UTC Reports First Quarter EPS Growth of 19 Percent on 11 Percent Higher Sales; Raises 2011 Sales and EPS Outlook

News provided by

United Technologies Corp.

Apr 20, 2011, 06:59 ET

HARTFORD, Conn., April 20, 2011 /PRNewswire/ -- United Technologies Corp. (NYSE: UTX) today reported first quarter 2011 earnings per share of $1.11 and net income attributable to common shareowners of $1.0 billion, up 19 percent and 17 percent, respectively, over the year ago quarter.  Sales for the quarter increased 11 percent to $13.3 billion with 9 percent organic growth.  Favorable foreign currency translation and net acquisitions each contributed 1 percent to the sales growth.  

Results for the current quarter include $0.02 per share in restructuring costs. Earnings per share in the year ago quarter included $0.05 in restructuring costs.  Before these items, earnings per share increased 15 percent year over year.  Foreign currency translation and currency hedges at Pratt & Whitney Canada accounted for $0.01 of the earnings per share increase.

First quarter segment operating margin at 14.7 percent was 100 basis points higher than prior year.  Adjusted for restructuring costs, segment operating margin at 15.0 percent was 80 basis points higher than prior year.  Research and development costs increased year over year by $88 million to $485 million.  Cash flow from operations was $1.36 billion and, after capital expenditures of $180 million, exceeded net income attributable to common shareowners.

"This was another solid quarter for UTC with broad-based acceleration in organic growth, as well as strong earnings momentum and cash generation," said Louis Chenevert, UTC Chairman & Chief Executive Officer.  "Nearly 20 percent growth in earnings per share reflects excellent conversion, especially as we continued to increase our investments in game changing products and technologies."  

"Based on the strong start to the year, particularly in Carrier's short cycle businesses, we are raising the full year earnings per share expectation to $5.25 to $5.40, from $5.20 to $5.35 previously.  We now anticipate 2011 EPS growth to be 11 to 14 percent on sales growth of 5 percent," Chenevert added.  "The global economic recovery continues to gain traction as evidenced by the momentum of our end markets and we now expect 2011 sales of $57 billion, at the high end of our prior range of $56 billion to $57 billion."  

New equipment orders at Otis were up 17 percent over the year ago first quarter including favorable foreign exchange of 3 percentage points.  Commercial HVAC new equipment orders at Carrier grew 26 percent including favorable foreign exchange of 2 points.  Commercial spares orders at Pratt & Whitney's large engine business grew 33 percent and at Hamilton Sundstrand were up 23 percent over the year ago first quarter.

"Continued focus on working capital drove strong cash generation even with the increase in inventory.  We continue to expect UTC's cash flow from operations less capital expenditures to meet or exceed net income attributable to common shareowners for the year," Chenevert said.  

Share repurchase in the quarter was $750 million and acquisition spending was $106 million.  Full year expectations remain unchanged for both share repurchase and acquisitions at $2.5 billion and $1.5 billion, respectively.

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 contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws.  From time to time, oral or written forward-looking statements may also be included in other materials released to the public.  These forward-looking statements are intended to provide management's current expectations or plans for our future operating and financial performance, 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," "target," "anticipate," "will," "should," "see," "guidance," "confident" and other words of similar meaning in connection with a discussion of future operating or financial performance.  These include, among others, statements relating to: future sales, earnings, cash flow, results of operations, uses of cash and other measures of financial performance; the effect of economic conditions in the markets in which we operate and in the United States and globally and any changes therein, including financial market conditions, fluctuation in commodity prices, interest rates and foreign currency exchange rates; levels of end market demand in construction and in both the commercial and defense segments of the aerospace industry; levels of air travel, financial difficulties (including bankruptcy) of commercial airlines; the impact of weather conditions, natural disasters and the financial condition of our customers and suppliers; delays and disruption in delivery of materials and services from suppliers; new business opportunities; cost reduction efforts and restructuring costs and savings and other consequences thereof; the scope, nature or impact of acquisition and divestiture activity, including integration of acquired businesses into our existing businesses; the development, production and support of advanced technologies and 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 repurchases of common stock; future levels of indebtedness and capital and research and development spending; 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 the United States and other countries in which we operate.  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 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 Operations








Quarter Ended

March 31,








(Unaudited)

(Millions, except per share amounts)





2011 

2010 












Net sales





$

13,344 

$

12,040 













Costs, Expenses and Other:











Cost of products and services sold








9,641 

8,732 

Research and development






485 

397 

Selling, general and administrative






1,543 

1,424 

Other income, net






(104)

(36)

