filings.toolsItem 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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Item 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| Condensed Consolidated Statements of Income (Unaudited) | ||||||||||||||||||||
| For the three months ended June 30 | For the six months ended June 30 | |||||||||||||||||||
| (In millions, except per share amounts) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||
| Sales of products | $ | 3,207 | $ | 3,213 | $ | 6,253 | $ | 6,344 | ||||||||||||
| Sales of services | 1,632 | 1,604 | 3,237 | 3,180 | ||||||||||||||||
| Total revenues | 4,839 | 4,817 | 9,489 | 9,524 | ||||||||||||||||
| Cost of products | 2,045 | 2,084 | 4,012 | 4,121 | ||||||||||||||||
| Cost of services | 792 | 793 | 1,574 | 1,572 | ||||||||||||||||
| Gross profit | 2,002 | 1,940 | 3,904 | 3,831 | ||||||||||||||||
| Selling, general, and administrative | 1,067 | 1,072 | 2,105 | 2,134 | ||||||||||||||||
| Research and development | 327 | 298 | 651 | 568 | ||||||||||||||||
| Total operating expenses | 1,395 | 1,370 | 2,756 | 2,702 | ||||||||||||||||
| Operating income | 608 | 570 | 1,148 | 1,129 | ||||||||||||||||
| Interest and other financial charges – net | 131 | 137 | 254 | 273 | ||||||||||||||||
| Non-operating benefit (income) costs | (101) | (123) | (204) | (238) | ||||||||||||||||
| Other (income) expense – net | (1) | (14) | 8 | (22) | ||||||||||||||||
| Income before income taxes | 578 | 570 | 1,090 | 1,116 | ||||||||||||||||
| Benefit (provision) for income taxes | (143) | (137) | (267) | (300) | ||||||||||||||||
| Net income | 435 | 433 | 823 | 816 | ||||||||||||||||
| Net (income) loss attributable to noncontrolling interests | (7) | (15) | (21) | (26) | ||||||||||||||||
| Net income attributable to GE HealthCare | 428 | 418 | 802 | 790 | ||||||||||||||||
| Deemed preferred stock dividend of redeemable noncontrolling interest | — | — | — | (183) | ||||||||||||||||
| Net income attributable to GE HealthCare common stockholders | $ | 428 | $ | 418 | $ | 802 | $ | 607 | ||||||||||||
| Earnings per share attributable to GE HealthCare common stockholders: | ||||||||||||||||||||
| Basic | $ | 0.94 | $ | 0.92 | $ | 1.76 | $ | 1.34 | ||||||||||||
| Diluted | $ | 0.93 | $ | 0.91 | $ | 1.75 | $ | 1.33 | ||||||||||||
| Weighted-average number of shares outstanding: | ||||||||||||||||||||
| Basic | 457 | 455 | 456 | 455 | ||||||||||||||||
| Diluted | 459 | 458 | 459 | 458 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | ||||||||||||||||||||
| For the three months ended June 30 | For the six months ended June 30 | |||||||||||||||||||
| (In millions, net of tax) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||
| Net income attributable to GE HealthCare | $ | 428 | $ | 418 | $ | 802 | $ | 790 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 7 | 15 | 21 | 26 | ||||||||||||||||
| Net income | 435 | 433 | 823 | 816 | ||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||
| Currency translation adjustments – net of taxes | (30) | 3 | (106) | 60 | ||||||||||||||||
| Pension and Other Postretirement Plans – net of taxes | (36) | (18) | (71) | (83) | ||||||||||||||||
| Cash flow hedges – net of taxes | 8 | 10 | 24 | (29) | ||||||||||||||||
| Other comprehensive income (loss) | (58) | (5) | (154) | (52) | ||||||||||||||||
| Comprehensive income (loss) | 377 | 428 | 669 | 764 | ||||||||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interests | 7 | 15 | 21 | 26 | ||||||||||||||||
| Comprehensive income attributable to GE HealthCare | $ | 370 | $ | 413 | $ | 648 | $ | 738 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| Condensed Consolidated Statements of Financial Position (Unaudited) | ||||||||
| As of | ||||||||
| (In millions, except share and per share amounts) | June 30, 2024 | December 31, 2023 | ||||||
| Cash, cash equivalents, and restricted cash | $ | 2,015 | $ | 2,504 | ||||
| Receivables – net of allowances of $103 and $98 | 3,343 | 3,525 | ||||||
| Due from related parties | 11 | 32 | ||||||
| Inventories | 2,023 | 1,960 | ||||||
| Contract and other deferred assets | 977 | 1,000 | ||||||
| All other current assets | 437 | 389 | ||||||
| Current assets | 8,806 | 9,410 | ||||||
| Property, plant, and equipment – net | 2,458 | 2,500 | ||||||
| Goodwill | 13,116 | 12,936 | ||||||
| Other intangible assets – net | 1,195 | 1,253 | ||||||
| Deferred income taxes | 4,365 | 4,474 | ||||||
| All other non-current assets | 1,913 | 1,881 | ||||||
| Total assets | $ | 31,852 | $ | 32,454 | ||||
| Short-term borrowings | $ | 1,007 | $ | 1,006 | ||||
| Accounts payable | 2,824 | 2,947 | ||||||
| Due to related parties | 27 | 99 | ||||||
| Contract liabilities | 1,876 | 1,918 | ||||||
| Current compensation and benefits | 1,235 | 1,518 | ||||||
| All other current liabilities | 1,348 | 1,493 | ||||||
| Current liabilities | 8,318 | 8,981 | ||||||
| Long-term borrowings | 8,233 | 8,436 | ||||||
| Non-current compensation and benefits | 5,455 | 5,782 | ||||||
| Deferred income taxes | 55 | 68 | ||||||
| All other non-current liabilities | 1,796 | 1,877 | ||||||
| Total liabilities | 23,858 | 25,144 | ||||||
| Commitments and contingencies | ||||||||
| Redeemable noncontrolling interests | 177 | 165 | ||||||
| Common stock, par value $0.01 per share, 1,000,000,000 shares authorized, 456,654,068 shares issued and outstanding as of June 30, 2024; 455,342,290 shares issued and outstanding as of December 31, 2023 | 5 | 5 | ||||||
| Additional paid-in capital | 6,540 | 6,493 | ||||||
| Retained earnings | 2,101 | 1,326 | ||||||
| Accumulated other comprehensive income (loss) – net | (845) | (691) | ||||||
| Total equity attributable to GE HealthCare | 7,801 | 7,133 | ||||||
| Noncontrolling interests | 16 | 12 | ||||||
| Total equity | 7,817 | 7,145 | ||||||
| Total liabilities, redeemable noncontrolling interests, and equity | $ | 31,852 | $ | 32,454 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| Condensed Consolidated Statements of Changes in Equity (Unaudited) | ||||||||||||||||||||||||||
| Common stock | ||||||||||||||||||||||||||
| (In millions) | Common shares outstanding | Par value | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income (loss) – net | Equity attributable to noncontrolling interests | Total equity | |||||||||||||||||||
| Balances as of March 31, 2024 | 456 | $ | 5 | $ | 6,504 | $ | 1,687 | $ | (787) | $ | 14 | $ | 7,423 | |||||||||||||
| Issuance of common stock in connection with employee stock plans, net of shares withheld for employee taxes | — | — | — | — | — | — | — | |||||||||||||||||||
| Net income attributable to GE HealthCare | — | — | — | 428 | — | — | 428 | |||||||||||||||||||
| Dividends declared ($0.03 per common share) | — | — | — | (14) | — | — | (14) | |||||||||||||||||||
| Other comprehensive income (loss) attributable to GE HealthCare | — | — | — | — | (58) | — | (58) | |||||||||||||||||||
| Changes in equity attributable to noncontrolling interests | — | — | — | — | — | 2 | 2 | |||||||||||||||||||
| Share-based compensation | — | — | 36 | — | — | — | 36 | |||||||||||||||||||
| Balances as of June 30, 2024 | 457 | $ | 5 | $ | 6,540 | $ | 2,101 | $ | (845) | $ | 16 | $ | 7,817 |
| Common stock | ||||||||||||||||||||||||||
| (In millions) | Common shares outstanding | Par value | Additional paid-in capital | Retained earnings | Net parent investment | Accumulated other comprehensive income (loss) – net | Equity attributable to noncontrolling interests | Total equity | ||||||||||||||||||
| Balances as of March 31, 2023 | 455 | $ | 5 | $ | 6,425 | $ | 185 | $ | — | $ | 75 | $ | 6 | $ | 6,696 | |||||||||||
| Net transfers from GE, including Spin-Off-related adjustments | — | — | — | — | (9) | — | 3 | (6) | ||||||||||||||||||
| Issuance of common stock in connection with the Spin-Off and reclassification of net parent investment | — | — | (9) | — | 9 | — | — | — | ||||||||||||||||||
| Issuance of common stock in connection with employee stock plans, net of shares withheld for employee taxes | — | — | 7 | — | — | — | — | 7 | ||||||||||||||||||
| Net income attributable to GE HealthCare | — | — | — | 418 | — | — | — | 418 | ||||||||||||||||||
| Dividends declared ($0.06 per common share) | — | — | — | (27) | — | — | — | (27) | ||||||||||||||||||
| Other comprehensive income (loss) attributable to GE HealthCare | — | — | — | — | — | (5) | — | (5) | ||||||||||||||||||
| Changes in equity attributable to noncontrolling interests | — | — | — | — | — | — | 3 | 3 | ||||||||||||||||||
| Share-based compensation | — | — | 28 | — | — | — | — | 28 | ||||||||||||||||||
| Balances as of June 30, 2023 | 455 | $ | 5 | $ | 6,451 | $ | 576 | $ | — | $ | 70 | $ | 12 | $ | 7,114 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| Condensed Consolidated Statements of Changes in Equity (Unaudited) | ||||||||||||||||||||||||||
| Common stock | ||||||||||||||||||||||||||
| (In millions) | Common shares outstanding | Par value | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income (loss) – net | Equity attributable to noncontrolling interests | Total equity | |||||||||||||||||||
| Balances as of December 31, 2023 | 455 | $ | 5 | $ | 6,493 | $ | 1,326 | $ | (691) | $ | 12 | $ | 7,145 | |||||||||||||
| Issuance of common stock in connection with employee stock plans, net of shares withheld for employee taxes | 1 | — | (24) | — | — | — | (24) | |||||||||||||||||||
| Net income attributable to GE HealthCare | — | — | — | 802 | — | — | 802 | |||||||||||||||||||
| Dividends declared ($0.06 per common share) | — | — | — | (28) | — | — | (28) | |||||||||||||||||||
| Other comprehensive income (loss) attributable to GE HealthCare | — | — | — | — | (154) | — | (154) | |||||||||||||||||||
