3Q 2010 Highlights (Continuing Operations Attributable to GE)
• EPS of .29, up 32%; earnings of $3.2 billion, up 29%
• Total company orders of $19.4 billion, up 7%; equipment orders up 9%
• GE Capital credit losses continued to decline and earnings are improving; reserves flat
• $78 billion consolidated cash and equivalents
• Industrial cash flow from operations on track for $14-$15 billion at YE, high end of plan
• Industrial operating margins strong at 16.4%, excluding NBCU
• Executing capital allocation plan, including company stock repurchase (.9 billion YTD), increased dividend and strategic acquisitions.
GE announced today third-quarter 2010 earnings from continuing operations (attributable to GE) of $3.2 billion, with EPS of .29 per share up 32% from the third quarter of 2009. GE’s economic environment continues to improve, as evidenced by consecutive quarters of orders and continuing-earnings growth.
Revenues were $35.9 billion for the quarter, down 5%, consistent with the first half of 2010. Revenues were impacted by lower equipment sales and reduced GE Capital assets. GE expects fourth-quarter 2010 Industrial revenues to grow sequentially from third quarter and to be about flat with the year-ago period.
“For the first time in eight quarters, we saw growth in both equipment and service orders,” GE Chairman and CEO Jeff Immelt said. “Equipment orders increased 9%, including 33% growth in Technology Infrastructure. We had strong global demand, including orders for 60 GE90 aircraft engines by Emirates, 142 Evolution Series locomotives for the North American market, and seven gas and two steam turbines to supply power to Saudi Electric Company. Healthcare orders in China and India improved by more than 20%. Service-orders growth reflects increased installed-base utilization. Overall backlog remained flat at $172 billion.
“Company execution was strong in the quarter,” Immelt said. “Industrial operating margins were 16.4%, up 40 basis points, excluding NBC Universal. We continued to invest for global product leadership, competitive adjacent-market positioning and efficient operations. We increased year-to-date research and development investment 21%. Cash generated from Industrial operating activities totaled $3.8 billion in the quarter and we are on track for $14- $15 billion this year, the high end of our plan. At quarter-end, GE had $78 billion of consolidated cash and equivalents. Strong cash generation remains a hallmark for GE.”
Energy Infrastructure delivered as expected in a tough environment, with flat operating profit on declining revenues. Healthcare profit improved 14%, driven by improved global demand. Aviation profits declined, reflecting initial shipments of the new GEnx engine and in comparison to a gain in the third quarter of 2009. Revenues at NBCU were flat at $4.1 billion with operating profit down 15%; NBCU revenue and operating profit were favorable compared to the year-ago period after adjusting for 2009 transactions without comparable events in 2010.
“GE Capital continues to outperform expectations and position itself to play offense,” Immelt said. “Higher core income and lower losses indicate that business has turned the corner and our efforts over the past 18 months to strengthen the franchise are paying off. Net earnings of .9 billion were up .7 billion from a year ago. Reserves remained flat at $9.1 billion, while key performance measurements continued to improve. Further, we saw year-overy ear and quarter-over-quarter improvements in most GE Capital portfolios, with particularly strong performance in Consumer and Commercial Lending and Leasing.
“GE Capital has strengthened its franchise into an advantaged specialty-finance player that is creating value for GE shareholders,” Immelt said. “GE Capital is well positioned with respect to Basel III capital requirements and we expect earnings growth in our financial services business to continue.
“Also in the quarter, GE Capital increased reserves by $1.1 billion related to our disposition of our former Japan consumer finance business, recorded in discontinued operations,” Immelt said. “Based on what we know today, we believe this update fully addresses our claims risk.”
There were no other significant charges or gains in the third quarter.
“Effective capital allocation will benefit GE investors as we go forward,” Immelt said. “Recent capital-allocation moves have included GE Energy’s announced $3.0 billion acquisition of Dresser, Inc., a global energy infrastructure technology and service provider; GE Capital’s announced acquisition of $1.6 billion in sales finance portfolios from Citi Retail Partner Cards; and our Power & Water business’ announced purchase of Calnetix Power Solutions for entrance into the $1 billion waste-heat-recovery segment. In the third quarter of 2010, we increased the dividend 20% and extended our share repurchase program. We are confident in our financial strength and cash flow.
“Third-quarter 2010 results should give investors confidence that a renewed GE should grow earnings and dividends in 2011 and beyond,” Immelt said.
Third-Quarter 2010 Financial Highlights:
Earnings from continuing operations attributable to GE were $3.2 billion, up 29% from $2.5 billion in the third quarter of 2009. EPS from continuing operations was .29, up 32% from last year. Segment profit increased 11% compared with the third quarter of 2009 as an over 500% increase at GE Capital more than offset earnings declines of 10% at Technology Infrastructure and 15% at NBCU. Including the effects of discontinued operations, third-quarter net earnings attributable to GE common shareowners were $2.0 billion (.18 per share) in the third quarter of 2010 compared with $2.4 billion (.23 per share) in the third quarter of 2009.
Revenues decreased 5% to $35.9 billion. GE Capital Services’ revenues fell 2% versus last year to $12.5 billion. Industrial sales were $23.6 billion, down 6% from the third quarter of 2009.
Cash generated from GE Industrial operating activities in the first nine months of 2010 totaled $10.1 billion, down 11% from $11.4 billion last year.
The accompanying tables include information integral to assessing the company’s financial position, operating performance and cash flow.
GE will discuss preliminary third-quarter results on a Webcast at 8:30 am ET today, available at ge.com/investors. Related charts will be posted there prior to the Webcast.
GE (ge.com) is a diversified infrastructure, finance and media company taking on the world’s toughest challenges. From aircraft engines and power generation to financial services, health care solutions, and television programming, GE operates in more than 100 countries and employs about 300,000 people worldwide.
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: 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 conditions in the financial and credit markets on the availability and cost of General Electric Capital Corporation’s (GECC) funding and on our ability to reduce GECC’s asset levels as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; changes in Japanese consumer behavior that may affect our estimates of liability for Grey Zone claims; 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 adequacy of our cash flow and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned 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 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.
Anne Eisele, GE - P: +1 203 373 3061 / M: +1 203 522 9045 / E: anne.eisele[.]ge.com.