Good day ladies and gentlemen, and welcome to the General Electric first quarter 2013 earnings conference call. [Operator instructions.] I would now like to turn the program over to your host for today’s conference, Trevor Schauenberg, vice president of investor communications. Please proceed.

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

Thanks, Trevor, and good morning everybody. In the first quarter, our market conditions proved to be volatile. Most of our emerging markets, including China, remain strong. However, the U.S. indicators were mixed, while housing improved. Some of our shorter cycle energy segments experienced push outs from March. We planned for Europe to be similar to 2012, down again, but it was even weaker than we had expected. And finally, we had an FX headwind in our oil and gas business. Based on this backdrop, our results were mixed. Our EPS was $0.39, up 15%. This was actually $0.35, because not all of the NBC gain was offset by restructuring in the quarter. Leading indicators in our longer cycle infrastructure businesses were encouraging, with orders up 3%, which was 6% ex wind. Equivalent orders were up 10%, and we had a 1.3x book-to-bill ratio in the quarter. So this gives us confidence in our delivery schedule for the second half and beyond. Power and water was a drag on our overall results. Wind and thermal units were down in the fourth quarter, but that was expected. We experienced incremental pressure in European services and based on our current backlog, however, we expect shipments to significantly improve in the second half. And we’ll show you a detailed chart with the financial profile for the remainder of the year. Finally, GE Capital delivered a solid quarter, up 9%, while they continue to shrink their noncore assets, which are down $17 billion in the quarter versus previous years. We remain focused on our operating priorities. We were able to accelerate restructuring actions, and we’ve taken out $200 million of structural SG&A costs in the first quarter, well on our way to at least a $1 billion reduction in 2013. Margins were negatively impacted by…

Thanks, Jeff. I’ll start with the first quarter summary. We had continuing operations revenues of $35 billion, and that was flat with last year. Industrial sales of $22.3 billion are down 6%, driven by power and water as you can see on the right side. GE Capital revenues of $11.5 billion were up 2%, and both the total and the capital revenues include the benefit of the NBCU gain. Operating earnings of $4.1 billion were up [14%], operating earnings per share of $0.39 were up 15%, and if you adjust for the net benefit of $0.04 from the gain exceeding restructuring, the operating EPS would have been $0.35, and I’ll cover that on the next page. Continuing EPS includes the impact of our non-operating pension and net earnings per share includes the impact of discontinued operations, which I’m also going to cover on the next page. As Jeff covered, CFOA was $200 million, driven by the working capital investments, incentive payments, and tax timing. For taxes, the GE rate at 20% for the quarter is in line with the rate of about 20% that we expect for GE for the year, but there could be some variability from quarter to quarter. And on GE Capital, the tax rate was 4%, and that rate is down because in the fiscal cliff resolution, the active financing exception was retroactively extended, which gave us a benefit in the first quarter. Because of expected additional asset reduction opportunities, we currently expect to see a mid-single digit GE Capital rate rather than the 10% rate we previously forecasted. On the right side of the page, you can see the segment results. Total industrial segment profit was down 11%. That was driven by power and water, as you can see. Segment profit for the other industrial…

Thanks. Just again on the 2013 framework, we have no change to the overall operating framework for the year. And by that I mean specifically we expect our EPS to grow in line with previous commitments. The mix will change. We believe it’s going to be hard for our power and water business earnings in ’13 to equal ’12, which we’ve talked about previously, primarily due to the incremental weakness that we’re seeing in power gen in Europe, and services. As a result, our industrial earnings will grow in the range of high single-digits to double digits. On the positive side, we expect capital earnings to be slightly better, and our corporate costs will be lower. Previously, we were at $3.5 billion in corporate costs, and we’re now targeting $3 billion, so that’s an improvement of $500 million. We expect to hit our margin goals, and we are on track to drive SG&A as a percentage of revenue to 15% by 2014, while organic growth could be at the end of the range. We’ve reflected the changes that we’ve seen in the market and we’re going to be aggressive on costs as we go through the year. So on balance, the rest of the framework remains unchanged. And finally, just in summary, some of our markets in the first quarter of ’13 were more challenging than expected. Europe was tougher, and some of the short cycle markets were slower in March, and we saw some push outs. But despite that, we still plan to achieve our full year EPS framework, really based on power and water strengthening, stronger backlog and deliveries, capital strength, and more cost out. And we plan to achieve our margin goals. We ended the quarter with very strong cash position of $90 billion consolidated and $22 billion at the parent, and we plan to return $18 billion to investors in dividends and buyback while continuing to execute on bolt-on acquisitions. So in a challenging environment, we’re committed to delivering for investors. Trevor, let me turn it back to you and let’s take some questions.

