General Electric Q1 2008 Earnings Call Transcript

| About: General Electric (GE)
This article is now exclusive for PRO subscribers.

General Electric Company (NYSE:GE) Q1 2008 Earnings Call April 11, 2008 8:30 AM ET


Dan Janki - Vice President, Investor Communications

Jeffrey R. Immelt - Chairman of the Board, Chief Executive Officer

Keith S. Sherin - Vice Chairman of the Company, Chief Financial Officer


Jeffrey Sprague - Citigroup

Deane Dray - Goldman Sachs

Stephen Tusa - J.P. Morgan

Robert Cornell - Lehman Brothers

Scott Davis - Morgan Stanley

Nicole Parent - Credit Suisse

John Inch - Merrill Lynch

Ann Duignan - Bear Stearns

Nigel Coe - Deutsche Bank


Good day, ladies and gentlemen, and welcome to the General Electric first quarter 2008 earnings conference call. (Operator Instructions) I would now like to turn the program over to your host for today’s conference, Dan Janki, VP of Investor Communications. Please proceed.

Dan Janki

Thank you, Melanie. First of all, I would like to welcome everyone to our first quarter earnings conference call. Today’s presentation material, press release, and supplementals are available at our investor website at Today’s presentation does contain first line based on the world and economic environment as we see it today and that is subject to change.

Today we are going to cover our first quarter results, second quarter and total year outlook and to do that we have our Chairman and CEO, Jeff Immelt, and our Vice Chairman and CFO, Keith Sherin. So at this time, I would like to turn it over to Jeff to get us started.

Jeffrey R. Immelt

Great, Dan. Good morning, everyone. I’ll just say at the outset that we are disappointed in our performance. We missed our guidance primarily but not solely driven by financial services. We did continue to see a few bright spots. Our global growth was very strong at up 22%. Emerging markets and even the developed ex-U.S. were solid, but we did see a slowing U.S. economy in Q1.

The industrial earnings were up substantially, really led by infrastructure, which remains strong across the board. But the financial services environment was very difficult and it became even more difficult late in the quarter, and commercial finance and GE Money were down about 20%.

We had planned for a difficult environment in December. The environment I think particularly in financial services became more difficult during the quarter, and what we’ve tried to do what Keith will go through is that we’ve reframed the balance of the year based on the world that we see today and some of the challenges we saw in financial services in March.

If you look at the first quarter, there’s really three basic things that I would go through. First, what happened versus guidance? Commercial finance, which has been a very reliable performer, which has consistently hit its numbers over the years, had about a $0.05 earnings per share impact from lower gains and mark-to-market impairment versus plan. Healthcare, because OEC didn’t ship, and CNI had a very challenging appliance market also created headwinds.

We had planned for a difficult environment. We had planned for an environment that was going to be challenging. But what I would say is that kind of late in the quarter, particularly after the Bear Sterns event, we experienced an extraordinary disruption in our ability to complete asset sales and current marks in impairments. And this was something that we clearly didn’t see until the end of the quarter. We also saw a slowdown in March in the U.S. healthcare and CNI markets.

I think what we did is try to reflect on that, not create excuses about it but take appropriate actions. We’ve reviewed all the businesses in the last few weeks. We’ve made operational adjustments as we approach the year going forward. The company fundamentals remain strong. We’ve got good global growth. We’ve got big infrastructure backlogs. We’ve got strong productivity programs, a strong balance sheet, great industrial cash flow.

We believe that the strategy and the fundamentals of the company remain strong but we felt like it was wise to revise guidance for the remainder of 2008 to reflect today’s market realities. And what Keith will go through basically sketches out an industrial earnings that still remains up 10% to 15% but allowing for financial service earnings to be down 5 to down 10. So we are really assuming no improvement during the year. We think we’ve adequately reflected the environment that we see today and really aren’t counting on any overall improvements.

Just looking at the key performance metrics, growth remained fairly strong for the quarter -- orders up 8%, revenues up 8%, assets up 20%. Our organic revenue growth was 5% industrially, down 7 financially, really based on lower volume as we drove price and fewer gains.

EPS, as I’ve said earlier, missed plan and we are below guidance. Returns at 18.1% were flat year over year. Margins were down year over year. We did achieve good productivity in pricing but the mix of equipment versus service and a lower overall healthcare earnings really did bring down overall margin rate for the quarter. And cash, led by industrial cash flow growth of 8%, remains a solid story and should carry forward for the rest of the year.

So overall, a mixed performance in a tough environment and Keith will take you through some of the details.

Keith S. Sherin

Thanks, Jeff. Let me start with orders. We continue to have very strong absolute orders. On the left side, our major equipment orders for the first quarter, we had $12 billion of major equipment orders, up 11%. These orders are always lumpy on a quarterly basis. You can see that in aviation. In the fourth quarter, they are up 66%, in the first quarter, they are down 21%. Aviation has had pretty tough comparisons in commercial engines but even down 21%, the absolute level of orders continued to allow us to build backlog. The orders were 1.3 times the shipments.

You can see then energy had another great quarter, up 59%. Our thermal orders were up 125%, our wind orders were up 40%. Oil and gas and transportation are also lumpy but both grew their orders number and they built their backlog.

And finally, I think if you look at infrastructure in total, infrastructure out of this total major equipment orders had $9.3 billion of orders, up 15%, and the backlog grew to $46.8 billion. It’s up 48% from last year. So we just continue to have a tremendous performance in our infrastructure segment, not only the absolute level of orders, which you can see in the bar on a rolling four quarter average at $12.5 billion, but then that is building backlog because again on a rolling four quarter average, you’re dealing with $9.8 billion of shipments. So we are adding $3 billion to $4 billion of backlog a quarter here as we continue. Even with these orders leveling off at these levels, it’s going to continue to sustain growth for the next several years, so a great performance in orders on major equipment driven by infrastructure.

In the middle is services -- we had service orders of $8.3 billion, up 5%. You can see aviation was up 4%, driven by strength in military. Commercial services orders were $19.7 million a day versus $19.3 million last year, up 2%. Energy service orders were down 2. That’s really driven by a timing in nuclear service. The orders were down 29%. The power gen services were up 9% and you’ll see later in revenue, they had a good quarter.

Oil and gas was very strong. Healthcare had a good services quarter, and over on the right side are our flow orders -- $3.9 billion in the quarter, we’re down 2%. This is organically so we don’t have any impact from favorable translation on overseas orders. This is what it would be in local currency.

You can see appliances had a tough market. That is mostly in the U.S. Retail down 5, and the contract, the builder channel, down 14, created down 6 for appliances in total and enterprise solutions was up 3, with good strength in sensing and inspection technologies and digital energy.

So our infrastructure orders continue to be the strength of the company. The flow environment is tougher but we continue to build backlog and it bodes well for going forward in the industrial businesses.

I’m going to start with a summary of the first quarter and then I’ll cover the industrial businesses, followed by the financial businesses. This is a summary of operations on the left side. Revenues of 42.2, up 8%. The industrial sales of $24 billion were up 12%, so the lower revenue number was in financial services. Earnings of $4.4 billion were down 12%, with earnings per share of $0.44 down 8%, and then on a total reported basis, including the impact of discontinued operations, down 2%.

Cash flow of $4.9 billion is down versus last year because of the special dividends in GE Capital. I’ll show that on the cash page later, and industrial CFOA of $3.7 billion was up 8%.

Taxes, you can see the consolidated rate for the quarter came in at 16%. That’s four points lower than last year. You can also see the lower rate was all due to the GE Capital rate of 3% in the quarter.

The capital rate came in at 3% as a result of the lower U.S. pretax earnings that’s principally caused by the negative mark-to-market impact and lower gains that Jeff mentioned. And since the U.S. earnings are taxed at a much higher rate than our average rate, decreasing those earnings caused the average rate to decline. So for the total year, our guidance today would be to have the tax rate in line with the 16% Q1 rate and that will be flat with last year.

And on the right side, you can see the business results. I’m going to cover this business by business, but if you take the whole quarter, our segment profit of $6.3 billion was about $600 million short of our guidance. Most of that miss came in commercial finance, as Jeff said, and the balance was in healthcare and industrial.

So there’s really two drivers that we are dealing with -- tougher capital markets impacted our financial services business, and I’ll take you through the details of that. And a slower U.S. economy pressured our results.

I’m going to do the pitch in a little different order this time. We’re going to start with a summary of our industrial businesses and look at those and then go into the financial businesses, because I think there are two different stories in the quarter. If you look at the industrial businesses, on the left side our industrial net income, so not including any of the financial services impact, is up 26% year over year.

Now, on a segment basis, so if you look at the four businesses without any impact to corporate, the net income is up about 12%. But the fact that we had less restructuring and other charges at corporate this year than last year lifted the reported net income up to 26%. It’s driven by strong revenue growth led by the global activity. Revenues up 12, organic up 5, global up 28, services strong.

And on the right side are the drivers by business. I’m going to take you through each of these pages business by business but infrastructure did have a great quarter, NBCU continues to deliver solid profitable growth. Healthcare had a tough quarter and also has tough comparisons, I’ll explain that when I get to the healthcare page. And industrial had a mixed story -- a strong performance from enterprise solutions but the market for CNI was very challenging, so let me go through the details.

I’m going to start with infrastructure. We had another great quarter in infrastructure. Revenues of $14.9 billion, up 23%, a segment profit of $2.6 billion, up 17%. The key business results are listed down the left side and if you look at the box on the bottom left, you can see the industrial businesses in here without any impact to the financial services verticals, revenue and segment profit were both up 21%, another very strong quarter.

