UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 23, 2008
UNITED TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 1-812 | 06-0570975 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
One Financial Plaza
Hartford, Connecticut 06103
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code
(860) 728-7000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 2—Financial Information
| Item 2.02. | Results of Operations and Financial Condition |
On January 23, 2008, United Technologies Corporation issued a press release announcing its fourth quarter 2007 results.
The press release issued January 23, 2008 is furnished herewith as Exhibit No. 99 to this Report, and shall not be deemed filed for the purposes of Section 18 of the Exchange Act.
Section 8—Other Events
| Item 8.01. | Other Events |
Attached as Exhibit 100 to this report are the following materials from United Technologies Corporation’s press release for the quarter and year ended December 31, 2007, filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statement of Operations, (ii) Segment Revenues and Operating Profit, (iii) Consolidated Operating Profit – Restructuring and Related Charges, (iv) Condensed Consolidated Balance Sheet, and (v) Condensed Consolidated Statement of Cash Flows. Users of this data are advised pursuant to Rule 401 of Regulation S-T that the information contained in the XBRL documents is unaudited and these are not the official publicly filed financial statements of United Technologies Corporation. The purpose of submitting these XBRL formatted documents is to test the related format and technology and, as a result, investors should continue to rely on the official filed version of the furnished documents and not rely on this information in making investment decisions.
In accordance with Rule 402 of Regulation S-T, the information in this Current Report on Form 8-K, including Exhibit 100, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Section 9—Financial Statements and Exhibits
| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits.
The following exhibits are included herewith:
| Exhibit |
Exhibit Description | |
| 99 |
Press release, dated January 23, 2008, issued by United Technologies Corporation. |
| 100 |
The following materials from United Technologies Corporation’s press release on Form 8-K for the quarter and year ended December 31, 2007, filed herewith, formatted in XBRL: (i) Condensed Consolidated Statement of Operations, (ii) Segment Revenues and Operating Profit, (iii) Consolidated Operating Profit – Restructuring and Related Charges, (iv) Condensed Consolidated Balance Sheet, and (v) Condensed Consolidated Statement of Cash Flows. | |
| EX-100.INS |
XBRL Instance Document (File name: utx-20071231.xml) | |
| EX-100.SCH |
XBRL Taxonomy Extension Schema Document (File name: utx-20071231.xsd) | |
| EX-100.PRE |
XBRL Taxonomy Presentation Linkbase Document (File name: utx-20071231_pre.xml) | |
| EX-100.LAB |
XBRL Taxonomy Label Linkbase Document (File name: utx-20071231_lab.xml) | |
| EX-100.CAL |
XBRL Taxonomy Calculation Linkbase Document (File name: utx-20071231_cal.xml) | |
| EX-100.REF |
XBRL Taxonomy Extension Reference Linkbase Document (File name: utx-20071231_ref.xml) | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UNITED TECHNOLOGIES CORPORATION | ||||||
| (Registrant) | ||||||
| Date: January 23, 2008 |
By: | /s/ Gregory J. Hayes | ||||
| Gregory J. Hayes | ||||||
| Vice President, Accounting and Finance | ||||||
EXHIBIT INDEX
| Exhibit Number |
Exhibit Description | |
| 99 | Press release, dated January 23, 2008, issued by United Technologies Corporation. | |
| 100 | The following materials from United Technologies Corporation’s press release on Form 8-K for the quarter and year ended December 31, 2007, filed herewith, formatted in XBRL: (i) Condensed Consolidated Statement of Operations, (ii) Segment Revenues and Operating Profit, (iii) Consolidated Operating Profit – Restructuring and Related Charges, (iv) Condensed Consolidated Balance Sheet, and (v) Condensed Consolidated Statement of Cash Flows. | |
| EX-100.INS | XBRL Instance Document (File name: utx-20071231.xml) | |
| EX-100.SCH | XBRL Taxonomy Extension Schema Document (File name: utx-20071231.xsd) | |
| EX-100.PRE | XBRL Taxonomy Presentation Linkbase Document (File name: utx-20071231_pre.xml) | |
| EX-100.LAB | XBRL Taxonomy Label Linkbase Document (File name: utx-20071231_lab.xml) | |
| EX-100.CAL | XBRL Taxonomy Calculation Linkbase Document (File name: utx-20071231_cal.xml) | |
| EX-100.REF | XBRL Taxonomy Extension Reference Linkbase Document (File name: utx-20071231_ref.xml) | |
Exhibit 99
UTC REPORTS FOURTH QUARTER AND FULL YEAR EPS OF $1.08 AND $4.27,
UP 24 PERCENT AND 15 PERCENT, RESPECTIVELY; AFFIRMS 2008 OUTLOOK
HARTFORD, Conn., January 23, 2008 – United Technologies Corp. (NYSE:UTX) today reported fourth quarter 2007 earnings per share of $1.08 and net income of $1.1 billion, up 24 percent and 23 percent, respectively. Consolidated revenues for the quarter increased 15 percent to $14.7 billion, including organic growth of 8 percent. Cash flow from operations was $2.0 billion and, after capital expenditures of $456 million, substantially exceeded fourth quarter net income.
