GE Aerospace (GE) Q4 2011 Earnings Report, Transcript and Summary

Trevor A. Schauenberg - Vice President of Corporate Investor Communications Jeffrey R. Immelt - Executive Chairman, Chief Executive Officer and Member of Public Responsibilities Committee Keith S. Sherin - Vice Chairman and Chief Financial Officer

Nigel Coe - Morgan Stanley, Research Division Scott R. Davis - Barclays Capital, Research Division C. Stephen Tusa - JP Morgan Chase & Co, Research Division John G. Inch - BofA Merrill Lynch, Research Division Brian K. Langenberg - Langenberg & Company, LLC Jason Feldman - UBS Investment Bank, Research Division Julian Mitchell - Crédit Suisse AG, Research Division Christopher Glynn - Oppenheimer & Co. Inc., Research Division Shannon O'Callaghan - Nomura Securities Co. Ltd., Research Division Jeffrey T. Sprague - Vertical Research Partners Inc. Terry Darling - Goldman Sachs Group Inc., Research Division Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division Deane M. Dray - Citigroup Inc, Research Division

Good day, ladies and gentlemen, and welcome to the General Electric Fourth Quarter 2011 Earnings Conference Call. [Operator Instructions] My name is Chanel, and I will be your conference coordinator today. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Trevor Schauenberg, Vice President of Investor Communications. Please proceed.

Thank you, Chanel. Good morning and welcome, everyone. We're pleased to host today's fourth quarter 2011 earnings webcast. Regarding materials for this webcast, we issued a press release earlier this morning, and the presentation slides are available. Slides are also available for download and printing on our website at www.ge.com/investor. As always, elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today. Those elements can change as the world changes. Please interpret them in that light. For today's webcast, we have our Chairman and CEO, Jeff Immelt; and our Vice Chairman and CFO, Keith Sherin. Now I'd like to turn it over to our Chairman and CEO, Jeff Immelt.

Great, Trevor. Good morning. Thanks. Look, GE finished the year with real strength. We had the best order results in history. Many of our key end-use markets are showing momentum like Commercial Real Estate and Aviation. The emerging markets continue to be very strong. There are a few challenged markets like Europe and Appliances but on balance, we have a positive outlook. Company operations were strong. EPS grew by 11%. Organic growth was 5%. CFOA and liquidity were very strong. GE Capital exceeded all of their performance goals and ended with a very strong Tier 1 common ratio. We're executing a balanced capital allocation plan. We increased the dividend again in fourth quarter. Overall, the dividend grew by 21% in 2011. Our buyback for the year was 5.4 billion, including both common shares and the Berkshire preferred. Finally, we ended 2011 with confidence that we could deliver on our 2012 double-digit of earnings framework. So overall, a good quarter. Orders grew by 15%, which was up 9% organically. We had fairly broad-based strength. Of particular note, Energy orders were up 23%. Thermal orders were up 88% and we had orders for 50 heavy-duty gas turbines in the quarter. Orders in the emerging markets grew by 26%. We end the year with $200 billion of backlog and had an equipment book-to-bill ratio of 1.23 for the quarter. So these numbers certainly support a 5% to 10% organic growth goal for 2012. Our investments in growth are paying off. First, on the global front, we had a 25% expansion in our Industrial growth market revenue. Our expansion was broad-based with most businesses and most regions experiencing strong growth. Services grew by 14% and expanded margins. We had strong growth across all businesses and we ended the year with $147 billion of service backlog. We increased R&D by 16% in 2011, resulting in multiple new product launches. In Healthcare, we launched leadership products in MR, ultrasound and interventional. Energy is growing in both the heavy-duty gas turbine market with the Flex 50 and 60, but also in the distributed energy products with solar and waste heat recovery. Aviation has positioned the LEAP-X to win and had the H80 turboprop launched to penetrate new segments. Rail is picking up global orders. We're launching a full range of Appliance products in the next 6 quarters. So overall, our organic growth should continue. And we made progress on margins in the quarter. We're up 250 basis points versus third quarter '11. Most of our negative rate versus fourth quarter 2010 is explained by acquisitions and R&D investment. Looking forward, we still feel good about a 50 basis point improvement in 2012. We have good productivity programs in place. We're making structural improvements and our global and R&D investments are on a run rate. We see energy pricing stabilizing as we move through 2012 and into 2013, and so margins are an important focus for our leadership team and we think we'll make progress in 2012. In cash, we had very good, very strong cash performance. CFOA was $5.5 billion in the fourth quarter. That's a record quarter. This led to total CFOA of $12.1 billion for the year. Our working capital performance was very strong in the fourth quarter. Consolidated cash was $85 billion at year end. Our capital allocation plan was in line with expectations. We grew the dividend twice in 2011. We completed nearly $12 billion of acquisitions and bought back $5.4 billion of stock, including the Berkshire preferred. So overall, cash and capital allocation were either equal to or better than planned and we feel good about that performance. We continue to strengthen GE Capital liquidity. We're prepared for 2012 maturities by having a substantial amount of cash on hand. We've already issued $5 billion of long-term debt. So we're off to a good start. Our Tier 1 common ratio was 11.4% for GECC and 9.9% for GECS. On a Basel III basis, we compare favorably to the banks. We ended 2011 with $445 billion of ending net investment, ahead of our plan. As a result, we're resetting our ending net investment goal for 2012 to between $425 billion and $440 billion. We will continue to grow in high return segments. Our expectations for GE Capital earnings are unchanged for 2012. At the same time, we expect to have lower debt issuances for the year. So looking forward, we've achieved a focused, high margin, safe GE Capital, a Financial Service business that can grow and win in this marketplace. And with that, I'll turn it over to Keith to go through operations.

