Last checked at 28 Feb 2014 17:49
United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
Part 3 of 3
Other Pension Plans in 2013 included 40 U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million. These defined benefit plans generally provide benefits to employees based on formulas recognizing length of service and earnings.
Pension Plan Participants | |||||
Principal | Other | ||||
pension | pension | ||||
December 31, 2013 | Total | plans | plans | ||
Active employees | 128,000 | 94,000 | 34,000 | ||
Vested former employees | 229,000 | 184,000 | 45,000 | ||
Retirees and beneficiaries | 263,000 | 230,000 | 33,000 | ||
Total | 620,000 | 508,000 | 112,000 |
Cost of Pension Plans | ||||||||||||||||||||||||||
Total | Principal pension plans | Other pension plans | ||||||||||||||||||||||||
(In millions) | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | |||||||||||||||||
Service cost for benefits earned | $ | 1,970 | $ | 1,779 | $ | 1,498 | $ | 1,535 | $ | 1,387 | $ | 1,195 | $ | 435 | $ | 392 | $ | 303 | ||||||||
Prior service cost amortization | 253 | 287 | 207 | 246 | 279 | 194 | 7 | 8 | 13 | |||||||||||||||||
Expected return on plan assets | (4,163) | (4,394) | (4,543) | (3,500) | (3,768) | (3,940) | (663) | (626) | (603) | |||||||||||||||||
Interest cost on benefit obligations | 2,983 | 2,993 | 3,176 | 2,460 | 2,479 | 2,662 | 523 | 514 | 514 | |||||||||||||||||
Net actuarial loss amortization | 4,007 | 3,701 | 2,486 | 3,664 | 3,421 | 2,335 | 343 | 280 | 151 | |||||||||||||||||
Pension plans cost | $ | 5,050 | $ | 4,366 | $ | 2,824 | $ | 4,405 | $ | 3,798 | $ | 2,446 | $ | 645 | $ | 568 | $ | 378 | ||||||||
Actuarial assumptions are described below. The actuarial assumptions at December 31 are used to measure the year-end benefit obligations and the pension costs for the subsequent year.
Principal pension plans | Other pension plans (weighted average) | ||||||||||||||||
December 31 | 2013 | 2012 | 2011 | 2010 | 2013 | 2012 | 2011 | 2010 | |||||||||
Discount rate | 4.85 | % | 3.96 | % | 4.21 | % | 5.28 | % | 4.39 | % | 3.92 | % | 4.42 | % | 5.11 | % | |
Compensation increases | 4.00 | 3.90 | 3.75 | 4.25 | 3.76 | 3.30 | 4.31 | 4.44 | |||||||||
Expected return on assets | 7.50 | 8.00 | 8.00 | 8.00 | 6.92 | 6.82 | 7.09 | 7.25 | |||||||||
To determine the expected long-term rate of return on pension plan assets, we consider current and target asset allocations, as well as historical and expected returns on various categories of plan assets. In developing future return expectations for our principal pension plans' assets, we formulate views on the future economic environment, both in the U.S. and abroad. We evaluate general market trends and historical relationships among a number of key variables that impact asset class returns such as expected earnings growth, inflation, valuations, yields and spreads, using both internal and external sources. We also take into account expected volatility by asset class and diversification across classes to determine expected overall portfolio results given current and target allocations. Based on our analysis of future expectations of asset performance, past return results, and our current and target asset allocations, we have assumed a 7.5% long-term expected return on those assets for cost recognition in 2014. This is a reduction from the 8.0% we had assumed in 2013, 2012 and 2011. For the principal pension plans, we apply our expected rate of return to a market-related value of assets, which stabilizes variability in the amounts to which we apply that expected return.
We amortize experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions, over a period no longer than the average future service of employees.
Funding policy for the GE Pension Plan is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus such additional amounts as we may determine to be appropriate. We contributed $433 million to the GE Pension Plan in 2012. The ERISA minimum funding requirements did not require a contribution in 2013. As such, we did not contribute to the GE Pension Plan in 2013. We expect to contribute $528 million to the GE Pension Plan in 2014. In addition, we expect to pay approximately $244 million for benefit payments under our GE Supplementary Pension Plan and administrative expenses of our principal pension plans and expect to contribute approximately $800million to other pension plans in 2014. In 2013, comparative amounts were $225 million and $673 million, respectively.
Benefit obligations are described in the following tables. Accumulated and projected benefit obligations (ABO and PBO) represent the obligations of a pension plan for past service as of the measurement date. ABO is the present value of benefits earned to date with benefits computed based on current compensation levels. PBO is ABO increased to reflect expected future compensation.
Projected Benefit Obligation | |||||||||||
Principal pension plans | Other pension plans | ||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||
Balance at January 1 | $ | 63,502 | $ | 60,510 | $ | 13,584 | $ | 11,637 | |||
Service cost for benefits earned | 1,535 | 1,387 | 435 | 392 | |||||||
Interest cost on benefit obligations | 2,460 | 2,479 | 523 | 514 | |||||||
Participant contributions | 156 | 157 | 14 | 16 | |||||||
Plan amendments | - | - | 11 | (6) | |||||||
Actuarial loss (gain) (a) | (6,406) | 2,021 | (575) | 890 | |||||||
Benefits paid | (3,134) | (3,052) | (477) | (425) | |||||||
Acquisitions (dispositions) / other - net | - | - | 46 | 230 | |||||||
Exchange rate adjustments | - | - | (26) | 336 | |||||||
Balance at December 31(b) | $ | 58,113 | $ | 63,502 | $ | 13,535 | $ | 13,584 | |||
(a) Principally associated with discount rate changes.
(b) The PBO for the GE Supplementary Pension Plan, which is an unfunded plan, was $5,162 million and $5,494 million at year-end 2013 and 2012, respectively.
Accumulated Benefit Obligation | |||||
December 31 (In millions) | 2013 | 2012 | |||
GE Pension Plan | $ | 50,967 | $ | 55,664 | |
GE Supplementary Pension Plan | 3,946 | 4,114 | |||
Other pension plans | 12,629 | 12,687 | |||
Plans With Assets Less Than ABO | |||||
December 31 (In millions) | 2013 | 2012 | |||
Funded plans with assets less than ABO | |||||
Plan assets | $ | 57,430 | $ | 53,276 | |
Accumulated benefit obligations | 60,715 | 66,069 | |||
Projected benefit obligations | 63,532 | 69,234 | |||
Unfunded plans(a) | |||||
Accumulated benefit obligations | 5,243 | 5,390 | |||
Projected benefit obligations | 6,512 | 6,828 | |||
(a) Primarily related to the GE Supplementary Pension Plan.
Plan Assets
The fair value of the classes of the pension plans' investments is presented below. The inputs and valuation techniques used to measure the fair value of the assets are consistently applied and described in Note 1.
Fair Value of Plan Assets | |||||||||||
Principal pension plans | Other pension plans | ||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||
Balance at January 1 | $ | 44,738 | $ | 42,137 | $ | 9,702 | $ | 8,381 | |||
Actual gain on plan assets | 6,312 | 4,854 | 1,212 | 720 | |||||||
Employer contributions | 225 | 642 | 673 | 737 | |||||||
Participant contributions | 156 | 157 | 14 | 16 | |||||||
Benefits paid | (3,134) | (3,052) | (477) | (425) | |||||||
Acquisitions (dispositions) / other - net | - | - | (31) | - | |||||||
Exchange rate adjustments | - | - | (34) | 273 | |||||||
Balance at December 31 | $ | 48,297 | $ | 44,738 | $ | 11,059 | $ | 9,702 | |||
Asset Allocation | ||||||||
Other pension plans | ||||||||
Principal pension plans | (weighted average) | |||||||
2013 | 2013 | 2013 | 2013 | |||||
Target | Actual | Target | Actual | |||||
allocation | allocation | allocation | allocation | |||||
Equity securities | 17 - 57 | % (a) | 45 | % (b) | 55 | % | 55 | % |
Debt securities (including cash equivalents) | 13 - 53 | 31 | 32 | 34 | ||||
Private equities | 8 - 18 | 13 | 2 | 1 | ||||
Real estate | 2 - 12 | 7 | 6 | 5 | ||||
Other | 3 - 13 | 4 | 5 | 5 | ||||
(a) Target equally divided between U.S. equity securities and non-U.S. equity securities.
(b) Actual allocations were 26% for U.S. equity securities and 19% for non-U.S. equity securities.
Plan fiduciaries of the GE Pension Plan set investment policies and strategies for the GE Pension Trust and oversee its investment allocation, which includes selecting investment managers, commissioning periodic asset-liability studies and setting long-term strategic targets. Long-term strategic investment objectives take into consideration a number of factors, including the funded status of the plan, a balance between risk and return and the plan's liquidity needs. Target allocation percentages are established at an asset class level by plan fiduciaries. Target allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target range.
Plan fiduciaries monitor the GE Pension Plan's liquidity position in order to meet the near-term benefit payment and other cash needs. The GE Pension Plan holds short-term debt securities to meet its liquidity needs.
GE Pension Trust assets are invested subject to the following additional guidelines:
· Short-term securities must generally be rated A-1/P-1 or better, except for 15% of such securities that may be rated A-2/P-2 and other short-term securities as may be approved by the plan fiduciaries.
· Real estate investments may not exceed 25% of total assets.
· Investments in restricted securities (excluding real estate investments) that are not freely tradable may not exceed 30% of total assets (actual was 17% of trust assets at December 31, 2013).
According to statute, the aggregate holdings of all qualifying employer securities (e.g., GE common stock) and qualifying employer real property may not exceed 10% of the fair value of trust assets at the time of purchase. GE securities represented 4.5% and 4.2% of trust assets at year-end 2013 and 2012, respectively.
The GE Pension Plan has a broadly diversified portfolio of investments in equities, fixed income, private equities, real estate and hedge funds; these investments are both U.S. and non-U.S. in nature. As of December 31, 2013, U.S. government direct and indirect obligations represented 16% of total GE Pension Plan assets. No other sector concentration of assets exceeded 15% of total GE Pension Plan assets.
The following tables present GE Pension Plan investments measured at fair value.
(In millions) | Level 1 | Level 2 | Level 3 | Total | |||||||
December 31, 2013 | |||||||||||
Equity securities | |||||||||||
U.S. equity securities(a) | $ | 11,067 | $ | 1,568 | $ | - | $ | 12,635 | |||
Non-U.S. equity securities(a) | 7,832 | 1,292 | - | 9,124 | |||||||
Debt securities | |||||||||||
Fixed income and cash investment funds | - | 2,078 | - | 2,078 | |||||||
U.S. corporate(b) | - | 4,555 | - | 4,555 | |||||||
Residential mortgage-backed | - | 1,093 | - | 1,093 | |||||||
U.S. government and federal agency(c) | - | 5,253 | - | 5,253 | |||||||
Other debt securities(d) | - | 2,317 | - | 2,317 | |||||||
Private equities(a) | - | - | 6,269 | 6,269 | |||||||
Real estate(a) | - | - | 3,354 | 3,354 | |||||||
Other investments(e) | - | 169 | 1,622 | 1,791 | |||||||
Total investments | $ | 18,899 | $ | 18,325 | $ | 11,245 | 48,469 | ||||
Other(f) | (172) | ||||||||||
Total assets | $ | 48,297 | |||||||||
December 31, 2012 | |||||||||||
Equity securities | |||||||||||
U.S. equity securities(a) | $ | 8,876 | $ | 2,462 | $ | - | $ | 11,338 | |||
Non-U.S. equity securities(a) | 6,699 | 1,644 | - | 8,343 | |||||||
Debt securities | |||||||||||
Fixed income and cash investment funds | - | 1,931 | 50 | 1,981 | |||||||
U.S. corporate(b) | - | 2,758 | - | 2,758 | |||||||
Residential mortgage-backed | - | 1,420 | 3 | 1,423 | |||||||
U.S. government and federal agency(c) | - | 5,489 | - | 5,489 | |||||||
Other debt securities(d) | - | 2,053 | 22 | 2,075 | |||||||
Private equities(a) | - | - | 6,878 | 6,878 | |||||||
Real estate(a) | - | - | 3,356 | 3,356 | |||||||
Other investments(e) | - | 44 | 1,694 | 1,738 | |||||||
Total investments | $ | 15,575 | $ | 17,801 | $ | 12,003 | 45,379 | ||||
Other(f) | (641) | ||||||||||
Total assets | $ | 44,738 | |||||||||
(a) Included direct investments and investment funds.
(b) Primarily represented investment-grade bonds of U.S. issuers from diverse industries.
(c) Included short-term investments to meet liquidity needs.
(d) Primarily represented investments in non-U.S. corporate bonds, non-U.S. government bonds and commercial mortgage-backed securities.
(e) Substantially all represented hedge fund investments.
(f) Primarily represented net unsettled transactions related to purchases and sales of investments and accrued income receivables.
The following tables present the changes in Level 3 investments for the GE Pension Plan.
Changes in Level 3 Investments for the Year Ended December 31, 2013 | |||||||||||||||||
Purchases, | Transfers | ||||||||||||||||
issuances | in and/or | ||||||||||||||||
January 1, | Net realized | Net unrealized | and | out of | December 31, | ||||||||||||
(In millions) | 2013 | gains (losses) | gains (losses) | settlements | Level 3 | (a) | 2013 | ||||||||||
Debt securities | |||||||||||||||||
Fixed income and cash | |||||||||||||||||
investment funds | $ | 50 | $ | (7) | $ | - | $ | (43) | $ | - | $ | - | |||||
Residential mortgage-backed | 3 | - | - | - | (3) | - | |||||||||||
Other debt securities | 22 | - | - | (22) | - | - | |||||||||||
Private equities | 6,878 | 525 | 588 | (1,675) | (47) | 6,269 | |||||||||||
Real estate | 3,356 | 23 | 330 | (355) | - | 3,354 | |||||||||||
Other investments | 1,694 | (1) | 200 | (77) | (194) | 1,622 | |||||||||||
$ | 12,003 | $ | 540 | $ | 1,118 | $ | (2,172) | $ | (244) | $ | 11,245 | ||||||
(a) Transfers in and out of Level 3 are considered to occur at the beginning of the period.
Changes in Level 3 Investments for the Year Ended December 31, 2012 | |||||||||||||||||
Purchases, | Transfers | ||||||||||||||||
issuances | in and/or | ||||||||||||||||
January 1, | Net realized | Net unrealized | and | out of | December 31, | ||||||||||||
(In millions) | 2012 | gains (losses) | gains (losses) | settlements | Level 3 | (a) | 2012 | ||||||||||
Debt securities | |||||||||||||||||
Fixed income and cash | |||||||||||||||||
investment funds | $ | 62 | $ | - | $ | 9 | $ | (21) | $ | - | $ | 50 | |||||
U.S. corporate | 3 | (1) | - | (2) | - | - | |||||||||||
Residential mortgage-backed | 5 | (2) | - | - | - | 3 | |||||||||||
Other debt securities | 146 | (2) | - | (122) | - | 22 | |||||||||||
Private equities | 6,786 | 133 | 438 | (479) | - | 6,878 | |||||||||||
Real estate | 3,274 | 20 | 279 | (217) | - | 3,356 | |||||||||||
Other investments | 1,709 | 32 | 72 | (71) | (48) | 1,694 | |||||||||||
$ | 11,985 | $ | 180 | $ | 798 | $ | (912) | $ | (48) | $ | 12,003 | ||||||
(a) Transfers in and out of Level 3 are considered to occur at the beginning of the period.
Other pension plans' assets were $11,059 million and $9,702 million at December 31, 2013 and 2012, respectively. Equity and debt securities amounting to $9,781 million and $8,497 million represented approximately 89% of total investments at both December 31, 2013 and 2012. The plans' investments were classified as 11% Level 1, 78% Level 2 and 11% Level 3 at December 31, 2013. The plans' investments were classified as 14% Level 1, 75% Level 2 and 11% Level 3 at December 31, 2012. The changes in Level 3 investments were insignificant for the years ended December 31, 2013 and 2012.
Pension Asset (Liability) | |||||||||||
Principal pension plans | Other pension plans | ||||||||||
December 31 (In millions) | 2013 | 2012 | 2013 | 2012 | |||||||
Funded status(a)(b) | $ | (9,816) | $ | (18,764) | $ | (2,476) | $ | (3,882) | |||
Pension asset (liability) recorded in the | |||||||||||
Statement of Financial Position | |||||||||||
Pension asset | $ | - | $ | - | $ | 325 | $ | 141 | |||
Pension liabilities | |||||||||||
Due within one year(c) | (170) | (159) | (67) | (62) | |||||||
Due after one year | (9,646) | (18,605) | (2,734) | (3,961) | |||||||
Net amount recognized | $ | (9,816) | $ | (18,764) | $ | (2,476) | $ | (3,882) | |||
Amounts recorded in shareowners' | |||||||||||
equity (unamortized) | |||||||||||
Prior service cost (credit) | $ | 1,160 | $ | 1,406 | $ | 9 | $ | (4) | |||
Net actuarial loss | 11,555 | 24,437 | 2,459 | 3,962 | |||||||
Total | $ | 12,715 | $ | 25,843 | $ | 2,468 | $ | 3,958 | |||
(a) Fair value of assets less PBO, as shown in the preceding tables.
(b) The GE Pension Plan was underfunded by $4.7 billion and $13.3 billion at December 31, 2013 and December 31, 2012, respectively.
(c) For principal pension plans, represents the GE Supplementary Pension Plan liability.
In 2014, we estimate that we will amortize $215 million of prior service cost and $2,565 million of net actuarial loss for the principal pension plans from shareowners' equity into pension cost. For other pension plans, the estimated prior service cost and net actuarial loss to be amortized in 2014 will be $5 million and $215 million, respectively. Comparable amortized amounts in 2013, respectively, were $246 million and $3,664 million for the principal pension plans and $7 million and $343 million for other pension plans.
Estimated Future Benefit Payments | ||||||||||||||||||
2019 | - | |||||||||||||||||
(In millions) | 2014 | 2015 | 2016 | 2017 | 2018 | 2023 | ||||||||||||
Principal pension | $ | 3,105 | $ | 3,175 | $ | 3,240 | $ | 3,310 | $ | 3,380 | $ | 18,370 | ||||||
plans | ||||||||||||||||||
Other pension | ||||||||||||||||||
plans | $ | 495 | $ | 505 | $ | 510 | $ | 525 | $ | 540 | $ | 2,935 | ||||||
Retiree Health and Life Benefits
We sponsor a number of retiree health and life insurance benefit plans (retiree benefit plans). Principal retiree benefit plans are discussed below; other such plans are not significant individually or in the aggregate. We use a December 31 measurement date for our plans.
Principal Retiree Benefit Plans provide health and life insurance benefits to certain eligible participants and these participants share in the cost of healthcare benefits. In 2012, we amended our principal retiree benefit plans such that, effective January 1, 2015, our post-65 retiree medical plans will be closed to salaried and retired salaried employees who are not enrolled in the plans as of that date, and we will no longer offer company-provided life insurance in retirement for certain salaried employees who retire after that date. These plans cover approximately 198,000 retirees and dependents.
Cost of Principal Retiree Benefit Plans | ||||||||
(In millions) | 2013 | 2012 | 2011 | |||||
Service cost for benefits earned | $ | 229 | $ | 219 | $ | 216 | ||
Prior service cost amortization | 393 | 518 | 647 | |||||
Expected return on plan assets | (60) | (73) | (97) | |||||
Interest cost on benefit obligations | 410 | 491 | 604 | |||||
Net actuarial loss (gain) amortization | (45) | 32 | (110) | |||||
Net curtailment/settlement gain | - | (101) | - | |||||
Retiree benefit plans cost | $ | 927 | $ | 1,086 | $ | 1,260 | ||
Actuarial assumptions are described below. The actuarial assumptions at December 31 are used to measure the year-end benefit obligations and the retiree benefit plan costs for the subsequent year.
December 31 | 2013 | 2012 | 2011 | 2010 | ||||
Discount rate | 4.61 | % | 3.74 | %(a) | 4.09 | %(a) | 5.15 | % |
Compensation increases | 4.00 | 3.90 | 3.75 | 4.25 | ||||
Expected return on assets | 7.00 | 7.00 | 7.00 | 8.00 | ||||
Initial healthcare trend rate(b) | 6.00 | 6.50 | 7.00 | 7.00 | ||||
(a) Weighted average discount rates of 3.77% and 3.94% were used for determination of costs in 2013 and 2012, respectively.
(b) For 2013, ultimately declining to 5% for 2030 and thereafter.
To determine the expected long-term rate of return on retiree life plan assets, we consider current and target asset allocations, historical and expected returns on various categories of plan assets, as well as expected benefit payments and resulting asset levels. In developing future return expectations for retiree benefit plan assets, we formulate views on the future economic environment, both in the U.S. and abroad. We evaluate general market trends and historical relationships among a number of key variables that impact asset class returns such as expected earnings growth, inflation, valuations, yields and spreads, using both internal and external sources. We also take into account expected volatility by asset class and diversification across classes to determine expected overall portfolio results given current and target allocations. Based on our analysis of future expectations of asset performance, past return results, our current and target asset allocations as well as a shorter time horizon for retiree life plan assets, we have assumed a 7.0% long-term expected return on those assets for cost recognition in 2014. We apply our expected rate of return to a market-related value of assets, which stabilizes variability in the amounts to which we apply that expected return.
We amortize experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions, over a period no longer than the average future service of employees.
Funding Policy. We fund retiree health benefits on a pay-as-you-go basis. We expect to contribute approximately $545 million in 2014 to fund such benefits. We fund the retiree life insurance trust at our discretion.
Changes in the accumulated postretirement benefit obligation for retiree benefit plans follow.
Accumulated Postretirement Benefit Obligation (APBO) | ||||||
(In millions) | 2013 | 2012 | ||||
Balance at January 1 | $ | 11,804 | $ | 13,056 | ||
Service cost for benefits earned | 229 | 219 | ||||
Interest cost on benefit obligations | 410 | 491 | ||||
Participant contributions | 52 | 54 | ||||
Plan amendments | - | (832) | ||||
Actuarial gain | (1,836) | (a) | (60) | |||
Benefits paid | (746) | (758) | ||||
Net curtailment/settlement | - | (366) | ||||
Balance at December 31(b) | $ | 9,913 | $ | 11,804 | ||
(a) Primarily associated with discount rate change and lower costs from new healthcare supplier contracts.
(b) The APBO for the retiree health plans was $7,626 million and $9,218 million at year-end 2013 and 2012, respectively.
A one percentage point change in the assumed healthcare cost trend rate would have the following effects.
1% | 1% | ||||
(In millions) | Increase | Decrease | |||
APBO at December 31, 2013 | $ | 788 | $ | (671) | |
Service and interest cost in 2013 | 63 | (52) | |||
Plan Assets
The fair value of the classes of retiree benefit plans' investments is presented below. The inputs and valuation techniques used to measure the fair value of assets are consistently applied and described in Note 1.
Fair Value of Plan Assets | |||||
(In millions) | 2013 | 2012 | |||
Balance at January 1 | $ | 946 | $ | 1,004 | |
Actual gain on plan assets | 118 | 98 | |||
Employer contributions | 533 | 548 | |||
Participant contributions | 52 | 54 | |||
Benefits paid | (746) | (758) | |||
Balance at December 31 | $ | 903 | $ | 946 | |
Asset Allocation | ||||
December 31 | 2013 | 2013 | ||
Target | Actual | |||
allocation | allocation | |||
Equity securities | 35 - 75 | %(a) | 39 | %(b) |
Debt securities (including cash equivalents) | 11 - 46 | 38 | ||
Private equities | 0 - 25 | 14 | ||
Real estate | 0 - 12 | 7 | ||
Other | 0 - 10 | 2 | ||
(a) Target allocations were 18-38% for U.S. equity securities and 17-37% for non-U.S. equity securities.
(b) Actual allocations were 23% for U.S. equity securities and 16% for non-U.S. equity securities.
