UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2023OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number:001-35727Netflix,Inc.(Exact name of Registrant as specified in its charter)Delaware77-0467272(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification Number)121 Albright Way,Los Gatos,California95032(Address of principal executive offices)(Zip Code)(408)540-3700(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon stock,par value$0.001 per shareNFLXNASDAQ Global Select MarketIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during thepreceding 12 months(or for such shorter period that the registrant was required to file such reports)and(2)has been subject to such filing requirements for the past 90days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growthcompany.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the ExchangeAct.Large Accelerated FilerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined by Rule 12b-2 of the Exchange Act).Yes No As of March 31,2023,there were 444,536,878 shares of the registrants common stock,par value$0.001,outstanding.Table of Contents PagePart I.Financial InformationItem 1.Consolidated Financial StatementsConsolidated Statements of Operations3Consolidated Statements of Comprehensive Income4Consolidated Statements of Cash Flows5Consolidated Balance Sheets6Consolidated Statements of Stockholders Equity7Notes to Consolidated Financial Statements8Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations18Item 3.Quantitative and Qualitative Disclosures About Market Risk27Item 4.Controls and Procedures27Part II.Other InformationItem 1.Legal Proceedings28Item 1A.Risk Factors29Item 2.Unregistered Sales of Equity Securities and Use of Proceeds29Item 6.Exhibits29Exhibit Index30Signatures302Table of ContentsNETFLIX,INC.Consolidated Statements of Operations(unaudited)(in thousands,except per share data)Three Months EndedMarch 31,2023March 31,2022Revenues$8,161,503$7,867,767 Cost of revenues4,803,625 4,284,705 Marketing555,362 555,978 Technology and development687,275 657,530 General and administrative400,924 397,928 Operating income1,714,317 1,971,626 Other income(expense):Interest expense(174,239)(187,579)Interest and other income(expense)(71,204)195,645 Income before income taxes1,468,874 1,979,692 Provision for income taxes(163,754)(382,245)Net income$1,305,120$1,597,447 Earnings per share:Basic$2.93$3.60 Diluted$2.88$3.53 Weighted-average shares of common stock outstanding:Basic445,244 444,146 Diluted452,417 452,984 See accompanying notes to the consolidated financial statements.3Table of ContentsNETFLIX,INC.Consolidated Statements of Comprehensive Income(unaudited)(in thousands)Three Months EndedMarch 31,2023March 31,2022Net income$1,305,120$1,597,447 Other comprehensive income(loss):Foreign currency translation adjustments25,611(33,675)Comprehensive income$1,330,731$1,563,772 See accompanying notes to the consolidated financial statements.4Table of ContentsNETFLIX,INC.Consolidated Statements of Cash Flows(unaudited)(in thousands)Three Months Ended March 31,2023March 31,2022Cash flows from operating activities:Net income$1,305,120$1,597,447 Adjustments to reconcile net income to net cash provided by operating activities:Additions to content assets(2,458,666)(3,584,164)Change in content liabilities(354,791)(347,149)Amortization of content assets3,459,984 3,166,365 Depreciation and amortization of property,equipment and intangibles90,335 74,602 Stock-based compensation expense99,099 119,209 Foreign currency remeasurement loss(gain)on debt80,651(161,821)Other non-cash items120,008 101,968 Deferred income taxes(98,782)(68,906)Changes in operating assets and liabilities:Other current assets(88,522)41,157 Accounts payable(89,668)(215,444)Accrued expenses and other liabilities185,299 350,763 Deferred revenue(2,390)16,743 Other non-current assets and liabilities(68,937)(167,931)Net cash provided by operating activities2,178,740 922,839 Cash flows from investing activities:Purchases of property and equipment(62,019)(121,158)Acquisitions(124,521)Purchases of short-term investments(201,634)Net cash used in investing activities(263,653)(245,679)Cash flows from financing activities:Repayments of debt(700,000)Proceeds from issuance of common stock26,028 13,678 Repurchases of common stock(400,101)Net cash used in financing activities(374,073)(686,322)Effect of exchange rate changes on cash,cash equivalents and restricted cash26,423(11,448)Net increase(decrease)in cash,cash equivalents and restricted cash1,567,437(20,610)Cash,cash equivalents and restricted cash at beginning of period5,170,582 6,055,111 Cash,cash equivalents and restricted cash at end of period$6,738,019$6,034,501 See accompanying notes to the consolidated financial statements.5Table of ContentsNETFLIX,INC.Consolidated Balance Sheets(in thousands,except share and par value data)As of March 31,2023December 31,2022(unaudited)AssetsCurrent assets:Cash and cash equivalents$6,714,594$5,147,176 Short-term investments1,112,910 911,276 Other current assets2,655,119 3,208,021 Total current assets10,482,623 9,266,473 Content assets,net32,349,184 32,736,713 Property and equipment,net1,413,094 1,398,257 Other non-current assets5,245,444 5,193,325 Total assets$49,490,345$48,594,768 Liabilities and Stockholders EquityCurrent liabilities:Current content liabilities$4,344,580$4,480,150 Accounts payable591,987 671,513 Accrued expenses and other liabilities1,718,069 1,514,650 Deferred revenue1,262,271 1,264,661 Short-term debt399,163 Total current liabilities8,316,070 7,930,974 Non-current content liabilities2,908,029 3,081,277 Long-term debt14,037,965 14,353,076 Other non-current liabilities2,400,085 2,452,040 Total liabilities27,662,149 27,817,367 Commitments and contingencies(Note 7)Stockholders equity:Common stock,$0.001 par value;4,990,000,000 shares authorized at March 31,2023 and December 31,2022;444,536,878 and 445,346,776 issued and outstanding at March 31,2023 and December 31,2022,respectively4,762,395 4,637,601 Treasury stock at cost(2,786,534 and 1,564,478 shares at March 31,2023 and December 31,2022,respectively)(1,228,920)(824,190)Accumulated other comprehensive loss(191,695)(217,306)Retained earnings18,486,416 17,181,296 Total stockholders equity21,828,196 20,777,401 Total liabilities and stockholders equity$49,490,345$48,594,768 See accompanying notes to the consolidated financial statements.6Table of ContentsNETFLIX,INC.Consolidated Statements of Stockholders Equity(unaudited)(in thousands)Three Months Ended March 31,2023March 31,2022Total stockholders equity,beginning balances$20,777,401$15,849,248 Common stock and additional paid-in capital:Beginning balances$4,637,601$4,024,561 Issuance of common stock upon exercise of options25,695 11,810 Stock-based compensation expense99,099 119,209 Ending balances$4,762,395$4,155,580 Treasury stock:Beginning balances$(824,190)$(824,190)Repurchases of common stock to be held as treasury stock(404,730)Ending balances$(1,228,920)$(824,190)Accumulated other comprehensive loss:Beginning balances$(217,306)$(40,495)Other comprehensive income(loss)25,611(33,675)Ending balances$(191,695)$(74,170)Retained earnings:Beginning balances$17,181,296$12,689,372 Net income1,305,120 1,597,447 Ending balances$18,486,416$14,286,819 Total stockholders equity,ending balances$21,828,196$17,544,039 See accompanying notes to the consolidated financial statements.7Table of ContentsNETFLIX,INC.Notes to Consolidated Financial Statements(unaudited)1.Basis of Presentation and Summary of Significant Accounting PoliciesThe accompanying interim consolidated financial statements of Netflix,Inc.and its wholly owned subsidiaries(the“Company”)have been prepared inconformity with accounting principles generally accepted in the United States(“U.S.”)and are consistent in all material respects with those applied in theCompanys Annual Report on Form 10-K for the year ended December 31,2022 filed with the Securities and Exchange Commission(the“SEC”)on January26,2023.The preparation of consolidated financial statements in conformity with U.S.generally accepted accounting principles(“GAAP”)requiresmanagement to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes.Significantitems subject to such estimates and assumptions include the amortization of content assets and the recognition and measurement of income tax assets andliabilities.The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under thecircumstances.On a regular basis,the Company evaluates the assumptions,judgments and estimates.Actual results may differ from these estimates.The interim financial information is unaudited,but reflects all normal recurring adjustments that are,in the opinion of management,necessary to fairlypresent the information set forth herein.The interim consolidated financial statements should be read in conjunction with the audited consolidated financialstatements and related notes included in the Companys Annual Report on Form 10-K for the year ended December 31,2022.Interim results are not necessarilyindicative of the results for a full year.There have been no material changes in the Companys significant accounting policies as compared to the significant accounting policies described in theCompanys Annual Report on Form 10-K for the year ended December 31,2022.2.Revenue RecognitionThe Companys primary source of revenues is from monthly membership fees.Members are billed in advance of the start of their monthly membershipand revenues are recognized ratably over each monthly membership period.Revenues are presented net of the taxes that are collected from members andremitted to governmental authorities.The Company is the principal in all its relationships where partners,including consumer electronics(“CE”)manufacturers,multichannel video programming distributors(“MVPDs”),mobile operators and internet service providers(“ISPs”),provide access to theservice as the Company retains control over service delivery to its members.Typically,payments made to the partners,such as for marketing,are expensed.However,if there is no distinct service provided in exchange for the payments made to the partners or if the price that the member pays is established by thepartners and there is no standalone price for the Netflix service(for instance,in a bundle),these payments are recognized as a reduction of revenues.The following tables summarize revenues,paid net membership additions,and ending paid memberships by region for the three months ended March 31,2023 and March 31,2022,respectively:United States and Canada(UCAN)As of/Three Months Ended March 31,2023March 31,2022(in thousands)Revenues$3,608,645$3,350,424 Paid net membership additions(losses)102(636)Paid memberships at end of period(1)74,398 74,579 Europe,Middle East,and Africa(EMEA)8Table of ContentsAs of/Three Months Ended March 31,2023March 31,2022(in thousands)Revenues$2,517,641$2,561,831 Paid net membership additions(losses)644(303)Paid memberships at end of period(1)77,373 73,733 Latin America(LATAM)As of/Three Months Ended March 31,2023March 31,2022(in thousands)Revenues$1,070,192$998,948 Paid net membership additions(losses)(450)(351)Paid memberships at end of period(1)41,249 39,610 Asia-Pacific(APAC)As of/Three Months Ended March 31,2023March 31,2022(in thousands)Revenues$933,523$916,754 Paid net membership additions(losses)1,455 1,087 Paid memberships at end of period(1)39,478 33,719(1)A paid membership(also referred to as a paid subscription)is defined as a membership that has the right to receive Netflix service following sign-up and a method ofpayment being provided,and that is not part of a free trial or certain other promotions that may be offered by the Company to new or rejoining members.Certain members havethe option to add extra member sub accounts.These extra member sub accounts are not included in paid memberships.A membership is canceled and ceases to be reflected inthe above metrics as of the effective cancellation date.Voluntary cancellations generally become effective at the end of the prepaid membership period.Involuntarycancellations,as a result of a failed method of payment,become effective immediately.Memberships are assigned to territories based on the geographic location used at time ofsign-up as determined by the Companys internal systems,which utilize industry standard geo-location technology.Total U.S.revenues,inclusive of DVD revenues not reported in the tables above,were$3.3 billion and$3.1 billion for the three months ended March 31,2023 and 2022,respectively.DVD revenues were$32 million and$40 million for the three months ended March 31,2023 and 2022,respectively.Deferred revenue consists of membership fees billed that have not been recognized,as well as gift cards and other prepaid memberships that have notbeen fully redeemed.As of March 31,2023,total deferred revenue was$1,262 million,the vast majority of which was related to membership fees billed thatare expected to be recognized as revenue within the next month.The remaining deferred revenue balance,which is related to gift cards and other prepaidmemberships,will be recognized as revenue over the period of service after redemption,which is expected to occur over the next 12 months.Total deferredrevenue as of March 31,2023 remained relatively flat as compared to the balance of$1,265 million as of December 31,2022.9Table of Contents3.Earnings Per ShareBasic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period.Diluted earnings pershare is computed using the weighted-average number of outstanding shares of common stock and,when dilutive,potential outstanding shares of commonstock during the period.Potential shares of common stock consist of incremental shares issuable upon the assumed exercise of stock options.The computationof earnings per share is as follows:Three Months EndedMarch 31,2023March 31,2022(in thousands,except per share data)Basic earnings per share:Net income$1,305,120$1,597,447 Shares used in computation:Weighted-average shares of common stock outstanding445,244 444,146 Basic earnings per share$2.93$3.60 Diluted earnings per share:Net income$1,305,120$1,597,447 Shares used in computation:Weighted-average shares of common stock outstanding445,244 444,146 Employee stock options7,173 8,838 Weighted-average number of shares452,417 452,984 Diluted earnings per share$2.88$3.53 Employee stock options with exercise prices greater than the average market price of the common stock were excluded from the diluted calculation astheir inclusion would have been anti-dilutive.The following table summarizes the potential shares of common stock excluded from the diluted calculation:Three Months EndedMarch 31,2023March 31,2022(in thousands)Employee stock options5,847 2,749 10Table of Contents4.Cash,Cash Equivalents,Restricted Cash,and Short-term InvestmentsThe Companys investment policy is consistent with the definition of available-for-sale securities.The Company does not buy and hold securitiesprincipally for the purpose of selling them in the near future.The Companys policy is focused on the preservation of capital,liquidity and return.From time totime,the Company may sell certain securities but the objectives are generally not to generate profits on short-term differences in price.The following tablessummarize the Companys cash,cash equivalents,restricted cash and short-term investments as of March 31,2023 and December 31,2022:As of March 31,2023 Cash and cashequivalentsShort-terminvestmentsOther CurrentAssetsNon-currentAssetsTotal(in thousands)Cash$3,787,630$3,889$19,483$3,811,002 Level 1 securities:Money market funds2,561,649 53$2,561,702 Level 2 securities:Time Deposits(1)365,315 1,112,910$1,478,225$6,714,594$1,112,910$3,889$19,536$7,850,929 As of December 31,2022 Cash and cashequivalentsShort-terminvestmentsOther CurrentAssetsNon-currentAssetsTotal(in thousands)Cash$4,071,584$3,410$19,874$4,094,868 Level 1 securities:Money market funds569,826 122 569,948 Level 2 securities:Time Deposits(1)505,766 911,276 1,417,042$5,147,176$911,276$3,410$19,996$6,081,858(1)The majority of the Companys time deposits are domestic deposits,which mature within one year.Other current assets include restricted cash for deposits related to self insurance and letter of credit agreements.Non-current assets include restricted cashrelated to letter of credit agreements.The fair value of cash equivalents and short-term investments included in the Level 2 category is based on observableinputs,such as quoted prices for similar assets at the measurement date;quoted prices in markets that are not active;or other inputs that are observable,eitherdirectly or indirectly.See Note 6 Debt to the consolidated financial statements for further information regarding the fair value of the Companys senior notes.There were no material gross realized gains or losses in the three months ended March 31,2023 and 2022,respectively.115.Balance Sheet ComponentsContent Assets,NetContent assets consisted of the following:As ofMarch 31,2023December 31,2022(in thousands)Licensed content,net$12,533,388$12,732,549 Produced content,netReleased,less amortization9,306,337 9,110,518 In production9,872,138 10,255,940 In development and pre-production637,321 637,706 19,815,796 20,004,164 Content assets,net$32,349,184$32,736,713 As of March 31,2023,approximately$5,430 million,$2,781 million,and$1,952 million of the$12,533 million unamortized cost of the licensed contentis expected to be amortized in each of the next three years.As of March 31,2023,approximately$3,553 million,$2,393 million,and$1,692 million of the$9,306 million unamortized cost of the produced content that has been released is expected to be amortized in each of the next three years.As of March 31,2023,the amount of accrued participations and residuals was not material.The following table represents the amortization of content assets:Three Months Ended March 31,2023March 31,2022(in thousands)Licensed content$1,723,678$1,884,438 Produced content1,736,306 1,281,927 Total$3,459,984$3,166,365 12Property and Equipment,NetProperty and equipment and accumulated depreciation consisted of the following:As ofMarch 31,2023December 31,2022Estimated Useful Lives(in thousands)Land$86,452$85,005 Buildings60,420 52,106 30 yearsLeasehold improvements1,050,836 1,040,570 Over life of leaseFurniture and fixtures153,836 153,682 3 yearsInformation technology443,073 442,681 3 yearsCorporate aircraft115,578 115,578 8-10 yearsMachinery and equipment27,068 26,821 3-5 yearsCapital work-in-progress284,181 235,555 Property and equipment,gross2,221,444 2,151,998 Less:Accumulated depreciation(808,350)(753,741)Property and equipment,net$1,413,094$1,398,257 LeasesThe Company has entered into operating leases primarily for real estate.Operating leases are included in Other non-current assets on the CompanysConsolidated Balance Sheets,and represent the Companys right to use the underlying asset for the lease term.The Companys obligations to make leasepayments are included in Accrued expenses and other liabilities and Other non-current liabilities on the Companys Consolidated Balance Sheets.Information related to the Companys operating right-of-use assets and related operating lease liabilities were as follows:Three Months EndedMarch 31,2023March 31,2022(in thousands)Cash paid for operating lease liabilities$113,407$103,141 Right-of-use assets obtained in exchange for new operating lease obligations20,894 141,298 As ofMarch 31,2023December 31,2022(in thousands)Operating lease right-of-use assets,net$2,175,020$2,227,122 Current operating lease liabilities363,304 355,985 Non-current operating lease liabilities2,155,415 2,222,503 Total operating lease liabilities$2,518,719$2,578,488 13Other Current AssetsOther current assets consisted of the following:As ofMarch 31,2023December 31,2022(in thousands)Trade receivables$1,025,509$988,898 Prepaid expenses485,997 392,735 Other1,143,613 1,826,388 Total other current assets$2,655,119$3,208,021 The decrease in Other was primarily driven by receipt of amounts due under a modified content licensing arrangement.6.DebtAs of March 31,2023,the Company had aggregate outstanding notes of$14,437 million,net of$76 million of issuance costs,with varying maturities(the Notes).Of the outstanding balance,$399 million,net of issuance costs,is classified as short-term debt on the Consolidated Balance Sheets.As ofDecember 31,2022,the Company had aggregate outstanding notes of$14,353 million,net of$79 million of issuance costs.Each of the Notes were issued atpar and are senior unsecured obligations of the Company.Interest is payable semi-annually at fixed rates.A portion of the outstanding Notes is denominated inforeign currency(comprised of 5,170 million)and is remeasured into U.S.dollars at each balance sheet date(with remeasurement loss totaling$81 million forthe three months ended March 31,2023).The following table provides a summary of the Companys outstanding debt and the fair values based on quoted market prices in less active markets as ofMarch 31,2023 and December 31,2022:Principal Amount at ParLevel 2 Fair Value as ofMarch 31,2023December 31,2022Issuance DateMaturityMarch 31,2023December 31,2022(in millions)(in millions)5.750%Senior Notes$400$400 February 2014March 2024$404$404 5.875%Senior Notes800 800 February 2015February 2025817 811 3.000%Senior Notes(1)510 503 April 2020June 2025503 495 3.625%Senior Notes500 500 April 2020June 2025487 479 4.375%Senior Notes1,000 1,000 October 2016November 2026991 980 3.625%Senior Notes(1)1,412 1,391 May 2017May 20271,403 1,338 4.875%Senior Notes1,600 1,600 October 2017April 20281,610 1,557 5.875%Senior Notes1,900 1,900 April 2018November 20282,002 1,930 4.625%Senior Notes(1)1,194 1,177 October 2018May 20291,222 1,151 6.375%Senior Notes800 800 October 2018May 2029862 830 3.875%Senior Notes(1)1,303 1,284 April 2019November 20291,283 1,201 5.375%Senior Notes900 900 April 2019November 2029917 885 3.625%Senior Notes(1)1,194 1,177 October 2019June 20301,153 1,078 4.875%Senior Notes1,000 1,000 October 2019June 2030998 944$14,513$14,432$14,652$14,083(1)The following Senior Notes have a principal amount denominated in euro:3.000%Senior Notes for 470 million,3.625%Senior Notes for 1,300 million,4.625%Senior Notes for 1,100 million,3.875%Senior Notes for 1,200 million,and 3.625%Senior Notes for 1,100 million.14Table of ContentsEach of the Notes are repayable in whole or in part upon the occurrence of a change of control,at the option of the holders,at a purchase price in cashequal to 101%of the principal plus accrued interest.The Company may redeem the Notes prior to maturity in whole or in part at an amount equal to theprincipal amount thereof plus accrued and unpaid interest and an applicable premium.The Notes include,among other terms and conditions,limitations on theCompanys ability to create,incur or allow certain liens;enter into sale and lease-back transactions;create,assume,incur or guarantee additional indebtednessof certain of the Companys subsidiaries;and consolidate or merge with,or convey,transfer or lease all or substantially all of the Companys and its subsidiariesassets,to another person.As of March 31,2023 and December 31,2022,the Company was in compliance with all related covenants.Revolving Credit FacilityOn March 6,2023,the Company amended its$1 billion unsecured revolving credit facility(Revolving Credit Agreement)to replace the Londoninterbank offered rate to a variable secured overnight financing rate(the“Term SOFR Rate”)as the rate to which interest payments are indexed,among otherthings.The Revolving Credit Agreement matures on June 17,2026.Revolving loans may be borrowed,repaid and reborrowed until June 17,2026,at whichtime all amounts borrowed must be repaid.The Company may use the proceeds of future borrowings under the Revolving Credit Agreement for workingcapital and general corporate purposes.As of March 31,2023,no amounts have been borrowed under the Revolving Credit Agreement.The borrowings under the Revolving Credit Agreement bear interest,at the Companys option,of either(i)a floating rate equal to a base rate(the“Alternate Base Rate”)or(ii)a rate equal to the Term SOFR Rate(or the applicable benchmark replacement),plus a margin of 0.75%.The Alternate Base Rateis defined as the greatest of(A)the rate of interest published by the Wall Street Journal,from time to time,as the prime rate,(B)the federal funds rate,plus 0.500%and(C)the Term SOFR Rate for a one-month tenor,plus 1.00%.The Term SOFR Rate is the forward-looking secured overnight financing rateadministered by the Federal Reserve Bank of New York or a successor administrator,for the relevant interest period,but in no event shall the Term SOFR Ratebe less than 0.00%per annum.The Company is also obligated to pay a commitment fee on the undrawn amounts of the Revolving Credit Agreement at an annual rate of 0.10%.TheRevolving Credit Agreement requires the Company to comply with certain covenants,including covenants that limit or restrict the ability of the Companyssubsidiaries to incur debt and limit or restrict the ability of the Company and its subsidiaries to grant liens and enter into sale and leaseback transactions;and,inthe case of the Company or a guarantor,merge,consolidate,liquidate,dissolve or sell,transfer,lease or otherwise dispose of all or substantially all of the assetsof the Company and its subsidiaries,taken as a whole.As of March 31,2023 and December 31,2022,the Company was in compliance with all relatedcovenants.7.Commitments and ContingenciesContentAs of March 31,2023,the Company had$21.5 billion of obligations comprised of$4.3 billion included in Current content liabilities and$2.9 billion ofNon-current content liabilities on the Consolidated Balance Sheets and$14.3 billion of obligations that are not reflected on the Consolidated Balance Sheetsas they did not yet meet the criteria for asset recognition.As of December 31,2022,the Company had$21.8 billion of obligations comprised of$4.5 billion included in Current content liabilities and$3.1billion of Non-current content liabilities on the Consolidated Balance Sheets and$14.2 billion of obligations that are not reflected on the ConsolidatedBalance Sheets as they did not yet meet the criteria for asset recognition.The expected timing of payments for these content obligations is as follows:As of March 31,2023December 31,2022(in thousands)Less than one year$9,771,665$10,038,483 Due after one year and through three years9,536,111 9,425,551 Due after three years and through five years1,964,812 2,124,307 Due after five years253,283 243,606 Total content obligations$21,525,871$21,831,947 15Table of ContentsContent obligations include amounts related to the acquisition,licensing and production of content.Obligations that are in non-U.S.dollar currencies aretranslated to the U.S.dollar at period end rates.An obligation for the production of content includes non-cancelable commitments under creative talent andemployment agreements as well as other production related commitments.An obligation for the acquisition and licensing of content is incurred at the time theCompany enters into an agreement to obtain future titles.Once a title becomes available,a content liability is recorded on the Consolidated Balance Sheets.Certain agreements include the obligation to license rights for unknown future titles,the ultimate quantity and/or fees for which are not yet determinable as ofthe reporting date.Traditional film output deals,or certain TV series license agreements where the number of seasons to be aired is unknown,are examples ofsuch license agreements.The Company does not include any estimated obligation for these future titles beyond the known minimum amount.However,theunknown obligations are expected to be significant.Legal ProceedingsFrom time to time,in the normal course of its operations,the Company is subject to litigation matters and claims,including claims relating to employeerelations,business practices and patent infringement.Litigation can be expensive and disruptive to normal business operations.Moreover,the results ofcomplex legal proceedings are difficult to predict and the Companys view of these matters may change in the future as the litigation and events related theretounfold.The Company expenses legal fees as incurred.The Company records a provision for contingent losses when it is both probable that a liability has beenincurred and the amount of the loss can be reasonably estimated.An unfavorable outcome to any legal matter,if material,could have an adverse effect on theCompanys operations or its financial position,liquidity or results of operations.The Company is involved in litigation matters not listed herein but does not consider the matters to be material either individually or in the aggregate atthis time.The Companys view of the matters not listed may change in the future as the litigation and events related thereto unfold.IndemnificationIn the ordinary course of business,the Company has entered into contractual arrangements under which it has agreed to provide indemnification ofvarying scope and terms to business partners and other parties with respect to certain matters,including,but not limited to,losses arising out of the Companysbreach of such agreements and out of intellectual property infringement claims made by third parties.In these circumstances,payment may be conditional onthe other party making a claim pursuant to the procedures specified in the particular contract.The Companys obligations under these agreements may be limited in terms of time or amount,and in some instances,the Company may have recourseagainst third parties for certain payments.In addition,the Company has entered into indemnification agreements with its directors and certain of its officers thatwill require it,among other things,to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.Theterms of such obligations vary.It is not possible to make a reasonable estimate of the maximum potential amount of future payments under these or similar agreements due to theconditional nature of the Companys obligations and the unique facts and circumstances involved in each particular agreement.No amount has been accrued inthe accompanying consolidated financial statements with respect to these indemnification obligations.8.Stockholders EquityStock Option PlanIn June 2020,the Companys stockholders approved the 2020 Stock Plan,which was adopted by the Companys Board of Directors in March 2020subject to stockholder approval.The 2020 Stock Plan provides for the grant of incentive stock options to employees and for the grant of non-statutory stockoptions,stock appreciation rights,restricted stock and restricted stock units to employees,directors and consultants.16Table of ContentsA summary of the activities related to the Companys stock option plans is as follows:Options OutstandingSharesAvailablefor GrantNumber ofSharesWeighted-AverageExercise Price(per share)Weighted-AverageRemainingContractual Term(in years)AggregateIntrinsic Value(in thousands)Balances as of December 31,202216,454,103 19,896,861$242.22 Granted(591,343)591,343 317.39Exercised(412,158)62.29 Expired(574)13.14 Balances as of March 31,202315,862,760 20,075,472$248.14 5.58$2,545,760 Vested and expected to vest as of March 31,202320,075,472$248.14 5.58$2,545,760 Exercisable as of March 31,202320,014,050$247.85 5.56$2,544,913 The aggregate intrinsic value in the table above represents the total pretax intrinsic value(the difference between the Companys closing stock price onthe last trading day of the first quarter of 2023 and the exercise price,multiplied by the number of in-the-money options)that would have been received by theoption holders had all option holders exercised their options on the last trading day of the first quarter of 2023.This amount changes based on the fair marketvalue of the Companys common stock.A summary of the amounts related to option exercises,is as follows:Three Months EndedMarch 31,2023March 31,2022(in thousands)Total intrinsic value of options exercised$116,310$114,762 Cash received from options exercised26,028 13,678 Stock-based CompensationStock options are generally vested in full upon grant date and exercisable for the full ten year contractual term regardless of employment status.Stockoptions granted to certain named executive officers vest on the one-year anniversary of the grant date,subject to the employees continuous employment orservice with the Company through the vesting date.The following table summarizes the assumptions used to value option grants using the lattice-binomialmodel and the valuation data:Three Months EndedMarch 31,2023March 31,2022Dividend yield%Expected volatility468%Risk-free interest rate3.63%1.71%Suboptimal exercise factor4.22 4.71 Weighted-average fair value(per share)$186$228 Total stock-based compensation expense(in thousands)$99,099$119,209 Total income tax impact on provision(in thousands)$21,711$26,413 Stock RepurchasesIn March 2021,the Companys Board of Directors authorized the repurchase of up to$5 billion of its common stock,with no expiration date.Stockrepurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act,including through the use of tradingplans intended to qualify under Rule 10b5-1 under the Exchange Act,privately-negotiated transactions,accelerated stock repurchase plans,block purchases,orother similar purchase techniques and in such amounts as management deems appropriate.The Company is not obligated to repurchase any specific number ofshares,and the timing and actual number of shares repurchased will depend on a variety of factors,including the Companys stock price,general economic,business and market conditions,and alternative investment17Table of Contentsopportunities.The Company may discontinue any repurchases of its common stock at any time without prior notice.During the three months ended March 31,2023,the Company repurchased 1,222,056 shares for an aggregate amount of$400 million.As of March 31,2023,$4.0 billion remain available forrepurchases.Shares repurchased by the Company are accounted for when the transaction is settled.As of March 31,2023,there were no unsettled sharerepurchases.Direct costs incurred to acquire the shares are included in the total cost of the shares.9.Income Taxes Three Months Ended March 31,2023March 31,2022(in thousands,except percentages)Provision for income taxes$163,754$382,245 Effective tax rate11%The effective tax rates for the three months ended March 31,2023 differed from the Federal statutory rate primarily due to the impact of internationalprovisions of the Tax Cuts and Jobs Act,research and development credits,and the recognition of excess tax benefits of stock-based compensation.Theeffective tax rates for the three months ended March 31,2022 differed from the Federal statutory rate primarily due to an increase in foreign taxes,offset by theimpact of international provisions of the Tax Cuts and Jobs Act and the recognition of excess tax benefits of stock-based compensation.The decrease in the effective tax rate for the three months ended March 31,2023,as compared to the same period in 2022 was primarily due to a decreasein foreign taxes.For the three months ended March 31,2023,the Company recognized a discrete tax benefit related to the excess tax benefits from stock-basedcompensation of$24 million,compared to the three months ended March 31,2022 of$25 million.Gross unrecognized tax benefits were$234 million and$227 million as of March 31,2023 and December 31,2022,respectively.The gross unrecognizedtax benefits,if recognized by the Company,will result in a reduction of approximately$162 million to the provision for income taxes thereby favorablyimpacting the Companys effective tax rate.The Company files U.S.Federal,state and foreign tax returns.The Company is currently under examination by the IRS for the years 2016 through 2018and is subject to examination for 2019 through 2022.The foreign and state tax returns for the years 2015 through 2022 are subject to examination by variousstates and foreign jurisdictions.While the Company is in various stages of inquiries and examinations by federal,state and foreign taxing authorities,webelieve that our tax positions will more likely than not be sustained.Nonetheless,it is possible that future obligations related to these matters could arise.Given the potential outcome of the current examinations as well as the impact of the current examinations on the potential expiration of the statute oflimitations,it is reasonably possible that the balance of unrecognized tax benefits could significantly change within the next twelve months.However,anestimate of the range of reasonably possible adjustments cannot be made at this time.10.Segment and Geographic InformationThe Company operates as one operating segment.The Companys chief operating decision maker(CODM)is its co-chief executive officers,whoreview financial information presented on a consolidated basis for the purposes of making operating decisions,assessing financial performance and allocatingresources.Total U.S.revenues were$3.3 billion and$3.1 billion for the three months ended March 31,2023 and 2022,respectively.See Note 2 RevenueRecognition for additional information about streaming revenue by region.The Companys long-lived tangible assets,as well as the Companys operating lease right-of-use assets recognized on the Consolidated Balance Sheets asof March 31,2023 and December 31,2022,were located as follows:As ofMarch 31,2023December 31,2022(in thousands)United States$2,721,743$2,745,071 International866,371 880,308 Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations18Table of ContentsForward-Looking StatementsThis Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws.These forward-lookingstatements include,but are not limited to,statements regarding:our core strategy;our ability to improve our content offerings and service;our future financialperformance,including expectations regarding revenues,deferred revenue,operating income and margin,net income,expenses,and profitability;liquidity,including the sufficiency of our capital resources,net cash provided by(used in)operating activities,access to financing sources,and free cash flows;capitalallocation strategies,including any stock repurchases or repurchase programs;seasonality;stock price volatility;impact of foreign exchange rate fluctuations,including on net income,revenues and average revenues per paying member;impact of interest rate fluctuations;adequacy of existing facilities;futureregulatory changes and their impact on our business;intellectual property;price changes and testing;impact of recently adopted accounting pronouncements;accounting treatment for changes related to content assets;acquisitions;membership growth,including impact of content and pricing changes on membershipgrowth;partnerships;member viewing patterns;dividends;future contractual obligations,including unknown content obligations and timing of payments;ourglobal content and marketing investments,including investments in original programming;content amortization;resolution of tax examinations;tax expense;unrecognized tax benefits;deferred tax assets;and our ability to effectively manage change and growth.These forward-looking statements are subject to risksand uncertainties that could cause actual results and events to differ materially from those included in forward-looking statements.Factors that might cause orcontribute to such differences include,but are not limited to,those discussed in our Annual Report on Form 10-K for the year ended December 31,2022 filedwith the Securities and Exchange Commission(“SEC”)on January 26,2023,in particular the risk factors discussed under the heading“Risk Factors”in Part I,Item 1A.We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this Quarterly Report on Form 10-Q,unless required by law.Investors and others should note that we announce material financial information to our investors using our investor relations website(),SECfilings,press releases,public conference calls and webcasts.We use these channels,as well as social media and blogs to communicate with our members andthe public about our company,our services and other issues.It is possible that the information we post on social media and blogs could be deemed to bematerial information.Therefore,we encourage investors,the media,and others interested in our company to review the information we post on the socialmedia channels and blogs listed on our investor relations website.OverviewWe are one of the worlds leading entertainment services with over 232 million paid memberships in over 190 countries enjoying TV series,films andgames across a wide variety of genres and languages.Members can play,pause and resume watching as much as they want,anytime,anywhere,and canchange their plans at any time.Our core strategy is to grow our business globally within the parameters of our operating margin target.We strive to continuously improve our membersexperience by offering compelling content that delights them and attracts new members.We seek to drive conversation around our content to further enhancemember joy,and we are continuously enhancing our user interface to help our members more easily choose content that they will find enjoyable.Our membership growth exhibits a seasonal pattern that reflects variations when consumers buy internet-connected screens and when they tend toincrease their viewing.Historically,the fourth quarter represents our greatest streaming membership growth.In addition,our membership growth can beimpacted by our content release schedule and changes to pricing.19Table of ContentsResults of OperationsThe following represents our consolidated performance highlights:As of/Three Months EndedChangeMarch 31,2023March 31,2022Q123 vs.Q122(in thousands,except revenue per membership and percentages)Financial Results:Streaming revenues$8,130,001$7,827,957$302,044 4%DVD revenues(1)31,502 39,810(8,308)(21)%Total revenues$8,161,503$7,867,767$293,736 4%Operating income$1,714,317$1,971,626$(257,309)(13)%Operating margin21%(4)%Global Streaming Memberships:Paid net membership additions(losses)1,751(203)1,954 963%Paid memberships at end of period232,498 221,641 10,857 5%Average paying memberships231,623 221,743 9,880 4%Average monthly revenue per paying membership$11.70$11.77$(0.07)(1)%(1)In April 2023,we announced our plans to discontinue our DVD-by-mail service,which we do not expect to have a material effect on our operations or financial results.Consolidated revenues for the three months ended March 31,2023 increased 4%as compared to the three months ended March 31,2022.The increase inour consolidated revenues was due to the 4%growth in average paying memberships,partially offset by a 1crease in average monthly revenue per payingmembership.The decrease in average monthly revenue per paying membership was primarily due to the strengthening of the U.S.dollar relative to certainforeign currencies and changes in plan mix,partially offset by our price changes.Operating expenses grew at a faster rate than revenue,which was unfavorably impacted by fluctuations in foreign exchange rates,resulting in a decreasein operating margin as compared to the prior comparative period.Streaming RevenuesWe primarily derive revenues from monthly membership fees for services related to streaming content to our members.We offer a variety of streamingmembership plans,the price of which varies by country and the features of the plan.As of March 31,2023,pricing on our paid plans ranged from the U.S.dollar equivalent of$1 to$26 per month.We expect that from time to time the prices of our membership plans in each country may change and we may testother plan and price variations.The following tables summarize streaming revenue and other streaming membership information by region for the three months ended March 31,2023and 2022.20Table of ContentsUnited States and Canada(UCAN)As of/Three Months EndedChange March 31,2023March 31,2022Q123 vs.Q122(in thousands,except revenue per membership and percentages)Revenues$3,608,645$3,350,424$258,221 8%Paid net membership additions(losses)102(636)738 116%Paid memberships at end of period74,398 74,579(181)%Average paying memberships74,347 74,897(550)(1)%Average monthly revenue per paying membership$16.18$14.91$1.27 9%Constant currency change(1)9%Europe,Middle East,and Africa(EMEA)As of/Three Months EndedChange March 31,2023March 31,2022Q123 vs.Q122(in thousands,except revenue per membership and percentages)Revenues$2,517,641$2,561,831$(44,190)(2)%Paid net membership additions(losses)644(303)947 313%Paid memberships at end of period77,373 73,733 3,640 5%Average paying memberships77,051 73,885 3,166 4%Average monthly revenue per paying membership$10.89$11.56$(0.67)(6)%Constant currency change(1)1%Latin America(LATAM)As of/Three Months EndedChange March 31,2023March 31,2022Q123 vs.Q122(in thousands,except revenue per membership and percentages)Revenues$1,070,192$998,948$71,244 7%Paid net membership additions(losses)(450)(351)(99)(28)%Paid memberships at end of period41,249 39,610 1,639 4%Average paying memberships41,474 39,786 1,688 4%Average monthly revenue per paying membership$8.60$8.37$0.23 3%Constant currency change(1)8%Asia-Pacific(APAC)As of/Three Months EndedChange March 31,2023March 31,2022Q123 vs.Q122(in thousands,except revenue per membership and percentages)Revenues$933,523$916,754$16,769 2%Paid net membership additions(losses)1,455 1,087 368 34%Paid memberships at end of period39,478 33,719 5,759 17%Average paying memberships38,751 33,176 5,575 17%Average monthly revenue per paying membership$8.03$9.21$(1.18)(13)%Constant currency change(1)(6)!Table of Contents(1)We believe constant currency information is useful in analyzing the underlying trends in average monthly revenue per paying membership.In order to exclude the effect offoreign currency rate fluctuations on average monthly revenue per paying membership,we estimate current period revenue assuming foreign exchange rates had remainedconstant with foreign exchange rates from each of the corresponding months of the prior-year period.For the three months ended March 31,2023,our revenues would have beenapproximately$346 million higher had foreign currency exchange rates remained constant with those for the three months ended March 31,2022.Cost of RevenuesAmortization of content assets makes up the majority of cost of revenues.Expenses associated with the acquisition,licensing and production of content(such as payroll and related personnel expenses,costs associated with obtaining rights to music included in our content,overall deals with talent,miscellaneousproduction related costs and participations and residuals),streaming delivery costs and other operations costs make up the remainder of cost of revenues.Wehave built our own global content delivery network(“Open Connect”)to help us efficiently stream a high volume of content to our members over the internet.Delivery expenses,therefore,include equipment costs related to Open Connect,payroll and related personnel expenses and all third-party costs,such as cloudcomputing costs,associated with delivering content over the internet.Other operations costs include customer service and payment processing fees,includingthose we pay to our integrated payment partners,as well as other costs incurred in making our content available to members.Three Months EndedChangeMarch 31,2023March 31,2022Q123 vs.Q122(in thousands,except percentages)Cost of revenues$4,803,625$4,284,705$518,92012%As a percentage of revenues59T%The increase in cost of revenues was primarily due to a$294 million increase in content amortization relating to our existing and new content,includingmore exclusive and original programming.Other costs of revenues increased$225 million,primarily due to an increase in other content expenses in the threemonths ended March 31,2023 as compared to the three months ended March 31,2022.MarketingMarketing expenses consist primarily of advertising expenses and certain payments made to our marketing and advertising sales partners,includingconsumer electronics(“CE”)manufacturers,multichannel video programming distributors(“MVPDs”),mobile operators,and internet service providers(“ISPs”).Advertising expenses include promotional activities such as digital and television advertising.Marketing expenses also include payroll and relatedexpenses for personnel that support marketing activities.Three Months EndedChangeMarch 31,2023March 31,2022Q123 vs.Q122(in thousands,except percentages)Marketing$555,362$555,978$(616)%As a percentage of revenues7%7%Marketing expenses for the three months ended March 31,2023 as compared to the three months ended March 31,2022 remained relatively flat.Technology and DevelopmentTechnology and development expenses consist primarily of payroll and related expenses for technology personnel responsible for making improvementsto our service offerings,including testing,maintaining and modifying our user interface,our recommendations,merchandising and infrastructure.Technologyand development expenses also include costs associated with general use computer hardware and software.Three Months EndedChangeMarch 31,2023March 31,2022Q123 vs.Q122(in thousands,except percentages)Technology and development$687,275$657,530$29,7455%As a percentage of revenues8%8Table of ContentsThe increase in technology and development expenses was primarily due to a$26 million increase in personnel-related costs.General and AdministrativeGeneral and administrative expenses consist primarily of payroll and related expenses for corporate personnel.General and administrative expenses alsoinclude professional fees and other general corporate expenses.Three Months EndedChangeMarch 31,2023March 31,2022Q123 vs.Q122(in thousands,except percentages)General and administrative$400,924$397,928$2,9961%As a percentage of revenues5%5%General and administrative expenses for the three months ended March 31,2023 as compared to the three months ended March 31,2022 remainedrelatively flat.Interest ExpenseInterest expense consists primarily of the interest associated with our outstanding debt obligations,including the amortization of debt issuance costs.SeeNote 6 Debt in the accompanying notes to our consolidated financial statements for further detail on our debt obligations.Three Months EndedChange March 31,2023March 31,2022Q123 vs.Q122(in thousands,except percentages)Interest expense$174,239$187,579$(13,340)(7)%As a percentage of revenues2%2%Interest expense primarily consists of interest on our Notes of$174 million for the three months ended March 31,2023.The decrease in interest expensefor the three months ended March 31,2023 as compared to the three months ended March 31,2022 was due to the lower average aggregate principal of interestbearing notes outstanding.Interest and Other Income(Expense)Interest and other income(expense)consists primarily of foreign exchange gains and losses on foreign currency denominated balances and interest earnedon cash,cash equivalents and short-term investments.Three Months EndedChange March 31,2023March 31,2022Q123 vs.Q122(in thousands,except percentages)Interest and other income(expense)$(71,204)$195,645$(266,849)(136)%As a percentage of revenues(1)%2%Interest and other income(expense)decreased in the three months ended March 31,2023 primarily due to foreign exchange losses of$107 million,compared to gains of$192 million for the corresponding period in 2022.In the three months ended March 31,2023,the foreign exchange losses were primarilydriven by the non-cash loss of$81 million from the remeasurement of our 5,170 million Senior Notes,coupled with the remeasurement of cash and contentliability positions in currencies other than the functional currencies.In the three months ended March 31,2022,the foreign exchange gains were primarilydriven by the$162 million non-cash gain from the remeasurement of our 5,170 million Senior Notes,coupled with the remeasurement of cash and contentliability positions in currencies other than the functional currencies.The change in foreign currency gains and losses was partially offset by higher interestincome earned in the three months ended March 31,2023 as compared to the corresponding period in 2022.Provision for Income Taxes23Table of Contents Three Months EndedChange March 31,2023March 31,2022Q123 vs.Q122(in thousands,except percentages)Provision for income taxes$163,754$382,245$(218,491)(57)fective tax rate11%The effective tax rates for the three months ended March 31,2023 differed from the Federal statutory rate primarily due to the impact of internationalprovisions of the Tax Cuts and Jobs Act,research and development credits,and the recognition of excess tax benefits of stock-based compensation.The decrease in the effective tax rate for the three months ended March 31,2023,as compared to the same period in 2022 was primarily due to a decreasein foreign taxes.Liquidity and Capital ResourcesAs ofChangeMarch 31,2023December 31,2022March 31,2023 vs.December 31,2022(in thousands,except percentages)Cash,cash equivalents,restricted cash and short-term investments$7,850,929$6,081,858$1,769,071 29%Short-term and long-term debt14,437,128 14,353,076 84,052 1sh,cash equivalents,restricted cash and short-term investments increased$1,769 million in the three months ended March 31,2023 primarily due tocash provided by operations,primarily offset by the repurchase of stock.Debt,net of debt issuance costs,increased$84 million primarily due to the remeasurement of our euro-denominated notes.The amount of principal andinterest on our outstanding notes due in the next twelve months is$685 million.As of March 31,2023,no amounts had been borrowed under the$1 billionRevolving Credit Agreement.See Note 6 Debt in the accompanying notes to our consolidated financial statements.We anticipate that our future capital needs from the debt market will be more limited compared to prior years.Our ability to obtain this or any additionalfinancing that we may choose or need,including for potential strategic acquisitions and investments,will depend on,among other things,our developmentefforts,business plans,operating performance,and the condition of the capital markets at the time we seek financing.We may not be able to obtain suchfinancing on terms acceptable to us or at all.If we raise additional funds through the issuance of equity or debt securities,those securities may have rights,preferences or privileges senior to the rights of our common stock,and our stockholders may experience dilution.In March 2021,our Board of Directors authorized the repurchase of up to$5 billion of our common stock,with no expiration date.Stock repurchasesmay be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act,including through the use of trading plans intendedto qualify under Rule 10b5-1 under the Exchange Act,privately-negotiated transactions,accelerated stock repurchase plans,block purchases,or other similarpurchase techniques and in such amounts as management deems appropriate.We are not obligated to repurchase any specific number of shares,and the timingand actual number of shares repurchased will depend on a variety of factors,including our stock price,general economic,business and market conditions,andalternative investment opportunities.We may discontinue any repurchases of our common stock at any time without prior notice.For the three months endedMarch 31,2023,the Company repurchased 1,222,056 shares of common stock for an aggregate amount of$400 million.As of March 31,2023,$4.0 billionremains available for repurchases.Our primary uses of cash include the acquisition,licensing and production of content,marketing programs,streaming delivery and personnel-relatedcosts,as well as for strategic acquisitions and investments.Cash payment terms for non-original content have historically been in line with the amortizationperiod.Investments in original content,and in particular content that we produce and own,require more cash upfront relative to licensed content.For example,production costs are paid as the content is created,well in advance of when the content is available on the service and amortized.We expect to continue tosignificantly invest in global content,particularly in original content,which will impact our liquidity.We currently anticipate that cash flows from operations,available funds and access to financing sources,including our revolving credit facility,will continue to be sufficient to meet our cash needs for the next twelvemonths and beyond.24Table of ContentsOur material cash requirements from known contractual and other obligations primarily relate to our content,debt and lease obligations.As of March 31,2023,the expected timing of those payments are as follows:Payments due by PeriodContractual obligations(in thousands):TotalNext 12 MonthsBeyond 12 MonthsContent obligations(1)$21,525,871$9,771,665$11,754,206 Debt(2)17,898,596 685,089 17,213,507 Operating lease obligations(3)3,309,657 472,369 2,837,288 Total$42,734,124$10,929,123$31,805,001(1)As of March 31,2023,content obligations were comprised of$4.3 billion included in“Current content liabilities”and$2.9 billion of“Non-currentcontent liabilities”on the Consolidated Balance Sheets and$14.3 billion of obligations that are not reflected on the Consolidated Balance Sheets as theydid not then meet the criteria for recognition.The material cash requirements above do not include any estimated obligation for the unknown future titles,payment for which could range from lessthan one year to more than five years.However,these unknown obligations are expected to be significant and we believe could include approximately$1 billion to$4 billion over the next three years,with the payments for the vast majority of such amounts expected to occur after the next twelve months.The foregoing range is based on considerable management judgments and the actual amounts may differ.Once we know the title that we will receiveand the license fees,we include the amount in the contractual obligations table above.(2)Debt obligations include our Notes consisting of principal and interest payments.See Note 6 Debt to the consolidated financial statements for furtherdetails.(3)Operating lease obligations are comprised of operating lease liabilities included in Accrued expenses and other liabilities and Other non-currentliabilities on the Consolidated Balance Sheets,inclusive of imputed interest.Operating lease obligations also include additional obligations that are notreflected on the Consolidated Balance Sheets as they did not meet the criteria for recognition.See Note 5 Balance Sheet Components in theaccompanying notes to our consolidated financial statements for further details regarding leases.As of March 31,2023,we had gross unrecognized tax benefits of$234 million.At this time,an estimate of the range of reasonably possible adjustmentsto the balance of unrecognized tax benefits cannot be made.Free Cash FlowWe define free cash flow as cash provided by(used in)operating activities less purchases of property and equipment and change in other assets.Webelieve free cash flow is an important liquidity metric because it measures,during a given period,the amount of cash generated that is available to repay debtobligations,make strategic acquisitions and investments and for certain other activities like stock repurchases.Free cash flow is considered a non-GAAPfinancial measure and should not be considered in isolation of,or as a substitute for,net income,operating income,net cash provided by operating activities,orany other measure of financial performance or liquidity presented in accordance with GAAP.In assessing liquidity in relation to our results of operations,we compare free cash flow to net income,noting that the major recurring differences areexcess content payments over amortization,non-cash stock-based compensation expense,non-cash remeasurement gain/loss on our euro-denominated debt,and other working capital differences.Working capital differences include deferred revenue,excess property and equipment purchases over depreciation,taxesand semi-annual interest payments on our outstanding debt.Our receivables from members generally settle quickly.25Table of ContentsThree Months EndedChangeMarch 31,2023March 31,2022Q123 vs.Q122(in thousands,except percentages)Net cash provided by operating activities$2,178,740$922,839$1,255,901 136%Net cash used in investing activities(263,653)(245,679)17,974 7%Net cash used in financing activities(374,073)(686,322)(312,249)(45)%Non-GAAP reconciliation of free cash flow:Net cash provided by operating activities2,178,740 922,839 1,255,901 136%Purchases of property and equipment(62,019)(121,158)(59,139)(49)%Free cash flow$2,116,721$801,681$1,315,040 164%Net cash provided by operating activities increased$1,256 million to$2,179 million for the three months ended March 31,2023.The increase in net cashprovided by operating activities was primarily driven by a decrease in payments for content assets,coupled with a$294 million or 4%increase in revenues.The payments for content assets decreased$1,118 million,from$3,931 million to$2,813 million,or 28%,as compared to the increase in the amortization ofcontent assets of$294 million,from$3,166 million to$3,460 million,or 9%.The increase in net cash provided by operating activities was partially offset byincreased payments associated with higher operating expenses,primarily related to increased headcount to support our continued improvements in ourstreaming service and our international expansion.Net cash used in investing activities increased$18 million for the three months ended March 31,2023,primarily due to purchases of short-terminvestments,partially offset by there being no acquisitions in the three months ended March 31,2023,as compared to acquisitions for an aggregate amount of$125 million in the three months ended March 31,2022,and a decrease in purchases of property and equipment.Net cash used in financing activities decreased$312 million for the three months ended March 31,2023,primarily due to there being no repayment ofdebt in the three months ended March 31,2023 as compared to the repayment upon maturity of the$700 million aggregate principal amount of our 5.500%Senior Notes in February 2022,partially offset by the repurchases of common stock for an aggregate amount of$400 million in the three months endedMarch 31,2023.Free cash flow was$812 million higher than net income for the three months ended March 31,2023,primarily due to$647 million of amortizationexpense over cash payments for content assets,$99 million non-cash stock-based compensation expense and$81 million of non-cash remeasurement loss onour euro-denominated debt,partially offset by$15 million in other non-favorable working capital differences.Free cash flow was$796 million lower than net income for the three months ended March 31,2022,primarily due to$765 million of cash payments forcontent assets over amortization expense and$162 million of non-cash remeasurement gain on our euro-denominated debt,partially offset by$119 million ofnon-cash stock-based compensation expense and$12 million in other favorable working capital differences.IndemnificationThe information set forth under Note 7 Commitments and Contingencies to the consolidated financial statements under the caption“Indemnification”isincorporated herein by reference.Critical Accounting EstimatesThe preparation of financial statements and related disclosures in conformity with U.S.generally accepted accounting principles and the Companysdiscussion and analysis of its financial condition and operating results require the Companys management to make judgments,assumptions and estimates thataffect the amounts reported.Note 1,“Basis of Presentation and Summary of Significant Accounting Policies”of the Notes to consolidated Financial Statementsin Part I,Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II,Item 8 of our Annual Report on Form 10-K for the yearended December 31,2022,describe the significant accounting policies and methods used in the preparation of the Companys consolidated financialstatements.There have been no material changes to the Companys critical accounting estimates included in our Annual Report on Form 10-K for the yearended December 31,2022.26Table of ContentsItem 3.Quantitative and Qualitative Disclosures About Market RiskFor financial market risks related to changes in interest rates,reference is made to Item 7A“Quantitative and Qualitative Disclosures About Market Risk”contained in Part II of our Annual Report on Form 10-K for the year ended December 31,2022.Our exposure to market risk has not changed significantlysince December 31,2022.Interest Rate RiskAt March 31,2023,our cash equivalents and short-term investments were generally invested in money market funds and time deposits.Interest paid onsuch funds fluctuates with the prevailing interest rate.As of March 31,2023,we had$14.5 billion of debt,consisting of fixed rate unsecured debt in fourteen tranches due between 2024 and 2030.Refer toNote 6 Debt to the consolidated financial statements for details about all issuances.The fair value of our debt will fluctuate with movements of interest rates,increasing in periods of declining rates of interest and declining in periods of increasing rates of interest.The fair value of our debt will also fluctuate based onchanges in foreign currency rates,as discussed below.Foreign Currency RiskCurrencies denominated in other than the U.S.dollar account for 57%of revenue for the three months ended March 31,2023.We therefore have foreigncurrency risk related to these currencies,which are primarily the euro,the British pound,the Brazilian real,the Canadian dollar,the Mexican Peso,theJapanese yen,and the Australian dollar.Accordingly,changes in exchange rates,and in particular a weakening of foreign currencies relative to the U.S.dollar may negatively affect our revenueand operating income as expressed in U.S.dollars.In the three months ended March 31,2023,our revenues would have been approximately$346 millionhigher had foreign currency exchange rates remained consistent with those in the same period of 2022.We have also experienced and will continue to experience fluctuations in our net income as a result of gains(losses)on the settlement and theremeasurement of monetary assets and liabilities denominated in currencies that are not the functional currency.In the three months ended March 31,2023,werecognized a$107 million foreign exchange loss primarily due to the non-cash remeasurement of our Senior Notes denominated in euros,coupled with theremeasurement of cash and content liabilities denominated in currencies other than the functional currencies.In addition,the effect of exchange rate changes on cash,cash equivalents and restricted cash as disclosed on the Consolidated Statements of Cash Flowfor the three months ended March 31,2023 was an increase of$26 million.We do not use foreign exchange contracts or derivatives to hedge any foreign currency exposures.The volatility of exchange rates depends on manyfactors that we cannot forecast with reliable accuracy.Our continued international expansion increases our exposure to exchange rate fluctuations and,as aresult,such fluctuations could have a significant impact on our future results of operations.Item 4.Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur management,with the participation of our co-Chief Executive Officers and Chief Financial Officer,evaluated the effectiveness of our disclosurecontrols and procedures(as defined in Rules 13a-15(e)and 15d-15(e)under the Exchange Act)as of the end of the period covered by this Quarterly Report onForm 10-Q.Based on that evaluation,our co-Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures as ofthe end of the period covered by this Quarterly Report on Form 10-Q were effective in providing reasonable assurance that information required to be disclosedby us in reports that we file or submit under the Exchange Act,is recorded,processed,summarized and reported within the time periods specified in theSecurities and Exchange Commissions rules and forms,and that such information is accumulated and communicated to our management,including our co-Chief Executive Officers and Chief Financial Officer,as appropriate,to allow timely decisions regarding required disclosures.Our management,including our co-Chief Executive Officers and Chief Financial Officer,does not expect that our disclosure controls and procedures orour internal controls will prevent all error and all fraud.A control system,no matter how well conceived and operated,can provide only reasonable,notabsolute,assurance that the objectives of the control system are met.Further,the design of a control system must reflect the fact that there are resourceconstraints,and the benefits of controls must be considered relative to their costs.Because of the inherent limitations in all control systems,no evaluation ofcontrols can provide absolute assurance that all control issues and instances of fraud,if any,within the Company have been detected.Changes in Internal Control Over Financial ReportingThere were no changes in our internal control over financial reporting that occurred during the quarter ended March 31,2023,that have materiallyaffected,or are reasonably likely to materially affect,our internal control over financial reporting.27Table of ContentsPART II.OTHER INFORMATIONItem 1.Legal ProceedingsThe information set forth under Note 7 Commitments and Contingencies in the notes to the consolidated financial statements under the caption“LegalProceedings”is incorporated herein by reference.28Table of ContentsItem 1A.Risk FactorsThere have been no material changes from the risk factors previously disclosed under the heading Risk Factors in the Companys Annual Report onForm 10-K for the year ended December 31,2022.Item 2.Unregistered Sales of Equity Securities and Use of ProceedsCompany Purchases of Equity SecuritiesStock repurchases during the three months ended March 31,2023 were as follows:PeriodTotal Number ofShares Purchased(1)Average Price Paid perShare(2)Total Number ofShares Purchased asPart of PubliclyAnnounced Programs(1)Approximate DollarValue of Shares thatMay Yet Be PurchasedUnder the Program(1)(in thousands)January 1-31,2023$4,400,000 February 1-28,2023454,686$356.55 454,686$4,237,883 March 1-31,2023767,370$310.00 767,370$4,000,000 Total1,222,056 1,222,056(1)In March 2021,the Companys Board of Directors authorized the repurchase of up to$5 billion of its common stock,with no expiration date.For further informationregarding stock repurchase activity,see Note 8 Stockholders Equity to the consolidated financial statements in this Quarterly Report.(2)Average price paid per share includes costs associated with the repurchases.Item 6.Exhibits(a)Exhibits:See Exhibit Index immediately following the signature page of this Quarterly Report on Form 10-Q.29Table of ContentsEXHIBIT INDEX ExhibitNumberExhibit DescriptionIncorporated by ReferenceFiledHerewithFormFile No.ExhibitFiling Date3.1Restated Certificate of Incorporation8-K001-357273.1June 8,20223.2Amended and Restated Bylaws8-K001-357273.2February 24,202310.1Amended and Restated Executive Severance and RetentionIncentive PlanX10.2Amended Revolving Credit AgreementX31.1Certification of Co-Chief Executive Officer Pursuant to Section302 of the Sarbanes-Oxley Act of 2002X31.2Certification of Co-Chief Executive Officer Pursuant to Section302 of the Sarbanes-Oxley Act of 2002X31.3Certification of Chief Financial Officer Pursuant to Section 302 ofthe Sarbanes-Oxley Act of 2002X32.1*Certifications of Co-Chief Executive Officers and Chief FinancialOfficer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X101The following financial statements from the Companys QuarterlyReport on Form 10-Q for the quarter ended March 31,2023,formatted in Inline XBRL:(i)Consolidated Statements ofOperations,(ii)Consolidated Statements of ComprehensiveIncome,(iii)Consolidated Statements of Cash Flows,(iv)Consolidated Balance Sheets,(v)Consolidated Statements ofStockholders Equity and(vi)Notes to Consolidated FinancialStatements,tagged as blocks of text and including detailed tagsX104The cover page from the Companys Quarterly Report on Form 10-Q for the quarter ended March 31,2023,formatted in Inline XBRLX*These certifications are not deemed filed by the SEC and are not to be incorporated by reference in any filing we make under the Securities Act of 1933 orthe Securities Exchange Act of 1934,irrespective of any general incorporation language in any filings.Indicates a management contract or compensatory planSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.30Table of ContentsNETFLIX,INC.Dated:April 21,2023By:/s/Ted SarandosTed SarandosCo-Chief Executive Officer(Principal executive officer)Dated:April 21,2023By:/s/Greg PetersGreg PetersCo-Chief Executive Officer(Principal executive officer)Dated:April 21,2023By:/s/Jeffrey KarbowskiJeffrey KarbowskiChief Accounting Officer(Principal accounting officer)31EXHIBIT 10.1Executive Severance and Retention Incentive PlanAmended and Restated February 22,20231.Introduction.The purpose of this Executive Severance and Retention Incentive Plan(the“Plan”)is to provideassurances of specified severance benefits to eligible executives of Netflix,Inc.and its Affiliates upon certain terminations ofemployment and to provide specified retention incentives to eligible executives of the Company upon a Change in Control.TheCompany believes that the severance plan set forth in this Plan will aid the Company in attracting and retaining highly qualifiedindividuals.In addition,the Company believes that the retention incentive set forth in this Plan will help(a)assure that the Companywill have continued dedication and objectivity from its executives notwithstanding the possibility,threat or occurrence of a Changein Control and(b)provide the Covered Executives with an incentive to continue their employment and to motivate executives tomaximize the value of the Company upon a Change in Control for the benefit of its stockholders.This Plan is an“employee welfarebenefit plan,”as defined in Section 3(1)of the Employee Retirement Income Security Act of 1974,as amended.This documentconstitutes both the written instrument under which the Plan is maintained and the required summary plan description for the Plan.2.Important Terms.To help you understand how this Plan works,it is important to know the following terms:2.1 “Administrator”means Netflix,acting through its Chief Talent Officer,or any person to whom the Administrator hasdelegated any authority or responsibility pursuant to Section 9,but only to the extent of such delegation.2.2 “Affiliate”means any corporation or other entity(including,but not limited to,a limited liability company,partnershipor joint venture)controlling,controlled by,or under common control with Netflix,Inc.,unless otherwise excluded from the Plan.Alist of Affiliates excluded from the Plan is maintained by the Plan Administrator,and the Plan Administrator has the sole discretionto determine the inclusion or exclusion of any particular Affiliate from the Plan.Entities that become Affiliates through acquisitionare generally excluded from the Plan.Questions regarding whether a particular Affiliate is covered by the Plan should be directed tothe Plan Administrator.2.3 “Allocatable Compensation”means a currency-denominated annual compensation amount available for allocation bythe Covered Executive between cash compensation and equity compensation as approved by(i)the Compensation Committee of theBoard(the“Compensation Committee”)or other properly designated Board committee,or(ii)for a Covered Executive whosecompensation is not subject to approval by a committee of the Board,their manager or other authorized individual,in either case thatis in effect either(a)immediately preceding the Severance Date(with respect to the Severance Benefit)or the date of the Change ofControl(with respect to the Retention Incentive),or(b)at any time within the twelve(12)month period prior to the Severance Date(with respect to the Severance Benefit)or date of the Change of Control(with respect to the Retention Incentive),whichever of(a)or(b)is greater.2.4 “Board”means the Board of Directors of Netflix.2.5 “Cause”means(i)an act of fraud or personal dishonesty undertaken by a Covered Executive in connection with theCovered Executives responsibilities as an employee that is intended to result in substantial gain or personal enrichment of theCovered Executive,(ii)a Covered Executives conviction of,or plea of nolo contendere to,a felony,or(iii)a Covered Executivesgross misconduct in connection with the performance of the Covered1EXHIBIT 10.1Executives responsibilities as an employee or willful failure to perform a reasonable material component of the Covered Executivesresponsibilities as an employee.2.6 “Change in Control”means the first to occur of any of the following:(a)Any“person”(as such term is used in Sections 13(d)and 14(d)of the Exchange Act)becomes the“beneficialowner”(as defined in Rule 13d-3 of the Exchange Act),directly or indirectly,of securities of Netflix representing fifty percent(50%)or more of the total voting power represented by Netflixs then outstanding voting securities;or(b)consummation of the sale or disposition by Netflix of all or substantially all of Netflixs assets;or(c)The consummation of a merger or consolidation of Netflix with any other corporation,other than a merger orconsolidation which would result in the voting securities of Netflix outstanding immediately prior thereto continuing to represent(either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent)at least fiftypercent(50%)of the total voting power represented by the voting securities of Netflix,or such surviving entity or its parentoutstanding immediately after such merger or consolidation;or(d)A change in the composition of the Board,as a result of which less than a majority of the Directors areIncumbent Directors.An“Incumbent Director”means a Director who either(A)is a Director as of the Effective Date,or(B)iselected,or nominated for election,to the Board with the affirmative votes of at least a majority of those Directors whose election ornomination was not in connection with any transaction described in subsections(a),(b)or(c)or in connection with an actual orthreatened proxy contest relating to the election of Directors.2.7 “Company”means Netflix and its Affiliates.2.8 “Covered Executive”means a common law employee employed by Netflix or an Affiliate at the Vice President levelor higher as reflected in Netflixs or Affiliates human resource systems.2.9 “Director”means a member of Netflixs Board of Directors.2.10 “Effective Date”means July 1,2005.2.11 “ERISA”means the Employee Retirement Income Security Act of 1974,as amended.2.12 “Involuntary Termination”means a termination of employment with the Company of a Covered Executive under thecircumstances described in Section 3.1.For purposes of the Plan,the transfer of a Covered Executives employment between Netflixand its Affiliates,or between Affiliates will not be considered a termination of employment and the Covered Executive will not beentitled to receive a Severance Benefit.2.13 “Netflix”means Netflix,Inc.,a Delaware corporation,and any successor thereto.2.14 “Option”means a right granted pursuant to Netflixs stock option plan(s)to purchase common stock of Netflixpursuant to the terms and conditions of such plan(s).2.15 “Plan”means the Executive Severance and Retention Incentive Plan,as set forth in this document,and as hereafteramended from time to time.2EXHIBIT 10.12.16 “Retention Incentive”means the compensation the Covered Executive will be provided pursuant to Section 4.2.17 “Severance Benefit”means the compensation and other benefits the Covered Executive will be provided pursuant toSection 3.2.18 “Severance Date”means the date on which an Eligible Executive experiences an Involuntary Termination.3.Severance.3.1 Eligibility.If at any time prior to a Change in Control,Netflix or an Affiliate terminates a Covered Executivesemployment for other than Cause,death or permanent disability such that the Covered Executive is no longer an employee of theCompany,then,subject to the Covered Executives compliance with Section 3.3,the Covered Executive shall receive the SeveranceBenefit provided pursuant to this Section 3.For purposes of clarification,the severance amount set forth in 3.2 shall not be due orpayable to any Covered Executive who shall have received or is eligible to receive the Retention Incentive.3.2 Severance Benefit.(a)Each Covered Executive who becomes eligible for a Severance Benefit under Section 3.1 shall be paid a lumpsum cash payment equal to twelve(12)months of Allocatable Compensation.Notwithstanding the foregoing,employees hired asCovered Executives shall be paid a lump sum cash payment equal to thirty-six(36)months of Allocatable Compensation(subject tothe other provisions of this Section 3.2),provided that the Severance Benefit shall be reduced by an amount equal to one(1)monthof Allocatable Compensation for each month of tenure at the Company for the Covered Executives first twenty four(24)months ofcontinuous employment following hire by the Company.The purpose of the foregoing is to provide newly hired Covered Executiveswith 36 months Severance Benefit reducing to the standard twelve(12)months.The Severance Benefit shall be paid to the CoveredExecutive as soon as administratively practicable following the Severance Date,but in no event more than two and one half monthsfollowing the Severance Date but subject to Section 7 and to the Covered Executives compliance with Section 3.3.(b)Notwithstanding any contrary provision of the Plan,the Administrator may provide a Covered Executive with aSeverance Benefit that is different than the standard 12 months Severance Benefit provided in Section 3.2(a);provided however,thatany Severance Benefit provided pursuant to this Section 3.2(b)shall be no less than 12 months.Any Severance Benefit providedpursuant this Section 3.2(b)shall be in writing and executed by the Administrator.(c)The Administrator may reduce the Severance Benefit provided in Section 3.2(a)or(b)but only with the writtenconsent of the Covered Executive,and provided that any such reduction may be made only if in accordance with all applicable laws,including(but not limited to)Section 409A of the Code.3.3 Release Agreement.As a condition to receiving a Severance Benefit under this Plan,each Covered Executive will berequired to sign a waiver and release of all claims arising out of their Involuntary Termination and employment with the Company ina form reasonably satisfactory to the Chief Legal Officer of Netflix(the“Release”).The Release must be executed and irrevocablyeffective within the period required by the Release but in no event later than sixty(60)days following the Covered ExecutivesSeverance Date,inclusive of any revocation period set forth in the Release(such deadline,the“Release Deadline”).The SeveranceBenefit3EXHIBIT 10.1will not be paid or provided until the Release becomes irrevocably effective.If the Release does not become irrevocably effective bythe Release Deadline due to action or inaction of the Covered Executive,the Covered Executive will forfeit all rights to theSeverance Benefit.Notwithstanding any contrary provision of the Plan,in order to help a Covered Executive avoid having to pay the additionaltwenty percent(20%)income tax under Section 409A of the Internal Revenue Code of 1986,as amended,in the event that aCovered Executives Severance Date occurs at a time during the calendar year when it would be possible for the Release to becomeeffective in the calendar year following the calendar year in which the Severance Date occurs,then the Severance Benefit owed(ifany)will be paid on the first payroll date that is at least sixty(60)days following the Severance Date(but in all cases subject toSection 7).4.Retention Incentive.4.1 Eligibility.An individual shall be eligible for the Retention Incentive under the Plan,in the amount set forth inSection 4.2,only if the individual(i)is a Covered Executive on the date of a Change in Control,and(ii)is not eligible for aSeverance Benefit under Section 3;provided,that,any individual who becomes a Covered Executive on or after March 1,2023 isnot eligible for a Retention Incentive,unless(i)they are an“executive officer”designated by the Board or(ii)designated by theAdministrator,in their discretion,as eligible for the Retention Incentive and named on a list maintained by the Administrator.4.2 Retention Incentive.Each Covered Executive eligible for a Retention Incentive in accordance with Section 4.1 shallbe entitled to receive a lump sum cash payment equal to twelve(12)months of Allocatable Compensation.The Retention Incentiveshall be paid to the Covered Executive as soon as administratively practicable following the date of the Change in Control,but in noevent more than two and one-half months thereafter.4.3 Parachute Payments.In the event that a Severance Benefit or Retention Incentive provided for in this Plan orotherwise payable or provided to the Covered Executive(i)constitutes a“parachute payment”within the meaning of Section 280Gof the Internal Revenue Code of 1986,as amended(the“Code”)and(ii)but for this Section 4.3,would be subject to the excise taximposed by Section 4999 of the Code(the“Excise Tax”),then the Employees Severance Benefit or Retention Incentive hereundershall be either(a)delivered in full,or(b)delivered as to such lesser extent which would result in no portion of such benefits being subject to the ExciseTax,whichever of the foregoing amounts,taking into account the applicable federal,state and local income taxes and the Excise Tax,results in the receipt by the Covered Executive on an after-tax basis,of the greatest amount of benefits,notwithstanding that all orsome portion of such benefits may be taxable under Section 4999 of the Code.Unless Netflix and the Covered Executive otherwiseagree in writing,any determination required under this Section 4.3 shall be made in writing in good faith by an accounting firmchosen by the Administrator and reasonably acceptable to the Covered Executive(the“Accountants”).If a reduction in benefits isrequired only under the Plan,the reduction will apply to the Employees Severance Benefit or Retention Incentive,as applicable.If areduction in benefits is required under the Plan and one or more other arrangements or plans entered into with or maintained for thebenefit of the Covered Executive that provides for vesting acceleration of equity awards,cash severance or retention benefits,and/orcontinued employee benefits coverage,the reduction will occur in the following order:the vesting acceleration of stock options orstock appreciation rights,then cash severance or retention benefits,then vesting acceleration of equity awards other than stockoptions or stock appreciation rights,and then Company-paid employee benefits coverage.In the event that acceleration of vesting ofstock4EXHIBIT 10.1options,stock appreciation rights or other equity awards is to be reduced,such acceleration of vesting shall be cancelled in thereverse order of the date of grant for the Covered Executives stock options,stock appreciation rights or other equity awards,asapplicable.If two or more stock options,stock appreciation rights or other equity awards are granted on the same day,the stockoptions,stock appreciation rights or other equity awards,as applicable,will be reduced on a pro-rata basis.For purposes of makingthe calculations required by this Section 4.3,the Accountants may make reasonable assumptions and approximations concerningapplicable taxes and may rely on reasonable,good faith interpretations concerning the application of Sections 280G and 4999 of theCode.Netflix and the Covered Executive shall furnish to the Accountants such information and documents as the Accountants mayreasonably request in order to make a determination under this Section.Netflix shall bear all costs the Accountants may reasonablyincur in connection with any calculations contemplated by this Section 4.3.5.Reserved6.Non-Duplication of Benefits.Notwithstanding any other provision in the Plan to the contrary and except as providedin this Section 6,the Severance Benefits and Retention Incentive provided hereunder shall be in lieu of any other severance and/orretention plan benefits and the Severance Benefits and Retention Incentive provided hereunder shall be reduced by any severancepaid or provided to a Covered Executive under any other plan or arrangement.Notwithstanding the preceding sentence,thisSection 6 shall not apply to a Covered Executive to the extent such Covered Executives separate,written employment,retention orother agreement with the Company explicitly exempts the Covered Executive from the preceding sentence.7.Section 409A.7.1 Notwithstanding anything herein to the contrary,it is the intent that the Retention Incentives and Severance Benefitspayable under the Plan satisfy the requirements of the“short-term deferral”rule set forth in Section 1.409A-1(b)(4)of the TreasuryRegulations and be exempt from Section 409A of the Code and the final regulations and any guidance promulgated thereunder(“Section 409A”).If the Severance Benefits(or any portion thereof),when considered together with any other severance paymentsor separation benefits,are considered deferred compensation subject to Section 409A(together,the“Deferred CompensationSeparation Benefits”),no Deferred Compensation Separation Benefits or other severance benefits that otherwise are exempt fromSection 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)will be considered due or payable until the CoveredExecutive has incurred a“separation from service”within the meaning of Section 409A.In addition,if the Covered Executive is a“specified employee”within the meaning of Section 409A at the time of the Covered Executives separation from service(other thandue to death),then any Deferred Compensation Separation Benefits otherwise due to the Covered Executive on or within the six(6)month period following the Covered Executives separation from service will accrue during such six(6)month period and willbecome payable in a lump sum payment(less applicable withholding taxes)on the date six(6)months and one(1)day following thedate of the Covered Executives separation from service.All subsequent payments,if any,will be payable in accordance with thepayment schedule applicable to each payment or benefit.Notwithstanding anything herein to the contrary,if the Covered Executivedies following their separation but prior to the six(6)month anniversary of their date of separation,then any payments delayed inaccordance with this paragraph will be payable in a lump sum(less applicable withholding taxes)to the Covered Executives estateas soon as administratively practicable after the date of the Covered Executives death and all other Deferred CompensationSeparation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit.7.2 Each payment and benefit payable under the Plan is intended to constitute a separate payment for purposes ofSection 1.409A-2(b)(2)of the Treasury Regulations.Any5EXHIBIT 10.1payment or benefit that satisfies the requirements of the“short-term deferral”rule set forth in Section 1.409A-1(b)(4)of the TreasuryRegulations shall not constitute a Deferred Compensation Separation Benefit.Any payment or benefit that entitles the CoveredExecutive to taxable reimbursements or taxable in-kind benefits covered by Section 1.409A-1(b)(9)(v)shall not constitute aDeferred Compensation Separation Benefit.Any severance payment or portion thereof that qualifies as a payment made as a resultof an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii)of the Treasury Regulations that does not exceedthe Section 409A Limit shall not constitute a Deferred Compensation Separation Benefit.For this purpose,“Section 409A Limit”will mean the lesser of two(2)times:(A)the Covered Executives annualized compensation based upon the annual rate of pay paidto Covered Executive during his or her taxable year preceding the Covered Executives taxable year of the Covered Executivesseparation from service as determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1)and any Internal Revenue Serviceguidance issued with respect thereto;or(B)the maximum amount that may be taken into account under a qualified plan pursuant toSection 401(a)(17)of the Code for the year in which the Covered Executives employment is terminated.7.3 It is the intent of this Plan to comply with the requirements of Section 409A so that none of the payments and benefitsto be provided hereunder will be subject to the additional tax imposed under Section 409A,and any ambiguities herein will beinterpreted to so comply.Notwithstanding anything to the contrary in the Plan,including but not limited to Section 11,Netflixreserves the right to amend the Plan as it deems necessary or advisable,in its sole discretion and without the consent of the CoveredExecutives,to comply with Section 409A of the Code or to otherwise avoid income recognition under Section 409A of the Codeprior to the actual payment of Retention Incentives or Severance Benefits or imposition of any additional tax(provided that no suchamendment shall materially reduce the benefits provided hereunder).8.Withholding.The Company will withhold from any Severance Benefit and Retention Incentive all federal,state,local and other taxes required to be withheld therefrom and any other required payroll deductions.9.Administration.Netflix is the administrator of the Plan(within the meaning of section 3(16)(A)of ERISA).ThePlan will be administered and interpreted by the Administrator(in their sole discretion).The Administrator is the“named fiduciary”of the Plan for purposes of ERISA and will be subject to the fiduciary standards of ERISA when acting in such capacity.Anydecision made or other action taken by the Administrator prior to a Change in Control with respect to the Plan,and any interpretationby the Administrator of any term or condition of the Plan prior to a Change in Control,or any related document,will be conclusiveand binding on all persons and be given the maximum possible deference allowed by law.Following a Change in Control,anydecision made or other action taken by the Administrator with respect to the Plan,and any interpretation by the Administrator of anyterm or condition of the Plan,or any related document that(i)does not affect the benefits payable under the Plan shall not be subjectto review unless found to be arbitrary and capricious or(ii)does affect the benefits payable under the Plan shall not be subject toreview unless found to be unreasonable or not to have been made in good faith.The Administrator has the authority to act for theCompany(in a non-fiduciary capacity)as to any matter pertaining to the Plan;provided,however,that this authority does not applywith respect to(a)Netflixs power to amend or terminate the Plan or(b)any action that could reasonably be expected to increasesignificantly the cost of the Plan is subject to the prior approval of the senior officer of Netflix.The Administrator may delegate inwriting to any other person all or any portion of their authority or responsibility with respect to the Plan.10.Eligibility to Participate.The Administrator will not be excluded from participating in the Plan if otherwise eligible,but the Administrator is not entitled to act or pass upon any matters pertaining specifically to their own benefit or eligibility underthe Plan.A6EXHIBIT 10.1senior officer of Netflix,Inc.will act upon any matters pertaining specifically to the benefit or eligibility of the Administrator underthe Plan.11.Amendment or Termination.The Board and the Compensation Committee reserve the right to amend or terminatethe Plan at any time provided that(a)as the Plan relates to each individual who is a Covered Executive on the Effective Date,without such Covered Executives written consent,the Plan may not be amended or terminated so as to reduce the amount of theSeverance Benefit or Retention Incentive payable to the Covered Executive nor to restrict the Covered Executives eligibility for aSeverance Benefit or Retention Incentive,and(b)as the Plan relates to each individual who first becomes a Covered Executive afterthe Effective Date,(1)the Plan may be amended or terminated before such individual becomes a Covered Executive,and(2)aftersuch individual becomes a Covered Executive,without such Covered Executives written consent,the Plan may not be amended orterminated so as to reduce the amount of the Severance Benefit and Retention Incentive payable to the Covered Executive nor torestrict the Covered Executives eligibility for a Severance Benefit or Retention Incentive.Any amendment or termination of thePlan will be in writing.Any action of Netflix in amending or terminating the Plan will be taken in a non-fiduciary capacity.Upon aChange in Control and following the receipt by all eligible Covered Executives of the Retention Incentive provided for herein,thisPlan shall have no further force or effect.12.Cl