Thanks, Jeff, and good morning, everyone. I'm going to start with the fourth quarter summary. We had continuing operations revenues in the quarter of $38 billion. They were down 8%. Industrial sales of $26.7 billion were reported down 7%. However, if you look at the notes at the bottom of the page, excluding the impact of not having the NBC revenues last year, GE's Industrial sales were up 11%. Financial Services revenues of 11.6% were down 9%. That was driven by our lower assets year-over-year mostly. Operating earnings of $4.1 billion were up 6% and operating earnings per share of $0.39 were up 11%, reflecting the benefit of retiring the preferred shares. Continuing earnings per share includes the impact of the non-operating pension and net earnings per share includes the impact of discontinued operations, and that reflects a $0.02 charge this year, which I'm going to cover on the next page and also on a comparison basis, the non-repeat of the net $0.06 of gains we had last year in discontinued operations. Our cash for the year of $12.1 billion was very strong. We had a great fourth quarter and the total year and Jeff covered that. For taxes, in the fourth quarter, our tax rates were 15% for GE, excluding GE Capital. The GE Capital rate was 4% and those rates include about $0.03 of benefit from our IRS audit resolution for the years 2006 and 2007, and I'll go into a little more detail on that on the next page. So those amounts put us right in line with our third quarter outlook for tax rates for GE and GE Capital. The consolidated GE rate ended the year at 29%. The GE rate, excluding GE Capital, was 38% and that includes the impact of the NBCU gain from the first quarter. If you exclude that, the GE rate was 19% for the year. That's up 2 points over last year. And the GE Capital rate for the year came in at 12% and that rate's up significantly from 2010 as a result of our significantly higher pretax income. As you look forward for 2012, I would estimate our GE rate to be somewhere in the low 20% range and the GE Capital rate to be somewhere in the mid-teens range for 2012. On the right side, you can see the segment results. Industrial revenues were up 10%. Industrial segment profit was up 2%. That was driven by Transportation and Aviation. You can see Energy was flat and that's a big improvement versus the 3Q year-to-date results. Healthcare was down slightly and Home & Business Solutions continue to be negatively impacted by the housing market. Down at the bottom, GE Capital had another strong quarter with earnings up 58% and I'm going to go into each of the segments in more detail in a few pages. Before I get to the businesses, I will start with the other items page. As we mentioned during third quarter, we were in negotiation for final resolution of the 2006, 2007 tax years with the IRS. We did reach a resolution on several tax matters for those 2 years that resulted in $0.03 of benefit in the fourth quarter. And in terms of geography, $0.01 of that was in Industrial and $0.02 of that were recorded in GE Capital. So overall, a $0.03 benefit at the end of the year from that resolution. We also had some one-time costs in Q4. We had a little more than $0.02 related to restructuring. We reduced the cost structure in Energy, Healthcare and GE Capital. We also had almost $0.01 of one-time costs related to this year's acquisitions as we've had throughout the year. So if you look at where these were recorded, the charges were recorded at corporate. On an after-tax basis, we have $78 million in Energy, $58 million in Healthcare, $28 million in GE Capital and then Aviation, H&BS, Transportation and corporate all had about $15 million of restructuring as we work on lowering our cost base as we go into 2012. On the bottom of the page, we did an update on Grey Zone reserves in the fourth quarter. While the claims have declined significantly from the peak that we saw in the first quarter of 2011, we did see an uptick in September. Then we saw declines in October through December. Based on the 2011 activity, we've updated our long-term claims reduction assumption. We had set this at 4% in the third quarter of 2010 and we reduced it this quarter by about 1 point. So if you include the current claim severity as well as the claims assumption adjustment, it resulted in a $243 million addition to the reserves in the fourth quarter. We end the year with $692 million of reserves and we expect the claims to continue to decline. The December claims were down and we will have to obviously monitor and communicate where we are in Grey Zone going forward, but the trends feel good based on where we are at the end of the fourth quarter. One other point that is not on the page as we discussed in the first quarter earnings, we did have 6 more days in Q1 2011 versus Q1 2010 and that's just based on our fiscal calendar. That helped us by about $0.01 EPS in the first quarter. In the fourth quarter, we had the opposite effect. We had 6 fewer days in the fourth quarter of '11 versus '10 and that impact was about $1 billion of lower revenue and about $0.01 less EPS in the fourth quarter and so we also absorbed that impact. Next, I want to cover 2 reporting updates for you. On the left side, we're in the process of merging GE Capital Services into GE Capital Corporation, so that we end up with one SEC registrant for Financial Services. Basically, the current reporting for GE Capital Services will become the going-forward reporting for all of GE Capital Corporation. Those results at GE Capital Services will be the segment GE Capital that we use with investors that will be what Mike Neal and the team run. There won't be 2 organizations. We think this is a big simplification. It will be effective for the first quarter earnings and we're going to file an 8-K today outlining this merger. So there's no change in the fourth quarter or how we're reporting GE Capital until the first quarter and going forward, we'll have one consistent Financial Services entity. So I look forward to getting to just reporting GE Capital and having it be the total enterprise. On the right side, we completed an internal reorganization in October. We moved the responsibility for the measurement and controls business run by Brian Palmer over to Dan Heintzelman in the Oil & Gas business. You can see the financial size here, $4 billion of revenue, $600 million of op profit on a total year basis and the details of this move are in the supplemental materials that we released this morning. We moved this business because it reflects the customer alignment for the M&CS business. It's much more aligned with the Oil & Gas base. It's going to give us more scale. In the solutions business for Oil & Gas, there is no change to the overall Energy Infrastructure segment. So this is just between Energy and Oil & Gas within the segment. And today, on the results that we'll show you, I'll give you both the before and after, so you can clearly see this impact. So 2 organization changes and I'll move on to the business results. First is Energy Infrastructure. The fourth quarter was a mixed performance. We had a terrific orders quarter, as Jeff talked about and I'll give you more details. Revenue was also very strong, but it was less than our September forecasts. We had some wind units and we had some equipment installations pushed into 2012. We also had some impact that was worse than we expected in September from the stronger dollar. Segment profit, while it was significantly better than the first 3 quarters, it was slightly less than the growth we expected and I'll cover that by business. I'm going to cover the details for Energy and Oil & Gas on the new basis as I've just covered. So you can see that down on the bottom left. However, the pre-reorganization basis is also shown on the bottom left and as I said, the supplemental data has all the details. So what I'm going to go through now is on the basis with M&CS moved into Oil & Gas. I'll start with Energy. We had another quarter of great orders growth. Orders of $11 billion were up 19%. Equipment orders at $6 billion were up 33%. They're even up 24%, excluding the impact of the acquisitions. Renewable orders at $2 billion were up 53%. We had orders for 1,023 wind turbines versus 477 a year ago. Thermal orders of $1.9 billion were up 88%. We received orders for 50 gas turbines versus 29 last year. That's a great quarter for gas turbines. Equipment orders price was down 4.4%. Renewables pricing was down 4.9%. Thermal pricing was down 12.5%. If you look at the combined thermal and Power Gen Services orders price impact, it was down 5.5% and service pricing was flat. Service orders in the quarter $5 billion were up 6%. When you look at the top line, revenue of $9.2 billion was up 11%. That's driven by the strong volume we had and the acquisition benefit. Organic revenue in Energy was up 6%. Equipment revenue of $5 billion was up 15%. That was driven by renewables, so $1.6 billion was up 15%. We shipped 688 wind turbines versus 592 last year. That was a little short of our goal if you look at what we put out for the third quarter. As we expected for the total year, we had some slip. End market revenue was up 57%. Aero revenue was up 14% and that growth was partially offset by thermal revenues of $1.3 billion. It was down 3%. We had higher volume of gas turbines, 33 this year versus 18 last year, but that was more than offset by having lower balance of plant revenue, items that are produced by other parties that we don't make, but we include the project and also the lower pricing. Service revenue, about $4.1 billion was up 7%. And for the quarter, segment profit of $1.7 billion was down 3% as the benefits of the higher volume and material deflation were more than offset by lower pricing and negative unit mix. Now while being down 3% is a great improvement over the third quarter year-to-date results of down 20%, the main drag continued to be our wind business, which accounted for $41 million of the $44 million year-over-year op profit decrease. And I'll cover some more of the dynamics on the wind business for 2012 on the next page. For Oil & Gas, orders