UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C.
20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
from____________________________to__________________________
Commission file number 1-812
UNITED TECHNOLOGIES CORPORATION
DELAWARE 06-0570975
One Financial Plaza, Hartford, Connecticut 06103
(860) 728-7000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
At March 31, 2001 there were 470,735,511 shares of Common Stock outstanding.
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended March 31, 2001
Page
Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Statement of 1
Operations for the quarters ended March
31, 2001 and 2000
Condensed Consolidated Balance Sheet at March 2
31, 2001 and December 31, 2000
Condensed Consolidated Statement of Cash 3
Flows for the quarters ended March 31,
2001 and 2000
Notes to Condensed Consolidated Financial 4
Statements
Report of Independent Accountants 10
Item 2. Management's Discussion and Analysis of 11
Results of Operations and Financial Position
Item 3. Quantitative and Qualitative 15
Disclosures About Market Risk
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
Exhibit Index 19
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Part I - Financial Information
Item 1 - Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended
March 31,
In Millions (except per share amounts) 2001 2000
Revenues:
Product sales $ 4,988 $ 4,824
Service sales 1,609 1,483
Financing revenues and other income, net 74 83
6,671 6,390
Costs and expenses:
Cost of products sold 3,794 3,693
Cost of services sold 1,018 935
Research and development 297 314
Selling, general and administrative 785 781
Interest 107 86
6,001 5,809
Income before income taxes
and minority interests 670 581
Income taxes 204 177
Minority interests 26 27
Net income $ 440 $ 377
Earnings per share of Common Stock:
Basic $ .92 $ .78
Diluted $ .86 $ .74
Dividends per share of Common Stock $ .225 $ .20
Average number of shares outstanding:
Basic 471 473
Diluted 508 511
See accompanying Notes to Condensed Consolidated Financial Statements
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, December 31,
2001 2000
In Millions (Unaudited)
Assets
Cash and cash equivalents $ 780 $ 748
Accounts receivable, net 4,410 4,445
Inventories and contracts in progress, net 4,005 3,756
Future income tax benefits 1,420 1,439
Other current assets 347 274
Total Current Assets 10,962 10,662
Fixed assets 10,426 10,355
Less: Accumulated depreciation (5,919) (5,868)
4,507 4,487
Goodwill 6,778 6,771
Other assets 3,440 3,444
Total Assets $ 25,687 $ 25,364
Liabilities and Shareowners' Equity
Short-term borrowings $ 666 $ 1,039
Accounts payable 2,333 2,261
Accrued liabilities 5,905 5,748
Long-term debt currently due 248 296
Total Current Liabilities 9,152 9,344
Long-term debt 3,960 3,476
Future pension and postretirement benefit obligations 1,649 1,636
Other long-term liabilities 2,761 2,814
Series A ESOP Convertible Preferred Stock 756 767
ESOP deferred compensation (329) (335)
427 432
Shareowners' Equity:
Common Stock 4,799 4,665
Treasury Stock (4,149) (3,955)
Retained earnings 8,035 7,743
Accumulated other non-shareowners' changes in equity (947) (791)
7,738 7,662
Total Liabilities and Shareowners' Equity $ 25,687 $ 25,364
See accompanying Notes to Condensed Consolidated Financial Statements
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Quarter Ended
March 31,
In Millions 2001 2000
Operating Activities:
Net income $ 440 $ 377
Adjustments to reconcile net income
to net cash flows provided by
operating activities:
Depreciation and amortization 222 212
Deferred income tax provision 32 27
Change in:
Accounts receivable (20) 23
Inventories and contracts in progress (241) (99)
Accounts payable and accrued liabilities 256 21
Other current assets (29) (4)
Other, net (27) (31)
Net cash flows provided by operating
activities 633 526
Investing Activities:
Capital expenditures (207) (149)
Investments in businesses (173) (269)
Disposition of businesses 8 -
Increase in customer financing assets, net (52) (15)
Other, net (3) 40
Net cash flows used in investing activities (427) (393)
Financing Activities:
Issuance of long-term debt 500 216
Repayment of long-term debt (105) (145)
Decrease in short-term borrowings, net (332) (122)
Dividends paid on Common Stock (106) (94)
Repurchase of Common Stock (200) (300)
Other, net 82 13
Net cash flows used in financing activities (161) (432)
Effect of foreign exchange rate changes on Cash and
cash equivalents (13) (1)
Net increase (decrease) in Cash and cash
equivalents 32 (300)
Cash and cash equivalents, beginning of year 748 957
Cash and cash equivalents, end of period $ 780 $ 657
See accompanying Notes to Condensed Consolidated Financial Statements
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Condensed Consolidated Financial Statements at March 31, 2001 and for the
quarters ended March 31, 2001 and 2000 are unaudited, but in the opinion of
management include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods. The results reported in these condensed consolidated financial
statements should not necessarily be taken as indicative of results that may be
expected for the entire year. The financial information included herein should
be read in conjunction with the financial statements and notes in the
Corporation's Annual Report incorporated by reference in Form 10-K for calendar
year 2000.
Issuance of Long-Term Debt
In February 2001, the Corporation issued $500 million of 6.35%
unsubordinated, unsecured, nonconvertible notes ("the 6.35% Notes") under a
shelf registration filed with the Securities and Exchange Commission in
December 2000. The 6.35% Notes are due March 1, 2011, with interest payable
semiannually commencing September 1, 2001. The Corporation may redeem all or
any portion of the 6.35% Notes at any time for a formula-based price
determined at the time of the redemption. Proceeds from the issuance were used
primarily to repay commercial paper. The proceeds from these commercial paper
borrowings were used for working capital and for general corporate purposes,
which includes financing acquisitions and repurchases of the Corporation's
Common Stock.
Derivative Instruments and Hedging Activities
Effective January 1, 2001, the Corporation adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended. The standard requires that all derivative
instruments be recorded on the balance sheet at fair value. The accounting for
the changes in fair value depends on how the derivative is used and designated.
Adoption of this standard resulted in a $3 million pre-tax transition gain,
recorded in Financing revenues and other income, net and reduced shareowners'
equity by $7 million, net of tax. The income statement gain recorded at
transition was largely offset by a net loss in the quarter associated primarily
with derivatives and embedded derivatives that are not designated as hedges and
do not cover balance sheet exposures.
The Corporation is exposed to fluctuations in foreign currency exchange
rates, interest rates and commodity prices. To manage certain of these
exposures, the Corporation uses derivative instruments, including swaps, forward
contracts and options. Derivative instruments used 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.
Foreign Currency Exposures
The Corporation's global presence and large volume of international sales,
purchases, investments and borrowings expose it to fluctuations in foreign
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
currency exchange rates. Foreign currency exposures are identified and managed
at the operating unit level. Exposures that cannot be naturally offset within an
operating unit to an insignificant amount are hedged. The Corporation has
foreign currency forward contracts that are designated as hedges of the cash
flow variability arising from forecasted foreign-currency-denominated sales and
purchases. Gains and losses on those derivatives are recorded in shareowners'
equity to the extent they are effective as hedges and reclassified into sales or
cost of products sold in the period in which the hedged transaction impacts
earnings.
The Corporation has foreign currency forward contracts and swaps that cover
the exposure arising from remeasurement of foreign-currency-denominated
receivables, payables and borrowings. The gains and losses on those derivative
instruments are reported in earnings and largely offset the transaction
gains and losses on remeasurement of the related balance sheet items. The
Corporation also has a significant amount of foreign currency net asset
exposures. Currently, the Corporation does not hold any derivative contracts
that hedge its foreign currency net asset exposures but may consider such
strategies in the future.
Interest Rate Exposures
The Corporation's long-term debt portfolio consists mostly of fixed-rate
instruments to minimize earnings volatility related to interest expense. From
time to time the Corporation issues commercial paper, which creates an exposure
to changes in interest rates. The Corporation does not currently hold interest
rate derivative contracts.