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Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-Q?QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2023oro TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _Commission file number:1-32853M COMPANY(Exact name of registrant as specified in its charter)Delaware41-0417775(State or other jurisdiction of incorporation)(IRS Employer Identification No.)3M Center,St.Paul,Minnesota55144-1000(Address of Principal Executive Offices)(Zip Code)(Registrants Telephone Number,Including Area Code)(651)733-1110Not Applicable(Former Name or Former Address,if Changed Since Last Report)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,Par Value$.01 Per ShareMMMNew York Stock ExchangeMMMChicago Stock Exchange,Inc.0.950%Notes due 2023MMM23New York Stock Exchange1.500%Notes due 2026MMM26New York Stock Exchange1.750%Notes due 2030MMM30New York Stock Exchange1.500%Notes due 2031MMM31New York Stock ExchangeNote:The common stock of the Registrant is also traded on the SIX Swiss Exchange.Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of thischapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.Seethe definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.:Large accelerated filer?Accelerated filer?Non-accelerated filer?Smaller reporting company?Emerging growth company?If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No Indicate the number of shares outstanding of each of the issuers classes of common stock,as of the latest practicable date.ClassOutstanding at March 31,2023Common Stock,$0.01 par value per share551,672,217 shares1Table of Contents3M COMPANYForm 10-Q for the Quarterly Period Ended March 31,2023TABLE OF CONTENTSBEGINNINGPAGEPART IFINANCIAL INFORMATIONITEM 1.Financial Statements3Index to Financial Statements:Consolidated Statement of Income3Consolidated Statement of Comprehensive Income4Consolidated Balance Sheet5Consolidated Statement of Cash Flows6Notes to Consolidated Financial Statements7Note 1.Significant Accounting Policies7Note 2.Revenue8Note 3.Acquisitions and Divestitures10Note 4.Goodwill and Intangible Assets11Note 5.Restructuring Actions12Note 6.Supplemental Income Statement Information13Note 7.Supplemental Equity and Comprehensive Income Information14Note 8.Income Taxes17Note 9.Marketable Securities17Note 10.Long-Term Debt and Short-Term Borrowings18Note 11.Pension and Postretirement Benefit Plans18Note 12.Derivatives19Note 13.Fair Value Measurements23Note 14.Commitments and Contingencies24Note 15.Business Segments48ITEM 2.Managements Discussion and Analysis of Financial Condition and Results of Operations50Index to Managements Discussion and Analysis:Overview50Results of Operations56Performance by Business Segment58Financial Condition and Liquidity63Cautionary Note Concerning Factors That May Affect Future Results68ITEM 3.Quantitative and Qualitative Disclosures About Market Risk69ITEM 4.Controls and Procedures69PART IIOTHER INFORMATIONITEM 1.Legal Proceedings70ITEM 1A.Risk Factors70ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds77ITEM 3.Defaults Upon Senior Securities77ITEM 4.Mine Safety Disclosures77ITEM 5.Other Information77ITEM 6.Exhibits782Table of Contents3M COMPANYFORM 10-QFor the Quarterly Period Ended March 31,2023PART I.Financial InformationItem 1.Financial Statements.3M Company and SubsidiariesConsolidated Statement of Income(Unaudited)Three months endedMarch 31,(Millions,except per share amounts)20232022Net sales$8,031$8,829 Operating expensesCost of sales4,613 4,826 Selling,general and administrative expenses1,705 1,882 Research,development and related expenses472 480 Total operating expenses6,790 7,188 Operating income1,241 1,641 Other expense(income),net52 38 Income before income taxes1,189 1,603 Provision for income taxes210 302 Income of consolidated group979 1,301 Income(loss)from unconsolidated subsidiaries,net of taxes2 2 Net income including noncontrolling interest981 1,303 Less:Net income(loss)attributable to noncontrolling interest5 4 Net income attributable to 3M$976$1,299 Weighted average 3M common shares outstanding basic552.7 572.3 Earnings per share attributable to 3M common shareholders basic$1.77$2.27 Weighted average 3M common shares outstanding diluted553.2 575.0 Earnings per share attributable to 3M common shareholders diluted$1.76$2.26 The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.3Table of Contents3M Company and SubsidiariesConsolidated Statement of Comprehensive Income(Unaudited)Three months endedMarch 31,(Millions)20232022Net income including noncontrolling interest$981$1,303 Other comprehensive income(loss),net of tax:Cumulative translation adjustment116(171)Defined benefit pension and postretirement plans adjustment51 87 Cash flow hedging instruments(24)(1)Total other comprehensive income(loss),net of tax143(85)Comprehensive income(loss)including noncontrolling interest1,124 1,218 Comprehensive(income)loss attributable to noncontrolling interest(5)(3)Comprehensive income(loss)attributable to 3M$1,119$1,215 The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.4Table of Contents3M Company and SubsidiariesConsolidated Balance Sheet(Unaudited)(Dollars in millions,except per share amount)March 31,2023December 31,2022AssetsCurrent assetsCash and cash equivalents$3,824$3,655 Marketable securities current145 238 Accounts receivable net of allowances of$162 and$1744,638 4,532 InventoriesFinished goods2,523 2,497 Work in process1,546 1,606 Raw materials and supplies1,237 1,269 Total inventories5,306 5,372 Prepaids558 435 Other current assets492 456 Total current assets14,963 14,688 Property,plant and equipment26,296 25,998 Less:Accumulated depreciation(17,049)(16,820)Property,plant and equipment net9,247 9,178 Operating lease right of use assets883 829 Goodwill12,855 12,790 Intangible assets net4,585 4,699 Other assets4,353 4,271 Total assets$46,886$46,455 LiabilitiesCurrent liabilitiesShort-term borrowings and current portion of long-term debt$3,012$1,938 Accounts payable3,130 3,183 Accrued payroll604 692 Accrued income taxes268 259 Operating lease liabilities current263 261 Other current liabilities3,279 3,190 Total current liabilities10,556 9,523 Long-term debt12,948 14,001 Pension and postretirement benefits1,956 1,966 Operating lease liabilities627 580 Other liabilities5,448 5,615 Total liabilities31,535 31,685 Commitments and contingencies(Note 14)Equity3M Company shareholders equity:Common stock par value,$.01 par value;944,033,056 shares issued9 9 Shares outstanding-March 31,2023:551,672,217Shares outstanding-December 31,2022:549,245,105Additional paid-in capital6,816 6,691 Retained earnings47,966 47,950 Treasury stock,at cost:(32,963)(33,255)Shares at March 31,2023:392,360,839Shares at December 31,2022:394,787,951Accumulated other comprehensive income(loss)(6,530)(6,673)Total 3M Company shareholders equity15,298 14,722 Noncontrolling interest53 48 Total equity15,351 14,770 Total liabilities and equity$46,886$46,455 The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.5Table of Contents3M Company and SubsidiariesConsolidated Statement of Cash Flows(Unaudited)Three months endedMarch 31,(Millions)20232022Cash Flows from Operating ActivitiesNet income including noncontrolling interest$981$1,303 Adjustments to reconcile net income including noncontrolling interest to net cash provided by operatingactivitiesDepreciation and amortization466 459 Company pension and postretirement contributions(27)(42)Company pension and postretirement expense37 43 Stock-based compensation expense135 135 Deferred income taxes(93)(49)Changes in assets and liabilitiesAccounts receivable(73)(189)Inventories91(319)Accounts payable36 261 Accrued income taxes(current and long-term)(37)179 Other net(241)(770)Net cash provided by(used in)operating activities1,275 1,011 Cash Flows from Investing ActivitiesPurchases of property,plant and equipment(PP&E)(475)(424)Proceeds from sale of PP&E and other assets3 56 Purchases of marketable securities and investments(364)(125)Proceeds from maturities and sale of marketable securities and investments450 217 Proceeds from sale of businesses,net of cash sold 13 Net cash provided by(used in)investing activities(386)(263)Cash Flows from Financing ActivitiesChange in short-term debt net(5)Repayment of debt(maturities greater than 90 days)(1,150)(579)Proceeds from debt(maturities greater than 90 days)1,107 Purchases of treasury stock(29)(773)Proceeds from issuance of treasury stock pursuant to stock option and benefit plans187 164 Dividends paid to shareholders(827)(852)Other net(4)(9)Net cash provided by(used in)financing activities(716)(2,054)Effect of exchange rate changes on cash and cash equivalents(4)(11)Net increase(decrease)in cash and cash equivalents169(1,317)Cash and cash equivalents at beginning of year3,655 4,564 Cash and cash equivalents at end of period$3,824$3,247 The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.6Table of Contents3M Company and SubsidiariesNotes to Consolidated Financial Statements(Unaudited)NOTE 1.Significant Accounting PoliciesBasis of PresentationThe interim consolidated financial statements are unaudited but,in the opinion of management,reflect all adjustments necessary for a fair statement of the Companysconsolidated financial position,results of operations and cash flows for the periods presented.These adjustments consist of normal,recurring items.The results of operations forany interim period are not necessarily indicative of results for the full year.The interim consolidated financial statements and notes are presented as permitted by therequirements for Quarterly Reports on Form 10-Q.This Quarterly Report on Form 10-Q should be read in conjunction with the Companys consolidated financial statementsand notes included in its Annual Report on Form 10-K.Effective in the first quarter of 2023,3M made changes in the measure of segment operating performance and segment composition used by 3Ms chief operating decisionmakerimpacting 3Ms disclosed measure of segment profit/loss(business segment operating income).Also effective in the first quarter of 2023,3Ms Consumer businesssegment re-aligned from four divisions to three divisions,see additional information in Note 15.3Ms disclosed disaggregated revenue was also updated as a result of thesechanges,see additional information in Note 2.Information provided herein reflects the impact of these changes for all periods presented.Earnings Per ShareThe difference in the weighted average 3M shares outstanding for calculating basic and diluted earnings per share attributable to 3M common shareholders is a result of thedilution associated with the Companys stock-based compensation plans.Certain options outstanding under these stock-based compensation plans were not included in thecomputation of diluted earnings per share attributable to 3M common shareholders because they would have had an anti-dilutive effect of 35.6 million and 23.1 million averageoptions for the three months ended March 31,2023 and 2022,respectively.The computations for basic and diluted earnings per share follow:Earnings Per Share ComputationsThree months endedMarch 31,(Amounts in millions,except per share amounts)20232022Numerator:Net income attributable to 3M$976$1,299 Denominator:Denominator for weighted average 3M common shares outstanding basic552.7 572.3 Dilution associated with the Companys stock-based compensation plans0.5 2.7 Denominator for weighted average 3M common shares outstanding diluted553.2 575.0 Earnings per share attributable to 3M common shareholders basic$1.77$2.27 Earnings per share attributable to 3M common shareholders diluted$1.76$2.26 7Table of ContentsSupplier Finance Program ObligationsUnder supplier finance programs,3M agrees to pay participating banks the stated amount of confirmed invoices from its designated suppliers on the original maturity dates ofthe invoices,generally within 90 days of the invoice date.3M or the banks may terminate the agreements with advance notice.Separately,the banks may have arrangementswith the suppliers that provide them the option to request early payment from the banks for invoices confirmed by 3M.3Ms outstanding balances of confirmed invoices in theprograms as of March 31,2023 and December 31,2022 were approximately$310 million and$260 million,respectively.These amounts are included within accounts payableon 3Ms consolidated balance sheet.New Accounting PronouncementsRefer to Note 1 to the Consolidated Financial Statements in 3Ms 2022 Annual Report on Form 10-K for a discussion of applicable standards issued and not yet adopted by 3M.NOTE 2.RevenueContract Balances:Deferred revenue primarily relates to revenue that is recognized over time for one-year software license contracts.Deferred revenue(current portion)as of March 31,2023 andDecember 31,2022 was$520 million and$538 million,respectively.Approximately$200 million of the December 31,2022 balance and of the December 31,2021 balancewas recognized as revenue during the three months ended March 31,2023 and during the three months ended March 31,2022.Operating Lease Revenue:Net sales includes rental revenue from durable medical devices as part of operating lease arrangements(reported within the Medical Solutions Division),which was$139million and$136 million during the three months ended March 31,2023 and 2022,respectively.8Table of ContentsDisaggregated revenue information:The Company views the following disaggregated disclosures as useful to understanding the composition of revenue recognized during the respective reporting periods:Three months endedMarch 31,Net Sales(Millions)20232022Abrasives$341$329Automotive Aftermarket312295Closure and Masking Systems245258Electrical Markets324309Industrial Adhesives and Tapes544621Personal Safety9031,127Roofing Granules110112Total Safety and Industrial Business Segment2,7793,051Advanced Materials301305Automotive and Aerospace462460Commercial Solutions432454Electronics672923Transportation Safety183198Total Transportation and Electronics Business Segment2,0502,340Food Safety92Health Information Systems300300Medical Solutions1,1231,128Oral Care341348Separation and Purification Sciences232260Other Health Care14 Total Health Care Business Group2,0102,128Home,Health and Auto Care400437Construction and Home Improvement Markets529603Stationery and Office263269Total Consumer Business Group1,1921,309Corporate and Unallocated1Total Company$8,031$8,829Three months endedMarch 31,Net Sales(Millions)20232022Americas$4,399$4,438 Asia Pacific2,180 2,770 Europe,Middle East and Africa1,452 1,621 Worldwide$8,031$8,829 Americas included United States net sales to customers of$3.6 billion for both the three months ended March 31,2023 and 2022.9Table of ContentsNOTE 3.Acquisitions and DivestituresRefer to Note 3 to the Consolidated Financial Statements in 3Ms 2022 Annual Report on Form 10-K for more information on relevant pre-2023 acquisitions and divestitures.Acquisitions:3M makes acquisitions of certain businesses from time to time that are aligned with its strategic intent with respect to,among other factors,growth markets and adjacentproduct lines or technologies.Goodwill resulting from business combinations is largely attributable to the existing workforce of the acquired businesses and synergies expectedto arise after 3Ms acquisition of these businesses.2023 acquisitions:There were no acquisitions that closed during the three months ended March 31,2023.Divestitures:3M may divest certain businesses from time to time based upon review of the Companys portfolio considering,among other items,factors relative to the extent of strategic andtechnological alignment and optimization of capital deployment,in addition to considering if selling the businesses results in the greatest value creation for the Company and forshareholders.As discussed in Note 15(Business Segments),gains/losses on business divestitures are reflected in Corporate and Unallocated.2023 divestitures and previously announced divestitures:There were no divestitures that closed during the three months ended March 31,2023.In July 2022,3M announced its intention to spin off the Health Care business as a separate public company.3M expects to initially retain an ownership position of 19.9%in thebusiness,which 3M intends to monetize over time.The spin-off transaction is intended to be tax-free for U.S.federal income tax purposes and is subject to customaryconditions,including the filing and effectiveness of a Form 10 registration statement,receipt of a private letter ruling from the Internal Revenue Service and a tax opinion fromexternal counsel,satisfactory completion of financing,and final approval by the Companys Board of Directors,among other items.3M continues to work towards closing thetransaction by year-end 2023 or early 2024,subject to required conditions,as well as additional factors such as conditions in the equity and debt markets,other externalconditions,and developments involving 3M or any of its businesses,which could delay the completion of the transaction relative to the anticipated timeline.Because theintended transaction is a spin-off,the Health Care business is not classified as held for sale.Operating income and held-for-sale amounts:With respect to the businesses above,operating income information of the Health Care business is included in Note 15.Further,with the respect to these businesses,there wereno assets and liabilities associated with disposal groups classified as held for sale as of December 31,2022 and as of March 31,2023.Information related to other held for saledisposal groups is included in Note 13.10Table of ContentsNOTE 4.Goodwill and Intangible AssetsGoodwillThere was no goodwill recorded from acquisitions during the first three months of 2023.The amounts in the“Translation and other”row in the following table primarily relateto changes in foreign currency exchange rates.The goodwill balance by business segment follows:(Millions)Safety and IndustrialTransportation andElectronicsHealth CareConsumerTotal CompanyBalance as of December 31,2022$4,509$1,501$6,515$265$12,790Translation and other10 6 40 9 65 Balance as of March 31,2023$4,519$1,507$6,555$274$12,855Accounting standards require that goodwill be tested for impairment annually and between annual tests in certain circumstances such as a change in reporting units or thetesting of recoverability of a significant asset group within a reporting unit.At 3M,reporting units correspond to a division.As described in Note 15,effective in the firstquarter of 2023,3M changed its measure of segment operating performance and the composition of reportable segments and realigned divisions within the Consumer businesssegment.For any changes that resulted in reporting unit changes,the Company applied the relative fair value method to determine the impact on goodwill of the associatedreporting units.The impacts of these changes on reported amounts were immaterial and resulted in no impairment.As of March 31,2023,the Companys accumulated goodwillimpairment loss is$0.3 billion.Acquired Intangible AssetsThe carrying amount and accumulated amortization of acquired finite-lived intangible assets,in addition to the balance of non-amortizable intangible assets follow:(Millions)March 31,2023December 31,2022Customer related intangible assets$4,075$4,062 Patents429 426 Other technology-based intangible assets2,086 2,081 Definite-lived tradenames1,166 1,166 Other amortizable intangible assets83 84 Total gross carrying amount7,839 7,819 Accumulated amortization customer related(1,812)(1,747)Accumulated amortization patents(425)(421)Accumulated amortization other technology-based(1,050)(1,000)Accumulated amortization definite-lived tradenames(525)(509)Accumulated amortization other(59)(60)Total accumulated amortization(3,871)(3,737)Total finite-lived intangible assets net3,968 4,082 Non-amortizable intangible assets(primarily tradenames)617 617 Total intangible assets net$4,585$4,699 Certain tradenames acquired by 3M are not amortized because they have been in existence for over 60 years,have a history of leading-market share positions,have been and areintended to be continuously renewed,and the associated products of which are expected to generate cash flows for 3M for an indefinite period of time.11Table of ContentsAmortization expense follows:Three months endedMarch 31,(Millions)20232022Amortization expense$122$131 Expected amortization expense for acquired amortizable intangible assets recorded as of March 31,2023 follows:(Millions)Remainder of 202320242025202620272028After 2028Amortization expense$356$452$422$416$397$378$1,547 The preceding expected amortization expense is an estimate.Actual amounts of amortization expense may differ from estimated amounts due to additional intangible assetacquisitions,changes in foreign currency exchange rates,impairment of intangible assets,accelerated amortization of intangible assets and other events.3M expenses the costsincurred to renew or extend the term of intangible assets.NOTE 5.Restructuring Actions2023 to 2025 Structural Reorganization ActionsIn the first quarter of 2023,3M announced it would undertake structural reorganization actions to reduce the size of the corporate center of the Company,simplify supply chain,streamline 3Ms geographic footprint,reduce layers of management,further align business go-to-market models to customers,and reduce manufacturing roles to align withproduction volumes.During the first quarter of 2023,management approved and committed to undertake associated actions impacting approximately 1,200 positions resultingin a pre-tax charge of$52 million.Remaining activities related to the restructuring actions approved and committed under this initiative are expected to be largely completedthrough the end of 2023.3M expects to commit to further actions under this initiative.This aggregate initiative beginning in the first quarter of 2023 and continuing through2025 is expected to impact approximately 8,500 positions worldwide with an expected pre-tax charge of$700 million to$900 million over that period.The related restructuring charges for periods presented were recorded in the income statement as follows:(Millions)Three months ended March 31,2023Cost of sales$16 Selling,general and administrative expenses32 Research,development and related expenses4 Total operating income impact$52 The business segment operating income impact of these restructuring charges is summarized as follows:Three months ended March 31,2023(Millions)Employee RelatedSafety and Industrial$10 Transportation and Electronics12 Health Care2 Consumer3 Corporate and unallocated25 Total operating expense$52 12Table of ContentsRestructuring actions,including cash impacts,follow:(Millions)Employee-RelatedExpense incurred in the first quarter of 2023$52 Cash payments(13)Accrued restructuring action balance as of March 31,2023$39 2022 Restructuring ActionsOperational/Marketing Capability Restructuring:As described in Note 5 in 3Ms 2022 Annual Report on Form 10-K,in late 2020,3M announced it would undertake certain actions beginning in the fourth quarter of 2020 tofurther enhance its operations and marketing capabilities to take advantage of certain global market trends while de-prioritizing investments in slower-growth end markets.Inthe first quarter of 2022,management approved and committed to undertake the remaining actions under this initiative resulting in a pre-tax charge of$18 million.Thisinitiative,beginning in 2020 and ending with committed first quarter 2022 actions,impacted approximately 3,100 positions worldwide with a pre-tax charge of approximately$280 million over that period.Activities related to this restructuring were largely completed in the third quarter of 2022.Divestiture-Related Restructuring:As described in Note 5 in 3Ms 2022 Annual Report on Form 10-K,during the third quarter of 2022,following the Food Safety Division split-off transaction and combinationwith Neogen completed in September 2022(see Note 3 in 3Ms 2022 Annual Report on Form 10-K)management approved and committed to undertake certain restructuringactions addressing corporate functional costs across 3M in relation to the magnitude of amounts previously allocated to the divested business.These actions affected approximately 850 positions worldwide and resulted in a third quarter 2022 pre-tax charge of$41 million,within Corporate and Unallocated.Theassociated accrued restructuring balance as of December 31,2022 was$10 million and remaining activities related to this divestiture-related restructuring are expected to belargely completed through the first half of 2023.NOTE 6.Supplemental Income Statement InformationOther expense(income),net consists of the following:Three months endedMarch 31,(Millions)20232022Interest expense$123$113 Interest income(40)(8)Pension and postretirement net periodic benefit cost(benefit)(31)(67)Total$52$38 Pension and postretirement net periodic benefit costs described in the table above include all components of defined benefit plan net periodic benefit costs except service cost,which is reported in various operating expense lines.Refer to Note 11 for additional details on the components of pension and postretirement net periodic benefit costs.13Table of ContentsNOTE 7.Supplemental Equity and Comprehensive Income InformationCash dividends declared and paid totaled$1.50 and$1.49 per share for the first quarter of 2023 and 2022,respectively.Consolidated Changes in EquityThree months ended March 31,20233M Company Shareholders(Millions)TotalCommonStock andAdditionalPaid-in CapitalRetainedEarningsTreasuryStockAccumulatedOtherComprehensiveIncome(Loss)Non-controllingInterestBalance at December 31,2022$14,770$6,700$47,950$(33,255)$(6,673)$48Net income981 976 5 Other comprehensive income(loss),net of tax:Cumulative translation adjustment116116 Defined benefit pension and post-retirement plans adjustment51 51 Cash flow hedging instruments(24)(24)Total other comprehensive income(loss),net of tax143Dividends declared(827)(827)Stock-based compensation125 125 Reacquired stock(29)(29)Issuances pursuant to stock option and benefit plans188(133)321 Balance at March 31,2023$15,351$6,825$47,966$(32,963)$(6,530)$53Three months ended March 31,20223M Company Shareholders(Millions)TotalCommonStock andAdditionalPaid-inCapitalRetainedEarningsTreasuryStockAccumulatedOtherComprehensiveIncome(Loss)Non-controllingInterestBalance at December 31,2021$15,117$6,438$45,821$(30,463)$(6,750)$71Net income1,3031,2994Other comprehensive income(loss),net of tax:Cumulative translation adjustment(171)(170)(1)Defined benefit pension and post-retirement plans adjustment8787 Cash flow hedging instruments(1)(1)Total other comprehensive income(loss),net of tax(85)Dividends declared(852)(852)Stock-based compensation130130 Reacquired stock(773)(773)Issuances pursuant to stock option and benefit plans164(212)376 Balance at March 31,2022$15,004$6,568$46,056$(30,860)$(6,834)$7414Table of ContentsChanges in Accumulated Other Comprehensive Income(Loss)Attributable to 3M by ComponentThree months ended March 31,2023(Millions)CumulativeTranslationAdjustmentDefined BenefitPension andPostretirementPlansAdjustmentCash FlowHedgingInstruments,UnrealizedGain(Loss)TotalAccumulatedOtherComprehensiveIncome(Loss)Balance at December 31,2022,net of tax:$(2,828)$(3,838)$(7)$(6,673)Other comprehensive income(loss),before tax:Amounts before reclassifications1056 111Amounts reclassified out64(41)23Total other comprehensive income(loss),before tax10564(35)134Tax effect11(13)119 Total other comprehensive income(loss),net of tax11651(24)143Balance at March 31,2023,net of tax:$(2,712)$(3,787)$(31)$(6,530)Three months ended March 31,2022(Millions)CumulativeTranslationAdjustmentDefined BenefitPension andPostretirementPlansAdjustmentCash FlowHedgingInstruments,UnrealizedGain(Loss)TotalAccumulatedOtherComprehensiveIncome(Loss)Balance at December 31,2021,net of tax:$(1,943)$(4,753)$(54)$(6,750)Other comprehensive income(loss),before tax:Amounts before reclassifications(150)6(144)Amounts reclassified out 115(7)108Total other comprehensive income(loss),before tax(150)115(1)(36)Tax effect(20)(28)(48)Total other comprehensive income(loss),net of tax(170)87(1)(84)Balance at March 31,2022,net of tax:$(2,113)$(4,666)$(55)$(6,834)Income taxes are not provided for foreign translation relating to permanent investments in international subsidiaries,but tax effects within cumulative translation do includeimpacts from items such as net investment hedge transactions.Reclassification adjustments are made to avoid double counting in comprehensive income items that aresubsequently recorded as part of net income.15Table of ContentsReclassifications out of Accumulated Other Comprehensive Income Attributable to 3MDetails about Accumulated Other Comprehensive Income ComponentsAmount Reclassified from Accumulated OtherComprehensive IncomeLocation on Income StatementThree months endedMarch 31,(Millions)20232022Defined benefit pension and postretirement plans adjustmentsGains(losses)associated with defined benefit pension and postretirement plansamortizationTransition asset$Other(expense)income,netPrior service benefit13 13 Other(expense)income,netNet actuarial loss(77)(127)Other(expense)income,netCurtailments/Settlements(1)Other(expense)income,netTotal before tax(64)(115)Tax effect13 28 Provision for income taxesNet of tax(51)(87)Cash flow hedging instruments gains(losses)Foreign currency forward/option contracts43 9 Cost of salesInterest rate contracts(2)(2)Interest expenseTotal before tax41 7 Tax effect(10)(2)Provision for income taxesNet of tax31 5 Total reclassifications for the period,net of tax$(20)$(82)16Table of ContentsNOTE 8.Income TaxesThe effective tax rate for the first quarter of 2023 was 17.7 percent,a decrease from 18.8 percent in the prior year.The primary factor that decreased the Companys effective taxrate for first quarter 2023 was deferred tax impacts of 2023 activity.The total amounts of unrecognized tax benefits that,if recognized,would affect the effective tax rate as of March 31,2023 and December 31,2022 are$994 million and$965million,respectively.It is reasonably possible that the amount of unrecognized tax benefits could significantly change within the next 12 months.At this time,the Company isnot able to estimate the range by which these potential events could impact 3Ms unrecognized tax benefits in the next 12 months.As of March 31,2023 and December 31,2022,the Company had valuation allowances of$114 million and$115 million on its deferred tax assets,respectively.NOTE 9.Marketable SecuritiesThe Company invests in asset-backed securities,certificates of deposit/time deposits,commercial paper,and other securities.The following is a summary of amounts recordedon the Consolidated Balance Sheet for marketable securities(current and non-current).(Millions)March 31,2023December 31,2022Commercial paper$85$213 Certificates of deposit/time deposits56 21 U.S.treasury securities U.S.municipal securities4 4 Current marketable securities145 238 U.S.municipal securities23 23 Non-current marketable securities23 23 Total marketable securities$168$261 At March 31,2023 and December 31,2022,gross unrealized,gross realized,and net realized gains and/or losses(pre-tax)were not material.The balances at March 31,2023 for marketable securities by contractual maturity are shown below.Actual maturities may differ from contractual maturities because the issuersof the securities may have the right to prepay obligations without prepayment penalties.(Millions)March 31,2023Due in one year or less$145 Due after one year through five years15 Due after five years through ten years8 Total marketable securities$168 17Table of ContentsNOTE 10.Long-Term Debt and Short-Term BorrowingsIn February 2023,3M repaid$500 million aggregate principal amount of fixed-rate registered notes that matured.InMarch 2023,3M repaid$650 million aggregate principal amount of fixed-rate medium-term notes that matured.2022 issuances,maturities,and extinguishments of short-and long-term debt are described in Note 12 to the Consolidated Financial Statements in 3Ms 2022 Annual Report onForm 10-K.The Company had$1.1 billion in commercial paper outstanding at March 31,2023,compared to no commercial paper outstanding as of December 31,2022.Future Maturities of Long-term DebtMaturities of long-term debt in the table below reflect the impact of put provisions associated with certain debt instruments and are net of the unamortized debt issue costs suchthat total maturities equal the carrying value of long-term debt as of March 31,2023.The maturities of long-term debt for the periods subsequent to March 31,2023 are asfollows(in millions):Remainder of202320242025202620272028After 2028Total$800$1,100$1,865$1,452$846$731$8,054$14,848NOTE 11.Pension and Postretirement Benefit PlansThe service cost component of defined benefit net periodic benefit cost is recorded in cost of sales;selling,general and administrative expenses;and research,development andrelated expenses.The other components of net periodic benefit cost are reflected in other expense(income),net.Components of net periodic benefit cost and other supplementalinformation for the three months ended March 31,2023 and 2022 follow:Benefit Plan InformationThree months ended March 31,Qualified and Non-qualified Pension BenefitsPostretirement BenefitsUnited StatesInternational(Millions)202320222023202220232022Net periodic benefit cost(benefit)Operating expenseService cost$43$64$19$35$6$11 Non-operating expenseInterest cost166 104 55 32 22 13 Expected return on plan assets(244)(241)(75)(72)(19)(18)Amortization of transition asset Amortization of prior service benefit(6)(6)1 (8)(7)Amortization of net actuarial loss73 106 2 11 2 10 Settlements,curtailments,special termination benefits and other 1 Total non-operating expense(benefit)(11)(37)(17)(29)(3)(1)Total net periodic benefit cost(benefit)$32$27$2$6$3$10 For the three months ended March 31,2023 contributions totaling$26 million were made to the Companys U.S.and international pension plans and$1 million to itspostretirement plans.Future contributions will depend on market conditions,interest rates and other factors.3Ms annual measurement date for pension and postretirementassets and liabilities is December 31 each year,which is also the date used for the related annual measurement assumptions.18Table of ContentsNOTE 12.DerivativesThe Company uses interest rate swaps,currency swaps,and forward and option contracts to manage risks generally associated with foreign exchange rate and interest ratefluctuations.Note 14 to the Consolidated Financial Statements in 3Ms 2022 Annual Report on Form 10-K explains the types of derivatives and financial instruments used by3M,how and why 3M uses such instruments,and how such instruments are accounted for.It also contains information regarding previously initiated contracts or instruments.Additional information with respect to derivatives is included elsewhere as follows:Impact on other comprehensive income of nonderivative hedging and derivative instruments is included in Note 7.Fair value of derivative instruments is included in Note 13.Derivatives and/or hedging instruments associated with the Companys long-term debt are described in Note 12 to the Consolidated Financial Statements in 3Ms 2022Annual Report on Form 10-K.Refer to the section below titled Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as HedgingInstruments for details on the location within the consolidated statements of income for amounts of gains and losses related to derivative instruments designated as cash flow orfair value hedges(along with similar information relative to the hedged items)and derivatives not designated as hedging instruments.Additional information relative to cashflow hedges,fair value hedges,net investment hedges and derivatives not designated as hedging instruments is included below as applicable.Cash Flow Hedges:As of March 31,2023,the Company had a balance of$31 million associated with the after-tax net unrealized loss associated with cash flow hedging instruments recorded inaccumulated other comprehensive income.This includes a remaining balance of$92 million(after-tax loss)related to forward starting interest rate swap and treasury rate lockcontracts,which will be amortized over the respective lives of the underlying notes.Based on exchange rates as of March 31,2023,of the total after-tax net unrealized balanceas of March 31,2023,3M expects to reclassify approximately$42 million after-tax net unrealized gain over the next 12 months(with the impact offset by earnings/losses fromunderlying hedged items).The amount of pretax gain(loss)recognized in other comprehensive income related to derivative instruments designated as cash flow hedges is provided in the following table.Pretax Gain(Loss)Recognized in Other Comprehensive Income onDerivativeThree months endedMarch 31,(Millions)20232022Foreign currency forward/option contracts$6$6 Interest rate contracts Total$6$6 Fair Value Hedges:3M had a fixed-to-floating interest rate swap that was terminated in 2007 with respect to the Companys 30-year$220 million principal amount debenture due in 2028.As thisdebt is still outstanding,its carrying value includes the remaining basis adjustment from this discontinued fair value hedge.The following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for active fair value hedges,as well as remaining amounts fordiscontinued fair value hedges:(Millions)Carrying Value of the Hedged LiabilitiesCumulative Amount of Fair Value HedgingAdjustment Included in the Carrying Value ofthe Hedged LiabilitiesLocation on the Consolidated Balance SheetMarch 31,2023December 31,2022March 31,2023December 31,2022Long-term debt$916$903$(86)$(98)19Table of ContentsNet Investment Hedges:At March 31,2023,the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 150 million euros,along with aprincipal amount of long-term debt instruments designated in net investment hedges totaling 2.4 billion euros.The maturity dates of these derivative and nonderivativeinstruments designated in net investment hedges range from 2023 to 2031.The amount of gain(loss)excluded from effectiveness testing recognized in income relative to instruments designated in net investment hedge relationships is not material.Theamount of pretax gain(loss)recognized in other comprehensive income related to derivative and nonderivative instruments designated as net investment hedges are as follows.Pretax Gain(Loss)Recognized as Cumulative Translation within OtherComprehensive IncomeThree months endedMarch 31,(Millions)20232022Foreign currency denominated debt$(43)$59 Foreign currency forward contracts(2)2 Total$(45)$61 Derivatives Not Designated as Hedging Instruments:Derivatives not designated as hedging instruments include de-designated foreign currency forward and option contracts that formerly were designated in cash flow hedgingrelationships(as referenced in the Cash Flow Hedges section above).In addition,3M enters into foreign currency contracts that are not designated in hedging relationships tooffset,in part,the impacts of changes in value of various non-functional currency denominated items including certain intercompany financing balances.These derivativeinstruments are not designated in hedging relationships;therefore,fair value gains and losses on these contracts are recorded in earnings.The Company does not hold or issuederivative financial instruments for trading purposes.Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging InstrumentsThe location in the consolidated statement of income and pre-tax amounts recognized in income related to derivative instruments designated in cash flow or fair value hedgingrelationships and for derivatives not designated as hedging instruments are as follows:Location and Amount of Gain(Loss)Recognized in IncomeThree months ended March 31,Cost of salesOther expense(income),net(Millions)2023202220232022Information regarding cash flow and fair value hedging relationships:Total amounts of income and expense line items presented in the consolidated statement of income in which theeffects of derivatives are recorded$4,613$4,826$52$38 Gain or(loss)on cash flow hedging relationships:Foreign currency forward/option contracts:Amount of gain or(loss)reclassified from accumulated other comprehensive income into income43 9 Interest rate contracts:Amount of gain or(loss)reclassified from accumulated other comprehensive income into income (2)(2)Gain or(loss)on fair value hedging relationships:Interest rate contracts:Hedged items (12)48 Derivatives designated as hedging instruments 12(48)Information regarding derivatives not designated as hedging instruments:Gain or(loss)on derivatives not designated as instruments:Foreign currency forward/option contracts8(20)(26)25 20Table of ContentsLocation,Fair Value,and Gross Notional Amounts of Derivative InstrumentsThe following tables summarize the fair value of 3Ms derivative instruments,excluding nonderivative instruments used as hedging instruments,and their location in theconsolidated balance sheet.Notional amounts below are presented at period end foreign exchange rates,except for certain interest rate swaps,which are presented using theinception dates foreign exchange rate.Gross Notional AmountAssetsLiabilities(Millions)LocationFair Value AmountLocationFair Value AmountMarch 31,2023December 31,2022March 31,2023December 31,2022March 31,2023December 31,2022Derivatives designated as hedginginstrumentsForeign currency forward/option contracts$2,525$2,368 Other current assets$72$89 Other currentliabilities$31$27 Foreign currency forward/option contracts763 835 Other assets43 55 Other liabilities9 9 Interest rate contracts800 800 Other assets Other liabilities90 102 Total derivatives designated ashedging instruments115 144 130 138 Derivatives not designated as hedginginstrumentsForeign currency forward/option contracts3,563 2,816 Other current assets20 73 Other currentliabilities20 4 Total derivatives not designated ashedging instruments20 73 20 4 Total derivative instruments$135$217$150$142 Credit Risk and Offsetting of Assets and Liabilities of Derivative InstrumentsThe Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps,currency swaps,and forward and option contracts.However,theCompanys risk is limited to the fair value of the instruments.The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits,and by selecting major international banks and financial institutions as counterparties.3M enters into master netting arrangements with counterparties when possible to mitigatecredit risk in derivative transactions.A master netting arrangement may allow each counterparty to net settle amounts owed between a 3M entity and the counterparty as a resultof multiple,separate derivative transactions.The Company does not anticipate nonperformance by any of these counterparties.3M has elected to present the fair value of derivative assets and liabilities within the Companys consolidated balance sheet on a gross basis even when derivative transactionsare subject to master netting arrangements and may otherwise qualify for net presentation.However,the following tables provide information as if the Company had elected tooffset the asset and liability balances of derivative instruments,netted in accordance with various criteria in the event of default or termination as stipulated by the terms ofnetting arrangements with each of the counterparties.For each counterparty,if netted,the Company would offset the asset and liability balances of all derivatives at the end ofthe reporting period based on the 3M entity that is a party to the transactions.Derivatives not subject to master netting agreements are not eligible for net presentation.21Table of ContentsOffsetting of Financial Assets under Master Netting Agreements with Derivative Counterparties Gross Amount of Derivative AssetsPresented in the Consolidated BalanceSheetGross Amounts not Offset in the Consolidated Balance Sheet that are Subject to MasterNetting Agreements Gross Amount of Eligible OffsettingRecognized Derivative LiabilitiesCash Collateral ReceivedNet Amount of Derivative Assets(Millions)March 31,2023December 31,2022March 31,2023December 31,2022March 31,2023December 31,2022March 31,2023December 31,2022Derivatives subject to master nettingagreements$135$217$49$40$86$177 Derivatives not subject to master nettingagreements Total$135$217$86$177 Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties Gross Amount of Derivative LiabilitiesPresented in the Consolidated BalanceSheetGross Amounts not Offset in the Consolidated Balance Sheet that are Subject to MasterNetting Agreements Gross Amount of Eligible OffsettingRecognized Derivative AssetsCash Collateral ReceivedNet Amount of Derivative Liabilities(Millions)March 31,2023December 31,2022March 31,2023December 31,2022March 31,2023December 31,2022March 31,2023December 31,2022Derivatives subject to master nettingagreements$150$142$49$40$101$102 Derivatives not subject to master nettingagreements Total$150$142$101$102 Currency Effects3M estimates that year-on-year foreign currency transaction effects,including hedging impacts,increased pre-tax income by approximately$36 million and$17 million for thethree months ended March 31,2023 and 2022,respectively.These estimates include transaction gains and losses,including derivative instruments designed to reduce foreigncurrency exchange rate risks.22Table of ContentsNOTE 13.Fair Value Measurements3M follows ASC 820,Fair Value Measurements and Disclosures,with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis.In addition to the information above,refer to Note 15 to the Consolidated Financial Statements in 3Ms 2022 Annual Report on Form 10-K for a qualitative discussion of theassets and liabilities that are measured at fair value on a recurring and nonrecurring basis,a description of the valuation methodologies used by 3M,and categorization withinthe valuation framework of ASC 820.The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis.Fair Value atFair Value Measurements Using Inputs Considered asLevel 1Level 2Level 3Description(Millions)March 31,2023December 31,2022March 31,2023December 31,2022March 31,2023December 31,2022March 31,2023December 31,2022Assets:Available-for-sale:Marketable securities:Commercial paper$85$213$85$213$Certificates of deposit/time deposits56 21 56 21 U.S.treasury securities U.S.municipal securities27 27 27 27 Derivative instruments assets:Foreign currency forward/option contracts135 217 135 217 Liabilities:Derivative instruments liabilities:Foreign currency forward/option contracts60 40 60 40 Interest rate contracts90 102 90 102 The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis in the table above that used significantunobservable inputs(level 3).Marketable securities certain U.S.municipal securities onlyThree months endedMarch 31,(Millions)20232022Beginning balance$27$30 Total gains or losses:Included in earnings Included in other comprehensive income Purchases and issuances Sales and settlements Transfers in and/or out of level 3 Ending balance$27$30 Change in unrealized gains or losses for the period included in earnings for securities held at the end of thereporting period In addition,the plan assets of 3Ms pension and postretirement benefit plans are measured at fair value on a recurring basis(at least annually).Refer to Note 13 to theConsolidated Financial Statements in 3Ms 2022 Annual Report on Form 10-K.23Table of ContentsAssets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis:Disclosures are required for certain assets and liabilities that are measured at fair value,but are recognized and disclosed at fair value on a nonrecurring basis in periodssubsequent to initial recognition.For 3M,such measurements of fair value relate primarily to indefinite-lived and long-lived asset impairments,goodwill impairments,andadjustment in carrying value of equity securities for which the measurement alternative of cost less impairment plus or minus observable price changes is used.There were nomaterial impairments of assets or adjustments to equity securities using the measurement alternative for the first three months of 2023 and 2022.As discussed in Note 15 to theConsolidated Financial Statements in 3Ms 2022 Annual Report on Form 10-K,in the third quarter of 2022,management committed to a plan to exit and dispose of net assets inRussia through an intended sale of related subsidiaries and,as a result,records this held-for-sale disposal group at the lower of its fair value less cost to sell or carrying amount.In determining the carrying amount,the balance of cumulative translation adjustment within accumulated other comprehensive loss that will be eliminated upon sale is included.As of March 31,2023 the amounts of major assets and liabilities of this held-for-sale disposal group primarily included approximately$50 million within other currentliabilities that largely represented a reserve against the balance of cumulative translation adjustment.Fair Value of Financial Instruments:The Companys financial instruments include cash and cash equivalents,marketable securities,accounts receivable,certain investments,accounts payable,borrowings,andderivative contracts.The fair values of cash equivalents,accounts receivable,accounts payable,and short-term borrowings and current portion of long-term debt approximatedcarrying values because of the short-term nature of these instruments.Available-for-sale marketable securities,in addition to certain derivative instruments,are recorded at fairvalues as indicated in the preceding disclosures.To estimate fair values(classified as level 2)for its long-term debt,the Company utilized third-party quotes,which are derivedall or in part from model prices,external sources,market prices,or the third-partys internal records.Information with respect to the carrying amounts and estimated fair valuesof these financial instruments follow:March 31,2023December 31,2022(Millions)Carrying ValueFair ValueCarrying ValueFair ValueLong-term debt,excluding current portion$12,948$11,635$14,001$12,484 The fair values reflected in the sections above consider the terms of the related debt absent the impacts of derivative/hedging activity.The carrying amount of long-term debtreferenced above is impacted by certain fixed-to-floating interest rate swaps that are designated as fair value hedges and by the designation of certain fixed rate Eurobondsecurities issued by the Company as hedging instruments of the Companys net investment in its European subsidiaries.NOTE 14.Commitments and ContingenciesLegal Proceedings:The Company and some of its subsidiaries are involved in numerous claims and lawsuits,principally in the United States,and regulatory proceedings worldwide.These claims,lawsuits and proceedings relate to matters including,but not limited to,products liability(involving products that the Company now or formerly manufactured and sold),intellectual property,commercial,antitrust,federal healthcare program related laws and regulations,such as the False Claims Act and anti-kickback laws,securities,andenvironmental laws in the United States and other jurisdictions.Unless otherwise stated,the Company is vigorously defending all such litigation and proceedings.From time totime,the Company also receives subpoenas,investigative demands or requests for information from various government agencies in the United States and foreign countries.The Company generally responds in a cooperative,thorough and timely manner.These responses sometimes require time and effort and can result in considerable costs beingincurred by the Company.Such requests can also lead to the assertion of claims or the commencement of administrative,civil,or criminal legal proceedings against theCompany and others,as well as to settlements.The outcomes of legal proceedings and regulatory matters are often difficult to predict.Any determination that the Companysoperations or activities are not,or were not,in compliance with applicable laws or regulations could result in the imposition of fines,civil or criminal penalties,and equitableremedies,including disgorgement,suspension or debarment or injunctive relief.24Table of ContentsProcess for Disclosure and Recording of Liabilities Related to Legal ProceedingsMany lawsuits and claims involve highly complex issues relating to causation,scientific evidence,and alleged actual damages,all of which are otherwise subject to substantialuncertainties.Assessments of lawsuits and claims can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.Thecategories of legal proceedings in which the Company is involved may include multiple lawsuits and claims,may be spread across multiple jurisdictions and courts which mayhandle the lawsuits and claims differently,may involve numerous and different types of plaintiffs,raising claims and legal theories based on specific allegations that may notapply to other matters,and may seek substantial compensatory and,in some cases,punitive,damages.These and other factors contribute to the complexity of these lawsuits andclaims and make it difficult for the Company to predict outcomes and make reasonable estimates of any resulting losses.The Companys ability to predict outcomes and makereasonable estimates of potential losses is further influenced by the fact that a resolution of one or more matters within a category of legal proceedings may impact theresolution of other matters in that category in terms of timing,amount of liability,or both.When making determinations about recording liabilities related to legal proceedings,the Company complies with the requirements of ASC 450,Contingencies,and relatedguidance,and records liabilities in those instances where it can reasonably estimate the amount of the loss and when the loss is probable.Where the reasonable estimate of theprobable loss is a range,the Company records as an accrual in its financial statements the most likely estimate of the loss,or the low end of the range if there is no one bestestimate.The Company either discloses the amount of a possible loss or range of loss in excess of established accruals if estimable,or states that such an estimate cannot bemade.The Company discloses significant legal proceedings even where liability is not probable or the amount of the liability is not estimable,or both,if the Company believesthere is at least a reasonable possibility that a loss may be incurred.Based on experience and developments,the Company reexamines its estimates of probable liabilities andassociated expenses and receivables each period,and whether a loss previously determined to not be reasonably estimable and/or not probable is now able to be reasonablyestimated or has become probable.Where appropriate,the Company makes additions to or adjustments of its reasonably estimated losses and/or accruals.As a result,thecurrent accruals and/or estimates of loss and the estimates of the potential impact on the Companys consolidated financial position,results of operations and cash flows for thelegal proceedings and claims pending against the Company will likely change over time.Because litigation is subject to inherent uncertainties,and unfavorable rulings or developments could occur,the Company may ultimately incur charges substantially in excessof presently recorded liabilities,including with respect to matters for which no accruals are currently recorded because losses are not currently probable and reasonablyestimable.Many of the matters described herein are at varying stages,seek an indeterminate amount of damages or seek damages in amounts that the Company believes are notindicative of the ultimate losses that may be incurred.It is not uncommon for claims to be resolved over many years.As a matter progresses,the Company may receiveinformation,through plaintiff demands,through discovery,in the form of reports of purported experts,or in the context of settlement or mediation discussions that purport toquantify an amount of alleged damages,but with which the Company may not agree.Such information may or may not lead the Company to determine that it is able to make areasonable estimate as to a probable loss or range of loss in connection with a matter.However,even when a loss or range of loss is not probable and reasonably estimable,developments in,or the ultimate resolution of,a matter could be material to the Company and could have a material adverse effect on the Company,its consolidated financialposition,results of operations and cash flows.In addition,future adverse rulings or developments,or settlements in,one or more matters could result in future changes todeterminations of probable and reasonably estimable losses in other matters.Process for Disclosure and Recording of Insurance Receivables Related to Legal ProceedingsThe Company estimates insurance receivables based on an analysis of the terms of its numerous policies,including their exclusions,pertinent case law interpreting comparablepolicies,its experience with similar claims,and assessment of the nature of the claim and remaining coverage,and records an amount it has concluded is recognizable andexpects to receive in light of the loss recovery and/or gain contingency models under ASC 450,ASC 610-30,and related guidance.For those insured legal proceedings wherethe Company has recorded an accrued liability in its financial statements,the Company also records receivables for the amount of insurance that it concludes as recognizablefrom the Companys insurance program.For those insured matters where the Company has not recorded an accrued liability because the liability is not probable or the amountof the liability is not estimable,or both,but where the Company has incurred an expense in defending itself,the Company records receivables for the amount of insurance that itconcludes as recognizable for the expense incurred.25Table of ContentsThe following sections first describe the significant legal proceedings in which the Company is involved,and then describe the liabilities and associated insurance receivablesthe Company has accrued relating to its significant legal proceedings.Respirator Mask/Asbestos LitigationAs of March 31,2023,the Company is a named defendant,with multiple co-defendants,in numerous lawsuits in various courts that purport to represent approximately 4,152individual claimants,compared to approximately 4,028 individual claimants with actions pending December 31,2022.The vast majority of the lawsuits and claims resolved by and currently pending against the Company allege use of some of the Companys mask and respirator products andseek damages from the Company and other defendants for alleged personal injury from workplace exposures to asbestos,silica,coal mine dust or other occupational dustsfound in products manufactured by other defendants or generally in the workplace.A minority of the lawsuits and claims resolved by and currently pending against theCompany generally allege personal injury from occupational exposure to asbestos from products previously manufactured by the Company,which are often unspecified,as wellas products manufactured by other defendants,or occasionally at Company premises.The Companys current volume of new and pending matters is substantially lower than it experienced at the peak of filings in 2003.The Company expects that filing of claimsin the future will continue to be at much lower levels than in the past.Accordingly,the number of claims alleging more serious injuries,including mesothelioma,othermalignancies,and black lung disease,will represent a greater percentage of total claims than in the past.Over the past twenty plus years,the Company has prevailed in fifteen ofthe sixteen cases tried to a jury(including the lawsuits in 2018 described below).In 2018,3M received a jury verdict in its favor in two lawsuits one in California state court inFebruary and the other in Massachusetts state court in December both involving allegations that 3M respirators were defective and failed to protect the plaintiffs againstasbestos fibers.In April 2018,a jury in state court in Kentucky found 3Ms 8710 respirators failed to protect two coal miners from coal mine dust and awarded compensatorydamages of approximately$2 million and punitive damages totaling$63 million.In August 2018,the trial court entered judgment and the Company appealed.In 2019,theCompany settled a substantial majority of the then-pending coal mine dust lawsuits in Kentucky and West Virginia for$340 million,including the jury verdict in April 2018 inthe Kentucky case mentioned above,and the appeal was dismissed.In October 2020,3M defended a respirator case before a jury in King County,Washington,involving aformer shipyard worker who alleged 3Ms 8710 respirator was defective and that 3M acted negligently in failing to protect him against asbestos fibers.The jury delivered acomplete defense verdict in favor of 3M,concluding that the 8710 respirator was not defective in design or warnings and any conduct by 3M was not a cause of plaintiffsmesothelioma.The plaintiff appealed the verdict.In May 2022,the First Division intermediate appellate court in Washington affirmed in part and reversed in part 3Ms trialvictory,concluding that the trial court misapplied Washington law in instructing the jury about factual causation.The Washington Supreme Court declined to review the matter.The Company has demonstrated in these past trial proceedings that its respiratory protection products are effective as claimed when used in the intended manner and in theintended circumstances.Consequently,the Company believes that claimants are unable to establish that their medical conditions,even if significant,are attributable to theCompanys respiratory protection products.Nonetheless,the Companys litigation experience indicates that claims of persons alleging more serious injuries,includingmesothelioma,other malignancies,and black lung disease,are costlier to resolve than the claims of unimpaired persons,and it therefore believes the average cost of resolvingpending and future claims on a per-claim basis will continue to be higher than it experienced in prior periods when the vast majority of claims were asserted by medicallyunimpaired claimants.Since the second half of 2020,the Company has experienced an increase in the number of cases filed that allege injuries from exposures to coal minedust;that increase represents the substantial majority of the growth in case numbers referred to above.The rate of coal mine dust-related case filings decelerated in 2022 and hascontinued to decelerate in 2023.3M moved two cases involving over 400 plaintiffs to federal court based on,among others,the Class Action Fairness Act.The federal districtcourt remanded the cases to state court.In March 2023,the Sixth Circuit Court of Appeals granted 3Ms petition to review the remand order,and in April 2023 reversed thedistrict courts remand order;accordingly,those cases will remain in federal court.26Table of ContentsAs previously reported,the State of West Virginia,through its Attorney General,filed a complaint in 2003 against the Company and two other manufacturers of respiratoryprotection products in the Circuit Court of Lincoln County,West Virginia,and amended its complaint in 2005.The amended complaint seeks substantial,but unspecified,compensatory damages primarily for reimbursement of the costs allegedly incurred by the State for workers compensation and healthcare benefits provided to all workers withoccupational pneumoconiosis and unspecified punitive damages.In October 2019,the court granted the States motion to sever its unfair trade practices claim,which seeks civilpenalties of up to$5,000 per violation under the states Consumer Credit Protection Act relating to statements that the State contends were misleading about 3Ms respirators.Inthe first quarter of 2023,a bench trial for the unfair trade practices claims was continued indefinitely.An expert witness retained by the State has recently estimated that 3M soldover five million respirators into the state during the relevant time period,and the State alleges that each respirator sold constitutes a separate violation under the Act.3Mdisputes the experts estimates and the States position regarding what constitutes a separate violation of the Act.3M has asserted various additional defenses,including that theCompanys marketing did not violate the Act at any time,and that the States claims are barred under the applicable statute of limitations.No liability has been recorded for anyportion of this matter because the Company believes that liability is not probable and reasonably estimable at this time.In addition,the Company is not able to estimate apossible loss or range of loss given the lack of any meaningful discovery responses by the State of West Virginia as to key issues,and the assertions of claims against two othermanufacturers where a defendants share of liability may turn on the law of joint and several liability and by the amount of fault,if any,a factfinder may allocate to eachdefendant if the case were ultimately tried.Respirator Mask/Asbestos Liabilities and Insurance ReceivablesThe Company regularly conducts a comprehensive legal review of its respirator mask/asbestos liabilities.The Company reviews recent and historical claims data,includingwithout limitation,(i)the number of pending claims filed against the Company,(ii)the nature and mix of those claims(i.e.,the proportion of claims asserting usage of theCompanys mask or respirator products and alleging exposure to each of asbestos,silica,coal or other occupational dusts,and claims pleading use of asbestos-containingproducts allegedly manufactured by the Company),(iii)the costs to defend and resolve pending claims,and(iv)trends in filing rates and in costs to defend and resolve claims,(collectively,the“Claims Data”).As part of its comprehensive legal review,the Company regularly provides the Claims Data to a third party with expertise in determining theimpact of Claims Data on future filing trends and costs.The third party assists the Company in estimating the costs to defend and resolve pending and future claims.TheCompany uses this analysis to develop its estimate of probable liability.Developments may occur that could affect the Companys estimate of its liabilities.These developments include,but are not limited to,significant changes in(i)the keyassumptions underlying the Companys accrual,including the number of future claims,the nature and mix of those claims,and the average cost of defending and resolvingclaims and in maintaining trial readiness(ii)trial and appellate outcomes,(iii)the law and procedure applicable to these claims,and(iv)the financial viability of other co-defendants and insurers.As a result of its review of its respirator mask/asbestos liabilities,of pending and expected lawsuits and of the cost of resolving claims of persons who claim more seriousinjuries,including mesothelioma,other malignancies,and black lung disease,the Company decreased its accruals in the first three months of 2023 for respirator mask/asbestosliabilities by$40 million.In the first three months of 2023,the Company made payments for legal defense costs and settlements of$11 million related to the respiratormask/asbestos litigation.As of March 31,2023,the Company had an accrual for respirator mask/asbestos liabilities(excluding Aearo accruals)of$553 million.This accrualrepresents the Companys estimate of probable loss and reflects an estimation period for future claims that may be filed against the Company approaching the year 2050.TheCompany cannot estimate the amount or upper end of the range of amounts by which the liability may exceed the accrual the Company has established because of(i)theinherent difficulty in projecting the number of claims that have not yet been asserted or the time period in which future claims may be asserted,(ii)the fact that complaintsnearly always assert claims against multiple defendants where the damages alleged are typically not attributed to individual defendants so that a defendants share of liabilitymay turn on the law of joint and several liability,which can vary by state,(iii)the multiple factors described above that the Company considers in estimating its liabilities,and(iv)the several possible developments described above that may occur that could affect the Companys estimate of liabilities.As of March 31,2023,the Companys receivable for insurance recoveries related to the respirator mask/asbestos litigation was$4 million.In addition,the Company continuesto seek coverage under the policies of certain insolvent and other insurers.Once those claims for coverage are resolved,the Company will have collected substantially all of itsremaining insurance coverage for respirator mask/asbestos claims.27Table of ContentsRespirator Mask/Asbestos Litigation Aearo TechnologiesOn April 1,2008,a subsidiary of the Company acquired the stock of Aearo Holding Corp.,the parent of Aearo Technologies(“Aearo”).Aearo manufactured and sold variousproducts,including personal protection equipment,such as eye,ear,head,face,fall and certain respiratory protection products.Aearo and/or other companies that previouslyowned and operated Aearos respirator business(American Optical Corporation,Warner-Lambert LLC,AO Corp.and Cabot Corporation(“Cabot”)are named defendants,with multiple co-defendants,including the Company,in numerous lawsuits in various courts in which plaintiffs allege use of mask and respirator products and seek damagesfrom Aearo and other defendants for alleged personal injury from workplace exposures to asbestos,silica-related,coal mine dust,or other occupational dusts found in productsmanufactured by other defendants or generally in the workplace.In July 2022,Aearo Technologies and certain of its related entities(collectively,the Aearo Entities)voluntarily initiated chapter 11 proceedings under the U.S.Bankruptcy Code seeking court supervision to establish a trust,funded by the Company,to efficiently and equitablysatisfy all claims determined to be entitled to compensation(including the Aearo respirator mask/asbestos matters).This represents a change in strategy for managing theCombat Arms Version 2 earplugs and Aearo respirator mask/asbestos alleged litigation liabilities.As a result,3Ms accrual relative to the commitments associated with thattrust includes Aearo respirator mask/asbestos matters.The U.S.Bankruptcy Court has stayed the Aearo respirator mask/asbestos litigation matters as the chapter 11 proceedingsmove forward.For additional information,see the discussion within the section Product Liability Litigation with respect to Aearo Technologies Dual-Ended Combat ArmsEarplugs.Preceding respirator mask/asbestos Aearo Technologies matters/information:Prior to the voluntary chapter 11 proceedings and as previously disclosed,as of December 31,2021,the Company,through its Aearo subsidiary,had accruals of$46 millionfor product liabilities and defense costs related to current and future Aearo-related asbestos,silica-related and coal mine dust claims.Responsibility for legal costs,as well asfor settlements and judgments,is shared in an informal arrangement among Aearo,Cabot,American Optical Corporation and a subsidiary of Warner Lambert and theirrespective insurers(the“Payor Group”).Liability is allocated among the parties based on the number of years each company sold respiratory products under the“AO Safety”brand and/or owned the AO Safety Division of American Optical Corporation and the alleged years of exposure of the individual plaintiff.Aearos share of the contingentliability is further limited by an agreement entered into between Aearo and Cabot on July 11,1995.This agreement provides that,so long as Aearo pays to Cabot a quarterlyfee of$100,000,Cabot will retain responsibility and liability for,and indemnify Aearo against,any product liability claims involving exposure to asbestos,silica,or silicaproducts for respirators sold prior to July 11,1995.Because of the difficulty in determining how long a particular respirator remains in the stream of commerce after beingsold,Aearo and Cabot have applied the agreement to claims arising out of the alleged use of respirators involving exposure to asbestos,silica or silica products prior toJanuary 1,1997.With these arrangements in place,Aearos potential liability is limited to exposures alleged to have arisen from the use of respirators involving exposure toasbestos,silica,or silica products on or after January 1,1997.To date,Aearo has elected to pay the quarterly fee.Aearo could potentially be exposed to additional claims forsome part of the pre-July 11,1995 period covered by its agreement with Cabot if Aearo elects to discontinue its participation in this arrangement,or if Cabot is no longer ableto meet its obligations in these matters.Developments may occur that could affect the estimate of Aearos liabilities.These developments include,but are not limited to:(i)significant changes in the number offuture claims,(ii)significant changes in the average cost of resolving claims,(iii)significant changes in the legal costs of defending these claims,(iv)significant changes inthe mix and nature of claims received,(v)trial and appellate outcomes,(vi)significant changes in the law and procedure applicable to these claims,(vii)significant changesin the liability allocation among the co-defendants,(viii)the financial viability of members of the Payor Group including exhaustion of available insurance coverage limits,and/or(ix)a determination that the interpretation of the contractual obligations on which Aearo has estimated its share of liability is inaccurate.The Company cannotdetermine the impact of these potential developments on its current estimate of Aearos share of liability for these existing and future claims.If any of the developmentsdescribed above were to occur,the actual amount of these liabilities for existing and future claims could be significantly larger than the amount accrued.Because of theinherent difficulty in projecting the number of claims that have not yet been asserted,the complexity of allocating responsibility for future claims among the Payor Group,and the several possible developments that may occur that could affect the estimate of Aearos liabilities,the Company cannot estimate the amount or range of amounts bywhich Aearos liability may exceed the accrual the Company has established.28Table of ContentsEnvironmental Matters and LitigationThe Companys operations are subject to environmental laws and regulations including those pertaining to air emissions,wastewater discharges,toxic or hazardous substances,and the handling and disposal of solid and hazardous wastes enforceable by national,state,and local authorities around the world,many for which private parties in the UnitedStates and abroad have rights of action.These laws and regulations can form the basis of,under certain circumstances,claims for the investigation and remediation ofcontamination,for capital investment in pollution control equipment,for restoration of and/or compensation for damages to natural resources,and for personal injury andproperty damage claims.The Company has incurred,and will continue to incur,costs and capital expenditures in complying with these laws and regulations,defending personalinjury and property damage claims,and modifying its business operations in light of its environmental responsibilities.In its effort to satisfy its environmental responsibilitiesand comply with environmental laws and regulations,the Company has established,and periodically updates,policies relating to environmental standards of performance for itsoperations worldwide.Under certain environmental laws,including the United States Comprehensive Environmental Response,Compensation and Liability Act of 1980(CERCLA)and similar statelaws,the Company may be jointly and severally liable,sometimes with other potentially responsible parties,for the costs of remediation of environmental contamination atcurrent or former facilities and at off-site locations where hazardous substances have been released or disposed of.The Company has identified numerous locations,many ofwhich are in the United States,at which it may have some liability for remediation of contamination.Please refer to the section entitled“Environmental Liabilities andInsurance Receivables”that follows for information on the amount of the accrual for such liabilities.Environmental MattersAs previously reported,the Company has been voluntarily cooperating with ongoing reviews by local,state,federal(primarily the U.S.Environmental Protection Agency(EPA),and international agencies of possible environmental and health effects of various perfluorinated compounds,including perfluorooctanoate(PFOA),perfluorooctanesulfonate(PFOS),perfluorohexane sulfonate(PFHxS),perfluorobutane sulfonate(PFBS),hexafluoropropylene oxide dimer acid(HFPO-DA)and other per-andpolyfluoroalkyl substances(collectively PFAS).As a result of a phase-out decision in May 2000,the Company no longer manufactures certain PFAS compounds including PFOA,PFOS,PFHxS,and their pre-cursorcompounds.The Company ceased manufacturing and using the vast majority of these compounds within approximately two years of the phase-out announcement and ceased allmanufacturing and the last significant use of this chemistry by the end of 2008.The Company continues to manufacture a variety of shorter chain length PFAS compounds,including,but not limited to,pre-cursor compounds to perfluorobutane sulfonate(PFBS).These compounds are used as input materials to a variety of products,includingengineered fluorinated fluids,fluoropolymers and fluorelastomers,as well as surfactants,additives,and coatings.Through its ongoing life cycle management and its rawmaterial composition identification processes associated with the Companys policies covering the use of all persistent and bio-accumulative materials,the Company continuesto review,control or eliminate the presence of certain PFAS in purchased materials,as intended substances in products,or as byproducts in some of 3Ms current manufacturingprocesses,products,and waste streams.3M announced in December 2022 it will take two actions:exiting all PFAS manufacturing by the end of 2025;and working to discontinue the use of PFAS across its productportfolio by the end of 2025.3Ms decision is based on careful consideration and a thorough evaluation of the evolving external landscape,including multiple factors such asaccelerating regulatory trends focused on reducing or eliminating the presence of PFAS in the environment and changing stakeholder expectations.PFAS Regulatory and Legislative ActivityRegulatory and legislative activities concerning PFAS are accelerating in the United States,Europe and elsewhere,and before certain international bodies.These activitiesinclude gathering of exposure and use information,risk assessment activities,consideration of regulatory approaches,and increasingly strict restrictions on various uses ofPFAS in products and on PFAS in manufacturing emissions,in some cases moving towards non-detectable limits for certain PFAS compounds.Regulations of PFAS inemissions and in environmental media such as soil and water(including drinking water)are increasingly being set at levels that continue to decrease.Global regulations alsoappear to be increasingly focused on a broader group of PFAS,and may include those PFAS compounds used in current products.If such activity continues,including ifregulations become final and enforceable,3M may incur material costs to comply with new regulatory requirements or as a result of litigation or additional enforcement actions.Such regulatory changes may also have an impact on 3Ms reputation and may also increase its costs and potential litigation exposure to the extent legal defenses rely onregulatory thresholds,or changes in regulation influence public perception.Given divergent and rapidly evolving regulatory drinking water and other standards,there iscurrently significant uncertainty about the potential costs to industry and communities associated with remediation and control technologies that may be required.29Table of ContentsEuropeIn the European Union,where 3M has PFAS manufacturing facilities in countries such as Germany and Belgium,recent regulatory activities have included both preliminaryand on-going work on various restrictions of PFAS or certain PFAS compounds under the EUs Registration,Evaluation,Authorization and Restriction of Chemicals(REACH)and the EUs Persistent Organic Pollutants(POPs)Regulation.PFOA,PFOS and PFHxS(and their related compounds)have also been listed in the Stockholm Convention,which has been ratified by more than 180 countries and aims for global elimination of certain listed substances(with narrow exceptions).In February 2023,the European Chemicals Agency(ECHA)published the proposal it received in January 2023 from the national authorities of Germany,Denmark,theNetherlands,Norway and Sweden to restrict PFAS under the European Unions chemicals regulation.The proposal aims to restrict the manufacture,placing on the market anduse of PFAS under REACH.In March 2023,the six month consultation phase on the PFAS Restriction Proposal started.If the proposed rule becomes enforceable prior to 3Msannounced exit from PFAS manufacturing by the end of 2025,depending on the scope and obligations contained in any final rule,PFAS manufacturers including 3M Belgiumcould incur additional costs and potential exposures,including future compliance costs,possible litigation and/or enforcement actions.Effective January 2023,the EU Food Contaminants Regulation targeting four PFAS(PFOS,PFOA,PFNA,PFHxS)in foodstuff(eggs and animal derived meat)prohibits thesale in all member states of foods containing levels of these chemicals exceeding the regulatory thresholds.As member states implement the regulation,Dyneon,a 3Msubsidiary that operates the Gendorf facility in Germany,in coordination with local authorities and farmers,has proposed a pilot program of food sampling to determine if anyremedial action is necessary.The EU regulates PFAS in drinking water via a Drinking Water Directive,which includes a limit of 0.1 micrograms per liter(g/l)(or 0.1 parts for billion(ppb)for a sum of20 PFAS in drinking water.January 2023 was the deadline for Member States to implement the Directive in their countries.Dyneon has a recycling process for a critical emulsifier from which small amounts of PFOA are present after recycling,as an unintended and unavoidable byproduct of certainearlier process steps.With respect to the applicability of the amendment of the EU POPs Regulation with PFOA applicable since 2021,Dyneon proactively consulted with therelevant German competent authority regarding process improvements underway.The implementation of process improvements and analytical work is ongoing.3M Belgium,a subsidiary of the Company,has been working with the Public Flemish Waste Agency(OVAM)for several years to investigate and remediate historical PFAScontamination at and near the 3M Belgium facility in Zwijndrecht,Antwerp,Belgium.In connection with a ring road construction project(the Oosterweel Project)in Antwerpthat involved extensive soil work,an investigative committee with judicial investigatory powers was formed in June 2021 by the Flemish Parliament to investigate PFAS foundin the soil and groundwater near the Zwijndrecht facility.3M Belgium testified at Flemish parliamentary committee hearings in June and September 2021 on PFAS-relatedmatters.The Flemish Parliament,the Minister of the Environment,and regulatory authorities initiated investigations and demands for information related to the release of PFASfrom the Zwijndrecht facility.The Company has cooperated with the authorities in the investigations and information requests and is working with the authorities on an ongoingbasis,as they continue to maintain oversight of 3M Belgiums operations at the Zwijndrecht facility,as further discussed below.Separately,as previously disclosed,theCompany is aware that certain residents of Zwijndrecht and non-governmental organizations filed a criminal complaint with an Antwerp investigatory judge against 3MBelgium,alleging it had unlawfully abandoned waste in violation of its environmental care obligations.Certain additional parties reportedly joined the complaint.3M Belgiumhas not been served with any such complaint.In February 2023,the federal judicial police requested additional documents following an earlier request for documents that 3MBelgium had provided;3M Belgium has complied with the request for additional documents.Safety measures wastewater discharge.In August 2021,the Flemish Government served 3M Belgium with a safety measure requiring the capture of certain processwastewaters to prevent their entry into the site wastewater treatment plant.While 3M Belgium appealed the Safety Measure due to the belief it lacked adequate legal and factualfoundation,3M Belgium promptly implemented the required actions.30Table of ContentsIn October 2021,the Province of Antwerp unilaterally adopted lower discharge limits for the nine PFAS compounds specifically identified in the water discharge permit for theZwijndrecht facility and added a special condition that essentially prohibits discharge of any PFAS chemistry without a specific limit in the permit.3M Belgium received a newtwo-year permit in May 2022 which contains strict new limits for 24 different PFAS,effective July 1,2022.3M Belgium believes that the recently installed additional controlsystems will enable it to meet these limits.Subsequently,the environmental enforcement agency informed 3M Belgium that the agency believes that 3M Belgium must applyfor discharge limits for certain additional“short-chain”PFAS pursuant to the special condition.Although disagreeing with the agencys position,3M Belgium developed anapplication to amend the permit to add the additional PFAS.3M Belgium has insufficient information to predict the limits that will be set forth for additional short-chain PFASand is therefore unable to assess whether the current or future wastewater treatment system,as currently conceived,will meet future limits imposed.In December 2022,3MBelgium received an official infraction report from the Flemish Environmental Inspectorate regarding the discharge of certain short chain PFAS compounds in wastewater fromthe Zwijndrecht facility.3M Belgium previously identified these compounds and shared the results with the Inspectorate.The compounds at issue do not have specific dischargelimits in the applicable wastewater discharge permit,and the infraction report references a special condition in the permit that prohibits detectable discharge of PFAScompounds that do not have a specific discharge limit in the permit.3M Belgium disagrees with the Inspectorates interpretation of the special condition and the time periodpermitted for compliance with it.Moreover,3M Belgium instituted a capturing process to prevent wastewaters containing short chain PFAS identified in the infraction reportfrom entering the treatment system or its discharge.3M Belgium notified the Inspectorate that complying with the special condition means ceasing the legally requiredextraction and treatment of contaminated groundwater.The Inspectorate acknowledged this fact but insisted that 3M Belgium continue to extract and treat groundwater.Groundwater treatment continues and 3M Belgium has applied for a modification of the water discharge permit to add parameters for the short chain PFAS.3M Belgium willcontinue its efforts to comply with the special condition and to minimize discharge of all PFAS,including the PFAS identified in the infraction report,but an inability to meetdischarge limits for short chain PFAS could have a significant adverse impact on 3M Belgiums normal operations and the Companys businesses that receive products and othermaterials from the facility,some of which may not be available in similar quantities from other 3M facilities,which could in turn impact these businesses ability to fulfillsupply obligations to their customers.Safety measure emissions.As previously disclosed,in October 2021,the Flemish environmental enforcement agency issued a new safety measure that prohibits all emissionsof all forms of PFAS from the facility unless and until specifically approved on a process-by-process basis.3M Belgium thereupon commenced an appeal process to the Councilof States,seeking,among other things,urgent suspension of the safety measure during the pendency of the appeal process.At the same time,3M Belgium complied with thesafety measure by idling the affected production at the facility.The Council of States declined to grant urgent suspension of the safety measure.3M Belgium established aregular cadence of meetings with the relevant authorities to review restart of specific PFAS-related production processes.The agency recently clarified that the safety measureapplies to release of PFAS into water,and as such,reviews have been expanded as requested.In October 2022,3M Belgium received a report from the Flemish inspectorate regarding certain health and safety issues noted during inspections of the Zwijndrecht facility inMarch 2022,alleging certain related deficiencies,some dating back to 2010.In December 2022,3M Belgium provided the inspectorate with responses to the allegations,including plans and timelines for compliance where applicable,and plans to continue to inform the inspectorate on corrective actions to be taken.As of July 2022,the authorities have approved the restart of key production processes and 3M Belgium continues to conduct required monitoring and reporting activities.Belgian government authorities continue to maintain oversight of 3M Belgiums operations and compliance with applicable requirements at the Zwijndrecht facility.InSeptember 2022,the environmental enforcement agency issued an infraction report alleging that 3M Belgium had misconstrued an exemption in the safety measure and thusnot fully complied with the safety measure in the operation of certain production lines.Discussions are underway with the environmental enforcement agency and thoseproduction lines are now being addressed in accordance with the review and approval provisions of the safety measure.Although the authorities have approved the restart and/orcontinued operation of key production processes,a negative development in their ongoing oversight review,or inability to fully restart all production processes,could have asignificant adverse impact on 3M Belgiums normal operations and the Companys businesses that receive products and other materials from the facility,some of which maynot be available in similar quantities from other 3M facilities,which could in turn impact these businesses ability to fulfill supply obligations to their customers.31Table of ContentsNotice of default environmental law compliance.Also in September 2021,the Flemish Region issued a notice of default alleging violations of environmental laws and seekingPFAS-related information,indemnity and a remediation plan for soil and water impacts due to PFAS originating from the Zwijndrecht facility.In September 2021,3Mresponded to the notice of default and announced a plan to invest up to 125 million euros in the next three years in actions related to the Zwijndrecht community,includingsupport for local commercial farmers impacted by restrictions on sale of agricultural products,and enhancements to site discharge control technologies.3M is also committed topayment for ongoing off-site descriptive soil investigation and appropriate soil remediation.In March 2022,the Company announced an investment of 150 million euros toadvance remedial actions to address legacy PFAS previously produced at the Zwijndrecht facility.An accredited third-party soil remediation expert has progressed towards aremedial action plan based on a descriptive soil investigation that would help inform 3M Belgiums remedial actions onsite and in certain surrounding areas.3M Belgiumrepresentatives continue to have discussions with the relevant authorities regarding further soil remedial actions in connection with the Flemish Soil Decree,which requires bothpublic authorities and private parties to remediate contaminated soil and groundwater in Flanders.In February 2023,the Flemish waste agency(OVAM)rejected a required descriptive soil investigation(DSI)submitted by 3M Belgium,required that a new DSI be submittedby the end of March,and also required that 3M Belgium propose a plan to implement additional precautionary measures for individuals living in designated areas near theZwijndrecht plant.At the end of March 2023,3M Belgium submitted a revised DSI,along with an appeal of the rejection of the DSI.3M Belgium also submitted a proposalregarding precautionary measures that is being discussed with OVAM.In December 2022,the Flemish Cabinet took steps to implement an executive action(the“Site Decision”)designed to expand 3Ms remedial obligations around theZwijndrecht site.On March 31,2023,the Site Decision was fully approved by the Flemish Cabinet.While the full impact of the Site Decision remains to be determined,itappears to establish a remediation zone within 5 kilometers of Zwijndrecht,and may create a presently undetermined amount of additional financial and remedial obligations for3M Belgium.In July 2022,3M Belgium and the Flemish Government announced an agreement in connection with the Zwijndrecht facility.Pursuant to the agreement,3M Belgium,amongother things,committed an aggregate of 571 million euros,which includes the previous commitments described above.In aggregate,the commitment includes enhancements tosite discharge control technologies,support for qualifying local farmers,amounts to address certain identified priority remedial actions(which may include supportingadditional actions as required under the Flemish Soil Decree),funds to be used by the Flemish Government in its sole discretion in connection with PFAS emissions from theZwijndrecht facility,and support for the Oosterweel Project in cash and support services.The agreement contains certain provisions ending current litigation and providingcertain releases of liability for 3M,while recognizing that the Flemish Government retains its authority to act in the future to protect its citizenry.In connection with theseactions,the Company recorded a pre-tax charge of approximately$500 million in the first half of 2022,with approximately$355 million in the second quarter of 2022.Civil litigation-As of March 31,2023,a total of seven actions against 3M Belgium are pending in Belgian civil courts.The cases include claims by neighboring and othercompanies for alleged soil and wastewater or rainwater contamination with PFAS;and tort liability claims and environmental injunction procedure by environmental NGOs andseveral hundred individuals.While most of the actions are in early stages,one of the actions,brought by a family living near the 3M Belgium plant,had a hearing in February2023.Another case,involving an environmental injunction procedure,was brought by environmental NGOs originally against 3M Belgiums contractors and later against 3MBelgium.The case seeks to accelerate the descriptive soil investigation and remediation process,and judicial hearings in this case are scheduled for April 2023.The Netherlands government has indicated they are investigating potential claims to recover damages from companies related to alleged PFAS contamination of the WesternScheldt,a river that flows through Belgium and the Netherlands.United States:Federal ActivityIn the United States,the EPA has developed human health effects documents summarizing the available data studies of both PFOA and PFOS.In October 2021,EPA releasedits“PFAS Strategic Roadmap:EPAs Commitments to Action 2021-2024,”which presents EPAs approach to PFAS,including investing in research to increase theunderstanding of PFAS,pursuing a comprehensive approach to proactively control PFAS exposures to humans and the environment,and broadening and accelerating the scopeof clean-up of PFAS in the environment.In June 2022,EPA released new final lifetime health advisory levels for PFBS(2,000 ppt)and HFPO-DA and its salts(“GenX”)(4 ppt),and new interim lifetime healthadvisory levels for PFOA(.004 ppt)and PFOS(.02 ppt).Lifetime health advisories are intended to provide information about concentrations of drinking water contaminants atwhich adverse health effects are not expected to occur over the specified exposure duration.32Table of ContentsIn March 2023,EPA published proposed national primary drinking water standards for six PFAS PFOA,PFOS,PFBS,PFHxS,PFNA,and HFPO-DA,along with aneconomic analysis including purported estimated costs of the proposed rule.For PFOA and PFOS,EPA has proposed a drinking water standard of 4 ppt.For the other fourPFAS,EPA is proposing to adopt for the first time a drinking water standard based on a“hazard index”approach,under which the levels of those four compounds,if detected,would be input into an EPA-provided formula to determine whether they exceed EPAs cumulative risk threshold.If the proposed drinking water standards are finalized,3Mcould incur additional costs and potential exposures,including future compliance costs,possible litigation and/or enforcement
2023-07-07
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Page 1 of 6 UnitedHealth Group Reports First Quarter 2023 Results Revenues of$91.9 Billion,Grew 15%.
