Good day, ladies and gentlemen, and welcome to the General Electric First Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen only mode. My name is Derek, and I'll be your conference coordinator for today. If at any time during the call you require assistance, please press star followed by 0 and the conference coordinator will be happy to assist you. If you experience issues with the slides refreshing or there appears to be delays in the slide advancement, 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 Sean Burke, Vice President of Investor Communications. Please proceed.
Thank you, Derek. Good morning, and welcome, everyone. We are pleased to host today's Q1 webcast. Regarding the materials for this webcast, we issued a press release earlier this morning and the presentation slides are available via the webcast. Slides are also available for download and printing on our website at www.g.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 Sheerin. Now I'd like to turn it over to our Chairman and CEO, Jeff Immelt.
Thanks, Trevor, and good morning, everybody. Hey, look, in the Q1, our market conditions proved to be volatile. Most of our emerging markets, including China, remained strong. However, the U. S.
Indicators were mixed. While housing improved, some of our shorter cycle energy segments experienced push outs from March. We plan for Europe to be similar to 2012 down again, but it was even weaker than we had expected. And finally, we had an FX headwind in our oil and gas business. Based on this backdrop, our results were mixed.
Our EPS was 0 point 39 $5 because not all of the NBCU gain was offset by restructuring in the quarter. Leading indicators in our longer cycle infrastructure businesses were encouraging with orders up 3%, which is 6% ex wind. Equipment orders were up 10% and we had a 1.3 times book to bill ratio in the quarter. So this gives us confidence in our delivery schedule for the second half and beyond. Power and water was a drag on our overall results.
Wind and thermal units were down in the Q1, but that was expected. We experienced incremental pressure in European Services. And based on our current backlog, however, we expect shipments to significantly improve in the second half. And we'll show you a detailed chart with the financial profile for the remainder of the year. Finally GE Capital delivered a solid quarter, up 9%, while they continue to shrink their non core assets, which were down $17,000,000,000 in the quarter versus previous years.
We remain focused on our operating priorities. We're able to accelerate restructuring actions and we've taken out $200,000,000 of structural SG and A costs in the Q1, well on our way to at least $1,000,000,000 reduction in 2013. Margins were negatively impacted by some of the revenue shortfalls in Europe and Power and Water, but we remain on track to deliver the 70 basis points margin expansion this year and we'll show you more details later in the deck. We finished the quarter with $90,000,000,000 of consolidated cash and $22,000,000,000 of cash at the parent level. We returned $3,900,000,000 of cash from investors in the Q1 including $2,000,000,000 of dividends and $1,900,000,000 of share buyback.
We announced the intent to purchase Lufkin, a $3,000,000,000 bolt on acquisition, which broadens our artificial lift portfolio in oil and gas. For perspective, GE's artificial lift business grew by 12% in the quarter. We expect to close this transaction in the previously announced Avio deal in the second half of this year and both deals will be accretive to industrial earnings in 2014. So in summary, our industrial segment profits were about $200,000,000 below our expectations and that really was a function of Europe, which worsened during the quarter and some short cycle push outs from March into the Q2. Now we were able to offset that gap by doing a good job on corporate cost and slightly better GE Capital performance.
So that's really a summary of the Q1. Overall orders were a good story, up 3% overall and 6% ex wind. Equipment orders grew by 10%. Oil and Gas and Aviation were particularly strong and pound water ex wind grew by 10%. We ended the quarter with $216,000,000,000 in backlog, which is a record for GE.
Orders pricing was up 0.6 points, in line with expectations. Many growth markets were strong. China was up 67%, Latin America was up 44 percent Middle East and Northern Africa were up 22% and Sub Saharan Africa were up 41%. Service orders were mixed. Our investors closely tracked commercial aviation spares and they grew by 10% in the quarter.
That's good news. And while power and water service orders declined, commitments increased, which helped future periods. So the orders momentum in equipment and backlog expansion, I think, positions us well for the second half. Revenue overall was challenged. We knew the first quarter was going to be tough.
Overall, our organic growth was down 6 points, but that really was a function of Power and Water. Organic growth was up 2 points excluding that segment, which is going through a tough cycle. Our revenue grew by more than 10% in 5 of 9 growth regions, including Middle East, North Africa and Turkey, Sub Saharan Africa, Australia, New Zealand, ASEAN and China. We continue to see strength in many regions and believe the growth markets will stay on track for the year. We grew backlog in service and margins in services.
Europe was a drag on service revenue overall, knocking 5 points off our growth. But meanwhile, our oil and gas service revenue was up 10%. Our investments in R and D continue to pay off. We were selected by Boeing as sole source for the next generation 777. We're launching the world's most energy efficient wind turbine.
Our leadership in locomotive technology is at the forefront of potential LNG conversions. We continue to focus on new NPIs in healthcare and appliances. And we have a solid pipeline of advanced gas path upgrades worth about $500,000,000 which should have PowerGen services in the balance of the year. The biggest driver of Industrial segment profit is the power and water shipment profile that we've mentioned to you before. In the Q1, their operating profit was down 39%, driven by significantly lower gas turbine, wind turbine and aeroderivative unit shipments.
In Europe, the service business was down about 22% and was the primary cause of total service revenues being down. Despite their lower volume, the team delivered 70 basis points of services margin improvement. And overall, the team did a nice job in reducing costs, but volume decline was far greater pressuring the margin rates. We expect the 2nd quarter unit shipment volume to improve slightly, but it will still be negative versus last year and services should be positive and continue to grow margin rates in the quarter and throughout the year. The second half volume is supported by our $9,500,000,000 equipment backlog and will be up significantly in both wind and aero from the first half.
Services will also be up in the second half and we have a better comps versus Europe. The higher volume leverage coupled with service margin growth will drive an improved margin rate. In addition, Steve and the team are working to deliver $250,000,000 of structural cost improvements throughout the year. So these efforts should deliver a flat margin rate for the total year. On total margins, the industrial margin rate was 12.9 percent for the quarter, down about 80 basis points, but up 40 basis points excluding the power and water cycle.
We saw solid improvement in 4 of our businesses, driven by strong value gap and cost execution. Oil and Gas was negatively impacted by foreign exchange, but some of that will come back during the year. And we're planning on 4 businesses being above a 70 basis points improvement overall. If you look at the Q1 and total year dynamics, you'll see that we don't expect any significant impact from mix and the R and D drag from the Q1 is mostly timing in Aviation and Oil and Gas and will be neutral by the end of the year. The value gap was strong in the Q1 and we anticipate it continuing to strengthen throughout the year.