On the right side are some of the business dynamics and let me start with a little more detail on aviation and then I’ll go into energy and then wrap up infrastructure. So aviation, revenues up 25 and segment profit up 11. Revenues up 8% ex Smiths. Total orders, as I mentioned, $5.1 billion were down 11%. Commercial engines had $1.5 billion of orders. It’s down 50% because of the really tough comparisons we had last year in the first quarter for Genex, but even with that we added over 120 Genex orders and military engine orders were up 52%.

Product backlog continues to grow. We ended the quarter at $19.3 billion, up 51%, so we continue to build backlog even while we are shipping more engines. Revenues of $4.3 billion were up 25%, as I said. The commercial engine revenues were up 10%. We shipped 35 more commercial engines this year than last year. Service revenues were up 6. In that, commercial was actually down 3. We had very strong spare parts sales in the quarter, $19.4 million a day versus 17.5 last year, so that’s up 11. But that was offset by lower contractual services results against some touch comparisons last year. Military engines were up 18% and Smiths added close to $600 million, about 18 points of the revenue.

So op profit up 11, really driven by Smiths, that’s up 7, and the core operations up 4. And a pretty positive quarter here, despite some tough comparisons.

Energy is next and energy is just extremely strong. Energy revenues were up 21, segment profits up 32, total orders continue to be excellent here. The orders of $4.8 billion were up 30% in the quarter. Major equipment orders were up 60%, so we are getting a good backlog built. Thermal orders of $2.2 billion were up 125%. We received orders for 38 gas turbines this year versus 33 last year. The thermal backlog that we are working off is up to $7.4 billion, up 100% from a year ago. And the wind business continues to perform very well. Wind orders of $1.8 billion were up 40% and the backlog is now close to $12 billion, up more than two times from a first quarter a year ago.

Overall, the power gen orders, prices also positive, up 4% for the quarter, which also bodes well for the future. Revenues in the quarter $5.6 billion were up 21%, driven by thermal. Thermal revenue was up 33%. We shipped 36 gas turbines in the quarter, up from 28 last year. We shipped 569 wind turbines versus 524 last year and the service revenues were up 11%.

Op profit was up 32%, driven by both volume and price at power gen. Overall just a great broad-based, excellent quarter.

Oil and gas and transportation both had very strong performances and the asset quality in the verticals continues to be excellent. We have zero non-earning assets in these two businesses.

So overall, infrastructure continues to be the strength for the company and it’s based on tremendous global demand.

Next is healthcare. Healthcare had a challenging quarter, both in the marketplace, as Jeff mentioned, and with tough comparison. The tough comparison is because last year we recognized revenue on delivery to recognizing revenue on shipment. We did that in the third quarter and we corrected prior periods to reflect that.

So when you look at the reported results here, revenue of $3.9 billion was flat and segment profit of $528 million was reported down 17%. The reported variance looks much worse than the actual operating performance.

If you -- the way to think about it, if you look at the footnote A in the bottom of this page, the revenue recognition change that we made last year added $254 million of revenue to the first quarter of ’07 and $117 million of op profit, basically those shipments that were recorded as revenue in the fourth quarter of ’06, because we had to go to delivery, rolled into the first quarter of ’07. The business had no operating activity associated with that. It was just an accounting move. And if you adjust for just that change impact, the business was closer to flat on op profit, so the V looks worse than it is in terms of operations.

You can see that also in the marketplace. You know, when you start with the commercial trends, the orders were up 2%, service was up 8%, equipment was down 1%. We continue to see a very tough equipment market. CT was down 15, MR was up 8, x-ray was down 5, and in Americas, the Americas DI was down 13. We still have some pretty tough comparisons versus DRA. We had backlog coming into ’07 and the international was up 5, so it’s a similar story -- good strong global performance and tougher in the U.S. market.

Services backlog of $2.1 billion, up 7%. We had a great long-term service agreement win with HCA, five-year service contract on both DI and Biomed, so we had pretty good service performance.

And on the right side are the dynamics that impacted us versus our guidance. First of all, as Jeff mentioned, we are disappointed not to ship OEC. We’ve been working this for 20 months. We’re in a tough process here. We’ve completed all of our obligations and we are working through responses from the FDA. You know, that hurt us by about five points versus our estimate, not having those shipments. We do expect to ship in April here and we’ve got to work through the final steps.

The bigger impact in the quarter though is the U.S. market was tougher than we forecast and that hurt us by about 15 points versus estimate. So the V looks worse than it is but we did miss versus our guidance because of our performance in the market place.

The bright side of healthcare continues to be global. The global equipment revenues were strong. DI internationally was up 8, clinical systems internationally was up 13, life sciences, which is bigger in Europe, up 24 and services was up 9, so a very good story.

Our miss in healthcare was driven by the challenging U.S. environment, partially offset by continued global growth.

Industrial, overall results had a tough quarter -- revenue up 1 and segment profit down 16. You need to split that, as I said earlier, between consumer and industrial enterprise solutions. On the left side, you can see some of the commercial trends we are dealing with. The U.S. appliance industry core was down 10% in units, total was down 18% in the first quarter. Core was down 9% in January and February and then it went down 11 in March and you all know the housing story, which is really impacting our contract channel, our builder channel.

The partial offset continued to be global growth in both the rest of CNI and enterprise solutions. U.S. orders were down 5 but Asia and Latin America were up over 20%.

On the right side you can see that enterprise solutions had a very good quarter -- revenue up 8, segment profit up 15, driven by the growth that we see in sensing and inspection and digital energy, and that should continue. However, that didn’t offset the pressure we had in commercial, consumer, and industrial. We responded to the inflationary inputs that we have on raw materials. We raised price. We did have positive price in the quarter. We lost about a point a share and we didn’t offset all the inflation.

We are taking a lot of actions on cost, base costs were down, salary employees are down and we are doing a lot of restructuring at CNI to deal with this environment. So we are operating in a tough U.S. environment. The consumer markets are tough, especially in CNI and we are getting some of the benefits from the stronger global growth here in the segment.

And next is NBC -- NBC delivered their sixth quarter in a row of positive earnings growth. I think revenues of 3.6, up 3 and segment profit of 712 up 3. Pretty good performance.

When you look at the pieces of NBC, the network and local stations were basically flat in revenue in the quarter but up 3% in op profit so you know, our shows have been performing pretty well. The primetime is on track to finish number two. Our prime ratings a 2.8, within 3% of last year so that’s the best year-to-year comparison for any of the networks. We can continue to improve that but we feel good about the progress the teams are making.

NBCU produced content really helped in the quarter. We had strong DVD sales from product like Heroes and House and 30 Rock that we produced. And the one offset here in the network was the local markets were challenging. We saw local ad spending decrease of about 11% in the quarter, and this is an indicator that it’s tough out there.

The real bright spot and strength here continues to be in entertainment and information cable. We had another great quarter. USA was number one for the seventh consecutive quarter. They are winning in total viewers in all the demos. Again, great results at USA together with Bravo and Sci-Fi helped deliver double-digit profit growth in this segment.

And the information cable channels are doing great. MSNBC had its highest rated quarter in six years. The ratings at CNBC Business Day were the highest in seven years, so this whole segment is really performing.

Film had a very strong quarter with nice results in the award shows. Op profit was up double-digit, principally driven by this year’s DVDs. American Gangster and Atonement had very good results versus easier comparisons last year, and for the parks we saw good attendance and spending in January and Feb but slightly lower than expected in March, another thing we are watching.

Digital, we launched the consumer version of hulu -- very good reviews and our digital revenue was up about 5% in the quarter. So overall, another on-track quarter for the NBCU team.

And finally on industrial, one more page -- you know, we’re running the company with a disciplined focus on operations. If you look at the left side about our operating profit rate the rate is down 70 basis points in the quarter. I think you have to peel it apart a little bit. With our growth and the op profit and we still grew our op profit dollars, and on the positive side here, if you look at the variance items here, our pricing actions that we’re taking are more than offsetting inflation. We are getting positive productivity, so we are working hard on the cost structure and getting more output with the same or less input.

You know, there are two drags here that are both future opportunities -- the equipment services mix. You know, we’re up 3X on equipment versus services at lower margins. That’s just a future opportunity as we continue to build the install base and the fact that our acquisitions, especially in infrastructure with Vetco and Smith, are at lower op profit is another opportunity because we are working on the cost structure and we will get those op profit rates up.

So on -- we definitely have more work to do in healthcare. It was a drag of 50 basis points in the quarter and right now overall when you look at the dynamics, we expect the total year to be about flat with last year at about 16.6. But that will be accompanied by good revenue and good op profit growth.

In the middle, you know, as a result of the first quarter we’re going back with all the teams. We are taking on an additional $600 million of base cost, another 3% reduction on the base cost balance here, so we are taking a lot of actions to try to deal with some of the environment we see that is tougher than we thought. And on the right side, we are totally focused on delivering our net income growth and cash flow. And the quarter is up 8, a little ahead of plan but on track for the up 10% for the year on the industrial side with a lot of good activities on cycle time and lien and a focus on progress collections. I have a page later on the cash but we are off to a good start, so we are running the company with a lot of operating discipline and we have to, given that we’ve got a tougher environment.

Let me shift now to the financial services side. Everyone is aware of the challenges that are out there in these financial markets. There have been massive write-offs. That’s created the need for significant capital infusions.

