2014

UTC First Quarter Earnings Per Share Increase 6 Percent To $1.39, Up 16 Percent Adjusted For Restructuring And One-Time Items; Reaffirms 2013 EPS Outlook Of $5.85 To $6.15

HARTFORD, Conn., April 23, 2013 /PRNewswire/ -- United Technologies Corp. (NYSE: UTX) reported first quarter earnings per share of $1.39 and net income attributable to common shareowners of $1.3 billion, up 6 percent and 7 percent, respectively, over the year ago quarter.  Results for the current quarter include $0.11 per share of favorable one-time items net of restructuring costs.  Earnings per share in the year ago quarter included a $0.21 benefit from one-time items net of restructuring costs.  Before these items, earnings per share increased 16 percent year over year.  Net foreign currency translation and hedges at Pratt & Whitney Canada had an adverse impact of $0.01 in the quarter.

Sales for the quarter of $14.4 billion were 16 percent above prior year driven by the benefit of net acquisitions. Organic sales decreased 2 percent from the year ago quarter reflecting ongoing weakness in both Europe and the commercial aerospace aftermarket, and the impact of defense cuts at Sikorsky. First quarter segment operating profit increased 14 percent over the prior year quarter. Adjusted for restructuring costs and net one-time items, segment operating profit grew 15 percent.

"Our focus on integration and execution led to solid performance as we continue to build momentum," said Louis Chenevert, UTC Chairman & Chief Executive Officer. "The Goodrich and IAE acquisitions are exceeding our expectations and creating new opportunities for long term organic growth."

New equipment orders at Otis increased 24 percent over the year ago first quarter, led by 29 percent growth in China. Foreign currency had a 2 point favorable impact in China. UTC Climate, Controls & Security equipment orders increased 5 percent organically.  Large commercial engine spares orders were up 14 percent at Pratt & Whitney including the benefit from the incremental International Aero Engines share. Organically, commercial spares orders were down 28 percent at Pratt & Whitney.  On a pro-forma basis, adjusted to include Goodrich in both years, commercial spares orders increased 2 percent at UTC Aerospace Systems.

"Macroeconomic indicators coupled with order improvement in our commercial businesses point towards a gradual resumption of organic growth during the course of the year," Chenevert added. "Our ongoing focus on cost reduction provides strong operating leverage and we continue to expect 2013 earnings per share of $5.85 to $6.15 on sales of $64 to $65 billion." 

Cash flow from operations was $1.4 billion and capital expenditures were $295 million in the quarter. Share repurchase was $335 million and UTC continues to anticipate share repurchase and acquisitions of $1 billion each in 2013. The company continues to expect cash flow from operations less capital expenditures to meet or exceed net income attributable to common shareowners for the year.

"We started our share repurchase program and closed additional divestitures this quarter in accordance with our plan," Chenevert said. "Our strong cash position will allow us to pay down $2 billion of debt in 2013, up from our prior estimate of $1 billion, as we execute our deleveraging strategy."

United Technologies Corp., based in Hartford, Connecticut, is a diversified company providing high technology products and services to the building and aerospace industries. Additional information, including a webcast, is available on the Internet at http://www.utc.com. To learn more about UTC, visit the website or follow the company on Twitter: @UTC

All financial results and projections reflect continuing operations unless otherwise noted. The accompanying tables include information integral to assessing the company's financial position, operating performance, and cash flow, including a reconciliation of differences between non-GAAP measures used in this release and the comparable financial measures calculated in accordance with generally accepted accounting principles in the United States.