| Changes in equity attributable to noncontrolling interests | — | — | — | — | — | 4 | 4 | |||||||||||||||||||
| Share-based compensation | — | — | 70 | — | — | — | 70 | |||||||||||||||||||
| Balances as of June 30, 2024 | 457 | $ | 5 | $ | 6,540 | $ | 2,101 | $ | (845) | $ | 16 | $ | 7,817 |
| Common stock | ||||||||||||||||||||||||||
| (In millions) | Common shares outstanding | Par value | Additional paid-in capital | Retained earnings | Net parent investment | Accumulated other comprehensive income (loss) – net | Equity attributable to noncontrolling interests | Total equity | ||||||||||||||||||
| Balances as of December 31, 2022 | — | $ | — | $ | — | $ | — | $ | 11,235 | $ | (1,878) | $ | 5 | $ | 9,362 | |||||||||||
| Net transfers from GE, including Spin-Off-related adjustments | — | — | — | — | (4,842) | 2,000 | 2 | (2,840) | ||||||||||||||||||
| Issuance of common stock in connection with the Spin-Off and reclassification of net parent investment | 454 | 5 | 6,388 | — | (6,393) | — | — | — | ||||||||||||||||||
| Issuance of common stock in connection with employee stock plans, net of shares withheld for employee taxes | 1 | — | 11 | — | — | — | — | 11 | ||||||||||||||||||
| Net income attributable to GE HealthCare | — | — | — | 790 | — | — | — | 790 | ||||||||||||||||||
| Dividends declared ($0.06 per common share) | — | — | — | (27) | — | — | — | (27) | ||||||||||||||||||
| Other comprehensive income (loss) attributable to GE HealthCare | — | — | — | — | — | (52) | — | (52) | ||||||||||||||||||
| Changes in equity attributable to noncontrolling interests | — | — | — | — | — | — | 5 | 5 | ||||||||||||||||||
| Share-based compensation | — | — | 52 | — | — | — | — | 52 | ||||||||||||||||||
| Changes in equity due to redemption value adjustments on redeemable noncontrolling interests | — | — | — | (187) | — | — | — | (187) | ||||||||||||||||||
| Balances as of June 30, 2023 | 455 | $ | 5 | $ | 6,451 | $ | 576 | $ | — | $ | 70 | $ | 12 | $ | 7,114 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||||||
| For the six months ended June 30 | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Net income | $ | 823 | $ | 816 | |||||||
| Adjustments to reconcile Net income to Cash from (used for) operating activities | |||||||||||
| Depreciation of property, plant, and equipment | 137 | 124 | |||||||||
| Amortization of intangible assets | 160 | 189 | |||||||||
| Gain on fair value remeasurement of contingent consideration | (10) | (3) | |||||||||
| Net periodic postretirement benefit plan (income) expense | (180) | (207) | |||||||||
| Postretirement plan contributions | (170) | (180) | |||||||||
| Share-based compensation | 70 | 52 | |||||||||
| Provision for income taxes | 267 | 300 | |||||||||
| Cash paid during the year for income taxes | (287) | (271) | |||||||||
| Changes in operating assets and liabilities, excluding the effects of acquisitions: | |||||||||||
| Receivables | 112 | (32) | |||||||||
| Due from related parties | 19 | 10 | |||||||||
| Inventories | (116) | (172) | |||||||||
| Contract and other deferred assets | 12 | (64) | |||||||||
| Accounts payable | (41) | (40) | |||||||||
| Due to related parties | (57) | (11) | |||||||||
| Contract liabilities | (20) | 111 | |||||||||
| Current compensation and benefits | (266) | (114) | |||||||||
| All other operating activities - net | (155) | (107) | |||||||||
| Cash from (used for) operating activities | 300 | 401 | |||||||||
| Cash flows – investing activities | |||||||||||
| Additions to property, plant and equipment and internal-use software | (209) | (213) | |||||||||
| Dispositions of property, plant, and equipment | — | 1 | |||||||||
| Purchases of businesses, net of cash acquired | (259) | (147) | |||||||||
| All other investing activities - net | (69) | 9 | |||||||||
| Cash from (used for) investing activities | (537) | (350) | |||||||||
| Cash flows – financing activities | |||||||||||
| Net increase (decrease) in borrowings (maturities of 90 days or less) | — | (12) | |||||||||
| Newly issued debt, net of debt issuance costs (maturities longer than 90 days) | 1 | 2,000 | |||||||||
| Repayments and other reductions (maturities longer than 90 days) | (156) | (6) | |||||||||
| Dividends paid to stockholders | (28) | (14) | |||||||||
| Redemption of noncontrolling interests | — | (211) | |||||||||
| Net transfers (to) from GE | — | (1,317) | |||||||||
| All other financing activities - net | (27) | 6 | |||||||||
| Cash from (used for) financing activities | (210) | 446 | |||||||||
| Effect of foreign currency rate changes on cash, cash equivalents, and restricted cash | (41) | (3) | |||||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | (488) | 494 | |||||||||
| Cash, cash equivalents, and restricted cash at beginning of year | 2,506 | 1,451 | |||||||||
| Cash, cash equivalents, and restricted cash as of June 30 | $ | 2,018 | $ | 1,945 | |||||||
| Supplemental disclosure of cash flows information | |||||||||||
| Cash paid during the year for interest | $ | (274) | $ | (250) | |||||||
| Non-cash investing activities | |||||||||||
| Acquired but unpaid property, plant, and equipment | $ | 76 | $ | 70 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
GE HealthCare Technologies Inc. and its subsidiaries (“GE HealthCare,” the “Company,” “our,” “us,” or “we”) is a leading global medical technology, pharmaceutical diagnostics, and digital solutions innovator. We operate at the center of the healthcare ecosystem, helping enable precision care by increasing health system capacity, enhancing productivity, digitizing healthcare delivery, and improving clinical outcomes while serving patients’ demand for greater efficiency, access, and personalized medicine. Our products, services, and solutions are designed to enable clinicians to make more informed decisions quickly and efficiently, improving patient care from diagnosis to therapy to monitoring.
On January 3, 2023, the General Electric Company, which now operates as GE Aerospace, (“GE”) completed the spin-off of GE HealthCare Technologies Inc. (the “Spin-Off”). The Spin-Off was completed through a distribution of approximately 80.1% of the Company’s outstanding common stock to holders of record of GE’s common stock as of the close of business on December 16, 2022 (the “Distribution”), which resulted in the issuance of approximately 454 million shares of common stock. Prior to the Distribution, the Company issued 100 shares of common stock in exchange for $1.00, all of which were held by GE as of December 31, 2022. As a result of the Distribution, the Company became an independent public company. On April 2, 2024, GE completed the separation of its GE Vernova business into an independent publicly traded company. As of June 30, 2024, GE’s beneficial ownership was approximately 6.7% of the Company’s outstanding common stock.
In connection with the Spin-Off, certain adjustments were recorded to reflect transfers from GE, the draw-down of the Term Loan Facility, and settlement of Spin-Off transactions with GE, which resulted in the net reduction in Total equity of $2,840 million. These items substantially consisted of the transfer of: (1) certain pension plan liabilities and assets, (2) certain deferred income taxes, (3) deferred compensation liabilities, and (4) employee termination obligations.
In connection with the Spin-Off, the Company entered into or adopted several agreements that provide a framework for the relationship between the Company and GE. See Note 17, “Related Parties and Transition Services Agreement” for more information on these agreements and related transactions.
The condensed consolidated financial statements (the “financial statements”) have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position and operating results have been included. All intercompany balances and transactions within the Company have been eliminated in the financial statements. Operating results for the three and six months ended June 30, 2024 and 2023 are not necessarily indicative of the results that may be expected for the fiscal year as a whole. The December 31, 2023 period presented on the Condensed Consolidated Statement of Financial Position was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The following tables are presented in millions of U.S. dollars unless otherwise stated. Certain columns and rows throughout this document may not sum due to the use of rounded numbers. Percentages presented are calculated from the underlying whole-dollar amounts.
Certain prior year amounts in the financial statements and notes thereto have been reclassified to conform to the current year presentation, which provides additional detail to readers of the financial statements. Amounts related to current compensation and benefit obligations that were previously reported within the All other current liabilities and All other operating activities lines on the Condensed Consolidated Statements of Financial Position and Statements of Cash Flows, respectively, have been reclassified to separate lines on the respective financial statements.
The financial statements and notes should be read in conjunction with the Company’s audited consolidated and combined financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
ESTIMATES AND ASSUMPTIONS.
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates based on assumptions about current, and for some estimates, future, economic and market conditions, which affect the reported amounts and related disclosures in the financial statements. We base our estimates and judgments on historical experience and on various other assumptions and information that we believe to be reasonable under the circumstances. Although our 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, financial position, and cash flows.
