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2014-06-30 10-Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
 
____________________________________ 

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý.    No  ¨.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý.    No  ¨.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
ý
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨.    No  ý.
At June 30, 2014 there were 914,810,016 shares of Common Stock outstanding.

Table of Contents

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

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

2
Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 
 
Quarter Ended June 30,
(Dollars in millions, except per share amounts)
2014
 
2013
Net Sales:
 
 
 
Product sales
$
13,017

 
$
11,661

Service sales
4,174

 
4,345

 
17,191

 
16,006

Costs and Expenses:
 
 
 
Cost of products sold
10,182

 
8,712

Cost of services sold
2,749

 
2,840

Research and development
666

 
631

Selling, general and administrative
1,623

 
1,737

 
15,220

 
13,920

Other income, net
384

 
421

Operating profit
2,355

 
2,507

Interest expense, net
206

 
217

Income from continuing operations before income taxes
2,149

 
2,290

Income tax expense
359

 
645

Net income from continuing operations
1,790

 
1,645

Less: Noncontrolling interest in subsidiaries' earnings from continuing operations
110

 
93

Income from continuing operations attributable to common shareowners
1,680

 
1,552

Discontinued operations (Note 2):
 
 
 
Income from operations
—

 
43

Loss on disposal
—

 
(25
)
Income tax expense
—

 
(10
)
Income from discontinued operations attributable to common shareowners
—

 
8

Net income attributable to common shareowners
$
1,680

 
$
1,560

Earnings Per Share of Common Stock - Basic:
 
 
 
Income from continuing operations attributable to common shareowners
$
1.87

 
$
1.72

Net income attributable to common shareowners
$
1.87

 
$
1.73

Earnings Per Share of Common Stock - Diluted:
 
 
 
Income from continuing operations attributable to common shareowners
$
1.84

 
$
1.70

Net income attributable to common shareowners
$
1.84

 
$
1.71

See accompanying Notes to Condensed Consolidated Financial Statements


3
Table of Contents

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 
 
Six Months Ended June 30,
(Dollars in millions, except per share amounts)
2014
 
2013
Net Sales:
 
 
 
Product sales
$
23,709

 
$
21,916

Service sales
8,227

 
8,489

 
31,936

 
30,405

Costs and Expenses:
 
 
 
Cost of products sold
18,263

 
16,560

Cost of services sold
5,358

 
5,457

Research and development
1,290

 
1,241

Selling, general and administrative
3,219

 
3,364

 
28,130

 
26,622

Other income, net
647

 
730

Operating profit
4,453

 
4,513

Interest expense, net
431

 
453

Income from continuing operations before income taxes
4,022

 
4,060

Income tax expense
926

 
1,063

Net income from continuing operations
3,096

 
2,997

Less: Noncontrolling interest in subsidiaries' earnings from continuing operations
203

 
175

Income from continuing operations attributable to common shareowners
2,893

 
2,822

Discontinued operations (Note 2):
 
 
 
Income from operations
—

 
63

Loss on disposal
—

 
(40
)
Income tax expense
—

 
(19
)
Income from discontinued operations attributable to common shareowners
—

 
4

Net income attributable to common shareowners
$
2,893

 
$
2,826

Earnings Per Share of Common Stock - Basic:
 
 
 
Income from continuing operations attributable to common shareowners
$
3.21

 
$
3.13

Net income attributable to common shareowners
$
3.21

 
$
3.14

Earnings Per Share of Common Stock - Diluted:
 
 
 
Income from continuing operations attributable to common shareowners
$
3.16

 
$
3.09

Net income attributable to common shareowners
$
3.16

 
$
3.09

See accompanying Notes to Condensed Consolidated Financial Statements


4
Table of Contents

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

 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2014
 
2013
 
2014
 
2013
Net income from continuing operations
$
1,790

 
$
1,645

 
$
3,096

 
$
2,997

Net income from discontinued operations
—

 
8

 
—

 
4

Net income
1,790

 
1,653

 
3,096

 
3,001

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
 
 
 
 
 
 
Foreign currency translation adjustments arising during period
424

 
(289
)
 
315

 
(884
)
Reclassification adjustments for loss on sale of an investment in a foreign entity recognized in Other income, net
—

 
36

 
3

 
32

 
424

 
(253
)
 
318

 
(852
)
Pension and post-retirement benefit plans
 
 
 
 
 
 
 
Pension and post-retirement benefit plans adjustments during the period
(18
)
 
26

 
1

 
57

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

 
227

 
208

 
454

 
86

 
253

 
209

 
511

Tax expense
(29
)
 
(91
)
 
(69
)
 
(183
)
 
57

 
162

 
140

 
328

Unrealized (loss) gain on available-for-sale securities
 
 
 
 
 
 
 
Unrealized holding (loss) gain arising during period
(44
)
 
6

 
(12
)
 
133

Reclassification adjustments for gain included in Other income, net
(6
)
 
(27
)
 
(30
)
 
(54
)
 
(50
)
 
(21
)
 
(42
)
 
79

Tax benefit (expense)
21

 
8

 
18

 
(30
)
 
(29
)
 
(13
)
 
(24
)
 
49

Change in unrealized cash flow hedging
 
 
 
 
 
 
 
Unrealized cash flow hedging gain (loss) arising during period
102

 
(64
)
 
