General Electric Company (GE) — Q1 2015 Earnings Call Transcript

Thank you. Good morning, and welcome everyone. We are pleased to host today’s first quarter 2015 earnings webcast. Regarding the materials for this webcast, we issued the press release, presentation and supplemental earlier this morning on our website at www.ge.com/investor. As a reminder, elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today. Those elements can change as the world changes. Please interpret them in that light. For today’s webcast, we have our Chairman and CEO, Jeff Immelt; and our Senior Vice President and CFO, Jeff Bornstein. Now I’d like to turn it over to our Chairman and CEO, Jeff Immelt.

Thanks, Matt. GE had a good quarter in a slow growth and volatile environment just to give you an economic read from the world of GE. We see the US getting a little bit better every day, Europe is slightly improving, overall, China remains good for GE. Resource-rich markets are mixed. We expect to have positive revenue in places like the Middle East, Latin America, and Africa. Meanwhile, Russia and Australia will be tough. We are seeing the world that we plan for. Industrial EPS grew by 14% despite having $0.03 of uncovered restructuring. Operating EPS was $0.31 excluding the impact of the capital announcement. Organically, orders were up 1% and revenue grew 3%. Industrial segment profit grew by 9% or 12% organically with margins up 120 basis points. Oil and gas had a solid first quarter. Organically, they were positive in orders with revenue flat. Profit was up 11% organically. The oil and gas market remains volatile with some segments under pressure. However, our diversified oil and gas platforms delivered in the first quarter. We are on track for our targets in 2015. We are running the company well. We spent a bit of time last week discussing capital allocation. I would only reiterate that we are on full execution of our GE Capital plan. All of our CFOA targets and capital allocation goals are in line with our framework. We remain on track for industrial EPS of $1.10 to $1.20. Orders were up 1% organically and we finished the quarter with $263 billion of backlog. Again, oil and gas orders were up 2% organically, as they closed a few big Subsea deals. Orders pricing declined slightly. Service orders were up 3% organically with broad-based strength. Aviation spares grew by 31% and remained robust. We remain on track for strong orders in predictivity in 2015. New installed orders for healthcare, IT grew substantially in the first quarter. We launched asset performance management in the manufacturing space. Orders for transportation, software, and solutions are planned to be up 50% for the year and we expect consistent growth for wind power and EGPs for the year. We saw some encouraging signs in the quarter. Aviation remains very strong recording $800 million on LEAP orders. The LEAP has won 79% of all neo and max orders. LEAP engines for Neo and C-919 are flying and the LEAP for Boeing is in the test plane and flying soon. The engine is ahead of schedule. The LEAP engine has been one of our most successful product launches in history. Healthcare equipment orders grew by 5% in the US. Transportation continues to record global wins, and they received a $350 million order in Angola. Power conversion grew orders by 10%, and we have solid orders performance in China of 54%. We expected power to have tough comps in the first quarter. In addition, they saw several orders slip into the second quarter. But overall, we see good demand for units in North America, Japan, Saudi, North Africa, Mexico, and Brazil, and we anticipate a strong power orders recovery in the second quarter. Orders support our organic growth target for the year. Our businesses executed well in the quarter. Organic revenue growth was up 3%. Geographic growth is balanced. The US was up 2% and growth markets were up 6%. We saw strength in China up 6%, Middle East, up 19%, Africa up 11%, and Latin America up 13%. From a business standpoint, we had organic growth in six or seven segments, and we have forecast organic growth of up 2% to 5% and remain on track for that. Margins continue to be a good story with growth of 120 basis points. We have targeted 50 basis points of gross margin expansion for the year and we hit 90 basis points in the first quarter. We had favorable mix value gap and productivity in the quarter. Meanwhile, simplification continues to drive good results, and we are seeing more benefits ahead. One of the goals for 2015 is to expand margins in both equipment and service. We grew equipment margins by 120 basis points and service by 70 basis points in the quarter. We are making progress on margins as a company. Industrial CFOA was $900 million. It was less than expected. Our shortfall was driven by some aviation supply chain disruptions and power and water orders timing. We will recover this in the second quarter. At the half, we plan on CFOA to be significantly higher than a year ago and we are on track for CFOA goals for the year. Our balance sheet remains quite strong. In the future, we will continue to look at ways to achieve a more efficient balance sheet. From a capital allocation standpoint, Alstom remains on track for the second half close. We always expected that this deal would get a second look in the US and Europe. Alstom is impacted by similar volatile market dynamics as GE. But we continue to see this as a good strategic international fit for us, and we intend to complete a deal that is good for investors. Now over to Jeff.

