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2014-09-30 8-K Earnings Release


 
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 21, 2014
____________________________________ 
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 06101
(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 21, 2014, United Technologies Corporation (“UTC” or the “the Company”) issued a press release announcing its third quarter 2014 results.
The press release issued October 21, 2014 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 (the “Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be deemed to be incorporated by reference into any filing by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Section 9—Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number
Exhibit Description
99
Press release, dated October 21, 2014, 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 21, 2014
By:
/S/ GREGORY J. HAYES        
 
 
Gregory J. Hayes
 
 
Senior Vice President and Chief Financial Officer




 
EXHIBIT INDEX
 
Exhibit
Number
Exhibit Description
99
Press release, dated October 21, 2014, issued by United Technologies Corporation.



2014-09-30 8-K Earnings Release Exhibit 99


Exhibit 99

UTC REPORTS THIRD QUARTER 2014 RESULTS

•
EPS of $2.04, up 32% (up 12% to $1.82 ex. restructuring and one-time items)
•
Sales of $16.2 billion, including 5% organic growth
•
Segment margins up 60 bps to 17.2%, ex. restructuring and one-time items
•Reaffirms 2014 EPS expectation of $6.75 to $6.85

HARTFORD, Conn., Oct. 21, 2014 - United Technologies Corp. (NYSE:UTX) reported third quarter earnings per share of $2.04 and net income attributable to common shareowners of $1.9 billion, up 32 percent and 31 percent respectively over the year ago quarter. Results for the current quarter include $0.22 per share of favorable one-time items net of restructuring costs. Earnings per share in the year ago quarter included $0.08 of restructuring costs and one-time items. Excluding these items in both quarters, earnings per share increased 12 percent year over year.
Sales of $16.2 billion increased 5 percent, all driven by organic growth. Third quarter segment operating profit increased 16 percent over the prior year, with operating margin of 17.5 percent. Excluding restructuring costs and net one-time items, segment operating profit grew 8 percent with 60 basis points of operating margin expansion to 17.2 percent.
“UTC delivered another quarter of solid performance,” said Louis Chênevert, UTC Chairman & Chief Executive Officer. “Along with strong margin expansion and a fifth consecutive quarter of organic sales growth, we’ve seen increased demand for our integrated building solutions and revenue synergy opportunities for our Building and Industrial Systems businesses. We also achieved a number of significant program milestones that position UTC for long-term growth. These include supporting the first flight of the Airbus A320neo with Pratt & Whitney’s new Geared Turbofan engines and unveiling Sikorsky’s next-generation S-97 Raider helicopter.”
Otis new equipment orders in the quarter increased 4 percent over the prior year at constant currency. Equipment orders at UTC Climate, Controls & Security increased 5 percent excluding early order activity ahead of next year’s SEER-14 standard change. Large commercial engine spares orders were up 1 percent at Pratt & Whitney and commercial spares orders increased 11 percent at UTC Aerospace Systems. Commercial aftermarket sales were up 7 percent and 10 percent at Pratt & Whitney and UTC Aerospace Systems, respectively.
“With double-digit earnings and 4 percent organic sales growth through the first three quarters, UTC remains on track to deliver on our expectations for the year,” said Chênevert. “Our solid backlog and organic growth trends continue to give us confidence in our earnings per share range of $6.75 to $6.85, on sales of about $65 billion.”
Cash flow from operations was $1.9 billion and capital expenditures were $415 million in the quarter. Share repurchase was $425 million. UTC now expects share repurchase of $1.5 billion for the year, up from the previous expectation of $1.35 billion. As a result of ongoing investment to support the aerospace upcycle, the company continues to anticipate 2014 cash flow from operations less capital expenditures of about 90 percent of net income attributable to common shareowners.




United Technologies Corp., based in Hartford, Connecticut, provides 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. To learn more about UTC, visit the website or follow the company on Twitter: @UTC
All financial results and projections reflect continuing operations unless otherwise noted. The accompanying tables include information integral to assessing the company’s financial position, operating performance, and cash flow, including a reconciliation of differences between non-GAAP measures used in this release and the comparable financial measures calculated in accordance with generally accepted accounting principles in the United States.

