10-Q 1 ge3q14_10q.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 (Mark One)
 
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 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 001-00035
 
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
There were 10,042,192,011 shares of common stock with a par value of $0.06 per share outstanding at September 30, 2014.

 
(1)


General Electric Company
Page
PART I - FINANCIAL INFORMATION
Item 1.    Financial Statements
Condensed Statement of Earnings
4
Condensed, Consolidated Statement of Comprehensive Income
6
Condensed, Consolidated Statement of Changes in Shareowners' Equity
6
Condensed Statement of Financial Position
7
Condensed Statement of Cash Flows
8
Notes to Condensed, Consolidated Financial Statements (Unaudited)
9
Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
53
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
79
Item 4.     Controls and Procedures
79
 
 
PART II - OTHER INFORMATION
Item 1.         Legal Proceedings
Item 2.      Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 6.            Exhibits
   Signatures
80
81
82
83
 
(2)



FORWARD-LOOKING STATEMENTS
This document contains "forward-looking statements" – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," or "target." Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about expected income; earnings per share; revenues; organic growth; margins; cost structure; restructuring charges; cash flows; return on capital; capital expenditures, capital allocation or capital structure; dividends; and the split between Industrial and GE Capital earnings. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: current economic and financial conditions, including interest and exchange rate volatility, commodity and equity prices and the value of financial assets; the impact of conditions in the financial and credit markets on the availability and cost of General Electric Capital Corporation's (GECC) funding, GECC's exposure to counterparties and our ability to reduce GECC's asset levels as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; pending and future mortgage securitization claims and litigation in connection with WMC, which may affect our estimates of liability, including possible loss estimates; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the adequacy of our cash flows and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at planned levels; GECC's ability to pay dividends to GE at the planned level, which may be affected by GECC's cash flows and earnings, financial services regulation and oversight, and other factors; our ability to convert pre-order commitments/wins into orders; the price we realize on orders since commitments/wins are stated at list prices; customer actions or developments such as early aircraft retirements or reduced energy demand and other factors that may affect the level of demand and financial performance of the major industries and customers we serve; the effectiveness of our risk management framework; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation; adverse market conditions, timing of and ability to obtain required bank regulatory approvals, or other factors relating to us or Synchrony Financial that could prevent us from completing the Synchrony split-off as planned; our capital allocation plans, as such plans may change including with respect to the timing and size of share repurchases, acquisitions, joint ventures, dispositions and other strategic actions; our success in completing announced transactions, such as the proposed transactions and alliances with Alstom, and our ability to realize anticipated earnings and savings; our success in integrating acquired businesses and operating joint ventures; the impact of potential information technology or data security breaches; and the other factors that are described in "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2013. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

This document includes certain forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materially.


CORPORATE INFORMATION
GE's Investor Relations website at www.ge.com/investor and our corporate blog at www.gereports.com, as well as GE's Facebook page and Twitter accounts, contain a significant amount of information about GE, including financial and other information for investors. GE encourages investors to visit these websites from time to time, as information is updated and new information is posted.
(3)


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

General Electric Company and consolidated affiliates
Condensed Statement of Earnings
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30
 
Consolidated
 
 
GE(a)
 
Financial Services (GECC)
(In millions, except share amounts)
2014
 
2013
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues and other income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales of goods
$
 18,723
 
$
 17,967
 
 
$
 18,764
 
$
 17,994
 
$
 28
 
$
 33
Sales of services
 
 7,167
 
 
 7,185
 
 
 
 7,261
 
 
 7,268
 
 
 -
 
 
 -
Other income
 
 258
 
 
 363
 
 
 
 236
 
 
 271
 
 
 -
 
 
 -
GECC earnings from continuing operations
 
 -
 
 
 -
 
 
 
 1,492
 
 
 1,903
 
 
 -
 
 
 -
GECC revenues from services (Note 12)
 
 10,026
 
 
 10,146
 
 
 
 -
 
 
 -
 
 
 10,423
 
 
 10,573
   Total revenues and other income
 
 36,174
 
 
 35,661
 
 
 
 27,753
 
 
 27,436
 
 
 10,451
 
 
 10,606
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of goods sold
 
 15,232
 
 
 14,657
 
 
 
 15,274
 
 
 14,690
 
 
 25
 
 
 29
Cost of services sold
 
 4,508
 
 
 4,798
 
 
 
 4,603
 
 
 4,881
 
 
 -
 
 
 -
Interest and other financial charges
 
 2,357
 
 
 2,445
 
 
 
 377
 
 
 338
 
 
 2,093
 
 
 2,224
Investment contracts, insurance losses and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   insurance annuity benefits
 
 662
 
 
 672
 
 
 
 -
 
 
 -
 
 
 700
 
 
 714
Provision for losses on financing receivables
 
 957
 
 
 789
 
 
 
 -
 
 
 -
 
 
 957
 
 
 789
Other costs and expenses
 
 8,543
 
 
 8,680
 
 
 
 3,686
 
 
 3,921
 
 
 5,082
 
 
 4,934
   Total costs and expenses
 
 32,259
 
 
 32,041
 
 
 
 23,940
 
 
 23,830
 
 
 8,857
 
 
 8,690
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings from continuing operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   before income taxes
 
 3,915
 
 
 3,620
 
 
 
 3,813
 
 
 3,606
 
 
 1,594
 
 
 1,916
Benefit (provision) for income taxes
 
 (463)
 
 
 (348)
 
 
 
 (416)
 
 
 (344)
 
 
 (47)
 
 
 (3)
Earnings from continuing operations
 
 3,452
 
 
 3,272
 
 
 
 3,397
 
 
 3,262
 
 
 1,547
 
 
 1,913
Earnings (loss) from discontinued operations,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   net of taxes
 
 57
 
 
 (91)
 
 
 
 57
 
 
 (91)
 
 
 57
 
 
 (91)
Net earnings
 
 3,509
 
 
 3,181
 
 
 
 3,454
 
 
 3,171
 
 
 1,604
 
 
 1,822
Less net earnings (loss) attributable to
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   noncontrolling interests
 
 (28)
 
 
 (10)
 
 
 
 (83)
 
 
 (20)
 
 
 55
 
 
 10
Net earnings attributable to the Company
 
 3,537
 
 
 3,191
 
 
 
 3,537
 
 
 3,191
 
 
 1,549
 
 
 1,812
Preferred stock dividends declared
 
 -
 
 
 -
 
 
 
 -
 
 
 -
 
 
 -
 
 
 -
Net earnings attributable to GE common
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   shareowners
$
 3,537
 
$
 3,191
 
 
$
 3,537
 
$
 3,191
 
$
 1,549
 
$
 1,812
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts attributable to GE common shareowners:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Earnings from continuing operations
$
 3,452
 
$
 3,272
 
 
$
 3,397
 
$
 3,262
 
$
 1,547
 
$
 1,913
   Less net earnings (loss) attributable
      to noncontrolling interests
 
 (28)
 
 
 (10)
 
 
 
 (83)
 
 
 (20)
 
 
 55
 
 
 10
   Earnings from continuing operations attributable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      to the Company
 
 3,480
 
 
 3,282
 
 
 
 3,480
 
 
 3,282
 
 
 1,492
 
 
 1,903
   GECC preferred stock dividends declared
 
 -
 
 
 -
 
 
 
 -
 
 
 -
 
 
 -
 
 
 -
   Earnings from continuing operations attributable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      to GE common shareowners
 
 3,480
 
 
 3,282
 
 
 
 3,480
 
 
 3,282
 
 
 1,492
 
 
 1,903
   Earnings (loss) from discontinued operations,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      net of taxes
 
 57
 
 
 (91)
 
 
 
 57
 
 
 (91)
 
 
 57
 
 
 (91)
Net earnings attributable to GE common shareowners
$
 3,537
 
$
 3,191
 
 
$
 3,537
 
$
 3,191
 
$
 1,549
 
$
 1,812
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per-share amounts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Earnings from continuing operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Diluted earnings per share
$
 0.34
 
$
 0.32
 
 
 
 
 
 
 
 
 
 
 
 
 
      Basic earnings per share
$
 0.35
 
$
 0.32
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Net earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Diluted earnings per share
$
 0.35
 
$
 0.31
 
 
 
 
 
 
 
 
 
 
 
 
 
      Basic earnings per share
$
 0.35
 
$
 0.31
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
$
 0.22
 
$
 0.19
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), which is presented on a one-line basis.


