10-Q 1 a2015-06x3010xq.htm 10-Q 2015-06-30 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 June 30, 2015
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 June 30, 2015 there were 890,597,745 shares of Common Stock outstanding.



UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended June 30, 2015
 
 
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 June 30,
(Dollars in millions, except per share amounts)
2015
 
2014
Net Sales:
 
 
 
Product sales
$
12,046

 
$
13,017

Service sales
4,287

 
4,174

 
16,333

 
17,191

Costs and Expenses:
 
 
 
Cost of products sold
9,020

 
10,182

Cost of services sold
2,805

 
2,749

Research and development
606

 
666

Selling, general and administrative
1,543

 
1,623

 
13,974

 
15,220

Other income, net
193

 
384

Operating profit
2,552

 
2,355

Interest expense, net
216

 
206

Income before income taxes
2,336

 
2,149

Income tax expense
684

 
359

Net income
1,652

 
1,790

Less: Noncontrolling interest in subsidiaries' earnings
110

 
110

Net income attributable to common shareowners
$
1,542

 
$
1,680

Earnings Per Share of Common Stock:
 
 
 
Basic
$
1.76

 
$
1.87

Diluted
$
1.73

 
$
1.84

See accompanying Notes to Condensed Consolidated Financial Statements


3


UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 
 
Six Months Ended June 30,
(Dollars in millions, except per share amounts)
2015
 
2014
Net Sales:
 
 
 
Product sales
$
22,419

 
$
23,709

Service sales
8,455

 
8,227

 
30,874

 
31,936

Costs and Expenses:
 
 
 
Cost of products sold
16,850

 
18,263

Cost of services sold
5,498

 
5,358

Research and development
1,208

 
1,290

Selling, general and administrative
3,106

 
3,219

 
26,662

 
28,130

Other income, net
614

 
647

Operating profit
4,826

 
4,453

Interest expense, net
434

 
431

Income before income taxes
4,392

 
4,022

Income tax expense
1,242

 
926

Net income
3,150

 
3,096

Less: Noncontrolling interest in subsidiaries' earnings
182

 
203

Net income attributable to common shareowners
$
2,968

 
$
2,893

Earnings Per Share of Common Stock:
 
 
 
Basic
$
3.35

 
$
3.21

Diluted
$
3.31

 
$
3.16

See accompanying Notes to Condensed Consolidated Financial Statements

4


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

 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2015
 
2014
 
2015
 
2014
Net income
$
1,652

 
$
1,790

 
$
3,150

 
$
3,096

Other comprehensive income, net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
 
 
 
 
 
 
Foreign currency translation adjustments arising during period
439

 
424

 
(266
)
 
315

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

 

 
(1
)
 
3

 
440

 
424

 
(267
)
 
318

Pension and post-retirement benefit plans
 
 
 
 
 
 
 
Pension and post-retirement benefit plans adjustments during the period
(7
)
 
(18
)
 
45

 
1

Amortization of actuarial loss, prior service cost and transition obligation
218

 
104

 
435

 
208

 
211

 
86

 
480

 
209

Tax expense
(79
)
 
(29
)
 
(176
)
 
(69
)
 
132

 
57

 
304

 
140

Unrealized gain (loss) on available-for-sale securities
 
 
 
 
 
 
 
Unrealized holding gain (loss) arising during period
1

 
(44
)
 
87

 
(12
)
Reclassification adjustments for gain included in Other income, net
(26
)
 
(6
)
 
(54
)
 
(30
)
 
(25
)
 
(50
)
 
33

 
(42
)
Tax benefit (expense)
11

 
21

 
(11
)
 
18

 
(14
)
 
(29
)
 
22

 
(24
)
Change in unrealized cash flow hedging
 
 
 
 
 
 
 
Unrealized cash flow hedging gain (loss) arising during period
62

 
102

 
(122
)
 
22

Loss reclassified into Product sales
43

 
13

 
100

 
31

 
105

 
115

 
(22
)
 
53

Tax (expense) benefit
(29
)
 
(29
)
 
7

 
(17
)
 
76

 
86

 
(15
)
 
36

Other comprehensive income, net of tax
634

 
538

 
44

 
470

Comprehensive income
2,286

 
2,328

 
3,194

 
3,566

Comprehensive income attributable to noncontrolling interest
(110
)
 
(110
)
 
(142
)
 
(196
)
Comprehensive income attributable to common shareowners
$
2,176

 
$
2,218

 
$
3,052

 
$
3,370

See accompanying Notes to Condensed Consolidated Financial Statements

5


UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
 
(Dollars in millions)
June 30, 2015
 
December 31, 2014
Assets
 
 
 
Cash and cash equivalents
$
5,933

 
$
5,235

Accounts receivable, net
11,516

 
11,317

Inventories and contracts in progress, net
10,295

 
9,865

Future income tax benefits, current
1,942

 
1,931

Other assets, current
983

 
1,410

Total Current Assets
30,669

 
29,758

Customer financing assets
1,037

 
978

Future income tax benefits
1,378

 
1,494

Fixed assets
19,963

 
19,764

Less: Accumulated depreciation
(10,697
)
 