This press release includes statements that constitute “forward-looking statements” under the securities laws. Forward-looking statements often contain words such as “believe,” “expect,” “plans,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “confident” and similar terms. Forward-looking statements may include, among other things, statements relating to future and estimated sales, earnings, cash flow, charges, expenditures, share repurchases and other measures of financial performance. All forward-looking statements involve risks, uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Risks and uncertainties include, without limitation, the effect of economic conditions in the markets in which we operate, including financial market conditions, fluctuation in commodity prices, interest rates and foreign currency exchange rates; future levels of research and development spending; levels of end market demand in construction and in the aerospace industry; levels of air travel; financial difficulties of commercial airlines; the impact of government budget and funding decisions on the economy; changes in government procurement priorities and funding; weather conditions and natural disasters; delays and disruption in delivery of materials and services from suppliers; company and customer directed cost reduction efforts and restructuring costs and consequences thereof; the impact of acquisitions, dispositions, joint ventures and similar transactions; the development and production of new products and services; the impact of diversification across product lines, regions and industries; the impact of legal proceedings, investigations and other contingencies; pension plan assumptions and future contributions; the effect of changes in tax, environmental and other laws and regulations and political conditions; and other factors beyond our control. The level of share repurchases depends upon market conditions and the level of other investing activities and uses of cash. The forward-looking statements speak only as of the date of this press release and we undertake no obligation to update or revise any forward-looking statements as of a later date. For additional information identifying factors that may cause actual results to vary materially from those stated in forward-looking statements, see our reports on Forms 10-K, 10-Q and 8-K filed with the SEC from time to time, including, but not limited to, the information included in UTC's Forms 10-K and 10-Q under the headings “Business,” “Risk Factors,” “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Legal Proceedings” and in the notes to the financial statements included in UTC's Forms 10-K and 10-Q.

UTC-IR
# # #




United Technologies Corporation
Condensed Consolidated Statement of Operations
 
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
 
 
(Unaudited)
 
(Unaudited)
(Millions, except per share amounts)
2014
 
2013
 
2014
 
2013
Net Sales
$
16,168

 
$
15,462

 
$
48,104

 
$
45,867

Costs and Expenses:
 
 
 
 
 
 
 
 
Cost of products and services sold
11,466

 
11,020

 
35,087

 
33,037

 
Research and development
677

 
630

 
1,967

 
1,871

 
Selling, general and administrative
1,580

 
1,633

 
4,799

 
4,997

 
Total Costs and Expenses
13,723

 
13,283

 
41,853

 
39,905

Other income, net
301

 
187

 
948

 
917

Operating profit
2,746

 
2,366

 
7,199

 
6,879

 
Interest expense, net
186

 
226

 
617

 
679

Income from continuing operations before income taxes
2,560

 
2,140

 
6,582

 
6,200

 
Income tax expense
608

 
614

 
1,534

 
1,677

Income from continuing operations
1,952

 
1,526

 
5,048

 
4,523

 
Less: Noncontrolling interest in subsidiaries' earnings from continuing operations
98

 
111

 
301

 
286

Income from continuing operations attributable to common shareowners
1,854

 
1,415

 
4,747

 
4,237

Discontinued Operations:
 
 
 
 
 
 
 
 
Income from operations
—

 
—

 
—

 
63

 
Gain (loss) on disposal
—

 
10

 
—

 
(30
)
 
Income tax benefit (expense)
—

 
7

 
—

 
(12
)
Income from discontinued operations attributable to common shareowners
—


17


—


21

Net income attributable to common shareowners
$
1,854

 
$
1,432

 
$
4,747

 
$
4,258

Earnings Per Share of Common Stock - Basic:
 
 
 
 
 
 
 
 
From continuing operations attributable to common shareowners
$
2.07

 
$
1.57

 
$
5.28

 
$
4.70

 
From discontinued operations attributable to common shareowners
—

 
0.02

 
—

 
0.02

Earnings Per Share of Common Stock - Diluted:
 
 
 
 
 
 
 
 
From continuing operations attributable to common shareowners
$
2.04

 
$
1.55

 
$
5.20

 
$
4.64

 
From discontinued operations attributable to common shareowners
—

 
0.02

 
—

 
0.02

Weighted Average Number of Shares Outstanding:
 
 
 
 
 
 
 
 
Basic shares
898

 
901

 
899

 
901

 
Diluted shares
910

 
916

 
913

 
914

As described on the following pages, consolidated results for the quarters and nine months ended September 30, 2014 and 2013 include restructuring costs and non-recurring items that management believes should be considered when evaluating the underlying financial performance.
See accompanying Notes to Condensed Consolidated Financial Statements.




