2015 3Q

GE 2015 third quarter
performance
Financial results & Company highlights
October 16, 2015
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," "will," "would," or "target." Forward-looking statements by their nature address
matters that are, to different degrees, uncertain, such as statements about our announced plan to reduce the size of our financial services businesses, including expected cash and non-cash charges associated with this
plan; expected income; earnings per share; revenues; organic growth; margins; cost structure; restructuring charges; cash flows; return on capital; capital expenditures, capital allocation or capital structure; dividends;
and the split between Industrial and GE Capital earnings. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:
obtaining (or the timing of obtaining) any required regulatory reviews or approvals or any other consents or approvals associated with our announced plan to reduce the size of our financial services businesses; our
ability to complete incremental asset sales as part of that plan in a timely manner (or at all) and at the prices we have assumed; changes in law, economic and financial conditions, including interest and exchange rate
volatility, commodity and equity prices and the value of financial assets, including the impact of these conditions on our ability to sell or the value of incremental assets to be sold as part of our announced plan to reduce
the size of our financial services businesses as well as other aspects of that plan; the impact of conditions in the financial and credit markets on the availability and cost of GECC's funding, and GECC's exposure to
counterparties; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; pending and future mortgage loan repurchase claims and other
litigation claims in connection with WMC, which may affect our estimates of liability, including possible loss estimates; 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 flows and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at planned levels;
GECC's ability to pay dividends to GE at the planned level, which may be affected by GECC's cash flows and earnings, financial services regulation and oversight, and other factors; our ability to convert pre-order
commitments/wins into orders; the price we realize on orders since commitments/wins are stated at list prices; customer actions or developments such as early aircraft retirements or reduced energy demand and other
factors that may affect the level of demand and financial performance of the major industries and customers we serve; the effectiveness of our risk management framework; the impact of regulation and regulatory,
investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation and litigation; adverse market conditions, timing of and ability to obtain required bank regulatory
approvals, or other factors relating to us or Synchrony Financial that could prevent us from completing the Synchrony Financial split-off as planned; our capital allocation plans, as such plans may change including with
respect to the timing and size of share repurchases, acquisitions, joint ventures, dispositions and other strategic actions; our success in completing, including obtaining regulatory approvals for, announced transactions,
such as the proposed transactions and alliances with Alstom, Appliances and our announced plan to reduce the size of our financial services businesses, and our ability to realize anticipated earnings and savings; our
success in integrating acquired businesses and operating joint ventures; the impact of potential information technology or data security breaches; and the other factors that are described in "Risk Factors" in our Annual
Report on Form 10-K for the year ended December 31, 2014. These or other 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 includes certain forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materially.
This document also contains 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
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Imagination at work.
3Q’15 overview
Environment
Execution versus goals
 Slow growth and volatile environment
continues
 GE Capital exits ahead of plan … $126B
signed, $60B closed YTD
GE executing well:
 Industrial operating + Verticals-a) EPS
$.29, +16% … Industrial EPS +9%
 Industrial segment OP margins +100
bps. with gross margins +80 bps.
 Industrial CFOA YTD $6.1B, +23%
 Significant portfolio pivot …
execution is accelerating
Ind. segments
Orders
Revenue
Op Profit
Reported
Organic
(26)%
(1)%
5%
(23)%
4%
9%
2015 Goals
Grow Industrial segments
Organic growth (2-5%)
Margin expansion
3QYTD
+11%
6% organic
4%
100 bps.