22

 
(159
)
Loss reclassified into Product sales
13

 
15

 
31

 
23

Gain reclassified into Other income, net
—

 
—

 
—

 
(2
)
 
115

 
(49
)
 
53

 
(138
)
Tax (expense) benefit
(29
)
 
15

 
(17
)
 
35

 
86

 
(34
)
 
36

 
(103
)
Other comprehensive income (loss), net of tax
538

 
(138
)
 
470

 
(578
)
Comprehensive income
2,328

 
1,515

 
3,566

 
2,423

Comprehensive income attributable to noncontrolling interest
(110
)
 
(88
)
 
(196
)
 
(149
)
Comprehensive income attributable to common shareowners
$
2,218

 
$
1,427

 
$
3,370

 
$
2,274

See accompanying Notes to Condensed Consolidated Financial Statements

5
Table of Contents

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
 
(Dollars in millions)
June 30, 2014
 
December 31, 2013
Assets
 
 
 
Cash and cash equivalents
$
4,962

 
$
4,619

Accounts receivable, net
11,795

 
11,458

Inventories and contracts in progress, net
9,896

 
10,330

Future income tax benefits, current
1,996

 
1,964

Other assets, current
992

 
1,071

Total Current Assets
29,641

 
29,442

Customer financing assets
1,098

 
1,156

Future income tax benefits
1,273

 
1,236

Fixed assets
19,218

 
18,661

Less: Accumulated depreciation
(10,192
)
 
(9,795
)
Fixed assets, net
9,026

 
8,866

Goodwill
28,378

 
28,168

Intangible assets, net
15,715

 
15,521

Other assets
7,011

 
6,205

Total Assets
$
92,142

 
$
90,594

Liabilities and Equity
 
 
 
Short-term borrowings
$
407

 
$
388

Accounts payable
7,297

 
6,965

Accrued liabilities
14,798

 
15,335

Long-term debt currently due
1,828

 
112

Total Current Liabilities
24,330

 
22,800

Long-term debt
17,837

 
19,741

Future pension and postretirement benefit obligations
3,207

 
3,444

Other long-term liabilities
11,429

 
11,279

Total Liabilities
56,803

 
57,264

Commitments and contingent liabilities (Note 14)
 
 

Redeemable noncontrolling interest
146

 
111

Shareowners' Equity:
 
 
 
Common Stock
15,060

 
14,764

Treasury Stock
(21,094
)
 
(20,431
)
Retained earnings
42,343

 
40,539

Unearned ESOP shares
(121
)
 
(126
)
Accumulated other comprehensive loss
(2,403
)
 
(2,880
)
Total Shareowners' Equity
33,785

 
31,866

Noncontrolling interest
1,408

 
1,353

Total Equity
35,193

 
33,219

Total Liabilities and Equity
$
92,142

 
$
90,594

See accompanying Notes to Condensed Consolidated Financial Statements

6
Table of Contents

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,
(Dollars in millions)
2014
 
2013
Operating Activities of Continuing Operations:
 
 
 
Income from continuing operations
$
3,096

 
$
2,997

Adjustments to reconcile income from continuing operations to net cash flows provided by operating activities of continuing operations:
 
 
 
Depreciation and amortization
935

 
883

Deferred income tax provision
36

 
10

Stock compensation cost
118

 
133

Change in:
 
 
 
Accounts receivable
(312
)
 
(282
)
Inventories and contracts in progress
(791
)
 
(974
)
Other current assets
(47
)
 
68

Accounts payable and accrued liabilities
151

 
924

Global pension contributions
(144
)
 
(51
)
Other operating activities, net
35

 
(360
)
Net cash flows provided by operating activities of continuing operations
3,077

 
3,348

Investing Activities of Continuing Operations:
 
 
 
Capital expenditures
(739
)
 
(664
)
Investments in businesses
(84
)
 
(66
)
Dispositions of businesses
156

 
1,299

Decrease (increase) in customer financing assets, net
73

 
(27
)
Increase in collaboration intangible assets
(308
)
 
(300
)
Other investing activities, net
29

 
(134
)
Net cash flows (used in) provided by investing activities of continuing operations
(873
)
 
108

Financing Activities of Continuing Operations:
 
 
 
Repayment of long-term debt, net
(173
)
 
(1,224
)
Increase (decrease) in short-term borrowings, net
19

 
(302
)
Proceeds from Common Stock issued under employee stock plans
113

 
222

Dividends paid on Common Stock
(1,026
)
 
(930
)
Repurchase of Common Stock
(670
)
 
(670
)
Other financing activities, net
(106
)
 
(83
)
Net cash flows used in financing activities of continuing operations
(1,843
)
 
(2,987
)
Discontinued Operations:
 
 
 
Net cash used in operating activities
—

 
(694
)
Net cash provided by investing activities
—

 
351

Net cash flows used in discontinued operations
—

 
(343
)
Effect of foreign exchange rate changes on cash and cash equivalents
(18
)
 
