10-Q 1 a2014-09x3010xq.htm 10-Q 2014-09-30 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
 
____________________________________ 

FORM 10-Q
____________________________________ 
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
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 1-812
 
____________________________________ 
UNITED TECHNOLOGIES CORPORATION
____________________________________ 
DELAWARE
 
06-0570975
One Financial Plaza, Hartford, Connecticut 06101
(860) 728-7000

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  ý.    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) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý.    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.
 
Large accelerated filer
ý
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
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  ý.
At September 30, 2014 there were 911,658,325 shares of Common Stock outstanding.



UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended September 30, 2014
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

United Technologies Corporation and its subsidiaries' names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or tradenames of United Technologies Corporation and its subsidiaries. Names, abbreviations of names, logos, and products and service designators of other companies are either the registered or unregistered trademarks or tradenames of their respective owners. As used herein, the terms "we," "us," "our," "the Company," or "UTC," unless the context otherwise requires, mean United Technologies Corporation and its subsidiaries. References to internet web sites in this Form 10-Q are provided for convenience only. Information available through these web sites is not incorporated by reference into this Form 10-Q.

2


PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 
 
Quarter Ended September 30,
(Dollars in millions, except per share amounts)
2014
 
2013
Net Sales:
 
 
 
Product sales
$
11,507

 
$
11,243

Service sales
4,661

 
4,219

 
16,168

 
15,462

Costs and Expenses:
 
 
 
Cost of products sold
8,444

 
8,316

Cost of services sold
3,022

 
2,704

Research and development
677

 
630

Selling, general and administrative
1,580

 
1,633

 
13,723

 
13,283

Other income, net
301

 
187

Operating profit
2,746

 
2,366

Interest expense, net
186

 
226

Income from continuing operations before income taxes
2,560

 
2,140

Income tax expense
608

 
614

Net income from continuing operations
1,952

 
1,526

Less: Noncontrolling interest in subsidiaries' earnings from continuing operations
98

 
111

Income from continuing operations attributable to common shareowners
1,854

 
1,415

Discontinued operations (Note 2):
 
 
 
Gain on disposal

 
10

Income tax benefit

 
7

Income from discontinued operations attributable to common shareowners

 
17

Net income attributable to common shareowners
$
1,854

 
$
1,432

Earnings Per Share of Common Stock - Basic:
 
 
 
Income from continuing operations attributable to common shareowners
$
2.07

 
$
1.57

Net income attributable to common shareowners
$
2.07

 
$
1.59

Earnings Per Share of Common Stock - Diluted:
 
 
 
Income from continuing operations attributable to common shareowners
$
2.04

 
$
1.55

Net income attributable to common shareowners
$
2.04

 
$
1.57

See accompanying Notes to Condensed Consolidated Financial Statements


3


UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 
 
Nine Months Ended September 30,
(Dollars in millions, except per share amounts)
2014
 
2013
Net Sales:
 
 
 
Product sales
$
35,216

 
$
33,159

Service sales
12,888

 
12,708

 
48,104

 
45,867

Costs and Expenses:
 
 
 
Cost of products sold
26,707

 
24,876

Cost of services sold
8,380

 
8,161

Research and development
1,967

 
1,871

Selling, general and administrative
4,799

 
4,997

 
41,853

 
39,905

Other income, net
948

 
917

Operating profit
7,199

 
6,879

Interest expense, net
617

 
679

Income from continuing operations before income taxes
6,582

 
6,200

Income tax expense
1,534

 
1,677

Net income from continuing operations
5,048

 
4,523

Less: Noncontrolling interest in subsidiaries' earnings from continuing operations
301

 
286

Income from continuing operations attributable to common shareowners
4,747

 
4,237

Discontinued operations (Note 2):
 
 
 
Income from operations

 
63

Loss on disposal

 
(30
)
Income tax expense

 
(12
)
Income from discontinued operations attributable to common shareowners

 
21

Net income attributable to common shareowners
$
4,747

 
$
4,258

Earnings Per Share of Common Stock - Basic:
 
 
 
Income from continuing operations attributable to common shareowners
$
5.28

 
$
4.70

Net income attributable to common shareowners
$
5.28

 
$
4.73

Earnings Per Share of Common Stock - Diluted:
 
 
 
Income from continuing operations attributable to common shareowners
$
5.20

 
$
4.64

Net income attributable to common shareowners
$
5.20

 
$
4.66

See accompanying Notes to Condensed Consolidated Financial Statements


4


UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)

 
Quarter Ended
September 30,
 
Nine Months Ended September 30,
(Dollars in millions)
2014
 
2013
 
2014
 
2013
Net income from continuing operations
$
1,952

 
$
1,526

 
$
5,048

 
$
4,523

Net income from discontinued operations

 
17

 

 
21

Net income
1,952

 
1,543

 
5,048

 
4,544

Other comprehensive (loss) income, net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
 
 
 
 
 
 
Foreign currency translation adjustments arising during period
(744
)
 
436

 
(429
)
 
(448
)
Reclassification adjustments for loss (gain) on sale of an investment in a foreign entity recognized in Other income, net
1

 
(1
)
 
4

 
31

 
(743
)
 
435

 
(425
)
 
(417
)
Pension and post-retirement benefit plans
 
 
 
 
 
 
 
Pension and post-retirement benefit plans adjustments during the period
14

 
(18
)
 
15

 
39

Amortization of actuarial loss, prior service cost and transition obligation
104

 
226

 
312

 
680

 
118

 
208

 
327

 
719

Tax expense
(42
)
 
(64
)
 
(111
)
 
(247
)
 
76

 
144

 
216

 
472

Unrealized (loss) gain on available-for-sale securities
 
 
 
 
 
 
 
Unrealized holding (loss) gain arising during period
(59
)
 
93

 
(71
)
 
226

Reclassification adjustments for gain included in Other income, net

 
(27
)
 
(30
)
 
(81
)
 
(59
)
 
66

 
(101
)
 
145

Tax benefit (expense)
22

 
(25
)
 
40

 
(55
)
 