Plan fiduciaries set investment policies and strategies for the trust and oversee its investment allocation, which includes selecting investment managers and setting long-term strategic targets. The primary strategic investment objectives are balancing investment risk and return and monitoring the plan's liquidity position in order to meet the near-term benefit payment and other cash needs. Target allocation percentages are established at an asset class level by plan fiduciaries. Target allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target range.
Trust assets invested in short-term securities must generally be invested in securities rated A-1/P-1 or better, except for 15% of such securities that may be rated A-2/P-2 and other short-term securities as may be approved by the plan fiduciaries. According to statute, the aggregate holdings of all qualifying employer securities (e.g., GE common stock) and qualifying employer real property may not exceed 10% of the fair value of trust assets at the time of purchase. GE securities represented 4.0% and 5.8% of trust assets at year-end 2013 and 2012, respectively.
Retiree life plan assets were $903 million and $946 million at December 31, 2013 and 2012, respectively. Equity and debt securities amounting to $727 million and $741 million represented approximately 77% and 75% of total investments at December 31, 2013 and 2012, respectively. The plans' investments were classified as 33% Level 1, 43% Level 2 and 24% Level 3 at December 31, 2013. The plans' investments were classified as 28% Level 1, 47% Level 2 and 25% Level 3 at December 31, 2012. The changes in Level 3 investments were insignificant for the years ended December 31, 2013 and 2012.
Retiree Benefit Asset (Liability) | |||||
December 31 (In millions) | 2013 | 2012 | |||
Funded status(a) | $ | (9,010) | $ | (10,858) | |
Liability recorded in the Statement of Financial Position | |||||
Retiree health plans | |||||
Due within one year | $ | (531) | $ | (589) | |
Due after one year | (7,095) | (8,629) | |||
Retiree life plans | (1,384) | (1,640) | |||
Net liability recognized | $ | (9,010) | $ | (10,858) | |
Amounts recorded in shareowners' equity (unamortized) | |||||
Prior service cost | $ | 963 | $ | 1,356 | |
Net actuarial loss (gain) | (1,667) | 182 | |||
Total | $ | (704) | $ | 1,538 | |
(a) Fair value of assets less APBO, as shown in the preceding tables.
In 2014, we estimate that we will amortize $395 million of prior service cost and $170 million of net actuarial gain from shareowners' equity into retiree benefit plans cost. Comparable amortized amounts in 2013 were $393 million of prior service cost and $45 million of net actuarial gain.
Estimated Future Benefit Payments | ||||||||||||||||||
2019 | - | |||||||||||||||||
(In millions) | 2014 | 2015 | 2016 | 2017 | 2018 | 2023 | ||||||||||||
$ | 725 | $ | 725 | $ | 725 | $ | 725 | $ | 725 | $ | 3,500 | |||||||
Postretirement Benefit Plans
2013 Cost of Postretirement Benefit Plans and Changes in Other Comprehensive Income
Total | Principal | Other | Retiree | ||||||||
postretirement | pension | pension | benefit | ||||||||
(In millions) | benefit plans | plans | plans | plans | |||||||
Cost of postretirement benefit plans | $ | 5,977 | $ | 4,405 | $ | 645 | $ | 927 | |||
Changes in other comprehensive income | |||||||||||
Prior service cost - current year | 11 | - | 11 | - | |||||||
Net actuarial gain - current year(a) | (12,263) | (9,218) | (1,151) | (1,894) | |||||||
Prior service cost amortization | (646) | (246) | (7) | (393) | |||||||
Net actuarial gain (loss) amortization | (3,962) | (3,664) | (343) | 45 | |||||||
Total changes in other comprehensive income | (16,860) | (13,128) | (1,490) | (2,242) | |||||||
Cost of postretirement benefit plans and | |||||||||||
changes in other comprehensive income | $ | (10,883) | $ | (8,723) | $ | (845) | $ | (1,315) | |||
(a) Principally associated with discount rate changes and plan asset gains in excess of expected return on plan assets.
NOTE 13. ALL OTHER LIABILITIES
This caption includes liabilities for various items including non-current compensation and benefits, deferred income, interest on tax liabilities, unrecognized tax benefits, environmental remediation, asset retirement obligations, derivative instruments, product warranties and a variety of sundry items.
Accruals for non-current compensation and benefits amounted to $27,853 million and $40,318 million at December 31, 2013 and 2012, respectively. These amounts include postretirement benefits, pension accruals, and other compensation and benefit accruals such as deferred incentive compensation. See Note 12.
We are involved in numerous remediation actions to clean up hazardous wastes as required by federal and state laws. Liabilities for remediation costs exclude possible insurance recoveries and, when dates and amounts of such costs are not known, are not discounted. When there appears to be a range of possible costs with equal likelihood, liabilities are based on the low end of such range. It is reasonably possible that our environmental remediation exposure will exceed amounts accrued. However, due to uncertainties about the status of laws, regulations, technology and information related to individual sites, such amounts are not reasonably estimable. Total reserves related to environmental remediation and asbestos claims, were $2,612 million at December 31, 2013.
NOTE 14. INCOME TAXES
Provision for Income Taxes | ||||||||
(In millions) | 2013 | 2012 | 2011 | |||||
GE | ||||||||
Current tax expense | $ | 4,239 | $ | 2,307 | $ | 5,166 | ||
Deferred tax expense (benefit) from temporary differences | (2,571) | (294) | (327) | |||||
1,668 | 2,013 | 4,839 | ||||||
GECC | ||||||||
Current tax expense (benefit) | (268) | 1,379 | 783 | |||||
Deferred tax expense (benefit) from temporary differences | (724) | (858) | 123 | |||||
(992) | 521 | 906 | ||||||
Consolidated | ||||||||
Current tax expense | 3,971 | 3,686 | 5,949 | |||||
Deferred tax expense (benefit) from temporary differences | (3,295) | (1,152) | (204) | |||||
Total | $ | 676 | $ | 2,534 | $ | 5,745 |
GE and GECC file a consolidated U.S. federal income tax return. This enables GE to use GECC tax deductions and credits to reduce the tax that otherwise would have been payable by GE. The GECC effective tax rate for each period reflects the benefit of these tax reductions in the consolidated return. GE makes cash payments to GECC for these tax reductions at the time GE's tax payments are due.
Consolidated U.S. earnings from continuing operations before income taxes were $6,099 million, $8,309 million and $10,206 million in 2013, 2012 and 2011, respectively. The corresponding amounts for non-U.S.-based operations were $10,052 million, $9,072 million and $9,953 million in 2013, 2012 and 2011, respectively.
Consolidated current tax expense includes amounts applicable to U.S. federal income taxes of $85 million, $685 million and $1,079 million in 2013, 2012 and 2011, respectively, including the benefit from GECC deductions and credits applied against GE's current U.S. tax expense. Consolidated current tax expense amounts applicable to non-U.S. jurisdictions were $3,659 million, $2,871 million and $4,624 million in 2013, 2012 and 2011, respectively. Consolidated deferred taxes related to U.S. federal income taxes were an expense (benefit) of $(2,315) million, $(414) million and $1,529 million in 2013, 2012 and 2011, respectively, and amounts applicable to non-U.S. jurisdictions of an expense (benefit) of $(1,038) million, $(773) million and $(2,077) million in 2013, 2012 and 2011, respectively.
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss and tax credit carryforwards, and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established.
Our businesses are subject to regulation under a wide variety of U.S. federal, state and foreign tax laws, regulations and policies. Changes to these laws or regulations may affect our tax liability, return on investments and business operations. For example, GE's effective tax rate is reduced because active business income earned and indefinitely reinvested outside the United States is taxed at less than the U.S. rate. A significant portion of this reduction depends upon a provision of U.S. tax law that defers the imposition of U.S. tax on certain active financial services income until that income is repatriated to the United States as a dividend. This provision is consistent with international tax norms and permits U.S. financial services companies to compete more effectively with foreign banks and other foreign financial institutions in global markets. This provision, which had expired at the end of 2011, was reinstated in January 2013 retroactively for two years through the end of 2013. The provision had been scheduled to expire and had been extended by Congress on six previous occasions, but there can be no assurance that it will continue to be extended. In the event the provision is not extended after 2013, the current U.S. tax imposed on active financial services income earned outside the United States would increase, making it more difficult for U.S. financial services companies to compete in global markets. If this provision is not extended, we expect our effective tax rate to increase significantly after 2014.
We have not provided U.S. deferred taxes on cumulative earnings of non-U.S. affiliates and associated companies that have been reinvested indefinitely. These earnings relate to ongoing operations and, at December 31, 2013 and December 31, 2012, were approximately $110 billion and $108 billion, respectively. Most of these earnings have been reinvested in active non-U.S. business operations and we do not intend to repatriate these earnings to fund U.S. operations. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. federal income tax liability that would be payable if such earnings were not reinvested indefinitely. Deferred taxes are provided for earnings of non-U.S. affiliates and associated companies when we plan to remit those earnings.
Annually, we file over 5,800 income tax returns in over 250 global taxing jurisdictions. We are under examination or engaged in tax litigation in many of these jurisdictions. During 2013, the Internal Revenue Service (IRS) completed the audit of our consolidated U.S. income tax returns for 2008-2009, except for certain issues that remain under examination. During 2011, the IRS completed the audit of our consolidated U.S. income tax returns for 2006-2007, except for certain issues that remained under examination. At December 31, 2013, the IRS was auditing our consolidated U.S. income tax returns for 2010-2011. In addition, certain other U.S. tax deficiency issues and refund claims for previous years were unresolved. The IRS has disallowed the tax loss on our 2003 disposition of ERC Life Reinsurance Corporation. We have contested the disallowance of this loss. It is reasonably possible that the unresolved items could be resolved during the next 12 months, which could result in a decrease in our balance of "unrecognized tax benefits" - that is, the aggregate tax effect of differences between tax return positions and the benefits recognized in our financial statements. We believe that there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties. Resolution of audit matters, including the IRS audit of our consolidated U.S. income tax returns for 2008-2009, reduced our 2013 consolidated income tax rate by 2.8 percentage points. Resolution of audit matters, including the IRS audit of our consolidated U.S. income tax returns for 2006-2007, reduced our 2011 consolidated effective tax rate by 2.4 percentage points.
The balance of unrecognized tax benefits, the amount of related interest and penalties we have provided and what we believe to be the range of reasonably possible changes in the next 12 months were:
December 31 (In millions) | 2013 | 2012 | |||
Unrecognized tax benefits | $ | 5,816 | $ | 5,445 | |
Portion that, if recognized, would reduce tax expense and effective tax rate(a) | 4,307 | 4,032 | |||
Accrued interest on unrecognized tax benefits | 975 | 961 | |||
Accrued penalties on unrecognized tax benefits | 164 | 173 | |||
Reasonably possible reduction to the balance of unrecognized tax benefits | |||||
in succeeding 12 months | 0-900 | 0-800 | |||
Portion that, if recognized, would reduce tax expense and effective tax rate(a) | 0-350 | 0-700 | |||
(a) Some portion of such reduction might be reported as discontinued operations.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
(In millions) | 2013 | 2012 | |||
Balance at January 1 | $ | 5,445 | $ | 5,230 | |
Additions for tax positions of the current year | 771 | 293 | |||
Additions for tax positions of prior years | 872 | 882 | |||
Reductions for tax positions of prior years | (1,140) | (723) | |||
Settlements with tax authorities | (98) | (191) | |||
Expiration of the statute of limitations | (34) | (46) | |||
Balance at December 31 | $ | 5,816 | $ | 5,445 |
We classify interest on tax deficiencies as interest expense; we classify income tax penalties as provision for income taxes. For the years ended December 31, 2013, 2012 and 2011, $22 million, $(45) million and $(197) million of interest expense (income), respectively, and $0 million, $33 million and $10 million of tax expense (income) related to penalties, respectively, were recognized in the Statement of Earnings.
A reconciliation of the U.S. federal statutory income tax rate to the actual income tax rate is provided below.
Reconciliation of U.S. Federal Statutory Income Tax Rate to Actual Income Tax Rate | ||||||||||||||||||
Consolidated | GE | GECC | ||||||||||||||||
2013 | 2012 | 2011 | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | ||||||||||
U.S. federal statutory income | ||||||||||||||||||
tax rate | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % |
Increase (reduction) in rate | ||||||||||||||||||
resulting from | ||||||||||||||||||
inclusion of after-tax | ||||||||||||||||||
earnings of GECC in | ||||||||||||||||||
before-tax earnings of GE | - | - | - | (16.9) | (15.3) | (11.9) | - | - | - | |||||||||
Tax on global activities | ||||||||||||||||||
including exports(a) | (24.7) | (12.5) | (10.4) | (4.1) | (4.3) | (5.2) | (45.0) | (18.4) | (14.7) | |||||||||
NBCU gain | (0.7) | - | 9.3 | (0.7) | - | 9.8 | - | - | - | |||||||||
Business Property disposition | - | (1.9) | - | - | - | - | - | (4.2) | - | |||||||||
U.S. business credits(b) | (3.6) | (2.6) | (3.2) | (1.5) | (0.7) | (1.5) | (4.6) | (4.3) | (4.7) | |||||||||
All other - net | (1.8) | (3.4) | (2.2) | (2.0) | (2.7) | (0.9) | 1.0 | (1.5) | (3.5) | |||||||||
(30.8) | (20.4) | (6.5) | (25.2) | (23.0) | (9.7) | (48.6) | (28.4) | (22.9) | ||||||||||
Actual income tax rate | 4.2 | % | 14.6 | % | 28.5 | % | 9.8 | % | 12.0 | % | 25.3 | % | (13.6) | % | 6.6 | % | 12.1 | % |
(a) Included (6.0)% and (13.3)% in consolidated and GECC, respectively, related to the sale of 68.5% of our Swiss consumer finance bank, Cembra Money Bank AG (Cembra), through an initial public offering in 2013.
(b) U.S. general business credits, primarily the credit for manufacture of energy efficient appliances, the credit for energy produced from renewable sources, the advanced energy project credit, the low-income housing credit and the credit for research performed in the U.S.
Deferred Income Taxes
Aggregate deferred income tax amounts are summarized below.
December 31 (In millions) | 2013 | 2012 | |||
Assets | |||||
GE | $ | 15,284 | $ | 19,745 | |
GECC | 13,224 | 11,876 | |||
28,508 | 31,621 | ||||
Liabilities | |||||
GE | (10,223) | (13,799) | |||
GECC | (18,010) | (17,876) | |||
(28,233) | (31,675) | ||||
Net deferred income tax asset (liability) | $ | 275 | $ | (54) |
Principal components of our net asset (liability) representing deferred income tax balances are as follows:
December 31 (In millions) | 2013 | 2012 | |||
GE | |||||
Provision for expenses(a) | $ | 5,934 | $ | 6,503 | |
Principal pension plans | 3,436 | 6,567 | |||
Retiree insurance plans | 3,154 | 3,800 | |||
Non-U.S. loss carryforwards(b) | 874 | 942 | |||
Contract costs and estimated earnings | (3,550) | (3,087) | |||
Intangible assets | (2,268) | (2,269) | |||
Depreciation | (1,079) | (698) | |||
Investment in global subsidiaries | (1,077) | (921) | |||
Investment in NBCU LLC | - | (4,937) | |||
Other - net | (363) | 46 | |||
5,061 | 5,946 | ||||
GECC | |||||
Operating leases | (6,284) | (6,141) | |||
Financing leases | (4,075) | (4,506) | |||
Intangible assets | (1,943) | (1,666) | |||
Cash flow hedges | (163) | (115) | |||
Net unrealized gains (losses) on securities | (145) | (314) | |||
Non-U.S. loss carryforwards(b) | 3,791 | 3,049 | |||
Allowance for losses | 2,640 | 1,975 | |||
Investment in global subsidiaries | 1,883 | 1,689 | |||
Other - net | (490) | 29 | |||
(4,786) | (6,000) | ||||
Net deferred income tax asset (liability) | $ | 275 | $ | (54) | |
(a) Represented the tax effects of temporary differences related to expense accruals for a wide variety of items, such as employee compensation and benefits, other pension plan liabilities, interest on tax liabilities, product warranties and other sundry items that are not currently deductible.
(b) Net of valuation allowances of $2,089 million and $1,712 million for GE and $862 million and $628 million for GECC, for 2013 and 2012, respectively. Of the net deferred tax asset as of December 31, 2013, of $4,665 million, $30 million relates to net operating loss carryforwards that expire in various years ending from December 31, 2014, through December 31, 2016; $478 million relates to net operating losses that expire in various years ending from December 31, 2017 through December 31, 2030 and $4,157 million relates to net operating loss carryforwards that may be carried forward indefinitely.
NOTE 15. SHAREOWNERS' EQUITY
(In millions) | 2013 | 2012 | 2011 | |||||
Preferred stock issued | $ | - | $ | - | $ | - | ||
Common stock issued | $ | 702 | $ | 702 | $ | 702 | ||
Accumulated other comprehensive income | ||||||||
Balance at January 1 | $ | (20,230) | $ | (23,974) | $ | (17,855) | ||
Other comprehensive income before reclassifications | 8,844 | 841 | (9,601) | |||||
Reclassifications from other comprehensive income | 2,266 | 2,903 | 3,482 | |||||
Other comprehensive income, net, attributable to GE | 11,110 | 3,744 | (6,119) | |||||
Balance at December 31 | $ | (9,120) | $ | (20,230) | $ | (23,974) | ||
Other capital | ||||||||
Balance at January 1 | $ | 33,070 | $ | 33,693 | $ | 36,890 | ||
Gains (losses) on treasury stock dispositions and other | (576) | (623) | (703) | |||||
Preferred stock redemption | - | - | (2,494) | |||||
Balance at December 31 | $ | 32,494 | $ | 33,070 | $ | 33,693 | ||
Retained earnings | ||||||||
Balance at January 1 | $ | 144,055 | $ | 137,786 | $ | 131,137 | ||
Net earnings attributable to the Company | 13,057 | 13,641 | 14,151 | |||||
Dividends(a) | (8,060) | (7,372) | (7,498) | |||||
Other | (1) | - | (4) | |||||
Balance at December 31 | $ | 149,051 | $ | 144,055 | $ | 137,786 | ||
Common stock held in treasury | ||||||||
Balance at January 1 | $ | (34,571) | $ | (31,769) | $ | (31,938) | ||
Purchases | (10,466) | (5,295) | (2,067) | |||||
Dispositions | 2,476 | 2,493 | 2,236 | |||||
Balance at December 31 | $ | (42,561) | $ | (34,571) | $ | (31,769) | ||
Total equity | ||||||||
GE shareowners' equity balance at December 31 | $ | 130,566 | $ | 123,026 | $ | 116,438 | ||
Noncontrolling interests balance at December 31 | 6,217 | 5,444 | 1,696 | |||||
Total equity balance at December 31 | $ | 136,783 | $ | 128,470 | $ | 118,134 | ||
(a) Included $1,031 million ($806 million related to our preferred stock redemption) of dividends on preferred stock in 2011.
Shares of GE Preferred Stock
On October 16, 2008, we issued 30,000 shares of 10% cumulative perpetual preferred stock (par value $1.00 per share) having an aggregate liquidation value of $3,000 million, and warrants to purchase 134,831,460 shares of common stock (par value $0.06 per share) to Berkshire Hathaway Inc. (Berkshire Hathaway) for net proceeds of $2,965 million in cash. The proceeds were allocated to the preferred shares ($2,494 million) and the warrants ($471 million) on a relative fair value basis and recorded in other capital. The warrants were exercisable through October 16, 2013, at an exercise price of $22.25 per share of common stock and were to be settled through physical share issuance. The terms of the warrants were amended in January 2013 to allow for net share settlement where the total number of issued shares is based on the amount by which the average market price of GE common stock over the 20 trading days preceding the date of exercise exceeds the exercise price of $22.25. On October 16, 2013, Berkshire Hathaway Inc. (Berkshire Hathaway) exercised in full their warrants to purchase shares of GE common stock and on October 17, 2013, GE delivered 10.7 million shares to Berkshire Hathaway. The transaction had equal and offsetting effects on other capital and common stock held in treasury.
The preferred stock was redeemable at our option three years after issuance at a price of 110% of liquidation value plus accrued and unpaid dividends. On September 13, 2011, we provided notice to Berkshire Hathaway that we would redeem the shares for the stated redemption price of $3,300 million, plus accrued and unpaid dividends. In connection with this notice, we recognized a preferred dividend of $806 million (calculated as the difference between the carrying value and redemption value of the preferred stock), which was recorded as a reduction to earnings attributable to common shareowners and common shareowners' equity. The preferred shares were redeemed on October 17, 2011.
GE has 50 million authorized shares of preferred stock ($1.00 par value). No shares were issued and outstanding as of December 31, 2013 and 2012.
Shares of GE Common Stock
On December 14, 2012, we increased the existing authorization by $10 billion to $25 billion for our share repurchase program and extended the program (which would have otherwise expired on December 31, 2013) through 2015. On February 12, 2013, we increased the existing authorization by an additional $10 billion resulting in authorization to repurchase up to a total of $35 billion of our common stock through 2015. Under this program, on a book basis, we repurchased 432.6 million shares for a total of $10,375 million during 2013 and 248.6 million shares for a total of $5,185 million during 2012.
GE has 13.2 billion authorized shares of common stock ($0.06 par value).
Common shares issued and outstanding are summarized in the following table.
December 31 (In thousands) | 2013 | 2012 | 2011 | |||
Issued | 11,693,841 | 11,693,841 | 11,693,841 | |||
In treasury | (1,632,960) | (1,288,216) | (1,120,824) | |||
Outstanding | 10,060,881 | 10,405,625 | 10,573,017 |
Accumulated Other Comprehensive Income | ||||||||
(In millions) | 2013 | 2012 | 2011 | |||||
Investment securities | ||||||||
Balance at January 1 | $ | 677 | $ | (30) | $ | (636) | ||
OCI before reclassifications - net of deferred taxes of $(407), $387 and $341(a) | (692) | 683 | 577 | |||||
Reclassifications from OCI - net of deferred taxes of $222, $13 and $1 | 318 | 22 | 31 | |||||
Other comprehensive income(b) | (374) | 705 | 608 | |||||
Less: OCI attributable to noncontrolling interests | (4) | (2) | 2 | |||||
Balance at December 31 | $ | 307 | $ | 677 | $ | (30) | ||
Currency translation adjustments (CTA) | ||||||||
Balance at January 1 | $ | 412 | $ | 133 | $ | (86) | ||
OCI before reclassifications - net of deferred taxes of $(613), $(266) and $(717) | 510 | 474 | (201) | |||||
Reclassifications from OCI - net of deferred taxes of $793, $54 and $357 | (818) | (174) | 381 | |||||
Other comprehensive income(b) | (308) | 300 | 180 | |||||
Less: OCI attributable to noncontrolling interests | (22) | 21 | (39) | |||||
Balance at December 31 | $ | 126 | $ | 412 | $ | 133 | ||
Cash flow hedges | ||||||||
Balance at January 1 | $ | (722) | $ | (1,176) | $ | (1,280) | ||
OCI before reclassifications - net of deferred taxes of $250, $392 and $238 | 738 | 385 | (860) | |||||
Reclassifications from OCI - net of deferred taxes of $(177), $(245) and $202 | (271) | 68 | 978 | |||||
Other comprehensive income(b) | 467 | 453 | 118 | |||||
Less: OCI attributable to noncontrolling interests | 2 | (1) | 14 | |||||
Balance at December 31 | $ | (257) | $ | (722) | $ | (1,176) | ||
Benefit plans | ||||||||
Balance at January 1 | $ | (20,597) | $ | (22,901) | $ | (15,853) | ||
Prior service credit (cost) - net of deferred taxes of $(5), $304 and $(276) | (6) | 534 | (495) | |||||
Net actuarial gain (loss) - net of deferred taxes of $4,506, $(574) and $(4,746) | 8,269 | (1,396) | (8,637) | |||||
Net curtailment/settlement - net of deferred taxes of $0, $123 and $0 | - | 174 | - | |||||
Prior service cost amortization - net of deferred taxes of $267, $326 and $341 | 397 | 497 | 514 | |||||
Net actuarial loss amortization - net of deferred taxes of $1,343, $1,278 and $811 | 2,640 | 2,490 | 1,578 | |||||
Other comprehensive income(b) | 11,300 | 2,299 | (7,040) | |||||
Less: OCI attributable to noncontrolling interests | (1) | (5) | 8 | |||||
Balance at December 31 | $ | (9,296) | $ | (20,597) | $ | (22,901) | ||
Accumulated other comprehensive income at December 31 | $ | (9,120) | $ | (20,230) | $ | (23,974) | ||
(a) Includes adjustments of $(1,171) million, $527 million and $786 million in 2013, 2012 and 2011, respectively, to deferred acquisition costs, present value of future profits, and investment contracts, insurance liabilities and insurance annuity benefits in our run-off insurance operations to reflect the effects that would have been recognized had the related unrealized investment securities holding gains and losses actually been realized.
