Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

General Electric Company (NYSE:GE)

Q3 2012 Earnings Call

October 19, 2012 8:30 AM ET

Executives

Trevor Schauenberg – VP, Investor Communications

Jeff Immelt – Chairman and CEO

Keith Sherin – Vice Chairman and CFO

Analysts

Scott Davis – Barclays

Steve Tusa – JP Morgan

Nigel Coe – Morgan Stanley

Steven Winoker – Sanford Bernstein

Andrew Obin – Bank of America Merrill Lynch

Deane Dray – Citi Research

John Inch – Deutsche Bank

Shannon O’Callaghan – Nomura

Jeff Sprague – Vertical Research Partners

Julian Mitchell – Credit Suisse

Jason Feldman – UBS

Brian Langenberg – Langenberg Investments

Operator

Good day, ladies and gentlemen, and welcome to the General Electric Third Quarter 2012 Earnings Conference Call. At this time all participants are in a listen only mode. My name is Chanelle and I will be your conference coordinator today. (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to turn the program over to your host for today’s conference, Trevor Schauenberg, Vice President of Investor Communications. Please proceed.

Trevor Schauenberg

Thank you, Chanelle. Good morning, and welcome, everyone. We are pleased to host today’s third quarter 2012 earnings webcast. Regarding the materials for this webcast, we issued a press release earlier this morning and the presentation slides are available via the webcast on our website at www.ge.com/investor.

As always, elements of the 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 Vice Chairman and CFO Keith Sherin. Now I’d like to turn over to our Chairman and CEO, Jeff Immelt.

Jeff Immelt

Great. Trevor, thanks. Good morning, everybody. Look, we had a good third quarter in a challenging environment. Europe is tough; Asian resource risk countries are okay and U.S. had packets of growth but still some uncertainty.

Revenue growth was good in the environment with organic growth up 8% in the quarter and 10% year-to-date. We finished the quarter were $203 billion of backlog. Earnings were solid growing at 13%. Both industrial and capital had double-digit earnings growth in the quarter. Every industrial business had positive earnings growth for the first time since the third quarter of ‘05.And our simplification efforts are yielding results with corporate costs ahead of plan.

Margins grew by 70 basis points consistent with our expectations. CFOA is up 63% year-to-date and we’ve repurchased $3 billion of stock. Importantly in this environment we remain on track for our 2012 framework.

For orders, orders were 21.5 billion, just in context for orders, factoring in some of the big items. They were up 4% ex-wind and excluding the impact of foreign exchange. Orders pricing was positive for the quarter and year-to-date. The down cycle and wind is as expected and gas turbine orders were fairly strong. We saw about $1 billion of orders push out from third quarter to fourth quarter and our backlog position is strong as we enter the fourth quarter and facing into 2013.

Our key growth engines remain on track. In fact every industrial business had positive organic growth in the quarter. Growth markets expanded by 9% including in China, up 23%, Africa up 22% and Latin America up 21%, we expect six of nine growth regions to have double-digit order growth at ‘12.

We had the highest services backlog in our history with expanding margins. And we’ve launched successful products including the Flex 60, new subsea technology and new appliances. And our new aircraft engines are winning high market share. With our investments in place we should be able to sustain a solid growth rate into the future.

Our margins are a good story growing 70 basis points to 14.4%. We had expansion in every business, including Energy if you exclude the impact of our Wind business. The fundamentals remain strong as we finish the year. Our value gap will be positive in both 2012 and 2013. We remain on track for $2 billion-plus and structural cost-out to simplification efforts. We were able to do significant restructuring in the quarter. We’re on track for 100 basis points of improvement in 2012 and 2013 in line with our plans.

Cash is a decent story with year-to-date total of $10.7 billion, up 63%. The dividend from capital is a positive story for investors. Our industrial CFOA has been pressured by an unusual equipment build, which should have positive growth in the fourth quarter. We’re executing our capital allocation plans. Year-to-date, we’ve paid out $5.4 billion in dividends and bought back $3 billion of GE stock. Our balance sheet is very strong and we end the quarter with $85 billion of consolidated cash.

Now over to Keith to review operations.

Keith Sherin

Thanks, Jeff. I’m going to start with the third quarter summary. We had continuing operations revenues of $36.3 billion. That was reported up 3% ex-FX. Revenues were up 6%. Industrial sales of $24.7 billion are up 7%, 10% ex-FX. GE Capital revenues of $11.4 billion were down 5% as we continue to reduce our assets. And our operating earnings of $3.8 billion were up 10%.

Operating earnings per share of $.36 were up 13%, and you can see the 13% excludes the impact of last year’s third quarter preferred stock redemption commitment, which you’ll remember was an 8% reduction in equity, obviously not having a repeat of that results in the huge fees here. So operating EPS is up 50%, continuing and net EPS are 43% and 50%. Continuing EPS includes the impact of non-operating pension and net EPS includes the impact of discontinued operations, which I’ll cover on the next page.

As Jeff said, year-to-date cash of $10.7 billion was up 63% including the dividends from GE capital. And for taxes, the GE rate, 21% is consistent with the low 20s rate we forecast in the first two quarters, and the year-to-date rate is 22%. The 4% GE Capital rate’s consistent with the mid single-digit rate that we forecasted at the end of the second quarter and we continue to expect to finish the year with a mid-single digit GE Capital tax rate.

On the right side, you can see the segment results with total Industrial segment profit up 11%, and it’s great to have all five industrial segments delivering positive earnings growth. GE Capital also had another strong quarter with earnings up 11% so overall, a strong segment growth quarters. I’m going to cover each of these segments in more detail in a minute.

Before I get into those business results, I’ll take you through the other items from Q3. As we mentioned at the infrastructure investor meeting, we had $0.03 in one-time benefits related to the gain from NBCUniversal. The majority of the benefit was driven by the A&E transaction. NBCU sold its remaining 16% stake in A&E and our share of the gain was $0.03 after tax. We also had $0.03 after tax of restructuring and other charges in the quarter. These charges related primarily to continued cost structure improvements in Energy, Healthcare, Aviation, HNBS and GE capital. We also had a charge in the quarter related to the planned disposition of one of our plants as well as costs related to the acquisitions.

On the bottom of the page, there was minimal net impact from discontinued operations in the quarter. We resolved an outstanding item related to the plastics disposition that resulted in a $0.01 gain at the parent. And for WMC we had $1.3 billion of claims come in, in 3Q. That’s significantly less in the second quarter, but higher than we had previously expected and that resulted in an after-tax reserve impact of $78 million in the quarter. So overall, EPS and one-time benefits and costs were relatively offsetting here.

