bank accounts and would lose the short-term liquidity
benefit of commingling with respect to such collections. In addition, under various debt and derivative instruments, guarantees and
covenants, we could be required to post additional capital or collateral in the event of a ratings downgrade, which would increase the
impact of a ratings downgrade on our liquidity and capital position. Swap, forward and option contracts are executed under standard
master agreements that typically contain mutual downgrade provisions that provide the ability of the counterparty to require termination
if the credit ratings of the applicable GE entity were to fall below specified ratings levels agreed upon with the counterparty, primarily
BBB/Baa2. For additional discussion about our current credit ratings and related considerations, refer to the Capital Resources and
Liquidity - Credit Ratings and Conditions section within MD&A.
Economy, customers & counterparties - Deterioration in conditions in the global economy, the major industries we serve or
the financial markets, or in the soundness of financial institutions, governments or customers we deal with, can adversely
affect our business and results of operations. The business and operating results of our industrial businesses have been, and will
continue to be, affected by worldwide economic conditions, including conditions in the air transportation, power generation, renewable
energy, healthcare and other industries we serve. Existing or potential customers may delay or cancel plans to purchase our products
and services, including large infrastructure projects, and may not be able to fulfill their obligations to us in a timely fashion as a result of
business deterioration, cash flow shortages or difficulty obtaining financing for particular projects or due to macroeconomic conditions,
geopolitical disruptions, changes in law or other challenges affecting the strength of the global economy. The airline industry, for
example, is highly cyclical, and the level of demand for air travel is correlated to the strength of the U.S. and international economies.
An extended disruption of regional or international travel, such as a disruption in connection with a terrorist incident, health pandemic or
recessionary economic environment that results in the loss of business and leisure traffic, could have a material adverse effect on our
airline customers, the viability of their business and their demand for our products and services. Such effects would be particularly
significant for GE in the current environment, in which we have dependency on the continued strength of our Aviation business as we
execute on planned dispositions and continue working to improve the operations and execution of other GE businesses. Secular,
cyclical and competitive pressures facing customers across our energy businesses can also have a significant impact on the operating
results and outlooks for our businesses. These include pressures such as lower demand in our Power business than in the past as a
result of increased cost competitiveness and market penetration by renewable sources of power generation; the effects of changes in
production or other tax credits for wind energy projects, and significant price competition among wind equipment manufacturers and
consolidation in the industry; and shifts in the availability of financing for certain types of projects as investors, governments, regulators
and other market participants develop plans for addressing climate change. In particular, our ability to effect an operational turnaround
in our Power business will be more challenging to the extent that markets for our products and services remain lower for longer than
expected. Further, our vendors may experience similar conditions, which may impact their ability to fulfill their obligations to us. We also
at times face greater challenges collecting on receivables with customers that are sovereign governments or located in emerging
markets. If there is significant deterioration in the global economy, our results of operations, financial position and cash flows could be
materially adversely affected.
GE 2019 FORM 10-K 55
RISK FACTORS
GE Capital - A smaller GE Capital continues to have exposure to insurance, credit and other risks and, in the event of future
adverse developments, may not be able to meet its business and financial objectives without further actions at GE Capital or
additional capital contributions by GE. To fund the statutory capital contributions that it expects to make to its insurance subsidiaries
over the next several years, as well as to meet its debt maturities and other obligations, GE Capital expects to rely on its existing
liquidity, cash generated from asset reductions, cash flows from its businesses, GE repayments of intercompany loans and capital
contributions from GE. However, as GE Capital’s excess liquidity from past disposition proceeds runs off, and as its future earnings are
reduced as a result of business and asset sales, there is a risk that future adverse developments could cause liquidity or funding stress
for GE Capital. For example, it is possible that future requirements for capital contributions to the insurance subsidiaries will be greater
than currently estimated or could be accelerated by regulators. Our annual testing of insurance reserves is subject to a variety of
assumptions, including assumptions about the discount rate (which is sensitive to changes in market interest rates), morbidity, mortality
and future long-term care premium increases. Any future adverse changes to these assumptions (to the extent not offset by any
favorable changes to these assumptions) could result in an increase to future policy benefit reserves and, potentially, to the amount of
capital we are required to contribute to the insurance subsidiaries (as discussed in the Other Items - Insurance section within MD&A).
We also anticipate that the new insurance accounting standard scheduled to be effective after 2021 (as discussed in the Other Items -
New Accounting Standards section within MD&A) will significantly change the accounting for measurements of our long-duration
insurance liabilities under GAAP and will materially affect our financial statements. In addition, we continue to evaluate strategic options
to accelerate the further reduction in the size of GE Capital. Some of these options could have a material financial charge depending on
the timing, negotiated terms and conditions of any ultimate arrangements. It is also possible that contingent liabilities and loss estimates
from GE Capital’s continuing or discontinued operations (see the Other Consolidated Information - Discontinued Operations section
within MD&A) will need to be recognized or increase in the future and will become payable. If GE Capital's credit ratings are
downgraded because of inadequate increases in its capital levels over time, changes in rating application or methodology or other
factors, GE Capital may also face increased interest costs and limitations on its ability to access external funding in the future.
GE Capital also has exposure to many different industries and counterparties, including sovereign governments, and routinely executes
transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks
and other institutional clients. Many of these transactions expose GE Capital to credit risk in the event of default of its counterparty or
client. If conditions in the financial markets deteriorate, they may adversely affect the business and results of operations of GE Capital,
as well as the soundness of financial institutions, governments and other counterparties we deal with. There can be no assurance that
future liabilities, losses or impairments to the carrying value of financial assets would not materially and adversely affect GE Capital's
business, financial position, results of operations and capacity to provide financing to support orders from GE's industrial businesses, or
that factors causing sufficiently severe stress at GE Capital would not require GE to make larger than expected capital contributions to
GE Capital in the future.
Postretirement benefit plans - Increases in pension and healthcare benefits obligations and costs can adversely affect our
earnings, cash flows and progress toward our leverage goals. Our results of operations may be positively or negatively affected by
the amount of income or expense we record for our defined benefit pension plans. GAAP requires that we calculate income or expense
for the plans using actuarial valuations, which reflect assumptions about financial markets, interest rates and other economic conditions
such as the discount rate and the expected long-term rate of return on plan assets. We are also required to make an annual
measurement of plan assets and liabilities, which may result in a significant reduction or increase to equity. The factors that impact our
pension calculations are subject to changes in key economic indicators, and future decreases in the discount rate or low returns on plan
assets can increase our funding obligations and adversely impact our financial results. In addition, although GAAP expense and
pension funding contributions are not directly related, key economic factors that affect GAAP expense would also likely affect the
amount of cash we would be required to contribute to pension plans under ERISA. Failure to achieve expected returns on plan assets
driven by various factors, which could include a continued environment of low interest rates or sustained market volatility, could also
result in an increase to the amount of cash we would be required to contribute to pension plans. In addition, there may be upward
pressure on the cost of providing healthcare benefits to current employees and retirees. Although we have actively sought to control
increases in these costs, there can be no assurance that we will succeed in limiting cost increases, and continued upward pressure
could reduce our profitability. For a discussion regarding how our financial statements have been and can be affected by our pension
and healthcare benefit obligations, see the Other Consolidated Information - Postretirement Benefit Plans and the Critical Accounting
Estimates - Pension Assumptions sections within MD&A and Note 13 to the consolidated financial statements.
GE 2019 FORM 10-K 56
RISK FACTORS
LEGAL & COMPLIANCE RISKS. Legal and compliance risk relates to risks arising from the government and regulatory environment
and action and from legal proceedings and compliance with integrity policies and procedures, including those relating to financial
reporting and environmental, health and safety matters. Government and regulatory risk includes the risk that the government or
regulatory actions will impose additional cost on us or require us to make adverse changes to our business models or practices.
Regulatory - We are subject to a wide variety of laws, regulations and government policies that may change in significant
ways. Our businesses are subject to regulation under a wide variety of U.S. federal and state and non-U.S. laws, regulations and
policies. There can be no assurance that laws, regulations and policies will not be changed in ways that will require us to modify our
business models and objectives or affect our returns on investments by restricting existing activities and products, subjecting them to
escalating costs or prohibiting them outright. In particular, recent trends globally toward increased protectionism, import and export
controls and the use of tariffs and other trade barriers can result in actions by governments around the world that have been and may
continue to be disruptive and costly to our businesses, and can interfere with our global operating model and weaken our competitive
position. Other legislative and regulatory areas of significance for our businesses that U.S. and non-U.S. governments have focused
and continue to focus on include cybersecurity, data privacy and sovereignty, improper payments, competition law, compliance with
complex economic sanctions, climate change and greenhouse gas emissions, foreign exchange intervention in response to currency
volatility and currency controls that could restrict the movement of liquidity from particular jurisdictions. Potential further changes to tax
laws, including additional guidance concerning the enactment of the recent U.S. tax reform, may have an effect on GE's, GE Capital's
or other regulated subsidiaries' structure, operations, sales, liquidity, capital requirements, effective tax rate and performance. For
example, legislative or regulatory measures by states or non-U.S. governments in response to the recent U.S. federal tax reform or
otherwise, or rules, interpretations or audits under the new or existing tax laws, could increase our costs or tax rate. In addition, efforts
by public and private sectors to control healthcare costs may lead to lower reimbursements and increased utilization controls related to
the use of our products by healthcare providers. Regulation or government scrutiny may impact the requirements for marketing our
products and slow our ability to introduce new products, resulting in an adverse impact on our business. Furthermore, we have been,
and expect to continue, participating in U.S. and international governmental programs, which require us to comply with strict
governmental regulations. Inability to comply with these regulations could adversely affect our status in these projects and could have
collateral consequences such as debarment. Debarment, depending on the entity involved and length of time, can limit our ability to
participate in other projects involving multilateral development banks and adversely affect our results of operations, financial position
and cash flows.
Legal proceedings - We are subject to legal proceedings, investigations and legal compliance risks, including trailing
liabilities from businesses that we dispose of or that are inactive. We are subject to a variety of legal proceedings, legal
compliance risks and environmental, health and safety compliance risks in virtually every part of the world. We, our representatives,
and the industries in which we operate are subject to continuing scrutiny by regulators, other governmental authorities and private
sector entities or individuals in the U.S., the European Union, China and other jurisdictions, which have led or may, in certain
circumstances, lead to enforcement actions, adverse changes to our business practices, fines and penalties, required remedial actions
such as contaminated site clean-up or the assertion of private litigation claims, and damages that could be material. For example,
following our acquisition of Alstom's Thermal, Renewables and Grid businesses in 2015, we are subject to legacy legal proceedings and
legal compliance risks that relate to claimed anti-competitive conduct or improper payments by Alstom in the pre-acquisition period, and
payments for settlements, judgments, penalties or other liabilities in connection with those matters will result in cash outflows. In
addition, since late 2017 we have been subject to a range of shareholder lawsuits and inquiries from governmental authorities related to
the Company's financial performance, accounting and disclosure practices and related matters. We have observed that these
proceedings related to claims about past financial performance and reporting pose particular reputational risks for the Company that
can cause new allegations about past or current misconduct, even if unfounded, to have a more significant impact on our reputation
and how we are viewed by investors, customers and others than they otherwise would. We have established reserves for legal matters
when and as appropriate; however, the estimation of legal reserves or possible losses involves significant judgment and may not reflect
the full range of uncertainties and unpredictable outcomes inherent in litigation and investigations, and the actual losses arising from
particular matters may exceed our current estimates and adversely affect our results of operations. While we believe that we have
adopted appropriate risk management and compliance programs, the global and diverse nature of our operations and the current
enforcement environment mean that legal and compliance risks will continue to exist with respect to our operations, and we are also
subject to material trailing legal liabilities from businesses that we dispose of or that are inactive. We also expect that additional legal
proceedings and other contingencies will arise from time to time. Moreover, we sell products and services in growth markets where
claims arising from alleged violations of law, product failures or other incidents involving our products and services are adjudicated
within legal systems that are less developed and less reliable than those of the U.S. or other more developed markets, and this can
create additional uncertainty about the outcome of proceedings before courts or other governmental bodies in such markets. See Note
23 to the consolidated financial statements for further information about legal proceedings and other loss contingencies.
LEGAL PROCEEDINGS
Refer to Legal Matters and Environmental, Health and Safety Matters in Note 23 to the consolidated financial statements for information
relating to legal proceedings.
GE 2019 FORM 10-K 57
REPORTS
MANAGEMENT AND AUDITOR’S REPORTS
MANAGEMENT’S DISCUSSION OF FINANCIAL RESPONSIBILITY. Management is responsible for the preparation of the
consolidated financial statements and related information that are presented in this report. The consolidated financial statements, which
include amounts based on management’s estimates and judgments, have been prepared in conformity with U.S generally accepted
accounting principles.
The Company designs and maintains accounting and internal control systems to provide reasonable assurance that assets are
safeguarded against loss from unauthorized use or disposition, and that the financial records are reliable for preparing consolidated
financial statements and maintaining accountability for assets. These systems are enhanced by policies and procedures, an
organizational structure providing division of responsibilities, careful selection and training of qualified personnel, and a program of
internal audits.
The Company engaged KPMG LLP, an independent registered public accounting firm, to audit and render an opinion on the
consolidated financial statements and internal control over financial reporting in accordance with the standards of the Public Company
Accounting Oversight Board (PCAOB). In March 2019, the PCAOB announced the effectiveness of a new requirement for auditors to
communicate critical audit matters (CAMs) in the audit opinion, and the KPMG audit opinion that follows includes this discussion of
CAMs. In December 2018, we announced our intention to conduct an auditor tender process, which is currently underway.
The Board of Directors, through its Audit Committee, which consists entirely of independent directors, meets periodically with
management, internal auditors, and our independent registered public accounting firm to ensure that each is meeting its responsibilities
and to discuss matters concerning internal controls and financial reporting. KPMG LLP and the internal auditors each have full and free
access to the Audit Committee.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING. Management is responsible for
establishing and maintaining adequate internal control over financial reporting for the Company. With our participation, an evaluation of
the effectiveness of our internal control over financial reporting was conducted as of December 31, 2019, based on the framework and
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of
December 31, 2019.
Our independent registered public accounting firm has issued an audit report on our internal control over financial reporting. Their report
follows.
/s/ H. Lawrence Culp, Jr.
H. Lawrence Culp, Jr.
Chairman of the Board and Chief Executive Officer
February 24, 2020
/s/ Jamie S. Miller
Jamie S. Miller
Senior Vice President and Chief Financial Officer
DISCLOSURE CONTROLS. 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 our disclosure controls and procedures were
effective as of December 31, 2019. There have been no changes in the Company’s internal control over financial reporting during the
quarter ended December 31, 2019, that have materially affected, or are reasonably likely to materially affect, its internal control over
financial reporting.
GE 2019 FORM 10-K 58
REPORTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareowners
of General Electric Company:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated statements of financial position of General Electric Company and consolidated
affiliates (the Company) as of December 31, 2019 and 2018, the related consolidated statements of earnings (loss), comprehensive
income (loss), changes in shareowners’ equity and cash flows for each of the years in the three-year period ended December 31, 2019,
and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over
financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year
period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019 based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Accompanying Supplemental Information
The accompanying consolidating information appearing on pages 63, 65, and 67 (the supplemental information) has been subjected to
audit procedures performed in conjunction with the audit of the Company’s consolidated financial statements. The supplemental
information is the responsibility of the Company’s management. Our audit procedures included determining whether the supplemental
information reconciles to the consolidated financial statements or the underlying accounting and other records, as applicable, and
performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In our
opinion, the supplemental information is fairly stated, in all material respects, in relation to the consolidated financial statements as a
whole.
GE 2019 FORM 10-K 59
REPORTS
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Evaluation of revenue recognition on certain long-term service agreements
As discussed in Note 1 to the consolidated financial statements, the Company enters into long-term service agreements with some of
its customers. Certain long-term service agreements require the Company to provide maintenance services that may include levels of
assurance regarding asset performance and uptime throughout the contract period. Revenue for such long-term service agreements is
recognized using the percentage of completion method, based on costs incurred relative to total expected costs.
We identified the evaluation of revenue recognition on certain long-term service agreements as a critical audit matter because of the
complex auditor judgment required in evaluating some of the long-term estimates in such arrangements. Such estimates include the
amount of customer payments expected to be received over the contract term, which are generally based on a combination of both
historical customer utilization of the covered assets as well as forward-looking information such as market conditions. In addition, these
estimates include the total costs expected to be incurred to perform required maintenance services over the contract term and include
estimates of expected cost improvements when such cost improvements are supported by actual results or have been proven effective.
Further, contract modifications that extend or revise contract terms are not uncommon and require judgment in evaluating the related
revisions of the long-term estimates.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls
over the Company’s revenue recognition process for long-term service agreements, including controls related to estimating customer
payments and costs expected to be incurred to perform required maintenance services over the contract term. We evaluated the
estimated customer payments by comparing the estimated customer utilization of the covered assets to historical utilization and
industry utilization data, where available. We evaluated the estimated costs expected to be incurred to perform required maintenance
services over the contract term by:
•
•
•
•
comparing estimated labor and part costs to historical labor and parts costs,
comparing the estimated useful life, which is referred to as part life, of certain component parts to historical data and regulatory
limits on part life, where applicable,
inspecting evidence underlying the inclusion of cost improvements in estimated costs, including regulatory and engineering
approvals and actual reductions in production costs to date, and
ascertaining if major overhauls of covered assets are included in the cost estimates on a basis consistent with the estimated
customer utilization of the assets that is used in estimating customer payments.
In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in testing certain cost estimates,
including assessing statistical models used by the Company to estimate the part life of certain component parts of the covered assets.
Evaluation of premium deficiency testing to assess the adequacy of future policy benefit reserves
As discussed in Notes 1 and 12 to the consolidated financial statements, the Company performs premium deficiency testing to assess
the adequacy of future policy benefit reserves. This testing is performed on an annual basis, or whenever events and changes in
circumstances indicate that a premium deficiency event may have occurred. Significant uncertainties exist in testing cash flow
projections in the premium deficiency testing for these insurance contracts, including consideration of a wide range of possible
outcomes of future events over the life of the underlying contracts that can extend for long periods of time.
We identified the evaluation of premium deficiency testing to assess the adequacy of future policy benefit reserves as a critical audit
matter. Specifically, the evaluation of the following key assumptions in the premium deficiency testing required subjective auditor
judgment and specialized skills and knowledge: long-term care morbidity and mortality, long-term care morbidity improvement and
mortality improvement, discount rates, and long-term care premium rate increases.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls
over the Company’s premium deficiency testing process, including controls to develop the key assumptions described above. In
addition, we involved actuarial professionals with specialized skills and knowledge, who assisted in:
•
•
•
•
challenging the Company’s key assumptions and results by evaluating the relevance, reliability, and consistency of the
assumptions with each other, the underlying data, relevant historical data, and industry data,
assessing the summary experience data and the corresponding actuarial assumptions for conformity with generally accepted
actuarial principles,
performing recalculations to assess that the key assumptions were reflected in the cash flow projections, and
comparing the current year and prior year cash flow projections to analyze the impact of the updated key assumptions to the
cash flows.
GE 2019 FORM 10-K 60
REPORTS
We evaluated projected future long-term premium rate increases by comparing the proposed, attained, denied, and approved premium
rate increases to underlying source documentation. We also compared the current year premium rate increase projection to actual
historical rate increase experience.
Evaluation of projected revenue and operating profit used in the assessment of the carrying value of goodwill in the Grid
Solutions equipment and services and Hydro reporting units
As discussed in Note 8 to the consolidated financial statements, the Company performs a goodwill impairment test on an annual basis
or whenever events or changes in circumstances indicate that the carrying value of a reporting unit might exceed its fair value.
Projected revenue and operating profit are important elements of the estimated future cash flows used by the Company in determining
the fair value of each reporting unit and the amount of related goodwill impairment losses.
In the second quarter of 2019, the Company reorganized its Grid Solutions reporting unit to separate the Grid Solutions software
business and the Grid Solutions equipment and services business. As a result of this reorganization, the Company allocated goodwill to
the Grid Solutions businesses based on their relative fair values, and performed a goodwill impairment test. The goodwill allocated to
the Grid Solutions equipment and services business was determined to be impaired, and an impairment loss of $744 million was
recorded. In the third quarter of 2019, the Company performed its annual goodwill impairment test, and recorded an impairment loss of
$742 million in its Hydro reporting unit.
We identified the evaluation of projected revenue and operating profit used in the assessment of the carrying value of goodwill,
including the determination of related goodwill impairment losses, for the Grid Solutions equipment and services and Hydro reporting
units as a critical audit matter. Specifically, the evaluation of projected revenue and operating profit required the application of subjective
auditor judgment because these projections involve assumptions about future events.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls
over the Company’s goodwill impairment process, including controls over the development of projected financial information, and the
Company’s review of the projections and comparison to historical results. We evaluated the projected revenue and operating profit
assumptions by comparing the projected amounts to the past performance of the reporting units, including historical results and growth
rates, and relevant and reliable industry benchmark data related to future events. We also considered evidence obtained in other areas
of the audit, including information that might be contrary to the assumptions used by the Company in preparing its projections. We
evaluated the Company’s ability to accurately prepare projections by comparing the projected revenues and operating profit to actual
results for the same period. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:
•
•
comparing the projected amounts to industry benchmark data, and
evaluating sensitivity analyses related to key inputs, including long-term revenue growth rates and projected operating profit.
Evaluation of the effects of particular tax positions
As discussed in Note 15 to the consolidated financial statements, the Company’s annual tax rate is based on the Company’s income,
statutory tax rates, and the effects of tax positions taken in the various jurisdictions in which the Company operates. Tax laws are
complex and subject to different interpretations by taxpayers and respective government taxing authorities.
We identified the evaluation of the effects of particular tax positions as a critical audit matter. Complex auditor judgment was involved in
evaluating the Company’s interpretation of applicable tax laws and regulations for these tax positions, including the evaluation of
income tax uncertainties related to the tax positions.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls
over the Company’s income tax process for particular tax positions, including controls related to the Company’s interpretation of
applicable tax laws and regulations and the evaluation of income tax uncertainties. We inspected relevant documentation related to
particular tax positions, including correspondence between the Company and taxing authorities. In addition, we involved tax
professionals with specialized skills and knowledge, who assisted in:
•
•
evaluating the Company’s interpretation and application of relevant tax laws and regulations related to the tax positions,
including income tax uncertainties, and
assessing the Company’s computation of the effects of the tax positions.
/s/ KPMG LLP
KPMG LLP
We have served as the Company's auditor since 1909.
Boston, Massachusetts
February 24, 2020
GE 2019 FORM 10-K 61
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
STATEMENT OF EARNINGS (LOSS)
(In millions; per-share amounts in dollars)
Sales of goods
Sales of services
GE Capital revenues from services
Total revenues (Note 26)
Cost of goods sold
Cost of services sold
Selling, general and administrative expenses
Interest and other financial charges
Insurance losses and annuity benefits (Note 12)
Goodwill impairments (Note 8)
Non-operating benefit costs
Other costs and expenses
Total costs and expenses
Other income (Note 19)
GE Capital earnings (loss) from continuing operations
Earnings (loss) from continuing operations
before income taxes
Benefit (provision) for income taxes (Note 15)
Earnings (loss) from continuing operations
Earnings (loss) from discontinued operations,
net of taxes (Note 2)
Net earnings (loss)
Less net earnings (loss) attributable to noncontrolling
interests
Net earnings (loss) attributable to the Company
Preferred stock dividends
Net earnings (loss) attributable to GE common
shareholders
Amounts attributable to GE common shareholders
Earnings (loss) from continuing operations
Less net earnings (loss) attributable to
noncontrolling interests, continuing operations
Earnings (loss) from continuing operations attributable
to the Company
Preferred stock dividends
Earnings (loss) from continuing operations attributable
to GE common shareholders
Earnings (loss) from discontinued operations,
net of taxes
Less net earnings (loss) attributable to
noncontrolling interests, discontinued operations
Net earnings (loss) attributable to
GE common shareholders
Per-share amounts (Note 18)
Earnings (loss) from continuing operations
Diluted earnings (loss) per share
Basic earnings (loss) per share
Net earnings (loss)
Diluted earnings (loss) per share
Basic earnings (loss) per share
Dividends declared per common share
GE 2019 FORM 10-K 62
$
$
$
$
$
$
$
$
$
Consolidated
2019
2018
58,949 $
28,538
7,728
95,214
60,148 $
28,792
8,072
97,012
48,406
21,622
13,949
4,227
3,294
1,486
2,844
458
96,287
2,222
—
1,149
(726)
423
(5,335)
(4,912)
66
(4,979)
(460)
50,244
22,574
14,643
4,766
2,790
22,136
2,753
414
120,320
2,321
—
(20,987)
(93)
(21,080)
(1,363)
(22,443)
(89)
(22,355)
(447)
2017
62,709
29,233
7,337
99,279
52,483
23,110
14,257
4,655
12,168
2,550
2,423
1,060
112,707
2,083
—
(11,345)
2,808
(8,536)
(312)
(8,849)
(365)
(8,484)
(436)
(5,439) $
(22,802) $
(8,920)
423 $
(21,080) $
(8,536)
(90)
(283)
7
416
(460)
(44)
(20,991)
(447)
(21,438)
(5,335)
(1,363)
60
1
(8,253)
(436)
(8,689)
(312)
(81)
(5,439) $
(22,802) $
(8,920)
(0.01) $
(0.01) $
(0.62) $
(0.62) $
0.04 $
(2.47) $
(2.47) $
(2.62) $
(2.62) $
0.37 $
(1.00)
(1.00)
(1.03)
(1.03)
0.84
FINANCIAL STATEMENTS
STATEMENT OF EARNINGS (LOSS)
(CONTINUED)
(In millions)
Sales of goods
Sales of services
GE Capital revenues from services
Total revenues (Note 26)
Cost of goods sold
Cost of services sold
Selling, general and administrative expenses
Interest and other financial charges
Insurance losses and annuity benefits (Note 12)
Goodwill impairments (Note 8)
Non-operating benefit costs
Other costs and expenses
Total costs and expenses
Other income (Note 19)
GE Capital earnings (loss) from continuing operations
Earnings (loss) from continuing operations
before income taxes
Benefit (provision) for income taxes (Note 15)
Earnings (loss) from continuing operations
Earnings (loss) from discontinued operations,
net of taxes (Note 2)
Net earnings (loss)
Less net earnings (loss) attributable to noncontrolling
interests
Net earnings (loss) attributable to the Company
Preferred stock dividends
Net earnings (loss) attributable to GE common
shareholders
Amounts attributable to GE common shareholders:
Earnings (loss) from continuing operations
Less net earnings (loss) attributable to
noncontrolling interests, continuing operations
Earnings (loss) from continuing operations attributable
to the Company
Preferred stock dividends
Earnings (loss) from continuing operations attributable
to GE common shareholders
Earnings (loss) from discontinued operations,
net of taxes
Less net earnings (loss) attributable to
noncontrolling interests, discontinued operations
Net earnings (loss) attributable to
GE common shareholders
GE(a)
2019
2018
$
59,138 $
28,581
—
87,719
60,147 $
28,891
—
89,038
48,620
19,665
13,404
2,115
—
1,486
2,828
—
88,118
2,200
(530)
1,271
(1,309)
(38)
(5,335)
(5,373)
66
(5,439)
—
50,265
20,611
13,851
2,415
—
22,136
2,740
(51)
111,967
2,317
(489)
(21,101)
(467)
(21,568)
(1,363)
(22,931)
(129)
(22,802)
—
2017
62,786
29,443
—
92,229
52,588
21,062
13,094
2,538
—
1,165
2,409
(22)
92,834
1,893
(6,765)
(5,476)
(3,493)
(8,970)
(319)
(9,288)
(368)
(8,920)
—
GE Capital
2018
2019
$
79 $
—
8,662
8,741
121 $
—
9,430
9,551
61
2,019
931
2,532
3,353
—
16
480
9,392
—
—
(652)
582
(69)
192
123
1
122
(460)
95
2,089
1,341
2,982
2,849
—
12
558
9,926
—
—
(375)
374
(1)
(1,670)
(1,672)
40
(1,712)
(447)
2017
130
—
8,940
9,070
102
2,196
1,662
3,145
12,213
1,386
14
986
21,703
—
—
(12,633)
6,302
(6,331)
(312)
(6,643)
4
(6,647)
(436)
$
(5,439) $ (22,802) $
(8,920) $
(338) $
(2,159) $
(7,083)
$
(38) $ (21,568) $
(8,970) $
(69) $
(1) $
(6,331)
6
(130)
(280)
(44)
—
(21,438)
—
(8,689)
—
(44)
(21,438)
(8,689)
1
(70)
(460)
(530)
40
(42)
(447)
(3)
(6,328)
(436)
(489)
(6,765)
(5,335)
(1,363)
(319)
192
(1,670)
(312)
60
1
(88)
—
—
6
$
(5,439) $ (22,802) $
(8,920) $
(338) $
(2,159) $
(7,083)
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.
GE 2019 FORM 10-K 63
FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION
December 31 (In millions, except share amounts)
Cash, cash equivalents and restricted cash
Investment securities (Note 3)
Current receivables (Note 4)
Financing receivables – net (Note 5)
Inventories (Note 6)
Other GE Capital receivables
Property, plant and equipment – net (Note 7)
Operating lease assets (Note 7)
Receivable from GE Capital
Investment in GE Capital
Goodwill (Note 8)
Other intangible assets – net (Note 8)
Contract and other deferred assets (Note 9)
All other assets (Note 10)
Deferred income taxes (Note 15)
Assets of businesses held for sale (Note 2)
Assets of discontinued operations (Note 2)
Total assets
Short-term borrowings (Note 11)
Short-term borrowings assumed by GE (Note 11)
Accounts payable, principally trade accounts
Progress collections and deferred income (Note 9)
Other GE current liabilities (Note 14)
Non-recourse borrowings of consolidated securitization entities (Note 11)
Long-term borrowings (Note 11)
Long-term borrowings assumed by GE (Note 11)
Operating lease liabilities (Note 7)
Insurance liabilities and annuity benefits (Note 12)
Non-current compensation and benefits
All other liabilities (Note 14)
Liabilities of businesses held for sale (Note 2)
Liabilities of discontinued operations (Note 2)
Total liabilities
Preferred stock (5,939,875 shares outstanding at both
December 31, 2019 and December 31, 2018)
Common stock (8,738,434,000 and 8,702,227,000 shares outstanding
at December 31, 2019 and December 31, 2018, respectively)
Accumulated other comprehensive income (loss) – net attributable to GE
Other capital
Retained earnings
Less common stock held in treasury
Total GE shareholders’ equity
Noncontrolling interests (Note 16)
Total equity
Total liabilities and equity
GE 2019 FORM 10-K 64
Consolidated
2019
36,394 $
48,521
16,769
3,134
14,104
7,144
43,290
2,896
—
—
26,734
10,653
16,801
16,461
9,889
9,149
4,109
266,048 $
22,072 $
—
15,926
20,508
15,753
1,655
67,155
—
3,162
39,826
31,687
16,583
1,658
203
236,187
2018
31,124
33,508
14,645
7,699
13,803
7,143
43,611
—
—
—
33,974
12,178
17,431
18,357
12,117
1,629
63,853
311,072
12,776
—
13,826
18,983
14,866
1,875
88,949
—
—
35,562
31,928
20,839
708
19,281
259,591
6
6
702
(11,732)
34,405
87,732
(82,797)
28,316
1,545
29,861
266,048 $
702
(14,414)
35,504
93,109
(83,925)
30,981
20,500
51,481
311,072
$
$
$
$
FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION (CONTINUED)
December 31 (In millions, except share amounts)
Cash, cash equivalents and restricted cash
Investment securities (Note 3)
Current receivables (Note 4)
Financing receivables – net (Note 5)
Inventories (Note 6)
Other GE Capital receivables
Property, plant and equipment – net (Note 7)
Operating lease assets (Note 7)
Receivable from GE Capital
Investment in GE Capital
Goodwill (Note 8)
Other intangible assets – net (Note 8)
Contract and other deferred assets (Note 9)
All other assets (Note 10)
Deferred income taxes (Note 15)
Assets of businesses held for sale (Note 2)
Assets of discontinued operations (Note 2)
Total assets
Short-term borrowings (Note 11)
Short-term borrowings assumed by GE (Note 11)
Accounts payable, principally trade accounts
Progress collections and deferred income (Note 9)
Other GE current liabilities (Note 14)
Non-recourse borrowings of consolidated securitization entities (Note 11)
Long-term borrowings (Note 11)
Long-term borrowings assumed by GE (Note 11)
Operating lease liabilities (Note 7)
Insurance liabilities and annuity benefits (Note 12)
Non-current compensation and benefits
All other liabilities (Note 14)
Liabilities of businesses held for sale (Note 2)
Liabilities of discontinued operations (Note 2)
Total liabilities
Preferred stock (5,939,875 shares outstanding at both
December 31, 2019 and December 31, 2018)
Common stock (8,738,434,000 and 8,702,227,000 shares outstanding
at December 31, 2019 and December 31, 2018, respectively)
Accumulated other comprehensive income (loss) – net attributable to GE
Other capital
Retained earnings
Less common stock held in treasury
Total GE shareholders’ equity
Noncontrolling interests (Note 16)
Total equity
Total liabilities and equity
$
$
$
GE(a)
2019
17,613 $
10,008
13,883
—
14,104
—
14,370
3,077
19,142
15,299
25,895
10,461
16,833
8,399
8,189
8,626
202
186,100 $
5,606 $
5,473
17,702
20,694
16,833
—
15,085
25,895
3,369
—
31,208
12,787
1,620
106
156,379
2018
16,632
187
10,262
—
13,803
—
14,828
—
22,513
11,412
33,070
11,942
17,431
8,578
10,176
1,524
59,169
231,526
5,147
4,207
17,579
19,239
16,444
—
20,804
32,054
—
—
31,461
14,881
748
17,481
180,045
GE Capital
2019
18,781 $
38,514
—
6,979
—
11,767
29,649
237
—
—
839
192
—
8,648
1,700
241
3,907
121,454 $
12,030 $
2,104
886
—
—
1,655
26,175
17,038
238
40,232
472
5,040
52
97
106,016
2018
14,492
33,393
—
13,628
—
15,361
29,510
—
—
—
904
236
—
9,869
1,936
—
4,610
123,939
4,999
2,684
1,171
—
—
1,875
36,154
19,828
—
35,994
459
7,562
—
1,800
112,527
6
6
6
6
702
(11,732)
34,405
87,732
(82,797)
28,316
1,406
29,721
186,100 $
702
(14,414)
35,504
93,109
(83,925)
30,981
20,499
51,480
231,526
$
—
(852)
17,001
(857)
—
15,299
139
15,438
121,454 $
—
(783)
12,883
(694)
—
11,412
1
11,412
123,939
$
$
$
$
(a) Represents the adding together of all GE Industrial affiliates and GE Capital continuing operations on a one-line basis. See Note 1.