United Technologies Corporation
Segment Net Sales and Operating Profit
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
 
(Unaudited)
 
(Unaudited)
(Millions)
2014
 
2013
 
2014
 
2013
Net Sales
 
 
 
 
 
 
 
Otis
$
3,326

 
$
3,188

 
$
9,646

 
$
9,140

UTC Climate, Controls & Security
4,351

 
4,237

 
12,631

 
12,617

Pratt & Whitney
3,564

 
3,386

 
10,485

 
10,412

UTC Aerospace Systems
3,535

 
3,312

 
10,621

 
9,896

Sikorsky
1,620

 
1,541

 
5,365

 
4,356

Segment Sales
16,396

 
15,664

 
48,748

 
46,421

Eliminations and other
(228
)
 
(202
)
 
(644
)
 
(554
)
Consolidated Net Sales
$
16,168

 
$
15,462

 
$
48,104

 
$
45,867

 
 
 
 
 
 
 
 
Operating Profit
 
 
 
 
 
 
 
Otis
$
703

 
$
681

 
$
1,966

 
$
1,906

UTC Climate, Controls & Security
807

 
696

 
2,159

 
1,968

Pratt & Whitney
633

 
439

 
1,453

 
1,412

UTC Aerospace Systems
575

 
501

 
1,767

 
1,501

Sikorsky
152

 
159

 
(79
)
 
405

Segment Operating Profit
2,870

 
2,476

 
7,266

 
7,192

Eliminations and other
—

 
7

 
288

 
32

General corporate expenses
(124
)
 
(117
)
 
(355
)
 
(345
)
Consolidated Operating Profit
$
2,746

 
$
2,366

 
$
7,199

 
$
6,879

Segment Operating Profit Margin
 
 
 
 
 
 
 
Otis
21.1
%
 
21.4
%
 
20.4
 %
 
20.9
%
UTC Climate, Controls & Security
18.5
%
 
16.4
%
 
17.1
 %
 
15.6
%
Pratt & Whitney
17.8
%
 
13.0
%
 
13.9
 %
 
13.6
%
UTC Aerospace Systems
16.3
%
 
15.1
%
 
16.6
 %
 
15.2
%
Sikorsky
9.4
%
 
10.3
%
 
(1.5
)%
 
9.3
%
Segment Operating Profit Margin
17.5
%
 
15.8
%
 
14.9
 %
 
15.5
%

As described on the following pages, consolidated results for the quarters and nine months ended September 30, 2014 and 2013 include restructuring costs and non-recurring items that management believes should be considered when evaluating the underlying financial performance.




United Technologies Corporation
Restructuring Costs and Non-Recurring Items Included in Consolidated Results
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
 
(Unaudited)
 
(Unaudited)
In Millions - Income (Expense)
2014
 
2013
 
2014
 
2013
Non-Recurring items included in Net Sales:
 
 
 
 
 
 
 
Sikorsky
$
—

 
$
—

 
$
830

 
$
—

 
 
 
 
 
 
 
 
Restructuring Costs included in Operating Profit:
 
 
 
 
 
 
 
Otis
$
(15
)
 
$
(19
)
 
$
(53
)
 
$
(68
)
UTC Climate, Controls & Security
(14
)
 
(28
)
 
(82
)
 
(66
)
Pratt & Whitney
(8
)
 
(22
)
 
(55
)
 
(122
)
UTC Aerospace Systems
(26
)
 
(24
)
 
(36
)
 
(65
)
Sikorsky
—

 
(11
)
 
(17
)
 
(25
)
Eliminations and other
—

 
1

 
—

 
1

 
(63
)
 
(103
)
 
(243
)
 
(345
)
Non-Recurring items included in Operating Profit:
 
 
 
 
 
 
 
UTC Climate, Controls & Security
30

 
—

 
30

 
38

Pratt & Whitney
83

 
(25
)
 
1

 
168

Sikorsky
—

 
—

 
(466
)
 
—

Eliminations and other
—

 
—

 
220

 
—

 
113

 
(25
)
 
(215
)
 
206

Total impact on Consolidated Operating Profit
50

 
(128
)
 
(458
)
 
(139
)
Non-Recurring items included in Interest Expense, Net
23

 
—

 
44

 
36

Tax effect of restructuring and non-recurring items above
5

 
34

 
155

 
39

Non-Recurring items included in Income Tax Expense
118

 
24

 
371

 
141

Impact on Net Income from Continuing Operations Attributable to Common Shareowners
$
196