See Note 3 for other-than-temporary impairment amounts.

See accompanying notes. Separate information is shown for "GE" and "Financial Services (GECC)." Transactions between GE and GECC have been eliminated from the "Consolidated" columns.
 
(4)


General Electric Company and consolidated affiliates
Condensed Statement of Earnings
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30
 
Consolidated
 
 
GE(a)
 
Financial Services (GECC)
(In millions, except share amounts)
2014
 
2013
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues and other income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales of goods
$
 53,893
 
$
 50,902
 
 
$
 54,017
 
$
 50,970
 
$
 89
 
$
 90
Sales of services
 
 21,945
 
 
 20,939
 
 
 
 22,245
 
 
 21,218
 
 
 -
 
 
 -
Other income
 
 792
 
 
 2,082
 
 
 
 689
 
 
 1,893
 
 
 -
 
 
 -
GECC earnings from continuing operations
 
 -
 
 
 -
 
 
 
 5,289
 
 
 5,765
 
 
 -
 
 
 -
GECC revenues from services (Note 12)
 
 29,955
 
 
 31,740
 
 
 
 -
 
 
 -
 
 
 31,124
 
 
 32,900
   Total revenues and other income
 
 106,585
 
 
 105,663
 
 
 
 82,240
 
 
 79,846
 
 
 31,213
 
 
 32,990
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of goods sold
 
 43,600
 
 
 41,390
 
 
 
 43,729
 
 
 41,474
 
 
 81
 
 
 75
Cost of services sold
 
 14,668
 
 
 13,871
 
 
 
 14,969
 
 
 14,150
 
 
 -
 
 
 -
Interest and other financial charges
 
 7,116
 
 
 7,648
 
 
 
 1,142
 
 
 988
 
 
 6,325
 
 
 6,994
Investment contracts, insurance losses and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   insurance annuity benefits
 
 1,940
 
 
 2,022
 
 
 
 -
 
 
 -
 
 
 2,041
 
 
 2,131
Provision for losses on financing receivables
 
 2,895
 
 
 3,256
 
 
 
 -
 
 
 -
 
 
 2,895
 
 
 3,256
Other costs and expenses
 
 25,216
 
 
 25,984
 
 
 
 11,355
 
 
 11,881
 
 
 14,477
 
 
 14,631
   Total costs and expenses
 
 95,435
 
 
 94,171
 
 
 
 71,195
 
 
 68,493
 
 
 25,819
 
 
 27,087
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings from continuing operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   before income taxes
 
 11,150
 
 
 11,492
 
 
 
 11,045
 
 
 11,353
 
 
 5,394
 
 
 5,903
Benefit (provision) for income taxes
 
 (1,172)
 
 
 (1,166)
 
 
 
 (1,143)
 
 
 (1,065)
 
 
 (29)
 
 
 (100)
Earnings from continuing operations
 
 9,978
 
 
 10,326
 
 
 
 9,902
 
 
 10,288
 
 
 5,365
 
 
 5,803
Earnings (loss) from discontinued operations,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   net of taxes
 
 28
 
 
 (335)
 
 
 
 28
 
 
 (335)
 
 
 33
 
 
 (334)
Net earnings
 
 10,006
 
 
 9,991
 
 
 
 9,930
 
 
 9,953
 
 
 5,398
 
 
 5,469
Less net earnings (loss) attributable to
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   noncontrolling interests
 
 (75)
 
 
 140
 
 
 
 (151)
 
 
 102
 
 
 76
 
 
 38
Net earnings attributable to the Company
 
 10,081
 
 
 9,851
 
 
 
 10,081
 
 
 9,851
 
 
 5,322
 
 
 5,431
Preferred stock dividends declared
 
 -
 
 
 -
 
 
 
 -
 
 
 -
 
 
 (161)
 
 
 (135)
Net earnings attributable to GE common
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   shareowners
$
 10,081
 
$
 9,851
 
 
$
 10,081
 
$
 9,851
 
$
 5,161
 
$
 5,296
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts attributable to GE common shareowners:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Earnings from continuing operations
$
 9,978
 
$
 10,326
 
 
$
 9,902
 
$
 10,288
 
$
 5,365
 
$
 5,803
   Less net earnings (loss) attributable
      to noncontrolling interests
 
 (75)
 
 
 140
 
 
 
 (151)
 
 
 102
 
 
 76
 
 
 38
   Earnings from continuing operations attributable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      to the Company
 
 10,053
 
 
 10,186
 
 
 
 10,053
 
 
 10,186
 
 
 5,289
 
 
 5,765
   GECC preferred stock dividends declared
 
 -
 
 
 -
 
 
 
 -
 
 
 -
 
 
 (161)
 
 
 (135)
   Earnings from continuing operations attributable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      to GE common shareowners
 
 10,053
 
 
 10,186
 
 
 
 10,053
 
 
 10,186
 
 
 5,128
 
 
 5,630
   Earnings (loss) from discontinued operations,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      net of taxes
 
 28
 
 
 (335)
 
 
 
 28
 
 
 (335)
 
 
 33
 
 
 (334)
Net earnings attributable to GE common shareowners
$
 10,081
 
$
 9,851
 
 
$
 10,081
 
$
 9,851
 
$
 5,161
 
$
 5,296
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per-share amounts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Earnings from continuing operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Diluted earnings per share
$
 0.99
 
$
0.98
 
 
 
 
 
 
 
 
 
 
 
 
 
      Basic earnings per share
$
 1.00
 
$
0.99
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Net earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Diluted earnings per share
$
 0.99
 
$
0.95
 
 
 
 
 
 
 
 
 
 
 
 
 
      Basic earnings per share
$
 1.00
 
$
0.96
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.66
 
$
0.57
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), which is presented on a one-line basis.
See Note 3 for other-than-temporary impairment amounts.
See accompanying notes. Separate information is shown for "GE" and "Financial Services (GECC)." Transactions between GE and GECC have been eliminated from the "Consolidated" columns.
(5)


General Electric Company and consolidated affiliates
Condensed, Consolidated Statement of Comprehensive Income
(Unaudited)
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
 
2014
 
 
2013
 
 
2014
 
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
 3,509
 
$
 3,181
 
$
 10,006
 
$
 9,991
Less net earnings (loss) attributable to
 
 
 
 
 
 
 
 
 
 
 
   noncontrolling interests
 
 (28)
 
 
 (10)
 
 
 (75)
 
 
 140
Net earnings attributable to the Company
$
 3,537
 
$
 3,191
 
$
 10,081
 
$
 9,851
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
   Investment securities
$
 (284)
 
$
 170
 
$
 450
 
$
 (362)
   Currency translation adjustments
 
 (1,590)
 
 
 (383)
 
 
 (1,649)
 
 
 (469)
   Cash flow hedges
 
 55
 
 
 58
 
 
 136
 
 
 351
   Benefit plans
 
 859
 
 
 765
 
 
 2,072
 
 
 2,826
Other comprehensive income (loss)
 
 (960)
 
 
 610
 
 
 1,009
 
 
 2,346
Less other comprehensive income (loss) attributable to
 
 
 
 
 
 
 
 
 
 
 
   noncontrolling interests
 
 (8)
 
 
 10
 
 
 (1)
 
 
 (21)
Other comprehensive income (loss) attributable to the Company
$
 (952)
 
$
 600
 
$
 1,010
 
$
 2,367
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
 2,549
 
$
 3,791
 
$
 11,015
 
$
 12,337
Less comprehensive income (loss) attributable to
 
 
 
 
 
 
 
 
 
 
 
   noncontrolling interests
 
 (36)
 
 
 -
 
 
 (76)
 
 
 119
Comprehensive income attributable to the Company
$
 2,585
 
$
 3,791
 
$
 11,091
 
$
 12,218
 
 
 
 
 
 
 
 
 
 
 
 
Amounts presented net of taxes. See Note 11 for further information about other comprehensive income and noncontrolling interests.


See accompanying notes.