GE 2019 FORM 10-K 65
FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
For the years ended December 31 (In millions)
Net earnings (loss)
(Earnings) loss from discontinued operations
Adjustments to reconcile net earnings (loss) to cash provided from
operating activities:
Depreciation and amortization of property, plant and equipment (Note 7)
Amortization of intangible assets (Note 8)
Goodwill impairments (Note 8)
(Earnings) loss from continuing operations retained by GE Capital
(Gains) losses on purchases and sales of business interests (Note 19)
Principal pension plans cost (Note 13)
Principal pension plans employer contributions (Note 13)
Other postretirement benefit plans (net) (Note 13)
Provision (benefit) for income taxes (Note 15)
Cash recovered (paid) during the year for income taxes
Decrease (increase) in contract and other deferred assets
Decrease (increase) in GE current receivables
Decrease (increase) in inventories
Increase (decrease) in accounts payable
Increase (decrease) in GE progress collections
All other operating activities
Cash from (used for) operating activities – continuing operations
Cash from (used for) operating activities – discontinued operations
Cash from (used for) operating activities
Additions to property, plant and equipment
Dispositions of property, plant and equipment
Additions to internal-use software
Net decrease (increase) in GE Capital financing receivables
Proceeds from sale of discontinued operations
Proceeds from principal business dispositions
Net cash from (payments for) principal businesses purchased
Capital contribution from GE to GE Capital
All other investing activities
Cash from (used for) investing activities – continuing operations
Cash from (used for) investing activities – discontinued operations
Cash from (used for) investing activities
Net increase (decrease) in borrowings (maturities of 90 days or less)
Newly issued debt (maturities longer than 90 days)
Repayments and other reductions (maturities longer than 90 days)
Capital contribution from GE to GE Capital
Net dispositions (purchases) of GE shares for treasury
Dividends paid to shareholders
All other financing activities
Cash from (used for) financing activities – continuing operations
Cash from (used for) financing activities – discontinued operations
Cash from (used for) financing activities
Effect of currency exchange rate changes on cash, cash equivalents
and restricted cash
Increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Less cash, cash equivalents and restricted cash of
discontinued operations at end of year
Cash, cash equivalents and restricted cash of continuing operations
at end of year
Supplemental disclosure of cash flows information
Cash paid during the year for interest
GE 2019 FORM 10-K 66
Consolidated
2019
(4,912) $
5,335
2018
(22,443) $
1,363
$
4,026
1,569
1,486
—
(53)
3,878
(298)
(1,228)
726
(1,950)
62
(2,851)
(1,109)
2,977
1,373
1,388
10,419
(1,647)
8,772
(5,813)
3,718
(282)
1,117
5,864
4,683
(68)
—
1,466
10,684
(1,745)
8,939
280
2,185
(16,567)
—
29
(649)
(1,043)
(15,764)
(368)
(16,133)
(50)
1,529
35,548
37,077
4,419
2,163
22,136
—
(1,522)
4,226
(6,283)
(1,033)
93
(1,404)
(81)
(358)
(356)
1,545
(571)
1,317
3,210
1,768
4,978
(6,627)
4,093
(320)
1,796
29
8,425
(1)
—
11,530
18,925
(645)
18,280
(4,343)
3,120
(20,319)
—
(17)
(4,474)
(1,312)
(27,345)
(4,462)
(31,807)
(628)
(9,176)
44,724
35,548
2017
(8,849)
312
4,332
1,862
2,550
—
(1,024)
3,687
(1,978)
(888)
(2,808)
(1,924)
(1,243)
(3,902)
324
169
1,912
13,308
5,840
714
6,554
(6,642)
5,530
(454)
805
1,464
3,208
(2,722)
—
5,538
6,728
(1,349)
5,379
1,699
10,879
(25,220)
—
(2,550)
(8,650)
(85)
(23,927)
5,443
(18,484)
891
(5,659)
50,384
44,724
638
4,424
7,901
36,439 $
31,124 $
36,823
(3,816) $
(4,409) $
(4,211)
$
$
FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS (CONTINUED)
For the years ended December 31 (In millions)
GE(a)
2019
2018
2017
2019
GE Capital
2018
2017
Net earnings (loss)
(Earnings) loss from discontinued operations
Adjustments to reconcile net earnings (loss) to cash provided from
operating activities:
Depreciation and amortization of property, plant and equipment (Note 7)
Amortization of intangible assets
Goodwill impairments (Note 8)
(Earnings) loss from continuing operations retained by GE Capital
(Gains) losses on purchases and sales of business interests (Note 19)
Principal pension plans cost (Note 13)
Principal pension plans employer contributions (Note 13)
Other postretirement benefit plans (net) (Note 13)
Provision (benefit) for income taxes (Note 15)
Cash recovered (paid) during the year for income taxes
Decrease (increase) in contract and other deferred assets
Decrease (increase) in GE current receivables
Decrease (increase) in inventories
Increase (decrease) in accounts payable
Increase (decrease) in GE progress collections
All other operating activities (Note 24)
Cash from (used for) operating activities – continuing operations
Cash from (used for) operating activities – discontinued operations
Cash from (used for) operating activities
Additions to property, plant and equipment
Dispositions of property, plant and equipment
Additions to internal-use software
Net decrease (increase) in GE Capital financing receivables (Note 24)
Proceeds from sale of discontinued operations
Proceeds from principal business dispositions
Net cash from (payments for) principal businesses purchased
Capital contribution from GE to GE Capital
All other investing activities (Note 24)
Cash from (used for) investing activities – continuing operations
Cash from (used for) investing activities – discontinued operations
Cash from (used for) investing activities
Net increase (decrease) in borrowings (maturities of 90 days or less)
Newly issued debt (maturities longer than 90 days)
Repayments and other reductions (maturities longer than 90 days)
Capital contribution from GE to GE Capital
Net dispositions (purchases) of GE shares for treasury (Note 24)
Dividends paid to shareholders
All other financing activities (Note 24)
Cash from (used for) financing activities – continuing operations
Cash from (used for) financing activities – discontinued operations
Cash from (used for) financing activities
Effect of currency exchange rate changes on cash, cash equivalents
and restricted cash
Increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Less cash, cash equivalents and restricted cash of
discontinued operations at end of year
Cash, cash equivalents and restricted cash of continuing operations
at end of year
Supplemental disclosure of cash flows information
Cash paid during the year for interest
$ (5,373) $(22,931) $ (9,288) $
1,363
5,335
319
123 $ (1,672) $ (6,643)
312
(192)
1,670
2,026
57
—
—
(50)
—
—
(15)
(582)
(46)
—
—
—
(44)
—
605
1,881
(1,917)
(35)
(3,830)
3,348
(8)
3,389
—
3,938
—
—
2,617
9,453
2,023
11,476
2,277
2,110
65
53
— 1,386
—
—
—
(288)
—
—
—
—
(23)
(18)
(6,302)
(374)
264
(61)
—
—
—
—
—
—
(75)
2
—
—
11,114
158
2,374
1,582
(968)
(415)
1,407
1,166
(4,569)
3,853
(14)
9,986
29
2,011
—
—
482
11,777
186
11,964
(3,680)
4,579
(31)
2,897
1,464
—
—
—
3,013
8,242
(1,784)
6,458
(256)
2,154
69
(4,308)
1,909
3,045
(11,632) (19,836) (21,007)
—
—
—
—
(4,311)
(371)
(280)
(2,408)
(7,007) (23,878) (23,619)
— 1,909
(7,008) (23,878) (21,710)
4,000
—
(455)
(819)
(1)
6
447
(134)
4,439 (10,882) (13,399)
39,301
25,902
25,902
15,020
15,020
19,460
2,001
1,512
1,486
530
(3)
3,878
(298)
(1,213)
1,309
(1,904)
62
(3,904)
(877)
684
1,317
72
4,614
(49)
4,565
(2,216)
371
(274)
—
5,864
1,083
(447)
(4,000)
3,675
4,056
(3,449)
607
(595)
31
(6,458)
—
29
(352)
(312)
(7,658)
(368)
(8,026)
2,290
2,109
22,136
489
(1,234)
4,226
(6,283)
(1,015)
467
(1,343)
(81)
(966)
(364)
1,595
(433)
676
701
2,051
2,752
2,050
1,796
1,165
10,781
(1,024)
3,687
(1,978)
(865)
3,493
(2,188)
(1,243)
1,040
339
(46)
1,938
1,504
11,479
(195)
11,284
(3,403)
(2,234)
1,186
271
(423)
(306)
—
—
—
—
3,086
6,047
(2,722)
(1)
—
—
(640)
(9,439)
3,138 (11,715)
2,312
(698)
(9,403)
2,439
(987)
6,570
(1,023)
—
(17)
(4,179)
1,107
1,470
(4,462)
(2,992)
1,808
16,267
(5,579)
—
(2,550)
(8,355)
290
1,881
3,534
5,415
(56)
(2,911)
20,528
17,617
(494)
1,706
18,822
20,528
444
7,739
11,083
18,822
4
3,896
7,144
633
528
757
$17,613 $ 16,632 $11,678
$18,826 $14,492 $25,145
$ (1,975) $ (2,201) $ (2,347) $ (2,632) $ (2,883) $ (2,793)
(a) Represents the adding together of all GE Industrial affiliates and the impact of GE Capital dividends on a one-line basis. See Note 1.
GE 2019 FORM 10-K 67
FINANCIAL STATEMENTS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
STATEMENT OF COMPREHENSIVE INCOME (LOSS)
For the years ended December 31 (In millions)
Net earnings (loss)
Less net earnings (loss) attributable to noncontrolling interests
Net earnings (loss) attributable to the Company
Investment securities
Currency translation adjustments
Cash flow hedges
Benefit plans
Other comprehensive income (loss)
Less other comprehensive income (loss) attributable to noncontrolling interests
Other comprehensive income (loss) attributable to the Company
Comprehensive income (loss)
Less comprehensive income (loss) attributable to noncontrolling interests
Comprehensive income (loss) attributable to the Company
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (In millions)
Preferred stock issued
Common stock issued
Beginning balance
Investment securities
Currency translation adjustments
Cash flow hedges
Benefit plans
Accumulated other comprehensive income (loss) ending balance
Beginning balance
Gains (losses) on treasury stock dispositions
Stock-based compensation
Other changes
Other capital ending balance
Beginning balance
Net earnings (loss) attributable to the Company
Dividends and other transactions with shareholders
Changes in accounting (Note 1)
Retained earnings ending balance
Beginning balance
Purchases
Dispositions
Common stock held in treasury ending balance
GE shareholders' equity balance
Noncontrolling interests balance (Note 16)
Total equity balance at December 31(a)
$
$
$
$
$
$
$
$
$
$
$
$
$
2019
2018
(4,912) $
66
(4,979) $
100 $
1,275
36
1,229
2,641
(40)
2,681 $
(2,272) $
26
(2,297) $
(22,443) $
(89)
(22,355) $
64 $
(1,664)
(51)
1,416
(235)
(225)
(10) $
(22,678) $
(314)
(22,364) $
2019
2018
6
702
$
$
6
702
$
$
$
(14,414)
100
1,315
35
1,231
(11,732) $
35,504
(925)
475
(649)
34,405
93,109
(4,979)
(766)
368
87,732
(83,925)
(57)
1,186
(82,797) $
28,316
1,545
29,861
$
$
$
(14,404)
63
(1,472)
(49)
1,448
(14,414) $
37,384
(759)
413
(1,534)
35,504
117,245
(22,355)
(4,042)
2,261
93,109
(84,902)
(268)
1,244
(83,925) $
30,981
20,500
51,481
$
$
2017
(8,849)
(365)
(8,484)
(776)
2,178
51
2,782
4,236
51
4,184
(4,613)
(314)
(4,300)
2017
6
702
(18,588)
(777)
2,145
50
2,766
(14,404)
37,224
(304)
358
106
37,384
133,857
(8,484)
(8,130)
2
117,245
(83,038)
(3,849)
1,985
(84,902)
56,031
17,468
73,499
(a) Total equity balance decreased by $(43,638) million from December 31, 2017, primarily due to non-cash after-tax goodwill
impairment charge of $(22,371) million in 2018, reduction of noncontrolling interest balance of $(15,836) million attributable to Baker
Hughes Class A shareholders at December 31, 2017 and after-tax loss of $(8,238) million in discontinued operations due to
deconsolidation of Baker Hughes in 2019, partially offset by after-tax gain of $2,508 million in discontinued operations due to spin-off
and subsequent merger of our Transportation business with Wabtec in 2019.
GE 2019 FORM 10-K 68
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION. We present our financial statements in a three-column format, which allows investors to
see our GE industrial operations separately from our financial services operations. We believe that this provides useful supplemental
information to our consolidated financial statements. To the extent that we have transactions between GE and GE Capital, these
transactions are made on arm's length terms, are reported in the respective columns of our financial statements and are eliminated in
consolidation. See Note 25 for further information.
Our financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP), which requires us to
make estimates based on assumptions about current, and for some estimates, future, economic and market conditions which affect
reported amounts and related disclosures in our financial statements. Although our current estimates contemplate current and expected
future conditions, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our
results of operations and financial position.
We have reclassified certain prior-year amounts to conform to the current-year’s presentation. Certain columns and rows may not add
due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers in millions. Unless otherwise
indicated, information in these notes to 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.
CONSOLIDATION. Our financial statements consolidate all of our affiliates, entities where we have a controlling financial interest, most
often because we hold a majority voting interest, or where we are required to apply the variable interest entity (VIE) model
because we have the power to direct the most economically significant activities of entities. We reevaluate whether we have a
controlling financial interest in all entities when our rights and interests change.
REVENUES FROM THE SALE OF EQUIPMENT
Performance Obligations Satisfied Over Time. We recognize revenue on agreements for the sale of customized goods including
power generation equipment, long-term construction projects and military development contracts on an over-time basis as we
customize the customer's equipment during the manufacturing or integration process and obtain right to payment for work performed.
We recognize revenue as we perform under the arrangements using the percentage of completion method which is based on our costs
incurred to date relative to our estimate of total expected costs. Our estimate of costs to be incurred to fulfill our promise to a customer
is based on our history of manufacturing or constructing similar assets for customers and is updated routinely to reflect changes in
quantity or pricing of the inputs. We provide for potential losses on these agreements when it is probable that we will incur the loss.
Our billing terms for these over-time contracts are generally based on achieving specified milestones. The differences between the
timing of our revenue recognized (based on costs incurred) and customer billings (based on contractual terms) results in changes to our
contract asset or contract liability positions. See Note 9 for further information.
Performance Obligations Satisfied at a Point in Time. We recognize revenue on agreements for non-customized equipment
including commercial aircraft engines, healthcare equipment and other goods we manufacture on a standardized basis for sale to the
market at the point in time that the customer obtains control of the good, which is generally no earlier than when the customer has
physical possession of the product. We use proof of delivery for certain large equipment with more complex logistics, whereas the
delivery of other equipment is estimated based on historical averages of in-transit periods (i.e., time between shipment and delivery).
Where arrangements include customer acceptance provisions based on seller or customer-specified objective criteria, we recognize
revenue when we have concluded that the customer has control of the goods and that acceptance is likely to occur. We do not
provide for anticipated losses on point-in-time transactions prior to transferring control of the equipment to the customer.
Our billing terms for these point-in-time equipment contracts generally coincide with delivery to the customer; however, within certain
businesses, we receive progress collections from customers for large equipment purchases, to generally reserve production slots.
REVENUES FROM THE SALE OF SERVICES. Consistent with our Management’s Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) discussion and the way we manage our businesses, we refer to sales under service agreements, which
includes 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 sometimes offer our customers financing discounts for
the purchase of certain GE products when sold in contemplation of long-term service agreements. These sales are accounted for as
financing arrangements when payments for the products are collected through higher usage-based fees from servicing the equipment.
See Note 9 for further information.
Performance Obligations Satisfied Over Time. We enter into long-term service agreements with our customers primarily within our
Aviation and Power segments. These agreements require us to provide preventative maintenance, overhauls, and standby "warranty-
type" services that include certain levels of assurance regarding asset performance and uptime throughout the contract periods, which
generally range from 5 to 25 years. We account for items that are integral to the maintenance of the equipment as part of our
performance obligation, unless the customer has a substantive right to make a separate purchasing decision (e.g., equipment upgrade).
GE 2019 FORM 10-K 69
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We recognize revenue as we perform under the arrangements using the percentage of completion method which is based on our costs
incurred to date relative to our estimate of total expected costs. Throughout the life of a contract, this measure of progress captures the
nature, timing and extent of our underlying performance activities as our stand-ready services often fluctuate between routine
inspections and maintenance, unscheduled service events and major overhauls at pre-determined usage intervals. We provide for
potential losses on these agreements when it is probable that we will incur the loss. Contract modifications that extend or revise
contract terms are not uncommon and generally result in our recognizing the impact of the revised terms prospectively over the
remaining life of the modified contract (i.e., effectively like a new contract).
Our billing terms for these arrangements are generally based on the utilization of the asset (e.g., per hour of usage) or upon the
occurrence of a major maintenance event within the contract, such as an overhaul. The differences between the timing of our revenue
recognized (based on costs incurred) and customer billings (based on contractual terms) results in changes to our contract asset or
contract liability positions. See Note 9 for further information.
We also enter into long-term services agreements in our Healthcare and Renewable Energy segments. Revenues are recognized for
these arrangements on a straight-line basis consistent with the nature, timing and extent of our services, which primarily relate to
routine maintenance and as needed product repairs. We generally invoice periodically as services are provided.
Performance Obligations Satisfied at a Point in Time. We sell certain tangible products, largely spare parts, through our services
businesses. We recognize revenues and bill our customers at the point in time that the customer obtains control of the good, which is at
the point in time we deliver the spare part to the customer.
COLLABORATIVE ARRANGEMENTS. Our Aviation business enters into collaborative arrangements and joint ventures with
manufacturers and suppliers of components used to build and maintain certain engines. Under these arrangements, GE and its
collaborative partners share in the risks and rewards of these programs through various revenue, cost and profit sharing payment
structures. GE recognizes revenue and costs for these arrangements based on the scope of work GE is responsible for transferring to
its customers. GE’s payments to participants are primarily recorded as either cost of services sold ($1,939 million, $1,809 million and
$1,884 million for the years ended December 31, 2019, 2018 and 2017, respectively) or as cost of goods sold ($2,974 million, $3,097
million and $2,806 million for the years ended December 31, 2019, 2018 and 2017, respectively). Our most significant collaborative
arrangement is with Safran Aircraft engines, a subsidiary of Safran Group of France, which sells LEAP and CFM56 engines through
CFM International, a jointly owned company. GE makes substantial sales of parts and services to CFM International based on arm's
length terms.
GE CAPITAL REVENUES FROM SERVICES. We use the interest method to recognize income on loans. Interest on loans includes
origination, commitment and other non-refundable fees related to funding (recorded in earned income on the interest method). We stop
accruing interest at the earlier of the time at which collection of an account becomes doubtful or the account becomes 90 days past
due. Previously recognized interest income that was accrued but not collected from the borrower is reversed, unless the terms of the
loan agreement permit capitalization of accrued interest to the principal balance. Payments received on nonaccrual loans are applied to
reduce the principal balance of the loan. We resume accruing interest on nonaccrual loans only when payments are brought current
according to the loan’s original terms and future payments are reasonably assured.
We recognize financing lease income on the interest method to produce a level yield on funds not yet recovered. Estimated
unguaranteed residual values are based upon management's best estimates of the value of the leased asset at the end of the lease
term. We use various sources of data in determining these estimates, including information obtained from third parties, which is
adjusted for the attributes of the specific asset under lease. Guarantees of residual values by unrelated third parties are included
within minimum lease payments. Significant assumptions we use in estimating residual values include estimated net cash flows over
the remaining lease term, anticipated results of future remarketing, and estimated future component part and scrap metal prices,
discounted at an appropriate rate.
We recognize operating lease income on a straight-line basis over the terms of underlying leases.
SALES OF BUSINESS INTERESTS IN WHICH WE LOSE CONTROL. Gains or losses on sales of affiliate shares that result in our
loss of a controlling financial interest are recorded in earnings. If we retain a noncontrolling interest in our former affiliate, we initially
record our investment at fair value, and any subsequent adjustments to the carrying value of the investment are recorded in earnings.
SALES OF BUSINESS INTERESTS IN WHICH WE RETAIN CONTROL. Gains or losses on sales of affiliate shares where we retain a
controlling financial interest are recorded in equity.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH. Debt securities and money market instruments with original maturities of
three months or less are included in cash, cash equivalents and restricted cash unless classified as available-for-sale investment
securities. Restricted cash primarily comprised collateral for receivables sold and funds restricted in connection with certain ongoing
litigation matters and amounted to $589 million and $388 million at December 31, 2019 and December 31, 2018, respectively.
INVESTMENT SECURITIES. We report investments in available-for-sale debt securities and certain equity securities at fair value.
Unrealized gains and losses on available-for-sale debt securities are recorded to other comprehensive income, net of applicable taxes
and adjustments related to our insurance liabilities. Unrealized gains and losses on equity securities with readily determinable fair
values are recorded to earnings.
GE 2019 FORM 10-K 70
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Although we generally do not have the intent to sell any specific debt securities in the ordinary course of managing our portfolio, we
may sell debt securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity
requirements and the funding of claims and obligations to policyholders.
We regularly review investment securities for impairment. For debt securities, if we do not intend to sell the security or it is not more
likely than not that we will be required to sell the security before recovery of our amortized cost, we evaluate qualitative criteria, such as
the financial health of and specific prospects for the issuer, to determine whether we do not expect to recover the amortized cost basis
of the security. We also evaluate quantitative criteria including determining whether there has been an adverse change in expected
future cash flows. If we do not expect to recover the entire amortized cost basis of the security, we consider the security to be other-
than-temporarily impaired (OTTI), and we record the difference between the security’s amortized cost basis and its recoverable amount
in earnings and the difference between the security’s recoverable amount and fair value in other comprehensive income. If we intend to
sell the security or it is more likely than not we will be required to sell the security before recovery of its amortized cost basis, the
security is also considered OTTI, and we recognize the entire difference between the security’s amortized cost basis and its fair value in
earnings. See Note 3 for further information.
CURRENT RECEIVABLES. Amounts due from customers arising from the sales of products and services are recorded at the
outstanding amount, less allowance for losses. We regularly monitor the recoverability of our receivables. See Note 4 for further
information.
FINANCING RECEIVABLES. Our financing receivables portfolio consists of a variety of loans and leases, including both larger-
balance, non-homogeneous loans and leases and smaller-balance homogeneous loans and leases. We routinely evaluate our entire
portfolio for potential specific credit or collection issues that might indicate an impairment. Losses on financing receivables are
recognized when they are incurred, which requires us to make our best estimate of probable losses inherent in the portfolio. See Note 5
for further information.
INVENTORIES. All inventories are stated at lower of cost or realizable values. Cost of inventories is primarily determined on a first-in,
first-out (FIFO) basis. See Note 6 for further information.
PROPERTY, PLANT AND EQUIPMENT. The cost of GE property, plant and equipment is generally depreciated on a straight-line basis
over its estimated economic life. The cost of GE Capital equipment leased to others on operating leases is depreciated on a straight-
line basis to estimated residual value over the lease term or over the estimated economic life of the equipment. See Note 7 for further
information.
LEASE ACCOUNTING. We determine if an arrangement is a lease or a service contract at inception. Where an arrangement is a lease
we determine if it is an operating lease or a finance lease. Subsequently, if the arrangement is modified we reevaluate our classification.
Lessee. At lease commencement, we record a lease liability and corresponding right-of-use (ROU) asset. Lease liabilities represent the
present value of our future lease payments over the expected lease term which includes options to extend or terminate the lease when
it is reasonably certain those options will be exercised. We have elected to include lease and non-lease components in determining our
lease liability for all leased assets except our vehicle leases. Non-lease components are generally services that the lessor performs for
the Company associated with the leased asset. For those leases with payments based on an index, the lease liability is determined
using the index at lease commencement. Lease payments based on increases in the index subsequent to lease commencement are
recognized as variable lease expense as they occur. The present value of our lease liability is determined using our incremental
collateralized borrowing rate at lease inception. ROU assets represent our right to control the use of the leased asset during the lease
and are recognized in an amount equal to the lease liability. Over the lease term we use the effective interest rate method to account for
the lease liability as lease payments are made and the ROU asset is amortized to earnings in a manner that results in a straight-line
expense recognition in the Statement of Earnings. A ROU asset and lease liability is not recognized for leases with an initial term of 12
months or less and we recognize lease expense for these leases on a straight-line basis over the lease term. We test ROU assets at
least annually for impairment or whenever events or changes in circumstance indicate that the asset may be impaired.
Lessor. Equipment leased to others under operating leases are included in Property, plant and equipment and leases classified as
finance leases are included in Financing receivables on our Statement of Financial Position. Finance lease receivables are tested for
impairment as described in the Financing Receivables section above. See Notes 5 and 7 for further information.
GOODWILL AND OTHER INTANGIBLE ASSETS. We test goodwill at least annually for impairment at the reporting unit level. A
reporting unit is the operating segment, or one level below that operating segment (the component level) if discrete financial information
is prepared and regularly reviewed by segment management. However, components are aggregated as a single reporting unit if they
have similar economic characteristics. We recognize an impairment charge if the carrying amount of a reporting unit exceeds its fair
value and the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill. When a portion of a
reporting unit is disposed, goodwill is allocated to the gain or loss on disposition based on the relative fair values of the business or
businesses disposed and the portion of the reporting unit that will be retained.
GE 2019 FORM 10-K 71
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For other intangible assets that are not deemed indefinite-lived, cost is generally amortized on a straight-line basis over the asset’s
estimated economic life, except for individually significant customer-related intangible assets that are amortized in relation to total
related sales. Amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the
related carrying amounts may not be recoverable. In these circumstances, they are tested for impairment based on undiscounted cash
flows and, if impaired, written down to estimated fair value based on either discounted cash flows or appraised values. See Note 8 for
further information.
ASSOCIATED COMPANIES. For unconsolidated entities over which we have significant influence and have not elected the fair value
option, we account for our interest as equity method investments, and our investments in, and advances to, associated companies are
presented on a one-line basis in All other assets in our consolidated Statement of Financial Position, net of any impairment. We
evaluate our equity method investments for impairment whenever events or changes in circumstance indicate that the carrying amounts
of such investments may not be recoverable. If a decline in the value of an equity method investment is determined to be other than
temporary, a loss is recorded in earnings in the current period. Our share of the results of associated companies are presented on a
one-line basis in Other income within continuing operations in our consolidated Statement of Earnings (Loss). See Note 10 for further
information.
Where we adopt the fair value option for our investment in an associated company, our investment in and any advances to are recorded
in Investment securities in our consolidated Statement of Financial Position and any subsequent changes in fair value are recognized in
Other income within continuing operations in our consolidated Statement of Earnings (Loss). See Note 3 for further information.
DERIVATIVES AND HEDGING. We use derivatives to manage a variety of risks, including risks related to interest rates, foreign
exchange and commodity prices. Accounting for derivatives as hedges requires that, at inception and over the term of the arrangement,
the hedged item and related derivative meet the requirements for hedge accounting. In evaluating whether a particular relationship
qualifies for hedge accounting, we test effectiveness at inception and each reporting period thereafter by determining whether changes
in the fair value of the derivative offset, within a specified range, changes in the fair value of the hedged item. If fair value changes fail
this test, we discontinue applying hedge accounting to that relationship prospectively. Fair values of both the derivative instrument and
the hedged item are calculated using internal valuation models incorporating market-based assumptions, subject to third-party
confirmation, as applicable. See Note 21 for further information.
DEFERRED INCOME TAXES. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts
of assets and liabilities and their tax bases, as well as from net operating loss and tax credit carryforwards, and are stated at enacted
tax rates expected to be in effect when those taxes are paid or recovered. Deferred income tax assets represent amounts available to
reduce income taxes payable on taxable income in future years. We evaluate the recoverability of these future tax deductions and
credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary
differences, forecasted operating earnings and available tax planning strategies. To the extent we consider it more likely than not that a
deferred tax asset will not be recovered, a valuation allowance is established. Deferred taxes, as needed, are provided for our
investment in affiliates and associated companies when we plan to remit those earnings. See Note 15 for further information.
BUSINESSES AND ASSETS HELD FOR SALE. Businesses and assets held for sale represent components that meet accounting
requirements to be classified as held for sale and are presented as single asset and liability amounts in our financial statements with a
valuation allowance, if necessary, to recognize the net carrying amount at the lower of cost or fair value, less cost to sell. Financing
receivables that no longer qualify to be presented as held for investment are classified as assets held for sale and recognized in our
financial statements at the lower of cost or fair value, less cost to sell, with that amount representing a new cost basis at the date of
transfer.
The determination of fair value for businesses and assets held for sale involves significant judgments and assumptions. Development of
estimates of fair values in this circumstance is complex and is dependent upon, among other factors, the nature of the potential sales
transaction (for example, asset sale versus sale of legal entity), composition of assets and/or businesses in the disposal group, the
comparability of the disposal group to market transactions and negotiations with third-party purchasers. Such factors bear directly on
the range of potential fair values and the selection of the best estimates. Key assumptions were developed based on market observable
data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical
transaction. We review all businesses and assets held for sale each reporting period to determine whether the existing carrying
amounts are fully recoverable in comparison to estimated fair values, less cost to sell. See Note 2 for further information.
INVESTMENT CONTRACTS, INSURANCE LIABILITIES AND INSURANCE ANNUITY BENEFITS. Our run-off insurance operations
include providing insurance and reinsurance for life and health risks and providing certain annuity products. Primary product types
include long-term care, structured settlement annuities, life and disability insurance contracts and investment contracts. Insurance
contracts are contracts with significant mortality and/or morbidity risks, while investment contracts are contracts without such risks.
For traditional long-duration insurance contracts, we report premiums as revenue when due. Premiums received on non-traditional
long-duration insurance contracts and investment contracts, including annuities without significant mortality risk, are not reported as
revenues but rather as deposit liabilities. We recognize revenues for charges and assessments on these contracts, mostly for mortality,
contract initiation, administration and surrender. Amounts credited to policyholder accounts are charged to expense.
