10-Q 1 geform10q3q13.htm GE FORM 10Q 3Q 2013 geform10q3q13.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON, D.C. 20549
 
FORM 10-Q
 (Mark One)
 
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2013
 
OR
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ____ to ____
 
Commission file number 001-00035
 
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)

 
New York
 
14-0689340
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
3135 Easton Turnpike, Fairfield, CT
 
06828-0001
(Address of principal executive offices)
 
(Zip Code)
 
(Registrant’s telephone number, including area code) (203) 373-2211
 
_______________________________________________
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
 
There were 10,117,369,000 shares of common stock with a par value of $0.06 per share outstanding at September 30, 2013.
 

 
 
(1)
 
 

 
General Electric Company
   
Page
Part I - Financial Information
   
     
Item 1. Financial Statements
   
Condensed Statement of Earnings
   
       Three Months Ended September 30, 2013
 
3
Nine Months Ended September 30, 2013
 
4
Condensed, Consolidated Statement of Comprehensive Income
 
5
Condensed, Consolidated Statement of Changes in Shareowners' Equity
 
5
Condensed Statement of Financial Position
 
6
Condensed Statement of Cash Flows
 
7
Summary of Operating Segments
 
8
Notes to Condensed, Consolidated Financial Statements (Unaudited)
 
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
58
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
84
Item 4. Controls and Procedures
 
84
     
Part II - Other Information
   
     
Item 1. Legal Proceedings
Item 2. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
84
86
Item 6. Exhibits
 
87
Signatures
 
88
 
Forward-Looking Statements
 
This document contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; potential market disruptions or other impacts arising in the United States or Europe from developments in sovereign debt situations; the impact of conditions in the financial and credit markets on the availability and cost of General Electric Capital Corporation’s (GECC) funding and on our ability to reduce GECC’s asset levels as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; changes in Japanese consumer behavior that may affect our estimates of liability for excess interest refund claims (GE Money Japan); pending and future mortgage securitization claims and litigation in connection with WMC, which may affect our estimates of liability, including possible loss estimates; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the adequacy of our cash flows and earnings and other conditions, which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at planned levels; GECC’s ability to pay dividends to GE at the planned level; our ability to convert pre-order commitments into orders; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation; our capital allocation plans, as such plans may change and affect planned share repurchases and strategic actions, including acquisitions, joint ventures and dispositions; our success in completing announced transactions and integrating acquired businesses; the impact of potential information technology or data security breaches; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

GE’s Investor Relations website at www.ge.com/investor and our corporate blog at www.gereports.com, as well as GE’s Facebook page and Twitter accounts, contain a significant amount of information about GE, including financial and other information for investors.  GE encourages investors to visit these websites from time to time, as information is updated and new information is posted.
 
 
 
(2)
 
 

Part I. Financial Information
 
 
Item 1. Financial Statements.
 
General Electric Company and consolidated affiliates
Condensed Statement of Earnings
 
 
Three months ended September 30, (Unaudited)
 
Consolidated
   
GE(a)
 
Financial Services (GECC)
(In millions, except share amounts)
2013 
 
2012 
   
2013 
 
2012 
 
2013 
 
2012 
                                     
Revenues and other income
                                   
Sales of goods
$
 17,966 
 
$
 17,734 
   
$
 17,994 
 
$
 17,860 
 
$
 33 
 
$
 34 
Sales of services
 
 7,186 
   
 6,805 
     
 7,268 
   
 6,889 
   
 – 
   
 – 
Other income
 
 363 
   
 787 
     
 271 
   
 818 
   
 – 
   
 – 
GECC earnings from continuing operations
 
 – 
   
 – 
     
 1,895 
   
 1,675 
   
 – 
   
 – 
GECC revenues from services
 
 10,210 
   
 10,928 
     
 – 
   
 – 
   
 10,637 
   
 11,240 
   Total revenues and other income
 
 35,725 
   
 36,254 
     
 27,428 
   
 27,242 
   
 10,670 
   
 11,274 
                                     
Costs and expenses
                                   
Cost of goods sold
 
 14,658 
   
 14,419 
     
 14,690 
   
 14,550 
   
 29 
   
 27 
Cost of services sold
 
 4,799 
   
 4,090 
     
 4,881 
   
 4,174 
   
 – 
   
 – 
Interest and other financial charges
 
 2,462 
   
 2,972 
     
 338 
   
 294 
   
 2,241 
   
 2,798 
Investment contracts, insurance losses and
                                   
   insurance annuity benefits
 
 672 
   
 756 
     
 – 
   
 – 
   
 714 
   
 798 
Provision for losses on financing receivables
 
 821 
   
 1,122 
     
 – 
   
 – 
   
 821 
   
 1,122 
Other costs and expenses
 
 8,705 
   
 8,871 
     
 3,922 
   
 4,300 
   
 4,959 
   
 4,754 
   Total costs and expenses
 
 32,117 
   
 32,230 
     
 23,831 
   
 23,318 
   
 8,764 
   
 9,499 
                                     
Earnings from continuing operations
                                   
   before income taxes
 
 3,608 
   
 4,024 
     
 3,597 
   
 3,924 
   
 1,906 
   
 1,775 
Benefit (provision) for income taxes
 
 (345)
   
 (557)
     
 (344)
   
 (477)
   
 (1)
   
 (80)
Earnings from continuing operations
 
 3,263 
   
 3,467 
     
 3,253 
   
 3,447 
   
 1,905 
   
 1,695 
Earnings (loss) from discontinued operations,
                                   
   net of taxes
 
 (82)
   
 41 
     
 (82)
   
 41 
   
 (83)
   
 (107)
Net earnings
 
 3,181 
   
 3,508 
     
 3,171 
   
 3,488 
   
 1,822 
   
 1,588 
Less net earnings (loss) attributable to
                                   
   noncontrolling interests
 
 (10)
   
 17 
     
 (20)
   
 (3)
   
 10 
   
 20 
Net earnings attributable to the Company
 
 3,191 
   
 3,491 
     
 3,191 
   
 3,491 
   
 1,812 
   
 1,568 
Preferred stock dividends declared
 
 – 
   
 – 
     
 – 
   
 – 
   
 – 
   
 – 
Net earnings) attributable to GE common
                                   
   shareowners
$
 3,191 
 
$
 3,491 
   
$
 3,191 
 
$
 3,491 
 
$
 1,812 
 
$
 1,568 
                                     
                                     
Amounts attributable to the Company
                                   
   Earnings from continuing operations
$
 3,273 
 
$
 3,450 
   
$
 3,273 
 
$
 3,450 
 
$
 1,895 
 
$
 1,675 
   Earnings (loss) from discontinued operations,
                                   
      net of taxes
 
 (82)
   
 41 
     
 (82)
   
 41 
   
 (83)
   
 (107)
   Net earnings attributable to the Company
$
 3,191 
 
$
 3,491 
   
$
 3,191 
 
$
 3,491 
 
$
 1,812 
 
$
 1,568 
                                     
Per-share amounts
                                   
   Earnings from continuing operations
                                   
      Diluted earnings per share
$
 0.32 
 
$
 0.33 
                         
      Basic earnings per share
$
 0.32 
 
$
 0.33 
                         
                                     
   Net earnings
                                   
      Diluted earnings per share
$
 0.31 
 
$
 0.33 
                         
      Basic earnings per share
$
 0.31 
 
$
 0.33 
                         
                                     
Dividends declared per common share
$
 0.19 
 
$
 0.17 
                         
                                     
                                     

(a)
Represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), which is presented on a one-line basis.
 
See Note 3 for other-than-temporary impairment amounts.
 
 
See accompanying notes. Separate information is shown for "GE" and "Financial Services (GECC)." Transactions between GE and GECC have been eliminated from the "Consolidated" columns.
 
