UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission file number 1-812
UNITED TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06 0570975
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Financial Plaza, Hartford, Connecticut 06101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 728-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
Common Stock ($1 par value) New York Stock Exchange
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
At January 31, 1998, there were 229,188,343 shares of Common Stock outstanding;
the aggregate market value of the voting Common Stock held by non-affiliates at
January 31, 1998 was approximately $18,621,552,869.
List hereunder documents incorporated by reference and the Part of the Form 10-K
into which the document is incorporated: (1) United Technologies Corporation
1997 Annual Report to Shareowners, Parts I, II and IV; and (2) United
Technologies Corporation Proxy Statement for the 1998 Annual Meeting of
Shareowners, Part III.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and is not to be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
UNITED TECHNOLOGIES CORPORATION
_______________________________
Index to Annual Report
on Form 10-K
Year Ended December 31, 1997
PART I Page
Item 1. Business .................................. 1
Item 2. Properties ................................ 9
Item 3. Legal Proceedings ......................... 10
Item 4. Submission of Matters to a Vote of Security 11
Holders ...................................
- ----- Executive Officers of the Registrant ...... 11
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters ........... 13
Item 6. Selected Financial Data ................... 13
Item 7. Management's Discussion and Analysis of 13
Results of Operations and Financial Position
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with 13
Accountants on Accounting and Financial
Disclosure ................................
PART III
Item 10. Directors and Executive Officers of the 14
Registrant ................................
Item 11. Executive Compensation .................... 14
Item 12. Security Ownership of Certain Beneficial 14
Owners and Management .....................
Item 13. Certain Relationships and Related 14
Transactions ..............................
PART IV
Item 14. Exhibits, Financial Statement Schedules, and 14
Reports on Form 8-K .......................
1
Item 1. Business
United Technologies Corporation was incorporated in Delaware in 1934.
Growth has been enhanced by acquisitions and by the internal growth of existing
businesses of the Corporation*.
Management's Discussion and Analysis of the Corporation's Results of
Operations for 1997 compared to 1996 and for 1996 compared to 1995, and its
Financial Position at December 31, 1997 and 1996, as well as Selected Financial
Data for each year in the five year period ended December 31, 1997 are set forth
on pages 21 through 27 of the Corporation's 1997 Annual Report to Shareowners.
Whenever reference is made in this Form 10-K to specific pages in the 1997
Annual Report to Shareowners, such pages are incorporated herein by reference.
Operating Units and Industry Segments
The Corporation conducts its business within five principal industry
segments. The operating units of the Corporation are grouped based upon the
industry segment in which they participate. The business units participating in
each industry segment and their respective principal products are as follows:
Business Segment Principal Products
Otis --Otis elevators, escalators and service
Carrier --Carrier heating, ventilating and air conditioning
(HVAC) systems and equipment, transport and
commercial refrigeration equipment, aftermarket
service and components.
Automotive --Automotive systems and components
Pratt & Whitney --Pratt & Whitney engines, parts, service and space
propulsion
Flight Systems --Sikorsky helicopters, parts and service
--Hamilton Standard engine controls, environmental
controls, propellers, other flight systems, and
service.
Business segment financial data for the years 1995 through 1997, including
financial information about foreign and domestic operations and export sales, is
included in Note 15 of Notes to Consolidated Financial Statements on pages 41
through 43 of the Corporation's 1997 Annual Report to Shareowners.
Description of Business by Industry Segment
The following description of the Corporation's business by industry segment
should be read in conjunction with Management's Discussion and Analysis of
Results of Operations and Financial Position appearing in the Corporation's 1997
Annual Report to Shareowners, especially the information contained therein under
the heading ``Business Environment'`.
___________
* "Corporation", unless the context otherwise requires, means
United Technologies Corporation and its consolidated subsidiaries.
2
Otis
Otis is the world's leader in production, installation and service in the
elevator industry, defined as elevators, escalators and moving sidewalks. Otis
designs, manufactures, sells and installs a wide range of passenger and freight
elevators, including hydraulic and geared elevators for low and medium speed
applications and gearless elevators for high-speed passenger operations in high-
rise buildings. Otis also produces a broad line of escalators, moving sidewalks
and shuttle systems for horizontal transportation. In addition to new
equipment, Otis provides modernization products and services to upgrade
elevators and escalators.
Otis provides maintenance services for a substantial portion of the
elevators and escalators which it sells and also services elevators and
escalators of other manufacturers. Otis conducts its business principally
through various subsidiaries and affiliated companies worldwide. In some cases,
consolidated subsidiaries and affiliates have significant minority interests.
In addition, as part of its global growth strategies, Otis has made investments
and continues to invest in emerging markets worldwide, including those in
Central and Eastern Europe (such as Russia and Ukraine) and Asia (such as the
People's Republic of China). Otis' investments in emerging markets carry a
higher level of currency, political and economic risk than investments in
developed markets.
Otis' business is subject to changes in economic, industrial and
international conditions, including possible changes in interest rates, which
could affect the demand for elevators, escalators and services; changes in
legislation and in government regulations; changes in technology; changes in the
level of construction activity; and substantial competition from a large number
of companies including other major domestic and foreign manufacturers and
service providers. The principal methods of competition are price, delivery
schedule, product performance, service and other terms and conditions of sale.
Otis' products and services are sold principally to builders and building
contractors and owners.
Revenues generated by Otis' international operations were 83 percent and 85
percent of total Otis segment revenues in 1997 and 1996, respectively.
International operations are subject to local government regulations (including
regulations relating to capital contributions, currency conversion and
repatriation of earnings), as well as to varying currency, political and
economic risks.
At December 31, 1997, the Otis business backlog amounted to $3,429 million
as compared to $3,718 million at December 31, 1996. Substantially all of the
business backlog at December 31, 1997 is expected to be realized as sales in
1998.
Carrier
Carrier is the world's largest manufacturer of heating, ventilating and air
conditioning systems and equipment. Carrier also participates in the
commercial and transport refrigeration businesses, and provides aftermarket
service and components for its products. In 1997, Carrier expanded into the
U.S. commercial refrigeration business by acquiring Ardco, Inc. and Tyler
Refrigeration Corporation, two U.S.-based manufacturers of commercial
refrigeration equipment.
The products manufactured by Carrier include chillers and airside equipment,
commercial unitary systems, residential split systems (cooling only and heat
pump), duct-free split systems, window and portable room air conditioners and
furnaces, as well as transport refrigeration and commercial refrigeration
equipment.
As part of its global growth strategies, Carrier has made investments and
continues to invest in emerging markets worldwide, including those in Asia (such
as the People's Republic of China) and Latin America. Carrier's investments in
emerging markets carry a higher level of currency, political and economic risk
than investments in developed markets. Carrier's business is subject to changes
in economic, industrial, international and climate conditions, including
possible changes in interest rates, which could affect the demand for its
products; changes in legislation and government regulations, including those
relating to refrigerants and their effect on global environmental conditions;
changes in technology; changes in the level of construction activity; and
competition from a large number of companies, including other major domestic and
foreign manufacturers. The principal methods of competition are
3
product performance (including quality and reliability), delivery schedule,
price, service and other terms and conditions of sale.
Carrier's products and services are sold principally to builders, building
contractors and owners, residential homeowners, supermarkets and food service
companies. Sales are made both directly to the customer and by or through
manufacturers' representatives, distributors, dealers, individual wholesalers
and retail outlets.
Revenues generated by Carrier's international operations, including U.S.
export sales, were 58 percent and 55 percent of total Carrier segment revenues
in 1997 and 1996, respectively. International operations are subject to local
government regulations (including regulations relating to capital contributions,
currency conversion and repatriation of earnings), as well as to varying
currency, political and economic risks.
At December 31, 1997, the Carrier business backlog amounted to $1,021
million, as compared to $960 million at December 31, 1996. Substantially all of
the business backlog at December 31, 1997 is expected to be realized as sales in
1998.
Automotive
The Corporation's Automotive business is conducted through UT Automotive,
Inc. ("UTA"). UTA is a large independent supplier of automotive electrical
distribution systems and related components (terminals and connectors, body
electronics, junction boxes, and switches) in the Americas and Europe. UTA is
also a large independent supplier in North America of modular headliners,
instrument panels, door trim assemblies, vehicle remote entry systems, and
fractional horsepower DC electric motors used in commercial and industrial
applications.
UTA also produces other products such as interior trim (sun visors,
armrests, and consoles), mirrors, thermal and acoustical barriers, airbag
covers, electronic controls and modules, engine cooling modules, interior
lighting systems, windshield wiper systems, and electrical starters for
commercial applications. In the fourth quarter of 1996 UTA sold its steering
wheels business.
UTA competes worldwide to sell products to automotive manufacturers. Sales
to the major automotive manufacturers are made against periodic short-term
releases issued by the automotive manufacturers under contracts generally
awarded for a particular car or light truck model. To serve its worldwide
customer base, UTA maintains over 82 principal facilities in the Americas,
Europe and Asia.
Ford Motor Company is UTA's largest customer. In 1997, sales to Ford Motor
Company were $1,125 million, or 38 percent of total UTA revenues. In 1996 and
1995, sales to Ford Motor Company were $1,224 million (38 percent of total UTA
revenues) and $1,238 million (40 percent of total UTA revenues), respectively.
UTA's business is subject to changes in economic, industrial and
international conditions; changes in interest rates and in the level of
automotive production which could affect the demand for many of its products;
changes in the prices of essential raw materials and petroleum-based
materials; changes in legislation and in government regulations; changes in
technology; and substantial competition from a large number of companies
including other major domestic and foreign automotive parts suppliers. The
principal methods of competition are technology, price, delivery schedule,
quality and product performance.
UTA is also subject to continuing pressure from automotive manufacturers to
reduce its prices and to assume greater responsibilities. These pressures have
resulted in UTA taking on an increasing portion of automotive manufacturers'
engineering, design, development and tooling expenditures. UTA is also subject
to significant pressure to share in automotive manufacturers' liabilities
associated with warranty and product liability risks. While recognizing the
increased risks and responsibilities, UTA has positioned itself among the
leading first tier suppliers responding to the automotive manufacturers'
requirements in this regard. UTA has entered into long term supply agreements
with many of its customers which require price reductions. Future productivity
improvements must be realized in order for such arrangements to be profitable.
4
Revenues generated by UTA's international operations, including U.S. export
sales (excluding revenues from certain non-U.S. operations which manufacture
exclusively for the U.S. market), were 39 percent and 35 percent of total
Automotive segment revenues in 1997 and 1996, respectively. International
operations are subject to local government regulations (including regulations
relating to capital contributions, currency conversion and repatriation of
earnings), as well as to varying currency, political and economic risks.
At December 31, 1997, the UTA business backlog amounted to $682 million as
compared to $774 million at December 31, 1996. Substantially all of the
business backlog at December 31, 1997 is expected to be realized as sales in
1998.
Aerospace and Defense Businesses
The Corporation's Pratt & Whitney and Flight Systems business segments
produce aerospace and defense products. These businesses are subject to rapid
changes in technology; lengthy and costly development cycles; the effects of the
continuing consolidation within the aerospace and defense industry; heavy
dependence on a small number of products and programs; changes in legislation
and in government procurement and other regulations and procurement practices;
procurement preferences and policies of some foreign customers which require in-
country manufacture through co-production, offset programs (where in-country
purchases and financial support projects are required as a condition to
obtaining orders), joint ventures and production sharing, licensing or other
arrangements; substantial competition from major domestic manufacturers and from
foreign manufacturers whose governments sometimes give them direct and indirect
research and development, marketing subsidies and other assistance for their
commercial products; and changes in economic, industrial and international
conditions.
The principal methods of competition in the Corporation's aerospace and
defense businesses are price, product performance, service, delivery schedule
and other terms and conditions of sale, including fleet introductory allowances
and performance and operating cost guarantees, and the participation by the
Corporation and its finance subsidiaries in customer financing arrangements in
connection with sales of commercial jet engines and helicopters. Fleet
introductory allowances are financial incentives offered by the Corporation to
airline customers in order to make engine sales which lead, in turn, to the sale
of parts and services.
Sales of military products are affected by defense budgets (both in the U.S.
and, to some extent, abroad), U.S. foreign policy and the presence of
competition. Military spare parts sales have been, and will continue to be,
affected by the decline in overall procurement by the U.S. and foreign
governments and, to a lesser extent, by the U.S. and foreign governments' policy
of increasing parts purchases from suppliers other than the original equipment
manufacturers.
Pratt & Whitney
Pratt & Whitney is one of the world's leading producers of large turbofan
(jet) engines for commercial and military aircraft and small gas turbine engines
for business and regional/commuter aircraft. Pratt & Whitney provides overhaul
and repair services and spare and replacement parts for the engines it produces,
as well as overhaul and repair services and fleet management services for many
models of commercial and military jet and gas turbine engines. In addition,
Pratt & Whitney produces propulsion systems and solid rocket boosters for the
United States Air Force ("USAF") and the National Aeronautics and Space
Administration ("NASA") and provides land based power generation equipment.
Pratt & Whitney products are sold principally to aircraft manufacturers,
airlines and other aircraft operators, aircraft leasing companies, and the U.S.
and foreign governments. Pratt & Whitney sales in the U.S. and Canada are made
directly to the customer and, to a limited extent, through independent
distributors. Other export sales are made with the assistance of an overseas
network of independent foreign representatives. Sales to the Boeing Company
("Boeing"), Airbus Industrie ("Airbus") and McDonnell Douglas Corporation
("McDonnell Douglas"), including sales to the Douglas Products Division of
Boeing after Boeing's 1997 acquisition of McDonnell Douglas, consisting
primarily of commercial aircraft jet engines, amounted to 33 percent of total
Pratt & Whitney revenues in 1997. Pratt & Whitney's major competitors are the
aircraft engine businesses of General Electric Company ("GE") and Rolls-Royce
plc.
5
Pratt & Whitney currently produces three families of large commercial jet
engines; the JT8D-200, the PW2000 series and the PW4000 series. Pratt &
Whitney's JT8D-200 powers the Boeing MD-80 aircraft. Applications for the PW2000
series include the Boeing 757-200/PF aircraft. Pratt & Whitney's PW4000 engine
family powers the Airbus A310-300, A300-600 and A330-200/300 series; the Boeing
747-400, 767-200/300 and 777-200/300 series of aircraft; and the Boeing MD-11
aircraft. Boeing has announced that its Douglas Products Division will
continue to produce MD-80 aircraft until current production commitments end
in 1999 and that it will continue to offer MD-11 aircraft, although primarily
as freight aircraft.
IAE International Aero Engines AG, a Swiss corporation in which Pratt &
Whitney has a 33 percent interest, markets and supports the V2500 engine.
Applications for the V2500 engine include Airbus' A319, A320 and A321 aircraft
and Boeing's MD-90. Boeing has announced that its Douglas Products Division
will continue to produce MD-90 aircraft until current production commitments end
in 1999 and that Boeing will support existing MD-90 production commitments in
China through the MD-90 Trunkliner program.
In the case of many commercial aircraft today, aircraft manufacturers offer
their customers a choice of engines, giving rise to substantial competition
among engine manufacturers at the time of the sale of aircraft. This
competition continues to be increasingly intense particularly where new
commercial airframe/engine combinations are first introduced to the market and
into the fleets of individual airlines. Financial incentives granted by engine
suppliers, and performance and operating cost guarantees on their part, are
frequently important factors in such sales and can be substantial. (For
information regarding customer financing commitments, participation in
guarantees of customer financing arrangements and performance and operating cost
guarantees, see Notes 1, 4, 13 and 14 of Notes to Consolidated Financial
Statements at pages 33 to 35 and 40 to 41 of the Corporation's 1997 Annual
Report to Shareowners.)
In view of the global nature of the commercial aircraft industry and the
risk and cost associated with launching new engine development programs, Pratt &
Whitney has developed strategic alliances and collaboration arrangements on
commercial engine programs in which costs, revenues and risks are shared. At
December 31, 1997, the percentages of these items shared by other participants
in these alliances were approximately as follows: 25 percent of the JT8D-200
series engine program, 29 percent of the PW2000 series engine program, 22
percent of the 94 and 100 inch fan models of the PW4000, 31 percent of the
PW4084 and PW4090 models, and 29 percent of the PW4098 model.
GE-P&W Engine Alliance, LLC, an alliance between GE Aircraft Engines and
Pratt & Whitney in which Pratt & Whitney has a 50 percent interest, was formed
during 1996 to develop, market and manufacture a new jet engine that is intended
to power super-jumbo aircraft. Although no aircraft manufacturer has as yet
committed to produce a super-jumbo aircraft, the GE-P&W Engine Alliance has
continued its marketing activities.
In 1997, as part of its plans to increase its overhaul and repair business,
Pratt & Whitney purchased the aero engine repair operations of Howmet
Corporation and N.V. Interturbine.
Pratt & Whitney currently produces two military aircraft engines, the F100
(powering F-15 and F-16 fighter aircraft) and the F117 (powering C-17 transport
aircraft). All of Pratt & Whitney's F100 and F117 sales contracts are with the
USAF or with foreign governments.
6
Pratt & Whitney is under contract with the USAF to develop the F119 engine,
the only anticipated source of propulsion for the two-engine F-22 fighter
aircraft being developed by Lockheed Martin Corporation ("Lockheed Martin")
and Boeing. The F-22 made its first flight in September 1997, powered by Pratt
& Whitney F119 engines. In addition, the Department of Defense selected two
weapon systems contractors, Boeing and Lockheed Martin, to proceed into the next
phase of the Joint Strike Fighter program development. Both companies have
selected derivatives of Pratt & Whitney's F119 engine as their engine of choice
to provide power for the Joint Strike Fighter demonstration aircraft.
Management cannot predict with certainty whether, when, and in what quantities
Pratt & Whitney will produce F119 engines.
Pratt & Whitney Space Propulsion ("SP") produces hydrogen fueled rocket
engines for the commercial and U.S. Government space markets and advanced turbo
pumps for NASA. SP, together with NPO Energomash, is developing a new Lox-
Kerosene RD-180 booster engine for two launch vehicles being marketed by
Lockheed Martin. Chemical Systems, a unit of SP, manufactures solid fuel
propulsion systems and booster motors for the commercial and civil markets and
several U.S. military launch vehicles and missiles.
Gas turbine engines manufactured by Pratt & Whitney Canada, including
various turbofan, turboprop and turbo shaft engines, are used in a variety of
aircraft including six to eighty passenger business and regional airline
aircraft and light and medium helicopters. Pratt & Whitney Canada also provides
services worldwide.