GE 2019 FORM 10-K 72
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Liabilities for traditional long-duration insurance contracts includes both future policy benefit reserves and claims reserves. Future policy
benefit reserves represent the present value of future policy benefits less the present value of future gross premiums based on actuarial
assumptions. Liabilities for investment contracts equal the account value, that is, the amount that accrues to the benefit of the contract
or policyholder including credited interest and assessments through the financial statement date.
Claim reserves are established when a claim is incurred or is estimated to have been incurred and represents our best estimate of the
present value of the ultimate obligations for future claim payments and claim adjustments expenses.
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 offsetting after-tax reduction
to net unrealized gains recorded in other comprehensive income. See Note 12 for further information.
POSTRETIREMENT BENEFIT PLANS. We sponsor a number of pension and retiree health and life insurance benefit plans that we
present in three categories, principal pension plans, other pension plans and principal retiree benefit plans. We use a December 31
measurement date for these plans. On our consolidated Statement of Financial Position, we measure our plan assets at fair value and
the obligations at the present value of the estimated payments to plan participants. Participants earn benefits based on their service
and pay. Those estimated future payment amounts are determined based on assumptions. Differences between our actual results and
what we assumed are recorded in a separate component of equity each period. These differences are amortized into earnings over the
remaining average future service of active employees or the expected life of inactive participants, as applicable, who participate in the
plan. See Note 13 for further information.
LOSS CONTINGENCIES. Loss contingencies are uncertain and unresolved matters that arise in the ordinary course of business and
result from events or actions by others that have the potential to result in a future loss. Such contingencies include, but are not limited to
environmental obligations, litigation, regulatory investigations and proceedings, product quality and losses resulting from other events
and developments. When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best
estimate for the ultimate loss. When there appears to be a range of possible costs with equal likelihood, liabilities are based on the low-
end of such range. Disclosure is provided for material loss contingencies when a loss is probable but a reasonable estimate cannot be
made, and when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will
exceed the recorded provision. We regularly review contingencies to determine whether the likelihood of loss has changed and to
assess whether a reasonable estimate of the loss or range of loss can be made. See Note 23 for further information.
SUPPLY CHAIN FINANCE PROGRAMS. We evaluate supply chain finance programs to ensure where we use a third-party
intermediary to settle our trade payables, their involvement does not change the nature, existence, amount, or timing of our trade
payables and does not provide the Company with any direct economic benefit. If any characteristics of the trade payables change or we
receive a direct economic benefit, we reclassify the trade payables as borrowings.
FAIR VALUE MEASUREMENTS. The following sections describe the valuation methodologies we use to measure financial and non-
financial instruments accounted for at fair value including certain assets within our pension plans and retiree benefit plans. Observable
inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These inputs
establish a fair value hierarchy:
Level 1 – Quoted prices for identical instruments in active markets.
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are
not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 – Significant inputs to the valuation model are unobservable.
RECURRING FAIR VALUE MEASUREMENTS. For financial assets and liabilities measured at fair value on a recurring basis, primarily
investment securities and derivatives, fair value is the price we would receive to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of active markets for the identical assets or liabilities,
such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal
information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement
date. See Note 20 for further information.
Debt Securities. When available, we use quoted market prices to determine the fair value of debt securities which are included in Level
1. For our remaining debt securities, we obtain pricing information from an independent pricing vendor. The inputs and assumptions to
the pricing vendor’s models are derived from market observable sources including benchmark yields, reported trades, broker/dealer
quotes, issuer spreads, benchmark securities, bids, offers and other market-related data. These investments are included in Level 2.
Our pricing vendors may also provide us with valuations that are based on significant unobservable inputs, and in those circumstances,
we classify the investment securities in Level 3.
Annually, we conduct reviews of our primary pricing vendor to validate that the inputs used in that vendor’s pricing process are deemed
to be market observable as defined in the standard. We believe that the prices received from our pricing vendor are representative of
prices that would be received to sell the assets at the measurement date (exit prices) and are classified appropriately in the hierarchy.
GE 2019 FORM 10-K 73
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We use non-binding broker quotes and other third-party pricing services as our primary basis for valuation when there is limited, or no,
relevant market activity for a specific instrument or for other instruments that share similar characteristics. Debt securities priced in this
manner are included in Level 3.
Equity securities with readily determinable fair values. These publicly traded equity securities are valued using quoted prices and
are included in Level 1.
Derivatives. The majority of our derivatives are valued using internal models. The models maximize the use of market observable
inputs including interest rate curves and both forward and spot prices for currencies and commodities. Derivative assets and liabilities
included in Level 2 primarily represent interest rate swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3 primarily represent equity derivatives and interest rate products that
contain embedded optionality or prepayment features.
Investments in private equity, real estate and collective funds held within our pension plans. These investments are generally
valued using the net asset value (NAV) per share as a practical expedient for fair value provided certain criteria are met. The NAVs are
determined based on the fair values of the underlying investments in the funds. Investments that are measured at fair value using the
NAV practical expedient are not required to be classified in the fair value hierarchy.
NONRECURRING FAIR VALUE MEASUREMENTS. Certain assets are measured at fair value on a nonrecurring basis. These assets
may include loans and long-lived assets reduced to fair value upon classification as held for sale, impaired loans based on the fair value
of the underlying collateral, impaired equity securities without readily determinable fair value, equity method investments and long-lived
assets, and remeasured retained investments in formerly consolidated subsidiaries upon a change in control that results in the
deconsolidation of that subsidiary and retention of a noncontrolling stake in the entity. Assets written down to fair value when impaired
and retained investments are not subsequently adjusted to fair value unless further impairment occurs. See Note 20 for further
information.
Equity investments without readily determinable fair value and Associated companies. Equity investments without readily
determinable fair value and associated companies are valued using market observable data such as transaction prices when available.
When market observable data is unavailable, investments are valued using either a discounted cash flow model, comparative market
multiples, third-party pricing sources or a combination of these approaches as appropriate. These investments are generally included in
Level 3.
Long-lived Assets. Fair values of long-lived assets, including aircraft, are primarily derived internally and are based on observed sales
transactions for similar assets. In other instances for which we do not have comparable observed sales transaction data, collateral
values are developed internally and corroborated by external appraisal information. Adjustments to third-party valuations may be
performed in circumstances where market comparables are not specific to the attributes of the specific collateral or appraisal
information may not be reflective of current market conditions due to the passage of time and the occurrence of market events since
receipt of the information.
ACCOUNTING CHANGES. On January 1, 2019, we adopted ASU No. 2016-02 and related amendments, Leases (Topic 842). Upon
adoption, we recorded a $315 million increase to retained earnings, primarily attributable to the release of deferred gains on sale-lease
back transactions. Our ROU assets and lease liabilities for operating leases at adoption were $3,272 million and $3,459 million,
respectively, excluding discontinued operations and businesses held for sale. After the adoption date, principal collections on financing
leases are classified as Cash from operating activities in our consolidated Statement of Cash Flows. Previously, such flows were
classified as Cash from investing activities.
On January 1, 2019, we adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for
Hedging Activities. The ASU requires certain changes to the presentation of hedge accounting in the financial statements and some
new or modified disclosures. The ASU also simplifies the application of hedge accounting and expands the strategies that qualify for
hedge accounting. The adoption had an immaterial effect on our financial statements.
NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE. In August 2019, we announced an agreement to sell PK AirFinance,
an aviation lending business within our Capital segment, to Apollo Global Management, LLC and Athene Holding Ltd. The sale of a
substantial portion of the assets and liabilities was completed in the fourth quarter for proceeds of $3,575 million, and we recognized a
pre-tax gain of $50 million. As of December 31, 2019, we had remaining assets of $241 million (including Cash, cash equivalents and
restricted cash of $45 million) and liabilities of $52 million for this business classified as held for sale. We expect to complete the sale of
these remaining assets in the first half of 2020.
In February 2019, we announced an agreement to sell our BioPharma business within our Healthcare segment to Danaher Corporation
for total consideration of approximately $21,400 million, subject to certain adjustments. As of December 31, 2019, we had assets of
$8,742 million (including goodwill of $5,549 million) and liabilities of $1,372 million for this business classified as held for sale. We
expect to complete the sale, subject to regulatory approval, in the first quarter of 2020.
In 2018, we signed an agreement to sell Energy Financial Services' (EFS) debt origination business within our Capital segment, to
Starwood Property Trust, Inc. The sale was completed for proceeds of $2,011 million and we recognized a pre-tax gain of $288 million.
GE 2019 FORM 10-K 74
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In November 2017, the Company announced its intention to exit approximately $20 billion of industrial assets. Since this
announcement, we have classified various businesses across our Power, Aviation, and Healthcare segments, and Corporate as held for
sale. In 2019, we closed certain of these transactions within Corporate and our Power and Aviation segments for total net proceeds of
$1,070 million, recognized a pre-tax gain of $214 million in Other income in our consolidated Statement of Earnings (Loss) and
liquidated $548 million of our previously recorded valuation allowance. These transactions are subject to customary working capital and
other post-close adjustments. In addition, we recorded an additional valuation allowance of $254 million for the remaining businesses in
held for sale. As of December 31, 2019, we have closed the sale of substantially all of these assets in accordance with the plan.
FINANCIAL INFORMATION FOR ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE
December 31 (In millions)
Current receivables
Inventories
Financing receivables held for sale
Property, plant, and equipment – net and Operating leases
Goodwill and Other intangible assets - net
Valuation allowance
Deferred income taxes
All other assets
Assets of businesses held for sale
Accounts payable & Progress collections and deferred income
Non-current compensation and benefits
All other liabilities
Liabilities of businesses held for sale
2019
499 $
712
197
958
6,286
(719)
815
400
9,149 $
843 $
466
349
1,658 $
2018
184
529
—
423
884
(1,013)
—
622
1,629
428
152
128
708
$
$
$
$
DISCONTINUED OPERATIONS. Discontinued operations include our Baker Hughes and Transportation segments and certain assets
and liabilities from legacy financial services businesses. Results of operations, financial position and cash flows for these businesses
are reported as discontinued operations for all periods presented.
In September 2019, pursuant to our announced plan of an orderly separation of Baker Hughes over time, we sold a total of 144.1
million shares in Baker Hughes for $3,037 million in cash (net of certain deal related costs), which reduced our ownership interest in
Baker Hughes from 50.2% to 36.8%. As a result, we have deconsolidated our Baker Hughes segment and reclassified its results to
discontinued operations for all periods presented and recognized a loss of $8,715 million ($8,238 million after-tax). The loss represents
the sum of the realized loss on sale of the 144.1 million shares as well as the loss upon deconsolidation, which represents the
difference between the carrying value and fair value of our remaining interest as of the transaction date.
We elected to account for our remaining interest in Baker Hughes (comprising our 36.8% ownership interest and a promissory note
receivable) at fair value. The initial fair value of this investment was $9,587 million based on the Baker Hughes opening share price of
$23.53 as of the transaction date and the fair value of the promissory note receivable of $706 million. Our investment is recorded in
Investment securities in our consolidated Statement of Financial Position and related earnings or loss from subsequent changes in fair
value will be recognized in Other income in continuing operations in our consolidated Statement of Earnings (Loss). See Note 3 for
further information.
We have continuing involvement with Baker Hughes primarily through our remaining interest, ongoing purchases and sales of products
and services, as well as the transition services that we provide to Baker Hughes. They also participated in GE Capital's supply chain
finance program up to the date of separation. In addition, in the fourth quarter of 2019, we formed an aeroderivative joint venture (JV)
with Baker Hughes relating to their respective aeroderivative gas turbine products and services. The JV has total assets net of liabilities
of $613 million and is currently consolidated by GE. Since the date of the transaction, we had sales and purchases of products and
services with Baker Hughes and affiliates of $312 million and $105 million, respectively. We have collected net cash of $1,016 million
from Baker Hughes related to these activities, including $494 million of repayments on the promissory note. In addition, in the fourth
quarter of 2019 we received a dividend of $68 million from Baker Hughes.
In February 2019, we completed the spin-off and subsequent merger of our Transportation business with Wabtec, a U.S. rail equipment
manufacturer. In the transaction, our shareholders received shares of Wabtec common stock representing an approximate 24.3%
ownership interest in Wabtec common stock. We received $2,827 million in cash (net of certain deal related costs) as well as shares of
Wabtec common stock and Wabtec non-voting convertible preferred stock that, together, represent approximately 24.9% ownership
interest in Wabtec. In addition, we are entitled to additional cash consideration up to $470 million for tax benefits that Wabtec realizes
from the transaction. We reclassified our Transportation segment to discontinued operations in the first quarter of 2019.
As part of the transaction, we recorded a gain of $3,471 million ($2,508 million after-tax) in discontinued operations and a net after-tax
decrease of $852 million in additional paid in capital in connection with the spin-off of approximately 49.4% of Transportation to our
shareholders. The decrease in additional paid in capital was net of $940 million of taxes, including $860 million of current taxes (of
which $693 million was related to U.S. federal taxes). The fair value of our interest in Wabtec’s common and preferred shares was
$3,513 million based on the opening share price of $73.45 at the date of the transaction and was recorded in Investment securities in
our consolidated Statement of Financial Position.
GE 2019 FORM 10-K 75
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Discontinued operations for our financial services businesses primarily relate to the GE Capital Exit Plan (our plan, announced on April
10, 2015, to reduce the size of our financial services businesses) and were previously reported in our Capital segment. These
discontinued operations primarily comprise our mortgage portfolio in Poland, residual assets and liabilities related to our exited U.S.
mortgage business (WMC), and trailing liabilities associated with the sale of our GE Capital businesses.
In January 2019, we announced an agreement in principle with the United States to settle the investigation by the U.S. Department of
Justice (DOJ) regarding potential violations of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by
WMC and GE Capital, and in April 2019, the parties entered into a definitive settlement agreement. Under the agreement, which
concludes this investigation, GE, without admitting liability or wrongdoing, paid the United States a civil penalty of $1,500 million.
In June 2019, GE Capital recorded in Earnings (loss) from discontinued operations, net of taxes in our consolidated Statement of
Earnings (Loss), $332 million of tax benefits and $46 million of net interest benefits due to a decrease in our balance of unrecognized
tax benefits. See Note 15 for further information.
RESULTS OF DISCONTINUED OPERATIONS
For the year ended December 31, 2019 (In millions)
Sales of goods and services
GE Capital revenues and other income (loss)
Cost of goods and services sold
Other costs and expenses
Earnings (loss) of discontinued operations before income taxes
Benefit (provision) for income taxes(b)
Earnings (loss) of discontinued operations, net of taxes(a)
Gain (loss) on disposal before income taxes
Benefit (provision) for income taxes(b)
Gain (loss) on disposal, net of taxes
Earnings (loss) from discontinued operations, net of taxes
For the year ended December 31, 2018 (In millions)
Sales of goods and services
GE Capital revenues and other income (loss)
Cost of goods and services sold
Other costs and expenses
Earnings (loss) of discontinued operations before income taxes
Benefit (provision) for income taxes(b)
Earnings (loss) of discontinued operations, net of taxes(a)
Gain (loss) on disposal before income taxes
Benefit (provision) for income taxes(b)
Gain (loss) on disposal, net of taxes
Earnings (loss) from discontinued operations, net of taxes
For the year ended December 31, 2017 (In millions)
Sales of goods and services
GE Capital revenues and other income (loss)
Cost of goods and services sold
Other costs and expenses
Earnings (loss) of discontinued operations before income taxes
Benefit (provision) for income taxes(b)
Earnings (loss) of discontinued operations, net of taxes(a)
Gain (loss) on disposal before income taxes
Benefit (provision) for income taxes(b)
Gain (loss) on disposal, net of taxes
Baker Hughes
Transportation
and Other
GE Capital
Total
$
$
$
$
$
$
16,047
—
(13,317)
(2,390)
340
(176)
165
(8,715)
477
(8,238)
$
550
—
(478)
(19)
—
53
(15)
39
3,471
(963)
2,508
— $
33
—
(240)
(207)
344
136
61
(5)
56
(8,074) $
2,547
$
192
$
$
22,859
—
(19,198)
(3,346)
315
(347)
(33)
—
—
—
3,898
—
(2,809)
(607)
482
(143)
339
—
—
—
$
— $
(1,347)
—
(407)
(1,755)
82
(1,673)
4
(1)
3
16,598
33
(13,795)
(2,650)
186
153
339
(5,183)
(491)
(5,675)
—
(5,335)
26,757
(1,347)
(22,007)
(4,360)
(958)
(408)
(1,366)
4
(1)
3
(33) $
339
$
(1,670) $
(1,363)
$
17,180
—
(14,450)
(2,993)
(264)
(59)
(323)
—
—
—
3,935
—
(2,990)
(483)
461
(138)
323
—
—
—
$
— $
174
—
(910)
(735)
295
(440)
306
(178)
128
21,115
174
(17,441)
(4,386)
(538)
97
(441)
306
(178)
128
Earnings (loss) from discontinued operations, net of taxes
(a) Earnings (loss) of discontinued operations attributable to the Company after income taxes was $279 million, $(1,367) million and
(312) $
(323) $
323
$
$
(312)
$(360) million for the years ended December 31, 2019, 2018 and 2017, respectively.
(b) Total tax benefit (provision) for discontinued operations and disposals included current tax benefit (provision) of $1,260 million,
$(508) million, and $(704) million, including current U.S. Federal tax benefit (provision) of $1,252 million, $156 million and $(313)
million, and deferred tax benefit (provision) of $(1,599) million, $99 million and $624 million for the years ended December 31, 2019,
2018, and 2017, respectively.
GE 2019 FORM 10-K 76
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31 (In millions)
Cash, cash equivalents and restricted cash
Investment securities
Current receivables
Inventories
Financing receivables held for sale (Polish mortgage portfolio)
Property, plant and equipment - net
Goodwill and intangible assets - net
Deferred income taxes
All other assets
Assets of discontinued operations(a)
Accounts payable & Progress collections and deferred income
All other liabilities
Liabilities of discontinued operations(b)
2019
638 $
202
81
—
2,485
—
—
264
439
4,109 $
40 $
163
203 $
2018
4,424
522
6,258
5,419
2,745
7,139
31,622
1,174
4,550
63,853
6,806
12,476
19,281
$
$
$
$
(a) Assets of discontinued operations included $54,596 million and $4,573 million related to our Baker Hughes and Transportation
businesses, respectively as of December 31, 2018.
(b) Liabilities of discontinued operations included $15,535 million and $1,871 million related to our Baker Hughes and Transportation
businesses, respectively as of December 31, 2018.
Included within All other liabilities of discontinued operations at December 31, 2019 and December 31, 2018 are intercompany tax
receivables in the amount of $839 million and $1,141 million, respectively, primarily related to the financial services businesses that
were part of the GE Capital Exit Plan, which are offset within All other liabilities of consolidated GE.
NOTE 3. INVESTMENT SECURITIES
All of our debt securities are classified as available-for-sale and substantially all are investment-grade debt securities supporting
obligations to annuitants and policyholders in our run-off insurance operations. Changes in fair value of our debt securities are recorded
to other comprehensive income. Equity securities with readily determinable fair values are included within this caption and changes in
their fair value are recorded in earnings.
December 31 (In millions)
Debt
U.S. corporate
Non-U.S. corporate
State and municipal
Mortgage and asset-backed
Government and agencies
Equity
Total
2019
2018
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Estimated
fair value
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Estimated
fair value
$
$
23,037 $
2,161
3,086
3,117
1,391
10,025
42,816 $
4,636 $
260
598
116
126
—
5,736 $
(11) $
(1)
(15)
(4)
—
—
(31) $
27,661
2,420
3,669
3,229
1,516
10,025
48,521
$
$
21,306 $
1,906
3,320
3,325
1,314
107
31,277 $
2,257 $
53
367
51
62
—
2,792 $
(357) $
(76)
(54)
(54)
(20)
—
(561) $
23,206
1,883
3,633
3,322
1,357
107
33,508
The estimated fair values of investment securities at December 31, 2019 increased since December 31, 2018, primarily due to
decreases in market yields and the classification of our remaining equity interest in Baker Hughes within investment securities. We
elected to account for our remaining Baker Hughes interest and a promissory note receivable at fair value. At December 31, 2019, the
fair value of our interest in Baker Hughes was $9,888 million.
Net unrealized gains (losses) for equity securities, which are recorded in Other income within continuing operations, were $800 million
(including a gain of $793 million related to our interest in Baker Hughes), $(8) million and an insignificant amount for the years ended
December 31, 2019, 2018 and 2017, respectively.
Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the Baker Hughes promissory
note totaled $7,967 million, $3,222 million and $3,240 million for the years ended December 31, 2019, 2018, and 2017, respectively.
Gross realized gains on investment securities were $115 million, $249 million and $243 million, and gross realized losses and
impairments were $(203) million, $(41) million and $(24) million for the years ended 2019, 2018 and 2017, respectively. These realized
losses included $(132) million related to the Wabtec sale as of December 31, 2019.
Gross unrealized losses of $(11) million and $(20) million are associated with debt securities with a fair value of $724 million and $274
million that have been in a loss position for less than 12 months and 12 months or more, respectively, at December 31, 2019. Gross
unrealized losses of $(310) million and $(251) million are associated with debt securities with a fair value of $7,048 million, and $3,856
million that have been in a loss position for less than 12 months and 12 months or more, respectively, at December 31, 2018.
GE 2019 FORM 10-K 77
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Contractual maturities of investments in available-for-sale debt securities (excluding mortgage and asset-backed securities) at
December 31, 2019 are as follows:
(In millions)
Due
Within one year
After one year through five years
After five years through ten years
After ten years
Amortized
cost
Estimated
fair value
$
514 $
2,615
6,614
19,932
527
2,766
7,599
24,374
We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.
In addition to the equity securities described above, we hold $517 million and $542 million of equity securities without readily
determinable fair value at December 31, 2019 and December 31, 2018, respectively that are classified in All other assets in our
consolidated Statement of Financial Position. We initially recognize these assets at cost and have recorded insignificant fair value
increases, net of impairment, to earnings for the years ended December 31, 2019 and 2018, respectively and cumulatively, based on
observable transactions.
NOTE 4. CURRENT AND LONG-TERM RECEIVABLES
December 31 (In millions)
Power
Renewable Energy
Aviation(a)
Healthcare
Corporate
Customer receivables
Sundry receivables
Allowance for losses
Total current receivables
Consolidated
2019
4,689 $
2,306
3,249
2,105
246
12,594
5,049
(874)
16,769 $
2018
4,652
1,938
1,483
2,431
238
10,742
4,573
(670)
14,645
$
$
GE
2019
3,289 $
1,749
2,867
1,379
223
9,507
5,247
(872)
13,883 $
$
$
2018
2,270
1,475
1,145
1,260
205
6,355
4,569
(662)
10,262
(a) Increase in Aviation segment is primarily driven by receivables from Boeing due to 737 MAX temporary fleet grounding, with balance
of $1,397 million as of December 31, 2019.
Current sundry receivables include supplier advances, revenue sharing programs receivables, other non-income based tax receivables,
certain intercompany balances that eliminate upon consolidation and deferred purchase price. The deferred purchase price represents
our retained risk with respect to current customer receivables sold to third parties through one of the receivable facilities. The balance of
the deferred purchase price held by GE Capital at December 31, 2019 and 2018, was $421 million and $468 million, respectively.
Sales of GE current customer receivables. GE sales of customer receivables to GE Capital or third parties are made on arm's length
terms and any discount related to time value of money is recognized by GE when the customer receivables are sold. As of December
31, 2019 and 2018, GE sold approximately 51% and 66%, respectively, of its gross customer receivables to GE Capital or third parties.
The performance of sold current receivables is similar to the performance of our other GE current receivables; delinquencies are not
expected to be significant. Any difference between the carrying value of receivables sold and total cash collected is recognized as
financing costs by GE in Interest and other financial charges in our consolidated Statement of Earnings (Loss). Costs of $515
million and $616 million were recognized during the years ended December 31, 2019 and 2018, respectively.
GE 2019 FORM 10-K 78
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Activity related to customer receivables sold by GE is as follows:
(In millions)
Balance at January 1
GE sales to GE Capital
GE sales to third parties
GE Capital sales to third parties
Collections and other
Reclassification from long-term customer receivables
Balance at December 31
GE Capital
Third Parties
GE Capital
Third Parties
2019
$
$
4,386
40,988
—
(28,073)
(14,621)
407
$
3,087 (a) $
7,880
—
6,370
28,073
(35,567)
—
6,757
$
$
2018
9,656
50,318
—
(30,904)
(25,414)
731
4,386 (a)
$
$
5,710
—
5,481
30,904
(34,216)
—
7,880
(a) At December 31, 2019 and 2018, $539 million and $1,380 million, respectively, of the current receivables purchased and retained by
GE Capital, had been sold by GE to GE Capital with recourse (i.e., GE retains all or some risk of default). The effect on GE cash
flows from operating activities (CFOA) of claims by GE Capital on receivables sold with recourse has been insignificant for the years
ended December 31, 2019 and 2018.
When GE sells customer receivables to GE Capital or third parties it accelerates the receipt of cash that would otherwise have been
collected from customers. In any given period, the amount of cash received from sales of customer receivables compared to the cash
GE would have otherwise collected had those customer receivables not been sold represents the cash generated or used in the period
relating to this activity. Sales to GE Capital impact GE CFOA, while sales to third parties impact both GE and Consolidated CFOA. The
impact of selling fewer customer receivables to GE Capital and those subsequently sold by GE Capital to third parties, including the
effect of business dispositions, decreased GE’s CFOA by $2,099 million, $3,401 million and $138 million in the years ended December
31, 2019, 2018 and 2017, respectively.
LONG-TERM RECEIVABLES. In certain circumstances, GE provides customers, primarily within our Power, Renewable Energy and
Aviation businesses, with extended payment terms for the purchase of new equipment, purchases of upgrades and spare parts for our
long-term service agreements. These long-term customer receivables are initially recorded at present value and have an average
remaining duration of approximately three years and are included in All other assets in the consolidated Statement of Financial Position.
December 31 (In millions)
Long-term customer receivables
Long-term sundry receivables
Allowance for losses
Total long-term receivables
Consolidated
2019
906 $
1,504
(128)
2,282 $
2018
1,442
1,180
(145)
2,477
$
$
GE
2019
506 $
1,834
(128)
2,212 $
$
$
2018
559
1,519
(145)
1,933
Long-term sundry receivables include supplier advances, revenue sharing programs receivables, other non-income based tax
receivables and certain intercompany balances that eliminate upon consolidation.
Sales of GE long-term customer receivables. Through the second quarter of 2018, sales of long-term customer receivables were
primarily made to GE Capital, while subsequently, GE has sold an insignificant amount to third parties to transfer economic risk during
both the years ended December 31, 2019 and 2018. Activity related to long-term customer receivables purchased by GE Capital is as
follows:
GE Capital December 31 (In millions)
Balance at January 1
GE sales to GE Capital
Sales, collections, accretion and other
Reclassification to current customer receivables
Balance at December 31(a)
2019
883
—
(75)
(407)
400
$
$
2018
1,947
134
(468)
(731)
883
$
$
(a) At December 31, 2019 and 2018, $312 million and $628 million, respectively, of long-term customer receivables purchased and
retained by GE Capital, had been sold by GE to GE Capital with recourse (i.e., GE retains all or some risk of default). The effect on
GE CFOA of claims by GE Capital on receivables sold with recourse have been insignificant for the years ended December 31,
2019 and 2018.
Similar to sales of current customer receivables, sales of long-term customer receivables can result in cash generation or use in our
Statements of Cash Flows. The impact from the sale of long-term customer receivables to GE Capital, including those subsequently
sold by GE Capital to third parties, decreased GE’s CFOA by $585 million, $878 million and increased GE's CFOA by $250 million in
the years ended December 31, 2019, 2018 and 2017, respectively.
GE 2019 FORM 10-K 79
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNCONSOLIDATED RECEIVABLES FACILITIES. GE Capital has two revolving receivables facilities, with a total program size of
$4,300 million, under which customer receivables purchased from GE are sold to third parties. In one of the facilities, upon the sale of
receivables, we receive proceeds of cash and deferred purchase price and the Company’s remaining risk with respect to the sold
receivables is limited to the balance of the deferred purchase price. In December 2018, we renegotiated the terms of this receivables
facility. Effective January 2019, sales of receivables to the third-party purchasers and creation of deferred purchase price occur monthly
rather than daily. As a result, both non-cash increases to the deferred purchase price and cash payments received on the deferred
purchase price declined in 2019. In the other facility, upon the sale of receivables, we receive proceeds of cash only and therefore the
Company has no remaining risk with respect to the sold receivables. Activity related to these facilities is included in GE Capital sales to
third parties line in the sales of GE current customer receivables table above and is as follows:
For the years ended December 31 (In millions)
Customer receivables sold to receivables facilities
Total cash purchase price for customer receivables
Cash collections re-invested to purchase customer receivables
Non-cash increases to deferred purchase price
Cash payments received on deferred purchase price
$
$
2019
21,695
21,202
18,012
257
303
$
$
2018
23,984
18,040
15,095
5,272
5,192
CONSOLIDATED SECURITIZATION ENTITIES. GE Capital consolidates three VIEs that purchased customer receivables and long-
term customer receivables from GE. At December 31, 2019 and 2018, these VIEs held current customer receivables of $2,080 million
and $2,141 million and long-term customer receivables of $375 million and $678 million, respectively that were funded through the
issuance of non-recourse debt to third parties. At December 31, 2019 and 2018, the outstanding debt under their respective debt
facilities was $1,655 million and $1,875 million, respectively.
NOTE 5. FINANCING RECEIVABLES AND ALLOWANCES
December 31 (In millions)
Loans, net of deferred income
Investment in financing leases, net of deferred income
Allowance for losses
Financing receivables – net
Consolidated
2019
1,098 $
2,070
3,168
(33)
3,134 $
2018
5,118
2,639
7,757
(58)
7,699
$
$
GE Capital
2019
4,927 $
2,070
6,996
(17)
6,979 $
2018
10,834
2,822
13,656
(28)
13,628
$
$
Consolidated finance lease income was $173 million, $275 million and $274 million for the years ended December 31, 2019, 2018 and
2017, respectively.
NET INVESTMENT IN FINANCING LEASES
December 31 (In millions)
Total minimum lease payments receivable
Less principal and interest on third-party non-recourse debt
Net minimum lease payments receivable
Less deferred income
Discounted lease receivable
Estimated unguaranteed residual value of leased assets,
net of deferred income
Investment in financing leases, net of deferred income(b)
$
$
Total financing leases
Direct financing and
sales type leases(a)
Leveraged leases
2019
1,628 $
(216)
1,412
(178)
1,234
835
2,070 $
$
2018
2,719
(474)
2,245
(329)
1,916
2019
2018
2019
2018
799 $
—
799
(139)
660
$
1,421
—
1,421
(286)
1,135
829 $
(216)
613
(39)
574
1,298
(474)
824
(43)
781
906
2,822
$
412
1,072 $
420
1,556
$
423
997 $
486
1,266
(a) Included $506 million and $399 million investment in sales type leases at December 31, 2019 and 2018, respectively.
(b) See Note 15 for deferred tax amounts related to financing leases.
CONTRACTUAL MATURITIES, DUE IN
(In millions)
2020
2021
2022
2023
2024
Thereafter
Total loans
Net minimum lease payments receivable
$
3,832 $
303
511 $
270
238 $
194
113 $
281
93 $
198
140 $
166
Total
4,927
1,412
We expect actual maturities to differ from contractual maturities, primarily as a result of prepayments.
GE 2019 FORM 10-K 80
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We manage our GE Capital financing receivables portfolio using delinquency and nonaccrual data as key performance indicators. At
December 31, 2019, 4.2%, 2.9% and 6.1% of financing receivables were over 30 days past due, over 90 days past due and on
nonaccrual, respectively, with the vast majority of nonaccrual financing receivables secured by collateral. At December 31, 2018, 2.4%,
1.8% and 0.9% of financing receivables were over 30 days past due, over 90 days past due and on nonaccrual, respectively.
GE Capital financing receivables that comprise receivables purchased from GE are reclassified to either Current receivables or All other
assets in the consolidated Statement of Financial Position. To the extent these receivables are purchased with full or limited recourse,
they are excluded from the delinquency and nonaccrual data above. See Note 4 for further information.
