GE Aerospace (GE) Q4 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the General Electric Fourth Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. My name is Ellen and I will be your conference coordinator today. [Operator Instructions] As a reminder, this conference is being recorded. I would now like turn the program over to your host for today’s conference, Matt Cribbins, Vice President of Investor Communications. Please proceed.

Good morning and thanks for joining our fourth quarter 2015 webcast. Earlier today we posted the press release, presentation, and supplemental 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. Today I’m joined by our Chairman and CEO, Jeff Immelt; and our CFO, Jeff Bornstein. Now, I’d like to turn it over to Jeff Immelt.

Thanks, Matt. Let me start with some thoughts on the macro environment and GE’s fit in it. For the last few years I’ve talked about a slow growth and volatile economy. This is still my view. In the fourth quarter across our own large industrial footprint orders grew are 1% organically and our backlog is at a record of $315 billion up 7% organically. Our biggest industrial business which is power had organic orders growth of 29% in the quarter. I’ve a difficult time reconciling this with the mood that is in the markets. Clearly oil pricing is a concern and will have an impact. But our organic orders growth in the Middle East were up 14% in the quarter. So our economic activity is ongoing. I know there is a concern about emerging markets in total, but our organic growth was up 7% in the quarter ex-Alstom. And our business in China grew slightly organically in the year and backlog grew by 11%. So we are seeing a lot of the economic volatility, but there is still enough business out there for GE to hit its goals. The GE team had a good quarter in a volatile environment, total operating EPS was $0.52 up 27% and industrial EPS was $0.47 up 27%. Orders were up slightly in organic growth as down slightly versus a year ago. Total industrial margins expanded by 80 basis points, and 2015 CFOA grew by 8% to $16.4 billion. Industrial profit expanded by 3% organically. We hit or exceeded all of our goals in 2015, organic growth was 3% with 80 basis points of margin expansion leading to 7% organic profit growth. EPS was $1.31 up 17%. We achieved this despite having $0.05 of FX headwind. The verticals hit their plan and capital return $4.3 billion to the parent. Our cash and free cash flow execution was ahead of plan. We returned $33 billion to investors, including the excellent execution with Synchrony. We also executed a massive amount of portfolio change in the year. GE Capital exceeds or ahead of plan with $157 billion of signings to-date. The impact of Alstom was flat on EPS slightly better than expected. Alstom had an impact on several segments and Jeff will take you through those results, but on balance we like what we see in Alstom. And last week we announced the disposition of appliances to hire for $5.4 billion. This will create an attractive gain and allow us to significantly increase our restructuring targets in 2016. So we’re committed to our 2016 framework in the face of macroeconomic volatility. Now for orders. Orders grew by 3%, which was up 1% organically and as I said earlier our backlog is $315 billion up 7% ex-Alstom. Alstom added $29 billion to our backlog. Services grew by 5%, which was up 3% organically and equipment grew by 2%, which was down slightly organically. Service orders were strong, our power gen service orders grew by 13% ex-Alstom and commercial aviation service orders were up 14%. Healthcare service orders were up 3% and Alstom orders were $2.6 billion. We had some nice wins with Alstom in China on the hydro business several combined cycle gas turbine power plants with richer GE content. And the Hinkley Point Nuclear Steam turbine in the United Kingdom. On the product side of GE we also had some solid highlights. Two I’ll call out, power booked 12 HA turbine orders in the quarter and we now have 33 in backlog. In addition we have another 49 technical selections. And in healthcare, our MR orders grew by 18% in the quarter and our bioprocessing grew by 16% in the quarter. So great results by those businesses. Globally orders were generally positive growing 8% in total and 12% in the growth regions. As I said earlier, we had strengthened the Middle East and ASEAN and India, and Latin America was also decent. Including Alstom, China was up 15% in orders in the quarter and backlog grew by 16% to $21 billion. Order pricing was up 0.9% in the quarter and we have good pricing momentum in both aviation and power. So overall, our backlog and orders pricing gives us high visibility as we approach our organic growth targets in 2016. So let’s talk about the execution of the team and what you saw on the segment results. Overall, the team executed in a tough environment in the quarter, organic growth was down slightly and for the year organic growth was up 3% with seven of eight segments growing. Service remains steady up 5% in the year and 4% in the quarter organically. The oil and gas team I’d really like to call out because I think they executed very well in 2015. But the 7% decline in revenue the organic operating profit grew by 1%. And this is ahead of what we said last year. Our team executed on restructuring they improved their value gap and they invested in their core franchise. And we expect the team to continue to execute in 2016. Looking at revenue in 2016 let me just give you a few metrics and some things to think about. We primarily ship from backlog so orders and backlog growth matter. In 2015 six to seven businesses grew backlog some substantially, when we do our analytics around convertible backlog and business performance we see a path to 2% to 4% organic growth for ‘16 even with a very difficult oil and gas market. The most robust part of our business is service. Service backlog grew by 16% in 2015 and we expect another year of 20% plus growth in our digital applications. Both of these support sustained growth in services. We had another strong quarter and year-end margins, for the year our industrial margins were up 80 basis points at the segment level and 110 basis points overall. Services were up 40 basis points and equipment was up 20 basis points. We continue to make good progress on value gap up more than $450 million on the year in cost productivity. Mix was favorable in the quarter and in addition we have solid momentum for cost out. Again due to the higher appliances gain we can do a record level of restructuring in ‘16 to fortify our framework. Specifically we believe we can execute on an incremental $1.7 billion in the year, which should yield incremental benefits. Last year we discussed new compensation plans that was aligned with investors and delivered results, I’m convinced that this incentivized our team to deliver superior results in ‘15 and we have set our 2016 targets to drive our framework. Our strategy and business model is paying off and we believe we can deliver strong performance in the face of economic volatility. Now for cash, CFOA grew for the year by 8%, industrial free cash flow grew by 4%, and total free cash flow grew by 14% to $13.5 billion. Total year core industrial cash flow ex-Alstom was $12.6 billion, up 3% and total year free cash flow conversion was 85% in line with our expectations. GE capital dividends were $4.3 billion for the year and we’re still on track for $18 billion in dividends to the parent in 2016. The balance sheet is very strong and the price for appliances was a pleasant surprise. The business had been improving and there was strong interest in the business and a price of $5.4 billion gives us more than $1.3 billion of incremental cash. For capital allocation we returned $33 billion in the year including Synchrony and looking at 2016 we’re still on track to return $26 billion to investors in dividend and buyback. So before I turn over to Jeff let me reflect a little on the Alstom results. We’ve integrated too much of revenue all of the deal related cost and the impact of the joint ventures all for the first time. There is inherent complexity as we go through so bear with us, but in general I would say the business and our outlook and our execution are on track and we’re still excited about Alstom.

Thanks, Jeff, I’ll start with the fourth quarter summary. Revenues were $33.9 billion, up 1% in the quarter. Industrial revenues including corporate were up 3% to $31.3 billion. You could see on the right side that Industrial segments were down 1% reported and down 1% organic. Alstom revenue up $2 billion in the quarter was offset by $1.3 billion of foreign exchange and dispositions of $700 million. Industrial operating plus verticals EPS was $0.52, up 27% and that’s driven by industrial up 27%, and verticals flat. The Operating EPS number of $0.31 includes other continuing GE Capital activity including headquarter run-off and other exit related items I’ll cover in more details shortly. $0.26 of continuing EPS includes the impact of non-operating pension, and net EPS $0.64 includes discontinued operations. The total disc ops impact was a positive $3.7 billion, driven by the $3.4 billion gain from Synchrony and earnings from the businesses held in sale. As Jeff said we generated $16.4 billion of CFOA for the year that’s up 8%. Industrial CFOA was $12.1 billion down 1%, but up 3% when you exclude Alstom CFOA and taxes associated with the disposition of signaling. The GE tax rate was 5% bringing the total year rate to 14%. The tax rate in the quarter was driven by the appliances transaction moving into 2016 tax benefits associated with integrating our existing service business with Alstom’s business in Switzerland, higher tax benefits principally on the signaling gain we had in the quarter and legislation making the U.S. research credit permitted. The reported GE capital tax rate in the quarter of 39% reflects a tax benefit on a pre-tax loss. The tax rate for the vertical businesses was a negative 13%, reflecting reduced the income at EFS and international tax benefits that will diminish as we complete the GE Capital exit plan. Going forward as we complete the exit, we expect GE Capital vertical tax rate to be approximately 10%. On the right side of the segment results as I mentioned industrial segment revenues were down 1% reported and down 1% organic with foreign exchange and dispositions offsetting Alstom. The foreign exchange was $1.3 billion drag on industrial segment revenue and $163 million impact on industrial segment op profit. The power renewable and energy management businesses were impacted by the Alstom acquisition and I’ll walk you through the impact on the next page. At the December outlook meeting we said we would present industrial results including corporate operating cost. On that basis industrial op profit for the quarter was down 6% reported, but up 3% organically on strong corporate cost performance. To give you context on the quarter organic revenue was down 1% was a little over $1 billion lower than we expected. This was driven by power, lower by about $350 million on expanded scope and BOP, aero and reciprocating engines that did not close in the quarter, about $400 million in renewables on low wind turbines, which I’ll cover more on shortly and $300 million of softness in oil and gas and $100 million of softness in convertible orders in our energy management business. Most of the $1 billion was timing and we expect it to convert in 2016. For the full year organic revenue was up 3%. What’s laid out on this page is the impact of Alstom on the power renewables and energy management businesses. You can see the reported op profit of the businesses in the first column. The impact of Alstom in the middle column and the op profit and the Vs excluding Alstom on the right. Power on a standalone basis would have been down 5%, renewables would have been down 54% and energy management would have been up 4%. The outsize impact of Alstom in energy management business is due to the JV structure of digital energy in the Alstom grid business. We contributed positive earnings from digital energy to Alstom’s business that had negative earnings. Remember this is a 50-50 JV and we consolidate 100% of the revenue, but record only 50% of the earnings. In the case of energy management the 17% organic V reflects the organic performance for the power conversion and industrial solutions business, which is how we will report organic for this segment going forward. The organic V including digital energy would have been plus 19%. In the quarter the EPS impact of Alstom was break even. With a pre-tax loss of $234 million in the segments and an additional $160 million of deal cost and accounting items at corporate offset by a positive tax benefit. Revenue was $2 billion and order were $2.6 billion. As we look to 2016 no change to the guidance we gave you of $0.05 of EPS from Alstom. Next I’ll do the earnings walk as we’ve been doing for the last number of quarters. So you understand the dynamics clearly and what’s going on in the earning. Starting with the first column on the left and working down, industrial operating net income was $4.6 billion and vertical income was $438 million for total industrial plus verticals operating earnings of $5.1 billion. On the other GE Capital line we incurred $2.1 billion of cost in the quarter. This was driven by restructuring charges, the preferred dividend payment, headquarter run off, operating expenses and excess interest cost. We also took an impairments of about $800 million related to the Homer City power plant asset, which I’ll cover more on the GE Capital page. As a result total operating earnings were $3 billion. Including non-operating pension cost continuing earnings were $2.6 billion. We had a $3.7 billion of income in discontinued operations principally related to the Synchrony gain. Adjusting for these items net earnings for the quarter were $6.3 billion. In the center and far right column you can see the associated EPS number and their variance versus prior year. On the next page industrial other items from the quarter. We had $0.04 of charges related to industrial restructuring and other items that we take in a corporate. Charges were $567 million on a pre-tax basis with $160 million of those charges related to the Alstom deal cost and accounting items. We also had a $1 billion of industrial gains in the quarter, which equated to $0.08 of EPS at the transactional tax rates. The pre-tax signaling gain was $622 million and the appliance breakup fee was $175 million. Additionally, we sold our embedded controls business in energy management and our clarient business in healthcare. On the bottom of the page you can see the total year restructuring gains profile. We incurred restructuring charges of $0.12 and had gains of $0.11 for a net charge of a penny for the year. This was $0.02 better than we communicated in December driven by about a penny of lower restructuring primarily Alstom related and slightly higher gains driven by predominantly tax at the transaction level. For 2016, we expect gains in restructuring to largely offset for the year however there will be a quarterly variability in the timing. As Jeff mentioned, we signed the appliances transaction, which we expect to contribute about $0.20 of gain mid-year this year. That combined with some smaller transactions should yield gains of about $0.25 in 2016. We will use this opportunity to continue to invest in improving the industrial margins and cost. This will benefit us not only in 2016, but will position us well for 2017 and 2018. Now I’ll go through the segments starting with the power business. With the combination of Alstom into the power segment, we have reorganized some of the sub-businesses so I’ll take a minute to walk through these changes. First, the thermal business was renamed gas power systems. This business includes gas turbines and steam and generators for combined cycle applications and additionally we moved the equipment side of our aero turbines business to gas power systems. Second, the power services business includes our PGS business and services related to aero turbines. The distributed power business now includes just our reciprocating engines and the service businesses for Jenbacher [ph] and Walker Shaw. Additionally, as you know we have a standalone steam business that we acquired from Alstom. Moving to the financial results, orders in the quarter up $9.6 billion including $1 billion of Alstom orders grew 40%. Excluding Alstom, orders were $8.6 billion up 25% with equipment orders up 46% and services up 8%. Within equipment orders, gas power systems was higher by 60% ex-Alstom. The increase was driven by orders for 55 gas turbines versus 41 last year and expanded scope including BOP for a large Saudi 7 AP order. In the fourth quarter we took new orders for 12 HA turbines versus two last year. Five units in the U.S., four in Pakistan and three in Asia. Our HA backlog now totals 33 with an additional 49 technical selections for a total of 82 units. Aero turbine orders were down 14% on 43 units versus 50 last year and distributed power engines were lower by 12% with weakness in Walker Shaw gas compression partly offset by strong orders in the Jenbacher. Equipment OPI was strong at 6.7% driven by HA turbine demand. Service orders excluding Alstom grew 8% on higher installations growth in multi-year contracts and strong upgrades. AGP sold 42 for the quarter versus 26 a year ago bringing a total year orders on AGPs to 119. Alstom orders as I mentioned totals $1 billion including two steam turbines and 6 HSRGs one in conjunction with GE orders. Ex-Alstom, equipment backlog ended at $8.3 billion up 15%, service backlog grew 4% to $53 billion. In total, power backlog ended the year at $62 billion ex-Alstom and $77 billion with Alstom. Core GE revenues were $6.2 billion down 10% and down 7% organically. Equipment revenues were down 25% driven by fewer gas turbine shipments, foreign exchange and lower balance of plant. In the quarter, the business shipped 28 gas turbines versus 44 a year ago. Total year shipments were 107 units, lower units and lower BOP were driven by no repeat of the large Algerian deal in the fourth quarter of last year. Service revenues were up 1% driven by power services up 8%. AGPs with 35 in the quarter versus 24 a year ago, bringing total shipments to 104 for the year. Strength in power service was partly offset by lower distributed power service down 15%. Alstom revenues in the quarter totaled $917 million with $255 million from equipment and $662 million from services. GE core operating profit was $1.7 billion down 5%. The decrease was driven by lower volume and partially offset by positive value gap. Margins improved 140 basis points in the quarter. Alstom operating profit was a loss of $80 million, reflecting operations, deal cost and accounting adjustments. Given the scale of the Alstom consolidation on our first close things went reasonably well. The core business came in a little lower on revenue than expected driven by the timing of BOP and aero engine shipments. However orders were better than expected on strong demand for both H&F products particularly in Saudi and Pakistan. 2016 is a big execution year with the Alstom integration shipping approximately 24 HA turbines and executing on our product cost strategy. In total, we expect to ship 110 gas turbines and 125 AGPs with 60% to 65% of these units shipping in the second half of the year in 2016. Next I’ll cover renewable, total renewable orders were $2.5 billion in the quarter up 1%. Excluding Alstom, orders were $2 billion down 18% and down 10% ex-foreign exchange. We took orders for 827 wind turbines versus 1,251 a year ago in the quarter. The decline was a result of lower U.S. orders partly driven by the strength in the fourth quarter of last year related to the PTC extension. This year the PTC extension includes a multi-year phase out. Orders were also impacted by the shift from the 1.x product line to the new 2.x and 3.x products that drive fewer units, but more megawatts. Additionally, we had three deals delayed to 2016 for a total of 240 turbines or above $550 million of orders. Orders outside the U.S. were up 19% ex-FX and down 2% reported with strength in Europe, the Middle East and South Asia. Backlog in the renewables’ core business ended at $7.1 billion, up 27% year-over-year. Also renewable orders were $469 million in the quarter with a large hydro win of $400 million in China at the Three Gorges project. Alstom added $5.3 billion of backlog to the renewables’ business. Renewables’ revenue for the fourth quarter totaled $1.9 billion lowered by 16% and down 8% ex-exchange. The Legacy GE business had revenue of $1.9 billion down 20% reported and down 12% ex-foreign exchange. Core unit shipments were 847 in the quarter versus 1,081 last year. This was lower than expected as two deals for 165 turbines pushed into 2016. Operating profit ex-Alstom was $125 million down 54%. The decline was attributable to lower volume of 234 units, negative mix from the new 2.x product as we come down the cost curve and foreign exchange. Alstom op profit was a loss of $69 million. In 2016, we expect to ship about 350 onshore turbines, including 250 of Alstom wind units. As Jeff discussed earlier 2016 organic revenues should be high single-digits to low double-digits depending on the mix of unit shipped. Core op profit should be flat to up slightly as the business focus on improving the cost curve for the new 2.0 and 3.0 megawatt product launches and delivering $100 million of Alstom cost synergies. Next on aviation, global passenger air travel continues to grow robustly up 6.7% November year-to-date both domestic and international markets are strong, particularly in the Middle East and Asia-Pacific. Air freight volume grew 2.3% November year-to-date. Orders in the fourth quarter of $6.8 billion were down 16%, commercial engine orders were down 47% as expected. We booked $1.9 billion of engine orders including $100 million of GE90, $600 million of GenEx orders, $400 million of LEAP CFM orders and $500 million of CF6 orders. Commercial equipment backlog ended the year at $29.5 billion, up 11%. Military equipment orders of $353 million in the quarter were higher by two times on a large Navy F-414 order. Service orders were higher by 9% with strong commercial spares orders up 10% to $39 million a day and CSAs were up 24% in the quarter. Military services were down 20%. Services backlog ended the year at over $116 billion, up 15% versus last year. Revenues of $6.7 billion were up 5% with commercial equipment revenues down 5%. We shipped 59 GenEx units versus 77 last year driven by schedule. We have no delinquencies to borrowing. Military equipment revenue was down 1% and services revenue was up strongly at 18%, driven by commercial services up 24%. Operating profit grew 12% on strengthened services, positive value gap and good cost productivity. Operating margin rates improved basis points. The Aviation team delivered another solid execution year, for the year revenues grew 3%, operating profit grew 11% and margins expanded 160 basis points. Our share on each of our engine platforms is very strong and a LEAP launch remains on track for mid-year. We expect another solid year from David Joyce and the team at Aviation. Next is oil and gas. The segment continues to operate in a very difficult environment and we continue to be focused on being hyper competitive on new opportunities and very aggressive on the cost structure. For the fourth quarter orders of $3.3 billion were down 35% and down 28% organically. Equipment orders were down 52% or 44% organically. All segments had lower orders driven by delays in reduced CapEx spending with the exception of our downstream platform, which grew orders 51% reported and up 84% organically. For the other segments on a reported basis, subsea was down 49%, TMS was down 78% and surface was down 65%. Service orders were down 17% and down 13% organically. On a reported basis TMS was down 24%, surface was down 29%, subsea was down 35% and M&C was down 8%, partly offset by downstream which exclude service orders by 20%. Not included in orders, but included in backlog TMS signed four new long-term service agreements totaling $1.5 billion in the quarter. Total backlog at the ended the year at above $23 billion, which was down 9% versus last year and down 4% ex-exchange. Revenues in the quarter were down 16% reported and down 6% organic. Foreign exchange reduced revenues $437 million in the quarter, equipment revenues were down 21% reported and 12% organically. By business surface was down 49%, TMS down 18%, subsea down 15%. Organically TMS was down 8%, subsea was down 5%. Service revenues were down 9% and flat organically with M&C down 5% offset by TMS up 22% organically. Operating profit in the quarter was down 19% and down 7% organic. Foreign exchange in the quarter was a $93 million headwind. The business continued to deliver on cost reductions and inflation which partially offset the negative volume and price. Margin rates were down 70 basis points on an organic basis margins contracted 10 basis points. The business executed in early and aggressive cost-out program beginning in 2014 delivering $600 million of cost out during 2015. For the year revenue and op profit were down 5% and up 1% respectively and organic margin rates actually expanded 90 basis points. For 2016 our best view for revenues and op profit continues to be down 10% to 15%, most likely at the bottom end of that range given the outlook for the industry and our view of volume and price. Our base plan at December outlook call for $400 million of cost out in 2016 to get to the $1 billion run rate over 2015 and 2016. We are working another $400 million of additional cost out reductions to offset the likely lower volume of price pressure. We expect the first half to be tougher year-over-year versus the second half and [indiscernible] orders team have executed very well in 2015 and we expect the business will continue to outperform on a relative basis in 2016. Next up in healthcare, orders of $5.2 billion were down 4%, but up 1% organically. Geographically orders in the U.S. were down 1%, Europe was down 8% and up 4% ex-FX and the Middle East region was down 4% and up 5% ex-FX. China was down 6% reported and down 3% ex-FX. Tenders in China continue to improve slowly year-over-year tenders were flat after several quarters of contraction. In terms of business lines healthcare systems orders were down 6% and down 1% excluding exchange. The U.S. was down 2% driven by lower molecular imaging and X-Ray on tough comparisons offset partially by strong MR up 33% and ultrasound up 5% on new product upgrades. Europe was down 8% reported, but grew 5% ex-foreign exchange. Europe was up 5% ex-FX for the year and have seen six consecutive quarters of organic growth. China orders were down 11% reported and down 9% excluding exchange. Our current outlook for 2016 is for orders growth in China as government tenders begin to rebound. Life Sciences continued to performance very well. In the fourth quarter orders grew 2% up 8% ex-exchange. Within Life Science bioprocess grew 16% ex-FX was strengthening Korea, China and the U.S. Healthcare revenues were down 3% reported and up 3% ex-FX. Healthcare systems revenues were lower by 4%, reported and up 3% ex-FX and Life Sciences revenues grew 6% excluding exchange. Operating profit was lower versus the fourth quarter of last year by 4%, excluding exchange and lower by 8% reported. Volume growth and cost productivity were more than offset by price and higher growth investments. Margin rates contracted 100 basis points in the quarter. In 2016 we expect John in the healthcare business to improve operationally in terms of earnings and margin rates. Our outlook is for the Life Science business to continue to grow strongly and profitably and for HCS business to execute the digital transformation and aggressively reduced products and service cost. In transportation North American carloads were down 6.4% in the quarter driven by a very weak carloads in call down almost 20% and petroleum down 13%, intermodal volume was also down 1% in the quarter. For the year volume was down 2.2% driven by commodities with intermodal higher by 2%. Lower volume and operational improvements have improved velocity on the rails, on average 2.4 miles an hour that’s up 10% versus last year. For our business orders in the quarter were very strong up 66% to 3.2 billion, driven by equipment orders up 113%. We took our largest order ever of 1,000 locos in India and also secure node for 100 Tier 4s in the U.S. Service orders were down 6% at ex-signaling, on lower overhaul volume driven by increased park locos. Revenues were up 2% reported and up 11% ex-signaling. Equipment revenues were higher by 17%, 27% organically, principally driven by locomotives partly offset by services down 8% on lower overhauls. Op profit was higher in the quarter by 18% ex-signaling and up 8% reported. Increased loco volume, value gap and productivity drove earnings higher. Margins improved 100 basis points reported and 120 basis points organically. The transportation team delivered a tremendous year. Excluding the signaling sale they grew revenues 7%, operating profit 16% and improved margins 150 basis points. They launched and delivered 425 Tier 4 locomotives on time, on cost and the performance is significantly exceeded customer expectations. 2016 is going to be a more challenging year with softer demand in the U.S. and in the commodity markets. We shipped 985 locos in 2015 and expect to ship about 800 in 2016. The team is executing an aggressive cost plan to address the lower volume. We expect the business to be down mid-single digits on op profit in 2016. On energy management as I mentioned earlier describing results for energy management is complicated by the contribution of our digital energy business to the grid JV. For financial reporting purposes we report 100% of the grid JVs orders and revenues, but only report 50% of their earnings. Going forward we will report results on this basis, but all our organic calculations will include only industrial solutions and the power conversion business. Orders in the quarter were $2.6 billion up 15% reported, of the $2.6 billion $1.1 billion was from the grid business with Alstom contributing $716 million and digital energy business contributing $342 million. Digital energy orders were down 10% reported and down 8% organically. Power conversion orders were down 17% and down 11% organically, on no repeat of larger renewable orders in the fourth quarter of last year. For the total year power conversion orders were very strong up 19% organically. Industrial Solutions orders in the quarter were down 17% report and down 11% organically, driven by foreign exchange and dispositions. North America demand in the quarter was weak across all Industrial Solutions segments. Backlog for the quarter ended at $11.7 billion. Reported revenues of $2.4 billion were higher by 20%. Grid solutions revenue totaled $952 million inclusive of $393 million of digital energy revenue. Industrial Solutions revenues were down 8% and down 4% organically. Power conversion was down 6%, but up 9% organically. Reported op profit for the energy management segment was $33 million, which includes the effects of establishing the grid JV and Alstom’s results. Before the effects of Alstom, as I covered earlier, energy management earned $118 million of op profit up 4% driven by the productivity and the gain on sale in our media’s business partly offset by lower Industrial Solutions volume. The contribution of our digital energy business to grid JV combined with the Alstom grid operating results equaled the loss which we recorded at 50% or $5 million. As we announced last week and Jeff spoke about it earlier, we have an agreement to sell our appliance units to Haier, which we expect to close mid-year. Fourth quarter results for both Appliances & Lighting had revenue essentially flat. Appliance revenue was up slightly from last year and lightings saw a flat revenue and growth organically. LED growth in the quarter was 28%, operating profit for the segment was up 28% with very strong performance in appliances up 51% on strong cost performance and up 4% organically in lighting, but down 10% reported driven by foreign exchange. The appliance team had a strong year essentially doubling profits and expanding margins significantly. They’ve also done an outstanding job managing the business through this disposition process. Lastly, I’ll cover GE Capital. Our Verticals businesses earned $438 million this quarter, that’s up 7% from prior year driven by operations and higher tax benefits partially offset by lower gains. Portfolio quality remains stable and the aviation portfolio finished the quarter with zero delinquencies in only two AOGs. Working down the page, GE Capital corporate generated a $2 billion loss in the quarter principally driven by restructuring and other charges related to the GE Capital transformation. Preferred dividend payments, excess interest costs including the cost associated with the debt exchange we completed in October and headquarter’s operating cost. In the current quarter we took an impairment of approximately $800 million on our Homer City coal-fired power plant in the U.S. related to a decision to exit the investment overtime. This investment was not strategic to the verticals’ go forward business and this actually aligns this portfolio more closely to the GE store going forward. These charges within the framework of the $23 billion charge to effect the GE Capital transformation. Discontinued operations, which now includes the consumer segment generated earnings of $3.7 billion, primarily driven by a $3.4 billion gain associated with the Synchrony split off as well as the earnings and gains from discontinued operation. Overall, GE Capital reported $2.1 billion of earnings and we ended the quarter with $167 billion of E&I excluding liquidity. The verticals ended the quarter with $79 billion in the E&I excluding liquidity. Our liquidity levels remains very strong at $91 billion. Our Basel III Tier 1 common ratio was 14.5%, which is up 80 basis points from the third quarter after paying dividends of $3.9 billion during the quarter bringing our total dividends in 2015 to $4.3 billion. Assets sales remained ahead of plan and we ended the year with $157 billion of signed deals and $104 billion of deals closed. Overall, keeping that GE Capital team have executed ahead of schedule on all aspects versus the plan we share with you back in April. We expect to be largely complete by the end of 2016 and are on track to file for CP receipt [ph] in the first quarter of this year. And with that, I’ll turn it back Jeff.

So let me end by going through our operating framework. This is the framework I showed in December. We’ve no change but increasing our goals for disposition cash. I know a lot happened earlier in the year, but 2015 closes out where we thought it would. So let’s start with organic growth of 2% to 4%. We finished 2015 with $315 billion of backlog earlier outlined how we achieved those goals even in the face of a tougher oil and gas market. We’ve broad business and geographic diversity and service, which is 80% of our earnings should continue to grow by 3% to 5% in 2016. We had two months of Alstom in 2015 and so far so good, we think our synergies were achievable and with the appliances transaction we’re now looking at the ability to fund incremental restructuring. In addition this gives us upside to our disposition cash for the year. All of our goals for GE Capital remain on track, our dispositions are a year ahead of plan, capital dividends are the key to returning about $26 billion to you this year and we plan to file for SIFI de-designation later this quarter. We’re acting to get more out of this economy. We’re aggressively managing our cost structure to capitalize on deflation. We have a very strong balance sheet with substantial cash. We have the ability to finance our industrial products, which is a huge advantage. Our diversity in both regions and markets allows us to outperform single purpose competitors. We can move production to the lowest cost regions and capitalize on currency or excess capacity. We’ve all the elements to help ourselves in a tough economy. Buyback capacity, substantial restructuring funding and services growth and we’ve continued to invest. Our long-term commitments for R&D, globalization investments like Alstom have built a huge backlog. So just to recap some of our highlights for ‘16 double-digit EPS growth, returning $26 billion of cash, Alstom integration, digital execution, there is really a lot of value here in GE. So Matt now let me turn it back to you for some questions.

Thanks, Jeff. Operator please open up the lines for questions.

[Operator Instructions] Our first question is from Scott Davis with Barclays.

Hi, good morning guys.

Hey, Scott. Good morning.

One of the things that’s changed in the last couple of months is just the severe currency devaluations we’ve seen in some of the emerging markets out there, but your order book in EM seems to be pretty good, I mean are you pricing, can you just give us a sense of kind of current and past are you pricing contracts in U.S. dollars, are you pricing them in local currency or is there a mix, just a little color there?

Okay, maybe I’ll do a little bit on the geographic side Scott and then give you a sense. We had a very strong fourth quarter in the Middle East that was a lot driven by power, pricing actually was a pretty good on those transactions for the quarter. I’d say on balance the pricing we’ve experienced on power, rail, aviation usually those show in the pricing and the backlog and the order book. So I don’t think we’ve seen really any diminution of pricing in the emerging market orders. So you know guys our stuff is lumpy so there is big transactions, but I don’t -- we don’t see anything. Jeff would you want to add to that?

Just a couple of things, so what we do in China there has been very little albeit a little bit more lately the differences in exchange between the U.S. to China are pretty di minimus, a lot of our businesses that I gave you are dollar based and then obviously in oil and gas and energy management and a number of other businesses we do work in local currency. And so Brazil where we’re in Brazil and Europe in the euro we’ve had a little bit of a currency impact and that’s what you hear us reporting when we give you reported versus organic. On the orders front I don’t think we’ve seen that big of an impact, and when you look at orders in the quarter particularly in power, orders price has been very, very good, very strong particularly on the H turbine, largely because we’re selling out slots.

That makes sense. And then just moving to oil and gas how was $30 oil impact your 2016 outlook I guess what I mean is that you have I mean 2015 was pretty amazing with the cost out and you haven’t seen decremental margins at all in that business and is that sustainable and are there break points in oil prices where it’s just not sustainable any more to maintain that type of drop through?

So again what I would say is that just on a macro comment, there is still lot of efficiency opportunities we have in our oil and gas business, both in the supply chain. And so I think what Jeff talked about earlier in terms of the ability to do incremental restructuring is still out there and then I would just again segment our business into kind of project based business where we’re still in execution mode and that’s probably 70% or 80% of our total revenues and then businesses like drilling and surface that are probably the most susceptible as oil pricing goes down to $30 we’re trying to stay ahead on the cost curve is going to be very difficult in the future and we just need to be flexible at a $30 environment the one we see today. But that’s a very small portion of our overall oil and gas business.

I would just add, I would just expand a little bit on what Jeff said. So if you think about the business long-term more contractual and project based stuff. Turbo machinery, downstream and subsea, that’s about 65% of our revenue in ‘16 and of those revenues more than 70% of those are in backlog. If you add the M&C business on top of that, which tend to be more flow in convertible. But it’s about roughly 50% exposure oil and gas and 50% to non-oil and gas, that’s 85% of revenue and when you add M&C you’ve got about little bit north of 65% of next year’s revenues in backlog. So to Jeff’s point the real short-term exposure today anyways we look at is service and drilling and they are very susceptible to volatility around what they see for convertible demand in any period of time. But it’s 15% of the revenue.

Again Jeff I'll come back and -- because of appliances guys we have kind of $2 billion plus of restructuring that wasn’t in our plan when we stood in front of you in December.

So I am going to follow on with that. So the way we think about it within the range of down 10% or 15%, everything else being we maybe at the lower end of the range we may be closer to down 15%, we came into the year we told you we had plans to take $400 million a cost out on top of the $600 million a cost out we delivered in ‘15 for a total $1 billion over the two years ‘15 and ‘16. We are now going after an incremental $400 million on top of that. So now we are trying to deliver $800 million of cost out to 2016 and appliances is an important part of our ability to do that. So we are going to invest more aggressively in 2016 in restructuring the oil and gas footprint that we even did in 2015. So that gives us Scott some ability to moderate potentially if revenues are even lower or the lower end of the range then we can moderate the impact on profitability.

Yeah, sounds like appliances was timed just right. So good luck, congrats guys. I’ll step off.

Thanks, Scott.

The next question is from Julian Mitchell with Credit Suisse.

Hi, thank you.

Hey, Julian. Good morning.

Good morning. Just a quick question firstly on Alstom, the core business as you say lost money on the EBIT line in Q4, you’ve talked about $200 million of core Alstom profit in 2016, how quickly do you think the business goes back to profits or is it sort of a second half turn around on the core Alstom business?

I think we expect it -- we are often running on the synergies as we speak, having said that most of those synergies and most of the improvement in the core operations is going to happen with will accelerate over the course of the year. I think we feel very good about the guidance we gave you in December around the outlook for Alstom in 2016 of $0.05 contribution that today feels very solid. Now I’d go back to what we said about 2015 on that call, we came in almost line item by line item virtually right on top of what we told you we’re a little better in tax than we estimated. But the other elements of the cost in the operations we talked about on that call is exactly where we came in and ended up Alstom in the fourth quarter ended up being essentially break even with tax or zero drag on EPS. So I think right now we are on course and the benefits and the improvement will accelerate as you would expect over the course of the year.

I would echo with what Jeff said Julian. Look as you guys can see this is a large complicated transaction to get it integrated. But when we look underlying in terms of customer response and geographic opportunities and things like that I think this is everything we thought it would be. So now we just got to get out there and execute.

Great thanks. And then just a quick follow-up on healthcare, the profits there were down I think about 9% in the second half of 2015, you’re guiding profits up in 2016. What is it that’s really swinging there sort of from the second half to the next 12 months.

Look I think Julian, when I think about healthcare in 2016, this should be low to mid-single digit organic revenue grower with margin enhancement, that’s what investors should expect in healthcare. I think when you look at the second half of last year we allowed the business to spend incrementally on NPI to make some changes in their IT business to invest more. So basically I think we allowed them to increase their spending in the second half. That should be opportunities when we look in the future. Better VCP, better NPIs and I expect healthcare to have a decent 2016.

We’re going to deliver a better product cost profile in 2016.

Great, thank you.

Next question comes from Andrew Kaplowitz with Citi.

Good morning, guys.

Hey, Andrew.

Jeff so can you talk about your ability to grow margin for the company in ‘16. If you look at 4Q you had 110 basis points of gross margin improvement ex-Alstom despite the declining organic sales, your value gap and mix give you 100 basis points of that improvement. So given you higher margin services orders are growing faster than equipment and raw material costs are coming down, could you sustain the 100 basis points you saw in the quarter from mix and value gap as you move forward?

So great question. Our goal what we’ve told forces year-on-year we have a target to improve margins 50 basis points, that’s true as well in 2016. So the geography of where that improvements comes from I think it will be largely the same I think value gap will contribute a little bit less in 2016 to the margin expansion I think variable cost productivity or productivity general will or product cost if you will, will contribute more. And then corporate and SG&A will also contribute in 2016. So we’re still on the 50 basis points march at op profits and down through corporate costs or industrial margins. But the mix between what value gap contributes and what we get out of productivity was going to change a little bit.

I would also say guys last year was the first year of our IC plan where we call the AIP. More than the half of the businesses have gross margin targets they all have margin targets. This has been really a god driver of these results and we think we’ve set the bar appropriate in ‘16 to get the same kind of benefits.

And then I would say if you mentioned services growth were equivalent that’s important actually there is no question about it. We need a big service businesses PGS and aviation to grow and deliver with it because we have these product launches. So we’ve got the H turbine coming next year, we got a little over 100 LEAP engines launching next year and we got the 2.x and 3.x wind turbines going. So continuing the momentum and services is very, very important to the overall story.

Jeff if I could just follow-up on service for a second, your organic service orders slowed slightly in the quarter from 4Q versus 3Q but still good at 3% you guys are going at 3% to 5% service growth. Can you talk about the sustainability of your service business especially in power in the current environment and how much is digital really helping is that seems like robust growth there?

Yeah look I mean I would start again with the digital focus, which is growing 20% not just in power, but in other businesses but we also have very targeted programs in all of our businesses to go after the aged install base, Alstom brings unique capabilities to the power business. Aviation guys, we’re still seeing good revenue passenger miles. There is lots of opportunities for our aviation business to continue to grow. Healthcare is actually after several years of flat revenue and services is actually grown 3% or 4% the last few quarters. So we’re very programmatic in the service side. I think we see that continuing into next year with digital being the number one driver. And at the end of the day I think in an environment like this, this is the bolus for the company, is the installed base.

The only think I’ll add Jeff is the upgrade. So we think we’ll do at least 125 AGPs next year in every one of the businesses is really pushing on the upgrade.

Thanks, guys.

Great, thanks.

The next question is from Andrew Obin with Bank of America.

Hi, guy. Good morning.

Hey, Andrew. Good morning.

Just the question on restructuring. Now that you have this extra $0.20 from the appliances. I am sure you did have some restructuring built into your number before because you were expecting appliance sale in the middle of the year. But given that the gain brings restructuring and you have a lot more restructuring this year. Does that mean that there is more cushion to the numbers or does that mean that the core guidance is actually reflecting more macro headwinds?

Okay. So in our core plan we expected to drill about $1.7 billion pre-tax of restructuring in 2016. We will double that with appliances. And so we will do a lot heavier restructuring, first of all we’re going to try to accelerate a lot of what we were going to do in Alstom in ‘17 and ‘18 as much of that as we can actually we’re going to try to accelerate. We’re going to do more as I mentioned earlier in oil and gas and every one of the businesses we’re going to do more around the product service cost footprint of the company. So it does both things when we spend that incremental money there will be some amount of benefit in 2016, but maybe even more importantly it’s a great base to work from for 2017 and ‘18 and it will help us continue to deliver these margin improvements that you've seen.

I would add Andrew look. I’m going to say the same thing today that I said a year ago. Every one of our businesses has a very detailed incentive compensation plan that internally just like last year rolls out to more than we talked about externally. And that’s the way we’ve run the place and that’s why we continue to run the place. And I just -- I look at the ability to do incremental restructuring as a good opportunity for us to continue to deliver good results.

And just the follow-up question, are you guys seeing any signs of stabilization in China because that seems to be a big concern I apologize if I missed your remarks in the beginning.

Yeah I think for us that the first thing I’d say there is no one China, right. I don’t think macro anymore when I talk about China I think micro. I think about aviation, healthcare, power, mining that’s how I think everybody is got to start thinking about China. Now aviation remains super strong right. I think on the power side it’s going to become a gas more predominantly gas turbine market it’s been cyclical but I like how we’re positioned in the future in China there. And the third business is healthcare, healthcare has had a tough couple of years, I think the sense of our team is that we feel that stabilizing by tough I mean it’s gone from up 10% to 15% to maybe flat to down slightly right. So our team I think has seen some signs of stabilization there. That to me is the swing or let’s say on China, but aviation is super strong even today.

Thank you very much.

Great, thanks.

The next question is from Joe Ritchie with Goldman Sachs.

Hey, Joe. Good morning.

Good morning, guys. And so maybe following up on Andrew’s question slightly differently I guess as you go into 2016 and then take a look back into 2015. Industrial EBIT grew very low single-digit this past year and as we head into 2016 there are a lot of headwinds whether it’s orders down, mix is becoming a bigger headwind and then you’ve clearly oil and gas pressures are intensifying. And so what I’m trying to understand is how much of the incremental improvement in industrial segment EBIT is going to be driven by the restructuring actions that you’re taking?

Well. Let me go back and try to help you with that in terms of what 2015 was. So in the fourth quarter our restructuring efforts delivered a little over $220 million of benefits. And those are restructuring have started in ‘14 and some of them were executed in 2015 et cetera. And for the year that was about $1 billion of value if you will against margins. In 2016 will roll forward and based on what we did in ‘15 and the benefits realizing in 2016 and the incremental spend in 2016. I mean everything else being equal we would expect that more and more to flow to industrial EBIT in 2015. And yes it’s part and parcel about remaking the competitiveness of this company around products and service cost and it’s critically important and our track record I think over the last couple of years of these businesses delivering back to margin improvements based on the restructuring spend I think it’s been on balance very good.

Yeah no that’s fair and it has been good and it clearly should help provide a tailwind for 2017 and 2018. Maybe one follow-up question Jeff just a reminder on $35 billion in the composition of the $35 billion dividend from the asset sales and leverage and has that changed at all just given the asset prices have come down a little bit at the start of this year?

No, so key thing is team have done an absolutely remarkable job executing against this plan, as you know Jeff mentioned I’ll just reiterate a little bit just to give base line everybody $157 billion of signings, $104 billion of asset closings in 2015. In 2016 we’ll sign something on order of magnitude of another $50 billion in deals we’d expect more than half of that to happen hopefully here in the first half of the year and we’ll close, we’ll get wire transfers for about another $100 billion of closings in 2016. And so far we’re tracking slightly better on a price of intangible book what we presented in April of next year and we think everything else being equal as we sit here today with $50 billion of signings to go all which are in process that we’re going to end up at or maybe incrementally slightly better on the price to tangible book when we get through the end of this process hopefully at the end of 2016.

Okay, thanks guys. I’ll get back in the queue.

Great, thanks.

The next question is from Steven Winoker with Bernstein.

Yes thanks and good morning.

Hey, Steve.

Hey. So you covered a lot of ground, but one of the things on page four, the simplification of SG&A cost being flat in the fourth quarter just maybe run us through the dynamics there in terms of it coming down off of the prior savings you’ve been seeing in quarter-after-quarter there?

Sure so we had $224 million of SG&A structural cost out in the quarter that was down 7% year-over-year for the year we’re down about $800 million or about 6%. And the reason you see it is not contributing to the margin performance is because that $224 million came out at about the same rate as volume came down in the quarter. So it’s not that we didn’t get cost out we absolutely did it’s not that we lost any momentum. $224 million is about the middle of what we’ve been each of the last four quarters actually probably closer to last eight quarters, it’s just the volume was down and so it didn’t contribute. We expect -- I think we said in December we expect to improve SG&A to sales in 2016 and so you should expect it to show up on that line is contributing to the margin expansion in 2016. As it did for 30 basis points this year.

Okay, sounds good. And then if I just want to clarify in the pricing again when you point to the 3.8% in power and you talked about the HA turbine driving a lot of that you guys are -- how are you thinking about like-for-like pricing versus mix is that HA is all like-for-like pricing if not driving the mix?

Yeah that’s all like-for-like.

Okay all right and then just…

Go ahead I'm sorry.

No, go ahead.

I was just going to say I think what the team has done in this HA launch is pretty remarkable so all the growth in the heavy duty gas market is this class of turbine. The gigawatts get added over the next couple of years 75% of that’s going to come from this class of turbine. They’ve gone from no share to a very high level of share and this is about $300 million of price in the quarter on the H and it’s effectively we’re selling slots out. So it’s been a terrific story.

Okay, I’ll pass it on. Thanks guys.

Thanks Steve.

The next question is from Jeffrey Sprague with Vertical Research Partners.

Hey, Jeff.

Good morning, how are you?

How are you?

Great. Hey just back to kind of the whole restructuring dynamic and kind of understanding the bridge into 2016. So I think your guide for ‘16 roughly implies about $19 billion in segment op if we use the December construct. So just building off $18 billion in 2015 with $1 billion in restructuring savings and Alstom of $600 million is that how we should be thinking about it so you have a kind of core erosion elsewhere in the portfolio of $400 million to $500 million?

I don’t think so, Jeff.

I don’t have that reconciliation in front of me. We’ll get back to you on that, but here is how we thought about the bridge is when we go from ‘15 to ‘16 we’ll get incremental restructuring savings, as a V we earned $1 billion of restructuring savings in ‘15, we think we’ll be better there in ‘16. But it won’t be $1 billion better than it was in 2015. We’ll get margin expansion and organic growth of 2% to 4% and the only decrement if you will as you describe it is we are overcoming the launch cost and the launch margins associated with the LEAP and the H, the wind turbines et cetera, et cetera. So we will grow our profit next year. I don’t have the bridge exactly in front of me at the moment.

But Segment-by-segment power is up ex-Alstom.

Right.

Renewable is up ex-Alstom, aviation up, healthcare up, transportation I think we said down slightly, energy management up. So segment-by-segment Jeff I think attracts the positive operating profit growth for next year.

Okay. Roughly $19 billion is a good place to be though on the segment side?

Yeah.

Yeah, $19 billion -- it’s roughly 19 billion.

Okay, great.

Little better than $19 billion. Yeah.

And then just back to kind of the macro can you give us a little bit of sense on how much of your backlog is in Middle Eastern areas or kind of areas where you’ve got really resource pressures on government budgets and the like?

I think the -- let me just. I don’t have a regional split on backlog, now obviously our power business, obviously from power generation perspective has got a big backlog associated with the Middle East, our oil and gas business as a backlog that’s associated with West Africa, Brazil and the Middle East. We have a big backlog in aviation associated with it. Emirates, Qatar Airlines, et cetera. I don’t think in the case of power or aviation that we have concerns about our Middle East backlog in any way...

Yeah, I was going to reflect on that to a certain extent I think Jeff we’ve always talked about the resource rich regions being more or less $30 billion or something like that for the company. But in the fourth quarter we had a record orders quarter in Saudi Arabia. Our business in Latin America has -- because again demand for electricity has grown 8% last year, good aviation backlogs things like that. So I think the diversification of the mix of businesses we have is still pretty positive even in regions like Saudi Arabia.

Right. And then maybe just one last one. The order price index info was helpful, I wonder if you could share what us kind of the price impact on revenues in the quarter?

Yeah. So in revenues in the quarter we had price of about $150 million, about $100 million of that came from power aviation was strong as well and then as you would expect healthcare had negative price of roughly $100 million. Most everybody had modest positive price.

The next question is from Deane Dray with RBC Capital Markets.

Thank you. Good morning, everyone.

Hey, Deane.

Hey. Just had a couple of clean up questions here, just to go back to the appliances deal, we’ve gotten a lot of questions about this that the deal you struck with higher, significantly more favorable than Electrolux gain of $0.20 versus $0.06. How do the deal all come together, I know they are now directly comparable. But just give us a sense on how it played out?

Again Deane I think we were we follow the process for Electrolux until December 7th. So that kind of ran its course, that gave us the ability to kind of look to see what other outcomes would be important for the business. There was a tremendous -- after December 7th, there was a tremendous amount of interest in the business. I think which we have to keep in mind is that the EBITDA of the business is better over the -- while we were in the process. The multiples in the industry improved while we’re in the process. And I think what we always knew was true about the appliance business is that it had a favorable position in the North American market that was valued by people on the outside and that’s what we saw in the 30 days kind of post for December 7th. I would add Deane we wanted to move quickly because the business have been for sale for two years and it’s just there was a real reason for us to kind of get this transaction and we’re pleased with the way it turned out.

Yeah congratulations on that. And just a last question from me, I know you’re out of the quarterly guidance business, but given the expectations of the higher restructuring and they won’t be time with gains. What is the first quarter dynamics look like with regard to gains in restructuring?

So today we think we’re going to have about $700 million of restructuring in the first quarter. We’ll have some very modest gains in the first quarter. So we’ll have naked restructuring in the quarter of between $600 million and $700 million pre-tax in the quarter. And do you want me to give full first quarter. So here is when I’d say is when you look at the profile for the year when we talked about gas turbines and power systems. I mentioned the back that a lot of our volumes was in the second half of the year. The first quarter in power business we’re going to be down significantly on gas turbines. Last year we had the tail-end of Algeria and we have some Egyptian shipments in first quarter. So even though we’re going to be up on shipments year-over-year for the total year for power systems the first quarter is going to be light on gas turbines year-over-year.

The next question is from Shannon O'Callaghan with UBS.

Hey, Shannon.

Good morning. Hey Jeff maybe a little more on the core margin expansion in the power business the 140 basis points, I mean you’ve talked about positive value gap and mix. What -- maybe a little more color there what’s really driving that?

Yeah a big part of it is the strength in their service businesses, TGS was very strong in the quarter that was important. We also shipped fewer gas turbines year-over-year in the quarter from a mix perspective that certainly helped them expand margins in the quarter the 140 basis points. So the value gap was really strong.

I mean just some context here guys. Our organic growth for the total company in the fourth quarter of ‘14 was up 9% organic growth for power was up 20% or something in the fourth quarter of last year. And that was a lot of the Algerian shipments that we had that were product shipments in ‘14. So kind of to Jeff’s point we had let’s say much more difficult comps from a revenue standpoint, but much easier comps from a margin standpoint when you compare fourth quarter of ‘15 to fourth quarter of ‘14.

Okay. Yeah that makes a lot of sense. And then just on corporate cost I mean got some benefits there in the quarter I know it’s an initiative you’re working on. I mean are we kind of at a reasonable run rate now or is there a lot more to go there in ‘16?

No we’re going to be down in ‘16. So we finished the year with $2.1 billion of corporate operating cost. We gave you a range of $2.0 billion to $2.2 billion. We’re running the place to the bottom of that range. And no we’re not close to the end of what we’re doing around corporate.

The next question is from Nigel Coe with Morgan Stanley.

Nigel.

Thanks, good morning guys. Again a little delay [ph] here so I’ll keep this brief. So just on back on the restructuring obviously a huge number for this year, Jeff. Should we -- you’ve got $0.08 in the next year 2017 for Alstom restructuring. Should we assume that the bulk of that $0.08 comes into this year?

We I don’t think it will be the bulk of it. We’re going to try and move as much of the restructuring into ‘16 as we can. All of that restructuring you don’t just write a check and then get the benefits it’s actually all kinds of execution around it. So we’re going to try to execute as much of the restructuring list actions if you will that we’re planned there is a 17 actions we’re going to try to do as many of those in ‘16 on top of what we already planned as possible.

Okay, that’s helpful.

I’ll add Nigel with this about of restructuring this year; we’re going to get some benefits yet this year. The book when we’re going to come in ‘17 but we’ll still get some restructuring actual benefits in ‘16 just based on the quality of projects we’ve got.

Okay, that’s helpful. And then just quickly on the -- you gave a little bit color on 1Q and obviously 4Q is noisy with some of the project delays and Alstom accountings I am just thinking on 1Q do you still see the scope for some backlog push out into the back half of the year and to what extent that we still have some of these accounting issues on Alstom in 1Q?

We are going to continue -- we are not done purchase accounting. So we from an accounting perspective we’ve own the company for two months. So we’ve done a significant amount of work getting the initial purchase accounting done, but we are not complete yet. And that really I’m hopeful that will be done with all of that in the first half of this year. And I think in terms of how our volumes lays out I mean we’re a little more back end loaded this year maybe than we were last year just away the order book wants to play out. But I would say to a certain extent guys things like just the change in PTC probably pushed some wind turbines from ‘15 to ‘16, that’s unforecastable, but it’s generally a positive. So again I think by and large we feel pretty good about how our backlog lays out and the integrity of the backlog. Again we are not [indiscernible] about the oil and gas market and kind of -- we need to be fast on our feet as it pertains to how that business rolls out the rest of the year.

Great, thank you, Jeff. Couple of quick announcements before we wrap up. The replay of today’s webcast will be available this afternoon on our investor website. We are going to host healthcare investor meeting in New York City on March 11th and our first quarter 2016 earnings webcast will be on April 22nd. Jeff?

Yeah, Matt thanks. Again thanks again guys I think it was given the first time we closed Alstom. This was more complicated than we like again that will get better as time goes on. So it took us a long time to work through it. But I think if you stand back and look at ‘16 we’ve got a lot of self help in place with restructuring, big backlog, our share repurchase and we feel good about double-digit earnings growth, about returning a lot of cash back to investors and about really continuing to drive our strategy into the future. So we feel great about the company and we look forward to having more conversations. Great Matt, thanks.