(10,488
)
Fixed assets, net
9,266

 
9,276

Goodwill
27,933

 
27,796

Intangible assets, net
15,706

 
15,560

Other assets
6,784

 
6,427

Total Assets
$
92,773

 
$
91,289

Liabilities and Equity
 
 
 
Short-term borrowings
$
2,782

 
$
126

Accounts payable
7,153

 
6,967

Accrued liabilities
13,622

 
14,006

Long-term debt currently due
172

 
1,796

Total Current Liabilities
23,729

 
22,895

Long-term debt
19,489

 
17,872

Future pension and postretirement benefit obligations
6,373

 
6,683

Other long-term liabilities
11,110

 
11,135

Total Liabilities
60,701

 
58,585

Commitments and contingent liabilities (Note 13)

 

Redeemable noncontrolling interest
134

 
140

Shareowners' Equity:
 
 
 
Common Stock
15,141

 
15,300

Treasury Stock
(24,520
)
 
(21,922
)
Retained earnings
46,443

 
44,611

Unearned ESOP shares
(110
)
 
(115
)
Accumulated other comprehensive loss
(6,577
)
 
(6,661
)
Total Shareowners' Equity
30,377

 
31,213

Noncontrolling interest
1,561

 
1,351

Total Equity
31,938

 
32,564

Total Liabilities and Equity
$
92,773

 
$
91,289

See accompanying Notes to Condensed Consolidated Financial Statements

6


UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,
(Dollars in millions)
2015
 
2014
Operating Activities:
 
 
 
Net income
$
3,150

 
$
3,096

Adjustments to reconcile net income to net cash flows provided by operating activities:
 
 
 
Depreciation and amortization
958

 
935

Deferred income tax provision
325

 
36

Stock compensation cost
102

 
118

Change in:
 
 
 
Accounts receivable
(359
)
 
(312
)
Inventories and contracts in progress
(456
)
 
(791
)
Other current assets
(146
)
 
(47
)
Accounts payable and accrued liabilities
(83
)
 
151

Global pension contributions
(70
)
 
(144
)
Other operating activities, net
(573
)
 
35

Net cash flows provided by operating activities
2,848

 
3,077

Investing Activities:
 
 
 
Capital expenditures
(706
)
 
(739
)
Investments in businesses
(256
)
 
(84
)
Dispositions of businesses
166

 
156

(Increase) decrease in customer financing assets, net
(95
)
 
73

Increase in collaboration intangible assets
(247
)
 
(308
)
Receipts from settlements of derivative contracts
415

 
37

Other investing activities, net
167

 
(8
)
Net cash flows used in investing activities
(556
)
 
(873
)
Financing Activities:
 
 
 
Issuance (repayment) of long-term debt, net
3

 
(173
)
Increase in short-term borrowings, net
2,645

 
19

Proceeds from Common Stock issued under employee stock plans
26

 
113

Dividends paid on Common Stock
(1,096
)
 
(1,026
)
Repurchase of Common Stock
(3,000
)
 
(670
)
Other financing activities, net
(124
)
 
(106
)
Net cash flows used in financing activities
(1,546
)
 
(1,843
)
Effect of foreign exchange rate changes on cash and cash equivalents
(48
)
 
(18
)
Net increase in cash and cash equivalents
698

 
343

Cash and cash equivalents, beginning of year
5,235

 
4,619

Cash and cash equivalents, end of period
$
5,933

 
$
4,962


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 June 30, 2015 and for the quarters and six months ended June 30, 2015 and 2014 are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement 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 (2014 Annual Report) incorporated by reference to our Annual Report on Form 10-K for calendar year 2014 (2014 Form 10-K).
Note 1: Acquisitions, Dispositions, Goodwill and Other Intangible Assets
Business Acquisitions and Dispositions. During the six months ended June 30, 2015, our investment in business acquisitions was $273 million, including debt assumed of $17 million, and consisted of the acquisition of the majority interest in a UTC Climate, Controls & Security business and a number of small acquisitions, primarily in our commercial businesses.
On July 20, 2015, we announced an agreement to sell our Sikorsky Aircraft business (Sikorsky) to Lockheed Martin Corp. for $9 billion in cash, subject to a working capital and net indebtedness adjustment. The sale is expected to close by the end of 2015 or in the first quarter of 2016, and is subject to customary closing conditions, including regulatory approvals. As a result, Sikorsky will be reported in discontinued operations beginning in the third quarter of 2015.
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 jet engine 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 June 30, 2015 are as follows:
(Dollars in millions)
 
Current assets
$
1,947

Noncurrent assets
963

Total assets
$
2,910

 
 
Current liabilities
$
1,946

Noncurrent liabilities
1,437

Total liabilities
$
3,383

Goodwill. Changes in our goodwill balances for the six months ended June 30, 2015 were as follows:
(Dollars in millions)
Balance as of
January 1, 2015
 