General Electric Company and consolidated affiliates
Condensed, Consolidated Statement of Changes in Shareowners' Equity
(Unaudited)
 
 
 
 
 
 
 
 
Nine months ended September 30
(In millions)
 
 
2014
 
 
2013
 
 
 
 
 
 
 
GE shareowners' equity balance at January 1
 
$
 130,566
 
$
 123,026
Increases from net earnings attributable to the Company
 
 
 10,081
 
 
 9,851
Dividends and other transactions with shareowners
 
 
 (6,635)
 
 
 (5,839)
Other comprehensive income (loss) attributable to the Company
 
 
 1,010
 
 
 2,367
Net sales (purchases) of shares for treasury
 
 
 (444)
 
 
 (6,454)
Changes in other capital
 
 
 420
 
 
 (259)
Ending balance at September 30
 
 
 134,998
 
 
 122,692
Noncontrolling interests
 
 
 8,513
 
 
 6,353
Total equity balance at September 30
 
$
 143,511
 
$
 129,045
 
 
 
 
 
 
 
See Note 11 for further information about changes in shareowners' equity.


See accompanying notes.
 
(6)


General Electric Company and consolidated affiliates
Condensed Statement of Financial Position
 
Consolidated
 
 
GE(a)
 
Financial Services (GECC)
 
September 30,
 
December 31,
 
 
September 30,
 
December 31,
 
September 30,
 
December 31,
(In millions, except share amounts)
2014
 
2013
 
 
2014
 
2013
 
2014
 
2013
 
(Unaudited)
 
 
 
 
(Unaudited)
 
 
 
(Unaudited)
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and equivalents
$
 90,439
 
$
 88,555
 
 
$
 10,576
 
$
 13,682
 
$
 79,863
 
$
 74,873
Investment securities (Note 3)
 
 47,016
 
 
 43,981
 
 
 
 318
 
 
 323
 
 
 46,701
 
 
 43,662
Current receivables
 
 21,957
 
 
 21,388
 
 
 
 11,461
 
 
 10,970
 
 
 -
 
 
 -
Inventories (Note 4)
 
 19,431
 
 
 17,325
 
 
 
 19,374
 
 
 17,257
 
 
 57
 
 
 68
Financing receivables – net (Note 5 and 18)
 
 226,553
 
 
 241,940
 
 
 
 -
 
 
 -
 
 
 237,405
 
 
 253,029
Other GECC receivables
 
 8,601
 
 
 9,114
 
 
 
 -
 
 
 -
 
 
 15,273
 
 
 16,513
Property, plant and equipment – net (Note 6)
 
 65,460
 
 
 68,827
 
 
 
 16,677
 
 
 17,574
 
 
 49,135
 
 
 51,607
Investment in GECC
 
 -
 
 
 -
 
 
 
 81,323
 
 
 77,745
 
 
 -
 
 
 -
Goodwill (Note 7)
 
 77,859
 
 
 77,648
 
 
 
 52,193
 
 
 51,453
 
 
 25,666
 
 
 26,195
Other intangible assets – net (Note 7)
 
 14,357
 
 
 14,310
 
 
 
 13,167
 
 
 13,180
 
 
 1,195
 
 
 1,136
All other assets
 
 71,241
 
 
 70,808
 
 
 
 24,705
 
 
 23,708
 
 
 47,140
 
 
 47,366
Assets of businesses held for sale (Note 2)
 
 5,777
 
 
 50
 
 
 
 2,619
 
 
 -
 
 
 3,158
 
 
 50
Assets of discontinued operations (Note 2)
 
 1,330
 
 
 2,339
 
 
 
 9
 
 
 9
 
 
 1,321
 
 
 2,330
Total assets(b)
$
 650,021
 
$
 656,285
 
 
$
 232,422
 
$
 225,901
 
$
 506,914
 
$
 516,829
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings (Note 8)
$
 69,916
 
$
 77,890
 
 
$
 2,043
 
$
 1,841
 
$
 68,676
 
$
 77,298
Accounts payable, principally trade accounts
 
 16,758
 
 
 16,471
 
 
 
 15,693
 
 
 16,353
 
 
 7,182
 
 
 6,549
Progress collections and price adjustments accrued
 
 12,384
 
 
 13,125
 
 
 
 12,397
 
 
 13,152
 
 
 -
 
 
 -
Dividends payable
 
 2,209
 
 
 2,220
 
 
 
 2,209
 
 
 2,220
 
 
 -
 
 
 -
Other GE current liabilities
 
 12,695
 
 
 13,381
 
 
 
 12,695
 
 
 13,381
 
 
 -
 
 
 -
Non-recourse borrowings of consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   securitization entities (Note 8)
 
 30,231
 
 
 30,124
 
 
 
 -
 
 
 -
 
 
 30,231
 
 
 30,124
Bank deposits (Note 8)
 
 60,815
 
 
 53,361
 
 
 
 -
 
 
 -
 
 
 60,815
 
 
 53,361
Long-term borrowings (Note 8)
 
 213,179
 
 
 221,665
 
 
 
 14,543
 
 
 11,515
 
 
 198,735
 
 
 210,279
Investment contracts, insurance liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   and insurance annuity benefits
 
 27,491
 
 
 26,544
 
 
 
 -
 
 
 -
 
 
 27,991
 
 
 26,979
All other liabilities
 
 56,347
 
 
 61,057
 
 
 
 40,214
 
 
 40,955
 
 
 16,593
 
 
 20,531
Deferred income taxes
 
 1,612
 
 
 (275)
 
 
 
 (4,084)
 
 
 (5,061)
 
 
 5,696
 
 
 4,786
Liabilities of businesses held for sale (Note 2)
 
 1,721
 
 
 6
 
 
 
 807
 
 
 -
 
 
 914
 
 
 6
Liabilities of discontinued operations (Note 2)
 
 1,152
 
 
 3,933
 
 
 
 148
 
 
 143
 
 
 1,004
 
 
 3,790
Total liabilities(b)
 
 506,510
 
 
 519,502
 
 
 
 96,665
 
 
 94,499
 
 
 417,837
 
 
 433,703
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GECC preferred stock (50,000 shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  at both September 30, 2014 and December 31, 2013)
 
 -
 
 
 -
 
 
 
 -
 
 
 -
 
 
 -
 
 
 -
Common stock (10,042,192,000 and 10,060,881,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
shares outstanding at September 30, 2014 and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   December 31, 2013, respectively)
 
 702
 
 
 702
 
 
 
 702
 
 
 702
 
 
 -
 
 
 -
Accumulated other comprehensive income (loss) – net(c)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Investment securities
 
 755
 
 
 307
 
 
 
 755
 
 
 307
 
 
 830
 
 
 309
   Currency translation adjustments
 
 (1,518)
 
 
 126
 
 
 
 (1,518)
 
 
 126
 
 
 (1,196)
 
 
 (687)
   Cash flow hedges
 
 (121)
 
 
 (257)
 
 
 
 (121)
 
 
 (257)
 
 
 (105)
 
 
 (293)
   Benefit plans
 
 (7,226)
 
 
 (9,296)
 
 
 
 (7,226)
 
 
 (9,296)
 
 
 (360)
 
 
 (363)
Other capital
 
 32,914
 
 
 32,494
 
 
 
 32,914
 
 
 32,494
 
 
 32,999
 
 
 32,563
Retained earnings
 
 152,497
 
 
 149,051
 
 
 
 152,497
 
 
 149,051
 
 
 54,105
 
 
 51,165
Less common stock held in treasury
 
 (43,005)
 
 
 (42,561)
 
 
 
 (43,005)
 
 
 (42,561)
 
 
 -
 
 
 -
Total GE shareowners' equity
 
 134,998
 
 
 130,566
 
 
 
 134,998
 
 
 130,566
 
 
 86,273
 
 
 82,694
Noncontrolling interests(d) (Note 11)
 
 8,513
 
 
 6,217
 
 
 
 759
 
 
 836
 
 
 2,804
 
 
 432
Total equity
 
 143,511
 
 
 136,783
 
 
 
 135,757
 
 
 131,402
 
 
 89,077
 
 
 83,126
Total liabilities and equity
$
 650,021
 
$
 656,285
 
 
$
 232,422
 
$
 225,901
 
$
 506,914
 
$
 516,829
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), which is presented on a one-line basis.
(b) Our consolidated assets at September 30, 2014 included total assets of $49,456 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets included net financing receivables of $42,799 million and investment securities of $3,500 million. Our consolidated liabilities at September 30, 2014 included liabilities of certain VIEs for which the VIE creditors do not have recourse to GE. These liabilities included non-recourse borrowings of consolidated securitization entities (CSEs) of $28,780 million. See Note 16.
(c) The sum of accumulated other comprehensive income (loss) (AOCI) attributable to the Company was $(8,110) million and $(9,120) million at September 30, 2014 and December 31, 2013, respectively.
(d) Included AOCI attributable to noncontrolling interests of $(181) million and $(180) million at September 30, 2014 and December 31, 2013, respectively.
See accompanying notes. Separate information is shown for "GE" and "Financial Services (GECC)." Transactions between GE and GECC have been eliminated from the "Consolidated" columns.
 