Full year earnings per share of $4.27 and net income of $4.2 billion increased 15 and 13 percent, respectively, from 2006 results. Revenues increased 14 percent to $54.8 billion, including 9 points of organic growth, 3 points from foreign exchange, and 2 points from acquisitions. Full year cash flow from operations was $5.3 billion and capital expenditures were $1.2 billion.
“UTC had a powerful close to 2007 and expects continuing good performance in 2008. Although the U.S. economic outlook is mixed, UTC’s balance across geographic and product markets should sustain yet another year of double digit earnings per share growth,” said UTC Chairman and Chief Executive Officer George David.
“Organic growth was 9 percent for 2007, a fourth year in a row at comparable levels. Markets across the board were good for us with the single exception of North American Residential for Carrier. Commercial aerospace volumes for UTC in total grew organically at 11 percent, as did our commercial construction businesses combined in Otis and Carrier at 10 percent.
“In 2007, all six UTC businesses grew operating profits at double digit rates, and we expect the same in 2008. Even with the significant deterioration in its North American Residential market, Carrier grew its operating profit overall at 12 percent on strong performances in its three other global businesses. Accordingly, UTC confirms its prior guidance range for 2008 earnings per share of $4.65 to $4.85, up 9 percent to 14 percent, respectively.
“Cash flow from operations less capital expenditures reached 99 percent of net income in 2007 in spite of two large non recurring outflows in the first quarter totaling $500 million. Very strong fourth quarter performance made this a good cash flow year for UTC in spite of these one time items, and we anticipate being at our usual standard of cash flow exceeding net income again in 2008,” David added.
Share repurchase in the quarter was $501 million and totaled $2.0 billion for the year. Acquisition spending, including debt assumed, was $2.3 billion for the year with $403 million in the fourth quarter. Debt to capital ended the year at 30 percent, lower than 2006.
Foreign currency translation increased fourth quarter revenues by 5 percent and earnings by $0.02 per share. Restructuring, tax related items, and other non recurring charges were $0.04 in excess of one time favorable items in the quarter. As previously disclosed, the year ago period included a $0.05 per share impact for restructuring charges in excess of one time favorable items.
Restructuring costs in the fourth quarter were $63 million, and in the year $166 million. Additional favorable items are anticipated in 2008 to offset trailing costs from previous restructuring actions and to fund new actions potentially initiated throughout the year.
The accompanying tables include information integral to assessing the company’s financial position, operating performance, and cash flow.
United Technologies Corp., based in Hartford, Connecticut, is a diversified company that provides a broad range of high technology products and support services to the building systems and aerospace industries.
This release is supplemented by presentation materials that are available on UTC’s website at www.utc.com, and includes “forward looking statements” concerning expected revenue, earnings, cash flow, share repurchases, restructuring and other
matters that are subject to risks and uncertainties. These statements often contain words such as “expect”, “anticipate”, “plan”, “estimate”, “believe”, “will”, “see”, “guidance” and similar terms. Important factors that could cause actual results to differ materially from those anticipated or implied in forward looking statements include changes in the health of the global economy; strength of end market demand in construction and in both the commercial and defense segments of the aerospace industry; fluctuation in commodity prices, interest rates, foreign currency exchange rates, and the impact of weather conditions; as well as company specific items including the availability and impact of acquisitions; the rate and ability to effectively integrate these acquired businesses; the ability to achieve cost reductions at planned levels; challenges in the design, development, production and support of advanced technologies and new products and services; delays and disruption in delivery of materials and services from suppliers; labor disputes; and the outcome of legal proceedings. The level of share repurchases may vary depending on the level of other investing activities. For information identifying other important economic, political, regulatory, legal, technological, competitive and other uncertainties, see UTC’s SEC filings as submitted from time to time, including but not limited to, the information included in UTC’s 10-K and 10-Q Reports under the headings “Business”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Cautionary Note Concerning Factors that May Affect Future Results”, as well as the information included in UTC’s Current Reports on Form 8-K.