of $4.7 billion were up 34%. Equipment orders of $2.4 billion were up 40%, driven by the acquisitions, plus strong refinery and petrochemical orders. Service orders of $2.3 billion were up 29% on strong drilling and production activity. Oil & Gas orders price index was a positive 2/10 in the quarter. Revenue of $4.1 billion was up 38%, again driven by the impact of the acquisitions. Excluding acquisitions, the revenue was up 6%. Segment profit of $630 million was up 12%. That's driven by the acquisitions plus strong volume, partially offset by negative productivity across the business. So overall, when you look at Energy Infrastructure, a significantly improved earnings profile as we exit 2011. Now I thought it’d be helpful to give you a little more detail on the Energy plan for 2012. On this chart, we ended the year with $6.7 billion of op profit. Our plan is to grow double digit 2012 and you can see the drivers on the right side. First, we have an incredibly strong equipment backlog. Energy equipment orders of $25.5 billion were up 39% last year. We're planning on double-digit growth in the equipment deliveries and you can see the huge growth in wind and aero volume down on the bottom left that's in the business plan for 2012. For services, our service orders were $22.8 billion, up 9% for 2011. Our service backlog stands at $50 billion. So we should expect a good services year in Energy. We invested a lot in new products and in growth. We’ve peaked in terms of our program and growth investments as a percent of revenue. So that's not going to be a drag on margins for Energy and we'll get a full year of the acquisition earnings. So those 4 factors more than offset the price pressure that we already have in the backlog and that we've talked about quite a bit. So the Energy teams work through the toughest part of the earnings cycle, mainly driven by the 2011 wind margin declines and we're looking forward to delivering double-digit earnings growth in 2012. Next is Aviation. The Aviation team had another solid quarter in the fourth quarter. Orders of $6.9 billion were up 18%. Commercial engine orders of $3.3 billion were up 67%, driven by the GE90. Military engine orders of $402 million were up 53%, driven by foreign military orders. Equipment orders price was up 1.9% and we ended the quarter with a backlog of $22.5 million, up 12% versus last year. Service orders of $2.7 billion were down 9%. Military services were down 41%, driven by lower F110 spares. And Commercial Services were up 1%, driven by higher overall activity -- overhaul activity, partially offset by a lower spares rate. The fourth quarter spares order rate was $22.3 million a day, down 11% and that reflects the aggressive purchasing that we saw in the third quarter in advance of the November price increase. If you look at the total year average daily order rate for our spares, it was $24.7 million, up 13% over 2010 and the team feels very confident about the current spares rate and how they're doing in the marketplace commercially. Revenue of $4.9 billion, that was up 2%, driven by equipment, up 3% and services, up 2%. We shipped 518 commercial engines in the quarter. That was down 7 engines from last year, but revenues were up 10% on more GE90 units, and we shipped 34 GEnx units in the quarter. Segment profit of $850 million was up 4%. That's driven by the strong volume and the positive value gap in the business. On the right side, Transportation. The Transportation team continued delivering strong results in the fourth quarter. Orders of $1.2 billion were down 11%. That's driven by the tough comparisons. Equipment orders of $500 million were down 43% because of no repeat of last year's $550 million multiyear orders. So the orders still in the backlog, but it's a tough comparison. Service orders of $739 million were up 57%. That's driven by the growth in our long-term service agreements and orders pricing for Transportation was up 1.2%. Revenue in the quarter, $1.5 billion was up 43%, driven by all the strong volume. We shipped 210 locomotives domestically versus 86 in the fourth quarter last year. We shipped 48 international units versus 30 last year and mining revenues were also up almost 40% on higher volume. Service revenues were up over 30% on strong long-term agreement. Performance and segment profit of $226 million was up more than 200%, driven by all that strong volume and the services delivery. Next is Healthcare. We did see a slowdown in the developed markets in Q4 for Healthcare. Orders of $5.2 billion were flat. Equipment orders of $3.2 billion were up 1%. Diagnostic Imaging overall globally was down 2%. Clinical Systems was up 5%. Life Sciences was up 3%. If you go by geography, U.S. Equipment was down 7% and non-U.S. Equipment was up 6% and here are some of the pieces. Europe was down 13%. That was the toughest market. China was up 29%. India was up 20%. Latin America was up 6%. Service orders of $2.1 billion were down 1% and the total orders price for the business was down 1.9%. Revenue of $5.2 billion was up 1%. That was really driven by the emerging markets, which were up 16%, partially offset by the declines in Europe and the U.S. Segment profit of $953 million was down 5% as the benefits of the higher volume and productivity were more than offset by negative pricing and the continued investments we're making in the new business like Intel Home Health JV and also new products. On the right side of the page, H&BS had another tough quarter. Revenues of $2.2 billion were down 4%. Segment profit of $82 million was down 41%. These results were driven by appliances. The domestic market was down 12% units in the quarter. We gained 7/10 point of share in the quarter, but the inflation we saw was only partially offset by pricing, resulting in the overall segment profit decline. Lighting revenues were down 1%, driven by Europe and Intelligent Platforms revenues were up 4%, driven by strong software growth. And let me shift to GE Capital. Mike Neal and the Capital team had a really good quarter. Revenues of $10.7 billion were down 9%, in line with our NE shrinkage, plus the impact of the fewer days. Pretax and after-tax earnings continue to rebound. On the right side, asset quality metrics showed continued improvements or stability. We had $49 billion of volume in the quarter, which was up 13% from Q3. Our margins came in at 5.4% for the year. We continue to beat our ending investment targets and there's a lot more information about GE Capital in the supplemental charts on reserve coverage in non-earnings that we posted this morning. So just a few highlights by business. I'll start with Consumer. The Consumer business had another positive earnings quarter. We ended the year with assets of $139 billion. That was down 6%. Net income of $575 million was up 5% and that was driven by the improved credit costs. U.S. Retail Finance had a great quarter. They earned $463 million, which was up 29%, driven by some acquisitions. We added some portfolios and also lowered credit costs. The U.S. Retail Finance volume was strong. It was up 3% over last year and it was up 14% versus the third quarter. For Europe, we had net income of $111 million. That was down 35%, but it was driven by not having the Garanti earnings that we used to have since we sold our stake there. We also had $63 million of after-tax impairments on our Greek bonds and that brings the net book value of our Greek holdings down to about $74 million. Our U.K. Home Lending business earned $89 million in the quarter, good performance on asset quality. 30-day delinquencies were down 97 basis points versus Q3. Our owned real estate stock was down to 461 houses, and that's the lowest we've had since 2005. And on the houses that we did repossess and sold, we realized 115% of the carrying value on our sales in the fourth quarter, so pretty good marks and valuation. Next is Real Estate. Commercial Real Estate had another quarter with significant improvements over last year. Assets of $61 billion were down $12 billion or 16% versus last year and they were also down $4 billion or 6% versus the third quarter. So we continue to work this book down. The business ended Q4 with $153 million of losses after tax. That was $256 million better than last year. During the quarter, we incurred $64 million of after-tax credit costs and $168 million of after-tax marks and impairments. And also during the quarter, a bright spot I'd say, we sold 157 properties for $1.9 billion, realizing $132 million in after-tax gains. So there -- as you see in the press, there is more liquidity in the commercial real estate market, and our business is benefiting from that. As Jeff mentioned on the front page, our unrealized loss on the equity portfolio was down to $2.6 billion and the outlook is that Real Estate is going to continue to deliver a strong improved performance in 2012. Commercial Lending & Leasing also had another strong quarter. Assets of $194 billion were down 4% due to the run-off of some non-core assets and dispositions. Net income of $777 million was up 37%. That's driven by lower losses and higher core income. Americas’ net income of $570 million was up 42%, driven by lower credit costs and that's their best quarter that they've had in 4 years. Europe and Asia were both down a bit, driven by lower assets. GECAS. GECAS fourth quarter is actually better than it looks. You can see here net income of $315 million is reported down 27%, but that included the impact last year of $167 million of tax benefits from the IRS settlement we had last year in the fourth quarter. There were no such benefits allocated to GECAS this year. So if you look on a normalized basis, net earnings would have been about 19% up, driven by continued improvements in core margin. Asset quality remained strong here. We ended the quarter -- ended the year with 2 aircraft on the ground, so another good year for GECAS. And Energy Financial Services also had a strong quarter. Earnings of $110 million were up 234%, driven by higher core income and higher gains. So overall, another very strong performance by GE Capital, and let me turn it back to Jeff.