 
 
(3)
 
 

General Electric Company and consolidated affiliates
Condensed Statement of Earnings
 
 
Nine months ended September 30, (Unaudited)
 
Consolidated
   
GE(a)
 
Financial Services (GECC)
(In millions, except share amounts)
2013 
 
2012 
   
2013 
 
2012 
 
2013 
 
2012 
                                     
Revenues and other income
                                   
Sales of goods
$
 50,902 
 
$
 53,234 
   
$
 50,970 
 
$
 53,432 
 
$
 90 
 
$
 90 
Sales of services
 
 20,939 
   
 19,835 
     
 21,218 
   
 20,142 
   
 – 
   
 – 
Other income
 
 2,082 
   
 1,737 
     
 1,893 
   
 1,827 
   
 – 
   
 – 
GECC earnings from continuing operations
 
 – 
   
 – 
     
 5,744 
   
 5,569 
   
 – 
   
 – 
GECC revenues from services
 
 31,935 
   
 32,925 
     
 – 
   
 – 
   
 33,095 
   
 33,878 
   Total revenues and other income
 
 105,858 
   
 107,731 
     
 79,825 
   
 80,970 
   
 33,185 
   
 33,968 
                                     
Costs and expenses
                                   
Cost of goods sold
 
 41,390 
   
 42,681 
     
 41,473 
   
 42,893 
   
 75 
   
 75 
Cost of services sold
 
 13,871 
   
 12,896 
     
 14,150 
   
 13,203 
   
 – 
   
 – 
Interest and other financial charges
 
 7,700 
   
 9,521 
     
 988 
   
 960 
   
 7,046 
   
 8,962 
Investment contracts, insurance losses and
                                   
   insurance annuity benefits
 
 2,022 
   
 2,155 
     
 – 
   
 – 
   
 2,131 
   
 2,271 
Provision for losses on financing receivables
 
 3,338 
   
 2,728 
     
 – 
   
 – 
   
 3,338 
   
 2,728 
Other costs and expenses
 
 26,074 
   
 25,605 
     
 11,883 
   
 12,214 
   
 14,719 
   
 13,918 
   Total costs and expenses
 
 94,395 
   
 95,586 
     
 68,494 
   
 69,270 
   
 27,309 
   
 27,954 
                                     
Earnings from continuing operations
                                   
   before income taxes
 
 11,463 
   
 12,145 
     
 11,331 
   
 11,700 
   
 5,876 
   
 6,014 
Benefit (provision) for income taxes
 
 (1,159)
   
 (1,718)
     
 (1,065)
   
 (1,319)
   
 (94)
   
 (399)
Earnings from continuing operations
 
 10,304 
   
 10,427 
     
 10,266 
   
 10,381 
   
 5,782 
   
 5,615 
Earnings (loss) from discontinued operations,
                                   
   net of taxes
 
 (313)
   
 (709)
     
 (313)
   
 (709)
   
 (313)
   
 (857)
Net earnings
 
 9,991 
   
 9,718 
     
 9,953 
   
 9,672 
   
 5,469 
   
 4,758 
Less net earnings (loss) attributable to
                                   
   noncontrolling interests
 
 140 
   
 88 
     
 102 
   
 42 
   
 38 
   
 46 
Net earnings attributable to the Company
 
 9,851 
   
 9,630 
     
 9,851 
   
 9,630 
   
 5,431 
   
 4,712 
Preferred stock dividends declared
 
 – 
   
 – 
     
 – 
   
 – 
   
 (135)
   
 – 
Net earnings (loss) attributable to GE common
                                   
   shareowners
$
 9,851 
 
$
 9,630 
   
$
 9,851 
 
$
 9,630 
 
$
 5,296 
 
$
 4,712 
                                     
                                     
Amounts attributable to the Company
                                   
   Earnings from continuing operations
$
 10,164 
 
$
 10,339 
   
$
 10,164 
 
$
 10,339 
 
$
 5,744 
 
$
 5,569 
   Earnings (loss) from discontinued operations,
                                   
      net of taxes
 
 (313)
   
 (709)
     
 (313)
   
 (709)
   
 (313)
   
 (857)
   Net earnings attributable to the Company
$
 9,851 
 
$
 9,630 
   
$
 9,851 
 
$
 9,630 
 
$
 5,431 
 
$
 4,712 
                                     
Per-share amounts
                                   
   Earnings from continuing operations
                                   
      Diluted earnings per share
$
0.98 
 
$
0.98 
                         
      Basic earnings per share
$
0.99 
 
$
0.98 
                         
                                     
   Net earnings
                                   
      Diluted earnings per share
$
0.95 
 
$
0.91 
                         
      Basic earnings per share
$
0.96 
 
$
0.91 
                         
                                     
Dividends declared per common share
$
0.57 
 
$
0.51 
                         
                                     
                                     
(a)
Represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), which is presented on a one-line basis.
 
See Note 3 for other-than-temporary impairment amounts.
 
See accompanying notes. Separate information is shown for “GE” and “Financial Services (GECC).” Transactions between GE and GECC have been eliminated from the “Consolidated” columns.
 
 
(4)
 
 
 

General Electric Company and consolidated affiliates
                 
Condensed, Consolidated Statement of Comprehensive Income
                 
                         
   
Three months ended September 30, (Unaudited)
 
Nine months ended September 30, (Unaudited)
(In millions)
   
2013 
   
2012 
   
2013 
   
2012 
                         
Net earnings
 
$
 3,181 
 
$
 3,508 
 
$
 9,991 
 
$
 9,718 
Less: net earnings (loss) attributable to
                       
   noncontrolling interests
   
 (10)
   
 17 
   
 140 
   
 88 
Net earnings attributable to GE
 
$
 3,191 
 
$
 3,491 
 
$
 9,851 
 
$
 9,630 
                         
Other comprehensive income (loss)
                       
   Investment securities
 
$
 170 
 
$
 122 
 
$
 (362)
 
$
 620 
   Currency translation adjustments
   
 (383)
   
 1,296 
   
 (469)
   
 306 
   Cash flow hedges
   
 58 
   
 65 
   
 351 
   
 210 
   Benefit plans
   
 765 
   
 924 
   
 2,826 
   
 2,520 
Other comprehensive income (loss)
   
 610 
   
 2,407 
   
 2,346 
   
 3,656 
Less: other comprehensive income (loss) attributable to
                       
   noncontrolling interests
   
 10 
   
 5 
   
 (21)
   
 3 
Other comprehensive income (loss) attributable to GE
 
$
 600 
 
$
 2,402 
 
$
 2,367 
 
$
 3,653 
                         
Comprehensive income
 
$
 3,791 
 
$
 5,915 
 
$
 12,337 
 
$
 13,374 
Less: comprehensive income (loss) attributable to
                       
   noncontrolling interests
   
 - 
   
 22 
   
 119 
   
 91 
Comprehensive income attributable to GE
 
$
 3,791 
 
$
 5,893 
 
$
 12,218 
 
$
 13,283 
                         
                         
 Amounts presented net of taxes. See Note 12 for further information about other comprehensive income and noncontrolling interests.
 
See accompanying notes.
 
 
General Electric Company and consolidated affiliates
         
Condensed, Consolidated Statement of Changes in Shareowners' Equity
         
           
           
 
Nine months ended September 30, (Unaudited)
(In millions)
 
2013 
   
2012 
         
GE shareowners' equity balance at January 1
$
 123,026 
 
$
 116,438 
Increases from net earnings attributable to GE
 
 9,851 
   
 9,630 
Dividends and other transactions with shareowners
 
 (5,839)
   
 (5,390)
Other comprehensive income (loss) attributable to GE
 
 2,367 
   
 3,653 
Net sales (purchases) of shares for treasury
 
 (6,454)
   
 (1,205)
Changes in other capital
 
 (259)
   
 (574)
Ending balance at September 30
 
 122,692 
   
 122,552 
Noncontrolling interests
 
 6,353 
   
 5,464 
Total equity balance at September 30
$
 129,045 
 
$
 128,016 
           
           
See Note 12 for further information about changes in shareowners' equity 
 
 
See accompanying notes.
 
