UTC Reports Fourth Quarter and Full Year EPS of $1.15 and $4.12; Affirms 2010 Outlook of 7 to 13 Percent Earnings Growth

Jan 27, 2010, 07:09 ET from United Technologies Corp.

HARTFORD, Conn., Jan. 27 /PRNewswire-FirstCall/ -- United Technologies Corp. (NYSE: UTX) today reported fourth quarter 2009 earnings per share of $1.15 and net income attributable to common shareowners of $1.1 billion, down 7 percent and 6 percent, respectively, over the year ago quarter.  Results for the current quarter include an $0.08 per share charge for restructuring costs net of one time items.  In 2008, there was a net benefit of $0.06 per share from one time gains in excess of restructuring costs. Before these items, earnings per share grew 5 percent, or $0.06.  Foreign currency translation contributed $0.04 of the earnings per share growth.

Consolidated revenues for the quarter of $14.1 billion were 5 percent below prior year, including 6 points of organic decline and 1 point of net divestitures, offset by 3 points of favorable foreign currency translation.  Segment operating margin at 13.7 percent was 110 basis points higher than prior year.  Adjusted for restructuring costs and one time items, segment operating margin was 150 basis points higher than prior year.  Cash flow from operations was $1.5 billion, including $637 million of global pension contributions.  Capital expenditures were $325 million in the quarter.

Full year earnings per share of $4.12 and net income attributable to common shareowners of $3.8 billion declined 16 and 18 percent, respectively, from 2008 results.  Revenues of $52.9 billion were 11 percent below prior year including organic decline (7 points), adverse foreign currency translation (3 points), and net divestitures (1 point).  Cash flow from operations was $5.4 billion and capital expenditures were $826 million.

"UTC closed the year with solid performance in the face of continuing difficult end markets," said Louis Chenevert, UTC Chairman & Chief Executive Officer.  "Relentless focus on costs across the business contributed to strong margin expansion in the quarter.  Strong working capital performance led full year cash flow from operations less capital expenditures to be 118 percent of net income attributable to common shareowners, including $1.3 billion of global pension contributions."

Restructuring and other charges for the quarter were $135 million, bringing the full year to $830 million. For the year, restructuring and other charges were $0.46 of earnings per share, net of one-time gains.

"Year over year order rates have remained stable, although at low levels, and we saw increases in some Asian economies, notably China,"  Chenevert continued.  "While order rates will keep pressure on our top line, particularly in the first half of 2010, we anticipate that benefits from structural cost actions will allow us to deliver earnings growth of 7 percent to 13 percent with 2010 earnings per share of $4.40 to $4.65.

"We expect our usual standard of cash flow from operations less capital expenditures equal to or exceeding net income attributable to common shareowners in 2010.  Our acquisition placeholder is $3 billion including the GE Security transaction, and share repurchase is expected to be $1.5 billion," Chenevert added.

Share repurchase in the quarter was $320 million and totaled $1.1 billion for the year.  Acquisition spending was $703 million for the year with $146 million in the fourth quarter.  

The accompanying tables include information integral to assessing the company's financial position, operating performance, and cash flow.

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.

This release includes "forward looking statements" concerning expected revenue, earnings, cash flow, share repurchases, restructuring; anticipated benefits of UTC's diversification, cost reduction efforts and business model; and other matters that are subject to risks and uncertainties. These statements often contain words such as "expect", "anticipate", "plan", "estimate", "believe", "will", "should", "see", "guidance" and similar terms. Important factors that could cause actual results to differ materially from those anticipated or implied in forward looking statements include extended weakness in global economic conditions; extended contraction in credit conditions; the impact of volatility and deterioration in financial markets on overall levels of economic activity; declines in end market demand in construction and in both the commercial and defense segments of the aerospace industry; fluctuation in commodity prices, interest rates, foreign currency exchange rates, and the impact of weather conditions; and company specific items including the impact of further deterioration and extended weakness in global economic conditions on demand for our products and services, the financial strength of customers and suppliers and on levels of air travel; financial difficulties, including bankruptcy, of commercial airlines; the availability and impact of acquisitions; the rate and ability to effectively integrate these acquired businesses; the ability to achieve cost reductions at planned levels; challenges in the design, development, production and support of advanced technologies and new products and services; delays and disruption in delivery of materials and services from suppliers; labor disputes; and the outcome of legal proceedings. The level of share repurchases may vary depending on the level of other investing activities. For information identifying other important economic, political, regulatory, legal, technological, competitive and other uncertainties, see UTC's SEC filings as submitted from time to time, including but not limited to, the information included in UTC's 10-K and 10-Q Reports under the headings "Business", "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Cautionary Note Concerning Factors that May Affect Future Results", as well as the information included in UTC's Current Reports on Form 8-K.

