10-Q 1 geform10q1q14.htm GE FORM 10Q 1Q 2014 geform10q1q14.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 March 31, 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 10,027,765,000 shares of common stock with a par value of $0.06 per share outstanding at March 31, 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
 
5
Condensed, Consolidated Statement of Changes in Shareowners’ Equity
 
5
Condensed Statement of Financial Position
 
6
Condensed Statement of Cash Flows
 
7
Notes to Condensed, Consolidated Financial Statements (Unaudited)
 
8
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
44
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
 
66
Item 4.  Controls and Procedures
 
66
     
PART II  OTHER INFORMATION
 
   
Item 1.  Legal Proceedings
Item 2.  Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 6.  Exhibits
 Signatures
 
66
68
69
70
 
 
(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,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; potential market disruptions or other impacts arising in the United States or Europe from developments in sovereign debt situations; the impact of conditions in the financial and credit markets on the availability and cost of General Electric Capital Corporation’s (GECC) funding and on our ability to reduce GECC’s asset levels as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; 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; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, power generation, oil and gas production, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation; our capital allocation plans, as such plans may change 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 and integrating acquired businesses; our ability to complete the staged exit from our North American Retail Finance business or the acquisition of the Thermal, Renewables and Grid businesses of Alstom as planned; the impact of potential information technology or data security breaches; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
 
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
 
 
Three months ended March 31 (Unaudited)
 
Consolidated
   
GE(a)
 
Financial Services (GECC)
(In millions, except share amounts)
2014 
 
2013 
   
2014 
 
2013 
 
2014 
 
2013 
                                     
Revenues and other income
                                   
Sales of goods
$
 16,941 
 
$
 15,674 
   
$
 16,988 
 
$
 15,677 
 
$
 27 
 
$
 26 
Sales of services
 
 6,909 
   
 6,513 
     
 7,023 
   
 6,626 
   
 – 
   
 – 
Other income
 
 196 
   
 1,615 
     
 161 
   
 1,620 
   
 – 
   
 – 
GECC earnings from continuing operations
 
 – 
   
 – 
     
 1,933 
   
 1,938 
   
 – 
   
 – 
GECC revenues from services
 
 10,132 
   
 11,141 
     
 – 
   
 – 
   
 10,488 
   
 11,442 
   Total revenues and other income
 
 34,178 
   
 34,943 
     
 26,105 
   
 25,861 
   
 10,515 
   
 11,468 
                                     
Costs and expenses
                                   
Cost of goods sold
 
 13,713 
   
 12,866 
     
 13,762 
   
 12,874 
   
 25 
   
 21 
Cost of services sold
 
 4,809 
   
 4,449 
     
 4,923 
   
 4,562 
   
 – 
   
 – 
Interest and other financial charges
 
 2,414 
   
 2,603 
     
 365 
   
 324 
   
 2,161 
   
 2,382 
Investment contracts, insurance losses and
                                   
   insurance annuity benefits
 
 620 
   
 663 
     
 – 
   
 – 
   
 643 
   
 689 
Provision for losses on financing receivables
 
 970 
   
 1,457 
     
 – 
   
 – 
   
 970 
   
 1,457 
Other costs and expenses
 
 8,196 
   
 8,766 
     
 3,808 
   
 4,057 
   
 4,574 
   
 4,886 
   Total costs and expenses
 
 30,722 
   
 30,804 
     
 22,858 
   
 21,817 
   
 8,373 
   
 9,435 
                                     
Earnings from continuing operations
                                   
   before income taxes
 
 3,456 
   
 4,139 
     
 3,247 
   
 4,044 
   
 2,142 
   
 2,033 
Benefit (provision) for income taxes
 
 (516)
   
 (508)
     
 (318)
   
 (424)
   
 (198)
   
 (84)
Earnings from continuing operations
 
 2,940 
   
 3,631 
     
 2,929 
   
 3,620 
   
 1,944 
   
 1,949 
Earnings (loss) from discontinued operations,
                                   
   net of taxes
 
 12 
   
 (120)
     
 12 
   
 (120)
   
 12 
   
 (120)
Net earnings
 
 2,952 
   
 3,511 
     
 2,941 
   
 3,500 
   
 1,956 
   
 1,829 
Less net earnings (loss) attributable to
                                   
   noncontrolling interests
 
 (47)
   
 (16)
     
 (58)
   
 (27)
   
 11 
   
 11 
Net earnings attributable to the Company
$
 2,999 
 
$
 3,527 
   
$
 2,999 
 
$
 3,527 
 
$
 1,945 
 
$
 1,818 
                                     
Amounts attributable to the Company
                                   
   Earnings from continuing operations
$
 2,987 
 
$
 3,647 
   
$
 2,987 
 
$
 3,647 
 
$
 1,933 
 
$
 1,938 
   Earnings (loss) from discontinued operations,
                                   
      net of taxes
 
 12 
   
 (120)
     
 12 
   
 (120)
   
 12 
   
 (120)
   Net earnings attributable to the Company
$
 2,999 
 
$
 3,527 
   
$
 2,999 
 
$
 3,527 
 
$
 1,945 
 
$
 1,818 
                                     
Per-share amounts
                                   
   Earnings from continuing operations
                                   
      Diluted earnings per share
$
0.29 
 
$
0.35 
                         
      Basic earnings per share
$
0.30 
 
$
0.35 
                         
                                     
   Net earnings
                                   
      Diluted earnings per share
$
0.30 
 
$
0.34 
                         
      Basic earnings per share
$
0.30 
 
$
0.34 
                         
                                     
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, Consolidated Statement of Comprehensive Income
         