 
 
 
(5)
 
 
General Electric Company and consolidated affiliates
Condensed Statement of Financial Position
 
Consolidated
   
GE(a)
 
Financial Services (GECC)
 
September 30,
 
December 31,
   
September 30,
 
December 31,
 
September 30,
 
December 31,
(In millions, except share amounts)
2013 
 
2012 
   
2013 
 
2012 
 
2013 
 
2012 
 
(Unaudited)
       
(Unaudited)
     
(Unaudited)
   
Assets
                                   
Cash and equivalents
$
 86,500 
 
$
 77,357 
   
$
 10,202 
 
$
 15,509 
 
$
 76,298 
 
$
 61,942 
Investment securities
 
 43,897 
   
 48,510 
     
 96 
   
 74 
   
 43,805 
   
 48,439 
Current receivables
 
 20,582 
   
 19,902 
     
 10,741 
   
 9,274 
   
 -   
   
 -   
Inventories
 
 17,943 
   
 15,374 
     
 17,865 
   
 15,295 
   
 78 
   
 79 
Financing receivables – net
 
 243,835 
   
 258,028 
     
 -   
   
 -   
   
 254,223 
   
 268,951 
Other GECC receivables
 
 9,030 
   
 7,890 
     
 -   
   
 -   
   
 14,899 
   
 13,917 
Property, plant and equipment – net
 
 68,741 
   
 69,044 
     
 17,016 
   
 16,033 
   
 51,680 
   
 52,974 
Investment in GECC
 
 -   
   
 -   
     
 79,164 
   
 77,930 
   
 -   
   
 -   
Goodwill
 
 78,024 
   
 73,175 
     
 51,328 
   
 46,143 
   
 26,696 
   
 27,032 
Other intangible assets – net
 
 14,226 
   
 11,987 
     
 13,056 
   
 10,700 
   
 1,176 
   
 1,294 
All other assets
 
 72,881 
   
 101,659 
     
 23,143 
   
 39,534 
   
 50,139 
   
 62,201 
Deferred income taxes
 
 3,937 
   
 (42)
     
 9,597 
   
 5,946 
   
 (5,660)
   
 (5,988)
Assets of businesses held for sale
 
 169 
   
 211 
     
 118 
   
 -   
   
 51 
   
 211 
Assets of discontinued operations
 
 1,673 
   
 2,308 
     
 9 
   
 9 
   
 1,664 
   
 2,299 
Total assets(b)
$
 661,438 
 
$
 685,403 
   
$
 232,335 
 
$
 236,447 
 
$
 515,049 
 
$
 533,351 
                                     
Liabilities and equity
                                   
Short-term borrowings
$
 80,496 
 
$
 101,392 
   
$
 1,102 
 
$
 6,041 
 
$
 79,830 
 
$
 95,940 
Accounts payable, principally trade accounts
 
 16,449 
   
 15,657 
     
 14,906 
   
 14,259 
   
 7,189 
   
 6,259 
Progress collections and price adjustments accrued
 
 12,122 
   
 10,877 
     
 12,149 
   
 10,877 
   
 -   
   
 -   
Dividends payable
 
 1,922 
   
 1,980 
     
 1,922 
   
 1,980 
   
 -   
   
 -   
Other GE current liabilities
 
 14,669 
   
 14,895 
     
 14,669 
   
 14,896 
   
 -   
   
 -   
Non-recourse borrowings of consolidated
                                   
   securitization entities
 
 29,966 
   
 30,123 
     
 -   
   
 -   
   
 29,966 
   
 30,123 
Bank deposits
 
 50,761 
   
 46,461 
     
 -   
   
 -   
   
 50,761 
   
 46,461 
Long-term borrowings
 
 226,872 
   
 236,084 
     
 11,493 
   
 11,428 
   
 215,503 
   
 224,776 
Investment contracts, insurance liabilities
                                   
   and insurance annuity benefits
 
 26,661 
   
 28,268 
     
 -   
   
 -   
   
 27,155 
   
 28,696 
All other liabilities
 
 70,033 
   
 68,588 
     
 52,432 
   
 53,093 
   
 17,656 
   
 15,961 
Liabilities of businesses held for sale
 
 42 
   
 157 
     
 38 
   
 -   
   
 4 
   
 157 
Liabilities of discontinued operations
 
 2,400 
   
 2,451 
     
 68 
   
 70 
   
 2,332 
   
 2,381 
Total liabilities(b)
 
 532,393 
   
 556,933 
     
 108,779 
   
 112,644 
   
 430,396 
   
 450,754 
                                     
GECC preferred stock (50,000 and 40,000 shares
                                   
  outstanding at September 30, 2013 and
                                   
  December 31, 2012, respectively.)
 
 -   
   
 -   
     
 -   
   
 -   
   
 -   
   
 -   
Common stock (10,117,369,000 and 10,405,625,000
                                   
  shares outstanding at September 30, 2013 and
                                   
  December 31, 2012, respectively)
 
 702 
   
 702 
     
 702 
   
 702 
   
 -   
   
 -   
                                     
Accumulated other comprehensive income (loss) – net(c)
                                   
   Investment securities
 
 315 
   
 677 
     
 315 
   
 677 
   
 297 
   
 673 
   Currency translation adjustments
 
 (36)
   
 412 
     
 (36)
   
 412 
   
 (238)
   
 (131)
   Cash flow hedges
 
 (370)
   
 (722)
     
 (370)
   
 (722)
   
 (396)
   
 (746)
   Benefit plans
 
 (17,772)
   
 (20,597)
     
 (17,772)
   
 (20,597)
   
 (706)
   
 (736)
Other capital
 
 32,811 
   
 33,070 
     
 32,811 
   
 33,070 
   
 32,564 
   
 31,586 
Retained earnings
 
 148,067 
   
 144,055 
     
 148,067 
   
 144,055 
   
 52,593 
   
 51,244 
Less common stock held in treasury
 
 (41,025)
   
 (34,571)
     
 (41,025)
   
 (34,571)
   
 -   
   
 -   
                                     
Total GE shareowners’ equity
 
 122,692 
   
 123,026 
     
 122,692 
   
 123,026 
   
 84,114 
   
 81,890 
Noncontrolling interests(d)
 
 6,353 
   
 5,444 
     
 864 
   
 777 
   
 539 
   
 707 
Total equity
 
 129,045 
   
 128,470 
     
 123,556 
   
 123,803 
   
 84,653 
   
 82,597 
                                     
Total liabilities and equity
$
 661,438 
 
$
 685,403 
   
$
 232,335 
 
$
 236,447 
 
$
 515,049 
 
$
 533,351 
                                     
                                     
(a)  
Represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), which is presented on a one-line basis.
 
(b)
Our consolidated assets at September 30, 2013 include total assets of $46,748 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets include net financing receivables of $40,398 million and investment securities of $4,148 million. Our consolidated liabilities at September 30, 2013 include liabilities of certain VIEs for which the VIE creditors do not have recourse to GE. These liabilities include non-recourse borrowings of consolidated securitization entities (CSEs) of $28,416 million. See Note 18.
 
(c)
The sum of accumulated other comprehensive income (loss) attributable to GE was $(17,863) million and $(20,230) million at September 30, 2013 and December 31, 2012, respectively.
 
(d)
Included accumulated other comprehensive income (loss) attributable to noncontrolling interests of $(176) million and $(155) million at September 30, 2013 and December 31, 2012, respectively.
 
See accompanying notes. Separate information is shown for "GE" and "Financial Services (GECC)." Transactions between GE and GECC have been eliminated from the "Consolidated" columns.
 
 
 
(6)
 
 
General Electric Company and consolidated affiliates
Condensed Statement of Cash Flows
 
Nine months ended September 30, (Unaudited)
 
Consolidated
   
GE(a)
 
Financial Services (GECC)
(In millions)
2013 
 
2012 
   
2013 
 
2012 
 
2013 
 
2012 
                                     
Cash flows – operating activities
                                   
Net earnings
$
 9,991 
 
$
 9,718 
   
$
 9,953 
 
$
 9,672 
 
$
 5,469 
 
$
 4,758 
Less net earnings (loss) attributable to noncontrolling
   interests
 
 140 
   
 88 
     
 102 
   
 42 
   
 38 
   
 46 
Net earnings attributable to the Company
 
 9,851 
   
 9,630 
     
 9,851 
   
 9,630 
   
 5,431 
   
 4,712 
(Earnings) loss from discontinued operations
 
 313 
   
 709 
     
 313 
   
 709 
   
 313 
   
 857 
Adjustments to reconcile net earnings attributable to the
                                   
   Company to cash provided from operating activities
                                   
      Depreciation and amortization of property,
                                   
         plant and equipment
 
 7,155 
   
 6,699 
     
 1,783 
   
 1,677 
   
 5,372 
   
 5,022 
      Earnings from continuing operations retained by GECC(b)
 
 - 
   
 - 
     
 (1,797)
   
 (123)
   
 - 
   
 - 
      Deferred income taxes
 
 (2,051)
   
 (1,555)
     
 (2,568)
   
 (605)
   
 517 
   
 (950)
      Decrease (increase) in GE current receivables
 
 196 
   
 114 
     
 (1,262)
   
 345 
   
 - 
   
 - 
      Decrease (increase) in inventories
 
 (1,795)
   
 (1,949)
     
 (1,759)
   
 (1,895)
   
 - 
   
 (22)
      Increase (decrease) in accounts payable
 
 977 
   
 221 
     
 574 
   
 299 
   
 747 
   
 (310)
      Increase (decrease) in GE progress collections
 
 918 
   
 (1,015)
     
 944 
   
 (1,015)
   