(b) Total other comprehensive income was $11,085 million, $3,757 million and $(6,134) million in 2013, 2012 and 2011, respectively.
Reclassification out of AOCI | ||||||||||
Components of AOCI | 2013 | 2012 | 2011 | Statement of Earnings Caption | ||||||
Available-for-sale securities | ||||||||||
Realized gains (losses) on | ||||||||||
sale/impairment of securities | $ | (540) | $ | (35) | $ | (32) | Other income | |||
222 | 13 | 1 | Tax (expense) or benefit | |||||||
$ | (318) | $ | (22) | $ | (31) | Net of tax | ||||
Currency translation adjustments | ||||||||||
Gains (losses) on dispositions | $ | 25 | $ | 120 | $ | (738) | Costs and expenses | |||
793 | 54 | 357 | Tax (expense) or benefit | |||||||
$ | 818 | $ | 174 | $ | (381) | Net of tax | ||||
Cash flow hedges | ||||||||||
Gains (losses) on interest rate derivatives | $ | (364) | $ | (499) | $ | (820) | Interest and other financial charges | |||
Foreign exchange contracts | 564 | 792 | (510) | (a) | ||||||
Other | 248 | (116) | 150 | (b) | ||||||
448 | 177 | (1,180) | Total before tax | |||||||
(177) | (245) | 202 | Tax (expense) or benefit | |||||||
$ | 271 | $ | (68) | $ | (978) | Net of tax | ||||
Benefit plan items | ||||||||||
Amortization of prior service costs | $ | (664) | $ | (823) | $ | (855) | (c) | |||
Amortization of actuarial gains (losses) | (3,983) | (3,768) | (2,389) | (c) | ||||||
(4,647) | (4,591) | (3,244) | Total before tax | |||||||
1,610 | 1,604 | 1,152 | Tax (expense) or benefit | |||||||
$ | (3,037) | $ | (2,987) | $ | (2,092) | Net of tax | ||||
Total reclassification adjustments | $ | (2,266) | $ | (2,903) | $ | (3,482) | Net of tax | |||
(a) Includes $608 million, $894 million and $(310) million in GECC revenues from services and $(44) million, $(102) million and $(200) million in interest and other financial charges for the years ended December 31, 2013, 2012 and 2011, respectively.
(b) Primarily included in costs and expenses.
(c) Amortization of prior service costs and actuarial gains and losses out of AOCI are included in the computation of net periodic pension costs. See Note 12 for further information.
Noncontrolling Interests
Noncontrolling interests in equity of consolidated affiliates includes common shares in consolidated affiliates and preferred stock issued by GECC. The balance is summarized as follows.
December 31 (In millions) |
| 2013 |
|
| 2012 |
|
|
|
|
|
|
GECC preferred stock | $ | 4,950 |
| $ | 3,960 |
Other noncontrolling interests in consolidated affiliates(a) |
| 1,267 |
|
| 1,484 |
Total | $ | 6,217 |
| $ | 5,444 |
(a) Consisted of a number of individually insignificant noncontrolling interests in partnerships and consolidated affiliates.
Changes to noncontrolling interests are as follows.
Years ended December 31 | ||||||||
(In millions) | 2013 | 2012 | 2011 | |||||
Beginning balance | $ | 5,444 | $ | 1,696 | $ | 5,262 | ||
Net earnings | 298 | 223 | 292 | |||||
GECC issuance of preferred stock | 990 | 3,960 | - | |||||
GECC preferred stock dividend | (298) | (123) | - | |||||
Repurchase of NBCU shares(a) | - | - | (3,070) | |||||
Dispositions(b) | (175) | - | (609) | |||||
Dividends | (80) | (42) | (34) | |||||
Other (including AOCI)(c) | 38 | (270) | (145) | |||||
Ending balance | $ | 6,217 | $ | 5,444 | $ | 1,696 | ||
(a) In January 2011 and prior to the transaction with Comcast, we acquired 12.3% of NBCU's outstanding shares from Vivendi for $3,673 million and made an additional payment of $222 million related to previously purchased shares. Of these amounts, $3,070 million reflects a reduction in carrying value of noncontrolling interests. The remaining amount of $825 million represents the amount paid in excess of our carrying value, which was recorded as an increase in our basis in NBCU.
(b) Includes noncontrolling interests related to the sale of GE SeaCo of $311 million and the redemption of Heller Financial preferred stock of $275 million in 2011.
(c) Primarily acquisitions and eliminations.
During the second quarter of 2013, GECC issued 10,000 shares of non-cumulative perpetual preferred stock with a $0.01 par value for proceeds of $990 million. The preferred shares bear an initial fixed interest rate of 5.25% through June 15, 2023, bear a floating rate equal to three-month LIBOR plus 2.967% thereafter and are callable on June 15, 2023. Dividends on the GECC preferred stock are payable semi-annually, in June and December, with the first payment on this issuance made in December 2013.
During 2012, GECC issued 40,000 shares of non-cumulative perpetual preferred stock with a $0.01 par value for proceeds of $3,960 million. Of these shares, 22,500 bear an initial fixed interest rate of 7.125% through June 15, 2022, bear a floating rate equal to three-month LIBOR plus 5.296% thereafter and are callable on June 15, 2022, and 17,500 shares bear an initial fixed interest rate of 6.25% through December 15, 2022, bear a floating rate equal to three-month LIBOR plus 4.704% thereafter and are callable on December 15, 2022. Dividends on the GECC preferred stock are payable semi-annually, in June and December, with the first payment on these issuances made in December 2012. GECC preferred stock is presented as noncontrolling interests in the GE consolidated statement of financial position.
During 2013 and 2012, GECC paid quarterly dividends of $1,930 million and $1,926 million, respectively, and special dividends of $4,055 million and $4,500 million, respectively, to GE. No dividends were paid during 2011.
NOTE 16. OTHER STOCK-RELATED INFORMATION
We grant stock options, restricted stock units (RSUs) and performance share units (PSUs) to employees under the 2007 Long-Term Incentive Plan. This plan replaced the 1990 Long-Term Incentive Plan. In addition, we grant options and RSUs in limited circumstances to consultants, advisors and independent contractors under a plan approved by our Board of Directors in 1997 (the Consultants' Plan). Share requirements for all plans may be met from either unissued or treasury shares. Stock options expire 10 years from the date they are granted and vest over service periods that range from one to five years. RSUs give the recipients the right to receive shares of our stock upon the vesting of their related restrictions. Restrictions on RSUs vest in various increments and at various dates, beginning after one year from date of grant through grantee retirement. Although the plan permits us to issue RSUs settleable in cash, we have only issued RSUs settleable in shares of our stock. PSUs give recipients the right to receive shares of our stock upon the achievement of certain performance targets.
All grants of GE options under all plans must be approved by the Management Development and Compensation Committee, which consists entirely of independent directors.
Stock Compensation Plans | ||||||||
Securities | ||||||||
to be | Weighted | Securities | ||||||
issued | average | available | ||||||
upon | exercise | for future | ||||||
December 31, 2013 (Shares in thousands) | exercise | price | issuance | |||||
Approved by shareowners | ||||||||
Options | 473,247 | $ | 20.02 | (a) | ||||
RSUs | 13,572 | (b) | (a) | |||||
PSUs | 950 | (b) | (a) | |||||
Not approved by shareowners (Consultants' Plan) | ||||||||
Options | 364 | 25.32 | (c) | |||||
RSUs | - | (b) | (c) | |||||
Total | 488,133 | $ | 20.02 | 404,574 | ||||
(a) In 2007, the Board of Directors approved the 2007 Long-Term Incentive Plan (the Plan), which replaced the 1990 Long-Term Incentive Plan. During 2012, an amendment was approved to increase the number of shares authorized for issuance under the Plan from 500 million shares to 925 million shares. No more than 230 million of the total number of authorized shares may be available for awards granted in any form provided under the Plan other than options or stock appreciation rights. Total shares available for future issuance under the Plan amounted to 376.4 million shares at December 31, 2013.
(b) Not applicable.
(c) Total shares available for future issuance under the Consultants' Plan amount to 28.2 million shares.
Outstanding options expire on various dates through December 13, 2023.
The following table summarizes information about stock options outstanding at December 31, 2013.
Stock Options Outstanding | ||||||||||||||
Outstanding | Exercisable | |||||||||||||
Average | Average | |||||||||||||
Shares | Average | exercise | Shares | exercise | ||||||||||
Exercise price range | (In thousands) | life(a) | price | (In thousands) | price | |||||||||
Under $10.00 | 34,973 | 4.9 | $ | 9.57 | 26,995 | $ | 9.57 | |||||||
10.01-15.00 | 56,571 | 5.1 | 11.98 | 45,821 | 11.98 | |||||||||
15.01-20.00 | 172,157 | 6.8 | 17.46 | 91,007 | 17.24 | |||||||||
20.01-25.00 | 139,740 | 9.1 | 22.55 | 20,533 | 21.57 | |||||||||
25.01-30.00 | 20,638 | 4.3 | 28.19 | 20,115 | 28.23 | |||||||||
30.01-35.00 | 35,993 | 1.6 | 33.54 | 35,993 | 33.54 | |||||||||
Over $35.00 | 13,539 | 3.3 | 38.67 | 13,539 | 38.67 | |||||||||
Total | 473,611 | 6.5 | $ | 20.02 | 254,003 | $ | 20.15 | |||||||
At year-end 2012, options with a weighted average exercise price of $20.85 were exercisable on 214 million shares.
(a) Average contractual life remaining in years.
Stock Option Activity | |||||||||||
Weighted | |||||||||||
Weighted | average | Aggregate | |||||||||
average | remaining | intrinsic | |||||||||
Shares | exercise | contractual | value | ||||||||
(In thousands) | price | term (In years) | (In millions) | ||||||||
Outstanding at January 1, 2013 | 467,837 | $ | 19.27 | ||||||||
Granted | 62,762 | 23.80 | |||||||||
Exercised | (36,191) | 13.65 | |||||||||
Forfeited | (9,688) | 18.95 | |||||||||
Expired | (11,109) | 31.60 | |||||||||
Outstanding at December 31, 2013 | 473,611 | $ | 20.02 | 6.5 | $ | 4,140 | |||||
Exercisable at December 31, 2013 | 254,003 | $ | 20.15 | 5.1 | $ | 2,348 | |||||
Options expected to vest | 200,909 | $ | 19.79 | 8.0 | $ | 1,656 | |||||
We measure the fair value of each stock option grant at the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value of options granted during 2013, 2012 and 2011 was $4.52, $3.80 and $4.00, respectively. The following assumptions were used in arriving at the fair value of options granted during 2013, 2012 and 2011, respectively: risk-free interest rates of 2.5%, 1.3% and 2.6%; dividend yields of 4.0%, 4.0% and 3.9%; expected volatility of 28%, 29% and 30%; and expected lives of 7.5 years, 7.8 years and 7.7 years. Risk-free interest rates reflect the yield on zero-coupon U.S. Treasury securities. Expected dividend yields presume a set dividend rate and we used a historical five-year average for the dividend yield. Expected volatilities are based on implied volatilities from traded options and historical volatility of our stock. The expected option lives are based on our historical experience of employee exercise behavior.
The total intrinsic value of options exercised during 2013, 2012 and 2011 amounted to $392 million, $265 million and $65 million, respectively. As of December 31, 2013, there was $663 million of total unrecognized compensation cost related to nonvested options. That cost is expected to be recognized over a weighted average period of 2 years, of which approximately $180 million after tax is expected to be recognized in 2014.
Stock option expense recognized in net earnings during 2013, 2012 and 2011 amounted to $231 million, $220 million and $230 million, respectively. Cash received from option exercises during 2013, 2012 and 2011 was $490 million, $355 million and $89 million, respectively. The tax benefit realized from stock options exercised during 2013, 2012 and 2011 was $128 million, $88 million and $21 million, respectively.
Other Stock-based Compensation | |||||||||||
Weighted | |||||||||||
Weighted | average | Aggregate | |||||||||
average | remaining | intrinsic | |||||||||
Shares | grant date | contractual | value | ||||||||
(In thousands) | fair value | term (In years) | (In millions) | ||||||||
RSUs outstanding at January 1, 2013 | 14,878 | $ | 22.45 | ||||||||
Granted | 3,951 | 24.54 | |||||||||
Vested | (4,583) | 24.35 | |||||||||
Forfeited | (674) | 21.25 | |||||||||
RSUs outstanding at December 31, 2013 | 13,572 | $ | 22.58 | 2.8 | $ | 380 | |||||
RSUs expected to vest | 12,352 | $ | 22.32 | 2.7 | $ | 346 | |||||
The fair value of each restricted stock unit is the market price of our stock on the date of grant. The weighted average grant date fair value of RSUs granted during 2013, 2012 and 2011 was $24.54, $20.79 and $16.74, respectively. The total intrinsic value of RSUs vested during 2013, 2012 and 2011 amounted to $109 million, $116 million and $154 million, respectively. As of December 31, 2013, there was $190 million of total unrecognized compensation cost related to nonvested RSUs. That cost is expected to be recognized over a weighted average period of 2 years, of which approximately $42 million after tax is expected to be recognized in 2014. As of December 31, 2013, 1.0 million PSUs with a weighted average remaining contractual term of 2 years, an aggregate intrinsic value of $27 million and $8 million of unrecognized compensation cost were outstanding. Other share-based compensation expense for RSUs and PSUs recognized in net earnings amounted to $62 million, $79 million and $84 million in 2013, 2012 and 2011, respectively.
The income tax benefit recognized in earnings based on the compensation expense recognized for all share-based compensation arrangements amounted to $145 million, $153 million and $163 million in 2013, 2012 and 2011, respectively. The excess of actual tax deductions over amounts assumed, which are recognized in shareowners' equity, were $86 million $53 million and $12 million in 2013, 2012 and 2011, respectively.
When stock options are exercised and restricted stock vests, the difference between the assumed tax benefit and the actual tax benefit must be recognized in our financial statements. In circumstances in which the actual tax benefit is lower than the estimated tax benefit, that difference is recorded in equity, to the extent there are sufficient accumulated excess tax benefits. At December 31, 2013, our accumulated excess tax benefits are sufficient to absorb any future differences between actual and estimated tax benefits for all of our outstanding option and restricted stock grants.
NOTE 17. OTHER INCOME
(In millions) | 2013 | 2012 | 2011 | |||||
GE | ||||||||
Purchases and sales of business interests(a) | $ | 1,777 | $ | 574 | $ | 3,804 | ||
Licensing and royalty income | 320 | 290 | 304 | |||||
Marketable securities and bank deposits | 54 | 38 | 52 | |||||
Associated companies(b) | 40 | 1,545 | 894 | |||||
Interest income from GECC | 21 | 114 | 206 | |||||
Other items(c) | 674 | 96 | 8 | |||||
2,886 | 2,657 | 5,268 | ||||||
Eliminations | 222 | (94) | (205) | |||||
Total | $ | 3,108 | $ | 2,563 | $ | 5,063 | ||
(a) Included a pre-tax gain of $1,096 million on the sale of our 49% common equity interest in NBCU LLC and $3,705 million related to formation of NBCU LLC, in 2013 and 2011, respectively. See Note 2.
(b) Included income of $1,416 million and $789 million from our former equity method investment in NBCU LLC, in 2012 and 2011, respectively.
(c) Included net gains on asset sales of $330 million in 2013.
NOTE 18. GECC REVENUES FROM SERVICES
(In millions) | 2013 | 2012 | 2011 | |||||
Interest on loans | $ | 17,951 | $ | 18,843 | $ | 19,818 | ||
Equipment leased to others | 9,804 | 10,456 | 10,879 | |||||
Fees | 4,720 | 4,709 | 4,669 | |||||
Investment income(a) | 1,809 | 2,630 | 2,500 | |||||
Financing leases | 1,667 | 1,888 | 2,378 | |||||
Associated companies(b) | 1,809 | 1,538 | 2,337 | |||||
Premiums earned by insurance activities | 1,573 | 1,715 | 1,905 | |||||
Real estate investments(c) | 2,528 | 1,709 | 1,625 | |||||
Other items(a)(d) | 2,080 | 1,757 | 2,065 | |||||
43,941 | 45,245 | 48,176 | ||||||
Eliminations | (1,546) | (1,273) | (1,219) | |||||
Total | $ | 42,395 | $ | 43,972 | $ | 46,957 | ||
(a) Included net other-than-temporary impairments on investment securities of $747 million, $140 million and $387 million in 2013, 2012 and 2011, respectively, of which $96 million related to the impairment of an investment in a Brazilian company that was fully offset by the benefit of a guarantee provided by GE as a component of other items for 2013. See Note 3.
(b) During 2013, we sold our remaining equity interest in the Bank of Ayudhya (Bay Bank) and recorded a pre-tax gain of $641 million. During 2012, we sold our remaining equity interest in Garanti Bank, which was classified as an available-for-sale security. During 2011, we sold an 18.6% equity interest in Garanti Bank and recorded a pre-tax gain of $690 million.
(c) During 2013, we sold real estate comprising certain floors located at 30 Rockefeller Center, New York for a pre-tax gain of $902 million.
(d) During 2013, we sold a portion of Cembra through an initial public offering and recorded a pre-tax gain of $351 million.
NOTE 19. SUPPLEMENTAL COST INFORMATION
We funded research and development expenditures of $4,750 million in 2013, $4,520 million in 2012 and $4,601 million in 2011. Research and development costs are classified in cost of goods sold in the Statement of Earnings. In addition, research and development funding from customers, principally the U.S. government, totaled $711 million, $680 million and $788 million in 2013, 2012 and 2011, respectively.
Consolidated other costs and expenses totaled $35,143 million, $35,897 million and $36,841 million in 2013, 2012 and 2011, respectively, and comprised selling, general and administrative costs (SG&A), depreciation and amortization and other operating costs. GE's SG&A totaled $16,105 million, $17,671 million and $17,554 million in 2013, 2012 and 2011, respectively. GECC's operating and administrative expenses totaled $12,463 million, $12,023 million and $13,009 million in 2013, 2012 and 2011, respectively, and depreciation and amortization totaled $7,313 million, $6,901 million and $6,918 million in 2013, 2012 and 2011, respectively.
Our businesses enter into collaborative arrangements primarily with manufacturers and suppliers of components used to build and maintain certain engines, under which GE and these participants share in risks and rewards of these product programs. Under these arrangements, participation fees earned and recorded as other income totaled $44 million, $36 million and $12 million for the years 2013, 2012 and 2011, respectively. GE's payments to participants are recorded as cost of services sold ($820 million, $594 million and $612 million for the years 2013, 2012 and 2011, respectively) or as cost of goods sold ($2,613 million, $2,507 million and $1,996 million for the years 2013, 2012 and 2011, respectively).
Rental expense under operating leases is shown below.
(In millions) | 2013 | 2012 | 2011 | |||||
GE | $ | 1,220 | $ | 1,134 | $ | 958 | ||
GECC | 428 | 539 | 592 | |||||
1,648 | 1,673 | 1,550 | ||||||
Eliminations | (135) | (142) | (165) | |||||
Total | $ | 1,513 | $ | 1,531 | $ | 1,385 |
At December 31, 2013, minimum rental commitments under noncancellable operating leases aggregated $3,087 million and $1,427 million for GE and GECC, respectively. Amounts payable over the next five years follow.
(In millions) | 2014 | 2015 | 2016 | 2017 | 2018 | |||||||||
GE | $ | 660 | $ | 581 | $ | 523 | $ | 440 | $ | 354 | ||||
GECC | 253 | 213 | 185 | 153 | 113 | |||||||||
913 | 794 | 708 | 593 | 467 | ||||||||||
Eliminations | (59) | (42) | (34) | (24) | (16) | |||||||||
Total | $ | 854 | $ | 752 | $ | 674 | $ | 569 | $ | 451 |
NOTE 20. EARNINGS PER SHARE INFORMATION
2013 | 2012 | 2011 | |||||||||||||||
(In millions; per-share amounts in dollars) | Diluted | Basic | Diluted | Basic | Diluted | Basic | |||||||||||
Amounts attributable to the Company: | |||||||||||||||||
Consolidated | |||||||||||||||||
Earnings from continuing operations for per-share | |||||||||||||||||
calculation(a)(b) | $ | 15,145 | $ | 15,157 | $ | 14,604 | $ | 14,603 | $ | 14,102 | $ | 14,101 | |||||
Preferred stock dividends declared(c) | - | - | - | - | (1,031) | (1,031) | |||||||||||
Earnings from continuing operations attributable to | |||||||||||||||||
common shareowners for per-share calculation(a)(b) | 15,145 | 15,157 | 14,604 | 14,603 | 13,070 | 13,070 | |||||||||||
Earnings (loss) from discontinued operations for | |||||||||||||||||
per-share calculation(a)(b) | (2,128) | (2,116) | (980) | (980) | 30 | 30 | |||||||||||
Net earnings attributable to GE common shareowners | |||||||||||||||||
for per-share calculation(a)(b) | $ | 13,028 | $ | 13,040 | $ | 13,622 | $ | 13,622 | $ | 13,099 | $ | 13,098 | |||||
Average equivalent shares | |||||||||||||||||
Shares of GE common stock outstanding | 10,222 | 10,222 | 10,523 | 10,523 | 10,591 | 10,591 | |||||||||||
Employee compensation-related shares (including | |||||||||||||||||
stock options) and warrants | 67 | - | 41 | - | 29 | - | |||||||||||
Total average equivalent shares | 10,289 | 10,222 | 10,564 | 10,523 | 10,620 | 10,591 | |||||||||||
Per-share amounts | |||||||||||||||||
Earnings from continuing operations | $ | 1.47 | $ | 1.48 | $ | 1.38 | $ | 1.39 | $ | 1.23 | $ | 1.23 | |||||
Earnings (loss) from discontinued operations | (0.21) | (0.21) | (0.09) | (0.09) | - | - | |||||||||||
Net earnings | 1.27 | 1.28 | 1.29 | 1.29 | 1.23 | 1.24 | |||||||||||
Our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and, therefore, are included in the computation of earnings per share pursuant to the two-class method. Application of this treatment has an insignificant effect.
(a) Included an insignificant amount of dividend equivalents in each of the three years presented.
(b) Included in 2013 is a dilutive adjustment for the change in income for forward purchase contracts that may be settled in stock.
(c) Included $806 million related to the redemption of our 10% cumulative preferred stock in 2011. See Note 15.
For the years ended December 31, 2013, 2012 and 2011, there were approximately 121 million, 292 million and 321 million, respectively, of outstanding stock awards that were not included in the computation of diluted earnings per share because their effect was antidilutive.
Earnings-per-share amounts are computed independently for earnings from continuing operations, earnings (loss) from discontinued operations and net earnings. As a result, the sum of per-share amounts from continuing operations and discontinued operations may not equal the total per-share amounts for net earnings.