                       
     
Three months ended March 31 (Unaudited)
(In millions)
             
2014 
   
2013 
                       
Net earnings
           
$
 2,952 
 
$
 3,511 
Less: net earnings (loss) attributable to
                     
   noncontrolling interests 
             
 (47)
   
 (16)
Net earnings attributable to the Company
           
$
 2,999 
 
$
 3,527 
                       
Other comprehensive income (loss)
                     
   Investment securities
           
$
 457 
 
$
 68 
   Currency translation adjustments
             
 49 
   
 (459)
   Cash flow hedges
             
 68 
   
 102 
   Benefit plans
             
 695 
   
 853 
Other comprehensive income (loss)
             
 1,269 
   
 564 
Less: other comprehensive income (loss) attributable to
                     
   noncontrolling interests
             
 (2)
   
 (2)
Other comprehensive income (loss) attributable to the Company
           
$
 1,271 
 
$
 566 
                       
Comprehensive income
           
$
 4,221 
 
$
 4,075 
Less: comprehensive income (loss) attributable to
                     
   noncontrolling interests
             
 (49)
   
 (18)
Comprehensive income attributable to the Company
           
$
 4,270 
 
$
 4,093 
                       
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
         
                       
                       
     
Three months ended March 31 (Unaudited)
(In millions)
             
2014 
   
2013 
                   
GE shareowners' equity balance at January 1
           
$
 130,566 
 
$
 123,026 
Increases from net earnings attributable to the Company
             
 2,999 
   
 3,527 
Dividends and other transactions with shareowners
             
 (2,210)
   
 (1,974)
Other comprehensive income (loss) attributable to the Company
             
 1,271 
   
 566 
Net sales (purchases) of shares for treasury
             
 (840)
   
 (1,422)
Changes in other capital
             
 50 
   
 (9)
Ending balance at March 31
             
 131,836 
   
 123,714 
Noncontrolling interests
             
 6,183 
   
 5,336 
Total equity balance at March 31
           
$
 138,019 
 
$
 129,050 
                       
See Note 11 for further information about changes in shareowners’ equity.
 
See accompanying notes.
 
 
(5)
 
 
 
General Electric Company and consolidated affiliates
Condensed Statement of Financial Position
 
Consolidated
   
GE(a)
 
Financial Services (GECC)
 
March 31,
 
December 31,
   
March 31,
 
December 31,
 
March 31,
 
December 31,
(In millions, except share amounts)
2014 
 
2013 
   
2014 
 
2013 
 
2014 
 
2013 
 
(Unaudited)
       
(Unaudited)
     
(Unaudited)
   