UTC-IR

CONTACT:

John Moran

860-728-7062

www.utc.com

United Technologies Corporation

Condensed Consolidated Statement of Operations

Quarter Ended

December 31,

Year Ended

December 31,

(Unaudited)

(Unaudited)

(Millions, except per share amounts)

2009 

2008 

2009 

2008 

Revenues

$

14,100 

$

14,770 

$

52,920 

$

59,757 

Costs and Expenses

Cost of goods and services sold

10,317 

10,828 

38,861 

43,637 

Research and development

421 

490 

1,558 

1,771 

Selling, general and administrative

1,555 

1,649 

6,036 

6,724 

Operating Profit

1,807 

1,803 

6,465 

7,625 

Interest expense

183 

171 

705 

689 

Income before income taxes

1,624 

1,632 

5,760 

6,936 

Income taxes

455 

403 

1,581 

1,883 

Net income

1,169 

1,229 

4,179 

5,053 

Less: Noncontrolling interest in subsidiaries' earnings

96 

84 

350 

364 

Net income attributable to common shareowners

$

1,073 

$

1,145 

$

3,829 

$

4,689 

Net Earnings Per Share of Common Stock

Basic

$

1.17 

$

1.24 

$

4.17 

$

5.00 

Diluted

$

1.15 

$

1.23 

$

4.12 

$

4.90 

Average Shares

Basic

915 

922 

917 

938 

Diluted

931 

933 

929 

956 

As described on the following pages, consolidated results for the quarters and years ended December 31, 2009 and 2008 include non-recurring items, restructuring and other charges.

See accompanying Notes to Condensed Consolidated Financial Statements.

United Technologies Corporation

Segment Revenues and Operating Profit

Quarter Ended

December 31,

Year Ended

December 31,

(Unaudited)

(Unaudited)

(Millions)

2009 

2008 

2009 

2008 

Revenues

Otis

$

3,200 

$

3,243 

$

11,779 

$

12,949 

Carrier

2,819 

3,262 

11,413 

14,944 

UTC Fire & Security

1,532 

1,502 

5,531 

6,462 

Pratt & Whitney

3,255 

3,587 

12,577 

14,041 

Hamilton Sundstrand

1,416 

1,564 

5,599 

6,207 

Sikorsky

1,947 

1,600 

6,318 

5,368 

Segment Revenues

14,169 

14,758 

53,217 

59,971 

Eliminations and other

(69)

12 

(297)

(214)

Consolidated Revenues

$

14,100 

$

14,770 

$

52,920 

$

59,757 

Operating Profit

Otis

$

677 

$

578 

$

2,447 

$

2,477 

Carrier

146 

160 

740 

1,316 

UTC Fire & Security

196 

147 

493 

542 

Pratt & Whitney

488 

520 

1,835 

2,122 

Hamilton Sundstrand

231 

304 

857 

1,099 

Sikorsky

202 

152 

608 

478 

Segment Operating Profit

1,940 

1,861 

6,980 

8,034 

Eliminations and other

(25)

54 

(167)

(1)

General corporate expenses

(108)

(112)

(348)

(408)

Consolidated Operating Profit

$

1,807 

$

1,803 

$

6,465 

$

7,625 

Segment Operating Profit Margin

Otis

21.2%

17.8%

20.8%

19.1%

Carrier

5.2%

4.9%

6.5%

8.8%

UTC Fire & Security

12.8%

9.8%

8.9%

8.4%

Pratt & Whitney

15.0%

14.5%

14.6%

15.1%

Hamilton Sundstrand

16.3%

19.4%

15.3%

17.7%

Sikorsky

10.4%

9.5%

9.6%

8.9%

Segment Operating Profit Margin

13.7%

12.6%

13.1%

13.4%

As described on the following pages, consolidated results for the quarters and years ended December 31, 2009 and 2008 include non-recurring items, restructuring and other charges.