GE Capital is not directly impacted anywhere near the way the financial institutions have been hit, but you have to realize the deleveraging effect that is going on in the marketplace is slowing some of the global commercial activity. And I tried to put a couple of indicators on the bottom half of this chart to show that, that global commercial real estate sales have been running at $250 billion plus a quarter and we saw a real slow down in the first quarter, down 60%.

The leverage loan market really fell off in the first quarter. You know, the large cap transactions obviously fell off in the fourth quarter but there’s been a lot of mid-market activity that’s continued and that’s slowed down and the U.S. CapEx is also slowing, which does impact some of our flow businesses.

And then one other event that’s not on the page, obviously Jeff mentioned was the meltdown and the takeover of Bear Stearns, which created more volatility in the capital markets in the second half of March than we could have ever anticipated.

So this is a really tough environment. Now, GE Capital has great real estate assets. Our underwriting is fantastic. We are very disciplined in what we do in terms of underwriting and risk management, spread of risk, diversification. But we are not completely immune from this capital market’s volatility.

And on the next page, there are a lot of positives around our financial services. This is not a gloom-and-doom story. You know, our funding is in great shape. We did $35 billion of long-term debt in the first quarter. We are ahead of our plan for the total year. Demand for our commercial paper is strong. Our spreads have come down. The CDS swap rates have come back into more normal relationships and I think that’s all good news.

New business margins are improving. You can see on the right side the Q1 commercial finance volumes at higher spreads. We have an opportunity to put capital to work at great returns and senior secured debt positions that we know the assets, at low loan to value real estate positions where we can underwrite and understand the assets and we are doing that, and that will demonstrate improvement in the future.

And the credit -- this is not a credit story. The credit is solid, as expected. You know, the commercial finance 30-day delinquencies are 1.36%. It’s up 10 basis points from a year ago. These are at historic low levels for us, so the quality of the portfolio continues to be very robust.

You know, GE Money delinquencies are in line with the plan. I’ll cover that on the GE Money page and the one issue we had is that the capital markets and the gains were tougher than expected, and I’ll cover the impact of that in the next few pages.

So we are continuing to reshape financial services. We were on track for a $50 billion redeployment goal. We closed the Merrill Lynch capital deal. We’ve got an LOI on European commercial platforms in the commercial business in Italy. We sold the corporate card in the first quarter and we got that done with American Express. I’ll show you the impact of that. We’ve got an LOI on some select European GE Money dispositions where we don’t have scale and we think it’s appropriate to get them with a bigger player. And we are really going to -- we are going to lighten up on our U.S. exposure, obviously. We are on track for selling the U.S. PLCC business and we are on track for the final exit in Japan.

So the core business remains solid and the investments or redeployment are going to be more positive going forward.

So here’s a summary of the financial businesses in the first quarter. Our miss was in commercial finance. As Jeff said, we had $270 million of negative marks in impairments versus our plan and they basically were in three categories. They are in public equities, they’re in a retained interest valuations from things that we’ve securitized where we still own the equity tranche, and they are in warehouse marks.

We also had lower gains than planned. You know, over $100 million of gains in real estate pushed out of the quarter and other asset sales that we are working didn’t get completed. Some of those real estate transactions have already been completed in April so it’s a timing issue, to some extent.

Those were the big drivers. On the other side, the asset quality is stable, as I said. We have lots of attractive origination opportunities and both GE Money and the verticals met their estimates, and I’ll take you through the pieces of where we are on GE Money but we did have a miss in commercial finance. I think it’s important to keep in perspective; we still earned over $2.5 billion of net income in our financial services businesses at a 20% return on equity, so it’s a solid relative performance but it’s below our expectation and it is not what we expected and we’re disappointed.

So let me take you through the two businesses. In commercial finance, it was a really challenging quarter. We continue to see strong asset growth. Our global originations are good. You know, assets reported up 27%; it’s up 19% except ex. Revenues were up 7 and the segment profit of $1.158 billion was down 20%.

Two drivers here, really; one was real estate. Real estate earnings were down 16% in the quarter and that’s driven by lower gains on property sales. We did sell $1.7 billion of assets in the quarter. However, we were working on and forecasting internally another $900 million or so of sales that didn’t happen. The good news is we are selling properties and we did complete some of those, as I said, in the second quarter and we’ll continue to be able to realize those benefits but they are going to be at a lower level than we wanted, than they were in the first quarter.

We sold in the quarter 56 properties for $1.7 billion and we added $7 billion of assets. Now, we are also remixing the real estate portfolio. The $7 billion of asset growth was in -- 85% of that is senior secured debt at about 70% loan to values and 25% to 30% ROE, so there are really good solid opportunities out there to get a spread business earning great returns and we are doing a good job of remixing that portfolio. And the quality of the portfolio remains strong. You know, the earnings in real estate or 0.38% of outstanding receivables -- we do not have a credit issue here -- 30-day delinquencies is 0.36%, down 4 basis points over last year, so credit is very strong and the quality of the portfolio and the assets are great.

Capital Solutions, really not a big driver in the quarter. Earnings were up 1%. We had good core asset growth and we had some acquisitions in Europe and Japan. They had some of the marks, about $15 million of the marks on retained interest were in the Capital Solutions business. But the balance of the commercial finance earnings were down year over year, driven by corporate finance. That was down 41%. That’s where the majority of the negative marks were.

As I said, they fall into three categories -- public equity investments, where you are just marking them, security to whatever the mark is at the end of the period from public stock valuations; retained interest on securitizations, where we hold the equity -- that’s really a model that we have to run; and then finally warehouse loans and assets. We underwrite a lot of loans but with the intent to sell them in the market place and at the end of the quarter, we had to take some of those markets. You know, the index, loan index for the comparable products was about $0.95 on the dollar as we started the year and that went down as low as $0.85 on the dollar through the quarter and towards the end of the quarter is between $0.85 and $0.88 or so, so that was about $55 million.

The largest mark we had was about a $40 million write-down on a Hong Kong listed wind turbine gear manufacturer and we also wrote off our common stock in FGIC, about $36 million after tax.

So what -- you know, we are subject to additional market decline but as Jeff said, our normal volatility here for the marks is somewhere around 25 a quarter. We had $50 million in the fourth quarter and then in the first quarter, we really have had a spike here. I think we don’t anticipate anything like that as you go forward into the second quarter. We’ve taken a very hard look at it but we are subject to some of the volatility in the marketplace obviously here.

Q1 new business underwriting is at much improved pricing. That’s really good news. The portfolio of quality and commercial remains stable, as I’ve said, and we are also reducing our costs in commercial finance. So the core here is in great shape and we had a tough quarter.

GE Money also had a tough quarter. The difference is it’s right in line with our expectations. Revenues of $6.4 billion, up 7. Segment profit of 995, down 19. Again, asset growth up 21, really the assets are up 8 ex the foreign exchange translation impact, so we had pretty good core growth in Europe. We had -- the Americas had $6 million of growth year over year but that’s down about 6% from year-end, so we’ve taken some pretty strong underwriting actions here and we are slowing the growth in the Americas.

Segment profit, down 19. That’s what we expected. Really, it’s the mix. Global non-Americas earnings were up 15% and the Americas was down 50%. We had lower securitization. As you know, last year we had additional securitizations we did in the first quarter that partially offset some of the losses we had from our WMC business and the WMC losses went into discontinued operations but the securitization gains remain in continuing ops, which drives this negative variance, obviously.

We also had higher provisions in the quarter in the Americas. It’s about in line with our plan. We said we were going to have about $600 million of higher provisions. We had about $200 million in the quarter driven by the Americas and I’ll cover some more of that in a minute, and then we partially offset both of those impacts with a gain from selling the corporate card business to American Express, and you can see in the GE Money segment, a $218 million benefit against those lower securitizations and additional provisions.

On the top right you can see the portfolio quality, the 30-plus day delinquency for GE Money. Total delinquencies at 564 are up 42 basis points and almost all of that is explained by the growth in the delinquencies in North America, in line with what we expected, up 100 basis points.

We are making real progress on repositioning some of the money portfolio, as I said. It’s great to have the corporate card closed. We are in the process of exiting some of our European platforms where we don’t have scale. We are on track for the U.S. PLCC sale. We have the data room. We have a banker or two and we have interested parties working on that and Japan is progressing really well, and we continue to take a lot of costs out here. We’ve taken the headquarters way down in the money organization. In the quarter, operating expenses were down 5% despite the fact that we are investing in global growth and we are adding more collectors domestically, so the team is doing a good job of taking costs out in this tougher environment.

Next is cash -- first quarter cash flow, $4.9 billion was our plan. It’s down year over year because of the GECS special dividend from the sale of Swiss Re shares. Industrial cash flow of 8%, which is slightly ahead of our internal plan. And on the right side, you can see the walk. We started with $6.7 billion of cash. We added the $4.9 billion of cash we generated, less the dividends we paid of $3 billion. We repurchased $1 billion of stock in the quarter. Plant and equipment investment was about $900 million and we didn’t really close any acquisition or disposition activity in the quarter, relatively minor. And last year if you remember, we raised the long-term bond. We used that to pay off our commercial paper on the industrial side at the end of the quarter, so we lowered the total debt from where we were at the end of the year and we ended with about $5 billion in cash in the quarter.

So with this start and even adjusting for what I’m going to cover in a minute on revised guidance, we are on track for the $23 billion of CFOA that we have for the year.

So that finishes the quarter and now I’m going to shift to going forward, which is one of the points Jeff made. You know, we hate missing our numbers. It’s something that the team takes incredibly seriously. It’s something we pride ourselves on and this is a really tough quarter for us. Jeff teed up that we have put together a framework to deal with these first quarter issues in a responsible way for investors.