NOTE 6. INVENTORIES
December 31 (In millions)
Raw materials and work in process
Finished goods
Total inventories
NOTE 7. PROPERTY, PLANT AND EQUIPMENT AND OPERATING LEASES
Depreciable lives-new
(in years)
Original Cost
2019
2019
8,771 $
5,333
14,104 $
2018
8,057
5,746
13,803
$
$
Net Carrying Value
2018
2019
8 $
608 $
8-40
4-20
1-10
$
7,824
20,082
2,165
30,680 $
700
8,455
19,425
2,646
31,225
$
$
596 $
3,875
8,360
1,539
14,370 $
2018
673
4,083
8,048
2,024
14,828
1-40
149 $
153
29 $
32
15-20
15-20
15-20
15-35
35,507
4,113
5,474
237
45,480 $
36,476
3,234
5,230
209
45,302
(972)
75,187 $
(909)
75,618
$
$
21,414
3,283
4,709
214
29,649 $
22,201
2,489
4,660
128
29,510
(729)
43,290 $
(728)
43,611
$
$
December 31 (Dollars in millions)
Land and improvements
Buildings, structures and related equipment
Machinery and equipment
Leasehold costs and manufacturing plant under construction
GE
Land and improvements, buildings, structures and related
equipment
Equipment leased to others (ELTO)
Aircraft
Engines
Helicopters
All other
GE Capital(a)
Eliminations
Total
(a) Included $1,539 million and $1,397 million of original cost of assets leased to GE with accumulated amortization of $(251) million
and $(241) million at December 31, 2019 and 2018, respectively.
Consolidated depreciation and amortization related to property, plant and equipment was $4,026 million, $4,419 million and $4,332
million for the years ended December 31, 2019, 2018 and 2017, respectively. Amortization of GE Capital ELTO was $2,019 million,
$2,089 million and $2,190 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Noncancellable future rentals due from customers for equipment on operating leases at December 31, 2019, are as follows:
(In millions)
2020
2021
2022
2023
2024
Thereafter
Total
Operating lease income on our ELTO was $3,804 million, $4,075 million, and $4,144 million for the years ended December 31, 2019,
2018, and 2017, respectively, and comprises fixed lease income of $3,045 million, $3,243 million and $3,395 million and variable lease
income of $759 million, $832 million and $748 million, respectively.
$
2,982 $
2,625 $
2,258 $
1,820 $
1,647 $
5,652 $
16,985
Operating Lease Assets and Liabilities. Our ROU assets and lease liabilities for operating leases were $2,896 million and $3,162
million, respectively, as of December 31, 2019. Substantially all of our operating leases have remaining lease terms of 12 years or less,
some of which may include options to extend.
OPERATING LEASE EXPENSE (In millions)
Long-term (fixed)
Long-term (variable)
Short-term
Total operating lease expense
2019
834
136
206
1,176
$
$
2018
966
177
133
1,276
$
$
2017
1,003
231
131
1,365
$
$
GE 2019 FORM 10-K 81
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MATURITY OF LEASE LIABILITIES (In millions)
2020
2021
2022
2023
2024
Thereafter
Total
Undiscounted lease payments
Less: imputed interest
Total lease liability as of December 31, 2019
$
766 $
655 $
561 $
465 $
375 $
914 $
$
3,737
(575)
3,162
SUPPLEMENTAL INFORMATION RELATED TO OPERATING LEASES (Dollars in millions)
Operating cash flows used for operating leases for the year ended December 31, 2019
Right-of-use assets obtained in exchange for new lease liabilities for the year ended December 31, 2019
Weighted-average remaining lease term at December 31, 2019
Weighted-average discount rate at December 31, 2019
$
$
888
746
6.9 years
4.9%
NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
CHANGES IN GOODWILL BALANCES
2018
2019
Balance at
December 31,
2017
Dispositions
and
classifications
to held for sale Impairments
Currency
exchange
and other
Balance at
December 31,
2018
Dispositions
and
classifications
to held for sale Impairments
Currency
exchange
and other
Balance at
December 31,
2019
$
20,855 $
(1,903) $ (18,443) $
(369) $
139 $
— $
— $
6 $
145
7,626
10,008
17,306
984
2,042
58,821 $
(3)
(12)
(21)
—
(81)
(2,859)
—
—
—
(833)
(2,020) $ (22,136) $
(35)
(158)
(58)
(80)
9
(691) $
4,730
9,839
17,226
904
1,136
33,974 $
—
—
(5,558)
(39)
—
(5,597) $
(1,486)
—
—
—
—
(1,486) $
46
20
59
(26)
(262)
(157) $
3,290
9,859
11,728
839
873
26,734
$
(In millions)
Power
Renewable
Energy
Aviation
Healthcare
Capital(a)
Corporate(b)
Total
(a) Capital balance at December 31, 2019 is our GE Capital Aviation Services (GECAS) business.
(b) Corporate balance at December 31, 2019 is our Digital business.
Goodwill balances decreased primarily as a result of transferring our BioPharma business within our Healthcare segment to held for
sale and goodwill impairments at our Hydro and Grid Solutions equipment and services reporting units within our Renewable Energy
segment.
In the second quarter of 2019, we reorganized our Grid Solutions reporting unit in our Power segment by separating our Grid Solutions
software business from the Grid Solutions reporting unit. Our Grid Solutions software business was then moved into Corporate and
combined with our Digital business. In addition, the remaining Grid Solutions reporting unit (now referred to as Grid Solutions
equipment and services) was moved into our Renewable Energy segment as a separate reporting unit. As a result, we allocated
goodwill between Grid Solutions software and the Grid Solutions equipment and services reporting units based on the relative fair
values of each business. This resulted in $1,618 million of goodwill transferring from our Power segment to our Renewable Energy
segment and our Digital business within Corporate in the amounts of $744 million and $874 million, respectively.
As a consequence of separating the two businesses, the Grid Solutions equipment and services reporting unit’s fair value was below its
carrying value. Therefore, we conducted step two of the goodwill impairment test for this reporting unit using a current outlook.
In performing the second step, we identified unrecognized intangible assets primarily related to internally developed technology and
trade name. The combination of these unrecognized intangibles, adjustments to the carrying value of other assets and liabilities, and
reduced reporting unit fair value calculated in step one, resulted in an implied fair value of goodwill below the carrying value of goodwill
for the Grid Solutions equipment and services reporting unit. Therefore, we recorded a non-cash goodwill impairment loss of $744
million in Goodwill impairments in our consolidated Statement of Earnings (Loss). We determined the fair value of the Grid Solutions
equipment and services reporting unit using a combination of the market and income approaches. After the impairment charge, there is
no remaining goodwill associated with our Grid Solutions equipment and services reporting unit.
Further, in the second quarter of 2019, a portion of goodwill recorded at Corporate associated with our Digital acquisitions that was
previously allocated to our Renewable Energy, Aviation and Healthcare segments in purchase accounting and for goodwill testing
purposes was reflected in these segments in the table above.
GE 2019 FORM 10-K 82
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the third quarter of 2019, we performed our annual impairment test. Based on the results of this test, the fair values of each of our
reporting units exceeded their carrying values except for our Hydro reporting unit within our Renewable Energy segment. The Hydro
reporting unit continued to experience declines in order growth and increased project costs which resulted in downward revisions to our
current and projected earnings and cash flows for this business. Therefore, we performed a step two analysis which resulted in a non-
cash goodwill impairment loss of $742 million. We determined the fair value of the Hydro reporting unit using the income approach. We
recorded the impairment loss in Goodwill impairments in our consolidated Statement of Earnings (Loss). After the impairment charge,
there is no remaining goodwill associated with our Hydro reporting unit. All of the goodwill in this reporting unit was previously recorded
as a result of the Alstom acquisition.
Subsequent to this year's third quarter testing, and in order to improve alignment of our annual goodwill impairment testing and
strategic planning processes, we changed our annual testing date from the third quarter to the fourth quarter. Therefore, we retested the
goodwill at each of our reporting units in the fourth quarter of 2019. Based on the results of this test, the fair value of all our reporting
units exceeded their carrying values.
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 December 31, 2019, our Additive reporting unit had
goodwill of $1,116 million.
We also continue to evaluate strategic options to accelerate the further reduction in the size of GE Capital, some of which could have a
material charge depending on the timing, negotiated terms and conditions of any agreements, including $839 million of goodwill.
In 2018, we recognized a total non-cash goodwill impairment loss of $22,136 million in our Power Generation, Grid Solutions, and
Hydro reporting units in our Power and Renewable Energy segments.
Determining the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of
factors including actual operating results. It is reasonably possible that the judgments and estimates described above could change in
future periods.
INTANGIBLE ASSETS SUBJECT TO
AMORTIZATION December 31 (In millions)
Gross carrying
amount
Accumulated
amortization
Gross carrying
amount
Accumulated
amortization
Net
2019
2018
Customer-related(a)
Patents and technology
Capitalized software
Trademarks & other
Total
$
$
6,770 $
8,180
5,822
737
21,510 $
(3,070) $
(3,730)
(3,651)
(406)
(10,857) $
3,701
4,450
2,171
332
10,653
$
$
7,107 $
9,166
5,951
818
23,041 $
(2,768) $
(3,973)
(3,643)
(481)
(10,865) $
(a) Balance includes payments made to our customers, primarily within our Aviation business.
Net
4,341
5,192
2,308
337
12,178
Intangible assets decreased in the fourth quarter of 2019, primarily as a result of amortization, impairments, and the transfer of
BioPharma within our Healthcare segment to held for sale of $542 million. Consolidated amortization expense was $1,569 million,
$2,163 million and $1,862 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Included within amortization expense for the years ended December 31, 2019 and December 31, 2018 were non-cash impairment
charges recorded in Corporate and in our Power segment for $103 million and $428 million, respectively. We determined the fair value
of these intangible assets using an income approach. These charges were recorded in Selling, general, and administrative expenses in
our consolidated Statement of Earnings (Loss).
Estimated Consolidated annual pre-tax amortization for intangible assets over the next five calendar years are as follows:
ESTIMATED 5 YEAR CONSOLIDATED AMORTIZATION (In millions)
2020
2021
2022
2023
2024
Estimated annual pre-tax amortization
$
1,358 $
1,274 $
1,173 $
1,081 $
1,107
During 2019, we recorded additions to intangible assets subject to amortization of $664 million with a weighted-average amortizable
period of 5.4 years, including capitalized software of $555 million, with a weighted-average amortizable period of 5.2 years.
GE 2019 FORM 10-K 83
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. CONTRACT AND OTHER DEFERRED ASSETS & PROGRESS COLLECTIONS AND DEFERRED INCOME
Contract and other deferred assets decreased $629 million in 2019. Our long-term service agreements decreased primarily due to
billings of $11,508 million and a net unfavorable change in estimated profitability of $124 million at Power and $49 million at Aviation,
offset by revenues recognized of $11,082 million.
December 31, 2019 (In millions)
Revenues in excess of billings
Billings in excess of revenues
Long-term service agreements(a)
Short-term and other service agreements
Equipment contract revenues(b)
Total contract assets
Deferred inventory costs(c)
Nonrecurring engineering costs(d)
Customer advances and other(e)
Contract and other deferred assets
December 31, 2018 (In millions)
Revenues in excess of billings
Billings in excess of revenues
Long-term service agreements(a)
Short-term and other service agreements
Equipment contract revenues(b)
Total contract assets
Deferred inventory costs(c)
Nonrecurring engineering costs(d)
Customer advances and other(e)
Contract and other deferred assets
Power
Aviation
Renewable
Energy
Healthcare
Other
Total
$
$
$
$
$
$
5,342 $
(1,561)
3,781 $
190
2,508
6,478
943
44
—
7,465 $
4,996 $
(3,719)
1,278 $
316
82
1,675
287
2,257
1,165
5,384 $
5,368 $
(1,693)
3,675 $
167
2,761
6,603
1,003
43
—
7,650 $
5,412 $
(3,297)
2,115 $
272
80
2,468
673
1,916
1,146
6,204 $
— $
—
— $
43
1,217
1,260
1,677
47
—
2,985 $
— $
—
— $
—
1,174
1,174
1,267
85
—
2,525 $
— $
—
— $
169
324
492
359
35
—
886 $
— $
—
— $
251
320
571
360
34
—
966 $
— $ 10,338
(5,280)
—
5,058
— $
717
—
106
4,236
10,011
106
3,267
—
2,391
8
1,133
(32)
82 $ 16,801
— $ 10,780
(4,989)
—
5,790
— $
—
690
4,400
64
10,880
64
3,309
5
2,095
17
1,146
—
87 $ 17,431
(a) Included amounts due from customers at Aviation for the sales of engines, spare parts and services, which we will collect through
higher usage-based fees from servicing equipment under long-term service agreements, totaling $1,712 million and $1,562 million
as of December 31, 2019 and 2018, respectively. The corresponding discount is recorded within liabilities as Deferred income and
amounted to $308 million and $310 million as of December 31, 2019 and 2018, respectively.
(b) Included are amounts due from customers at Power for the sale of services upgrades, which we collect through incremental fixed or
usage-based fees from servicing the equipment under long-term service agreements, totaling $909 million and $886 million as of
December 31, 2019 and 2018, respectively.
(c) 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.
(d) Included costs incurred prior to production (such as requisition engineering) for equipment production contracts, primarily within our
Aviation segment, which are allocated ratably to each unit produced.
(e) Included advances to and amounts due from customers at Aviation for the sale of engines, spare parts and services, which we will
collect through incremental fees for goods and services to be delivered in future periods, totaling $986 million and $950 million as of
December 31, 2019 and 2018, respectively. The corresponding discount is recorded within liabilities as Deferred income and
amounted to $256 million and $223 million as of December 31, 2019 and 2018, respectively.
PROGRESS COLLECTIONS & DEFERRED INCOME. Progress collections represent cash received from customers under ordinary
commercial payment terms in advance of delivery. Progress collections on equipment contracts primarily comprise milestone payments
received from customers prior to the manufacture and delivery of customized equipment orders. Other progress collections primarily
comprise down payments from customers to reserve production slots for standardized inventory orders such as advance payments
from customers when they place orders for wind turbines and blades within our Renewable Energy segment and payments from
airframers and airlines for install and spare engines, respectively, within our Aviation segment.
Progress collections and deferred income increased $1,456 million in 2019 primarily due to milestone payments received primarily at
Aviation and Renewable Energy. These increases were partially offset by the timing of revenue recognition in excess of new collections
received, primarily at Healthcare and Power.
Revenues recognized for contracts included in liability position at the beginning of the year were $11,020 million and $14,960 million for
the year ended December 31, 2019 and 2018, respectively.
GE 2019 FORM 10-K 84
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019 (In millions)
Progress collections on equipment contracts
Other progress collections
Total progress collections
Deferred income(a)
GE Progress collections and deferred income
December 31, 2018 (In millions)
Progress collections on equipment contracts
Other progress collections
Total progress collections
Deferred income(a)
GE Progress collections and deferred income
Power
Aviation
Renewable
Energy
Healthcare
Other
Total
$
$
$
$
$
$
5,857 $
413
6,270 $
49
6,319 $
115 $
4,748
4,863 $
1,528
6,391 $
1,268 $
4,193
5,461 $
284
5,745 $
— $
305
305 $
1,647
1,952 $
5,536 $
691
6,227 $
112
6,339 $
114 $
4,034
4,148 $
1,338
5,486 $
1,325 $
3,557
4,883 $
260
5,143 $
— $
299
299 $
1,692
1,991 $
— $
7,240
9,849
189
189 $ 17,089
3,606
287 $ 20,694
98
— $
6,975
8,783
201
201 $ 15,758
3,480
280 $ 19,239
79
(a) Included in this balance are finance discounts associated with customer advances at Aviation of $564 million and $533 million as of
December 31, 2019 and 2018, respectively.
NOTE 10. ALL OTHER ASSETS
December 31 (In millions)
Equity method and other investments (Notes 3 and 26)
Long-term receivables (Note 4)
Prepaid taxes and deferred charges
Derivative instruments (Note 21)
Other
Total GE
Equity method and other investments (Notes 3 and 26)
GECAS pre-delivery payments (Note 23)
Assets held for sale
Derivative instruments (Note 21)
Other
Total GE Capital
Eliminations
Total Consolidated
2019
4,015 $
2,212
1,480
211
481
8,399 $
2,227 $
2,934
2,294
529
664
8,648 $
(586)
16,461 $
2018
4,003
1,933
1,763
30
849
8,578
3,097
3,086
2,762
175
748
9,869
(90)
18,357
$
$
$
$
$
GE 2019 FORM 10-K 85
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. BORROWINGS
December 31 (Dollars in millions)
Commercial paper
Current portion of long-term borrowings
Current portion of long-term borrowings assumed by GE
Other
Total GE short-term borrowings
Current portion of long-term borrowings
Intercompany payable to GE
Other
Total GE Capital short-term borrowings
Eliminations
Total short-term borrowings
Senior notes
Senior notes assumed by GE
Subordinated notes assumed by GE
Other
Total GE long-term borrowings
Senior notes
Subordinated notes
Intercompany payable to GE
Other
Total GE Capital long-term borrowings
Eliminations
Total long-term borrowings
Non-recourse borrowings of
consolidated securitization entities
Total borrowings
2019
2018
Amount Average Rate
$
$
$
$
3,008
766
5,473
1,832
11,079
11,226
2,104
804
14,134
(3,140)
22,072
1.62% $
0.36
3.71
3.01%
$
$
$
Amount Average Rate
14,762
23,024
2,871
324
40,980
2.11% $
4.17
3.68
$
Amount Average Rate
1.64%
4.02
3.76
3,005
60
4,207
2,081
9,354
2.00%
3,984
2,684
1,015
7,684
(4,262)
12,776
Amount Average Rate
2.28%
20,387
4.30
29,218
2,836
3.64
417
52,858
25,371
178
17,038
626
43,213
(17,038)
67,155
1,655
90,882
3.66% $
$
$
$
1.34%
35,105
165
19,828
885
55,982
(19,892)
88,949
1,875
103,599
3.49%
2.05%
Maturities
2022-2044 $
2021-2054
2021-2037
$
2021-2042 $
$
$
$
2020-2021
At December 31, 2019, the outstanding GE Capital borrowings that had been assumed by GE as part of the GE Capital Exit Plan was
$31,368 million ($5,473 million short term and $25,895 million long term), for which GE has an offsetting Receivable from GE Capital of
$19,142 million. The difference of $12,226 million ($3,369 million in short-term borrowings and $8,857 million in long-term borrowings)
represents the amount of borrowings GE Capital had funded with available cash to GE via intercompany loans in lieu of GE issuing
borrowings externally. In 2019, GE repaid $1,523 million of maturing intercompany loans from GE Capital.
At December 31, 2019, total GE borrowings of $32,917 million comprised GE-issued borrowings of $20,691 million and intercompany
loans from GE Capital to GE of $12,226 million as described above.
GE has provided a full and unconditional guarantee on the payment of the principal and interest on all tradable senior and subordinated
outstanding long-term debt securities and all commercial paper issued or guaranteed by GE Capital. At December 31, 2019, the
Guarantee applies to $34,683 million of GE Capital debt.
On September 30, 2019, GE completed a tender offer to purchase $4,846 million in aggregate principal amount of certain senior
unsecured debt, comprising $1,250 million of 4.500% Notes due 2044, $1,144 million of 4.125% Notes due 2042, €992 million ($1,101
million equivalent) of 2.125% Notes due 2037, €784 million ($870 million equivalent) of 1.500% Notes due 2029, €374 million ($415
million equivalent) of 1.875% Notes due 2027, and €59 million ($66 million equivalent) of 1.250% Notes due 2023. The total cash
consideration paid for these purchases was $5,031 million and the total carrying amount of the purchased notes was $4,787 million,
resulting in a loss of $255 million (including $12 million of accrued fees and other costs associated with the tender) which was recorded
in Interest and other financial charges in the GE Statement of Earnings (Loss). In addition to the purchase price, GE paid any accrued
and unpaid interest on the purchased notes through the date of purchase.
Non-recourse borrowings of consolidated securitization entities included $1,569 million and $225 million of current portion of long-term
borrowings at December 31, 2019 and 2018, respectively. See Notes 4 and 22 for further information.
See Note 21 for further information about borrowings and associated interest rate swaps.
GE 2019 FORM 10-K 86
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Long-term debt maturities over the next five years follow.
(In millions)
GE excluding assumed debt
GE Capital debt assumed by GE(a)
GE Capital other debt
$
2020
$
766
5,473
11,226(b)
2021
47 $
4,685
1,930
2022
4,994 $
1,954
2,215
2023
1,360 $
2,842
2,418
2024
773
918
117
(a) Of these maturities, $3,369 million, $442 million, zero, zero and $528 million for 2020, 2021, 2022, 2023 and 2024 respectively,
were effectively transferred to GE through intercompany loans with right of offset.
(b) Fixed and floating rate notes of $443 million contain put options with exercise dates in 2020, which have final maturity beyond 2024.
NOTE 12. INSURANCE LIABILITIES AND ANNUITY BENEFITS
Insurance liabilities and annuity benefits comprise mainly obligations to annuitants and insureds in our run-off insurance operations.
December 31, 2019 (In millions)
Future policy benefit reserves
Claim reserves(b)
Investment contracts(c)
Unearned premiums and other
Eliminations
Total
December 31, 2018 (In millions)
Future policy benefit reserves
Claim reserves(b)
Investment contracts(c)
Unearned premiums and other
Eliminations
Total
Long-term care
insurance
contracts
Structured
settlement
annuities & life
insurance
contracts
Other
contracts
Other
adjustments(a)
Total
$
$
$
$
16,755 $
4,238
—
30
21,023
—
21,023 $
16,029 $
3,917
—
34
19,980
—
19,980 $
9,511 $
252
1,136
196
11,095
—
11,095 $
9,495 $
230
1,239
205
11,169
—
11,169 $
183 $
1,125
1,055
96
2,459
(406)
2,053 $
169 $
1,178
1,149
103
2,599
(432)
2,167 $
5,655 $
—
—
5,655
—
5,655 $
2,247 $
—
—
—
2,247
—
2,247 $
32,104
5,615
2,191
322
40,232
(406)
39,826
27,940
5,324
2,388
342
35,994
(432)
35,562
(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 Other comprehensive income in our consolidated Statement of Earnings (Loss).
(b) Other contracts included claim reserves of $342 million and $346 million related to short-duration contracts at Electric Insurance
Company, net of eliminations, at December 31, 2019 and December 31, 2018, respectively.
(c) Investment contracts are contracts without significant mortality or morbidity risks.
We annually perform premium deficiency testing in the aggregate across our run-off insurance portfolio. We performed this year’s
testing in the third quarter of 2019, consistent with our historical practice prior to 2017 when we reconstructed our claim cost curves.
These procedures included updating experience studies since our last test completed in the fourth quarter of 2018, independent
actuarial analysis and review of industry benchmarks. As we experienced a premium deficiency in 2018, our 2019 premium deficiency
testing started with a zero margin and, accordingly, any net adverse development would result in a future charge to earnings. Using our
most recent future policy benefit reserve assumptions, including changes to our assumptions related to discount rate and future
premium rate increases, as described below, we identified a premium deficiency resulting in a $972 million non-cash pre-tax charge to
earnings in the third quarter 2019.
GE 2019 FORM 10-K 87
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The increase to future policy benefit reserves resulting from our 2019 testing was primarily attributable to the following key assumption
changes:
• We have observed a significant decline in market interest rates this year, which has resulted in a lower discount rate and adversely
impacted our reserve margin by $1,344 million. As noted above, our discount rate is based upon the actual yields on our
investment portfolio and our forecasted reinvestment rates, which comprise the future rates at which we expect to invest proceeds
from investment maturities, net of operating cash flows, and projected future capital contributions. Market interest rates have
declined by approximately 130 basis points since our 2018 premium deficiency test, with 60 basis points of this reduction occurring
since the second quarter 2019. Although the movement in market rates impacts the reinvestment rate, it does not materially impact
the actual yield on our existing investments. Furthermore, our assumed reinvestment rate on future fixed income investments is
based both on current expected long-term average rates and market interest rates. Thus, a decline in market interest rates will not
result in an equivalent decline in our discount rate assumption. Our discount rate assumption for purposes of performing the
premium deficiency assessment resulted in weighted average rate of 5.74% compared to 6.04% in 2018. This decline in the
discount rate from 2018 to 2019 reflected a lower reinvestment rate increasing to an expected long-term average investment yield
over a longer period, lower prospective expected returns on higher yielding assets classes introduced with our 2018 strategic
initiatives, and slightly lower actual yields on our investment security portfolio.
• Higher levels of projected long-term care premium rate increases due to larger rate filings by some ceding companies than
previously planned, which favorably impacted our reserve margin by $263 million. Since our premium deficiency testing performed
in 2018, we have implemented approximately $200 million of previously approved rate increase actions. Our 2019 premium
deficiency test includes approximately $2,000 million of anticipated future premium increases or benefit reductions associated with
future in-force rate actions. This represents an increase of $300 million from our 2018 premium deficiency test to account for
actions that are: (a) approved and not yet implemented, (b) filed but not yet approved, and (c) estimated on future filings through
2028, and includes the effect of the lower discount rate mentioned above.
Certain future adverse changes in our assumptions could result in the unlocking of reserves, resetting of actuarial assumptions to
current assumptions, an increase to future policy benefit reserves and a charge to earnings. Any favorable changes to these
assumptions could result in additional margin in our premium deficiency test and higher income over the remaining duration of the
portfolio, including higher investment income.
Claim reserve activity included incurred claims of $1,873 million, $2,106 million and $2,020 million, of which $(36) million, $(46) million
and $135 million related to the recognition of adjustments to prior year claim reserves arising from our periodic reserve evaluation in the
years ended December 31, 2019, 2018 and 2017, respectively. Paid claims were $1,626 million, $1,937 million and $1,670 million in the
years ended December 31, 2019, 2018 and 2017, respectively. The vast majority of paid claims relate to prior year insured events
primarily as a result of the length of time long-term care policyholders remain on claim.
When insurance companies cede insurance risk to third parties, such as reinsurers, they are not relieved of their primary obligation to
policyholders and cedents. When losses on ceded risks give rise to claims for recovery, we establish allowances for probable losses on
such receivables from reinsurers as required. The vast majority of our remaining net reinsurance recoverables are secured by assets
held in a trust for which we are the beneficiary. Reinsurance recoverables, net of allowances of $1,355 million and $1,090 million, are
included in Other GE Capital receivables in our consolidated Statement of Financial Position, and amounted to $2,416 million and
$2,271 million at December 31, 2019 and December 31, 2018, respectively.
We recognize reinsurance recoveries as a reduction of Insurance losses and annuity benefits in our consolidated Statement of
Earnings (Loss). Reinsurance recoveries were $362 million, $324 million and $454 million for the years ended December 31, 2019,
2018 and 2017, respectively.
Statutory accounting practices, not GAAP, determine the required statutory capital levels of our insurance legal entities and, therefore,
may affect the amount or timing of capital contributions that may be required from GE Capital to its insurance legal entities. Statutory
accounting practices are set forth by the National Association of Insurance Commissioners (NAIC) as well as state laws, regulation and
general administrative rules and differ in certain respects from GAAP. The 2018 and 2019 premium deficiency results described above
were recorded on a GAAP basis. The adverse impact on our statutory additional actuarial reserves (AAR) arising from our revised
assumptions in 2017, including the collectability of reinsurance recoverables, is expected to require GE Capital to contribute
approximately $14,500 million additional capital to its run-off insurance operations in 2018-2024. For statutory accounting purposes, the
Kansas Insurance Department (KID), approved our request for a permitted accounting practice to recognize the 2017 AAR increase
over a seven-year period. GE Capital provided capital contributions to its insurance subsidiaries of $2,000 million, $1,900 million and
$3,500 million in the first quarters of 2020, 2019 and 2018, respectively. GE Capital expects to provide further capital contributions of
approximately $7,000 million through 2024 subject to ongoing monitoring by KID. GE is a party to capital maintenance agreements with
its run-off insurance subsidiaries whereby GE will maintain their statutory capital levels at 300% of their year-end Authorized Control
Level risk-based capital requirements as defined from time to time by the NAIC.
GE 2019 FORM 10-K 88
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. POSTRETIREMENT BENEFIT PLANS
PENSION BENEFITS AND RETIREE HEALTH AND LIFE BENEFITS.
We sponsor a number of pension and retiree health and life insurance benefit plans that we present in three categories, principal
pension plans, other pension plans and principal retiree benefit plans. Smaller pension plans with pension assets or obligations less
than $50 million and other retiree benefit plans are not presented. We use a December 31 measurement date for these plans.
Principal pension plans represent the GE Pension Plan and the GE Supplementary Pension Plan. The GE Pension Plan is a defined
benefit plan that covers approximately 245,500 retirees and beneficiaries, approximately 97,000 vested former employees and
approximately 31,500 active employees. This plan has been closed to new participants since 2012.
The GE Supplementary Pension Plan is an unfunded plan that provides supplementary benefits to higher-level, longer-service
employees. The GE Supplementary Pension Plan annuity benefit has been closed to new participants since 2011 and has been
replaced by an installment benefit.
Other pension plans in 2019 included 44 U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million
which cover approximately 57,000 retirees and beneficiaries, approximately 54,000 vested former employees and approximately 22,000
active employees. Principal retiree benefit plans provide health and life insurance benefits to certain eligible participants, and these
participants share in the cost of the healthcare benefits. Principal retiree benefit plans cover approximately 176,000 retirees and
dependents.
In October 2019, we approved changes to our principal pension plans. The GE Pension Plan benefits for approximately 20,000
employees with salaried benefits will be frozen effective January 1, 2021, and thereafter these employees will receive increased
company contributions in the company sponsored defined contribution plan in lieu of participation in a defined benefit plan. As a result,
we recognized a non-cash pre-tax curtailment loss of $298 million in the fourth quarter of 2019 as non-operating benefit costs. In
addition, the GE Supplementary Pension Plan benefits for approximately 700 employees who became executives before 2011 will be
frozen effective January 1, 2021, and thereafter these employees will accrue the installment benefit currently offered to new executives
since 2011. The change in the GE Supplementary Pension Plan reduced the projected benefit obligation by $297 million and has been
treated as a plan amendment that is being amortized over future periods.
As result, we remeasured the pension assets and obligations for the principal pension plans as of October 1, 2019, which resulted in a
net actuarial loss of $4,735 million, which was recorded in Accumulated other comprehensive income. The net actuarial loss was
primarily due to a reduction in the discount rate since December 31, 2018, offset by our asset performance up to the remeasurement
date and the impact of the freeze for the GE Pension Plan.
Finally, we offered approximately 100,000 former U.S. employees with a vested benefit in the GE Pension Plan a limited-time option to
take a lump sum distribution in lieu of future monthly payments. In December 2019, lump sum distributions of $2,657 million were made
from the GE Pension Trust.
At December 31, 2019, we completed our annual year-end measurement of the funded status of the principal pension plans which
resulted in a net actuarial gain of $3,898 million which was recorded in Accumulated Other Comprehensive Income. The net actuarial
gain was primarily due to the impact of the lump-sum distributions, an increase in the discount rate since the remeasurement date,
asset performance in the fourth quarter and updated mortality assumptions.
For the year ended December 31, 2019, we recognized a net actuarial loss of $837 million which is a result of a $4,735 million net
actuarial loss from remeasurement as of October 1, 2019 and a $3,898 million net actuarial gain from our annual year-end
measurement.
GE 2019 FORM 10-K 89
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COST OF OUR BENEFITS PLANS AND ASSUMPTIONS
(Dollars in millions)
Components of expense (income)
Service cost - operating
Interest cost
Expected return on plan assets
Amortization of net actuarial loss (gain)
Amortization of prior service cost (credit)
Curtailment / settlement loss (gain)(a)
Non-operating
Net periodic expense (income)
Weighted-average assumptions used to
determine benefit obligations
Discount rate
Compensation increases
Initial healthcare trend rate(b)
Weighted-average assumptions used to
determine benefit cost
Discount rate(c)
Expected rate of return on plan assets
2019
2018
2017
Principal
pension
Other
pension
Principal
retiree
benefit
Principal
pension
Other
pension
Principal
retiree
benefit
Principal
pension
Other
pension
Principal
retiree
benefit
$ 654
2,780
(3,428)
3,439
135
349
3,275
$3,929
$
$ 246
542
(1,144)
319
3
13
(267)
58
202
(21)
(118)
(232)
(38)
(207)
$ (21) $ (149)
$ 888
2,658
(3,248)
3,785
143
34
3,372
$ 4,260
$
$ 323
548
(1,285)
312
(9)
1
(433)
63
196
(29)
(79)
(230)
—
(142)
$ (110) $ (79)
$ 1,055
2,856
(3,390)
2,812
290
64
2,632
$ 3,687
$ 542
561
(1,176)
418
(5)
24
(178)
$ 364
$
$
94
224
(36)
(80)
(171)
4
(59)
35
3.36% 1.97% 3.05%
3.16
2.95
N/A
N/A
3.75
5.90
4.34% 2.75% 4.12%
3.16
3.60
N/A
N/A
3.60
6.00
3.64% 2.41% 3.43%
3.09
3.55
N/A
N/A
3.55
6.00
4.07
6.75
2.75
6.76
4.12
7.00
3.64
6.75
2.41
6.75
3.43
7.00
4.11
7.50
2.55
6.75
3.75
7.00
(a) For 2019, principal pension principally the curtailment loss due to GE Pension Plan freeze announced in October 2019.
