FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Plan period ended December 31, 1999 Commission File Number 1-812 UNITED TECHNOLOGIES CORPORATION DEFINED CONTRIBUTION RETIREMENT PLAN UNITED TECHNOLOGIES CORPORATION One Financial Plaza Hartford, Connecticut 06101
FINANCIAL STATEMENTS OF THE UNITED TECHNOLOGIES CORPORATION DEFINED CONTRIBUTION RETIREMENT PLAN REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Administrator of the United Technologies Corporation Defined Contribution Retirement Plan In our opinion, the accompanying statements of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the United Technologies Corporation Defined Contribution Retirement Plan (the "Plan") at December 31, 1999 and December 31, 1998, and the changes in net assets available for benefits for the year ended December 31, 1999 in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Hartford, Connecticut June 28, 2000
United Technologies Corporation Defined Contribution Retirement Plan Statement of Net Assets Available for Benefits (Thousands of Dollars) December 31, December 31, 1999 1998 Assets: Plan's interest in Master Trust (Notes 3, 4 and 5) $ 13,364 $ 8,698 Net Assets Available for Benefits $ 13,364 $ 8,698 The accompanying notes are an integral part of these financial statements.
United Technologies Corporation Defined Contribution Retirement Plan Statement of Changes in Net Assets Available for Benefits (Thousands of Dollars) Year Ended December 31, 1999 Additions to net assets attributed to: Investment Income: Net appreciation in fair value of investments $ 744 Interest 369 Dividends 44 Total investment income 1,157 Deductions from net assets attributed to: Distributions to participants (440) Total deductions (440) Net increase prior to transfers 717 Plan transfers: Assets transferred into Plan (Note 10) 4,010 Assets transferred out of Plan (61) Net Plan transfers 3,949 Net increase 4,666 Net Assets Available for Benefits, December 31, 1998 8,698 Net Assets Available for Benefits, December 31, 1999 $13,364 The accompanying notes are an integral part of these financial statements.
UNITED TECHNOLOGIES CORPORATION DEFINED CONTRIBUTION RETIREMENT PLAN Notes to Financial Statements NOTE 1 - DESCRIPTION OF THE PLAN General. The United Technologies Corporation ("UTC") Defined Contribution Retirement Plan (the "Plan") is a defined contribution savings and money purchase plan administered by UTC. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Eligible employees of UTC and certain of its subsidiaries may participate after completing one year of service. As described in Note 9, all active Plan participants became participants of the UTC Employee Savings Plan II (formerly, the UTC Savings Plan for Hourly Management-Represented Employees) in 1998. The following is a brief description of the Plan. For more complete information, participants should refer to the Plan document which is available from UTC. Contributions and Vesting. The employer made contributions for each participant for up to 3.5 percent of the participant's compensation through July 1998. No participant contributions were made during the 1999 and 1998 Plan years (see Note 9). Participant contributions, plus actual earnings thereon, are fully vested at all times under the Plan. Generally, employer contributions, plus actual earnings thereon, become fully vested after two years of Plan participation. Participant Accounts. Each participant's account is credited with the participant's contributions and allocations of (a) UTC's contributions based on a percentage of the participant's contribution and (b) Plan earnings based on account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. Forfeited balances of terminated participants' nonvested amounts are used to reduce future UTC contributions. For the period ended December 31, 1999, no forfeitures were used to fund employer contributions. Trustee and Recordkeeper. All of the Plan's assets are held by Bankers Trust Company ("Bankers Trust"), the Plan trustee. Fidelity Institutional Retirement Services Company ("Fidelity") performs participant account recordkeeping responsibilities. Payment of Benefits. Generally, benefits are paid in a lump sum to a terminating participant. A participant terminating due to retirement may elect to receive benefits in installments over two to twenty years. At the participant's election, the portion of a lump sum distribution attributable to an investment in the UTC Common Stock Fund investment option may be paid in shares of UTC Common Stock instead of cash. There were no distributions in UTC Common Stock for the year ended December 31, 1999. Other. Participants who transfer to a new UTC location with a different savings plan may have the option of transferring their account balances in accordance with the provisions of the new savings plan. NOTE 2 - SUMMARY OF ACCOUNTING PRINCIPLES Basis of Accounting. The financial statements of the Plan are prepared under the accrual method of accounting, except for benefits which are recorded when paid.