Thanks, Jeff. I will start with the first quarter summary. As we discussed last week, we took a significant day one charge related to the exit of the non-vertical assets of GE Capital. On this page, I will start with the underlying financial performance of the company, excluding those charges and then on the next page, I’ll walk you back to our reported financials. We had revenues of $33.1 billion, which were down 3% in the quarter driven by GE Capital which was down 7%. Industrial sales of $23.8 billion were down 1%. Operating earnings of $3.1 billion were down 5% on lower GE Capital earnings. Operating earnings per share of $0.31 were down 6%, with Industrial EPS up 14% and GE Capital EPS down 21%. Continuing EPS of $0.27 includes the impact of non-operating pensions and net EPS includes the impact of discontinued operations. As Jeff said, CFOA for the quarter is $1.3 billion. We had Industrial CFOA of $900 million and received $450 million of dividends from GE Capital. Industrial cash flow was lighter than our expectations driven by the timing on progress collections, particularly in power and water and the impact of an aviation supply chain issue on inventory. These timing issues will reverse in the second and third quarters and our expectation is that the Industrial cash flow will be stronger in Q2 and will be up substantially for the first half versus last year. The GE Capital exit significantly impacts our tax rate for the quarter. As a result, we are providing both the reported tax provisions and tax rates on the bottom left side of the chart. The GE tax rate for the quarter was 23%, in line with guidance we provided. The reported GE Capital tax rate is not meaningful as the charges to shrink the company cause there to be a $6.2 billion tax expense, while there is a significant pretax loss. As we noted previously, GE Capital will have a higher tax rate going forward and we expect variability in the tax rate as we transition the business through the next few years. On the right side, you can see the segment results. Industrial segment revenues were down 1% reported and up 3% organically reflecting about four points of headwind from foreign exchange. Foreign exchange was approximately a $940 million drag on Industrial segment revenue and about $120 million impact on operating profit. Despite this headwind, Industrial segment operating profit was up 9%. GE Capital earnings were down 21% primarily driven by lower Synchrony earnings due to the minority interest and lower assets. I’ll cover the dynamics of each of the segments in a couple of pages, but first, I want to walk through these results to our reported financials. Starting with the first column on the left and working down, as we said, Industrial operating earnings were $1.6 billion, up 14% and GE Capital earnings were $1.5 billion for total operating earnings of $3.1 billion. Including non-operating pension, continuing earnings were $2.7 billion. We had approximately $80 million benefit in discontinued operations associated with the sale of our consumer mortgage business in Australia to bring net earnings to $2.8 billion. The next column is the impact of GE Capital exit announcements as we reviewed with you last week. As we discussed, we took a $14 billion charge associated with classifying businesses and assets held for sale and a $6 billion tax charge. We also took a $2.3 billion discontinued operations charge principally reflecting the real estate transaction. After adjusting first quarter operations for these items, the reported amounts are shown in the third column. So, $2.8 billion of operations net earnings offset by $16.4 billion of GE Capital charges works to the reported $13.6 billion net earnings loss for the first quarter or a loss of $1.35 per share. As we move to the execution plan we shared with you last week, there will be adjustments and we will continue to keep you updated on progress and the impacts of those actions. Next on other items. We don’t have a long list this quarter. We had $0.03 related to ongoing industrial restructuring and other items as we continue to take actions to improve the cost structure of the company. This was $422 million on a pretax basis. But about a third of that related to restructuring oil and gas. As we discussed before, we are taking aggressive actions to reduce our cost footprint given the challenging environment and the team are laser-focused on execution. For the year, we will continue to execute on restructuring projects with urgency. As you are aware, we are expecting some gains this year from appliances and signaling transaction. In the profile on the bottom of the page, we have assumed