(7)


General Electric Company and consolidated affiliates
Condensed Statement of Cash Flows
 
Nine months ended September 30 (Unaudited)
 
Consolidated
 
 
GE(a)
 
Financial Services (GECC)
(In millions)
2014
 
2013
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows – operating activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
 10,006
 
$
 9,991
 
 
$
 9,930
 
$
 9,953
 
$
 5,398
 
$
 5,469
Less net earnings (loss) attributable to noncontrolling interests
 
 (75)
 
 
 140
 
 
 
 (151)
 
 
 102
 
 
 76
 
 
 38
Net earnings attributable to the Company
 
 10,081
 
 
 9,851
 
 
 
 10,081
 
 
 9,851
 
 
 5,322
 
 
 5,431
(Earnings) loss from discontinued operations
 
 (28)
 
 
 335
 
 
 
 (28)
 
 
 335
 
 
 (33)
 
 
 334
Adjustments to reconcile net earnings attributable to the
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Company to cash provided from operating activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Depreciation and amortization of property,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         plant and equipment
 
 6,995
 
 
 7,152
 
 
 
 1,891
 
 
 1,783
 
 
 5,104
 
 
 5,369
      Earnings from continuing operations retained by GECC(b)
 -
 
 
 -
 
 
 
 (3,068)
 
 
 (1,818)
 
 
 -
 
 
 -
      Deferred income taxes
 
 (1,937)
 
 
 (2,043)
 
 
 
 (618)
 
 
 (2,568)
 
 
 (1,319)
 
 
 525
      Decrease (increase) in GE current receivables
 
 (691)
 
 
 196
 
 
 
 (535)
 
 
 (1,262)
 
 
 -
 
 
 -
      Decrease (increase) in inventories
 
 (2,768)
 
 
 (1,795)
 
 
 
 (2,771)
 
 
 (1,759)
 
 
 20
 
 
 -
      Increase (decrease) in accounts payable
 
 1,377
 
 
 971
 
 
 
 1,054
 
 
 574
 
 
 811
 
 
 741
      Increase (decrease) in GE progress collections
 
 (735)
 
 
 918
 
 
 
 (748)
 
 
 944
 
 
 -
 
 
 -
      Provision for losses on GECC financing receivables
 
 2,895
 
 
 3,256
 
 
 
 -
 
 
 -
 
 
 2,895
 
 
 3,256
      All other operating activities
 
 921
 
 
 (1,631)
 
 
 
 1,917
 
 
 1,748
 
 
 (1,083)
 
 
 (3,848)
Cash from (used for) operating activities – continuing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   operations
 
 16,110
 
 
 17,210
 
 
 
 7,175
 
 
 7,828
 
 
 11,717
 
 
 11,808
Cash from (used for) operating activities – discontinued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   operations
 
 135
 
 
 (48)
 
 
 
 (1)
 
 
 (2)
 
 
 136
 
 
 (46)
Cash from (used for) operating activities
 
 16,245
 
 
 17,162
 
 
 
 7,174
 
 
 7,826
 
 
 11,853
 
 
 11,762
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows – investing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additions to property, plant and equipment
 
 (9,701)
 
 
 (10,129)
 
 
 
 (2,806)
 
 
 (2,705)
 
 
 (7,351)
 
 
 (7,581)
Dispositions of property, plant and equipment
 
 4,914
 
 
 4,119
 
 
 
 -
 
 
 -
 
 
 4,935
 
 
 4,119
Net decrease (increase) in GECC financing receivables
 
 849
 
 
 7,324
 
 
 
 -
 
 
 -
 
 
 963
 
 
 8,598
Proceeds from sale of discontinued operations
 
 232
 
 
 -
 
 
 
 -
 
 
 -
 
 
 232
 
 
 -
Proceeds from principal business dispositions
 
 607
 
 
 1,101
 
 
 
 579
 
 
 260
 
 
 -
 
 
 841
Proceeds from sale of equity interest in NBCU LLC
 
 -
 
 
 16,699
 
 
 
 -
 
 
 16,699
 
 
 -
 
 
 -
Net cash from (payments for) principal businesses purchased
 
 (2,090)
 
 
 (1,617)
 
 
 
 (2,090)
 
 
 (8,001)
 
 
 -
 
 
 6,384
All other investing activities
 
 3,501
 
 
 14,538
 
 
 
 (254)
 
 
 (946)
 
 
 4,901
 
 
 15,922
Cash from (used for) investing activities – continuing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   operations
 
 (1,688)
 
 
 32,035
 
 
 
 (4,571)
 
 
 5,307
 
 
 3,680
 
 
 28,283
Cash from (used for) investing activities – discontinued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   operations
 
 (231)
 
 
 (13)
 
 
 
 1
 
 
 2
 
 
 (232)
 
 
 (15)
Cash from (used for) investing activities
 
 (1,919)
 
 
 32,022
 
 
 
 (4,570)
 
 
 5,309
 
 
 3,448
 
 
 28,268
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows – financing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net increase (decrease) in borrowings (maturities of
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   90 days or less)
 
 (5,957)
 
 
 (9,949)
 
 
 
 (704)
 
 
 (164)
 
 
 (6,611)
 
 
 (9,917)
Net increase (decrease) in bank deposits
 
 9,004
 
 
 (2,229)
 
 
 
 -
 
 
 -
 
 
 9,004
 
 
 (2,229)
Newly issued debt (maturities longer than 90 days)
 
 33,490
 
 
 41,456
 
 
 
 3,058
 
 
 101
 
 
 30,432
 
 
 41,355
Repayments and other reductions (maturities longer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   than 90 days)
 
 (41,984)
 
 
 (55,451)
 
 
 
 (215)
 
 
 (5,051)
 
 
 (41,768)
 
 
 (50,396)
Proceeds from issuance of GECC preferred stock
 
 -
 
 
 990
 
 
 
 -
 
 
 -
 
 
 -
 
 
 990
Net dispositions (purchases) of GE shares for treasury
 
 (1,359)
 
 
 (7,496)
 
 
 
 (1,359)
 
 
 (7,496)
 
 
 -
 
 
 -
Dividends paid to shareowners
 
 (6,643)
 
 
 (5,895)
 
 
 
 (6,643)
 
 
 (5,895)
 
 
 (2,382)
 
 
 (4,082)
Proceeds from initial public offering of Synchrony Financial
 
 2,842
 
 
 -
 
 
 
 -
 
 
 -
 
 
 2,842
 
 
 -
All other financing activities
 
 (466)
 
 
 (445)
 
 
 
 246
 
 
 115
 
 
 (552)
 
 
 (425)
Cash from (used for) financing activities – continuing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   operations
 
 (11,073)
 
 
 (39,019)
 
 
 
 (5,617)
 
 
 (18,390)
 
 
 (9,035)
 
 
 (24,704)
Cash from (used for) financing activities – discontinued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   operations
 
 (6)
 
 
 22
 
 
 
 -
 
 
 -
 
 
 (6)
 
 
 22
Cash from (used for) financing activities
 
 (11,079)
 
 
 (38,997)
 
 
 
 (5,617)
 
 
 (18,390)
 
 
 (9,041)
 
 
 (24,682)
Effect of currency exchange rate changes on cash
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   and equivalents
 
 (1,360)
 
 
 (1,038)
 
 
 
 (93)
 
 
 (52)
 
 
 (1,267)
 
 
 (986)
Increase (decrease) in cash and equivalents
 
 1,887
 
 
 9,149
 
 
 
 (3,106)
 
 
 (5,307)
 
 
 4,993
 
 
 14,362
Cash and equivalents at beginning of year
 
 88,787
 
 
 77,459
 
 
 
 13,682
 
 
 15,509
 
 
 75,105
 
 
 62,044
Cash and equivalents at September 30
 
 90,674
 
 
 86,608
 
 
 
 10,576
 
 
 10,202
 
 
 80,098
 
 
 76,406
Less cash and equivalents of discontinued operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   at September 30
 
 130
 
 
 152
 
 
 
 -
 
 
 -
 
 
 130
 
 
 152
Cash and equivalents of continuing operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   at September 30
$
 90,544
 
$
 86,456
 
 
$
 10,576
 
$
 10,202
 
$
 79,968
 
$
 76,254
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), which is presented on a one-line basis.