And the biggest negative in the quarter was the volume leverage from Power and Water and as I said, it will be tailwind in the second half of the year. As I've said before, we went into the year with a plan that would deliver more than 70 basis points of margin expansion. Given the Q1 dynamics and the short cycle energy related volume pressure, we've eaten into that hedge. But we still have an internal plan for 90 basis points of improvement, more than the 70,000,000,000 or 70 basis points that we've told all of you about. And that improvement is going to be driven by a change in power and water shipment profile, services margin growth and accelerate cost out programs.
And in many ways, our margin progression fits the pattern of previous years. Cash in the quarter was impacted about $1,500,000,000 by shipment timing and a couple of unusual items. We grew working capital by $800,000,000 to support power and water and commercial engine shipments later in the year. In addition, we had an impact of about $800,000,000 in incentive and tax payout timing. Not included in the number and not in the number is a capital dividend of about $450,000,000 which will be realized in Q2 CFOA.
The company has a very strong cash position with $90,000,000,000 in consolidated cash and $22,000,000,000 at the parent. And we have no change in our overall CFOA framework for the year. We remain committed to returning $18,000,000,000 to investors in 2013 through dividends and buybacks. So now let me turn it over to Keith and give you more details about the segments. All right.
Thanks, Jeff. I'll start with the Q1 summary. We had continuing operations revenues of $35,000,000,000 and that was flat with last year. Industrial sales of $22,300,000,000 are down 6% driven by Power and Water as you can see on the right side. GE Capital revenues of $11,500,000,000 were up 2% and both the total and the capital revenues include the benefit of the MVCU gain.
Operating earnings of $4,100,000,000 were up 14%. Operating earnings per share of $0.39 were up 15% and if you adjust for the net benefit of $0.04 from the gain exceeding restructuring, the operating EPS would have been $0.35 and I'll cover that on the next page. Continuing EPS includes the impact of our non operating pension and net earnings per share includes the impact of discontinued operations, which I'm also going to cover on the next page. As Jeff covered, CFOA was $200,000,000 driven by the working capital investments, incentive payments and tax timing. For taxes, the GE rate of 20% for the quarter is in line with the rate of about 20% that we expect for GE for the year, but there could be some variability from quarter to quarter.
And on GE Capital, the tax rate was 4% and that rate is down because in the fiscal cliff resolution, the active financing exception was retroactively extended, which gave us a benefit in the Q1. Because of expected additional asset reduction opportunities, we currently expect see a mid single digit GE Capital rate rather than the 10% rate we previously forecast. On the right side of the page, you can see the segment results. Total industrial segment profit was down 11%. That was driven by Power and Water as you can see.
Segment profit for the other industrial businesses was up 6%, and we expect Power and Water, Oil and Gas, Energy Management to all improve as the year progresses. And I'll cover each of the segments in more detail. Before I go through the business results, I'm going to take you through the other items from the Q1. Starting with Industrial, as you know, we realized a $1,100,000,000 pretax gain related to the NBCU transaction, and that resulted in an $0.08 after tax EPS benefit. The industrial MVCU gain was partially offset by $0.04 of restructuring and other items in the quarter.
The charges related primarily to our cost structure improvements and our ongoing simplification actions across the company and the amounts by business are Power and Water, 94, Energy Management, 60, Healthcare, 48, Aviation, 46, Oil and Gas, 42, HMBS, 38 and Corporate, 46. On the bottom of the page, you'll see the restructuring plan for the rest of the year. We're planning to offset the additional $0.04 related to the MVCU gain with $0.02 of restructuring in 2nd quarter and a $0.01 each in the 3rd Q4 based on the timing of the restructuring actions being completed and approved. Moving to G Capital, we had $0.05 of benefit related to the sale of the 30 Rock Real Estate assets and those gains were offset in 2 categories. First, we had $0.02 of charges related to the platform exits and restructuring actions.
In the real estate business, we had an after tax charge for $123,000,000 that related to our planned exit of another $2,300,000,000 of equity assets. In addition, we had $53,000,000 of charges related to cost reductions and core asset exits in the rest of GE Capital. The second category is we had $0.03 related to consumer reserves. In the Q1, we finalized our updates to our reserve models in the U. S.
Retail business for a more granular segmentation of loss types. You know we've been working on that all year last year. In the quarter, this included completion of the analysis on bankruptcy, which for us is one of the larger categories of losses. And the $0.03 also includes the impact for our consumer portfolios in Europe and Asia and also our current assessment of forecasted charge offs across the entire portfolio. So these adjustments are aligned with regulatory guidance and industry standards and we believe we've completed the methodology adjustments in our consumer franchise.
On discontinued operations at the bottom of the page, we had $109,000,000 after tax impact in the quarter. On WMC, we added $107,000,000 to reserves in the quarter as pending claims increased from $5,400,000,000 to $6,200,000,000 We ended the quarter with $740,000,000 in reserves covering both the pending and the future claims. And on Great Zones, claims were up in the Q1 above our model assumptions. So we booked $50,000,000 of additional reserves and we ended the quarter with $561,000,000 of reserves. In total, the operating impact from the other items netted to a $0.04 benefit for the quarter and that will be offset through the balance of the year through restructuring as I said.
So let me move on to the businesses. I'll start with Power and Water. We were planning for a tough first half based on the volume comparisons for wind and thermal, but the market was even tougher than we expected. Orders of $5,200,000,000 were down 13%. Equipment orders of $2,600,000,000 were down 6% and that's driven by wind.
Our renewable orders of $1,100,000,000 were down 27%. Our thermal orders of $759,000,000 were up 10% and our distributed power orders of $563,000,000 were up 22%. So one of the highlights here in the quarter is that excluding wind, our equipment orders in power and water were up 16%. Service orders of $2,500,000,000 were down 19%. That's driven by tough comparisons as well as order push outs.
In the quarter, we had about $100,000,000 of orders on several gas turbine upgrade projects, mostly in the U. S. That slipped out of the quarter and overall orders pricing for the business was flat in the Q1. Revenues of $4,800,000,000 were down 26%. Jeff showed you the unit comparisons for the Q1, which drove the decline.
Equipment revenue was down 42%, service revenues were down 9%, and segment profit of $719,000,000 was down 39%, driven by the lower volume. We reduced our SG and A by 14%, but it wasn't enough given the unit declines and margins were down 3 point 2 points. As we got to the end of the quarter, we had challenges in the market. As I mentioned, we had about $100,000,000 of gas turbine upgrade packages that slipped out of the quarter. We also had 2 distributed energy projects for a little over $100,000,000 that were delayed and pushed into the second half.
