10-KPeriod: FY2015

GENERAL ELECTRIC CO Annual Report, Year Ended Feb 27, 2015

Filed February 27, 2015For Securities:GE

Summary

General Electric Company (GE) reported its fiscal year 2014 results, showcasing a diversified business model with a significant industrial and financial services segment. The company experienced an increase in consolidated revenues and a slight uptick in net earnings attributable to common shareowners. Key strategic developments during the year included progress on the planned exit from its North American Retail Finance business, Synchrony Financial, and significant acquisitions and divestitures across various industrial segments, such as the Alstom acquisition, the sale of its Appliances business, and the acquisition of Milestone Aviation Group. The company continued its focus on returning capital to shareholders through dividends and share repurchases, while also managing its financial services segment with a goal to reduce its End Net Investment (ENI). The industrial segments, particularly Aviation and Oil & Gas, demonstrated strong revenue and profit growth, driven by increased volume and productivity. However, the company noted challenges in certain sectors due to macroeconomic factors and currency fluctuations. GE Capital continued its strategic repositioning, with a target to reduce its ENI, which is expected to impact short-term earnings but improve long-term performance. The report also highlights the company's commitment to risk management and compliance across its global operations.

Financial Highlights

48 data points
Beta

Revenue

$117.39B

49.0% Gross Margin

Net Income

-$6.13B

-5.2% Net Margin

EPS (Diluted)

$-4.88

Total Assets

$493.07B

Cash & Equivalents

$70.48B

Free Cash Flow

$12.58B

Financial Statements
Beta
Revenue$117.39B
Cost of Revenue$59.91B
Gross Profit$57.48B
R&D Expenses$5.28B
SG&A Expenses$17.83B
Operating Expenses$109.20B
Operating Income$1.66B
Net Income-$6.13B
EPS (Basic)$-4.96
EPS (Diluted)$-4.88
Shares Outstanding (Basic)1.24B
Shares Outstanding (Diluted)1.25B

Key Highlights

  • 1Consolidated revenues increased by 2% to $148.6 billion, driven by a 6% increase in industrial segment revenues.
  • 2Net earnings attributable to common shareowners were $15.2 billion, a 16.7% increase from the prior year.
  • 3Industrial segment profit increased by 10% to $17.8 billion, with key growth drivers in Aviation, Oil & Gas, and Power & Water.
  • 4GE Capital's revenues decreased by 3% to $42.7 billion, reflecting ongoing dispositions and organic revenue declines, though segment profit decreased by 12% due to dispositions and core decreases.
  • 5The company returned $10.8 billion to shareholders in 2014 through dividends ($8.9 billion) and stock buybacks ($1.9 billion).
  • 6Significant strategic initiatives included progress on the Synchrony Financial IPO and staged exit, the agreement to sell the Appliances business to Electrolux, and the proposed acquisition of Alstom's Thermal, Renewables, and Grid businesses.
  • 7GE's strategy to achieve 75% of its operating earnings from its industrial businesses by 2016 is progressing, with a current target for 2016 goals.
  • 8The company faced challenges from foreign currency volatility, with a negative impact of $0.9 billion on consolidated revenues due to a stronger U.S. dollar.

Frequently Asked Questions

In 2014, GE focused on several key strategic initiatives. These included advancing its goal of deriving 75% of operating earnings from industrial businesses by 2016, making progress on the staged exit of its North American Retail Finance business (Synchrony Financial), and actively managing GE Capital's End Net Investment (ENI) target. Significant M&A activity involved the agreement to sell its Appliances business to Electrolux and the proposed acquisition of Alstom's Thermal, Renewables, and Grid businesses.

GE Capital's revenues decreased by 3% to $42.7 billion in 2014, impacted by dispositions and organic revenue declines primarily due to lower ENI. Segment profit also decreased by 12% due to dispositions, core decreases, and lower gains, partially offset by lower impairments and provisions for losses. GE Capital is actively pursuing a strategy to reduce its ENI, targeting a balance below $300 billion, by exiting non-strategic or underperforming businesses. While this may reduce near-term earnings, the company believes it will improve long-term performance by concentrating on core businesses, reducing liquidity risk, and strengthening capital ratios.

GE's industrial segments showed strong performance in 2014. Total industrial segment revenues increased by 6% to $109.9 billion, with an organic revenue growth of 7%. Industrial segment profit grew by 10% to $17.8 billion. Significant growth was noted in Aviation (up 9% in revenue and 14% in profit) and Oil & Gas (up 10% in revenue and 19% in profit), driven by higher volumes, productivity gains, and acquisitions. Power & Water also saw revenue growth of 11%, though profit growth was more modest at 7%.

GE's pension plans faced challenges in 2014, with the GE Pension Plan being underfunded by $15.8 billion on a GAAP basis, a significant increase from the prior year. This was primarily due to lower discount rates and new mortality assumptions. The company's total postretirement benefit plans' costs decreased in 2014 primarily due to higher discount rates and lower loss amortization for pension plans. However, GE expects costs to increase in 2015 due to lower discount rates and updated mortality assumptions. The company did not make contributions to the GE Pension Plan in 2014 or 2013, and ERISA minimum funding requirements are not expected to necessitate contributions in 2015.