FINAL TRANSCRIPT

Conference Call Transcript

GE - 1Q ’05 Earnings Call

Event Date/Time: Apr. 15. 2005 / 8:30AM ET Event Duration: 1 hr 8 min

Thomson StreetEvents [email protected] 617.603.7900 www.streetevents.com 1 © 2005 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. FINAL TRANSCRIPT Apr. 15. 2005 / 8:30AM, GE - 1Q ’05 Earnings Call

CORPORATE PARTICIPANTS Bill Cary General Electric - VP Investor Communications Jeff Immelt General Electric - CEO Keith Sherin General Electric - SVP Finance & CFO

CONFERENCE CALL PARTICIPANTS Nicole Parent Credit Suisse First Boston - Analyst Don MacDougall Banc of America Securities - Analyst Scott Davis Morgan Stanley - Analyst Bob Cornell Lehman Brothers - Analyst Deane Dray Goldman Sachs - Analyst Ann Duignan Bear Stearns - Analyst Peter Nesvold Bear Stearns - Analyst Steve Tusa JP Morgan - Analyst Robert McCarthy CIBC World Markets - Analyst Brian Langenberg Langenberg & Company - Analyst Tony Boase AG Edwards - Analyst John Inch Merrill Lynch - Analyst Jeff Sprague Smith Barney - Analyst

PRESENTATION

Operator

Good day, ladies and gentlemen, and welcome to the General Electric first quarter 2005 earnings conference call. At this time, all participants are in a listen-only mode. My name is Rachel and I will be your coordinator today. If at any time during the call you do require assistance, please press star followed by zero and a conference coordinator will be happy to assist you. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Bill Cary, VP of Investor Communications. Please proceed, sir.

Bill Cary - General Electric - VP Investor Communications

Thomson StreetEvents [email protected] 617.603.7900 www.streetevents.com 2 © 2005 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. FINAL TRANSCRIPT Apr. 15. 2005 / 8:30AM, GE - 1Q ’05 Earnings Call

Thank you very much, Rachel. Good morning, everybody. Welcome to our first quarter earnings call. We are delighted to be here this morning to talk about our results for the quarter. Please remember that this is a webcast. So if you haven't done already, please refresh your browser so you can see our slides. You should have the press release that we put on the wire about 6:30 this morning and the slides that -- that we are going to take you through are available on our web site at www.ge.com/investor along with some is supplemental information. Again, if you don't see it, please refresh and you can download and print to -- the slides to follow along. Also please remember, as always, elements of this presentation are forward-looking and are based on our view of the world as we see it today and, of course, our businesses in that world can change in the future. So we ask that you interpret our comments in that light.

This morning we are going to cover our current quarter performance, a quick outlook for the second quarter of '05, and, as always, we will allow time for your questions at the end of the presentation. So with that, we've got Keith Sherin for our first-quarter results, we are pleased that he is healthy, and Jeff Immelt, our CEO, is with us as well. With that, Jeff, let's take it off.

Jeff Immelt - General Electric - CEO

Great, Bill, thanks, and good morning. Just to dig right into it. Our businesses and our news markets are seeing continued strong growth. This is what we expected and what we are seeing. Orders were up 16% and really reflected growth across the Company and asset quality remains strong. And behind this momentum our first quarter financial results were very strong. Revenue was up 19%. Our organic growth was up 10%. Earnings were up 25%. EPS at $0.38 were up 19%. We had nine of eleven businesses growing double-digits. Energy and Insurance both had very strong quarters. And the initiatives, service revenues up 15%, growth platforms up 9%. And we saw good growth around the world up 33%. Cash continued to be strong. Industrial CFOA was up 19% and total CFOA up 10%. And we continued to really execute on our strategy. The Genworth secondary was completed.

We are very pleased with the way the stock is trading and that allowed us to eliminate parent-support debt. And the portfolio, that really we have been working on the last few years, really is working for investors and the new capabilities we've added are really doing well. So, first quarter we are really at the high-end of expectations and we have excellent momentum going into the second quarter. The next page just looks at some customer wins. I am not going to go through each of them, but they show a variety of the themes really around the Company. Energy had good momentum globally. We continue to see good momentum in China and some of our investments and product lines like Wind showed good growth in the first quarter. Transportation is really a story of product and service growth. The evolution locomotive and getting positioned for GEnx wins, we think, give us good momentum and the service that goes with that continue to be very strong. Healthcare really had a great quarter. The best we have seen in several years behind new products that we think are really going to accelerate during the year.

Consumer Finance, good growth with retailers as we continue to expand on that front. Commercial Finance, good global growth and continue to build a portfolio through acquisitions. NBC Universal really showed the strength of diversity. The entertainment cable operating profit was up 20% and we had a very strong quarter in -- in the parks and movies and DVDs and we see good momentum on those fronts. Infrastructure, really the momentum behind some of the acquisitions that we completed and great organic growth in these marketplaces. Consumer and Industrial had an excellent quarter. Lighting revenues were up 11%. Our high-end appliance strategy really is working and even the Consumer Industrial segment showed real strength. And many new products introduced in the -- in the Advanced Materials segment which allow us to grow the -- the high-end of that product line.

Keith Sherin - General Electric - SVP Finance & CFO

Well, let me pick it up here with orders. Obviously they continue to be very positive. Total orders for the Company in the quarter were 17.6 billion, up 16%. And if you look at the way we have reported our businesses. Here on the left side we've got the flow orders, ex-acquisition disposition. You can see that in total for the Company up 10% in the quarter, strong Advanced Materials, Appliances up high single-digits, Lighting up 11. So nice broad growth in the quarter. Major equipment in the middle, up 31%, which is just a terrific result. You can see that the strength in Energy, the strength in Transportation, and the strength in Healthcare, including Biosciences. And if you look at services on the right side up 11% in the quarter, just continued strong double-digit growth. A nice spread here, Energy up 8%, Transportation up 15% and Healthcare up 12.

So the orders remain strong and the current second quarter estimates are in line with our first quarter performance. A little bit about the portfolio of quality. It continues to be very strong. On the left side we talk about our delinquencies over 30 days past due. Basically on the -- on the Consumer side, you can see the delinquencies are flat globally. And on equipment financing the delinquencies were up 16 basis points. 15 basis points of that changes from the acquisition of Icon. And if you adjust for that the Commercial delinquencies are also flat. If you look on the

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bottom left, you can see that we don't have any aircraft on the ground out of our 1200 aircraft portfolios. So Henry Hubschman and the GECS team continue to do a great job utilizing their assets. On the right side you can see the equipment services businesses continue to experience strong economic demand.

Utilization is up 5 points. Of that 5-points improvement over the year one point comes from improving our own fleet quality. We are de-fleeting older units. And four points come from better customer demand. We have about 50,000 more units out with customers than we had a year ago. So, containers, trailers, trucks, railcars, very positive for the equipment services business. If you look at the total results for the first quarter, you've seen the highlights in the press release. We had a tremendous growth quarter. Revenues 39.8 billion up 19%. Industrial sales up 25%. Financial services revenues were up 13. And net revenue where contributed value was also up 13 taking out the interest costs.