(b) For 2019, ultimately declining to 5% for 2030 and thereafter.
(c) Weighted average 2019 discount rate for principal pension was 4.07%. Discount rate was 4.34% for January 1, 2019 through
September 30, 2019 and then changed to 3.24% for the remainder of 2019 due to the remeasurement of the plans for the U.S.
pension changes announced in October 2019.
The components of net periodic benefit costs, other than the service cost component, are included in Non-operating benefit costs in our
consolidated Statement of Earnings (Loss).
GE 2019 FORM 10-K 90
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PLAN FUNDED STATUS AND AMOUNTS RECORDED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
2019
Other
pension
Principal
pension
Principal
retiree
benefit
Principal
pension
2018
Other
pension
$ 23,066
323
548
37
82
(879) (e)
5,153
58
202
61
(23)
275 (e)
(533)
(33)
—
—
—
$ 74,985
888
2,658
90
—
(6,263) (e)
(3,729)
—
—
(129)
—
(1,002)
(11)
—
(90)
(983)
5,160 (g) $ 68,500 (d) $ 21,091
50,361
(2,996)
6,283
90
(3,729)
—
—
—
$ 50,009
$ 18,491
19,306
(245)
475
37
(1,002)
—
(185)
(849)
$ 17,537
$ 3,554
Principal
retiree
benefit
$ 6,006
63
196
60
—
(593) (f)
(569)
—
—
(10)
—
$ 5,153 (g)
518
(17)
370
60
(569)
—
—
—
$
362
$ 4,791
—
(280)
746
(117)
—
(378)
(18,211)
$(18,491)
(4,183)
$ (3,554)
(4,413)
$ (4,791)
362
57
342
61
(533)
—
—
—
289
4,871
—
(355)
(4,516)
(4,871)
$ 68,500
654
2,780
77
(42) (a)
7,073 (b)
(3,788)
(838)
(2,657) (c)
(3)
—
$ 21,091
246
542
29
(17)
2,422 (e)
(1,043)
(32)
—
(1,030)
713
$ 71,756 (d) $ 22,921
50,009
8,694
298
77
(3,788)
(2,657) (c)
—
—
$ 52,633
$ 19,123
17,537
2,229
716
29
(1,043)
—
(1,030)
704
$ 19,142
$ 3,779
—
(296)
475
(123)
(18,827)
$ (19,123)
(4,131)
$ (3,779)
$
$
$
$
$
(in millions)
Change in benefit obligations
Balance at January 1
Service cost
Interest cost
Participant contributions
Plan amendments
Actuarial loss (gain)
Benefits paid
Curtailments
Settlements
Acquisitions (dispositions) / other - net
Exchange rate adjustments
Balance at December 31
Change in plan assets
Balance at January 1
Actual gain (loss) on plan assets
Employer contributions
Participant contributions
Benefits paid
Settlements
Acquisitions (dispositions) / other - net
Exchange rate adjustments
Balance at December 31
Funded status - deficit(h)
Amounts recorded in the consolidated
Statement of Financial Position
Non-current assets - other
Current liabilities - other
Non-current liabilities - compensation and
benefits
Net amount recorded
Amounts recorded in Accumulated
other comprehensive income (loss)
Prior service cost (credit)
Actuarial loss (gain)
Total recorded in Accumulated other
comprehensive income (loss)
67
7,961
(16)
4,665
(2,376)
(833)
596
10,430
7
3,740
(2,584)
(1,196)
$
8,028
$ 4,649
$
(3,209)
$ 11,026
$ 3,747
$ (3,780)
(a) GE Supplementary Pension Plan amendment for the U.S. pension changes announced in October 2019 offset by other plan
amendments adopted in 2019.
(b) Principally associated with discount rate changes offset by impact of the one-time lump sum payments.
(c) Payments made to former employees from the GE Pension Trust for the one-time lump sum payments.
(d) The PBO for the GE Supplementary Pension Plan, which is an unfunded plan, was $6,691 million and $6,110 million at year-end
2019 and 2018, respectively.
(e) Principally associated with discount rate changes.
(f) Principally due to discount rate changes and favorable cost trends.
(g) The benefit obligation for retiree health plans was $3,306 million and $3,425 million at December 31, 2019 and 2018, respectively.
(h) Total unfunded status for principal pension plan, other pension plans and principal retiree benefit plans was $27,773 million and
$26,836 million at December 31, 2019 and 2018, respectively. Of these amounts, $14,340 million and $13,292 million at December
31, 2019 and 2018, respectively, related to plans that are not subject to regulatory funding requirements and the benefits for these
plans are funded as they become due.
GE 2019 FORM 10-K 91
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ASSUMPTIONS USED IN CALCULATIONS. We determine the discount rate using the weighted-average yields on high-quality fixed-
income securities that have maturities consistent with the timing of benefit payments. Lower discount rates increase the size of the
benefit obligation and generally increase pension expense in the following year; higher discount rates reduce the size of the benefit
obligation and generally reduce subsequent-year pension expense.
The compensation assumption is used to estimate the annual rate at which pay of plan participants will grow. If the rate of growth
assumed increases, the size of the pension obligations will increase, as will the amount recorded in Accumulated other comprehensive
income (loss) in our consolidated Statement of Financial Position and amortized into earnings in subsequent periods.
The expected return on plan assets is the estimated long-term rate of return that will be earned on the investments used to fund the
pension obligations. To determine this rate, we consider the composition of our plan investments, our historical returns earned, and our
expectations about the future. Based on our analysis, we have assumed a 6.75% long-term expected return on GE Pension Plan
assets for cost recognition in 2019 and 2018. This is a reduction from the 7.50% we assumed in 2017.
The healthcare trend assumptions apply to our pre-65 retiree medical plans. Our post-65 retiree plan has a fixed subsidy and therefore
is not subject to healthcare inflation.
We evaluate these assumptions annually. We evaluate other assumptions periodically, such as retirement age, mortality and turnover,
and update them as necessary to reflect our actual experience and expectations for the future. Differences between our actual results
and what we assumed are recorded in Accumulated other comprehensive income each period. These differences are amortized into
earnings over the remaining average future service of active participating employees or the expected life of inactive participants, as
applicable.
THE COMPOSITION OF OUR PLAN ASSETS. The fair value of our pension plans' investments is presented below. The inputs and
valuation techniques used to measure the fair value of these assets are described in Note 1 and have been applied consistently.
(In millions)
Global equity
Debt securities
Fixed income and cash investment funds
U.S. corporate(a)
Other debt securities(b)
Real estate
Private equities and other investments
Total
Plan assets measured at net asset value
Global equity
Debt securities
Real estate
Private equities and other investments
Total plan assets at fair value
2019
2018
Principal pension
Other pension
Principal pension
Other pension
$
6,826
$
3,484
$
6,015
$
4,323
4,398
8,025
6,076
2,309
23
27,657
14,616
3,744
1,167
5,449
52,633
$
8,089
365
424
140
452
12,954
1,450
914
1,930
1,894
19,142
$
$
2,069
8,734
5,264
2,218
557
24,857
12,558
6,400
1,261
4,933
50,009
$
6,320
397
472
175
369
12,056
1,228
883
1,704
1,666
17,537
(a) Primarily represented investment-grade bonds of U.S. issuers from diverse industries.
(b) Primarily represented investments in residential and commercial mortgage-backed securities, non-U.S. corporate and government
bonds and U.S. government, federal agency, state and municipal debt.
GE Pension Plan investments with a fair value of $2,838 million and $2,990 million in 2019 and 2018, respectively, were classified
within Level 3 and primarily relate to real estate. The remaining investments were substantially all considered Level 1 and 2. Other
pension plans investments with a fair value of $105 million and $116 million in 2019 and 2018, respectively, were classified within Level
3. Principal retiree benefit plan investments with a fair value of $289 million and $362 million at December 31, 2019 and 2018,
respectively, comprised global equity and debt securities which are considered Level 1 and 2. There were no Level 3 principal retiree
benefit plan investments held in 2019 and 2018. Plan assets that were measured at fair value using NAV as practical expedient were
excluded from the fair value hierarchy.
ASSET ALLOCATION OF PENSION PLANS
2019 Target allocation
2019 Actual allocation
Global equity
Debt securities (including cash equivalents)
Real estate
Private equities & other investments
Principal
Pension
Other Pension
(weighted
average)
Principal
Pension
Other Pension
(weighted
average)
30.0 - 47.0 %
21.0 - 65.0
3.5 - 13.5
6.0 - 16.0
23 %
55
9
13
41 %
42
7
10
27 %
51
11
11
GE 2019 FORM 10-K 92
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Plan fiduciaries of the GE Pension Plan set investment policies and strategies for the GE Pension Trust and oversee its investment
allocation, which includes selecting investment managers and setting long-term strategic targets. The primary strategic investment
objectives are balancing investment risk and return and monitoring the plan’s liquidity position in order to meet the near-term benefit
payment and other cash needs. Target allocation percentages are established at an asset class level by plan fiduciaries. Target
allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target
range.
GE securities represented 0.6% and 0.5% of the GE Pension Trust assets at December 31, 2019 and 2018, respectively. The GE
Pension Plan has a broadly diversified portfolio of investments in equities, fixed income, private equities and real estate; these
investments are both U.S. and non-U.S. in nature. The plan utilizes derivatives to implement investment strategies as well as for
hedging asset and liability risks. As of December 31, 2019, no sector concentration of assets exceeded 15% of total GE Pension Plan
assets.
OUR FUNDING POLICY. Our policy for funding the GE Pension Plan is to contribute amounts sufficient to meet minimum funding
requirements under employee benefit and tax laws. We may decide to contribute additional amounts beyond this level. We made
contributions of $6,000 million to the GE Pension Plan in 2018. Our 2018 contributions satisfied our minimum ERISA funding
requirement of $1,500 million and the remaining $4,500 million was a voluntary contribution to the plan. This voluntary contribution was
sufficient to satisfy our minimum ERISA funding requirement for 2019 and 2020. In October 2019, we announced our intent to
contribute approximately $4,000 million to $5,000 million to the GE Pension Plan in 2020. We expect this amount to equal our
estimated future minimum ERISA funding requirements at least through 2022.
We expect to pay approximately $305 million for benefit payments under our GE Supplementary Pension Plan and administrative
expenses of our principal pension plans and expect to contribute approximately $500 million to other pension plans in 2020. We fund
retiree health benefits on a pay-as-you-go basis and the retiree life insurance trust at our discretion. We expect to contribute
approximately $360 million in 2020 to fund such benefits.
EXPECTED FUTURE BENEFIT PAYMENTS OF OUR BENEFIT PLANS
(In millions)
2020
2021
2022
2023
2024
2025 - 2029
$
Principal
pension
3,795
3,875
3,930
3,965
3,980
19,965
Other
pension
Principal retiree
benefit
$
$
1,030
1,005
1,015
1,035
1,050
5,550
495
475
455
435
415
1,775
DEFINED CONTRIBUTION PLAN. We have a defined contribution plan for eligible U.S. employees that provides discretionary
contributions. Defined contribution costs were $355 million, $410 million and $460 million for the years ended December 31, 2019,
2018, and 2017, respectively.
COST OF POSTRETIREMENT BENEFIT PLANS AND CHANGES IN OTHER COMPREHENSIVE INCOME
For the years ended December 31
2019
2018
2017
(In millions, pre-tax)
Cost (income) of postretirement benefit
plans
Changes in other comprehensive
income
Principal
pension
Other
pension
Principal
retiree
benefit
Principal
pension
Other
pension
Principal
retiree
benefit
Principal
pension
Other
pension
Principal
retiree
benefit
$ 3,929 $
(21) $
(149) $ 4,260 $
(110) $
(79) $ 3,687 $
364 $
35
Prior service cost (credit) - current year
Actuarial loss (gain) - current year
(42)
971
(17)
1,252
Reclassifications out of AOCI
Curtailment / settlement gain (loss)
Amortization of net actuarial gain (loss)
Amortization of prior service credit (cost)
Total changes in other comprehensive
income
Cost of postretirement benefit plans and
changes in other comprehensive income
(353)
(3,439)
(135)
(12)
(319)
(3)
(2,998)
901
(23)
240
4
118
232
571
—
(111)
(45)
(3,785)
(143)
82
464
(2)
(312)
9
—
(543)
—
79
230
—
474
(64)
(2,812)
(290)
—
(639)
(20)
(418)
5
(8)
(128)
(4)
80
171
(4,084)
241
(234)
(2,692)
(1,072)
111
$
931 $
880 $
422
$
176 $
131 $
(313) $
995 $
(708) $
146
GE 2019 FORM 10-K 93
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. CURRENT AND ALL OTHER LIABILITIES
December 31 (In millions)
Sales allowances, equipment projects and other commercial liabilities
Product warranties (Note 23)
Employee compensation and benefit liabilities
Taxes payable
Environmental, health and safety liabilities (Note 23)
Due to GE Capital
Other
Other GE current liabilities
Eliminations
Consolidated other GE current liabilities
Sales allowances, equipment projects and other commercial liabilities
Product warranties (Note 23)
Uncertain tax positions and related liabilities
Alstom legacy legal matters (Note 23)
Environmental, health and safety liabilities (Note 23)
Redeemable noncontrolling interests (Note 16)
Derivative instruments (Note 21)
Other
GE all other liabilities
Aircraft maintenance reserve, sales deposits and other commercial liabilities
Interest payable
Uncertain tax positions and other taxes payable
Derivative instruments (Note 21)
Other
GE Capital other liabilities
Eliminations
Consolidated all other liabilities
Total
2019
5,203 $
1,371
5,114
1,349
330
1,080
2,385
16,833
(1,080)
15,753 $
4,422
793
2,585
875
2,154
439
171
1,349
12,787 $
2,900
1,189
394
31
525
5,040 $
(1,244)
16,583 $
32,336 $
2018
5,255
1,346
5,138
503
204
1,578
2,422
16,444
(1,578)
14,866
5,136
846
3,404
889
1,968
378
328
1,931
14,881
2,585
1,458
1,646
258
1,615
7,562
(1,605)
20,839
35,705
$
$
$
$
$
$
NOTE 15. INCOME TAXES
GE and GE Capital file a consolidated U.S. federal income tax return. This enables GE and GE Capital to use tax deductions and
credits of one member of the group to reduce the tax that otherwise would have been payable by another member of the group. The
effective tax rate reflects the benefit of these tax reductions in the consolidated return. GE makes cash payments to GE Capital for tax
reductions and GE Capital pays for tax increases at the time GE’s tax payments are due.
Our businesses are subject to regulation under a wide variety of U.S. federal, state and foreign tax laws, regulations and policies.
Changes to these laws or regulations may affect our tax liability, return on investments and business operations.
(BENEFIT) PROVISION FOR INCOME TAXES (In millions)
2019
2018
Current tax expense (benefit)
Deferred tax expense (benefit) from temporary differences
Total GE
Current tax expense (benefit)
Deferred tax expense (benefit) from temporary differences
Total GE Capital
Current tax expense (benefit)
Deferred tax expense (benefit) from temporary differences
Total consolidated
CONSOLIDATED EARNINGS (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (In millions)
U.S. earnings
Non-U.S. earnings
Total
GE 2019 FORM 10-K 94
$
$
$
$
2,551 $
(1,242)
1,309
(720)
138
(582)
1,831
(1,104)
726 $
2019
506 $
643
1,149 $
1,743 $
(1,276)
467
596
(970)
(374)
2,339
(2,245)
93 $
2017
2,405
1,088
3,493
(1,008)
(5,294)
(6,302)
1,397
(4,205)
(2,808)
2018
(9,861) $
(11,126)
(20,987) $
2017
(17,918)
6,573
(11,345)
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED (BENEFIT) PROVISION FOR INCOME TAXES (In millions)
2019
2018
2017
U.S. Federal
Current
Deferred
Non - U.S.
Current
Deferred
Other
Total
INCOME TAXES PAID (RECOVERED) (In millions)
GE
GE Capital
Total(a)
(a) Includes tax payments reported in discontinued operations.
$
$
$
$
146 $
(1,266)
1,019 $
(3,144)
2,008
106
(267)
726 $
2019
2,183 $
45
2,228 $
1,132
1,197
(111)
93 $
2018
1,803 $
65
1,868 $
(734)
(3,625)
1,820
(429)
160
(2,808)
2017
2,700
(264)
2,436
RECONCILIATION OF U.S. FEDERAL
STATUTORY INCOME TAX RATE TO
ACTUAL INCOME TAX RATE
Consolidated
GE
GE Capital
2019
2018
2017
2019
2018
2017
2019
2018
2017
U.S. federal statutory income tax rate
21.0% 21.0 % 35.0%
21.0% 21.0 % 35.0 %
21.0% 21.0% 35.0%
Increase (reduction) in rate resulting from
inclusion of after-tax earnings of GE
Capital in before-tax earnings of GE
Tax on global activities including exports
U.S. business credits(a)
Goodwill impairments
Tax Cuts and Jobs Act enactment
All other – net(b)(c)(d)
Actual income tax rate
—
(5.0)
2.6
(21.5)
(0.2)
2.7
(21.4)
—
91.0
(22.5)
26.0
0.2
(52.5)
42.2
63.2% (0.4)% 24.8% 103.0% (2.2)% (63.8)%
8.8
86.5
(9.1)
23.5
7.9
(35.6)
82.0
—
30.3
4.3
(7.8)
(39.8)
2.8
(10.2)
(43.2)
34.6
1.5
(7.3)
(89.6)
5.2
(98.8)
(0.5)
(5.0)
0.4
(21.4)
0.5
2.8
(23.2)
—
—
3.2
8.1
120.0
21.9
—
—
(36.5)
15.2
(8.0)
23.1
68.3
78.7
89.3% 99.7% 49.9%
—
12.2
3.2
(3.8)
3.1
0.2
14.9
(a) U.S. general business credits, primarily the credit for energy produced from renewable sources and the credit for research
performed in the U.S.
(b) Included, for each period, the expense or benefit for Other taxes reported above in the consolidated (benefit) provision for income
taxes, net of 21.0% federal effect for the years ended December 31, 2019 and 2018 and 35.0% federal effect for the year ended
December 31, 2017.
(c) For the year ended December 31, 2019, included (12.5)% and (11.3)% in consolidated and GE, respectively, related to the
disposition of the Digital ServiceMax business. For the year ended December 31, 2018, included 2.8% and 2.8% in consolidated
and GE, respectively, related to deductible stock losses. Included in 2017 is 5.6% and 11.7% in consolidated and GE, respectively,
related to the disposition of the Water business. Also included in 2017 is (3.1)% and (6.4)% in consolidated and GE, respectively,
related to losses on planned dispositions.
(d) For the year ended December 31, 2019, included (32.9)%, (27.9)% and 3.5% in consolidated, GE and GE Capital, respectively for
the resolution of the IRS audit of our consolidated U.S. income tax returns for 2012-2013.
U.S. TAX REFORM. On December 22, 2017, the U.S. enacted legislation commonly known as the Tax Cuts and Jobs Act (U.S. tax
reform) that lowered the statutory tax rate on U.S. earnings to 21%, taxes historic foreign earnings at a reduced rate of tax, establishes
a territorial tax system and enacts new taxes associated with global operations.
The impact of enactment of U.S. tax reform was recorded in 2017 on a provisional basis as the legislation provided for additional
guidance to be issued by the U.S. Department of the Treasury on several provisions including the computation of the transition tax. This
amount was adjusted in both 2018 and 2019 based on guidance issued during each of these years. Additional guidance may be issued
after 2019 and any resulting effects will be recorded in the quarter of issuance. Additionally, as part of U.S. tax reform, the U.S. has
enacted a minimum tax on foreign earnings (global intangible low tax income). We have not made an accrual for the deferred tax
aspects of this provision.
GE 2019 FORM 10-K 95
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
With the enactment of U.S. tax reform, we recorded, for the year ended December 31, 2017, tax expense of $4,512 million to reflect our
provisional estimate of both the transition tax on historic foreign earnings ($1,155 million including $2,925 million at GE and $(1,770)
million at GE Capital) and the revaluation of deferred taxes ($3,357 million including $1,980 million at GE and $1,377 million at GE
Capital). For the year ended December 31, 2018, we finalized our provisional estimate of the enactment of U.S. tax reform and
recorded an additional tax expense of $41 million. For the year ended December 31, 2019, we recorded an additional tax expense of $2
million based on the issuance in January 2019 of final regulations on the transition tax on historic foreign earnings. The cash impact of
the transition tax on historic foreign earnings was largely offset by accelerated use of deductions and tax credits and was substantially
incurred with the filing of the 2017 tax return with no amount subject to the deferred payment provision provided under law.
UNRECOGNIZED TAX POSITIONS. Annually, we file over 4,100 income tax returns in almost 300 global taxing jurisdictions. We are
under examination or engaged in tax litigation in many of these jurisdictions. The Internal Revenue Service (IRS) is currently auditing
our consolidated U.S. income tax returns for 2014-2015. In June 2019, the IRS completed the audit of our consolidated U.S. income tax
returns for 2012-2013, which resulted in a decrease in our balance of unrecognized tax benefits (i.e., the aggregate tax effect of
differences between tax return positions and the benefits recognized in our financial statements). The Company recognized a resulting
non-cash continuing operations tax benefit of $378 million plus an additional net interest benefit of $107 million. Of these amounts, GE
recorded $355 million of tax benefits and $98 million of net interest benefits and GE Capital recorded $23 million of tax benefits and $9
million of net interest benefits. GE Capital recorded an additional non-cash benefit in discontinued operations of $332 million of tax
benefits and $46 million of net interest benefits. See Note 2 for further information. As previously disclosed, the United Kingdom tax
authorities disallowed interest deductions claimed by GE Capital for the years 2007-2015 that could result in a potential impact of
approximately $1 billion, which includes a possible assessment of tax and reduction of deferred tax assets, not including interest and
penalties. We are contesting the disallowance. We comply with all applicable tax laws and judicial doctrines of the United Kingdom and
believe that the entire benefit is more likely than not to be sustained on its technical merits. We believe that there are no other
jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or
cash flows. We further believe that we have made adequate provision for all income tax uncertainties.
The balance of unrecognized tax benefits, the amount of related interest and penalties we have provided and what we believe to be the
range of reasonably possible changes in the next 12 months were:
UNRECOGNIZED TAX BENEFITS December 31 (Dollars in millions)
Unrecognized tax benefits
Portion that, if recognized, would reduce tax expense and effective tax rate(a)
Accrued interest on unrecognized tax benefits
Accrued penalties on unrecognized tax benefits
Reasonably possible reduction to the balance of unrecognized tax benefits
in succeeding 12 months
Portion that, if recognized, would reduce tax expense and effective tax rate(a)
(a) Some portion of such reduction may be reported as discontinued operations.
UNRECOGNIZED TAX BENEFITS RECONCILIATION (In millions)
Balance at January 1
Additions for tax positions of the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years(a)
Settlements with tax authorities
Expiration of the statute of limitations
Balance at December 31
2019
4,169 $
2,701
722
195
0-700
0-650
2019
5,563 $
403
500
(1,927)
(155)
(214)
4,169 $
2018
5,563
4,265
934
182
0-1,300
0-1,200
2018
5,449
300
945
(905)
(64)
(162)
5,563
$
$
$
(a) For 2019, reductions included $710 million related to the completion of the 2012-2013 IRS audit and $442 million related to the
deconsolidation of Baker Hughes.
We classify interest on tax deficiencies as interest expense; we classify income tax penalties as provision for income taxes. For the
years ended December 31, 2019, 2018 and 2017, $(93) million, $127 million and $143 million of interest expense (income),
respectively, and $20 million, $(7) million and $7 million of tax expense (income) related to penalties, respectively, were recognized in
our consolidated Statement of Earnings (Loss).
DEFERRED INCOME TAXES. We have not provided deferred taxes on cumulative net earnings of non-U.S. affiliates and associated
companies of approximately $40 billion that have been reinvested indefinitely. Given U.S. tax reform, substantially all of our prior
unrepatriated earnings were subject to U.S. tax and accordingly we expect to have the ability to repatriate available non-U.S. cash
without additional federal tax cost, and any foreign withholding tax on a repatriation to the U.S. would potentially be partially offset by a
U.S. foreign tax credit. However, because most of these earnings have been reinvested in active non-U.S. business operations, as of
December 31, 2019, we have not decided to repatriate these earnings to the U.S. It is not practicable to determine the income tax
liability that would be payable if such earnings were not reinvested indefinitely.
GE 2019 FORM 10-K 96
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DEFERRED INCOME TAXES December 31 (In millions)
GE
GE Capital
Total assets
GE
GE Capital
Eliminations
Total liabilities
Net deferred income tax asset (liability)
COMPONENTS OF THE NET DEFERRED INCOME TAX ASSET (LIABILITY)
December 31 (In millions)
Principal pension plans
Other non-current compensation and benefits
Provision for expenses
Intangible assets
Retiree insurance plans
Non-U.S. loss carryforwards(a)
U.S. credit carryforwards(b)
Baker Hughes investment
Contract assets
Depreciation
Other – net(c)
GE
Operating leases
Financing leases
Intangible assets
Insurance company loss reserves
Non-U.S. loss carryforwards(a)
U.S. credit carryforwards(b)
Other – net(c)
GE Capital
Eliminations
Net deferred income tax asset (liability)
2019
12,807 $
5,124
17,931
(4,618)
(3,424)
—
(8,042)
9,889 $
2019
4,016 $
2,206
1,990
1,315
1,023
602
74
(1,256)
(1,232)
(823)
274
8,189
(2,218)
(477)
(10)
1,715
1,274
785
631
1,700
—
9,889 $
2018
14,479
6,214
20,693
(4,302)
(4,278)
4
(8,576)
12,117
2018
3,883
2,431
2,208
820
1,006
1,362
74
721
(1,781)
(855)
307
10,176
(2,690)
(599)
(16)
1,386
1,231
2,491
133
1,936
4
12,117
$
$
$
$
(a) Net of valuation allowances of $4,801 million and $3,799 million for GE and $201 million and $767 million for GE Capital as of
December 31, 2019 and 2018, respectively. Of the net deferred tax asset as of December 31, 2019 of $1,876 million, $3 million
relates to net operating loss carryforwards that expire in various years ending from December 31, 2020 through December 31, 2022;
$193 million relates to net operating losses that expire in various years ending from December 31, 2023 through December 31,
2039 and $1,680 million relates to net operating loss carryforwards that may be carried forward indefinitely.
(b) Of the net deferred tax asset as of December 31, 2019 of $859 million for U.S. credit carryforwards, $74 million expires in the years
ending December 31, 2030 through 2032 and $785 million expires in various years ending from December 31, 2036 through
December 31, 2039.
(c) Included valuation allowances related to assets other than non-U.S. loss carryforwards of $1,897 million and $1,002 million for GE
and $248 million and $131 million for GE Capital as of December 31, 2019 and 2018, respectively.
GE 2019 FORM 10-K 97
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. SHAREHOLDERS’ EQUITY
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (In millions)
2019
2018
Beginning balance
Other comprehensive income (loss) (OCI) before reclassifications – net of
deferred taxes of $32, $41 and $(335)(a)
Reclassifications from OCI – net of deferred taxes of $(11), $(6) and $(81)
Other comprehensive income (loss)
Less OCI attributable to noncontrolling interests
Investment securities ending balance
Beginning balance
OCI before reclassifications – net of deferred taxes of $(98), $29 and $(537)
Reclassifications from OCI – net of deferred taxes of $(9), $89 and $(543)(b)
Other comprehensive income (loss)
Less OCI attributable to noncontrolling interests
Currency translation adjustments ending balance
Beginning balance
OCI before reclassifications – net of deferred taxes of $6, $(26) and $31
Reclassifications from OCI – net of deferred taxes of $2, $4 and $(28)
Other comprehensive income (loss)
Less OCI attributable to noncontrolling interests
Cash flow hedges ending balance
Beginning balance
OCI before reclassifications – net of deferred taxes of $(355), $115 and $32
Reclassifications from OCI – net of deferred taxes of $852, $2,610 and $1,111
Other comprehensive income (loss)
Less OCI attributable to noncontrolling interests
Benefit plans ending balance
Accumulated other comprehensive income (loss) at December 31
$
$
$
$
$
$
$
$
$
(39) $
(102) $
141
(42)
100
—
61
$
(6,134) $
41
1,234
1,275
(40)
(4,818) $
13
(21)
58
37
2
49
$
$
(8,254) $
(1,820)
3,048
1,228
(2)
(7,024) $
87
(23)
64
—
(39) $
(4,661) $
(2,076)
412
(1,664)
(192)
(6,134) $
62
(149)
98
(51)
(2)
13
$
$
(9,702) $
71
1,345
1,416
(32)
(8,254) $
2017
674
(627)
(149)
(776)
1
(102)
(6,806)
846
1,333
2,179
35
(4,661)
12
171
(120)
51
1
62
(12,469)
550
2,232
2,782
15
(9,702)
(11,732) $
(14,414) $
(14,404)
(a) Included adjustments of $(2,693) million, $1,825 million and $(1,259) million in 2019, 2018 and 2017, respectively, related to
insurance liabilities and annuity benefits in our run-off insurance operations to reflect the effects that would have been recognized
had the related unrealized investment security gains been realized. See Note 12 for further information.
(b) Currency translation gains and losses included $1,066 million, zero and $483 million in 2019, 2018 and 2017, respectively, in
earnings (loss) from discontinued operations, net of taxes.
In 2016, we issued $5,694 million of GE Series D preferred stock, which are callable on January 21, 2021. In addition to Series D, $250
million of existing GE Series A, B and C preferred stock are also outstanding. The total carrying value of GE preferred stock at
December 31, 2019 was $5,738 million and will increase to $5,944 million by the respective call dates through periodic accretion.
Dividends on GE preferred stock are payable semi-annually in June and December and accretion is recorded on a quarterly basis.
Dividends on GE preferred stock totaled $460 million, including cash dividends of $295 million, $447 million, including cash dividends of
$295 million, and $436 million, including cash dividends of $295 million, for the years ended December 31, 2019, 2018 and 2017,
respectively.
In conjunction with the 2016 exchange of GE Capital preferred stock into GE preferred stock, GE Capital issued preferred stock to GE
for which the amount and terms mirrored the GE external preferred stock. In 2018, GE Capital and GE exchanged the existing Series D
preferred stock issued to GE for new Series D preferred stock, which is mandatorily convertible into GE Capital Common stock on
January 21, 2021. After this conversion, GE Capital will no longer pay preferred dividends to GE. The exchange of GE Capital Series D
preferred stock has no impact on the GE Series D preferred stock, which remains callable for $5,694 million on January 21, 2021 or
thereafter on dividend payment dates. Additionally, there were no changes to the existing Series A, B or C preferred stock issued to GE.
GE has 50.0 million authorized shares of preferred stock ($1.00 par value), of which 5,939,875, 5,939,875 and 5,939,875 shares are
outstanding as of December 31, 2019, 2018 and 2017, respectively. GE’s authorized common stock consists of 13,200 million shares
having a par value of $0.06 each, with 11,694 million shares issued. Under our share purchase programs we repurchased shares of 1.1
million, and 19.5 million, for a total of $10 million and $235 million for the years ended 2019 and 2018, respectively.
Noncontrolling interests in equity of consolidated affiliates amounted to $1,545 million and $20,500 million, including zero and $19,239
million attributable to Baker Hughes Class A shareholders at December 31, 2019 and 2018, respectively. See Note 2 for further
information related to the Baker Hughes transaction. Net earnings (loss) attributable to noncontrolling interests were $33 million, $203
million and $(47) million in 2019, 2018 and 2017, respectively. Dividends attributable to noncontrolling interests were $(331) million,
$(362) million and $(222) million in 2019, 2018 and 2017, respectively.
GE 2019 FORM 10-K 98
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Redeemable noncontrolling interests presented in 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 $439 million
and $378 million as of December 31, 2019 and 2018, respectively. Net earnings (loss) attributable to redeemable noncontrolling
interests was $33 million, $(291) million and $(320) million for the years ended December 31, 2019, 2018 and 2017, respectively. On
October 2, 2018, we settled the redeemable noncontrolling interest balance associated with three joint ventures with Alstom for a
payment amount of $3,105 million in accordance with contractual payment terms.
