SEC Filing

View:



                              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 September 30, 1998



                                  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  06101

                            (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 September 30, 1998 there were 225,826,780 shares of Common Stock outstanding.


                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES

              CONTENTS OF QUARTERLY REPORT ON FORM 10-Q

                   Quarter Ended September 30, 1998



                                                               Page

Part I - Financial Information

  Item 1. Financial Statements:

     Condensed Consolidated Statement of                         1
       Operations for the quarters ended                         
       September 30, 1998 and 1997
     Condensed Consolidated Statement of                         2
       Operations for the nine months ended                      
       September 30, 1998 and 1997
     Condensed Consolidated Balance Sheet at                     3
       September 30, 1998 and December 31, 1997                  
     Condensed Consolidated Statement of Cash                    4
       Flows for the nine months ended September                 
       30, 1998 and 1997
     Notes to Condensed Consolidated Financial                   5
       Statements
     Report of Independent Accountants                           8

  Item 2. Management's Discussion and Analysis of                9
     Results of Operations and Financial Position                

Part II - Other Information

  Item 1. Legal Proceedings                                     17

  Item 6. Exhibits and Reports on Form 8-K                      17

Signatures                                                      18

Exhibit Index
  1
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES

            CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                             (Unaudited)

                                                                 Quarter Ended
                                                                 September 30,
In Millions of Dollars (except per share amounts)             1998           1997
                                                                
Revenues:
   Product sales                                       $      5,082   $      4,675
   Service sales                                              1,358          1,261
   Financing revenues and other income, net                     (18)            43
                                                              6,422          5,979
Costs and expenses:
   Cost of products sold                                      3,949          3,717
   Cost of services sold                                        846            766
   Research and development                                     324            268
   Selling, general and administrative                          719            690
   Interest                                                      49             49
                                                              5,887          5,490
Income before income taxes and minority interests               535            489
   Income taxes                                                 171            159
   Minority interests                                            16             30
Net Income                                             $        348   $        300

Earnings per share of common stock:
   Basic                                               $       1.50   $       1.25
   Diluted                                             $       1.41   $       1.18
Dividends per share of common stock                    $        .36   $       0.31

Average number of shares outstanding (in thousands)
   Basic                                                    227,103        234,323
   Diluted                                                  246,435        253,883



See accompanying Notes to Condensed Consolidated Financial Statements
  2
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES

            CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                             (Unaudited)

                                                               Nine Months Ended
                                                                 September 30,
In Millions of Dollars (except per share amounts)             1998           1997
                                                                
Revenues:
   Product sales                                       $     15,140   $     14,466
   Service sales                                              4,004          3,788
   Financing revenues and other income, net                      54            142
                                                             19,198         18,396
Costs and expenses:
   Cost of products sold                                     11,867         11,558
   Cost of services sold                                      2,518          2,349
   Research and development                                     952            855
   Selling, general and administrative                        2,200          2,119
   Interest                                                     145            146
                                                             17,682         17,027
Income before income taxes and minority interests             1,516          1,369
   Income taxes                                                 484            445
   Minority interests                                            64             96
Net Income                                             $        968   $        828

Earnings per share of common stock:
   Basic                                               $       4.13   $       3.41
   Diluted                                             $       3.89   $       3.23
Dividends per share of common stock                    $       1.03   $       0.93

Average number of shares outstanding (in thousands):
   Basic                                                    228,506        235,789
   Diluted                                                  248,076        254,986


See accompanying Notes to Condensed Consolidated Financial Statements
  3
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

                                                                
                                                        September 30,   December 31,
In Millions of Dollars                                       1998           1997
                                                         (Unaudited)

                                Assets

                                                                
Cash and cash equivalents                              $        663   $        755
Accounts receivable, net                                      4,351          3,789
Inventories and contracts in progress, net                    3,110          3,173
Future income tax benefits                                    1,385          1,111
Other current assets                                            193            420
   Total Current Assets                                       9,702          9,248

Fixed assets                                                 10,897         10,655
   Less - accumulated depreciation                           (6,689)        (6,393)
                                                              4,208          4,262

Goodwill                                                      1,731            983
Other assets                                                  2,647          2,226

   Total Assets                                        $     18,288   $     16,719
   
                 Liabilities and Shareowners' Equity

                                                                
Short-term borrowings                                  $        400   $        217
Accounts payable                                              2,026          1,978
Accrued liabilities                                           5,563          4,993
Long-term debt currently due                                    100            123
   Total Current Liabilities                                  8,089          7,311

