1. GE 2009 third quarter
performance
October 16, 2009
โ Financial results & company highlights
"Results are preliminary and unaudited. This document contains โforward-looking statementsโ- 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 โexpect,โ โanticipate,โ โintend,โ โplan,โ โbelieve,โ
โseek,โ โsee,โ or โwill.โ Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual
results to be materially different than those expressed in our forward-looking statements include: the severity and duration of current economic and financial conditions, including volatility
in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of U.S. and foreign government programs to restore liquidity and stimulate national
and global economies; the impact of conditions in the financial and credit markets on the availability and cost of GE Capitalโs funding and on our ability to reduce GE Capitalโs asset levels as
planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; 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 soundness of other financial institutions with which GE Capital does business; the adequacy of our cash
flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the current level; the level of demand and financial performance of the major
industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and healthcare; the impact of regulation and regulatory,
investigative and legal proceedings and legal compliance risks, including the impact of proposed financial services regulation; strategic actions, including acquisitions and dispositions and
our success in integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature.
These 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.โ
โThis document may also contain 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 supplemental information posted to the investor relations section of our website at www.ge.com.โ
โIn this document, โGEโ refers to the Industrial businesses of the Company including GECS on an equity basis. โGE (ex. GECS)โ and/or โIndustrialโ refer to GE excluding Financial Services.โ
2. Overview
Global environment improving but expecting gradual recovery
3Qโ09 earnings of $2.5B โฆ $.22 EPS, (51)% driven by Capital Finance
โข Industrial segment profit +4% โฆ Infrastructure, Media, C&I
โข Capital Finance $263MM, (87)% โฆ favorable tax credits as expected
โข Aggressive cost out โฆ $.05 EPS restructuring and other charges in 3Q
Executing through the recession
โข Cash flow of $4.4B in 3Qโ09 & $11.5B, +1% YTD โฆ positioned for $15B+ total year
โข $61B consolidated cash โฆ parent cash increased vs. 2Q
โข Strong industrial margin expansion โฆ 16.3%, + 260 bps. versus 3Qโ08
โข Infrastructure orders (18)%, but backlog increased to record high of $174B
โข Services continue to remain strong
โข GE Capital Finance reserves +$0.8B in 3Q, coverage at 2.08%
Continuing to invest in the long term
โข Tracking to higher โ09 R&D spend vs. โ08
โข Broke ground on GE Energy Technology Center in Russia
โข ScanWind acquisition expanding offshore wind capability
Preliminary 2009 third quarter results/2
3. Environment
Big factors Status
Dramatic financial โBetterโ + Credit markets improving
crisis + Pricing attractive
โ Losses still remain high
Difficult recession โBottomingโ + Some signs of life
+ Delinquencies leveling off
โ Excess capacity, CAPEX constrained
โ Unemployment
Global growth โAvailableโ + Emerging markets relative strength
Environment improved in 3Qโ09
Preliminary 2009 third quarter results/3
4. Executing through the recession
Stabilize Outperforming Strengthen the
Capital Finance + in a + balance sheet
tough economy
Funding well ahead Protect backlog Strong cash generation
of plan
Services strength Maximize financial
Capital ratios flexibility
strong & improving Global orders
Strong margins on Lower cost
new originations
Expanding margins
Working through
Real Estate cycle
Status
Much improved As expected Much improved
Preliminary 2009 third quarter results/4
5. Capital Finance safe & secure
($ in billions)
Long-term debt funding GECS commercial paper Leverageโb)
$84 7.7:1
$72 GECS 5.9:1 5.7:1
$45 $35-40 $50 $50
GECC 7.1:1 5.6:1 5.4:1
35โa)
'08 '09 '10F 4Q'08 2Q'09 3Q'09 4Q'08 2Q'09 3Q'09
(a- 2009 YTD as of 10/5 (b- net of cash & equivalents with hybrid
Cash & backup bank lines >2X CP debt as equity ex. noncontrolling interests
Tier 1 common ratio Ending net investmentโc)
7.4% 7.5% $525
5.7% $501
