2014

UTC Reports First Quarter 2014 Results - EPS of $1.32 on sales of $14.75 billion

- Organic sales growth of 5%

- Increases lower end of 2014 EPS range, now expects EPS of $6.65 to $6.85

HARTFORD, Conn., April 22, 2014 /PRNewswire/ -- United Technologies Corp. (NYSE: UTX) reported first quarter earnings per share of $1.32 and net income attributable to common shareowners of $1.2 billion, down 5 percent and 4 percent respectively, over the year ago quarter.  Results for the current quarter include $0.09 per share of restructuring costs.  Earnings per share in the year ago quarter included $0.11 of favorable one-time items net of restructuring costs.  Excluding these items in both quarters, earnings per share increased 10 percent year over year. 

Sales of $14.75 billion increased 2 percent, reflecting the benefit of organic growth (5 points) partially offset by net divestitures (2 points) and adverse foreign exchange (1 point).  First quarter segment operating profit increased 4 percent over the prior year quarter.  Adjusted for restructuring costs and net one-time items, segment operating profit grew 9 percent.  

"UTC delivered strong results to start the year with continued momentum coming out of 2013," said Louis Chenevert, UTC Chairman & Chief Executive Officer.  "All five of the segments contributed to UTC's organic sales growth in the quarter.  Our focus on growth and execution is paying off as we capitalize on improving end markets."

New equipment orders at Otis increased 9 percent over the year ago first quarter, led by 27 percent growth in China.  Foreign currency had an unfavorable impact of 2 points overall and a favorable impact of 2 points in China.  Equipment orders at UTC Climate, Controls & Security increased 1 percent organically, with growth in HVAC and fire and security products partially offset by a decline at Transicold.  Large commercial engine spares orders were up 11 percent at Pratt & Whitney and commercial spares orders increased 9 percent at UTC Aerospace Systems. 

"Continued organic growth and orders strength give us confidence in our sales expectation of $64 billion for 2014," added Chenevert.  "Based on visibility to additional restructuring projects with solid returns, we now plan to increase restructuring spending from $300 million to $375 million, which we expect to be offset by one-time gains.  The sales outlook together with continued cost reduction positions us to increase the lower end of our earnings per share range.  We now expect earnings per share of $6.65 to $6.85, up from $6.55 to $6.85 previously."

Cash flow from operations was $1.3 billion and capital expenditures were $333 million in the quarter.  Share repurchase was $335 million and UTC continues to anticipate share repurchase, acquisitions, and debt paydown of $1 billion each in 2014.  The company continues to target cash flow from operations less capital expenditures equal to net income attributable to common shareowners for the year.        

United Technologies Corp., based in Hartford, Connecticut, provides 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 press release includes statements that constitute "forward-looking statements" under the securities laws. Forward-looking statements often contain words such as "believe," "expect," "plans," "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, share repurchases 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; the impact of government budget and funding decisions on the economy; changes in government procurement priorities and funding; weather conditions and natural disasters; delays and disruption in delivery of materials and services from suppliers; company and customer directed cost reduction efforts and restructuring costs and consequences thereof; the impact of acquisitions, dispositions, joint ventures and similar transactions; the development and production of new products and services; the impact of diversification across product lines, regions and industries; the outcome of legal proceedings, investigations and other contingencies; pension plan assumptions and future contributions; the effect of changes in tax, environmental and other laws and regulations and political conditions; and other factors beyond our control. The level of share repurchases depends upon 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 press release and we undertake no obligation to update or revise any forward-looking statements as of a later date. For additional information identifying factors that may cause actual results to vary materially from those stated in 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



Contact:

John Moran, UTC


(860) 728-7062




Investor Relations


(860) 728-7608

 

 

United Technologies Corporation

Condensed Consolidated Statement of Comprehensive Income




Quarter Ended March 31,



(Unaudited)

(Millions, except per share amounts)

2014


2013

Net Sales

$

14,745



$

14,399


Costs and Expenses:





Cost of products and services sold

10,690



10,465



Research and development

624



610



Selling, general and administrative

1,596



1,627



Total Costs and Expenses

12,910



12,702


Other income, net

263



309


Operating profit

2,098



2,006



Interest expense, net

225



236


Income from continuing operations before income taxes

1,873



1,770



Income tax expense

567



418


Income from continuing operations

1,306



1,352



Less: Noncontrolling interest in subsidiaries' earnings from continuing operations