Revenues from Pratt & Whitney's international operations, including U.S.
export sales, were 51 percent and 54 percent of total Pratt & Whitney segment
revenues in 1997 and 1996, respectively. Such operations are subject to local
government regulations (including regulations relating to capital contributions,
currency conversion and repatriation of earnings) as well as to varying
political and economic risks.
At December 31, 1997, the business backlog for Pratt & Whitney amounted to
$8,258 million, including $1,852 million of U.S. Government funded contracts and
subcontracts, as compared to $8,889 million and $1,927 million, respectively, at
December 31, 1996. Of the total Pratt & Whitney business backlog at December 31,
1997, approximately $4,325 million is expected to be realized as sales in 1998.
Significant elements of Pratt & Whitney's business, such as spare parts sales
for engines in service, generally have short lead times. Therefore, backlog may
not be indicative of future demand. Also, since a substantial portion of the
backlog for commercial customers is scheduled for delivery beyond 1998, changes
in economic conditions may cause customers to request that firm orders be
rescheduled or canceled.
Flight Systems
The Corporation's Flight Systems business is conducted through Sikorsky
Aircraft and Hamilton Standard.
Sikorsky is one of the world's leading manufacturers of military and
commercial helicopters and the primary supplier of transport helicopters to the
U.S. Army. All branches of the U.S. military operate Sikorsky helicopters.
Sikorsky produces helicopters for a variety of uses, including passenger,
utility/transport, cargo, anti-submarine warfare, search and rescue and heavy-
lift operations. Sikorsky also supplies helicopters to foreign governments and
the worldwide commercial market. In addition to sales of new helicopters,
Sikorsky's business base encompasses spare parts for past and current
helicopters produced by Sikorsky, and, through its subsidiary, Sikorsky Support
Services, Inc., the repair and retrofit of helicopters in the U.S. military
fleet. Other major helicopter manufacturers include Bell Helicopter Textron,
Eurocopter, Boeing Helicopters (including the recently acquired helicopter
business of McDonnell Douglas), Agusta, GKN Westland Helicopters and Mil.
Current production programs at Sikorsky include the Black Hawk medium-
transport helicopter for the U.S. and foreign governments; the international
Naval Hawk, a derivative of the Seahawk medium-sized helicopter for multiple
naval missions for foreign governments; the CH-53E Super Stallion heavy-lift
helicopter for the U.S. Marine Corps; and the S-76 intermediate-sized helicopter
for executive transport, offshore oil platform support, search and rescue,
emergency medical service and other utility operations.
7
In July, 1997 Sikorsky signed a multi-year contract with the U.S. Government
to deliver 108 Black Hawk helicopters from July 1997 through June 2002. Under
the contract, the Government currently has the right to cancel 54 helicopters
scheduled for delivery from July 1999 through June 2002. Declining Defense
Department budgets make Sikorsky increasingly dependent upon expanding its
international market position. Such sales sometimes require the development
of in-country co-production programs, such as the program in which Sikorsky
participates in South Korea.
Sikorsky is engaged in full scale development of the S-92 aircraft, a large
cabin derivative of the Black Hawk helicopter, for commercial and military
markets. Certification of the first S-92 is expected in the year 2000. A
significant portion of the development is being carried out by companies in
Brazil, the People's Republic of China, Japan, Spain and Taiwan under
collaborative arrangements.
Sikorsky has a 50% interest in a joint venture with Boeing Helicopters for
the development of the U.S. Army's next generation light helicopter, the RAH-66
Comanche. The Boeing Sikorsky Team is performing under a cost reimbursement
contract awarded in 1991. The first prototype aircraft performed a successful
first flight in January 1996 and is undergoing further flight testing. In
December 1996, Sikorsky and Boeing signed a modification to the contract which
includes additional development and testing and the fabrication of six early
operational capability aircraft. Management cannot predict with certainty
whether, when, and in what quantities the Comanche will go into production.
Hamilton Standard is a global producer of a number of flight systems for
both commercial and military aircraft. Major production programs include engine
controls, environmental controls, flight controls and propellers. Hamilton
Standard also supplies NASA's space suit/life support system and produces
environmental control and thermal control systems for international space
programs. Other Hamilton Standard products include fuel cell power plants,
microelectronic circuitry and advanced optical systems.
Revenues generated by Flight Systems' international operations, including
export sales, were 38 percent and 27 percent of total Flight Systems segment
revenues in 1997 and 1996, respectively. Such operations are subject to local
government regulations (including regulations relating to capital conditions,
currency conversion and repatriation of earnings) as well as to various
political and economic risks.
At December 31, 1997, the Flight Systems business backlog amounted to $2,373
million, including $1,238 million under funded contracts and subcontracts with
the U.S. Government, as compared to $2,606 million and $1,646 million,
respectively, at December 31, 1996. Of the total Flight Systems business
backlog at December 31, 1997, approximately $1,728 million is expected to be
realized as sales in 1998.
Other Matters Relating to the Corporation's
Business as a Whole
Research and Development
To maintain its competitive position, the Corporation spends substantial
amounts of its own funds on research and development. Such expenditures, which
are charged to income as incurred, were $1,187 million or 4.8 percent of total
sales in 1997, as compared with $1,122 million or 4.8 percent of total sales in
1996 and $963 million or 4.3 percent of total sales in 1995. The Corporation
also performs research and development work under contracts funded by the U.S.
Government and other customers. Such contract research and development, which
is performed principally in the Pratt & Whitney segment and to a lesser extent
in the Flight Systems segment, amounted to $974 million in 1997, as compared
with $870 million in 1996 and $871 million in 1995.
8
Contracts, Other Risk Factors, Environmental and Other Matters
Government contracts are subject to termination for the convenience of the
Government, in which event the Corporation normally would be entitled to
reimbursement for its allowable costs incurred plus a reasonable profit. Most
of the Corporation's sales are made under fixed-price type contracts; only 4.9
percent of the Corporation's total sales for 1997 were made under cost-
reimbursement type contracts.
Like many defense contractors, the Corporation has received allegations from
the U.S. Government that some contract prices should be reduced because cost or
pricing data submitted in negotiation of the contract prices may not have been
in conformance with Government regulations. The Corporation has made voluntary
refunds in those cases it believes appropriate, has settled some allegations,
and does not believe that any further price reductions that may be required will
have a material effect upon its financial position or results of operations.
The Corporation is now and believes that, in light of the current Government
contracting environment, it will be the subject of one or more Government
investigations. See Item 3 - Legal Proceedings at pages 10 and 11 of this Form
10-K for further discussion.
The Corporation does not currently believe that Defense Department budget
cutbacks will have a material adverse effect on the profitability of the
Corporation due in part to the growth in the Corporation's commercial
businesses.
Management currently believes that the diversification of the Corporation's
businesses across multiple industries and geographically throughout the world
has helped, and should continue to help, limit the effect of adverse conditions
in any one industry or the economy of any country or region on the consolidated
results of the Corporation. There can be no assurance, however, that the effect
of adverse conditions in one or more industries or regions will be limited or
offset in the future.
Like other users in the U.S., the Corporation is largely dependent upon
foreign sources for certain of its raw materials requirements such as cobalt
(Africa), and chromium (Africa, Eastern and Central Europe and the countries of
the former Soviet Union). To alleviate this dependence and accompanying risk,
the Corporation has a number of on-going programs which include the development
of new vendor sources; the increased use of more readily available materials
through material substitutions and the development of new alloys; and
conservation of materials through scrap reclamation and new manufacturing
processes such as net shape forging.
The Corporation has sought cost reductions in its purchases of certain other
materials, components, and supplies by consolidating its purchases and reducing
the number of suppliers. In some instances the Corporation is reliant upon a
single source of supply. A disruption in deliveries from its suppliers,
therefore, could have an adverse effect on the Corporation's ability to meet its
commitments to customers. The Corporation believes that it has appropriately
balanced the risks against the costs of sustaining a greater number of
suppliers.
The Corporation does not foresee any unavailability of materials,
components, or supplies which will have any material adverse effect on its
overall business, or on any of its business segments, in the near term.
The Corporation does not anticipate that compliance with current federal,
state and local provisions relating to the protection of the environment will
have a material adverse effect upon its cash flows, competitive position,
financial position or results of operations. (Environmental matters are the
subject of certain of the Legal Proceedings described in Item 3 - Legal
Proceedings at pages 10 and 11 of this Form 10-K, and are further addressed in
Management's Discussion and Analysis of Results of Operations and Financial
Position at page 27 and Notes 1 and 14 of Notes to Consolidated Financial
Statements at page 34 and 41 of the Corporation's 1997 Annual Report to
Shareowners.)
9
Most of the laws governing environmental matters include criminal
provisions. If the Corporation were convicted of a violation of the federal
Clean Air Act or the Clean Water Act, the facility or facilities involved in the
violation would be listed on the Environmental Protection Agency's (EPA) List of
Violating Facilities. The listing would continue until the EPA concluded that
the cause of the violation had been cured. Any listed facility cannot be used
in performing any U.S. Government contract awarded to the Corporation during any
period of listing by the EPA.
While the Corporation's patents, trademarks, licenses and franchises are
cumulatively important to its business, the Corporation does not believe that
the loss of any one or group of related patents, trademarks, licenses or
franchises would have a material adverse effect on the overall business of the
Corporation or on any of its business segments.
A discussion of the potential exposure to the Corporation arising from the
need to modify computer systems for the transition to the year 2000, and the
steps being taken by the Corporation to address these matters, is included in
Management's Discussion and Analysis of Results of Operations and Financial
Position under the heading "Year 2000" on page 27 of the Corporation's 1997
Annual Report to Shareowners.
This Report on Form 10-K, the Corporation's Annual Report to Shareowners and
the Corporation's Quarterly Reports on Form 10-Q contain "forward-looking
statements", as defined in the Private Securities Litigation Reform Act of 1995,
which reflect the Corporation's current view (as of the date such forward-
looking statement is made) with respect to future events, prospects,
projections or financial performance. Other written or oral statements made
by or on behalf of the Corporation including, but not limited to, press
releases and Reports on Form 8-K, may also include forward-looking statements.
All such forward-looking statements are subject to uncertainties, risks and
other factors that could affect the Corporation's operations, products and
markets and cause actual results to differ materially from those made,
implied, projected, forecasted or estimated in such forward-looking statements.
For information identifying some of these uncertainties, risks and other
factors, see the discussion included in Item 1 - Business of this Form 10-K
under the headings "Description of Business by Industry Segment" and "Other
Matters Relating to the Corporation's Business as a Whole" and in Item 3 -
Legal Proceedings of this Form 10-K.
Employees
At December 31, 1997, the Corporation's total employment was approximately
180,100.
Item 2. Properties
The Corporation's fixed assets include the plants and warehouses described
below and a substantial quantity of machinery and equipment, most of which is
general purpose machinery and equipment using special jigs, tools and fixtures
and in many instances having automatic control features and special adaptations.
The Corporation's plants, warehouses, machinery and equipment are in good
operating condition, are well maintained, and substantially all of its
facilities are in regular use. The Corporation considers the present level of
fixed assets capitalized as of December 31, 1997, suitable and adequate for the
respective industry segments' operations in the current business environment.
The following square footage numbers are approximations. At December 31,
1997, the Corporation operated (a) plants in the U.S. which had 33.3 million
square feet, of which 5.0 million square feet were leased; (b) plants outside
the U.S. which had 21.0 million square feet, of which 2.5 million square feet
were leased; (c) warehouses in the U.S. which had 4.7 million square feet, of
which 2.8 million square feet were leased; and (d) warehouses outside the U.S.
which had 6.1 million square feet, of which 3.8 million square feet were
leased.
10
Management believes that the facilities for the production of its products
are suitable and adequate for the business conducted therein, are being
appropriately utilized consistent with experience and have sufficient production
capacity for their present intended purposes. Utilization of the facilities
varies based on demand for the products. The Corporation continuously reviews
its anticipated requirements for facilities and, based on that review, may from
time to time acquire additional facilities and/or dispose of existing
facilities.
Item 3. Legal Proceedings
As previously reported, in June 1992, the Department of Justice filed a
civil False Claims Act complaint in the United States District Court for the
District of Connecticut, No. 592CV375, against Sikorsky Aircraft alleging that
the Government was overcharged by nearly $4 million in connection with the
pricing of parts supplied for the reconditioning of the Navy's Sea King
helicopter. The Complaint seeks treble damages plus a $10,000 penalty for each
false claim submitted. The bench trial in this matter concluded in August,
1997. Post-trial papers have been submitted to the judge and the parties are
awaiting the court's decision.
In December, 1996, the Department of Defense issued a contracting officer's
"final decision" with respect to Pratt & Whitney's Government contracts
accounting practices for aircraft engine parts produced by foreign companies
under certain commercial engine collaboration programs. The final decision
states that the Corporation failed to comply with various accounting
requirements incorporated in its contracts with the government. The final
decision covered the years 1984-95, inclusive, and claimed contract damages of
$260.3 million, of which $102.7 million is interest. This matter was initially
investigated by the U.S. Department of Justice, which closed its investigation
in 1996. The Corporation believes its accounting practices comply with contract
requirements and has not changed its accounting practices in response to the
government's claim. On December 24, 1996, the Corporation filed a notice of
appeal with the Armed Services Board of Contract Appeals. A hearing in this
matter is scheduled for March 1998. The Government has reserved its right to
file additional claims for 1996 (and later years if the accounting practices are
unchanged) plus additional interest. The Corporation has filed a counterclaim
against the Government in the amount of $42 million.
As previously reported, a jury in Chromalloy Gas Turbine Corporation v.
United Technologies Corporation, No. 95-CI-12541, a Texas state action, found
that Pratt & Whitney did not monopolize any relevant market but did willfully
attempt to monopolize an unspecified market. In May, 1997, the Court entered a
Final Judgment denying Chromalloy's request for damages, injunctive relief and
declaratory relief. Chromalloy has appealed the Court's decision.
In July 1997, the Corporation was served with a qui tam complaint under the
civil False Claims Act that had been filed under seal in the United States
District Court for the District of Connecticut in June 1994 (No. 394CV00963).
The Complaint seeks treble damages and penalties arising out of an alleged
failure by Norden Systems, Inc., a subsidiary of the Corporation, to account
properly for its fixed assets in billings on government contracts. (The assets
of Norden Systems, Inc. were sold to Westinghouse in 1994). The Government has
declined to take over the action which is being pursued by the relator.
In July 1997, the Corporation was served with a qui tam complaint under the
civil False Claims Act that had been filed under seal in the United States
District Court for the District of Connecticut in December 1994 (No.
394CV02063). The Complaint seeks treble damages and penalties arising out of an
alleged failure by Norden Systems, Inc., a subsidiary of the Corporation, and
the Corporation to account properly for insurance costs in billings on
government contracts. (The assets of Norden Systems, Inc. were sold to
Westinghouse in 1994). The Government has declined to take over the action
which is being pursued by the relator.
In January, 1998, the Corporation was served with a qui tam complaint under
the civil False Claims Act that had been filed under seal in the United States
District Court for the District of Connecticut in November, 1995 (No. 395CV02431
(DJS)). The Complaint seeks treble damages and penalties arising out of an
alleged failure of Hamilton Standard to implement an "Inspection Method Sheet
Inspection System". The Government has declined to take over the action which
is being pursued by the relator.
11
The Corporation does not believe that resolution of any of the foregoing
legal matters will have a material adverse effect upon the Corporation's
competitive position, results of operations, cash flows, or financial
position.
The Corporation is now, and believes that, in light of the current
government contracting environment, it will be the subject of one or more
government investigations. If the Corporation or one of its business units were
charged with wrongdoing as a result of any of these investigations, the
Corporation or one of its business units could be suspended from bidding on or
receiving awards of new government contracts pending the completion of legal
proceedings. If convicted or found liable, the Corporation could be fined and
debarred from new government contracting for a period generally not to exceed
three years. Any contracts found to be tainted by fraud could be voided by the
Government.
The Corporation has incurred and will likely continue to incur liabilities
under various state and federal statutes for the cleanup of pollutants
previously released into the environment. The Corporation believes that any
payments it may be required to make as a result of these claims will not have a
material effect upon the cash flows, competitive or financial position, or
results of operations of the Corporation. The Corporation has had liability and
property insurance in force over its history with a number of insurance
companies, and the Corporation has commenced litigation seeking indemnity and
defense under these insurance policies in relation to its environmental
liabilities. Settlements to date, which have not been material, have been
recorded upon receipt. While the litigation against the Corporation's historic
liability insurers has concluded, it is expected that the case against the
Corporation's property insurers will last several years. (For information
regarding the matters discussed in this paragraph, see "Environmental Matters"
in Management's Discussion and Analysis of Results of Operations and Financial
Position at page 27 and Notes 1 and 14 of the Notes to Consolidated Financial
Statements at pages 34 and 41 of the Corporation's 1997 Annual Report to
Shareowners.)
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to security holders for a vote during the fourth
quarter ended December 31, 1997.
- ----- Executive Officers of the Registrant
The executive officers of United Technologies Corporation, together with the
offices in United Technologies Corporation presently held by them, their
business experience since January 1, 1993, and their ages, are as follows:
Other Business Age
Name Title Experience 2/1/98
Since 1/1/93
Ari Bousbib Vice President Managing Director, The 36
Strategic Planning Strategic Partners
(since 1997) Group; Partner, Booz,
Allen & Hamilton.
Eugene Buckley President, Sikorsky President, Sikorsky 67
Aircraft Corporation Aircraft Division
(since 1995)
William L. Senior Vice 55
Bucknall, Jr. President, Human -------
Resources &
Organization
(since 1992)
12
Other Business Age
Name Title Experience 2/1/98
Since 1/1/93
Kevin Conway Vice President, Director of Taxes, 49
Taxes United Technologies
(since 1995) Corporation
George David Chairman (since President and Chief 55
1997), Operating Officer
President and Chief
Executive Officer
(since 1994)
C. Scott Greer President, UT President, Chief 47
Automotive Operating Officer
(since 1997) Echlin, Inc.
