10-QPeriod: Q3 FY2008

GENERAL ELECTRIC CO Quarterly Report for Q3 Ended Sep 30, 2008

Filed October 30, 2008For Securities:GE

Summary

General Electric Company (GE) reported a decrease in earnings for the third quarter and first nine months of 2008 compared to the prior year, reflecting challenging economic conditions. Consolidated net earnings for the third quarter decreased by 22% to $4.312 billion, with diluted earnings per share (EPS) falling 20% to $0.43. For the nine-month period, net earnings declined 12% to $13.688 billion, and diluted EPS decreased 9% to $1.37. Despite the earnings decline, consolidated revenues showed a 11% increase in the third quarter to $47.2 billion, driven by organic growth, a weaker U.S. dollar, and acquisitions. The industrial businesses, in particular, saw a 17% revenue increase. However, the financial services segment (GECS) experienced organic revenue declines. The company is actively managing its financial services business, including reducing the GECS dividend to GE and taking steps to strengthen its liquidity in response to volatile credit markets.

Financial Highlights

23 data points
Beta

Revenue

$47.23B

70.0% Gross Margin

Net Income

$4.31B

9.1% Net Margin

EPS (Diluted)

$3.44

Cash & Equivalents

$16.30B

Free Cash Flow

$6.79B

Financial Statements
Beta
Revenue$47.23B
Cost of Revenue$14.18B
Gross Profit$33.05B
Operating Expenses$10.54B
Operating Income$14.22B
Net Income$4.31B
EPS (Basic)$3.44
EPS (Diluted)$3.44

Key Highlights

  • 1Consolidated net earnings for Q3 2008 decreased by 22% to $4.312 billion compared to $5.559 billion in Q3 2007.
  • 2Diluted EPS for Q3 2008 decreased by 20% to $0.43 compared to $0.54 in Q3 2007.
  • 3Consolidated revenues increased by 11% to $47.2 billion in Q3 2008, driven by organic growth and a weaker U.S. dollar.
  • 4Industrial sales saw a significant increase of 17% to $28.9 billion in Q3 2008.
  • 5Financial services (GECS) revenues increased by 2% to $18.4 billion, but experienced organic revenue declines.
  • 6The company is implementing measures to strengthen liquidity and capital in response to volatile credit markets, including reducing the GECS dividend to GE and managing its commercial paper borrowings.
  • 7Significant acquisitions in the first nine months of 2008 included Merrill Lynch Capital, CitiCapital, and Bank BPH.

Frequently Asked Questions

The decrease in net earnings appears to be influenced by challenging economic conditions and volatility in the credit markets, which impacted the financial services segment's performance. While consolidated revenues grew, the financial services segment experienced organic revenue declines, and there were also losses from discontinued operations.

GE is taking several steps to strengthen its liquidity and capital position. These include reducing the GECS dividend to GE, suspending share repurchases, targeting a reduction in GECS commercial paper borrowings, and initiating a strategic resizing of the company to achieve a 60%/40% industrial-financial services earnings split. The company is also utilizing government liquidity facilities like the Federal Reserve's Commercial Paper Funding Facility.

In Q3 2008, Technology Infrastructure and Energy Infrastructure segments showed revenue growth. Capital Finance revenues increased slightly but saw a significant decline in segment profit. NBC Universal's revenues and profit increased, largely due to the Olympics broadcasts. The Consumer & Industrial segment experienced a decline in both revenues and segment profit.

Yes, there are several class action lawsuits filed by shareholders alleging false and misleading statements regarding GE's financial performance, guidance, and liquidity. The company states it intends to defend itself vigorously.