Goodwill 
Resulting from Business Combinations
 
Foreign Currency Translation and Other
 
Balance as of
June 30, 2015
Otis
$
1,664

 
$
6

 
$
(67
)
 
$
1,603

UTC Climate, Controls & Security
9,408

 
348

 
(121
)
 
9,635

Pratt & Whitney
1,481

 
36

 

 
1,517

UTC Aerospace Systems
14,892

 

 
(61
)
 
14,831

Sikorsky
347

 

 
(3
)
 
344

Total Segments
27,792

 
390

 
(252
)
 
27,930

Eliminations and other
4

 

 
(1
)
 
3

Total
$
27,796

 
$
390

 
$
(253
)
 
$
27,933


8


Intangible Assets. Identifiable intangible assets are comprised of the following:
 
June 30, 2015
 
December 31, 2014
(Dollars in millions)
Gross Amount
 
Accumulated
Amortization
 
Gross Amount
 
Accumulated
Amortization
Amortized:
 
 
 
 
 
 
 
Service portfolios
$
2,006

 
$
(1,295
)
 
$
2,103

 
$
(1,309
)
Patents and trademarks
389

 
(196
)
 
361

 
(190
)
IAE collaboration
3,118

 
(45
)
 
2,872

 
(20
)
Customer relationships and other
12,434

 
(2,835
)
 
12,189

 
(2,623
)
 
17,947

 
(4,371
)
 
17,525

 
(4,142
)
Unamortized:
 
 
 
 
 
 
 
Trademarks and other
2,130

 

 
2,177

 

Total
$
20,077

 
$
(4,371
)
 
$
19,702

 
$
(4,142
)
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.
Amortization of intangible assets for the quarter and six months ended June 30, 2015 was $179 million and $358 million, respectively, compared with $178 million and $357 million for the same periods of 2014. The following is the expected amortization of intangible assets for the years 2015 through 2020, which reflects an increase in expected amortization expense due to the pattern of economic benefit on certain aerospace intangible assets. 
(Dollars in millions)
 
Remaining 2015
 
2016
 
2017
 
2018
 
2019
 
2020
Amortization expense
 
$
337

 
$
714

 
$
745

 
$
771

 
$
767

 
$
777

Note 2: Earnings Per Share
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions, except per share amounts; shares in millions)
2015
 
2014
 
2015
 
2014
Net income attributable to common shareowners
$
1,542

 
$
1,680

 
$
2,968

 
$
2,893

 
 
 
 
 
 
 
 
Basic weighted average number of shares outstanding
877.3

 
900.1

 
884.8

 
900.3

Stock awards and equity units
12.1

 
14.6

 
13.0

 
14.5

Diluted weighted average number of shares outstanding
889.4

 
914.7

 
897.8

 
914.8

Earnings Per Share of Common Stock:
 
 
 
 
 
 
 
Basic
$
1.76

 
$
1.87

 
$
3.35

 
$
3.21

Diluted
1.73

 
1.84

 
3.31

 
3.16

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 both the quarter and six months ended June 30, 2015, the number of stock awards excluded from the computation was approximately 0.4 million. There were no anti-dilutive stock awards excluded from the computation for the quarter and six months ended June 30, 2014.

9


Note 3: Inventories and Contracts in Progress
(Dollars in millions)
June 30, 2015
 
December 31, 2014
Raw materials
$
2,011

 
$
2,056

Work-in-process
3,881

 
3,596

Finished goods
4,116

 
3,776

Contracts in progress
8,579

 
8,189

 
18,587

 
17,617

Less:
 
 
 
Progress payments, secured by lien, on U.S. Government contracts
(498
)
 
(300
)
Billings on contracts in progress
(7,794
)
 
(7,452
)
 
$
10,295

 
$
9,865

Inventory also includes capitalized contract development costs related to certain aerospace programs at UTC Aerospace Systems. As of June 30, 2015 and December 31, 2014, these capitalized costs were $185 million and $141 million, respectively, which will be liquidated as production units are delivered to the customer.
Note 4: Borrowings and Lines of Credit
(Dollars in millions)
June 30, 2015
 
December 31, 2014
Commercial paper
$
2,500

 
$

Other borrowings
282

 
126

Total short-term borrowings
$
2,782

 
$
126

At June 30, 2015, 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 June 30, 2015, there were no borrowings under 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. Effective June 30, 2015 we terminated a $1.5 billion revolving credit agreement, which had been entered into on March 11, 2015. As of June 30, 2015, our maximum commercial paper borrowing limit was $4.35 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. Commercial paper borrowings as of June 30, 2015 were largely used to initially finance the accelerated share repurchase agreements entered into on March 13, 2015. See Note 11 for further discussion of these accelerated share repurchase agreements.