(53
)
Net increase in cash and cash equivalents
343

 
73

Cash and cash equivalents, beginning of year
4,619

 
4,836

Cash and cash equivalents, end of period
$
4,962

 
$
4,909


See accompanying Notes to Condensed Consolidated Financial Statements

7
Table of Contents

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Condensed Consolidated Financial Statements at June 30, 2014 and for the quarters and six months ended June 30, 2014 and 2013 are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. The results reported in these Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. Certain reclassifications have been made to the prior year amounts to conform to the current year presentation. The financial information included herein should be read in conjunction with the financial statements and notes in our Annual Report to Shareowners (2013 Annual Report) incorporated by reference to our Annual Report on Form 10-K for calendar year 2013 (2013 Form 10-K).
Note 1: Acquisitions, Dispositions, Goodwill and Other Intangible Assets
Business Acquisitions and Dispositions. During the six months ended June 30, 2014, our cash investment in business acquisitions was $84 million, and consisted of a number of small acquisitions, primarily in our commercial businesses.
As a result of the 2012 transactions related to IAE International Aero Engines AG (IAE), Pratt & Whitney holds a 61% net interest in the collaboration and a 49.5% ownership interest in IAE. IAE's business purpose is to coordinate the design, development, manufacturing and product support of the V2500 program through involvement with the collaborators. IAE retains limited equity with the primary economics of the V2500 program passed to the participants in the separate collaboration arrangement. As such, we have determined that IAE is a variable interest entity with Pratt & Whitney its primary beneficiary, and IAE has, therefore, been consolidated. The carrying amounts and classification of assets and liabilities for IAE in our Condensed Consolidated Balance Sheet as of June 30, 2014 are as follows:
(Dollars in millions)
 
Current assets
$
2,006

Noncurrent assets
1,157

Total assets
$
3,163

 
 
Current liabilities
$
2,121

Noncurrent liabilities
1,187

Total liabilities
$
3,308

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

 
$
22

 
$
20

 
$
1,783

UTC Climate, Controls & Security
9,727

 
9

 
92

 
9,828

Pratt & Whitney
1,273

 
—

 
—

 
1,273

UTC Aerospace Systems
15,069

 
—

 
67

 
15,136

Sikorsky
353

 
—

 
—

 
353

Total Segments
28,163

 
31

 
179

 
28,373

Eliminations and other
5

 
—

 
—

 
5

Total
$
28,168

 
$
31

 
$
179

 
$
28,378


8
Table of Contents

Intangible Assets. Identifiable intangible assets are comprised of the following:
 
June 30, 2014
 
December 31, 2013
(Dollars in millions)
Gross Amount
 
Accumulated
Amortization
 
Gross Amount
 
Accumulated
Amortization
Amortized:
 
 
 
 
 
 
 
Service portfolios
$
2,279

 
$
(1,369
)
 
$
2,234

 
$
(1,295
)
Patents and trademarks
383

 
(190
)
 
380

 
(181
)
IAE collaboration
2,588

 
(10
)
 
2,273

 
—

Customer relationships and other
12,232

 
(2,480
)
 
12,049

 
(2,199
)
 
17,482

 
(4,049
)
 
16,936

 
(3,675
)
Unamortized:
 
 
 
 
 
 
 
Trademarks and other
2,282

 
—

 
2,260

 
—

Total
$
19,764

 
$
(4,049
)
 
$
19,196

 
$
(3,675
)
The customer relationships intangible assets include payments made to our customers to secure certain contractual rights. We amortize these intangible assets based on the underlying pattern of economic benefit, which may result in an amortization method other than straight-line. We classify amortization of such payments as a reduction of sales. The IAE collaboration intangible asset is amortized based upon the economic pattern of benefits as represented by the underlying cash flows. Prior to 2014, these cash flows were negative, and, accordingly, no amortization had previously been recorded. Amortization of intangible assets for the quarter and six months ended June 30, 2014 was $178 million and $357 million, respectively, compared with $176 million and $351 million for the same periods of 2013. The following is the expected amortization of intangible assets for the years 2014 through 2019, which reflects an increase in expected amortization expense due to the pattern of economic benefit on certain aerospace intangible assets. 
(Dollars in millions)
 
Remaining 2014
 
2015
 
2016
 
2017
 
2018
 
2019
Amortization expense
 
$
347

 
$
679

 
$
688

 
$
706

 
$
731

 
$
703


Note 2: Discontinued Operations
In 2012, the UTC Board of Directors approved plans for the divestiture of a number of non-core businesses, which were completed with the sale of substantially all operations of Pratt & Whitney Rocketdyne (Rocketdyne) on June 14, 2013. Cash generated from these divestitures was used to repay debt incurred to finance the acquisition of Goodrich Corporation (Goodrich) in 2012. On February 12, 2013, we completed the disposition of UTC Power to ClearEdge Power. We have no continuing involvement with the UTC Power business post-disposition.
The following summarized financial information for our discontinued operations businesses was segregated from continuing operations and reported as Discontinued Operations in 2013. There was no discontinued operations activity in the six months ended June 30, 2014.
(Dollars in millions)
Quarter Ended June 30, 2013
 
Six Months Ended June 30, 2013
Discontinued Operations:
 
 
 
Net sales
$
146

 
$
309

Income from operations
$
43

 
$
63

Income tax expense
(24
)
 
(32
)
Income from operations, net of income taxes
19

 
31

Loss on disposal
(25
)
 
(40
)
Income tax benefit
14

 
13

Net loss on discontinued operations
$
8

 
$
4


9
Table of Contents

Note 3: Earnings Per Share
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions, except per share amounts; shares in millions)
2014
 
2013
 
2014
 
2013
Net income attributable to common shareowners:
 
 
 
 
 
 
 
