2020
Annual Report
F ORWAR D - LO OKING S TATEMENT S
Some 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- GA AP FINANCIAL MEA SURE S
We 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 39-43 of the Management’s
Discussion and Analysis within our Form 10-K and in GE’s fourth-
quarter 2020 earnings materials posted to ge.com/investor,
as applicable.
INS IDE FRONT COVER
GE’s Haliade™-X offshore wind turbine is the
world’s most powerful offshore wind turbine
in operation today. Shown here, our operating
prototype in Rotterdam, Netherlands, broke
its own output records in 2020, producing
312 megawatt-hours of energy in a single
24-hour period.
C OVER
Pictured: Healthcare’s Yanmang Zhang
in Beijing, China, and Gas Power’s
Charles McKinney of Greenville,
South Carolina, U.S.A., rise to the challenge
of building a world that works.
Dear fellow shareholder,
Last year was marked not only by its challenges, but by how the world met them. I’m proud
of the meaningful progress GE made in 2020. We have momentum and intend to build on it.
The path forward was not a straight one. We began 2020 with a clear game plan, strength
in Aviation and Healthcare, and turnarounds well underway in Power and Renewable
Energy. Then the COVID-19 pandemic changed the world, disrupting how we live and work
and exacting terrible human costs. In GE’s businesses, the rapid decline in air travel and
disruption of global supply chains hit hard.
I often have witnessed our employees’ battle-tested commitment and grit over the past two-
plus years. Nowhere was this clearer than in the face of the pandemic, and I am profoundly
thankful to them. In our mission-critical industries, GE’s people served on the front lines
since the beginning, from delivering hospital equipment in the first days in Wuhan, China, to
maintaining the power equipment that keeps the lights on across the globe.
Take our Aviation team in Cheltenham,
U.K., for example. With demand for patient
monitors outstripping Healthcare’s
production capacity, they helped Healthcare
take over available floor space at their
factory. Using lean principles and only the
materials they had on hand, that Healthcare
team went from zero to more than 5,000
patient monitors in 15 weeks, delivering one
of our hospital customers’ most important
tools to fight COVID-19.
Together with our customers, the GE team
kept power flowing, hospitals operating,
and planes flying. To emerge as a stronger
company, we also adjusted our operating
model, based on three principles.
First, embrace reality. Our former chairman
Jack Welch, whose passing we mourned last
year, spoke of the need to “face reality as it
is, not as it was or as you wish it to be.” While
our business impact was severe, we couldn’t
know early on by how much or for how long.
We needed to think about the unthinkable
and prepare for a range of outcomes,
meeting daily, sometimes hourly, to gather
information and adjust.
Together with our customers,
the GE team kept power
flowing, hospitals operating,
and planes flying.
Second, redefine winning to focus and
motivate our teams. In 2020, this often
meant simply getting safely to a customer
site, completing an outage, or shipping one
more ventilator off the line. It also meant
focusing on what we could control, including
in our operations.
Third, execute the plan. We moved quickly to
reduce costs, preserve cash, and manage our
debt obligations. We made deep cuts to our
global Aviation workforce, an extraordinarily
difficult but necessary decision to protect
the business long term amid the pressure our
airline customers were facing.
These steps, combined with the headway
we already had been making to improve
execution, strengthened our capacity to work
through the uncertainties triggered by the
pandemic. And they helped us move faster on
our journey to transform GE’s performance
and culture.
1
ROUTE 2GE 2020 ANNUAL REPORT Rising to the
challenge of
building a world
that works
Investing in strategic sectors for
society’s future. Leading with
technology, solving sustainable
development challenges, and
partnering to resolve local needs.
EN ERGY TR ANSITION
Transforming millions
of lives with access to
reliable, affordable, and
cleaner electricity.
PRECISI ON
HEALTH
Building an
intelligence-based
healthcare system
and a healthier
world with more
integrated,
efficient, and
personalized care.
2020 scorecard
As I’ve noted before, this letter should serve
as a common reference for how we run GE so
we can all keep score together.
In 2020, GE’s orders and revenue declined,
mainly driven by Aviation. Despite this, our
backlog remained strong at $387 billion
with about 80 percent in services, where
we are in daily contact with our customers
and enjoy higher margins. Margins and
profit also contracted organically, but they
improved through the year as we executed
better and streamlined our costs. We
delivered positive free cash flow* despite the
still-difficult macro environment as a direct
result of those same efforts. You can find
our full performance summary on page six of
this letter.
Our goals for the year were three-fold:
continuing to strengthen our businesses,
improving our financial position, and driving
long-term profitable growth. In all, we
finished 2020 in a much better position
for future growth, and we entered 2021
with confidence.
CONTINUING TO S TRENGTHEN
OUR B USINE SSE S
Strengthening our businesses begins
with building the best team. In 2020, we
committed ourselves to the leadership
behaviors of humility, transparency, and
focus. These are more than just words; they
are changing the way we work. Humility
helps us recognize what we do not know. Ask
questions, then listen carefully. Transparency
makes us call it like we see it, highlighting
* Non-GAAP Financial Measure
2
the “red” and “green” in equal measure. Focus
helps us prioritize what we will and will
not do.
When paired with moving our “center of
gravity” toward the businesses, these
leadership behaviors enable the GE people
closest to our customers to serve them well.
They helped GE navigate 2020 and remain
critical to our cultural transformation.
diversity officer and appointed chief diversity
officers in each of our businesses. Today, we
are publishing GE’s Diversity Annual Report,
our first in many years. There is no quick fix,
but I am committed to driving real impact.
We can’t build the best team without more
progress in this area.
Let me show you how momentum is growing
across each of our businesses.
Power Our Power businesses help make
energy more accessible, providing reliable
electricity worldwide. In 2020, gas-based
electricity generation and GE gas turbine
utilization remained resilient. We continued
developing pathways for our customers
to decarbonize. Gas Power’s 7HA.02 gas
turbine, for example, will power the first
plant in the U.S. with a large-scale turbine
fired by a blend of hydrogen and gas. Power
Portfolio progressed its small modular reactor
technologies for nuclear energy.
Power also demonstrates the kind of progress
on cost, margin, and cash generation that
I think is possible across GE with better
operational rigor. Gas Power built a lower-
risk equipment backlog, and it delivered
positive free cash flow* one year ahead of
its commitment due to its efforts to reduce
costs and improve working capital. Both
Gas Power and Power Portfolio are building
stronger foundations to expand margins and
generate cash in the years ahead.
Renewable Energy Renewable Energy has
one of the broadest portfolios in the industry,
offering onshore and offshore wind, grid,
hydropower, and hybrid solutions including
Using lean, Aviation’s Angie Norman partnered with
Healthcare to stand up patient care monitor production
at her facility in Cheltenham, U.K., to help doctors aid in
the care of COVID-19 patients.
Getting the right people in the right positions
has been an important part of my job since
I started. In 2020, we welcomed a new GE
CFO, Carolina Dybeck Happe, and Aviation
CEO John Slattery—also marking the
retirement of David Joyce, who leaves behind
a remarkable legacy. We made numerous
internal and external leadership appointments
across our businesses and introduced our
newest director, former U.S. Secretary of
Defense Ashton B. Carter. After a thorough
and competitive review, our Board selected
Deloitte as GE’s independent auditor for 2021.
We also took steps on a much-needed
journey to improve inclusion and diversity in
our workforce. We named Mike Barber chief
GE 2020 ANNUAL REPORT F UTUR E OF FLIGHT
Partnering to facilitate
recovery of the commercial
aviation industry and
help airlines achieve their
sustainability goals.
HOW WE INVE S T IN OUR
COMMUNITIE S
Our approach to social impact is
embedded in our business strategy.
Fostering innovation, building
infrastructure, and shaping the
diverse workforce of tomorrow.
HOW WE GOVERN
OUR COMPANY
Holding ourselves and our partners
accountable to the highest standards of
integrity and competitiveness. Committed
to safety, inclusion, governance, and
managing our environmental impact.
completing our commercial product portfolio
renewal, which offers groundbreaking
efficiency gains in every market. Our LEAP
backlog stands at approximately 9,600
engines, including those for Boeing’s 737 MAX,
which began reentering service in December.
Our military franchise is poised for growth
with robust customer demand, and we have a
strong installed base in cargo operations.
While it remains difficult to predict when
air travel will fully resume, the flying public
is eager to get back into the air. This is good
for the world and our business. We’ll be
ready with the industry’s youngest fleet
with servicing opportunities ahead, a strong
narrowbody position with Airbus and Boeing,
and a vast installed base.
Healthcare Healthcare’s own purpose—
improving lives in the moments that matter—
also shone through in 2020. The team
increased output for critical equipment that
helps doctors diagnose and treat patients
with COVID-19, including quadrupling
ventilator production and supporting
customers on-site with installation and
service. We navigated delays in other
parts of our business, like Pharmaceutical
Diagnostics, where elective procedures were
postponed. Some capital expenditures in
healthcare markets are returning, though
we’re planning cautiously.
Healthcare grew revenue organically
and delivered strong margin and cash
performance in 2020. Through it all, we
invested for the future, launching more
than 40 new products and acquiring
Prismatic Sensors, which specializes in
photon-counting CT technology. Healthcare
remains focused on breakthrough imaging
technologies with digital at the forefront
as well as expanding margins as the
business grows.
Capital GE Capital continued to support
our industrial businesses and reduce overall
risk while navigating significant industry
disruption, especially at GECAS, our aircraft
leasing business. GECAS worked customer-
by-customer to manage our fleet of more
than 900 aircraft while responding to high
demand for cargo and helping customers
bring younger, more fuel-efficient aircrafts
DE VELOPING A LEAN MINDSE T
“Just go to the genba, where the action is.”
– Lean Sensei Katahira-san
Lean is a set of principles that emphasizes
customer focus, elimination of waste, and ruthless
prioritization of work to improve safety, quality,
delivery, and cost. Here are some ways GE
employees are using lean to deliver better results:
• Gas Power’s generator manufacturing team
reorganized its production line for stator
bars, reducing lead time on this complex
component by 63 percent.
• Power Conversion learned the root cause of
issues in working capital, created effective
countermeasures, and improved their past
dues balance by more than 30 percent.
• Renewable Energy’s Digital Services
Transactional team standardized their
process to develop cost models and
proposals, cutting the time it took to produce
a quote by 70 percent and adding about
$70 million to their transactional backlog
over the last year.
3
solar and storage. The market remains a
tailwind as new technologies reduce the
levelized cost of energy, and wind customers
around the world choose larger, more
efficient turbines.
Onshore Wind delivered record global
volumes in 2020, holding the No. 1 U.S. market
position for the last two years. Offshore Wind
received full certification for both the 12- and
13-megawatt Haliade™-X, the world’s most
powerful offshore wind turbine in operation
today, which now has 5.7 gigawatts in
customer commitments. Grid Solutions and
Hydro delivered better project execution
and reduced costs. Renewable Energy’s
growing backlog stands at an all-time high of
$30 billion with better margins, but we have
more to do. Our team remains focused on
operational improvements.
We have momentum and
intend to build on it.
Aviation Despite the pressures Aviation
faced in 2020, our team never strayed from
its purpose of lifting people up and bringing
them home safely. As commercial airlines
lost a half-trillion dollars in revenue and saw
demand drop by more than 65 percent1,
Aviation supported our global customers
throughout, helping them manage their fleets
and maintenance plans as they sought to
conserve cash.
Aviation improved margins through the
year and delivered nearly breakeven free
cash flow*. Our GE9X engine was certified
by the U.S. Federal Aviation Administration,
1
*
International Air Transport Association (IATA)
data, November 24, 2020.
Non-GAAP Financial Measure
GE 2020 ANNUAL REPORT into their fleets. Going forward, with lower
debt and a broader commercial market
recovery, we expect GE Capital earnings
to improve.
Corporate Within Corporate, GE Digital has
become a billion-dollar software unit focused
on improving profit and cash generation.
GE Research, International Markets, and
our Corporate functions are helping GE’s
businesses discover and deliver growth
opportunities. We also completed the sale
of Lighting, narrowing our focus on GE’s
industrial core.
S OL IDI F YING OUR
F INA NCIA L PO SITION
Almost exactly two years ago, we announced
the sale of our BioPharma business to
Danaher. At the time, there was no better way
to address the leverage challenges GE was
facing while still retaining one of the world’s
leading healthcare companies. This decision
proved to be critical in 2020. When we closed
the transaction for about $20 billion of
proceeds on March 31, our liquidity was
sound just as pandemic-related market
uncertainty was growing.
As the environment grew more volatile, we
executed a series of transactions to further
enhance our liquidity and minimize risk,
extending $10.5 billion of debt maturities
in the spring. We also reduced our debt and
commercial paper use, continued to de-risk
our pension, and maintained a higher cash
balance. In total, we reduced debt by about
$16 billion in 2020 and by $30 billion since
the beginning of 2019. We entered 2021 with
$37 billion of liquidity, giving us the capacity
to weather continued volatility, further
de-lever, and focus on organic growth.
DRIVING LON G-TERM
PROFITABLE GROW TH
Customers tell me they value GE’s technology
and team. But many also say it could be easier
to do business with us. We are changing this
with lean, an operating philosophy based
on the Toyota Production System, which is
helping us improve safety, quality, delivery, and
cost in support of long-term growth.
Vicki Lunsford helps build the heart of the first-ever
7HA.03 Gas Turbine, the rotor, for Florida Power
& Light. Once installed, Gas Power’s newest and
highest-capacity gas turbine will help FPL squeeze
more power from every cubic foot of natural gas,
saving money and burning less fuel.
Lean helps examine processes and
continually improve them by solving
problems at their root cause. The results
are real. Aviation’s On-Wing Support facility
in Doha, Qatar, for example, used lean tools
to reduce cycle time for engine cleaning and
repair processes by 30 percent. As a result,
our airline customers can now fit these
services into existing maintenance schedules
rather than separate engine removals,
saving them both time and disruption.
At Healthcare’s plant in Florence, South
Carolina, where we manufacture magnets
for MRI machines, the team used lean to
identify bottlenecks and obstacles to on-time
delivery. They grew their on-time delivery
rate by more than 90 percent and reduced
inventory at the plant by 23 percent with
more to go. Importantly, in both examples,
we are providing higher-quality service to
our customers.
Lean reaches well beyond manufacturing.
These principles are improving the way we
write code and collect receivables. We’re
running the company with a standardized
lean operating model, focusing quarterly on
key priorities such as talent, strategy, and
budgeting. This approach, along with our new,
virtual leadership development and lean
learning courses, is driving consistency and
focus deeper in our businesses.
We’ve laid the groundwork, but our work is just
beginning. In the spirit of kaizen, Japanese for
continuous improvement, progress uncovers
opportunities for more. We are working hard to
scale lean company-wide to help GE improve
performance and drive lasting cultural change.
Rising to the challenge of
building a world that works
If this is how we transform GE into a stronger
company, the why is to help build a world
that works. We’re focused on three important
opportunities—the energy transition to drive
decarbonization, precision medicine that
personalizes diagnoses and treatments, and
a future of smarter and more efficient flight.
EN ERGY TR ANSITION
Climate change is an urgent global priority.
With roughly 1 billion people without access
to reliable power and energy demand only
increasing, we must meet this demand while
reducing greenhouse gas emissions. As a
company helping to generate one-third of the
world’s power, GE plays a central role. We set
a new goal to achieve carbon neutrality within
HOW GE SUPPORTED THE FIGHT AGAINS T COVID -19 IN 2020
• Healthcare quadrupled ventilator production;
increased production capacity and output for other
critical medical equipment to help doctors diagnose
and treat COVID-19, including monitoring solutions,
x-ray, anesthesia, and point-of-care ultrasound
products; and launched digital solutions to help
providers deliver care to patients virtually.
• Aviation produced and serviced engines and
components for military and cargo aircraft flying
daily around the world to assist in response efforts.
• Power and Renewable Energy supported
electricity generation for critical hospitals,
healthcare facilities, and homes and businesses.
• Digital offered free licenses to customers to allow
plant operators and management teams real-time
monitoring and control access to plant operations.
• GE’s Employee Relief Fund supported 3,900
GE employees and their families around the
world facing unprecedented challenges due to
the pandemic.
• The GE Foundation contributed to global and
community health and disaster relief efforts, helped
deliver personal protective equipment to U.S.
healthcare workers in urgent need, and worked to
shore up healthcare systems in Southeast Asia and
Africa with trainings, infrastructure, and equipment.
4
GE 2020 ANNUAL REPORT
our own operations by 2030 after surpassing
our 2020 emissions reductions targets ahead
of schedule, and we announced our intention
to exit the new-build coal power market.
Most fundamentally, GE’s innovative technology
and expertise help our customers meet their
decarbonization goals. From the Haliade™-X,
to our approximately 50,000 onshore and
offshore wind turbines installed, to our HA
gas turbine fleet, to digital solutions that
help utilities modernize and bring more
renewables onto the grid—we can enable
substantive emissions reductions today while
accelerating new technologies for lower-
carbon power generation.
Satish Prabhakaran is part of a team of GE Research
scientists leading new technical advances in electric
propulsion components and systems, helping make
commercial electric flight a future reality.
PRE CI SIO N HEAL T H
Doctors, nurses, and clinicians are often
under-resourced and over-burdened, and
COVID-19 has brought this front and center.
Solving the industry’s productivity challenges
by improving access, enabling more precise
patient diagnosis and treatment, shortening
hospital stays and wait times, and lowering
overall costs is more pressing now than ever.
Delivering on the future of healthcare is
about enabling precision health—integrated,
efficient, and highly personalized care.
Making this a reality requires merging clinical
medicine and data science by applying
advanced analytics and artificial intelligence
across every possible point of the patient
journey. Healthcare’s Edison™ platform is
the foundation of our digital capabilities
and helps providers use data in new and
significant ways, such as applying deep
learning to make MRI scans both clearer and
faster. Today and tomorrow, Healthcare is
focused on building an intelligence-based
healthcare system and a healthier world.
F UTURE OF FLIGH T
The future of flight will be defined both by
how the aviation industry emerges from
the current cycle and how it innovates to
improve sustainability and efficiency. Servicing
our global installed base of commercial and
military engines keeps Aviation close to our
customers and able to anticipate their needs.
Our fuel-efficient engines can help them meet
their own emissions-reduction goals as well as
new global standards.
Our newest engines are incredibly popular
thanks in part to their strong fuel efficiency,
with the LEAP powering nearly 60 percent of
the Airbus A320neo fleet and the record-
setting GE9X already attracting hundreds of
orders and commitments. The GE Catalyst
turboprop engine, currently in testing, has
achieved 15 percent less fuel consumption
than predecessors. And further out, our work
on hybrid-electric propulsion may help make
commercial electric flight a future reality.
Path to growth
This is why GE exists—to rise to the challenge
of building a world that works. GE’s people did
that in remarkable fashion in 2020, building on
longstanding strengths and developing new
skills. As a result, we are starting the year with
real momentum.
You can start to see this in the sequential
improvements in our 2020 financial
performance and our 2021 outlook for
revenue, margin, and free cash flow* growth.
What you don’t always see is the resilient and
passionate team who come to work every day
to make a difference—who are using lean to
serve customers, deliver for shareholders, and
shape the GE of the future.
Last year, I shared some details about a lean
event we held to improve the way we build
gas turbines. While the pandemic prevented
me from visiting as many GE sites as I wanted
to in 2020, I was able to return to Greenville,
South Carolina. The progress the team made
over the last year was impressive; their
enthusiasm to find better ways to serve
their customers even more so. Lean tools
that were new to them when we met are
becoming second nature. They are reducing
lead times and improving on-time delivery
while reducing inventory. The team also
showed me opportunities they are pursuing
next. I left that day excited about what GE
can do and am keen to return.
This is not just happening in Greenville—or
Cheltenham or Doha or Florence. These are
examples of lean, not for lean’s sake, but
to serve our customers and strengthen our
company. Over time, working this way not
only will help GE deliver better results but also
deeply embed humility, transparency, and
focus throughout everything we do.
Thank you for your continued interest and
investment in our company. It’s my honor to be
on this team and in this role.
First row
• Diana Kayrouz, Renewable
Energy, Argentina
• Chris Day, Aviation, U.S.A.
• Amy Shen, Aviation, China
• Clay Griffis, Power, U.S.A.
• Frédéric Nyeto, Renewable
Energy, Canada
Second row
• Louis Chihara, Power, Japan
• Hridya I, GE Research, India
• Jérôme Poupon, Power, France
• Niall Cronin, Capital, Singapore
• Fitri Afriyanti, Power, Indonesia
Last row
• Andy Haileselassie, Aviation, Qatar
• Tyler Vermey, Healthcare, U.S.A.
• Amélie Lorenzi-Mercier,
Aviation, Canada
• Erustus Nzomo, Renewable
Energy, Kenya
• Nurali Virani, GE Research, U.S.A.
*
Non-GAAP Financial Measure
H. LAWRENCE CULP, JR.
Chairman of the Board and
Chief Executive Officer
February 12, 2021
G E 2 02 0 A N NU A L R E P OR T
5
How GE
Performed
in 2020
Total Company
PURPOSE We rise to the challenge of
building a world that works
CEO H. Lawrence Culp, Jr.
GAAP
2020
2019
YOY
REPORTED
Total Revenues
$79,619
$95,214
(16)%
GE Industrial Profit
$7,291
$1,801
F
GE Industrial Profit
Margin
Continuing EPS
Net EPS
GE Industrial Cash
from Operating
Activities (CFOA)
10.0%
2.1%
790bps
$0.59
$0.58
$(0.01)
$(0.62)
$(1,254)
$4,614
F
F
U
EMPLOYEES ~174,000
GLOBAL OPERATIONS 170+ countries
NON- GAAP*
2020
2019
YOY
GE Industrial
Organic Revenues
Adjusted GE
Industrial Profit
Adjusted GE Industrial
Profit Margin
Adjusted EPS
GE Industrial Free
Cash Flow (FCF)
$73,180
$84,051
(13)%
$2,520
$8,313
(70)%
3.4%
9.5%
$0.01
$606
$0.61
$2,322
(610)
bps
(98)%
(74)%
Dollars in millions;
except per-share amounts
Orders
Backlog
$71,979
$90,254
$386,520 $404,572
(20)%
(4)%
POWER
RENE WABLE ENERGY
AV IATION
MISSION Powering lives and making electricity
more affordable, reliable, accessible, and
more sustainable
UNITS Gas Power, Power Portfolio
INSTALLED BASE 7,000+ gas turbines
CEO Gas Power: Scott Strazik; Power Portfolio:
Dan Janki (as of 1Q’21)
EMPLOYEES ~34,000
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
Solutions, Hybrids Solutions
INSTALLED BASE 400+ GW of renewable
energy equipment
CEO Jérôme Pécresse
EMPLOYEES ~40,000
Revenues
Profit/(Loss)
Profit/(Loss) Margin
Segment FCF*
Orders
Backlog
2020
$17,589
$274
1.6%
$15
$15,986
$79,575
YOY
REPORTED
(6)%
(6)%
-bps
$1,538
YOY
ORGANIC
(5)%
(7)%
(10)bps
N/A
(5)%
(7)%
(4)%
N/A
Revenues
Profit/(Loss)
Profit/(Loss) Margin
Segment FCF*
Orders
Backlog
2020
$15,666
$(715)
(4.6)%
$(641)
$16,328
$30,001
YOY
REPORTED
2%
10%
60bps
$340
YOY
ORGANIC
4%
6%
50bps
N/A
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 ~37,700 commercial aircraft
engines1 and ~26,500 military aircraft engines
CEO John Slattery
EMPLOYEES ~40,000
Revenues
Profit/(Loss)
Profit/(Loss) Margin
Segment FCF*
2020
$22,042
$1,229
YOY
YOY
ORGANIC
REPORTED
(32)%
(33)%
(82)%
(82)%
5.6% (1,510)bps (1,540)bps
N/A
$(4,449)
$(34)
(3)%
9%
(3)%
N/A
Orders
Backlog
$21,590
$260,412
(41)%
(5)%
(41)%
N/A
HEALTHC AR E
C APITAL
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, Pharmaceutical
Diagnostics, BioPharma (this business was sold
on March 31, 2020)
INSTALLED BASE 4M+ healthcare installations
CEO Kieran Murphy
EMPLOYEES ~47,000
Revenues
Profit/(Loss)
Profit/(Loss) Margin
Segment FCF*
Orders
Backlog
YOY
REPORTED
2020
(10)%
$18,009
$3,060
(18)%
17.0% (170)bps
$314
$2,863
YOY
ORGANIC
4%
17%
190bps
N/A
$18,645
$17,100
(12)%
(7)%
1%
N/A
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), Working Capital
Solutions (WCS), Insurance
CEO Jennifer VanBelle (as of 1Q’21)
EMPLOYEES ~2,000
GE Capital
continuing operations
Discontinued operations
GE Capital earnings
In billions
Total GE Capital Assets
2020
$(1,710)
$(90)
$(1,800)
YOY
U
U
U
$116.9
(4.5)
6
Including GE and its joint venture partners
* Non-GAAP Financial Measure
1
U Unfavorable
F Favorable
GE 2020 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, 2020
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
Title of each class
Securities Registered Pursuant to Section 12(b) of the Act:
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.06 per share
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 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
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 þ
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 þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ
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 $58.9 billion. There were 8,767,942,000 shares of common stock with a par value of $0.06
outstanding at January 31, 2021.
The definitive proxy statement relating to the registrant’s Annual Meeting of Shareholders, to be held May 4, 2021, is incorporated by reference into Part
III to the extent described therein.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Forward-Looking Statements
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
Consolidated Statement of Comprehensive Income (Loss)
Consolidated 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, Including Deferred Inventory Costs
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 Intercompany Transactions
Note 25 Operating Segments
Note 26 Baker Hughes Summarized Financial Information
Directors, Executive Officers and Corporate Governance
Exhibits and Financial Statement Schedules
Form 10-K Cross Reference Index
Signatures
Page
3
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58
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63
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71
73
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82
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102
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106
107
108
111
112
FORWARD-LOOKING STATEMENTS. Our public communications and SEC filings may contain statements related to future,
not past, events. These forward-looking statements often address our expected future business and financial performance and financial
condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "estimate,"
"forecast," "target," "preliminary," or "range." Forward-looking statements by their nature address matters that are, to different degrees,
uncertain, such as statements about the impacts of the COVID-19 pandemic on our business operations, financial results and financial
position and on the world economy; our expected financial performance, including cash flows, revenues, organic growth, margins,
earnings and earnings per share; macroeconomic and market conditions and volatility; planned and potential business or asset
dispositions; our de-leveraging plans, including leverage ratios and targets, the timing and nature of actions to reduce indebtedness and
our credit ratings and outlooks; GE's and GE Capital's funding and liquidity; our businesses’ cost structures and plans to reduce costs;
restructuring, goodwill impairment or other financial charges; or tax rates.
For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking
statements include:
•
•
•
•
•
•
•
•
•
the continuing severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic, of businesses’ and
governments’ responses to the pandemic and of individual factors such as aviation passenger confidence on our operations and
personnel, and on commercial activity and demand across our and our customers’ businesses, and on global supply chains;
the extent to which the COVID-19 pandemic and related impacts will continue to adversely impact our business operations,
financial performance, results of operations, financial position, the prices of our securities and the achievement of our strategic
objectives;
changes in macroeconomic and market conditions and market volatility (including developments and volatility arising from the
COVID-19 pandemic), including interest rates, the value of securities and other financial assets (including our equity ownership
position in Baker Hughes), oil, natural gas and other commodity prices and exchange rates, and the impact of such changes and
volatility on our financial position and businesses;
our de-leveraging and capital allocation plans, including with respect to actions to reduce our indebtedness, the timing and amount
of GE dividends, organic investments, and other priorities;
further downgrades of our current short- and long-term credit ratings or ratings outlooks, or changes in rating application or
methodology, and the related impact on our liquidity, funding profile, costs and competitive position;
GE’s liquidity and the amount and timing of our GE Industrial cash flows and earnings, which may be impacted by customer,
supplier, competitive, contractual and other dynamics and conditions;
GE Capital's capital and liquidity needs, including in connection with GE Capital’s run-off insurance operations and discontinued
operations, the amount and timing of required capital contributions to the insurance operations and any strategic actions that we
may pursue; the impact of conditions in the financial and credit markets on GE Capital's ability to sell financial assets; the
availability and cost of funding; and GE Capital's exposure to particular counterparties and markets, including through GECAS to
the aviation sector and adverse impacts related to COVID-19;
our success in executing and completing asset dispositions or other transactions, including our plan to exit our equity ownership
position in Baker Hughes, the timing of closing for such transactions and the expected proceeds and benefits to GE;
global economic trends, competition and geopolitical risks, including changes in the rates of investment or economic growth in key
markets we serve, or an escalation of sanctions, tariffs or other trade tensions between the U.S. and China or other countries, and
related impacts on our businesses' global supply chains and strategies;
• market developments or customer actions that may affect levels of demand and the financial performance of the major industries
and customers we serve, such as secular, cyclical and competitive pressures in our Power business, pricing and other pressures in
the renewable energy market, levels of demand for air travel and other dynamics related to the COVID-19 pandemic, conditions in
key geographic markets and other shifts in the competitive landscape for our products and services;
operational execution by our businesses, including the operations and execution of our Power and Renewable Energy businesses,
and the performance of our Aviation business;
changes in law, regulation or policy that may affect our businesses, such as trade policy and tariffs, regulation related to climate
change, and the effects of tax law changes;
our decisions about investments in new products, services and platforms, and our ability to launch new products in a cost-effective
manner;
our ability to increase margins through implementation of operational changes, restructuring and other cost reduction measures;
the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of
Alstom and other investigative and legal proceedings;
the impact of actual or potential failures of our products or third-party products with which our products are integrated, and related
reputational effects;
the impact of potential information technology, cybersecurity or data security breaches at GE or third parties; and
the other factors that are described in "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 2020 FORM 10-K 3
ABOUT GENERAL ELECTRIC. General Electric Company (General Electric, GE or the Company) is a high-tech industrial
company that operates worldwide through its four industrial segments, Power, Renewable Energy, Aviation and Healthcare, and its
financial services segment, Capital. See the Segment Operations section within Management’s Discussion and Analysis of Financial
Condition (MD&A) for segment business descriptions and product and service offerings. See the Consolidated Results section within
MD&A and Results of Operations and Note 2 to the consolidated financial statements for information regarding our recent business
portfolio actions. Results of segments reclassified to discontinued operations have been recast for all periods presented.
We serve customers in over 170 countries. Manufacturing and service operations are carried out at 82 manufacturing plants located in
28 states in the United States and Puerto Rico and at 149 manufacturing plants located in 34 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 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.
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.
The strength and talent of our workforce are critical to the success of our businesses, and we continually strive to attract, develop and
retain personnel commensurate with the needs of our businesses in their operating environments. The Company’s human capital
management priorities are designed to support the execution of our business strategy and improve organizational effectiveness. We
monitor various factors across our priorities, including as a part of our business operating reviews during the year. The priorities focus
on:
•
Protecting the health and safety of our workforce: GE is committed to establishing and maintaining effective health and safety
standards and protocols across our businesses, ensuring continuous process improvement and providing ongoing education.
Sustaining a Company culture based in leadership behaviors of humility, transparency and focus with a commitment to unyielding
integrity: GE’s organizational culture supports talent attraction, engagement and retention and ensures our ways of working are
strongly connected to our goals.
Developing and managing our talent to best support our organizational goals: GE’s approach to talent management aims to ensure
strong individual and company performance; our development offerings are designed to support these goals.
Promoting inclusion and diversity across the enterprise: GE is committed to fostering an inclusive culture, where everyone feels
empowered to do their best work.
•
•
•
At year-end 2020, General Electric Company and consolidated affiliates employed approximately 174,000 people, of whom
approximately 56,000 were employed in the United States. Our Power, Renewable Energy, Aviation, Healthcare, and Capital segments
employed approximately 34,000, 40,000, 40,000, 47,000 and 2,000 people, respectively. In addition, Corporate employed
approximately 10,000 employees. Compared to the year-end 2019 figure of 205,000, the number of those employed at year-end 2020
decreased primarily as a result of restructuring, including actions at GE businesses to manage risk and proactively mitigate the financial
impact from COVID-19 and efforts to reduce Corporate costs, and business exits.
In the United States, GE has approximately 5,990 union-represented manufacturing and service employees, the majority of whom are
covered by four-year collective bargaining agreements ratified in August 2019. GE’s relationship with employee-representative
organizations outside the U.S. takes many forms, including in Europe where GE engages employees’ representatives’ bodies such as
works councils and trade unions in accordance with local law.
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, our integrity policies and our Diversity Annual Report,
is available at www.ge.com/sustainability and www.ge.com/about-us/diversity. 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.
GE 2020 FORM 10-K 4
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.
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 Industrial with the financial services businesses of GE Capital and are prepared in conformity with U.S.
generally accepted accounting principles (GAAP). Unless otherwise noted, tables are presented in U.S. dollars in millions. Certain
columns and rows within tables may not add due to the use of rounded numbers. Percentages presented in this report are calculated
from the underlying numbers in millions.
Discussions throughout this MD&A are based on continuing operations unless otherwise noted. Results for the years ended December
31, 2020 versus 2019 are discussed within this report. Refer to our Annual Report on Form 10-K for the year ended December 31, 2019
for discussions of results for the years ended December 31, 2019 versus 2018. 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.
Effective December 31, 2020, in order to enhance our financial statement presentation, we voluntarily made the following reporting
changes for all periods presented:
•
•
•
•
changed our presentation of GE Industrial restructuring program costs. Previously these costs were recorded within Corporate
Items and Eliminations. Now these costs are recorded within segment profit, except for significant, higher-cost programs that
continue to be recorded within Corporate Items and Eliminations. This change better aligns restructuring expense with cash
spend at the segments, driving accountability in both managing costs and benefits;
changed the presentation of our Statement of Financial Position to reflect the classification of assets and liabilities into current
and non-current and revised the definition of operating working capital in our Statement of Cash Flows, to drive increased
transparency to operational drivers for near- and long-term cash needs and enhanced linkage to free cash flows metrics;
began presenting research and development (R&D) expenses separately as part of costs and expenses in our consolidated
Statement of Earnings (Loss) to provide increased transparency to R&D spend and trends as part of GE's total investment in
innovation. These costs were previously reported in costs of goods and services sold; and
ceased reporting GE Capital as an equity method investment within the GE Industrial column. This change simplified reporting
for GE Industrial and has no impact on the GE Capital or Consolidated columns. Consistent with our historical practice, all
commercial transactions between GE Industrial and GE Capital continue to be reported on arms-length terms and are
eliminated upon consolidation.
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 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 Industrial 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 Industrial – the adding together of all industrial affiliates, giving effect to the elimination of transactions among such affiliates.
Any intercompany profits resulting from transactions between GE Industrial and GE Capital are eliminated at the GE Industrial
level. We present the results of GE Industrial 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.
•
•
In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial data but not
presented in our financial statements prepared in accordance with GAAP. Certain of these data are considered “non-GAAP financial
measures” under SEC rules. See the Non-GAAP Financial Measures section for the reasons we use these non-GAAP financial
measures and the reconciliations to their most directly comparable GAAP financial measures.
GE 2020 FORM 10-K 5
CONSOLIDATED RESULTS
2020 SIGNIFICANT DEVELOPMENTS. Coronavirus Disease 2019 (COVID-19) Pandemic. The COVID-19 pandemic has impacted
global economies, resulting in workforce and travel restrictions, supply chain and production disruptions and reduced demand and
spending across many sectors. Since the latter part of the first quarter of 2020, these factors have had a material adverse impact on our
operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in
industries that we serve. This section provides a brief overview of how we have been responding to current and potential impacts
related to COVID-19 on GE’s operations and financial condition and results, with additional details provided throughout the MD&A and
other relevant sections of this report.
During 2020, we adopted operational and governance rhythms across the Company, and with our Board of Directors, to coordinate and
oversee actions related to the COVID-19 pandemic, including an internal task force to protect the health and safety of our employees
globally and maintain business continuity; the assessment of financial and operating impacts, financial planning and mitigating cost,
cash, and other actions in response; funding and liquidity management and related treasury actions; enterprise risk management and
other functional activities across our global commercial, supply chain, human resources, controllership, government affairs, and other
organizations. In particular, we took a series of actions to enhance and extend our liquidity at both GE and GE Capital (as described
under "Liability Management and Deleveraging Actions" below), and we continue to evaluate market conditions as they evolve and take
precautionary measures to strengthen our financial position. We ended the year with $36.6 billion of consolidated cash, cash
equivalents and restricted cash, in addition to our available credit lines of $20.2 billion. See the Capital Resources and Liquidity section
for further information.
While factors related directly and indirectly to the COVID-19 pandemic have been impacting operations and financial performance at
varying levels across all our businesses, the most significant impact to date has been at our Aviation segment and our GE Capital
Aviation Services (GECAS) aircraft leasing business within our Capital segment. The pandemic has had and continues to have a
material adverse effect on the global airline industry, resulting in reduced flight schedules worldwide, an increased number of idle
aircraft, lower utilization, workforce reductions and declining financial performance within the airline industry. This has decreased
demand for higher margin service revenues within our Aviation segment directly impacting our profitability and cash flows during 2020.
Our Healthcare segment experienced increased demand for certain types of products and services, including ventilators, monitoring
solutions, x-ray, anesthesia and point-of-care ultrasound product lines, partially offset by decreased demand in other parts of the
business as patients have postponed certain procedures and hospitals have deferred spending. Our other businesses were also
adversely impacted by market developments, including delays or cancellations of new projects, new orders and related down payments.
In addition, workplace, travel and supply chain disruptions have caused delays of deliveries and the achievement of other billing
milestones directly impacting our profitability and cash flows for the year ended December 31, 2020. We anticipate many of these
impacts related to demand, profitability and cash flows will continue in future periods depending on the severity and duration of the
pandemic. For additional details about impacts related to Aviation and GECAS, Healthcare and our other businesses, refer to the
respective segment sections within MD&A.
Each of GE's businesses and Corporate are taking cost and cash actions to manage risk and proactively mitigate the financial impact
from COVID-19, as supply and demand dynamics continue to shift. In 2020, we executed more than $2 billion in operational cost
reduction and more than $3 billion in cash preservation actions across the company, including more than $1 billion in operational cost
reduction and more than $2 billion in cash preservation actions at Aviation, to right-size its cost structure and preserve its ability to serve
customers.
The ultimate impact of the COVID-19 pandemic on our operations and financial performance, and on those of customers and suppliers
in industries that we serve, depends on many factors that are not within our control, including the severity and duration of the pandemic;
governmental, business and individuals’ actions in response to the pandemic; and the development, availability and public acceptance
of effective treatments or vaccines. See the Risk Factors section for further information about related risks and uncertainties.
BioPharma. On March 31, 2020, we completed the sale of our BioPharma business within our Healthcare segment to Danaher
Corporation for consideration of $21.1 billion, and recognized a pre-tax gain of $12.4 billion. See the Segment Operations - Healthcare
section and Note 2 for further information.
Asset Impairments. In the third quarter of 2020, we recognized non-cash pre-tax impairment charges of $0.4 billion related to property,
plant and equipment and intangible assets at our Steam business within our Power segment due to our recent announcement to exit
the new build coal power market. We will continue to monitor the operating results and cash flow forecasts for the remaining business.
In the second quarter of 2020, we recognized a non-cash pre-tax impairment charge of $0.9 billion related to goodwill at our Additive
reporting unit within our Aviation segment. The Steam and Additive charges were recorded within earnings from continuing operations at
Corporate. In the second quarter of 2020, we recognized a non-cash pre-tax impairment charge of $0.8 billion related to goodwill in our
GECAS reporting unit within our Capital segment. In the year ended December 31, 2020, we recognized non-cash pre-tax impairments
of $0.5 billion on our GECAS leasing portfolio. See Segment Operations - Capital and Notes 7 and 8 for further information.
Liability Management and Deleveraging Actions. We reduced our consolidated borrowings by $15.8 billion in 2020, driven primarily
by debt tenders at GE Industrial and GE Capital of $4.2 billion and $11.9 billion, respectively, GE Capital maturities of $10.5 billion, and
repayment of GE Industrial commercial paper of $3.0 billion, partially offset by new debt issuances at GE Industrial and GE Capital of
$7.5 billion and $6.0 billion, respectively. GE Industrial net debt* ended at $32.3 billion at December 31, 2020, down $15.5 billion from
December 31, 2019, primarily driven by lower debt, a higher cash balance, and pension pre-funding of $2.5 billion in the fourth quarter
of 2020. See the Borrowings section of Capital Resources and Liquidity and Note 11 for further information.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 6
SEC Settlement. As previously reported on December 9, 2020, GE reached a settlement with the SEC that concluded and resolved the
SEC's investigation of GE in its entirety. Under the settlement, among other terms, GE paid a civil penalty of $0.2 billion in December
2020, of which $0.1 billion was recorded at Corporate and $0.1 billion was recorded at GE Capital. See Note 23 for further information.
SUMMARY OF 2020 RESULTS. Consolidated revenues were $79.6 billion, down $15.6 billion (16%) for the year primarily driven by
decreased GE industrial revenues of $14.6 billion and decreased GE Capital revenues of $1.5 billion. GE Industrial organic revenues*
were $73.2 billion, down $10.9 billion (13%) driven by our Aviation and Power segments, partially offset by our Healthcare and
Renewable Energy segments.
Continuing earnings per share was $0.59. Excluding gains (losses) on business dispositions, non-operating benefit costs, unrealized
gains (losses) on investments, goodwill impairments, restructuring and other charges, Steam asset impairments, debt extinguishment
costs, the SEC settlement, and U.S. tax reform, Adjusted earnings per share* was $0.01.
For the year ended December 31, 2020, GE Industrial profit was $7.3 billion and profit margins were 10.0%, up $5.5 billion, driven by
the gain on the sale of our BioPharma business of $12.4 billion, lower interest and other financial charges of $0.8 billion, decreased
goodwill impairments of $0.6 billion, decreased non-operating benefit cost of $0.4 billion and lower charges for significant, higher-cost
restructuring programs of $0.2 billion, partially offset by decreases at our industrial segments, an increase of $2.8 billion in losses on
our investment in Baker Hughes, impairment charges of $0.4 billion related to property, plant and equipment and intangible assets at
our Steam business, and the SEC settlement charges. Adjusted GE Industrial organic profit* decreased $4.7 billion, primarily as a result
of the impacts of COVID-19, particularly at our Aviation segment, partially offset by an increase at Healthcare.