So next I’m going to go to the businesses, and I’ll start with Energy. Before I get into it, this is the final quarter that we’re going to be reporting Energy infrastructure on this basis, and so for the fourth quarter we’ll be reporting the three new businesses after the reorganization: Power and Water, Oil and Gas, and Energy Management. And later this quarter, we’ll begin providing you with historical data recast into these three businesses so you can begin modeling on that basis.

Let me look at the total business. I’ll start with Energy first. Orders of $6.5 billion were down 17%. We’ve said it before, but the impact of Wind is huge here. Ex-Wind, Energy orders were flat year-over-year. Equipment orders of $3.4 billion were down 24%. Again, ex-Wind, equipment orders were up 11%. Thermal orders of $1 billion were up over 160% and we had orders for 29 gas turbines versus 16 last year.

Renewable orders of $518 million were down 72%. We had orders for 241 wind turbines versus 781 last year. Total equipment order pricing was down 1.4% with Thermal down 2.6% and Renewable down 4.2%. Year-to-date Thermal order pricing is private positive the 0.8% and our estimate for the whole year is about flat for Thermal order pricing.

Service orders of $3.1 billion were down 8% by declines in Energy Management. Power Generation services of $1.7 billion were up 1%. Revenues of $8.9 billion were up 17% driven by the strong volume growth. We had Equipment revenue of $5.5 billion, which was up 30%. We had Renewable revenue of $2.1 billion, which was up 61%. We shipped a 1,014 wind turbines versus 633 last year.

Aeroderivative revenues of $679 million were up 84% on higher units, we had 44 units this year versus 31 last year and also larger units. Thermal revenues of $1.6 billion were down 19% driven by lower balance of Plant revenues, lower pricing and foreign exchange. Service revenues of $3.4 billion up 1% driven by Power and Water services. And segment profit of $1.2 billion was up 11% as the benefits of all that strong volume and our services strength more than offset the lower pricing. Power Gen services operating profit was up 15% in Q3.

Now we’ve been breaking out the impact of wind because it masks the remaining business performance. If you take a look in the third quarter for energy x-wind in total, revenues would be up 8%, segment profits up 20% and margins would’ve been up 146 basis points.

Oil and Gas, they had another great quarter. Orders of $4.2 billion were up 7%, up 12% SFX. Equipment orders of $2.3 billion were up 10% driven by growth in turbo-machinery and subsea systems. We had $300 million of orders for the Shineer LNG project, we had over $200 million of orders for the Westies pipeline projects in China and we also had over $500 million of order push-outs for two projects that we’re working on in Angola and Brazil.

Service orders of $2 billion were up 3%, up 7% SFX and the orders price index was up 1.7%, sixth consecutive quarter of positive price for this business. We added $500 million to the backlog in Q3. Revenues of $3.7 billion were up 4%, up 11% SFX. And Equipment revenues of $1.9 billion were up 2%; Service revenues of $1.8 billion were up 6%. Segment profit of $534 million was up 18% driven by strong volume growth and lower-cost, which were partially offset by negative foreign exchange. And overall that resulted in 1.7 points of our profit expansion.

So another good quarter for the Energy and Oil and Gas and Energy Infrastructure in total and our current estimate for Energy Infrastructure segment is that profit growth will be about 10% for the total year 2012.

Next is Aviation. Orders of $5.2 billion were down 8%. Commercial Engine orders of $918 million were down 51%. When you have backlogs of two to seven years, depending on the engine model, we’re going to have some quarters with tough comparisons. We also had over $500 million of Commercial Aviation order push-outs for two customers in Asia this quarter.

Military Equipment orders of $1.1 billion were up 104% driven by transports and Navy F-18 fighters. Service orders of $2.6 billion were down 11%. Our third quarter spares average daily order rate was $22 million per day which was down 18% versus last year, but it’s up from the second quarter and it seems to have stabilized.

We continue to get pricing on new orders with total orders pricing up 2.3% in the quarter. Even with the tough order comparisons, overall book-to-bill was 1.09 with both Equipment and Service up over one. Revenue of $4.8 billion was down 1%. Equipment revenues of $2.3 billion and Service revenues of $2.4 billion were both down 1%. We shipped 520 commercial engines versus 565 last year. And in the quarter we shipped 25 GEnx units versus 28 last year.

Segment profit of $924 million was up 7% as the benefits of positive value GAAP and lower costs more than offset the impact of the one-time gain last year from the sale of our Rings business. The business improved operating margin rates 150 basis points in the quarter and if you exclude the impact of last year’s gain, our profit would’ve been up 17% and our profit rate would have been up 270 basis points.

Transportation. The Transportation business delivered another great quarter. Orders of $1.2 billion were up 21%. Orders pricing was up six-tenths of a percent. Equipment orders of $561 million up 28%, driven by higher international locomotive kits. And Service orders of $666 million were up 16%. Revenue of $1.4 billion was up 9% on strong volume. Equipment revenues of $781 million were up 5% driven by off-highway vehicle equipment, which was up 55%, partially offset by a lower locomotive revenues, which were down 13%.

We shipped 146 locomotives in the quarter versus 169 last year and we’re on track for a total year estimate of 650 units. Service revenues of 627 million were up 16%. Segment profit of 265 million was up 35% driven by the positive value gap and also lower cost and our operating here increased 360 basis points in the quarter.

Next is Healthcare. The U.S. market was a little tougher than expected in the quarter. Orders of 4.6 billion were down 1%. They’re up 3% ex-FX. Equipment orders of 2.6 billion were also down 1%, up 3% ex-FX driven by the developed markets down 5%, partially offset by the emerging markets, which were up 9%.

Just some of the numbers on orders, U.S. was down 6%, Europe was down 11% driven by Southern Europe. China was up 19%, Middle East Africa Eastern Europe were up 31%. India was down 17%.

By modality, CT was down 4%, MR was down 9%. Life Sciences was up 3% and ultrasound was up 1%.

Service orders of 2 billion were down 1% also driven by Europe down 12% and revenues of 4.3 billion were down 1% or were up three points FX adjusted. Emerging markets were the strength, here up 13% offsetting the developed markets, which were down 4%. Segment profit of 620 million was up 2% as the benefits of the volume growth in cost reductions more than offset lower pricing in some inflation. As a result operating profit rate was up 40 basis points in the quarter.

On the right side home and business solutions delivered positive results despite a continued tough environment. Revenues of 2.1 billion were up 1% as appliance revenues were up nine, offsetting the lighting revenues, which were down nine. For appliances we’re seeing some contract channel strength. Contract channel revenues were up 22% driven by housing starts and retail sales were up 1%.

Pricing is up and year-to-date share is up about 1.1 points and the new products continue to be well received in the marketplace.

Lighting continue to see volume pressure in both the U.S. and Europe. And overall for the business segment profit of 61 million was up 61% driven by the higher pricing which was partially offset by material inflation and the lighting, lower lighting volume.