Assets
                                   
Cash and equivalents
$
 86,979 
 
$
 88,555 
   
$
 11,690 
 
$
 13,682 
 
$
 75,289 
 
$
 74,873 
Investment securities
 
 45,733 
   
 43,981 
     
 286 
   
 323 
   
 45,450 
   
 43,662 
Current receivables
 
 20,975 
   
 21,388 
     
 11,102 
   
 10,970 
   
 - 
   
 - 
Inventories
 
 18,881 
   
 17,325 
     
 18,819 
   
 17,257 
   
 62 
   
 68 
Financing receivables – net
 
 237,005 
   
 241,940 
     
 - 
   
 - 
   
 247,242 
   
 253,029 
Other GECC receivables
 
 9,009 
   
 9,114 
     
 - 
   
 - 
   
 15,643 
   
 16,513 
Property, plant and equipment – net
 
 67,743 
   
 68,827 
     
 17,624 
   
 17,574 
   
 50,489 
   
 51,607 
Investment in GECC
 
 - 
   
 - 
     
 79,637 
   
 77,745 
   
 - 
   
 - 
Goodwill
 
 79,129 
   
 77,648 
     
 52,793 
   
 51,453 
   
 26,336 
   
 26,195 
Other intangible assets – net
 
 14,788 
   
 14,310 
     
 13,518 
   
 13,180 
   
 1,275 
   
 1,136 
All other assets
 
 70,504 
   
 70,808 
     
 23,940 
   
 23,708 
   
 47,164 
   
 47,366 
Assets of businesses held for sale
 
 48 
   
 50 
     
 - 
   
 - 
   
 48 
   
 50 
Assets of discontinued operations
 
 1,458 
   
 2,339 
     
 9 
   
 9 
   
 1,449 
   
 2,330 
Total assets(b)
$
 652,252 
 
$
 656,285 
   
$
 229,418 
 
$
 225,901 
 
$
 510,447 
 
$
 516,829 
                                     
Liabilities and equity
                                   
Short-term borrowings
$
 76,121 
 
$
 77,890 
   
$
 1,547 
 
$
 1,841 
 
$
 75,102 
 
$
 77,298 
Accounts payable, principally trade accounts
 
 17,206 
   
 16,471 
     
 15,718 
   
 16,353 
   
 7,740 
   
 6,549 
Progress collections and price adjustments accrued
 
 12,804 
   
 13,125 
     
 12,817 
   
 13,152 
   
 - 
   
 - 
Dividends payable
 
 2,206 
   
 2,220 
     
 2,206 
   
 2,220 
   
 - 
   
 - 
Other GE current liabilities
 
 13,622 
   
 13,381 
     
 13,622 
   
 13,381 
   
 - 
   
 - 
Non-recourse borrowings of consolidated
                                   
   securitization entities
 
 28,724 
   
 30,124 
     
 - 
   
 - 
   
 28,724 
   
 30,124 
Bank deposits
 
 54,743 
   
 53,361 
     
 - 
   
 - 
   
 54,743 
   
 53,361 
Long-term borrowings
 
 220,992 
   
 221,665 
     
 14,469 
   
 11,515 
   
 206,654 
   
 210,279 
Investment contracts, insurance liabilities
                                   
   and insurance annuity benefits
 
 27,019 
   
 26,544 
     
 - 
   
 - 
   
 27,604 
   
 26,979 
All other liabilities
 
 59,147 
   
 61,057 
     
 40,841 
   
 40,955 
   
 18,773 
   
 20,531 
Deferred income taxes
 
 381 
   
 (275)
     
 (4,575)
   
 (5,061)
   
 4,956 
   
 4,786 
Liabilities of businesses held for sale
 
 2 
   
 6 
     
 - 
   
 - 
   
 2 
   
 6 
Liabilities of discontinued operations
 
 1,266 
   
 3,933 
     
 144 
   
 143 
   
 1,122 
   
 3,790 
Total liabilities(b)
 
 514,233 
   
 519,502 
     
 96,789 
   
 94,499 
   
 425,420 
   
 433,703 
                                     
GECC preferred stock (50,000 shares outstanding
                                   
  at both March 31, 2014 and December 31, 2013)
 
 - 
   
 - 
     
 - 
   
 - 
   
 - 
   
 - 
Common stock (10,027,765,000 and 10,060,881,000
                                   
  shares outstanding at March 31, 2014 and
                                   
    December 31, 2013, respectively)
 
 702 
   
 702 
     
 702 
   
 702 
   
 - 
   
 - 
Accumulated other comprehensive income (loss) – net(c)
                                   
   Investment securities
 
 764 
   
 307 
     
 764 
   
 307 
   
 793 
   
 309 
   Currency translation adjustments
 
 177 
   
 126 
     
 177 
   
 126 
   
 (773)
   
 (687)
   Cash flow hedges
 
 (189)
   
 (257)
     
 (189)
   
 (257)
   
 (225)
   
 (293)
   Benefit plans
 
 (8,601)
   
 (9,296)
     
 (8,601)
   
 (9,296)
   
 (381)
   
 (363)
Other capital
 
 32,544 
   
 32,494 
     
 32,544 
   
 32,494 
   
 32,563 
   
 32,563 
Retained earnings
 
 149,840 
   
 149,051 
     
 149,840 
   
 149,051 
   
 52,610 
   
 51,165 
Less common stock held in treasury
 
 (43,401)
   
 (42,561)
     
 (43,401)
   
 (42,561)
   
 - 
   
 - 
                                     
Total GE shareowners’ equity
 
 131,836 
   
 130,566 
     
 131,836 
   
 130,566 
   
 84,587 
   
 82,694 
Noncontrolling interests(d)
 
 6,183 
   
 6,217 
     
 793 
   
 836 
   
 440 
   
 432 
Total equity
 
 138,019 
   
 136,783 
     
 132,629 
   
 131,402 
   
 85,027 
   
 83,126 
                                     
Total liabilities and equity
$
 652,252 
 
$
 656,285 
   
$
 229,418 
 
$
 225,901 
 
$
 510,447 
 
$
 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 March 31, 2014 include total assets of $46,492 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets include net financing receivables of $40,749 million and investment securities of $3,797 million. Our consolidated liabilities at March 31, 2014 include liabilities of certain VIEs for which the VIE creditors do not have recourse to GE. These liabilities include non-recourse borrowings of consolidated securitization entities (CSEs) of $27,175 million. See Note 16.
(c)
The sum of accumulated other comprehensive income (loss) (AOCI) attributable to the Company was $(7,849) million and $(9,120) million at March 31, 2014 and December 31, 2013, respectively.
(d)
Included AOCI attributable to noncontrolling interests of $(180) million at both March 31, 2014 and December 31, 2013.
 
See accompanying notes. Separate information is shown for "GE" and "Financial Services (GECC)." Transactions between GE and GECC have been eliminated from the "Consolidated" columns.
 
 
(6)
 
 
 
General Electric Company and consolidated affiliates
Condensed Statement of Cash Flows
 
Three months ended March 31 (Unaudited)
 
Consolidated
   
GE(a)
 
Financial Services (GECC)
(In millions)
2014 
 
2013 
   
2014 
 
2013 
 
2014 
 
2013 
                                     
Cash flows – operating activities
                                   
Net earnings
$
 2,952 
 
$
 3,511 
   
$
 2,941 
 
$
 3,500 
 
$
 1,956 
 
$
 1,829 
Less: net earnings (loss) attributable to noncontrolling
   interests
 
 (47)
   
 (16)
     
 (58)
   
 (27)
   
 11 
   
 11 
Net earnings attributable to the Company
 
 2,999 
   
 3,527 
     
 2,999 
   
 3,527 
   
 1,945 
   
 1,818 
(Earnings) loss from discontinued operations
 
 (12)
   