GE Industrial cash flows from (used for) operating activities (CFOA) of continuing operations were $(1.3) billion and $4.6 billion for the
years ended December 31, 2020 and 2019, respectively. GE Industrial CFOA decreased primarily due to lower net income, largely as a
result of COVID-19 impacts, GE Pension Plan contributions of $2.5 billion in 2020 and higher cash paid for taxes, partially offset by
lower cash used for operating working capital. GE Industrial free cash flows (FCF)* were $0.6 billion and $2.3 billion for the years ended
December 31, 2020 and 2019, respectively. GE Industrial FCF* decreased primarily due to lower net income, partially offset by lower
cash used for operating working capital and a decrease in additions to property, plant and equipment and internal-use software. See the
Capital Resources and Liquidity - Statement of Cash Flows section for further information.
Orders are contractual commitments with customers to provide specified goods or services for an agreed upon price. Backlog is unfilled
customer orders for products and product services (expected life of contract sales for product services).
GE INDUSTRIAL ORDERS
Equipment
Services
Total orders(a)
2020
36,841 $
35,137
71,979 $
2019
44,951 $
45,303
90,254 $
2018
49,276
45,523
94,799
$
$
(a) Orders included $1,136 million, $3,643 million and $3,210 million related to BioPharma for the years ended December 31, 2020,
2019 and 2018, respectively.
For the year ended December 31, 2020, orders decreased $18.3 billion (20%) on a reported basis and decreased $14.8 billion (17%)
organically, with decreases at Aviation, primarily driven by declines in both commercial equipment and service orders due to COVID-19
and the 737 MAX grounding; at Power primarily driven by a decrease in equipment orders; and at Renewable Energy primarily due to a
decrease in services orders; partially offset by an increase at Healthcare. Equipment orders were down $5.0 billion (12%) organically
and services orders were down $9.8 billion (22%) organically. Excluding BioPharma, orders decreased $15.0 billion (17%) organically.
GE INDUSTRIAL BACKLOG
Equipment
Services
Total backlog(a)
2020
73,286 $
313,234
386,520 $
2019
78,968 $
325,605
404,572 $
2018
77,126
273,499
350,625
$
$
(a) Backlog as of December 31, 2020 excludes the BioPharma business due to its disposition in the first quarter of 2020. Backlog as of
December 31, 2019 and 2018 included $1,247 million and $905 million, respectively, related to BioPharma.
As of December 31, 2020, backlog decreased $18.1 billion (4%) from the prior year primarily driven by Aviation due to a reduction in
our Commercial Services backlog and cancellations of commercial equipment orders. The reduction in Commercial Services reflects
lower anticipated engine utilization, the cancellation of equipment unit orders, customer fleet restructuring and contract modifications.
Power decreased due to sales outpacing new orders; Healthcare decreased with the disposition of the BioPharma business of $1.2
billion; and Renewable Energy increased due to new orders outpacing sales. Excluding the BioPharma disposition, backlog decreased
$16.8 billion (4%) from December 31, 2019.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 7
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 25 for further information.
December 31, 2020
Backlog
Adjustments
Remaining performance obligation
Equipment
$
$
73,286 $
(27,294)
45,991 $
Services
313,234 $
(128,626)
184,608 $
Total
386,520
(155,921)
230,600
Adjustments to reported backlog of $155.9 billion as of December 31, 2020 are largely driven by adjustments of $146.3 billion in our
Aviation segment: (1) backlog includes engine contracts for which we have received purchase orders that are cancelable; (2) our
services backlog includes contracts that are cancelable without substantive penalty, primarily time and materials contracts; (3) backlog
includes engines contracted under long-term service agreements, even if the engines have not yet been put into service. These
adjustments to reported backlog to the extent realized are generally expected to be satisfied beyond one year.
Consolidated revenues
Equipment
Services
GE Industrial revenues
GE Capital revenues
2020
79,619 $
37,620
35,480
73,100 $
7,245 $
$
$
$
2019
95,214 $
43,080
44,639
87,719 $
8,741 $
2018
97,012
43,679
45,359
89,038
9,551
For the year ended December 31, 2020, consolidated revenues decreased $15.6 billion (16%), primarily driven by decreased
Industrial revenues of $14.6 billion and decreased GE Capital revenues of $1.5 billion.
GE Industrial revenues decreased $14.6 billion (17%), with decreases in services and equipment. The decrease in services was
primarily at Aviation, driven by lower commercial spare part shipments, decreased shop visits and the cumulative impact of changes in
billing and cost assumptions in our long-term service agreements; and at Power, due to declines in transactional part sales and
upgrades at Gas Power. The decrease in equipment was primarily at Aviation, due to fewer commercial install and spare engine unit
shipments; and at Healthcare, due to the disposition of the BioPharma business; partially offset by increases at Renewable Energy,
primarily from Onshore Wind with more wind turbine shipments than in the prior year, and Offshore Wind; and at Gas Power, due to an
increase in Heavy-Duty gas turbine unit shipments. This decrease included the net effects of dispositions of $3.6 billion and the effects
of a stronger U.S. dollar of $0.3 billion. Excluding the effects of acquisitions, dispositions and foreign currency, GE Industrial organic
revenues* decreased $10.9 billion (13%), with a decrease in services revenues of $8.8 billion (20%) and a decrease in equipment
revenues of $2.1 billion (5%). GE Industrial organic revenues* decreased at Aviation and Power, partially offset by increases at
Healthcare and Renewable Energy. Excluding the BioPharma disposition, GE Industrial organic revenues* decreased $10.9 billion
(13%).
GE Capital revenues decreased $1.5 billion (17%), as a result of volume declines and lower gains. These volume declines were
primarily at GECAS related to lower interest income attributable to the sale of PK AirFinance and lower rental revenue on our aircraft
leasing portfolio, and at Working Capital Solutions (WCS) related to lower purchases of GE Industrial customer receivables and the run-
off of the GE Capital supply chain finance program (See GE Industrial Working Capital Transactions within MD&A for further
information).
(Per-share amounts in dollars and diluted)
Continuing earnings (loss) attributable to GE common shareholders
Continuing earnings (loss) per share
2020
5,355 $
0.59 $
$
$
2019
(44) $
(0.01) $
2018
(21,438)
(2.47)
For the year ended December 31, 2020, consolidated continuing earnings increased $5.4 billion, due to increased GE Industrial
profit of $5.5 billion and decreased provision for GE Industrial income taxes of $0.9 billion, partially offset by an increase in GE Capital
losses of $1.2 billion.
GE Industrial profit increased $5.5 billion driven primarily by the gain on the sale of our BioPharma business of $12.4 billion, lower
interest and other financial charges of $0.8 billion, decreased goodwill impairments of $0.6 billion, decreased non-operating benefit cost
of $0.4 billion and lower charges for significant, higher-cost restructuring programs of $0.2 billion; partially offset by decreases at our
industrial segments, an increase of $2.8 billion in losses on our investment in Baker Hughes, impairment charges of $0.4 billion related
to property, plant and equipment and intangible assets at our Steam business, and the SEC settlement charges. GE Industrial profit
margin was 10.0%, an increase of 790 basis points, primarily due to the same net increases as described above. Adjusted GE Industrial
profit* was $2.5 billion, a decrease of 65% organically*, primarily due to a decrease at our Aviation segment, partially offset by an
increase at Healthcare and a decrease in Adjusted corporate operating costs*. Adjusted GE industrial profit margin* was 3.4%, a
decrease of 520 basis points organically*, primarily due to the same net decreases as described above. At Aviation, the primary drivers
were lower volume on commercial spare part and commercial spare engine shipments, decreased shop visits and net unfavorable
changes of $1.1 billion to the estimated profitability in its long-term service agreements. At Healthcare, the primary drivers were cost
reductions and increased demand for Healthcare Systems (HCS) products used directly in response to COVID-19, partially offset by
decreases in Pharmaceutical Diagnostics (PDx) volume.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 8
GE Capital continuing losses increased $1.2 billion primarily due to an impairment of goodwill of $0.8 billion (pre-tax), volume declines,
higher mark-to-market effects and other impairments, including $0.5 billion (pre-tax) on the GECAS fixed-wing aircraft portfolio as a
result of COVID-19 and related market impacts, lower gains, debt tender costs, the SEC settlement charge and the nonrecurrence of a
2019 tax reform enactment adjustment. These increased losses were partially offset by the nonrecurrence of a $1.0 billion pre-tax
charge identified through the completion of our 2019 annual insurance premium deficiency review, higher tax benefits including the tax
benefit related to the BioPharma sale and lower excess interest cost. Gains were $0.4 billion and $0.7 billion in 2020 and 2019,
respectively.
AVIATION AND GECAS 737 MAX. Aviation develops, produces, and sells LEAP aircraft engines to Boeing, Airbus and COMAC
through CFM International (CFM), a company jointly owned by GE and Safran Aircraft Engines, a subsidiary of the Safran Group of
France. The LEAP-1B engine is the exclusive engine for the Boeing 737 MAX. In March 2019, global regulatory authorities ordered a
temporary fleet grounding of the Boeing 737 MAX. In May 2020, Boeing resumed production of the 737 MAX. In November 2020, the
U.S. Federal Aviation Administration (FAA) lifted the grounding notice for the 737 MAX and Boeing commenced aircraft deliveries to
customers in compliance with FAA regulatory requirements in December 2020. A number of other global regulators since the FAA's
action have also lifted the orders that suspended 737 MAX operations for airlines under their jurisdictions. Aviation commercial
equipment backlog as of December 31, 2020 includes approximately 9,600 LEAP engines, including the impact of approximately 1,500
LEAP-1B unit order cancellations in 2020. See the Segment Operations - Aviation section for further information. During 2020, CFM and
Boeing reached an agreement to align production rates for 2020 and secure payment terms for engines delivered in 2019 and 2020. In
2020, Aviation received payments, net of progress collections, of $0.5 billion for engines delivered in 2019. A final payment of $0.2
billion, net of progress collections, is expected to be received in the first quarter of 2021 for engines delivered in 2019. CFM and Boeing
continue to work closely to ensure a successful reentry into service, with a strong commitment to safety while navigating industry
disruption.
During 2020, GECAS agreed with Boeing to restructure its 737 MAX orderbook including previously canceled positions, resulting in 77
orders now remaining. As of December 31, 2020, GECAS owned 29 of these 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
77 of these aircraft on order and has made financing commitments to acquire a further 16 aircraft under purchase and leaseback
contracts with airlines.
As of December 31, 2020, we have approximately $1.7 billion of net assets ($3.2 billion of assets and $1.5 billion of liabilities) related to
the 737 MAX program that primarily comprised Aviation accounts receivable offset by progress collections and GECAS pre-delivery
payments and owned aircraft subject to lease. No impairment charges were incurred related to the 737 MAX aircraft and related
balances, as we continue to believe these assets are recoverable over their contractual or useful lives. We continue to monitor 737
MAX return to service and return to delivery developments with our airline customers, lessees and Boeing.
LEAP continues to be a strong engine program for us, and we delivered 815 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, significant, higher-cost restructuring programs, manufacturing footprint 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 Corporate Items and Eliminations section 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 2020 FORM 10-K 9
SUMMARY OF REPORTABLE SEGMENTS
Power
Renewable Energy
Aviation
Healthcare
Capital
Total segment revenues
Corporate items and eliminations
Consolidated revenues
Power
Renewable Energy
Aviation
Healthcare
Capital
Total segment profit
Corporate items and eliminations
GE Industrial goodwill impairments
GE Industrial interest and other financial charges
GE Industrial non-operating benefit costs
GE Industrial 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
2020
17,589 $
15,666
22,042
18,009
7,245
80,551
(932)
79,619 $
274 $
(715)
1,229
3,060
(1,710)
2,138
8,239
(877)
(1,333)
(2,424)
(388)
5,355
(125)
—
(125)
5,230 $
2019
18,625 $
15,337
32,875
19,942
8,741
95,519
(305)
95,214 $
291 $
(791)
6,812
3,737
(530)
9,519
(1,825)
(1,486)
(2,115)
(2,828)
(1,309)
(44)
(5,335)
60
(5,395)
(5,439) $
2018
22,150
14,288
30,566
19,784
9,551
96,339
673
97,012
(1,105)
140
6,454
3,522
(489)
8,521
(2,201)
(22,136)
(2,415)
(2,740)
(467)
(21,438)
(1,363)
1
(1,364)
(22,802)
$
$
$
$
POWER. 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. We have organized the businesses within our Power segment into Gas Power and Power Portfolio.
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.
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, 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 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. We continue to execute for our customers through COVID-19, prioritizing safety first and
foremost. From an operations perspective, we are working within our supply chain and with our suppliers to catch up on parts and
project scope that were delayed as a result of COVID-19. Despite difficult travel and customer site restrictions, we continue to service
our customers' installed base and have completed roughly 90% of all planned outages in the year. From a market perspective, both
gas-based electricity generation and GE gas turbine utilization has remained stable. Our ability to close transactions, particularly
services parts & upgrades, has been impacted by constrained customer budgets and access to financing due to oil prices and
economic slowdown, especially in Gas Power. Although there may be market challenges in the near term, we believe gas will play a
critical role in the energy transition and our view of the market has not materially changed, albeit timing on new orders is harder to
forecast.
Power continues to right size its business to better align with market demand and drive its businesses with an operational rigor and
discipline that is focused on its customers’ lifecycle experience. In Gas Power, we continue to size the business for a 25-30 GW market,
although acknowledge that the size any given year can vary. We remain focused on our underwriting discipline and risk management to
ensure we are securing deals that meet our financial hurdles and we have a high confidence to deliver for our customers.
GE 2020 FORM 10-K 10
Looking ahead, we anticipate the power market to continue to be impacted by overcapacity in the industry, continued price pressure
from competition on servicing the installed base, and the uncertain timing of deal closures due to financing and the complexities of
working in emerging markets. Market factors related to the energy transition such as greater renewable energy penetration and the
adoption of climate change-related policies continue to impact long-term demand, to differing degrees across markets globally. As such,
we announced in the third quarter of 2020 that we will be exiting the new build coal power market, while continuing to service our
customers' installed base.
We continue to invest in new product development, such as our HA-Turbines, and upgrades as these are critical to our customers and
the long-term strategy of the business. In 2020, we supplied the first purpose-built hydrogen-burning power plant in the U.S. with Gas
Power's 7HA.02 turbine. Our fundamentals remain strong with approximately $80 billion in backlog and a gas turbine installed base
greater than 7,000 units, including approximately 1,800 units under long-term service agreements.
(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.
Equipment
Services
Total backlog
Equipment
Services
Total orders
Gas Power
Power Portfolio
Total segment revenues
Equipment
Services
Total segment revenues(a)
Segment profit (loss)(b)(c)
Segment profit margin
Orders
2020
68
57
20
11
15.0
2019
74
63
18
11
13.6
Sales
2020
71
51
21
20
2019
53
38
11
15
2020
$ 17,127
62,448
$ 79,575
$
4,597
11,390
$ 15,986
2019
$ 17,661
67,640
$ 85,302
$
5,215
11,684
$ 16,899
2018
$ 18,763
66,230
$ 84,993
$
9,319
13,326
$ 22,645
$ 12,655
4,935
$ 17,589
$ 13,122
5,503
$ 18,625
$ 13,296
8,853
$ 22,150
$
6,707
10,883
$ 17,589
$
6,247
12,378
$ 18,625
$
$
274
1.6 %
291
1.6 %
$
8,077
14,073
$ 22,150
$
(1,105)
(5.0) %
(a) Power segment revenues represent 24% and 22% of total industrial revenues and total segment revenues, respectively, for the year
ended December 31, 2020.
(b) Power segment profit represents 4% of total industrial profit for the year ended December 31, 2020.
(c) Included restructuring charges of $16 million, $94 million and $297 million for the years ended December 31, 2020, 2019 and 2018,
respectively, that were previously reported within the Corporate segment and were reclassified into the Power segment results in the
fourth quarter of 2020 for all periods presented. For a summary of all restructuring charges by segment, see the Other Consolidated
Information section.
For the year ended December 31, 2020, segment orders were down $0.9 billion (5%), segment revenues were down $1.0 billion
(6%) and segment profit was down 6%.
Backlog as of December 31, 2020 decreased $5.7 billion (7%) from December 31, 2019, primarily driven by sales outpacing new
orders.
Orders decreased $0.8 billion (4%) organically, primarily due to decreases in Gas Power Heavy-Duty Gas Turbine unit and services
orders and Steam equipment orders.
Revenues decreased $0.9 billion (5%) organically*, primarily due to decreases in Gas Power services revenues, primarily related to
decreases in transactional part sales and upgrades, partially offset by increases in Gas Power equipment revenues related to 13 more
Heavy-Duty gas turbine unit shipments. Steam equipment and service revenues also decreased.
Profit decreased 7% organically* due to lower revenues, charges of approximately $0.3 billion related to an under-performing JV in
China, charges related to contracts, a charge for a specific customer credit event at Gas Power, and a quality reserve at Power Portfolio
on the legacy product line that we have since exited in Power Conversion, partially offset by continued efforts to right size the business
across Gas Power and Power Portfolio.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 11
RENEWABLE ENERGY. Renewable Energy includes one of the broadest portfolios in the industry to provide end-to-end solutions for
our customers demanding reliable and affordable renewable energy by combining onshore and offshore wind, blades, hydro, storage,
solar 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 equipped more than 90 percent of utilities with our grid solutions in developed and emerging markets.
Onshore Wind – delivers technology and services for the onshore wind power industry by providing smart, modular turbines that are
uniquely situated for a variety of wind environments. Wind services help customers improve cost, capacity and performance of their
assets over the lifetime of the fleet, utilizing digital infrastructure to monitor, predict and optimize wind farm energy performance. Our
Onshore Wind business supports a turbine installed base of approximately 50,000 units. For reporting purposes, Onshore Wind
includes the operations of our blade manufacturer, LM Wind.
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 power consumers. Grid offers a comprehensive portfolio of equipment, hardware, protection and
control, automation and digital services. Grid is also equipped to address the challenges of the energy transition by safely and reliably
connecting intermittent renewable energy generation to transmission networks.
Hydro Solutions – represents more than 25 percent of the total installed hydropower capacity worldwide through a portfolio of
solutions and services for hydropower generation, 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 hydropower plant operators.
Offshore Wind – leads the industry in offshore wind power technologies and offshore wind farm development with the Haliade-X, the
world's most powerful offshore wind turbine installed today.
Hybrid Solutions – provides reliable, affordable and dispatchable integration of renewable energies that drive vital stability to the grid
and includes unique applications to integrate storage and renewable energy generation sources, such as wind, hydropower and solar.
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, has driven price
pressure and the need for innovation.
We continue to invest 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, and in exploring new ways to further improve the efficiency and flexibility of
our hydropower technology with new innovative turbine designs and digital solutions. 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 competes 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.
We continue to observe growth across the global onshore wind market together with a positive impact on deliveries and installations in
the U.S. from the Production Tax Credit (PTC) cycle and customer preference shifting to larger, more efficient units to drive down costs
and compete with other power generation options. Despite the competitive nature of the market, onshore wind order pricing has
stabilized globally. Several energy-related tax credit extensions were passed into law in December 2020 further extending the phase-
down of U.S. PTCs. Under the current legislation, onshore wind projects that begin construction in 2021 will also qualify for a 60% PTC.
We expect high levels of production observed in 2020 to continue for 2021 deliveries at Onshore Wind and are closely monitoring our
execution during this period.
Additionally, offshore wind projects that begin construction before 2026 are eligible to elect either the PTC or the Investment Tax Credit
(ITC), with the ITC extended by five years at the full rate. We have received full certification for our Haliade-X 12- and 13MW prototypes
and during the fourth quarter of 2020 reported orders within Offshore Wind for the supply of 95 Haliade-X 13MW units for the first phase
of the Dogger Bank Wind Farm in the U.K.
New product introductions remain important to our onshore and offshore customers who are demonstrating the willingness to adopt the
new technology of larger turbines that decrease the levelized cost of energy. During 2020, we delivered our first Onshore 5MW Cypress
units and have reported more than 600 of these units in backlog. We have observed significant market demand for our Offshore
Haliade-X units and based on existing customer commitments, expect to report additional orders and backlog for the next two phases of
Dogger Bank and for offshore projects in the U.S. upon obtaining final notification to proceed. We are preparing for large scale
production of Haliade-X in response to this market demand.
The grid market remains challenging as we continue to experience pricing pressure in the High Voltage Direct Current (HVDC) and High
Voltage (HV) product lines. The hydropower industry continues to maximize value and grid flexibility with refurbishments, repower 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 improved operating results in 2021.
GE 2020 FORM 10-K 12
Despite the COVID-19 pandemic, we have continued to deliver for our customers, while taking all necessary precautions for our
employees, and returned our manufacturing locations and long-term project sites to pre-COVID-19 capacity levels and operations.
While we do not believe the long-term outlook for renewable energy products and services has materially changed, we are monitoring
the impact of the pandemic on the renewable energy industry, including electricity consumption forecasts and customer capital
expenditure levels, supply chain, availability of financing and our ability to execute on equipment and long-term projects, including the
impact of possible customer related delays. In response to volume declines in certain of our businesses, we implemented additional
cost reduction measures, restructuring and cash preservation actions.
Onshore and Offshore (In units)
Wind Turbines
Wind Turbine Gigawatts
Repower units
Equipment
Services
Total backlog
Equipment
Services
Total orders
Onshore Wind
Grid Solutions equipment and services
Hydro, Offshore Wind and Hybrid Solutions
Total segment revenues
Equipment
Services
Total segment revenues(a)
Segment profit (loss)(b)(c)
Segment profit margin
Orders
2020
3,602
12.7
504
2019
4,325
12.8
1,269
Sales
2020
3,744
10.8
1,022
2019
3,424
9.5
1,057
2020
$ 17,470
12,531
$ 30,001
$ 14,109
2,218
$ 16,328
$ 10,881
3,585
1,200
$ 15,666
2019
$ 16,297
11,233
$ 27,530
$ 13,964
2,920
$ 16,884
$ 10,421
4,016
900
$ 15,337
2018
$ 14,385
9,285
$ 23,670
$ 11,763
3,520
$ 15,283
$
8,220
4,579
1,489
$ 14,288
$ 12,859
2,807
$ 15,666
(715)
$
(4.6) %
$ 12,267
3,069
$ 15,337
(791)
$
(5.2) %
$ 11,419
2,870
$ 14,288
140
$
1.0 %
(a) Renewable Energy segment revenues represent 21% and 19% of total industrial revenues and total segment revenues,
respectively, for the year ended December 31, 2020.
(b) Renewable Energy segment profit represents (10)% of total industrial profit for the year ended December 31, 2020.
(c) Included restructuring charges of $200 million, $125 million and $152 million for the years ended December 31, 2020, 2019 and
2018, respectively, that were previously reported within the Corporate segment and were reclassified into the Renewable Energy
segment results in the fourth quarter of 2020 for all periods presented. For a summary of all restructuring charges by segment, see
the Other Consolidated Information section.
For the year ended December 31, 2020, segment orders were down $0.6 billion (3%), segment revenues were up $0.3 billion
(2%) and segment profit was up $0.1 billion (10%).
Backlog as of December 31, 2020 increased $2.5 billion (9%) from December 31, 2019, primarily from Offshore Wind due to our first
Haliade-X order from Dogger Bank Wind Farm, new Cypress platform orders mainly in Onshore Wind Europe and an increase in Hydro.
These increases were partially offset by sales exceeding new orders at Grid, primarily as a result of increased commercial selectivity in
certain product lines.
Orders decreased $0.4 billion (3%) organically, primarily due to lower Onshore Wind turbine and repower unit orders in North America
compared to the prior year due to the PTC phase down and lower orders at Grid. These decreases were partially offset by increased
orders at Offshore Wind of Haliade-X, other regions of Onshore Wind, LM Wind, Hybrid Solutions and Hydro.
Revenues increased $0.6 billion (4%) organically*, primarily from Onshore Wind with 300 more wind turbine shipments on a unit basis,
and 13% more on a megawatt basis, and at Offshore Wind and Hybrid Solutions compared to the prior year. These increases were
partially offset by lower Grid revenues, primarily attributable to lower volumes in the Power Transformer product line, and lower Hydro
revenues.
Profit increased $0.1 billion (6%) organically*, as the impact of higher sales volume at Onshore Wind, the favorable impact of cost
reduction measures and improved project execution exceeded higher restructuring costs and the nonrecurrence of a $0.1 billion non-
cash gain from the termination of two Offshore Wind contracts in 2019.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 13
AVIATION. Aviation designs and produces commercial and military aircraft engines, integrated engine 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 and aftermarket services through joint ventures with Safran Group of
France and Raytheon Technologies Corporation via their Pratt & Whitney segment. Commercial provides maintenance, component
repair and overhaul services (MRO), including sales of replacement parts.
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.
Systems & Other – provides engines, components, systems and services for commercial and military segments. This includes engines
and components for business, general aviation and aeroderivative segments, along with avionics systems, aviation electric power
systems and gear and transmission components. 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.
Competition & Regulation. The global businesses for aircraft jet engines, maintenance, component repair and overhaul services
(including parts sales) are highly competitive. Both domestic and international 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 and systems orders tend to follow civil air travel and demand and
military procurement cycles.
Our product, services and activities are subject to a number of global regulators such as the U.S. Federal Aviation Administration (FAA),
European Union Aviation Safety Agency (EASA), Civil Aviation Administration of China (CAAC) and other regulatory bodies.
Significant Trends & Developments. The global COVID-19 pandemic continues to have a material adverse effect on the global airline
industry. A key underlying driver of Aviation’s commercial engine and services businesses is global commercial air traffic, which in turn
is driven by economic activity and consumer and business propensity to travel. Since the beginning of the pandemic in the first quarter
of 2020, we have seen varied levels of recovery in global markets. Government travel restrictions, public health advisories, individuals'
propensity to travel and continued cases of the virus have all impacted the level of air travel. Due to the global airline industry
contraction, Aviation’s airline and airframe customers are taking measures to address reduced demand, which, in turn, continue to
materially impact Aviation’s business operations and financial performance. As a result, our long-term service agreement billings
decreased approximately 19% from the prior year, partially mitigated by customer billings for contract terminations, modifications and
annual contractual minimum engine flight hours. Aviation is closely monitoring government actions and economic and industry
forecasts, although such forecasts continue to evolve and reflect the uncertainty about the severity and duration of the decline in
commercial air traffic. Aviation regularly tracks global departures, which as of December 31, 2020, were approximately 40% below the
pre-COVID-19 baseline. More broadly, we are in frequent dialogue with our airline and airframe customers about the outlook for
commercial air travel, new aircraft production, and after-market services. Given the current trend, we expect domestic travel routes
primarily served by narrowbody aircraft to recover before long-haul, international travel routes which are primarily served by widebody
aircraft. We continue to expect the engine aftermarket recovery to lag departure trends across regions and fleets, which would result in
long-term service agreement billings and cash to recover prior to associated revenues and profits. Consistent with industry projections,
Aviation continues to estimate the duration of the market recovery to be prolonged over multiple years dependent on containing the
spread of the virus, effective inoculation programs and government collaboration to encourage travel, particularly around quarantine
requirements.
Aviation has taken several business actions to respond to the current adverse environment, including a reduction of approximately 25%
of its total global workforce. For the year ended December 31, 2020, Aviation realized more than $1 billion in operational cost reduction
and $2 billion in cash preservation actions, including a headcount reduction of over 11,000 employees. Aviation expects to realize cost
and cash savings in 2021 as a result of the actions taken in 2020 and further initiatives in 2021. The business is actively monitoring the
pace of demand recovery to ensure the business is appropriately sized for the future. In addition, we continue to partner with our airline
and leasing customers and are working closely with our airframe partners to align production rates for 2021 and beyond.
Aviation’s operational and financial performance is impacted by commercial air traffic, shop visit and spare part demand, fleet
retirements, and demand for new aircraft. We monitor and forecast each of these factors as part of Aviation’s long-term planning
process, which may result in additional business restructuring actions. Given the uncertainty related to the severity and length of the
global COVID-19 pandemic and the impact on these factors across the aviation sector and specific customers, Aviation could be
required to record charges, impairments, or other adverse financial impacts in future periods if actual results differ significantly from
Aviation's current estimates.
As it relates to the military environment, Aviation continues to forecast strong military demand creating future growth opportunities for
our Military business as the U.S. Department of Defense and foreign governments have continued flight operations, and have allocated
budgets to upgrade and modernize their existing fleets. During 2020, Aviation experienced supply chain execution challenges which
resulted in fewer engine and spare part shipments than the prior year. The business is actively addressing these matters to enable
future growth in Military.
GE 2020 FORM 10-K 14
Total engineering, comprised of company, customer and partner-funded and nonrecurring engineering costs, decreased compared to
prior year in line with the changes in the commercial environment. For the year ended December 31, 2020, company-funded research
and development spend decreased compared to 2019, and we expect the reduction to continue in line with the actions outlined above.
However, customer and partner-funded engineering efforts, primarily in our Military business, increased compared to the prior year. In
September 2020, Aviation announced it received certification from the FAA for the GE9X engine, the world’s largest and most powerful
commercial aircraft engine.
Aviation is taking actions to protect its ability to serve its customers now and as the global airline industry recovers. While its near-term
focus remains on navigating the COVID-19 pandemic, Aviation’s deep history of innovation and technology leadership, commercial
engine installed base of approximately 37,700 units, military engine installed base of approximately 26,500 units, with approximately
12,500 units under long-term service agreements, and $260 billion backlog represents strong long-term fundamentals. Aviation is taking
actions to protect and strengthen its business and seeks to emerge from this crisis stronger and drive long-term cash and profitable
growth over time.
(In units, except where noted)
Commercial Engines
LEAP Engines(a)
Military Engines
Spares Rate(b)
Orders
2020
678
351
1,023
2019
2,390
1,568
801
$
Sales
2020
1,487
815
683
18.0 $
2019
2,863
1,736
717
31.0
(a) LEAP engines are a subset of Commercial Engines
(b) Commercial externally shipped spares and spares used in time & material shop visits in millions of dollars per day.
Equipment
Services
Total backlog
Equipment
Services
Total orders
Commercial Engines & Services
Military
Systems & Other
Total segment revenues
Equipment
Services
Total segment revenues(a)
Segment profit (loss)(b)(c)
Segment profit margin
2020
$ 34,486
225,927
$ 260,412
$
8,119
13,471
$ 21,590
$ 13,017
4,572
4,453
$ 22,042
$
8,582
13,460
$ 22,042
1,229
$
2019
$ 39,131
234,114
$ 273,245
$ 14,459
22,280
$ 36,738
$ 24,217
4,389
4,269
$ 32,875
$ 12,737
20,138
$ 32,875
6,812
$
2018
$ 37,831
185,696
$ 223,527
$ 15,268
20,248
$ 35,517
$ 22,724
4,103
3,740
$ 30,566
$ 11,499
19,067
$ 30,566
6,454
$
5.6 %
20.7 %
21.1 %
(a) Aviation segment revenues represent 30% and 27% of total industrial revenues and total segment revenues, respectively, for the
year ended December 31, 2020.
(b) Aviation segment profit represents 17% of total industrial profit for the year ended December 31, 2020.
(c) Included restructuring charges of $26 million, $8 million and $12 million for the years ended December 31, 2020, 2019 and 2018,
respectively, that were previously reported within the Corporate segment and were reclassified into the Aviation segment results in
the fourth quarter of 2020 for all periods presented. For a summary of all restructuring charges by segment, see the Other
Consolidated Information section.
For the year ended December 31, 2020, segment orders were down $15.1 billion (41%), segment revenues were down $10.8
billion (33%) and segment profit was down $5.6 billion (82%).
Backlog as of December 31, 2020 decreased $12.8 billion (5%) from December 31, 2019, primarily due to a reduction in our
Commercial Services backlog and cancellations of commercial equipment orders, which included approximately 1,500 LEAP 1-B unit
order cancellations and 22 GE9x unit order cancellations. The reduction to Commercial Services backlog reflects estimates of lower
engine utilization, the partial cancellation of long-term service agreements related to the equipment unit order cancellations, and
anticipated customer fleet restructuring and contract modifications. Backlog adjustments could be necessary in future periods for
additional cancellations of new commercial engine orders, fleet retirements, or changes to customer aircraft utilization and operating
behavior.
GE 2020 FORM 10-K 15
Orders decreased $14.8 billion (41%) organically, primarily driven by lower commercial equipment and service orders as airline
customers have slowed or deferred new engine orders, as well as delayed maintenance and repair operations while existing fleets have
lower utilization or been grounded. Military orders increased 21% compared to the prior year primarily driven by equipment and new
development orders.
Revenues decreased $10.5 billion (32%) organically*. Equipment revenues decreased, primarily due to 1,376 fewer commercial install
and spare engine unit shipments, including 921 fewer LEAP units and 228 fewer CFM56 units versus the prior year, in part due to the
737 MAX grounding and production slowdown. Commercial Services revenues decreased, primarily due to lower commercial spare part
shipments, decreased shop visits and the cumulative impact of changes in billing and cost assumptions in our long-term service
agreements. Military revenues increased primarily due to increased revenues on development contracts and engine shipment mix,
partially offset by fewer engine and spare part shipments due to supply chain execution challenges.
Profit decreased $5.6 billion (82%) organically*, primarily due to lower volume on commercial spare part and commercial spare engine
shipments, and decreased shop visits in our service agreements. During the year ended December 31, 2020, Aviation recorded
expenses of $0.5 billion due to lower production volumes and initiated restructuring actions given decreases in demand primarily related
to commercial engines. Aviation also recorded pre-tax charges totaling $0.2 billion due to expected future losses related primarily to
customer credit risk given the current environment. In addition, Aviation recorded net unfavorable changes of $1.1 billion to the
estimated profitability in its long-term service agreements. This decrease includes a $0.6 billion pre-tax charge to reflect the cumulative
COVID-19 pandemic-related impacts of changes to billing and cost assumptions for certain long-term service agreements, reflecting
lower engine utilization, anticipated customer fleet restructuring and contract modifications as a result of current and forecasted market
conditions. Additional adjustments could occur in future periods and could be material for certain long-term service agreements if actual
customer operating behavior differs significantly from Aviation's current estimates.
HEALTHCARE. Healthcare provides essential healthcare technologies to developed and emerging markets and has expertise in
medical imaging, digital solutions, patient monitoring and diagnostics, drug discovery and performance improvement solutions that are
the building blocks of precision health. Products and services are sold worldwide primarily to hospitals and medical facilities.
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 Digital Solutions (EDS) includes enterprise
digital, artificial intelligence applications, consulting and Command Center offerings designed to improve efficiency in healthcare
delivery and expand global access to advanced health care.
Pharmaceutical Diagnostics – 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. These products include both contrast imaging and molecular imaging
agents.
BioPharma – This business was sold on March 31, 2020. It delivered products, services and manufacturing solutions for drug
discovery, biopharmaceutical production, and cellular and gene therapy technologies, so that scientists can discover new ways to
predict, diagnose and treat disease.
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. Key factors affecting competition include technological innovations, productivity solutions,
competitive pricing and the ability to provide lifecycle 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. During the first half of 2020, there was an increase in demand for certain of our products that are
highly correlated in response to the COVID-19 pandemic, including ventilators, monitoring solutions, x-ray, anesthesia and point-of-care
ultrasound product lines. However, we also saw reduction in demand and delays in procurement in other products and services that
were not critical to the response efforts or where procedures could be postponed (magnetic resonance, contrast agents and nuclear
tracers). We have experienced some moderation in COVID-19 related demand in the second half of 2020 and have experienced some
recovery in overall hospital spending, though this varies by market. The pandemic is still driving uncertainty in our markets globally, as
well as additional supply chain and logistics costs, and we expect this to continue. We expect capital expenditures, particularly in private
markets, to remain under pressure from revenue declines and cautious spending related to COVID-19 impacts. In response to
continuing near-term volatility and cost pressures, we have driven structural cost reduction and cash optimization actions that began in
the first quarter of 2020.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 16
The global healthcare market has continued to expand, driven by macro trends relating to growing and aging populations, increasing
chronic and lifestyle-related diseases, accelerating demand for healthcare in emerging markets, and increasing use of diagnostic
imaging. Technological innovation that makes it possible to address an increasing number of diseases, conditions and patients in a
more cost-effective manner has also driven growth across each of our global markets.
The Healthcare Systems (HCS) equipment market over the long term continues to expand at low single-digit rates or better, while
demand continues for services on new equipment as well as on our existing installed base. However, there is short-term variation driven
by market-specific political, environmental and economic cycles. There has been some moderation in tariffs in both U.S. and China,
however, this is subject to changes in U.S.-China trade regulations. Long-term growth in emerging markets is driven by 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 Pharmaceutical Diagnostics (PDx) business is well positioned in the contrast agent and nuclear tracer markets. This market is
expected to grow over the long-term, driven by continued diagnostic imaging procedure growth and increasing contrast and tracer-
enhanced biomarkers of these same procedures, as these products help to increase the precision of the diagnostic information
provided to clinicians. After we experienced reduced demand in the first half of 2020, we saw an increase in the second half of 2020 for
PDx products as procedure volume increased.
We continue focusing on creating new products and digital solutions as well as expanding uses of existing offerings that are tailored to
the different needs of our global customers. GE Healthcare recently introduced the Voluson™ SWIFT, an industry-first Sono-automation
tool, which leverages artificial intelligence to automatically identify fetal anatomy, enhancing workflow by more than 70%. In addition, we
launched the next version of Mural Virtual Care Solution, which provides clinical decision support with a view of patients' status across a
care area, hospital or system. We also completed the acquisition of Prismatic Sensors AB, which specializes in photon counting
Computed Tomography (CT).
Equipment
Services
Total backlog
Equipment
Services
Total orders
Healthcare Systems
Pharmaceutical Diagnostics
BioPharma
Total segment revenues
Equipment
Services
Total segment revenues(a)
Segment profit (loss)(b)(c)
Segment profit margin
$
2020
5,538
11,562
$ 17,100
$ 10,811
7,835
$ 18,645
$ 15,387
1,792
830
$ 18,009
$
9,992
8,017
$ 18,009
3,060
$
$
2019
6,978
11,480
$ 18,458
$ 12,959
8,213
$ 21,172
$ 14,648
2,005
3,289
$ 19,942
$ 11,585
8,357
$ 19,942
3,737
$
$
2018
6,254
11,155
$ 17,409
$ 12,574
8,323
$ 20,897
$ 14,886
1,888
3,010
$ 19,784
$ 11,422
8,363
$ 19,784
3,522
$
17.0 %
18.7 %
17.8 %
(a) Healthcare segment revenues represent 25% and 22% of total industrial revenues and total segment revenues, respectively, for the
year ended December 31, 2020.
(b) Healthcare segment profit represents 42% of total industrial profit for the year ended December 31, 2020.
(c) Included restructuring charges of $134 million, $159 million and $176 million for the years ended December 31, 2020, 2019 and
2018, respectively, that were previously reported within the Corporate segment and were reclassified into the Healthcare segment
results in the fourth quarter of 2020 for all periods presented. For a summary of all restructuring charges by segment, see the Other
Consolidated Information section.
For the year ended December 31, 2020, segment orders were down $2.5 billion (12%), segment revenues were down $1.9
billion (10%) and segment profit was down $0.7 billion (18%).
Backlog as of December 31, 2020 decreased $1.4 billion (7%) from December 31, 2019, primarily due to the BioPharma disposition.
Excluding Biopharma, backlog decreased $0.1 billion.
Orders increased $0.3 billion (1%) organically, due to increases in demand for COVID-19 related products, including a $0.3 billion order
from the U.S. Department of Health and Human Services to deliver 50,000 ventilators in partnership with Ford, partially offset by PDx.
Excluding BioPharma, orders were up $0.1 billion organically.
Revenues increased $0.7 billion (4%) organically*, driven by increased demand in HCS products used directly in response to
COVID-19, partially offset by reduced volume in PDx from a decrease in non-essential routine procedures. Excluding BioPharma,
revenues increased $0.6 billion (4%) organically*.
Profit increased $0.5 billion (17%) organically*, primarily due to cost reductions and increased demand for HCS products used directly
in response to COVID-19, partially offset by decreases in PDx volume. Excluding BioPharma, profits increased $0.4 billion (17%)
organically*.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 17
CAPITAL. 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 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) – 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 1,600 aircraft and
serves approximately 205 customers in 73 countries from a network of 15 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.
Working Capital Solutions (WCS) – provides working capital services primarily by purchasing GE Industrial customer receivables.
Insurance – Refer to the Other Items - Insurance section 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, investors, such as sovereign wealth funds, hedge funds and private 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. We continue to evaluate strategic options to accelerate the further reduction in the size of GE
Capital, some of which could result in material financial charges depending on the timing, negotiated terms and conditions of any
ultimate arrangements.
At GE Capital, the primary effect of the COVID-19 pandemic pertains to its GECAS business. The pandemic has led to worldwide
reduction of flight schedules and it is difficult to predict its longer-term impact. Additionally, the related market volatility resulted in higher
credit spreads on the investment securities held by our run-off insurance business, which resulted in marks and impairments taken in
the first quarter, which, starting in the second quarter more than recovered in 2020.
As of December 31, 2020, GECAS owned 917 fixed-wing aircraft, of which 27 with a book value of $0.6 billion were available to lease to
customers (aircraft on the ground). We test recoverability of each fixed-wing aircraft in our operating lease portfolio at least annually.
Additionally, we perform quarterly evaluations in circumstances such as when assets are re-leased or current lease terms have
changed.
Given the environment, we accelerated our review in the second quarter to focus on leases with higher risk of repossession based on
our assessment of customer credit risk default and any unplaced leased assets rolling-off over the next 12 months, which represented
approximately 20% of our fixed-wing aircraft operating lease portfolio. In addition, we performed our detailed annual portfolio review in
the third quarter of 2020, which incorporated third-party appraisal data, updates to all cash flow assumptions as well as evolving market
and customer dynamics that we are monitoring. These analyses resulted in pre-tax impairments of $0.5 billion in 2020, primarily on our
fixed-wing aircraft operating lease portfolio. Pre-tax impairments were $0.1 billion in 2019. The increase in pre-tax impairments was
driven by declining cash flow projections of the future collectability of rents on aircraft and engines currently under contract related to
market impacts resulting from the pandemic. Continued deterioration in cash flow projections, including current rents, downtime, release
rates and residual assumptions could result in future impairments in the operating lease portfolio.
