General Electric Company (GE)
Q4 2012 Earnings Call
February 13, 2013 09:30 AM ET
Trevor Schauenberg - VP, Investor Communications
Keith Sherin - CFO
Jeff Immelt - CEO
Scott Davis - Barclays
Steve Tusa - JPMorgan
Jeff Sprague - Vertical Research
Deane Dray - Citi Research
John Inch - Deutsche Bank
Steve Winoker - Sanford Bernstein
Good day ladies and gentlemen and welcome to the General Electric, GE Investor webcast. At this time, all participants are in listen-only mode. My name is Shequana (ph) and I will be your conference coordinator today. (Operator Instructions). As a reminder this conference is being recorded. I would now like to turn the program over to your host for today’s call, Trevor Schauenberg, Vice President of Investor Communications. Please proceed.
Thank you Shequana (ph). Good morning and welcome everyone. We’re pleased to host today’s webcast. Regarding the materials for this webcast, we issued a Press Release earlier last night and the presentation slides are available via the webcast. Slides are also available for download and printing on our website as usual at www.ge.com/investor.
As always, elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today. Those elements can change as the world changes, please interpret them in that light.
For today's webcast, we have our Chairman and CEO, Jeff Immelt; and our Vice Chairman and CFO, Keith Sherin. Now I'd like to turn it over to our Vice Chairman and CFO, Keith Sherin.
Trevor, thank you. Good morning everyone (audio gap) and the implications for GE and I’ll start off with deal itself. We reached an agreement to sell our remaining 49% equity stake in NBCU to Comcast for $16.7 billion. We think this is an attractive exit price. It’s about 10 times the 2012 EBITDA and it’s about 18 months earlier than our first put opportunity which as all of you know was only for one half of our remaining stake.
In addition, we reached in an agreement to sell the NBCU floors in 30 Rock to NBCU. GE Capital has owned those floors since 1996 and Comcast is also buying the CNBC Headquarters in Englewood Cliffs, New Jersey from GE Capital.
The total for the real estate is $1.4 billion and the total proceeds we’re going to receive are $18.1 billion. On the right bar, the second bar shows the composition of the proceeds. GE Capital will receive $1.4 billion of the cash. GE will receive the rest.
In addition of the cash that we’re receiving, we will be getting $4 billion of Comcast guaranteed notes and $700 million of NBCU preferred stock. All of the securities can be monetized at or after closing at GE’s discretion and we’re still working on the details of how we’re going to do that.
We have a plan with Comcast right now to close all of this by late March. As we close this, GE will realize a $1 billion pretax gain on a 49% sale and GE Capital will realize a $900 million pretax gain on the real estate sale. For cash planning purposes this is for GE Industrial, is the sale of the final stake of 49% and as a result we're going to paying approximately $3.2 billion of cash taxes.
So I just put that in there so that when we look at capital allocation planning, we can get the net number. After monetization of the Securities, the GE Parent will realize approximately $13.5 billion in after tax cash. So, we’re really pleased to have reached this agreement with Comcast. We think we're exiting at an attractive price and with that let me turn it over to Jeff to talk about Investor messages.
Great Keith. Good morning everybody. I think it is a great transaction for GE and then what does it mean for GE investors? First, we don't expect any earning solution from the loss of NBC earnings in 2013 and ’14 and we’ll cover that in the next page. It really is an acceleration of cash from our capital allocation frame work. So we really intend to continue our disciplined balanced approach that we've been using and we’ll increase and accelerate the buyback.
Our board has authorized an increase to our buyback from the existing $25 billion to $35 billion through 2015. As of today we have about $23 billion remaining and our plan is to buyback approximately $10 billion worth of stock this year alone. So really, a significant acceleration. And this will really allow us to make significant progress of our objective by reducing our share count below a 10 billion shares.
We remain committed to improving our industrial earnings mix and we will continue to be disciplined on M&A. The gains will enable us to fund additional restructuring and I’ll cover more of that on the next page and as with Keith, but this restructuring will also help us exceed our $2 billion cost of the goal through 2014. So we're making great progress on margins and we think this will allow us to accelerate that and continue that. And so with this acceleration we plan to return $18 billion to shareholders in 2013 through dividends and buybacks.
So, with that back to Keith to really talk about the impact on our outlook and on earnings.
Thanks Jeff. Just on the left side, we plan to invest these gains in restructuring in 2013 for our industrial businesses. Our two year cost out goal will be higher than the $2 billion. We don't have the final numbers on that, we're still finalizing the details of restructuring as you can imagine so we're going to have to give you more clarity on that as we finalized those programs but it will exceed the $2 billion goal. The actions are also going to help us ensure that we deliver our margin expansion goals and on the GE Capital side, we plan to accelerate some additional non-core asset exits.
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