UTC Reports Second Quarter EPS Growth From Continuing Operations of 15 Percent; Expects 2012 EPS of $5.25 to $5.35 on Sales of $58 Billion to $59 Billion and Increases Restructuring

HARTFORD, Conn., July 26, 2012 /PRNewswire/ -- United Technologies Corp. (NYSE: UTX) today reported second quarter 2012 results. All results in this release reflect continuing operations unless otherwise noted.

Earnings per share of $1.62 and net income attributable to common shareowners of $1.5 billion, were up 15 percent and 14 percent, respectively, over the year ago quarter.  Results for the current quarter include $0.10 per share of net favorable one-time items, partially offset by $0.06 of restructuring costs.  Earnings per share in the year ago quarter included $0.05 per share of net favorable one-time items, partially offset by $0.04 of restructuring costs.  Before these items, earnings per share increased 13 percent year over year.  The effective tax rate for the quarter was 22.5 percent. Foreign currency translation, and hedges at Pratt & Whitney Canada, had an adverse impact of $0.05.

United Technologies completed the acquisition of Rolls Royce's interests in International Aero Engines on June 29.  For its proposed acquisition of Goodrich Corporation, United Technologies anticipates receiving full regulatory approval today and closing the acquisition by the end of this week.

"The Goodrich and IAE transactions better position UTC to serve the growing aerospace market," said Louis Chenevert, UTC Chairman & Chief Executive Officer.

"We are concluding on the substantial transformational changes to our portfolio that will generate shareholder value well into the future."

Sales for the quarter of $13.8 billion were 5 percent below prior year.  Organic sales increased 1 percent over the year ago quarter, while net divestitures and foreign currency translation each had an adverse impact of 3 points.  Combined, net divestitures and foreign currency translation accounted for $0.8 billion of the sales decline.

Second quarter segment operating margin at 16.5 percent was 70 basis points higher than prior year.  Adjusted for restructuring costs and net one-time items, segment operating margin at 16.4 percent was 80 basis points higher than prior year.  Research and development costs increased $31 million in the quarter to $525 million. Cash flow from operations was $1.7 billion and capital expenditures were $244 million in the quarter.

"UTC delivered solid operating performance while sustaining our investment in game-changing technology in the face of a challenging economic environment," Chenevert added.

New equipment orders at Otis were down 7 percent over the year ago second quarter, including unfavorable foreign exchange of 3 percentage points.  North American Residential HVAC new equipment orders at UTC Climate, Controls & Security grew 4 percent.  Commercial spares orders were down 15 percent at Pratt & Whitney's large engine business and down 10 percent at Hamilton Sundstrand.

"In light of the slowing global economy, a weaker Euro that we now assume to be in the range of $1.20 for the remainder of the year, and late July close for Goodrich, we now expect 2012 sales of $58 billion to $59 billion," Chenevert added. "We expect earnings per share of $5.25 to $5.35, versus our prior expectation of $5.30 to $5.50. As always, we will focus on cost reduction and strong execution. We are increasing our investment in restructuring this year to $500 million, up from our prior plan of $450 million, and continue to expect net one-time gains of $600 million."

UTC continues to expect cash flow from operations less capital expenditures to meet or exceed net income attributable to common shareowners for the year. The company does not anticipate share repurchase in 2012 and has a placeholder of $500 million for acquisitions excluding the Goodrich transaction. UTC continues to expect a full year effective tax rate of 29.5 percent, excluding Goodrich and one-time items.

Earnings per share from discontinued operations were a loss of $0.15 in the quarter.  Results included a $179 million pre-tax impairment charge associated with the UTC Power business, which was moved to discontinued operations in the second quarter, as well as a reserve for potential warranty costs associated with the Clipper business.

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.

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, financing plans, charges, expenditures, anticipated benefits of acquisitions and divestitures, results of operations, 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 indebtedness and capital and 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 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 or impact of acquisitions, dispositions, joint ventures and other business arrangements, including integration of acquired businesses; the timing of completion of the previously announced transaction with Goodrich; the timing and impact of anticipated dispositions of  businesses; the timing and amount of anticipated gains, losses, impairments and charges related to such dispositions; the timing and impact of anticipated debt reduction  in connection with the anticipated Goodrich transaction; 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 and political conditions in countries in which we operate and other factors beyond our control. The closing of the Goodrich acquisition is subject to customary closing conditions. The completion of the proposed divestitures of businesses is subject to uncertainties, including the ability to secure disposition agreements on acceptable terms; the satisfaction of information, consultation, and / or negotiation obligations, if any, with employee representatives; and satisfaction of other customary conditions.