Thanks, Jeff. Thank you, Keith. Operator, let’s open up the phone lines for questions. I know we have another earnings call later today, so let’s try to limit the questions to two a piece if we could today. Thank you.

[Operator instructions.] And our first question is coming from the line of Scott Davis from Barclays.

Just on the margin targets, and I don’t want to make you repeat yourself for the third time today, but just to be clear, you are expecting to make the 70 basis points for the year, including power and water, right? Not excluding power and water?

Yeah, including power and water. I think we started the year with more than we needed, at 130 basis points to 140 basis points. We spent a little bit of that in the first quarter, but we see power and water strengthening for the year. We think the margin rate for power and water will be kind of flat year over year. And even with that, we expect margin rates to grow by 70 basis points, and we still have a hedge in that number. This is not an uncommon profile for us in terms of the way that the year lines up and stuff like that. I don’t know, Keith, do you want to just go through some of the dynamics of the margins?

Sure. Let me just start with the profile, and then we can go back to the pieces if you want, Jeff. Over the last seven years, we always have margin growth from the first quarter to the total year. And in five of the last seven years, we have declines in the first quarter. So it’s not an uncommon profile for us. We grow our margins from the first quarter anywhere between 50 and 280 basis points. On average it’s about 150 basis points. And in 2006 and 2010 we grew our margins approximately what we need for 2013. So it’s not uncommon, and we do have a lot of work to do, and we can take you through the pieces either by the categories or by business, Scott, whatever you’d like.

I think that’s what we’ve got in all of our expectations and all the execution models for the team.

And as a follow up, when you think about this backlog that you’re building and book-to-bill is solid and such, but are you booking this backlog at a margin that’s accretive to your existing margin structure, that helps yield some confidence, one for the 70 basis points, but also set us up for 2014 to see operating margins continue to move forward?

The margins in backlog are actually higher. We’ve had good pricing for the past five quarters, and our value gap, when you really hone in our value gap, it is wildly positive. We had a very strong value gap in the first quarter. That’s only going to ramp for the year. So the value gap could be $800 million plus this year. And so I think that all portends to good health in the backlog.

Your next question is from the line of Steve Tusa of JPMorgan Chase.

My first question is on a little bit of housekeeping on oil and gas. Definitely a weaker performance than I was expecting. The margin down year over year, the orders there have been trending really well. You said turbo machinery was down. Can you maybe give us a little bit more color around what drove the downside there?

Are you talking about top line or are you talking about orders?

Top line and profit, I guess both.

, : And on revenue, turbo machinery revenues were down in the quarter. I think some of this is timing. We had large LNG projects in the quarter relative to last year’s Gorgon and LNG projects, Curtis project in Australia. Drilling and surface was up 6%, with artificial lift up 15% And subsea was down 10%. Again, we had some tough timing relative to projects last year. But the backlog itself is up a couple of billion dollars. And pricing is up for the eighth quarter in a row, and it’s a little longer cycle. I think the only softness in M&C services was something we’re watching. It was a little less than we expected, a little over $100 million, as we just saw some push outs and people pushing out the investment decisions. But the core of oil and gas, subsea, drilling and production, turbo machinery, has a very good outlook in terms of equipment deliveries. And on revenue, turbo machinery revenues were down in the quarter. I think some of this is timing. We had large LNG projects in the quarter relative to last year’s Gorgon and LNG projects, Curtis project in Australia. Drilling and surface was up 6%, with artificial lift up 15% And subsea was down 10%. Again, we had some tough timing relative to projects last year. But the backlog itself is up a couple of billion dollars. And pricing is up for the eighth quarter in a row, and it’s a little longer cycle. I think the only softness in M&C services was something we’re watching. It was a little less than we expected, a little over $100 million, as we just saw some push outs and people pushing out the investment decisions. But the core of oil and gas, subsea, drilling and production, turbo machinery, has a very good outlook in terms of equipment deliveries.

