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The GE Brief: July 29, 2020

GE Reports Staff
July 29, 2020

Recognizing a still-difficult COVID-19 environment, GE Chairman and CEO H. Lawrence Culp Jr. told analysts and investors during GE’s second-quarter earnings presentation on Wednesday, the company has started to see “some early signs of improvement in June and July.” Culp stressed that GE took “head-on” the challenges posed by the second quarter, executed “well operationally,” and utilized actions “to further de-risk the company.” He noted that “based on what we see today and the actions we've taken, sequential improvement in earnings and cash in the second half of 2020 is achievable. And, we expect to return to positive Industrial free cash flow in 2021.”
By the numbers: GE recorded total orders of $13.8 billion in the second quarter, down 38% over the same period last year. Organic orders were down 35%. Total revenues (GAAP) stood at $17.7 billion, down 24%; industrial organic revenues* reached $16.3 billion, down 20%. Industrial profit margin (GAAP) was negative 5.7%, down 390 basis points; adjusted Industrial profit margin* stood at negative 3.2%, down 1,170 basis points. Continuing earnings per share (GAAP) were negative $0.27, including noncash goodwill, other charges and the impact of marking GE's investment in Baker Hughes to market. Adjusted EPS* reached negative $0.15. GE’s cash flow from operating activities (GAAP) was negative $1.6 billion, and industrial free cash flow* negative $2.1 billion.
During his presentation, Culp stressed that despite the current environment, GE’s backlog “remains a great strength at $381 billion with about 80% in services. While services are hurting in the near-term, they have a multiyear time horizon and keep us close to our customers,” he said. He also pointed out that the company has been de-risking its balance sheet, and — by putting emphasis on maintaining liquidity in the current environment — ended the quarter with $41 billion in cash. GE also proactively extended near-term debt maturities, and continued to reduce debt. Since the beginning of 2019, the company reduced debt by $22 billion.
The earnings results are here.
In a LinkedIn post published in conjunction with earnings, Culp thanked his GE colleagues “who are working tirelessly to serve our customers and communities.” For example, he said, at GE Aviation and GE Capital Aviation Services, which leases aircraft to air carriers, many of the economic indicators dating back to March — like airlines conserving cash, not flying the planes they have, limiting maintenance spend and deferring orders — remained relevant. “We’re aggressively managing these businesses with cost and cash actions and partnering closely with our customers on a daily basis,” he wrote. He also noted increased demand for some GE Healthcare products — ventilators and patient monitors, for example — but  “procedure deferrals are still affecting other products, including those in our high-margin Pharmaceutical Diagnostics business. Despite these volume and mix pressures, our team held margin flat,” he said.
Embrace reality: Culp summarized GE’s operations in three core steps: embracing reality, redefining winning and executing its plan. “The current environment is what it is,” he wrote. “So, we’re further optimizing our cost structure, and as mentioned before, we’re targeting more than $2 billion of cost actions and $3 billion of cash actions in 2020.” He also pointed out that GE businesses shifted focus “from margin expansion to decremental margin improvement.” Finally, he said GE hasn’t lost sight of accelerating its transformation. “For example, in Gas Power, the team is leveraging lean problem-solving in the new product introduction process for the third generation of the HA turbine, the 7HA.03. This allows us to drive efficiencies and solve potential problems earlier than ever, focusing on both the present and the future.”
You can read the full post here.
Angie Norman is comfortable with uncertainty. As one of GE’s experts in lean management, it’s her specialty to crack complex problems in urgent need of a solution. So in March, when GE Healthcare needed to set up and attach accessories to thousands of medical monitors in record time to serve patients during the pandemic, she was exactly the right person for the job. These monitors track heart rate and other vital signs, and doctors and nurses need them to treat ailing patients. It was a complex task in a small window of time.
The common goal: Norman doesn’t even work for GE Healthcare; she works for GE Aviation. But applying her knowledge of lean management, the business methodology which emphasizes waste reduction and efficient production and is at the heart of GE’s turnaround, she got to work. She secured space to assemble the monitors in GE Aviation’s Cheltenham plant in England, which typically makes aircraft power systems. She spearheaded worker training and drafted a plan with her team, who were soon putting in two shifts a day assembling the monitors. The first batch was ready to ship in early May, just six weeks after the project had begun. It was all about having a plan to execute, Norman said — and the teamwork to execute it: “It shows how powerful a common goal can be.” 
Learn more here.

Important information about GE's forward-looking statements.
*Non-GAAP Financial measures
In this document, we sometimes use information derived from consolidated financial data but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP).  Certain of these data are considered “non-GAAP financial measures” under the U.S. Securities and Exchange Commission rules. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in our quarterly report on Form 10-Q and the GE earnings supplemental information package posted to the investor relations section of our website at, as applicable.

GE’s Investor Relations website at and corporate blog at, as well as GE’s Facebook page and Twitter accounts, contain a significant amount of information about GE, including financial and other information for investors. GE encourages investors to visit these websites from time to time, as information is updated and new information is posted.



“When we look back on a very challenging quarter, we will remember it as one where our team came together and met it head-on, executing well operationally and taking actions to further de-risk our company. Together, we are building a world that works.”

— H. Lawrence Culp Jr., GE chairman and CEO


Quote: GE Reports. Images: GE Aviation.