So net earnings of $4 billion up 25% and earnings per share $0.38, up 19%. The earnings per share variance is a little lower than the earning variance because of the additional shares that we issued last year for Amersham and Universal. On right side you can see the earnings dynamics. 3.2 billion of earnings last year in the first quarter, operations very strong, up 900 million. Pension, which is non-cash, and insurance together combined for a small impact of about $100 million year-over-year. So, $4 billion in the first quarter. The bottom right I have listed the tax rates for industrial and financial services. And right now these -- these reflect our current estimates for our total year rates. Of course, there are tax planning opportunities and income mix changes that could effect our rates for the remainder of the year. In the quarter the industrial rate was basically flat, it's up 3/10 with no major changes. And the financial services rate year-over-year was down 1.3 points, driven by the continued benefits of the America Jobs Creation Act which is the ETI replacement. And that's partially offset by higher U.S. pretax income growth but pretty close to where we were last year.

The next page is just a summary. We are obviously really pleased with the segment performance. When you look at the first quarter, the numbers are consistent with what Jeff and Bill outlined in the year-end conference call. Clearly Energy and Transportation are both in an improving part of the business cycle with great results and what we expected. Healthcare plus Infrastructure plus Universal all benefiting from both organic and acquisition growth. Commercial and Consumer Finance, just solid underwriting and great risk management. Our portfolio quality continues to give us benefits there. The cash generators are having good a performance. And at the bottom Insurance was impacted by the Genworth IPO and I will give you more detail by segment in a few pages, but nine of eleven up double-digit.

On growth, we have talked about initiatives to drive organic growth and in the first quarter our organic growth was -- was up 10%, and we had six of eleven businesses that grew in excess of the 8% target. And really it is based on some very sound fundamentals that we think are sustainable, both through the rest of this year and into the future. Product services continued to see good expansion, revenue grew 15%. We continue to grow our CSA commitments in that activity. Energy had a very strong quarter from a service standpoint, as did Transportation and Healthcare. And, again, these are revenues that are in backlog and seeing good momentum. The growth platforms were up 9%. We saw strong double-digit order growth in oil and gas and water. And good revenue growth really across the board. Telemundo up 23%, Security up 34%, Healthcare IT up 7%. So good performance by the growth platforms.

Global revenue was up 33%. We saw strong revenue growth in lots of different parts of the world, China, again, up 55%, and we think globalization continues to be a good asset for us. And imagination breakthroughs. We've talked about having 80 imagination breakthroughs. We will have twenty generate revenue in 2005, and this just gives you some of the highlights. We have had a great launch of our VCT product line. The Dual Card in Consumer Finance has had 13 launches to date. The evolution engine is winning market share in the locomotive segment, 1300 units in backlog at high average selling prices. And mobile water, which is a new business for us, is now at a $100 million run rate and that really takes the service model that we have created in a lot of the other parts of the Company into the water space.

So, again, these were all hardcore initiatives that we have had in place for several years that are now delivering, and we think this is what is going to drive casual, sustainable, organic growth, not just in the first quarter but into the future. Jump to first-quarter cash flow. We are off to a good start and we are on track with what we expected. Total CFOA was up 10%. You can see that we have split it between the GE Capital dividend and the industrial cash flow from operating activities. The GE Capital dividend last year went from 400 million last year to 200 million this year. This year we had no repeat of the 200 million special dividend related to the FGIC Insurance disposition. So, on an operating basis it is the same. You can see the great strength in the industrial cash flow from 2.2 billion last year up to 2.7, up 19%. It's in line with our earnings growth. Down at the bottom, we returned $2.4 billion to shareholders. You can see that over on the walk on the right side with our dividends and our stock repurchase. The dividend yield today is about 2.5%.

We are really thrilled that we eliminated the parent-supported debt. I'm going to talk more about that in a few pages and we didn't have any special dividend in the first quarter, as I mentioned. The right side is the cash balance walk. We started the year with 3.2 billion. We had the CFOA from the left side the page at 2.9 billion adding, our dividends and stock repurchase back to shareholders, our P&E. We closed two important acquisitions in the quarter, Edwards and Ionics. And the change in debt rounds out the cash balance at $1.5 billion. So, our acquisitions,

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a little front-end loaded, but we are on track for a total year estimate of CFOA up 10 to 15%, about $17 billion. And during the quarter, we completed an important program that really demonstrates GE's financial strength. On the left side you can see the total program we've had to reduce parent-supported debt back in November '02 at $17 billion. In March of '05, we are happy to report it is at zero. With a secondary offering of Genworth, we used the 2.6 billion of proceeds to finalize the parent-supported debt paydown. That's been eliminated three quarters ahead of schedule and, as a result, we are able to increase the GE Capital dividend in the second quarter from 10% of earnings up to 40%.

In the middle, we continued to improve our dividend to shareholders. The actions our board took in December resulted in our 29th consecutive annual increase. We've paid dividends for over 100 years. And now that we have completed the parent-supported debt program, we can also accelerate the buyback that the board also approved in December. We are excited about this investment. We bought back about 100 million in the first quarter and will ramp up to spend about 3 million for the whole year. So, up to $15 billion share repurchase through 2007 and we are thrilled to be able to accelerate in the second quarter. So the dividend increase and the share repurchase are great for our returns for shareholders. Now just a -- an overview look at kind of the second-quarter operations before I jump into the businesses. We got a great profile. You can see that another big milestone here for us is Energy turns positive, expecting operating profit to be up 5% to 10%. And then continued strength in our other businesses. Down the line you can see we just got terrific, both revenue and segment profit Vs.

On the right side, you can see the total outlook for the company, strong overall revenue and earnings growth. And we are looking at ten of eleven up double-digit and depending upon where Energy comes in, we could have the whole portfolio up double-digit. So, we are reaffirming our second quarter guidance, $0.42 to $0.44, that's what we had out there before. And our second quarter year-to-date Industrial cash is going to be consistent with what we said as well, up 10% to 15%. So now let me jump into the businesses. Start with Advanced Materials on the left side. They had a terrific quarter, obviously, $2.2 billion of revenue up 18% in operating profit, great leverage up 61%. Really the revenue is driven by strong pricing. For our -- for the whole segment, price is up 24% year-over-year and volume is down about 7% and the team's making the right trade-off on the price volume.

For plastics, in February we executed our fifth price increase that we have done in the last 12 months. And on the price realization, we have already realized about 80% of those increases, and we are getting more price back than we are experiencing in material inflation. But, we continue to experience high material inflation. Benzene for the quarter was an average of 3.17 a gallon which is up versus $1.90 last year. April closed at 3.87, so that continues to be a pressure point. But the great news for us here is capacity utilization in polycarbonates over 90%. We are driving price and we are seeing some share loss at the low-end. We are walking away from some low-end ABS and low-end PC.

Overall for the whole segment here if you look at the quarter, operating profit, price is up about $400 million, inflation and other costs are up about $285 million, and volume is slightly lower, about $10 million. So a terrific result in the quarter. When you roll forward to the second quarter, the dynamics look pretty similar to us. We expect to have price continue to be ahead of inflation, operating profit up 50% plus, and we are working with a team on more price and smart trade-offs on volume. On the right side, Consumer and Industrials also a very good quarter. You can see results as reported. Revenues were up five and operating profits up eleven. If you adjust for the dispositions that occur during the year last year, principally motors and some small home electrical products, you can see the results are even better. Revenue really, on an adjusted basis, was up double-digit and operating profit was up very strong.

So, this team is also doing a good job on the volume and price trade-offs. Basically volume and price were about 60 million positive, more than offsetting the material inflation, about $50 million. So appliances, for example, right now, are implementing their second price increase. And we are doing a great job in the marketplace. We are following the strategy. It continues to work on high-end appliance unit growth. You can see the V's very strong on the high-end for us on monogram profile. In our industrial part of the business, we had a very strong quarter. Commercial Industrial revenues in the lighting business were up 11, our GE supply business up 21. So pretty good activity that we are seeing in -- in that sector.