So next is GE Capital. Mike Neal and the team delivered a strong quarter. Revenues of $11.4 billion were down 5%, in line with assets, which were down 7%. Net income of $1.7 billion was up 11% driven by improvements in real estate as well as lower margin impairments, partially offset by higher credit costs and of course lower assets.

We ended the quarter with $425 billion of ending investment, a quarter ahead of our target and we expect any to continue to decline further in the fourth quarter. Our net interest margin was 4.9%, up 50 basis points. There are more details on GE capital and capital levels in the supplemental deck that we posted this morning.

On the right side you can see the asset quality metrics were stable in the quarter. 30-day delinquencies ere down in mortgage driven by improved collections and they were up our U.S. retail business driven by normal 3Q seasonality. Delinquencies were close to flat in both real estate and CLL.

Volume was up 2% driven by consumer volume up 5%. Commercial volume down 5% as we continue to originate the strong returns. Non-core ENI was down 6 billion in Q3 versus Q2. We’re substantially done with our 2012 long-term funding, our capital position strengthened in the quarter and even after paying 5.4 billion of dividends we ended Q3 with Tier 1 common with 10.2% of 56 basis points.

For some comments by business I’ll start with CLL. Commercial lending and leasing business assets were down 8% as we continue to reduce our non-core assets including third party funding for Penske and the CECO disposition. Commercial volume in the Americas of 7.2 billion was down 3% while we maintain our pricing on new business to earn over 2% return on investment.

Overall earnings of 568 million were down 17%. It’s driven by lower assets, it’s driven by one loss of 32 million loss on one account in Europe and it’s driven by continued pressure in Italy about $20 million. Even with those items our European business earned over $40 million and the Americas earned $545 million, which was flat with last year and up 3% from the second quarter.

For consumer, our consumer assets were down 3%. It’s driven by runoff in Europe and Asia, partially offset by growth in U.S. retail. Earnings of $749 million were down 7%, driven by higher retail reserves in the U.S. The impact to lower assets and our non-core business, partially offset by the 80 million gain we had from our selling our 7.6% of our whole stake in BAY, the bank in Thailand.

The U.S. retail business earned $445 million, which was down 4% as the benefits of higher assets and better margins were offset by the higher loss provisions due to additional segmentation of the portfolio more in line with industry standards.

Our core European business earned $119 million, which was down 3% on lower assets. For real estate, real estate continued to deliver positive performance in the quarter earnings of $217 million were up $300 million from last year. They were about flat with Q2. The earnings improvements was driven by lower losses and impairments, tax benefits, and higher core income. During Q3 we sold 165 properties for $1.7 billion realizing $121 million of after-tax gains, up $55 million from last year.

We continue to shrink our real estate book as well. Assets of $55 billion were down 14% versus last year. They’re down 4% versus Q2. And in addition we closed the business properties disposition in October, which result in another $5 billion reduction in Q4.

Next is GECAS, GECAS had another great quarter. Earnings of $251 million were up 21% driven by higher core income. Partially offset by slightly higher impairments year-over-year. Net impairments this year were $135 million after tax versus $107 million last year. Portfolio quality continues to be strong with only $50 million of non-earnings and only three aircraft on the ground.

Energy Financial Service earnings of $152 million were up 67% driven by asset sales, $132 million driven by asset sales. We completed $600 million of volume in Q3 at 5% ROIC. So overall, another positive quarter for GE Capital. As we look at finishing the year we think the $1.7 billion net income from third quarter is a good proxy for the fourth quarter outlook. We expect lower GECAS impairments. We’d expect to not have the BAY gain repeat. And we continue to have loss of earnings from shrinking assets ahead of schedule so that is our view for third quarter look at run rate into fourth quarter.

With that, let me turn it back to Jeff.

Jeff Immelt

Great, Keith. Thanks. Look, on the operating framework we really have no material changes for the 2012 operating framework. We are on track for double-digit earnings growth in total and for Industrial and Financial Services earnings. Our outlook for the Industrial segments remained in line with our September meeting.

You can see in the corporate cost line that our simplification efforts are working and sustainable and we are lower estimate for the year to $2.8 billion based on third quarter performance. CFOA is on track and industrial organic revenue growth has been about 10% year-to-date. We expect it to be about 10% for the year. We believe that capital revenue will decline about 10% based on the E&I reduction ahead of plan so total revenue for the entire company will be up about 3% in 2012.

So to summarize, let’s recap the big factors for investors and how we performed against those objectives. Industrial earnings growth results remain positive. This is fueled by good organic growth and momentum in margin enhancement. And you know as I said earlier the simplification efforts really are generating results.

We’re executing our plan with GE Capital making a smaller, more profitable, and restoring dividend to the parent. We have returned a $8.4 billion to investors year-to-date through dividend and buyback. We are executing a balance capital allocation plan of growing dividends in line with earnings, value-creating buybacks and bolt-on acquisitions in the $1 billion to $3 billion range. The GE team continues to execute in a volatile environment. We expect to continue to outperform in 2012 and 2013.

Now back to Trevor for questions.

Trevor Schauenberg

Great. Thanks, Jeff. Thanks, Keith. Chanelle, why don’t we open the phone lines for questions?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Scott Davis with Barclays.

Scott Davis – Barclays

Hi. Good morning, guys.

Jeff Immelt

Hey, Scott.

Keith Sherin

Good morning, Scott.

Scott Davis – Barclays

One of the things when we try to kind of model out margins and sustainable margin expansion going forward, I mean can you help us understand if there’s any way to think about the 70 basis points? How much of that was value gap? How much of that is kind of from past restructuring? Any way to carve that up a bit?

Jeff Immelt

Sure. If you look in the third quarter, Scott, value gap was about $50 million drag actually in the quarter. That was two-tenths of a point of drag. Mix, equipment versus services and other mix, was about a half point of drag, 120 million or so. And cost out is the real driver here. It’s over $500 million. It’s 1.4 points of improvement and it’s across the board. It’s lower variable costs.

Its better base cost performance with this volume and it’s simplification efforts are starting to kick in. So I think I don’t have it relative to prior restructuring as you asked, but I think that’s a good framework for the third quarter. It’s great that the margins have turn positive here. And our expectation is that this margin improvement will continue in the fourth quarter and will increase obviously from the third quarter level to get us to our goal of the total year.

Keith Sherin

We still think value gap, Scott, will be positive for the year. It’s been up more than $100 million year-to-date before Q3.

Jeff Immelt

So for the total year, it will be slightly positive.

Keith Sherin

So for the total year, it’ll be positive and I expect it’s going to be positive again in 2013 as well.