Long-term debt                                                1,605          1,275
Future pension and postretirement benefit obligations         1,294          1,267
Other long-term liabilities                                   2,468          2,343

Series A ESOP Convertible Preferred Stock                       844            865
ESOP deferred compensation                                     (389)          (415)
                                                                455            450
Shareowners' Equity:
   Common Stock                                               2,647          2,488
   Treasury Stock                                            (2,970)        (2,472)
   Retained earnings                                          5,229          4,558
   Accumulated other non-shareowner changes in
     equity                                                    (529)          (501)
                                                              4,377          4,073

 Total Liabilities and Shareowners' Equity             $     18,288   $     16,719

See accompanying Notes to Condensed Consolidated Financial Statements
  4
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES




            CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                             (Unaudited)

                                                               Nine Months Ended
                                                                 September 30,
In Millions of Dollars                                        1998           1997
                                                                
Operating activities:
   Net income                                          $        968   $        828
   Adjustments to reconcile net income to net cash
    flows provided by operating activities:
    Depreciation and amortization                               644            632
    Deferred income tax benefit                                (271)          (293)
    Change in:
     Accounts receivable                                       (372)           (65)
     Inventories and contracts in progress                      187             64
     Accounts payable and accrued liabilities                   574             92
     Other current assets                                       195            150
    Other, net                                                    8            222
     Net cash flows provided by operating                     1,933          1,630
       activities
Investing activities:
   Capital expenditures                                        (552)          (522)
   Acquisitions of business units                            (1,117)          (269)
   Dispositions of business units                                 -             37
   (Increase) decrease in customer financing
    assets, net                                                (183)            18
   Other, net                                                    49            142
     Net cash flows used in investing activities             (1,803)          (594)
Financing activities:
   Issuance of long-term debt                                   402             10
   Repayments of long-term debt                                 (99)           (79)
   Increase (decrease) in short-term borrowings, net            182            (49)
   Dividends paid on Common Stock                              (235)          (219)
   Common Stock repurchase                                     (502)          (539)
   Other, net                                                    36             25
     Net cash flows used in financing activities               (216)          (851)
Effect of foreign exchange rate changes on Cash and
  cash equivalents                                               (6)           (29)

     Net (decrease) increase in Cash and cash
       equivalents                                              (92)           156
Cash and cash equivalents, beginning of year                    755          1,127
Cash and cash equivalents, end of period               $        663   $      1,283




See accompanying Notes to Condensed Consolidated Financial Statements
  5
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES


         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             (Unaudited)

  The Condensed Consolidated Financial Statements at September 30, 1998 and for
the quarters and nine-month periods ended September 30, 1998 and 1997 are
unaudited, but in the opinion of the Corporation include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results for the interim periods.  Certain reclassifications
have been made to prior year amounts to conform to the current year
presentation.

  Beginning in the first quarter of 1998, the Corporation's financial
statements reflect the adoption of  Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income."  The Statement requires disclosure of
total non-shareowner changes in equity in interim periods and additional
disclosures of the components of non-shareowner changes in equity on an annual
basis.  Total non-shareowner changes in equity includes all changes in equity
during a period except those resulting from investments by and distributions to
shareowners.  The specific components include: net income, deferred gains and
losses resulting from foreign currency translation and minimum pension liability
adjustments.  Total non-shareowner changes in equity were $367 million and $940
million in the third quarter and nine-month period of 1998, compared to $262
million and $678 million in the same periods of 1997.

  In June of 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" which is effective beginning January 1, 2000.  The
Corporation is evaluating the impact of the new requirement.  Management does
not expect the application to have a material impact on the Corporation's
financial position, results of operations or cash flows.

  In 1997, the Emerging Issues Task Force (EITF) issued EITF 96-16,
"Investor's Accounting for an Investee When the Investor Has a Majority of the
Voting Interest but the Minority Shareholder or Shareholders Have Certain
Approval or Veto Rights".  The Corporation will adopt this new requirement, for
all existing ventures involving minority shareholders, in the full year 1998
financial statements. Adoption of this requirement will not have an impact on
the Corporation's consolidated net assets or net income.  However,
deconsolidation of certain entities will impact consolidated revenues,
expenses and cash flows.