Second-quarter dynamics are, again, as we said on Advanced Material, pretty similar to the first quarter, good operating leverage and continuing to make that sure that we recover our inflation with pricing. Switching to the next page, start on the left side with Healthcare. Just a great quarter overall, $3.3 billion of revenue up 33%, operating profit up 21. That does include the Biosciences. If you -- if you look at the quarter, we just had a great orders quarter. Healthcare technology orders for equipment was up 19%. You can see CT was great up 34%. We took orders for 124 VCT units. We have a backlog of 190 units. We are sold out and we are working on increasing our capacity. On the MR side, we had a great quarter up 88%. We sold 33 TMRs and we've got great activity in our high-definition MR. And that's selling great globally. Ultrasound had a great quarter. Services had a great quarter. For revenue for the technology business, revenue was $2.6 billion, up about 5%. In the Americas it was up 7, Europe was up about 7 and Asia it was up about 3.

If you look at the Biosciences business, we had a great quarter, solid growth in medical diagnostics. The revenue is up 25% on a comparable basis to last year. Protein separation's revenue was up about 31%. And the orders, when you look, give us a lot of confidence as we go into the second

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quarter, operating profit up 15 to 20, broad-based strength. We are getting the benefit of about 50 million of synergies in the first quarter. We're on track for 250 million for the total year, and -- and the second quarter should be pretty strong as we said. In the middle is NBC Universal. Also another -- the whole portfolio really performed here. They had ar great quarter, revenue, obviously, favorable and operating profit up 80%. If you go to a comparable basis, as if Universal was there in the first quarter last year, the revenue is up about 5 and the operating profit is up about 20. If you look at the pieces, the network revenue was up about 6% and the operating profit was up 35%. So very strong.

Cable in total was up about 8% of revenue, up about 8% in our profit. Parks were favorable. Film was down a little bit on revenue. We had a few less DVDs than the last year in the first quarter, if you had it on a comparable basis, but profitability was up about 16%. And stations were down about 15% on out profits. So, again, it's the portfolio. Our entertainment cable is fabulous. You look at the entertainment stations, Bravo, Sci-fi, USA, they're up about 23%. The film business, both at the theatre and the DVD releases, had a very strong quarter. Jeff mentioned Meet The Fockers is the all-time highest grossing comedy. Another movie that did well for us was White Noise. The DVDs of Ray and Friday Night Lights did very well. And while the network ratings are tough, we are encouraged about the mid season replacements. And when you look forward to the second quarter we expect to see a profile similar to the comparable basis, operating profit up 15 to 20%. We are ready for a nice -- great film and great cable quarter.

We do have some tougher comparisons on the network and we'll be comparing to the Friends and Frazier finales there. We got about 75 million of synergies in the quarter. We're on track for the $350 million total year and the business is really doing a great job on an integrated basis. On the right side is Infrastructure. A great quarter, revenues obviously very strong, our profit up 30. Even -- even ex-acquisitions here, you look at the revenues up 13 and the operating profits up 19, driven by water. Water had a very strong performance, revenue up 19, orders up 13. Securities got good strength in the core product lines. We closed InVision and that's contributed about $65 million of revenue and good margins. And the homeland protection remains a little uneven, but we have got a lot of great orders that we are working on with Homeland Security. On a reported basis, the orders were up 58% including InVision.

We are thrilled about closing Ionics, giving us desalination capability and a nice services business. And we're thrilled about closing Edwards, given the business fire safety. Those will start to contribute both revenue and operating profit in the second quarter. And you look at the profile here of both revenues going to be very strong and our profit very strong in the second quarter for the Infrastructure businesses. Switching to Consumer Finance and Commercial Finance, both had great quarters. If you look at the numbers on Consumer Finance, just fabulous assets at 150 billion up 40%. The asset growth was driven by core plus acquisitions. One thing that we adjust for here is if you look we did buy a secured mortgage business in Australia called AFIG, it is talked about in the 10K and the Annual Report. If you adjust for the secured portfolio that we consolidated, you are dealing with about 28% asset growth. And ex-FX you're dealing with about 21% asset growth, right in line with the earnings. So, I think that's a more comparable way to look at this.

Net income is up $133 million, it's really driven by core growth. About 140 million, we got a little bit from acquisition, about 20 million, and it's offset by lower securitizations, about 35 million. And it is broad-based. The Americas had a fabulous quarter, up 28%, up $46 million, and that growth is really coming from the card portfolios, SAM's, Gap, JC Penney, Lowe's. Europe was up 11%, it's up $30 million. Eastern Europe and southern Europe offset a slower UK and in Asia the results are great, up 33%. Japan is basically flat. It's up a couple of percent but the rest of Asia and Australia is up about 80%. So the acquisitions plus the performance of the businesses has been really strong there. We -- we continue to do a great job with new products.

The Dual Card launch is spreading all around the world. We've got millions and millions of cards out there and that growth is accelerating. And the portfolio quality remains strong. We showed you delinquencies were flat and the rest of the portfolio quality is really in line and we expect a similar profile to the first quarter and second quarter. On the right side, the Commercial Finance business had another great quarter, assets up 6% and income up 21. You know, this -- this team continues to get leverage from both productivity and higher returns. The return on equity here increased 215 basis points in the quarter to 20.3%. We had -- we had great core growth, the earnings were up 196 million. The core growth was about 110 of that and a big contributor was lower losses from the portfolio quality. We had some acquisitions that contributed. And it was offset somewhat by lower securitizations, about $30 million. So broad -- broad-based execution in Commercial Finance as well. This is a terrific profile. Real estate was up about $50 million. We had some nice property sales in the UK. And some of the acquisitions that we made are really performing.

Aviation had a good quarter, 163 million, up 13%. We are getting the favorable tax benefits from the American Jobs Creation Act in this segment and that was somewhat offset by some impairments. We took about 129 million after-tax of impairments in the quarter. Basically we have about 48 older aircraft that we packaged up and have commitments to sell, MD-80s, some older A300s, A310s, greatly improve the portfolio quality. So, that happened in the quarter. As I mentioned no aircraft on the ground at GKS. There are a couple points about GKS. All 50 new aircraft that we are going to take delivery from the major air-framers on in the year are placed and 99% of the aircraft that are going come off lease during the

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rest of the year are placed. We have one aircraft to go. So this team is just doing a great job on managing assets. Overall, strong operations, great asset quality and another terrific quarter, and second quarter has a nice profile.

Shifting to insurance. There is really two pieces in the insurance results now. One is what are the -- what's the impact of Insurance Solutions, the business that was formerly Employers Reinsurance. On that business, we had 151 million of earnings in the quarter, up 8%. Prices up slightly. Volumes down slightly as we continue to resize the book. We did have lower adverse development offset by some wind storms and some unfavorability and life mortality. Overall up 8%. We continue to have good operating results there. We are maintaining our disciplined underwriting approach. We are working the strategy. We continuing to exit on profitable lines and we're going to continue to work on reducing our investment.

The second piece is the GE share of Genworth. In the quarter that amounted to $238 million. Last year it was 271 million, so it is down slightly, that is driving the income change in the quarter here for us in total in insurance. The secondary offering contributed a $86 million gain. And then the balance of that earnings came from our ownership share of the Genworth earnings. So, about 150 million. On the right side, as I mentioned earlier, we are -- we are thrilled to complete the Genworth secondary. We completed it in March, sold about 99.9 million shares. We got the 2.6 million of cash proceeds and paid off the remaining parent-supported debt. Right now we own about 51.7% of Genworth. It has a great value, the stock continues to perform very well in the marketplace. And we are going to reduce our ownership in an orderly manner over the next 24 months.