(37
)
 
41

 
(61
)
 
90

Change in unrealized cash flow hedging
 
 
 
 
 
 
 
Unrealized cash flow hedging (loss) gain arising during period
(142
)
 
97

 
(120
)
 
(62
)
Loss (gain) reclassified into Product sales
24

 
(1
)
 
55

 
22

Gain reclassified into Other income, net

 

 

 
(2
)
 
(118
)
 
96

 
(65
)
 
(42
)
Tax benefit (expense)
29

 
(24
)
 
12

 
11

 
(89
)
 
72

 
(53
)
 
(31
)
Other comprehensive (loss) income, net of tax
(793
)
 
692

 
(323
)
 
114

Comprehensive income
1,159

 
2,235

 
4,725

 
4,658

Comprehensive income attributable to noncontrolling interest
(71
)
 
(128
)
 
(267
)
 
(277
)
Comprehensive income attributable to common shareowners
$
1,088

 
$
2,107

 
$
4,458

 
$
4,381

See accompanying Notes to Condensed Consolidated Financial Statements

5


UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
 
(Dollars in millions)
September 30, 2014
 
December 31, 2013
Assets
 
 
 
Cash and cash equivalents
$
5,035

 
$
4,619

Accounts receivable, net
11,080

 
11,458

Inventories and contracts in progress, net
10,341

 
10,330

Future income tax benefits, current
1,989

 
1,964

Other assets, current
966

 
1,071

Total Current Assets
29,411

 
29,442

Customer financing assets
1,081

 
1,156

Future income tax benefits
1,223

 
1,236

Fixed assets
19,744

 
18,661

Less: Accumulated depreciation
(10,562
)
 
(9,795
)
Fixed assets, net
9,182

 
8,866

Goodwill
28,169

 
28,168

Intangible assets, net
15,684

 
15,521

Other assets
7,024

 
6,205

Total Assets
$
91,774

 
$
90,594

Liabilities and Equity
 
 
 
Short-term borrowings
$
347

 
$
388

Accounts payable
7,046

 
6,965

Accrued liabilities
14,721

 
15,335

Long-term debt currently due
1,794

 
112

Total Current Liabilities
23,908

 
22,800

Long-term debt
17,857

 
19,741

Future pension and postretirement benefit obligations
3,033

 
3,444

Other long-term liabilities
11,446

 
11,279

Total Liabilities
56,244

 
57,264

Commitments and contingent liabilities (Note 14)

 

Redeemable noncontrolling interest
141

 
111

Shareowners' Equity:
 
 
 
Common Stock
15,187

 
14,764

Treasury Stock
(21,519
)
 
(20,431
)
Retained earnings
43,668

 
40,539

Unearned ESOP shares
(118
)
 
(126
)
Accumulated other comprehensive loss
(3,169
)
 
(2,880
)
Total Shareowners' Equity
34,049

 
31,866

Noncontrolling interest
1,340

 
1,353

Total Equity
35,389

 
33,219

Total Liabilities and Equity
$
91,774

 
$
90,594

See accompanying Notes to Condensed Consolidated Financial Statements

6


UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
(Dollars in millions)
2014
 
2013
Operating Activities of Continuing Operations:
 
 
 
Income from continuing operations
$
5,048

 
$
4,523

Adjustments to reconcile income from continuing operations to net cash flows provided by operating activities of continuing operations:
 
 
 
Depreciation and amortization
1,418

 
1,335

Deferred income tax provision
118

 
13

Stock compensation cost
203

 
216

Change in:
 
 
 
Accounts receivable
159

 
(198
)
Inventories and contracts in progress
(1,345
)
 
(1,461
)
Other current assets
(128
)
 
118

Accounts payable and accrued liabilities
(82
)
 
1,077

Global pension contributions
(204
)
 
(72
)
Other operating activities, net
(162
)
 
(660
)
Net cash flows provided by operating activities of continuing operations
5,025

 
4,891

Investing Activities of Continuing Operations:
 
 
 
Capital expenditures
(1,154
)
 
(1,047
)
Investments in businesses
(378
)
 
(120
)
Dispositions of businesses
244

 
1,465

Decrease (increase) in customer financing assets, net
72

 
(121
)
Increase in collaboration intangible assets
(459
)
 
(547
)
Other investing activities, net
199

 
(229
)
Net cash flows used in investing activities of continuing operations
(1,476
)
 
(599
)
Financing Activities of Continuing Operations:
 
 
 
Repayment of long-term debt, net
(222
)
 
(1,795
)
Decrease in short-term borrowings, net
(128
)
 
(204
)
Proceeds from Common Stock issued under employee stock plans
131

 
336

Dividends paid on Common Stock
(1,538
)
 
(1,395
)
Repurchase of Common Stock
(1,095
)
 
(1,000
)
Other financing activities, net
(222
)
 
(168
)
Net cash flows used in financing activities of continuing operations
(3,074
)
 
(4,226
)
Discontinued Operations:
 
 
 
Net cash used in operating activities

 
(603
)
Net cash provided by investing activities

 
351

Net cash flows used in discontinued operations

 
(252
)
Effect of foreign exchange rate changes on cash and cash equivalents
(59
)
 