And in addition, we had expected a stronger European power and water service market and that was down 22% on lower gas turbine utilization. So all these items would have been in revenues and of course would have had a significant impact on both margin dollars and rate. On the right side is oil and gas. Orders of $4,800,000,000 were up 11%. Equipment orders of $2,900,000,000 were up 24% driven by strong turbomachinery, strong drilling and service orders for upstream production.
Service orders of $1,900,000,000 were down 5%, driven by lower drilling and surface orders related to lower activity in North America. Our backlog grew by $2,200,000,000 in the first quarter to $17,000,000,000 and orders pricing across the business was up 1.5%, our 8th quarter of order price increases. Revenue of $3,400,000,000 was flat. Equipment revenue of $1,700,000,000 was down 4% as our growth in drilling and surface was more than offset by declines in turbomachinery. And service revenues of $1,700,000,000 were up 4% that was driven by stronger global spare parts sales, partially offset by lower measurement and control short cycle volume.
M and C was lower as we saw customers delay investment
decisions in the portfolio and that impacted our expected revenues in both
equipment and portfolio and that impacted our expected revenues in both equipment and service by about $125,000,000 Segment profit of $325,000,000 was down 4% as the benefits of service growth were partially offset by higher program spending and the one unusual item in the quarter here was we had $34,000,000 of negative foreign exchange related to the weakening of the British pound. This is on an economic hedge over a long term contract in the business and we will recover as we deliver the project. That hedge will go back to 0 as we deliver the units over the next 12 months to 18 months. Excluding the FX impact segment, profit would have been up about 6%. Next is Aviation.
The Aviation team had another strong quarter. Orders of $6,600,000,000 were up 22 percent, equipment orders of $3,800,000,000 were up 47%. Commercial engine orders of $3,000,000,000 were up 90% driven by $1,400,000,000 of LEAP orders and 875 $1,000,000 of GE90 orders. Military equipment orders of $300,000,000 were down 42%. Service orders of $2,800,000,000 were down 2%.
Commercial service orders of $2,200,000,000 were up 8% and our Q1 average daily spares order rate was $25,300,000 per day, up 10%. Military spares were down 44% on tough prior year comparisons and overall business order pricing was up 2.1%. Revenue of $5,100,000,000 was up 4% driven by equipment, was up 8%. We shipped 5.96 commercial engines in the quarter that was up 13 units or 2%. And we shipped 2 79 military engines, which were up 44 units or 19%.
Service revenues of $2,500,000 were flat as our commercial spare parts shipments were flat in the quarter. Segment profit of 936 was up 9% as the benefits of a positive value gap and lower SG and A costs more than offset higher R and D and the impact of 28 more Gen X engine shipments and margin rates grew 80 basis points in the quarter. On the right side is healthcare. Orders of $4,300,000,000 were down 2%. Equipment orders of $2,300,000,000 were down 3%.
For equipment, in the developed markets, it was down 5% and it's the same story we've had last year. The U. S. Was flat, Europe was down 9%, a little worse and Japan was down 26%, 16% excluding FX, so soft. Developing markets were up 4%, driven by China up 16%, Latin America up 4%, India down 7%, and the Middle East down 19%.
By modality, MR was flat, CT was down 5%, ultrasound was up 7%, life sciences was flat and diagnostic guidance systems, which is x-ray plus interventional, now DGS was down 10%. Service orders of $2,000,000,000 were down 1%. Revenue of $4,300,000,000 was flat driven by the growth markets up 10% offset by the developed markets down 4%. And segment profit of $595,000,000 was up 2% as the benefits of restructuring more than offset the impact of lower pricing and foreign exchange and margin rates here were up 30 basis points. Next is Transportation.
Transportation team delivered another solid quarter. Orders of $1,200,000,000 were down 26%. Equipment orders of $413,000,000 were down 59% as locomotive orders were down 70%, driven somewhat by tough comparisons and also the net impact of the slowing coal market on the rail industry. Service orders of 746 dollars were up 31% driven by strong signaling and orders pricing was up 10 basis points for the business. Revenues of $1,400,000,000 were up 12%.
Our equipment revenue was up 3% as the impact of lower locomotive shipments, 143 this year versus 159 last year was more than offset with higher mining volumes somewhat driven by the acquisitions. Service revenues were up 24% driven by higher long term contract revenues and mining services and segment profit of $267,000,000 was up 15% driven by the positive value gap in services growth and margins increased 50 basis points. For energy management, orders of $2,200,000,000 were up 6% driven by power conversion, it was up 8%, digital energy was up 11%. Revenues of $1,700,000,000 were up 2%, driven again by power conversion up 11%, partially offset by lower revenues in Intelligent Platforms, which was down 15%. And segment profit of $15,000,000 was down 29%, that's only $6,000,000 but that was driven by $15,000,000 of higher expenses in Asia and Brazil for expanding capabilities to deliver the global $2,500,000,000 backlog that's grown over 25% in the past year.
So segment margins were down 30 basis points driven by those investments and we expect this business to grow segment profit and margins through the rest of the year. Home and Business Solutions had another positive quarter. Revenues of $1,900,000,000 were flat as we saw 3% growth in appliances, partially offset by 5% decline in lighting sales. And segment profit of $79,000,000 was up 39% driven by the positive pricing and a little lower program spend and margins were up 1.1 points for the quarter. And next is GE Capital.
Mike Neal and the team delivered another solid result in Q1. Revenues of $11,500,000,000 were up 2%. If you exclude the impact of the 30 Rock gain, revenues were down 6% in line with lower assets. As I covered on the earlier page, the impact of the 30 ROC gain was offset by the restructuring and the reserve increases and I'll cover those by business. And net income of $1,900,000,000 was up 9% as we more than offset the impact of lower earning assets with core growth and the AFE tax benefit.
We ended the quarter with $402,000,000,000 of ending net investment, which was down $32,000,000,000 from last year and $15,000,000,000 from year end and our net interest margin was 5% and our Basel I Tier 1 common ratio improved 65 basis points to a little over 11%. On the right side of the page, you can see our asset quality continues to improve. Delinquencies were flat or lower across the board. Our non earning assets were down year over year and from year end and our liquidity remains very strong, $68,000,000,000 of cash and we ended the quarter with less than $40,000,000,000 of commercial paper and that's the first time in 21 years we've been under $40,000,000,000 so substantial change in the money profile of this business. By business, the commercial lending and leasing business ended Q1 with assets of $176,000,000,000 down 7% from last year, driven primarily by non core shrinkage including $7,000,000,000 lower Penske, lower trailer leasing, lower CECO assets.