United Technologies Corporation

Restructuring and Non-recurring Items

Consolidated operating profit for the quarters and years ended December 31, 2009 and 2008 includes restructuring and other charges as follows:

Quarter Ended

December 31,

Year Ended

December 31,

(Unaudited)

(Unaudited)

(Millions)

2009 

2008 

2009 

2008 

Otis

$

27 

$

10 

$

158 

$

21 

Carrier(1) 

71 

49 

210 

140 

UTC Fire & Security

30 

112 

63 

Pratt & Whitney(2) 

13 

33 

190 

116 

Hamilton Sundstrand

19 

13 

88 

16 

Sikorsky

Eliminations and other(3) 

62 

General corporate expenses

Total Restructuring and Other Charges(1) 

$

135 

$

136 

$

830 

$

357 

(1) Approximately $23 million and $39 million of the total amount of restructuring and other charges incurred at Carrier in the quarter and year ended December 31, 2009, respectively, resides in other income, net which is reflected within revenues.

(2) Total restructuring and other charges incurred at Pratt & Whitney in the year ended December 31, 2009 include $51 million of charges recorded in the quarter ended September 30, 2009 that relate to reserves established in connection with the announced plans to close its Connecticut Airfoil Repair Operations facility in East Hartford, Connecticut and its engine overhaul facility in Cheshire, Connecticut.  Litigation is pending in U.S. District Court in Hartford, Connecticut concerning whether the planned closures comply with the terms of Pratt & Whitney's collective bargaining agreement with the International Association of Machinists.

(3) Total restructuring and other charges incurred in the year ended December 31, 2009 primarily reflects the impact of a curtailment of our domestic pension plans during the quarter ended September 30, 2009.

Consolidated results for the quarters and years ended December 31, 2009 and 2008 include the following non-recurring items:

Q4-2009

Carrier:  Approximately $27 million of gains related to divestiture activity.

Q3-2009

Carrier:  Approximately $57 million gain recognized from the contribution of the majority of Carrier's U.S. residential sales and distribution business into a new venture formed with Watsco, Inc.

Eliminations and other:  Approximately $17 million of favorable pretax interest adjustments related to global tax examination activity in the quarter, primarily reflecting the completion of our review of the 2004 to 2005 Internal Revenue Service (IRS) audit report.

Income Taxes:  Favorable income tax adjustments of approximately $38 million based on global examination activity in the quarter, including completion of our review of the 2004 to 2005 IRS audit report.

Income Taxes:  Approximately $32 million adverse tax impact associated with a foreign reorganization. 

Q2-2009

Otis:  Approximately $52 million non-cash, non-taxable gain recognized on the remeasurement to fair value of a previously held equity interest in a joint venture resulting from the purchase of a controlling interest.

Q1-2009

Income Taxes:  Favorable tax impact of approximately $25 million related to the formation of a commercial venture.

Q4-2008

Carrier:  Approximately $67 million gain from the contribution of a business into a new venture operating in the Middle East and the Commonwealth of Independent States.

Hamilton Sundstrand:  Approximately $25 million gain on the completion of a divestiture of a business.

Eliminations and other:  Approximately $38 million gain from the sale of marketable securities and an approximately $12 million favorable pretax interest adjustment related to settlement of disputed adjustments from the 2000 through 2003 examination with the Appeals Division of the IRS.

Income Taxes:  Favorable income tax adjustments of approximately $62 million related to settlement of disputed adjustments from the 2000 through 2003 examination with the Appeals Division of the IRS.

Q3-2008

Pratt & Whitney:  Approximately $37 million non-cash gain on a partial sale of an investment.

