General Electric Co Earnings Call Nuggets: Value Gap and China’s Growth
Scott Davis – Barclays Capital: It looks like most of the full year margin expansion came from value gap. Can you talk more specifically about 4Q? The 120 basis points is a pretty big number; if there’s a way to think of that in terms of value gap versus maybe mix or cost?
Keith S. Sherin – Vice Chairman and CFO: Sure. I’ll give you both actually, because I think it’s helpful to look at the pieces. You said it in the fourth quarter value gap was big. It was 80 basis points, so the growth came from value gap. We had very strong pricing. We saw a material deflation. And you can see that the changes in order pricing are flowing through into revenue. We had – equipment service mix was a drag. As you know, that’s been a drag all year long. It was 50 basis points; the same as what we had for the total year as we had higher revenues and equipment growth on services, and also you know the wind story; higher wind revenues at lower margins has been a drag all year long.
We offset two things. One, we did have the dispositions. That was about 60 basis points in the quarter, and we had strong productivity, which was 30 basis points in the quarter as we offset the impact of the negative mix; so, overall 120 basis points. And for the year, it’s really a similar story. Value gap was 20 basis points of that 30 basis points growth. We had a real drag on mix in other that was in total 60 basis points. But we offset that with strong productivity. A lot of that is simplification. Our SG&A as a percent of revenue went down a full point. We have done a good job with costs and we’ve got great programs in place that will help us as we go forward into ’13 as you know and the gains in total for the total year were about 7 basis points on the impact for the margins. So, pretty good performance; so the strength really value gap and productivity driving margin improvement, both in the quarter and for the total year.
Scott Davis – Barclays Capital: Stepping back to a little bit of a bigger picture question. The Avio deal seems pretty interesting for many reasons. But when you think about taking a step backwards and is this part of a bigger trend and opportunity to start to buy in some of the supply partners that you have that, I mean, there’s multiple positives that can come out of that I guess in risk reduction and controlling intellectual property and things like that. I mean, are there other things out there that you can do that are similar to this type of transaction?
Jeffrey R. Immelt – Chairman and CEO: Scott, we did a couple of other joint ventures that you probably saw last year that enhanced our position in controls and fuel nozzles and additive manufacturing and things like that. We think Avio made a ton of sense just given the amount of GE content and things like that. I would say we don’t have a bunch more on the drawing board; but what I would say is, we’ve got an incredible backlog and skyline of aircraft engines coming at us for the next five to 10 years and we believe that actually being able to drive real productivity in the supply and innovation in the supply chain will likely be one of the real margin enhancers as we look at the Aviation business in the next three, four, five, 10 years. So it is part of a bigger productivity play. I don’t think there’s necessarily things like Avio on the drawing board per se, but we continue to look at productive manufacturing of a well-identified backlog as being a major source of margin benefit for our investors going forward.
Stephen Tusa – JPMorgan: The China growth of close to 20% remains pretty strong. Could you maybe talk about what was above and below that average and how you see that playing out in 2013? I mean, you guys have skated through the weakness there pretty nicely.
Jeffrey R. Immelt – Chairman and CEO: So, Steve, I’d say – we definitely saw the China strengthen again at the end of the year. The big drivers of China continue to be Healthcare and Aviation, and we believe that the China momentum will likely continue into 2013. So, I don’t know, Keith do you want to…?
Keith S. Sherin – Vice Chairman and CFO: Well, (indiscernible) for the quarter, Power & Water had a big quarter. They were up over 30%. Healthcare had a big quarter, up 15% for the year. They were up over 20%. Aviation continues to be very important to us for the year, up 18%. There were some orders that we had pushed out of the third quarter still pushed out of the fourth quarter. So we expect some more orders in aviation in China in the first quarter. So those three are really the strength and we continue to see investments by the government in those industries and we’re benefitting from the move to gas in Chin a bit. The great emphasis on Healthcare and certainly on Transportation with the Aviation position we have.
Jeffrey R. Immelt – Chairman and CEO: I think there’s a knock-on Steve as well as China grows. You see more activity in Africa and Brazil and places like that as well. So, it has a knock-on effect. It’s also positive.
Stephen Tusa – JPMorgan: How big is your China business going to be year-end now?
Keith S. Sherin – Vice Chairman and CFO: The revenue for the year was just a little under $6 billion in ’12.
Stephen Tusa – JPMorgan: And then one last question just on margins. I guess the value gap obviously is ramping here. I mean, that doesn’t seem like that’s lumpy. So, you had biggest quarter obviously in the fourth quarter, which means you should probably start the year with a pretty decent value gap in the first half, and then maybe if you could talk about how those other swing factors like mix, the other things you talked about in the bridge progressed as you move through first half ’13, if there’s anything lumpy that you need to call out that may impact the 70 basis points first half to second half type of thing?
Jeffrey R. Immelt – Chairman and CEO: Steve, again, if I look at margins, I think value gap is pretty well dialed in. Structural cost; what Keith talked about SG&A as a percentage of revenue. That should continue to get better. Those two aren’t necessarily lumpy. Service margins aren’t really lumpy. We continue to get good progress there. My view is wind will be lumpy, right, as you think about how it plays through the balance of 2013. And the one that we don’t really control so much is how mix goes through. So, I’d say a lot of the levers should continue with pretty good progress, and the one that we’ll manage this year as the year goes on is just the impact of – there will be a $0.03 headwind in wind. We don’t see that necessarily changing, and that’s another thing to play through. But we feel confident in the 70 basis points for the year.
Keith S. Sherin – Vice Chairman and CFO: Yeah, we’re not really giving quarterly margin guidance, but as Jeff said, for the year, based on those factors, we feel pretty confident we have internal plan that’s above 70. We don’t have any gains that are in the plan to get to that 70 and we’ve got some good momentum as we come out of the fourth quarter on the margin improvement.
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