General Electric Company — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed February 11, 2022. Figures are U.S. dollars. The filing reports annual results, with selected fourth-quarter information. GE operates Aviation, Healthcare, Renewable Energy and Power. It changed to one-column consolidated reporting after completing the GECAS transaction; prior periods were re-presented.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $74.2 billion | $75.8 billion |
| Continuing earnings (loss) attributable to GE common shareholders | $(3.56) billion; $(3.25) per diluted share | $6.14 billion; $5.46 per diluted share |
| Net earnings (loss) attributable to GE common shareholders, including discontinued operations | $(6.76) billion; $(6.16) per diluted share | $5.23 billion; $4.63 per diluted share |
| GAAP profit (loss) margin | (5.0)% | 7.9% |
| Adjusted profit and margin (non-GAAP) | $4.61 billion; 6.5% | $2.25 billion; 3.1% |
| Cash from operating activities, continuing operations | $0.9 billion | $1.0 billion |
| Free cash flow (non-GAAP) | $1.9 billion | $0.6 billion |
| Total borrowings at year-end | $35.2 billion | $74.9 billion |
| Cash, cash equivalents and restricted cash at year-end | $15.8 billion | $36.5 billion |
GE had $14.4 billion of committed revolving credit facilities available at year-end, including a $10.0 billion unused syndicated facility. The company reported total remaining performance obligations of $239.8 billion, up 4% from 2020.
Segment results
- Aviation: Revenue $21.3 billion, down 3%; segment profit $2.9 billion, up from $1.2 billion. Recovery in commercial travel and higher shop-visit volume supported improvement, while air traffic remained below 2019 levels.
- Healthcare: Revenue $17.7 billion, down 2%; segment profit $3.0 billion, versus $3.1 billion. Orders and service activity improved, but supply constraints delayed delivery and revenue conversion.
- Renewable Energy: Revenue $15.7 billion, approximately flat; segment loss widened to $0.8 billion from $0.7 billion. Onshore Wind faced project delays and lower repower deliveries, while new-product costs and Grid performance weighed on results.
- Power: Revenue $16.9 billion, down 4%; segment profit increased to $0.7 billion from $0.3 billion, principally on stronger Gas Power services and cost actions.
Material changes and unusual items
- Revenue declined 2% year over year. Organic equipment revenue fell 8%, partly offset by 4% growth in organic services revenue.
- Continuing results swung from profit to loss. Key factors included the nonrecurrence of the $12.4 billion BioPharma sale gain recorded in 2020 and $6.5 billion of 2021 debt extinguishment costs. Higher segment profit and equity-security gains partly offset these items.
- GE completed the GECAS combination with AerCap on November 1, receiving $22.6 billion cash, 111.5 million AerCap shares valued at about $6.6 billion at closing, and a $1.0 billion AerCap note. GE recorded a $3.9 billion after-tax loss in discontinued operations and expects to monetize its AerCap stake over time.
- GE repurchased $32.6 billion of debt in 2021 and recorded a $6.1 billion after-tax extinguishment loss. Management expects lower interest expense as a result.
- GE discontinued most factoring programs during 2021. Management reported a $5.1 billion adverse CFOA effect for the nine months ended December 31, associated with cash collections that would otherwise have occurred in the period; GE excludes this effect from its reported free cash flow measure.
- Healthcare acquired BK Medical for approximately $1.5 billion in cash. GE also completed a 1-for-8 reverse stock split in August 2021; share and per-share comparatives were retrospectively restated.
Outlook, management commentary and risks
- GE announced plans to create three public companies: Aviation; Healthcare, targeted for a tax-free spin-off in early 2023, with GE expecting to retain 19.9%; and combined Renewable Energy, Power and Digital, targeted for a spin-off in early 2024. These are plans, not completed transactions, and depend on approvals, tax treatment, financing and other conditions. The filing does not provide specific consolidated earnings or revenue guidance for 2022.
- Management cited continuing COVID-19 uncertainty, aviation market recovery, inflation, supply-chain shortages and delays, and customer or project timing as factors that could affect results. Healthcare supply constraints delayed conversion of orders into revenue; Renewable Energy also faced cost, permitting and policy uncertainty.
- At year-end, Moody’s rated GE Baa1 with a negative outlook, S&P BBB+ and on CreditWatch with negative implications, and Fitch BBB with a stable outlook. GE stated that further downgrades could affect funding costs, liquidity and commercial activity.
- GE expected approximately $5.5 billion of additional capital contributions to its run-off insurance subsidiaries through 2024, including about $2.0 billion in first-quarter 2022, subject to statutory testing and regulatory monitoring. Its 2021 GAAP insurance premium-deficiency test showed an approximately 11% positive margin, but results remain sensitive to actuarial and investment assumptions.
- Bank BPH’s Polish foreign-currency mortgage portfolio remained exposed to borrower litigation and further losses or capital needs. Environmental, product-liability, regulatory and Alstom-related matters also carry uncertainty; the filing says a meaningful estimate of possible additional losses cannot be made for certain matters.
- Subsequent to year-end, GE disclosed a non-binding agreement to sell part of Steam Power to EDF. GE expected a non-cash pre-tax impairment of approximately $0.7–$0.8 billion; any sale remained subject to conditions and was expected to close in the first half of 2023.
Most important facts for investors to verify
- Reconcile GAAP losses to adjusted profit and EPS, with particular attention to debt tender costs, equity-security marks, discontinued operations and other exclusions.
- Assess recurring cash generation separately from working-capital effects, discontinued factoring, collateral movements and asset-sale proceeds.
- Track execution and financing of the planned Healthcare and energy-business separations, including tax consequences and the effect on credit ratings.
- Monitor Aviation recovery, Renewable Energy profitability, supply-chain constraints and progress converting the $239.8 billion RPO balance into revenue and cash.
- Review insurance statutory capital requirements, reserve assumptions and Bank BPH litigation exposure, alongside other material legal and environmental contingencies.
The auditor issued an unqualified opinion on the 2021 financial statements and internal control over financial reporting. The filing identifies long-term service agreement revenue estimates and insurance premium-deficiency testing as critical audit matters.