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): October 16, 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 October 16, 2008, United Technologies Corporation issued a press release announcing its third quarter 2008 results.
The press release issued October 16, 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 Securities Exchange Act of 1934, as amended.
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 October 16, 2008, issued by United Technologies Corporation. |
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: October 16, 2008 | By: | /s/ GREGORY J. HAYES | ||
| Gregory J. Hayes | ||||
| Senior Vice President and Chief Financial Officer | ||||
EXHIBIT INDEX
| Exhibit |
Exhibit Description | |
| 99 |
Press release, dated October 16, 2008, issued by United Technologies Corporation. |
Exhibit 99
UTC REPORTS THIRD QUARTER EPS UP 10 PERCENT TO $1.33, CONFIRMS HIGH END
OF 2008 EARNINGS GUIDANCE
HARTFORD, Conn., Oct. 16, 2008 – United Technologies Corp. (NYSE:UTX) today reported third quarter 2008 earnings per share of $1.33 and net income of $1.3 billion, up 10 percent and 6 percent, respectively, over the year ago quarter. Results for the current quarter include a $0.03 per share net impact for restructuring costs in excess of a one time gain. In 2007, a one time gain exceeded restructuring costs for a net benefit of $0.04 per share. Excluding restructuring costs and the one time gains in both periods, earnings per share grew 16 percent year over year.
Third quarter consolidated revenues increased 7 percent to $14.8 billion, including 4 percent organic growth. Foreign currency translation accounted for 3 points of the revenue growth and $0.03 of the earnings per share increase. Cash flow from operations was $1.8 billion and capital expenditures were $268 million for the quarter.
“UTC had another solid quarter, with operating margin expansion of 50 basis points and four of six business units reporting double digit earnings growth,” said Louis Chênevert, UTC President and Chief Executive Officer. “Based on the strong performance in the first three quarters of the year, we are raising the bottom end of earnings per share guidance to $4.90 from $4.80. We now expect earnings per share of $4.90—$4.95, up 15 to 16 percent above 2007 earnings per share.
“While we did see order rates slow in some businesses in the quarter given the current turmoil, our backlogs across UTC remain strong. We are confident our balanced portfolio, global footprint, and strong aftermarket presence will enable us to deliver on our guidance,” Chênevert said.
New equipment orders at Otis were flat in the quarter, with solid double digit growth in Asia offset by a decline in North America. Carrier’s Commercial HVAC new equipment orders were up double digits globally. Commercial aerospace spares orders in the quarter were below sales at Pratt & Whitney’s Commercial Engines business and approximately equal to sales at Hamilton Sundstrand.
Chênevert added, “In the face of ongoing economic challenges, we continue to aggressively reduce costs and restructure our businesses. In the third quarter, we spent $93 million on restructuring, and we’re on track to spend around $300 million for the full year. We also spent $950 million for share repurchase in the quarter for a total of $2.5 billion year to date and now expect share repurchase to be around $3 billion for 2008. We believe these actions, together with the balance of UTC’s businesses, will position us to outperform peers in 2009.
“Cash flow from operations less capital expenditures was 123% of net income in the quarter. We continue to expect cash flow from operations less capital expenditures to meet or exceed net income for the full year,” Chênevert continued.
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 providing high technology products and services to the building and aerospace industries. Additional information, including a webcast, is available on the Internet at http://www.utc.com.
This release includes “forward-looking statements” concerning expected revenue, earnings, cash flow, restructuring and share repurchases; anticipated benefits of UTC’s diversification, cost reduction efforts, and business model; and other matters. These matters are subject to risks and uncertainties. Important factors that could cause actual results to differ materially from those anticipated or implied in forward looking statements include the health of the global economy; the impact of volatility and deterioration in financial markets on overall levels of economic activity; 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; and company-specific factors including the impact of financial market volatility and deterioration on the financial strength of customers and suppliers and on levels of air travel; the availability and impact of acquisitions; the rate and ability to effectively integrate 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.