Jay L. Acting Chief Director, Internal 47
Haberland Financial Officer Audit;
(since 1997), and Vice President, Finance,
Vice President- Commercial & Industrial
Controller (since Group
1996) The Black & Decker
Corporation
Ruth R. Harkin Senior Vice President and Chief 53
President, Executive Officer,
International Overseas Private
Affairs and Investment Corporation;
Government Relations Partner, Akin, Gump,
(since 1997) Strauss, Hauer & Field
Robert J. Senior Vice ------- 64
Hermann President, Science &
Technology (since
1992)
Karl J. Krapek Executive Vice ------- 49
President (since
1997) and President,
Pratt & Whitney
(since 1992)
Raymond P. President, Hamilton Executive Vice 54
Kurlak Standard (since President, Sikorsky
1995)
John R. Lord President, Carrier President, Carrier NAO 54
Corporation
(since 1995)
Stephen F. Page President and Chief Executive Vice President 58
Executive Officer, and Chief Financial
Otis Elevator (since Officer, United
1997) Technologies
Corporation; Executive
Vice President and Chief
Financial Officer, The
Black & Decker
Corporation
Gilles A. H. Vice President - Vice President, Finance 51
Renaud Treasurer Carrier Corporation
(since 1996)
William H. Vice President, Vice President and 54
Trachsel Secretary and Deputy Deputy General Counsel
General Counsel
(since 1993)
Jean-Pierre van Chairman, Otis President, Otis Elevator 63
Rooy Elevator
(since 1997)
13
Other Business Age
Name Title Experience 2/1/98
Since 1/1/93
Irving B. Executive Vice ------- 52
Yoskowitz President and
General Counsel
(since 1990)
All of the officers serve at the pleasure of the Board of Directors of United
Technologies Corporation or the subsidiary designated.
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
See Comparative Stock Data appearing on page 43 of the Corporation's 1997
Annual Report to Shareowners containing the following data relating to the
Corporation's Common Stock: principal market, quarterly high and low sales
prices, approximate number of shareowners and frequency and amount of dividends.
All such data are incorporated by reference in this Report.
Item 6. Selected Financial Data
See the Five Year Summary appearing on page 21 of the Corporation's 1997
Annual Report to Shareowners containing the following data: revenues, net
income, basic and diluted earnings per share, cash dividends on Common Stock,
total assets and long-term debt. All such data are incorporated by reference in
this Report. See Notes to Consolidated Financial Statements appearing on pages
33 through 43 of the Corporation's 1997 Annual Report to Shareowners for a
description of any accounting changes and acquisitions or dispositions of
businesses materially affecting the comparability of the information reflected
in such Five Year Summary.
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Position
See Management's Discussion and Analysis of Results of Operations and
Financial Position appearing on pages 22 through 27 of the Corporation's 1997
Annual Report to Shareowners; such discussion and analysis is incorporated by
reference in this Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
See discussion appearing at pages 26 through 27 and 33 through 34 of the
Corporation's 1997 Annual Report to Shareowners under the headings "Derivative
and Other Financial Instruments" and "Hedging Activity" for information
concerning market risk sensitive instruments. Such information is incorporated
by reference in this Form 10-K.
Item 8. Financial Statements and Supplementary Data
The 1997 and 1996 Balance Sheets, and other financial statements for the
years 1997, 1996 and 1995, together with the report thereon of Price Waterhouse
LLP dated January 22, 1998, appearing on pages 28 through 32 in the
Corporation's 1997 Annual Report to Shareowners are incorporated by reference in
this Form 10-K.
The 1997 and 1996 Selected Quarterly Financial Data appearing on page 43 in
the Corporation's 1997 Annual Report to Shareowners are incorporated by
reference in this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
14
Item 10. Directors and Executive Officers of the Registrant
The information required by Item 10 with respect to directors is
incorporated herein by reference from pages 4 through 7 of the Corporation's
Proxy Statement for the 1998 Annual Meeting of Shareowners. Information
regarding executive officers is contained in Part I of this Form 10-K at
pages 11 through 13. Information concerning Section 16(a) compliance is
contained in the section entitled "Section 16(a) Beneficial Ownership
Reporting Compliance" at page 9 of the 1998 Proxy Statement.
Item 11. Executive Compensation
The information required by Item 11 is incorporated herein by reference from
pages 9 through 10 and 18 through 22 of the Corporation's Proxy Statement for
the 1998 Annual Meeting of Shareowners. Such incorporation by reference shall
not be deemed to specifically incorporate by reference the information referred
to in Item 402(a)(8) of Regulation S-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is incorporated herein by reference from
pages 8 and 9 of the Corporation's Proxy Statement for the 1998 Annual Meeting
of Shareowners.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 is incorporated herein by reference from
page 9 of the Corporation's Proxy Statement for the 1998 Annual Meeting of
Shareowners.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Page Number
(a) Financial Statements, Financial Statement in Annual
Schedules and Exhibits Report
(1) Financial Statements (incorporated by
reference from the 1997 Annual Report to
Shareowners):
Report of Independent Accountants ......... 28
Consolidated Statement of Operations for
the Three Years ended December 31, 1997 ... 29
Consolidated Balance Sheet--December 31, 30
1997 and 1996 .............................
Consolidated Statement of Cash Flows for 31
the Three Years ended December 31, 1997 ...
Consolidated Statement of Changes in 32
Shareowners' Equity .......................
Notes to Consolidated Financial Statements 33
Selected Quarterly Financial Data 43
(Unaudited) ...............................
Page Number
in Form 10-K
(2) Financial Statement Schedule
For the three years ended December 31,
1997:
Report of Independent Accountants on S-I
Financial Statement .......................
Schedule II Valuation and Qualifying S-II
Accounts ..................................
Consent of Independent Accountants ........ F-1
15
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
the notes thereto.
(3) Exhibits:
The following list of exhibits includes exhibits
submitted with this Form 10-K as filed with the SEC and
those incorporated by reference to other filings.
Exhibit Number
3.1 Restated Certificate of Incorporation,
incorporated by reference to Exhibit 3(i) to
United Technologies Corporation Quarterly Report
on Form 10-Q (Commission File number 1-812) for
quarterly period ended June 30, 1997.
3.2 Bylaws, incorporated by reference to Exhibit 3.2
to United Technologies Corporation Annual Report
on Form 10-K (Commission file number 1-812) for
fiscal year ended December 31, 1994.
4 The Corporation hereby agrees to furnish upon
request to the Commission a copy of each
instrument defining the rights of holders of long-
term debt of the Corporation and its consolidated
subsidiaries and any unconsolidated subsidiaries.
10.1 United Technologies Corporation 1979 Long Term
Incentive Plan, incorporated by reference to
Exhibit 10(i) to United Technologies Corporation
Annual Report on Form 10-K (Commission file number
1-812) for fiscal year ended December 31, 1992.
10.2 United Technologies Corporation Annual Executive
Incentive Compensation Plan, as amended. *
10.3 United Technologies Corporation Disability
Insurance Benefits for Executive Control Group,
incorporated by reference to Exhibit 10 (iii) to
United Technologies Corporation Annual Report on
Form 10-K (Commission file number 1-812) for
fiscal year ended December 31, 1992.
10.4 United Technologies Corporation Executive Estate
Preservation Program, incorporated by reference to
Exhibit 10(iv) to United Technologies Corporation
Annual Report on Form 10-K (Commission file number
1-812) for fiscal year ended December 31, 1992.
10.5 United Technologies Corporation Pension
Preservation Plan, incorporated by reference to
Exhibit 10(v) for United Technologies Corporation
Annual Report on Form 10-K (Commission file number
1-812) for fiscal year ended December 31, 1992.
10.6 United Technologies Corporation Senior Executive
Severance Plan, incorporated by reference to
Exhibit 10(vi) to United Technologies Corporation
Annual Report on Form 10-K (Commission file number
1-812) for fiscal year ended December 31, 1992.
10.7 United Technologies Corporation Deferred
Compensation Plan, as amended. *
10.8 Otis Elevator Company Incentive Compensation Plan,
incorporated by reference to Exhibit 10(viii) to
United Technologies Corporation Annual Report on
Form 10-K (Commission file number 1-812) for
fiscal year ended December 31, 1992.
10.9 United Technologies Corporation Directors
Retirement Plan, as amended. *
10.10 United Technologies Corporation Deferred
Compensation Plan for Non-Employee Directors,
incorporated by reference to Exhibit 10(x) to
United Technologies Corporation Annual Report on
Form 10-K (Commission file number 1-812) for
fiscal year ended December 31, 1992.
10.11 United Technologies Corporation Long Term
Incentive Plan, as amended. *
16
Exhibit Number
10.12 United Technologies Corporation Executive
Disability, Income Protection and Standard
Separation Agreement Plan, incorporated by
reference to Exhibit 10(xii) to United
Technologies Corporation Annual Report on Form 10-K
(Commission file number 1-812) for fiscal year
ended December 31, 1992.
10.13 United Technologies Corporation Directors'
Restricted Stock/Unit Program, incorporated by
reference to Exhibit 10(xiii) to United
Technologies Corporation Annual Report on Form 10-K
(Commission file number 1-812) for fiscal year
ended December 31, 1992.
10.14 United Technologies Corporation Board of Directors
Deferred Stock Unit Plan. *
10.15 United Technologies Corporation Pension
Replacement Plan, incorporated by reference to
Exhibit 10(xv) to United Technologies Corporation
Annual Report on Form 10-K (Commission file number
1-812) for fiscal year ended December 31, 1993.
10.16 United Technologies Corporation Special Retention
and Stock Appreciation Program, incorporated by
reference to Exhibit 10(xvi) to United
Technologies Corporation Report on Form 10-Q
(Commission file number 1-812) for quarterly
period ended September 30, 1995.
10.17 United Technologies Corporation Nonemployee
Director Stock Option Plan. *
11 Statement re: Computation of Per Share Earnings.**
12 Statement re: Computation of Ratio of Earnings to
Fixed Charges. **
13 Annual Report to Shareowners for year ended
December 31, 1997 (except for the pages and
information thereof expressly incorporated by
reference in this Form 10-K, the Annual Report to
Shareowners is provided solely for the information
of the Securities and Exchange Commission and is
not to be deemed ``filed'` as part of this Form
10-K). **
21 Subsidiaries of the Registrant. **
23 Consent of Price Waterhouse, included as page F-1 of
this Form 10-K.
24 Powers of Attorney of Howard H. Baker, Jr.,
Antonia Handler Chayes, Charles W. Duncan, Jr.,
Jean-Pierre Garnier, Pehr G. Gyllenhammar, Karl J.
Krapek, Charles R. Lee, Robert H. Malott, William
J. Perry, Frank P. Popoff, Andre Villeneuve,
Harold A. Wagner and Jacqueline G. Wexler. **
27 Financial Data Schedule. **
27.1 Restated Prior Periods' Financial Data Schedule.**
27.2 Restated Prior Periods' Financial Data Schedule.**
Notes to Exhibits List:
* Incorporated by reference to Exhibit of the
same number to United Technologies Corporation
Annual Report on Form 10-K (Commission file
number 1-812) for fiscal year ended December
31, 1995.
** Submitted electronically herewith.
(b) No reports on Form 8-K were filed by the Registrant during
the fourth quarter of 1997.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
UNITED TECHNOLOGIES CORPORATION
(Registrant)
By /s/ Jay L. Haberland
Jay L. Haberland
Acting Chief Financial Officer
Date: February 16, 1998 and Vice President, Controller
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 indicated, on the date set forth below.
Signature Title Date
/s/ George David Chairman, Director and February 16, 1998
George David President and Chief
Executive Officer
/s/ Jay L. Haberland Acting Chief Financial February 16, 1998
Jay L. Haberland Officer and Vice
President - Controller
HOWARD H. BAKER, JR. * Director )
(Howard H. Baker, Jr.)
ANTONIA HANDLER CHAYES * Director )
(Antonia Handler Chayes)
CHARLES W. DUNCAN, JR. * Director )
(Charles W. Duncan, Jr.)
JEAN-PIERRE GARNIER * Director )
(Jean-Pierre Garnier)
PEHR G. GYLLENHAMMAR * Director ) *By:/s/ William H. Trachsel
(Pehr G. Gyllenhammar) William H. Trachsel
Attorney-in Fact
Date: February 16, 1998
KARL J. KRAPEK* Director )
(Karl J. Krapek)
CHARLES R. LEE * Director )
(Charles R. Lee)
ROBERT H. MALOTT * Director )
(Robert H. Malott)
18
Signature Title Date
WILLIAM J. PERRY* Director )
(William J. Perry)
FRANK P. POPOFF * Director ) *By: /s/ William H. Trachsel
(Frank P. Popoff) William H. Trachsel
Attorney-in Fact
Date: February 16, 1998
ANDRE VILLENEUVE * Director )
(Andre Villeneuve)
HAROLD A. WAGNER * Director )
(Harold A. Wagner)
JACQUELINE G. WEXLER * Director )
(Jacqueline G. Wexler)
S-I SCHEDULE I
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of United Technologies Corporation
Our audits of the consolidated financial statements referred to in our
report dated January 22, 1998 appearing on page 28 of the 1997 Annual Report to
Shareowners of United Technologies Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, the Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Hartford, Connecticut
January 22, 1998
S-II
SCHEDULE II
UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
Three Years Ended December 31, 1997
(Millions of Dollars)
Allowances for Doubtful Accounts and Other Customer Financing Activity:
Balance December 31, 1994 $ 509
Provision charged to income 1
Doubtful accounts written off (net) (88)
Other adjustments 8
Balance December 31, 1995 430
Provision charged to income 40
Doubtful accounts written off (net) (57)
Other adjustments (1)
Balance December 31, 1996 412
Provision charged to income 59
Doubtful accounts written off (net) (29)
Other adjustments (16)
Balance December 31, 1997 $ 426
Future Income Tax Benefits - Valuation allowance:
Balance December 31, 1994 $ 355
Additions charged to income tax expense 49
Reductions credited to income tax expense (52)
Balance December 31, 1995 352
Additions charged to income tax expense 30
Reductions credited to income tax expense (48)
Balance December 31, 1996 334
Additions charged to income tax expense 55
Reductions credited to income tax expense (95)
Balance December 31, 1997 $ 294
F-1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 333-
26331, 33-46916, 33-40163, 33-34320, 33-31514, 33-29687 and 33-6452) and in
the Registration Statements on Form S-8 (Nos. 333-21853, 333-18743, 333-
21851, 33-57769, 33-45440, 33-11255, 33-26580, 33-26627, 33-28974, 33-51385,
33-58937, and 2-87322) of United Technologies Corporation of our report
dated January 22, 1998 appearing on page 28 of the 1997 Annual Report to
Shareowners which is incorporated by reference in this Annual Report on Form
10-K. We also consent to the incorporation by reference of our report on
the Financial Statement Schedule, which appears on page S-I of this Form 10-K.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Hartford, Connecticut
February 16, 1998
EXHIBIT 11
UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES
Computations of Basic Earnings Per Share and Diluted Earnings Per Share
For the Five Years Ended December 31, 1997
(Millions of Dollars, except per share amounts)
1997 1996 1995 1994 (1) 1993
Net Income $ 1,072 $ 906 $ 750 $ 585 $ 487
ESOP Convertible Preferred Stock dividend (32) (30) (27) (22) (43)
Basic earnings for period $ 1,040 $ 876 $ 723 $ 563 $ 444
ESOP Convertible Preferred Stock adjustment 27 24 21 17 16
Diluted earnings for period $ 1,067 $ 900 $ 744 $ 580 $ 460
Basic average number of shares outstanding during
the period (thousands) 234,443 241,454 245,642 251,077 249,264
Stock awards (thousands) 5,878 4,877 2,975 2,630 2,623
ESOP convertable preferred stock (thousands) 13,234 12,275 10,889 9,285 25,152
Diluted average number of shares outstanding during
the period (thousands) 253,555 258,606 259,506 262,992 277,039
Basic earnings per common share $ 4.44 $ 3.63 $ 2.94 $ 2.24 $ 1.78
Diluted earnings per common share $ 4.21 $ 3.48 $ 2.87 $ 2.20 $ 1.66
(1) In 1994, the Corporation adopted AICPA Statement of Position (SOP) 93-6, "Employers' Accounting for
Employee Stock Ownership Plans" and conformed its calculations of earnings per common share to the
requirements of this SOP.
EXHIBIT 12
UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Millions of Dollars)
Years Ended December 31,
1997 1996 1995 1994 1993
Fixed Charges:
Interest on indebtedness $ 195 $ 221 $ 244 $ 275 $ 251
Interest capitalized 11 16 16 19 29
One-third of rents* 87 87 88 101 115
Total Fixed Charges $ 293 $ 324 $ 348 $ 395 $ 395
Earnings:
Income (loss) before income taxes
and minority interests $ 1,764 $ 1,560 $ 1,344 $ 1,076 $ 909
Fixed charges per above 293 324 348 395 395
Less: interest capitalized (11) (16) (16) (19) (29)
282 308 332 376 366
Amortization of interest capitalized 37 38 41 43 42
Total Earnings $ 2,083 $ 1,906 $ 1,717 $ 1,495 $ 1,317
Ratio of Earnings to Fixed Charges 7.11 5.88 4.93 3.78 3.33
* Reasonable approximation of the interest factor.
EXHIBIT 13
FIVE YEAR SUMMARY
IN MILLIONS OF DOLLARS (EXCEPT PER SHARE AMOUNTS) 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR
Revenues $ 24,713 $ 23,512 $ 22,802 $ 21,197 $ 21,081
Research and development 1,187 1,122 963 978 1,137
Segment operating profit margin 8.8% 8.5% 7.8% 7.3% 6.1%
Net income 1,072 906 750 585 487
Earnings per share:
Basic 4.44 3.63 2.94 2.24 1.78
Diluted 4.21 3.48 2.87 2.20 1.66
Cash dividends per common share 1.24 1.10 1.025 .95 .90
Average number of shares of Common Stock
outstanding (thousands):
Basic 234,443 241,454 245,642 251,077 249,264
Diluted 253,555 258,606 259,506 262,992 277,039
Return on average common shareowners' equity, after tax 24.5% 21.1% 18.6% 15.4% 13.1%
AT YEAR END
Working capital $ 1,937 $ 2,398 $ 2,395 $ 1,799 $ 902
Total assets 16,719 16,745 15,958 15,624 15,618
Long-term debt, including current portion 1,398 1,534 1,747 2,041 2,179
Total debt 1,615 1,785 2,041 2,443 2,959
Debt to total capitalization 28% 29% 34% 39% 45%
Net debt (total debt less cash) 860 658 1,141 2,057 2,538
Net debt to total capitalization 17% 13% 22% 35% 41%
ESOP Preferred Stock, net 450 434 398 339 176
Shareowners' equity 4,073 4,306 4,021 3,752 3,598
Equity per common share 17.78 18.08 16.47 15.24 14.27
Number of employees:
United States 72,300 69,800 70,900 75,900 81,700
Europe 43,900 42,400 40,700 41,500 40,300
Asia Pacific 28,100 27,600 25,600 21,000 15,900
Other 35,800 34,000 33,400 33,100 30,700
Total 180,100 173,800 170,600 171,500 168,600
21
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL POSITION
The Corporation's operations are classified into five principal business
segments. Otis, Carrier and UT Automotive serve customers in the commercial
property, residential housing and automotive industries. Pratt & Whitney and the
Flight Systems segment, which includes Sikorsky and Hamilton Standard, serve
commercial and government customers in the aerospace industry. See Note 15 of
Notes to Consolidated Financial Statements for the operating results of the
Corporation's business segments.