GECC Verticals-a) EPS ~$.15
$.12
GECC cash to parent
$0.5B dividend
Disciplined/balanced capital allocation
CFOA $14-16B-b)
$6.5B
FCF + disp. $12-15B
$4.6B
Cash to investors $10-30B
$7.2B
Portfolio actions
$126B GECC signed YTD
Synchrony launch next week-c)
Alstom close imminent
Appliances review continues
(a- Verticals include businesses expected to be retained including allocated corporate costs
(b- Taxes associated with dispositions included in net disposition proceeds
(c- Subject to market conditions
2
Alstom
Deal/remedies update …
Economics intact …
• European Commission approval
• Purchase price ~$9.5B
• DOJ filed proposed consent decree
• Earnings per share
$.15-.20
• GE will divest to Ansaldo:
− Alstom’s GT26 new unit sales
− Alstom’s GT36 technology
development program
− Services contracts for 34 GT26s
• GE will divest Alstom’s PSM business
… license agreement in place
Expect deal to close in 4Q
$.05-.08
$(.01)-(.02)
2015E
2016F
2018F
• Year 5 gross cost synergies ~$3B
• Strong deal returns
This is a good deal for GE
3
Synchrony update
Received Federal Reserve approval for Synchrony separation
Split exchange mechanics
 At launch: File S-4 & exchange
offer terms set (week of Oct. 19th)
 Offer period: 20 business days
 Day 16-18: Determine final
exchange ratio
 Day 20: Close week of Nov. 16th
(subject to extension for
pricing/material amendments)
 Plan is to launch Synchrony
exchange next week … subject to
market conditions
 Expect proceeds of $18-21B-a)
and buyback of 650-750MM
shares-a)
 Gain embedded in proceeds and
buyback … no impact to GECC
capital levels
Expect to retire 6-7% of GE float by mid-November
4
(a- At current prices; dependent on offer terms and movement of GE & SYF stock prices prior to and during exchange
GE Capital update
4Q’14 ENI (ex-liquidity), $ in billions
’15E signings
~$140-150B
Portfolio sales
$126
Activity
since 2Q
Synchrony
~$65B
~$100
$58
~$70
$60
Signed deals
In market
Goals
’15E closings
Latest view
1 ~$90B asset sales in ’15
~$100B
2 All sales committed by ’17
Largely done by ’16
3 ~$35B dividend to GE
On track
4 Timing of dividends
Better
5 SIFI de-designation application
Targeting 1Q’16
 Deal pricing slightly above original
estimate … 1.4X P/TBV vs. 1.3X (1.1X
total plan)
 Higher forgone income as a result of
accelerated asset sales
 ALM actions, including $36B debt
exchange, offset excess interest costs
from accelerated sales
 In line with $23B estimated exit impact
… $21B taken to date
 2015 ENI ~$175B (including disc ops)
with accelerated sales and Synchrony
split
Expect ~$3B dividend-a) in ’15 … on track for ~$18B in ’16
5
(a- Subject to regulatory approval
3Q’15 orders $23.2B, (26)%
($ in billions)
Equipment
$
V%
Power
Power&&Water
Water
Oil
Oil&&Gas
Gas
Energy
EnergyMgmt.
Mgmt.
Aviation
Aviation
Healthcare
Healthcare
Transportation
Transportation
Total
Total
Ex. FX
$3.5
1.1
1.6
2.8
2.6
0.1
$11.2
7%
(60)
6
(58)
(5)
(95)
(43)%
(40)%
Backlog ($B)
Services
$
V%
$3.4
2.0
0.5
3.7
1.9
0.7
$12.0
8%
(13)
(8)
13
(3)
(5)
2%
6%
$266 $268 $272 $270
$256
$252
$249 $250
72
70
70
71
70
64
Equip. 64
65
Services 185
Orders price profile 0.2%
+1.5%
195
198
200
199
1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15
 Services strength continues …+6% organically
… PGS +10%, Aviation spares rate +28%
 Large one-time orders in 3Q’14 for GE9X and
Tier 4 … $6B headwind
(0.2)%
(1.7)%
(1.9)%
EM
186
 YTD orders are (4)% organically
+1.5%
O&G
188
Highlights
+0.1%
P&W
'13
185
Aviation
Healthcare
Trans.
 Power & Water +13% and Healthcare +3%
organically
 Oil & Gas impacted by industry dynamics …
(32)% organically
6
Industrial segment execution
Revenue growth
4%
YTD organic
+4%
Segment
Segment
gross margins OP margins
27.6%
17.3%
(1)%
3Q
reported
3Q
organic
Industrial -a)
OP margins
15.5%
+80 bps.
