This summary is based on the fourth quarter fiscal 2008 earnings call conducted by General Electric Co. (GE) on 23 January, 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
- Earnings were $3.9 billion or 37 cents a share, down 43% from $6.8 billion or 68 cents a share in 2007.
- Revenues were $46.2 billion, down 5% from $48.5 billion in the prior year.
Full Year Highlights:
- Revenues was up 6% to $182 billion.
- Net income was $17.3 billion or $1.78 a share, down 22% from $22 billion or $2.20 a share in the prior year.
Fourth Quarter Highlights
Earnings from continuing operations were $3.9 billion or 37 cents a share, down 43% from $6.8 billion or 68 cents a share as credit losses continued in financial services
- Segment profit fell 25%, on a 67% decline at Capital Finance.
- Revenues were $46.2 billion, down 5% from $48.5 billion in the prior year, reflecting a stronger U.S. dollar, and lower core growth, partially offset by the net effects of acquisitions.
- GECS revenues fell 18% and industrial sales were $31.1 billion, a 7% increase from 2007.
- Cash generated operating activities totaled $19.1 billion, down 18% from $23.3 billion last year, reflecting a 5% increase from the Industrial businesses.
This increase was more than offset by a decrease in GECS’ dividends primarily due to a non-repeat $2.7 billion special dividend and a third quarter reduction in GECS dividend rate to 10% of earnings.
- The Company had solid Industrial cash flow from operating activities of $16.7 billion, an increase of 5% from 2007.
- For growth, total orders were down slightly but very strong absolute levels in this environment.
- The firm had higher losses and impairments of about $2.6 billion which generated a $900 million tax benefit.
- It had restructuring and lower income like less US real estate gains which reduced high tax jurisdiction income by about $2.3 billion.
The firm exited the corporate card business, the partnership marketing group business, the Japanese consumer finance business and also executed the consumer asset swap with Santander.
- Overall it exited $14 billion of assets and completed the Santander swap already in the first two weeks of 2009 for another $8 billion.
- GE beat its own commercial paper reduction target ending the year at $72 billion, that’s down $29 billion in 2008 and down $16 billion in the fourth quarter alone.
- It has already issued $29 billion of long-term debt in GE Capital against the plan for the year of $45 billion so completed 64% of 2009 needs.
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Capital Finance revenues of $14.8 billion were down 17% and segment profit of $1 billion was down 67%.
- Assets in GE Capital Finance were down 2%, with GE Money assets at $185 billion down 12% year over year driven most by foreign exchange.
- Net income of $832 million was down 14% driven by the higher reserve provisions that it took mostly in the Americas, $660 million.
- Real estate, assets of $85 billion were up 8% year over year as GE invested in the debt portfolio early in the year.
- Debt as a percent of total assets is up to 57% of the portfolio but the assets were down 4% from the third quarter and the business reported a $60 million loss that was down over $660 million from last year and it was mainly driven by fewer gains in the quarter.
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Commercial Lending and Leasing had an earnings decline of over $400 million from the mark to markets in equity securities with the largest being Genpac from $96 million.
- It had almost $400 million in incremental loss provisions that it put into the business in the quarter and had lower gains of about $150 million.
- There was an increase in the commercial delinquencies and non-earnings with pressure across most of the portfolio.
It also continues to see deterioration in the consumer portfolio during the quarter in both the mortgage and the non-mortgage books.
- On the mortgage book, it increased coverage rate of 56% to 0.64% and really had significantly less losses here being a senior secured lender with insurance.
- The reserves to non-earnings are about 11.5% and the average loan to value across the entire portfolio is at 76%.
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Infrastructure and Media had orders of $13.4 billion, that was down 11%.
- Healthcare was down 6%, life sciences was up strong, surgery was up favorably obviously with the OEC orders and shipments and DI was down 14%.
- For transportation, equipment orders were down 48% in the quarter and 59% for the year and the firm ended the year with $51 billion backlog that was up 6%.
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Energy Infrastructure: revenues of $11.4 billion were up 21% and the firm had $2 billion of segment profit up 11%.
- Orders in energy were flat at $8.7 billion but that’s a strong absolute level of orders and GE received orders for 70 gas turbines.
- Only six gas turbines are about $200 million of the 55-unit rack order that was announced in December.
Wind orders were up 5% to $4 billion a little over 930 turbines versus about $900 million last year.
