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Q2 2020

GE releases its 2Q 2020 Results

Steve Winoker
July 29, 2020

I hope you and your families remain safe and healthy. GE released its second quarter 2020 results today, and I encourage you to read the full materials and listen to our earnings call at 8:00 AM ET.
Key points on GE’s financial performance this quarter:

  • Total orders $13.8B, (38)%; organic orders (35)%
  • Total revenues (GAAP) $17.7B, (24)%; Industrial organic revenues* $16.3B, (20)%
  • Industrial profit margin (GAAP) of (5.7)%, (390) bps; adjusted Industrial profit margin* (3.2)%, (1,170) bps
  • Continuing Earnings Per Share (EPS) (GAAP) of $(0.27), including non-cash goodwill and other charges and the impact of marking GE's investment in Baker Hughes to market; adjusted EPS* $(0.15)
  • GE Cash Flow From Operating Activities (GAAP) $(1.6)B; Industrial free cash flow* $(2.1)B

Our CEO Larry Culp 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."
As we indicated to all of you during the last earnings call and investor conferences, 2Q’20 was indeed a challenging quarter, hitting our shorter cycle, more profitable businesses the hardest. In Aviation and GECAS specifically, it’s no surprise that we’ve seen a steep decline in commercial demand due to COVID-19. In Healthcare, demand for COVID-19 related products remained elevated in 2Q’20, but we saw pressure on our Pharmaceutical Diagnostics business. And in Power and Renewable Energy, some outages shifted to the right and field mobility constraints impacted projects. That said, we’re seeing some early signs of improvement in our end markets and businesses with GE/CFM departures now down less than (50)% below our January baseline, Healthcare scans recovering to near our 4Q baseline in July, and accelerated cost out measures executed in Power and Renewable Energy.

As part of our efforts to mitigate the financial impact of COVID-19, we made progress on the $2B+ of cost actions and $3B+ of cash actions targeted for 2020, completing more than a third to date. Of note, while earnings was negative $(0.15) and Industrial free cash flow was negative at $(2.1)B, our Industrial free cash flow came in almost $2B better than the midpoint of the guide we provided at a conference in May. This was primarily due to working capital improvement with better than expected collections across all businesses. In all, the teams across GE met this quarter head-on with improving operational execution and further de-risking actions.

We remain committed to improving our balance sheet. During the second quarter, GE 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. Year to date, GE has reduced debt by $9.1 billion—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. Furthermore, we are launching a program to fully monetize our Baker Hughes position over approximately three years.

Looking forward, we expect earnings and cash to improve in the second half of 2020 as end markets stabilize, our cost and cash actions take hold and decrementals improve. In addition, as Larry highlights in the press release, we expect to return to positive free cash flow in 2021.

For the last 18 months, we have introduced and carried over some enhanced disclosures in the 10-K/Q. For this quarter, we thought it would be helpful to point out a handful of key disclosures/process improvements:

  • Process improvement: Given the current environment and working remotely, our financial closing and reporting team re-evaluated and streamlined processes, which yielded an additional day efficiency in our closing cycle vs 1Q’20. Also, we reduced the 10-Q page count by 11 pages to 66 pages from 2Q’19 to 2Q’20.
  • COVID-19: Provided an update of cost and cash actions and segment performance, including our Aviation segment and our GECAS business within our Capital segment.
  • Portfolio actions: Baker Hughes investment unrealized gain based on June 30, 2020 share price; sold all remaining held for sale businesses, including Lighting.
  • Liquidity and borrowings: Debt offering and tender results and recent credit rating impact; 2Q’20 liability management actions, 4Q’19 to 2Q’20 debt walk provided in earnings presentation Appendix.
  • Insurance and pension: Continued to disclose COVID-19 related market events may have an effect on assumptions surrounding future insurance policy benefit reserves, which is tested annually in 3Q, and/or our funded status of our pension plans, which is measured annually in 4Q.
  • Impairments: Non-cash goodwill impairments at our Additive business within our Aviation segment and GECAS business within our Capital segment; non-cash impairment at our GECAS business related to higher risk customers within our aircraft operating lease portfolio, which is also subject to a detailed annual review in 3Q.
  • Aviation long-term service agreements: A charge to reflect the cumulative impacts of changes in billing and cost assumptions for certain agreements given the continued uncertainty in the airline industry.

As Larry said today, "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."

We appreciate your continued interest in GE, and please take care.

Important information about our 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 our corporate blog at, as well as GEs 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.