+100 bps.
+120 bps.
3Q’15
3Q’15
3Q’15
Growth highlights
+ Industrial segment organic growth +4% with 6/7
segments up … 9th quarter of organic growth
+ U.S. revenue +5%, growth markets (7)% … YTD growth
markets flat
+ Services revenue +6%, equipment +2% ex. FX YTD
+ Orders for software/analytics +16%; gaining
momentum for GE Digital
+ NPIs driving momentum … 4 H unit orders, 21 in backlog;
Power Conversion organic growth of 15%; 6 LM6000PF+
for efficient power; Life Sciences revenue +8% ex. FX
including manufacturing launch in China; locomotive
units grew by 18%
+ Long-term commitment to Aviation innovation &
execution for customers … $142B backlog
Segment drivers
Mix
Value gap (price/inflation)
Cost productivity
Gross Margins
Simplification (SG&A)
Base inflation/other
Op Profit Margins
3Q
0.1 pts
0.3
0.4
YTD
+0.8 pts. +70bps.
0.3
(0.1)
YTD
+1.0 pts.
+100bps.
 Segment equipment margins +40
bps., service margins +90 bps. YTD
7
(a- Industrial includes Corporate, excluding gains and restructuring
Generating cash
($ in billions)
3Q YTD CFOA
$7.2
GECC
dividend
2.2
Industrial
5.0
$6.5
V%
GE cash balance walk
Total
(9)%
0.5
(80)%
6.1
23%
2014
2015
FCF
$4.8
$4.3
(9)%
Ind’l. FCF
$2.5
$3.9
53%
 3Q YTD Industrial cash flow $6.1B, +23% … 3Q
Industrial cash flow $2.6B, (14)%
 No GE Capital dividend in 3Q … expect
additional ~$2.5B dividend-a) in 4Q
Beginning balance 1/1/15
$15.9
CFOA
6.5
Dividends
(7.0)
Net P&E
(2.2)
Acquisitions
(0.1)
Buyback
(0.2)
Debt issuance
3.4
Other
0.4
September 2015
$16.8
+ Cash returned to investors will be ~$30B with Synchrony-b)
+ Expect CFOA at high end of range … ~$16B
(a- Subject to regulatory approval
(b- Subject to market conditions
Note: Individual amounts are rounded. As a result, the sum of the parts presented may not add to the total.
8
3Q’15 consolidated results
($ in millions)
($ in billions – except EPS)
3Q’15
Revenues
$31.7
– Industrial revenue
25.8
– Verticals-a) revenue
2.6
-b)
– Other GECC revenue 3.7
Industrial + Verticals EPS
Operating EPS
Continuing EPS
Net EPS
CFOA YTD
– Industrial
Consolidated tax rate
– GE (ex-GECC)
– GECC
.29
.32
.28
.25
$6.5
6.1
3Q’15
11%
17
(6 )
V%
(1)%
(2)
(3)
0
Revenues
$
Segment
profit
$
$6,461
V%
1%
Oil & Gas
3,868
(16)
584
(12)
16
3
–
(29)
Energy Mgmt.
1,773
(2)
127
F
Aviation
6,001
5
1,353
7
Healthcare
4,255
(5)
652 (10)
(9)
23
3Q’14
13%
18
(2)
Transportation
1,593
3
379
11
Appliances & Lighting
2,293
8
165
88
Power & Water
Organic
Industrial Segments
26,243
(1)/4
GE Capital Verticals-a)
2,577
(3)
Ind. Seg. + Verticals
Industrial + Verticals EPS
Industrial operating
GE Capital Verticals-a)
$28,820
3Q’15
V%
$.25
$.03
$.29
9%
50%
16%
(a- Verticals include businesses expected to be retained including allocated corporate costs
(b- Other GE Capital includes the Consumer segment, GE Capital HQ run-off, & exit-related items
Note: Individual amounts are rounded. As a result, the sum of the parts presented may not add to the total.