These guys were, on a profit basis, probably 30 or 40 weaker than I really wanted them to do this quarter. I still think this business is going to be high single-digit revenue, strong double-digit operating profit growth for the year. I think what Keith mentioned, we saw late in the quarter kind of a flow business in the control side that’s something that we’re not counting on necessarily getting better for the year, but it was just kind of around the edges, or else I think we would have done better in the quarter.

And then one follow up. Again, we’re kind of sitting here in a tough macro. This happened in the fourth quarter. I guess when I look at these results, and I listen to you guys explaining what’s going on here, it’s mind boggling how many moving parts there are here, especially again in GE Capital. At what point do we again kind of maybe evaluate the size and complexity of the organization and make, I guess, a tougher longer term decision on the structure of the company? It just seems like a little bit of macro weakness kind of goes a long way, and there’s just so many moving parts to even be able to forecast and manage it. It has to be a challenge. So I’m just curious as to how you guys view that in the boardroom.

Let me just go back and tell you what happened vis-à-vis my expectations. I just want to maybe talk openly and just give you a thought. I think the industrial side was about $200 million weaker than I would have planned for -- what our internal plan was. We basically saw Europe -- Europe was running negative 5, negative 8 through February. By the end of the quarter, that was negative 15. That was a pretty big move. I think you’ve seen it reflected in a lot of other companies’ announcements. On the short cycle stuff, we saw pushes pretty consistent with what other people had seen. Now, given the volatile time, the leadership team created multiple hedges in the plan. We had a $500 million – we were always running corporate for less than what we needed. We had other hedges in the company. So by the time you put it all together, we’re basically consistent with commitments, which is the way you’d want us to run the place. So I just think we’re explaining $200 million out of a big company, but we’ve been able to offset that through other hedges and operating disciplines that we’ve got inside the company, which is I think what you want us to do. That’s my story.

I appreciate it. I think this year is obviously the -- again we’re kind of sitting here and it’s back end loaded. So the second half is a very serious commitment that I know a lot of the investors I talk to are going to be watching very closely.

We’re focused on it as well. It’s the way all the comp plans are driven, and the basic cycle of power and water is more or less consistent with the way we had talked about the year.

This is a power and water story. If you look, our revenues take out the NBCU gain, and you’re looking at industrial sales were down $1.3 billion. Thermal and wind are down $1.5 billion. This is what we’re going to be wrestling through. It’s that power and water volume profile that Jeff showed you.

Your next question is from the line of Nigel Coe of Morgan Stanley.

Jeff, you commented on the 2 to 6 that’s more towards the lower end of that range for the full year. And it seems that the weakness in oil and gas and the weakness in power and water are more of a timing issue, so we’ve seen some push outs. But the profile seems to be very much in line with what you’d expected. So I’m just wondering what else is driving this down towards the lower end of that range for the full year. First of all, I think it’s prudent to do that because you had a negative 5 in the first quarter, but I’m just wondering, maybe in some of the short cycle businesses, where are we now versus where we were in December?