In terms of the second quarter outlook, net income is forecast to be somewhere around 200 million. We think -- obviously, there is no repeat of the Genworth loss on the IPO that we had last year in the second quarter. And we -- we will have a significantly lower percent of ownership of Genworth. And than on the Insurance Solution side we think that will be approximately flat with last year. And that's our current forecast outlook, about 200 million. Moving on to Transportation, just very strong results in the segment. You can see revenue up 10 and operating profit up 17, really driven by great performance in our aircraft engines business. Revenue there about $3 billion, up 7%, and operating profit of 650 million, up 19%. Engine deliveries were about flat at 487 units. But total orders in the quarter were up 16, and was driven by spares. You can see this -- strong Commercial spares momentum continues.

We were able to increase the backlog a little bit as our shipping rate was about 14 million a day, our order rate was 16 million a day. This is supported by lots of flying activity. We've got U.S. revenue passenger miles we're up all the way through the first quarter, they're up 10% in March. Freighter volumes are up 10%, 10% plus when you look globally. So there's just a lot of supporting activity for the spares business. With our younger fleet and our more fuel-efficient engines out there, we are the ones who are getting some pretty good utilization. The rail business also was very strong. We are sold out of our new EVO locomotive. We've got 650-plus units in the backlog and rail services also had a great quarter, up 22% in the quarter. So, the second-quarter dynamics look pretty good. Double-digit operating profit growth driven by the strong spares and great equipment delivery. On the right side is Energy. And this team just continues to meet expectations.

Actually in the quarter, the revenue was slightly better when you look at 4.5 million, up 16%. That was driven by service revenue, was a little better up 22%. And the Wind revenue was up 3.5 times and you can see down below the Wind revenue of $420 million. We had 283 Wind units, versus 74 last year, contributing to that revenue growth. On the profit side, we just had great growth in services. As I mentioned, the revenue is up 22. That fueled a nice profit growth. That was offset by continued declines in Energy products, although they were positive, and project cost updates on some long-term hydro projects and higher steel costs for the Wind project.

In total down 8%, but, we've really reached an important milestone here, another milestone for GE. After ten quarters of declining operating profit, Energy's going to go positive in the second quarter and the team is on track for their 3.2 billion for the total year. So with that, I'm going to turn it back over to Jeff.

Jeff Immelt - General Electric - CEO

Great, Keith, thanks. Just, again, to wrap up here and talk about earnings. In December of '04, we talked about a range of $1.75 to $1.83. We're really going to focus that on the high-end, going to $1.78 to $1.83, up 12 to 15%. We talked about a couple of factors that, really, we thought would impact the area. The plastics business. Any time you have lots of raw material inflation, it is more volatile. But, our pricing is ahead of inflation and we are just driving the price share trade-offs right now in the marketplace, which is something we know how to do, and we are really working on maximizing margins. Energy is as planned. As Keith just said, I think it is evolving the way we thought it would. The team is doing a good job on execution and we are encouraged by that.

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The U.S. diagnostic imaging market actually looks better from an order standpoint. We don't translate orders into revenue in the quarter that they are received, typically, but we think that bodes well for the second half of the year from a standpoint of the strong orders growth we saw in the first quarter and insurance, again, is as planned, as Keith said. So our outlook overall is stronger for the year. We are narrowing the 2005 outlook to the high-end of the range of $1.78 to $1.83. And just in summary, I think our results reflect good execution of our strategy. You know we've stayed pretty consistent on the -- on the strategy for the Company. It delivered in the first quarter double-digit revenue earnings, EPS and CFOA and strong organic revenue growth. And we think this is sustainable into the future.

The Company is in great shape. The business performance is strong and broad-based, as Keith showed for the second quarter. Every business in the company, well, it should have positive earnings in Q2. The AAA is very solid. We've eliminated parent-support debt ahead of schedule and cash flow will expand with increasing GE Capital dividend. And we are executing on a pretty consistent strategy that, again, we think sets up the rest the year in 2006 and beyond in great shape that really has -- has two key pillars. One is a portfolio that has been changed to be faster growth in the world we live in today. And the other one is a really total focus of the Company on organic growth capability and driving that into the future. So the EPS, we think we've flexed that strategy in 2005 and we think we have really strong momentum through the rest of this year and into the future. So, the Company's in great shape. Bill, I'm going to turn it back to you and take some questions.

Bill Cary - General Electric - VP Investor Communications

Great, Jeff, thanks very much. Rachel, we'd like to go ahead and start taking questions now. If you could open the question line, that would be great. QUESTION AND ANSWER

Operator

Absolutely, sir. [OPERATOR INSTRUCTIONS] Out of courtesy to all participants, please limit yourself to one question. Our first question comes from Nicole Parent of Credit Suisse First Boston.

Nicole Parent - Credit Suisse First Boston - Analyst

Good morning, guys.

Jeff Immelt - General Electric - CEO

Hi, Nicole.

Keith Sherin - General Electric - SVP Finance & CFO

Hi, Nicole.

Nicole Parent - Credit Suisse First Boston - Analyst

Jeff, I guess with the portfolio transformation largely complete, I would love to get your thoughts on any potential strategic actions that you might be considering for the advancement to your materials business.

Jeff Immelt - General Electric - CEO

Nicole, we are in a good part of the cycle on -- in Advanced Materials. We think that capacity utilization is going to stay and polycarbonate's going to stay north of 90 for, oh, the next 18 or 24 months. We are executing on a good strategy there. There has been a lot of, let's say, private equity activity in the marketplace. But our focus right now is on executing with that team and with that business and we think it ought to give us some expanding margins for the next few years.

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Nicole Parent - Credit Suisse First Boston - Analyst

Great. And I guess just one follow-up. Relative to the unbelievable 10% organic growth in the first quarter, particularly at -- with respect to the 8% target you have going forward for -- annually, could you just talk about how we should think about organic growth as the year progresses?

Jeff Immelt - General Electric - CEO

You know, Nicole, I think the -- you know the 8% is the goal inside the Company. I -- my belief is that there is nothing I look at right now that suggests that we shouldn't be on that goal or above that goal for the rest of this year. We are seeing, I think, broad-based strength for the company. And, again, I think what is good about GE is today services are probably, oh, more than 30% of our industrial revenue. So it's -- it's high margin organic growth and we feel great about the momentum we've got there, great about the global growth. Industries like Water are performing just like we thought they would, bringing GE capability in that space. So I think, Nicole, we think the 8% looks solid, and -- and we don't see anything about the 10% in the first quarter that we shouldn't be able to keep driving for the year.

Nicole Parent - Credit Suisse First Boston - Analyst

Great, thank you.

Operator

Thank you. Our next question comes from the line of Don MacDougall of Banc of America Securities.

Don MacDougall - Banc of America Securities - Analyst

Good morning, everyone, great-looking quarter, particularly on sales. If I wanted to look at the glass, say, half empty, Jeff, I guess the thing I would focus on would be the margins. You got great organic growth. The margins, particularly in Healthcare and Energy, were a little less than I was expecting. And I guess I am just wondering if we could get some granularity on if there was anything unusual with respect to profitability in either of those two segments.

Keith Sherin - General Electric - SVP Finance & CFO

If I can help out a little bit here, Don, on the margins. If you look at total for the Company, we're about flat on our profit margin but I think you got to take into account the impact of the minority interest. And if you look at that we are up about 7/10. I think as you go through the quarters, our expectation is that we are going to be able to grow those margins up a point over each quarter for a total year to be up about a point on total out profits. That is consistent with our plan. I think it is just timing of the first quarter. The Energy business, as you turn that positive, you know that that's been such a big factor on us as the bubbles come down. That is a really nice factor for us as Energy goes positive through the rest of the year. And in Healthcare, as Jeff said, the orders look great.