$1,270
V%
7%
Organic
4,530
5/9
351
55
(2)% $4,881
7%
9
Earnings dynamics
(after tax, $ in millions – except EPS)
3Q’15
Net income
3Q’15 EPS
$2,569
$0.25
9%
351
0.03
50%
$2,920
$0.29
16%
Consumer
795
0.08
33%
Other GE Capital-b)
(411)
(0.04)
U
$3,303
$0.32
3%
(450)
(0.04)
(33)%
$2,853
$0.28
0%
(347)
(0.03)
U
$2,506
$0.25
(29)%
Earnings walk
Industrial operating
Verticals-a)
Industrial + Verticals earnings
Operating earnings
Non-operating pension
Continuing earnings
CRE/CLL earnings/other disc. ops.
Net earnings
EPS V%
Industrial + Verticals EPS $.29, +16% … strong Industrial growth, +9%
(a- Verticals include businesses expected to be retained including allocated corporate costs
(b- Other GE Capital includes HQ run-off & exit-related items
Note: Individual amounts are rounded. As a result, the sum of the parts presented may not add to the total.
10
3Q’15 Industrial other items
Restructuring & other
items
EPS
$(.02)
 $(346)MM pre-tax, $(244)MM after-tax
 Structural cost actions, acquisition-related &
other costs; includes pension mortality impact
2015 summary
1H
3Q
4QE
TYE
Restructuring & other items-a)
$(.06)
$(.02)
~$(.06)
~$(.14)
Gains & settlements-a)
$.03
$–
~$.11
~$.14
$(.03)
$(.02)
~$.05
~$–
Total
Gains = restructuring for the year but variability in quarterly timing
11
(a- After tax impact based on estimated transactional tax rates
Industrial segments
($ in millions)
Power & Water
3Q’15
Oil & Gas
$
V%
3Q’15
Revenues
$6,461
1%
Revenues
Segment profit
$1,270
7%
Op profit %
19.7%
1.0 pts.
$
V%
$3,868
(16)%
Segment profit
$584
(12)%
Op profit %
15.1%
0.7 pts.
3Q dynamics
3Q dynamics
• $6.9B orders, +8% ... equipment +7% with
DP +61%, Renewables +2% and Thermal (6)%;
services +8% with PGS +10%
• $3.0B orders, (38)% … equipment (60)% with
every segment down; services (13)%, (4)%
organic
• Revenue … equipment (6)% with Renewables
+8% offset by Thermal (10)% on lower units,
DP (13)%; services +9%
• Revenue ... (7)% organic with equipment (18)%,
(8)% organic and services (14)%, (5)% organic
• Margins +100 bps. driven by base cost
productivity and services growth
• Operating profit flat organically; margins +70
bps. on higher value gap driven by cost
deflation
Strong margin expansion despite tough market dynamics
12
Industrial segments
($ in millions)
Aviation
3Q’15
Healthcare
$
V%
3Q’15
Revenues
$6,001
5%
Revenues
Segment profit
$1,353
7%
Op profit %
22.5%
0.3 pts.
3Q dynamics
• $6.5B orders, (35)% … equip. (58)% on lower
GE90/9X orders; services +13% with spares
+28% … $142B backlog, +11% VPY
$
V%
$4,255
(5)%
Segment profit
$652
(10)%
Op profit %
15.3% (0.9) pts.
3Q dynamics
• $4.5B orders, (4)%, +3% ex. FX … emerging
markets (5)%, +4% ex. FX; U.S. (1)%; Europe
(5)%, +11% ex. FX, China (1)%
• Revenue … equip. (6)% on lower volume with
comm’l. (1)% & military (20)%; services +17%
• Revenue (5)%, +2% ex. FX with HCS +1% & Life
Sciences +8% ex. FX … emerging markets (3)%
• Segment profit +7% on strong services volume ex. FX; developed +3% ex. FX
and positive value gap … margins +30 bps.