 - 
   
 - 
      Provision for losses on GECC financing receivables
 
 3,338 
   
 2,728 
     
 - 
   
 - 
   
 3,338 
   
 2,728 
      All other operating activities
 
 (1,634)
   
 4,354 
     
 1,749 
   
 1,630 
   
 (3,852)
   
 2,853 
Cash from (used for) operating activities – continuing
                                   
   operations
 
 17,268 
   
 19,936 
     
 7,828 
   
 10,652 
   
 11,866 
   
 14,890 
Cash from (used for) operating activities – discontinued
                                   
   operations
 
 (106)
   
 142 
     
 (2)
   
 - 
   
 (104)
   
 142 
Cash from (used for) operating activities
 
 17,162 
   
 20,078 
     
 7,826 
   
 10,652 
   
 11,762 
   
 15,032 
                                     
Cash flows – investing activities
                                   
Additions to property, plant and equipment
 
 (10,130)
   
 (10,500)
     
 (2,705)
   
 (2,741)
   
 (7,582)
   
 (8,098)
Dispositions of property, plant and equipment
 
 4,119 
   
 4,836 
     
 - 
   
 - 
   
 4,119 
   
 4,836 
Net decrease (increase) in GECC financing receivables
 
 7,221 
   
 9,464 
     
 - 
   
 - 
   
 8,495 
   
 9,521 
Proceeds from sale of discontinued operations
 
 - 
   
 227 
     
 - 
   
 - 
   
 - 
   
 227 
Proceeds from principal business dispositions
 
 1,101 
   
 293 
     
 260 
   
 49 
   
 841 
   
 244 
Proceeds from sale of equity interest in NBCU LLC
 
 16,699 
   
 - 
     
 16,699 
   
 - 
   
 - 
   
 - 
Net cash from (payments for) principal businesses purchased
 
 (1,617)
   
 (604)
     
 (8,001)
   
 (604)
   
 6,384 
   
 - 
All other investing activities
 
 14,532 
   
 8,971 
     
 (946)
   
 (334)
   
 15,916 
   
 9,519 
Cash from (used for) investing activities – continuing
                                   
   operations
 
 31,925 
   
 12,687 
     
 5,307 
   
 (3,630)
   
 28,173 
   
 16,249 
Cash from (used for) investing activities – discontinued
                                   
   operations
 
 97 
   
 (152)
     
 2 
   
 - 
   
 95 
   
 (152)
Cash from (used for) investing activities
 
 32,022 
   
 12,535 
     
 5,309 
   
 (3,630)
   
 28,268 
   
 16,097 
                                     
Cash flows – financing activities
                                   
Net increase (decrease) in borrowings (maturities of
                                   
   90 days or less)
 
 (9,949)
   
 (660)
     
 (164)
   
 661 
   
 (9,917)
   
 (1,209)
Net increase (decrease) in bank deposits
 
 (2,222)
   
 1,195 
     
 - 
   
 - 
   
 (2,222)
   
 1,195 
Newly issued debt (maturities longer than 90 days)
 
 41,456 
   
 43,468 
     
 101 
   
 33 
   
 41,355 
   
 43,215 
Repayments and other reductions (maturities longer
                                   
   than 90 days)
 
 (55,451)
   
 (70,405)
     
 (5,051)
   
 (17)
   
 (50,396)
   
 (70,388)
Proceeds from issuance of GECC preferred stock
 
 990 
   
 3,960 
     
 - 
   
 - 
   
 990 
   
 3,960 
Net dispositions (purchases) of GE shares for treasury
 
 (7,496)
   
 (2,280)
     
 (7,496)
   
 (2,280)
   
 - 
   
 - 
Dividends paid to shareowners
 
 (5,895)
   
 (5,401)
     
 (5,895)
   
 (5,401)
   
 (4,082)
   
 (5,446)
All other financing activities
 
 (445)
   
 (2,783)
     
 115 
   
 (54)
   
 (425)
   
 (2,729)
Cash from (used for) financing activities – continuing
                                   
   operations
 
 (39,012)
   
 (32,906)
     
 (18,390)
   
 (7,058)
   
 (24,697)
   
 (31,402)
Cash from (used for) financing activities – discontinued
                                   
   operations
 
 15 
   
 - 
     
 - 
   
 - 
   
 15 
   
 - 
Cash from (used for) financing activities
 
 (38,997)
   
 (32,906)
     
 (18,390)
   
 (7,058)
   
 (24,682)
   
 (31,402)
Effect of currency exchange rate changes on cash
                                   
   and equivalents
 
 (1,038)
   
 1,243 
     
 (52)
   
 16 
   
 (986)
   
 1,227 
Increase (decrease) in cash and equivalents
 
 9,149 
   
 950 
     
 (5,307)
   
 (20)
   
 14,362 
   
 954 
Cash and equivalents at beginning of year
 
 77,459 
   
 84,622 
     
 15,509 
   
 8,382 
   
 62,044 
   
 76,823 
Cash and equivalents at September 30
 
 86,608 
   
 85,572 
     
 10,202 
   
 8,362 
   
 76,406 
   
 77,777 
Less cash and equivalents of discontinued operations
                                   
   at September 30
 
 108 
   
 110 
     
 - 
   
 - 
   
 108 
   
 110 
Cash and equivalents of continuing operations
                                   
   at September 30
$
 86,500 
 
$
 85,462 
   
$
 10,202 
 
$
 8,362 
 
$
 76,298 
 
$
 77,667 
                                     
                                     
(a)
Represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), which is presented on a one-line basis.
 
(b)
Represents GECC earnings from continuing operations attributable to the Company, net of GECC dividends paid to GE.
 
See accompanying notes. Separate information is shown for "GE" and "Financial Services (GECC)." Transactions between GE and GECC have been eliminated from the "Consolidated" columns and are discussed in Note 19.
 
 
 
 
(7)
 
 
 

Summary of Operating Segments
General Electric Company and consolidated affiliates
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
(Unaudited)
 
(Unaudited)
(In millions)
2013 
 
2012 
 
2013 
 
2012 
                       
Revenues(a)
                     
   Power & Water
$
 6,498 
 
$
 7,196 
 
$
 17,038 
 
$
 20,647 
   Oil & Gas
 
 4,315 
   
 3,645 
   
 11,669 
   
 10,693 
   Energy Management
 
 1,828 
   
 1,879 
   
 5,557 
   
 5,478 
   Aviation
 
 5,364 
   
 4,781 
   
 15,741 
   
 14,527 
   Healthcare
 
 4,304 
   
 4,307 
   
 13,083 
   
 13,107 
   Transportation
 
 1,406 
   
 1,409 
   
 4,425 
   
 4,244 
   Home & Business Solutions
 
 2,098 
   
 1,955 
   
 6,142 
   
 5,899 
   Total industrial segment revenues
 
 25,813 
   
 25,172 
   
 73,655 
   
 74,595 
   GE Capital
 
 10,670 
   
 11,274 
   
 33,185 
   
 33,968 
      Total segment revenues
 
 36,483 
   
 36,446 
   
 106,840 
   
 108,563 
Corporate items and eliminations(a)
 
 (758)
   
 (192)
   
 (982)
   
 (832)
Consolidated revenues and other income
$
 35,725 
 
$
 36,254 
 
$
 105,858 
 
$
 107,731 
                       
Segment profit(a)
                     
   Power & Water
$
 1,289 
 
$
 1,184 
 
$
 3,095 
 
$
 3,675 
   Oil & Gas
 
 519 
   
 469 
   
 1,376 
   
 1,275 
   Energy Management
 
 18 
   
 42 
   
 64 
   
 67 
   Aviation
 
 1,091 
   
 924 
   
 3,094 
   
 2,708 
   Healthcare
 
 665 
   
 620 
   
 1,986 
   
 1,899 
   Transportation
 
 306 
   
 265 
   
 886 
   
 779 
   Home & Business Solutions
 
 77 
   
 60 
   
 239 
   
 196 
   Total industrial segment profit
 
 3,965 
   
 3,564 
   
 10,740 
   
 10,599 
   GE Capital
 
 1,895 
   
 1,675 
   
 5,744 
   
 5,569 
      Total segment profit
 
 5,860 
   
 5,239 
   
 16,484 
   
 16,168 
Corporate items and eliminations(a)
 
 (1,905)
   
 (1,018)
   
 (4,267)
   
 (3,550)
GE interest and other financial charges
 
 (338)
   
 (294)
   
 (988)
   
 (960)
GE provision for income taxes
 
 (344)
   
 (477)
   
 (1,065)
   
 (1,319)
Earnings from continuing operations attributable
                     
  to the Company
 
 3,273 
   
 3,450 
   
 10,164 
   
 10,339 
Earnings (loss) from discontinued operations,
                     
  net of taxes, attributable to the Company
 
 (82)
   
 41 
   
 (313)
   
 (709)
Consolidated net earnings attributable to
                     
   the Company
$
 3,191 
 
$
 3,491 
 
$
 9,851 
 
$
 9,630 
                       
                       
(a)  
Segment revenues includes both revenues and other income related to the segment. Segment profit excludes results reported as discontinued operations, earnings attributable to noncontrolling interests of consolidated subsidiaries, GECC preferred stock dividends declared and accounting changes. Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segment’s management is measured – excluded in determining segment profit, which we sometimes refer to as “operating profit,” for Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation and Home & Business Solutions; included in determining segment profit, which we sometimes refer to as “net earnings,” for GE Capital.
 