 120 
     
 (12)
   
 120 
   
 (12)
   
 120 
Adjustments to reconcile net earnings attributable to the
                                   
   Company to cash provided from operating activities
                                   
      Depreciation and amortization of property,
                                   
         plant and equipment
 
 2,275 
   
 2,309 
     
 659 
   
 612 
   
 1,616 
   
 1,697 
      Earnings from continuing operations retained by GECC(b)
 - 
   
 - 
     
 (1,433)
   
 (1,938)
   
 - 
   
 - 
      Deferred income taxes
 
 (1,964)
   
 (1,511)
     
 (341)
   
 (1,762)
   
 (1,623)
   
 251 
      Decrease (increase) in GE current receivables
 
 482 
   
 562 
     
 (143)
   
 (635)
   
 - 
   
 - 
      Decrease (increase) in inventories
 
 (1,445)
   
 (977)
     
 (1,453)
   
 (963)
   
 13 
   
 (1)
      Increase (decrease) in accounts payable
 
 1,007 
   
 750 
     
 165 
   
 134 
   
 887 
   
 614 
      Increase (decrease) in GE progress collections
 
 (334)
   
 598 
     
 (347)
   
 598 
   
 - 
   
 - 
      Provision for losses on GECC financing receivables
 
 970 
   
 1,457 
     
 - 
   
 - 
   
 970 
   
 1,457 
      All other operating activities
 
 986 
   
 (2,124)
     
 1,656 
   
 507 
   
 (638)
   
 (2,802)
Cash from (used for) operating activities – continuing
                                   
   operations
 
 4,964 
   
 4,711 
     
 1,750 
   
 200 
   
 3,158 
   
 3,154 
Cash from (used for) operating activities – discontinued
                                   
   operations
 
 (3)
   
 (101)
     
 - 
   
 (2)
   
 (3)
   
 (99)
Cash from (used for) operating activities
 
 4,961 
   
 4,610 
     
 1,750 
   
 198 
   
 3,155 
   
 3,055 
                                     
Cash flows – investing activities
                                   
Additions to property, plant and equipment
 
 (3,361)
   
 (3,644)
     
 (1,090)
   
 (975)
   
 (2,361)
   
 (2,696)
Dispositions of property, plant and equipment
 
 1,192 
   
 829 
     
 - 
   
 - 
   
 1,192 
   
 829 
Net decrease (increase) in GECC financing receivables
 
 3,169 
   
 5,209 
     
 - 
   
 - 
   
 3,983 
   
 6,326 
Proceeds from sale of discontinued operations
 
 232 
   
 - 
     
 - 
   
 - 
   
 232 
   
 - 
Proceeds from principal business dispositions
 
 20 
   
 272 
     
 20 
   
 111 
   
 - 
   
 161 
Proceeds from sale of equity interest in NBCU LLC
 
 - 
   
 16,699 
     
 - 
   
 16,699 
   
 - 
   
 - 
Net cash from (payments for) principal businesses purchased
 
 (1,454)
   
 6,383 
     
 (1,454)
   
 (9)
   
 - 
   
 6,392 
All other investing activities
 
 2,084 
   
 5,654 
     
 81 
   
 (249)
   
 3,009 
   
 6,226 
Cash from (used for) investing activities – continuing
                                   
   operations
 
 1,882 
   
 31,402 
     
 (2,443)
   
 15,577 
   
 6,055 
   
 17,238 
Cash from (used for) investing activities – discontinued
                                   
   operations
 
 (90)
   
 83 
     
 - 
   
 2 
   
 (90)
   
 81 
Cash from (used for) investing activities
 
 1,792 
   
 31,485 
     
 (2,443)
   
 15,579 
   
 5,965 
   
 17,319 
                                     
Cash flows – financing activities
                                   
Net increase (decrease) in borrowings (maturities of
                                   
   90 days or less)
 
 (3,330)
   
 (9,849)
     
 (756)
   
 (529)
   
 (3,750)
   
 (9,457)
Net increase (decrease) in bank deposits
 
 1,175 
   
 (3,237)
     
 - 
   
 - 
   
 1,175 
   
 (3,237)
Newly issued debt (maturities longer than 90 days)
 
 8,775 
   
 17,521 
     
 3,034 
   
 92 
   
 5,743 
   
 17,430 
Repayments and other reductions (maturities longer
                                   
   than 90 days)
 
 (11,601)
   
 (23,465)
     
 (35)
   
 (5,013)
   
 (11,566)
   
 (18,452)
Net dispositions (purchases) of GE shares for treasury
 
 (1,337)
   
 (1,733)
     
 (1,337)
   
 (1,733)
   
 - 
   
 - 
Dividends paid to shareowners
 
 (2,223)
   
 (1,983)
     
 (2,223)
   
 (1,983)
   
 (500)
   
 - 
All other financing activities
 
 46 
   
 (195)
     
 37 
   
 (29)
   
 9 
   
 (166)
Cash from (used for) financing activities – continuing
                                   
   operations
 
 (8,495)
   
 (22,941)
     
 (1,280)
   
 (9,195)
   
 (8,889)
   
 (13,882)
Cash from (used for) financing activities – discontinued
                                   
   operations
 
 (6)
   
 (15)
     
