01—Abstract
Summary
Summary of the 10-K filed February 26, 2019. Cited figures are marked; the original filing is the authoritative source.
General Electric (GE) in its 2018 10-K filing reported significant strategic shifts and financial challenges.
The company faced a substantial net loss of $22.8 billiona, largely driven by a $22.1 billion goodwill impairment charge, primarily in its Power segment, reflecting ongoing difficulties in that market. Despite a slight increase in consolidated revenues to $121.6 billion, driven by its Aviation and Oil & Gas segments, GE Industrial organic revenues saw minimal growth. The company announced significant portfolio actions, including agreements to sell its BioPharma business for $21.4 billion and the completion of its Transportation segment merger with Wabtec.
These divestitures are part of a broader strategy to streamline operations and reduce leverage. The company also reduced its quarterly dividend to $0.01b per share, retaining approximately $4 billion annually. GE's new CEO, H.
Lawrence Culp Jr., who took over in October 2018, is focused on improving operational execution and cost reduction across the company, particularly within the struggling Power segment. The financial results highlight the ongoing transformation efforts and the challenges faced in certain core industrial businesses.
02—Key points
Key Highlights
- GE reported a significant net loss of $22.8 billion for the year ended December 31, 2018, largely impacted by a $22.1 billion goodwill impairment charge in the Power segment.
- Consolidated revenues increased by 3% to $121.6 billion, primarily driven by growth in Aviation and Oil & Gas segments, though industrial segment organic revenues saw only a slight increase.
- The company is actively pursuing portfolio transformations, with agreements announced for the sale of its BioPharma business for $21.4 billion and the completion of the Transportation segment merger with Wabtec.
- GE significantly reduced its quarterly dividend to $0.01 per share, a move intended to retain approximately $4 billion in cash annually.
- The Power segment continues to face significant challenges due to industry overcapacity, project execution issues, and market factors, leading to a reported segment loss of $0.8 billion.
- The Aviation segment demonstrated strong performance with a 13% revenue increase and a 20% profit increase, driven by strong commercial engine demand and services.
- GE Capital's financial services segment continued its deleveraging efforts, with total borrowings decreasing and no common dividends paid to GE in 2018.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2018, General Electric Co lost $0.23.
- Revenue$97.01B100.0%
- Cost of revenue−$72.82B75.1%
- Gross profit$24.19B24.9%
- Operating costs−$45.19B46.6%
- Operating income−$20.99B21.6%
- Interest, other & tax−$1.36B1.4%
- Net income−$22.36B23.0%
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 26, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $97.01B$99.28B | −2.3% |
| Cost of Revenue | $72.82B$64.33B | +13.2% |
| Gross Profit | $24.19B$34.95B | −30.8% |
| R&D Expenses | $3.42B$5.50B | −38.0% |
| SG&A Expenses | $14.64B$14.26B | +2.7% |
| Operating Expenses | $120.32B$112.71B | +6.8% |
| Operating Income | -$20.99B-$8.25B | −154.3% |
| Net Income | -$22.36B-$8.48B | −163.5% |
| EPS (Basic) | $-20.96$-8.24 | −154.4% |
| EPS (Diluted) | $-20.96$-8.24 | −154.4% |
| Shares Outstanding (Basic) | 1.09B1.09B | 0.0% |
| Shares Outstanding (Diluted) | 1.09B1.09B | 0.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of GE's significant net loss in 2018?
The primary driver of GE's substantial net loss of $22.8 billion was a non-cash goodwill impairment charge of $22.1 billion, predominantly related to its Power segment, reflecting the challenging market conditions and revised future earnings expectations for that business.
What are the key strategic initiatives GE is undertaking?
GE is focused on significant portfolio transformation and operational improvements. Key initiatives include divesting non-core businesses, such as the planned sale of its BioPharma business and the merger of its Transportation segment with Wabtec, to streamline operations, reduce debt, and enhance financial flexibility.
How did GE's major business segments perform in 2018?
The Aviation segment showed strong performance with increased revenues and profits. The Power segment continued to struggle with significant losses and impairments. Healthcare reported growth in revenues and profits, while Oil & Gas saw revenue growth but faced market volatility. Renewable Energy revenues grew, but profits declined due to pricing pressure and consolidation challenges.
What is the company's financial position regarding debt and liquidity?
GE is actively working to reduce its leverage. Total consolidated borrowings decreased significantly in 2018. The company is utilizing proceeds from divestitures and focusing on cash flow generation from its industrial businesses to meet its debt obligations. However, credit rating downgrades in late 2018 impacted its commercial paper borrowing capacity, leading to increased reliance on revolving credit facilities.
06—Continue