Hey, great, Keith. Thanks. For 2012, we're confirming our earnings framework. Strong orders and rebounding margins support double-digit industrial growth. Better margins, improving commercial real estate and lower losses support double-digit capital growth. Corporate cost and CFOA are in line with our December meeting. Industrial organic growth is well-positioned to expand by 5% to 10%. Capital revenue will be below our December meeting based on lower ENI. So we close here with momentum towards these results and goals that we have for 2012. To conclude, we're positioned, I think, for strong execution in '12. Organic growth looks solid with a $200 billion backlog. Margins are improving, fueled by productivity programs and cost actions. Our industrial returns will exceed 15%. We're positioned to deliver on the 2 areas most important to investors, double-digit industrial earnings growth with higher margins and double-digit capital earnings growth with the goal of restarting the GE Capital dividend to GE. So it's a good quarter, could have been even better and that's encouraging for 2012. So I like our momentum and really, we feel good about where we are and what we can get done in 2012. So, Trevor, with that, let's -- back over to you.

Thanks, Jeff, and Keith. Chanel, we're ready to take questions now.

[Operator Instructions] Our first question comes from Scott Davis from Barclays Capital.

Guys, can you talk about your confidence in your margin guide in Energy? And you've been talking about 50 basis points, but you put up a pretty big 4Q, which raises the base for 2011 and then you also raised your gas turbine shipments from 130 -- well, you were at 128 last quarter, now you're saying 137. So your mix shift is turning a little bit more negative and your base is higher. So just talk about that 50 basis points because that's a pretty big movement in our model.

Well, I think I'll take a shot at it and let Jeff also add to it, Scott. I think if you look at the drag that we've had in Energy this year and the drag that we've had for the whole company, it's been driven by our investments in R&D and global. And as we've said, we've taken that and we’ve got it in the run rate and that's not going to continue to be a drag. That was -- for the fourth quarter, it was 0.09 point on the whole company and for Energy, it was a similar result. The second drag that we've had in 2010 that you'd expect were the acquisitions. We've acquired these companies. We've only started to really integrate them. We don't have a full year. That was 0.5 point of drag on the company in the fourth quarter and our expectation is that we continue to get improvements in those acquisitions. We've got a lot of people working on both the top line and the operating synergies, and so that is another factor that we've got to work. And then finally, the one drag that was just on the whole company all year long was wind. On the totally year, it was 0.8 point for the whole company. And as you can see, our wind expectation is that we're going to have a significant amount of volume. It's certainly not going to be an operating profit dollar drag like we saw in 2011. I mean, it was close to $700 million of operating profit drag dollars in 2011 on this business. We don't expect anything like that. We expect actually to have an improvement in the wind performance in 2012 and we're going to have to work the mix issue associated with that, but there's a lot of good factors. The services business has an incredible backlog. We've got to execute in businesses like the Oil & Gas business on large projects, so make sure we don't have any cost or quality issues or things like that and the whole team is focused on it. So it's important to us. It's important to investors. We have some good factors that don't repeat from 2011 that were headwinds that don't repeat as headwinds, but we need to execute. There's no question about it, Scott.

That's helpful. And just as a follow-up, Keith, for you, I'm calc-ing out about $10 billion of potential dry powder you'll have in 2012 to either buy back stock or do deals or dividend, whatever kind of you guys decide. I mean, I guess, first -- my first question is kind of does that $10 billion kind of pass your sniff test and b, have your priorities to deploy that cash changed at all since your Analyst Day in December?

Well, I think 2012, we expect to have growth in cash flow from our Industrial business. As you know, we ended the year at $12 billion. We expect that to grow in 2012. We already have increased the dividend for 2012 as you saw. Our expectation is that we're going to have a balanced capital allocation plan between buyback and M&A. We're going to look at opportunities and see what we do. I think to get to a number like you're talking about, we really do need, first of all, the capital dividend. And we would expect that over time, we're going to get excess capital out of capital, not just the 45% earnings and we have to get some of that. Other thing that I would say is right now, we're still planning on keeping about $8 billion of cash at the parent. We ended the year a little bit above that number just from a safe and secure and how we manage the company for all sorts of unforeseen risks. So I'd factor that into your math, but we expect to have a good cash year and have a good capital allocation year.

I think we'll have available cash in line with what we said in December. We've got a $200 billion backlog. We don't need -- really, we don't need acquisitions. I wouldn't look for us to do a big acquisition. We've got a pretty full pipeline of new products and so I think the emphasis on dividend reducing the float over time, those take a very high priority.

Our next question comes from the line of Steve Tusa, JPMorgan. C. Stephen Tusa - JP Morgan Chase & Co, Research Division: So you guys gave us the service margin of 28.5%. I think you've given us kind of a number that's close to that in the past. I don't know what that margin refers to. There's a lot of different numbers that you refer to when you say margin. But backing into what the equipment margin is kind of gets me to a low single-digit number. Is that correct way to look at it?

Yes, equipment margins are in that range. C. Stephen Tusa - JP Morgan Chase & Co, Research Division: Historically, how high have those margins gotten? Obviously, exclude the gas turbine bubble, they have been higher historically, correct?

