This summary is based on the first quarter fiscal 2009 earnings call conducted by General Electric Inc. (GE) on April 17, 2009.
Management:
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Chairman and CEO: Jeff Immelt
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Vice Chairman and CFO: Keith Sherin
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VP, Investor Communications: Trevor Schauenberg
Key Investors Issues
- Revenues of $38.4 billion were down 9% from $42 billion in 2008.
- The firm earned $2.8 billion or 26 cents a share in net income, down 35%.
First Quarter Highlights
Revenues of $38.4 billion were down 9% from $42 billion in 2008 with Industrial sales of $24 billion down 1% due to the impact of the strong dollar in the quarter.
- GE Capital Services’ (GECS) revenues fell 20% over last year to $14.4 billion.
- Financial services revenue as expected would be down as the firm was shrinking that balance sheet, $14.4 billion, down 20%.
- The backlog is essentially flat quarter-over-quarter as the firm had about $500 million of cancellations, $400 million in energy and $100 million in aviation.
The firm earned $2.8 billion or 26 cents a share in net income, down 35% from $4.4 billion or 43 cents a share in the prior year as segment profit fell 27%.
- Strong earnings growth of 19% at Energy Infrastructure was more than offset by a 58% decline at Capital Finance and a 45% decrease at NBC Universal.
- Cash generated from GE operating activities totaled $2.8 billion, down 42% from last year, primarily reflecting the lack of a GECS dividend payment in 2009 and lower progress collections, which were offset by improvements in working capital.
- SG&A for GECS was down $600 million and the firm expects delinquencies and provisions for losses and write-offs to all continue to increase.
- Capital Finance earned $1.1 billion which, while down 58% from last year, was a very positive outcome in this environment and year-over-year total assets at $542 billion are down 13% from a year ago.
In Consumer the firm earned $727 million, down 27% year-over-year driven by higher credit costs.
- The credit costs in Consumer were up $581 million and the firm also had lower gains - last year it had about $290 million of gains as it sold the corporate card business - and those declines were offset by higher tax benefits.
- Technology Infrastructure delivered revenues of $10.4 billion, which were basically flat with 42% of revenues in Tech Infra coming from services and they were up about 5% while segment profit of $1.8 billion was up 6%.
- Energy Infrastructure revenues of $8.2 billion were up 7% with 47% of the segment revenues coming from services and segment profit of $1.3 billion was up 19%.
Key questions and answers from the first quarter earnings call conducted by General Electric Inc. (GE) on April 17, 2009.
Nicole Parent (Credit Suisse):
Are people more inclined to actually ramp up service because they''re not replacing the equipment or does it impact just timeline wise because you haven''t had the equipment sales that you might have in a different type of environment?
Keith Sherin: There''s two factors going on. One is the services grow by installed base and then dollars by installed base. So the installed base has been flat at best, but the dollars per installed base has been growing.
And then the other one is health care information technology, which we show in the service numbers, and I would say even though I''m bullish about health care IT later this year, I think there''s just been a lot of uncertainty about where the government programs are going to go and who''s going to qualify.
Jeff Sprague (Citigroup Investments):
Can you just provide a little more clarity on how to frame tax for the rest of the year?
Keith Sherin: If you look at GE Capital in the first quarter we had about $1.2 billion of tax credits - it''s 1160. $700 million of the benefit in total at GE Capital Services off the income statement comes from this one-time permanent reinvestment.
That''s not something that you would plan on having to repeat, but if you wanted to get to a run rate you ought to take a quarter of it and put it into the results.
And if you adjust the $1.1 billion earnings that GE Capital has, either at the GE Capital Finance level or you could do it off the income statement, basically if you adjust for the $700 million and you put a quarter of it in the run rate, at the end of the day it comes out to be about $700 million of net income for GE Capital adjusted for tax.
So I think the tax benefits are somewhere around $500 million in GE Capital without the one-time benefit and you could run that forward through the year and then take a quarter of the $700 million benefit and kind of have it be - that’s where we are right now for run rate.
Now the thing I''d say to caution you is if the losses go higher and those losses are in high tax places, GE will be able to use those tax losses and then the tax credit number in GE Capital could be higher as you move towards the right side of those risk cases.
Jeff Sprague (Citigroup Investments):
Can you reconcile that equity trends in Capital?