Based on the resulting pressure on its airline customers, GECAS continues to work with customers on restructuring requests as they
arise. As a result of these requests, we have executed agreements with customers to reschedule certain lease payments. As of
December 31, 2020, we have a contractually deferred balance of $0.4 billion. In addition, we have invoiced $0.3 billion under these
agreements and collected about 84%. We expect to continue to receive requests for rent deferrals and/or lease restructures from our
global airline customers as a result of COVID-19 and related market impacts. An extended disruption of regional or international travel
could result in an increase in these types of requests in future periods, which could result in an increase to the trade receivable balance.
As GECAS evaluates future lease restructures, there is a risk of lease modifications that could have a material adverse effect on
GECAS operations, financial position and cash flows.
In October 2020, Pacific Investment Management Company (PIMCO), one of the world’s premier fixed income investment managers,
and GECAS announced they had reached a preliminary agreement to develop an aviation leasing venture to support up to $3 billion in
aircraft asset financings. PIMCO and GECAS have executed certain of the definitive agreements and obtained relevant regulatory
clearances for the venture.
GE 2020 FORM 10-K 18
We annually perform premium deficiency testing in the aggregate across our run-off insurance portfolio in the third quarter. As a result of
the testing, we identified no premium deficiency. See the Other Items section and Note 12 for further information.
GE Capital received $2 billion of additional capital contributions from GE in the fourth quarter of 2020. See the Capital Resources and
Liquidity section for further information.
As previously mentioned, GE reached a settlement with the SEC and paid a civil penalty of $0.2 billion in December 2020, of which $0.1
billion was recorded and paid at GE Capital. See Note 23 for further information.
GECAS
EFS
WCS(a)
Insurance
Other continuing operations(a)(b)
Total segment assets
GE Capital debt to equity ratio
December 31, 2020
$
$
35,863 $
2,385
5,884
50,824
18,569
113,526 $
December 31, 2019
37,979
1,823
9,014
46,266
22,463
117,546
3.4:1
3.9:1
(a) In the first quarter of 2020, the remaining Industrial Finance assets of $268 million were transferred to Other continuing operations.
(b) Included cash, cash equivalents and restricted cash of $13,245 million as of December 31, 2020 and $17,618 million as of
December 31, 2019.
GECAS
EFS
WCS
Insurance
Other continuing operations
Total segment revenues(a)
GECAS
EFS
WCS
Insurance
Other continuing operations(b)
Total segment profit (loss)
2020
3,947 $
74
334
2,946
(55)
7,245 $
(786) $
52
66
189
(1,232)
(1,710) $
2019
4,895 $
145
829
2,904
(31)
8,741 $
1,029 $
121
234
(611)
(1,303)
(530) $
2018
4,944
144
1,451
2,941
71
9,551
1,225
85
305
(157)
(1,947)
(489)
$
$
$
$
(a) Capital segment revenues represent 9% of total segment revenues for the year ended December 31, 2020.
(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 businesses, which
are driven by GE Capital’s interest allocation process. Interest costs are allocated to GE Capital businesses based on the tenor of
their assets using the market rate at the time of origination, which differs from the asset profile when the debt was originated. As a
result, actual interest expense is higher than interest expense allocated to the remaining GE Capital businesses. All preferred stock
dividend costs have become a GE Industrial obligation in January 2021. See Note 16 for further information. In addition, we
anticipate unallocated interest costs to gradually decline as debt matures and/or is refinanced.
For the year ended December 31, 2020, segment revenues decreased $1.5 billion (17%) and segment losses were up $1.2
billion.
Capital revenues decreased $1.5 billion (17%), as a result of volume declines and lower gains. These volume declines were primarily at
GECAS related to lower interest income attributable to the sale of PK AirFinance and lower rental revenue on our aircraft leasing
portfolio, and at WCS related to lower purchases of GE Industrial customer receivables and the run-off of the GE Capital supply chain
finance program (See GE Industrial Working Capital Transactions for further information). Capital losses increased $1.2 billion, primarily
due to an impairment of goodwill of $0.8 billion (pre-tax), volume declines, higher mark-to-market effects and other impairments,
including $0.5 billion (pre-tax) on the GECAS fixed-wing aircraft portfolio as a result of COVID-19 and related market impacts, lower
gains, debt tender costs, the SEC settlement charge and the nonrecurrence of a 2019 tax reform enactment adjustment. These
increased losses were partially offset by the nonrecurrence of a $1.0 billion pre-tax charge identified through the completion of our 2019
annual insurance premium deficiency review, higher tax benefits including the tax benefit related to the BioPharma sale and lower
excess interest cost. Gains were $0.4 billion and $0.7 billion in 2020 and 2019, respectively, which primarily related to sales of certain
GECAS aircraft and engines resulting in gains of $0.2 billion and $0.4 billion in 2020 and 2019, respectively, and the sale of equity
method investments resulting in gains of $0.1 billion and $0.2 billion in 2020 and 2019, respectively, at EFS.
GE 2020 FORM 10-K 19
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 intersegment activities. In addition, the Corporate Items and
Eliminations amounts related to earnings include certain costs of our principal retirement plans, significant, higher-cost restructuring
programs and other costs reported in Corporate.
Corporate items and eliminations includes the results of our Lighting segment, through its disposition in the second quarter of 2020, and
GE Digital business for all periods presented.
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
Steam asset impairments(a) (Notes 7 and 8)
SEC settlement charge(b)
Unrealized gains (losses)
Goodwill impairments(c) (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)
Functions & operations
Environmental, health & safety (EHS) and other items
Eliminations
Adjusted total corporate operating costs (Non-GAAP)
2020
2019
2018
1,313 $
(2,245)
(932) $
1,791 $
(2,096)
(305) $
2,783
(2,110)
673
12,472 $
(680)
(363)
(100)
(1,911)
(728)
(1,328)
7,362 $
8,689
(1,328) $
(1,028) $
(104)
(195)
(1,328) $
4 $
(886)
—
—
793
(1,486)
(1,736)
(3,311) $
(1,575)
(1,736) $
(1,295) $
(258)
(184)
(1,736) $
1,370
(2,056)
—
—
—
(22,136)
(1,514)
(24,337)
(22,822)
(1,514)
(1,622)
169
(61)
(1,514)
$
$
$
$
$
$
$
(a) Included non-cash pre-tax impairment charges of $429 million, net of $65 million attributable to noncontrolling interests for the
Steam business within our Power segment in 2020.
(b) GE reached a settlement with the SEC and paid a civil penalty of $200 million in December 2020, of which $100 million was
recorded and paid at Corporate and $100 million was recorded and paid at GE Capital.
(c) Included non-cash pre-tax impairment charge of $877 million, net of $149 million attributable to noncontrolling interests for the
Additive reporting unit within our Aviation segment in 2020.
Adjusted total corporate operating costs* excludes gains (losses) on disposals and held for sale businesses, significant, higher-cost
restructuring programs, 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, 2020, revenues decreased by $0.6 billion, primarily as a result of a $0.5 billion decrease in
revenues due to the sale of our Current and Lighting businesses in April 2019 and June 2020, respectively, and $0.1 billion of higher
inter-segment eliminations. Corporate costs decreased by $10.7 billion due to $12.5 billion of higher net gains, primarily driven by $12.4
billion of gains from the sale of our BioPharma business in 2020. Corporate costs also decreased by $0.8 billion due to $1.5 billion of
goodwill impairment charges related to our Renewable Energy segment in 2019 as compared to $0.7 billion of net goodwill impairment
charges related to our Aviation segment in 2020. In addition, Corporate costs decreased by $0.2 billion due to lower restructuring and
other charges in 2020, primarily at Corporate and Power, partially offset by higher restructuring at Aviation. These decreases were
partially offset by $2.7 billion of higher net unrealized losses, primarily related to a $1.8 billion mark-to-market loss on our Baker Hughes
shares and a $0.1 billion impairment on our Ventures portfolio in 2020, as compared to a $0.8 billion mark-to-market gain on our Baker
Hughes shares in 2019. Corporate recognized $0.4 billion of non-cash impairment charges related to property, plant and equipment and
intangible assets at our Steam business within our Power segment in 2020. In addition, Corporate costs increased by $0.1 billion due to
the settlement of the SEC investigation in 2020.
Adjusted total corporate operating costs* decreased by $0.4 billion in 2020 primarily as the result of $0.3 billion of cost reductions within
our Digital business and functions and $0.2 billion of lower costs primarily associated with existing EHS matters. Overall, eliminations
were relatively flat due to higher intercompany elimination activity from project financing investments associated with wind energy
projects in our Renewable Energy segment and higher GE industrial inter-segment eliminations, offset by lower spare engine sales from
our Aviation segment to our GECAS business.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 20
COSTS AND GAINS NOT INCLUDED IN SEGMENT RESULTS. As discussed in the Segment Operations section, 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 amounts relate primarily to significant, higher-cost restructuring programs, goodwill impairment charges
and gains/(losses) on acquisition and disposition activities.
Power
Renewable Energy
Aviation
Healthcare
Total industrial segments
Corporate Items and Eliminations
Total GE Industrial
Costs
2020
583 $
13
1,099
3
1,698 $
173
1,871 $
2019
307 $
1,537
—
43
1,888 $
486
2,374 $
2018
20,178 $
3,114
7
58
23,357 $
857
24,214 $
$
$
$
Gains (Losses)
2019
2020
49 $
—
14
12,364
12,427 $
(1,866)
10,561 $
(2) $
—
—
(1)
(4) $
801
797 $
2018
988
—
(116)
785
1,657
(288)
1,370
OTHER CONSOLIDATED INFORMATION
RESTRUCTURING. Restructuring actions are essential to our cost improvement efforts for both existing operations and those acquired.
Restructuring and other charges relate primarily to workforce reductions, facility exit costs associated with the consolidation of sales,
service and manufacturing facilities, the integration of acquisitions, and certain other asset write-downs such as those associated with
product line exits. We also recognize an obligation for severance benefits that vest or accumulate with service. We continue to closely
monitor the economic environment and expect to undertake further restructuring actions to more closely align our cost structure with
earnings goals. This table is inclusive of all restructuring charges in our segments.
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
GE Industrial restructuring and other charges
Capital
Total restructuring and other charges by business
Restructuring and other charges cash expenditures
2020
856 $
332
66
—
1,254 $
570 $
697
(13)
1,254 $
2020
236 $
213
397
137
245
1,229 $
25
1,254 $
1,175 $
$
$
$
$
$
$
$
$
2019
823 $
349
180
(9)
1,343 $
386 $
993
(36) $
1,343 $
2019
402 $
176
8
201
529
1,315 $
28
1,343 $
1,209 $
2018
989
1,449
612
—
3,050
1,092
1,838
120
3,050
2018
1,301
301
18
222
1,110
2,952
98
3,050
1,480
Liabilities associated with restructuring activities were approximately $1.3 billion, $1.7 billion, and $2.6 billion, including actuarial
determined post-employment severance benefits of $0.7 billion, $1.0 billion, and $1.6 billion as of December 31, 2020, 2019, and 2018,
respectively.
INTEREST AND OTHER FINANCIAL CHARGES
GE Industrial
GE Capital
$
2020
1,333 $
2,186
2019
2,115 $
2,532
2018
2,415
2,982
The decrease in GE Industrial interest and other financial charges for the year ended December 31, 2020 was driven primarily by lower
interest on borrowings due to repayments of intercompany loans from GE Capital and lower losses related to the completion of tender
offers to purchase GE Industrial senior notes (including fees and other costs associated with the tenders), and lower expenses on sales
of GE Industrial current receivables mainly driven by lower sales of receivables and lower benchmark interest rates. The primary
components of GE Industrial interest and other financial charges are interest on short- and long-term borrowings and financing costs on
sales of receivables. Total GE Industrial interest and other financial charges of $0.9 billion and $1.3 billion were recorded at Corporate
and $0.5 billion and $0.8 billion were recorded by GE Industrial segments for the years ended December 31, 2020 and 2019,
respectively.
GE 2020 FORM 10-K 21
The decrease in GE Capital interest and other financial charges for the year ended December 31, 2020 was primarily due to lower
average borrowings balances due to maturities and a decrease in average interest rates due to changes in market rates, partially offset
by higher net interest on assumed debt resulting from a decrease in intercompany loans to GE Industrial which bear the right of offset
(see the Borrowings section of Capital Resources and Liquidity for an explanation of assumed debt and right-of-offset loans), and the
$0.2 billion loss resulting from the completion of tender offers to purchase GE Capital senior notes (including fees and other costs
associated with the tenders). GE Capital average borrowings were $55.8 billion, $61.8 billion and $78.7 billion in 2020, 2019 and 2018,
respectively. The GE Capital average composite effective interest rate (including interest allocated to discontinued operations) was
4.0%, 4.2% and 3.9% in 2020, 2019 and 2018, respectively.
POSTRETIREMENT BENEFIT PLANS. Refer to Note 13 for our pension and retiree benefit plans.
INCOME TAXES
CONSOLIDATED
Effective tax rate (ETR)
Provision (benefit) for income taxes
Cash income taxes paid(a)
(a) Included taxes paid related to discontinued operations.
2020
(9.1) %
(474) $
1,291
2019
63.2 %
726
2,228
$
2018
(0.4) %
93
1,868
$
For the year ended December 31, 2020, the consolidated income tax benefit was $0.5 billion. The change in tax from a tax provision
in 2019 to a tax benefit for 2020 was primarily due to the decrease in pre-tax income excluding the gain from the sale of our BioPharma
business and non-deductible goodwill impairment charges and a decrease in valuation allowances on non-U.S. deferred tax assets
partially offset by the increase in tax expense associated with the disposition of the BioPharma business in 2020 compared to the
amount recognized on preparatory steps for the planned disposition in 2019 and a decrease in benefit from the completion of the
Internal Revenue Service (IRS) audits.
Absent additional taxes enacted as part 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 as certain non-U.S. income is subject to local
country tax rates that are below the 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, 2020, we have not decided to repatriate these earnings to the U.S. Given U.S. tax
reform, substantially all of our net prior unrepatriated earnings were subject to U.S. tax and accordingly we generally 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%, our Power operations located in Switzerland where the earnings are taxed at between 9% and
18.6% and our Aviation operations located in Singapore where the earnings are primarily taxed at a rate of 8%.
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
Benefit/(expense) of foreign tax rate difference on non-U.S. earnings
Benefit of audit resolutions
BioPharma disposition and preparatory restructuring
Other
Total benefit/(expense)
2020
90 $
129
1,447
(186)
1,480 $
2019
27 $
86
(633)
(526)
(1,046) $
2018
(292)
225
—
(973)
(1,040)
$
$
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.
GE 2020 FORM 10-K 22
For the year ended December 31, 2020, the change from an expense from global operations in 2019 to a benefit from global
operations in 2020 reflects the lower rate of tax on the disposition of the BioPharma business in 2020 compared to an amount of tax
recognized on preparatory steps for the planned disposition in 2019 and a decrease in valuation allowances on non-U.S. deferred tax
assets.
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 and Note 15. The nature of
business activities and associated income taxes differ for GE Industrial and for GE Capital; therefore, a separate analysis of each is
presented in the paragraphs that follow.
GE INDUSTRIAL EFFECTIVE TAX RATE
GE Industrial ETR
GE Industrial provision for income taxes
2020
5.3 %
388
$
2019
72.7 %
$
1,309
$
2018
(2.3) %
467
For the year ended December 31, 2020, the GE Industrial provision for income taxes decreased primarily due to the decrease in pre-
tax income excluding the gain from the sale of our BioPharma business and non-deductible goodwill impairment charges and a
decrease in valuation allowances on non-U.S. deferred tax assets partially offset by the increase in tax expense associated with the
disposition of the BioPharma business in 2020 compared to the amount recognized on preparatory steps for the planned disposition in
2019 and a decrease in benefit from the completion of the IRS audits.
GE CAPITAL EFFECTIVE TAX RATE
GE Capital ETR
GE Capital provision (benefit) for income taxes
2020
41.1 %
(862) $
2019
89.3 %
(582) $
2018
99.7 %
(374)
$
For the year ended December 31, 2020, the GE Capital tax benefit increased primarily due to the decrease in pre-tax income
excluding non-deductible goodwill impairment charges and due to larger benefits on global operations including a tax benefit associated
with the disposition of the BioPharma business in 2020.
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. In addition to funding R&D internally, we also receive funding externally from our customers and partners, which
contributes to the overall R&D for the company.
Power
Renewable Energy
Aviation
Healthcare
Corporate(a)
Total
GE funded
2019
314 $
522
906
994
382
3,118 $
2020
317 $
466
707
845
231
2,565 $
$
$
Customer and Partner funded(b)
2018
409 $
413
950
968
675
3,415 $
2020
13 $
19
1,090
27
106
1,255 $
2019
13 $
9
911
25
89
1,046 $
2018
5 $
11
564
23
48
650 $
Total R&D
2019
327 $
531
1,817
1,019
471
4,164 $
2020
330 $
485
1,797
872
336
3,820 $
2018
414
424
1,514
991
722
4,065
(a) Includes Global Research Center and Digital business.
(b) Customer funded is principally U.S. Government funded in our Aviation segment.
DISCONTINUED OPERATIONS. Discontinued operations primarily include certain businesses in our GE Capital segment (our
mortgage portfolio in Poland and trailing liabilities associated with the sale of our GE Capital businesses) and our Baker Hughes and
Transportation segments. See Notes 2 and 23 for further financial information regarding our businesses in discontinued operations.
The mortgage portfolio in Poland (Bank BPH) comprises floating-rate residential mortgages, 87% of which are indexed to or
denominated in foreign currencies (primarily Swiss francs). At December 31, 2020, the total portfolio had a carrying value of $2.4 billion
with a 1.61% 90-day delinquency rate and an average loan to value ratio of approximately 63.0%. The portfolio is recorded at the lower
of cost or fair value, less cost to sell, and included a $0.3 billion impairment, which reflected market yields as well as estimates with
respect to ongoing litigation in Poland related to foreign currency-denominated mortgages and other factors. See Note 23 for additional
information about this litigation and the potential for further adverse developments to result in further losses related to these loans in
future reporting periods.
GE 2020 FORM 10-K 23
CAPITAL RESOURCES AND LIQUIDITY
FINANCIAL POLICY. We intend to maintain a disciplined financial policy, including maintaining a high cash balance. We are targeting a
sustainable long-term credit rating in the Single-A range, achieving a GE Industrial net debt*-to-EBITDA ratio of less than 2.5x and a
dividend in line with our peers over time, as well as maintaining a less than 4-to-1 debt-to-equity ratio for GE Capital. In addition to net
debt*-to-EBITDA, we also evaluate other leverage measures, including gross debt-to-EBITDA, and we will ultimately size our
deleveraging actions across a range of measures to ensure we are operating the Company based on a strong balance sheet. We
intend to continue to decrease our GE Industrial leverage over time as we navigate this period of uncertainty, although we now expect
to achieve our GE Industrial leverage target over time.
LIQUIDITY POLICY. We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to
maintain a sufficient liquidity position to meet our obligations under both normal and stressed conditions. We intend to maintain a high
level of cash and maximize flexibility as we navigate the current environment. At both GE Industrial and GE Capital, we manage our
liquidity to provide access to sufficient funding to meet our business needs and financial obligations, as well as capital allocation and
growth objectives, throughout business cycles.
GE Industrial has continued to enhance its cash management operations, targeting increased linear cash flow, lower factoring, and
reducing restricted cash. As a result, we reduced our intra-quarter borrowings by $3.6 billion in 2020 and reduced our GE Industrial
cash needs to below approximately $13 billion on a go-forward basis. However, we will continue holding elevated cash levels through
this period of uncertainty.
At GE Capital, we continue to hold cash levels to cover at least 12 months of long-term debt maturities.
We believe that our consolidated liquidity and availability under our revolving credit facilities will be sufficient to meet our liquidity needs.
CONSOLIDATED LIQUIDITY. Following is a summary of cash, cash equivalents and restricted cash at December 31, 2020.
GE Industrial
GE Capital
Consolidated
December 31, 2020
$
$
23,209 U.S.
13,421 Non-U.S.
36,630 Consolidated
December 31, 2020
18,934
17,696
36,630
$
$
Cash held in non-U.S. entities has generally been reinvested in active foreign business operations; however, substantially all of our
unrepatriated earnings were subject to U.S. federal tax and, if there is a change in reinvestment, we would expect to be able to
repatriate available cash (excluding amounts held in countries with currency controls) without additional federal tax cost. Any foreign
withholding tax on a repatriation to the U.S. would potentially be partially offset by a U.S. foreign tax credit.
GE INDUSTRIAL LIQUIDITY. GE Industrial's primary sources of liquidity consist of cash and cash equivalents, free cash flows from our
operating businesses, monetization of receivables, and short-term borrowing facilities, including revolving credit facilities. Cash
generation can be subject to variability based on many factors, including seasonality, receipt of down payments on large equipment
orders, timing of billings on long-term contracts, market conditions and our ability to execute dispositions. Additionally, as previously
reported, we launched a program in the third quarter of 2020 to fully monetize our Baker Hughes position over approximately three
years. Consistent with the program’s design, we received initial proceeds of approximately $0.4 billion in the fourth quarter of 2020 and
$0.7 billion in January 2021. See Note 26 for further information.
GE Industrial cash, cash equivalents and restricted cash totaled $23.2 billion at December 31, 2020, including $2.2 billion of cash held
in countries with currency control restrictions and $0.4 billion of restricted use cash. Cash held in countries with currency controls
represents amounts held in countries that may restrict the transfer of funds to the U.S. or limit our ability to transfer funds to the U.S.
without incurring substantial costs. Restricted use cash represents amounts that are not available to fund operations, and primarily
comprised funds restricted in connection with certain ongoing litigation matters.
In the fourth quarter of 2020, GE Industrial took actions to continue to solidify its financial position through a $2.5 billion pre-funding to
the GE Pension Plan as well as the repayment of $1.5 billion of intercompany loans to GE Capital. Based on our current assumptions,
we do not anticipate further contributions to the GE Pension Plan through 2023.
As previously communicated, GE Industrial provided a capital contribution to GE Capital in the fourth quarter of 2020 of $2.0 billion, in
line with the first quarter 2020 insurance statutory funding. In 2021, GE Industrial expects to provide an additional contribution to GE
Capital in line with the existing insurance statutory funding requirement of approximately $2.0 billion. Further 2021 capital contributions
will depend on GE Capital’s performance, including GECAS operations and the Insurance statutory asset adequacy testing results, in
light of the uncertain environment. Going forward, we anticipate GE Capital’s liquidity and capital needs will be met through a
combination of GE Capital liquidity, GE Capital asset sales, GE Capital future earnings and capital contributions from GE Industrial.
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, as well as GE Industrial repayments of intercompany loans and capital contributions from
GE Industrial. We expect to maintain a sufficient liquidity position to fund our insurance obligations and debt maturities. See the
Segment Operations - Capital section for further information regarding allocation of GE Capital interest expense to the GE Capital
businesses.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 24
GE Capital cash, cash equivalents and restricted cash totaled $13.4 billion at December 31, 2020, excluding $0.5 billion of cash in
insurance entities, which was classified as All other assets on the GE Capital Statement of Financial Position. See Note 10 for further
information about classification of cash in insurance entities.
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,
including approximately $2.0 billion in the first quarter of 2021, pending completion of our December 31, 2020 statutory reporting
process, which includes asset adequacy testing. 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. We will continue to monitor the interest rate
environment, including the impact of reinvestment rates and our investment portfolio performance, and other factors in determining the
related effect on our expected future capital contributions. See the Critical Accounting Estimates section for discussion of the sensitivity
of interest rate changes to our insurance liabilities. GE is required to maintain specified capital levels at these insurance subsidiaries
under capital maintenance agreements. Going forward, we anticipate funding any capital needs for insurance through a combination of
GE Capital liquidity, GE Capital asset sales, GE Capital future earnings and capital contributions from GE Industrial.
BORROWINGS. Consolidated total borrowings were $75.1 billion and $90.9 billion at December 31, 2020 and December 31, 2019,
respectively, a decrease of $15.8 billion ($16.3 billion excluding intercompany eliminations). See the following table for a summary of
GE Industrial and GE Capital borrowings.
GE Industrial
Commercial paper
GE Industrial senior notes
Intercompany loans from
GE Capital
Other GE Industrial
borrowings
Total GE Industrial
adjusted borrowings(a)
December 31, 2020 December 31, 2019 GE Capital
December 31, 2020 December 31, 2019
$
— $
3,008
18,994
15,488
3,177
12,226
1,352
2,195
$
23,523 $
32,917
Senior and subordinated
notes
Senior and subordinated
notes assumed by
GE Industrial
Intercompany loans to
GE Industrial
Other GE Capital
borrowings
Total GE Capital
adjusted
borrowings(a)(b)
$
30,987 $
36,501
22,390
31,368
(3,177)
(12,226)
1,944
3,358
$
52,144 $
59,001
(a) Consolidated total borrowings of $75,067 million and $90,882 million at December 31, 2020 and December 31, 2019, respectively,
are net of intercompany eliminations of $600 million and $1,036 million, respectively, of other GE Industrial borrowings from GE
Capital, primarily related to timing of cash settlements associated with GE Industrial receivables monetization programs.
(b) Included $5,687 million and $4,234 million at December 31, 2020 and December 31, 2019, respectively, of fair value adjustments for
debt in fair value hedge relationships. See Note 21 for further information.
The reduction in GE Industrial adjusted borrowings at December 31, 2020 compared to December 31, 2019, was driven primarily by
$9.0 billion (including $1.5 billion in the fourth quarter of 2020) of repayments of intercompany loans from GE Capital, debt repurchases
of $4.2 billion, lower commercial paper of $3.0 billion, and net repayments and maturities of other debt of $1.1 billion, partially offset by
issuances of new long-term debt of $7.5 billion and $0.6 billion related to changes in foreign exchange rates.
GE Industrial net debt* was $32.3 billion and $47.9 billion at December 31, 2020 and December 31, 2019, respectively. The reduction
was driven primarily by $9.0 billion of repayments of intercompany loans from GE Capital, an increase in the net cash deduction of $4.2
billion due to a higher cash balance, the repurchase of $4.2 billion of debt, a reduction in after-tax pension and principal retiree benefit
plan liabilities of $1.8 billion, a reduction in commercial paper of $3.0 billion, and net repayments and maturities of other debt of $1.1
billion, partially offset by new issuances of new long-term debt of $7.5 billion and $0.6 billion related to changes in foreign exchange
rates.
The reduction in GE Capital adjusted borrowings at December 31, 2020 compared to December 31, 2019, was driven primarily by debt
repurchases of $11.9 billion (including $2.2 billion in the fourth quarter of 2020), long-term debt maturities and other repayments of
$10.7 billion (including $2.8 billion in the fourth quarter of 2020), and lower non-recourse borrowings of $0.8 billion, partially offset by GE
Industrial repayments of intercompany loans of $9.0 billion (which has the effect of increasing GE Capital borrowings), issuances of new
long-term debt of $6.0 billion, $1.4 billion of fair value adjustments for debt in fair value hedge relationships, and $0.5 billion related to
changes in foreign exchange rates.
Liability Management Actions. In 2020, we took a series of actions to enhance and extend our liquidity at both GE Industrial and GE
Capital, issuing a total of $13.5 billion of longer-dated debt and reducing near-term maturities by $10.5 billion in the second quarter, with
the remaining $3 billion to be leverage neutral in GE Capital by the end of 2021. Following are details of these and other actions.
In the second quarter of 2020, GE Industrial issued a total of $7.5 billion of senior notes, and used the proceeds to complete a tender
offer to purchase $4.2 billion of GE senior notes, to reduce commercial paper and other debt by $1.8 billion, and to repay $1.5 billion of
intercompany loans from GE Capital. The total of these transactions was leverage neutral for GE Industrial within the second quarter.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 25
In the second quarter of 2020, GE Capital issued a total of $6.0 billion of senior notes and used the proceeds to complete a tender offer
to purchase a total of $9.8 billion of debt. In the fourth quarter of 2020, GE Capital completed a tender offer to purchase a total of $2.2
billion of debt with maturities from 2021 through 2023 using the $1.5 billion of proceeds from the GE Industrial repayment of
intercompany loans as well as existing cash.
The following table provides a reconciliation of total short- and long-term borrowings as reported on the respective GE Industrial and GE
Capital Statements of Financial Position to borrowings adjusted for assumed debt and intercompany loans:
December 31, 2020
Total short- and long-term borrowings
Debt assumed by GE Industrial from GE Capital
Intercompany loans with right of offset
Total intercompany payable (receivable) between GE Industrial and GE Capital
Total borrowings adjusted for assumed debt and intercompany loans
GE Industrial
$
GE Capital
42,736 $ 32,931 $
(22,390)
3,177
(19,213)
23,523 $ 52,144 $
22,390
(3,177)
19,213
$
Consolidated
75,067
—
—
—
75,067
In 2015, senior unsecured notes and commercial paper were assumed by GE Industrial 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 Industrial, resulting in the establishment of an intercompany receivable and payable between GE Industrial and GE
Capital. In addition, GE Capital has periodically made intercompany loans to GE Industrial 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 Industrial and GE Capital, as noted in the table above.
The remaining intercompany loans from GE Capital to GE Industrial bear the right of offset against amounts owed by GE Capital to GE
Industrial under the assumed debt agreement and can be prepaid by GE Industrial at any time, in whole or in part, without premium or
penalty. These loans are priced at market terms and have a collective weighted average interest rate of 3.7% and term of approximately
15.2 years at December 31, 2020.
GE Industrial has in place committed revolving credit lines. The following table provides a summary of committed and available credit
lines.
GE INDUSTRIAL COMMITTED AND AVAILABLE REVOLVING CREDIT FACILITIES
Unused back-up revolving syndicated credit facility
Unused revolving syndicated credit facility
Bilateral revolving credit facilities
Total committed revolving credit facilities
Less offset provisions
Total net available revolving credit facilities
December 31, 2020
15,000 $
—
5,238
20,238 $
—
20,238 $
December 31, 2019
20,000
14,772
7,225
41,997
6,700
35,297
$
$
$
Under the terms of an agreement between GE Capital and GE Industrial, GE Capital has the right to compel GE Industrial to borrow
under the $15.0 billion unused back-up revolving syndicated credit facility. Under this agreement, GE Industrial would transfer the
proceeds to GE Capital as intercompany loans, which would be subject to the same terms and conditions as those between GE
Industrial and the lending banks. GE Capital has not exercised this right.
The following table provides a summary of the activity in the primary external sources of short-term borrowings for GE Industrial in the
fourth quarters of 2020 and 2019. GE Industrial uses its bilateral revolving credit facilities from time to time to meet its short-term
liquidity needs.
2020
2019
Average borrowings during the fourth quarter
Maximum borrowings outstanding during the fourth quarter
Ending balance at December 31
Average borrowings during the fourth quarter
Maximum borrowings outstanding during the fourth quarter
Ending balance at December 31
$
$
— $
—
—
2,994 $
3,231
3,018
473 $
1,150
—
1,272 $
1,500
—
GE Industrial
Commercial Paper
Bilateral Revolving
Credit Facilities
Total
473
1,150
—
4,265
4,731
3,018
In the third quarter of 2020, we reduced our ending commercial paper balance to zero. Total average and maximum borrowings in the
table above are calculated based on the daily outstanding balance of the sum of commercial paper and revolving credit facilities.
GE 2020 FORM 10-K 26
CREDIT RATINGS AND CONDITIONS. We have relied, and may continue to rely, on the short- and long-term debt capital markets to
fund, among other things, a significant portion of our operations. The cost and availability of debt financing is influenced by our credit
ratings. Moody’s Investors Service (Moody’s), Standard and Poor’s Global Ratings (S&P), and Fitch Ratings (Fitch) currently issue
separate ratings on GE Industrial and GE Capital short- and long-term debt. The credit ratings of GE Industrial and GE Capital as of the
date of this filing are set forth in the table below.
GE Industrial
GE Capital
Outlook
Short term
Long term
Outlook
Short term
Long term
Moody's
Negative
P-2
Baa1
Negative
P-2
Baa1
S&P
Negative
A-2
BBB+
Negative
A-2
BBB+
Fitch
Stable
F3
BBB
Stable
F3
BBB
We are disclosing our credit ratings and any current quarter updates to these ratings to enhance understanding of our sources of
liquidity and the effects of our ratings on our costs of funds and access to liquidity. 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.
Substantially all of the Company's debt agreements in place at December 31, 2020 do not contain material credit rating covenants.
GE’s unused back-up revolving syndicated credit facility and certain of our bilateral revolving credit facilities contain a customary net
debt-to-EBITDA financial covenant, which GE satisfied at December 31, 2020.
The Company may from time to time enter into agreements that contain minimum ratings requirements. The following table provides a
summary of the maximum estimated potential liquidity impact in the event of further downgrades with regards to the most significant
contractual credit ratings conditions of the Company.
Triggers Below
BBB+/A-2/P-2
BBB/A-3/P-3
BBB- and below
$
At December 31, 2020
709
768
1,432
The amounts in the table above represent the incremental estimated liquidity impact that could occur if we were to fall below each given
ratings level.
Our most significant contractual ratings requirements are related to ordinary course commercial activities, our receivables sales
programs, and our derivatives portfolio. The timing within the quarter of the potential liquidity impact of these areas may differ, as can
the remedies to resolving any potential breaches of required ratings levels.
FOREIGN EXCHANGE 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 Chinese
renminbi, the British pound sterling and the Indian rupee, among others. The effects of foreign currency fluctuations on earnings,
excluding the earnings impact of the underlying hedged item, was less than $0.1 billion, $0.1 billion, and $0.3 billion for the years ended
December 31, 2020, 2019 and 2018, respectively. This analysis excludes any offsetting effect from the forecasted future transactions
that are economically hedged.
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 with regards to our borrowings 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, 2021, interest rates increased by 100 basis points and the increase
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 2020
consolidated net earnings would decline by less than $0.1 billion for interest rate risk and approximately $0.1 billion for foreign
exchange risk.
GE 2020 FORM 10-K 27
LIBOR REFORM. In connection with the potential transition away from the use of the London interbank offered rate (LIBOR) as an
interest rate benchmark, on November 30, 2020, the ICE Benchmark Administration Limited (IBA) announced a consultation on its
intention to cease the publication of the one-week and two-month USD LIBOR settings immediately following the LIBOR publication on
December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. This
followed an announcement on November 18, 2020, that IBA would consult on its intention to cease the publication of all GBP, EUR,
CHF and JPY LIBOR settings immediately following the LIBOR publication on December 31, 2021.
The Company’s most significant exposures to LIBOR relate to preferred stock issued by GE Industrial and certain floating-rate debt
securities issued by GE Capital, for which contractual fallback language exists. Additionally, with respect to our derivatives portfolio, we
are managing the transition from LIBOR based on industry-wide LIBOR reform efforts, including the recently released LIBOR protocols
issued by the International Swaps and Derivatives Association. None of these exposures are benchmarked to one-week or two-month
USD LIBOR.
We are in the process of managing the transition and any financial impact will be accounted for under Accounting Standards Update
(ASU) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which
we adopted in the fourth quarter of 2020. See Note 1 for further information.
STATEMENT OF CASH FLOWS. We manage the cash flow performance of our industrial and financial services businesses
separately, in order to enable us and our investors to evaluate the cash from operating activities of our industrial businesses separately
from the cash flows of our financial services business.
Transactions between GE Industrial and GE Capital are reported in the respective columns of our statement of cash flows, but are
eliminated in deriving our consolidated statement of cash flows. Intercompany loans from GE Capital to GE Industrial are reflected as
cash from (used for) financing activities at GE Industrial and cash from (used for) investing activities at GE Capital. Capital contributions
from GE Industrial to GE Capital are reflected as cash used for investing activities at GE Industrial and cash from financing activities at
GE Capital. See the GE Industrial working capital transactions section and Notes 4 and 24 for further information regarding certain
transactions affecting our consolidated Statement of Cash Flows.
The following provides information on our cash flows in 2020 compared with 2019. Refer to our Annual Report on Form 10-K for the
year ended December 31, 2019 for information regarding cash flows in 2019 compared with 2018.
GE INDUSTRIAL CASH FLOWS FROM CONTINUING OPERATIONS. The most significant source of cash in GE Industrial CFOA is
customer-related activities, the largest of which is collecting cash resulting from product or services sales. The most significant
operating use of cash is to pay our suppliers, employees, tax authorities, contribute to post retirement plans and pay others for a wide
range of material, services and taxes.
GE Industrial measures itself on a GE Industrial free cash flows* basis. This metric includes GE Industrial 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.
2020 CFOA (GAAP) AND FREE CASH FLOWS (FCF) BY SEGMENT (NON-GAAP)
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
285 $
(245)
(328) $
(302)
763 $
(737)
3,143 $
(256)
(5,117) $
(40)
(1,254)
(1,579)
(25)
(11)
(61)
(24)
(23)
(143)
—
—
15 $
—
—
(641) $
—
—
(34) $
—
—
2,863 $
(2,500)
(1,082)
(1,598) $
(2,500)
(1,082)
606
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 28
2019 CFOA (GAAP) AND FCF BY SEGMENT (NON-GAAP)
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)
(274)
—
—
(1,523) $
—
—
(980) $
—
—
4,415 $
—
—
2,550 $
—
(198)
(2,139) $
—
(198)
2,322
2018 CFOA (GAAP) AND FCF BY SEGMENT (NON-GAAP)
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)
(11)
(73)
(90)
(67)
(306)
—
—
(2,273) $
—
—
98 $
—
—
4,230 $
—
—
3,018 $
(6,000)
(180)
(731) $
(6,000)
(180)
4,341
GE Industrial cash used for operating activities was $1.3 billion in 2020, an increase of $5.9 billion compared with 2019, primarily
due to: a general decrease in net income (after adjusting for the gain on the sale of BioPharma and non-cash losses related to our
interest in Baker Hughes), primarily due to COVID-19 impacts in our Aviation segment; GE Pension Plan contributions (which are
excluded from GE Industrial free cash flows*) of $2.5 billion; partially offset by a decrease in cash used for operating working capital of
$2.0 billion; lower provisions for income taxes of $0.9 billion; and an increase in cash paid for income taxes of $0.5 billion. Increases in
Aviation-related customer allowance accruals (which is a component of All other operating activities) of $0.5 billion were $0.2 billion
higher compared with 2019.
We utilized the provision of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which allows employers to defer the
payment of Social Security taxes and, as a result, we deferred $0.3 billion as of December 31, 2020.
The decrease in cash used for working capital was due to: a decrease in cash used for current receivables of $3.3 billion, which was
primarily driven by lower volume, partially offset by a higher decrease in sales of receivables; an increase in cash generated by
inventories, including deferred inventory, of $2.5 billion, which was primarily driven by lower material purchases, partially offset by lower
liquidations; and changes in current contract assets of $0.7 billion, primarily due to a net unfavorable change in estimated profitability of
$1.1 billion at Aviation (see Note 9). These decreases in cash used for working capital were partially offset by: an increase in cash used
for accounts payable and equipment project accruals of $2.9 billion, which was primarily as a result of lower volume in 2020 and higher
disbursements related to purchases of materials in prior periods; and lower progress collections and current deferred income of $1.7
billion, which included a partial offset due to early payments received at our Aviation Military equipment business of $0.7 billion in 2020
as part of the U.S. Department of Defense's efforts to support vendors in its supply chain during the pandemic.
GE Industrial cash from investing activities was $17.7 billion in 2020, an increase of $13.7 billion compared with 2019, primarily due
to: net proceeds from the sale of our BioPharma business of $20.3 billion; lower capital contributions from GE Industrial to GE Capital of
$2.0 billion; partially offset by the nonrecurrence of proceeds from the spin-off of our Transportation business of $6.2 billion (including
the sale of our retained ownership interests in Wabtec); and lower proceeds from sales of our stake in Baker Hughes of $2.6 billion
(including the sale of a portion of our retained ownership interests in 2020). Cash used for additions to property, plant and equipment
and internal-use software, which is a component of GE Industrial free cash flows*, was $1.7 billion in 2020, down $0.8 billion compared
with 2019.
GE Industrial cash used for financing activities was $10.9 billion in 2020, an increase of $3.3 billion compared with 2019, primarily
due to: higher repayments of intercompany loans from GE Capital of $7.5 billion; a reduction in commercial paper of $3.0 billion;
reductions of other debt of $0.8 billion; partially offset by new principal issuances of long-term debt of $7.5 billion in the second quarter
of 2020 and lower repurchases of long-term debt of $0.6 billion.
GE INDUSTRIAL CASH FLOWS FROM DISCONTINUED OPERATIONS. GE Industrial cash used for investing activities in 2019 was
primarily due to the deconsolidation of Baker Hughes cash as a result of the reduction in our ownership interest in the segment in the
third quarter of 2019. GE Industrial cash used for financing activities in 2019 primarily reflects payments of Baker Hughes dividends to
noncontrolling interests.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 29
GE CAPITAL CASH FLOWS FROM CONTINUING OPERATIONS. GE Capital cash from operating activities was $3.5 billion in
2020, an increase of $1.6 billion compared with 2019, primarily due to: cash collateral received, which is a standard market practice to
minimize derivative counterparty exposures, and settlements received on derivative contracts (components of All other operating
activities) of $1.9 billion in 2020, an increase of $0.6 billion compared with 2019 as well as a general increase in cash generated from
earnings (loss) from continuing operations. These are partially offset by an increase in trade receivables due to short-term extensions of
payment terms to customers of $0.3 billion driven primarily by COVID-19 and other market related effects.
GE Capital cash from investing activities was $8.2 billion in 2020, a decrease of $1.2 billion compared with 2019, primarily due to:
lower proceeds from business dispositions of $3.9 billion; lower net collections of financing receivables of $3.2 billion; a decrease in
cash related to our current receivables and supply chain finance programs with GE Industrial of $1.9 billion; higher net purchases of
equity investments of $1.5 billion and a decrease of GECAS sales deposits of $1.1 billion primarily driven by COVID-19 and other
market related effects; partially offset by repayments of GE Capital intercompany loans (a component of All other investing activities) by
GE Industrial of $9.0 billion in 2020, an increase of $7.5 billion compared with 2019; an increase in cash received related to net
settlements between our continuing operations (primarily our Corporate function) and businesses in discontinued operations of $2.2
billion and a decrease in net purchases of investment securities of $0.3 billion.
GE Capital cash used for financing activities was $16.7 billion in 2020, an increase of $9.7 billion compared with 2019, primarily due
to: higher net repayments of borrowings of $8.5 billion and a lower capital contribution from GE Industrial to GE Capital of $2.0 billion;
partially offset by lower cash settlements on derivatives hedging foreign currency debt of $1.1 billion.