NOTE 21. FAIR VALUE MEASUREMENTS
For a description of how we estimate fair value, see Note 1.
The following tables present our assets and liabilities measured at fair value on a recurring basis. Included in the tables are investment securities primarily supporting obligations to annuitants and policyholders in our run-off insurance operations and supporting obligations to holders of GICs in Trinity and investment securities held in our CLL business collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries.
Netting | ||||||||||||||
(In millions) | Level 1 | (a) | Level 2 | (a) | Level 3 | adjustment | (b) | Net balance | ||||||
December 31, 2013 | ||||||||||||||
Assets | ||||||||||||||
Investment securities | ||||||||||||||
Debt | ||||||||||||||
U.S. corporate | $ | - | $ | 18,788 | $ | 2,953 | $ | - | $ | 21,741 | ||||
State and municipal | - | 4,193 | 96 | - | 4,289 | |||||||||
Residential mortgage-backed | - | 1,824 | 86 | - | 1,910 | |||||||||
Commercial mortgage-backed | - | 3,025 | 10 | - | 3,035 | |||||||||
Asset-backed(c) | - | 489 | 6,898 | - | 7,387 | |||||||||
Corporate - non-U.S. | 61 | 645 | 1,064 | - | 1,770 | |||||||||
Government - non-U.S. | 1,590 | 789 | 31 | - | 2,410 | |||||||||
U.S. government and federal | ||||||||||||||
agency | - | 545 | 225 | - | 770 | |||||||||
Retained interests | - | - | 72 | - | 72 | |||||||||
Equity | ||||||||||||||
Available-for-sale | 475 | 31 | 11 | - | 517 | |||||||||
Trading | 78 | 2 | - | - | 80 | |||||||||
Derivatives(d) | - | 8,304 | 175 | (6,739) | 1,740 | |||||||||
Other(e) | - | - | 494 | - | 494 | |||||||||
Total | $ | 2,204 | $ | 38,635 | $ | 12,115 | $ | (6,739) | $ | 46,215 | ||||
Liabilities | ||||||||||||||
Derivatives | $ | - | $ | 5,409 | $ | 20 | $ | (4,355) | $ | 1,074 | ||||
Other(f) | - | 1,170 | - | - | 1,170 | |||||||||
Total | $ | - | $ | 6,579 | $ | 20 | $ | (4,355) | $ | 2,244 | ||||
December 31, 2012 | ||||||||||||||
Assets | ||||||||||||||
Investment securities | ||||||||||||||
Debt | ||||||||||||||
U.S. corporate | $ | - | $ | 20,580 | $ | 3,591 | $ | - | $ | 24,171 | ||||
State and municipal | - | 4,469 | 77 | - | 4,546 | |||||||||
Residential mortgage-backed | - | 2,162 | 100 | - | 2,262 | |||||||||
Commercial mortgage-backed | - | 3,088 | 6 | - | 3,094 | |||||||||
Asset-backed(c) | - | 715 | 5,023 | - | 5,738 | |||||||||
Corporate - non-U.S. | 71 | 1,132 | 1,218 | - | 2,421 | |||||||||
Government - non-U.S. | 702 | 1,019 | 42 | - | 1,763 | |||||||||
U.S. government and federal | ||||||||||||||
agency | - | 3,288 | 277 | - | 3,565 | |||||||||
Retained interests | - | - | 83 | - | 83 | |||||||||
Equity | ||||||||||||||
Available-for-sale | 590 | 16 | 13 | - | 619 | |||||||||
Trading | 248 | - | - | - | 248 | |||||||||
Derivatives(d) | - | 11,432 | 434 | (7,926) | 3,940 | |||||||||
Other(e) | 35 | - | 799 | - | 834 | |||||||||
Total | $ | 1,646 | $ | 47,901 | $ | 11,663 | $ | (7,926) | $ | 53,284 | ||||
Liabilities | ||||||||||||||
Derivatives | $ | - | $ | 3,434 | $ | 20 | $ | (3,177) | $ | 277 | ||||
Other(f) | - | 908 | - | - | 908 | |||||||||
Total | $ | - | $ | 4,342 | $ | 20 | $ | (3,177) | $ | 1,185 | ||||
(a) The fair value of securities transferred between Level 1 and Level 2 was $2 million during 2013.
(b) The netting of derivative receivables and payables (including the effects of any collateral posted or received) is permitted when a legally enforceable master netting agreement exists.
(c) Includes investments in our CLL business in asset-backed securities collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries.
(d) The fair value of derivatives included an adjustment for non-performance risk. The cumulative adjustment was a gain (loss) of $(7) million and $(15) million at December 31, 2013 and 2012, respectively. See Note 22 for additional information on the composition of our derivative portfolio.
(e) Included private equity investments and loans designated under the fair value option.
(f) Primarily represented the liability associated with certain of our deferred incentive compensation plans.
The following tables present the changes in Level 3 instruments measured on a recurring basis for the years ended December 31, 2013 and 2012, respectively. The majority of our Level 3 balances consist of investment securities classified as available-for-sale with changes in fair value recorded in shareowners' equity.
Changes in Level 3 Instruments for the Year Ended December 31, 2013 | |||||||||||||||||||||||||||||||
Net | |||||||||||||||||||||||||||||||
(In millions) | change in | ||||||||||||||||||||||||||||||
Net realized/ | unrealized | ||||||||||||||||||||||||||||||
Net | unrealized | gains | |||||||||||||||||||||||||||||
realized/ | gains (losses) | (losses) | |||||||||||||||||||||||||||||
unrealized | included in | relating to | |||||||||||||||||||||||||||||
Balance | gains | accumulated | Balance | instruments | |||||||||||||||||||||||||||
at | (losses) | other | Transfers | Transfers | at | still held at | |||||||||||||||||||||||||
January 1, | included | comprehensive | into | out of | December 31, | December 31, | |||||||||||||||||||||||||
2013 | in earnings | (a) | income | Purchases | Sales | Settlements | Level 3 | (b) | Level 3 | (b) | 2013 | 2013 | (c) | ||||||||||||||||||
Investment securities | |||||||||||||||||||||||||||||||
Debt | |||||||||||||||||||||||||||||||
U.S. corporate | $ | 3,591 | $ | (497) | $ | 135 | $ | 380 | $ | (424) | $ | (231) | $ | 108 | $ | (109) | $ | 2,953 | $ | - | |||||||||||
State and municipal | 77 | - | (7) | 21 | - | (5) | 10 | - | 96 | - | |||||||||||||||||||||
Residential | |||||||||||||||||||||||||||||||
mortgage-backed | 100 | - | (5) | - | (2) | (7) | - | - | 86 | - | |||||||||||||||||||||
Commercial | |||||||||||||||||||||||||||||||
mortgage-backed | 6 | - | - | - | - | (6) | 10 | - | 10 | - | |||||||||||||||||||||
Asset-backed | 5,023 | 5 | 32 | 2,632 | (4) | (795) | 12 | (7) | 6,898 | - | |||||||||||||||||||||
Corporate - non-U.S. | 1,218 | (103) | 49 | 5,814 | (3) | (5,874) | 21 | (58) | 1,064 | - | |||||||||||||||||||||
Government | |||||||||||||||||||||||||||||||
- non-U.S. | 42 | 1 | (12) | - | - | - | - | - | 31 | - | |||||||||||||||||||||
U.S. government and | |||||||||||||||||||||||||||||||
federal agency | 277 | - | (52) | - | - | - | - | - | 225 | - | |||||||||||||||||||||
Retained interests | 83 | 3 | 1 | 6 | - | (21) | - | - | 72 | - | |||||||||||||||||||||
Equity | |||||||||||||||||||||||||||||||
Available-for-sale | 13 | - | - | - | - | - | - | (2) | 11 | - | |||||||||||||||||||||
Trading | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||
Derivatives(d)(e) | 416 | (66) | 2 | (2) | - | (226) | 37 | 3 | 164 | (30) | |||||||||||||||||||||
Other | 799 | (68) | 12 | 538 | (779) | - | 4 | (12) | 494 | (102) | |||||||||||||||||||||
Total | $ | 11,645 | $ | (725) | $ | 155 | $ | 9,389 | $ | (1,212) | $ | (7,165) | $ | 202 | $ | (185) | $ | 12,104 | $ | (132) | |||||||||||
(a) Earnings effects are primarily included in the "GECC revenues from services" and "Interest and other financial charges" captions in the Statement of Earnings.
(b) Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
(c) Represented the amount of unrealized gains or losses for the period included in earnings.
(d) Represented derivative assets net of derivative liabilities and included cash accruals of $9 million not reflected in the fair value hierarchy table.
(e) Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 22.
Changes in Level 3 Instruments for the Year Ended December 31, 2012 | |||||||||||||||||||||||||||||||
Net | |||||||||||||||||||||||||||||||
(In millions) | change in | ||||||||||||||||||||||||||||||
Net realized/ | unrealized | ||||||||||||||||||||||||||||||
Net | unrealized | gains | |||||||||||||||||||||||||||||
realized/ | gains (losses) | (losses) | |||||||||||||||||||||||||||||
unrealized | included in | relating to | |||||||||||||||||||||||||||||
Balance | gains | accumulated | Balance | instruments | |||||||||||||||||||||||||||
at | (losses) | other | Transfers | Transfers | at | still held at | |||||||||||||||||||||||||
January 1, | included | comprehensive | into | out of | December 31, | December 31, | |||||||||||||||||||||||||
2012 | in earnings | (a) | income | Purchases | Sales | Settlements | Level 3 | (b) | Level 3 | (b) | 2012 | 2012 | (c) | ||||||||||||||||||
Investment securities | |||||||||||||||||||||||||||||||
Debt | |||||||||||||||||||||||||||||||
U.S. corporate | $ | 3,235 | $ | 66 | $ | 32 | $ | 483 | $ | (214) | $ | (110) | $ | 299 | $ | (200) | $ | 3,591 | $ | - | |||||||||||
State and municipal | 77 | - | 10 | 16 | - | (1) | 78 | (103) | 77 | - | |||||||||||||||||||||
Residential | |||||||||||||||||||||||||||||||
mortgage-backed | 41 | (3) | 1 | 6 | - | (3) | 135 | (77) | 100 | - | |||||||||||||||||||||
Commercial | |||||||||||||||||||||||||||||||
mortgage-backed | 4 | - | (1) | - | - | - | 6 | (3) | 6 | - | |||||||||||||||||||||
Asset-backed | 4,040 | 1 | (25) | 1,490 | (502) | - | 25 | (6) | 5,023 | - | |||||||||||||||||||||
Corporate - non-U.S. | 1,204 | (11) | 19 | 341 | (51) | (172) | 24 | (136) | 1,218 | - | |||||||||||||||||||||
Government | |||||||||||||||||||||||||||||||
- non-U.S. | 84 | (33) | 38 | 65 | (72) | (40) | - | - | 42 | - | |||||||||||||||||||||
U.S. government and | |||||||||||||||||||||||||||||||
federal agency | 253 | - | 24 | - | - | - | - | - | 277 | - | |||||||||||||||||||||
Retained interests | 35 | (1) | (3) | 16 | (6) | (12) | 54 | - | 83 | - | |||||||||||||||||||||
Equity | |||||||||||||||||||||||||||||||
Available-for-sale | 17 | - | (1) | 3 | (3) | (1) | 2 | (4) | 13 | - | |||||||||||||||||||||
Trading | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||
Derivatives(d)(e) | 369 | 29 | (1) | (1) | - | (112) | 190 | (58) | 416 | 160 | |||||||||||||||||||||
Other | 817 | 50 | 2 | 159 | (137) | - | - | (92) | 799 | 43 | |||||||||||||||||||||
Total | $ | 10,176 | $ | 98 | $ | 95 | $ | 2,578 | $ | (985) | $ | (451) | $ | 813 | $ | (679) | $ | 11,645 | $ | 203 | |||||||||||
(a) Earnings effects are primarily included in the "GECC revenues from services" and "Interest and other financial charges" captions in the Statement of Earnings.
(b) Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.
(c) Represented the amount of unrealized gains or losses for the period included in earnings.
(d) Represented derivative assets net of derivative liabilities and included cash accruals of $2 million not reflected in the fair value hierarchy table.
(e) Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 22.
Non-Recurring Fair Value Measurements
The following table represents non-recurring fair value amounts (as measured at the time of the adjustment) for those assets remeasured to fair value on a non-recurring basis during the fiscal year and still held at December 31, 2013 and 2012. These assets can include loans and long-lived assets that have been reduced to fair value when they are held for sale, impaired loans that have been reduced based on the fair value of the underlying collateral, cost and equity method investments and long-lived assets that are written down to fair value when they are impaired and the remeasurement of retained investments in formerly consolidated subsidiaries upon a change in control that results in deconsolidation of a subsidiary, if we sell a controlling interest and retain a noncontrolling stake in the entity. Assets that are written down to fair value when impaired and retained investments are not subsequently adjusted to fair value unless further impairment occurs.
Remeasured during the year ended December 31 | |||||||||||
2013 | 2012 | ||||||||||
(In millions) | Level 2 | Level 3 | Level 2 | Level 3 | |||||||
Financing receivables and loans held for sale | $ | 210 | $ | 2,986 | $ | 366 | $ | 4,094 | |||
Cost and equity method investments(a) | - | 690 | 8 | 313 | |||||||
Long-lived assets, including real estate | 2,050 | 1,088 | 702 | 2,182 | |||||||
Total | $ | 2,260 | $ | 4,764 | $ | 1,076 | $ | 6,589 | |||
(a) Includes the fair value of private equity and real estate funds included in Level 3 of $126 million and $84 million at December 31, 2013 and 2012, respectively.
The following table represents the fair value adjustments to assets measured at fair value on a non-recurring basis and still held at December 31, 2013 and 2012.
Year ended December 31 | |||||
(In millions) | 2013 | 2012 | |||
Financing receivables and loans held for sale | $ | (361) | $ | (595) | |
Cost and equity method investments(a) | (484) | (153) | |||
Long-lived assets, including real estate(b) | (1,188) | (624) | |||
Total | $ | (2,033) | $ | (1,372) | |
(a) Includes fair value adjustments associated with private equity and real estate funds of $(14) million and $(33) million during 2013 and 2012, respectively.
(b) Includes impairments related to real estate equity properties and investments recorded in other costs and expenses of $108 million and $218 million during 2013 and 2012, respectively.
Level 3 Measurements
The following table presents information relating to the significant unobservable inputs of our Level 3 recurring and non-recurring measurements.
Valuation | Unobservable | Range (weighted | ||||||
(Dollars in millions) | Fair value | technique | inputs | average) | ||||
December 31, 2013 | ||||||||
Recurring fair value measurements | ||||||||
Investment securities | ||||||||
Debt | ||||||||
U.S. corporate | $ | 898 | Income approach | Discount rate(a) | 1.5%-13.3% (6.5%) | |||
Asset-backed | 6,854 | Income approach | Discount rate(a) | 1.2%-10.5% (3.7%) | ||||
Corporate - non-U.S. | 819 | Income approach | Discount rate(a) | 1.4%-46.0% (15.1%) | ||||
Other financial assets | 381 | Income approach, Market comparables | Weighted average cost of capital | 9.3%-9.3% (9.3%) | ||||
EBITDA multiple | 5.4X-12.5X (9.5X) | |||||||
Discount rate(a) | 5.2%-8.8% (5.3%) | |||||||
Capitalization rate(b) | 6.3%-7.5% (7.2%) | |||||||
Non-recurring fair value measurements | ||||||||
Financing receivables and loans held for sale | $ | 1,937 | Income approach, Business enterprise value | Capitalization rate(b) | 5.5%-16.7% (8.0%) | |||
EBITDA multiple | 4.3X-5.5X (4.8X) | |||||||
Discount rate(a) | 6.6%-6.6% (6.6%) | |||||||
Cost and equity method investments | 102 | Income approach, Market comparables | Discount rate(a) | 5.7%-5.9% (5.8%) | ||||
Capitalization rate(b) | 8.5%-10.6% (10.0%) | |||||||
Weighted average cost of capital | 9.3%-9.6% (9.4%) | |||||||
EBITDA multiple | 7.1X-14.5X (11.3X) | |||||||
Revenue multiple | 2.2X-12.6X (9.4X) | |||||||
Long-lived assets, including real estate | 694 | Income approach | Capitalization rate(b) | 5.4%-14.5% (7.8%) | ||||
Discount rate(a) | 4.0%-23.0% (9.0%) | |||||||
December 31, 2012 | ||||||||
Recurring fair value measurements | ||||||||
Investment securities | ||||||||
Debt | ||||||||
U.S. corporate | $ | 1,652 | Income approach | Discount rate(a) | 1.3%-29.9% (11.1%) | |||
Asset-backed | 4,977 | Income approach | Discount rate(a) | 2.1%-13.1% (3.8%) | ||||
Corporate - non-U.S. | 865 | Income approach | Discount rate(a) | 1.5%-25.0% (13.2%) | ||||
Other financial assets | 633 | Income approach, Market comparables | Weighted average cost of capital | 8.7%-10.2% (8.7%) | ||||
EBITDA multiple | 4.9X-10.6X (7.9X) | |||||||
Non-recurring fair value measurements | ||||||||
Financing receivables and loans held for sale | $ | 2,835 | Income approach, Business enterprise value | Capitalization rate(b) | 3.8%-14.0% (8.0%) | |||
EBITDA multiple | 2.0X-6.0X (4.8X) | |||||||
Cost and equity method investments | 72 | Income approach | Capitalization rate(b) | 9.2%-12.8% (12.0%) | ||||
Long-lived assets, including real estate | 985 | Income approach | Capitalization rate(b) | 4.8%-14.6% (7.3%) | ||||
(a) Discount rates are determined based on inputs that market participants would use when pricing investments, including credit and liquidity risk. An increase in the discount rate would result in a decrease in the fair value.
(b) Represents the rate of return on net operating income that is considered acceptable for an investor and is used to determine a property's capitalized value. An increase in the capitalization rate would result in a decrease in the fair value.
At December 31, 2013 and December 31, 2012, other Level 3 recurring fair value measurements of $2,816 million and $3,146 million, respectively, and non-recurring measurements of $1,460 million and $2,412 million, respectively, are valued using non-binding broker quotes or other third-party sources. For a description of our process to evaluate third-party pricing servicers, see Note 1. At December 31, 2013 and December 31, 2012, other recurring fair value measurements of $327 million and $370 million, respectively, and non-recurring fair value measurements of $571 million and $285 million, respectively, were individually insignificant and utilize a number of different unobservable inputs not subject to meaningful aggregation.
NOTE 22. FINANCIAL INSTRUMENTS
The following table provides information about the assets and liabilities not carried at fair value in our Statement of Financial Position. The table excludes finance leases and non-financial assets and liabilities. Substantially all of the assets discussed below are considered to be Level 3. The vast majority of our liabilities' fair value can be determined based on significant observable inputs and thus considered Level 2. Few of the instruments are actively traded and their fair values must often be determined using financial models. Realization of the fair value of these instruments depends upon market forces beyond our control, including marketplace liquidity.
2013 | 2012 | ||||||||||||||||
Assets (liabilities) | Assets (liabilities) | ||||||||||||||||
Carrying | Carrying | ||||||||||||||||
Notional | amount | Estimated | Notional | amount | Estimated | ||||||||||||
December 31 (In millions) | amount | (net) | fair value | amount | (net) | fair value | |||||||||||
GE | |||||||||||||||||
Assets | |||||||||||||||||
Investments and notes | |||||||||||||||||
receivable | $ | (a) | $ | 488 | $ | 512 | $ | (a) | $ | 222 | $ | 222 | |||||
Liabilities | |||||||||||||||||
Borrowings(b) | (a) | (13,356) | (13,707) | (a) | (17,469) | (18,619) | |||||||||||
GECC | |||||||||||||||||
Assets | |||||||||||||||||
Loans | (a) | 226,293 | 230,792 | (a) | 235,888 | 238,254 | |||||||||||
Other commercial mortgages | (a) | 2,270 | 2,281 | (a) | 2,222 | 2,249 | |||||||||||
Loans held for sale | (a) | 512 | 512 | (a) | 1,180 | 1,181 | |||||||||||
Other financial instruments(c) | (a) | 1,622 | 2,203 | (a) | 1,858 | 2,276 | |||||||||||
Liabilities | |||||||||||||||||
Borrowings and bank | |||||||||||||||||
deposits(b)(d) | (a) | (371,062) | (386,823) | (a) | (397,039) | (414,264) | |||||||||||
Investment contract benefits | (a) | (3,144) | (3,644) | (a) | (3,321) | (4,150) | |||||||||||
Guaranteed investment | |||||||||||||||||
contracts | (a) | (1,471) | (1,459) | (a) | (1,644) | (1,674) | |||||||||||
Insurance - credit life(e) | 2,149 | (108) | (94) | 2,277 | (120) | (104) | |||||||||||
(a) These financial instruments do not have notional amounts.
(b) See Note 10.
(c) Principally cost method investments.
(d) Fair values exclude interest rate and currency derivatives designated as hedges of borrowings. Had they been included, the fair value of borrowings at December 31, 2013 and 2012 would have been reduced by $2,284 million and $7,937 million, respectively.
(e) Net of reinsurance of $1,250 million and $2,000 million at December 31, 2013 and 2012, respectively.
A description of how we estimate fair values follows.
Loans
Based on a discounted future cash flows methodology, using current market interest rate data adjusted for inherent credit risk or quoted market prices and recent transactions, if available.
Borrowings and bank deposits
Based on valuation methodologies using current market interest rate data that are comparable to market quotes adjusted for our non-performance risk.
Investment contract benefits
Based on expected future cash flows, discounted at currently offered rates for immediate annuity contracts or the income approach for single premium deferred annuities.
Guaranteed investment contracts
Based on valuation methodologies using current market interest rate data, adjusted for our non-performance risk.
All other instruments
Based on observable market transactions and/or valuation methodologies using current market interest rate data adjusted for inherent credit risk.
Assets and liabilities that are reflected in the accompanying financial statements at fair value are not included in the above disclosures; such items include cash and equivalents, investment securities and derivative financial instruments.
Additional information about certain categories in the table above follows.
Insurance - credit life
Certain insurance affiliates, primarily in Consumer, issue credit life insurance designed to pay the balance due on a loan if the borrower dies before the loan is repaid. As part of our overall risk management process, we cede to third parties a portion of this associated risk, but are not relieved of our primary obligation to policyholders.
Loan Commitments | |||||
Notional amount | |||||
December 31 (In millions) | 2013 | 2012 | |||
Ordinary course of business lending commitments(a) | $ | 4,756 | $ | 3,708 | |
Unused revolving credit lines(b) | |||||
Commercial(c) | 16,570 | 17,929 | |||
Consumer - principally credit cards | 290,662 | 271,211 | |||
(a) Excluded investment commitments of $1,395 million and $1,276 million as of December 31, 2013 and 2012, respectively.
(b) Excluded inventory financing arrangements, which may be withdrawn at our option, of $13,502 million and $12,813 million as of December 31, 2013 and 2012, respectively.
(c) Included commitments of $11,629 million and $12,923 million as of December 31, 2013 and 2012, respectively, associated with secured financing arrangements that could have increased to a maximum of $14,590 million and $15,731 million at December 31, 2013 and 2012, respectively, based on asset volume under the arrangement.
Securities Repurchase and Reverse Repurchase Arrangements
Our issuances of securities repurchase agreements are insignificant and are limited to activities at certain of our foreign banks primarily for purposes of liquidity management. At December 31, 2013, we were party to repurchase agreements totaling $126 million, which were reported in short-term borrowings on the financial statements. We have had no repurchase agreements that were accounted for as off-book financing and we do not engage in securities lending transactions.
We also enter into reverse securities repurchase agreements primarily for short-term investment with maturities of 90 days or less. At December 31, 2013, we were party to reverse repurchase agreements totaling $20.8 billion, which were reported in cash and equivalents on the financial statements. Under these reverse securities repurchase agreements, we typically lend available cash at a specified rate of interest and hold U.S. or highly-rated European government securities as collateral during the term of the agreement. Collateral value is in excess of amounts loaned under the agreements.