And as we go through the rest the year with Biosciences and technologies, I think you will see those margins improve as well. So, as far as we look at it, the way the year started out is exactly what we're expecting and we do think we are right on track for the point improvement in margin for the total year.

Don MacDougall - Banc of America Securities - Analyst

Okay. My follow-up question would be on GE Capital and the asset growth. I think, as I recall from the press release, it was about 17%. With a 40% payout ratio and the kind of return on equity that you guys get in the business, I would guess that the sustainable rate of asset growth is probably something less than that. Did you see that asset growth coming in as we go through the year? Or do you think you can maintain it in the high teens.

Keith Sherin - General Electric - SVP Finance & CFO

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You know, it -- again, you mention the ROEs and what can the asset growth be with the retained earnings. Again, it depends on the mix of businesses. Obviously you saw a lot of asset growth in the Consumer side. A little lower than we wanted on the Commercial side. We think we can get that up. We can grow the assets in the mid-teens here with our ROEs and our productivity and our risk management. So, I think -- I think we are very careful about it. Everything we do today, Don, in terms of allocating capital and financial services is based on economic leverages, and -- and we have a checkbook and we keep track of it very carefully to make sure that we manage our equity and our returns on equity and our asset growth in a way that gives solid earnings growth.

Don MacDougall - Banc of America Securities - Analyst

Very good, thank you.

Keith Sherin - General Electric - SVP Finance & CFO

Thanks, Don.

Operator

Thank you. Our next question comes from the line of Scott Davis with Morgan Stanley.

Scott Davis - Morgan Stanley - Analyst

Good morning, guys.

Jeff Immelt - General Electric - CEO

Hi, Scott.

Scott Davis - Morgan Stanley - Analyst

There again, I hate to fixate on the negative, but want to go back to your Healthcare margins. I guess what is not clear to me is what is going to change over the next couple of quarters that are actually going to get those margins up, because clearly your top-line was there. And I am just wondering if there is something that -- did integration cost goes down, is there something going with pricing, give me a little bit more granularity there, please.

Keith Sherin - General Electric - SVP Finance & CFO

I think -- first of all, the margins were pretty consistent with the first quarter of last year. If you look through the year, the margins grow in Healthcare just on a seasonal basis, on a quarter by quarter basis. Second thing, we have nice margins on the orders that were taken. You look at the VCT, the reason for introducing new products like the VCT and high-definition MR, these are higher margin products that we're introducing in the marketplace. We're really winning and winning share in those products. I think those come through, as Jeff said, in the future quarters. We also -- right now, if you remember, we are amortizing about $40 million a quarter of intangible costs in that business and that's a non-cash charge. So really, while the out profit was up in the 20s, it is really up, consistent with revenue, up 33 -- up 33% when you take out that intangible.

You know the tech revenues were up about 6%, if you look at the quarter and separate out Biosciences and adjusting for the one-time things in the quarter last year, the out profit in tech is up about 12%. So we are really happy with the performance of the team and we think the orders bode well when you look at it, the business going forward.

Scott Davis - Morgan Stanley - Analyst

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Okay.

Jeff Immelt - General Electric - CEO

Scott, I would add to that, the new products like VCT and the high-definition MR are probably 10 to 15% higher priced than their counterparts. So, those -- as they ship in the second half of the year, that has a very positive impact as well.

Scott Davis - Morgan Stanley - Analyst

Okay. And a follow-on question. Your net income growth in Consumer and Commercial Finance was really strong this quarter. Is -- was there any adjustment to reserves or anything in your reserve release that might have helped out a little bit in the quarter?

Keith Sherin - General Electric - SVP Finance & CFO

There wasn't any reserve release, the loss provisions were lower as we continue to see improved asset quality on the Commercial side. They were up a little bit on the Consumer side. So we've had -- we've had 12 quarters in a row of improved asset quality in the business, and you are starting to see that in approved -- in approved operating performance from losses. So that did happen in the quarter, lower losses but not a reserve release or provision change.

Scott Davis - Morgan Stanley - Analyst

Okay, thanks, guys

Operator

Thank you. Our next question comes from the line of Bob Cornell of Lehman Brothers.

Bob Cornell - Lehman Brothers - Analyst

Good morning, everybody.

Keith Sherin - General Electric - SVP Finance & CFO

Hey, Bob.

Jeff Immelt - General Electric - CEO

Hey, Bob.

Bob Cornell - Lehman Brothers - Analyst

Yeah, first question. Actually, we've heard some rumblings that Europe is slowing. You guys didn't mention that at all. You talked about global growth being strong, but if you looked at the general breadth of the business for GE around the world, how do you see Europe versus the states versus Asia.

Jeff Immelt - General Electric - CEO

Bob, I would say that we have seen, and I would say it didn't start in this quarter, I would say it started really in the fourth quarter, some slowing in Europe on some of the shorter cycle businesses. But, our business in Europe overall was up close to 40% for the quarter based on some of the

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acquisitions and share gains and things like that. So, you know, I would say that -- that in Europe we had planned on a year of relatively -- of economic growth that would be half of what it was in the United States. And that's pretty much what we have seen on the core market in Europe.

Bob Cornell - Lehman Brothers - Analyst

Just another question. I mean, how about fleshing out sort of the picture for Energy. You talked about Wind and some other things. Obviously this is a turn quarter, when you look at the -- one the swing factors for GE this year on the high-end of the range and low-end of the range is the -- how the Energy business does. How is the cost takeout at Greenville going? What is the outlook for the Gas Turbo business, profitability in the Chinese gas turbines, I mean, Wind -- what is the fleshed-out picture for Energy?

Keith Sherin - General Electric - SVP Finance & CFO

Well, I think the quarter was an indicator that we are right on track where we thought, Bob. If you look at the gas turbine business, what we refer to as Energy products. At one point we thought the business might be about breakeven. They actually made a couple $200 million, in the quarter.

Bob Cornell - Lehman Brothers - Analyst

In the quarter?

Keith Sherin - General Electric - SVP Finance & CFO

And for the year we think that could be about 2 to 300 million -- 300 million for the total year. So, Energy products, the gas turbine business, is doing pretty well. We had 34 new gas turbine orders in the quarter versus 25 last year. So the volume is pretty good globally. I think the pricing is a little tough. Pricing on the new unit orders was down.

Bob Cornell - Lehman Brothers - Analyst

How much?

Keith Sherin - General Electric - SVP Finance & CFO

About 10% on new units. If you look at the rest of Energy products. As you know, we have taken the Wind business and the hydro business and the other things and we put those under Mark Little and the leadership team of Energy products. They are so solid in terms of operations and running the business, those guys are doing a good job managing that. The Wind business is going to have a fabulous year. As you know, we're going to go up from about 800 million of revenue to 2.2 billion this year. That ramps up through the year.

We've continued to have challenges in our supply chain and in some of our older warranty costs associated with the original in-the-field units. But that business is going to have dramatic improvements in profitability as we go through the year and ramp up. So that looks great. The services business is fabulous. We saw the services were up 22% in the quarter. That continues to have a very strong outlook both on contractual services and on -- and on -- on the transactional services. So when you look -- we are on track for the 3.2 billion. Oil and gas has just had some fantastic orders. That business looks like it's going to be up strong double-digit for the year. We are on track for the 3.2 billion. So it is a big part of the Company and having it go up to positive like we forecast is going to be great and that starts in the second quarter. We are really looking forward to it.