I think the way we look at, just in total, how we run the company is we don’t necessarily assume things are going to get better. So, not in a catastrophic way, but we saw Europe marginally get worse during the quarter. We’re now not counting on that getting better. We saw a couple of short cycle businesses get pushed. We’ve gone through a pretty granular analysis here of what we think comes back and what we shouldn’t count on. And I think when you do that calculus, we just think the smartest thing to do is to say to investors, look, we think this could be at the low end of the range because we’re not counting on stuff getting better during the year. If it does, great. But we’re not counting on it. And we’re going to take out costs accordingly so that we kind of hedge our bets. So that’s really the answer. We just don’t count on everything coming back that got pushed, and we don’t count on things that we view as getting incrementally worse getting better.

When we calculate our models, should we be putting a bit more pressure on healthcare and perhaps home and business solutions, or is it fairly evenly spread?

Power and water, we would like to surprise you guys on the upside as you go through the year, right? So think about the power and water profile in the year. And then other than that, I’d say healthcare was a smidge weaker than we would have expected, but we still think oil and gas and home and business and the other businesses are going to be pretty solid.

I think you said it exactly right. When you look at what happened in the quarter, we tried to take that into account and decide what does it mean for the year, and not counting on Europe certainly getting a lot better. That’s going to take you probably to the low end of the organic range. Power and water we originally thought would be close to flat. I think today we’re saying power and water probably for the year will be down a bit, and that’s based on the profile that we saw in the quarter, and our expectation of what that means for the year. You do see it getting better in the second half, and you do see the recovery, but in total it’s probably a little weaker than we wanted for the total year. The other businesses, we’ll see. I think we’ve got a great backlog in oil and gas. We’ve got to execute on the long cycle projects. What will we see in the short cycle there? We’ll have to see. I think healthcare, we’re talking about plus or minus 1% here, not a lot of change versus our expectations in the healthcare model I would say. So I think it’s prudent to plan the way we are, and as Jeff said, we’re going to continue to grind away at taking out the costs. We’ve got more restructuring that will happen through the year as we said. We’re committed to getting the billion dollars of cost out. And it could be higher based on what we have to do to rightsize this place for this market.

And a quick one on the internal plan, the 1.3 points of internal target for margin. Does that include the additional benefit from the restructuring from the NBCU gain? Because the 1.3 points is higher than I expected?

Yeah, it does. That’s one of the drivers to the difference.

Your next question is coming from the line of Julian Mitchell, Credit Suisse.

If I think about the EBIT bridge, you called out four main items behind that this quarter. Last quarter there was a fifth, which was also service. If I think about service and R&D, in R&D you had said back in January that should be sort of flattish as a margin driver. Do you still believe that? You highlight the fact that R&D was up 7% in Q1. Is there something extra on R&D pressure maybe around the LEAP [X] or something that we need to think about? And secondly, on services, you had a plus-plus there for services in the Q4 earnings slides. Services now you had four consecutive quarters of flat to down orders. The commentary around European services is obviously very bad. And I just wondered if your margin guidance embeds a recovery, or how much of a recovery, in services over the balance of the year?

The services, let me go to that point first. We do expect a services improvement as we go through the year. We have some specific items that we’re working on. For example, in power and water, as Jeff talked about, we’ve got these advanced gas path upgrades. We’ve got over 50 of them that we’re working on for the year. We sold two in the quarter. We’ve got a number of those in the backlog, and a number of that still have to be closed. So I think there are some specific items that we do expect. We have some comparisons in Europe that could be a little bit better. And the service margin rate was up 30 basis points in the first quarter. So I think for us, when you look at the four factors on the margin page: mix, which does include equipment versus services, was a positive 10 basis points in the quarter. We’re estimating it will be flat for the year. We’re counting on less wind. We’re counting on more GNX engines, as you saw, but that was kind of in the run rate for the first quarter. And we’re counting on some services growth as we expect equipment to grow as we go into the second half. So we do have some services growth in the plan.

R&D, the [unintelligible] will be flat. I don’t expect that to be a headwind. I think we had aviation and oil and gas in Q1 that were at a higher run rate, but in total that’s going to be flat for the year.

It will be flat as a percentage of sales, yeah. That’s right in line.