 - 
   
 - 
   
 (6)
   
 (15)
Cash from (used for) financing activities
 
 (8,501)
   
 (22,956)
     
 (1,280)
   
 (9,195)
   
 (8,895)
   
 (13,897)
Effect of currency exchange rate changes on cash
                                   
   and equivalents
 
 73 
   
 (714)
     
 (19)
   
 (17)
   
 92 
   
 (697)
Increase (decrease) in cash and equivalents
 
 (1,675)
   
 12,425 
     
 (1,992)
   
 6,565 
   
 317 
   
 5,780 
Cash and equivalents at beginning of year
 
 88,787 
   
 77,459 
     
 13,682 
   
 15,509 
   
 75,105 
   
 62,044 
Cash and equivalents at March 31
 
 87,112 
   
 89,884 
     
 11,690 
   
 22,074 
   
 75,422 
   
 67,824 
Less: cash and equivalents of discontinued operations
                                   
   at March 31
 
 133 
   
 158 
     
 - 
   
 - 
   
 133 
   
 158 
Cash and equivalents of continuing operations
                                   
   at March 31
$
 86,979 
 
$
 89,726 
   
$
 11,690 
 
$
 22,074 
 
$
 75,289 
 
$
 67,666 
                                     
(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.
 
 
(7)
 
 
 
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.

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.

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.
 
 
(8)
 
 
 
2. ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
 
Assets and Liabilities of Businesses Held for Sale
 
In the first quarter of 2013, we committed to sell certain of our machining & 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.

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.

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 March 31
(In millions)
             
2014 
   
2013 
                       
Operations
                     
Total revenues and other income (loss)
           
$
 29 
  
$
 54 
                       
Earnings (loss) from discontinued operations
               
  
   
   before income taxes
           
$
 (14)
  
$
 (142)
Benefit (provision) for income taxes
             
 7 
  
 
 124 
Earnings (loss) from discontinued operations,
               
  
   
   net of taxes
           
$
 (7)
  
$
 (18)
                 
  
   
Disposal
               
  
   
Gain (loss) on disposal before income taxes
           
$
 18 
  
$
 (187)
Benefit (provision) for income taxes
             
 1 
  
 
 85 
Gain (loss) on disposal, net of taxes
           
$
 19 
  
$
 (102)
                 
  
   
Earnings (loss) from discontinued operations,
               
  
   
   net of taxes(a)
           
$
 12 
  
$
 (120)
                       
(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.
 
 
(9)
 
 
 
     
             
(In millions)
     
March 31, 2014
 
December 31, 2013
                     
Assets
                   
Cash and equivalents
         
$
 133 
  
$
 232 
Financing receivables – net
           
 1 
   
 711 
Other
           
 1,324 
  
 
 1,396 
Assets of discontinued operations
         
$
 1,458 
  
$
 2,339 
             
  
  
 
  
Liabilities
           
  
  
 
  
Deferred income taxes
         
$
 258 
 
$
 248 
Other
           
 1,008 
  
 
 3,685 
Liabilities of discontinued operations
         
$
 1,266 
  
$
 3,933 
                     

Other assets at March 31, 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. Our reserve for refund claims decreased from $1,836 million at December 31, 2013 to $56 million at March 31, 2014, reflecting payment in March 2014 of the amount required by the February 26, 2014 agreement. The $56 million liability reflects the final remaining amount payable under the February 26, 2014 agreement.

GE Money Japan earnings (loss) from discontinued operations, net of taxes, were $(1) million and $(51) million in the three months ended March 31, 2014 and 2013, respectively.

WMC
 
During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In connection with the sale, WMC retained certain representation and warranty obligations related to loans sold to third parties prior to the disposal of the business and contractual obligations to repurchase previously sold loans 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 March 31, 2014, such claims consisted of $4,466 million of individual claims generally submitted before the filing of a lawsuit (compared to $5,643 million at December 31, 2013) and $6,989 million of additional claims asserted against WMC in litigation without making a prior claim (Litigation Claims) (compared to $6,780 at December 31, 2013). The total amount of these claims, $11,455 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 March 31, 2014, these amounts do not include approximately $700 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.

 
(10)
 
 
 
Reserves related to repurchase claims made against WMC were $550 million at March 31, 2014, reflecting a net decrease to reserves in the quarter ended March 31, 2014 of $250 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 March 31
(In millions)
   
2014 
   
2013
             
Balance, beginning of period
  
$
 800 
  
$
 633 
Provision
   
 - 
   
 107 
Claim resolutions
  
 
 (250)
  
 
 - 
Balance, end of period
  
$
 550 
  
$
 740 
             

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 March 31, 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 March 31, 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. 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.

WMC revenues and other income (loss) from discontinued operations were $4 million and $(107) million in the three months ended March 31, 2014 and 2013, respectively. WMC earnings (loss) from discontinued operations, net of taxes, were $(2) million and $(71) million in the three months ended March 31, 2014 and 2013, respectively.

 
 
 
(11)
 
 
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. Consumer Russia revenues and other income (loss) from discontinued operations were $24 million and $67 million in the three months ended March 31, 2014 and 2013, respectively. Consumer Russia earnings (loss) from discontinued operations, net of taxes, were $1 million (including a $4 million gain on disposal) and $(11) million in the three months ended March 31, 2014 and 2013, respectively.
 