Operating profit






1,779 

1,523 

Interest expense, net






149 

171 

Income before income taxes






1,630 

1,352 

Income tax expense






529 

405 

Net income






1,101 

947 

Less: Noncontrolling interest in subsidiaries' earnings






89 

81 

Net income attributable to common shareowners





$

1,012 

$

866 













Earnings Per Share of Common Stock:











Basic





$

1.13 

$

.95 

Diluted





$

1.11 

$

.93 













Weighted average number of shares outstanding:











Basic shares






899 

914 

Diluted shares






915 

929 













As described on the following pages, consolidated results for the quarters ended March 31, 2011 and 2010 include restructuring and other costs 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)





2011 

2010 












Net Sales










Otis





$

2,772 

$

2,726 

Carrier






2,766 

2,467 

UTC Fire & Security






1,628 

1,415 

Pratt & Whitney






3,095 

2,841 

Hamilton Sundstrand






1,448 

1,326 

Sikorsky






1,582 

1,358 

Segment Sales






13,291 

12,133 

Eliminations and other






53 

(93)

Consolidated Net Sales





$

13,344 

$

12,040 
























Operating Profit










Otis





$

630 

$

596 

Carrier






310 

139 

UTC Fire & Security






162 

123 

Pratt & Whitney






471 

436 

Hamilton Sundstrand






244 

221 

Sikorsky






141 

145 

Segment Operating Profit






1,958 

1,660 

Eliminations and other






(90)

(60)

General corporate expenses






(89)

(77)

Consolidated Operating Profit





$

1,779 

$

1,523 
























Segment Operating Profit Margin










Otis






22.7%

21.9%

Carrier






11.2%

5.6%

UTC Fire & Security






10.0%

8.7%

Pratt & Whitney






15.2%

15.3%

Hamilton Sundstrand






16.9%

16.7%

Sikorsky






8.9%

10.7%

Segment Operating Profit Margin






14.7%

13.7%


As described on the following pages, consolidated results for the quarters ended March 31, 2011 and 2010 include restructuring and other costs that management believes should be considered when evaluating the underlying financial performance.

United Technologies Corporation

Restructuring and Other Costs


Consolidated operating profit for the quarters ended March 31, 2011 and 2010 includes restructuring and other costs as follows:








Quarter Ended

March 31,








(Unaudited)

(Millions)





2011 

2010 

Otis





$

2 

$

11 

Carrier






14 

18 

UTC Fire & Security






7 

10 

Pratt & Whitney






4 

26 

Hamilton Sundstrand






3 

2 

Sikorsky






1 

- 

Total Restructuring and Other Costs





$

31 

$

67 














The impact of restructuring and other costs on net income attributable to common shareowners and diluted earnings per share of common stock for the quarters ended March 31, 2011 and 2010 is as follows:








Quarter Ended

March 31,








(Unaudited)

(Millions)





2011 

2010 













Impact on Income Before Income Taxes –











Restructuring and other costs





$

(31)

$

(67)

Tax effect of above






10 

22 

Impact on Net Income Attributable to Common

    Shareowners





$

(21)

$

(45)













Impact on Diluted Earnings Per Share of

    Common Stock





$

(0.02)

$

(0.05)


The following page provides segment net sales, operating profits and operating profit margins as adjusted for the aforementioned restructuring and other costs.  Management believes these adjusted results more accurately portray the ongoing operational performance and fundamentals of the underlying businesses.  The amount and timing of restructuring and other 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 and Other Costs (as reflected on the previous page)







Quarter Ended

March 31,







(Unaudited)

(Millions)





2011 

2010 












Net Sales










Otis





$

2,772 

$

2,726 

Carrier






2,766 

2,467 

UTC Fire & Security






1,628 

1,415 

Pratt & Whitney






3,095 

2,841 

Hamilton Sundstrand






1,448 

1,326 

Sikorsky






1,582 

1,358 

Segment Sales






13,291 

12,133 

Eliminations and other






53 

(93)

Consolidated Net Sales





$

13,344 

$

12,040 
























Adjusted Operating Profit










Otis





$

632 

$

607 

Carrier






324 

157 

UTC Fire & Security






169 

133 

Pratt & Whitney






475 

462 

Hamilton Sundstrand






247 

223 

Sikorsky






142 

145 

Adjusted Segment Operating Profit






1,989 

1,727 

Eliminations and other






(90)

(60)

General corporate expenses






(89)

(77)

