FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Plan period ended December 31, 1995 Commission File Number 1-812 UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN (Full title of the plan) UNITED TECHNOLOGIES CORPORATION One Financial Plaza Hartford, Connecticut 06101 (Name of issuer of the securities held pursuant to the plan and the address of its principal executive office) FINANCIAL STATEMENTS OF THE UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN REPORT OF INDEPENDENT ACCOUNTANTS To United Technologies Corporation and Participants of the United Technologies Corporation Employee Savings Plan In our opinion, the accompanying statements of net assets available for benefits with fund information and the related statement of changes in net assets available for benefits with fund information present fairly, in all material respects, the net assets available for benefits of the United Technologies Corporation Employee Savings Plan at December 31, 1995 and November 30, 1995, and the changes in net assets available for benefits for the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Hartford, Connecticut May 24, 1996 UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Net Assets Available for Benefits With Fund Information December 31, 1995 (Thousands of Dollars, except unit value)
(See accompanying Notes to Financial Statements)UTC Funds Income Fund Equity Fund Stock Fund Global Fund Loan Fund ESOP Fund Combined Assets: Investments: Beneficial interests in contracts issued by insurance companies, at cost plus accrued interest $ 2,862,117 $ - $ - $ - $ - $ - $ 2,862,117 Beneficial interests in Bankers Trust Company Pyramid Fixed Income Index Fund, at market - - - 26,777 - - 26,777 Beneficial interests in Bankers Trust Company Pyramid Equity Index Fund, at market - 479,711 - 33,752 - - 513,463 Beneficial interests in Bankers Trust Company Pyramid International Securities Index Fund, at market - - - 31,132 - - 31,132 United Technologies Corporation Common Stock, at market - - 195,627 - - - 195,627 United Technologies Corporation ESOP Preferred Stock, at market - - - - - 1,271,994 1,271,994 Participant loans, at cost - - - - 50,436 - 50,436 Temporary investments, at cost plus accrued interest 121 8 4,758 6 - 430 5,323 Total Investments 2,862,238 479,719 200,385 91,667 50,436 1,272,424 4,956,869 Contributions and fund and plan transfers receivable 921 4,990 3,138 2,799 326 - 12,174 Accrued ESOP contribution receivable - - - - - 90,046 90,046 Total Assets 2,863,159 484,709 203,523 94,466 50,762 1,362,470 5,059,089 Less - Liabilities: Contributions and fund and plan transfers payable 9,541 - - - - - 9,541 Loans payable, net 2,088 706 646 168 482 - 4,090 Accrued interest on ESOP debt and note payable - - - - - 2,508 2,508 ESOP debt - - - - - 481,600 481,600 Note payable to United Technologies Corporation - - - - - 83,733 83,733 Accrued investment purchases - - - 936 - - 936 Total Liabilities 11,629 706 646 1,104 482 567,841 582,408 Net Assets Available for Benefits $ 2,851,530 $ 484,003 $ 202,877 $ 93,362 $ 50,280 $ 794,629 $ 4,476,681 Units of participation 537,129,738 37,844,580 26,614,066 50,182,173 50,280,000 170,235,991 Unit value $ 5.31 $ 12.79 $ 7.62 $ 1.86 $ 1.00 $ 4.67 UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Net Assets Available for Benefits With Fund Information November 30, 1995 (Thousands of Dollars, except unit value)
(See accompanying Notes to Financial Statements)UTC Funds Income Fund Equity Fund Stock Fund Global Fund Loan Fund ESOP Fund Combined Assets: Investments: Beneficial interests in contracts issued by insurance companies, at cost plus accrued interest $ 2,879,629 $ - $ - $ - $ - $ - $ 2,879,629 Beneficial interests in Bankers Trust Company Pyramid Fixed Income Index Fund, at market - - - 25,280 - - 25,280 Beneficial interests in Bankers Trust Company Pyramid Equity Index Fund, at market - 451,595 - 30,843 - - 482,438 Beneficial interests in Bankers Trust Company Pyramid International Securities Index Fund, at market - - - 28,906 - - 28,906 United Technologies Corporation Common Stock, at market plus accrued dividends ($1,066) - - 185,401 - - - 185,401 United Technologies Corporation ESOP Preferred Stock, at market - - - - - 1,258,117 1,258,117 Participant loans, at cost - - - - 50,500 - 50,500 Temporary investments, at cost plus accrued interest 109 4 2,640 257 - 10,080 13,090 Total Investments 2,879,738 