This release includes statements that constitute "forward-looking statements" under the securities laws. Forward-looking statements often contain words such as "believe," "expect," "plans," "strategy," "prospects," "estimate," "project," "target," "anticipate," "will," "should," "see," "guidance," "confident" and similar terms. Forward-looking statements may include, among other things, statements relating to future and estimated sales, earnings, cash flow, charges, expenditures, anticipated benefits of acquisitions and divestitures, results of operations, share repurchases, uses of cash and other measures of financial performance. All forward-looking statements involve risks, uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Risks and uncertainties include, without limitation, the effect of economic conditions in the markets in which we operate, including financial market conditions, fluctuation in commodity prices, interest rates and foreign currency exchange rates; future levels of research and development spending; levels of end market demand in construction and in the aerospace industry; levels of air travel; financial difficulties of commercial airlines; changes in government procurement priorities and availability of funding; the impact of weather conditions and natural disasters; the financial condition of our customers and suppliers; delays and disruption in delivery of materials and services from suppliers; cost reduction efforts and restructuring costs and savings and other consequences thereof; the scope, nature, timing or impact of acquisitions, dispositions, joint ventures and other business arrangements, including integration of acquired businesses; the timing and amount of gains, losses, impairments and charges related to anticipated dispositions; the timing and impact of anticipated debt reduction following the Goodrich acquisition; the development and production of new products and services; the anticipated benefits of diversification and balance of operations across product lines, regions and industries; the impact of the negotiation of collective bargaining agreements and labor disputes; the outcome of legal proceedings and other contingencies; future availability of credit; pension plan assumptions and future contributions; and the effect of changes in tax, environmental and other laws and regulations, political conditions in countries in which we operate and other factors beyond our control. The completion of the proposed divestitures of businesses is subject to uncertainties, including the ability to secure regulatory approvals on acceptable terms, and satisfaction of other customary conditions. The timing and amount of share repurchases depends upon UTC's evaluation of market conditions and the level of other investing activities and uses of cash. The forward-looking statements speak only as of the date of this release and we undertake no obligation to update or revise any forward-looking statements after the date of this release. For additional information identifying factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Forms 10-K, 10-Q and 8-K filed with the SEC from time to time, including, but not limited to, the information included in UTC's Forms 10-K and 10-Q under the headings "Business," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Legal Proceedings" and in the notes to the financial statements included in UTC's Forms 10-K and 10-Q.

UTC-IR

United Technologies Corporation

Condensed Consolidated Statement of Comprehensive Income



(Millions, except per share amounts)

Net sales

Quarter Ended March 31,
(Unaudited)

2013

2012

$            14,399

$       12,416

Costs and Expenses:



Cost of products and services sold

10,465

8,930

Research and development

610

544

Selling, general and administrative

1,627

1,529

Total Costs and Expenses

12,702

11,003

Other income, net

309

300

Operating profit

2,006

1,713

Interest expense, net

236

129

Income from continuing operations before income taxes

1,770

1,584

Income tax expense

418

320

Income from continuing operations

1,352

1,264

Less: Non-controlling interest in subsidiaries' earnings from continuing operations

82

75

Income from continuing operations attributable to common shareowners

1,270

1,189

Discontinued operations:



Income from operations

20

30

Loss on disposal

(15)

(961)

Income tax benefit (expense)

(9)

74

Loss from discontinued operations

(4)

(857)

Less: Non-controlling interest in subsidiaries' earnings from discontinued operations

2

Loss from discontinued operations attributable to common shareowners

(4)

(859)

Net income attributable to common shareowners

$               1,266

$             330

Comprehensive income

$                 908

$             904

Less: Comprehensive income attributable to non-controlling interests

61

85

Comprehensive income attributable to common shareowners

$                 847

$             819

Earnings (Loss) Per Share of Common Stock - Basic:



From continuing operations attributable to common shareowners

$                 1.41

$            1.33

From discontinued operations attributable to common shareowners


(0.96)

Earnings (Loss) Per Share of Common Stock - Diluted:



From continuing operations attributable to common shareowners

$                 1.39

$            1.31

From discontinued operations attributable to common shareowners


(0.95)

Weighted average number of shares outstanding:



Basic shares

901

891

Diluted shares

914

904




As described on the following pages, consolidated results for the quarters ended March 31, 2013 and 2012 include restructuring costs and non-recurring items that management believes should be considered when evaluating the underlying financial performance.