Issuance of Long-term Debt

  In August of 1998, the Corporation issued $400 million of 6.7%
unsubordinated, unsecured, nonconvertible notes (the "Notes") under a shelf
registration statement previously filed with the Securities and Exchange
Commission.  The Notes are due August 1, 2028, with interest payable
semiannually commencing February 1, 1999. The Notes are not redeemable at the
option of the Corporation or repayable at the option of the holder prior to
maturity, and do not provide for any sinking fund payments.  Proceeds from this
issuance were used for general corporate purposes, including acquisitions and
repurchases of the Corporation's common stock. At September 30, 1998, up to $471
million of additional medium-term and long-term debt could be issued under this
registration statement.
  6
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES


Contingent Liabilities

  While there has been no significant change in the Corporation's material
contingencies during 1998, the matters previously described in Note 14 of the
Notes to Consolidated Financial Statements in the Corporation's Annual Report,
incorporated by reference in the Corporation's Annual Report on Form 10-K for
calendar year 1997, are summarized below.

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.  Where no amount within a range of estimates is
more likely, the minimum is accrued.  Otherwise, 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.  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.

  The Corporation has had insurance in force over its history with a number of
insurance companies and has commenced litigation seeking indemnity and defense
under these insurance policies in relation to its environmental liabilities.
The litigation is expected to last several years.  Environmental liabilities are
not reduced by potential insurance reimbursements.

  As discussed above, the Corporation has accrued for the costs of
environmental remediation activities and periodically reassesses these amounts.
Management believes that losses materially in excess of amounts accrued are not
reasonably possible.

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, the Corporation or
one of its business units 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.
  7
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES

Other

  The Corporation extends performance and operating cost guarantees, which are
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 its liability 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 adverse effect upon either results of
operations, cash flows or financial position of the Corporation.

Earnings Per Share
                             Quarter Ended          Nine Months Ended
                             September 30,            September 30,
In Millions of Dollars
 (except per share          1998        1997         1998        1997
 amounts)
[S]                                             [C]          [C]
Net Income             $      348   $     300   $      968   $     828
ESOP Stock dividends           (8)         (8)         (24)        (24)

Basic earnings                340         292          944         804

ESOP Stock adjustment           7           7           20          20

Diluted earnings       $      347   $     299   $      964   $     824

Average shares
 (thousands):
Basic                     227,103     234,323      228,506     235,789

Stock awards                5,680       6,279        5,970       6,030
ESOP Stock                 13,652      13,281       13,600      13,167

Diluted                   246,435     253,883      248,076     254,986

Basic earnings per     $     1.50   $    1.25   $     4.13   $    3.41
 share

Diluted earnings per   $     1.41   $    1.18   $     3.89   $    3.23
 share
  8
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES

  With respect to the unaudited condensed consolidated financial information of
United Technologies Corporation for the quarters and nine-month periods ended
September 30, 1998 and 1997, 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 October 21, 1998 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 the 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 consolidated subsidiaries for
the quarters and nine months ended September 30, 1998 and 1997, the condensed
consolidated statement of cash flows for the nine months ended September 30,
1998 and 1997, and the condensed consolidated balance sheet as of September 30,
1998.  This financial information is the responsibility of the company'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 generally accepted auditing standards, 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 financial information for it to be in
conformity with generally accepted accounting principles.

  We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1997, 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 22, 1998 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, 1997,
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.



PricewaterhouseCoopers LLP
Hartford, Connecticut
October 21, 1998
  9
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             RESULTS OF OPERATIONS AND FINANCIAL POSITION


                         BUSINESS ENVIRONMENT

  The Corporation's operations are classified into five principal business
segments.  Otis, Carrier and UT Automotive subsidiaries serve customers in the
commercial property, residential housing and automotive industries.  Pratt &
Whitney and the Flight Systems segment, which includes Sikorsky Aircraft and
Hamilton Standard, serve commercial and government customers in the aerospace
industry.  As worldwide businesses, these operations are affected by global and
regional economic factors.  However, the diversity of the Corporation's
businesses and global market presence has helped limit the impact of any one
industry or the economy of any single country on the consolidated results.

  The Asian economic crisis has significantly slowed growth in the region since
the latter part of 1997.  Tightening of credit in Asia has restricted available
financing for new construction and slowed the completion of projects currently
underway, resulting in less activity compared to recent years.  While
recognizing that the Asian economic downturn will likely continue beyond 1998,
management believes the long-term economic growth prospects of the region remain
intact.  Therefore, the Corporation's Asian investment strategy continues to
focus on the long-term infrastructure requirements of the region.

