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Q3 2020

GE releases its 3Q 2020 Results

Steve Winoker
October 28, 2020

I hope you and your families remain safe and healthy. GE released its third 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 $15.5B, (31)%; organic orders (28)%
  • Total revenues (GAAP) $19.4B, (17)%; Industrial organic revenues* $17.9B, (12)%
  • Industrial profit margin (GAAP) of (7.2)%, (510) bps; adjusted Industrial profit margin* 5.6%, (440) bps
  • Continuing EPS (GAAP) of $(0.13), including non-cash impairment charges in Steam Power and the impact of marking GE's investment in Baker Hughes to market; adjusted EPS* $0.06
  • GE CFOA (GAAP) $90M; Industrial free cash flow* $514M

Our CEO Larry Culp said, “I am proud of the GE team’s work in the third quarter to build momentum while continuing to protect the safety of our employees, serve our customers and communities, and preserve GE’s strengths. We are improving our profit and cash performance with organic margin expansion in every segment except Aviation, though orders more broadly remain under pressure. While our work continues, GE’s transformation is accelerating, and we expect Industrial free cash flow to be at least $2.5 billion in the fourth quarter and positive in 2021. We remain focused on unlocking upside potential for the long term.”
As we continue to navigate the ongoing impact of the COVID-19 pandemic, like everyone else, we’ve seen a material impact on year-to-date results. That said, we delivered sequential improvement in 3Q. We continue to manage Aviation aggressively, executing against the $1B+ cost and $2B+ cash actions in that business. This delivered sequential improvement, despite the challenging market conditions. We believe that air traffic and the aerospace industry will recover, but the recovery will take years, not months or quarters. In Healthcare, we continue to deliver on our cost actions, and this is resulting in solid margin expansion. While COVID-19 related demand has moderated, we saw scan data approach the pre-COVID baseline this quarter. Power and Renewables have been less impacted by the pandemic. Our focus has been driving their turnaround progress. Improved operational discipline and cost out are starting to show in their results with margin expansion in both of these businesses.
As part of our efforts to mitigate the financial impact of COVID-19, we made progress on the company’s $2B+ cost and $3B+ cash actions targeted for 2020, completing 75% to-date. Positive Industrial FCF of $0.5B was improved $2.6B sequentially, primarily due to better working capital and earnings. In all, we’re building momentum – our teams across GE are managing through this still-difficult environment working to improve their businesses in some way every day.
We remain committed to improving our balance sheet, and we ended the third quarter with $39B of total cash. Year to date, we have reduced GE debt by $11.7B with $8.1B from GE Industrial and $3.6B from GE Capital. Since the beginning of 2019, we have reduced our debt by ~$25B. In the third quarter, we completed our Insurance premium deficiency test (also known as a loss recognition test, or LRT); this resulted in a small positive margin and no charge. We’re also fully monetizing our remaining $5B stake in Baker Hughes over the next three years, and in October, we received the first proceeds of ~$400M. 
There are some 10-Q items that I would like to highlight for you, including ongoing enhancements we have been introducing and carrying forward in the 10-K/Qs over the last 18 months:

  • Process improvement: Given the current environment and working remotely, our financial closing and reporting team continues to reevaluate and streamline processes. Also, we reduced the page count of our 10-Q by 17 pages to 67 pages from 3Q’19 to 3Q’20. In order to more closely align with our footnote presentation, we converted the scaling of all MD&A tables from dollars in billions to millions.
  • COVID-19: Provided an update of cost and cash actions and segment performance.
  • Impairments: Non-cash asset impairments related to property, plant and equipment and intangible assets at our Steam business within our Power segment related to our recent announcement that we intend to exit new build coal power; completed detailed annual review of our aircraft operating lease portfolio at our GECAS business, resulting in a non-cash impairment charge.
  • SEC investigation: Recorded $100M reserve related to the investigation in its entirety encompassing all matters under investigation. Note 19 provides additional information.
  • Baker Hughes investment: Recorded an unrealized loss based on September 30, 2020 share price. Launched program to monetize our Baker Hughes position over approximately three years and received first sales proceeds in 4Q.
  • Liquidity and borrowings: Plan to provide capital contribution to GE Capital for Insurance statutory funding in 4Q of 2020 and in 2021, expect an additional contribution from GE to GE Capital for Insurance statutory funding of approximately $2 billion. Further contributions depend on GE Capital’s performance, including GECAS operations and the Insurance CFT results in light of the uncertain environment.
  • Insurance: Completed our annual Insurance U.S. GAAP premium deficiency test, which resulted in a small positive margin above current reserve levels and did not impact earnings.

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.