RECENT ACCOUNTING PRONOUNCEMENTS.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07 (“ASU 2023-07”), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires annual and interim disclosures that are expected to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The provisions of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-07.
In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The provisions of ASU 2023-09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-09.
NOTE 2. REVENUE RECOGNITION
Our revenues primarily consist of sales of products and services to customers. Products include equipment, imaging agents, software-related offerings, and upgrades. Services include contractual and stand-by preventative maintenance and corrective services, as well as on-demand service parts, extended warranties, training, and other service-type offerings. The Company recognizes revenue from contracts with customers when the customer obtains control of the underlying products or services.
CONTRACT ASSETS.
Contract assets reflect revenue recognized on contracts with customers in excess of billings based on contractual terms. Contract assets are classified as current or non-current based on the amount of time expected to lapse until the Company’s right to consideration becomes unconditional. Other deferred assets consist of costs to obtain contracts, primarily commissions, other cost deferrals for shipped products, and deferred service, labor, and direct overhead costs.
| Contract and Other Deferred Assets | As of | |||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Contract assets | $ | 611 | $ | 600 | ||||
| Other deferred assets | 367 | 400 | ||||||
| Contract and other deferred assets | 977 | 1,000 | ||||||
| Non-current contract assets(1) | 81 | 72 | ||||||
| Non-current other deferred assets(1) | 96 | 96 | ||||||
| Total contract and other deferred assets | $ | 1,155 | $ | 1,168 |
(1)Non-current contract and other deferred assets are recognized within All other non-current assets in the Condensed Consolidated Statements of Financial Position.
CONTRACT LIABILITIES.
Contract liabilities include customer advances and deposits received when orders are placed and billed in advance of completion of performance obligations. Contract liabilities are classified as current or non-current based on the periods over which remaining performance obligations (“RPO”) are expected to be satisfied with our customers.
As of June 30, 2024 and December 31, 2023, contract liabilities were approximately $2,562 million and $2,623 million, respectively, of which the non-current portion of $685 million and $705 million, respectively, was recognized in All other non-current liabilities in the Condensed Consolidated Statements of Financial Position. Contract liabilities decreased $61 million in 2024 primarily due to a decrease in customer advances. Revenue recognized related to the contract liabilities balance at the beginning of the year was approximately $1,116 million and $1,105 million for the six months ended June 30, 2024 and 2023, respectively.
REMAINING PERFORMANCE OBLIGATIONS.
RPO represents the estimated revenue expected from customer contracts that are partially or fully unperformed inclusive of amounts deferred in contract liabilities, excluding contracts, or portions thereof, that provide the customer with the ability to cancel or terminate without incurring a substantive penalty. As of June 30, 2024, the aggregate amount of the contracted revenues allocated to our unsatisfied performance obligations was $14,531 million. We expect to recognize revenue as we satisfy our RPO as follows: a) product-related RPO of $4,648 million of which 98% is expected to be recognized within two years, and the remaining thereafter; and b) services-related RPO of $9,883 million of which 64% and 93% are expected to be recognized within two years and five years, respectively, and the remaining thereafter.
NOTE 3. SEGMENT INFORMATION
As of June 30, 2024, GE HealthCare’s operations were organized and managed through four reportable segments: Imaging, Ultrasound, Patient Care Solutions (“PCS”), and Pharmaceutical Diagnostics (“PDx”). These segments have been identified based on the nature of the products sold and how the Company manages its operations. We have not aggregated any of our operating segments to form reportable segments. A description of our reportable segments has been provided in the “Business” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
The performance of these segments was principally measured based on Total revenues and an earnings metric defined as “Segment EBIT.” Segment EBIT is calculated as Income before income taxes in our Condensed Consolidated Statements of Income excluding the impact of the following: Interest and other financial charges – net, Non-operating benefit (income) costs, restructuring costs, acquisition and disposition-related benefits (charges), gain (loss) on business and asset dispositions, Spin-Off and separation costs, amortization of acquisition-related intangible assets, and investment revaluation gain (loss).
| Total Revenues by Segment | For the three months ended June 30 | For the six months ended June 30 | ||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||
| Imaging: | ||||||||||||||||||||
| Radiology | $ | 2,171 | $ | 2,227 | $ | 4,233 | $ | 4,315 | ||||||||||||
| Interventional Guidance | 425 | 393 | 829 | 801 | ||||||||||||||||
| Total Imaging | 2,596 | 2,620 | 5,062 | 5,116 | ||||||||||||||||
| Total Ultrasound | 823 | 839 | 1,647 | 1,698 | ||||||||||||||||
| PCS: | ||||||||||||||||||||
| Monitoring Solutions | 538 | 563 | 1,065 | 1,115 | ||||||||||||||||
| Life Support Solutions | 235 | 207 | 454 | 436 | ||||||||||||||||
| Total PCS | 772 | 770 | 1,519 | 1,551 | ||||||||||||||||
| Total PDx | 639 | 568 | 1,238 | 1,126 | ||||||||||||||||
| Other**(1)** | 9 | 20 | 24 | 33 | ||||||||||||||||
| Total revenues | $ | 4,839 | $ | 4,817 | $ | 9,489 | $ | 9,524 | ||||||||||||
(1) Financial information not presented within the reportable segments, shown within the Other category, represents HealthCare Financial Services (“HFS”) which does not meet the definition of an operating segment.
| Segment EBIT | For the three months ended June 30 | For the six months ended June 30 | ||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||
| Segment EBIT | ||||||||||||||||||||
| Imaging | $ | 286 | $ | 278 | $ | 526 | $ | 469 | ||||||||||||
| Ultrasound | 178 | 191 | 360 | 398 | ||||||||||||||||
| PCS | 78 | 84 | 159 | 193 | ||||||||||||||||
| PDx | 200 | 152 | 378 | 307 | ||||||||||||||||
| Other(1) | 1 | 6 | 1 | 8 | ||||||||||||||||
| 742 | 711 | 1,423 | 1,375 | |||||||||||||||||
| Restructuring costs | (29) | (19) | (68) | (31) | ||||||||||||||||
| Acquisition and disposition-related benefits (charges) | 3 | 2 | 3 | 1 | ||||||||||||||||
| Gain (loss) on business and asset dispositions | — | — | — | — | ||||||||||||||||
| Spin-Off and separation costs | (67) | (72) | (126) | (130) | ||||||||||||||||
| Amortization of acquisition-related intangible assets | (35) | (32) | (66) | (63) | ||||||||||||||||
| Investment revaluation gain (loss) | (6) | (6) | (26) | (1) | ||||||||||||||||
| Interest and other financial charges – net | (131) | (137) | (254) | (273) | ||||||||||||||||
| Non-operating benefit income (costs) | 101 | 123 | 204 | 238 | ||||||||||||||||
| Income before income taxes | $ | 578 | $ | 570 | $ | 1,090 | $ | 1,116 |
(1) Financial information not presented within the reportable segments, shown within the Other category, represents HFS and certain other business activities which do not meet the definition of an operating segment.
NOTE 4. RECEIVABLES
| Current Receivables | As of | ||||||||||
| June 30, 2024 | December 31, 2023 | ||||||||||
| Current customer receivables**(1)** | $ | 3,174 | $ | 3,339 | |||||||
| Non-income based tax receivables | 143 | 166 | |||||||||
| Other sundry receivables | 129 | 118 | |||||||||
| Current sundry receivables | 272 | 284 | |||||||||
| Allowance for credit losses | (103) | (98) | |||||||||
| Total current receivables – net | $ | 3,343 | $ | 3,525 |
(1) Chargebacks, which are primarily related to our PDx business, are generally settled through issuance of credits, typically within one month of initial recognition, and are recorded as a reduction to current customer receivables. Balances related to chargebacks were $126 million and $144 million as of June 30, 2024 and December 31, 2023, respectively.
| Long-Term Receivables | As of | |||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Long-term customer receivables | $ | 63 | $ | 55 | ||||
| Non-income based tax receivables | 23 | 26 | ||||||
| Other sundry receivables | 97 | 73 | ||||||
| Long-term sundry receivables | 120 | 99 | ||||||
| Allowance for credit losses | (30) | (30) | ||||||
| Total long-term receivables – net**(1)** | $ | 153 | $ | 124 |
(1) Long-term receivables are recognized within All other non-current assets in the Condensed Consolidated Statements of Financial Position.
NOTE 5. FINANCING RECEIVABLES
| As of | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Loans receivable, at amortized cost | $ | 26 | $ | 29 | ||||
| Investment in financing leases, net of deferred income | 70 | 71 | ||||||
| Allowance for credit losses | (3) | (3) | ||||||
| Current financing receivables – net**(1)** | 93 | 97 | ||||||
| Loans receivable, at amortized cost | 33 | 37 | ||||||
| Investment in financing leases, net of deferred income | 144 | 146 | ||||||
| Allowance for credit losses | (5) | (5) | ||||||
| Non-current financing receivables – net**(1)** | $ | 172 | $ | 178 |
(1) Current financing receivables and non-current financing receivables are recognized within All other current assets and All other non-current assets, respectively, in the Condensed Consolidated Statements of Financial Position.
As of June 30, 2024, 4%, 4%, and 4% of financing receivables were over 30 days past due, over 90 days past due, and on nonaccrual, respectively, with the majority of nonaccrual financing receivables secured by collateral. As of December 31, 2023, 5%, 5%, and 6% of financing receivables were over 30 days past due, over 90 days past due, and on nonaccrual, respectively, with the majority of nonaccrual financing receivables secured by collateral.
NOTE 6. LEASES
Operating lease liabilities recognized within All other current liabilities and All other non-current liabilities in the Condensed Consolidated Statements of Financial Position were $380 million and $383 million as of June 30, 2024 and December 31, 2023, respectively. The total lease expense related to our operating lease portfolio was $59 million and $57 million for the three months ended June 30, 2024 and 2023, respectively, and $119 million and $113 million for the six months ended June 30, 2024 and 2023, respectively.