$485
GECC $475-485
GECS 4.7 6.4 6.5
4Q'08 2Q'09 3Q'09 4Q'08 2Q'09 3Q'09 4Q'09E
GECS $53 $68 $71 (c- Capital Finance excluding effects of FX
equity
Strong execution through the crisis โฆ
ahead of plan on all metrics Preliminary 2009 third quarter results/5
6. Backlog growing
($ in billions)
Orders $18.4/(18)% 3Q VPY/(18)% YTD Protecting backlog ($B)
Equipment Services $172 $171 $169 $174
$158
$ V% $ V% $125 51 50 48 47
$110 49
Energy $2.6 (50)% $3.9 9% 31
Equip. 23
O&G 1.3 6 0.8 (5)
Aviation 1.9 (37) 2.6 1 121 121 122 127
CSA 87 93 109
Healthcare 2.4 (13) 1.5 (1)
Transportation 0.2 (23) 0.5 (43)
Ent. Solutions 0.9 (24) โ โ '05 '06 '07 '08 1Q 2Q 3Q
Total $9.2 (32)% $9.2 3%
2009
Equipment orders Highlights
$14.4 $13.4 $13.2 Equipment orders +$0.7B vs. 2Qโ09 โฆ
$12.9 continuing to win global orders
$9.9 +
$8.4 $9.2 Service orders +3% driven by strength in
Energy with Smart Grid
Backlog at all-time high: equipment steady &
continuing to acquire service commitments
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE โ $7.9B new CSA additions 3Qโ09
2008 2009
Equipment orders improving โฆ up $741MM vs. 2Qโ09
Preliminary 2009 third quarter results/6
7. Industrial revenues
($ in billions)
Key initiatives from 12/08 5 Services revenue solid
1 Protect backlog: up YTD, +$4B vs. 2Q +
โ Cancellations remain low: $0.2B in 3Q, $35
<$0.8B YTD $32
2 Growth in emerging markets
โ China +26%, India +12%, E. Europe +18%
3 Launching more new products โฆ R&D up
'07 '08 '09E
+ Extending product lines
+ Big initiatives: ecomagination, Margins + + +
CSA B/L $109 $121 $127
healthymagination
+ Key product launches + 9 new Aviation CSAs $5.4B, 7 new Energy
+ Growing adjacencies CSAs $1.7B
+ Healthcare emerging market strength โฆ
4 Stimulus โฆ only beginning, expect ramp up China +19%, India +8%
in 4Qโ09/2010 + O&G CSA backlog +7% YTD
+ Wind + Smart Grid + Transportation Marine & Stationary up
+ HCIT + Global Rail double digits
Total backlog at $174B โฆ record high
Preliminary 2009 third quarter results/7
8. Lowering cost
($ in billions โ pretax)
Aggressive base Restructuring & other
3Q margin improvement cost reduction charges - pipeline โ09/โ10
16.3% $44 $2B+
โ bps. $40
13.7% โ
Energy 100
Tech 10 $0.4B 4Q ~2 years
approved
NBCU 90
$0.9B
C&I 60 3Qโ09
3Q'08 3Q'09 '08 '09E '10F Projects Payback
CM expansion of 4.6 pts. Significant restructuring & 3Q projects
โ Positive value gap โฆ price other charges to date โ Incandescent lighting
expansion $0.5B โ โ07 โฆ $2.0B โ Transportation resizing
Service margins +4 pts. โ โ08 โฆ $1.8B โ Optimizing services footprint
No repeat of Olympics +1 pt. โ โ09 YTD โฆ $1.9B $0.7B+ being reviewed for
3Q base costs 10% potential 4Qโ09/โ10 execution
On track for total year growth
Continuing to restructure โฆ positioning for reset economy
Preliminary 2009 third quarter results/8
9. Generating cash
($ in billions)
3Q YTD CFOA GE cash balance walk Consolidated
cash $61B
$13.6 V%
Total
GECS $11.5 (16)%
dividend 2.3 Beginning balance 1/1/09 $12.1
CFOA 11.5
Industrial 11.3 1% Dividends (7.8)
P&E (1.8)
GECS capital contribution (9.5)
2008 2009
Acquisitions/dispositions 0.5
No GECS dividend, Industrial cash flow
higher year over year Change in debt/other 0.2
Focus on working capital driving strong September 2009 $5.2
cash generation
CFOA on track for $15B+ total year
Preliminary 2009 third quarter results/9
12. 3Q items
(Earnings per-share)
Impact Comments
Corporate restructuring & $(.05) Cost structure improvements
other charges Footprint reductions & organization
realignment
Marks & impairments (.06) Real Estate, Treasury marks & other
impairments
NBCU items .01 AETN gain less impairments & other
charges in NBCU
$(.10)
Continued restructuring improves cost base
Preliminary 2009 first quarter results/ 12
13. Capital Finance highlights
($ in millions) Update from July 28
3Qโ09 $ V% Funding
+ โ09 ENI reduction targets already achieved
Revenues $12,161 (30)% + GECC funded >90% of 2010 plan
โ Negative carry cost ~$0.7B in โ09
Segment profit $263 (87)%
Assets $551B (11)% Originations
+ $23B of commercial originations YTD
Key 3Q business results + Underwriting business at attractive returns
Assets Segment Losses
($B) profit ($MM) + Slightly better than Fed base case
$ V% $ V% โ Real Estate continues to be difficult
Consumer $180 (16)% $434 (45)% Reserve coverage
Real Estate 84 (6) (538) U + Reserves $7.3B, up $0.8B from 2Q
+ Coverage 2.08%, up 26 bps.