GE INDUSTRIAL WORKING CAPITAL TRANSACTIONS. Sales of Receivables. In order to manage short-term liquidity and credit
exposure, GE Industrial may sell current customer receivables to GE Capital and third parties. These transactions are made on arms-
length terms and any discount related to time value of money is recognized within the respective GE Industrial business in the period
these receivables were sold to GE Capital or third parties. See Note 4 for further information.
Supply Chain Finance Programs. GE Industrial facilitates voluntary supply chain finance programs with third parties, which provide
participating GE Industrial suppliers the opportunity to sell their GE Industrial receivables to third parties at the sole discretion of both
the suppliers and the third parties.
At December 31, 2020 and 2019, included in GE Industrial's accounts payable is $2.9 billion and $2.4 billion, respectively, of supplier
invoices that are subject to the third-party programs. Total GE Industrial supplier invoices paid through these third-party programs were
$4.9 billion and $1.4 billion for the years ended December 31, 2020 and 2019, respectively.
Previously, GE Capital operated a supply chain finance program for suppliers to GE Industrial's businesses. The remaining GE
Industrial liability associated with the funded participation in the GE Capital program is presented as accounts payable and amounted to
$0.1 billion and $2.1 billion at December 31, 2020 and 2019, respectively. Cash flows associated with the decrease in this liability are
reflected as cash used for operating activities at GE Industrial and cash from investing activities at GE Capital, and are eliminated in our
consolidated statement of cash flows.
INTERCOMPANY TRANSACTIONS BETWEEN GE INDUSTRIAL AND GE CAPITAL. Transactions between related companies are
made on arms-length terms and are reported in the GE Industrial and GE Capital columns of our financial statements, which we believe
provide useful supplemental information to our consolidated financial statements. Consistent with our historical practice, all commercial
transactions between GE Industrial and GE Capital continue to be reported on arms-length terms and are eliminated upon
consolidation. See Note 24 for further information.
GE Capital Finance Transactions. During the years ended December 31, 2020 and 2019, GE Capital acquired from third parties 20
aircraft with a list price totaling $1.7 billion and 51 aircraft with a list price totaling $6.4 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 $0.2 billion and $0.7 billion, which included $0.1 billion and $0.6 billion to CFM
International, during the years ended December 31, 2020 and 2019, respectively. Additionally, GE Capital had $2.1 billion and $2.0
billion of net book value of engines, originally manufactured by GE Aviation and affiliates and subsequently leased back to GE Aviation
and affiliates at December 31, 2020 and 2019, respectively.
Also, during the years ended December 31, 2020 and 2019, GE Industrial recognized equipment revenues of $2.3 billion and $1.6
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. At December 31, 2020 and 2019, GE Capital had funded related investments of
$1.3 billion and $0.6 billion, respectively.
For certain of these investments, in order to meet its underwriting criteria, GE Capital may obtain a direct guarantee from GE Industrial
related to the performance of the third party. GE Industrial guarantees include direct performance or payment guarantees, return on
investment guarantees and asset value guarantees. As of December 31, 2020, GE Industrial had outstanding guarantees to GE Capital
on $0.9 billion of funded exposure and $0.1 billion of unfunded commitments, which included guarantees issued by industrial
businesses. The recorded contingent liability for these guarantees was insignificant as of December 31, 2020 and is based on individual
transaction level defaults, losses and/or returns.
GE 2020 FORM 10-K 30
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. Actual results in these areas could differ from management's estimates. See Note 1 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.
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 service 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 a 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 fleet management strategies through 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, 2020, our net long-term service agreements balance of $1.3 billion represents approximately 0.7% of our total
estimated life of contract billings of $188.4 billion. Our contracts (on average) are approximately 20.9% 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 $8.9 billion and $11.5 billion during the years ended December 31, 2020 and
2019, respectively.
See Notes 1 and 9 for further information.
IMPAIRMENT OF GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS. We perform our annual goodwill impairment testing
in the fourth quarter. In assessing the possibility that a reporting unit’s fair value has been reduced below its carrying amount due to the
occurrence of events or circumstances between annual impairment testing dates, we consider all available evidence, including (i) the
results of our impairment testing from the most recent testing date (in particular, the magnitude of the excess of fair value over carrying
value observed), (ii) downward revisions to internal forecasts or decreases in market multiples (and the magnitude thereof), if any, and
(iii) declines in market capitalization below book value (and the magnitude and duration of those declines), if any.
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.
GE 2020 FORM 10-K 31
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. 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 10.5% to 22.5%.
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 for further information.
INSURANCE AND INVESTMENT CONTRACTS. Refer to the Other Items - Insurance section for further discussion of the accounting
estimates and assumptions in our insurance reserves and their sensitivity to change. Also see Notes 1 and 12 for further information.
PENSION ASSUMPTIONS. Refer to Note 13 for our accounting estimates and assumptions related to our postretirement benefit plans.
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, repatriations of available cash from foreign earnings are
expected to 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, 2020, we have not changed our indefinite reinvestment decision as
a result of tax reform but will reassess this on an ongoing basis.
We evaluate the recoverability of deferred income tax assets 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, which
heavily rely 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 $2.1 billion and $2.2 billion at December 31, 2020 and 2019, respectively. Of this, $0.1 billion and $0.2
billion at December 31, 2020 and 2019, respectively, were associated with losses reported in discontinued operations, primarily related
to our legacy financial services businesses, and $0.2 billion was related to held for sale assets at December 31, 2019.
See Other Consolidated Information – Income Taxes section and Notes 1 and 15 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 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.
GE 2020 FORM 10-K 32
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 us 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 $42.2 billion and $39.8 billion and primarily relate to individual long-
term care insurance reserves of $21.3 billion and $21.0 billion and structured settlement annuities and life insurance reserves of $10.7
billion and $11.1 billion, at December 31, 2020 and 2019, respectively. The increase in insurance liabilities and annuity benefits of $2.4
billion from December 31, 2019 to December 31, 2020 is primarily due to an adjustment of $2.5 billion resulting from an increase in
unrealized gains on investment securities that would result in a premium deficiency should those gains be realized.
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 both December 31, 2020 and 2019.
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. We believe recent elevated mortality across our portfolio and lower long-term care insurance
claims are short term in nature and attributable to COVID-19. However, the effects of COVID-19, including the timing and success of
vaccinations, remain uncertain and may result in variability in levels of future mortality and long-term care insurance claims activity,
including changes in policyholder behavior (e.g., policyholder willingness to enter long-term care facilities or seek care at home), among
others.
These monitoring activities also allow us to evaluate opportunities to reduce our insurance risk profile and improve the results of our
run-off insurance operations. Such opportunities may include the pursuit of future premium rate increases and benefit reductions on
long-term care insurance contracts in accordance with our reinsurance 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.
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 2020.
GE 2020 FORM 10-K 33
Presented in the table below are GAAP and statutory reserve balances and key attributes of our long-term care insurance portfolio.
December 31, 2020
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
$
$
$
$
ERAC
15,757
24,081
190,000
254,000
76
70,600
52,800
113,800
85,100
$
$
UFLIC
5,570
6,843
62,000
62,000
83
56,900
56,900
77,000
77,000
Total
21,327
30,924
252,000
316,000
78
67,200
53,600
104,700
83,500
69 %
81 %
34 %
72 %
34 %
91 %
— %
80 %
61 %
84 %
25 %
74 %
11,000
8,800
19,800
(a) Statutory balances reflect recognition of the estimated remaining statutory increase in reserves of approximately $5.5 billion through
2023 under the permitted accounting practice discussed further below and in Note 12.
Structured settlement annuities and life insurance contracts. We reinsure approximately 29,100 structured settlement annuities with an
average attained age of 53. 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. As of December 31,
2020, across our U.S. and Canadian life insurance blocks, we reinsure approximately $80 billion of net amount at risk (i.e., difference
between the death benefit and any accrued cash value) from approximately 2 million policies with an average attained age of 59. In
2020, our incurred claims were approximately $0.6 billion with an average individual claim of approximately $50,000. The largest
product types covered are 20-year level term policies, which represent approximately 35% of the net amount at risk and a significant
portion are anticipated to lapse (i.e., the length of time a policy will remain in force) over the next 3 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 $42.0 billion and $38.0 billion and commercial mortgage loans of $1.8 billion and $1.9 billion at December 31, 2020 and
2019, respectively. Additionally, we expect to purchase approximately $7 billion of new assets through 2024 in conjunction with
expected capital contributions from GE Capital to our insurance subsidiaries, of which approximately $2.0 billion is expected to be
contributed in the first quarter of 2021, pending completion of our December 31, 2020 statutory reporting process, which includes asset
adequacy testing. Our investment securities are classified as available-for-sale and comprise mainly investment-grade debt securities.
The portfolio includes $8.2 billion of net unrealized gains that are recorded within Other comprehensive income, net of applicable taxes
and other adjustments as of December 31, 2020.
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, 2020, the entire $8.2 billion balance of net unrealized gains
on our investment securities required a related increase to future policy benefit reserves. This adjustment increased from $5.7 billion in
2019 to $8.2 billion in 2020 primarily from higher unrealized gains within the investment security portfolio supporting our insurance
contracts as a result of decreased market yields. See Note 3 for further information about our investment securities.
GE 2020 FORM 10-K 34
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. This process includes
consideration of various asset allocation strategies and incorporates information from 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. Asset allocation planning is a dynamic process that considers changes in market conditions, risk
appetite, liquidity needs and other factors which are reviewed on a periodic basis by our investment team. 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.
Our run-off insurance operations have approximately $0.8 billion of assets held by states or other regulatory bodies in statutorily
required deposit accounts, and approximately $32.2 billion of assets held in trust accounts associated with reinsurance contracts and
reinsurance security trust agreements in place between either ERAC or UFLIC as the reinsuring entity and a number of ceding insurers.
Assets in these 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 and trust agreements. Some of these trust agreements may allow a
ceding company to withdraw trust assets from the trust and hold these assets on its balance sheet, in an account under its control for
the benefit of ERAC or UFLIC which might allow the ceding company to exercise investment control over such assets.
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.
Claim reserves. Claim reserves are established when a claim is incurred and represents our best estimate of the present value of the
ultimate obligations for future claim payments and claim adjustment expenses. Key inputs include actual known facts about the claim,
such as the benefits available and cause of disability of the claimant, as well as assumptions derived from our actual historical
experience and expected future changes in experience factors. Claim reserves are evaluated periodically for potential changes in loss
estimates with the support of qualified actuaries, and any changes are recorded in earnings in the period in which they are determined.
Reinsurance recoverables. We cede insurance risk to third-party reinsurers for a portion of our insurance contracts, primarily on long-
term care insurance policies, and record receivables for estimated recoveries as we are not relieved from our primary obligation to
policyholders or cedents. These receivables are estimated in a manner consistent with the future policy benefit reserves and claim
reserves. Reserves ceded to reinsurers, net of allowance, were $2.6 billion and $2.4 billion at December 31, 2020 and 2019,
respectively, and are included in the caption Other GE Capital receivables in our consolidated Statement of Financial Position.
Premium Deficiency Testing. We annually perform premium deficiency testing in the third quarter in the aggregate across our run-off
insurance portfolio. The premium deficiency testing assesses the adequacy of future policy benefit reserves, net of unamortized
capitalized acquisition costs, using current assumptions without provision for adverse deviation. A comprehensive review of premium
deficiency assumptions is a complex process and depends on a number of factors, many of which are interdependent and require
evaluation individually and in the aggregate across all insurance products. The vast majority of our run-off insurance operations consists
of reinsurance from multiple ceding insurance entities pursuant to treaties having complex terms and conditions. Premium deficiency
testing relies on claim and policy information provided by these ceding entities and considers the reinsurance treaties and underlying
policies. In order to utilize that information for purposes of completing experience studies covering all key assumptions, we perform
detailed procedures to conform and validate the data received from the ceding entities. Our long-term care insurance business includes
coverage where credible claim experience for higher attained ages is still emerging, and to the extent future experience deviates from
current expectations, new projections of claim costs extending over the expected life of the policies may be required. Significant
uncertainties exist in making projections for these long-term care insurance contracts, which requires that we consider a wide range of
possible outcomes.
GE 2020 FORM 10-K 35
The primary assumptions used in the premium deficiency tests include:
Morbidity. Morbidity assumptions used in estimating future policy benefit reserves are based on estimates of expected incidences of
disability among policyholders and the costs associated with these policyholders asserting claims under their contracts, and these
estimates account for any expected future morbidity improvement. For long-term care exposures, estimating expected future costs
includes assessments of incidence (probability of a claim), utilization (amount of available benefits expected to be incurred) and
continuance (how long the claim will last). Prior to 2017, premium deficiency assumptions considered the risk of anti-selection by
including issue age adjustments to morbidity based on an actuarial assumption that long-term care policies issued to younger
individuals would exhibit lower expected incidences and claim costs than those issued to older policyholders. Recent claim experience
and the development of reconstructed claim cost curves indicated issue age differences had minimal impact on claim cost projections,
and, accordingly, beginning in 2017, issue age adjustments were eliminated in developing morbidity assumptions. Higher morbidity
increases, while lower morbidity decreases, the present value of expected future benefit payments.
Rate of Change in Morbidity. Our annual premium deficiency testing incorporates our best estimates of projected future changes in the
morbidity rates reflected in our base claim cost curves. These estimates draw upon a number of inputs, some of which are subjective,
and all of which are interpreted and applied in the exercise of professional actuarial judgment in the context of the characteristics
specific to our portfolios. This exercise of judgment considers factors such as the work performed by internal and external independent
actuarial experts engaged to advise us in our annual testing, the observed actual experience in our portfolios measured against our
base projections, industry developments, and other trends, including advances in the state of medical care and health-care technology
development. With respect to industry developments, we take into account that there are differences between and among industry
peers in portfolio characteristics (such as demographic features of the insured populations), the aggregate effect of morbidity
improvement or deterioration as applied to base claim cost projections, the extent to which such base cost projections reflect the most
current experience, and the accepted diversity of practice in actuarial professional judgment. We assess the potential for any change in
morbidity with reference to our existing base claim cost projections, reconstructed in 2017. Projected improvement or deterioration in
morbidity can have a material impact on our future claim cost projections, both on a stand-alone basis and also by virtue of influencing
other variables such as discount rate and premium rate increases.
Mortality. Mortality assumptions used in estimating future policy benefit reserves are based on published mortality tables as adjusted for
the results of our experience studies and estimates of expected future mortality improvement. For life insurance products, higher
mortality increases the present value of expected future benefit payments, while for annuity and long-term care insurance contracts,
higher mortality decreases the present value of expected future benefit payments.
Discount rate. Interest rate assumptions used in estimating the present value of future policy benefit reserves are based on expected
investment yields, net of related investment expenses and expected defaults. In estimating future investment yields, we consider the
actual yields on our current investment securities held by our run-off insurance operations and the future rates at which we expect to
reinvest any proceeds from investment security maturities, net of other operating cash flows, and the projected future capital
contributions into our run-off insurance operations. Lower future investment yields result in a lower discount rate and a higher present
value of future policy benefit reserves.
Future long-term care premium rate increases. 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 rely upon the
primary insurers that issued the underlying policies to file proposed premium rate increases on those policies with the relevant state
insurance regulators. While we have no direct ability to seek or to institute such premium rate increases, we often collaborate with the
primary insurers in accordance with reinsurance contractual terms to file proposed premium rate increases. The amount of times that
rate increases have occurred varies by ceding company. We consider recent experience of rate increase filings made by our ceding
companies along with state insurance regulatory processes and precedents in establishing our current expectations. Higher future
premium rate increases lower the present value of future policy benefit reserves and lower future premium rate increases increase the
present value of future policy benefit reserves.
Terminations. Terminations refers to the rate at which the underlying policies are cancelled due to either mortality, lapse (non-payment
of premiums by a policyholder), or, in the case of long-term care insurance, benefit exhaustion. Termination rate assumptions used in
estimating the present value of future policy benefit reserves are based on the results of our experience studies and reflect actuarial
judgment. Lower termination rates increase, while higher termination rates decrease, the present value of expected future benefit
payments.
In 2017, based on elevated claim experience for a portion of our long-term care insurance contracts, we initiated a comprehensive
review of all premium deficiency testing assumptions across all insurance products, resulting in a reconstruction of our future claim cost
projections for long-term care insurance products. While our long-term care insurance claim experience has shown some emerging
modest favorable experience, it remains largely in-line with those reconstructed projections. However, the extent of actual experience
since 2017 to date is limited in the context of a long-tailed, multi-decade portfolio.
GE 2020 FORM 10-K 36
2020 Premium Deficiency Testing. We completed our annual premium deficiency testing in the aggregate across our run-off
insurance portfolio in the third quarter of 2020. These procedures included updating experience studies since our last test completed in
the third quarter of 2019, independent actuarial analysis and review of industry benchmarks. As we experienced a premium deficiency
in 2019, our 2020 premium deficiency testing started with a zero margin and, accordingly, any net adverse development would result in
a future premium deficiency. Using our most recent future policy benefit reserve assumptions, including changes to our assumptions
related to morbidity, future premium rate increases and discount rate, the 2020 premium deficiency testing results indicated there was a
positive margin of less than 2% of the recorded future policy benefit reserves, excluding Other adjustments, at September 30, 2020. As
a result, the assumptions updated in connection with the premium deficiency recognized in 2019 remain locked-in and will remain so
unless another premium deficiency occurs in the future.
The increase in the premium deficiency testing margin from our 2019 testing was primarily attributable to modestly favorable emerging
morbidity experience in our long-term care insurance portfolio, primarily at the older attained ages, in the period since the 2017
reconstruction of our future claim cost projections ($0.4 billion) and higher projected future premium rate increase approvals ($0.2
billion), partially offset by a decline in the overall discount rate to a weighted average rate of 5.70% compared to 5.74% in 2019 ($0.2
billion). This decline in the discount rate from 2019 to 2020 reflects a lower expected reinvestment rate, due to lower benchmark interest
rates in the U.S, increasing to a lower expected long-term average investment yield over a longer period and slightly lower actual yields
on our investment security portfolio, partially offset by increased allocations to higher yielding asset classes introduced with our 2018
strategic initiatives, which included a modest decline in expected yield compared to 2019 assumptions.
As noted above, while our observed long-term care insurance claim experience has shown some emerging modest favorable
experience in the period since the 2017 reconstruction of our future claim cost projections, it remains largely in-line with those
reconstructed projections. Based on the application of professional actuarial judgment to the factors discussed above, we have made
no substantial change to our assumptions concerning morbidity improvement, mortality, mortality improvement, or terminations in 2020.
As with all assumptions underlying our premium deficiency testing, we will continue to monitor these factors, which may result in future
changes in our assumptions.
Since our premium deficiency testing performed in 2019, we have implemented approximately $0.3 billion of previously approved long-
term care insurance premium rate increase actions and expect higher projected future premium rate increase approvals of
approximately $0.2 billion. Our 2020 premium deficiency test includes approximately $1.9 billion of anticipated future premium
increases or benefit reductions associated with future in-force rate actions. This represents a decrease of $0.1 billion from our 2019
premium deficiency test to account for actions that are: (a) approved and not yet implemented, (b) filed but not yet approved, and (c)
estimated on future filings through 2028 and includes the effects of the lower discount rate mentioned above and longer anticipated
timing to achieve certain premium rate approvals.
As a result of exposure period cut-off dates to permit experience to develop and lags in ceding company data reporting from our ceding
companies, the impact of COVID-19 is not reflected in the experience studies data used in our 2020 premium deficiency testing.
However, we assessed certain scenarios to understand potential impacts associated with COVID-19 and, due to the insignificance and
short-term nature of such uncertain future impacts, including the natural offsets from mortality in the aggregate across our run-off
insurance products, concluded adjustments to our primary assumptions used in the premium deficiency testing were not warranted.
When results of the premium deficiency testing indicate overall reserves are sufficient, we are also required to assess whether
additional future policy benefit reserves are required to be accrued over time in the future. Such an accrual would be required if profits
are projected in earlier future periods followed by losses projected in later future years (i.e., profits followed by losses). When this
pattern of profits followed by losses is projected, we would be required to accrue a liability in the expected profitable years by the
amount necessary to offset projected losses in later future years. We noted our projections as of third quarter 2020 indicate the present
value of projected earnings in each future year to be positive, and therefore, no further adjustments to our future policy benefit reserves
were required at this time.
GAAP Reserve Sensitivities. The results of our premium deficiency testing are sensitive to the assumptions described above.
Considering the results of the 2020 premium deficiency test which resulted in a small margin, any future net adverse changes in our
assumptions may reduce the margin or result in a premium deficiency requiring an increase to future policy benefit reserves. For
example, adverse changes in key assumptions related to our future policy benefits reserves, holding all other assumptions constant,
would have the following effects on the projected present value of future cash flows as presented in the table below. Any future net
favorable changes to these assumptions could result in a lower projected present value of future cash flows and additional margin in our
premium deficiency test and higher income over the remaining duration of the portfolio, including higher investment income. The
assumptions within our future policy benefit reserves are subject to significant uncertainties, including those inherent in the complex
nature of our reinsurance treaties. Many of our assumptions are interdependent and require evaluation individually and in the aggregate
across all insurance products. Small changes in the amounts used in the sensitivities or the use of different factors could result in
materially different outcomes from those reflected below.
GE 2020 FORM 10-K 37
Long-term care insurance
morbidity improvement
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
2019 assumption
1.25% per year over 12
to 20 years
Based on company
experience
0.5% per year for 10
years with annual
improvement graded to
0% over next 10 years
2020 assumption
1.25% per year over 12
to 20 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
Varies by block, attained
age and benefit period;
average 0.5 - 1.15%
Based on company
experience
Based on company
experience
Varies by block based
on filing experience
Varies by block based
on filing experience
5.74%
3.05%; grading to a
long-term average
investment yield of 5.9%
5.70%
2.70%; grading to a
long-term average
investment yield of 5.8%
Structured settlement
annuity mortality
Life insurance mortality
Based on company
experience
Based on company
experience
Based on company
experience
Based on company
experience
Hypothetical change in 2020
assumption
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%
25% adverse change in
premium rate increase
success rate
25 basis point reduction
25 basis point reduction;
grading to a long-term
average investment yield
of 5.8%
5% decrease in mortality
5% increase in mortality
Estimated increase to
projected present value of
future cash flows (pre-tax)
$600
$3,400
$1,000
$400
$1,100
$500
$900
Less than $100
$100
$300
Statutory Considerations. Our run-off insurance subsidiaries are required to prepare statutory financial statements in accordance with
statutory accounting practices. Statutory accounting practices, not GAAP, determine the required statutory capital levels of our
insurance legal entities.
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, among other differences. 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 (of which approximately $2.0 billion is expected to be contributed in the first
quarter of 2021, pending completion of our December 31, 2020 statutory reporting process, which includes asset adequacy testing),
subject to ongoing monitoring by KID. GE is a party to capital maintenance agreements with ERAC and UFLIC under which GE is
required to 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.
GE 2020 FORM 10-K 38
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 estimated remaining life 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.
See Other Items - New Accounting Standards and Notes 1 and 12 for further information.
NEW ACCOUNTING STANDARDS. The Financial Accounting Standards Board (FASB) issued ASU No. 2018-12, Financial Services -
Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts with an effective date for periods
beginning after December 31, 2021, with an election to adopt early. On November 5, 2020, the FASB issued ASU 2020-11, Financial
Services - Insurance (Topic 944): Effective Date and Early Application which defers the effective date for all insurance entities by one
year and allows the early application transition date to be either the beginning of the prior period or the earliest prior period presented.
We are evaluating the effect of the standard on our consolidated financial statements and anticipate that its adoption will significantly
change the accounting for measurements of our long-duration insurance liabilities. The ASU requires cash flow assumptions used in the
measurement of various insurance liabilities to be reviewed at least annually and updated if actual experience or other evidence
indicates previous assumptions need to be revised with any required changes recorded in earnings. Under the current accounting
guidance, the discount rate is based on expected investment yields, while under the ASU the discount rate will be equivalent to the
upper-medium grade (i.e., single A) fixed-income instrument yield reflecting the duration characteristics of the liability and is required to
be updated in each reporting period with changes recorded in other comprehensive income. In measuring the insurance liabilities under
the new standard, contracts shall not be grouped together from different issue years. These changes result in the elimination of
premium deficiency testing and shadow adjustments. While we continue to evaluate the effect of the standard on our ongoing financial
reporting, we anticipate that the adoption of the ASU will materially affect our financial statements. As the ASU is only applicable to the
measurements of our long-duration insurance liabilities under GAAP, it will not affect the accounting for our insurance reserves or the
levels of capital and surplus under statutory accounting practices.
NON-GAAP FINANCIAL MEASURES. We believe that presenting non-GAAP financial measures provides management and
investors useful measures to evaluate performance and trends of the total company and its businesses. This includes adjustments in
recent periods to GAAP financial measures to increase period-to-period comparability following actions to strengthen our overall
financial position and how we manage our business.
In addition, management recognizes that certain non-GAAP terms may be interpreted differently by other companies under different
circumstances. In various sections of this report we have made reference to the following non-GAAP financial measures in describing
our (1) revenues, specifically GE Industrial organic revenues by segment; BioPharma organic revenues, GE Industrial organic
revenues, and GE Industrial equipment and services organic revenues (2) profit, specifically GE Industrial organic profit and profit
margin by segment; BioPharma organic profit and profit margin, Adjusted GE Industrial profit and profit margin (excluding certain items);
Adjusted GE Industrial organic profit and profit margin; Adjusted earnings (loss); and Adjusted earnings (loss) per share (EPS), and (3)
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 2020 FORM 10-K 39
2020
Power (GAAP)
GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP)
Revenues
2019
$ 17,589 $ 18,625
19
104
—
$ 17,619 $ 18,502
$ 15,666 $ 15,337
—
94
—
Segment profit (loss)
2020
274 $
(3)
2
10
266 $
(715) $
—
—
16
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
2019
291
(2)
7
—
287
(791)
—
(11)
—
—
8
(167)
19
15
(64)
(5) % $
2 % $
2020
1.6 %
(7) %
10 %
V%
(6) %
(6) % $
V%
Profit margin
2019
1.6 %
V pts
—pts
1.5 %
(4.6) % (5.2) %
1.6 % (0.1)pts
0.6pts
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)
Less: BioPharma organic (Non-GAAP)
Healthcare excluding BioPharma
organic (Non-GAAP)
$ 15,824 $ 15,243
$ 22,042 $ 32,875
—
—
369
13
(3)
—
$ 22,032 $ 32,506
$ 18,009 $ 19,942
21
55
21 2,603
—
(46)
$ 17,979 $ 17,318
762
839
4 % $
(731) $
—
(2)
(5)
(781)
(33) % $ 1,229 $ 6,812
—
(2)
—
(32) % $ 1,237 $ 6,814
(10) % $ 3,060 $ 3,737
(4)
(2) 1,111
—
(6)
4 % $ 3,081 $ 2,630
311
380
(13)
6 %
(82) %
(4.6) % (5.1) %
0.5pts
5.6 % 20.7 % (15.1)pts
(82) %
5.6 % 21.0 % (15.4)pts
(18) % 17.0 % 18.7 % (1.7)pts
17 % 17.1 % 15.2 %
1.9pts
$ 17,140 $ 16,557
4 % $ 2,701 $ 2,319
16 % 15.8 % 14.0 %
1.8pts
We believe these measures provide management and investors with a more complete understanding of underlying operating results
and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these
activities can obscure underlying trends. We also believe presenting organic revenues* and organic profit* separately for our industrial
businesses provides management and investors with useful information about the trends of our industrial businesses and enables a
more direct comparison to other non-financial companies.
BIOPHARMA ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN (NON-GAAP)
BioPharma (GAAP)
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
BioPharma organic (Non-GAAP)
Revenues
2020
2019
830 $ 3,289
—
—
— 2,527
—
(9)
762
839 $
$
$
$
V%
(75) % $
$
10 % $
Segment profit (loss)
2020
2019
382 $ 1,472
—
—
— 1,161
—
2
311
380 $
Profit margin
V%
V pts
(74) % 46.0 % 44.8 % 1.2 pts
2019
2020
22 % 45.3 % 40.8 % 4.5 pts
GE INDUSTRIAL ORGANIC REVENUES (NON-GAAP)
GE Industrial total revenues (GAAP)
Adjustments:
Less: acquisitions
Less: business dispositions(a)
Less: foreign currency effect(b)
GE Industrial organic revenues (Non-GAAP)
2020
73,100 $
138
58
(276)
73,180 $
2019
87,719
37
3,631
—
84,051
$
$
V%
(17) %
(13) %
(a) Dispositions impact in 2019 primarily related to our BioPharma business within our Healthcare segment, with revenues of $2,527
million, Lighting with revenues of $299 million, and Hamble Aerostructures within our Aviation segment, with revenues of $203
million.
(b) Primarily the Brazilian real, euro and Indian rupee.
We believe these measures provide management and investors with a more complete understanding of underlying operating results
and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these
activities can obscure underlying trends.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 40
GE INDUSTRIAL EQUIPMENT ORGANIC REVENUES (NON-GAAP)
GE Industrial total equipment revenues (GAAP)
Adjustments:
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
GE Industrial equipment organic revenues (Non-GAAP)
GE INDUSTRIAL SERVICES ORGANIC REVENUES (NON-GAAP)
GE Industrial total services revenues (GAAP)
Adjustments:
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
GE Industrial services organic revenues (Non-GAAP)
2020
37,620 $
13
19
(174)
37,761 $
2020
35,480 $
125
39
(102)
35,419 $
2019
43,080
14
3,193
—
39,873
2019
44,639
23
438
—
44,178
$
$
$
$
V%
(13) %
(5) %
V%
(21) %
(20) %
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.
ADJUSTED GE INDUSTRIAL PROFIT AND PROFIT MARGIN
GE Industrial total revenues (GAAP)
2020
2019
$
73,100
$
87,719
GE Industrial total costs and expenses (GAAP)
Less: GE Industrial interest and other financial charges
Less: non-operating benefit costs
Less: restructuring & other(a)
Less: Steam asset impairments(a)
Less: SEC settlement charge(a)
Less: goodwill impairments(a)
Add: noncontrolling interests
Adjusted GE Industrial costs (Non-GAAP)
GE Industrial other income (GAAP)
Less: unrealized gains (losses)(a)
Less: restructuring & other(a)
Less: gains (losses) and impairments for disposed or held for sale businesses(a)
Adjusted GE Industrial 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)
77,252
1,333
2,424
693
363
100
728
(161)
71,450
11,444
(1,911)
13
12,472
871
7,291
$
10.0 %
88,118
2,115
2,828
922
—
—
1,486
6
80,773
2,200
793
36
4
1,367
1,801
2.1 %
2,520
$
8,313
3.4 %
9.5 %
$
$
(a) See the Corporate Items and Eliminations section 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.
ADJUSTED GE INDUSTRIAL ORGANIC PROFIT (NON-GAAP)
Adjusted GE Industrial profit (Non-GAAP)
Adjustments:
2020
2019
$
2,520
$
8,313
V%
(70) %
Less: acquisitions
Less: business dispositions
Less: foreign currency effect
Adjusted GE Industrial organic profit (Non-GAAP)
$
Adjusted GE Industrial profit margin (Non-GAAP)
Adjusted GE Industrial organic profit margin (Non-GAAP)
(4)
(3)
22
2,505
$
3.4 %
3.4 %
6
1,064
—
7,244
9.5 %
8.6 %
(65) %
(6.1) pts
(5.2) pts
We believe this measure provides management and investors with a more complete understanding of underlying operating results and
trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency, as these activities
can obscure underlying trends.
GE 2020 FORM 10-K 41
ADJUSTED EARNINGS (LOSS) AND ADJUSTED EPS
(NON-GAAP) (Per-share amounts in dollars)
Consolidated earnings (loss) from continuing operations
attributable to GE common shareholders (GAAP)(a)
Add: Accretion of redeemable noncontrolling interests (RNCI)
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)(b)
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)
Less: SEC settlement charge (pre-tax and net of tax)
Steam asset impairments (pre-tax)(b)
Tax effect on Steam asset impairments
Less: Steam asset impairments (net of tax)
Goodwill impairments (pre-tax)(b)
Tax effect on goodwill impairments
Less: goodwill impairments (net of tax)
Unrealized gains (losses) (pre-tax)(b)
Tax effect on unrealized gains (losses)
Less: unrealized gains (losses) (net of tax)
Debt extinguishment costs (pre-tax)
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)
Accretion of RNCI (pre-tax)
Tax effect on accretion of RNCI
Less: Accretion of RNCI (net of tax)
Less: GE Industrial U.S. tax reform enactment adjustment
Adjusted GE Industrial earnings (loss) (Non-GAAP)
GE Capital earnings (loss) from continuing operations attributable
to GE common shareholders (GAAP)
Insurance premium deficiency test charge (pre-tax)
Tax effect on insurance premium deficiency test charge
Less: Insurance premium deficiency test charge (net of tax)
Goodwill impairments (pre-tax)
Tax effect on goodwill impairments
Less: goodwill impairments (net of tax)
Less: SEC settlement charge (pre-tax and net of tax)
Debt extinguishment costs (pre-tax)
Tax effect on debt extinguishment costs
Less: debt extinguishment costs (net of tax)
Less: GE Capital U.S. tax reform enactment adjustment
Less: GE Capital tax benefit related to BioPharma sale
Adjusted GE Capital earnings (loss) (Non-GAAP)
2020
2019
Earnings
EPS
Earnings
EPS
$ 5,342 $
(151)
0.61 $
(0.02)
(45) $
—
(0.01)
—
(1,710)
6,901
(2,424)
509
(1,915)
12,472
(1,080)
11,392
(680)
151
(529)
(100)
(363)
37
(326)
(728)
(23)
(751)
(1,911)
460
(1,451)
(63)
13
(50)
—
—
—
(151)
—
(151)
(51)
833 $
$
(0.20)
0.79
(0.28)
0.06
(0.22)
1.42
(0.12)
1.30
(0.08)
0.02
(0.06)
(0.01)
(0.04)
—
(0.04)
(0.08)
—
(0.09)
(0.22)
0.05
(0.17)
(0.01)
—
(0.01)
—
—
—
(0.02)
—
(0.02)
(0.01)
0.10 $ 5,191 $
(530)
485
(2,828)
594
(2,234)
4
34
39
(886)
187
(699)
—
—
—
—
(1,486)
(55)
(1,541)
793
(114)
679
(255)
53
(201)
—
(647)
(647)
—
—
—
(101)
(1,710)
—
—
—
(839)
3
(836)
(100)
(238)
44
(194)
2
143
(724) $
(0.20)
—
—
—
(0.10)
—
(0.10)
(0.01)
(0.03)
—
(0.02)
—
0.02
(0.08) $
$
(530)
(972)
204
(768)
—
—
—
—
—
—
—
99
—
139 $
(0.06)
0.06
(0.32)
0.07
(0.26)
—
—
—
(0.10)
0.02
(0.08)
—
—
—
—
(0.17)
(0.01)
(0.18)
0.09
(0.01)
0.08
(0.03)
0.01
(0.02)
—
(0.07)
(0.07)
—
—
—
(0.01)
0.59
(0.06)
(0.11)
0.02
(0.09)
—
—
—
—
—
—
—
0.01
—
0.02
Adjusted GE Industrial earnings (loss) (Non-GAAP)
Add: Adjusted GE Capital earnings (loss) (Non-GAAP)
Adjusted earnings (loss) (Non-GAAP)
(a) Earnings for per-share calculation includes allocation of participating securities pursuant to the two-class method. See Note 18 for
further information. Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not
equal the total.
0.10 $ 5,191 $
(0.08)
0.01 $ 5,330 $
833 $
(724)
109 $
0.59
0.02
0.61
139
$
$
(b) See the Corporate Items and Eliminations section for further information.
GE 2020 FORM 10-K 42
The service cost for our pension and other benefit plans are included in adjusted earnings*, which represents the ongoing cost of
providing pension benefits to our employees. The components of non-operating benefit costs are mainly driven by capital allocation
decisions and market performance. We believe the retained costs in Adjusted earnings* and Adjusted EPS* provides management
and investors a useful measure to evaluate the performance of the total company and increases period-to-period comparability. We
also use Adjusted EPS* as a performance metric at the company level for our annual executive incentive plan for 2020. We believe
presenting Adjusted Industrial earnings* and Adjusted Industrial EPS* separately for our financial services businesses also provides
management and investors with useful information about the relative size of our industrial and financial services businesses in relation
to the total company.
GE INDUSTRIAL NET DEBT (NON-GAAP)
Total GE Industrial short- and long-term borrowings (GAAP)
Less: GE Capital short- and long-term debt assumed by GE Industrial
Add: intercompany loans from GE Capital
Total adjusted GE Industrial borrowings
Pension and principal retiree benefit plan liabilities (pre-tax)(a)
Less: taxes at 21%
Pension and principal retiree benefit plan liabilities (net of tax)
GE Industrial operating lease liabilities
GE Industrial preferred stock
Less: 50% of GE Industrial preferred stock
50% of preferred stock
Deduction for total GE Industrial cash, cash equivalents and restricted cash
Less: 25% of GE Industrial cash, cash equivalents and restricted cash
Deduction for 75% of GE Industrial cash, cash equivalents and restricted cash
Total GE Industrial net debt (Non-GAAP)
December 31, 2020
42,736 $
22,390
3,177
23,523 $
25,492
5,353
20,139 $
3,133
5,918
2,959
2,959 $
(23,209)
(5,802)
(17,407) $
32,347 $
December 31, 2019
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
$
$
$
$
$
$
(a) Represents the sum of the net deficit of principal pension, other pension, and principal retiree benefit plans as disclosed in Note 13.
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
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), the Standard & Poor’s 500 Industrials Stock Index
(S&P Industrial) and the Dow Jones Industrial Average (DJIA) on December 31, 2015, 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. In 2020, we began measuring GE’s relative performance against the S&P Industrial index for performance share unit
awards. In previous years we have provided the DJIA, and it is included in the above graph for comparison purposes only.
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, 2021, there were approximately 365,000 shareholder accounts of record.
*Non-GAAP Financial Measure
GE 2020 FORM 10-K 43
$100$105$60$27$41$40$100$112$136$130$171$203$100$119$144$125$161$179$100$116$149$144$180$198GES&P 500S&P IndustrialDJIA201520162017201820192020$0$100$200
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. GE did not repurchase any equity
securities during the three months ended December 31, 2020.
RISK FACTORS. The following discussion of the material factors, events and uncertainties that may make an investment in the
Company speculative or risky 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 face, and additional risks not currently known to us or that we currently
consider immaterial may also negatively impact us. 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,
in ways we may not be able to accurately predict, recognize or control, have a material adverse effect on our business, reputation,
financial position, results of operations, cash flows and stock price, and they could cause our future results to be materially different
than we presently anticipate.
STRATEGIC RISKS. Strategic risk relates to the Company's future business plans and strategies, including the risks associated with:
the global macro-environment; competitive threats, the demand for our products and services and the success of our investments in
technology and innovation; our portfolio of businesses and capital allocation decisions; dispositions, acquisitions, joint ventures and
restructuring activity; intellectual property; and other risks.
COVID-19 - The global COVID-19 pandemic has had and is expected to continue to have a material adverse impact on our
operations and financial performance, as well as on the operations and financial performance of many of the customers and
suppliers in industries that we serve. Our operations and financial performance have been negatively impacted by the COVID-19
pandemic that has caused, and is expected to continue to cause, the global slowdown of economic activity (including the decrease in
demand for a broad variety of goods and services), disruptions in global supply chains and significant volatility and disruption of
financial markets. Across all of our businesses, we have experienced and expect to continue to experience operational challenges from
the need to protect employee health and safety, site shutdowns, workplace disruptions and restrictions on the movement of people, raw
materials and goods, both at our own facilities and at those of our customers and suppliers. We also have experienced, and expect to
continue experiencing, lower demand and volume for products and services (particularly at GE Aviation, as described below, and also
for portions of GE Healthcare’s business), customer requests for potential payment deferrals or other contract modifications, supply
chain under-liquidation, delays of deliveries and the achievement of other billing milestones, delays or cancellations of new projects and
related down payments and other factors related directly and indirectly to the COVID-19 pandemic that adversely impact our
businesses.
In particular, the interruption of regional and international air travel from COVID-19 is having a material adverse effect on our airline and
airframer customers, the viability of their businesses and their demand for our services and products. In this context, we have observed
a significant increase in the number of requests for payment deferrals, contract modifications, aircraft lease restructurings and similar
actions across the aviation sector, which may lead to additional charges, impairments and other adverse financial impacts, or to
customer disputes, at GE Aviation and GE Capital Aviation Services. Disruption of the aviation industry, which could continue for an
uncertain period of time, is particularly significant for GE, as we have depended on the strength of our Aviation business as we have
been working to improve the operations and execution of other GE businesses and strengthen the company’s balance sheet. As a
result, disruption of the aviation industry, which could continue for an uncertain period of time, is particularly significant for GE.
The ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not
within our control, including, but not limited, to: the severity and duration of the pandemic, including the impact of coronavirus mutations
and resurgences; governmental, business and individuals’ actions that have been and continue to be taken in response to the
pandemic (including restrictions on travel and transport and workforce pressures); the impact of the pandemic and actions taken in
response on global and regional economies, travel, and economic activity; the development, availability and public acceptance of
effective treatments or vaccines; the availability of federal, state, local or non-U.S. funding programs; general economic uncertainty in
key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace and extent
of recovery when the COVID-19 pandemic subsides. A number of accounting estimates that we make have been and will continue to be
affected by the COVID-19 pandemic and uncertainties related to these and other factors, and our accounting estimates and
assumptions may change over time in response to COVID-19 (see Note 1). As the COVID-19 pandemic continues to adversely affect
our operating and financial results, it may also have the effect of heightening many of the other risk factors described below.
GE 2020 FORM 10-K 44
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 56% of our revenues for 2020 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,
geopolitical risks and demand or supply shocks from events that could include war, a major terrorist attack, natural disasters or actual or
threatened health emergencies (such as COVID-19). 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, sovereign 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 tariffs, export controls or other trade barriers, or changes to tax or other laws and policies, have been and may continue to be
disruptive and costly to our businesses, and these 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 be harmful to global economic 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.