  Worldwide airline profits, traffic growth and load factors have been a
reliable indicator for new aircraft and after-market orders.  U.S. and European
airlines are experiencing continued profitability driven primarily by traffic
growth, low fuel prices and the effect of cost reduction programs.  Airlines in
the Asia Pacific region have suffered declines in operating results reflecting
weaker local economies.  This erosion in earnings has resulted in a decrease in
new orders for aerospace products and cancelations or deferrals of existing
orders throughout the industry.

The defense portion of the Corporation's aerospace businesses continues to
respond to a changing global political environment.  The U.S. defense industry
continues to downsize and consolidate in response to continued pressure on U.S.
defense spending.
  10
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES


                        RESULTS OF OPERATIONS

  Consolidated revenues and margin percentages were as follows:


                             Quarter Ended          Nine Months Ended
                             September 30,            September 30,
In Millions of Dollars      1998        1997         1998        1997
                                                 
Sales                  $    6,440   $   5,936   $   19,144   $  18,254
Financing revenues and
 other income, net            (18)         43           54         142
Revenues               $    6,422   $   5,979   $   19,198   $  18,396

Gross margin %               25.5%       24.5%        24.9%       23.8%



  Consolidated revenues for the third quarter and nine-month period of 1998
increased 7% and 4% over the same periods of 1997.  Excluding the unfavorable
impact of foreign currency translation, revenues would have increased 9% and 6%
in the third quarter and nine-month period of 1998 compared to the same periods
of 1997, driven by growth at Carrier and Pratt & Whitney.

  Financing revenues and other income, net, decreased $61 million and $88
million in the third quarter and nine-month period of 1998 from the same periods
of 1997.  These results reflect costs of Pratt & Whitney's repurchases of
participant interests in commercial engine programs in 1998.  The year-to-date
results also include the favorable settlement of a contract dispute with the
U.S. Government, which occurred in the first quarter of 1998.

  Gross margin as a percentage of sales increased one percentage point in the
third quarter and 1.1 percentage points in the nine-month period of 1998
compared to the same periods of 1997, primarily due to improvements at Pratt &
Whitney and UT Automotive.

  Research and development expenses increased $56 million (21%) and $97 million
(11%) in the third quarter and nine-month period of 1998 compared to 1997.  The
increases in the third quarter and nine-month period are primarily due to
increases at Pratt & Whitney and UT Automotive.  As a percentage of sales,
research and development was 5% in both the third quarter and nine-month period
of 1998 compared to 4.5% and 4.7% in the third quarter and nine-month period of
1997.

  Selling, general and administrative expenses increased $29 million (4%) and
$81 million (4%) in the third quarter and nine-month period of 1998 over the
same periods of 1997 primarily due to increases at Carrier, largely due to
acquisitions, Pratt & Whitney and UT Automotive.  However, these expenses
decreased as a percentage of sales to 11.2% and 11.5% in the third quarter and
nine-month period of 1998 from 11.6% in both the third quarter and nine-month
period of 1997.

  The effective tax rate for the nine-month period of 1998 was 31.9%, compared
to 32.5% for the nine-month period of 1997.  The Corporation has continued to
lower its effective income tax rate by implementing tax reduction strategies.

  Minority interest expense decreased $14 million (47%) and $32 million (33%)
in the third quarter and nine-month period of 1998 compared to 1997, due to the
level of the Corporation's earnings in less than wholly owned subsidiaries,
principally in Asia, and recent purchases of minority shareholder interests.
  11

                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES


  Revenues and operating profits of the Corporation's principal business
segments for the quarters and nine-month periods ended September 30, 1998 and
1997 are as follows (in millions of dollars):


                                                             Operating
                           Revenues      Operating Profits Profit Margin
                         1998     1997     1998     1997    1998   1997
                                                
Quarter Ended
September 30,
  Otis                $  1,375 $  1,342 $   147  $   131   10.7%   9.8%
  Carrier                1,788    1,513     189      157   10.6%  10.4%
  UT Automotive            646      659      37       42    5.7%   6.4%
  Pratt & Whitney        2,009    1,838     232      208   11.5%  11.3%
  Flight Systems           654      655      73       73   11.2%  11.1%