BUSINESS ENVIRONMENT
As worldwide businesses, the Corporation's operations are affected by global and
regional economic factors. However, the diversity of the Corporation's
businesses and global market presence has helped limit the impact of any one
industry or the economy of any single country on the consolidated results.
Revenues from outside the U.S., including U.S. export sales, in dollars and as a
percentage of consolidated revenues, are as follows:
IN MILLIONS OF DOLLARS 1997 1996 1995 1997 1996 1995
- -------------------------------------------------------------------------------------------------
Europe $ 4,788 $ 4,800 $ 4,599 19% 20% 20%
Asia Pacific 2,952 3,042 2,707 12% 13% 12%
Other 2,380 2,238 2,042 10% 10% 9%
U.S. Exports 4,022 3,124 3,267 16% 13% 14%
----------------------------------------------------------------------
International
Revenues $14,142 $13,204 $12,615 57% 56% 55%
----------------------------------------------------------------------
As part of its globalization strategy, the Corporation has invested in
businesses in emerging markets, which include the People's Republic of China
(PRC), the former Soviet Union and other emerging nations, which carry higher
levels of currency, political and economic risks than investments in developed
markets. At December 31, 1997, the Corporation's net investment in any one of
these countries was less than 4% of consolidated equity.
Economic growth rates in the Asia Pacific region slowed during the latter
part of 1997. Tightening of credit in Asia is likely to affect available
financing for new construction activities, resulting in lower or, in some cases,
no growth in the near-term compared to recent years. While recognizing that the
Asian economic downturn could continue in 1998, and possibly beyond, management
believes the long-term economic growth prospects of the region remain intact.
Therefore, the Corporation's Asian investment strategy continues to focus on the
long-term infrastructure requirements of the region.
OTIS is the world's largest elevator and escalator manufacturing and service
company. The elevator and escalator service market is an important aspect of
Otis' business. Otis is impacted by global and regional economic factors,
particularly fluctuations in commercial construction which affect new equipment
installations, and labor costs which can impact service and maintenance margins
on installed elevators and escalators. In 1997, 83% of Otis' revenues were
generated outside the U.S. Accordingly, changes in foreign currency exchange
rates can significantly affect the translation of Otis' operating results into
U.S. dollars for financial reporting purposes.
During 1997, U.S. office building construction starts were higher than the
prior year and commercial vacancy rates continued to improve. In Europe, Otis'
new equipment activity increased along with a growing base of service business.
Otis maintains a significant presence in the Asia Pacific region where economic
growth weakened in 1997.
CARRIER is the world's largest manufacturer of commercial and residential
heating, ventilating and air conditioning (HVAC) systems and equipment. Carrier
is also a supplier of transport and commercial refrigeration equipment, as well
as after-market service and component sales. During 1997, 58% of Carrier's
revenues were generated by international operations and U.S. exports.
Accordingly, Carrier's results are impacted by commercial and residential
construction activity worldwide, regional weather conditions and changes in
foreign currency exchange rates.
U.S. residential housing starts were flat in 1997, compared to 1996, while
commercial construction starts in the U.S. improved. Asian economies weakened in
1997 while Europe remained weak.
UT AUTOMOTIVE (UTA) develops and manufactures a wide variety of electrical and
interior trim systems and components for original equipment manufacturers (OEMs)
in the automotive industry. Sales to Ford Motor Company, UTA's largest customer,
were 38% of UTA's revenues in 1997. UTA also has important relationships with
Chrysler Corporation and General Motors Corporation as well as PSA, Renault,
Volvo, Austin Rover/BMW and Fiat in Europe and the U.S. manufacturing divisions
of Japanese automotive OEMs.
North American car and light truck production and European car sales were
higher in 1997, compared to 1996. UTA's revenues were impacted by lower sales of
high content vehicles in North America and benefited from higher volumes in
Europe. The automotive OEMs apply significant cost reduction and performance
pressures on suppliers and continue to require suppliers to bear an increasing
portion of engineering, design, development, tooling and warranty expenditures.
During 1997, 39% of UTA's revenues were generated by international
operations and U.S. exports. Accordingly, UTA's results are impacted by changes
in foreign currency exchange rates.
COMMERCIAL AEROSPACE
The financial performance of the Corporation's Pratt & Whitney and Flight
Systems segments is directly tied to the aviation industry. Pratt & Whitney is a
major supplier of commercial, general aviation and military aircraft engines,
along with spare parts, product support and a full range of overhaul, repair and
fleet management services. The Flight Systems segment provides environmental,
flight and fuel control systems and propellers for commercial and military
aircraft through Hamilton Standard, and
22
commercial and military helicopters, along with after-market products and
services, through Sikorsky Aircraft.
Worldwide airline profits have been a reliable indicator for new aircraft
and after-market orders. U.S. and European airlines are experiencing strong
levels of profitability driven primarily by higher traffic growth, improved
yields and major cost reduction programs. Airlines in the Asia Pacific region,
with the exception of the PRC, have suffered recent erosion in operating results
reflecting weaker local economies. This recent erosion in earnings could result
in a decrease in new orders for aerospace products and cancelations or deferrals
of existing orders. Airlines in the PRC (excluding Hong Kong) are benefiting
from a relatively stable currency and strong domestic economic growth.
Pratt & Whitney's mix of large commercial engine shipments has shifted to
newer, higher thrust engines for wide-bodied aircraft in a market which is very
price and product competitive.
The follow-on spare parts sales for Pratt & Whitney engines in service have
traditionally been an important source of profit for the Corporation. The large
investment required for new aircraft, coupled with performance improvements and
hush-kit upgrades to older aircraft and engines, have resulted in lengthened
lives of older aircraft in operation, including those with Pratt & Whitney
engines.
Technological improvement to newer generation engines that increase
reliability, as well as vertical integration of OEMs in the overhaul and
maintenance business, may alter the market environment in the after-market
business.
GOVERNMENT BUSINESS
During 1997, the Corporation's sales to the U.S. Government were $3,311 million
or 14% of total sales, a decline from $3,382 million or 15% of total sales in
1996 and $3,651 million or 16% of total sales in 1995.
The defense portion of the Corporation's aerospace businesses continues to
respond to a changing global political environment. The U.S. defense industry
continues to downsize and consolidate in response to continued pressure on U.S.
defense spending.
Sikorsky will continue to supply Black Hawk helicopters to the U.S. and
foreign governments under contracts extending into 2002, albeit at lower volumes
than in the past. The U.S. Army Comanche helicopter contract, awarded to a
Sikorsky/Boeing joint venture, supports completion of prototype development,
flight testing and aircraft for initial field tests.
The significant decrease in the U.S. defense procurement of helicopters in
recent years has placed the U.S. helicopter manufacturers under some of the same
pressures that have led to consolidation in other segments of the U.S. defense
industry. Sikorsky is responding to these pressures by improving its products
and increasing sales to foreign government customers. In addition, an
international team led by Sikorsky is developing the S-92, a large cabin
derivative of the Black Hawk family, for commercial and military markets.
Pratt & Whitney continues to deliver F100 engines and military spare parts
to both U.S. and foreign governments. Pratt & Whitney's engines have been
selected to power two of the primary U.S. Air Force programs of the future: the
C-17 airlifter which is currently in production and the F-22 fighter which is
currently being developed. In 1996, derivatives of Pratt & Whitney's F119 engine
were chosen to provide power for the Joint Strike Fighter demonstration
aircraft. The Joint Strike Fighter program is intended to lead to the
development of a single aircraft, with two configurations, to satisfy future
requirements of the U.S. Navy, Air Force and Marine Corps and the United Kingdom
Royal Navy.
RESULTS OF OPERATIONS
IN MILLIONS OF DOLLARS 1997 1996 1995
- -------------------------------------------------------------
Sales $24,495 $23,273 $22,624
Financing revenues and
other income, net 218 239 178
-------------------------------
Revenues $24,713 $23,512 $22,802
-------------------------------
Consolidated revenues increased 5% in 1997 and 3% in 1996. Excluding the
unfavorable impact of foreign currency translation, consolidated revenues would
have increased by 8% and 4% in 1997 and 1996. The Corporation estimates that
increases in selling prices to customers averaged approximately 1% in 1997 and
1996, indicating that the real volume of revenues increased 7% in 1997 and 3% in
1996.
Financing revenues and other income, net, decreased $21 million in 1997 and
increased $61 million in 1996. The 1996 increase was principally due to the gain
on the sale of UT Automotive's steering wheels business which was partially
offset by lower financing revenues associated with a lower customer financing
asset base.
IN MILLIONS OF DOLLARS 1997 1996 1995
- ------------------------------------------------------------
Cost of sales $18,652 $17,737 $17,600
Gross margin % 23.9% 23.8% 22.2%
Gross margin as a percentage of sales increased one-tenth of a percentage
point in 1997. Gross margin as a percentage of sales increased 1.6 percentage
points in 1996 reflecting improved margin percentages at Pratt & Whitney,
Carrier and Flight Systems. Gross margin in both years benefited from the
Corporation's continuing cost reduction efforts.
IN MILLIONS OF DOLLARS 1997 1996 1995
- ---------------------------------------------------------
Research and development $1,187 $1,122 $963
Percent of sales 4.8% 4.8% 4.3%
Research and development expenses increased $65 million (6%) and $159
million (17%) in 1997 and 1996. The increases in 1997 and 1996 occurred in all
segments. Research and development expenses in 1998 are expected to remain
between 4% and 5% of sales.
IN MILLIONS OF DOLLARS 1997 1996 1995
- ----------------------------------------------------------
Selling, general and
administrative $2,915 $2,872 $2,651
Percent of sales 11.9% 12.3% 11.7%
Selling, general and administrative expenses, as a percentage of sales,
decreased four-tenths of a percentage point in 1997 while increasing six-tenths
of a percentage point in 1996. The 1997 decrease was primarily due to decreases
at Pratt & Whitney and Flight Systems. The 1996 increase, although somewhat
mitigated by ongoing cost reduction efforts, was attributable to higher expenses
for incentive based compensation plans and litigation costs.
23
IN MILLIONS OF DOLLARS 1997 1996 1995
- ----------------------------------------------------
Interest expense $ 195 $ 221 $ 244
Interest expense decreased 12% and 9% in 1997 and 1996 mainly due to
reduced average borrowing levels.
YEARS ENDED DECEMBER 31 1997 1996 1995
- --------------------------------------------------------------
Average interest rate:
Short-term borrowings 11.7% 11.8% 8.8%
Total debt 8.3% 8.7% 8.5%
The weighted-average rate applicable to debt outstanding at December 31,
1997 was 9.8% for short-term borrowings and 8.3% for total debt. Short-term
borrowing rates exceed those of total debt due to higher short-term borrowing
rates in certain foreign operations.
1997 1996 1995
- ------------------------------------------------------------
Effective income tax rate 32.5% 33.5% 34.5%
The Corporation has reduced its effective income tax rate by implementing
tax reduction strategies.
The future tax benefit arising from net deductible temporary differences is
$2,075 million and relates to expenses recognized for financial reporting
purposes which will result in tax deductions over varying future periods.
Management believes that the Corporation's earnings during the periods when the
temporary differences become deductible will be sufficient to realize those
future income tax benefits.
While some tax credit and loss carryforwards have no expiration date,
certain foreign and state tax loss carryforwards arise in a number of different
tax jurisdictions with expiration dates beginning in 1998. For those
jurisdictions where the expiration date or the projected operating results
indicate that realization is not likely, a valuation allowance has been
provided. U.S. foreign tax credit carryforwards, which require future foreign
source income to be utilized, expire after five years and are reserved through
valuation allowances.
The Corporation believes, based upon a review of prior period income tax
returns, that it is entitled to income tax refunds for prior periods. These
potential refunds are reviewed as part of the examination of the Corporation's
income tax returns by the Internal Revenue Service and the impact on the
Corporation's liability for income taxes for these years cannot presently be
determined.
Net income:
Increased 18% or $166 million from 1996 to 1997.
Increased 21% or $156 million from 1995 to 1996.
[GRAPHIC OMITTED: Bar Chart showing
Effective Tax Rate (%) from 1993-1997]
Data Points as follows:
1993 37.0%
1994 35.7%
1995 34.5%
1996 33.5%
1997 32.5%
SEGMENT REVIEW
Revenues Operating Profits Operating Profit Margin
IN MILLIONS OF DOLLARS 1997 1996 1995 1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
Otis $5,548 $5,595 $5,287 $ 465 $ 524 $ 511 8.4% 9.4% 9.7%
Carrier 6,056 5,958 5,456 458 422 354 7.6% 7.1% 6.5%
UT Automotive 2,987 3,233 3,061 173 196 180 5.8% 6.1% 5.9%
Pratt & Whitney 7,402 6,201 6,170 816 637 530 11.0% 10.3% 8.6%
Flight Systems 2,862 2,651 2,947 285 234 209 10.0% 8.8% 7.1%
1997 COMPARED TO 1996
OTIS revenues decreased $47 million (1%) in 1997. Excluding the unfavorable
impact of foreign currency translation, 1997 revenues would have increased 7%
with all regions showing growth.
Otis operating profits decreased $59 million (11%) in 1997. Excluding the
unfavorable impact of foreign currency translation, 1997 operating profits would
have decreased 2%. The 1997 results include the impact of salaried workforce
reductions designed to lower costs and streamline the organization. North
American, South American and European operations improved in 1997, partially
offset by a decline in Asia Pacific operations. Otis expects additional charges
in 1998 associated with the closure of certain facilities in order to further
streamline operations.
CARRIER revenues increased $98 million (2%) in 1997. Excluding the unfavorable
impact of foreign currency translation, 1997 revenues would have increased 5%,
primarily due to the impact of European acquisitions and increases at Carrier
Transicold. Revenue increases were partially offset by declines due to sluggish
economic conditions in Europe, unseasonably cool summer selling seasons in
Europe and North America and an economic downturn in the Asia Pacific region,
particularly Southeast Asia.
Carrier operating profits increased $36 million (9%) in 1997. Excluding the
unfavorable impact of foreign currency translation, 1997 operating profits would
have increased 12%. The increase in 1997 results reflects improvements at
Carrier Transicold and the impact of acquisitions which more than offset
declines in Asia Pacific and European operations and the weather related
weakness noted above.
UT AUTOMOTIVE revenues decreased $246 million (8%) in 1997. Foreign currency
translation reduced 1997 revenues by 3%. The comparative decrease in 1997
revenues is also the result of the sale of the steering wheels business in the
fourth quarter of 1996 and lower volumes at most businesses.
UT Automotive operating profits decreased $23 million (12%) in 1997.
Foreign currency translation reduced 1997 operating profits by 7%. The
comparative results were also impacted by lower volumes, domestic administrative
workforce reductions, a
24
provision for a European plant closure in 1997 and the fourth quarter 1996 sale
of the steering wheels business, which more than offset improvements at the
interiors business and in Europe.
PRATT & WHITNEY revenues increased $1,201 million (19%) in 1997, reflecting
higher volumes in both the after-market and new engine businesses.
Pratt & Whitney operating profits increased $179 million (28%), reflecting
strong after-market results partially offset by higher research and development
spending. 1997 operating results also benefited from continued cost reduction
efforts which more than offset raw material price increases and costs associated
with staff reductions.
FLIGHT SYSTEMS revenues increased $211 million (8%) in 1997 due to increases at
both Hamilton Standard and Sikorsky.
Flight Systems operating profits increased $51 million (22%) in 1997, as a
result of continuing operating performance improvement at both Hamilton Standard
and Sikorsky, partially offset by higher research and development spending.
[GRAPHIC OMITTED: Bar Chart showing
Segment Operating Profits ($ Billions)
from 1993 - 1997 ]
Data Points as follows:
1993 $1.293
1994 $1.544
1995 $1.786
1996 $1.992
1997 $2.174
[GRAPHIC OMITTED: Bar Chart showing
Operating Cash Flows ($ Billions) from
1993-1997]
Data Points as follows:
1993 $1.508
1994 $1.357
1995 $2.044
1996 $2.095
1997 $2.131
1996 COMPARED TO 1995
OTIS revenues increased $308 million (6%) in 1996. Excluding the unfavorable
impact of foreign currency translation, 1996 revenues would have increased
approximately 9% with all geographic regions showing increases. Acquisitions in
1996 and 1995 had a positive impact on 1996 revenues.
Otis operating profits increased $13 million (3%) in 1996. Excluding the
unfavorable impact of foreign currency translation, 1996 operating profits would
have increased 6%. North America, Latin America and Asia Pacific regions showed
increases in 1996. European operations were flat as a result of 1996 charges
related to headcount reductions and the closure of a manufacturing facility.
CARRIER revenues increased $502 million (9%) in 1996, reflecting increases in
all geographic regions led by strong growth in the Asia Pacific region and a
strong summer selling season in North America.
Carrier operating profits increased $68 million (19%) in 1996. Improvements
were driven by strong demand for residential and commercial packaged air
conditioning in North America, continued growth in the Asia Pacific region and
strong performance in Latin America, while European operations remained
essentially flat. Carrier Transicold results were lower in 1996 due to softness
in the transport refrigeration business in the second half of the year.
UT AUTOMOTIVE revenues increased $172 million (6%) in 1996, primarily due to
higher vehicle content in North America, higher industry volumes in Europe and a
fourth quarter gain realized on the sale of the steering wheels business.
UT Automotive operating profits increased $16 million (9%) in 1996. The
increase is due to the fourth quarter gain of $78 million on the sale of the
steering wheels business, which was largely offset by charges for cost reduction
and other actions, including the discontinuance of certain product lines and the
consolidation of certain production facilities. These actions were taken in
response to changing industry conditions and to enhance cost structure and
competitive position. In addition, the interiors business experienced
manufacturing problems and higher costs to implement turn around strategies. The
1996 results also include a provision related to UT Automotive's participation
in the costs of a customer recall program.
PRATT & WHITNEY revenues increased $31 million in 1996. The 1996 revenues
reflect the impact of the change in classification of sales associated with
Pratt & Whitney's strategic alliances and related collaborative arrangements on
its engine programs, as described in Note 1 of Notes to Consolidated
Financial Statements. This reclassification did not affect operating profits or
assets. While 1995 amounts were not reclassified, the impact would have been a
reduction of revenues and cost of sales of approximately $400 million. 1996
benefited from increases in the commercial and government after-market and
general aviation businesses.
Pratt & Whitney operating profits increased $107 million (20%) in 1996. The
increase reflects continued margin improvements in the commercial and government
after-market and general aviation businesses, more than offsetting planned
increases in research and development spending and higher selling, general and
administrative expenses.