Common dividends from GE Capital to GE totaled zero, zero and $4,105 million (including cash dividends of $4,016 million) for the
years ended December 31, 2019, 2018 and 2017, respectively.
NOTE 17. SHARE-BASED COMPENSATION
We grant stock options, restricted stock units and performance share units to employees under the 2007 Long-Term Incentive Plan.
Grants made under all plans must be approved by the Management Development and Compensation Committee of GE’s Board of
Directors, which is composed entirely of independent directors. We record compensation expense for awards expected to vest over the
vesting period. We estimate forfeitures based on experience and adjust expense to reflect actual forfeitures. When options are
exercised and restricted stock units vest, we issue shares from treasury stock.
Stock options provide employees the opportunity to purchase GE shares in the future at the market price of our stock on the date the
award is granted (the strike price). The options become exercisable over the vesting period (typically three or five years) and expire 10
years from the grant date if not exercised. Restricted stock units (RSU) provide an employee with the right to receive shares of GE
stock when the restrictions lapse over the vesting period. Upon vesting, each RSU is converted into GE common stock on a one-for-
one basis. Performance share units (PSU) provide an employee with the right to receive shares of GE stock based upon achievement
of certain performance or market metrics. Upon vesting (if applicable), each PSU is converted into GE common stock on a one-for-one
basis. We value stock options using a Black-Scholes option pricing model, RSUs using market price on grant date, and PSUs using
both market price on grant date and a Monte Carlo simulation as needed based on performance metrics.
WEIGHTED AVERAGE GRANT DATE FAIR VALUE
Stock Options
RSUs
PSUs
2019
2018
$
3.48 $
3.00 $
10.12
10.73
13.96
4.80
2017
3.81
24.89
N/A
Key assumptions used in the Black Scholes valuation for stock options include: risk free rates of 2.5%, 2.8%, and 2.3%, dividend yields
of 0.4%, 2.3%, and 3.3%, expected volatility of 33%, 32%, and 28%, expected lives of 6.0 years, 5.9 years, and 6.3 years, and strike
prices of $10.00, $12.13, and $18.97 for 2019, 2018, and 2017, respectively.
STOCK-BASED COMPENSATION
ACTIVITY
Shares (in
millions)
Stock Options
Weighted
average
exercise
price
Weighted
average
contractual
term (in
years)
RSUs
Weighted
average
grant date
fair value
Weighted
average
contractual
term (in
years)
Intrinsic
value (in
millions)
Intrinsic
value (in
millions)
Shares (in
millions)
Outstanding at January 1, 2019
Spin-off adjustment (a)
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2019
Exercisable at December 31, 2019
Expected to vest
466 $
17
34
(7)
(11)
(41)
458 $
335 $
113 $
19.59
N/A
10.00
9.36
13.66
17.24
18.66
21.03
12.36
4.6 $
3.1 $
8.5 $
185
—
165
29 $
1
16
(15)
(3)
N/A
28 $
N/A
26 $
18.07
N/A
10.12
17.04
15.40
N/A
13.29
N/A
13.45
1.4 $
N/A
1.3 $
315
N/A
285
(a) In connection with the spin-off of GE Transportation and pursuant to the anti-dilution provisions of the 2007 Long Term Incentive
Plan, the Company made adjustments to exercise price and the number of shares to preserve the intrinsic value of the awards prior
to the separation. The adjustments to the stock-based compensation awards did not result in additional compensation expense.
Total outstanding PSUs at December 31, 2019 were 12 million shares with a weighted average fair value of $7.39. The intrinsic value
and weighted average contractual term of PSUs outstanding were $128 million and 2.3 years, respectively.
GE 2019 FORM 10-K 99
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions)
Compensation expense (after-tax)(a)(b)
Cash received from stock options exercised
Intrinsic value of stock options exercised and RSUs vested
2019
2018
$
400 $
336 $
69
154
24
83
2017
241
528
493
(a) Unrecognized compensation cost related to unvested equity awards as of December 31, 2019 was $515 million, which will be
amortized over a weighted average period of 1.1 years.
(b) Income tax benefit recognized in earnings was $20 million, $40 million and $138 million in 2019, 2018, and 2017, respectively.
NOTE 18. EARNINGS PER SHARE INFORMATION
2019
2018
2017
(In millions; per-share amounts in dollars)
Diluted
Basic
Diluted
Basic
Diluted
Basic
Earnings (loss) from continuing operations for
per-share calculation
Preferred stock dividends
Earnings (loss) from continuing operations attributable to
common shareholders for per-share calculation
Earnings (loss) from discontinued operations for
per-share calculation
Net earnings (loss) attributable to GE common
shareholders for per-share calculation
Shares of GE common stock outstanding
Employee compensation-related shares (including
stock options) and warrants(a)
Total average equivalent shares
Earnings (loss) from continuing operations
Earnings (loss) from discontinued operations
Net earnings (loss)
Potentially dilutive securities(a)
$
$
$
416 $
(460)
416
(460)
$ (20,997) $ (20,997) $
(447)
(447)
(8,270) $
(436)
(8,270)
(436)
(45) $
(45) $ (21,445) $ (21,445) $
(8,706) $
(8,706)
(5,396)
(5,396)
(1,372)
(1,372)
(251)
(251)
(5,440)
(5,440)
(22,809)
(22,809)
(8,944)
(8,944)
8,724
—
8,724
(0.01) $
(0.62)
(0.62)
8,724
—
8,724
(0.01) $
(0.62)
(0.62)
450
8,691
—
8,691
(2.47) $
(0.16)
(2.62)
8,691
—
8,691
(2.47) $
(0.16)
(2.62)
420
8,687
—
8,687
(1.00) $
(0.03)
(1.03)
8,687
—
8,687
(1.00)
(0.03)
(1.03)
119
(a) All outstanding stock awards are not included in the computation of diluted earnings per share because their effect was
antidilutive due to the loss from continuing operations.
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 years ended December 31, 2019, 2018 and 2017, as a result of excess dividends in respect to the current period earnings,
losses were not allocated to the participating securities.
Earnings-per-share amounts are computed independently for earnings (loss) from continuing operations, earnings (loss) from
discontinued operations and net earnings (loss). As a result, the sum of per-share amounts from continuing operations and
discontinued operations may not equal the total per-share amounts for net earnings.
NOTE 19. OTHER INCOME
(In millions)
Purchases and sales of business interests(a)
Licensing and royalty income
Associated companies
Net interest and investment income(b)
Other items
GE
Eliminations
Total
2019
3 $
256
206
1,220
515
2,200
22
2,222 $
2018
1,234 $
218
21
562
282
2,317
4
2,321 $
2017
1,024
188
208
358
115
1,893
189
2,083
$
$
(a) Included a pre-tax gain of $224 million on the sale of ServiceMax partially offset by charges to the valuation allowance on
businesses classified as held for sale of $245 million in 2019. Included pre-tax gains of $737 million on the sale of Distributed
Power, $681 million on the sale of Value-Based Care and $267 million on the sale of Industrial Solutions, partially offset by charges
to the valuation allowance on businesses classified as held for sale of $554 million in 2018. Included a pre-tax gain of $1,931 million
on the sale of our Water business, partially offset by charges to the valuation allowance on businesses classified as held for sale of
$1,000 million in 2017. See Note 2 for further information.
(b) Included unrealized gain of $793 million related to our interest in Baker Hughes in 2019. Included interest income associated with
customer advances of $143 million, $136 million and $105 million in 2019, 2018 and 2017, respectively. See Notes 1, 3 and 9.
GE 2019 FORM 10-K 100
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20. FAIR VALUE MEASUREMENTS
RECURRING FAIR VALUE MEASUREMENTS. Our assets and liabilities measured at fair value on a recurring basis include
investment securities mainly supporting obligations to annuitants and policyholders in our run-off insurance operations, derivatives, and
our remaining equity interest in Baker Hughes.
ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS December 31 (In millions)
Level 1
Level 2
2019
2018
2019
2018
Level 3(a)
2019
Netting
adjustment(d)
Net balance(b)
2018
2019
2018
2019
2018
Investment securities
Derivatives
Total assets
Derivatives
Other(c)
Total liabilities
$
$
$
$
9,704 $
—
9,704 $
— $
—
— $
88 $ 33,606 $ 29,408 $
—
88 $ 36,167 $ 31,605 $
2,197
2,561
— $
—
— $
834 $
807
1,641 $
1,814 $
722
2,535 $
5,210 $
11
5,221 $
19 $
—
19 $
— $
4,013 $
8
— $ 48,521 $ 33,508
205
740
(2,001)
4,021 $ (1,832) $ (2,001) $ 49,261 $ 33,713
(1,832)
6 $
—
6 $
(651) $ (1,234) $
—
—
(651) $ (1,234) $
202 $
807
1,009 $
586
722
1,308
(a) Included debt securities classified within Level 3 of $3,977 million of U.S. corporate and $330 million of Government and agencies
securities at December 31, 2019, and $3,498 million of U.S. corporate and $292 million of Government and agencies securities at
December 31, 2018.
(b) See Notes 3 and 21 for further information on the composition of our investment securities and derivative portfolios.
(c) Primarily represents the liabilities associated with certain of our deferred incentive compensation plans.
(d) The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Amounts
include fair value adjustments related to our own and counterparty non-performance risk.
LEVEL 3 INSTRUMENTS. The majority of our Level 3 balances comprised debt securities classified as available-for-sale with changes
in fair value recorded in other comprehensive income.
(In millions)
2019
Investment securities $
2018
Investment securities $
Balance at
January 1
Net realized/
unrealized
gains(losses)(a)
Purchases(b)
Sales &
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Balance at
December 31
4,013 $
399 $
2,159 $
(1,308) $
— $
(53) $
5,210
4,109 $
(231) $
729 $
(333) $
2 $
(262) $
4,013
(a) Primarily included net unrealized gains (losses) of $404 million and $(231) million in other comprehensive income for the years
ended December 31, 2019 and December 31, 2018, respectively.
(b) Included $975 million and $615 million of U.S. corporate debt securities for the years ended December 31, 2019 and 2018,
respectively.
NONRECURRING FAIR VALUE MEASUREMENTS. The following table represents fair values (as measured at the time of the
adjustment) for those assets remeasured to fair value on a nonrecurring basis during the fiscal year and were still held at December 31,
2019 and 2018.
(In millions)
Remeasured during the years ended December 31
2019
2018
Level 2
Level 3
Level 2
Level 3
Financing receivables and financing receivables held for sale
Equity securities without readily determinable fair value and equity
method investments
Long-lived assets
Goodwill
Total
$
$
— $
—
12
—
12 $
21
$
306
412
—
739
$
— $
479
152
—
631 $
47
874
422
2,440
3,783
GE 2019 FORM 10-K 101
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2019 and 2018, certain Level 3 assets with recurring fair value measurements of $4,933 million and $3,893 million,
respectively, and nonrecurring measurements of $377 million and $483 million, respectively, were valued using non-binding broker
quotes or other third-party sources. These fair value measurements utilize a number of different unobservable inputs not subject to
meaningful aggregation. In addition, certain equity securities without readily determinable fair value and equity method investments with
a fair value totaling $36 million and $572 million at December 31, 2019 and 2018, respectively, were valued using the income approach,
for which discount rates were determined based on inputs that market participants would use when pricing investments, including credit
and liquidity risk. An increase in the discount rates would result in a decrease in the fair values. The range of discount rates used to
price these investments was 12%-16%, with a weighted average of 15% and 6.5%-35%, with a weighted average of 8.9% at December
31, 2019 and 2018, respectively. Other Level 3 assets with recurring and nonrecurring fair value measurements are not material
individually or in the aggregate.
NOTE 21. 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.
(In millions)
Assets
Loans and other receivables
Liabilities
Borrowings (Note 11)
Investment contracts (Note 12)
December 31, 2019
Carrying
amount
(net)
Estimated
fair value
December 31, 2018
Carrying
amount
(net)
Estimated
fair value
$
$
4,113 $
4,208
90,882 $
2,191
97,754
2,588
$
$
8,811 $
8,829
103,599 $
2,388
100,492
2,630
Unlike the carrying amount, estimated fair value of borrowings included $1,106 million and $1,324 million of accrued interest at
December 31, 2019 and 2018, respectively.
Assets and liabilities that are reflected in the accompanying financial statements at fair value are not included in the above disclosures;
such items include cash and equivalents, investment securities and derivative financial instruments.
DERIVATIVES AND HEDGING. Our policy requires that derivatives are used solely for managing risks and not for speculative
purposes. Total gross notional was $98,018 million ($55,704 million in GE Capital and $42,314 million in GE) and $117,104 million
($79,082 million in GE Capital and $38,022 million in GE) at December 31, 2019 and 2018, respectively. GE Capital notional relates
primarily to managing interest rate and currency risk between financial assets and liabilities, and GE notional relates primarily to
managing currency risk.
GE and GE Capital use cash flow hedges primarily to reduce or eliminate the effects of foreign exchange rate changes. In addition, GE
Capital uses fair value hedges to hedge the effects of interest rate and currency changes on debt it has issued as well as net
investment hedges to hedge investments in foreign operations. Both GE and GE Capital also use derivatives not designated as hedges
from an accounting standpoint (and therefore we do not apply hedge accounting to the relationship) but otherwise serve the same
economic purpose as other hedging arrangements. We use economic hedges when we have exposures to currency exchange risk for
which we are unable to meet the requirements for hedge accounting or when changes in the carrying amount of the hedged item are
already recorded in earnings in the same period as the derivative making hedge accounting unnecessary. Even though the derivative is
an effective economic hedge, there may be a net effect on earnings in each period due to differences in the timing of earnings
recognition between the derivative and the hedged item.
GE 2019 FORM 10-K 102
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The table below provides additional information about how derivatives are reflected in our financial statements. Derivative assets and
liabilities are recorded at fair value exclusive of interest earned or owed on interest rate derivatives, which is presented separately in our
consolidated Statement of Financial Position. Cash collateral and securities held as collateral represent assets that have been provided
by our derivative counterparties as security for amounts they owe us (derivatives that are in an asset position).
(In millions)
Interest rate contracts
Currency exchange contracts
Derivatives accounted for as hedges
Interest rate contracts
Currency exchange contracts
Other contracts
Derivatives not accounted for as hedges
Gross derivatives
Netting and credit adjustments
Cash collateral adjustments
Net derivatives recognized in Statement of
Financial Position
Net accrued interest
Securities held as collateral
Net amount
December 31, 2019
December 31, 2018
Gross
Notional
All other
assets
All other
liabilities
Gross
Notional
All other
assets
All other
liabilities
$
$
$
$
$
23,918 $
7,044
30,961 $
3,185 $
62,165
1,706
67,056 $
1,636 $
99
1,734 $
18 $
697
123
838 $
98,018 $
2,572 $
11
46
57
12
744
40
796
853
$
$
$
$
$
22,904 $
7,854
30,758 $
6,198 $
77,544
2,604
86,346 $
1,335 $
175
1,511 $
28 $
653
13
695 $
117,104 $
2,205 $
23
114
138
2
1,472
209
1,682
1,820
$
$
$
$
(546) $
(1,286)
(546)
(105)
740 $
182 $
(469)
452 $
202
1
—
203
$
$
$
$
(959) $
(1,042)
(967)
(267)
205 $
205 $
(235)
174 $
586
1
—
587
Fair value of derivatives in our consolidated Statement of Financial Position excluded accrued interest. Cash collateral adjustments
excluded excess collateral received and posted of $104 million and $603 million at December 31, 2019, respectively, and $3 million and
$439 million at December 31, 2018, respectively. Securities held as collateral excluded excess collateral received with a fair value of
$27 million and zero at December 31, 2019 and 2018, respectively.
FAIR VALUE HEDGES. We use derivatives to hedge the effects of interest rate and currency exchange rate changes on our
borrowings. At December 31, 2019, the cumulative amount of hedging adjustments of $4,234 million (including $2,458 million on
discontinued hedging relationships) was included in the carrying amount of the hedged liability of $54,723 million. At December 31,
2018, the cumulative amount of hedging adjustments of $3,255 million (including $2,731 million on discontinued hedging relationships)
was included in the carrying amount of the hedged liability of $59,651 million. The cumulative amount of hedging adjustments was
primarily recorded in long-term borrowings.
CASH FLOW HEDGES. We use cash flow hedging primarily to reduce or eliminate the effects of foreign exchange rate changes on
purchase and sale contracts in our industrial businesses and to convert foreign currency debt that we have issued in our financial
services business back to our functional currency. Changes in the fair value of cash flow hedges are recorded in Accumulated other
comprehensive income (AOCI) in our consolidated Statement of Financial Position and recorded in earnings in the period in which the
hedged transaction occurs. The gain (loss) recognized in AOCI was $25 million, $(154) million and $199 million for the years ended
December 31, 2019, 2018 and 2017, respectively. The gain (loss) reclassified from AOCI to earnings was $(60) million, $(102) million
and $149 million for the years ended December 31, 2019, 2018 and 2017, respectively. These amounts were primarily related to
currency exchange and interest rate contracts.
The total amount in AOCI related to cash flow hedges of forecasted transactions was a $110 million gain at December 31, 2019. We
expect to reclassify $16 million of gain to earnings in the next 12 months contemporaneously with the earnings effects of the related
forecasted transactions. For the years ended December 31, 2019, 2018 and 2017, we recognized insignificant gains and losses related
to hedged forecasted transactions and firm commitments that did not occur by the end of the originally specified period. At December
31, 2019, 2018 and 2017, the maximum term of derivative instruments that hedge forecasted transactions was 13 years, 14 years and
15 years, respectively.
NET INVESTMENT HEDGES. We invest in foreign operations that conduct their financial services activities in currencies other than the
U.S. dollar. We hedge the currency risk associated with those investments primarily using non-derivative instruments such as debt
denominated in a foreign currency and short-term currency exchange contracts under which we receive U.S. dollars and pay foreign
currency. 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.
GE 2019 FORM 10-K 103
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total gain (loss) recognized in AOCI on hedging instruments for the years ended December 31, 2019, 2018 and 2017 was $120
million, $646 million and $(1,852) million, respectively, comprising $(36) million, $162 million and $(277) million on currency exchange
contracts and $156 million, $484 million and $(1,575) million on foreign currency debt, respectively. The total gain (loss) excluded from
assessment and recognized in earnings was $27 million, $23 million and $19 million for the years ended December 31, 2019, 2018 and
2017, respectively.
The carrying value of foreign currency debt designated as net investment hedges was $9,190 million, $12,458 million and $13,028 at
December 31, 2019, 2018 and 2017 respectively. The total reclassified from AOCI into earnings was $7 million, $(1) million and $125
million for the years ended December 31, 2019, 2018 and 2017, respectively.
EFFECTS OF DERIVATIVES ON EARNINGS. All derivatives are marked to fair value on our balance sheet, whether they are
designated in a hedging relationship for accounting purposes or are used as economic hedges. For derivatives not designated as
hedging instruments, substantially all of the gain or loss recognized in earnings is offset by either the current period change in value of
underlying exposures which is recorded in earnings in the current period or a future period when the recording of the exposures occur.
The table below presents the effect of our derivative financial instruments in the consolidated Statement of Earnings (Loss):
(In millions)
Total amounts presented in
the consolidated Statement
of Earnings (Loss)
Total effect of cash flow
hedges
Hedged items
Derivatives designated as
hedging instruments
Total effect of fair value
hedges
Revenues
Cost of
sales
2019
Interest
Expense
SG&A
Other
Income
Revenues
Cost of
sales
2018
Interest
Expense
SG&A
Other
Income
$ 95,214 $ 70,029 $ 4,227 $ 13,949 $ 2,222
$ 97,012 $ 72,818 $ 4,766 $ 14,643 $ 2,321
$
5 $
(24) $
(37) $
(3) $
— $
(53) $
(10) $
(39) $
— $
—
$ (1,276)
1,229
$
(48)
$
617
(724)
$
(107)
Interest rate contracts
Currency exchange contracts
Other
$
(24) $
180
(2)
— $
(35)
—
(50) $
—
195
— $
(6)
—
— $
(59)
1
(72) $
— $
(1,303)
(1)
(520)
—
(4) $
—
(95)
— $
—
—
—
(47)
(10)
Total effect of derivatives
not designated as hedges
$
154 $
(35) $
145 $
(6) $
(58) $ (1,375) $
(520) $
(99) $
— $
(56)
COUNTERPARTY CREDIT RISK. Fair values of our derivatives can change significantly from period to period based on, among other
factors, market movements and changes in our positions. We manage counterparty credit risk (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 $368 million and $95 million at December 31, 2019 and 2018, respectively. Counterparties' exposures to our derivative
liability (including accrued interest), net of collateral posted by us, was $159 million and $571 million at December 31, 2019 and 2018,
respectively.
NOTE 22. VARIABLE INTEREST ENTITIES
In addition to the three VIEs detailed in Note 4, we have other consolidated VIEs with assets of $2,663 million and $2,321 million, and
liabilities of $1,137 million and $1,611 million at December 31 2019 and 2018, respectively. The increase in consolidated VIE assets is
primarily due to the formation of the aeroderivative JV described in Note 2. These entities have no features that could expose us to
losses that would significantly exceed the difference between the consolidated assets and liabilities. Substantially all the assets of our
consolidated VIEs at December 31, 2019 can only be used to settle the liabilities of those VIEs.
Our investments in unconsolidated VIEs were $1,937 million and $2,346 million, at December 31, 2019 and 2018, respectively. These
investments are primarily owned by GE Capital businesses, $621 million and $1,670 million of which were owned by EFS, comprised of
equity method investments, and $896 million and zero of which were owned by our run-off insurance operations, primarily comprising
investment securities, at December 31, 2019 and 2018, 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 23.
GE 2019 FORM 10-K 104
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIES
COMMITMENTS. The GECAS business within our Capital segment has placed multiple-year orders for various Boeing, Airbus and
other aircraft manufacturers with list prices approximating $36,313 million, excluding pre-delivery payments made in advance, (including
366 new aircraft with delivery dates of 16% in 2020, 19% in 2021 and 65% in 2022 through 2026) and secondary orders with airlines for
used aircraft of approximately $2,419 million (including 55 used aircraft with delivery dates of 71% in 2020, 20% in 2021 and 9% in
2022) at December 31, 2019. When we purchase aircraft, it is at a contractual price, which is usually less than the aircraft
manufacturer’s list price. As of December 31, 2019, we have made $2,934 million of pre-delivery payments to aircraft manufacturers.
GE Capital had total investment commitments of $2,648 million at December 31, 2019. The commitments primarily comprise project
financing investments in thermal and wind energy projects of $1,225 million and investments by our run-off insurance operations in
investment securities and other assets of $1,394 million, included within these commitments are obligations to make additional
investments in unconsolidated VIEs of $217 million and $996 million, respectively. See Note 22 for further information.
As of December 31, 2019, in our Aviation segment, we have committed to provide financing assistance of $2,269 million of future
customer acquisitions of aircraft equipped with our engines.
GUARANTEES. At December 31, 2019, we were committed under the following guarantee arrangements:
Credit Support. At December 31, 2019, we have provided $1,565 million of credit support on behalf of certain customers or associated
companies, predominantly joint ventures and partnerships, using arrangements such as standby letters of credit and performance
guarantees. The liability for such credit support was $35 million at December 31, 2019.
Indemnification Agreements – Continuing Operations. At December 31, 2019, we have $1,611 million of other indemnification
commitments, including representations and warranties in sales of businesses or assets, for which we recorded a liability of $192
million.
Indemnification Agreements – Discontinued Operations. At December 31, 2019, we have provided specific indemnities to buyers of
GE Capital’s assets that, in the aggregate, represent a maximum potential claim of $1,032 million with the related reserves of $142
million, which incorporates our evaluation of risk and the likelihood of making payments under the indemnities. The recognized liabilities
represent the estimated fair value of the indemnities when issued as adjusted for any subsequent probable and estimable losses.
Approximately 44% of these exposures are expected to be resolved within the next year, while substantially all indemnifications are
expected to be resolved within the next ten years.
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. An analysis of changes in the liability for product warranties follows.
(In millions)
Balance at January 1
Current-year provisions
Expenditures
Other changes
Balance at December 31
2019
2,192 $
713
(715)
(26)
2,165 $
2018
2,103 $
945
(788)
(69)
2,192 $
2017
1,743
929
(708)
139
2,103
$
$
GE 2019 FORM 10-K 105
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LEGAL MATTERS. 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.
WMC. During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued
all new loan originations by the second quarter of 2007, and was never a loan servicer. In connection with the sale, WMC
retained certain representation and warranty obligations related to loans sold to third parties prior to the disposal of the business and
contractual obligations to repurchase previously sold loans that had an early payment default. All claims received by WMC for early
payment default have either been resolved or are no longer being pursued. The remaining claims that were active during 2019 were
brought by securitization trustees or administrators seeking recovery from WMC for alleged breaches of representations and warranties
on mortgage loans that serve as collateral for residential mortgage-backed securities (RMBS). These claims were resolved as part of
the Chapter 11 bankruptcy case described below.
In January 2019, we announced an agreement in principle with the United States to settle the investigation by the U.S. Department of
Justice (DOJ) regarding potential violations of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by
WMC and GE Capital, and in April 2019, the parties entered into a definitive settlement agreement. Under the agreement, which
concludes this investigation, GE, without admitting liability or wrongdoing, paid the United States a civil penalty of $1,500 million.
In April 2019, WMC commenced a case under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware. WMC subsequently filed a Chapter 11 plan seeking an efficient and orderly resolution of all claims, demands,
rights, and/or liabilities to be asserted by or against WMC as the debtor. GE Capital provided approximately $14 million of debtor-in-
possession financing to fund administrative expenses associated with the Chapter 11 proceeding. In August 2019, we reached a
settlement with WMC to resolve potential claims that WMC may have had against certain GE entities. This settlement was incorporated
into and approved as part of the Chapter 11 plan that the Bankruptcy Court approved in November 2019. The Chapter 11 plan also
incorporated the resolution of the claims at issue in the previously reported lawsuit that the TMI Trust Company (TMI), as successor to
Law Debenture Trust Company of New York, brought against WMC in the United States District Court for the District of Connecticut with
respect to approximately $800 million of mortgage loans. The Chapter 11 plan became effective in December 2019, and GE Capital’s
membership interests in WMC were extinguished pursuant to the plan. In total, we paid approximately $207 million to WMC in
connection with the settlement of potential claims that WMC may have had against us, as discussed above. As of December 31, 2019,
we had no further liabilities to WMC. As a condition to the settlement agreement described above, GE Capital provided WMC $39.5
million of exit financing that is secured by other remaining assets of WMC.
Alstom legacy legal matters. On November 2, 2015, we acquired the Thermal, Renewables and Grid businesses from Alstom. Prior to
the acquisition, the seller was the subject of two 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
Israel and Slovenia that are described below. The reserve balance was $875 million and $889 million at December 31, 2019 and 2018,
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.
GE 2019 FORM 10-K 106
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In September 2013, the Israeli Antitrust Authority issued a decision whereby Alstom, Siemens AG and ABB Ltd. were held liable for an
alleged anti-competitive arrangement in the gas-insulated switchgears market in Israel. While there was no fine in connection with that
decision, claimants brought civil actions in 2013 seeking damages of approximately $950 million and $600 million, respectively, related
to the alleged conduct underlying the decision that are pending before the Central District Court in Israel. The parties have been
working to finalize a settlement, which is subject to court approval, and we anticipate a decision from the court in the first half of 2020.
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 o tanj, 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.
Shareholder and related lawsuits. Since November 2017, several putative shareholder class actions under the federal securities laws
have been filed against GE and certain affiliated individuals and consolidated into a single action currently pending in the U.S. District
Court for the Southern District of New York (the Hachem case). In October 2019, the lead plaintiff filed a fifth amended consolidated
class action complaint naming as defendants GE and current and former GE executive officers. It alleges violations of Sections 10(b)
and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 related to insurance reserves and accounting for long-term service
agreements and seeks damages on behalf of shareholders who acquired GE stock between February 27, 2013 and January 23, 2018.
GE filed a motion to dismiss in December 2019.
Since February 2018, multiple shareholder derivative lawsuits have also been filed against current and former GE executive officers
and members of GE’s Board of Directors and GE (as nominal defendant). Two shareholder derivative lawsuits are currently pending:
the Bennett case, which was filed in Massachusetts state court, and the Cuker case, which was filed in New York state court. These
lawsuits have alleged violations of securities laws, breaches of fiduciary duties, unjust enrichment, waste of corporate assets, abuse of
control and gross mismanagement, although the specific matters underlying the allegations in the lawsuits have varied. The allegations
in the Bennett case relate to substantially the same facts as those underlying the securities class action described above, and the
allegations in the Cuker case relate to alleged corruption in China. The Bennett complaint also includes a claim for professional
negligence and accounting malpractice against GE’s auditor, KPMG. 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. In
September 2019, GE filed a motion to dismiss the amended complaint.
In June 2018, a lawsuit (the Bezio case) was filed in New York state court derivatively on behalf of participants in GE’s 401(k) plan (the
GE Retirement Savings Plan (RSP)), and alternatively as a class action on behalf of shareholders who acquired GE stock between
February 26, 2013 and January 24, 2018, alleging violations of Section 11 of the Securities Act of 1933 based on alleged misstatements
and omissions related to insurance reserves and performance of GE’s business segments in a GE RSP registration statement and
documents incorporated therein by reference. In November 2018, the plaintiffs filed an amended derivative complaint naming as
defendants GE, former GE executive officers and Fidelity Management Trust Company, as trustee for the GE RSP. In January 2019,
GE filed a motion to dismiss, and in November 2019, the court dismissed the remaining claims and the plaintiffs filed a notice of appeal.
In December 2019, the plaintiffs filed a second amended derivative complaint, and in January 2020, GE filed a motion to dismiss.
In July 2018, a putative class action (the Mahar case) was filed in New York state court naming as defendants GE, former GE executive
officers, a former member of GE’s Board of Directors and KPMG. It alleged violations of Sections 11, 12 and 15 of the Securities Act of
1933 based on alleged misstatements related to insurance reserves and performance of GE’s business segments in GE Stock Direct
Plan registration statements and documents incorporated therein by reference and seeks damages on behalf of shareholders who
acquired GE stock between July 20, 2015 and July 19, 2018 through the GE Stock Direct Plan. In February 2019, this case was
dismissed. In March 2019, plaintiffs filed an amended derivative complaint naming the same defendants. In April 2019, GE filed a
motion to dismiss the amended complaint. In October 2019, the court denied GE's motion to dismiss and stayed the case pending the
outcome of the Hachem case. In November 2019, the plaintiffs moved to re-argue to challenge the stay, and GE cross-moved to re-
argue the denial of the motion to dismiss and filed a notice of appeal.
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 has been stayed pending resolution of the motion to dismiss the Hachem case.
In December 2018, a putative class action (the Varga case) was filed in the U.S. District Court for the Northern District of New York
naming GE and a former GE executive officer as defendants in connection with the oversight of the GE RSP. It alleges that the
defendants breached fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) by failing to advise GE RSP
participants that GE Capital insurance subsidiaries were allegedly under-reserved and continued to retain a GE stock fund as an
investment option in the GE RSP. The plaintiffs seek unspecified damages on behalf of a class of GE RSP participants and
beneficiaries from January 1, 2010 through January 19, 2018 or later. In April 2019, GE filed a motion to dismiss.
GE 2019 FORM 10-K 107
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In February 2019, two putative class actions (the Birnbaum case and the Sheet Metal Workers Local 17 Trust Funds case) were filed in
the U.S. District Court for the Southern District of New York naming as defendants GE and current and former GE executive officers. In
April 2019, the court issued an order consolidating these two actions. In June 2019, the lead plaintiff filed an amended consolidated
complaint. It alleges violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 based on alleged misstatements
regarding GE's H-class turbines and goodwill related to GE's Power business. The lawsuit seeks damages on behalf of shareholders
who acquired GE stock between December 4, 2017 and December 6, 2018. In August 2019, the lead plaintiff filed a second amended
complaint. In September 2019, GE filed a motion to dismiss the second amended complaint.
In February 2019, a securities action (the Touchstone case) was filed in the U.S. District Court for the Southern District of New 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 six
institutional investors who purchased GE common stock between August 1, 2014 and October 30, 2018 and rescission of those
purchases. This case has been stayed pending resolution of the motion to dismiss the Hachem case.
As previously reported by Baker Hughes, in March 2019, two 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 two 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 December 2019, the court
granted a six-month stay.