Derivatives and hedging
As a matter of policy, we use derivatives for risk management purposes, and we do not use derivatives for speculative purposes. A key risk management objective for our financial services businesses is to mitigate interest rate and currency risk by seeking to ensure that the characteristics of the debt match the assets they are funding. If the form (fixed versus floating) and currency denomination of the debt we issue do not match the related assets, we typically execute derivatives to adjust the nature and tenor of funding to meet this objective within pre-defined limits. The determination of whether we enter into a derivative transaction or issue debt directly to achieve this objective depends on a number of factors, including market-related factors that affect the type of debt we can issue.
The notional amounts of derivative contracts represent the basis upon which interest and other payments are calculated and are reported gross, except for offsetting foreign currency forward contracts that are executed in order to manage our currency risk of net investment in foreign subsidiaries. Of the outstanding notional amount of $320,000 million, approximately 87%, or $277,000 million, is associated with reducing or eliminating the interest rate, currency or market risk between financial assets and liabilities in our financial services businesses. The remaining derivative activities primarily relate to hedging against adverse changes in currency exchange rates and commodity prices related to anticipated sales and purchases and contracts containing certain clauses that meet the accounting definition of a derivative. The instruments used in these activities are designated as hedges when practicable. When we are not able to apply hedge accounting, or when the derivative and the hedged item are both recorded in earnings concurrently, the derivatives are deemed economic hedges and hedge accounting is not applied. This most frequently occurs when we hedge a recognized foreign currency transaction (e.g., a receivable or payable) with a derivative. Since the effects of changes in exchange rates are reflected concurrently in earnings for both the derivative and the transaction, the economic hedge does not require hedge accounting.
The following table provides information about the fair value of our derivatives by contract type, separating those accounted for as hedges and those that are not.
2013 | 2012 | ||||||||||
Fair value | Fair value | ||||||||||
December 31 (In millions) | Assets | Liabilities | Assets | Liabilities | |||||||
Derivatives accounted for as hedges | |||||||||||
Interest rate contracts | $ | 3,837 | $ | 1,989 | $ | 8,443 | $ | 719 | |||
Currency exchange contracts | 1,830 | 984 | 890 | 1,777 | |||||||
Other contracts | 1 | - | 1 | - | |||||||
5,668 | 2,973 | 9,334 | 2,496 | ||||||||
Derivatives not accounted for as hedges | |||||||||||
Interest rate contracts | 270 | 169 | 452 | 195 | |||||||
Currency exchange contracts | 2,257 | 2,245 | 1,797 | 691 | |||||||
Other contracts | 284 | 42 | 283 | 72 | |||||||
2,811 | 2,456 | 2,532 | 958 | ||||||||
Gross derivatives recognized in statement of | |||||||||||
financial position | |||||||||||
Gross derivatives | 8,479 | 5,429 | 11,866 | 3,454 | |||||||
Gross accrued interest | 1,227 | 241 | 1,683 | 14 | |||||||
9,706 | 5,670 | 13,549 | 3,468 | ||||||||
Amounts offset in statement of financial position | |||||||||||
Netting adjustments(a) | (4,120) | (4,113) | (2,801) | (2,786) | |||||||
Cash collateral(b) | (2,619) | (242) | (5,125) | (391) | |||||||
(6,739) | (4,355) | (7,926) | (3,177) | ||||||||
Net derivatives recognized in statement of | |||||||||||
financial position | |||||||||||
Net derivatives | 2,967 | 1,315 | 5,623 | 291 | |||||||
Amounts not offset in statement of | |||||||||||
financial position | |||||||||||
Securities held as collateral(c) | (1,962) | - | (5,227) | - | |||||||
Net amount | $ | 1,005 | $ | 1,315 | $ | 396 | $ | 291 | |||
Derivatives are classified in the captions "All other assets" and "All other liabilities" and the related accrued interest is classified in "Other GECC receivables" and "All other liabilities" in our financial statements.
(a) The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Amounts included fair value adjustments related to our own and counterparty non-performance risk. At December 31, 2013 and 2012, the cumulative adjustment for non-performance risk was a gain (loss) of $(7) million and $(15) million, respectively.
(b) Excludes excess cash collateral received and posted of $160 million and $37 million at December 31, 2013, respectively, and $42 million and $10 million at December 31, 2012, respectively.
(c) Excludes excess securities collateral received of $363 million and $359 million at December 31, 2013 and 2012, respectively.
Fair value hedges
We use interest rate and currency exchange derivatives to hedge the fair value effects of interest rate and currency exchange rate changes on local and non-functional currency denominated fixed-rate debt. For relationships designated as fair value hedges, changes in fair value of the derivatives are recorded in earnings within interest and other financial charges, along with offsetting adjustments to the carrying amount of the hedged debt. The following table provides information about the earnings effects of our fair value hedging relationships for the years ended December 31, 2013 and 2012, respectively.
2013 | 2012 | ||||||||||
(In millions) | Gain (loss) | Gain (loss) | Gain (loss) | Gain (loss) | |||||||
on hedging | on hedged | on hedging | on hedged | ||||||||
derivatives | items | derivatives | items | ||||||||
Interest rate contracts | $ | (5,258) | $ | 5,180 | $ | 708 | $ | (1,041) | |||
Currency exchange contracts | (7) | 6 | (68) | 98 | |||||||
Fair value hedges resulted in $(79) million and $(303) million of ineffectiveness in 2013 and 2012, respectively. In both 2013 and 2012, there were insignificant amounts excluded from the assessment of effectiveness.
Cash flow hedges
We use interest rate, currency exchange and commodity derivatives to reduce the variability of expected future cash flows associated with variable-rate borrowings and commercial purchase and sale transactions, including commodities. For derivatives that are designated in a cash flow hedging relationship, the effective portion of the change in fair value of the derivative is reported as a component of AOCI and reclassified into earnings contemporaneously and in the same caption with the earnings effects of the hedged transaction.
The following table provides information about the amounts recorded in AOCI, as well as the gain (loss) recorded in earnings, primarily in GECC revenue from services, interest and other financial charges, and other costs and expenses, when reclassified out of AOCI, for the years ended December 31, 2013 and 2012, respectively. See Note 15 for additional information about reclassifications out of AOCI.
Gain (loss) recognized | Gain (loss) reclassified from | ||||||||||
in AOCI | AOCI into earnings | ||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||
Interest rate contracts | $ | (26) | $ | (158) | $ | (364) | $ | (499) | |||
Currency exchange contracts | 941 | 1,004 | 817 | 681 | |||||||
Commodity contracts | (6) | 6 | (5) | (5) | |||||||
Total | $ | 909 | $ | 852 | $ | 448 | $ | 177 | |||
The total pre-tax amount in AOCI related to cash flow hedges of forecasted transactions was a $251 million loss at December 31, 2013. We expect to transfer $208 million to earnings as an expense in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. In 2013, we recognized insignificant gains and losses related to hedged forecasted transactions and firm commitments that did not occur by the end of the originally specified period. At December 31, 2013 and 2012, the maximum term of derivative instruments that hedge forecasted transactions was 19 years and 20 years, respectively.
For cash flow hedges, the amount of ineffectiveness in the hedging relationship and amount of the changes in fair value of the derivatives that are not included in the measurement of ineffectiveness are both reflected in earnings each reporting period. These amounts are primarily reported in GECC revenues from services and totaled $0 million and $5 million for the years ended December 31, 2013 and 2012, respectively.
Net investment hedges in foreign operations
We use currency exchange derivatives to protect our net investments in global operations conducted in non-U.S. dollar currencies. For derivatives that are designated as hedges of net investment in a foreign operation, we assess effectiveness based on changes in spot currency exchange rates. Changes in spot rates on the derivative are recorded as a component of AOCI until such time as the foreign entity is substantially liquidated or sold. The change in fair value of the forward points, which reflects the interest rate differential between the two countries on the derivative, is excluded from the effectiveness assessment.
The following table provides information about the amounts recorded in AOCI for the years ended December 31, 2013 and 2012, as well as the gain (loss) recorded in GECC revenues from services when reclassified out of AOCI.
Gain (loss) recognized | Gain (loss) reclassified | ||||||||||
(In millions) | in CTA | from CTA | |||||||||
2013 | 2012 | 2013 | 2012 | ||||||||
Currency exchange contracts | $ | 2,322 | $ | (2,905) | $ | (1,525) | $ | 27 | |||
The amounts related to the change in the fair value of the forward points that are excluded from the measure of effectiveness were $(678) million and $(874) million for the years ended December 31, 2013 and 2012, respectively, and are recorded in interest and other financial charges.
Free-standing derivatives
Changes in the fair value of derivatives that are not designated as hedges are recorded in earnings each period. As discussed above, these derivatives are typically entered into as economic hedges of changes in interest rates, currency exchange rates, commodity prices and other risks. Gains or losses related to the derivative are typically recorded in GECC revenues from services or other income, based on our accounting policy. In general, the earnings effects of the item that represent the economic risk exposure are recorded in the same caption as the derivative. Losses for the year ended December 31, 2013 on derivatives not designated as hedges were $(449) million composed of amounts related to interest rate contracts of $(111) million, currency exchange contracts of $(595) million, and other derivatives of $257 million. These losses were more than offset by the earnings effects from the underlying items that were economically hedged. Losses for the year ended December 31, 2012 on derivatives not designated as hedges were $(90) million composed of amounts related to interest rate contracts of $(296) million, currency exchange contracts of $80 million, and other derivatives of $126 million. These losses were more than offset by the earnings effects from the underlying items that were economically hedged.
Counterparty credit risk
Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. We manage counterparty credit risk (the risk that counterparties will default and not make payments to us according to the terms of our agreements) on an individual counterparty basis. Where we have agreed to netting of derivative exposures with a counterparty, we net our exposures with that counterparty and apply the value of collateral posted to us to determine the exposure. We actively monitor these net exposures against defined limits and take appropriate actions in response, including requiring additional collateral.
As discussed above, we have provisions in certain of our master agreements that require counterparties to post collateral (typically, cash or U.S. Treasury securities) when our receivable due from the counterparty, measured at current market value, exceeds a specified limit. The fair value of such collateral was $4,581 million, of which $2,619 million was cash and $1,962 million was in the form of securities held by a custodian for our benefit. Under certain of these same agreements, we post collateral to our counterparties for our derivative obligations, the fair value of which was $242 million at December 31, 2013. At December 31, 2013, our exposure to counterparties (including accrued interest), net of collateral we hold, was $871 million. This excludes exposure related to embedded derivatives.
Additionally, our master agreements typically contain mutual downgrade provisions that provide the ability of each party to require termination if the long-term credit rating of the counterparty were to fall below A-/A3. In certain of these master agreements, each party also has the ability to require termination if the short-term rating of the counterparty were to fall below A-1/P-1. Our master agreements also typically contain provisions that provide termination rights upon the occurrence of certain other events, such as a bankruptcy or events of default by one of the parties. If an agreement was terminated under any of these circumstances, the termination amount payable would be determined on a net basis and could also take into account any collateral posted. The net amount of our derivative liability, after consideration of collateral posted by us and outstanding interest payments was $1,234 million at December 31, 2013. This excludes embedded derivatives.
NOTE 23. VARIABLE INTEREST ENTITIES
We use variable interest entities primarily to securitize financial assets and arrange other forms of asset-backed financing in the ordinary course of business. Except as noted below, investors in these entities only have recourse to the assets owned by the entity and not to our general credit. We do not have implicit support arrangements with any VIE. We did not provide non-contractual support for previously transferred financing receivables to any VIE in 2013 or 2012.
In evaluating whether we have the power to direct the activities of a VIE that most significantly impact its economic performance, we consider the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and our decision-making role, if any, in those activities that significantly determine the entity's economic performance as compared to other economic interest holders. This evaluation requires consideration of all facts and circumstances relevant to decision-making that affects the entity's future performance and the exercise of professional judgment in deciding which decision-making rights are most important.
In determining whether we have the right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE, we evaluate all of our economic interests in the entity, regardless of form (debt, equity, management and servicing fees, and other contractual arrangements). This evaluation considers all relevant factors of the entity's design, including: the entity's capital structure, contractual rights to earnings (losses), subordination of our interests relative to those of other investors, contingent payments, as well as other contractual arrangements that have the potential to be economically significant. The evaluation of each of these factors in reaching a conclusion about the potential significance of our economic interests is a matter that requires the exercise of professional judgment.
Consolidated Variable Interest Entities
We consolidate VIEs because we have the power to direct the activities that significantly affect the VIEs economic performance, typically because of our role as either servicer or manager for the VIE. Our consolidated VIEs fall into three main groups, which are further described below:
· Trinity comprises two consolidated entities that hold investment securities, the majority of which are investment grade, and were funded by the issuance of GICs. The GICs included conditions under which certain holders could require immediate repayment of their investment should the long-term credit ratings of GECC fall below AA-/Aa3 or the short-term credit ratings fall below A-1+/P-1. The outstanding GICs are subject to their scheduled maturities and individual terms, which may include provisions permitting redemption upon a downgrade of one or more of GECC's ratings, among other things, and are reported in investment contracts, insurance liabilities and insurance annuity benefits.
· Consolidated Securitization Entities (CSEs) were created to facilitate securitization of financial assets and other forms of asset-backed financing that serve as an alternative funding source by providing access to variable funding notes and term markets. The securitization transactions executed with these entities are similar to those used by many financial institutions and substantially all are non-recourse. We provide servicing for substantially all of the assets in these entities. The financing receivables in these entities have similar risks and characteristics to our other financing receivables and were underwritten to the same standard. Accordingly, the performance of these assets has been similar to our other financing receivables; however, the blended performance of the pools of receivables in these entities reflects the eligibility criteria that we apply to determine which receivables are selected for transfer. Contractually the cash flows from these financing receivables must first be used to pay third-party debt holders as well as other expenses of the entity. Excess cash flows are available to GE. The creditors of these entities have no claim on other assets of GE.
· Other remaining assets and liabilities of consolidated VIEs relate primarily to three categories of entities: (1) joint ventures that lease equipment of $1,539 million of assets and $727 million of liabilities; (2) other entities that are involved in power generating and leasing activities of $762 million of assets and no liabilities; and (3) insurance entities that, among other lines of business, provide property and casualty and workers' compensation coverage for GE of $1,209 million of assets and $566 million of liabilities.
The table below summarizes the assets and liabilities of consolidated VIEs described above.
Consolidated Securitization Entities | |||||||||||||||||
Credit | Trade | ||||||||||||||||
December 31 (In millions) | Trinity | (a) | cards | (b) | Equipment | (b) | receivables | Other | Total | ||||||||
2013 | |||||||||||||||||
Assets(c) | |||||||||||||||||
Financing | |||||||||||||||||
receivables, net | $ | - | $ | 24,766 | $ | 12,928 | $ | 2,509 | $ | 2,044 | $ | 42,247 | |||||
Investment securities | 2,786 | - | - | - | 1,044 | 3,830 | |||||||||||
Other assets | 213 | 20 | 557 | - | 2,430 | 3,220 | |||||||||||
Total | $ | 2,999 | $ | 24,786 | $ | 13,485 | $ | 2,509 | $ | 5,518 | $ | 49,297 | |||||
Liabilities(c) | |||||||||||||||||
Borrowings | $ | - | $ | - | $ | - | $ | - | $ | 598 | $ | 598 | |||||
Non-recourse | |||||||||||||||||
borrowings | - | 15,363 | 10,982 | 2,180 | 49 | 28,574 | |||||||||||
Other liabilities | 1,482 | 228 | 248 | 25 | 1,351 | 3,334 | |||||||||||
Total | $ | 1,482 | $ | 15,591 | $ | 11,230 | $ | 2,205 | $ | 1,998 | $ | 32,506 | |||||
2012 | |||||||||||||||||
Assets(c) | |||||||||||||||||
Financing | |||||||||||||||||
receivables, net | $ | - | $ | 24,169 | $ | 12,456 | $ | 2,339 | $ | 1,952 | $ | 40,916 | |||||
Investment securities | 3,435 | - | - | - | 1,051 | 4,486 | |||||||||||
Other assets | 217 | 29 | 360 | - | 2,428 | 3,034 | |||||||||||
Total | $ | 3,652 | $ | 24,198 | $ | 12,816 | $ | 2,339 | $ | 5,431 | $ | 48,436 | |||||
Liabilities(c) | |||||||||||||||||
Borrowings | $ | - | $ | - | $ | - | $ | - | $ | 711 | $ | 711 | |||||
Non-recourse | |||||||||||||||||
borrowings | - | 17,208 | 9,811 | 2,050 | 54 | 29,123 | |||||||||||
Other liabilities | 1,656 | 146 | 11 | 8 | 1,215 | 3,036 | |||||||||||
Total | $ | 1,656 | $ | 17,354 | $ | 9,822 | $ | 2,058 | $ | 1,980 | $ | 32,870 | |||||
(a) Excludes intercompany advances from GECC to Trinity, which are eliminated in consolidation of $1,837 million and $2,441 million at December 31, 2013 and 2012, respectively.
(b) We provide servicing to the CSEs and are contractually permitted to commingle cash collected from customers on financing receivables sold to CSE investors with our own cash prior to payment to a CSE, provided our short-term credit rating does not fall below A-1/P-1. These CSEs also owe us amounts for purchased financial assets and scheduled interest and principal payments. At December 31, 2013 and 2012, the amounts of commingled cash owed to the CSEs were $6,314 million and $6,225 million, respectively, and the amounts owed to GECC by CSEs were $5,540 million and $6,143 million, respectively.
(c) Asset amounts exclude intercompany receivables for cash collected on behalf of these entities by GE as servicer, which are eliminated in consolidation. Such receivables provide the cash to repay the entities' liabilities. If these intercompany receivables were included in the table above, assets would be higher. In addition, other assets, borrowings and other liabilities exclude intercompany balances that are eliminated in consolidation.
Total revenues from our consolidated VIEs were $7,540 million, $7,127 million and $6,326 million in 2013, 2012 and 2011, respectively. Related expenses consisted primarily of provisions for losses of $1,247 million, $1,171 million and $1,146 million in 2013, 2012 and 2011, respectively, and interest and other financial charges of $355 million, $541 million and $594 million in 2013, 2012 and 2011, respectively. These amounts do not include intercompany revenues and costs, principally fees and interest between GE and the VIEs, which are eliminated in consolidation.
Investments in Unconsolidated Variable Interest Entities
Our involvement with unconsolidated VIEs consists of the following activities: assisting in the formation and financing of the entity, providing recourse and/or liquidity support, servicing the assets and receiving variable fees for services provided. We are not required to consolidate these entities because the nature of our involvement with the activities of the VIEs does not give us power over decisions that significantly affect their economic performance.
Our largest exposure to any single unconsolidated VIE at December 31, 2013 is an investment in asset-backed securities issued by the Senior Secured Loan Program (SSLP), a fund that invests in high-quality senior secured debt of various middle-market companies ($6,996 million). Other significant unconsolidated VIEs include investments in real estate entities ($2,369 million), which generally consist of passive limited partnership investments in tax-advantaged, multi-family real estate and investments in various European real estate entities; and exposures to joint ventures that purchase factored receivables ($2,624 million).
The classification of our variable interests in these entities in our financial statements is based on the nature of the entity and the type of investment we hold. Variable interests in partnerships and corporate entities are classified as either equity method or cost method investments. In the ordinary course of business, we also make investments in entities in which we are not the primary beneficiary but may hold a variable interest such as limited partner interests or mezzanine debt investments. These investments are classified in two captions in our financial statements: "All other assets" for investments accounted for under the equity method, and "Financing receivables - net" for debt financing provided to these entities. Our investments in unconsolidated VIEs at December 31, 2013 and December 31, 2012 follow.
December 31 (In millions) | 2013 | 2012 | ||||
Other assets and investment securities | $ | 9,129 | $ | 10,027 | ||
Financing receivables - net | 3,346 | 2,654 | ||||
Total investments | 12,475 | 12,681 | ||||
Contractual obligations to fund | ||||||
investments or guarantees | 2,741 | 2,608 | ||||
Revolving lines of credit | 31 | 41 | ||||
Total | $ | 15,247 | $ | 15,330 | ||
As previously reported, during 2012, Penske Truck Leasing Co., L.P. (PTL) effected a recapitalization and subsequently acquired third-party financing in order to repay outstanding debt owed to GECC. In the first quarter of 2013, PTL had repaid all outstanding debt owed and terminated its borrowing arrangement with GECC. During the second quarter of 2013, PTL ceased to be a VIE as a result of a principal in PTL retiring from the GE Board. Therefore, our investment in PTL ($899 million at December 31, 2013) is not reported in the December 31, 2013 balance in the table above. As co-issuer and co-guarantor of the $700 million of debt raised by the funding entity related to PTL, GECC reports this amount, which is also our loss exposure and excluded from the table above, as debt of GECC in its financial statements. GECC has been indemnified by the other limited partners of PTL for their proportionate share of the debt obligation.
In addition to the entities included in the table above, we also hold passive investments in RMBS, CMBS and ABS issued by VIEs. Such investments were, by design, investment grade at issuance and held by a diverse group of investors. Further information about such investments is provided in Note 3.
NOTE 24. COMMITMENTS AND GUARANTEES
Commitments
In our Aviation segment, we had committed to provide financing assistance on $2,669 million of future customer acquisitions of aircraft equipped with our engines, including commitments made to airlines in 2013 for future sales under our GE90 and GEnx engine campaigns. The GECAS business of GE Capital had placed multiple-year orders for various Boeing, Airbus and other aircraft with list prices approximating $29,405 million and secondary orders with airlines for used aircraft of approximately $816 million at December 31, 2013.
Product Warranties
We provide for estimated product warranty expenses when we sell the related products. Because warranty estimates are forecasts that are based on the best available information - mostly historical claims experience - claims costs may differ from amounts provided. An analysis of changes in the liability for product warranties follows.
(In millions) | 2013 | 2012 | 2011 | |||||
Balance at January 1 | $ | 1,383 | $ | 1,507 | $ | 1,405 | ||
Current-year provisions | 745 | 611 | 866 | |||||
Expenditures | (814) | (723) | (881) | |||||
Other changes | 10 | (12) | 117 | |||||
Balance at December 31 | $ | 1,324 | $ | 1,383 | $ | 1,507 | ||
Guarantees
Our guarantees are provided in the ordinary course of business. We underwrite these guarantees considering economic, liquidity and credit risk of the counterparty. We believe that the likelihood is remote that any such arrangements could have a significant adverse effect on our financial position, results of operations or liquidity. We record liabilities for guarantees at estimated fair value, generally the amount of the premium received, or if we do not receive a premium, the amount based on appraisal, observed market values or discounted cash flows. Any associated expected recoveries from third parties are recorded as other receivables, not netted against the liabilities.
At December 31, 2013, we were committed under the following guarantee arrangements beyond those provided on behalf of VIEs. See Note 23.
· Credit Support. We have provided $2,775 million of credit support on behalf of certain customers or associated companies, predominantly joint ventures and partnerships, using arrangements such as standby letters of credit and performance guarantees. These arrangements enable these customers and associated companies to execute transactions or obtain desired financing arrangements with third parties. Should the customer or associated company fail to perform under the terms of the transaction or financing arrangement, we would be required to perform on their behalf. Under most such arrangements, our guarantee is secured, usually by the asset being purchased or financed, or possibly by certain other assets of the customer or associated company. The length of these credit support arrangements parallels the length of the related financing arrangements or transactions. The liability for such credit support was $36 million at December 31, 2013.
· Indemnification Agreements. We have agreements that require us to fund up to $125 million at December 31, 2013 under residual value guarantees on a variety of leased equipment. Under most of our residual value guarantees, our commitment is secured by the leased asset. The liability for these indemnification agreements was $21 million at December 31, 2013.
