01—Abstract
Summary
Summary of the 10-K filed February 24, 2017. Cited figures are marked; the original filing is the authoritative source.
General Electric Company (GE) reported its 2016 annual results, highlighting a significant transformation driven by portfolio adjustments, including the acquisition of Alstom and the divestiture of its Appliances business.
The company continued its GE Capital Exit Plan, substantially completing the dispositions of its financial services businesses, which led to a significant reduction in GE Capital's total assets and a substantial decrease in Financial Services losses. Industrial segments showed mixed performance, with Power and Aviation demonstrating revenue growth, while Oil & Gas experienced declines due to lower commodity prices. GE's strategic focus on becoming a simpler, more valuable digital industrial company was evident in its investments in digital capabilities and additive manufacturing, alongside efforts to improve operational efficiency and cost structures across its segments.
02—Key points
Key Highlights
- GE completed a significant portion of its GE Capital Exit Plan, reducing GE Capital's total assets by 63% from December 31, 2014, to December 31, 2016.
- The acquisition of Alstom's Thermal, Renewables, and Grid businesses in late 2015 contributed $13.0 billion in revenues in 2016, impacting the Power, Energy Connections & Lighting, and Renewable Energy segments.
- The company reported a substantial decrease in Financial Services losses, primarily due to the absence of charges related to the GE Capital Exit Plan in 2015.
- Industrial segment revenues saw an increase of 6%, driven by acquisitions and growth in Power, Renewable Energy, Aviation, and Healthcare, though partially offset by declines in Oil & Gas and Transportation.
- GE returned $30.5 billion to shareholders in 2016 through $8.5 billion in dividends and $22.0 billion in stock buybacks.
- The company announced strategic transactions in 2016, including the agreement to combine its Oil & Gas business with Baker Hughes and the planned acquisition of LM Wind Power.
- GE invested in digital capabilities by acquiring Meridium Inc., Arcam AB, Concept Laser GmbH, Bit Stew, and Wise.io, aiming to enhance its Industrial Internet vision and machine learning offerings.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, General Electric Co kept $0.06.
- Revenue$119.47B100.0%
- Cost of revenue−$62.44B52.3%
- Gross profit$57.03B47.7%
- Operating costs−$49.23B41.2%
- Operating income$7.80B6.5%
- Interest, other & tax−$297.0M0.2%
- Net income$7.50B6.3%
Where FY2016 revenue went
$119.47B- Cost of revenue: $62.44B, 52% of revenue
- Other operating costs: $26.04B, 22% of revenue
- SG&A: $17.76B, 15% of revenue
- Net income: $7.50B, 6.3% of revenue
- R&D: $5.44B, 4.6% of revenue
Kept 6.3% as net incomeNet income $7.50B · 6.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 24, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $119.47B$117.39B | +1.8% |
| Cost of Revenue | $62.44B$59.91B | +4.2% |
| Gross Profit | $57.03B$57.48B | −0.8% |
| R&D Expenses | $5.44B$5.28B | +3.0% |
| SG&A Expenses | $17.76B$17.83B | −0.4% |
| Operating Expenses | $116.58B$109.20B | +6.8% |
| Operating Income | $7.80B$1.66B | +368.9% |
| Net Income | $7.50B-$6.13B | +222.4% |
| EPS (Basic) | $6.08$-4.96 | +222.6% |
| EPS (Diluted) | $6.00$-4.88 | +223.0% |
| Shares Outstanding (Basic) | 1.13B1.24B | −9.2% |
| Shares Outstanding (Diluted) | 1.14B1.25B | −8.8% |
05—Questions
Frequently Asked Questions
What were the major strategic actions taken by GE in 2016?
In 2016, GE focused on portfolio transformation. Key actions included completing a significant portion of the GE Capital Exit Plan, divesting its Appliances business, and announcing major transactions such as the combination of its Oil & Gas business with Baker Hughes and the planned acquisition of LM Wind Power. The company also continued to invest in digital capabilities through several acquisitions.
How did the Alstom acquisition impact GE's financials in 2016?
The acquisition of Alstom's Thermal, Renewables, and Grid businesses, completed in late 2015, contributed $13.0 billion in revenues in 2016. While it significantly impacted the Power, Energy Connections & Lighting, and Renewable Energy segments, it also resulted in an operating loss of $0.3 billion for the Alstom business within GE's results, partly due to purchase accounting and acquisition-related charges.
What is the status of the GE Capital Exit Plan, and what is its financial impact?
GE substantially completed its GE Capital Exit Plan in 2016, having signed agreements for $197 billion of GE Capital's net investment (excluding liquidity), with $190 billion closed by year-end. This plan led to a significant reduction in GE Capital's total assets (down 63% from $500 billion in 2014 to $183 billion in 2016) and a substantial decrease in Financial Services losses, primarily due to the absence of 2015 charges related to the plan.
How did GE manage shareholder returns in 2016?
GE demonstrated a strong commitment to returning capital to shareholders in 2016, distributing a total of $30.5 billion. This was achieved through $8.5 billion in dividends paid to shareholders and $22.0 billion repurchased through share buyback programs, including significant amounts under accelerated share repurchase (ASR) agreements.
06—Continue