that appliance gain in the second quarter and the signaling gain in the second half, but both are subject to regulatory approval. Although there will be quarterly variability in gains and restructuring time, we expect gains to equal restructuring for the year on an EPS basis. Next, I will give an update on power and water. Orders for the quarter were $4.5 billion were down 21% driven by equipment orders down 29% and services down 15%. Orders were lighter than expected due to financing delays and timing of agreements, but not competitive losses. For example, we signed a deal for two 7F gas this week that we expected to sign in the first quarter. Our framework for wind and thermal orders has not changed for the year and we expect second quarter orders to be up double-digits. In the first quarter, we booked 21 gas turbines versus 31 a year ago and 376 wind turbines versus 422 turbines in the first quarter of 2014. In terms of edge technology, we reported another order for a 90K in Latin America, and this brings the backlog to 16 units. In addition, we’ve been technically selected on an additional 37 units and are bidding an incremental 50 units beyond that. Distributed power equipment orders were down 53%, driven by nine fewer turbines. We expect distributed power turbine orders to be roughly flat for the year. Gas engine orders were lower by 39% in the quarter driven by softer demand in gas compression. Overall, DPE will continue to be soft for the year. Service orders were down 15% with PGFs down 20%, driven by no repeat of a large upgrade in Japan a year ago and lower new unit installs. EGP orders were 16, down one year-over-year. No change in outlook for EGPs or services for the total year. Revenue of $5.7 billion was higher by 4%, but was up 9% ex foreign exchange. Equipment revenues were up 1% on very strong thermal volume. We shipped 39 gas turbines versus 17 a year ago, that was partially offset by distributed power down 37%, and renewables down 30% on lower unit shipments of 15 and 175 respectively. Service revenues were higher by 7%, driven by higher upgrades including EGP upgrades 21 versus 17 a year ago. Operating profit of $871 million was down 2%, that’s flat ex foreign exchange driven by higher volume offset by negative productivity and supply chain and engineering associated with the H ramp and negative product mix due to lower distributed power. Value gap in the quarter was a positive $12 million. Op profit margins were down 90 basis points in the quarter. We remain on track with the outlook we provided and we expect 100 to 105 gas turbine orders and shipments this year with a good pipeline of activity. We still expect wind shipments of around 3000 to 3200 turbines and AGP upgrades remain on track and distributed power will remain pressured throughout the year. Next, I’ll cover oil and gas. Oil and gas orders of $4.3 billion were down 6% reported, but up 2% organically. Equipment orders of $2.2 billion were down 10% flat organically. Service orders were down 27% on weak North American activity, and TMS’s orders were down 23% with no repeat of two large LNG orders we took in the first quarter of last year. It was still a decent order this quarter for TMS which booked more than $700 million of new orders in the quarter. Subsea and drilling orders were up 74% on large deals we booked in Ghana and Brazil. Service orders of $2.1 billion were down 3% and up 4% organically. Surface was lower by 21% and TMS was down 8% largely due to foreign exchange. Subsea was strong up 21%, MNC was down 1% organically. Revenues of just under $4 billion were flat year-over-year organically and down 8% reported. Reported negative 3% include seven points of foreign exchange and one point of disposition. Equipment revenues were down 13% with TMS down 9% reported, but up 22% ex foreign exchange and Subsea down 8% reported, but up 6% ex exchange. MNC was down 8% organically in the quarter and service revenues were down 2% reported but up 4% organic with Surface down 23% and MNC up 11% organically. Operating profit was up 11% organically, down 3% reported driven by negative FX offset by strong productivity of both base cost and product and service cost. Price was a $5 million drag in the first quarter, but the business delivered positive value gap. Margins improved 50 basis points reported and were 120 basis points better ex the impact of exchange on earnings. This will be a challenging year in oil and gas, but the team has been aggressive on remaking the cost structure of the business and we believe that we remain within the scenarios that supported our total year industrial guidance of $1.10 to $1.20 a share.