IR-UTC
# # #
United Technologies Corporation
Condensed Consolidated Statement of Operations
| (Millions, except per share amounts) | Quarter Ended December 31, (Unaudited) |
Year Ended December 31, (Unaudited) | ||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||
| Revenues |
$ | 14,714 | $ | 12,787 | $ | 54,759 | $ | 47,829 | ||||
| Cost and Expenses |
||||||||||||
| Cost of goods and services sold |
10,729 | 9,521 | 39,922 | 34,740 | ||||||||
| Research and development |
481 | 406 | 1,678 | 1,529 | ||||||||
| Selling, general and administrative |
1,711 | 1,432 | 6,109 | 5,462 | ||||||||
| Operating Profit |
1,793 | 1,428 | 7,050 | 6,098 | ||||||||
| Interest expense |
174 | 153 | 666 | 606 | ||||||||
| Income before income taxes and minority interests |
1,619 | 1,275 | 6,384 | 5,492 | ||||||||
| Income taxes |
481 | 337 | 1,836 | 1,494 | ||||||||
| Minority interests |
78 | 73 | 324 | 266 | ||||||||
| Net Income |
$ | 1,060 | $ | 865 | $ | 4,224 | $ | 3,732 | ||||
| Net Earnings Per Share of Common Stock |
||||||||||||
| Basic |
$ | 1.11 | $ | 0.89 | $ | 4.38 | $ | 3.81 | ||||
| Diluted |
$ | 1.08 | $ | 0.87 | $ | 4.27 | $ | 3.71 | ||||
| Average Shares |
||||||||||||
| Basic |
959 | 972 | 964 | 980 | ||||||||
| Diluted |
984 | 998 | 989 | 1,006 | ||||||||
As described on the following pages, consolidated results for the years and quarters ended December 31, 2007 and 2006 include non-recurring items, restructuring and related charges.
See accompanying Notes to Condensed Consolidated Financial Statements.
United Technologies Corporation
Segment Revenues and Operating Profit
| (Millions) | Quarter Ended December 31, (Unaudited) |
Year Ended December 31, (Unaudited) |
||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| Revenues | ||||||||||||||||
| Otis |
$ | 3,363 | $ | 2,848 | $ | 11,885 | $ | 10,290 | ||||||||
| Carrier |
3,721 | 3,219 | 14,644 | 13,481 | ||||||||||||
| UTC Fire & Security |
1,688 | 1,326 | 5,754 | 4,747 | ||||||||||||
| Pratt & Whitney |
3,218 | 3,046 | 12,129 | 11,112 | ||||||||||||
| Hamilton Sundstrand |
1,492 | 1,297 | 5,636 | 4,995 | ||||||||||||
| Sikorsky |
1,278 | 1,084 | 4,789 | 3,230 | ||||||||||||
| Segment Revenues |
14,760 | 12,820 | 54,837 | 47,855 | ||||||||||||
| Eliminations and other |
(46 | ) | (33 | ) | (78 | ) | (26 | ) | ||||||||
| Consolidated Revenues |
$ | 14,714 | $ | 12,787 | $ | 54,759 | $ | 47,829 | ||||||||
| Operating Profit | ||||||||||||||||
| Otis |
$ | 648 | $ | 514 | $ | 2,321 | $ | 1,888 | ||||||||
| Carrier |
259 | 193 | 1,381 | 1,237 | ||||||||||||
| UTC Fire & Security |
137 | 101 | 443 | 301 | ||||||||||||
| Pratt & Whitney |
496 | 409 | 2,011 | 1,817 | ||||||||||||
| Hamilton Sundstrand |
254 | 219 | 967 | 832 | ||||||||||||
| Sikorsky |
110 | 58 | 373 | 173 | ||||||||||||
| Segment Operating Profit |
1,904 | 1,494 | 7,496 | 6,248 | ||||||||||||
| Eliminations and other |
12 | 27 | (60 | ) | 187 | |||||||||||
| General corporate expenses |
(123 | ) | (93 | ) | (386 | ) | (337 | ) | ||||||||
| Consolidated Operating Profit |
$ | 1,793 | $ | 1,428 | $ | 7,050 | $ | 6,098 | ||||||||
As described on the following pages, consolidated results for the years and quarters ended December 31, 2007 and 2006 include non-recurring items, restructuring and related charges.
