BOSTON — GE announced results today for the first quarter ending March 31, 2020.
GE Chairman and CEO H. Lawrence Culp, Jr. said, “During this unprecedented pandemic, the GE team is focused on protecting the safety of our employees and communities, serving customers in their critical time of need, and preserving our strength for the long term. GE is delivering critical infrastructure and services across the globe, including our teams at Healthcare supporting caregivers who diagnose and treat COVID-19 patients every day.”
Culp continued, “The impact from COVID-19 materially challenged our first-quarter results, especially in Aviation, where we saw a dramatic decline in commercial aerospace as the virus spread globally in March. We are targeting more than $2 billion in operational cost out and $3 billion of cash preservation to mitigate the financial impact, and we executed a series of actions to de-risk and de-lever our balance sheet amid a challenging environment. While there are many unknowns, there will be another side—planes will fly again, healthcare will normalize and modernize, and the world still needs more efficient, resilient energy. We’re embracing today’s reality and accelerating our multi-year transformation to make GE a stronger, nimbler, and more valuable company.”
Read the full results on GE’s Investor Relations website.
Recent Actions in Light of COVID-19
Protecting safety of employees and communities:
- GE has implemented business continuity plans, safety protocols, and medical response plans to protect its employees while serving the needs of its customers and partners while minimizing disruption. GE has encouraged employees who are not directly performing customer-essential jobs to work from home wherever possible. For customer-essential employees, GE is dramatically increasing frequency of cleaning and disinfection at its facilities, applying physical distancing guidelines, monitoring health symptoms, and making personal protective equipment available as necessary, all in parallel with government directives.
- GE is restricting travel to business-essential only, in parallel with government directives.
- GE is offering additional, COVID-19-related paid leave policies for employees who are diagnosed with the virus or quarantined.
- GE also has provided employees and their family members with emotional health and well-being resources, including resources for mindfulness, exercise, nutrition, stress, short-term counseling, and referrals.
- GE is creating a GE Employee Relief Fund as a new public charity to support global employees facing unprecedented financial hardship due to COVID-19. More than 75 senior company leaders have pledged to contribute to the fund that will assist their coworkers.
- The GE Foundation pledged financial support to the World Health Organization’s COVID-19 Solidarity Response Fund and Boston Resiliency Fund and contributed to Americares to deliver 1.4 million protective masks to healthcare workers.
Serving customers in critical time of need:
- Healthcare has increased its global manufacturing capacity and output for critical medical equipment important in the diagnosis and treatment of COVID-19, including in its respiratory, computed tomography (CT), monitoring solutions, x-ray, anesthesia, and point-of-care ultrasound product lines. Healthcare doubled its capacity of ventilators in the first quarter and plans to double it again by the end of June. The team also is providing digital solutions and using artificial intelligence to improve patient management and hospital operations to maximize life-saving resources.
- Across its businesses, GE is helping to serve customer needs in several ways, including:
- Aviation, which powers two-thirds of U.S. military fighters and helicopters, is producing engines and components for military aircraft that are in the air daily around the world to assist in response efforts.
- Powering one-third of the world, Power and Renewable Energy teams support power generation that provides electricity essential for hospitals, health care facilities, and homes and businesses.
- GE is leveraging additive manufacturing to alleviate supply chain constraints, speed up production, and produce personal protective equipment for employees and health care workers on the front lines.
- GE Digital is offering a free 90-day license to its remote monitoring and control system to 20,000 utilities and factories. The remote capabilities allow plant operators and management teams real-time monitoring and control access to plant operations.
Preserving GE’s strength:
- Each of GE’s businesses and Corporate are taking cost and cash actions to manage risk and proactively mitigate the financial impacts from COVID-19. Across the company, GE is targeting more than $2 billion in operational cost out and more than $3 billion in cash preservation activities in 2020 to improve its cost structure and preserve its ability to serve customers.
- GE continues to prioritize innovation. For example, in the first quarter Healthcare introduced its LOGIQ™ E10 Series ultrasound, which can process 10 times more data and generate images faster than GE’s previous systems to help clinicians bring fast, precise answers to their patients. GE is also collaborating across industries, working with Ford Motor Company to further scale ventilator production.
- GE completed the sale of BioPharma on March 31, 2020, for approximately $20 billion in net cash proceeds.
- GE maintains access to strong liquidity. At the close of the first quarter ending March 31, 2020, GE held cash, cash equivalents, and restricted cash of $47.3 billion, including the proceeds from the BioPharma sale. Of the $47.3 billion, $33.8 billion was held in Industrial and $13.5 billion was held in Capital.GE took a series of recent actions to enhance and extend its liquidity, reduce Industrial debt by more than $7 billion, and reduce Capital debt by approximately $4 billion, including:
- Leverage-neutral actions to enhance and extend liquidity: On April 22, 2020, GE issued $6 billion of GE Company debt and used the proceeds to complete a tender offer to purchase $4.2 billion of debt maturing between 2020 and 2024. GE intends to use the remaining proceeds toward debt reduction, and the combination of these transactions is expected to be leverage neutral. Separately, as part of its planned financial management process, on April 17, 2020, GE entered into a $15 billion revolving syndicated credit facility maturing in 2023, replacing GE’s prior $20 billion revolving syndicated credit facility maturing in 2021.
- Reduced Industrial debt by approximately $7 billion: GE reduced commercial paper use by $1.1 billion in the first quarter. Separately, using proceeds from the BioPharma transaction, GE repaid $6 billion of its intercompany loan to GE Capital on April 1, 2020.
- Reduced Capital debt by approximately $4 billion: GE Capital reduced external debt by $10 billion year to date, including $4.7 billion of maturities in the first quarter. GE Capital also completed a tender for $5.4 billion of its 2020 maturities on April 23, 2020. These were offset by the $6 billion intercompany loan repayment.
- GE remains committed to achieving its leverage goals over time.
Financial Impact from COVID-19
During the first quarter of 2020, impact from COVID-19 began having a material adverse impact on GE’s operations, financial performance, and many of its customers and suppliers. While factors related directly and indirectly to the COVID-19 pandemic have begun impacting operations and financial performance at varying levels across all of GE’s businesses, the most significant financial impact to date has been at Aviation and GE Capital Aviation Services (GECAS), where COVID-19 caused a rapid decline in global commercial aviation demand in March.
In total, COVID-19 factors negatively impacted GE CFOA and GE Industrial free cash flow* by approximately $1 billion, and negatively impacted GE Industrial profit by approximately $0.8 billion and GE Capital earnings by approximately $0.1 billion. Excluding restructuring of $0.1 billion, adjusted GE Industrial profit* was negatively impacted by $0.7 billion. The second quarter will be the first full quarter with pressure from COVID-19, and GE expects that its financial results will decline sequentially.
Given the evolving nature of the COVID-19 pandemic, at this time, GE cannot forecast with reasonable accuracy the full duration, magnitude, and pace of recovery across our end markets, operations, and supply chains. As a result, on April 9, 2020, GE withdrew its guidance for 2020.
Results by Reporting SegTagged with financial results, GE