BOSTON — GE announced results today for the second quarter ending June 30, 2020.
GE Chairman and CEO H. Lawrence Culp, Jr. said, “The GE team remains focused on protecting the safety of our people, serving our customers and communities, and preserving our strengths, and I want to thank all of my colleagues for their tireless efforts. We had a very challenging second quarter that we met head-on, executing well operationally while we took actions to further de-risk our company. Our earnings performance was impacted by the ongoing impact of COVID-19 on our businesses, but Industrial free cash flow was better than our expectations and previously communicated range. We made faster progress on elements within our control, including our targeted cost and cash preservation actions.”
Culp continued, “We’re working through a still-difficult COVID-19 environment, and while it’s too early to predict the trajectory for the recovery of commercial aviation, we continue to plan for a prolonged return to prior levels of activity. Still, based on what we see today and the actions we’ve taken, sequential improvement in earnings and cash in the second half of the year is achievable. We expect to return to positive Industrial free cash flow in 2021. We are accelerating our transformation to make GE stronger and drive long-term, profitable growth.”
GE continued to take action on its priorities:
- Supported global customers and communities combatting COVID-19, including tripling production of GE’s CARESCAPE™ R860 ventilators in the quarter; partnering with Ford to scale the Airon-licensed pNeuton Model A-E ventilator; increasing manufacturing capacity of monitoring solutions, X-ray, anesthesia, and point-of-care ultrasound systems; and pledging financial support to communities through the GE Foundation and to employees through GE’s Employee Relief Fund.
- Realized more than one-third of cost and cash actions in the second quarter toward target of more than $2 billion of cost actions and more than $3 billion of cash actions during 2020.
- Reduced near-term liquidity needs by $10.5 billion through a series of GE and GE Capital debt offerings and repayments that GE expects to be leverage neutral by the end of 2021.
- Reduced debt by $9.1 billion year to date—including $7.8 billion in GE Industrial net debt* and $1.3 billion in GE Capital debt—and by approximately $22 billion since the beginning of 2019.
- Launching program to fully monetize remaining stake in Baker Hughes over approximately three years, in line with GE’s stated goal.
- Focused portfolio by selling GE Lighting to Savant Systems, Inc.
- Named new leaders, including John Slattery as president- and CEO-elect, Aviation; Pat Byrne as VP, Lean Transformation, GE, in addition to his role leading GE Digital; Nancy Anderson as Chief Information Officer, GE; Mike Barber as Chief Diversity Officer, GE; and chief diversity officers across GE’s businesses.
- Completed thorough and competitive audit tender process, selecting Deloitte as GE’s independent auditor for the 2021 fiscal year.
Total Company Results
During the second quarter, GE also recognized several significant items that affected its financial results, including:
- Non-cash pre-tax goodwill impairment charges of $877 million related to Additive within GE’s Aviation segment and $839 million related to GECAS within GE Capital, which together negatively impacted continuing EPS (GAAP) by $0.18.
- A $608 million pre-tax charge to reflect updated billing and cost assumptions for certain long-term service agreements (LTSAs) at Aviation in light of COVID-19. This was driven by lower utilization forecasts, specific contract adjustments, and customer credit risk.
- A $1.8 billion pre-tax unrealized gain on marking its investment in Baker Hughes to market, which favorably impacted continuing EPS (GAAP) by $0.18.
Baker Hughes Update
Concurrent with today’s earnings release, GE is launching a program to fully monetize its Baker Hughes position over approximately three years. This program is designed to enable GE to sell its shares at a price that approximates the volume-weighted average price of the Baker Hughes shares over an extended period of time. Executing on this program over time will allow GE to divest a substantial non-core asset, redeploy capital, enhance financial flexibility, and strengthen its balance sheet. GE expects to use proceeds from these transactions for further deleveraging.