Sure. When you're -- if we can get to those kind of levels, the incremental margin associated with the gas turbine business was fantastic back in the late... C. Stephen Tusa - JP Morgan Chase & Co, Research Division: Well, I guess, excluding that, though.

Well, I think if we -- right now, you're looking at a thermal business that is -- the market actually is pretty good globally. 50 gas turbine orders in the fourth quarter is pretty good, but there's still excess capacity. I think if you see a tightening in that market, you're going to be able to get incremental margins on the equipment side. I think that's going to be a good factor for us. But right now, you're still seeing, obviously, price erosion when you look at the orders price index that we have, but the commitment levels that we're seeing are starting to stabilize. And I think Jeff said that'll roll into the end of '12 and into '13 at much better margins for us from an equipment perspective.

And, Scott, we ought to get improving equipment margins as part of the 50 basis points improvement in 2012 versus 2011. C. Stephen Tusa - JP Morgan Chase & Co, Research Division: Right. So longer term, you've got $60 billion-ish of revenue that's really sitting there dramatically kind of under-earning at this stage, given the level of volume you're doing?

I think there's another -- if you look, there’s another factor maybe to think about is Aviation. We're really in the early launch phases around the GEnx and that will continue to improve as well. We got to get up to the run rate in terms of the number of engines. But clearly, the launch engines are the worse ones in terms of cost plus price and we're going to work our way into in a different place in Aviation, and GEnx will probably be one of the bigger factors. C. Stephen Tusa - JP Morgan Chase & Co, Research Division: Right. And then one more question just on Consumer. It was kind of down sequentially. Is that just some Europe headwind kind of flowing through? And I know the provision was also up a little bit on the GE Capital income statement.

Yes, I think there -- the main thing in the quarter for consumer that I think about was the Greek bond impairment was in the Consumer segment. C. Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. Because delinquencies, non-earnings all kind of continue to head in the right direction.

Yes, I think the main point we had in the quarter -- 3Q to 4Q would be the Greek bonds. The asset quality performance was good, and you do put up a little bit of provision as we had asset growth, Steve, for 3Q to 4Q.

The next question comes from Steven Winoker, Sanford Bernstein. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: So just a first question on the reorganization of GECS and GECC into GE Capital. When you think about how the Fed is looking at -- or when you think about how you would think about sort of what makes sense in terms of the right entity, we've talked about the difference in coverage and reserves for GECC versus GECS. Is there any reason to believe this wouldn't make it more likely that GECS would be the entity to look at as opposed to GECC?

Well, exactly. And I think all we're doing is sort of a reverse merger, Steve. If you look at what we're doing is we're putting GECS back under GECC. So the total now will be GECS. And if you look at our current reporting when you see things like Tier 1 capital at 9.9% for GE Capital Services, going forward, that will be 9.9% for GE Capital. We're going to have one entity and it's going to be the top level, but we're going to call it GE Capital. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: So this essentially removes even the possibility that GECC would have been something that regulators might have considered?

That's right. I think at the end of the day, our expectations were, and it hasn't been finally decided, were that the total Financial Services assets of the company would be regulated. And this isn't something the Fed made us do, but I think it does simplify everything and make it clearer for investors. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And you said this is not something that was based on input from regulators?

That's correct.

No, this goes back almost 20 years, Steve, and it's just -- I think it just simplifies it for our equity investors and for our bondholders. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And you talked about lower debt issuance. Can you quantify that a little bit?

Well, we'll have to see how we go through the year. We gave a range of $425 million to $440 million. As we go through the year, we'll look at the composition. Will we be able to -- I want to see how the long-term debt markets look. We want to look at CP. We'll look at alternative funding. It's going to depend upon those factors. But in total, if you got all the way down to the $425 million, you'd expect to have a combination of lower CP and long-term financing. And the margins, Steve, are still good. The earning power is still good. I think what we've said to you guys is we've got more than $70 billion of what we call red assets. The market in the U.S. is healthy for that kind of stuff. So I think that's -- we're just confident that -- in our earnings power and the ENI progress, I think, is a good thing for investors. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And then maybe just one final one. 15 months ago or so when you took the last Shinsei reserve, I think we all asked the question of how do we know that, that was the right number and that, that was sort of it and we talked about frequency and severity. How do we know that this is the right number and that this is it?

Well, it's our best estimate. You're right. We're dealing with a tail of a liability here that's got a lot of volatility. I think the Takefuji bankruptcy wasn't something that we foresaw when we put up that reserve 15 months ago. This is our first adjustment in 15 months. We've done a lot of statistical analysis and we've got a dedicated team on the ground managing these claims. It is our best estimate as of today based on the information we have on both claims volume and severity and we're just going to have to continue to watch it. I think...

And the claims volume is heading down. The claims volume is going down and December was better than what we had forecast, a little bit. But it's just such a long-tail liability and we're just going to have to watch it.

Your next question comes from Nigel Coe from Morgan Stanley.

You talk about, Keith, you talk about some push-outs in engine, I think, mainly in winds. Can you maybe just quantify that versus the September plan? And is there any evidence that there's more project push-outs?

Well, from September, when we laid out the Energy goals and where we were heading into the year, I'd say there's a number of factors that affected our Energy revenue. We had about $400 million that I would put in the push-out category. About half of that is wind. We had wind units in Canada that didn't get the revenue that we thought we were going to get that will come in '12. And we also had some push-outs on installations for about another 200. So there's about $400 million of things that we didn't record that we thought we were going to and that moved into the next year. We had about $200 million from FX from the beginning of the quarter. The dollar was much stronger than we thought, so that impacted a little bit versus our September estimate. And we had some weakness in our industrial systems business, more than we thought, probably another $100 million. So those are kind of the things that we see versus where we were in September in the Energy business.

Okay. No, that's really helpful. And then on the Energy pricing, it looks like it ticked down again versus 3Q. I think 3Q was down 1.8% and last quarter, it was down 4.4%, I think, you said, Keith?

Say the numbers you had again.

I think it was 1.8% last quarter on Energy equipment orders pricing, and this quarter, it was 4.4%?

Yes. That's correct.

Does that make the goal of keeping Energy margins flat next year more difficult?

Well, we've considered that and what we put together is our plan. I think the team does have to manage through that margin pressure as we showed you on the chart for 2012. We're going to have to have good execution on inflation and deflation and global sourcing. We've got to grow our service business, and we've got to have good cost of quality and execution on our projects, but we have factored that in. I mean, our guys when we put the plan together, that's not worse than what we're expecting, but it is pressure, obviously, in 2012 and we think we've accounted for it. This is a big deal, getting Energy up to positive margins. So just like Scott said and what you said, I mean, this is something the team is really focused on.

Sure. And then finally, obviously, the dealings and what you can [ph] say about the Fed's review, but it sounds like they started off, understanding the business and understanding the funding model, can you just may be give some color in terms of where they're focusing right now?