NOTE 7. ACQUISITIONS, GOODWILL, AND OTHER INTANGIBLE ASSETS
ACQUISITIONS.
MIM Software
On April 1, 2024, the Company acquired 100% of the stock of MIM Software Inc. (“MIM Software”) for approximately $259 million, net of cash acquired, $13 million of potential earn-out payments, and up to $23 million of other contingent payments based on service requirements. The acquisition was funded with cash on hand. This transaction was accounted for as a business combination. The preliminary purchase price allocation resulted in goodwill of $195 million, customer-related intangible assets of $52 million, developed technology intangible assets of $48 million, net deferred tax liabilities of $19 million, and other net assets of $7 million. The goodwill associated with the acquired business, recorded within the Imaging segment, is non-deductible for tax purposes and is attributed to expected synergies and commercial benefits from use of the MIM Software technology in our existing GE HealthCare portfolio. MIM Software is a global provider of medical imaging analysis and artificial intelligence (“AI”) solutions for the practice of radiation oncology, molecular radiotherapy, diagnostic imaging, and urology at imaging centers, hospitals, specialty clinics, and research organizations worldwide.
Revenue and earnings of MIM Software included in the Company’s financial statements since the acquisition date are not material to our consolidated revenue and earnings. If the acquisition of MIM Software had taken place as of the beginning of 2023, consolidated revenues and earnings would not have been significantly different from reported amounts.
Caption Health
On February 17, 2023, the Company acquired 100% of the stock of Caption Health, Inc. (“Caption Health”) for $127 million of upfront payment, $10 million of future holdback payment, and potential earn-out payments valued at $13 million based primarily on various milestones and sales targets. This transaction was accounted for as a business combination. The preliminary purchase price allocation resulted in goodwill of $94 million, intangible assets of $60 million, and deferred tax liabilities of $3 million. The purchase price allocation for Caption Health was finalized in the first quarter of 2024 without material adjustments. The goodwill associated with the acquired business is non-deductible for tax purposes and is reported in the Ultrasound segment. Caption Health is an AI company whose technology expands access to AI-guided ultrasound screening for novice users.
GOODWILL.
| Balance as of December 31, 2023 | Acquisitions | Foreign exchange and other | Balance as of June 30, 2024 | ||||||||||||||||||||
| Imaging | $ | 4,431 | $ | 195 | $ | (7) | $ | 4,620 | |||||||||||||||
| Ultrasound | 3,933 | — | (7) | 3,926 | |||||||||||||||||||
| PCS | 2,038 | — | (1) | 2,036 | |||||||||||||||||||
| PDx | 2,534 | — | (1) | 2,533 | |||||||||||||||||||
| Total Goodwill | $ | 12,936 | $ | 195 | $ | (15) | $ | 13,116 |
We assess 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 did not identify any reporting units that required an interim impairment test since the last annual impairment testing date.
OTHER INTANGIBLE ASSETS.
Intangible assets decreased during the six months ended June 30, 2024, primarily as a result of amortization, partially offset by additions related to the acquisition of MIM Software. Substantially all of our intangible assets are subject to amortization. Amortization expense was $81 million and $93 million for the three months ended June 30, 2024 and 2023, respectively, and $160 million and $189 million for the six months ended June 30, 2024 and 2023, respectively.
NOTE 8. BORROWINGS
The Company’s borrowings include the following senior unsecured notes and credit agreements:
Senior Unsecured Notes
The Company’s borrowings include $8,250 million aggregate principal amount of senior unsecured notes in six series with maturity dates ranging from 2024 through 2052 (collectively, the “Notes”). Refer to the table below for further information about the Notes.
Credit Facilities
The Company has credit agreements providing for:
-
a five-year senior unsecured revolving credit facility in an aggregate committed amount of $2,500 million, maturing on January 3, 2028;
-
a 364-day senior unsecured revolving credit facility in an aggregate committed amount of $1,000 million, maturing on December 11, 2024; and
-
a three-year senior unsecured term loan credit facility in an aggregate principal amount of $2,000 million, maturing on January 2, 2026 (the “Term Loan Facility” and, together with the five-year revolving credit facility and the 364-day revolving credit facility, the “Credit Facilities”).
There were no outstanding amounts under the five-year revolving credit facility and 364-day revolving credit facility as of June 30, 2024 or December 31, 2023.
As of June 30, 2024, we have repaid a total of $1,000 million of the Term Loan Facility, $150 million of which was paid in the current year. We had no principal debt repayments on the Notes for the six months ended June 30, 2024.
| Borrowings Composition | As of | |||||||
| June 30, 2024 | December 31, 2023 | |||||||
| 5.550% senior notes due November 15, 2024 | $ | 1,000 | $ | 1,000 | ||||
| 5.600% senior notes due November 15, 2025 | 1,500 | 1,500 | ||||||
| 5.650% senior notes due November 15, 2027 | 1,750 | 1,750 | ||||||
| 5.857% senior notes due March 15, 2030 | 1,250 | 1,250 | ||||||
| 5.905% senior notes due November 22, 2032 | 1,750 | 1,750 | ||||||
| 6.377% senior notes due November 22, 2052 | 1,000 | 1,000 | ||||||
| Floating rate Term Loan Facility due January 2, 2026 | 1,000 | 1,150 | ||||||
| Other | 47 | 52 | ||||||
| Total principal debt issued | 9,297 | 9,452 | ||||||
| Less: Unamortized debt issuance costs and discounts | 30 | 35 | ||||||
| Add: Cumulative basis adjustment for fair value hedges | (27) | 25 | ||||||
| Total borrowings | 9,240 | 9,442 | ||||||
| Less: Short-term borrowings(1) | 1,007 | 1,006 | ||||||
| Long-term borrowings | $ | 8,233 | $ | 8,436 |
(1) Short-term borrowings as of June 30, 2024 and December 31, 2023 includes $1,003 million and $1,002 million, respectively, related to the current portion of our long-term borrowings, net of unamortized debt issuance costs and discounts.
See Note 12, “Financial Instruments and Fair Value Measurements” for further information about borrowings and associated derivatives contracts.
LETTERS OF CREDIT, GUARANTEES, AND OTHER COMMITMENTS.
As of June 30, 2024 and December 31, 2023, the Company had bank guarantees and surety bonds of approximately $812 million and $751 million, respectively, related to certain commercial contracts. Additionally, we have issued approximately $28 million and $39 million of guarantees as of June 30, 2024 and December 31, 2023, respectively, primarily related to residual value and credit guarantees on equipment sold to third-party finance companies. Our Condensed Consolidated Statements of Financial Position reflect a liability of $4 million as of June 30, 2024 and December 31, 2023 related to these guarantees. For credit-related guarantees, we estimate our expected credit losses related to off-balance sheet credit exposure consistent with the method used to estimate the allowance for credit losses on financial assets held at amortized cost. See Note 13, “Commitments, Guarantees, Product Warranties, and Other Loss Contingencies” for further information on guarantee arrangements with GE.
NOTE 9. 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 Other Postretirement Plans (“OPEB Plans”). Please refer to Note 10, “Postretirement Benefit Plans” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for further information. On January 1, 2024, we transitioned from legacy GE multiple-employer OPEB plans to GE HealthCare sponsored single-employer OPEB plans. This change did not have an impact on our results of operations or financial position. Pension plans with pension assets or obligations less than $50 million are not included in the results below.
| Components of Expense (Income) | For the three months ended June 30 | |||||||||||||||||||||||||
| Principal Pension Plans | Other Pension Plans | OPEB | ||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||
| Service cost – Operating | $ | 7 | $ | 9 | $ | 6 | $ | 6 | $ | 2 | $ | 2 | ||||||||||||||
| Interest cost | 227 | 238 | 50 | 53 | 14 | 15 | ||||||||||||||||||||
| Expected return on plan assets | (284) | (293) | (63) | (64) | — | — | ||||||||||||||||||||
| Amortization of net loss (gain) | (19) | (35) | 5 | 3 | (15) | (16) | ||||||||||||||||||||
| Amortization of prior service cost (credit) | 2 | — | — | (1) | (22) | (22) | ||||||||||||||||||||
| Non-operating | $ | (74) | $ | (90) | $ | (8) | $ | (10) | $ | (23) | $ | (23) | ||||||||||||||
| Net periodic expense (income) | $ | (67) | $ | (81) | $ | (2) | $ | (4) | $ | (21) | $ | (21) |
| For the six months ended June 30 | ||||||||||||||||||||||||||||||||
| Principal Pension Plans | Other Pension Plans | OPEB Plans | ||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||
| Service cost – Operating | $ | 14 | $ | 17 | $ | 12 | $ | 12 | $ | 4 | $ | 4 | ||||||||||||||||||||
| Interest cost | 454 | 478 | 100 | 105 | 27 | 30 | ||||||||||||||||||||||||||
| Expected return on plan assets | (567) | (586) | (126) | (127) | — | — | ||||||||||||||||||||||||||
| Amortization of net loss (gain) | (38) | (66) | 10 | 5 | (30) | (32) | ||||||||||||||||||||||||||
| Amortization of prior service cost (credit) | 4 | — | — | (2) | (44) | (44) | ||||||||||||||||||||||||||
| Non-operating | $ | (147) | $ | (174) | $ | (16) | $ | (20) | $ | (47) | $ | (46) | ||||||||||||||||||||
| Net periodic expense (income) | $ | (133) | $ | (157) | $ | (4) | $ | (8) | $ | (43) | $ | (42) |
In the six months ended June 30, 2024, the Company made cash benefit payments totaling $59 million to its Principal Pension Plans, $40 million to its Other Pension Plans, and $71 million to its OPEB Plans. In 2024, the Company expects to make total cash contributions of approximately $336 million to these plans. The Company does not have a required minimum funding contribution for its U.S.-based GE HealthCare Pension Plan in 2024. Future contributions will depend on market conditions, interest rates, and other factors.