Commodity Exposures
The Corporation is exposed to volatility in the prices of raw materials used
in some of its products and uses forward contracts, in limited circumstances, to
hedge a portion of the forecasted purchase of raw materials. The forward
contracts are designated as hedges of the cash flow variability that result
from the forecasted purchases. Gains and losses on those derivatives are
deferred in shareowners' equity to the extent they are effective as hedges and
reclassified into cost of products sold in the period in which the hedged trans-
action impacts earnings.
Quarterly Activity
At March 31, 2001, the fair value of derivatives held by the Corporation,
including those embedded in other contracts, was a $53 million net liability.
The non-shareowner changes in equity associated with hedging activity during the
quarter ended March 31, 2001 were as follows:
In Millions, net of tax
December 31, 2000 $ -
Cash flow hedging loss, net (37)
Net loss reclassified to sales
or cost of products sold 8
March 31, 2001 $ (29)
Of the amount recorded in shareowners' equity, a $34 million pre-tax loss is
expected to be reclassified into sales or cost of products sold to reflect
the fixed prices obtained from hedging within the next 12 months. Gains
and losses recognized in earnings related to discontinuance of cash flow
hedges and ineffectiveness of cash flow hedges during the quarter ended
March 31, 2001 were immaterial. All open derivative contracts mature by
June 2003.
Non-Shareowners' Changes in Equity
Non-shareowners' changes in equity include all changes in equity during a
period except changes resulting from investments by and distributions to
shareowners. A summary of the non-shareowners' changes in equity is provided
below.
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Quarter Ended
March 31,
In Millions 2001 2000
Net Income $ 440 $ 377
Foreign currency translation, net (111) (29)
Unrealized holding loss on marketable equity
securities, net (16) (74)
Cash flow hedging loss, net (29) -
$ 284 $ 274
Investments in Businesses
During the first quarter of 2001, the Corporation invested $203 million,
including debt assumed, in the acquisition of businesses. Those investments
include Hamilton Sundstrand's purchase of Claverham Group LTD, a U.K. supplier
to the European aerospace industry, and other small industry consolidating
transactions. The assets and liabilities of the acquired businesses accounted
for under the purchase method were recorded at their fair values at the dates of
acquisition. The excess of the purchase price over the estimated fair values
of the net assets acquired has been recorded as goodwill and is being amortized
over its estimated useful life. The results of operations of all acquired
businesses have been included in the Condensed Consolidated Statement of
Operations beginning on the effective date of each acquisition. The pro forma
results, assuming these acquisitions had been made at the beginning of the year,
would not be materially different from reported results.
Inventories and Contracts in Progress
March 31, December 31,
In Millions 2001 2000
Inventories consist of the following:
Raw material $ 694 $ 738
Work-in-process 1,278 1,179
Finished goods 2,299 2,099
Contracts in progress 1,826 1,849
6,097 5,865
Less:
Progress payments, secured by lien, on U.S.
Government contracts (149) (137)
Billings on contracts in progress (1,943) (1,972)
$ 4,005 $ 3,756
Restructuring
During 1999, the Corporation's operating segments initiated a variety of
programs aimed at further strengthening their future profitability and
competitive position. These programs focused principally on rationalizing
manufacturing processes and improving the overall level of organizational
efficiency, including the removal of management layers. Restructuring charges
accrued in 1999 were $842 million before income taxes and minority interests and
were expected to result in net reductions of approximately 15,000 salaried and
hourly employees and approximately 8 million square feet of facilities.
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
The 1999 accrued costs were recorded at each of the Corporation's operating
segments as follows:
In Millions
Otis $ 178
Carrier 182
Pratt & Whitney 345
Flight Systems 131
Other 6
$ 842
The following table summarizes the accrued costs associated with the 1999
restructuring actions by type and related activity through March 31, 2001:
Accrued Accrued Exit &
Severance Lease Accrued Site
and Related Asset Write- Termination Restoration &
In Millions Costs downs Costs Other Costs Total
1999 Charges:
Staff reductions $ 433 $ - $ - $ - $ 433
Facility closures 149 160 44 56 409
Total accrued charges 582 160 44 56 842
Adjustments (62) - (11) 1 (72)
Utilized to date:
Cash (362) - (16) (24) (402)
Non-cash (115) (160) (8) - (283)
Balance at
March 31, 2001 $ 43 $ - $ 9 $ 33 $ 85
The 1999 accrued costs related to:
. Workforce reductions of approximately 15,000 employees, primarily at Pratt &
Whitney (5,200 employees), Otis (4,000 employees) and Carrier (3,200
employees).
. Plant closings that were planned to result in the reduction of approximately
8 million square feet of facilities, primarily at Pratt & Whitney (3 million
square feet) and Carrier (2.9 million square feet), and charges associated
with the write-down of property, plant and equipment to fair value, where
fair value is based on appraised value, primarily at Pratt & Whitney ($70
million) and Carrier ($41 million).
The adjustments to the 1999 restructuring liability result from completion of
programs for amounts lower than originally estimated and revision of several of
the original programs. The $14 million adjustment in the first quarter of 2001
was more than offset by additional restructuring related charges of $44 million
that were not accruable or contemplated when the 1999 programs were initiated.
As of March 31, 2001, workforce reductions of approximately 12,800 employees
were completed and approximately 4.8 million square feet were eliminated under
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
the 1999 restructuring programs. Reductions of approximately 900 employees and
approximately 2 million square feet remain under the 1999 restructuring
programs. The programs are expected to be substantially complete in the first
half of 2001.
Contingent Liabilities
There has been no significant change in the Corporation's material
contingencies during 2001. Summarized below, however, are the matters previously
described in Notes 1 and 14 of the Notes to Consolidated Financial Statements in
the Corporation's Annual Report, incorporated by reference in Form 10-K for
calendar year 2000.
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 foreign operations.
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. 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. Where no amount within a range of estimates is
more likely, the minimum is accrued. 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. Accrued
environmental liabilities are not reduced by potential insurance reimbursements.
The Corporation periodically reassesses these accrued amounts. Management
believes that the likelihood of incurring losses materially in excess of
amounts accrued is remote.
The Corporation has had insurance in force over its history with a number of
insurance companies and has litigation seeking indemnity and defense under
these insurance policies in relation to its environmental liabilities. The
litigation is expected to last several years.
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, they 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.
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AND SUBSIDIARIES
Other
The Corporation extends performance and operating cost guarantees 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 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 impact on the Corporation's financial position, results of
operations or cash flows.
Earnings Per Share
Quarter Ended
March 31,
In Millions (except per share amounts) 2001 2000
Net income $ 440 $ 377
Less: ESOP Stock dividends (8) (8)
Basic earnings 432 369
ESOP Stock adjustment 7 7
Diluted earnings $ 439 $ 376
Average shares:
Basic 471 473
Stock awards 11 11
ESOP Stock 26 27
Diluted 508 511
Earnings per share of Common Stock:
Basic $ .92 $ .78
Diluted $ .86 $ .74
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
With respect to the unaudited condensed consolidated financial information of
United Technologies Corporation for the quarters ended March 31, 2001 and 2000,
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") reported that they have
applied limited procedures in accordance with professional standards for a
review of such information. However, their separate report dated April 19,
2001, appearing below, states that they did not audit and they do not express an
opinion on that unaudited condensed consolidated financial information.
PricewaterhouseCoopers has not carried out any significant or additional audit
tests beyond those which would have been necessary if their report had not been
included. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review
procedures applied. PricewaterhouseCoopers is not subject to the liability
provisions of Section 11 of the Securities Act of 1933 ("the Act") for their
report on the unaudited condensed consolidated financial information because
that report is not a "report" or a "part" of a registration statement prepared
or certified by PricewaterhouseCoopers within the meaning of Sections 7 and 11
of the Act.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareowners of
United Technologies Corporation
We have reviewed the accompanying condensed consolidated statement of
operations of United Technologies Corporation and its consolidated subsidiaries
for the quarters ended March 31, 2001, and 2000, the condensed consolidated
statement of cash flows for the three months ended March 31, 2001 and 2000, and
the condensed consolidated balance sheet as of March 31, 2001. This financial
information is the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial information
for it to be in conformity with accounting principles generally accepted in the
United States of America.