 
$
(70
)
 
$
112

 
$
77

Impact on Diluted Earnings Per Share from Continuing Operations
$
0.22

 
$
(0.08
)
 
$
0.12

 
$
0.08







Details of the non-recurring items for the quarters and nine months ended September 30, 2014 and 2013 above are as follows:
Quarter Ended September 30, 2014
UTC Climate, Controls & Security: Approximately $30 million net gain from UTC Climate, Controls & Security's ongoing portfolio transformation, primarily due to a gain on the sale of an interest in a joint venture in North America.
Pratt & Whitney: Approximately $83 million net gain, primarily as a result of fair value adjustments related to a business acquisition.
Interest Expense, Net: Approximately $23 million of favorable pre-tax interest adjustments, primarily related to the resolution of disputes with the Appeals Division of the IRS for the Company's 2006 - 2008 tax years.
Income Tax Expense: Approximately $118 million of favorable income tax adjustments, primarily related to the resolution of disputes with the Appeals Division of the IRS for the Company's 2006 - 2008 tax years.
Quarter Ended June 30, 2014
Pratt & Whitney:
•
Approximately $60 million charge to adjust the fair value of a Pratt & Whitney joint venture investment.
•
Approximately $22 million charge for impairment of assets related to a joint venture.
Sikorsky:
•
A cumulative adjustment to record $830 million in sales and $438 million in losses based upon the change in estimate required for the contractual amendments signed with the Canadian Government on the Maritime Helicopter program.
•
Approximately $28 million charge for the impairment of a Sikorsky joint venture investment.
Eliminations & Other: Approximately $220 million gain on an agreement with a state taxing authority for the monetization of tax credits.
Interest Expense, Net: Approximately $21 million of favorable pre-tax interest adjustments, primarily related to the conclusion of the IRS's examination of the Company's 2009 and 2010 tax years.
Income Tax Expense: Approximately $253 million of favorable income tax adjustments related to the conclusion of the IRS's examination of the Company's 2009 and 2010 tax years, as well as the settlement of state income taxes related to the disposition of the Hamilton Sundstrand Industrials businesses.
Quarter Ended September 30, 2013
Pratt & Whitney: Approximately $25 million charge to adjust the fair value of a Pratt & Whitney joint venture investment.
Income Tax Expense: Favorable tax benefit of approximately $24 million as a result of a U.K. tax rate reduction enacted in July 2013.
Quarter Ended June 30, 2013
Pratt & Whitney: Approximately $193 million gain from the sale of the Pratt & Whitney Power Systems business. This gain was not reclassified to "Discontinued Operations" due to our expected level of continuing involvement in the business post disposition.
Interest Expense, Net: Approximately $36 million of favorable pre-tax interest adjustments related to settlements for the Company's tax years prior to 2006, as well as the conclusion of certain IRS examinations of 2009 and 2010 tax years.
Income Tax Expense: Approximately $22 million of favorable income tax adjustments related to the conclusion of certain IRS examinations of 2009 and 2010 tax years.




Quarter Ended March 31, 2013
UTC Climate, Controls & Security: Approximately $38 million net gain from UTC Climate, Controls & Security's ongoing portfolio transformation, primarily due to a gain on the sale of a business in Hong Kong.
Income Tax Expense:  Approximately $95 million of favorable income tax adjustments as a result of the enactment of the American Taxpayer Relief Act of 2012 in January 2013. The $95 million is primarily related to the retroactive extension of the research and development credit to 2012.




United Technologies Corporation
Segment Net Sales and Operating Profit Adjusted for Restructuring Costs and Non-Recurring Items (as reflected on the previous pages)

 
Quarter Ended September 30,
 
Nine Months Ended September 30,
 
(Unaudited)
 
(Unaudited)
(Millions)
2014
 
2013
 
2014
 
2013
Net Sales
 
 
 
 
 
 
 
Otis
$
3,326

 
$
3,188

 
$
9,646

 
$
9,140

UTC Climate, Controls & Security
4,351

 
4,237

 
12,631

 
12,617

Pratt & Whitney
3,564

 
3,386

 
10,485

 
10,412

UTC Aerospace Systems
3,535

 
3,312

 
10,621

 
9,896

Sikorsky
1,620

 
1,541

 
4,535

 
4,356

Segment Sales
16,396

 
15,664

 
47,918

 
46,421

Eliminations and other
(228
)
 