Adjusted Consolidated Operating Profit





$

1,810 

$

1,590 
























Adjusted Segment Operating Profit Margin










Otis






22.8%

22.3%

Carrier






11.7%

6.4%

UTC Fire & Security






10.4%

9.4%

Pratt & Whitney






15.3%

16.3%

Hamilton Sundstrand






17.1%

16.8%

Sikorsky






9.0%

10.7%

Adjusted Segment Operating Profit Margin






15.0%

14.2%

United Technologies Corporation

Condensed Consolidated Balance Sheet



March 31,

December 31,



2011 

2010 

(Millions)

(Unaudited)

(Unaudited)

Assets





Cash and cash equivalents

$

4,440 

$

4,083 

Accounts receivable, net

9,260 

8,925 

Inventories and contracts in progress, net

8,827 

7,766 

Other assets, current

2,478 

2,736 

Total Current Assets

25,005 

23,510 








Fixed assets, net

6,382 

6,280 

Goodwill

18,193 

17,721 

Intangible assets, net

4,177 

4,060 

Other assets

6,907 

6,922 








Total Assets

$

60,664 

$

58,493 








Liabilities and Equity





Short-term debt

$

501 

$

279 

Accounts payable

5,635 

5,206 

Accrued liabilities

12,780 

12,247 

Total Current Liabilities

18,916 

17,732 








Long-term debt

9,986 

10,010 

Other long-term liabilities

8,317 

8,102 

Total Liabilities

37,219 

35,844 








Redeemable noncontrolling interest

319 

317 








Shareowners' Equity:





Common Stock

12,627 

12,431 

Treasury Stock

(18,212)

(17,468)

Retained earnings

30,812 

30,191 

Accumulated other comprehensive loss

(3,101)

(3,769)

Total Shareowners' Equity

22,126 

21,385 

Noncontrolling interest

1,000 

947 

Total Equity

23,126 

22,332 








Total Liabilities and Equity

$

60,664 

$

58,493 








Debt Ratios:





Debt to total capitalization

31%

32%

Net debt to net capitalization

21%

22%








See accompanying Notes to Condensed Consolidated Financial Statements.

United Technologies Corporation

Condensed Consolidated Statement of Cash Flows









Quarter Ended

March 31,









(Unaudited)

(Millions)





2011 

2010 














Operating Activities:











Net income attributable to common shareowners





$

1,012 

$

866 

Noncontrolling interest in subsidiaries' earnings






89 

81 

Net income






1,101 

947 

Adjustments to reconcile net income to net cash flows provided

   by operating activities:










Depreciation and amortization






333 

327 


Deferred income tax provision






124 

59 


Stock compensation cost






52 

45 


Change in working capital






(301)

(194)

Global pension contributions






(29)

(42)

Other operating activities, net






81 

12 


Net cash flows provided by operating activities




1,361 

1,154 














Investing Activities:











Capital expenditures






(180)

(147)

Acquisitions and dispositions of businesses, net






(57)

(2,067)

Other investing activities, net






36 

90 


Net cash flows used in investing activities






(201)

(2,124)














Financing Activities:











Increase in borrowings, net






187 

2,172 

Dividends paid on Common Stock






(368)

(373)

Repurchase of Common Stock






(727)

(500)

Other financing activities, net






29 

19 


Net cash flows (used in) provided by financing activities




(879)

1,318 














Effect of foreign exchange rate changes on cash and cash equivalents



76 

(9)
















Net increase in cash and cash equivalents






357 

339 














Cash and cash equivalents, beginning of year






4,083 

4,449 

Cash and cash equivalents, end of period





$

4,440 

$

4,788 




























See accompanying Notes to Condensed Consolidated Financial Statements.

United Technologies Corporation

Free Cash Flow Reconciliation



Quarter Ended March 31,



(Unaudited)

(Millions)

2011 

2010 












Net income attributable to common shareowners

$

1,012 


$

866 

Noncontrolling interest in subsidiaries' earnings

89 



81 

Net income

1,101 



947 













Depreciation and amortization

333 



327 

Change in working capital

(301)



(194)

Other operating activities, net

228 



74 

Net cash flows provided by operating activities

1,361 



1,154 


Net cash flows provided by operating activities as a percentage

    of net income attributable to common shareowners


135 

%


133 

%

Capital expenditures

(180)



(147)


Capital expenditures as a percentage of net income

    attributable to common shareowners


(18)

%


(17)

%

Free cash flow

$

1,181 


$

1,007 


Free cash flow as a percentage of net income

    attributable to common shareowners


117 

%


116 

%


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.

United Technologies Corporation

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) We previously reported "Other income, net," which included "Interest income," as a component of "Revenues."   "Other income, net," excluding "Interest income," is now reflected as a component of "Costs, Expenses and Other," while "Interest income" is now netted with "Interest expense" for financial statement presentation.

Contact:  John Moran
(860) 728-7062

SOURCE United Technologies Corp.

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