 

See accompanying Notes to Condensed Consolidated Financial Statements.


 

United Technologies Corporation

Segment Net Sales and Operating Profit

 



(Millions)

Net Sales

Quarter Ended March 31,

(Unaudited)

2013

2012



Otis

$                                              2,814

$        2,770

UTC Climate, Controls & Security

3,837

4,112

Pratt & Whitney

3,402

3,052

UTC Aerospace Systems

3,263

1,236

Sikorsky

1,249

1,346

Segment Sales

14,565

12,516

Eliminations and other

(166)

(100)

Consolidated Net Sales

$                                            14,399

$      12,416




Operating Profit



Otis

$                                                 575

$           566

UTC Climate, Controls & Security

520

544

Pratt & Whitney

406

389

UTC Aerospace Systems

501

198

Sikorsky

90

136

Segment Operating Profit

2,092

1,833

Eliminations and other

21

(24)

General corporate expenses

(107)

(96)

Consolidated Operating Profit

$                                              2,006

$        1,713







Segment Operating Profit Margin



Otis

20.4%

20.4%

UTC Climate, Controls & Security

13.6%

13.2%

Pratt & Whitney

11.9%

12.7%

UTC Aerospace Systems

15.4%

16.0%

Sikorsky

7.2%

10.1%

Consolidated Segment Operating Profit Margin

14.4%

14.6%




As described on the following pages, consolidated results for the quarters ended March 31, 2013 and 2012 include restructuring costs and non-recurring items that management believes should be considered when evaluating the underlying financial performance.

 

United Technologies Corporation

Restructuring Costs and Non-Recurring Items Included in Consolidated Results



In Millions - Income (Expense)

Restructuring Costs included in Operating Profit:

Quarter Ended March 31,
(Unaudited)

2013

2012



Otis

$                 (10)

$              (28)

UTC Climate, Controls & Security

(22)

(35)

Pratt & Whitney

(7)

(37)

UTC Aerospace Systems

(8)

(2)

Sikorsky

(5)

(3)

Eliminations and other


(6)


(52)

(111)

Non-Recurring items included in Operating Profit:



UTC Climate, Controls & Security

38

112

Eliminations and other


(10)


38

102

Total impact on Consolidated Operating Profit

(14)

(9)

Non-Recurring items included in Interest Expense, Net

15

Tax effect of restructuring and non-recurring items above

16

(23)

Non-Recurring items included in Income Tax Expense

95

203

Impact on Net Income from Continuing Operations Attributable to Common Shareowners

$                  97

$             186

Impact on Diluted Earnings Per Share from Continuing Operations

$               0.11

$            0.21

 

Details of the non-recurring items for the quarters ended March 31, 2013 and 2012 above are as follows:

Quarter Ended March 31, 2013

UTC Climate, Controls & Security: Approximately $38 million net gain from UTC Climate, Controls & Security's ongoing portfolio transformation, primarily due to a gain on the sale of a business in Hong Kong.

Income Tax Expense: Approximately $95 million of favorable income tax adjustments as a result of the enactment of the American Taxpayer Relief Act of 2012 in January 2013. The $95M is primarily related to the retroactive extension of the research and development credit to 2012.

Quarter Ended March 31, 2012

UTC Climate, Controls & Security: Approximately $112 million net gain from UTC Climate, Controls & Security's ongoing portfolio transformation. This net gain includes approximately $215 million from the sale of a controlling interest in a manufacturing and distribution joint venture in Asia, partially offset by $103 million of impairment charges related to planned business dispositions.

Eliminations and other: An additional $10 million of reserves were established for the export licensing compliance matters recorded in the fourth quarter 2011.

Interest Expense, Net: Approximately $15 million of favorable pre-tax interest adjustments related to the conclusion of the IRS's examination of the Company's 2006 - 2008 tax years.

