GENERAL ELECTRIC CO

FINANCIAL POLICY. GE Aerospace is committed to maintaining strong investment grade ratings with a disciplined capital allocation strategy. The Company will continue to invest in future growth and innovation through research and development and capital expenditures. We intend to return a majority of our free cash flow* to shareholders through dividends and share repurchases. Merger and acquisition investments will be pursued in a disciplined way and focused on those that offer strategic, operational and financial synergies.

LIQUIDITY POLICY. We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet our business needs and financial obligations under both normal and stressed conditions. We believe that our consolidated liquidity and availability under our revolving credit facilities will be sufficient to meet our liquidity needs.

CONSOLIDATED LIQUIDITY. Our primary sources of liquidity consist of cash and cash equivalents, free cash flow* from our operating businesses, and access to capital markets. If needed, we can also draw from short-term borrowing facilities, including revolving credit facilities. Cash generation can be subject to variability based on many factors, including receipt of down payments on large equipment orders, timing of billings on long-term contracts, timing of customer allowances and market conditions. Total cash, cash equivalents and restricted cash was $13.6 billion at December 31, 2024, of which $4.4 billion was held in the U.S. and $9.2 billion was held outside the U.S.

Cash held in non-U.S. entities has generally been reinvested in active foreign business operations; however, substantially all of our unrepatriated earnings were subject to U.S. federal tax and, if there is a change in reinvestment, we would expect to be able to repatriate available cash (excluding amounts held in countries with currency controls) without significant tax cost.

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Cash, cash equivalents and restricted cash at December 31, 2024 included $0.4 billion of cash held in countries with currency control restrictions. Cash held in countries with currency controls represents amounts held in countries that may restrict the transfer of funds to the U.S. or limit our ability to transfer funds to the U.S. without incurring substantial costs. Excluded from cash, cash equivalents and restricted cash was $0.9 billion of cash in our run-off insurance operations, which was classified as All other assets in the Statement of Financial Position.

As part of the spin-off of GE HealthCare completed in the first quarter of 2023, we retained 19.9% stake of GE HealthCare common stock upon the spin. During the year ended December 31, 2024, we sold all of our remaining GE Healthcare shares and received total proceeds of $5.2 billion from the disposition of 61.6 million shares. See Notes 3 and 19 for further information.

Following approval of a statutory permitted accounting practice in 2018 by our primary insurance regulator, the Kansas Insurance Department (KID), we have since provided a total of $15.0 billion of capital contributions to our insurance subsidiaries, including the final contribution of $1.8 billion in the first quarter of 2024. See Note 12 for further information.

On March 7, 2024, the Company announced that the Board of Directors had authorized the repurchase of up to $15.0 billion of our common stock, which replaced our previous $3.0 billion share repurchase authorization. Under this program, shares may be repurchased on the open market, via various strategies, including plans complying with rules 10b5-1 and 10b-18 as well as plans using accelerated share repurchases. In connection with this new authorization, we repurchased 28.8 million shares for $4.9 billion from April 2024 through December 31, 2024. This included repurchases of 12.5 million shares for $2.2 billion using accelerated stock repurchases, which were utilized as a mechanism to achieve planned repurchase volumes within a quarter during closed windows.

BORROWINGS. Consolidated total borrowings were $19.3 billion and $20.5 billion at December 31, 2024 and December 31, 2023, respectively, a decrease of $1.2 billion, mainly due to maturities. In April 2024, the Company replaced its previous $10.0 billion syndicated credit facility with a five-year unsecured revolving credit facility in an aggregate committed amount of $3.0 billion. The total interest payments on consolidated borrowings are estimated to be $0.8 billion, $0.8 billion, $0.7 billion, $0.7 billion and $0.7 billion for 2025, 2026, 2027, 2028 and 2029, respectively.

CREDIT RATINGS AND CONDITIONS. We have relied, and may continue to rely, on the short- and long-term debt capital markets to fund, among other things, a significant portion of our operations. The cost and availability of debt financing is influenced by our credit ratings. Moody’s Investors Service (Moody’s) and Standard and Poor’s Global Ratings (S&P) currently issue ratings on our short- and long-term debt. Fitch, which previously issued ratings on us, affirmed our BBB+ long term rating and F1 short-term rating and subsequently withdrew its ratings on us on September 13, 2024, at our request. Our credit ratings as of the date of this filing are set forth in the table below.

Our ratings may be subject to a revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating.

Substantially all of the Company's debt agreements in place at December 31, 2024 do not contain material credit rating covenants. Our unused back-up revolving syndicated credit facility contains a customary net debt-to-EBITDA financial covenant, which we satisfied at December 31, 2024.