At December 31, 2013, we also had $1,009 million of other indemnification commitments, substantially all of which relate to representations and warranties in sales of businesses or assets.
· Contingent Consideration. These are agreements to provide additional consideration to a buyer or seller in a business combination if contractually specified conditions related to the acquisition or disposition are achieved.
NOTE 25. SUPPLEMENTAL CASH FLOWS INFORMATION
Changes in operating assets and liabilities are net of acquisitions and dispositions of principal businesses.
Amounts reported in the "Proceeds from sales of discontinued operations" and "Proceeds from principal business dispositions" lines in the Statement of Cash Flows are net of cash disposed and included certain deal-related costs. Amounts reported in the "Net cash from (payments for) principal businesses purchased" line is net of cash acquired and included certain deal-related costs and debt assumed and immediately repaid in acquisitions. Amounts reported in the "Proceeds from sale of equity interest in NBCU LLC" line included certain deal-related costs.
Amounts reported in the "All other operating activities" line in the Statement of Cash Flows consist primarily of adjustments to current and noncurrent accruals, deferrals of costs and expenses and adjustments to assets. GECC had non-cash transactions related to foreclosed properties and repossessed assets totaling $482 million, $839 million and $859 million in 2013, 2012 and 2011, respectively.
Certain supplemental information related to GE and GECC cash flows is shown below.
For the years ended December 31 (In millions) | 2013 | 2012 | 2011 | |||||
GE | ||||||||
Net dispositions (purchases) of GE shares for treasury | ||||||||
Open market purchases under share repurchase program | $ | (10,225) | $ | (5,005) | $ | (2,065) | ||
Other purchases | (91) | (110) | (100) | |||||
Dispositions | 1,038 | 951 | 709 | |||||
$ | (9,278) | $ | (4,164) | $ | (1,456) | |||
GECC | ||||||||
All other operating activities | ||||||||
Amortization of intangible assets | $ | 425 | $ | 447 | $ | 562 | ||
Net realized losses on investment securities | 523 | 34 | 197 | |||||
Cash collateral on derivative contracts | (2,271) | 2,900 | 1,247 | |||||
Increase (decrease) in other liabilities | 2,334 | 560 | (1,344) | |||||
Other | (912) | 1,477 | 2,465 | |||||
$ | 99 | $ | 5,418 | $ | 3,127 | |||
Net decrease (increase) in GECC financing receivables | ||||||||
Increase in loans to customers | $ | (311,860) | $ | (308,156) | $ | (322,270) | ||
Principal collections from customers - loans | 307,849 | 307,250 | 332,100 | |||||
Investment in equipment for financing leases | (8,652) | (9,192) | (9,610) | |||||
Principal collections from customers - financing leases | 9,646 | 10,976 | 12,431 | |||||
Net change in credit card receivables | (8,058) | (8,030) | (6,243) | |||||
Sales of financing receivables | 14,664 | 12,642 | 8,117 | |||||
$ | 3,589 | $ | 5,490 | $ | 14,525 | |||
All other investing activities | ||||||||
Purchases of investment securities | $ | (16,422) | $ | (15,666) | $ | (20,816) | ||
Dispositions and maturities of investment securities | 18,139 | 17,010 | 19,535 | |||||
Decrease (increase) in other assets - investments | 1,089 | 4,338 | 2,672 | |||||
Proceeds from sales of real estate properties | 10,680 | 3,381 | 3,152 | |||||
Other | 1,486 | 2,731 | 3,190 | |||||
$ | 14,972 | $ | 11,794 | $ | 7,733 | |||
Newly issued debt (maturities longer than 90 days) | ||||||||
Short-term (91 to 365 days) | $ | 55 | $ | 59 | $ | 10 | ||
Long-term (longer than one year) | 44,833 | 55,782 | 43,257 | |||||
$ | 44,888 | $ | 55,841 | $ | 43,267 | |||
Repayments and other reductions (maturities | ||||||||
longer than 90 days) | ||||||||
Short-term (91 to 365 days) | $ | (52,553) | $ | (94,114) | $ | (81,918) | ||
Long-term (longer than one year) | (3,291) | (9,368) | (2,786) | |||||
Principal payments - non-recourse, leveraged leases | (585) | (426) | (732) | |||||
$ | (56,429) | $ | (103,908) | $ | (85,436) | |||
All other financing activities | ||||||||
Proceeds from sales of investment contracts | $ | 491 | $ | 2,697 | $ | 4,396 | ||
Redemption of investment contracts | (980) | (5,515) | (6,230) | |||||
Other | (420) | (49) | 42 | |||||
$ | (909) | $ | (2,867) | $ | (1,792) |
NOTE 26. INTERCOMPANY TRANSACTIONS
Transactions between related companies are made on an arms-length basis, are eliminated and consist primarily of GECC dividends to GE; GE customer receivables sold to GECC; GECC services for trade receivables management and material procurement; buildings and equipment (including automobiles) leased between GE and GECC; information technology (IT) and other services sold to GECC by GE; aircraft engines manufactured by GE that are installed on aircraft purchased by GECC from third-party producers for lease to others; and various investments, loans and allocations of GE corporate overhead costs.
These intercompany transactions are reported in the GE and GECC columns of our financial statements, but are eliminated in deriving our consolidated financial statements. Effects of these eliminations on our consolidated cash flows from operating, investing and financing activities are $(5,088) million, $492 million and $4,690 million for 2013, $(8,542) million, $2,328 million and $6,703 million for 2012 and $(558) million, $(373) million and $903 million for 2011, respectively. Details of these eliminations are shown below.
For the years ended December 31 (In millions) | 2013 | 2012 | 2011 | |||||
Cash from (used for) operating activities-continuing operations | ||||||||
Combined | $ | 34,125 | $ | 39,557 | $ | 32,669 | ||
GE customer receivables sold to GECC | 360 | (1,809) | (577) | |||||
GECC dividends to GE | (5,985) | (6,426) | - | |||||
Other reclassifications and eliminations | 537 | (307) | 19 | |||||
$ | 29,037 | $ | 31,015 | $ | 32,111 | |||
Cash from (used for) investing activities-continuing operations | ||||||||
Combined | $ | 28,182 | $ | 9,262 | $ | 21,540 | ||
GE customer receivables sold to GECC | 262 | 2,005 | 421 | |||||
Other reclassifications and eliminations | 230 | 323 | (794) | |||||
$ | 28,674 | $ | 11,590 | $ | 21,167 | |||
Cash from (used for) financing activities-continuing operations | ||||||||
Combined | $ | (50,319) | $ | (57,758) | $ | (47,818) | ||
GE customer receivables sold to GECC | (622) | (196) | 156 | |||||
GECC dividends to GE | 5,985 | 6,426 | - | |||||
Other reclassifications and eliminations | (673) | 473 | 747 | |||||
$ | (45,629) | $ | (51,055) | $ | (46,915) | |||
NOTE 27. OPERATING SEGMENTS
Basis for presentation
Our operating businesses are organized based on the nature of markets and customers. Segment accounting policies are the same as described in Note 1. Segment results for our financial services businesses reflect the discrete tax effect of transactions.
Results of our formerly consolidated subsidiary, NBCU, and our equity method investment in NBCU LLC, which we sold in the first quarter of 2013 are reported in the Corporate items and eliminations line on the Summary of Operating Segments.
A description of our operating segments as of December 31, 2013, can be found below, and details of segment profit by operating segment can be found in the Summary of Operating Segments table in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Power & Water
Power plant products and services, including design, installation, operation and maintenance services are sold into global markets. Gas, steam and aeroderivative turbines, nuclear reactors, generators, combined cycle systems, controls and related services, including total asset optimization solutions, equipment upgrades and long-term maintenance service agreements are sold to power generation and other industrial customers. Renewable energy solutions include wind turbines. Water treatment services and equipment include specialty chemical treatment programs, water purification equipment, mobile treatment systems and desalination processes.
Oil & Gas
Oil & Gas supplies mission critical equipment for the global oil and gas industry, used in applications spanning the entire value chain from drilling and completion through production, liquefied natural gas (LNG) and pipeline compression, pipeline inspection, and including downstream processing in refineries and petrochemical plants. The business designs and manufactures surface and subsea drilling and production systems, equipment for floating production platforms, compressors, turbines, turboexpanders, high pressure reactors, industrial power generation and a broad portfolio of auxiliary equipment.
Energy Management
Energy Management is GE's electrification business. Global teams design leading technology solutions for the delivery, management, conversion and optimization of electrical power for customers across multiple energy-intensive industries. GE has invested in our Energy Management capabilities, with strategic acquisitions and joint ventures that enable GE to increase its offerings to the utility, industrial, renewables, oil and gas, marine, metals and mining industries. Plant automation hardware, software and embedded computing systems including controllers, embedded systems, advanced software, motion control, operator interfaces and industrial computers are also provided by Energy Management.
Aviation
Aviation products and services include jet engines, aerospace systems and equipment, replacement parts and repair and maintenance services for all categories of commercial aircraft; for a wide variety of military aircraft, includ-ing fighters, bombers, tankers and helicopters; for marine appli-cations; and for executive and regional aircraft. Products and services are sold worldwide to airframe manufacturers, airlines and government agencies.
Healthcare
Healthcare products include diagnostic imaging systems such as Magnetic Resonance (MR), Computed Tomography (CT) and Positron Emission Tomography (PET) scanners, X-ray, nuclear imaging, digital mammography, and Molecular Imaging technologies. Healthcare-manufactured technologies include patient and resident monitoring, diagnostic cardiology, ultrasound, bone densitometry, anesthesiology and oxygen therapy, and neonatal and critical care devices. Related services include equipment monitoring and repair, information technologies and customer productivity services. Products also include diagnostic imaging agents used in medical scanning procedures, drug discovery, biopharmaceutical manufacturing and purification, and tools for pro-tein and cellular analysis for pharmaceutical and academic research, including a pipeline of precision molecular diagnostics in development for neurology, cardiology and oncology applications. Products and services are sold worldwide to hospitals, medical facilities, pharmaceutical and biotechnology companies, and to the life science research market.
Transportation
Transportation is a global technology leader and supplier to the railroad, mining, marine and drilling industries. GE provides freight and passenger locomotives, diesel engines for rail, marine and stationary power applications, railway signaling and communications systems, underground mining equipment, motorized drive systems for mining trucks, information technology solutions, high-quality replacement parts and value added services.
Appliances & Lighting
Products include major appliances and related services for products such as refrigerators, freezers, electric and gas ranges, cooktops, dishwashers, clothes washers and dryers, microwave ovens, room air conditioners, residential water systems for filtration, softening and heating, and hybrid water heaters. These products are distributed both to retail outlets and direct to consumers, mainly for the replacement market, and to building contractors and distributors for new installations. Lighting products include a wide variety of lamps and lighting fixtures, including light-emitting diodes. Products and services are sold in North America and in global markets under various GE and private-label brands.
GE Capital
CLL has particular mid-market expertise, and primarily offers secured commercial loans, equipment financing and other financial services to companies across a wide range of industries including construction, retail, manufacturing, transportation, media, communications, technology and healthcare. Equipment financing activities include industrial, medical, fleet vehicles, corporate aircraft, construction, office imaging and many other equipment types.
Consumer offers a full range of financial products including private-label credit cards; personal loans; bank cards; auto loans and leases; mortgages; debt consolidation; home equity loans; deposit and other savings products; and small and medium enterprise lending on a global basis.
Real Estate offers a comprehensive range of capital and investment solutions and finances, with both equity and loan structures, the acquisition, refinancing and renovation of office buildings, apartment buildings, retail facilities, hotels and industrial properties.
Energy Financial Services offers financial products to the global energy industry including structured equity, debt, leasing, partnership financing, product finance, and broad-based commercial finance.
GECAS, our commercial aircraft financing and leasing business, offers a wide range of aircraft types and financing options, including operating leases and secured debt financing, and also provides productivity solutions including spare engine leasing, airport and airline consulting services, and spare parts financing and management.
Revenues | ||||||||||||||||||||||||||
Total revenues(a) | Intersegment revenues(b) | External revenues | ||||||||||||||||||||||||
(In millions) | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | |||||||||||||||||
| ||||||||||||||||||||||||||
Power & Water | $ | 24,724 | $ | 28,299 | $ | 25,675 | $ | 947 | $ | 1,119 | $ | 794 | $ | 23,777 | $ | 27,180 | $ | 24,881 | ||||||||
Oil & Gas | 16,975 | 15,241 | 13,608 | 360 | 314 | 302 | 16,615 | 14,927 | 13,306 | |||||||||||||||||
Energy Management | 7,569 | 7,412 | 6,422 | 848 | 487 | 504 | 6,721 | 6,925 | 5,918 | |||||||||||||||||
Aviation | 21,911 | 19,994 | 18,859 | 500 | 672 | 417 | 21,411 | 19,322 | 18,442 | |||||||||||||||||
Healthcare | 18,200 | 18,290 | 18,083 | 14 | 37 | 65 | 18,186 | 18,253 | 18,018 | |||||||||||||||||
Transportation | 5,885 | 5,608 | 4,885 | 12 | 11 | 33 | 5,873 | 5,597 | 4,852 | |||||||||||||||||
Appliances & Lighting | 8,338 | 7,967 | 7,693 | 25 | 23 | 22 | 8,313 | 7,944 | 7,671 | |||||||||||||||||
Total industrial | 103,602 | 102,811 | 95,225 | 2,706 | 2,663 | 2,137 | 100,896 | 100,148 | 93,088 | |||||||||||||||||
GE Capital | 44,067 | 45,364 | 48,324 | 1,150 | 1,037 | 977 | 42,917 | 44,327 | 47,347 | |||||||||||||||||
Corporate items | ||||||||||||||||||||||||||
and eliminations(c) | (1,624) | (1,491) | 2,993 | (3,856) | (3,700) | (3,114) | 2,232 | 2,209 | 6,107 | |||||||||||||||||
Total | $ | 146,045 | $ | 146,684 | $ | 146,542 | $ | - | $ | - | $ | - | $ | 146,045 | $ | 146,684 | $ | 146,542 | ||||||||
(a) Revenues of GE businesses include income from sales of goods and services to customers and other income.
(b) Sales from one component to another generally are priced at equivalent commercial selling prices.
(c) Includes the results of NBCU (our formerly consolidated subsidiary) and our former equity method investment in NBCUniversal LLC.
Revenues from customers located in the United States were $68,617 million, $70,466 million and $69,910 million in 2013, 2012 and 2011, respectively. Revenues from customers located outside the United States were $77,428 million, $76,218 million and $76,632 million in 2013, 2012 and 2011, respectively.
Property, plant and | ||||||||||||||||||||||||||
Assets(a)(b) | equipment additions(c) | Depreciation and amortization | ||||||||||||||||||||||||
At December 31 | For the years ended December 31 | For the years ended December 31 | ||||||||||||||||||||||||
(In millions) | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | |||||||||||||||||
Power & Water | $ | 29,526 | $ | 27,174 | $ | 27,074 | $ | 714 | $ | 661 | $ | 770 | $ | 668 | $ | 647 | $ | 605 | ||||||||
Oil & Gas | 26,181 | 20,099 | 18,855 | 1,185 | 467 | 904 | 479 | 426 | 434 | |||||||||||||||||
Energy Management | 9,962 | 9,253 | 9,835 | 137 | 155 | 414 | 323 | 287 | 239 | |||||||||||||||||
Aviation | 32,272 | 25,144 | 23,567 | 1,178 | 781 | 699 | 677 | 644 | 569 | |||||||||||||||||
Healthcare | 27,956 | 28,458 | 27,981 | 316 | 322 | 378 | 861 | 879 | 869 | |||||||||||||||||
Transportation | 4,472 | 4,389 | 2,633 | 282 | 724 | 193 | 167 | 90 | 88 | |||||||||||||||||
Appliances & Lighting | 4,237 | 4,133 | 3,675 | 405 | 485 | 268 | 300 | 265 | 260 | |||||||||||||||||
GE Capital | 516,829 | 539,351 | 584,643 | 9,978 | 11,879 | 9,871 | 7,738 | 7,348 | 7,480 | |||||||||||||||||
Corporate items | ||||||||||||||||||||||||||
and eliminations(d) | 5,125 | 26,998 | 19,740 | 194 | (99) | 56 | 260 | 218 | 186 | |||||||||||||||||
Total | $ | 656,560 | $ | 684,999 | $ | 718,003 | $ | 14,389 | $ | 15,375 | $ | 13,553 | $ | 11,473 | $ | 10,804 | $ | 10,730 | ||||||||
(a) Assets of discontinued operations, NBCU (our formerly consolidated subsidiary) and our former equity method investment in NBCUniversal LLC are included in Corporate items and eliminations for all periods presented.
(b) Total assets of the Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Appliances & Lighting and GE Capital operating segments at December 31, 2013, include investment in and advances to associated companies of $507 million, $108 million, $788 million, $1,463 million, $576 million, $10 million, $388 million and $17,348 million, respectively. Investments in and advances to associated companies contributed approximately $(26) million, $18 million, $3 million, $4 million, $(48) million, $0 million, $40 million and $1,809 million to segment pre-tax income of Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Appliances & Lighting and GE Capital operating segments, respectively, for the year ended December 31, 2013. Aggregate summarized financial information for significant associated companies assuming a 100% ownership interest included: total assets of $98,658 million, primarily financing receivables of $46,655 million; total liabilities of $66,535 million, primarily debt of $40,030 million; revenues totaled $22,692 million; and net earnings totaled $2,431 million.
(c) Additions to property, plant and equipment include amounts relating to principal businesses purchased.
(d) Includes deferred income taxes that are presented as assets for purposes of our consolidating balance sheet presentation.
Interest and other financial charges | Provision (benefit) for income taxes | ||||||||||||||||
(In millions) | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | |||||||||||
GE Capital | $ | 9,267 | $ | 11,596 | $ | 13,760 | $ | (992) | $ | 521 | $ | 906 | |||||
Corporate items and eliminations(a) | 849 | 811 | 662 | 1,668 | 2,013 | 4,839 | |||||||||||
Total | $ | 10,116 | $ | 12,407 | $ | 14,422 | $ | 676 | $ | 2,534 | $ | 5,745 | |||||
(a) Included amounts for Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Appliances & Lighting, for which our measure of segment profit excludes interest and other financial charges and income taxes.
Property, plant and equipment - net associated with operations based in the United States were $28,657 million, $27,192 million and $25,974 million at year-end 2013, 2012 and 2011, respectively. Property, plant and equipment - net associated with operations based outside the United States were $40,170 million, $41,441 million and $38,573 million at year-end 2013, 2012 and 2011, respectively.
NOTE 28. QUARTERLY INFORMATION (UNAUDITED)
First quarter | Second quarter | Third quarter | Fourth quarter | ||||||||||||||||||||
(In millions; per-share amounts in dollars) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||
Consolidated operations | |||||||||||||||||||||||
Earnings from continuing operations | $ | 3,631 | $ | 3,257 | $ | 3,423 | $ | 3,681 | $ | 3,272 | $ | 3,460 | $ | 5,149 | $ | 4,449 | |||||||
Earnings (loss) from discontinued | |||||||||||||||||||||||
operations | (120) | (185) | (124) | (543) | (91) | 48 | (1,785) | (303) | |||||||||||||||
Net earnings | 3,511 | 3,072 | 3,299 | 3,138 | 3,181 | 3,508 | 3,364 | 4,146 | |||||||||||||||
Less net earnings attributable to | |||||||||||||||||||||||
noncontrolling interests | (16) | 38 | 166 | 33 | (10) | 17 | 158 | 135 | |||||||||||||||
Net earnings attributable to | |||||||||||||||||||||||
the Company | $ | 3,527 | $ | 3,034 | $ | 3,133 | $ | 3,105 | $ | 3,191 | $ | 3,491 | $ | 3,206 | $ | 4,011 | |||||||
Per-share amounts - earnings from | |||||||||||||||||||||||
continuing operations | |||||||||||||||||||||||
Diluted earnings per share | $ | 0.35 | $ | 0.30 | $ | 0.31 | $ | 0.34 | $ | 0.32 | $ | 0.33 | $ | 0.49 | $ | 0.41 | |||||||
Basic earnings per share | 0.35 | 0.30 | 0.32 | 0.34 | 0.32 | 0.33 | 0.49 | 0.41 | |||||||||||||||
Per-share amounts - earnings (loss) | |||||||||||||||||||||||
from discontinued operations | |||||||||||||||||||||||
Diluted earnings per share | (0.01) | (0.02) | (0.01) | (0.05) | (0.01) | - | (0.18) | (0.03) | |||||||||||||||
Basic earnings per share | (0.01) | (0.02) | (0.01) | (0.05) | (0.01) | - | (0.18) | (0.03) | |||||||||||||||
Per-share amounts - net earnings | |||||||||||||||||||||||
Diluted earnings per share | 0.34 | 0.29 | 0.30 | 0.29 | 0.31 | 0.33 | 0.32 | 0.38 | |||||||||||||||
Basic earnings per share | 0.34 | 0.29 | 0.30 | 0.29 | 0.31 | 0.33 | 0.32 | 0.38 | |||||||||||||||
Selected data | |||||||||||||||||||||||
GE | |||||||||||||||||||||||
Sales of goods and services | $ | 22,303 | $ | 23,687 | $ | 24,623 | $ | 25,138 | $ | 25,262 | $ | 24,749 | $ | 28,826 | $ | 27,301 | |||||||
Gross profit from sales | 4,867 | 5,653 | 6,007 | 5,800 | 5,691 | 6,025 | 6,819 | 8,341 | |||||||||||||||
GECC | |||||||||||||||||||||||
Total revenues | 11,468 | 11,267 | 10,916 | 11,285 | 10,606 | 11,207 | 11,077 | 11,605 | |||||||||||||||
Earnings from continuing operations | |||||||||||||||||||||||
attributable to the Company | 1,938 | 1,760 | 1,924 | 2,112 | 1,903 | 1,668 | 2,493 | 1,805 | |||||||||||||||
For GE, gross profit from sales is sales of goods and services less costs of goods and services sold.
Earnings-per-share amounts are computed independently each quarter for earnings from continuing operations, earnings (loss) from discontinued operations and net earnings. As a result, the sum of each quarter's per-share amount may not equal the total per-share amount for the respective year; and the sum of per-share amounts from continuing operations and discontinued operations may not equal the total per-share amounts for net earnings for the respective quarters.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that (i) our disclosure controls and procedures were effective as of December 31, 2013, and (ii) no change in internal control over financial reporting occurred during the quarter ended December 31, 2013, that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.
Management's annual report on internal control over financial reporting and the report of our independent registered public accounting firm appears in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.
Item 9B. Other Information.
Not applicable.
Part III
Item 10. Directors, Executive Officers and Corporate Governance.
Executive Officers of the Registrant (As of February 1, 2014)
| Date assumed | |||||
Executive | ||||||
Name |
| Position |
| Age | Officer Position | |
Jeffrey R. Immelt | Chairman of the Board and Chief Executive Officer | 57 | January 1997 | |||
Jeffrey S. Bornstein | Senior Vice President and Chief Financial Officer | 48 | July 2013 | |||
Kathryn A. Cassidy | Senior Vice President and GE Treasurer | 59 | March 2003 | |||
Elizabeth J. Comstock | Senior Vice President, Chief Marketing Officer | 53 | April 2013 | |||
Brackett B. Denniston III | Senior Vice President and General Counsel | 66 | February 2004 | |||
Jan R. Hauser | Vice President, Controller & Chief Accounting Officer | 54 | April 2013 | |||
Daniel C. Heintzelman | Vice Chairman, Enterprise Risk and Operations | 56 | October 2013 | |||
Susan Peters | Senior Vice President, Human Resources | 60 | August 2013 | |||
John G. Rice | Vice Chairman of General Electric Company; | |||||
President & CEO, Global Growth & Operations | 57 | September 1997 | ||||
Keith S. Sherin | Vice Chairman of General Electric Company; CEO, GE Capital | 55 | January 1999 |
All Executive Officers are elected by the Board of Directors for an initial term that continues until the Board meeting immediately preceding the next annual statutory meeting of shareowners, and thereafter are elected for one-year terms or until their successors have been elected. All Executive Officers have been executives of General Electric Company for the last five years except for Ms. Hauser. Prior to joining GE in March 2013, Ms. Hauser served as a partner, Accounting Services, National Professional Services Group at PricewaterhouseCoopers LLP.