Bob Cornell - Lehman Brothers - Analyst

Me too. Thanks.

Keith Sherin - General Electric - SVP Finance & CFO

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All right, Bob.

Operator

Thank you. Our next question comes from the line of Deane Dray of Goldman Sachs.

Deane Dray - Goldman Sachs - Analyst

Thank you, good morning. On the core growth number of 10%. Did you give the breakout of what was the industrial piece to that?

Keith Sherin - General Electric - SVP Finance & CFO

9.5 as -- .

Jeff Immelt - General Electric - CEO

I guess, 10 as well.

Deane Dray - Goldman Sachs - Analyst

I am sorry?

Jeff Immelt - General Electric - CEO

It was 10, I think, Deane.

Deane Dray - Goldman Sachs - Analyst

Okay. And then on the insurance side of the business, could you remind us of the -- for the second quarter, you said flat, -- how much of that is the ERC business? Is that impacted at all by any of the runoff businesses?

Keith Sherin - General Electric - SVP Finance & CFO

No, what I -- yes, I said for the second quarter, that Insurance Solutions would be flat. There's actually going to be a favorable income in total because, if you remember last year, we had a loss on the IPO in the Insurance business of about $330 million. So in -- in the businesses, the way I see it is Insurance Solutions will be about flat with where they were last year, somewhere around 140 -- $150 million of earnings. And then we will get our share of Genworth which, now we own 50%, and that's going to be somewhere in the 70 to $90 million range. We do have about $20 million of impact from the runoff, as you said, offsetting that. We are somewhere around $200 million is what we are forecasting for the second quarter, Deane.

Deane Dray - Goldman Sachs - Analyst

Was there any reserve activity at ERC?

Keith Sherin - General Electric - SVP Finance & CFO

We had about $39 million of reserve strengthening in ERC, pre-taxed. It's significantly below what we had last year.

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Jeff Immelt - General Electric - CEO

But I would say, Deane, for about eight or nine months, we have seen claims come in right about on estimate.

Keith Sherin - General Electric - SVP Finance & CFO

Some great trends there.

Jeff Immelt - General Electric - CEO

We've got some decent trends going.

Deane Dray - Goldman Sachs - Analyst

Great, if I could just sneak one more question in on the pace of buybacks. In the commentary, the release had said that it was being accelerated, but if I heard you correctly, 3 billion for the year. If you're going to do 15 originally over three years, that looks like the first year might be a little bit light.

Keith Sherin - General Electric - SVP Finance & CFO

Well, again, we are not starting until the second quarter. We are going -- we are estimating we are going to spend about 3 this year, I think, You will be up at $5 billion annual run rate in the next several months. And, we're -- that's our forecast right now, about 3 for the year. So I think over the three years we will spend about the $15 billion, but we are ramping up -- as you saw, I think if you looked, the acquisitions, we said we would do 3 to 5 billion of Industrial acquisitions, we closed 2.7 already in the first quarter. They are a little front-end loaded and we're just going to manage our cash flow to make sure that we keep all of our ratios a strong AAA and also deliver on the growth investment in new companies, and also deliver on the buyback. And those are the trade-offs we are making.

Deane Dray - Goldman Sachs - Analyst

Great, thank you.

Operator

Thank you. Our next question comes from the line of Peter Nesvold with of Bear Stearns.

Ann Duignan - Bear Stearns - Analyst

Hi, good morning, it's Ann Duignan with a question first before Peter. Just a quick question on the Energy business. You shipped about 283 Wind turbines in the first quarter versus 74 last year. What is the Power team's current expectation for the renewal of the production tax credit. And is there any risk that we could likely see a Wind bubble in '05 and '06, and if we did, would it have any material impact on the Power Group's profitability in '06?

Jeff Immelt - General Electric - CEO

I think on the PTC, this is something that probably 100 out of 100 Senators support. The question is just which legislation it goes on. But I would say there's broad bipartisan support for the production tax credit. So the question is, which Bill is it goes on, not whether or not it will pass. And again, I think the -- if today, as states pass kind of renewable regulations, the RPS regulations, Wind is probably the most prevalent renewable energy source and so we think, not just this year but going in the next couple of years, the Wind business is going to be -- continue to be relatively strong.

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Ann Duignan - Bear Stearns - Analyst

And is there a point in time in the year when that -- the PTC would need to be passed in order for continuous flow of orders to come into '06?

Jeff Immelt - General Electric - CEO

No, I would say right now the customer interest in '06 orders is very high.

Ann Duignan - Bear Stearns - Analyst

Okay. Very good. And Peter has a follow-up question on the Capital side.

Peter Nesvold - Bear Stearns - Analyst

Hey, guys. On the insurance side, the recent A.M. Best announcement seemed to suggest you might have to shore up the balance sheet a little bit at ERC. Is that the case, number one? And number two, can you quantify what that might be?

Keith Sherin - General Electric - SVP Finance & CFO

Yeah, actually we have been working pretty proactively with them. I think one of the things that you see previously, rating agencies have given Insurance Solutions the benefit of the support of a parent like GE, a AAA-rated company. As we've talked about the Insurance Solutions being less strategically important in the portfolio, some of those implicit support agreements have been things that we have had to work with the rating agencies on. And in the first quarter what we did basically was we -- we made that explicit. So we put a net worth maintenance agreement in place. We do not anticipate that that will be called upon based on the actions that the Insurance Solution's team has taken themselves. And for us it is a question, we really want to make sure that we have the maximum franchise value and flexibility and we are supporting that business. And they are doing a great job with their own capital management. We have one in place and we don't anticipate that will have any impact on us.

Peter Nesvold - Bear Stearns - Analyst

Okay. Thanks for the time.

Keith Sherin - General Electric - SVP Finance & CFO

All right, Peter

Operator

Thank you. Our next question comes from the line of Steve Tusa of JP Morgan.

Steve Tusa - JP Morgan - Analyst

Good morning.

Jeff Immelt - General Electric - CEO

Hi, Steve.

Steve Tusa - JP Morgan - Analyst

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Did I catch you correctly when you said Energy products is going to make 2 to $300 million bucks this year.

Keith Sherin - General Electric - SVP Finance & CFO

Yes, on the gas turbine business.

Steve Tusa - JP Morgan - Analyst

Okay, then just looking at your reaffirmation --

Keith Sherin - General Electric - SVP Finance & CFO

On the gas turbine business.

Steve Tusa - JP Morgan - Analyst

On the gas turbine business. So the various forecasts for new platform services and products are the breakeven $200 million. That is -- that's in line with what you are saying now?

Jeff Immelt - General Electric - CEO

Yeah, I think we are saying that is kind of at the higher end of that range.

Steve Tusa - JP Morgan - Analyst

Okay. So, doing a little better in Energy products.

Jeff Immelt - General Electric - CEO

Yeah.

Steve Tusa - JP Morgan - Analyst

And then just quickly a little bit more of a macro question. You said you are watching volumes in Advanced Materials. I would assume part of that has to do with, you said, losing -- losing some customers given the price increases. But is there anything in kind of the general macro environment and the end markets that you are serving there that worries you a little bit coming out of March and moving into April?

Jeff Immelt - General Electric - CEO

I can't say that there really is. We watch car build and cell phones and things like that. Asia still looks pretty strong. Lots of segments of the electronics industry still looks pretty strong. Our auto business, our penetration is a little bit better. But, this is kind of my fifth cycle I have seen probably in the last 20 years. And right now we have really got the team focused on -- on margin rates in terms of -- in terms of where we look at and what we do. And that's -- and that's really what's the -- kind of the drumbeat of that business right now.

