GE Aerospace (GE) Q3 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the General Electric Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen only mode. My name is Jason, and I will be your conference coordinator today. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today’s conference, Matt Cribbins, Vice President of Investor Communications. Please proceed.

Good morning, everyone, and welcome to GE’s Third Quarter 2017 Earnings Call. With us today are our Chairman and CEO, John Flannery; GE Vice Chairman and CFO, Jeff Bornstein and incoming CFO, Jamie Miller. Before we start, I would like to remind you that our earnings release, presentation and supplemental have been available since earlier today on our website at www.ge.com/investor. Please note that some of the statements we are making today are forward-looking and are based on our best view of the world and our businesses as we see them today. As described in our SEC filings and on our website, those elements can change as the world changes. And now, I’ll turn the call over to John Flannery.

Okay, great. Thanks Matt. Good morning. Before we get into the results of the quarter, I want to give you an update on the review of the company we've been doing over the last 90 days. While the company has many area of strength, it's also clear from our current results that we need to make some major changes, with urgency and a depth of purpose. Our results are unacceptable to say the least. The first thing I'd say is the review of the company has been and continues to be exhaustive. The team and I performed deep dives on all aspects of the company and no stone has been left unturned. We are evaluating our businesses, processes, corporate, our culture, how decisions are made, how we think about goals accountability, how we incentivize people, how we prioritize investments in the segment and at the overall company level including global research, digital and additive. We've also reviewed our operating processes, our team, and capital allocation and how we communicate to investors. Everything is on the table and there have been no sacred cow. I'll give a more detail look at our investor meeting in November but at a higher level here the key things and actions you can expect in November. First, we are driving sweeping change and moving with speed and purpose. I am focusing heavily on the culture of the company. Our culture needs to be driven by mutual candor and intense execution, and the accountability that must come with that. We have announced changes to the team at the highest level to the company. We've made a series of senior level changes in our Power business. We announced last week that Ed Garden from Trian is joining the Board. Things will not stay the same at GE. In addition to changes in our culture and our team, I'll share more with you in November on our capital allocation methods, changes we are making to analytics and metrics, and process improvement. In particular, these changes are focused on improving the cash generation of the company. We have to manage the company for cash and profitability in addition to growth. We need to hold teams accountable for the results. I am also working with our Board on comprehensive changes to our compensation plan to better align the team with investors. Speaking of our team, I found that to be an area of broad strength overall. We have dedicated teams across the globe that customers can rely on to go the extra mile. Second, fundamentally we have a strong set of businesses and leadership position. We have some major challenges in our Power unit but performance in most of the other segments is strong. That said we have a substantial opportunity to improve cash and margins across the entire company. This is where I am focusing my time and effort. As a start, we are already implementing a plan to drive substantially in excess of $2 billion of cost out in 2018 compared to our previous target of $1 billion. We will have a much smaller, more focused corporate and we are rightsizing our businesses to face market realities and will be mindful of the need to balance aggressive focus on costs with critical investment and long-term growth initiatives. We will be much more disciplined at all levels of the company on capital allocation. Our NPI spend, P&E investment, working capital. I will also hold the team accountable for securing the returns that we can and we should achieve from our restructuring which I view as important investment in the future of our businesses. Much like I experienced in my healthcare days, I see this largely as a self help story. We can and we will and we must improve the cash flow and margins of the company. Third, I am conscious of the fact that size and scale drive complexity. The company has many strong franchises but a number of other businesses which drain investment and management resources without the prospect for a substantial reward. We will have a simpler, more focused portfolio. To date, we've identified $20 billion plus of assets that we will exit in the next one to two years. We are also reviewing potential further optionality with other assets in our portfolio. Each GE business is being measured against the set of rigorous, strategic and financial objective and the belief that we can add value to the businesses over time will serve as a central tenet in shaping GE's future portfolio. Doing these three things well, redefining our culture, a back to basic approach to running our businesses better and reducing our complexity, these things will return to us our ultimate purpose. Running a GE platform that is built for value creation for our owners. I will run the company for cash generation and performance better than peers. We have leadership positions in global infrastructure businesses where our scale and deep technology domain represents significant and harder and competitive advantages. We will continue to investment in digital and additive to drive upside. GE has always been a company that combines innovation and technology with process rigor and global reach to create powerful outcomes for customers and improves the lives of literally billions of people around the world. The questions of who we are and what our relevance to the world is, those are not the issues facing the company today. The questions of how we execute and what results we deliver, those are the issues we are addressing with utmost sense of urgency. Lastly, I know there have been questions about capital allocation and our commitment to the dividend. We manage the company for total shareholder return, balancing growth and the dividend payout. The dividend is a priority in our capital allocation framework and we understand its importance to our investor base. We are in the process of finalizing our 2018 framework and we will share that with you in November. We will be reviewing our outlook for 2017 and 2018 in terms of sources of cash and CFOA generation. We will do that with an appropriate balance of growth investment and dividend payout, and we will share our overall capital allocation framework with you in the November meeting. As I said at the outset, the results I am about to share with you are completely unacceptable. As I look forward, however, from where we are, I see a journey with significant upside driven by running our businesses better, leveraging the strength of the portfolio and unlocking value where it make sense. I am highly confident in our ability to execute on this. The bedrock of my confidence comes from the people of General Electric, many of whom are listening to this all. They are smart, passionate, tough, experienced and I can assure they are determined and united to restore our performance and operate with integrity, with accountability and with an unwavering sense of purpose. I am humbled to be their leader and excited about taking this journey together with them. In our 125 year history, GE has been known for combining technology and innovation with execution intensity to produce outstanding results for customers and for our owners. We will regain that trajectory and I look forward to sharing more with you in November when we get together in New York City. And now let me turn to our Q3 results. In terms of the third quarter, it goes without saying that this quarter was a very challenging one for us. At the highest level, we had strong performance in most segments that was more than offset by results in our Power and Oil and Gas businesses. This was especially true in our earnings and CFOA. EPS in the quarter was $0.29 down 9%. We had $0.21 of restructuring and other one time items, offset by a $0.21 gains in the sale of our water business. Organic revenue was down 1% and op profit was down 7%. In both cases this reflects good performance in most segments, offset by weakness in our Power business. Orders in the quarter of $29.8 billion were up 11% and flat organically. I'll walk you through the orders by business on the next page. Industrial segment revenue was $30 billion; this was up 10% reported and down 1% organically. Power was down 6% organically and Oil and Gas was down 7%. Excluding Power and Oil and Gas we saw 2% organic growth across the rest of our businesses. Industrial op profit was down 7% with Power down 51% and Oil and Gas down 35%. Aviation and Healthcare had very strong quarters, up 12% and 14% respectively. Industrial margins of 11.8% were down 220 basis points. Power and Oil and Gas were down substantially. All other businesses expanded margins. We are delivering on structural cost; we took out $500 million in the quarter bringing the total year-to-date to $1.2 billion. We've already exceeded our total year goal of $1 billion which will position us well for 2018. Industrial CFOA was $1.7 billion in the quarter and $2.1 billion adjusted for dividends received from Baker. Jeff will walk you through these dynamics. Next on to top line performance. Let me start with orders on the left. Orders of $29.8 billion were up 11% but flat organically after adjusting for Baker Hughes. Organically, equipment orders were down 10% and service orders were strong up 10%. The decline in equipment was driven by Power down 32% due to lower TM orders, lower extended scope and steam. Renewables were down 6% due to the non repeat of a large offshore deal last year, Merkur. However, we saw good growth in the onshore business up 36% on very strong international growth. Oil and Gas equipment orders were up 3x, up 58% organically and Transportation was up over 100% off of a low base. Aviation and Healthcare continue to have solid orders up 8%. We saw broad strength across our services portfolios. Power services orders were about flat and all other businesses were up. Aviation was particularly strong, up 13% with the spare rate up 21%. Renewable service order was up 22% on US re-powering demand and transportation service was up 44% on strong mining volume and transactional services. I am particularly pleased with the orders performance in digital this quarter. They achieved $1.4 billion of orders, up 50% with strength in Power of 23%, Transportation up 45%, Oil and Gas up 5x. Year-to-date, Digital orders are up 32%. We are getting real traction here with customers as we continue to focus our efforts on our core market. Revenue was down 1% organic including the effects of acquisitions and dispositions in FX. Year-to-date organic revenue is up 2%. Equipment revenue was down 9%, organic driven by Power down 6%, Aviation down 7% on lower engine shipment and Transportation down 44% on significantly lower logos Strength in services revenue was led by Aviation, Renewables re-power activity and Transportation. Okay, next on to execution. With respect to cost out, I am very pleased with our progress here. We are ahead of plan for the year and have a strong pipeline of ideas, many of which are being implemented as we speak. Structural cost of $5.7 billion in the quarter was down $500 million. Year-to-date structural cost is down $1.2 billion with $900 million of that in the segments and $300 million in corporate. And year-to-date in Power, cost is down $590 million and Aviation is down $200 million. As I mentioned, our current rollout for 2018 is an additional $2 billion plus of cost out with more to come. Industrial margins were 11.8% in the quarter, down 220 basis points. Excluding Oil and Gas margins are down 90 basis points. Our costs out actions are beginning to register. Ex power and water and oil and gas, all other businesses were up 250 basis points. Oil and Gas and Power margins were down about 700 basis points each. So the big picture on the quarter, strength in many segments in terms of orders, operating profit and margin rate but these strong performances were more than offset by Power and Oil and Gas. And now let me turn things to Jeff Bornstein and Jamie Miller. But before they start, I just want to note that Jeff has been a big leader in the company and an important partner to me as I have transitioned into the CEO role. Jamie is hitting the ground running and I know our finance function will be in good hands under her leadership. So with that over to you Jeff and Jamie.