We want to give you a framework that reflects all the realities we are dealing with, it captures the down sides but it doesn’t assume things are going to get better. And we’ve completed detailed operating reviews with all our teams over the last 10 days. We ran through every single one of the operations about what happened and what does it mean for the future and we think this framework takes into account the need for more flexibility in a more volatile world. And so this chart is structured to look at what happened in the first quarter, what’s our view of the changes for the balance of the year and why, so let me take you through it.

If you look, our original guidance was 242, up 10% plus. First is infrastructure -- infrastructure remains very solid. We’re adding a penny to the balance of the year. It’s going to be up 20%.

Second, if you look at the balance of our industrial businesses, we had a miss in the first quarter. We do not think that miss carries through with the same rates for the balance of the year, so giving a guidance -- a lower guidance range of $0.03 to $0.04 impact for the balance of the year is an appropriate risk reduction. We’ve been through each of the businesses, as we’ve said.

You know, we are expecting continued U.S. softness but we do have the OEC benefits that are going to happen and we do have additional cost action, so we think that’s appropriate.

And finally, financial services, we have to take into account the first quarter miss, $0.05 in the first quarter. But again, the same thing here; there’s going to be less of an impact quarterly going forward we anticipate. First of all, the new business margins are strong. We are going to continue to allocate capital to great opportunities and we are seeing big bulk opportunities where we could put it into core spread business and we are going to continue to do that.

We are going to have to assume lower gains based on what we had in the quarter, probably $0.02 to $0.03 lower in real estate lower for the balance of the year. Real estate made $2.3 billion last year and they are down 17% in the quarter. We are going to be down somewhere between 15% and 20% for the year in real estate, so that’s one of the big drivers here.

The U.S. continues to be pressured in the consumer business and we expect to have probably some pressure on provisions as we look at going through the year.

And finally, I think the thing that we are also trying to deal with here is the range contemplates the second half PLCC sale. If we do that, it’s most likely that the earnings, which are about $0.04 from PLCC and any gain that we get would end up in discontinued operations, so I think rather than having a set of range guidance that we give you today and then having to deal with that in the second half, we’re just saying to anticipate probably about $0.04 in that range for the total year from PLCC.

So you know, our new range is 220 to 230, up 0% to 5%. I think it reflects what we saw in the first quarter. I think it’s a realistic look. I’ll show you the second quarter in a minute and I think it’s an appropriate risk reduction as you look at the year, and we’ve still got to execute and we know that and we are going to do that.

Infrastructure is incredibly strong. We are counting on that and we think you can count on that too. We are adjusting the rest of industrial to reflect the tougher U.S. environment that we saw in March and the tougher capital market environment for financial services, a reality we’re dealing with.

So what’s that mean for the second quarter? If you look at the second quarter by business here, infrastructure remains solid. We should have great revenue growth. We’re taking the segment profit, anticipate it up 20% plus. We’ve got broad strength and a lot of visibility -- I mean, everyone asks is infrastructure slowing or have you seen it globally. I mean, this isn’t backlog. This is things that’s going to continue for a couple of years and then there’s an opportunity to have it continue even longer than that based on the global needs that will happen. In places like the U.S. where we are going to need energy and in places like the U.S. where the carriers are going to have to re-fleet when the global carriers get done, so I think this is a really broad-based business for us and very good visibility in the short-term.

Commercial finance -- you know, we took it from down 20 in the first quarter to down 10. We do have some of the real estate carryover I mentioned. As I said, some of those sales have happened but we’ve got some more real estate to do. We don’t anticipate a repeat of the Q1 marks in the impairments and we do have some pretty good growth that we put in place at high returns.

GE Money, down 20, similar to the first quarter. You know, it’s going to continue to be challenging. We have the U.S. pressure, probably additional pressure and tough securitization comparisons, the same as what we had in the first quarter, pretty similar in the second quarter, offset by the continued global growth. So I would say a pretty similar profile to the first quarter.

Healthcare, we’re going to get the OEC shipments and the comparisons are just easier in the second quarter. The adjustment that we had in healthcare in the first quarter that added on profit and created a negative V of 17, went the other way in the second quarter of ’07 so we actually had a $40 million reduction in second quarter ’07 on profit from that change, and that gives that business an easier comparison. So the V looks a little funny compared to the first quarter, but I think driven by OEC and that change in the rev rec, we’re feeling pretty confident about where we are here.

NBC Universal continues its first quarter performance and industrial continues to have pressure in CNI but good growth and easier comparisons in their price solutions.

So overall for the total company, we are talking about $45 billion of revenue, up about 6%. Continuing earnings of $5.3 billion to $5.5 billion and a continuing earnings EPS of $0.53 to $0.55, down 2 to plus 2.

So let me wrap up, with just putting it back together as a summary for what the 2008 total year looks like revised. You know, we got revenues of $187 billion, up 8%. That’s down a bit. Earnings obviously $22 billion to $23 billion, down from where we were. CFOA of $23 billion plus 10% industrial, we still feel good about that and the return on total capital of 18%.

You know, on the right side, you can see the new segment outlook Vs; infrastructure continues to be strong. We’ve reflected the pressure in the financial services business this year and in total with those Vs, we expect the GE industrial earnings to be up 10% to 15% for the year and GE Financial to be down 5 to 10 and with that, that’s the range of $2.20 to $2.30, 0% to 5%.

So that’s a look at the quarter, a look at the changes in guidance and how we feel about it going forward and let me turn it back to Jeff.

Jeffrey R. Immelt

Great, Keith, thanks. Just to recap, you know, look, we’re disappointed in performance. We hate to disappoint investors. I do think the environment in first quarter ’08 was more difficult than we expected, particularly in financial services and particularly late in the quarter, just to put it in context. But we are not -- you know, that’s -- really doesn’t mitigate where we ended up this quarter. Nonetheless, the business model remains very strong. The balance sheet is strong. We’ve got great global growth. We’ve got strong orders, a very strong backlog. The backlog is up 34%. Infrastructure has very strong momentum. We’ve got good restructuring activity going on. The cash flow is high. We’re committed to the dividend and buy-back plan, so we think the company has got lots of strengths as we sit here today and you know, we’re reframing this year to model a more difficult environment with guidance of $2.20 to $2.30, industrial up 10 to 15, financial services down 5 to down 10.

So that’s an update on the quarter. Again, we’re happy to answer questions. We have a very strong commitment to execute in a difficult 2008.

Dan Janki

Thanks, Jeff. Melanie, we would like to open it up for questions now.

Question-and-Answer Session


(Operator Instructions) Our first question comes from the line of Jeffrey Sprague with Citigroup. Go ahead.

Jeffrey Sprague - Citigroup

Thank you. Good morning, everyone. I guess one thing we’ll all be struggling with here today is just trying to get comfortable that we’ve got a baseline we can have some confidence in and I guess just a couple of things that I’m wondering is although you are looking for lower gains, if you could give us some sense of how important gains still are in your earnings outlook for the remainder of the year.

Keith S. Sherin

You know, I think the biggest place here is real estate obviously, Jeff. If you look at our real estate book, about 50% of the assets are debt and about 50% are equity. The real estate business made about $2.3 billion last year, as I said. They are going to be down somewhere between 15% and 20%, we’d anticipate, and the gains are going to be 60% of their year probably. So we are selling a lot of real estate. We’re lowering what we thought we had -- you know, we had as we entered the year an embedded gain of over $3 billion in the properties that we have. We still have a pretty robust global market but you know, we are counting on real estate property sales as part of that business model that continue to be a significant piece of those earnings.

At the same time, all the investment we’re making is on the debt side of the business to remix it and that gives us more of a spread business going forward. So you know, we sat down with Mike Neil and Ron Pressman and the commercial finance team. Obviously we spent a lot of time on this and these numbers take into account the pressure they’ve seen and what they think will happen as we go forward on real estate. And certainly as far as visibility into the second quarter, we think we’ve got our hands around what the second quarter looks like and we’ve got pretty good confidence on that for commercial finance.

So there’s still more in the quarter to get done and more in the year to get done but we think we’ve capture what that exposure is for us.

Jeffrey R. Immelt

And Jeff, what I would say is if you look on the industrial side first where we’ve guided up 10 to 15, it’s really driven by infrastructure and I just think that’s really very bedrock solid with high visibility in the backlog and you know, I think -- when you think about healthcare, CNI, and NBC, I think what Keith laid out adequately reflects, you know, if the economy gets a little bit worse, we can still accommodate that.

And on the financial services side, I think we are just looking at run-rates. What we saw in the first quarter, we’re not assuming anything gets better and I think executing on that plan gives us a level of confidence that in commercial finance, we’re going to be in good shape for the rest of the year.

Keith S. Sherin

I think another -- Jeff mentioned run-rates. Commercial finance made $1.158 billion in the first quarter. You know, we’re somewhere around $1.175 billion in the second quarter. I mean, I think it’s a thought-out, well thought-out plan for them and we are trying to make sure we don’t have this happen again, Jeff, obviously.

Jeffrey Sprague - Citigroup

Can you give us a sense of the size of the asset base subject to marks and impairments? And is there -- you know, you’ve got kind of a calendar tempo on reevaluating aircraft and other things. I mean, I would guess none of that happened in the quarter. Are you looking at any of that in the back-half of the year?