See accompanying notes. 
 
 
 
 
(8)
 
 
 
 
Notes to Condensed, Consolidated Financial Statements (Unaudited)
 
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
The accompanying condensed, consolidated financial statements represent the consolidation of General Electric Company (the Company) and all companies that we directly or indirectly control, either through majority ownership or otherwise. See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (2012 consolidated financial statements), which discusses our consolidation and financial statement presentation. As used in this report on Form 10-Q (Report), “GE” represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), whose continuing operations are presented on a one-line basis; GECC consists of General Electric Capital Corporation and all of its affiliates; and “Consolidated” represents the adding together of GE and GECC with the effects of transactions between the two eliminated. Unless otherwise indicated, we refer to the caption revenues and other income simply as “revenues” throughout Item 1 of this Form 10-Q.

We have reclassified certain prior-period amounts to conform to the current-period presentation. Unless otherwise indicated, information in these notes to the condensed, consolidated financial statements relates to continuing operations.

Accounting Changes
 
On January 1, 2012, we adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2011-05, an amendment to Accounting Standards Codification (ASC) 220, Comprehensive Income. ASU 2011-05 introduced a new statement, the Consolidated Statement of Comprehensive Income. The amendments affect only the display of those components of equity categorized as other comprehensive income and do not change existing recognition and measurement requirements that determine net earnings.

On January 1, 2012, we adopted FASB ASU 2011-04, an amendment to ASC 820, Fair Value Measurements. ASU 2011-04 clarifies or changes the application of existing fair value measurements, including: that the highest and best use valuation premise in a fair value measurement is relevant only when measuring the fair value of nonfinancial assets; that a reporting entity should measure the fair value of its own equity instrument from the perspective of a market participant that holds that instrument as an asset; to permit an entity to measure the fair value of certain financial instruments on a net basis rather than based on its gross exposure when the reporting entity manages its financial instruments on the basis of such net exposure; that in the absence of a Level 1 input, a reporting entity should apply premiums and discounts when market participants would do so when pricing the asset or liability consistent with the unit of account; and that premiums and discounts related to size as a characteristic of the reporting entity’s holding are not permitted in a fair value measurement. Adopting these amendments had no effect on the financial statements. For a description of how we estimate fair value and our process for reviewing fair value measurements classified as Level 3 in the fair value hierarchy, see Note 1 in our 2012 consolidated financial statements.

See Note 1 in our 2012 consolidated financial statements for a summary of our significant accounting policies.

Interim Period Presentation
 
The condensed, consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed, consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. It is suggested that these condensed, consolidated financial statements be read in conjunction with the financial statements and notes thereto included in our 2012 consolidated financial statements. We label our quarterly information using a calendar convention, that is, first quarter is labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish interim quarterly closing dates using a fiscal calendar, which requires our businesses to close their books on either a Saturday or Sunday, depending on the business. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar for 2013 is available on our website, www.ge.com/secreports.

 
 
 
(9)
 
 

2. ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
 
Assets and Liabilities of Businesses Held for Sale
 
In the first quarter of 2013, we committed to sell certain of our machining and fabrication businesses at Aviation and our Consumer auto and personal loan business in Portugal.  We completed the sale of our Consumer auto and personal loan business in Portugal on July 15, 2013 for proceeds of $83 million.

In the second quarter of 2012, we committed to sell a portion of our Business Properties portfolio (Business Property) in Real Estate, including certain commercial loans, the origination and servicing platforms and the servicing rights on loans previously securitized by GECC. We completed the sale of Business Property on October 1, 2012 for proceeds of $2,406 million. We deconsolidated substantially all Real Estate securitization entities in the fourth quarter of 2012 as servicing rights related to these entities were transferred to the buyer at closing.

Summarized financial information for businesses held for sale is shown below.
 

 
At
 
September 30,
 
December 31,
(In millions)
2013
 
2012
           
Assets
         
Cash and equivalents
$
 4 
 
$
 74 
Financing receivables – net
 
 - 
   
 47 
Property, plant and equipment – net
 
 26 
   
 31 
Other intangible assets – net
 
 20 
   
 9 
Other
 
 119 
   
 50 
Assets of businesses held for sale
$
 169 
 
$
 211 
           
Liabilities
         
Short-term borrowings
$
 - 
 
$
 138 
Other
 
 42 
   
 19 
Liabilities of businesses held for sale
$
 42 
 
$
 157 

NBCU
 
On March 19, 2013, we closed a transaction to sell our remaining 49% common equity interest in NBCUniversal LLC (NBCU LLC) to Comcast Corporation (Comcast) for total consideration of $16,722 million, consisting of $11,997 million in cash, $4,000 million in Comcast guaranteed debt and $725 million in preferred stock. The $4,000 million of debt and the $725 million of preferred shares were both issued by a wholly-owned subsidiary of Comcast.  During the three months ended March 31, 2013, but subsequent to the closing of the transaction, both of these instruments were sold at approximately par value. In addition, Comcast is obligated to share with us potential tax savings associated with Comcast’s purchase of our NBCU LLC interest, if realized. We did not recognize these potential future payments as consideration for the sale, but will record such payments in income as they are received. GECC also sold real estate comprising certain floors located at 30 Rockefeller Center, New York and the CNBC property located in Englewood Cliffs, New Jersey to affiliates of NBCU LLC for $1,430 million in cash.

As a result of the transactions, we recognized a pre-tax gain of $1,096 million ($825 million after tax) on the sale of our 49% common equity interest in NBCU LLC and $921 million ($564 million after tax) on the sale of GECC’s real estate properties.

 
Discontinued Operations
 
Discontinued operations primarily comprised GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd.), our U.S. mortgage business (WMC), our Consumer mortgage lending business in Ireland (Consumer Ireland) and our CLL trailer services business in Europe (CLL Trailer Services). Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.
 
 
 
 
(10)
 
 

Summarized financial information for discontinued operations is shown below.
 
 
Three months ended September 30,
 
Nine months ended September 30,
(In millions)
 
2013
   
2012 
   
2013
   
2012 
                       
Operations
                     
Total revenues and other income (loss)
$
 79 
 
$
 (17)
 
$
 109 
 
$
 (160)
                       
Earnings (loss) from discontinued operations
                     
   before income taxes
$
 2 
 
$
 (139)
 
$
 (157)
 
$
 (587)
Benefit (provision) for income taxes
 
 9 
   
 30 
   
 151 
   
 187 
Earnings (loss) from discontinued operations,
                     
   net of taxes
$
 11 
 
$
 (109)
 
$
 (6)
 
$
 (400)
                       
Disposal
                     
Gain (loss) on disposal before income taxes
$
 (108)
 
$
 (4)
 
$
 (390)
 
$
 (506)
Benefit (provision) for income taxes
 
 15 
   
 154 
   
 83 
   
 197 
Gain (loss) on disposal, net of taxes
$
 (93)
 
$
 150 
 
$
 (307)
 
$
 (309)
                       
Earnings (loss) from discontinued operations,
                     
   net of taxes(a)
$
 (82)
 
$
 41 
 
$
 (313)
 
$
 (709)
                       
                       
(a)
The sum of GE industrial earnings (loss) from discontinued operations, net of taxes, and GECC earnings (loss) from discontinued operations, net of taxes, is reported as GE earnings (loss) from discontinued operations, net of taxes, on the Condensed Statement of Earnings.
 