Industry dynamics and outlooks – The strategic priorities and financial performance of our businesses are subject to major
trends in our industries, such as decarbonization and digitization, and we may not appropriately plan for or adapt quickly
enough to dynamics that in some cases can take many years to play out. Our long-term operating results and competitive position
depend substantially upon our ability to continually develop, introduce, and market new and innovative technology, products, services
and platforms, to modify existing products and services, to customize products and services, to maintain long-term customer
relationships and to increase our productivity over time as we perform on long-term service agreements. 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. In some cases, major disruptive dynamics can arise quickly in
our industries, such as the impact of the COVID-19 pandemic on air travel and the outlook for a return to flight at pre-pandemic levels,
as described above. In other cases, we must anticipate and respond to market and technological changes driven by broader trends
such as decarbonization efforts in response to climate change, or increased digitization in healthcare or other industries we serve or
growth in industrial automation, that present both risks and opportunities for our businesses. For example, the significant decreases in
recent years in the levelized cost of energy for renewable sources of power generation (such as wind and solar), along with ongoing
changes in government, investor, customer and consumer policies, commitments, preferences and considerations related to climate
change, in some cases have adversely affected, and are expected to continue to affect, the demand for and the competitiveness of
products and services related to fossil fuel-based power generation, including sales of new gas turbines and the utilization and servicing
needs for existing gas power plants. Continued shifts toward greater penetration by renewables in both new capacity additions and the
proportionate share of power generation, particularly depending on the pace and timeframe for such shifts across different markets
globally, could have a material adverse effect on the performance of our Power business and our consolidated results. While the
anticipated market growth and generation share for renewable energy over time is favorable for our wind businesses, there too we face
uncertainties related to the future anticipated levels of government subsidies and credits, significant price competition among wind
equipment manufacturers, dynamics between onshore and offshore wind power, potential further consolidation in the wind industry and
competition with other sources of renewable energy such as solar. In addition, the achievement of deep decarbonization goals over the
coming decades is likely to depend in part on technologies that are not yet deployed or widely adopted today but may become more
important over time (such as grid-scale batteries or other storage solutions, hydrogen-based power generation, carbon capture and
sequestration or advanced nuclear power), and we may not adequately position our businesses to benefit from the growth in adoption
of these technologies. These trends related to the global energy transition and decarbonization, including the relative competitiveness
of different types of product and service offerings within and across our energy businesses, as well as for GE Aviation, 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, greenhouse gas emission reduction commitments, incentives or
mandates for particular types of energy or policies that impact the availability of financing for certain types of projects) at the national
and sub-national levels or by private actors.
GE 2020 FORM 10-K 45
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 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, such as competitors from digital technology
companies), 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, to the extent they result in
bringing a product to market, 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 to the extent there may be under-
investment that could lead to loss of sales of our products and services in the future, particularly in our long-cycle businesses. 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.
Restructuring & retention - 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 have been a central component of our ongoing efforts to improve operational and financial
performance, and we have also taken additional actions or accelerated the pace of actions to mitigate the adverse financial effects of
COVID-19 on our businesses. 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.
Business portfolio - Our success depends on achieving our strategic and financial objectives, including through dispositions,
acquisitions, integrations and joint ventures. Over the past several years we have been pursuing a variety of dispositions, including
the ongoing monetization of our remaining equity ownership position in Baker Hughes. The proceeds from those dispositions have been
an important source of cash flow for the Company as part of our strategic and financial planning. When we seek to sell certain
businesses, equity interests or assets, we may encounter difficulties in finding buyers or in market conditions that could delay or prevent
the accomplishment of our objectives, and declines in the values of equity interests (such as our remaining interest in Baker Hughes) or
other assets that we sell can diminish the cash proceeds that we realize. We may dispose of businesses or assets at a price or on
terms that are less favorable than we had anticipated, or with purchase price adjustments or the exclusion of assets or liabilities that
must be divested, managed or run off separately. We can also be subject to limitations in the form of regulatory or governmental
approvals that may prevent certain prospective counterparties from completing transactions with us or delay us from executing
transactions on our preferred timeline, or arising from our debt or other contractual obligations that limit our ability to complete certain
transactions. Moreover, dispositions have the effect of reducing the Company’s cash flow and earnings capacity, resulting in a less
diversified portfolio of businesses and increasing our dependency on remaining businesses for our financial results from ongoing
operations. Dispositions or other business separations also often involve continued financial involvement in the divested business, such
as through continuing equity ownership, retained assets or liabilities, transition services agreements, commercial agreements,
guarantees, indemnities or other current or contingent financial obligations or liabilities. Under these arrangements, performance by the
divested businesses or other conditions outside our control could materially affect our future financial results. With respect to
acquisitions, joint ventures and business integrations, we may not achieve expected returns and other benefits on a timely basis or at all
as a result of changes in strategy or separation/integration challenges related to personnel, IT systems or other factors. Executing on all
types of portfolio transactions can divert senior management time and resources from other pursuits. In addition, in connection with
acquisitions over time, we have recorded significant goodwill and other intangible assets on our balance sheet, and if we are not able to
realize the value of these assets, we may be required to incur charges relating to the impairment of these assets. We also participate in
a number of joint ventures with other companies or government enterprises in various markets around the world, including joint
ventures where we have a lesser degree of control over the business operations, which may expose us to additional operational,
financial, reputational, legal or compliance risks.
GE 2020 FORM 10-K 46
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. 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, results of operations and cash flows. The Company’s financial results depend on the successful execution of our
businesses’ operating plans across all steps of the product and service lifecycle. We continue working to improve the operations and
execution of our businesses and our ability to effect the desired improvements will be a significant factor in determining the financial
performance of the Company as a whole. For example, new product introductions remain important to onshore and offshore wind
customers, and in that environment the Renewable Energy business will need to continue to prioritize product quality, delivery and other
aspects of its operational execution as new technology of larger turbines is introduced, including the Haliade-X offshore wind turbine.
Operational failures at any of our businesses 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 or over which GE does not have control. 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.
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, results of operations and cash flows. 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, or if parts or other components
that we incorporate in our products have defects or other quality issues. 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 was subject to a global fleet
grounding for nearly two years until November 2020 following two fatal crashes that were unrelated to the LEAP engine. The pace and
success of the 737 MAX’s safe return to service and the corresponding LEAP engine production rates will have material significance to
the results and outlook of our Aviation business. There can be no assurance that the operational processes around product design,
manufacture, performance and servicing that we or our customers or other third parties have designed to meet rigorous quality
standards will be sufficient to prevent us or our customers or other third parties from experiencing 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, software vulnerabilities or malicious software, that could result in potential product,
safety, quality, regulatory or environmental risks.
GE 2020 FORM 10-K 47
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. A significant cyber-related attack in one of our
industries, even if such an attack does not involve GE products, services or systems, could pose broader disruptions and adversely
affect our business. For example, we have observed an increase in third-party breaches at suppliers, service providers and software
providers, and our efforts to mitigate adverse effects on GE if this trend continues may be less successful in the future. The increasing
degree of interconnectedness between GE and its partners, suppliers and customers also poses a risk to the security of GE’s network
as well as the larger ecosystem in which GE operates. There can be no assurance that our attempts to mitigate cybersecurity risks by
employing a number of measures, including employee training, monitoring and testing, performing security reviews and requiring
business partners with connections to the GE network to appropriately secure their information technology systems, and maintenance
of protective systems and contingency plans, will be sufficient to prevent, detect and limit the impact of cyber-related attacks, and we
remain vulnerable to known or unknown threats. In addition to existing risks, the adoption of new technologies in the future may also
increase our exposure to cybersecurity breaches and failures. While we have developed secure development lifecycle design practices
to secure our software designs and connected products, an unknown vulnerability or compromise could potentially impact the security
of GE’s software or connected products, lead to the loss of GE intellectual property, safety risks or unavailability of equipment. 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 or denial of access to 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, actual or threatened
public health emergencies 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. 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; the harm to us
could be significant if, for example, a quality issue at a supplier or with components that we integrate into our products results in a
widespread quality issue across one of our product lines or our fleet. 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. An unknown security vulnerability or malicious software embedded in a supplier’s product that is later integrated into a GE
product could lead to a vulnerability in the security of GE’s product or if used internally in the GE network environment to a compromise
of the GE network, which could potentially lead to the loss of information or operational disruptions.
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 our 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.
GE 2020 FORM 10-K 48
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 primarily on cash flows from operations, as well as
proceeds from dispositions. Continuing to de-lever and service 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 addition, 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 statutory insurance 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 cash generation by our businesses or disposition proceeds 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 increase 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, such as the increased economic uncertainty and reduced economic activity
resulting from the COVID-19 pandemic, 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.
Liquidity - Failure to meet our cash flow targets, or additional credit downgrades, could adversely affect our liquidity, funding
costs and related margins. We rely primarily on cash from operations, as well as proceeds from business and asset dispositions and
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 depends, in part, on our credit ratings. As previously reported, in April 2020, Moody's and S&P changed their credit
rating outlooks for GE and GE Capital from Stable to Negative, and Fitch lowered its credit ratings for GE and GE Capital. There can be
no assurance that we will not face additional credit downgrades as a result of factors such as our continued progress in decreasing our
leverage, the performance of our businesses, the failure to execute on dispositions or changes in rating application or methodology for
GE or GE Capital. 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. In
addition, 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. 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.
GE Capital - A smaller GE Capital continues to have exposure to insurance, credit, legal 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 compared to current plans. 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 sales and cash flows from its businesses, as well as 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 2022 (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 that the adoption of the accounting standard
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 or other adverse effects 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, such as those related to Bank BPH (see Note 23) 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 for GE Capital or other factors, GE Capital may also face
increased interest costs and limitations on its ability to access external funding in the future. 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.
GE 2020 FORM 10-K 49
Customers & counterparties – Global economic, industry-specific or other developments that weaken the soundness of
significant customers, governments, financial institutions or other parties we deal with can adversely affect our business,
results of operations and cash flows. 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 or at all 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. Aviation industry activity is also particularly influenced by a small group of large original equipment manufacturers, as well
as large airlines in various geographies, and our credit exposure to some of our largest aviation customers is significant. As described
above, the current extended disruption of regional and international air travel from the COVID-19 pandemic has had and is expected to
continue to have a material adverse effect on our airframer and airline customers. A potential future disruption in connection with a
terrorist incident, cyberattack, actual or threatened public health emergency or recessionary economic environment that results in the
loss of business and leisure traffic could also adversely affect these customers, their ability to fulfill their obligations to us in a timely
fashion or at all, demand for our products and services and the viability of a customer’s business. Secular, cyclical or other pressures
facing customers across our energy businesses, including in connection with decarbonization, industry consolidation and competition
and shifts in the availability of financing for certain types of projects, can also have a significant impact on the operating results and
outlooks for our businesses operating in those industries. GE Capital also has exposure to many different industries and counterparties,
including customers that are sovereign governments or located in emerging markets, and routinely executes transactions with
counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, insurance
companies and other institutional clients. Many of these transactions expose GE Capital and its subsidiaries to credit and other risks in
the event of insolvency or other default of its counterparty or client. For example, a portion of GE Capital’s run-off insurance operations’
assets that are held in trust accounts associated with UFLIC reinsurance contracts and reinsurance security trust agreements are
currently held in trusts for the benefit of insurance company subsidiaries of Genworth, which in January 2021 announced that it would
focus on a contingency plan to meet its near-term liabilities amidst uncertainty around the completion of its planned merger with China
Oceanwide. Solvency or other concerns about Genworth or its insurance company subsidiaries may cause those subsidiaries or their
regulators to take or attempt to take actions that could adversely affect UFLIC, including control over assets in the relevant trusts. 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, in our industries, in financial markets or with particular significant
counterparties, our results of operations, financial position and cash flows could be materially adversely affected.
Postretirement benefit plans - Increases in pension, healthcare and life insurance 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 and future retirees, and life insurance benefits to eligible
retirees. There can be no assurance that the measures we have taken to control increases in these costs 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 Note 13.
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.
GE 2020 FORM 10-K 50
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 or interpreted or enforced 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 changes to taxation of global income, 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 U.S. federal, states or non-U.S. governments, 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, disputes, 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,
commercial disputes, 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 have resulted
and will in the future result in cash outflows. In addition, while in December 2020 we entered into a settlement to conclude the
previously disclosed SEC investigation of GE, we remain subject to a range of shareholder lawsuits related to the Company's financial
performance, accounting and disclosure practices and related legacy 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. There can be no assurance that the risk
management and compliance programs we have adopted will mitigate legal and compliance risks, particularly in light of the global and
diverse nature of our operations and the current enforcement environment. 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 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 for information relating
to legal proceedings.
GE 2020 FORM 10-K 51
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 June 2020, we announced that the Audit Committee selected Deloitte and Touche LLP as the
Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2021.
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, 2020, 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, 2020.
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 and Chief Executive Officer
February 12, 2021
/s/ Carolina Dybeck Happe
Carolina Dybeck Happe
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, 2020. There have been no changes in the Company’s internal control over financial reporting during the
quarter ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, its internal control over
financial reporting.
GE 2020 FORM 10-K 52
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
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, 2020 and 2019, the related consolidated statements of earnings (loss), comprehensive
income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020,
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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year
period ended December 31, 2020, 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, 2020 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 57, 59, and 61 (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 2020 FORM 10-K 53
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 following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the
operating effectiveness of 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, specifically considering the information provided by the Company’s airline
customers about the current outlook in response to the COVID-19 pandemic for commercial air travel and after-market services within
the Aviation segment, 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 Note 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 improvement and mortality improvement, discount rates, and
long-term care premium rate increases.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the
operating effectiveness of 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:
•
•
•
assessing 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
GE 2020 FORM 10-K 54
•
comparing the current year and prior year cash flow projections to analyze the impact of the updated key assumptions on the
gross premium valuation used to assess the adequacy of the future policy benefit reserves.
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 the carrying value of goodwill in the Additive and GECAS 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. The
discount rate applied to projected cash flows and the selection of publicly traded companies are important elements 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 2020, the Company performed an interim goodwill impairment test in response to the decline in current market conditions as
a result of the COVID-19 pandemic. The goodwill allocated to the Additive reporting unit and the goodwill allocated to the GE Capital
Aviation Services (GECAS) reporting unit were determined to be impaired, and impairment losses of $877 million and $839 million were
recorded, respectively.
We identified the evaluation of the discount rate applied to projected cash flows used in the assessment of the carrying value of
goodwill for the Additive reporting unit, and the evaluation of publicly traded companies used in the assessment of the carrying value of
goodwill for the GECAS reporting unit, for which such assumptions are used by the Company in the determination of related goodwill
impairment losses, as a critical audit matter. Specifically, the evaluation of these assumptions required the application of subjective
auditor judgment because changes to these assumptions may have a substantial impact on the determination of fair value of each
reporting unit. We performed sensitivity analyses to determine the significance of the assumptions used to determine the fair value of
the Additive and GECAS reporting units, individually and in the aggregate, which required a higher degree of auditor judgment.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the
operating effectiveness of certain internal controls over the Company’s goodwill impairment process, including controls over the
Company’s selection of the discount rate, and the relevance of the publicly traded companies selected by the Company’s specialists. In
our evaluation of the Additive reporting unit fair value, we evaluated the Company’s assessment of the value of the reporting unit under
the discounted cash flow method. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating
the reasonableness of the discount rate applied to projected cash flows selected by management by comparing the discount rate
selected by management against a discount rate that was independently developed using publicly available market data for comparable
entities. In our evaluation of the GECAS reporting unit fair value, we involved valuation professionals with specialized skills and
knowledge, who assisted in evaluating the Company’s assessment of the value of the reporting unit under the market approach. We
evaluated the reasonableness of the market approach utilized and we evaluated the relevance of the publicly traded companies utilized
by:
•
•
comparing the publicly traded companies selected in management’s analysis over the GECAS reporting unit to similar
companies in the aircraft leasing industry, and
comparing management’s determination of the fair value of the GECAS reporting unit to a range of fair values that was
independently developed.
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 following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the
operating effectiveness of 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 12, 2021
GE 2020 FORM 10-K 55
STATEMENT OF EARNINGS (LOSS)
For the years ended December 31 (In millions; per-share amounts in dollars)
Sales of goods
Sales of services
GE Capital revenues from services
Total revenues (Note 25)
Cost of goods sold
Cost of services sold
Selling, general and administrative expenses
Research and development
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)
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 2020 FORM 10-K 56
Consolidated
2020
49,464 $
23,558
6,597
79,619
42,041
18,380
12,621
2,565
3,273
2,397
1,717
2,433
384
85,809
11,387
5,197
474
5,672
(125)
5,546
(158)
5,704
(474)
2019
58,949 $
28,538
7,728
95,214
45,902
21,009
13,949
3,118
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)
2018
60,148
28,792
8,072
97,012
47,570
21,833
14,643
3,415
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)
5,230 $
(5,439) $
(22,802)
5,672 $
423 $
(21,080)
(158)
5,829
(474)
5,355
7
(90)
416
(460)
(20,991)
(447)
(44)
(21,438)
(125)
(5,335)
(1,363)
—
60
1
5,230 $
(5,439) $
(22,802)
0.59 $
0.59 $
0.58 $
0.58 $
0.04 $
(0.01) $
(0.01) $
(0.62) $
(0.62) $
0.04 $
(2.47)
(2.47)
(2.62)
(2.62)
0.37
$
$
$
$
$
$
$
$
$
STATEMENT OF EARNINGS (LOSS)
(CONTINUED)
For the years ended December 31 (In millions)
Sales of goods
Sales of services
GE Capital revenues from services
Total revenues (Note 25)
Cost of goods sold
Cost of services sold
Selling, general and administrative expenses
Research and development
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
GE Industrial
2019
2020
2018
2020
GE Capital
2019
$ 49,443 $ 59,138 $ 60,147 $
28,581
—
87,719
23,656
—
73,100
28,891
—
89,038
57 $
—
7,188
7,245
79 $
—
8,662
8,741
42,030
15,951
12,073
2,565
1,333
—
877
2,424
—
77,252
46,115
19,051
13,404
3,118
2,115
—
1,486
2,828
—
47,591
19,869
13,851
3,415
2,415
—
22,136
2,740
(51)
88,118 111,967
48
2,527
823
—
2,186
2,438
839
9
469
9,339
61
2,019
931
—
2,532
3,353
—
16
480
9,392
Other income (Note 19)
11,444
2,200
2,317
—
—
2018
121
—
9,430
9,551
95
2,089
1,341
—
2,982
2,849
—
12
558
9,926
—
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
7,291
(388)
6,904
1,801
(1,309)
492
(20,612)
(467)
(21,079)
(2,095)
862
(1,232)
(652)
582
(69)
(375)
374
(1)
(35)
6,868
(5,527)
(5,035)
307
(20,772)
(90)
(1,322)
192
123
(1,670)
(1,672)
(161)
7,029
—
66
(5,101)
—
(129)
(20,643)
—
3
(1,325)
(474)
1
122
(460)
40
(1,712)
(447)
$
7,029 $
(5,101) $ (20,643) $
(1,800) $
(338) $
(2,159)
$
6,904 $
492 $ (21,079) $
(1,232) $
(69) $
(161)
6
(130)
3
1
(1)
40
7,065
—
486
—
(20,949)
—
(1,235)
(474)
(70)
(460)
(42)
(447)
7,065
486
(20,949)
(1,710)
(530)
(489)
(35)
(5,527)
307
(90)
192
(1,670)
—
60
1
—
—
—
$
7,029 $
(5,101) $ (20,643) $
(1,800) $
(338) $
(2,159)
GE 2020 FORM 10-K 57
STATEMENT OF FINANCIAL POSITION
December 31 (In millions, except share amounts)
Cash, cash equivalents and restricted cash(a)
Investment securities (Note 3)
Current receivables (Note 4)
Financing receivables – net (Note 5)
Inventories, including deferred inventory costs (Note 6)
Other GE Capital receivables
Receivable from GE Capital
Current contract assets (Note 9)
All other current assets (Note 10)
Assets of businesses held for sale (Note 2)
Current assets
Investment securities (Note 3)
Financing receivables – net (Note 5)
Other GE Capital receivables
Property, plant and equipment – net (Note 7)
Receivable from 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 discontinued operations (Note 2)
Total assets
Short-term borrowings (Note 11)
Short-term borrowings assumed by GE (Note 11)
Accounts payable and equipment project accruals
Progress collections and deferred income (Note 9)
All other current liabilities (Note 14)
Liabilities of businesses held for sale (Note 2)
Current liabilities
Deferred income (Note 9)
Long-term borrowings (Note 11)
Long-term borrowings assumed by GE (Note 11)
Insurance liabilities and annuity benefits (Note 12)
Non-current compensation and benefits
All other liabilities (Note 14)
Liabilities of discontinued operations (Note 2)
Total liabilities
Preferred stock (5,939,875 shares outstanding at both
December 31, 2020 and December 31, 2019)
Common stock (8,765,493,000 and 8,738,434,000 shares outstanding
at December 31, 2020 and December 31, 2019, 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
Consolidated
2020
36,630 $
7,319
16,691
1,265
15,890
3,331
—
5,764
1,522
—
88,412
42,549
1,771
4,661
44,662
—
25,524
9,774
5,888
14,597
12,081
3,532
253,452 $
4,778 $
—
16,476
18,215
16,600
—
56,069
1,801
70,288
—
42,191
29,752
16,077
200
216,378
2019
35,811
9,888
16,568
1,077
17,215
2,635
—
7,390
3,362
9,149
103,096
38,632
2,057
4,509
45,879
—
26,734
10,653
5,737
13,882
9,889
4,109
265,177
23,641
—
17,357
18,389
17,821
1,658
78,865
1,555
67,241
—
39,826
31,687
15,938
203
235,316
6
6
702
(9,749)
34,307
92,247
(81,961)
35,552
1,522
37,073
253,452 $
702
(11,732)
34,405
87,732
(82,797)
28,316
1,545
29,861
265,177
$
$
$
$
(a) Excluded $455 million and $583 million at December 31, 2020 and 2019, respectively, in GE Capital insurance entities, which is
subject to regulatory restrictions. This balance is included in All other assets. See Note 10 for further information.
GE 2020 FORM 10-K 58
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, including deferred inventory costs (Note 6)
Other GE Capital receivables
Receivable from GE Capital
Current contract assets (Note 9)
All other current assets (Note 10)
Assets of businesses held for sale (Note 2)
Current assets
Investment securities (Note 3)
Financing receivables – net (Note 5)
Other GE Capital receivables
Property, plant and equipment – net (Note 7)
Receivable from 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 discontinued operations (Note 2)
Total assets
Short-term borrowings (Note 11)
Short-term borrowings assumed by GE (Note 11)
Accounts payable and equipment project accruals
Progress collections and deferred income (Note 9)
All other current liabilities (Note 14)
Liabilities of businesses held for sale (Note 2)
Current liabilities
Deferred income (Note 9)
Long-term borrowings (Note 11)
Long-term borrowings assumed by GE (Note 11)
Insurance liabilities and annuity benefits (Note 12)
Non-current compensation and benefits
All other liabilities (Note 14)
Liabilities of discontinued operations (Note 2)
Total liabilities
Preferred stock (5,939,875 shares outstanding at both
December 31, 2020 and December 31, 2019)
Common stock (8,765,493,000 and 8,738,434,000 shares outstanding
at December 31, 2020 and December 31, 2019, 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 Industrial
2020
23,209 $
7,319
13,442
—
15,890
—
2,432
5,764
835
—
68,892
2019
17,613 $
GE Capital
2020
13,421 $
9,888
13,682
—
17,215
—
2,104
7,390
852
8,626
77,371
—
—
5,110
—
5,069
—
—
1,021
—
24,621
2019
18,198
—
—
4,922
—
6,881
—
—
2,936
241
33,177
36
—
—
16,433
16,780
25,524
9,632
5,921
7,948
9,350
144
38,514
2,057
4,886
29,886
—
839
192
—
6,294
1,700
3,907
$ 160,658 $ 170,238 $ 116,914 $ 121,454
42,515
1,771
5,076
29,600
—
—
143
—
7,068
2,731
3,388
120
—
—
17,447
17,038
25,895
10,461
5,769
7,748
8,189
202
$
918 $
2,432
16,380
18,371
14,131
—
52,232
1,801
19,428
19,957
—
29,291
16,440
139
139,289
5,606 $
5,473
19,134
18,575
15,251
1,620
65,660
2,028 $
2,432
947
—
3,890
—
9,297
1,555
15,085
25,895
—
31,208
16,306
106
155,815
—
30,902
16,780
42,565
453
1,151
61
101,210
13,598
2,104
886
—
4,052
52
20,691
—
26,261
17,038
40,232
472
1,226
97
106,016
6
6
6
6
702
(8,945)
15,294
94,910
(81,961)
20,006
1,363
21,369
—
(852)
17,001
(857)
—
15,299
139
15,438
$ 160,658 $ 170,238 $ 116,914 $ 121,454
702
(10,881)
17,398
88,589
(82,797)
13,017
1,406
14,423
—
(804)
19,007
(2,663)
—
15,545
159
15,704
GE 2020 FORM 10-K 59
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)
(Gains) losses on purchases and sales of business interests (Note 19)
(Gains) losses on equity securities (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 (Note 15)
Changes in operating working capital:
Decrease (increase) in current receivables
Decrease (increase) in inventories, including deferred inventory costs
Decrease (increase) in current contract assets
Increase (decrease) in accounts payable and
equipment project accruals
Increase (decrease) in progress collections and
current deferred income
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 Industrial to GE Capital
Sales of retained ownership interests
Net (purchases) dispositions of GE Capital investment securities (Note 3)
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 Industrial to GE Capital
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 2020 FORM 10-K 60
Consolidated
$
2020
5,546 $
125
2019
(4,912) $
5,335
2018
(22,443)
1,363
4,636
1,382
1,717
(12,526)
2,105
3,559
(2,806)
(893)
(474)
(1,441)
(1,319)
1,105
1,631
4,026
1,569
1,486
(53)
(693)
3,878
(298)
(1,228)
726
(1,950)
(2,851)
(1,581)
891
(575)
2,674
(216)
2,040
3,597
—
3,597
(3,252)
1,644
(151)
(20)
—
20,596
(85)
—
417
(1,352)
(1,019)
16,778
(136)
16,642
(4,168)
15,028
(29,876)
—
(648)
(188)
(19,853)
1
(19,852)
145
531
37,077
37,608
1,531
1,869
10,419
(1,647)
8,772
(5,813)
3,718
(282)
1,117
5,864
4,683
(68)
—
3,383
(1,616)
(301)
10,684
(1,745)
8,939
280
2,185
(16,567)
—
(649)
(1,013)
(15,764)
(368)
(16,133)
(50)
1,529
35,548
37,077
4,419
2,163
22,136
(1,522)
(166)
4,226
(6,283)
(1,033)
93
(1,404)
(358)
(573)
751
666
(563)
1,739
3,210
1,768
4,978
(6,627)
4,093
(320)
1,796
29
8,425
(1)
—
—
2,534
8,995
18,925
(645)
18,280
(4,343)
3,120
(20,319)
—
(4,474)
(1,328)
(27,345)
(4,462)
(31,806)
(628)
(9,176)
44,724
35,548
524
638
4,424
37,085 $
36,439 $
31,124
(2,976) $
(4,101) $
(4,508)
$
$
STATEMENT OF CASH FLOWS (CONTINUED)
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:
GE Industrial
2020
2019
2018
2020
$ 6,868 $ (5,035) $ (20,772) $ (1,322) $
35 5,527
(307)
90
GE Capital
2019
2018
123 $ (1,672)
(192) 1,670
Depreciation and amortization of property, plant and equipment (Note 7) 2,130 2,001 2,290
1,325 1,512 2,109
Amortization of intangible assets (Note 8)
877 1,486 22,136
Goodwill impairments (Note 8)
(Gains) losses on purchases and sales of business interests (Note 19)
(Gains) losses on equity securities (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 (Note 15)
Changes in operating working capital:
(12,468)
2,080
3,559 3,878 4,226
(2,806)
(298)
(846) (1,213)
388 1,309
(2,447) (1,904)
2,534 2,026 2,110
53
—
(288)
21
—
—
(18)
(374)
(61)
57
839
(58)
25
—
—
(47)
(862)
(1,343) 1,007
57
—
(50)
(6)
—
—
(15)
(582)
(46)
(6,283)
(1,015)
467
(1,234)
(185)
(3)
(688)
Decrease (increase) in current receivables
(558) (3,904)
Decrease (increase) in inventories, including deferred inventory costs 1,188 (1,349)
Decrease (increase) in current contract assets
891
Increase (decrease) in accounts payable and
equipment project accruals
Increase (decrease) in progress collections and
current deferred income
All other operating activities
(247) 1,476
591
(2,556)
1,631
381
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 5)
Proceeds from sale of discontinued operations
Proceeds from principal business dispositions
Net cash from (payments for) principal businesses purchased
Capital contribution from GE Industrial to GE Capital
Sales of retained ownership interests
Net (purchases) dispositions of GE Capital investment securities (Note 3)
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 Industrial to GE Capital
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
(966)
(581)
751
—
—
—
—
—
—
716
(29)
(44)
—
—
—
2
(8)
(7)
(424)
3,463
—
610
(32) (1,917)
(1)
—
—
—
—
—
1,261
138
3,495 1,881 1,582
(415)
(35) 1,166
(2,234) (1,765) (3,830) (4,569)
1,450 3,348 3,853
(14)
199 3,389 9,986
—
29
—
34 3,938 2,011
—
—
—
—
—
—
—
—
—
(1,352) (1,616) 2,534
(640) 9,673 4,233 (2,052)
8,231 9,453 11,777
186
8,131 11,476 11,964
(256) (4,308)
7,566 2,154 3,045
(1,023) (25,252) (11,632) (19,836)
—
2,000 4,000
(371)
(455)
(819) (2,408)
(16,738) (7,007) (23,878)
(4,462)
—
(2,992) (16,738) (7,008) (23,878)
—
(4,179)
(100) 2,023
(469)
(58)
(698)
(987)
(525)
—
(1)
32
(1,254) 4,614
548 1,117
701
(49) 2,051
(1,223) 4,565 2,752
(1,579) (2,216)
371
202
(274)
(143)
—
—
— 5,864
271
(306)
—
—
20,394 1,083 6,047
(85)
(447)
(2,000) (4,000)
417 3,383
—
292
—
523
17,729 4,056 3,138
(36) (3,449)
31 6,570
607 2,439
(595)
17,693
(4,234)
7,462
(13,673) (6,458)
—
(352)
(283) 1,090
(10,941) (7,658) 1,470
—
(354)
(141)
1
(368)
(10,940) (8,026)
61
(56)
5,591 (2,911) 1,706
17,617 20,528 18,822
23,209 17,617 20,528
(494)
6
84
(134)
(5,060) 4,439 (10,882)
19,460 15,020 25,902
14,400 19,460 15,020
—
4 3,896
524
633
528
$ 23,209 $ 17,613 $ 16,632 $ 13,876 $ 18,826 $ 14,492
$ (1,276) $ (1,975) $ (2,201) $ (1,957) $ (2,632) $ (2,883)
GE 2020 FORM 10-K 61
CONSOLIDATED 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
$
$
$
$
$
$
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended December 31 (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)
$
$
$
$
$
2020
5,546 $
(158)
5,704 $
(1) $
435
(77)
1,632
1,989
6
1,984 $
7,536 $
(152)
7,688 $
2020
6 $
702 $
(11,732)
(1)
433
(77)
1,628
(9,749) $
34,405
(703)
429
176
34,307 $
87,732
5,704
(1,014)
(175)
92,247 $
(82,797)
(28)
864
(81,961) $
35,552
1,522
37,073 $
2019
(4,912) $
66
(4,979) $
100 $
1,275
36
1,229
2,641
(40)
2,681 $
(2,272) $
26
(2,297) $
2019
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 $
2018
(22,443)
(89)
(22,355)
64
(1,664)
(51)
1,416
(235)
(225)
(10)
(22,678)
(314)
(22,364)
2018
6
702
(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
(a) Total equity balance decreased by $(14,408) million from December 31, 2018, primarily due to reduction of noncontrolling interest
balance of $(19,239) million attributable to Baker Hughes Class A shareholders at December 31, 2018, after-tax loss of $(8,238)
million in discontinued operations due to deconsolidation of Baker Hughes in 2019, and after-tax net realized and unrealized loss on
our remaining interest in Baker Hughes of $(936) million in 2019 and 2020, partially offset by after-tax gain of $11,213 million due to
the sale of our BioPharma business within our Healthcare segment, and 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 2020 FORM 10-K 62
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 industrial operations separately from our financial services operations. We believe that this provides useful supplemental
information to our consolidated financial statements. To the extent that we have transactions between GE Industrial and GE Capital,
these transactions are made on arms- length terms, are reported in the respective columns of our financial statements and are
eliminated in consolidation. See Note 24 for further information.
Effective December 31, 2020, in order to enhance our financial statement presentation, we voluntarily made the following reporting
changes for all periods presented:
•
•
•
•
changed our presentation of GE Industrial restructuring program costs. Previously these costs were recorded within Corporate
Items and Eliminations. Now these costs are recorded within segment profit, except for significant, higher-cost programs that
continue to be recorded within Corporate Items and Eliminations;
changed the presentation of our Statement of Financial Position to reflect the classification of assets and liabilities into current
and non-current and revised the definition of operating working capital in our Statement of Cash Flows. For the classification of
certain current assets and liabilities, we use the duration of our operating cycle, which may be longer than one year;
began presenting research and development expenses separately as part of costs and expenses in our consolidated
Statement of Earnings (Loss). These costs were previously reported in costs of goods and services sold; and
ceased reporting GE Capital as an equity method investment within the GE Industrial column. This change has no impact on
the GE Capital or Consolidated columns. Consistent with our historical practice, all commercial transactions between GE
Industrial and GE Capital continue to be reported on arms-length terms and are eliminated upon consolidation.
Our financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP), which requires us to
make estimates based on assumptions about current, and for some estimates, future, economic and market conditions which affect
reported amounts and related disclosures in our financial statements. Although our current estimates contemplate current and expected
future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially
affect our results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by
the ongoing Coronavirus Disease 2019 (COVID-19) pandemic. The severity, magnitude and duration, as well as the economic
consequences of the COVID-19 pandemic, are uncertain, rapidly changing and difficult to predict. As a result, our accounting estimates
and assumptions may change over time in response to COVID-19. Such changes could result in future impairments of goodwill,
intangibles, long-lived assets and investment securities, revisions to estimated profitability on long-term product service agreements,
incremental credit losses on receivables and debt securities, a decrease in the carrying amount of our tax assets, or an increase in our
insurance liabilities and pension obligations as of the time of a relevant measurement event.
In preparing our Statement of Cash Flows, we make certain adjustments to reflect cash flows that cannot otherwise be calculated by
changes in our Statement of Financial Position. These adjustments may include, but are not limited to, the effects of currency
exchange, acquisitions and dispositions of businesses, businesses classified as held for sale, the timing of settlements to suppliers for
property, plant and equipment, non-cash gains/losses and other balance sheet reclassifications.
We have reclassified certain prior-year amounts to conform to the current-year’s presentation. Unless otherwise noted, tables are
presented in U.S. dollars in millions. Certain columns and rows may not add due to the use of rounded numbers. Percentages
presented are calculated from the underlying numbers in millions. Earnings per share amounts are computed independently for
earnings from continuing operations, earnings from discontinued operations and net earnings. As a result, the sum of per-share
amounts may not equal the total. Unless otherwise indicated, information in these notes to 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.
GE 2020 FORM 10-K 63
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 Industrial 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).
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.
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 ($1,221 million, $1,939 million and
$1,809 million for the years ended December 31, 2020, 2019 and 2018, respectively) or as cost of goods sold ($2,279 million, $2,974
million and $3,097 million for the years ended December 31, 2020, 2019 and 2018, 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 non-consolidated company. GE makes substantial sales of parts and services to CFM International
based on arms-length terms.
GE CAPITAL REVENUES FROM SERVICES. We recognize operating lease income on a straight-line basis over the terms of
underlying leases, and we use the interest method to recognize income on loans and finance leases. We stop accruing interest on
loans at the earlier of the time at which collection of an account becomes doubtful or the account becomes 90 days past due. Estimated
unguaranteed residual values for finance leases 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.
GE 2020 FORM 10-K 64
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.
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 $411 million and $589 million at December 31, 2020 and December 31, 2019, 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.
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 contain an
expected credit loss, and we record the difference between the security’s amortized cost basis and its recoverable amount in earnings
as an allowance for credit loss 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 considered impaired, 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.
ALLOWANCE FOR CREDIT LOSSES. When we record customer receivables, contract assets and financing receivables arising from
revenue transactions, as well as commercial mortgage loans and reinsurance recoverables in GE Capital’s run-off insurance
operations, financial guarantees and certain commitments, we record an allowance for credit losses for the current expected credit
losses (CECL) inherent in the asset over its expected life. The allowance for credit losses is a valuation account deducted from the
amortized cost basis of the assets to present their net carrying value at the amount expected to be collected. Each period the allowance
for credit losses is adjusted through earnings to reflect expected credit losses over the remaining lives of the assets. We evaluate debt
securities with unrealized losses to determine whether any of the losses arise from concerns about the issuer’s credit or the underlying
collateral and record an allowance for credit losses, if required.
We estimate expected credit losses based on relevant information about past events, including historical experience, current conditions,
and reasonable and supportable forecasts that affect the collectability of the reported amount. When measuring expected credit losses,
we pool assets with similar country risk and credit risk characteristics. Changes in the relevant information may significantly affect the
estimates of expected credit losses.
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. 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 Industrial 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.
GE 2020 FORM 10-K 65
LEASE ACCOUNTING. Lessee Arrangements. At lease commencement, we record a lease liability and corresponding right-of-use
(ROU) asset. Options to extend the lease are included as part of the ROU lease asset and liability when it is reasonably certain the
Company will exercise the option. 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. The present value of our lease liability is determined using our incremental collateralized borrowing
rate at lease inception. For leases with an initial term of 12 months or less, an ROU asset and lease liability is not recognized and lease
expense is recognized on a straight-line basis over the lease term. We test ROU assets whenever events or changes in circumstance
indicate that the asset may be impaired.
Lessor Arrangements. 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. 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. We
recognize an impairment charge if the carrying amount of a reporting unit exceeds its fair value. 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.
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.
DERIVATIVES AND HEDGING. We use derivatives to manage a variety of risks, including risks related to interest rates, foreign
exchange, certain equity investments 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.
INSURANCE LIABILITIES AND 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.
Liabilities for traditional long-duration insurance contracts include 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 represent 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.
Reinsurance recoverables are recorded when we cede insurance risk to third parties but are not relieved from our 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. See Note 12 for further information.
GE 2020 FORM 10-K 66
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 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.
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.
GE 2020 FORM 10-K 67
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. See Note 13 for further information.
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.
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, 2020, we adopted ASU No. 2016-13, Financial Instruments - Credit Losses. ASU 2016-13
requires us to prospectively record an allowance for credit losses for the current expected credit losses inherent in the asset over its
expected life, replacing the incurred loss model that recognized losses only when they became probable and estimable. We recorded a
$221 million increase in our allowance for credit losses and a $175 million decrease to retained earnings, net of tax, reflecting the
cumulative effect on retained earnings.
On January 1, 2020 we adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment. The ASU eliminates Step 2 of the goodwill impairment test and the qualitative assessment for any reporting unit with a zero
or negative carrying amount. The ASU also requires an entity to disclose the amount of goodwill allocated to each reporting unit with a
zero or negative carrying amount. The adoption did not have an impact on our financial statements.
In March 2020, the Financial Accounting Standards Board issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the
Effects of Reference Rate Reform on Financial Reporting. On October 1, 2020, we adopted the new standard, which provides optional
expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other
transactions affected by reference rate reform if certain criteria are met. We will apply the accounting relief as relevant contract and
hedge accounting relationship modifications are made during the reference rate reform transition period. We do not expect the standard
to have a material impact on our consolidated financial statements.
NOTE 2. BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE. On March 31, 2020, we completed the sale of our BioPharma
business within our Healthcare segment for total consideration of $21,112 million (after certain working capital adjustments). The
consideration consisted of $20,695 million in cash and $417 million of pension liabilities that were assumed by Danaher. In addition, we
incurred $185 million of cash payments directly associated with the transaction. As a result, we recognized a pre-tax gain of $12,362
million ($11,213 million after-tax) in our consolidated Statement of Earnings (Loss).
In the first half of 2020, we sold all our remaining businesses classified as held for sale, including the remaining Lighting business within
Corporate and the remaining PK AirFinance business within our Capital segment.
DISCONTINUED OPERATIONS. Discontinued operations primarily include certain businesses in our GE Capital segment (our
mortgage portfolio in Poland and trailing liabilities associated with the sale of our GE Capital businesses) and our Baker Hughes and
Transportation segments. Results of operations, financial position and cash flows for these businesses are reported as discontinued
operations for all periods presented.
In September 2019, we reduced our ownership interest in Baker Hughes from 50.2% to 36.8%. As a result, we deconsolidated our
Baker Hughes segment and reclassified its results to discontinued operations for all periods presented and recognized a loss of $8,715
million ($8,238 million after-tax).
We have continuing involvement with Baker Hughes (BKR) primarily through our remaining interest, ongoing purchases and sales of
products and services, transition services that we provide to BKR, as well as an aeroderivative joint venture (JV) we formed with BKR in
the fourth quarter of 2019.
The JV is jointly controlled by GE and BKR and is consolidated by GE due to the significance of our investment in BKR. Our Aviation
segment sells products and services to the JV. In turn, the JV sells products and services primarily to BKR and our Power segment.
GE 2020 FORM 10-K 68
Transactions between the JV and GE businesses are eliminated in consolidation. During 2020, we had sales of $563 million to BKR for
products and services from the JV, and we collected cash of $603 million from Baker Hughes. If our investment in BKR is reduced to
below 20%, we would no longer have significant influence in BKR and, as a result, we would not consolidate the JV. A potential
deconsolidation of the JV is not expected to have a material impact on GE Industrial free cash flows.
For the year ended December 31, 2020, we had sales of $839 million and purchases of $216 million with BKR for products and services
outside of the JV. We collected net cash of $855 million from BKR related to sales, purchases and transition services. In addition, we
received $204 million of repayments on the promissory note receivable from BKR and dividends of $267 million on our investment.
In February 2019, we completed the spin-off and subsequent merger of our Transportation business with Wabtec. As a result, we
recorded a gain of $3,471 million ($2,508 million after-tax) in discontinued operations.