FOREIGN EXCHANGE RISK AND INTEREST RATE RISK. As a result of our global operations, we generate and incur a small portion of our revenue and expenses in currencies other than the U.S. dollar. Such principal currencies include the euro, the British Sterling pound, and Brazilian real. The effect of foreign currency fluctuations on earnings was immaterial for the year ended December 31, 2024. See Note 22 for further information about our risk exposures, our use of derivatives, and the effects of this activity on our financial statements.

Exchange rate and interest rate risks are managed with a variety of techniques, including selective use of derivatives. We apply policies to manage each of these risks, including prohibitions on speculative activities. It is our policy to minimize currency exposures by conducting operations in the U.S. dollar if possible or by utilizing the protection of hedge strategies. To assess exposure to interest rate risk, we apply a +/- 100 basis points change in interest rates and keep that in place for the next 12 months. To assess exposure to currency risk of assets and liabilities denominated in other than their functional currencies, we evaluate the effect of a 10% shift in exchange rates against the U.S. dollar (USD). The analyses indicated that our 2024 consolidated net earnings would decline by $0.1 billion for interest rate risk and $0.1 billion for foreign exchange risk.

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STATEMENT OF CASH FLOWS

CASH FLOWS FROM CONTINUING OPERATIONS. The most significant source of cash flows from operating activities (CFOA) is customer-related activities, the largest of which is collecting cash resulting from equipment or services sales. The most significant operating use of cash is to pay our suppliers, employees, tax authorities and postretirement plans. GE Aerospace measures itself on a free cash flow* basis. This metric includes CFOA plus investments in property, plant and equipment and additions to internal-use software, and this metric excludes any cash received from dispositions of property, plant and equipment.

Cash from operating activities was $5.8 billion in 2024, an increase of$1.2 billion compared to 2023, primarily due to: an increase in net income (after adjusting for depreciation of property, plant and equipment, amortization of intangible assets, goodwill impairments and non-cash (gains) losses related to our retained and sold ownership interests in GE HealthCare, AerCap and Baker Hughes) driven by all segments, a decrease in income tax payments, partially offset by working capital growth and decrease in All other operating activities. The components of All other operating activities were as follows:

The cash impacts from changes in working capital were $(0.4) billion, a decrease of $1.1 billion compared to 2023, due to: current receivables of $(0.9) billion, driven by higher volume partially offset by higher collections, including increased collections from CFM International; inventories, including deferred inventory, of $(0.2) billion, driven by higher material purchases and lower liquidations primarily due to output challenges; current contract assets, contract liabilities and current deferred income of $(0.2) billion, driven by higher revenue recognition, partially offset by billings and net unfavorable changes in estimated profitability; progress collections of $0.3 billion, driven by higher collections offset by higher liquidations; accounts payable was flat, driven by higher disbursements related to purchases of materials in prior periods, partially offset by higher volume.

Cash from operating activities was $4.6 billion in 2023, an increase of$0.6 billion compared to 2022, primarily due to: an increase in net income (after adjusting for depreciation of property, plant, and equipment, amortization of intangible assets and non-cash (gains) losses related to our retained and sold ownership interests in GE HealthCare, AerCap and Baker Hughes) primarily in our Commercial Engines & Services business; partially offset by an increase in income tax payments and working capital growth. The components of All other operating activities were as follows:

The cash impacts from changes in working capital were $0.6 billion, a decrease of $0.5 billion compared to 2022, due to: current receivables of $1.7 billion, driven by higher collections partially offset by higher volume; inventories, including deferred inventory, of $(0.3) billion, driven by higher material purchases outpacing liquidations primarily due to output challenges; current contract assets, contract liabilities and current deferred income was flat, driven by higher billings offset by higher revenue recognition; progress collections of $(0.9) billion, driven by lower collections and higher liquidations; accounts payable of $(0.9) billion, driven by higher disbursements related to purchases of materials in prior periods partially offset by higher volume.

Cash used for investing activities was $0.6 billion in 2024, a decrease of $8.2 billion compared to 2023, primarily due to: higher cash paid related to net settlements between our continuing operations and businesses in discontinued operations of $4.6 billion, primarily related to the separation of GE Vernova of $3.0 billion in 2024 and lower cash received of $1.1 billion related to the separation of GE HealthCare in 2023 (components of All other investing activities); a decrease in proceeds of $3.8 billion from the disposition of our remaining retained ownership interests in AerCap and Baker Hughes of $6.8 billion in 2023, partially offset by an increase in proceeds of $3.1 billion from the disposition of our remaining retained ownership interest in GE HealthCare in 2024. These increases in cash used were partially offset by proceeds received from the dispositions of our non-core licensing business and Electric Insurance Company of $0.5 billion. Cash used for additions to property, plant and equipment and internal-use software, which are components of free cash flow*, was $1.0 billion and $0.9 billion in 2024 and 2023, respectively.