Keith S. Sherin

I’d say we’ll have to wait and see where those go but right now, things like the asset values on aircraft and everything continue to be incredibly strong. I mean, we can’t get enough aircraft for the global demand so I -- I wouldn’t anticipate that that’s something that we’re going to be dealing with in any big way in the year, based on what we see today.

On the other side on what’s subject to it, you know, we have in the three categories, we have about $700 million of public equities that are in a trading category that get marked to market through the P&L. You know, the normal volatility on those securities has been plus or minus 10% and we just had one security that was down 45% from the end of the year to the first quarter, based on I guess the Chinese stock market really is probably the biggest driver. So I think that volatility was extraordinary.

You know, we have at all times somewhere around a $4 billion to $5 billion warehouse. Right now, it’s about $4 billion of loans that we’ve originated to sell. You know, it’s a lower cost or market model. You know, I think taking the mark somewhere from $0.95 down to between $0.85 and $0.89, depending upon the security in the quarter, you know, that was a pretty dramatic move. Right now, that’s above that, the index is above that mark so we’ll see where that goes.

And then retained interest, we have about $1.5 billion of retained interest in the commercial finance book related to the securitizations we’ve done. Again, that is a mark. That is not a credit mark; that’s a mark based on the fact that the yields investors expect for securities like this have risen and so the present value, the discounted cash flow really came down and that’s about $55 million in the quarter. I mean, the spreads widened from the end of the year from 400 basis points to 1,000 basis points, depending upon those securitizations on what we had to discount the cash flows by, so I think the dramatic mark-to-market there is totally based on the market conditions and basically as long as we hold those securities to maturity, we are going to earn that back.

So those are the three categories. We do have a lot of investment securities in our insurance business. You have to evaluate those for impairment, whether they are other than temporarily impaired and we have always had unrealized gains and unrealized losses in those portfolios but these are the three categories that gave us the volatility this quarter, Jeff.

Jeffrey R. Immelt

And Jeff, again those could go the other way but we are not counting on any improvements during the year.

Jeffrey Sprague - Citigroup

And just finally and I’ll pass it on, can you give us a sense of what your guidance assumes on provisioning, in money in particular but across the entire finance portfolio?

Keith S. Sherin

Sure. I would say that in commercial finance, we do have a plan that does have a little higher losses. That hasn’t really changed, that outlook hasn’t really changed for us. I think in GE Money, the main -- first of all, the provisions are growing with asset growth globally but the main provision pressure point is obviously the Americas. You know, we’ve said at the beginning of the year and the end of last year, we are going to have about $600 million more provisions. This guidance does anticipate that that could be a couple hundred million more as we go through the year in the Americas.

We saw about $200 million in the first quarter out of the 600, so we just based on the delinquencies and we’ll see where the consumer goes here. The guidance does contemplate that we could have more there.

Jeffrey Sprague - Citigroup

All right. Thanks a lot.


Our next question comes from the line of Deane Dray with Goldman Sachs. Go ahead.

Deane Dray - Goldman Sachs

Thank you. Good morning. Jeff, I think what investors will have difficult reconciling today is the timing of this miss because back on March 13th at that retail investor webcast, you did talk about reaffirming guidance and feeling as though the environment hadn’t changed significantly and that was two weeks to go in the quarter. So just take us through about what you knew then and how did conditions change. Was it reporting lines, was it just that you did not see the severity of this in the last two weeks? I know March is what, 50% of the quarter or so, so the timing is there but just take us through what you knew at March 13th and how we should think about that.

Jeffrey R. Immelt

You know, we had the CC the week before that webcast. I had a chance to review in some detail what the businesses were doing. At that point in time, we still felt like we were on track for the quarter and for the year. We spent a lot of time thinking about those things. I think two days after the webcast, the weekend of the Bear Stearns situation took place.

You know, the last two weeks of March were a different world, particularly in financial services. And like I said, I don’t want to -- I don’t want this to be a company that’s about excuses but I think the $500 million plus in commercial finance that we missed in the quarter you know fundamentally took place with really the inability to do transactions in the last two weeks that we normally could get done and marks that basically we do at the end of the quarter that basically all went negative, and that’s the vast majority of what we saw and what we experienced.

Deane Dray - Goldman Sachs

And then looking forward for the expectation about the portfolio moves you are anticipating, including the sale of private label credit card, has the credit market conditions and prices that you think you could get as you shift out of GE Money into commercial finance, have those expectations changed both in the timing and valuations?

Jeffrey R. Immelt

You know, Deane, let me use your question to maybe answer it a little bit more expansively. You know, look, I think there’s a question investors could ask today about financial services vis-à-vis where it fits in GE, because the industrial businesses are strong and the financial businesses aren’t as strong as we’d like to see.

And what I would say is that basically what we’ve done over the last few years is try to de-risk financial services by existing insurance, reinsurance, mortgage insurance, and we want to continue to do that to get to more of a debt spread and consistent model. And we continue to drive along those lines.

I think what the corporate card experience shows is that when you’ve got strategic buyers that like an asset, you know, that you can still have the very beneficial transactions that take place in these markets. So I feel good about the swap we are doing with Santander. I feel good about the AMEX transaction. We think that the PLCC is going to get a lot of interest because it’s a unique asset and we plan to continue to do this throughout the year to redeploy at a higher return, de-risk the business and improve the overall perspective on what we’ve got in financial services.

Deane Dray - Goldman Sachs

Any change in buy-backs and how you are feeling about that? You’ve got a $15 billion program.

Jeffrey R. Immelt

I think the buy-back, Deane, the buy-back and dividend remain intact and we’ll continue to look to see as we do additional transactions the best way to redeploy that capital.

Deane Dray - Goldman Sachs

Thank you.


Our next question comes from the line of Stephen Tusa with J.P. Morgan. Go ahead.

Stephen Tusa - J.P. Morgan

Good morning. So I’m just trying to understand the healthcare result. I know you talked about the tough comp there but wasn’t that something that you would have known about at the beginning of the year when you gave the first quarter guidance? Because it was still a pretty big -- you know, the comp was still a pretty big miss to actual guidance.

Keith S. Sherin

Sure. I’m -- you know, I’m trying to distinguish between two things. I think clearly we knew the comp and I was just trying to use that explanation to make sure you saw -- a down 17 looks pretty funny to then say you are going to be up 5 in the second quarter. That’s completely separate from the fact that we missed our guidance and in the miss of guidance, really it’s OEC that hurt us, about $50 million in revenue in the first quarter versus what we are planning on. And then DRA was worse than we expected. The U.S. DI revenue came in about 8 to 9 points below our plan. That’s probably about $90 million of revenue.

And then we also saw a spillover into some of the other businesses from the economy and into clinical systems and we -- you know, we saw community hospital orders down 18% in March, but I think they were impacted by some of their funding capability. But that was about $100 million of revenue, so you look at our -- versus our guidance, Steve, you are right. We had a revenue miss of about $250 million and that spilled into op profit miss at about a 50% contribution margin rating.

Stephen Tusa - J.P. Morgan

Right, and I think you guys missed last year, even though it was pretty clear the DRA was going to be an impact. And kind of getting back to Deane’s comments around what happened in mid-March and then a year ago or a couple of years ago, there was the whole organic growth guidance. You know, people look at you guys as a pretty visible company. Jeff, I’m just wondering if you could maybe comment on is there something cultural here with regard to GE that makes it difficult with a company this big to take a really good hard look in the mirror and put, whether it’s forecasts or make the changes necessary to perhaps unlock some of the value that’s clearly going on in the infrastructure business, because you know, everything that’s great about your company is seeming to be offset by things that people maybe aren’t focused on because there is not enough visibility into the businesses and these surprises in financial services.

I’m just wondering if there is something that makes you guys think twice about the strategy that you guys have been on over the last few years.

Jeffrey R. Immelt

You know, Steve, what I would say because you know, again, I think if you look at the financial service situation and the way it took place in this quarter, you know, we weren’t alone in that. I would say the financial service markets have remained volatile. I think clearly we are in an unprecedented area vis-à-vis what we’ve seen in March and at the end of the day, our earnings -- I’m not giving an excuse, our earnings being down 20% versus the industry are still reasonably strong and so I think our business model is still strong.

In the case of healthcare, look, I’m not happy about the fact that we’ve had a plant shut down for 20 months in our healthcare business. And I think until we get that plant up and going, it’s difficult to look to see how our healthcare business really is performing in itself what is a difficult market.

Keith S. Sherin

And the commercial finance track record is just unparalleled. It’s a business team that executes, they’ve got a lot of credibility, more than 10 years in a row of basically meeting every commitment and managing risks and opportunities in a way that you know, you’ve got to look at some of the disruption here as being extraordinary.

Stephen Tusa - J.P. Morgan

Yeah, and I completely agree with you guys because I think that is a great financial services franchise but what seems to be somewhat of an inability for investors to get comfort with, you know, the fact that there aren’t going to be surprises there and then we see a quarter like this where there is kind of a lack of gains and a little bit more benefit from gains and real estate, et cetera. It’s just -- it makes it hard for investors, especially in this environment, to have conviction I think that you guys really are a safe reliable growth company which is kind of the core of the value proposition you guys have put forth to the investment community.

Jeffrey R. Immelt

Look, I still, Steve, think that the strength of the company, the big backlogs we’ve got in infrastructure, I like our healthcare business vis-à-vis over a five or ten-year time period, this has been a 15% earning grower. We’ve got world-class franchises across the board. We don’t like surprising investors. We’ll continue to work the portfolio to invest in higher growth, higher margin businesses, like we’ve been doing. And look, we’ve laid out for the balance of 2008 what we believe is appropriate for the company.