Net income from continuing operations
$
1,680

 
$
1,552

 
$
2,893

 
$
2,822

Net income from discontinued operations
—

 
8

 
—

 
4

Net income attributable to common shareowners
$
1,680

 
$
1,560

 
$
2,893

 
$
2,826

Basic weighted average number of shares outstanding
900.1

 
901.1

 
900.3

 
901.0

Stock awards and equity units
14.6

 
13.0

 
14.5

 
12.8

Diluted weighted average number of shares outstanding
914.7

 
914.1

 
914.8

 
913.8

Earnings Per Share of Common Stock - Basic:
 
 
 
 
 
 
 
Net income from continuing operations
$
1.87

 
$
1.72

 
$
3.21

 
$
3.13

Net income from discontinued operations
—

 
0.01

 
—

 
0.01

Net income attributable to common shareowners
1.87

 
1.73

 
3.21

 
3.14

Earnings Per Share of Common Stock - Diluted:
 
 
 
 
 
 
 
Net income from continuing operations
$
1.84

 
$
1.70

 
$
3.16

 
$
3.09

Net income from discontinued operations
—

 
0.01

 
—

 
0.01

Net income attributable to common shareowners
1.84

 
1.71

 
3.16

 
3.09

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock appreciation rights and stock options, when the average market price of the common stock is lower than the exercise price of the related stock awards during the period. These outstanding stock awards are not included in the computation of diluted earnings per share because the effect would be anti-dilutive.  For the quarters and six months ended June 30, 2014 and 2013, there were no anti-dilutive stock awards excluded from the computation.
Note 4: Inventories and Contracts in Progress
(Dollars in millions)
June 30, 2014
 
December 31, 2013
Raw materials
$
2,039

 
$
1,983

Work-in-process
3,788

 
4,600

Finished goods
3,824

 
3,360

Contracts in progress
8,572

 
7,929

 
18,223

 
17,872

Less:
 
 
 
Progress payments, secured by lien, on U.S. Government contracts
(507
)
 
(279
)
Billings on contracts in progress
(7,820
)
 
(7,263
)
 
$
9,896

 
$
10,330

As of June 30, 2014 and December 31, 2013, inventory also includes capitalized contract development costs of $155 million and $159 million, respectively, primarily related to certain aerospace programs at UTC Aerospace Systems. These capitalized costs are liquidated as production units are delivered to the customer.
During the quarter ended June 30, 2014, Sikorsky and the Canadian Government signed amendments to their existing contracts for development, production and support of the CH-148 helicopter. These amendments include significant changes in program scope, governance and delivery methodology. Accordingly, in the quarter ended June 30, 2014, we recognized a change in estimate on this program resulting in the liquidation of approximately $1.3 billion of inventory, including all capitalized contract development costs related to this program. As of December 31, 2013, inventory included approximately $740 million of capitalized contract development costs related to this program.