Sure. They've been with us for around 6 months now, the Fed. I think without any specifics, they're working on the things you'd expect them to be working on. They're looking at our risk systems and risk teams, our risk models. They're looking at our capital levels. They're looking at our liquidity and our liquidity risk management. They're -- we're working cooperatively with them. We're in a dialogue. They know we’d like to restart the dividend, and we have a process going on to review what they need to be able to help make a decision on that and it's going at their pace, I would say. So it's a lot of work. It's a ton of oversight and we're committed to working constructively with them. And at the end of the day, as soon as we can give you more information about that, we will.

Our macro benchmarks look pretty good, I mean, when you look at our Tier 1 capital ratios and things like that. So I think we're pleased with how we finished the year. We're pleased with the operating results at GE Capital and ultimately, that's the proof of the pudding, ultimately. So that's what we want to focus on. We're in a process that we just don't control it. We're working as hard as we can and we'll give you as much as we can when we can.

Our next question comes from Julian Mitchell with Credit Suisse. Julian Mitchell - Crédit Suisse AG, Research Division: Yes, my first question was in terms of the Energy business, you and Alstom have both had decent orders in that for the December quarter. Their outlook's fairly positive for March as well. But looking at your gas turbine volumes, you had an acceleration in the decline in thermal pricing in Q4 versus Q3. So I wondered if there's a sense in which, although on the surface, sort of infrastructure projects are going ahead, you're actually finding that there are some delays going on and so you priced maybe slightly more cheaper than normal just to make sure you got decent volumes in Q4 in terms of order intake because I think your thermal pricing was down in Q3 on the order side about 7 or 8, and now it’s down around 12.

Julian, some of this is just geographic mix of where the orders come from. I think doubting [ph] tends to be slightly lower priced and there was some big orders there in the quarter, stuff like that. But again, I'd go back to what we said in the past, which is first, we start with commitments, then we go to orders. I'd say the pricing in commitments seems to be stabilizing. That tends to be the leading indicator of pricing, But I think the difference between Q3 and Q4 is as much mix driven as it is any more intensity in the marketplace. And as Keith said earlier, there's a lot of interest. There's a lot of interest in gas turbines, really, on a global basis. Of the 50 orders that we took in Q4, I think only 2 were in the U.S., something like that. So I mean, we haven't even really seen much out of the U.S. yet. So I'd say the commitment is a good leading indicator for '13 and what we're seeing in '12 is no different than what we really expected. Julian Mitchell - Crédit Suisse AG, Research Division: Okay. And then secondly, on Healthcare. The profits are down there and I was intrigued to see the U.S., the comments around the U.S. being fairly weak. And I guess Philips said the U.S. was good for them, obviously, with a very weak Europe though. So I guess, how confident are you that Healthcare profits can grow in '12 given you've got quite a high revenue growth base from the first half of 2011? And obviously, there's sort of persistent price deflation just by nature in the Healthcare market.

When you look at the market in Q3, which is the last time we really have Neiman [ph] data, it was, I think, flat to up a couple points. We gained...

About 3 points.

A couple of points of share or 3 points a share in Q3. So we haven't really seen the market data yet in the U.S. Our expectation for the U.S. market is kind of flattish in 2012 and that's kind of what we're building -- have built our plan around. We're going to restructure Europe, which has already begun. We've got excellent emerging market revenue growth, which I think is both profitable and kind of fuels the earnings and then Life Sciences remain strong. So our target for Healthcare is revenue in the single-digit range and earnings in the single-digit range for next year and we didn’t see anything as we closed the year that says that shouldn't be where the goals remain.

Our next question comes from Shannon O'Callaghan from Nomura.

So can I ask you to fill out, I guess, the 50 gas turbines orders a little more? You said a big Saudi, very little U.S., maybe just a little bit more how that shakes out and what you're seeing in the different global markets? And do you expect that mix to change in '12?

Boy, it's incredibly spread out, Shannon. We had 4 in Australia, 1 in Canada, 4 in China, 1 in Colombia, 6 in Egypt, 5 in Iraq, 1 in Japan, 1 in Korea, 2 in Russia, 13 in Saudi Arabia. I mean, it's just spread out. It's global activity and our teams are covering it. I think, Shannon, gas is really the fuel of choice. I would say that with more confidence today than even in the past and the U.S. hasn't really started yet. So someday, there's going to be a U.S. market.

Okay. And how about just a little bit more on Europe? I mean you mentioned seeing more weakness in December. I mean what's the pace of weakening that you're seeing? Are you seeing sort of things accelerate to the downside or maybe a little color on what you're seeing over the last 6 weeks or so?

I think the one that you really saw it directly was in Healthcare. Europe was soft. Our orders in Healthcare were down 10% in the fourth quarter. Our revenues were down 7%. That's consistent with the framework Jeff talked about in Healthcare. But when you're dealing with governments and reimbursements and austerity programs, that's probably what we expect to see. Across GE Capital, we actually had pretty good performance. Our asset quality metrics across Europe, across both commercial and Consumer business has improved. In the quarter on delinquency, 30-day delinquencies and non-earnings, so the team there continues to do a job managing their books. So I think Healthcare is the one we saw. We saw a little bit in industrial systems, but not more than what we expected.

I don't think Europe was really worse than what we expected. I think we're preparing for a recession, and that's what we expect. And I think encouragingly, it looks like there's more liquidity in the market now than there probably was even 30 days ago, but we'll see how it all shakes out. We're ready for a tough environment.

Our next question comes from Deane Dray with Citi Investment Research.

Was hoping we could circle back to the newer lower target for ENI at GE Capital. And I know that's a welcome news on a risk management standpoint and you hinted about it in the December meeting. The fact you're not lowering any of the framework for GE Capital suggests that you -- some of this progress on cutting the balance sheet debt would come from the non-core assets and, Jeff, you hinted as, said there's more open or willing market for that. Could you just take us through where the cutting and the reduction might come from in the timeframe?

First thing I would say, the revenue for Capital in '12, again, with lower ENI will probably be down. And it's always hard to forecast revenue in GE Capital, but that's the one correction I'd make. I think earnings, we think, are still on track. But I think one of the big ones is what Keith talks about in Commercial Real Estate. I mean there's just a lot more liquidity for Commercial Real Estate. I think the guys were down for the year almost more than $10 billion in ENI for the year. So I think you could see that very well in Commercial Real Estate. And then I think there's just some other portfolios that are small in the U.S. that we think are going to be able to whittle away at the red assets. At the same time, incoming margins remain good and we've got a good origination team. So we think we can grow where we want to grow and continue to execute on the red asset plan.

The plan we laid out, Deane, as Jeff said, was to lower the red assets. If you look at 2011, our ending net investment on a reported basis was down $26 billion. It's down $32 billion if you include things that end up getting transferred into disc operations, discontinued operations and is taken out of the original number. So $32 billion last year of shrinkage, $27 billion of that came from what we considered red assets and we still got $80 billion of red assets. So I think the team is going to continue to run that off and we're going to continue to invest in the green assets. And just based on the fact that we're $20 billion ahead of plan on the anti-shrinkage plan, our reality is probably in 2012, we're going to be smaller.