(29
)
Net increase (decrease) in cash and cash equivalents
416

 
(215
)
Cash and cash equivalents, beginning of year
4,619

 
4,836

Cash and cash equivalents, end of period
$
5,035

 
$
4,621


See accompanying Notes to Condensed Consolidated Financial Statements

7


UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Condensed Consolidated Financial Statements at September 30, 2014 and for the quarters and nine months ended September 30, 2014 and 2013 are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. The results reported in these Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. Certain reclassifications have been made to the prior year amounts to conform to the current year presentation. The financial information included herein should be read in conjunction with the financial statements and notes in our Annual Report to Shareowners (2013 Annual Report) incorporated by reference to our Annual Report on Form 10-K for calendar year 2013 (2013 Form 10-K).
Note 1: Acquisitions, Dispositions, Goodwill and Other Intangible Assets
Business Acquisitions and Dispositions. During the nine months ended September 30, 2014, our investment in business acquisitions was $506 million, including debt assumed of $128 million, and consisted of the acquisition of the majority interest in a Pratt & Whitney joint venture and a number of small acquisitions, primarily in our commercial businesses.
As a result of the 2012 transactions related to IAE International Aero Engines AG (IAE), Pratt & Whitney holds a 61% net interest in the collaboration and a 49.5% ownership interest in IAE. IAE's business purpose is to coordinate the design, development, manufacturing and product support of the V2500 program through involvement with the collaborators. IAE retains limited equity with the primary economics of the V2500 program passed to the participants in the separate collaboration arrangement. As such, we have determined that IAE is a variable interest entity with Pratt & Whitney its primary beneficiary, and IAE has, therefore, been consolidated. The carrying amounts and classification of assets and liabilities for IAE in our Condensed Consolidated Balance Sheet as of September 30, 2014 are as follows:
(Dollars in millions)
 
Current assets
$
1,855

Noncurrent assets
1,184

Total assets
$
3,039

 
 
Current liabilities
$
2,141

Noncurrent liabilities
1,209

Total liabilities
$
3,350

Goodwill. Changes in our goodwill balances for the nine months ended September 30, 2014 were as follows:
(Dollars in millions)
Balance as of
January 1, 2014
 
Goodwill 
Resulting from Business Combinations
 
Foreign Currency Translation and Other
 
Balance as of
September 30, 2014
Otis
$
1,741

 
$
21

 
$
(48
)
 
$
1,714

UTC Climate, Controls & Security
9,727

 
11

 
(133
)
 
9,605

Pratt & Whitney
1,273

 
209

 

 
1,482

UTC Aerospace Systems
15,069

 

 
(55
)
 
15,014

Sikorsky
353

 

 
(4
)
 
349

Total Segments
28,163

 
241

 
(240
)
 
28,164

Eliminations and other
5

 

 

 
5

Total
$
28,168

 
$
241

 
$
(240
)
 
$
28,169


8


Intangible Assets. Identifiable intangible assets are comprised of the following:
 
September 30, 2014
 
December 31, 2013
(Dollars in millions)
Gross Amount
 
Accumulated
Amortization
 
Gross Amount
 
Accumulated
Amortization
Amortized:
 
 
 
 
 
 
 
Service portfolios
$
2,183

 
$
(1,334
)
 
$
2,234

 
$
(1,295
)
Patents and trademarks
376

 
(192
)
 
380

 
(181
)
IAE collaboration
2,738

 
(15
)
 
2,273

 

Customer relationships and other
12,260

 
(2,556
)
 
12,049

 
(2,199
)
 
17,557

 
(4,097
)
 
16,936

 
(3,675
)
Unamortized:
 
 
 
 
 
 
 
Trademarks and other
2,224

 

 
2,260

 

Total
$
19,781

 
$
(4,097
)
 
$
19,196

 
$
(3,675
)
Customer relationship intangible assets include payments made to our customers to secure certain contractual rights. We amortize these intangible assets based on the underlying pattern of economic benefit, which may result in an amortization method other than straight-line. We classify amortization of such payments as a reduction of sales. The IAE collaboration intangible asset is amortized based upon the economic pattern of benefits as represented by the underlying cash flows. Prior to 2014, these cash flows were negative, and, accordingly, no amortization had previously been recorded. Amortization of intangible assets for the quarter and nine months ended September 30, 2014 was $182 million and $540 million, respectively, compared with $180 million and $531 million for the same periods of 2013. The following is the expected amortization of intangible assets for the years 2014 through 2019, which reflects an increase in expected amortization expense due to the pattern of economic benefit on certain aerospace intangible assets. 
(Dollars in millions)
 
Remaining 2014
 
2015
 
2016
 
2017
 
2018
 
2019
Amortization expense
 
$
162

 
$
669

 
$
677

 
$
751

 
$
819

 
$
810

Note 2: Discontinued Operations
In 2012, the UTC Board of Directors approved plans for the divestiture of a number of non-core businesses, which were completed with the sale of substantially all operations of Pratt & Whitney Rocketdyne (Rocketdyne) on June 14, 2013. Cash generated from these divestitures was used to repay debt incurred to finance the acquisition of Goodrich Corporation (Goodrich) in 2012. On February 12, 2013, we completed the disposition of UTC Power to ClearEdge Power. We have no continuing involvement with the UTC Power business post-disposition.
The following summarized financial information for our discontinued operations businesses was segregated from continuing operations and reported as Discontinued Operations in 2013. There was no discontinued operations activity in the nine months ended September 30, 2014.
(Dollars in millions)
Quarter Ended September 30, 2013
 
Nine Months Ended September 30, 2013
Discontinued Operations:
 
 
 
Net sales
$

 
$
309

Income from operations
$

 
$
63

Income tax expense

 
(32
)
Income from operations, net of income taxes

 
31

Gain (loss) on disposal
10

 
(30
)
Income tax benefit
7

 
20

Income from discontinued operations
$
17

 
$
21


9


Note 3: Earnings Per Share
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions, except per share amounts; shares in millions)
2014
 
2013
 
2014
 
2013
Net income attributable to common shareowners:
 
 
 
 
 
 
 
Net income from continuing operations
$
1,854

 
$
1,415

 
$
4,747

 
$
4,237

Net income from discontinued operations

 
17

 

 
21

Net income attributable to common shareowners
$
1,854

 
$
1,432

 
$
4,747

 
$
4,258

Basic weighted average number of shares outstanding
897.7

 
900.8

 
899.3

 
900.9

Stock awards and equity units
12.5

 
14.7

 
13.8

 
13.2

Diluted weighted average number of shares outstanding
910.2

 
915.5

 
913.1

 
914.1

Earnings Per Share of Common Stock - Basic:
 
 
 
 
 
 
 
Net income from continuing operations
$
2.07

 
$
1.57

 
$
5.28

 
$
4.70

Net income from discontinued operations

 
0.02

 