(b) Represents GECC earnings from continuing operations attributable to the Company, net of GECC dividends paid to GE.

See accompanying notes. Separate information is shown for "GE" and "Financial Services (GECC)." Transactions between GE and GECC have been eliminated from the "Consolidated" columns and are discussed in Note 17.
 
(8)


NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed, consolidated financial statements represent the consolidation of General Electric Company (the Company) and all companies that we directly or indirectly control, either through majority ownership or otherwise. See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (2013 consolidated financial statements), which discusses our consolidation and financial statement presentation. As used in this report on Form 10-Q (Report), "GE" represents the adding together of all affiliated companies except General Electric Capital Corporation (GECC or Financial Services), whose continuing operations are presented on a one-line basis; GECC consists of General Electric Capital Corporation and all of its affiliates; and "Consolidated" represents the adding together of GE and GECC with the effects of transactions between the two eliminated. Unless otherwise indicated, we refer to the caption revenues and other income simply as "revenues" throughout Item 1 of this Form 10-Q.

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

Interim Period Presentation

The condensed, consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed, consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. It is suggested that these condensed, consolidated financial statements be read in conjunction with the financial statements and notes thereto included in our 2013 consolidated financial statements. We label our quarterly information using a calendar convention, that is, first quarter is labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish interim quarterly closing dates using a fiscal calendar, which requires our businesses to close their books on either a Saturday or Sunday, depending on the business. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar for 2014 is available on our website, www.ge.com/secreports.

Synchrony Financial Initial Public Offering

On August 5, 2014, we completed the initial public offering (IPO) of our North American Retail Finance business, Synchrony Financial, as a first step in a planned, staged exit from that business. Synchrony Financial closed the IPO of 125 million shares of common stock at a price to the public of $23.00 per share and on September 3, 2014, Synchrony Financial issued an additional 3.5 million shares of common stock pursuant to an option granted to the underwriters in the IPO (Underwriters' Option).  We received net proceeds from the IPO and the Underwriters' Option of $2,842 million, which remain at Synchrony Financial. Following the closing of the IPO and the Underwriters' Option, we currently own approximately 85% of Synchrony Financial and as a result, GECC will continue to consolidate the business. In addition, in August 2014, Synchrony Financial completed issuances of $3,593 million of senior unsecured debt with maturities up to 10 years and $8,000 million of unsecured term loans maturing in 2019 under the New Bank Term Loan Facility with third party lenders.

Summary of Significant Accounting Policies

See the Notes in our 2013 consolidated financial statements for a summary of our significant accounting policies.

Accounting Changes

On January 1, 2014, we adopted Accounting Standards Update (ASU) 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. Under the revised guidance, the entire amount of the cumulative translation adjustment associated with the foreign entity will be released into earnings in the following circumstances: (a) the sale of a subsidiary or group of net assets within a foreign entity that represents a complete or substantially complete liquidation of that entity, (b) the loss of a controlling financial interest in an investment in a foreign entity, or (c) when the accounting for an investment in a foreign entity changes from the equity method to full consolidation. The revised guidance applies prospectively to transactions or events occurring on or after January 1, 2014.

(9)

On January 1, 2014, we adopted ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. Under the new guidance, an unrecognized tax benefit is required to be presented as a reduction to a deferred tax asset if the disallowance of the tax position would reduce the available tax loss or tax credit carryforward instead of resulting in a cash tax liability. The ASU applies prospectively to all unrecognized tax benefits that exist as of the adoption date and reduced both deferred tax assets and income tax liabilities by $1,224 million as of January 1, 2014.

In the second quarter of 2014, the Company elected to early adopt ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU changes the criteria for reporting discontinued operations. To be classified as a discontinued operation, the disposal of a component or group of components must represent a strategic shift that has, or will have, a major effect on an entity's operations and financial results. The ASU also expands the disclosure requirements for those transactions that meet the new criteria to be classified as discontinued operations. The revised accounting guidance applies prospectively to all disposals (or classifications as held for sale) of components of an entity and for businesses that, upon acquisition, are classified as held for sale on or after adoption. Early adoption is permitted for disposals (or classifications as held for sale) that have not been previously reported in financial statements. The effects of applying the revised guidance will vary based upon the nature and size of future disposal transactions. It is expected that fewer disposal transactions will meet the new criteria to be reported as discontinued operations.



2. ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS

Assets and Liabilities of Businesses Held for Sale

In the third quarter of 2014, we signed an agreement to sell our Appliances business with assets of $2,619 million and liabilities of $807 million to Electrolux for $3.3 billion. The transaction remains subject to customary closing conditions and regulatory approvals, and is targeted to close in 2015.

In the second quarter of 2014, we committed to sell GE Money Bank AB, our consumer finance business in Sweden, Denmark and Norway (GEMB-Nordic) with assets of $3,158 million and liabilities of $914 million to Santander. The transaction is targeted to close in the fourth quarter of 2014.

In the first quarter of 2013, we committed to sell certain of our machining & fabrication businesses at Aviation and our Consumer auto and personal loan business in Portugal. We completed the sale of our machining & fabrication business on December 2, 2013 for proceeds of $108 million. We completed the sale of our Consumer auto and personal loan business in Portugal on July 15, 2013 for proceeds of $83 million.

Financial Information for Assets and Liabilities of Businesses Held for Sale
 
 
 
 
(In millions)
September 30, 2014
 
December 31, 2013
 
 
 
 
 
 
Assets
 
 
 
 
 
Cash and equivalents
$
 105
 
$
 5
Inventories
 
 696
 
 
 -
Financing receivables – net
 
 2,684
 
 
 -
Property, plant, and equipment – net
 
 915
 
 
 -
Goodwill
 
 590
 
 
 24
Intangible assets – net
 
 120
 
 
 2
Other
 
 667
 
 
 19
Assets of businesses held for sale
$
 5,777
 
$
 50
 
 
 
 
 
 
Liabilities
 
 
 
 
 
Accounts payable
$
 480
 
$
 1
Other current liabilities
 
 300
 
 
 -
Bank deposits
 
 757
 
 
 -
Other
 
 184
 
 
 5
Liabilities of businesses held for sale
$
 1,721
 
$
 6
 
 
 
 
 
 

(10)

NBCU

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

In the first quarter of 2013, as a result of the transactions, we recognized pre-tax gains of $1,096 million ($825 million after tax) on the sale of our 49% common equity interest in NBCU LLC and $921 million ($564 million after tax) on the sale of GECC's real estate properties.