We previously audited in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet as of
December 31, 2000, and the related consolidated statements of operations, of
changes in shareowners' equity and of cash flows for the year then ended (not
presented herein), and in our report dated January 18, 2001, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 2000, is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
April 19, 2001
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AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Position
BUSINESS ENVIRONMENT
The Corporation's operations are classified into four principal operating
segments: Otis, Carrier, Pratt & Whitney and Flight Systems. Otis and Carrier
serve customers in the commercial and residential property industries. Carrier
also serves commercial and transport refrigeration customers. Pratt & Whitney
and the Flight Systems segment, which includes Sikorsky Aircraft ("Sikorsky")
and Hamilton Sundstrand, primarily serve commercial and government customers in
the aerospace industry.
For discussion of the Corporation's business environment, refer to the
discussion of "Business Environment" in the Management's Discussion and
Analysis of Results of Operations and Financial Position in the Corporation's
Annual Report incorporated by reference in Form 10-K for calendar year 2000.
Significant changes in the Corporation's business environment during the first
quarter of 2001 are discussed below.
As worldwide businesses, the Corporation's operations are affected by global
and regional economic factors. During the first quarter of 2001, weaker European
and Asian currencies had a negative impact on the Corporation's consolidated
results. However, in general, the diversity of the Corporation's businesses
and global market presence have helped, and should continue to help, limit
the impact of any one industry or the economy of any single country on the
consolidated results.
There have been no other significant changes in the Corporation's business
environment during the first quarter of 2001.
RESULTS OF CONTINUING OPERATIONS
Consolidated revenues increased $281 million (4%) to $6.67 billion in the
first quarter of 2001 compared to the same period in 2000. Excluding the
unfavorable impact of foreign currency translation, consolidated revenues
increased 7%. The increase reflects the purchase of Specialty Equipment
Companies in the fourth quarter of 2000 and growth in the ongoing businesses of
Carrier, Pratt & Whitney and Otis.
Gross margin as a percentage of sales increased 0.5 percentage points to 27.1%
in the first quarter of 2001 principally as a result of previous cost reduction
actions.
Research and development spending decreased $17 million (5%) in the first
quarter of 2001 compared to 2000, primarily due to a decrease at Pratt &
Whitney, which reflects the variable nature of engineering development program
schedules. As a percentage of sales, research and development was 4.5% in the
first quarter of 2001 as compared to 5.0% in the same period of 2000.
Research and development is expected to be approximately 5% of sales in 2001.
Selling, general and administrative expenses increased $4 million (0.5%) in
the first quarter of 2001 compared to 2000. The increase is related to the
impact of acquisitions, primarily at Carrier, partially offset by a decrease
resulting from cost reduction actions. As a percentage of sales, these expenses
were 11.9% in the first quarter of 2001, as compared to 12.4% in the same
period of 2000.
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Interest expense increased $21 million (24%) in the first quarter of 2001
compared to 2000. The increase is primarily related to the issuance of $500
million of 6.35% Notes due 2011 in February 2001 and $500 million of 7.125%
Notes due 2010 in November 2000.
The effective income tax rate for the first quarter of 2001 was 30.4% compared
to 30.5% for the first quarter of 2000. The Corporation has continued to lower
its effective income tax rate by implementing tax reduction strategies.
Restructuring and Other Costs
As described in the Notes to Condensed Consolidated Financial Statements, the
Corporation's operating segments initiated a variety of programs in 1999 aimed
at further strengthening their future profitability and competitive position.
The 1999 programs totaled $1,120 million, before income taxes and minority
interests, and included accrued restructuring charges of $842 million, related
charges of $141 million that were not accruable when initiated, and charges
associated with product development and aircraft systems integration and non-
product purchasing.
In February 2000, a Federal District Court issued an injunction relative to
certain restructuring actions planned by Pratt & Whitney that would move work
from Connecticut to Arkansas, Texas and Oklahoma. After a subsequent ruling by
the Second Circuit Court of Appeals, the injunction remains in place until the
end of the Collective Bargaining Agreement in December 2001. In February 2001,
Pratt & Whitney agreed, for the life of the current Collective Bargaining
Agreement, to retain this work within the bargaining unit. The Corporation
does not believe that this outcome will materially impact the Corporation's
restructuring program.
During the first quarter of 2001, the Corporation incurred and recognized
approximately $44 million of costs that were not accruable or contemplated when
the 1999 programs were inititated and expects to incur at least $100 million in
total for all of 2001. In the current year, the Corporation expects to have
pre-tax cash outflows of up to $200 million associated with the 1999
programs and costs that were not accruable or contemplated when the 1999
programs were initiated. These cash flows are expected to largely occur in the
first of half of the year and will use cash generated by operations. The 1999
restructuring and other actions taken by the Corporation are expected to
result in savings that should offset the additional costs expected to be
incurred, resulting in a net benefit in 2001. Recurring savings, associated
primarily with a net reduction in workforce and facility closures, are
expected to increase through 2002 to approximately $750 million pre-tax
annually, primarily benefiting cost of products sold.
Segment Review
Revenues, operating profits and operating profit margins of the Corporation's
principal operating segments include the results of all majority-owned
subsidiaries, consistent with the management reporting of these businesses.
Adjustments to reconcile segment reporting to consolidated results are included
in "Eliminations and other," which also includes certain small subsidiaries.
Results quarters ended March 31, 2001 and 2000 are as follows:
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
In Millions of Dollars Operating
Revenues Operating Profits Profit Margin
Quarter Ended March 31, 2001 2000 2001 2000 2001 2000
Otis $ 1,548 $ 1,543 $ 220 $ 192 14.2% 12.4%
Carrier 2,085 1,846 131 123 6.3% 6.7%
Pratt & Whitney 1,878 1,824 343 282 18.3% 15.5%
Flight Systems 1,254 1,257 168 138 13.4% 11.0%
Total segment 6,765 6,470 862 735 12.7% 11.4%
Eliminations and other (94) (80) (33) (11)
General corporate expenses - - (52) (57)
Consolidated $ 6,671 $ 6,390 777 667
Interest expense (107) (86)
Income before income taxes
and minority interests $ 670 $ 581
Otis revenues increased $5 million in the first quarter of 2001 compared
to 2000. Excluding the impact of foreign currency translation, revenues
increased 6%, reflecting increases in all regions. The increases were led by
Europe and North America and related to higher new equipment and service sales.
The negative foreign currency impact was primarily due to European and
Asian currencies.
Otis operating profits increased $28 million (15%) in the first quarter of
2001 compared to 2000. Excluding the impact of foreign currency translation,
operating profit increased 21%, reflecting profit improvements in all regions
primarily due to previous cost reduction actions.
Carrier revenues increased $239 million (13%) in the first quarter of 2001
compared to 2000. Excluding the impact of foreign currency translation, revenues
increased 16%, reflecting the acquisition of Specialty Equipment Companies
during the fourth quarter of 2000, growth in international markets and
growth in a weak North American residential market. The improvements were
partially offset by continued weakness in the commercial refrigeration
business and North American transport refrigeration business. The negative
foreign currency impact was primarily due to European and Asian currencies.
Carrier operating profits increased $8 million (7%) in the first quarter of
2001 compared to 2000. Excluding the impact of foreign currency translation,
operating profit increased by 11%, in line with the increased revenues and the
acquisition of Specialty Equipment Companies. The increase was partially offset
by weakness in the North American transport refrigeration market, a slow ramp-
up in commercial refrigeration new plant efficiency, and investments in new
products.
Pratt & Whitney revenues increased $54 million (3%) in the first quarter of
2001 compared to 2000. The increase was primarily due to improved aftermarket
and small commercial engine shipments at Pratt & Whitney Canada and increased
shipments of industrial gas turbines at Pratt & Whitney Power Systems, partially
offset by an expected decline in government funded development for large
military engines related to program timing.