Net income of 3 $98,000,000 was down 40% driven by the Americas. In the Americas, net income of $267,000,000 was down 51% and that's driven by lower assets as well as a $166,000,000 after tax impairment charge on one investment in the quarter. CLO volume was good in the quarter, up 8%. New business returns remained strong at about a 2% ROI and asset quality remained strong with flat delinquencies and lower non earnings. Our consumer business ended Q1 with assets of $137,000,000,000 that was up 1%.
Net income of $523,000,000 was down 37%, driven by the finalization of the portfolio segmentation that I covered earlier. U. S. Retail finance earned $382,000,000 which was down $259,000,000 driven by the reserve increase. Excluding the reserves increase, the business was about flat in the quarter.
Asset quality in this business continues to be very strong. Our 30 day delinquencies of 4.2% are at the lowest level we've seen in 10 years that we've been reporting on this basis. And U. S. Retail volume was up 6% in the quarter versus last year, core Europe earned $145,000,000 in the quarter.
For real estate, the team had another great quarter. Assets of $43,000,000,000 were down 28% from last year. They were down $3,500,000,000 from year end. Net income of $690,000,000 was up more than $630,000,000 from last year, again driven by the gain on 30 Rock. If you exclude the gain and the charge for the equity exits that I covered earlier, real estate earned $261,000,000 and that was up over $200,000,000 from last year, driven by higher tax benefits, lower losses and marks and higher gains.
In the quarter, not including 30 Rock, we sold 52 properties for $1,300,000,000 $121,000,000 of after tax gains and 30 day delinquencies at 2.16 percent at the lowest since the Q4 of 2008. For the verticals, both GECAS and Energy Financial Services had strong quarters in the Q1. GECAS earned $348,000,000 of net income that was up 9%. Earnings were driven by lower impairments and higher operating income and EFS net income of $83,000,000 was up 17% driven by higher gains. So overall, G Capital delivered another strong result in the quarter.
And as you look forward to Q2, we'll continue to have the loss of earnings from shrinking assets ahead of schedule. And if you adjust for the one time items that I covered, a normalized run rate for GE Capital, the Q1 was about $1,800,000,000 to $1,850,000,000 In Q2, we'll also have the preferred dividend payment for the first half of twenty thirteen and that is covered in our corporate line in our operating framework that Jeff's going to cover in a minute. So with that, let me turn it back to Jeff. Great, Keith. Thanks.
Just again on the 2013 framework, we have no change to the overall operating framework for the year. And by that I mean and specifically we expect our EPS to grow in line with previous commitments. The mix will change. We believe it's going to be hard for our Power and Water business earnings in 2013 to equal 12, which we've talked about previously, primarily due to the incremental weakness that we're seeing in PowerGen in Europe and Services. As a result, our industrial earnings will grow in the range of high single digits to double digits.
On the positive side, we expect capital earnings to be slightly better and our corporate costs will be lower. Previously, we were at $3,500,000,000 in corporate costs. So and we're now targeting $3,000,000,000 So that's an improvement of $500,000,000 We expect to hit our margin goals and we are on track to drive SG and A as a percentage of revenue to 15% by 2014, while organic growth could be at the lower end of the range. Now we've reflected the changes that we've seen in the market and we're going to be aggressive on costs as we go through the year. So on balance, the rest of the framework remains unchanged.
And finally, just in summary, some of our markets in the Q1 of 2013 were more challenging than expected. Europe was tougher and some of the short cycle markets were slower in March and we saw some push outs. But despite that, we still plan to achieve our full year EPS framework really based on power and water strengthening, stronger backlog and deliveries, capital strength and more cost out. And we plan to achieve our margin goals. We ended the quarter with a very strong cash position of $90,000,000,000 consolidated and $22,000,000,000 at the parent.
And we plan to return $18,000,000,000 to investors in dividends and buyback, while continuing to execute on bolt on acquisitions. So in a challenging environment, we're committed to delivering for investors. So Trevor, let me turn it back to you and let's take some questions.
Great. Thanks, Jeff. Thank you, Keith. Derek, let's open up the phone lines for questions. I know we have another earnings call today, so let's try to limit the questions to 2 apiece if we could today.
Thank you.
And our first question is coming from the line of Scott Davis from Barclays.
Hi, good morning guys. Hey, Scott. Just on the margin targets, Jeff, and I don't want to make you repeat yourself for the 3rd time today. But just to be clear, you are expecting to make the 70 bps for the year, including Power and Water, right, not excluding Power and Water?
Yes, including Power and Water, Scott. I think we started the year with more than we needed at 130, 140 basis points. We spent a little bit of that in the Q1, but we see Power and Water strengthening for the year. We think the margin rate for Power and Water will be kind of flat year over year. And even with that, we expect margin rates to grow by 70 basis points.
And we still have a hedge in that number. This is not an uncommon profile for us Scott in terms of the way that the year lines up and stuff like that. I don't know Keith you want to just talk through some of the dynamics of margins? Sure. Well, sure.
Let me just start with the profile and then we can go back to the pieces if you want, Jeff. Over the last 7 years on average over the last 7 years, we always have margin growth from the Q1 to the total year. And in 5 of the last 7 years, we have declines in the Q1. So it's not an uncommon profile for us. We grow our margins from the Q1 anywhere between 50 and 280 basis points.
On average, it's about 150 basis points. And in 2006 and 2010, we grew our margins approximately what we need for 2013. So it's not uncommon and we do have a lot of work to do and we can take you through the pieces either by the categories or by business, Scott, whatever you'd like. So that's Scott, I think that's what everybody is that's what we've got in all of our expectations and all the execution models for the team.
Okay. Fair enough. And as a follow-up, when you think about this backlog that you're building and book to bill is solid and such, but are you booking this backlog at a margin that's accretive to your existing margin structure that helps yield some confidence, 1, for the 70 bps, but also set us up for 2014 to see operating margins continue to move forward?
So the margins in backlog are actually higher. We've had good pricing, Scott, for the past 5 quarters. And our value gap when you really hone in our value gap is wildly positive. We had a very strong value gap in the Q1. That's only going to ramp for the year.
So the value gap could be $800,000,000 plus this year. And so I think that all portends to good health in the backlog.
Okay. I'll pass it on. Thank you, guys.
Thanks, Scott.
Your next question is from the line of Steve Tusa, JPMorgan Chase.
Hey, good morning. Hey, Steve. Hi, Steve. I guess, just my first question is on a little bit of, I guess, housekeeping on oil and gas. Definitely a weaker performance than I was expecting.