10


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

 
$
500

4.875% notes due 2015

 
1,200

5.375% notes due 2017 1
1,000

 
1,000

1.800% notes due 2017 1
1,500

 
1,500

1.778% junior subordinated notes due 2018
1,100

 

6.800% notes due 2018 4
99

 
99

6.125% notes due 2019 1
1,250

 
1,250

8.875% notes due 2019
271

 
271

4.500% notes due 2020 1
1,250

 
1,250

4.875% notes due 2020 4
171

 
171

8.750% notes due 2021
250

 
250

3.100% notes due 2022 1
2,300

 
2,300

1.550% junior subordinated notes due 2022

 
1,100

1.250% notes due 2023 (€750 million principal value) 2
841

 

7.100% notes due 2027 4
141

 
141

6.700% notes due 2028
400

 
400

7.500% notes due 2029 1
550

 
550

5.400% notes due 2035 1
600

 
600

6.050% notes due 2036 1
600

 
600

6.800% notes due 2036 4
134

 
134

7.000% notes due 2038 4
159

 
159

6.125% notes due 2038 1
1,000

 
1,000

5.700% notes due 2040 1
1,000

 
1,000

4.500% notes due 2042 1
3,500

 
3,500

4.150% notes due 2045 3
850

 

Project financing obligations
199

 
147

Other (including capitalized leases) 4
339

 
378

Total principal long-term debt
19,504

 
19,500

Other (fair market value adjustments and discounts) 4
157

 
168

Total long-term debt
19,661

 
19,668

Less: current portion
172

 
1,796

Long-term debt, net of current portion
$
19,489

 
$
17,872

1
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.
2
We may redeem these notes, in whole or in part, at our option at any time. If redeemed prior to February 22, 2023, the redemption price in Euro shall equal 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 an annual basis at a rate based upon a comparable German federal government bond whose maturity is closest to the maturity of the notes plus 15 basis points. In addition, the notes may be redeemed at our option in whole, but not in part, at any time in the event of certain developments affecting U.S. taxation.
3
We may redeem these notes, in whole or in part, at our option at any time. If redeemed prior to November 16, 2044, the redemption price in U.S. Dollars shall equal 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 25 basis points.
4
Includes notes and remaining fair market value adjustments that were assumed as a part of the Goodrich acquisition on July 26, 2012.


11


On May 4, 2015, we completed the previously announced optional remarketing of the 1.550% junior subordinated notes, which were originally issued as part of our equity units on June 18, 2012. As a result of the remarketing, these notes were redesignated as our 1.778% junior subordinated notes due May 4, 2018. The 1.778% junior subordinated notes are effectively subordinated to existing or future preferred stock and indebtedness, guarantees and other liabilities, and are not redeemable prior to maturity. To date, we have not directly received any proceeds from the optional remarketing of the 1.550% junior subordinated notes. On August 3, 2015, we expect to receive approximately $1.1 billion from the proceeds of the remarketing, and issue approximately 11.3 million shares of Common Stock to settle the purchase obligation of the holders of the equity units under the purchase contract entered into at the time of the original issuance of the equity units.
On May 1, 2015, we repaid all 4.875% notes due in 2015, representing $1.2 billion in aggregate principal. On June 1, 2015, we repaid all floating rate notes due in 2015, representing $500 million in aggregate principal. On May 4, 2015, we issued $850 million aggregate principal amount of 4.150% notes due May 15, 2045. On May 22, 2015 we issued €750 million aggregate principal amount of 1.250% notes due May 22, 2023. The net proceeds from these debt issuances were used primarily to repay the notes maturing during the quarter ended June 30, 2015.
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.
Note 5: 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, Singapore, South Korea, 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 2003.
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 twelve months the amount of unrecognized tax benefits may change within a range of a net increase of $25 million to a net decrease of $460 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 13, Contingent Liabilities, for discussion regarding uncertain tax positions, included in the above range, related to pending litigation with respect to certain deductions claimed in Germany.
UTC tax years 2011 and 2012 are currently under review by the Examination Division of the Internal Revenue Service (IRS), which is expected to continue beyond the next 12 months. Goodrich Corporation tax years 2011 and 2012 through the date of acquisition by UTC are currently under review by the Examination Division of the IRS, which is also expected to continue beyond the next 12 months.
Note 6: 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 June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2015
 
2014
 
2015
 
2014
Defined benefit plans
$
25

 
$
60

 
$
70

 
$
144

Defined contribution plans
$
86

 
$
80

 
$
182

 
$
170

There were no significant contributions to our domestic defined benefit pension plans in the quarters and six months ended June 30, 2015 and 2014.
The following table illustrates the components of net periodic benefit cost for our defined pension and other postretirement benefit plans:

12


 
Pension Benefits
Quarter Ended June 30,
 
Other Postretirement Benefits
Quarter Ended June 30,
(Dollars in millions)
2015
 
2014
 
2015
 
2014
Service cost
$
124

 
$
122

 
$
1

 
$
1

Interest cost
350

 
380

 
8

 
10

Expected return on plan assets
(565
)
 
(554
)
 

 

Amortization
(2
)
 
(2
)
 

 