FLIGHT SYSTEMS revenues decreased $296 million (10%) in 1996 due to fewer
helicopter shipments.
Flight Systems operating profits increased $25 million (12%) in 1996. The
1996 results reflect performance improvements at Hamilton Standard, partially
offset by lower helicopter volume at Sikorsky. In addition, 1995 results include
costs associated with selling the wafer fabrication facility of Hamilton
Standard's Microelectronics Center and a service and warranty provision for a
Hamilton Standard propeller issue.
LIQUIDITY AND FINANCING COMMITMENTS
Management assesses the Corporation's liquidity in terms of its overall ability
to generate cash to fund its operating and investing activities. Significant
factors affecting the management of liquidity are cash flows generated from
operating activities, capital expenditures, customer financing requirements,
adequate bank lines of credit and financial flexibility to attract long-term
capital with satisfactory terms.
IN MILLIONS OF DOLLARS 1997 1996 1995
- -----------------------------------------------------------------
Net Cash Flows provided by
Operating Activities $ 2,131 $ 2,095 $ 2,044
Capital expenditures (843) (794) (780)
Decrease in customer
financing assets, net 39 48 235
Acquisition funding (584) (317) (204)
Common Stock repurchase (849) (459) (221)
Change in total debt (170) (256) (402)
Change in net debt 202 (483) (916)
25
Cash flows provided by operating activities remained at levels comparable
to 1996 and 1995.
Cash flows used in investing activities were $1,185 million during 1997
compared to $802 million in 1996. Capital expenditures in 1997 were $843
million, a $49 million increase over 1996. The Corporation expects 1998 capital
spending to be moderately higher than 1997. Customer financing activity provided
cash of $39 million and $48 million in 1997 and 1996, respectively. Both 1997
and 1996 results reflect lower customer financing asset sales than in 1995.
While the Corporation expects that customer financing activity will be a net use
of cash in 1998, actual funding is subject to usage under existing customer
financing commitments. Acquisitions in 1997 primarily include Carrier's domestic
acquisitions of two commercial refrigeration businesses and Pratt & Whitney's
acquisition of component repair operations. Acquisitions in 1996 included a
U.K. elevator company by Otis, UT Automotive's ownership increase in a European
subsidiary and the purchase of a European transportation air conditioning
company and a French commercial refrigeration distribution company by Carrier.
Proceeds from the disposition of business units in 1996 primarily included the
sale of UT Automotive's steering wheels business.
The Corporation repurchased $849 million of Common Stock during 1997,
representing 11.2 million shares, under previously announced share repurchase
programs. Share repurchase continues to be a significant use of the
Corporation's strong cash flows and serves to offset the dilutive effect
resulting from the issuance of stock under stock-based employee benefit
programs.
[GRAPHIC OMITTED: Bar Chart showing
Acquisitions ($ Millions) from 1993-1997]
Data Points as follows:
1993 $ --
1994 125
1995 204
1996 317
1997 584
[GRAPHIC OMITTED: Bar Chart showing Share
Repurchase ($ Millions) from 1993-1997]
Data Points as follows:
1993 $ --
1994 270
1995 221
1996 459
1997 849
IN MILLIONS OF DOLLARS 1997 1996
- ---------------------------------------------------
Cash and cash equivalents $ 755 $1,127
Total debt 1,615 1,785
Net debt (total debt less
cash) 860 658
Shareowners' equity 4,073 4,306
Debt to total capitalization 28% 29%
Net debt to total
capitalization 17% 13%
At December 31, 1997, the Corporation had credit commitments from banks
totaling $1.5 billion under a Revolving Credit Agreement, which also serves as
back-up for an uncommitted commercial paper facility. At December 31, 1997,
there were no borrowings under the Revolving Credit Agreement. In addition, at
December 31, 1997, approximately $1.2 billion was available under short-term
lines of credit with local banks at the Corporation's various international
subsidiaries.
At December 31, 1997, up to $871 million of medium-term and long-term debt
could be issued under a Registration Statement on file with the Securities and
Exchange Commission.
At December 31, 1997, the Corporation had commitments to finance or arrange
financing for approximately $934 million of commercial aircraft, of which as
much as $220 million may be required to be disbursed in 1998. The Corporation
cannot currently predict the extent to which these commitments will be utilized,
since certain customers may be able to obtain more favorable terms from other
financing sources. The Corporation may also arrange for third-party investors to
assume a portion of its commitments. Refer to Note 4 of Notes to Consolidated
Financial Statements for additional discussion of the Corporation's airline
industry and customer financing assets.
The Corporation believes that existing sources of liquidity are adequate to
meet anticipated short-term borrowing needs at comparable risk-based interest
rates for the foreseeable future.
DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS
The Corporation is exposed to changes in foreign currency exchange and interest
rates primarily in its cash, debt and foreign currency transactions. The
Corporation holds derivative instruments, including swaps, forward contracts and
options, to manage certain foreign currency exposures. Derivative instruments
utilized by the Corporation in its hedging activities are viewed as risk
management tools, involve little complexity and are not used for trading or
speculative purposes. The Corporation diversifies the counterparties used and
monitors the concentration of risk to limit its counterparty exposure.
International operations, including U.S. export sales, constitute a
significant portion of the revenues and identifiable assets of the Corporation,
which averaged approximately $13 billion and $7 billion, respectively, over the
last three years. These operations result in a large volume of foreign currency
commitment and transaction exposures and significant foreign currency net asset
exposures. Foreign currency commitment and transaction exposures are managed at
the operating unit level as an integral part of the business and residual
exposures that cannot be offset to an insignificant amount are hedged. These
hedges are scheduled to mature coincident with the timing of the underlying
foreign currency commitments and transactions. Currently, the Corporation does
not hold any derivative contracts that hedge its foreign currency net asset
exposures.
The Corporation's cash position includes amounts denominated in foreign
currencies. The Corporation manages its worldwide cash requirements considering
available funds among its many subsidiaries and the cost effectiveness with
which these funds can be accessed. The repatriation of cash balances from
certain of the Corporation's subsidiaries could have adverse tax consequences.
However, those balances are generally available without legal restrictions to
fund ordinary business operations. The Corporation has and will continue to
transfer cash from those subsidiaries to the parent and to other international
subsidiaries when it is cost effective to do so.
The Corporation's long-term debt portfolio consists mostly of fixed-rate
instruments in order to minimize earnings volatility related to interest
expense. The Corporation currently does not hold interest rate derivative
contracts.
The Corporation has evaluated its exposure to changes in foreign currency
exchange and interest rates in its market risk sensitive instruments using a
value at risk analysis. The value at risk model uses a variance/covariance
methodology which applies statistical analysis to the Corporation's market risk
sensitive instruments, primarily cash, debt and derivative instruments,
utilizing historical market data, volatilities and correlations. Based on a
26
95% confidence level and a one-day holding period, at December 31, 1997, the
potential loss in fair value of the Corporation's market risk sensitive
instruments was not material in relation to the Corporation's financial
position, results of operations or cash flows. The Corporation's calculated
value at risk exposure represents an estimate of reasonably possible net losses
based on historical market rates, volatilities and correlations and is not
necessarily indicative of actual results.
Refer to Notes 1, 12 and 13 of Notes to Consolidated Financial Statements
for additional discussion of the Corporation's foreign exchange and financial
instruments.
ENVIRONMENTAL MATTERS
The Corporation's operations are subject to environmental regulation by federal,
state and local authorities in the United States and regulatory authorities with
jurisdiction over its foreign operations. As a result, the Corporation has
established, and continually updates, policies relating to environmental
standards of performance for its operations worldwide. The Corporation believes
that expenditures necessary to comply with the present regulations governing
environmental protection will not have a material effect upon its cash flows,
competitive position, financial position or results of operations.
The Corporation has identified approximately 375 locations, mostly in the
United States, at which it may have some liability for remediating
contamination. The Corporation does not believe that any individual location's
exposure is material to the Corporation. Sites in the investigation or
remediation stage represent approximately 93% of the Corporation's recorded
liability. The remaining 7% of the recorded liability consists of sites where
the Corporation may have some liability but investigation is in the initial
stages or has not begun.
The Corporation has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA" or Superfund) at approximately 90 sites. The number of Superfund
sites, in and of itself, does not represent a relevant measure of liability
because the nature and extent of environmental concerns vary from site to site
and the Corporation's share of responsibility varies from sole responsibility to
very little responsibility. In estimating its liability for remediation, the
Corporation considers its likely proportionate share of the anticipated
remediation expense and the ability of other potentially responsible parties to
fulfill their obligations.
Environmental remediation expenditures were $35 million in 1997, $30
million in 1996 and $40 million in 1995. The Corporation estimates that
expenditures in each of the next two years will not exceed $50 million in the
aggregate for these sites.
Additional discussion of the Corporation's environmental matters is
included in Notes 1 and 14 of Notes to Consolidated Financial Statements.
U.S. GOVERNMENT
The Corporation's contracts with the U.S. Government are subject to audits. Like
many defense contractors, the Corporation has received audit reports which
recommend that certain contract prices should be reduced to comply with various
government regulations. Some of these audit reports involve substantial amounts.
The Corporation has made voluntary refunds in those cases it believes
appropriate.
FUTURE ACCOUNTING CHANGES
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income," and
No. 131, "Disclosures about Segments of an Enterprise and Related Information".
In July 1997, the Emerging Issues Task Force (EITF) issued EITF 96-16,
"Investor's Accounting for an Investee When the Investor Has a Majority of the
Voting Interest but the Minority Shareholder or Shareholders Have Certain
Approval or Veto Rights". The Corporation will adopt these new requirements in
1998. Management believes adoption of these requirements will not have a
material impact on the Corporation's reported financial position, results of
operations or cash flows.
YEAR 2000
The Corporation continues to assess its exposure related to the impact of the
Year 2000 date issue. The Year 2000 date issue arises from the fact that many
computer programs use only two digits to identify a year in a date field. The
Corporation's products and key financial and operational systems are being
reviewed and, where required, detailed plans have been, or are being, developed
and implemented on a schedule intended to permit the Corporation's computer
systems and products to continue to function properly. The Year 2000 date
conversion effort is expected to increase costs in 1998 and 1999. While final
cost estimates are not complete, management does not expect these costs will
have a material adverse impact on the Corporation's financial position, results
of operations or cash flows. However, the Corporation could be adversely
impacted by the Year 2000 date issue if suppliers, customers and other
businesses do not address this issue successfully. Management continues to
assess these risks in order to reduce the impact on the Corporation.
SAFE HARBOR STATEMENT
This annual report contains statements which, to the extent they are not
historical fact, constitute "forward looking statements" under the securities
laws. All forward looking statements involve risks, uncertainties and other
factors that may cause the actual results, performance or achievements of the
Corporation to differ materially from those contemplated or projected,
forecasted, estimated, budgeted, expressed or implied by or in such forward
looking statements. The forward looking statements in this document are intended
to be subject to the safe harbor protection provided under the securities laws.
For additional information identifying economic, political, climatic,
currency, regulatory, technological, competitive and some other important
factors which may affect the Corporation's operations, products and markets and
could cause actual results to vary materially from those anticipated in the
forward looking statements, see the Corporation's Securities and Exchange
Commission filings, including but not limited to, the discussion included in the
Business section of the Corporation's Annual Report on Form 10-K under the
headings "Description of Business by Industry Segment" and "Other Matters
Relating to the Corporation's Business as a Whole".
27
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The financial statements of United Technologies Corporation and its subsidiaries
are the responsibility of the Corporation's management and have been prepared in
accordance with generally accepted accounting principles.
Management is responsible for the integrity and objectivity of the
financial statements, including estimates and judgments reflected in them and
fulfills this responsibility primarily by establishing and maintaining
accounting systems and practices adequately supported by internal accounting
controls. These controls are designed to provide reasonable assurance that the
Corporation's assets are safeguarded, that transactions are executed in
accordance with management's authorizations and that the financial records are
reliable for the purpose of preparing financial statements. Self-monitoring
mechanisms are also a part of the control environment whereby, as deficiencies
are identified, corrective actions are taken. Even an effective internal control
system, no matter how well designed, has inherent limitations -- including the
possibility of the circumvention or overriding of controls -- and, therefore,
can provide only reasonable assurance with respect to financial statement
preparation and such safeguarding of assets. Further, because of changes in
conditions, internal control system effectiveness may vary over time.
The Corporation assessed its internal control system as of December 31,
1997. Based on this assessment, management believes the internal accounting
controls in use provide reasonable assurance that the Corporation's assets are
safeguarded, that transactions are executed in accordance with management's
authorizations, and that the financial records are reliable for the purpose of
preparing financial statements.
Independent accountants are appointed annually by the Corporation's
shareowners to audit the financial statements in accordance with generally
accepted auditing standards. Their report appears below. Their audits, as well
as those of the Corporation's internal audit department, include a review of
internal accounting controls and selective tests of transactions.
The Audit Review Committee of the Board of Directors, consisting of seven
directors who are not officers or employees of the Corporation, meets regularly
with management, the independent accountants and the internal auditors, to
review matters relating to financial reporting, internal accounting controls and
auditing.
/s/ George David
George David
Chairman and Chief Executive Officer
/s/ Jay L. Haberland
Jay L. Haberland
Vice President, Controller and
Acting Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareowners of
United Technologies Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in shareowners' equity and of
cash flows present fairly, in all material respects, the financial position of
United Technologies Corporation and its subsidiaries at December 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Corporation'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 generally accepted auditing
standards 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/ Price Waterhouse
One Financial Plaza
Hartford, Connecticut
January 22, 1998
28
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31
IN MILLIONS OF DOLLARS (EXCEPT PER SHARE AMOUNTS) 1997 1996 1995
- -------------------------------------------------------------------------------------
REVENUES
Product sales $19,337 $18,247 $17,972
Service sales 5,158 5,026 4,652
Financing revenues and other income, net 218 239 178
-------------------------------
24,713 23,512 22,802
COSTS AND EXPENSES
Cost of products sold 15,415 14,625 14,793
Cost of services sold 3,237 3,112 2,807
Research and development 1,187 1,122 963
Selling, general and administrative 2,915 2,872 2,651
Interest 195 221 244
-------------------------------
22,949 21,952 21,458
Income before income taxes and minority interests 1,764 1,560 1,344
Income taxes 573 523 464
Minority interests in subsidiaries' earnings 119 131 130
-------------------------------
NET INCOME $ 1,072 $ 906 $ 750
-------------------------------
EARNINGS PER SHARE OF COMMON STOCK:
Basic $ 4.44 $ 3.63 $ 2.94
Diluted 4.21 3.48 2.87
See accompanying Notes to Consolidated Financial Statements
29
CONSOLIDATED BALANCE SHEET
DECEMBER 31
IN MILLIONS OF DOLLARS, SHARES IN THOUSANDS 1997 1996
- ---------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 755 $ 1,127
Accounts receivable (net of allowance for doubtful
accounts of $347 and $331) 3,789 3,717
Inventories and contracts in progress 3,173 3,342
Future income tax benefits 1,111 946
Other current assets 420 479
-----------------------
Total Current Assets 9,248 9,611
Customer financing assets 216 296
Future income tax benefits 964 615
Fixed assets 4,262 4,371
Other assets 2,029 1,852
-----------------------
TOTAL ASSETS $ 16,719 $ 16,745
-----------------------
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 217 $ 251
Accounts payable 1,978 2,186
Accrued liabilities 4,993 4,679
Long-term debt currently due 123 97
-----------------------
Total Current Liabilities 7,311 7,213
Long-term debt 1,275 1,437
Future pension and postretirement benefit obligations 1,267 1,247
Future income taxes payable 133 155
Other long-term liabilities 1,779 1,475
Commitments and contingent liabilities (Notes 4 and 14)
Minority interests in subsidiary companies 431 478
Series A ESOP Convertible Preferred Stock, $1 par value
(Authorized-20,000 shares)
Outstanding-13,042 and 13,260 shares 865 880
ESOP deferred compensation (415) (446)
-----------------------
450 434
Shareowners' Equity:
Capital Stock:
Preferred Stock, $1 par value (Authorized-
230,000 shares; none issued or outstanding) -- --
Common Stock, $1 par value
(Authorized-1,000,000 shares)
Issued-287,837 and 285,760 shares 2,488 2,345
Treasury Stock (58,766 and 47,650 common shares at cost) (2,472) (1,626)
Retained earnings 4,558 3,849
Currency translation and minimum pension liability (501) (262)
-----------------------
TOTAL SHAREOWNERS' EQUITY 4,073 4,306
-----------------------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 16,719 $ 16,745
-----------------------
See accompanying Notes to Consolidated Financial Statements
30
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31
IN MILLIONS OF DOLLARS 1997 1996 1995
- --------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 1,072 $ 906 $ 750
Adjustments to reconcile net income
to net cash flows provided by operating activities:
Depreciation and amortization 848 853 844
Deferred income tax benefit (526) (20) (79)
Minority interests in subsidiaries' earnings 119 131 130
Change in:
Accounts receivable (204) 1 149
Inventories and contracts in progress 174 (364) 2
Other current assets (13) (23) (179)
Accounts payable and accrued liabilities 285 544 199
Other, net 376 67 228
----------------------------------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 2,131 2,095 2,044
----------------------------------
INVESTING ACTIVITIES
Capital expenditures (843) (794) (780)
Increase in customer financing assets (132) (137) (138)
Decrease in customer financing assets 171 185 373
Acquisitions of business units (584) (317) (204)
Dispositions of business units 37 177 103
Other, net 166 84 (8)
----------------------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (1,185) (802) (654)
----------------------------------
FINANCING ACTIVITIES
Issuance of long-term debt 12 30 --
Repayment of long-term debt (148) (273) (299)
Increase (decrease) in short-term borrowings 3 (93) (92)
Common Stock issued under employee stock plans 143 96 101
Dividends paid on Common Stock (291) (265) (252)
Common Stock repurchase (849) (459) (221)
Dividends to minority interests and other (139) (91) (111)
----------------------------------
NET CASH FLOWS USED IN FINANCING ACTIVITIES (1,269) (1,055) (874)
----------------------------------
Effect of foreign exchange rate changes on
Cash and cash equivalents (49) (11) (2)
Net (decrease) increase in Cash and cash equivalents (372) 227 514
Cash and cash equivalents, beginning of year 1,127 900 386
----------------------------------
Cash and cash equivalents, end of year $ 755 $ 1,127 $ 900
----------------------------------
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of amounts capitalized $ 171 $ 187 $ 220
Income taxes paid, net of refunds 929 480 461
See accompanying Notes to Consolidated Financial Statements
31
CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS' EQUITY
Other
Common Treasury Retained Changes
IN MILLIONS OF DOLLARS (EXCEPT PER SHARE AMOUNTS) Stock Stock Earnings in Equity
- ----------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994 $2,148 $ (947) $2,790 $(239)
Common Stock issued under employee plans (3.5 million shares) 101
Common Stock repurchased (5.7 million shares) (221)
Net income 750
Dividends on Common Stock ($1.025 per share) (252)
Dividends on ESOP Stock ($4.80 per share) (27)
Currency translation:
Deferred foreign currency translation and hedging adjustments (36)
Income tax benefits 9
Minimum pension liability:
Pension adjustment (76)
Income tax benefits 30
Other (9)
------------------------------------------
DECEMBER 31, 1995 2,249 (1,168) 3,252 (312)
Common Stock issued under employee plans (1.8 million shares) 96 1
Common Stock repurchased (8.0 million shares) (459)
Net income 906
Dividends on Common Stock ($1.10 per share) (265)
Dividends on ESOP Stock ($4.80 per share) (30)
Currency translation:
Deferred foreign currency translation and hedging adjustments 2
Income taxes (9)
Minimum pension liability:
Pension adjustment 94
Income taxes (37)
Other (14)
------------------------------------------
DECEMBER 31, 1996 2,345 (1,626) 3,849 (262)
Common Stock issued under employee plans (2.2 million shares) 143 3
Common Stock repurchased (11.2 million shares) (849)
Net income 1,072
Dividends on Common Stock ($1.24 per share) (291)
Dividends on ESOP Stock ($4.80 per share) (32)
Currency translation:
Deferred foreign currency translation and hedging adjustments (225)
Income taxes (6)
Minimum pension liability:
Pension adjustment (12)
Income tax benefits 4
Other (40)
------------------------------------------
DECEMBER 31, 1997 $2,488 $(2,472) $4,558 $(501)
------------------------------------------
See accompanying Notes to Consolidated Financial Statements
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING PRINCIPLES
The consolidated financial statements include the accounts of the Corporation
and its subsidiaries. Intercompany transactions have been eliminated. Certain
reclassifications have been made to prior year amounts to conform to the current
year presentation. The preparation of financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Actual results could differ from those
estimates.