Nine Months Ended
September 30,
  Otis                $  4,034 $  4,107 $   385  $   395    9.5%   9.6%
  Carrier                5,164    4,591     402      394    7.8%   8.6%
  UT Automotive          2,131    2,182     131      106    6.1%   4.9%
  Pratt & Whitney        5,899    5,501     773      600   13.1%  10.9%
  Flight Systems         2,086    2,075     211      214   10.1%  10.3%



  Otis revenues increased 2% in the third quarter and decreased 2% in the nine-
month period of 1998 compared to 1997.  Excluding the unfavorable impact of
foreign currency translation, revenues would have increased 6% and 3% in the
third quarter and nine-month period of 1998, with increases in Europe, North
America and Latin America, due to higher new equipment sales, partially offset
by declines in Asia.

  Otis operating profits increased $16 million (12%) in the third quarter while
decreasing $10 million (3%) in the nine-month period of 1998 compared to 1997.
The increase in the third quarter of 1998 reflects improvements in Europe, North
America and Latin America, partially offset by declines in Asia.  Foreign
currency translation did not have a significant impact on third quarter
operating profit.  Excluding the unfavorable impact of foreign currency
translation, operating profit would have been flat in the nine-month period of
1998. The 1998 year-to-date results include charges in the first quarter related
to salaried workforce reductions and the consolidation of manufacturing and
engineering facilities.  Excluding these charges, 1998 year-to-date operating
profits increased.

  Carrier revenues increased 18% and 12% in the third quarter and nine-month
period of 1998 compared to 1997.  Excluding the unfavorable impact of foreign
currency translation, revenues would have increased 21% and 16% in the third
quarter and nine-month period of 1998, due to the impact of acquisitions and
improvements in the commercial refrigeration operations, North America, Latin
America and Europe, partially offset by declines in Asia.

  Carrier operating profits increased $32 million (20%) and $8 million (2%) in
the third quarter and nine-month period of 1998 compared to 1997.  The 1998
third quarter results reflect improvement in the commercial refrigeration
operations, North America, Latin America and Europe and the impact of
acquisitions, partially offset by declines in Asia.  Foreign currency
  12
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES

translation did not have a significant impact on third quarter operating profit.
The 1998 year-to-date results include charges in the first quarter related to
workforce reductions, plant closures and implementation of a new manufacturing
strategy in the rotary chiller business.  Excluding the unfavorable impact of
foreign currency translation, 1998 year-to-date operating profits would have
increased 5%.

  UT Automotive revenues decreased 2% in the third quarter and nine-month
period of 1998 compared to 1997 due to a strike at General Motors Corporation
and lower volumes in the electrical systems business, partially offset by
improvement in Europe.

  UT Automotive operating profits decreased $5 million (12%) in the third
quarter while increasing $25 million (24%) in the nine-month period of 1998
compared to 1997.  The third quarter results reflect a decline due to a strike
at General Motors Corporation, partially offset by improvement in the interiors
business and in Europe. The 1997 year-to-date results include charges related to
administrative workforce reductions and a provision for a plant closure.

  Pratt & Whitney revenues increased 9% and 7% in the third quarter and nine-
month period of 1998 compared to 1997.  The 1998 third quarter increase reflects
higher after-market revenues, resulting primarily from acquisitions, as well as,
increased U.S. Government development revenues and commercial engine shipments.
The nine-month results also reflect strong after-market volumes and the
favorable settlement of a contract dispute with the U.S. Government which
occurred in the first quarter of 1998.

  Pratt & Whitney operating profits increased $24 million (12%) and $173
million (29%) in the third quarter and nine-month period of 1998 compared to
1997.  Third quarter results reflect improved commercial engine margins,
partially offset by higher research and development expenses and charges related
to workforce reduction efforts in Canada.  The nine-month results also reflect
strong after-market volumes and the favorable settlement of a contract dispute
with the U.S. Government, which occurred in the first quarter of 1998.

  Flight Systems revenues were flat in the third quarter and nine-month period
of 1998 compared to 1997, primarily due to increased revenues at Hamilton
Standard, which were favorably impacted by the first quarter 1998 acquisition of
a French aerospace components manufacturer, offset by lower volumes at Sikorsky.