93



82


Income from continuing operations attributable to common shareowners

1,213



1,270


Discontinued Operations:





Income from operations



20



Loss on disposal



(15)



Income tax expense



(9)


Loss from discontinued operations attributable to common shareowners



(4)


Net income attributable to common shareowners

$

1,213



$

1,266


Comprehensive income

$

1,238



$

908



Less: Comprehensive income attributable to noncontrolling interests

86



61


Comprehensive income attributable to common shareowners

$

1,152



$

847


Earnings Per Share of Common Stock - Basic:





From continuing operations attributable to common shareowners

$

1.35



$

1.41



From discontinued operations attributable to common shareowners




Earnings Per Share of Common Stock - Diluted:





From continuing operations attributable to common shareowners

$

1.32



$

1.39



From discontinued operations attributable to common shareowners




Weighted Average Number of Shares Outstanding:





Basic shares

901



901



Diluted shares

917



914



As described on the following pages, consolidated results for the quarters ended March 31, 2014 and 2013 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



Quarter Ended March 31,


(Unaudited)

(Millions)

2014


2013

Net Sales




Otis

$

2,955



$

2,814


UTC Climate, Controls & Security

3,851



3,837


Pratt & Whitney

3,329



3,402


UTC Aerospace Systems

3,450



3,263


Sikorsky

1,361



1,249


Segment Sales

14,946



14,565


Eliminations and other

(201)



(166)


Consolidated Net Sales

$

14,745



$

14,399






Operating Profit




Otis

$

570



$

575


UTC Climate, Controls & Security

537



520


Pratt & Whitney

388



406


UTC Aerospace Systems

590



501


Sikorsky

86



90


Segment Operating Profit

2,171



2,092


Eliminations and other

39



21


General corporate expenses

(112)



(107)


Consolidated Operating Profit

$

2,098



$

2,006










Segment Operating Profit Margin




Otis

19.3

%


20.4

%

UTC Climate, Controls & Security

13.9

%


13.6

%

Pratt & Whitney

11.7

%


11.9

%

UTC Aerospace Systems

17.1

%


15.4

%

Sikorsky

6.3

%


7.2

%

Segment Operating Profit Margin

14.5

%


14.4

%


As described on the following pages, consolidated results for the quarters ended March 31, 2014 and 2013 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



Quarter Ended March 31,


(Unaudited)

In Millions - Income (Expense)

2014


2013

Restructuring Costs included in Operating Profit:




Otis

$

(17)



$

(10)


UTC Climate, Controls & Security

(43)



(22)


Pratt & Whitney

(42)



(7)


UTC Aerospace Systems

(6)



(8)


Sikorsky

(17)



(5)



(125)



(52)


Non-Recurring items included in Operating Profit:




UTC Climate, Controls & Security



38





38


Total impact on Consolidated Operating Profit

(125)



(14)


Tax effect of restructuring and non-recurring items above

42



16


Non-Recurring items included in Income Tax Expense



95


Impact on Net Income from Continuing Operations Attributable to Common Shareowners

$

(83)



$

97


Impact on Diluted Earnings Per Share from Continuing Operations

$

(0.09)



$

0.11


 

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

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 $95 million is primarily related to the retroactive extension of the research and development credit to 2012.

 

United Technologies Corporation

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



Quarter Ended March 31,


(Unaudited)

(Millions)

2014


2013

Net Sales




Otis

$

2,955



$

2,814


UTC Climate, Controls & Security

3,851



3,837


Pratt & Whitney

3,329



3,402


UTC Aerospace Systems

3,450



3,263


Sikorsky

1,361



1,249


Segment Sales

14,946



14,565


Eliminations and other

(201)



(166)


Consolidated Net Sales

$

14,745



$

14,399






Adjusted Operating Profit




Otis

$

587



$

585


UTC Climate, Controls & Security

580



504


Pratt & Whitney

430



413


UTC Aerospace Systems

596



509


Sikorsky

103



95


Segment Operating Profit

2,296



2,106


Eliminations and other

39



21


General corporate expenses

(112)



(107)


Adjusted Consolidated Operating Profit

$

2,223



$

2,020






Adjusted Segment Operating Profit Margin




Otis

19.9

%


20.8

%

UTC Climate, Controls & Security

15.1

%


13.1

%

Pratt & Whitney

12.9

%


12.1

%

UTC Aerospace Systems

17.3

%


15.6

%

Sikorsky

7.6

%


7.6

%

Adjusted Segment Operating Profit Margin

15.4

%


14.5

%

 