So look, I understand your frustration. I’m not going to be defensive about it but by the same time, I think we’ve got to look at in the totality of the company, this is a company that’s delivered for a long time, a lot of quarters. We earn a lot more money than we did five or six years ago. We generate a lot more cash. We bought back a lot of stock and I think the franchise of the company is very strong and I feel the same way about the strategy.

Stephen Tusa - J.P. Morgan

Thanks a lot.


Our next question comes from the line of Robert Cornell with Lehman Brothers. Go ahead.

Robert Cornell - Lehman Brothers

Good morning, everybody. A couple of questions; I’m not sure if Deane asked this, I had to step away for a minute, but you said, Jeff and Keith both at the second half of March you saw the increased financial stress. What have you seen so far in April in that regard? Have you seen any recovery, has it gotten worse? What’s the story?

Keith S. Sherin

Well, you know, I mentioned we have concluded some of the real estate transactions that were kind of hung up at the end, so those did execute. You know, there’s very few indicators in the first two weeks that we see relative to the whole quarter.

The leverage loan market marks that we saw are -- the index is up over $0.90, so we’ve seen a little comeback in that since March, that’s one indicator. But it’s hard to say that we’ve seen a different environment than we saw in the second half of March.

I think the extraordinary volatility has definitely calmed down as you got to the end of March but it didn’t help us necessarily with some of the marks, Bob.

Robert Cornell - Lehman Brothers

I guess a question -- Jeff asked this question earlier and you answered it but I just want to go a little bit deeper. You know, if things started to unravel in the middle of March, you didn’t have an awful lot of time to really recast an annual result for a company as global and big as GE is. I mean, can you take us through the re-planning process a bit to help us understand how you got to the current guidance?

Jeffrey R. Immelt

Look, I think we saw what happened at the end of March. We sat down and basically gone through with each one of our business teams a way to go through the quarter, look what’s next. You know, with John Rice and infrastructure, it’s pretty easy, right? You see nothing but strength. We can profile it. We look to see could they do more on the balance of the year. In the case of Mike and Jeff, you know, the commercial finance team is one of the strongest management teams in the company, has delivered -- we’ve got a lot of ways to look at the business.

So you know, look, we went through fundamentally kind of what we’ve seen, which was tougher than where we forecasted we would be in December and reprofiled the year. And we did it from the context of -- look, we hate missing. We hate disappointing investors. We don’t want to do it again and so we’ve tried to create a framework that we know has got our credibility associated with it and that’s something that we all take very seriously.

Keith S. Sherin

I think if you look at the framework, Bob, we did all those meetings that Jeff talked about and done a lot of analysis and risk management planning here. If you look at the first quarter, we are down $0.07. We’ve got to deal with that reality. If you look at the second quarter, our midpoint of our guidance range would be $0.04 less than consensus, so at the half you are about $0.11 down, so from $2.42, that would get you to about $2.31. And in the second half, we think we’ve got a range that deals with the volatility plus also one of the points you’ve raised is what happens to PLCC. We’ve tried to say in our guidance let’s take those $0.04 out for the year. Eventually that’s going to happen. We’ve got to do a lot to execute that but why have to change later.

And I think we’ve tried to analyze what happened in the first quarter that doesn’t repeat, what gets better as you go through the year and we’ve tried to risk reduce some of the areas where we had volatility that we weren’t able to recover from in that late March period and I think we’ve done that and taken some of these numbers out.

So we try to make sure that we are dealing with the downside but we are not laying down.

Robert Cornell - Lehman Brothers

What is the economic backdrop you guys have based this on? Is this -- everybody is talking about the U.S. recession, whether it’s a two quarter, three quarter, how deep. I mean, what is the economic backdrop that you guys have used to frame this outlook?

Keith S. Sherin

Again, Bob, I think in the case of infrastructure, this is primarily driven by global demand and then backlog. In the case of NBC and CNI and healthcare, you know, we assume that the economy is going to be very tough and will remain tough. The bottom end of that range would have it tougher than it is today.

Jeffrey R. Immelt

And in financial services, I think we’ve got run-rate -- I think we’ve left probably one of the toughest quarters in financial services, so we’ve got a run-rate that we can use to really re-baseline, if you will, where the -- you know, where financial services could be. And look, I think we’ve been appropriately conservative in financial services.

Robert Cornell - Lehman Brothers

Okay, thanks.


Our next question comes from the line of Scott Davis with Morgan Stanley. Go ahead.

Scott Davis - Morgan Stanley

Good morning, guys. I know I’m going to throw gas in the fire. I think it’s going to be a rough day for everybody but it seems like something is broken here. I was looking at your working capital turns. They got a lot worse last year, margins disappointed. I mean, what -- is there something else going on here? Can you comment that maybe culturally you are having issues or maybe losing some of your key people, like the [Calhouns] of the world is having impact -- I mean, just a little bit more color there.

Keith S. Sherin

You know, I don’t think -- there’s a characterization about losing some of our discipline here is really fair. We run the company with a lot of operating discipline. We’ve continued to execute very effectively and deliver earnings growth.

You know, if you look at the industrial forecast this year, Scott, we are talking about 10% to 15% earnings growth from a $100 billion enterprise. I think that’s pretty good performance. We continue to generate cash flow in line with our earnings and that’s a challenge while you are growing a company of our size to be able to manage working capital, to be able to fund the growth but also deliver cash to pay the dividend and to do the buy-back and do acquisitions.

We’ve got an operating council led by the senior leadership team of this company that we meet every month or so to review where we are on global sourcing, on external factors that are affecting us from a cost perspective, on reducing our cost structure, on making sure that our new product introductions come in at better cost positions than old ones.

So we’ve just go so many operating mechanisms in this company that continue and are secure. So I don’t know; I feel like we are executing pretty well. I think there’s one soft spot. I think healthcare has been tough and I think we’ve got to turn that around. I think having a plant shut down really distorts the measurements and that’s an unfortunate thing. We’re just to the end of that but other than that, I think we’ve been operating the company pretty well and we’ve been hitting our numbers pretty well. We’ve got a disruption here in financial services that we have to deal with, unprecedented volatility. It’s not an excuse, as Jeff said, but I think you’ve got to separate that from how we run the company and how we operate and where we are strategically positioned with these businesses, which I think is extraordinary.

Jeffrey R. Immelt

Scott, you know our equipment revenue is two or three times services for a long time. That is an incredible headwind on margin rates. That all comes back with a big service backlog at some point. I don’t think that’s worth apologizing about and the infrastructure business is the shining star of the company and that remains very strong and very solid, if you look at how we are positioned.

Keith S. Sherin

You know, one good example, Jeff, is the wind business and I think we’ve had a lot of discussions about margins and should we be getting margin growth in infrastructure. You know, John Krenicki will have a debate with you -- should we stop selling all these wind units just because their margin rate is a little lower than the company average and the answer is absolutely not. We ought to build that installed base. We ought to take every one of these orders.

The wind business is up to a 15% operating profit and it’s growing 20% plus a year. Now, our margin looks like it is going down as we grow wind as a rate but we are getting more margin dollars, we are more profitable, and it’s the right thing to do for shareholders. It generates cash.

So you know, I think the overall mix of the business is creating a little bit of pressure on the margin rate in total, but the individual businesses and the operating actions they are taking on are the right things for us to grow our earnings and grow our cash, and I think that’s a good example where you’ve got to separate just what the absolute margin rate is from what the dynamics are of driving the profitability in the future.

Scott Davis - Morgan Stanley

Sure. It’s tough for us without have the granularity to really see behind the performance. I guess when I think about it, I reread the -- Jeff, I reread your annual letter last night and it just seems to be such a disconnect from the bullishness that I’m guessing you penned that letter some time in December of January, but it just seems to be such a disconnect when you look at margins, you look at working capital, you look at your ability to forecast and the controls. And although you are kind of saying you are not a company that offers excuses, this has been kind of a conference call full of excuses.

So I just -- it just feels like a different GE to me and you always talk about, and I think you even referenced this in your annual letter, that tough times are when GE is supposed to shine. Is there just something here where the business model feels like it is broken and there is always going to be an issue, whether it’s healthcare, whether it’s financial services, whether it’s -- I mean, you could make an argument that infrastructure even could be at risk, given where commodity prices are.

So I’m just wondering whether, you know, is it time to rethink the business model? Are there issues here that -- I think an earlier question asked are there cultural issues that just prevents you from thinking out of the box? Maybe this business model worked 10 years ago but it just -- you underperformed in the up cycle and now you are on pace to underperform in the down cycle. You know, that would be -- it just doesn’t seem to work.

I don’t know whether I’m asking a question or just making a comment, but --

Jeffrey R. Immelt

Look, Scott, I would say the last five years from continuing ops, revenue grew 13, earnings grew 14, cash was very strong, strong buy-back, expanding returns. We are into an unprecedented financial cycle and with that, our earnings down 20% is better than our peers and we are going to be positioned to deliver on the commitments that we’ve made today going forward in the year.

So look, I accept your point. I think we should continue to drive the strategy that we’ve got and that’s what we are going to do.

Scott Davis - Morgan Stanley

Okay, and then last question -- at what point, as a shareholder, when do we know whether this business model is working or not? I mean, at what point do you -- do we put a timeline on it and say okay, if we can’t execute our goals for the end of the year, then we’re going to have to rethink the strategy and maybe GE Capital and GE Industrial shouldn’t be together anymore, maybe there’s other changes that need to be made.