 
At
 
September 30,
 
December 31,
(In millions)
2013 
 
2012 
           
Assets
         
Cash and equivalents
$
 108 
 
$
 102 
Property, plant and equipment - net
 
 474 
   
 699 
Other
 
 1,091 
   
 1,507 
Assets of discontinued operations
$
 1,673 
 
$
 2,308 
           
Liabilities
         
Deferred income taxes
$
 323 
 
$
 372 
Other
 
 2,077 
   
 2,079 
Liabilities of discontinued operations
$
 2,400 
 
$
 2,451 


Assets at September 30, 2013 and December 31, 2012 primarily comprised cash, property, plant and equipment - net and a deferred tax asset for a loss carryforward, which expires principally in 2017 and in part in 2019, related to the sale of our GE Money Japan business.

GE Money Japan
 
During the third quarter of 2008, we completed the sale of GE Money Japan, which included our Japanese personal loan business. Under the terms of the sale, we reduced the proceeds for estimated refund claims in excess of the statutory interest rate. Proceeds from the sale were to be increased or decreased based on the actual claims experienced in accordance with loss-sharing terms specified in the sale agreement, with all claims in excess of 258 billion Japanese yen (approximately $3,000 million) remaining our responsibility. The underlying portfolio to which this obligation relates is in runoff and interest rates were capped for all designated accounts by mid-2009. In the third quarter of 2010, we were required to begin making reimbursements under this arrangement.
 
 
 
(11)
 
 

Overall, excess interest refund claims experience has been difficult to predict and subject to several adverse factors, including the challenging global economic conditions over the last few years, the financial status of other Japanese personal lenders (including the 2010 bankruptcy of a large independent personal loan company), substantial ongoing legal advertising, and consumer behavior. Our reserves declined from $700 million at December 31, 2012, to $527 million at September 30, 2013, as claim payments and the effects of a strengthening U.S. dollar against the Japanese yen were partially offset by an increase to reserves of $205 million. In determining reserve levels, we consider analyses of recent and historical claims experience, as well as pending and estimated future refund requests, adjusted for the estimated percentage of customers who present valid requests and associated estimated payments. We determined our reserve assuming the pace of incoming claims will decelerate, that average exposure per claim remains consistent with recent experience, and that we continue to see the impact of loss mitigation efforts. Since our disposition of the business, incoming claims have continued to decline; however, it is highly variable and difficult to predict the pace and pattern of that decline and such assumptions have a significant effect on the total amount of our liability. Holding all other assumptions constant, an adverse change of 20% and 50% in assumed incoming daily claim rate reduction (resulting in an extension of the claim period and higher incoming claims), would result in an increase to our reserve of approximately $75 million and $400 million, respectively. We continue to closely monitor and evaluate claims activity.

Based on the uncertainties discussed above, and considering other environmental factors in Japan, including the runoff status of the underlying book of business, challenging economic conditions, the impact of laws and regulations (including consideration of proposed legislation that could impose a framework for collective legal action proceedings), and the financial status of other local personal lending companies, it is difficult to develop a meaningful estimate of the aggregate possible claims exposure. These uncertainties and factors could have an adverse effect on claims development.

GE Money Japan earnings (loss) from discontinued operations, net of taxes, were $(80) million and $(9) million in the three months ended September 30, 2013 and 2012, respectively, and $(196) million and $(363) million in the nine months ended September 30, 2013 and 2012, respectively.

WMC
 
During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In connection with the sale, WMC retained certain representation and warranty obligations related to loans sold to third parties prior to the disposal of the business and contractual obligations to repurchase previously sold loans as to which there was an early payment default. All claims received by WMC for early payment default have either been resolved or are no longer being pursued.
 
Pending repurchase claims based upon representations and warranties made in connection with loan sales were $6,311 million at September 30, 2013, $5,357 million at December 31, 2012 and $705 million at December 31, 2011. Pending claims represent those active repurchase claims that identify the specific loans tendered for repurchase and, for each loan, the alleged breach of a representation or warranty. As such, they do not include unspecified repurchase claims, such as the Litigation Claims discussed below, or claims relating to breaches of representations that were made more than six years before WMC was notified of the claim. WMC believes that these repurchase claims do not meet the substantive and procedural requirements for tender under the governing agreements, would be disallowed in legal proceedings under applicable statutes of limitations or are otherwise invalid. The amounts reported in pending claims reflect the purchase price or unpaid principal balances of the loans at the time of purchase and do not give effect to pay downs, accrued interest or fees, or potential recoveries based upon the underlying collateral. Historically, a small percentage of the total loans WMC originated and sold have been treated as “validly tendered,” meaning the loan was subject to repurchase because there was a breach of a representation and warranty that materially and adversely affected the value of the loan, and the demanding party met all other procedural and substantive requirements for repurchase.

Reserves related to WMC pending and estimated future loan repurchase claims were $800 million at September 30, 2013, reflecting an increase to reserves in the nine months ended September 30, 2013 of $167 million due to incremental claim activity and updates to WMC’s estimate of future losses. The amount of these reserves is based upon pending and estimated future loan repurchase requests, WMC’s historical loss experience and evaluation of claim activity on loans tendered for repurchase. 
 
 
 
 
(12)
 
 
 

The following table provides a roll forward of the reserve and pending repurchase claims.
 
Reserve
   
Pending claims
(In millions)
 
Three months ended September 30, 2013
   
Nine months ended September 30, 2013
 
(In millions)
 
Three months ended September 30, 2013
   
Nine months ended September 30, 2013
                         
Reserve, beginning
  of period
$
 787 
 
$
 633 
 
Pending claims,
  beginning of period
$
 6,335 
 
$
 5,357 
Provision
 
 18 
   
 172 
 
New claims
 
 - 
   
 978 
Claim resolutions/
  rescissions
 
 (5)
   
 (5)
 
Claim resolutions/
  rescissions
 
 (24)
   
 (24)
Reserve, end
 of period
$
 800 
 
$
 800 
 
Pending claims, end
 of period
$
 6,311 
 
$
 6,311 
                         
Given the significant recent activity in pending claims and related litigation filed in connection with such claims, it is difficult to assess whether future losses will be consistent with WMC’s past experience. Adverse changes to WMC’s assumptions supporting the reserve for pending and estimated future loan repurchase claims may result in an increase to these reserves. For example, a 50% increase in the estimate of future loan repurchase requests and a 100% increase in the estimated loss rate on loans tendered (and assuming settlements at current demands), would result in an increase to the reserves of approximately $525 million.

There are 16 lawsuits involving claims made against WMC arising from alleged breaches of representations and warranties on mortgage loans included in 15 securitizations. WMC initiated three of the cases as the plaintiff; in the other cases WMC is a defendant. The adverse parties in these cases are securitization trustees or parties claiming to act on their behalf. In 12 of these lawsuits, the adverse parties seek compensatory or other relief for mortgage loans beyond those included in WMC’s previously discussed pending claims at September 30, 2013 (Litigation Claims). These Litigation Claims consist of sampling-based claims in two cases on approximately $900 million of mortgage loans and, in the other ten cases, claims for repurchase or damages based on the alleged failure to provide notice of defective loans, breach of a corporate representation and warranty, and/or non-specific claims for rescissionary damages on approximately $5,700 million of mortgage loans. These claims reflect the purchase price or unpaid principal balances of the loans at the time of purchase and do not give effect to pay downs, accrued interest or fees, or potential recoveries based upon the underlying collateral. As noted above, WMC believes that the Litigation Claims conflict with the governing agreements and applicable law. As a result, WMC has not included the Litigation Claims in its pending claims or in its estimates of future loan repurchase requests and holds no related reserve as of September 30, 2013.

At this point, WMC is unable to develop a meaningful estimate of reasonably possible loss in connection with the Litigation Claims described above due to a number of factors, including the extent to which courts will agree with the theories supporting the Litigation Claims. The case law on these issues is unsettled, and while several courts have supported some of the theories underlying WMC’s legal defenses, other courts have rejected them. There are a number of pending cases, including WMC cases, which, in the coming months, could provide more certainty regarding the legal status of these claims. An adverse court decision on any of the theories supporting the Litigation Claims could increase WMC’s exposure in some or all of the 16 lawsuits, result in a reclassification of some or all of the Litigation Claims to Pending Claims and provoke new claims and lawsuits on additional loans. However, WMC continues to believe that it has defenses to all the claims asserted in litigation, including, for example, causation and materiality requirements, limitations on remedies for breach of representations and warranties, and the applicable statutes of limitations. To the extent WMC is required to repurchase loans, WMC’s loss also would be affected by several factors, including pay downs, accrued interest and fees, and the value of the underlying collateral. It is not possible to predict the outcome or impact of these defenses and other factors, any one of which could materially affect the amount of any loss ultimately incurred by WMC on these claims.