451,599 188,041 85,286 50,500 1,268,197 4,923,361 Contributions and fund and plan transfers receivable 542 18,852 9,900 2,986 324 - 32,604 Accrued ESOP contribution receivable - - - - - 111,911 111,911 Accrued dividends on ESOP Preferred Stock - - - - - 14,348 14,348 Total Assets 2,880,280 470,451 197,941 88,272 50,824 1,394,456 5,082,224 Less - Liabilities: Contributions and fund and plan transfers payable 30,454 - - - - - 30,454 Loans payable, net 3,112 852 613 166 (146) - 4,597 Accrued interest on ESOP debt and notes payable - - - - - 10,759 10,759 ESOP debt - - - - - 517,500 517,500 Notes payable to United Technologies Corporation - - - - - 89,488 89,488 Total Liabilities 33,566 852 613 166 (146) 617,747 652,798 Net Assets Available for Benefits $ 2,846,714 $ 469,599 $ 197,328 $ 88,106 $ 50,970 $ 776,709 $ 4,429,426 Units of participation 539,445,273 37,377,051 26,186,677 48,496,808 50,970,000 171,351,758 Unit value $ 5.28 $ 12.56 $ 7.54 $ 1.82 $ 1.00 $ 4.53 UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Changes in Net Assets Available for Benefits With Fund Information Period Ended December 31, 1995 (Thousands of Dollars)
(See accompanying Notes to Financial Statements)UTC Funds Income Fund Equity Fund Stock Fund Global Fund Loan Fund ESOP Fund Combined Contributions: Participants $ 6,949 $ 2,722 $ 720 $ 742 $ - $ - $ 11,133 Employer 13 3 1 1 - 7,163 7,181 Total Contributions 6,962 2,725 721 743 - 7,163 18,314 Investment Income: Interest 16,897 - 40 1 323 17 17,278 Dividends - - - - - 1,793 1,793 Total Investment Income 16,897 - 40 1 323 1,810 19,071 Repayments on loans 1,721 440 160 130 (2,451) - - Unrealized appreciation of investments - 8,390 2,243 2,112 - 14,042 26,787 Gain on sale of investments - - - - - 15 15 Deduct: Distributions to participants: In cash 10,811 865 343 204 111 737 13,071 In shares of United Technologies Corporation Common Stock - - 19 - - - 19 Loans to participants 958 382 143 66 (1,549) - - Interest expense - - - - - 3,849 3,849 Earned and unapplied forfeitures - - - - - 2 2 Total Deductions 11,769 1,247 505 270 (1,438) 4,588 16,941 Inter-fund and inter-plan transfers (8,995) 4,096 2,890 2,540 - (522) 9 Net Increase (Decrease) in Net Assets Available for Benefits 4,816 14,404 5,549 5,256 (690) 17,920 47,255 Net Assets Available for Benefits November 30, 1995 2,846,714 469,599 197,328 88,106 50,970 776,709 4,429,426 Net Assets Available for Benefits December 31, 1995 $ 2,851,530 $ 484,003 $ 202,877 $ 93,362 $ 50,280 $ 794,629 $ 4,476,681 UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Notes to Financial Statements NOTE 1 - DESCRIPTION OF THE PLAN The United Technologies Corporation Employee Savings Plan (the Plan) is a defined contribution savings plan sponsored by United Technologies Corporation (UTC). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Generally, non-represented employees in participating business units of UTC are eligible to participate in the Plan after completing one year of service. Below is a brief description of the Plan. More complete information is provided in the plan document which is available from UTC. Effective December 1, 1995, the Plan year end was changed to the twelve month period ending December 31. The short period beginning December 1, 1995 and ending December 31, 1995 is covered by this report. Participants may elect to contribute, through payroll deductions, between 2 and 16 percent of their total compensation. Under the Internal Revenue Code, participants whose annual earnings totaled no more than $66,000 could have elected to have tax-deferred contributions made on their behalf of up to 16 percent during the 1995 plan year (subject to Internal Revenue Code limitations). This threshold, which is adjusted regularly for inflation, remained at $66,000 for the 1996 plan year. Participants whose earnings exceeded that amount could have elected to have tax-deferred contributions in amounts up to 7 percent of compensation subject to Internal Revenue Code non- discrimination tests and other limitations. Participant contributions are fully vested at all times under the Plan. UTC has established an Employee Stock Ownership Plan (ESOP Fund) to fund the employer matching contributions to the Plan. The ESOP Fund is primarily invested in UTC Series A ESOP Convertible Preferred Stock. UTC will match 60 percent of a participant's contributions, up to specified limits, in ESOP Preferred Stock (See Note 6). Generally, participants may not direct the employer matching contributions to an investment fund other than the ESOP Fund. Participants who have reached at least age 55 and have completed at least 10 years of continuous service may direct up to 50 percent, in multiples of 25 percent, of their ESOP Fund account balances and future employer contributions to be invested in the other investment funds offered through the Plan. Generally, employer contributions become fully vested after two years of Plan participation. All participant contributions are credited to a participant account maintained by UTC. Contributions are invested, pursuant to each participant's direction, in one or more of the following funds: the Income Fund, the Equity Fund, the UTC Stock Fund, and the Global Fund. Participants may elect to have 100 percent of their contributions invested in one investment fund or may allocate the contributions in any whole percentage among the funds. Participants are permitted to transfer their accounts between investment funds once per quarter in any whole percentage. The Income Fund is invested in contracts issued by five insurance companies. Under these contracts, each insurance company guarantees repayment in full of the principal amount invested plus interest credited at a fixed rate for a specified period. Interest is credited to each contract based on an annual interest rate set each year by the individual insurance companies. This rate, which differs among contracts, takes into account any difference between prior year credited interest and the actual amount of investment earnings allocable to the contract in accordance with the established allocation procedures of the insurance company. The weighted average rate set for the 1995 calendar year was 7.25 percent. The Equity Fund may be invested in common or capital stocks of corporations, bonds or securities convertible into such stocks, or shares of any federally registered mutual fund or similar type of investment fund, including investment in any commingled trust fund managed by Bankers Trust Company (BT), the Trustee, which is invested primarily in similar types of equity securities. During 1995, the Equity Fund was invested principally in the BT Pyramid Equity Index Fund, which is a portfolio of common stocks replicating the Standard & Poor's Composite Index of 500 stocks. Interest and dividends earned by the Equity Fund are reinvested and increase market value. The UTC Stock Fund consists principally of 2,061,920 and 1,966,242 shares of UTC Common Stock at December 31 and November 30, 1995, respectively. The Global Fund is invested in almost equal proportions in three different funds managed by the Trustee: the BT Pyramid International Securities Index Fund, the BT Pyramid Fixed Income Index Fund and the BT Pyramid Equity Index Fund (as described above). The BT Pyramid International Securities Index Fund invests in four other international index funds managed by the Trustee. The BT Pyramid Fixed Income Index Fund invests primarily in obligations of the U.S. Government and its agencies and other publicly traded, high-grade domestic debt instruments. Interest and dividends earned by these investments are reinvested and increase market value. Participants with at least two years of plan participation are allowed to borrow up to 50 percent of their account balances (excluding the ESOP Fund). Loan amounts can range from $1,000 to $50,000 and must be repaid in 5 years or less with interest. Forfeitures of employer contributions are used to reduce employer contributions; earned but unapplied forfeitures will be applied against future employer contributions and are shown separately in the Statement of Changes in Net Assets Available for Benefits With Fund Information. Participants who transfer to a new location of UTC which is covered by a different savings plan have the option of transferring their account balances in accordance with the provisions of the new savings plan, including available investment funds. The number of participants in the Plan at year end was as follows: The participants above may have investments in more than one of the investment funds. NOTE 2 - SUMMARY OF ACCOUNTING PRINCIPLES UTC has entered into a master trust agreement with the Trustee. Under this agreement, certain employee savings plans of UTC and its subsidiaries combine their trust fund investments in the Master Trust. Participating plans purchase units of participation in the investment funds based on their monthly contribution to such funds and the unit value of the applicable investment fund at the end of the month. The value of a unit in each fund is determined at the end of each month by dividing the sum of uninvested cash, accrued income and the current market value of investments by the total number of outstanding units in