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. CLL Trailer Services revenues and other income (loss) from discontinued operations were $1 million and $93 million in the three months ended March 31, 2014 and 2013, respectively. CLL Trailer Services earnings (loss) from discontinued operations, net of taxes, were $13 million and $14 million in the three months ended March 31, 2014 and 2013, respectively.


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.
 
 
March 31, 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
$
 22 
 
$
 11 
 
$
 - 
 
$
 33 
 
$
 21 
 
$
 14 
 
$
 - 
 
$
 35 
    Corporate – non-U.S.
 
 13 
   
 - 
   
 - 
   
 13 
   
 13 
   
 - 
   
 (1)
   
 12 
Equity
                                             
    Available-for-sale
 
 301 
   
 9 
   
 (70)
   
 240 
   
 302 
   
 9 
   
 (41)
   
 270 
    Trading
 
 - 
   
 - 
   
 - 
   
 - 
   
 6 
   
 - 
   
 - 
   
 6 
   
 336 
   
 20 
   
 (70)
   
 286 
   
 342 
   
 23 
   
 (42)
   
 323 
                                               
GECC
                                             
Debt
                                             
    U.S. corporate
 
 19,711 
   
 3,088 
   
 (138)
   
 22,661 
   
 19,600 
   
 2,323 
   
 (217)
   
 21,706 
    State and municipal
 
 5,115 
   
 409 
   
 (130)
   
 5,394 
   
 4,245 
   
 235 
   
 (191)
   
 4,289 
    Residential mortgage-
                                             
       backed(a)
 
 1,770 
   
 143 
   
 (39)
   
 1,874 
   
 1,819 
   
 139 
   
 (48)
   
 1,910 
    Commercial mortgage-backed
 
 2,986 
   
 198 
   
 (61)
   
 3,123 
   
 2,929 
   
 188 
   
 (82)
   
 3,035 
    Asset-backed
 
 7,347 
   
 32 
   
 (41)
   
 7,338 
   
 7,373 
   
 60 
   
 (46)
   
 7,387 
    Corporate – non-U.S.
 
 1,716 
   
 137 
   
 (64)
   
 1,789 
   
 1,741 
   
 103 
   
 (86)
   
 1,758 
    Government – non-U.S.
 
 2,058 
   
 103 
   
 (3)
   
 2,158 
   
 2,336 
   
 81 
   
 (7)
   
 2,410 
    U.S. government and federal
                                             
       agency
 
 707 
   
 48 
   
 (18)
   
 737 
   
 752 
   
 45 
   
 (27)
   
 770 
Retained interests
 
 64 
   
 11 
   
 - 
   
 75 
   
 64 
   
 8 
   
 - 
   
 72 
Equity
                                             
    Available-for-sale
 
 195 
   
 46 
   
 (8)
   
 233 
   
 203 
   
 51 
   
 (3)
   
 251 
    Trading
 
 68 
   
 - 
   
 - 
   
 68 
   
 74 
   
 - 
   
 - 
   
 74 
   
 41,737 
   
 4,215 
   
 (502)
   
 45,450 
   
 41,136 
   
 3,233 
   
 (707)
   
 43,662 
                                               
Eliminations
 
 (3)
   
 - 
   
 - 
   
 (3)
   
 (4)
   
 - 
   
 - 
   
 (4)
Total
$
 42,070 
 
$
 4,235 
 
$
 (572)
 
$
 45,733 
 
$
 41,474 
 
$
 3,256 
 
$
 (749)
 
$
 43,981 
                                               
(a)
Substantially collateralized by U.S. mortgages. At March 31, 2014, $1,225 million relates to securities issued by government-sponsored entities and $649 million relates to securities of private-label issuers. Securities issued by private-label issuers are collateralized primarily by pools of individual direct mortgage loans of financial institutions.
 
 
(12)
 
 
 
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)
 
                         
March 31, 2014
                       
Debt
                       
   U.S. corporate
$
 1,578 
 
$
 (63)
 
$
 563 
 
$
 (75)
 
   State and municipal
 
 942 
   
 (37)
   
 347 
   
 (93)
 
   Residential mortgage-backed
 
 187 
   
 (6)
   
 430 
   
 (33)
 
   Commercial mortgage-backed
 
 254 
   
 (11)
   
 803 
   
 (50)
 
   Asset-backed
 
 101 
   
 (1)
   
 294 
   
 (40)
 
   Corporate – non-U.S.
 
 56 
   
 (1)
   
 430 
   
 (63)
 
   Government – non-U.S.
 
 1,098 
   
 (3)
   
 52 
   
 - 
 
   U.S. government and federal agency
 
 238 
   
 (18)
   
 - 
   
 - 
 
Retained interests
 
 1 
   
 - 
   
 1 
   
 - 
 
Equity
 
 250 
   
 (78)
   
 - 
   
 - 
 
Total
$
 4,705 
 
$
 (218)
 
$
 2,920 
 
$
 (354)
(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 March 31, 2014, the estimated fair value of and gross unrealized losses on Corporate-non-U.S. securities were $13 million and an insignificant amount, respectively. The estimated fair value of and gross unrealized losses on Equity securities were $210 million and $(70) 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)
Includes gross unrealized losses related to securities that had other-than-temporary impairments previously recognized of $(85) million at March 31, 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 March 31, 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 March 31, 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 three months ended March 31, 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.
 