And what Keith said on margin rates, again, I think we’ve got a good window on margin accretion in the service business.

And then just secondly on the top line. If you think about sequestration, I guess, how are you thinking about that playing into your guidance for the revenue outlook in the military aftermarket in aviation, and also for U.S. healthcare? Did you see much of an effect? Or was it kind of just noise that caused some push outs? And was that a factor behind the low end of the revenue growth guidance comment?

Let me start with aviation. We have about 90% of our equipment on firm order for the year. And so as you saw in the quarter, the equipment was actually up in the quarter, equipment deliveries. We believe that that’s going to remain very strong. We’re in certain programs that are priorities for the Defense Department and things that are on firm commitment aren’t being cut right now. We did see a decline in service orders. Some of that was versus comparisons we had last year. And we’ll have to see how that plays out for the year. It was down about 14% in the quarter on revenue. I think that’s about what the team expects for run rates on services. But in the back half of the year, we’ll have to see how the sequestration in total plays out. I think there’s a couple of offsets that you’ve got to think about. One is our international military engine business is very strong. We had orders for about a little under 200 F-110s for the Saudi air force. That extends the production line of the F-110 product through 2016. We had India order for the light combat aircraft on the 414 and Switzerland on the 414. And we’ve got some significant orders in line for helicopter engines for both the army and the navy. So I think we’re concerned about it on the short cycle side in services. I think it could put some pressure in the back half of the year. In terms of healthcare, the U.S. market was just slow. Is there one driver? I think it’s just the fact that there’s a lot of uncertainty around healthcare. Providers are consolidating. They’re worried about costs and making profit, and they’re just being cautious on purchasing. So there we’ve got to drive our technology. And we have to continue to drive the productivity, and that’s what that healthcare team is going to do. I think their year is going to depend on continuing to do well in the emerging markets as well as taking the costs out. They had a good cost out performance in the quarter, and they’ve got to continue to do that through the rest of the year.

The next question is coming from the line of Jeff Sprague, Vertical Research.

First question is maybe on capital allocation. It dovetails a little bit with what Steve asked. There was an 8-K that came out about a week after the proxy outlining that comp is going to be tied to 2015 industrial profits as a percent of earnings. I’m not sure why that wasn’t in the proxy, but the real question is can you share that target with us? It seems very apropos to the valuation construct in the stock?

I think the way to think about that is it’s going to be consistent with with what we talk about externally vis-à-vis vision for the company over the next three years. So in many ways, you’ve got a perspective for that, I’d say, already.

And it’s a balance of the measurements. We’ve got a cumulative EPS, we’ve got a cumulative cash. We’ve got a percent of earnings that are coming out of the industrial business, which we expect to increase through the growth playbook period here, through that three-year period, as well as a return on total capital, which will also incorporate one of the returns from both our industrial side and our financial services side.

I think if you go back to the December outlook meeting, you’ll see the guideposts. And I think what we try to do is triangulate between total EPS, wanting to keep that on a certain trajectory and managing the mix of industrial, financial, generating cash, and making sure that our return on total capital. So I’d say the four metrics we have are pretty interwoven vis-à-vis how we think about value creation and how our investors want us to run the place. But I would go to the outlook meeting and that’s what gives you the guideposts.

That’s what I wanted to clarify. Thank you. And then just thinking about industrial, just kind of trying to put these pieces together, it looks like you’re going to pick up $0.04 in corporate on the lower guide. It looks like capital tax rate is $0.04. It’s unclear if industrial tax rate is a little bit lower. But it feels like you’re taking a dime out of industrial. Is that the right way to think about it? And could you share why corporate actually is going to be lower than you thought?

I think what we’re basically saying is we think about the segments. I wouldn’t change any of those other than necessarily power and water. And I think we basically guided power and water flat. And we’re saying that could be down slightly. So I don’t think we would agree with your math.