  Flight Systems operating profits were essentially flat in the third quarter
and nine-month period of 1998 compared to 1997.  The third quarter results
include improvements at Hamilton Standard, which were favorably impacted by the
first quarter 1998 acquisition of a French aerospace components manufacturer
offset by declines at Sikorsky.  In the nine-month period of 1998, declines at
Sikorsky were largely offset by improvement at Hamilton Standard.
  13
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES


                   FINANCIAL POSITION AND LIQUIDITY

  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, acquisitions,
customer financing requirements, common stock repurchases, adequate bank lines
of credit and financial flexibility to attract long-term capital on satisfactory
terms.

  Set forth below is selected key cash flow data:


                                                   Nine Months Ended
                                                     September 30,
In Millions of Dollars                             1998          1997
                                                     
Operating Activities
  Net cash flows provided                    $     1,933   $     1,630
  by operating activities                 

Investing Activities
  Capital expenditures                              (552)         (522)
  Acquisitions of business units                  (1,117)         (269)
  Dispositions of business units                       -            37
  (Increase) decrease in customer financing         (183)           18
  assets, net

Financing Activities
  Common Stock repurchase                           (502)         (539)
  Increase (Decrease) in total debt                  490          (104)
  Increase (Decrease) in net debt                    582          (260)



  Cash flows provided by operating activities were $1,933 million during the
first nine months of 1998 compared to $1,630 million for the first nine months
of 1997.  The increase resulted from improved operating and working capital
performance.

  Cash flows used in investing activities were a use of funds of $1,803 million
during the first nine months of 1998 compared to a use of $594 million in the
first nine months of 1997.  Capital expenditures in the nine-month period of
1998 were $552 million, a $30 million increase from the corresponding period of
1997.  The Corporation invested $1,117 million in the acquisition of businesses,
including Pratt & Whitney's investment in an overhaul and repair joint venture
in Singapore, Hamilton Standard's acquisition of a French aerospace components
manufacturer, Carrier's investment in a United States based distributor of HVAC
equipment and Otis' purchase of the outstanding minority shares of a European
subsidiary.  Customer financing activity was a net use of cash of $183 million
in the nine-month period of 1998, compared to a net source of cash of $18
million in 1997, primarily as a result of first quarter 1998 funding for an
airline customer.  While the Corporation expects 1998 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's total commitments to finance or arrange financing of commercial
aircraft and related equipment at September 30, 1998 were approximately $1.1
billion.

  As described in the Notes to the Condensed Consolidated Financial Statements,
the Corporation issued $00 million of unsubordinated, unsecured, noncovertible
notes.  The proceeds were used for general corporate purposes, including
acquisitions and repurchases of the Corporation's common stock.  At 
  14
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES


September 30, 1998, up to $471 million of additional medium-term and
long-term debt could be issued under a registration statement on file with the
Securities and Exchange Commission.

  The Corporation repurchased $502 million of Common Stock, representing 5.7
million shares, in the first nine months of 1998 under previously announced
share repurchase programs. Share repurchase continues to be a significant use of
the Corporation's strong cash flows and has more than offset the dilutive effect
resulting from the issuance of stock under stock-based employee benefit
programs.  On October 8, 1998, the Corporation's Board of Directors authorized
the acquisition of an additional 15 million shares under the Corporation's share
repurchase program.

  Other selected financial data is as follows:


                                 September 30, December 31, September 30,
In Millions of Dollars               1998          1997         1997
                                                   
Cash and cash equivalents        $      663   $      755    $    1,283
Total debt                            2,105        1,615         1,681
Net debt (total debt less cash)       1,442          860           398
Shareowners' equity                   4,377        4,073         4,298
Debt-to-total capitalization             32%          28%          28%
Net debt-to-total capitalization         25%          17%           8%



  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.  Management anticipates the level of debt-to-capital
will increase during the remainder of the year in order to satisfy its various
cash flow requirements, including acquisition spending and continued share
repurchases.


Year 2000

  The Corporation has developed a project plan to address the impact of the
Year 2000 on its internal systems, products and facilities, as well as, its key
suppliers and customers.  The project has strong executive sponsorship and is
being reviewed by an independent third party. The project consists of the
following phases: awareness, assessment, remediation, testing and contingency
planning.

  The Corporation has substantially completed the awareness phase and is in the
process of completing the assessment phase, with respect to its internal
systems, products and facilities.  The assessment phase is expected to be
substantially completed by December 1998. The Corporation is in the process of
of carrying out  the remediation and testing phases, which are expected to be
substantially completed by September 1999.