Steve Tusa - JP Morgan - Analyst

Great. Thank you.

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Jeff Immelt - General Electric - CEO

Thanks, Steve

Operator

Thank you. Our next question comes from the line of Robert McCarthy of CIBC World Markets.

Robert McCarthy - CIBC World Markets - Analyst

Good morning, gentlemen.

Jeff Immelt - General Electric - CEO

Good morning, Robert.

Robert McCarthy - CIBC World Markets - Analyst

If you mentioned this I do apologize, but what was the core volume of -- overall for GE and also on the Industrial business for the organic growth?

Jeff Immelt - General Electric - CEO

The organic growth for industrial was up about 10%.

Robert McCarthy - CIBC World Markets - Analyst

And of that, what was volume and price?

Keith Sherin - General Electric - SVP Finance & CFO

Volume was up about 23.

Robert McCarthy - CIBC World Markets - Analyst

Okay.

Keith Sherin - General Electric - SVP Finance & CFO

Price was 1 and exchange was 1.

Robert McCarthy - CIBC World Markets - Analyst

Okay.

Jeff Immelt - General Electric - CEO

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The -- what I would say Rob, on top of that, is the price inflation trade-off was probably negative 600 last year was actually positive in the first quarter this year.

Robert McCarthy - CIBC World Markets - Analyst

Okay.

Jeff Immelt - General Electric - CEO

We think that's going to stay positive for the year. Maybe a $200 million. So pricing actions have -- have outpaced inflation.

Robert McCarthy - CIBC World Markets - Analyst

Okay. And then just clearly use a broader statement. Some commentary over the past couple of months sees that -- seems to be that you've seen persistent inflation across a lot of your businesses and if you look at your results today, very strong top-line incremental margins, particularly weaker than expected in Energy and Healthcare, and obviously there could be some more idiosyncratic issues with that. But what is your outlook given your outlook for inflation and how we should think about top-line margins and incremental margins going into '05-'06?

Jeff Immelt - General Electric - CEO

Well, look, I think -- if you look at Energy, the -- it's actually pretty explainable. The -- the revenue is -- was pretty decent. What I would say in the Wind business, we've got steel inflation that we are in the process of passing through. And in the case of Energy, we had one or two hydro projects that we had kind of project cost update that was more or less a one-time expense in the quarter that we think is not going to be repeated. On a go-forward basis, we feel good about the Energy margin rates. Again, as we continue to expand, we think the margin rates will continue to expand during the year and the service margin rates are actually very high. In Healthcare, if you put back the intangibles, you'd actually have margin rates growing faster than revenue. And, again, the first quarter does tend to be a lower margin time of year and we think that gets stronger during the year. So what I would say is that the pricing, being positive versus inflation in the first quarter, bodes very well for expansion of margin rates throughout the year and I think Healthcare and Energy are pretty much per expectation.

Robert McCarthy - CIBC World Markets - Analyst

Okay, thank you for your time

Operator

Thank you. Our next question comes from Brian Langenberg of Langenberg and Company.

Brian Langenberg - Langenberg & Company - Analyst

Hi, good morning and thank you. Great quarter, guys. Help me with some math, especially in Healthcare. Just taking a look at the first quarter. I'm looking at incremental revenues of 826 million, incremental profits of 70. If I add back that 40 million of amortization for Amersham, let's call it 826 and 110, incremental margin of 13.3%, which -- take a look at Amersham's profit run rate at the time you were acquiring it, 450 - $470 million a year, kind of in the ball park. Given that we are talking about newer products, higher margins on service as we do this stuff, let's just take a look at the let's just call it near-term lack of incremental margin improvement and just put it into some different areas, whether it be equipment pricing, are there some up-front costs on new service contracts? Are you spending more in integration, et cetera, et cetera.

Keith Sherin - General Electric - SVP Finance & CFO

No I think you've got to look at -- we've never had Biosciences on a quarterly basis, Brian.

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Brian Langenberg - Langenberg & Company - Analyst

True.

Keith Sherin - General Electric - SVP Finance & CFO

Until you see what Biosciences does on a quarterly basis, just exactly what their historical trends are in the quarter. And if you look at the Biosciences for the total year they do reach those margin levels that we talked about and the synergies will more than offset that intangible amortization for the total year. So those margins -- .

Brian Langenberg - Langenberg & Company - Analyst

Based on missing the -- I'm missing the -- not seasonality, of course, but maybe historically it's been more profit in the back half than the whole year.

Keith Sherin - General Electric - SVP Finance & CFO

I think the piece we are going to have to lay out for you, because I think everything is as we expected in Biosciences and the margins are great and the revenue and everything is great. But on a seasonality basis, you will see that those margins grow as they get more volume.

Brian Langenberg - Langenberg & Company - Analyst

Okay, I will go back and take a look at that. Then just quickly just as a second part of this. Energy, you are mentioned two incremental costs that seem to be not a long-term thing. I thought I heard something about project and steel. If you could kind of give us enough flavor for what made kind of incremental cost headwinds you had in the quarter, that would be great.

Keith Sherin - General Electric - SVP Finance & CFO

We probably had $60 million or so of non-repeating types of project margin cost and the hydro project reviews that Jeff mentioned. On the Wind business, I don't have a number of what specifically -- non-repeating we probably had about 20 million impact from the incremental steel. The business is going to ramp up for the year.

Brian Langenberg - Langenberg & Company - Analyst

Got it.

Keith Sherin - General Electric - SVP Finance & CFO

So, as I said, we are expected to do 2.2 billion of revenue in the Wind business this year and that business gets better by about 75 million op margin in the quarter.

Jeff Immelt - General Electric - CEO

I think the bottom line on Energy is everybody ought to feel great. I think the gas turbine business is on or ahead of plan. Energy services grew by 22% in the quarter. Oil and gas orders grew by 56%. The 3.2 billion op profit commitment for the year looks extremely secure. And, again, I think if you look out beyond the second half of 2005 and into the future, because the installed basis expanded so greatly, we think it looks even better for services in the rest the business. So, I just think the short and long-term impact and outlook for Energy today is equal to or better than anything we've talked about publicly.

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Brian Langenberg - Langenberg & Company - Analyst

Great, thank you for shedding light on both counts.

Keith Sherin - General Electric - SVP Finance & CFO

All right, Brian.

Operator

Thank you. Our next question comes from the line of Tony Boase with AG Edwards.

Tony Boase - AG Edwards - Analyst

Thanks. Just have a question on Consumer and Commercial Finance spreads. Revenues were up 19%, contributed value was up 13%, does that indicate any kind of pressure on -- on your net spread? And what -- what would you anticipate for the year as far as contributed value growth?

Keith Sherin - General Electric - SVP Finance & CFO

Yeah, I think, if you look at contributed value, we -- the interest rate changes are only really one element of the return equation. I think you've got to look at our cost to serve. You've got to look at our risk associated with the business we are doing. What is the credit quality? So we are -- we are seeing some just CV compression, but the credit profile mix is a real driver in our overall margin. And if you include losses related to our average net investment and adjust -- on a risk adjusted basis, margins both in the Consumer business and in the Commercial business are actually improving. So, we are going to see lower spreads in lower risk businesses as we expand into the secured mortgage business, for example. But overall, when you do a risk adjusted look right now, we continue to be able to get actual margin improvement, spread improvement.