Pratt & Whitney operating profits increased $61 million (22%) in the first
quarter of 2001 compared to 2000, primarily reflecting increased shipments and
improved aftermarket performance at Pratt & Whitney Canada and continued cost
reductions.
Flight Systems revenues decreased $3 million in the first quarter of 2001
compared to 2000. The first quarter decrease is primarily associated with
13
14
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
lower value shipments at Sikorsky, largely offset by an increase at Hamilton
Sundstrand associated with increased original equipment sales and improved
aftermarket in the aerospace business.
Flight Systems operating profits increased $30 million (22%) in the first
quarter of 2001 compared to 2000, reflecting improved aftermarket performance in
the aerospace business at Hamilton Sundstrand and improvements at Sikorsky.
LIQUIDITY AND FINANCIAL POSITION
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, investments in
businesses, customer financing requirements, dividends, Common Stock
repurchases, adequate bank lines of credit and financial flexibility to attract
long-term capital with satisfactory terms.
March 31, December 31, March 31,
In Millions of Dollars 2001 2000 2000
Cash and cash equivalents $ 780 $ 748 $ 657
Total debt 4,874 4,811 4,265
Net debt (total debt less cash) 4,094 4,063 3,608
Shareowners' equity 7,738 7,662 7,036
Debt to total capitalization 39% 39% 38%
Net debt to total capitalization 35% 35% 34%
Net cash flows provided by operating activities increased $107 million in the
first quarter of 2001 compared to the corresponding period in 2000. The
increase reflects improved operating performance, in part due to lower
restructuring charges in 2001.
Cash used in investing activities increased $34 million to $427 million in the
first quarter of 2001 compared to the same period of 2000 primarily due to
increased capital expenditures. Cash spending for investments in businesses
for the first quarter of 2001 was $173 million and includes the Hamilton
Sundstrand acquisition of Claverham Group LTD. Total investments in businesses
in 2001 is expected to be at least $1 billion.
Customer financing activity was a net use of cash of $52 million in the first
quarter of 2001 compared with a $15 million net use of cash for the same
period of 2000, primarily due to customer generated requirements for financing.
While the Corporation expects that 2001 customer financing activity will be a
net use of funds, actual funding is subject to usage under existing customer
financing commitments during the remainder of the year. The Corporation had
financing and rental commitments of $1.8 billion related to commercial aircraft,
compared to $1.2 billion at December 31, 2000.
Net cash flows used in financing activities decreased $271 million in the
first quarter of 2001, reflecting the Corporation's issuance of $500 million
of 6.35% notes in February 2001 under shelf registration statements previously
filed with the Securities and Exchange Commission. Following this offering,
up to $500 million of additional medium-term and long-term debt could be issued
14
15
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
under shelf registration statements on file with the Securities and Exchange
Commission. The Corporation plans to register an additional $1.5 billion of
debt and equity securities (this statement, however, does not constitute an
offer of any securities for sale).
The Corporation repurchased $200 million of Common Stock, representing 2.7
million shares, in the first quarter of 2001 under previously announced share
repurchase programs. The share repurchase programs continue to be a use of the
Corporation's cash flows and have more than offset the dilutive effect resulting
from the issuance of stock and options under stock-based employee benefit
programs. At March 31, 2001, the Corporation was authorized to repurchase an
additional 8.6 million shares.
The Corporation manages its worldwide cash requirements considering available
funds among the many subsidiaries through which it conducts its business and the
cost effectiveness with which those 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.
Management believes that its existing cash position and other available
sources of liquidity are sufficient to meet current and anticipated requirements
for the foreseeable future. Although uncertainties in acquisition spending
could cause modest variations at times, management anticipates that the level of
debt-to-capital will remain generally consistent with recent levels.
New Accounting Guidance
Effective January 1, 2001, the Corporation adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended. See Notes to Condensed Consolidated Finan-
cial Statements for further discussion.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There has been no significant change in the Corporation's exposure to market
risk during the first quarter of 2001. For discussion of the Corporation's
exposure to market risk, refer to Item 7A, Quantitative and Qualitative
Disclosures about Market Risk, contained in the Corporation's Annual Report
incorporated by reference in Form 10-K for the calendar year 2000.
15
16
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS
This report on Form 10-Q contains statements which, to the extent they are
not statements of historical or present fact, constitute "forward-looking
statements" under the securities laws. From time to time, oral or written
forward-looking statements may also be included in other materials released to
the public. These forward-looking statements are intended to provide
management's current expectations or plans for the future operating and
financial performance of the Corporation, based on assumptions currently
believed to be valid. Forward-looking statements can be identified by the use
of words such as "believe," "expect," "plans," "strategy," "prospects,"
"estimate," "project," "anticipate" and other words of similar meaning in
connection with a discussion of future operating or financial performance.
These include, among others, statements relating to:
. Future earnings and other measurements of financial performance
. Future cash flow and uses of cash
. The effect of economic downturns or growth in particular regions
. The effect of changes in the level of activity in particular industries or
markets
. The scope, nature or impact of acquisition activity
. Product developments and new business opportunities
. Restructuring costs and savings
. The outcome of contingencies.
All forward-looking statements involve risks and uncertainties that may cause
actual results to differ materially from those expressed or implied in the
forward-looking statements. This Report on Form 10-Q includes important informa-
tion as to risk factors in the "Notes to Condensed Consolidated Financial
Statements" under the heading "Contingent Liabilities" and in the section
titled "Management's Discussion and Analysis of Results of Operations and
Financial Position" under the headings "Business Environment" and "Restructuring
and Other Costs." The Corporation's Annual Report on Form 10-K for 2000 also
includes important information as to risk factors in the "Business" section
under the headings "Description of Business by Operating Segment," "Other
Matters Relating to the Corporation's Business as a Whole" and "Legal
Proceedings." Additional important information as to risk factors is included
in the Corporation's 2000 Annual Report to Shareowners in the section titled
"Management's Discussion and Analysis of Results of Operations and Finan-
cial Position" under the headings "Business Environment" and "Restructuring
and Other Costs." For additional information identifying factors that may
cause actual results to vary materially from those stated in the forward-looking
statements, see the Corporation's reports on Forms 10-Q and 8-K filed with the
Securities and Exchange Commission from time to time.
16
17
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(ii) Bylaws as amended and restated effective March 21, 2001.*
(12) Statement re: computation of ratio of earnings to fixed charges.*
(15) Letter re: unaudited interim financial information.*
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended March 31,
2001.
*Submitted electronically herewith.
17
18
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
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 thereunto duly authorized.
UNITED TECHNOLOGIES CORPORATION
Dated: May 4, 2001 By: /s/ David J. FitzPatrick
David J. FitzPatrick
Senior Vice President,
Chief Financial Officer and Treasurer
Dated: May 4, 2001 By: /s/ David G. Nord
David G. Nord
Vice President, Controller
Dated: May 4, 2001 By: /s/ William H. Trachsel
William H. Trachsel
Senior Vice President, General Counsel and
Secretary
18
EXHIBIT INDEX
3(ii) Bylaws as amended and restated effective March 21, 2001.*
(12) Statement re: computation of ratio of earnings to fixed charges. *
(15) Letter re: unaudited interim financial information. *
*Submitted electronically herewith.
19
Exhibit 3(ii)
BYLAWS
OF
UNITED TECHNOLOGIES CORPORATION
AS AMENDED AND RESTATED EFFECTIVE MARCH 21, 2001
SECTION 1 - Meetings of Shareholders
SECTION 1.1 Annual Meetings.
Annual meetings of shareholders shall be held on or prior to April 30 in each
year for the purpose of electing directors and transacting such other proper
business as may come before the meeting.
SECTION 1.2 Special Meetings.
