10-QPeriod: Q2 FY2012

GENERAL ELECTRIC CO Quarterly Report for Q2 Ended Jun 30, 2012

Filed July 30, 2012For Securities:GE

Summary

General Electric (GE) reported a mixed financial performance for the second quarter and first half of 2012. Consolidated revenues saw a modest increase year-over-year, driven by strong performance in the industrial segments, particularly Energy Infrastructure and Transportation. However, this was partially offset by a decline in Financial Services revenues due to lower GE Capital Ending Net Investment and a stronger U.S. dollar. Net earnings attributable to common shareholders experienced a year-over-year decrease in both the second quarter and the first half of the year, impacted by losses from discontinued operations and a shift in income recognition from the prior year's NBC Universal sale. Despite the decline in net earnings, the company highlighted operational improvements and growth in its industrial segments. GE Capital continued its strategy of reducing its asset base, leading to a decrease in financing receivables and borrowings. The company also made progress on its liquidity management and continued its share repurchase program. Investors should monitor the ongoing performance of GE Capital, the impact of discontinued operations, and the company's ability to translate industrial segment strength into overall earnings growth.

Financial Highlights

43 data points
Beta

Revenue

$36.40B

15.9% Gross Margin

Net Income

$3.10B

8.5% Net Margin

EPS (Diluted)

$2.32

Total Assets

$694.12B

Cash & Equivalents

$74.30B

Free Cash Flow

$3.74B

Financial Statements
Beta
Revenue$36.40B
Cost of Revenue$14.80B
Gross Profit$5.80B
Operating Expenses$32.21B
Operating Income$5.87B
Net Income$3.10B
EPS (Basic)$2.32
EPS (Diluted)$2.32

Key Highlights

  • 1Consolidated revenues increased by 2% in Q2 2012 to $36.5 billion, driven by a 9% rise in industrial sales to $25.1 billion.
  • 2Earnings from continuing operations attributable to the Company increased slightly to $3.658 billion in Q2 2012 from $3.570 billion in Q2 2011.
  • 3Net earnings attributable to GE common shareowners decreased by 16% to $3.105 billion in Q2 2012 compared to $3.689 billion in Q2 2011.
  • 4GE Capital revenues decreased by 8% to $11.5 billion in Q2 2012, reflecting lower GE Capital Ending Net Investment and a stronger U.S. dollar.
  • 5Discontinued operations resulted in a net loss of $0.6 billion in Q2 2012, primarily from GE Money Japan and WMC.
  • 6The company's cash and equivalents stood at $74.3 billion at June 30, 2012, reflecting a decrease of $10.2 billion during the first six months of the year.
  • 7Moody's downgraded GE's senior unsecured debt rating to Aa3 and GE Capital's to A1 in April 2012, though the outlook remained stable.

Frequently Asked Questions

GE Capital revenues decreased primarily due to a lower GE Capital Ending Net Investment (ENI), the stronger U.S. dollar, and lower gains. Dispositions and organic revenue declines also contributed to the decrease.

The industrial segments showed strong performance, with Energy Infrastructure and Transportation revenues increasing significantly due to higher volumes and acquisitions. The company expects continued growth in these areas, driven by factors like increased equipment sales and global mining business growth.

Discontinued operations had a negative impact on earnings in Q2 2012, resulting in a net loss of $0.6 billion. This was mainly due to incremental reserves for excess interest claims related to GE Money Japan and WMC's representation and warranty obligations. The company is actively working to resolve these discontinued operations.

GE maintains a strong liquidity position with $74.3 billion in cash and equivalents at June 30, 2012. GE Capital is reducing its asset base and managing its funding through a diversified mix of debt, commercial paper, deposits, and securitizations. The company anticipates meeting its debt maturities through existing cash, new debt issuances, and collections.