Defined Contribution Plan
GE HealthCare sponsors a defined contribution plan for its eligible U.S. employees. Expenses associated with our employees’ participation in GE HealthCare’s defined contribution plan were $40 million and $33 million for the three months ended June 30, 2024 and 2023, respectively, and $73 million and $66 million for the six months ended June 30, 2024 and 2023, respectively.
NOTE 10. INCOME TAXES
Our effective income tax rate was 24.7% and 24.0% for the three months ended June 30, 2024 and 2023, respectively, and 24.5% and 26.9% for the six months ended June 30, 2024 and 2023, respectively. The tax rate for the three and six months ended June 30, 2024 and 2023 is higher than the U.S. statutory rate primarily due to the cost of global activities, including the U.S. taxation on international operations, withholding taxes, and state taxes.
Post Spin-Off, the Company’s previously undistributed earnings of our foreign subsidiaries are no longer indefinitely reinvested in non-U.S. businesses due to current U.S. funding needs. Therefore, in the first quarter of 2023, an incremental deferred tax liability of $30 million was recorded for withholding and other foreign taxes due upon future distribution of earnings. In addition, the Company is providing for withholding and other foreign taxes due upon future distribution of current period earnings.
The Company is currently being audited in a number of jurisdictions for tax years 2004-2022, including China, Germany, Norway, the United Kingdom, and the United States.
NOTE 11. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) – NET
Changes in Accumulated other comprehensive income (loss) (“AOCI”) by component, net of income taxes, were as follows.
| For the three months ended June 30, 2024 | |||||||||||||||||
| Currency translation adjustments**(1)** | Pension and Other Postretirement Plans | Cash flow hedges | Total AOCI | ||||||||||||||
| March 31, 2024 | $ | (1,781) | $ | 997 | $ | (2) | $ | (787) | |||||||||
| Other comprehensive income (loss) before reclassifications – net of taxes of $(6), $—, and $(2) | (30) | (1) | 9 | (23) | |||||||||||||
| Reclassifications from AOCI – net of taxes(2) of $—, $10, and $— | — | (35) | — | (36) | |||||||||||||
| Other comprehensive income (loss) | (30) | (36) | 8 | (58) | |||||||||||||
| Less: Other comprehensive income (loss) attributable to noncontrolling interests | — | — | — | — | |||||||||||||
| June 30, 2024 | $ | (1,812) | $ | 961 | $ | 6 | $ | (845) |
| For the three months ended June 30, 2023 | |||||||||||||||||
| Currency translation adjustments**(1)** | Pension and Other Postretirement Plans | Cash flow hedges | Total AOCI | ||||||||||||||
| March 31, 2023 | $ | (1,760) | $ | 1,865 | $ | (30) | $ | 75 | |||||||||
| Other comprehensive income (loss) before reclassifications – net of taxes of $28, $(11), and $(2) | 3 | 36 | 5 | 44 | |||||||||||||
| Reclassifications from AOCI – net of taxes(2) of $—, $17, and $(1) | — | (54) | 5 | (49) | |||||||||||||
| Other comprehensive income (loss) | 3 | (18) | 10 | (5) | |||||||||||||
| Less: Other comprehensive income (loss) attributable to noncontrolling interests | — | — | — | — | |||||||||||||
| June 30, 2023 | $ | (1,757) | $ | 1,847 | $ | (20) | $ | 70 |
| For the six months ended June 30, 2024 | |||||||||||||||||
| Currency translation adjustments**(1)** | Pension and Other Postretirement Plans | Cash flow hedges | Total AOCI | ||||||||||||||
| December 31, 2023 | $ | (1,706) | $ | 1,033 | $ | (18) | $ | (691) | |||||||||
| Other comprehensive income (loss) before reclassifications – net of taxes of $(14), $(1), and $(7) | (106) | 1 | 24 | (81) | |||||||||||||
| Reclassifications from AOCI – net of taxes(2) of $—, $22, and $— | — | (73) | — | (73) | |||||||||||||
| Other comprehensive income (loss) | (106) | (71) | 24 | (154) | |||||||||||||
| Less: Other comprehensive income (loss) attributable to noncontrolling interests | — | — | — | — | |||||||||||||
| June 30, 2024 | $ | (1,812) | $ | 961 | $ | 6 | $ | (845) |
| For the six months ended June 30, 2023 | |||||||||||||||||
| Currency translation adjustments**(1)** | Pension and Other Postretirement Plans | Cash flow hedges | Total AOCI | ||||||||||||||
| December 31, 2022 | $ | (1,845) | $ | (42) | $ | 9 | $ | (1,878) | |||||||||
| Other comprehensive income (loss) before reclassifications – net of taxes of $17, $(9), and $2 | 60 | 23 | (8) | 75 | |||||||||||||
| Reclassifications from AOCI – net of taxes(2) of $—, $33, and $6 | — | (106) | (21) | (127) | |||||||||||||
| Other comprehensive income (loss) | 60 | (83) | (29) | (52) | |||||||||||||
| Spin-Off related adjustments – net of taxes of $—, $(509), and $— | 28 | 1,972 | — | 2,000 | |||||||||||||
| Less: Other comprehensive income (loss) attributable to noncontrolling interests | — | — | — | — | |||||||||||||
| June 30, 2023 | $ | (1,757) | $ | 1,847 | $ | (20) | $ | 70 |
(1) The amount of Currency translation adjustments recognized in Other comprehensive income (loss) (“OCI”) during the three and six months ended June 30, 2024 and 2023 included net gains (losses) relating to net investment hedges, as further discussed in Note 12, “Financial Instruments and Fair Value Measurements.”
(2) Reclassifications from AOCI into earnings for Pension and Other Postretirement Plans are recognized within Non-operating benefit (income) costs, while Cash flow hedges are recognized within Cost of products and Cost of services in our Condensed Consolidated Statements of Income.
NOTE 12. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
DERIVATIVES AND HEDGING.
Our primary objective in executing and holding derivative contracts is to reduce the volatility of earnings and cash flows associated with risks related to foreign currency exchange rates, interest rates, and equity prices. These derivative contracts reduce, but do not entirely eliminate, the aforementioned risks. Our policy is to use derivative contracts solely for managing risks and not for speculative purposes.
Cash Flow Hedges
For derivative instruments designated as cash flow hedges, changes in the fair value of designated hedging instruments are initially recorded as a component of AOCI and subsequently reclassified to earnings in the period in which the hedged transaction affects earnings and to the same financial statement line item impacted by the hedged transaction. As of June 30, 2024, we expect to reclassify $7 million of pre-tax net deferred gains associated with designated cash flow hedges to earnings in the next 12 months, contemporaneously with the impact on earnings of the related hedged transactions.
The cash flows associated with derivatives designated as cash flow hedges are recorded in All other operating activities in the Condensed Consolidated Statements of Cash Flows.
Net Investment Hedges
We use cross-currency interest rate swaps and foreign currency forward contracts in combination with foreign currency option contracts to hedge the foreign currency risk associated with our net investment in foreign operations. As of June 30, 2024, these contracts were designated as hedges of our net investment in foreign operations, primarily in Euro and Chinese Renminbi currencies.
The cash flows associated with derivatives designated as net investment hedges are recorded in All other investing activities in the Condensed Consolidated Statements of Cash Flows. Cash flows from the periodic interest settlements on the cross-currency swaps are recorded in All other operating activities in the Condensed Consolidated Statements of Cash Flows.
Fair Value Hedges
We use interest rate swaps to hedge the interest rate risk on our fixed rate borrowings. These derivatives are designated as fair value hedges to hedge the changes in fair value due to benchmark interest rate risk of specific designated cash flows of our senior unsecured notes.
We record the changes in fair value on these swap contracts in Interest and other financial charges – net in our Condensed Consolidated Statements of Income, the same line item where the offsetting change in the fair value of the designated cash flows of the senior unsecured note is recorded as a basis adjustment.
Cash flows for the periodic interest settlements on the interest rate swaps are recorded in All other operating activities in the Condensed Consolidated Statements of Cash Flows.
Derivatives Not Designated as Hedging Instruments
We also execute derivative instruments, such as foreign currency forward contracts and equity-linked total return swaps, which are not designated as qualifying hedges. These derivatives serve as economic hedges of the foreign currency rate risk and equity price risk. We also identify and record foreign currency-related features in our purchase or sales contracts where the currency is not the local or functional currency of any substantive party to the contract and record them as embedded derivatives.
The changes in fair value of derivatives not designated in qualifying hedge transactions are recorded in Cost of products, Cost of services, Selling, general, and administrative (“SG&A”), and Other (income) expense – net in the Condensed Consolidated Statements of Income based on the nature of the underlying hedged transaction. Changes in fair value of embedded derivatives are recognized in Other (income) expense – net in the Condensed Consolidated Statements of Income.
The cash flows associated with derivatives not designated but used as economic hedges are recorded, based on the nature of the underlying hedged transaction, in All other operating activities and All other investing activities in the Condensed Consolidated Statements of Cash Flows. The cash flows related to embedded derivatives are included in All other operating activities in the Condensed Consolidated Statements of Cash Flows.