I mean, the margin down year over year, the orders there have been trending really well. You said Turbomachinery was down. Is that can you maybe give us a little bit more color around what drove the downside there?
You're talking about top line or you're talking about order?
Well, I guess top line and profit, I mean, I guess both.
Well, if you look
I'll start overall with orders. Turbomachinery had very strong orders. They're up 70%, by strong upstream. Again, those are a little longer cycle in terms of when they deliver. Drilling and surface was up 48%.
We had more BOPs and risers up, pressure control was up and artificial lift was up. Subsea, we had one big order delayed in the quarter. We had about a little under $500,000,000 associated with a large subsea project that's been pushed. We think that's pushed into the 3rd quarter. And on revenue, Turbomachinery revenues were down in the quarter.
I think some of this is timing. We had large LNG projects in the quarter relative to last year's Gorgon and LNG projects, Curtis project in Australia. Drilling and surface was up 6% with artificial lift up 15% and subsea was down 10%. Again, we had some tough timing relative to projects last year, but the backlog itself is up a couple of $1,000,000,000 and pricing is up for the 8th quarter in a row and it's a little longer cycle. I think the only softness in M and C Services was something we're watching.
It was a little less than we expected, a little over $100,000,000 as we just saw some push outs and people making pushing out investment decisions. But the core of oil and gas subsea drilling and production, turbomachinery has a very good outlook in terms of equipment deliveries. Hey, Steve, these guys were on a profit basis probably 30 or 40 weaker than I really wanted them to do this quarter. I still think this business is going to be high single digit revenue, strong double digit operating profit growth for the year. I think what Keith mentioned, we saw late in the quarter kind of a flow business in the control side that's something that we're not counting on necessarily getting better for the year, but was just kind of around the edges or else I think we would have done better in the quarter.
Got you. And then one just follow-up. I mean, again, we're kind of sitting here in a tough macro. This happened in the Q4. I guess when I look at these results and I listen to the you guys explaining what's going on here.
I mean, it's just it's mind boggling how many moving parts there are here, especially again in GE Capital. I mean, at what point do we again kind of maybe evaluate the size and complexity of the organization and make, I guess, a tougher longer term decision on the structure of the company. It just seems like a little bit of macro weakness kind of goes a long way and then and there's just many moving parts to even be able to forecast and manage it has to be a challenge. So I'm just curious as to how you guys view that in the boardroom.
Steve, let me just go back and tell you what happened vis a vis my expectations. And I just want to maybe talk openly and just give you a thought. I think the industrial side was about $200,000,000 weaker than I would have planned for, what our internal plan was. We basically saw Europe Europe was running negative 5%, negative 8% through February. By the end of the quarter, that was negative 15%.
That was a pretty big move. I think you've seen it reflected in a lot of other companies' announcements. On the short cycle stuff, we saw pushes pretty consistent with what other people have seen. Now given the volatile time, the leadership team created multiple hedges in the plan. We had a $500,000,000 We were always running corporate for less than what we needed.
We had other hedges in the company. So by the time you put it all together, we're basically consistent with commitments, which is the way you'd want us to run the which is the way you'd want us to run the place. So I just think look, I think we're explaining $200,000,000 out of a big company, but we've been able to offset that through other hedges and operating disciplines we've got inside the company, which is I think what you want us to do. So
Okay. I mean, I guess, yes, I appreciate it. I just I think this year is obviously the again, we're kind of sitting here and it's back end loaded. So it's the second half is a very serious commitment that I know a lot of the investors I talk to are going to be watching very closely. So I appreciate the comments and good luck.
Steve, we're focused on it as well. It's the way the all the comp plans are driven. And the basic cycle of Power and Water is more or less consistent with the way had talked about the year. This is a power and water story. If you look, our revenues take out the MVC gain, you look at industrial sales are down $1,300,000,000 Thermal and wind are down $1,500,000,000 This is what we're going to be wrestling through is that power and water volume profile that Jeff showed you.
Right. Okay. Thanks for the detail.
I appreciate it.
Okay. Thanks.
Your next question is from the line of Nigel Coe, Morgan Stanley.
Good morning, Nigel.
Yes. Thanks. Good morning.
Hi.
So just Jeff, you commented that on the 2% to 6% that more towards the lower end of that range for the full year. And it seems that the weakness in oil and gas
and the weakness in Power and Water are more of a timing issue. So we're seeing some push outs.
But the Water are more of a timing issue. So we're seeing some push outs, but the profile seems to be very much in line with what you'd expected. So I'm just wondering what else is driving us down towards the lower end of that range for the full year. I mean, first of all, I think it's prudent to do that because you had a negative 5% in the Q1. But I'm just wondering maybe in some of the short cycle businesses, where are we now versus where we were
in December? Nigel, again, I think the way we look at just in total how we run the company is we don't necessarily assume things are going to get better, right? So we saw I'd say not in a catastrophic, but we saw Europe marginally get worse during the quarter. We're now not counting on that getting better, right? We saw a couple of the short cycle businesses get pushed.
We've gone through a pretty granular analysis here of what we think comes back and what we shouldn't count on. And I think when you do that calculus, we just think the smartest thing to do is to say to investors, look, we think this could be at the low end of the range because we're not counting on stuff getting better during the year. If it does, great, but we're not counting on it. And we're going to take out cost accordingly so that we kind of hedge our bets. So that's really the answer Nigel.
We just don't count on everything coming back that got pushed and we don't count on things that we viewed getting incrementally worse getting better.
Okay. But when we calibrate our models, should we be putting a bit more pressure on health care and perhaps Home and Business Solutions or is it fairly evenly spread?
I think again guys, I guess if I were and Keith your views as well. I think, look, Power and Water, we would like to surprise you guys on the upside as you go through the year, right? So think about the Power and Water just profile in the year. And then other than that, I'd say Health Care was a smidge weaker than we would have expected, but we still think Oil and Gas and Home and Business and the other businesses are going to be pretty solid. I don't know, Keith.
Sure. I think you said it exactly right. When you look at what happened in the quarter, we're trying to take that into account and decide what does it mean for the year and not counting on Europe certainly getting a lot better. That's going to take it probably to the low end of the organic range. Power and water, we originally thought would be close to flat.
I think today we're saying power
and water probably for the year will
be down a bit and that's based on the profile that we saw in the quarter and our expectation of what that means for the year. You do see it getting better in the second half and you do see the recovery, but in total it's probably a little weaker than we wanted for the total year. The other businesses we'll see, I think we've got a great backlog in oil and gas. We've got to execute on the long cycle projects. What will we see in the short cycle there?