2023-07-06
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Fiscal Year 2023 Interim Report1ALIBABA GROUP HOLDING LIMITED阿里巴巴集團控股有限公司INTERIM REPORTFOR THE SIX M.
2023-07-03
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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2023OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _Commission file number 001-00035GENERAL ELECTRIC COMPANY(Exact name of registrant as specified in its charter)New York14-0689340(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)5 Necco Street BostonMA02210(Address of principal executive offices)(Zip Code)(Registrants telephone number,including area code)(617)443-3000Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon stock,par value$0.01 per shareGENew York Stock Exchange1.250%Notes due 2023GE 23ENew York Stock Exchange0.875%Notes due 2025GE 25New York Stock Exchange1.875%Notes due 2027GE 27ENew York Stock Exchange1.500%Notes due 2029GE 29New York Stock Exchange7 1/2%Guaranteed Subordinated Notes due 2035GE/35New York Stock Exchange2.125%Notes due 2037GE 37New York Stock ExchangeIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 duringthe preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements forthe past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company or anemerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and emerging growth company inRule 12b-2 of the Exchange Act.(Check one):Large accelerated filerAccelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No There were 1,088,960,029 shares of common stock with a par value of$0.01 per share outstanding at March 31,2023.TABLE OF CONTENTSPageForward-Looking Statements3About General Electric4Managements Discussion and Analysis of Financial Condition and Results of Operations(MD&A)4Consolidated Results4Segment Operations6Corporate9Other Consolidated Information10Capital Resources and Liquidity11Critical Accounting Estimates13Non-GAAP Financial Measures15Controls and Procedures19Other Financial Data19Financial Statements and Notes20Statement of Earnings(Loss)20Statement of Financial Position21Statement of Cash Flows22Statement of Comprehensive Income(Loss)23Statement of Changes in Shareholders Equity23Note 1 Basis of Presentation and Summary of Significant Accounting Policies24Note 2 Businesses Held for Sale and Discontinued Operations26Note 3 Investment Securities28Note 4 Current and Long-Term Receivables29Note 5 Inventories,Including Deferred Inventory Costs30Note 6 Property,Plant and Equipment and Operating Leases30Note 7 Goodwill and Other Intangible Assets30Note 8 Revenues31Note 9 Contract and Other Deferred Assets&Progress Collections and Deferred Income31Note 10 All Other Assets32Note 11 Borrowings33Note 12 Accounts Payable and Equipment Project Payables33Note 13 Insurance Liabilities and Annuity Benefits33Note 14 Postretirement Benefit Plans37Note 15 Current and All Other Liabilities38Note 16 Income Taxes38Note 17 Shareholders Equity39Note 18 Earnings Per Share Information39Note 19 Other Income(Loss)40Note 20 Restructuring Charges and Separation Costs40Note 21 Financial Instruments41Note 22 Variable Interest Entities43Note 23 Commitments,Guarantees,Product Warranties and Other Loss Contingencies43Exhibits45Form 10-Q Cross Reference Index45Signatures45FORWARD-LOOKING STATEMENTS.Our public communications and SEC filings may contain statements related to future,not past,events.Theseforward-looking statements often address our expected future business and financial performance and financial condition,and often contain words such asexpect,anticipate,intend,plan,believe,seek,see,will,would,estimate,forecast,target,preliminary,or range.Forward-lookingstatements by their nature address matters that are,to different degrees,uncertain,such as statements about planned and potential transactions,including ourplan to pursue a spin-off of our portfolio of energy businesses that are planned to be combined as GE Vernova(Renewable Energy,Power,Digital and EnergyFinancial Services);the impacts of macroeconomic and market conditions and volatility on our business operations,financial results and financial position andon the global supply chain and world economy;our expected financial performance,including cash flows,revenues,organic growth,margins,earnings andearnings per share;impacts related to the COVID-19 pandemic;our de-leveraging plans,including leverage ratios and targets,the timing and nature of actionsto reduce indebtedness and our credit ratings and outlooks;our funding and liquidity;our businesses cost structures and plans to reduce costs;restructuring,goodwill impairment or other financial charges;or tax rates.For us,particular areas where risks or uncertainties could cause our actual results to be materially different than those expressed in our forward-lookingstatements include:our success in executing planned and potential transactions,including our plan to pursue a spin-off of GE Vernova,and sales or other dispositions of ourequity interests in AerCap Holdings N.V.(AerCap)and GE HealthCare,the timing for such transactions,the ability to satisfy any applicable pre-conditions,and the expected proceeds,consideration and benefits to GE;changes in macroeconomic and market conditions and market volatility,including impacts related to the COVID-19 pandemic,risk of recession,inflation,supply chain constraints or disruptions,rising interest rates,perceived weakness or failures of banks,the value of securities and other financial assets(including our equity interests in AerCap and GE HealthCare),oil,natural gas and other commodity prices and exchange rates,and the impact of suchchanges and volatility on our business operations,financial results and financial position;global economic trends,competition and geopolitical risks,including impacts from the ongoing conflict between Russia and Ukraine and the relatedsanctions and other measures,decreases in the rates of investment or economic growth globally or in key markets we serve,or an escalation of sanctions,tariffs or other trade tensions between the U.S.and China or other countries,and related impacts on our businesses global supply chains and strategies;the continuing severity,magnitude and duration of the COVID-19 pandemic,including impacts of virus variants and resurgences,and of government,business and individual responses,such as continued or new government-imposed lockdowns and travel restrictions,and in particular any adverse impactsto the aviation industry and its participants;our capital allocation plans,including de-leveraging actions to reduce GEs indebtedness,the capital structures of the public companies that we plan to formfrom our businesses with the planned spin-off,the timing and amount of dividends,share repurchases,acquisitions,organic investments,and otherpriorities;downgrades of our current short-and long-term credit ratings or ratings outlooks,or changes in rating application or methodology,and the related impact onour funding profile,costs,liquidity and competitive position;the amount and timing of our cash flows and earnings,which may be impacted by macroeconomic,customer,supplier,competitive,contractual and otherdynamics and conditions;capital and liquidity needs associated with our financial services operations,including in connection with our run-off insurance operations and mortgageportfolio in Poland(Bank BPH),the amount and timing of any required capital contributions and any strategic actions that we may pursue;market developments or customer actions that may affect demand and the financial performance of major industries and customers we serve,such asdemand for air travel and other aviation industry dynamics related to the COVID-19 pandemic;pricing,cost,volume and the timing of investment bycustomers or industry participants and other factors in renewable energy markets;conditions in key geographic markets;technology developments;andother shifts in the competitive landscape for our products and services;operational execution by our businesses,including the success at our Renewable Energy business in improving product quality and fleet availability,executing on cost reduction initiatives and other aspects of operational performance,as well as the performance of GE Aerospace amidst the ongoingmarket recovery;changes in law,regulation or policy that may affect our businesses,such as trade policy and tariffs,regulation and incentives related to climate change(including the impact of the Inflation Reduction Act and other policies),and the effects of tax law changes;our decisions about investments in research and development,and new products,services and platforms,and our ability to launch new products in a cost-effective manner;our ability to increase margins through implementation of operational improvements,restructuring and other cost reduction measures;the impact of regulation and regulatory,investigative and legal proceedings and legal compliance risks,including the impact of Alstom,Bank BPH and otherinvestigative and legal proceedings;the impact of actual or potential quality issues or failures of our products or third-party products with which our products are integrated,and related costsand reputational effects;the impact of potential information technology,cybersecurity or data security breaches at GE or third parties;andthe other factors that are described in the Risk Factors section in our Annual Report on Form 10-K for the year ended December 31,2022,as suchdescriptions may be updated or amended in any future reports we file with the SEC.These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements.We do notundertake to update our forward-looking statements.This document includes certain forward-looking projected financial information that is based on currentestimates and forecasts.Actual results could differ materially.2023 1Q FORM 10-Q 3ABOUT GENERAL ELECTRIC.General Electric Company(General Electric,GE or the Company)is a high-tech industrial company that operatesworldwide through its three segments,Aerospace,Renewable Energy,and Power.Our products include commercial and military aircraft engines and systems;wind and other renewable energy generation equipment and grid solutions;and gas,steam,nuclear and other power generation equipment.We have significantglobal installed bases of equipment across these sectors,and services to support these products are also an important part of our business alongside newequipment sales.In November 2021,we announced a strategic plan to form three industry-leading,global,investment-grade public companies from(i)our Aerospace business,(ii)our Renewable Energy,Power,Digital and Energy Financial Services businesses,which we plan to combine and refer to as GE Vernova,and(iii)our formerHealthCare business.In July 2022,we announced the new brand names for our three planned future companies:GE Aerospace,GE HealthCare and GEVernova.For purposes of this report,we refer to our reporting segments as Aerospace,Renewable Energy and Power.The composition of these reportingsegments is unchanged.On January 3,2023,we completed the separation of the HealthCare business from GE through the spin-off of GE HealthCareTechnologies Inc.(GE HealthCare).In the spin-off,GE made a pro-rata distribution of approximately 80.1%of the shares of GE HealthCares common stock toGE shareholders,retaining approximately 19.9%of GE HealthCare common stock.The historical results of GE HealthCare and certain assets and liabilities included in the spin-off are now reported in GEs consolidated financial statements asdiscontinued operations.We continue to refer to our reporting segments of Renewable Energy and Power,each of which are expected to become GE Vernovabusinesses,reflecting the organization and management of these businesses within GE today.Additionally,on January 1,2023,we retrospectively adoptedAccounting Standards Update No.2018-12,Financial Services Insurance(Topic 944):Targeted Improvements to the Accounting for Long-Duration Contracts.See Note 1 for further information.GEs Internet address at ,Investor Relations website at and our corporate blog at ,as well asGEs LinkedIn and other social media accounts,including GE_Reports,contain a significant amount of information about GE,including financial and otherinformation for investors.GE encourages investors to visit these websites from time to time,as information is updated and new information is posted.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(MD&A).Theconsolidated financial statements of General Electric Company are prepared in conformity with U.S.generally accepted accounting principles(GAAP).Unlessotherwise noted,tables are presented in U.S.dollars in millions.Certain columns and rows within tables may not add due to the use of rounded numbers.Percentages presented in this report are calculated from the underlying numbers in millions.Discussions throughout this MD&A are based on continuingoperations unless otherwise noted.The MD&A should be read in conjunction with the Financial Statements and Notes to the consolidated financial statements.In the accompanying analysis of financial information,we sometimes use information derived from consolidated financial data but not presented in our financialstatements prepared in accordance with GAAP.Certain of these data are considered“non-GAAP financial measures”under SEC rules.See the Non-GAAPFinancial Measures section for the reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financialmeasures.CONSOLIDATED RESULTSFIRST QUARTER 2023 RESULTS.Total revenues were$14.5 billion,up$1.8 billion for the quarter,driven primarily by increases at Aerospace and Power.Continuing earnings(loss)per share was$5.56.Excluding the results from our run-off Insurance business,non-operating benefit costs,gains(losses)onpurchases and sales of business interests,gains(losses)on equity securities,restructuring costs and separation costs,Adjusted earnings per share*was$0.27.For the three months ended March 31,2023,profit margin was 44.8%and profit was up$7.7 billion,primarily due to an increase in gains on equity securities of$6.1 billion,the nonrecurrence of the Steam asset sale impairment of$0.8 billion,an increase in segment profit of$0.4 billion,an increase in non-operatingbenefit income of$0.3 billion and the nonrecurrence of Russia and Ukraine charges of$0.2 billion.These increases were partially offset by an increase inrestructuring and other charges and separation costs of$0.2 billion.Adjusted organic profit*increased$0.5 billion,driven primarily by increases at Aerospace,Renewable Energy and Power.Cash flows from operating activities(CFOA)were$0.2 billion and$(0.9)billion for the three months ended March 31,2023 and 2022,respectively.Cash flowsfrom operating activities increased primarily due to an increase in net income(after adjusting for depreciation of property,plant,and equipment,amortization ofintangible assets and non-cash(gains)losses related to our retained ownership interests in GE HealthCare,AerCap and Baker Hughes)and a decrease in cashused for working capital.Free cash flows*(FCF)were$0.1 billion and$(1.2)billion for three months ended March 31,2023 and 2022,respectively.FCF*increased primarily due to the same reasons as noted for CFOA above.See the Capital Resources and Liquidity-Statement of Cash Flows section for furtherinformation.*Non-GAAP Financial Measure2023 1Q FORM 10-Q 4Remaining performance obligation(RPO)is unfilled customer orders for products and product services(expected life of contract sales for product services)excluding any purchase order that provides the customer with the ability to cancel or terminate without incurring a substantive penalty.See Note 8 for furtherinformation.RPOMarch 31,2023December 31,2022Equipment$47,991$44,198 Services194,063 192,385 Total RPO$242,054$236,582 As of March 31,2023,RPO increased$5.5 billion(2%)from December 31,2022,primarily at Renewable Energy,from new orders at Grid and Onshore Windexceeding sales;at Aerospace,from engines contracted under long-term service agreements that have now been put into service and an increase inCommercial orders;and at Power,driven by Gas Power equipment.REVENUESThree months ended March 3120232022Equipment revenues$5,287$4,608 Services revenues8,407 7,302 Insurance revenues791 764 Total revenues$14,486$12,675 For the three months ended March 31,2023,total revenues increased$1.8 billion(14%).Equipment revenues increased,primarily at Aerospace,due to anincrease in commercial install and spare engine unit shipments;at Renewable Energy,due to higher revenue at Grid and Offshore Wind;and at Power,due tohigher Gas Power Heavy-duty gas turbine deliveries.Services revenues increased,primarily at Aerospace,due to increased internal shop visit volume andcommercial spare part shipments and higher prices,and at Power,due to growth in Gas Power non-contractual services,partially offset by a decrease atRenewable Energy,due to fewer repower unit deliveries at Onshore Wind.Excluding the change in Insurance revenues,the net effects of acquisitions and dispositions and the effects of a weaker U.S.dollar of$0.2 billion,organicrevenues*increased$2.0 billion(17%),with equipment revenues up$0.8 billion(18%)and services revenues up$1.2 billion(16%).Organic revenues*increased at Aerospace,Power and Renewable Energy.EARNINGS(LOSS)AND EARNINGS(LOSS)PER SHAREThree months ended March 31(Per-share in dollars and diluted)20232022Continuing earnings(loss)attributable to GE common shareholders$6,103$(1,276)Continuing earnings(loss)per share$5.56$(1.16)For the three months ended March 31,2023,continuing earnings increased$7.4 billion,primarily due to an increase in gains on equity securities of$6.1billion,the nonrecurrence of the Steam asset sale impairment of$0.8 billion,an increase in segment profit of$0.4 billion,an increase in non-operating benefitincome of$0.3 billion and the nonrecurrence of Russia and Ukraine charges of$0.2 billion.These increases were partially offset by an increase in provision forincome tax of$0.2 billion and an increase in restructuring and other charges and separation costs of$0.2 billion.Adjusted earnings*were$0.3 billion,anincrease of$0.4 billion.Profit margin was 44.8%,an increase from(9.3)%.Adjusted profit*was$0.9 billion,an increase of$0.5 billion organically*,due toincreases at Aerospace,Renewable Energy and Power.Adjusted profit margin*was 6.4%,an increase of 330 basis points organically*.We continue to experience inflation pressure in our supply chain,as well as delays in sourcing key materials needed for our products and skilled labor shortages.This has delayed our ability to convert RPO to revenue and negatively impacted our profit margins.While the impact of inflation is expected to be challenging,we continue to take actions to limit this pressure,including lean initiatives to drive cost productivity,partnering with our suppliers and adjusting the pricing of ourproducts and services.Also,geopolitical uncertainties,including the ongoing Russia and Ukraine conflict,are introducing additional challenges.As of March 31,2023,we had approximately$0.3 billion of remaining assets in Russia and Ukraine,mainly in our Power business,which primarily relate to activity not subject tosanctions or restricted under Company policy.*Non-GAAP Financial Measure2023 1Q FORM 10-Q 5SEGMENT OPERATIONS.Refer to our Annual Report on Form 10-K for the year ended December 31,2022 for further information regarding ourdetermination of segment profit for continuing operations and for our allocations of corporate costs to our segments.SUMMARY OF REPORTABLE SEGMENTSThree months ended March 3120232022Vrospace$6,981$5,603 25%Renewable Energy2,837 2,871(1)%Power3,820 3,501 9%Total segment revenues13,638 11,975 14%Corporate848 700 21%Total revenues$14,486$12,675 14rospace$1,326$908 46%Renewable Energy(414)(434)5%Power75 63 19%Total segment profit(loss)987 538 83%Corporate(a)5,456(1,419)FInterest and other financial charges(257)(371)31%Non-operating benefit income(cost)385 105 FBenefit(provision)for income taxes(322)(76)UPreferred stock dividends(145)(52)UEarnings(loss)from continuing operations attributable to GE common shareholders6,103(1,276)FEarnings(loss)from discontinued operations attributable to GE common shareholders1,257 88 FNet earnings(loss)attributable to GE common shareholders$7,360$(1,188)F(a)Includes interest and other financial charges of$12 million and$16 million and benefit for income taxes of$51 million and$47 million related to EFS withinCorporate for the three months ended March 31,2023 and 2022,respectively.GE AEROSPACE.Our results in the first quarter of 2023 reflect continued growth in demand for commercial air travel.A key underlying driver of our commercialengine and services business is global commercial departures,which improved 21%during the first quarter of 2023 compared to the first quarter of 2022,andnow stands at approximately 97%of 2019 levels.The air traffic growth trends vary by region given economic conditions,airline competition and government regulations.Consistent with industry projections,weestimate both narrowbody and widebody air traffic to return to 2019 levels in late 2023 and grow in line with the global economic conditions.We are in frequentdialogue with our airline,airframe,and maintenance,repair and overhaul customers about the outlook for commercial air travel,new aircraft production,fleetretirements,and after-market services,including shop visit and spare parts demand.As it relates to the military environment,we continue to forecast strong military demand creating future growth opportunities for our Military business.The U.S.Department of Defense and foreign governments have continued flight operations,and have allocated budgets to upgrade and modernize their existing fleets.We increased our Commercial engine sales units in the first quarter of 2023,however,Military engine sales units decreased compared to the first quarter of 2022partly due to material availability and supplier challenges.Global material availability and labor shortages continue to cause disruptions for us and our suppliers,and have impacted our production and delivery.We continue to partner with our customers on future production rates.Aerospace is proactively managing theimpact of inflationary pressure by deploying lean initiatives to drive cost productivity,partnering with our suppliers and adjusting the pricing of our products andservices.We expect the impact of inflation will continue and we are taking actions to mitigate the impact.Total engineering,comprising company,customer and partner-funded and nonrecurring engineering costs,increased compared to the prior year.We remaincommitted to investing in developing and maturing technologies that enable a more sustainable future of flight.We continue to take actions to serve our customers now and as demand in the global airline industry increases.Our deep history of innovation and technologyleadership and a commercial and military engine installed base,including units produced by joint ventures,of approximately 67,000 units,with approximately11,800 units under long-term service agreements,represents strong long-term fundamentals.We believe Aerospace is well-positioned to drive long-termprofitable growth and higher cash generation over time.2023 1Q FORM 10-Q 6Three months ended March 31Sales in units,except where noted20232022Commercial Engines(a)481 343 LEAP Engines(b)366 239 Military Engines80 184 Spare Parts Rate(c)$31.1$22.8(a)Commercial Engines now includes Business Aviation and Aeroderivative units for all periods presented.(b)LEAP engines are subsets of commercial engines.(c)Commercial externally shipped spare parts and spare parts used in time and material shop visits in millions of dollars per day.RPOMarch 31,2023December 31,2022Equipment$14,316$13,748 Services123,114 121,511 Total RPO$137,430$135,260 SEGMENT REVENUES AND PROFITThree months ended March 3120232022Commercial Engines&Services$5,194$3,853 Military1,018 1,036 Systems&Other770 714 Total segment revenues$6,981$5,603 Equipment$1,974$1,654 Services5,007 3,949 Total segment revenues$6,981$5,603 Segment profit$1,326$908 Segment profit margin19.0.2%For the three months ended March 31,2023,segment revenues were up$1.4 billion(25%)and segment profit was up$0.4 billion(46%).RPO as of March 31,2023 increased$2.2 billion(2%)from December 31,2022,due to increases in both equipment and services.Equipment increasedprimarily due to an increase in Commercial orders since December 31,2022.Services increased primarily as a result of engines contracted under long-termservice agreements that have now been put into service and contract modifications.Revenues increased$1.4 billion(25%)organically*.Commercial Services revenues increased,primarily due to increased internal shop visit volume andcommercial spare part shipments,and higher prices.Commercial Engines revenues increased,primarily driven by 138 more commercial install and spareengine unit shipments,including 127 more LEAP units versus the prior year.Military revenues decreased,primarily due to 104 fewer engine shipments than theprior year,partially offset by product mix and growth in services.Profit increased$0.4 billion(43%)organically*,primarily due to increased internal shop visit volume and commercial spare part shipments,higher prices,andcost productivity.These increases in profit were partially offset by inflation in our supply chain,product mix and additional growth investment.RENEWABLE ENERGY will be part of GE Vernova.The recently enacted Inflation Reduction Act of 2022(IRA)introduces new and extends existing taxincentives for at least 10 years.The IRA is expected to resolve recent U.S.policy uncertainty that resulted in project delays and deferral of customer investmentsin Onshore Wind and significantly increase near-and longer-term demand in the U.S.for onshore and offshore wind projects.While the offshore wind industrycontinues to expect global growth through the decade,cost pressures and the ability to compete with the rapid pace of innovation remain key challenges.Finally,our Grid Solutions business is positioned to support grid expansion and modernization needs.At Onshore Wind,we are focused on improving our overall quality and fleet availability through reducing product variants and deploying repairs and othercorrective measures across the fleet.We intend to operate in fewer markets and focus on those markets with better pricing and margins.Approximately half ofOnshore Winds equipment RPO is associated with U.S.projects where we expect to receive IRA benefits that would reduce product costs as qualifying turbinesmanufactured in the U.S.in 2023 are delivered.Concurrently,we are undertaking a restructuring program to reduce our fixed costs.Our financial results aredependent on costs to address fleet availability and quality at Onshore Wind and the execution of cost reduction initiatives and pricing actions to mitigate theinflationary environment across all our businesses.*Non-GAAP Financial Measure2023 1Q FORM 10-Q 7New product introductions account for a large portion of our RPO in Onshore and Offshore Wind,such as our 3 MW and 5 MW Onshore units,and our 12-14MW Haliade-X Offshore units.Improving Onshore fleet availability and reducing the cost of new product platforms and blade technologies remain key priorities.We are also focused on our production capabilities and execution of our initial Haliade-X projects given the complexity and challenging nature of these newproduct introductions.At Grid,we observed strong European demand for High Voltage Direct Current(HVDC)solutions and are securing our position in the rapid growth offshore andonshore interconnection markets with products meeting the 2GW HVDC solution standard and developing new technology that solves for a denser,moreresilient,stable and efficient electric grid and lower greenhouse gas emissions.Three months ended March 31Onshore and Offshore sales in units20232022Wind Turbines405 502 Wind Turbine Gigawatts1.5 1.7 Repower units50 151 RPOMarch 31,2023December 31,2022Equipment$23,019$20,142 Services12,775 12,688 Total RPO$35,795$32,830 SEGMENT REVENUES AND PROFITThree months ended March 3120232022Onshore Wind$1,502$1,906 Grid Solutions equipment and services824 668 Offshore Wind,Hydro and Hybrid Solutions511 297 Total segment revenues$2,837$2,871 Equipment$2,311$2,173 Services527 698 Total segment revenues$2,837$2,871 Segment profit(loss)$(414)$(434)Segment profit margin(14.6)%(15.1)%For the three months ended March 31,2023,segment revenues were down 1%and segment losses were down 5%.RPO as of March 31,2023 increased$3.0 billion(9%)from December 31,2022 primarily from new HVDC orders at Grid and orders exceeding revenue atOnshore Wind,primarily in North America.Revenues increased$0.1 billion(5%)organically*,primarily from higher revenue at Grid and Offshore Wind,partially offset by fewer wind turbine and repowerunit deliveries at Onshore Wind,primarily attributable to customer delays and deferrals during 2022 due to U.S.tax policy uncertainty.Segment losses decreased 10%organically*,primarily attributable to higher volume at Grid and improved pricing and impact of cost reduction initiatives atOnshore Wind and Grid,partially offset by higher losses at Offshore Wind associated with Haliade-X ramp up and lower volume at Onshore Wind.POWER will be part of GE Vernova.During the three months ended March 31,2023,GE gas turbine utilization grew low-single digits with strength in theU.S.,while global electricity demand was down mid-single digits due to a milder winter.Utilization of the fleet continues to follow growing gas power generationdespite lower demand,capturing decreases coming from coal and resilient asset usage with a dynamic Europe environment.Looking ahead,we anticipate H-class units to be commissioned into the serviceable installed base.As we continue to work in emerging markets,there could be uncertainty in the timing of dealclosures due to financing and other complexities.Power has proactively managed the impact of inflationary pressure by deploying lean initiatives to drive costproductivity,partnering with our suppliers and adjusting the pricing of our products and services.We expect the impact of inflation will continue to be challengingand we will continue to take actions to manage.Although market factors related to the energy transition such as greater renewable energy penetration and theadoption of climate change-related policies continue to impact long-term demand(and related financing),we expect the gas power market to remain stable overthe next decade with gas power generation continuing to grow low-single-digits.We believe gas power will play a critical role in the energy transition.We remainfocused on our underwriting discipline and risk management to ensure we are securing deals that meet our financial hurdles and we have high confidence todeliver for our customers.In the first quarter of 2022,we signed a non-binding memorandum of understanding for GE Steam Power to sell a portion of its business to lectricit de FranceS.A.(EDF),which resulted in a reclassification of that business to held for sale.In the fourth quarter of 2022,we signed a binding agreement and expect tocomplete the sale,subject to regulatory approvals and other customary closing conditions,in the second half of 2023.On April 3,2023,our Gas Power businessacquired Nexus Controls,a business specializing in aftermarket control system upgrades and controls field services that is expected to strengthen our quality,service,and delivery of our customers assets.*Non-GAAP Financial Measure2023 1Q FORM 10-Q 8We continue to invest in new product development.In Nuclear we are investing in the design of small modular reactors where we signed an agreement in theperiod for the deployment of the technology.In Gas Power,our HA-Turbines have over 1.8 million operating hours across the installed base.Our fundamentalsremain strong with approximately$69.4 billion in RPO,including 28 HA-Turbines,and a gas turbine installed base of approximately 7,000 units,including 80 HA-Turbines,which has nearly doubled since 2019,and approximately 1,800 units under long-term service agreements.We also continue to invest for the long-term,including decarbonization pathways that will provide customers with cleaner,more reliable power.Three months ended March 31Sales in units20232022GE Gas Turbines23 20 Heavy-Duty Gas Turbines(a)18 13 HA-Turbines(b)4 2 Aeroderivatives(a)5 7(a)Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines.(b)HA-Turbines are a subset of Heavy-Duty Gas Turbines.RPOMarch 31,2023December 31,2022Equipment$12,056$11,561 Services57,382 57,420 Total RPO$69,438$68,981 SEGMENT REVENUES AND PROFITThree months ended March 3120232022Gas Power$2,867$2,489 Steam Power541 636 Power Conversion,Nuclear and other412 377 Total segment revenues$3,820$3,501 Equipment$1,102$965 Services2,718 2,536 Total segment revenues$3,820$3,501 Segment profit(loss)$75$63 Segment profit margin2.0%1.8%For the three months ended March 31,2023,segment revenues were up$0.3 billion(9%)and segment profit was up 19%.RPO as of March 31,2023 increased$0.5 billion(1%)from December 31,2022,primarily driven by Gas Power equipment.Revenues increased$0.4 billion(11%)organically*,primarily due to growth in Gas Power non-contractual services and Aeroderivatives and higher Gas PowerHeavy-duty gas turbine deliveries,partially offset by a reduction in Steam Power equipment on the exit of new build coal.Profit increased 35%organically*primarily due to growth in Gas Power non-contractual services.CORPORATE.The Corporate amounts related to revenues and earnings include the results of disposed businesses,certain amounts not included in operatingsegment results because they are excluded from measurement of their operating performance for internal and external purposes and the elimination ofintersegment activities.In addition,the Corporate amounts related to earnings include certain costs of our principal retirement plans,significant,higher-costrestructuring programs,separation costs,and other costs reported in Corporate.Corporate includes the results of the GE Digital business and our remaining GE Capital businesses,our former financial services business,including our run-offInsurance business(see Note 13 for further information).*Non-GAAP Financial Measure2023 1Q FORM 10-Q 9REVENUES AND OPERATING PROFIT(COST)Three months ended March 3120232022GE Digital revenues$237$220 Insurance revenues(Note 13)791 764 Eliminations and other(181)(284)Total Corporate revenues$848$700 Gains(losses)on purchases and sales of business interests$(55)$4 Gains(losses)on equity securities5,906(219)Restructuring and other charges(Note 20)(151)(35)Separation costs(Note 20)(205)(99)Steam asset sale impairment(824)Russia and Ukraine charges(230)Insurance profit(loss)(Note 13)70 106 Adjusted total Corporate operating costs(Non-GAAP)(109)(122)Total Corporate operating profit(cost)(GAAP)$5,456$(1,419)Less:gains(losses),impairments,Insurance,and restructuring&other5,565(1,297)Adjusted total Corporate operating costs(Non-GAAP)$(109)$(122)Functions&operations$(145)$(71)Environmental,health and safety(EHS)and other items30(51)Eliminations6(1)Adjusted total Corporate operating costs(Non-GAAP)$(109)$(122)Adjusted total corporate operating costs*excludes gains(losses)on purchases and sales of business interests,significant,higher-cost restructuring programs,separation costs,gains(losses)on equity securities,impairments and our run-off Insurance business profit.We believe that adjusting corporate costs to excludethe effects of items that are not closely associated with ongoing corporate operations provides management and investors with a meaningful measure thatincreases the period-to-period comparability of our ongoing corporate costs.For the three months ended March 31,2023,revenues increased by$0.1 billion due to lower intersegment eliminations.Corporate operating profit increasedby$6.9 billion due to$6.1 billion of higher gains on equity securities,primarily related to a gain on our GE HealthCare investment,lower losses on our AerCapinvestments,partially offset by lower gains on our Baker Hughes investments.Corporate operating profit increased as the result of a$0.8 billion non-cashimpairment charges related to property,plant and equipment and intangible assets as a result of reclassification of a portion of our Steam Power business toheld for sale in the first quarter of 2022.Corporate operating profit also increased due to$0.2 billion of charges from contracts and recoverability of assets inconnection with the conflict between Russia and Ukraine and resulting sanctions,primarily within our Aerospace and Power businesses in the first quarter of2022.These decreases were partially offset by$0.1 billion of higher separation costs and$0.1 billion of higher restructuring and other charges.Adjusted total corporate operating costs*remained relatively flat due to core reductions and favorability from higher bank interest,partially offset by foreignexchange dynamics.OTHER CONSOLIDATED INFORMATIONRESTRUCTURING AND SEPARATION COSTS.Significant,higher-cost restructuring programs are excluded from measurement of segment operatingperformance for internal and external purposes;those excluded amounts are reported in Restructuring and other charges for Corporate.In addition,we incurcosts associated with separation activities,which are also excluded from measurement of segment operating performance for internal and external purposes.See Note 20 for further information on restructuring and separation costs.INTEREST AND OTHER FINANCIAL CHARGES were$0.3 billion and$0.4 billion for the three months ended March 31,2023 and 2022,respectively.Thedecrease was primarily due to lower average borrowings balances.The primary components of interest and other financial charges are interest on short-andlong-term borrowings.POSTRETIREMENT BENEFIT PLANS.Refer to Note 14 for information about our pension and retiree benefit plans.INCOME TAXES.For the three months ended March 31,2023,the income tax rate was 4.2%compared to(2.5)%for the three months ended March 31,2022.The negative tax rate for 2022 reflects a tax expense on a pre-tax loss.The provision for income taxes was$0.3 billion for the three months ended March 31,2023 and an insignificant amount for the three months ended March 31,2022.The increase in tax was primarily due to the tax effect of the increase in pre-tax income excluding gains(losses)on our interests in GE HealthCare,AerCap and Baker Hughes and separation costs.For the three months ended March 31,2023,the adjusted income tax rate*was 28.0%compared to 500.0%for the three months ended March 31,2022.Theadjusted provision(benefit)for income taxes*was$0.2 billion in 2023 and an insignificant amount in 2022.The increase in tax was primarily due to the tax effectof the increase in adjusted earnings before taxes*.*Non-GAAP Financial Measure2023 1Q FORM 10-Q 10DISCONTINUED OPERATIONS primarily comprise our former GE HealthCare business,our mortgage portfolio in Poland,our GE Capital Aviation Services(GECAS)business,and other trailing assets and liabilities associated with prior dispositions.Results of operations,financial position and cash flows for thesebusinesses are reported as discontinued operations for all periods presented and the notes to the financial statements have been adjusted on a retrospectivebasis.See Note 2 for further information regarding our businesses in discontinued operations.CAPITAL RESOURCES AND LIQUIDITYFINANCIAL POLICY.We intend to maintain a disciplined financial policy with a sustainable investment-grade long-term credit rating.In the fourth quarter of2021,the Company announced plans to form three industry-leading,global,investment-grade companies,each of which will determine their own financialpolicies,including capital allocation,dividend,mergers and acquisitions and share buyback decisions.During the first quarter of 2023,the financial markets experienced disruption due to certain bank failures.Given the diversification and credit profile of GEsexposure to banking counterparties,we do not foresee any material financial impact from this disruption at this time,we will continue to monitor and will takeaction as needed.LIQUIDITY POLICY.We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidityposition to meet our business needs and financial obligations under both normal and stressed conditions.We believe that our consolidated liquidity andavailability 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 flows*from our operating businesses,cashgenerated from asset sales and dispositions,and short-term borrowing facilities,including revolving credit facilities.Cash generation can be subject to variabilitybased on many factors,including seasonality,receipt of down payments on large equipment orders,timing of billings on long-term contracts,timing ofAerospace-related customer allowances,market conditions and our ability to execute dispositions.Total cash,cash equivalents and restricted cash was$12.0billion at March 31,2023,of which$8.0 billion was held in the U.S.and$4.0 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 weresubject 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 countrieswith currency controls)without additional federal tax cost.Any foreign withholding tax on a repatriation to the U.S.would potentially be partially offset by a U.S.foreign tax credit.With regards to our announcement to form three public companies,the planning for and execution of the separations has impacted and isexpected to continue to impact indefinite reinvestment.The impact of such changes will be recorded when there is a specific change in ability and intent toreinvest earnings.Cash,cash equivalents and restricted cash at March 31,2023 included$1.6 billion of cash held in countries with currency control restrictions(including a total of$0.1 billion in Russia and Ukraine)and$0.8 billion of restricted use cash.Cash held in countries with currency controls represents amounts held in countries thatmay restrict the transfer of funds to the U.S.or limit our ability to transfer funds to the U.S.without incurring substantial costs.Restricted use cash representsamounts that are not available to fund operations,and primarily comprised funds restricted in connection with certain ongoing litigation matters.Excluded fromcash,cash equivalents and restricted cash was$0.7 billion of cash in our run-off Insurance business,which was classified as All other assets in the Statement ofFinancial Position.During the first quarter of 2023,we received total proceeds of$1.8 billion from the sale of AerCap shares.We expect to fully monetize our stake in AerCap overtime.We received proceeds of$0.2 billion in the first quarter of 2023,and have now fully monetized our Baker Hughes position.As part of the spin-off of GEHealthCare completed in the first quarter of 2023,we retained an approximately 19.9%stake of GE HealthCare common stock.We intend to exit our stake in GEHealthCare over time,in an orderly manner.Following approval of a statutory permitted accounting practice in 2018 by our primary insurance regulator,the Kansas Insurance Department(KID),we provideda total of$13.2 billion of capital contributions to our insurance subsidiaries,including$1.8 billion in the first quarter of 2023.We expect to provide the final capitalcontribution of approximately$1.8 billion in the first quarter of 2024,pending completion of our December 31,2023 statutory reporting process.See Note 13 forfurther information.On March 6,2022,the Board of Directors authorized the repurchase of up to$3 billion of our common stock.In connection with this authorization,werepurchased 3.2 million shares for$0.3 billion during the three months ended March 31,2023.Additionally,during the first quarter of 2023,we elected to redeem3 million of our outstanding shares of GE series D preferred stock for total cash spend of$3.0 billion.BORROWINGS.Consolidated total borrowings were$22.4 billion and$24.1 billion at March 31,2023 and December 31,2022,respectively,a decrease of$1.6billion.The reduction in borrowings was driven by$1.8 billion of net maturities and repayments of debt,partially offset by$0.2 billion primarily related to changesin foreign exchange rates.We have in place committed revolving credit facilities totaling$13.9 billion at March 31,2023,comprising a$10.0 billion unused back-up revolving syndicatedcredit facility and a total of$3.9 billion of bilateral revolving credit facilities.*Non-GAAP Financial Measure2023 1Q FORM 10-Q 11CREDIT 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.Moodys Investors Service(Moodys),Standard and Poors Global Ratings(S&P),and Fitch Ratings(Fitch)currently issue ratings on our short-and long-term debt.Our credit ratings as of the date ofthis filing are set forth in the following table.MoodysS&PFitchOutlookNegativeStableStableShort termP-2A-2F2Long termBaa1BBB BBBWe are disclosing our credit ratings and any current quarter updates to these ratings to enhance understanding of our sources of liquidity and the effects of ourratings on our costs of funds and access to liquidity.Our ratings may be subject to a revision or withdrawal at any time by the assigning rating organization,andeach rating should be evaluated independently of any other rating.For a description of some of the potential consequences of a reduction in our credit ratings,see the Financial Risks section of Risk Factors in our Annual Report on Form 10-K for the year ended December 31,2022.Substantially all of the Companys debt agreements in place at March 31,2023 do not contain material credit rating covenants.Our unused back-up revolvingsyndicated credit facility and certain of our bilateral revolving credit facilities contain a customary net debt-to-EBITDA financial covenant,which we satisfied atMarch 31,2023.The Company may from time to time enter into agreements that contain minimum ratings requirements.The following table provides a summary of the maximumestimated liquidity impact in the event of further downgrades below each stated ratings level.Triggers BelowMarch 31,2023BBB /A-2/P-2$18 BBB/A-3/P-3167 BBB-1,197 BB and below577 Our most significant contractual ratings requirements are related to ordinary course commercial activities.The timing within the quarter of the potential liquidityimpact of these areas may differ,as can the remedies to resolving any potential breaches of required ratings levels.FOREIGN EXCHANGE AND INTEREST RATE RISK.As a result of our global operations,we generate and incur a significant portion of our revenues andexpenses in currencies other than the U.S.dollar.Such principal currencies include the euro,the Chinese renminbi,the Indian rupee and the British poundsterling,among others.The effects of foreign currency fluctuations on earnings was less than$0.1 billion for both the three months ended March 31,2023 and2022.See Note 21 for further information about our risk exposures,our use of derivatives,and the effects of this activity on our financial statements.STATEMENT OF CASH FLOWSCASH FLOWS FROM CONTINUING OPERATIONS.The most significant source of cash in CFOA is customer-related activities,the largest of which iscollecting cash resulting from product or services sales.The most significant operating use of cash is to pay our suppliers,employees,tax authorities and postretirement plans.Cash from operating activities was$0.2 billion in 2023,an increase of$1.1 billion compared to 2022,primarily due to:an increase in net income(afteradjusting for depreciation of property,plant,and equipment,amortization of intangible assets and non-cash(gains)losses related to our retained ownershipinterests in GE HealthCare,AerCap,and Baker Hughes)primarily in our Aerospace business;and a decrease in cash used for working capital of$0.5 billion.The components of All other operating activities were as follows:Three months ended March 3120232022Increase(decrease)in Aerospace-related customer allowance accruals$135$282 Net interest and other financial charges/(cash paid)(79)31 Increase(decrease)in employee benefit liabilities125(113)Net restructuring and other charges/(cash expenditures)(1)(106)Other(54)(5)All other operating activities$125$89 The cash impacts from changes in working capital compared to prior year were as follows:current receivables of$1.1 billion,driven by higher collections,partially offset by higher volume;inventories,including deferred inventory,of$(0.5)billion,driven by higher material purchases,partially offset by higherliquidations;current contract assets of$(0.2)billion,driven by higher billings on our long-term service agreements,partially offset by higher revenue recognitionon those agreements;accounts payable and equipment project payables of$0.1 billion,driven by higher volume,partially offset by higher disbursements relatedto purchases of materials in prior periods;and progress collections and current deferred income of less than$0.1 billion.2023 1Q FORM 10-Q 12Cash from investing activities was$1.3 billion in 2023,an increase of$1.3 billion compared to 2022,primarily due to:higher cash received related to netsettlements between our continuing operations and businesses in discontinued operations of$0.9 billion,which primarily related to GE HealthCare in connectionwith the spin-off(a component of All other investing activities);and an increase in proceeds of$0.7 billion from the sales of our retained ownership interests inAerCap and Baker Hughes.Cash used for additions to property,plant and equipment and internal-use software,which are components of free cash flows*,was$0.3 billion in both 2023 and 2022.Cash used for financing activities was$5.2 billion in 2023,an increase of$3.8 billion compared to 2022,primarily due to:cash paid for redemption of GEpreferred stock of$3.0 billion in 2023;higher net debt maturities of$0.6 billion;and an increase in purchases of GE common stock for treasury of$0.3 billion.CASH FLOWS FROM DISCONTINUED OPERATIONSCash used for operating activities of discontinued operations was$0.4 billion in 2023,an increase of$0.8 billion compared with 2022,primarily driven byhigher disbursements related to purchases of materials in prior periods,a decrease in net income and higher separation costs related to our former GEHealthCare business.Cash used for investing activities of discontinued operations was$3.1 billion in 2023,an increase of$2.7 billion compared with 2022,primarily driven bythe deconsolidation of GE HealthCare cash and equivalents of$1.8 billion and higher net settlements between our discontinued operations and businesses incontinuing operations of$0.9 billion.Cash from financing activities of discontinued operations was$2.0 billion in 2023,an increase of$2.0 billion compared with 2022,primarily driven by GEHealthCares long-term debt issuance in connection with the spin-off of$2.0 billion.CRITICAL ACCOUNTING ESTIMATES.Refer to the Other Items-Insurance section for further discussion of the accounting estimates and assumptions inour insurance reserves and their sensitivity to change.See Notes 1 and 13 for further information.Please refer to the Critical Accounting Estimates and Note 1 tothe consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31,2022 for additional discussion of accounting policiesand critical accounting estimates.OTHER ITEMS INSURANCE.The run-off insurance operations of North American Life and Health(NALH)include Employers Reassurance Corporation(ERAC)and UnionFidelity Life Insurance Company(UFLIC).ERAC primarily assumed long-term care insurance and life insurance from numerous cedents under various types ofreinsurance treaties and stopped accepting new policies after 2008.UFLIC primarily assumed long-term care insurance,structured settlement annuities with andwithout life contingencies and variable annuities from Genworth Financial Inc.(Genworth)and has been closed to new business since 2004.On January 1,2023,we adopted Accounting Standards Update No.2018-12,Financial Services Insurance(Topic 944):Targeted Improvements to theAccounting for Long-Duration Contracts(ASU 2018-12).See Notes 1 and 13 for further information.Key Portfolio CharacteristicsLong-term care insurance contracts.The long-term care insurance contracts we reinsure provide coverage at varying levels of benefits to policyholders and mayinclude attributes(e.g.,lifetime benefit periods,inflation protection options,and joint life policies)that could result in claimants being on claim for longer periodsor at higher daily claim costs,or alternatively limiting the premium paying period,compared to contracts with a lower level of benefits.Presented in the table below are reserve balances and key attributes of our long-term care insurance portfolio.December 31,2022ERACUFLICTotalGAAP:Ending balance of reserves at locked-in rate$17,750$5,318$23,068 Gross statutory reserves(a)24,670 6,354 31,024 Number of policies in force181,700 52,600 234,300 Number of covered lives in force241,500 52,600 294,100 Average policyholder attained age77 84 79 GAAP:Ending balance of reserves at locked-in rate per policy(in actual dollars)$97,700$101,100$98,500 GAAP:Ending balance of reserves at locked-in rate per covered life(in actual dollars)73,500 101,100 78,400 Statutory:Gross reserves per policy(in actual dollars)(a)135,800 120,800 132,400 Statutory:Gross reserves per covered life(in actual dollars)(a)102,200 120,800 105,500 Percentage of policies with:Lifetime benefit period692a%Inflation protection option80%Joint lives33&%Percentage of policies that are premium paying69up%Policies on claim9,700 8,200 17,900(a)Statutory balances reflect recognition of the estimated remaining statutory increase in reserves of approximately$1.8 billion through 2023 under thepermitted accounting practice discussed further in Note 13.*Non-GAAP Financial Measure2023 1Q FORM 10-Q 13Structured settlement annuities.We reinsure approximately 26,000 structured settlement annuities with an average attained age of 55.These structuredsettlement annuities were primarily underwritten on impaired lives(i.e.,shorter-than-average life expectancies)at origination and have projected paymentsextending decades into the future.Our primary risks associated with these contracts include mortality(i.e.,life expectancy or longevity),mortality improvement(i.e.,assumed rate that mortality is expected to reduce over time),which may extend the duration of payments on life contingent contracts beyond our estimates,and reinvestment risk(i.e.,a low interest rate environment).Unlike long-term care insurance,structured settlement annuities offer no ability to require additionalpremiums or reduce benefits.Life Insurance contracts.Our life reinsurance business typically covers the mortality risk associated with various types of life insurance policies that we reinsurefrom approximately 150 ceding company relationships where we pay a benefit based on the death of a covered life.At December 31,2022,across our U.S.andCanadian life insurance portfolio,we reinsure approximately$59 billion of net amount at risk(i.e.,difference between the death benefit and any accrued cashvalue)from approximately 1.4 million policies with an average attained age of 61.In 2022,our incurred claims were approximately$0.5 billion with an averageindividual claim of approximately$46,000.The covered products primarily include permanent life insurance and 20-and 30-year level term insurance.Weanticipate a significant portion of the 20-year level term policies,which represent approximately 17%of the net amount of risk,to lapse through 2024 as thepolicies reach the end of their 20-year level premium period.Critical Accounting Estimates.Our insurance reserves include the following key accounting estimates and assumptions described below.Future policy benefit reserves.Future policy benefit reserves represent the present value of future benefits to be paid to or on behalf of policyholders and relatedexpenses less the present value of future net premiums and are estimated based on actuarial assumptions such as mortality,morbidity,terminations,andexpenses.The liability is measured for each group of contracts(i.e.cohorts)using current cash flow assumptions.We regularly monitor emerging experience in our run-off insurance operations and industry developments to identify trends that may help us refine our reserveassumptions.We review at least annually in the third quarter,future policy benefit reserves cash flow assumptions,except related claim expenses which remainlocked-in,and if the review concludes that the assumptions need to be updated,future policy benefit reserves are adjusted retroactively to the ASU2018-12transition date based on the revised net premium ratio using actual historical experience,updated cash flow assumptions,and the locked-in discount rate withthe effect of those changes recognized in current period earnings.Our annual review procedures include updating certain experience studies since our lastcompleted review,independent actuarial analysis(principally on long-term care insurance exposures)and review of industry benchmarks.The review ofexperience and assumptions is a comprehensive and complex process that depends on a number of factors,many of which are interdependent and requireevaluation individually and in the aggregate across all insurance products.The vast majority of our run-off insurance operations consists of reinsurance frommultiple ceding insurance entities pursuant to treaties having complex terms and conditions.The review relies on claim and policy information provided by theseceding entities and considers the reinsurance treaties and underlying policies.In order to utilize that information for purposes of completing experience studiescovering all key assumptions,we perform detailed procedures to conform and validate the data received from the ceding entities.Our long-term care insuranceportfolio includes coverage where credible claim experience for higher attained ages is still emerging,and to the extent future experience deviates from currentexpectations,new projections of claim costs extending over the expected life of the policies may be required.Significant uncertainties exist in making projectionsfor these long-term care insurance contracts,which requires that we consider a wide range of possible outcomes.The primary cash flow assumptions used in the annual review include:Morbidity.Morbidity assumptions used in estimating future policy benefit reserves are based on estimates of expected incidences of disability amongpolicyholders and the costs associated with these policyholders asserting claims under their contracts,and these estimates account for any expected futuremorbidity improvement.For long-term care insurance exposures,estimating expected future costs includes assessments of incidence(probability of a claim),utilization(amount of available benefits expected to be incurred)and continuance(how long the claim will last,including claim terminations due to death orrecovery).Rate of Change in Morbidity.Our review incorporates our best estimates of projected future changes in the morbidity rates reflected in our base claim incidencerates.These estimates draw upon a number of inputs,some of which are subjective,and all of which are interpreted and applied in the exercise of professionalactuarial judgment in the context of the characteristics specific to our portfolios.This exercise of actuarial judgment considers factors such as the work performedby internal and external independent actuarial experts engaged to advise us in our annual review,the observed actual experience in our portfolios measuredagainst our base assumptions,industry developments,and other trends,including advances in the state of medical care and health-care technologydevelopment.Terminations.Terminations include active life mortality and lapse.Mortality assumptions used in estimating future policy benefit reserves are based on publishedmortality tables as adjusted for the results of our experience studies and estimates of expected future mortality improvement.Lapse refers to the rate at whichthe underlying policies are cancelled due to non-payment of premiums by a policyholder.Lapse rate assumptions used in estimating the present value of futurepolicy benefit reserves are based on the results of our experience studies and reflect actuarial judgment.Future long-term care premium rate increases.Substantially all long-term care insurance policies that are currently premium paying allow the issuing insuranceentity to increase premiums,or alternatively allow the policyholder the option to decrease benefits,with approval by state regulators,should actual experienceemerge worse than what was projected when such policies were initially underwritten.As a reinsurer,we rely upon the primary insurers that issued theunderlying policies to file proposed premium rate increases on those policies with the relevant state insurance regulators.While we have no direct ability to seekor to institute such premium rate increases,we often collaborate with the primary insurers in accordance with reinsurance contractual terms to file proposedpremium rate increases.The amount of times that rate increases have occurred varies by ceding company.We consider recent experience of rate increasefilings made by our ceding companies along with state insurance regulatory processes and precedents in establishing our current expectations.2023 1Q FORM 10-Q 14Included in Insurance losses and annuity benefits in our Statement of Earnings(Loss)for the years ended December 31,2022 and 2021,are favorable pre-taxadjustments of$404 million and$408 million,respectively,from updating the net premium ratio after updating for actual historical experience each quarter andupdating of future cash flow assumptions in the third quarter of each year.Sensitivities.The following table provides sensitivities with respect to the impact of changes of key cash flow assumptions underlying our future policy benefitreserves using the locked-in discount rate assumption and have been estimated across the entire product line rather than at an individual cohort level.As ourinsurance operations are in run-off,the locked-in discount rate at the ASU 2018-12 transition date is the discount rate used for the computation of interestaccretion on future policy benefit reserves.Many of our assumptions are interdependent and require evaluation individually and in the aggregate across allinsurance products.Small changes in the amounts used in the sensitivities could result in materially different outcomes from those reflected below.In addition,the effects of changes to cash flow assumptions underlying our future policy benefit reserves may be partially or wholly reflected in the period in which theassumptions are changed and/or over future periods and may vary across cohorts.2021 assumption2022 assumptionHypothetical change in 2022assumptionEstimated adverse impactto projected present valueof future cash flows(In millions,pre-tax)Morbidity:Long-term care insuranceincidence ratesBased on companyexperienceBased on companyexperience5%increase in incidence rates$600Long-term care insurance claimcontinuanceBased on companyexperienceBased on companyexperience5%reduction in disabled lifedeaths$1,200Long-term care insuranceutilizationBased on companyexperience and affected byfuture cost of care inflationBased on companyexperience and affected byfuture cost of care inflation5%increase in utilization$1,100Long-term care insurance morbidityimprovementDecreases with attainedage,ends at age 100Decreases with attained age,ends at age 10025 basis point reduction by agewith 0%floorNo morbidity improvement$300$1,300Active life terminations:Long-term care insurancemortalityBased on companyexperienceBased on companyexperience5%reduction in mortality$300Long-term care insurance futurepremium rate increasesVaries by block based onfiling experienceVaries by block based onfiling experience25verse change insuccess rate on premium rateincrease actions not yetapproved$200Life insurance mortalityBased on companyexperienceBased on companyexperience5%increase in mortality$300While higher assumed inflation,holding all other assumptions constant,would result in unfavorable impacts to the projected present value of future cash flows inthe table above,it would be expected to be mitigated by more long-term care insurance policies reaching contractual daily or monthly benefit caps and byincreased investment income from higher portfolio yields.Our run-off insurance subsidiaries are required to prepare statutory financial statements in accordance with statutory accounting practices.Statutory accountingpractices are set forth by the National Association of Insurance Commissioners(NAIC)as well as state laws,regulation and general administrative rules and candiffer in certain respects from GAAP and would result in several of the sensitivities described in the table above being less impactful on our statutory reserves.See Capital Resources and Liquidity and Notes 1,3 and 13 for further information related to our run-off insurance operations.NON-GAAP FINANCIAL MEASURES.We believe that presenting non-GAAP financial measures provides management and investors useful measures toevaluate performance and trends of the total company and its businesses.This includes adjustments in recent periods to GAAP financial measures to increaseperiod-to-period comparability following actions to strengthen our overall financial position and how we manage our business.In addition,managementrecognizes that certain non-GAAP terms may be interpreted differently by other companies under different circumstances.In various sections of this report wehave made reference to the following non-GAAP financial measures in describing our(1)revenues,specifically organic revenues by segment;organic revenues;and equipment and services organic revenues and(2)profit,specifically organic profit and profit margin by segment;Adjusted profit and profit margin;Adjustedorganic profit and profit margin;Adjusted earnings(loss);Adjusted income tax rate;and Adjusted earnings(loss)per share(EPS),and(3)cash flows,specificallyfree cash flows(FCF).The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financialmeasures follow.2023 1Q FORM 10-Q 15ORGANIC REVENUES,PROFIT(LOSS)AND PROFIT MARGIN BY SEGMENT(NON-GAAP)RevenuesSegment profit(loss)Profit marginThree months ended March 3120232022V 232022V 232022V ptsAerospace(GAAP)$6,981$5,603 25%$1,326$908 46.0.2%2.8ptsLess:acquisitions Less:business dispositions Less:foreign currency effect(6)(1)30 4 Aerospace organic(Non-GAAP)$6,987$5,604 25%$1,295$904 43.5.1%2.4ptsRenewable Energy(GAAP)$2,837$2,871(1)%$(414)$(434)5%(14.6)%(15.1)%0.5ptsLess:acquisitions Less:business dispositions Less:foreign currency effect(159)7(22)Renewable Energy organic(Non-GAAP)$2,997$2,863 5%$(392)$(434)10%(13.1)%(15.2)%2.1ptsPower(GAAP)$3,820$3,501 9%$75$63 19%2.0%1.8%0.2ptsLess:acquisitions Less:business dispositions Less:foreign currency effect(67)(16)(37)(20)Power organic(Non-GAAP)$3,887$3,517 11%$112$83 35%2.9%2.4%0.5ptsWe believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established,ongoing operations by excluding the effect of acquisitions,dispositions and foreign currency,which includes translational and transactional impacts,as theseactivities can obscure underlying trends.ORGANIC REVENUES(NON-GAAP)Three months ended March 3120232022V%Total revenues(GAAP)$14,486$12,675 14%Less:Insurance revenues791 764 Adjusted revenues(Non-GAAP)$13,695$11,910 15%Less:acquisitions 1 Less:business dispositions Less:foreign currency effect(a)(235)(9)Organic revenues(Non-GAAP)$13,929$11,919 17%(a)Foreign currency impact in 2023 was primarily driven by U.S.dollar appreciation against the euro,Chinese renminbi and British pound.We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established,ongoing operations by excluding the effect of revenues from our run-off Insurance business,acquisitions,dispositions and foreign currency,which includestranslational and transactional impacts,as these activities can obscure underlying trends.EQUIPMENT AND SERVICES ORGANIC REVENUES(NON-GAAP)Three months ended March 3120232022V%Total equipment revenues(GAAP)$5,287$4,608 15%Less:acquisitions Less:business dispositions Less:foreign currency effect(170)(1)Equipment organic revenues(Non-GAAP)$5,458$4,609 18%Total services revenues(GAAP)$8,407$7,302 15%Less:acquisitions 1 Less:business dispositions Less:foreign currency effect(64)(8)Services organic revenues(Non-GAAP)$8,471$7,309 16%We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established,ongoing operations by excluding the effect of acquisitions,dispositions and foreign currency,which includes translational and transactional impacts,as theseactivities can obscure underlying trends.2023 1Q FORM 10-Q 16ADJUSTED PROFIT AND PROFIT MARGIN(NON-GAAP)Three months ended March 3120232022V%Total revenues(GAAP)$14,486$12,67514%Less:Insurance revenues(Note 13)791764Adjusted revenues(Non-GAAP)$13,695$11,91015%Total costs and expenses(GAAP)$14,075$13,9041%Less:Insurance cost and expenses(Note 13)722658Less:interest and other financial charges(a)257371Less:non-operating benefit cost(income)(385)(105)Less:restructuring&other(a)15138Less:separation costs(a)20599Less:Steam asset sale impairment(a)824Less:Russia and Ukraine charges(a)230Add:noncontrolling interests(27)14Add:EFS benefit from taxes(51)(47)Adjusted costs(Non-GAAP)$13,047$11,75511%Other income(loss)(GAAP)$6,081$49FLess:gains(losses)on equity securities(a)5,906(219)Less:restructuring&other(a)3Less:gains(losses)on purchases and sales of business interests(a)(55)4Adjusted other income(loss)(Non-GAAP)$230$260(12)%Profit(loss)(GAAP)$6,492$(1,180)FProfit(loss)margin(GAAP)44.8%(9.3)T.1ptsAdjusted profit(loss)(Non-GAAP)$877$415FAdjusted profit(loss)margin(Non-GAAP)6.4%3.5%2.9pts(a)See the Corporate and Other Consolidated Information sections for further information.We believe that adjusting profit to exclude the effects of items that are not closely associated with ongoing operations provides management and investors witha meaningful measure that increases the period-to-period comparability.Gains(losses)and restructuring and other items are impacted by the timing andmagnitude of gains associated with dispositions,and the timing and magnitude of costs associated with restructuring and other activities.ADJUSTED ORGANIC PROFIT(NON-GAAP)Three months ended March 3120232022Vjusted profit(loss)(Non-GAAP)$877$415 FLess:acquisitions(6)(5)Less:business dispositions Less:foreign currency effect(a)(81)(14)Adjusted organic profit(loss)(Non-GAAP)$964$434 FAdjusted profit(loss)margin(Non-GAAP)6.4%3.5%2.9 ptsAdjusted organic profit(loss)margin(Non-GAAP)6.9%3.6%3.3 pts(a)Included foreign currency negative effect on revenues of$235 million and positive effect on operating costs and other income(loss)of$154 million for thethree months ended March 31,2023.We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established,ongoing operations by excluding the effect of acquisitions,dispositions and foreign currency,which includes translational and transactional impacts,as theseactivities can obscure underlying trends.2023 1Q FORM 10-Q 17ADJUSTED EARNINGS(LOSS)ANDADJUSTED INCOME TAX RATE(NON-GAAP)(Per-share amounts in dollars)20232022Three months ended March 31EarningsEPSEarningsEPSEarnings(loss)from continuing operations(GAAP)(Note 18)$6,097$5.56$(1,276)$(1.16)Insurance earnings(loss)(pre-tax)710.061080.10Tax effect on Insurance earnings(loss)(16)(0.01)(24)(0.02)Less:Insurance earnings(loss)(net of tax)(Note 13)540.05840.08Earnings(loss)excluding Insurance(Non-GAAP)$6,043$5.51$(1,360)$(1.24)Non-operating benefit(cost)income(pre-tax)(GAAP)3850.351050.10Tax effect on non-operating benefit(cost)income(81)(0.07)(22)(0.02)Less:Non-operating benefit(cost)income(net of tax)3040.28830.08Gains(losses)on purchases and sales of business interests(pre-tax)(a)(55)(0.05)4Tax effect on gains(losses)on purchases and sales of business interests1(1)Less:Gains(losses)on purchases and sales of business interests(net of tax)(53)(0.05)3Gains(losses)on equity securities(pre-tax)(a)5,9065.39(219)(0.20)Tax effect on gains(losses)on equity securities(b)(c)(20)(0.02)Less:Gains(losses)on equity securities(net of tax)5,9065.39(239)(0.22)Restructuring&other(pre-tax)(a)(151)(0.14)(35)(0.03)Tax effect on restructuring&other320.0380.01Less:Restructuring&other(net of tax)(119)(0.11)(27)(0.02)Separation costs(pre-tax)(a)(205)(0.19)(99)(0.09)Tax effect on separation costs(56)(0.05)(24)(0.02)Less:Separation costs(net of tax)(261)(0.24)(123)(0.11)Steam asset sale impairment(pre-tax)(a)(824)(0.75)Tax effect on Steam asset sale impairment840.08Less:Steam asset sale impairment(net of tax)(740)(0.67)Russia and Ukraine charges(pre-tax)(a)(230)(0.21)Tax effect on Russia and Ukraine charges150.01Less:Russia and Ukraine charges(net of tax)(215)(0.20)Less:Excise tax on preferred stock redemption(30)(0.03)Adjusted earnings(loss)(Non-GAAP)$296$0.27$(102)$(0.09)Earnings(loss)from continuing operations before taxes(GAAP)$6,492$(1,180)Less:Total adjustments above(pre-tax)5,950(1,190)Adjusted earnings before taxes(Non-GAAP)$542$9Provision(benefit)for income taxes(GAAP)$271$29Less:Tax effect on adjustments above119(16)Adjusted provision(benefit)for income taxes(Non-GAAP)$152$45Income tax rate(GAAP)4.2%(2.5)justed income tax rate(Non-GAAP)28.0P0.0%(a)See the Corporate and Other Consolidated Information sections for further information.(b)Includes tax benefits available to offset the tax on gains(losses)on equity securities.(c)Includes related tax valuation allowances.Earnings-per-share amounts are computed independently.As a result,the sum of per-share amounts may not equal the total.The service cost for our pension and other benefit plans are included in Adjusted earnings*,which represents the ongoing cost of providing pension benefits toour employees.The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance.We believe theretained cost in Adjusted earnings*and the Adjusted tax rate*provides management and investors a useful measure to evaluate the performance of the totalcompany and increases period-to-period comparability.We also use Adjusted EPS*as a performance metric at the company level for our annual executiveincentive plan for 2023.