Special meetings of shareholders may be called from time to time by the Board of
Directors or by the chief executive officer of the Corporation. Special
meetings shall be held solely for the purpose or purposes specified in the
notice of meeting.
SECTION 1.3 Time and Place of Meetings.
Subject to the provisions of Section 1.1, each meeting of shareholders shall be
held on such date, at such hour and at such place as fixed by the Board of
Directors or in the notice of the meeting or, in the case of an adjourned
meeting, as announced at the meeting at which the adjournment is taken.
SECTION 1.4 Notice of Meetings.
A notice of each meeting of shareholders, stating the place, date and hour of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given personally, by mail or by electronic
transmission as set forth below to each shareholder entitled to vote at the
meeting. Unless otherwise provided by statute, the notice shall be given not
less than 10 nor more than 60 days before the date of the meeting and, if
mailed, shall be deposited in the United States mail, postage prepaid, directed
to the shareholder at his address as it appears on the records of the
Corporation. No notice need be given to any person with whom communication is
unlawful, nor shall there be any duty to apply for any permit or license to give
notice to any such person. If the time and place of an adjourned meeting of
shareholders are announced at the meeting at which the adjournment is taken, no
notice need be given of the adjourned meeting unless that adjournment is for
more than 30 days or unless, after the adjournment, a new record date is fixed
for the adjourned meeting. Without limiting the manner by which notice
otherwise may be given effectively to shareholders, any notice to shareholders
under the certificate of incorporation and these Bylaws may be given by
electronic transmission in the manner provided in Section 232 of the Delaware
General Corporation Law.
SECTION 1.5 Waiver of Notice.
Anything herein to the contrary notwithstanding, notice of any meeting of
shareholders need not be given to any shareholder who in person or by proxy
shall have waived in writing notice of the meeting, either before or after such
meeting, or who shall attend the meeting in person or by proxy, unless he
attends for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
- 1 -
SECTION 1.6 Quorum and Manner of Acting.
Subject to the provisions of these Bylaws, the certificate of incorporation and
statute as to the vote that is required for a specified action, the presence in
person or by proxy of the holders of a majority of the outstanding shares of the
Corporation entitled to vote at any meeting of shareholders shall constitute a
quorum for the transaction of business, and the vote in person or by proxy of
the holders of a majority of the shares constituting such quorum shall be
binding on all shareholders of the Corporation. A majority of the shares
present in person or by proxy and entitled to vote may, regardless of whether or
not they constitute a quorum, adjourn the meeting to another time and place.
Any business which might have been transacted at the original meeting may be
transacted at any adjourned meeting at which a quorum is present.
SECTION 1.7 Voting.
Shareholders shall be entitled to cumulative voting at all elections of
directors to the extent provided in or pursuant to the certificate of
incorporation. A shareholder may authorize another person or persons to vote
for him as proxy by: (a) executing a writing authorizing such other person or
persons to act for him as proxy, where execution of the writing is accomplished
by the shareholder or his authorized officer, director, employee or agent
signing such writing or causing his signature to be affixed to such writing by
any reasonable means including, but not limited to, by facsimile signature; or
(b) transmitting or authorizing the transmission of a telegram, cablegram, or
other means of electronic transmission to the person who will be the holder of
the proxy or to a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided, that any such telegram, cablegram or other
means of electronic transmission must either set forth or be submitted with
information from which it can be determined that the telegram, cablegram or
other electronic transmission was authorized by the shareholder. No proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period.
SECTION 1.8 Judges.
The votes at each meeting of shareholders shall be supervised by not less than
two judges who shall decide all questions respecting the qualification of
voters, the validity of the proxies and the acceptance or rejection of votes.
The judges shall be appointed by the Board of Directors but if, for any reason,
there are less than two judges present and acting at any meeting, the chairman
of the meeting shall appoint an additional judge or judges so that there shall
always be at least two judges to act at the meeting.
SECTION 1.9 List of Shareholders.
A complete list of the shareholders entitled to vote at each meeting of
shareholders, arranged in alphabetical order, and showing the address and number
of shares registered in the name of each shareholder, shall be prepared and made
available for examination during regular business hours by any shareholder for
any purpose germane to the meeting. The list shall be available for such
examination at the principal place of business of the Corporation for a period
of not less than 10 days prior to the meeting and during the whole time of the
meeting.
- 2 -
SECTION 1.10 Notice of Shareholder Business and Nominations.
(A) Annual Meetings of Shareholders.
(1)Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the
shareholders may be made at an annual meeting of shareholders (a) pursuant
to the Corporation's notice of meeting, (b) by or at the direction of the
Board of Directors or (c) by any shareholder of the Corporation who was a
shareholder of record at the time of giving of notice provided for in this
Section 1.10, who is entitled to vote at the meeting and who complied with
the notice procedures set forth in this Section 1.10.
(2)For nominations or other business to be properly brought before an annual
meeting by a shareholder pursuant to clause (c) of paragraph (A)(1) of this
Section 1.10, the shareholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must be
a proper matter for shareholder action. To be timely, a shareholder's
notice shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the 90th
day nor earlier than the close of business on the 120th day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice by the
shareholder to be timely must be so delivered not earlier than the close of
business on the 120th day prior to such annual meeting and not later than
the close of business on the later of the 90th day prior to such annual
meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time
period for the giving of a shareholder's notice as described above. Such
shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or reelection as a director
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14a-11 thereunder (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected);
(b) as to any other business that the shareholder proposes to bring before
the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting
and any material interest in such business of such shareholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as
to the shareholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made, (i) the name and address of
such shareholder, as they appear on the Corporation's books, and of such
beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such shareholder and such
beneficial owner.
(3)Notwithstanding anything in the second sentence of paragraph (A)(2) of this
Section 1.10 to the contrary, in the event that the number of directors to
be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the
Corporation at least 100 days prior to the first anniversary of the
preceding year's annual meeting, a shareholder's notice required by this
Section 1.10 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following
the day on which such public announcement is first made by the Corporation.
- 3 -
(B) Special Meetings of Shareholders.
Only such business shall be conducted at a special meeting of shareholders as
shall have been brought before the meeting pursuant to the Corporation's notice
of meeting. Nominations of persons for election to the Board of Directors may
be made at a special meeting of shareholders at which directors are to be
elected pursuant to the Corporation's notice of meeting (a) by or at the
direction of the Board of Directors or (b) by any shareholder of the Corporation
who is a shareholder of record at the time of giving of notice provided for in
this Section 1.10, who shall be entitled to vote at the meeting and who complies
with the notice procedures set forth in this Section 1.10. In the event the
Corporation calls a special meeting of shareholders for the purpose of electing
one or more directors to the Board of Directors, any such shareholder may
nominate a person or persons (as the case may be) for election to such
position(s) as specified in the Corporation's notice of meeting, if the
shareholder's notice required by paragraph (A)(2) of this Section 1.10 shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the close of business on the 120th day prior to such special
meeting and not later than the close of business on the later of the 90th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In
no event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a shareholder's notice as described
above.
(C) General.
(1)Only such persons who are nominated in accordance with the procedures set
forth in this Section 1.10 shall be eligible to serve as directors and only
such business shall be conducted at a meeting of shareholders as shall have
been brought before the meeting in accordance with the procedures set forth
in this Section 1.10. Except as otherwise provided by law, the chairman of
the meeting shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was made, or
proposed, as the case may be, in accordance with the procedures set forth in
this Section 1.10 and, if any proposed nomination or business is not in
compliance with this Section 1.10, to declare that such defective proposal
or nomination shall be disregarded.
(2)For purposes of this Section 1.10, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3)Notwithstanding the foregoing provisions of this Section 1.10, a shareholder
shall also comply with all applicable requirements of the Exchange Act and
the rules and regulations thereunder with respect to the matters set forth
in this Section 1.10. Nothing in this Section 1.10 shall be deemed to
affect any rights of shareholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
- 4 -
SECTION 1.11
(A) Consents to Corporate Action.