 
0.02

Net income attributable to common shareowners
2.07

 
1.59

 
5.28

 
4.73

Earnings Per Share of Common Stock - Diluted:
 
 
 
 
 
 
 
Net income from continuing operations
$
2.04

 
$
1.55

 
$
5.20

 
$
4.64

Net income from discontinued operations

 
0.02

 

 
0.02

Net income attributable to common shareowners
2.04

 
1.57

 
5.20

 
4.66

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock appreciation rights and stock options, when the average market price of the common stock is lower than the exercise price of the related stock awards during the period. These outstanding stock awards are not included in the computation of diluted earnings per share because the effect would be anti-dilutive.  For the quarter ended September 30, 2014, the number of stock awards excluded from the computation was approximately 3.6 million. For the nine months ended September 30, 2014, there were no anti-dilutive stock awards excluded from the computation. There were no anti-dilutive stock awards excluded from the computation for the quarter and nine months ended September 30, 2013.
Note 4: Inventories and Contracts in Progress
(Dollars in millions)
September 30, 2014
 
December 31, 2013
Raw materials
$
2,073

 
$
1,983

Work-in-process
3,945

 
4,600

Finished goods
3,957

 
3,360

Contracts in progress
8,756

 
7,929

 
18,731

 
17,872

Less:
 
 
 
Progress payments, secured by lien, on U.S. Government contracts
(440
)
 
(279
)
Billings on contracts in progress
(7,950
)
 
(7,263
)
 
$
10,341

 
$
10,330

During the quarter ended June 30, 2014, Sikorsky and the Canadian Government signed amendments to their existing contracts for development, production and support of the CH-148 helicopter. These amendments include significant changes in program scope, governance and delivery methodology. Accordingly, in the quarter ended June 30, 2014, we recognized a change in estimate on this program resulting in the liquidation of approximately $1.3 billion of inventory, including all capitalized contract development costs related to this program. As of December 31, 2013, inventory included approximately $740 million of capitalized contract development costs related to this program.
Inventory also includes capitalized contract development costs related to certain aerospace programs at UTC Aerospace Systems. As of September 30, 2014 and December 31, 2013, these capitalized costs were $149 million and $159 million, respectively, which will be liquidated as production units are delivered to the customer.

10


Note 5: Borrowings and Lines of Credit
(Dollars in millions)
September 30, 2014
 
December 31, 2013
Commercial paper
$
135

 
$
200

Other borrowings
212

 
188

Total short-term borrowings
$
347

 
$
388

At September 30, 2014, we had revolving credit agreements with various banks permitting aggregate borrowings of up to $4.35 billion pursuant to a $2.20 billion revolving credit agreement and a $2.15 billion multicurrency revolving credit agreement, both of which expire in May 2019. As of September 30, 2014, there were no borrowings under either of these revolving credit agreements. The undrawn portions of these revolving credit agreements are also available to serve as backup facilities for the issuance of commercial paper. As of September 30, 2014, our maximum commercial paper borrowing limit was $4 billion. We use our commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, debt refinancing, and repurchases of our common stock.
On April 1, 2014, we redeemed all remaining outstanding 2016 Goodrich 6.290% notes, representing approximately $188 million in aggregate principal, under our redemption notice issued on February 28, 2014.

11


Long-term debt consisted of the following:
(Dollars in millions)
September 30, 2014
 
December 31, 2013
LIBOR§ plus 0.500% floating rate notes due 2015
$
500

 
$
500

4.875% notes due 2015*
1,200

 
1,200

6.290% notes due 2016

 
188

5.375% notes due 2017*
1,000

 
1,000

1.800% notes due 2017*
1,500

 
1,500

6.800% notes due 2018
99

 
99

6.125% notes due 2019*
1,250

 
1,250

8.875% notes due 2019
271

 
271

4.500% notes due 2020*
1,250

 
1,250

4.875% notes due 2020
171

 
171

8.750% notes due 2021
250

 
250

3.100% notes due 2022*
2,300

 
2,300

1.550% junior subordinated notes due 2022
1,100

 
1,100

7.100% notes due 2027
141

 
141

6.700% notes due 2028
400

 
400

7.500% notes due 2029*
550

 
550

5.400% notes due 2035*
600

 
600

6.050% notes due 2036*
600

 
600

6.800% notes due 2036
134

 
134

7.000% notes due 2038
159

 
159

6.125% notes due 2038*
1,000

 
1,000

5.700% notes due 2040*
1,000

 
1,000

4.500% notes due 2042*
3,500

 
3,500

Project financing obligations
109

 
86

Other (including capitalized leases)
395

 
394

Total principal long-term debt
19,479

 
19,643

Other (fair market value adjustments and discounts)
172

 
210

Total long-term debt
19,651

 
19,853

Less: current portion
1,794

 
112

Long-term debt, net of current portion
$
17,857

 
$
19,741

*
We may redeem the above notes, in whole or in part, at our option at any time at a redemption price in U.S. Dollars equal to the greater of 100% of the principal amount of the notes to be redeemed or the sum of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed, discounted to the redemption date on a semiannual basis at the adjusted treasury rate plus 10-50 basis points. The redemption price will also include interest accrued to the date of redemption on the principal balance of the notes being redeemed.
The junior subordinated notes are redeemable at our option, in whole or in part, on a date not earlier than August 1, 2017. The redemption price will be the principal amount, plus accrued and unpaid interest, if any, up to but excluding the redemption date. We may extend or eliminate the optional redemption date as part of a remarketing of the junior subordinated notes which could occur between April 29, 2015 and July 15, 2015 or between July 23, 2015 and July 29, 2015.
Includes notes and remaining fair market value adjustments that were assumed as a part of the Goodrich acquisition on July 26, 2012.
§ 
The three-month LIBOR rate as of September 30, 2014 was approximately 0.2%.
We have an existing universal shelf registration statement filed with the Securities and Exchange Commission (SEC) for an indeterminate amount of equity and debt securities for future issuance, subject to our internal limitations on the amount of equity and debt to be issued under this shelf registration statement.