WMC has received claims on approximately $1,000 million of mortgage loans after the expiration of the statute of limitations as of September 30, 2013, $700 million of which are also included as Litigation Claims. Subsequent to September 30, 2013, WMC has received approximately $600 million of additional claims tendered after the six-year anniversary of the securitization. WMC has also received unspecified indemnification demands from depositors/underwriters/sponsors of residential mortgage-backed securities (RMBS) in connection with lawsuits brought by RMBS investors concerning alleged misrepresentations in the securitization offering documents to which WMC is not a party. WMC believes that it has defenses to these demands.
 
 
 
 
(13)
 
 

 
The reserve estimates reflect judgment, based on currently available information, and a number of assumptions, including economic conditions, claim activity, pending and threatened litigation, indemnification demands, estimated repurchase rates, and other activity in the mortgage industry. Actual losses arising from claims against WMC could exceed the reserve amount and additional claims and lawsuits could result if actual claim rates, governmental actions, litigation and indemnification activity, adverse court decisions, settlement activity, actual repurchase rates or losses WMC incurs on repurchased loans differ from its assumptions. It is difficult to develop a meaningful estimate of aggregate possible claims exposure because of uncertainties surrounding economic conditions, the ability and propensity of mortgage loan holders to present and resolve valid claims, governmental actions, mortgage industry activity and litigation, court decisions affecting WMC’s defenses, and pending and threatened litigation and indemnification demands against WMC.

WMC revenues and other income (loss) from discontinued operations were $(13) million and $(117) million in the three months ended September 30, 2013 and 2012, respectively, and $(167) million and $(475) million in the nine months ended September 30, 2013 and 2012, respectively. WMC’s losses from discontinued operations, net of taxes, were $11 million and $78 million in the three months ended September 30, 2013 and 2012, respectively, and $116 million and $314 million in the nine months ended September 30, 2013 and 2012, respectively.

Other Financial Services
 
In the first quarter of 2013, we announced the planned disposition of CLL Trailer Services and classified the business as discontinued operations. CLL Trailer Services revenues and other income (loss) from discontinued operations were $91 million and $95 million in the three months ended September 30, 2013 and 2012, respectively, and $274 million and $301 million in the nine months ended September 30, 2013 and 2012, respectively. CLL Trailer Services earnings (loss) from discontinued operations, net of taxes, were $(9) million and $5 million in the three months ended September 30, 2013 and 2012, respectively, and $(19) million (including a $118 million loss on disposal) and $24 million in the nine months ended September 30, 2013 and 2012, respectively.

In the first quarter of 2012, we announced the planned disposition of Consumer Ireland and classified the business as discontinued operations. We completed the sale in the third quarter of 2012 for proceeds of $227 million. Consumer Ireland revenues and other income (loss) from discontinued operations were an insignificant amount and $1 million in the three months ended September 30, 2013 and 2012, respectively, and an insignificant amount and $7 million in the nine months ended September 30, 2013 and 2012, respectively. Consumer Ireland earnings (loss) from discontinued operations, net of taxes, were $6 million and $(8) million in the three months ended September 30, 2013 and 2012, respectively, and $7 million and $(194) million (including a $121 million loss on disposal) in the nine months ended September 30, 2013 and 2012, respectively.

 
GE Industrial
 
GE industrial earnings (loss) from discontinued operations, net of taxes, were $1 million and $148 million in the three months ended September 30, 2013 and 2012, respectively, and an insignificant amount and $148 million in the nine months ended September 30, 2013 and 2012, respectively. During the third quarter of 2012, we resolved with the Internal Revenue Service the tax treatment of the 2007 disposition of our Plastics business, resulting in a tax benefit of $148 million. The sum of GE industrial earnings (loss) from discontinued operations, net of taxes, and GECC earnings (loss) from discontinued operations, net of taxes, is reported as GE earnings (loss) from discontinued operations, net of taxes, on the Condensed Statement of Earnings.
 

 
 
 
(14)
 
 

3. INVESTMENT SECURITIES
 
Substantially all of our investment securities are classified as available-for-sale. These comprise mainly investment grade debt securities supporting obligations to annuitants, policyholders and holders of guaranteed investment contracts (GICs) in our run-off insurance operations and Trinity, and investments held in our Commercial Lending and Leasing (CLL) business collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries. We do not have any securities classified as held-to-maturity.
 
 
September 30, 2013
 
December 31, 2012
     
Gross
 
Gross
         
Gross
 
Gross
   
 
Amortized
 
unrealized
 
unrealized
 
Estimated
 
Amortized
 
unrealized
 
unrealized
 
Estimated
(In millions)
cost
 
gains
 
losses
 
fair value
 
cost
 
gains
 
losses
 
fair value
                                               
GE
                                             
Debt
                                             
      U.S. corporate
$
 22 
 
$
 10 
 
$
 - 
 
$
 32 
 
$
 39 
 
$
 - 
 
$
 - 
 
$
 39 
      Corporate – non-U.S.
 
 13 
   
 1 
   
 - 
   
 14 
   
 6 
   
 - 
   
 - 
   
 6 
Equity
                                             
      Available-for-sale
 
 37 
   
 3 
   
 - 
   
 40 
   
 26 
   
 - 
   
 - 
   
 26 
      Trading
 
 10 
   
 - 
   
 - 
   
 10 
   
 3 
   
 - 
   
 - 
   
 3 
   
 82 
   
 14 
   
 - 
   
 96 
   
 74 
   
 - 
   
 - 
   
 74 
                                               
GECC
                                             
Debt
                                             
      U.S. corporate
 
 20,050 
   
 2,516 
   
 (209)
   
 22,357 
   
 20,233 
   
 4,201 
   
 (302)
   
 24,132 
      State and municipal
 
 4,187 
   
 246 
   
 (189)
   
 4,244 
   
 4,084 
   
 575 
   
 (113)
   
 4,546 
      Residential mortgage-
                                             
         backed(a)
 
 1,944 
   
 146 
   
 (59)
   
 2,031 
   
 2,198 
   
 183 
   
 (119)
   
 2,262 
      Commercial mortgage-backed
 
 2,919 
   
 194 
   
 (88)
   
 3,025 
   
 2,930 
   
 259 
   
 (95)
   
 3,094 
      Asset-backed
 
 6,533 
   
 8 
   
 (62)
   
 6,479 
   
 5,784 
   
 31 
   
 (77)
   
 5,738 
      Corporate – non-U.S.
 
 1,893 
   
 101 
   
 (96)
   
 1,898 
   
 2,391 
   
 150 
   
 (126)
   
 2,415 
      Government – non-U.S.
 
 2,370 
   
 86 
   
 (7)
   
 2,449 
   
 1,617 
   
 149 
   
 (3)
   
 1,763 
      U.S. government and federal
                                             
         agency
 
 839 
   
 52 
   
 (40)
   
 851 
   
 3,462 
   
 103 
   
 - 
   
 3,565 
Retained interests
 
 67 
   
 11 
   
 - 
   
 78 
   
 76 
   
 7 
   
 - 
   
 83 
Equity
                                             
      Available-for-sale
 
 208 
   
 46 
   
 (3)
   
 251 
   
 513 
   
 86 
   
 (3)
   
 596 
      Trading
 
 142 
   
 - 
   
 - 
   
 142 
   
 245 
   
 - 
   
 - 
   
 245 
   
 41,152 
   
 3,406 
   
 (753)
   
 43,805 
   
 43,533 
   
 5,744 
   
 (838)
   
 48,439 
                                               
Eliminations
 
 (4)
   
 - 
   
 - 
   
 (4)
   
 (3)
   
 - 
   
 - 
   
 (3)
Total
$
 41,230 
 
$
 3,420 
 
$
 (753)
 
$
 43,897 
 
$
 43,604 
 
$
 5,744 
 
$
 (838)
 
$
 48,510 
                                               
                                               
(a)
Substantially collateralized by U.S. mortgages. Of our total RMBS portfolio at September 30, 2013, $1,286 million relates to securities issued by government-sponsored entities and $745 million relates to securities of private label issuers. Securities issued by private label issuers are collateralized primarily by pools of individual direct mortgage loans of financial institutions.
 

The fair value of investment securities decreased to $43,897 million at September 30, 2013, from $48,510 million at December 31, 2012, primarily due to the sale of U.S. government and federal agency securities at our treasury operations and the impact of higher interest rates.
 
 
 
 
(15)
 
 

The following tables present the estimated fair values and gross unrealized losses of our available-for-sale investment securities.
 