The remaining information called for by this item is incorporated by reference to "Election of Directors," "Section 16(a) Beneficial Ownership Reporting Compliance," "Other Governance Policies and Practices" and "Board Committees" in our definitive proxy statement for our 2014 Annual Meeting of Shareowners to be held April 23, 2014, which will be filed within 120 days of the end of our fiscal year ended December 31, 2013 (the 2014 Proxy Statement).
Item 11. Executive Compensation.
Incorporated by reference to "Compensation Discussion and Analysis," "Compensation Committee Report," "Summary Compensation," "All Other Compensation," "Other Benefits," "Grants of Plan-Based Awards," "Outstanding Equity Awards," "Option Exercises and Stock Vested," "Pension Benefits," "Nonqualified Deferred Compensation," "Potential Payments Upon Termination at Fiscal Year-End" and "Director Compensation" in the 2014 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Incorporated by reference to "Stock Ownership Information" in the 2014 Proxy Statement. The remaining information called for by this item relating to "Securities Authorized for Issuance under Equity Compensation Plans" is provided in Note 16 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Incorporated by reference to "Related Person Transactions" and "Director Independence" in the 2014 Proxy Statement.
Item 14. Principal Accounting Fees and Services.
Incorporated by reference to "Independent Auditor Information" in the 2014 Proxy Statement.
Part IV
Item 15. Exhibits, Financial Statement Schedules.
(a)1. Financial Statements
Included in Part II of this report:
Statement of Earnings for the years ended December 31, 2013, 2012 and 2011
Consolidated Statement of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011
Consolidated Statement of Changes in Shareowners' Equity for the years ended December 31, 2013, 2012 and 2011
Statement of Financial Position at December 31, 2013 and 2012
Statement of Cash Flows for the years ended December 31, 2013, 2012 and 2011
Management's Annual Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Other financial information:
Summary of Operating Segments
Notes to consolidated financial statements
Operating segment information
(a)2. Financial Statement Schedules
The schedules listed in Reg. 210.5-04 have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
(a)3. Exhibit Index
2(a) | Master Agreement dated as of December 3, 2009 by and among General Electric Company, NBC Universal, Inc., Comcast Corporation and Navy, LLC. (Incorporated by reference to Exhibit 2(a) to General Electric's Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2009). |
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3(i) | The Certificate of Incorporation, as amended, of General Electric Company.* |
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3(ii) | The By-Laws, as amended, of General Electric Company (Incorporated by reference to Exhibit 3(ii) of General Electric's Current Report on Form 8-K dated February 15, 2013 (Commission file number 001-00035)). |
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4(a) | Amended and Restated General Electric Capital Corporation (GECC) Standard Global Multiple Series Indenture Provisions dated as of February 27, 1997 (Incorporated by reference to Exhibit 4(a) to GECC's Registration Statement on Form S-3, File No. 333-59707 (Commission file number 001-06461)). |
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4(b) | Third Amended and Restated Indenture dated as of February 27, 1997, between GECC and The Bank of New York Mellon, as successor trustee (Incorporated by reference to Exhibit 4(c) to GECC's Registration Statement on Form S-3, File No. 333-59707 (Commission file number 001-06461)). |
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4(c) | First Supplemental Indenture dated as of May 3, 1999, supplemental to Third Amended and Restated Indenture dated as of February 27, 1997 (Incorporated by reference to Exhibit 4(dd) to GECC's Post-Effective Amendment No. 1 to Registration Statement on Form S-3, File No. 333-76479 (Commission file number 001-06461)). |
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4(d) | Second Supplemental Indenture dated as of July 2, 2001, supplemental to Third Amended and Restated Indenture dated as of February 27, 1997 (Incorporated by reference to Exhibit 4(f) to GECC's Post-Effective Amendment No.1 to Registration Statement on Form S-3, File No. 333-40880 (Commission file number 001-06461)). |
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4(e) | Third Supplemental Indenture dated as of November 22, 2002, supplemental to Third Amended and Restated Indenture dated as of February 27, 1997 (Incorporated by reference to Exhibit 4(cc) to GECC's Post-Effective Amendment No. 1 to the Registration Statement on Form S-3, File No. 333‑100527 (Commission file number 001-06461)). |
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4(f) | Fourth Supplemental Indenture dated as of August 24, 2007, supplemental to Third Amended and Restated Indenture dated as of February 27, 1997 (Incorporated by reference to Exhibit 4(g) to GECC's Registration Statement on Form S-3, File number 333-156929 (Commission file number 001-06461)). |
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4(g)
| Indenture dated December 1, 2005, between General Electric Company and The Bank of New York Mellon, as successor trustee (Incorporated by reference to Exhibit 4(a) of General Electric's Current Report on Form 8-K filed on December 9, 2005 (Commission file number 001-00035)).
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4(h) | Senior Note Indenture dated as of October 9, 2012, between General Electric Company and The Bank of New York Mellon, as trustee (Incorporated by reference to Exhibit 4.1 to General Electric's Current Report on Form 8-K filed on October 9, 2012 (Commission file number 001-00035)). |
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4(i) | Twelfth Amended and Restated Fiscal and Paying Agency Agreement among GECC, GE Capital Australia Funding Pty Ltd., GE Capital European Funding, GE Capital U.K. Funding and The Bank of New York Mellon and The Bank of New York Mellon (Luxembourg) S.A., as fiscal and paying agents, dated as of April 5, 2013 (Incorporated by reference to Exhibit 4(i) to GECC's Form 10-K Report for the year ended December 31, 2013 (Commission file number 001-06461)). |
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4(j) | Letter from the Senior Vice President and Chief Financial Officer of General Electric to GECC dated September 15, 2006, with respect to returning dividends, distributions or other payments to GECC in certain circumstances described in the Indenture for Subordinated Debentures dated September 1, 2006, between GECC and the Bank of New York, as successor trustee (Incorporated by reference to Exhibit 4(c) to GECC's Post-Effective Amendment No. 2 to Registration Statement on Form S-3, File No. 333-132807 (Commission file number 001-06461)). |
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4(k)
| Agreement to furnish to the Securities and Exchange Commission upon request a copy of instruments defining the rights of holders of certain long-term debt of the registrant and consolidated subsidiaries.* |
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(10) | Except for 10(y), (z) and (aa) below, all of the following exhibits consist of Executive Compensation Plans or Arrangements: |
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(a) | General Electric Incentive Compensation Plan, as amended effective July 1, 1991 (Incorporated by reference to Exhibit 10(a) to General Electric Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 1991). | |||||
(b) | General Electric Financial Planning Program, as amended through September 1993 (Incorporated by reference to Exhibit 10(h) to General Electric Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 1993). | |||||
(c) | General Electric Supplemental Life Insurance Program, as amended February 8, 1991 (Incorporated by reference to Exhibit 10(i) to General Electric Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 1990). | |||||
(d) | General Electric Directors' Charitable Gift Plan, as amended through December 2002 (Incorporated by reference to Exhibit 10(i) to General Electric Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2002). | |||||
(e) | General Electric Leadership Life Insurance Program, effective January 1, 1994 (Incorporated by reference to Exhibit 10(r) to General Electric Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 1993). | |||||
(f) | General Electric 1996 Stock Option Plan for Non-Employee Directors (Incorporated by reference to Exhibit A to the General Electric Proxy Statement for its Annual Meeting of Shareowners held on April 24, 1996 (Commission file number 001-00035)). | |||||
(g) | General Electric Supplementary Pension Plan, as amended effective January 1, 2011 (Incorporated by reference to Exhibit 10(g) to General Electric's Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2010).
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(h) | General Electric 2003 Non-Employee Director Compensation Plan, Amended and Restated as of February 7, 2014.* | |||||
(i) | Amendment to Nonqualified Deferred Compensation Plans, dated as of December 14, 2004 (Incorporated by reference to Exhibit 10(w) to the General Electric Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2004). | |||||
(j) | GE Retirement for the Good of the Company Program, as amended effective January 1, 2009 (Incorporated by reference to Exhibit 10(j) to General Electric's Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2008. | |||||
(k) | GE Excess Benefits Plan, effective January 1, 2009 (Incorporated by reference to Exhibit 10(k) to General Electric's Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2008). | |||||
(l) | General Electric 2006 Executive Deferred Salary Plan, as amended January 1, 2009 (Incorporated by reference to Exhibit 10(l) to General Electric's Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2008). | |||||
(m) | General Electric Company 2007 Long-Term Incentive Plan (as amended and restated April 25, 2012) (Incorporated by reference to Exhibit 99.1 to General Electric's Registration Statement on Form S-8, dated May 4, 2012, File number 333-181177 (Commission file number 001-00035)). | |||||
(n) | Form of Agreement for Stock Option Grants to Executive Officers under the General Electric Company 2007 Long-term Incentive Plan, as amended January 1, 2009 (Incorporated by reference to Exhibit 10(n) to General Electric's Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2008). | |||||
(o) | Form of Agreement for Annual Restricted Stock Unit Grants to Executive Officers under the General Electric Company 2007 Long-term Incentive Plan, as amended January 1, 2009 (Incorporated by reference to Exhibit 10(o) to General Electric's Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 2008). | |||||
(p) | Form of Agreement for Periodic Restricted Stock Unit Grants to Executive Officers under the General Electric Company 2007 Long-term Incentive Plan (Incorporated by reference to Exhibit 10.4 of General Electric's Current Report on Form 8-K dated April 27, 2007 (Commission file number 001-00035)). | |||||
(q) | Form of Agreement for Long Term Performance Award Grants to Executive Officers under the General Electric Company 2007 Long-term Incentive Plan (as amended and restated April 25, 2012) (Incorporated by reference to Exhibit 10(a) of General Electric's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (Commission file number 001-00035)). | |||||
(r) | Form of Agreement for Performance Stock Unit Grants to Executive Officers under the General Electric Company 2007 Long-term Incentive Plan (Incorporated by reference to Exhibit 10.6 of General Electric's Current Report on Form 8-K dated April 27, 2007 (Commission file number 001-00035)). | |||||
(s) | First Restatement of the General Electric International Employee Stock Purchase Plan effective May 1, 2002 (Incorporated by reference to Exhibit 4.1 to General Electric's Registration Statement on Form S-8, File No. 333-163106 (Commission file number 001-00035)). | |||||
(t) | Form of Agreement for Long Term Performance Award Grants to Executive Officers under the General Electric Company 2007 Long-term Incentive Plan (Incorporated by reference to Exhibit 10 of General Electric's Current Report on Form 8-K dated February 12, 2010 (Commission file number 001-00035)). | |||||
(u) | Time Sharing Agreement dated November 22, 2010 between General Electric Company and Jeffrey R. Immelt (Incorporated by reference to Exhibit 10(z) to General Electric's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (Commission file number 001-00035)).
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(v)
(w)
(x)
| GE Stock Option Grant Agreement Dated March 4, 2010 for Jeffrey R. Immelt Terms & Conditions as Amended April 18, 2011 (Incorporated by reference to Exhibit 10(h) of General Electric's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (Commission file number 001-00035)).
Non-Competition Agreement between General Electric Company and John Krenicki effective July 24, 2012 (Incorporated by reference to Exhibit 10(a) of General Electric's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 (Commission file number 001-00035)).
Time Sharing Agreement dated March 13, 2013 between General Electric Company and Brackett B. Denniston III (Incorporated by reference to Exhibit 10(b) of General Electric's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 (Commission file number 001-00035)).
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(y) | Amended and Restated Income Maintenance Agreement, dated October 29, 2009, between the Registrant and General Electric Capital Corporation (Incorporated by reference to Exhibit 10 to GECC's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 (Commission file number 001-06461)).
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(z)
(aa) | Transaction Agreement dated as of February 12, 2013 among General Electric Company, Comcast Corporation, National Broadcasting Company Holding, Inc., Navy Holdings, Inc., NBCUniversal, LLC and NBCUniversal Media, LLC (Incorporated by reference to Exhibit 10(a) of General Electric's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 (Commission file number 001-00035)).
Amendment dated as of March 19, 2013 to the Transaction Agreement dated as of February 12, 2013 by and among General Electric Company, Comcast Corporation, NBCUniversal, LLC, NBCUniversal Media, LLC, National Broadcasting Company Holding, Inc. and Navy Holdings, Inc. (Incorporated by reference to Exhibit 10(c) of General Electric's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 (Commission file number 001-00035)).
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(11) | Statement re Computation of Per Share Earnings.** |
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12(a) | Computation of Ratio of Earnings to Fixed Charges.* |
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12(b) | Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.* |
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(21) | Subsidiaries of Registrant.* |
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(23) | Consent of Independent Registered Public Accounting Firm.* |
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(24) | Power of Attorney.* |
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31(a) | Certification Pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.* |
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31(b) | Certification Pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.* |
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(32) | Certification Pursuant to 18 U.S.C. Section 1350.* |
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99(a) | Undertaking for Inclusion in Registration Statements on Form S-8 of General Electric Company (Incorporated by reference to Exhibit 99(b) to General Electric Annual Report on Form 10-K (Commission file number 001-00035) for the fiscal year ended December 31, 1992). |
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99(b) | Computation of Ratio of Earnings to Fixed Charges (Incorporated by reference to Exhibit 12(a) to GECC's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (Commission file number 001-06461)). |
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(101) | The following materials from General Electric Company's Annual Report on Form 10-K for the year ended December 31, 2011, formatted in XBRL (eXtensible Business Reporting Language); (i) Statement of Earnings for the years ended December 31, 2013, 2012 and 2011, (ii) Consolidated Statement of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011, (iii) Consolidated Statement of Changes in Shareowners' Equity for the years ended December 31, 2013, 2012 and 2011, (iv) Statement of Financial Position at December 31, 2013 and 2012, (v) Statement of Cash Flows for the years ended December 31, 2013, 2012 and 2011, and (vi) the Notes to Consolidated Financial Statements. |
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* | Filed electronically herewith. |
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** | Information required to be presented in Exhibit 11 is provided in Note 20 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification 260, Earnings Per Share. |
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K for the fiscal year ended December 31, 2013, to be signed on its behalf by the undersigned, and in the capacities indicated, thereunto duly authorized in the Town of Fairfield and State of Connecticut on the 27th day of February 2014.
General Electric Company(Registrant) | |||
| |||
By | /s/ Jeffrey S. Bornstein | ||
Jeffrey S. BornsteinSenior Vice President and Chief Financial Officer(Principal Financial Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signer | Title | Date | |||
/s/ Jeffrey S. Bornstein | Principal Financial Officer | February 27, 2014 | |||
Jeffrey S. BornsteinSenior Vice President and Chief Financial Officer | |||||
/s/ Jan R. Hauser | Principal Accounting Officer | February 27, 2014 | |||
Jan R. HauserVice President and Controller | |||||
Jeffrey R. Immelt* | Chairman of the Board of Directors(Principal Executive Officer) | ||||
W. Geoffrey Beattie* John J. Brennan* | Director Director | ||||
James I. Cash, Jr.* Francisco D'Souza* Marijn E. Dekkers* | Director Director Director | ||||
Ann M. Fudge* | Director | ||||
Susan Hockfield* | Director | ||||
Andrea Jung* | Director | ||||
Robert W. Lane* | Director | ||||
Ralph S. Larsen* | Director | ||||
Rochelle B. Lazarus* | Director | ||||
James J. Mulva* | Director | ||||
James E. Rohr* | Director | ||||
Mary L. Schapiro* | Director | ||||
Robert J. Swieringa* | Director | ||||
James S. Tisch* | Director | ||||
Douglas A. Warner III* | Director | ||||
A majority of the Board of Directors | |||||
*By | /s/ Christoph A. Pereira | ||||
Christoph A. PereiraAttorney-in-factFebruary 27, 2014 |
Exhibit 3(i)
Restated Certificate of Incorporation
of
General Electric Company
Section 1. Name
The name of the corporation is General Electric Company.
Section 2. Purposes
The purposes of the corporation are as follows:
A. To manufacture, process, construct, develop, assemble, and produce in any way, to sell, lease, supply, and distribute in any way, to purchase, lease, mine, extract, and acquire in any way, to own, operate, experiment with, deal in, service, finance, and use in any way, equipment, apparatus, appliances, devices, structures, materials, processes, information, tangible and intangible property, services and systems of every kind, nature and description:
(1) for any electrical, or energy-conversion, application or purpose, including but not limited to the production, transmission, distribution, storage, regulation, control and use in any manner of electricity, or in any way connected with or deriving from any electrical, or energy-conversion, application or purpose, and,
(2) for any other application or purpose, whatsoever, including but not limited to industrial, utility, consumer, defense, governmental, scientific, educational, cultural, financial, recreational, agricultural, transportation, construction, mining, and communication applications or purposes.
B. To conduct studies and research and development, and to engage in any other activity relating to the development, application, and dissemination of information concerning science, technology, and other fields of endeavor.
C. To acquire by purchase, subscription or otherwise all or part of any interest in the property, assets, business, or good will of any corporation, association, firm, or individual, and to dispose of, or otherwise deal with, such property, assets, business or good will.
D. To engage in any activity which may promote the interests of the corporation, or enhance the value of its property, to the fullest extent permitted by law, and in furtherance of the foregoing purposes to exercise all powers now or hereafter granted or permitted by law, including the powers specified in the New York Business Corporation Law.
Section 3. Authorized Shares
A. General Authorization
The aggregate number of shares which the corporation is authorized to issue is 13,250,000,000 shares, consisting of:
(1) 13,200,000,000 shares of common stock having a par value of $0.06 per share; and
(2) 50,000,000 shares of preferred stock having a par value of $1 per share.
B. Preferred Stock
(1) The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this subsection B, to provide for the issuance of the preferred shares in series, and by filing a certificate pursuant to the Business Corporation Law, to establish the number of shares to be included in each such series, and to fix the designation, relative rights, preferences and limitations of the shares of each such series. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether dividends shall be cumulative and, if so, from which date or dates;
(c) Whether that series shall have voting rights, in addition to the voting rights provided by law and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
(f) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation;
(g) Any other relative rights, preferences and limitations of that series.
(2) Dividends on outstanding preferred shares shall be declared and paid, or set apart for payment, before any dividends shall be declared and paid, or set apart for payment, on the common shares with respect to the same dividend period.
C. Preemptive Rights
No present or future holder of any shares of the corporation of any class or series, whether heretofore or hereafter issued, shall have any preemptive rights with respect to (1) any shares of the corporation of any class or series, or (2) any other security of the corporation (including bonds and debentures) convertible into or carrying rights or options to purchase such shares.
Section 4. Office
The office of the corporation is located in the City of Schenectady, County of Schenectady, State of New York.
Section 5. By-laws
The by-laws may be amended or repealed, and new by-laws may be adopted, by the shareholders or the Board of Directors, except that the Board of Directors shall have no authority to amend or repeal any by-law which is adopted by the shareholders after April 20, 1948, unless such authority is granted to the Board by the specific provisions of a by-law adopted by the shareholders.
Section 6. Directors
The Board of Directors of the corporation shall consist of not less than ten directors, the exact number to be determined pursuant to procedures set forth in the by-laws.
A person who is or was a director of the corporation shall have no personal liability to the corporation or its shareholders for damages for any breach of duty in such capacity except that the foregoing shall not eliminate or limit liability where such liability is imposed under the Business Corporation Law of the State of New York.
The vote required for election of a director by the shareholders shall, except in a contested election, be the affirmative vote of a majority of the votes cast in favor of or against the election of a nominee at a meeting of shareholders. In a contested election, directors shall be elected by a plurality of the votes cast at a meeting of shareholders by the holders of shares entitled to vote in the election. An election shall be considered contested if as of the record date there are more nominees for election than positions on the board of directors to be filled by election at the meeting.
Section 7. Agent for Process
The Secretary of State of the State of New York is designated as the agent of the corporation upon whom process against it may be served, and the post office address to which the Secretary of State shall mail a copy of such process served upon him is Senior Litigation Counsel, General Electric Company, 3135 Easton Turnpike, Fairfield, CT 06828.
Exhibit 4(k)
Kathryn A. Cassidy Senior Vice President and GE Treasurer
General Electric Company 3135 Easton Turnpike Fairfield, CT 06828 |
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
February 27, 2014
Subject: | General Electric Company Annual Report on Form 10-K for the fiscal year ended December 31, 2013 - File No. 001-00035 |
Dear Sirs:
Neither General Electric Company (the "Company") nor any of its consolidated subsidiaries has outstanding any instrument with respect to its long-term debt, other than those filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, under which the total amount of securities authorized exceeds 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. In accordance with paragraph (b)(4)(iii) of Item 601 of Regulation S-K (17 CFR Sec. 229.601), the Company hereby agrees to furnish to the Securities and Exchange Commission, upon request, a copy of each instrument that defines the rights of holders of such long term debt not filed or incorporated by reference as an exhibit to the Company's Annual Report on Form 10‑K for the fiscal year ended December 31, 2013.
Very truly yours,
GENERAL ELECTRIC COMPANY
/s/ Kathryn A. Cassidy | |
Kathryn A. Cassidy | |
Senior Vice President and GE Treasurer
|
10(h)
2003 NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
(Amended and Restated as of February 7, 2014)
I. Non-Employee Director Compensation
A. Establishment of Annual Compensation
An annual compensation amount (the "Annual Base Compensation") payable to Non-Employee Directors (hereafter "Directors") of General Electric Company (the "Company") shall be established from time-to-time by the Board of Directors. Directors who are members of the Audit Committee, the Management Development and Compensation Committee or the Risk Committee, and any director who is serving as the lead independent director, shall also receive additional annual compensation equal to ten percent (10%) of the Annual Base Compensation for service on each such committee (such additional compensation together with the Annual Base Compensation are collectively referred to as the "Annual Compensation"). The amount of Annual Compensation will be reported annually in the Proxy Statement.
B. Payment of Annual Compensation
1. The Annual Compensation shall be payable in quarterly installments, with each installment payable as promptly as practicable following the last business day of the calendar quarter to which it applies. Quarterly payments shall be pro rated if Board service commences or terminates during a calendar quarter.
2. The Annual Compensation shall be paid sixty percent (60%) in Deferred Stock Units ("DSUs") and forty percent (40%) in cash. The number of DSUs to be paid and the terms of the DSUs shall be determined as provided in the following sections of this Plan.
3. Prior to the beginning of the calendar year of their annual election to the Board, Directors who have previously been elected to the Board may elect to receive in DSUs all or part of that portion of his or her Annual Compensation otherwise payable in cash. Notwithstanding the above, within 30 days from the date of their initial election or appointment to the Board, Directors may elect to receive in DSUs all or part of that portion of his or her Annual Compensation otherwise payable in cash; provided, however, that such election shall only apply to Annual Compensation earned in calendar quarters beginning after the date of such election. Such elections shall be irrevocable for the period for which the director is elected.
4. All DSUs earned with respect to Annual Compensation will be credited to the Director's DSU account (the "DSU Account") when such Annual Compensation is otherwise payable (the "Payment Date").
5. The Director's DSU Account will be credited with the number of DSUs calculated to the nearest thousandths of a DSU, determined by dividing the dollar amount of Annual Compensation to be paid in DSUs on the Payment Date by the average of the closing market price of the Company's common stock as reported on the Consolidated Tape of the New York Stock Exchange for the 20 trading days immediately preceding such Payment Date.