*Non-GAAP Financial Measure2023 1Q FORM 10-Q 18FREE CASH FLOWS(FCF)(NON-GAAP)Three months ended March 3120232022CFOA(GAAP)$155$(924)Less:Insurance CFOA6(15)CFOA excluding Insurance(Non-GAAP)$149$(909)Add:gross additions to property,plant and equipment(279)(239)Add:gross additions to internal-use software(20)(22)Less:separation cash expenditures(204)(3)Less:Corporate restructuring cash expenditures(32)Less:taxes related to business sales(16)Free cash flows(Non-GAAP)$102$(1,169)We believe investors may find it useful to compare free cash flows*performance without the effects of CFOA related to our run-off Insurance business,separation cash expenditures,Corporate restructuring cash expenditures(associated with the separation-related program announced in October 2022)andtaxes related to business sales.We believe this measure will better allow management and investors to evaluate the capacity of our operations to generate freecash flows.CONTROLS AND PROCEDURES.Under the direction of our Chief Executive Officer and Chief Financial Officer,we evaluated our disclosure controls andprocedures and internal control over financial reporting and concluded that(i)our disclosure controls and procedures were effective as of March 31,2023,and(ii)no change in internal control over financial reporting occurred during the quarter ended March 31,2023,that has materially affected,or is reasonably likely tomaterially affect,such internal control over financial reporting.OTHER FINANCIAL DATAPURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.On March 6,2022,the Board of Directors authorized up to$3billion of common share repurchases.We repurchased 3,225 thousand shares for$276 million during the three months ended March 31,2023 under thisauthorization.PeriodTotal number ofshares purchasedAverage price paidper shareTotal number ofshares purchasedas part of our sharerepurchaseauthorizationApproximate dollarvalue of shares thatmay yet bepurchased underour sharerepurchaseauthorization(Shares in thousands)2023January$February1,786 84.23 1,786 March1,438 87.62 1,438 Total3,225$85.74 3,225$1,749*Non-GAAP Financial Measure2023 1Q FORM 10-Q 19STATEMENT OF EARNINGS(LOSS)(UNAUDITED)Three months ended March 31(In millions,per-share amounts in dollars)20232022Sales of equipment$5,287$4,608 Sales of services8,407 7,302 Insurance revenues(Note 13)791 764 Total revenues(Note 8)14,486 12,675 Cost of equipment sold5,605 5,148 Cost of services sold5,124 4,626 Selling,general and administrative expenses2,142 2,725 Separation costs(Note 20)205 99 Research and development431 403 Interest and other financial charges269 387 Insurance losses,annuity benefits and other costs(Note 13)684 620 Non-operating benefit cost(income)(385)(105)Total costs and expenses14,075 13,904 Other income(loss)(Note 19)6,081 49 Earnings(loss)from continuing operations before income taxes6,492(1,180)Benefit(provision)for income taxes(Note 16)(271)(29)Earnings(loss)from continuing operations6,221(1,209)Earnings(loss)from discontinued operations,net of taxes(Note 2)1,257 101 Net earnings(loss)7,478(1,108)Less net earnings(loss)attributable to noncontrolling interests(27)28 Net earnings(loss)attributable to the Company7,506(1,136)Preferred stock dividends and other(145)(52)Net earnings(loss)attributable to GE common shareholders$7,360$(1,188)Amounts attributable to GE common shareholdersEarnings(loss)from continuing operations$6,221$(1,209)Less net earnings(loss)attributable to noncontrolling interests,continuing operations(27)14 Earnings(loss)from continuing operations attributable to the Company6,248(1,224)Preferred stock dividends and other(145)(52)Earnings(loss)from continuing operations attributable to GE common shareholders6,103(1,276)Earnings(loss)from discontinued operations attributableto GE common shareholders1,257 88 Net earnings(loss)attributable to GE common shareholders$7,360$(1,188)Earnings(loss)per share from continuing operations(Note 18)Diluted earnings(loss)per share$5.56$(1.16)Basic earnings(loss)per share$5.60$(1.16)Net earnings(loss)per share(Note 18)Diluted earnings(loss)per share$6.71$(1.08)Basic earnings(loss)per share$6.76$(1.08)2023 1Q FORM 10-Q 20STATEMENT OF FINANCIAL POSITION(UNAUDITED)(In millions)March 31,2023December 31,2022Cash,cash equivalents and restricted cash$12,001$15,810 Investment securities(Note 3)12,814 7,609 Current receivables(Note 4)14,212 14,831 Inventories,including deferred inventory costs(Note 5)16,198 14,891 Current contract assets(Note 9)2,244 2,467 All other current assets(Note 10)1,464 1,400 Assets of businesses held for sale(Note 2)1,353 1,374 Current assets60,286 58,384 Investment securities(Note 3)38,262 36,027 Property,plant and equipment net(Note 6)12,170 12,192 Goodwill(Note 7)13,107 12,999 Other intangible assets net(Note 7)5,990 6,105 Contract and other deferred assets(Note 9)5,631 5,776 All other assets(Note 10)15,888 15,477 Deferred income taxes(Note 16)10,344 10,001 Assets of discontinued operations(Note 2)2,793 31,890 Total assets$164,472$188,851 Short-term borrowings(Note 11)$2,262$3,739 Accounts payable and equipment project payables(Note 12)15,063 15,399 Progress collections and deferred income(Note 9)16,586 16,216 All other current liabilities(Note 15)12,313 12,130 Liabilities of businesses held for sale(Note 2)1,953 1,944 Current liabilities48,177 49,428 Deferred income(Note 9)1,500 1,409 Long-term borrowings(Note 11)20,159 20,320 Insurance liabilities and annuity benefits(Note 13)39,082 36,845 Non-current compensation and benefits10,244 10,400 All other liabilities(Note 15)10,937 11,063 Liabilities of discontinued operations(Note 2)1,551 24,474 Total liabilities131,649 153,938 Preferred stock(Note 17)3 6 Common stock(Note 17)15 15 Accumulated other comprehensive income(loss)net attributable to GE(Note 17)(3,289)(2,272)Other capital30,729 34,173 Retained earnings84,955 82,983 Less common stock held in treasury(80,762)(81,209)Total GE shareholders equity31,652 33,696 Noncontrolling interests1,171 1,216 Total equity32,823 34,912 Total liabilities and equity$164,472$188,851 2023 1Q FORM 10-Q 21STATEMENT OF CASH FLOWS(UNAUDITED)Three months ended March 31(In millions)20232022Net earnings(loss)$7,478$(1,108)(Earnings)loss from discontinued operations activities(1,257)(101)Adjustments to reconcile net earnings(loss)to cash from(used for)operating activitiesDepreciation and amortization of property,plant and equipment367 403 Amortization of intangible assets(Note 7)140 922(Gains)losses on purchases and sales of business interests52(15)(Gains)losses on equity securities(5,906)206 Principal pension plans cost(Note 14)(271)94 Principal pension plans employer contributions(52)(49)Other postretirement benefit plans(net)(181)(224)Provision(benefit)for income taxes271 29 Cash recovered(paid)during the year for income taxes(172)(24)Changes in operating working capital:Decrease(increase)in current receivables536(610)Decrease(increase)in inventories,including deferred inventory costs(1,275)(732)Decrease(increase)in current contract assets294 473 Increase(decrease)in accounts payable and equipment project payables(201)(293)Increase(decrease)in progress collections and current deferred income205 173 Financial services derivatives net collateral/settlement3(155)All other operating activities125 89 Cash from(used for)operating activities continuing operations155(924)Cash from(used for)operating activities discontinued operations(413)369 Cash from(used for)operating activities(259)(556)Additions to property,plant and equipment(279)(239)Dispositions of property,plant and equipment7 28 Additions to internal-use software(20)(22)Sales of retained ownership interests2,025 1,302 Net(purchases)dispositions of insurance investment securities(1,556)(1,344)All other investing activities1,096 239 Cash from(used for)investing activities continuing operations1,273(37)Cash from(used for)investing activities discontinued operations(3,068)(407)Cash from(used for)investing activities(1,796)(444)Net increase(decrease)in borrowings(maturities of 90 days or less)1 45 Newly issued debt(maturities longer than 90 days)9 Repayments and other debt reductions(maturities longer than 90 days)(1,815)(1,267)Dividends paid to shareholders(203)(140)Redemption of GE preferred stock(3,000)Purchases of GE common stock for treasury(309)(39)All other financing activities87(30)Cash from(used for)financing activities continuing operations(5,230)(1,431)Cash from(used for)financing activities discontinued operations1,999(28)Cash from(used for)financing activities(3,232)(1,459)Effect of currency exchange rate changes on cash,cash equivalents and restricted cash65(75)Increase(decrease)in cash,cash equivalents and restricted cash(5,220)(2,534)Cash,cash equivalents and restricted cash at beginning of year19,092 16,859 Cash,cash equivalents and restricted cash at March 3113,871 14,325 Less cash,cash equivalents and restricted cash of discontinued operations at March 311,180 1,223 Cash,cash equivalents and restricted cash of continuing operations at March 31$12,691$13,101 2023 1Q FORM 10-Q 22STATEMENT OF COMPREHENSIVE INCOME(LOSS)(UNAUDITED)Three months ended March 31(In millions)20232022Net earnings(loss)$7,478$(1,108)Less:net earnings(loss)attributable to noncontrolling interests(27)28 Net earnings(loss)attributable to the Company$7,506$(1,136)Currency translation adjustments2,387(181)Benefit plans(2,319)240 Investment securities and cash flow hedges706(2,998)Long-duration insurance contracts(a)(1,793)3,682 Less:other comprehensive income(loss)attributable to noncontrolling interests(3)(2)Other comprehensive income(loss)attributable to the Company$(1,017)$745 Comprehensive income(loss)$6,458$(365)Less:comprehensive income(loss)attributable to noncontrolling interests(30)26 Comprehensive income(loss)attributable to the Company$6,489$(391)(a)Represents the net after-tax change in future policy benefit reserves and related reinsurance recoverables from updating the discount rate.See Notes 1 and13 for further information.STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY(UNAUDITED)Three months ended March 31(In millions)20232022Preferred stock issued(a)$3$6 Common stock issued$15$15 Beginning balance(2,272)(4,860)Currency translation adjustments2,388(177)Benefit plans(2,317)238 Investment securities and cash flow hedges706(2,998)Long-duration insurance contracts(1,793)3,682 Accumulated other comprehensive income(loss)$(3,289)$(4,115)Beginning balance34,173 34,691 Gains(losses)on treasury stock dispositions(619)(396)Stock-based compensation73 91 Other changes(a)(2,898)5 Other capital$30,729$34,391 Beginning balance82,983 83,286 Net earnings(loss)attributable to the Company7,506(1,136)Dividends and other transactions with shareholders(b)(5,534)(141)Retained earnings$84,955$82,009 Beginning balance(81,209)(81,093)Purchases(311)(39)Dispositions759 459 Common stock held in treasury$(80,762)$(80,673)GE shareholders equity balance31,652 31,631 Noncontrolling interests balance1,171 1,278 Total equity balance at March 31$32,823$32,909(a)Included$3,000 million decrease substantially all in Other capital related to our redemption of GE Series D preferred stock in the first quarter of 2023.(b)Included$5,300 million decrease in Retained earnings reflecting a pro-rata distribution of approximately 80.1%of the shares of GE HealthCare on January 3,2023.2023 1Q FORM 10-Q 23NOTE 1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.Our financial statements are prepared inconformity with U.S.generally accepted accounting principles(GAAP),which requires us to make estimates based on assumptions about current,and for someestimates,future,economic and market conditions which affect reported amounts and related disclosures in our financial statements.Although our currentestimates 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.Such changes could result in future impairments of goodwill,intangibles,long-lived assets and investment securities,revisions to estimated profitability on long-term product service agreements,incremental credit losses onreceivables and debt securities,a change in the carrying amount of our tax assets and liabilities,or a change in our insurance liabilities and pension obligationsas of the time of a relevant measurement event.In preparing our Statement of Cash Flows,we make certain adjustments to reflect cash flows that cannot otherwise be calculated by changes in our Statementof Financial Position.These adjustments may include,but are not limited to,the effects of currency exchange,acquisitions and dispositions of businesses,businesses classified as held for sale,the timing of settlements to suppliers for property,plant and equipment,non-cash gains/losses and other balance sheetreclassifications.We have reclassified certain prior-year amounts to conform to the current-years presentation.Unless otherwise noted,tables are presented in U.S.dollars inmillions.Certain columns and rows may not add due to the use of rounded numbers.Percentages presented are calculated from the underlying numbers inmillions.Earnings per share amounts are computed independently for earnings from continuing operations,earnings from discontinued operations and netearnings.As a result,the sum of per-share amounts may not equal the total.Unless otherwise indicated,information in these notes to consolidated financialstatements relates to continuing operations.Certain of our operations have been presented as discontinued.We present businesses whose disposal representsa strategic shift that has,or will have,a major effect on our operations and financial results as discontinued operations when the components meet the criteria forheld for sale,are sold,or spun-off.See Note 2 for further information.On January 3,2023,General Electric Company(the Company or GE)completed the previously announced separation(the Separation)of its HealthCarebusiness,into a separate,independent publicly traded company.The historical results of GE HealthCare and certain assets and liabilities included in the spin-offare now reported in GEs consolidated financial statements as discontinued operations.See Note 2 for further information.The accompanying consolidated financial statements and notes are unaudited.The results reported in these financial statements should not be regarded asnecessarily indicative of results that may be expected for the entire year.These financial statements should be read in conjunction with the financial statements,notes and significant accounting policies included in our Annual Report on Form 10-K for the year ended December 31,2022.INSURANCE.Our run-off insurance operations include providing insurance and reinsurance for life and health risks and providing certain annuity products.Primary product types include long-term care,structured settlement annuities,life and disability insurance contracts and investment contracts.Insurancecontracts are contracts with significant mortality and/or morbidity risks,while investment contracts are contracts without such risks.Insurance revenues arecomprised primarily of premiums and investment income.For traditional long-duration insurance contracts,we report premiums as revenue when due.Premiumsreceived on non-traditional long-duration insurance contracts and investment contracts,including annuities without significant mortality risk,are not reported asrevenues but rather as deposit liabilities.We recognize revenues for charges and assessments on these contracts,mostly for mortality,administration andsurrender.Interest credited to policyholder accounts is charged to expense.Future policy benefit reserves represent the present value of future benefits to be paid to or on behalf of policyholders and related expenses less the presentvalue of future net premiums.The liability is measured by each group of contracts(i.e.,cohorts)using current cash flow assumptions.As a run-off insuranceoperation consisting substantially all of reinsurance,contracts are grouped into cohorts by legal entity and product type,based on the date the reinsurancecontract was consummated.Future policy benefit reserves are adjusted each period as a result of updating lifetime net premium ratios for differences betweenactual and expected experience with the retroactive effect of those variances recognized in current period earnings.We review at least annually in the thirdquarter,future policy benefit reserves cash flow assumptions,except related claim expenses which remain locked-in,and if the review concludes that theassumptions need to be updated,future policy benefit reserves are adjusted retroactively based on the revised net premium ratio using actual historicalexperience,updated cash flow assumptions,and the locked-in discount rate with the effect of those changes recognized in current period earnings.As our insurance operations are in run-off,the locked-in discount rate is the discount rate used for the computation of interest accretion on future policy benefitreserves recognized in earnings.However,cash flows used to estimate future policy benefit reserves are also discounted using an upper-medium grade(i.e.,low credit risk)fixed-income instrument yield reflecting the duration characteristics of the liabilities and is updated each reporting period with changes recorded inAOCI.As a result,changes in the current discount rate at each reporting period will be recognized as an adjustment to AOCI and not earnings each period,whereas changes relating to cash flow assumptions will be recognized in the Statement of Earnings(Loss).2023 1Q FORM 10-Q 24Reinsurance recoverables are recorded when we cede insurance risk to third parties but are not relieved from our primary obligation to policyholders andcedents.As reinsurance recoverables are recognized in a manner consistent with the future policy benefit reserves relating to the underlying reinsurancecontracts,changes in reinsurance recoverables from updating the discount rate in each reporting period are also recognized in AOCI.The allowance for creditlosses on reinsurance recoverables is based on the locked-in future policy benefit reserves discount rate for purposes of assessing changes in each reportingperiod.As such,movements in the gross reinsurance recoverable balance resulting from changes in the discount rate do not impact the allowance for creditlosses.Following the recapture transaction effective in the fourth quarter of 2022,the remaining reinsurance recoverables are not material.Liabilities for investment contracts equal the account value,that is,the amount that accrues to the benefit of the contract or policyholder including creditedinterest and assessments through the financial statement date.See Note 13 for further information.ADOPTIONS OF NEW ACCOUNTING STANDARDS.On January 1,2023,we adopted Accounting Standards Update No.2018-12,Financial Services Insurance(Topic 944):Targeted Improvements to the Accounting for Long-Duration Contracts.The new guidance for measuring the liability for future policybenefits and related reinsurance recoverable asset was adopted on a modified retrospective basis such that those balances were adjusted to conform to the newguidance at the January 1,2021 transition date.We recognized a$7,285 million after-tax decrease in Total equity at January 1,2021 from the effect of transition date adjustments due to adoption of the newguidance,as presented in the following table.Retained EarningsAOCIDecember 31,2020$92,247$(9,749)Liability for future policy benefits,including removal of related balances in AOCI(1,853)(8,806)Reinsurance recoverables,net of allowance for credit losses48 3,542 Other contracts,including market risk benefits(202)(14)Effect of transition adjustments$(2,007)$(5,278)Adjusted balance,January 1,2021$90,240$(15,027)The following table summarizes the balance of and pre-tax changes to total Insurance liabilities and annuity benefits attributable to changes in the liability forfuture policy benefits and market risk benefits at the transition date,due to adoption of the new guidance.Long-termcareStructuredsettlementannuitiesLifeOthercontracts(a)OtheradjustmentsTotalDecember 31,2020$21,378$9,124$517$3,012$8,160$42,191 Change in discount rate assumptions14,654 4,369 283 19,306 Change in cash flow assumptions(effect of insufficientgross premiums)and elimination of negative reserves1,545 39 761 2,345 Adjustment for removal of related balances in AOCI (8,160)(8,160)Market risk benefits and other 269 269 Adjusted balance,January 1,202137,577 13,532 1,561 3,281 55,951 Less:reinsurance recoverables,net7,036 15 44 7,095 Adjusted balance,January 1,2021,net of reinsurancerecoverables$30,541$13,532$1,546$3,237$48,856(a)As of December 31,2020,includes investment contracts($2,049 million),claim reserves related to short-duration contracts at Electric Insurance Company(EIC),net of eliminations($399 million),and other($564 million).EIC is a property and casualty insurance company primarily providing insurance to GE andits employees.For the liability for future policy benefits and related reinsurance recoverables,the new guidance transition adjustments are reflected in both AOCI and Retainedearnings.The transition adjustment reflected in AOCI is related to the difference in the discount rate used pre-transition and the discount rate required under thenew guidance,which is equivalent to an upper-medium grade fixed-income instrument yield reflecting the duration characteristics of our insurance liabilities,atJanuary 1,2021,and does not represent a change in our ultimate expected cash flows associated with the liability for future policy benefits or relatedreinsurance recoverables.The transition adjustment in AOCI also reflects removal of certain Other adjustments previously recorded in the liability for futurepolicy benefits related to changes in net unrealized gains on investment securities.Whereas pre-transition,we annually performed premium deficiency testing in the aggregate across our run-off insurance portfolio,the new guidance requires thegrouping of contracts(i.e.,cohorts)at a more granular level.Due to this lower level of aggregation,combined with the conversion of our long-term careinsurance claim cost projection models to first principles models,we identified certain cohorts at transition having insufficient gross premiums in our long-termcare insurance portfolio.A first principles model separates morbidity assumptions such as incidence(probability of a claim),continuance(length of a claim)andutilization(percentage of the d
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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30,2022OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _Commission file number 001-00035GENERAL ELECTRIC COMPANY(Exact name of registrant as specified in its charter)New York14-0689340(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)5 Necco Street BostonMA02210(Address of principal executive offices)(Zip Code)(Registrants telephone number,including area code)(617)443-3000Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon stock,par value$0.01 per shareGENew York Stock Exchange1.250%Notes due 2023GE 23ENew York Stock Exchange0.875%Notes due 2025GE 25New York Stock Exchange1.875%Notes due 2027GE 27ENew York Stock Exchange1.500%Notes due 2029GE 29New York Stock Exchange7 1/2%Guaranteed Subordinated Notes due 2035GE/35New York Stock Exchange2.125%Notes due 2037GE 37New York Stock ExchangeIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 duringthe preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements forthe past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company or anemerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and emerging growth company inRule 12b-2 of the Exchange Act.(Check one):Large accelerated filerAccelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No There were 1,092,668,140 shares of common stock with a par value of$0.01 per share outstanding at September 30,2022.TABLE OF CONTENTSPageForward-Looking Statements3About General Electric4Managements Discussion and Analysis of Financial Condition and Results of Operations(MD&A)4Consolidated Results4Segment Operations6Corporate11Other Consolidated Information12Capital Resources and Liquidity13Critical Accounting Estimates16Other Items16Non-GAAP Financial Measures18Controls and Procedures23Other Financial Data23Legal Proceedings23Financial Statements and Notes24Statement of Earnings(Loss)24Statement of Financial Position26Statement of Cash Flows27Statement of Comprehensive Income(Loss)28Statement of Changes in Shareholders Equity28Note 1 Basis of Presentation and Summary of Significant Accounting Policies29Note 2 Businesses Held for Sale and Discontinued Operations29Note 3 Investment Securities30Note 4 Current and Long-Term Receivables32Note 5 Inventories,Including Deferred Inventory Costs33Note 6 Property,Plant and Equipment and Operating Leases33Note 7 Goodwill and Other Intangible Assets33Note 8 Revenues34Note 9 Contract and Other Deferred Assets&Progress Collections and Deferred Income34Note 10 All Other Assets35Note 11 Borrowings36Note 12 Insurance Liabilities and Annuity Benefits36Note 13 Postretirement Benefit Plans37Note 14 Current and All Other Liabilities38Note 15 Income Taxes38Note 16 Shareholders Equity38Note 17 Earnings Per Share Information39Note 18 Other Income(Loss)39Note 19 Financial Instruments40Note 20 Variable Interest Entities41Note 21 Commitments,Guarantees,Product Warranties and Other Loss Contingencies42Exhibits44Form 10-Q Cross Reference Index44Signatures44FORWARD-LOOKING STATEMENTS.Our public communications and SEC filings may contain statements related to future,not past,events.Theseforward-looking statements often address our expected future business and financial performance and financial condition,and often contain words such asexpect,anticipate,intend,plan,believe,seek,see,will,would,estimate,forecast,target,preliminary,or range.Forward-lookingstatements by their nature address matters that are,to different degrees,uncertain,such as statements about the impacts of macroeconomic and marketconditions and volatility on our business operations,financial results and financial position and on the global supply chain and world economy;our expectedfinancial performance,including cash flows,revenues,organic growth,margins,earnings and earnings per share;impacts related to the COVID-19 pandemic;planned and potential transactions,including our plan to pursue spin-offs of GE HealthCare and our portfolio of energy businesses that are planned to becombined as GE Vernova(Renewable Energy,Power,Digital and Energy Financial Services);our de-leveraging plans,including leverage ratios and targets,thetiming and nature of actions to reduce indebtedness and our credit ratings and outlooks;our funding and liquidity;our businesses cost structures and plans toreduce costs;restructuring,goodwill impairment or other financial charges;or tax rates.For us,particular areas where risks or uncertainties could cause our actual results to be materially different than those expressed in our forward-lookingstatements include:our success in executing and completing asset dispositions or other transactions,including our plan to pursue spin-offs of GE HealthCare and GE Vernova,and sales or other dispositions of our equity interests in Baker Hughes Company(Baker Hughes)and AerCap Holdings N.V.(AerCap)and our expectedequity interest in GE HealthCare after its spin-off,the timing for such transactions,the ability to satisfy any applicable pre-conditions,and the expectedproceeds,consideration and benefits to GE;changes in macroeconomic and market conditions and market volatility,including impacts related to the COVID-19 pandemic,risk of recession,inflation,supply chain constraints or disruptions,rising interest rates,the value of securities and other financial assets(including our equity interests in Baker Hughesand AerCap,and our expected equity interest in GE HealthCare after its spin-off),oil,natural gas and other commodity prices and exchange rates,and theimpact of such changes and volatility on our business operations,financial results and financial position;the continuing severity,magnitude and duration of the COVID-19 pandemic,including impacts of virus variants and resurgences,and of government,business and individual responses,such as continued or new government-imposed lockdowns and travel restrictions and aviation passenger confidence;our capital allocation plans,including de-leveraging actions to reduce GEs indebtedness,the capital structures of the three public companies that we plan toform from our businesses with the planned spin-offs,the timing and amount of dividends,share repurchases,acquisitions,organic investments,and otherpriorities;downgrades of our current short-and long-term credit ratings or ratings outlooks,or changes in rating application or methodology,and the related impact onour funding profile,costs,liquidity and competitive position;the amount and timing of our cash flows and earnings,which may be impacted by macroeconomic,customer,supplier,competitive,contractual and otherdynamics and conditions;capital and liquidity needs associated with our financial services operations,including in connection with our run-off insurance operations and mortgageportfolio in Poland(Bank BPH),the amount and timing of any required capital contributions and any strategic actions that we may pursue;global economic trends,competition and geopolitical risks,including impacts from the ongoing conflict between Russia and Ukraine and the relatedsanctions and other measures,decreases in the rates of investment or economic growth globally or in key markets we serve,or an escalation of sanctions,tariffs or other trade tensions between the U.S.and China or other countries,and related impacts on our businesses global supply chains and strategies;market developments or customer actions that may affect demand and the financial performance of major industries and customers we serve,such aspricing,cost,volume and the timing of customer investment and other factors in renewable energy markets;demand for air travel and other dynamicsrelated to the COVID-19 pandemic;conditions in key geographic markets;and other shifts in the competitive landscape for our products and services;operational execution by our businesses,including the success at our Renewable Energy business in improving product quality and fleet availability,executing on cost reduction initiatives and other aspects of operational performance,as well as the performance of Aerospace amidst the ongoing marketrecovery;changes in law,regulation or policy that may affect our businesses,such as trade policy and tariffs,regulation and incentives related to climate change(including the impact of the Inflation Reduction Act and other policies),and the effects of tax law changes;our decisions about investments in research and development,and new products,services and platforms,and our ability to launch new products in a cost-effective manner;our ability to increase margins through implementation of operational improvements,restructuring and other cost reduction measures;the impact of regulation and regulatory,investigative and legal proceedings and legal compliance risks,including the impact of Alstom,Bank BPH and otherinvestigative and legal proceedings;the impact of actual or potential quality issues or failures of our products or third-party products with which our products are integrated,and related costsand reputational effects;the impact of potential information technology,cybersecurity or data security breaches at GE or third parties;andthe other factors that are described in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31,2021 and ourQuarterly Report on Form 10-Q for the quarter ended March 31,2022,as such descriptions may be updated or amended in any future reports we file withthe SEC.These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements.We do notundertake to update our forward-looking statements.This document includes certain forward-looking projected financial information that is based on currentestimates and forecasts.Actual results could differ materially.2022 3Q FORM 10-Q 3ABOUT GENERAL ELECTRIC.General Electric Company(General Electric,GE or the Company)is a high-tech industrial company that operatesworldwide through its four segments,Aerospace,HealthCare,Renewable Energy,and Power.Our products include commercial and military aircraft engines andsystems;healthcare systems and pharmaceutical diagnostics;wind and other renewable energy generation equipment and grid solutions;and gas,steam,nuclear and other power generation equipment.We have significant global installed bases of equipment across these sectors,and services to support theseproducts are also an important part of our business alongside new equipment sales.In November 2021,we announced a strategic plan to form three industry-leading,global,investment-grade public companies from our(i)Aerospace business,(ii)HealthCare business and(iii)combined Renewable Energy,Power,Digital and Energy Financial Services businesses.In July 2022,we announced the new brand names for our three planned future companies:GE Aerospace,GE HealthCare and GE Vernova.Therefore,for purposes of this report,we refer to our reporting segments as Aerospace(previously Aviation),HealthCare(previously Healthcare),Renewable Energy and Power.The composition of these reporting segments is unchanged.GEs Internet address at ,Investor Relations website at and our corporate blog at ,as well asGEs Facebook page,Twitter accounts and other social media,including GE_Reports,contain a significant amount of information about GE,including financialand other information for investors.GE encourages investors to visit these websites from time to time,as information is updated and new information is posted.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(MD&A).Theconsolidated financial statements of General Electric Company are prepared in conformity with U.S.generally accepted accounting principles(GAAP).Unlessotherwise noted,tables are presented in U.S.dollars in millions.Certain columns and rows within tables may not add due to the use of rounded numbers.Percentages presented in this report are calculated from the underlying numbers in millions.Discussions throughout this MD&A are based on continuingoperations unless otherwise noted.The MD&A should be read in conjunction with the Financial Statements and Notes to the consolidated financial statements.In the accompanying analysis of financial information,we sometimes use information derived from consolidated financial data but not presented in our financialstatements prepared in accordance with GAAP.Certain of these data are considered“non-GAAP financial measures”under SEC rules.See the Non-GAAPFinancial Measures section for the reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financialmeasures.CONSOLIDATED RESULTSTHIRD QUARTER 2022 RESULTS.Total revenues were$19.1 billion,up$0.5 billion for the quarter,driven primarily by increases at Aerospace and HealthCare,partially offset by decreases at Renewable Energy and Power.Continuing earnings(loss)per share was$(0.14).Excluding the results from our run-off Insurance business,separation costs,restructuring costs,non-operatingbenefit costs,gains(losses)on equity securities and gains(losses)on purchases and sales of business interests,Adjusted earnings per share*was$0.35.Forthe three months ended September 30,2022,profit margin was(0.3)%and profit was down$0.6 billion,primarily due to a net loss on the value of equitysecurities of$0.5 billion compared to the prior year gain,a decrease in segment profit of$0.4 billion,a decrease in Insurance profit of$0.4 billion and separationcosts of$0.2 billion,partially offset by a decrease in non-operating benefit costs of$0.6 billion and a net gain on purchases and sales of businesses of$0.2billion compared to the prior year loss.Adjusted organic profit*decreased$0.3 billion(20%),driven primarily by a decrease at Renewable Energy,partially offsetby an increase at Aerospace and lower adjusted total corporate operating costs*.Cash flows from operating activities(CFOA)were$1.3 billion and$(1.5)billion for the nine months ended September 30,2022 and 2021,respectively.Cashflows from operating activities increased primarily due to a decrease in cash collateral paid net of settlements on interest rate derivative contracts,an increase innet income(after adjusting for amortization of intangible assets,non-cash losses related to our interests in AerCap and Baker Hughes and non-operating debtextinguishment costs)and an increase in cash from all other operating activities.Free cash flows*(FCF)were$0.5 billion and$(1.8)billion for the nine monthsended September 30,2022 and 2021,respectively.FCF*increased primarily due to the same reasons as noted for CFOA above,partially offset by an increasein cash used for working capital(after adjusting for the impact from discontinued factoring programs and eliminations related to our receivables factoring andsupply chain finance programs).See the Capital Resources and Liquidity-Statement of Cash Flows section for further information.Remaining performance obligation(RPO)is unfilled customer orders for products and product services(expected life of contract sales for product services)excluding any purchase order that provides the customer with the ability to cancel or terminate without incurring a substantive penalty.See Note 8 for furtherinformation.RPOSeptember 30,2022December 31,2021Equipment$44,734$45,065 Services196,029 194,755 Total RPO$240,763$239,820*Non-GAAP Financial Measure2022 3Q FORM 10-Q 4As of September 30,2022,RPO increased$0.9 billion from December 31,2021,primarily at Aerospace,from engines contracted under long-term serviceagreements that have now been put into service and contract modifications;partially offset by decreases at Power,from the continued wind down of the SteamPower new build coal business and sales outpacing new orders in Gas Power contractual services;at Renewable Energy,from the overall impact of a strongerU.S.dollar and sales exceeding new orders at Onshore Wind;and at HealthCare,from the impact of contract renewal timing in services.REVENUESThree months ended September 30Nine months ended September 302022202120222021Equipment revenues$8,082$8,903$22,549$25,172 Services revenues10,356 8,910 30,041 26,427 Insurance revenues646 756 2,179 2,295 Total revenues$19,084$18,569$54,769$53,893 For the three months ended September 30,2022,total revenues increased$0.5 billion(3%).Equipment revenues decreased,primarily at Renewable Energy,due to fewer wind turbine deliveries at Onshore Wind;and at Power,due to decreases in Gas Power HA turbine and aeroderivative deliveries and decreases inSteam Power equipment on the exit of new build coal;partially offset by increases at HealthCare,due to Imaging and Ultrasound,mainly due to strong growth inthe U.S.and Europe,the Middle East and Africa;and at Aerospace,due to an increase in commercial install and spare engine unit shipments versus the prioryear.Services revenues increased,primarily at Aerospace,due to higher prices,increased shop visit volume and higher volume of commercial spare partshipments;at Renewable Energy,primarily due to higher core services and more repower unit deliveries at Onshore Wind;and at HealthCare,primarily due tothe continued growth of Pharmaceutical Diagnostics(PDx)and Healthcare Systems(HCS);partially offset by a decrease at Power,due to lower plannedcontractual services outages at Gas Power and prior year Steam Power services volume that did not repeat.Insurance revenues decreased$0.1 billion(15%).Excluding the change in Insurance revenues,the net effects of acquisitions of$0.1 billion,the net effects of dispositions of$0.1 billion and the effects of astronger U.S.dollar of$0.6 billion,organic revenues*increased$1.3 billion(7%),with equipment revenues down$0.5 billion(6%)and services revenues up$1.8 billion(20%).Organic revenues*increased at Aerospace and HealthCare,partially offset by decreases at Renewable Energy and Power.For the nine months ended September 30,2022,total revenues increased$0.9 billion(2%).Equipment revenues decreased,primarily at Renewable Energy,due to fewer wind turbine deliveries at Onshore Wind and lower revenue at Grid;at Power,due to a decrease in Steam Power equipment on the exit of new buildcoal;and at Aerospace,due to lower GEnx engine production rates and product transition with fewer engine shipments on legacy programs;partially offset by anincrease at HealthCare,driven by Imaging,mainly due to strong growth in the U.S.and Europe,the Middle East and Africa,partially offset by China.Servicesrevenues increased,primarily at Aerospace,due to higher prices,increased shop visit volume and higher volume of commercial spare part shipments;atRenewable Energy,primarily due to higher services revenue at Onshore Wind from a larger installed base and more repower unit deliveries;and at HealthCare,driven by the continued growth of HCS;partially offset by a decrease at Power,due to prior year Steam Power services volume that did not repeat.Insurancerevenues decreased$0.1 billion(5%).Excluding the change in Insurance revenues,the net effects of acquisitions of$0.2 billion,the net effects of dispositions of$0.2 billion and the effects of astronger U.S.dollar of$1.3 billion,organic revenues*increased$2.3 billion(4%),with equipment revenues down$2.1 billion(8%)and services revenues up$4.4 billion(17%).Organic revenues*increased at Aerospace and HealthCare,partially offset by decreases at Renewable Energy and Power.EARNINGS(LOSS)AND EARNINGS(LOSS)PER SHAREThree months ended September 30Nine months ended September 30(Per-share in dollars and diluted)2022202120222021Continuing earnings(loss)attributable to GE common shareholders$(153)$603$(1,609)$(1)Continuing earnings(loss)per share$(0.14)$0.54$(1.46)$(0.01)For the three months ended September 30,2022,continuing earnings decreased$0.8 billion primarily due to a net loss on the value of equity securities of$0.5 billion compared to the prior year gain,a decrease in segment profit of$0.4 billion,a decrease in Insurance profit of$0.4 billion and separation costs of$0.2billion,partially offset by a decrease in non-operating benefit costs of$0.6 billion and a net gain on purchases and sales of businesses of$0.2 billion comparedto the prior year loss.Adjusted earnings*was$0.4 billion,a decrease of$0.2 billion.Profit margin was(0.3)%,a decrease from 3.1%.Adjusted profit*was$1.1billion,a decrease of$0.3 billion organically*,due to a decrease at Renewable Energy,partially offset by an increase at Aerospace and lower adjusted totalcorporate operating costs*.Adjusted profit margin*was 5.8%,a decrease of 190 basis points organically*.For the nine months ended September 30,2022,continuing earnings decreased$1.6 billion primarily due to a net loss on the value of equity securities of$3.1billion compared to the prior year gain,an increase in provision for income taxes of$0.9 billion,the Steam asset sale impairment of$0.8 billion,separation costsof$0.6 billion and Russia and Ukraine charges of$0.3 billion,partially offset by a decrease in non-operating benefit costs of$1.8 billion,the nonrecurrence ofdebt extinguishment costs of$1.4 billion,lower adjusted total corporate operating costs of$0.5 billion,lower interest and other financial charges of$0.3 billionand an increase in segment profit of$0.2 billion.Adjusted earnings*were$1.5 billion,an increase of$0.5 billion.Profit margin was(1.5)%,a decrease from(0.4)%.Adjusted profit*was$3.7 billion,an increase of$0.7 billion organically*,due to increases at Aerospace and Power,and lower adjusted total corporateoperating costs*,partially offset by decreases Renewable Energy and HealthCare.Adjusted profit margin*was 7.0%,an increase of 100 basis pointsorganically*.*Non-GAAP Financial Measure2022 3Q FORM 10-Q 5We continue to experience inflation pressure in our supply chain,as well as delays in sourcing key materials needed for our products.This has delayed ourability to convert RPO to revenue and negatively impacted our profit margins.While we are taking actions to limit this pressure,we may continue to experienceimpacts in future periods.Also,geopolitical uncertainties with the ongoing Russia and Ukraine conflict,as well as recent COVID-19 impacts in China,areintroducing additional challenges.As of September 30,2022,we have approximately$0.5 billion of remaining assets in Russia and Ukraine,primarily in ourPower and HealthCare businesses,which relate to activity not subject to sanctions or restricted under Company policy.SEGMENT OPERATIONS.Refer to our Annual Report on Form 10-K for the year ended December 31,2021,for further information regarding ourdetermination of segment profit for continuing operations,and for our allocations of corporate costs to our segments.Three months ended September 30Nine months ended September 30SUMMARY OF REPORTABLE SEGMENTS20222021V 222021Vrospace$6,705$5,398 24%$18,434$15,230 21%HealthCare4,613 4,339 6,494 13,100 3%Renewable Energy3,594 4,208(15)%9,564 11,505(17)%Power3,529 4,026(12),233 12,242(8)%Total segment revenues18,440 17,970 3R,725 52,076 1%Corporate643 599 7%2,044 1,816 13%Total revenues$19,084$18,569 3%$54,769$53,893 2rospace$1,284$846 52%$3,341$1,664 FHealthCare712 704 1%1,901 2,203(14)%Renewable Energy(934)(151)U(1,786)(484)UPower141 204(31)R4 416 26%Total segment profit(loss)1,204 1,603(25)%3,980 3,799 5%Corporate(a)(960)(40)U(3,947)361 UInterest and other financial charges(377)(446)15%(1,146)(1,403)18bt extinguishment costs F(1,416)FNon-operating benefit income(cost)125(427)F396(1,374)FBenefit(provision)for income taxes(72)(35)U(701)211 UPreferred stock dividends(73)(52)(40)%(192)(180)(7)rnings(loss)from continuing operations attributable to GEcommon shareholders(153)603 U(1,609)(1)UEarnings(loss)from discontinued operations attributable toGE common shareholders(85)602 U(580)(2,856)80%Net earnings(loss)attributable to GE commonshareholders$(238)$1,205 U$(2,189)$(2,857)23%(a)Includes interest and other financial charges of$13 million and$16 million,and$45 million and$47 million;and benefit for income taxes of$52 million and$33 million,and$160 million and$111 million related to Energy Financial Services(EFS)within Corporate for the three and nine months ended September30,2022 and 2021,respectively.GE AEROSPACE.Our results in the third quarter of 2022 reflect the continued recovery of the commercial markets from the effects of the COVID-19 pandemic.Global industrial supply chain disruptions in material and labor continued to affect performance,however,Aerospace saw signs of improved flow through ourfactories.A key underlying driver of our commercial engine and services business is global commercial air traffic.We regularly track global departures,whichimproved 19%during the third quarter of 2022 compared to the third quarter of 2021,and stand at approximately 85%of 2019 levels as of September 30,2022.Global supply chain constraints and labor shortages,in part driven by the pandemic,are causing disruptions for us and our suppliers,which have impacted ourproduction and delivery.We continue to partner with our airline and leasing customers and collaborate with our airframe partners on future production rates.However,supply chain output improved this quarter,and we increased our Commercial and Military engine sales units by 32%compared to the second quarterof 2022 and 21%compared to the same quarter last year.Government travel restrictions and COVID-19 virus variants have driven varied levels of recovery regionally.We remain confident in the recovery,and currenttrends are in line with our recovery forecast.Consistent with updated industry projections,although overall traffic recovery remains unchanged,we now estimateboth single-aisle and twin-aisle air traffic to recover to 2019 levels in late 2023.We are in frequent dialogue with our airline,airframe,and maintenance,repairand overhaul customers about the outlook for commercial air travel,new aircraft production,fleet retirements,and after-market services,including shop visit andspare parts demand.As it relates to the military environment,we continue to forecast strong military demand creating future growth opportunities for our Military business as the U.S.Department of Defense and foreign governments have continued flight operations,and have allocated budgets to upgrade and modernize their existing fleets.InSeptember 2022,Aerospace and the U.S.Air Force successfully concluded testing on the second XA100 adaptive cycle engine,marking the final major contractmilestone of the Air Forces Adaptive Engine Transition Program(AETP).2022 3Q FORM 10-Q 6Total engineering,comprising company,customer and partner-funded and nonrecurring engineering costs,increased compared to the prior year.We continue tobe committed to investment in developing and maturing technologies that enable a more sustainable future of flight.We continue to take actions to protect our ability to serve our customers now and as the global airline industry recovers.Our deep history of innovation andtechnology leadership,commercial engine installed base of approximately 39,400 units,with approximately 11,500 units under long-term service agreements,and military engine installed base of approximately 26,200 units represents strong long-term fundamentals.We believe Aerospace is well-positioned to drivelong-term profitable growth and cash generation over time.Three months ended September 30Nine months ended September 30Sales in units,except where noted2022202120222021Commercial Engines(a)489 377 1,187 1,119 LEAP Engines(b)347 226 812 625 Military Engines151 154 466 405 Spare Parts Rate(c)$29.4$19.3$25.2$15.8(a)Commercial Engines now includes Business Aviation and Aeroderivative units for all periods presented.(b)LEAP engines are subsets of commercial engines.(c)Commercial externally shipped spare parts and spare parts used in time and material shop visits in millions of dollars per day.RPOSeptember 30,2022December 31,2021Equipment$12,324$11,139 Services117,785 114,133 Total RPO$130,109$125,272 SEGMENT REVENUES AND PROFITThree months ended September 30Nine months ended September 302022202120222021Commercial Engines&Services$4,971$3,602$13,130$10,071 Military1,027 1,107 3,159 3,104 Systems&Other707 689 2,146 2,055 Total segment revenues$6,705$5,398$18,434$15,230 Equipment$1,968$1,837$5,379$5,549 Services4,736 3,562 13,055 9,681 Total segment revenues$6,705$5,398$18,434$15,230 Segment profit$1,284$846$3,341$1,664 Segment profit margin19.1.7.1.9%For the three months ended September 30,2022,segment revenues were up$1.3 billion(24%)and segment profit was up$0.4 billion(52%).Revenues increased$1.3 billion(25%)organically*.Commercial Services revenues increased,primarily due to higher prices,increased shop visit volume andhigher volume of commercial spare part shipments.Commercial Engines revenues increased,primarily driven by 112 more commercial install and spare engineunit shipments,including 121 more LEAP units,versus the prior year.Military revenues decreased,primarily due to product mix and 3 fewer engine shipmentsthan the prior year.Profit increased$0.4 billion(47%)organically*,primarily due to higher prices,increased shop visit volume and higher volume of commercial spare partshipments.These increases in profit were partially offset by lower profit on Commercial Engine shipments driven by product transition with fewer engineshipments on legacy programs and more shipments on newer programs,inflation in our supply chain and additional growth investment.For the nine months ended September 30,2022,segment revenues were up$3.2 billion(21%)and segment profit was up$1.7 billion.RPO as of September 30,2022 increased$4.8 billion(4%)from December 31,2021,due to increases in both equipment and services.Equipment increasedprimarily due to an increase in Commercial orders since December 31,2021.Services increased primarily as a result of engines contracted under long-termservice agreements that have now been put into service and contract modifications.Revenues increased$3.3 billion(21%)organically*.Commercial Services revenues increased,primarily due to higher prices,increased shop visit volume andhigher volume of commercial spare part shipments.Commercial Services revenues also increased due to a net favorable change of$0.1 billion for its long-termservice agreements compared to a net unfavorable change of$0.3 billion for the same period in the prior year.Commercial Engines revenues increased,primarily driven by 68 more commercial install and spare engine unit shipments,including 187 more LEAP units versus the prior year,partially offset by lowerGEnx engine production rates and product transition with fewer engine shipments on legacy programs.Military revenues increased,primarily due to growth inservices and 61 more engine shipments than the prior year,partially offset by product mix.*Non-GAAP Financial Measure2022 3Q FORM 10-Q 7Profit increased$1.6 billion(96%)organically*,primarily due to higher prices,increased shop visit volume and higher volume of commercial spare partshipments.Profit also increased due to the impact of favorable contract margin reviews for long-term service agreements.These increases in profit were partiallyoffset by lower profit on Commercial Engine shipments driven by product transition with fewer engine shipments on legacy programs and more shipments onnewer programs,inflation in our supply chain and additional growth investment.GE HEALTHCARE.Market demand and RPO conversion remain positive despite inflationary and supply challenges continuing to impact the industry.Globalpublic spending in healthcare is solid,particularly in Europe and Asia.In the U.S.,customers are taking a more cautious approach as they monitor the economicenvironment.Overall,continued patient demand is leading providers to invest in products and services that increase productivity and reduce operating costs,animportant dynamic as healthcare systems modernize post-pandemic and prepare for increased demand longer-term.Actions of our supply chain andengineering teams as well as proactive supplier engagement are driving fewer delays in securing key materials.However,shortages are still impacting our abilityto deliver certain products.Our expectation is that supply chain pressures will continue to improve.We have proactively managed inflation across material andlogistics costs.We have continued to adjust pricing of our products,manage discretionary and structural cost in our business,as well as prioritize research anddevelopment investments.Delivering for patients and our customers remains a top priority.We continue to grow and invest in precision health,with a focus on creating new products and digital solutions as well as expanding uses of existing offeringsthat are tailored to the different needs of our global customers.During the third quarter of 2022,we announced an equity investment in AliveCor,furtherdeepening our ability to deliver connected care so clinicians can make faster,more informed decisions,and help improve patient outcomes.We also announceda collaboration with AMC Health allowing clinicians to offer remote monitoring as a virtual care solution that extends patient care to the home.We remaincommitted to innovate and invest to create more integrated,efficient and personalized precision care.RPOSeptember 30,2022December 31,2021Equipment$4,554$4,232 Services9,557 10,375 Total RPO$14,110$14,606 SEGMENT REVENUES AND PROFITThree months ended September 30Nine months ended September 302022202120222021Healthcare Systems(HCS)$4,086$3,832$11,998$11,572 Pharmaceutical Diagnostics(PDx)527 507 1,496 1,528 Total segment revenues$4,613$4,339$13,494$13,100 Equipment$2,352$2,187$6,945$6,671 Services2,261 2,151 6,549 6,429 Total segment revenues$4,613$4,339$13,494$13,100 Segment profit$712$704$1,901$2,203 Segment profit margin15.4.2.1.8%For the three months ended September 30,2022,segment revenues were up$0.3 billion(6%)and segment profit was up 1%.Revenues increased$0.4 billion(10%)organically*.Equipment revenues increased driven by Imaging and Ultrasound mainly due to strong growth in the U.S.and Europe,the Middle East and Africa.Services revenues increased,driven by the continued growth of PDx and HCS.Profit increased 4%organically*,driven by increased volume and HCS price,partially offset by material inflation and logistics cost across all product lines.Wealso continued to make planned research and development and commercial investments.For the nine months ended September 30,2022,segment revenues were up$0.4 billion(3%)and segment profit was down$0.3 billion(14%).RPO as of September 30,2022 decreased$0.5 billion(3%)from December 31,2021,primarily due to an increase in equipment orders,more than offset by theimpact of contract renewal timing in services.Revenues increased$0.7 billion(5%)organically*.Equipment revenues increased,driven by Imaging,mainly due to strong growth in the U.S.and Europe,theMiddle East and Africa,partially offset by China.Services revenues increased,driven by the continued growth of HCS,offset by PDx,primarily due to China.Profit decreased$0.2 billion(8%)organically*,driven by increased material inflation and logistics cost across all product lines,partially offset by increasedvolume and price.We also continued to make planned research and development and commercial investments.*Non-GAAP Financial Measure2022 3Q FORM 10-Q 8RENEWABLE ENERGY will be part of GE Vernova,GEs portfolio of energy businesses.Overall U.S.policy uncertainty,rising inflation and permittingchallenges has resulted in project delays and deferral of customer investments in Onshore Wind.During the third quarter,the Inflation Reduction Act of 2022was signed into law,which includes various tax incentives expected to increase longer term demand in the U.S.for onshore and offshore wind projects.Theoffshore wind industry continues to expect strong global growth through the decade and our Grid business is positioned to support grid expansion andmodernization needs.We have experienced significant cost inflation in materials and logistics costs across the entire business that impact price and customerdemand.At Onshore Wind,based on experience across our fleet,we are deploying repairs and other corrective measures to improve our overall quality andfleet availability resulting in higher warranty and related reserves.Concurrently,we are undertaking a restructuring program reflecting our selectivity strategy tooperate in fewer markets and to simplify and standardize product variants.Our financial results are dependent on costs to address fleet availability,execution ofcost reduction initiatives,the inflationary environment,improved selectivity and pricing,and U.S.Treasury tax implementation guidance.New product introductions account for a large portion of our RPO in Onshore and Offshore Wind driven by significant demand for larger turbines that decreasethe levelized cost of energy,such as our 5 MW Cypress and 3 MW Sierra Onshore units,and our 12-14 MW Haliade-X Offshore units.We expect to startshipping Haliade-X units for our first commercial project in the fourth quarter of this year.Improving fleet availability while reducing the cost of these new productplatforms and blade technologies,remains a key priority.At Grid Solutions,we are securing our position in the high growth offshore interconnection market withproducts meeting the 2GW high voltage direct current(HVDC)solution standard and developing new technology such as flexible transformers and eco-friendlyg switchgears that solve for a denser,more resilient and efficient electric grid and lower greenhouse gas emissions.Three months ended September 30Nine months ended September 30Onshore and Offshore sales in units2022202120222021Wind Turbines640 1,083 1,703 2,748 Wind Turbine Gigawatts2.2 3.6 5.8 8.9 Repower units140 27 415 276 RPOSeptember 30,2022December 31,2021Equipment$17,493$18,639 Services12,221 12,872 Total RPO$29,715$31,511 SEGMENT REVENUES AND PROFITThree months ended September 30Nine months ended September 302022202120222021Onshore Wind$2,445$3,047$6,403$8,048 Grid Solutions equipment and services744 759 2,145 2,330 Hydro,Offshore Wind and Hybrid Solutions405 401 1,016 1,126 Total segment revenues$3,594$4,208$9,564$11,505 Equipment$2,887$3,695$7,505$9,844 Services707 512 2,059 1,661 Total segment revenues$3,594$4,208$9,564$11,505 Segment profit(loss)$(934)$(151)$(1,786)$(484)Segment profit margin(26.0)%(3.6)%(18.7)%(4.2)%For the three months ended September 30,2022,segment revenues were down$0.6 billion(15%)and segment losses were up$0.8 billion.Revenues decreased$0.4 billion(10%)organically*,primarily from 443 fewer wind turbine deliveries,primarily at Onshore Wind in the U.S.,partially offset byhigher core services and 113 more repower unit deliveries at Onshore Wind,and improved pricing across all businesses.Segment losses increased$0.8 billion organically*,primarily from higher warranty and related reserves of$0.5 billion in response to the deployment of correctivemeasures and repair campaigns for operating units within our fleet,and lower U.S.volume at Onshore Wind and cost inflation across all businesses.Theseincreases were partially offset by higher volumes and the impact of cost reduction initiatives at Grid and improved pricing across all businesses.For the nine months ended September 30,2022,segment revenues were down$1.9 billion(17%)and segment losses were up$1.3 billion.RPO as of September 30,2022 decreased$1.8 billion(6%)from December 31,2021 primarily from the overall impact of a stronger U.S.dollar and salesexceeding new orders at Onshore Wind,partially offset by new orders at Grid and Hydro exceeding sales.The decline in new equipment orders at OnshoreWind is primarily attributable to the U.S.market decline and inflation-related pricing increases negatively impacting near-term demand.*Non-GAAP Financial Measure2022 3Q FORM 10-Q 9Revenues decreased$1.5 billion(13%)organically*,primarily from 1,045 fewer wind turbine deliveries,primarily at Onshore Wind and lower revenue at Grid dueto increased commercial selectivity,partially offset by higher services revenue at Onshore Wind from a larger installed base and 139 more repower unitdeliveries.Segment losses increased$1.4 billion organically*,primarily from lower U.S.volume and higher warranty and related reserves of$0.5 billion in the third quarterof 2022 in response to the deployment of corrective measures and repair campaigns for operating units within our fleet at Onshore Wind and cost inflationacross all businesses,partially offset by the impact of cost reduction initiatives.Onshore Wind results were also adversely impacted by execution of lower marginRPO and the impact of transitioning to newer product offerings internationally.POWER will be part of GE Vernova,GEs portfolio of energy businesses.During the nine months ended September 30,2022,global gas generation andGE utilization grew mid-single digits with strength in Europe and the U.S.The fleet continues to follow growing gas generation,capturing shortfalls coming fromnuclear outages,coal retirements and hydro and supply disruptions.Looking ahead,we anticipate the power market to continue to be impacted by overcapacityin the industry,continued price pressure from competition on servicing the installed base,and the uncertain timing of deal closures due to financing and thecomplexities of working in emerging markets,as well as the ongoing impacts of COVID-19.Although market factors related to the energy transition such asgreater renewable energy penetration and the adoption of climate change-related policies continue to impact long-term demand(and related financing),weexpect the gas market to remain stable over the next decade with gas generation continuing to grow low-single-digits.We believe gas will play a critical role inthe energy transition.We remain focused on our underwriting discipline and risk management to ensure we are securing deals that meet our financial hurdlesand we have high confidence to deliver for our customers.In the first quarter of 2022,we signed a non-binding memorandum of understanding for GE Steam Power to sell a portion of its business to lectricit de FranceS.A.(EDF),which resulted in a reclassification of that business to held for sale.We expect to complete the sale,subject to regulatory approval,in the first half of2023.In the second quarter of 2022,we announced that Gas Power intends to acquire Nexus Controls,a business specializing in aftermarket control systemupgrades and controls field services.The deal,which is subject to customary closing conditions including regulatory approval and mandatory information andconsultation processes with employees and their representatives,is expected to close in the second quarter of 2023.We continue to invest in new product development,such as our HA-Turbines and Nuclear small modular reactors.Our fundamentals remain strong withapproximately$67.5 billion in RPO and a gas turbine installed base greater than 7,000 units,including approximately 1,800 units under long-term serviceagreements.Three months ended September 30Nine months ended September 30Sales in units2022202120222021GE Gas Turbines20 22 69 47 Heavy-Duty Gas Turbines(a)14 14 37 34 HA-Turbines(b)3 5 6 11 Aeroderivatives(a)6 8 32 13(a)Heavy-Duty Gas Turbines and Aeroderivatives are subsets of GE Gas Turbines.(b)HA-Turbines are a subset of Heavy-Duty Gas Turbines.RPOSeptember 30,2022December 31,2021Equipment$11,611$12,169 Services55,848 56,569 Total RPO$67,459$68,738 SEGMENT REVENUES AND PROFITThree months ended September 30Nine months ended September 302022202120222021Gas Power$2,612$2,861$8,234$8,739 Steam Power571 790 1,898 2,327 Power Conversion,Nuclear and other346 376 1,101 1,176 Total segment revenues$3,529$4,026$11,233$12,242 Equipment$954$1,368$3,116$3,680 Services2,575 2,658 8,117 8,561 Total segment revenues$3,529$4,026$11,233$12,242 Segment profit(loss)$141$204$524$416 Segment profit margin4.0%5.1%4.7%3.4%*Non-GAAP Financial Measure2022 3Q FORM 10-Q 10For the three months ended September 30,2022,segment revenues were down$0.5 billion(12%)and segment profit was down$0.1 billion(31%).Revenues decreased$0.2 billion(5%)organically*,primarily due to decreases in Gas Power HA turbine and aeroderivative deliveries,lower planned contractualservices outages at Gas Power and decreases in Steam Power equipment on the exit of new build coal and prior year Steam Power services volume that did notrepeat,partially offset by favorable price escalation in our long-term service agreements.Profit decreased 23%organically*primarily due to lower planned contractual services outages and unfavorable equipment mix at Gas Power,partially offset byfavorable price escalation in our long-term service agreements.For the nine months ended September 30,2022,segment revenues were down$1.0 billion(8%)and segment profit was up$0.1 billion(26%).RPO as of September 30,2022 decreased$1.3 billion(2%)from December 31,2021,primarily driven by the continued wind down of the Steam Power newbuild coal business,sales outpacing new orders in Gas Power contractual services and the impact of the Russia and Ukraine conflict at Power Conversion.Revenues decreased$0.2 billion(2%)organically*,primarily due to a reduction in Steam Power equipment on the exit of new build coal and prior year SteamPower services volume that did not repeat,partially offset by higher Gas Power aeroderivative deliveries and favorable price escalation in our long-term serviceagreements.Profit increased$0.1 billion(27%)organically*primarily due to prior year project and legal charges at Steam Power that did not repeat,favorable priceescalation in our long-term service agreements and higher Gas Power aeroderivative deliveries,partially offset by lower planned contractual services outagesand unfavorable equipment mix at Gas Power.CORPORATE.The Corporate amounts related to revenues and earnings include the results of disposed businesses,certain amounts not included in operatingsegment results because they are excluded from measurement of their operating performance for internal and external purposes and the elimination ofintersegment activities.In addition,the Corporate amounts related to earnings include certain costs of our principal retirement plans,significant,higher-costrestructuring programs,separation costs,and other costs reported in Corporate.Corporate includes the results of the GE Digital business and our remaining GE Capital businesses,our former financial services business,including our run-offInsurance business(see Other Items-Insurance for further information).REVENUES AND OPERATING PROFIT(COST)Three months ended September 30Nine months ended September 302022202120222021Corporate revenues$210$237$635$693 Insurance revenues646 756 2,179 2,295 Eliminations and other(212)(394)(769)(1,171)Total Corporate revenues$643$599$2,044$1,816 Gains(losses)on purchases and sales of business interests$22$(156)$28$(159)Gains(losses)on equity securities(89)412(1,859)1,256 Restructuring and other charges(183)(64)(253)(395)Separation costs(227)(553)Steam asset sale impairment(Notes 6 and 7)(825)Russia and Ukraine charges(33)(263)Insurance profit(loss)(Note 12)(310)55 87 426 Adjusted total corporate operating costs(Non-GAAP)(140)(287)(307)(767)Total Corporate operating profit(cost)(GAAP)$(960)$(40)$(3,947)$361 Less:gains(losses),impairments,Insurance,and restructuring&other(820)247(3,640)1,128 Adjusted total corporate operating costs(Non-GAAP)$(140)$(287)$(307)$(767)Functions&operations$(127)$(173)$(258)$(541)Environmental,health and safety(EHS)and other items(22)(100)(81)(184)Eliminations9(13)32(42)Adjusted total corporate operating costs(Non-GAAP)$(140)$(287)$(307)$(767)Adjusted total corporate operating costs*excludes gains(losses)on purchases and sales of business interests,significant,higher-cost restructuring programs,separation costs,gains(losses)on equity securities,impairments and our run-off Insurance business profit.We believe that adjusting corporate costs to excludethe effects of items that are not closely associated with ongoing corporate operations provides management and investors with a meaningful measure thatincreases the period-to-period comparability of our ongoing corporate costs.*Non-GAAP Financial Measure2022 3Q FORM 10-Q 11For the three months ended September 30,2022,revenues remained relatively flat due to$0.2 billion of lower inter-segment eliminations offset by$0.1 billion of lower revenue in our run-off insurance business.Corporate operating profit decreased by$0.9 billion due to a$0.5 billion change in gains(losses)on equity securities,primarily related to$0.6 billion of higher mark-to-market losses on our Baker Hughes shares partially offset by$0.1 billion of mark-to-market gains on our AerCap shares.Operating profit also decreased due to$0.2 billion of separation costs and$0.1 billion of higher restructuring and othercharges primarily related to our Renewable Energy and HealthCare segments.Corporate operating profit also decreased by$0.4 billion in our run-off Insurancebusiness,primarily due to a charge related to terminating several reinsurance contracts(see Other Items-Insurance).These decreases were partially offset by$0.2 billion of lower losses on purchases and sales of business interests due to a$0.2 billion held for sale loss within our Power segment in 2021.Adjusted total corporate operating costs*decreased by$0.1 billion due to cost favorability in our functions and lower costs associated with EHS and other items.For the nine months ended September 30,2022,revenues increased by$0.2 billion due to$0.4 billion of lower intersegment eliminations partiallyoffset by$0.1 billion of lower revenue in our run-off Insurance business and$0.1 billion of lower revenue in our Digital business.Corporate operatingprofit decreased by$4.3 billion due to a$3.1 billion change in gains(losses)on equity securities,primarily related to$2.7 billion of mark-to-market losses on ourAerCap shares and note and$0.3 billion of lower mark-to-market gains on our Baker Hughes shares.In addition,operating profit decreased due to$0.8 billion ofnon-cash impairment charges related to property,plant and equipment and intangible assets as a result of reclassification of a portion of our Steam Powerbusiness to held for sale in the first quarter of 2022(see Note 2)and$0.3 billion of lower operating profit in our run-off Insurance business,primarily due to acharge related to terminating several reinsurance contracts(see Other Items-Insurance).Corporate operating profit also decreased as the result of$0.6 billionof separation costs and$0.3 billion of charges from contracts and recoverability of assets in connection with the conflict between Russia and Ukraine andresulting sanctions,primarily within our Aerospace and Power businesses.These decreases were partially offset by$0.2 billion of lower losses on purchasesand sales of business interests due to a$0.2 billion held for sale loss within our Power segment in 2021 and$0.1 billion of lower restructuring and other charges.Adjusted total corporate operating costs*decreased by$0.5 billion primarily as the result of$0.3 billion of lower functional costs,including favorability frommarket and foreign exchange dynamics,$0.1 billion of lower costs associated with EHS and other items and$0.1 billion due to lower intercompany eliminations.OTHER CONSOLIDATED INFORMATIONRESTRUCTURING.This table is inclusive of all restructuring charges in our segments and at Corporate,and the charges are shown below for the businesswhere they originated.Separately,in our reported segment results,significant,higher-cost restructuring programs are excluded from measurement of segmentoperating performance for internal and external purposes;those excluded amounts are reported in Restructuring and other charges for Corporate(see theCorporate section).RESTRUCTURING AND OTHER CHARGESThree months ended September 30Nine months ended September 302022202120222021Workforce reductions$76$132$113$634 Plant closures&associated costs and other asset write-downs110 23 165 87 Acquisition/disposition net charges and other14 9 41 16 Other (3)Total restructuring and other charges$200$164$316$736 Cost of equipment/services$86$61$135$349 Selling,general and administrative expenses114 103 184 393 Other(income)loss (3)(7)Total restructuring and other charges$200$164$316$736 Aerospace$6$3$16$64 HealthCare88 68 110 127 Renewable Energy66 14 78 149 Power30 65 97 341 Corporate10 14 15 55 Total restructuring and other charges$200$164$316$736 Restructuring and other charges cash expenditures$76$152$332$565 Liabilities associated with restructuring activities were approximately$0.9 billion and$1.0 billion,including actuarial determined post-employment severancebenefits of$0.5 billion and$0.5 billion as of September 30,2022 and December 31,2021,respectively.During the third quarter of 2022,we announced plans to undertake a restructuring program across our businesses planned to be part of GE Vernova,primarilyreflecting the selectivity strategy to operate in fewer markets and to simplify and standardize product variants at Renewable Energy.The estimated cost of thismulti-year restructuring program is approximately$0.6 billion,with the majority to be recognized in the first half of 2023.In October 2022,the companyannounced restructuring plans to reflect lower Corporate shared-service and footprint needs as GE HealthCare becomes independent.The estimated cost of thismulti-year restructuring program is approximately$0.7 billion,with the majority to be recognized in the fourth quarter of 2022.