Any action which is required to be or may be taken at any annual or special
meeting of shareholders of the Corporation, subject to the provisions of
Subsections (B) and (C) of this Section 1.11, may be taken without a meeting,
without prior notice and without a vote if consents in writing, setting forth
the action so taken, shall have been signed by the holders of the outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or to take such action at a meeting at which all shares entitled
to vote thereon were present and voted; provided, however, that prompt notice
of the taking of the corporate action without a meeting and by less than
unanimous written consent shall be given to those shareholders who have not
consented in writing.
(B) Determination of Record Date of Action by Written Consent.
The record date for determining shareholders entitled to consent to corporate
action in writing without a meeting shall be fixed by the Board of Directors of
the Corporation. Any shareholder of record seeking to have the shareholders
authorize or take corporate action by written consent without a meeting shall,
by written notice to the Secretary, request the Board of Directors to fix a
record date. Upon receipt of such a request, the Secretary shall place such
request before the Board of Directors at its next regularly scheduled meeting,
provided, however, that if the shareholder represents in such request that he
intends, and is prepared, to commence a consent solicitation as soon as is
permitted by the Exchange Act and the regulations thereunder and other
applicable law, the Secretary shall as promptly as practicable, call a special
meeting of the Board of Directors, which meeting shall be held as promptly as
practicable. At such regular or special meeting, the Board of Directors shall
fix a record date as provided in Section 213 (or its successor provision) of the
Delaware General Corporation Law. Should the Board fail to fix a record date as
provided for in this Subsection (B), then the record date shall be the day on
which the first written consent is expressed.
(C) Procedures for Written Consent.
In the event of the delivery to the Corporation of a written consent or consents
purporting to represent the requisite voting power to authorize or take
corporate action and/or related revocations, the Secretary shall provide for the
safekeeping of such consents and revocations and shall, as promptly as
practicable, engage nationally recognized independent judges of election for the
purpose of promptly performing a ministerial review of the validity of the
consents and revocations. No action by written consent and without a meeting
shall be effective until such judges have completed their review, determined
that the requisite number of valid and unrevoked consents has been obtained to
authorize or take the action specified in the consents, and certified such
determination for entry in the records of the Corporation kept for the purpose
of recording the proceedings of meetings of shareholders.
SECTION 2 - Board of Directors
SECTION 2.1 Number and Term of Office.
The number of directors shall be not less than 10 nor more than 19. The exact
number, within those limits, shall be fixed from time to time by the Board of
Directors. Each director shall hold office until a successor is elected and
qualified or until his earlier death, resignation or removal.
- 5 -
SECTION 2.2 Election.
The directors shall be elected annually by written ballot and, at each election,
the nominees receiving the greatest number of votes shall be the directors.
SECTION 2.3 Organization Meetings.
As promptly as practicable after each annual meeting of shareholders, an
organization meeting of the Board of Directors shall be held for the purpose of
organization and the transaction of other business.
SECTION 2.4 Stated Meetings.
The Board of Directors may provide for stated meetings of the Board.
SECTION 2.5 Special Meetings.
Special meetings of the Board of Directors may be called from time to time by
any four directors, by the chief executive officer, or by the chief operating
officer of the Corporation in concert with two directors.
SECTION 2.6 Business of Meetings.
Except as otherwise expressly provided in these Bylaws, any and all business may
be transacted at any meeting of the Board of Directors; provided, that if so
stated in the notice of meeting, the business transacted at a special meeting
shall be limited to the purpose or purposes specified in the notice.
SECTION 2.7 Time and Place of Meetings.
Subject to the provisions of Section 2.3, each meeting of the Board of Directors
shall be held on such date, at such hour and in such place as fixed by the Board
or in the notice or waivers of notice of the meeting or, in the case of an
adjourned meeting, as announced at the meeting at which the adjournment is
taken.
SECTION 2.8 Notice of Meetings.
No notice need be given of any organization or stated meeting of the Board of
Directors for which the Board has fixed the date, hour and place. Notice of the
date, hour and place of all other organization and stated meetings, and of all
special meetings, shall be given to each director personally, by telephone or
telegraph or by mail. If by mail, the notice shall be deposited in the United
States mail, postage prepaid, directed to the director at his residence or usual
place of business as the same appears on the books of the Corporation not later
than four days before the meeting. If given by telegraph, the notice shall be
directed to the director at his residence or usual place of business as the same
appears on the books of the Corporation not later than at any time during the
day before the meeting. If given personally or by telephone, the notice shall
be given not later than the day before the meeting.
SECTION 2.9 Waiver of Notice.
Anything herein to the contrary notwithstanding, notice of any meeting of the
Board of Directors need not be given to any director who shall have waived in
writing notice of the meeting, either before or after the meeting, or who shall
attend such meeting, unless he attends for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 2.10 Attendance by Telephone or Other Means of Communication.
Directors may participate in meetings of the Board of Directors by means of
conference telephone or other communications equipment by means of which all
directors participating in the meeting can hear one another, and such
participation shall constitute presence in person at the meeting.
- 6 -
SECTION 2.11 Quorum and Manner of Acting.
One-third of the total number of directors at the time provided for pursuant to
Section 2.1 shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors and, except as otherwise provided in these
Bylaws, in the certificate of incorporation or by statute, the act of a majority
of the directors present at any meeting at which a quorum is present shall be
the act of the Board. A majority of the directors present at any meeting,
regardless of whether or not they constitute a quorum, may adjourn the meeting
to another time or place. Any business which might have been transacted at the
original meeting may be transacted at any adjourned meeting at which a quorum is
present.
SECTION 2.12 Action Without a Meeting.
Any action which could be taken at a meeting of the Board of Directors may be
taken without a meeting if all of the directors consent to the action in writing
or by electronic transmission and the writing or writings or electronic
transmission or transmissions are filed with the minutes of the Board. Such
filings shall be in paper form if the minutes are maintained in paper form and
shall be in electronic form if the minutes are maintained in electronic form.
SECTION 2.13 Compensation of Directors.
Each director of the Corporation who is not a salaried officer or employee of
the Corporation, or of a subsidiary of the Corporation, may receive compensation
for serving as a director and for serving as a member of any Committee of the
Board, and may also receive fees for attendance at any meetings of the Board or
any Committee of the Board, and the Board may from time to time fix the amount
and method of payment of such compensation and fees; provided, that no director
of the Corporation shall receive any bonus or share in the earnings or profits
of the Corporation or any subsidiary of the Corporation except pursuant to a
plan approved by the shareholders at a meeting called for the purpose. The
Board may also, by vote of a majority of disinterested directors, provide for
and pay fair compensation to directors rendering services to the Corporation not
ordinarily rendered by directors as such.
SECTION 2.14 Resignation of Directors.
Any director may resign at any time upon written notice to the Corporation. The
resignation shall become effective at the time specified in the notice and,
unless otherwise provided in the notice, acceptance of the resignation shall not
be necessary to make it effective.
SECTION 2.15 Removal of Directors.
Any director may be removed, either for or without cause, at any time, by the
affirmative vote of the holders of record of a majority of the outstanding
shares of stock entitled to vote at a meeting of the shareholders called for the
purpose, and the vacancy in the Board caused by any such removal may be filled
by the shareholders at such meeting or at any subsequent meeting; provided, that
no director elected by a class vote of less than all the outstanding shares of
the Corporation may, so long as the right to such a class vote continues in
effect, be removed pursuant to this Section 2.15, except for cause and by the
affirmative vote of the holders of record of a majority of the outstanding
shares of such class at a meeting called for the purpose, and the vacancy in the
Board caused by the removal of any such director may, so long as the right to
such class vote continues in effect, be filled by the holders of the outstanding
shares of such class at such meeting or at any subsequent meeting; provided,
further, that if less than all the directors then in office are to be removed,
no director may be removed without cause if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at an election of
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the whole Board of Directors or, in the case of directors elected by a class
vote, the right to which class vote is still then in effect, if the votes cast
against his removal would be sufficient to elect him if then cumulatively voted
at an election of the class of directors of which he is a part.