UTC-IR
# # #
United Technologies Corporation
Condensed Consolidated Statement of Operations
| (Millions, except per share amounts) |
Quarter Ended September 30, (Unaudited) |
Nine Months Ended September 30, (Unaudited) | ||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||
| Revenues |
$ | 14,814 | $ | 13,863 | $ | 44,182 | $ | 40,045 | ||||
| Cost and Expenses |
||||||||||||
| Cost of goods and services sold |
10,664 | 10,068 | 32,004 | 29,193 | ||||||||
| Research and development |
436 | 399 | 1,281 | 1,197 | ||||||||
| Selling, general and administrative |
1,665 | 1,508 | 5,075 | 4,398 | ||||||||
| Operating Profit |
2,049 | 1,888 | 5,822 | 5,257 | ||||||||
| Interest expense |
177 | 179 | 518 | 492 | ||||||||
| Income before income taxes and minority interests |
1,872 | 1,709 | 5,304 | 4,765 | ||||||||
| Income taxes |
502 | 434 | 1,480 | 1,355 | ||||||||
| Minority interests |
101 | 78 | 280 | 246 | ||||||||
| Net Income |
$ | 1,269 | $ | 1,197 | $ | 3,544 | $ | 3,164 | ||||
| Net Earnings Per Share of Common Stock |
||||||||||||
| Basic |
$ | 1.36 | $ | 1.24 | $ | 3.76 | $ | 3.28 | ||||
| Diluted |
$ | 1.33 | $ | 1.21 | $ | 3.68 | $ | 3.19 | ||||
| Average Shares |
||||||||||||
| Basic |
933 | 963 | 943 | 966 | ||||||||
| Diluted |
951 | 989 | 964 | 991 | ||||||||
As described on the following pages, consolidated results for the quarters and nine months ended September 30, 2008 and 2007 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 September 30, (Unaudited) |
Nine Months Ended September 30, (Unaudited) |
||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Revenues |
||||||||||||||||
| Otis |
$ | 3,245 | $ | 2,936 | $ | 9,706 | $ | 8,522 | ||||||||
| Carrier |
3,917 | 3,738 | 11,682 | 10,923 | ||||||||||||
| UTC Fire & Security |
1,624 | 1,471 | 4,960 | 4,066 | ||||||||||||
| Pratt & Whitney |
3,150 | 3,036 | 9,649 | 8,911 | ||||||||||||
| Hamilton Sundstrand |
1,532 | 1,427 | 4,643 | 4,144 | ||||||||||||
| Sikorsky |
1,438 | 1,307 | 3,768 | 3,511 | ||||||||||||
| Segment Revenues |
14,906 | 13,915 | 44,408 | 40,077 | ||||||||||||
| Eliminations and other |
(92 | ) | (52 | ) | (226 | ) | (32 | ) | ||||||||
| Consolidated Revenues |
$ | 14,814 | $ | 13,863 | $ | 44,182 | $ | 40,045 | ||||||||
| Operating Profit |
||||||||||||||||
| Otis |
$ | 648 | $ | 567 | $ | 1,899 | $ | 1,673 | ||||||||
| Carrier |
421 | 420 | 1,156 | 1,122 | ||||||||||||
| UTC Fire & Security |
154 | 119 | 395 | 306 | ||||||||||||
| Pratt & Whitney |
530 | 503 | 1,602 | 1,515 | ||||||||||||
| Hamilton Sundstrand |
286 | 249 | 795 | 713 | ||||||||||||
| Sikorsky |
133 | 103 | 326 | 263 | ||||||||||||
| Segment Operating Profit |
2,172 | 1,961 | 6,173 | 5,592 | ||||||||||||
| Eliminations and other |
(33 | ) | 11 | (55 | ) | (72 | ) | |||||||||
| General corporate expenses |
(90 | ) | (84 | ) | (296 | ) | (263 | ) | ||||||||
| Consolidated Operating Profit |
$ | 2,049 | $ | 1,888 | $ | 5,822 | $ | 5,257 | ||||||||
As described on the following pages, consolidated results for the quarters and nine months ended September 30, 2008 and 2007 include non-recurring items, restructuring and related charges.
