General Electric (GE -2.11%) made progress toward reducing debt and solidifying its balance sheet. The company made a total of $4 billion in debt repayment, with $1.5 billion was repaid by GE in intercompany debt to GE Capital, and GE voluntarily pre-funded its estimated pension fund requirements to 2023 to the tune of $2.5 billion.
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Earlier in the year GE had planned to make $4 billion to $5 billion in pension contributions to at least 2022. However, due to "better-than-expected pension asset performance in 2020" GE is able to fund its requirements to around a year later and for $1.5 billion to $2.5 billion less.
It implies GE will have more of the future free cash flow it generates available to be used by the company.
GE now expects to reduce debt by $14.5 billion in 2020, with $9.6 billion coming from GE Industrial and $4.9 billion from GE Capital. Those figures would put GE slightly ahead of its original debt reduction plans which were made before the COVID-19 pandemic hit.
| General Electric's Debt |
Industrial Debt |
GE Capital Debt |
|---|---|---|
|
At Year End 2019 |
$32.9 billion |
$59 billion |
|
Year end 2020 plan in March |
$23 billion |
$55 billion |
|
Current year end 2020 plan |
$23.3 billion |
$54.1 billion |
Data source: General Electric.
As such, GE's overall debt is set to be lower than planned for in March, and pension fund requirements will be pre-funded to 2023 rather than 2022 as originally planned. It's a good result considering how badly GE Aviation got hit by the pandemic.
GE still has plenty of debt, but CEO Larry Culp continues to solidify the balance sheet, improve underlying free cash flow generation and make the stock more investable.
