01—Abstract
Summary
Summary of the 10-K filed February 18, 2009. Cited figures are marked; the original filing is the authoritative source.
In 2008, General Electric (GE) demonstrated resilience amidst challenging global economic and financial conditions, with consolidated revenues increasing to $182.5 billiona.
The company navigated significant market volatility, particularly impacting its Capital Finance segment, which saw earnings decline due to disruptions in capital markets and rising unemployment. Despite these headwinds, GE's industrial segments, including Energy Infrastructure and Technology Infrastructure, showed revenue growth driven by strong demand and strategic acquisitions. GE continued its strategy of operational focus and capital allocation, including the disposition of non-strategic businesses.
The company's liquidity position was actively managed, with efforts to reduce commercial paper borrowings and leverage government support programs. While GE maintained its strong industrial performance, investors closely watched the financial services arm's performance and the company's ability to maintain its 'AAA' credit ratings amidst market uncertainty.
02—Key points
Key Highlights
- Consolidated revenues grew to $182.5 billion in 2008, up from $172.5 billion in 2007, reflecting growth across industrial segments.
- The Capital Finance segment experienced a significant earnings decline, down to $7.1 billion in 2008 from $10.3 billion in 2007, impacted by challenging credit markets.
- Energy Infrastructure and Technology Infrastructure segments reported revenue growth, with Energy Infrastructure up 26% and Technology Infrastructure up 8%, driven by increased volume and acquisitions.
- GE's overall net earnings attributable to common shareholders decreased to $17.3 billion in 2008 from $22.2 billion in 2007.
- The company faced rating agency scrutiny, with S&P revising its outlook to negative and Moody's placing GE on review for possible downgrade, citing concerns over GE Capital's performance.
- GE raised significant capital in late 2008 through stock offerings ($15 billion) and contributed capital to GE Capital to strengthen its liquidity.
- The company's share repurchase program was suspended in September 2008.
- Environmental remediation expenditures were approximately $0.3 billion in 2008, with projected annual expenditures of $0.3 billion to $0.4 billion over the next two years.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, General Electric Co kept $0.10.
- Revenue$179.77B100.0%
- Cost of revenue−$54.60B30.4%
- Gross profit$125.17B69.6%
- Operating costs−$103.32B57.5%
- Operating income$21.85B12.2%
- Interest, other & tax−$4.44B2.5%
- Net income$17.41B9.7%
Where FY2008 revenue went
$179.77B- Other operating costs: $85.80B, 48% of revenue
- Cost of revenue: $54.60B, 30% of revenue
- Net income: $17.41B, 9.7% of revenue
- R&D: $3.11B, 1.7% of revenue
- SG&A: $14.40B, 8.0% of revenue
- Interest, other & tax: $4.44B, 2.5% of revenue
Kept 9.7% as net incomeR&D $3.11B · 1.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 18, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $179.77B$169.96B | +5.8% |
| Cost of Revenue | $54.60B$47.31B | +15.4% |
| Gross Profit | $125.17B$122.66B | +2.0% |
| R&D Expenses | $3.11B— | — |
| SG&A Expenses | $14.40B— | — |
| Operating Expenses | $161.81B$40.17B | +302.8% |
| Operating Income | $21.85B$25.61B | −14.7% |
| Net Income | $17.41B$22.21B | −21.6% |
| EPS (Basic) | $13.76$17.44 | −21.1% |
| EPS (Diluted) | $13.76$17.36 | −20.7% |
05—Questions
Frequently Asked Questions
How did the challenging economic conditions in 2008 affect GE's financial performance?
GE's financial performance in 2008 was significantly impacted by the challenging global economic and financial market conditions. While consolidated revenues grew to $182.5 billion, driven by its industrial segments, the Capital Finance segment experienced a substantial earnings decline due to disruptions in capital markets, rising unemployment, and tightening credit conditions. This led to an increase in the provision for losses on financing receivables and mark-to-market losses.
What was GE's strategy for managing its Capital Finance segment amidst market turmoil?
In response to the difficult financial environment, GE Capital focused on managing through the challenging credit environment and repositioning itself as a smaller, more diversely funded finance company. This included tightening underwriting standards, shifting teams from origination to collection, actively managing risk, and reducing its commercial paper borrowings. The company also took steps to strengthen its liquidity, including capital contributions to GE Capital and utilizing government support programs like the Temporary Liquidity Guarantee Program (TLGP).
How did the company's credit ratings perform in 2008, and what actions were taken in response?
GE's credit ratings faced pressure in 2008. Standard & Poor's revised its ratings outlook from stable to negative, citing concerns about GE Capital's future performance and funding. Moody's placed GE's long-term ratings on review for possible downgrade due to heightened uncertainty regarding GE Capital's asset quality and earnings. In response, GE raised $15 billion in capital through common and preferred stock offerings and made substantial capital contributions to GE Capital to bolster its financial position and liquidity.
What was the performance of GE's industrial segments in 2008?
GE's industrial segments generally performed well, demonstrating resilience. Energy Infrastructure revenues grew 26% driven by increased volume and pricing, while Technology Infrastructure revenues increased 8% due to higher volume, acquisitions, and the weaker U.S. dollar. Aviation, a key part of Technology Infrastructure, continued to achieve record revenues and earnings. The company highlighted ongoing investments in technology and services across these segments.
06—Continue