10
Table of Contents

Note 5: Borrowings and Lines of Credit
(Dollars in millions)
June 30, 2014
 
December 31, 2013
Commercial paper
$
230

 
$
200

Other borrowings
177

 
188

Total short-term borrowings
$
407

 
$
388

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

11
Table of Contents

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

 
$
500

4.875% notes due 2015*
1,200

 
1,200

6.290% notes due 2016‡
—

 
188

5.375% notes due 2017*
1,000

 
1,000

1.800% notes due 2017*
1,500

 
1,500

6.800% notes due 2018‡
99

 
99

6.125% notes due 2019*
1,250

 
1,250

8.875% notes due 2019
271

 
271

4.500% notes due 2020*
1,250

 
1,250

4.875% notes due 2020‡
171

 
171

8.750% notes due 2021
250

 
250

3.100% notes due 2022*
2,300

 
2,300

1.550% junior subordinated notes due 2022†
1,100

 
1,100

7.100% notes due 2027‡
141

 
141

6.700% notes due 2028
400

 
400

7.500% notes due 2029*
550

 
550

5.400% notes due 2035*
600

 
600

6.050% notes due 2036*
600

 
600

6.800% notes due 2036‡
134

 
134

7.000% notes due 2038‡
159

 
159

6.125% notes due 2038*
1,000

 
1,000

5.700% notes due 2040*
1,000

 
1,000

4.500% notes due 2042*
3,500

 
3,500

Project financing obligations
141

 
86

Other (including capitalized leases)‡
352

 
394

Total principal long-term debt
19,468

 
19,643

Other (fair market value adjustments and discounts)‡
197

 
210

Total long-term debt
19,665

 
19,853

Less: current portion
1,828

 
112

Long-term debt, net of current portion
$
17,837

 
$
19,741

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

12
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Note 6: Income Taxes
We conduct business globally and, as a result, UTC or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Belgium, Canada, China, France, Germany, Hong Kong, Italy, Japan, South Korea, Singapore, Spain, the United Kingdom and the United States. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2000.
In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances, and information available at the reporting date. It is reasonably possible that a net reduction within a range of $165 million to $335 million of unrecognized tax benefits may occur within the next twelve months as a result of additional worldwide uncertain tax positions, the revaluation of current uncertain tax positions arising from developments in examinations, in appeals, or in the courts, or the closure of tax statutes. See Note 14, Contingent Liabilities, for discussion regarding uncertain tax positions which are not included in this range related to previously disclosed German tax litigation.
As previously disclosed, the French Tax Authority had assessed €237 million (approximately $323 million) related to the proposed disallowance of certain recurring deductions claimed in France for tax years 2008 through 2011, with which assessment the Company disagreed. Based on ongoing resolution discussions, the Company had accrued an amount it believed to be a potential settlement amount for the matter, including potential applicability to subsequent tax years. During the quarter ended June 30, 2014, the matter was settled in an amount consistent with the accrual.
UTC tax years 2006 through 2008 are currently before the Appeals Division of the Internal Revenue Service (IRS Appeals) for resolution of certain proposed adjustments with which UTC does not agree. Settlement of these years is expected to be achieved during 2014. Review of UTC tax years 2009 and 2010 by the Examination Division of the IRS was completed during the quarter ended June 30, 2014. Examination activity for UTC tax years 2011 and 2012 is expected to commence during the third quarter of 2014.
The Company is engaged in litigation with respect to an issue involving the proper timing of deductions taken by Goodrich Corporation in its tax years 2005 and 2006, prior to its acquisition by UTC. This is a recurring issue, and the IRS may continue to challenge it in subsequent tax years until the issue is resolved. Goodrich Corporation tax years 2007 through 2010 are currently before IRS Appeals for resolution discussions regarding certain proposed adjustments with which UTC does not agree, including the recurring timing issue described above. Both the 2005 - 2006 litigation and the 2007 - 2010 appeals proceedings, together with all final computations for open tax years through 2010, are expected to be resolved during 2014. Examination activity for Goodrich Corporation tax years 2011 and 2012, prior to its acquisition by UTC, is expected to commence during the third quarter of 2014.
During the quarter ended June 30, 2014, the Examination Division of the Connecticut Department of Revenue Services completed its examination of UTC's 2010 - 2012 tax years.
As a result of completed examination activity as described above, the Company recognized non-cash gains in the quarter ended June 30, 2014 of approximately $274 million, including a pre-tax interest adjustment of $21 million. As a result of the anticipated conclusion of tax examination, appeal and litigation activity and associated re-evaluation of tax related liabilities and contingencies, we currently expect to recognize additional net gains, primarily non-cash, in the range of $210 million to $230 million prior to the end of 2014, including pre-tax interest in the range of $90 million to $110 million.
During the quarter ended June 30, 2014, we reached an agreement with a state taxing authority for the monetization of tax credits. As a result of this agreement, we recorded a gain of approximately $220 million through Other income, net in the quarter ended June 30, 2014.
Note 7: Employee Benefit Plans
Pension and Postretirement Plans. We sponsor both funded and unfunded domestic and foreign defined pension and other postretirement benefit plans, and defined contribution plans. Contributions to our plans were as follows:
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2014
 
2013
 
2014
 
2013
Defined benefit plans
$
60

 
$
22

 
$
144

 
$
51

Defined contribution plans
$
80

 
$
80

 
$
170

 
$
183


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

 
$
142

 
$
1

 
$
1

Interest cost
380

 
343

 
10

 
9

Expected return on plan assets
(554
)
 
(526
)
 
—

 
—

Amortization
(2
)
 
(9
)
 
—

 
(3
)
Recognized actuarial net loss (gain)
107

 
240

 
(1
)
 
(1
)
Net settlement and curtailment loss (gain)
6

 
(14
)
 
—

 
—

Total net periodic benefit cost
$
59

 
$
176

 
$
10

 
$
6

 
Pension Benefits
Six Months Ended June 30,
 
Other Postretirement Benefits
Six Months Ended June 30,
(Dollars in millions)
2014
 
2013
 
2014
 
2013
Service cost
$
244

 
$
286

 
$
2

 
$
2

Interest cost
760

 
686

 
20

 
19

Expected return on plan assets
(1,108
)
 
(1,053
)
 
—

 
—

Amortization
(4
)
 
(18
)
 
—

 
(6
)
Recognized actuarial net loss (gain)
214

 
480

 
(2
)
 
(2
)
Net settlement and curtailment loss (gain)
6

 
(17
)
 
—

 
—

Total net periodic benefit cost
$
112

 
$
364

 
$
20

 
$
13

Net settlement and curtailment gain for pension benefits includes curtailment gains of approximately $19 million and $24 million related to, and recorded in, discontinued operations for the quarter and six months ended June 30, 2013, respectively.
Note 8: Restructuring Costs
During the six months ended June 30, 2014, we recorded net pre-tax restructuring costs totaling $180 million for new and ongoing restructuring actions. We recorded charges in the segments as follows:
(Dollars in millions)
 
Otis
$
38

UTC Climate, Controls & Security
68

Pratt & Whitney
47

UTC Aerospace Systems
10

Sikorsky
17

Total
$
180

Restructuring charges incurred during the six months ended June 30, 2014 primarily relate to actions initiated during 2014 and 2013, and were recorded as follows:
(Dollars in millions)
 
Cost of sales
$
111

Selling, general and administrative
69

Total
$
180

2014 Actions. During the six months ended June 30, 2014, we initiated restructuring actions relating to ongoing cost reduction efforts, including workforce reductions and the consolidation of field operations. We recorded net pre-tax restructuring costs totaling $151 million, including $83 million in cost of sales and $68 million in selling, general and administrative expenses.