(202
)
 
(644
)
 
(554
)
Consolidated Net Sales
$
16,168

 
$
15,462

 
$
47,274

 
$
45,867

 
 
 
 
 
 
 
 
Adjusted Operating Profit
 
 
 
 
 
 
 
Otis
$
718

 
$
700

 
$
2,019

 
$
1,974

UTC Climate, Controls & Security
791

 
724

 
2,211

 
1,996

Pratt & Whitney
558

 
486

 
1,507

 
1,366

UTC Aerospace Systems
601

 
525

 
1,803

 
1,566

Sikorsky
152

 
170

 
404

 
430

Segment Operating Profit
2,820

 
2,605

 
7,944

 
7,332

Eliminations and other
—

 
6

 
68

 
31

General corporate expenses
(124
)
 
(117
)
 
(355
)
 
(345
)
Adjusted Consolidated Operating Profit
$
2,696

 
$
2,494

 
$
7,657

 
$
7,018

Adjusted Segment Operating Profit Margin
 
 
 
 
 
 
 
Otis
21.6
%
 
22.0
%
 
20.9
%
 
21.6
%
UTC Climate, Controls & Security
18.2
%
 
17.1
%
 
17.5
%
 
15.8
%
Pratt & Whitney
15.7
%
 
14.4
%
 
14.4
%
 
13.1
%
UTC Aerospace Systems
17.0
%
 
15.9
%
 
17.0
%
 
15.8
%
Sikorsky
9.4
%
 
11.0
%
 
8.9
%
 
9.9
%
Adjusted Segment Operating Profit Margin
17.2
%
 
16.6
%
 
16.6
%
 
15.8
%





United Technologies Corporation
Condensed Consolidated Balance Sheet
 
September 30,
 
December 31,
 
2014
 
2013
(Millions)
(Unaudited)
 
(Unaudited)
Assets
 
 
 
Cash and cash equivalents
$
5,035

 
$
4,619

Accounts receivable, net
11,080

 
11,458

Inventories and contracts in progress, net
10,341

 
10,330

Other assets, current
2,955

 
3,035

Total Current Assets
29,411

 
29,442

Fixed assets, net
9,182

 
8,866

Goodwill
28,169

 
28,168

Intangible assets, net
15,684

 
15,521

Other assets
9,328

 
8,597

Total Assets
$
91,774

 
$
90,594

 
 
 
 
Liabilities and Equity
 
 
 
Short-term debt
$
2,141

 
$
500

Accounts payable
7,046

 
6,965

Accrued liabilities
14,721

 
15,335

Total Current Liabilities
23,908

 
22,800

Long-term debt
17,857

 
19,741

Other long-term liabilities
14,479

 
14,723

Total Liabilities
56,244

 
57,264

Redeemable noncontrolling interest
141

 
111

Shareowners' Equity:
 
 

Common Stock
15,069

 
14,638

Treasury Stock
(21,519
)
 
(20,431
)
Retained earnings
43,668

 
40,539

Accumulated other comprehensive loss
(3,169
)
 
(2,880
)
Total Shareowners' Equity
34,049

 
31,866

Noncontrolling interest
1,340

 
1,353

Total Equity
35,389

 
33,219

Total Liabilities and Equity
$
91,774

 
$
90,594

Debt Ratios:
 
 
 
Debt to total capitalization
36
%
 
38
%
Net debt to net capitalization
30
%
 
32
%

See accompanying Notes to Condensed Consolidated Financial Statements.




United Technologies Corporation
Condensed Consolidated Statement of Cash Flows
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
 
(Unaudited)
 
(Unaudited)
(Millions)
2014
 
2013
 
2014
 
2013
Operating Activities of Continuing Operations:
 
 
 
 
 
 
 
Income from continuing operations
$
1,952

 
$
1,526

 
$
5,048

 
$
4,523

Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities of continuing operations:
 
 
 
 
 
 
 
Depreciation and amortization
483

 
452

 
1,418

 
1,335

Deferred income tax provision
82

 
4

 
118

 
13

Stock compensation cost
85

 
83

 
203

 
216

Change in working capital
(398
)
 
(200
)
 
(1,396
)
 
(464
)
Global pension contributions
(60
)
 
(21
)
 
(204
)
 
(72
)
Other operating activities, net
(196
)
 