*Non-GAAP Financial Measure2022 3Q FORM 10-Q 12SEPARATION COSTS.In November 2021,the company announced its plan to form three industry-leading,global public companies focused on the growthsectors of aviation,healthcare,and energy.As a result of this plan,we expect to incur separation,transition,and operational costs of approximately$2 billionand net tax costs of less than$0.5 billion,which will depend on specifics of the transactions.We incurred pre-tax separation costs of$227 million and$553 million,primarily related to employee costs,costs to establish certain stand-alone functions andinformation technology systems,professional fees,and other transformation and transaction costs to transition to three stand-alone public companies,for thethree and nine months ended September 30,2022,respectively.These costs are presented as separation costs in our consolidated Statement of Earnings(Loss).In addition,we incurred$51 million and$59 million of net tax benefit,including taxes associated with planned legal entity restructuring and changes toindefinite reinvestment of foreign earnings,for the three and nine months ended September 30,2022,respectively.We spent$96 million and$118 million incash for the three and nine months ended September 30,2022,respectively.INTEREST AND OTHER FINANCIAL CHARGES were$0.4 billion and$0.5 billion for the three months ended and$1.2 billion and$1.4 billion for the ninemonths ended September 30,2022 and 2021,respectively.The decrease was primarily due to lower average borrowings balances,partially offset by a lowerallocation of interest expense to discontinued operations.Inclusive of interest expense in discontinued operations,total interest and other financial charges were$0.4 billion and$0.6 billion for the three months ended and$1.2 billion and$2.0 billion for the nine months ended September 30,2022 and 2021,respectively.The primary components of interest and other financial charges are interest on short-and long-term borrowings.POSTRETIREMENT BENEFIT PLANS.Refer to Note 13 for information about our pension and retiree benefit plans.INCOME TAXES.For the three months ended September 30,2022,the income tax rate was(38.2)%compared to 0.3%for the three months endedSeptember 30,2021.The tax rate for 2022 reflects a tax expense on a pre-tax loss.The provision for income taxes was an insignificant amount for both the three months ended September 30,2022 and 2021.The increase in tax was primarilydue to the nonrecurrence of the tax benefit associated with an internal restructuring to recognize stock losses in the third quarter of 2021,partially offset by thedecrease in pre-tax income excluding the net loss in 2022 on our interest in AerCap and Baker Hughes.There was an insignificant tax effect on the net loss in2022 on AerCap and Baker Hughes because of our excess capital loss position.For the three months ended September 30,2022,the adjusted income tax rate*was 27.7%compared to 25.3%for the three months ended September 30,2021.The adjusted income tax rate*increased primarily due to higher tax expense related to stock-based compensation.For the nine months ended September 30,2022,the income tax rate was(65.6)%compared to 149.5%for the nine months ended September 30,2021.Thetax rate for 2022 reflects a tax expense on a pre-tax loss.The tax rate for 2021 reflects a tax benefit on a pre-tax loss.The provision(benefit)for income taxes was$0.5 billion for the nine months ended September 30,2022 compared to$(0.3)billion for the nine months endedSeptember 30,2021.The increase in tax was primarily due to the nonrecurrence of tax benefits associated with internal restructurings to recognize deductiblestock and loan losses in 2021 and the increase in pre-tax income excluding the net loss in 2022 on our interest in AerCap and Baker Hughes and assetimpairments.There was an insignificant tax effect on the net loss in 2022 on AerCap and Baker Hughes because of our excess capital loss position.For the nine months ended September 30,2022,the adjusted income tax rate*was 27.4%compared to 24.5%for the nine months ended September 30,2021.The adjusted income tax rate*increased primarily due to the nonrecurrence of a 2021 benefit from planning to utilize non-U.S.loss carryovers.DISCONTINUED OPERATIONS primarily comprise our GE Capital Aviation Services(GECAS)business,discontinued in 2021,our mortgage portfolio in Poland,and other trailing assets and liabilities associated with prior dispositions.Results of operations,financial position and cash flows for these businesses arereported as discontinued operations for all periods presented and the notes to the financial statements have been adjusted on a retrospective basis.See Note 2for further information regarding our businesses in discontinued operations.CAPITAL RESOURCES AND LIQUIDITYFINANCIAL POLICY.We intend to maintain a disciplined financial policy with a sustainable investment-grade long-term credit rating.In the fourth quarter of2021,the Company announced plans to form three industry-leading,global,investment-grade companies,each of which will determine their own financialpolicies,including capital allocation,dividend,mergers and acquisitions and share buyback decisions.LIQUIDITY POLICY.We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidityposition to meet our business needs and financial obligations under both normal and stressed conditions.We believe that our consolidated liquidity andavailability under our revolving credit facilities will be sufficient to meet our liquidity needs.*Non-GAAP Financial Measure2022 3Q FORM 10-Q 13CONSOLIDATED LIQUIDITY.Our primary sources of liquidity consist of cash and cash equivalents,free cash flows*from our operating businesses,cashgenerated from asset sales and dispositions,and short-term borrowing facilities,including revolving credit facilities.Cash generation can be subject to variabilitybased on many factors,including seasonality,receipt of down payments on large equipment orders,timing of billings on long-term contracts,timing ofAerospace-related customer allowances,market conditions and our ability to execute dispositions.Total cash,cash equivalents and restricted cash was$12.6billion at September 30,2022,of which$7.8 billion was held in the U.S.and$4.8 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 weresubject 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 countrieswith currency controls)without additional federal tax cost.Any foreign withholding tax on a repatriation to the U.S.would potentially be partially offset by a U.S.foreign tax credit.With regards to our announcement to form three public companies,we expect that planning for and execution of this separation will impactindefinite reinvestment.The impact of that change will be recorded when there is a specific change in ability and intent to reinvest earnings.Cash,cash equivalents and restricted cash at September 30,2022 included$2.3 billion of cash held in countries with currency control restrictions(including atotal of$0.1 billion in Russia and Ukraine)and$0.4 billion of restricted use cash.Cash held in countries with currency controls represents amounts held incountries that may restrict the transfer of funds to the U.S.or limit our ability to transfer funds to the U.S.without incurring substantial costs.Restricted use cashrepresents amounts that are not available to fund operations,and primarily comprised funds restricted in connection with certain ongoing litigation matters.Excluded from cash,cash equivalents and restricted cash was$0.4 billion of cash in our run-off Insurance business,which was classified as All other assets inthe Statement of Financial Position.In connection with the program we launched in 2020 to fully monetize our Baker Hughes position over approximately three years,we received proceeds of$4.1billion during the first nine months of 2022.In addition,we expect to fully monetize our stake in AerCap over time.We provided a total of$11.4 billion of capital contributions to our insurance subsidiaries since 2018,including$2.0 billion in the first quarter of 2022,and expectto provide further capital contributions of approximately$3.6 billion through 2024.These contributions are subject to ongoing monitoring by the KansasInsurance Department(KID),and the total amount to be contributed could increase or decrease,or the timing could be accelerated,based upon the results ofreserve adequacy testing or a decision by KID to modify the schedule of contributions set forth in January 2018.We are required to maintain specified capitallevels at these insurance subsidiaries under capital maintenance agreements.On March 6,2022,the Board of Directors authorized the repurchase of up to$3 billion of our common stock.In connection with this authorization,werepurchased 4.5 million shares for$0.3 billion and 9.1 million shares for$0.6 billion for the three months and nine months ended September 30,2022,respectively.BORROWINGS.Consolidated total borrowings were$30.4 billion and$35.2 billion at September 30,2022 and December 31,2021,respectively,a decrease of$4.8 billion.The reduction in borrowings was driven primarily by$2.9 billion of net maturities and repayments of debt and$1.7 billion related to changes inforeign exchange rates.We have in place committed revolving credit facilities totaling$14.3 billion at September 30,2022,comprising a$10.0 billion unused back-up revolvingsyndicated credit facility and a total of$4.3 billion of bilateral revolving credit facilities.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.Moodys Investors Service(Moodys),Standard and Poors Global Ratings(S&P),and Fitch Ratings(Fitch)currently issue ratings on our short-and long-term debt.Our credit ratings as of the date ofthis filing are set forth in the table below.MoodysS&PFitchOutlookNegativeCreditWatch NegativeStableShort termP-2A-2F3Long termBaa1BBB BBBWe are disclosing our credit ratings and any current quarter updates to these ratings to enhance understanding of our sources of liquidity and the effects of ourratings on our costs of funds and access to liquidity.Our ratings may be subject to a revision or withdrawal at any time by the assigning rating organization,andeach rating should be evaluated independently of any other rating.In connection with the planned spin-off of GE HealthCare,rating agencies are reviewingratings for both GE HealthCare and GE.For a description of some of the potential consequences of a reduction in our credit ratings,see the Financial Riskssection of Risk Factors in our Annual Report on Form 10-K for the year ended December 31,2021.Substantially all of the Companys debt agreements in place at September 30,2022 do not contain material credit rating covenants.Our unused back-uprevolving syndicated credit facility and certain of our bilateral revolving credit facilities contain a customary net debt-to-EBITDA financial covenant,which wesatisfied at September 30,2022.*Non-GAAP Financial Measure2022 3Q FORM 10-Q 14The Company may from time to time enter into agreements that contain minimum ratings requirements.The following table provides a summary of the maximumestimated liquidity impact in the event of further downgrades below each stated ratings level.Triggers BelowAt September 30,2022BBB /A-2/P-2$215 BBB/A-3/P-3650 BBB-1,224 BB and below592 Our most significant contractual ratings requirements are related to ordinary course commercial activities.The timing within the quarter of the potential liquidityimpact of these areas may differ,as can the remedies to resolving any potential breaches of required ratings levels.FOREIGN EXCHANGE.As a result of our global operations,we generate and incur a significant portion of our revenues and expenses in currencies other thanthe U.S.dollar.Such principal currencies include the euro,the Chinese renminbi,the Indian rupee and the Japanese yen,among others.The effects of foreigncurrency fluctuations on earnings was less than$0.1 billion for both the three and nine months ended September 30,2022 and 2021.See Note 19 for furtherinformation about our risk exposures,our use of derivatives,and the effects of this activity on our financial statements.STATEMENT OF CASH FLOWSCASH FLOWS FROM CONTINUING OPERATIONS.The most significant source of cash in CFOA is customer-related activities,the largest of which iscollecting cash resulting from product or services sales.The most significant operating use of cash is to pay our suppliers,employees,tax authorities and postretirement plans.Cash from operating activities was$1.3 billion in 2022,an increase of$2.8 billion compared to 2021,primarily due to:a decrease in financial services-relatedcash collateral paid net of settlements on interest rate derivative contracts of$1.3 billion,which is a standard market practice to minimize derivative counterpartyexposures;an increase in net income(after adjusting for amortization of intangible assets,non-cash losses related to our interests in AerCap and Baker Hughesand non-operating debt extinguishment costs)primarily in our Aerospace business;a decrease in cash used for working capital of$0.2 billion;and an increase incash from All other operating activities of$1.3 billion.The components of All other operating activities were as follows:Nine months ended September 3020222021Increase(decrease)in Aerospace-related customer allowance accruals$565$543 Net interest and other financial charges/(cash paid)7(474)Increase(decrease)in employee benefit liabilities(170)(111)Net restructuring and other charges/(cash expenditures)(70)144 Decrease in factoring related liabilities(26)(501)Cash settlement of Alstom legacy legal matter(175)Other(117)(543)All other operating activities$189$(1,117)The cash impacts from changes in working capital compared to prior year were as follows:current receivables of$(3.6)billion,driven by higher volume andlower collections,partially offset by the impact of decreases in sales of receivables to third parties in 2021;inventories,including deferred inventory,of$(1.6)billion,driven by higher material purchases and lower liquidations;current contract assets of$0.3 billion,driven by higher billings on our long-term serviceagreements,partially offset by lower revenue recognition on those agreements and net favorable changes in estimated profitability;accounts payable andequipment project accruals of$2.3 billion,driven by lower disbursements related to purchases of materials in prior periods and higher volume;and progresscollections and current deferred income of$2.8 billion,driven by lower liquidations and higher collections,including$0.6 billion of increased customer collectionson equipment orders to support production at our Aerospace business.Cash from investing activities was$1.2 billion in 2022,a decrease of$1.7 billion compared to 2021,primarily due to:cash paid related to net settlementsbetween our continuing operations and businesses in discontinued operations of$0.3 billion in 2022,primarily related to a capital contribution to Bank BPH,ascompared to cash received of$1.8 billion in 2021,primarily from our GECAS business(both components of All other investing activities);the nonrecurrence ofdeferred purchase price collections on our receivable facilities of$0.4 billion;partially offset by an increase in proceeds of$1.1 billion from the sales of ourretained ownership interest in Baker Hughes.Cash used for additions to property,plant and equipment and internal-use software,which are components of freecash flows*,was$1.0 billion in both 2022 and 2021.Cash used for financing activities was$5.1 billion in 2022,a decrease of$7.4 billion compared to 2021,primarily due to:the nonrecurrence of cash paid torepurchase long term debt of$8.7 billion,including cash paid for debt extinguishment costs of$1.7 billion in 2021;partially offset by higher cash paid onderivatives hedging foreign currency debt of$0.6 billion(a component of All other financing activities);and an increase in purchases of GE common stock fortreasury of$0.6 billion.*Non-GAAP Financial Measure2022 3Q FORM 10-Q 15CASH FLOWS FROM DISCONTINUED OPERATIONS.Cash from investing activities in 2022 was primarily due to a capital contribution to Bank BPH fromcontinuing operations.Cash from operating activities and cash used for investing activities in 2021 was primarily due to cash generated from earnings in ourGECAS business and net settlements from GECAS to continuing operations,respectively.SUPPLY CHAIN FINANCE PROGRAMS.We facilitate voluntary supply chain finance programs with third parties,which provide participating suppliers theopportunity to sell their GE receivables to third parties at the sole discretion of both the suppliers and the third parties.At September 30,2022 and December 31,2021,included in accounts payable was$4.0 billion and$3.4 billion,respectively,of supplier invoices that are subject to the third-party programs.Total supplierinvoices paid through these third-party programs were$5.6 billion and$4.9 billion for the nine months ended September 30,2022 and 2021,respectively.CRITICAL ACCOUNTING ESTIMATES.Please refer to the Critical Accounting Estimates and Other Items sections within MD&A and Note 1 to theconsolidated financial statements of our Annual Report on Form 10-K for the year ended December 31,2021 for a discussion of our accounting policies andcritical accounting estimates.OTHER ITEMS INSURANCE.Premium Deficiency Testing.We completed our annual premium deficiency testing in the aggregate across our run-off insurance portfolio in thethird quarter of 2022.These procedures included updating certain experience studies since our last test completed in the third quarter of 2021,independentactuarial analysis(principally on long-term care insurance exposures)and review of industry benchmarks.Using updated assumptions,the 2022 premiumdeficiency testing results indicated a positive margin of about 10%of the related future policy benefit reserves recorded at September 30,2022,or approximatelyequivalent to the 2021 premium deficiency testing results.The premium deficiency testing margin in 2022 was impacted by a lower discount rate in ourEmployers Reassurance Corporation(ERAC)portfolio due to the recapture transaction,as explained below,partially offset by higher prevailing benchmarkinterest rates in the U.S.The portfolio of investment securities expected to be received from the recapture transaction were assumed to be invested at yieldsbelow ERACs current portfolio yield before ultimately grading to the long-term average investment yield as we realign the portfolio over time.This effect waspartially offset by the net impact from assumed moderately higher near-term mortality related to COVID-19 in the aggregate across our run-off insuranceproducts(i.e.,for life insurance products,higher mortality increases the present value of expected future benefit payments,while for annuity and long-term careinsurance contracts,higher mortality decreases the present value of expected future benefit payments).Excluding the net impact from assumed moderatelyhigher near-term mortality related to COVID-19,we have made no substantial change to our assumptions concerning morbidity,morbidity improvement,mortality,mortality improvement,terminations,or long-term care insurance premium rate increases in 2022.As with all assumptions underlying our premiumdeficiency testing,we will continue to monitor these factors,which may result in future changes in our assumptions.As noted below in Other Items-New Accounting Standards,we are in process of converting our long-term care insurance claim cost projection models to firstprinciples models and expect to maintain a positive margin in connection with these changes.In third quarter of 2022,we agreed to terminate substantially all long-term care insurance exposures previously ceded to a single reinsurance company(recapture transaction).In connection with the recapture transaction,which is effective in the fourth quarter of 2022,we expect to receive a portfolio ofinvestment securities in complete settlement of reinsurance recoverables previously recognized under retrocession agreements with the reinsurance company,which represent substantially all of our reinsurance recoverables balance as of September 30,2022.In the third quarter of 2022,we recorded an increase to ourallowance for credit losses on such reinsurance recoverables of$0.4 billion(pre-tax)($0.3 billion(after-tax),reflecting terms of the recapture transaction and the$2.5 billion estimated fair value of the portfolio of investment securities expected to be received in the fourth quarter of 2022,and is unrelated to changes inclaim experience or projections of future policy benefit reserves.We expect to recoup this over time as the investment securities mature to par value.The recapture transaction reduces both our financial and operational risks by removing the future inherent risk of collectability of reinsurance recoverables,eliminating retrocession contracts having complex terms and conditions,assuming direct control of the portfolio of investment securities held in a trust for ourbenefit and redeploying those assets consistent with our portfolio realignment strategy and establishing administration service standards intended to enhanceclaim administration and innovation efforts.The effect of the recapture agreement does not increase our long-term care insurance liabilities as under the existingretrocession agreements we were not previously relieved of our primary obligation to companies from which we originally assumed the liabilities.In addition,wedo not expect changes to projected statutory funding as a result of the recapture transaction.GAAP Reserve Sensitivities.The following table provides sensitivities with respect to the impact of changes of key assumptions underlying our 2022 premiumdeficiency testing,exclusive of the impacts of converting our long-term care insurance claim cost projection models to first principles models as the conversionremains incomplete at the time of our 2022 premium deficiency testing.Many of our assumptions are interdependent and require evaluation individually and inthe aggregate across all insurance products.Small changes in the amounts used in the sensitivities could result in materially different outcomes from thosereflected below.2022 3Q FORM 10-Q 162021 assumption2022 assumptionHypothetical change in 2022assumptionEstimated adverse impact toprojected present value offuture cash flows(In millions,pre-tax)Long-term care insurancemorbidity improvement1.25%per year over 12 to 20years1.25%per year over 12 to 20years25 basis point reductionNo morbidity improvement$500$2,500Long-term care insurancemorbidityBased on companyexperienceBased on companyexperience5%increase in dollar amount ofpaid claims$900Long-term care insurancemortality improvement0.5%per year for 10 yearswith annual improvementgraded to 0%over next 10years0.5%per year for 10 yearswith annual improvementgraded to 0%over next 10years1.0%per year for 10 years withannual improvement graded to0%over next 10 years$400Total terminations:Long-term care insurancemortalityBased on companyexperienceBased on companyexperienceAny change in terminationassumptions that reduce totalterminations by 10%$900Long-term care insurancelapse rateVaries by block,attained ageand benefit period;average0.5%-1.15%Varies by block,attained ageand benefit period;average0.5%-1.15%Long-term care insurancebenefit exhaustionBased on companyexperienceBased on companyexperienceLong-term care insurance futurepremium rate increasesVaries by block based on filingexperienceVaries by block based on filingexperience25verse change insuccess rate on premium rateincrease actions not yetapproved$200Overall discount rate6.15%6.20% basis point reduction$700Life insurance mortalityBased on companyexperienceBased on companyexperience5%increase in mortality$300While higher assumed inflation,holding all other assumptions constant,would result in unfavorable impacts to the projected present value of future cash flows,itwould be expected to be mitigated by a higher discount rate and contractual daily or monthly benefit caps.See Other Items-New Accounting Standards,Note 12 and Other Items within MD&A in our Annual Report on Form 10-K for the year ended December 31,2021for further information related to our run-off insurance operations.NEW ACCOUNTING STANDARDS.The Financial Accounting Standards Board issued new guidance on accounting for long-duration insurance contracts that iseffective for our interim and annual periods beginning January 1,2023 and applied retrospectively to January 1,2021(i.e.,the transition date).We will adopt thenew guidance using the modified retrospective transition method where permitted.We expect adoption of the new guidance will significantly change theaccounting for measurements of our long-duration insurance liabilities and reinsurance recoverables and materially affect our consolidated financial statementsand require changes to our actuarial,accounting and financial reporting processes,systems,and internal controls.The new guidance requires cash flowassumptions used in the measurement of various insurance liabilities to be reviewed at least annually and updated if actual experience or other evidenceindicates previous assumptions warrant revision with any required changes recorded in earnings.These changes will result in the elimination of premiumdeficiency testing and shadow adjustments.Under the new guidance,the discount rate will be equivalent to the upper-medium grade(i.e.,single A)fixed-incomeinstrument yield reflecting the duration characteristics of our insurance liabilities and is required to be updated in each reporting period with changes recorded inAccumulated other comprehensive income(AOCI).As reinsurance recoverables are recognized in a manner consistent with the liabilities relating to theunderlying reinsurance contracts,changes in reinsurance recoverables from updating the single A discount rate in each reporting period are also recognized inAOCI.The allowance for credit losses on reinsurance recoverables will continue to be based on the locked-in discount rate for purposes of assessing changes ineach reporting period.As such,movements in the gross reinsurance recoverable balance resulting from changes in the single A discount rate will not impact theallowance for credit losses.Following the recapture transaction effective in the fourth quarter of 2022,as explained in Other Items Insurance above,theremaining reinsurance recoverables are not expected to be material.In conjunction with the adoption of the new guidance,we are in process of converting our long-term care insurance claim cost projection models to first principlesmodels that are based on more granular assumptions of expected future experience and will facilitate the new guidances requirements.2022 3Q FORM 10-Q 17As we are approaching the effective date for the new accounting guidance,as well as our implementation of the first principles models,we have estimated theimpact of those changes on Shareholders equity as of the new guidances transition date of January 1,2021.We currently estimate a decrease in Shareholdersequity at the transition date from adoption of the new guidance to be in an after-tax range of$7.0 billion to$8.0 billion,including approximately$5.5 billion to$6.0 billion in AOCI and$1.5 billion to$2.0 billion in Retained earnings.The decrease in AOCI is primarily attributable to remeasuring our insurance liabilities andreinsurance recoverables using the single A rate required under the new guidance,which is lower than our current locked-in discount rate,and the removal ofshadow adjustments.The decrease in Retained earnings at the transition date is primarily attributable to certain long-term care insurance exposures where theprojected present value of future cash flows exceeds the reserves at the transition date,based on the required lower level of grouping of contracts,combinedwith converting our long-term care insurance claim cost projection models to first principles models.To demonstrate the sensitivity of market interest rates on both our insurance liabilities and related assets,if the January 1,2021 transition date adjustment usedrates as of September 30,2022,while holding everything else constant,we estimate the decrease in Shareholders equity at the transition date would be in anafter-tax range of$4.0 billion to$5.0 billion.The new guidance is only applicable to the measurements of our long-duration insurance liabilities under GAAP.In addition,we do not expect changes tostatutory insurance reserves,regulatory capital requirements or projected funding as a result of the implementation of the first principles models.NON-GAAP FINANCIAL MEASURES.We believe that presenting non-GAAP financial measures provides management and investors useful measures toevaluate performance and trends of the total company and its businesses.This includes adjustments in recent periods to GAAP financial measures to increaseperiod-to-period comparability following actions to strengthen our overall financial position and how we manage our business.In addition,managementrecognizes that certain non-GAAP terms may be interpreted differently by other companies under different circumstances.In various sections of this report wehave made reference to the following non-GAAP financial measures in describing our(1)revenues,specifically organic revenues by segment;organic revenues;and equipment and services organic revenues(2)profit,specifically organic profit and profit margin by segment;Adjusted profit and profit margin;Adjustedorganic profit and profit margin;Adjusted earnings(loss);Adjusted income tax rate;and Adjusted earnings(loss)per share(EPS),and(3)cash flows,specificallyfree cash flows(FCF).The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financialmeasures follow.ORGANIC REVENUES,PROFIT(LOSS)AND PROFIT MARGIN BY SEGMENT(NON-GAAP)RevenuesSegment profit(loss)Profit marginThree months ended September 3020222021V 222021V 222021V ptsAerospace(GAAP)$6,705$5,398 24%$1,284$846 52.1.7%3.4ptsLess:acquisitions Less:business dispositions Less:foreign currency effect(22)39(2)Aerospace organic(Non-GAAP)$6,726$5,398 25%$1,245$848 47.5.7%2.8ptsHealthCare(GAAP)$4,613$4,339 6%$712$704 1.4.2%(0.8)ptsLess:acquisitions61 2 Less:business dispositions Less:foreign currency effect(232)(20)2 HealthCare organic(Non-GAAP)$4,784$4,339 10%$731$702 4.3.2%(0.9)ptsRenewable Energy(GAAP)$3,594$4,208(15)%$(934)$(151)U(26.0)%(3.6)%(22.4)ptsLess:acquisitions(21)(5)Less:business dispositions Less:foreign currency effect(231)(3)16(23)Renewable Energy organic(Non-GAAP)$3,825$4,231(10)%$(950)$(123)U(24.8)%(2.9)%(21.9)ptsPower(GAAP)$3,529$4,026(12)%$141$204(31)%4.0%5.1%(1.1)ptsLess:acquisitions Less:business dispositions 158 Less:foreign currency effect(145)5(6)13 Power organic(Non-GAAP)$3,675$3,863(5)%$148$192(23)%4.0%5.0%(1.0)pts2022 3Q FORM 10-Q 18ORGANIC REVENUES,PROFIT(LOSS)AND PROFIT MARGIN BY SEGMENT(NON-GAAP)RevenueSegment profit(loss)Profit marginNine months ended September 3020222021V 222021V 222021V ptsAerospace(GAAP)$18,434$15,230 21%$3,341$1,664 F18.1.9%7.2ptsLess:acquisitions Less:business dispositions Less:foreign currency effect(50)1 88 5 Aerospace organic(Non-GAAP)$18,485$15,229 21%$3,253$1,658 96.6.9%6.7ptsHealthCare(GAAP)$13,494$13,100 3%$1,901$2,203(14).1.8%(2.7)ptsLess:acquisitions175 (56)(5)Less:business dispositions Less:foreign currency effect(484)(90)(17)HealthCare organic(Non-GAAP)$13,803$13,100 5%$2,047$2,225(8).8.0%(2.2)ptsRenewable Energy(GAAP)$9,564$11,505(17)%$(1,786)$(484)U(18.7)%(4.2)%(14.5)ptsLess:acquisitions(43)(13)Less:business dispositions Less:foreign currency effect(442)73(29)Renewable Energy organic(Non-GAAP)$10,006$11,547(13)%$(1,860)$(442)U(18.6)%(3.8)%(14.8)ptsPower(GAAP)$11,233$12,242(8)%$524$416 26%4.7%3.4%1.3ptsLess:acquisitions Less:business dispositions 476 Less:foreign currency effect(321)(4)(24)(15)Power organic(Non-GAAP)$11,553$11,770(2)%$548$432 27%4.7%3.7%1.0ptsWe believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established,ongoing operations by excluding the effect of acquisitions,dispositions and foreign currency,which includes translational and transactional impacts,as theseactivities can obscure underlying trends.ORGANIC REVENUES(NON-GAAP)Three months ended September 30Nine months ended September 3020222021V 222021V%Total revenues(GAAP)$19,084$18,569 3%$54,769$53,893 2%Less:Insurance revenues646 756 2,179 2,295 Adjusted revenues(Non-GAAP)$18,438$17,813 4%$52,591$51,598 2%Less:acquisitions61(21)177(42)Less:business dispositions 70 179 Less:foreign currency effect(a)(638)2(1,314)(3)Organic revenues(Non-GAAP)$19,015$17,762 7%$53,728$51,465 4%(a)Foreign currency impact in 2022 was primarily driven by U.S.dollar appreciation against the euro,British pound and Japanese yen.We believe these measures provide management and investors with a more complete understanding of underlying operating results and trends of established,ongoing operations by excluding the effect of revenues from our run-off Insurance business,acquisitions,dispositions and foreign currency,which includestranslational and transactional impacts,as these activities can obscure underlying trends.EQUIPMENT AND SERVICESThree months ended September 30Nine months ended September 30ORGANIC REVENUES(NON-GAAP)20222021V 222021V%Total equipment revenues(GAAP)$8,082$8,903(9)%$22,549$25,172(10)%Less:acquisitions61 174 Less:business dispositions(45)(146)Less:foreign currency effect(401)(811)(1)Equipment organic revenues(Non-GAAP)$8,423$8,947(6)%$23,187$25,319(8)%Total services revenues(GAAP)$10,356$8,910 16%$30,041$26,427 14%Less:acquisitions(21)3(42)Less:business dispositions 114 324 Less:foreign currency effect(236)2(503)(2)Services organic revenues(Non-GAAP)$10,592$8,815 20%$30,541$26,146 17%We believe this measure provides management and investors with a more complete understanding of underlying operating results and trends of established,ongoing operations by excluding the effect of acquisitions,dispositions and foreign currency,which includes translational and transactional impacts,as theseactivities can obscure underlying trends.2022 3Q FORM 10-Q 19ADJUSTED PROFIT AND PROFIT MARGIN(NON-GAAP)Three months ended September 30Nine months ended September 3020222021V 222021V%Total revenues(GAAP)$19,084$18,5693%$54,769$53,8932%Less:Insurance revenues(Note 12)6467562,1792,295Adjusted revenues(Non-GAAP)$18,438$17,8134%$52,591$51,5982%Total costs and expenses(GAAP)$19,334$18,3375%$54,653$55,866(2)%Less:Insurance cost and expenses(Note 12)9567012,0921,869Less:interest and other financial charges(a)3774461,1461,403Less:non-operating benefit cost(income)(125)427(396)1,374Less:restructuring&other(a)18364256402Less:debt extinguishment costs(Note 11)1,416Less:separation costs(a)227553Less:Steam asset sale impairment(a)825Less:Russia and Ukraine charges(a)33263Add:noncontrolling interests4(73)51(72)Add:EFS benefit from taxes(52)(33)(160)(111)Adjusted costs(Non-GAAP)$17,637$16,5926%$49,805$49,2191%Other income(loss)(GAAP)$195$351(44)%$(941)$1,757ULess:gains(losses)on equity securities(a)(89)412(1,859)1,256Less:restructuring&other(a)37Less:gains(losses)on purchases and sales of business interests(a)22(156)28(159)Adjusted other income(loss)(Non-GAAP)$263$95F$888$65336%Profit(loss)(GAAP)$(55)$584U$(825)$(216)UProfit(loss)margin(GAAP)(0.3)%3.1%(3.4)pts(1.5)%(0.4)%(1.1)ptsAdjusted profit(loss)(Non-GAAP)$1,064$1,316(19)%$3,673$3,03321justed profit(loss)margin(Non-GAAP)5.8%7.4%(1.6)pts7.0%5.9%1.1pts(a)See the Corporate and Other Consolidated Information sections for further information.We believe that adjusting profit to exclude the effects of items that are not closely associated with ongoing operations provides management and investors witha meaningful measure that increases the period-to-period comparability.Gains(losses)and restructuring and other items are impacted by the timing andmagnitude of gains associated with dispositions,and the timing and magnitude of costs associated with restructuring and other activities.ADJUSTED ORGANIC PROFIT(NON-GAAP)Three months ended September 30Nine months ended September 3020222021V 222021Vjusted profit(loss)(Non-GAAP)$1,064$1,316(19)%$3,673$3,033 21%Less:acquisitions(5)(5)(74)(17)Less:business dispositions 5 13 Less:foreign currency effect(a)21 2 35(21)Adjusted organic profit(loss)(Non-GAAP)$1,048$1,314(20)%$3,712$3,058 21justed profit(loss)margin(Non-GAAP)5.8%7.4%(1.6)pts7.0%5.9%1.1 ptsAdjusted organic profit(loss)margin(Non-GAAP)5.5%7.4%(1.9)pts6.9%5.9%1.0 pts(a)Included foreign currency negative effect on revenues of$638 million and$1,314 million and positive effect on operating costs and other income(loss)of$658 million and$1,349 million for the three and nine months ended September 30,2022,respectively.We believe this measure provides management and investors with a more complete understanding of underlying operating results and trends of established,ongoing operations by excluding the effect of acquisitions,dispositions and foreign currency,which includes translational and transactional impacts,as theseactivities can obscure underlying trends.2022 3Q FORM 10-Q 20ADJUSTED EARNINGS(LOSS)ANDThree months ended September 30Nine months ended September 30ADJUSTED INCOME TAX RATE(NON-GAAP)20222021V 222021Vrnings(loss)from continuing operations(GAAP)(Note 17)$(150)$593 U$(1,606)$(11)UInsurance earnings(loss)(pre-tax)(310)56 92 430 Tax effect on Insurance earnings(loss)63(14)(24)(95)Less:Insurance earnings(loss)(net of tax)(Note 12)(247)42 68 334 Earnings(loss)excluding Insurance(Non-GAAP)$97$551(82)%$(1,674)$(345)UNon-operating benefit(cost)income(pre-tax)(GAAP)125(427)396(1,374)Tax effect on non-operating benefit(cost)income(26)90(83)289 Less:Non-operating benefit(cost)income(net of tax)99(337)313(1,085)Gains(losses)on purchases and sales of business interests(pre-tax)(a)22(156)28(159)Tax effect on gains(losses)on purchases and sales of businessinterests39 30 68 31 Less:Gains(losses)on purchases and sales of business interests(net oftax)61(126)95(128)Gains(losses)on equity securities(pre-tax)(a)(89)412(1,859)1,256 Tax effect on gains(losses)on equity securities(b)(c)(9)78(15)155 Less:Gains(losses)on equity securities(net of tax)(98)490(1,874)1,411 Restructuring&other(pre-tax)(a)(183)(64)(253)(395)Tax effect on restructuring&other38 7 54 36 Less:Restructuring&other(net of tax)(144)(57)(199)(359)Debt extinguishment costs(pre-tax)(Note 11)(1,416)Tax effect on debt extinguishment costs 298 Less:Debt extinguishment costs(net of tax)(1,119)Separation costs(pre-tax)(a)(227)(553)Tax effect on separation costs51 59 Less:Separation costs(net of tax)(176)(495)Steam asset sale impairment(pre-tax)(a)(825)Tax effect on Steam asset sale impairment 84 Less:Steam asset sale impairment(net of tax)(741)Russia and Ukraine charges(pre-tax)(a)(33)(263)Tax effect on Russia and Ukraine charges 15 Less:Russia and Ukraine charges(net of tax)(33)(248)Less:Accretion of redeemable noncontrolling interest(pre-tax and net oftax)(Note 17)(9)(9)Less:Accretion of preferred share repurchase(pre-tax and net of tax)(Note 17)3 3 Less:U.S.and foreign tax law change enactment (37)8 Less:Tax loss related to GECAS transaction (44)Adjusted earnings(loss)(Non-GAAP)$385$591(35)%$1,509$980 54rnings(loss)from continuing operations before taxes(GAAP)$(55)$584$(825)$(216)Less:Total adjustments above(pre-tax)(695)(180)(3,239)(1,659)Adjusted earnings before taxes(Non-GAAP)$640$763$2,414$1,443 Provision(benefit)for income taxes(GAAP)$21$2$541$(323)Less:Tax effect on adjustments above(157)(191)(121)(677)Adjusted provision(benefit)for income taxes(Non-GAAP)$177$193$662$354 Income tax rate(GAAP)(38.2)%0.3%(65.6)9.5justed income tax rate(Non-GAAP)27.7%.3.4$.5%(a)See the Corporate and Other Consolidated Information sections for further information.(b)Includes tax benefits available to offset the tax on gains(losses)on equity securities.(c)Includes related tax valuation allowances.The service cost for our pension and other benefit plans are included in Adjusted earnings*,which represents the ongoing cost of providing pension benefits toour employees.The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance.We believe theretained costs in Adjusted earnings*and the Adjusted income tax rate*provides management and investors a useful measure to evaluate the performance ofthe total company and increases period-to-period comparability.*Non-GAAP Financial Measure2022 3Q FORM 10-Q 21ADJUSTED EARNINGS(LOSS)PER SHARE(EPS)(NON-GAAP)Three months ended September 30Nine months ended September 30(In dollars)20222021V 222021Vrnings(loss)per share from continuing operations(GAAP)(Note 17)$(0.14)$0.54 U$(1.46)$(0.01)UInsurance earnings(loss)(pre-tax)(0.28)0.05 0.08 0.39 Tax effect on Insurance earnings(loss)0.06(0.01)(0.02)(0.09)Less:Insurance earnings(loss)(net of tax)(Note 12)(0.23)0.04 0.06 0.30 Earnings(loss)per share excluding Insurance(Non-GAAP)$0.09$0.50(82)%$(1.53)$(0.31)UNon-operating benefit(cost)income(pre-tax)(GAAP)0.11(0.39)0.36(1.25)Tax effect on non-operating benefit(cost)income(0.02)0.08(0.08)0.26 Less:Non-operating benefit(cost)income(net of tax)0.09(0.31)0.29(0.99)Gains(losses)on purchases and sales of business interests(pre-tax)(a)0.02(0.14)0.03(0.14)Tax effect on gains(losses)on purchases and sales of business interests0.04 0.03 0.06 0.03 Less:Gains(losses)on purchases and sales of business interests(net of tax)0.06(0.11)0.09(0.12)Gains(losses)on equity securities(pre-tax)(a)(0.08)0.37(1.69)1.14 Tax effect on gains(losses)on equity securities(b)(c)(0.01)0.07(0.01)0.14 Less:Gains(losses)on equity securities(net of tax)(0.09)0.44(1.71)1.29 Restructuring&other(pre-tax)(a)(0.17)(0.06)(0.23)(0.36)Tax effect on restructuring&other0.04 0.01 0.05 0.03 Less:Restructuring&other(net of tax)(0.13)(0.05)(0.18)(0.33)Debt extinguishment costs(pre-tax)(Note 11)(1.29)Tax effect on debt extinguishment costs 0.27 Less:Debt extinguishment costs(net of tax)(1.02)Separation costs(pre-tax)(a)(0.21)(0.50)Tax effect on separation costs0.05 0.05 Less:Separation costs(net of tax)(0.16)(0.45)Steam asset sale impairment(pre-tax)(a)(0.75)Tax effect on Steam asset sale impairment 0.08 Less:Steam asset sale impairment(net of tax)(0.68)Russia and Ukraine charges(pre-tax)(a)(0.03)(0.24)Tax effect on Russia and Ukraine charges 0.01 Less:Russia and Ukraine charges(net of tax)(0.03)(0.23)Less:Accretion of redeemable noncontrolling interest(pre-tax and net of tax)(Note 17)(0.01)(0.01)Less:Accretion of preferred share repurchase(pre-tax and net of tax)(Note17)Less:U.S.and foreign tax law change enactment (0.03)0.01 Less:Tax loss related to GECAS transaction (0.04)Adjusted earnings(loss)per share(Non-GAAP)$0.35$0.53(34)%$1.38$0.89 55%(a)See the Corporate and Other Consolidated Information sections for further information.(b)Includes tax benefits available to offset the tax on gains(losses)on equity securities.(c)Includes related tax valuation allowances.Earnings-per-share amounts are computed independently.As a result,the sum of per-share amounts may not equal the total.The service cost for our pension and other benefit plans are included in Adjusted earnings*,which represents the ongoing cost of providing pension benefits toour employees.The components of non-operating benefit costs are mainly driven by capital allocation decisions and market performance.We believe theretained costs in Adjusted earnings*and Adjusted EPS*provides management and investors a useful measure to evaluate the performance of the totalcompany and increases period-to-period comparability.We also use Adjusted EPS*as a performance metric at the company level for our annual executiveincentive plan for 2022.*Non-GAAP Financial Measure2022 3Q FORM 10-Q 22FREE CASH FLOWS(FCF)(NON-GAAP)Nine months ended September 3020222021V$CFOA(GAAP)$1,293$(1,527)$2,820 Less:Insurance CFOA48 40 CFOA excluding Insurance(Non-GAAP)$1,245$(1,568)$2,813 Add:gross additions to property
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Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-Q(Mark One)xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2023ORoTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission File No.1-2189ABBOTT LABORATORIESAn Illinois CorporationI.R.S.Employer Identification No.36-0698440100 Abbott Park RoadAbbott Park,Illinois 60064-6400Telephone:(224)667-6100Securities Registered Pursuant to Section 12(b)of the Act:Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which RegisteredCommon Shares,Without Par ValueABTNew York Stock ExchangeChicago Stock Exchange,Inc.Indicate by check mark whether the registrant:(l)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of l934 during the preceding 12 months(or for suchshorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes x No oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(229.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes x No oIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitionsof“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large Accelerated Filer xAccelerated Filer oNon-Accelerated Filer oSmaller reporting company oEmerging growth company oIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standardsprovided pursuant to Section 13(a)of the Exchange Act.oIndicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes o No xAs of March 31,2023,Abbott Laboratories had 1,738,946,799 common shares without par value outstanding.Table of Contents Abbott LaboratoriesTable of ContentsPart I-Financial InformationPageItem 1.Financial Statements and Supplementary DataCondensed Consolidated Statement of Earnings3Condensed Consolidated Statement of Comprehensive Income4Condensed Consolidated Balance Sheet5Condensed Consolidated Statement of Shareholders Investment6Condensed Consolidated Statement of Cash Flows7Notes to the Condensed Consolidated Financial Statements8Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations20Item 4.Controls and Procedures25Part II-Other Information25Item 1.Legal Proceedings25Item 2.Unregistered Sales of Equity Securities and Use of Proceeds25Item 6.Exhibits26Signature272Table of Contents Abbott Laboratories and SubsidiariesCondensed Consolidated Statement of Earnings(Unaudited)(dollars in millions except per share data;shares in thousands)Three Months EndedMarch 3120232022Net sales$9,747$11,895 Cost of products sold,excluding amortization of intangible assets4,331 4,987 Amortization of intangible assets491 512 Research and development654 697 Selling,general and administrative2,762 2,787 Total operating cost and expenses8,238 8,983 Operating earnings1,509 2,912 Interest expense153 131 Interest(income)(101)(14)Net foreign exchange(gain)loss6(3)Other(income)expense,net(111)(78)Earnings before taxes1,562 2,876 Taxes on earnings244 429 Net Earnings$1,318$2,447 Basic Earnings Per Common Share$0.75$1.38 Diluted Earnings Per Common Share$0.75$1.37 Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share1,741,738 1,761,911 Dilutive Common Stock Options9,977 12,631 Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options1,751,715 1,774,542 Outstanding Common Stock Options Having No Dilutive Effect7,332 2,655 The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.3Table of Contents Abbott Laboratories and SubsidiariesCondensed Consolidated Statement of Comprehensive Income(Unaudited)(dollars in millions)Three Months EndedMarch 3120232022Net Earnings$1,318$2,447 Foreign currency translation gain(loss)adjustments139(106)Net actuarial gains(losses)and amortization of net actuarial losses and prior service costs and credits,net of taxes of$in 2023 and$13 in20222 62 Net gains(losses)for derivative instruments designated as cash flow hedges and other,net of taxes of$(58)in 2023 and$(15)in 2022(129)(56)Other comprehensive income(loss)12(100)Comprehensive Income$1,330$2,347 March 31,2023December 31,2022Supplemental Accumulated Other Comprehensive Income(Loss)Information,net of tax:Cumulative foreign currency translation(loss)adjustments$(6,594)$(6,733)Net actuarial(losses)and prior service(costs)and credits(1,491)(1,493)Cumulative gains(losses)on derivative instruments designated as cash flow hedges46 175 Accumulated Other Comprehensive Income(Loss)$(8,039)$(8,051)The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.4Table of Contents Abbott Laboratories and SubsidiariesCondensed Consolidated Balance Sheet(Unaudited)(dollars in millions)March 31,2023December 31,2022AssetsCurrent Assets:Cash and cash equivalents$9,161$9,882 Short-term investments371 288 Trade receivables,less allowances of$503 in 2023 and$500 in 20226,020 6,218 Inventories:Finished products3,944 3,805 Work in process805 680 Materials1,924 1,688 Total inventories6,673 6,173 Prepaid expenses and other receivables2,152 2,663 Total Current Assets24,377 25,224 Investments776 766 Property and equipment,at cost20,605 20,212 Less:accumulated depreciation and amortization11,323 11,050 Net property and equipment9,282 9,162 Intangible assets,net of amortization10,006 10,454 Goodwill22,927 22,799 Deferred income taxes and other assets6,426 6,033$73,794$74,438 Liabilities and Shareholders InvestmentCurrent Liabilities:Trade accounts payable$4,167$4,607 Salaries,wages and commissions1,098 1,556 Other accrued liabilities5,758 5,845 Dividends payable888 887 Income taxes payable334 343 Current portion of long-term debt2,285 2,251 Total Current Liabilities14,530 15,489 Long-term debt14,615 14,522 Post-employment obligations,deferred income taxes and other long-term liabilities7,417 7,522 Commitments and ContingenciesShareholders Investment:Preferred shares,one dollar par value Authorized 1,000,000 shares,none issued Common shares,without par value Authorized 2,400,000,000 sharesIssued at stated capital amount Shares:2023:1,986,904,170;2022:1,986,519,27824,488 24,709 Common shares held in treasury,at cost Shares:2023:247,957,371;2022:248,724,257(15,307)(15,229)Earnings employed in the business35,868 35,257 Accumulated other comprehensive income(loss)(8,039)(8,051)Total Abbott Shareholders Investment37,010 36,686 Noncontrolling Interests in Subsidiaries222 219 Total Shareholders Investment37,232 36,905$73,794$74,438 The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.5Table of Contents Abbott Laboratories and SubsidiariesCondensed Consolidated Statement of Shareholders Investment(Unaudited)(in millions except shares and per share data)Three Months Ended March 3120232022Common Shares:Balance at January 1Shares:2023:1,986,519,278;2022:1,985,273,421$24,709$24,470 Issued under incentive stock programs Shares:2023:384,892;2022:251,63216 14 Share-based compensation296 324 Issuance of restricted stock awards(533)(504)Balance at March 31 Shares:2023:1,986,904,170;2022:1,985,525,053$24,488$24,304 Common Shares Held in Treasury:Balance at January 1Shares:2023:248,724,257;2022:221,191,228$(15,229)$(11,822)Issued under incentive stock programs Shares:2023:3,933,165;2022:4,144,476242 223 Purchased Shares:2023:3,166,279;2022:17,536,012(320)(2,127)Balance at March 31 Shares:2023:247,957,371;2022:234,582,764$(15,307)$(13,726)Earnings Employed in the Business:Balance at January 1$35,257$31,528 Net earnings1,318 2,447 Cash dividends declared on common shares(per share 2023:$0.51;2022:$0.47)(890)(826)Effect of common and treasury share transactions183 146 Balance at March 31$35,868$33,295 Accumulated Other Comprehensive Income(Loss):Balance at January 1$(8,051)$(8,374)Other comprehensive income(loss)12(100)Balance at March 31$(8,039)$(8,474)Noncontrolling Interests in Subsidiaries:Balance at January 1$219$222 Noncontrolling Interests share of income,business combinations,net of distributions and share repurchases3 8 Balance at March 31$222$230 The accompanying notes to condensed consolidated financial statements are an integral part of this statement.6Table of Contents Abbott Laboratories and SubsidiariesCondensed Consolidated Statement of Cash Flows(Unaudited)(dollars in millions)Three Months Ended March 3120232022Cash Flow From(Used in)Operating Activities:Net earnings$1,318$2,447 Adjustments to reconcile net earnings to net cash from operating activities Depreciation315 311 Amortization of intangible assets491 512 Share-based compensation281 305 Trade receivables233(751)Inventories(419)(554)Other,net(1,076)(205)Net Cash From Operating Activities1,143 2,065 Cash Flow From(Used in)Investing Activities:Acquisitions of property and equipment(380)(321)Sales(purchases)of other investment securities,net(86)(41)Other4 2 Net Cash From(Used in)Investing Activities(462)(360)Cash Flow From(Used in)Financing Activities:Net borrowings(repayments)of short-term debt and other(42)8 Repayments of long-term debt(751)Purchases of common shares(540)(2,307)Proceeds from stock options exercised62 59 Dividends paid(890)(832)Net Cash From(Used in)Financing Activities(1,410)(3,823)Effect of exchange rate changes on cash and cash equivalents8(6)Net Increase(Decrease)in Cash and Cash Equivalents(721)(2,124)Cash and Cash Equivalents,Beginning of Year9,882 9,799 Cash and Cash Equivalents,End of Period$9,161$7,675 The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.7Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 1 Basis of PresentationThe accompanying unaudited,condensed consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission and,therefore,do notinclude all information and footnote disclosures normally included in audited financial statements.However,in the opinion of management,all adjustments(which include only normal adjustments)necessary to present fairly the results of operations,financial position and cash flows have been made.It is suggested that these statements be read in conjunction with the financial statementsincluded in Abbotts Annual Report on Form 10-K for the year ended December 31,2022.The condensed consolidated financial statements include the accounts of the parent company andsubsidiaries,after elimination of intercompany transactions.Note 2 New Accounting StandardsRecent Adopted Accounting StandardsIn September 2022,the Financial Accounting Standards Board(FASB)issued Accounting Standards Update 2022-04,Disclosure of Supplier Finance Program Obligations,which requires an entity toreport information about its supplier finance program.Abbott adopted the standard on January 1,2023.The new standard did not have an impact on Abbotts condensed consolidated financialstatements.8Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 3 RevenueAbbotts revenues are derived primarily from the sale of a broad line of health care products under short-term receivable arrangements.Abbott has four reportable segments:EstablishedPharmaceutical Products,Diagnostic Products,Nutritional Products,and Medical Devices.The following tables provide detail by sales category:Three Months Ended March 31,2023Three Months Ended March 31,2022(in millions)U.S.IntlTotalU.S.IntlTotalEstablished Pharmaceutical Products Key Emerging Markets$912$912$906$906 Other 277 277 241 241 Total 1,189 1,189 1,147 1,147 Nutritionals Pediatric Nutritionals459 465 924 338 509 847 Adult Nutritionals353 690 1,043 339 708 1,047 Total812 1,155 1,967 677 1,217 1,894 Diagnostics Core Laboratory289 893 1,182 268 916 1,184 Molecular47 100 147 172 248 420 Point of Care93 41 134 91 37 128 Rapid Diagnostics906 319 1,225 2,181 1,344 3,525 Total1,335 1,353 2,688 2,712 2,545 5,257 Medical Devices Rhythm Management260 267 527 248 276 524 Electrophysiology238 267 505 216 269 485 Heart Failure218 63 281 196 54 250 Vascular218 399 617 209 410 619 Structural Heart210 251 461 190 221 411 Neuromodulation155 41 196 143 36 179 Diabetes Care479 834 1,313 343 783 1,126 Total1,778 2,122 3,900 1,545 2,049 3,594 Other3 3 3 3 Total$3,928$5,819$9,747$4,937$6,958$11,895 Note:The Acelis Connected Health business was internally transferred from Rapid Diagnostics to Heart Failure on January 1,2023.As a result,$29 million of sales for the first quarter of 2022 were moved from RapidDiagnostics to Heart Failure.Remaining Performance ObligationsAs of March 31,2023,the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied(or partially unsatisfied)was approximately$4.1 billion inthe Diagnostics segment and approximately$450 million in the Medical Devices segment.Abbott expects to recognize revenue on approximately 60 percent of these remaining performanceobligations over the next 24 months,approximately 17 percent over the subsequent 12 months and the remainder thereafter.9Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 3 Revenue(Continued)These performance obligations primarily reflect the future sale of reagents/consumables in contracts with minimum purchase obligations,extended warranty or service obligations related topreviously sold equipment,and remote monitoring services related to previously implanted devices.Abbott has applied the practical expedient described in FASB Accounting Standards Codification(ASC)606-10-50-14 and has not included remaining performance obligations related to contracts with original expected durations of one year or less in the amounts above.Other Contract Assets and LiabilitiesAbbott discloses Trade receivables separately in the Condensed Consolidated Balance Sheet at the net amount expected to be collected.Contract assets primarily relate to Abbotts conditional right toconsideration for work completed but not billed at the reporting date.Contract assets at the beginning and end of the period,as well as the changes in the balance,were not significant.Contract liabilities primarily relate to payments received from customers in advance of performance under the contract.Abbotts contract liabilities arise primarily in the Medical Devices reportablesegment when payment is received upfront for various multi-period extended service arrangements.Changes in the contract liabilities during the period are as follows:(in millions)Contract Liabilities:Balance at December 31,2022$500 Unearned revenue from cash received during the period122 Revenue recognized related to contract liability balance(93)Balance at March 31,2023$529 Note 4 Supplemental Financial InformationShares of unvested restricted stock that contain non-forfeitable rights to dividends are treated as participating securities and are included in the computation of earnings per share under the two-classmethod.Under the two-class method,net earnings are allocated between common shares and participating securities.Net earnings allocated to common shares for the three months ended March 31,2023 and 2022 were$1.313 billion and$2.438 billion,respectively.Other,net in Net cash from operating activities in the Condensed Consolidated Statement of Cash Flows for the first three months of 2023 includes$282 million of pension contributions and thepayment of cash taxes of approximately$122 million.The first three months of 2022 includes$334 million of pension contributions and the payment of cash taxes of approximately$195 million.The following summarizes the activity for the first three months of 2023 related to the allowance for doubtful accounts as of March 31,2023:(in millions)Allowance for Doubtful Accounts:Balance at December 31,2022$262 Provisions/charges to income8 Amounts charged off and other adjustments2 Balance at March 31,2023$272 10Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 4 Supplemental Financial Information(Continued)The allowance for doubtful accounts reflects the current estimate of credit losses expected to be incurred over the life of the accounts receivable.Abbott considers various factors in establishing,monitoring,and adjusting its allowance for doubtful accounts,including the aging of the accounts and aging trends,the historical level of charge-offs,and specific exposures related to particularcustomers.Abbott also monitors other risk factors and forward-looking information,such as country risk,when determining credit limits for customers and establishing adequate allowances.The components of long-term investments as of March 31,2023 and December 31,2022 are as follows:(in millions)March 31,2023December 31,2022Long-term Investments:Equity securities$565$558 Other211 208 Total$776$766 The increase in Abbotts long-term investments as of March 31,2023 versus the balance as of December 31,2022 primarily relates to an increase in the value of securities held in a rabbi trust andadditional investments,partially offset by equity method investment losses.Abbotts equity securities as of March 31,2023,include$305 million of investments in mutual funds that are held in a rabbi trust and were acquired as part of the St.Jude Medical,Inc.(St.JudeMedical)business acquisition.These investments,which are specifically designated as available for the purpose of paying benefits under a deferred compensation plan,are not available for generalcorporate purposes and are subject to creditor claims in the event of insolvency.Abbott also holds certain investments as of March 31,2023 with a carrying value of$162 million that are accounted for under the equity method of accounting and other equity investments with acarrying value of approximately$88 million that do not have a readily determinable fair value.Note 5 Changes In Accumulated Other Comprehensive Income(Loss)The changes in accumulated other comprehensive income(loss),net of income taxes,are as follows:Three Months Ended March 31Cumulative Foreign Currency Translation(Loss)AdjustmentsNet Actuarial(Losses)and Prior Service(Costs)and CreditsCumulative Gains(Losses)on Derivative Instruments Designated as Cash Flow Hedges and Other(in millions)202320222023202220232022Balance at January 1$(6,733)$(5,839)$(1,493)$(2,670)$175$135 Other comprehensive income(loss)beforereclassifications139(106)2 17(42)(34)Amounts reclassified from accumulated othercomprehensive income 45(87)(22)Net current period comprehensive income(loss)139(106)2 62(129)(56)Balance at March 31$(6,594)$(5,945)$(1,491)$(2,608)$46$79 11Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 5 Changes In Accumulated Other Comprehensive Income(Loss)(Continued)Reclassified amounts for cash flow hedges are recorded as Cost of products sold.Net actuarial losses and prior service cost are included as a component of net periodic benefit costs;see Note 12 foradditional details.Note 6 Goodwill and Intangible AssetsThe total amount of goodwill reported was$22.9 billion at March 31,2023 and$22.8 billion at December 31,2022.Foreign currency translation adjustments increased goodwill by approximately$128 million in the first three months of 2023.The amount of goodwill related to reportable segments at March 31,2023 was$2.7 billion for the Established Pharmaceutical Products segment,$286million for the Nutritional Products segment,$3.5 billion for the Diagnostic Products segment,and$16.4 billion for the Medical Devices segment.There was no reduction of goodwill relating toimpairments in the first three months of 2023.The gross amount of amortizable intangible assets,primarily product rights and technology,was$27.4 billion and$27.2 billion as of March 31,2023 and December 31,2022,respectively.Accumulated amortization was$18.2 billion and$17.6 billion as of March 31,2023 and December 31,2022,respectively.Foreign currency translation adjustments increased intangible assets by$43million in the first three months of 2023.Abbotts estimated annual amortization expense for intangible assets is approximately$2.0 billion in 2023,$1.9 billion in 2024,$1.7 billion in 2025,$1.5billion in 2026 and$1.2 billion in 2027.Indefinite-lived intangible assets,which relate to in-process R&D(IPR&D)acquired in a business combination,were approximately$807 million as of March 31,2023 and December 31,2022.Note 7 Restructuring PlansIn 2022 and 2023,Abbott management approved various plans to streamline operations in order to reduce costs and improve efficiencies in its medical devices,nutritional,diagnostic,and establishedpharmaceutical businesses.In the first three months of 2023,Abbott recorded employee related severance and other charges of approximately$17 million,of which approximately$6 million wasrecorded in Cost of products sold,and approximately$11 million was recorded in Selling,general and administrative expenses.The following summarizes the activity related to these restructuring actions and the status of the related accruals as of March 31,2023:(in millions)Accrued balance at December 31,2022$228 Restructuring charges in 202317 Payments and other adjustments(61)Accrued balance at March 31,2023$184 12Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 8 Incentive Stock ProgramsIn the first three months of 2023,Abbott granted 1,887,093 stock options,445,278 restricted stock awards and 4,761,433 restricted stock units under its incentive stock program.At March 31,2023,approximately 74 million shares were reserved for future grants.Information regarding the number of options outstanding and exercisable at March 31,2023 is as follows:OutstandingExercisableNumber of shares29,760,644 25,107,006 Weighted average remaining life(years)5.44.7Weighted average exercise price$73.33$65.76 Aggregate intrinsic value(in millions)$947$946 The total unrecognized share-based compensation cost at March 31,2023 amounted to approximately$760 million,which is expected to be recognized over the next three years.Note 9 Debt and Lines of CreditOn March 15,2022,Abbott repaid the$750 million outstanding principal amount of its 2.55%Notes upon maturity.Note 10 Financial Instruments,Derivatives and Fair Value MeasuresCertain Abbott foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates,primarily for anticipated intercompanypurchases by those subsidiaries whose functional currencies are not the U.S.dollar.These contracts,with gross notional amounts totaling$7.1 billion at March 31,2023 and$7.7 billion atDecember 31,2022,are designated as cash flow hedges of the variability of the cash flows due to changes in foreign exchange rates and are recorded at fair value.Accumulated gains and losses as ofMarch 31,2023 will be included in Cost of products sold at the time the products are sold,generally through the next twelve to eighteen months.Abbott enters into foreign currency forward exchange contracts to manage currency exposures for foreign currency denominated third-party trade payables and receivables,and for intercompanyloans and trade accounts payable where the receivable or payable is denominated in a currency other than the functional currency of the entity.For intercompany loans,the contracts require Abbott tosell or buy foreign currencies,primarily European currencies,in exchange for primarily U.S.dollars and other European currencies.For intercompany and trade payables and receivables,the currencyexposures are primarily the U.S.dollar and European currencies.At March 31,2023 and December 31,2022,Abbott held the gross notional amounts of$11.4 billion and$12.0 billion,respectively,of such foreign currency forward exchange contracts.Abbott has designated a yen-denominated,5-year term loan of approximately$451 million and$446 million as of March 31,2023 and December 31,2022,respectively,as a hedge of the netinvestment in certain foreign subsidiaries.The change in the value of the debt,which is due to changes in foreign exchange rates,is recorded in Accumulated other comprehensive income(loss),netof tax.Abbott is a party to interest rate hedge contracts with a notional amount totaling approximately$2.9 billion at March 31,2023 and December 31,2022 to manage its exposure to changes in the fairvalue of fixed-rate debt.These contracts are designated as fair value hedges of the variability of the fair value of fixed-rate debt due to changes in the long-term benchmark interest rates.The effect ofthe hedge is to change a fixed-rate interest obligation to a variable rate for that portion of the debt.Abbott records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt byan offsetting amount.13Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 10 Financial Instruments,Derivatives and Fair Value Measures(Continued)The following table summarizes the amounts and location of certain derivative financial instruments as of March 31,2023 and December 31,2022:Fair Value-AssetsFair Value-Liabilities(in millions)March 31,2023December 31,2022Balance Sheet CaptionMarch 31,2023December 31,2022Balance Sheet CaptionInterest rate swaps designated as fair value hedges:Non-current$Deferred income taxes andother assets$126$136 Post-employmentobligations,deferredincome taxes and otherlong-term liabilitiesCurrent Prepaid expenses and otherreceivables21 20 Other accrued liabilitiesForeign currency forward exchange contracts:Hedging instruments76 304 Prepaid expenses and otherreceivables139 96 Other accrued liabilitiesOthers not designated as hedges78 108 Prepaid expenses and otherreceivables96 130 Other accrued liabilitiesDebt designated as a hedge of net investment in aforeign subsidiary n/a451 446 Long-term debt$154$412$833$828 The following table summarizes the activity for foreign currency forward exchange contracts designated as cash flow hedges and certain other derivative financial instruments,as well as the amountsand location of income(expense)and gain(loss)reclassified into income for the three months ended March 31,2023 and 2022.Gain(loss)Recognized in OtherComprehensive Income(loss)Income(expense)and Gain(loss)Reclassified into IncomeThree Months Ended March 31Three Months Ended March 31(in millions)2023202220232022Income Statement CaptionForeign currency forward exchange contracts designated as cash flow hedges$(63)$(49)$126$27 Cost of products soldDebt designated as a hedge of net investment in a foreign subsidiary(5)30 n/aInterest rate swaps designated as fair value hedgesn/an/a9(121)Interest expense14Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 10 Financial Instruments,Derivatives and Fair Value Measures(Continued)Losses of$103 million and$51 million were recognized in the three months ended March 31,2023 and 2022,respectively,related to foreign currency forward exchange contracts not designated as ahedge.These amounts are reported in the Condensed Consolidated Statement of Earnings on the Net foreign exchange(gain)loss line.The carrying values and fair values of certain financial instruments as of March 31,2023 and December 31,2022 are shown in the following table.The carrying values of all other financialinstruments approximate their estimated fair values.The counterparties to financial instruments consist of select major international financial institutions.Abbott does not expect any losses from non-performance by these counterparties.March 31,2023December 31,2022(in millions)CarryingValueFairValueCarryingValueFairValueLong-term Investment Securities:Equity securities$565$565$558$558 Other211 211 208 208 Total Long-term Debt(16,900)(16,927)(16,773)(16,313)Foreign Currency Forward Exchange Contracts:Receivable position154 154 412 412(Payable)position(235)(235)(226)(226)Interest Rate Hedge Contracts:(Payable)position(147)(147)(156)(156)The fair value of the debt was determined based on significant other observable inputs,including current interest rates.15Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 10 Financial Instruments,Derivatives and Fair Value Measures(Continued)The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the balance sheet:Basis of Fair Value Measurement(in millions)OutstandingBalancesQuotedPrices in Active MarketsSignificantOther Observable InputsSignificantUnobservable InputsMarch 31,2023:Equity securities$315$315$Foreign currency forward exchange contracts154 154 Total Assets$469$315$154$Fair value of hedged long-term debt$2,720$2,720$Interest rate swap derivative financial instruments147 147 Foreign currency forward exchange contracts235 235 Contingent consideration related to business combinations133 133 Total Liabilities$3,235$3,102$133 December 31,2022:Equity securities$307$307$Foreign currency forward exchange contracts412 412 Total Assets$719$307$412$Fair value of hedged long-term debt$2,691$2,691$Interest rate swap derivative financial instruments156 156 Foreign currency forward exchange contracts226 226 Contingent consideration related to business combinations130 130 Total Liabilities$3,203$3,073$130 The fair value of foreign currency forward exchange contracts is determined using a market approach,which utilizes values for comparable derivative instruments.The fair value of debt wasdetermined based on the face value of the debt adjusted for the fair value of the interest rate swaps,which is based on a discounted cash flow analysis using significant other observable inputs.Thefair value of the contingent consideration was determined based on independent appraisals at the time of acquisition,adjusted for the time value of money and other changes in fair value.Note 11 Litigation and Environmental MattersAbbott has been identified as a potentially responsible party for investigation and cleanup costs at a number of locations in the United States and Puerto Rico under federal and state remediation lawsand is investigating potential contamination at a number of company-owned locations.Abbott has recorded an estimated cleanup cost for each site for which management believes Abbott has aprobable loss exposure.No individual site cleanup exposure is expected to exceed$4 million,and the aggregate cleanup exposure is not expected to exceed$10 million.16Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 11 Litigation and Environmental Matters(Continued)Abbott is involved in various claims and legal proceedings,and Abbott estimates the range of possible loss for its legal proceedings and environmental exposures to be from approximately$25million to$35 million.The recorded accrual balance at March 31,2023 for these proceedings and exposures was approximately$30 million.This accrual represents managements best estimate ofprobable loss,as defined by FASB ASC No.450,“Contingencies.”Within the next year,legal proceedings may occur that may result in a change in the estimated loss accrued by Abbott.While it isnot feasible to predict the outcome of all such proceedings and exposures with certainty,management believes that their ultimate disposition should not have a material adverse effect on Abbottsfinancial position,cash flows,or results of operations.Note 12 Post-Employment BenefitsRetirement plans consist of defined benefit,defined contribution,and medical and dental plans.Net periodic benefit costs,other than service costs,are recognized in the Other(income)expense,netline of the Condensed Consolidated Statement of Earnings.Net cost recognized for the three months ended March 31 for Abbotts major defined benefit plans and post-employment medical anddental benefit plans is as follows:Defined Benefit PlansMedical and Dental PlansThree MonthsEnded March 31Three MonthsEnded March 31(in millions)2023202220232022Service cost-benefits earned during the period$60$96$9$13 Interest cost on projected benefit obligations114 76 14 10 Expected return on plan assets(242)(236)(6)(7)Net amortization of:Actuarial loss,net3 59 5 Prior service cost(credit)(3)(6)Net cost(credit)$(65)$(5)$14$15 Abbott funds its domestic defined benefit plans according to Internal Revenue Service funding limitations.International pension plans are funded according to similar regulations.In the first threemonths of 2023 and 2022,$282 million and$334 million,respectively,were contributed to defined benefit plans.In the first three months of 2023 and 2022,$28 million was contributed in each yearto the post-employment medical and dental plans.Note 13 Taxes on EarningsTaxes on earnings reflect the estimated annual effective rates and include charges for interest and penalties.In the first three months of 2023 and 2022,taxes on earnings include approximately$3million and$30 million,respectively,in excess tax benefits associated with share-based compensation.In the first three months of 2023 and 2022,taxes on earnings also include approximately$22million and$30 million,respectively,of tax expense as the result of the resolution of various tax positions related to prior years.Tax authorities in various jurisdictions regularly review Abbotts income tax filings.Abbott believes that it is reasonably possible that the recorded amount of gross unrecognized tax benefits maydecrease approximately$75 million to$80 million,including cash adjustments,within the next twelve months as a result of concluding various domestic and international tax matters.17Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 14 Segment InformationAbbotts principal business is the discovery,development,manufacture and sale of a broad line of health care products.Abbotts products are generally sold directly to retailers,wholesalers,hospitals,health care facilities,laboratories,physicians offices and government agencies throughout the world.Abbotts reportable segments are as follows:Established Pharmaceutical Products International sales of a broad line of branded generic pharmaceutical products.Nutritional Products Worldwide sales of a broad line of adult and pediatric nutritional products.Diagnostic Products Worldwide sales of diagnostic systems and tests for blood banks,hospitals,commercial laboratories and alternate-care testing sites.For segment reporting purposes,the CoreLaboratories Diagnostics,Rapid Diagnostics,Molecular Diagnostics and Point of Care Diagnostics divisions are aggregated and reported as the Diagnostic Products segment.Medical Devices Worldwide sales of rhythm management,electrophysiology,heart failure,vascular,structural heart,neuromodulation and diabetes care products.For segment reporting purposes,the Cardiac Rhythm Management,Electrophysiology,Heart Failure,Vascular,Structural Heart,Neuromodulation and Diabetes Care divisions are aggregated and reported as the Medical Devicessegment.Abbotts underlying accounting records are maintained on a legal entity basis for government and public reporting requirements.Segment disclosures are on a performance basis consistent withinternal management reporting.Intersegment transfers of inventory are recorded at standard cost and are not a measure of segment operating earnings.The cost of some corporate functions and thecost of certain employee benefits are charged to segments at predetermined rates that approximate cost.Remaining costs,if any,are not allocated to segments.In addition,intangible assetamortization is not allocated to operating segments,and intangible assets and goodwill are not included in the measure of each segments assets.18Table of ContentsAbbott Laboratories and SubsidiariesNotes to the Condensed Consolidated Financial StatementsMarch 31,2023(Unaudited)Note 14 Segment Information(Continued)The following segment information has been prepared in accordance with the internal accounting policies of Abbott,as described above,and is not presented in accordance with generally acceptedaccounting principles applied to the consolidated financial statements.Net Sales to External CustomersOperating EarningsThree Months Ended March 31Three Months Ended March 31(in millions)202320222023 2022Established Pharmaceutical Products$1,189$1,147$300$242 Nutritional Products1,967 1,894 380 251 Diagnostic Products2,688 5,257 651 2,564 Medical Devices3,900 3,594 1,078 1,083 Total Reportable Segments9,744 11,892 2,409 4,140 Other3 3 Net sales$9,747$11,895 Corporate functions and benefit plan costs(77)(114)Net interest expense(52)(117)Share-based compensation(a)(281)(305)Amortization of intangible assets(491)(512)Other,net(b)54(216)Earnings before taxes$1,562$2,876 _Notes:2022 Sales and Operating Earnings for the Diagnostic Products and Medical Devices reportable segments have been updated to reflect the internal transfer of the Acelis Connected Health business fromDiagnostic Products to Medical Devices on January 1,2023.