Scott Davis – Barclays

Okay. That’s helpful. Jeff, going back to kind of your beginning remarks on the macro view, I mean, it seems that looking at some of the results from your peers that things have degraded a bit in the last couple months. I mean, when you’re thinking about your planning scenarios for really 2013, because I’m guessing you’re in our process now, what are the – such a wide range of outcomes out there, I mean, what are you guys planning for? And how do you – and I don’t know how you want to comment on it, whether you dial it down by region and what kind of GDP assumptions or whether you just want to talk about it more subjectively, but what do you plan for I guess?

Jeff Immelt

Well, Scott, I think you’ve got to have a pretty – you’ve got to factor in a number of different scenarios. I think most people are assuming that the fiscal cliff gets resolved in some way, and I don’t think we’re alone on that one. And then I think just when I look at orders in our growth regions, we’ll have six growth regions that have double-digit orders growth for the year. Six of nine. That’s pretty good, Scott. That’s – that gives me some comfort when I look at the resource rich and rising Asia, and so we still see decent opportunities in China.

We still see decent opportunities in the Middle East and Latin America, Russia, places like that. And then Europe’s going to be a grind. Europe’s going to be – we’re not assuming that Europe gets any better. So I think we’re kind of looking at 2013 being kind of like 2012 with the big variable being the fiscal cliff and we’re ready if it doesn’t go through, but we’re kind of making the same assessment most people do, that somehow it gets result.

Scott Davis – Barclays

Okay. That’s helpful. Thanks, guys. I’ll pass it on.

Jeff Immelt

Great. Okay, Scott. Thanks.

Operator

Our next question comes from Steve Tusa, JPMorgan.

Steve Tusa – JP Morgan

Hey. Good morning.

Jeff Immelt

Hey, Steve.

Steve Tusa – JP Morgan

Energy Infrastructure, now I guess up 10% for the year. What was the expectation prior to this? It seems like that’s – that the growth slows pretty materially in the fourth quarter. Is that timing around Wind or something like that?

Jeff Immelt

Yeah, there’s another obviously large chunk of revenue in of Wind in the fourth quarter. That’s – it is a drag on us. I think that’s probably the biggest factor for us. I mean, we still expect Energy to be up double-digit for the year. Year-to-date, they’re up about 12% and for the total year, it’ll be up 10% and they’ll be up in the mid-single digits in the fourth quarter here for us.

Steve Tusa – JP Morgan

Right. And so how does that kind of make you feel heading into next year, I guess outside of wind and the trends there? And also I guess you talked about orders pricing being up 8% year-to-date, but it’s going to come in flat, which means you’re going to have a pretty tough orders number, orders pricing number, in the fourth quarter. Does that change the views at all that you presented at the Investor Day several weeks ago?

Jeff Immelt

No, just to clear up this. It’s 0.8% year-to-date through the third quarter and we’re saying we expect it to be flat or slightly positive, so I – it’s not a big change for the – there’s no change in the fourth quarter, and that’s our total year estimate that we stuck to, Steve. So no, I think if you go by business, you’ve got to feel great about Oil and Gas. We continue to build backlog.

Our orders our strong. We had some orders slip even in the quarter. The outlook is very strong for next year as we head into the fourth quarter. For Energy itself, you feel great about the move to gas around the world. It’s certainly helping us in terms of our service outlook and we’ve got to continue to fight for every order they have been in the gas turbines side. We’re going to have – we think we’ll have growing megawatts of gas turbines sold in the outlook.

Keith Sherin

Yeah, Steve, at the end of September, we kind of said Power and Water would be up in 2012 and flat in 2013 and it would be up really double digits ex-Wind in 2013. I think we still that’s true.

Jeff Immelt

True. That’s the forecast.

Keith Sherin

We think Oil and Gas would be up double digits this year and next. We still think that’s true. And we think Energy Management would be up double digits in 2012 and 2013, and we still think that’s true. So I think it’s pretty consistent with what we said at the infrastructure day.

Steve Tusa – JP Morgan

Okay. And then in Aviation, the service revenues were only down one but the service orders were down double digit. What’s going on there and this timing around the price increase that pulled forward and some business last year. Can you maybe just talk about what you’re seeing as things stabilized on the spare stuff or maybe just give a quick update there?

Jeff Immelt

Yeah, I think spare’s outlook seem to stabilize, going from the third quarter. In the second quarter the spare’s rate was 20.6. In the third quarter it’s 22. Our outlook in the fourth quarter is similar to that. So right now in the third quarter you’re dealing with the biggest negative variance year-over-year and we’re kind of laughing ourselves on that. Our expectation is that at some point revenue past your miles are still positive year-over-year. Freight is down slightly.

But at the end of the day, with all of these flights going on cycles occurring, there’s going to be a pent-up demand for service here and we expect that to be positive for 2013. So in the fourth quarter, we’re not counting on that. We’re counting on the spares orders to be about where they are today and we think that will be a positive in 2013 as I said.

Steve Tusa – JP Morgan

Okay. Great. Thanks.

Jeff Immelt

All right, Steve.

Keith Sherin

Thanks.

Operator

Our next question comes from Nigel Coe with Morgan Stanley.

Nigel Coe – Morgan Stanley

Good morning.

Jeff Immelt

Hey, Nigel.

Keith Sherin

Hi, Nigel.

Nigel Coe – Morgan Stanley

Yeah, so aviation margins just about the prior gain where we’re obviously very strong, can you maybe talk about how the GEnx, you know, the learning curve on GEnx is impacting the comparisons?

Jeff Immelt

In the quarter, there’s a couple factors going on around GEnx. First of all you have just a few lower units so that’s a little bit positive year-over-year. We had 28 units last year, 25 this year. And then on a margin per unit, we continue to see good improvement. We’re on track for our cost reductions as we come down the learning curve and the other thing is we’re moving into better commercial arrangements as we get out of those launch orders for the GEnx shipments.

So I think it’s on track. It’s positive. In the fourth quarter we’re going to have a big increase in shipments here and we’re going to go up. The total year we’re expecting somewhere around 125 shipments I think on GEnx engines so you’re going to have – and in third quarter they’re down a little. In the fourth quarter we’re going to go from about 35 last year to close to 60 this year.

Nigel Coe – Morgan Stanley

Okay. But as the combination margins materially on the GEnx this last year?

Jeff Immelt

Yeah, I think the learning curve is down substantially, Nigel, and what Keith said is that the original launch orders are usually the most negative from a CM rate to the combination of those two things I think builds every year. So that gets better in 2013.

Keith Sherin

You’re probably seeing 10% improvement in margins year-over-year ‘11 to ‘12.

Nigel Coe – Morgan Stanley

Okay. And then switching to Thermal energy service, I think that was up 1%, what about that number being impacted by deferrals on some of their retro maintenance pedals because of the low gas price?

Jeff Immelt

If you look at the actual business in Q3 had revenue I think kick up 11 and earnings up 15 or something like that?

Keith Sherin

Yes. Service, PGS, Power Gen services.

