10-KPeriod: FY2019

GENERAL ELECTRIC CO Annual Report, Year Ended Dec 31, 2019

Filed February 24, 2020For Securities:GE

Summary

General Electric Company (GE) in 2019 continued its strategic transformation, focusing on streamlining its portfolio and improving operational execution. The company reported consolidated revenues of $95.2 billion, a slight decrease from the previous year, primarily due to declines in GE Capital revenues and corporate items, while its industrial segments showed growth. Significant portfolio actions included the spin-off of the Transportation segment and the agreement to sell the BioPharma business within Healthcare. Despite ongoing challenges in the Power segment, GE's Aviation and Healthcare segments demonstrated solid performance, driving industrial segment organic revenue growth. Financially, GE reported a net loss of $5.4 billion attributable to common shareholders, impacted by significant charges including an $8.7 billion loss on the deconsolidation of Baker Hughes and a $1.0 billion pre-tax charge related to an insurance premium deficiency. However, continuing operations saw a reduction in losses compared to the prior year, largely due to lower goodwill impairment charges. GE also focused on strengthening its balance sheet through debt reduction, ending the year with $47.9 billion in GE Industrial net debt.

Financial Statements
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Key Highlights

  • 1Consolidated revenues were $95.2 billion, a 2% decrease year-over-year, primarily driven by GE Capital and corporate items. Industrial segment organic revenues increased by 5.5%.
  • 2GE Industrial segment profit increased by 8% year-over-year, with positive contributions from Power, Healthcare, and Aviation segments, partially offset by Renewable Energy.
  • 3Significant portfolio actions included the spin-off of the Transportation segment to Wabtec (generating $6.2 billion in proceeds) and the agreement to sell the BioPharma business for approximately $21.4 billion, expected to close in Q1 2020.
  • 4The Aviation segment continued to be a strong performer, with revenues up 8% driven by commercial aftermarket earnings and long-term service agreements. However, the grounding of the Boeing 737 MAX impacted GE's cash flow from operating activities by approximately $1.4 billion.
  • 5The Power segment experienced a 16% revenue decline and a segment profit improvement of $1.2 billion, driven by cost productivity and absence of significant 2018 charges, but orders decreased significantly.
  • 6GE reported a net loss attributable to common shareholders of $5.4 billion. Continuing operations loss attributable to common shareholders was $44 million, an improvement from a loss of $21.4 billion in the prior year, largely due to a significant reduction in goodwill impairment charges.
  • 7GE generated $2.3 billion in GE Industrial free cash flow for the year, a decrease from $4.3 billion in the prior year, primarily due to higher working capital usage.

Frequently Asked Questions

GE's consolidated revenues in 2019 were $95.2 billion, a 2% decrease from 2018. The decrease was primarily driven by lower Corporate revenues ($1.0 billion) due to the sale of the Current business and lower GE Capital revenues ($0.8 billion). However, Industrial segment organic revenues increased by 5.5%, led by growth in Aviation, Renewable Energy, and Healthcare, partially offset by the Power segment.

GE continued its portfolio transformation. Key actions included the spin-off and merger of its Transportation segment with Wabtec Corporation, generating $6.2 billion in total proceeds. Additionally, GE announced an agreement to sell its BioPharma business within the Healthcare segment to Danaher Corporation for approximately $21.4 billion, with the sale expected to close in the first quarter of 2020.

The temporary grounding of the Boeing 737 MAX fleet adversely affected GE's cash flow from operating activities (CFOA) by approximately $1.4 billion for the year ended December 31, 2019. This was primarily due to an increase in receivables, net of progress collections, and lower collections on new purchase orders. However, within the Aviation segment, these impacts were more than offset by higher commercial aftermarket earnings, long-term service agreement billings, and other cash receipts.

In 2019, GE recognized non-cash pre-tax impairment charges of $1.5 billion related to goodwill in its Renewable Energy segment (Grid Solutions equipment and services and Hydro reporting units). These charges were lower compared to the $22.1 billion in goodwill impairment charges recorded in 2018, contributing to the improved net earnings from continuing operations.

GE reported consolidated total borrowings of $90.9 billion at December 31, 2019, down from $103.6 billion in the prior year, reflecting debt reduction efforts including a tender offer to repurchase $4.8 billion of GE senior unsecured debt. GE Industrial net debt was $47.9 billion. The company maintained a strong focus on liquidity, with $17.6 billion in GE cash and cash equivalents and $18.8 billion in GE Capital cash and cash equivalents at year-end 2019.