(301
)
 
(162
)
 
(660
)
Net cash flows provided by operating activities of continuing operations
1,948

 
1,543

 
5,025

 
4,891

Investing Activities of Continuing Operations:
 
 
 
 
 
 
 
Capital expenditures
(415
)
 
(383
)
 
(1,154
)
 
(1,047
)
Acquisitions and dispositions of businesses, net
(207
)
 
112

 
(134
)
 
1,345

Increase in collaboration intangible assets
(152
)
 
(247
)
 
(459
)
 
(547
)
Other investing activities, net
170

 
(190
)
 
271

 
(350
)
Net cash flows used in investing activities of continuing operations
(604
)
 
(708
)
 
(1,476
)
 
(599
)
Financing Activities of Continuing Operations:
 
 
 
 
 
 
 
Repayment of long-term debt, net
(50
)
 
(571
)
 
(222
)
 
(1,795
)
(Decrease) increase in short-term borrowings, net
(147
)
 
98

 
(128
)
 
(204
)
Dividends paid on Common Stock
(511
)
 
(465
)
 
(1,538
)
 
(1,395
)
Repurchase of Common Stock
(425
)
 
(330
)
 
(1,095
)
 
(1,000
)
Other financing activities, net
(97
)
 
30

 
(91
)
 
168

Net cash flows used in financing activities of continuing operations
(1,230
)
 
(1,238
)
 
(3,074
)
 
(4,226
)
Discontinued Operations:
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
—

 
91

 
—

 
(603
)
Net cash provided by investing activities
—

 
—

 
—

 
351

Net cash flows provided by (used in) discontinued operations
—

 
91

 
—

 
(252
)
Effect of foreign exchange rate changes on cash and cash equivalents
(41
)
 
24

 
(59
)
 
(29
)
Net increase (decrease) in cash and cash equivalents
73

 
(288
)
 
416

 
(215
)
Cash and cash equivalents, beginning of period
4,962

 
4,909

 
4,619

 
4,836

Cash and cash equivalents of continuing operations, end of period
$
5,035

 
$
4,621

 
$
5,035

 
$
4,621

 

See accompanying Notes to Condensed Consolidated Financial Statements.




United Technologies Corporation
Free Cash Flow Reconciliation
 
Quarter Ended September 30,
 
(Unaudited)
(Millions)
2014
 
2013
 
 
 
 
 
 
Net income from continuing operations attributable to common shareowners
$
1,854

 
 
$
1,415

 
Net cash flows provided by operating activities of continuing operations
$
1,948

 
 
$
1,543

 
Net cash flows provided by operating activities of continuing operations as a percentage of net income from continuing operations attributable to common shareowners
 
105
 %
 
 
109
 %
Capital expenditures
(415
)
 
 
(383
)
 
Capital expenditures as a percentage of net income from continuing operations attributable to common shareowners
 
(22
)%
 
 
(27
)%
Free cash flow from continuing operations
$
1,533

 
 
$
1,160

 
Free cash flow from continuing operations as a percentage of net income from continuing operations attributable to common shareowners
 
83
 %
 
 
82
 %
 
 
 
 
 
 
 
Nine Months Ended September 30,
 
(Unaudited)
(Millions)
2014
 
2013
 
 
 
 
 
 
Net income attributable to common shareowners from continuing operations
$
4,747

 
 
$
4,237

 
Net cash flows provided by operating activities of continuing operations
$
5,025

 
 
$
4,891

 
Net cash flows provided by operating activities of continuing operations as a percentage of net income attributable to common shareowners from continuing operations
 
106
 %
 
 
115
 %
Capital expenditures
(1,154
)
 
 
(1,047
)
 
Capital expenditures as a percentage of net income attributable to common shareowners from continuing operations
 
(24
)%
 
 
(25
)%
Free cash flow from continuing operations
$
3,871

 
 
$
3,844

 
Free cash flow from continuing operations as a percentage of net income attributable to common shareowners from continuing operations
 
82
 %
 
 
91
 %
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 sales 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.
(3)
Free cash flow, which represents cash flow from operations less capital expenditures, is the principal cash performance measure used by UTC. Management believes free cash flow provides a relevant measure of liquidity and a useful basis for assessing UTC's ability to fund its activities, including the financing of acquisitions, debt service, repurchases of UTC's common stock and distribution of earnings to shareholders. Other companies 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 shown above.