We'll have to see. I think healthcare could be a little the U. S. Market was a little we're talking about plus or minus 1% here, not a lot of change versus our expectations the healthcare model, I would say. So I think it's prudent to plan the way we are.
And as Jeff said, we're going to have to continue to grind away at taking out the costs. We've got more restructuring that will happen through the year, as we said. Committed to getting the $1,000,000,000 of cost out and it could be higher based on what we have to do to rightsize this place for this market.
That makes sense. And a quick one on the internal plan, the 1.3 points of internal target for margin. Does that include the additional benefit from restructuring from the NBCU gain? Because the 1.3 points is higher than I expected in some of the Yes,
it does. Yes, it does Nitro. That's really one of the drivers of the difference.
Okay. Thanks a lot guys.
All right.
Your next question is coming from the line of Julian Mitchell, Credit Suisse.
Thanks a lot.
Good morning, Julian.
Good morning. Hi. Yes, so if I think about the EBIT bridge, you called out kind of 4 main items behind that this quarter. Last quarter there was a 5th which was also service. If I think about service and R and D, I mean R and D you'd said back in January that should be sort of flattish as a margin driver.
Do you still believe that or I mean you highlight the fact that R and D was up 7% in Q1. Is there something extra on R and D pressure maybe around the LEAPEX or something that need to think about? And secondly on services, you had a plus plus there for services in the Q4 earnings slides. Services now you've had 4 consecutive quarters of flatter down orders. The commentary around European services is obviously very bad.
And I just wondered if your margin guidance embeds a recovery or how much of a recovery in services over the balance of this year?
Yes. I think the services, let me go to that point first. The services, we do expect services improvement as we go through the year. We have some specific items that we're working on. For example, in Power and Water, as Jeff talked about, we've got these path upgrades.
We've got over 50 of them that we're working on for the year. We sold 2 in the quarter. We've got a number of those in the backlog and a number that we still have to be closed. So I think there are some specific items that we do expect. We have some comparisons in Europe that could be a little bit better.
And the service margin rate was up 30 basis points in the Q1. So I think for us, when you look at the four factors on the margin page, mix, which does include equipment versus services, it was a positive 10 basis points in the quarter. We're estimating it will be flat for the year. We're counting on less wind. We're counting on more GNX engines as you saw, but that was kind of in the run rate in the Q1 and we're counting on some services growth as we expect equipment to grow as we go into the second half.
So we do have some services growth in the plan. R and D, Julien, will be flat. I don't expect that to be a headwind. I think we had aviation and oil and gas in Q1 that were at a higher run rate, but in total that's going to be flat for the year. It will be flat as a percent of sales.
As a percent of sales. Yes. And the what Keith said on margin rates, again, I think we've got a good window on margin accretion in the service business.
Got it. Thanks. And then just secondly on the top line, just on if you think about sequestration, I guess, and how are you thinking about that playing into your guidance for the revenue outlook in military aftermarket in Aviation and also for U. S. Healthcare?
Did you see much of an effect or it was kind of just noise that caused some push outs? And did that cause you was that a factor behind the low end of the revenue growth guidance comment?
Let me start with Aviation. We have about 90% of our equipment on firm order for the year. And so as you saw in the quarter, the equipment was actually up in the quarter, equipment deliveries. We believe that that's going to remain very strong. We're in certain programs that are priorities for the Defense Department and things that aren't firm commitment aren't being cut right now.
We did see a decline in service orders. Some of that was versus comparisons we had last year. And we'll have to see how that plays out for the year. It was down about 14% in the quarter on revenue. I think that's about what the team expects for run rates on services.
But in the back half of the year, we'll have to see how the sequestration in total plays out. I think there's a couple of offsets that you got to think about. One is our international military engine business is very strong. We had orders for about a little under 200 F-110s for the Saudi Air Force. That extends the production line of the F-one hundred and ten product through 2016.
We had India order for the light combat aircraft on the 414 and Switzerland on the 414, and we've got some significant orders in line for helicopter engines for both the Army and the Navy. So I think we're concerned about it on the short cycle side and services. I think it could put some pressure in the back half of the year. In terms of healthcare, the U. S.
Market was just slow. I don't find it to be there is a one driver. I think it's just the fact that there's a lot of uncertainty around healthcare. Providers are consolidating and they're worried about costs and making profit and then they're just being cautious on purchasing. So, there we got to drive our technology and we have to continue to drive the productivity and that's what that healthcare team is going to do.
I think their year is going to depend on continuing to do well in the emerging markets as well as taking the cost out. They had a good cost outperformance in the quarter and they got to continue to do that through the rest of the year.
Great.
Thanks. The next question is coming from the line of Jeff Sprague, Vertical Research.
Thank you. Good morning.
Good morning, Jeff.
Good morning. Hey, I guess first question is maybe on capital allocation dovetails a little bit with what Steve asked. There was an 8 ks that came out about a week after the proxy outlining that comp is going to be tied to 2015 industrial profits as a percent of earnings. I'm not sure why that wasn't in the proxy, but the real question is can you share that target with us? It seems very apropos kind of the valuation construct in the stock.
Well, Jeff, I again, I think the way to think about that is it's going to be consistent with what we talk about externally vis a vis kind of vision for the company over the next 3 years. So in many ways, you've got a perspective for that I'd say already. And it's a balance set of measurements. We've got a cumulative EPS. We've got a cumulative cash.
We've got a percent of earnings that are coming out of the industrial business, which we expect to increase through the growth playbook period here through that 3 year period as well as a return on total capital, which will also incorporate what are the returns from both our Industrial side and our Financial Services side, Jeff. I think if you Jeff, if you go back to the December outlook meeting, you'll see the guideposts. And I think what we try to do is triangulate between total EPS, wanting to keep that on a certain trajectory, managing the mix of industrial financial, generating cash and making sure that a return on total capital. So I'd say the 4 metrics we have are pretty interwoven visavis how we think about value creation and how our investors want us to run the place. Okay, great.
So But
I would go to the outlook meeting Jeff and just I think that gives you the guidepost.
That's what I wanted to clarify. Thank you. And then just thinking about industrial,
so just kind of trying
to put these pieces together, it looks like you're going to pick up $0.04 in corporate on the lower guide. It looks like capital tax rate is $0.04 It's unclear if industrial tax rate is a little bit lower. But it feels like you're taking a dime out of industrial. Is that the right way to think about it? And could you share why corporate actually is going to be lower than you thought?
I think Jeff what we're basically saying is we think about the segments, I wouldn't change any of those other than necessarily power and water. And I think we basically guided power and water flat and we're saying that could be down slightly. So I don't think we would agree with your math. Yes, that's very high. The capital tax rate is in the context of the total capital earnings for the year.
