Ge Q4 2008 Financial Results

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Ge Q4 2008 Financial Results

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Ge Q4 2008 Financial Results

  1. 1. GE 2008 fourth quarter performance January 23, 2009 – Financial results & company highlights quot;Results are preliminary and unaudited. 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 often contain words such as “expect,” “anticipate,” “intend,” “plan,” believe,” “seek,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could adversely or positively affect our future results include: the behavior of financial markets, including fluctuations in interest and exchange rates, commodity and equity prices and the value of financial assets: continued volatility and further deterioration of the capital markets; the commercial and consumer credit environment; the impact of regulation and regulatory, investigative and legal actions; strategic actions, including acquisitions and dispositions; future integration of acquired businesses; future financial performance of major industries which we serve, including, without limitation, the air and rail transportation, energy generation, media, real estate and healthcare industries; 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.“ “This document may also contain non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period-to-period comparisons. For a reconciliation of non-GAAP measures presented in this document, see the accompanying supplemental information posted to the investor relations section of our website at www.ge.com.” “In this document, “GE” refers to the Industrial businesses of the Company including GECS on an equity basis. “GE (ex. GECS)” and/or “Industrial” refer to GE excluding Financial Services.”
  2. 2. Environment Status since Impact December Industry deleveraging … credit loss estimate Still tough ($2T) … reducing liquidity Financial Services industry restructuring Still tough Global recession … growing unemployment Still tough Broad deflationary cycle begins Better Massive government stimulus Better Very tough environment Preliminary 2008 fourth quarter results/2
  3. 3. Running GE 1 Intensified management processes 4 New Financial Services business model Redefined Operating Council & Smaller, more focused Capital BOD Business exits More frequent rhythm Funding secure New compensation tools Risk reduction 2 Diversified & protecting revenues 5 Lowering cost Services provide foundation $1.5B restructuring & other charges Global diversity Deflation accelerating Invest in R&D/content Fewer people … less spending Financing available 6 Positioned for stimulus 3 Increased cash focus Global … company-to-country Strong working capital results Renewables/Smart Grid Equity raise Healthcare IT Focused reduction in assets Focused execution Preliminary 2008 fourth quarter results/3
  4. 4. Operations update 1 Completed 2008 in line with December meeting and prepared for a difficult 2009 2 Executing on liquidity and cash plan … support capital allocation 3 Capital Finance repositioning on track $8.6B earnings in 2008 ~$5B earnings in 2009 No change to 2009 framework 4 Infrastructure & Media remain solid 10% growth in 2008 0-5% growth in 2009 Preliminary 2008 fourth quarter results/4
  5. 5. Completed 2008 & 1 prepared for 2009
  6. 6. Results in line with December outlook ($ in billions – except EPS) December outlook Actual Assessment Revenues ~$185 $183 /– 4Q’08 restructuring & other charges $1.0-1.4 $1.5 Continuing earnings per share–a) $1.78 - $1.82 $1.78 Continuing earnings–a) ~$18 $18 Industrial CFOA ~$16 $16.7 + (a- attributable to common shareowners Results in line with December outlook Preliminary 2008 fourth quarter results/6
  7. 7. 4Q’08 key performance metrics (Continuing operations) Growth (V%) 4Q’08 EPS +7% $0.36 $0.37 $0.35 Infrastructure (2)% orders Industrial Net Capital sales Continuing Continuing earnings Finance (Ex. effects (Attributable to (6)% assets of pref. div.) common shareowners) Returns Margins Cash +5% $16.7 14.8% 18.3% 17.3% 4Q’08 4Q’08 YTD 4Q'07 4Q'08 ROTC Ind’l. CFOA Segment op. profit % Preliminary 2008 fourth quarter results/7