Recognized actuarial net loss (gain)
221

 
107

 
(1
)
 
(1
)
Net settlement and curtailment loss
3

 
6

 

 

Total net periodic benefit cost
$
131

 
$
59

 
$
8

 
$
10

 
Pension Benefits
Six Months Ended June 30,
 
Other Postretirement Benefits
Six Months Ended June 30,
(Dollars in millions)
2015
 
2014
 
2015
 
2014
Service cost
$
249

 
$
244

 
$
2

 
$
2

Interest cost
701

 
760

 
16

 
20

Expected return on plan assets
(1,134
)
 
(1,108
)
 

 

Amortization
(5
)
 
(4
)
 

 

Recognized actuarial net loss (gain)
442

 
214

 
(2
)
 
(2
)
Net settlement and curtailment loss
9

 
6

 

 

Total net periodic benefit cost
$
262

 
$
112

 
$
16

 
$
20

Note 7: Restructuring Costs
During the six months ended June 30, 2015, we recorded net pre-tax restructuring costs totaling $155 million for new and ongoing restructuring actions. We recorded charges in the segments as follows:
(Dollars in millions)
 
Otis
$
14

UTC Climate, Controls & Security
52

Pratt & Whitney
15

UTC Aerospace Systems
50

Sikorsky
23

Eliminations and other
1

Total
$
155

Restructuring charges incurred during the six months ended June 30, 2015 primarily relate to actions initiated during 2015 and 2014, and were recorded as follows:
(Dollars in millions)
 
Cost of sales
$
87

Selling, general and administrative
68

Total
$
155

2015 Actions. During the six months ended June 30, 2015, we recorded net pre-tax restructuring costs totaling $105 million, including $58 million in cost of sales and $47 million in selling, general and administrative expenses. The 2015 actions relate to ongoing cost reduction efforts, including workforce reductions and the consolidation of field operations.

13


We are targeting the majority of the remaining workforce and all facility related cost reduction actions for completion during 2015 and 2016. No specific plans for significant other actions have been finalized at this time. The following table summarizes the accrual balance and utilization by cost type for the 2015 restructuring actions:
(Dollars in millions)
Severance
 
Facility Exit,
Lease
Termination and
Other Costs
 
Total
Restructuring accruals at April 1, 2015
$
61

 
$

 
$
61

Net pre-tax restructuring costs
40

 
1

 
41

Utilization and foreign exchange
(12
)
 
(1
)
 
(13
)
Balance at June 30, 2015
$
89

 
$

 
$
89

The following table summarizes expected, incurred and remaining costs for the 2015 restructuring actions by segment:
(Dollars in millions)
Expected
Costs
 
Costs Incurred Quarter Ended March 31, 2015
 
Costs Incurred Quarter Ended June 30, 2015
 
Remaining Costs at
June 30, 2015
Otis
$
11

 
$

 
$
(4
)
 
$
7

UTC Climate, Controls & Security
34

 
(16
)
 
(12
)
 
6

Pratt & Whitney
3

 
(1
)
 
(2
)
 

UTC Aerospace Systems
53

 
(47
)
 
4

 
10

Sikorsky
49

 

 
(26
)
 
23

Eliminations and other
1

 

 
(1
)
 

Total
$
151

 
$
(64
)
 
$
(41
)
 
$
46

2014 Actions. During the six months ended June 30, 2015, we recorded net pre-tax restructuring costs totaling $48 million for restructuring actions initiated in 2014, including $27 million in cost of sales and $21 million in selling, general and administrative expenses. The 2014 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 2014 restructuring actions:
(Dollars in millions)
Severance
 
Asset
Write-Downs
 
Facility Exit,
Lease
Termination and
Other Costs
 
Total
Restructuring accruals at April 1, 2015
$
130

 
$

 
$
8

 
$
138

Net pre-tax restructuring costs
21

 
1

 
3

 
25

Utilization and foreign exchange
(28
)
 
(1
)
 
(5
)
 
(34
)
Balance at June 30, 2015
$
123

 
$

 
$
6

 
$
129

The following table summarizes expected, incurred and remaining costs for the 2014 restructuring actions by segment:
(Dollars in millions)
Expected
Costs
 
Costs Incurred in 2014
 
Costs Incurred Quarter Ended March 31, 2015
 
Costs Incurred Quarter Ended June 30, 2015
 
Remaining Costs at
June 30, 2015
Otis
$
130

 
$
(98
)
 
$
(6
)
 
$
(4
)
 
$
22

UTC Climate, Controls & Security
128

 
(86
)
 
(7
)
 
(18
)
 
17

Pratt & Whitney
83

 
(64
)
 
(10
)
 
(2
)
 
7

UTC Aerospace Systems
83

 
(72
)
 

 
(1
)
 
10

Sikorsky
20

 
(20
)
 

 

 

Eliminations and other
5

 
(5
)
 

 

 

Total
$
449

 
$
(345
)
 
$
(23
)
 
$
(25
)
 
$
56

2013 Actions. As of June 30, 2015, we have approximately $55 million of accrual balances remaining related to 2013 actions.