I mean, I guess it feels like in the six years I’ve covered the stock, every year it’s just kind of like the Chicago Cubs -- it’s next year, it’s next year and now you are looking at a year where you could under-grow the S&P in a year where you really -- I mean, it looked like you could substantially beat the S&P.

So I guess for the credit of shareholders, how should we judge you? You know, if we get into the end of the year and things aren’t working, do we need to make changes or are we going to have another 2009 is going to be great or 2010 is going to be great, so hold on?

Jeffrey R. Immelt

Scott, again, I think it’s -- no matter what form the company is in, it’s about driving revenue growth, earnings growth, returns and cash flow. And we’ll see when this year ends how we stack up against everybody else. But you know, look, I think the company has grown earnings and had PE compression and our belief is that we will continue to execute on a portfolio strategy that adds value and continued to deliver and that’s what we are going to do.

Scott Davis - Morgan Stanley

Okay. Sorry to beat up on you guys, I just wanted to clarify those issues.


Our next question comes from the line of Nicole Parent with Credit Suisse. Go ahead.

Nicole Parent - Credit Suisse

Good morning. I think, Jeff, we are all wrestling with how much of the shortfall in the quarter is tied to the credit market, the economy versus being self-inflicted. I think you said in the answer to an earlier question, you are not assuming things get better but do they get worse. I think you cited U.S. down 5% in the first quarter. What is your view of the second half?

And I guess now that plastics is gone, how good of an early cycle read do you think you have on Western Europe in light of these unprecedented financial market turmoil out there? I mean, do you see Europe and do you see this leading over into other countries?

Jeffrey R. Immelt

Nicole, I think we still in the U.S. have pretty good early warning systems with appliances and NBC and things like that. As it pertains to Europe, we don’t see real slowdowns yet in the businesses that we are really basic in, which are the longer cycle businesses. So again, I think we’ve reflected in the guidance range a U.S. economy that is going to stay very tough. The infrastructure piece that we look at basically looks to -- you know, portrays what we see in backlog and sustained ability to ship, where the pricing is, things like that.

So again, I think we’ve got some window on the global economy in the markets that we are in and the long cycle businesses really dominate still what we do, and I include in there healthcare, what we do outside the United States.

Nicole Parent - Credit Suisse

Okay, not to nitpick, but I guess when you think about the U.S. being down 5% in terms of your business in the first quarter, do you think that’s going to stay down for the rest of the year or could it get worse or could it get better? Could you just elaborate a little bit more on tough?

Jeffrey R. Immelt

You know, again I think in the case of businesses like appliances and some of the other businesses, we get easier comparisons as you get forward in the year but look, we are not counting on the business getting any better vis-à-vis what we see, and in the case of what Keith said on the U.S. consumer, we’ve actually allowed for a worsening of the U.S. consumer in our GE Money business.

So I think that’s the way to think about the U.S. and the U.S. economy.

Nicole Parent - Credit Suisse

Okay, thanks. And I guess just one follow-up; how should we think about healthcare CapEx? I think Keith, you acknowledged community hospital spend was down 18% for you guys in the quarter. Do you think hospitals have access to credit in this market? I mean, what is your CapEx forecast as you sit here today, your revised one, looking at what happened in the quarter versus today?

Keith S. Sherin

You know, I think we did see some of that pressure for community hospitals and other hospitals that access the public markets like the auction markets to provide their funding. We’ve seen the DRA impact, right Nicole? And that spread around to not just clinics but to hospitals. Now we are going to get into the second quarter and third quarter where we’ve got better comparisons and run-rates on those, but we have to watch what happens with some of the other businesses, like the clinical systems and the monitoring and some of the other flow products and some of the smaller entities.

So you know, our view in healthcare was that we’re going to continue to see pressure from the diagnostic imaging and clinical systems business in the U.S. and continue to see good growth outside the U.S. and our range accommodates that what we saw in the fourth quarter, saw in the first quarter, some of that continues but we also have to take into account the better comparisons as we get in through the year and the fact that OEC is going to be shipping. But I think the hospitals are going to continue to face some pressure in terms of funding and CapEx, Nicole. I don’t have a specific CapEx number, I’m sorry.

Jeffrey R. Immelt

But you know, Nicole, we -- NEMA, which is the industry that tracks the market with diagnostic imaging, they forecast a second half of this year where the market grew 8%. And in our scenario, business reviews that we did with Joe and his team, we’ve kind of said flat at best. So we’re not counting on any -- we’re not counting on what the people that watch the industry have kind of stated in terms of what they are going to look at for diagnostic imaging.

Nicole Parent - Credit Suisse

Okay, great and then just one last one on infrastructure margins -- do you guys think just based on the mix, you know, issues which aren’t anything new, do you think you can actually expand margins in infrastructure ’08 versus ’07?

Keith S. Sherin

I do think we can. I think if you look at what happened to us this quarter in infrastructure, every business was up except for aviation and aviation had some tough comparisons. I think the energy business is going to be our horse. Energy took their margin up from 14.8 to 16.1, they are up 1.3. Oil and gas took their margin up 1.5. Transportation took their margin up 3 points in the quarter, so I think we do have an opportunity to grow our margins in the infrastructure business. It is going to be powered by energy and it’s also going to be powered by the synergies we get out of both Vetco and Smith.

I think we can do that. I think the team is doing a great job. I mean, in the quarter where they grew the revenue 21%, they basically kept their op margin flat and they are selling a lot more wind turbines at lower than average margin and they’ve got the impact of the acquisitions, which diluted them by about 30 to 50 basis points.

So I think even despite the pressure they have, the equipment services mix, 3X, this business is really performing well and I think it will grow its margins in the future.

Jeffrey R. Immelt

We’ve got a positive value gap, positive price inflation gap in all those businesses, Nicole, and that’s the key.

Nicole Parent - Credit Suisse

Okay, great and just one last one -- when you think about how this all evolved over the quarter and the severity of what you learned in March in the second half, I mean, do you think about revising your planning process as a company or how do you think about that? I think when we all make mistakes, we all say what could I have done differently and I guess as you look back on this, how do you answer that question?

Jeffrey R. Immelt

You know, Nicole, when I stood up in December and talked about 10% plus, we had put a lot of planning into that before we did that. I really do believe that March was an extraordinary set of circumstances. I mean, you guys know the commercial finance team is one of the best teams in the company. It has delivered consistently over time.

Look, all that being said, you know, I don’t want to be personally appear to be stubborn about the company or that we can’t learn from it and clearly we are going to learn from this and factor it into the way that we think about running the company going forward.

This is -- you know, we like the team, we like the strategy, we like the businesses and we need to deliver what we’ve laid out for the rest of the year.

Nicole Parent - Credit Suisse

Okay. Thank you.


Our next question comes from the line of John Inch with Merrill Lynch. Go ahead.

John Inch - Merrill Lynch

Thank you. Good morning. So just to understand, the $2.20 to $2.30, how much of non-real estate gains from asset sales are you guys baking into the forecast? I mean, how should we be thinking about it? You’ve got $0.02 of the CPS, I don’t know if there were other business sales in there. What is basically the target, maybe a range or something?

Keith S. Sherin

Other than real estate, that would be the one place where you say as part of the business model, the sales of those equity properties are built in. You know, we do have other flow transactions that we are planning on doing for the year but I -- I don’t have a big transactional item. The biggest BD thing we are working on, John, is PLCC and we’d anticipate a gain with that but that that would go into discontinued operations.

So I think the real estate model is the one that we are most focused on, but we still plan on doing securitizations. We still plan on selling other assets in GE Capital but we’ve got that in kind of the core flow businesses, I would say.

We are going to continue to reposition financial services. We’ve got some of equipment services that we’re working on repositioning that could provide some upside. And then on the other side of GE Money, as we said, there are going to be some asset dispositions that we’ll do and we did anticipate that some of those would fund some of the provisions and some of the comparisons to securitizations, like the corporate card did in the first quarter. I don’t have a specific number on that though.

John Inch - Merrill Lynch

That’s fine but basically you are suggesting aim toward the low end of the $2.20 to $2.30, but if you sell the PLCC business, that’s -- what did you say, $0.04 of gain in that or there’s --

Keith S. Sherin

No, I said the PLCC, what we would say that if you looked at our guidance and you said that PLCC was going to be sold, that has about $0.04 of earnings in our year in it and the $2.20 to $2.30, we would say you should probably take that out.

John Inch - Merrill Lynch

So there is no gain from the PLCC in the numbers?

Keith S. Sherin

That’s correct, that’s correct. I’m sorry I didn’t say that clearer.

John Inch - Merrill Lynch

Okay, now I get it. Just a couple more quick ones; so just going back to the point about the misses in healthcare, and obviously we all know the economy is tough but Jeff, are you contemplating management changes? Not necessarily senior management changes but maybe other operational or you know, changes or structural, some kind of structural shake-up to perhaps kind of refocus some of these businesses in the next couple of years? How should we think about what’s going on behind the scenes now at GE?

Jeffrey R. Immelt

Well, look, I think we like the healthcare business from the outset. We like where it’s positioned. We like the demographic positioning of the company. Over a long period of time, it’s been a good performer.

You know, John, I think again there are certain things that are market based, there are certain things that are bad execution. I’m not at all happy about having a plant shut down for 20 months by the FDA. I think that’s all on us. And so we’ve already made some management changes associated with that and you know, look, if people don’t perform here, we still work very hard and if you just look at the set of officers in the annual report every year, there’s a different group every year and people have to perform to stay here.

So look, I mean, I just think we believe in the healthcare franchise and we have to get this plant back up and going. I think once we do that, this is a business that’s going to perform in 2008.