Let me add just a little bit to what Jeff said. I think he framed this year well. I think if the quarter, the guys are actually probably a little bit better than what we had anticipated, but you see all the volatility in the market and this is going to – it’s just going to be something we have to continue to evaluate quarter-by-quarter. But at the same time, I think one of the advantages we have at GE is, we can look at other businesses that have the potential to do better and over the context of the company, we’ve got a framework that we are confident in even if other scenarios in oil and gas take place. So I think that’s one of the strengths of GE you’ve seen the way Aviation got out of the gate, and that some businesses get a chance to provide some upside maybe during the year. We are making progress on margins as a company.

Hi guys. Good morning.

Hey, Scott.

I was intrigued by your couple of comments that you made, but Jeff Bornstein, the comment you made on incoming interest into the asset sales. I mean, give us a sense of – and I think the question really is, give us a sense of your availability to sell those assets quicker than you laid out in your timetable, meaning, are the books out, do you have – if the sovereign showed up tomorrow could you hand them the keys and a few months later you can get the deal done or are there some gating factors that could limit the timing?

Well, I would say, Scott, the amount of inbound interest has been incredible in both non-banks and banks, both domestic and international interest. So, I think that we are buoyed by the demand that we see so far. It really depends on the platform and the type of transaction we are talking about and we are organized to be able to do this as quickly as possible. Our goal is to monetize these assets, these platforms as fast as we can. There will be some gating challenges on getting ourselves into position to – as you describe to get all the books together, et cetera, et cetera. But we are going to go out to this as fast as humanly possible and I think the positive point here is the level of interest is really quite incredible.

Okay. That’s good and then, Jeff Immelt you made a comment in your prepared remarks about wanting to get to an efficient balance sheet or something in that regard and I really hadn’t heard you mention those terms before. I mean, how do you think of an inefficient industrial balance sheet? Is there some sort of a range of leverage or some way to measure that?

I think, Scott, in the near term, I think you have to think about us as safe and secure and marching through this process with GE Capital and things like that. Over the long term, I think our desire is to have an industrial looking balance sheet and how fast that goes, again depends on Jeff’s answer earlier on GE Capital assets and things like that, but our goal is to have over time to have investors look at GE as an industrial company and have a balance sheet that lines up more or less with our peers in that space.

Okay. And then last just a clean-up item, what impact on margins was currency in the quarter? Did you have a benefit from hedges in the margin improvement?

No, actually, FX was a drag in margins in the quarter.

Okay.

As I talked about in the Industrial segment margin, we had about $120 million FX drag and hedges were a very small offsets to the total impact. We actually had negative impacts all in.

Okay, very helpful. Thanks guys.

Great, Scott. Thanks.

Thanks and good morning.

Hey, Steve.

Hey, just can we go to that $1.10 to $1 framework. I heard you say that you are running the businesses to the high end of that range. Maybe an idea of what does that mean and also how much – can you just remind us how much of that is Alstom?

Again Steve, the way to think about that is, we have an AIP plan, a compensation plan and that lines up with how the internal business plans work. So, I think we talked to you guys, Steve at the year end meeting at EPG about the comp plan, we have the team too. So when you look at the AIP plan that frames compensation for the leadership team that’s what I referred to and it’s really the same comment I made in January about how we are running the place. I think with Alstom, Steve, we are counting on $0.01 for the year. So, not really much impact in 2015 and more so in 2016.

So, maybe just sticking on that then and maybe this is to Jeff Bornstein on this one. How are you - if we just walked our way from again this $0.31 and given the trending of oil and gas, what – just maybe, I think having just a little challenge given the weakness we are seeing in other companies bringing down guidance in oil and gas and related areas, what give you guys the confidence of getting to that over the next three quarters and more than sequential second half ramp and things like that?