December 31, November 30, 1995 1995 Income Fund 45,544 45,580 Equity Fund 19,917 19,716 UTC Stock Fund 11,364 11,191 Global Fund 7,919 7,785 ESOP Fund 40,964 40,944 such funds. The plans receive income from the funds' investments which increase the unit values. Distributions to participants reduce the number of participation units held by the plans. The financial statements of the Plan are prepared under the accrual method of accounting. Benefits are recorded when paid. The investments of the Income Fund are valued at cost plus accrued interest. The investments of the Equity Fund, the UTC Stock Fund, and the Global Fund are valued at market as determined by the Trustee by reference to published market data. The ESOP Preferred Stock is valued at its fair value, which is the higher of the guaranteed value ($65) or the market value of UTC's Common Stock (See Note 6). The expenses of operating the Plan are payable out of the funds held under the Plan, unless the employer elects to pay such expenses. The expenses for the 1995 plan year were paid by the employer. The Plan is not subject to federal income tax as the Plan and its related trust are considered by UTC to satisfy the qualification and exemption requirements of Sections 401(a) and 501(a) of the Internal Revenue Code. UTC has received a favorable determination letter (dated November 3, 1990) from the Internal Revenue Service (IRS) indicating that the ESOP portion of the Plan qualifies under Sections 401(a) and 501(a) of the Code. UTC has applied for a new determination letter from the IRS indicating that the other provisions of the Plan, as amended since the date of the most recent IRS letter applicable to such provisions (1986), continue to be tax exempt under Sections 401(a) and 501(a) of the Code. Under these sections, contributions by UTC, participants (at their election) and related earnings will be tax deferred until such amounts are distributed. It is expected, given the lack of substantive plan amendments, that a favorable determination will be issued from the IRS, and accordingly, no provision is made for federal income taxes. NOTE 3 - INSURANCE CONTRACTS The following is a summary of the insurance contracts held in the Income Fund and the portion allocable to the Plan:
(Thousands of Dollars) December 31, November 30, 1995 1995 CIGNA $ 1,566,944 $ 1,576,306 Aetna 494,944 503,447 Travelers 432,342 437,101 Prudential 219,677 223,870 Metropolitan Life 587,847 578,573 $ 3,301,754 $ 3,319,297 Amount of the contracts allocable to the Plan $ 2,862,117 $ 2,879,629 /TABLE NOTE 4 - GAIN ON SALE OF INVESTMENTS The Trustee uses the average cost method in determining the cost of securities for purposes of calculating the gain or loss on the sale of securities. Gains and losses of the Master Trust funds are allocated to the participating plans based upon participation units at the month-end valuation date following the sale. There were no gains recognized by the Master Trust funds for the one month period ended December 31, 1995. NOTE 5 - REQUESTED DISTRIBUTIONS The following is a summary of distributions requested by participants which had not yet been paid at the respective plan year end: These amounts are reflected as liabilities in the Plan's Form 5500. NOTE 6 - EMPLOYEE STOCK OWNERSHIP PLAN In conjunction with the establishment of the ESOP, as discussed above, UTC's Board of Directors authorized 20,000,000 shares of preferred stock, par value $1.00 per share designated as Series A ESOP Convertible Preferred Stock, having an annual dividend of $4.80 per share. Each share of ESOP Preferred Stock is convertible into one share of UTC's Common Stock. On June 30, 1989, the Trustee acquired 10,153,847 shares of this new series of ESOP Preferred Stock at an acquisition price of $65.00 per share and placed them in the Master Trust for future allocation to participants. On March 30, 1990, the Trustee acquired an additional 2,900,000 shares of this new series of ESOP Preferred Stock at an acquisition