Income Tax Expense: Approximately $203 million of favorable income tax adjustments related to the conclusion of the IRS's examination of the Company's 2006 - 2008 tax years.

Discontinued Operations:

  • Approximately $360 million and $590 million of pre-tax goodwill impairment charges ($220 million and $410 million after tax) related to Rocketdyne and Clipper, respectively.
  • Approximately $235 million of unfavorable income tax adjustments related to the recognition of a deferred tax liability on the existing difference between the expected accounting versus tax gain on the planned disposition of legacy Hamilton Sundstrand's Industrial businesses.

The following page provides segment net sales, operating profits and operating profit margins as adjusted for the aforementioned restructuring costs and non-recurring items. Management believes these adjusted results more accurately portray the ongoing operational performance and fundamentals of the underlying businesses. The amount and timing of restructuring costs and non-recurring activity can vary substantially from period to period with no assurances of comparable activity or amounts being incurred in future periods. These amounts have therefore been adjusted out in the following schedule in order to provide a more representative comparison of current year operating performance to prior year performance.

United Technologies Corporation

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



(Millions)

Net Sales

Quarter Ended March 31,

(Unaudited)

2013

2012



Otis

$                                      2,814

$          2,770

UTC Climate, Controls & Security

3,837

4,112

Pratt & Whitney

3,402

3,052

UTC Aerospace Systems

3,263

1,236

Sikorsky

1,249

1,346

Segment Sales

14,565

12,516

Eliminations and other

(166)

(100)

Consolidated Net Sales

$                                    14,399

$       12,416




Adjusted Operating Profit



Otis

$                                          585

$             594

UTC Climate, Controls & Security

504

467

Pratt & Whitney

413

426

UTC Aerospace Systems

509

200

Sikorsky

95

139

Segment Operating Profit

2,106

1,826

Eliminations and other

21

(8)

General corporate expenses

(107)

(96)

Adjusted Consolidated Operating Profit

$                                      2,020

$          1,722




Adjusted Segment Operating Profit Margin



Otis

20.8%

21.4%

UTC Climate, Controls & Security

13.1%

11.4%

Pratt & Whitney

12.1%

14.0%

UTC Aerospace Systems

15.6%

16.2%

Sikorsky

7.6%

10.3%

Adjusted Consolidated Segment Operating Profit Margin

14.5%

14.6%

 

United Technologies Corporation

Condensed Consolidated Balance Sheet





(Millions)

Assets

March 31,

2013

(Unaudited)

December 31

2012

(Unaudited)


$                                                       4,767

$        4,819


Cash and cash equivalents


Accounts receivable, net

10,791

11,099


Inventories and contracts in progress, net

10,161

9,537


Assets held for sale

938

1,071


Other assets, current

2,504

3,084


     Total Current Assets

29,161

29,610


Fixed assets, net

8,428

8,518


Goodwill

27,516

27,801


Intangible assets, net

15,125

15,189


Other assets

8,283

8,291


Total Assets

$                                                      88,513

$     89,409






Liabilities and Equity

$                                                         1,252

$        1,624


Short-term debt


Accounts payable

6,192

6,431


Accrued liabilities

14,854

15,310


Liabilities held for sale

261

421


Total Current Liabilities

22,559

23,786


Long-term debt

21,572

21,597


Other long-term liabilities

16,564

16,719


Total Liabilities

60,695

62,102






Redeemable non-controlling interest

255

238


Shareowners' Equity:




Common Stock

14,085

13,837


Treasury Stock

(19,575)

(19,251)


Retained earnings

37,551

36,776


Accumulated other comprehensive loss

(5,867)

(5,448)


Total Shareowners' Equity

26,194

25,914


Non-controlling interest

1,369

1,155


Total Equity

27,563

27,069


Total Liabilities and Equity

$                                                      88,513

$     89,409






Debt Ratios:




Debt to total capitalization

45%

46%


Net debt to net capitalization

40%

40%






See accompanying Notes to Condensed Consolidated Financial Statements.

