2Q ’09 Highlights (Continuing Operations attributable to GE)
· Earnings per share (EPS) of $.26, down 52%; earnings of $2.9 billion, down 47%
· Company revenues of $39.1 billion, down 17% (down 12% FX-adjusted); Industrial sales down 7%; financial services revenues down 29%, reflecting shrinkage at GE Capital
· Cash generated from operating activities totaled $7.1 billion in 1H ’09, ahead of plan; $52 billion cash and equivalents at quarter-end
· Energy Infrastructure earnings grew 13%; Technology Infrastructure earnings declined 11%
· Industrial operating profit rate solid at 16.3%, down 10 bps from ’08, and up 200 bps from 1Q ’09
· Capital Finance earned $590 million ($149 million pre-tax); on track for profitable 2009; reserve coverage increased by .9B, up 22 bps vs. prior quarter
· GE Capital completed 2009 long-term-debt funding plan; pre-funded about a third of 2010 plan
“In a global economic environment that continues to remain challenging, GE delivered solid second-quarter business results,” GE Chairman and CEO Jeff Immelt said. “We are executing through the recession by aggressively controlling costs and driving working capital improvements while continuing to invest for future growth. At the same time, we are actively maintaining our backlog, focusing on higher-margin services and continuing to run our financial services business for safety and soundness. We continue to position GE to win in a reset economy.”
Highlights for the quarter included sustained strength in high-margin services where orders grew 2% and contractual services backlog reached an all-time high of $122 billion. “Our service businesses had positive order and earnings growth in the first half of 2009, and we see this strength carrying over to the second half. Global growth continued to be strong: second-quarter industrial revenues grew 31% in China; 46% in India; and 10% in the Middle East. A highlight for the quarter was a record $8 billion in wins by GE and its two aircraft engine joint ventures at the Paris Air Show, which will be converted to orders in the future. In addition, we are targeting 400 global stimulus projects in areas where there are appropriations for nearly $200 billion. While we have only realized limited revenue to date, we believe that activity will increase in the second half of 2009.”
Energy and Technology Infrastructure earnings of $3.6 billion held flat on revenues of $20.1 billion, down 6% from the year-ago period. Energy Infrastructure earnings grew 13% with a strong focus on price and cost, while Technology Infrastructure earnings declined 11%, reflecting softened demand and pricing pressure in Healthcare and Transportation. While cable continues to deliver solid growth, continued pressure in advertising and local television markets, investment impairments and lower transaction gains contributed to the 41% quarterly decline in NBCU earnings.
“In a difficult environment, we are ahead of schedule on our plan to create a more focused financial services company. Capital Finance earned $590 million, including $149 million pre-tax, and remains on track to be profitable for the full year,” Immelt continued.
“We originated nearly $38 billion of new volume in the United States in the second quarter of 2009, an increase of 25% over the prior quarter. Since January 2008, we have provided $155 billion of new financings to companies, infrastructure projects and municipalities and extended $127 billion of credit to 50 million consumers. GE Capital has outstanding credit with more than 330,000 commercial customers and 145,000 small businesses; in 2009 we have added 16,000 new commercial customers and supported 23,000 new small businesses through our retail programs.”
While providing important liquidity, GE Capital continues to reduce its balance sheet. Excluding the effects of foreign exchange, Capital Finance has reduced its ending net investment by $24 billion in the first half of the year. “We have substantially increased our capital ratios, reduced leverage, increased reserves, accelerated long-term debt funding and lowered commercial paper balances,” Immelt said. A summary is below.
“I am pleased with the GE team’s execution in this tough environment. We see a 2009 that is consistent with our original framework. We have strengthened GE Capital. We have dramatically reduced cost and our cash flow is outstanding. We are investing in new products and are positioned to win in key global markets. We have an additional pipeline of over $2.0 billion in restructuring projects that we are evaluating to improve our performance in 2010 and beyond. We are confident that GE will compete and win in a reset economy.”
Second Quarter 2009 Financial Highlights:
Earnings from continuing operations attributable to GE were $2.9 billion, down 47% from $5.4 billion in the second quarter of 2008. EPS from continuing operations was $.26, down 52% from last year. Segment profit fell 36% compared with the second quarter of 2008, as 13% growth at Energy Infrastructure was more than offset by an 80% decline at Capital Finance and a 41% decrease at NBC Universal.
Positive items were more than offset by charges in the quarter. The Company realized a $.02 per-share benefit from a transaction gain, which was more than offset by $.03 per share in restructuring and other charges and $.04 per share in marks and impairments.
Including the effects of discontinued operations, second quarter net earnings attributable to GE were $2.7 billion ($.24 per share attributable to common shareholders) in 2009 compared with $5.1 billion ($.51 per share) in the second quarter of 2008.
Revenues fell 17% to $39.1 billion. GE Capital Services’ (GECS) revenues fell 29% versus last year to $13.4 billion. Industrial sales were $26 billion, down 7% from the second quarter of 2008.
Cash generated from GE operating activities in the first six months of 2009 totaled $7.1 billion, down 24% from $9.3 billion last year, primarily reflecting the lack of a GECS dividend payment in 2009. Strong working capital improvements more than offset declines in progress payments leading to results ahead of operating targets.
The accompanying tables include information integral to assessing the company’s financial position, operating performance and cash flow.
GE will discuss preliminary second-quarter results on a conference call and Webcast at 8:30 a.m. ET today. Call information is available at www.ge.com/investor, and related charts will be posted there prior to the call.
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GE (NYSE: GE) is a diversified infrastructure, finance and media company taking on the world’s toughest challenges. From aircraft engines and power generation to financial services, medical imaging, and television programming, GE operates in more than 100 countries and employs about 300,000 people worldwide. For more information, visit the company's Web site at www.ge.com.
Caution Concerning Forward-Looking Statements:
This document contains “forward-looking statements”- that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of U.S. and foreign government programs to restore liquidity and stimulate national and global economies; the impact of conditions in the financial and credit markets on the availability and cost of GE Capital’s funding and on our ability to reduce GE Capital’s asset levels and commercial paper exposure as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the soundness of other financial institutions with which GE Capital does business; the adequacy of our cash flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the current level; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of proposed financial services regulation; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.