In August 2019, a putative class action (the Tri-State case) was filed in the Delaware Court of Chancery naming as defendants GE and
the former Board of Directors of Baker Hughes Incorporated (BHI). It alleges fraud, aiding and abetting breaches of fiduciary duty, and
aiding and abetting breaches of duty of disclosure by GE based on allegations regarding financial statements that GE provided the
former BHI board, management and shareholders in connection with BHI’s merger with GE’s Oil and Gas Business in July 2017. The
plaintiff seeks damages on behalf of BHI shareholders during the period between October 7, 2016 and July 5, 2017. In October 2019,
the City of Providence filed a complaint containing allegations substantially similar to those in the Tri-State complaint. The cases were
consolidated in November 2019, and in December 2019, the plaintiffs filed an amended consolidated complaint which is similar to the
prior complaints but does not include fraud claims against GE.
These cases are at an early stage; we believe we have defenses to the claims and are responding accordingly.
SEC investigation. In late November 2017, staff of the Boston office of the U.S. Securities & Exchange Commission (SEC) notified us
that they are conducting an investigation of GE’s revenue recognition practices and internal controls over financial reporting related to
long-term service agreements. Following our investor update in January 2018 about the increase in future policy benefit reserves for
GE Capital’s run-off insurance operations, the SEC staff expanded the scope of its investigation to encompass the reserve increase and
the process leading to the reserve increase. Following our announcement in October 2018 about the expected non-cash goodwill
impairment charge related to GE’s Power business, the SEC expanded the scope of its investigation to include that charge as well. We
are providing documents and other information requested by the SEC staff, and we are cooperating with the ongoing investigation. Staff
from the DOJ are also investigating these matters, and we are providing them with requested documents and information as well.
Other GE Retirement Savings Plan class actions. Four putative class action lawsuits have been filed regarding the oversight of the
GE RSP, and those class actions have been consolidated into a single action in the U.S. District Court for the District of Massachusetts.
The consolidated complaint names as defendants GE, GE Asset Management, current and former GE and GE Asset Management
executive officers and employees who served on fiduciary bodies responsible for aspects of the GE RSP during the class period. Like
similar lawsuits that have been brought against other companies in recent years, this action alleges that the defendants breached their
fiduciary duties under ERISA in their oversight of the GE RSP, principally by retaining five proprietary funds that plaintiffs allege were
underperforming as investment options for plan participants and by charging higher management fees than some alternative funds. The
plaintiffs seek unspecified damages on behalf of a class of GE RSP participants and beneficiaries from September 26, 2011 through the
date of any judgment. In August and December 2018, the court issued orders dismissing one count of the complaint and denying GE's
motion to dismiss the remaining counts. We believe we have defenses to the claims and are responding accordingly.
GE 2019 FORM 10-K 108
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bank BPH. As previously reported, GE Capital’s subsidiary Bank BPH, along with other Polish banks, has been subject to ongoing
litigation in Poland related to its portfolio of floating rate residential mortgages, with cases brought by individual borrowers seeking relief
related to their foreign currency-denominated mortgages in various courts throughout Poland. Approximately 86% 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 $2.5
billion at December 31, 2019. In October 2019, the European Court of Justice (ECJ) issued a decision about the approach to remedy in
a case involving another Polish bank’s foreign currency loans, and in January 2020, a pending case involving a Bank BPH loan was
referred to the ECJ. While there remains significant uncertainty as to how the prior ECJ decision, or a future decision on the Bank BPH
case, will influence the Polish courts as they consider individual cases, we are observing an increase in the number of lawsuits brought
against Bank BPH and other banks in Poland with similar portfolios that may continue in future reporting periods. We also believe there
is a potential for unifying rules of decision to emerge regarding both the finding of liability and approach to remedy that could change
our estimate of the potential effects of borrower litigation. Future adverse developments in the potential for legislative relief or in
litigation across the Polish banking industry as a result of ECJ decisions or otherwise could result in losses related to these loans in
future reporting periods.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. Our operations, like operations of other companies engaged in similar
businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws and nuclear
decommissioning regulations. Additionally, like many other industrial companies, we and our subsidiaries are defendants in various
lawsuits related to alleged worker exposure to asbestos or other hazardous materials. Liabilities for environmental remediation, nuclear
decommissioning and worker exposure claims exclude possible insurance recoveries. It is reasonably possible that our exposure will
exceed amounts accrued. However, due to uncertainties about the status of laws, regulations, technology and information related to
individual sites and lawsuits, such amounts are not reasonably estimable. Total reserves related to environmental remediation, nuclear
decommissioning and worker exposure claims were $2,484 million and $2,172 million at December 31, 2019 and 2018, respectively.
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 EPA’s release in September 2015 of an intended final remediation
decision, GE and 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 EPA’s Environmental Appeals Board (EAB). The EAB issued its decision in January 2018, affirming parts of EPA’s decision and
granting relief to GE on certain significant elements of its challenge. The EAB remanded the decision back to EPA to address those
elements and reissue a revised final remedy, and EPA convened a mediation process with GE and interested stakeholders. In February
2020, EPA announced an agreement between EPA and many of the mediation stakeholders, including GE, concerning a revised
Housatonic River remedy. EPA will next propose this remedy for public comment and then finalize a revised remedy. As of December
31, 2019, 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.
Expenditures for site remediation, nuclear decommissioning and worker exposure claims amounted to approximately $236 million, $214
million, and $227 million for the years ended December 31, 2019, 2018, and 2017, respectively. We presently expect that such
expenditures will be approximately $350 million and $250 million in 2020 and 2021, respectively.
GE 2019 FORM 10-K 109
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 24. CASH FLOWS INFORMATION
Changes in operating assets and liabilities are net of acquisitions and dispositions of principal businesses.
Amounts reported in the Proceeds from sales of discontinued operations and Proceeds from principal business dispositions captions in
our consolidated Statement of Cash Flows are net of cash transferred and included certain deal-related costs. Amounts reported in the
Net cash from (payments for) principal businesses purchased caption are net of cash acquired and included certain deal-related costs
and debt assumed and immediately repaid in acquisitions.
GE For the years ended December 31 (In millions)
2019
2018
Increase (decrease) in employee benefit liabilities(a)
Other gains on investing activities
Restructuring and other charges(b)
Restructuring and other cash expenditures
Increase (decrease) in equipment project accruals
Baker Hughes Class B dividends received
Other(c)
All other operating activities
Derivative settlements (net)
Investments in intangible assets (net)
Other investments (net)(d)
Sales of retained ownership interests in Wabtec
Other(e)
All other investing activities
Disposition of Baker Hughes noncontrolling interests
Acquisition of noncontrolling interests(f)
Other(g)
All other financing activities
Open market purchases under share repurchase program
Other purchases
Dispositions
Net dispositions (purchases) of GE shares for treasury
$
$
$
$
$
$
$
$
227 $
(723)
1,144
(1,157)
(314)
282
613
72 $
(14) $
(30)
791
3,383
(455)
3,675 $
— $
(28)
(284)
(312) $
(10) $
(47)
84
29 $
587 $
(378)
2,244
(1,474)
(939)
494
142
676 $
(947) $
(496)
726
—
77
(640) $
4,373 $
(3,345)
79
1,107 $
(245) $
(23)
250
(17) $
2017
(68)
(138)
2,781
(1,484)
(212)
251
374
1,504
(1,016)
(321)
(1,404)
—
(6,698)
(9,439)
308
(135)
117
290
(3,506)
(67)
1,021
(2,550)
(a) Included non-cash adjustments for stock-based compensation expenses.
(b) Excluded non-cash adjustments reflected as Depreciation and amortization of property, plant and equipment or Amortization of
intangible assets in our consolidated Statement of Cash Flows.
(c) Included other adjustments to net income, such as write-downs of assets and the impacts of acquisition accounting and changes in
other assets and other liabilities classified as operating activities, such as the timing of payments of customer allowances.
(d) Included the provision of a promissory note to Baker Hughes in 2017 and subsequent principal collections in 2018 and 2019. See
Note 2.
(e) Included net activity related to settlements between our continuing operations and discontinued operations. In 2017, this was
primarily driven by funding in order to complete the Baker Hughes acquisition.
(f) Primarily included the acquisition of Alstom's interest in the grid technology, renewable energy, and global nuclear and French steam
power joint ventures for $(3,105) million in the fourth quarter of 2018. See Note 16.
(g) Primarily included debt tender expenditures of $(255) million incurred to purchase GE long-term debt in 2019.
GE 2019 FORM 10-K 110
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GE CAPITAL For the years ended December 31 (In millions)
Cash collateral and settlements received (paid) on derivative contracts
Increase (decrease) in other liabilities
Other(a)
All other operating activities
Increase in loans to customers
Principal collections from customers - loans
Investment in equipment for financing leases
Principal collections from customers - financing leases(b)
Sales of financing receivables
Net decrease (increase) in GE Capital financing receivables
Purchases of investment securities
Dispositions and maturities of investment securities
Decrease (increase) in other assets - investments
Other(c)
All other investing activities
Short-term (91 to 365 days)
Long-term (longer than one year)
Principal payments - non-recourse, leveraged leases
Repayments and other reductions (maturities longer than 90 days)
Redemption of investment contracts
Settlements paid on derivative contracts
Other
All other financing activities
2019
1,263 $
(1,470)
811
605 $
(15,022) $
18,083
(18)
—
345
3,389 $
(6,205) $
4,589
1,347
2,886
2,617 $
(10,515) $
(991)
(126)
(11,632) $
(279) $
(864)
324
(819) $
$
$
$
$
$
$
$
$
$
$
2018
(708) $
240
627
158 $
(30,207) $
37,237
(306)
802
2,458
9,986 $
(5,775) $
8,309
(4,516)
2,464
482 $
(14,251) $
(5,460)
(125)
(19,836) $
(268) $
(2,235)
95
(2,408) $
2017
836
(798)
11,076
11,114
(45,251)
47,471
(585)
1,011
251
2,897
(2,867)
10,001
(8,497)
4,375
3,013
(18,591)
(2,054)
(362)
(21,007)
(344)
(212)
276
(280)
(a) Primarily included non-cash adjustments for insurance-related charges recorded in 2019 and 2017.
(b) In 2019, per ASU No. 2016-02, Leases, principal collections from customers on financing leases is classified as cash from operating
activities.
(c) Primarily included cash related to our current receivables and supply chain finance programs and net activity related to settlements
between our continuing operations (primarily our treasury operations) and businesses in discontinued operations.
GE 2019 FORM 10-K 111
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 25. INTERCOMPANY TRANSACTIONS
Transactions between related companies may include, but are not limited to, the following: GE Capital working capital services to GE,
including current receivables and supply chain finance programs; GE Capital finance transactions, including related GE guarantees to
GE Capital; GE Capital financing of GE long-term receivables; and aircraft engines, power equipment and renewable energy equipment
manufactured by GE that are installed on GE Capital investments, including leased equipment.
In addition to the above transactions that primarily enable growth for the GE businesses, there are routine related party transactions,
which include, but are not limited to, the following: expenses related to parent-subsidiary pension plans; buildings and equipment
leased between GE and GE Capital, including sale-leaseback transactions; information technology (IT) and other services sold to GE
Capital by GE; settlements of tax liabilities; and various investments, loans and allocations of GE corporate overhead costs.
Presented below is a walk of intercompany eliminations from the combined GE and GE Capital totals to the consolidated cash flows.
(In millions)
Combined GE and GE Capital cash from (used for) operating activities - continuing operations $
GE current receivables sold to GE Capital
GE long-term receivables sold to GE Capital
Supply chain finance programs(a)
GE Capital common dividends to GE
Other reclassifications and eliminations
Consolidated cash from (used for) operating activities-continuing operations
Combined GE and GE Capital cash from (used for) investing activities - continuing operations
GE current receivables sold to GE Capital
GE long-term receivables sold to GE Capital
Supply chain finance programs(a)
GE Capital loans to GE
Repayment of GE Capital loans by GE
Capital contribution from GE to GE Capital
Other reclassifications and eliminations
Consolidated cash from (used for) investing activities-continuing operations
Combined GE and GE Capital cash from (used for) financing activities - continuing operations
GE current receivables sold to GE Capital
GE Capital common dividends to GE
GE Capital loans to GE
Repayment of GE Capital loans by GE
Capital contribution from GE to GE Capital
Other reclassifications and eliminations
Consolidated cash from (used for) financing activities-continuing operations
$
$
$
$
$
2019
2018
2017
6,495 $
1,081
468
2,289
—
86
10,419 $
13,509 $
(1,677)
(468)
(2,289)
—
(1,523)
4,000
(868)
10,684 $
(14,665) $
596
—
—
1,523
(4,000)
782
(15,764) $
2,282 $
5
1,079
(18)
—
(138)
3,210 $
14,915 $
(839)
(1,079)
18
6,479
—
—
(570)
18,925 $
(22,408) $
835
—
(6,479)
—
—
706
(27,345) $
13,853
(4,435)
(250)
302
(4,016)
387
5,840
(3,473)
4,561
250
(302)
7,271
(1,329)
—
(251)
6,728
(21,738)
(127)
4,016
(7,271)
1,329
—
(136)
(23,927)
(a) Represents the reduction of the GE liability associated with the funded participation in a supply chain finance program with GE
Capital, primarily as a result of GE Capital's sale of the program platform to MUFG Union Bank, N.A. (MUFG) in 2019.
GE current receivables sold to GE Capital excludes $303 million, $5,192 million and $4,411 million related to cash payments received
on the Receivable facility deferred purchase price in the years ended December 31, 2019, 2018 and 2017, respectively, which are
reflected as Cash from investing activities in the GE Capital and Consolidated columns of our consolidated Statement of Cash Flows.
Sales of current and long-term receivables from GE to GE Capital are classified as Cash from operating activities in the GE column of
our Statement of Cash Flows. See Note 4 for further information.
GE 2019 FORM 10-K 112
Power
Renewable Energy
Aviation
Healthcare
Total industrial segment
revenues
Capital
Corporate items
and eliminations
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 26. OPERATING SEGMENTS
BASIS FOR PRESENTATION. Our operating businesses are organized based on the nature of markets and customers. Segment
accounting policies are the same as described and referenced in Note 1. Segment results for our financial services businesses reflect
the discrete tax effect of transactions.
A description of our operating segments as of December 31, 2019, can be found in the Summary of Operating Segments section within
MD&A.
REVENUES (In millions)
2019
2018
2017
Total revenues(a)
$ 18,625 $ 22,150 $ 29,426
14,321
27,013
19,017
15,337
32,875
19,942
14,288
30,566
19,784
Years ended December 31
Intersegment revenues(b)
2019
2018
$
357 $
139
758
—
152 $
186
375
—
2017
326
242
459
—
External revenues
2019
2018
2017
$ 18,267 $ 21,997 $ 29,100
14,080
26,554
19,017
15,198
32,117
19,942
14,102
30,191
19,784
86,778
8,741
86,789
9,551
89,776
9,070
1,254
971
714
1,384
1,027
1,558
85,524
7,770
86,075
8,167
88,749
7,512
Total
(a) Revenues of GE businesses include income from sales of goods and services to customers.
(b) Sales from one component to another generally are priced at equivalent commercial selling prices.
— $
— $
$
(305)
433
$ 95,214 $ 97,012 $ 99,279
673
(2,225)
(2,097)
(2,585)
1,920
3,018
— $ 95,214 $ 97,012 $ 99,279
2,770
The equipment and services revenues classification in the table below is consistent with our segment MD&A presentation.
(In millions)
Power
2019
Years ended December 31
2018
2017
Equipment Services
Total
Equipment Services
Total
Equipment Services
Total
$
6,247 $ 12,378 $ 18,625
$
8,077 $ 14,073 $ 22,150
$ 12,909 $ 16,517 $ 29,426
Renewable Energy
12,267
3,069
15,337
11,419
2,870
14,288
13,969
352
14,321
Aviation
Healthcare
12,804
20,071
32,875
11,499
19,067
30,566
10,215
16,797
27,013
11,585
8,357
19,942
11,422
8,363
19,784
10,771
8,246
19,017
Total industrial segment revenues
$ 42,904 $ 43,875 $ 86,778
$ 42,416 $ 44,372 $ 86,789
$ 47,864 $ 41,913 $ 89,776
SEGMENT REVENUES
(In millions)
Gas Power
Power Portfolio
Power
Onshore Wind
Grid Solutions equipment and services
Other
Renewable Energy
Commercial
Military
Systems & Other
Aviation
Healthcare Systems
Life Sciences
Healthcare
Total industrial segment revenues
Capital(a)
Corporate items and eliminations
Consolidated revenues
Years ended December 31
2019
13,122
5,503
18,625
10,421
4,062
855
15,337
24,217
4,389
4,269
32,875
14,648
5,294
19,942
86,778
8,741
(305)
95,214
$
$
$
$
$
$
$
$
$
$
2018
13,296
8,853
22,150
8,220
4,772
1,296
14,288
22,724
4,103
3,740
30,566
14,886
4,898
19,784
86,789
9,551
673
97,012
$
$
$
$
$
$
$
$
$
2017
$17,100
12,326
29,426
8,055
5,117
1,149
14,321
19,709
3,991
3,314
27,013
14,460
4,557
19,017
89,776
9,070
433
99,279
$
$
$
$
$
$
$
$
$
$
(a) Substantially all of our revenues at GE Capital are outside of the scope of ASC 606.
Revenues from customers located in the United States were $39,372 million, $39,876 million and $41,468 million for the years ended
December 31, 2019, 2018 and 2017, respectively. Revenues from customers located outside the United States were $55,843 million,
$57,136 million and $57,811 million for the years ended December 31, 2019, 2018 and 2017, respectively.
GE 2019 FORM 10-K 113
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REMAINING PERFORMANCE OBLIGATION. As of December 31, 2019, the aggregate amount of the contracted revenues allocated
to our unsatisfied (or partially unsatisfied) performance obligations was $245,434 million. We expect to recognize revenue as we satisfy
our remaining performance obligations as follows: 1) equipment-related remaining performance obligation of $48,487 million of which
58%, 76% and 88% is expected to be recognized within 1, 2 and 5 years, respectively, and the remaining thereafter; and 2) services-
related remaining performance obligations of $196,947 million of which 14%, 46%, 72% and 83% 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.
Total sales of goods and services to agencies of the U.S. Government were 5%, 5% and 4% of GE revenues for the years ended
December 31, 2019, 2018 and 2017, respectively. Within our Aviation segment, defense-related sales were 5%, 4% and 4% of GE
revenues for the years ended December 31, 2019, 2018 and 2017, respectively.
PROFIT AND EARNINGS For the years ended December 31 (In millions)
2019
2018
2017
Power
Renewable Energy
Aviation
Healthcare
Total industrial segment profit
Capital
Total segment profit
Corporate items and eliminations
GE goodwill impairments
GE interest and other financial charges
GE non-operating benefit costs
GE provision for income taxes
Earnings (loss) from continuing operations attributable to GE common shareholders
Earnings (loss) from discontinued operations, net of taxes
Less net earnings (loss) attributable to noncontrolling interests, discontinued operations
Earnings (loss) from discontinued operations, net of taxes and noncontrolling interests
Consolidated net earnings (loss) attributable to GE common shareholders
$
$
386 $
(666)
6,820
3,896
10,436
(530)
9,906
(2,212)
(1,486)
(2,115)
(2,828)
(1,309)
(44)
(5,335)
60
(5,395)
(5,439) $
(808) $
292
6,466
3,698
9,647
(489)
9,158
(2,837)
(22,136)
(2,415)
(2,740)
(467)
(21,438)
(1,363)
1
(1,364)
(22,802) $
1,894
728
5,370
3,488
11,479
(6,765)
4,714
(3,798)
(1,165)
(2,538)
(2,409)
(3,493)
(8,689)
(312)
(81)
(231)
(8,920)
For the years ended December 31 (In millions)
2019
2018
Capital
Corporate items and eliminations(a)
Total
$
$
2,532 $
1,695
4,227 $
2,982 $
1,784
4,766 $
2017
3,145
1,510
4,655
$
$
2019
582 $
(1,309)
(726) $
2018
374 $
(467)
(93) $
2017
6,302
(3,493)
2,808
Interest and other financial charges
Benefit (provision) for income taxes
(a) Included amounts for Power, Renewable Energy, Aviation and Healthcare, for which our measure of segment profit excludes interest
and other financial charges and income taxes.
Assets
At December 31
Property, plant and
equipment additions(a)
For the years ended December 31
Depreciation and amortization(b)
For the years ended December 31
(In millions)
2019
2018
2017
2019
2018
Power
Renewable Energy
Aviation
Healthcare
Capital(c)
Corporate items
and eliminations(d)
Total continuing
$ 26,731 $ 27,389 $ 55,827
18,466
37,473
28,408
150,805
15,935
41,647
30,514
117,546
16,400
38,021
28,048
119,329
$
277 $
455
1,031
395
3,830
358 $
303
1,070
378
4,569
$
2017
1,018
677
1,426
393
3,680
2019
2018
880 $
425
1,150
702
2,083
1,307 $
474
1,042
832
2,163
29,565
10,758
$ 261,939 $ 247,219 $ 301,737
18,032
(175)
5,813 $
(46)
6,632 $
(64)
7,130
$
355
5,595 $
763
6,582 $
$
2017
1,228
382
979
806
2,342
456
6,193
(a) Additions to property, plant and equipment include amounts relating to principal businesses purchased.
(b) Included amortization expense related to intangible assets.
(c) Included Capital deferred income taxes that are presented as assets for purposes of our balance sheet presentation.
(d) Included GE deferred income taxes that are presented as assets for purposes of our balance sheet presentation.
GE 2019 FORM 10-K 114
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total assets of Power, Renewable Energy, Aviation, Healthcare, Capital and Corporate at December 31, 2019, include investments in
and advances to associated companies of $565 million, $630 million, $2,073 million, $245 million, $2,159 million and $45 million,
respectively. Investments in and advances to associated companies contributed approximately $(4) million, $(2) million, $204 million,
$19 million, $324 million and $(11) million to pre-tax income for the year ended December 31, 2019 of Power, Renewable Energy,
Aviation, Healthcare, Capital and Corporate, respectively.
We classify certain assets that cannot meaningfully be associated with specific geographic areas as “Other Global” for this purpose.
December 31 (In millions)
U.S.
Non-U.S.
Europe
Asia
Americas
Other Global
Total Non-U.S.
Total assets (Continuing Operations)
2019
2018
$
144,405 $
126,566
70,565
22,089
13,435
11,445
117,534 $
261,939 $
70,007
22,355
12,871
15,420
120,653
247,219
$
$
The increase in total continuing assets from December 31, 2018 to December 31, 2019 is primarily due to the deconsolidation of our
Baker Hughes segment and classification of our retained interest in Baker Hughes within investment securities, as well as lower sales
of receivables and the effect of adopting new leasing standards.
Property, plant and equipment – net associated with operations based in the United States were $11,992 million, $11,868 million and
$12,393 million at December 31, 2019, 2018 and 2017, respectively. Property, plant and equipment – net associated with operations
based outside the United States were $31,298 million, $31,743 million and $33,576 million at December 31, 2019, 2018 and 2017,
respectively.
NOTE 27. GUARANTOR FINANCIAL INFORMATION
GE Capital International Funding Company Unlimited Company (the Issuer) previously issued senior unsecured registered notes that
are fully and unconditionally, jointly and severally guaranteed by both the Company and GE Capital International Holdings Limited (each
a Guarantor, and together, the Guarantors). The Company is required to provide certain financial information regarding the Issuer and
the Guarantors of the registered securities, specifically Condensed Consolidating Statements of Earnings and Comprehensive Income,
Condensed Consolidating Statements of Financial Position and Condensed Consolidating Statements of Cash Flows for:
• General Electric Company (the Parent Company Guarantor) – prepared with investments in subsidiaries accounted for under
the equity method of accounting and excluding any inter-segment eliminations;
• GE Capital International Funding Company Unlimited Company (the Subsidiary Issuer) – finance subsidiary that issued the
guaranteed notes for debt;
• GE Capital International Holdings Limited (GECIHL) (the Subsidiary Guarantor) – prepared with investments in non-guarantor
subsidiaries accounted for under the equity method of accounting;
• Non-Guarantor Subsidiaries – prepared on an aggregated basis excluding any elimination or consolidation adjustments and
includes predominantly all non-cash adjustments for cash flows;
• Consolidating Adjustments – adjusting entries necessary to consolidate the Parent Company Guarantor with the Subsidiary
Issuer, the Subsidiary Guarantor and Non-Guarantor Subsidiaries and in the comparative periods, this category includes the impact
of new accounting policies adopted as described in Note 1; and
• Consolidated – prepared on a consolidated basis.
GE 2019 FORM 10-K 115
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 2019
(In millions)
Sales of goods and services
GE Capital revenues from services
Total revenues
Interest and other financial charges
Other costs and expenses
Total costs and expenses
Other income
Equity in earnings (loss) of affiliates
Earnings (loss) from continuing
operations before income taxes
Benefit (provision) for income taxes
Earnings (loss) from continuing
operations
Earnings (loss) from discontinued
operations, net of taxes
Net earnings (loss)
Less net earnings (loss) attributable to
noncontrolling interests
Net earnings (loss) attributable to
the Company
Other comprehensive income
Comprehensive income (loss)
attributable to the Company
Parent
Company
Guarantor
$
28,078 $
—
28,078
1,612
32,563
34,175
(3,853)
5,923
(4,028)
(1,143)
(5,170)
192
(4,979)
—
(4,979)
2,681
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Consolidated
— $
964
964
980
1
981
—
—
(17)
1
(16)
—
(16)
—
(16)
—
— $
64
64
154,927 $
9,949
164,876
(95,518) $
(3,250)
(98,768)
1,975
166,371
168,346
30,453
75,445
102,427
(228)
(1,745)
(106,876)
(108,622)
(24,378)
(82,658)
(97,182)
643
102,200
(96,539)
—
102,200
(5,585)
(102,124)
1,405
—
1,406
—
1,290
(52)
—
(52)
59
7
—
87,487
7,728
95,214
4,227
92,059
96,287
2,222
—
1,149
(726)
423
(5,335)
(4,912)
7
59
66
7
(1,022)
102,192
2,280
(102,184)
(1,258)
(4,979)
2,681
$
(2,297) $
(16) $
(1,015) $
104,472 $
(103,441) $
(2,297)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 2018
Parent
Company
Guarantor
$
34,972 $
—
34,972
1,728
47,471
49,199
3,910
(11,404)
(21,721)
1,092
(20,629)
(1,726)
(22,355)
—
(22,355)
(10)
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Consolidated
— $
— $
917
917
911
—
911
—
—
6
5
11
—
11
—
11
—
1,038
1,038
2,560
1
2,561
—
1,554
31
—
31
(39)
(8)
—
(8)
(82)
164,691 $
9,531
174,222
(110,723) $
(3,414)
(114,136)
2,459
186,262
188,721
29,268
240,036
254,803
(2,381)
(2,893)
(118,180)
(121,073)
(30,857)
(230,186)
(254,106)
1,191
88,940
8,072
97,012
4,766
115,554
120,320
2,321
—
(20,987)
(93)
252,422
(252,915)
(21,080)
—
252,422
401
(252,514)
(1,363)
(22,443)
(204)
116
(89)
252,627
(2,840)
(252,629)
2,922
(22,355)
(10)
$
(22,364) $
11 $
(90) $
249,786 $
(249,707) $
(22,364)
(In millions)
Sales of goods and services
GE Capital revenues from services
Total revenues
Interest and other financial charges
Other costs and expenses
Total costs and expenses
Other income
Equity in earnings (loss) of affiliates
Earnings (loss) from continuing
operations before income taxes
Benefit (provision) for income taxes
Earnings (loss) from continuing
operations
Earnings (loss) from discontinued
operations, net of taxes
Net earnings (loss)
Less net earnings (loss) attributable to
noncontrolling interests
Net earnings (loss) attributable to
the Company
Other comprehensive income
Comprehensive income (loss)
attributable to the Company
GE 2019 FORM 10-K 116
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 2017
(In millions)
Sales of goods and services
GE Capital revenues from services
Total revenues
Interest and other financial charges
Other costs and expenses
Total costs and expenses
Other income
Equity in earnings (loss) of affiliates
Earnings (loss) from continuing
operations before income taxes
Benefit (provision) for income taxes
Earnings (loss) from continuing
operations
Earnings (loss) from discontinued
operations, net of taxes
Net earnings (loss)
Less net earnings (loss) attributable to
noncontrolling interests
Net earnings (loss) attributable to
the Company
Other comprehensive income
Comprehensive income (loss)
attributable to the Company
Parent
Company
Guarantor
$
35,551 $
—
35,551
1,644
38,765
40,409
(959)
553
(5,263)
(2,896)
(8,159)
(325)
(8,484)
—
(8,484)
4,184
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Consolidated
— $
— $
703
703
652
—
653
—
—
50
(5)
45
—
45
—
45
—
800
800
2,006
18
2,023
—
1,938
714
115
829
41
870
—
870
567
161,172 $
9,888
171,060
(104,782) $
(4,053)
(108,835)
3,343
177,223
180,566
75,291
109,521
175,307
5,877
(2,990)
(107,954)
(110,943)
(72,249)
(112,012)
(182,152)
(282)
91,942
7,337
99,279
4,655
108,052
112,707
2,083
—
(11,345)
2,808
181,184
(182,435)
(8,536)
4
181,187
(32)
(182,467)
(312)
(8,849)
(137)
(228)
(365)
181,324
(7,552)
(182,239)
6,985
(8,484)
4,184
$
(4,300) $
45 $
1,436 $
173,773 $
(175,254) $
(4,300)
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 2019
(In millions)
Cash, cash equivalents and restricted cash
Receivables - net
Investment in subsidiaries
All other assets
Total assets
Short-term borrowings
Long-term and non-recourse borrowings
All other liabilities
Total liabilities
$
$
$
Parent
Company
Guarantor
10,591 $
47,170
147,397
28,377
233,535 $
135,172 $
40,660
66,808
242,640
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Consolidated
— $
17,726
—
236
17,961 $
— $
230
40,408
—
40,638 $
26,438 $
61,026
421,613
291,995
801,071 $
— $
2,981 $
9,712 $
16,771
161
16,932
24,417
70
27,468
34,262
146,972
190,946
(636) $
(99,104)
(609,418)
(118,000)
(827,158) $
(125,792) $
(47,301)
(68,705)
(241,799)
36,394
27,047
—
202,607
266,048
22,072
68,809
145,306
236,187
Total liabilities and equity
$
233,535 $
17,961 $
40,638 $
801,071 $
(827,158) $
266,048
GE 2019 FORM 10-K 117
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 2018
(In millions)
Cash, cash equivalents and restricted cash
Receivables - net
Investment in subsidiaries
All other assets
Total assets
Short-term borrowings
Long-term and non-recourse borrowings
All other liabilities
Total liabilities
$
$
$
Parent
Company
Guarantor
9,561 $
30,466
176,239
29,615
245,881 $
150,426 $
59,800
43,872
254,098
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Consolidated
— $
17,467
—
12
17,479 $
— $
2,792
45,832
—
25,975 $
69,268
733,535
359,063
(4,412) $
(90,504)
(955,605)
(138,230)
48,623 $ 1,187,841 $ (1,188,751) $
— $
9,854 $
9,649 $
16,115
336
16,452
24,341
245
34,439
41,066
153,160
203,875
(157,153) $
(50,498)
(41,622)
(249,273)
31,124
29,488
—
250,460
311,072
12,776
90,824
155,992
259,591
Total liabilities and equity
$
245,881 $
17,479 $
48,623 $ 1,187,841 $ (1,188,751) $
311,072
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2019
(In millions)
Cash from (used for) operating
activities(a)
Cash from (used for) investing activities
Cash from (used for) financing activities
Effect of currency exchange rate changes
on cash, cash equivalents and restricted
cash
Increase (decrease) in cash, cash
equivalents and restricted cash
Cash, cash equivalents and restricted cash
at beginning of year
Cash, cash equivalents and restricted cash
at end of year
Less cash, cash equivalents and restricted
cash of discontinued operations at end of
year
Cash, cash equivalents and restricted cash
of continuing operations at end of year
Parent
Company
Guarantor
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Consolidated
$
5,526 $
137 $
(1,685) $
33,515 $
(28,721) $
32,210
(36,706)
—
1,030
9,561
10,591
—
8,772
8,939
(137)
6,223
400,190
(429,548)
—
—
—
—
—
—
(4,538)
(436,933)
462,045
(16,133)
—
—
—
—
—
(50)
—
(50)
(3,277)
3,776
1,529
30,399
(4,412)
35,548
27,121
(636)
37,077
638
—
638
$
10,591 $
— $
— $
26,484 $
(636) $
36,439
(a) Parent Company Guarantor cash flows included cash from (used for) operating activities of discontinued operations of $(1,282)
million.