The following table presents the gross fair values of our outstanding derivative instruments.
| Fair Value of Derivatives | June 30, 2024 | December 31, 2023 | |||||||||||||||||||||
| Gross Notional | Fair Value – Assets | Fair Value – Liabilities | Gross Notional | Fair Value – Assets | Fair Value – Liabilities | ||||||||||||||||||
| Foreign currency forward contracts | $ | 1,411 | $ | 21 | $ | 13 | $ | 1,356 | $ | 8 | $ | 30 | |||||||||||
| Derivatives accounted for as cash flow hedges | 1,411 | 21 | 13 | 1,356 | 8 | 30 | |||||||||||||||||
| Cross-currency swaps(1) | 2,149 | — | 148 | 2,209 | — | 204 | |||||||||||||||||
| Foreign currency forward and options contracts | 1,859 | 17 | 12 | 991 | 9 | 11 | |||||||||||||||||
| Derivatives accounted for as net investment hedges | 4,008 | 17 | 160 | 3,200 | 9 | 215 | |||||||||||||||||
| Interest rate swaps(1) | 1,700 | — | 27 | 1,000 | 35 | 10 | |||||||||||||||||
| Derivatives accounted for as fair value hedges | 1,700 | — | 27 | 1,000 | 35 | 10 | |||||||||||||||||
| Foreign currency forward contracts | 4,108 | 9 | 8 | 3,597 | 19 | 12 | |||||||||||||||||
| Other derivatives(1)(2) | 409 | 25 | 1 | 438 | 57 | 2 | |||||||||||||||||
| Derivatives not designated as hedging instruments | 4,517 | 34 | 9 | 4,035 | 76 | 14 | |||||||||||||||||
| Total derivatives | $ | 11,636 | $ | 72 | $ | 209 | $ | 9,591 | $ | 128 | $ | 269 |
(1) Accrued interest was immaterial for the periods presented and is excluded from fair value. These amounts are recognized within All other current assets and All other current liabilities in the Condensed Consolidated Statements of Financial Position.
(2) Other derivatives are comprised of embedded derivatives and derivatives related to equity contracts. As of December 31, 2023, Other derivatives also included commodity contracts.
The following table presents amounts recorded in Long-term borrowings in the Condensed Consolidated Statements of Financial Position related to cumulative basis adjustment for fair value hedges.
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Carrying amount | Cumulative basis adjustment included in the carrying amount | Carrying amount | Cumulative basis adjustment included in the carrying amount | |||||||||||||||||||||||
| Long-term borrowings designated in fair value hedges | $ | 1,669 | $ | (27) | $ | 1,023 | $ | 25 | ||||||||||||||||||
Under the master arrangements with the respective counterparties to our derivative contracts, in certain circumstances and subject to applicable requirements, we are allowed to net settle transactions with a single net amount payable by one party to the other. However, we have elected to present the derivative assets and derivative liabilities on a gross basis on our Condensed Consolidated Statements of Financial Position and in the table above.
As of June 30, 2024 and December 31, 2023, the potential effect of rights of offset associated with the derivative contracts would be an offset to both assets and liabilities by $41 million, respectively.
The table below presents the pre-tax gains (losses) recognized in OCI associated with the Company’s cash flow and net investment hedges.
| Pre-tax Gains (Losses) Recognized in OCI Related to Cash Flow and Net Investment Hedges | ||||||||||||||||||||
| For the three months ended June 30 | For the six months ended June 30 | |||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||
| Cash flow hedges | $ | 11 | $ | 7 | $ | 31 | $ | (10) | ||||||||||||
| Net investment hedges(1) | 27 | (36) | 59 | (71) |
(1) Amounts recognized in OCI for excluded components for the periods presented were immaterial.
The tables below present the gains (losses) on our derivative financial instruments and hedging activity in the Condensed Consolidated Statements of Income.
| Derivative Financial Instruments and Hedging Activity | For the three months ended June 30, 2024 | |||||||||||||||||||||||||||||||
| Cost of products | Cost of services | SG&A | Interest and other financial charges – net | Other**(3)** | ||||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | 1 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
| Effects of cash flow hedges | 1 | — | — | — | — | |||||||||||||||||||||||||||
| Cross-currency swaps | — | — | — | 8 | — | |||||||||||||||||||||||||||
| Foreign currency forward and options contracts | — | — | — | 2 | — | |||||||||||||||||||||||||||
| Effects of net investment hedges**(1)** | — | — | — | 11 | — | |||||||||||||||||||||||||||
| Interest rate swaps(4) | — | — | — | (21) | — | |||||||||||||||||||||||||||
| Debt basis adjustment on Long-term borrowings | — | — | — | 14 | — | |||||||||||||||||||||||||||
| Effects of fair value hedges | — | — | — | (7) | — | |||||||||||||||||||||||||||
| Foreign currency forward contracts | 5 | 1 | — | — | — | |||||||||||||||||||||||||||
| Other derivatives(2) | — | — | 1 | — | 3 | |||||||||||||||||||||||||||
| Effects of derivatives not designated as hedging instruments | 5 | 1 | 1 | — | 3 | |||||||||||||||||||||||||||
| For the three months ended June 30, 2023 | ||||||||||||||||||||||||||||||||
| Cost of products | Cost of services | SG&A | Interest and other financial charges – net | Other**(3)** | ||||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | (5) | $ | (1) | $ | — | $ | — | $ | — | ||||||||||||||||||||||
| Effects of cash flow hedges | (5) | (1) | — | — | — | |||||||||||||||||||||||||||
| Cross-currency swaps | — | — | — | 8 | — | |||||||||||||||||||||||||||
| Foreign currency forward and option contracts | — | — | — | — | — | |||||||||||||||||||||||||||
| Effects of net investment hedges**(1)** | — | — | — | 9 | — | |||||||||||||||||||||||||||
| Interest rate swaps | — | — | — | — | — | |||||||||||||||||||||||||||
| Debt basis adjustment on Long-term borrowings | — | — | — | — | — | |||||||||||||||||||||||||||
| Effects of fair value hedges | — | — | — | — | — | |||||||||||||||||||||||||||
| Foreign currency forward contracts | 3 | 1 | — | — | 4 | |||||||||||||||||||||||||||
| Other derivatives(2) | — | — | 18 | — | — | |||||||||||||||||||||||||||
| Effects of derivatives not designated as hedging instruments | 3 | 1 | 18 | — | 4 | |||||||||||||||||||||||||||
| For the six months ended June 30, 2024 | ||||||||||||||||||||||||||||||||
| Cost of products | Cost of services | SG&A | Interest and other financial charges – net | Other**(3)** | ||||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
| Effects of cash flow hedges | — | — | — | — | — | |||||||||||||||||||||||||||
| Cross-currency swaps | — | — | — | 17 | — | |||||||||||||||||||||||||||
| Foreign currency forward and options contracts | — | — | — | 4 | — | |||||||||||||||||||||||||||
| Effects of net investment hedges**(1)** | — | — | — | 21 | — | |||||||||||||||||||||||||||
| Interest rate swaps(4) | — | — | — | (66) | — | |||||||||||||||||||||||||||
| Debt basis adjustment on Long-term borrowings | — | — | — | 52 | — | |||||||||||||||||||||||||||
| Effects of fair value hedges | — | — | — | (13) | — | |||||||||||||||||||||||||||
| Foreign currency forward contracts | (7) | (2) | — | — | — | |||||||||||||||||||||||||||
| Other derivatives(2) | — | — | 5 | — | 23 | |||||||||||||||||||||||||||
| Effects of derivatives not designated as hedging instruments | (7) | (2) | 5 | — | 23 | |||||||||||||||||||||||||||
| For the six months ended June 30, 2023 | ||||||||||||||||||||||||||||||||
| Cost of products | Cost of services | SG&A | Interest and other financial charges – net | Other**(3)** | ||||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | 22 | $ | 5 | $ | — | $ | — | $ | — | ||||||||||||||||||||||
| Effects of cash flow hedges | 22 | 5 | — | — | — | |||||||||||||||||||||||||||
| Cross-currency swaps | — | — | — | 17 | — | |||||||||||||||||||||||||||
| Foreign currency forward and option contracts | — | — | — | — | — | |||||||||||||||||||||||||||
| Effects of net investment hedges**(1)** | — | — | — | 17 | — | |||||||||||||||||||||||||||
| Interest rate swaps | — | — | — | — | — | |||||||||||||||||||||||||||
| Debt basis adjustment on Long-term borrowings | — | — | — | — | — | |||||||||||||||||||||||||||
| Effects of fair value hedges | — | — | — | — | — | |||||||||||||||||||||||||||
| Foreign currency forward contracts | 10 | 3 | — | — | 5 | |||||||||||||||||||||||||||
| Other derivatives(2) | — | — | 33 | — | — | |||||||||||||||||||||||||||
| Effects of derivatives not designated as hedging instruments | 10 | 3 | 33 | — | 5 | |||||||||||||||||||||||||||
(1) Changes in fair value related to components other than the spot rate are excluded from effectiveness testing for the three and six months ended June 30, 2024 and 2023.
(2) Other derivatives are primarily comprised of embedded derivatives and derivatives related to equity contracts.
(3) Amounts are inclusive of gains (losses) in Other (income) expense – net in the Condensed Consolidated Statements of Income.
(4) Amount includes $(7) million and $(13) million of interest expense on interest rate derivatives for the three and six months ended June 30, 2024, respectively.
FAIR VALUE MEASUREMENTS.
The following table represents assets and liabilities that are recorded and measured at fair value on a recurring basis.
| Fair Value of Assets and Liabilities Measured on a Recurring Basis | |||||||||||||||||||||||||||||
| As of June 30, 2024 | As of December 31, 2023 | ||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Money market funds | $ | — | $ | 215 | $ | — | $ | 215 | $ | — | $ | 200 | $ | — | $ | 200 | |||||||||||||
| Investment securities | 26 | — | — | 26 | 31 | — | — | 31 | |||||||||||||||||||||
| Derivatives | — | 72 | — | 72 | — | 128 | — | 128 | |||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Deferred compensation | 237 | 6 | — | 243 | 264 | 5 | — | 269 | |||||||||||||||||||||
| Derivatives | — | 209 | — | 209 | — | 269 | — | 269 | |||||||||||||||||||||
| Contingent consideration | — | — | 42 | 42 | — | — | 44 | 44 |
Cash equivalents
As of June 30, 2024 and December 31, 2023, Cash, cash equivalents and restricted cash of $2,015 million and $2,504 million, respectively, included money market funds of $215 million and $200 million, and other cash equivalents of $695 million and $1,023 million, respectively. The carrying values of the other cash equivalents approximate fair value due to their short maturities and are valued using Level 1 or Level 2 inputs.