United Technologies Corporation
Consolidated Operating Profit
Consolidated operating profit for the quarters and nine months ended September 30, 2008 and 2007 includes restructuring and related charges as follows:
| Quarter Ended September 30, (Unaudited) |
Nine Months Ended September 30, (Unaudited) |
||||||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||||||
| Otis |
$ | 5 | $ | 6 | $ | 11 | $ | 11 | |||||
| Carrier |
34 | 15 | 91 | 28 | |||||||||
| UTC Fire & Security |
— | 2 | 33 | 8 | |||||||||
| Pratt & Whitney |
52 | 12 | 83 | 39 | |||||||||
| Hamilton Sundstrand |
2 | 8 | 3 | 20 | |||||||||
| Sikorsky |
— | — | — | (3 | ) | ||||||||
| Total Restructuring and Related Charges |
$ | 93 | $ | 43 | $ | 221 | $ | 103 | |||||
Consolidated results for the for the quarters and nine months ended September 30, 2008 and 2007 include the following non-recurring items.
Q3—2008
| • | Pratt & Whitney: Approximately $37 million non-cash gain on a partial sale of an investment. |
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.
United Technologies Corporation
Condensed Consolidated Balance Sheet
| (Millions) | September 30, 2008 (Unaudited) |
December 31, 2007 (Unaudited) |
||||||
| Assets | ||||||||
| Cash and cash equivalents |
$ | 3,615 | $ | 2,904 | ||||
| Accounts receivable, net |
9,346 | 8,844 | ||||||
| Inventories and contracts in progress, net |
9,011 | 8,101 | ||||||
| Other current assets |
2,209 | 2,222 | ||||||
| Total Current Assets |
24,181 | 22,071 | ||||||
| Fixed assets, net |
6,441 | 6,296 | ||||||
| Goodwill, net |
16,074 | 16,120 | ||||||
| Intangible assets, net |
3,484 | 3,757 | ||||||
| Other assets |
6,630 | 6,331 | ||||||
| Total Assets |
$ | 56,810 | $ | 54,575 | ||||
| Liabilities and Shareowners’ Equity | ||||||||
| Short-term debt |
$ | 2,259 | $ | 1,133 | ||||
| Accounts payable |
5,104 | 5,059 | ||||||
| Accrued liabilities |
12,494 | 11,277 | ||||||
| Total Current Liabilities |
19,857 | 17,469 | ||||||
| Long-term debt |
8,113 | 8,015 | ||||||
| Other liabilities |
6,795 | 6,824 | ||||||
| Total Liabilities |
34,765 | 32,308 | ||||||
| Minority interest in subsidiary companies |
962 | 912 | ||||||
| Shareowners’ Equity: |
||||||||
| Common Stock |
10,769 | 10,358 | ||||||
| Treasury Stock |
(13,824 | ) | (11,338 | ) | ||||
| Retained Earnings |
24,380 | 21,751 | ||||||
| Accumulated other non-shareowners’ changes in equity |
(242 | ) | 584 | |||||
| 21,083 | 21,355 | |||||||
| Total Liabilities and Shareowners’ Equity |
$ | 56,810 | $ | 54,575 | ||||
| Debt Ratios: |
||||||||
| Debt to total capitalization |
33 | % | 30 | % | ||||
| Net debt to net capitalization |
24 | % | 23 | % | ||||
United Technologies Corporation
Condensed Consolidated Statement of Cash Flows
| (Millions) | Quarter Ended September 30, (Unaudited) |
Nine Months Ended September 30, (Unaudited) |
||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Operating Activities |
||||||||||||||||
| Net Income |
$ | 1,269 | $ | 1,197 | $ | 3,544 | $ | 3,164 | ||||||||
| Adjustments to reconcile net income to net cash flows provided by operating activities: |
||||||||||||||||