14


Note 8: 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 $15.0 billion and $13.9 billion at June 30, 2015 and December 31, 2014, respectively.
The following table summarizes the fair value of derivative instruments as of June 30, 2015 and December 31, 2014 which consist solely of foreign exchange contracts:
 
Asset Derivatives
 
Liability Derivatives
(Dollars in millions)
June 30, 2015
 
December 31, 2014
 
June 30, 2015
 
December 31, 2014
Derivatives designated as hedging instruments
$
18

 
$
3

 
$
272

 
$
248

Derivatives not designated as hedging instruments
56

 
139

 
67

 
71

As discussed in Note 4, on May 22, 2015 we issued approximately €750 million of Euro-denominated debt, which qualifies as a net investment hedge against our investments in European businesses under ASC 815, Derivatives and Hedging. As of June 30, 2015, the net investment hedge is deemed to be effective as defined under ASC 815.
The amount of gains and losses related to the Company's derivative financial instruments was as follows:
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2015
 
2014
 
2015
 
2014
Gain (loss) recorded in Accumulated other comprehensive loss
$
62

 
$
102

 
$
(122
)
 
$
22

Loss reclassified from Accumulated other comprehensive loss into Product sales (effective portion)
$
43

 
$
13

 
$
100

 
$
31

Assuming current market conditions continue, a $153 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 June 30, 2015, all derivative contracts accounted for as cash flow hedges will mature by July 2017.
The effect on the Condensed Consolidated Statement of Operations of foreign exchange contracts not designated as hedging instruments was as follows:
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2015
 
2014
 
2015
 
2014
Gain (loss) recognized in Other income, net
$
12

 
$
(14
)
 
$
30

 
$
12

We received $415 million and $37 million from settlements of derivative contracts during the six months ended June 30, 2015 and 2014, respectively.
Note 9: 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.

15


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 June 30, 2015 and December 31, 2014: 
June 30, 2015 (Dollars in millions)
Total
 
Level 1
 
Level 2
 
Level 3
Recurring fair value measurements:
 
 
 
 
 
 
 
Available-for-sale securities
$
920

 
$
920

 
$

 
$

Derivative assets
74

 

 
74

 

Derivative liabilities
(339
)
 

 
(339
)
 

December 31, 2014 (Dollars in millions)
Total
 
Level 1
 
Level 2
 
Level 3
Recurring fair value measurements:
 
 
 
 
 
 
 
Available-for-sale securities
$
961

 
$
961

 
$

 
$

Derivative assets
142

 

 
142

 

Derivative liabilities
(319
)
 

 
(319
)
 

Nonrecurring fair value measurements:
 
 
 
 
 
 
 
Business dispositions
3

 

 
3

 

We have recorded net gains of approximately $126 million during the six months ended June 30, 2015, as a result of a fair value adjustment related to the acquisition of a controlling interest in a UTC Climate, Controls & Security joint venture investment.
We recorded a charge of approximately $60 million during the six months ended June 30, 2014, to adjust the fair value of a Pratt & Whitney joint venture investment. During the six months ended June 30, 2014, we also recorded a charge of approximately $28 million to adjust the fair value of a Sikorsky 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 June 30, 2015, there were no significant transfers in and out of Level 1 and Level 2.
As of June 30, 2015, 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 June 30, 2015 and December 31, 2014:
 
June 30, 2015
 
December 31, 2014
(Dollars in millions)
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Long-term receivables
$
147

 
$
145

 
$
214

 
$
204

Customer financing notes receivable
342

 
337

 
262

 
260

Short-term borrowings
(2,782
)
 
(2,782
)
 
(126
)
 
(126
)
Long-term debt (excluding capitalized leases)
(19,634
)
 
(21,872
)
 
(19,634
)
 
(22,254
)
Long-term liabilities
(264
)
 
(289
)
 
(80
)
 
(74
)
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 June 30, 2015:
(Dollars in millions)
Total
 
Level 1
 
Level 2
 
Level 3
Long-term receivables
$
145

 
$

 
$
145

 
$

Customer financing notes receivable
337

 

 
337

 

Short-term borrowings
(2,782
)
 

 
(2,645
)
 
(137
)
Long-term debt (excluding capitalized leases)
(21,872
)
 

 
(21,480
)
 
(392
)
Long-term liabilities
(289
)
 

 
(289
)
 


16


We had commercial aerospace financing and other contractual commitments totaling approximately $10.5 billion and $11.3 billion as of June 30, 2015 and December 31, 2014, 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 10: 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, including unbilled receivables primarily related to long-term aftermarket contracts, are principally amounts arising from the sale of goods and delivery of services with a contractual maturity date or realization period of greater than one year, and are recognized as Other assets in our Condensed Consolidated Balance Sheet. 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 June 30, 2015 and December 31, 2014.
(Dollars in millions)
June 30, 2015
 
December 31, 2014
Long-term trade accounts receivable
$
1,154

 
$
1,045

Notes and leases receivable
465

 
381

Total long-term receivables
$
1,619

 
$
1,426

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 7% of our total long-term receivables were considered to bear high credit risk as of both June 30, 2015 and December 31, 2014.
For long-term trade accounts receivable, we evaluate credit risk and collectability individually to determine if an allowance is necessary. Our long-term receivables included in the table above are individually evaluated for recoverability, and we had valuation reserves of $17 million as of June 30, 2015 and $10 million as of December 31, 2014. At June 30, 2015 and December 31, 2014, 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 not recoverable.