Yeah, that’s very high. The capital tax rate is in the context of the total capital earnings for the year. There’s going to be a set of asset optimization transactions that we’re looking at. Some of them will cause potentially higher tax benefits, and it may also go with the lower earnings. So I don’t think we’re trying to do a direct offset for capital. And for corporate, basically what we’ve been able to do, first of all we had some better performance in the first quarter from NBC. That won’t continue obviously, but that’s included in the negative 172 that we have sitting here. And then on a run rate basis, we think we’re going to be somewhere around $750-775 million of base corporate expenses. We are getting some benefits from our simplification efforts. We have lower spending across the corporate functions. They’re going to be down 10% for the year. And that benefit will help us on our overall cost goals of getting $1 billion plus out for the year.

The next question is from the line of Shannon O’Callaghan of Nomura.

Can you give us the gas turbine and wind turbine unit orders for the quarter?

Gas turbines, we had 8 units in the quarter. We had 4 steam turbines versus 1. On the wind turbines, it was down. On renewables, we had 584 wind turbines versus 696 last year. So it’s down about 30%. Shannon O’Callaghan - Nomura : Just thinking about this, you shipped 12 in gas turbines, and you got orders for 8. What’s going on by geography in that number? I don’t know the last time those were that low. That’s a pretty low number. What are you seeing geographically? And do you have any visibility into things getting better?

They’re very spread, obviously, in the quarter. We’ve got a couple of Latin America, a couple in the Middle East, one in Russia, one in [Azian], one in the U.S. So they’re spread out. I think as you look forward, we’re expecting to be somewhere between around 120-130 gas turbines for the year in orders. So you’re going to see that pick up through the year. We do see some heavy activity in the Middle East. We’ve got some in EMEA, and we’ve got some in Latin America, and we’ve got some in Africa. So it’s pretty spread. I think there some core activity in the Middle East, which will be the foundation of that activity for the year.

The [unintelligible] report we were up three points of share in gas turbine in 2012, so our position is still strong. And I think what Keith said, it’s still our expectation to have 120-ish of orders in the year. Shannon O’Callaghan - Nomura : And then just a follow up on the mix question. In terms of getting to the 65% industrial earnings with the mix adjustments to this year that you made today, obviously ’13 is not going to be a year that really gets you far in that direction of the target. With power and water kind of tracking below what you thought, does this reassess your route to the target in terms of organic methods versus portfolio moves?

I’d say the macro was a little bit tougher than we had expected coming into it, but we still expect to have a really good year industrially inside the company. And so I still think there is a good chance that our percentage of earnings in industrial grows this year, even with the adjustments that we made today. And we’ve always been very open on portfolio moves vis-à-vis what we’re trying to do in GE Capital around really focusing on the green assets and being very open in an investor friendly way to look at the portfolio. So we’ll continue to work that, but we’ll do it in a smart way. We’ll do it in an investor friendly way. Again, I think if you go back to the question Jeff asked earlier, total EPS is a metric, how we allocate capital is a metric, and industrial percentage of earnings is a metric, total CFOA is a metric. So we’re going to drive value around all four of those metrics as we look at it going forward. But we expect to have a good year industrially this year.

And you look at capital, we ended the quarter at $402 billion of [any]. It’s down $32 billion from last year. There’s not a lot of huge transactions in there. We’re continuing to run off. We’ve got over $60 billion of noncore assets. We continue to run those off. The real estate gain enabled us to add to the current real estate plan. Another $2 billion of equity assets that we expect to exit this year. And so you’re going to continue to see asset declines based on the red asset runoffs. If we can get a little better GDP, a little higher growth in the CLL business, that would be great. But right now you say that market continues to be relatively flat for asset growth, and we need a little better economy to see that pick up. So right now I would expect that you’re going to continue to see any declines in GE Capital.

Your next question is from the line of John Inch, Deutsche Bank.

Just want to pick up on the capital issue. What do you think is the dilution associated with capital downsizing, say in 2013, year over year, and obviously that includes some of the actions that you described based on the gains that you were opportunistically able to leverage this quarter?