Deferred compensation
The deferred compensation liabilities as of June 30, 2024 and December 31, 2023 are comprised of market-based obligations indexed to the S&P 500 index fund and GE HealthCare stock in Level 1, and mutual funds in Level 2.
Derivatives
Derivatives are measured at fair value using a discounted cash flow method or option models using interest rates, foreign exchange spot and forward rates and yield curves observable at commonly quoted intervals, implied volatilities, and credit spreads as key inputs. Unobservable inputs relate to our own credit risk which is not significant to the overall measurement of fair value.
Contingent consideration
The contingent consideration liabilities as of June 30, 2024 and December 31, 2023 were recorded in connection with business acquisitions. The contingent consideration is recorded at fair value based on estimates of future cash flows associated with the acquired businesses. To the extent that the valuation of these liabilities is based on inputs that are less observable or not observable in the market, the determination of fair value requires more judgment. Accordingly, the fair value of contingent consideration is classified within Level 3 of the fair value hierarchy.
Non-recurring fair value measurements
Changes in fair value measurements of assets and liabilities measured at fair value on a non-recurring basis, such as equity method investments, equity investments without readily determinable fair value, financing receivables, and long-lived assets, were not material for the six months ended June 30, 2024 and 2023.
Fair value of other financial instruments
The estimated fair value of borrowings as of June 30, 2024 and December 31, 2023 was $9,609 million and $9,959 million, respectively, compared to a carrying value (which includes a reduction for unamortized debt issuance costs and discounts and cumulative basis adjustment) of $9,240 million and $9,442 million, respectively. The fair value of our borrowings includes accrued interest and is determined based on observable and quoted prices and spreads of comparable debt and benchmark securities and is considered Level 2 in the fair value hierarchy. See Note 8, “Borrowings” for further information.
NOTE 13. COMMITMENTS, GUARANTEES, PRODUCT WARRANTIES, AND OTHER LOSS CONTINGENCIES
GUARANTEES.
The Company has off-balance sheet credit exposure through standby letters of credit, bank guarantees, bid bonds, and surety bonds. See Note 8, “Borrowings” for further information.
Following the Spin-Off, which was completed pursuant to a Separation and Distribution Agreement (the “Separation and Distribution Agreement”), the Company had remaining performance guarantees on behalf of GE. Under the Separation and Distribution Agreement, GE was obligated to use reasonable best efforts to replace the Company as the guarantor or terminate all such performance guarantees. Until such termination or replacement, in the event of non-fulfillment of contractual obligations by the relevant obligors, the Company could have been obligated to make payments under the applicable instruments for which GE was obligated to reimburse and indemnify the Company. As of December 31, 2023, the Company’s maximum aggregate exposure, subject to GE reimbursement, was approximately $114 million. In the second quarter of 2024, these remaining performance guarantees were all terminated or replaced.
PRODUCT WARRANTIES.
We provide warranty coverage to our customers as part of customary practices in the market to provide assurance that the products we sell comply with agreed-upon specifications. We provide estimated product warranty expenses when we sell the related products. Warranty accruals are estimates that are based on the best available information, mostly historical claims experience, therefore claims costs may differ from amounts provided. An analysis of changes in the liability for product warranties follows.
| For the six months ended June 30 | |||||||||||
| 2024 | 2023 | ||||||||||
| Balance at beginning of period | $ | 192 | $ | 193 | |||||||
| Current-year provisions | 96 | 102 | |||||||||
| Expenditures | (112) | (105) | |||||||||
| Other changes | (4) | — | |||||||||
| Balance at end of period | $ | 172 | $ | 190 |
Product warranties are recognized within All other current liabilities in the Condensed Consolidated Statements of Financial Position.
LEGAL MATTERS.
In the normal course of our business, we are involved from time to time in various arbitrations; class actions; commercial, intellectual property, and product liability litigation; government investigations; investigations by competition/antitrust authorities; and other legal, regulatory, or governmental actions, including the significant matters described below that could have a material impact on our results of operations and cash flows. 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 such 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.
Contracts with Iraqi Ministry of Health
In 2017, a number of U.S. Service members, civilians, and their families brought a complaint in the U.S. District Court for the District of Columbia (the “District Court”) against a number of pharmaceutical and medical device companies, including GE HealthCare and certain affiliates, alleging that the defendants violated the U.S. Anti-Terrorism Act. The complaint seeks monetary relief and alleges that the defendants provided funding for an Iraqi terrorist organization through their sales practices pursuant to pharmaceutical and medical device contracts with the Iraqi Ministry of Health. In July 2020, the District Court granted defendants’ motions to dismiss and dismissed all of the plaintiffs’ claims. In January 2022, a panel of the U.S. Court of Appeals for the District of Columbia Circuit reversed the District Court’s decision. In February 2022, the defendants requested review of the decision by all of the judges on the U.S. Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit”). In February 2023, the D.C. Circuit denied this request. In June 2023, defendants petitioned the Supreme Court to review the D.C. Circuit’s decision. On June 24, 2024, the Supreme Court vacated the D.C. Circuit’s decision and remanded the case to the D.C. Circuit for further consideration in light of Twitter, Inc. v. Taamneh, a separate case decided by the Supreme Court in May 2023. The proceedings in the District Court are currently inactive.
Government Disclosures
From time to time, we make self-disclosures regarding our compliance with the Foreign Corrupt Practices Act (“FCPA”) and similar laws to relevant authorities who may pursue or decline to pursue enforcement proceedings against us. We, with the assistance of outside counsel, made voluntary self-disclosures to the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) beginning in 2018 regarding tender irregularities and other potential violations of the FCPA relating to our activities in certain provinces in China. We have been engaged in ongoing discussions with each of the SEC and the DOJ regarding these matters. We are fully cooperating with the reviews by these agencies and have implemented, and continue to implement, enhancements to our compliance policies and practices. At this time, we are unable to predict the duration, scope, result, or related costs associated with these disclosures to the SEC and the DOJ. We also are unable to predict what, if any, action may be taken by the SEC or the DOJ or what penalties or remedial actions they may seek. Any determination that our operations or activities are not in compliance with existing laws or regulations, including applicable foreign laws, could result in the imposition of fines, penalties, disgorgement, equitable relief, or other losses.
NOTE 14. RESTRUCTURING AND OTHER ACTIVITIES – NET
Restructuring activities are essential to optimize the business operating model for GE HealthCare and mostly involve workforce reductions, organizational realignments, and revisions to our real estate footprint. Specifically, restructuring and other charges (gains) primarily include facility exit costs, employee-related termination benefits associated with workforce reductions, asset write-downs, and cease-use costs. For segment reporting, restructuring and other activities are not allocated.
Net expenses for restructuring initiatives committed to by management through June 30, 2024 are included in the table below.
| Restructuring and Other Activities | For the three months ended June 30 | For the six months ended June 30 | ||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||
| Employee termination costs | $ | 17 | $ | 15 | $ | 42 | $ | 25 | ||||||||||||
| Facility and other exit costs | 5 | — | 13 | 1 | ||||||||||||||||
| Asset write-downs | 6 | 4 | 13 | 5 | ||||||||||||||||
| Total restructuring and other activities – net | $ | 29 | $ | 19 | $ | 68 | $ | 31 |
These restructuring initiatives are expected to result in additional expenses of approximately $16 million, to be incurred primarily over the next 12 months, substantially related to employee-related termination benefits and asset write-downs. Restructuring expenses (gains) are recognized within Cost of products, Cost of services, or SG&A, as appropriate, in the Condensed Consolidated Statements of Income.
Liabilities related to restructuring are recognized within Current compensation and benefits, All other current liabilities, Non-current compensation and benefits, and All other non-current liabilities in the Condensed Consolidated Statements of Financial Position and totaled $76 million and $68 million as of June 30, 2024 and December 31, 2023, respectively.
NOTE 15. EARNINGS PER SHARE
The numerator for both basic and diluted earnings per share (“EPS”) is Net income attributable to GE HealthCare common stockholders. The denominator of basic EPS is the weighted-average number of shares outstanding during the period. The dilutive effect of outstanding stock options, restricted stock units, and performance share units is reflected in the denominator for diluted EPS using the treasury stock method.
| Earnings Per Share | For the three months ended June 30 | For the six months ended June 30 | ||||||||||||||||||
| (In millions, except per share amounts) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||
| Numerator: | ||||||||||||||||||||
| Net income | $ | 435 | $ | 433 | $ | 823 | $ | 816 | ||||||||||||
| Net (income) loss attributable to noncontrolling interests | (7) | (15) | (21) | (26) | ||||||||||||||||
| Net income attributable to GE HealthCare | 428 | 418 | 802 | 790 | ||||||||||||||||
| Deemed preferred stock dividend of redeemable noncontrolling interest | — | — | — | (183) | ||||||||||||||||
| Net income attributable to GE HealthCare common stockholders | $ | 428 | $ | 418 | $ | 802 | $ | 607 | ||||||||||||
| Denominator: | ||||||||||||||||||||
| Basic weighted-average shares outstanding | 457 | 455 | 456 | 455 | ||||||||||||||||
| Dilutive effect of common stock equivalents | 3 | 3 | 3 | 3 | ||||||||||||||||
| Diluted weighted-average shares outstanding | 459 | 458 | 459 | 458 | ||||||||||||||||
| Basic earnings per share | $ | 0.94 | $ | 0.92 | $ | 1.76 | $ | 1.34 | ||||||||||||
| Diluted earnings per share | $ | 0.93 | $ | 0.91 | $ | 1.75 | $ | 1.33 | ||||||||||||
| Antidilutive securities(1) | 5 | 4 | 4 | 4 |
(1) Diluted earnings per share excludes certain shares issuable under share-based compensation plans because the effect would have been antidilutive.