Discontinued Operations

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

Financial Information for Discontinued Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
 
2014
 
 
2013
 
 
2014
 
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
Operations
 
 
 
 
 
 
 
 
 
 
 
Total revenues and other income (loss)
$
 (34)
 
$
 143
 
$
 (45)
 
$
 304
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from discontinued operations
 
 
 
 
 
 
 
 
 
 
 
   before income taxes
$
 (46)
 
$
 (10)
 
$
 (115)
 
$
 (186)
Benefit (provision) for income taxes
 
 103
 
 
 12
 
 
 128
 
 
 158
Earnings (loss) from discontinued operations,
 
 
 
 
 
 
 
 
 
 
 
   net of taxes
$
 57
 
$
 2
 
$
 13
 
$
 (28)
 
 
 
 
 
 
 
 
 
 
 
 
Disposal
 
 
 
 
 
 
 
 
 
 
 
Gain (loss) on disposal before income taxes
$
 -
 
$
 (108)
 
$
 14
 
$
 (390)
Benefit (provision) for income taxes
 
 -
 
 
 15
 
 
 1
 
 
 83
Gain (loss) on disposal, net of taxes
$
 -
 
$
 (93)
 
$
 15
 
$
 (307)
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from discontinued operations,
 
 
 
 
 
 
 
 
 
 
 
   net of taxes(a)
$
 57
 
$
 (91)
 
$
 28
 
$
 (335)
 
 
 
 
 
 
 
 
 
 
 
 
(a) The sum of GE industrial earnings (loss) from discontinued operations, net of taxes, and GECC earnings (loss) from discontinued operations, net of taxes, is reported as GE earnings (loss) from discontinued operations, net of taxes, on the Condensed Statement of Earnings.
 
(11)


(In millions)
 
 
 
 
September 30, 2014
 
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and equivalents
 
 
 
 
 
 
$
 130
 
$
 232
Financing receivables – net
 
 
 
 
 
 
 
 1
 
 
 711
Other
 
 
 
 
 
 
 
 1,199
 
 
 1,396
Assets of discontinued operations
 
 
 
 
 
 
$
 1,330
 
$
 2,339
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Deferred income taxes
 
 
 
 
 
 
$
 229
 
$
 248
Other
 
 
 
 
 
 
 
 923
 
 
 3,685
Liabilities of discontinued operations
 
 
 
 
 
 
$
 1,152
 
$
 3,933
 
 
 
 
 
 
 
 
 
 
 
 

Other assets at September 30, 2014 and December 31, 2013 primarily comprised a deferred tax asset for a loss carryforward, which expires principally in 2017 and in part in 2019, related to the sale of our GE Money Japan business.


GE Money Japan

During the third quarter of 2008, we completed the sale of GE Money Japan, which included our Japanese personal loan business. Under the terms of the sale, we reduced the proceeds from the sale for estimated refund claims in excess of the statutory interest rate. Proceeds from the sale were to be increased or decreased based on the actual claims experienced in accordance with loss-sharing terms specified in the sale agreement, with all claims in excess of 258 billion Japanese yen (approximately $3,000 million) remaining our responsibility. On February 26, 2014, we reached an agreement with the buyer to pay 175 billion Japanese yen (approximately $1,700 million) to extinguish this obligation. We have no remaining amount payable under the February 26, 2014 agreement as our reserve for refund claims of $1,836 million at December 31, 2013 was fully paid in the six months ended June 30, 2014.

Financial Information for GE Money Japan
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
 
2014
 
 
2013
 
 
2014
 
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from discontinued operations,
 
 
 
 
 
 
 
 
 
 
 
   net of taxes
$
 62
 
$
 (80)
 
$
 59
 
$
 (196)
 
 
 
 
 
 
 
 
 
 
 
 

WMC

During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In connection with the sale, WMC retained certain representation and warranty obligations related to loans sold to third parties prior to the disposal of the business and contractual obligations to repurchase previously sold loans that had an early payment default. All claims received by WMC for early payment default have either been resolved or are no longer being pursued.
 
The remaining active claims have been brought by securitization trustees or administrators seeking recovery from WMC for alleged breaches of representations and warranties on mortgage loans that serve as collateral for residential mortgage-backed securities (RMBS). At September 30, 2014, such claims consisted of $3,694 million of individual claims generally submitted before the filing of a lawsuit (compared to $5,643 million at December 31, 2013) and $8,266 million of additional claims asserted against WMC in litigation without making a prior claim (Litigation Claims) (compared to $6,780 million at December 31, 2013). The total amount of these claims, $11,960 million, reflects the purchase price or unpaid principal balances of the loans at the time of purchase and does not give effect to pay downs or potential recoveries based upon the underlying collateral, which in many cases are substantial, nor to accrued interest or fees. As of September 30, 2014, these amounts do not include approximately $1,156 million of repurchase claims relating to alleged breaches of representations that are not in litigation and that are beyond the applicable statute of limitations. WMC believes that repurchase claims brought based upon representations and warranties made more than six years before WMC was notified of the claim would be disallowed in legal proceedings under applicable statutes of limitations. Subsequent to the end of the third quarter, WMC received additional Litigation Claims of $864 million and other non-Litigation Claims of $308 million, all of which are beyond the applicable statute of limitations.
(12)


Reserves related to repurchase claims made against WMC were $588 million at September 30, 2014, reflecting a net decrease to reserves in the nine months ended September 30, 2014 of $212 million due to settlement activity. The reserve estimate takes into account recent settlement activity that reduced WMC's exposure on certain claims and is based upon WMC's evaluation of the remaining exposures as a percentage of estimated mortgage loan losses within the pool of loans supporting each securitization.  Recent settlements reduced WMC's exposure on claims asserted in certain securitizations and the claim amounts reported above give effect to these settlements.

Rollforward of the Reserve
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
 
2014
 
 
2013
 
 
2014
 
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
 549
 
$
 787
 
$
 800
 
$
 633
Provision
 
 40
 
 
 18
 
 
 142
 
 
 172
Claim resolutions / rescissions
 
 (1)
 
 
 (5)
 
 
 (354)
 
 
 (5)
Balance, end of period
$
 588
 
$
 800
 
$
 588
 
$
 800
 
 
 
 
 
 
 
 
 
 
 
 

Given the significant recent claim and related litigation activity and WMC's continuing efforts to resolve the lawsuits involving claims made against WMC, it is difficult to assess whether future losses will be consistent with WMC's past experience. Adverse changes to WMC's assumptions supporting the reserve may result in an increase to these reserves. Taking into account both recent settlement activity and the potential variability of settlements, WMC estimates a range of reasonably possible loss from $0 to approximately $500 million over its recorded reserve at September 30, 2014. This estimate excludes any possible loss associated with an adverse court decision on the applicable statute of limitations, as WMC is unable at this time to develop such a meaningful estimate.

At September 30, 2014, there were 14 lawsuits involving claims made against WMC arising from alleged breaches of representations and warranties on mortgage loans included in 13 securitizations. Subsequent to the end of the third quarter, WMC learned of an additional lawsuit filed on October 10, 2014, bringing the total to 15 pending lawsuits on 14 securitizations. The adverse parties in these cases are securitization trustees or parties claiming to act on their behalf. Although the alleged claims for relief vary from case to case, the complaints and counterclaims in these actions generally assert claims for breach of contract, indemnification, and/or declaratory judgment, and seek specific performance (repurchase of defective mortgage loan) and/or money damages. Adverse court decisions, including in cases not involving WMC, could result in new claims and lawsuits on additional loans. However, WMC continues to believe that it has defenses to the claims asserted in litigation, including, for example, based on causation and materiality requirements and applicable statutes of limitations. It is not possible to predict the outcome or impact of these defenses and other factors, any of which could materially affect the amount of any loss ultimately incurred by WMC on these claims.

WMC has also received indemnification demands, nearly all of which are unspecified, from depositors/underwriters/sponsors of RMBS in connection with lawsuits brought by RMBS investors concerning alleged misrepresentations in the securitization offering documents to which WMC is not a party. WMC believes that it has defenses to these demands.

To the extent WMC is required to repurchase loans, WMC's loss also would be affected by several factors, including pay downs, accrued interest and fees, and the value of the underlying collateral. The reserve and estimate of possible loss reflect judgment, based on currently available information, and a number of assumptions, including economic conditions, claim and settlement activity, pending and threatened litigation, court decisions regarding WMC's legal defenses, indemnification demands, government activity, and other variables in the mortgage industry. Actual losses arising from claims against WMC could exceed these amounts and additional claims and lawsuits could result if actual claim rates, governmental actions, litigation and indemnification activity, adverse court decisions, actual settlement rates or losses WMC incurs on repurchased loans differ from its assumptions.