  8. 8. Fourth quarter consolidated results ($ in billions – except EPS) ($ in millions) Results Continuing operations Segment Segment Revenues profit 4Q’08 V% $ V% $ V% Revenues $46.2 (5)% – Industrial sales 31.1 7 Energy Infra. $11,407 21% $2,006 11% – Financial Svcs. rev. 15.8 (18) Continuing earnings-a) 3.9 (43) Technology Infra. 12,555 1 2,495 1 Continuing earnings-b) 3.8 (44) EPS – continuing-a) .37 (46) NBC Universal 4,430 (3) 865 (6) EPS – continuing-b) .36 (47) – net earnings-b) .35 (47) Industrial (ex. C&I) 28,392 7 5,366 3 CFOA YTD 19.1 (18) Capital Finance 14,766 (17) 1,030 (67) – Industrial CFOA 16.7 5 4Q’08 YTD C&I 2,747 (17) 36 (86) Tax rate (56)% 5% – GE (ex. GECS) 17 25 $45,905 (4)% $6,432 (25)% – GECS Fav (44) (a- excludes effects of preferred dividend (b- attributable to common shareowners Preliminary 2008 fourth quarter results/8
  9. 9. Tax ($ in billions) GECS 4Q’08 tax benefit ’09 framework Impact on 4Q’08 tax rate GECS tax $0.03 benefit Restructuring 4Q’07 1 ’09 provision for & other GECS losses > ’08 high tax taxes jurisdiction income One-time $(0.9) global 2 Lower restructuring Higher benefits losses/ & other impairments $(0.8) 3 Lower global benefits/ $(2.1) $(0.4) one-time items $0.5B benefit from 4Q’08 pretax loss of $1.5B Lower benefits in ’09 but still expect a negative tax rate Preliminary 2008 fourth quarter results/9
  10. 10. 4Q’08 restructuring & other items ($ in billions – after tax) December $2.2B assumptions Actual Marks & impairments ~$0.7 $0.7 Marks & 0.7 - Investment securities $(0.7) impairments - Assets/commodities $(0.5) + FX/other +$0.5 Corporate funded restructuring ~0.5-0.9 1.0 & other charges - Infrastructure $(0.2) - NBCU $(0.1) Restructuring, - Capital Finance $(0.5) 1.5 reserves & - Corporate/other $(0.2) other items Capital Finance reserves ~0.5 0.5 4Q'08 Strong actions taken Preliminary 2008 fourth quarter results/10
  11. 11. Preparing for difficult ’09 ($ in billions – total year) $1B of 1 Proactively restructured cost base cost out $1.5B $23B–a) in ’09 ‒ Reducing work force ‒ Simplified organization ‒ Fewer layers/rooftops Transaction 2 Exits of non-core & underperforming status assets ‒ CPS ‒ Thai Auto ‒ PMG ’08 restructuring Ending net ‒ Japan Consumer & other investment (ENI) ‒ Germany Consumer charges reduction ‒ Santander swap (Austria, Finland, U.K.) from exits ‒ Australia Wizard LOI (a- includes $9B ’09 ENI reduction Proactively prepared for a tough 2009 Preliminary 2008 fourth quarter results/11
  12. 12. Execute on liquidity 2 & cash plan
  13. 13. Financial Services liquidity ($ in billions) Liquidity considerations Commercial paper $101 1 CP dynamics are more positive $72 + Market stabilized $50 + GE CP demand ; cost down; maturity on target + Balance down to $72B … ahead of plan 2009 4Q’07 4Q’08 + Back-up lines + cash > CP target + No CPFF use since November ENI (ex. cash) $583 $536 2 Demonstrating ability to manage long-term debt maturities through origination & collections + Cash $36B vs. $13B in 3Q 3Q’08 4Q’08 Alternative funding $81 $55 3 Retail funding sources growing successfully … $30 CDs/deposits up $25B in ’08 to $36B + Consistent with December outlook 2009 4Q’07 4Q’08 target Executing liquidity plan ahead of schedule Preliminary 2008 fourth quarter results/13
  14. 14. GECC leverage & debt plan Leverage Debt issuance plan 7:1 ~$45 $29 1Q’09 $16 to date $13 4Q’08 4Q’08 TY’09 Completed estimate to date Infused $5.5B cash into GECS Long term debt issuance ahead of plan 7:1 leverage – debt net of cash & ~64% of ’09 funding needs complete includes hedged hybrid equity Non-FDIC guaranteed debt issued in Jan. $126B guaranteed debt capacity under TLGP Met leverage commitments … debt issuances ahead of plan Preliminary 2008 fourth quarter results/14