• Segment profit (10)%, (4)% organic
 Aviation … tough orders comparisons but continued strong operating results
 Healthcare … better developed markets offset by emerging; R&D investments
13
Industrial segments
($ in millions)
Transportation
3Q’15
Revenues
Segment profit
Op profit %
$
V%
• $0.9B orders, (77)% … Tier 4 comparisons
• Revenue … equipment (2)% with locomotive
11%
shipments +18%, Mining (45)%; services +10%
1.6 pts. • Margins +160 bps. driven by strong value gap
$1,593
3%
$379
23.8%
Energy Management
3Q’15
Revenues
Segment profit
Op profit %
$
$1,773
$127
7.2%
3Q dynamics
3Q dynamics
• $2.1B orders, +2%, +8% ex. FX … equipment +6%
driven by Power Conversion; services (8)%
(2)%
• Revenue … Digital Energy +2%, Power Conversion
F
flat, Industrial Solutions (4)%; organic revenue +6%
3.9 pts. • Margins +390 bps. driven by continued simplification
V%
Appliances & Lighting
3Q’15
Revenues
Segment profit
Op profit %
$
$2,293
$165
7.2%
V%
8%
3Q dynamics
• Revenue … Appliances +10%; Lighting +5% … trad’l.
channels (15)%, LED +65% … now 39% of business
88%
• Op profit +88% with margin improvement driven
3.0 pts. by cost productivity
14
GE Capital
($ in millions)
3Q’15 performance
GE Capital update
Earnings
Verticals-a)
$351
Consumer
795
Run-off/HQ
(411)
Continuing Operations
$734
Earnings from disc. ops.
(347)
Total GECC
$387
• $176B of ENI ex-liq. … $271 incl. disc. ops.
• $97B of liquidity-b) … $82B ex-Synchrony
• Basel 3
T1C-c)
at 13.7%, up 230 bps. VPQ
 Verticals … on track to deliver $1.5B for
2015 … supporting GE Store with pullthrough financing
 Asset sales ahead of plan … ~$126B signed
to date and $60B closed
 Synchrony separation approved … 4Q split
on track
 Expect Consumer to move to discontinued
operations in 4Q
 Planning to apply for SIFI rescission in
1Q’16
Strong operational execution
(a- Verticals include businesses expected to be retained including allocated corporate costs
(b- Liquidity includes cash & equivalents in continuing & discontinued operations & businesses held for sale & certain debt obligations of the U.S. Treasury
(c- Basel 3 Tier 1 Common ratio estimated based on U.S. standardized transitional basis
Note: Individual amounts are rounded. As a result, the sum of the parts presented may not add to the total.
15
2015 operating framework
Operating EPS
1 Industrial
$1.10-1.20
$1.13-1.20
+
+
+
+
Industrial operating EPS up double digits … YTD +15%
Segment organic growth of 2-5% & margin expansion
Corporate ~$2.3B
BD … expect deals to close in 4Q15-a)
2 GE Capital retained ~$.15
businesses (Verticals)
+ Verticals on track
3 Capital asset sales
~$90B
~$100B
+ Impact from GE Capital exit … targeting ~$100B closed
in 2015; +$65B ENI reduction for Synchrony … signings
of $126B drive momentum in ’16
4 Free Cash Flow
+ Dispositions
$12-15B
+
+
+
+
5 Cash Returned
to Investors
$10-30B
~$30B
+ Dividend of ~$9B; buyback based on GE Capital dividend
+ Synchrony split-off estimate $18-21B-c)
CFOA of ~$16B-b); based on ~$3B GE Capital dividend-a)
P&E of ~$4-4.5B
Dispositions of $2-4B … Appliances-a) ~$2B
FCF + dispositions at high-end of range, including
Appliances proceeds-a)
(a- Subject to regulatory approval
(b- Taxes associated with dispositions included in net disposition proceeds
(c- At current prices; dependent on offer terms and movement of GE & SYF stock prices prior to and during exchange
16