RESULTS OF DISCONTINUED OPERATIONS
For the year ended December 31, 2020
Sales of goods and services
GE Capital revenues and other income (loss)
Cost of goods and services sold
Other income, costs and expenses
Earnings (loss) of discontinued operations before income taxes
Benefit (provision) for income taxes
Earnings (loss) of discontinued operations, net of taxes(a)
Gain (loss) on disposal before income taxes
Benefit (provision) for income taxes
Gain (loss) on disposal, net of taxes
Earnings (loss) from discontinued operations, net of taxes
For the year ended December 31, 2019
Sales of goods and services
GE Capital revenues and other income (loss)
Cost of goods and services sold
Other income, costs and expenses
Earnings (loss) of discontinued operations before income taxes
Benefit (provision) for income taxes
Earnings (loss) of discontinued operations, net of taxes(a)
Gain (loss) on disposal before income taxes
Benefit (provision) for income taxes
Gain (loss) on disposal, net of taxes
Transportation
and Other
GE Capital
Total
Baker Hughes
$
— $
—
—
2
2
(13)
(10)
(23)
—
(23)
— $
—
—
—
—
—
9
9
(12)
—
(12)
— $
55
—
(252)
(197)
105
(92)
3
(1)
2
—
55
—
(249)
(195)
101
(93)
(31)
(1)
(32)
$
$
(33) $
(3) $
(90) $
(125)
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
16,598
33
(13,795)
(2,650)
186
153
339
(5,183)
(491)
(5,675)
Earnings (loss) from discontinued operations, net of taxes
$
(8,074) $
2,547 $
192 $
(5,335)
For the year ended December 31, 2018
Sales of goods and services
GE Capital revenues and other income (loss)
Cost of goods and services sold
Other income, costs and expenses
Earnings (loss) of discontinued operations before income taxes
Benefit (provision) for income taxes
Earnings (loss) of discontinued operations, net of taxes(a)
Gain (loss) on disposal before income taxes
Benefit (provision) for income taxes
Gain (loss) on disposal, net of taxes
$
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
26,757
(1,347)
(22,007)
(4,360)
(958)
(408)
(1,366)
4
(1)
3
Earnings (loss) from discontinued operations, net of taxes
$
(33) $
339 $
(1,670) $
(1,363)
(a) Earnings (loss) of discontinued operations attributable to the Company after income taxes was $(94) million, $279 million and
$(1,367) million for the years ended December 31, 2020, 2019 and 2018, respectively.
GE 2020 FORM 10-K 69
December 31
Cash, cash equivalents and restricted cash
Investment securities
Current receivables
Financing receivables held for sale (Polish mortgage portfolio)
Property, plant and equipment - 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(a)(b)
$
$
$
$
2020
524 $
—
61
2,437
109
199
202
3,532 $
20 $
180
200 $
2019
638
202
81
2,485
123
264
317
4,109
40
163
203
(a) Assets and liabilities of discontinued operations included $3,388 million and $61 million related to GE Capital as of December 31,
2020.
(b) Included within All other liabilities of discontinued operations at December 31, 2020 and December 31, 2019 are intercompany tax
receivables in the amount of $704 million and $839 million, respectively, primarily related to the financial services businesses that
were part of the GE Capital Exit Plan, which are eliminated upon consolidation.
NOTE 3. INVESTMENT SECURITIES
All of our debt securities are classified as available-for-sale and substantially all are investment-grade supporting obligations to
annuitants and policyholders in our run-off insurance operations. Changes in their fair value are recorded in Other comprehensive
income. Equity securities with readily determinable fair values are also included within this caption and changes in their fair value are
recorded in Other income within continuing operations. Where we adopt the fair value option for our investment in an associated
company, our investment in and any advances to are recorded as Equity securities with readily determinable fair values. We classify
investment securities as current or non-current based on our intent regarding the usage of proceeds from those investments.
Investment securities held within insurance entities are classified as non-current as they support the long-duration insurance liabilities.
2020
2019
December 31
Equity (Baker Hughes)
Current investment securities
Debt
U.S. corporate
Non-U.S. corporate
State and municipal
Mortgage and asset-backed
Government and agencies
Other equity
Amortized
cost
7,319 $
7,319 $
$
$
$ 23,604 $
2,283
3,387
3,652
1,169
218
Non-current investment securities $ 34,313 $
$ 41,632 $
Total
Gross
unrealized
gains
Gross
unrealized
losses
Estimated
fair value
— $
— $
— $
— $
7,319 $
7,319 $
Amortized
cost
9,888 $
9,888 $
Gross
unrealized
gains
Gross
unrealized
losses
— $
— $
— $
— $
Estimated
fair value
9,888
9,888
6,651 $
458
878
171
184
—
8,342 $
8,342 $
(26) $ 30,230 $ 23,037 $
(1)
(9)
(71)
—
—
2,740
4,256
3,752
1,353
218
2,161
3,086
3,117
1,391
136
(106) $ 42,549 $ 32,928 $
(106) $ 49,868 $ 42,816 $
4,636 $
260
598
116
126
—
5,736 $
5,736 $
(11) $ 27,661
2,420
(1)
3,669
(15)
3,229
(4)
1,516
—
—
136
(31) $ 38,632
(31) $ 48,521
The amortized cost of debt securities as of December 31, 2020 excludes accrued interest of $414 million, which is reported in Other GE
Capital receivables.
The estimated fair values of investment securities increased since December 31, 2019, primarily due to a decrease in market yields and
new investments in our insurance business, partially offset by the mark-to-market effects on our remaining interest in BKR.
Total estimated fair value of debt securities in an unrealized loss position were $1,765 million and $999 million, of which $165 million
and $274 million had gross unrealized losses of $(20) million and $(20) million and had been in a loss position for 12 months or more at
December 31, 2020 and 2019, respectively. Gross unrealized losses of $(106) million at December 31, 2020 included $(26) million
related to U.S. corporate securities, primarily in the energy industry, and $(70) million related to commercial mortgage-backed securities
(CMBS). Substantially all of our CMBS in an unrealized loss position have received investment-grade credit ratings from the major
rating agencies and are collateralized by pools of commercial mortgage loans on real estate.
Net unrealized gains (losses) for equity securities with readily determinable fair values were $(1,670) million, $800 million and an
insignificant amount for the years ended December 31, 2020, 2019 and 2018, respectively.
Proceeds from debt and equity securities sales, early redemptions by issuers and principal payments on the BKR promissory note
totaled $5,060 million, $7,967 million and $3,222 million for the years ended December 31, 2020, 2019, and 2018, respectively. Gross
realized gains on investment securities were $177 million, $115 million and $249 million, and gross realized losses and impairments
were $(364) million, $(203) million and $(41) million for the years ended December 31, 2020, 2019 and 2018, respectively.
GE 2020 FORM 10-K 70
GE Capital cash flows associated with purchases, dispositions and maturities of investment securities are as follows:
For the years ended December 31
Purchases of investment securities
Dispositions and maturities of investment securities
Net (purchases) dispositions of GE Capital investment securities
2020
(6,031) $
4,679
(1,352) $
2019
(6,205)
4,589
(1,616)
$
$
Contractual maturities of our debt securities (excluding mortgage and asset-backed securities) at December 31, 2020 are as follows:
Due
Within one year
After one year through five years
After five years through ten years
After ten years
Amortized
cost
Estimated
fair value
$
494 $
2,781
6,390
20,778
501
3,070
7,687
27,321
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 $285 million and $517 million of equity securities without readily
determinable fair value at December 31, 2020 and December 31, 2019, respectively, that are classified within All other assets in our
consolidated Statement of Financial Position. Fair value adjustments, including impairments, recorded in earnings were $(161) million
for the year ended December 31, 2020 and insignificant amounts for both years ended December 31, 2019 and 2018.
NOTE 4. CURRENT AND LONG-TERM RECEIVABLES
December 31
Power
Renewable Energy
Aviation(a)
Healthcare
Corporate
Customer receivables
Sundry receivables(b)(c)
Allowance for losses(d)
Total current receivables
Consolidated
2020
3,995 $
2,401
4,417
2,336
310
13,459
4,395
(1,164)
16,691 $
2019
4,689 $
2,306
3,249
2,105
246
12,594
4,848
(874)
16,568 $
GE Industrial
2020
2,656 $
1,903
3,490
1,498
293
9,841
4,763
(1,161)
13,442 $
2019
3,289
1,749
2,867
1,379
223
9,507
5,047
(872)
13,682
$
$
(a) Includes Aviation receivables from CFM due to 737 MAX temporary fleet grounding of $448 million and $1,397 million as of
December 31, 2020 and 2019, respectively. During 2020, CFM and Boeing reached an agreement to secure payment terms for
engines delivered in 2019 and 2020, net of progress collections. Based on the agreement, the receivable is expected to be collected
from Boeing through the first quarter of 2021.
(b) Includes supplier advances, revenue sharing programs receivables in our Aviation business, other non-income based tax
receivables, primarily value-added tax related to our operations in various countries outside of the U.S., receivables from disposed
businesses, including receivables for transactional agreements and certain intercompany balances that eliminate upon
consolidation. Revenue sharing programs receivables in Aviation are amounts due from third parties who participate in engine
programs by developing and supplying certain engine components through the life of the program. The participants share in
program revenues, receive a share of customer progress payments and share costs related to discounts and warranties.
(c) Consolidated current receivables include deferred purchase price which represents our retained risk with respect to current
customer receivables sold to third parties through one of the receivable facilities. The balance of the deferred purchase price held by
GE Capital at December 31, 2020 and 2019, was $413 million and $421 million, respectively.
(d) GE Industrial allowance for credit losses primarily increased due to net provisions of $274 million, offset by write-offs and foreign
currency impact.
GE 2020 FORM 10-K 71
Sales of GE Industrial current customer receivables. When GE Industrial sells customer receivables to GE Capital or third parties, it
accelerates the receipt of cash that would have otherwise been collected from customers. In any given period, the amount of cash
received from sales of customer receivables compared to the cash GE Industrial would have otherwise collected had those customer
receivables not been sold represents the cash generated or used in the period relating to this activity. GE Industrial sales of customer
receivables to GE Capital or third parties are made on arms-length terms and any discount related to time value of money is recognized
by GE Industrial when the customer receivables are sold. In our Statement of Cash Flows, receivables purchased and retained by GE
Capital are reflected as cash from operating activities at GE Industrial, primarily as cash used for investing activities at GE Capital and
are eliminated in consolidation. Collections on receivables purchased by GE Capital are reflected primarily as cash from investing
activities at GE Capital and are reclassified to cash from operating activities in consolidation. As of December 31, 2020 and 2019, GE
Industrial sold approximately 40% and 51%, respectively, of its gross customer receivables to GE Capital or third parties. Any difference
between the carrying value of receivables sold and total cash collected is recognized as financing costs by GE Industrial in Interest and
other financial charges in our consolidated Statement of Earnings (Loss). Costs of $264 million and $515 million were recognized during
the years ended December 31, 2020 and 2019, respectively. The decrease in costs from prior year was driven by lower sales of
receivables as well as lower benchmark interest rates. Activity related to customer receivables sold by GE Industrial is as follows:
Balance at January 1
GE Industrial sales to GE Capital
GE Industrial 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
2020
2019
$
$
3,087
32,869
—
(18,654)
(14,004)
321
$
3,618 (a) $
6,757 $
—
863
18,654
(23,283)
—
2,992 $
4,386
40,988
—
(28,073)
(14,621)
407
3,087 (a)
$
$
7,880
—
5,286
28,073
(34,482)
—
6,757
(a) At December 31, 2020 and 2019, $505 million and $539 million, respectively, of the current receivables purchased and retained by
GE Capital, had been sold by GE Industrial to GE Capital with recourse (i.e., GE Industrial retains all or some risk of default). The
effect on GE Industrial cash flows from operating activities (CFOA) of claims by GE Capital on receivables sold with recourse was
insignificant for the years ended December 31, 2020 and 2019.
LONG-TERM RECEIVABLES
December 31
Long-term customer receivables(a)
Long-term sundry receivables(b)
Allowance for losses
Total long-term receivables
Consolidated
2020
585 $
1,748
(142)
2,191 $
2019
906 $
1,705
(128)
2,483 $
GE Industrial
2020
474 $
2,097
(142)
2,430 $
2019
506
2,035
(128)
2,413
$
$
(a) As of December 31, 2020 and 2019, GE Capital held $111 million and $400 million, respectively, of GE Industrial long-term customer
receivables, of which $98 million and $312 million had been purchased with recourse (i.e., GE Industrial retains all or some risk of
default). GE Industrial sold an insignificant amount of long-term customer receivables during the years ended December 31, 2020
and 2019.
(b) Includes supplier advances, revenue sharing programs receivables, other non-income based tax receivables and certain
intercompany balances that eliminate upon consolidation.
UNCONSOLIDATED RECEIVABLES FACILITIES. GE Capital has two revolving receivables facilities, under which customer
receivables purchased from GE Industrial are sold to third parties. In the first facility, which has a program size of $2,000 million, upon
the sale of receivables, we receive proceeds of cash and deferred purchase price and the Company’s remaining risk with respect to the
sold receivables is limited to the balance of the deferred purchase price. The program size of the first facility at December 31, 2019 was
$3,100 million. Under the second facility, upon the sale of receivables, we receive the proceeds of cash only and therefore the
Company has no remaining risk with respect to the sold receivables. In December 2020, GE Capital did not renew the second facility.
The program size of the second facility at December 31, 2019 was $1,200 million.
Activity related to these facilities is included in GE Capital sales to third parties line in the sales of GE Industrial current customer
receivables table above and is as follows:
For the years ended December 31
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
$
$
2020
13,591 $
13,031
11,567
481 $
489
2019
21,695
21,202
18,012
257
303
Cash payments received on deferred purchase price are reflected as cash from investing activities in both the GE Capital and
consolidated columns within our Statement of Cash Flows.
GE 2020 FORM 10-K 72
CONSOLIDATED SECURITIZATION ENTITIES. GE Capital consolidates three variable interest entities (VIEs) that purchased
customer receivables and long-term customer receivables from GE Industrial. At December 31, 2020 and 2019, these VIEs held current
customer receivables of $1,489 million and $2,080 million and long-term customer receivables of $93 million and $375 million,
respectively. At December 31, 2020 and 2019, the outstanding debt under their respective debt facilities was $892 million and $1,655
million, respectively.
NOTE 5. FINANCING RECEIVABLES AND ALLOWANCES
December 31
Loans, net of deferred income
Allowance for losses
Current financing receivables - net
Investment in financing leases, net of deferred income
Allowance for losses
Non-current financing receivables - net
Total financing receivables – net
$
$
Consolidated
2020
1,300 $
(36)
1,265
1,805
(34)
1,771
3,036 $
2019
1,098
(21)
1,077
2,070
(12)
2,057
3,134
$
$
GE Capital
2020
5,124 $
(13)
5,110
1,805
(34)
1,771
6,882 $
2019
4,927
(5)
4,922
2,070
(12)
2,057
6,979
Cash flows associated with GE Capital financing receivables are as follows:
For the years ended December 31
Increase in loans to customers
Principal collections from customers - loans
Sales of financing receivables and other
Net decrease (increase) in GE Capital financing receivables
2020
(15,155) $
15,311
42
199 $
2019
(15,022)
18,083
328
3,389
$
$
Consolidated finance lease income was $144 million, $173 million and $275 million for the years ended December 31, 2020, 2019 and
2018, respectively.
NET INVESTMENT IN FINANCING LEASES
December 31
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
2020
1,202 $
(83)
1,119
(133)
986
2019
1,628 $
(216)
1,412
(178)
1,234
2020
654
—
654
(99)
556
2019
799 $
—
799
(139)
660
819
1,805 $
835
2,070 $
472
1,028 $
412
1,072 $
2020
548 $
(83)
465
(34)
431
347
777 $
2019
829
(216)
613
(39)
574
423
997
(a) Included $506 million of investment in sales type leases at both December 31, 2020 and 2019.
(b) See Note 15 for deferred tax amounts related to financing leases.
CONTRACTUAL MATURITIES, DUE IN
Total loans
Net minimum lease payments receivable
$
2021
4,199 $
294
2022
261 $
200
2023
142 $
281
2024
134 $
193
We expect actual maturities to differ from contractual maturities, primarily as a result of prepayments.
2025
318 $
68
Thereafter
Total
5,124
1,119
68 $
83
We manage our GE Capital financing receivables portfolio using delinquency and nonaccrual data as key performance indicators. At
December 31, 2020, 5.7%, 5.0% and 5.3% of financing receivables were over 30 days past due, over 90 days past due and on
nonaccrual, respectively, with the vast majority of nonaccrual financing receivables secured by collateral. At December 31, 2019, 4.2%,
2.9% and 6.1% of financing receivables were over 30 days past due, over 90 days past due and on nonaccrual, respectively.
GE Capital financing receivables that comprise receivables purchased from GE Industrial 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.
GE 2020 FORM 10-K 73
NOTE 6. INVENTORIES, INCLUDING DEFERRED INVENTORY COSTS
December 31
Raw materials and work in process
Finished goods
Deferred inventory costs(a)
Inventories, including deferred inventory costs
2020
7,937 $
5,654
2,299
15,890 $
2019
8,771
5,333
3,111
17,215
$
$
(a) Represents cost deferral for shipped goods (such as components for wind turbine assemblies within our Renewable Energy
segment) and labor and overhead costs on time and material service contracts (primarily originating in Power and Aviation) and
other costs for which the criteria for revenue recognition has not yet been met. This was previously recorded in Contract and other
deferred assets.
NOTE 7. PROPERTY, PLANT AND EQUIPMENT AND OPERATING LEASES
December 31
Land and improvements
Buildings, structures and related equipment
Machinery and equipment
Leasehold costs and manufacturing plant under construction
ROU operating lease assets
GE Industrial
Land and improvements, buildings, structures and related
equipment
Equipment leased to others (ELTO)(a)
Aircraft
Engines
Helicopters
All other
ROU operating lease assets
GE Capital
Eliminations
Property, plant and equipment - net
Depreciable lives
(in years)
Net Carrying Value
Original Cost
2020
599 $
8 $
8 - 40
4 - 20
1 - 10
2020
589 $
2019
608 $
2019
596
3,875
8,360
1,539
3,077
$ 31,751 $ 30,680 $ 16,433 $ 17,447
3,828
7,869
1,350
2,798
8,210
20,915
2,028
7,824
20,082
2,165
1 - 40 $
144 $
149 $
23 $
29
15 - 20
15 - 20
15 - 20
15 - 35
35,507
4,113
5,474
237
34,372
4,957
5,750
235
21,414
3,283
4,709
214
237
$ 45,458 $ 45,480 $ 29,600 $ 29,886
20,931
3,540
4,724
194
189
(1,282)
(1,453)
$ 75,927 $ 74,880 $ 44,662 $ 45,879
(1,279)
(1,372)
(a) Included $1,475 million and $1,539 million of original cost of assets leased to GE Industrial with accumulated amortization of $(306)
million and $(251) million at December 31, 2020 and 2019, respectively.
Consolidated depreciation and amortization related to property, plant and equipment was $4,636 million, $4,026 million and $4,419
million for the years ended December 31, 2020, 2019 and 2018, respectively. Amortization of GE Capital ELTO was $2,527 million,
$2,019 million and $2,089 million for the years ended December 31, 2020, 2019 and 2018, respectively.
In the third quarter of 2020, we recognized a non-cash pre-tax impairment charge of $316 million related to property, plant and
equipment at our Steam business within our Power segment due to our recent announcement to exit the new build coal power market.
We determined the fair value of these assets using an income approach. This charge was recorded by Corporate in Selling, general,
and administrative expenses in our consolidated Statement of Earnings (Loss).
During 2020, our GE Capital Aviation Services (GECAS) business recognized pre-tax impairments of $542 million, primarily on its fixed-
wing aircraft operating lease portfolio. Pre-tax impairments were $74 million for 2019. We determined the fair values of these assets
using primarily the income approach. These charges are included in costs of services sold within the Statement of Earnings (Loss) and
within our Capital segment.
Noncancellable future rentals due from customers for equipment on operating leases at December 31, 2020, are as follows:
2021
2,833 $
2022
2,451 $
2023
2,072 $
2024
1,970 $
$
2025
1,658 $
Thereafter
Total
5,316 $ 16,300
Income on our operating lease portfolio, primarily from our GECAS business, was $3,342 million, $3,804 million, and $4,075 million for
the years ended December 31, 2020, 2019, and 2018, respectively, and comprises fixed lease income of $2,834 million, $3,045 million
and $3,243 million and variable lease income of $508 million, $759 million and $832 million, respectively.
Operating Lease Liabilities. Our consolidated operating lease liabilities, included within All other liabilities in our Statement of
Financial Position, were $2,973 million and $3,162 million as of December 31, 2020 and 2019, respectively, which included GE
Industrial operating lease liabilities of $3,133 million and $3,369 million, respectively. Substantially all of our operating leases have
remaining lease terms of 11 years or less, some of which may include options to extend.
GE 2020 FORM 10-K 74
OPERATING LEASE EXPENSE
Long-term (fixed)
Long-term (variable)
Short-term
Total operating lease expense
$
$
2020
745 $
118
209
1,072 $
2019
834 $
136
206
1,176 $
MATURITY OF LEASE LIABILITIES
Undiscounted lease payments
Less: imputed interest
Total lease liability as of December 31, 2020
2021
727 $
2022
648 $
2023
549 $
2024
437 $
$
Thereafter
2025
267 $
805 $
$
2018
966
177
133
1,276
Total
3,433
(460)
2,973
SUPPLEMENTAL INFORMATION RELATED TO OPERATING LEASES
Operating cash flows used for operating leases
Right-of-use assets obtained in exchange for new lease liabilities
Weighted-average remaining lease term
Weighted-average discount rate
$
$
2020
766
600
6.6 years
4.5 %
$
$
2019
888
746
6.9 years
4.9 %
NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
CHANGES IN GOODWILL BALANCES
2019
2020
Balance at
December 31,
2018
139 $
$
Dispositions Impairments
— $
— $
Currency
exchange
and other
Balance at
December 31,
2019
145 $
6 $
Acquisitions
Impairments
Currency
exchange
and other
— $
— $
— $
Balance at
December 31,
2020
146
4,730
9,839
17,226
904
1,136
33,974 $
—
—
(5,558)
(39)
—
(1,486)
—
—
—
—
(5,597) $
(1,486) $
46
20
60
(26)
(262)
(156) $
3,290
9,859
11,728
839
873
26,734 $
$
—
—
89
—
—
90 $
—
(877)
—
(839)
—
(1,717) $
111
266
37
—
2
417 $
3,401
9,247
11,855
—
876
25,524
Power
Renewable
Energy
Aviation
Healthcare
Capital
Corporate(a)
Total
(a) Corporate balance at December 31, 2020 and 2019 is our Digital business.
In the fourth quarter of 2020, 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.
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, 2020, our Additive reporting unit had
goodwill of $243 million.
In the second quarter of 2020 we performed an interim impairment test at our Additive reporting unit within our Aviation segment and
GECAS reporting unit within our Capital segment, both of which incorporated a combination of income and market valuation
approaches. The results of the analysis indicated that carrying values of both reporting units were in excess of their respective fair
values. Therefore, we recorded non-cash impairment losses of $877 million and $839 million for the Additive and GECAS reporting
units, respectively, in the caption Goodwill impairments in our consolidated Statement of Earnings (Loss). All of the goodwill in Additive
was the result of the Arcam AB and Concept Laser GmBH acquisitions in 2016. Of the $839 million of goodwill for GECAS, $729 million
arose from the acquisition of Milestone Aviation, our helicopter leasing business, in 2015. After the impairment charges, there was no
goodwill remaining in our GECAS reporting unit.
In 2019, goodwill decreased by $7,240 million, primarily as a result of transferring goodwill in our BioPharma business within our
Healthcare segment to held for sale in the amount of $5,548 million, and recognizing a total non-cash goodwill impairment loss in our
Grid Solutions equipment and services and Hydro reporting units in our Renewable Energy segment of $744 million and $742 million,
respectively. After the impairment charges, the Grid Solutions equipment and services and Hydro reporting units have no remaining
goodwill.
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.
GE 2020 FORM 10-K 75
INTANGIBLE ASSETS SUBJECT TO
AMORTIZATION December 31
Customer-related(a)
Patents and technology
Capitalized software
Trademarks & other
Total
2020
2019
Useful lives
(in years)
3 - 30 $
2 - 25
3 - 10
3 - 50
Gross
carrying
amount
6,862 $
8,191
5,826
778
Accumulated
amortization
(3,432) $
(4,135)
(3,840)
(477)
(11,883) $
Net
3,430 $
4,056
1,986
301
Gross
carrying
amount
6,770 $
8,180
5,822
737
Accumulated
amortization
Net
3,701
4,450
2,171
332
(10,857) $ 10,653
(3,070) $
(3,730)
(3,651)
(406)
$ 21,657 $
9,774 $ 21,510 $
(a) Balance includes payments made to our customers, primarily within our Aviation business.
Intangible assets decreased in 2020, primarily as a result of amortization. Consolidated amortization expense was $1,382 million,
$1,569 million and $2,163 million for the years ended December 31, 2020, 2019 and 2018, respectively. Included within amortization
expense for the years ended December 31, 2020, 2019 and 2018 were non-cash pre-tax impairment charges of $113 million, $103
million, and $428 million respectively.
In the third quarter of 2020, we recognized a non-cash pre-tax impairment charge of $113 million related to intangible assets at our
Steam business within our Power segment due to our recent announcement to exit the new build coal power market. We determined
the fair value of these intangible assets using an income approach. This charge was recorded by Corporate in Selling, general, and
administrative expenses in our consolidated Statement of Earnings (Loss).
Estimated consolidated annual pre-tax amortization for intangible assets over the next five calendar years are as follows:
ESTIMATED 5 YEAR CONSOLIDATED AMORTIZATION
Estimated annual pre-tax amortization
2021
1,162 $
2022
1,085 $
$
2023
992 $
2024
889 $
2025
817
During 2020, we recorded additions to intangible assets subject to amortization of $420 million with a weighted-average amortizable
period of 5.9 years, including capitalized software of $360 million, with a weighted-average amortizable period of 5.2 years.
NOTE 9. CONTRACT AND OTHER DEFERRED ASSETS & PROGRESS COLLECTIONS AND DEFERRED INCOME
Contract and other deferred assets decreased $1,474 million in 2020. Our long-term service agreements decreased primarily due to
billings of $9,571 million and a net unfavorable change in estimated profitability of $229 million at Power and $1,100 million at Aviation,
offset by revenues recognized of $8,971 million. The decrease in long-term service agreements included a $587 million pre-tax charge,
at Aviation, to reflect the cumulative COVID-19 pandemic-related impacts of changes to billing and cost assumptions for certain long-
term service agreements, reflecting lower engine utilization, anticipated customer fleet restructuring and contract modifications.
Additional adjustments could occur in future periods and could be material for certain long-term service agreements if actual customer
operating behavior differs significantly from Aviation's current estimates.
December 31, 2020
Revenues in excess of billings
Billings in excess of revenues
Long-term service agreements
Short-term and other service agreements
Equipment contract revenues
Current contract assets
Nonrecurring engineering costs(a)
Customer advances and other(b)
Non-current contract and other deferred assets
Total contract and other deferred assets
Power
Aviation
Renewable
Energy
Healthcare
Other
Total
$
$
$
$
$
5,282 $
(1,640)
3,642 $
129
2,015
5,786 $
16
822
838 $
6,623 $
3,072 $
(5,375)
(2,304) $
282
59
(1,963) $
2,409
2,481
4,889 $
2,927 $
— $
—
— $
106
1,127
1,233 $
34
—
34 $
1,268 $
— $
—
— $
173
306
479 $
31
128
159 $
638 $
— $
—
— $
29
201
229 $
8,354
(7,015)
1,338
719
3,707
5,764
—
2,490
(32)
3,398
5,888
(32) $
197 $ 11,653
GE 2020 FORM 10-K 76
December 31, 2019
Revenues in excess of billings
Billings in excess of revenues
Long-term service agreements
Short-term and other service agreements
Equipment contract revenues
Current contract assets
Nonrecurring engineering costs(a)
Customer advances and other(b)
Non-current contract and other deferred assets
Total contract and other deferred assets
Power
Aviation
Renewable
Energy
Healthcare
Other
Total
$
$
$
$
$
$
5,342 $
(1,561)
3,781 $
190
1,599
5,569 $
44 $
909
953 $
6,522 $
4,480 $
(4,914)
(435) $
316
82
(37) $
2,257 $
2,313
4,570 $
4,533 $
— $
—
— $
43
1,217
1,260 $
47 $
—
47 $
1,307 $
— $
—
— $
169
324
492 $
35 $
156
190 $
683 $
— $
—
— $
—
106
106 $
9,822
(6,476)
3,346
717
3,327
7,390
8 $
2,391
3,346
(32)
(24) $
5,737
82 $ 13,127
(a) 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.
(b) Included amounts due from customers at Aviation for the sales of engines, spare parts and services, and 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. We have reclassified certain prior-year amounts from the long-term service agreements and equipment
contract revenues line items in the table above to conform with the current year’s presentation.
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 $72 million in 2020 primarily due to the timing of new collections received in excess
of revenue recognition, primarily at Renewable Energy, Healthcare and Aviation. These increases were partially offset by revenue
recognized in excess of new collections at Power. Our Aviation Military equipment business received new collections of $708 million in
the second quarter 2020 as part of the U.S. Department of Defense's efforts to support vendors in its supply chain during the pandemic.
Revenues recognized for contracts included in a liability position at the beginning of the year were $12,314 million and $11,020
million for the years ended December 31, 2020 and 2019, respectively.
December 31, 2020
Progress collections on equipment contracts
Other progress collections
Total progress collections
Current deferred income
Progress collections and deferred income
Non-current deferred income
Total progress collections and deferred income
December 31, 2019
Progress collections on equipment contracts
Other progress collections
Total progress collections
Current deferred income
Progress collections and deferred income
Non-current deferred income
Total progress collections and deferred income
Power
Aviation
Renewable
Energy
Healthcare
Other
Total
4,918 $
458
5,376 $
17
5,393 $
116
5,509 $
214 $
4,623
4,837 $
132
4,969 $
898
5,867 $
1,229 $
4,604
5,834 $
194
6,028 $
214
6,241 $
— $
414
414 $
1,309
1,724 $
564
2,288 $
6,362
— $
(4)
10,096
(4) $ 16,458
105
1,757
102 $ 18,215
1,801
112 $ 20,016
10
5,857 $
413
6,270 $
18
6,288 $
31
6,319 $
115 $
4,748
4,863 $
90
4,953 $
874
5,827 $
1,268 $
4,193
5,461 $
140
5,602 $
144
5,745 $
— $
305
305 $
1,180
1,485 $
467
1,952 $
— $
7,240
9,662
2
2 $ 16,902
59
1,487
61 $ 18,389
1,555
39
100 $ 19,944
$
$
$
$
$
$
$
$
GE 2020 FORM 10-K 77
NOTE 10. ALL OTHER ASSETS
December 31
Prepaid taxes and deferred charges
Derivative instruments (Note 21)
Other
GE Industrial All other current assets
Assets held for sale
Derivative instruments (Note 21)
Other
GE Capital All other current assets
Eliminations
Consolidated All other current assets
Equity method and other investments
Long-term receivables (Note 4)
Prepaid taxes and deferred charges
Other
GE Industrial All other non-current assets
Equity method and other investments
GECAS pre-delivery payments (Note 23)
Insurance cash and cash equivalents(a)
Other
GE Capital All other non-current assets
Eliminations
Consolidated All other non-current assets
Total All other assets
2020
368 $
440
27
835 $
871 $
42
108
1,021 $
(334)
1,522 $
3,827 $
2,430
817
874
7,948 $
3,199 $
2,871
455
543
7,068 $
(419)
14,597 $
16,119 $
2019
610
211
31
852
2,294
529
113
2,936
(426)
3,362
4,015
2,413
870
449
7,748
2,227
2,934
583
551
6,294
(160)
13,882
17,244
$
$
$
$
$
$
$
$
$
$
$
(a) Cash and cash equivalents in GE Capital insurance entities is subject to regulatory restrictions and used for operations of those
entities. Therefore, the balance is included in All other assets.
Equity method investments. Unconsolidated entities over which we have significant influence are accounted for as equity method
investments and presented on a one-line basis in All other assets on our consolidated Statement of Financial Position. Equity method
income includes our share of the results of unconsolidated entities, gains (loss) from sales and impairments of investments, which is
included in Other income for GE Industrial and in Revenues from services for GE Capital in our consolidated Statement of Earnings
(Loss). See Note 1 for further information.
December 31
Power
Renewable Energy
Aviation
Healthcare
Capital(a)
Corporate items and eliminations
Total consolidated
$
Equity method investment balance
2019
565 $
630
2,073
245
2,159
28
5,700 $
2020
576 $
724
2,032
251
3,110
31
6,724 $
$
Equity method income (loss)
2020
2019
43 $
13
(41)
7
77
5
104 $
(4) $
(2)
204
19
217
(11)
423 $
2018
(20)
(1)
126
16
(254)
(99)
(233)
(a) Equity method investments in GE Capital increased $951 million driven primarily by an increase in renewable energy tax equity
investments at Energy Financial Services (EFS) and an increase in investments in our run-off insurance operations.
GE 2020 FORM 10-K 78
NOTE 11. BORROWINGS
December 31
Commercial paper
Current portion of long-term borrowings
Current portion of long-term borrowings assumed by GE Industrial
Other
Total GE Industrial short-term borrowings
Current portion of long-term borrowings
Intercompany payable to GE Industrial
Non-recourse borrowings of
consolidated securitization entities
Other
Total GE Capital short-term borrowings
Eliminations
Total short-term borrowings
Senior notes
Senior notes assumed by GE Industrial
Subordinated notes assumed by GE Industrial
Other
Total GE Industrial long-term borrowings
Senior notes
Subordinated notes
Intercompany payable to GE Industrial
Non-recourse borrowings of
consolidated securitization entities
Other
Total GE Capital long-term borrowings
Eliminations
Total long-term borrowings
Total borrowings
2020
2019
Amount Average Rate
$
$
$
$
$
—
36
2,432
882
3,350
853
2,432
892
283
4,461
(3,033)
4,778
— % $
5.03
3.49
$
1.72 % $
0.81
$
$
Amount Average Rate
18,994
18,178
1,779
435
39,386
2.90 % $
3.25
3.28
$
Amount Average Rate
1.62 %
3,008
0.36
766
5,473
3.71
1,832
11,079
3.01 %
1.26
11,226
2,104
1,569
804
15,702
(3,140)
23,641
Amount Average Rate
2.11 %
14,762
4.17
23,024
3.68
2,871
324
40,980
3.66 %
2.82
30,132
189
16,780
—
582
47,683
(16,780)
70,288
75,067
3.41 % $
$
$
$
25,371
178
17,038
86
626
43,299
(17,038)
67,241
90,882
Maturities
2022-2050 $
2022-2055
2035-2037
$
2022-2042 $
$
$
$
At December 31, 2020, the outstanding GE Capital borrowings that had been assumed by GE Industrial as part of the GE Capital Exit
Plan was $22,390 million ($2,432 million short term and $19,957 million long term), for which GE Industrial has an offsetting receivable
from GE Capital of $19,213 million. The difference of $3,177 million (zero in short-term borrowings and $3,177 million in long-term
borrowings) represents the amount of borrowings GE Capital had funded with available cash to GE Industrial via intercompany loans in
lieu of GE Industrial issuing borrowings externally. GE Industrial repaid a total of $9,049 million of intercompany loans from GE Capital
in 2020.
At December 31, 2020, total GE Industrial borrowings of $23,523 million comprised GE Industrial-issued borrowings of $20,346 million
and intercompany loans from GE Capital to GE Industrial of $3,177 million as described above.
GE Industrial has provided a full and unconditional guarantee on the payment of the principal and interest on all tradable senior and
subordinated outstanding long-term debt securities issued or guaranteed by GE Capital. This Guarantee applied to $28,503 million and
$34,683 million of GE Capital debt at December 31, 2020 and December 31, 2019, respectively.
In the second quarter of 2020, GE Industrial issued a total of $7,500 million in aggregate principal amount of senior unsecured debt,
comprising $1,000 million of 3.450% Notes due 2027, $1,250 million of 3.625% Notes due 2030, $1,500 million of 4.250% Notes due
2040, and $3,750 million of 4.350% Notes due 2050, and used these proceeds in addition to a portion of the proceeds from the
BioPharma sale to repay a total of $7,500 million of intercompany loans to GE Capital and to complete a tender offer to purchase
$4,237 million in aggregate principal amount of certain GE Industrial unsecured debt, comprising $2,046 million of 2.700% Notes due
2022, €934 million ($1,011 million equivalent) of 0.375% Notes due 2022, €425 million ($460 million equivalent) of 1.250% Notes due
2023, €376 million ($407 million equivalent) of floating-rate Notes due 2020, and $312 million of 3.375% Notes due 2024. The total cash
consideration paid for these purchases was $4,282 million and the total carrying amount of the purchased notes was $4,228 million,
resulting in a loss of $63 million (including $9 million of fees and other costs associated with the tender) which was recorded in Interest
and other financial charges in the GE Industrial Statement of Earnings (Loss). In addition to the purchase price, GE Industrial paid any
accrued and unpaid interest on the purchased notes through the date of purchase.
GE 2020 FORM 10-K 79
In the second quarter of 2020, GE Capital issued a total of $6,000 million in aggregate principal amount of senior unsecured debt with
maturities ranging from 2025 to 2032, and used these proceeds in addition to the proceeds received from repayments of intercompany
loans from GE Industrial to complete tender offers to purchase a total of $9,787 million in aggregate principal amount of certain senior
unsecured debt. The total cash consideration paid for these purchases was $9,950 million and the total carrying amount of the
purchased notes was $9,827 million, resulting in a total loss of $143 million (including $20 million of fees and other costs associated
with the tender) which was recorded in Interest and other financial charges in the GE Capital Statement of Earnings (Loss). In addition
to the purchase price, GE Capital paid any accrued and unpaid interest on the purchased notes through the date of purchase.
In the fourth quarter of 2020, GE Capital completed a tender offer to purchase a total of $2,157 million in aggregate principal amount of
certain senior unsecured debt. The total cash consideration paid for these purchases was $2,255 million and the carrying amount of the
purchased notes was $2,166 million, resulting in a total loss of $95 million (including $6 million of fees and other costs associated with
the tender) which was recorded in Interest and other financial charges in the GE Capital Statement of Earnings (Loss). In addition to the
purchase price, GE Capital paid any accrued and unpaid interest on the purchased notes through the date of purchase.
See Notes 4 and 22 for further information about non-recourse borrowings of consolidated securitization entities. See Note 21 for
further information about borrowings and associated interest rate swaps.
Long-term debt maturities over the next five years follow.
GE Industrial excluding assumed debt
GE Capital debt assumed by GE Industrial
GE Capital other debt
$
2021
36
2,432
$
853 (a)
2022
2,016 $
1,483
1,469
2023
977 $
1,977
1,771
2024
477 $
918
142
2025
2,440
237
3,477
(a) Fixed and floating rate notes of $340 million contain put options with exercise dates in 2021, which have final maturity beyond 2025.
The total interest payments on consolidated borrowings are estimated to be $2,326 million, $2,210 million, $2,072 million, $2,006 million
and $1,932 million for 2021, 2022, 2023, 2024 and 2025, respectively.
NOTE 12. INSURANCE LIABILITIES AND ANNUITY BENEFITS. Insurance liabilities and annuity benefits comprise
substantially all obligations to annuitants and insureds in our run-off insurance operations.
December 31, 2020
Future policy benefit reserves
Claim reserves(b)
Investment contracts
Unearned premiums and other
Eliminations
Total
December 31, 2019
Future policy benefit reserves
Claim reserves(b)
Investment contracts
Unearned premiums and other
Eliminations
Total
Long-term care
insurance
contracts
Structured
settlement
annuities & life
insurance
contracts
Other
contracts
Other
adjustments(a)
Total
$
$
$
$
16,934 $
4,393
—
19
21,346
—
21,346 $
16,755 $
4,238
—
30
21,023
—
21,023 $
9,207 $
275
1,034
189
10,705
—
10,705 $
9,511 $
252
1,136
196
11,095
—
11,095 $
181 $
1,068
1,016
89
2,354
(374)
1,980 $
183 $
1,125
1,055
96
2,459
(406)
2,053 $
8,160 $
—
—
—
8,160
—
8,160 $
5,655 $
—
—
—
5,655
—
5,655 $
34,482
5,736
2,049
298
42,565
(374)
42,191
32,104
5,615
2,191
322
40,232
(406)
39,826
(a) To the extent that unrealized gains on specific investment securities supporting our insurance contracts would result in a premium
deficiency should those gains be realized, an increase in future policy benefit reserves is recorded, with an after-tax reduction of net
unrealized gains recognized through Other comprehensive income in our consolidated Statement of Earnings (Loss).
(b) Other contracts included claim reserves of $316 million and $342 million related to short-duration contracts at Electric Insurance
Company, net of eliminations, at December 31, 2020 and 2019, respectively.
The increase in insurance liabilities and annuity benefits of $2,365 million from December 31, 2019 to December 31, 2020 is primarily
due to an adjustment of $2,505 million resulting from an increase in unrealized gains on investment securities that would result in a
premium deficiency should those gains be realized.
GE 2020 FORM 10-K 80
Claim reserve activity included incurred claims of $1,801 million, $1,873 million and $2,106 million, of which $(1) million, $(36) million
and $(46) million related to the recognition of adjustments to prior year claim reserves arising from our periodic reserve evaluation in the
years ended December 31, 2020, 2019 and 2018, respectively. Paid claims were $1,728 million, $1,626 million and $1,937 million in the
years ended December 31, 2020, 2019 and 2018, respectively.
Reinsurance recoveries are recorded as a reduction of insurance losses and annuity benefits in our consolidated Statement of Earnings
(Loss) and amounted to $350 million, $362 million and $324 million for the years ended December 31, 2020, 2019 and 2018,
respectively.
Reinsurance recoverables, net of allowances of $1,510 million and $1,355 million, are included in non-current Other GE Capital
receivables in our consolidated Statement of Financial Position, and amounted to $2,552 million and $2,416 million at December 31,
2020 and 2019, respectively. The vast majority of our remaining net reinsurance recoverables are secured by assets held in a trust for
which we are the beneficiary.
2020 Premium Deficiency Testing. We completed our annual premium deficiency testing in the aggregate across our run-off
insurance portfolio in the third quarter of 2020. The results of our testing indicated there was a positive margin of less than 2% of the
recorded future policy benefit reserves, excluding Other adjustments, at September 30, 2020. As a result, the assumptions updated in
connection with the premium deficiency recognized in 2019 remain locked-in and will remain so unless another premium deficiency
occurs in the future.