Financial Information for WMC
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
 
2014
 
 
2013
 
 
2014
 
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues and other income (loss)
$
 (35)
 
$
 (13)
 
$
 (70)
 
$
 (167)
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from discontinued operations,
 
 
 
 
 
 
 
 
 
 
 
   net of taxes
$
 (25)
 
$
 (11)
 
$
 (57)
 
$
 (116)
 
 
 
 
 
 
 
 
 
 
 
 
(13)


Other Financial Services

In the fourth quarter of 2013, we announced the planned disposition of Consumer Russia and classified the business as discontinued operations. At that time, we recorded a $170 million loss on the planned disposal. We completed the sale in the first quarter of 2014 for proceeds of $232 million.

Financial Information for Consumer Russia
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
 
2014
 
 
2013
 
 
2014
 
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues and other income (loss)
$
 -
 
$
 64
 
$
 24
 
$
 195
 
 
 
 
 
 
 
 
 
 
 
 
Gain (loss) on disposal, net of taxes
$
 -
 
$
 -
 
$
 4
 
$
 -
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from discontinued operations,
 
 
 
 
 
 
 
 
 
 
 
   net of taxes
$
 (1)
 
$
 (9)
 
$
 (1)
 
$
 (22)
 
 
 
 
 
 
 
 
 
 
 
 

In the first quarter of 2013, we announced the planned disposition of CLL Trailer Services and classified the business as discontinued operations. We completed the sale in the fourth quarter of 2013 for proceeds of $528 million.

Financial Information for CLL Trailer Services
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
 
2014
 
 
2013
 
 
2014
 
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues and other income (loss)
$
 -
 
$
 91
 
$
 1
 
$
 274
 
 
 
 
 
 
 
 
 
 
 
 
Gain (loss) on disposal, net of taxes
$
 -
 
$
 (21)
 
$
 12
 
$
 (118)
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) from discontinued operations,
 
 
 
 
 
 
 
 
 
 
 
   net of taxes
$
 23
 
$
 (9)
 
$
 34
 
$
 (19)
 
 
 
 
 
 
 
 
 
 
 
 
 
(14)


3. INVESTMENT SECURITIES

Substantially all of our investment securities are classified as available-for-sale. These comprise mainly investment-grade debt securities supporting obligations to annuitants, policyholders in our run-off insurance operations and supporting obligations to holders of guaranteed investment contracts (GICs) in Trinity and investments held in our CLL business collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries. We do not have any securities classified as held-to-maturity.

 
September 30, 2014
 
December 31, 2013
 
 
 
Gross
 
Gross
 
 
 
 
 
Gross
 
Gross
 
 
 
Amortized
 
unrealized
 
unrealized
 
Estimated
 
Amortized
 
unrealized
 
unrealized
 
Estimated
(In millions)
cost
 
gains
 
losses
 
fair value
 
cost
 
gains
 
losses
 
fair value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    U.S. corporate
$
 5
 
$
 2
 
$
 -
 
$
 7
 
$
 21
 
$
 14
 
$
 -
 
$
 35
    Corporate – non-U.S.
 
 14
 
 
 -
 
 
 -
 
 
 14
 
 
 13
 
 
 -
 
 
 (1)
 
 
 12
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Available-for-sale
 
 305
 
 
 4
 
 
 (131)
 
 
 178
 
 
 302
 
 
 9
 
 
 (41)
 
 
 270
    Trading
 
 119
 
 
 -
 
 
 -
 
 
 119
 
 
 6
 
 
 -
 
 
 -
 
 
 6
 
 
 443
 
 
 6
 
 
 (131)
 
 
 318
 
 
 342
 
 
 23
 
 
 (42)
 
 
 323
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GECC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    U.S. corporate
 
 20,000
 
 
 3,524
 
 
 (99)
 
 
 23,425
 
 
 19,600
 
 
 2,323
 
 
 (217)
 
 
 21,706
    State and municipal
 
 5,176
 
 
 517
 
 
 (89)
 
 
 5,604
 
 
 4,245
 
 
 235
 
 
 (191)
 
 
 4,289
    Residential mortgage-backed(a)
 
 1,698
 
 
 155
 
 
 (25)
 
 
 1,828
 
 
 1,819
 
 
 139
 
 
 (48)
 
 
 1,910
    Commercial mortgage-backed
 
 2,993
 
 
 181
 
 
 (40)
 
 
 3,134
 
 
 2,929
 
 
 188
 
 
 (82)
 
 
 3,035
    Asset-backed
 
 7,767
 
 
 12
 
 
 (119)
 
 
 7,660
 
 
 7,373
 
 
 60
 
 
 (46)
 
 
 7,387
    Corporate – non-U.S.
 
 1,569
 
 
 175
 
 
 (44)
 
 
 1,700
 
 
 1,741
 
 
 103
 
 
 (86)
 
 
 1,758
    Government – non-U.S.
 
 2,250
 
 
 129
 
 
 (2)
 
 
 2,377
 
 
 2,336
 
 
 81
 
 
 (7)
 
 
 2,410
    U.S. government and federal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
       agency
 
 579
 
 
 53
 
 
 -
 
 
 632
 
 
 752
 
 
 45
 
 
 (27)
 
 
 770
Retained interests
 
 25
 
 
 2
 
 
 -
 
 
 27
 
 
 64
 
 
 8
 
 
 -
 
 
 72
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Available-for-sale
 
 251
 
 
 51
 
 
 (10)
 
 
 292
 
 
 203
 
 
 51
 
 
 (3)
 
 
 251
    Trading
 
 22
 
 
 -
 
 
 -
 
 
 22
 
 
 74
 
 
 -
 
 
 -
 
 
 74
 
 
 42,330
 
 
 4,799
 
 
 (428)
 
 
 46,701
 
 
 41,136
 
 
 3,233
 
 
 (707)
 
 
 43,662
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Eliminations
 
 (3)
 
 
 -
 
 
 -
 
 
 (3)
 
 
 (4)
 
 
 -
 
 
 -
 
 
 (4)
Total
$
 42,770
 
$
 4,805
 
$
 (559)
 
$
 47,016
 
$
 41,474
 
$
 3,256
 
$
 (749)
 
$
 43,981
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Substantially collateralized by U.S. mortgages. At September 30, 2014, $1,218 million related to securities issued by government-sponsored entities and $610 million related to securities of private-label issuers. Securities issued by private-label issuers are collateralized primarily by pools of individual direct mortgage loans of financial institutions.
 
(15)


Estimated Fair Value and Gross Unrealized Losses of Available-for-Sale Investment Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In loss position for
 
 
Less than 12 months
 
12 months or more
 
 
 
 
Gross
 
 
 
Gross
 
 
Estimated
 
unrealized
 
Estimated
 
unrealized
 
(In millions)
fair value(a)
 
losses(a)(b)
 
fair value
 
losses(b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Debt
 
 
 
 
 
 
 
 
 
 
 
 
   U.S. corporate
$
 647
 
$
 (8)
 
$
 1,433
 
$
 (91)
 
   State and municipal
 
 134
 
 
 (2)
 
 
 649
 
 
 (87)
 
   Residential mortgage-backed
 
 96
 
 
 (1)
 
 
 436
 
 
 (24)
 
   Commercial mortgage-backed
 
 126
 
 
 (1)
 
 
 853
 
 
 (39)
 
   Asset-backed
 
 7,172
 
 
 (86)
 
 
 274
 
 
 (33)
 
   Corporate – non-U.S.
 
 29
 
 
 -
 
 
 317
 
 
 (44)
 
   Government – non-U.S.
 
 880
 
 
 (2)
 
 
 2
 
 
 -
 
   U.S. government and federal agency
 
 -
 
 
 -
 
 
 7
 
 
 -
 
Retained interests
 
 -
 
 
 -
 
 
 -
 
 
 -
 
Equity
 
 235
 
 
 (141)
 
 
 -
 
 
 -
 
Total
$
 9,319
 
$
 (241)
 
$
 3,971
 
$
 (318)
(c)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
Debt
 
 
 
 
 
 
 
 
 
 
 
 
   U.S. corporate
$
 2,170
 
$
 (122)
 
$
 598
 
$
 (95)
 
   State and municipal
 
 1,076
 
 
 (82)
 
 
 367
 
 
 (109)
 
   Residential mortgage-backed
 
 232
 
 
 (11)
 
 
 430
 
 
 (37)
 
   Commercial mortgage-backed
 
 396
 
 
 (24)
 
 
 780
 
 
 (58)
 
   Asset-backed
 
 112
 
 
 (2)
 
 
 359
 
 
 (44)
 
   Corporate – non-U.S.
 
