10-QPeriod: Q1 FY2001

GENERAL ELECTRIC CO Quarterly Report for Q1 Ended Mar 31, 2001

Filed April 19, 2001For Securities:GE

Summary

General Electric Company (GE) reported a solid first quarter for 2001, demonstrating resilience despite a slowing U.S. economy. Total revenues increased by 2% to a record $30.5 billion, driven by an 11% rise in industrial business revenues, particularly in long-cycle sectors like Power Systems, Medical Systems, and Aircraft Engines. This segment's operating profit saw a double-digit increase, signaling operational strength and the benefits of initiatives like Six Sigma and digitization. GE Capital Services (GECS) also delivered strong earnings growth of 16%, buoyed by its diverse global operations in consumer services, equipment management, and specialty insurance. While GECS's total revenues saw a slight decline due to strategic exits from certain businesses, its core performance remains robust. The company also announced a significant divestiture of GE American Communications Inc. (Americom) expected to generate approximately $1 billion in after-tax gain, further optimizing its portfolio. The adoption of new accounting standards (SFAS No. 133 and EITF 99-20) resulted in non-cash charges but are not expected to materially impact future results.

Key Highlights

  • 1Consolidated revenues reached a record $30.5 billion, up 2% year-over-year.
  • 2GE's industrial businesses showed strong performance with an 11% revenue increase and double-digit operating profit growth, led by Power Systems and Technical Products & Services.
  • 3GE Capital Services (GECS) earnings grew 16% year-over-year, driven by consumer services, equipment management, and specialty insurance.
  • 4Diluted earnings per share (excluding accounting changes) were $0.30, a 15% increase from the prior year's $0.26.
  • 5The company announced plans to sell GE American Communications Inc. (Americom) for approximately $5 billion, expected to result in a $1 billion after-tax gain.
  • 6Operating cash flow for GE increased by 18% to $3.1 billion.
  • 7Adoption of SFAS No. 133 (Derivative Instruments) and EITF 99-20 resulted in non-cash charges of $444 million in the quarter, reducing reported net earnings.

Frequently Asked Questions

GE adopted SFAS No. 133 (Accounting for Derivative Instruments and Hedging Activities) and EITF 99-20 (impairment accounting for retained beneficial interests) effective January 1, 2001. The adoption of SFAS No. 133 resulted in a cumulative effect of change in accounting principle of $(444) million, reducing net earnings by $0.04 per share. The adoption of EITF 99-20 resulted in an additional reduction of net earnings by $120 million ($0.01 per share). These were non-cash charges and are not expected to materially affect future results.

GE's industrial segments showed mixed performance. Long-cycle businesses like Power Systems (revenue up 33%, profit more than doubled) and Aircraft Engines (revenue up 12%, profit up 7%) performed strongly. However, short-cycle businesses were affected by the U.S. economic slowdown, with Appliances revenues down 5% and Industrial Products and Systems operating profit down 18% due to lower selling prices. NBC revenues declined 3% due to advertising market softness.

The proposed sale of GE American Communications Inc. (Americom) is a strategic move to streamline GE Capital Services' portfolio. The transaction, valued at approximately $5 billion, is expected to generate an after-tax gain of about $1 billion. GE Capital Services will retain a 25% economic interest in a newly formed holding company combining Americom and SES ASTRA's operations, allowing for continued participation in the satellite services sector.

GE generated $3.1 billion in operating cash flow, an 18% increase from the prior year. This robust cash generation supported $1.6 billion in dividends paid to shareholders and $0.9 billion in share repurchases under its ongoing program. GE's consolidated cash and equivalents remained stable at $8.2 billion, with GE's standalone cash and equivalents increasing to $7.5 billion.