United Technologies Corporation
Consolidated Operating Profit
Consolidated operating profit for the years and quarters ended December 31, 2007 and 2006 includes restructuring and related charges as follows:
| Quarter Ended December 31, (Unaudited) |
Year Ended December 31, (Unaudited) | ||||||||||||
| 2007 | 2006 | 2007 | 2006 | ||||||||||
| Otis |
$ | 10 | $ | 6 | $ | 21 | $ | 46 | |||||
| Carrier |
5 | 10 | 33 | 69 | |||||||||
| UTC Fire & Security |
31 | 21 | 39 | 44 | |||||||||
| Pratt & Whitney |
14 | 32 | 53 | 68 | |||||||||
| Hamilton Sundstrand |
3 | 11 | 23 | 40 | |||||||||
| Sikorsky |
— | 2 | (3 | ) | 21 | ||||||||
| Total Restructuring and Related Charges |
$ | 63 | $ | 82 | $ | 166 | $ | 288 | |||||
Consolidated results for the years and quarters ended December 31, 2007 and 2006 include the following non-recurring items.
Q4 - 2007
Carrier: Segment results include a $57 million gain from the sale of Fincoil, an industrial cooling manufacturing business, and a $36 million charge on the settlement of litigation related to a furnace warranty matter.
Otis: Segment results include a $26 million gain from the sale of a non-core business.
Income Taxes: Charges for income tax adjustments of $49 million associated with, amongst other items, foreign tax matters including a change in non-U.S. tax laws.
Q3 - 2007
Eliminations and Other: Approximately $28 million pretax interest adjustments related to the completion of the Internal Revenue Service (IRS) examination of tax years 2000 through 2003.
Income Taxes: Favorable income tax adjustment of approximately $50 million, related primarily to the completion of the IRS examination of tax years 2000 through 2003.
Q1 - 2007
Otis: Segment results include an $84 million gain from the sale of land. The consolidated operating results include taxes related to the gain of approximately $29 million in addition to an approximately $27 million charge for the minority partner’s interest in the gain. The resulting impact to consolidated net income is approximately $28 million.
Pratt & Whitney: Approximately $40 million gain at Pratt & Whitney from a contract termination.
Eliminations and Other: A $216 million loss recorded in connection with the European Union commission fine.
Eliminations and Other: A $151 million gain from the sale of marketable securities.
In the first quarter, the net impact of the above items ($0.05 per share), together with $35 million of pre-tax restructuring and related charges ($0.02 per share), had a $0.07 adverse impact to earnings per share.
Q3 - 2006
Carrier: Approximately $60 million pretax gain realized on the sale of a partnership interest in Scroll Technologies, a North American manufacturer of compressors used primarily for heating, ventilating, and air-conditioning equipment.
Q2 - 2006
Pratt & Whitney: Approximately $80 million pretax gain related to the settlement of a claim by the Department of Defense regarding Pratt & Whitney’s cost accounting practices for engine parts on commercial engine collaboration programs.
Eliminations and Other: Approximately $60 million pretax interest income related to the final determination by the U.S. Congress Joint Committee on Taxation on a disputed issue in the IRS examination of tax years 1994 through 1999.
Income Taxes: Favorable income tax adjustment of approximately $35 million, related to a determination by the U.S. Congress Joint Committee on Taxation on a disputed issue in the IRS examination of tax years 1994 through 1999.