Just on actual volume, if you took $35 billion at a 1.5% return, that would be a total year estimate of the loss margin, lost earnings that they have. They offset some of that with cost. Our new business volume has been at better returns. But that will size it for you roughly. If that’s what you’re asking.

It is. From an E&I context, E&I is going to drop sub-400, I’m assuming, relatively quickly. Where do you think it ends? What’s the trajectory, ultimately? Is it you just subtract the 60 and you have some optionality around some of the other possible investments, like in offshore banks or some of the other stuff? Or is there some other asset to that?

The team is not trying to just have $60 billion of noncore assets go out and not grow the core business. We’re actually trying to remix, as you know. So far, though, if you look at the last couple of years, our runoff in noncore has exceeded our remixing. So it depends upon what that remixing looks like. Right now we continue to be active in the market. Our organic volume is low single digits. And we have a lot of refinancing that has occurred. We would like to acquire some portfolios. If we could find the price to match our objectives on returns, we would do that. So we have capacity, obviously. We’ve been shrinking and building up the equity. But so far, if you just look at what’s happened so far, the runoff of noncore has exceeded the remix into the green assets. And we’ll see what happens. As we’ve said in the framework discussions, big material portfolio moves are not part of the base plan. But we’re going to look at those opportunistically. We do have some value maximizing franchises in the business, obviously, and if we had the opportunity to move some of those based on the market or buyers, or a better appetite, we would definitely evaluate those. But right now the base plan is to continue to remix. If you look at the last couple of years, the runoff has exceeded core growth. And we’ll see how that plays out. And we do have opportunity on value maximizing.

As a follow up, could you spend just a second on China? It actually seemed to be one of the brighter spots in your quarter. And China’s obviously kind of within a recession last year. What are you seeing today in your businesses there and the trajectory? And if you could maybe put it in the context of price and orders and just how you’re feeling about that market and its future contribution.

We had revenue up double digits last year, we had revenue up double digits in the quarter. And we had orders that were up 60% plus, almost 70%. So I always try to answer this that we are a composite of the businesses we’re in, and not necessarily a reflection of everything. So if you think about our three biggest businesses, which are aviation, healthcare, and power and water, all three of them are in a pretty good cycle right now. Healthcare continues to grow strong double digits. Healthcare was up 14.

Aviation was up favorably. They had $900 million of orders. Oil and gas was a good quarter, up 76%. Energy and power was down about 30.

[Cross talk] The gas tailwind, over time, with more gas turbine demand vis-à-vis coal and other fuels. I think over the long term it’s going to portend well. So we think China will continue to be a good story.

I guess the question is Europe, not just for GE but others, the down side surprised this quarter. It sounds like China was a little bit of an upside surprise. Do you think this trend is sustainable? Or is there some kind of a first of year blip or aberration, because of the timing of who knows what?

I think our growth region story is still pretty strong. Orders are up 17% overall. We see this as more of a tailwind than a headwind for the year.

I think you’ve got to level-ize the 70% order rate. We’re planning on double digit order rates in China, and the start to the year gives us confidence that we’ll have that for the year.

Your next question is coming from the line of Deane Dray, Citi Research.

I was hoping to get some color on the updated restructuring plans for the balance of the year. Your initial plan was the bulk was coming in in the second and third quarter. I see some has slipped into the fourth quarter. But just comment on the timing. What are the areas you’re able to talk about on the balance of these restructurings, the payback? And we do recognize that these will be excluded from operating results because you’ve had part of that gain slip through, or fall through, on the first quarter.