Tony Boase - AG Edwards - Analyst

Just a quick question on industrial cash flow. If I do kind of a rough approximation, net income, I guess, was about 1.7 billion for industrial. Another 600 million of depreciation. And so you've got $400 million between the 2.7 in cash flow from operations and what we can easily identify. How does that 400 million break down?

Keith Sherin - General Electric - SVP Finance & CFO

We actually had about 700 million in other cash associated with everything from all of our benefits of payments and things that are outside of working capital and taxes. And we had about a 400 million usage in working capital in the quarter. We've built inventory as we have ramped up the EVO locomotives. We've built some inventory in our Advanced Materials business and a little bit in C&I. Those are the two other factors. Great, thanks a lot

Operator

Thank you. Our next question comes from the line of John Inch with Merrill Lynch.

John Inch - Merrill Lynch - Analyst

Thanks, good morning.

Jeff Immelt - General Electric - CEO

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John, how are you?

John Inch - Merrill Lynch - Analyst

Good, thanks. Question on, if you were to look at your plan for cost actions for the year, be it say restructuring, plant closures, were you guys able to opportunistically do a little bit more of that activity in the first quarter?

Jeff Immelt - General Electric - CEO

Again, I think nothing above what we had planned for the year, John, and we'll continue to execute on our simplification strategies and -- and cost strategies for the year and things like that. But I would say very consistent with what our game plan has been.

Keith Sherin - General Electric - SVP Finance & CFO

And we're on track -- .

John Inch - Merrill Lynch - Analyst

No incremental plant closures or anything like that?

Jeff Immelt - General Electric - CEO

No.

John Inch - Merrill Lynch - Analyst

Just the follow-up then is on G-CAS. You talked a little bit about it in the call, but perhaps you could just give us an update in terms of your -- how you are thinking about the business, vis-a-vis orders. Are you happy with the 1300 planes that are flying today and perhaps more importantly, how many planes should we be thinking about your plans to move to Asia and how many perhaps would you have capacity to move to Asia from the U.S.?

Jeff Immelt - General Electric - CEO

Well, you know, John, the market, as it pertains to revenue pass-through miles and what I would call commercial freight, continues to be very strong overall. And so there's, I would say, continues to be demand. These rates are growing kind of 25, 30%. So we continue to see that as being broad-based strength. G-CAS has 60 planes in China today and that could easily grow in the future. So, I just think we feel good about the backdrop of the industry today, vis-a-vis revenue passenger miles and freight shipments and things like that which says, we have got a lot of strategic flexibility as it pertains to where we go with the assets.

Keith Sherin - General Electric - SVP Finance & CFO

We did a review with the G-CAS team about marketing opportunities. They went out to the customer base and if we could have more planes, we could place several hundred planes with a -- more than 100 different carriers outside the U.S. So there is, as Jeff said, tremendous demand. And Henry and his team have demonstrated they know how to take advantage of that.

John Inch - Merrill Lynch - Analyst

Great, thanks, guys.

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Bill Carey - General Electric - VP Investor Communications

I think we have time for one more question this morning, Jeff and Keith. Okay?

Jeff Immelt - General Electric - CEO

Great

Operator

Okay, one moment, sir. Our next question -- our final question today, sir, comes from the line of Jeff Sprague of Smith Barney.

Jeff Sprague - Smith Barney - Analyst

Thanks, good morning, everyone.

Jeff Immelt - General Electric - CEO

Hi, Jeff, how are you.

Jeff Sprague - Smith Barney - Analyst

Good. I guess just to drill in on a couple of other things since we covered a lot of ground here this morning already. On the price and cost. I guess if you got 1% price it kind of implies that cost was up somewhere south of $200 million in total for the Company. Is -- am I in the right ball park there? I am just trying to understand if when you talk about kind of the price cost offset, are we really going apples to apples? Is there some kind of volume dynamics or something else that gets you to that comment that there is an offset there.

Keith Sherin - General Electric - SVP Finance & CFO

No, it is pretty straightforward. I think on the price, the number I have is 224 million positive.

Jeff Sprague - Smith Barney - Analyst

Okay.

Keith Sherin - General Electric - SVP Finance & CFO

And on the material inflation it's 209 million negative.

Jeff Sprague - Smith Barney - Analyst

Okay, beautiful.

Keith Sherin - General Electric - SVP Finance & CFO

So you got it right on.

Jeff Sprague - Smith Barney - Analyst

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And on Power in the U.S. I mean, certainly the -- the overall segment looks very bright here. I am just wondering as we look at kind of this resurgence in the U.S. economy. That kind of flat -- multi-year flat period that we were all expecting in the U.S. if you go back to a year or two ago when we were all looking forward. How is that changed. I mean it feels like we could get a turn in the U.S. sooner than we thought. There is certainly some of the coal gasification stuff going on. Could you just update us on kind of the core home market here?

Keith Sherin - General Electric - SVP Finance & CFO

We have -- we -- we aren't seeing a lot of activity on the gas turbines obviously, Jeff. We still have -- we had 75 turbines in storage at the end of the year. We got 69 at the end of the quarter. And out of the 34 new gas turbine orders, those were for outside the U.S. I think you're still going to see that period for a while here where we work off that excess capacity. But there's certainly a ton of opportunities when you look at the future and things, as you mentioned, about coal gasification.

Jeff Immelt - General Electric - CEO

Jeff, I think we will definitely take some orders on coal gasification this year that are kind of 2007 revenue and things like that. And the other thing I'd say is that as we continue to evolve with higher energy efficient technologies, customers and high natural gas pricing environments are going to want a new technology. So I -- I think over a three to five year time period, I think the U.S. market will rebound and be a meaningful part of our revenue.

Jeff Sprague - Smith Barney - Analyst

And then just one final follow-up on Energy products. Given the cost takeout and everything you are doing. You mentioned in the quarter you are booking new units at about 10% lower price. You are surprising us here with a little bit better profitability in Energy products. Should that carry forward as we think about delivering those units that you are booking now at lower price?

Jeff Immelt - General Electric - CEO

I think, Jeff, on the Energy products business it is going -- given the increase demand we see globally, it is going to be a business that should make $200 million. Again, it is not going to be breakaway profitability. I just -- again, I want to remind everybody that that just builds the installed base, and the revenue growth and services should continue to expand and accelerate because the units outside the U.S. still have service contracts and parts and things like that. I just think it gives us a more solid foundation on the units business, but it -- and even more exciting futures on the service business.

Keith Sherin - General Electric - SVP Finance & CFO

For the -- for the year, when we talk about 3.2, our current profile, Jeff , is Energy products is about 300 million for the year, Energy services is 2.4 billion. It is up over 30%. And the new platforms are about 0.5 billion. So that's how we -- how we see the year developing.

Jeff Sprague - Smith Barney - Analyst

Thank you very much.

Keith Sherin - General Electric - SVP Finance & CFO

Great.

Bill Carey - General Electric - VP Investor Communications

Okay. Well, listen, thanks very much. Jeff, I don't know if you wanted to make any concluding comments.

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Jeff Immelt - General Electric - CEO

No, just want to say thanks for the questions. Bill, turn it back over to you.

Bill Carey - General Electric - VP Investor Communications

Great. Thank you so very much for your time, everybody. Again the materials that we've reviewed today will remain available on our web site. Early next week, we will post a transcript of today's call for you to use. And there will be a replay of this call available this afternoon just to refer to the website to get the call-in numbers and to be able to download it. Again, thank you very much for your time and Joann and I will be available for your questions this afternoon. See you later

Operator

Ladies and gentlemen, this concludes your conference call. Thanks for your participation today. You may now disconnect.

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