CLL 214 (14) 135 (65)
GECAS 50 1 191 (33) Cost out
EFS 23 3 41 (87) + Delivered $2.6B cost out YTD
Executing well in difficult environment
$2B Capital Finance earnings YTD
Committed to GE Capital, strengthening fixed charge coverage agreement
Next Capital Finance analyst meeting December 8
Preliminary 2009 first quarter results/ 13
14. Capital Finance portfolio quality
Equipment Consumer
30+ delinquencyโa) Non-earners
13.38%
13.23% 7.79% 7.78%
11.80%
Mortgage 6.81%
10.56% Mortgage
2.84% 3.01% 9.22% 5.47%
8.80%
Delinquenciesโa) 2.78% 8.20% 8.73% 4.59% 4.71%
4.78%
7.43%
6.38% Total 4.19%
2.17% 2.86% 3.33% Total
2.45% 2.74%
1.61% 2.27%
5.62% 6.02% 5.92% 5.95%
1.68% Non-earners 4.70%
1.46% Non-mortgage
2.16% 2.21% 2.33%
1.75% Non-mortgage
1.41%
3Q'08 4Q'08 1Q'09 2Q'09 3Q'09 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09
Drivers Drivers
Delinquency up 23 bps., driven by North America delinquencies up 31 bps. to 7.27%
Americas portfolio partially offset by โ Delinquency up from seasonal low but rate of increase slowing
Asia & Europe U.K. home lending down 9 bps. from 2Q
Non-earners +41 bps. vs. 2Qโ09 โ Continued improvement in HPI (3 consecutive months)
โ Driven by senior secured loans โฆ โ Net gains on REO sales vs. marks in all 3 quarters
well collateralized Global banking delinquencies flat โฆ strong collections efforts
(a- managed assets
Tough environment โฆ but some signs of stabilization
Preliminary 2009 third quarter results/14
15. Capital Finance reserve coverage
($ in billions)
$7.3 Commercial
$6.6
Allowance Reserves increased by $0.6B in 3Qโ09 โฆ
$5.7 3.1 coverage rate to 1.43%
for losses $5.3
2.5 โ Strong collateral will lead to ultimate
2.0 loss significantly below non-earners
Commโl. 1.7
Consumer
4.1 4.2
Consumer 3.6 3.7 Coverage at 3.11%
U.S. Card & Sales Finance
โ Coverage rate up 45 bps. to 7.02%
โ Reserves/non-earnings 209%
Mortgage
4Q'08 1Q'09 2Q'09 3Q'09
โ Coverage rate up 26 bps. to 1.59%
Reserve โ Reserves/non-earnings 20%
coverage 1.42% 1.59% 1.82% 2.08% โ U.K. REO sales realization at 115%
Reserve coverage +$757MM, +26 bps. vs. prior quarter
Preliminary 2009 third quarter results/15
16. Capital Finance non-earning exposure walk
($ in billions)
Commercial Consumer
$7.2 (1.5)
$6.5 (1.8)
(1.8)
100%
recovery
4.8 (1.4)
Non-
189%
(2.3) coverage mortgage
$3.3
Loans in (2.8)
non-
recovery/ $3.1 mortgage
workout Cure
reserves
Expect full
recovery/ 186%
cure coverage 206%
coverage
1.6
Collateral $1.0
value on
remaining (0.1) 0.5
exposure
3Qโ09 Estimated 3Qโ09 3Qโ09 Mortgage Estimated Estimated Estimated 3Qโ09
non-earning loss exposure non-earning non-earnings collateral MI loss mortgage
reserves
value exposure reserves
2Qโ09 coverage 173% 173%
Preliminary 2009 third quarter results/16
17. Commercial Real Estate
Debt portfolio quality Equity operating metrics
4.03% 4.19%
Delinquencies Original
2.24% Metrics ($MM) outlook 3Q YTD Status
2.88% 2.90%
0.62%
1.15%
NOI $1,104 $1,199
0.28% Non-earners (pre-tax)
1.22%
0.19% 0.41%
0.18%
Gains $124 $88
2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09 (net)
Non-earners steady โฆ $1.3B 2Q and 3Q Impairments $291 $467
(pre-tax)
Specific reserves $562MM 3Q primarily due
to revaluation review Occupancy 80% 79%
โ 77% of impaired loans with specific reserves
are current
Leasing 18.0 19.1
Reserve coverage increased from 1.2% to 2.3% (MM sq. ft.)