Beginning January 1, 1997, international operating subsidiaries, which had
generally been included in the consolidated financial statements based on fiscal
years ending November 30, are now included in the consolidated financial
statements based on fiscal years ending December 31. December 1996 results from
these international subsidiaries, which were not significant, are included in
retained earnings.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand, demand deposits and short-term
cash investments which are highly liquid in nature and have original maturities
of three months or less.
INVENTORIES AND CONTRACTS IN PROGRESS
Inventories and contracts in progress are stated at the lower of cost or
estimated realizable value and are primarily based on first-in, first-out (FIFO)
cost or average cost methods; however, certain subsidiaries use the last-in,
first-out (LIFO) method. Costs accumulated against specific contracts or orders
are at actual costs. Materials in excess of requirements for contracts and
orders currently in effect or anticipated have been reserved and written off
when appropriate.
Manufacturing tooling costs are charged to inventories or to fixed assets
depending upon their nature, general applicability and useful lives. Tooling
costs included in inventory are charged to cost of sales based on usage,
generally within two years after they enter productive use.
Manufacturing costs are allocated to current production and firm contracts.
General and administrative expenses are charged to expense as incurred.
FIXED ASSETS
Fixed assets are stated at cost. Depreciation is computed over the assets'
useful lives, ranging from 3 to 12 years for machinery, tools and equipment and
20 to 40 years for buildings and improvements, generally using accelerated
methods for aerospace operations and the straight-line method for other
operations.
GOODWILL AND OTHER LONG-LIVED ASSETS
Goodwill, which represents costs in excess of fair values assigned to the
underlying net assets of acquired companies, is included in other assets and is
generally being amortized over periods ranging up to 40 years.
The Corporation evaluates potential impairment of goodwill on an ongoing
basis and other long-lived assets when appropriate. If the carrying amount of an
asset exceeds the sum of its undiscounted expected future cash flows, the
asset's carrying value is written down to fair value.
REVENUE RECOGNITION
Sales under government and commercial fixed-price contracts and government
fixed-price-incentive contracts are recorded at the time deliveries are made or,
in some cases, on a percentage of completion basis. Sales under
cost-reimbursement contracts are recorded as work is performed and billed. Sales
of commercial aircraft engines sometimes require significant participation by
the Corporation in aircraft financing arrangements; when appropriate, such sales
are accounted for as operating leases. Sales under elevator and escalator
installation and modernization contracts are accounted for under the percentage
of completion method.
Prospective losses, if any, on contracts are provided for when the losses
are anticipated. Loss provisions are based upon any excess of inventoriable
manufacturing or engineering costs and estimated warranty and product guarantee
costs over the net revenue from the products contemplated by the specific order.
Contract accounting requires estimates of future costs over the performance
period of the contract. These estimates are subject to change, which can result
in adjustments to margins on contracts in progress.
Service sales, representing after-market repair and maintenance activities,
are recognized over the contractual period or as services are performed.
In 1996, the Corporation changed its classification of sales associated
with Pratt & Whitney's strategic alliances and related collaborative
arrangements on its engine programs. Collaboration participants' share of
revenue, previously included in cost of sales, has been reported as a reduction
of sales in the Consolidated Statement of Operations for the years ended
December 31, 1997 and 1996. This reclassification was made to more clearly
present Pratt & Whitney's production costs and operating activities and did not
affect net income or assets. While 1995 amounts were not reclassified, the
impact would have been a reduction of revenues and cost of sales of
approximately $400 million.
RESEARCH AND DEVELOPMENT
Research and development costs not specifically covered by contracts and those
related to the Corporation-sponsored share of research and development activity
in connection with cost- sharing arrangements are charged to expense as
incurred.
HEDGING ACTIVITY
The Corporation holds derivative instruments, including swaps, forward contracts
and options, to manage certain foreign currency exposures. Derivative
instruments are viewed by the Corporation as risk management tools and are not
used for trading or speculative purposes. Derivatives used for hedging purposes
must be designated as, and effective as, a hedge of the identified risk exposure
at the inception of the contract. Accordingly, changes in the market value of
the derivative contract must be highly corre-
33
lated with changes in the market value of the underlying hedged item at
inception of the hedge and over the life of the hedge contract. Any derivative
instrument designated but no longer effective as a hedge would be reported at
market value and the related gains and losses would be recognized in earnings.
Cash flows from derivative instruments designated as hedges are classified
consistent with the items being hedged.
Derivatives that are designated as, and effective as, a hedge of firm
foreign currency commitments are accounted for using the deferral method. Gains
and losses from instruments that hedge firm commitments are deferred and
recognized as part of the economic basis of the transactions underlying the
commitments when the associated hedged transaction occurs. Gains and losses from
instruments that hedge foreign-currency-denominated receivables, payables and
debt instruments are reported in earnings and offset the effects of foreign
exchange gains and losses from the associated hedged items. Carrying amounts of
foreign exchange contracts are included in other assets and accrued liabilities.
Gains and losses on terminations of foreign exchange contracts are deferred and
amortized over the remaining period of the original contract to the extent the
underlying transaction is still likely to occur. Gains and losses on
terminations of foreign exchange contracts are recognized in earnings when
terminated in conjunction with the cancelation of the related commitment or
transaction.
If a foreign currency hedge amount were to exceed the amount of the
commitment or transaction to be hedged, gains and losses on the excess amount
would be recognized in earnings.
ENVIRONMENTAL
Environmental investigatory, remediation, operating and maintenance costs are
accrued when it is probable that a liability has been incurred and the amount
can be reasonably estimated. Where no amount within a range of estimates is more
likely, the minimum is accrued. Otherwise, the most likely cost to be incurred
is accrued based on an evaluation of currently available facts with respect to
each individual site including existing technology, current laws and regulations
and prior remediation experience. For sites with multiple responsible parties,
the Corporation considers its likely proportionate share of the anticipated
remediation costs and the ability of the other parties to fulfill their
obligations in establishing a provision for those costs. Liabilities with fixed
or reliably determinable future cash payments are discounted. Environmental
liabilities are not reduced by potential insurance reimbursements.
EARNINGS PER SHARE
In the fourth quarter of 1997, the Corporation adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share," for all periods presented.
Basic earnings per share computations are based on the average number of shares
of Common Stock outstanding during the year. Diluted earnings per share reflects
the assumed exercise and conversion of all securities, including stock options
and Series A Employee Stock Ownership Plan Convertible Preferred Stock (ESOP
Stock) committed to employees' savings plan accounts.
2. BUSINESS DISPOSITIONS
During the fourth quarter of 1996, the Corporation sold UT Automotive's steering
wheels business for proceeds of approximately $140 million. The Corporation
recorded a pretax gain of approximately $78 million which is included in
Financing revenues and other income, net.
3. EARNINGS PER SHARE
Average
Income Shares Per Share
(MILLIONS) (THOUSANDS) Amount
- ----------------------------------------------------------------
DECEMBER 31, 1997
Net Income $ 1,072
Less: ESOP Stock dividends (32)
--------
BASIC EARNINGS PER SHARE $ 1,040 234,443 $ 4.44
Stock awards 5,878
ESOP Stock adjustment 27 13,234
-------- -------
DILUTED EARNINGS PER SHARE $ 1,067 253,555 $ 4.21
-------- -------
DECEMBER 31, 1996
Net Income $ 906
Less: ESOP Stock dividends (30)
--------
BASIC EARNINGS PER SHARE $ 876 241,454 $ 3.63
Stock awards 4,877
ESOP Stock adjustment 24 12,275
-------- -------
DILUTED EARNINGS PER SHARE $ 900 258,606 $ 3.48
-------- -------
DECEMBER 31, 1995
Net Income $ 750
Less: ESOP Stock dividends (27)
--------
BASIC EARNINGS PER SHARE $ 723 245,642 $ 2.94
Stock awards 2,975
ESOP Stock adjustment 21 10,889
-------- -------
DILUTED EARNINGS PER SHARE $ 744 259,506 $ 2.87
-------- -------
4. AIRLINE INDUSTRY AND CUSTOMER FINANCING ASSETS
The Corporation has receivables and other financing assets with commercial
airline industry customers, totaling $1,235 million and $1,415 million at
December 31, 1997 and 1996, net of allowances of $257 million and $254 million,
respectively.
Customer financing assets consist of the following:
IN MILLIONS OF DOLLARS 1997 1996
- -------------------------------------------------------
Notes and leases receivable $139 $152
Products under lease 129 214
-------------
268 366
Less: receivables due within one year 52 70
-------------
$216 $296
-------------
Scheduled maturities of notes and leases receivable due after one year are
as follows: $19 million in 1999, $22 million in 2000, $10 million in 2001, $2
million in 2002 and $34 million in 2003 and thereafter.
Financing commitments, in the form of secured debt, guarantees or lease
financing, may be required by commercial aircraft engine customers. The extent
to which the financing commitments will be utilized cannot currently be
predicted, since customers may be able to obtain more favorable terms from other
financing sources. The Corporation may also arrange for third-party investors to
assume a portion of its commitments. If financing commitments are exercised,
debt financing is generally secured by assets with fair market values equal to
or exceeding the financed amounts with interest rates established at the time of
funding. The Corporation also may lease aircraft and sublease
34
the aircraft to customers under long-term noncancelable operating leases. In
some instances, customers may have minimum lease terms which result in sublease
periods shorter than the Corporation's lease obligation. Lastly, the Corporation
has residual value and other guarantees related to various commercial aircraft
engine customer financing arrangements. The estimated fair market values of the
guaranteed assets equal or exceed the value of the related guarantees, net of
existing reserves.
The following tables summarize the airline industry commitments and related
maturities of the Corporation's financing and rental commitments as of December
31, 1997 should all commitments be exercised as scheduled:
IN MILLIONS OF DOLLARS Commitments
- -----------------------------------------------
Financing $934
Rental 112
Residual value and other 117
Maturities
IN MILLIONS OF DOLLARS Financing Rental
- -----------------------------------------------------
1998 $220 $ 10
1999 233 10
2000 82 10
2001 50 10
2002 51 10
Thereafter 298 62
The Corporation has a 33% interest in International Aero Engines (IAE), an
international consortium of four shareholders organized to support the V2500
commercial aircraft engine program. IAE may offer customer financing in the form
of guarantees, secured debt or lease financing in connection with V2500 engine
sales. At December 31, 1997, IAE has financing commitments of $360 million. In
addition, IAE has lease obligations under long-term noncancelable leases of
approximately $370 million through 2021 related to aircraft which are subleased
to customers under long-term leases. These aircraft have fair market values
which exceed the financed amounts. The shareholders of IAE have guaranteed IAE's
financing arrangements to the extent of their respective ownership interests. In
the event any shareholder were to default on certain of these financing
arrangements, the other shareholders would be proportionately responsible. The
Corporation's share of IAE's financing arrangements was approximately $240
million and $350 million at December 31, 1997 and 1996.
5. INVENTORIES AND CONTRACTS IN PROGRESS
IN MILLIONS OF DOLLARS 1997 1996
- --------------------------------------------------------------------------
Inventories $ 3,525 $ 3,701
Contracts in progress 1,382 1,434
--------------------------
4,907 5,135
Less:
Progress payments, secured by lien,
on U.S. Government contracts (144) (230)
Billings on contracts in progress (1,590) (1,563)
--------------------------
$ 3,173 $ 3,342
--------------------------
The methods of accounting followed by the Corporation do not permit
classification of inventories by category; however, inventories consist
primarily of raw materials and work in process. Contracts in progress
principally relate to elevator and escalator contracts and include costs of
manufactured components, accumulated installation costs and estimated earnings
on incomplete contracts.
The Corporation's sales contracts in many cases are long-term contracts
expected to be performed over periods exceeding twelve months. Approximately 58%
of total inventories and contracts in progress have been acquired or
manufactured under such long-term contracts at December 31, 1997 and 1996. It is
impracticable for the Corporation to determine the amounts of inventory
scheduled for delivery under long-term contracts within the next twelve months.
If inventories which were valued using the LIFO method had been valued
under the FIFO method, they would have been higher by $132 million at December
31, 1997 ($140 million at December 31, 1996).
6. FIXED ASSETS
IN MILLIONS OF DOLLARS 1997 1996
- --------------------------------------------------------------------
Land $ 157 $ 175
Buildings and improvements 3,097 3,157
Machinery, tools and equipment 7,117 7,011
Under construction 284 318
----------------------------
10,655 10,661
Accumulated depreciation (6,393) (6,290)
----------------------------
$ 4,262 $ 4,371
----------------------------
Depreciation expense was $754 million in 1997, $786 million in 1996 and
$792 million in 1995.
7. OTHER ASSETS
IN MILLIONS OF DOLLARS 1997 1996
- -----------------------------------------------------------------
Goodwill (net of accumulated
amortization of $398 and $381) $ 983 $ 682
Receivables due after one year 170 210
Investments 265 310
Prepaid pension costs and other 611 650
----------------------
$2,029 $1,852
----------------------
Current and long-term accounts receivable at December 31, 1997 and 1996
included approximately $142 million and $117 million, respectively, representing
retainage under contract provisions and amounts which are not presently billable
because of lack of final prices or contractual documents under government
contracts or other reasons. These items are expected to be collected in the
normal course of business.
8. ACCRUED LIABILITIES
IN MILLIONS OF DOLLARS 1997 1996
- -------------------------------------------------------------
Accrued salaries, wages and
employee benefits $ 915 $ 956
Service and warranty accruals 431 417
Advances on sales contracts 713 694
Income taxes payable 659 526
Other 2,275 2,086
----------------------
$4,993 $4,679
----------------------
35
9. BORROWINGS AND LINES OF CREDIT
Short-term borrowings consist of the following:
IN MILLIONS OF DOLLARS 1997 1996
- ---------------------------------------------------
Foreign bank borrowings $217 $219
Notes payable -- 32
------------------
$217 $251
------------------
The weighted-average interest rates applicable to short-term borrowings
outstanding at December 31, 1997 and 1996 were 9.8% and 9.6%, respectively. At
December 31, 1997, the Corporation had approximately $1.2 billion available
under various short-term lines of credit with local banks related principally to
international subsidiaries.
At December 31, 1997, the Corporation had credit commitments from banks
totaling $1.5 billion under a Revolving Credit Agreement, which also serves as
back-up for an uncommitted commercial paper facility. There were no borrowings
under the Revolving Credit Agreement.
Long-term debt consists of the following:
1997 Debt
Weighted
Average
IN MILLIONS OF DOLLARS Interest Rate Maturity 1997 1996
- ----------------------------------------------------------------------
Notes and other debt
denominated in:
U.S. dollars 8.6% 1998-2021 $ 620 $ 642
Foreign currency 7.7% 1998-2030 58 82
Capital lease obligations 7.3% 1998-2016 311 365
ESOP debt 7.7% 1998-2009 409 445
--------------
$1,398 $1,534
Less: Long-term debt
currently due 123 97
--------------
$1,275 $1,437
--------------
Principal payments required on long-term debt for the next five years are
$123 million in 1998, $95 million in 1999, $183 million in 2000, $94 million in
2001 and $41 million in 2002.
During 1996 and 1995, the Corporation executed in-substance defeasances by
depositing U.S. Government Securities into irrevocable trusts to cover the
interest and principal payments on $296 million of its debt. For financial
reporting purposes, the debt has been considered extinguished. As of December
31, 1997, the amount outstanding on these debt instruments was $178 million.
The percentage of total debt at floating interest rates was 16% and 18% at
December 31, 1997 and 1996, respectively.
10. TAXES ON INCOME
Significant components of income taxes (benefits) for each year are as follows:
IN MILLIONS OF DOLLARS 1997 1996 1995
- ------------------------------------------------------------------------------
Current:
United States:
Federal $ 599 $ 174 $ 105
State 41 19 21
Foreign 424 371 360
--------------------------------------------
1,064 564 486
Future:
United States:
Federal (406) (12) (78)
State (82) 5 (6)
Foreign (38) (13) 5
--------------------------------------------
(526) (20) (79)
--------------------------------------------
538 544 407
Attributable to items
credited (charged) to
equity 35 (21) 57
--------------------------------------------
$ 573 $ 523 $ 464
--------------------------------------------
Future income taxes represent the tax effects of transactions which are
reported in different periods for tax and financial reporting purposes. These
amounts consist of the tax effects of temporary differences between the tax and
financial reporting balance sheets and tax carryforwards. The tax effects of
temporary differences and tax carryforwards which gave rise to future income tax
benefits and payables at December 31, 1997 and 1996 are as follows:
IN MILLIONS OF DOLLARS 1997 1996
- ------------------------------------------------------------------------
Future income tax benefits:
Insurance and employee benefits $ 566 $ 569
Other asset basis differences 569 289
Other liability basis differences 999 735
Tax loss carryforwards 123 142
Tax credit carryforwards 112 160
Valuation allowance (294) (334)
--------------------------
$ 2,075 $ 1,561
--------------------------
Future income taxes payable:
Fixed assets $ 95 $ 109
Other items, net 50 59
--------------------------
$ 145 $ 168
--------------------------
Current and non-current future income tax benefits and payables within the
same tax jurisdiction are generally offset for presentation in the Consolidated
Balance Sheet. Valuation allowances have been established primarily for tax
credit and tax loss carryforwards to reduce the future income tax benefits to
amounts expected to be realized.
