10-QPeriod: Q1 FY2020

GENERAL ELECTRIC CO Quarterly Report for Q1 Ended Mar 31, 2020

Filed April 29, 2020For Securities:GE

Summary

General Electric Company (GE) reported its first-quarter 2020 results amidst the unprecedented impact of the COVID-19 pandemic. The company experienced significant headwinds, particularly in its Aviation segment, due to reduced air travel and grounded fleets. Revenues for the quarter declined to $20.5 billion from $22.2 billion in the prior year. However, a substantial one-time gain from the sale of its BioPharma business within Healthcare boosted reported earnings significantly. Adjusted earnings per share (EPS) paint a clearer picture of ongoing operational performance, which was impacted by the pandemic's effects across various segments. Despite the challenges, GE ended the quarter with a robust cash position of $47.3 billion. The company has taken proactive cost-saving and cash preservation measures, targeting over $2 billion in operational cost out and over $3 billion in cash preservation actions. Furthermore, GE completed a significant debt offering and tender offer in April 2020 to extend debt maturities and enhance liquidity. The company remains focused on deleveraging its balance sheet, although it now expects to achieve prior targets over a longer period due to increased uncertainty.

Financial Highlights

46 data points
Beta

Revenue

$19.38B

25.6% Gross Margin

Net Income

$6.20B

32.0% Net Margin

EPS (Diluted)

$5.61

Total Assets

$262.02B

Cash & Equivalents

$47.29B

Free Cash Flow

-$737.00M

Financial Statements
Beta
Revenue$19.38B
Cost of Revenue$14.43B
Gross Profit$4.95B
R&D Expenses$723.00M
SG&A Expenses$3.06B
Operating Expenses$20.05B
Operating Income$6.22B
Net Income$6.20B
EPS (Basic)$5.62
EPS (Diluted)$5.61
Shares Outstanding (Basic)1.09B
Shares Outstanding (Diluted)1.09B

Key Highlights

  • 1COVID-19 pandemic significantly impacted operations, particularly in the Aviation segment, leading to reduced demand and revenue.
  • 2Sale of the BioPharma business for $21.1 billion resulted in a significant pre-tax gain of $12.3 billion, boosting reported net earnings.
  • 3Consolidated revenues decreased to $20.5 billion from $22.2 billion in Q1 2019.
  • 4GE maintained a strong liquidity position, ending the quarter with $47.3 billion in cash, cash equivalents, and restricted cash.
  • 5The company is implementing cost-reduction and cash preservation measures, targeting over $2 billion in operational cost out and over $3 billion in cash preservation actions.
  • 6Aviation segment faced significant challenges due to the global airline industry downturn, resulting in lower commercial engine and services demand.
  • 7The company is actively managing its debt profile, completing a $6 billion debt issuance and tender offer in April 2020 to extend maturities.

Frequently Asked Questions

The COVID-19 pandemic had a material adverse impact on GE's operations and financial performance. The most significant financial impact was felt in the Aviation segment due to reduced flight schedules, grounded aircraft, and decreased demand for engines and services. Other segments like Power and Renewable Energy also experienced disruptions in supply chains, project delays, and reduced demand. GE Capital's GECAS aircraft leasing business was also significantly affected.

The sale of the BioPharma business to Danaher Corporation on March 31, 2020, for $21.1 billion resulted in a substantial pre-tax gain of $12.3 billion ($11.1 billion after-tax). This significantly boosted GE's reported net earnings for the quarter, making it difficult to assess the underlying operational performance without looking at adjusted figures.

GE ended the first quarter of 2020 with a strong liquidity position, reporting $47.3 billion in consolidated cash, cash equivalents, and restricted cash, in addition to available credit lines. The company is implementing proactive cost and cash actions, targeting over $2 billion in operational cost out and over $3 billion in cash preservation actions across the company. In April 2020, GE issued $6 billion of debt and used proceeds to tender for $4.2 billion of its senior notes to extend debt maturities and enhance liquidity.

The primary ongoing risk is the continued uncertainty surrounding the duration and magnitude of the COVID-19 pandemic and its economic consequences. This includes potential further impacts on operations, supply chains, customer demand (especially in Aviation), and financial market volatility. Other risks include further credit rating downgrades, challenges in de-leveraging the balance sheet, and operational execution across its industrial businesses.