 
(13)
 
 
 
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 March 31, 2014, $1,225 million and $649 million related to agency and non-agency securities, respectively.  Additionally, $355 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 March 31
(In millions)
           
2014 
 
2013 
                       
Total pre-tax, OTTI recognized
           
$
 38 
 
$
 302 
Less: pre-tax, OTTI recognized in AOCI
             
 (4)
   
 (11)
Pre-tax, OTTI recognized in earnings(a)
           
$
 34 
 
$
 291 
                       
(a)
Included pre-tax, other-than-temporary impairments recorded in earnings related to equity securities of $1 million during both the three months ended March 31, 2014 and 2013.
 

Changes in Cumulative Credit Loss Impairments Recognized on Debt Securities Still Held
                       
             
Three months ended March 31
(In millions)
           
2014 
 
2013 
                       
Cumulative credit loss impairments recognized,
                     
   beginning of period
           
$
 1,192 
 
$
 588 
Credit loss impairments recognized on securities
                     
   not previously impaired
             
 - 
   
 263 
Incremental credit loss impairments recognized
                     
   on securities previously impaired
             
 29 
   
 12 
Less: credit loss impairments previously
                     
   recognized on securities sold during the period
             
 (51)
   
 (1)
Cumulative credit loss impairments recognized,
                     
   end of period
           
$
 1,170 
 
$
 862 
                       
 
 
(14)
 
 
 
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
           
$
 1,870 
 
$
 1,887 
  After one year through five years
             
 3,633 
   
 3,896 
  After five years through ten years
             
 5,349 
   
 5,641 
  After ten years
             
 18,490 
   
 21,361 
                       
We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.


Gross Realized Gains and Losses on Available-for-Sale Investment Securities
 
             
Three months ended March 31
(In millions)
           
2014 
 
2013 
                       
GE
                     
Gains
           
$
 - 
 
$
 1 
Losses, including impairments
             
 - 
   
 (13)
Net
             
 - 
   
 (12)
                       
GECC
                     
Gains
             
 19 
   
 62 
Losses, including impairments
             
 (36)
   
 (278)
Net
             
 (17)
   
 (216)
Total
           
$
 (17)
 
$
 (228)
                       


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 $1,349 million for the three months ended March 31, 2014, 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 $7,654 million for the three months ended March 31, 2013, 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 $(5) million and $42 million in the three months ended March 31, 2014 and 2013, respectively.
 
 
(15)
 
 
 
 
4. INVENTORIES
 
                   
(In millions)
           
March 31, 2014
 
December 31, 2013
                       
Raw materials and work in process
           
$
 10,447 
 
$
 10,220 
Finished goods
             
 7,911 
   
 6,794 
Unbilled shipments
             
 766 
   
 584 
               
 19,124 
   
 17,598 
Less revaluation to LIFO
             
 (243)
   
 (273)
Total
           
$
 18,881 
 
$
 17,325 
                       
 
5. GECC FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
 
               
                   
(In millions)
           
March 31, 2014
 
December 31, 2013
                       
Loans, net of deferred income(a)
           
$
 226,135 
 
$
 231,268 
Investment in financing leases, net of deferred income
         
 26,251 
   
 26,939 
               
 252,386 
   
 258,207 
Allowance for losses
             
 (5,144)
   
 (5,178)
Financing receivables – net(b)
           
$
 247,242 
 
$
 253,029 
                       
(a)  
Deferred income was $1,714 million and $2,013 million at March 31, 2014 and December 31, 2013, respectively.
(b)  
Financing receivables at March 31, 2014 and December 31, 2013 included $532 million and $544 million, respectively, relating to loans that had been acquired in a transfer but have been subject to credit deterioration since origination.
 
 
Financing Receivables by Portfolio and Allowance for Losses

During the first quarter of 2014, we combined our CLL Europe and CLL Asia portfolios into CLL International and we transferred our CLL Other portfolio to the CLL Americas portfolio. Prior-period amounts were reclassified to conform to the current-period presentation. 
               
                   
(In millions)
           
March 31, 2014
 
December 31, 2013
                       
Commercial
                     
  CLL
                     
    Americas
           
$
 68,367 
 
$
 69,036 
    International
             
 46,208 
   
 47,431 
  Total CLL
             
 114,575 
   
 116,467 
  Energy Financial Services
             
 2,753 
   
 3,107 
  GE Capital Aviation Services (GECAS)
             
 8,851 
   
 9,377 
  Other
             
 139 
   
 318 
Total Commercial
             
 126,318 
   
 129,269 
                       
Real Estate
             
 20,236 
   
 19,899 
                       
Consumer
                     
  Non-U.S. residential mortgages
             
 30,355 
   
 30,501 
  Non-U.S. installment and revolving credit
             
 13,715 
   
 13,677 
  U.S. installment and revolving credit
             
 52,887 
   
 55,854 
  Non-U.S. auto
             
 1,957 
   
 2,054 
  Other
             
 6,918 
   
 6,953 
Total Consumer
             
 105,832 
   
 109,039 
Total financing receivables
             
 252,386 
   
 258,207 
Allowance for losses
             
 (5,144)
   
 (5,178)
Total financing receivables – net
           
$
 247,242 
 
$
 253,029 
                       
 
 
(16)
 
 
 