(a)Approximately 45 percent of the annual net cost of share-based awards will typically be recognized in the first quarter due to the timing of the granting of share-based awards.(b)Other,net for the three months ended March 31,2022 includes$120 million of charges related to a voluntary recall within the Nutritional Products segment.Note 15 Subsequent EventOn April 27,2023,Abbott completed the acquisition of Cardiovascular Systems,Inc.(CSI)for$20 per common share,which equated to a purchase price of approximately$850 million.Theacquisition was funded with cash on hand.CSI sells an atherectomy system used in treating peripheral and coronary artery disease.The acquisition adds complementary technologies to Abbottsportfolio of vascular device offerings.The transaction will be accounted for as a business combination.Abbott has begun the process of measuring,as of the acquisition date,the acquired assets andassumed liabilities.Preliminary purchase price allocation estimates will be disclosed in Abbotts Form 10-Q for the period ending June 30,2023.19Table of ContentsItem 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsFinancial Review Results of OperationsAbbotts revenues are derived primarily from the sale of a broad line of health care products under short-term receivable arrangements.Patent protection and licenses,technological and performancefeatures,and inclusion of Abbotts products under a contract most impact which products are sold;price controls,competition and rebates most impact the net selling prices of products;and foreigncurrency translation impacts the measurement of net sales and costs.Abbotts primary products are medical devices,diagnostic testing products,nutritional products and branded genericpharmaceuticals.The following tables detail sales by reportable segment for the three months ended March 31.Percent changes are versus the prior year and are based on unrounded numbers.Net Sales to External Customers(in millions)Three Months EndedMarch 31,2023Three Months EndedMarch 31,2022TotalChangeImpact ofForeign ExchangeTotal Change Excl.Foreign ExchangeEstablished Pharmaceutical Products$1,189$1,147 3.7%(7.4).1%Nutritional Products1,967 1,894 3.8(3.9)7.7 Diagnostic Products2,688 5,257(48.9)(1.8)(47.1)Medical Devices3,900 3,594 8.5(3.9)12.4 Total Reportable Segments9,744 11,892(18.1)(3.3)(14.8)Other3 3 n/mn/mn/mNet Sales$9,747$11,895(18.1)(3.3)(14.8)Total U.S.$3,928$4,937(20.4)(20.4)Total International$5,819$6,958(16.4)(5.7)(10.7)_Notes:The Acelis Connected Health business was internally transferred from Diagnostic Products to Medical Devices on January 1,2023.As a result,$29 million of sales for the first quarter of 2022 were movedfrom Diagnostic Products to Medical Devices.In order to compute results excluding the impact of exchange rates,current year U.S.dollar sales are multiplied or divided,as appropriate,by the current year average foreign exchange rates and then thoseamounts are multiplied or divided,as appropriate,by the prior year average foreign exchange rates.n/m=Percent change is not meaningfulThe 14.8 percent decrease in total net sales during the first three months of 2023,excluding the impact of foreign exchange,reflected the decrease in demand for Abbotts rapid diagnostic tests todetect COVID-19,partially offset by higher growth across other businesses.Abbotts COVID-19 testing-related sales totaled approximately$730 million during the first quarter of 2023 andapproximately$3.3 billion during the first quarter of 2022.Excluding the impact of COVID-19 testing-related sales,Abbotts total net sales increased 4.9 percent.Excluding the impacts of COVID-19 testing-related sales and foreign exchange,Abbotts total net sales increased 9.4 percent.Abbotts net sales were unfavorably impacted by changes in foreign exchange rates in the first quarter asthe relatively stronger U.S.dollar decreased total international sales by 5.7 percent and total sales by 3.3 percent.Due to the unpredictability of demand for COVID-19 tests,the future extent to which COVID-19 will have a material effect on Abbotts business,financial condition or results of operations isuncertain.20Table of ContentsThe table below provides detail by sales category for the three months ended March 31.Percent changes are versus the prior year and are based on unrounded numbers.(in millions)March 31,2023March 31,2022TotalChangeImpact of Foreign ExchangeTotal Change Excl.Foreign ExchangeEstablished Pharmaceutical Products Key Emerging Markets$912$906 0.7%(7.6)%8.3%Other Emerging Markets277 241 15.0(6.8)21.8 Nutritionals International Pediatric Nutritionals465 509(8.6)(4.7)(3.9)U.S.Pediatric Nutritionals459 338 36.1 36.1 International Adult Nutritionals690 708(2.6)(7.0)4.4 U.S.Adult Nutritionals353 339 3.9 3.9 Diagnostics Core Laboratory1,182 1,184(0.2)(5.3)5.1 Molecular147 420(65.0)(1.0)(64.0)Point of Care134 128 4.7(1.0)5.7 Rapid Diagnostics1,225 3,525(65.3)(0.8)(64.5)Medical Devices Rhythm Management527 524 0.4(3.6)4.0 Electrophysiology505 485 3.9(4.9)8.8 Heart Failure281 250 12.4(1.2)13.6 Vascular617 619(0.2)(4.1)3.9 Structural Heart461 411 12.2(4.2)16.4 Neuromodulation196 179 9.4(1.8)11.2 Diabetes Care1,313 1,126 16.6(4.4)21.0 Note:The Acelis Connected Health business was internally transferred from Rapid Diagnostics to Heart Failure on January 1,2023.As a result,$29 million of sales for the first quarter of 2022 were moved from RapidDiagnostics to Heart Failure.21Table of ContentsExcluding the unfavorable effect of foreign exchange,sales in the Key Emerging Markets for Established Pharmaceutical Products increased 8.3 percent in the first three months of 2023,led bygrowth in several countries,including Brazil,China and southeast Asia,and across several therapeutic areas,including cardio-metabolic,respiratory,and central nervous system/pain management.Other Emerging Markets,excluding the effect of foreign exchange,increased by 21.8 percent in the first three months of 2023.Excluding the impact of foreign exchange,total Nutritional Products sales in the first three months of 2023 increased 7.7 percent.In U.S.Pediatric Nutritionals,the 36.1 percent increase in sales inthe first three months of 2023 reflects the impact of the unfavorable effects of the voluntary recall of certain infant formula products in the first quarter of 2022,partially offset by a decrease in 2023Pedialyte sales.Excluding the effect of foreign exchange,the 3.9 percent decrease in International Pediatric Nutritional sales in the first three months of 2023 primarily reflects the impact of exitingthe pediatric nutrition business in China,partially offset by growth in several other markets.Excluding the effect of foreign exchange,the increases of 3.9 percent in U.S.Adult Nutritionals and 4.4 percent in International Adult Nutritionals in the first three months of 2023 were led bygrowth of Ensure products.The 47.1 percent decrease in Diagnostic Products sales in the first three months of 2023,excluding the impact of foreign exchange,was driven by lower demand for COVID-19 tests.In RapidDiagnostics,sales decreased 64.5 percent in the first three months of 2023,excluding the effect of foreign exchange,due to lower demand for COVID-19 tests.In the first three months of 2023 and2022,Rapid Diagnostics COVID-19 testing-related sales were$704 million and$3.0 billion,respectively.In the first three months of 2023,Rapid Diagnostics sales increased 5.1 percent,excludingCOVID-19 testing-related sales,and increased 8.0 percent,excluding the impact of foreign exchange and COVID-19 testing-related sales.In Core Laboratory Diagnostics,sales increased 5.1 percent in the first three months of 2023,excluding the effect of foreign exchange,due to the higher volume of routine diagnostic testingperformed in hospitals and other laboratories,partially offset by lower test sales for the detection of COVID-19 IgG and IgM antibodies.In the first three months of 2023 and 2022,Core LaboratoryDiagnostics COVID-19 testing-related sales were$6 million and$28 million,respectively.In the first three months of 2023,Core Laboratory Diagnostics sales increased 1.7 percent,excludingCOVID-19 testing-related sales,and increased 7.1 percent,excluding the impact of foreign exchange and COVID-19 testing-related sales.The 64.0 percent decrease in Molecular Diagnostics sales in the first three months of 2023,excluding the effect of foreign exchange,was driven by lower demand for laboratory-based molecular testsfor COVID-19 as well as lower demand for respiratory testing compared to significantly higher-than-usual demand in the first quarter of 2022.In the first three months of 2023 and 2022,MolecularDiagnostics COVID-19 testing-related sales were$20 million and$246 million,respectively.In the first three months of 2023,Molecular Diagnostics sales decreased 27.1 percent,excludingCOVID-19 testing-related sales,and decreased 24.8 percent,excluding the impact of foreign exchange and COVID-19 testing-related sales.Excluding the effect of foreign exchange,total Medical Devices sales grew 12.4 percent in the first three months of 2023,led by double-digit growth in Diabetes Care,Structural Heart,Heart Failureand Neuromodulation.Higher Diabetes Care sales were driven by continued growth of FreeStyle Libre,Abbotts continuous glucose monitoring system,in the U.S.and internationally.FreeStyleLibre sales totaled$1.2 billion in the first three months of 2023,which reflected a 25.4 percent increase,excluding the effect of foreign exchange,over the first three months of 2022 when FreeStyleLibre sales totaled$1.0 billion.During the first three months of 2023,procedure volumes increased across the cardiovascular and neuromodulation businesses.In Structural Heart,the 16.4 percent increase in sales,excluding theeffect of foreign exchange,reflects an acceleration in the growth of the MitraClip product along with contributions from recently launched products,including Amulet,Navitor,and TriClip.InVascular,the 3.9 percent increase in sales,excluding the impact of foreign exchange,during the first three months of 2023 primarily reflects double-digit growth in endovascular sales.22Table of ContentsIn Electrophysiology,the 8.8 percent increase in sales,excluding the effect of foreign exchange,primarily reflects higher procedure volumes in various European countries and the U.S.InNeuromodulation the 11.2 percent increase in sales,excluding the effect of foreign exchange,was driven by the recent launch of the Eterna rechargeable spinal cord stimulation system for thetreatment of chronic pain along with market growth compared to the prior year period.In the first three months of 2023,Medical Devices received various product approvals.In January 2023,Abbott announced that the U.S.Food and Drug Administration(FDA)had approved Navitor,Abbotts second-generation transcatheter aortic valve implantation system to treat people with severe aortic stenosis who are at high or extreme risk for open-heart surgery.In March 2023,AbbottsFreestyle Libre continuous glucose monitoring system received U.S.FDA clearance for integration with automated insulin delivery systems.In March 2023,the U.S.FDA approved Abbotts EpicMax stented tissue valve to treat people with aortic regurgitation or stenosis.The gross profit margin percentage was 50.5 percent for the first quarter of 2023 compared to 53.8 percent for the first quarter of 2022.The decrease in the first quarter of 2023 reflects theunfavorable effects of lower sales of COVID-19 tests,foreign exchange,and higher costs for various manufacturing inputs,partially offset by the impact in 2022 of the voluntary product recall in theNutritional business and the impact in 2023 of gross margin improvement initiatives.Research and development(R&D)expenses decreased$43 million,or 6.2 percent,in the first quarter of 2023 compared to the prior year.The decrease in R&D expenses in the first quarter of 2023was primarily driven by the timing of spending on various projects and the favorable impact of foreign exchange.Selling,general and administrative expenses decreased$25 million,or 0.9 percent,in the first quarter of 2023 compared to the prior year as higher selling and marketing spending to drive growthacross various businesses was offset by the favorable impact of foreign exchange and the nonrecurrence of 2022 expenses related to the product recall in the Nutritional segment.Other(Income)Expense,netOther income,net increased from$78 million of income in the first quarter of 2022 to$111 million of income in the first quarter of 2023.The increase in the first quarter of 2023 reflects higherincome in 2023 related to the non-service cost components of net pension and post-retirement medical benefit costs.Interest Expense,netInterest expense,net decreased$65 million in the first quarter of 2023 due to the impact of higher interest rates on interest income,partially offset by the impact of interest rate hedge contracts relatedto certain fixed-rate debt.Taxes on EarningsTaxes on earnings reflect the estimated annual effective rates and include charges for interest and penalties.In the first three months of 2023 and 2022,taxes on earnings include approximately$3million and$30 million,respectively,in excess tax benefits associated with share-based compensation.In the first three months of 2023 and 2022,taxes on earnings also include approximately$22million and$30 million,respectively,of tax expense as the result of the resolution of various tax positions related to prior years.Tax authorities in various jurisdictions regularly review Abbotts income tax filings.Abbott believes that it is reasonably possible that the recorded amount of gross unrecognized tax benefits maydecrease approximately$75 million to$80 million,including cash adjustments,within the next twelve months as a result of concluding various domestic and international tax matters.TM23Table of ContentsLiquidity and Capital Resources March 31,2023 Compared with December 31,2022The decrease in cash and cash equivalents from$9.9 billion at December 31,2022 to$9.2 billion at March 31,2023 primarily reflects the payment of dividends,share repurchases and capitalexpenditures,partially offset by the cash generated from operations in the first three months of 2023.Working capital was$9.8 billion at March 31,2023 and$9.7 billion at December 31,2022.Theincrease in working capital in 2023 primarily reflects an increase in inventory and a decrease in accounts payable,partially offset by a decrease in cash and cash equivalents.In the Condensed Consolidated Statement of Cash Flows,Net cash from operating activities for the first three months of 2023 totaled approximately$1.1 billion,which reflects a decrease of$922million from the prior year.The decrease is primarily due to a decline in operating earnings,partially offset by the timing of the collection of trade receivables and a reduction in cash taxes paid.Inthe first three months of 2023,Net cash from operating activities includes$282 million of pension contributions and the payment of cash taxes of approximately$122 million.In the first three monthsof 2022,Net cash from operating activities includes$334 million of pension contributions and the payment of cash taxes of approximately$195 million.On March 15,2022,Abbott repaid the$750 million outstanding principal amount of its 2.55%Notes upon maturity.In September 2019,the board of directors authorized the early redemption of up to$5 billion of outstanding long-term notes.As of March 31,2023,$2.15 billion of the$5 billion authorizationremains available.At March 31,2023,Abbotts long-term debt rating was AA-by Standard&Poors Corporation and A1 by Moodys Investors Service.Abbott expects to maintain an investment grade rating.Abbotthas readily available financial resources,including lines of credit of$5.0 billion which expire in 2025.In the first quarter of 2023,Abbott repurchased approximately 3 million of its common shares for$300 million.As of March 31,2023,$2.134 billion remains available for repurchase under the sharerepurchase program authorized by the board of directors in December 2021.In the first quarter of 2023,Abbott declared a quarterly dividend of$0.51 per share on its common shares,which represents an increase of 8.5 percent over the$0.47 per share dividend declared in thefirst quarter of 2022.Business AcquisitionOn April 27,2023,Abbott completed the acquisition of Cardiovascular Systems,Inc.(CSI)for$20 per common share,which equated to a purchase price of approximately$850 million.Theacquisition was funded with cash on hand.CSI sells an atherectomy system used in treating peripheral and coronary artery disease.The acquisition adds complementary technologies to Abbottsportfolio of vascular device offerings.The transaction will be accounted for as a business combination.Legislative IssuesAbbotts primary markets are highly competitive and subject to substantial government regulations throughout the world.Abbott expects debate to continue over the availability,method of delivery,and payment for health care products and services.It is not possible to predict the extent to which Abbott or the health care industry in general might be adversely affected by these factors in thefuture.A more complete discussion of these factors is contained in Item 1,Business,and Item 1A,Risk Factors,in the 2022 Annual Report on Form 10-K.Private Securities Litigation Reform Act of 1995 A Caution Concerning Forward-Looking StatementsUnder the safe harbor provisions of the Private Securities Litigation Reform Act of 1995,Abbott cautions that any forward-looking statements made by Abbott are subject to risks and uncertaintiesthat may cause actual results to differ materially from those indicated in the forward-looking statements.Economic,competitive,governmental,technological and other factors that may affectAbbotts operations are discussed in Item 1A,Risk Factors in our Annual Report on Form 10-K for the year ended December 31,2022,and are incorporated herein by reference.Abbott undertakesno obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments,except as required by law.24Table of ContentsPART I.FINANCIAL INFORMATIONItem 4.Controls and Procedures(a)Evaluation of disclosure controls and procedures.The Chief Executive Officer,Robert B.Ford,and Chief Financial Officer,Robert E.Funck,Jr.,evaluated the effectiveness of AbbottLaboratories disclosure controls and procedures as of the end of the period covered by this report,and concluded that Abbott Laboratories disclosure controls and procedures wereeffective to ensure that information Abbott is required to disclose in the reports that it files or submits with the Securities and Exchange Commission(the“Commission”)under theSecurities Exchange Act of 1934(the“Exchange Act”)is recorded,processed,summarized and reported,within the time periods specified in the Commissions rules and forms,and toensure that information required to be disclosed by Abbott in the reports that it files or submits under the Exchange Act is accumulated and communicated to Abbotts management,including its principal executive officer and principal financial officer,as appropriate to allow timely decisions regarding required disclosure.(b)Changes in internal control over financial reporting.During the quarter ended March 31,2023,there were no changes in Abbotts internal control over financial reporting(as defined inRule 13a-15(f)under the Exchange Act)that have materially affected,or are reasonably likely to materially affect,Abbotts internal control over financial reporting.PART II.OTHER INFORMATIONItem 1.Legal ProceedingsAbbott is involved in various claims,legal proceedings and investigations,including those described in our Annual Report on Form 10-K for the year ended December 31,2022.Item 2.Unregistered Sales of Equity Securities and Use of Proceeds(c)Issuer Purchases of Equity SecuritiesPeriod(a)TotalNumber of Shares(or Units)Purchased(b)AveragePrice Paid per Share(or Unit)(c)Total Numberof Shares(or Units)Purchased as Part of Publicly Announced Plans or Programs(d)MaximumNumber(or Approximate Dollar Value)of Shares(or Units)that May Yet Be Purchased Under the Plans or ProgramsJanuary 1,2023-January 31,2023$2,434,092,348 February 1,2023-February 28,2023600,000 100.933 600,000 2,373,532,278 March 1,2023-March 31,20232,369,830 101.037 2,369,830 2,134,092,391 Total2,969,830 101.016 2,969,830$2,134,092,391 _1.These shares do not include the shares surrendered to Abbott to satisfy tax withholding obligations in connection with the vesting of restricted stock or restricted stock units.2.On December 10,2021,the board of directors authorized the repurchase of up to$5 billion of Abbott common shares,from time to time.(1)(2)(1)(2)(1)(2)(1)(2)25Table of ContentsItem 6.ExhibitsExhibit No.Exhibit3.1By-Laws of Abbott Laboratories,as amended and restated,effective April 28,2023,filed as Exhibit 3.1 to the Abbott Laboratories Current Report on Form 8-K filed onFebruary 17,2023.10.1Abbott Laboratories Non-Employee Directors Fee Plan,as amended and restated.31.1Certification of Chief Executive Officer Required by Rule 13a-14(a)(17 CFR 240.13a-14(a).31.2Certification of Chief Financial Officer Required by Rule 13a-14(a)(17 CFR 240.13a-14(a).Exhibits 32.1 and 32.2 are furnished herewith and should not be deemed to be“filed”under the Securities Exchange Act of 1934.32.1Certification of Chief Executive Officer Pursuant to 18 U.S.C.Section 1350,as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2Certification of Chief Financial Officer Pursuant to 18 U.S.C.Section 1350,as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101The following financial statements and notes from the Abbott Laboratories Quarterly Report on Form 10-Q for the quarter ended March 31,2023,formatted in InlineXBRL:(i)Condensed Consolidated Statement of Earnings;(ii)Condensed Consolidated Statement of Comprehensive Income;(iii)Condensed Consolidated BalanceSheet;(iv)Condensed Consolidated Statement of Shareholders Investment;(v)Condensed Consolidated Statement of Cash Flows;and(vi)Notes to the CondensedConsolidated Financial Statements.104Cover Page Interactive Data File(the cover page XBRL tags are embedded in the Inline XBRL document and included in Exhibit 101).26Table of ContentsSIGNATUREPursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.ABBOTT LABORATORIESBy:/s/ROBERT E.FUNCK,JR.Robert E.Funck,Jr.Executive Vice President,Finance and Chief Financial OfficerDate:May 4,202327Exhibit 10.1 As Amended and Restated effective May 1,2023 ABBOTT LABORATORIES NON-EMPLOYEE DIRECTORS FEE PLAN SECTION 1.PURPOSE ABBOTT LABORATORIES NON-EMPLOYEE DIRECTORS FEE PLAN-referred to below as the“Plan”-has been established by ABBOTT LABORATORIES-referred to below as the“Company”-to attract and retain as members of its Board of Directors persons who are not full-time employees of the Company or any of its subsidiaries but whose business experience and judgment are a valuable asset to the Company and its subsidiaries.SECTION 2.DIRECTORS COVERED As used in the Plan,the term“Director”means any person who is elected to the Board of Directors of the Company in April,1962 or at any time thereafter,and is not a full-time employee of the Company or any of its subsidiaries.SECTION 3.FEES PAYABLE TO DIRECTORS 3.1 Each Director shall be entitled to a deferred monthly fee of Ten Thousand Five Hundred Dollars($10,500.00)for each calendar month or portion thereof(excluding the month in which he is first elected a Director)that he holds such office with the Company.3.2 A Director who serves as Chairman of the Executive Committee of the Board of Directors shall be entitled to a deferred monthly fee of One Thousand Six Hundred Dollars($1,600.00)for each calendar month or portion thereof(excluding the month in which he is first elected to such position)that he holds such position.3.3 A Director who serves as Lead Director of the Board of Directors shall be entitled to a deferred monthly fee of Three Thousand Three Hundred Thirty-Three Dollars and Thirty-Three Cents($3,333.33)for each calendar month or portion thereof(excluding the month in which he is first elected to such position)that he holds such position.The Lead Director shall not be entitled to any fees under Section 3.6.3.4 Audit Committee Fees(a)A Director whoserves as Chairman of the Audit Committee of the Board of Directors shall be entitled to a deferred monthly fee of Two Thousand Five Hundred Dollars($2,500.00)for each calendar month or portion thereof(excluding the month in which he is first elected to such position)that he holds such position.2(b)Each Director who serves on the Audit Committee of the Board of Directors(other than the Chairman of the Audit Committee)shall be entitled to a deferred monthly fee of Five Hundred Dollars($500.00)for each calendar month or portion thereof(excluding the month in which he is first elected to such position)that he holds such position.3.5 A Director who serves as Chairman of the Compensation Committee of the Board of Directors shall be entitled to a deferred monthly fee of Two Thousand Eighty-Three Dollars and Thirty-Three Cents($2,083.33)for each calendar month or portion thereof(excluding the month in which he is first elected to such position)that he holds such position.3.6 Except as provided in Section 3.3,a Director who serves as Chairman of the Nominations and Governance Committee of the Board of Directors shall be entitled to a deferred monthly fee of One Thousand Two Hundred Fifty Dollars($1,250.00)for each calendar month or portion thereof(excluding the month in which he is first elected to such position)that he holds such position.3.7 A Director who serves as Chairman of the Public Policy Committee of the Board of Directors shall be entitled to a deferred monthly fee of One Thousand Two Hundred Fifty Dollars($1,250.00)for each calendar month or portion thereof(excluding the month in which he is first elected to such position)that he holds such position.3.8 A Director who serves as Chairman of any other Committee created by this Board of Directors shall be entitled to a deferred monthly fee of One Thousand Two Hundred Fifty Dollars($1,250.00)for each calendar month or portion thereof(excluding the month in which he is first elected to such position)that he holds such position.3.9 A Directors Deferred Fee Account shall be credited with interest annually.During the calendar years 1968 and prior,the rate of interest credited to deferred fees shall be four(4)percent per annum.During the calendayears 1969 through 1992,the rate of interest credited to deferred fees shall be the average of the prime rates being charged by the two largest commercial banks in the City of Chicago as of the end of the month coincident with or last preceding the date upon which said interest is so credited.During the calendar years 1993 through 2007,the rate of interest credited to deferred fees shall be equal to:(a)the average of the prime rates being charged by the two largest commercial banks in the City of Chicago as of the end of the month coincident with or last preceding the date upon which said interest is so credited;plus(b)two hundred twenty-five(225)basis points.For the calendar year 2008 and subsequent years,the rate of interest credited to deferred fees shall be equal to:(a)the average of the“prime rate”of interest published by The Wall Street Journal(Mid-West Edition)or comparable successor quotation service on the first business day of January and the last business day of each month of the fiscal year;plus(b)two hundred twenty-five(225)basis points.For purposes of this provision,the term“deferred fees”shall include“deferred monthly fees,”and“deferred meeting fees,”and shall also include any such interest credited thereon.3.10 For purposes of Sections 3.1,3.2,3.3,3.4,3.5,3.6,3.7,and 3.8,the automatic deferral of the fees specified therein shall be subject to a Directors election to receive such fees currently pursuant to Section 4.1 or Section 8.1 of the Plan.SECTION 4.PAYMENT OF DIRECTORS FEES 4.1 Any Director may,by written notice filed with the Secretary of the Company no later than December 31 in a calendar year,elect to receive current payment of all or any portion of the monthly and meeting fees earned by him in calendar years subsequent to the calendar year in which he files such 3 notice,in which case such fees shall not be deferred but shall be paid quarterly as earned and no interest shall be credited thereon.Such election shall be irrevocable as of December 31 of the year prior to the year in which the fees will be earned.Notwithstanding the timing requirements described above,an individual who is newly elected as a Director may make the election described above by filing it with the Secretary of the Company within the thirty(30)day period immediately following the date he or she first becomes a Director eligible to participate in the Plan(and all plans that would be aggregated with the Plan pursuant to Treasury Regulation 1.409A-1(c)(2)(i),provided,that the compensation subject to such election relates solely to services performed after the date of such election and provided further,that such election shall become irrevocable on the thirtieth day following the date he or she first becomes a Director eligible to participate in the Plan.In no event shall the fees subject to an election under this Section 4.1 be paid later than the last day of the“applicable 2 month period”,as such term is defined in Treasury Regulation 1.409A-1(b)(4)(i)(A).Any Director who has previously provided notice pursuant to this Section 4.1 may,by written notice filed with the Secretary of the Company no later than December 31 in a calendar year,elect to defer payment of all or a portion of the monthly and meeting fees earned by him in calendar years subsequent to the year in which he files such notice,in which case such fees shall be paid to him in accordance with Section 4.2 below.4.2 A Directors deferred fees earned pursuant to the Plan shall commence to be paid on the first day of the calendar month next following the earlier of his death or his attainment of age sixty-five(65)if he is not then serving as a Director,or the termination of his service as a Director if he serves as a Director after the attainment of age sixty-five(65).4.3 A Directorsdeferred fees that have commenced to be payable pursuant to Section 4.2 shall be payable in annual installments in the order in which they shall have been deferred(i.e.,the deferred fees and earnings thereon for the earliest year of service as a Director will be paid on the date provided for in Section 4.2,the deferred fees for the next earliest year of service as a Director will be paid on the anniversary of the payment of the first installment,etc.).4.4 A Directors deferred fees shall continue to be paid until all deferred fees which he is entitled to receive under the Plan shall have been paid to him(or,in case of his death,to his beneficiary).4.5 If a Director incurs a termination of service as a Director within two(2)years following the occurrence of a Change in Control(as defined below),the aggregate unpaid balance of such Directors deferred fees plus all unpaid interest credited thereon,shall be paid to such Director in a lump sum within thirty(30)days following the date of such termination of service;provided,however,that if such Change in Control does not constitute a“change in control event”(as defined in Treasury Regulation 1.409A-3(i)(5),then the aggregate unpaid balance of such Directors deferred fees shall be paid in accordance with Sections 4.2 and 4.3.Notwithstanding any other provision of the Plan,if a Director has made the alternative election set forth in Section 8.1,and if such Director incurs a termination of service as a Director within five(5)years following the occurrence of a Change in Control,the aggregate unpaid balance of such Directors fees deposited to the Directors Grantor Trust(as defined below)plus all unpaid interest credited thereon,shall be paid to such Director from the Directors Grantor Trust in a lump sum within thirty(30)days following the date of such termination of service.4.6 A“Change in Control”shall be deemed to have occurred on the earliest of the following dates:(i)the date any Person is or becomesthe Beneficial Owner,directly or indirectly,of securities of the Company(not including in the securities beneficially owned by such Person any securities acquired directly from 4 the Company or its Affiliates)representing 20%or more of the combined voting power of the Companys then outstanding securities,excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause(a)of paragraph(iii)below;or(ii)the date the following individuals cease for any reason to constitute a majority of the number of directors then serving:individuals who,on the date hereof,constitute the Board of Directors and any new director(other than a director whose initial assumption of office is in connection with an actual or threatened election contest,including but not limited to a consent solicitation,relating to the election of directors of the Company)whose appointment or election by the Board of Directors or nomination for election by the Companys shareholders was approved or recommended by a vote of at least two-thirds(2/3)of the directors then still in office who either were directors on the date hereof or whose appointment,election or nomination for election was previously so approved or recommended;or(iii)the date on which there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or other entity,other than(a)a merger or consolidation(I)immediately following which the individuals who comprise the Board of Directors immediately prior thereto constitute at least a majority of the Board of Directors of the Company,the entity surviving such merger or consolidation or,if the Company or the entity surviving such merger or consolidation is then a subsidiary,the ultimate parent thereof and(II)which results in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent(either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof),in combination with the ownership of anytrustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company,at least 50%of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation,or(b)a merger or consolidation effected to implement a recapitalization of the Company(or similar transaction)in which no Person is or becomes the Beneficial Owner,directly or indirectly,of securities of the Company(not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates)representing 20%or more of the combined voting power of the Companys then outstanding securities;or(iv)the date the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Companys assets,other than a sale or disposition by the Company of all or substantially all of the Companys assets to an entity,at least 50%of the combined voting power of the voting securities of which are owned by shareholders of the Company,in combination with the ownership of any trustee or other fiduciary holding securities 5 under an employee benefit plan of the Company or any subsidiary of the Company,in substantially the same proportions as their ownership of the Company immediately prior to such sale.(1)Notwithstanding the foregoing,a“Change in Control”shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.(2)For purposes of this Plan:“Affiliate”shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act;“Beneficial Owner”shall have the meaning set forth in Rule 13d-3 under the Exchange Act;“Exchange Act”shall mean the Securities Exchange Act of 1934,as amended from time to time;and“Person”shall have the meaning given in Section 3(a)(9)of the Exchange Act,as modified and used in Sections 13(d)and 14(d)thereof,except that such term shall not include(i)the Company or any of its subsidiaries,(ii)a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates,(iii)an underwriter temporarily holding securities pursuant to an offering of such securities,or(iv)a corporation owned,directly or indirectly,by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company.4.7 A“Potential Change in Control”shall exist during any period in which the circumstances described in paragraphs(i),(ii),(iii)or(iv),below,exist(provided,however,that a Potential Change in Control shall cease to exist not later than the occurrence of a Change in Control):(i)The Company enters into anagreement,the consummation of which would result in the occurrence of a Change in Control,provided that a Potential Change in Control described in this paragraph(i)shall cease to exist upon the expiration or other termination of all such agreements.(ii)Any Person(without regard to the exclusions set forth in subsections(i)through(iv)of such definition)publicly announces an intention to take or to consider taking actions the consummation of which would constitute a Change in Control;provided that a Potential Change in Control described in this paragraph(ii)shall cease to exist upon the withdrawal of such intention,or upon a determination by the Board of Directors that there is no reasonable chance that such actions would be consummated.(iii)Any Person becomes the Beneficial Owner,directly or indirectly,of securities of the Company representing 10%or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Companys then outstanding securities(not 6 including any securities beneficially owned by such Person which are or were acquired directly from the Company or its Affiliates).(iv)The Board of Directors adopts a resolution to the effect that,for purposes of this Agreement,a Potential Change in Control exists;provided that a Potential Change in Control described in this paragraph(iv)shall cease to exist upon a determination by the Board of Directors that the reasons that gave rise to the resolution providing for the existence of a Potential Change in Control have expired or no longer exist.4.8 The provisions of Sections 4.5,4.6,4.7 and this Section 4.8 may not be amended or deleted,nor superseded by any other provision of this Plan,(i)during the pendency of a Potential Change in Control and(ii)during the period beginning on the date of a Change in Control and ending on the date five(5)years following such Change in Control.SECTION 5.CONVERSION TO COMMON STOCK UNITS 5.1 Any Director who is then serving as a director may,by written notice filed with the Secretary of the Company,irrevocably elect to have all or any portion of deferred fees previously earned but not yet paid,transferred from the Directors Deferred Fee Account to a stock account established under this Section 5(“Stock Account”).Any election as to a portion of such fees shall be expressed as a percentage and the same percentage shall be applied to all such fees regardless of the calendar year in which earned or to all deferred fees earned in designated calendar years,as specified by the Director.A Director may make no more than one notional investment election under this Section 5.l in any calendar year.All such elections may apply only to deferred fees for which an election has not previously been made and shall be irrevocable.5.2 Any Director may,by written notice filed with the Secretary of the Company,elect to have all or any portion of deferred fees earned subsequent to the date such notice isfiled credited to a Stock Account established under this Section 5.Fees covered by such election shall be credited to such account at the end of each calendar quarter in,or for which,such fees are earned.Such election may be revoked or modified by such Director,by written notice filed with the Secretary of the Company,as to deferred fees to be earned in calendar years subsequent to the calendar year such notice is filed,but shall be irrevocable as to deferred fees earned prior to such year.5.3 Deferred fees credited to a Stock Account under Section 5.1 shall be converted to Common Stock Units by dividing the deferred fees so credited by the closing price of common shares of the Company on the date the notice of election under Section 5 is received by the Company(or the next business day,if there are no sales on such date)as reported on the New York Stock Exchange Composite Reporting System.Deferred fees credited to a Stock Account under Section 5.2 shall be converted to Common Stock Units by dividing the deferred fees so credited by the closing price of common shares of the Company as of the last business day of the calendar quarter for which the credit is made,as reported on the New York Stock Exchange Composite Reporting System.5.4 Each Common Stock Unit shall be credited with(or adjusted for)the same cash and stock dividends,stock splits and other distributions and adjustments as are received by or applicable to one common share of the Company.All cash dividends and other cash distributions credited to Common Stock Units shall be converted to additional Common Stock Units by dividing each such dividend or distribution by the closing price of common shares of the Company on the payment date for such dividend or distribution,as reported by the New York Stock Exchange Composite Reporting System.7 5.5 The value of the Common Stock Units credited each Director shall be paid to the Director in cash on the dates specified in Section 4.3(or,if applicable,Section 4.5).The amount of each payment shall be determined by multiplying the Common Stock Units payable on each date specified in Section 4.3(or,if applicable,Section 4.5)by the closing price of common shares of the Company on the day prior to the payment date(or the next preceding business day if there are no sales on such date),as reported by the New York Stock Exchange Composite Reporting System.SECTION 6.MISCELLANEOUS 6.1 Each Director or former Director entitled to payment of deferred fees hereunder,from time to time may name any person or persons(who may be named contingently or successively)to whom any deferred Directors fees earned by him and payable to him are to be paid in case of his death before he receives any or all of such deferred Directors fees.Each designation will revoke all prior designations by the same Director or former Director,shall be in a form prescribed by the Company,and will be effective only when filed by the Director or former Director in writing with the Secretary of the Company during his lifetime.If a deceased Director or former Director shall have failed to name a beneficiary in the manner provided above,or if the beneficiary named by a deceased Director or former Director dies before him or before payment of all the Directors or former Directors deferred Directors fees,the Company,in its discretion,may direct payment of the remaining installments required by Section 4.3 to either:(a)any one or more or all of the next of kin(including the surviving spouse)of the Director or former Director,and in such proportions as the Company determines;or(b)the legal representative or representatives of the estate of the last to die of the Director or former Director and his last surviving beneficiary.The person or persons towhom any deceased Directors or former Directors deferred Directors fees are payable under this Section will be referred to as his“beneficiary.”6.2 Establishment of the Plan and coverage thereunder of any person shall not be construed to confer any right on the part of such person to be nominated for reelection to the Board of Directors of the Company,or to be reelected to the Board of Directors.6.3 Payment of deferred Directors fees will be made only to the person entitled thereto in accordance with the terms of the Plan,and deferred Directors fees are not in any way subject to the debts or other obligations of persons entitled thereto,and may not be voluntarily or involuntarily sold,transferred or assigned.When a person entitled to a payment under the Plan is under legal disability or,in the Companys opinion,is in any way incapacitated so as to be unable to manage his financial affairs,the Company may direct that payment be made to such persons legal representative,or to a relative or friend of such person for his benefit.Any payment made in accordance with the preceding sentence shall be in complete discharge of the Companys obligation to make such payment under the Plan.6.4 Any action required or permitted to be taken by the Company under the terms of the Plan shall be by affirmative vote of a majority of the members of the Board of Directors then in office.6.5 Notwithstanding anything in the Plan to the contrary,any amounts under the Plan that were earned and vested before January 1,2005(as determined in accordance with Code Section 409A)with respect to a Director who retired before January 1,2005(“Grandfathered Amounts”)shall be subject to the terms and conditions of the Plan as administered and as in effect on December 31,2004.Amendments made to the Plan pursuant to this amendment and restatement or otherwise shall not affect 8 the Grandfathered Amounts unless expressly provided for in the amendment.The terms and conditions applicable to the Grandfathered Amounts are set forth in Exhibit A attached hereto.6.6 To the extent applicable,it is intended that the Plan comply with the provisions of Section 409A of the Code.The Plan will be administered and interpreted in a manner consistent with this intent,and any provision that would cause the Plan to fail to satisfy Section 409A of the Code will have no force and effect until amended to comply therewith(which amendment may be retroactive to the extent permitted by Section 409A of the Code).Notwithstanding anything contained herein to the contrary,for all purposes of this Plan,a Director shall not be deemed to have had a termination of service as a Director until the Director has incurred a separation from service as defined in Treasury Regulation 1.409A-1(h)and,to the extent required to avoid accelerated taxation and/or tax penalties under Code Section 409A and applicable guidance issued thereunder,payment of the amounts payable under the Plan that would otherwise be payable during the six-month period after the date of termination shall instead be paid on the first business day after the expiration of such six-month period,plus interest thereon,at a rate equal to the rate specified in Section 8.8(to the extent that such interest is not already provided to the Director under Section 8.10),from the respective dates on which such amounts would otherwise have been paid until the actual date of payment.In addition,for purposes of the Plan,each amount to be paid and each installment payment shall be construed as a separate identified payment for purposes of Section 409A of the Code.6.7 Except as expressly provided herein,the provisions of the Plan as they were in effect immediately prior to the January 1,2013 amendment shall continue to apply to any Director who retired or otherwise terminated service as aDirector prior to January 1,2013.SECTION 7.AMENDMENT AND DISCONTINUANCE While the Company expects to continue the Plan,it must necessarily reserve,and does hereby reserve,the right to amend or discontinue the Plan at any time;provided,however,that any amendment or discontinuance of the Plan shall be prospective in operation only,and shall not affect the payment of any deferred Directors fees theretofore earned by any Director,or the conditions under which any such fees are to be paid or forfeited under the Plan.Any discontinuance of the Plan by the Company shall comply with the requirements of Section 409A of the Code.SECTION 8.ALTERNATE PAYMENT OF FEES 8.1 By written notice filed with the Secretary of the Company prior to each calendar year beginning after December 31,1988,a Director may elect to receive all or a portion of his fees earned in the following calendar year in accordance with the provisions of Section 8.An election under this Section 8.1 shall become irrevocable as of December 31 of the calendar year prior to the year in which such monthly and meeting fees will be earned(or,in the case of a new Director,on the 30th day following the Directors first participation in the Plan and all plans that would be aggregated with the Plan pursuant to Treasury Regulation 1.409A-1(c)(2)(i),provided,that the compensation subject to such election relates solely to services performed after the date of such election).8.2 If payment of a Directors fees is made pursuant to Section 8.1,such fees shall not be deferred and a portion of the gross amount of such fees shall be paid currently in cash for the Director directly to a“Grantor Trust”established by the Director,provided such trust is in a form which the Company determines to be substantially similar to the trust attached to this plan as Exhibit B;and the balance of the gross amount of such fees shall be paid currently in cash directly to the Director,provided that the portion paid directly to the Director shall be an amount equal to the aggregate federal,state and 9 local individual income taxes attributable to the gross fees paid pursuant to this Section 8.2(determined in accordance with Section 8.14).In no event shall such fees be paid to the Grantor Trust or directly to the Director later than the last day of the“applicable 2 month period,”as such term is defined in Treasury Regulation 1.409A-1(b)(4)(i)(A).8.3 The Company will establish and maintain four separate accounts in the name of each Director who has made an election under Section 8.1 as follows:a“Pre-Tax Fee Account,”an“After-Tax Fee Account,”a“Pre-Tax Stock Account”and an“After-Tax Stock Account”(collectively,the“Accounts”).(a)The Pre-Tax Fee Account shall reflect the total amount of any fees paid in cash to a Director or deposited to a Directors Grantor Trust,including the amount equal to the aggregate federal,state and local individual income taxes attributable to the fees paid pursuant to Section 8.2,and Interest to be credited to a Director pursuant to Section 8.8.The After-Tax Fee Account shall reflect such gross amounts but shall be maintained on an after-tax basis.(b)The Pre-Tax Stock Account shall reflect the total amount of fees converted to Common Stock Units pursuant to Section 5,including the amount equal to the aggregate federal,state and local individual income taxes attributable to the fees paid pursuant to Section 8.2,and any adjustments made pursuant to Section 8.9.The After-Tax Stock Account shall reflect such gross amounts but shall be maintained on an after-tax basis.(c)The Accounts established pursuant to this Section 8.3 are for the convenience of the administration of the Plan and no trust relationship with respect to such Accounts is intended or should be implied.8.4 As of the end of each calendar year,the Company shall adjust each Directors Pre-Tax Fee Account as follows:(a)FIRST,charge,in any year in which the Director is entitled to receive a distribution from his or her Grantor Trust,anamount equal to the distribution from the fee account maintained thereunder that would have been made to the Director if the aggregate amounts paid according to Section 8.2 had instead been deferred under Section 3;(b)NEXT,credit an amount equal to the gross amount of any fees paid for that year,not converted to Common Stock Units,that are paid to the Director(including the amount deposited in the Directors Grantor Trust and the amount equal to the aggregate federal,state and local individual income taxes attributable to the fees paid pursuant to Section 8.2)according to Section 8.2;and(c)FINALLY,credit an amount equal to the Interest earned for that year according to Section 8.8.8.5 As of the end of each calendar year,the Company shall adjust each Directors After-Tax Fee Account as follows:10(a)FIRST,charge,in any year in which the Director is in receipt of a benefit distribution from his or her Grantor Trust,an amount equal to the product of(i)the distribution that would have been made to the Director if the aggregate amounts paid according to Section 8.2 had instead been deferred under Section 3,multiplied by(ii)a fraction,the numerator of which is the balance in the Directors After-Tax Fee Account as of the end of the prior fiscal year and the denominator of which is the balance of the Directors Pre-Tax Fee Account as of that same date;(b)NEXT,credit an amount equal to the fees not converted to Common Stock Units that are paid that year to the Director directly to the Directors Grantor Trust according to Section 8.2;and(c)FINALLY,credit an amount equal to the After-Tax Interest earned for that year according to Section 8.8.8.6 As of the end of each calendar year,the Company shall adjust each Directors Pre-Tax Stock Account as follows:(a)FIRST,charge,in any year in which the Director is entitled to receive a distribution from his or her Grantor Trust,an amount equal to the distribution that would have been made to the Director if the aggregate amount of fees paid according to Section 8.2 had instead been deferred under Section 3 and the adjustments had been made under Section 5;(b)NEXT,credit an amount equal to the total amount of any fees for that year that are converted to Common Stock Units and paid to the Director(including the amount deposited in the Directors Grantor Trust and the amount equal to the aggregate federal,state and local individual income taxes attributable to the fees paid pursuant to Section 8.2)and allocated to the Stock Account maintained thereunder)according to Section 8.2;and(c)NEXT,credit an amount equal to the net earnings of the Directors Grantor Trust for the year;and(d)FINALLY,credit an amount equal to the Book Value Adjustments to be made for that year according toSection 8.9.8.7 As of the end of each calendar year,the Company shall adjust each Directors After-Tax Stock Account as follows:(a)FIRST,charge,in any year in which the Director is entitled to receive a distribution from his or her Grantor Trust,an amount equal to the product of(i)the distribution that would have been made to the Director if the aggregate amounts paid according to Section 8.2 had instead been deferred under Section 3 and the adjustments had been made under Section 5,multiplied by(ii)a fraction,the numerator of which is the balance in the Directors After-Tax Stock Account as of the end of the prior fiscal year and the denominator of which is the balance of the Directors Pre-Tax Stock Account as of that same date;(b)NEXT,credit an amount equal to the fees converted to Common Stock Units that are paid that year to the Director directly to the Directors Grantor Trust and 11 allocated to the Stock Account maintained thereunder according to Section 8.2;and(c)NEXT,credit an amount equal to the net earnings of the Directors Grantor Trust for the year;and(d)FINALLY,credit an amount equal to the Book Value Adjustments to be made for that year according to Section 8.9.8.8 The Directors Pre-Tax Fee Account and After-Tax Fee Account shall be credited with interest as follows:(a)As of the end of each calendar year,a Directors Pre-Tax Fee Account shall be credited with interest(“Interest”)at the following rate:(i)the average of the“prime rate”of interest published by the Wall Street Journal(Mid-West Edition)or comparable successor quotation service on the first business day of January and the last business day of each month of the fiscal year;(ii)plus two hundred twenty-five(225)basis points.(b)As of the end of each calendar year,a Directors After-Tax Fee Account shall be credited with the amount of Interest set forth above,multiplied by(one minus the aggregate of the applicable federal,state and local individual income tax rates and employment tax rate,determined in accordance with subsection 7.5)(the“After-Tax Interest”).8.9 As of the end of each calendar year,a Directors Pre-Tax Stock Account and After-Tax Stock Account shall be adjusted as provided in Section 5.4,to the extent applicable,and shall also be adjusted to reflect the increase or decrease in the fair market value of the Companys common stock determined in accordance with Section 5.5,except that(i)any reference to the payment date in such Section shall mean December 31 of the applicable calendar year for purposes of this Section,and(ii)adjustments to the After-Tax Stock Account shall be made on an after-tax basis.Such adjustments shall be referred to as“Book Value Adjustments.”8.10 In addition to any fees paid to a Directors Grantor Trust under Section 8.2 during the year,the Company shall also make a payment(an“Interest Payment”)with respect to each Director who has established a Grantor Trust for each year in which the Grantor Trust is in effect.The Interest Payment shall equal the excess,if any,of the gross amount of the Interest credited to the Director(as defined in Section 8.8(a),over the net earnings of the Directors Grantor Trust for the year,and shall be paid within thirty(30)days beginning April 1 of the following calendar year.A portion of such gross Interest Payment,equal to the excess,if any,of the Net Interest Accrual over the net earnings of the Directors Grantor Trust(i.e.,the Pre-Amendment Amount),shall be deposited in the Directors Grantor Trust,with the balance paid to the Director;provided,however,in the event that the net earnings of the Directors Grantor Trust exceeds the Net Interest Accrual,a distribution from the Grantor Trust shall be required in accordance with Section 8.15.A Directors Net Interest Accrual for a year is an amount equal to the After-Tax Interest credited to the Directors After-Tax Fee Account for that year in accordance with Section 8.8(b).8.11 In addition to the fees paid under Section 8.2 during the year and the Interest Payment described above,the Company shall also make a payment(a“Principal Payment”)with respect to each 12 Director who has established a Grantor Trust for each year in which the Grantor Trust is in effect,to be credited to the Stock Account maintained thereunder.Prior to January 1,2013,the Principal Payment equaled the excess,if any,of 75 percent of the fair market value(as determined in accordance with Section 5.5)of the balance of the Directors After-Tax Stock Account on December 31 over the balance in the Stock Account maintained under the Directors Grantor Trust as of that same date,and was paid within the thirty(30)-day period beginning April 1 of the following calendar year.Effective as of January 1,2013,the Principal Payment shall equal the excess,if any,of 75 percent of the fair market value(as determined in accordance with Section 5.5)of the balance of the Directors Pre-Tax Stock Account on December 31 over the balance in the Stock Account maintained under the Directors Grantor Trust as of that same date,and shall be paid within the thirty(30)-day period beginning April 1 of the following calendar year.For the calendar year in which the last installment distribution is made from the Directors Grantor Trust(meaning,the year that is X years following the year of the event triggering the payments,where X is the same number of years served by the Director),the payment made under this Section 8.11 shall equal the excess,if any,of 100 percent of the balance of the Directors After-Tax Stock Account over the balance in the Stock Account maintained under the Directors Grantor Trust as of that same date.8.12 Each Directors Grantor Trust assets shall be invested solely in the instruments specified by investment guidelines established by the Committee.Such investment guidelines,once established,may be changed by the Committee,provided that any change shall not take effect until the year following the year in which the change is made and provided further that the instruments specified shall be consistent with theprovisions of Section 3(b)of the form of Grantor Trust attached hereto as Exhibit B.8.13 For purposes of Section 8,a Directors federal income tax rate shall be deemed to be the highest marginal rate of federal individual income tax in effect in the calendar year in which a calculation under this Section is to be m
2023-06-19
52页
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Earnings Results PresentationFirst Quarter 2023April 14,20232ConfidentialFirst Quarter Results Snaps.
2023-06-05
40页
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Table of ContentsUnited StatesSecurities and Exchange CommissionWashington,D.C.20549_ Form 10-Q(Mark.
2023-06-05
82页
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JD.com Announces First Quarter 2023 ResultsBEIJING,May 11,2023(GLOBE NEWSWIRE)-JD.com,Inc.(NASDAQ:JD.
2023-06-02
11页