 108
 
 
 (4)
 
 
 454
 
 
 (83)
 
   Government – non-U.S.
 
 1,479
 
 
 (6)
 
 
 42
 
 
 (1)
 
   U.S. government and federal agency
 
 229
 
 
 (27)
 
 
 254
 
 
 -
 
Retained interests
 
 2
 
 
 -
 
 
 -
 
 
 -
 
Equity
 
 253
 
 
 (44)
 
 
 -
 
 
 -
 
Total
$
 6,057
 
$
 (322)
 
$
 3,284
 
$
 (427)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Includes the estimated fair value of and gross unrealized losses on Corporate-non-U.S. and Equity securities held by GE. At September 30, 2014, the estimated fair value of and gross unrealized losses on Equity securities were $149 million and $(131) million, respectively. At December 31, 2013, the estimated fair value of and gross unrealized losses on Corporate-non-U.S. securities were $12 million and $(1) million, respectively. The estimated fair value of and gross unrealized losses on Equity securities were $222 million and $(41) million, respectively.
(b) Included gross unrealized losses related to securities that had other-than-temporary impairments previously recognized of $(55) million at September 30, 2014.
(c) The majority relate to debt securities held to support obligations to holders of GICs and more than 70% are debt securities that were considered to be investment-grade by the major rating agencies at September 30, 2014.


We regularly review investment securities for other-than-temporary impairment (OTTI) using both qualitative and quantitative criteria. For debt securities, our qualitative review considers our ability and intent to hold the security and the financial condition of and near-term prospects for the issuer, including whether the issuer is in compliance with the terms and covenants of the security. Our quantitative review considers whether there has been an adverse change in expected future cash flows. Unrealized losses are not indicative of the amount of credit loss that would be recognized and at September 30, 2014 are primarily due to increases in market yields subsequent to our purchase of the securities. We presently do not intend to sell the vast majority of our debt securities that are in an unrealized loss position and believe that it is not more likely than not that we will be required to sell the vast majority of these securities before anticipated recovery of our amortized cost. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during the nine months ended September 30, 2014 have not changed. For equity securities, we consider the duration and the severity of the unrealized loss. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future.

Our corporate debt portfolio comprises securities issued by public and private corporations in various industries, primarily in the U.S. Substantially all of our corporate debt securities are rated investment grade by the major rating agencies.
(16)


Our RMBS portfolio is collateralized primarily by pools of individual, direct mortgage loans, of which substantially all are in a senior position in the capital structure of the deals, not other structured products such as collateralized debt obligations. Of the total RMBS held at September 30, 2014, $1,218 million and $610 million related to agency and non-agency securities, respectively.  Additionally, $316 million was related to residential subprime credit securities, primarily supporting our guaranteed investment contracts. Substantially all of the subprime exposure is related to securities backed by mortgage loans originated in 2006 and prior. A majority of subprime RMBS have been downgraded to below investment grade and are insured by Monoline insurers (Monolines). We continue to place partial reliance on Monolines with adequate capital and claims paying resources depending on the extent of the Monoline's anticipated ability to cover expected credit losses.

Our commercial mortgage-backed securities (CMBS) portfolio is collateralized by both diversified pools of mortgages that were originated for securitization (conduit CMBS) and pools of large loans backed by high-quality properties (large loan CMBS), a majority of which were originated in 2007 and prior. The vast majority of the securities in our CMBS portfolio have investment-grade credit ratings.

Our asset-backed securities (ABS) portfolio is collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries, as well as a variety of diversified pools of assets such as student loans and credit cards. The vast majority of the securities in our ABS portfolio are in a senior position in the capital structure of the deals.

Pre-tax, Other-Than-Temporary Impairments on Investment Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
Total pre-tax, OTTI recognized
$
 5
 
$
 62
 
$
 52
 
$
 523
Pre-tax, OTTI recognized in AOCI
 
 -
 
 
 (6)
 
 
 (4)
 
 
 (36)
Pre-tax, OTTI recognized in earnings(a)
$
 5
 
$
 56
 
$
 48
 
$
 487
 
 
 
 
 
 
 
 
 
 
 
 
(a) Included pre-tax, other-than-temporary impairments recorded in earnings related to equity securities of an insignificant amount and $13 million in the three months ended September 30, 2014 and 2013, respectively, and $3 million and $14 million in the nine months ended September 30, 2014 and 2013, respectively.

Changes in Cumulative Credit Loss Impairments Recognized on Debt Securities Still Held
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative credit loss impairments recognized,
 
 
 
 
 
 
 
 
 
 
 
   beginning of period
$
 1,171
 
$
 945
 
$
 1,193
 
$
 588
Credit loss impairments recognized on securities
 
 
 
 
 
 
 
 
 
 
 
   not previously impaired
 
 2
 
 
 -
 
 
 3
 
 
 385
Incremental credit loss impairments recognized
 
 
 
 
 
 
 
 
 
 
 
   on securities previously impaired
 
 3
 
 
 42
 
 
 34
 
 
 61
Less credit loss impairments previously
 
 
 
 
 
 
 
 
 
 
 
   recognized on securities sold during the period
 
 6
 
 
 52
 
 
 60
 
 
 99
Cumulative credit loss impairments recognized,
 
 
 
 
 
 
 
 
 
 
 
   end of period
$
 1,170
 
$
 935
 
$
 1,170
 
$
 935
 
 
 
 
 
 
 
 
 
 
 
 

Contractual Maturities of Investment in Available-for-Sale Debt Securities
(Excluding Mortgage-Backed and Asset-Backed Securities)
 
 
 
 
 
 
 
Amortized
 
Estimated
(In millions)
cost
 
fair value
 
 
 
 
 
 
Due
 
 
 
 
 
  Within one year
$
 1,850
 
$
 1,857
  After one year through five years
 
 3,807
 
 
 4,150
  After five years through ten years
 
 5,294
 
 
 5,626
  After ten years
 
 18,642
 
 
 22,126
 
 
 
 
 
 

We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.
(17)


Gross Realized Gains and Losses on Available-for-Sale Investment Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
GE
 
 
 
 
 
 
 
 
 
 
 
Gains
$
 -
 
$
 -
 
$
 2
 
$
 1
Losses, including impairments
 
 -
 
 
 -
 
 
 -
 
 
 (20)
Net
 
 -
 
 
 -
 
 
 2
 
 
 (19)
 
 
 
 
 
 
 
 
 
 
 
 
GECC
 
 
 
 
 
 
 
 
 
 
 
Gains
 
 42
 
 
 34
 
 
 104
 
 
 219
Losses, including impairments
 
 (8)
 
 
 (60)
 
 
 (53)
 
 
 (477)
Net
 
 34
 
 
 (26)
 
 
 51
 
 
 (258)
Total
$
 34
 
$
 (26)
 
$
 53
 
$
 (277)
 
 
 
 
 
 
 
 
 
 
 
 

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

Proceeds from investment securities sales and early redemptions by issuers totaled $1,689 million and $4,240 million for the three and nine months ended September 30, 2014, respectively, principally from sales of short-term government securities in our bank subsidiaries and Treasury operations and redemptions of non-U.S. corporate and asset-backed securities in our CLL business.

Proceeds from investment securities sales and early redemptions by issuers totaled $2,890 million and $16,828 million for the three and nine months ended September 30, 2013, respectively, principally from the sale of Comcast guaranteed debt, sales of short-term securities in our bank subsidiaries and Treasury operations and redemptions of non-U.S. corporate and asset-backed securities in our CLL business.

We recognized pre-tax gains (losses) on trading securities of $56 million and $(2) million in the three months ended September 30, 2014 and 2013, respectively, and $52 million and $49 million in the nine months ended September 30, 2014 and 2013, respectively.



4. INVENTORIES
 
 
 
 
 
 
 
 
(In millions)
 
 
 
 
September 30, 2014
 
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
Raw materials and work in process
 
 
 
 
 
 
$
 10,593
 
$
 10,220
Finished goods
 
 
 
 
 
 
 
 8,084
 
 
 6,794
Unbilled shipments
 
 
 
 
 
 
 
 878
 
 
 584
 
 
 
 
 
 
 
 
 19,555