Allowance for Losses on Financing Receivables
                                   
       
Provision
                 
 
Balance at
 
charged to
     
Gross
     
Balance at
(In millions)
January 1
 
operations
 
Other
(a)
write-offs
(b)
Recoveries
(b)
March 31
2014 
                                 
Commercial
                                 
  CLL
                                 
    Americas
$
 473 
 
$
 84 
 
$
 (1)
 
$
 (156)
 
$
 19 
 
$
 419 
    International
 
 505 
   
 18 
   
 2 
   
 (100)
   
 24 
   
 449 
  Total CLL
 
 978 
   
 102 
   
 1 
   
 (256)
   
 43 
   
 868 
  Energy Financial Services
 
 8 
   
 9 
   
 - 
   
 (2)
   
 1 
   
 16 
  GECAS
 
 17 
   
 8 
   
 - 
   
 - 
   
 - 
   
 25 
  Other
 
 2 
   
 - 
   
 (2)
   
 - 
   
 - 
   
 - 
Total Commercial
 
 1,005 
   
 119 
   
 (1)
   
 (258)
   
 44 
   
 909 
                                   
Real Estate
 
 192 
   
 (15)
   
 2 
   
 (6)
   
 2 
   
 175 
                                   
Consumer
                                 
  Non-U.S. residential mortgages
 
 358 
   
 10 
   
 5 
   
 (46)
   
 9 
   
 336 
  Non-U.S. installment and
                                 
    revolving credit
 
 594 
   
 71 
   
 8 
   
 (189)
   
 104 
   
 588 
  U.S. installment and
                                 
    revolving credit
 
 2,823 
   
 752 
   
 18 
   
 (785)
   
 139 
   
 2,947 
  Non-U.S. auto
 
 56 
   
 12 
   
 2 
   
 (23)
   
 14 
   
 61 
  Other
 
 150 
   
 21 
   
 (17)
   
 (40)
   
 14 
   
 128 
Total Consumer
 
 3,981 
   
 866 
   
 16 
   
 (1,083)
   
 280 
   
 4,060 
                                   
Total
$
 5,178 
 
$
 970 
 
$
 17 
 
$
 (1,347)
 
$
 326 
 
$
 5,144 
                                   
2013 
                                 
Commercial
                                 
  CLL
                                 
     Americas
$
 496 
 
$
 71 
 
$
 (1)
 
$
 (103)
 
$
 30 
 
$
 493 
     International
 
 525 
   
 94 
   
 (10)
   
 (150)
   
 24 
   
 483 
  Total CLL
 
 1,021 
   
 165 
   
 (11)
   
 (253)
   
 54 
   
 976 
  Energy Financial Services
 
 9 
   
 (1)
   
 - 
   
 - 
   
 - 
   
 8 
  GECAS
 
 8 
   
 (1)
   
 - 
   
 - 
   
 - 
   
 7 
  Other
 
 3 
   
 - 
   
 - 
   
 (1)
   
 - 
   
 2 
Total Commercial
 
 1,041 
   
 163 
   
 (11)
   
 (254)
   
 54 
   
 993 
                                   
Real Estate
 
 320 
   
 (20)
   
 (6)
   
 (29)
   
 - 
   
 265 
                                   
Consumer
                                 
                                   
  Non-U.S. residential mortgages
 
 480 
   
 56 
   
 (17)
   
 (55)
   
 12 
   
 476 
  Non-U.S. installment and
                                 
     revolving credit
 
 582 
   
 180 
   
 (14)
   
 (231)
   
 140 
   
 657 
  U.S. installment and
                                 
      revolving credit
 
 2,282 
   
 1,014 
   
 (50)
   
 (744)
   
 163 
   
 2,665 
  Non-U.S. auto
 
 67 
   
 17 
   
 (5)
   
 (30)
   
 17 
   
 66 
  Other
 
 172 
   
 47 
   
 7 
   
 (52)
   
 7 
   
 181 
Total Consumer
 
 3,583 
   
 1,314 
   
 (79)
   
 (1,112)
   
 339 
   
 4,045 
                                   
Total
$
 4,944 
 
$
 1,457 
 
$
 (96)
 
$
 (1,395)
 
$
 393 
 
$
 5,303 
                                   
(a)  
Other primarily includes the effects of currency exchange.
(b)  
Net write-offs (gross write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as a result of losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables.
 
 
(17)
 
 
 
Credit Quality Indicators
 
We provide further detailed information about the credit quality of our Commercial, Real Estate and Consumer financing receivables portfolios. For each portfolio, we describe the characteristics of the financing receivables and provide information about collateral, payment performance, credit quality indicators, and impairment. We manage these portfolios using delinquency and nonaccrual data as key performance indicators. The categories used within this section such as impaired loans, troubled debt restructuring (TDR) and nonaccrual financing receivables are defined by the authoritative guidance and we base our categorization on the related scope and definitions contained in the related standards. The categories of nonaccrual and delinquent are used in our process for managing our financing receivables.

 
Past Due and Nonaccrual Financing Receivables

   
March 31, 2014
   
December 31, 2013
 
   
Over 30 days
   
Over 90 days
         
Over 30 days
   
Over 90 days
       
   
past due
   
past due
 
Nonaccrual
   
past due
   
past due
 
Nonaccrual
 
                                     
Commercial
                                   
  CLL
                                   
     Americas