12


Note 6: Income Taxes
We conduct business globally and, as a result, UTC or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Belgium, Canada, China, France, Germany, Hong Kong, Italy, Japan, South Korea, Singapore, Spain, the United Kingdom and the United States. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2000.
In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances, and information available at the reporting date. It is reasonably possible that over the next 12 months the amount of unrecognized tax benefits may change within a range of a net increase of $30 million to a net decrease of $150 million as a result of additional worldwide uncertain tax positions, the revaluation of current uncertain tax positions arising from developments in examinations, in appeals, or in the courts, or the closure of tax statutes. See Note 14, Contingent Liabilities, for discussion regarding uncertain tax positions which are not included in this range related to previously disclosed German tax litigation.
The Company is engaged in litigation with the Internal Revenue Service (IRS) with respect to an issue involving the proper timing of deductions taken by Goodrich Corporation in its tax years 2005 and 2006, prior to its acquisition by UTC. This is a recurring issue, and the IRS may continue to challenge it in subsequent tax years until the issue is resolved. Goodrich Corporation tax years 2007 through 2010 are currently before the Appeals Division of the IRS (IRS Appeals) for resolution discussions regarding certain proposed adjustments with which UTC does not agree, including the recurring timing issue described above. Both the 2005 - 2006 litigation and the 2007 - 2010 appeals proceedings, together with all final computations for open tax years through 2010, are expected to be resolved during the fourth quarter of 2014. As a result, we currently expect to recognize non-cash gains of approximately $90 million during the fourth quarter of 2014, primarily comprised of pre-tax interest. IRS examination activity for Goodrich Corporation tax years 2011 and 2012, prior to its acquisition by UTC, commenced during the third quarter of 2014.
UTC tax years 2006 through 2008 have been before IRS Appeals for resolution of certain proposed adjustments with which UTC did not agree. These proceedings were completed and resolution was achieved during the quarter ended September 30, 2014. IRS examination activity for UTC tax years 2011 and 2012 commenced during the third quarter of 2014. Additionally, during the quarter ended September 30, 2014, an agreement was reached between the Company and the Canada Revenue Agency (CRA) with respect to the amount of the research credits to which the Company was entitled for tax years 2006 through 2012. As a result of the completed IRS Appeals activity and agreement with the CRA, the Company recognized non-cash gains in the quarter ended September 30, 2014 of approximately $141 million, including a pre-tax interest adjustment of $23 million.
During the quarter ended June 30, 2014, the Examination Division of the IRS completed a review of UTC tax years 2009 and 2010 and the Examination Division of the Connecticut Department of Revenue Services completed a review of UTC's 2010 - 2012 tax years. As a result of the completion of these examinations, the Company recognized non-cash gains of approximately $274 million, including a pre-tax interest adjustment of $21 million, during the second quarter of 2014. Additionally, the Company reached an agreement with a state taxing authority during the second quarter of 2014 for the monetization of tax credits resulting in a gain of approximately $220 million through Other Income in the quarter ended June 30, 2014.
During the quarter ended June 30, 2014, the Company also settled a dispute with the French Tax Authority related to the proposed disallowance of certain recurring deductions claimed in France for tax years 2008 through 2011.
Note 7: Employee Benefit Plans
Pension and Postretirement Plans. We sponsor both funded and unfunded domestic and foreign defined pension and other postretirement benefit plans, and defined contribution plans. Contributions to our plans were as follows:
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions)
2014
 
2013
 
2014
 
2013
Defined benefit plans
$
60

 
$
21

 
$
204

 
$
72

Defined contribution plans
$
79

 
$
75

 
$
249

 
$
258


13


There were no contributions to our domestic defined benefit pension plans in the quarters and nine months ended September 30, 2014 and 2013. The following table illustrates the components of net periodic benefit cost for our defined pension and other postretirement benefit plans:
 
Pension Benefits
Quarter Ended September 30,
 
Other Postretirement Benefits
Quarter Ended September 30,
(Dollars in millions)
2014
 
2013
 
2014
 
2013
Service cost
$
122

 
$
142

 
$
1

 
$
1

Interest cost
381

 
343

 
10

 
9

Expected return on plan assets
(555
)
 
(526
)
 

 

Amortization
(3
)
 
(8
)
 

 
(2
)
Recognized actuarial net loss (gain)
108

 
237

 
(1
)
 
(1
)
Net settlement and curtailment loss
2

 

 

 

Total net periodic benefit cost
$
55

 
$
188

 
$
10

 
$
7

 
Pension Benefits
Nine Months Ended September 30,
 
Other Postretirement Benefits
Nine Months Ended September 30,
(Dollars in millions)
2014
 
2013
 
2014
 
2013
Service cost
$
366

 
$
428

 
$
3

 
$
3

Interest cost
1,141

 
1,029

 
30

 
28

Expected return on plan assets
(1,663
)
 
(1,579
)
 

 

Amortization
(7
)
 
(26
)
 

 
(8
)
Recognized actuarial net loss (gain)
322

 
717

 
(3
)
 
(3
)
Net settlement and curtailment loss (gain)
8

 
(17
)
 

 

Total net periodic benefit cost
$
167

 
$
552

 
$
30

 
$
20

Net settlement and curtailment loss (gain) for pension benefits includes curtailment gains of approximately $24 million related to, and recorded in, discontinued operations for the nine months ended September 30, 2013. There were no curtailment gains related to discontinued operations for the quarter ended September 30, 2013.
Note 8: Restructuring Costs
During the nine months ended September 30, 2014, we recorded net pre-tax restructuring costs totaling $243 million for new and ongoing restructuring actions. We recorded charges in the segments as follows:
(Dollars in millions)
 
Otis
$
53

UTC Climate, Controls & Security
82

Pratt & Whitney
55

UTC Aerospace Systems
36

Sikorsky
17

Total
$
243

Restructuring charges incurred during the nine months ended September 30, 2014 primarily relate to actions initiated during 2014 and 2013, and were recorded as follows:
(Dollars in millions)
 