These 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 we distribute 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

 










Quarter Ended

June 30,


Six Months Ended

June 30,




(Unaudited)


(Unaudited)

(Millions, except per share amounts)


2012


2011


2012


2011














Net sales


$

13,807


$

14,469


$

26,223


$

27,142















Costs and Expenses:














Cost of products and services sold



9,934



10,468



18,864



19,620


Research and development



525



494



1,069



962


Selling, general and administrative



1,509



1,576



3,038



3,026


       Total Costs and Expenses



11,968



12,538



22,971



23,608

Other income, net



340



219



640



316

Operating profit



2,179



2,150



3,892



3,850


Interest expense, net



168



141



297



290

Income from continuing operations before income taxes



2,011



2,009



3,595



3,560


Income tax expense



453



612



773



1,103

Income from continuing operations



1,558



1,397



2,822



2,457















Discontinued operations:














(Loss) income from operations



(3)



70



27



149


Loss on disposal



(210)



-



(1,171)



-


Income tax benefit (expense)



77



(37)



151



(75)


(Loss) income from discontinued operations



(136)



33



(993)



74















Net income



1,422



1,430



1,829



2,531


Less: Noncontrolling interest in subsidiaries' earnings



94



112



171



201

Net income attributable to common shareowners


$

1,328


$

1,318


$

1,658


$

2,330















Comprehensive income


$

721


$

1,637


$

1,625


$

3,442


Less: Comprehensive income attributable to

     noncontrolling interests



67



114



152



239

Comprehensive income attributable to common

     shareowners


$

654


$

1,523


$

1,473


$

3,203















Net income (loss) attributable to common shareowners:














From continuing operations


$

1,466


$

1,288


$

2,655


$

2,261


From discontinued operations



(138)



30



(997)



69















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














From continuing operations


$

1.64


$

1.44


$

2.98


$

2.52


From discontinued operations



(0.16)



0.03



(1.12)



0.08















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














From continuing operations


$

1.62


$

1.41


$

2.94


$

2.48


From discontinued operations



(0.15)



0.03



(1.10)



0.08

 

As described on the following pages, consolidated results for the quarters and six months ended June 30, 2012 and 2011 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

June 30,


Six Months Ended

June 30,



(Unaudited)


(Unaudited)

(Millions)


2012


2011


2012


2011














Net Sales













Otis


$

3,027


$

3,192


$

5,797


$

5,964

UTC Climate, Controls & Security



4,572



5,140



8,684



9,533

Pratt & Whitney



3,447



3,276



6,499



6,149

Hamilton Sundstrand



1,254



1,171



2,490



2,309

Sikorsky



1,620



1,786



2,966



3,368

Segment Sales



13,920



14,565



26,436



27,323

Eliminations and other



(113)



(96)



(213)



(181)

Consolidated Net Sales


$

13,807


$

14,469


$

26,223


$

27,142



























Operating Profit













Otis


$

651


$

743


$

1,217


$

1,373

UTC Climate, Controls & Security



789



665



1,333



1,136

Pratt & Whitney



427



424



816



852

Hamilton Sundstrand



211



185



409



357

Sikorsky



213



277



349



418

Segment Operating Profit



2,291



2,294



4,124



4,136

Eliminations and other



(8)



(40)



(32)



(93)

General corporate expenses



(104)



(104)



(200)



(193)

Consolidated Operating Profit


$

2,179


$

2,150


$

3,892


$

3,850



























Segment Operating Profit Margin













Otis



21.5%



23.3%



21.0%



23.0%

UTC Climate, Controls & Security



17.3%



12.9%



15.4%



11.9%

Pratt & Whitney



12.4%



12.9%



12.6%



13.9%

Hamilton Sundstrand



16.8%



15.8%



16.4%



15.5%

Sikorsky



13.1%



15.5%



11.8%



12.4%

Consolidated Segment Operating Profit Margin



16.5%



15.8%



15.6%



15.1%

As described on the following pages, consolidated results for the quarters and six months ended June 30, 2012 and 2011 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

June 30,


Six Months Ended

June 30,




(Unaudited)


(Unaudited)

(Millions)


2012


2011


2012


2011















Restructuring Costs included in Operating Profit:







     Otis


$

(35)


$

(4)


$

(63)


$

(6)

     UTC Climate, Controls & Security



(37)



(24)



(72)



(45)

     Pratt & Whitney



(17)



(25)



(54)



(29)

     Hamilton Sundstrand



(3)



(2)



(5)



(4)

     Sikorsky



(3)



(2)



(6)



(3)

     Eliminations and other



2



-



(4)



-





(93)



(57)



(204)



(87)















Non-Recurring items included in Operating Profit:







     UTC Climate, Controls & Security



110



-



222



-

     Sikorsky



-



73



-



73

     Eliminations and other



-



-



(10)



-





110



73



212



73
















Total impact on Consolidated Operating Profit


17



16



8



(14)















Non-Recurring items included in

     Interest Expense, Net


-



-



15



-
















Tax effect of restructuring and non-recurring













      items above



19



(8)



(4)



2