36
The sources of income before income taxes and minority interests were:
IN MILLIONS OF DOLLARS 1997 1996 1995
- ----------------------------------------------------------------------
United States $ 704 $ 488 $ 346
Foreign 1,060 1,072 998
--------------------------------------
$1,764 $1,560 $1,344
--------------------------------------
United States income taxes have not been provided on undistributed earnings
of international subsidiaries. The Corporation's intention is to reinvest these
earnings permanently or to repatriate the earnings only when it is tax effective
to do so. Accordingly, the Corporation believes that any U.S. tax on repatriated
earnings would be substantially offset by U.S. foreign tax credits.
Differences between effective income tax rates and the statutory U.S.
federal income tax rates are as follows:
1997 1996 1995
- -----------------------------------------------------------------------------
Statutory U.S. federal
income tax rate 35.0% 35.0% 35.0%
Varying tax rates of
consolidated subsidiaries
(including Foreign Sales
Corporation) (4.4) (5.5) (5.4)
Other 1.9 4.0 4.9
--------------------------------------
Effective income tax rate 32.5% 33.5% 34.5%
--------------------------------------
Tax credit carryforwards at December 31, 1997 are $112 million and expire
as follows: $1 million in 1999, $1 million in 2000, $2 million in 2001, $1
million in 2002 and $107 million over an indefinite carry-forward period.
Tax loss carryforwards at December 31, 1997 are $597 million and expire as
follows:
IN MILLIONS OF DOLLARS Federal State Foreign
- -------------------------------------------------------------------
1998-2002 $ 31 $ 90 $ 94
2003-2007 -- 112 5
2008-2012 34 126 --
Indefinite -- -- 105
11. EMPLOYEE BENEFIT PLANS
EMPLOYEE PENSION BENEFITS
The Corporation and its domestic subsidiaries have a number of defined benefit
pension plans covering substantially all U.S. employees. Plan benefits are
generally based on years of service and the employee's compensation during the
last several years of employment. The Corporation's funding policy is based on
an actuarially determined cost method allowable under Internal Revenue Service
regulations. The funds are invested either in various securities by trustees or
in insurance annuity contracts. Certain foreign subsidiaries have defined
benefit pension plans or severance indemnity plans covering their employees.
In addition to the defined benefit plans covering U.S. and foreign
employees discussed above, the Corporation makes contributions to multiemployer
plans (predominantly defined benefit plans) covering certain employees in some
of its U.S. operations.
Summarized below are the components of pension expense for defined benefit
plans and multiemployer plans:
IN MILLIONS OF DOLLARS 1997 1996 1995
- ---------------------------------------------------------------------------
Defined benefit plans:
Service expense $ 228 $ 213 $ 181
Interest expense 664 648 621
Actual return on assets (2,073) (1,130) (1,279)
Net amortization and
deferral of actuarial
gains 1,300 399 576
----------------------------------------
Pension expense $ 119 $ 130 $ 99
----------------------------------------
Pension expense of
multiemployer plans $ 26 $ 24 $ 25
----------------------------------------
The following table summarizes the funded status of the defined benefit pension
plans:
DECEMBER 31, 1997 DECEMBER 31, 1996
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
IN MILLIONS OF DOLLARS Benefits Exceed Assets Benefits Exceed Assets
- -----------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested $ 7,573 $ 244 $ 7,199 $ 227
Nonvested 625 34 569 37
------------------------------------------------------
Accumulated benefit obligation 8,198 278 7,768 264
Effect of projected future salary increases 1,077 113 1,057 106
------------------------------------------------------
Projected benefit obligation (PBO)
for services rendered to date 9,275 391 8,825 370
Plan assets available for benefits 10,567 3 8,952 4
------------------------------------------------------
PBO less than (greater than) plan assets 1,292 (388) 127 (366)
Unrecognized net (gain) loss (1,070) 97 104 78
Unrecognized prior service cost 162 34 173 40
Unrecognized net (asset) obligation
at transition (74) 17 (98) 22
Additional minimum liability recognized -- (55) -- (48)
------------------------------------------------------
Pension asset (liability) included in
the Consolidated Balance Sheet $ 310 $ (295) $ 306 $ (274)
------------------------------------------------------
37
The pension funds are valued at September 30 of the respective years in the
preceding table. Major assumptions used in the accounting for the defined
benefit pension plans are shown in the following table as weighted averages:
1997 1996 1995
- ------------------------------------------------------------------------------
Discount rate 7.4% 7.5% 7.6%
Salary scale 4.9% 5.0% 5.0%
Expected return on assets 9.7% 9.7% 9.7%
EMPLOYEE HEALTH CARE AND INSURANCE BENEFITS
Substantially all domestic full-time employees who retire from the Corporation
between age 55 and age 65, and certain foreign employees, are eligible to
receive postretirement health care and life insurance benefits under various
plans. Certain of these plans call for defined dollar benefits. Other plans are
contributory defined benefit plans and include certain cost sharing features
such as deductibles and co-payments. These benefits are generally funded on a
pay-as-you-go basis. Certain retired employees of businesses acquired by the
Corporation are covered under other health care plans that differ from current
plans in coverage, deductibles and retiree contributions.
Summary information on the Corporation's plans is as follows:
IN MILLIONS OF DOLLARS 1997 1996
- -------------------------------------------------------------------------------
Accumulated postretirement benefit obligation (APBO):
Retirees $470 $476
Fully eligible, active participants 13 9
Other active participants 217 218
-----------------
700 703
Less: plan assets at fair value 82 83
-----------------
Postretirement benefit obligation
in excess of plan assets 618 620
Unrecognized net gain 67 53
Unrecognized net reduction
in prior service expense 204 229
-----------------
Accrued postretirement
benefit liability $889 $902
-----------------
The components of postretirement benefit expense are as follows:
IN MILLIONS OF DOLLARS 1997 1996 1995
- ---------------------------------------------------------------------------
Service expense $ 10 $ 10 $ 9
Interest expense 52 52 57
Actual return on plan assets (6) (6) (6)
Net amortization and
deferral of actuarial gains (18) (20) (17)
-----------------------------------
Net postretirement benefit
expense $ 38 $ 36 $ 43
-----------------------------------
Discount rates of 7.5%, 7.6% and 7.7% were used to calculate the APBO at
December 31, 1997, 1996 and 1995, respectively. The assumed health care cost
trend rate used in measuring the APBO was 11.50% in 1997, declining by .75% per
year to an ultimate rate of 7.50%. If the health care cost trend rate
assumptions were increased by 1% per year, the APBO as of December 31, 1997
would be increased by approximately 4%. The effect of this change on the service
expense and interest expense components of the postretirement benefit expense
for 1997 would be an increase of 6%.
EMPLOYEE SAVINGS PLANS
The Corporation and certain subsidiaries sponsor various employee savings plans.
Total contribution expenses were $80 million, $75 million and $72 million for
1997, 1996 and 1995.
The Corporation's nonunion domestic employee savings plan uses an ESOP for
employer contributions. External borrowings, guaranteed by the Corporation and
reported as debt on the Consolidated Balance Sheet, were used by the ESOP to
fund a portion of its purchase of ESOP Stock from the Corporation. Each share of
ESOP Stock is convertible into two shares of Common Stock, has a guaranteed
value of $65, a $4.80 annual dividend and is redeemable at any time for $65.96
per share. Upon notice of redemption by the Corporation, the Trustee has the
right to convert the ESOP Stock into Common Stock. Because of its guaranteed
value, the ESOP Stock is classified outside of permanent equity.
Shares of ESOP Stock are committed to employees at fair value on the date
earned. The ESOP Stock's cash dividends are used for debt service payments.
Participants receive shares in lieu of the cash dividends. As debt service
payments are made, ESOP Stock is released from an unreleased shares account. If
share releases do not meet share commitments, the Corporation will contribute
additional ESOP Stock, Common Stock or cash. At December 31, 1997, 6.7 million
shares had been committed to employees, leaving 6.3 million unreleased shares in
the ESOP Trust, with an approximate fair value of $915 million based on
equivalent common shares.
Upon withdrawal, shares of the ESOP Stock must be converted into the
Corporation's Common Stock or, if the value of the Common Stock is less than the
guaranteed value of the ESOP Stock, the Corporation must repurchase the shares
at their guaranteed value.
LONG-TERM INCENTIVE PLANS
The Corporation has long-term incentive plans authorizing various types of
market-based incentive and performance-based awards, including stock options,
which may be awarded to officers and employees. The exercise price of stock
options, as set at the time of the grant, is not less than the fair market value
per share at the date of grant. Under the Corporation's Long-Term Incentive
Plan (1989 Plan), the number of shares which may be utilized for awards granted
during a given calendar year may not exceed 2% of the aggregate shares of Common
Stock, treasury shares and potentially dilutive common shares for the preceding
year. In addition, up to 1 million options on Common Stock may be granted
annually under the Corporation's Employee Stock Option Plan.
In 1995, the Board of Directors established the Special Retention and Stock
Appreciation Program (1995 Plan) for certain key employees whose continued
performance and retention is deemed to be important to the Corporation. Up to 2
million award units can be granted under the 1995 Plan in any calendar year.
In June 1995, the Corporation granted a key group of senior executives 1.2
million stock appreciation units under the 1995 Plan and 1.2 million
market-based incentive awards under the 1989
38
Plan. The grant price of $39.125 represented the market value per share at the
date of grant. These awards became exercisable in September 1996 when the
closing price of the Corporation's Common Stock averaged more than $57 for
thirty consecutive trading days.
In February 1997, the Corporation granted a key group of senior executives
850,000 stock options under the 1989 Plan. The grant price of $75.875 represents
the market value per share at the date of grant. The options become exercisable
at the earlier of the closing stock price of the Corporation's Common Stock
averaging $125 or higher for thirty consecutive trading days or nine years.
A summary of the transactions under all plans for the three years ended
December 31, 1997 follows:
Stock Options Other
SHARES AND UNITS Average Incentive
IN THOUSANDS Shares Price Shares/Units
- ----------------------------------------------------------------------------
OUTSTANDING AT:
DECEMBER 31, 1994 16,192 $ 26.14 148
Granted 4,387 33.47 1,969
Exercised/earned (4,123) 23.65 (85)
Canceled (387) 31.49 (22)
------- ------
DECEMBER 31, 1995 16,069 28.65 2,010
Granted 4,392 51.10 13
Exercised/earned (2,139) 24.09 (236)
Canceled (242) 39.56 --
------- ------
DECEMBER 31, 1996 18,080 34.49 1,787
Granted 4,723 71.38 87
Exercised/earned (2,211) 26.70 (578)
Canceled (565) 59.04 (33)
------- ------
DECEMBER 31, 1997 20,027 $ 43.36 1,263
------- ------
The Corporation applies APB Opinion 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its long-term
incentive plans. Accordingly, no compensation cost has been recognized for its
fixed stock options. The compensation cost that has been recorded for
stock-based performance awards was $22 million, $45 million and $22 million for
1997, 1996 and 1995, respectively.
The following table summarizes information about stock options outstanding
(in thousands) at December 31, 1997:
Options Outstanding Options Exercisable
EXERCISE Average Average
PRICE Shares Price Term Shares Price
- ----------------------------------------------------------------------
$15.01-$30.00 4,358 $ 24.29 3.76 4,358 $ 24.29
$30.01-$45.00 7,176 33.30 6.72 4,238 33.68
$45.01-$60.00 3,996 50.99 8.11 398 52.27
$60.01-$75.00 3,017 68.76 9.08 7 69.00
$75.01-$90.00 1,480 75.89 9.16 -- --
Had compensation cost for the Corporation's stock-based compensation plans
been determined based on the fair value at the grant date for awards under those
plans consistent with the requirements of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," the Corporation's
net income and earnings per share would have been reduced to the following pro
forma amounts:
IN MILLIONS OF DOLLARS
(EXCEPT PER SHARE AMOUNTS) 1997 1996 1995
- -------------------------------------------------------------------------------
Net income As reported $ 1,072 $ 906 $ 750
Pro forma 1,042 894 746
Basic earnings
per share As reported $ 4.44 $ 3.63 $ 2.94
Pro forma 4.31 3.58 2.93
Diluted earnings
per share As reported $ 4.21 $ 3.48 $ 2.87
Pro forma 4.09 3.43 2.86
The fair value of each stock option grant has been estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
1997 1996 1995
- --------------------------------------------------------------------------------
Risk-free interest rate 6.3% 5.3% 7.5%
Expected life 6 years 6 years 6 years
Expected volatility 18% 17% 21%
Expected dividend yield 2% 2% 3%
The weighted-average grant date fair values of options granted during 1997,
1996 and 1995 were $18.56, $11.91 and $8.80, respectively.
12. FOREIGN EXCHANGE
The Corporation conducts business in many different currencies and, accordingly,
is subject to the inherent risks associated with foreign exchange rate
movements. The financial position and results of operations of substantially all
of the Corporation's foreign subsidiaries are measured using the local currency
as the functional currency. The aggregate effects of translating the financial
statements of these subsidiaries are deferred as a separate component of
shareowners' equity. The Corporation had foreign currency net assets in more
than forty currencies, aggregating $1.4 billion and $1.8 billion at December 31,
1997 and 1996, including Canadian dollar net assets of $420 million and $460
million, respectively. The Corporation's net assets in the Asia Pacific region
were $441 million and $524 million at December 31, 1997 and 1996, respectively.
At December 31, 1996, the Corporation had $139 million notional principal
amount of outstanding currency swap contracts, to hedge its foreign net assets,
which were terminated in 1997.
Foreign currency commitment and transaction exposures are managed at the
operating unit level as an integral part of the business and residual exposures
that cannot be offset to an insignificant amount are hedged. These hedges are
executed by authorized management at the operating units and are scheduled to
mature coincident with the timing of the underlying foreign currency commitments
and transactions. Hedged items include foreign currency denominated receivables
and payables on the balance sheet, firm purchase orders and firm sales
commitments.
39
At December 31, the Corporation had the following amounts related to
foreign exchange contracts hedging foreign currency transactions and firm
commitments:
IN MILLIONS OF DOLLARS 1997 1996
- -------------------------------------------------------
Notional amount:
Buy contracts $1,747 $1,928
Sell contracts 1,062 780
Gains and losses explicitly
deferred as a result of
hedging firm commitments:
Gains deferred $ 14 $ 14
Losses deferred (69) (14)
-----------------------
$ (55) $ --
-----------------------
The deferred gains and losses are expected to be recognized in earnings
over the next two years, as these transactions are realized, along with the
offsetting gains and losses on the underlying commitments.
13. FINANCIAL INSTRUMENTS
The Corporation operates internationally and, in the normal course of business,
is exposed to fluctuations in interest rates and currency values. These
fluctuations can increase the costs of financing, investing and operating the
business. The Corporation manages this risk to acceptable limits through the use
of derivatives to create offsetting positions in foreign currency markets. The
Corporation views derivative financial instruments as risk management tools and
is not party to any leveraged derivatives.
The notional amounts of derivative contracts do not represent the amounts
exchanged by the parties, and thus are not a measure of the exposure of the
Corporation through its use of derivatives. The amounts exchanged by the parties
are normally based on the notional amounts and other terms of the derivatives,
which relate to exchange rates. The value of derivatives is derived from those
underlying parameters and changes in the relevant rates.
By nature, all financial instruments involve market and credit risk. The
Corporation enters into derivative financial instruments with major investment
grade financial institutions. The Corporation has policies to monitor its credit
risks of counterparties to derivative financial instruments. Pursuant to these
policies the Corporation periodically determines the fair value of its
derivative instruments in order to identify its credit exposure. The Corporation
diversifies the counterparties used as a means to limit counterparty exposure
and concentration of risk. Credit risk is assessed prior to entering into
transactions and periodically thereafter. The Corporation does not anticipate
nonperformance by any of these counterparties.
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Significant differences can arise
between the fair value and carrying amount of financial instruments at historic
cost.
The carrying amounts and fair values of financial instruments are as
follows:
DECEMBER 31, 1997 DECEMBER 31, 1996
Carrying Fair Carrying Fair
IN MILLIONS OF DOLLARS Amount Value Amount Value
- --------------------------------------------------------------------------------
Financial assets:
Long-term receivables $ 91 $ 89 $ 118 $ 118
Customer financing assets 117 117 136 133
Financial liabilities:
Short-term borrowings 217 217 251 250
Long-term debt 1,087 1,260 1,169 1,339
Foreign exchange contracts:
In a receivable position 21 20 24 29
In a payable position 97 69 29 (1)
The following methods and assumptions were used to estimate the fair value
of financial instruments:
CASH, CASH EQUIVALENTS AND SHORT-TERM BORROWINGS
The carrying amount approximates fair value because of the short maturity of
those instruments.
LONG-TERM RECEIVABLES AND CUSTOMER FINANCING ASSETS
The fair values are based on quoted market prices for those or similar
instruments. When quoted market prices are not available, an approximation of
fair value is based upon projected cash flows discounted at an estimated current
market rate of interest.
DEBT
The fair values are estimated based on the quoted market prices for the same or
similar issues or on the current rates offered to the Corporation for debt of
the same remaining maturities.
FOREIGN EXCHANGE CONTRACTS
The fair values are estimated based on the amount that the Corporation would
receive or pay to terminate the agreements at the reporting date.
FINANCING COMMITMENTS
The Corporation had outstanding financing commitments totaling approximately
$934 million and $1,553 million at December 31, 1997 and 1996. Risks associated
with changes in interest rates are negated 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 the
commitment itself is not readily determinable and is not considered significant.
Additional information pertaining to these commitments is included in Note 4.
40
14. COMMITMENTS AND CONTINGENT LIABILITIES
LEASES
The Corporation occupies space and uses certain equipment under lease
arrangements. Rent expense in 1997, 1996 and 1995 under such arrangements was
$261 million, $262 million and $265 million, respectively. Rental commitments at
December 31, 1997 under long-term noncancelable operating leases are as follows:
IN MILLIONS OF DOLLARS
- -----------------------------------
1998 $171
1999 126
2000 86
2001 72
2002 60
Thereafter 153
----
$668
----
See Note 4 for lease commitments associated with customer financing
arrangements.