Cost of sales
$
136

Selling, general and administrative
107

Total
$
243

2014 Actions. During the nine months ended September 30, 2014, we initiated restructuring actions relating to ongoing cost reduction efforts, including workforce reductions and the consolidation of field operations. We recorded net pre-tax

14


restructuring costs totaling $215 million, including $109 million in cost of sales and $106 million in selling, general and administrative expenses.
We are targeting the majority of the remaining workforce and all facility related cost reduction actions for completion during 2014 and 2015. No specific plans for significant other actions have been finalized at this time. The following table summarizes the accrual balances and utilization by cost type for the 2014 restructuring actions:
(Dollars in millions)
Severance
 
Asset
Write-Downs
 
Facility Exit,
Lease
Termination and
Other Costs
 
Total
Restructuring accruals at July 1, 2014
$
112

 
$

 
$
1

 
$
113

Net pre-tax restructuring costs
43

 
4

 
17

 
64

Utilization and foreign exchange
(45
)
 
(4
)
 
(7
)
 
(56
)
Balance at September 30, 2014
$
110

 
$

 
$
11

 
$
121

The following table summarizes expected, incurred and remaining costs for the 2014 restructuring actions by segment:
(Dollars in millions)
Expected
Costs
 
Costs Incurred Quarter Ended
March 31, 2014
 
Costs Incurred Quarter Ended June 30, 2014
 
Costs Incurred Quarter Ended September 30, 2014
 
Remaining Costs at September 30, 2014
Otis
$
85

 
$
(18
)
 
$
(28
)
 
$
(17
)
 
$
22

UTC Climate, Controls & Security
97

 
(16
)
 
(21
)
 
(16
)
 
44

Pratt & Whitney
78

 
(37
)
 
(10
)
 
(8
)
 
23

UTC Aerospace Systems
37

 
(3
)
 
(2
)
 
(22
)
 
10

Sikorsky
17

 
(16
)
 

 
(1
)
 

Total
$
314

 
$
(90
)
 
$
(61
)
 
$
(64
)
 
$
99

2013 Actions. During the nine months ended September 30, 2014, we recorded net pre-tax restructuring costs totaling $33 million for restructuring actions initiated in 2013, including $29 million in cost of sales and $4 million in selling, general and administrative expenses. The 2013 actions relate to ongoing cost reduction efforts, including workforce reductions and the consolidation of field operations. The following table summarizes the accrual balances and utilization by cost type for the 2013 restructuring actions:
(Dollars in millions)
Severance
 
Asset
Write-Downs
 
Facility Exit,
Lease
Termination and
Other Costs
 
Total
Restructuring accruals at July 1, 2014
$
132

 
$

 
$
23

 
$
155

Net pre-tax restructuring costs
(4
)
 

 
4

 

Utilization and foreign exchange
(26
)
 

 
(6
)
 
(32
)
Balance at September 30, 2014
$
102

 
$

 
$
21

 
$
123

The following table summarizes expected, incurred and remaining costs for the 2013 restructuring actions by segment:
(Dollars in millions)
Expected
Costs
 
Costs Incurred in 2013
 
Costs Incurred Quarter Ended
March 31, 2014
 
Costs Incurred Quarter Ended June 30, 2014
 
Costs Incurred Quarter Ended September 30, 2014
 
Remaining Costs at September 30, 2014
Otis
$
69

 
$
(69
)
 
$
(1
)
 
$
2

 
$

 
$
1

UTC Climate, Controls & Security
124

 
(89
)
 
(24
)
 
(2
)
 
2

 
11

Pratt & Whitney
163

 
(154
)
 
(6
)
 
1

 

 
4

UTC Aerospace Systems
88

 
(71
)
 
(1
)
 
(3
)
 
(3
)
 
10

Sikorsky
36

 
(38
)
 

 
1

 
1

 

Total
$
480

 
$
(421
)
 
$
(32
)
 
$
(1
)
 
$

 
$
26

2012 Actions. As of September 30, 2014, we have approximately $55 million of accrual balances remaining related to 2012 actions.

15


Note 9: Financial Instruments
We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments under the Derivatives and Hedging Topic of the FASB ASC and those utilized as economic hedges. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We have used derivative instruments, including swaps, forward contracts and options to manage certain foreign currency, interest rate and commodity price exposures.
The four quarter rolling average of the notional amount of foreign exchange contracts hedging foreign currency transactions was $13.0 billion and $12.3 billion at September 30, 2014 and December 31, 2013, respectively.
The following table summarizes the fair value of derivative instruments as of September 30, 2014 and December 31, 2013 which consist solely of foreign exchange contracts:
 
Asset Derivatives
 
Liability Derivatives
(Dollars in millions)
September 30, 2014
 
December 31, 2013
 
September 30, 2014
 
December 31, 2013
Derivatives designated as hedging instruments
$
13

 
$
59

 
$
128

 
$
103

Derivatives not designated as hedging instruments
87

 
31

 
89

 
54

The impact from foreign exchange derivative instruments that qualified as cash flow hedges was as follows:
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions)
2014
 
2013
 
2014
 
2013
(Loss) gain recorded in Accumulated other comprehensive loss
$
(142
)
 
$
97

 
$
(120
)
 
$
(64
)
Loss reclassified from Accumulated other comprehensive loss (gain) into Product sales (effective portion)
$
24

 
$
(1
)
 
$
55

 
$
22

Assuming current market conditions continue, a $72 million pre-tax loss is expected to be reclassified from Accumulated other comprehensive loss into Product sales to reflect the fixed prices obtained from foreign exchange hedging within the next 12 months. At September 30, 2014, all derivative contracts accounted for as cash flow hedges will mature by September 2016.
The effect on the Condensed Consolidated Statement of Operations of foreign exchange contracts not designated as hedging instruments was as follows:
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions)
2014
 
2013
 
2014
 
2013
Gain recognized in Other income, net
$
10

 
$
10

 
$
22

 
$
33

Note 10: Fair Value Measurements
The Fair Value Measurements and Disclosure Topic of the FASB ASC establishes a valuation hierarchy for disclosure of the inputs to the valuations used to measure fair value. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 - quoted prices in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly; and
Level 3 - unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

