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 20, 2010
UNITED TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 1-812 | 06-0570975 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
One Financial Plaza
Hartford, Connecticut 06103
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code
(860) 728-7000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 2—Financial Information
| Item 2.02. | Results of Operations and Financial Condition. |
On October 20, 2010, United Technologies Corporation issued a press release announcing its third quarter 2010 results.
The press release issued October 20, 2010 is furnished herewith as Exhibit No. 99 to this Report, and shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Section 9—Financial Statements and Exhibits
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
The following exhibits are included herewith:
| Exhibit |
Exhibit Description | |
| 99 | Press release, dated October 20, 2010, 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 20, 2010 | By: | /S/ GREGORY J. HAYES | ||
| Gregory J. Hayes | ||||
| Senior Vice President and Chief Financial Officer | ||||
EXHIBIT INDEX
| Exhibit |
Exhibit Description | |
| 99 | Press release, dated October 20, 2010, issued by United Technologies Corporation. | |
Exhibit 99
UTC REPORTS THIRD QUARTER EPS GROWTH OF 14 PERCENT,
EXPECTS 2010 EPS OF $4.70, UP 14 PERCENT, AND
INCREASES EXPECTED 2010 NET RESTRUCTURING BY $100 MILLION
HARTFORD, Conn., October 20, 2010 – United Technologies Corp. (NYSE:UTX) today reported third quarter 2010 earnings per share of $1.30 and net income attributable to common shareowners of $1.2 billion, up 14 percent and 13 percent, respectively, over the year ago third quarter. Results for the current and prior year quarters included net charges for restructuring and one time items of $0.09 and $0.13 per share, respectively. Before these charges, earnings per share increased 9 percent year over year. Currency hedges at Pratt & Whitney Canada, net of foreign exchange translation, contributed $0.02 to the earnings per share increase.
Revenues of $13.5 billion for the quarter were 1 percent above prior year with 3 points of organic growth and 1 point of adverse foreign currency translation. Segment operating margin at 16.1 percent was 160 basis points higher than prior year. Adjusted for restructuring and one time items, segment operating margin of 16.3 percent was 90 basis points higher than prior year. Cash flow from operations was $1.7 billion and, after capital expenditures of $177 million, substantially exceeded net income attributable to common shareowners.
“UTC’s results this quarter reflect solid operating leverage with strong conversion on organic revenue growth,” said Louis Chênevert, UTC Chairman & Chief Executive Officer. “Sustained and structural cost reduction actions drove record segment operating margin, while we increased our investment in new game changing technologies. Cash generation continued to be exceptional, and we made additional contributions of $350 million to our domestic pension plans.
“Based on the strong year to date performance, we are raising 2010 earnings per share guidance to $4.70, the high end of our prior range of $4.60 to $4.70, while increasing restructuring, net of one time items, by $100 million,” Chênevert added. “As expected, commercial aerospace aftermarket orders have rebounded nicely but the commercial construction markets remain weak. Additional restructuring will further position us for solid earnings growth in the years ahead.”
New equipment orders at Otis were down 1 percent over the year ago third quarter. Commercial HVAC new equipment orders at Carrier grew 3 percent including unfavorable foreign exchange of 1 point. Commercial spares orders at Pratt & Whitney’s large engine business grew 35 percent and at Hamilton Sundstrand were up 13 percent over the year ago third quarter.
“We expect 2010 earnings per share will grow 14 percent over 2009 on revenues of $54 billion, up 2 percent,” Chênevert continued. “We now expect full year cash flow from operations less capital expenditures to exceed 100 percent of net income attributable to common shareowners. UTC’s leadership team remains focused on maximizing the potential of our world class franchises and achieving industry leading margins in all of our operating segments.”
Share repurchase was $494 million in the quarter and $1.6 billion year to date. Acquisition spend was $183 million in the quarter and $2.6 billion year to date. For the year, UTC expects that share repurchase and acquisition spend will be at least $2 billion and around $3 billion, respectively.
United Technologies Corp., based in Hartford, Connecticut, is a diversified company providing high technology products and services to the building and aerospace industries. Additional information, including a webcast, is available on the Internet at http://www.utc.com.
This release includes “forward looking statements” concerning expected revenue, earnings, cash flow, share repurchases, restructuring; anticipated benefits of UTC’s diversification, cost reduction efforts and business model; and other matters that are subject to risks and uncertainties. These statements often contain words such as “expect”, “anticipate”, “plan”, “estimate”, “believe”, “will”, “should”, “see”, “guidance” and similar terms. Important uncertainties that could cause actual results to differ materially from those anticipated or implied in forward looking statements include the severity and duration of global recessionary conditions, including limited availability of credit; the impact of volatility and deterioration in financial markets on overall levels of economic activity; declines in end market demand in construction and in both the commercial and defense segments of the aerospace industry; fluctuation in foreign currency exchange rates, commodity prices, interest rates, and the impact of weather conditions; and company specific items including the impact of further deterioration or extended weakness in global economic conditions on demand for our products and services, the financial strength of customers and suppliers and on levels of air travel; financial difficulties, including bankruptcy, of commercial airlines; the availability and impact of acquisitions; the
rate and ability to effectively integrate these acquired businesses; the ability to achieve cost reductions at planned levels; challenges in the design, development, production and support of advanced technologies and new products and services; delays and disruption in delivery of materials and services from suppliers; labor disputes; and the outcome of legal proceedings. The level of share repurchase may vary depending on the level of other investing activities. For information identifying other important economic, political, regulatory, legal, technological, competitive and other uncertainties, see UTC’s SEC filings as submitted from time to time, including but not limited to, the information included in UTC’s 10-K and 10-Q Reports under the headings “Business”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Cautionary Note Concerning Factors that May Affect Future Results”, as well as the information included in UTC’s Current Reports on Form 8-K.
UTC-IR
# # #
United Technologies Corporation
Condensed Consolidated Statement of Operations
| Quarter Ended September 30, (Unaudited) |
Nine Months
Ended September 30, (Unaudited) |
|||||||||||||||
| (Millions, except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| Revenues |
$ | 13,527 | $ | 13,375 | $ | 39,508 | $ | 38,820 | ||||||||
| Costs and Expenses: |
||||||||||||||||
| Cost of products and services sold |
9,667 | 9,836 | 28,414 | 28,544 | ||||||||||||
| Research and development |
433 | 344 | 1,289 | 1,137 | ||||||||||||
| Selling, general and administrative |
1,478 | 1,424 | 4,393 | 4,481 | ||||||||||||
| Operating Profit |
1,949 | 1,771 | 5,412 | 4,658 | ||||||||||||
| Interest expense |
182 | 170 | 560 | 522 | ||||||||||||
| Income before income taxes |
1,767 | 1,601 | 4,852 | 4,136 | ||||||||||||
| Income tax expense |
468 | 456 | 1,394 | 1,126 | ||||||||||||
| Net income |
1,299 | 1,145 | 3,458 | 3,010 | ||||||||||||
| Less: Noncontrolling interest in subsidiaries’ earnings |
101 | 87 | 284 | 254 | ||||||||||||
| Net income attributable to common shareowners |
$ | 1,198 | $ | 1,058 | $ | 3,174 | $ | 2,756 | ||||||||
| Earnings Per Share of Common Stock: |
||||||||||||||||
| Basic |
$ | 1.32 | $ | 1.15 | $ | 3.49 | $ | 3.00 | ||||||||
| Diluted |
$ | 1.30 | $ | 1.14 | $ | 3.43 | $ | 2.97 | ||||||||
| Weighted average number of shares outstanding: |
||||||||||||||||
| Basic shares |
906 | 917 | 910 | 918 | ||||||||||||
| Diluted shares |
919 | 929 | 925 | 928 | ||||||||||||
As described on the following pages, consolidated results for the quarters and nine months ended September 30, 2010 and 2009 include non-recurring items, restructuring and other costs.
See accompanying Notes to Condensed Consolidated Financial Statements.
United Technologies Corporation
Segment Revenues and Operating Profit
| Quarter
Ended September 30, (Unaudited) |
Nine Months
Ended September 30, (Unaudited) |
|||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| Revenues |
||||||||||||||||
| Otis |
$ | 2,914 | $ | 2,962 | $ | 8,483 | $ | 8,579 | ||||||||
| Carrier |
2,964 | 3,007 | 8,528 | 8,594 | ||||||||||||
| UTC Fire & Security |
1,657 | 1,383 | 4,695 | 3,999 | ||||||||||||
| Pratt & Whitney |
3,250 | 3,031 | 9,440 | 9,322 | ||||||||||||
| Hamilton Sundstrand |
1,419 | 1,400 | 4,147 | 4,183 | ||||||||||||
| Sikorsky |
1,548 | 1,648 | 4,605 | 4,371 | ||||||||||||
| Segment Revenues |
13,752 | 13,431 | 39,898 | 39,048 | ||||||||||||
| Eliminations and other |
(225 | ) | (56 | ) | (390 | ) | (228 | ) | ||||||||
| Consolidated Revenues |
$ | 13,527 | $ | 13,375 | $ | 39,508 | $ | 38,820 | ||||||||
| Operating Profit |
||||||||||||||||
| Otis |
$ | 678 | $ | 633 | $ | 1,915 | $ | 1,770 | ||||||||
| Carrier |
380 | 312 | 852 | 594 | ||||||||||||
| UTC Fire & Security |
187 | 149 | 478 | 297 | ||||||||||||
| Pratt & Whitney |
547 | 444 | 1,505 | 1,347 | ||||||||||||
| Hamilton Sundstrand |
255 | 247 | 680 | 626 | ||||||||||||
| Sikorsky |
163 | 157 | 477 | 406 | ||||||||||||
| Segment Operating Profit |
2,210 | 1,942 | 5,907 | 5,040 | ||||||||||||
| Eliminations and other |
(178 | ) | (98 | ) | (242 | ) | (142 | ) | ||||||||
| General corporate expenses |
(83 | ) | (73 | ) | (253 | ) | (240 | ) | ||||||||
| Consolidated Operating Profit |
$ | 1,949 | $ | 1,771 | $ | 5,412 | $ | 4,658 | ||||||||
| Segment Operating Profit Margin |
||||||||||||||||
| Otis |
23.3 | % | 21.4 | % | 22.6 | % | 20.6 | % | ||||||||
| Carrier |
12.8 | % | 10.4 | % | 10.0 | % | 6.9 | % | ||||||||
| UTC Fire & Security |
11.3 | % | 10.8 | % | 10.2 | % | 7.4 | % | ||||||||
| Pratt & Whitney |
16.8 | % | 14.6 | % | 15.9 | % | 14.4 | % | ||||||||
| Hamilton Sundstrand |
18.0 | % | 17.6 | % | 16.4 | % | 15.0 | % | ||||||||
| Sikorsky |
10.5 | % | 9.5 | % | 10.4 | % | 9.3 | % | ||||||||
| Segment Operating Profit Margin |
16.1 | % | 14.5 | % | 14.8 | % | 12.9 | % | ||||||||
As described on the following pages, consolidated results for the quarters and nine months ended September 30, 2010 and 2009 include non-recurring items, restructuring and other costs.
United Technologies Corporation
Restructuring and Other Costs
Consolidated operating profit for the quarters and nine months ended September 30, 2010 and 2009 includes restructuring and other costs as follows:
| Quarter
Ended September 30, (Unaudited) |
Nine Months Ended September 30, (Unaudited) |
|||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Otis |
$ | 12 | $ | 52 | $ | 40 | $ | 131 | ||||||||
| Carrier1 |
(1 | ) | 43 | 32 | 139 | |||||||||||
| UTC Fire & Security |
24 | 7 | 53 | 107 | ||||||||||||
| Pratt & Whitney2 |
13 | 57 | 48 | 177 | ||||||||||||
| Hamilton Sundstrand |
2 | 13 | 11 | 69 | ||||||||||||
| Sikorsky |
7 | — | 14 | 7 | ||||||||||||
| Eliminations and other3 |
1 | 59 | 12 | 62 | ||||||||||||
| General corporate expenses |
— | — | — | 3 | ||||||||||||
| Total Restructuring and Other Costs1 |
$ | 58 | $ | 231 | $ | 210 | $ | 695 | ||||||||
| 1 | Approximately $1 million, $4 million and $12 million of the total amount of restructuring and other costs incurred in the quarters ended March 31, 2010, September 30, 2009 and June 30, 2009, respectively, resides in other income, net which is reflected within revenues. |
| 2 | Restructuring and other costs recorded in the quarter ended September 30, 2009 at Pratt & Whitney primarily reflect reserves established in connection with Pratt’s announced plans to close its Connecticut Airfoil Repair Operations facility in East Hartford, Connecticut and its engine overhaul facility in Cheshire, Connecticut. |
| 3 | Total restructuring and other costs within Eliminations and other incurred in the quarters and nine months ended September 30, 2010 and 2009 primarily reflects the impact of curtailments of our domestic pension plans. |
Non-Recurring Items
Consolidated results for the quarters and nine months ended September 30, 2010 and 2009 include the following non-recurring items:
Q3-2010
Carrier: Approximately $24 million net gain resulting from dispositions associated with Carrier’s ongoing portfolio transformation.
Eliminations and other: Approximately $159 million other-than-temporary impairment charge of our equity investment in Clipper Windpower Plc, a California-based wind turbine manufacturer.
Income tax expense: Approximately $102 million favorable net tax benefit associated with management’s intention to repatriate additional foreign cash to the U.S. in 2010.
Q2-2010
Carrier: Approximately $47 million net charge resulting from dispositions associated with Carrier’s ongoing portfolio transformation. Included in this net charge is an approximately $58 million asset impairment charge associated with the expected disposition of a business, partially offset by an approximately $11 million gain on the sale of another business.
Hamilton Sundstrand: Approximately $28 million of asset impairment charges. These charges relate primarily to the expected disposition of an aerospace business as part of Hamilton Sundstrand’s ongoing low cost sourcing initiatives.
Eliminations and other: Favorable pretax interest adjustment of approximately $24 million associated with the resolution of an uncertain temporary tax item in the quarter.
Q3-2009
Carrier: Approximately $57 million gain recognized from the contribution of the majority of Carrier’s U.S. residential sales and distribution business into a new venture formed with Watsco, Inc.
Eliminations and other: Approximately $17 million of favorable pretax interest adjustments related to global tax examination activity in the quarter, primarily reflecting the completion of our review of the 2004 to 2005 Internal Revenue Service (IRS) audit report.
Income tax expense: Favorable income tax adjustments of approximately $38 million based on global examination activity in the quarter, including completion of our review of the 2004 to 2005 IRS audit report.
Income tax expense: Approximately $32 million adverse tax impact associated with a foreign reorganization.
Q2-2009
Otis: Approximately $52 million non-cash, non-taxable gain recognized on the remeasurement to fair value of a previously held equity interest in a joint venture resulting from the purchase of a controlling interest.
Q1-2009
Income tax expense: Favorable tax impact of approximately $25 million related to the formation of a commercial venture.
The following page provides segment revenues, operating profits and operating profit margins as adjusted for restructuring and other costs, and the aforementioned non-recurring items. Management believes these adjusted results more accurately portray the ongoing operational performance and fundamentals of the underlying businesses. The amount and timing of restructuring and other costs and non-recurring activity can vary substantially from period to period with no assurances of comparable activity or amounts being incurred in future periods. The amount of restructuring and other costs in 2009 was significantly in excess of that incurred in prior years as well as the levels expected to be incurred in 2010 and reflected the severity of the global recession. These amounts have therefore been adjusted out in the following schedule in order to provide a more representative comparison of current year operating performance to prior year performance.
United Technologies Corporation
Segment Revenues and Operating Profit Adjusted for Restructuring and Other Costs and Non-Recurring Items (as reflected on the previous page)
| Quarter
Ended September 30, (Unaudited) |
Nine Months
Ended September 30, (Unaudited) |
|||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| Adjusted Revenues |
||||||||||||||||
| Otis |
$ | 2,914 | $ | 2,962 | $ | 8,483 | $ | 8,527 | ||||||||
| Carrier |
2,940 | 2,954 | 8,494 | 8,553 | ||||||||||||
| UTC Fire & Security |
1,657 | 1,383 | 4,695 | 3,999 | ||||||||||||
| Pratt & Whitney |
3,250 | 3,031 | 9,440 | 9,322 | ||||||||||||
| Hamilton Sundstrand |
1,419 | 1,400 | 4,147 | 4,183 | ||||||||||||
| Sikorsky |
1,548 | 1,648 | 4,605 | 4,371 | ||||||||||||
| Adjusted Segment Revenues |
13,728 | 13,378 | 39,864 | 38,955 | ||||||||||||
| Eliminations and other |
(66 | ) | (73 | ) | (255 | ) | (245 | ) | ||||||||
| Adjusted Consolidated Revenues |
$ | 13,662 | $ | 13,305 | $ | 39,609 | $ | 38,710 | ||||||||
| Adjusted Operating Profit |
||||||||||||||||
| Otis |
$ | 690 | $ | 685 | $ | 1,955 | $ | 1,849 | ||||||||
| Carrier |
355 | 298 | 907 | 676 | ||||||||||||
| UTC Fire & Security |
211 | 156 | 531 | 404 | ||||||||||||
| Pratt & Whitney |
560 | 501 | 1,553 | 1,524 | ||||||||||||
| Hamilton Sundstrand |
257 | 260 | 719 | 695 | ||||||||||||
| Sikorsky |
170 | 157 | 491 | 413 | ||||||||||||
| Adjusted Segment Operating Profit |
2,243 | 2,057 | 6,156 | 5,561 | ||||||||||||
| Eliminations and other |
(18 | ) | (56 | ) | (95 | ) | (97 | ) | ||||||||
| General corporate expenses |
(83 | ) | (73 | ) | (253 | ) | (237 | ) | ||||||||
| Adjusted Consolidated Operating Profit |
$ | 2,142 | $ | 1,928 | $ | 5,808 | $ | 5,227 | ||||||||
| Adjusted Segment Operating Profit Margin |
||||||||||||||||
| Otis |
23.7 | % | 23.1 | % | 23.0 | % | 21.7 | % | ||||||||
| Carrier |
12.1 | % | 10.1 | % | 10.7 | % | 7.9 | % | ||||||||
| UTC Fire & Security |
12.7 | % | 11.3 | % | 11.3 | % | 10.1 | % | ||||||||
| Pratt & Whitney |
17.2 | % | 16.5 | % | 16.5 | % | 16.3 | % | ||||||||
| Hamilton Sundstrand |
18.1 | % | 18.6 | % | 17.3 | % | 16.6 | % | ||||||||
| Sikorsky |
11.0 | % | 9.5 | % | 10.7 | % | 9.4 | % | ||||||||
| Adjusted Segment Operating Profit Margin |
16.3 | % | 15.4 | % | 15.4 | % | 14.3 | % | ||||||||
United Technologies Corporation
Condensed Consolidated Balance Sheet
| (Millions) | September
30, 2010 (Unaudited) |
December
31, 2009 (Unaudited) |
||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ | 5,731 | $ | 4,449 | ||||
| Accounts receivable, net |
8,731 | 8,469 | ||||||
| Inventories and contracts in progress, net |
8,430 | 7,509 | ||||||
| Other assets, current |
2,445 | 2,767 | ||||||
| Total Current Assets |
25,337 | 23,194 | ||||||
| Fixed assets, net |
6,148 | 6,364 | ||||||
| Goodwill |
17,422 | 16,298 | ||||||
| Intangible assets, net |
4,070 | 3,538 | ||||||
| Other assets |
7,672 | 6,368 | ||||||
| Total Assets |
$ | 60,649 | $ | 55,762 | ||||
| Liabilities and Equity |
||||||||
| Short-term debt |
$ | 2,231 | $ | 1,487 | ||||
| Accounts payable |
4,964 | 4,634 | ||||||
| Accrued liabilities |
12,425 | 11,792 | ||||||
| Total Current Liabilities |
19,620 | 17,913 | ||||||
| Long-term debt |
10,071 | 8,257 | ||||||
| Other long-term liabilities |
8,387 | 8,204 | ||||||
| Total Liabilities |
38,078 | 34,374 | ||||||
| Redeemable noncontrolling interest |
318 | 389 | ||||||
| Shareowners’ Equity: |
||||||||
| Common Stock |
12,147 | 11,565 | ||||||
| Treasury Stock |
(16,920 | ) | (15,408 | ) | ||||
| Retained earnings |
29,384 | 27,396 | ||||||
| Accumulated other comprehensive loss |
(3,357 | ) | (3,487 | ) | ||||
| Total Shareowners’ Equity |
21,254 | 20,066 | ||||||
| Noncontrolling interest |
999 | 933 | ||||||
| Total Equity |
22,253 | 20,999 | ||||||
| Total Liabilities and Equity |
$ | 60,649 | $ | 55,762 | ||||
| Debt Ratios: |
||||||||
| Debt to total capitalization |
36 | % | 32 | % | ||||
| Net debt to net capitalization |
23 | % | 20 | % | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
United Technologies Corporation
Condensed Consolidated Statement of Cash Flows
| Quarter
Ended September 30, (Unaudited) |
Nine Months
Ended September 30, (Unaudited) |
|||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Operating Activities: |
||||||||||||||||
| Net income attributable to common shareowners |
$ | 1,198 | $ | 1,058 | $ | 3,174 | $ | 2,756 | ||||||||
| Noncontrolling interest in subsidiaries’ earnings |
101 | 87 | 284 | 254 | ||||||||||||
| Net income |
1,299 | 1,145 | 3,458 | 3,010 | ||||||||||||
| Adjustments to reconcile net income to net cash flows provided by operating activities: |
||||||||||||||||
| Depreciation and amortization |
342 | 316 | 1,008 | 925 | ||||||||||||
| Deferred income tax (benefit) provision |
(251 | ) | 13 | (123 | ) | 36 | ||||||||||
| Stock compensation cost |
24 | 32 | 112 | 110 | ||||||||||||
| Change in working capital |
428 | 480 | 31 | 284 | ||||||||||||
| Global pension contributions * |
(438 | ) | (182 | ) | (699 | ) | (633 | ) | ||||||||
| Other operating activities, net |
272 | 49 | 443 | 146 | ||||||||||||
| Net cash flows provided by operating activities |
1,676 | 1,853 | 4,230 | 3,878 | ||||||||||||
| Investing Activities: |
||||||||||||||||
| Capital expenditures |
(177 | ) | (161 | ) | (479 | ) | (501 | ) | ||||||||
| Acquisitions and dispositions of businesses, net |
(115 | ) | (297 | ) | (2,351 | ) | (450 | ) | ||||||||
| Other investing activities, net |
(35 | ) | 254 | 144 | 220 | |||||||||||
| Net cash flows used in investing activities |
(327 | ) | (204 | ) | (2,686 | ) | (731 | ) | ||||||||
| Financing Activities: |
||||||||||||||||
| Increase (decrease) in borrowings, net |
212 | (409 | ) | 2,492 | (1,037 | ) | ||||||||||
| Dividends paid on Common Stock |
(370 | ) | (339 | ) | (1,114 | ) | (1,018 | ) | ||||||||
| Repurchase of Common Stock |
(494 | ) | (430 | ) | (1,644 | ) | (780 | ) | ||||||||
| Other financing activities, net |
(61 | ) | 55 | (42 | ) | (73 | ) | |||||||||
| Net cash flows used in financing activities |
(713 | ) | (1,123 | ) | (308 | ) | (2,908 | ) | ||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents |
98 | 90 | 46 | 66 | ||||||||||||
| Net increase in cash and cash equivalents |
734 | 616 | 1,282 | 305 | ||||||||||||
| Cash and cash equivalents, beginning of period |
4,997 | 4,016 | 4,449 | 4,327 | ||||||||||||
| Cash and cash equivalents, end of period |
$ | 5,731 | $ | 4,632 | $ | 5,731 | $ | 4,632 | ||||||||
| * | Non-cash activities include contributions of UTC Common Stock of $250 million to domestic defined benefit pension plans in the second quarter of 2010. |
See accompanying Notes to Condensed Consolidated Financial Statements.