ENVIRONMENTAL
The Corporation's operations are subject to environmental regulation by federal,
state and local authorities in the United States and regulatory authorities with
jurisdiction over its local operations. As described in Note 1, the Corporation
has accrued for the costs of environmental remediation activities and
periodically reassesses these amounts. Management believes that losses
materially in excess of amounts accrued are not reasonably possible.
The Corporation has had insurance in force over its history with a number
of insurance companies and has commenced litigation seeking indemnity and
defense under these insurance policies in relation to its environmental
liabilities. The litigation is expected to last several years. Environmental
liabilities are not reduced by potential insurance reimbursements.
U.S. GOVERNMENT
The Corporation is now and believes that, in light of the current government
contracting environment, it will be the subject of one or more government
investigations. If the Corporation or one of its business units were charged
with wrongdoing as a result of any of these investigations, the Corporation or
one of its business units could be suspended from bidding on or receiving awards
of new government contracts pending the completion of legal proceedings. If
convicted or found liable, the Corporation could be fined and debarred from new
government contracting for a period generally not to exceed three years. Any
contracts found to be tainted by fraud could be voided by the Government.
The Corporation's contracts with the U.S. Government are also subject to
audits. Like many defense contractors, the Corporation has received audit
reports which recommend that certain contract prices should be reduced to comply
with various government regulations. Some of these audit reports involve
substantial amounts. The Corporation has made voluntary refunds in those cases
it believes appropriate.
OTHER
The Corporation extends performance and operating cost guarantees, which are
beyond its normal warranty and service policies, for extended periods on some of
its products, particularly commercial aircraft engines. Liability under such
guarantees is contingent upon future product performance and durability. The
Corporation has accrued its estimated liability that may result under these
guarantees.
The Corporation also has other commitments and contingent liabilities
related to legal proceedings and matters arising out of the normal course of
business.
The Corporation has accrued its liability for environmental investigatory,
remediation, operating and maintenance costs, performance guarantees and other
litigation and claims based on management's estimate of the probable outcome of
these matters. While it is possible that the outcome of these matters may differ
from the recorded liability, management believes that resolution of these
matters will not have a material adverse effect upon either results of
operations, cash flows or the financial position of the Corporation.
15. BUSINESS SEGMENT FINANCIAL DATA
The Corporation and its subsidiaries design, develop, manufacture and sell
high-technology products, classified in five principal business segments.
Otis products include elevators and escalators, service, maintenance and
spare parts sold to a diversified international customer base in commercial real
estate development.
Carrier products include heating, ventilating and air conditioning systems
and equipment, transport and commercial refrigeration equipment and service for
a diversified international customer base principally in commercial and
residential real estate development.
UT Automotive products include electrical distribution
systems, electromechanical and hydraulic devices, electric motors, car and truck
interior trim components, steering wheels (through October 1996), instrument
panels and other products for the automotive industry principally in North
America and Europe.
Pratt & Whitney products include aircraft engines and spare parts sold to a
diversified customer base including international and domestic commercial
airlines and aircraft leasing companies, aircraft manufacturers, regional and
commuter airlines, and U.S. and non-U.S. governments. Pratt & Whitney also
provides product support and a full range of overhaul, repair and fleet
management services and produces land based power generation equipment which is
used for electrical power generation and other applications.
The Flight Systems segment includes Sikorsky Aircraft and Hamilton
Standard. Sikorsky Aircraft products include helicopters and spare parts sold
primarily to U.S. and non-U.S. governments. Hamilton Standard products include
environmental, flight and fuel control systems and propellers sold primarily to
U.S. and non-U.S. governments, aerospace and defense prime contractors, and
airframe and jet engine manufacturers. Hamilton Standard products also include
fuel cells sold primarily to commercial manufacturers.
41
Business segment information for the three years ended December 31, 1997
follows:
BUSINESS SEGMENTS
Total Revenues Operating Profits
IN MILLIONS OF DOLLARS 1997 1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
Otis $ 5,548 $ 5,595 $ 5,287 $ 465 $ 524 $ 511
Carrier 6,056 5,958 5,456 458 422 354
UT Automotive 2,987 3,233 3,061 173 196 180
Pratt & Whitney 7,402 6,201 6,170 816 637 530
Flight Systems 2,862 2,651 2,947 285 234 209
Corporate items and eliminations (142) (126) (119) (23) (21) 2
-------------------------------------------------------------------------------
Total segment $ 24,713 $ 23,512 $ 22,802 2,174 1,992 1,786
-------------------------------------------------------------------------------
General corporate expenses
and other (215) (211) (198)
Interest expense (195) (221) (244)
-------------------------------------
Consolidated income before income
taxes and minority interests $ 1,764 $ 1,560 $ 1,344
-------------------------------------
Depreciation and
Identifiable Assets Capital Expenditures Amortization
IN MILLIONS OF DOLLARS 1997 1996 1995 1997 1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Otis $ 2,434 $ 2,712 $ 2,613 $ 143 $ 132 $ 115 $ 134 $ 116 $ 108
Carrier 3,618 3,387 2,959 143 169 151 148 145 134
UT Automotive 1,875 1,856 1,875 163 138 140 128 128 122
Pratt & Whitney 4,165 4,261 4,215 285 248 240 286 296 314
Flight Systems 1,544 1,416 1,425 92 86 106 121 123 127
Corporate items and
eliminations 3,083 3,113 2,871 17 21 28 31 45 39
-------------------------------------------------------------------------------------------------------
Total $16,719 $16,745 $15,958 $ 843 $ 794 $ 780 $ 848 $ 853 $ 844
-------------------------------------------------------------------------------------------------------
GEOGRAPHIC AREAS
Total Revenues Intergeographic Revenues External Revenues
IN MILLIONS OF DOLLARS 1997 1996 1995 1997 1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
United States operations $ 15,127 $ 14,007 $ 13,968 $ 559 $ 592 $ 534 $ 14,568 $ 13,415 $ 13,434
International operations:
Europe 4,961 4,977 4,769 173 177 170 4,788 4,800 4,599
Asia Pacific 3,330 3,395 3,024 378 353 317 2,952 3,042 2,707
Other 2,809 2,668 2,463 429 430 421 2,380 2,238 2,042
Corporate items
and eliminations (1,514) (1,535) (1,422) (1,539) (1,552) (1,442) 25 17 20
------------------------------------------------------------------------------------------------------
Total $ 24,713 $ 23,512 $ 22,802 $ -- $ -- $ -- $ 24,713 $ 23,512 $ 22,802
------------------------------------------------------------------------------------------------------
Operating Profits Identifiable Assets
IN MILLIONS OF DOLLARS 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
United States operations $ 1,176 $ 965 $ 773 $ 7,752 $ 7,252 $ 7,110
International operations:
Europe 453 461 457 2,596 2,749 2,540
Asia Pacific 225 272 235 1,814 2,171 2,078
Other 343 310 321 1,467 1,454 1,357
Corporate items
and eliminations (23) (16) -- 3,090 3,119 2,873
---------------------------------------------------------------------
Total $ 2,174 $ 1,992 $ 1,786 $16,719 $16,745 $15,958
---------------------------------------------------------------------
42
REVENUES
Total revenues by business segment and geographic area include intersegment and
intergeographic sales. Generally, such sales and transfers are made at prices
approximating those which the selling or transferring entity is able to obtain
on sales of similar products to unaffiliated customers.
Revenues include sales under prime contracts and subcontracts to the U.S.
Government, for the most part Pratt & Whitney and Flight Systems products, as
follows:
IN MILLIONS OF DOLLARS 1997 1996 1995
- ----------------------------------------------------------------------
Pratt & Whitney $1,935 $1,857 $1,841
Flight Systems 1,346 1,498 1,780
Sales to Ford Motor Company, UT Automotive's largest customer, comprised
approximately 38%, 38% and 40% of UT Automotive's revenues in 1997, 1996 and
1995, respectively.
Revenues from United States operations include export sales as follows:
IN MILLIONS OF DOLLARS 1997 1996 1995
- ----------------------------------------------------------------------
Europe $ 944 $ 854 $ 869
Asia Pacific 1,862 1,478 1,686
Other 1,216 792 712
--------------------------------------
$4,022 $3,124 $3,267
--------------------------------------
Export sales include direct sales to commercial customers outside the
United States and sales to the U.S. Government, commercial and affiliated
customers which are known to be for resale to customers outside the United
States.
IDENTIFIABLE ASSETS
Identifiable assets are those which are specifically identified with the
business segments and geographic areas in which operations are conducted.
General corporate assets consist principally of customer financing subsidiaries,
future income tax benefits and investments in other companies.
ELIMINATIONS
Eliminations made in reconciling business and geographic area data with the
related consolidated amounts include intersegment and intergeographic sales,
unrealized profits in inventory and similar items.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
IN MILLIONS OF DOLLARS (EXCEPT QUARTER ENDED
PER SHARE AMOUNTS) March 31 June 30 September 30 December 31
- ---------------------------------------------------------------------------------------------------
1997
Sales $5,886 $6,432 $5,936 $6,241
Gross margin 1,350 1,544 1,453 1,496
Net income 224 304 300 244
Earnings per share of Common Stock:
Basic $ .91 $ 1.26 $ 1.25 $ 1.02
Diluted $ .87 $ 1.19 $ 1.18 $ .97
1996
Sales $5,348 $6,002 $5,908 $6,015
Gross margin 1,240 1,444 1,432 1,420
Net income 164 259 254 229
Earnings per share of Common Stock:
Basic $ .64 $ 1.04 $ 1.02 $ .93
Diluted $ .63 $ .99 $ .98 $ .88
As a result of the change in the reporting period for international operating
subsidiaries discussed in Note 1, the pattern of 1997 quarterly results differs
from the past due in part to seasonality in some business segments.
COMPARATIVE STOCK DATA
1997 1996
COMMON STOCK High Low Dividend High Low Dividend
- ----------------------------------------------------------------------------------------------------
First Quarter 79 1/2 65 1/8 $.31 59 45 1/4 $.275
Second Quarter 87 3/4 70 1/4 $.31 58 1/8 50 3/16 $.275
Third Quarter 88 15/16 76 3/4 $.31 60 13/16 50 3/4 $.275
Fourth Quarter 81 13/16 66 3/4 $.31 70 7/16 59 3/4 $.275
The Corporation's Common Stock is listed on the New York Stock Exchange. The
high and low prices are based on the Composite Tape of the New York Stock
Exchange. There were approximately 23,000 common shareowners of record at
December 31, 1997.
43
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
The companies listed below are direct or indirect subsidiaries of the
Registrant. Their names and jurisdictions of incorporation are as follows:
Ardco, Inc. ......................................... Illinois
Carrier Corporation ................................. Delaware
Carrier Hong Kong Limited ........................... Hong Kong
Carrier Mexico S.A. de C.V. ......................... Mexico
Carrier S.A. ........................................ France
Carrier S.p.A. ..................................... Italy
Carrier Suetrak Transportkaelte ..................... Germany
Carrier-Espana, SA. ................................ Spain
China Tianjin Otis Elevator Company, Ltd. ........... China
Daewoo Carrier Corporation .......................... South Korea
Elevadores Otis Ltda. .............................. Brazil
Express Lifts Holding Company ....................... Cayman Islands
Gate S.p.A. ......................................... Italy
Generale Frigorifique S.A.S. ....................... France
Johns Perry Lifts Holdings .......................... Cayman Islands
Mecanismos Auxiliares Industriales, S.A. ............ Spain
Microtecnica S.P.A. ................................. Italy
Misr Refrigeration And Air Conditioning Manufacturing
Company S.A.E. ...................................... Egypt
Nippon Otis Elevator Company ........................ Japan
Otis ................................................ France
Otis Elevator Company ............................... New Jersey
Otis Elevator Company ............................... Delaware
Otis Elevator Company Pty. Ltd. .................... Australia
Otis Europe ......................................... France
Otis Far East Holdings Limited ...................... Hong Kong
Otis G.m.b.H. ...................................... Germany
Otis Plc ............................................ United Kingdom
Otis S.p.A. ......................................... Italy
Pratt & Whitney Canada Inc. ......................... Canada
SGC Holding Company, Inc. .......................... Delaware
Shanghai Hezhong Carrier ............................ China
Sikorsky Aircraft Corporation ....................... Delaware
Sikorsky Export Corporation ......................... Delaware
Springer Carrier S.A. ............................... Brazil
Surrey S.A.C.I.F.I.A. ............................... Argentina
Societe Offranvillaise de Technologie, S.A. France
(Technoffra) ........................................
The Express Lift Company Limited .................... United Kingdom
Toyo Carrier Engineering Co., LTD. .................. Japan
Turbine Airfoil Refurb Inc. ......................... Delaware
Turbo Power And Marine Systems, Inc. ................ Delaware
Tyler Holdings Corporation .......................... Delaware
United Technologies Automotive (Hungary) Kft ........ Hungary
United Technologies Automotive Electrical Systems de Mexico
Mexico, S.A. de C.V. ................................
United Technologies Automotive, Inc. ................ Delaware
United Technologies Holdings Plc .................... United Kingdom
United Technologies Motor Systems, Inc. ............. Delaware
UT Finance Corporation .............................. Delaware
UT Insurance (Vermont), Inc. ........................ Vermont
Zardoya Otis, S.A. .................................. Spain
Other subsidiaries of the Registrant have been omitted from this listing since,
considered in the aggregate as a single subsidiary, they would not constitute a
significant subsidiary.
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Howard H. Baker, Jr.
Howard H. Baker, Jr.
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Antonia Handler Chayes
Antonia Handler Chayes
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Charles W. Duncan, Jr.
Charles W. Duncan, Jr.
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Jean-Pierre Garnier
Jean-Pierre Garnier
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Pehr G. Gyllenhammar
Pehr G. Gyllenhammar
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Karl J. Krapek
Karl J. Krapek
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Charles R. Lee
Charles R. Lee
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Robert H. Malott
Robert H. Malott
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ William J. Perry
William J. Perry
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Frank P. Popoff
Frank P. Popoff
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Andre Villenueve
Andre Villenueve
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Harold A. Wagner
Harold A. Wagner
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or as an
officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), or as a member of a committee of said Board, or in all of said
capacities, hereby constitutes and appoints JAY L. HABERLAND, IRVING B.
YOSKOWITZ, and WILLIAM H. TRACHSEL, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute any and all
instruments which the said attorneys and agents may deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act of 1934 and
any rules and regulations and requirements of the Securities and Exchange
Commission in respect thereof in connection with the filing of the Annual Report
of the Corporation on Form 10-K for the fiscal year ended December 31, 1997,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in the capacities
aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to
be filed with the Securities and Exchange Commission, and any and all amendments
to the said Form 10-K Annual Report, and any and all instruments and documents
filed as a part of or in connection with the said Form 10-K Annual Report or any
amendments thereto; hereby ratifying and confirming all that the said attorneys
and agents, or any one of them, have done, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney
this 9th day of February, 1998.
/s/ Jacqueline G. Wexler
Jacqueline G. Wexler
UTCL1 - 11615
5
1,000,000
YEAR
DEC-31-1997
JAN-01-1997
DEC-31-1997
755
0
4,136
347
3,173
9,248
10,655
6,393
16,719
7,311
1,275
450
0
2,488
1,585
16,719
19,337
24,713
15,415
18,652
1,187
0
195
1,764
573
1,072
0
0
0
1,072
4.44
4.21
The [EPS-PRIMARY] amount represents BASIC earnings per share
and the [EPS-DILUTED] amount represents DILUTED earnings per
share in accordance with Statement of Financial Accounting
Standards No. 128, Earnings Per Share.
5
1,000,000
9-MOS 6-MOS 3-MOS YEAR
DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1996
JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1996
SEP-30-1997 JUN-30-1997 MAR-31-1997 DEC-31-1996
1,283 1,413 1,265 1,127
0 0 0 0
4,203 4,234 3,857 4,048
344 336 325 331
3,346 3,327 3,565 3,342
9,882 10,061 9,757 9,611
10,766 10,694 10,595 10,661
6,541 6,449 6,340 6,290
16,921 17,031 16,689 16,745
7,317 7,481 7,306 7,213
1,363 1,381 1,398 1,437
444 441 439 434
0 0 0 0
2,461 2,432 2,383 2,345
1,837 1,901 1,856 1,961
16,921 17,031 16,689 16,745
14,466 9,791 4,645 18,247
18,396 12,417 5,934 23,512
11,558 7,841 3,760 14,625
13,907 9,424 4,536 17,737
855 587 271 1,122
0 0 0 0
146 97 48 221
1,369 880 377 1,560
445 286 124 523
828 528 224 906
0 0 0 0
0 0 0 0
0 0 0 0
828 528 224 906
3.41 2.17 .91 3.63
3.23 2.05 .87 3.48
The [EPS-PRIMARY] amount represents BASIC earnings per share
and the [EPS-DILUTED] amount represents DILUTED earnings per
share in accordance with Statement of Financial Accounting
Standards No. 128, Earnings Per Share.
5
1,000,000
9-MOS 6-MOS 3-MOS YEAR
DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1995
JAN-01-1996 JAN-01-1996 JAN-01-1996 JAN-01-1995
SEP-30-1996 JUN-30-1996 MAR-31-1996 DEC-31-1995
1,259 1,075 1,088 900
0 0 0 0
4,170 4,162 3,869 4,029
317 390 374 347
3,154 3,164 3,259 2,954
9,318 9,214 9,169 8,952
10,603 10,457 10,403 10,326
6,323 6,174 6,063 5,906
16,414 16,183 16,026 15,958
6,913 6,690 6,494 6,557
1,469 1,543 1,641 1,649
426 417 408 398
0 0 0 0
2,307 2,289 2,272 2,249
1,953 1,854 1,801 1,772
16,414 16,183 16,026 15,958
13,566 8,932 4,159 17,972
17,374 11,435 5,392 22,802
10,882 7,197 3,379 14,793
13,142 8,666 4,108 17,600
794 524 250 963
0 0 0 0
168 114 58 244
1,170 739 293 1,344
394 250 99 464
677 423 164 750
0 0 0 0
0 0 0 0
0 0 0 0
677 423 164 750
2.70 1.68 .64 2.94
2.59 1.61 .63 2.87
The [EPS-PRIMARY] amount represents BASIC earnings per share
and the [EPS-DILUTED] amount represents DILUTED earnings per
share in accordance with Statement of Financial Accounting
Standards No. 128, Earnings Per Share.