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PRESS RELEASE 1 First quarter 2023 results TotalEnergies once again demonstrates its ability to generate strong results in a softening oil&gas price environment As part of its multi-energy strategy,TotalEnergies presents for the first time the results of the Integrated Power segment 12Paris,April 27,2023 The Board of Directors of TotalEnergies SE,chaired by CEO Patrick Pouyann,met on April 26,2023,to approve the first quarter 2023 financial statements.On the occasion,Patrick Pouyann said:“TotalEnergies once again demonstrates its ability to generate strong results,posting in the first quarter 2023 adjusted net income of$6.5 billion,cash flow of$9.6 billion,and return on average capital employed of 25%,in an environment of lower oil and gas prices.IFRS net income was$5.6 billion for the quarter.In an environment with Brent prices averaging$81/b,Exploration&Production generated adjusted net operating income of$2.7 billion and cash flow of$4.9 billion with production growth of 2%compared to the previous quarter*,benefiting in particular from the start-up of gas production on Block 10 in Oman and the acquisition of a 20%interest in the SARB/Umm Lulu oil fields in the United Arab Emirates.Integrated LNG delivered adjusted net operating income and cash flow of$2.1 billion,leveraging its integrated global portfolio,in an environment of European and Asian gas prices returning to levels close to Brent parity at$16-17/Mbtu,given the mild winter and high inventories in Europe.The Company launched this quarter the integrated engineering studies(FEED)on the Papua LNG project,which will contribute to the future growth of the LNG portfolio.The Integrated Power segment generated adjusted net operating income and cash flow of$0.4 billion in the first quarter.ROACE was nearly 10%over 12 months,confirming the Companys ability to profitably grow this business.TotalEnergies closed this quarter the acquisition of a 34%interest in Casa Dos Ventos in Brazil,contributing to the growth of its installed renewable power generation capacity to 18 GW.Downstream posted adjusted net operating income of$1.9 billion and cash flow of$2.2 billion,benefiting from strong refining margins.TotalEnergies announced the sale for 3.1 billion to Alimentation Couche-Tard of its retail networks in Germany and the Netherlands as well as a 40%/60%partnership with them to operate the stations in Belgium and Luxembourg.Given these strong results,the Board of Directors confirmed the increase of 7.25%in the first interim dividend for the 2023 financial year,to 0.74 per share,as well as the repurchase of up to$2 billion of shares in the second quarter of 2023.(1)Definition on page 3.(2)Excluding leases.*Restated for the production related to TotalEnergies stake in Novatek.1Q234Q22Changevs 4Q221Q22Changevs 1Q22 Net income(TotalEnergies share)(B$)5.63.3 70%4.9 12justed net income(TotalEnergies share)(1)-in billions of dollars(B$)6.57.6-13%9.0-27%-in dollars per share2.612.97-12%3.40-23justed EBITDA(1)(B$)14.216.0-11.4-19CF(1)(B$)9.89.4 4.0-19sh Flow from operations(B$)5.15.6-9%7.6-33%Net-debt-to-capital ratio(2)of 11.5%at March 31,2023 vs.7.0%at December 31,2022First 2023 interim dividend set at 0.74/share 2 1.Highlights(3)Social and environmental responsibility Publication of the Sustainability&Climate 2023 Progress Report presenting the progress made on TotalEnergies transformation strategy and the update of its climate ambition TotalEnergies ranked Number 2 in employee share ownership in Europe according to the report of the European Federation of Employee Share Ownership TotalEnergies guarantees customers that its fuel price will not exceed 1.99/l in its stations in France Upstream Acquisition of CEPSAs upstream assets in the United Arab Emirates,representing a share of 50 kboe/d Agreement with the Iraqi Government to move forward with the multi-energy project in Iraq Launch of the Lapa South-West project in Brazil Downstream Sale to Alimentation Couche-Tard of retail networks in Germany and the Netherlands and 40%/60%partnership in Belgium and Luxembourg Agreement with waste recycling company Paprec to develop chemical plastic recycling projects in France Creation of a joint venture with Air Liquide to develop a network of more than 100 hydrogen stations for trucks in Europe Integrated LNG Production start-up on Block 10 and signed a long-term LNG contract for 0.8 Mt/year in Oman Launch of Papua LNG Integrated Engineering Studies in Papua New Guinea Delivery of the first LNG cargo to the Dhamra LNG terminal in India Commissioning of the floating LNG regasification terminal in Lubmin,Germany Authorization by the French and European authorities for the installation of the floating LNG regasification terminal in Le Havre in France Integrated Power Closing of the acquisition of a 34%interest in Casa dos Ventos,leading renewable developer in Brazil Acquisition from Corio Generation a 50%interest(minus 10 shares)in the 600 MW Formosa 3 offshore wind project in Taiwan Signature of renewable power purchase agreements with Sasol and Air Liquide in South Africa Decarbonization&new molecules Acquisition of PGB,Polands leading biogas producer Entry on two permits for the storage of CO2 in the North Sea,Denmark(3)Some of the transactions mentioned in the highlights remain subject to the agreement of the authorities or to the fulfilment of conditions precedent under the terms of the agreements.3 2.Key figures from TotalEnergies consolidated financial statements(4)*Average-$exchange rate:1.0730 in the first quarter 2023,1.0205 in the fourth quarter 2022 and 1.1217 in the first quarter 2022.(4)Adjusted results are defined as income using replacement cost,adjusted for special items,excluding the impact of changes for fair value;adjustment items are on page 19.(5)Adjusted EBITDA(Earnings Before Interest,Tax,Depreciation and Amortization)corresponds to the adjusted earnings before depreciation,depletion and impairment of tangible and intangible assets and mineral interests,income tax expense and cost of net debt,i.e.,all operating income and contribution of equity affiliates to net income.(6)Effective tax rate=(tax on adjusted net operating income)/(adjusted net operating income income from equity affiliates dividends received from investments impairment of goodwill tax on adjusted net operating income).(7)In accordance with IFRS rules,adjusted fully-diluted earnings per share is calculated from the adjusted net income less the interest on the perpetual subordinated bonds.(8)Organic investments=net investments excluding acquisitions,asset sales and other operations with non-controlling interests.(9)Net acquisitions=acquisitions assets sales other transactions with non-controlling interests(see page 21).(10)Net investments=organic investments net acquisitions(see page 21).(11)Operating cash flow before working capital changes,is defined as cash flow from operating activities before changes in working capital at replacement cost,excluding the mark-to-market effect of Integrated LNG and Integrated Power contracts and including capital gains from renewable projects sale.The inventory valuation effect is explained on page 25.The reconciliation table for different cash flow figures is on page 21.(12)DACF=debt adjusted cash flow,is defined as operating cash flow before working capital changes and financial charges.In millions of dollars,except effective tax rate,earnings per share and number of shares1Q234Q221Q23 vs 4Q221Q221Q23vs1Q22Adjusted EBITDA(5)14,16715,997-11,424-19justed net operating income from business segments6,9938,238-15%9,458-26%Exploration&Production2,6533,528-25%5,015-47%Integrated LNG2,0722,408-14%3,133-34%Integrated Power370481-23%(82)nsRefining&Chemicals1,6181,487 9%1,120 44%Marketing&Services280334-162 3%Contribution of equity affiliates to adjusted net income1,0791,873-42%1,861-42fective tax rate(6)41.4A.48.7justed net income(TotalEnergies share)6,5417,561-13%8,977-27justed fully-diluted earnings per share(dollars)(7)2.612.97-12%3.40-23justed fully-diluted earnings per share(euros)*2.432.93-17%3.03-20%Fully-diluted weighted-average shares(millions)2,4792,522-2%2,614-5%Net income(TotalEnergies share)5,5573,264 70%4,944 12%Organic investments(8)3,4333,935-13%1,981 73%Net acquisitions(9)2,987(133)ns922x3.2Net investments(10)6,4203,802 69%2,903x2.2Operating cash flow before working capital changes(11)9,6219,135 5,626-17%Operating cash flow before working capital changes w/o financial charges(DACF)(12)9,7749,361 4,995-19sh flow from operations5,1335,618-9%7,617-33C.Key figures of environment,greenhouse gas emissions and production 3.1 Environment*liquids and gas price realizations,refining margins*The indicators are shown on page 26.*This indicator represents TotalEnergies average margin on variable cost for refining in Europe(equal to the difference between TotalEnergies European refined product sales and crude oil purchases with associated variable costs divided by volumes refined in tons).3.2 Greenhouse gas emissions(13)Estimated 1Q23 emissions.Scope 1 2 emissions from operated installations were down in the first quarter 2023,as a result of the decrease in the use of gas-fired power plants in a context of lower demand in Europe and given the decline in flaring on Exploration&Production facilities.Estimated 1Q23 emissions.(13)The six greenhouse gases in the Kyoto protocol,namely CO2,CH4,N2O,HFCs,PFCs and SF6,with their respective GWP(Global Warming Potential)as described in the 2007 IPCC report.HFCs,PFCs and SF6 are virtually absent from the Companys emissions or are considered as non-material and are therefore not counted.(14)Scope 1 2 GHG emissions of operated facilities are defined as the sum of direct emissions of greenhouse gases from sites or activities that are included in the scope of reporting(as defined in the Companys 2022 Universal Registration Document)and indirect emissions attributable to brought-in energy(electricity,heat,steam),excluding purchased industrial gases(H2).(15)TotalEnergies reports Scope 3 GHG emissions,category 11,which correspond to indirect GHG emissions related to the use by customers of energy products,i.e.,combustion of the products to obtain energy.The Company follows the oil&gas industry reporting guidelines published by IPIECA,which comply with the GHG Protocol methodologies.In order to avoid double counting,this methodology accounts for the largest volume in the oil,biofuels and gas value chains,i.e.,the higher of the two production volumes or sales to end customers.The highest point for each value chain for 2023 will be evaluated considering realizations over the full year,TotalEnergies gradually providing quarterly estimates.1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Brent($/b)81.288.8-92.2-21%Henry Hub($/Mbtu)2.76.1-55%4.6-40%NBP($/Mbtu)16.132.3-502.3-50%JKM($/Mbtu)16.530.5-461.1-47%Average price of liquids($/b)Consolidated subsidiaries73.480.6-9.1-19%Average price of gas($/Mbtu)Consolidated subsidiaries8.8912.74-30.27-28%Average price of LNG($/Mbtu)Consolidated subsidiaries and equity affiliates 13.2714.83-11.60-2%Variable cost margin-Refining Europe,VCM($/t)*87.873.6 19F.3 90%GHG emissions(MtCO2e)1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Scope 1 2 from operated facilities(14)9.110.1-10%9.6-6%of which Oil&Gas7.68.3-8%7.9-4%of which CCGT1.51.8-17%1.7-15%Scope 1 2-equity share12.814.7-13.0-9%Methane emissions(ktCH4)1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Methane emissions from operated facilities911-17-8%Methane emissions-equity share1110 12-7%Scope 3 emissions(MtCO2e)1Q232022Scope 3 from Oil,Biofuels and Gas Worldwide(15)est.903895 3.3 Production*Company production=E&P production Integrated LNG production.Hydrocarbon production was 2,524 thousand barrels of oil equivalent per day(kboe/d)in the first quarter of 2023,up 1%year-on-year(excluding Novatek),comprised of: 4%due to start-ups and ramp-ups,notably Mero 1 in Brazil and Ikike in Nigeria, 1%due to the increase in OPEC production quotas,-1%portfolio effect,notably related to the end of the Bongkot operating licenses in Thailand,the exit from Termokarstovoye and Kharyaga in Russia and the effective withdrawal from Myanmar,partially offset by the entry into the producing fields of Spia and Atapu in Brazil and SARB/Umm Lulu in the United Arab Emirates,as well as the increased participation in the Waha concessions in Libya,-3%due to the natural decline of the fields.Production was up 2%quarter-on-quarter(excluding Novatek),benefiting in particular from the start-up of gas production from Block 10 in Oman,the acquisition of an interest in the SARB/Umm Lulu oil fields in the United Arab Emirates,and the ramp-up of Johan Sverdrup Phase 2 project in Norway.Hydrocarbon production1Q234Q221Q23 vs 4Q221Q221Q23vs1Q22Hydrocarbon production(kboe/d)2,5242,812-10%2,843-11%Oil(including bitumen)(kb/d)1,3981,357 3%1,305 7%Gas(including condensates and associated NGL)(kboe/d)1,1261,455-23%1,538-27%Hydrocarbon production(kboe/d)2,5242,812-10%2,843-11%Liquids(kb/d)1,5621,570-1,527 2%Gas(Mcf/d)5,1916,681-22%7,162-28%Hydrocarbon production excluding Novatek(kboe/d)2,5242,475 2%2,508 1%6 4.Analysis of business segments 4.1 Integrated LNG 4.1.1 Production*The Companys equity production may be sold by TotalEnergies or by the joint ventures.Hydrocarbon production for LNG was up 7%year-on-year(excluding Novatek),due to the restart of Snhvit in Norway during the second quarter 2022.Overall LNG sales in the first quarter of 2023 were down 17%year-on-year,mainly as a result of lower spot volumes,linked to lower demand for LNG in Europe due to the mild winter weather and high inventories.Hydrocarbon production for LNG1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Integrated LNG(kboe/d)463503-8I2-6%Liquids(kb/d)6258 6 3%Gas(Mcf/d)2,1792,420-10%2,349-7%Integrated LNG excluding Novatek(kboe/d)463445 4C3 7%Liquefied Natural Gas in Mt1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Overall LNG sales11.012.7-13.3-17%incl.Sales from equity production*4.04.4-11%4.4-11%incl.Sales by TotalEnergies from equity production and third party purchases9.911.4-14.9-17%7 4.1.2 Results*Detail of adjustment items shown in the business segment information annex to financial statements.*Excluding financial charges,except those related to lease contracts,excluding the impact of contracts recognized at fair value.*Excluding financial charges,except those related to leases.Integrated LNG adjusted net operating income was$2,072 million in the first quarter 2023:down 10%quarter-on-quarter(excluding Novatek),mainly due to lower hydrocarbon prices;down 25%year-on-year(excluding Novatek)due to lower LNG sales and prices,as well as exceptional trading results in the first quarter of 2022.Operating cash flow before working capital changes for Integrated LNG was$2,081 million in the first quarter 2023:down 23%quarter-on-quarter(excluding Novatek),due to lower prices and a lag effect on dividend payments received from equity affiliates;down 16%year-on-year(excluding Novatek),due to lower prices.Cash flow from operations was$3,536 million for the quarter,linked to the positive impact on working capital of the decrease in margin calls and receivables.In millions of dollars1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Adjusted net operating income*2,0722,408-14%3,133-34%including adjusted income from equity affiliates7861,213-35%1,404-44%Organic investments396195x2(61)nsNet acquisitions75919x39.9(20)nsNet investments1,155214x5.4(81)nsOperating cash flow before working capital changes*2,0812,688-23%2,492-16sh flow from operations*3,536134x26.42,219 59%8 4.2 Integrated Power 4.2.1 Capacities,productions,clients and sales(1)Includes 20%of Adani Green Energy Ltds gross capacity effective first quarter 2021,50%of Clearway Energy Groups gross capacity effective third quarter 2022 and 49%of Casa dos Ventos gross capacity effective first quarter 2023.(2)End of period data.(3)Solar,wind,hydroelectric and combined-cycle gas turbine(CCGT)plants.Gross installed renewable power generation capacity was close to 18 GW at the end of the first quarter 2023,up by more than 1 GW quarter-on-quarter,including 0.6 GW from the acquisition of an interest in the Casa dos Ventos portfolio of renewable projects in Brazil and the connection of 0.3 GW from the Seagreen offshore wind project in the UK.Net electricity generation was 8.4 TWh in the quarter:up 10%year-on-year,due to growing electricity generation from renewables,offsetting the lower generation from flexible capacity,down 11%quarter-on-quarter due to lower flexible capacity generation in the context of lower demand,partially offset by growing renewable power generation.Integrated Power1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Portfolio of renewable power generation gross capacity(GW)(1),(2)70.469.0 2F.8 50%o/w installed capacity 17.916.8 7.7 68%o/w capacity in construction 6.26.1 1%6.1 2%o/w capacity in development 46.346.0 10.1 54%Portfolio of renewable power generation net capacity(GW)(2)44.445.5-24.4 29%o/w installed capacity 8.47.7 9%5.4 55%o/w capacity in construction 4.04.1-2%4.2-3%o/w capacity in development 32.033.6-5$.8 29%Gas-fired power generation gross installed capacity(GW)(2)5.85.8-5.8-Gas-fired power generation net installed capacity(GW)(2)4.34.3-4.5-5%Net power production(TWh)(3)8.49.4-11%7.6 10%incl.power production from renewables3.83.3 16%2.2 72%Clients power-BtB and BtC(Million)(2)6.06.1-2%6.1-1%Clients gas-BtB and BtC(Million)(2)2.82.7-2.7 1%Sales power-BtB and BtC(TWh)15.514.6 6.3-5%Sales gas-BtB and BtC(TWh)37.328.1 335.0 7%9 4.2.2 Results*Detail of adjustment items shown in the business segment information annex to financial statements.*Excluding financial charges,except those related to lease contracts,excluding the impact of contracts recognized at fair value for the sector and including capital gains on the sale of renewable projects.*Excluding financial charges,except those related to leases.Excluding margin calls,reported in the Integrated LNG segment since the implementation in 2022 of its centralized management.Integrated Power adjusted net operating income was$370 million in the first quarter 2023:up significantly year-on-year,due to the contribution from gas-fired power plants and the performance of power trading,which offset the impact of seasonality in the power marketing business,down 23%quarter-on-quarter,notably due to the impact of seasonality in the power marketing business.Cash flow from operations was($1,285)million in the first quarter 2023,mainly due to the negative impact on working capital of the seasonality of the power&gas marketing business(gap between a seasonal monthly cost of supply and a fixed monthly B2C clients payment estimated on the year-n-1 consumption).In millions of dollars1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Adjusted net operating income*370481-23%(82)nsincluding adjusted income from equity affiliates5688-36&x2.2Organic investments577455 2719 81%Net acquisitions519(230)ns661-22%Net investments1,096225x4.9980 12%Operating cash flow before working capital changes*440439-93x4.7Cash flow from operations*(1,285)861ns(1,904)ns10 4.3 Exploration&Production 4.3.1 Production 4.3.2 Results*Details on adjustment items are shown in the business segment information annex to financial statements.*Tax on adjusted net operating income/(adjusted net operating income-income from equity affiliates-dividends received from investments-impairment of goodwill tax on adjusted net operating income).*Excluding financial charges,except those related to leases.Exploration&Production adjusted net operating income was$2,653 million in the first quarter 2023:down 22%quarter-on-quarter(excluding Novatek),due to lower oil and gas prices,down 45%year-on-year(excluding Novatek)for the same reasons,as well as higher taxation,particularly in the UK.Operating cash flow before working capital changes in the first quarter 2023 was$4,907 million,down 3%quarter-on-quarter(excluding Novatek),reflecting lower gas and oil prices in the first quarter 2023 and exceptional taxes during the fourth quarter 2022,notably taxes related to the European solidarity contribution.Hydrocarbon production1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22EP(kboe/d)2,0612,309-11%2,351-12%Liquids(kb/d)1,5001,512-1%1,467 2%Gas(Mcf/d)3,0124,261-29%4,813-37%EP excluding Novatek(kboe/d)2,0612,030 2%2,075-1%In millions of dollars,except effective tax rate1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Adjusted net operating income*2,6533,528-25%5,015-47%including adjusted income from equity affiliates135316-5755-62fective tax rate*57.1T.4G.0%Organic investments2,1342,219-4%1,426 50%Net acquisitions1,938105x18.5316x6.1Net investments 4,0722,324 75%1,742x2.3Operating cash flow before working capital changes*4,9074,988-2%7,303-33sh flow from operations*4,5364,035 12%5,768-21 4.4 Downstream(Refining&Chemicals and Marketing&Services)4.4.1 Results*Detail of adjustment items shown in the business segment information annex to financial statements.*Excluding financial charges,except those related to leases.4.5 Refining&Chemicals 4.5.1 Refinery and petrochemicals throughput and utilization rates*Includes refineries in Africa reported in the Marketing&Services segment.*Based on distillation capacity at the beginning of the year.*Olefins.*Based on olefins production from steam crackers and their treatment capacity at the start of the year.Refined volumes were up 6%year-on-year,notably due to the restart of the Donges refinery in France in the second quarter 2022.Petrochemical production was down 8%year-on-year for monomers and 13%for polymers,due to slowing global demand.In millions of dollars1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Adjusted net operating income*1,8981,821 4%1,392 36%Organic investments2901,023-72)2-1%Net acquisitions(229)(28)ns(34)nsNet investments61995-94%8-76%Operating cash flow before working capital changes*2,1891,681 30%1,896 15sh flow from operations*(1,524)939ns2,005nsRefinery throughput and utilization rate*1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Total refinery throughput(kb/d)1,4031,389 1%1,317 6%France357312 14%2 42%Rest of Europe596580 35-1%Rest of world450497-10F0-2%Utlization rate based on crude only*78wt%Petrochemicals production and utilization rate1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Monomers*(kt)1,2951,095 18%1,404-8%Polymers (kt)1,111917 21%1,274-13%Steamcracker utilization rate*75f 4.5.2 Results*Detail of adjustment items shown in the business segment information annex to financial statements.*Excluding financial charges,except those related to leases.Refining&Chemicals adjusted net operating income was$1,618 million in the first quarter 2023:up 9%quarter-on-quarter,due to strong margins,up 44%year-on-year for the same reason as well as higher refined volumes.Operating cash flow before working capital changes was$1,733 million in the first quarter of 2023,up 51%quarter-on-quarter,taking into account the fourth quarter 2022 negative impact of the European solidarity contribution for refining activities of$0.7 billion.Cash flow from operations was($851)million in the first quarter of 2023,due to the negative impact on working capital of an increase in inventories linked to strikes in France in March.In millions of dollars1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Adjusted net operating income*1,6181,487 9%1,120 44%Organic investments198585-667 1%Net acquisitions5(5)ns-nsNet investments203580-657 3%Operating cash flow before working capital changes*1,7331,144 51%1,433 21sh flow from operations*(851)232ns1,107ns13 4.6 Marketing&Services 4.6.1 Petroleum product sales*Excludes trading and bulk refining sales.In the first quarter 2023,sales of petroleum products were down 6%quarter-on-quarter and year-on-year,due to lower industrial demand in Europe linked to higher prices for petroleum products,partially offset by the recovery in aviation activities.4.6.2 Results*Detail of adjustment items shown in the business segment information annex to financial statements.*Excluding financial charges,except those related to leases.Marketing&Services adjusted net operating income was$280 million in the first quarter 2023,up 3%year-on-year,mainly thanks to the strong performance of the retail network activities.Cash flow from operations was($673)million in the first quarter of 2023,due to the negative impact of lower prices on working capital.Sales in kb/d*1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Total Marketing&Services sales1,3601,450-6%1,452-6%Europe757816-7y0-4%Rest of world602634-5f2-9%In millions of dollars1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Adjusted net operating income*280334-162 3%Organic investments92438-79-3%Net acquisitions(234)(23)ns(34)nsNet investments(142)415ns61nsOperating cash flow before working capital changes*456537-15F3-2sh flow from operations*(673)707ns898ns145.TotalEnergies results 5.1 Adjusted net operating income from business segments Adjusted net operating income from business segments was$6,993 million in the first quarter 2023,compared to$9,458 million in the first quarter of 2022,mainly due to lower oil and gas prices.5.2 Adjusted net income(TotalEnergies share)TotalEnergies adjusted net income was$6,541 million in the first quarter 2023 versus$8,977 million in the first quarter of 2022,mainly due to lower oil and gas prices.Adjusted net income excludes the after-tax inventory effect,special items and the impact of changes in fair value(16).Adjustments to net income(17)were($984)million in the first quarter 2023,consisting mainly of:($0.4)billion of inventory effect,($0.4)billion effects of changes in fair value,($0.2)billion related to the impacts of the European solidarity contribution and the inframarginal income contribution in France.TotalEnergies average tax rate of 41.4%in the first quarter 2023 was stable compared to the previous quarter,versus 38.7%in the first quarter 2022,mainly as a result of the higher tax rate for Exploration&Production,related notably to the Energy Profits Levy in the UK.5.3 Adjusted earnings per share Adjusted diluted net earnings per share were$2.61 in the first quarter 2023,based on 2,479 million weighted average diluted shares,compared to$3.40 a year earlier.As of March 31,2023,the number of diluted shares was 2,468 million.As part of its shareholder return policy,TotalEnergies repurchased 32.2 million shares for cancellation in the first quarter of 2023 for$2 billion.5.4 Acquisitions-asset sales Acquisitions were$3,256 million in the first quarter 2023,notably for:the acquisition of a 20%interest in the SARB/Umm Lulu concession in the United Arab Emirates,payments related to the acquisition of a 6.25%stake in the NFE LNG project in Qatar,a 34%stake in a joint venture with Casa dos Ventos in Brazil.Divestments were$269 million in the first quarter 2023,mainly related to the sale of 50%of the Marketing&Services subsidiary in Egypt.5.5 Net cash flow TotalEnergies net cash flow(18)was$3,201 million in the first quarter 2023 compared to$8,723 million a year earlier,given the$2,005 million decrease in cash flow and the$3,517 million increase in net investments to$6,420 million this quarter.In the first quarter,cash flow from operations was$5,133 million compared to$9,621 million of operating cash flow before working capital changes,reflecting the$4.5 billion increase in working capital requirements,mainly due to the effects of lower prices on tax and trade payables,higher crude and petroleum product inventories notably due to the strikes in France,and the seasonality of the gas and power marketing business.(16)These adjustment elements are explained page 25.(17)Total net income adjustment items are detailed page 19 as well as in the annexes to the accounts.(18)Net cash flow=operating cash flow before working capital changes-net investments(including other transactions with non-controlling interest).15 5.6 Profitability Return on equity was 29.7%for the twelve months ended March 31,2023.Return on average capital employed was 25.4%for the twelve months ended March 31,2023.6.TotalEnergies SE statutory accounts Net income for TotalEnergies SE,the parent company,amounted to 2,189 million in the first quarter 2023,compared to 1,035 million in the first quarter 2022.7.Annual 2023 Sensitivities*Sensitivities are revised once per year upon publication of the previous years fourth quarter results.Sensitivities are estimates based on assumptions about TotalEnergies portfolio in 2023.Actual results could vary significantly from estimates based on the application of these sensitivities.The impact of the$-sensitivity on adjusted net operating income is essentially attributable to Refining&Chemicals.*In a 80$/b Brent environment.Adjusted net incomeAverage adjusted shareholders equityReturn on equity(ROE)29.72.5!.8%In millions of dollarsApril 1,2022January 1,2022April 1,2021March 31,2022March 31,2023December 31,202224,382111,79434,21936,657115,233112,831Adjusted net operating incomeAverage capital employedROACE35,71238,21225,803In millions of dollarsApril 1,2022January 1,2022April 1,2021March 31,2023December 31,2022March 31,2022140,842135,312143,51725.4(.2.0%ChangeEstimated impact on adjustednet operating incomeEstimated impact on cash flow from operationsDollar /-0.1$per-/ 0.1 B$0 B$Average liquids price* /-10$/b /-2.5 B$ /-3.0 B$European gas price-NBP/TTF /-2$/Mbtu /-0.4 B$ /-0.4 B$Variable cost margin,European refining(VCM) /-10$/t /-0.4 B$ /-0.5 B$16 8.Outlook After briefly falling below$75/b in mid-March,oil prices rose above$80/b in April,notably due to the decision by some OPEC countries to reduce their production quotas to stabilize a market marked by fears of financial crisis and recession.After several quarters of exceptionally high diesel cracks,European refining margins are easing down because of lower economic growth expectations and high products inventories fueled by Chinese exports and the quicker than anticipated reorganization of Russian flows following the European embargo.Demand for petroleum products could be supported in the coming weeks by the entry into the driving season in the US for gasoline,as well as the global recovery of air traffic for aviation fuel.Given the evolution of oil and gas prices in recent months and the lag effect on price formulas,TotalEnergies anticipates that its average LNG selling price should be between$10-12/Mbtu in the second quarter 2023.Given the high inventory levels at the end of winter,European and Asian gas prices are expected to remain stable in the second quarter before rebounding in the second half 2023,driven by restocking gas in Europe before winter and the demand recovery in China,in a context of limited LNG production growth.Futures markets anticipate prices in the range of$18/Mbtu for winter 2023-24.For the second quarter 2023,TotalEnergies anticipates a hydrocarbon production around 2.5 Mboe/d,LNG sales that should benefit from the restart of Freeport LNG and a utilization rate in refineries up to more than 80%given the end of strikes in France.The Company confirms its guidance for net investments between$16-18 billion in 2023,including$5 billion in low-carbon energies.*To listen to the conference call with CEO Patrick Pouyann and CFO Jean-Pierre Sbraire today at 13:30(Paris time),please log on to or dial 44(0)121 281 8004 or 1(718)705-8796.The conference replay will be available on the Companys website after the event.*TotalEnergies contacts Media Relations: 33(0)1 47 44 46 99 l l TotalEnergiesPRInvestor Relations: 33(0)1 47 44 46 46 l 17 9.Operating information by segment 9.1 Companys production(Exploration&Production Integrated LNG)Combined liquids and gasproduction by region(kboe/d)1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Europe583918-379-39rica494477 4I8-1%Middle East and North Africa718703 2g0 7%Americas441442-386 14%Asia-Pacific288272 630-13%Total production2,5242,812-10%2,843-11%includes equity affiliates344670-49q5-52%Liquids production by region(kb/d)1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Europe235282-17)8-21rica371358 471-Middle East and North Africa578565 2S8 7%Americas263259 2 1 31%Asia-Pacific116106 99-3%Total production1,5621,570-1,527 2%includes equity affiliates150199-24!0-29%Gas production by region(Mcf/d)1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Europe1,8793,412-45%3,557-47rica615592 4d3-4%Middle East and North Africa772745 4r7 6%Americas9941,030-3%1,041-5%Asia-Pacific931902 3%1,194-22%Total production5,1916,681-22%7,162-28%includes equity affiliates1,0542,535-58%2,714-61 9.2 Downstream(Refining&Chemicals and Marketing&Services)*Olefins,polymers.9.3 Renewables(1)Includes 20%of the gross capacities of Adani Green Energy Limited,50%of Clearway Energy Group and,from 1Q23,49%of Casa dos Ventos.(2)End-of-period data.Petroleum product sales by region(kb/d)1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Europe1,7361,665 4%1,635 6rica667743-10v1-12%Americas849740 15w5 9%Rest of world623558 12S1 17%Total consolidated sales3,8753,706 5%3,701 5%Includes bulk sales387388-409-5%Includes trading2,1271,868 14%1,840 16%Petrochemicals production*(kt)1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Europe1,047835 25%1,260-17%Americas607477 27c8-5%Middle East and Asia753700 7x1-4%Installed power generation gross capacity(GW)(1),(2)SolarOnshore WindOffshore WindOther Total SolarOnshore WindOffshore WindOtherTotal France0.80.60.00.21.50.80.60.00.11.5Rest of Europe0.21.10.50.01.80.21.10.30.01.6Africa 0.10.00.00.00.20.10.00.00.00.1Middle East 1.20.00.00.01.21.20.00.00.01.2North America3.02.10.00.15.12.92.10.00.15.1South America0.40.90.00.01.30.40.30.00.00.7India5.00.40.00.05.44.90.40.00.05.3Asia-Pacific1.30.00.10.01.51.20.00.10.01.4Total 12.05.00.70.317.911.74.50.40.216.8Power generation gross capacity from renewables in construction(GW)(1),(2)SolarOnshore WindOffshore WindOther Total SolarOnshore WindOffshore WindOther Total France0.20.10.00.00.40.20.10.00.10.4Rest of Europe0.10.00.60.00.70.10.00.90.01.0Africa 0.00.00.00.00.00.00.00.00.00.0Middle East 0.00.00.00.00.00.00.00.00.00.0North America2.70.10.00.53.42.60.00.00.53.1South America0.10.60.00.00.70.00.00.00.00.0India0.40.10.00.00.50.80.20.00.01.0Asia-Pacific0.00.00.50.00.60.10.00.50.00.6Total 3.60.91.20.56.23.80.31.40.66.1Power generation gross capacity from renewables in development(GW)(1),(2)SolarOnshore WindOffshore WindOther Total SolarOnshore WindOffshore WindOther Total France0.90.20.00.01.21.60.40.00.02.0Rest of Europe3.60.44.40.18.43.80.44.40.18.6Africa 0.70.30.00.11.10.60.10.00.10.9Middle East 0.50.00.00.00.50.60.00.00.00.6North America10.72.84.14.522.110.83.44.14.122.4South America1.30.50.00.01.80.81.10.00.22.0India4.60.20.00.04.84.40.10.00.04.5Asia-Pacific2.40.42.90.76.42.20.12.30.45.0Total 24.74.811.45.446.324.85.510.84.946.01Q234Q221Q234Q221Q234Q2219 10.Adjustment items to net income(TotalEnergies share)In millions of dollars1Q234Q221Q22Special items affecting net income(TotalEnergies share)(159)(5,585)(4,993)Gain(loss)on asset sales203-Restructuring charges-(14)(3)Impairments(60)(3,845)(5,061)Other(302)(1,726)71After-tax inventory effect:FIFO vs.replacement cost(391)(705)1,040Effect of changes in fair value(434)1,993(80)Total adjustments affecting net income(984)(4,297)(4,033)20 11.Reconciliation of adjusted EBITDA with consolidated financial statements 11.1 Reconciliation of net income(TotalEnergies share)to adjusted EBITDA 11.2 Reconciliation of revenues from sales to adjusted EBITDA and net income(TotalEnergies share)In millions of dollars1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Net income-TotalEnergies share5,5573,264 70%4,944 12%Less:adjustment items to net income(TotalEnergies share)984 4,297-77%4,033-76justed net income-TotalEnergies share6,541 7,561-13%8,977-27justed itemsAdd:non-controlling interests74 210-65v-3d:income taxes4,090 4,530-10%4,724-13d:depreciation,depletion and impairment of tangible assets and mineral interests3,026 3,204-6%3,148-4d:amortization and impairment of intangible assets99 111-11 3d:financial interest on debt710 719-1F2 54%Less:financial income and expense from cash&cash equivalents(373)(338)ns(59)nsAdjusted EBITDA14,167 15,997-11,424-19%In millions of dollars1Q234Q221Q23 vs 4Q221Q221Q23 vs 1Q22Adjusted itemsRevenues from sales58,309 63,884-9c,938-9%Purchases,net of inventory variation(37,479)(42,755)ns(40,762)nsOther operating expenses(7,752)(7,027)ns(7,409)nsExploration costs(94)(250)ns(136)nsOther income77 636-881-36%Other expense,excluding amortization and impairment of intangible assets(38)(480)ns(173)nsOther financial income248 266-79 x2.1Other financial expense(183)(150)ns(135)nsNet income(loss)from equity affiliates1,079 1,873-42%1,861-42justed EBITDA14,167 15,997-11,424-19justed itemsLess:depreciation,depletion and impairment of tangible assets and mineral interests(3,026)(3,204)ns(3,148)nsLess:amortization of intangible assets(99)(111)ns(96)nsLess:financial interest on debt(710)(719)ns(462)nsAdd:financial income and expense from cash&cash equivalents373 338 10Y x6.3Less:income taxes(4,090)(4,530)ns(4,724)nsLess:non-controlling interests(74)(210)ns(76)nsAdd:adjustment-TotalEnergies share(984)(4,297)ns(4,033)nsNet income-TotalEnergies share5,557 3,264 70%4,944 12! 12.Investments-Divestments*Change in debt from renewable projects(TotalEnergies share and partner share).13.Cash flow*Operating cash flow before working capital changes,is defined as cash flow from operating activities before changes in working capital at replacement cost,excluding the mark-to-market effect of Integrated LNG and Integrated Power sectors contracts and including capital gain from renewable projects sale.Historical data have been restated to cancel the impact of fair valuation of Integrated LNG and Integrated Power sectors contracts.*Changes in working capital are presented excluding the mark-to-market effect of Integrated LNG and Integrated Power sectors contracts.In millions of dollars1Q234Q221Q23 vs 4Q221Q221Q23vs1Q22Organic investments(a)3,4333,935-13%1,981 73pitalized exploration205 287-294 80%Increase in non-current loans374 210 78#4 60%Repayment of non-current loans,excluding organic loan repayment from equity affiliates(229)(259)ns(435)nsChange in debt from renewable projects(TotalEnergies share)-(124)-100%-nsAcquisitions(b)3,256 292 x11.21,400 x2.3Asset sales(c)269 425-37G8-44%Change in debt from renewable projects(partner share)(3)109 ns(2)nsNet acquisitions2,987(133)ns922 x3.2Net investments(a b-c)6,420 3,802 69%2,903 x2.2Other transactions with non-controlling interests(d)-50-100%-nsOrganic loan repayment from equity affiliates(e)6(335)ns(487)nsChange in debt from renewable projects financing*(f)(3)233 ns(2)nsCapex linked to capitalized leasing contracts(g)60 61-26 67%Expenditures related to carbon credits(h)1 8-88%-nsCash flow used in investing activities(a b-c d e f-g-h)6,362 3,681 73%2,378 x2.7In millions of dollars1Q234Q221Q23 vs 4Q221Q221Q23vs1Q22Operating cash flow before working capital changes w/o financial charges(DACF)9,774 9,361 4,995-19%Financial charges(153)(226)ns(369)nsOperating cash flow before working capital changes(a)*9,621 9,135 5,626-17%(Increase)decrease in working capital*(3,989)(2,247)ns(4,775)nsInventory effect(502)(895)ns1,255 nsCapital gain from renewable project sales(3)(40)ns(2)nsOrganic loan repayments from equity affiliates6(335)ns(487)nsCash flow from operations5,133 5,618-9%7,617-33%Organic investments(b)3,433 3,935-13%1,981 73%Free cash flow after organic investments,w/o net asset sales(a-b)6,188 5,200 19%9,645-36%Net investments(c)6,420 3,802 69%2,903 x2.2Net cash flow(a-c)3,201 5,333-40%8,723-63 14.Gearing ratio(1)Excludes leases receivables and leases debts.(2)Including initial margins held as part of the Companys activities on organized markets.15.Return on average capital employedTwelve months ended March 31,2023 Full year 2022*At replacement cost(excluding after-tax inventory effect).In millions of dollars03/31/202312/31/202303/31/2022Current borrowings(1)16,28014,06516,759Other current financial liabilities597488502Current financial assets(1),(2)(7,223)(8,556)(7,231)Net financial assets classified as held for sale(38)(38)(38)Non-current financial debt(1)34,82036,98738,924Non-current financial assets(1)(1,101)(1,303)(587)Cash and cash equivalents(27,985)(33,026)(31,276)Net debt(a)15,3508,61717,053Shareholders equity-TotalEnergies share115,581111,724116,480Non-controlling interests2,8632,8463,375Shareholders equity(b)118,444114,570119,855Net-debt-to-capital ratio=a/(a b)11.5%7.0.5%Leases(c)8,1318,0968,028Net-debt-to-capital ratio including leases(a c)/(a b c)16.5.7.3%In millions of dollarsIntegrated LNGIntegrated PowerExploration&ProductionRefining&ChemicalsMarketing&ServicesCompanyAdjusted net operating income10,1081,42715,1177,8001,55835,712Capital employed at 03/31/2022*44,8039,93771,5188,8477,751141,853Capital employed at 03/31/2023*34,18318,98267,65810,1158,811139,830ROACE25.6%9.9!.7.3.8%.4%In millions of dollarsIntegrated LNGIntegrated PowerExploration&ProductionRefining&ChemicalsMarketing&ServicesCompanyAdjusted net operating income11,16997517,4797,3021,55038,212Capital employed at 12/31/2021*46,6549,32471,6758,0698,783141,813Capital employed at 12/31/2022*33,67116,22565,7847,4387,593128,811ROACE27.8%7.6%.4.2.9(.2# 16.Restated key figures for 2021 and 2022 for Integrated LNG and Integrated Power segments16.1 Integrated LNG 16.1.1 Operational data*The Companys equity production may be sold by TotalEnergies or by the joint-ventures.16.1.2 Restated key figures Including the centralized management of balance sheet positions(including margin calls)related to single market access for LNG,gas and power activities since 2022.Effects of changes in fair value in gas and LNG positions are allocated to the operating income of Integrated LNG sector Effects of changes in fair value in power positions are allocated to the operating income of Integrated Power sector.*Excluding financial charges,except those related to lease contracts,excluding the impact of contracts recognized at fair value for the sector.*Excluding financial charges,except those related to leases.Hydrocarbon production for LNG202120221Q222Q223Q224Q22Integrated LNG(kboe/d)529469492462418503Liquids(kb/d)635360534058Gas(Mcf/d)2,5412,2672,3492,2332,0672,420Liquefied Natural Gas in Mt202120221Q222Q223Q224Q22Overall LNG sales42.048.113.311.710.412.7incl.Sales from equity production*17.417.04.44.14.04.4incl.Sales by TotalEnergies from equity production and third party purchases35.142.811.910.29.211.4In millions of dollars202120221Q222Q223Q224Q22Adjusted net operating income5,59111,1693,1332,2153,4132,408including adjusted income from equity affiliates2,6595,6371,4041,1921,8281,213Organic investments2,061519(61)171213195Net acquisitions(910)(47)(20)(36)(10)19Net investments1,151472(81)135203214Operating cash flow before working capital changes*5,4049,7842,4922,1122,4922,688Cash flow from operations*(2,765)9,6042,2193,8023,449134Capital employed end of period46,65433,67144,80341,60637,74233,67124 16.2 Integrated Power 16.2.1 Operational data(1)Includes 20%of Adani Green Energy Ltds gross capacity effective first quarter 2021.(2)Includes 50%of Clearway Energy Groups gross capacity effective third quarter 2022.(3)End of period data.(4)Solar,wind,hydroelectric and combined-cycle gas turbine(CCGT)plants.16.2.2 Restated key figures Excluding the centralized management of balance sheet positions(including margin calls)related to single market access for LNG,gas and power activities since 2022.Effects of changes in fair value in gas and LNG positions are allocated to the operating income of Integrated LNG sector Effects of changes in fair value in power positions are allocated to the operating income of Integrated Power sector.*Excluding financial charges,except those related to lease contracts,excluding the impact of contracts recognized at fair value for the sector and including capital gains on the sale of renewable projects.*Excluding financial charges,except those related to leases.Integrated Power202120221Q222Q223Q224Q22Portfolio of renewable power generation gross capacity(GW)(1),(2),(3)43.069.046.850.767.869.0o/w installed capacity 10.316.810.711.616.016.8o/w capacity in construction 6.56.16.15.25.46.1o/w capacity in development 26.246.030.133.946.446.0Portfolio of renewable power generation net capacity(GW)(3)31.745.534.438.445.245.5o/w installed capacity 5.17.75.45.87.47.7o/w capacity in construction 4.64.14.23.73.54.1o/w capacity in development 22.033.624.828.934.233.6Gas-fired power generation gross installed capacity(GW)(3)5.85.85.85.85.85.8Gas-fired power generation net installed capacity(CCGT)(GW)(3)4.54.34.54.34.34.3Net power production(TWh)(4)21.233.27.67.78.59.4incl.power production from renewables6.810.42.22.52.43.3Clients power-BtB and BtC(Million)(3)6.16.16.16.26.36.1Clients gas-BtB and BtC(Million)(3)2.72.72.72.72.82.7Sales power-BtB and BtC(TWh)56.655.316.312.312.114.6Sales gas-BtB and BtC(TWh)101.296.335.019.114.228.1In millions of dollars202120221Q222Q223Q224Q22Adjusted net operating income652975(82)340236481including adjusted income from equity affiliates3720126276088Organic investments1,2801,385319170440455Net acquisitions2,0752,136661(22)1,728(230)Net investments3,3553,5219801482,168225Operating cash flow before working capital changes*72097093248191439Cash flow from operations*3,59266(1,904)168941861Capital employed end of period9,32416,2259,93712,56817,18116,22525 Disclaimer:The terms“TotalEnergies”,“TotalEnergies company”and“Company”in this document are used to designate TotalEnergies SE and the consolidated entities directly or indirectly controlled by TotalEnergies SE.Likewise,the words“we”,“us”and“our”may also be used to refer to these entities or their employees.The entities in which TotalEnergies SE directly or indirectly owns a shareholding are separate and independent legal entities.This press release presents the results for the first quarter 2023 from the consolidated financial statements of TotalEnergies SE as of March 31,2023(unaudited).The limited review procedures by the Statutory Auditors are underway.The notes to the consolidated financial statements(unaudited)are available on the website .This document may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995,notably with respect to the financial condition,results of operations,business activities and industrial strategy of TotalEnergies.This document may also contain statements regarding the perspectives,objectives,areas of improvement and goals of TotalEnergies,including with respect to climate change and carbon neutrality(net zero emissions).An ambition expresses an outcome desired by TotalEnergies,it being specified that the means to be deployed do not depend solely on TotalEnergies.These forward-looking statements may generally be identified by the use of the future or conditional tense or forward-looking words such as“envisions”,“intends”,“anticipates”,“believes”,“considers”,“plans”,“expects”,“thinks”,“targets”,“aims”or similar terminology.Such forward-looking statements included in this document are based on economic data,estimates and assumptions prepared in a given economic,competitive and regulatory environment and considered to be reasonable by TotalEnergies as of the date of this document.These forward-looking statements are not historical data and should not be interpreted as assurances that the perspectives,objectives or goals announced will be achieved.They may prove to be inaccurate in the future,and may evolve or be modified with a significant difference between the actual results and those initially estimated,due to the uncertainties notably related to the economic,financial,competitive and regulatory environment,or due to the occurrence of risk factors,such as,notably,the price fluctuations in crude oil and natural gas,the evolution of the demand and price of petroleum products,the changes in production results and reserves estimates,the ability to achieve cost reductions and operating efficiencies without unduly disrupting business operations,changes in laws and regulations including those related to the environment and climate,currency fluctuations,as well as economic and political developments,changes in market conditions,loss of market share and changes in consumer preferences,or pandemics such as the COVID-19 pandemic.Additionally,certain financial information is based on estimates particularly in the assessment of the recoverable value of assets and potential impairments of assets relating thereto.Neither TotalEnergies SE nor any of its subsidiaries assumes any obligation to update publicly any forward-looking information or statement,objectives or trends contained in this document whether as a result of new information,future events or otherwise.The information on risk factors that could have a significant adverse effect on TotalEnergies business,financial condition,including its operating income and cash flow,reputation,outlook or the value of financial instruments issued by TotalEnergies is provided in the most recent version of the Universal Registration Document which is filed by TotalEnergies SE with the French Autorit des Marchs Financiers and the annual report on Form 20-F filed with the United States Securities and Exchange Commission(“SEC”).Financial information by business segment is reported in accordance with the internal reporting system and shows internal segment information that is used to manage and measure the performance of TotalEnergies.In addition to IFRS measures,certain alternative performance indicators are presented,such as performance indicators excluding the adjustment items described below(adjusted operating income,adjusted net operating income,adjusted net income),return on equity(ROE),return on average capital employed(ROACE),gearing ratio,operating cash flow before working capital changes,the shareholder rate of return.These indicators are meant to facilitate the analysis of the financial performance of TotalEnergies and the comparison of income between periods.They allow investors to track the measures used internally to manage and measure the performance of TotalEnergies.These adjustment items include:(i)Special items Due to their unusual nature or particular significance,certain transactions qualified as special items are excluded from the business segment figures.In general,special items relate to transactions that are significant,infrequent or unusual.However,in certain instances,transactions such as restructuring costs or asset disposals,which are not considered to be representative of the normal course of business,may be qualified as special items although they may have occurred within prior years or are likely to occur again within the coming years.(ii)Inventory valuation effect The adjusted results of the Refining&Chemicals and Marketing&Services segments are presented according to the replacement cost method.This method is used to assess the segments performance and facilitate the comparability of the segments performance with those of TotalEnergies principal competitors.In the replacement cost method,which approximates the LIFO(Last-In,First-Out)method,the variation of inventory values in the statement of income is,depending on the nature of the inventory,determined using either the month-end price differentials between one period and another or the average prices of the period rather than the historical value.The inventory valuation effect is the difference between the results according to the FIFO(First-In,First-Out)and the replacement cost.(iii)Effect of changes in fair value The effect of changes in fair value presented as an adjustment item reflects,for some transactions,differences between internal measures of performance used by TotalEnergies management and the accounting for these transactions under IFRS.IFRS requires that trading inventories be recorded at their fair value using period-end spot prices.In order to best reflect the management of economic exposure through derivative transactions,internal indicators used to measure performance include valuations of trading inventories based on forward prices.TotalEnergies,in its trading activities,enters into storage contracts,whose future effects are recorded at fair value in TotalEnergies internal economic performance.IFRS precludes recognition of this fair value effect.Furthermore,TotalEnergies enters into derivative instruments to risk manage certain operational contracts or assets.Under IFRS,these derivatives are recorded at fair value while the underlying operational transactions are recorded as they occur.Internal indicators defer the fair value on derivatives to match with the transaction occurrence.The adjusted results(adjusted operating income,adjusted net operating income,adjusted net income)are defined as replacement cost results,adjusted for special items,excluding the effect of changes in fair value.Euro amounts presented for the fully adjusted-diluted earnings per share represent dollar amounts converted at the average euro-dollar(-$)exchange rate for the applicable period and are not the result of financial statements prepared in euros.Cautionary Note to U.S.Investors The SEC permits oil and gas companies,in their filings with the SEC,to separately disclose proved,probable and possible reserves that a company has determined in accordance with SEC rules.We may use certain terms in this press release,such as“potential reserves”or“resources”,that the SECs guidelines strictly prohibit us from including in filings with the SEC.U.S.investors are urged to consider closely the disclosure in the Form 20-F of TotalEnergies SE,File N 1-10888,available from us at 2,place Jean Millier Arche Nord Coupole/Regnault-92078 Paris-La Dfense Cedex,France,or at our website .You can also obtain this form from the SEC by calling 1-800-SEC-0330 or on the SECs website sec.gov.26 First Quarter 2023:Main Indicators Paris,April 18,2023 The main indicators,estimated financial information and key elements impacting TotalEnergies first quarter 2023 aggregates are shown below:*Sales in$/Sales in volume for consolidated affiliates.*Sales in$/Sales in volume for consolidated and equity affiliates.*This indicator represents the average margin on variable costs realized by TotalEnergies European refining business(equal to the difference between the sales of refined products realized by TotalEnergies European refining and the crude purchases as well as associated variable costs,divided by refinery throughput in tons).(1)Does not take include oil,gas and LNG trading activities,respectively.Main elements impacting the quarter aggregates Hydrocarbon production is expected to exceed 2.5 Mboe/d this quarter,up by close to 50 kboe/d compared to the previous quarter*,benefiting in particular from the start-up of gas production on Block 10 in Oman and the acquisition of an interest in the SARB/Umm Lulu oil fields in the United Arab Emirates.Besides the effect of the deconsolidation of Novatek as of January 1,2023,the results of the Integrated LNG segment,while remaining very significant,will be impacted by the lower demand for LNG in Europe due to the mild winter weather and high inventory levels.Refining&Chemicals results are expected to be higher given the sustained refining margins during the quarter.To be recalled that TotalEnergies will publish the results of the Integrated LNG and Integrated Power segments separately on April 27,2023 and will provide on that occasion the restatement of the annual 2021 and quarterly 2022 accounts.2023 Sensitivities*Sensitivities are revised once per year upon publication of the previous years fourth quarter results.Sensitivities are estimates based on assumptions about TotalEnergies portfolio in 2023.Actual results could vary significantly from estimates based on the application of these sensitivities.The impact of the$-sensitivity on adjusted net operating income is essentially attributable to Refining&Chemicals.*In a 80$/b Brent environment.*Restated for production related to TotalEnergies stake in Novatek.Main indicators1Q234Q223Q222Q221Q22/$1.071.021.011.061.12 Brent($/b)81.288.8100.8113.9102.2 Average liquids price*(1)($/b)73.480.693.6102.990.1 Average gas price*(1)($/Mbtu)8.8912.7416.8311.0112.27 Average LNG price*(1)($/Mbtu)13.2714.8321.5113.9613.60 Variable Cost Margin,European refining*($/t)87.873.699.2145.746.3ChangeEstimated impact on adjustednet operating incomeEstimated impact on cash flow from operationsDollar /-0.1$per-/ 0.1 B$0 B$Average liquids price* /-10$/b /-2.5 B$ /-3.0 B$European gas price-NBP/TTF /-2$/Mbtu /-0.4 B$ /-0.4 B$Variable cost margin,European refining(VCM) /-10$/t /-0.4 B$ /-0.5 B$27 Disclaimer The terms“TotalEnergies”,“TotalEnergies company”and“Company”in this document are used to designate TotalEnergies SE and the consolidated entities directly or indirectly controlled by TotalEnergies SE.Likewise,the words“we”,“us”and“our”may also be used to refer to these entities or their employees.The entities in which TotalEnergies SE directly or indirectly owns a shareholding are separate and independent legal entities.The data presented in this document is based on TotalEnergies internal preliminary reporting and is not audited.This data is not intended to be a comprehensive summary of all items that will affect TotalEnergies SEs results or to provide an estimate of the first quarter 2023 results.Actual results may vary.To the extent permitted by law,TotalEnergies SE disclaims all liability from the use of this data.This document may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995,notably with respect to the financial condition,results of operations,business activities and industrial strategy of TotalEnergies.This document may also contain statements regarding the perspectives,objectives,areas of improvement and goals of TotalEnergies,including with respect to climate change and carbon neutrality(net zero emissions).An ambition expresses an outcome desired by TotalEnergies,it being specified that the means to be deployed do not depend solely on TotalEnergies.These forward-looking statements may generally be identified by the use of the future or conditional tense or forward-looking words such as“envisions”,“intends”,“anticipates”,“believes”,“considers”,“plans”,“expects”,“thinks”,“targets”,“aims”or similar terminology.Such forward-looking statements included in this document are based on economic data,estimates and assumptions prepared in a given economic,competitive and regulatory environment and considered to be reasonable by TotalEnergies as of the date of this document.These forward-looking statements are not historical data and should not be interpreted as assurances that the perspectives,objectives or goals announced will be achieved.They may prove to be inaccurate in the future,and may evolve or be modified with a significant difference between the actual results and those initially estimated,due to the uncertainties notably related to the economic,financial,competitive and regulatory environment,or due to the occurrence of risk factors,such as,notably,the price fluctuations in crude oil and natural gas,the evolution of the demand and price of petroleum products,the changes in production results and reserves estimates,the ability to achieve cost reductions and operating efficiencies without unduly disrupting business operations,changes in laws and regulations including those related to the environment and climate,currency fluctuations,as well as economic and political developments,changes in market conditions,loss of market share and changes in consumer preferences,or pandemics such as the COVID-19 pandemic.Additionally,certain financial information is based on estimates particularly in the assessment of the recoverable value of assets and potential impairments of assets relating thereto.Neither TotalEnergies SE nor any of its subsidiaries assumes any obligation to update publicly any forward-looking information or statement,objectives or trends contained in this document whether as a result of new information,future events or otherwise.The information on risk factors that could have a significant adverse effect on TotalEnergies business,financial condition,including its operating income and cash flow,reputation,outlook or the value of financial instruments issued by TotalEnergies is provided in the most recent version of the Universal Registration Document which is filed by TotalEnergies SE with the French Autorit des Marchs Financiers and the annual report on Form 20-F filed with the United States Securities and Exchange Commission(“SEC”).Financial information by business segment is reported in accordance with the internal reporting system and shows internal segment information that is used to manage and measure the performance of TotalEnergies.In addition to IFRS measures,certain alternative performance indicators are presented,such as performance indicators excluding certain adjustment items(i.e.,special items,inventory valuation effect and effect of changes in fair value)-adjusted net operating income,adjusted net income).These indicators are meant to facilitate the analysis of the financial performance of TotalEnergies and the comparison of income between periods.They allow investors to track the measures used internally to manage and measure the performance of TotalEnergies.The adjusted results(adjusted net operating income,adjusted net income)are defined as replacement cost results,adjusted for special items,excluding the effect of changes in fair value.For further details on the adjustment items,please refer to the last published earnings statement and notes to the consolidated financial statements.28 TotalEnergies financial statementsFirst quarter 2023 consolidated accounts,IFRS 29 CONSOLIDATED STATEMENT OF INCOME TotalEnergies(unaudited)1stquarter4thquarter1stquarter(M$)(a)202320222022Sales62,60368,58268,606Excise taxes(4,370)(4,629)(4,656)Revenues from sales 58,23363,95363,950Purchases,net of inventory variation(38,351)(41,555)(39,648)Other operating expenses(7,785)(7,354)(7,623)Exploration costs(92)(250)(861)Depreciation,depletion and impairment of tangible assets and mineral interests(3,062)(2,505)(3,679)Other income 341584143Other expense(300)(2,828)(2,290)Financial interest on debt(710)(719)(462)Financial income and expense from cash&cash equivalents 393357214Cost of net debt(317)(362)(248)Other financial income 258266203Other financial expense(183)(150)(135)Net income(loss)from equity affiliates 960(281)43Income taxes(4,071)(6,077)(4,804)Consolidated net income 5,6313,4415,051TotalEnergies share 5,5573,2644,944Non-controlling interests 74177107Earnings per share($)2.231.271.87Fully-diluted earnings per share($)2.211.261.85(a)Except for per share amounts.30 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME TotalEnergies(unaudited)1stquarter4thquarter1stquarter(M$)202320222022Consolidated net income5,6313,4415,051Other comprehensive incomeActuarial gains and losses 3387-Change in fair value of investments in equity instruments 4(2)3Tax effect(8)(56)11Currency translation adjustment generated by the parent company 1,4666,800(1,750)Items not potentially reclassifiable to profit and loss 1,4657,129(1,736)Currency translation adjustment(1,250)(3,672)1,012Cash flow hedge 1,202(9,669)(263)Variation of foreign currency basis spread(3)(14)49share of other comprehensive income of equity affiliates,net amount(98)842(84)Other 33-Tax effect(336)2,93253Items potentially reclassifiable to profit and loss(482)(9,578)767Total other comprehensive income(net amount)983(2,449)(969)Comprehensive income 6,6149924,082TotalEnergies share 6,5507923,953Non-controlling interests6420012931 CONSOLIDATED BALANCE SHEETTotalEnergies March 31,2023December 31,2022March 31,2022(M$)(unaudited)(unaudited)(unaudited)ASSETS Non-current assetsIntangible assets,net 33,23431,93132,504Property,plant and equipment,net 107,499107,101104,450Equity affiliates:investments and loans 29,99727,88929,334Other investments 1,2091,0511,490Non-current financial assets 2,3572,7311,490Deferred income taxes 4,7725,0495,299Other non-current assets 2,7092,3883,033Total non-current assets 181,777178,140177,600Current assetsInventories,net 22,78622,93624,456Accounts receivable,net 24,12824,37832,000Other current assets 28,15336,07050,976Current financial assets 7,5358,7467,415Cash and cash equivalents 27,98533,02631,276Assets classified as held for sale 668568856Total current assets 111,255125,724146,979Total assets 293,032303,864324,579LIABILITIES&SHAREHOLDERS EQUITY Shareholders equityCommon shares 7,8288,1638,137Paid-in surplus and retained earnings 123,357123,951123,008Currency translation adjustment(12,784)(12,836)(13,643)Treasury shares(2,820)(7,554)(1,022)Total shareholders equity-TotalEnergies Share 115,581111,724116,480Non-controlling interests 2,8632,8463,375Total shareholders equity 118,444114,570119,855Non-current liabilitiesDeferred income taxes 11,30011,02111,281Employee benefits 1,8401,8292,610Provisions and other non-current liabilities 21,27021,40221,649Non-current financial debt 42,91545,26446,546Total non-current liabilities 77,32579,51682,086Current liabilitiesAccounts payable 36,03741,34646,869Other creditors and accrued liabilities 42,57852,27556,972Current borrowings 17,88415,50218,252Other current financial liabilities 597488502Liabilities directly associated with the assets classified as held for sale 16716743Total current liabilities 97,263109,778122,638Total liabilities&shareholders equity 293,032303,864324,57932 CONSOLIDATED STATEMENT OF CASH FLOWTotalEnergies(unaudited)1stquarter4thquarter1stquarter(M$)202320222022CASH FLOW FROM OPERATING ACTIVITIES Consolidated net income 5,6313,4415,051Depreciation,depletion,amortization and impairment 3,1872,7494,578Non-current liabilities,valuation allowances and deferred taxes 314(75)2,538(Gains)losses on disposals of assets(252)2,192(13)Undistributed affiliates equity earnings(349)1,506262(Increase)decrease in working capital(3,419)(3,791)(4,923)Other changes,net 21(404)124Cash flow from operating activities 5,1335,6187,617CASH FLOW USED IN INVESTING ACTIVITIES Intangible assets and property,plant and equipment additions(4,968)(4,097)(3,457)Acquisitions of subsidiaries,net of cash acquired(136)(4)-Investments in equity affiliates and other securities(1,407)(260)(89)Increase in non-current loans(389)(211)(241)Total expenditures(6,900)(4,572)(3,787)Proceeds from disposals of intangible assets and property,plant and equipment 68113177Proceeds from disposals of subsidiaries,net of cash sold 18316088Proceeds from disposals of non-current investments 4923215Repayment of non-current loans 238595929Total divestments 5388911,409Cash flow used in investing activities(6,362)(3,681)(2,378)CASH FLOW USED IN FINANCING ACTIVITIES Issuance(repayment)of shares:-Parent company shareholders-Treasury shares(2,103)(2,551)(1,176)Dividends paid:-Parent company shareholders(1,844)(4,356)(1,928)-Non-controlling interests(21)(12)(22)Net issuance(repayment)of perpetual subordinated notes-1,958Payments on perpetual subordinated notes(158)(51)(136)Other transactions with non-controlling interests(86)(82)5Net issuance(repayment)of non-current debt 11842534Increase(decrease)in current borrowings(1,274)(3,500)657Increase(decrease)in current financial assets and liabilities 1,3943,5545,594Cash flow from(used in)financing activities(3,974)(6,573)4,986Net increase(decrease)in cash and cash equivalents(5,203)(4,636)10,225Effect of exchange rates 1621,721(291)Cash and cash equivalents at the beginning of the period 33,02635,94121,342Cash and cash equivalents at the end of the period 27,98533,02631,27633 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITYTotalEnergies(unaudited)Common shares issuedPaid-in surplus and retained earningsCurrency translation adjustmentTreasury shares Shareholders equity-TotalEnergiesShareNon-controlling interestsTotal shareholders equity(M$)NumberAmountNumberAmountAs of January 1,2022 2,640,429,3298,224117,849(12,671)(33,841,104)(1,666)111,7363,263114,999Net income of the first quarter 2022-4,944-4,9441075,051Other comprehensive income-(19)(972)-(991)22(969)Comprehensive Income-4,925(972)-3,9531294,082Dividend-(22)(22)Issuance of common shares-Purchase of treasury shares-(22,378,128)(1,176)(1,176)-(1,176)Sale of treasury shares(a)-(315)-6,168,047315-Share-based payments-92-92-92Share cancellation(30,665,526)(87)(1,418)-30,665,5261,505-Net issuance(repayment)of perpetual subordinated notes-1,958-1,958-1,958Payments on perpetual subordinated notes-(96)-(96)-(96)Other operations with non-controlling interests-(1)-(1)65Other items-14-14(1)13As of March 31,2022 2,609,763,8038,137123,008(13,643)(19,385,659)(1,022)116,4803,375119,855Net income from April 1 to December 31,2022-15,582-15,58241115,993Other comprehensive income-(2,914)798-(2,116)(24)(2,140)Comprehensive Income-12,668798-13,46638713,853Dividend-(9,989)-(9,989)(514)(10,503)Issuance of common shares 9,367,48226344-370-370Purchase of treasury shares-(117,829,615)(6,535)(6,535)-(6,535)Sale of treasury shares(a)-(3)-27,6073-Share-based payments-137-137-137Share cancellation-Net issuance(repayment)of perpetual subordinated notes-(2,002)-(2,002)-(2,002)Payments on perpetual subordinated notes-(235)-(235)-(235)Other operations with non-controlling interests-469-553186Other items-(23)-(23)(433)(456)As of December 31,2022 2,619,131,2858,163123,951(12,836)(137,187,667)(7,554)111,7242,846114,570Net income of the first quarter 2023-5,557-5,557745,631Other comprehensive income-91380-993(10)983Comprehensive Income-6,47080-6,550646,614Dividend-(21)(21)Issuance of common shares-Purchase of treasury shares-(33,842,858)(2,703)(2,703)-(2,703)Sale of treasury shares(a)-(395)-6,446,384395-Share-based payments-54-54-54Share cancellation(128,869,261)(335)(6,707)-128,869,2617,042-Net issuance(repayment)of perpetual subordinated notes-Payments on perpetual subordinated notes-(77)-(77)-(77)Other operations with non-controlling interests-39(28)-11(25)(14)Other items-22-22(1)21As of March 31,2023 2,490,262,0247,828123,357(12,784)(35,714,880)(2,820)115,5812,863118,444(a)Treasury shares related to the performance share grants.34 INFORMATION BY BUSINESS SEGMENT TotalEnergies(unaudited)1st quarter 2023Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&ServicesCorporate IntercompanyTotal(M$)External sales4,8728,5551,95424,85522,3598-62,603Intersegment sales5,9991,68510,7289,06112057(27,650)-Excise taxes-(184)(4,186)-(4,370)Revenues from sales10,87110,24012,68233,73218,29365(27,650)58,233Operating expenses(9,445)(9,831)(4,762)(31,892)(17,787)(161)27,650(46,228)Depreciation,depletion and impairment of tangible assets and mineral interests(288)(47)(2,066)(414)(224)(23)-(3,062)Operating income 1,1383625,8541,426282(119)-8,943Net income(loss)from equity affiliates and other items804(70)6852243(21)-1,076Tax on net operating income(205)(111)(3,398)(325)(119)63-(4,095)Net operating income 1,7371812,5241,153406(77)-5,924Net cost of net debt(293)Non-controlling interests(74)Net income-TotalEnergies share5,5571st quarter 2023(adjustments)(a)Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&ServicesCorporate IntercompanyTotal(M$)External sales(76)-(76)Intersegment sales-Excise taxes-Revenues from sales(76)-(76)Operating expenses(300)(70)(8)(424)(101)-(903)Depreciation,depletion and impairment of tangible assets and mineral interests-(36)-(36)Operating income(b)(376)(70)(8)(460)(101)-(1,015)Net income(loss)from equity affiliates and other items(4)(111)(73)(37)217-(8)Tax on net operating income45(8)(48)3210-31Net operating income(b)(335)(189)(129)(465)126-(992)Net cost of net debt8Non-controlling interests-Net income-TotalEnergies share(984)(a)Adjustments include special items,inventory valuation effect and the effect of changes in fair value.(b)Of which inventory valuation effect -On operating income-(415)(87)-On net operating income-(327)(64)-1st quarter 2023(adjusted)Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&ServicesCorporate IntercompanyTotal(M$)External sales4,9488,5551,95424,85522,3598-62,679Intersegment sales5,9991,68510,7289,06112057(27,650)-Excise taxes-(184)(4,186)-(4,370)Revenues from sales10,94710,24012,68233,73218,29365(27,650)58,309Operating expenses(9,145)(9,761)(4,754)(31,468)(17,686)(161)27,650(45,325)Depreciation,depletion and impairment of tangible assets and mineral interests(288)(47)(2,066)(378)(224)(23)-(3,026)Adjusted operating income 1,5144325,8621,886383(119)-9,958Net income(loss)from equity affiliates and other items808411418926(21)-1,084Tax on net operating income(250)(103)(3,350)(357)(129)63-(4,126)Adjusted net operating income 2,0723702,6531,618280(77)-6,916Net cost of net debt(301)Non-controlling interests(74)Adjusted net income-TotalEnergies share6,5411st quarter 2023Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&ServicesCorporate IntercompanyTotal(M$)Total expenditures1,1951,2344,05222515935-6,900Total divestments49149318301-538Cash flow from operating activities 3,536(1,285)4,536(851)(673)(130)-5,13335 INFORMATION BY BUSINESS SEGMENT TotalEnergies(unaudited)4th quarter 2022Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&Services CorporateIntercompanyTotal(M$)External sales4,62810,0552,60026,65024,63712-68,582Intersegment sales5,7831,80712,86611,73027463(32,523)-Excise taxes-(199)(4,430)-(4,629)Revenues from sales10,41111,86215,46638,18120,48175(32,523)63,953Operating expenses(8,361)(9,836)(6,173)(37,107)(19,939)(266)32,523(49,159)Depreciation,depletion and impairment of tangible assets and mineral interests(405)(54)(1,343)(393)(276)(34)-(2,505)Operating income 1,6451,9727,950681266(225)-12,289Net income(loss)from equity affiliates and other items1,150103(3,874)161(62)113-(2,409)Tax on net operating income(269)(112)(4,635)(898)(113)22-(6,005)Net operating income 2,5261,963(559)(56)91(90)-3,875Net cost of net debt(434)Non-controlling interests(177)Net income-TotalEnergies share3,2644th quarter 2022(adjustments)(a)Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&Services CorporateIntercompanyTotal(M$)External sales69-69Intersegment sales-Excise taxes-Revenues from sales69-69Operating expenses3821,719(108)(821)(211)(88)-873Depreciation,depletion and impairment of tangible assets and mineral interests(108)-844-(37)-699Operating income(b)3431,719736(821)(248)(88)-1,641Net income(loss)from equity affiliates and other items(195)(113)(4,025)(101)(9)-(4,443)Tax on net operating income(30)(124)(798)(621)1423-(1,536)Net operating income(b)1181,482(4,087)(1,543)(243)(65)-(4,338)Net cost of net debt8Non-controlling interests33Net income-TotalEnergies share(4,297)(a)Adjustments include special items,inventory valuation effect and the effect of changes in fair value.(b)Of which inventory valuation effect -On operating income-(712)(184)-On net operating income-(586)(137)-4th quarter 2022(adjusted)Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&Services CorporateIntercompanyTotal(M$)External sales4,55910,0552,60026,65024,63712-68,513Intersegment sales5,7831,80712,86611,73027463(32,523)-Excise taxes-(199)(4,430)-(4,629)Revenues from sales10,34211,86215,46638,18120,48175(32,523)63,884Operating expenses(8,743)(11,555)(6,065)(36,286)(19,728)(178)32,523(50,032)Depreciation,depletion and impairment of tangible assets and mineral interests(297)(54)(2,187)(393)(239)(34)-(3,204)Adjusted operating income 1,3022537,2141,502514(137)-10,648Net income(loss)from equity affiliates and other items1,345216151262(53)113-2,034Tax on net operating income(239)12(3,837)(277)(127)(1)-(4,469)Adjusted net operating income 2,4084813,5281,487334(25)-8,213Net cost of net debt(442)Non-controlling interests(210)Adjusted net income-TotalEnergies share7,5614th quarter 2022Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&Services CorporateIntercompanyTotal(M$)Total expenditures3106402,47858850749-4,572Total divestments319186215125424-891Cash flow from operating activities 1348614,035232707(351)-5,61836 INFORMATION BY BUSINESS SEGMENT TotalEnergies(unaudited)1st quarter 2022Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&Services CorporateIntercompanyTotal(M$)External sales5,5076,7872,15131,00823,1494-68,606Intersegment sales3,49852113,8189,27726763(27,444)-Excise taxes-(192)(4,464)-(4,656)Revenues from sales9,0057,30815,96940,09318,95267(27,444)63,950Operating expenses(6,886)(7,294)(5,708)(37,411)(17,984)(293)27,444(48,132)Depreciation,depletion and impairment of tangible assets and mineral interests(278)(43)(2,661)(380)(273)(44)-(3,679)Operating income 1,841(29)7,6002,302695(270)-12,139Net income(loss)from equity affiliates and other items(2,495)(5)242156(42)108-(2,036)Tax on net operating income(261)(33)(3,863)(525)(225)105-(4,802)Net operating income(915)(67)3,9791,933428(57)-5,301Net cost of net debt(250)Non-controlling interests(107)Net income-TotalEnergies share4,9441st quarter 2022(adjustments)(a)Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&Services CorporateIntercompanyTotal(M$)External sales(3)15-12Intersegment sales-Excise taxes-Revenues from sales(3)15-12Operating expenses(107)(10)(791)947268(132)-175Depreciation,depletion and impairment of tangible assets and mineral interests-(493)-(29)(9)-(531)Operating income(b)(110)5(1,284)947239(141)-(344)Net income(loss)from equity affiliates and other items(3,948)9(14)117(3)106-(3,733)Tax on net operating income101262(251)(80)20-(38)Net operating income(b)(4,048)15(1,036)813156(15)-(4,115)Net cost of net debt113Non-controlling interests(31)Net income-TotalEnergies share(4,033)(a)Adjustments include special items,inventory valuation effect and the effect of changes in fair value.(b)Of which inventory valuation effect -On operating income-947308-On net operating income-845228-1st quarter 2022(adjusted)Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&Services CorporateIntercompanyTotal(M$)External sales5,5106,7722,15131,00823,1494-68,594Intersegment sales3,49852113,8189,27726763(27,444)-Excise taxes-(192)(4,464)-(4,656)Revenues from sales9,0087,29315,96940,09318,95267(27,444)63,938Operating expenses(6,779)(7,284)(4,917)(38,358)(18,252)(161)27,444(48,307)Depreciation,depletion and impairment of tangible assets and mineral interests(278)(43)(2,168)(380)(244)(35)-(3,148)Adjusted operating income 1,951(34)8,8841,355456(129)-12,483Net income(loss)from equity affiliates and other items1,453(14)25639(39)2-1,697Tax on net operating income(271)(34)(4,125)(274)(145)85-(4,764)Adjusted net operating income 3,133(82)5,0151,120272(42)-9,416Net cost of net debt(363)Non-controlling interests(76)Adjusted net income-TotalEnergies share8,9771st quarter 2022Integrated LNG Integrated Power Exploration&ProductionRefining&ChemicalsMarketing&Services CorporateIntercompanyTotal(M$)Total expenditures2901,1491,9712281409-3,787Total divestments84417128327795-1,409Cash flow from operating activities 2,219(1,904)5,7681,107898(471)-7,61737 Reconciliation of the information by business segment with Consolidated Financial Statements TotalEnergies(unaudited)Consolidated 1stquarter 2023statement(M$)AdjustedAdjustments(a)of incomeSales62,679(76)62,603Excise taxes(4,370)-(4,370)Revenues from sales 58,309(76)58,233Purchases net of inventory variation(37,479)(872)(38,351)Other operating expenses(7,752)(33)(7,785)Exploration costs(94)2(92)Depreciation,depletion and impairment of tangible assets and mineral interests(3,026)(36)(3,062)Other income 77264341Other expense(137)(163)(300)Financial interest on debt(710)-(710)Financial income and expense from cash&cash equivalents 37320393 Cost of net debt(337)20(317)Other financial income 24810258Other financial expense(183)-(183)Net income(loss)from equity affiliates 1,079(119)960Income taxes(4,090)19(4,071)Consolidated net income 6,615(984)5,631TotalEnergies share 6,541(984)5,557Non-controlling interests 74-74(a)Adjustments include special items,inventory valuation effect and the effect of changes in fair value.Consolidated 1stquarter 2022statement(M$)AdjustedAdjustments(a)of incomeSales68,5941268,606Excise taxes(4,656)-(4,656)Revenues from sales 63,9381263,950Purchases net of inventory variation(40,762)1,114(39,648)Other operating expenses(7,409)(214)(7,623)Exploration costs(136)(725)(861)Depreciation,depletion and impairment of tangible assets and mineral interests(3,148)(531)(3,679)Other income 12122143Other expense(269)(2,021)(2,290)Financial interest on debt(462)-(462)Financial income and expense from cash&cash equivalents 59155214 Cost of net debt(403)155(248)Other financial income 11984203Other financial expense(135)-(135)Net income(loss)from equity affiliates 1,861(1,818)43Income taxes(4,724)(80)(4,804)Consolidated net income 9,053(4,002)5,051TotalEnergies share 8,977(4,033)4,944Non-controlling interests 7631107(a)Adjustments include special items,inventory valuation effect and the effect of changes in fair value.
2023-06-02
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Allianz 2023Group financial results FY 2022 and 1Q 2023IFRS 9/17MunichMay 12,2023Allianz Investor R.