Jeff Immelt

Yes. So the run rate is not – it’s still a little bit lumpy but the run rate’s not bad and then on the ongoing order rate was up 1% and we still think that some of those are really based on how hard the units are running and that unwinds itself. And then in Europe, we have a relatively big install base in Europe and that has to a certain extent the opposite issue. It’s not running. But I think in the U.S., there’ll be decent growth as time goes on.

Keith Sherin

I think the performance in the quarter, Power Gen services was...

Jeff Immelt

Pretty good.

Keith Sherin

15 was a pretty good quarter.

Nigel Coe – Morgan Stanley

Right. And then just finally, you mentioned you called out a couple of order deferrals push out into 4Q. To what extent is that just normal lumpiness in the business into an extent you think that’s been impacted by some concerns around the macro?

Jeff Immelt

Well, I just think you’re always going to have some of that with the large orders we’re dealing with. I mean there was really nothing on the Asia aviation orders other than just timing of approvals and it just didn’t happen in the quarter that we originally estimated it.

I think that some of the oil and gas orders those involved a lot of parties with large engine energy contractors and government approvals and so I think that may be more typical that you’re always going to have something pushing around but for us over $1 billion seem to really push out of the quarter. There were other orders that pushed that seemed like normal quarterly things for us but there were over 1 billion that we would’ve called out as pushing out.

Nigel Coe – Morgan Stanley

That’s great. Take you very much.

Jeff Immelt

Thanks, Nigel.

Operator

Our next question comes from Steven Winoker with Sanford Bernstein.

Steven Winoker – Sanford Bernstein

Thanks, and good morning.

Jeff Immelt

Hey, Steve.

Keith Sherin

Hey, Steve.

Steven Winoker – Sanford Bernstein

Hey. Can I just switch over to GE Capital first. Just help me understand again, you mentioned the Thai gains, what other gains were in there and how much again was that Thai gain? And were there any other gains baked into the GE Capital reporting numbers as sort of a normal course of business?

Keith Sherin

Yeah, the Thai gain was $80 million from the sale of some of our shares in BAY. We also had the gains in real estate that I talked about from selling properties. And we had one other gain that was over $50 million in the quarter. It was the sale of the pipeline in EFS so in the EFS results that was the large driver of the earnings year-over-year.

Steven Winoker – Sanford Bernstein

Was that 15 or 50?

Keith Sherin

It’s supposed to be the ones – 58.

Steven Winoker – Sanford Bernstein

Oh, 58. Okay.

Keith Sherin

58, after-tax gain.

Steven Winoker – Sanford Bernstein

Okay. And then was there – there wasn’t anything – I had heard something about Irish mortgage bank there’s nothing on that?

Keith Sherin

I don’t have anything on Irish mortgage. I think it was closed. The deal that we previously announced.

Steven Winoker – Sanford Bernstein

Okay. Great. And then the consumer reserve I just saw it go up from $3.1 billion to $3.4 billion. I’m looking at the credit metrics you are showing in the supplemental, I’m sorry, in the regular. I don’t – I’m not quite sure I see the connection. Can you just give me some color for the overall increase in reserving and provisioning and what was driving some of that?

Jeff Immelt

Sure. As I mentioned on the reserves in Consumer, we did update the reserve practice for some more granular segmentation loss types. Essentially what we are doing is we’re doing a more detailed look at to determine the period of time from the loss event to the write-off, the incurred loss period it’s called. So we did some of that work in the third quarter. The incurred loss period was a little longer using that segmentation. It increased our reserves about $200 million in the U.S. Retail Finance business in the quarter.

Outside of that, we had the normal seasonality, which did contribute and we had asset growth, which contributed to reserve growth quarter-over-quarter and also year-over-year on asset growth. So if you look though in total assets were up 10 on retail finance, volumes up 10. The charge-off rate are down, Steve. They’re down 24 basis points year-over-year, 36 basis points quarter-over-quarter. Delinquencies are down 36 points year-over-year. So the fundamentals of this business are still very good. It really is a detailed segmentation of the portfolio that added a couple hundred million dollars to the reserves as opposed to anything to do with asset quality

Steven Winoker – Sanford Bernstein

Okay. And any impairments on GECAS?

Jeff Immelt

Yeah. In GECAS we had impairments. The total number is about 135 after tax in the quarter. I think in general I would say that some classic 737s were in there. Some A320s, old A320s, older A320s as well as 50-seat regional jets are probably the three things that would make up that number.

Steven Winoker – Sanford Bernstein

Okay. And last, let me just sneak in one industrial question. On the 29 gas turbines, what countries, and I know a gross number, any cancellations or deferrals of just the turbine side too?

Jeff Immelt

Yeah, there were no cancellations in the quarter. In terms of where the turbines were, there were quite few from Saudi Arabia. Hang on one second here.

Steven Winoker – Sanford Bernstein

I’m mostly interested in the U.S.

Jeff Immelt

I have zero in the U.S. We had 5 in China, 8 in Saudi, 2 in Algeria, 2 in Turkey, 7 in Iraq, 2 in Egypt.

Steven Winoker – Sanford Bernstein

Okay. All right. Thanks, guys

Jeff Immelt

Yep.

Keith Sherin

Thanks, Steve.

Operator

Our next question comes from Andrew Obin with Bank of America Merrill Lynch.

Andrew Obin – Bank of America Merrill Lynch

Good morning.

Jeff Immelt

Morning.

Keith Sherin

Hey, Andrew.

Andrew Obin – Bank of America Merrill Lynch

A question on GE Capital, as we look at ROI on new business, what’s the sequential trend by business within GE Capital?

Jeff Immelt

Well, I will give you a few of them. If you look at the Americas for the Commercial business, second quarter was 2.4, third 2.3. If you look at Asia, and CLL, 1.9, 1.9. If you look at Asia consumer 3.6, 3.4. If you look at Europe CLL was 2.1 in the second quarter, it’s 1.7 in the third quarter. If you look at retail for us in the U.S. 4.7 in the second quarter, 5.3. So overall, as I showed you, the net interest margins were up 50 basis points and our new business ROIs are still hanging in there on new business volume.

Andrew Obin – Bank of America Merrill Lynch

All right. Sure. And just also on GE Capital, as you extract more capital out of GE Capital, what should we expect for the pace of share buybacks relative to what we saw the quarter?

Keith Sherin

Well, we like the buyback pace in the quarter over $2 billion, a little over $2 billion. Our objective as we said is to continue to prioritize the dividend and grow that in line with earnings. We continue to have that point, the buyback and our objective is to retire the shares that we shipped before the financial crisis over the next several years.

And we’re doing a pretty good job on getting after that. And the cash from GE Capital obviously is a big help, so if we can continue to get the cash – although this year we’ve already gotten all the special dividends, now we get the regular dividend on earnings. That’s going to help us a lot with the buyback. And based on the market, we’ll see what happens in the fourth quarter. We expect to retire somewhere between 125 and 150 million shares this year.