17


Note 11: Shareowners' Equity and Noncontrolling Interest
A summary of the changes in shareowners' equity and noncontrolling interest comprising total equity for the quarters and six months ended June 30, 2015 and 2014 is provided below:
 
Quarter Ended June 30,
 
2015
 
2014
(Dollars in millions)
Share-owners'
Equity
 
Non-controlling Interest
 
Total
Equity
 
Share-owners'
Equity
 
Non-controlling Interest
 
Total
Equity
Equity, beginning of period
$
28,650

 
$
1,517

 
$
30,167

 
$
32,317

 
$
1,378

 
$
33,695

Comprehensive income for the period:
 
 
 
 
 
 
 
 
 
 
 
Net income
1,542

 
110

 
1,652

 
1,680

 
110

 
1,790

Total other comprehensive income
634

 

 
634

 
538

 

 
538

Total comprehensive income for the period
2,176

 
110

 
2,286

 
2,218

 
110

 
2,328

Common Stock issued under employee plans
112

 

 
112

 
125

 

 
125

Common Stock repurchased

 

 

 
(335
)
 

 
(335
)
Dividends on Common Stock
(543
)
 

 
(543
)
 
(512
)
 

 
(512
)
Dividends on ESOP Common Stock
(18
)
 

 
(18
)
 
(18
)
 

 
(18
)
Dividends attributable to noncontrolling interest

 
(61
)
 
(61
)
 

 
(44
)
 
(44
)
Purchase of subsidiary shares from noncontrolling interest

 
(4
)
 
(4
)
 
(10
)
 
(30
)
 
(40
)
Acquisition of noncontrolling interest

 
1

 
1

 

 

 

Disposition of noncontrolling interest

 

 

 

 
3

 
3

Redeemable noncontrolling interest
1

 
(1
)
 

 

 
(9
)
 
(9
)
Other
(1
)
 
(1
)
 
(2
)
 

 

 

Equity, end of period
$
30,377

 
$
1,561

 
$
31,938

 
$
33,785

 
$
1,408

 
$
35,193

 
Six Months Ended June 30,
 
2015
 
2014
(Dollars in millions)
Share-owners'
Equity
 
Non-controlling
Interest
 
Total
Equity
 
Share-owners'
Equity
 
Non-controlling
Interest
 
Total
Equity
Equity, beginning of period
$
31,213

 
$
1,351

 
$
32,564

 
$
31,866

 
$
1,353

 
$
33,219

Comprehensive income for the period:
 
 
 
 
 
 
 
 
 
 
 
Net income
2,968

 
182

 
3,150

 
2,893

 
203

 
3,096

Total other comprehensive (loss) income
84

 
(40
)
 
44

 
477

 
(7
)
 
470

Total comprehensive income for the period
3,052

 
142

 
3,194

 
3,370

 
196

 
3,566

Common Stock issued under employee plans
237

 

 
237

 
290

 

 
290

Common Stock repurchased
(3,000
)
 

 
(3,000
)
 
(670
)
 

 
(670
)
Dividends on Common Stock
(1,096
)
 

 
(1,096
)
 
(1,026
)
 

 
(1,026
)
Dividends on ESOP Common Stock
(37
)
 

 
(37
)
 
(36
)
 

 
(36
)
Dividends attributable to noncontrolling interest

 
(116
)
 
(116
)
 

 
(100
)
 
(100
)
Sale (purchase) of subsidiary shares from noncontrolling interest
11

 
10

 
21

 
(9
)
 
(6
)
 
(15
)
Acquisition of noncontrolling interest

 
173

 
173

 

 

 

Disposition of noncontrolling interest

 
(3
)
 
(3
)
 

 
3

 
3

Redeemable noncontrolling interest
(3
)
 
5

 
2

 

 
(38
)
 
(38
)
Other

 
(1
)
 
(1
)
 

 

 