In the second quarter, the net impact of the above favorable items ($0.13 per share), together with approximately $80 million of pre-tax restructuring and related charges ($0.06 per share), contributed $0.07 to earnings per share.
Q1 - 2006
Pratt & Whitney: Approximately $25 million gain realized on the sale of a partnership interest in an engine program at Pratt Canada.
Eliminations and Other: Approximately $25 million gain from the sale of marketable securities.
United Technologies Corporation
Condensed Consolidated Balance Sheet
| (Millions) | December 31, 2007 |
December 31, 2006 |
||||||
| (Unaudited) | (Unaudited) | |||||||
| Assets | ||||||||
| Cash and cash equivalents |
$ | 2,904 | $ | 2,546 | ||||
| Accounts receivable, net |
8,844 | 7,679 | ||||||
| Inventories and contracts in progress, net |
8,101 | 6,657 | ||||||
| Other current assets |
2,222 | 1,962 | ||||||
| Total Current Assets |
22,071 | 18,844 | ||||||
| Fixed assets, net |
6,296 | 5,725 | ||||||
| Goodwill, net |
16,120 | 14,146 | ||||||
| Intangible assets, net |
3,757 | 3,216 | ||||||
| Other assets |
6,331 | 5,210 | ||||||
| Total Assets |
$ | 54,575 | $ | 47,141 | ||||
| Liabilities and Shareowners’ Equity | ||||||||
| Short-term debt |
$ | 1,133 | $ | 894 | ||||
| Accounts payable |
5,059 | 4,263 | ||||||
| Accrued liabilities |
11,277 | 10,051 | ||||||
| Total Current Liabilities |
17,469 | 15,208 | ||||||
| Long-term debt |
8,015 | 7,037 | ||||||
| Other liabilities |
6,824 | 6,763 | ||||||
| Total Liabilities |
32,308 | 29,008 | ||||||
| Minority interest in subsidiary companies |
912 | 836 | ||||||
| Shareowners’ Equity: |
||||||||
| Common Stock |
10,358 | 9,395 | ||||||
| Treasury Stock |
(11,338 | ) | (9,413 | ) | ||||
| Retained Earnings |
21,751 | 18,754 | ||||||
| Accumulated other non-shareowners’ changes in equity |
584 | (1,439 | ) | |||||
| 21,355 | 17,297 | |||||||
| Total Liabilities and Shareowners’ Equity |
$ | 54,575 | $ | 47,141 | ||||
| Debt Ratios: |
||||||||
| Debt to total capitalization |
30 | % | 31 | % | ||||
| Net debt to net capitalization |
23 | % | 24 | % | ||||
United Technologies Corporation
Condensed Consolidated Statement of Cash Flows
| (Millions) | Quarter Ended December 31, (Unaudited) |
Year Ended December 31, (Unaudited) |
||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| Operating Activities |
||||||||||||||||
| Net Income |
$ | 1,060 | $ | 865 | $ | 4,224 | $ | 3,732 | ||||||||
| Adjustments to reconcile net income to net cash flows provided by operating activities: |
||||||||||||||||
| Depreciation and amortization |
310 | 261 | 1,173 | 1,033 | ||||||||||||
| Deferred income taxes and minority interest |
284 | (157 | ) | 382 | 52 | |||||||||||
| Stock compensation cost |
57 | 44 | 198 | 180 | ||||||||||||
| Changes in working capital |
605 | 872 | 32 | 191 | ||||||||||||
| Other, net |
(271 | ) | (230 | ) | (679 | ) | (385 | ) | ||||||||
| Net Cash Provided by Operating Activities |
2,045 | 1,655 | 5,330 | 4,803 | ||||||||||||
| Investing Activities |
||||||||||||||||
| Capital expenditures |
(456 | ) | (351 | ) | (1,153 | ) | (954 | ) | ||||||||
| Acquisitions and disposal of businesses, net |
(295 | ) | (287 | ) | (1,739 | ) | (460 | ) | ||||||||
| Other, net |
(275 | ) | 44 | (290 | ) | 153 | ||||||||||
| Net Cash Used in Investing Activities |
(1,026 | ) | (594 | ) | (3,182 | ) | (1,261 | ) | ||||||||
| Financing Activities |
||||||||||||||||
| Increase in borrowings, net |
(172 | ) | (497 | ) | 893 | (533 | ) | |||||||||
| Dividends paid on Common Stock |
(294 | ) | (246 | ) | (1,080 | ) | (951 | ) | ||||||||
| Repurchase of Common Stock |
(501 | ) | (738 | ) | (2,001 | ) | (2,068 | ) | ||||||||
| Other, net |
14 | 15 | 233 | 210 | ||||||||||||
| Net Cash Used in Financing Activities |
(953 | ) | (1,466 | ) | (1,955 | ) | (3,342 | ) | ||||||||
| Effect of foreign exchange rates |
28 | 37 | 165 | 99 | ||||||||||||
| Net increase (decrease) in cash and cash equivalents |