Andrew Obin – Bank of America Merrill Lynch

Thank you very much.

Keith Sherin

Yep.

Jeff Immelt

Thanks.

Operator

Next question comes from Deane Dray with Citi Research.

Jeff Immelt

Hey, Deane.

Deane Dray – Citi Research

Thank you. Good morning, everyone. Hey, just a clarification first just on the headlines coming up about the revenue guidance, total revenue guidance going from 5% to 3%. So we already – you told us that GE Capital revenues are down, maybe there’s some FX, but just if you could parse out for us what the delta is?

Jeff Immelt

That was the big…

Keith Sherin

It’s really GE Capital.

Deane Dray – Citi Research

Okay. That...

Keith Sherin

And I don’t know if anybody’s really forecasting FX.

Jeff Immelt

Yeah.

Keith Sherin

Obviously FX had a big impact on us in the quarter; certainly industrially. But the change on the framework that we showed you was what Jeff said. The GE Capital total year revenue’s going to be down closer to 10 than 5. And we would have thought that was worth updating.

Deane Dray – Citi Research

Good. Just want to make sure because there’s a couple of headlines out there and that clears that up. And then on the cash flow, you said there was some equipment build in the third quarter; that gets resolved. What’s the business? And any color there regarding the size?

Keith Sherin

Sure. Obviously, we’ve built up some working capital to support our fourth quarter shipments. You look at – it’s mostly in energy. Energy’s working capital bill was $1.3 billion through the third quarter. And we’re expecting a big fourth quarter in terms of deliveries. If you look at the profile last year third quarter to fourth quarter, we had a big revenue increase between the quarters. We also had a significant increase in cash flow between third quarter and fourth quarter. Fourth quarter will be our biggest cash flow period for the year. And we’re expecting a profile similar to last year; a little higher than last year in terms of cash coming out of Industrial in the fourth quarter.

Deane Dray – Citi Research

And progress on the red assets at GE Capital?

Keith Sherin

I don’t have a specific number. I know in total we’re down about $6 billion. How much? $6 billion on quarter-over-quarter. Yeah. There’s about $70 billion on balance sheet today on the red assets. So in the quarter, we felt great about it. You look at the runoff we had. I can just give you some numbers on some things that are down year-over-year. U.K. Home Lending’s down $1 billion Deane, France is down $1.5 billion, Poland’s down $1.3 billion, Spain’s down $1 billion. Those are all non-core assets that we’re running off here in a pretty good pace.

Deane Dray – Citi Research

Great. Just last question from me is maybe some commentary regarding the debt issue for the parent because that certainly doesn’t happen often and it’s never a better time to issue debt when you don’t really need the financing. But just give us a context of $7 billion; you did it in three consoles use of that proceeds?

Jeff Immelt

Yeah, it kind of goes back to the first question about what you think about the environment. I mean as we look forward, we have a $5 billion debt in GE that matures February and so we decided that we really didn’t want to be trying to replace that debt in an environment where the fiscal cliff may be a disruptor or not. So we decided to go in the fourth quarter. We like the rates.

As you said, we did $7 billion. We’ll have a big-interest savings if you look on that debt. We’ll probably have annual savings around $70 million at the rates that we did that debt at with a mix of 5, 10 and 30 years as you know. So we decided to get that out of the way. We know we have to do; we didn’t want to do it in a disrupted environment. We like the rates where they are. It creates a savings for us. Now we do have a little higher interest cost in the fourth quarter because of that, but for us it just seems like the right thing to do.

Deane Dray – Citi Research

That’s real helpful. Thank you.

Jeff Immelt

Deane? Deane, are you clear on the revenue point?

Deane Dray – Citi Research

Absolutely.

Jeff Immelt

I just want it clear to everybody. Good.

Deane Dray – Citi Research

Yeah, appreciate it. Thanks.

Keith Sherin

Great.

Operator

Our next question comes from John Inch with Deutsche Bank.

John Inch – Deutsche Bank

Thank you. Good morning.

Jeff Immelt

Hey, John good morning.

Keith Sherin

John.

John Inch – Deutsche Bank

Hi, guys. Keith, maybe a question for you. It’s really on the buffet and warrants. With your stock price sort of where it is, I’m wondering what are you thinking of in terms of possibly, maybe buying them in advance? And if you don’t do that is very dilutionary impact kind of on a net basis of this that provides for headwind that maybe we should be thinking about?

Keith Sherin

Yeah, John, if you think about it, the dilution is on amounts above $22.25.

John Inch – Deutsche Bank

Right.

Keith Sherin

And it’s de minimis. We’d love to have the stock to go up to $25.25. That would be less than $400 million of dilution. I think its 135 million shares that you’re talking about the dilution on. So I’m thrilled that we’re in the money on them. And yet we’re going to have to deal with the dilution, but I don’t think it’s a big deal for investors.

John Inch – Deutsche Bank

Okay. That clears that up. With zero U.S. gas turbine orders, can you just remind us, what is your sort of latest thought toward the timing of a U.S. gas turbine cycle recovery? Years and maybe you could blend that in with them with a little bit of pricing kind of what you are seeing on the pricing side that sort of thing?

Jeff Immelt

John, I would just go back to what Steve basically said in September. We think there is activity right now that’s going on that’ll turn into commitments next year. So I think as you go into 2013 and into 2014, those commitments will go into orders. And I think that pace will grow as each year goes by. So we’re seeing quoting activity right now. We expect to book some orders next year and we think that’ll grow over time. I think the good news is that gas is the fuel of choice, and as new capacity comes in, it’s going to be gas turbines.

John Inch – Deutsche Bank

So if the trajectory holds, presumably the price though, doesn’t start to meaningfully kick in until what, 2014? If the timeline...

Jeff Immelt

Look, I think the good news, John, is that we’re – we’ve been kind of firming a bottom right now. So I think you could see some positive OPI into 2013, not great, but some positive, just because I think we’ve been trying for the last period of time. So I think that will start improving and then I think it accelerate as time goes on.

John Inch – Deutsche Bank

Just lastly, Jeff, with the cash and the cash position in pretty robust shape, what are your thoughts toward maybe upping your M&A spend targets? Just even given the macro sluggish environment that might be perhaps prompting more companies to consider selling or make more properties available. What are your thoughts here?

Keith Sherin

I go back, John, to our disciplines. I think dividend in line with earnings. We think the dividend is really important. Continuing to buy back stock with an eye on getting back to 10 billion shares at some point and the $1 billion to $3 billion. So if we see a good acquisition in that range that meets our hurdle rates, we’ll go for it. But it’s not burning a hole in our pocket and we don’t think we need it to do what we need to do in 2013.