16


The following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring and nonrecurring basis in our Condensed Consolidated Balance Sheet as of September 30, 2014 and December 31, 2013: 
September 30, 2014 (Dollars in millions)
Total
 
Level 1
 
Level 2
 
Level 3
Recurring fair value measurements:
 
 
 
 
 
 
 
Available-for-sale securities
$
863

 
$
863

 
$

 
$

Derivative assets
100

 

 
100

 

Derivative liabilities
(217
)
 

 
(217
)
 

Nonrecurring fair value measurements:
 
 
 
 
 
 
 
Business dispositions
44

 

 
44

 

December 31, 2013 (Dollars in millions)
Total
 
Level 1
 
Level 2
 
Level 3
Recurring fair value measurements:
 
 
 
 
 
 
 
Available-for-sale securities
$
988

 
$
988

 
$

 
$

Derivative assets
90

 

 
90

 

Derivative liabilities
(157
)
 

 
(157
)
 

Nonrecurring fair value measurements:
 
 
 
 
 
 
 
Business dispositions
66

 

 
66

 

We have recorded gains of approximately $23 million, including a $48 million net gain during the nine months ended September 30, 2014, as a result of fair value adjustments related to the acquisition of the majority interest in a Pratt & Whitney joint venture. During the nine months ended September 30, 2014, we also recorded an approximately $30 million net gain from UTC Climate, Controls & Security's ongoing portfolio transformation, primarily due to a gain on the sale of an interest in a joint venture in North America, and a charge of approximately $28 million to adjust the fair value of a Sikorsky joint venture investment.
During the nine months ended September 30, 2013, we recorded an approximately $38 million net gain from UTC Climate, Controls & Security's ongoing portfolio transformation, primarily due to a gain on the sale of a business in Hong Kong. In addition, during that nine-month period we recorded a gain of approximately $193 million from the sale of the Pratt & Whitney Power Systems business, as well as an approximately $25 million charge to adjust the fair value of a Pratt & Whitney joint venture investment.
Valuation Techniques. Our available-for-sale securities include equity investments that are traded in active markets, either domestically or internationally, and are measured at fair value using closing stock prices from active markets. Our derivative assets and liabilities include foreign exchange contracts and commodity derivatives that are measured at fair value using internal models based on observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties' credit risks. As of September 30, 2014, there were no significant transfers in and out of Level 1 and Level 2.
As of September 30, 2014, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk. Similarly, there has not been any significant adverse impact to our derivative assets based on our evaluation of our counterparties' credit risks.
The following table provides carrying amounts and fair values of financial instruments that are not carried at fair value in our Condensed Consolidated Balance Sheet at September 30, 2014 and December 31, 2013:
 
September 30, 2014
 
December 31, 2013
(Dollars in millions)
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Long-term receivables
$
1,016

 
$
954

 
$
655

 
$
586

Customer financing notes receivable
270

 
262

 
394

 
366

Short-term borrowings
(347
)
 
(347
)
 
(388
)
 
(388
)
Long-term debt (excluding capitalized leases)
(19,614
)
 
(21,992
)
 
(19,807
)
 
(21,525
)
Long-term liabilities
(294
)
 
(268
)
 
(283
)
 
(253
)

17


The following table provides the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Condensed Consolidated Balance Sheet as of September 30, 2014:
(Dollars in millions)
Total
 
Level 1
 
Level 2
 
Level 3
Long-term receivables
$
954

 
$

 
$
954

 
$

Customer financing notes receivable
262

 

 
262

 

Short-term borrowings
(347
)
 

 
(135
)
 
(212
)
Long-term debt (excluding capitalized leases)
(21,992
)
 

 
(21,644
)
 
(348
)
Long-term liabilities
(268
)
 

 
(268
)
 

We had commercial aerospace financing and other contractual commitments totaling approximately $10.9 billion and $11.3 billion as of September 30, 2014 and December 31, 2013, respectively, related to commercial aircraft and certain contractual rights to provide product on new aircraft platforms. Risks associated with changes in interest rates on these commitments are mitigated by the fact that interest rates are variable during the commitment term, and are set at the date of funding based on current market conditions, the fair value of the underlying collateral and the credit worthiness of the customers. As a result, the fair value of these financings is expected to equal the amounts funded. The fair value of these commitments is not readily determinable.
Note 11: Long-Term Financing Receivables
Our long-term financing receivables primarily represent balances related to our aerospace businesses, such as long-term trade accounts receivable, leases receivable, and notes receivable. We also have other long-term receivables related to our commercial businesses; however, both the individual and aggregate amounts of those other receivables are not significant.
Long-term trade accounts receivable represent amounts arising from the sale of goods and services with a contractual maturity date of greater than one year and are recognized as Other assets in our Condensed Consolidated Balance Sheet. The increase in long-term trade accounts receivable at September 30, 2014, relative to December 31, 2013, is primarily attributable to billings by Sikorsky on its CH-148 contract with the Canadian Government. Notes and leases receivable represent notes and lease receivables other than receivables related to operating leases, and are recognized as Customer financing assets in our Condensed Consolidated Balance Sheet. The following table summarizes the balance by class of aerospace business-related long-term receivables as of September 30, 2014 and December 31, 2013.
(Dollars in millions)
September 30, 2014
 
December 31, 2013
Long-term trade accounts receivable
$
1,007

 
$
714

Notes and leases receivable
436

 
583

Total long-term receivables
$
1,443

 
$
1,297

Customer credit ratings range from customers with an extremely strong capacity to meet financial obligations, to customers whose uncollateralized receivable is in default. There can be no assurance that actual results will not differ from estimates or that consideration of these factors in the future will not result in an increase or decrease to the allowance for credit losses on long-term receivables. Based upon the customer credit ratings, approximately 6% and 9% of the total long-term receivables reflected in the table above were considered to bear high credit risk as of September 30, 2014 and December 31, 2013, respectively.
For long-term trade accounts receivable, we evaluate credit risk and collectability individually to determine if an allowance is necessary. Our long-term receivables reflected in the table above, which include reserves of $18 million and $49 million as of September 30, 2014 and December 31, 2013, respectively, are individually evaluated for impairment. At both September 30, 2014 and December 31, 2013, we did not have any significant balances that are considered to be delinquent, on non-accrual status, past due 90 days or more, or considered to be impaired.

