10-QPeriod: Q1 FY2015

GENERAL ELECTRIC CO Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 4, 2015For Securities:GE

Summary

General Electric (GE) reported a significant shift in its financial strategy during the first quarter of 2015, marked by the announcement of its plan to "exit" most of its financial services business, GE Capital. This strategic pivot aims to refocus the company on its core industrial operations. The company incurred substantial charges in Q1 2015 related to this exit plan, impacting overall profitability. Despite a notable decline in revenues and earnings, particularly within the GE Capital segment, the industrial segments showed resilience, with Power & Water, Aviation, Healthcare, Transportation, and Appliances & Lighting all reporting increased segment profit or revenue, driven by factors like higher volume, improved productivity, and favorable business mix. Investors should note the substantial charges ($16.1 billion after-tax) recognized in Q1 2015 stemming from the GE Capital Exit Plan, which significantly weighed down net earnings. While the industrial businesses demonstrated positive trends in profitability and some revenue growth, the overarching story of this quarter is the aggressive deleveraging and restructuring of GE Capital. The company also provided a full guarantee for GE Capital's debt, a move designed to reassure bondholders during the transition.

Financial Highlights

44 data points
Beta

Revenue

$2.87B

192.4% Gross Margin

Net Income

-$13.57B

-473.6% Net Margin

EPS (Diluted)

$-10.80

Total Assets

$617.63B

Free Cash Flow

$4.59B

Financial Statements
Beta
Revenue$2.87B
Cost of Revenue$13.52B
Gross Profit$5.51B
SG&A Expenses$4.42B
Operating Expenses$24.62B
Operating Income-$5.72B
Net Income-$13.57B
EPS (Basic)$-10.80
EPS (Diluted)$-10.80
Shares Outstanding (Basic)1.26B
Shares Outstanding (Diluted)1.26B

Key Highlights

  • 1Announced a significant plan to reduce the size of GE Capital by selling most of its assets over the next 24 months, refocusing on industrial businesses.
  • 2Incurred $16.1 billion in after-tax charges in Q1 2015 related to the GE Capital Exit Plan, significantly impacting reported net earnings.
  • 3Consolidated revenues decreased by 12% to $29.4 billion, primarily due to GE Capital exit impacts and foreign exchange headwinds.
  • 4Industrial segment revenues decreased by 1% to $24.4 billion, but industrial segment profit increased by 9% to $3.6 billion, driven by strong performance in Aviation and Appliances & Lighting.
  • 5GE returned $2.4 billion to shareholders through dividends and stock buybacks in the first quarter.
  • 6GE's credit rating outlook was stable, but Moody's downgraded its senior unsecured debt rating to A1 from Aa3 following the GE Capital Exit Plan announcement.

Frequently Asked Questions

General Electric announced a plan to significantly reduce the size of its financial services business, GE Capital, by selling most of its assets over the next 24 months. The company intends to refocus on its core industrial businesses.

The GE Capital Exit Plan resulted in substantial after-tax charges of $16.1 billion in Q1 2015. These charges included tax expenses related to foreign earnings repatriation, write-offs of deferred tax assets, and asset impairments, which led to a significant net loss for the quarter.

The industrial segments demonstrated resilience. While consolidated revenues declined, industrial segment revenues saw a modest 1% decrease, and industrial segment profit increased by 9% year-over-year. Segments like Aviation and Appliances & Lighting showed strong profit growth, indicating a healthier performance in the core industrial operations.

GE provided a full and unconditional guarantee for approximately $210 billion of GE Capital's debt as of April 10, 2015, as part of the exit plan. This action was taken to ensure compliance with debt covenants and to reassure debt holders during the transition. The company's borrowings decreased by $13.0 billion in the quarter.