SECTION 2.16 Filling of Vacancies Not Caused by Removal.
Vacancies and newly created directorships resulting from an increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director;
provided, that if the vacancy to be filled would, at an election of the whole
Board of Directors, be filled by a class vote of less than all of the
outstanding shares of the Corporation, and if any of the directors remaining in
office were elected by the same class, such majority vote of the directors shall
be effective only if it is concurred in by a majority of the remaining directors
elected by such class or by a sole remaining director elected by such class. If
for any reason there shall be no directors in office, any officer, any
shareholder or any executor, administrator, trustee or guardian of a
shareholder, or other fiduciary with like responsibility for the person or
estate of a shareholder, may call a special meeting of shareholders in
accordance with the provisions of these Bylaws for the purpose of electing
directors.
SECTION 3 - Committees of the Board of Directors
SECTION 3.1 Executive Committee.
By resolution adopted by an affirmative vote of the majority of the whole Board
of Directors, the Board may appoint an Executive Committee consisting of the
directors who occupy the offices of the Chairman, chief executive and operating
officers of the Corporation, ex officio, and two or more other directors and, if
deemed desirable, one or more directors as alternate members who may replace any
absentee or disqualified member at any meeting of the Executive Committee. If
so appointed, the Executive Committee shall, when the Board is not in session,
have all the power and authority of the Board in the management of the business
and affairs of the Corporation not reserved to the Board by Section 3.3. The
Executive Committee shall keep a record of its acts and proceedings and shall
report the same from time to time to the Board of Directors.
SECTION 3.2 Other Committees.
By resolution adopted by an affirmative vote of the majority of the whole Board
of Directors, the Board may from time to time appoint such other Committees of
the Board, consisting of one or more directors and, if deemed desirable, one or
more directors who shall act as alternate members and who may replace any
absentee or disqualified member at any meeting of the Committee, and may
delegate to each such Committee any of the powers and authority of the Board in
the management of the business and affairs of the Corporation not reserved to
the Board pursuant to Section 3.3. Each such Committee shall keep a record of
its acts and proceedings.
SECTION 3.3 Powers Reserved to the Board.
No Committee of the Board shall take any action to amend the certificate of
incorporation or these Bylaws, adopt any agreement to merge or consolidate the
Corporation, declare any dividend or recommend to the shareholders a sale, lease
or exchange of all or substantially all of the assets and property of the
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Corporation, a dissolution of the Corporation or a revocation of a dissolution
of the Corporation. No Committee of the Board shall take any action which is
required in these Bylaws, in the certificate of incorporation or by statute to
be taken by a vote of a specified proportion of the whole Board of Directors.
SECTION 3.4 Election of Committee Members; Vacancies.
So far as practicable, members of the Committees of the Board and their
alternates (if any) shall be appointed at each organization meeting of the Board
of Directors and, unless sooner discharged by an affirmative vote of the
majority of the whole Board, shall hold office until the next organization
meeting of the Board and until their respective successors are appointed. In
the absence or disqualification of any member of a Committee of the Board,
the member or members (including alternates) present at any meeting of the
Committee and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another director to act at the
meeting in place of any absent or disqualified member. Vacancies in
Committees of the Board created by death, resignation or removal may be
filled by an affirmative vote of a majority of the whole Board of Directors.
SECTION 3.5 Meetings.
Each Committee of the Board may provide for stated meetings of such Committee.
Special meetings of each Committee may be called by any two members of the
Committee (or, if there is only one member, by that member in concert with the
chief executive officer) or by the chief executive and chief operating officers
of the Corporation. The provisions of Section 2 regarding the business, time
and place, notice and waivers of notice of meetings, attendance at meetings and
action without a meeting shall apply to each Committee of the Board, except that
the references in such provisions to the directors and the Board of Directors
shall be deemed, respectively, to be references to the members of the Committee
and to the Committee.
SECTION 3.6 Quorum and Manner of Acting.
A majority of the members of any Committee of the Board shall constitute a
quorum for the transaction of business at meetings of the Committee, and the act
of a majority of the members present at any meeting at which a quorum is present
shall be the act of the Committee. A majority of the members present at any
meeting, regardless of whether or not they constitute a quorum, may adjourn the
meeting to another time or place. Any business which might have been transacted
at the original meeting may be transacted at any adjourned meeting at which a
quorum is present.
SECTION 4 - Officers
SECTION 4.1 Election and Appointment.
The elected officers of the Corporation shall consist of a Chairman, a
President, one or more Vice Presidents, a Controller, a Treasurer, a Secretary
and such other elected officers as shall from time to time be designated by the
Board of Directors. The Board shall designate from among such elected officers
a chief executive officer, a chief operating officer, a chief financial officer
and a chief accounting officer of the Corporation, and may from time to time
make, or provide for, other designations it deems appropriate. The Board may
also appoint, or provide for the appointment of, such other officers and agents
as may from time to time appear necessary or advisable in the conduct of the
affairs of the Corporation. Any number of offices may be held by the same
person, except no person may at the same time be both the chief executive and
the chief financial officer.
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SECTION 4.2 Duties of the Chairman.
The Chairman shall preside, when present, at each meeting of shareholders and at
all meetings of the Board of Directors and the Executive Committee. He shall
have general supervision of the affairs of the Corporation and over the chief
executive officer in the discharge of his duties, and shall have such other
powers and duties as may from time to time be committed to him by the Board of
Directors.
SECTION 4.3 Duties of the Chief Executive Officer.
Under the general supervision of the Chairman, the chief executive officer of
the Corporation shall, in the absence of the Chairman, preside at all meetings
of shareholders and at all meetings of the Board of Directors, the Executive
Committee and, except to the extent otherwise provided in these Bylaws or by the
Board, shall have general authority to execute any and all documents in the name
of the Corporation and general and active supervision and control of all of the
business and affairs of the Corporation. In the absence of the chief executive
officer, his duties shall be performed and his powers may be exercised by the
chief operating officer or by such other officer as shall be designated either
by the chief executive officer in writing or (failing such designation) by the
Executive Committee or Board of Directors.
SECTION 4.4 Duties of Other Officers.
The other officers of the Corporation shall have such powers and duties not
inconsistent with these Bylaws as may from time to time be conferred upon them
in or pursuant to resolutions of the Board of Directors, and shall have such
additional powers and duties not inconsistent with such resolutions as may from
time to time be assigned to them by any competent superior officer. The Board
shall assign to one or more of the officers of the Corporation the duty to
record the proceedings of the meetings of the shareholders and the Board of
Directors in a book to be kept for that purpose.
SECTION 4.5 Term of Office and Vacancy.
So far as practicable, the elected officers shall be elected at each
organization meeting of the Board, and shall hold office until the next
organization meeting of the Board and until their respective successors are
elected and qualified. If a vacancy shall occur in any elected office, the
Board of Directors may elect a successor for the remainder of the term.
Appointed officers shall hold office at the pleasure of the Board or of the
officer or officers authorized by the Board to make such appointments. Any
officer may resign by written notice to the Corporation.
SECTION 4.6 Removal of Elected Officers.
Elected officers may be removed at any time, either for or without cause, by the
affirmative vote of a majority of the whole Board of Directors at a meeting
called for that purpose.
SECTION 4.7 Compensation of Elected Officers.
The compensation of all elected officers of the Corporation shall be fixed from
time to time by the Board of Directors; provided, that no elected officer of the
Corporation shall receive any bonus or share in the earnings or profits of the
Corporation or any subsidiary of the Corporation except pursuant to a plan
approved by the shareholders at a meeting called for the purpose.
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SECTION 5 - Shares and Transfer of Shares
SECTION 5.1 Certificates.
The shares of the Corporation shall be represented by certificates or, if and to
the extent the Board of Directors determines, shall be uncertificated shares.