18


Note 12: Shareowners' Equity and Noncontrolling Interest
A summary of the changes in shareowners' equity and noncontrolling interest comprising total equity for the quarters and nine months ended September 30, 2014 and 2013 is provided below:
 
Quarter Ended September 30,
 
2014
 
2013
(Dollars in millions)
Share-owners'
Equity
 
Non-controlling Interest
 
Total
Equity
 
Share-owners'
Equity
 
Non-controlling Interest
 
Total
Equity
Equity, beginning of period
$
33,785

 
$
1,408

 
$
35,193

 
$
26,987

 
$
1,382

 
$
28,369

Comprehensive income for the period:
 
 
 
 
 
 
 
 
 
 
 
Net income
1,854

 
98

 
1,952

 
1,432

 
111

 
1,543

Total other comprehensive (loss) income
(766
)
 
(27
)
 
(793
)
 
675

 
17

 
692

Total comprehensive income for the period
1,088

 
71

 
1,159

 
2,107

 
128

 
2,235

Common Stock issued under employee plans
154

 

 
154

 
312

 

 
312

Common Stock repurchased
(425
)
 

 
(425
)
 
(330
)
 

 
(330
)
Dividends on Common Stock
(512
)
 

 
(512
)
 
(465
)
 

 
(465
)
Dividends on ESOP Common Stock
(17
)
 

 
(17
)
 
(17
)
 

 
(17
)
Dividends attributable to noncontrolling interest


 
(145
)
 
(145
)
 


 
(161
)
 
(161
)
(Purchase) / sale of subsidiary shares from noncontrolling interest
(24
)
 
6

 
(18
)
 
(17
)
 
(56
)
 
(73
)
Disposition of noncontrolling interest


 

 

 


 
(1
)
 
(1
)
Redeemable noncontrolling interest

 

 

 

 
50

 
50

Equity, end of period
$
34,049

 
$
1,340

 
$
35,389

 
$
28,577

 
$
1,342

 
$
29,919

 
Nine Months Ended September 30,
 
2014
 
2013
(Dollars in millions)
Share-owners'
Equity
 
Non-controlling
Interest
 
Total
Equity
 
Share-owners'
Equity
 
Non-controlling
Interest
 
Total
Equity
Equity, beginning of period
$
31,866

 
$
1,353

 
$
33,219

 
$
25,914

 
$
1,155

 
$
27,069

Comprehensive income for the period:
 
 
 
 
 
 
 
 
 
 
 
Net income
4,747

 
301

 
5,048

 
4,258

 
286

 
4,544

Total other comprehensive (loss) income
(289
)
 
(34
)
 
(323
)
 
123

 
(9
)
 
114

Total comprehensive income for the period
4,458

 
267

 
4,725

 
4,381

 
277

 
4,658

Common Stock issued under employee plans
444

 
 
 
444

 
764

 
 
 
764

Common Stock repurchased
(1,095
)
 
 
 
(1,095
)
 
(1,000
)
 
 
 
(1,000
)
Dividends on Common Stock
(1,538
)
 
 
 
(1,538
)
 
(1,395
)
 
 
 
(1,395
)
Dividends on ESOP Common Stock
(53
)
 
 
 
(53
)
 
(51
)
 
 
 
(51
)
Dividends attributable to noncontrolling interest
 
 
(245
)
 
(245
)
 
 
 
(288
)
 
(288
)
(Purchase) / sale of subsidiary shares from noncontrolling interest
(33
)
 

 
(33
)
 
(36
)
 
175

 
139

Disposition of noncontrolling interest
 
 
3

 
3

 
 
 
(6
)
 
(6
)
Redeemable noncontrolling interest

 
(38
)
 
(38
)
 

 
29

 
29

Equity, end of period
$
34,049

 
$
1,340

 
$
35,389

 
$
28,577

 
$
1,342

 
$
29,919


19


A summary of the changes in each component of accumulated other comprehensive income (loss), net of tax for the quarters and nine months ended September 30, 2014 and 2013 is provided below:
(Dollars in millions)
Foreign
Currency
Translation
 
Defined
Benefit
Pension and
Post-
retirement
Plans
 
Unrealized Gains
(Losses) on
Available-for-Sale
Securities
 
Unrealized
Hedging
(Losses)
Gains
 
Accumulated
Other
Comprehensive
(Loss) Income
Quarter Ended September 30, 2014
 
 
 
 
 
 
 
 
 
Balance at June 30, 2014
$
495

 
$
(3,127
)
 
$
272

 
$
(43
)
 
$
(2,403
)
Other comprehensive (loss) income before reclassifications, net
(717
)
 
9

 
(37
)
 
(113
)
 
(858
)
Amounts reclassified, pretax
1

 
104

 

 
24

 
129

Tax (benefit) expense reclassified

 
(37
)
 

 

 
(37
)
Balance at September 30, 2014
$
(221
)
 
$
(3,051
)
 
$
235

 
$
(132
)
 
$
(3,169
)
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
$
170

 
$
(3,267
)
 
$
296

 
$
(79
)
 
$
(2,880
)
Other comprehensive income (loss) before reclassifications, net
(395
)
 
10

 
(43
)
 
(98
)
 
(526
)
Amounts reclassified, pretax
4

 
312

 
(30
)
 
55

 
341

Tax (benefit) expense reclassified

 
(106
)
 
12

 
(10
)
 
(104
)
Balance at September 30, 2014
$
(221
)
 
$
(3,051
)
 
$
235

 
$
(132
)
 
$
(3,169
)
(Dollars in millions)
Foreign
Currency
Translation
 
Defined
Benefit
Pension and
Post-
retirement
Plans