Great. Is there any change in the expected contribution from GE Capital to earnings, still that 30% to 40% and likely at the lower end?

I'd keep it there for now, yes. I mean the fourth quarter was about 40%. That's where we are right now on a run rate kind of, so you've got to -- we'll have to see how we do in 2012, but we're not changing that target.

I'd keep it there for now. Again, I'd come back, Deane, and say the strategic priority, job one for the GE team in 2012 is to grow the Industrial earnings more than 10% and that, in the end, is kind of a laser-like focus that we've got and I like the backlog we have to do it with.

Great. Just last question for me is on cash flow. A bit stronger than what we were looking for in the fourth quarter. We had expected a little bit more of a working capital build. Were the push-outs the reason you didn't have to do that? Or just true that up for us, if you could.

Well, probably, the -- your expectation came with the fact that through the 3 quarters, we had built some inventory and we had a little more working capital than we wanted in our plan. And we did a -- the teams did a great job in the fourth quarter drawing down that inventory. Our working capital use for the year was only $700 million on double-digit revenue growth and we increased our turnover by 0.10 point. So the teams did do a good job on working capital and I think it was -- we were behind at the end of third quarter year-to-date, and we caught up and actually exceeded where we're expected to be in the fourth quarter. So progress was down a little over $1 billion and we only used $700 million of working capital while growing the Industrial business 14%. It was a pretty good year.

Our next question comes from Terry Darling with Goldman Sachs.

I wanted just to continue down this path of changes to the 2012 outlook at the margin relative to December and maybe start over on the Capital side. Keith, I wonder, did the pre-provision performance at Capital in the fourth quarter, how did that perform versus your expectations?

Capital came in a little better than we wanted in total. I don't have any specifics around pre-provision that came to mind in getting ready for today, Terry.

Okay. And so in terms of the deltas...

I hope it's specific [ph] to what you're looking for.

No, just in terms of the deltas for '12, I mean, beyond the faster turnover of the red assets, areas for upside, for the capital framework, I'm curious about.

Sure. If you look at -- there really hasn't been a change in the fourth quarter in that. As Jeff said, the only change would be we'll probably have revenue be a little lower, but you look the margins are good. We're going to have continued significant improvements in Real Estate. That's our expectation. Losses will be slightly better. They're close to the run rate. Those will be some of the bigger drivers that we expect in 2012.

Okay. And then I'll take a shot at this, one more shot at this Energy horse here. The lower U.S. natural gas prices impact on your short-cycle Oil & Gas business, I know it's not a big part of the company, but pretty high margins there. What are you seeing in terms of that risk element?

No, I haven't seen anything specifically. The lower natural gas prices make an attractive fuel, obviously...

Maybe more on the drilling side.

Well, the drilling and production, we've had tremendous service orders that I saw in the quarter. I didn't see anything unusual in the equipment side.

On the equipment side, that's helpful.

We're still working on integrating everything we did with Wood Group and that gives us much more presence on the land-based drilling and production, but I didn't see anything unusual in the order base.

Okay. And then just a couple points of clarification. On your comments on the Fed review, obviously, tough to characterize. But I guess can one interpret that as timing, perhaps, has shifted a little further out in terms of when you might anticipate things coming to a conclusion there? Is that fair?

Well, what did we want? We wanted to do the dividend starting with the year and as a result of being with the Fed, we haven't been able to do that and it's really just something we don't control. I really haven't ever laid out a timing and they haven't given us a timing. We just are going to continue to work with them. Our goal is to do the dividend in 2012. We haven't changed that goal and we think we're going to be able to achieve what we said, but the timing is -- we haven't given one and it hasn't changed for us. We're just working with them constructively.

Okay. And then just lastly, any other items you want to call out for people to note with regards to the 1Q year-over-year comparisons? You called out the days issues. That's pretty clear. Anything else that you want to call out there? For instance, you saw only $0.03 of restructuring in 4Q, you're talking about a range of $0.03 to $0.04. Do you have a heavier restructure in the fourth -- in the first quarter of '12 over '11? Any other items like that you want call out?

I think if I look at first quarter alone, I don't see anything unusual in this year's first quarter '11. If you look at last year, you've got to remember, we had the NBCU gain and then in Capital, we had the large gain from the Garanti sale. So I think those are things that we're working through, comparing to. But in this year, I don't have anything that I would call out.

Our next question comes from Jeffrey Sprague with Vertical Research.

Just a little more detail on Energy pricing if we could. Jeff, could you elaborate a little bit on your comment about things firming up in commitments? And when would you expect price on orders to inflect? Do you think that is a second half '12 event?

So again, Jeff, I think the -- when we look at commitments, the pricing has stabilized. That tends to be, let's say, anywhere from a 6-month to an 18-month cycle. So I think the lead indicators suggest that the equipment pricing, as it goes into orders is going to start stabilizing, and then it goes from orders to revenue. So that's not necessarily a different scenario than what we've talked about in the past, I don't think.

Right. And, Keith, I may have missed it, but can you give us the price in revenues in the quarter in Energy, thermal, renewables, all in?

Well, the total was down 1%. I don't have the split between the pieces. The total for Energy selling price was 1% down. For the company, it was 0.5% down in total.

Our next question comes from Christopher Glynn from Oppenheimer. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: Looking through the initial resumption of GE Capital dividend but noting the ENI targets coming down, is it reasonable to expect that future GE Capital payout ratio could be well above the historical payout ratios?

Well, our goal that we've laid out is that we'd like to have GE Capital pay the same percent of its earnings that GE pays to its shareholders. So we're at about a 45% payout ratio and that would be our goal. Now sometimes in the Financial Services world, the discussion is that there's a 33% or 30% payout ratio at the banks, but there's also buybacks on top of that. GE Capital doesn't have that equivalent of a buyback. So I think that's a reasonable expectation. That's what we're working on is to start with a 45% of GE Capital's earnings back to the parent, which would be above historical. The second thing that I think that we're thinking about is as we shrink GE Capital, as we've built up the capital base, we have excess capital, we believe, on top of whatever the target of capital that regulators are going to require for Tier 1 for a very large important financial institution. We haven't formally been notified that we're a SIFI. We aren't under anybody's Basel framework yet, but we're reporting like we will be and we believe we have capital levels that will exceed what the targets are that we’ll be -- the banks will be held to. And our objective is as we shrink GE Capital the dividend, that excess capital back to the parent. And over the next several years, that could be several billions of dollars. So our -- that's our goal. We'll have to see how we do as we work with the Fed, but that's our goal. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: Okay. And next question, answer might be obvious, but I'll ask it anyway. Are you buying any properties in CRE?