II. Administration of DSU Accounts
A. Consolidation of Prior Deferred Fee Accounts
For Directors serving on the Board on January 1, 2003, the balances of deferred stock units in any deferred fee accounts maintained by the Company under the Company's Non-Employee Director Deferred Fee Plan in effect on December 31, 2002, or predecessors to that plan, shall be deemed to be transferred to the DSU Accounts established under this Plan, and, together with any other amounts specifically credited to a Director's DSU Account, shall be administered under the terms of this Plan. The balances of deferred stock units in any deferred fee accounts maintained by the Company under the Company's Non-Employee Director Deferred Fee Plan in effect on December 31, 2002, or predecessors to that plan, for former directors who were not serving on the Board on January 1, 2003 shall be administered under the applicable terms of such prior plan or plans.
B. Crediting With Dividend Equivalents
1. On each dividend payment date, a Director's DSU Account will be credited with regular quarterly dividend equivalents in the form of additional DSUs determined by multiplying the number of DSUs in the Director's DSU Account on the related dividend record date by any per share cash dividends declared by the Company on its common stock and dividing the product by the closing market price of the Company's common stock as reported on the Consolidated Tape of the New York Stock Exchange on such dividend payment date.
2. The DSU Accounts will also be credited with DSUs by multiplying the number of DSUs in the Director's DSU Account by any stock dividends declared by the Company on its common stock.
C. Recapitalization
If, as a result of a recapitalization of the Company (including stock splits), the Company's outstanding shares of common stock shall be changed into a greater or smaller number of shares, the number of DSUs credited to a Director's DSU Account shall be appropriately adjusted on the same basis.
D. Election To Switch DSUs Upon Termination of Board Service
Prior to the end of the calendar year in which Board service terminates, a Director may irrevocably elect to switch up to 100% of the value of the DSUs in his or her DSU Account into cash, effective on the date one year following termination of Board service (hereafter "First Anniversary Date"). The cash value of the DSUs will be based on the number of DSUs in the Director's DSU Account on the First Anniversary Date multiplied by the average of the closing market price of the Company's common stock as reported on the Consolidated Tape for the New York Stock Exchange for the 20 trading days immediately preceding the First Anniversary Date. The cash in the DSU Account will thereafter be credited monthly with interest equivalents based upon the prior calendar month's average yield for U.S. Treasury notes and bonds with maturities of from ten to twenty years, as published by an official agency to be determined by the -Chief Financial Officer and utilized on a consistent year to year basis.
E. Payment of DSU Accounts
1. Form of Distribution for Director and Survivor Payout Elections for amounts credited to the Director's DSU Account on or before December 31, 2004
(a) At any time before the end of the calendar year in which Board service terminates, a Director may elect to have the DSU Account paid: (i) in a lump sum on the First Anniversary Date (or as soon thereafter as practicable); or (ii) in up to ten (10) annual installments, beginning on July 15th following the First Anniversary Date (or as soon thereafter as is practical).
(b) In the event that a Director's service on the Board terminates as a result of death, the beneficiary(s) designated by the Director (or failing such designation, the Director's estate), may elect to have the Director's DSU Account: (i) paid out in a lump sum as soon as practicable following the Director's death; or (ii) paid out in annual installments up to an aggregate of ten (10) annual installments, commencing in the month of July following the Director's death. In the event of a Director's death subsequent to termination of Board service, but prior to receiving all entitled deferred payments, the beneficiary(s) designated by the Director (or failing such designation, the Director's estate), may elect to have the Director's DSU Account paid out in a lump sum as soon as practicable following the Director's death.
2. Form of Distribution for Director and Survivor Payout Elections for Post 2004 DSUs.
(a) For amounts credited to the Director's DSU account after December 31, 2004, the amounts shall be paid in accordance with the irrevocable election of the Director (lump sum, five year installments or ten year installments) made prior to the beginning of the calendar year of his or her annual election to the Board (or, for a Director serving his or her initial term, made within 30 days of his or her election to the Board).Installment payments shall begin on July 15th following the First Anniversary Date. Lump sum payments shall be made on the First Anniversary Date.
(b) If a Director's service on the Board terminates as a result of death payments shall be made upon the Director's death in the form elected by the Director to the beneficiary(s) designated by the Director (or failing such designation, to the Director's estate).
(c) In the event of a Director's death subsequent to termination of Board service but prior to receiving all entitled deferred payments, payments shall be continue to be made in the form elected by the Director to the beneficiary(s) designated by the Director (or failing such designation, to the Director's estate).
3. Determination of Amount of Cash Installment Payments.
(a) Regardless of whether the Director has elected to convert DSUs to cash value under section D above, all payouts of a Director's DSU Account will be paid in cash.
(b) The amount of the first cash installment payment shall be a fraction of the value of the DSUs in the Director's DSU Account on the date of the initial installment payment, the numerator of which is one and the denominator of which is the total number of installments elected. Each subsequent installment shall be calculated in the same manner as of the date of that installment payment, except that the denominator shall be reduced by the number of installments which have been previously paid.
(c) The value of DSUs in a Director's DSU Account will be determined for purposes of the preceding section by multiplying the number of DSUs in the Director's DSU Account on the Payment Date by the average of the closing market price of the Company's common stock as reported on the Consolidated Tape of New York Stock Exchange for the 20 trading days immediately preceding such date.
III. General Provisions
A. Assignability
No right to receive payment under this Plan shall be transferable or assignable by a participant except by will or laws of descent and distribution.
B. Amendment of the Plan
This Plan may be amended, suspended or terminated at any time by the Board of Directors of the Company. However, no amendment, suspension or termination of the Plan may, without the consent of a participant, alter or impair any of the rights previously granted under the Plan. Any amendment or termination shall comply with the restrictions of Section 409A of the Internal Revenue Code ("Section 409A") to the extent applicable. No amendment or termination of the Plan may accelerate a scheduled payment of amounts subject to Section 409A, nor may any amendment or termination permit a subsequent deferral of amounts subject to Section 409A.
C. Compliance with 409A; Effective Date
This Plan is intended to comply with Section 409A of the Internal Revenue Code with respect to amounts accrued after December 31, 2004; provided, however, that the requirements of Section 409A of the Code shall only apply to amounts accrued in excess of amounts accrued and vested on December 31, 2004 (adjusted for earnings on such amounts). The Plan shall be administered and interpreted in a manner consistent with such intent. This Plan is effective as of January 1, 2003.
Exhibit 12(a) | ||||||||||||||
General Electric Company | ||||||||||||||
Computation of Ratio of Earnings to Fixed Charges | ||||||||||||||
Years ended December 31 | ||||||||||||||
(Dollars in millions) | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||
|
|
|
| |||||||||||
General Electric Company and | ||||||||||||||
consolidated affiliates | ||||||||||||||
Earnings(a) | $ | 15,976 | $ | 15,396 | $ | 18,794 | $ | 14,078 | $ | 9,696 | ||||
Plus: | ||||||||||||||
Interest and other financial charges | ||||||||||||||
included in expense(b) | 10,116 | 12,407 | 14,422 | 15,431 | 17,516 | |||||||||
One-third of rental expense(c) | 504 | 510 | 462 | 563 | 595 | |||||||||
Adjusted "earnings" | $ | 26,597 | $ | 28,313 | $ | 33,677 | $ | 30,072 | $ | 27,807 | ||||
Fixed charges: | ||||||||||||||
Interest and other financial charges | ||||||||||||||
included in expense(b) | $ | 10,116 | $ | 12,407 | $ | 14,422 | $ | 15,431 | $ | 17,516 | ||||
Interest capitalized | 29 | 28 | 25 | 39 | 42 | |||||||||
One-third of rental expense(c) | 504 | 510 | 462 | 563 | 595 | |||||||||
Total fixed charges | $ | 10,649 | $ | 12,945 | $ | 14,908 | $ | 16,033 | $ | 18,153 | ||||
Ratio of earnings to fixed charges | 2.50 | 2.19 | 2.26 | 1.88 | 1.53 | |||||||||
(a) Earnings before income taxes, noncontrolling interests, discontinued operations and undistributed earnings of equity investees.
(b) Includes interest on tax deficiencies.
(c) Considered to be representative of interest factor in rental expense.
Exhibit 12(b) | ||||||||||||||
General Electric Company | ||||||||||||||
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends | ||||||||||||||
Years ended December 31 | ||||||||||||||
(Dollars in millions) | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||
|
|
|
| |||||||||||
General Electric Company and | ||||||||||||||
consolidated affiliates | ||||||||||||||
Earnings(a) | $ | 15,976 | $ | 15,396 | $ | 18,794 | $ | 14,078 | $ | 9,696 | ||||
Plus: | ||||||||||||||
Interest and other financial charges | ||||||||||||||
included in expense(b) | 10,116 | 12,407 | 14,422 | 15,431 | 17,516 | |||||||||
One-third of rental expense(c) | 504 | 510 | 462 | 563 | 595 | |||||||||
Adjusted "earnings" | $ | 26,597 | $ | 28,313 | $ | 33,677 | $ | 30,072 | $ | 27,807 | ||||
Fixed charges: | ||||||||||||||
Interest and other financial charges | ||||||||||||||
included in expense(b) | $ | 10,116 | $ | 12,407 | $ | 14,422 | $ | 15,431 | $ | 17,516 | ||||
Interest capitalized | 29 | 28 | 25 | 39 | 42 | |||||||||
One-third of rental expense(c) | 504 | 510 | 462 | 563 | 595 | |||||||||
Total fixed charges | $ | 10,649 | $ | 12,945 | $ | 14,908 | $ | 16,033 | $ | 18,153 | ||||
Ratio of earnings to fixed charges | 2.50 | 2.19 | 2.26 | 1.88 | 1.53 | |||||||||
Preferred stock dividend requirements | $ | - | $ | - | $ | 1,031 | $ | 300 | $ | 300 | ||||
Ratio of earnings before provision for | ||||||||||||||
income taxes to earnings from | ||||||||||||||
continuing operations | 1.04 | 1.17 | 1.40 | 1.08 | 0.90 | |||||||||
Preferred stock dividend factor on | ||||||||||||||
pre-tax basis | $ | - | $ | - | $ | 1,443 | $ | 325 | $ | 271 | ||||
Fixed charges | 10,649 | 12,945 | 14,908 | 16,033 | 18,153 | |||||||||
Total fixed charges and preferred stock | ||||||||||||||
dividend requirements | $ | 10,649 | $ | 12,945 | $ | 16,351 | $ | 16,358 | $ | 18,424 | ||||
Ratio of earnings to combined fixed | ||||||||||||||
charges and preferred stock dividends | 2.50 | 2.19 | 2.06 | 1.84 | 1.51 | |||||||||
(a) Earnings before income taxes, noncontrolling interests, discontinued operations and undistributed earnings of equity investees.
(b) Includes interest on tax deficiencies.
(c) Considered to be representative of interest factor in rental expense.
Exhibit 21
SUBSIDIARIES OF REGISTRANT
General Electric's principal affiliates as of December 31, 2013, are listed below. All other affiliates, if considered in the aggregate as a single affiliate, would not constitute a significant subsidiary.
AFFILIATES OF REGISTRANT INCLUDED IN REGISTRANT'S FINANCIAL STATEMENTS
| Percentage of voting |
| ||
securities directly or | State or Country | |||
indirectly owned by | of incorporation | |||
registrant (1) | or organization | |||
| ||||
Amersham Health Norge AS |
| 100 | Norway | |
Bently Nevada, Inc. |
| 100 | Delaware | |
Calma Company | 100 | Delaware | ||
Cardinal Cogen, Inc. |
| 100 | Delaware | |
Caribe GE International of Puerto Rico, Inc. |
| 100 | Puerto Rico | |
Datex-Ohmeda, Inc. |
| 100 | Delaware | |
Dresser, Inc. | 100 | Delaware | ||
Druck Incorporated | 100 | Connecticut | ||
GE Aviation Service Operation LLP |
| 100 | Singapore | |
GE Aviation Systems Group Limited |
| 100 | United Kingdom and Northern Ireland | |
GE Aviation Systems North America, Inc. |
| 100 | Delaware | |
GE Aviation UK |
| 100 | United Kingdom and Northern Ireland | |
GE Betz International, Inc. |
| 100 | Pennsylvania | |
GE Caledonian Limited |
| 100 | United Kingdom & Northern Ireland | |
GE Capital Global Financial Holdings, Inc. |
| 100 | Connecticut | |
GE Capital UK Finance |
| 100 | United Kingdom & Northern Ireland | |
GE Drives & Controls, Inc. |
| 100 | Delaware | |
GE Druck Holdings Limited |
| 100 | United Kingdom & Northern Ireland | |
GE Energy Europe B.V. |
| 100 | Netherlands | |
GE Energy Netherlands, B.V. |
| 100 | Netherlands | |
GE Energy Parts, Inc. |
| 100 | Delaware | |
GE Energy Power Conversion Group SAS | 100 | France | ||
GE Energy Products France SNC |
| 100 | France | |
GE Energy Services, Inc. |
| 100 | Delaware | |
GE Energy (USA), LLC | 100 | Delaware | ||
GE Engine Services, LLC |
| 100 | Delaware | |
GE Engine Services - Dallas, LP |
| 100 | Delaware | |
GE Engine Services Distribution, LLC |
| 100 | Delaware | |
GE Engine Services UNC Holding I, Inc. |
| 100 | Delaware | |
GE Europe Holdings LLC |
| 100 | Delaware | |
GE Financial Assurance Holdings, Inc. |
| 100 | Delaware | |
GE Financial Funding |
| 100 | Ireland | |
GE Financial Ireland |
| 100 | Ireland | |
GE Gas Turbines (Greenville) L.L.C. |
| 100 | Delaware | |
GE Generators (Pensacola), L.L.C. |
| 100 | Delaware | |
GE Global Sourcing LLC | 100 | Delaware | ||
GE Healthcare AS |
| 100 | Norway | |
GE Healthcare Bio-Sciences AB |
| 100 | Sweden | |
GE Healthcare BVBA |
| 100 | Belgium | |
GE Healthcare European Holdings SARL |
| 100 | Luxembourg | |
GE Healthcare Finland Oy |
| 100 | Finland | |
GE Healthcare Japan Corporation |
| 100 | Japan | |
GE Healthcare Ltd. |
| 100 | United Kingdom & Northern Ireland | |
GE Healthcare Norge AS |
| 100 | Norway | |
GE Healthcare USA Holding Inc. |
| 100 | Delaware | |
GE Holdings Luxembourg & Co. SARL |
| 100 | Luxembourg | |
GE Hungary Kft. |
| 100 | Hungary | |
GE Infrastructure Aviation Limited |
| 100 | United Kingdom & Northern Ireland | |
GE Infrastructure, Inc. |
| 100 | Delaware | |
GE Infrastructure Technology International LLC. | 100 | Delaware | ||
GE Inspection and Repair Services Limited |
| 100 | United Kingdom & Northern Ireland | |
GE Intelligent Platforms Embedded Systems, Inc. |
| 100 | Delaware | |
GE Intelligent Platforms, Inc. |
| 100 | Delaware | |
GE Investments, Inc. |
| 100 | Nevada | |
GE Ionics Inc. | 100 | Massachusetts | ||
GE Italia Holding S.p.A |
| 99 | Italy | |
GE Jenbacher GmbH & Co OG |
| 100 | Austria | |
GE Keppel Energy Services Pte. Ltd. |
| 50 | Singapore | |
GE Maintenance Services, Inc. | 100 | Delaware | ||
GE Media Holdings, Inc. | 100 | Delaware | ||
GE Medical Systems Global Technology Company, LLC |
| 100 | Delaware | |
GE Medical Systems Information Technologies, Inc. |
| 100 | Wisconsin | |
GE Medical Systems Societe en Commandite Simple |
| 100 | France | |
GE Medical Systems, Inc. |
| 100 | Delaware | |
GE Medical Systems, LLC |
| 100 | Delaware | |
GE Medical Systems, Ultrasound & Primary Care Diagnostics LLC |
| 100 | Delaware | |
GE Military Systems |
| 100 | Delaware | |
GE Oil & Gas U.K. Limited |
| 100 | United Kingdom & Northern Ireland | |
GE Osmonics, Inc. |
| 100 | Minnesota | |
GE Pacific Holdings Pte. Ltd. |
| 100 | Singapore | |
GE Pacific Private Limited |
| 100 | Singapore | |
GE Packaged Power, Inc. |
| 100 | Delaware | |
GE Packaged Power, L.P. |
| 100 | Delaware | |
GE Transportation Parts, LLC |
| 100 | Delaware | |
GE Transportation Systems Global Signaling, LLC |
| 100 | Delaware | |
GE UK Group Limited |
| 100 | United Kingdom & Northern Ireland | |
GE Water & Process Technologies Canada |
| 100 | Canada | |
GE Wind Energy, LLC |
| 100 | Delaware | |
GEA Parts, LLC |
| 100 | Delaware | |
GEA Products LP |
| 100 | Delaware | |
GEAE Technology, Inc. |
| 100 | Delaware | |
GEFH AS |
| 100 | Norway | |
GEH HOLDINGS | 100 | United Kingdom & Northern Ireland | ||
GENE Holding LLC |
| 100 | Delaware | |
General Electric (Bermuda) Ltd. |
| 100 | Bermuda | |
General Electric Canada Company |
| 100 | Canada | |
General Electric Capital Corporation |
| 100 | Delaware | |
General Electric CGR Europe SAS |
| 100 | France | |
General Electric Europe Holdings C.V. |
| 100 | Netherlands | |
General Electric Finance Holding GmbH |
| 100 | Germany | |
General Electric Financing C.V. |
| 100 | Netherlands | |
General Electric Foreign Sales Corporation | 100 | The Bahamas and Eleuthera Island | ||
General Electric International (Benelux) BV |
| 100 | Netherlands | |
General Electric International, Inc. |
| 100 | Delaware | |
General Electric International Operations Company, Inc. | 100 | Delaware | ||
General Electric Services (Bermuda) Ltd. |
| 100 | Bermuda | |
General Electric Services Luxembourg SARL |
| 100 | Luxembourg | |
Granite Services, Inc. |
| 100 | Delaware | |
IDX Systems Corporation |
| 100 | Vermont | |
Monogram Licensing, Inc. | 100 | Delaware | ||
Monogram Licensing International, Inc. | 100 | Delaware | ||
MRA Systems, Inc. |
| 100 | Delaware | |
Nuclear Fuel Holding Co., Inc. |
| 100 | Delaware | |
Nuovo Pignone S.p.A. |
| 100 | Italy | |
OEC Medical Systems, Inc. |
| 100 | Delaware | |
Panametrics Ltd. |
| 100 | Bermuda | |
Patent Licensing International, Inc. | 100 | Delaware | ||
PII Limited |
| 100 | United Kingdom & Northern Ireland | |
Reuter-Stokes, Inc. |
| 100 | Delaware | |
Unison Industries, LLC |
| 100 | Delaware | |
Viceroy, Inc. |
| 100 | Delaware | |
Whatman Limited |
| 100 | United Kingdom & Northern Ireland |
(1) With respect to certain companies, shares in names of nominees and qualifying shares in names of directors are included in above percentages.
Exhibit 23
Consent of Independent Registered Public Accounting Firm
The Board of DirectorsGeneral Electric Company:
We consent to the incorporation by reference in the registration statement on Form S-3 (Registration Nos. 33-50639, 33-29024, 333-59671, 333-72566, 333-177803 and 333-186882), on Form S-4 (Registration No. 333-107556), and on Form S-8 (Registration Nos. 333-01953, 333-42695, 333-74415, 333-83164, 333-98877, 333-94101, 333-65781, 333-88233, 333-117855, 333-99671, 333-102111, 333-142452, 333-155587, 333-158069, 333-158071, 333-163106, 333-177805, 333-179688, 333-181177 and 333-184792) of General Electric Company of our report dated February 27, 2014, with respect to the statement of financial position of General Electric Company and consolidated affiliates as of December 31, 2013 and 2012, and the related statements of earnings, comprehensive income, changes in shareowners' equity and cash flows for each of the years in the three-year period ended December 31, 2013, and the effectiveness of internal control over financial reporting as of December 31, 2013, which report appears in the December 31, 2013 annual report on Form 10-K of General Electric Company.
/s/ KPMG LLP
Stamford, Connecticut
February 27, 2014
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a director or officer of General Electric Company, a New York corporation (the "Company"), hereby constitutes and appoints Jeffrey R. Immelt, Brackett B. Denniston III, Jeffrey S. Bornstein, Jan R. Hauser, and Christoph A. Pereira, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all capacities, to sign one or more Annual Reports for the Company's fiscal year ended December 31, 2013 on Form 10-K under the Securities Exchange Act of 1934, as amended, or such other form as any such attorney-in-fact may deem necessary or desirable, any amendments thereto, and all additional amendments thereto, each in such form as they or any one of them may approve, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done so that such Annual Report shall comply with the Securities Exchange Act of 1934, as amended, and the applicable Rules and Regulations adopted or issued pursuant thereto, as fully and to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitute or resubstitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her hand this 7th day of February, 2014.
/s/ Jeffrey R. Immelt | |||||
Jeffrey R. Immelt | |||||
Chairman of the Board | |||||
(Principal Executive | |||||
Officer and Director) | |||||
/s/ Jeffrey S. Bornstein | /s/ Jan R. Hauser | ||||
Jeffrey S. Bornstein | Jan R. Hauser | ||||
Senior Vice President and | Vice President and Controller | ||||
Chief Financial Officer | (Principal Accounting Officer) | ||||
(Principal Financial Officer) | |||||
(Page 1 of 2)
/s/ W. Geoffrey Beattie | /s/ Ralph S. Larsen | |||||||
W. Geoffrey Beattie | Ralph S. Larsen | |||||||
Director | Director | |||||||
/s/ John J. Brennan | /s/ Rochelle B. Lazarus | |||||||
John J. Brennan | Rochelle B. Lazarus | |||||||
Director | Director | |||||||
/s/ James I. Cash, Jr. | /s/ James J. Mulva | |||||||
James I. Cash, Jr. | James J. Mulva | |||||||
Director | Director
| |||||||
/s/ Francisco D'Souza |
/s/ James E. Rohr | |||||||
Francisco D'Souza Director
| James E. Rohr Director | |||||||
/s/ Marijn E. Dekkers | /s/ Mary L. Schapiro | |||||||
Marijn E. Dekkers | Mary L. Schapiro | |||||||
Director | Director | |||||||
/s/ Ann M. Fudge | /s/ Robert J. Swieringa | |||||||
Ann M. Fudge | Robert J. Swieringa | |||||||
Director | Director | |||||||
/s/ Susan Hockfield | /s/ James S. Tisch | |||||||
Susan Hockfield Director |
| |||||||
|
/s/ Douglas A. Warner III
| |||||||
A MAJORITY OF THE BOARD OF DIRECTORS
(Page 2 of 2)
Exhibit 31(a)
Certification Pursuant toRules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as Amended
I, Jeffrey R. Immelt, certify that: | ||
1. | I have reviewed this annual report on Form 10-K of General Electric Company; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. | |
Date: February 27, 2014
/s/ Jeffrey R. Immelt | |
Jeffrey R. Immelt | |
Chief Executive Officer |
Exhibit 31(b)
Certification Pursuant toRules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as Amended
I, Jeffrey S. Bornstein, certify that: | ||
1. | I have reviewed this annual report on Form 10-K of General Electric Company; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. | |
Date: February 27, 2014
/s/ Jeffrey S. Bornstein | |
Jeffrey S. Bornstein | |
Chief Financial Officer |
Exhibit 32
Certification Pursuant to18 U.S.C. Section 1350
In connection with the Annual Report of General Electric Company (the "registrant") on Form 10-K for the year ending December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "report"), we, Jeffrey R. Immelt and Jeffrey S. Bornstein, Chief Executive Officer and Chief Financial Officer, respectively, of the registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:
(1) | The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant. |
February 27, 2014 | |
/s/ Jeffrey R. Immelt | |
Jeffrey R. Immelt | |
Chief Executive Officer
| |
/s/ Jeffrey S. Bornstein | |
Jeffrey S. Bornstein | |
Chief Financial Officer |