John Inch – Deutsche Bank

Thanks very much.

Keith Sherin

Thanks.

Jeff Immelt

Thanks, John.

Operator

Our next question comes from Shannon O’Callaghan with Nomura.

Shannon O’Callaghan – Nomura

Good morning, guys.

Jeff Immelt

Hey, Shannon.

Shannon O’Callaghan – Nomura

Hey. So just back on the re-segmentation of the U.S. retail business, what was the thought process behind making that choice? And then the extra provision in the quarter, was that a sort of the catch-up? Or what’s the sort of normalized annual hit to earnings relative to the way you used to segment it?

Jeff Immelt

Yeah, I think we’re going through a process in the retail finance business to take a look at our reserve practices and our segmentation relative to industry standards. In the quarter, we did a couple of factors. We did aged accounts and we did fraudulent accounts. I mean, we’re basically trying to identify individual events and then go back and say how long is the incurred loss period for that type of event? And there will be – there are other categories we’re still looking at: if people pass away, if people reach settlements, if people have bankruptcies.

So we’re basically trying to segment that book into very detailed and more conservative, realistically more conservative, look at reserve positions based on when the incurred loss period actually started. So I think in the quarter, there’s no more to come from those categories. I think we’re going to continue to look at these other categories. To us, we’re just trying to make sure that we’re in line with industry practices and it’s something that we’re going to do through fourth quarter and first quarter I believe.

Shannon O’Callaghan – Nomura

Okay. Any so any estimate of sort of what the more conservative method is in terms of a dollar amount on the earnings impact for a year?

Jeff Immelt

I don’t. I’d say the one thing I’d look at is if I think about the outlook from third quarter to fourth quarter, I think retail finance probably has an outlook that’s similar in the fourth quarter to what they had the third quarter.

Shannon O’Callaghan – Nomura

Okay.

Jeff Immelt

Even though they’ve had this one-time thing, I think if you look at the outlook, it’s probably going to be – based on volume growth and based on whatever we’re doing with reserves, our outlook is probably close to what we had in the third quarter.

Shannon O’Callaghan – Nomura

Okay. And then just Energy into 4Q, I mean, can you give us a little more feel on the number of sort of wind turbine units and the pressure you’re expecting? I mean, the margin this quarter was like 13.6% for sort of the pure Energy business. You normally have this seasonal uptick, but you’ve got this pressure. Can you maybe gauge where you see those going?

Jeff Immelt

I gave you the total number, if the total year’s going to be up 10%, you look at where we are third quarter to date, I think you can get a pretty good estimate of what we think the margin is for Energy for the fourth quarter. I don’t have the exact dollars but that math’s pretty clear.

Shannon O’Callaghan – Nomura

And what are you thinking for wind turbine units?

Jeff Immelt

It’s 750 or so units.

Keith Sherin

It’s 700, yeah.

Jeff Immelt

So 750 or so units.

Keith Sherin

Yeah.

Shannon O’Callaghan – Nomura

Okay. All right. Thanks, guys.

Operator

Our next question comes from Jeff Sprague with Vertical Research Partners.

Jeff Sprague – Vertical Research Partners

Thank you. Good morning, guys.

Jeff Immelt

Good morning, Jeff.

Jeff Sprague – Vertical Research Partners

Hi. How are you doing?

Jeff Immelt

Hi, Jeff.

Jeff Sprague – Vertical Research Partners

Good morning. Thanks. I just want to drill a little farther into power service if we could. Just some color on what you are actually seeing your customers do? So you’re running at higher utilization, I wonder if there’s some dynamic though that we are running more base load as opposed to kind of the peaking cycles and that’s – is that playing into what seems to be softer order there than I guess we would all guess given kind of the trends in the business right now?

Jeff Immelt

I think you heard from some of this from Steve Bowles in the infrastructure meeting, Jeff. You know basically you’re absolutely right. I mean people are running the gas turbines a lot more and they are running them as base load. And that is ultimately good news and I think the idea is going to be you’re going to have either sooner maintenance needs or maybe there will be a little deeper overhaul when you get into repair these units when they do have an overhaul.

But Steve’s message was that these were going to pull in, running these things at full base load power at this point is maybe pulling overhauls by three months, six months in the out years. These overhauls are pretty well scheduled based on times the units will run. So I think it is a positive. I think it’s all positive. But I think it’s a little further out there but right now they are definitely running gas turbine units a lot more on the running of this baseload.

Keith Sherin

Jeff, we said I think in September that we expected good earnings growth from Power Gen services in 2013 and we don’t see anything that changes that assessment.

Jeff Sprague – Vertical Research Partners

Yeah, I thought the comment actually was flattish for 2013 on services, no?

Jeff Immelt

Flattish overall for the Power and Water business.

Keith Sherin

Yeah flattish for the Power and Water business, but for services we expect growth. We expect wind to be negative.

Jeff Sprague – Vertical Research Partners

As we get closer to the wind down turn is it actually playing in a way you thought in terms of the magnitude of drop next year?

Keith Sherin

Jeff, it is. I think we expect revenues will be down, probably 40% something like that next year and we have always said that it would be about $0.03 of headwind next year. And that really assumes kind of no market in the US. There is some discussion about whether or not there is a production tax credit as you do some kind of tax deal at the end of the year. And if there is one I think that would be good for the business but it’s not something we are counting on.

Jeff Sprague – Vertical Research Partners

And then finally, just thinking about cash flow, I mean it does look like a challenge in Q4. The idea of the working capital draws is understandable. But does that cash flow forecast does it also predicated on particular order strength in the fourth quarter that would drive deposits or progress payments? Is that any part of it?

Jeff Immelt

Not really, Jeff. I think progress remains a headwind. It’s an unusual year just because the spike in wind and stuff like that so this is just been an unusual year from that standpoint. But we see the working capital levers for cash...

Keith Sherin

They’re pretty similar profile to last year the fourth quarter. I think the one difference is you have the wind progress coming down and we factored that in, Jeff. We don’t have any replenishment in the wind progress in the forecast and basically we are shipping that in the fourth quarter. So I think we take that into account but it’s a big fourth quarter and we have to execute.

Jeff Sprague – Vertical Research Partners

All right. Thank you very much.

Jeff Immelt

Yep.

Keith Sherin

Thanks, Jeff.

Operator

Our next question comes from Julian Mitchell with Credit Suisse.

Jeff Immelt

Hi, Julian.

Julian Mitchell – Credit Suisse

Hi.

Jeff Immelt

Good morning.

Julian Mitchell – Credit Suisse

Good morning. Firstly, on Aviation, I wanted to follow-up on your comments around some push-outs at some Asian carriers. And also, in the segment profit growth, I mean you call out the value gas and productivity driving up EBIT year-on-year. I just wanted to check what the latest thoughts were on R&D, you know around the headwinds there in light of the Leap 1a and 1b designs being frozen. Are you still on track for R&D to stop moving flat to down in 2013?