Thanks John. Before I go through the results for the quarter, I want to share with you why we are transitioning my role as a CFO to Jamie. Although we are proud of many of the important changes made over the last few years, including reducing corporate structure, adding additive, restructuring GE capital, exiting appliances, integrating Alstom and establishing Baker Hughes GE, our operating performance is not been where it should be. Most recently Power emerged as a real challenge in terms of volume, profitability and cash flow. I've talked a lot about accountability inside the company and that sense of accountability has to start with me. We are not living up to our own standards or those of investors and the buck stops at me. John and I made this decision together and although leaving the incredibly hard working and dedicated finance team and the company, it's the hardest thing I have ever done in my 20 years with GE. I know it's the right decision for the company, myself and my family. John is driving a lot of change in the company and its culture. And it's the right time to change. I am excited for John to share more with your in November on the progress and thinking we've undertaken. Jamie will be great in the role and will bring a unique perspective to the job and to the company. First, I'll update on cash. You'll see that the page is different than how we've historically presented. We also provided another metric this quarter given the close of BHGE deal in July which more accurately reflects the cash available for GE to use. Let me take a minute to walk you through the left side of the page. Our reported CFOA was $500 million in the quarter that represents GE cash flow including 100% of Baker Hughes CFOA. Next on GE capital, we did not receive a dividend in the quarter. As you know, we are in the process of performing an actuarial analysis of claims reserves and our insurance business. Until that review is being completed, we have deferred the decision to pay GE Capital dividends to GE. Our industrial CFOA was $1.7 billion in the quarter adjusted for $1.3 billion of US pension plan funding and deal taxes. This is down $1.2 billion from prior year. With BHGE on a dividend basis and excluding oil and gas CFOA, our industrial CFOA was $2.1 billion. On the right side, we provided some color on the Industrial CFOA dynamics including oil and gas for the quarter, versus our expectation our CFOA in the quarter was negatively impacted by two things. Lower than expected Power earnings and underperformance in working capital. Working capital was usage in the quarter of $1.3 billion principally driven by inventory receivable. This is worse than expectation primarily driven by lower than anticipated Power volume which was resulted in lower earnings and higher inventory on hand. We also had lower oil and gas collection versus planned. Contract assets were a use of $800 million in the quarter, of the $800 million, $300 million was from our equipment contract given the timing of our revenue recognition milestones which will catch up as we executed against this contract. The remaining $500 million is from our long-term service payments due to better cost performance in parts life primarily in Power and Transportation. All other operating cash flow in the quarter was $1.3 billion driven by two things. First, we had non cash expenses such as intangible amortization and pension that are adjusted out in this line. Second, we had a $500 million correction for the first half related to derivative hedge settlement that have been incorrectly cost applied in operating cash flow versus investment cash flow. Our first half CFOA was under reported by $500 million. We ended the quarter with $12.8 billion of cash on the balance sheet which includes $4.8 billion of cash in Baker Hughes GE. Our performance was below expectation in a quarter primarily driven by Power which is facing challenging market conditions. The balance of the segment performance was in line with expectations on cash. On consolidated results, 3Q revenues were $33.5 billion, up 40% with Industrial revenues of $31 billion, up 17%. The growth year-over-year was principally driven by the water gain and the Baker Hughes acquisition. As you can see on the right side of the page, industrial segment revenues were up 10% on a reported basis but down 1% organically. Industrial operating plus vertical EPS was $0.29, down 9% versus prior year driven substantially by industrial segment op profit down 10%. Gains from restructures had no net impact in the quarter as the water gain of $0.21 was offset by $0.08 restructuring and $0.13 of impairments which I will cover on the next page. That compared to $0.04 of net restructuring after gains in 3Q of 2016. Operating EPS was $0.26 in the quarter down $0.01 from 3Q, 2016. This incorporates other continuing GE Capital activity including excess debt headquarter runoff cost that I'll cover in more detail on the GE Capital page. Continuing EPS of $0.22 includes the impact of non operating pension and net EPS of $0.21 includes discontinued operations. Total disc ops impact was a charge of $105 million in the quarter. The GE tax rate was a negative 4% in the quarter driven by the low tax water gain. Excluding gains and restructuring, our tax rate was in the mid-teens. We currently expect the GE tax rate for the year in the low single digits including the effects of the low taxes on water. As a result, our fourth quarter rate is expected to be around zero. Adjusting for gains and restructuring, our total year tax rate is projected to be in the low to mid-teens. On the right side of the segment results, as I mentioned, Industrial segment revenue were up 10% on a reported basis down 1% organically. On a year-to-date basis, industrial segment revenues are up 2% organically. Industrial segment op profit was down 10% and industrial op profit which includes corporate was down 7%. The decline year-over-year was driven principally by Power and oil and gas while the other segments and corporate were up strongly plus 23% combined. I'll cover the individual segment dynamics separately. Next on one time items, as I said we had $0.08 of charges related to industrial restructuring and other items. $0.06 of that related to GE activity and $0.02 related to Baker Hughes integration and synergy investment. In total, restructuring and other items were $1 billion before tax with restructuring charges totaling about $700 million pretax and BD M&A charges of approximately $300 million related to Baker Hughes, the LM acquisition and the water disposition. The restructuring charges were higher than we originally planned driven by accelerated restructuring actions we taken at corporate. We also had two impairments in the quarters. As you know, during the third quarter we performed our annual impairment test of goodwill for all reporting units. Based on the results of our testing, the fair values of each of the GE reporting units exceeded their carrying value except for power conversion reporting unit within the Power segment. The primary factors contributing to reduction in fair value of this reporting unit were extended down turns in marine and oil and gas markets increased pricing pressures in the low margin renewable market and the late introduction of new technologies and products. As a result of the analysis, we've recognized the non cash goodwill impairment of $947 million in the quarter to write down the carrying values of power conversions goodwill to its implied fair value. We also recorded $315 million asset impairment related to our power plant investment in 2010 to launch the older steam-cooled H turbine, given the over capacity in the California market, we booked an impairment driven by anticipated exit of the asset, together those impairment sold $0.13. We sold our water business on September 30 and recorded corresponding gain of $0.21. At the bottom of the chart you can see year-to-date summary. Through the third quarter we recorded $0.22 of restructuring and other charges, $0.13 of impairments and $0.21 of gains for a net charge of $0.14. Jamie will take you through an outlook for the fourth quarter restructuring in a few pages. Next, I'll cover the segments. I'll start with Power which now represents the combined power and energy connection segments. We have severely disappointed with the result of power and are taking actions to position the business going forward. This includes a refocus on the basics, significant additional cost out plans and changes to management including announcing a new Head of Power Services this week. The business has been undergoing market changes and we haven't changed fast enough with it. The market demand for heavy duty gas turbines declined to 40 gigawatt this year down from 46 gigawatt last year. The structure of the service market has also changed as we discuss on the second quarter conference call driven by renewables fleet penetration for AGP, lower capacity payments, utilization and outages. However, the decline we saw in our services business in the third quarter was much sharper than the decrease in the first half. We expect these issues to persist to the fourth quarter and into 2018. Let me give you some color on the performance of the business during the quarter. Year-over-year Power revenue were down 4% with profit down 51%. Let me start by walking through the dynamics contributing to the significant negative leverage driving margin income pressure of 700 basis points. There are really three drives. First, the decline in the market year-over-year principally in our service business. Aero derivatives and power conversion. Within services, we had less AGPs down 54% and lower outages. Outages were down 18% in the third quarter versus down 12% in the first half, a 50% acceleration in decline. Aero derivative unit were down 32 versus the third quarter of last year and far off our expectation in the quarter. Second, poor execution resulting in project delays and cost to quality items. In addition, we had to establish a bad debt reserve for our Venezuelan receivable. Third, the mix effect of having lower volume and high margin in aero and service businesses and higher volume in low margin grid and balance of plant resulted in a substantial margin headwind. Now let me talk about performance relative to our expectations. Power was sharply lower than we expected. Most of that miss was driven by aero and services volume. We had expected to shift twice as many aero units in the quarter but due to customer financing needs and geographic deal complexity, these transactions did not close. Services were also below expectations. We shift 13 AGPs versus our plan of 39 coming into the quarter. This miss was driven by a forecast that did not reflect lower customer demand from higher fleet penetration and longer customer paybacks and several large deals that were delayed moving into 2018. Outages and other transactional services were also below plan. As a result, Power services in total likely be down about 20% for the year. Let me give you also some color on orders and revenue in the quarter. Orders for Power were $8.3 billion, down 18%. Equipment orders were down 32% with Power down 37% and Energy connections down 25%. Power is lower on fewer area down 75% a 9 units versus 36 units was last year and lower balance of plant down 83% and no repeatable large order in power for $750 million last year. Gas turbine unit orders totaled 15 versus 11 a year ago including 3 aged units. Service order was up 1% and $4.4 billion. Energy connections were down 5% and Power is up 1%. AGPs were 14 units versus 24 a year go. Revenues of $8.7 billion were down 4%. Equipment revenues were down 3% on lower aero derivative with units down 78%, 9 versus 41 last year. Gas turbine shipments were down 8, 22 versus 30 a year ago. This was offset partially by higher HRSGs and balance of plant which grew 63%. H unit shipments were 2 versus 7 last year. We expect to shift 23 H units this year with all remaining fourth quarter eight shipments in backlog. Service revenues of $4.3 billion were down 4% with the energy connections up 6% and power down 5%. Power services were down on lower AGPs down 54% at 13 versus 28 units last year and outages were down 18%. Our CSA cum adjustments in the quarter were $323 million, down from last year's $366 million. The new guidance we have for the total year includes an outlook for Power in the fourth quarter that should de-risk our volume assumptions. We are now forecasting AGPs at 80 to 90 for the total year down from the previous 155 to 165 forecast. We've taken down our total year aero forecast from 96 units to 50 to 55 units in shipments. We also expect outage and other transactional service to be lower than planned in the fourth quarter. And as I mentioned before, service in total will likely to be down about 20% for the year. Gas turbine orders and shipments remain on track. So all in a very disappointing quarter and outlook for 2017. But we've new leaders in place in the business with the focus on cost out, cash and pragmatic views of the market. We've a top 2018 and front risk but we are optimistic about the business beyond that. We will discuss more with you on November 13. Next is Renewables. Renewable energy orders were $3 billion, down 1% reported and down 7% organic, driven by no repeat of large Merkur order last year in our offshore business of $634 million. Onshore wind orders were strong at $2.6 billion, up 33%. Onshore equipment orders of $1.9 billion or up 36% on strong international wins in Australia, Thailand and Serbia. Partly offsetting strong international activity US orders were down 41% on a tough comparison to PTC Safe Harbor orders last year. The total unit ordered was 693 up 17%, with megawatts up 40% versus last year. Onshore service orders of $706 million were higher by 27% on continued strength in US re-power orders. Hydro orders of $198 million were down 50% and offshore were down substantially with no repeat of the Merkur as I discussed previously. LM blade orders totaled $147 million in the quarter. Revenue grew 5% reported and was down 2% organic. Onshore win was down 1% offset by service up 3x on re-power volume. Hydro revenues grew 30%; LM revenues totaled $161 million in the quarter. Operating profit of $257 million was up 27% and up 13% organically driven by US r-powering volume, better product cost partially offset by price. Margin rates improved to 150 basis points with LM and expanded 110 basis points organically. Next on Aviation. Global passenger RPKs grew 7.9% August year-to-date with strong growth both domestically and internationally. Air freight volumes have been very strong as well, going 10.5% August year-to-date. Low practice globally remains well above 80%. Orders in the quarter totaled $6.9 billion, up 12%. Equipment orders grew 8%. Commercial engine orders were flat at $1.4 billion on higher CFM and GE 90 offset by lower LEAP at GEnx orders. These orders did not include any of the Paris Air Show announcements. Avio grew equipment orders 46% in the quarter. The military equipment orders were up 10% including $92 million of FO14 orders from the navy. Service orders grew 13% with commercial services growing 11% on spares growth of 21% and $23.2 million a day. And military services up 56% driven by orders for advanced combat engine and advanced helicopter programs. Revenues in the quarter grew 8% to $6.8 billion. Equipment revenue was down 5% on lower commercial engine shipments of 641 engines versus 654 with higher LEAP deliveries largely offsetting fewer legacy engines. The business shift 111 LEAP engines including 23 Boeing 1B retrofitted engines associated with LPD disc issue from earlier in the year. Military equipment revenues were down 20%. Services revenue grew 18% on higher commercial spares up 21% to $23.2 million a day, and another stronger of military up 33% largely driven by spare demand. Operating profit in the quarter of $1.7 billion was up 12% primarily driven by volume, structural cost productivity and value gap partially offset by margin pressure from higher LEAP shipments. Margins expanded 90 basis points in the third quarter. Next is Healthcare. Healthcare orders of $5.1 billion were up 6% versus last year. Geographically organic orders were up 4% in the US, 8% in Europe and emerging markets grew 11% driven by China which was up 20%. On a product basis, healthcare system orders grew 5% driven by ultrasound high by 11% and imaging up 8% with good performance in the mammography and CT. Life sciences continued strong performance growing 14% driven by bioprocess growth of 17% and core imaging up 9%. Revenues in the quarter of $4.7 billion grew 5% with healthcare systems higher by 4% and life sciences up 10%. Operating profit was up 14% including a small gain on a disposition of non strategic operation in our lifesciences business. Excluding the gain, our profit grew 8% driven by volume and productivity partially offset by price and program investments. Margins expanded 140 basis points reported and 50 basis points organically. Next on Oil and Gas. Baker Hughes GE, as you know, we closed the deal on July 3. The new company positions BHGE well for the broad structure of services the customers have been asking for and we believe the timing of the deal was right for both Baker and GE shareholders. The team is up and running with the integration and making significant progress. The synergy pipeline remains strong and the team continues to receive positive feedback from customers and employees. BHGE release its financial results this morning at 6.45 and the Lorenzo his team will hold their earnings call immediately following the GE earnings call today. We owned 62.5% of BHGE which means we consolidated 100% of their orders, revenues and cash flow from operating activities. However, the segment operating profit and net income are net of 37.5% minority interest attributable to Baker Hughes Class A shareholder. Also the operating profit we report for oil and gas is adjusted for GE reporting conventions such as excluding restructuring and BD charges. Therefore our 62.5% of profit will therefore what the BHGE shows as operating income. We've included in the supplemental presentation a walk from BHGE reported results to what we show is segment our profit. The business now has four reporting segments. Oil field services which is predominantly legacy Baker Hughes products, turbo machinery and process solutions which is the GE turbo machinery and down stream businesses, oil and field equipment comprise of GE subsea and drilling and pressure control and digital solutions which is a combination of GE digital solutions plus Baker Hughes pipeline solutions business. To provide perspective of how on the going business performed, I'll provide concurrence to the combined business based on financial as if the merger had taken place on 1/1/2016. The supplemental financial information is included in the 8-K that BHGE issues on September 6. For reference, I would give you the total organic orders and revenue comparisons as well. These would be results of our legacy oil and gas business. Orders over $5.7 billion up 130% reported and up 27% organically. On a combined business basis, orders were up 18%. All segments were up in the quarter with oil field equipment up 45% and digital solutions up 43%. Revenues were up 81% reported and down 7% organically. On a pro forma basis, revenues were flat. Oil field services were up 9% and turbo machinery was 2% more than offset by oil field equipment down 28% and digital solutions down 2%. Segment operating profit was $231 million, down 35% reported and down about 70% in our legacy oil and gas business, primarily driven by longer cycle oil field equipment business. As I mentioned earlier, this represents GE share of Baker Hughes GE earnings adjusted for restructuring and reporting differences between GE and Baker Hughes GE. Next is current and lighting. Orders for current were $234 million in the quarter, down 29% on a non repeat of large financial services company retrofit and run off our traditional lighting products. Revenues of $483 million were down 16%, driven by market and product exits. Operating profit was $23 million versus the loss of $15 million in the third quarter of last year. We are completing the build out of the current business and the restructuring of our legacy business and products. Finally I'll cover GE Capital. The verticals were $300 million in the quarter, down 36% from prior year driven primarily by impairments associated with two investments in energy financial services and our annual impairment review of GECAS. GECAS annual impairments totaled about $50 million primarily driven by 4777 aircraft. Other continuing operations showing $275 million loss in the quarter driven by $318 million of excess interest expense, $43 million of run off operating expenses and restructuring costs, $36 million of preferred equity cost partly offset by gains from asset sales. In total, other continuing operations were $166 million better than last year driven by lower excess interest and lower headquarter restructuring cost. GE Capital ended the quarter with $155 billion of assets including $33 billion of liquidity, down $6 billion from the second quarter. As I mentioned on our last earnings call, we've recently observed elevated claims experience for a portion of the long-term care book at GE Capital's legacy insurance business which represents $12 billion or roughly 50% of our insurance reserve. As a result, we began a comprehensive review in the third quarter of premium deficiency assumptions that are used in the annual claim reserve adequacy test. This is a very complex exercise and the team is making good progress. We expect to complete this process by the end of the year. Until the review is being completed we've deferred the decision to pay approximately $3 billion of additional GE Capital of dividend. Year-to-date GE Capital has paid $4 billion of dividends to GE. Lastly, in other continuing operations we continue to expect incremental tax benefits in the fourth quarter associated with the recovering of portion of the exit plan tax cost we incurred when we announced the restructuring. Next, I'll hand it over to Jamie to cover transportation.

Good morning. Hi, this is Jamie Miller. I am glad to be here and I am looking forward to working with all of you. I thought I take you through Transportation's results this morning but before I do that just a little bit of background on me. I actually spent most of my career outside of GE. I was a partner at PricewaterhouseCoopers, I led Investor Relations in much of finance at WellPoint now Anthem, and I joined GE nine years ago as GE's Chief Accounting Office. Since then I have been our Chief Information Officer and most recently the CEO of GE Transportation. And most of my career is in finance and I know GE and its businesses very, very well. I am happy to be back at corporate. I am happy to be working with John and really helping to revaluate and set a new course of GE. Picking up on Transportation, North American car load volume was up 3.8% in the quarter primarily driven by inter motor car load of 6.6% and commodity car loads of 1.1%. Part locomotives ended the quarter at about 4,000 units and we expect the market for new locomotives will continue to remain challenging. Orders of $1.72 million were up 54% on easy comparison primarily driven by strong volume and services both mining and locomotive transactional services. Backlog at the end of the quarter sits at $14.5 billion. Services backlog was impacted in the quarter by $3.1 billion by a termination notice received from a large North American customer. This contract covers 800 locomotives most of which are currently in service. And the termination while it had no financial impact on the quarter, we do expect to finalize our new service arrangement in the near future. And in the meantime we continue to service the unit. Revenues of $1.74 million were down 14% with op profit down 11%. This was driven by lower locomotive shipments, partially offset by services volumes and cost productivity. And for the year the business will deliver about 450 locomotives. Our profit will be down double digits. Total North American shipments will be down 73% this year with international up 46%. The team has really executed well during a difficult market decline really by focusing on cost out. We've taken 20% of structural cost out over two years. Resizing and relocating the business operations while winning international orders. On September 30, we signed our agreement with Egyptian National Railways worth $575 million for 100 locos and services. That will be recognized as an order in the fourth quarter. And lastly our 1,000 locomotive contracts in India have been in the press recently. We had several meetings with the Indian government and we are confident that the agreement is moving forward as planned. The first locomotive actually arrived on the ground in India last week and we'll ship two locomotives in the fourth quarter and then about 75 to 100 units per year after that. So a little bit on my focus areas in the next few weeks. I have been in Boston for about 10 days now and first John mentioned his company review. I am deeply engaged in that process with John and the team. We've got great franchise businesses but we are really focused on how do we really simplify the company and create the right clarity and contract for value creation. We need to make the company far less complex and we've got to bring a much deeper level of operating rigor. I am also reevaluating our metrics and reporting. And I'll take you through that in more detail on November 13 but as some examples, we will be moving off of the industrial and vertical's EPS reporting. We will conform the GE definition to industry standard on free cash flow and we are really looking at how we can report in a much cleaner way, just a much simpler presentation of what you see. I'd kind of call it back to the basics approach. Consistency and transparency but with data that you can digest. And I want your feedback here but that's the target. On the right hand side of the page, we layout some thoughts on the rest of 2017. As Jeff mentioned, Power has seen more difficult market conditions that we planned. With a sharper decline in services in the third quarter and we expect those conditions and relative performance to continue as we move into the fourth quarter. The team has taken a fairly pragmatic view of the outlook. They are focused on cost out and really rightsizing the business. On Aviation, the business performance was stronger in the third quarter than we expected as commercial spares continue to grow strong double digit versus high single digits estimate. In the fourth quarter, we expect margin rates to be pressured from higher LEAP shipments and we expect 150 plus more than last year in LEAP shipments and expect to see moderating spares growth. But based on current year-to-date performance, we expect margin rates will be positive for the total year. Oil and Gas and Transportation end markets continued to be challenging and we expect Healthcare performance to be consistent with third quarter year-to-date with low to mid single digit top line growth, with stronger growth in our profit and continuing margin rate expansion. This business is executing well on simplifying the structure and reducing cost in both product and manufacturing, while investing in the next generation of digital products and solutions. At GE Capital, Jeff mentioned that we expect our insurance actuarial review to be concluded in the fourth quarter. As many of you may know this book of business includes long-term carry insurance which can be quite difficult to analyze and reset the reserve. Jeff mentioned that decision to hold off on the GE Capital additional dividends for the third and fourth quarters until that analysis is finalized. In addition, in GE Capital other continuing operations for the fourth quarter, we expect incremental tax benefits associated with recovering a portion that GE Capital exit plan tax cost we incurred and restructuring charges should be about $0.10 or maybe a bit more in the fourth quarter, up from prior guidance of $0.05. The industrial solution sales are now expected to close mid 2018. On cash flow, we now expect industrial cash flow for the year to be about $7 billion and that's what Baker Hughes GE reported on a dividend basis post transaction. This is well below the $12 billion estimate we provided at the second quarter earnings and it's principally driven by three businesses. Power is the biggest driver on lower volume, higher inventory and the timing of payments on long-term equipment contracts. Oil and Gas is about $1 billion off about half of that being driven by lower volume and collections in the first half and the rest driven by our methodology change to show them on the dividend basis for the second half of the year. In Renewables, is also about $500 million off on lower than expected volume impacting inventory and progress collection. So lastly as John and I go deep on the company and the 2018 framework, there also maybe held for sale charges in the fourth quarter related to the portfolio review. So we will discuss all of that in 2018 at John's investor outlook meeting on November 13.

Thanks Jamie. I am going to wrap with the 2017 framework. For earnings, our estimate for industrial and vertical EPS is $1.05 to $1.10. This excludes any potential insurance adjustments or charges for asset held for sale that Jamie just mentioned. The key drivers versus or $1.60 framework of the following things. One, Power down significantly on lower services earnings and lower aero units. Second is higher restructuring and other charges over $0.45 for the year including the power conversion goodwill charge? And third lower earnings from Baker Hughes and plant and lastly lower buyback than we originally planed. As Jamie mentioned, cash will be approximately $7 billion for the year. Power alone will be lower than expected by $3 billion on lower earnings and higher inventory. Oil and Gas and Renewables were also come in lower than our plan. We expect substantially higher cash generation in 2018 driven by lower structural headwinds, things like tax and restructuring charges. A rigorous cost out plan and a substantial improvement in working capital. That said, obviously $7 billion of cash is significantly lower than the guidance and this performance is simply not acceptable. There needs to be real change and you should know that this team is committed to that. I am confident that we understand the issues and know the path forward. I look forward to going through our company outlook with you on November 13. And with that Matt I'll turn it back over to you.

Thanks John. We’ve got lot to cover. With that operator let's open up the call for questions.

[Operator Instructions] Our first question comes from Steven Winoker from UBS.

Thanks. Good morning, John, Jeff, Matt. Welcome to the new role, Jamie. John and Jeff, I'm sure investors appreciate the acknowledgment that 3Q showed unacceptable results. And I know you quickly mentioned in your upfront remarks, but I really have to start with sustainability of the dividend. Right now we're talking about $8 billion dividend, which gets me to something like an 88% payout ratio this year at the high end of guidance. And then more importantly on cash flow, we're talking about something like $7 billion of CFOA, as you mentioned, before CapEx of I think about $4 billion; which leads me to only about $3 billion of free cash flow before any GE Capital dividend, which you've now postponed due to the insurance actuarial review. So how is that level of dividend sustainable without jeopardizing the future growth of the company? And can you give us some sense of what you see as a sustainable payout ratio, may be something closer to 40% to 50%?

Steve, this is John here. Just a few things I'd say on dividend. First and foremost we still have some moving pieces in motion and we'll bring this altogether for you in November as we said earlier. I just go back from there to few thoughts. One is philosophy, managing for total shareholder return so there does need to be a balance of investing in growth organic and inorganic growth and the dividend payout. So it's a philosophy expect a balance. We will present this framework in November as we complete the 2017 and 2018 processes, serious processes we need to through as a team. The last thing I'd say is just as a frame of reference. The 2017 number of $7 billion cash position, cash flow is a not zip code we are going to remain in. We expect improvement in that cash flow substantially in 2018. There are some structural issues like tax and restructuring charges that will not recur, $2 billion of cost out would be cash, and it would be improvement in working capital. But bottom line I'd say total shareholder return will come back to you in November with the final assessment. I understand your question and we don't plan to stay at $7 billion cash flow generation number.

Steve, I'd just add to that. When you really think about 2017 to 2018 comparison, John mentioned first sort of the structural headwinds in 2017 I don't repeat. There is one time tax cost in Power of about $1 billion. We've got higher cash cost for restructuring at 2017. And we also had the PTC dynamics and the progress burn on renewable that we won't see again in 2018 so the structural piece of this is about $2 billion in 2017. When you think about 2018, we are going to get the benefit of more cost out, John talked about that right upfront and those actions have been taken throughout this year and will accelerate as we go into next year. We are also going to see some real working capital improvement. You know cash flow was hit this year by working capital burn. As we go into the next year that's really going to flip as we burned down that excess inventory build in both Power and Renewables. On a free cash flow front, we will have lower CapEx and software spend next year. And so there is headwinds here and I think you are going to -- you've seen that in the discussion earlier and I am sure we'll talk a little bit more about power, power, transportation and few others but the tailwind both the structural and the operational should really more than offset that as we get into 2018.

That's great, Jamie. I'll just add in the end here is we came out of the quarter with $8 billion of cash, $12.8 billion with Baker Hughes. We expect to go out of the year with about $8 billion of GE cash plus Baker Hughes. So and that's after we pay the dividend here in October and after we deal with the GE company maturity here in the fourth quarter of about $4 billion.

Right. So that covers it for this year, right, Jeff, then?

Yes.

Okay. So as a follow-up, John, I'd like to ask about this notion -- and I know you are going to go into more detail in November -- but just to start to think at a higher level of when GE earnings and cash flow hits when investors can think about as a trough, and by how much. When you start growing again, particularly in light of power's performance? And what I expect will be much larger restructuring actions taken and you've talked about beyond the $1.3 billion in fourth quarter. So, at this point of -- you're talking about 2018 having a lot of benefits that 2017 doesn't have. But how should investors get some certainty about when they can think that GE is in trough?

So, listen, I'd say -- I'd characterize this and think of 2018 as a reset year. As you know from the outset of the call, we have a lot of businesses performing well. We have significant issues in power, those will persist into 2018 and there are a lot of structural actions we need to take as a company. Cost out actions, capital allocation actions. Those will play out I'd say during 2018 and I'd look that as a reset year and a foundation for growth in cash and earnings and margins going forward into 2019 and beyond.

Our next question comes from Andrew Kaplowitz from Citi.

Hey, good morning, guys. I just wanted to follow up on Steve's question on power. When we step back and look at the entire business, obviously you've taken a reset here in guidance. And when you look at the business in terms of AGPs, aero units, just the total services, we know you don't want to give us specifics on 2018 yet, and you've already talked about expecting a tough 2018. But do many -- or really any of these shipments move into 2018? And how much cost out can -- how much can cost out help you stabilizes the business in 2018 and beyond?

Yes. I'll start. So as you would imagine we essentially have a team at Power and they are going very deep not just on structurally what's going on services and how we think about on a go forward basis. But also the structure, the cost structure of power itself. This is something we John and I have been on for last four five months. We don't have a cost structure that reflects the market that they are competing in. And we need to get out and they are deeply, deeply engaged and laying that out for 2018. That is critically important to getting the business stabilized and moving forward. I think one of the things they are trying to do is over the last three or four years I would say the amount of convertible short term volume that the business with whether it's AGPs or aero units et cetera has grown over time. And one of the things we are trying to do is get the business stabilized on what is their pragmatic look at volume not just in the fourth quarter but for 2018 that sets the business up for the long term. And I think that that's what the team is pulling together. They and John will share with you in November when they stand up. But I think we are focused on all the things you would expect us to be focused on power and team is really digging in.

Andy, just one other thing I'd add to that. We spend a lot of time in power. I have been there several times already. We had a lot of time with the teams. When I look at that business in that situation first overall I really put it into three basic thoughts. One is the macro situation. Two is our franchise and three is how we execute and how we run the business. The macro situation is challenged, it's a very dynamic industry, there is lot of disruption especially in North America, over capacity, utilization, and you guys all know the issues. So there is a lot going on in the industry but I think even on a number of scenarios that look at, there is going to be some growth 2%,3%, 1% there is a range of forecast of the electricity generation coming from gas power over the next 10 years. So you've got emerging market et cetera. So it's a challenged macro environment for sure. But there is a base there. Second is our position. This gets to the notion. We have strong franchises. We've got leading technology. We've got 50% share in H class, large and installed base 30% of the world's electricity of the machine. So macro is tough, franchise is really quite solid, the execution has been the issue here. As Jeff said, we just fundamentally did not see the change in the market and we kept an open throughout opposition if you will and did not take enough cost out quickly and we've been left with inventory that goes overly optimistic. So as I step back and look at from where we are today, Russell, the team, they really digging into the business. I see a lot of opportunity move forward in terms of cost out, margin rate et cetera. So it's an inherently good franchise in a tough market and we can run this better.

Our next question comes from Julian Mitchell from Credit Suisse.

Hi, thank you. Just a question I guess I am looking at power and the relationship of that to your commentary of significant CFOA improvement in 2018. Because I guess a lot of the CFOA shortfall this year is because of power, and you said there's, I think, $3 billion less cash than expected in that business. It's obviously a backlog business. I would guess the pro forma power backlog today, including energy connections, is $100 billion or so. And given that the power market will stay tough in 2018, how do you reconcile the significant overall firm-wide CFOA improvement with a very tough power market again in 2018 and maybe further out?

So I am going to start and then I am going to let Jamie trying to give her views on 2018. So I think it's a good question. We do have a big backlog that's an asset we believe not a liability. But if I were going to focus on three things from 2017 to 2018 in power, one is inventory. So we total for the company this year and $7 billion receive CFOA construct that Jamie talked about. A big piece, almost $2 billion of that is an under performance in inventory versus the working capital assumption we had for the year at $12 billion which is about $3 billion flow. And virtually all of that inventory is power. So where we are over optimistic planning both services and units inventory. That inventory is going to liquidate over time and we will get a big benefit we believe in 2018. Second is in 2017 we had about $1 billion of tax associated with restructuring between Hungary and Switzerland as part of the Alstom something. That cash outflow will not repeat next year. And then I think importantly the third leg if you will is a meaningful cost out which also equals cash. A meaningful cost out of the structurally and what's going on in power. We stay well underway on, we are not waiting to exercise these actions; we are taking these actions as we speak. And that also will be a contributor or better profile in 2018. Jamie you want to --

Yes. Jeff, I'd say you touched on the big item which is the tax piece, the higher cash cost this year for restructuring, more cost out really helping us as we get into 2018. And as you can imagine, John talked about the $2 billion plus, a big percentage of that is power. And then the working capital improvement. I guess I'd just say that so to we are going to take you through more detail views and all of 2018 on November 13. We've taken pretty pragmatic view towards this. And I think what you see in terms of us looking at the total year 2017 as well as how we are thinking about 2018 will be tampered as it relate to power. We do expect the condition that we are seeing to continue as we move into that but some of the structural stuff that underlies the cash flow should be a tailwind to offset that.

Next we have Jeff Sprague with Vertical Research Partners.

Thanks and good morning, everyone. There have been a couple elephants in the room leading up to today, and another one has been the contract asset account, which is also built upon numerous assumptions. As we sit here and listen to aggressive forecasts, unrealistic assumptions, et cetera, particularly in power, how do we get comfortable with what's gone on in that account? And have you guys actually been able to scrub through that yet?

Yes. I'll start and then Jamie will say -- so we have Jeff, we've been digging through that I'd say over the last six months. I think we are very comfortable with where we are. And I think you got to think about in power case in a number of buckets. The first is long term service agreement. And I want to be clear here in the third quarter with this performance, our productivity at CSA cum catch was actually down $45 million year-over-year. So it's a small contributor where we are year-over-year in the quarter but it's not the reason that we will way off where we thought we would be in the third quarter. The second is we've really grown long-term equipment agreement. Now this is 811 accounting, these are long-term contracts and generally anywhere from 12 to 24 months, where we build projects out and as we go along the way we incur cost, we rev rec on milestones and then there is also cash billing milestones. And they don't always line up on top one another. That has grown over the last two years, really is a function of two things. One is we added Alstom to the portfolio which had a more higher content of long term project. And as we build out the H units we've done a lot more full scope, much larger scope projects even if it were just content to the turbine island all the way through HRSG and the steam tail that we got with all Alstom, so the amount of this activity in the portfolio has grown. And as a result of that our 811 balance is particularly in power have grown. And so that cost if you will generally liquidates over 12 to 18 months. So we are higher this year by about $800 million than we originally forecast, almost all of that in power. But that will liquidate and turn to cash as we hit billing milestone over the next 12 to 18 months. Jamie you want to --

Yes. On contract assets, look I am deeply familiar with that model and I've only be here in Boston for a couple of weeks but I have gone through and sat through a number of the big reviews with the businesses. And I know the GE balance sheet very well. Look, there is nothing I've seen that gives me any indication on the accounting issue here. I think Jeff explained it pretty well in term of long-term contract equipment build we are seeing.

Last thing Jeff I'd say just if you try to synthesize the power situation I would say overly optimistic on the market. Aggressive inventory build in TM and AGPs and not taking the cost out. Those three things have sort of combined to lead to an earning shortfall and the cash pressure.

Next we have Scott Davis from Melius Research.

Hi, good morning, guys. John, it seems like you're making lots of changes at the management levels and direct reports and such. But what can we expect at the Board level? You could make an argument this current Board was kind of the Board that got GE to this bad spot. So how do you think about that -- changes in that regard?

So just a couple of things on that, Scott. One is as I said at the outset; we are looking at every single aspect of the company. Inside the company and outside and that includes the Board. So everything has been on the table. I'd add that the Board has given me a mandate to look at everything with on constraints. They have been fully supporting of making change. We announced recently that Ed Garden is joining the Board. I really look forward to that. I think that's going to enhance the dialogue at the Board level. I think a really robust dialogue to be between and the Board is the healthy dynamic that something I look forward to. And then the last thing obviously is referenced frequently Board is big at 18 people; there is no doubt about that. And that's one of the topics being discussed. So I put it in the bucket of all things being examined right now.