GE 2019 FORM 10-K 118
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2018
(In millions)
Cash from (used for) operating
activities(a)
Cash from (used for) investing activities
Cash from (used for) financing activities
Effect of currency exchange rate changes
on cash, cash equivalents and restricted
cash
Increase (decrease) in cash, cash
equivalents and restricted cash
Cash, cash equivalents and restricted cash
at beginning of year
Cash, cash equivalents and restricted cash
at end of year
Less cash, cash equivalents and restricted
cash of discontinued operations at end of
year
Cash, cash equivalents and restricted cash
of continuing operations at end of year
Parent
Company
Guarantor
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Consolidated
$
42,950 $
(387) $
34,361 $
328,029 $
(399,976) $
4,978
1,292
(38,154)
457
(70)
27,415
(297,621)
(61,779)
(48,782)
286,736
116,979
18,280
(31,807)
—
6,089
3,472
9,561
—
—
—
—
—
—
—
(3)
3
—
—
(628)
—
(628)
(19,002)
3,739
(9,176)
49,400
(8,151)
44,724
30,399
(4,412)
35,548
4,424
—
4,424
$
9,561 $
— $
— $
25,975 $
(4,412) $
31,124
(a) Parent Company Guarantor cash flows included cash from (used for) operating activities of discontinued operations of $1,991
million.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2017
(In millions)
Cash from (used for) operating
activities(a)
Cash from (used for) investing activities
Cash from (used for) financing activities
Effect of currency exchange rate changes
on cash, cash equivalents and restricted
cash
Increase (decrease) in cash, cash
equivalents and restricted cash
Cash, cash equivalents and restricted cash
at beginning of year
Cash, cash equivalents and restricted cash
at end of year
Less cash, cash equivalents and restricted
cash of discontinued operations at end of
year
Cash, cash equivalents and restricted cash
of continuing operations at end of year
Parent
Company
Guarantor
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Consolidated
$
(29,441) $
52 $
4,305 $
149,385 $
(117,747) $
(4,432)
34,616
(52)
—
(1,871)
(2,473)
—
743
2,729
3,472
—
—
—
—
—
—
—
(39)
41
3
—
6,554
5,379
(222,298)
234,032
70,782
(121,410)
(18,484)
891
—
891
(1,239)
(5,125)
(5,659)
50,640
(3,026)
50,384
49,400
(8,151)
44,724
7,901
—
7,901
$
3,472 $
— $
3 $
41,499 $
(8,151) $
36,823
(a) Parent Company Guarantor cash flows included cash from (used for) operating activities of discontinued operations of $239 million.
NOTE 28. BAKER HUGHES SUMMARIZED FINANCIAL INFORMATION
In September 2019, we deconsolidated our Baker Hughes segment and elected to account for our remaining interest in Baker Hughes
(comprising 377.4 million shares and a promissory note receivable) at fair value. At December 31, 2019, the fair value of our interest in
Baker Hughes was $9,888 million. Since the date of deconsolidation, we have not sold any shares of Baker Hughes and recognized an
unrealized gain of $793 million for the period ended December 31, 2019 based on a share price of $25.63. See Notes 2 and 3 for
further information.
GE 2019 FORM 10-K 119
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summarized financial information of Baker Hughes from the date of deconsolidation is as follows.
From September 16 to December 31, 2019 (In millions)
Revenues
Gross Profit
Net income (loss)
Net income (loss) attributable to the entity
December 31, 2019 (In millions)
Current
Noncurrent
Total assets
Current
Noncurrent
Total liabilities
Noncontrolling interests
$
$
$
$
$
$
7,751
1,558
120
60
15,222
38,147
53,369
10,014
8,857
18,871
12,570
Baker Hughes is a SEC registrant with separate filing requirements, and its financial information can be obtained from www.sec.gov or
www.bakerhughes.com.
NOTE 29. QUARTERLY INFORMATION (UNAUDITED)
(In millions; per-share amounts in dollars)
Consolidated operations
Earnings (loss) from continuing operations
Earnings (loss) from discontinued operations
Net earnings (loss)
Less net earnings (loss) attributable to
noncontrolling interests
Net earnings (loss) attributable to
the Company
Per-share amounts – earnings (loss) from
continuing operations
Diluted earnings (loss) per share
Basic earnings (loss) per share
Per-share amounts – earnings (loss)
from discontinued operations
Diluted earnings (loss) per share
Basic earnings (loss) per share
Per-share amounts – net earnings (loss)
Diluted earnings (loss) per share
Basic earnings (loss) per share
Dividends declared
Selected data
GE
Sales of goods and services
Gross profit from sales
GE Capital
First quarter
2019
2018
Second quarter
2019
2018
Third quarter
2019
2018
Fourth quarter
2019
2018
$
983 $
2,663
3,645
$
446
(1,559)
(1,113)
(115) $
219
104
791
(122)
669
$ (1,290) $(23,014) $
(8,093)
(9,383)
155
(22,859)
845 $
(123)
721
57
34
(23)
(132)
40
(90)
(7)
697
163
860
99
$ 3,588 $ (1,147) $
127 $
800
$ (9,423) $(22,769) $
728 $
761
$
0.10 $
0.10
$
0.03
0.03
(0.03) $
(0.03)
$
0.08
0.08
(0.15) $
(0.15)
(2.64) $
(2.64)
0.07 $
0.08
0.06
0.06
0.30
0.30
0.40
0.41
0.01
(0.17)
(0.17)
(0.14)
(0.14)
0.12
0.03
0.03
(0.01)
(0.01)
(0.01)
(0.01)
0.01
0.07
0.07
0.12
(0.93)
(0.93)
(1.08)
(1.08)
0.01
0.02
0.02
(2.62)
(2.62)
0.12
(0.02)
(0.01)
0.06
0.06
0.01
0.01
0.01
0.07
0.07
0.01
$ 20,324 $ 21,138
4,879
4,494
$ 21,416 $ 22,190
5,100
4,500
$ 21,519 $ 21,273
3,924
4,660
$ 24,460 $ 24,437
4,261
5,780
Total revenues
Earnings (loss) from continuing operations
attributable to the Company
2,227
2,173
2,321
2,429
2,097
2,473
2,096
2,476
175
(179)
99
(22)
(603)
58
259
101
For GE, gross profit from sales is sales of goods and services less costs of goods and services sold.
Earnings-per-share amounts are computed independently each quarter for earnings (loss) from continuing operations, earnings (loss)
from discontinued operations and net earnings (loss). As a result, the sum of each quarter’s per-share amount may not equal the total
per-share amount for the respective year; and the sum of per-share amounts from continuing operations and discontinued operations
may not equal the total per-share amounts for net earnings (loss) for the respective quarters.
GE 2019 FORM 10-K 120
FORWARD-LOOKING STATEMENTS
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 our
expected financial performance, including cash flows, revenues, organic growth, margins, earnings and earnings per share;
macroeconomic and market conditions; planned and potential business or asset dispositions; our de-leveraging plans, including
leverage ratios and targets, the timing and nature of actions to reduce indebtedness and our credit ratings and outlooks; GE's and GE
Capital's funding and liquidity; our businesses’ cost structures and plans to reduce costs; restructuring, goodwill impairment or other
financial charges; or tax rates.
For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking
statements include:
•
our success in executing and completing, including obtaining regulatory approvals and satisfying other closing conditions for,
announced GE Industrial and GE Capital business or asset dispositions or other transactions, including the planned sale of our
BioPharma business within our Healthcare segment and plan to exit our equity ownership position in Baker Hughes, the timing of
closing for those transactions and the expected proceeds and benefits to GE;
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,
competitive, contractual and other dynamics and conditions;
• GE Capital's capital and liquidity needs, including in connection with GE Capital’s run-off insurance operations and discontinued
operations; the amount and timing of required capital contributions to the insurance operations and 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;
global economic trends, competition and geopolitical risks, including changes in the rates of investment or economic growth in key
markets we serve, or an escalation of trade tensions such as those between the U.S. and China;
changes in macroeconomic and market conditions, particularly interest rates as it relates to our pension and run-off insurance
liabilities, as well as the value of stocks and other financial assets (including our equity ownership positions in Baker Hughes), oil
and other commodity prices and exchange rates;
•
•
• market developments or customer actions that may affect levels of demand and the financial performance of the major industries
and customers we serve, such as secular, cyclical and competitive pressures in our Power business, pricing and other pressures in
the renewable energy market, levels of demand for air travel and other customer dynamics such as early aircraft retirements,
conditions in key geographic markets and other shifts in the competitive landscape for our products and services;
the length and severity of the recent coronavirus outbreak, including its impacts across our businesses on demand, operations in
China and our global supply chains;
operational execution by our businesses, including our ability to improve the operations and execution of our Power and
Renewable Energy businesses, and the continued strength of our Aviation business;
changes in law, regulation or policy that may affect our businesses, such as trade policy and tariffs, regulation related to climate
change and the effects of U.S. tax reform and other tax law changes;
our decisions about investments in new products, services and platforms, and our ability to launch new products in a cost-effective
manner;
our ability to increase margins through implementation of operational changes, restructuring and other cost reduction measures;
the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of
Alstom, SEC and other investigative and legal proceedings;
the impact of actual or potential failures of our products or third-party products with which our products are integrated, such as the
fleet grounding of the Boeing 737 MAX and the timing of its return to service, and related reputational effects;
the impact of potential information technology, cybersecurity or data security breaches; and
the other factors that are described in "Risk Factors" in this form 10-K report.
•
•
•
•
•
•
•
•
•
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.
GE 2019 FORM 10-K 121
OTHER INFORMATION
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information about our Executive Officers (As of February 1, 2020)
Name
Position
H. Lawrence Culp, Jr.
Jamie S. Miller
Michael J. Holston
David L. Joyce
L. Kevin Cox
Kieran P. Murphy
Jérôme X. Pécresse
Russell Stokes
Scott L. Strazik
Thomas S. Timko
Chairman of the Board & Chief Executive Officer
Senior Vice President & Chief Financial Officer
Senior Vice President, General Counsel & Secretary
Vice Chairman of General Electric Company;
President & CEO, GE Aviation
Senior Vice President, Chief Human Resources Officer
Senior Vice President of General Electric Company;
President & CEO, GE Healthcare
Senior Vice President of General Electric Company;
President & CEO, GE Renewable Energy
Senior Vice President of General Electric Company;
President & CEO, GE Power Portfolio
Senior Vice President of General Electric Company;
CEO, GE Gas Power
Vice President, Controller & Chief Accounting Officer
Date assumed
Executive
Age Officer Position
56
51
57
63
56
56
October 2018
November 2017
April 2018
September 2016
February 2019
September 2018
52
September 2018
48
September 2018
41
January 2019
51
September 2018
All Executive Officers are elected by the Board of Directors for an initial term that continues until the Board meeting immediately
preceding the next annual statutory meeting of shareholders, and thereafter are elected for one-year terms or until their successors
have been elected. All Executive Officers have been executives of General Electric Company for the last five years except for Messrs.
Culp, Cox, Holston, Pécresse and Timko.
Prior to joining GE in April 2018 as an independent director and being elected to the position of Chairman and CEO in October 2018,
Mr. Culp served as CEO at Danaher Corp. (2001-2014); as a senior advisor at Danaher Corp. (2014-2016); as a senior lecturer at
Harvard Business School (2015-2018); and as a senior adviser at Bain Capital Private Equity, LP (2017-2018).
Prior to joining GE in February 2019, Mr. Cox had been Chief Human Resources Officer at American Express since 2005.
Prior to joining GE in April 2018, Mr. Holston had been general counsel at Merck since 2015, after joining the drugmaker as chief ethics
and compliance officer in 2012.
Prior to joining GE in November 2015 with the acquisition of Alstom, Mr. Pécresse was an Executive Vice President of Alstom since
June 2011.
Prior to joining GE in September 2018, Mr. Timko was Vice President, Controller and Chief Accounting Officer at General Motors since
2013.
The remaining information called for by this item is incorporated by reference to “Election of Directors,” “Other Governance Policies &
Practices” and “Board Operations” in our definitive proxy statement for our 2020 Annual Meeting of Shareholders to be held May 5,
2020, which will be filed within 120 days of the end of our fiscal year ended December 31, 2019 (the 2020 Proxy Statement).
GE 2019 FORM 10-K 122
OTHER INFORMATION
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)1. Financial Statements
Included in the “Financial Statements and Supplementary Data” section of this report:
Management’s Annual Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Statement of Earnings (Loss) for the years ended December 31, 2019, 2018 and 2017
Statement of Financial Position at December 31, 2019 and 2018
Statement of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Statement of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 and 2017
Statement of Changes in Shareholders' Equity for the years ended December 31, 2019, 2018 and 2017
Notes to consolidated financial statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Summary of Operating Segments
(a)2. Financial Statement Schedules
The schedules listed in Reg. 210.5-04 have been omitted because they are not applicable or the required information is shown in the
consolidated financial statements or notes thereto.
(a)3. Exhibit Index
Exhibit
Number
2(a)
2(b)
3(i)
3(ii)
4(a)
4(b)
4(c)
4(d)
4(e)
4(f)
4(g)
Description
Transaction Agreement and Plan of Merger dated as of October 30, 2016 among General Electric, Baker Hughes
Incorporated, Bear Mergersub, Inc. and Bear Newco, Inc. (Incorporated by reference to Exhibit 2.1 to GE’s Current Report
on Form 8-K, dated November 3, 2016 (Commission file number 001-00035)).
Amendment to Transaction Agreement and Plan of Merger dated March 27, 2017 between General Electric Company,
Baker Hughes Incorporated, Bear Newco, Inc., Bear MergerSub, Inc., BHI Newco, Inc., and Bear MergerSub 2, Inc.
(Incorporated by reference to Bear Newco, Inc.'s Registration Statement on Form S-4, pages A-II-I through G-16, filed
pursuant to Rule 424(b)(3) on May 30, 2017 (Commission file number 333-216991)).
The Restated Certificate of Incorporation of General Electric Company (Incorporated by reference to Exhibit 3(i) to GE’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2013), as amended by the Certificate of Amendment,
dated December 2, 2015 (Incorporated by reference to Exhibit 3.1 to GE’s Current Report on Form 8-K, dated December
3, 2015), as further amended by the Certificate of Amendment, dated January 19, 2016 (Incorporated by reference to
Exhibit 3.1 to GE’s Current Report on Form 8-K, dated January 20, 2016), as further amended by the Certificate of
Change of General Electric Company (Incorporated by reference to Exhibit 3(1) to GE’s Current Report on Form 8-K,
dated September 1, 2016, as further amended by the Certificate of Amendment, dated May 13, 2019 (Incorporated by
reference to Exhibit 3.1 to GE’s Current Report on Form 8-K, dated May 13, 2019), and 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) (in each case, under Commission file number 001-00035).
The By-Laws of General Electric Company, as amended on May 13, 2019 (Incorporated by reference to Exhibit 3.2 to
GE’s Current Report on Form 8-K dated May 13, 2019) (Commission file number 001-00035)).
Amended and Restated General Electric Capital Corporation Standard Global Multiple Series Indenture Provisions dated
as of February 27, 1997 (Incorporated by reference to Exhibit 4(a) to General Electric Capital Corporation’s Registration
Statement on Form S-3, File No. 333-59707 (Commission file number 001-06461)).
Third Amended and Restated Indenture dated as of February 27, 1997, between General Electric Capital Corporation and
The Bank of New York Mellon, as successor trustee (Incorporated by reference to Exhibit 4(c) to General Electric Capital
Corporation’s Registration Statement on Form S-3, File No. 333-59707 (Commission file number 001-06461)).
First Supplemental Indenture dated as of May 3, 1999, supplemental to Third Amended and Restated Indenture dated as
of February 27, 1997 (Incorporated by reference to Exhibit 4(dd) to General Electric Capital Corporation’s Post-Effective
Amendment No. 1 to Registration Statement on Form S-3, File No. 333-76479 (Commission file number 001-06461)).
Second Supplemental Indenture dated as of July 2, 2001, supplemental to Third Amended and Restated Indenture dated
as of February 27, 1997 (Incorporated by reference to Exhibit 4(f) to General Electric Capital Corporation’s Post-Effective
Amendment No.1 to Registration Statement on Form S-3, File No. 333-40880 (Commission file number 001-06461)).
Third Supplemental Indenture dated as of November 22, 2002, supplemental to Third Amended and Restated Indenture
dated as of February 27, 1997 (Incorporated by reference to Exhibit 4(cc) to General Electric Capital Corporation’s Post-
Effective Amendment No. 1 to the Registration Statement on Form S-3, File No. 333 100527 (Commission file number
001-06461)).
Fourth Supplemental Indenture dated as of August 24, 2007, supplemental to Third Amended and Restated Indenture
dated as of February 27, 1997 (Incorporated by reference to Exhibit 4(g) to General Electric Capital Corporation’s
Registration Statement on Form S-3, File number 333-156929 (Commission file number 001-06461)).
Senior Note Indenture, dated October 9, 2012, by and between the Company and The Bank of New York Mellon, as
trustee (Incorporated by reference to Exhibit 4.1 of GE’s Current Report on Form 8-K dated October 9, 2012 (Commission
file number 001-00035)).
GE 2019 FORM 10-K 123
OTHER INFORMATION
4(h)
4(i)
4(j)
4(k)
4(l)
(10)
Indenture dated as of October 26, 2015, among GE Capital International Funding Company, as issuer, General Electric
Company and General Electric Capital Corporation, as guarantors and The Bank of New York Mellon, as trustee
(Incorporated by reference to Exhibit 99 to General Electric’s Current Report on Form 8-K filed on October 26, 2015
(Commission file number 001-00035)).
Global Supplemental Indenture dated as of April 10, 2015, among General Electric Capital Corporation, General Electric
Company and The Bank of New York Mellon, as trustee. (Incorporated by reference to Exhibit 4(i) to GE’s Annual Report
on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2015).
Second Global Supplemental Indenture dated as of December 2, 2015, among General Electric Capital Corporation,
General Electric Company and The Bank of New York Mellon, as successor trustee (Incorporated by reference to Exhibit
4.2 to General Electric’s Current Report on Form 8-K filed on December 3, 2015 (Commission file number 001-00035)).
Agreement to furnish to the Securities and Exchange Commission upon request a copy of instruments defining the rights
of holders of certain long-term debt of the registrant and consolidated subsidiaries.*
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.*
Except for 10(aa) and (bb) below, all of the following exhibits consist of Executive Compensation Plans or Arrangements:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
General Electric Incentive Compensation Plan, as amended effective July 1, 1991 (Incorporated by reference to
Exhibit 10(a) to GE’s Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended
December 31, 1991).
General Electric Financial Planning Program, as amended through September 1993 (Incorporated by reference
to Exhibit 10(h) to GE’s Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year
ended December 31, 1993).
General Electric Supplemental Life Insurance Program, as amended February 8, 1991 (Incorporated by
reference to Exhibit 10(i) to GE’s Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal
year ended December 31, 1990).
General Electric Directors’ Charitable Gift Plan, as amended through December 2002 (Incorporated by reference
to Exhibit 10(i) to GE’s Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year
ended December 31, 2002).
General Electric Leadership Life Insurance Program, effective January 1, 1994 (Incorporated by reference to
Exhibit 10(r) to GE’s Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended
December 31, 1993).
General Electric Supplementary Pension Plan, as amended effective July 1, 2015. (Incorporated by reference to
Exhibit 10(f) to GE’s Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended
December 31, 2015).
General Electric 2003 Non-Employee Director Compensation Plan, Amended and Restated as of December 7,
2018 (Incorporated by reference to Exhibit 10(g) to GE's Annual Report on Form 10-K (Commission file number
001-00035) for the fiscal year ended December 31, 2018).
Form of Director Indemnification Agreement (Incorporated by reference to Exhibit 10(cc) to GE’s Annual Report on Form
10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2018).
Amendment to Nonqualified Deferred Compensation Plans, dated as of December 14, 2004 (Incorporated by
reference to Exhibit 10(w) to the GE’s Annual Report on Form 10-K (Commission file number 001-00035) for the
fiscal year ended December 31, 2004).
GE Retirement for the Good of the Company Program, as amended effective January 1, 2009 (Incorporated by
reference to Exhibit 10(j) to GE’s Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal
year ended December 31, 2008).
GE Excess Benefits Plan, effective January 1, 2009 (Incorporated by reference to Exhibit 10(k) to GE’s Annual
Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2008).
General Electric 2006 Executive Deferred Salary Plan, as amended January 1, 2009 (Incorporated by reference
to Exhibit 10(l) to GE’s Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year
ended December 31, 2008).
GE 2007 Long-Term Incentive Plan as amended and restated April 26, 2017, and as further amended and
restated February 15, 2019 (Incorporated by reference to Exhibit 10(l) to GE’s Annual Report on Form 10-K
(Commission file number 001-00035) for the fiscal year ended December 31, 2018).
Form of Agreement for Stock Option Grants to Executive Officers under the General Electric Company 2007
Long-Term Incentive Plan, as amended January 1, 2009 (Incorporated by reference to Exhibit 10(n) to GE’s
Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31,
2008).
Form of Agreement for Annual Restricted Stock Unit Grants to Executive Officers under the General Electric
Company 2007 Long-Term Incentive Plan, as amended February 7, 2014 (Incorporated by reference to Exhibit
10(a) to GE’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (Commission file number
001-00035)).
Form of Agreement for Periodic Restricted Stock Unit Grants to Executive Officers under the General Electric
Company 2007 Long-Term Incentive Plan, as amended February 7, 2014 (Incorporated by reference to Exhibit
10(b) to GE’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (Commission file number
001-00035)).
Form of Agreement for Performance Stock Unit Grants to Executive Officers in 2018 under the General Electric
Company 2007 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10(r) to GE’s Annual Report on
Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2018).
GE 2019 FORM 10-K 124
OTHER INFORMATION
(r)
(s)
(t)
(u)
(v)
(w)
(x)
(y)
(z)
(aa)
(bb)
Form of Agreement for Performance Stock Unit Grants to Executive Officers in 2019 under the General Electric
Company 2007 Long-Term Incentive Plan.*
General Electric International Employee Stock Purchase Plan, as amended and restated on April 25, 2018
(Incorporated by reference to Exhibit 99.1 to GE’s Registration Statement on Form S-8, dated May 1, 2018, File
No. 333-224587 (Commission file number 001-00035)).
General Electric Company Annual Executive Incentive Plan, effective January 1, 2018 (Incorporated by reference
to Exhibit 10(a) to GE’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 (Commission file
number 001-00035)).
Employment Agreement between Henry Lawrence Culp, Jr. and General Electric Company, effective October 1,
2018 (Incorporated by reference to Exhibit 10(z) to GE’s Annual Report on Form 10-K (Commission file number
001-00035) for the fiscal year ended December 31, 2018).
GE Performance Stock Unit Grant Agreement for H. Lawrence Culp, Jr. (Incorporated by reference to Exhibit
10(aa) to GE’s Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended
December 31, 2018).
Employment Agreement between Michael Holston and General Electric Company, effective April 9, 2018
(Incorporated by reference to Exhibit 10(a) to GE’s Quarterly Report on Form 10-Q for the quarter ended June
30, 2018 (Commission file number 001-00035)).
Employment Agreement between L. Kevin Cox and General Electric Company, effective January 22, 2019.*
GE Performance Stock Unit Grant Agreement for David Joyce, effective December 23, 2019.*
Employment Agreement between Carolina Dybeck Happe and General Electric Company, effective November
24, 2019.*
Amended and Restated Agreement, dated April 10, 2015, between General Electric Company and General
Electric Capital Corporation (Incorporated by reference to Exhibit 10 to GE’s Current Report on Form 8-K, dated
April 10, 2015 (Commission file number 001-00035)).
Credit Agreement dated as of June 22, 2018 among General Electric Company, as the borrower, JPMorgan
Chase Bank, N.A. and Citibank, N.A., as co-administrative agents, and the lenders party thereto (Incorporated by
reference to Exhibit 10(b) to GE’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018) and
Amendment No. 1 to Credit Agreement dated March 12, 2019 (Incorporated by reference to Exhibit 10(b) to GE’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2019) (Commission file number 001-00035)).
Statement re Computation of Per Share Earnings.**
Subsidiaries of Registrant.*
Consent of Independent Registered Public Accounting Firm.*
Power of Attorney.*
Certification Pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.*
Certification Pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.*
Certification Pursuant to 18 U.S.C. Section 1350.*
Undertaking for Inclusion in Registration Statements on Form S-8 of General Electric Company (Incorporated by
reference to Exhibit 99(b) to General Electric Annual Report on Form 10-K (Commission file number 001-00035) for the
fiscal year ended December 31, 1992).
Computation of Ratio of Earnings to Fixed Charges (Incorporated by reference to Exhibit 12(a) to GE Capital’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2014 (Commission file number 001-06461)).
Supplement to Present Required Information in Searchable Format.*
The following materials from General Electric Company's Annual Report on Form 10-K for the year ended December 31,
2018, formatted as Inline XBRL (eXtensible Business Reporting Language); (i) Statement of Earnings (Loss) for the years
ended December 31, 2019, 2018 and 2017, (ii) Statement of Financial Position at December 31, 2019 and 2018, (iii)
Statement of Cash Flows for the years ended December 31, 2019, 2018 and 2017, (iv) Statement of Comprehensive
Income (Loss) for the years ended December 31, 2019, 2018 and 2017, (v) Statement of Changes in Shareholders'
Equity for the years ended December 31, 2019, 2018 and 2017, and (vi) the Notes to Consolidated Financial Statements.*
(11)
(21)
(23)
(24)
31(a)
31(b)
(32)
99(a)
99(b)
99(c)
(101)
(104)
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*
**
Filed electronically herewith.
Information required to be presented in Exhibit 11 is provided in Note 18 to the consolidated financial statements in this
Form 10-K Report in accordance with the provisions of Financial Accounting Standards Board Accounting Standards
Codification 260, Earnings Per Share.
GE 2019 FORM 10-K 125
OTHER INFORMATION
FORM 10-K CROSS REFERENCE INDEX
Item Number
Part I
Item 1.
Business
Item 1A.
Item 1B.
Risk Factors
Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Page(s)
3, 7, 9-20
50-57
Not applicable
3
106-109
Not applicable
50
49
4-49
28-30, 102-104
62-120
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Not applicable
Item 9A.
Controls and Procedures
Item 9B.
Part III
Item 10.
Other Information
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
58
Not applicable
122
(a)
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
(b), 99-100
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Part IV
Item 15.
Item 16.
Signatures
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
(c)
(d)
123-125
Not applicable
127
(a) Incorporated by reference to “Compensation” in the 2020 Proxy Statement.
(b) Incorporated by reference to “Stock Ownership Information” in the 2020 Proxy Statement.
(c) Incorporated by reference to “Related Person Transactions” and “How We Assess Director Independence” in the 2020 Proxy
Statement.
(d) Incorporated by reference to “Independent Auditor Information” in the 2020 Proxy Statement.
GE 2019 FORM 10-K 126
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual
report on Form 10-K for the fiscal year ended December 31, 2019, to be signed on its behalf by the undersigned, and in the capacities
indicated, thereunto duly authorized in the City of Boston and Commonwealth of Massachusetts on the 24th day of February 2020.
General Electric Company
(Registrant)
By
/s/ Jamie S. Miller
Jamie S. Miller
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Signer
Title
Date
/s/ Jamie S. Miller
Jamie S. Miller
Senior Vice President and
Chief Financial Officer
/s/ Thomas S. Timko
Thomas S. Timko
Vice President, Chief Accounting Officer and
Controller
/s/ H. Lawrence Culp, Jr.
H. Lawrence Culp, Jr.*
Chairman of the Board of Directors
Principal Financial Officer
February 24, 2020
Principal Accounting Officer
February 24, 2020
Principal Executive Officer
February 24, 2020
Director
Director
Director
Director
Director
Director
Director
Director
Director
Sébastien M. Bazin*
Francisco D'Souza*
Edward P. Garden*
Thomas W. Horton*
Risa Lavizzo-Mourey*
Catherine A. Lesjak*
Paula Rosput Reynolds*
Leslie F. Seidman*
James S. Tisch*
A majority of the Board of Directors
*By /s/ Christoph A. Pereira
Christoph A. Pereira
Attorney-in-fact
February 24, 2020
GE 2019 FORM 10-K 127
Exhibit 31(a)
Certification Pursuant to
Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as Amended
I, H. Lawrence Culp, Jr., certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of General Electric Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 24, 2020
/s/ H. Lawrence Culp, Jr.
H. Lawrence Culp, Jr.
Chief Executive Officer
Certification Pursuant to
Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as Amended
Exhibit 31(b)
I, Jamie S. Miller, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of General Electric Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 24, 2020
/s/ Jamie S. Miller
Jamie S. Miller
Chief Financial Officer
Certification Pursuant to
18 U.S.C. Section 1350
Exhibit 32
In connection with the Annual Report of General Electric Company (the “registrant”) on Form 10-K for the period ended
December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “report”), we, H. Lawrence
Culp, Jr. and Jamie S. Miller, Chief Executive Officer and Chief Financial Officer, respectively, of the registrant, certify, pursuant
to 18 U.S.C. § 1350, that to our knowledge:
(1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of
operations of the registrant.
February 24, 2020
/s/ H. Lawrence Culp, Jr.
H. Lawrence Culp, Jr.
Chief Executive Officer
/s/ Jamie S. Miller
Jamie S. Miller
Chief Financial Officer
E X E C U T I V E O F F I C E S
General Electric Company
5 Necco Street, Boston, MA 02210
+1 (617) 443-3000
R E G I S T E R E D O F F I C E
General Electric Company
1 River Road, Schenectady, NY 12345
A N N U A L M E E T I N G
GE’s 2020 Annual Meeting of Shareholders will be held at 10:00 AM ET on Tuesday May 5, 2020
at the Westin Boston Waterfront at 425 Summer Street, Boston, MA 02210.
S H A R E H O L D E R I N F O R M A T I O N
For shareholder inquiries, including enrollment information and a prospectus for the Direct
Purchase and Reinvestment Plan, “GE Stock Direct,” write to GE Share Owner Services,
P.O. Box 64874, St. Paul, MN 55164-0874; or call (800) 786-2543 (800-STOCK-GE) or
+1 (651) 450-4064.
For internet access to general shareholder information and certain forms, including transfer
instructions, visit the website at www.shareowneronline.com. You may also submit
shareholder inquiries using the email link in the “Contact Us” section of the website.
S T O C K E X C H A N G E I N F O R M A T I O N
In the United States, GE common stock is listed on the New York Stock Exchange (NYSE), its
principal market. It also is listed on certain non-U.S. exchanges, including the London Stock
Exchange, Euronext Paris, SIX Swiss Exchange, and the Frankfurt Stock Exchange.
C O R P O R A T E O M B U D S P E R S O N
To report concerns related to compliance with the law, GE policies, or government contracting
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F O R M 1 0 - K A N D O T H E R R E P O R T S ; C E R T I F I C A T I O N S
This 2019 GE Annual Report includes the GE Annual Report on Form 10-K. The Form 10-K
Report filed with the U.S. Securities and Exchange Commission (SEC) in February 2020 also
contains additional information including exhibits. GE’s Chief Executive Officer has also
submitted to the NYSE a certification certifying that he is not aware of any violations by GE
of the NYSE corporate governance listing standards. The GE Form 10-K can be viewed at
https://www.ge.com/investor-relations/annual-report and is also available, without charge,
from GE Corporate Investor Communications, 5 Necco Street, Boston, MA 02210.
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C O N TA C T T H E G E B O A R D O F D I R E C T O R S
The Audit Committee and the non-management directors have established procedures to enable
anyone who has a concern about GE’s conduct, or any employee who has a concern about
the Company’s accounting, internal accounting controls, or auditing matters, to communicate
that concern directly to the lead director or to the Audit Committee. Such communications
may be confidential or anonymous and may be submitted in writing to: GE Board of Directors,
General Electric Company, 5 Necco Street, Boston, MA 02210; or call (800) 417-0575 or
+1 (617) 443-3078; or send an email to directors@corporate.ge.com.
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I N F O R M A T I O N
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B A C K C O V E R
The GE9X is the world’s largest and most
powerful commercial aircraft engine.
It incorporates GE’s most advanced
technologies that have been developed
over the last decade to make it the most
fuel-efficient engine in its class while
also delivering unmatched performance.
Here, the engine undergoes testing in
Peebles, Ohio.
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