Risks understood and manageable
Preliminary 2009 third quarter results/17
18. NBCU highlights
($ in millions)
3Qโ09 $ V% 3Qโ09 reported 13%
AETN less 3Qโ09 impairments (22)
Revenues $4,079 (20)% & other charges
Segment profit $732 13% Adjusted (9)%
3rd quarter dynamics
1 Cable 3 Film & Parks
+ Cable strength continues โฆ USA rated #1, - Under performance at the box office โฆ
delivered more viewers in 3Q than any cable Inglourious Basterds only success
network has in any quarter - Tough comps versus last yearโs Mamma Mia
+ Syfy +30%, CNBC +9%, Bravo +4% +/- Continued weakness in Parks attendance,
offset by strong cost control
2 Broadcast 4 Digital & Other
+/- Prime ratings as expected, scatter above upfront + hulu continues strong growth
+ Successful launch of The Jay Leno Show + Gain on AETN partially offset by impairments
+ Conan & Fallon win 3Q Late Night in key demo & other charges
+ Local markets showing signs of improvement + Continued costs/workforce reduction
Performance in line with industry
Preliminary 2009 third quarter results/18
20. Energy Infrastructure highlights
($ in millions)
3Qโ09 $ V% 3Q dynamics
Revenues $8,917 (9)% Energy
Segment profit $1,582 11% โข $6.5B orders, (25)% โฆ expect Kuwait in 4Q
โข Revenues (11)% โฆ Thermal (30)%, Water (16)%,
Wind & Aero flat โฆ Energy Services +10%
Key 3Q business results โข Segment profit +11% โฆ $0.4B price + deflation
Segment
Revenues profit
$ V% $ V% Oil & Gas
Energy $7,128 (11)% $1,273 11% โข $2.1B orders, +1% โฆ equipment backlog $6.9B,
CSA backlog $3.8B
Oil & Gas 1,953 3 338 11 โข Revenues +3% โฆ equipment +7%, service (2)%
โข Segment profit +11% โฆ value gap & base cost
control strong drivers
Strong operating leverage despite fewer shipments
Preliminary 2009 third quarter results/20
21. 2009 company update
EPG 3Q YTD
Energy ++ +14%
+ Solid service position
Infrastructure
3% โ Lower equipment sales
Technology + (5) (3)% + Strong cost out/margins
Infrastructure
+ Global stimulus
NBCU โ (27)
Capital Finance Profitable $2.0B + Funding solid; originations strong
โ Tough loss environment
Corporate/C&I Flat (7)% + C&I better
+ Plan to do more restructuring
Strong business execution in tough environment
Funding more restructuring
Improving cost structure for 2010+
Preliminary 2009 third quarter results/21
22. Summary
1 Global environment improving but expecting gradual recovery
2 Very solid operating execution versus outlook for this year
3 Dramatically strengthened funding & balance sheet at GE Capital;
GE parent is accumulating cash โฆ achieved safe & secure objectives
4 Highly valuable Industrial backlog โฆ service model is robust โฆ
equipment margin expansion is proven
5 Will continue to invest for long-term growth
Preliminary 2009 third quarter results/22