14
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We are targeting the majority of the remaining workforce and all facility related cost reduction actions for completion during 2014. No specific plans for significant other actions have been finalized at this time. The following table summarizes the accrual balances and utilization by cost type for the 2014 restructuring actions:
(Dollars in millions)
Severance
 
Asset
Write-Downs
 
Facility Exit,
Lease
Termination and
Other Costs
 
Total
Restructuring accruals at April 1, 2014
$
80

 
$
—

 
$
—

 
$
80

Net pre-tax restructuring costs
58

 
—

 
3

 
61

Utilization and foreign exchange
(26
)
 
—

 
(2
)
 
(28
)
Balance at June 30, 2014
$
112

 
$
—

 
$
1

 
$
113

The following table summarizes expected, incurred and remaining costs for the 2014 restructuring actions by segment:
(Dollars in millions)
Expected
Costs
 
Costs Incurred Quarter Ended
March 31, 2014
 
Costs Incurred Quarter Ended June 30, 2014
 
Remaining Costs at June 30, 2014
Otis
$
71

 
$
(18
)
 
$
(28
)
 
$
25

UTC Climate, Controls & Security
77

 
(16
)
 
(21
)
 
40

Pratt & Whitney
70

 
(37
)
 
(10
)
 
23

UTC Aerospace Systems
5

 
(3
)
 
(2
)
 
—

Sikorsky
16

 
(16
)
 
—

 
—

Total
$
239

 
$
(90
)
 
$
(61
)
 
$
88

2013 Actions. During the six months ended June 30, 2014, we recorded net pre-tax restructuring costs totaling $33 million for restructuring actions initiated in 2013, including $30 million in cost of sales and $3 million in selling, general and administrative expenses. The 2013 actions relate to ongoing cost reduction efforts, including workforce reductions and the consolidation of field operations. The following table summarizes the accrual balances and utilization by cost type for the 2013 restructuring actions:
(Dollars in millions)
Severance
 
Asset
Write-Downs
 
Facility Exit,
Lease
Termination and
Other Costs
 
Total
Restructuring accruals at April 1, 2014
$
172

 
$
—

 
$
22

 
$
194

Net pre-tax restructuring costs
(5
)
 
—

 
6

 
1

Utilization and foreign exchange
(35
)
 
—

 
(5
)
 
(40
)
Balance at June 30, 2014
$
132

 
$
—

 
$
23

 
$
155

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

 
$
(69
)
 
$
(1
)
 
$
2

 
$
1

UTC Climate, Controls & Security
119

 
(89
)
 
(24
)
 
(2
)
 
4

Pratt & Whitney
163

 
(154
)
 
(6
)
 
1

 
4

UTC Aerospace Systems
91

 
(71
)
 
(1
)
 
(3
)
 
16

Sikorsky
37

 
(38
)
 
—

 
1

 
—

Total
$
479

 
$
(421
)
 
$
(32
)
 
$
(1
)
 
$
25

2012 Actions. As of June 30, 2014, we have approximately $67 million of accrual balances remaining related to 2012 actions.
Note 9: Financial Instruments
We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments under the Derivatives and Hedging Topic of the FASB ASC and those utilized as economic hedges. We operate

15
Table of Contents

internationally and, in the normal course of business, are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We have used derivative instruments, including swaps, forward contracts and options to manage certain foreign currency, interest rate and commodity price exposures.
The four quarter rolling average of the notional amount of foreign exchange contracts hedging foreign currency transactions was $12.7 billion and $12.3 billion at June 30, 2014 and December 31, 2013, respectively.
The following table summarizes the fair value of derivative instruments as of June 30, 2014 and December 31, 2013 which consist solely of foreign exchange contracts:
 
Asset Derivatives
 
Liability Derivatives
(Dollars in millions)
June 30, 2014
 
December 31, 2013
 
June 30, 2014
 
December 31, 2013
Derivatives designated as hedging instruments
$
66

 
$
59

 
$
62

 
$
103

Derivatives not designated as hedging instruments
66

 
31

 
56

 
54

The impact from foreign exchange derivative instruments that qualified as cash flow hedges was as follows:
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2014
 
2013
 
2014
 
2013
Gain (loss) recorded in Accumulated other comprehensive loss
$
102

 
$
(64
)
 
$
22

 
$
(159
)
Loss reclassified from Accumulated other comprehensive loss into Product sales (effective portion)
$
13

 
$
15

 
$
31

 
$
23

Assuming current market conditions continue, a $31 million pre-tax loss is expected to be reclassified from Accumulated other comprehensive loss into Product sales to reflect the fixed prices obtained from foreign exchange hedging within the next 12 months. At June 30, 2014, all derivative contracts accounted for as cash flow hedges will mature by June 2016.
The effect on the Condensed Consolidated Statement of Operations of foreign exchange contracts not designated as hedging instruments was as follows:
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2014
 
2013
 
2014
 
2013
(Loss) gain recognized in Other income, net
$
(14
)
 
$
(9
)
 
$
12

 
$
23

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

16
Table of Contents

The following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring and nonrecurring basis in our Condensed Consolidated Balance Sheet as of June 30, 2014 and December 31, 2013: 
June 30, 2014 (Dollars in millions)
Total
 
Level 1
 
Level 2
 
Level 3
Recurring fair value measurements:
 
 
 
 
 
 
 
Available-for-sale securities
$
921

 
$
921

 
$
—

 
$
—

Derivative assets
132

 
—

 
132

 
—

Derivative liabilities
(118
)
 
—

 
(118
)
 
—

Nonrecurring fair value measurements:
 
 
 
 
 
 
 