| Depreciation and amortization |
326 | 308 | 971 | 863 | ||||||||||||
| Deferred income taxes and minority interest |
91 | 90 | 137 | 98 | ||||||||||||
| Stock compensation cost |
51 | 44 | 161 | 141 | ||||||||||||
| Changes in working capital |
49 | (178 | ) | (690 | ) | (573 | ) | |||||||||
| Other, net |
49 | (78 | ) | 18 | (408 | ) | ||||||||||
| Net Cash Provided by Operating Activities |
1,835 | 1,383 | 4,141 | 3,285 | ||||||||||||
| Investing Activities |
||||||||||||||||
| Capital expenditures |
(268 | ) | (238 | ) | (810 | ) | (697 | ) | ||||||||
| Acquisitions and disposal of businesses, net |
23 | (1,236 | ) | (438 | ) | (1,444 | ) | |||||||||
| Other, net |
286 | (145 | ) | 58 | (15 | ) | ||||||||||
| Net Cash Provided by (Used) in Investing Activities |
41 | (1,619 | ) | (1,190 | ) | (2,156 | ) | |||||||||
| Financing Activities |
||||||||||||||||
| (Decrease) increase in borrowings, net |
(328 | ) | 471 | 1,252 | 1,065 | |||||||||||
| Dividends paid on Common Stock |
(286 | ) | (296 | ) | (869 | ) | (786 | ) | ||||||||
| Repurchase of Common Stock |
(950 | ) | (500 | ) | (2,470 | ) | (1,500 | ) | ||||||||
| Other, net |
(60 | ) | 14 | (149 | ) | 219 | ||||||||||
| Net Cash Used in Financing Activities |
(1,624 | ) | (311 | ) | (2,236 | ) | (1,002 | ) | ||||||||
| Effect of foreign exchange rates |
(79 | ) | 65 | (4 | ) | 137 | ||||||||||
| Net increase (decrease) in cash and cash equivalents |
173 | (482 | ) | 711 | 264 | |||||||||||
| Cash and cash equivalents—beginning of period |
3,442 | 3,292 | 2,904 | 2,546 | ||||||||||||
| Cash and cash equivalents—end of period |
$ | 3,615 | $ | 2,810 | $ | 3,615 | $ | 2,810 | ||||||||
United Technologies Corporation
Free Cash Flow Reconciliation
| Quarter Ended | ||||||||||||||
| September 30, 2008 |
September 30, 2007 |
|||||||||||||
| (Millions) | (Unaudited) | (Unaudited) | ||||||||||||
| Net income |
$ | 1,269 | $ | 1,197 | ||||||||||
| Depreciation and amortization |
326 | 308 | ||||||||||||
| Changes in working capital |
49 | (178 | ) | |||||||||||
| Other |
191 | 56 | ||||||||||||
| Cash flow from operating activities |
1,835 | 1,383 | ||||||||||||
| Cash flow from operating activities as a percentage of net income |
144 | % | 116 | % | ||||||||||
| Capital expenditures |
(268 | ) | (238 | ) | ||||||||||
| Capital expenditures as a percentage of net income |
(21 | )% | (20 | )% | ||||||||||
| Free cash flow |
$ | 1,567 | $ | 1,145 | ||||||||||
| Free cash flow as a percentage of net income |
123 | % | 96 | % | ||||||||||
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. Not included within organic growth for 2008 is a non-recurring item of approximately $37 million related to a non-cash gain on a partial sale of an investment at Pratt & Whitney. Non-recurring items that are not included in organic growth in 2007 include $28 million pretax interest adjustment related to the completion of the IRS examination of tax years 2000 through 2003, 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. |
| (3) | Otis segment results for the first quarter of 2007 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. |