We also noted our projections as of third quarter 2020 indicate the present value of projected earnings in each future year to be
positive, and therefore, no further adjustments to our future policy benefit reserves were required at this time.
Considering the results of the 2020 premium deficiency test which resulted in a small margin, any future net adverse changes in our
assumptions may reduce the margin or result in a premium deficiency requiring an increase to future policy benefit reserves. Any future
net favorable changes to these assumptions could result in a lower projected present value of future cash flows and additional margin in
our premium deficiency test and higher income over the remaining duration of the portfolio, including higher investment income.
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 2020 premium deficiency testing described above was
performed 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 (of which approximately $2,000 million is expected to be contributed in the first quarter of
2021 pending completion of our December 31, 2020 statutory reporting process, which includes asset adequacy testing), subject to
ongoing monitoring by KID. GE is a party to capital maintenance agreements with its run-off insurance subsidiaries under which GE is
required to 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 2020 FORM 10-K 81
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.
DESCRIPTION OF OUR PLANS
Plan Category
Participants
Funding
Other
GE Pension Plan
Covers U.S.
participants.
~176,500 retirees
and beneficiaries,
~93,000 vested
former employees
and ~26,500 active
employees.
Our funding policy 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.
Principal Pension
Plans
GE Supplementary
Pension Plan
Provides
supplementary
benefits to higher-
level, longer-service
U.S. employees
This plan is unfunded. We pay
benefits from company cash.
Other Pension
Plans
44 U.S. and non-
U.S. pension plans
with pension assets
or obligations
greater than $50
million
Covers ~56,500
retirees and
beneficiaries,
~49,500 vested
former employees
and ~20,000 active
employees
Our funding policy is to
contribute amounts sufficient to
meet minimum funding
requirements under employee
benefit and tax laws in each
country. We pay benefits for
some plans from company cash.
This plan has been closed to new
participants since 2012. Benefits for
~20,000 employees with salaried
benefits were 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 (announced 10/2019).
The annuity benefit has been closed
to new participants since 2011 and
has been replaced by an installment
benefit. Benefits for ~700
employees who became executives
before 2011 were frozen effective
January 1, 2021, and thereafter
these employees will accrue the
installment benefit offered to new
executives since 2011.
In certain countries, benefit accruals
have ceased and/or have been
closed to new hires as of various
dates.
Principal Retiree
Benefit Plans
Provides health and
life insurance
benefits to certain
eligible participants
Covers U.S
participants.
~170,000 retirees
and dependents
We fund retiree health benefits
on a pay-as-you-go basis and
the retiree life insurance trust at
our discretion.
Participants share in the cost of the
healthcare benefits.
FUNDING STATUS BY PLAN TYPE
Benefit Obligation
2019
2020
Fair Value of Assets
2020
2019
Deficit/(Surplus)
2019
2020
Principal Pension Plans:
GE Pension Plan (subject to regulatory funding)
GE Supplementary Pension Plan (not subject to regulatory funding)
Other Pension Plans:
Subject to regulatory funding
Not subject to regulatory funding
Principal retiree benefit plans (not subject to regulatory funding)
Total plans subject to regulatory funding
Total plans not subject to regulatory funding
Total plans
$ 68,945 $ 65,065 $ 58,843 $ 52,633 $ 10,102 $ 12,432
6,691
—
—
7,353
17,455 19,123
58,843 52,633
6,691
76,298 71,756
7,353
21,793 19,907
3,014
5,160
2,865
5,019
21,283 18,906
236
289
223
134
510
2,642
4,885
1,001
2,778
4,871
10,612 13,433
90,738 84,972
15,237 14,865
14,880 14,340
$ 105,975 $ 99,837 $ 80,483 $ 72,064 $ 25,492 $ 27,773
80,126 71,539
525
357
FUNDING. The Employee Retirement Income Security Act (ERISA) determines minimum pension funding requirements in the U.S. In
December 2020, we made a discretionary contribution of $2,500 million to the GE Pension Plan and, based on our current
assumptions, we do not anticipate additional required contributions to the plan through 2023. We made a contribution to the GE
Pension Plan in 2018 which was sufficient to satisfy our minimum ERISA funding requirements for 2019 and 2020.
GE 2020 FORM 10-K 82
On an ERISA basis, our preliminary estimate is that the GE Pension Plan was approximately 94% and 93% funded at January 1, 2021
and 2020 respectively. The ERISA funded status is higher than the GAAP funded status (85% and 81% funded for 2020 and 2019
respectively) primarily because the ERISA prescribed interest rate for determining liabilities is calculated using a long-term 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.
We expect to pay approximately $325 million for benefit payments under our GE Supplementary Pension Plan and administrative
expenses of our principal pension plans and expect to contribute approximately $460 million to other pension plans in 2021. 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 $335 million in 2021 to fund such benefits.
ACTIONS. In December 2020, we transferred obligations of $1,706 million from the GE Pension Plan, representing the benefits of
approximately 70,000 of GE’s retirees and beneficiaries, to a third-party insurance company by irrevocably committing to purchase
group annuity contracts. The transaction was funded directly by the assets of the plan and is reflected as a settlement.
In 2019, 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 assets of the plan and this event is reflected as a settlement.
COST OF OUR BENEFITS PLANS
AND ASSUMPTIONS
2020
2019
2018
Principal
pension
Other
pension
Principal
retiree
benefit
Principal
pension
Other
pension
Principal
retiree
benefit
Principal
pension
Other
pension
Principal
retiree
benefit
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
$ 243
422
(1,082)
434
1
12
$ 59
$ 657
150
2,350
(11)
(2,993)
(82)
3,399
(234)
146
—
—
$ 2,902 $ (213) $ (177)
$ (118)
$ 3,559 $ 30
$ 246
542
(1,144)
319
3
13
$ 58
$ 654
202
2,780
(21)
(3,428)
(118)
3,439
(232)
135
349
(38)
$ 3,275 $ (267) $ (207)
$ 3,929 $ (21) $ (149)
$ 888
2,658
(3,248)
3,785
143
34
$ 323
548
(1,285)
312
(9)
1
$ 63
196
(29)
(79)
(230)
—
$ 3,372 $ (433) $ (142)
$ 4,260 $ (110) $ (79)
2.61 % 1.44 % 2.15 % 3.36 % 1.97 % 3.05 %
2.95
N/A
3.16
N/A
2.82
5.90
3.75
5.90
2.95
N/A
3.06
N/A
4.34 % 2.75 % 4.12 %
3.16
3.60
N/A
N/A
3.60
6.00
3.36
6.25
1.97
5.69
3.05
7.00
4.07
6.75
2.75
6.76
4.12
7.00
3.64
6.75
2.41
6.75
3.43
7.00
(a) For 2019, the principal pension amount is a curtailment loss driven by freezing the GE Pension Plan benefits for certain participants.
(b) For 2020, 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.
We expect 2021 net periodic benefit costs for principal pension, other pension and principal retiree benefit plans to be about
$2,400 million, which is a decrease of approximately $1,100 million from 2020. The decrease is primarily due to the freezing of benefits
for certain participants under the GE Pension Plan and lower interest costs driven by the lower discount rate. The 2020 year-end
discount rate increases the amortization of net actuarial loss, but this increase is offset by less amortization of net actuarial loss related
to past years.
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 2020 FORM 10-K 83
PLAN FUNDED STATUS AND AMOUNTS RECORDED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Change in benefit obligations
Balance at January 1
Service cost
Interest cost
Participant contributions
Plan amendments
Actuarial loss (gain) - net
Benefits paid
Curtailments
Settlements
Dispositions/ acquisitions / 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
Dispositions/ acquisitions / other - net
Exchange rate adjustments
Balance at December 31
Funded status - deficit
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)
2020
2019
Principal
pension
Other
pension
Principal
retiree
benefit
Principal
pension
Other
pension
$ 71,756
657
2,350
69
—
7,057 (a)
(3,885)
—
(1,706) (b)
—
—
$ 22,921
243
422
28
27
1,927 (a)
(1,062)
(69)
—
(335)
556
$ 76,298 (f) $ 24,658
52,633
8,926
2,806
69
(3,885)
(1,706) (b)
—
—
$ 58,843
$ 17,455
19,142
2,542
509
28
(1,062)
—
(59)
406
$ 21,506
$ 3,152
$
$
$
$
5,160
59
150
63
(7)
85 (a)
$ 21,091
246
542
29
(17)
2,422 (a)
(1,043)
(32)
—
(1,030)
713
5,019 (g) $ 71,756 (f) $ 22,921
$ 68,500
654
2,780
77
(42) (c)
7,073 (d)
(3,788)
(838)
(2,657) (e)
(3)
—
(491)
—
—
—
—
289
(22)
295
63
(491)
—
—
—
134
4,885
50,009
8,694
298
77
(3,788)
(2,657) (e)
—
—
$ 52,633
$ 19,123
17,537
2,229
716
29
(1,043)
—
(1,030)
704
$ 19,142
$ 3,779
Principal
retiree
benefit
$ 5,153
58
202
61
(23)
275 (a)
(533)
(33)
—
—
—
$ 5,160 (g)
362
57
342
61
(533)
—
—
—
$ 289
$ 4,871
—
(315)
845
(106)
—
(330)
—
(296)
475
(123)
—
(355)
(17,140)
$ (17,455)
(3,891)
$ (3,152)
(4,555)
(4,885)
$
(18,827)
$ (19,123)
(4,131)
$ (3,779)
(4,516)
$ (4,871)
(80)
5,687
19
4,582
(2,148)
(633)
67
7,961
(16)
4,665
(2,376)
(833)
$ 5,607
$ 4,601
$
(2,781)
$ 8,028
$ 4,649
$ (3,209)
(a) Principally associated with discount rate changes.
(b) Irrevocable commitment to purchase group annuity contracts from a third-party insurance company in December 2020.
(c) GE Supplementary Pension Plan amendment for the U.S. pension changes announced in October 2019 offset by other plan
amendments adopted in 2019.
(d) Principally associated with discount rate changes offset by impact of the one-time lump sum payments under the GE Pension Plan.
(e) Payments made to former employees from the GE Pension Plan assets for the one-time lump sum payments.
(f) The benefit obligation for the GE Supplementary Pension Plan, which is an unfunded plan, was $7,353 million and $6,691 million at
year-end 2020 and 2019, respectively.
(g) The benefit obligation for retiree health plans was $3,094 million and $3,306 million at December 31, 2020 and 2019, respectively.
ASSUMPTIONS USED IN CALCULATIONS. 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.
Projected benefit obligations are measured as the present value of expected benefit payments. We discount those cash payments
using a discount rate. We determine the discount rate using the weighted-average yields on 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.
GE 2020 FORM 10-K 84
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) (AOCI) 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
benefit obligations. 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.
Based on our analysis, we have assumed a 6.25% long-term expected return on our GE Pension Plan assets for cost recognition in
2020, as compared to 6.75% in 2019 and 2018.
The Society of Actuaries issued new mortality improvement tables in 2020 and new mortality base and improvement tables in 2019. We
updated mortality assumptions in the U.S. accordingly. These changes in assumptions decreased the December 31, 2020 and 2019
U.S. pension and retiree benefit plans' obligations by $180 million and $529 million, respectively.
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 critical assumptions at least annually on a plan and country-specific basis. We periodically evaluate other
assumptions involving demographics factors such as retirement age and turnover, and update them to reflect our actual experience and
expectations for the future. Actual results in any given year will often differ from actuarial assumptions because of economic and other
factors. 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.
SENSITIVITIES TO KEY ASSUMPTIONS. Fluctuations in discount rates can significantly impact pension cost and obligations. A 25
basis point decrease in discount rate would increase principal pension plan cost in the following year by about $220 million and would
increase the principal pension projected benefit obligation at year-end by about $2,400 million. The deficit sensitivity to the discount rate
is lower than the projected benefit obligation sensitivity as a result of the liability hedging program incorporated in the plan's asset
allocation. A 50 basis point decrease in the expected return on assets would increase principal pension plan cost in the following year
by about $250 million.
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.
Global equities
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 equities
Debt securities
Real estate
Private equities and other investments
Total plan assets at fair value
2020
2019
Principal pension
$
5,552 $
Other pension
Principal pension
3,674 $
6,826 $
Other pension
3,484
6,831
8,512
5,505
2,274
490
29,164
16,259
5,445
1,324
6,651
10,003
410
440
81
499
15,107
1,415
1,268
1,978
1,738
4,398
8,025
6,076
2,309
23
27,657
14,616
3,744
1,167
5,449
$
58,843 $
21,506 $
52,633 $
8,089
365
424
140
452
12,954
1,450
914
1,930
1,894
19,142
(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 $2,721 million and $2,838 million at December 31, 2020 and 2019, 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 $97 million and $105 million at December 31, 2020 and 2019, respectively, were
classified within Level 3. Principal retiree benefit plan investments with a fair value of $134 million and $289 million at December 31,
2020 and 2019, respectively, comprised equity and debt securities which are considered Level 1 and 2. There were no Level 3 principal
retiree benefit plan investments held in 2020 and 2019. Plan assets that were measured at fair value using NAV as practical expedient
were excluded from the fair value hierarchy.
GE 2020 FORM 10-K 85
ASSET ALLOCATION OF PENSION PLANS
2020 Target allocation
2020 Actual allocation
Global equities
Debt securities (including cash equivalents)
Real estate
Private equities & other investments
Principal
Pension
30.0 - 47.0 %
21.0 - 65.0
3.5 - 13.5
6.0 - 16.0
Other Pension
(weighted
average)
Principal
Pension
Other Pension
(weighted
average)
22 %
52
9
17
37 %
45
6
12
25 %
56
10
9
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 plan fiduciaries' primary strategic
investment objectives are balancing investment risk and return and monitoring the plan’s liquidity position in order to meet the plan's
near-term benefit payment and other cash needs. The plan has incorporated de-risking objectives and liability hedging programs as part
of its long-term investment strategy. The plan utilizes a combination of long dated corporate bonds, treasuries, strips and derivatives to
implement its investment strategies as well as for hedging asset and liability risks. 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% of the GE Pension Trust assets at December 31, 2020 and 2019. 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. As of December 31, 2020, no sector concentration of assets exceeded 15% of total GE Pension Plan assets.
ANNUALIZED RETURNS
GE Pension Plan
EXPECTED FUTURE BENEFIT PAYMENTS OF OUR BENEFIT PLANS
2021
2022
2023
2024
2025
2026 - 2030
1 year
17.6 %
5 years
9.7 %
10 years
8.0 %
25 years
8.0 %
$
Principal
pension
3,725
3,785
3,820
3,845
3,865
19,410
Other pension
945
$
945
955
970
995
5,185
$
Principal retiree
benefit
460
440
420
395
380
1,615
DEFINED CONTRIBUTION PLAN. We have a defined contribution plan for eligible U.S. employees that provides employer
contributions. Defined contribution costs were $318 million, $355 million and $410 million for the years ended December 31, 2020,
2019, and 2018, respectively.
COST OF POSTRETIREMENT BENEFIT PLANS AND CHANGES IN OTHER COMPREHENSIVE INCOME
For the years ended December 31
2020
2019
2018
(Pre-tax)
Cost (income) of postretirement benefit
plans
Changes in other comprehensive income
Prior service cost (credit) - current year
Actuarial loss (gain) - current year
Reclassifications out of AOCI
Principal
pension
Other
pension
Principal
retiree
benefit
Principal
pension
Other
pension
Principal
retiree
benefit
Principal
pension
Other
pension
Principal
retiree
benefit
$ 3,559 $ 30 $
(118) $ 3,929 $
(21) $
(149) $ 4,260 $ (110) $
(79)
—
27
1,124 529
(7)
119
(42)
(17)
971 1,592
(23)
240
—
(111)
82
464
—
(543)
Curtailment / settlement gain (loss)
Dispositions
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 $ 1,138 $
—
—
(3,399)
(146)
(2,421)
(3)
(166)
(434)
(1)
—
—
82
234
(353)
—
(3,439)
(135)
(12)
(340)
(319)
(3)
4
—
118
232
(45)
(2)
— —
(312)
9
(3,785)
(143)
—
—
79
230
(48)
428
(2,998)
901
571
(4,084)
241
(234)
(18) $
310 $
931 $
880 $
422
$
176 $ 131 $
(313)
GE 2020 FORM 10-K 86
NOTE 14. CURRENT AND ALL OTHER LIABILITIES
December 31
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
Derivative instruments (Note 21)
Other
GE Industrial All other current liabilities
Aircraft maintenance reserve, sales deposits and other commercial liabilities
Interest payable
Derivative instruments (Note 21)
Other
GE Capital All other current liabilities
Eliminations
Consolidated All other current liabilities
Sales allowances, equipment projects and other commercial liabilities
Product warranties (Note 23)
Operating lease liabilities (Note 7)
Uncertain and other income taxes and related liabilities
Alstom legacy legal matters (Note 23)
Environmental, health and safety liabilities (Note 23)
Redeemable noncontrolling interests (Note 16)
Other
GE Industrial All other non-current liabilities
Other commercial liabilities
Operating lease liabilities (Note 7)
Uncertain and other income taxes and related liabilities
GE Capital All other non-current liabilities
Eliminations
Consolidated All other non-current liabilities
Total
2020
5,123 $
1,197
4,763
413
359
984
250
1,044
14,131
1,465
1,064
117
1,244
3,890
(1,422)
16,600 $
3,917
857
3,133
3,652
858
2,210
487
1,326
16,440
455
221
475
1,151
(1,514)
16,077 $
32,677 $
2019
4,277
1,371
5,114
429
330
1,080
171
2,479
15,251
2,336
1,189
31
495
4,052
(1,483)
17,821
3,923
793
3,369
3,410
875
2,154
439
1,342
16,306
573
238
415
1,226
(1,593)
15,938
33,759
$
$
$
$
We have reclassified certain prior-year amounts, including equipment project costs accruals of $1,432 million from GE Industrial All
other current liabilities to Accounts payable and equipment project accruals to conform with the current year’s presentation.
NOTE 15. INCOME TAXES. GE Industrial and GE Capital file a consolidated U.S. federal income tax return. This enables GE
Industrial 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 Industrial makes cash payments to GE Capital for tax reductions and GE Capital pays for tax increases at the time GE
Industrial’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
Current tax expense (benefit)
Deferred tax expense (benefit) from temporary differences
Total GE Industrial
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
2020
2,123 $
(1,735)
388
329
(1,191)
(862)
2,452
(2,926)
(474) $
2019
2,551 $
(1,242)
1,309
(720)
138
(582)
1,831
(1,104)
726 $
2018
1,743
(1,276)
467
596
(970)
(374)
2,339
(2,245)
93
$
$
GE 2020 FORM 10-K 87
CONSOLIDATED EARNINGS (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
U.S. earnings (loss)
Non-U.S. earnings (loss)
Total
CONSOLIDATED (BENEFIT) PROVISION FOR INCOME TAXES
U.S. Federal
Current
Deferred
Non - U.S.
Current
Deferred
Other
Total
INCOME TAXES PAID (RECOVERED)
GE Industrial
GE Capital
Total(a)
(a) Includes tax payments reported in discontinued operations.
2020
(5,325) $
10,522
5,197 $
2019
506 $
643
1,149 $
2018
(9,861)
(11,126)
(20,987)
2020
2019
2018
939 $
(2,032)
146 $
(1,266)
1,019
(3,144)
1,331
(793)
80
(474) $
2020
2,399 $
(1,108)
1,291 $
2,008
106
(267)
726 $
2019
2,183 $
45
2,228 $
1,132
1,197
(111)
93
2018
1,803
65
1,868
$
$
$
$
$
$
RECONCILIATION OF U.S. FEDERAL
STATUTORY INCOME TAX RATE TO
ACTUAL INCOME TAX RATE
U.S. federal statutory income tax rate
Tax on global activities including exports(a)
U.S. business credits(b)
Goodwill impairments
Tax Cuts and Jobs Act enactment
All other – net(c)(d)(e)
Consolidated
GE Industrial
GE Capital
2020
2018
2020
2019
2020
2018
2018
2019
21.0 % 21.0 % 21.0 % 21.0 % 21.0 % 21.0 % 21.0 % 21.0 % 21.0 %
61.0
(28.5)
(6.4)
(3.3)
16.6
6.9
5.6
0.9
(25.1)
(6.1)
51.7
(30.1)
3.2
120.0
—
(36.5)
(8.0)
78.7
(5.1)
0.4
(21.9)
0.5
2.8
(23.3)
(16.3)
(1.0)
2.5
0.7
(1.6)
(15.7)
91.0
(22.5)
26.0
0.2
(52.5)
42.2
(5.0)
2.6
(21.5)
(0.2)
2.7
(21.4)
13.8
4.7
(8.3)
0.1
9.8
20.1
8.1
21.9
—
15.2
23.1
68.3
2019
Actual income tax rate
(9.1) % 63.2 % (0.4) %
5.3 % 72.7 % (2.3) % 41.1 % 89.3 % 99.7 %
(a) For the year ended December 31, 2020, included (27.8)%, (18.5)% and 4.6% in consolidated, GE Industrial and GE Capital,
respectively, related to the sale of our Biopharma business. For the year ended December 31, 2019, included 55.1% and 35.1% in
consolidated and GE Industrial, respectively related to the sale of our BioPharma business.
(b) U.S. general business credits, primarily the credit for energy produced from renewable sources and the credit for research
performed in the U.S.
(c) For the year ended December 31, 2020, included (2.7)%, (0.9)% and 3.6% in consolidated, GE Industrial and GE Capital,
respectively for the resolution of the IRS audit of our consolidated U.S. income tax returns for 2014-2015. For the year ended
December 31, 2019, included (32.9)%, (19.7)% and 3.5% in consolidated, GE Industrial and GE Capital, respectively for the
resolution of the IRS audit of our consolidated U.S. income tax returns for 2012-2013.
(d) For the year ended December 31, 2020, included (3.9)%, (2.1)% and 2.2% in consolidated, GE Industrial and GE Capital,
respectively, related to deductible stock losses. For the year ended December 31, 2019, included (12.5)% and (8.0)% in
consolidated and GE Industrial, 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 Industrial, respectively, related to deductible stock losses.
(e) 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.
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 2020 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 2020 FORM 10-K 88
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. For the year
ended December 31, 2020, we recorded an additional tax expense of $49 million to reflect the impact of voluntary adjustments we
provided the government reflecting finalization of amounts reported on the 2017 tax return. There could be further adjustment to the
transition tax as a result of the current audit of the 2017 and 2018 tax years.
UNRECOGNIZED TAX POSITIONS. Annually, we file over 3,600 income tax returns in almost 300 global taxing jurisdictions. We are
under examination or engaged in tax litigation in many of these jurisdictions. The IRS is currently auditing our consolidated U.S. income
tax returns for 2016-2018. In December 2020, the IRS completed the audit of our consolidated U.S. income tax returns for 2014-2015.
The Company recognized a continuing operations benefit of $140 million plus an additional net interest benefit of $96 million. In
addition, GE Capital recorded a benefit in discontinued operations of $130 million of tax benefits and $25 million of net interest benefits.
In June 2019, the IRS completed the audit of our consolidated U.S. income tax returns for 2012-2013. The Company recognized a
continuing operations tax benefit of $378 million plus an additional net interest benefit of $107 million. 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. The United Kingdom tax authorities disallowed interest deductions claimed by GE Capital for the years 2004-2015 that
could result in a potential impact of approximately $1.1 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
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
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
$
$
$
2020
4,191 $
2,986
628
179
0-350
0-250
2020
4,169 $
836
326
(863)
(127)
(151)
4,191 $
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, 2020, 2019 and 2018, $(30) million, $(93) million and $127 million of interest expense (income),
respectively, and $(13) million, $20 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 $42 billion that have been reinvested indefinitely. Given U.S. tax reform, substantially all of our prior
unrepatriated net 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, 2020, 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.
The following table presents our net deferred tax assets and net deferred tax liabilities attributable to different tax jurisdictions or
different tax paying components.
GE 2020 FORM 10-K 89
DEFERRED INCOME TAXES December 31
GE Industrial
GE Capital
Total assets
GE Industrial
GE Capital
Total liabilities
Net deferred income tax asset (liability)
COMPONENTS OF THE NET DEFERRED INCOME TAX ASSET (LIABILITY) December 31
Principal pension plans
Provision for expenses
Other compensation and benefits
Principal retiree benefit plans
Capitalized expenditures
Non-U.S. loss carryforwards(a)
Intangible assets
Baker Hughes investment
Depreciation
Contract assets
Other – net(b)
GE Industrial
Insurance company loss reserves
Non-U.S. loss carryforwards(a)
Capitalized expenditures
Operating leases
Financing leases
Other – net(b)
GE Capital
Net deferred income tax asset (liability)
2020
10,069 $
3,610
13,679
(719)
(879)
(1,598)
12,081 $
2020
3,666 $
2,258
1,968
1,026
993
814
486
(973)
(676)
(460)
248
9,350
1,684
1,194
799
(1,900)
(393)
1,347
2,731
12,081 $
2019
8,888
2,500
11,388
(699)
(800)
(1,499)
9,889
2019
4,016
1,990
2,206
1,023
860
602
1,315
(1,256)
(823)
(1,232)
(512)
8,189
1,715
1,274
742
(2,218)
(477)
664
1,700
9,889
$
$
$
$
(a) Net of valuation allowances of $5,934 million and $4,801 million for GE Industrial and $265 million and $201 million for GE Capital
as of December 31, 2020 and 2019, respectively. Of the net deferred tax asset as of December 31, 2020 of $2,008 million, $19
million relates to net operating loss carryforwards that expire in various years ending from December 31, 2021 through December
31, 2023; $112 million relates to net operating losses that expire in various years ending from December 31, 2024 through
December 31, 2040 and $1,957 million relates to net operating loss carryforwards that may be carried forward indefinitely.
(b) Included valuation allowances related to assets other than non-U.S. loss carryforwards of $898 million and $1,897 million for GE
Industrial and $221 million and $248 million for GE Capital as of December 31, 2020 and 2019, respectively.
GE 2020 FORM 10-K 90
NOTE 16. SHAREHOLDERS’ EQUITY
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Beginning balance
Other comprehensive income (loss) (OCI) before reclassifications – net of
deferred taxes of $10, $32 and $41(a)
Reclassifications from OCI – net of deferred taxes of $(14), $(11) and $(6)
Other comprehensive income (loss)
Less OCI attributable to noncontrolling interests
Investment securities ending balance
Beginning balance
OCI before reclassifications – net of deferred taxes of $(25), $(98) and $29
Reclassifications from OCI – net of deferred taxes of $0, $(9) and $89(b)(c)
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 $11, $6 and $(26)
Reclassifications from OCI – net of deferred taxes of $(11), $2 and $4(b)
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 $(283), $(418) and $115
Reclassifications from OCI – net of deferred taxes of $805, $915 and $2,610 (b)(c)
Other comprehensive income (loss)
Less OCI attributable to noncontrolling interests
Benefit plans ending balance
Accumulated other comprehensive income (loss) at December 31
$
$
2020
61 $
55
(56)
(1)
—
60 $
(4,818) $
(255)
691
435
2
(4,386) $
49 $
(94)
17
(77)
—
(28) $
(7,024) $
(1,256)
2,888
1,632
4
(5,395) $
2019
(39) $
141
(42)
100
—
61 $
(6,134) $
41
1,234
1,275
(40)
(4,818) $
13 $
(21)
58
37
2
49 $
(8,254) $
(2,097)
3,325
1,228
(2)
(7,024) $
2018
(102)
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)
(9,749) $
(11,732) $
(14,414)
(a) Included adjustments of $(1,979) million, $(2,693) million and $1,825 million in 2020, 2019 and 2018, 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) The total reclassification from AOCI included $836 million, including currency translation of $688 million, net of taxes, in 2020,
related to the sale of our BioPharma business within our Healthcare segment.
(c) Currency translation and benefit plan gains and losses included $1,343 million, including currency translation of $1,066 million, net
of taxes, in 2019 earnings (loss) from discontinued operations related to deconsolidation of Baker Hughes.
In 2016, we issued $5,694 million of GE Series D preferred stock, in addition to $245 million of existing GE Series A, B and C preferred
stock, which are also outstanding. The total carrying value of GE Industrial preferred stock at December 31, 2020 was $5,918 million
and will increase to $5,940 million by the respective call dates through periodic accretion. Dividends on GE Industrial preferred stock
are payable semi-annually in June and December and accretion is recorded on a quarterly basis. Dividends on GE Industrial preferred
stock totaled $474 million, including cash dividends of $295 million, $460 million, including cash dividends of $295 million, and $447
million, including cash dividends of $295 million, for the years ended December 31, 2020, 2019 and 2018, respectively. On January 21,
2021, the GE Series D preferred stock became callable and its dividends converted from 5% fixed rate to 3-month LIBOR plus 3.33%.
As of the filing date of this Form 10-K for the year ended December 31, 2020, the GE Series D preferred stock has not been called.
In conjunction with the 2016 exchange of GE Capital preferred stock into GE preferred stock, GE Capital issued preferred stock to GE
Industrial for which the amount and terms mirrored the GE Industrial external preferred stock. In 2018, GE Capital and GE Industrial
exchanged the existing Series D preferred stock issued to GE Industrial for new Series D preferred stock, which is mandatorily
convertible into GE Capital common stock on January 21, 2021. In the first quarter of 2021, GE Capital and GE Industrial also agreed to
retire the Series A, B and C GE Capital preferred stock effective on the Series D conversion date of January 21, 2021. As a result of
these actions, effective January 21, 2021, there is no remaining preferred stock between GE Industrial and GE Capital, and accordingly
GE Capital will no longer pay preferred dividends to GE Industrial and all preferred stock dividend costs have become a GE Industrial
obligation effective January 21, 2021. The exchange of GE Capital Series D preferred stock has no impact on the GE Series D
preferred stock, which remains callable for $5,694 million effective on January 21, 2021 or thereafter on dividend payment dates.
Similarly, there were no changes to the GE Series A, B or C preferred stock, which become callable at various dates in 2022 and 2023.
GE has 50 million authorized shares of preferred stock ($1.00 par value), of which 5,939,875 shares are outstanding as of December
31, 2020, 2019 and 2018. 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. To facilitate settlement of employee compensation programs, we repurchased shares of 0.5 million and
1.1 million, for a total of $15.3 million and $9.6 million for the years ended December 31, 2020 and 2019, respectively.
GE 2020 FORM 10-K 91
Noncontrolling interests in equity of consolidated affiliates amounted to $1,522 million and $1,545 million at December 31, 2020 and
2019, respectively. Net earnings (loss) attributable to noncontrolling interests were $(33) million, $33 million and $203 million in 2020,
2019 and 2018, respectively. Dividends attributable to noncontrolling interests were $(16) million, $(331) million and $(362) million in
2020, 2019 and 2018, respectively.
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 $487 million
and $439 million as of December 31, 2020 and 2019, respectively. Net earnings (loss) attributable to redeemable noncontrolling
interests was $(125) million, $33 million and $(291) million for the years ended December 31, 2020, 2019 and 2018, 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) and performance shares 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 and performance shares 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/Performance shares
$
2020
3.58 $
7.91
7.91
2019
3.48 $
10.12
10.73
2018
3.00
13.96
4.80
Key assumptions used in the Black-Scholes valuation for stock options include: risk free rates of 1.0%, 2.5%, and 2.8%, dividend yields
of 0.4%, 0.4%, and 2.3%, expected volatility of 36%, 33%, and 32%, expected lives of 6.1 years, 6.0 years, and 5.9 years, and strike
prices of $10.56, $10.00, and $12.13 for 2020, 2019, and 2018, respectively.
Stock options
RSUs
Weighted
average
contractual
term (in
years)
Intrinsic
value (in
millions)
Shares (in
millions)
STOCK-BASED COMPENSATION
ACTIVITY
Outstanding at January 1, 2020
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2020
Exercisable at December 31, 2020
Expected to vest
Shares (in
millions)
458 $
36
(1)
(15)
(78)
400 $
305 $
90 $
Weighted
average
exercise
price
18.66
10.56
7.48
11.12
19.14
18.16
20.28
11.50
4.5 $
3.3 $
8.2 $
156
62
87
Weighted
average
grant date
fair value
13.29
7.91
14.44
11.80
N/A
9.04
N/A
9.41
28 $
46
(10)
(4)
N/A
60 $
N/A
49 $
Weighted
average
contractual
term (in
years)
Intrinsic
value (in
millions)
2.1 $
N/A
1.9 $
653
N/A
533
Total outstanding PSUs and performance shares at December 31, 2020 were 21 million shares with a weighted average fair value of
$8.62. The intrinsic value and weighted average contractual term of PSUs and performance shares outstanding were $232 million and
3.0 years, respectively.
Compensation expense (after-tax)(a)(b)
Cash received from stock options exercised
Intrinsic value of stock options exercised and RSUs vested
$
2020
353 $
6
81
2019
400 $
69
154
2018
336
24
83
(a) Unrecognized compensation cost related to unvested equity awards as of December 31, 2020 was $543 million, which will be
amortized over a weighted average period of 1.3 years.
(b) Income tax benefit recognized in earnings was $10 million, $20 million and $40 million in 2020, 2019, and 2018, respectively.
GE 2020 FORM 10-K 92
NOTE 18. EARNINGS PER SHARE INFORMATION
(Earnings for per-share calculation;
per-share amounts in dollars)
Earnings (loss) from continuing operations
Preferred stock dividends
Accretion of redeemable noncontrolling interests,
net of tax(a)
Earnings (loss) from continuing operations attributable to
common shareholders
Earnings (loss) from discontinued operations
Net earnings (loss) attributable to GE common
shareholders
$
$
Shares of GE common stock outstanding
Employee compensation-related shares (including
stock options) and warrants(a)
Total average equivalent shares
Earnings (loss) per share from continuing operations
Earnings (loss) per share from discontinued operations
Net earnings (loss) per share
$
Potentially dilutive securities(b)
2020
Diluted
5,817 $
(474)
Basic
5,817 $
(474)
2019
Diluted
416 $
(460)
2018
Diluted
Basic
Basic
416 $ (20,997) $ (20,997)
(447)
(447)
(460)
(151)
(151)
—
—
—
—
5,191 $
(125)
5,191 $
(125)
(45) $
(5,396)
(45) $ (21,445) $ (21,445)
(1,372)
(1,372)
(5,396)
5,066
8,753
9
8,761
0.59 $
(0.01)
0.58
444
5,066
8,753
—
8,753
0.59 $
(0.01)
0.58
(5,440)
(5,440)
(22,809)
(22,809)
8,724
8,724
8,691
8,691
—
8,724
—
8,724
(0.01) $
(0.62)
(0.62)
450
(0.01) $
(0.62)
(0.62)
—
8,691
(2.47) $
(0.16)
(2.62)
420
—
8,691
(2.47)
(0.16)
(2.62)
(a) Represents accretion adjustment of redeemable noncontrolling interests in our Additive business within our Aviation segment.
(b) Outstanding stock awards not included in the computation of diluted earnings per share because their effect was antidilutive.
Our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered
participating securities and, therefore, are included in the computation of earnings per share pursuant to the two-class method. For the
year ended December 31, 2020, application of this treatment had an insignificant effect. For the years ended December 31, 2019 and
2018, as a result of excess dividends in respect to the current period earnings, losses were not allocated to the participating securities.
NOTE 19. OTHER INCOME
Purchases and sales of business interests(a)
Licensing and royalty income
Equity method income
Net interest and investment income(b)
Other items
GE Industrial
Eliminations
Total
2020
12,468 $
161
27
(1,546)
334
11,444
(57)
11,387 $
$
$
2019
3 $
256
206
1,220
515
2,200
22
2,222 $
2018
1,234
218
21
562
282
2,317
4
2,321
(a) Included a pre-tax gain of $12,362 million on the sale of BioPharma in 2020. 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. See Note 2 for further information.
(b) Included a realized and unrealized pre-tax loss of $2,037 million and unrealized pre-tax gain of $793 million related to our interest in
Baker Hughes in 2020 and 2019, respectively. Included interest income associated with customer advances of $146 million, $143
million and $136 million in 2020, 2019 and 2018, respectively. See Notes 3, 9 and 26.
GE 2020 FORM 10-K 93
NOTE 20. FAIR VALUE MEASUREMENTS
Our assets and liabilities measured at fair value on a recurring basis include debt securities mainly supporting obligations to annuitants
and policyholders in our run-off insurance operations, our remaining equity interest in Baker Hughes and derivatives.
ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
December 31
Investment securities
Derivatives
Total assets
Derivatives
Other(c)
Total liabilities
Level 1
Level 2
Level 3(a)
2020
2020
2019
$ 7,319 $ 9,704 $ 36,684 $ 33,606 $ 5,866 $ 5,210 $
2019
2020
— $ 49,868 $ 48,521
740
483
8
$ 7,319 $ 9,704 $ 39,741 $ 36,167 $ 5,874 $ 5,221 $ (2,582) $ (1,832) $ 50,352 $ 49,261
(1,832)
(2,582)
3,057
2,561
— $
11
—
—
2020
2019
2019
2019
2020
Netting
adjustment(d)
Net balance(b)
$
$
— $
—
— $
— $ 1,112 $
—
— $ 1,892 $ 1,641 $
834 $
807
780
7 $
—
7 $
19 $
—
19 $
(752) $
—
(752) $
(651) $
—
202
807
(651) $ 1,147 $ 1,009
367 $
780
(a) Included debt securities classified within Level 3 of $4,185 million of U.S. corporate and $976 million of Mortgage and asset-backed
securities at December 31, 2020, and $3,977 million of U.S. corporate and $330 million of Government and agencies securities at
December 31, 2019.
(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.
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
2020
Investment securities $
2019
Investment securities $
5,210 $
357 $
1,301 $
(958) $
2 $
(45) $
5,866
4,013 $
399 $
2,159 $
(1,308) $
— $
(53) $
5,210
(a) Primarily included net unrealized gains (losses) of $323 million and $404 million in Other comprehensive income for the years ended
December 31, 2020 and 2019, respectively.
(b) Included $745 million of Mortgage and asset-backed securities for the year ended December 31, 2020, and $975 million of U.S.
corporate debt securities for the year ended December 31, 2019.
Substantially all of these Level 3 securities are fair valued using non-binding broker quotes or other third-party sources that utilize a
number of different unobservable inputs not subject to meaningful aggregation.
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.
Assets
Loans and other receivables
Liabilities
Borrowings (Note 11)
Investment contracts (Note 12)
December 31, 2020
December 31, 2019
Carrying
amount
(net)
Estimated
fair value
Carrying
amount
(net)
Estimated
fair value
$
$
3,842 $
3,970 $
4,113 $
4,208
75,067 $
2,049
86,171 $
2,547
90,882 $
2,191
97,754
2,588
The higher fair value in relation to carrying value for borrowings at December 31, 2020 compared to December 31, 2019 was driven
primarily by a decline in market interest rates. Unlike the carrying amount, the estimated fair value of borrowings included $898 million
and $1,106 million of accrued interest at December 31, 2020 and 2019, respectively.
Assets and liabilities that are reflected in the accompanying financial statements at fair value are not included in the above disclosures;
such items include cash and equivalents, investment securities and derivative financial instruments.
GE 2020 FORM 10-K 94
DERIVATIVES AND HEDGING. Our policy requires that derivatives are used solely for managing risks and not for speculative
purposes. Total gross notional was $95,874 million ($45,672 million in GE Capital and $50,202 million in GE Industrial) and $98,018
million ($55,704 million in GE Capital and $42,314 million in GE Industrial) at December 31, 2020 and 2019, respectively. GE Capital
notional relates primarily to managing interest rate and currency risk between financial assets and liabilities, and GE Industrial notional
relates primarily to managing currency risks related to foreign exchange, certain equity investments and commodity prices.
GE Industrial 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 Industrial 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.
FAIR VALUE OF DERIVATIVES
December 31, 2020
December 31, 2019
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
Gross
Notional
20,500 $
7,512
28,011 $
448 $
65,379
2,036
67,863 $
All other
assets
1,912 $
165
2,077 $
6 $
764
218
988 $
All other
liabilities
7 $
128
135 $
1 $
913
71
983 $
Gross
Notional
23,918 $
7,044
30,961 $
3,185 $
62,165
1,706
67,056 $
All other
assets
1,636 $
99
1,734 $
All other
liabilities
11
46
57
18 $
697
123
838 $
12
744
40
796
853
95,874 $
3,065 $
1,118 $
98,018 $
2,572 $
$
$
$
$
(647) $
(1,935)
(647)
(104)
483 $
— $
(2)
480 $
367
—
—
367
$
$
$
$
(546) $
(1,286)
(546)
(105)
740 $
182 $
(469)
452 $
202
1
—
203
It is standard market practice to post or receive cash collateral with our derivative counterparties in order to minimize counterparty
exposure. Included in GE Capital cash, cash equivalents and restricted cash was total net cash collateral received on derivatives of
$3,289 million (comprising $4,203 million received and $914 million posted) at December 31, 2020, and $1,584 million (comprising
$2,294 million received and $710 million posted) at December 31, 2019. Of these amounts, $1,968 million and $695 million at
December 31, 2020 and December 31, 2019, respectively, were received on interest rate derivatives traded through clearing houses,
which are recorded as a reduction of derivative assets.
Also included in total net cash collateral received are amounts presented as cash collateral adjustments in the table above, amounts
related to accrued interest on interest rate derivatives presented as a reduction of Net accrued interest of $292 million and $207 million
at December 31, 2020 and December 31, 2019, respectively, and excess net cash collateral posted of $802 million (comprising
$3 million received and $805 million posted) at December 31, 2020, and $499 million (comprising $104 million received and
$603 million posted) at December 31, 2019, which are excluded from cash collateral adjustments in the table above.
Securities held as collateral excluded excess collateral received of zero and $27 million at December 31, 2020 and December 31, 2019,
respectively. In the third quarter of 2020, one of our counterparties converted its collateral from securities to cash, which is in line with
our other derivative counterparties.
Fair value of derivatives in our consolidated Statement of Financial Position excludes accrued interest.
FAIR VALUE HEDGES. We use derivatives to hedge the effects of interest rate and currency exchange rate changes on our
borrowings. At December 31, 2020, the cumulative amount of hedging adjustments of $5,687 million (including $2,248 million on
discontinued hedging relationships) was included in the carrying amount of the hedged liability of $29,374 million. 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 $42,759 million. The cumulative amount of hedging adjustments was
primarily recorded in long-term borrowings.