There is going to be a set of asset optimization transactions that we're looking at. Some of them will potentially us to have higher tax benefits and it may also go with lower earnings. So I don't think we're trying to do a direct offset for capital. And for corporate, basically what we've been able to do, first of all, we had some better performance in the Q1 from NBC. That won't continue obviously, but that's included in the negative $172,000,000 that we have sitting here.
And then on a run rate basis, we think we're going to be somewhere around $750,000,000 $775,000,000 of base corporate expenses. We are getting some benefits from our simplification efforts. We have lower spending across the corporate functions. They're going to be down 10% for the year and that benefit will help us on our overall cost goals of getting $1,000,000,000 plus out for the year, Jeff.
Okay, great. That's great. Thank you very much.
Okay.
The next question is from the line of Shannon O'Callaghan, Nomura.
Good morning, guys. Hey, good morning, Shannon.
Hey, can you give
us the gas turbine and wind turbine unit orders for the quarter?
Sure. Gas turbines, we had 8 units in the quarter. We had 4 steam turbines versus 1. On the wind turbines, hang on one second, I know I have it. It was down, but it was still on renewables, we had 584 wind turbines versus 696 last year.
So it's down about 30%.
Okay. And so I mean just thinking about this, right? I mean you shipped like 12 in gas turbines, you got orders for 8. What's going on by geography in that number? Those are I don't know when the last time I those were that low, but that's a pretty low number.
What are you seeing geographically? And do you have any visibility into things getting better?
Yes. I think they're very spread. Obviously, in the quarter, we got a couple Latin America, a couple in the Middle East, 1 in Russia, 1 in ASEAN, 1 in the U. S. So they're spread out.
I think as you look forward, we're expecting to be somewhere between around 120 and 130 gas turbines for year in orders. So you're going to see that pick up through the year. We do see some heavy activity in the Middle East. We've got some in EMEA and we've got some in Latin America and we've got some in Africa. So we it's pretty spread.
I think there's some core activity in the Middle East, which will be the foundation of that activity for the year. Yes, I see, Shneur, we the Macquarie report, we were up 3 points of share in gas turbine in 2012. So our position is still strong. And I think what Keith said, it's still our expectation to have 120 ish of orders in the year.
Okay. And then just a follow-up on the kind of the mix question. So in terms of getting to the 65% industrial earnings with the mix adjustments to this year that you made today, obviously 2013 is not going to be a year that really gets you far in that direction of the target. I mean do you with Power and Water kind of tracking below what you thought, I mean do you does this reassess your route to the target in terms of organic methods versus portfolio moves?
Again, I go back, Shannon. Look, I'd say the quarter was the macro was a little bit tougher than we'd expected coming into it. But we still expect to have a really good year industrially inside the company. And so I still think there is a good chance that our percentage of earnings in Industrial grows this year even with the adjustments that we made today. And look, we've always been very open on portfolio moves visavis what we're trying to do in GE Capital around really focusing on the green assets and being very open kind of an investor friendly way to look at the portfolio.
So we'll continue to work that. But we'll do it in a smart way. We'll do it in an investor friendly way. Again, I think if you go back to the question Jeff asked earlier, total EPS is a metric, how we allocate capital is a metric, industrial percentage of earnings is a metric, total CFOA is a metric. So we're going to drive value around all four of those metrics as we look at going forward.
But we expect to have a good year industrially this year. Sure. And you look at capital, we ended the quarter with $402,000,000,000 of any. It's down 30 $2,000,000,000 from last year. There's not a lot of just huge transactions in there.
I mean, we're continuing to run off. We got over $60,000,000,000 of non core assets. We continue to run those off. The real estate gain enabled us to add to the current real estate plan, another $2,000,000,000 of equity assets that we expect to exit this year. And so you're going to continue to see asset declines based on the red asset runoffs.
If we can get a little better GDP and a little higher growth in the CLL business, that'd be great. But right now, you'd say that market continues to be relatively flat for asset growth and we need a little better economy to see that pickup. So right now, I would expect that you're going to continue to see any declines in GE Capital.
Okay, great. Thanks guys.
All right, Shannon.
Your next question is from the line of John H. Deutsche Bank.
Thank you. Good morning, everybody.
Hey, John. Good morning,
John. Just I want to pick up on the capital issue. What Jeff and Keith do you think is the dilution associated with capital downsizing say in 2013 year over year? And obviously that includes some of the actions that you described based on the gains that you were opportunistically able to leverage this quarter?
Well, just on actual volume down, if you took $35,000,000,000 at a 1.5% return that would be a total year estimate of sort of the lost margin, lost earnings that they have. Now they offset some of that with cost. Our new business volume has been at better returns. But that will size it for you roughly, if that's what you're asking, John.
Yes. No, it is.
So from
an E and I context, Keith, I mean, E and I is going to drop sub-four 100, I'm assuming relatively quickly. Where do you think it ends? Like what's the trajectory ultimately? Is it you just subtract the $60,000,000,000 and we have some optionality around some of the other possible investments like in offshore banks or some of the other stuff? Or is there some other offset to that?
Well, the team is not trying to just have $60,000,000,000 of non core assets go out and not grow the core business. I mean, we're actually trying to remix, as you know. So far though, if you look at the last couple of years, our runoff of non core has exceeded our remixing. So it depends upon what that remixing looks like. Right now, we're we continue to be active in the market.
Our organic volume is mid low single digits and we have a lot of refinancing that has occurred. We would like to acquire some portfolios if we could find the price to match our objectives on returns, we would do that. So we have capacity, obviously. We've been shrinking and building up the equity. But so far, if you just look at what's happened so far, the runoff of non core has exceeded the remix into the green assets and we'll see what happens.
As we've said in the framework discussions, big material portfolio moves are not part of the base plan, but we're going to look at those opportunistically. We do have some value maximizing franchises in the business, obviously. And if we had the opportunity to move some of those based on the market or buyers or better appetite, we would definitely evaluate those. But right now, the base plan is to continue to remix. If you look at the last couple of years, the runoff has exceeded the core growth.
We'll see how that plays out and we do have opportunity on value maximizing.
Yes. No, that's helpful. Thanks. As a follow-up, could you guys spend just a second on China? It actually seemed to be one of the brighter spots in your quarter.
And just in terms of China is obviously kind of was in a recession last year. What are you seeing today in your businesses there and the trajectory? And maybe you could put it in the context of price and orders and just how you're feeling about that market and its future contribution?