Notwithstanding any such determination by the Board of Directors, every
shareholder shall be entitled to a certificate signed by the Chairman or the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, certifying the class and number of
shares owned by him in the Corporation; provided, that, where such certificate
is countersigned by a Transfer Agent or a Registrar, the signature of any such
Chairman, President, Vice President, Treasurer, Assistant Treasurer, Secretary
or Assistant Secretary may be a facsimile. In case any officer or officers who
shall have signed or whose facsimile signature or signatures shall have been
used on any such certificate or certificates shall cease to be such officer or
officers, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been issued by the Corporation, such
certificate or certificates may be issued by the Corporation with the same
effect as if he or they were such officer or officers at the date of issue.
SECTION 5.2 Transfer Agents and Registrars.
The Board of Directors may, in its discretion, appoint one or more responsible
banks or trust companies in the City of New York and in such other city or
cities (if any) as the Board may deem advisable, from time to time, to act as
Transfer Agents and Registrars of shares of the Corporation; and, when such
appointments shall have been made, no certificate for shares of the Corporation
shall be valid until countersigned by one of such Transfer Agents and registered
by one of such Registrars.
SECTION 5.3 Transfers of Shares.
Shares of the Corporation may be transferred upon authorization by the record
holder thereof, or by an attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary or with a Transfer Agent and Registrar,
and by the delivery of the certificates therefor, provided such shares are
represented by certificates, accompanied either by an assignment in writing on
the back of the certificates or by written power of attorney to sell, assign or
transfer the same, signed by the record holder thereof, but no transfer shall
affect the right of the Corporation to pay any dividend upon the shares to the
holder of record thereof, or to treat the holder of record as the holder in fact
thereof for all purposes; and no transfer shall be valid, except between the
parties thereto, until such transfer shall have been made upon the books of the
Corporation.
SECTION 5.4 Lost Certificates.
In case any certificate for shares of the Corporation shall be lost, stolen or
destroyed, the Board of Directors, in its discretion, or any Transfer Agent
thereunto duly authorized by the Board, may authorize the issuance of a
substitute certificate in place of the certificate so lost, stolen or destroyed,
and may cause such substitute certificate to be countersigned by the appropriate
Transfer Agent (if any) and registered by the appropriate Registrar (if any);
provided, that in each such case, the applicant for a substitute certificate
shall furnish to the Corporation and to such of its Transfer Agents and
Registrars as may require same, evidence to their satisfaction, in their
discretion, of the loss, theft or destruction of such certificate and of the
ownership thereof, and such security or indemnity as may be required by them.
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SECTION 5.5 Record Dates.
In order that the Corporation may determine the shareholders entitled to notice
of or to vote at any meeting of shareholders, or any adjournment thereof, or to
consent to action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of shares
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date which shall be not more than 60 nor less than 10 days
before the date of any meeting of shareholders, and not more than 60 days prior
to any other action. In such case, those shareholders, and only those
shareholders, who are shareholders of record on the date fixed by the Board of
Directors shall, notwithstanding any subsequent transfer of shares on the books
of the Corporation, be entitled to notice of and to vote at such meeting of
shareholders, or any adjournment thereof, or to consent to such corporate action
in writing without a meeting, or be entitled to receive payment of such dividend
or other distribution or allotment of rights, or be entitled to exercise rights
in respect of any such change, conversion or exchange of shares or to
participate in any such other lawful action.
SECTION 6 - Miscellaneous
SECTION 6.1 Fiscal Year.
The fiscal year of the Corporation shall be the calendar year.
SECTION 6.2 Surety Bonds.
The Chief Financial Officer, the Controller, the Treasurer, each Assistant
Treasurer, and such other officers and agents of the Corporation as the Board of
Directors may from time to time direct shall be bonded at the expense of the
Corporation for the faithful performance of their duties in such amounts and by
such surety companies as the Board may from time to time determine.
SECTION 6.3 Signature of Negotiable Instruments.
All bills, notes, checks or other instruments for the payment of money shall be
signed or countersigned in such manner as from time to time may be prescribed by
resolution of the Board of Directors.
SECTION 6.4 Independent Accountants.
At each annual meeting, the shareholders shall appoint an independent public
accountant or firm of independent public accountants to act as the Independent
Accountants of the Corporation until the next annual meeting. Among other
duties, it shall be the duty of the Independent Accountants so appointed to make
periodic audits of the books and accounts of the Corporation. As soon as
reasonably practicable after the close of the fiscal year, the shareholders
shall be furnished with consolidated financial statements of the Corporation and
its consolidated subsidiaries, as at the end of such fiscal year, duly certified
by such Independent Accountants, subject to such notes or comments as the
Independent Accountants shall deem necessary or desirable for the information of
the shareholders. In case the shareholders shall at any time fail to appoint
Independent Accountants or in case the Independent Accountants appointed by the
shareholders shall decline to act or shall resign or otherwise become incapable
of acting, the Board of Directors shall appoint Independent Accountants to
discharge the duties provided for herein. Any Independent Accountants appointed
pursuant to any of the provisions hereof shall be directly responsible to the
shareholders, and the fees and expenses of any such Independent Accountants
shall be paid by the Corporation.
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SECTION 6.5 Indemnification of Officers, Directors, Employees, Agents and
Fiduciaries; Insurance.
(A)The Corporation may indemnify, in accordance with and to the full extent
permitted by the laws of the State of Delaware as in effect at the time of
the adoption of this Section 6.5 or as such laws may be amended from time to
time, and shall so indemnify to the full extent permitted by such laws, any
person (and the heirs and legal representatives of any such person) made or
threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, by reason of the fact that such person is or was a director,
officer, employee, agent or fiduciary of the Corporation or any constituent
corporation absorbed in a consolidation or merger, or serves as such with
another corporation, partnership, joint venture, trust or other enterprise
at the request of the Corporation or any such constituent corporation.
(B)By action of the Board of Directors notwithstanding any interest of the
directors in such action, the Corporation may purchase and maintain
insurance in such amounts as the Board of Directors deems appropriate on
behalf of any person who is or was a director, officer, employee, agent or
fiduciary of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the Corporation shall
have the power to indemnify him against such liability under the provisions
of this Section 6.5.
SECTION 7 - Bylaws Amendments
SECTION 7.1 By the Shareholders.
These Bylaws may be amended by the shareholders at a meeting called for such
purpose in any manner not inconsistent with any provision of law or of the
certificate of incorporation.
SECTION 7.2 By the Directors.
These Bylaws may be amended by the affirmative vote of a majority of the whole
Board of Directors in any manner not inconsistent with any provision of law or
of the certificate of incorporation; provided, that the Board may not amend this
Section 7.2, or the bonus proviso of Section 2.13 (Compensation of Directors),
or Section 2.15 (Removal of Directors), Section 4.6 (Removal of Elected
Officers) or Section 4.7 (Compensation of Elected Officers).
Exhibit 12
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Quarter Ended
March 31,
In Millions of Dollars 2001 2000
Fixed Charges:
Interest expense $ 107 $ 86
Interest capitalized 6 4
One-third of rents* 16 17
Total Fixed Charges $ 129 $ 107
Earnings:
Income before income taxes
and minority interests $ 670 $ 581
Fixed charges per above 129 107
Less: interest capitalized (6) (4)
123 103
Amortization of interest capitalized 5 4
Total Earnings $ 798 $ 688
Ratio of Earnings to Fixed Charges 6.19 6.43
* Reasonable approximation of the interest factor.
Exhibit 15
April 30, 2001
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that our report dated April 19, 2001 on our review of interim
financial information of United Technologies Corporation as of and for the
period ended March 31, 2001 and included in the Corporation's quarterly report
on Form 10-Q for the quarter then ended is incorporated by reference in the
Prospectus constituting part of its Registration Statements on Form S-3
(Nos. 333-51830 and 333-91959), in the Registration Statement on Form S-4
(No. 333-77991) as amended by Post-Effective Amendment No. 1 on Form S-8 (No.
333-77991-01) 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, 2-87322, 333-77817, and 333-82911).
Yours very truly,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