 

United Technologies Corporation

Condensed Consolidated Statement of Cash Flows



(Millions)

Operating Activities of Continuing Operations:

Quarter Ended March 31,
(Unaudited)

2013

2012



Income from continuing operations

$              1,352

$          1,264

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



Depreciation and amortization

444

318

Deferred income tax (benefit) provision

(40)

159

Stock compensation cost

70

47

Change in working capital

(198)

(189)

Global pension contributions

(29)

(13)

Other operating activities, net

(190)

(263)

Net cash flows provided by operating activities of continuing operations

1,409

1,323

Investing Activities of Continuing Operations:



Capital expenditures

(295)

(187)

Acquisitions and dispositions of businesses, net

722

(20)

Increase in collaboration intangible assets

(157)

Other investing activities, net

69

97

Net cash flows provided by (used in) investing activities of continuing operations

339

(110)

Financing Activities of Continuing Operations:



Repayment of long-term debt, net

(46)

(63)

Decrease in short-term borrowings, net

(329)

(404)

Dividends paid on Common Stock

(465)

(412)

Repurchase of Common Stock

(335)

Other financing activities, net

156

42

Net cash flows used in financing activities of continuing operations

(1,019)

(837)

Discontinued Operations:



Net cash used in operating activities

(715)

(21)

Net cash used in investing activities

(51)

(1)

Net cash used in financing activities


(2)

Net cash flows used in discontinued operations

(766)

(24)

Effect of foreign exchange rate changes on cash and cash equivalents

(18)

50

Net (decrease) increase in cash and cash equivalents

(55)

402

Cash and cash equivalents, beginning of period

4,836

5,960

Cash and cash equivalents, end of period

4,781

6,362

Less: Cash and cash equivalents of assets held for sale

14

77

Cash and cash equivalents of continuing operations, end of period

$                                 4,767

$          6,285


See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

United Technologies Corporation

Free Cash Flow Reconciliation


(Millions)

Quarter Ended March 31,

(Unaudited)

2013

2012





Net income attributable to common shareowners from continuing operations

$ 1,270


$ 1,189


Net cash flows provided by operating activities of continuing operations

$ 1,409


$ 1,323


Net cash flows provided by operating activities of continuing operations as a percentage of net income attributable to common shareowners from continuing operations


111 %


111 %

Capital expenditures

(295)


(187)


Capital expenditures as a percentage of net income attributable to common shareowners from continuing operations


(23)%


(16)%

Free cash flow from continuing operations

$ 1,114


$ 1,136


Free cash flow from continuing operations as a percentage of net income attributable to common shareowners from continuing operations


88 %


95 %

 

Notes to Condensed Consolidated Financial Statements

  1. Debt to total capitalization equals total debt divided by total debt plus equity. Net debt to net capitalization equals total
    debt less cash and cash equivalents divided by total debt plus equity less cash and cash equivalents.
  2. Organic sales growth represents the total reported increase within the Corporation's ongoing businesses less the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and significant non-recurring items.
  3. Free cash flow, which represents cash flow from operations less capital expenditures, is the principal cash performance measure used by UTC. Management believes free cash flow provides a relevant measure of liquidity and a useful basis for assessing UTC's ability to fund its activities, including the financing of acquisitions, debt service, repurchases of UTC's common stock and distribution of earnings to shareholders. Other companies that use the term free cash flow may calculate it differently. The reconciliation of net cash flow provided by operating activities, prepared in accordance with generally accepted accounting principles, to free cash flow is shown above.
  4. Prior period amounts reported within these Condensed Consolidated Financial Statements have been revised for discontinued operations related to the actual and planned divestiture of the UTC Power business.

 

Contact:

John Moran, UTC


(860) 728-7062




Investor Relations


(860) 728-7608

SOURCE United Technologies Corp.



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