Master Trust. The Plan's assets are kept in a Master Trust maintained by the Plan's trustee. Under the Master Trust agreement, the assets of certain employee savings plans of UTC and its subsidiaries are combined. Participating plans purchase units of participation in the investment funds based on their contribution to such funds and the unit value of the applicable investment fund at the end of the trading day in which a transaction occurs. The unit value of each fund is determined at the close of each day by dividing the sum of uninvested cash, accrued income and the current value of investments by the total number of outstanding units in such funds. Income from the funds' investments increases the participating plans' unit values. Distributions to participants reduce the number of participation units held by the participating plans (see Note 5). Investment Valuation and Income Recognition. The Income Fund's investments in insurance contracts (see Note 4) are stated at contract value, which represents contributions plus earnings, less Plan withdrawals. All other funds are stated at fair value, as determined by the Plan trustee, typically by reference to published market data. Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Plan Expenses. Plan administrative expenses, including Plan trustee and recordkeeping fees, were paid directly by the employer in 1999. The employer also paid certain investment management fees for the Bankers Trust managed funds. There were no other administrative and investment expenses paid out of Plan assets during 1999. Use of Estimates. The preparation of financial statements requires UTC to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates. NOTE 3 - INVESTMENTS The following presents investments that represent 5 percent or more of the Plan's net assets: December 31, (Thousand of Dollars, 1999 1998 except unit amounts) Equity Fund, 97,426 and 106,205 units, respectively $3,190 $2,874 UTC Common Stock Fund, 40,260 units in 1999 $ 848 N/A Income Fund, 64,260 and 73,901 units, respectively $4,653 $4,942 NOTE 4 - INVESTMENT CONTRACTS WITH INSURANCE COMPANIES The Plan's Income Fund invests in insurance contracts with insurance companies. Under these contracts, each insurance company guarantees repayment in full of the principal amount plus interest credited at a fixed rate for a specified period. Interest is credited to each contract based on an annual interest rate set each year by the individual insurance companies. This rate, which differs among contracts, takes into account any difference between prior year credited interest and the actual amount of investment earnings allocable to the contract
in accordance with the established allocation procedures of the insurance company. The interest rates earned for 1999 and 1998 were 8.1% and 8.5%, respectively. NOTE 5 - INVESTMENT IN MASTER TRUST UTC has entered into a Master Trust agreement with Bankers Trust. Under this agreement, certain savings plans of UTC and its subsidiaries combine their trust fund investments in the Master Trust. Participating plans purchase units of participation in the investment funds based on their contribution to such funds along with income that the investment funds may earn, less distributions made to the plans' participants. At December 31, 1999, the Plan's interest in the Master Trust comprised 225,050 units of the 510,203,518 total units of participation, or 0.04%. At December 31, 1998, the Plan's interest in the Master Trust comprised 223,357 units of the total 522,172,913 units of participation, or 0.04%.
