01—Abstract
Summary
Summary of the 10-K filed February 26, 2013. Cited figures are marked; the original filing is the authoritative source.
General Electric's 2012 Form 10-K (filed February 26, 2013) shows a company in gradual recovery: consolidated revenues were essentially flat at $147.4 billiona, while earnings from continuing operations attributable to the Company rose 3% to $14.7 billion and diluted EPS from continuing operations increased 12% to $1.39.
Operating EPS, a non-GAAP measure that excludes non-operating pension costs, rose 16% to $1.52b. Net earnings attributable to the Company fell 4% to $13.6 billion, driven by a $1.0 billion loss from discontinued operations, mainly reserve increases tied to GE Money Japan and WMC mortgage-repurchase exposure. The industrial segments grew: Power & Water, Oil & Gas, Energy Management and Transportation posted double-digit revenue gains, with Oil & Gas aided by acquisitions, and GE ended the year with a record $210 billion backlog.
GE Capital continued to shrink as management reduced its ending net investment from $513 billion in January 2009 to $419 billionc at year-end 2012. Segment profit rose to $7.4 billion, helped by lower impairments and a sharply lower tax rate. The company's balance sheet and liquidity remain strong, with $77.4 billion of consolidated cash and committed unused credit lines of $48.2 billion.
Credit ratings were S&P AA+ and Moody's Aa3 at GE, though Moody's downgraded GECC by two notches to A1 in April 2012. Management also disclosed that GE will sell its remaining 49% NBCUniversal stake to Comcast for about $16.7 billiond, which should generate further cash and reduce the company's exposure to media.
Key risks for investors include the reinstated but temporary U.S. tax deferral on active financial services income, which expires after 2013; a GE Pension Plan underfunded by $13.3 billion; European sovereign exposure within GECC; and ongoing WMC mortgage litigation covering roughly $3.8 billion of pending loan claims. The effective tax rate fell to 14.4% from 28.3%, partly because the prior year included a large NBCU gain, so 2012 comparisons flatter some metrics.
02—Key points
Key Highlights
- Earnings from continuing operations attributable to GE rose 3% to $14.7 billion; diluted EPS from continuing operations rose 12% to $1.39, and operating EPS rose 16% to $1.52.
- Consolidated revenues were roughly flat at $147.4 billion, with industrial segment revenues up 8% organically to $101.8 billion, led by Power & Water (+10%), Oil & Gas (+12%) and Transportation (+15%).
- Record infrastructure backlog of $209.5 billion at year-end 2012, up 4%, supporting revenue visibility for the industrial businesses.
- GE Capital reduced its ending net investment to $419 billion from $513 billion in 2009, while segment profit rose to $7.4 billion from $6.6 billion.
- Net earnings attributable to the Company fell 4% to $13.6 billion because of a $1.0 billion loss from discontinued operations, driven by GE Money Japan and WMC reserve increases.
- Agreement to sell the remaining 49% NBCUniversal stake to Comcast for about $16.7 billion, expected to close in Q1 2013, plus a $35 billion share buyback authorization through 2015 and a quarterly dividend of $0.19 per share.
- Liquidity remained strong, with $77.4 billion of consolidated cash and $48.2 billion of committed unused credit lines; the Moody's downgrade of GECC to A1 in 2012 had no material operational impact.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, General Electric Co kept $0.12.
- Revenue$112.59B100.0%
- Cost of revenue−$56.78B50.4%
- Gross profit$55.80B49.6%
- Operating costs−$32.92B29.2%
- Operating income$22.89B20.3%
- Interest, other & tax−$9.25B8.2%
- Net income$13.64B12.1%
Where FY2012 revenue went
$112.59B- Cost of revenue: $56.78B, 50% of revenue
- Other operating costs: $27.72B, 25% of revenue
- Net income: $13.64B, 12% of revenue
- R&D: $5.20B, 4.6% of revenue
- Interest, other & tax: $9.25B, 8.2% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 26, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $112.59B$110.06B | +2.3% |
| Cost of Revenue | $56.78B$51.45B | +10.4% |
| Gross Profit | $55.80B$58.61B | −4.8% |
| R&D Expenses | $5.20B$4.60B | +13.0% |
| Operating Expenses | $129.30B$126.38B | +2.3% |
| Operating Income | $22.89B$20.65B | +10.8% |
| Interest Expense | $12.51B$14.53B | −13.9% |
| Net Income | $13.64B$14.15B | −3.6% |
| EPS (Basic) | $10.32$9.92 | +4.0% |
| EPS (Diluted) | $10.32$9.84 | +4.9% |
| Shares Outstanding (Basic) | 1.32B1.32B | −0.6% |
| Shares Outstanding (Diluted) | 1.32B— | — |
05—Questions
Frequently Asked Questions
Did GE's core earnings actually grow in 2012, or was growth driven by one-time items?
Continuing earnings grew 3% to $14.7 billion, and operating earnings (which exclude non-operating pension costs) grew 8% to $16.1 billion. The 2012 results were not inflated by the 2011 NBCU gain, which was a $3.7 billion pre-tax item that was non-recurring. Investors should note that the lower 2012 effective tax rate of 14.4% (versus 28.3% in 2011) also helped comparisons, and net earnings declined because of discontinued-operation losses.
What are the main risks to GE's future earnings and cash flow?
Key risks include the expiration of the U.S. deferral of tax on active financial services income after 2013, which management says would significantly raise its effective tax rate after 2014; continued WMC mortgage repurchase litigation involving roughly $3.8 billion of pending loan claims; European sovereign and credit exposure at GECC of $88.9 billion in financing receivables; and the GE Pension Plan being underfunded by $13.3 billion.
Is GE Capital still a large part of the company, and how is it changing?
GE Capital still contributes about 31% of consolidated revenues and roughly 28% of total segment profit. Management is deliberately shrinking it, reducing ending net investment by about $94 billion since 2009 through dispositions, run-off and a focus on selective financial services. Its total assets fell from $584.5 billion to $539.2 billion in 2012, and it is being considered for designation as a nonbank systemically important financial institution.
How strong is GE's balance sheet and capacity to return cash to shareholders?
GE had $77.4 billion of consolidated cash at year-end 2012, with about $62 billion held at GECC. Approximately $53.2 billion of cash was held outside the U.S., of which $14.4 billion was indefinitely reinvested. Total shareowners' equity was $123.0 billion. The company paid $7.4 billion in dividends in 2012, repurchased $5.2 billion of stock under the program, and raised the buyback authorization to $35 billion through 2015.
06—Continue