  The Corporation has been assessing its Year 2000 risks related to significant
relationships with third parties via ongoing communication with its critical
suppliers and customers.  As part of the process, the Corporation has requested
written assurances from these suppliers and customers that they have Year 2000
readiness programs in place, as well as an affirmation that they will be 

  15
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES


compliant when necessary.   Responses to these inquiries are currently being
gathered and reviewed.  Further analysis, including site visits, will be
conducted as necessary.  Activities related to third parties are scheduled to be
completed by September 1999.  Despite these efforts, the Corporation can provide
no assurance that supplier and customer Year 2000 compliance plans will be
successfully completed in a timely manner.

  The Corporation is taking  steps to prevent major interruptions in the
business due to Year 2000 problems using both internal and external resources to
identify and correct Year 2000 problems and to test for Year 2000 readiness.
The estimated external costs of the project, including equipment costs and
consultant and software licensing fees, are expected to be approximately $140
million. Internal costs, which are primarily payroll related, are expected to be
approximately $55 million. These costs are being funded through operating cash
flows with amounts that would normally be budgeted for the Corporation's
information systems and production and facilities equipment.  As of 
September 30, 1998, total costs of external and internal resources incurred
amounted to approximately $55 million and relate primarily to internal systems,
products and facilities.  Although the Corporation has been working on its Year
2000 readiness efforts for several years, costs incurred prior to 1997 have not
been separately tracked and are generally not included in the estimate of total
costs.

  The schedule for completion and the estimated associated costs are based on
management's estimates, which include assumptions of future events.  There can
be no assurance that the Corporation, its suppliers and customers will be fully
Year 2000 compliant by January 1, 2000.  The Corporation therefore could be
adversely impacted by such things as loss of revenue, production delays, product
failures, lack of third party readiness and other business interruptions.
Accordingly, the Corporation has begun developing contingency plans to address
potential issues which include, among other actions, development of backup
procedures and identification of alternate suppliers.  The ultimate effects on
the Corporation or its suppliers or customers of not being fully Year 2000
compliant is not reasonably estimable.  However, the Corporation believes its
Year 2000 remediation efforts together with the diverse nature of its businesses
help reduce the potential impact of non-compliance to levels which will not have
a material adverse impact on its financial position, results of operations or
cash flows.


Euro Conversion

  On January 1, 1999, the European Economic and Monetary Union (EMU) will enter
into a three-year transition phase during which a common currency, the "euro",
will be introduced in participating countries.  Initially, the euro will be used
for wholesale financial transactions and it will replace the legacy currencies
that will be withdrawn between January 1, 2002 and July 1, 2002. The Corporation
has been preparing for the euro since December of 1996 and has identified issues
and developed implementation plans associated with the conversion, including
technical adaptation of information technology and other systems, continuity of
long-term contracts, foreign currency considerations, long-term competitive
implications of the conversions and the effect on the market risk inherent in
financial instruments. These implementation plans are expected to be completed
within a timetable that is consistent with the transition phases of the euro.

  Based on its evaluation to date, management believes that the introduction of
the euro, including the total costs for the conversion, will not have a material
adverse impact on the Corporation's financial position, results of operations
or cash flows. However, uncertainty exists as to the effects the euro will have
on the marketplace and there is no guarantee that all problems will be foreseen
and corrected or that other third parties will address the conversion
successfully.

                   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.  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:

 - 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 anticipated uses of cash
 - the scope or nature of acquisition activity
 - prospective product developments
 - cost reduction efforts
 - the outcome of contingencies
 - the impact of Year 2000 conversion efforts
 - the transition to the use of the Euro as a currency

From time to time, oral or written forward-looking statements may also be
included in other materials released to the public.

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.  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-K, 10-Q and 8-K
filed with the Securities and Exchange Commission from time to time.  The
Corporation's Annual Report on Form 10-K for 1997 includes important information
as to risk factors in the "Business" section under the headings "Description
of Business by Industry Segment" and "Other Matters Relating to the 
Corporation's Business as a Whole".  Additional important information as to
risk factors is included in this report and the Corporation's other reports on
Form 10-Q filed in 1998 in the section titled "Management's Discussion and
Analysis of Results of Operations and Financial Position" under the headings
"Business Environment", "Year 2000" and "Euro Conversion".
  17
                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES


Part II - Other Information

Item 1 - Legal Proceedings

  There have been no material developments with respect to legal proceedings
during the third quarter of 1998.  For a description of previously reported
legal proceedings, refer to Part I, Item 3 - Legal Proceedings of the
Corporation's Annual Report on Form 10-K for calendar year 1997 and Part II,
Item 1 - Legal Proceedings of the Corporation's Quarterly Reports on Form 10-Q
for the quarters ended March 31 and June 30, 1998.