GE 2020 FORM 10-K 95
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 AOCI and recorded in
earnings in the period in which the hedged transaction occurs. The gain (loss) recognized in AOCI was $(61) million, $25 million and
$(154) million for the years ended December 31, 2020, 2019 and 2018, respectively. The gain (loss) reclassified from AOCI to earnings
was $(7) million, $(60) million and $(102) million for the years ended December 31, 2020, 2019 and 2018, 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 $16 million gain at December 31, 2020. We
expect to reclassify $32 million of loss to earnings in the next 12 months contemporaneously with the earnings effects of the related
forecasted transactions. For all periods presented we recognized an immaterial amount related to hedged forecasted transactions and
firm commitments that did not occur by the end of the originally specified period. At December 31, 2020, 2019 and 2018, the maximum
term of derivative instruments that hedge forecasted transactions was 14 years, 13 years and 14 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.
The total gain (loss) recognized in AOCI on hedging instruments for the years ended December 31, 2020, 2019 and 2018 was $(675)
million, $120 million and $646 million, respectively, comprising $(41) million, $(36) million and $162 million on currency exchange
contracts and $(633) million, $156 million and $484 million on foreign currency debt, respectively. For all periods presented we
recognized an immaterial amount excluded from assessment and recognized in earnings.
The carrying value of foreign currency debt designated as net investment hedges was $8,348 million, $9,190 million and $12,458 million
at December 31, 2020, 2019 and 2018 respectively. The total reclassified from AOCI into earnings was zero, $7 million and $(1) million
for the years ended December 31, 2020, 2019 and 2018, respectively.
EFFECTS OF DERIVATIVES ON EARNINGS. All derivatives are marked to fair value on our Statement of Financial Position, whether
they are designated in a hedging relationship for accounting purposes or are used as economic hedges. For derivatives not designated
as hedging instruments, substantially all of the gain or loss recognized in earnings is offset by either the current period change in value
of underlying exposures which is recorded in earnings in the current period or a future period when the recording of the exposures
occurs.
The table below presents the effect of our derivative financial instruments in the consolidated Statement of Earnings (Loss):
Revenues
Cost of
sales
2020
Interest
Expense
SG&A
Other
Income
Revenues
Cost of
sales
2019
Interest
Expense
SG&A
Other
Income
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
$ 79,619 $ 60,421 $ 3,273 $ 12,621 $ 11,387 $ 95,214 $ 66,911 $ 4,227 $ 13,949 $ 2,222
$
88 $
(56) $
(40) $
1 $ — $
5 $
(24) $
(37) $
(3) $ —
$ (1,775)
1,743
$
(31)
$ (1,276)
1,229
$
(48)
Interest rate contracts
Currency exchange contracts
Other
$
(35) $ — $
(328)
—
16
—
(11) $ — $
—
—
129
86
8 $
19
(46)
(24) $ — $
180
(2)
(35)
—
(50) $ — $
—
195
(6)
—
(6)
(59)
7
Total effect of derivatives
not designated as hedges
$
(362) $
16 $
(11) $
215 $
(19) $
154 $
(35) $
145 $
(6) $
(58)
The gain (loss) excluded for cash flow hedges was $25 million and $(1) million for the years ended December 31, 2020 and 2019,
respectively. This amount is recognized primarily in Revenues in our consolidated Statement of Earnings (Loss).
GE 2020 FORM 10-K 96
COUNTERPARTY CREDIT RISK. We manage the risk that counterparties will default and not make payments to us according to the
terms of our agreements on an individual counterparty basis. Where we have agreed to netting of derivative exposures with a
counterparty, we net our exposures with that counterparty and apply the value of collateral posted to us to determine the exposure. We
actively monitor these net exposures against defined limits and take appropriate actions in response, including requiring additional
collateral. Our exposures to counterparties (including accrued interest), net of collateral we held, was $388 million and $368 million at
December 31, 2020 and 2019, respectively. Counterparties' exposures to our derivative liability (including accrued interest), net of
collateral posted by us, was $304 million and $159 million at December 31, 2020 and 2019, respectively.
NOTE 22. VARIABLE INTEREST ENTITIES. In addition to the three VIEs detailed in Note 4, in our consolidated Statement of
Financial Position, we have additional consolidated VIEs with assets of $1,888 million and $1,740 million, and liabilities of $812 million
and $943 million, inclusive of intercompany eliminations, at December 31, 2020 and 2019, respectively. 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, 2020 can only be used to settle the liabilities of those VIEs.
Our investments in unconsolidated VIEs were $3,378 million and $1,937 million, at December 31, 2020 and 2019, respectively. These
investments are primarily owned by GE Capital businesses of which $1,141 million and $621 million were owned by EFS and
comprised of equity method investments, primarily renewable energy tax equity investments, at December 31, 2020 and 2019,
respectively. In addition, $1,833 million and $896 million were owned by our run-off insurance operations, primarily comprising
investment securities, at December 31, 2020 and 2019, respectively. The increase in investments in unconsolidated VIEs in our run-off
insurance operations reflects implementation of our revised reinvestment plan which incorporates the introduction of strategic initiatives
to invest in higher-yielding asset classes. Our maximum exposure to loss in respect of unconsolidated VIEs is increased by our
commitments to make additional investments in these entities described in Note 23.
NOTE 23. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES AND OTHER LOSS CONTINGENCIES
COMMITMENTS. The GECAS business within our Capital segment has placed multiple-year orders with various Boeing, Airbus and
other aircraft manufacturers with list prices approximating $26,760 million, excluding pre-delivery payments made in advance (including
279 new aircraft with delivery dates of 25% in 2021, 14% in 2022 and 61% in 2023 through 2026) and secondary orders with airlines for
used aircraft of approximately $1,985 million (including 43 used aircraft with delivery dates of 72% in 2021, 21% in 2022 and 7% in
2023) at December 31, 2020. 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, 2020, we have made $2,871 million of pre-delivery payments to aircraft manufacturers.
During 2020, GECAS agreed with Boeing to restructure its 737 MAX orderbook including previously canceled positions, resulting in 77
orders now remaining.
GE Capital had total investment commitments of $1,957 million at December 31, 2020. The commitments primarily comprise project
financing investments in thermal and wind energy projects of $684 million and investments by our run-off insurance operations in
investment securities and other assets of $1,249 million, and included within these commitments are obligations to make additional
investments in unconsolidated VIEs of $549 million and $1,047 million, respectively. See Note 22 for further information.
As of December 31, 2020, in our Aviation segment, we have committed to provide financing assistance of $1,935 million of future
customer acquisitions of aircraft equipped with our engines.
GUARANTEES. At December 31, 2020, we were committed under the following guarantee arrangements:
Credit Support. At December 31, 2020, we have provided $1,525 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 $46 million.
Indemnification Agreements – Continuing Operations. At December 31, 2020, we have $1,455 million of other indemnification
commitments, including representations and warranties in sales of businesses or assets, for which we recorded a liability of $142
million.
Indemnification Agreements – Discontinued Operations. At December 31, 2020, we have provided specific indemnities to buyers of
GE Capital’s assets that, in the aggregate, represent a maximum potential claim of $630 million with the related reserves of $104
million.
PRODUCT WARRANTIES. We provide for estimated product warranty expenses when we sell the related products. Because warranty
estimates are forecasts that are based on the best available information, mostly historical claims experience, claims costs may differ
from amounts provided. An analysis of changes in the liability for product warranties follows.
Balance at January 1
Current-year provisions
Expenditures
Other changes
Balance at December 31
$
$
2020
2,165 $
788
(913)
14
2,054 $
2019
2,192 $
713
(715)
(26)
2,165 $
2018
2,103
945
(788)
(69)
2,192
GE 2020 FORM 10-K 97
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.
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
Slovenia that are described below. The reserve balance was $858 million and $875 million at December 31, 2020 and December 31,
2019, respectively.
Regardless of jurisdiction, the allegations relate to claimed anti-competitive conduct or improper payments in the pre-acquisition period
as the source of legal violations and/or damages. Given the significant litigation and compliance activity related to these matters and our
ongoing efforts to resolve them, it is difficult to assess whether the disbursements will ultimately be consistent with the reserve
established. The estimation of this reserve involved significant judgment and may not reflect the full range of uncertainties and
unpredictable outcomes inherent in litigation and investigations of this nature, and at this time we are unable to develop a meaningful
estimate of the range of reasonably possible additional losses beyond the amount of this reserve. Damages sought may include
disgorgement of profits on the underlying business transactions, fines and/or penalties, interest, or other forms of resolution. Factors
that can affect the ultimate amount of losses associated with these and related matters include the way cooperation is assessed and
valued, prosecutorial discretion in the determination of damages, formulas for determining fines and penalties, the duration and amount
of legal and investigative resources applied, political and social influences within each jurisdiction, and tax consequences of any
settlements or previous deductions, among other considerations. Actual losses arising from claims in these and related matters could
exceed the amount provided.
In connection with alleged improper payments by Alstom relating to contracts won in 2006 and 2008 for work on a state-owned power
plant in Šoštanj, Slovenia, the power plant owner in January 2017 filed an arbitration claim for damages of approximately $430 million
before the International Chamber of Commerce Court of Arbitration in Vienna, Austria. In February 2017, a government investigation in
Slovenia of the same underlying conduct proceeded to an investigative phase overseen by a judge of the Celje District Court. In
September 2020, the relevant Alstom legacy entity was served with an indictment, which we had anticipated as we are working with the
parties to resolve these matters.
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. In January 2021, the court granted defendants’ motion to dismiss as to the majority of
the claims. Specifically, the court dismissed all claims related to insurance reserves, as well as all claims related to accounting for long-
term service agreements, with the exception of certain claims about historic disclosures related to factoring in the Power business that
survive as to GE and its former CFO Jeffrey S. Bornstein. All other individual defendants have been dismissed from the case. In
addition, the court denied the plaintiffs’ request to amend their complaint again.
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). Six shareholder derivative lawsuits are currently pending: the
Bennett case, which was filed in Massachusetts state court; the Cuker, Lindsey, Priest and Tola cases, which were filed in New York
state court; and the Burden case, which was filed in the U.S. District Court for the Southern District of New York. These lawsuits have
alleged violations of securities laws, breaches of fiduciary duties, unjust enrichment, waste of corporate assets, abuse of control and
gross mismanagement, although the specific matters underlying the allegations in the lawsuits have varied. The allegations in the
Bennett, Lindsey, Priest, Tola and Burden cases 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 plaintiffs seek unspecified damages
and improvements in GE’s corporate governance and internal procedures. The Bennett case has been stayed pending final resolution
of another shareholder derivative lawsuit (the Gammel case) that was previously dismissed. In August 2019, the Cuker plaintiffs filed an
amended complaint, and GE in September 2019 filed a motion to dismiss the amended complaint. The Lindsey case has been stayed
by agreement of the parties.
GE 2020 FORM 10-K 98
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
December 2020, the court granted GE's motion to dismiss and dismissed the second amended complaint with prejudice.
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. The court denied both motions for re-argument, and in November
2020, the Appellate Division First Department affirmed the court's denial of GE's motion to dismiss. In January 2021, GE filed a motion
for leave to appeal to the New York Court of Appeals.
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. In March 2020, the
court granted GE’s motion to dismiss the case, and in February 2021, the Second Circuit in the plaintiffs' appeal affirmed the lower
court's dismissal.
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 May 2020, the court granted GE's
motion to dismiss the case, and in February 2021, the Second Circuit in the plaintiffs' appeal affirmed the lower court's dismissal.
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.
GE 2020 FORM 10-K 99
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 October 2020, the special
litigation committee filed a report with the Court recommending that the derivative action be terminated.
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. In February 2020, GE and the other defendants filed a motion to dismiss
the amended consolidated complaint. In October 2020, the court dismissed all claims asserted against GE, allowing only the claim
against the former BHI CEO to move forward.
SEC investigation. As previously reported in a Form 8-K filing on December 9, 2020, GE reached a settlement with the SEC in
connection with the SEC investigation that we had previously disclosed. Consistent with common SEC practice, GE neither admits nor
denies the findings in the administrative order that the SEC issued in connection with the settlement. Under the terms of the settlement,
GE in December 2020 paid a civil penalty of $200 million and consented to an order requiring it to cease and desist from violations of
specified provisions of the federal securities laws and rules promulgated thereunder. In addition, GE agreed to cooperation obligations
and to report during a one-year period to the SEC about compliance related to its Power business and GE Capital’s run-off insurance
operations.
The SEC's order contains findings related to disclosures with respect to GE’s Power business during the 2015–2017 time period and
disclosures and internal controls with respect to GE Capital’s run-off insurance operations during the third quarter of 2015 through the
first quarter of 2017. The settlement concluded and resolved the SEC investigation of GE in its entirety.
The SEC’s order makes no allegation that prior period financial statements were misstated. This settlement did not require corrections
or restatements of GE’s previously reported financial statements, and GE stands behind its financial reporting.
GE cooperated with the SEC over the course of its investigation. As noted in the order, GE has taken a number of steps since the time
periods covered by the investigation to enhance its investor disclosures regarding power and insurance trends and risks, as well as
enhancing internal controls on its insurance premium deficiency testing (also known as loss recognition testing) process and adding
disclosure controls and procedures concerning its insurance liabilities.
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.
Bank BPH. As previously reported, GE Capital’s subsidiary Bank BPH, along with other Polish banks, has been subject to ongoing
litigation in Poland related to its portfolio of floating rate residential mortgage loans, with cases brought by individual borrowers seeking
relief related to their foreign currency-denominated mortgage loans in various courts throughout Poland. At December 31, 2020,
approximately 87% of the Bank BPH portfolio is indexed to or denominated in foreign currencies (primarily Swiss francs), and the total
portfolio had a carrying value of $2,437 million. We continue to observe an increase in the number of lawsuits being brought against
Bank BPH and other banks in Poland, and this is likely to continue in future reporting periods.
GE 2020 FORM 10-K 100
We estimate potential losses for Bank BPH in connection with borrower litigation cases that are pending by recording legal reserves, as
well as in connection with potential future cases or other adverse developments as part of our ongoing valuation of the Bank BPH
portfolio, which we record at the lower of cost or fair value, less cost to sell. At December 31, 2020, the total amount of such estimated
losses was $315 million. We have updated our assumptions underlying this amount over time in response to the trends we have
previously reported of there being an increase in the number of lawsuits filed, more findings of liability and more severe remedies being
ordered against Polish banks, including Bank BPH. We also expect these trends to continue in future reporting periods, although Bank
BPH is unable at this time to develop a meaningful estimate of reasonably possible losses associated with active and inactive Bank
BPH mortgage loans beyond the amounts currently recorded. These estimates involve significant judgment, including assumptions
about the number of borrowers that will file lawsuits, whether liability will be established in lawsuits and the nature of the remedy that a
court will order if liability is established, as well as the following factors: uncertainty related to how Polish courts will interpret and apply
prior judicial decisions; the pendency of potentially significant judicial decisions that we anticipate will be issued in the first half of 2021,
including a decision by the European Court of Justice (ECJ) on the case involving a Bank BPH mortgage loan that was referred to the
ECJ in January 2020 and one or more binding resolutions from the Polish Supreme Court; uncertainty related to a proposal by the
Chairman of the Polish Financial Supervisory Authority in December 2020 that banks voluntarily offer borrowers an opportunity to
convert their foreign currency-denominated mortgage loans to Polish zlotys using an exchange rate applicable at the date of loan
origination, and about the approaches that other Polish banks will adopt in response to this proposal; and uncertainty arising from a
decision of the Polish Office of Competition and Consumer Protection (UOKiK) in December 2020 which found that certain foreign
exchange clauses that appear in certain of Bank BPH’s mortgage loan agreements are unfair contractual terms under Polish law.
Future adverse developments related to any of these factors, or other factors such as potential regulatory or legislative relief across the
Polish banking industry, could have a material adverse effect on Bank BPH and the carrying value of its mortgage loan portfolio and
could result in significant losses beyond the amount that we currently estimate.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. 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 $2,569 million and $2,484 million at December 31, 2020 and 2019, 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 the EPA’s release in September 2015 of an intended final remediation
decision, GE and the EPA engaged in mediation and the first step of the dispute resolution process contemplated by the consent
decree. In October 2016, the EPA issued its final decision pursuant to the consent decree, which GE and several other interested
parties appealed to the EPA’s Environmental Appeals Board (EAB). The EAB issued its decision in January 2018, affirming parts of the
EPA’s decision and granting relief to GE on certain significant elements of its challenge. The EAB remanded the decision back to the
EPA to address those elements and reissue a revised final remedy, and the EPA convened a mediation process with GE and interested
stakeholders. In February 2020, the EPA announced an agreement between the EPA and many of the mediation stakeholders, including
GE, concerning a revised Housatonic River remedy. Based on the mediated resolution, the EPA solicited public comment on a draft
permit in July 2020 and issued the final revised permit effective January 4, 2021. As of December 31, 2020, 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 $247 million, $236
million and $214 million for the years ended December 31, 2020, 2019 and 2018, respectively. We presently expect that such
expenditures will be approximately $350 million and $240 million in 2021 and 2022, respectively.
GE 2020 FORM 10-K 101
NOTE 24. INTERCOMPANY TRANSACTIONS
Presented below is a walk of intercompany eliminations from the combined GE Industrial and GE Capital totals to the consolidated cash
flows for continuing operations.
Combined GE Industrial and GE Capital cash from (used for) operating activities
GE Industrial current receivables sold to GE Capital(a)
GE Industrial long-term receivables sold to GE Capital(b)
Supply chain finance programs(c)
Other reclassifications and eliminations
Consolidated cash from (used for) operating activities
Combined GE Industrial and GE Capital cash from (used for) investing activities
GE Industrial current receivables sold to GE Capital
GE Industrial long-term receivables sold to GE Capital(b)
Supply chain finance programs(c)
GE Capital loans to GE Industrial
Repayment of GE Capital loans by GE Industrial
Capital contribution from GE Industrial to GE Capital
Other reclassifications and eliminations
Consolidated cash from (used for) investing activities
Combined GE Industrial and GE Capital cash from (used for) financing activities
GE Industrial current receivables sold to GE Capital
GE Capital loans to GE Industrial
Repayment of GE Capital loans by GE Industrial
Capital contribution from GE Industrial to GE Capital
Other reclassifications and eliminations
Consolidated cash from (used for) financing activities
$
$
$
$
$
2020
2,240 $
(597)
312
2,002
(360)
3,597 $
25,960 $
496
(312)
(2,002)
—
(9,049)
2,000
(315)
16,778 $
2019
6,495 $
1,081
468
2,289
86
10,419 $
13,509 $
(1,677)
(468)
(2,289)
—
(1,523)
4,000
(868)
10,684 $
(27,678) $
(14,665) $
102
—
9,049
(2,000)
675
596
—
1,523
(4,000)
782
$
(19,853) $
(15,764) $
2018
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)
(a) Included the elimination of $14,677 million, $14,716 million and $20,675 million payments to GE Industrial for current receivables
purchased and retained by GE Capital and the related reclassification to CFOA of $14,079 million, $15,797 million and
$20,680 million due to GE Capital collections and other activity in our consolidated Statement of Cash Flows for the years ended
December 31, 2020, 2019 and 2018, respectively.
(b) Primarily included the reclassification of long-term receivables purchased and retained by GE Capital to current receivables.
(c) Represents the elimination of net payments from GE Industrial to GE Capital related to the funded participation in a supply chain
finance program with GE Capital. The reduction of the GE Industrial liability associated with this program is primarily as a result of
GE Capital's sale of the program platform to MUFG Union Bank, N.A. (MUFG) in 2019.
NOTE 25. 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, 2020 can be found in the Segment Operation section within MD&A.
REVENUES
Years ended December 31
Power
Renewable Energy
Aviation
Healthcare
Capital
Corporate items
and eliminations
Total revenues(a)
Intersegment revenues(b)(c)
External revenues
2018
2020
2019
$ 17,589 $ 18,625 $ 22,150 $
15,666 15,337 14,288
22,042 32,875 30,566
18,009 19,942 19,784
9,551
8,741
7,245
2020
352 $
142
1,445
1
566
2019
357 $
139
758
—
971
2020
2019
2018
2018
152 $ 17,237 $ 18,267 $ 21,997
15,523 15,198 14,102
186
20,597 32,117 30,191
375
18,008 19,942 19,784
—
8,167
1,384
6,679
7,770
Total
$ 79,619 $ 95,214 $ 97,012 $
— $
— $
(932)
(305)
673
(2,507)
(2,225)
(2,097)
2,770
— $ 79,619 $ 95,214 $ 97,012
1,575
1,920
(a) Revenues of GE Industrial 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.
(c) The increase in intersegment revenues in 2020 at Aviation is primarily driven by higher sales to the Aeroderivative joint venture
between our Power segment and Baker Hughes, partially offset by lower spare sales to our GECAS business.
The equipment and services revenues classification in the table below is consistent with our segment MD&A presentation.
GE 2020 FORM 10-K 102
Power
Renewable Energy
Aviation
Healthcare
Corporate items and industrial
eliminations
Total GE Industrial revenues
SEGMENT REVENUES
Gas Power
Power Portfolio
Power
Onshore Wind
Grid Solutions equipment and services
Hydro, Offshore Wind and Hybrid Solutions
Renewable Energy
Commercial Engines & Services
Military
Systems & Other
Aviation
Healthcare Systems
Pharmaceutical Diagnostics
BioPharma
Healthcare
Corporate items and industrial eliminations
Total GE Industrial revenues
Capital(a)
GE Capital-GE Industrial eliminations
Consolidated revenues
2020
Years ended December 31
2019
2018
Total
Equipment Services
Equipment Services
$ 6,707 $ 10,883 $ 17,589 $ 6,247 $ 12,378 $ 18,625 $ 8,077 $ 14,073 $ 22,150
11,419 2,870 14,288
12,267 3,069 15,337
12,859 2,807 15,666
11,499 19,067 30,566
12,737 20,138 32,875
8,582 13,460 22,042
11,422 8,363 19,784
11,585 8,357 19,942
9,992 8,017 18,009
Equipment Services
Total
Total
(520)
987 2,250
$ 37,620 $ 35,480 $ 73,100 $ 43,080 $ 44,639 $ 87,719 $ 43,679 $ 45,359 $ 89,038
1,263
(206)
697
314
243
940
Years ended December 31
2020
2019
12,655 $
13,122 $
4,935
5,503
17,589 $
18,625 $
10,881 $
10,421 $
3,585
1,200
15,666 $
4,016
900
15,337 $
13,017 $
24,217 $
4,572
4,453
4,389
4,269
22,042 $
32,875 $
15,387 $
14,648 $
1,792
830
18,009 $
2,005
3,289
19,942 $
(206) $
940 $
73,100
87,719
7,245 $
(726)
79,619 $
8,741 $
(1,245)
95,214 $
2018
13,296
8,853
22,150
8,220
4,579
1,489
14,288
22,724
4,103
3,740
30,566
14,886
1,888
3,010
19,784
2,250
89,038
9,551
(1,577)
97,012
$
$
$
$
$
$
$
$
$
$
$
(a) Substantially all of our revenues at GE Capital are outside of the scope of ASC 606.
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.
Year ended December 31, 2020
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
Renewable
Energy
$ 7,846
Aviation
$ 11,239
Healthcare
$ 7,611
Capital
$ 3,550
Corporate
items and
eliminations
$
Total
(1,117) $ 35,314
3,047
2,640
819
1,314
$ 7,820
$ 15,666
4,288
3,920
882
1,713
$ 10,803
$ 22,042
3,952
4,719
879
848
$ 10,398
$ 18,009
1,395
997
639
664
$ 3,695
$ 7,245
$
$
155
(20)
(2)
52
15,733
16,216
4,701
7,655
185 $ 44,305
(932) $ 79,619
Power
$ 6,186
2,895
3,961
1,483
3,064
$ 11,403
$ 17,589
65 %
50 %
49 %
58 %
51 %
56 %
GE 2020 FORM 10-K 103
Year ended December 31, 2019
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
Year ended December 31, 2018
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
Renewable
Energy
$ 7,413
Aviation
$ 13,384
Healthcare
$ 8,526
Capital
$ 4,149
Corporate
items and
eliminations
$
Total
(93) $ 39,372
2,925
2,737
1,064
1,198
$ 7,924
$ 15,337
7,452
6,641
1,593
3,805
$ 19,491
$ 32,875
4,132
5,436
1,056
792
$ 11,416
$ 19,942
1,577
1,454
742
819
$ 4,592
$ 8,741
$
$
(135)
(130)
(33)
86
19,092
20,156
6,336
10,259
(212) $ 55,843
(305) $ 95,214
Power
$ 5,992
3,140
4,018
1,915
3,560
$ 12,633
$ 18,625
68 %
52 %
59 %
57 %
53 %
59 %
$ 7,456
$ 4,912
$ 12,529
$ 8,574
$ 5,282
$
1,124 $ 39,876
4,538
4,072
2,546
3,538
$ 14,694
$ 22,150
3,212
2,933
2,179
1,052
$ 9,376
$ 14,288
7,027
5,787
1,459
3,764
$ 18,037
$ 30,566
4,164
5,219
988
839
$ 11,210
$ 19,784
1,383
1,368
632
886
$ 4,269
$ 9,551
$
$
(496)
(79)
87
37
19,828
19,300
7,892
10,117
(451) $ 57,136
673 $ 97,012
66 %
66 %
59 %
57 %
45 %
59 %
REMAINING PERFORMANCE OBLIGATION. As of December 31, 2020, the aggregate amount of the contracted revenues allocated
to our unsatisfied (or partially unsatisfied) performance obligations was $230,600 million. We expect to recognize revenue as we satisfy
our remaining performance obligations as follows: 1) equipment-related remaining performance obligation of $45,991 million of which
58%, 80% and 98% is expected to be recognized within 1, 2 and 5 years, respectively, and the remaining thereafter; and 2) services-
related remaining performance obligations of $184,608 million of which 14%, 45%, 65% and 81% is expected to be recognized within 1,
5, 10 and 15 years, respectively, and the remaining thereafter. Contract modifications could affect both the timing to complete as well as
the amount to be received as we fulfill the related remaining performance obligations.
Total sales of goods and services to agencies of the U.S. Government were 7%, 5% and 5% of GE Industrial revenues for the years
ended December 31, 2020, 2019 and 2018, respectively. Within our Aviation segment, defense-related sales were 6%, 5% and 4% of
GE Industrial revenues for the years ended December 31, 2020, 2019 and 2018, respectively.
PROFIT AND EARNINGS For the years ended December 31
Power
Renewable Energy
Aviation
Healthcare
Capital
Total segment profit
Corporate items and eliminations
GE Industrial goodwill impairments
GE Industrial interest and other financial charges
GE Industrial non-operating benefit costs
GE Industrial 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
$
$
2020
274 $
(715)
1,229
3,060
(1,710)
2,138
8,239
(877)
(1,333)
(2,424)
(388)
5,355
(125)
—
(125)
5,230 $
2019
291 $
(791)
6,812
3,737
(530)
9,519
(1,825)
(1,486)
(2,115)
(2,828)
(1,309)
(44)
(5,335)
60
(5,395)
(5,439) $
2018
(1,105)
140
6,454
3,522
(489)
8,521
(2,201)
(22,136)
(2,415)
(2,740)
(467)
(21,438)
(1,363)
1
(1,364)
(22,802)
GE 2020 FORM 10-K 104
For the years ended December 31
Capital
Corporate items and eliminations(a)
Total
Interest and other financial charges
Benefit (provision) for income taxes
2020
2,186 $
1,087
3,273 $
2019
2,532 $
1,695
4,227 $
2018
2,982 $
1,784
4,766 $
$
$
2020
862 $
(388)
474 $
2019
582 $
(1,309)
(726) $
2018
374
(467)
(93)
(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
Power
Renewable Energy
Aviation
Healthcare
Capital(c)
Corporate items
and eliminations(d)
Total continuing
2018
2020
2019
$ 24,453 $ 26,731 $ 27,389 $
15,927 15,935 16,400
38,634 41,083 37,488
22,229 30,503 28,037
113,526 117,546 119,329
2020
245 $
302
737
256
1,765
2019
277 $
455
1,031
395
3,830
2018
358 $
303
1,070
378
4,569
2020
749 $
413
1,142
628
2,590
2019
2018
880 $ 1,307
425
474
1,042
1,150
702
832
2,163
2,083
35,151 29,269 18,043
763
$ 249,920 $ 261,068 $ 246,686 $ 3,252 $ 5,813 $ 6,632 $ 6,018 $ 5,595 $ 6,582
(175)
494
355
(51)
(46)
(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 Industrial deferred income taxes that are presented as assets for purposes of our balance sheet presentation.
We classify certain assets that cannot meaningfully be associated with specific geographic areas as “Other Global” for this purpose.
December 31
U.S.
Non-U.S.
Europe
Asia
Americas
Other Global
Total Non-U.S.
Total assets (Continuing Operations)
2020
2019
$ 148,963 $ 143,534
58,301
20,630
10,795
11,230
70,565
22,089
13,435
11,445
$ 100,956 $ 117,534
$ 249,920 $ 261,068
The decrease in continuing assets in 2020 was primarily driven by lower volume and the impact of COVID-19, higher net repayment of
borrowings, and funding of the GE Pension Plan. The sale of our BioPharma business caused a decrease in assets in different regions,
but was more than offset by the proceeds from the sale in the U.S.
Property, plant and equipment – net associated with operations based in the United States were $13,010 million and $13,447 million at
December 31, 2020 and 2019, respectively. Property, plant and equipment – net associated with operations based outside the United
States were $31,651 million and $32,432 million at December 31, 2020 and 2019, respectively.
GE 2020 FORM 10-K 105
NOTE 26. BAKER HUGHES SUMMARIZED FINANCIAL INFORMATION. We account for our remaining interest in Baker
Hughes (comprising 349.4 million shares with 33.8% ownership and a promissory note receivable as of December 31, 2020) at fair
value. The fair value of our interest in Baker Hughes at December 31, 2020 and 2019, was $7,319 million and $9,888 million,
respectively. We recognized a realized and unrealized pre-tax loss of $2,037 million ($1,562 million after-tax) based on a share price of
$20.85 and a pre-tax unrealized gain of $793 million ($626 million after-tax) based on a share price of $25.63 for the years ended
December 31, 2020 and 2019, respectively. The 2020 loss included a $54 million pre-tax derivative loss associated with the forward
sale of Baker Hughes shares pursuant to our previously announced program to monetize our Baker Hughes position. In October 2020,
we completed a forward sale of 28 million shares and received proceeds of $417 million. In January 2021, we completed a forward sale
of 38 million shares and received proceeds of $735 million. See Notes 2 and 3 for further information.
Summarized financial information of Baker Hughes is as follows.
For the years ended December 31
Revenues
Gross Profit
Net income (loss)
Net income (loss) attributable to the entity
(a) Financial information is from September 16, 2019 (date of deconsolidation) to December 31, 2019.
As of December 31
Current
Noncurrent
Total assets
Current
Noncurrent
Total liabilities
Noncontrolling interests
2020
20,705 $
3,199
(15,761)
(9,940)
2020
16,455 $
21,552
38,007 $
10,227 $
9,538
19,765 $
5,349 $
$
$
$
$
$
$
2019(a)
7,751
1,558
120
60
2019
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.
GE 2020 FORM 10-K 106
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information about our Executive Officers (As of February 1, 2021)
Name
Position
H. Lawrence Culp, Jr.
Carolina Dybeck Happe
Michael J. Holston
David L. Joyce
L. Kevin Cox
Kieran P. Murphy
Jérôme X. Pécresse
John Slattery
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
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 Aviation
Senior Vice President of General Electric Company;
President & CEO, GE Aviation Services, and Chairman, 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
October 2018
57
48 March 2020
58
64
57
57
April 2018
September 2016
February 2019
September 2018
53
September 2018
52
September 2020
49
September 2018
42
January 2019
52
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, Slattery and Timko, and Ms. Dybeck Happe.
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 March 2020, Ms. Dybeck Happe had been Chief Financial Officer of A.P. Moller - Maersk A/S since 2019 after
serving as Chief Financial Officer of Assa Abloy AB since 2012 until 2018.
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 July 2020, Mr. Slattery had been President and Chief Executive Officer of Commercial Aviation for Embraer, S.A.
since 2016 after serving as the Chief Commercial Officer for Embraer Commercial Aviation since 2012.
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 2021 Annual Meeting of Shareholders to be held May 4,
2021, which will be filed within 120 days of the end of our fiscal year ended December 31, 2020 (the 2021 Proxy Statement).
GE 2020 FORM 10-K 107
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, 2020, 2019 and 2018
Statement of Financial Position at December 31, 2020 and 2019
Statement of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Statement of Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018
Statement of Changes in Shareholders' Equity for the years ended December 31, 2020, 2019 and 2018
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)
4(h)
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)).
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)).
GE 2020 FORM 10-K 108
4(i)
4(j)
4(k)
4(l)
(10)
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 for the fiscal year ended December 31, 2015 (Commission file number 001-00035)).
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(gg) and (hh) 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)
(r)
(s)
(t)
(u)
(v)
(w)
(x)
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 for the fiscal year ended December 31, 1991 (Commission file
number 001-00035)).
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 for the fiscal year ended December 31, 1993 (Commission
file number 001-00035)).
General Electric Executive Life Insurance Plan, as amended and restated January 1, 2020.*
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 for the fiscal year ended December 31, 2002 (Commission
file number 001-00035)).
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 for the fiscal year ended December 31, 1993 (Commission file
number 001-00035)).
General Electric Supplementary Pension Plan, as amended effective January 1, 2020.*
General Electric Restoration Plan, effective January 1, 2021.*
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 for the fiscal year ended
December 31, 2018(Commission file number 001-00035)).
Form of Director Indemnification Agreement (Incorporated by reference to Exhibit 10(cc) to GE’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2018 (Commission file number 001-00035)).
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 for the fiscal year ended December 31, 2004
(Commission file number 001-00035)).
GE Retirement for the Good of the Company Program, as amended effective January 1, 2018.*
GE US Executive Severance Plan, effective January 1, 2021.*
GE Excess Benefits Plan, effective January 1, 2009 (Incorporated by reference to Exhibit 10(k) to GE’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2008 (Commission file number 001-00035)).
Amendment to GE Excess Benefits Plan, effective December 31, 2020.*
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 for the fiscal year ended December 31, 2008 (Commission
file number 001-00035)).
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 for
the fiscal year ended December 31, 2018 (Commission file number 001-00035)).
Amendment, dated August 18, 2020, to the 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(c) to
GE’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (Commission file number
001-00035)).
Form of Agreement for Stock Option Grants to Executive Officers under the General Electric Company 2007
Long-Term Incentive Plan, as of March 2020.*
Form of Agreement for Restricted Stock Unit Grants to Executive Officers under the General Electric Company
2007 Long-Term Incentive Plan, as of March 2020.*
Form of Agreement for Leadership Restricted Stock Unit Grants to Executive Officers under the General Electric
Company 2007 Long-Term Incentive Plan, as of September 2020.*
Form of Agreement for Performance Stock Unit Grants to Executive Officers in 2019 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 for the fiscal year ended December 31, 2019 (Commission file number 001-00035)).
Form of Agreement for Performance Stock Unit Grants to Executive Officers in 2020 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, 2020 (Incorporated by reference
to Exhibit 10(a) to GE’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (Commission file
number 001-00035)).
GE 2020 FORM 10-K 109
(y)
(z)
(aa)
(bb)
(cc)
(dd)
(ee)
(ff)
(gg)
(hh)
Employment Agreement between H. 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 for the fiscal year ended
December 31, 2018 (Commission file number 001-00035)).
Amendment No.1, effective August 18, 2020, to the Employment Agreement between H. Lawrence Culp, Jr. and
General Electric Company, effective October 1, 2018 (Incorporated by reference to Exhibit 10.1 to General
Electric Company’s Current Report on Form 8-K, dated August 20, 2020 (Commission file number 001-00035)).
Performance Share Grant Agreement for H. Lawrence Culp, Jr., dated August 18, 2020 (Incorporated by
reference to Exhibit 10.2 to General Electric Company’s Current Report on Form 8-K, dated August 20, 2020
(Commission file number 001-00035)).
Employment Agreement between Carolina Dybeck Happe and General Electric Company, effective November
24, 2019 (Incorporated by reference to Exhibit 10(z) to GE’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2019 (Commission file number 001-00035)).
Memorandum of Understanding between General Electric Company and Carolina Dybeck Happe, effective
March 1, 2020 (Incorporated by reference to Exhibit 10(c) to GE’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2020 (Commission file number 001-00035)).
Amendment No. 1, effective September 2, 2020, to the Employment Agreement between Carolina Dybeck Happe
and General Electric Company, effective November 24, 2019 (Incorporated by reference to Exhibit 10(d) to GE’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (Commission file number
001-00035)).
Performance Stock Unit Grant Agreement for Carolina Dybeck Happe, dated September 3, 2020 (Incorporated
by reference to Exhibit 10(e) to GE’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020
(Commission file number 001-00035)).
Separation Agreement & Release between General Electric Company and Jamie Miller, dated February 17, 2020
(Incorporated by reference to Exhibit 1.01 to GE's Current Report on Form 8-K, dated February 20, 2020
(Commission file number 001-00035)).
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)).
Three-Year Credit Agreement, dated as of April 17, 2020, among General Electric Company, as the Borrower,
JPMorgan Chase, N.A., as Administrative Agent, and the lenders party thereto (Incorporated by reference to
Exhibit 10.1 to GE's Current Report on Form 8-K, dated April 20, 2020 (Commission file number 001-00035)).
Statement re Computation of Per Share Earnings.**
Subsidiaries of Registrant.*
List of Subsidiary Guarantors and Issuers of Guaranteed Securities.*
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,
2020, formatted as Inline XBRL (eXtensible Business Reporting Language); (i) Statement of Earnings (Loss) for the years
ended December 31, 2020, 2019 and 2018, (ii) Statement of Financial Position at December 31, 2020 and 2019, (iii)
Statement of Cash Flows for the years ended December 31, 2020, 2019 and 2018, (iv) Statement of Comprehensive
Income (Loss) for the years ended December 31, 2020, 2019 and 2018, (v) Statement of Changes in Shareholders' Equity
for the years ended December 31, 2020, 2019 and 2018, and (vi) the Notes to Consolidated Financial Statements.*
(11)
(21)
(22)
(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 2020 FORM 10-K 110
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)
4, 10-18, 103-104
44-51
Not applicable
4
98-101
Not applicable
44
Not applicable
5-43
27, 94-97
56-106
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
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
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
52
Not applicable
107
(a)
(b), 92
(c)
(d)
108-110
Not applicable
112
(a) Incorporated by reference to “Compensation” in the 2021 Proxy Statement.
(b) Incorporated by reference to “Stock Ownership Information” in the 2021 Proxy Statement.
(c) Incorporated by reference to “Related Person Transactions” and “How We Assess Director Independence” in the 2021 Proxy
Statement.
(d) Incorporated by reference to “Independent Auditor Information” in the 2021 Proxy Statement.
GE 2020 FORM 10-K 111
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, 2020, 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 12th day of February 2021.
SIGNATURES
General Electric Company
(Registrant)
By
/s/ Thomas S. Timko
Thomas S. Timko
Vice President, Chief Accounting Officer and
Controller
(Principal Accounting 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/ Carolina Dybeck Happe
Carolina Dybeck Happe
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 12, 2021
Principal Accounting Officer
February 12, 2021
Principal Executive Officer
February 12, 2021
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Sébastien M. Bazin*
Ashton B. Carter
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 12, 2021
GE 2020 FORM 10-K 112
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 12, 2021
/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, Carolina Dybeck Happe, 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 12, 2021
/s/ Carolina Dybeck Happe
Carolina Dybeck Happe
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, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “report”), we, H. Lawrence
Culp, Jr. and Carolina Dybeck Happe, 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 12, 2021
/s/ H. Lawrence Culp, Jr.
H. Lawrence Culp, Jr.
Chief Executive Officer
/s/ Carolina Dybeck Happe
Carolina Dybeck Happe
Chief Financial Officer
E X EC U TIVE O FFICE S
General Electric Company
5 Necco Street, Boston, MA 02210
+1 (617) 443-3000
R EGI S TER ED O FFICE
General Electric Company
1 River Road, Schenectady, NY 12345
AN N UAL MEE TING
GE’s 2021 Annual Meeting of Shareholders will be held on Tuesday, May 4, 2021.
S H AR EHO LDER INFORMATION
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.
WHER E YOU C AN FIN D
MORE INFORMATION
2021
Sustainability Report
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.
FRONT COVER OPTION 1
S TOCK E XCHANGE INFORMATION
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 OR P OR ATE OM BUDSPE RSON
To report concerns related to compliance with the law, GE policies, or government contracting
requirements, write to GE Corporate Ombudsperson, P.O. Box 52560, Boston, MA 02205; or call
+1 (617) 443-3077; or send an email to ombudsperson@corporate.ge.com.
F ORM 10-K A ND OTHER REPORT S; CERTIFIC ATIONS
This 2020 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 2021 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.
PR OD UC T INFO RMATION
For information about GE’s consumer products and services, visit us at www.ge.com.
C ONTAC T THE GE BOARD OF DIREC TORS
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.
©2021 General Electric Company. Printed in U.S.A.
GE is a trademark of the General Electric Company. LinkedIn, the LinkedIn logo and the IN logo
are trademarks of LinkedIn Corporation. Other marks used throughout are trademarks and
service marks of their respective owners.
GE is a world-leading corporation:
2020 Annual Report
https://www.ge.com/investor-relations/
annual-report
2020 Diversity Annual Report
https://www.ge.com/about-us/diversity
2021 Proxy Statement
To be published later this year
https://www.ge.com/proxy
2021 Sustainability Report
To be published later this year
https://www.ge.com/sustainability
BACK COVER
The back cover of this report features GE
employees, including:
Logan Toynbee, Renewable Energy
Ashley Meaux, GE Digital
Lauren Duncan, Aviation
Donovan Buckley, GE Research
Tammy Franklin, Power
Jon Ohman, Aviation
Yanmang Zhang, Healthcare
Charles McKinney, Power
Forbes
World’s Best
Employers
Interbrand
Best Global
Brands
Universum
World’s Most
Attractive
Employers
Boston Business
Journal
Top Charitable
Contributor
NYSE
LISTED
The manufacturing facility that produced
this report is an EPA GreenPower Partner
that is powered by renewable energy
generated by GE wind turbines.
2020 Diversity Annual Report2020Annual Report2021Notice of Annual Meetingand Proxy Statement General Electric Company
5 Necco Street
Boston, MA 02210
www.ge.com