  15. 15. GE cash ($ in billions) GE CFOA GE excluding GECS Total V% $23.3 $19.1 (18)% 4Q’07 $6.7 GECS 7.3 2.4 dividend CFOA 19.1 Dividend (12.4) 16.0 16.7 5% Industrial Equity issuance 15.0 CFOA GECS contribution/buyback (8.7) P&E (3.0) '07 '08 Acquisitions/dispositions (3.1) • GECS dividend down $4.9B Change in debt/other (1.5) – Non-repeat of Swiss Re & GE Life proceeds in 1Q’07 4Q’08 $12.1 – Regular GECS dividend at 10% from 3Q’08 (vs. 40%) Consolidated cash $48B at year end vs. $16B 3Q’08 Preliminary 2008 fourth quarter results/15
  16. 16. Capital Finance 3 repositioning on track 2009 earnings of ~$5B
  17. 17. GE Capital Finance ($ in billions) Earnings Our focus 1 Manage current cycle in a safe & responsible way $8.6 ‒ Reposition funding model ‒ Manage credit cycle 2 Reposition GE Capital as a well- ~$5 funded, smaller finance company ‒ Outperform in 2009 ‒ Position business to grow in 2010 & beyond 3 Support customers through new origination ‒ $48B in 4Q … plan for $150-200B in ’09 ‒ Focus on mid-market, verticals, consumer '08 '09F Challenging year but strong relative performance Preliminary 2008 fourth quarter results/17
  18. 18. Capital Finance highlights ($ in millions) 4Q discussion points 4Q’08 $ V% Revenues $14,766 (17)% GE Money executing on business exits, Segment profit $1,030 (67)% cost-out & deposit-funding; while increasing reserves Assets $573B (2)% Key 4Q business results Real Estate debt portfolio performing … Assets Segment equity gains significantly, plan to hold ($B) profit ($MM) long term $ V% $ V% CLL originating at higher margins while GE Money $184 (12)% $832 (14)% integrating Merrill/Citi & taking cost out … Real Estate 85 8 (60) U $0.4B of marks, increased reserves CLL 232 1 (200) U Capital Solutions 119 (3 ) 92 (84) Verticals performing well – growing Energy renewables, only 1 GECAS aircraft GECAS 49 5 239 (5) on ground EFS 22 18 219 24 $1B net income as expected Preliminary 2008 fourth quarter results/18
  19. 19. Capital Finance portfolio quality ($ in millions) Commercial Consumer 30+ delinquency Non-earners 2.17% 10.74% 5.57% 9.28% 4.64% 8.53% Mortgage 1.61% 7.80% 4.17% Mortgage 7.26% 1.48% 3.77% 7.47% 1.36% 6.39% 3.40% 5.92% 3.40% 5.38% 5.66% 1.21% 2.54% 2.78% Total Delinquencies 2.12% 2.34% 1.38% Total Non-earners 5.62% 4.30% 4.36% 4.34% 4.70% Non-mortgage 1.01% 1.77% Non-mortgage 0.83% 0.82% 0.80% 1.44% 1.21% 1.24% 1.31% 4Q'07 1Q'08 2Q'08 3Q'08 4Q'08 4Q'07 1Q'08 2Q'08 3Q'08 4Q'08 4Q'07 1Q'08 2Q'08 3Q'08 4Q'08 Drivers Drivers Continued delinquency pressure across NA unsecured & U.K. mortgage markets deteriorate further most portfolios +56 bps. vs. 3Q’08 … ‒ Delinquencies up 108 bps. vs. 3Q’08 … NA +64 bps., U.K. +29 bps. Capital Solutions +38 bps., HFS +14 bps. ‒ Non-earners up 62 bps. vs. 3Q’08 … NA +17 bps., UK +28 bps. Non-earners +37 bps./$697 vs. 3Q’08 ‒ Lower volume impacting rate … mortgage down 69% ‒ Driven by senior secured loans … Mortgage loss rates rising but remain low expect significant recovery ‒ 4Q’08 write-offs of $109MM … 0.67% of financing receivables ‒ Current portfolio LTV at 76%, plus insurance coverage ‒ UK repo stock flat vs. 3Q’08 Preliminary 2008 fourth quarter results/19
  20. 20. Credit losses & reserves ($ in billions) Credit losses (pretax) Consumer +69% +64% ~$9.0 ~$10 U.S. Card & Sales Finance $7.5 ~$7.2 – Increased reserves by $0.5B in 4Q – Coverage rate +178 bps. to 6.15% Consumer $4.4 – Reserves/non-earnings 224% $3.0 $3.2 $3.2 $3.0 $2.5 Mortgage – Coverage rate 56% to .64% Commercial – Reserves/non-earnings 11.5% '02 '03 '04 '05 '06 '07 '08A '09E – Average LTVs 76% Reserves Exits & FX $0.5 ~$6.6 $7.2 Commercial $5.3 ~$5.8 $5.2 $4.9 $4.6 $4.2 Consumer Reserves increased by $0.4B in 4Q’08 $3.9 $3.9 – Coverage rate 40% to .74% Commercial Well underwritten portfolio of assets & strong asset management capabilities '02 '03 '04 '05 '06 '07 '08A '09E Cov. 2.44% 2.36% 1.85% 1.42% 1.21% 1.10% 1.38% 1.61% 1.96% 1.41% Planning for tougher loss environment than we showed on 12/2 Preliminary 2008 fourth quarter results/20