Business dispositions
44

 
—

 
44

 
—

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

 
$
988

 
$
—

 
$
—

Derivative assets
90

 
—

 
90

 
—

Derivative liabilities
(157
)
 
—

 
(157
)
 
—

Nonrecurring fair value measurements:
 
 
 
 
 
 
 
Business dispositions
66

 
—

 
66

 
—

We have recorded charges of approximately $85 million, including a $60 million charge during the six months ended June 30, 2014, to adjust the fair value of a Pratt & Whitney joint venture investment. During the six months ended June 30, 2014, we also recorded a charge of approximately $28 million to adjust the fair value of a Sikorsky joint venture investment.
During the six months ended June 30, 2013, we recorded an approximately $38 million net gain from UTC Climate, Controls & Security's ongoing portfolio transformation, primarily due to a gain on the sale of a business in Hong Kong. In addition, during that six-month period we recorded a gain of approximately $193 million from the sale of the Pratt & Whitney Power Systems business.
Valuation Techniques. Our available-for-sale securities include equity investments that are traded in active markets, either domestically or internationally, and are measured at fair value using closing stock prices from active markets. Our derivative assets and liabilities include foreign exchange contracts and commodity derivatives that are measured at fair value using internal models based on observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties' credit risks. As of June 30, 2014, there were no significant transfers in and out of Level 1 and Level 2.
As of June 30, 2014, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk. Similarly, there has not been any significant adverse impact to our derivative assets based on our evaluation of our counterparties' credit risks.
The following table provides carrying amounts and fair values of financial instruments that are not carried at fair value in our Condensed Consolidated Balance Sheet at June 30, 2014 and December 31, 2013:
 
June 30, 2014
 
December 31, 2013
(Dollars in millions)
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Long-term receivables
$
966

 
$
911

 
$
655

 
$
586

Customer financing notes receivable
288

 
281

 
394

 
366

Short-term borrowings
(407
)
 
(407
)
 
(388
)
 
(388
)
Long-term debt (excluding capitalized leases)
(19,627
)
 
(22,012
)
 
(19,807
)
 
(21,525
)
Long-term liabilities
(297
)
 
(295
)
 
(283
)
 
(253
)

17
Table of Contents

The following table provides the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Condensed Consolidated Balance Sheet as of June 30, 2014:
(Dollars in millions)
Total
 
Level 1
 
Level 2
 
Level 3
Long-term receivables
$
911

 
$
—

 
$
911

 
$
—

Customer financing notes receivable
281

 
—

 
281

 
—

Short-term borrowings
(407
)
 
—

 
(230
)
 
(177
)
Long-term debt (excluding capitalized leases)
(22,012
)
 
—

 
(21,676
)
 
(336
)
Long-term liabilities
(295
)
 
—

 
(295
)
 
—

We had commercial aerospace financing and other contractual commitments totaling approximately $11.4 billion and $11.3 billion as of June 30, 2014 and December 31, 2013, respectively, related to commercial aircraft and certain contractual rights to provide product on new aircraft platforms. Risks associated with changes in interest rates on these commitments are mitigated by the fact that interest rates are variable during the commitment term, and are set at the date of funding based on current market conditions, the fair value of the underlying collateral and the credit worthiness of the customers. As a result, the fair value of these financings is expected to equal the amounts funded. The fair value of these commitments is not readily determinable.
Note 11: Long-Term Financing Receivables
Our long-term financing receivables primarily represent balances related to our aerospace businesses, such as long-term trade accounts receivable, leases receivable, and notes receivable. We also have other long-term receivables related to our commercial businesses; however, both the individual and aggregate amounts of those other receivables are not significant.
Long-term trade accounts receivable represent amounts arising from the sale of goods and services with a contractual maturity date of greater than one year and are recognized as Other assets in our Condensed Consolidated Balance Sheet. Notes and leases receivable represent notes and lease receivables other than receivables related to operating leases, and are recognized as Customer financing assets in our Condensed Consolidated Balance Sheet. The following table summarizes the balance by class of aerospace business-related long-term receivables as of June 30, 2014 and December 31, 2013.
(Dollars in millions)
June 30, 2014
 
December 31, 2013
Long-term trade accounts receivable
$
986

 
$
714

Notes and leases receivable
457

 
583

Total long-term receivables
$
1,443

 
$
1,297

Customer credit ratings range from customers with an extremely strong capacity to meet financial obligations, to customers whose uncollateralized receivable is in default. There can be no assurance that actual results will not differ from estimates or that consideration of these factors in the future will not result in an increase or decrease to the allowance for credit losses on long-term receivables. Based upon the customer credit ratings, approximately 7% and 9% of the total long-term receivables reflected in the table above were considered to bear high credit risk as of June 30, 2014 and December 31, 2013, respectively.
For long-term trade accounts receivable, we evaluate credit risk and collectability individually to determine if an allowance is necessary. Our long-term receivables reflected in the table above, which include reserves of $16 million and $49 million as of June 30, 2014 and December 31, 2013, respectively, are individually evaluated for impairment. At both June 30, 2014 and December 31, 2013, we did not have any significant balances that are considered to be delinquent, on non-accrual status, past due 90 days or more, or considered to be impaired.