The following page provides segment revenues, operating profits and operating profit margins as adjusted for restructuring and other charges, and the aforementioned non-recurring items.  Management believes these adjusted results more accurately portray the ongoing operational performance and fundamentals of the underlying businesses.  The amounts and timing of restructuring and other charges and non-recurring activity can vary substantially from period to period with no assurances of comparable activity or amounts being incurred in future periods.  The $830 million of restructuring and other charges in 2009 is significantly in excess of that incurred in prior years and reflects the severity of the current global recession.  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 Revenues and Operating Profit Adjusted for Restructuring and Other Charges and Non-Recurring Items (as reflected on the previous page)

Quarter Ended

December 31,

Year Ended

December 31,

(Unaudited)

(Unaudited)

(Millions)

2009 

2008 

2009 

2008 

Adjusted Revenues

Otis

$

3,200 

$

3,243 

$

11,727 

$

12,949 

Carrier

2,815 

3,195 

11,368 

14,877 

UTC Fire & Security

1,532 

1,502 

5,531 

6,462 

Pratt & Whitney

3,255 

3,587 

12,577 

14,004 

Hamilton Sundstrand

1,416 

1,539 

5,599 

6,182 

Sikorsky

1,947 

1,600 

6,318 

5,368 

Adjusted Segment Revenues

14,165 

14,666 

53,120 

59,842 

Eliminations and other

(69)

(38)

(314)

(264)

Adjusted Consolidated Revenues

$

14,096 

$

14,628 

$

52,806 

$

59,578 

Adjusted Operating Profit

Otis

$

704 

$

588 

$

2,553 

$

2,498 

Carrier

190 

142 

866 

1,389 

UTC Fire & Security

201 

177 

605 

605 

Pratt & Whitney

501 

553 

2,025 

2,201 

Hamilton Sundstrand

250 

292 

945 

1,090 

Sikorsky

202 

152 

615 

478 

Adjusted Segment Operating Profit

2,048 

1,904 

7,609 

8,261 

Eliminations and other

(25)

(122)

(50)

General corporate expenses

(108)

(112)

(345)

(408)

Adjusted Consolidated Operating Profit

$

1,915 

$

1,797 

$

7,142 

$

7,803 

Adjusted Segment Operating Profit Margin

Otis

22.0%

18.1%

21.8%

19.3%

Carrier

6.7%

4.4%

7.6%

9.3%

UTC Fire & Security

13.1%

11.8%

10.9%

9.4%

Pratt & Whitney

15.4%

15.4%

16.1%

15.7%

Hamilton Sundstrand

17.7%

19.0%

16.9%

17.6%

Sikorsky

10.4%

9.5%

9.7%

8.9%

Adjusted Segment Operating Profit Margin

14.5%

13.0%

14.3%

13.8%

United Technologies Corporation

Condensed Consolidated Balance Sheet

December 31,

December 31,

2009 

2008 

(Millions)

(Unaudited)

(Unaudited)

Assets

Cash and cash equivalents

$

4,449 

$

4,327 

Accounts receivable, net

8,469 

9,480 

Inventories and contracts in progress, net

7,509 

8,340 

Other assets, current

2,767 

2,320 

Total Current Assets

23,194 

24,467 

Fixed assets, net

6,364 

6,348 

Goodwill, net

16,298 

15,363 

Intangible assets, net

3,538 

3,443 

Other assets

6,368 

7,216 

Total Assets

$

55,762 

$

56,837 

Liabilities and Equity

Short-term debt

$

1,487 

$

2,139 

Accounts payable

4,634 

5,594 

Accrued liabilities

11,792 

12,069 

Total Current Liabilities

17,913 

19,802 

Long-term debt

8,257 

9,337 

Other liabilities

8,204 

10,772 

Total Liabilities

34,374 

39,911 

Redeemable noncontrolling interest

389 

245 

Shareowners' Equity:

Common Stock

11,565 

10,979 

Treasury Stock

(15,408)

(14,316)

Retained earnings

27,396 

25,034 

Accumulated other comprehensive loss

(3,487)

(5,934)

Total Shareowners' Equity

20,066 

15,763 

Noncontrolling interest

933 

918 

Total Equity

20,999 

16,681 

Total Liabilities and Equity

$

55,762 

$

56,837 

Debt Ratios:

Debt to total capitalization

32%

41%

Net debt to net capitalization

20%

30%

See accompanying Notes to Condensed Consolidated Financial Statements.