Listen, I think that the scenarios that we shared with you at year end, we updated again in the first quarter call. I am sorry – in the first quarter on the fourth quarter call. We evaluated a number of different scenarios around oil and gas. As we communicated to you, all of those scenarios we felt were within the range of $1.10 or $1.20. We’ve got the team, Lorenzo and the team are executing like crazy on a substantial cost plan. They are right on track, actually slightly ahead of schedule. They are going to take out close to $600 million of cost this year, both base cost and product and service cost. So, when we take a look at where we ended here in the first quarter with oil and gas and how we think about the balance in the next three quarters and very importantly, with all the restructuring that we are doing, the benefits of that largely in the second half of the year, we feel like today, based on everything we know, that those scenarios and that guidance that we gave you remains intact.

Let me add just a little bit to what Jeff said. I think he framed this year well. I think if the quarter, the guys are actually probably a little bit better than what we had anticipated, but you see all the volatility in the market and this is going to – it’s just going to be something we have to continue to evaluate quarter-by-quarter. But at the same time, I think one of the advantages we have at GE is, we can look at other businesses that have the potential to do better and over the context of the company, we’ve got a framework that we are confident in even if other scenarios in oil and gas take place. So I think that’s one of the strengths of GE you’ve seen the way Aviation got out of the gate and that some businesses get a chance to provide some upside maybe during the year.

Okay, and then just lastly on this topic. The 1.4% order pricing, negative order pricing in oil and gas again, that is really - how should we think about that in terms of – are these additional, is there any additional re-negotiation or existing backlog happening or is this new and where are you seeing the weakness on that front?

Yes, so, when you look at order pricing, Steve, that 1.4% is almost entirely associated with the Ghana Subsea order we took. So it’s not broadly across the portfolio. We have not re-negotiated any prices from existing backlog. So that’s where we are today.

Okay, I will hand it on. Thanks a lot.

Great. Great Steve, thanks.

Yes, good morning.

Hey, Andrew.

Just, yes, maybe I’ll let others ask questions on oil and gas, let's focus a little bit elsewhere. As I look into 2016 and what about renewables, and I guess I will touch on oil and gas, what about Subsea because the industry timing on Subsea suggests that orders will be very strong this year, but what does it mean for 2016 in power and water and oil and gas given the specific regulatory dynamic and industry-specific dynamic in these two sub-segments?

So, I think, with renewables, again, what I would say Andrew is, we always think about the US in the context of the PTC. And there is nothing we see today that indicates that the PTC is not going to get rolled over in some capacity. So that kind of keeps the US at a kind of let’s say steady state and then when you look around the world, you see growth. I mean, I think if you look at Brazil, if you look at places in Europe, if you look at even Africa and the Middle East, we see pretty good growth. China, we see pretty good growth in wind globally.

I think we are thinking we’ll do another 3000 turbines is our current estimate in 2016 as well. There is a shift. There is going to be more international than domestic as we move forward, no question about that. But roughly the same kind of volumes.

I think the way to think about Subsea is, on an incoming order standpoint, each project that’s going to get a ton of scrutiny whether it’s the Ghana project that we signed or Bonga in Nigeria or projects in Australia or things like that. But once a project is going, that’s unlikely that it will be stopped. In other words, you already have fixed costs and when it gets into the production mode, it’s unlikely that it’s going to slow down. So, we still think Subsea in 2015 and 2016 is going to be okay within that context.

And just to follow-up a little bit shorter-term looking into the second quarter you highlighted some delays in Power and Water and Aviation. So, if these two segments recover actually into the second quarter, what does it imply for organic Industrial growth in the second quarter?

Well, I think at the moment, we’ve given you guidance for the year. We expect organic growth to be 2% to 5% for the year, we were 3% here in the first quarter. I think that’s generally the trend we expect to be on throughout the year.