So what I would say John is look we had revenue up double digits last year. We had revenue up double digits in the quarter and we had orders that were up 60% to 5. 70%. Almost 70%. So I the way I always try to answer this is that we are a composite of the businesses we're in and not necessarily a reflection of everything.
So you think about our 3 biggest businesses, which are Aviation, Healthcare and Power and Water, all three of them are in a pretty good cycle right now. Healthcare continues to grow strong double digits. Health care was up 14%. Aviation was very favorable. It had $900,000,000 of orders.
Oil and gas was a good quarter, up 76%. Energy power was down about 30%. But I mean power was
down about 30%. But I mean
power was down about the gas tailwind over time with more gas turbine demand visavis coal and other fuels. But I think over the long term is going to pertain well. So we think China was going to be a good story. Great. I
guess the question is, I mean Europe not just for GE but others downside surprise this quarter. It sounds like China was a little bit of an upside surprise. Is this do you think this trend is sustainable? Or is there some sort of a some kind of a first of year blip or aberration because of the timing of who knows what? Just something perhaps that
John, I think our growth region story is still pretty strong. Orders up 17% overall. I don't think we see this as a we see this as more of a tailwind than a headwind for the year. I think you got to levelize the 70% order rate. I mean, we're planning on double digit order rates in China and the start to the year gives us confidence that we'll have that for the year.
Got it. Thanks guys.
Yes. Your next question is coming from the line of Deane Dray, Citi Research.
Thank you. Good morning everyone. Good morning.
I was hoping to get some color on the updated restructuring plans for the balance of the year. Your initial plan was the bulk was coming in, in the second and third quarter. I see some slipped into the 4th quarter. But just comment on the timing. What are the areas you're able to talk about on the balance of these restructurings, the payback?
And just we do recognize that these will be excluded from operating results because you've had part of that gain slip through or fall through on the Q1?
Well, that's right. We've tried to give you the profile. In the second, third and fourth quarter, it's really a function of getting all of the work complete to be able to meet the criteria required to do the accounting. We have to have the plan finalized. We have to take all the actions, including getting whatever approvals might be required of works councils or negotiating with unions that we have contractually in place.
And some of those things are just going to fold off fold into the second, third and fourth quarter. And some of that money that's in the second, third and fourth quarter is related to projects we've already approved. It's just the timing of getting those expenses accrued on the restructuring will fall into those later quarters. The majority of it is going to be headcount and plant closing and site closings. We continue to downsize our footprint and as part of simplification, people are reducing the number of profit and loss centers across the company.
We are reducing the number of business sites. We're consolidating into common lease facilities. We're closing some of our older capacity plants. You've seen some of that in the U. S.
And consolidating into different facilities that are more productive. So we've just got a tremendous amount of activity. It's spread across the world. It's about probably about a half in the U. S.
And the rest spread between Europe and Asia, a little bit in Latin America and it substantially reductions in compensation and benefits and then facilities.
Great. I know we're The payback is about 18 months, Dean.
You asked about the payback.
Yes. Okay.
Thank you. Thanks, Steve.
Your next question is from the line of Steve Winoker, Sanford Bernstein.
Good morning. Hey, Steve. Hey, Steve. Hey, just to switch gears to capital for a second. Any reason that you'd have to believe that the context is different in terms of thinking about the dividend announcement that was made roughly in May last year as you look out now?
Any reason to believe that things are have shifted in a way such that we should be thinking about that differently in 2013 versus what happened in 2012? Well, I don't believe so. As you
know, we're not one of the CCAR entities. We do go through our own process that mirrors a lot of that activity 1 on 1 with our regulator. We don't comment on any of those discussions. We have done obviously stress tests and capital plans and we'll work constructively with them on that. And we our current expectation is that the timing would be similar to last year.
And if that changes, we'll let you know, but that's our current expectation, Steve. Steve, the E and I is lower and the ratios are better, right? So this GE Capital is in very strong position right now.
Okay, great. And just a minor question, but Safran had talked about $200,000,000 of additional spend in the LEAPX and Silvercrest. So it's obviously across 2 engines there. But that I'm just trying to equate sort of your responsibility in the LEAP X side. Have we seen whatever tick up there might be already?
Because they said that was additional spending that we're going to be doing going forward. Have we seen that with you guys already? Well, you saw the
R and D in aviation is up. We do expect and have that in the run rate. The trade off that we have is the Gen X spending on the PIP programs comes down. But aviation spending a lot of money. In total, for R and D, we expect it to be flat as a percent of revenue for the business.
Aviation will probably be a little higher than the other businesses. And it's in line with all the new programs that they have, as you said, the LEAP, the Passport, the finish of the PIF programs on the Gen X.
Okay, great. That's clear. Thanks
a lot. Yes.
And the next question is from the line of Andrew Obin, Bank of America Merrill Lynch.
Thank you very much. Good morning, Andrew. Good morning. Just a question on restructuring. So I think you mentioned that there is a 18 month payback on restructuring?
That's right.
So can you just talk about what was the margin cushion before NBCU divestiture right when you're up the restructuring targets?
It was more than 70 basis points. The restructuring obviously is added to it. I don't have that broken out specifically. It did give us a Couple of $100,000,000 maybe something like that.
Sure.
Yeah. Sure.
Okay. But from that perspective that should flow into 2014 as well, right?
Yes. No, look like I said, we're going to by 2014 SG and A as a percentage of revenue is going to be 15%. We're on that path and we're going to stay on that path.
And can
we have a pretty
good go
ahead. And just a little bit more granularity as to which businesses you're going to sort of do restructuring in throughout the year, how that will flow business by business for the year, if you can do that?
I don't have it split by business. I think it would be pretty similar to the profile that I gave you. I gave you the dollars by business for the 1st quarter's restructuring. I don't see any reason why we wouldn't have a little higher proportion in the Power and Water Energy Management and
Healthcare. Terrific. Thank you very much.
That should be the 3 priorities.
Great. We've hit all the questions. So just to close out today, the replay of today's webcast will be available this afternoon on our website. We'll be distributing our quarterly supplemental data for GE Capital soon. I have a couple of announcements regarding some upcoming investor events and dates.
Next Wednesday, April 24 is our 2013 Annual Shareholders Meeting in New Orleans. We hope to see you there. On May 22, Jeff will present the 2013 Electrical Products Group BPG Conference. On June 19, David Joyce and Norman Liu will host an analyst meeting in conjunction with the Paris Air Show. And then finally, our Q2 2013 earnings webcast will be on Friday, July 19.
So thank you, everyone. As always, we'll be available today to take your questions. Thank you.
Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.