price of $69.77 per share and placed them in the Master Trust for future allocation to participants. On February 9, 1994, the Trustee acquired an additional 1,400,000 shares of ESOP Preferred Stock at an acquisition price of $70.22 per share and placed them in the Master Trust for future allocation to participants. The ESOP financed the purchase of these shares with interest bearing promissory notes. UTC is required to contribute sufficient funds each year which, when combined with quarterly dividends on the ESOP Preferred Stock, will meet the ESOP's debt service requirements. Participants in the ESOP Fund accrue, on a monthly basis, a beneficial interest equal to the employer contributions at the rate of 60 percent of participants' participating contributions. This beneficial interest is represented by share equivalents of ESOP Preferred Stock, as calculated monthly at the higher of the month end price of UTC Common Stock or the $65.00 per share ESOP Preferred Stock guaranteed value. ESOP Preferred Stock dividends, at the annual rate of $4.80 per share, are attributed to these ESOP Preferred Stock share equivalents based on participants' beneficial interests in such shares held as of the record dates which are coincident with the payment dates. Shares of ESOP Preferred Stock must be allocated to participants' accounts by the Trustee at least once per Plan year, but are generally allocated over the course of the Plan year. Purchased shares of ESOP Preferred Stock are held by the Trustee with the number of purchased shares allocated to each participant determined annually in accordance with a method approved by the Internal Revenue Service. To the extent that allocated shares are not sufficient to meet the matching requirement
December 31, 1995 November 30, 1995 (Thousands of Dollars) Dollars Units Dollars Units Income Fund $ 21,543 4,057,942 $ 20,872 3,955,107 Equity Fund 2,085 163,058 1,886 150,078 UTC Stock Fund 644 84,526 687 91,115 Global Fund 205 110,063 294 161,771 Loan Fund 288 288,000 331 331,000 of the Plan, UTC is required to contribute additional ESOP Preferred Stock, UTC Common Stock or cash. Shares allocated to participants generally may not be distributed until the participant's termination, disability, retirement or death. Upon distribution, shares of ESOP Preferred Stock must be converted into one share of UTC's Common Stock or, if the value of the Common Stock is less than the guaranteed value, the Trustee may require UTC to repurchase the ESOP Preferred Stock for the guaranteed value. The Trustee accounts for participants' beneficial interests in the ESOP Fund based upon units of participation and related unit value (see Note 2). The ESOP Preferred Stock is redeemable, in whole or in part, generally at the option of UTC at a redemption price of $66.92 per share plus accrued and unpaid dividends. The redemption price decreases annually until it reaches $65.00. However, upon notice to the Trustee of UTC's intention to redeem, the Trustee may elect to convert each ESOP preferred share into one share of UTC Common Stock if the value of UTC's Common Stock exceeds the redemption price. Participants were credited with employer matching contributions representing approximately 45,700 shares for the period ended December 31, 1995, with a market value of approximately $4.3 million. In addition, participants earned dividends of approximately $.8 million during the one month period on the allocated shares, representing approximately 8,300 shares. The difference of approximately $2.0 million between the total value of shares earned by participants, including dividends, and the total of employer contributions on the Statement of Changes in Net Assets Available for Benefits With Fund Information is due to the accrual of contributions to fund interest payable. The ESOP Fund's investment in ESOP Preferred Stock at period end is as follows: As discussed above, market is represented by the higher of the guaranteed value of $65 per share or the month end price of UTC's Common Stock. As such, the market value of the ESOP Preferred Stock was $94.875 and $93.75 at December 31 and November 30, 1995, respectively. Further, the Net Assets Available for Benefits in the ESOP Fund at December 31 and November 30, 1995 include unrealized appreciation of approximately $400.5 million and $385.8 million, of which $220.6 million and $215.7 million is on unallocated shares.