94 | (368 | ) | 358 | 299 | |||||||||||
| Cash and cash equivalents - beginning of period |
2,810 | 2,914 | 2,546 | 2,247 | ||||||||||||
| Cash and cash equivalents - end of period |
$ | 2,904 | $ | 2,546 | $ | 2,904 | $ | 2,546 | ||||||||
United Technologies Corporation
Free Cash Flow Reconciliation
| Quarter Ended | ||||||||||||||
| (Millions) | December 31, 2007 | December 31, 2006 | ||||||||||||
| (unaudited) | (unaudited) | |||||||||||||
| Net income |
$ | 1,060 | $ | 865 | ||||||||||
| Depreciation and amortization |
310 | 261 | ||||||||||||
| Change in working capital |
605 | 872 | ||||||||||||
| Other |
70 | (343 | ) | |||||||||||
| Cash flow from operating activities |
2,045 | 1,655 | ||||||||||||
| Cash flow from operating activities as a percentage of net income |
193 | % | 191 | % | ||||||||||
| Capital expenditures |
(456 | ) | (351 | ) | ||||||||||
| Capital expenditures as a percentage of net income |
(43 | )% | (41 | )% | ||||||||||
| Free cash flow |
$ | 1,589 | $ | 1,304 | ||||||||||
| Free cash flow as a percentage of net income |
150 | % | 151 | % | ||||||||||
Free cash flow, which represents cash flow from operations less capital expenditures, is the principal cash performance measure used by the Company. Management believes free cash flow provides a relevant measure of liquidity and a useful basis for assessing the Corporation’s ability to fund its activities, including the financing of acquisitions, debt service, repurchases of the Corporation’s Common Stock and distribution of earnings to shareholders. Others that use the term free cash flow may calculate it differently. The reconciliation of net cash flow provided by operating activities prepared in accordance with Generally Accepted Accounting Principles to free cash flow is above.
United Technologies Corporation
Notes to Condensed Consolidated Financial Statements
| (1) | Debt to total capitalization equals total debt divided by total debt plus equity. Net debt to net capitalization equals total debt less cash and cash equivalents divided by total debt plus equity less cash and cash equivalents. |
| (2) | Organic growth represents the total reported increase within the Corporation’s ongoing businesses less the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and significant non-recurring items. Non-recurring items that are not included in organic growth in 2007 include a $57 million gain at Carrier from the sale of Fincoil, a $36 million charge at Carrier on the settlement of litigation related to a furnace warranty matter, a $28 million pretax interest adjustment related to the completion of the IRS examination of tax years 2000 through 2003, a $26 million gain at Otis from the sale of a non-core business, an $84 million gain at Otis from the sale of land (See Note 3 below), a $40 million gain at Pratt & Whitney from a contract termination, and $151 million from the sale of marketable securities, and a $216 million loss recorded in connection with the EU commission fine during the first quarter. Non-recurring items that are not included in organic growth in 2006 include approximately $25 million from the sale of a partnership interest in an engine program at Pratt Canada, $25 million from the sale of marketable securities, approximately $80 million from the settlement of Pratt collaboration programs, approximately $60 million pretax gain realized on the sale of a partnership interest in Scroll Technologies, and approximately $60 million of interest income related to the final ruling on the 1994 – 1999 U.S. federal tax audits. |
| (3) | Otis segment results include an $84 million gain from the sale of land. The consolidated operating results include taxes related to the gain of approximately $29 million in addition to an approximately $27 million charge for the minority partner’s interest in the gain. The resulting impact to consolidated net income is approximately $28 million. |