But directionally, they would imply that ex oil and gas there should be some room for acceleration in the rest of the business, right?

Again, we see those segments getting better in the second quarter, but again, we don’t want to – we just don’t want to do organic revenue each quarter-by-quarter, Andrew.

Okay, I tried.

So, we are comfortable in the range and we leave the rest to you.

Good morning guys.

Hey, Shannon.

Hey, so, maybe just on the equipment margin improvement, 120 basis points, pretty impressive, it looks like some benefit from mix in the quarter. As we go forward, I mean, assuming you can't count on that mix every quarter, value gap, cost productivity and some of those things Jeff Bornstein and Dan Heintzelman are working on, does that ramp as quickly as Q2, Q3 and maybe just a little expectation on how you see that equipment margin playing out through the year?

So, we expect the initiatives that teams are going and that Dan and I are working with the businesses on will gain momentum as we move throughout the year. As you saw on Jeff’s page, when you walk through the margins, we had 60 basis points of mix. I think what we talked about at year end when we talked about the year was, mix that probably wanted to be hopefully would be something more neutral. So, I would expect us to gain momentum on the cost line and product service cost line and we’ll see what mix plays out. But I would assume for the year that mix will be roughly neutral.

And any segments so far as you are kind of attacking that cost structure, any segments that you are particularly encouraged by the opportunity you have seen?

I think every single one of these businesses has enormous opportunity. I mean, when you look at the first quarter results, I mean, particularly around equipment margins, just about every business had improvement with the exception of power and water and oil and gas. So I think that it’s not unique to any one business, every one of these businesses has an enormous opportunity to get products and service cost at another level.

Okay, and then just - maybe on Alstom, Jeff Immelt, you mentioned some of the difficult trends in the market but Alstom would be facing that you are also seeing, obviously. Can you still get to sort of the plan there even if the markets are a little tougher and then any update in terms of the regulatory process and how some of the concerns of the European Commission around heavy-duty gas turbine concentration might be remedied?

Yes, I would say, let me answer the second piece first, Shannon. I would say, there is nothing really that’s been a big surprise as we go through this. So, we always thought that there would be a second request or that process would take until this summer and so, I would say, so far nothing really is a surprise. I think on the financials, we still look for a high-teens return and $0.16 accretion in 2016. So we still feel that is achievable and synergies are quite robust and we like that. And the last thing I would say is, look, at the end of the day, just like every deal, we have always reserved as we do these transactions that we will only do deals that are investor-friendly and that achieve good returns. And so I think we have established that in this case and I think we are optimistic about how Alstom fits with GE.

Hi, thank you.

Hey, Julian.

Hi, just a question on power and water. The services orders were down a decent amount, sales though were up. So maybe give a little bit of color around what’s going on in the Thermal Services business in particular by region, because it does seem as if the orders are softer, AGP as well, and sales are still okay.

So, Julian, I’ll start with, orders were soft year-over-year largely because we had a very large upgrade in Japan last year that we just didn’t repeat this year. Secondly, the number of new unit installs that the Services business worked on in the quarter were fewer year-over-year. So that’s most of what we saw in softness in power-gen services. AGPs are flat. We told you we think we do about 100 for the year. We will do 100 for the year. I don’t think we are changing any of the outlook there. So, I don’t think there is a broad team here even geographically around power-gen services.

Good morning everybody.

Good morning Barbara.

So is predictivity growth tracking your expectations since you spoke about your plans back in the fall and can you talk about which of your operating segments are driving the most demand for predictive analytic solutions this year?

Yes, so, we see again – I would say, 30% to 40% growth, pretty consistently across the business in software and predictivity, I just had a review with all the businesses last week. And so, there is a variety of different – and there is – I’d say clearly, the power and power upgrade, things like power-up on the wind turbine side, we’ve got 10 installs, but really another 100 behind that, that’s quite exciting. As I mentioned, the rail business has got expectations to grow about orders about 50% for the year. So we are seeing both from a software and things like movement plan our size are growing. The radiology ITPs is up 13% in terms of new bookings in the quarter. So, some pretty good activity there. We’ve kind of launched what we call Assets Performance Management APM in oil and gas. So we are seeing an original service funnel in that activity. So, I’d say, macro kind of in the 30% to 40% range with strong double digits in each business as we look at software and predictivity for the year.