 
In loss position for
 
 
Less than 12 months
 
12 months or more
 
     
Gross
     
Gross
 
 
Estimated
 
unrealized
 
Estimated
 
unrealized
 
(In millions)
fair value
 
losses
(a)
fair value
 
losses
(a)
                         
September 30, 2013
                       
Debt
                       
   U.S. corporate
$
 2,120 
 
$
 (134)
 
$
 416 
 
$
 (75)
 
   State and municipal
 
 996 
   
 (84)
   
 313 
   
 (105)
 
   Residential mortgage-backed
 
 237 
   
 (9)
   
 511 
   
 (50)
 
   Commercial mortgage-backed
 
 292 
   
 (26)
   
 773 
   
 (62)
 
   Asset-backed
 
 5,950 
   
 (13)
   
 404 
   
 (49)
 
   Corporate – non-U.S.
 
 140 
   
 (1)
   
 495 
   
 (95)
 
   Government – non-U.S.
 
 1,474 
   
 (6)
   
 40 
   
 (1)
 
   U.S. government and federal agency
 
 444 
   
 (40)
   
 - 
   
 - 
 
Retained interests
 
 9 
   
 - 
   
 - 
   
 - 
 
Equity
 
 17 
   
 (3)
   
 - 
   
 - 
 
Total
$
 11,679 
 
$
 (316)
 
$
 2,952 
 
$
 (437)
 
                         
December 31, 2012
                       
Debt
                       
   U.S. corporate
$
 434 
 
$
 (7)
 
$
 813 
 
$
 (295)
 
   State and municipal
 
 146 
   
 (2)
   
 326 
   
 (111)
 
   Residential mortgage-backed
 
 98 
   
 (1)
   
 691 
   
 (118)
 
   Commercial mortgage-backed
 
 37 
   
 - 
   
 979 
   
 (95)
 
   Asset-backed
 
 18 
   
 (1)
   
 658 
   
 (76)
 
   Corporate – non-U.S.
 
 167 
   
 (8)
   
 602 
   
 (118)
 
   Government – non-U.S.
 
 201 
   
 (1)
   
 37 
   
 (2)
 
   U.S. government and federal agency
 
 - 
   
 - 
   
 - 
   
 - 
 
Retained interests
 
 3 
   
 - 
   
 - 
   
 - 
 
Equity
 
 26 
   
 (3)
   
 - 
   
 - 
 
Total
$
 1,130 
 
$
 (23)
 
$
 4,106 
 
$
 (815)
 
                         
                         
(a)  
Includes gross unrealized losses at September 30, 2013 of $(131) million related to securities that had other-than-temporary impairments previously recognized.
 

 
We regularly review investment securities for impairment using both qualitative and quantitative criteria. We presently do not intend to sell the vast majority of our debt securities that are in an unrealized loss position and believe that it is not more likely than not that we will be required to sell these securities before recovery of our amortized cost. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during the nine months ended September 30, 2013 have not changed from those described in Note 3 in our 2012 consolidated financial statements.

During the three months ended September 30, 2013, we recognized pre-tax, other-than-temporary impairments of $62 million, of which $56 million was recorded through earnings ($13 million relates to equity securities), and $6 million was recorded in accumulated other comprehensive income (loss) (AOCI). At July 1, 2013, cumulative impairments recognized in earnings associated with debt securities still held were $945 million. During the three months ended September 30, 2013, we recognized no first-time impairments and incremental charges on previously impaired securities of $42 million. Of these cumulative amounts recognized through September 30, 2013, $52 million related to securities that were subsequently sold before the end of the third quarter of 2013.

During the three months ended September 30, 2012, we recognized pre-tax, other-than-temporary impairments of $25 million, all of which was recorded through earnings. At July 1, 2012, cumulative impairments recognized in earnings associated with debt securities still held were $578 million. During the three months ended September 30, 2012, we recognized no first-time impairments and incremental charges on previously impaired securities of $13 million. Of these cumulative amounts recognized through September 30, 2012, $39 million related to securities that were subsequently sold before the end of the third quarter of 2012.
 
 
 
 
(16)
 
 

During the nine months ended September 30, 2013, we recognized pre-tax, other-than-temporary impairments of $523 million, of which $487 million was recorded through earnings ($14 million relates to equity securities), and $36 million was recorded in AOCI. At January 1, 2013, cumulative impairments recognized in earnings associated with debt securities still held were $588 million. During the nine months ended September 30, 2013, we recognized first-time impairments of $385 million and incremental charges on previously impaired securities of $61 million. Of these cumulative amounts recognized through September 30, 2013, $99 million related to securities that were subsequently sold before the end of the third quarter of 2013.

During the nine months ended September 30, 2012, we recognized pre-tax, other-than-temporary impairments of $90 million, of which $89 million was recorded through earnings ($24 million relates to equity securities) and $1 million was recorded in AOCI. At January 1, 2012, cumulative impairments recognized in earnings associated with debt securities still held were $726 million. During the nine months ended September 30, 2012, we recognized first-time impairments of $10 million and incremental charges on previously impaired securities of $25 million. Of these cumulative amounts recognized through September 30, 2012, $209 million related to securities that were subsequently sold before the end of the third quarter of 2012.

Contractual Maturities of Investment in Available-for-Sale Debt Securities (Excluding Mortgage-Backed and Asset-Backed Securities)
         
 
 
Amortized
 
Estimated
(In millions)
cost
 
fair value
           
Due
         
  Within one year
$
 2,784 
 
$
 2,800 
  After one year through five years
 
 3,502 
   
 3,720 
  After five years through ten years
 
 5,032 
   
 5,264 
  After ten years
 
 18,056 
   
 20,061 
           

We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.

Supplemental information about gross realized gains and losses on available-for-sale investment securities follows.
 
 
Three months ended September 30,
 
Nine months ended September 30,
(In millions)
2013 
 
2012 
 
2013 
 
2012 
                       
GE
                     
Gains
$
 - 
 
$
 - 
 
$
 1 
 
$
 - 
Losses, including impairments
 
 - 
   
 - 
   
 (20)
   
 - 
Net
 
 - 
   
 - 
   
 (19)
   
 - 
                       
GECC
                     
Gains
 
 34 
   
 26 
   
 219 
   
 85 
Losses, including impairments
 
 (60)
   
 (55)
   
 (477)
   
 (159)
Net
 
 (26)
   
 (29)
   
 (258)
   
 (74)
Total
$
 (26)
 
$
 (29)
 
$
 (277)
 
$
 (74)


Although we generally do not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing our investment securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements and the funding of claims and obligations to policyholders. In some of our bank subsidiaries, we maintain a certain level of purchases and sales volume principally of non-U.S. government debt securities. In these situations, fair value approximates carrying value for these securities.

Proceeds from investment securities sales and early redemptions by issuers totaled $2,890 million and $2,696 million in the three months ended September 30, 2013 and 2012, respectively, and $16,828 million and $9,200 million in the nine months ended September 30, 2013 and 2012, respectively, principally from the sale of Comcast guaranteed debt and short-term securities in our bank subsidiaries and treasury operations.
 
 
 
 
(17)
 
 

We recognized pre-tax gains (losses) on trading securities of $(2) million and $1 million in the three months ended September 30, 2013 and 2012, respectively, and $49 million and $37 million in the nine months ended September 30, 2013 and 2012, respectively.


4. INVENTORIES
 
At
 
September 30,
 
December 31,
(In millions)
2013 
 
2012 
           
Raw materials and work in process
$
 10,642 
 
$
 9,295 
Finished goods
 
 6,974 
   
 6,099 
Unbilled shipments
 
 678 
   
 378 
   
 18,294 
   
 15,772 
Less revaluation to LIFO
 
 (351)
   
 (398)
Total
$
 17,943 
 
$
 15,374 


5. GECC FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
 
 
At
 
September 30,
 
December 31,
(In millions)
2013
 
2012 
           
Loans, net of deferred income(a)
$
 229,639 
 
$
 241,465 
Investment in financing leases, net of deferred income
 
 29,736 
   
 32,471 
   
 259,375 
   
 273,936 
Less allowance for losses
 
 (5,152)
   
 (4,985)
Financing receivables – net(b)
$
 254,223 
 
$
 268,951 
           
           
(a)  
Deferred income was $1,963 million and $2,182 million at September 30, 2013 and December 31, 2012, respectively.
 
(b)  
Financing receivables at September 30, 2013 and December 31, 2012 included $582 million and $750 million, respectively, relating to loans that had been acquired in a transfer but have been subject to credit deterioration since origination.
 
 
 
 
(18)