That’s right. We’ve tried to give you the profile. And in the second and third quarter, it’s really a function of getting all of the work complete to be able to meet the criteria required to do the accounting. We have to have the plan finalized. We have to take all the actions, including getting whatever approvals might be required of works councils or negotiating with unions that we have contractually in place. And some of those things are just going to fold into the second, third, and fourth quarter. And some of that money that’s in the second, third, and fourth quarters is related to projects we’ve already approved, it’s just the timing of getting those expenses accrued on the restructuring will fall into those later quarters. So the majority of it is going to be headcount, and plant closing, and site closings. We continue to downsize our footprint, and as part of simplification, people are reducing the number of profit and loss centers across the company. We are reducing the number of business sites, or consolidating into common lease facilities. We’re closing some of our older capacity plants. You’ve seen some of that in the U.S. And consolidating it to different facilities that are more productive. So we’ve just got a tremendous amount of activity. It’s spread across the world. It’s probably about half in the U.S., and the rest spread between Europe and Asia, and a little bit in Latin America. And it’s substantially reductions in compensation and benefits and then facilities. And the payback is about 18 months.

Your next question is from the line of Steve Winoker of Sanford Bernstein.

Just to switch gears to capital for a second, any reason that you’d have to believe that the context is different in terms of thinking about the dividend announced, since that was made roughly in May last year, as you look out now? Any reason to believe that things have shifted in a way such that we should be thinking about that differently in 2013 versus what happened in 2012?

I don’t believe so. As you know, we’re not one of the CCAR entities. We do go through our own process that mirrors a lot of that activity, one on one, with our regulator. We don’t comment on any of those discussions. We have done obviously stress tests and capital plans. And we’ll work constructively with them on that. And our current expectation is that the timing would be similar to the last year and if that changes, we’ll let you know. But that’s our current expectation.

The B&I is lower, and the ratios are better. GE Capital is in a very strong position right now.

And just a minor question, but [unintelligible] had talked about $200 million of additional spend in the LEAP X and [Silver Crest], so it’s obviously across two engines there. I’m just trying to equate your responsibility on the LEAP X side. Have we seen whatever tick up there might be already? Because they said that was additional spending that we’re going to be doing going forward. Have we seen that with you guys already?

Well, you saw the R&D and aviation is up. We do expect and have that in the run rate. The tradeoff that we have is the Gen X spending on the [pit] programs comes down. But aviation has been spending a lot of money. In total, for R&D we expect it to be flat as a percentage of revenue for the business. Aviation will probably be a little higher than the other businesses, and it’s in line with all the new programs that they have. As you saw, the LEAP, the Passport, the finish of the [pit] programs on the Gen X.

And the next question is from the line of Andrew Obin, Bank of America Merrill Lynch

Just a question on restructuring. I think you mentioned that there is an 18-month payback on restructuring?

That’s right.

So can you just talk about what was the margin cushion before NBC, your divestiture, right when you upped the restructuring targets?

It was more than 70 basis points. The restructuring obviously has added to it. I don’t have that broken out specifically. A couple hundred million bucks, something like that.

But from that perspective, that would flow into 2014 as well, right?

Yeah. Look, like I said, we’re going to, by ’14, SG&A as a percentage of revenue, is going to be 15%. We’re on that path, and we’re going to stay on that path.

And just a little bit more granularity as to which businesses you’re going to do restructuring in throughout the year, how that will flow business by business for the year?

I don’t have it split by business. I think it would be pretty similar to the profile that I gave you. I gave you the dollars by business for the first quarter’s restructuring. I don’t see any reason why we wouldn’t have a little higher proportion in the power and water, energy management, and healthcare. Those would be the three priorities.

Great. We’ve hit all the questions. So just to close out today, the replay of today’s webcast will be available this afternoon on our website. We’ll be distributing our quarterly supplemental data for GE Capital soon. I have a couple of announcements regarding some upcoming investor events and dates. Next Wednesday, April 24, is our 2013 annual shareholders meeting in New Orleans. We hope to see you there. On May 22, Jeff will present at the 2013 Electrical Products Group, EPG, conference. On June 19, David Joyce and Norma Lu will host an analyst meeting in conjunction with the Paris Air Show. And then finally, our second quarter 2013 earnings webcast will be on Friday, July 19. So thank you everyone. As always, we’ll be available today to take your questions.