John Inch - Merrill Lynch

And just last, Keith, how are you guys thinking about Triple A? Maybe you could just sort of size, are there risks to the Triple A given the financial services environment or do you guys feel still pretty good that you are in a pretty good shape to preserve it?

Keith S. Sherin

No, we feel great about it. We have an incredible discipline from the board of directors to the leadership team of this company to the actions we take in GE Capital and the capital board to run the company as a Triple A. We have an incredible risk management process. We have a great liquidity profile and we are in contact with the rating agencies every week on all sorts of things around the world and both the rating agencies understand where we are and they are both supportive of us keeping the Triple A today and in the future.

We believe in funding ourselves for safety and security first. That’s why we kind of did our debt plan to get ahead of the year. We had a year plan of doing about $80 billion of long-term debt. We did 35 in the first quarter. Even though the markets were tough, we went out and did the debt to get it in place in advance of some of the transactions we think we are going to do.

We’ve been very disciplined about our commercial paper, keeping it right around $100 billion balance. We ended the quarter I think at $102 billion. We could have a much higher balance of commercial paper but we’ve chosen to keep that at a certain level so that it’s completely aligned with all of our liquidity back-up plans.

We have a cash balance and a liquidity plan that we keep in place for any type of temporary disruption and we feel great about the business, the underlying business model that we have and the rating agencies agree with us, John.

John Inch - Merrill Lynch

Okay. Thanks very much.


Our next question comes from the line of Ann Duignan with Bear Stearns. Go ahead.

Ann Duignan - Bear Stearns

Good morning. It’s a tough day to be a Bear Stearns employee, considering the impact it’s had on you guys. Quick follow-up questions; just curious, I think you said that your outlook for tax rate now is 16% versus your initial guidance of 18%. Is that correct or did I pick it up wrong?

Keith S. Sherin

No, that’s correct.

Ann Duignan - Bear Stearns

Okay and you didn’t call that out in your revised ’08 framework that would have had a positive impact?

Keith S. Sherin

Well, we revised it from 18 to 16 but if you look at the revised EPS guidance, the reduction in the financial services earnings includes the impact of the lower tax rate.

Ann Duignan - Bear Stearns

Okay, so that’s where it’s inserted.

Keith S. Sherin

So we’ve taken into account in the financial services EPS range.

Ann Duignan - Bear Stearns

Okay, and then I think most of my questions have been answered but what are you seeing -- I know you said that you are not seeing a significant slowdown in your long cycle businesses in Western Europe and places outside of the U.S. but what are things like GE Money seeing in Europe, particularly in Eastern Europe? Is there any knock-on effect or are you anticipating any knock-on effect in other regions of the world?

Keith S. Sherin

Actually, in GE Money I would say the one place we have seen an increase in delinquencies is in the secured book in the U.K., which is our iGroup mortgage book. It is up around 14% delinquency. We’ve seen those rates over the last three years go as high as 17%, 18%. That’s the one place globally we’ve seen an increase in delinquency. We do not have any losses rolling through in that book. We have very low loan-to-value exposure. We have mortgage insurance that we use any time it gets above 80%. We underwrite all those loans to the highest possible rate that could impact the consumer based on what they’ve -- how they’ve borrowed and we’ve got a very good business team there. And everything obviously after all of the lessons we learned in WMC, we went over and made sure we applied all those in our global mortgage business.

So I think are in pretty good shape there and the rest of the delinquencies outside of the U.S. and outside of that U.K. secured book are actually down in GE Money globally, so we feel pretty good about the global balance sheet, asset quality of GE Money outside the pressure we are seeing in the Americas, Ann.

Ann Duignan - Bear Stearns

Okay, and finally, just one quick follow-up; commercial after market in aerospace I think you said was down 3% in the quarter. Is there any risk to that business as we look at higher fuel prices and all the complexities that are going on in the aerospace industry right now? I know original equipment demand remains strong around the world but what about after market, particularly in the U.S. as we begin to see activity slow maybe in this region?

Keith S. Sherin

I think overall, first of all, you have seen a couple of airlines go bankrupt in the last couple of weeks. Number one, we don’t have any significant exposure to them. Everything we have is secured by relatively new aircraft. I think the total was around $100 million for the couple that went bankrupt and we have a very good position in great planes.

You know, the revenue passenger miles growth is what really drives our after market performance here, Ann, and the revenue passenger miles were up 4.5% in the quarter so people, the airlines are flying and as long as they are flying, we are going to be doing more maintenance. And I think the things that are getting pressured will be the older, less fuel efficient engines and that’s not the bigger proportion of our mix. We’ve got a lot of the newer aircraft out there.

So I think number one, we can’t get enough planes today based on the global demand. You don’t really feel that when you are sitting here reading about some ATA or Aloha going bankrupt but it’s true. Henry [Huksman] and the team could really use more aircraft. We are -- our order book is placed through 2009 and I think almost all of 2010 is now placed for new aircraft we are getting out of Airbus and Boeing, so the global demand is incredibly strong. The aircraft values are very good and I think we are going to have to deal with the airlines being under financial pressure because of fuel and we’ve seen that cycle obviously a lot of times in the last ten years.

So we feel pretty good about it but it’s something obviously we have to watch.

Ann Duignan - Bear Stearns

Okay, thank you. I’ll take my other questions offline.

Dan Janki

Melanie, we’d like to take the last question, please.


Yes, sir. Our final question comes from the line of Nigel Coe with Deutsche Bank. Go ahead.

Nigel Coe - Deutsche Bank

So 45 minutes of Q&A and [inaudible] tough questions. So you are down 11% in the first hour of trading. It looks like the market is pricing at $2.20 already for the full year. I guess [downside] from here would be if anything happens to infrastructure, and I tend to agree that 2008’s in the bag. But orders were a little bit lighter this quarter and I understand it’s lumpy and that could be the reason, but is there any sign that the tighter credit conditions or slowing global growth is causing [orders] to get pushed back or cancelled, and therefore we might see [orders sort of] weaken from here?

Jeffrey R. Immelt

Actually, we haven’t seen that. I would say just a couple of the numbers on the orders, just so I give them to you and then I want to tell you about what I think the next phase is coming. If you look at the dollars of orders in infrastructure, so up 11%, not the 30% that we’ve been averaging but you know, if you look at, we did $10.5 billion in the first quarter last year of major equipment orders, $12.8 billion in the second quarter, 11.7 in the third quarter, 13.8 in the third quarter -- all one 1.2 to 1.4 times the revenue we had in the quarter, building an incredible backlog. The total orders last year were $50 billion, up 29% and the absolute level of orders that we have this year at 11.7 in the first quarter against some tough comparisons, up 11.

And I think the thing that’s really positive is we are just now starting to see a little bit of gas turbine ordering in the U.S. In the first quarter, I think we had four orders out of the 39 that were for the U.S., and if you look at the energy dynamics in this country and you look at supply demand and you look at the need for more capacity and you look at the environmental regulations and you look at how difficult it is to [site] a nuclear plant and you are selling every wind turbine you possibly can, gas turbines are going to be sold in this country. And the price is greater than inflation in that business, and so I feel like this I really in good shape now. I can’t say never say never but this is the most sustainable long cycle positive revenue generating thing that I’ve seen in GE in my career.

Nigel Coe - Deutsche Bank

Okay, so just some of the indicators for orders, you know, tender activity, proposals, that’s all consistent with what you expect at this stage?

Jeffrey R. Immelt

I think the energy business, you are going to continue to see incredible -- I think oil and gas is going to continue to be very strong. I think you are going to see lumpiness in aviation because you know, Airbus and Boeing are basically full through 2011, 2012, so I think that’s the one place, Nigel, where you say you’ve got to expect that to level off just based on how full people are, based on things like the push-outs of the 787, the push-out of the Airbus deliveries. I think that’s the one place that you say we’ve got to see a leveling off in aviation but again, it’s leveling off at a very, very good number for us.

Nigel Coe - Deutsche Bank

Fair enough, and [inaudible], so just two quick questions; price inflation [inaudible] is much narrower than the second half of the year, yet still the prices are unfair. What are you baking in for the second half of the year for that spread?

Jeffrey R. Immelt

Well, we are going to still have a positive value gap in the infrastructure business. I think we have pressure in healthcare where the price erosion does not offset inflation and we’ve got to recover some of that price value gap in the industrial segment. So infrastructure is the power and overall for the whole company, our price inflation gap was positive and for the whole year, we expect it to be positive, driven by infrastructure.

Nigel Coe - Deutsche Bank

Okay, and then just finally on the -- on your insurance business, you do have some unrealized losses on the securities in that business and I understand that these are held to maturity securities so they are not mark to market. But what would have to happen for you to actually realize that loss?

Keith S. Sherin

Basically in the investment securities portfolio, you have to determine that the securities are other than temporarily impaired. We have a process where every quarter you look at what is the security, we do a discounted cash flow underwriting of the company. We look at whether it’s a credit issue or a market issue and we look at how long it’s been underwater. And we have to periodically take those impairments that are other than temporary and put them into the P&L, based on that discipline process. And we’ve been doing that for years, obviously, since we’ve had that portfolio forever here.

Nigel Coe - Deutsche Bank

Okay. Thanks a lot.

Dan Janki

I would like to thank everybody. Joanne and I will be available all day and transcripts and other information will be available on our website, so thank you very much.


This concludes your conference call. Thank you for your participation today. You may now disconnect. Have a wonderful day.

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 All other use is prohibited.


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