United Technologies Corporation

Condensed Consolidated Statement of Cash Flows

Quarter Ended

December 31,

Year Ended

December 31,

(Unaudited)

(Unaudited)

(Millions)

2009 

2008 

2009 

2008 

Operating Activities

Net income attributable to common shareowners

$

1,073 

$

1,145 

$

3,829 

$

4,689 

Noncontrolling interest in subsidiaries' earnings

96 

84 

350 

364 

Net income

1,169 

1,229 

4,179 

5,053 

Adjustments to reconcile net income to net cash flows

    provided by operating activities:

Depreciation and amortization

333 

350 

1,258 

1,321 

Deferred income tax provision

415 

188 

451 

45 

Stock compensation cost

43 

50 

153 

211 

Changes in working capital

781 

460 

1,065 

(230)

Global pension contributions

(637)

(135)

(1,270)

(193)

Other operating activities, net

(629)

(122)

(483)

(46)

Net Cash Provided by Operating Activities

1,475 

2,020 

5,353 

6,161 

Investing Activities

Capital expenditures

(325)

(406)

(826)

(1,216)

Acquisitions and disposal of businesses, net

(95)

(477)

(545)

(915)

Other investing activities, net

47 

(263)

267 

(205)

Net Cash Used in Investing Activities

(373)

(1,146)

(1,104)

(2,336)

Financing Activities

(Decrease) increase in borrowings, net

(700)

1,039 

(1,737)

2,291 

Dividends paid on Common Stock

(338)

(341)

(1,356)

(1,210)

Repurchase of Common Stock

(320)

(690)

(1,100)

(3,160)

Other financing activities, net

75 

(10)

(159)

Net Cash Used in Financing Activities

(1,283)

(2)

(4,191)

(2,238)

Effect of foreign exchange rates

(2)

(160)

64 

(164)

Net (decrease) increase in cash and cash equivalents

(183)

712 

122 

1,423 

Cash and cash equivalents - beginning of period

4,632 

3,615 

4,327 

2,904 

Cash and cash equivalents - end of period

$

4,449 

$

4,327 

$

4,449 

$

4,327 

See accompanying Notes to Condensed Consolidated Financial Statements.

United Technologies Corporation

Free Cash Flow Reconciliation

Quarter Ended December 31,

(Millions)

(Unaudited)

2009 

2008 

Net income attributable to common shareowners

$

1,073 

$

1,145 

Noncontrolling interest in subsidiaries' earnings

96 

84 

Net income

1,169 

1,229 

Depreciation and amortization

333 

350 

Changes in working capital

781 

460 

Other

(808)

(19)

Cash flow from operating activities

1,475 

2,020 

Cash flow from operating activities as a percentage of

    net income attributable to common shareowners

137 

%

176 

%

Capital expenditures

(325)

(406)

Capital expenditures as a percentage of net income

    attributable to common shareowners

(30)

%

(35)

%

Free cash flow

$

1,150 

$

1,614 

Free cash flow as a percentage of net income

    attributable to common shareowners

107 

%

141 

%

Year Ended December 31,

(Millions)

(Unaudited)

2009 

2008 

Net income attributable to common shareowners

$

3,829 

$

4,689 

Noncontrolling interest in subsidiaries' earnings

350 

364 

Net income

4,179 

5,053 

Depreciation and amortization

1,258 

1,321 

Changes in working capital

1,065 

(230)

Other

(1,149)

17 

Cash flow from operating activities

5,353 

6,161 

Cash flow from operating activities as a percentage of

    net income attributable to common shareowners

140 

%

131 

%

Capital expenditures

(826)

(1,216)

Capital expenditures as a percentage of net income

    attributable to common shareowners

(22)

%

(26)

%

Free cash flow

$

4,527 

$

4,945 

Free cash flow as a percentage of net income

    attributable to common shareowners

118 

%

105 

%

Free cash flow, which represents cash flow from operations less capital expenditures, is the principal cash performance measure used by the Company. Management believes free cash flow provides a relevant measure of liquidity and a useful basis for assessing the Corporation's ability to fund its activities, including the financing of acquisitions, debt service, repurchases of the Corporation's Common Stock and distribution of earnings to shareholders.  Others 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 above.

