10-QPeriod: Q3 FY2018

GENERAL ELECTRIC CO Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 30, 2018For Securities:GE

Summary

General Electric (GE) reported a significant net loss of $22.8 billion for the third quarter of 2018, primarily driven by a massive $22.0 billion non-cash goodwill impairment charge related to its Power segment. Excluding this impairment and other special items, adjusted earnings per share was $0.14. Consolidated revenues decreased by 4% to $29.6 billion, largely due to the divestiture of businesses like Water and Industrial Solutions. Despite the significant loss, GE announced a drastic reduction in its quarterly dividend to $0.01 per share, effective December 2018, which is expected to save approximately $3.9 billion annually. The company is undergoing a strategic transformation, focusing on its Power, Renewable Energy, and Aviation businesses, with plans to separate GE Healthcare and divest its stake in Baker Hughes. The company also saw a substantial increase in GE Pension Plan contributions, impacting cash flows from operations.

Financial Highlights

46 data points
Beta

Revenue

$23.39B

23.7% Gross Margin

Net Income

-$22.77B

-97.3% Net Margin

EPS (Diluted)

$-20.96

Total Assets

$311.69B

Cash & Equivalents

$22.05B

Free Cash Flow

-$3.92B

Financial Statements
Beta
Revenue$23.39B
Cost of Revenue$17.85B
Gross Profit$5.54B
SG&A Expenses$4.10B
Operating Expenses$46.63B
Operating Income-$21.69B
Net Income-$22.77B
EPS (Basic)$-20.96
EPS (Diluted)$-20.96
Shares Outstanding (Basic)1.09B
Shares Outstanding (Diluted)1.09B

Key Highlights

  • 1Reported a net loss of $22.8 billion for the quarter, significantly impacted by a $22.0 billion goodwill impairment charge in the Power segment.
  • 2Consolidated revenues decreased 4% year-over-year to $29.6 billion, mainly due to business dispositions.
  • 3Announced a significant reduction in quarterly dividend from $0.12 to $0.01 per share, effective December 2018, aiming to retain approximately $3.9 billion annually.
  • 4Industrial segment organic revenues showed a slight increase of 1% for the nine months, driven by Aviation and Oil & Gas, while Power segment revenues continued to decline.
  • 5GE CFOA for the nine months was negative $4.1 billion, impacted by $6.0 billion in GE Pension Plan contributions and no dividends from GE Capital.
  • 6GE announced leadership changes, with H. Lawrence Culp, Jr. named Chairman and CEO, effective September 30, 2018.
  • 7The company is executing a strategic portfolio review, planning separations and divestitures of key businesses like GE Healthcare and Baker Hughes.

Frequently Asked Questions

The primary driver of the significant net loss of $22.8 billion is a $22.0 billion non-cash goodwill impairment charge recorded in the third quarter of 2018. This impairment is related to the company's Power Generation and Grid Solutions businesses within the Power segment, reflecting the challenging market conditions and downward revisions in earnings and cash flow forecasts for these businesses.

General Electric announced a substantial reduction in its quarterly dividend from $0.12 to $0.01 per share, effective December 2018. This move is intended to preserve cash, allowing the company to retain approximately $3.9 billion annually, which will support deleveraging and strategic priorities.

GE is actively pursuing a strategic portfolio transformation. Key announced actions include plans to separate GE Healthcare into a standalone company and to divest its equity ownership in Baker Hughes over the next two to three years. The company is also focusing on its core Power, Renewable Energy, and Aviation businesses.

The Power segment is significantly impacting GE's results negatively. Revenues declined substantially due to market challenges, including industry overcapacity and project execution issues. The segment also incurred the majority of the goodwill impairment charge, contributing significantly to the overall net loss.

GE's liquidity position remains a focus, with $13.9 billion in cash and cash equivalents at quarter-end. However, credit ratings from S&P were lowered, impacting short-term borrowing capacity and potentially increasing funding costs. The company is relying on operational cash flows and planned dispositions to manage liquidity. GE Capital's role is also being significantly reduced as part of the strategic shift.