18
Table of Contents

Note 12: Shareowners' Equity and Noncontrolling Interest
A summary of the changes in shareowners' equity and noncontrolling interest comprising total equity for the quarters and six months ended June 30, 2014 and 2013 is provided below:
 
Quarter Ended June 30,
 
2014
 
2013
(Dollars in millions)
Share-owners'
Equity
 
Non-controlling Interest
 
Total
Equity
 
Share-owners'
Equity
 
Non-controlling Interest
 
Total
Equity
Equity, beginning of period
$
32,317

 
$
1,378

 
$
33,695

 
$
26,194

 
$
1,369

 
$
27,563

Comprehensive income for the period:
 
 
 
 
 
 
 
 
 
 
 
Net income
1,680

 
110

 
1,790

 
1,560

 
93

 
1,653

Total other comprehensive income (loss)
538

 
—

 
538

 
(133
)
 
(5
)
 
(138
)
Total comprehensive income for the period
2,218

 
110

 
2,328

 
1,427

 
88

 
1,515

Common Stock issued under employee plans
125

 

 
125

 
201

 

 
201

Common Stock repurchased
(335
)
 

 
(335
)
 
(335
)
 

 
(335
)
Dividends on Common Stock
(512
)
 

 
(512
)
 
(465
)
 

 
(465
)
Dividends on ESOP Common Stock
(18
)
 

 
(18
)
 
(17
)
 

 
(17
)
Dividends attributable to noncontrolling interest


 
(44
)
 
(44
)
 


 
(71
)
 
(71
)
Purchase of subsidiary shares from noncontrolling interest
(10
)
 
(33
)
 
(43
)
 
(18
)
 
(1
)
 
(19
)
Sale of subsidiary shares in noncontrolling interest
—

 
3

 
3

 
—

 
5

 
5

Disposition of noncontrolling interest


 
3

 
3

 


 
(5
)
 
(5
)
Redeemable noncontrolling interest in subsidiaries' earnings


 
(1
)
 
(1
)
 


 
(2
)
 
(2
)
Redeemable noncontrolling interest in total other comprehensive (loss) income

 
(2
)
 
(2
)
 

 
2

 
2

Redeemable noncontrolling interest reclassification to noncontrolling interest

 
(6
)
 
(6
)
 

 
(3
)
 
(3
)
Equity, end of period
$
33,785

 
$
1,408

 
$
35,193

 
$
26,987

 
$
1,382

 
$
28,369


19
Table of Contents

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

 
$
1,353

 
$
33,219

 
$
25,914

 
$
1,155

 
$
27,069

Comprehensive income for the period:
 
 
 
 
 
 
 
 
 
 
 
Net income
2,893

 
203

 
3,096

 
2,826

 
175

 
3,001

Total other comprehensive income (loss)
477

 
(7
)
 
470

 
(552
)
 
(26
)
 
(578
)
Total comprehensive income for the period
3,370

 
196

 
3,566

 
2,274

 
149

 
2,423

Common Stock issued under employee plans
290

 
 
 
290

 
452

 
 
 
452

Common Stock repurchased
(670
)
 
 
 
(670
)
 
(670
)
 
 
 
(670
)
Dividends on Common Stock
(1,026
)
 
 
 
(1,026
)
 
(930
)
 
 
 
(930
)
Dividends on ESOP Common Stock
(36
)
 
 
 
(36
)
 
(34
)
 
 
 
(34
)
Dividends attributable to noncontrolling interest
 
 
(100
)
 
(100
)
 
 
 
(127
)
 
(127
)
Purchase of subsidiary shares from noncontrolling interest
(13
)
 
(33
)
 
(46
)
 
(19
)
 
(10
)
 
(29
)
Sale of subsidiary shares in noncontrolling interest
4

 
27

 
31

 
—

 
242

 
242

Disposition of noncontrolling interest
 
 
3

 
3

 
 
 
(5
)
 
(5
)
Redeemable noncontrolling interest in subsidiaries' earnings
 
 
(7
)
 
(7
)
 
 
 
(2
)
 
(2
)
Redeemable noncontrolling interest in total other comprehensive income
 
 
—

 
—

 
 
 
6

 
6

Redeemable noncontrolling interest reclassification to noncontrolling interest
 
 
(31
)
 
(31
)
 
 
 
(26
)
 
(26
)
Equity, end of period
$
33,785

 
$
1,408

 
$
35,193

 
$
26,987

 
$
1,382

 
$
28,369

A summary of the changes in each component of accumulated other comprehensive income (loss), net of tax for the quarters and six months ended June 30, 2014 and 2013 is provided below:
(Dollars in millions)
Foreign
Currency
Translation
 
Defined
Benefit
Pension and
Post-
retirement
Plans
 
Unrealized Gains
(Losses) on
Available-for-Sale
Securities
 
Unrealized
Hedging
(Losses)
Gains
 
Accumulated
Other
Comprehensive
(Loss) Income
Quarter Ended June 30, 2014
 
 
 
 
 
 
 
 
 
Balance at March 31, 2014
$
71

 
$
(3,184
)
 
$
301

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

 
(12
)
 
(28
)
 
80

 
464

Amounts reclassified, pretax
—

 
104

 
(6
)
 
13

 
111

Tax (benefit) expense reclassified
—

 
(35
)
 
5

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

 
$
(3,127
)
 
$
272

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

 
$
(3,267
)
 
$
296

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

 
1

 
(6
)
 
15

 
332

Amounts reclassified, pretax
3

 
208

 
(30
)
 
31

 
212

Tax (b