Jeff Immelt

Yeah, we are on track for the R&D. If you look at the margins in the quarter, stronger pricing was a big part of it and cost productivity with the other part that aviation got and we expect those two factors to continue. If you look at R&D and Aviation itself, it was up about, it was down about 7% and it’s holding steady around 5% of revenue. So as a percent of revenue as we said we don’t expect this to continue to be a drag. We’ll see what happens as we get into 2013 but we like the position we are in those engines. We’ve gone to design freeze on two of the three versions of LEAP and we’re on track for the design freeze on schedule for the third version.

Julian Mitchell – Credit Suisse

Thanks. Just the comments around some of the push outs on the OE parts?

Jeff Immelt

The push outs? Yes.

Julian Mitchell – Credit Suisse

Yes.

Keith Sherin

Yeah, it’s purely – my understanding of it is purely a signature approval and it’s not someone wondering whether they’re going to take these planes. So we’re highly confident that these orders are going to happen in the fourth quarter and it’s two customers and it’s about $500 million now. Again if you remember last year in the fourth quarter I think equipment was up 20 plus percent.

Jeff Immelt

We had huge orders quarter.

Keith Sherin

Huge order quarter in aviation so, yeah again, with these backlogs we’re going to have that type of lumpiness but these orders it’s not like someone worrying about their fleet planning or anything.

Julian Mitchell – Credit Suisse

Got it. And then just second on healthcare, the picture of the past 12 months has been very good growth in emerging markets, Europe very weak, in the U.S. kind of hanging on. Looking at the U.S. equipment order trends last couple quarters, I mean is there – are you worried about starting to rollover? I mean maybe six months from now the numbers are looking down kind of high single digit that sort of rate as you’re looking at U.S. healthcare specifically?

Jeff Immelt

I don’t see that, Julian. I think it’s around flat and it’s going to continue to be around flat and there’s nothing that our guys see that suggest it’s getting materially worse as time goes on. I just think it’s a tough market but it’s not like Europe.

Julian Mitchell – Credit Suisse

Okay. Thanks.

Jeff Immelt

Yup.

Keith Sherin

Great. Chanelle, we have – I want to finish up by 9:30 because of some other earnings calls. Let’s take a couple more than close out.

Operator

Will do. Our next question comes from Jason Feldman with UBS.

Jason Feldman – UBS

Good morning.

Jeff Immelt

Hi, Jason.

Jason Feldman – UBS

Just wanted to follow-up on the aviation aftermarket. You talked about expectation of improvement next year. Wondering if you have any sense of what kind of impact you had this year from the earlier and normal retirements of younger planes, the cannibalization for parts and whether you expect that to continue or whether you’ve really haven’t seen much of that?

Jeff Immelt

That’s been part of our run rate and analysis for the business already to take a look at where new serviceable parts going to come from. I think the biggest impact that we’ve had this year really has been on the wide-body. It’s the CF6 is down. It’s down by overhauls and freights and it’s really a maintenance pressure on us while this CFM products and the GE90 products are both up so on the more prevalent install base narrow body growth that we’ve had you starting to see those engines come in for overhaul.

Certainly the GE90 and the 777 you’re seeing those engines coming for overhaul and we’re just seeing a push out. I think a lot of its freight. I think some of it are in Europe and some of the older applications that CF6 is on and we’re really having to deal with that more than cannibalization on the narrow body product.

Jason Feldman – UBS

Okay. Thanks. And briefly on capital, we’ve heard a lot this earning season about CapEx kind of being pushed out. You certainly alluded to the fiscal cliff and whatnot. Have you seen any impact on CLL loan demand or is there still efficiently few competitors that you’re still able to originate as much as you want there?

Jeff Immelt

We said the commercial volume is down about 5%. I think the bigger part of that is it’s uncertainty. It’s people not willing to spend because they have a more certain environment around whether it’s taxes or healthcare or social cost or things like that and just the general backdrop in terms of confidence so I think we have seen some of that. We are seeing nice volume on the equipment side in the CLL business but on the CapEx side I’d say that’s been soft.

Keith Sherin

Soft, yeah.

Jason Feldman – UBS

Great. Thank you.

Jeff Immelt

Next.

Operator

And our final question comes from Brian Langenberg with Langenberg Investments.

Brian Langenberg – Langenberg Investments

Hi, guys.

Jeff Immelt

Good morning, Brian.

Brian Langenberg – Langenberg Investments

Good morning. About the 300 million of restructuring you did, can you just layer that around the segments like how much impact there was in each of the industrial segments?

Jeff Immelt

Sure. If you look at it by business, I will give you after tax numbers. Energy was 50. Healthcare was 27. GE Capital is 25. HNBS was 17. Aviation was 16. And about 100 was associated with the planned exit.

Brian Langenberg – Langenberg Investments

Okay, great, all right. I will follow up for later but thank you very much.

Jeff Immelt

Great. Just before we wrap up I want to give some thoughts about the company going forward. With all the volatility in the environment I think our Aviation business, we’re winning in the marketplace with a massive backlog. Oil and Gas is a fast-growth market with a lot of opportunity for expansion. I think our Power and Water business is really well-positioned for a gas cycle.

Healthcare remains a diagnostic leader with a great growth market foundation. Our Transportation business is well-positioned for growth based on new technology and global expansion. Energy Management has room to grow. And our Consumer businesses will benefit from an improving housing cycle.

GE Capital is smaller, stronger and more competitive. And we’re operating the company well with large backlogs, I think, successful acquisitions, expanding margins and substantial cash. So from an investor standpoint, while the environment is volatile, I think our path for growth and execution is very well understood by the team. And we think this quarter demonstrates that and we think we feel good about how we’re positioned for the fourth quarter and 2013. So Trevor thanks, and have a good day.

Trevor Schauenberg

Great. Thanks, Jeff, a couple of items just to close out the day. A replay of today’s webcast will be available this afternoon. We’ll be serving our quarterly supplemental data schedule for GE Capital later today. I do have some announcements of some upcoming investor events. First, on Wednesday, December 12, Steve Bolze, our President and CEO of GE Power and Water, will host a plant tour at our manufacturing facility in Greenville, South Carolina. More details will be sent in the coming weeks about that.

Second, our annual outlook meeting investor meeting with our Chairman CEO will be held in New York City, likely to be at 30 Rock again, will be held on Monday, December 17. We’ll send out more information regarding that event. And finally, our fourth quarter 2012 earnings webcast will be held on Friday, January 18. Thank you everyone. As always, we’ll be available today to take your questions.

Operator

This concludes your conference call. Thank you for your participation today. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: General Electric Company's CEO Discusses Q3 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts