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): July 20, 2005
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 July 20, 2005, United Technologies Corporation issued a press release announcing its second quarter 2005 results.
The press release issued July 20, 2005 is furnished herewith as Exhibit No. 99.1 to this Report, and shall not be deemed filed for the purposes of Section 18 of the Exchange Act.
Section 9—Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits
| (c) | Exhibits. |
The following exhibit is included herewith:
| Exhibit Number |
Exhibit Description | |
| 99.1 | Press release, dated July 20, 2005, 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: July 20, 2005 |
By: | /s/ Gregory J. Hayes | ||
| Gregory J. Hayes | ||||
| Vice President, Accounting and Control | ||||
EXHIBIT INDEX
| Exhibit Number |
Exhibit Description |
Page | ||
| 99.1 | Press release, dated July 20, 2005, issued by United Technologies Corporation | 1 |
Exhibit 99.1
UTC REPORTS 17 PERCENT SECOND QUARTER EARNINGS PER SHARE INCREASE; RAISES
CASH FLOW EXPECTATIONS AND TIGHTENS 2005 EPS OUTLOOK TO HIGH END OF RANGE
HARTFORD, Conn., July 20, 2005 – United Technologies Corp. (NYSE:UTX) today reported second quarter 2005 earnings per share increased 17 percent to $0.95 compared with the year ago second quarter. Consolidated revenues increased 16 percent to $11.2 billion, including 6 percent organic growth and contributions from the Linde commercial refrigeration and Kidde acquisitions.
As anticipated, second quarter results include favorable income tax and interest income adjustments related principally to 1994-1999 U.S. federal tax audits and a non-cash investment gain on shares held in SNECMA. UTC recorded $70 million of restructuring costs in the quarter, and the net impact of these adjustments and costs contributed $0.09 to earnings per share. UTC expects second half costs for restructuring to equal or exceed this $0.09 per share net favorable impact. In the year ago second quarter, favorable items exceeded costs for restructuring by $0.07 per share on a split adjusted basis and were more than offset with additional restructuring costs in the second half.
“This is another strong quarter for UTC,” said Chairman and Chief Executive Officer George David. “We had solid revenue and double digit operating profit improvements in 5 of our 6 businesses. Carrier’s operating profit was down slightly in the quarter as a result of weaker North American and European residential HVAC markets and continued commodity cost pressures.”
“Following this solid quarter and first half, we’re tightening our earnings guidance and raising our cash outlook accordingly. Earnings per share should grow 14 to 16 percent in the range of $3.00-$3.07 for the year. Cash flow from operations less capital expenditures should equal net income, including voluntary cash pension contributions of $500 million. The businesses are in great shape,” David added.
Cash flow from operations of $1.188 billion in the quarter included $100 million in voluntary cash pension contributions and, after capital expenditures of $183 million, exceeded net income.
Share repurchase in the quarter was $260 million, and $375 million for the first half. UTC expects to repurchase approximately $1 billion of common stock for the year, similar to last year’s level and an increase from prior expectation of $600 million.
Year to date earnings per share increased 18 percent to $1.59 on revenue growth of 13 percent. Net income grew 19 percent to $1.6 billion. First half cash flow from operations of $2.0 billion includes $165 million in voluntary cash pension contributions and, after capital expenditures of $335 million, exceeded net income.
The accompanying tables include information integral to assessing the company’s financial position, operating performance and cash flow.
United Technologies Corp., based in Hartford, Connecticut, is a diversified company that provides a broad range of high technology products and support services to the building systems and aerospace industries.
This release is supplemented by presentation materials that are available on UTC’s website at www.utc.com, and includes “forward looking statements” concerning expected revenues, earnings, cash flow and other matters that are subject to risks and uncertainties. Important factors that could cause actual results to differ materially from those anticipated or implied in forward looking statements include the health of the global economy; strength of end market demand in building construction and in both the commercial and defense segments of the aerospace industry; fluctuation in commodity prices, interest rates, foreign currency exchange rates, and the impact of weather conditions; and company specific items including the availability and impact of acquisitions, the rate and ability to effectively integrate these acquired businesses, the ability to achieve cost reductions at planned levels, and the outcome of legal proceedings. 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 in the “Business” section of UTC’s Annual Report on Form 10-K, the information included in UTC’s 10-K and 10-Q Reports under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and the information included in Current Reports on Form 8-K.
# # #
United Technologies Corporation
Condensed Consolidated Statement of Operations
| Quarter Ended June 30, |
Six Months Ended June 30, (Unaudited) |
|||||||||||||||
| (Millions, except per share amounts)
|
2005 |
2004 |
2005 |
2004 |
||||||||||||
| Revenues |
$ | 11,152 | $ | 9,622 | $ | 20,559 | $ | 18,268 | ||||||||
| Cost and Expenses |
||||||||||||||||
| Cost of goods and services sold |
7,990 | 6,976 | 14,805 | 13,251 | ||||||||||||
| Research and development |
318 | 315 | 609 | 626 | ||||||||||||
| Selling, general and administrative |
1,355 | 1,114 | 2,568 | 2,254 | ||||||||||||
| Operating Profit |
1,489 | 1,217 | 2,577 | 2,137 | ||||||||||||
| Interest expense |
120 | 91 | 220 | 178 | ||||||||||||
| Income before income taxes and minority interests |
1,369 | 1,126 | 2,357 | 1,959 | ||||||||||||
| Income taxes |
(326 | ) | (248 | ) | (603 | ) | (478 | ) | ||||||||
| Minority interests |
(72 | ) | (61 | ) | (132 | ) | (113 | ) | ||||||||
| Net Income |
$ | 971 | $ | 817 | $ | 1,622 | $ | 1,368 | ||||||||
| Earnings Per Share of Common Stock |
||||||||||||||||
| Basic |
$ | .98 | $ | .82 | $ | 1.63 | $ | 1.37 | ||||||||
| Diluted |
$ | .95 | $ | .81 | $ | 1.59 | $ | 1.35 | ||||||||
| Average Shares |
||||||||||||||||
| Basic |
995 | 992 | 994 | 996 | ||||||||||||
| Diluted |
1,018 | 1,010 | 1,017 | 1,014 | ||||||||||||
As described on the following pages, consolidated results for the quarters and six months ended June 30, 2005 and 2004 include restructuring and related charges and non-recurring items.
United Technologies Corporation
Segment Revenues and Operating Profit
| Quarter Ended June 30, (Unaudited) |
Six Months Ended June 30, (Unaudited) |
|||||||||||||||
| (Millions)
|
2005 |
2004 |
2005 |
2004 |
||||||||||||
| Revenues |
||||||||||||||||
| Otis |
$ | 2,415 | $ | 2,193 | $ | 4,737 | $ | 4,295 | ||||||||
| Carrier |
3,413 | 3,018 | 6,118 | 5,248 | ||||||||||||
| UTC Fire & Security |
1,162 | 707 | 1,926 | 1,410 | ||||||||||||
| Pratt & Whitney |
2,273 | 2,080 | 4,286 | 4,019 | ||||||||||||
| Hamilton Sundstrand |
1,126 | 935 | 2,154 | 1,861 | ||||||||||||
| Sikorsky |
704 | 623 | 1,309 | 1,183 | ||||||||||||
| Segment Revenues |
11,093 | 9,556 | 20,530 | 18,016 | ||||||||||||
| Eliminations and other |
59 | 66 | 29 | 252 | ||||||||||||
| Consolidated Revenues |
$ | 11,152 | $ | 9,622 | $ | 20,559 | $ | 18,268 | ||||||||
| Operating Profit |
||||||||||||||||
| Otis |
$ | 422 | $ | 342 | $ | 844 | $ | 644 | ||||||||
| Carrier |
393 | 354 | 545 | 416 | ||||||||||||
| UTC Fire & Security |
53 | 32 | 92 | 63 | ||||||||||||
| Pratt & Whitney |
368 | 295 | 708 | 501 | ||||||||||||
| Hamilton Sundstrand |
170 | 140 | 322 | 271 | ||||||||||||
| Sikorsky |
63 | 50 | 116 | 96 | ||||||||||||
| Segment Operating Profit |
1,469 | 1,213 | 2,627 | 1,991 | ||||||||||||
| Eliminations and other |
102 | 74 | 113 | 291 | ||||||||||||
| General corporate expenses |
(82 | ) | (70 | ) | (163 | ) | (145 | ) | ||||||||
| Consolidated Operating Profit |
$ | 1,489 | $ | 1,217 | $ | 2,577 | $ | 2,137 | ||||||||
As described on the following pages, consolidated results for the quarters and six months ended June 30, 2005 and 2004 include restructuring and related charges and non-recurring items.
United Technologies Corporation
Consolidated Operating Profit
Consolidated operating profit for the quarters and six months ended June 30, 2005 and 2004 includes restructuring and related charges as follows:
| Quarter Ended June 30, |
Six Months Ended June 30, | |||||||||||
| 2005 |
2004 |
2005 |
2004 | |||||||||
| Restructuring and Related Charges |
||||||||||||
| Otis |
$ | 18 | $ | 38 | $ | 23 | $ | 106 | ||||
| Carrier |
25 | 71 | 50 | 184 | ||||||||
| UTC Fire & Security |
1 | — | 2 | — | ||||||||
| Pratt & Whitney |
2 | 23 | 12 | 74 | ||||||||
| Hamilton Sundstrand |
17 | 10 | 26 | 30 | ||||||||
| Sikorsky |
3 | 7 | 3 | 8 | ||||||||
| Segment Operating Profit |
66 | 149 | 116 | 402 | ||||||||
| Eliminations and other |
4 | 7 | 4 | 13 | ||||||||
| General corporate expenses |
— | — | — | — | ||||||||
| Consolidated Operating Profit |
$ | 70 | $ | 156 | $ | 120 | $ | 415 | ||||
Consolidated results for the quarters and six months ended June 30, 2005 and 2004 include the following non-recurring items:
2005
Q2
| • | Eliminations and Other: Approximately $75 million non-cash gain on shares held in Snecma, a French aerospace company, upon its merger with SAGEM. Approximately $45 million interest income related to 1994-1999 U.S. federal tax audits. |
| • | Income Taxes: Net favorable income tax adjustment of approximately $60 million, principally related to 1994-1999 U.S. federal tax audits. The tax impact of Hamilton Sundstrand’s divestiture of its Falk business was substantially offset by the tax benefit arising from the sale of a non-core Carrier refrigeration business. Neither transaction significantly impacted pre-tax earnings. |
In the second quarter, the net impact of the above favorable items ($0.14 per share), together with $70 million of pre-tax restructuring and related charges ($0.05 per share), contributed $0.09 to earnings per share.
Q1
| • | Eliminations and Other: Approximately $30 million gain from the sale of a portion of the shares held in Snecma. |
2004
Q2
| • | Eliminations and Other: Approximately $125 million interest income related to settlement of 1986-1993 U.S. federal tax audits. |
| • | Income Taxes: Favorable income tax adjustment of approximately $80 million, related to settlement of 1986-1993 U.S. federal tax audits. |
In the second quarter, the net impact of the above favorable items, together with $156 million of pre-tax restructuring and related charges, contributed $0.07 to earnings per share on a post-split basis.
Q1
| • | Eliminations and Other: $250 million gain following a payment from DaimlerChrysler in consideration for the Corporation’s release of certain commitments made by DaimlerChrysler in support of MTU Aero Engines GmbH. |
United Technologies Corporation
Condensed Consolidated Balance Sheet
| (Millions) | June 30, 2005 |
December 31, 2004 |
||||||
| (Unaudited) | (Audited) | |||||||
| Assets | ||||||||
| Cash and cash equivalents |
$ | 1,985 | $ | 2,265 | ||||
| Accounts receivable, net |
7,374 | 6,315 | ||||||
| Inventories and contracts in progress, net |
5,874 | 5,078 | ||||||
| Other current assets |
2,062 | 2,012 | ||||||
| Total Current Assets |
17,295 | 15,670 | ||||||
| Fixed assets, net |
5,187 | 5,231 | ||||||
| Goodwill, net |
12,263 | 10,111 | ||||||
| Intangible assets, net |
3,000 | 2,016 | ||||||
| Other assets |
7,046 | 7,413 | ||||||
| Total Assets |
$ | 44,791 | $ | 40,441 | ||||
| Liabilities and Shareowners’ Equity | ||||||||
| Short-term debt |
$ | 598 | $ | 1,360 | ||||
| Accounts payable |
3,975 | 3,490 | ||||||
| Accrued liabilities |
9,614 | 8,245 | ||||||
| Total Current Liabilities |
14,187 | 13,095 | ||||||
| Long-term debt |
6,615 | 4,231 | ||||||
| Other liabilities |
7,793 | 7,939 | ||||||
| Minority interest in subsidiary companies |
922 | 910 | ||||||
| Total Liabilities |
29,517 | 26,175 | ||||||
| Shareowners’ Equity: |
||||||||
| Common Stock |
8,282 | 7,850 | ||||||
| Treasury Stock |
(6,616 | ) | (6,312 | ) | ||||
| Retained Earnings |
15,057 | 13,880 | ||||||
| Accumulated other non-shareowners’ changes in equity |
(1,449 | ) | (1,152 | ) | ||||
| 15,274 | 14,266 | |||||||
| Total Liabilities and Shareowners’ Equity |
$ | 44,791 | $ | 40,441 | ||||
| Debt Ratios: |
||||||||
| Debt to total capitalization |
32 | % | 28 | % | ||||
| Net debt to net capitalization |
25 | % | 19 | % | ||||
United Technologies Corporation
Condensed Statement of Cash Flows
| Quarter Ended June 30, (Unaudited) |
Six Months Ended June 30, (Unaudited) |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Operating Activities |
||||||||||||||||
| Net Income |
$ | 971 | $ | 817 | $ | 1,622 | $ | 1,368 | ||||||||
| Adjustments to reconcile net income to net cash flows provided by operating activities: |
||||||||||||||||
| Depreciation and amortization |
237 | 252 | 463 | 514 | ||||||||||||
| Deferred income taxes and minority interest |
156 | 142 | 254 | 197 | ||||||||||||
| Stock compensation cost |
36 | 33 | 71 | 76 | ||||||||||||
| Changes in working capital |
(122 | ) | (363 | ) | (226 | ) | (73 | ) | ||||||||
| Voluntary contributions to pension plans |
(100 | ) | (50 | ) | (165 | ) | (358 | ) | ||||||||
| Other, net |
10 | 263 | 15 | 130 | ||||||||||||
| Net Cash Provided by Operating Activities |
1,188 | 1,094 | 2,034 | 1,854 | ||||||||||||
| Investing Activities |
||||||||||||||||
| Capital expenditures |
(183 | ) | (148 | ) | (335 | ) | (271 | ) | ||||||||
| Acquisitions and disposal of businesses, net |
(2,241 | ) | (162 | ) | (2,361 | ) | (203 | ) | ||||||||
| Other, net |
(128 | ) | (35 | ) | (30 | ) | 33 | |||||||||
| Net Cash Used in Investing Activities |
(2,552 | ) | (345 | ) | (2,726 | ) | (441 | ) | ||||||||
| Financing Activities |
||||||||||||||||
| Increase (decrease) in borrowings, net |
1,805 | (20 | ) | 1,070 | (301 | ) | ||||||||||
| Dividends paid on Common Stock |
(209 | ) | (165 | ) | (417 | ) | (331 | ) | ||||||||
| Repurchase of Common Stock |
(260 | ) | (264 | ) | (375 | ) | (480 | ) | ||||||||
| Other, net |
75 | 4 | 157 | 108 | ||||||||||||
| Net Cash Provided (Used) in Financing Activities |
1,411 | (445 | ) | 435 | (1,004 | ) | ||||||||||
| Effect of foreign exchange rates |
(25 | ) | (17 | ) | (23 | ) | (14 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents |
22 | 287 | (280 | ) | 395 | |||||||||||
| Cash and cash equivalents - beginning of period |
1,963 | 1,731 | 2,265 | 1,623 | ||||||||||||
| Cash and cash equivalents - end of period |
$ | 1,985 | $ | 2,018 | $ | 1,985 | $ | 2,018 | ||||||||
United Technologies Corporation
Notes to Condensed Consolidated Financial Statements
| (1) | UTC adopted Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), “Share-Based Payment”, (SFAS 123(R)) as of January 1, 2005 using the modified retrospective method described in the standard. This standard requires the cost of stock options to be measured at fair value and recognized in the statement of operations on the grant date. In accordance with the standard all periods prior to January 1, 2005 were restated to reflect the impact of the standard as if it had been adopted on January 1, 1995, the original effective date of SFAS No. 123. |
| (2) | Certain reclassifications have been made to prior year amounts to conform to current year presentation. |
| (3) | 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. |
| (4) | Organic growth represents the total reported revenue 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 revenues that are not included in organic growth in 2005 include approximately $45 million of interest income related to 1994 – 1999 U.S. federal tax audits and approximately $105 million investment gain (approximately $30 million recorded in the first quarter). Non-recurring revenues that were not included in organic growth in 2004 include the $125 million of interest income in connection with the second quarter tax settlement and the first quarter gain of $250 million associated with the payment from DaimlerChrysler. |