  21. 21. Capital Finance framework ($ in billions) Capital Finance Trend Dynamics 2008 earnings $8.6B Real Estate + Debt ~60% of portfolio – Planning for $0-(0.5)B loss – Embedded loss ~$4B (pretax) Assets/portfolio ~0-(1.0) + Operator … ability to hold long term GE Money + Deposit base Gains (1.4)-(1.8) - Loss pressure - Lower volume Losses (1.3)-(2.0) CLL + Mid-market strength + Consolidation savings SG&A cost 1.1-1.3 - Recessionary pressure Verticals + Deep domain Tax (1.0)-(2.0) + Attractive returns – Lower asset sales 2009 estimated earnings ~$5B Higher margin new business … reinvest run-off/restructure into higher return core Preliminary 2008 fourth quarter results/21
  22. 22. Infrastructure & 4 Media solid
  23. 23. 4Q’08 Infrastructure orders Equipment Services 4Q’08 TY’08 4Q’08 TY’08 (V%) (V%) Energy –% 26% Energy –% 7% O&G (19 ) (11 ) O&G 2 25 Aviation (26 ) (13 ) Aviation 9 10 Transportation (48 ) (59 ) Transportation (10) 18 Healthcare (6 ) 2 Healthcare 1 7 Ent. Solutions (8 ) 3 Water 1 8 Total equipment (11)% 1% Total services 2% 10% Energy … Thermal +1%, Wind +5% Energy … core Power Gen offset by Nuclear Healthcare … Life Sciences +20%, Surgery O&G … upgrades and short cycle down favorable, DI 14% Aviation … Military & Commercial strength Aviation … tough comps +11% in ($ in billions – orders 4 quarter rolling average) $121 CSA backlog 2008 $14 Orders $93 $11 +6% in Backlog $51 2008 $31 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q ’06 ’07 ’08 ’06 ’07 ’08 Dec. Analyst Actual Equipment ~(10)% (11)% Services 0-5 2 Preliminary 2008 fourth quarter results/23 Total backlog +$15B in 2008, +9%
  24. 24. Energy Infrastructure highlights ($ in millions) 4Q dynamics 4Q’08 $ V% Energy Revenues $11,407 21% • Orders flat … backlog up 14%, $24B … CSA portfolio +$3.4B Segment profit $2,006 11% • $0.2B Iraq orders in 4Q … ~$2.8B in ’09 • Revenue growth +29% … Thermal +76%, Wind +29% … Aero +88% Key 4Q business results • Service revenues +3% … tough comps Segment • Segment profit +15% … positive value gap, Revenues profit Wind & Thermal margin expansion $ V% $ V% • Equipment growth vs. services mix impacting op. profit by (179) bps. Energy $8,942 29% $1,639 15% Oil & Gas Oil & Gas 2,096 (4) 406 22 • Orders (11)% … backlog down 1%, $7.6B • Revenues (4)% … organic +1% • Strong services performance, +14% • Segment profit +22% … price & productivity strong drivers Double digit growth Preliminary 2008 fourth quarter results/24
  25. 25. Technology Infrastructure highlights ($ in millions) 4Q dynamics 4Q’08 $ V% Aviation • Orders (12)%, service orders +9%, ’08 backlog Revenues $12,555 1% +12% to $26B Segment profit $2,495 1% • Revenue growth +2% … commercial/military equipment revenue +6%, service (2)% • Segment profit growth +21% … favorable price, Key 4Q business results cost productivity Healthcare Segment Revenues profit • Orders (4)% … equipment orders (6)%, service $ V% $ V% orders +1%, U.S. DI equipment orders (30)% • Revenues (3)% … services +1%, equipment (5)% Aviation $5,155 2% $1,161 21% Transportation (9)–a) Healthcare 4,823 (3) 942 • Orders (23)%, 1,648+ units in backlog • Revenue growth +20% … global loco + 29% Transportation 1,410 20 212 (16) • Segment profit impacted by costs for new (a- October 12, 2007 8-K adjustment added $350MM revenue & international platform build $162MM operating profit to previously reported 2007 Mixed environment Preliminary 2008 fourth quarter results/25