NOTE 16. SUPPLEMENTAL FINANCIAL INFORMATION
| Cash, Cash Equivalents, and Restricted Cash | As of | |||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Cash and cash equivalents | $ | 1,997 | $ | 2,494 | ||||
| Short-term restricted cash | 17 | 10 | ||||||
| Total Cash, cash equivalents, and restricted cash as presented in the Condensed Consolidated Statements of Financial Position | 2,015 | 2,504 | ||||||
| Long-term restricted cash(1) | 3 | 2 | ||||||
| Total Cash, cash equivalents, and restricted cash as presented in the Condensed Consolidated Statements of Cash Flows | $ | 2,018 | $ | 2,506 |
(1) Long-term restricted cash is recognized within All other non-current assets in the Condensed Consolidated Statements of Financial Position.
| Inventories | As of | |||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Raw materials | $ | 934 | $ | 961 | ||||
| Work in process | 102 | 91 | ||||||
| Finished goods | 987 | 908 | ||||||
| Inventories**(1)** | $ | 2,023 | $ | 1,960 |
(1) Certain inventory items are long-term in nature and therefore have been recognized within All other non-current assets in the Condensed Consolidated Statements of Financial Position.
| Property, Plant, and Equipment – Net | As of | |||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Original cost | $ | 5,207 | $ | 5,208 | ||||
| Accumulated depreciation | (3,108) | (3,064) | ||||||
| Right-of-use operating lease assets, net of amortization | 359 | 356 | ||||||
| Property, plant, and equipment – net | $ | 2,458 | $ | 2,500 |
| All Other Current and Non-Current Assets | As of | |||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Prepaid expenses and deferred costs | $ | 218 | $ | 147 | ||||
| Financing receivables – net | 93 | 97 | ||||||
| Derivative instruments | 58 | 84 | ||||||
| Other(1) | 68 | 61 | ||||||
| All other current assets | $ | 437 | $ | 389 | ||||
| Prepaid pension asset | $ | 742 | $ | 716 | ||||
| Equity method and other investments | 340 | 357 | ||||||
| Financing receivables – net | 172 | 178 | ||||||
| Long-term receivables – net | 153 | 124 | ||||||
| Inventories | 149 | 147 | ||||||
| Contract and other deferred assets | 177 | 168 | ||||||
| Other(2) | 178 | 191 | ||||||
| All other non-current assets | $ | 1,913 | $ | 1,881 |
(1) Current Other primarily consists of tax receivables.
(2) Non-current Other primarily consists of indemnity assets associated with separation agreements with GE, capitalized cloud computing software, tax receivables, and derivative instruments.
| All Other Current and Non-Current Liabilities | As of | |||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Sales allowances and related liabilities | $ | 211 | $ | 228 | ||||
| Income and indirect tax liabilities including uncertain tax positions | 200 | 260 | ||||||
| Product warranties | 172 | 192 | ||||||
| Accrued freight and utilities | 115 | 132 | ||||||
| Operating lease liabilities | 113 | 110 | ||||||
| Derivative instruments(1) | 99 | 128 | ||||||
| Interest payable on borrowings | 87 | 87 | ||||||
| Environmental and asset retirement obligations | 19 | 21 | ||||||
| Other(2) | 331 | 335 | ||||||
| All other current liabilities | $ | 1,348 | $ | 1,493 | ||||
| Contract liabilities | $ | 685 | $ | 705 | ||||
| Operating lease liabilities | 267 | 273 | ||||||
| Environmental and asset retirement obligations | 264 | 265 | ||||||
| Income and indirect tax liabilities including uncertain tax positions | 194 | 208 | ||||||
| Derivative instruments | 108 | 136 | ||||||
| Finance lease obligations | 42 | 38 | ||||||
| Sales allowances and related liabilities | 23 | 27 | ||||||
| Other(3) | 212 | 225 | ||||||
| All other non-current liabilities | $ | 1,796 | $ | 1,877 |
(1) Derivative instruments include the related accrued interest. Refer to Note 12, “Financial Instruments and Fair Value Measurements” for further information.
(2) Current Other primarily consists of miscellaneous accrued costs, dividends payable to stockholders, and contingent consideration liabilities.
(3) Non-current Other primarily consists of miscellaneous accrued costs, contingent consideration liabilities, and indemnity liabilities associated with separation agreements with GE.
SUPPLY CHAIN FINANCE PROGRAMS.
The Company participates in voluntary supply chain finance programs which provide participating suppliers the opportunity to sell their GE HealthCare receivables to third parties at the sole discretion of both the suppliers and the third parties. We evaluate supply chain finance programs to ensure the use of a third-party intermediary to settle our trade payables 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. In connection with the supply chain finance programs, payment terms normally range from 30 to 180 days, depending on the underlying supplier agreements.
Included within Accounts payable in the Condensed Consolidated Statements of Financial Position as of June 30, 2024 and December 31, 2023 were $393 million and $365 million, respectively, of confirmed supplier invoices that are outstanding and subject to third-party programs.
REDEEMABLE NONCONTROLLING INTERESTS**.**
The Company has noncontrolling interests with redemption features. These redemption features, such as put options, could require the Company to purchase the noncontrolling interests upon the occurrence of certain events. All noncontrolling interests with redemption features that are not solely within our control are recognized within the Condensed Consolidated Statements of Financial Position between liabilities and equity. Redeemable noncontrolling interests are initially recorded at the issuance date fair value. Those that are currently redeemable, or probable of becoming redeemable, are subsequently adjusted to the greater of current redemption value or initial carrying value.
The activity attributable to redeemable noncontrolling interests for the six months ended June 30, 2024 and 2023 is presented below.
| Redeemable Noncontrolling Interests | For the six months ended June 30 | ||||||||||
| 2024 | 2023 | ||||||||||
| Balance at beginning of period | $ | 165 | $ | 230 | |||||||
| Net income attributable to redeemable noncontrolling interests | 16 | 21 | |||||||||
| Redemption value adjustments(1) | — | 183 | |||||||||
| Distributions to and exercise of redeemable noncontrolling interests and other(2) | (4) | (225) | |||||||||
| Balance at end of period | $ | 177 | $ | 209 |
(1) As of January 3, 2023, certain redeemable noncontrolling interests were probable of becoming redeemable due to the change of control that occurred upon consummation of the Spin-Off. As a result, these redeemable noncontrolling interests were remeasured to their current redemption value. The remeasurement was accounted for as a deemed preferred stock dividend of redeemable noncontrolling interest and recorded as an adjustment to Retained earnings in the Condensed Consolidated Statements of Financial Position.
(2) In the first quarter of 2023, the redeemable noncontrolling interest holder exercised its option redemption provision. The redemption amount of $211 million was paid in the second quarter of 2023.
| Other Income (Expense) – Net | For the three months ended June 30 | For the six months ended June 30 | ||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||
| Net financing income and investment income (loss) | $ | — | $ | — | $ | (15) | $ | 13 | ||||||||||||
| Equity method income (loss) | 2 | 5 | 3 | 9 | ||||||||||||||||
| Change in fair value of assumed obligations | (9) | (6) | (17) | (19) | ||||||||||||||||
| Other items, net(1) | 7 | 15 | 21 | 19 | ||||||||||||||||
| Total other income (expense) – net | $ | 1 | $ | 14 | $ | (8) | $ | 22 |
(1) Other items, net primarily consists of lease income and licensing and royalty income for the three and six months ended June 30, 2024, and lease income, gains and losses related to derivatives, and licensing and royalty income for the three and six months ended June 30, 2023.
NOTE 17. RELATED PARTIES AND TRANSITION SERVICES AGREEMENT
In connection with the Spin-Off, the Company entered into or adopted several agreements that provide a framework for the relationship between the Company and GE, including the Transition Services Agreement (“TSA”). These agreements were structured in anticipation of GE’s transaction to separate the GE Vernova business as described in Note 1, “Organization and Basis of Presentation.” Under these agreements, we incurred $45 million, net, and $84 million, net, for the three months ended June 30, 2024 and 2023, respectively, and $98 million, net, and $192 million, net, for the six months ended June 30, 2024 and 2023, respectively. These amounts represent fees charged from GE and GE Vernova to the Company primarily for information technology, human resources, and research and development and is net of fees charged from the Company to GE and GE Vernova for facilities and other shared services. For more information on these agreements, see Note 19, “Related Parties” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Current amounts due from and to GE under the various agreements are recognized within Due from related parties or Due to related parties, as applicable, in the Condensed Consolidated Statements of Financial Position. Non-current amounts due from GE were $70 million and $81 million, and due to GE were $41 million and $33 million, as of June 30, 2024 and December 31, 2023, respectively. These amounts were recognized within All other non-current assets and All other non-current liabilities, respectively, in the Condensed Consolidated Statements of Financial Position and primarily relate to tax and other indemnities. Following its separation from GE, GE Vernova does not meet the definition of a related party; accordingly, amounts as of June 30, 2024 due to and from GE Vernova in accordance with the TSA are excluded from the Due from related parties and Due to related parties financial statement line items and non-current balances disclosed above.
NOTE 18. SUBSEQUENT EVENTS
Effective July 1, 2024, the Image Guided Therapies subsegment, previously part of the Imaging segment, was realigned to the Ultrasound segment to better match its clinical usage and realize stronger business and customer impact by providing the right image guidance in the right care setting. Following this realignment, the Company continues to have four reportable segments. Beginning with the Form 10-Q filing for the period ending September 30, 2024, any historical segment financial information presented will be recast to conform to the new reportable segments structure.
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