Item 6 - Exhibits and Reports on Form 8-K

(a)  Exhibits:

     (12) Statement re computation of ratio of earnings to fixed charges.
     (15) Letter re unaudited interim financial information.
     (27) Financial data schedule (submitted electronically herewith).

(b)  A report on Form 8-K dated July 30,1998 was filed with the Securities and
     Exchange Commission on August 10, 1998.  The report contains the form of
     note deposited with the Depository Trust Company in connection with the
     Corporation's issuance of $400 million principal amount of its 6.70% Notes
     due August 1, 2028.

     A report on Form 8-K dated August 24, 1998 was filed with the Securities
     and Exchange Commission on August 28, 1998.  The report contains specimen
     notes and a tax opinion in connection with the issuance and sale from time
     to time by the Corporation of up to $471,050,000 aggregate principal amount
     of its Medium-Term Notes, Series B, Due from Nine Months to Thirty Years
     from Date of Issue."
  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:  November 6, 1998       By: /s/ David J. FitzPatrick
                               David J. FitzPatrick
                               Senior Vice President and
                               Chief Financial Officer


Dated:  November 6, 1998       By: /s/ Jay L. Haberland
                               Jay L. Haberland
                               Vice President and Controller


Dated:  November 6, 1998       By: /s/ William H. Trachsel
                               William H. Trachsel
                               Senior Vice President, General Counsel and
                               Secretary

                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES


EXHIBIT INDEX


Exhibit 12  -  Statement re computation of ratio of earnings to fixed charges

Exhibit 15  -  Letter re unaudited interim financial information

Exhibit 27  -  Financial data schedule (submitted electronically herewith)




                                                            Exhibit 12


                   UNITED TECHNOLOGIES CORPORATION
                           AND SUBSIDIARIES

    STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES



                                                               Nine Months Ended
                                                                 September 30,
 In Millions of Dollars                                        1998           1997
                                                                 
 Fixed Charges:
   Interest on indebtedness                             $        145   $        146
   Interest capitalized                                           10              8
   One-third of rents*                                            64             65

   Total Fixed Charges                                  $        219   $        219

 Earnings:
   Income before income taxes and minority interests    $      1,516   $      1,369

   Fixed charges per above                                       219            219
   Less: interest capitalized                                    (10)            (8)
                                                                 209            211

   Amortization of interest capitalized                           24             28

   Total Earnings                                       $      1,749   $      1,608

 Ratio of Earnings to Fixed Charges                             7.98           7.34



* Reasonable approximation of the interest factor.
/TABLE






                                                            Exhibit 15



November 6, 1998


Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549

Ladies and Gentlemen:

We are aware that United Technologies Corporation has included our report dated
October 21, 1998 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectus constituting part of its Registration
Statements on Form S-3 (Nos. 333-26331, 33-46916, 33-34320, 33-31514, 33-29687,
and 33-6452) 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 and 2-87322).  We are also aware of our
responsibilities under the Securities Act of 1933.

Yours very truly,



PricewaterhouseCoopers LLP

 

 5

This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at September 30, 1998 (Unaudited) and the
Condensed Consolidated Statement of Operations for the nine months ended
September 30, 1998 (Unaudited) and is qualified in its entirety by reference to
such financial statements.

 1,000,000
       
                             
                   9-MOS
                          DEC-31-1998
                             JAN-01-1998
                               SEP-30-1998
                                             663
                                         0
                                    4,754
                                       403
                                      3,110
                                 9,702
                                          10,897
                                   6,689
                                  18,288
                            8,089
                                          1,605
                              455
                                          0
                                         2,647
                                       1,730
                    18,288
                                         15,140
                                19,198
                                           11,867
                                   14,385
                                   952
                                     0
                                 145
                                  1,516
                                       484
                                968
                                       0
                                      0
                                            0
                                       968
                                     4.13
                                     3.89

The [EPS-PRIMARY] amount represents BASIC earnings per share and the
[EPS-DILUTED] amount represents DILUTED earnings per share in accordance with
Statement of Financial Accountings Standards No. 128, Earnings Per Share.