(Thousands of Dollars, December 31, 1995 November 30, 1995 except share amounts) Allocated Total Allocated Total Number of Shares 6,023,794 13,407,056 5,916,548 13,419,914 Guaranteed Value $ 391,547 $ 871,459 $ 384,576 $ 872,294 Market $ 571,507 $ 1,271,994 $ 554,676 $ 1,258,117 NOTE 7 - ESOP DEBT On February 1, 1990, the Master Trust with UTC as guarantor executed a Note and Guaranty Agreement to issue $660,000,000 of Series A, B, C and D notes (described below) representing the ESOP's permanent financing. Interest is payable quarterly on the 10th of March, June, September and December coincident with the dividend payment date on the ESOP Preferred Stock. Principal payments are payable annually on the 10th of December. The amounts outstanding under the Agreement at December 31, 1995 are as follows: Required payments on these Notes, in aggregate, for the next five plan years are $36.3 million in 1996, $36.4 million in 1997, $36.3 million in 1998, $36.0 million in 1999 and $35.5 million in 2000. NOTE 8 - PURCHASE OF SERIES A ESOP CONVERTIBLE PREFERRED SHARES On February 9, 1994, the Trustee acquired an additional 1,400,000 shares of ESOP Preferred Stock at an acquisition price of $70.22 per share and placed them in the Master Trust for future allocation to participants. The ESOP financed the purchase of these shares with a 6.75% $98.3 million promissory note issued to UTC. The balance of this note was paid in full in December 1995. NOTE 9 - NOTE PAYABLE TO UTC The Note Payable to UTC is a promissory note with interest payable quarterly on the 10th of March, June, September and December coincident with the dividend payment date on the ESOP Preferred Stock. Principal payments are generally payable annually on the 10th of December. At December 31, 1995, $83,733,000 was outstanding under the 10.5% Note, issued March 30, 1990 and due over the period 1996 to 2009. Required principal payments on the Note for the next five plan years are $4.5 million in 1996, $4.6 million in 1997, $4.6 million in 1998, $4.8 million in 1999 and $4.9 million in 2000. NOTE 10 - PLAN TERMINATION Although it has not expressed any intent to do so, UTC has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100 percent vested in their accounts.
Principal Rate of Note Series (000's) Interest Due A $ 145,000 7.24% 1996 - 1999 B 286,600 7.68% 2000 - 2008 C 17,300 7.68% 2008 D 32,700 7.68% 2009 $ 481,600 SIGNATURES The Plan (or persons who administer the employee benefit plan), pursuant to the requirements of the Securities Exchange Act of 1934, has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Dated: June 7, 1996 By: /s/ Daniel P. O'Connell Daniel P. O'Connell Corporate Director, Employee Benefits and Human Resources Systems United Technologies Corporation Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-26627) of United Technologies Corporation of our report dated May 24, 1996 appearing in the United Technologies Corporation Employee Savings Plan's Annual Report on Form 11-K for the period ended December 31, 1995. PRICE WATERHOUSE LLP Hartford, Connecticut June 7, 1996