2023-06-02
62页
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Deutsche TelekomJanuary 1 to March 31Interim Group ReportQ1 2023Contents Deutsche Telekom at a glance To our shareholders 4 Development of selected financial data 6 Highlights in the first quarter of 2023 Interim Group management report 8 Group organization,strategy,and management 9 The economic environment 11 Development of business in the Group 21 Development of business in the operating segments 33 Events after the reporting period 33 Forecast 33 Risks and opportunities Interim consolidated financial statements 35 Consolidated statement of financial position 36 Consolidated income statement 37 Consolidated statement of comprehensive income 38 Consolidated statement of changes in equity 40 Consolidated statement of cash flows 41 Significant events and transactions 52 Other disclosures 66 Events after the reporting period Responsibility statement Review report Additional information 69 Reconciliation for the change in disclosure of key figures for the prior-year period 70 Reconciliation for the organic development of key figures for the prior-year period 71 Glossary 71 Disclaimer 72 Financial calendar In the interest of clarity,we have tended to avoid using a combination of pronouns such as“he/she/they,”etc.with regard to gender.All references to individuals refer equally to all genders.=pq2Deutsche Telekom.Interim Group Report Q1 2023.Deutsche Telekom at a glance millions of Q1 2023 Q1 2022 Change%FY 2022 Revenue and earnings(according to the management approach)a Net revenueb 27,839 27,746 0.3 114,413 Of which:domestic.6 23.2 22.1 Of which:internationalw.4 76.8 77.9 Service revenueb,c 22,814 22,033 3.5 91,988 EBITDA 24,046 13,092 83.7 43,986 EBITDA(adjusted for special factors)11,516 11,436 0.7 46,410 EBITDA AL 22,364 11,087 n.a.35,989 EBITDA AL(adjusted for special factors)9,963 9,873 0.9 40,208 EBITDA AL margin(adjusted for special factors)5.8 35.6 35.1 Profit(loss)from operations(EBIT)18,015 6,327 n.a.16,159 Revenue and earnings from continuing operations(according to financial statements)a Net revenueb 27,824 27,693 0.5 114,197 EBITDA 11,044 12,863(14.1)43,049 Profit(loss)from operations(EBIT)5,014 6,194(19.1)15,414 Net profit(loss)15,360 3,949 n.a.8,001 Net profit(loss)(adjusted for special factors)1,959 2,238(12.5)9,081 Earnings per share(basic and diluted)3.09 0.79 n.a.1.61 Adjusted earnings per share(basic and diluted)0.39 0.45(13.3)1.83 Statement of financial position Total assets 303,793 292,422 3.9 298,590 Shareholders equity 98,685 87,656 12.6 87,320 Equity ratio2.5 30.0 29.2 Net debtd 133,517 135,947(1.8)142,425 Cash flows Net cash from operating activities 9,558 9,358 2.1 35,819 Cash capex (4,826)(7,173)32.7(24,114)Cash capex(before spectrum investment)(4,759)(4,658)(2.2)(21,019)Free cash flow(before dividend payments and spectrum investment)4,822 4,750 1.5 15,239 Free cash flow AL(before dividend payments and spectrum investment)3,579 3,781(5.3)11,470 Net cash from(used in)investing activities 2,005(4,512)n.a.(22,306)Net cash(used in)from financing activities (6,340)(2,653)n.a.(15,438)a The GD Towers business entity,which operated the cell tower business in Germany and Austria and was assigned to the Group Development operating segment,was recognized as a discontinued operation in the interim consolidated financial statements from the third quarter of 2022 until its sale on February 1,2023.Prior-year comparatives were adjusted retrospectively.In the interim Group management report,we include the contributions by GD Towers in the results of operations according to the management approach for the period mentioned.The prior-year comparatives were not adjusted retrospectively.For information on the sale of GD Towers,please refer to the section“Group organization,strategy,and management”in the interim Group management report and the section“Changes in the composition of the Group and other transactions”in the interim consolidated financial statements.b As of the third quarter of 2022 the principal/agent consideration regarding the recognition of gross and net revenues was changed.Prior-year comparatives were adjusted retrospectively.c As of January 1,2023,the definition of service revenue was extended.Prior-year comparatives were adjusted retrospectively.d Including net debt reported under liabilities directly associated with non-current assets and disposal groups held for sale.millions Mar.31,2023 Dec.31,2022 Change Mar.31,2023/Dec.31,2022%Mar.31,2022 Change Mar.31,2023/Mar.31,2022%Fixed-network and mobile customers Mobile customersa 248.1 245.4 1.1 248.3(0.1)Fixed-network lines 25.7 25.3 1.7 26.0(1.4)Broadband customersb 21.6 21.4 0.7 21.7(0.8)a Including T-Mobile US wholesale customers(Mar.31,2023:29.7 million;Dec.31,2022:30.2 million;Mar.31,2022:32.3 million).b Excluding wholesale.The figures shown in this report were rounded in accordance with standard business rounding principles.As a result,the total indicated may not be equal to the precise sum of the individual figures.Changes were calculated on the basis of millions for greater precision.For information on the development of business in the operating segments,please refer to the section“Development of business in the operating segments”in the interim Group management report and in the IR back-up on our Investor Relations website.=pqDeutsche Telekom at a glance 3Deutsche Telekom.Interim Group Report Q1 2023.To our shareholders Development of selected financial data Net revenue,service revenuea,b billions of 040302010Q1 2022Q1 202327.727.822.0Servicerevenue22.8ServicerevenueEBITDA AL(adjusted for special factors)a billions of 01551020Q1 2022Q1 20239.910.0Profit/loss from operations(EBIT)a billions of 01551020Q1 2022Q1 20236.318.0Net profit billions of 01551020Q1 2022Q1 20233.915.4For a reconciliation for the organic development of key figures for the prior-year comparative period,please refer to the section“Additional information.”Net revenue increased slightly by 0.3%to EUR 27.8 billion;in organic terms,it decreased slightly by 0.5%.Service revenue increased by 3.5%to EUR 22.8 billion;in organic terms,the increase was 2.6%.Our Germany segment increased revenue by 3.0%year-on-year,on the back of strong development of service revenues.The United States segment recorded revenue growth of 2.1%,mainly due to exchange rate effects,but on an organic basis,revenue was down 2.3%against the prior year.Revenue in our Europe segment grew by 3.8%on account of the positive trend in mobile business and by 4.9%in organic terms.Revenue in Systems Solutions was up 2.0%year-on-year on the back of growth in the Digital,Road Charging,and Advisory portfolio areas.In Group Development,revenue declined by 87.6%due to the sale of TMobile Netherlands and GD Towers,but was up 4.2%against the prior year on an organic basis.Adjusted EBITDA AL grew slightly by 0.9%to EUR 10.0 billion.In organic terms,it increased by 1.0%.In our Germany segment,adjusted EBITDA AL was up 4.0%,driven by high-value revenue growth and enhanced cost efficiency.In the United States,adjusted EBITDA AL increased by 5.9%,mainly due to exchange rate effects.In organic terms,it increased by 1.3%.Adjusted core EBITDA AL grew by 11.5%to EUR 6.4 billion.Adjusted EBITDA AL in the Europe segment increased slightly by 0.7%.In organic terms,it increased by 1.2%.In Systems Solutions,adjusted EBITDA AL grew by 10.3%due to efficiency effects and increased revenue in our Digital and Road Charging portfolio areas.In Group Development,adjusted EBITDA AL declined by 81.7%due to the sale of TMobile Netherlands and GD Towers.In organic terms,it increased by 32.0%.At 35.8%,the Groups adjusted EBITDA AL margin remained at the same high level posted in the prior year.The adjusted EBITDA AL margin was 40.5%in the Germany segment,35.3%in the Europe segment,and 35.8%in the United States segment.EBIT increased substantially to EUR 18.0 billion,mainly as a result of the gain on deconsolidation from the sale of GD Towers.Special factors had a positive effect of EUR 12.4 billion on EBITDA AL.Deconsolidations,disposals and acquisitions generated proceeds of EUR 12.6 billion,most of which was attributable to the sale of GD Towers.In the prior-year period,the special factors affecting EBITDA AL totaled EUR 1.2 billion.EBITDA AL thus increased by EUR 11.3 billion to EUR 22.4 billion.At EUR 6.0 billion,depreciation,amortization and impairment losses were lower than in the prior-year period,with the decrease being almost exclusively attributable to the United States and Group Development operating segments.Our net profit also increased significantly to EUR 15.4 billion due to the sale of GD Towers.The loss from financial activities increased by EUR 0.4 billion to EUR 1.3 billion,with other financial income decreasing in particular in connection with the measurement of provisions and liabilities.Finance costs increased by EUR 0.1 billion.The tax expense decreased by EUR 0.8 billion to EUR 0.3 billion.Profit attributable to non-controlling interests increased by EUR 0.6 billion to EUR 1.1 billion,a trend mainly attributable to the United States segment.Adjusted earnings per share decreased from EUR 0.45 to EUR 0.39.The GD Towers business entity,which operated the cell tower business in Germany and Austria and was assigned to the Group Development operating segment,was recognized as a discontinued operation in the interim consolidated financial statements from the third quarter of 2022 until its sale on February 1,2023.In the interim Group management report,we include the contributions by GD Towers in the results of operations according to the management approach for the period mentioned.For information on the sale of GD Towers,please refer to the section“Group organization,strategy,and management”in the interim Group management report and the section“Changes in the composition of the Group and other transactions”in the interim consolidated financial statements.a As of the third quarter of 2022 the principal/agent consideration regarding the recognition of gross and net revenues was changed.Prior-year comparatives were adjusted retrospectively.b=pqTo our shareholders 4Deutsche Telekom.Interim Group Report Q1 2023.Equity ratio0302010Dec.31,2022Mar.31,202329.232.5Net debtc billions of 015010050200Dec.31,2022Mar.31,2023142.4133.5Cash capex(before spectrum investment)billions of 0108624Q1 2022Q1 20234.84.7Free cash flow AL(before dividend payments and spectrum investment)billions of 0108624Q1 2022Q1 20233.63.8For further information,please refer to the section“Development of business in the Group”in the interim Group management report.For further information on the development of business in the operating segments,please refer to the section“Development of business in the operating segments”in the interim Group management report and to the IR back-up on our Investor Relations website.The equity ratio increased by 3.3 percentage points against December 31,2022 to 32.5%.The increase in shareholders equity from EUR 87.3 billion to EUR 98.7 billion is primarily attributable to profit of EUR 16.4 billion.Shareholders equity was reduced in particular by transactions with owners(EUR 4.5 billion),mainly in connection with the share buy-back program at TMobile US.Other comprehensive income also decreased the carrying amount(EUR 0.7 billion).This mainly includes effects from currency translations recognized directly in equity(EUR 1.1 billion)and positive effects from the remeasurement of defined benefit plans(EUR 0.4 billion).Net debt decreased by EUR 8.9 billion compared with the end of 2022 to EUR 133.5 billion.The main reducing factor was cash proceeds of EUR 10.7 billion from the sale of GD Towers.It was further reduced by free cash flow(before dividend payments and spectrum investment)of EUR 4.8 billion and exchange rate effects of EUR 1.9 billion.The main factors increasing net debt were the share buy-back program at TMobile US(EUR 4.3 billion)and the sale-and-leaseback transaction in connection with the sale of the GD Towers(EUR 3.0 billion).Additions of lease liabilities and right-of-use assets(EUR 0.8 billion)and other effects(EUR 0.3 billion)also had an increasing impact.Cash capex(before spectrum investment)increased slightly by EUR 0.1 billion to EUR 4.8 billion.The increase resulted mainly from higher capital expenditure in the Germany and Europe operating segments.In the United States,cash capex decreased as a result of higher cash outflows in the prior year for the accelerated build-out of the 5G network and the integration of Sprint.By contrast,cash capex(including spectrum investment)decreased by EUR 2.3 billion to EUR 4.8 billion.Spectrum licenses were purchased for EUR 0.1 billion in the reporting period,in particular in the United States segment.In the prior-year period,the United States segment had acquired spectrum licenses for a total amount of EUR 2.5 billion.Free cash flow AL was down by EUR 0.2 billion to EUR 3.6 billion.It was reduced by a net increase of EUR 0.3 billion in interest payments,EUR 0.3 billion higher cash outflows for the repayment of lease liabilities,mainly in the United States operating segment,an increase of EUR 0.1 billion in cash capex(before spectrum investment),and an increase of EUR 0.1 billion in tax payments.The sound business performance in the operating segments had an increasing effect on net cash from operating activities.Lower cash outflows in connection with the integration of Sprint in the United States and exchange rate effects also had a positive impact.Including net debt reported under liabilities directly associated with non-current assets and disposal groups held for sale.c=pqTo our shareholders 5Deutsche Telekom.Interim Group Report Q1 2023.Highlights in the first quarter of 2023 For further information on these and other events,please refer to our media information.For comprehensive information on the T-Share,please visit our Investor Relations website.Guidance raised for the 2023 financial year In view of the sound business performance in our United States operating segment,we are raising our guidance for adjusted EBITDA AL of the Group for the 2023 financial year.Instead of around EUR 40.8 billion,we now expect to post adjusted EBITDA AL of around EUR 40.9 billion.Transactions Sale of GD Towers.On July 13,2022,Deutsche Telekom agreed to sell a 51.0%stake in the cell tower business companies in Germany and Austria(GD Towers),hitherto assigned to the Group Development operating segment,to DigitalBridge and Brookfield.After all necessary regulatory approvals had been duly granted and all other closing conditions met,the transaction was closed on February 1,2023.Deutsche Telekom retains a 49.0%stake,benefiting from future value upside at GD Towers.We have largely leased back the sold passive network infrastructure in Germany and Austria,enabling Telekom Deutschland and TMobile Austria to maintain their mobile network leadership.Agreement on the acquisition of Kaena in the United States.On March 9,2023,TMobile US entered into a Merger and Unit Purchase Agreement for the acquisition of 100%of the outstanding equity of Kaena Corporation and its subsidiaries including,among others,Mint Mobile,for a maximum purchase price of USD 1.35 billion.The upfront payment is expected to be approximately USD 950 million,before working capital adjustments.The acquisition is subject to certain customary closing conditions,including certain regulatory approvals and is expected to close by the end of 2023.Share buy-back program continued and majority stake in TMobile US secured.In the first quarter of 2023,TMobile US bought back around 33 million additional shares with a total volume of USD 4.8 billion(EUR 4.4 billion)under its share buy-back program.Taking the treasury shares held by TMobile US into account,Deutsche Telekoms stake in TMobile US stood at 50.2%as of March 31,2023.For further information on these corporate transactions,please refer to the section“Group organization,strategy,and management”in the interim Group management report and the section“Changes in the composition of the Group and other transactions”in the interim consolidated financial statements.Network build-out Germany.As of the end of the first quarter of 2023,our 5G network was available to 95.1%of the German population,and a total of around 5.7 million households have the option of a direct connection to our fiber-optic network.United States.As of the end of the first quarter of 2023,TMobile US 5G network covered around 98%of the U.S.population,with 275 million people already benefiting from Ultra Capacity 5G.Europe.As of the end of the first quarter of 2023,our national companies covered 51.1%of the population in our European footprint with 5G,and a total of around 8.2 million households have the option of a direct connection to our fiber-optic network.Sustainability 2022 Corporate Responsibility Report.Our CR Report illustrates the progress we made in 2022 with our activities and efforts to become more sustainable,focusing on the ESG pillars of the environment,social commitment,and governance.The report also contains a special section entitled“Experiencing sustainability,”an interactive special on the circular economy,and practical tips for saving resources in daily life.=pqTo our shareholders 6Deutsche Telekom.Interim Group Report Q1 2023.Cooperations,partnerships,and major deals Fiber-optic cooperations.Consistent with our strategy regarding the shared use of networks,in the first quarter of 2023 we both agreed and finalized further fiber-optic cooperations.In addition to regional partnerships in the Stuttgart region(Stadtwerke Nrtingen),Upper Franconia(Stdtische Werke berlandwerke Coburg),and Bavaria(Stadtnetz Bamberg),the fiber-optic partnership of Magenta Telekom and Meridiam,Alpen Glasfaser GmbH,started operations in Austria in March 2023.Major deal for TSystems.The European Space Agency(ESA)has chosen TSystems as a service provider for the Copernicus Data Space Ecosystem,one of the worlds largest public platforms for Earth observation data.The data can be used to conduct trend analyses for science,industry,and politics.The public,including more than 600 thousand registered users,have had access to the new Copernicus Data Space Ecosystem since January 24,2023.For further information,please refer to our media report.Products,rate plans,and services Mobile World Congress(MWC)2023.“Giving technology a heartbeat”was our motto at MWC Barcelona from February 27 to March 2,2023,where we showcased technology and innovations for people,the environment,and businesses.The focus was on resilient and sustainable networks,e.g.,for seamless connectivity across space via 5G(joint commitment with ESA)and IoT(in collaboration with Intelsat and Skylo),for the commercial deployment of Open RAN(with partners Nokia,Fujitsu,and Mavenir),and for easy access to application programming interfaces(APIs)via a cross-country and cross-network platform(e.g.,T DevEdge in collaboration with TMobile US).For further information,please refer to our media report.Awards Brand.For the first time,BrandZ rates Deutsche Telekom the most valuable German brand with a brand value of USD 67.2 billion in its March 2023 study Top50 Most Valuable German Brands.Deutsche Telekom is already ranked Europes most valuable company brand for the first time with a brand value of USD 62.9 billion,according to the study Brand Finance Global 500 published in January 2023.Networks.Both TMobile US and our national companies in Europe once again received accolades for their networks in the first quarter of 2023,including the Ookla Speedtest Award for the best mobile network in Croatia and the Czech Republic,and for the fastest fixed-network internet in Austria.Business Customers.TSystems is a recognized Amazon Web Services(AWS)Networking Competency Partner,successfully meeting AWSs high technical bar and quality requirements for connecting customers existing infrastructure to the cloud.In addition,together with its consulting company Detecon,TSystems has been rated as a leading provider in all German categories by the analyst firm Information Services Group(ISG)in its survey Digital Business Enablement and ESG Services 2022,and by Pierre Audoin Consultants(PAC)in its Innovation Radar Leaders in Sustainability-related IT Consulting&Services in Europe 2023.For information on awards for responsible corporate governance,please refer to our website.=pqTo our shareholders 7Deutsche Telekom.Interim Group Report Q1 2023.Interim Group management report Group organization,strategy,and management With regard to our Group organization,strategy,and management,please refer to the explanations in the 2022 combined management report(2022 Annual Report).From the Groups point of view,the following significant events in the first three months of 2023 resulted in changes and/or additions.Group organization Sale of GD Towers.On July 13,2022,Deutsche Telekom agreed to sell a 51.0%stake in the cell tower business companies in Germany and Austria(GD Towers),hitherto assigned to the Group Development operating segment,to DigitalBridge and Brookfield.After all necessary regulatory approvals had been duly granted and all other closing conditions met,the transaction was closed on February 1,2023.The sale price is based on an enterprise value of EUR 17.5 billion.The total preliminary gain on deconsolidation resulting from the sale amounts to EUR 15.9 billion,of which EUR 12.9 billion is included in profit/loss from discontinued operation as other operating income in the consolidated income statement as of the deconsolidation date.As Deutsche Telekom has largely leased back the sold passive network infrastructure in Germany and Austria under a sale and leaseback transaction,a further EUR 3.0 billion will be recognized pro rata in subsequent periods.Overall,right-of-use assets were recognized in the amount of EUR 2.0 billion and lease liabilities in the amount of EUR 5.0 billion.The transaction resulted in preliminary cash proceeds of EUR 10.7 billion.The stake retained by Deutsche Telekom of 49.0%has been included in the consolidated financial statements using the equity method since February 1,2023.The carrying amount of the investment amounted to EUR 6.0 billion as of March 31,2023.For further information on the sale of the GD tower companies,please refer to the section“Changes in the composition of the Group and other transactions”in the interim consolidated financial statements.Share buy-back program continued and majority stake in TMobile US secured.In the first quarter of 2023,TMobile US bought back around 33 million additional shares with a total volume of USD 4.8 billion(EUR 4.4 billion)under its share buy-back program.Taking the treasury shares held by TMobile US into account,Deutsche Telekoms stake in TMobile US stood at 50.2%as of March 31,2023.Furthermore,the transactions described below will affect the segment and organizational structure of Deutsche Telekom in the future:Agreement to sell the U.S.wireline business.On September 6,2022,TMobile US reached an agreement with Cogent Infrastructure(Cogent)on the sale of TMobile US fiber-optic-based wireline business.Under the agreement,Cogent will take over all shares in the entity that holds all of the assets and liabilities related to the former Sprints fiber-optic-based wireline network.The sale price is USD 1 and is subject to customary adjustments laid down in the purchase agreement.In addition,upon completion of the transaction,TMobile US undertakes to enter into a separate agreement on IP transit services,according to which TMobile US will pay a total of USD 700 million to Cogent.The assets and liabilities of the wireline business have been reported in the consolidated statement of financial position as held for sale since September 30,2022.The transaction was closed on May 1,2023.All necessary regulatory approvals had been duly granted and all other closing conditions met.Agreement on the acquisition of Kaena in the United States.On March 9,2023,TMobile US entered into a Merger and Unit Purchase Agreement for the acquisition of 100%of the outstanding equity of Kaena Corporation and its subsidiaries including,among others,Mint Mobile,for a maximum purchase price of USD 1.35 billion to be paid out 39%in cash and 61%in shares of TMobile US common stock.Kaena Corporation is currently one of the wholesale partners of TMobile US,offering wireless telecommunications services to customers.The purchase price is variable dependent upon specified performance indicators of Kaena Corporation during certain periods before and after closing and consists of an upfront payment at deal close,subject to certain agreed-upon adjustments,and a variable earnout payable 24 months after the close of the transaction.The upfront payment is expected to be approximately USD 950 million,before working capital adjustments.The acquisition is subject to certain customary closing conditions,including certain regulatory approvals and is expected to close by the end of 2023.=pqInterim Group management report 8Deutsche Telekom.Interim Group Report Q1 2023.Management of the Group Presentation of GD Towers according to the management approach.The GD Towers business entity had been recognized in the interim consolidated financial statements as a discontinued operation from the third quarter of 2022 until its sale on February 1,2023.In the interim Group management report,we include the contributions by GD Towers in the results of operations according to the management approach for the period mentioned.The following table provides a reconciliation of the amounts recognized in the consolidated income statement to the financial performance indicators relevant for the management approach:millions of Q1 2023 Of which:continuing operations Of which:discontinued operation Q1 2022 Of which:continuing operations Of which:discontinued operation Net revenuea 27,839 27,824 15 27,746 27,693 53 Service revenuea 22,814 22,818(4)22,033 22,036(4)EBITDA 24,046 11,044 13,001 13,092 12,863 229 Depreciation of right-of-use assets (1,246)(1,246)0(1,654)(1,604)(50)Interest expenses on recognized lease liabilities (435)(430)(5)(351)(345)(6)EBITDA AL 22,364 9,368 12,996 11,087 10,914 173 Special factors affecting EBITDA AL 12,401(523)12,924 1,214 1,215 0 EBITDA AL(adjusted for special factors)9,963 9,891 73 9,873 9,699 173 Depreciation,amortization and impairment losses (6,030)(6,030)0(6,765)(6,669)(96)Profit(loss)from operations(EBIT)18,015 5,014 13,001 6,327 6,194 133 Profit(loss)from financial activities (1,331)(1,315)(16)(890)(898)8 Profit(loss)before income taxes 16,685 3,699 12,986 5,438 5,296 141 Earnings per share(basic and diluted)3.09 0.34 2.75 0.79 0.77 0.02 Adjusted earnings per share(basic and diluted)0.39 0.39 0.01 0.45 0.43 0.02 a As of the third quarter of 2022 the principal/agent consideration regarding the recognition of gross and net revenues was changed.Prior-year comparatives were adjusted retrospectively.Broader definition of service revenue.Since January 1,2023,service revenue additionally includes certain software revenues generated with ICT business in the Systems Solutions and Europe operating segments,as well as in the Group Headquarters&Group Services segment.Comparative figures have been adjusted retrospectively.The economic environment This section provides additional information on,and explains recent changes to,the economic situation as described in the 2022 combined management report(2022 Annual Report),focusing on macroeconomic developments,the overall economic outlook,the currently prevailing economic risks,and the regulatory environment in the first three months of 2023.Macroeconomic development The development of the global economy was rather weak in spring 2023.While its gradual recovery from both the coronavirus pandemic and the consequences of the war in Ukraine is stimulating economic activity,persistent inflation and the tight monetary policy of central banks around the globe will continue to have a negative impact.The interest rate hikes worldwide since spring 2022 contributed to turbulences in the finance sector in the first quarter of 2023.The inflation-induced loss of purchasing power is stifling macroeconomic demand,while higher interest rates are negatively affecting financing terms for households and businesses.In light of current developments,in its April 2023 forecast,the International Monetary Fund(IMF)expects global economic output to grow by 2.8%in the current year compared to growth of 3.4%in the prior year.The IMF expects German economic output to decline by 0.1%and consumer prices to increase by 6.2%in the current year.According to the Bitkom-ifo-Digitalindex,the business climate in the digital sector remains significantly brighter than in the economy as a whole.In March 2023,the business expectations of IT and telecommunications companies for the coming months reached their highest level since the war broke out in Ukraine in February 2022.The national economies in our core markets in North America and Europe are set to grow this year.According to the IMF forecast,economic output is expected to grow this year by 1.6%in the United States and by 0.8%in the eurozone.=pqInterim Group management report 9Deutsche Telekom.Interim Group Report Q1 2023.Overall economic outlook In particular Chinas U-turn on its strict zero-Covid policy is likely to stimulate steady global economic growth and revive global trade in goods.This should also help further alleviate supply shortages.With energy prices falling in Europe,the growth outlooks are brightening.However,an easing of consumer price inflation in the U.S.economic area and the eurozone is likely to be slow.High inflation is expected to continue to curb consumer spending in the coming quarters.Significant downside risks continue to weigh on the economic outlook.If inflation falls at a slower rate than expected,it could result in the need for a more aggressive tightening of monetary policy.This would further dampen consumer demand.At the same time,the recent rise in financial market risks has hindered the central banks efforts to combat inflation.Europe avoided a gas shortage in winter 2022/23,but the supply situation for winter 2023/24 is still uncertain and energy prices could rise if demand for natural gas increases in Asia.A possible escalation of the war in Ukraine could also lead to a renewed rise in energy prices.Geopolitical tensions between the United States and China present a further risk,and could put significant pressure on global trade in goods and international supply chains.Regulation Awarding of spectrum At the multi-band auction in Croatia,which began with a bidding phase on January 17,2023,Hrvatski Telekom secured an above-average package of spectrum,comprising the largest share of spectrum(2x 105 MHz),for around EUR 135 million.The Polish regulatory authority UKE concluded an initial consultation on a draft award procedure for the 3,400 to 3,800 MHz band,and announced a further consultation which began on April 6,2023.The procedure is now expected to conclude by the end of 2023.Awards for the 700/800 MHz and 26,000 MHz bands could follow in the course of 2023.In the Czech Republic,the procedure to extend the 900/1,800 MHz GSM license,which expires in 2024,is expected to begin in the course of 2023.Meanwhile,the Slovakian regulator announced a procedure(auction)to re-award spectrum in the 900 MHz and 2,100 MHz bands at the end of 2023.In Austria and Hungary,the millimeter wave spectrum in the 26,000 MHz band is also expected to come up for award in 2023.In order to free up this band,Hungary has already begun awarding substitute frequencies in the 32,000 MHz band.In the United States,on August 8,2022,TMobile US reached agreements with Channel 51 License and LB License on the acquisition of licenses in the 600 MHz spectrum for an aggregate purchase price of USD 3.5 billion(EUR 3.4 billion).On March 30,2023,the contractual parties further agreed that the transaction be divided into two separate tranches.The transfer of the licenses in accordance with the agreements is subject to regulatory approvals and certain other customary closing conditions.The first tranche is expected to be concluded between the middle and end of 2023,while the second tranche is expected to be concluded in 2024.The following table provides an overview of the main ongoing and planned spectrum awards and auctions as well as license extensions.It also indicates spectrum to be awarded in the near future in various countries.Main spectrum awards Expected start of award procedure Expected end of award procedure Frequency ranges(MHz)Planned award procedures Updated information Austria Q2 2023 Q3 2023 26,000/3,400-3,800(residual spectrum)Details tbd Poland Q3 2023 Q4 2023 3,400-3,800 Auction(SMRAa),4 blocks of 100 MHz,cap set at 100 MHz in consultation draft Start of procedure with first consultation in December 2022.Second consultation started in April 2023.Bidding process expected in H2 2023.Poland Q3 2023 Q4 2023 700/800 Auction or tender procedureb,details and timeline tbd Plans for all bands still unclear due to discussions on award models,dependency on the adoption of the Cyber Security Act,and standstill in 700 MHz border coordination talks with Russia.Poland Q3 2023 Q4 2023 26,000 Details tbd Regulatory authority announced plans for award procedures in 2023 without giving details.Slovakia Q3 2023 Q4 2023 900/2,100 New award proceedings(auction)Czech Republic Q2 2023 Q4 2023 900/1,800 Extension procedure 900/1,800 MHz GSM license of TMobile Czech Republic will expire in 2024.Extension procedure expected in 2023.Hungary Q3 2023 Q4 2023 26,000 Details tbd Regulatory authority announced plans for award procedures in 2023 without giving details.a SMRA:simultaneous(electronic)multi-round auction with ascending,parallel bids for all available frequency bands.b Tender procedure(beauty contest auction)offering a competitive selection process for assigning scarce frequencies.=pqInterim Group management report 10Deutsche Telekom.Interim Group Report Q1 2023.Development of business in the Group This section provides additional information on,and explains recent changes to,the significant events as described in the 2022 combined management report(2022 Annual Report),and looks at the effects of these changes on the development of business in the Group.In the section“The economic environment,”we also focus on macroeconomic developments in the first three months of 2023.For more information on global economic developments and the associated business risks,please refer to the section“Risks and opportunities.”For further information on significant events in the 2022 financial year,please refer to the sections“Group organization,”“Management of the Group,”and“Development of business in the Group”in the 2022 combined management report(2022 Annual Report).Presentation of GD Towers according to the management approach.The GD Towers business entity had been recognized in the interim consolidated financial statements as a discontinued operation from the third quarter of 2022 until its sale on February 1,2023.In the interim Group management report,we include the contributions by GD Towers in the results of operations according to the management approach for the period mentioned.For further information on the sale and the presentation of GD Towers according to the management approach,including a reconciliation to the consolidated income statement,please refer to the section“Group organization,strategy,and management.”Results of operations of the Group millions of Q1 2023 Q1 2022 Change Change%FY 2022 Net revenuea 27,839 27,746 93 0.3 114,413 Service revenuea,b 22,814 22,033 781 3.5 91,988 EBITDA AL(adjusted for special factors)9,963 9,873 90 0.9 40,208 EBITDA AL 22,364 11,087 11,277 n.a.35,989 Depreciation,amortization and impairment losses (6,030)(6,765)735 10.9(27,827)Profit(loss)from operations(EBIT)18,015 6,327 11,688 n.a.16,159 Profit(loss)from financial activities (1,331)(890)(441)(49.6)(4,455)Profit(loss)before income taxes 16,685 5,438 11,247 n.a.11,703 Net profit(loss)15,360 3,949 11,411 n.a.8,001 Net profit(loss)(adjusted for special factors)1,959 2,238(279)(12.5)9,081 Earnings per share(basic and diluted)3.09 0.79 2.30 n.a.1.61 Adjusted earnings per share(basic and diluted)0.39 0.45(0.06)(13.3)1.83 a As of the third quarter of 2022 the principal/agent consideration regarding the recognition of gross and net revenues was changed.Prior-year comparatives were adjusted retrospectively.b As of January 1,2023,the definition of service revenue was extended.Prior-year comparatives were adjusted retrospectively.In order to increase the informative value of the prior-year comparatives based on changes to the Companys structure or exchange rate effects,we also describe selected figures in organic terms,by adjusting the figures for the prior-year period for changes in the composition of the Group,exchange rate effects,and other effects.Due to changes in the composition of the Group,the figures for the prior-year period presented on an organic basis were reduced in the Group Development operating segment in connection with the sale of TMobile Netherlands as of March 31,2022,and of GD Towers as of February 1,2023.The net positive exchange rate effects were primarily attributable to the translation of U.S.dollars to euros.Revenue,service revenue In the first quarter of 2023,we generated net revenue of EUR 27.8 billion,which was up EUR 0.1 billion or 0.3%year-on-year.In organic terms,revenue decreased slightly by EUR 0.1 billion or 0.5%,including positive net exchange rate effects of EUR 0.8 billion,with changes in the composition of the Group having a reducing effect of EUR 0.6 billion.Service revenue in the Group increased by EUR 0.8 billion or 3.5%year-on-year to EUR 22.8 billion.In organic terms,service revenue increased by EUR 0.6 billion or 2.6%.=pqInterim Group management report 11Deutsche Telekom.Interim Group Report Q1 2023.Contribution of the segments to net revenue(according to the management approach)millions of Q1 2023 Q1 2022 Change Change%FY 2022 Germany 6,141 5,963 178 3.0 24,505 United States 18,262 17,880 382 2.1 75,436 Europe 2,784 2,682 102 3.8 11,158 Systems Solutions 946 927 19 2.0 3,811 Group Development 102 825(723)(87.6)1,708 Group Headquarters&Group Services 578 604(26)(4.3)2,407 Intersegment revenue(975)(1,134)159 14.0(4,612)Net revenuea 27,839 27,746 93 0.3 114,413 a As of the third quarter of 2022 the principal/agent consideration regarding the recognition of gross and net revenues was changed.Prior-year comparatives were adjusted retrospectively.All of our operating segments with the exception of Group Development contributed to the positive revenue trend.Revenue in our home market of Germany was up on the prior-year level,increasing by 3.0%.In organic terms,revenue grew by 2.3%year-on-year.This increase was primarily driven by growth in service revenues,in both the fixed-network core business,mainly due to broadband,and in mobile communications.Our United States operating segment contributed revenue growth of 2.1%to this trend,mainly due to exchange rate effects.In organic terms,revenue declined by 2.3%year-on-year due to lower terminal equipment revenue,partially offset by higher service revenue.In our Europe operating segment,revenue increased by 3.8%year-on-year.In organic terms,revenue increased by 4.9%,primarily attributable to the increase in high-margin services revenues in the mobile business.Revenue in our Systems Solutions operating segment was up 2.0%year-on-year;in organic terms,it was up 4.5%.This positive revenue trend was mainly driven by growth in the Digital,Road Charging,and Advisory portfolio areas,which more than offset the expected decline in traditional IT infrastructure business.Revenue in our Group Development operating segment declined by 87.6%compared with the prior-year period,due to the sales of TMobile Netherlands and GD Towers.In organic terms,it increased by 4.2%.For further information on revenue development in our segments,please refer to the section“Development of business in the operating segments.”Contribution of the segments to net revenuea,b%Europe0.1Group DevelopmentSystems Solutions21.5Germany65.6United States9.82.8a For further information on net revenue,please refer to the section“Segment reporting”in the interim consolidated financial statements.b As of the third quarter of 2022 the principal/agent consideration regarding the recognition of gross and net revenues was changed.Prior-year comparatives were adjusted retrospectively.Breakdown of revenue by regionbe.6North America0.4Other countries22.6Germany11.4Europe(excluding Germany)At 65.6%,our United States operating segment again provided by far the largest contribution to net revenue of the Group,up 1.2 percentage points above the level in the prior-year period.The proportion of net revenue generated internationally also increased from 76.8%to 77.4%.=pqInterim Group management report 12Deutsche Telekom.Interim Group Report Q1 2023.Adjusted EBITDA AL,EBITDA AL Adjusted EBITDA AL increased year-on-year by EUR 0.1 billion or 0.9%to EUR 10.0 billion in the first quarter of 2023.In organic terms,adjusted EBITDA AL increased by EUR 0.1 billion or 1.0%,including positive net exchange rate effects of EUR 0.3 billion,and with changes in the composition of the Group having a net reducing effect of EUR 0.3 billion.Adjusted core EBITDA AL,i.e.,adjusted EBITDA AL excluding revenue from terminal equipment leases in the United States,thereby presenting operational development undistorted by the strategic withdrawal from the terminal equipment lease business,increased by EUR 0.4 billion or 4.1%to EUR 9.8 billion.Contribution of the segments to adjusted Group EBITDA AL(according to the management approach)millions of Q1 2023 Q1 2022 Change Change%FY 2022 Germany 2,489 2,393 96 4.0 9,837 United States 6,536 6,172 364 5.9 25,614 Europe 983 976 7 0.7 3,964 Systems Solutions 75 68 7 10.3 284 Group Development 65 356(291)(81.7)964 Group Headquarters&Group Services(176)(85)(91)n.a.(437)Reconciliation(9)(7)(2)(28.6)(17)EBITDA AL(adjusted for special factors)9,963 9,873 90 0.9 40,208 All operating segments with the exception of Group Development also made a positive contribution to the adjusted EBITDA AL trend.Our Germany operating segment contributed to the increase thanks to high-value revenue growth and improved cost efficiency with 4.0%higher adjusted EBITDA AL;in organic terms,it increased by 3.1%.In our United States operating segment,adjusted EBITDA AL increased by 5.9%,essentially due to exchange rate effects.In organic terms,adjusted EBITDA AL grew by 1.3%year-on-year.Adjusted core EBITDA AL at TMobile US increased by EUR 0.7 billion or 11.5%to EUR 6.4 billion.Adjusted EBITDA AL in our Europe operating segment increased by 0.7%.In organic terms,adjusted EBITDA AL grew by 1.2%,again making a positive contribution to earnings,with a positive net margin more than sufficient to offset the higher indirect costs.In our Systems Solutions operating segment,adjusted EBITDA AL increased by 10.3%or,in organic terms,by 4.6%.Efficiency effects from our transformation program and increased revenue in our Digital and Road Charging portfolio areas exceeded the decline in earnings in the traditional IT infrastructure business.Adjusted EBITDA AL in our Group Development operating segment declined by 81.7%year-on-year due to the sale of TMobile Netherlands and GD Towers.In organic terms,it increased by 32.0%.EBITDA AL increased by EUR 11.3 billion year-on-year to EUR 22.4 billion,with special factors affecting EBITDA AL changing by EUR 11.2 billion to EUR 12.4 billion.Net income of EUR 12.6 billion was recorded as special factors under effects of deconsolidations,disposals,and acquisitions.The deconsolidation of GD Towers as of February 1,2023 gave rise to income of EUR 12.9 billion.Net expenses of EUR 0.3 billion,mainly in connection with integration costs incurred as a result of the merger of TMobile US and Sprint,had an offsetting effect.These expenses include in particular expenses from the integration of IT systems,expenses in connection with the decommissioning of Sprints wireless network and additional depreciation and impairment losses from reductions in the useful lives of leased network technology for cell sites in the United States.In the prior-year period,net income of EUR 1.3 billion had been recorded as special factors under effects of deconsolidations,disposals,and acquisitions.Of this income,EUR 1.7 billion resulted from the deconsolidation of GlasfaserPlus and a further EUR 0.9 billion from the sale of TMobile Netherlands.Net expenses of EUR 1.2 billion,mainly in connection with integration costs incurred as a result of the merger of TMobile US and Sprint,had an offsetting effect.Expenses incurred in connection with staff restructuring were on a par with the prior-year level at EUR 0.2 billion.No other special factors affecting EBITDA AL were recognized in the reporting period.The prior-year figure included payments on account received from insurance companies in connection with damage sustained in the catastrophic flooding in July 2021.For further information on the development of(adjusted)EBITDA AL in our segments,please refer to the section“Development of business in the operating segments.”=pqInterim Group management report 13Deutsche Telekom.Interim Group Report Q1 2023.Profit/loss from operations(EBIT)Group EBIT increased to EUR 18.0 billion,up EUR 11.7 billion against the level of the prior-year period.This change was primarily due to the deconsolidation gain from the sale of GD Towers.At EUR 6.0 billion,depreciation,amortization and impairment losses on intangible assets,property,plant and equipment,and right-of-use assets were EUR 0.7 billion lower in the first quarter of 2023 than in the prior-year period,with the decrease being almost exclusively attributable to the United States and Group Development operating segments.Depreciation and amortization at TMobile US were lower due to the ongoing strategic withdrawal from the terminal equipment lease business.Depreciation and amortization also decreased due to the complete write-off of certain 4G network components,including assets affected by the decommissioning of the former Sprints legacy CDMA and LTE networks in 2022.The decrease was offset by increased depreciation and amortization in connection with the further build-out of the nationwide 5G network in the United States.In the Group Development operating segment,depreciation of property,plant and equipment and right-of-use assets were down on the prior-year level in connection with the fact that GD Towers had been held for sale until it was sold and accordingly the related depreciation had been suspended,and in connection with its subsequent sale.By contrast,a further reduction in the useful life of leased network technology for cell sites resulted in an increase in depreciation of the corresponding right-of-use assets of EUR 0.1 billion.No significant impairment losses were recorded either in the reporting period or in the prior-year period.For information on the sale and the presentation of GD Towers according to the management approach,including a reconciliation for the consolidated income statement,please refer to the section“Group organization,strategy,and management.”Profit before income taxes Profit before income taxes increased by EUR 11.2 billion to EUR 16.7 billion.Loss from financial activities increased year-on-year from EUR 0.9 billion to EUR 1.3 billion,with other financial income declining from EUR 0.3 billion to EUR 0.1 billion,in particular in connection with the interest component from the measurement of provisions and liabilities.This decrease was mainly attributable to the subsequent measurement using actuarial principles of the present value of the provision recognized for the Civil Service Health Insurance Fund.Finance costs also increased from EUR 1.2 billion to EUR 1.4 billion,mainly due to the sale and leaseback of sold passive network infrastructure in Germany and Austria in connection with the sale of GD Towers and the modification of the arrangements between TMobile US and Crown Castle in 2022,which resulted in an increase in the carrying amounts of the lease liabilities.Net profit,adjusted net profit Net profit increased year-on-year by EUR 11.4 billion to EUR 15.4 billion.The tax expense decreased by EUR 0.8 billion to EUR 0.3 billion.The tax rate was significantly reduced in the first quarter of 2023 by the realization of tax-free income from the sale of GD Towers.Taxes were furthermore reduced by deferred tax effects arising in connection with the sale-and-leaseback transaction concluded.Profit attributable to non-controlling interests increased by EUR 0.6 billion to EUR 1.1 billion.This increase was primarily attributable to our United States operating segment.Excluding special factors,which had a positive overall effect of EUR 13.4 billion on net profit,adjusted net profit in the first quarter of 2023 amounted to EUR 2.0 billion,compared with EUR 2.2 billion in the prior-year period.For further information on tax expense,please refer to the section“Income taxes”in the interim consolidated financial statements.Earnings per share,adjusted earnings per share Earnings per share is calculated as net profit divided by the weighted average number of ordinary shares outstanding,which totaled 4,974 million as of March 31,2023.This resulted in earnings per share of EUR 3.09,which was mainly affected by the gain on deconsolidation of GD Towers.In the prior-year period,earnings per share had been EUR 0.79.Earnings per share adjusted for special factors affecting net profit amounted to EUR 0.39 compared with EUR 0.45 in the prior-year period.Employees Headcount development Mar.31,2023 Dec.31,2022 Change Change%FTEs in the Group 207,789 206,759 1,030 0.5 Of which:civil servants(in Germany,with an active service relationship)8,095 8,381(286)(3.4)Germany 60,800 59,014 1,786 3.0 United States 68,890 67,088 1,802 2.7 Europe 33,729 34,083(354)(1.0)Systems Solutions 25,695 27,392(1,697)(6.2)Group Development 115 828(713)(86.1)Of which:GD Towers 0 762(762)(100.0)Group Headquarters&Group Services 18,560 18,353 207 1.1=pqInterim Group management report 14Deutsche Telekom.Interim Group Report Q1 2023.As of March 31,2023,the Groups headcount was up slightly compared with the end of 2022,by 0.5%.In our Germany operating segment,the number of employees increased by 3.0%against year-end 2022,mainly due to the transfer of employees of Multimedia Solutions GmbH from the Systems Solutions operating segment.The total number of full-time equivalent employees in the United States operating segment increased by 2.7%against the end of 2022,primarily due to hiring and retention initiatives in sales and customer service.In our Europe operating segment,the headcount was down by 1.0%compared with the end of the prior year,in particular in Slovakia,Croatia,and Hungary.The headcount in our Systems Solutions operating segment was down 6.2%year-end 2022,mainly due to the transfer of Multimedia Solutions GmbH into the Germany operating segment.In the Group Development operating segment,the sharp year-on-year decrease in headcount of 86.1%was mainly due to the sale of GD Towers as of February 1,2023.The headcount in the Group Headquarters&Group Services segment was up 1.1%compared with the end of 2022,mainly due to the increase in the number of employees in the Technology and Innovation Board department.The ongoing staff restructuring at Vivento had an offsetting effect.Reconciliations of financial performance indicators from the IFRS consolidated financial statements A reconciliation of the definition of EBITDA to the“after leases”indicator(EBITDA AL)can be found in the following table:millions of Q1 2023 Q1 2022 Change Change%FY 2022 EBITDA 24,046 13,092 10,954 83.7 43,986 Depreciation of right-of-use assetsa(1,246)(1,654)408 24.7(6,507)Interest expenses on recognized lease liabilitiesa(435)(351)(84)(23.9)(1,489)EBITDA AL 22,364 11,087 11,277 n.a.35,989 Special factors affecting EBITDA AL 12,401 1,214 11,187 n.a.(4,219)EBITDA AL(adjusted for special factors)9,963 9,873 90 0.9 40,208 a Excluding finance leases at T-Mobile US.The following table presents the reconciliation of net profit to net profit adjusted for special factors:millions of Q1 2023 Q1 2022 Change Change%FY 2022 Net profit(loss)15,360 3,949 11,411 n.a.8,001 Special factors affecting EBITDA AL 12,401 1,214 11,187 n.a.(4,219)Staff-related measures(232)(183)(49)(26.8)(1,230)Non-staff-related restructuring(10)(9)(1)(11.1)(175)Effects of deconsolidations,disposals and acquisitions 12,623 1,333 11,290 n.a.(2,256)Impairment losses(1)(4)3 75.0(276)Other 21 77(56)(72.7)(283)Special factors affecting net profit 1,000 496 504 n.a.3,139 Impairment losses(17)(30)13 43.3(989)Profit(loss)from financial activities 0 21(21)(100.0)(487)Income taxes 876 4 872 n.a.1,936 Non-controlling interests 141 502(361)(71.9)2,680 Special factors 13,401 1,710 11,691 n.a.(1,080)Net profit(loss)(adjusted for special factors)1,959 2,238(279)(12.5)9,081=pqInterim Group management report 15Deutsche Telekom.Interim Group Report Q1 2023.The following table presents a reconciliation of EBITDA AL,EBIT,and net profit to the respective figures adjusted for special factors:millions of EBITDA AL Q1 2023 EBIT Q1 2023 EBITDA AL Q1 2022 EBIT Q1 2022 EBITDA AL FY 2022 EBIT FY 2022 EBITDA AL/EBIT 22,364 18,015 11,087 6,327 35,989 16,159 Germany(104)(104)1,621 1,621 1,162 1,162 Staff-related measures(98)(98)(100)(100)(523)(523)Non-staff-related restructuring(5)(5)(1)(1)(8)(8)Effects of deconsolidations,disposals and acquisitions 6 6 1,656 1,656 1,608 1,608 Impairment losses 0 0 0 0 0 0 Other(7)(7)66 66 84 84 United States(363)(357)(1,258)(1,255)(5,949)(6,637)Staff-related measures(74)(74)(28)(28)(352)(352)Non-staff-related restructuring 0 0 0 0 0 0 Effects of deconsolidations,disposals and acquisitions(328)(319)(1,229)(1,226)(4,956)(5,084)Impairment losses(1)(4)0 0(275)(836)Other 40 40 0 0(366)(366)Europe(5)(5)(1)(1)(31)(147)Staff-related measures(5)(5)(6)(6)(70)(70)Non-staff-related restructuring 0 0 0 0 0 0 Effects of deconsolidations,disposals and acquisitions 4 4 5 5 12 12 Impairment losses 0 0 0 0 0(117)Other(5)(5)0 0 27 27 Systems Solutions(26)(35)(30)(43)(159)(270)Staff-related measures(20)(20)(20)(20)(107)(107)Non-staff-related restructuring(1)(1)0 0(5)(5)Effects of deconsolidations,disposals and acquisitions 0 0(2)(2)(2)(2)Impairment losses 0(8)(1)(14)0(111)Other(6)(6)(7)(7)(44)(44)Group Development 12,941 12,941 869 869 992 992 Staff-related measures(3)(3)(1)(1)(10)(10)Non-staff-related restructuring 0 0 0 0 0 0 Effects of deconsolidations,disposals and acquisitions 12,944 12,944 871 871 1,003 1,003 Impairment losses 0 0 0 0 0 0 Other 0 0(1)(1)(1)(1)Group Headquarters&Group Services(42)(42)13(3)(234)(270)Staff-related measures(32)(32)(28)(28)(168)(168)Non-staff-related restructuring(5)(5)(8)(8)(162)(162)Effects of deconsolidations,disposals and acquisitions(4)(4)33 33 80 80 Impairment losses 0 0(3)(19)0(36)Other(1)(1)18 18 17 17 Group 12,401 12,398 1,214 1,187(4,219)(5,171)Staff-related measures(232)(232)(183)(183)(1,230)(1,230)Non-staff-related restructuring(10)(10)(9)(9)(175)(175)Effects of deconsolidations,disposals and acquisitions 12,623 12,632 1,333 1,336(2,256)(2,384)Impairment losses(1)(13)(4)(34)(276)(1,100)Other 21 21 77 77(283)(283)EBITDA AL/EBIT(adjusted for special factors)9,963 5,617 9,873 5,140 40,208 21,330 Profit(loss)from financial activities(adjusted for special factors)(1,317)(908)(3,931)Profit(loss)before income taxes(adjusted for special factors)4,301 4,233 17,399 Income taxes(adjusted for special factors)(1,150)(1,086)(4,157)Profit(loss)(adjusted for special factors)3,151 3,146 13,242 Profit(loss)(adjusted for special factors)attributable to Owners of the parent(net profit(loss)(adjusted for special factors)1,959 2,238 9,081 Non-controlling interests(adjusted for special factors)1,192 908 4,161=pqInterim Group management report 16Deutsche Telekom.Interim Group Report Q1 2023.Financial position of the Group Condensed consolidated statement of financial position millions of Mar.31,2023c.31,2022 Change Mar.31,2022 Assets Cash and cash equivalents 10,913 3.6 5,767 5,146 9,875 Trade receivables 15,891 5.2 16,766(875)15,542 Intangible assets 138,142 45.5 140,600(2,458)137,224 Property,plant and equipment 65,532 21.6 65,729(197)63,159 Right-of-use assets 34,524 11.4 33,727 797 37,028 Investments accounted for using the equity method 7,337 2.4 1,318 6,019 1,960 Current and non-current financial assets 10,939 3.6 9,910 1,029 8,348 Deferred tax assets 7,711 2.5 8,316(605)7,416 Non-current assets and disposal groups held for sale 487 0.2 4,683(4,196)71 Miscellaneous assets 12,317 4.1 11,774 543 11,799 Total assets 303,793 100.0 298,590 5,203 292,422 Liabilities and shareholders equity Current and non-current financial liabilities 108,381 35.7 113,030(4,649)110,557 Current and non-current lease liabilities 42,454 14.0 38,792 3,662 40,131 Trade and other payables 11,106 3.7 12,035(929)10,865 Provisions for pensions and other employee benefits 3,676 1.2 4,150(474)5,010 Current and non-current other provisions 7,751 2.6 8,204(453)8,533 Deferred tax liabilities 21,835 7.2 22,800(965)20,517 Liabilities directly associated with non-current assets and disposal groups held for sale 384 0.1 3,347(2,963)0 Miscellaneous liabilities 9,521 3.1 8,912 609 9,153 Shareholders equity 98,685 32.5 87,320 11,365 87,656 Total liabilities and shareholders equity 303,793 100.0 298,590 5,203 292,422 Total assets amounted to EUR 303.8 billion as of March 31,2023,up by EUR 5.2 billion against December 31,2022.The main contributing factors were the cash proceeds from the sale of GD Towers,the sale-and-leaseback transaction concluded in this connection to lease the sold passive network infrastructure in Germany and Austria,and the inclusion of the remaining 49.0%stake.Total assets were reduced in connection with the derecognition of the assets and liabilities that had been fully consolidated until the transaction was closed.Exchange rate effects,primarily from the translation of U.S.dollars into euros,decreased the carrying amount of total assets.On the assets side,trade receivables amounted to EUR 15.9 billion,down by EUR 0.9 billion against the 2022 year-end.This was due to lower receivables in the United States and Germany,operating segments.Exchange rate effects,mainly from the translation of U.S.dollars into euros,also decreased the carrying amount.Intangible assets decreased by EUR 2.5 billion to EUR 138.1 billion,due in particular to exchange rate effects of EUR 2.0 billion,primarily from the translation of U.S.dollars into euros.Amortization and impairment losses of EUR 1.7 billion also reduced it.By contrast,additions had an increasing effect of EUR 1.2 billion on the carrying amount.Property,plant and equipment decreased by EUR 0.2 billion compared with December 31,2022 to EUR 65.5 billion.Depreciation charges of EUR 2.9 billion had a decreasing effect on the carrying amount.Exchange rate effects of EUR 0.5 billion,primarily from the translation of U.S.dollars into euros,and disposals of EUR 0.1 billion also reduced the carrying amount.By contrast,additions for the upgrade and build-out of the network(broadband,fiber-optic,and mobile infrastructure build-out)increased the carrying amount by EUR 3.3 billion.Compared with December 31,2022,right-of-use assets increased by EUR 0.8 billion to EUR 34.5 billion.The carrying amount was increased by additions of EUR 2.8 billion,mainly due to the sale and leaseback of sold passive network infrastructure in Germany and Austria in connection with the sale of the GD Towers.In this connection,retained right-of-use assets of EUR 2.0 billion were recognized.Depreciation,amortization and impairment losses of EUR 1.4 billion and exchange rate effects of EUR 0.5 billion,primarily from the translation of U.S.dollars into euros,decreased the carrying amount.For further information on the sale of GD Towers,please refer to the section“Group organization,strategy,and management.”=pqInterim Group management report 17Deutsche Telekom.Interim Group Report Q1 2023.Investments accounted for using the equity method increased by EUR 6.0 billion compared to December 31,2022,to EUR 7.3 billion,essentially as a result of the sale of the 51.0%stake in GD Towers.Following the loss of control pursuant to the IFRSs as a result of the transaction,the companies were deconsolidated as of February 1,2023.Since this date,the remaining 49.0%of the shares have been included in the consolidated financial statements as an investment accounted for using the equity method.The carrying amount of the investment amounted to EUR 6.0 billion as of March 31,2023.For further information on the sale of GD Towers,please refer to the section“Group organization,strategy,and management.”Current and non-current financial assets increased by EUR 1.0 billion to EUR 10.9 billion.The net total of originated loans and receivables increased by EUR 1.0 billion to EUR 5.3 billion.Under short-term investments,government bonds were bought during the course of the year.As of March 31,2023,they had a carrying amount of EUR 0.8 billion.The carrying amount was also increased by an existing shareholder loan to GD Towers of EUR 0.4 billion,which must be reported in the consolidated statement of financial position as a result of the deconsolidation of the companies.By contrast,the carrying amount of cash collateral deposited was reduced by EUR 0.2 billion.Non-current assets and disposal groups held for sale decreased by EUR 4.2 billion compared with December 31,2022 to EUR 0.5 billion.The sale of GD Towers as of February 1,2023 had a reducing effect of EUR 4.2 billion.Up until this date,the assets had been classified as held for sale on account of the sales agreement concluded.For further information on the sale of GD Towers,please refer to the section“Group organization,strategy,and management.”Other assets increased by EUR 0.5 billion to EUR 12.3 billion.Current and non-current other assets contributed EUR 0.3 billion to this increase,due to an increase in receivables from other taxes.In addition,contract assets and capitalized contract costs each increased by EUR 0.1 billion.On the liabilities and shareholders equity side,current and non-current financial liabilities decreased by EUR 4.6 billion compared with the end of 2022 to a total of EUR 108.4 billion.The carrying amount of bonds and other securitized liabilities decreased by EUR 3.9 billion,with exchange rate effects,in particular from the translation of U.S.dollars into euros,accounting for EUR 1.3 billion of this decrease.Early repayments in the Group by way of early buy-backs in February and March 2023 of EUR,GBP,and USD bonds with a total volume of EUR 3.3 billion,and the scheduled repayment of a EUR bond of EUR 0.2 billion also reduced the carrying amount.Net repayments of commercial paper also decreased the carrying amount by EUR 2.3 billion.The carrying amount was increased by the senior notes issued in the reporting period by TMobile US with a total volume of USD 3.0 billion(EUR 2.8 billion).The carrying amounts of liabilities to banks,liabilities with the right of creditors to priority repayment in the event of default,other interest-bearing liabilities,and derivative financial liabilities all recorded minor decreases.Current and non-current lease liabilities increased by EUR 3.7 billion to EUR 42.5 billion compared with December 31,2022,mainly resulting from the sale and leaseback of sold passive network infrastructure in Germany and Austria in connection with the sale of GD Towers.As a result of this transaction,lease liabilities increased by EUR 5.0 billion.By contrast,lease liabilities in the United States operating segment decreased by EUR 0.6 billion due to a decline in network and build-out investments and the closure of former Sprint shops.Exchange rate effects,in particular from the translation of U.S.dollars into euros,reduced the carrying amount by EUR 0.6 billion.For further information on the sale of GD Towers,please refer to the section“Group organization,strategy,and management.”Trade and other payables decreased by EUR 0.9 billion to EUR 11.1 billion,due in particular to lower liabilities following a sharp decline in procurement volumes in the United States and Europe operating segments owing to seasonal effects.Exchange rate effects,mainly from the translation of U.S.dollars into euros,also decreased the carrying amount.Provisions for pensions and other employee benefits decreased by EUR 0.5 billion compared with December 31,2022 to EUR 3.7 billion,mainly due to an increase in the fair values of plan assets.The decline in the discount rate compared with December 31,2022 had an offsetting effect.Overall,the remeasurement of defined benefit plans resulted in an actuarial gain of EUR 0.4 billion recognized directly in equity.Current and non-current other provisions decreased by EUR 0.5 billion compared with the end of 2022 to EUR 7.8 billion.Other provisions for personnel costs decreased by EUR 0.2 billion,and the provisions for procurement and sales support by EUR 0.1 billion,mainly in connection with the bonuses paid out to employees and sales partners in the United States operating segment.Provisions for restoration obligations also decreased by EUR 0.1 billion,due in particular to the decommissioning of the former Sprint mobile network and shop closures.Exchange rate effects,in particular from the translation of U.S.dollars into euros,also contributed to the decrease in the carrying amount.=pqInterim Group management report 18Deutsche Telekom.Interim Group Report Q1 2023.Liabilities directly associated with non-current assets and disposal groups held for sale decreased by EUR 3.0 billion against December 31,2022 to EUR 0.4 billion.The sale of GD Towers as of February 1,2023 reduced the carrying amount by EUR 3.0 billion.Up until this date,the liabilities had been classified as held for sale on account of the sales agreement concluded.Miscellaneous liabilities increased by EUR 0.6 billion compared to December 31,2022 to EUR 9.5 billion,mainly due to an increase in other liabilities of EUR 0.4 billion,driven by an increase in liabilities from other taxes.In addition,income tax liabilities increased by EUR 0.2 billion and contract liabilities by EUR 0.1 billion.Shareholders equity increased from EUR 87.3 billion as of December 31,2022 to EUR 98.7 billion,with profit of EUR 16.4 billion and capital increases from share-based payments of EUR 0.1 billion having an increasing effect.By contrast,transactions with owners reduced shareholders equity by EUR 4.5 billion,mainly in connection with the share buy-back program at TMobile US.Other comprehensive income also decreased the carrying amount by EUR 0.7 billion.The main factors here were negative currency translation effects recognized directly in equity amounting to EUR 1.1 billion,offset by a positive effect of EUR 0.4 billion from the remeasurement of defined benefit plans.For further information on the statement of financial position,please refer to the section“Selected notes to the consolidated statement of financial position”in the interim consolidated financial statements.Calculation of net debt millions of Mar.31,2023a Dec.31,2022a Change Change%Mar.31,2022a Bonds and other securitized liabilities 89,892 93,802(3,910)(4.2)93,296 Liabilities to banks 3,914 4,122(208)(5.0)3,753 Other financial liabilities 14,575 15,107(532)(3.5)13,508 Lease liabilities 42,736 41,063 1,673 4.1 40,131 Financial liabilities and lease liabilities 151,117 154,093(2,976)(1.9)150,688 Accrued interest(1,039)(999)(40)(4.0)(1,166)Other(967)(805)(162)(20.1)(889)Gross debt 149,111 152,289(3,178)(2.1)148,633 Cash and cash equivalents 10,913 5,767 5,146 89.2 9,875 Derivative financial assets 2,240 2,273(33)(1.5)2,064 Other financial assets 2,441 1,824 617 33.8 747 Net debt 133,517 142,425(8,908)(6.3)135,947 Lease liabilitiesb 40,469 38,692 1,777 4.6 37,818 Net debt AL 93,048 103,733(10,685)(10.3)98,129 a Including net debt reported under liabilities directly associated with non-current assets and disposal groups held for sale.b Excluding finance leases at T-Mobile US.Changes in net debt millions of 320133,517142,425(4,822)(10,667)2,9718374,305(1,852)GD Towers cashproceedsNet debt as of Dec.31,2022Free cash flow(before dividend payments and spectrum investment)Additions of lease liabilities and of right-of-use assetsGD Towers saleand leasebackExchange rate effectsOther effectsNet debt as of Mar.31,2023T-Mobile USshare buy-backprogram=pqInterim Group management report 19Deutsche Telekom.Interim Group Report Q1 2023.Other effects of EUR 0.3 billion include,among other factors,the acquisition of spectrum,the recognition of liabilities for the acquisition of media broadcasting rights,share buy-backs at our subsidiaries,and contrasting measurement effects in connection with derivatives.For further information on the sale of GD Towers,please refer to the section“Group organization,strategy,and management.”Calculation of free cash flow AL millions of Q1 2023 Q1 2022 Change Change%FY 2022 Net cash from operating activities 9,558 9,358 200 2.1 35,819 Cash outflows for investments in intangible assets(1,187)(3,551)2,364 66.6(7,551)Cash outflows for investments in property,plant and equipment(3,639)(3,621)(18)(0.5)(16,563)Cash capex(4,826)(7,173)2,347 32.7(24,114)Spectrum investment 67 2,514(2,447)(97.3)3,096 Cash capex(before spectrum investment)(4,759)(4,658)(101)(2.2)(21,019)Proceeds from the disposal of intangible assets(excluding goodwill)and property,plant and equipment 23 50(27)(54.0)439 Free cash flow(before dividend payments and spectrum investment)4,822 4,750 72 1.5 15,239 Principal portion of repayment of lease liabilitiesa(1,244)(969)(275)(28.4)(3,769)Free cash flow AL(before dividend payments and spectrum investment)3,579 3,781(202)(5.3)11,470 a Excluding finance leases at T-Mobile US Free cash flow AL(before dividend payments and spectrum investment)decreased by EUR 0.2 billion year-on-year to EUR 3.6 billion.The following effects impacted on this development:Net cash from operating activities increased by EUR 0.2 billion to EUR 9.6 billion on the back of the good business performance.Lower cash outflows in connection with the integration of Sprint in the United States and exchange rate effects also had an increasing effect.The increase in net interest payments of EUR 0.3 billion and the increase in tax payments of EUR 0.1 billion,in particular,had a reducing effect.Cash capex(before spectrum investment)increased slightly by EUR 0.1 billion to EUR 4.8 billion.In the Germany operating segment,capital expenditure totaled around EUR 1.2 billion in the first quarter of 2023,EUR 0.3 billion more than in the prior-year period,with much of this figure going towards the fiber-optic build-out.Cash outflows in the Europe operating segment increased by EUR 0.1 billion to EUR 0.4 billion.Here,we also continue to invest in the provision of broadband and fiber-optic technology and in 5G as part of our integrated network strategy.By contrast,cash capex in the United States operating segment decreased by EUR 0.2 billion to EUR 2.8 billion,mainly as a result of higher cash outflows in the prior year for the accelerated build-out of the 5G network and the integration of Sprint.In the Systems Solutions operating segment,our capital expenditure was EUR 0.1 billion.The increase is mainly due to catch-up effects in the Cloud Services and Road Charging portfolio areas following supply shortages in 2022.In the Group Development operating segment,cash capex decreased,mainly due to the sales of TMobile Netherlands and GD Towers.An increase of EUR 0.3 billion in cash outflows for the repayment of lease liabilities reduced free cash flow AL.This mainly related to leases in the United States operating segment.For further information on the statement of cash flows,please refer to the section“Notes to the consolidated statement of cash flows”in the interim consolidated financial statements.=pqInterim Group management report 20Deutsche Telekom.Interim Group Report Q1 2023.Development of business in the operating segments Germany Customer development thousands Mar.31,2023 Dec.31,2022 Change Mar.31,2023/Dec.31,2022%Mar.31,2022 Change Mar.31,2023/Mar.31,2022%Mobile customers 56,067 54,249 3.4 53,968 3.9 Contract customers 24,037 23,791 1.0 23,165 3.8 Prepaid customersa 32,030 30,458 5.2 30,803 4.0 Fixed-network lines 17,349 17,363(0.1)17,480(0.7)Retail broadband lines 14,789 14,715 0.5 14,533 1.8 Of which:optical fiberb 12,238 12,112 1.0 10,584 15.6 Television(IPTV,satellite)4,172 4,122 1.2 4,018 3.8 Unbundled local loop lines(ULLs)3,017 3,136(3.8)3,487(13.5)Wholesale broadband lines 8,086 8,045 0.5 7,970 1.5 Of which:optical fiber 7,020 6,970 0.7 6,837 2.7 a Due to a network switchover,a portion of our prepaid customers had been migrated to another provider by the end of the third quarter of 2022.b From June 1,2022 until December 31,2022,we migrated customers to fiber-optic lines under our“Turn customers into fans”(Kunden zu Fans machen)initiative.Around 1 million lines in total were upgraded as part of this initiative.Total In Germany we continue to be market leader both in terms of fixed-network and mobile revenues.This success is attributable to our high-performance networks,a broad product portfolio,and good service.We want to offer our customers a seamless and technology-neutral telecommunications experience.We regularly adapt our product portfolio to address the needs of our customers.The fixed-network broadband market hosts a large number of players with differing infrastructures from national through to regional providers.In order to consolidate our position on the market as Germanys leading telecommunications provider,we continue to add new offerings to our portfolio.Mobile communications The number of high-value mobile contract customers under the Telekom and congstar brands grew by 274 thousand customers overall.Sustained high demand for mobile rate plans with data volumes continues to drive this trend.The number of prepaid customers grew by 1.6 million compared with December 31,2022,primarily from the automotive industry.Fixed network Demand remained high for our fiber-optic-based lines,with the total number increasing to 19.3 million since the end of 2022.Two key factors are driving this strong growth:demand for higher bandwidths,and the technical migration of customer lines to optical fiber under our“Turn customers into fans”(Kunden zu Fans machen)initiative,which concluded at the end of 2022.The number of broadband lines remained at a high level,increasing by 74 thousand compared with December 31,2022 to 14.8 million.Almost 42%of the customers subscribed to a rate plan with speeds of 100 Mbit/s or higher.We recorded an increase of 50 thousand in the number of TV customers compared with year-end 2022.The number of fixed-network lines stood at 17.3 million.=pqInterim Group management report 21Deutsche Telekom.Interim Group Report Q1 2023.Wholesale As of March 31,2023,fiber-optic-based lines accounted for 63.2%of all lines 0.9 percentage points more than at the end of 2022.This growth is a result of the demand for our commitment agreements.Ongoing demand among retail customers for higher-bandwidth lines also contributed to the increase.The number of unbundled local loop lines decreased by 119 thousand compared with the end of the prior year,partly as a result of the shift to higher-value fiber-optic-based lines and partly from consumers switching to other providers.In addition,our wholesale customers are migrating their retail customers to their own fiber-optic-based lines.The total number of wholesale lines at the end of March 2023 was 11.1 million.Development of operationsa millions of Q1 2023 Q1 2022 Change Change%FY 2022 Revenueb 6,141 5,963 178 3.0 24,505 Consumers 3,077 3,034 43 1.4 12,370 Business Customers 2,269 2,186 83 3.8 9,040 Wholesale 672 679(7)(1.0)2,676 Other 123 63 60 95.2 419 Service revenueb 5,417 5,290 127 2.4 21,533 EBITDA 2,483 4,021(1,538)(38.2)11,025 Special factors affecting EBITDA (104)1,621(1,725)n.a.1,162 EBITDA(adjusted for special factors)2,587 2,400 187 7.8 9,864 EBITDA AL 2,385 4,015(1,630)(40.6)10,998 Special factors affecting EBITDA AL (104)1,621(1,725)n.a.1,162 EBITDA AL(adjusted for special factors)2,489 2,393 96 4.0 9,837 EBITDA AL margin(adjusted for special factors).5 40.1 40.1 Depreciation,amortization and impairment losses (1,036)(998)(38)(3.8)(4,019)Profit(loss)from operations(EBIT)1,447 3,024(1,577)(52.1)7,006 EBIT margin#.6 50.7 28.6 Cash capex (1,187)(902)(285)(31.6)(4,399)Cash capex(before spectrum investment)(1,187)(902)(285)(31.6)(4,399)a As of July 1,2022,the security business was transferred from the Systems Solutions operating segment to the Germany operating segment.Prior-year comparatives were adjusted retrospectively.b As of the third quarter of 2022 the principal/agent consideration regarding the recognition of gross and net revenues was changed.Prior-year comparatives were adjusted retrospectively.Revenue,service revenue In the first quarter of 2023,we generated revenue of EUR 6.1 billion,which was up by 3.0%year-on-year.In organic terms,revenue increased by 2.3%year-on-year.The growth in service revenues of 2.4%was attributable to increased revenue in the fixed-network core business,largely broadband-driven,and in mobile business.Another revenue driver was the partnership business.In organic terms,service revenue increased by 1.6%year-on-year.Revenue from Consumers increased by 1.4%compared with the prior year.Revenue from broadband business continued to grow,due in part to the positive effects from customer appreciation for stable data lines and high bandwidths.Fixed-network terminal equipment business also posted growth on the back of demand on the customer side for terminal equipment lease models.Volume-driven declines in revenue from voice components continued to impact on traditional fixed-network business.Mobile business declined slightly on account of terminal equipment business.Mobile service revenues remained stable,despite a network switchover of a portion of our prepaid customers.Revenue from Business Customers was up by 3.8%year-on-year.This was due in part to the IT business.The mobile business grew thanks to higher service revenues as a result of ongoing growth in the customer base,and from the terminal equipment business.In organic terms,revenue increased by 2.1%year-on-year.Wholesale revenue declined by 1.0%year-on-year in the first quarter of 2023.The positive trend in the number of fiber-optic-based lines held steady,with a year-on-year increase of 2.7%.However,this was not enough to fully offset the decrease in revenues,among other things from declining volumes of unbundled local loop lines.=pqInterim Group management report 22Deutsche Telekom.Interim Group Report Q1 2023.Adjusted EBITDA AL,EBITDA AL Adjusted EBITDA AL increased by EUR 0.1 billion or 4.0%year-on-year to EUR 2.5 billion.In organic terms,adjusted EBITDA AL grew by 3.1%year-on-year.Our adjusted EBITDA AL margin increased to 40.5%.The main reasons for this increase are a sound operational development,driven by high-value revenue growth,and enhanced cost efficiency.Organic factors also include the smaller headcount and ongoing implementation of efficiency enhancement and digitalization measures.EBITDA AL decreased by EUR 1.6 billion to EUR 2.4 billion.In the prior-year quarter,special factors included the gain on deconsolidation of GlasfaserPlus(EUR 1.7 billion)and initial payments on account received from insurance companies in connection with damage sustained in the catastrophic flooding in July 2021(EUR 0.1 billion).Expenses for socially responsible instruments in connection with staff restructuring were at the prior-year level.Profit/loss from operations(EBIT)Profit from operations amounted to EUR 1.4 billion,a decrease of 52.1%year-on-year.This decline is primarily attributable to the gain recognized in the prior year on the deconsolidation of GlasfaserPlus.Depreciation,amortization and impairment losses were up against the prior-year level,mainly resulting from the sale and leaseback of sold passive network infrastructure in Germany in connection with the sale of GD Towers.For further information on the sale of GD Towers,please refer to the section“Group organization,strategy,and management.”Cash capex(before spectrum investment),cash capex Cash capex increased by EUR 285 million or 31.6%compared with the prior year.Capital expenditure totaled around EUR 1.2 billion in the first three months of 2023,in particular for the fiber-optic build-out.The number of households passed by our fiber-optic network had increased to around 5.7 million by the end of March 2023.In mobile communications,95.1%of German households can already use 5G.United States Customer development thousands Mar.31,2023 Dec.31,2022 Change Mar.31,2023/Dec.31,2022%Mar.31,2022 Change Mar.31,2023/Mar.31,2022%Customers 114,917 113,598 1.2 109,541 4.9 Postpaid customers 93,525 92,232 1.4 88,423 5.8 Postpaid phone customersa 73,372 72,834 0.7 70,656 3.8 Other postpaid customersa 20,153 19,398 3.9 17,767 13.4 Prepaid customers 21,392 21,366 0.1 21,118 1.3 a Customers impacted by the decommissioning of the legacy Sprint CDMA and LTE and T-Mobile US UMTS networks have been excluded from our customer base resulting in the removal of 212 thousand postpaid phone customers and 349 thousand postpaid other customers in the first quarter of 2022.In connection with our acquisition of companies,we included a base adjustment in the first quarter of 2022 to increase postpaid phone customers by 17 thousand and reduce postpaid other customers by 14 thousand.Customers At March 31,2023,the United States operating segment(TMobile US)had 114.9 million customers,compared to 113.6 million customers at December 31,2022.Net customer additions were 1.3 million in the first quarter of 2023,compared to 1.4 million in the first quarter of 2022 due to the factors described below.Postpaid net customer additions were 1.3 million in the first quarter of 2023,compared to 1.3 million in the first quarter of 2022.Postpaid net customer additions were relatively flat due to lower postpaid phone net customer additions,primarily due to lower gross additions driven by continued normalizing of industry growth closer to pre-pandemic levels and fewer migrations from prepaid,partially offset by lower churn.This decrease was mostly offset by higher postpaid other net customer additions,primarily due to growth in High Speed Internet,partially offset by lower net additions from mobile internet devices.High Speed Internet net customer additions included in postpaid other net customer additions were 445 thousand and 329 thousand in the first quarter of 2023 and 2022,respectively.Prepaid net customer additions were 26 thousand in the first quarter of 2023,compared to 62 thousand in the first quarter of 2022.This decrease was primarily due to continued normalization of industry growth toward pre-pandemic levels,partially offset by growth in High Speed Internet and fewer migrations to postpaid.High Speed Internet net customer additions included in prepaid net customer additions were 78 thousand and 9 thousand in the first quarter of 2023 and 2022,respectively.=pqInterim Group management report 23Deutsche Telekom.Interim Group Report Q1 2023.Development of operations millions of Q1 2023 Q1 2022 Change Change%FY 2022 Revenuea 18,262 17,880 382 2.1 75,436 Service revenuea 14,475 13,456 1,019 7.6 58,219 EBITDA 7,545 6,647 898 13.5 26,707 Special factors affecting EBITDA (234)(820)586 71.5(4,155)EBITDA(adjusted for special factors)7,779 7,467 312 4.2 30,862 EBITDA AL 6,173 4,914 1,259 25.6 19,665 Special factors affecting EBITDA AL (363)(1,258)895 71.1(5,949)EBITDA AL(adjusted for special factors)6,536 6,172 364 5.9 25,614 Core EBITDA AL(adjusted for special factors)b 6,401 5,741 660 11.5 24,280 EBITDA AL margin(adjusted for special factors)5.8 34.5 34.0 Depreciation,amortization and impairment losses (3,970)(4,604)634 13.8(19,237)Profit(loss)from operations(EBIT)3,575 2,044 1,531 74.9 7,470 EBIT margin.6 11.4 9.9 Cash capex (2,862)(5,535)2,673 48.3(16,340)Cash capex(before spectrum investment)(2,799)(3,025)226 7.5(13,361)a As of the third quarter of 2022 the principal/agent consideration regarding the recognition of gross and net revenues was changed.Prior-year comparatives were adjusted retrospectively.b Adjusted core EBITDA AL is distinguished by excluding revenue from terminal equipment leases from adjusted EBITDA AL,thereby presenting operational development undistorted by the withdrawal from the terminal equipment lease business.Revenue,service revenue Total revenue for the United States operating segment of EUR 18.3 billion in the first quarter of 2023 increased by 2.1%,compared to EUR 17.9 billion in the first quarter of 2022.In U.S.dollars,TMobile US total revenues decreased 2.3%during the same period.Total revenues decreased primarily due to lower equipment revenues partially offset by higher service revenues.The components of these changes are described below.Service revenues increased in the first quarter of 2023 by 7.6%to EUR 14.5 billion.This increase resulted from higher postpaid revenues,primarily due to higher average postpaid accounts and higher postpaid Average Revenue per Account(ARPA).This increase was partially offset by lower wholesale and other service revenues,primarily from lower Lifeline and MVNO revenues and lower prepaid revenues,primarily from lower prepaid Average Revenue per User(ARPU),partially offset by higher average prepaid customers.Equipment revenues decreased in the first quarter of 2023 primarily from a decrease in the number of devices sold primarily driven by higher postpaid upgrades in the prior-year period related to facilitating the migration of Sprint customers to the TMobile US network and an increase in contra-revenue primarily driven by higher imputed interest rates on equipment installment plans(EIP).In addition,equipment revenues decreased due to a decrease in lease revenues and customer purchases of leased devices primarily due to a lower number of customer devices under lease as a result of the continued strategic shift in device financing from leasing to EIP.The decrease in equipment revenues was partially offset by higher average revenue per device sold primarily driven by higher promotions in the prior-year period,which included promotions for Sprint customers to facilitate their migration to the TMobile US network,partially offset by a decrease in the high-end phone mix.Adjusted EBITDA AL,EBITDA AL In euros,adjusted EBITDA AL increased by 5.9%to EUR 6.5 billion in the first quarter of 2023,compared to EUR 6.2 billion in the first quarter of 2022.The adjusted EBITDA AL margin increased to 35.8%in the first quarter of 2023,compared to 34.5%in the first quarter of 2022.In U.S.dollars,adjusted EBITDA AL increased 1.3%during the same period.Adjusted EBITDA AL increased primarily due to lower average cost per device sold driven by a decrease in the high-end phone mix,higher service revenues as discussed above and higher realized Sprint Merger-related synergies.This increase was partially offset by lower equipment revenues as described above and higher site costs related to the continued build-out of our nationwide 5G network.In U.S.dollars,lease revenues decreased as a result of the continued strategic shift in device financing from leasing to EIP by 70.0%in 2023.=pqInterim Group management report 24Deutsche Telekom.Interim Group Report Q1 2023.Adjusted core EBITDA AL increased by 11.5%to EUR 6.4 billion in the first quarter of 2023,compared to EUR 5.7 billion in the first quarter of 2021.In U.S.dollars,adjusted core EBITDA AL increased by 6.6%during the same period.The change was primarily due to the fluctuation in adjusted EBITDA AL,discussed above,excluding the change in lease revenues.EBITDA AL in the first quarter of 2023 included special factors of EUR-0.4 billion compared to EUR-1.3 billion in the first quarter of 2022.The change in special factors was primarily due to lower Sprint Merger-related costs.The change in special factors is also impacted by other special items including certain severance,restructuring and other expenses and income,not directly attributable to the Sprint Merger which are not reflective of TMobile US core business activities.Special factors include Sprint Merger-related costs predominantly associated with the integration of Sprint and are comprised of integration costs to achieve efficiencies in network,retail,information technology and back office operations,migrate customers to the TMobile US network and billing systems and the impact of legal matters assumed as part of the Sprint Merger.In addition,Sprint Merger-related special factors include restructuring costs,including severance,store rationalization and network decommissioning as well as transaction costs,including legal and professional services related to the completion of transactions.Overall,EBITDA AL increased by 25.6%to EUR 6.2 billion in the first quarter of 2023,compared to EUR 4.9 billion in the first quarter of 2022,primarily due to the factors described above,including special factors.Profit/loss from operations(EBIT)EBIT increased by 74.9%to EUR 3.6 billion in the first quarter of 2023,compared to EUR 2.0 billion in the first quarter of 2022.In U.S.dollars,EBIT increased by 67.0%during the same period primarily due to higher EBITDA AL and lower depreciation,amortization and impairment losses.In U.S.dollars,depreciation,amortization and impairment losses decreased 17.5%primarily due to lower depreciation expense on leased devices,resulting from a lower number of total customer devices under lease and certain 4G-related network assets becoming fully depreciated,including assets impacted by the decommissioning of the legacy Sprint CDMA and LTE networks in 2022.These decreases were partially offset by higher depreciation expense(excluding leased devices)from the continued build-out of our nationwide 5G network.Cash capex(before spectrum investment),cash capex Cash capex(before spectrum investment)decreased by 7.5%to EUR 2.8 billion in the first quarter of 2023,compared to EUR 3.0 billion in the first quarter of 2022.In U.S.dollars,cash capex(before spectrum investment)decreased by 11.4%due to decrease in purchases of property and equipment primarily due to increased capital efficiency following our accelerated nationwide 5G network build-out in 2022.Cash capex decreased by 48.3%to EUR 2.9 billion in the first quarter of 2023,compared to EUR 5.5 billion in the first quarter of 2022.In U.S.dollars,cash capex decreased by 50.7%primarily due to USD 2.8 billion paid for spectrum licenses won at the conclusion of Auction 110 in February 2022 compared to no spectrum licenses won during the first quarter of 2023.Europe Customer development thousands Mar.31,2023 Dec.31,2022 Change Mar.31,2023/Dec.31,2022%Mar.31,2022 Change Mar.31,2023/Mar.31,2022%Europe,total Mobile customers 47,357 47,336 0.0 45,584 3.9 Contract customers 26,580 26,476 0.4 25,803 3.0 Prepaid customers 20,777 20,860(0.4)19,781 5.0 Fixed-network lines 8,341 7,907 5.5 7,814 6.7 Broadband customers 6,765 6,682 1.2 6,443 5.0 Television(IPTV,satellite,cable)4,160 4,131 0.7 4,050 2.7 Unbundled local loop lines(ULL)/Wholesale PSTN 1,728 1,768(2.3)1,886(8.4)Wholesale broadband lines 1,044 1,011 3.3 909 14.9 Greece Mobile customers 7,298 7,323(0.3)7,130 2.4 Fixed-network lines 3,031 2,622 15.6 2,619 15.7 Broadband customers 2,375 2,359 0.7 2,315 2.6 a“Other”:national companies of North Macedonia,Montenegro,and the lines of the GTS Central Europe group in Romania.=pqInterim Group management report 25Deutsche Telekom.Interim Group Report Q1 2023.thousands Mar.31,2023 Dec.31,2022 Change Mar.31,2023/Dec.31,2022%Mar.31,2022 Change Mar.31,2023/Mar.31,2022%Romania Mobile customers 4,062 4,166(2.5)3,821 6.3 Hungary Mobile customers 5,987 5,950 0.6 5,727 4.5 Fixed-network lines 1,899 1,886 0.7 1,836 3.4 Broadband customers 1,534 1,507 1.8 1,433 7.0 Poland Mobile customers 12,553 12,512 0.3 11,845 6.0 Fixed-network lines 30 30 0.0 29 3.4 Broadband customers 182 154 18.2 91 100.0 Czech Republic Mobile customers 6,440 6,423 0.3 6,338 1.6 Fixed-network lines 721 704 2.4 659 9.4 Broadband customers 440 430 2.3 401 9.7 Croatia Mobile customers 2,293 2,305(0.5)2,275 0.8 Fixed-network lines 867 868(0.1)872(0.6)Broadband customers 649 648 0.2 637 1.9 Slovakia Mobile customers 2,464 2,446 0.7 2,479(0.6)Fixed-network lines 851 856(0.6)867(1.8)Broadband customers 644 643 0.2 639 0.8 Austria Mobile customers 4,566 4,510 1.2 4,394 3.9 Fixed-network lines 607 605 0.3 598 1.5 Broadband customers 665 663 0.3 659 0.9 Othera Mobile customers 1,693 1,702(0.5)1,574 7.6 Fixed-network lines 336 336 0.0 335 0.3 Broadband customers 277 277 0.0 269 3.0 a“Other”:national companies of North Macedonia,Montenegro,and the lines of the GTS Central Europe group in Romania.Total In the Europe operating segment,almost all key performance indicators for customer development improved compared with the end of 2022.Our convergent product portfolio,in particular,generated growth compared with year-end 2022 of 2.4%in FMC customers thanks to ongoing demand.As a consequence,we are working flat out to build out our fixed-network infrastructure with state-of-the-art optical fiber.The number of broadband customers has increased by 1.2%.The mobile business remained on a par with the year-end level.Our build-out of the 5G network is making good progress.Mobile communications In our Europe operating segment,the overall number of mobile customers as of March 31,2023 remained stable against year-end 2022 at 47.4 million.The number of contract customers increased slightly by 0.4%.The contract customer base grew in almost all of our national companies,but in particular in Greece,the Czech Republic,Slovakia,Austria,and Poland.Overall,contract customers accounted for 56.1%of the total customer base.Our customers benefited from greater coverage with fast mobile broadband a result of our integrated network strategy.The footprint countries of our operating segment are also making excellent headway with 5G.As of March 31,2023,our national companies covered 51.1%of the population(in particular in Greece,Montenegro,North Macedonia,the Czech Republic,and Austria)with 5G.The prepaid customer base declined slightly by 0.4%compared with the end of 2022,especially in Romania and Greece.As part of our ordinary business activities,we offer our prepaid customers high-value contract plans with the resulting number of contract conversions also contributing positively to contract customer business.Fixed network The broadband business increased by 1.2%compared with the end of 2022 to a total of 6.8 million customers.This growth is mainly driven by the national companies in Poland,Hungary,Greece,and the Czech Republic.By continuing to invest in optical fiber,we are systematically building out our fixed-network infrastructure.At the end of the first quarter of 2023,a total of around 8.2 million households(coverage of 32.1%)were provided with the option by our national companies to subscribe to a direct connection to our fiber-optic network with speeds reaching up to 1 Gbit/s.The utilization rate was up slightly at around 33%.The number of fixed-network lines increased further by 5.5%,reaching 8.3 million as of March 31,2023.The TV and entertainment business had a total of 4.2 million customers as of the end of the first quarter of 2023,up slightly by 0.7%compared with the end of the prior year.This was attributable among other things to the acquisition of exclusive rights to broadcast sports events in the prior year.With both telecommunications providers and OTT players offering TV services,the TV market is already saturated in many countries of our segment.=pqInterim Group management report 26Deutsche Telekom.Interim Group Report Q1 2023.FMC fixed-mobile convergence and digitalization Our portfolio of convergent products,MagentaOne,was highly popular with consumers across all of our national companies.As of March 31,2023,we had 7.2 million FMC customers;this corresponds to growth of 2.4%compared with the end of the prior year.Our national companies in particular in the Czech Republic,Greece,Hungary,and Poland contributed to this growth.At the end of the reporting quarter,FMC customers accounted for 61.2%of the broadband customer base.We have also seen slight growth in the marketing of our MagentaOne Business product to business customers.We continue to expand our digital interaction with customers,which means we can meet customer needs in a more personalized and efficient way,and position products and innovative services on the market more quickly.Around 66%of our customers use our service app.Development of operations millions of Q1 2023 Q1 2022 Change Change%FY 2022 Revenuea 2,784 2,682 102 3.8 11,158 Greece 736 743(7)(0.9)3,155 Romania 69 78(9)(11.5)306 Hungary 457 433 24 5.5 1,715 Poland 365 337 28 8.3 1,413 Czech Republic 321 290 31 10.7 1,226 Croatia 222 209 13 6.2 905 Slovakia 202 191 11 5.8 806 Austria 352 341 11 3.2 1,391 Otherb 77 75 2 2.7 320 Service revenuea,c 2,298 2,250 48 2.1 9,296 EBITDA 1,088 1,065 23 2.2 4,296 Special factors affecting EBITDA (5)(1)(4)n.a.(31)EBITDA(adjusted for special factors)1,094 1,066 28 2.6 4,327 EBITDA AL 978 975 3 0.3 3,933 Special factors affecting EBITDA AL (5)(1)(4)n.a.(31)EBITDA AL(adjusted for special factors)983 976 7 0.7 3,964 Greece 319 314 5 1.6 1,310 Romania 4 12(8)(66.7)38 Hungary 110 127(17)(13.4)493 Poland 93 98(5)(5.1)378 Czech Republic 129 125 4 3.2 503 Croatia 80 79 1 1.3 349 Slovakia 84 86(2)(2.3)350 Austria 133 124 9 7.3 506 Otherb 31 11 20 n.a.37 EBITDA AL margin(adjusted for special factors)5.3 36.4 35.5 Depreciation,amortization and impairment losses (610)(619)9 1.5(2,572)Profit(loss)from operations(EBIT)478 446 32 7.2 1,724 EBIT margin.2 16.6 15.5 Cash capex (439)(362)(77)(21.3)(1,872)Cash capex(before spectrum investment)(436)(358)(78)(21.8)(1,755)The contributions of the national companies correspond to their respective unconsolidated financial statements and do not take consolidation effects at operating segment level into account.a As of the third quarter of 2022 the principal/agent consideration regarding the recognition of gross and net revenues was changed.Prior-year comparatives were adjusted retrospectively.b“Other”:national companies in North Macedonia,Montenegro,and the GTS Central Europe group in Romania,as well as the Europe Headquarters.c As of January 1,2023,the definition of service revenue was extended.Prior-year comparatives were adjusted retrospectively.Revenue,service revenue Our Europe operating segment generated revenue of EUR 2.8 billion in the first three months of 2023,a year-on-year increase of 3.8%.In organic terms,i.e.,assuming constant exchange rates,revenue increased by 4.9%year-on-year.Service revenues also grew against the prior year,by 3.0%in organic terms.=pqInterim Group management report 27Deutsche Telekom.Interim Group Report Q1 2023.Organic revenue growth was largely driven by the strong performance of the mobile business,especially the increase in mobile service revenues with higher margins:alongside the larger contra
2023-06-02
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