GE to restate 2016, 2017 earnings


GE asset sales catch the attention of private equity firms

Carlyle Group Co-CEO Glenn Youngkin discusses how his company plans to continue its success and what the future holds for General Electric.

The challenges continue for General Electric which disclosed it will restate two years of earnings in order to adopt a new accounting standard.

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This will result in the restated earnings per share being lower by about 13 cents for 2016 and 16 cents for 2017, driven primarily by the required changes in accounting for long-term product service arrangements, GE said in the 10-K filing released Friday.

The restatement will come when the company reports first quarter earnings in April of this year.

This is the latest knock for the industrial giant struggling with a turnaround. In the filing, CEO John Flannery, who took over for Jeff Immelt last August, acknowledged that 2017 was a "challenging year" while adding that management was "continuing to review every option to ensure the best results for our customers, employees and owners," as stated in the filing.

Flannery announced in October sweeping plans to sell $20 billion worth of company assets. Last week investors learned Baker Hughes would not be one of those just yet. GE CFO Jamie Miller confirmed it will hold onto the oil services giant squashing speculation the unit would be sold as part of the company's efforts to downsize and raise cash.

GE is also part of an industry-wide investigation of subprime mortgages involving the Department of Justice. In the filing the company disclosed it was issued subpoenas for GE Capital and its WMC Mortgage arm, now defunct, as part of the review. It is cooperating with all inquiries.

GE has faced a myriad of bad news over the past year alone, including taking a $6.2 billion after-tax charge over the fourth quarter of 2017, which it announced in mid-January following a review of its GE Capital insurance portfolio. The company said GE Capital expects to make statutory reserve contributions of $15 billion over seven years.

While GE shareholders have been bearing the brunt of a company in turmoil, private equity investors see some opportunity.

“I think everybody is standing poised and ready to see what their strategic review brings forth as far as what businesses are going to stay in. Whether they stay as monolithic GE or whether they … split into separate companies. But I would say the world of private equity is watching to see what happens there because they are just such a good company,” Youngkin said Friday on “Maria Bartiromo’s Wall Street.”

Shares of GE have dropped 25% so far this year and closed at $14.49 on Friday.

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