The following is a summary of the financial information and data for the Master Trust and the portion applicable to the Plan: United Technologies Corporation Master Trust Statement of Net Assets (Thousands of Dollars) December 31, December 31, 1999 1998 Assets: Short-term investments $ 23,147 $ 6,646 Investments: Equity: Mutual funds 663,679 483,050 Equity commingled index funds 1,466,274 1,310,686 Common stock 784,371 526,457 ESOP stock fund 3,152,372 2,736,411 Debt: Fixed income commingled index funds 28,140 26,874 Insurance company investment contracts 3,883,142 3,731,589 Participant notes receivable 81,647 83,257 Subtotal 10,082,772 8,904,970 ESOP receivables 116,234 101,138 Interest and dividend receivables 20,085 8,824 Total assets 10,219,091 9,014,932 Liabilities: Accrued liabilities 6,014 1,378 Accrued ESOP interest 2,154 2,205 ESOP debt 336,600 372,600 Notes payable to UTC 131,233 104,033 Total liabilities 476,001 480,216 Net Assets $ 9,743,090 $8,534,716 Net assets of the Master Trust allocable to the Plan $ 13,364 $ 8,698
United Technologies Corporation Master Trust Statement of Changes in Net Assets (Thousands of Dollars) Year Ended December 31, 1999 Additions: Interest and dividend income $ 414,622 Net appreciation on fair value of investments 1,004,193 Contributions from participating plans for purchase of units 289,582 Total additions 1,708,397 Deductions: Benefit payments on behalf of participating plans (437,791) Master trust expenses (38,225) Total deductions (476,016) Net increase prior to transfers 1,232,381 Plan transfers: Assets transferred in 41,739 Assets transferred out (65,746) Net Plan transfers (24,007) Increase in net assets 1,208,374 Net assets: Beginning of year 8,534,716 End of year $9,743,090 Amounts pertaining to the Plan: Plan interest in net appreciation and investment income of Master Trust $ 1,157 Assets transferred into Plan (Note 10) $ 4,010 Pension benefits paid $ (440) Assets transferred out of Plan $ (61)
NOTE 6 - RELATED-PARTY TRANSACTIONS Certain Plan investment options are managed by Bankers Trust and Fidelity. Bankers Trust and Fidelity are the Plan's trustee and recordkeeper, respectively, as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions NOTE 7 - FUNDING POLICY The Corporation funds its obligation to the Plan on a monthly basis. At December 31, 1999, the minimum funding requirements under ERISA have been met. NOTE 8 - PLAN TERMINATION Although it has not expressed any intent to do so, UTC has the right under the Plan to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100 percent vested in their accounts. NOTE 9 - FROZEN PLAN During 1998, all active Plan participants became participants of the UTC Employee Savings Plan II. Previously accumulated participant balances will remain in the Plan. No additional contributions will be made to the Plan. Participants will continue to be able to direct or withdraw their remaining investment balances in accordance with Plan provisions. NOTE 10 - PLAN MERGER On June 10, 1999, UTC acquired Sundstrand Corporation and merged it with its Hamilton Standard division and formed a wholly owned subsidiary, Hamilton Sundstrand. Effective December 31, 1999, a former plan of Sundstrand Corporation, the Sullair Corporation Employees' Supplemental Retirement Plan (the "Sullair Plan") was merged into the Plan. The Sullair Plan has been frozen since 1984 thereby requiring no future employer or employee contributions. Participant accounts are credited with earnings less administrative expenses. On January 3, 2000 (trade date December 31, 1999), approximately $4,010,000 of net assets were transferred into the Plan. NOTE 11 - TAX STATUS The Internal Revenue Service has determined and informed UTC by letter dated April 22, 1996, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code ("IRC"). The Plan has been amended since receiving the determination letter. However, the Plan administrator and tax counsel believe that the Plan is designed and currently being operated in compliance with the applicable requirements of the IRC. NOTE 12 - SUBSEQUENT EVENT During 1999, UTC approved the merger of the Ardco Money Purchase Plan into the Plan. Salaried participants of the Ardco Money Purchase Plan are eligible to participate in the Plan effective January 1, 2000. Subsequent to year-end, approximately $3,194,000 of net assets was transferred into the Plan.
SIGNATURES The Plan (or other persons who administer the employee benefit plan), pursuant to the requirements of the Securities Exchange Act of 1934, has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. UNITED TECHNOLOGIES CORPORATION DEFINED CONTRIBUTION RETIREMENT PLAN Dated: June 28, 2000 By: /s/ Michael C. Sankner Michael C. Sankner Manager, Actuarial Administrator United Technologies Corporation
Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-58937) of United Technologies Corporation of our report dated June 28, 2000 relating to the financial statements of the United Technologies Corporation Defined Contribution Retirement Plan, which appears in this Form 11-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Hartford, Connecticut June 28, 2000