Thank you. Good morning everyone.

Hey, Deane.

Hey, just a couple of questions on the Aviation side, that spares number being up 31% really jumps out and do you see changes in airline behavior, is this coming through because of lower fuel and how sustainable is this through 2015?

Well, you heard the revenue, the volume numbers are pretty good. Revenue passenger miles, very, very strong. There is no question that most of the forecasts are that the Aviation industry globally are probably going to have the most profitable year in history this year. I think IATA was estimating almost $25 billion of profit. And the airlines are no question stocking inventory. You’ll recall that, in 2012, there was a really large destocking that went on and since that de-stocking in 2012, spares have improved each of the last couple of years. So, maybe that the airlines based on the profitability to operations are more aggressively replenishing some of that de-stocking that happened a few years ago. But very strong. Now, we don’t expect that rate of 31% to persist for the year. I think we talked about double digits and we are probably talking about mid double digits, mid-teens, maybe. But it’s not going to be 31% for the year.

Thank you. Good morning gentlemen.

Hey, Jeff.

Hey, good morning. Just wanted to kind of circle back around to Alstom. Given that there was kind of such an abrupt change in strategy around capital and you are achieving kind of your business next goal kind of through subtraction largely, how do you actually feel about Alstom here? Is that really the right asset and is there a way to back out of that if the EU is a little too demanding?

Well, I would take that in two pieces. I’d say the premise for the deal, Jeff, is relevant today as it’s been in the past which is great complementary products, opportunity to drive excellent synergies, good return on investments and we feel at the, kind of four times EBITDA, post-synergies is a pretty attractive entry point into an investment like that. So high double digits returns and in a market we really know. And then, look, I think just like every – I would back up and say, the company has gotten probably 100 deals through Brussels in the past decade, something like that. So, I think we know how to approach this and know how to get these things done. But just like every other deal we have ever done that just ever would become unattractive, we wouldn’t do it. So that’s so different than any other transaction we’ve ever done as a company.

Hi, good morning everyone.

Hey, Rob.

Hey, it looks like we've reached the lightning round of the call. So I got one question from me. I'll make it count. In any event, just in terms of the timing of the divestiture of a large part of these GE Capital assets, I mean, obviously the inbound call volume is very encouraging, but at the end of the day given the size, scope and nature of a lot of these businesses, you’re going to be dealing probably with a lot of large, SIFI like institutions, I mean, how do you reconcile the need for speed killing in terms of getting to these divestitures versus getting the right price and how are you thinking about those decisions and do you think the timeline is practical?

Well, I think the plan that Keith laid out with all of you last week, we laid out a plan that span a couple of – 2.5 years ago, roughly. But that we thought that the bulk of this work would be done by the end of 2016. Now, we are going to try to outperform that. There is no question I think that, when we think about the risk associated with this including price and value, speed is the single biggest mitigate. We have a market today that’s incredibly receptive to these kinds of assets. And so, we need to be able to capitalize on that. There is - no question, we’ve got to balance from an execution standpoint the nature of the buyer and the size of the transaction, to the extent that we are relying on, maybe a back-end regulatory approval by the buyer, we are doing smaller transactions that maybe, maybe not, maybe better from a price perspective than doing several large big bulk deals. But, I think, my guess is that Keith and the team will run almost a parallel process. They will evaluate on both tracks, platform-by-portfolio, the level of interest there versus a couple several maybe much larger deals. They try to sweep up many of those platforms simultaneously. So, we are completely aware of exactly what you are asking and we have a process and we’ll make sure that we evaluate on those sides, but speed is the key.