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Cash from investing activities was $7.7 billion in 2023, a decrease of $2.7 billion compared with 2022, primarily due to: higher cash paid related to net settlements between our continuing operations and businesses in discontinued operations of $6.3 billion, primarily related to lower cash received of $7.6 billion related to the separation of GE Healthcare partially offset by higher cash received of $0.8 billion from the separation of GE Vernova and an increase in cash paid for derivatives settlements of $0.4 billion (components of All other investing activities); partially offset by an increase in proceeds of $4.3 billion from the disposition of our retained ownership interests in GE HealthCare, AerCap and Baker Hughes. Cash used for additions to property, plant and equipment and internal-use software, which are components of free cash flow*, was $0.9 billion and $0.7 billion in 2023 and 2022, respectively.

Cash used for financing activities was $6.6 billion in 2024, a decrease of $3.9 billion compared to 2023, primarily due to: cash paid for redemption of GE preferred stock of $5.8 billion in 2023; lower net debt maturities of $2.6 billion and an increase in cash received of $0.9 billion from stock option exercises (a component of All other financing activities); partially offset by an increase in treasury stock repurchases of $4.6 billion and higher dividends paid to shareholders of $0.4 billion.

Cash used for financing activities was $10.5 billion in 2023, a decrease of $3.0 billion compared with 2022, primarily due to: cash paid to repurchase long-term debt of $6.9 billion, including debt extinguishment costs in 2022, lower other net debt maturities of $0.5 billion, lower cash paid on derivatives hedging foreign currency debt of $0.7 billion, an increase in cash received of $0.5 billion from stock option exercises, the settlement of Concept Laser GmbH's interest of $0.2 billion in 2022 (components of All other financing activities); partially offset by higher cash paid for redemption of GE preferred stock of $5.7 billion.

Free cash flow* (FCF) was $6.1 billion and $4.7 billion for the years ended December 31, 2024 and 2023, respectively. FCF* increased primarily due to higher net income and lower income tax payments, partially offset by a decrease in All other operating activities and working capital growth, after adjusting for an increase in Corporate & Other restructuring cash expenditures, which are excluded from FCF*.

Free cash flow* was $4.7 billion and $3.5 billion for the years ended December 31, 2023 and 2022, respectively. FCF* increased primarily due to higher net income, partially offset by higher income tax payments and working capital growth, after adjusting for increases in separation cash and Corporate & Other restructuring cash expenditures, which are excluded from FCF*.

CASH FLOWS FROM DISCONTINUED OPERATIONS

Cash used for operating activities of discontinued operationswas $1.1 billion in 2024, an increase of $1.7 billion compared to 2023, primarily driven by down payments received on equipment orders at our former GE Vernova business and disbursements for purchases of materials incurred by our former GE HealthCare business in 2023.

Cash from operating activities of discontinued operations was $0.6 billion in 2023, a decrease of $1.3 billion compared to 2022, primarily driven by higher disbursements related to purchases of materials in prior periods and higher separation costs related to our former GE HealthCare business, partially offset by down payments received on equipment orders at our former GE Vernova business and tax receipts from our trailing operations.

Cash used for investing activities of discontinued operations was $1.1 billion in 2024, a decrease of $2.6 billion compared to 2023, primarily driven by higher cash received of $4.6 billion from net settlements between our discontinued operations and businesses in continuing operations, due to cash received of $3.0 billion in 2024 related to the separation of our former GE Vernova business and cash paid of $1.1 billion in 2023 related to the separation of our former GE HealthCare business. In addition, there was a decrease in cash used due to the prior year separation of GE HealthCare cash and cash equivalents of $1.8 billion. These decreases in cash used were partially offset by a reduction of cash and cash equivalents of $4.2 billion due to the separation of GE Vernova in 2024.

Cash used for investing activities of discontinued operations was $3.7 billion in 2023, a decrease of $4.4 billion compared to 2022, primarily driven by higher cash received of $6.3 billion from net settlements between our discontinued operations and businesses in continuing operations, due to cash received of $7.6 billion related to the separation of our former GE HealthCare business and cash paid of $0.8 billion related to the separation of our former GE Vernova business; partially offset by a reduction in cash due to the separation of GE HealthCare cash and cash equivalents of $1.8 billion in 2023.

Cash used for financing activities of discontinued operationswas $0.1 billion in 2024, a decrease of $2.0 billion compared to 2023, driven by GE HealthCare's long-term debt issuance of $2.0 billion in connection with the spin-off in 2023.

Cash from financing activities of discontinued operations was $1.9 billion in 2023, a decrease of $6.1 billion compared to 2022, primarily driven by lower long-term debt issuances of $6.3 billion at GE HealthCare in connection with the spin-off in 2022.