Next we have Andrew Obin from Bank of America.

Hi, guys, good morning. I just wanted a question on cash flow. We've been getting questions on intra-company receivables that were created when GE assumed debt from GE Capital. So first, is the timing of these receivables matched to the maturities of the debt assumed by the industrial company? Basically the question is could there be a timing shortfall? And finally, is there a risk that the assets rolling off GE Capital can't cover the size of their receivable, and you might need to put in more capital into GE Capital down the line, sort of crippling -- impacting industrial cash flow?

Andrew, there is no timing mismatch between GE and GE Capital. They are as opposed to going to external markets around some of the debt that we added this year. We gave our plan to increase net debt -- debt in the company $12 billion this year. Some of that we've gone externally, some of that we've taken from GE Capital by assuming existing external debt to GE Capital had on a fair value basis from coupon perspective. But there is no mismatch of receivables or timing between GE and GE Capital whatsoever. And we don't have any reason to believe that the $155 billion of assets that GE Capital has is not going to serve us, their outstanding debt. Based on maturities here, the cash flow and the earnings in the business, that the GE Capital with the excess liquidity and GE Capital was going to essentially run off year end 2019 and lot of that outstanding debt is essentially the fees in our liquidity pool. So I don't see issues with the either of those things.

Next we have Robert McCarthy from Stifel.

Good morning, everyone. I guess the question -- turning to the asset sales, as we have picked over the dividend quite a bit, is how do you think about kind of the what's on the chopping block, how you are thinking about it, how you are thinking about the cash generation of some of these businesses? Because despite the fact that you said at the outset that there isn't an existential question here with respect to GE, the fact of the matter is any asset sales that you're going to garner or that are going to be accretive or give a good valuation are probably some of the better cash- and growth-led assets of the company. So how do you get away from the fact that you might be selling businesses that ultimately leave you with a company with just structurally lower industrial free cash flow by definition?

So let me just for a background I grew up 20 years in the financial services business largely investing money. So this is sort of my background to look at where do we invest, what are the structural opportunities, what are the risk, what are risk adjusted returns we can expect. So as an orientation that's how I come and looking at our portfolio and how we allocate capital. We do a lot of the capital allocation inside the company if you will. NPI spending, P&E all those things we are looking at that very intensely. A lot of the capital the company is allocated that level. So we've got a very robust plan and we are implementing and looking at that inside businesses, between businesses, should we put more money in business unit one or two et cetera. So there is a deep analysis going in implementing inside the company. When I look outside the company and what our options are outside the company. They are just a number of businesses here we are really evaluating in that context. Can they compete? What's our competitive position? What's going on in the end markets? What are the returns on capital? How much capital do this each businesses consume? How much management bandwidth do these businesses consume? And as you start to array our entire portfolio which is large and complex and we want to simplify that. There are number of assets, some performing well, and some not performing well that we just don't want to stay with over time. They are good companies that might have a better home somewhere else. So it's a dynamic process, it's a return base process. And at the end of the day the exercise here is to really concentrate the economic firepower of the company on the areas that promises most substantial reward. There are a lot of areas we want to grow in additive and digital and things. So we want to make sure we are channeling the money to the highest return option. And that will be a dynamic and ongoing process always for me.

Next we have Deane Dray from - RBC Capital Markets.

Thanks. Good morning, everyone. I'd just like to follow up on Rob's question there; and John, your answer. You sized today a new disclosure, $20 billion in asset exits over 1 to 2 years. And maybe you can address the timeframe in terms of might you be moving quicker in these exits? And also you talked about other options being considered beyond that $20 billion. Can you frame for us, both in size and thematically, how you might be looking at these other options beyond the $20 billion?

I'd say on size and two things on timing just stick to the 1 to 2 years outlook. We've got a process going on right now, depending on the type of transaction and structure, the speed of that will move, if there are carve outs and things we have work we had to. So I wouldn’t change the outlook for that. With respect to broader than that, I'd go back to what I have said earlier which is dynamic process that I will do everyday while I am in this job, which is looking at all the portfolio and where we can create value and where we are competitive.. So I don't have a specific thing to share with you today. We will review, I have seen more depth in November but it's going to be an ongoing philosophy and mentality and rigor that make sure we are always investing in the right places.

Thank you. Next we have Nigel Coe from Morgan Stanley.

Thanks for question. Maybe John, just clarify the $20 billion. I'm a little bit confused. Is that $20 billion of sales, or is that estimated value of the asset sales you've identified?

It's rough estimate of asset value.

Okay, great. Fantastic. And then maybe Jeff or Jamie, you put out a $0.05 estimate for the impact of ASC 606. So can you maybe just mark us to market on where that sits right now? Thanks.

Yes. So I'll give you shot. We are not going to have a final number until we complete the year. So that just to lay that down. Jamie is going to share with you in November an estimate what we think the 605 to 606 impacts going to be 2017. I would say generally the last thing we told investors was we expect the 2018 to be about $0.05 impact on transition. We don't have final numbers here but I think that's going to be a larger impact. I don't know exactly how much but it could be between $0.05 and $0.08 or $0.05 and $0.10. And will that get closer to final when we move towards year end. The other thing I want to caution everybody on, once we convert the 606 on January 1st, those are the only books we are going to have. We are not going to keep two sets of books between 605 and 606. So the ability for Jamie and the team in 2018 to go back and tell you exactly what that transition impact is going to be for the year or any given quarter is only going to be a very rough estimate. We are not going to keep two sets of book.

So, look we will take you through this on November 13. I mean obviously there is a big fourth quarter focus area. The one thing I'd add to what Jeff said is the cum catch is still in the range of what we've been estimating before. And as we go through it we lay out both how we think you should think about margins on long-term equipment, margin on services and just how best to sort of gauge the 2018 to 2017 run rate views.

Great, thanks. I Jump before you wrap we just want to thank everyone for joining. Know we ran a little bit long but we wanted to try to get in as many question as we could. John to you.

Great. Thanks Matt. I'd finish where I started just saying we are deeply disappointed in today's results. They are unacceptable. That is crystal clear to the team here. We fundamentally have a collection of good franchises. We have to run them better. We know what the issues are. We know we need to do the fix them and I'd characterize this as largely a self help story here. And I'd just from here forward we reset the company for a better future. And on the behalf of myself and I know definitely all of the GE employees, we look forward to delivering for investors. This is a company we have deep pride in and you can count on us to deliver in the future. Thanks.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. And you may now disconnect.