Equity, end of period
$
30,377

 
$
1,561

 
$
31,938

 
$
33,785

 
$
1,408

 
$
35,193


18


On March 13, 2015, we entered into accelerated share repurchase (ASR) agreements with each of Goldman, Sachs & Co. (Goldman Sachs) and Morgan Stanley & Co. LLC (Morgan Stanley) to repurchase shares of our common stock for an aggregate purchase price of $2.65 billion. Each ASR agreement provides for the repurchase of our common stock based on the average of the daily volume-weighted average prices of our common stock during the term of such ASR agreement, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreement.
On March 13, 2015, we paid the aggregate purchase price and received an initial delivery of 18.6 million shares of common stock at a price of $121.24 per share, representing approximately 85% of the shares expected to be repurchased. The aggregate purchase price was recorded as a reduction to shareowners’ equity, consisting of a $2.25 billion increase in treasury stock and a $398 million decrease in additional paid-in capital. Upon final settlement of the ASR agreements, under certain circumstances, each of Goldman Sachs and Morgan Stanley may be required to deliver additional shares of common stock, or, under certain circumstances, we may be required to deliver shares of common stock or to make a cash payment, at our election, to Goldman Sachs and Morgan Stanley. The final settlement of the transactions under the ASR agreements is expected to occur no later than the fourth quarter of 2015 and may be accelerated at the option of Goldman Sachs or Morgan Stanley, as the case may be.
Each of the ASR agreements contains customary terms for these types of transactions, including the mechanisms to determine the number of shares or the amount of cash that will be delivered at settlement, the required timing of delivery upon settlement, the specific circumstances under which adjustments may be made to the repurchase transactions, the specific circumstances under which the repurchase transactions may be canceled prior to the scheduled maturity and various acknowledgments, representations and warranties made by the Company and Goldman Sachs or Morgan Stanley, as applicable, to one another.
A summary of the changes in each component of accumulated other comprehensive income (loss), net of tax for the quarters and six months ended June 30, 2015 and 2014 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 June 30, 2015
 
 
 
 
 
 
 
 
 
Balance at March 31, 2015
$
(1,718
)
 
$
(5,537
)
 
$
344

 
$
(300
)
 
$
(7,211
)
Other comprehensive income (loss) before reclassifications, net
439

 
(4
)
 
4

 
49

 
488

Amounts reclassified, pretax
1

 
218

 
(26
)
 
43

 
236

Tax (benefit) expense reclassified

 
(82
)
 
8

 
(16
)
 
(90
)
Balance at June 30, 2015
$
(1,278
)
 
$
(5,405
)
 
$
330

 
$
(224
)
 
$
(6,577
)
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2015
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
$
(1,051
)
 
$
(5,709
)
 
$
308

 
$
(209
)
 
$
(6,661
)
Other comprehensive (loss) income before reclassifications, net
(226
)
 
31

 
58

 
(83
)
 
(220
)
Amounts reclassified, pretax
(1
)
 
435

 
(54
)
 
100

 
480

Tax (benefit) expense reclassified

 
(162
)
 
18

 
(32
)
 
(176
)
Balance at June 30, 2015
$
(1,278
)
 
$
(5,405
)
 
$
330

 
$
(224
)
 
$
(6,577
)

19


(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 June 30, 2014
 
 
 
 
 
 
 
 
 
Balance at March 31, 2014
$
71

 
$
(3,184
)
 
$
301

 
$
(129
)
 
$
(2,941
)
Other comprehensive income (loss) before reclassifications, net
424

 
(12
)
 
(28
)
 
80

 
464

Amounts reclassified, pretax

 
104

 
(6
)
 
13

 
111

Tax (benefit) expense reclassified

 
(35
)
 
5

 
(7
)
 
(37
)
Balance at June 30, 2014
$
495

 
$
(3,127
)
 
$
272

 
$
(43
)
 
$
(2,403
)
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
$
170

 
$
(3,267
)
 
$
296

 
$
(79
)
 
$
(2,880
)
Other comprehensive income (loss) before reclassifications, net
322

 
1

 
(6
)
 
15

 
332

Amounts reclassified, pretax
3

 
208

 
(30
)
 
31

 
212

Tax (benefit) expense reclassified

 
(69
)
 
12

 
(10
)
 
(67
)
Balance at June 30, 2014
$
495

 
$
(3,127
)
 
$
272

 
$
(43
)
 
$
(2,403
)
Amounts reclassified related to our defined benefit pension and postretirement plans include amortization of prior service costs and transition obligations, and actuarial net losses recognized during each period presented. These costs are recorded as components of net periodic pension cost for each period presented (see Note 6 for additional details).
All noncontrolling interests with redemption features, such as put options, that are not solely within our control (redeemable noncontrolling interests) are reported in the mezzanine section of the Condensed Consolidated Balance Sheet, between liabilities and equity, at the greater of redemption value or initial carrying value. A summary of the changes in redeemable noncontrolling interest recorded in the mezzanine section of the Condensed Consolidated Balance Sheet for the quarters and six months ended June 30, 2015 and 2014 is provided below:
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2015
 
2014
 
2015
 
2014
Redeemable noncontrolling interest, beginning of period
$
135

 
$
137

 
$
140

 
$
111

Net income
3

 
1

 
4

 
7

Foreign currency translation
(2
)
 
2

 
(9
)
 

Dividends attributable to noncontrolling interest

 

 
(3
)
 
(3
)
Purchase of subsidiary shares from noncontrolling interest
(1
)