United Technologies Corporation

Notes to Condensed Consolidated Financial Statements

    
    
    
    (1) Certain reclassifications have been made to the prior year 
        amounts to conform to the current year presentation of 
        noncontrolling interests and collaborative arrangements as 
        required by the Consolidation and Distinguishing Liabilities from 
        Equity Topics and the Collaborative Arrangements Topic, respectively,
        of the FASB Accounting Standards Codification ("FASB ASC").  
        Effective January 1, 2009, we adopted the provisions under the 
        Consolidation Topic and Distinguishing Liabilities from Equity 
        Topic as it relates to the accounting for noncontrolling interests
        in consolidated financial statements, both of which were applied 
        retrospectively to all periods presented.  Such provisions of the 
        Consolidation Topic include a requirement that the carrying value 
        of noncontrolling interest (previously referred to as minority 
        interest) be removed from the mezzanine section of the balance sheet
        and reclassified as equity, unless it is subject to the provisions of
        the Distinguishing Liabilities from Equity Topic; and consolidated net
        income to be recast to include net income attributable to the 
        noncontrolling interest.  The Distinguishing Liabilities from Equity
        Topic requires certain noncontrolling interests where the company is
        subject to a put option under which it may be required to purchase an
        interest in a consolidated subsidiary from the noncontrolling interest
        holder to be recorded at the greater of redemption value or
        noncontrolling interest carrying value within the mezzanine section
        of the balance sheet.
    
        The Collaborative Arrangements Topic, which we adopted as of January
        1, 2009, has been applied retrospectively to all prior periods 
        presented for all collaborative arrangements existing as of the 
        effective date.  The Collaborative Arrangements Topic requires that
        participants in a collaborative arrangement report costs incurred and
        revenues generated from these transactions on a gross basis and in the
        appropriate line item in each company's financial statement.  Under 
        this Topic, revenues were increased approximately $213 million and
        $271 million for the quarters ended December 31, 2009 and 2008 and
        $801 million and $1,076 million for the years ended December 31, 2009
        and 2008, respectively, with an offsetting increase to cost of sales
        to reflect the collaborators' share of revenues on a gross basis.
        Additionally, both accounts receivable and accounts payable were 
        increased by $368 million as of December 31, 2008 in order to reflect
        the amounts owed to our collaborative partners for their share of
        revenues on a gross basis.
    
    (2) 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.
    
    (3) Organic 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.  Non-recurring 
        items that are not included in organic growth in 2009 include an 
        approximately $57 million gain recognized from the contribution of the
        majority of Carrier's U.S. residential sales and distribution business
        into a new venture formed with Watsco, Inc., approximately $52 million
        related to a non-cash, non-taxable gain recognized on the 
        remeasurement to fair value of a previously held equity interest 
        in a joint venture as a result of the purchase of a controlling 
        interest, approximately $17 million of favorable pretax interest 
        adjustments related to global tax examination activity during the
        year, primarily reflecting the completion of our review of the 2004 
        to 2005 Internal Revenue Service (IRS) audit report and approximately
        $27 million of gains related to divestiture activity at Carrier.  Not 
        included within organic growth for 2008 is an approximately $67 
        million gain from the contribution of a business into a new venture
        operating in the Middle East and the Commonwealth of Independent 
        States, an approximately $25 million gain on the completion of a 
        divestiture of a business at Hamilton Sundstrand, an approximately 
        $37 million non-cash gain on a partial sale of an investment at Pratt
        & Whitney, an approximately $38 million gain from the sale of 
        marketable securities, and approximately $12 million of favorable 
        pretax interest adjustments related to settlement of disputed 
        adjustments resulting from the 2000 through 2003 examination with 
        the Appeals Division of the IRS.
    

SOURCE United Technologies Corp.



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http://www.utc.com