10-QPeriod: Q1 FY2009

GENERAL ELECTRIC CO Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 1, 2009For Securities:GE

Summary

General Electric (GE) reported a decrease in net earnings attributable to the Company for the first quarter of 2009, down 36% to $2.736 billion from $4.304 billion in the prior year. This decline was primarily driven by a significant drop in revenues from its Capital Finance segment, which fell 23% to $13.1 billion, reflecting the challenging economic environment and organic revenue declines. While industrial segments showed mixed performance, with Energy Infrastructure increasing revenues and segment profit, Technology Infrastructure revenues were flat. The company is actively managing its liquidity and capital structure, having contributed $9.5 billion to GE Capital Services (GECS) and reduced its quarterly dividend by 68% to conserve cash. The financial services segment, GECS, experienced a substantial revenue decrease of 20% to $14.4 billion, impacted by increased provision for losses on financing receivables and organic revenue declines. Despite these challenges, GE emphasized its strong liquidity position with $46.8 billion in cash and equivalents and substantial credit lines. The company also highlighted its ongoing efforts to reduce asset levels within GECS and its commitment to managing funding costs effectively amidst market volatility.

Financial Highlights

23 data points
Beta

Revenue

$14.28B

42.1% Gross Margin

Net Income

$2.83B

19.8% Net Margin

EPS (Diluted)

$2.08

Cash & Equivalents

$46.83B

Free Cash Flow

-$2.76B

Financial Statements
Beta
Revenue$14.28B
Cost of Revenue$11.43B
Gross Profit$6.01B
Operating Expenses$9.34B
Operating Income$978.00M
Net Income$2.83B
EPS (Basic)$2.08
EPS (Diluted)$2.08

Key Highlights

  • 1Net earnings attributable to GE common shareowners decreased 36% to $2.736 billion compared to $4.304 billion in Q1 2008.
  • 2Consolidated revenues decreased 9% to $38.4 billion, with Financial Services revenues declining 20% to $14.4 billion.
  • 3Capital Finance segment profit decreased 58% to $1.119 billion, driven by a 23% revenue drop and increased provisions for losses.
  • 4Energy Infrastructure segment profit increased 19% to $1.273 billion on higher volume and prices.
  • 5GE's cash and equivalents stood at $46.8 billion as of March 31, 2009.
  • 6The company reduced its quarterly common stock dividend by 68% to $0.10 per share, effective in Q3 2009.
  • 7GE provided a $9.5 billion capital contribution to GECS to improve tangible capital and reduce leverage.

Frequently Asked Questions

The primary driver of the decrease in earnings was the significant decline in revenues and profitability from GE Capital Services (GECS), particularly the Capital Finance segment, due to the challenging economic environment, higher provisions for losses on financing receivables, and organic revenue declines.

GE is actively managing its liquidity by reducing its quarterly dividend, contributing capital to GECS, reducing GECS commercial paper borrowings, utilizing government liquidity programs (CPFF and TLGP), maintaining committed credit lines, and managing collections versus originations to ensure sufficient funding.

The Capital Finance segment continues to face challenges due to the weakened economic environment, leading to increased delinquencies and nonearning receivables. While the company is tightening underwriting standards and focusing on collection effectiveness, it expects conditions to remain difficult, potentially resulting in higher provisions for loan losses.

While the company recognized unrealized losses on investment securities, primarily debt securities including RMBS and CMBS, it has not recognized significant other-than-temporary impairment losses in the first quarter of 2009. The company reviews its investment securities for impairment regularly and intends to hold securities with unrealized losses until their amortized cost can be recovered.