 

United Technologies Corporation

Condensed Consolidated Balance Sheet



March 31,


December 31,


2014


2013

(Millions)

(Unaudited)


(Unaudited)

Assets




Cash and cash equivalents

$

4,477



$

4,619


Accounts receivable, net

11,537



11,458


Inventories and contracts in progress, net

10,992



10,330


Other assets, current

2,814



3,035


Total Current Assets

29,820



29,442


Fixed assets, net

8,895



8,866


Goodwill

28,216



28,168


Intangible assets, net

15,528



15,521


Other assets

8,770



8,597


Total Assets

$

91,229



$

90,594






Liabilities and Equity




Short-term debt

$

304



$

500


Accounts payable

6,949



6,965


Accrued liabilities

15,678



15,335


Total Current Liabilities

22,931



22,800


Long-term debt

19,739



19,741


Other long-term liabilities

14,727



14,723


Total Liabilities

57,397



57,264


Redeemable noncontrolling interest

137



111


Shareowners' Equity:




Common Stock

14,813



14,638


Treasury Stock

(20,760)



(20,431)


Retained earnings

41,205



40,539


Accumulated other comprehensive loss

(2,941)



(2,880)


Total Shareowners' Equity

32,317



31,866


Noncontrolling interest

1,378



1,353


Total Equity

33,695



33,219


Total Liabilities and Equity

$

91,229



$

90,594






Debt Ratios:




Debt to total capitalization

37

%


38

%

Net debt to net capitalization

32

%


32

%


See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

United Technologies Corporation

Condensed Consolidated Statement of Cash Flows



Quarter Ended March 31,


(Unaudited)

(Millions)

2014


2013

Operating Activities of Continuing Operations:




Income from continuing operations

$

1,306



$

1,352


Adjustments to reconcile net income from continuing operations to net cash flows provided

by operating activities of continuing operations:




Depreciation and amortization

467



444


Deferred income tax provision (benefit)

44



(40)


Stock compensation cost

60



70


Change in working capital

(521)



(198)


Global pension contributions

(84)



(29)


Other operating activities, net

63



(190)


Net cash flows provided by operating activities of continuing operations

1,335



1,409


Investing Activities of Continuing Operations:




Capital expenditures

(333)



(295)


Acquisitions and dispositions of businesses, net

106



722


Increase in collaboration intangible assets

(142)



(157)


Other investing activities, net

(73)



69


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

(442)



339


Financing Activities of Continuing Operations:




Issuance (repayment) of long-term debt, net

6



(46)


Decrease in short-term borrowings, net

(200)



(329)


Dividends paid on Common Stock

(514)



(465)


Repurchase of Common Stock

(335)



(335)


Other financing activities, net

48



156


   Net cash flows used in financing activities of continuing operations

(995)



(1,019)


Discontinued Operations:




Net cash used in operating activities



(715)


Net cash used in investing activities



(51)


   Net cash flows used in discontinued operations



(766)


Effect of foreign exchange rate changes on cash and cash equivalents

(40)



(18)


   Net decrease in cash and cash equivalents

(142)



(55)


Cash and cash equivalents, beginning of period

4,619



4,836


Cash and cash equivalents, end of period

4,477



4,781


Less: Cash and cash equivalents of assets held for sale



14


Cash and cash equivalents of continuing operations, end of period

$

4,477



$

4,767



See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

United Technologies Corporation

Free Cash Flow Reconciliation



Quarter Ended March 31,


(Unaudited)

(Millions)

2014


2013







Net income from continuing operations attributable to common shareowners

$

1,213




$

1,270



Net cash flows provided by operating activities of continuing operations

$

1,335




$

1,409



Net cash flows provided by operating activities of continuing operations as a

percentage of net income from continuing operations attributable to common

shareowners


110

%



111

%

Capital expenditures

(333)




(295)



Capital expenditures as a percentage of net income from continuing operations

attributable to common shareowners


(27)

%



(23)

%

Free cash flow from continuing operations

$

1,002




$

1,114



Free cash flow from continuing operations as a percentage of net income from

continuing operations attributable to common shareowners


83

%



88

%

 

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.

 

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SOURCE United Technologies Corp.



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