United Technologies Corporation
Free Cash Flow Reconciliation
| Quarter Ended September 30, (Unaudited) |
||||||||||||||||
| (Millions) | 2010 | 2009 | ||||||||||||||
| Net income attributable to common shareowners |
$ | 1,198 | $ | 1,058 | ||||||||||||
| Noncontrolling interest in subsidiaries’ earnings |
101 | 87 | ||||||||||||||
| Net income |
1,299 | 1,145 | ||||||||||||||
| Depreciation and amortization |
342 | 316 | ||||||||||||||
| Change in working capital |
428 | 480 | ||||||||||||||
| Other operating activities, net |
(393 | ) | (88 | ) | ||||||||||||
| Net cash flows provided by operating activities |
1,676 | 1,853 | ||||||||||||||
| Net cash flows provided by operating activities as a percentage of net income attributable to common shareowners |
140 | % | 175 | % | ||||||||||||
| Capital expenditures |
(177 | ) | (161 | ) | ||||||||||||
| Capital expenditures as a percentage of net income attributable to common shareowners |
(15 | ) % | (15 | ) % | ||||||||||||
| Free cash flow |
$ | 1,499 | $ | 1,692 | ||||||||||||
| Free cash flow as a percentage of net income attributable to common shareowners |
125 | % | 160 | % | ||||||||||||
| Nine Months Ended
September 30, (Unaudited) |
||||||||||||||||
| (Millions) | 2010 | 2009 | ||||||||||||||
| Net income attributable to common shareowners |
$ | 3,174 | $ | 2,756 | ||||||||||||
| Noncontrolling interest in subsidiaries’ earnings |
284 | 254 | ||||||||||||||
| Net income |
3,458 | 3,010 | ||||||||||||||
| Depreciation and amortization |
1,008 | 925 | ||||||||||||||
| Change in working capital |
31 | 284 | ||||||||||||||
| Other operating activities, net |
(267 | ) | (341 | ) | ||||||||||||
| Net cash flows provided by operating activities |
4,230 | 3,878 | ||||||||||||||
| Net cash flows provided by operating activities as a percentage of net income attributable to common shareowners |
133 | % | 141 | % | ||||||||||||
| Capital expenditures |
(479 | ) | (501 | ) | ||||||||||||
| Capital expenditures as a percentage of net income attributable to common shareowners |
(15 | ) % | (18 | ) % | ||||||||||||
| Free cash flow |
$ | 3,751 | $ | 3,377 | ||||||||||||
| Free cash flow as a percentage of net income attributable to common shareowners |
118 | % | 123 | % | ||||||||||||
Free cash flow, which represents cash flow from operations less capital expenditures, is the principal cash performance measure used by the Corporation. Management believes free cash flow provides a relevant measure of liquidity and a useful basis for assessing the Corporation’s ability to fund its activities, including the financing of acquisitions, debt service, repurchases of the Corporation’s Common Stock and distribution of earnings to shareholders. Others that use the term free cash flow may calculate it differently. The reconciliation of net cash flow provided by operating activities, prepared in accordance with Generally Accepted Accounting Principles, to free cash flow is above.
United Technologies Corporation
Notes to Condensed Consolidated Financial Statements
| (1) | Debt to total capitalization equals total debt divided by total debt plus equity. Net debt to net capitalization equals total debt less cash and cash equivalents divided by total debt plus equity less cash and cash equivalents. |
| (2) | Organic revenue growth represents the total reported increase within the Corporation’s ongoing businesses less the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and significant non-recurring items. Non-recurring items that are not included within organic revenue growth in 2010 include an approximately $24 million net gain resulting from dispositions associated with Carrier’s ongoing portfolio transformation, an approximately $159 million other-than-temporary impairment charge of our equity investment in Clipper Windpower Plc, a California-based wind turbine manufacturer, an approximately $11 million gain on the sale of a business associated with Carrier’s ongoing portfolio transformation and a favorable pretax interest adjustment of approximately $24 million associated with the resolution of an uncertain temporary tax item. Non-recurring items that are not included in organic revenue growth in 2009 include an approximately $57 million gain recognized from the contribution of the majority of Carrier’s U.S. residential sales and distribution business into a new venture formed with Watsco, Inc., approximately $52 million related to a non-cash, non-taxable gain recognized on the remeasurement to fair value of a previously held equity interest in a joint venture as a result of the purchase of a controlling interest and approximately $17 million of favorable pretax interest adjustments related to global tax examination activity, primarily reflecting the completion of our review of the 2004 to 2005 Internal Revenue Service (IRS) audit report. |