  26. 26. Segment highlights – NBCU ($ in millions) 4Q’08 $ V% Revenues $4,430 (3)% Segment profit $865 (6)% 4th quarter dynamics 1 Cable 3 Film & Parks +/- Tough fall in a crowded market … + Cable strong everywhere, USA #1 Changeling, Express, offset by Mamma Mia + Bravo, SciFi, USA up double digits video + MSNBC +37% – fastest growing news + Milk, Frost/Nixon received Oscar nominations channel in prime … quot;the place for politicsquot; +/- Record DVD sales … >100MM units sold, but + CNBC +14% – remains clear leader in catalog weaker than expected business news +/- Parks per caps strong; attendance mixed 2 Broadcast 4 Digital, cost, other – Significant market downturn in Stations + hulu a real success – Difficult fall primetime season – Economy hitting internet ads + TV studio continues to perform … key profit + Reducing costs and headcount across the driver with very strong margins board + NBC News remains a strong #1 + Rightsizing network model + Changing broadcast model … signed Leno +/- Insurance settlement offset by asset write for 10 p.m. slot downs Solid performance in tough environment Preliminary 2008 fourth quarter results/26
  27. 27. Industrial business model keys ($ in billions) 1 Infrastructure equipment 2 Global $51 $17 + 2008 growth +9% Stimulus drivers: + $0.2B of ~$3B Iraq order + Healthcare IT booked 4Q’08 + Smart Grid + ~$1B Saudi gas turbine + Wind/renewables order booked 4Q’08 + Global healthcare + China healthcare +33% 4Q backlog 4Q international revenues Services Margins 3 4 $9.4 17.3% + 2008 growth +10% + Positive value gap + Margins ~26% + Equipment/services + Backlog $121B turns positive in 2009 + Installed base + Deflation accelerating working harder 4Q service 4Q segment op. revenues profit margin Global & services remain robust … stimulus helps Preliminary 2008 fourth quarter results/27
  28. 28. Cost focus … more & sooner 5 ($ in billions) Direct material Base cost Indirect cost December $53 $51 $44 $41 $24 $22 '08 '09F '08 '09F '08 '09F Deflation & exchange Proactive restructuring Sourcing deflation (7)% favorability Headcount reduction Headcount impact on Reenergized global indirect spend (3)% Lower spend rates supply chain More Better Done planned Substantial reduction in ’09 cost Preliminary 2008 fourth quarter results/28
  29. 29. ’09 operating framework Factors ’09F Revenues 0-(5)% + ~3% Industrial organic growth ‒ Shrink Financial Services (5)%, economy, credit Industrial segment profit +0-5 + Backlog, service, gov’t. investment, cost (ex. C&I) ‒ Economy, credit Capital Finance earnings ~$5B + Margins, cost U.S. principal ‒ Losses, gains, volume, FX pension plans Assets down 28% No ’09 funding Corporate cost/C&I Flat + Lower restructuring ’09 expense ~$0.3B ‒ Pension vs. $0.2B in ’08 ‒ Tax + Plan to run C&I … earning about $0.3B Preliminary 2008 fourth quarter results/29
  30. 30. Capital allocation Recession deeper & longer Environment really Financial Services crisis worse tough 12 major Financial Services companies downgraded in 4Q But Industrial CFOA $16.7B vs. $16B We hit or beat every Reduced leverage to 7:1 cash & liquidity CP reduction ahead of plan commitment since ~64% of ’09 debt pre-funded crisis began Operating Council & GECS BOD drive results Management focus Quarterly monthly; monthly weekly is intense Aligning compensation around cash Adjusted in line with environment Plans are realistic And Dividend represents good shareowner return in this environment Maintain disciplines Running Company to be Triple A 2009 priorities: In line with Invest to grow GE organically December Maintain the GE dividend … $13B outlook Execute on Financial Services plan Preliminary 2008 fourth quarter results/30
  31. 31. Summary 1 Completed 2008 in line with 3 No change to 2009 financial December meeting framework Earned $18B … third highest year Capital Finance at ~$5B in history Infrastructure & Media +0-5% Capital Finance earned $8.6B … Corporate/C&I flat with ’08 total Financial Services $7.8B Infrastructure & Media +10% 4Q in line with expectations Running the Company with 4 intensity 2 Executed on liquidity & cash plan Intensify processes Generated $16.7B Industrial Diversify & protect revenues CFOA … above plan Increase cash ENI reduction of $47B vs. 3Q’08 Change business model ~64% of ’09 debt funding needs Lower cost completed Position for stimulus Positioned to outperform in this very tough environment Preliminary 2008 fourth quarter results/31

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