Rob, I just want to say that, the lifetime achievement award winner Joanna Morris is working in the phones this morning. So don’t blame Jeff Bornstein or me for any of this activity. And I want to echo just what Jeff Bornstein said, which is, you got to think about each one of these assets having multiple options for what we do. So, it’s not like for any one of these, there is not like be one game plan. There is going to be multiple for every platform.

Hey, good morning.

Hey, Steve, how are you?

Well. So, just to be clear, is the oil and gas guidance, what is that now for the year? I am not sure that was like an explicit comment on oil and gas and then if you could just opine on the - a little more clarity around what happened with the aviation supply chain, there has definitely been a lot of noise from maybe sub-suppliers and stuff like that around that supply chain. So just curious as to how you guys are kind of fitting into that puzzle?

We didn’t make any commentary on our guidance on oil and gas Steve, So, I think what we said is, down 0% to 5%, probably closer to 5%. We evaluated this scenario is to be on 5%. All those are concerted in the guidance we gave you at $1.10 and $1.20. We got the team executing to a plan that supports the $1.10 to $1.20.

As Jeff talked about, Keith incented the team and our targets internally on the higher end of that range, not the lower end of that range. So no change or anything we’ve shared in the two calls previous to this. And then, I would say, Steve, the production is ramping in Q2 and getting back on schedule and no real update other than what Jeff Bornstein said on the call.

Thanks, Joanna and good morning everyone.

Hey, Joe.

The first question, I guess first and only question is really on the order of priority on the asset sales. Can you just discuss a little bit both on COL and consumer, and I guess specifically as it relates to US versus international, how you are thinking about the order of priority, because I would imagine that given your goal to de-designate the non-bank SIFI I would imagine would be focused on the US assets. So, any color there would be helpful.

So, where Keith and team are focused on first and foremost, those platforms where we might be more concerned about the franchise value itself, where the people are a big component of the value creation process. So, he has prioritized the focus based on that first. You are correct, I would say the second order priority would be, we think in the US, our ability to execute quickly and in scale is very favorable today and it is a big part of the discussion around the SIFI status. So, having said that, it’s not that we are not going to do anything outside the US, we are going to be working the international platform in parallel here as well.

Well, thanks, good morning.

Hey, Nigel.

Hey, so Jeff, I think you are going to win the prize for most bullish CEO this quarter. The $1.20, I just wanted to kind of divine what you mean by working towards the high-end because right now consensus is close to $1.10. So, are you encouraged enough to raise our numbers and if so, do you see a path of 5% organic or is it primarily mid-point to low-point but offset by margins? So any comments there would be helpful.

I think, Nigel, this is the exact same comment I made in January that just centers where the internal incentive plan and the internal incentive plan sits towards the high end of the range and we were transparent about this at year end and we were transparent about it in January and I am transparent about it April. Again, I think the value of a portfolio is that, you’ve got a series of businesses that are doing well and you’ve got markets that are still volatile out there and we just want to see how that continues to evolve, like I said earlier, like Jeff said, we are pleased with where oil and gas finished in the first quarter, but that market is extremely volatile right now. And we just want to see how we continue to progress, what happens in the marketplace. And let’s see what happens. There is plenty of chance to make other changes as the year goes through. But let’s see how we do quarter-by-quarter. And beyond that, look, I think we are – we’ve got a good diversified set of businesses that are doing well in the industries we are in and we need to see how the world continues to evolve.

Okay, a couple of announcements before we wrap up. Next Wednesday, we’ll hold our Annual Shareholders Meeting in Oklahoma City. On May 20th, Jeff will present at EPG and on June 16th, we’ll hold Paris Air Show Investor Meeting and as always, we will be available later today to take your questions. Jeff?

Great Matt. Thanks, thanks everybody. We announced a lot last week on really positioning the company for the future. We are excited about that strategic change, that strategic pivot. The underlying performance of the company both Industrial and GE Capital is per our expectations for the year. We continue to make progress. We are pleased by the execution of the team in the first quarter and we look forward to the rest of the year. Thanks, Matt.