We're not buying any properties. We have done some debt investing, but we're not buying any properties. We're running the equity book down. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: Okay. And then lastly, with the double-digits earnings framework for both capital and industrial, are you biased to one exceeding the other or too close to call?

No bias. We want to execute well and have a good year.

Our next question comes from Jason Feldman from UBS.

So on the Energy service front, earlier this year, the federal court stated that the CSAPR rules, which we had expected to shift more fuel switching from coal to gas. Does that impact your outlook on the service side at all for this year?

I couldn't tell you. I am not familiar with that, and I'd have to get -- we'll have to get back to you on that, Jason. I do think the gas power is running harder. There's no doubt about it, but I don't know that, that specific change is material in the way we think about financials for the year.

Okay. And balance of plant revenues come up when we're talking about the Energy margins, I think, the last 2 quarters. Last quarter, it was a bit of a headwind or maybe more than a bit of a headwind. This quarter, it sounds like a year-over-year comp basis, it actually helped you. Can you give us a little bit more quantification of how much of a difference that made? And is that just kind of volatility that we just have to live with, given the nature of the business?

The only thing I have is that we're about $100 million lower on balance of plant in the quarter. So obviously, there is no margin really associated with that. It did help the margin rates a little bit, but it also contributes to lower revenue. So that's the only number I had.

Our next question comes from the line of Brian Langenberg of Langenberg & Company. Brian K. Langenberg - Langenberg & Company, LLC: Two questions. The first one is with respect to the merger of GE Capital, GECC, you're not a company that tends to let things lay for like 20 years. So until recently, there was a reason to have that structure. Just touch on what operational and/or tax benefits are -- have gone away with going from 2 to 1, 2 structures to 1? And then the second part is how much cost out do you think you can get to offset the $300 million of additional spending you need to do in the new financial world? That's the first question.

Well, let me start with the first one. There was a good logic for GE Capital Services. We had a broker-dealer, Kidder, Peabody. And we had significant insurance operations, both what is now Genworth that we call GEFA and also ERC. So the insurance operations, the reinsurance operations and the Kidder, Peabody were originally under GECS on the other side of the ownership, and then GECC was on the other side of -- as part of the assets of GE Capital Services. But the point is that, over time, as we sold all the insurance businesses, as we got out of the Kidder and the broker-dealer, really, the difference between GECS and GECC is almost insignificant. We have about $30 billion of investment securities and we'll have the GE Capital team, Mike Neal and Jeff Bornstein and Bill Cary and those guys manage that. Now there's an insignificant change in our tax outlook as a result of this merger. So really, it's just a collapse of 2 SEC registrants and over time, it had a purpose and today, it has less of a purpose and actually just provides kind of confusion. In terms of costs, it’s -- the GE Capital team's done a great job on SG&A. Our SG&A was actually down in 2011 despite the fact that we're investing like crazy on the regulatory side. So they're getting good productivity in their back office and they continue to do a good job managing their costs. Brian K. Langenberg - Langenberg & Company, LLC: And so in terms of collapsing 2 into 1, is there a significant incremental cost to come out once the 2 structures go away?

No, I think it's really in some of the accounting, consolidation and reporting, it'll simplify their life, but there's not a big cost structure at GECS. Brian K. Langenberg - Langenberg & Company, LLC: Okay. And then just a last question. With aerospace, you called out some pre-buy in the third quarter, which is not something I’d really heard about from other aerospace players. I mean, just kind of looking at it simplistically, are you suggesting that there's a good $250 million of pre-buy in the third quarter on the aerospace side?

It would have been orders for spare parts. I don't you think that would have showed up in their cash flow yet, their ordering. So we can -- we report our average daily order rate. I can't tell you what the timing of when they actually took that was, but it was $29 million a day or something, $27 million a day in the third quarter, up 20%. We didn't expect it to be that high and basically, they're just getting in, in advance of our November price increase. So in terms of when they actually took that material, that's not something I have. And [indiscernible] in the third quarter, we're nowhere near as high as that. So it really would have been ordering.

Our next question comes from John Inch with Bank of America.

Keith, so just to clarify, so do any of the quarters in '12 have this days issue as it pertains to the compares versus '11? I'm just going back to Terry's question.

I asked the same question yesterday and I’ve been assured that we're on a normal calendar comparison in 2012. Happy to report, John.

Yes, okay. Right. No, that clears up that. Going back to the restructuring, again I don’t want to split hairs. I thought the fourth quarter was maybe going to be $0.03 to $0.04, you said $0.02. Does that imply that there is sort of front-loaded restructuring this year? And maybe, Keith, if you could scope out sort of what your thoughts are vis-a-vis restructuring in Europe. I mean, I know you talked about Healthcare restructuring, but is half of this going to be Europe, front-half weighted, just anything you could maybe call out?

Sure. I would say, first of all, what we talked about in December, we have a category restructuring and other charges that was going to be about $0.03, and that's $0.03 to $0.04 and we did $0.03. It's not that we really pushed anything out. We work with the teams on what projects can they identify that have a good payback and can they execute? And we ended up with the projects we identified. I would say over half of the projects that we funded in the fourth quarter are related to Europe in Healthcare and Energy. And if you look at, going forward, in 2012 and our plan, we've -- on a normal quarter, we're somewhere around $100 million of restructuring in our quarter and our plan is kind of built assuming that type of run rate. Now if we have more good projects, we may pull some in. We'll reserve the right. But just based from a planning and how we talked about that $3 billion of costs in the corporate line, that's how you should think about it, John.

Okay. So kind of linearly spread throughout the year then?

So far, yes.

And just lastly, Keith, the provisions for the capital were relatively flat sequentially. What's been happening to provisions in Europe and maybe you could give us just -- I didn't see it in the supplemental. What was the ending asset, financial asset base in Europe? I think it was $132 million or something in the third quarter?

I think Europe was down a little bit. I don't have the exact number. We'll get it to you and I don't separate provisions by region. I have it by business. Provisions were -- if you look, reserves came down about $300 million. Some of that was write-offs greater than provisions, some of that was FX and provisions were flat in Europe.

Yes. So the question is, really, you're not really seeing incremental losses associated with European...

Well, actually, the asset quality was actually better. The only thing in Europe that we -- was unusual, I would say, was the 2 things. One is the Greek bonds and the second thing, we put up some money in Hungary for mortgages.

We have no more questions. I will turn it back over to you, Trevor.

Thanks, Chanel. Five wrap-up comments to close here. The replay of today's webcast will be available this afternoon on our website. We will be distributing our quarterly supplemental data schedule for GE Capital later today. Two announcements to make. First, we will host our Global Growth Investor Meeting on March 6 and 7 in Rio de Janeiro, Brazil. We hope you can join us. We'll have a full agenda that we'll be getting out next week on that and it's pretty packed. So we hope to see everybody there. Second, our first quarter 2012 earnings webcast will be on April 20. As always, we'll be available to take your questions. Thank you very much.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.