UTC Reports Second Quarter EPS Growth of 14 Percent on 5 Percent Higher Revenues; Raises 2010 EPS Guidance

HARTFORD, Conn., July 21 /PRNewswire-FirstCall/ -- United Technologies Corp. (NYSE: UTX) today reported second quarter 2010 earnings per share of $1.20 and net income attributable to common shareowners of $1.1 billion, both up 14 percent over the year ago second quarter.  Results for the current quarter include a net charge of $0.12 per share for restructuring and one time items.  Earnings per share in the year ago quarter included a net charge of $0.16 for restructuring and a one time item.  Before these charges, earnings per share increased 9 percent year over year.  Currency hedges, net of translation, at Pratt & Whitney Canada contributed $0.03 to the earnings per share increase.

Revenues of $13.9 billion for the quarter were 5 percent above prior year, including 4 points of organic growth and 1 point of net acquisitions.   Segment operating margin at 14.6 percent was 160 basis points higher than prior year.  Adjusted for restructuring and one time items, segment operating margin of 15.7 percent was 80 basis points higher than prior year.  Cash flow from operations was $1.4 billion and, after capital expenditures of $155 million, exceeded net income attributable to common shareowners.

"UTC's results this quarter reflect strong execution in an improved end market environment," said Louis Chenevert, UTC Chairman & Chief Executive Officer.  "The return of revenue growth, combined with our cost reduction actions, led to solid earnings growth.  Our relentless focus on cost drove the segment operating margin to a record high."  

"Based on the strong first half performance and continuing improvement in order rates, we are increasing our 2010 earnings per share guidance to a range of $4.60 to $4.70, up from $4.50 to $4.65.  Earnings per share is now expected to grow 12 to 14 percent over 2009 on revenues of $54 billion," Chenevert added.  This range still includes $0.20 of net charges for anticipated restructuring and one time items.

New equipment orders at Otis were up 12 percent over the year ago second quarter, including favorable foreign exchange of 1 point.  Commercial HVAC new equipment orders grew 6 percent (including favorable foreign exchange 1 point) and Carrier Transicold's organic orders were up 39 percent.  Commercial spares orders at Pratt & Whitney's large engine business grew 8 percent and at Hamilton Sundstrand were up 7 percent over the year ago second quarter.    

"Cash generation remains strong and working capital performance improved both sequentially and from the second quarter last year.  We continue to expect cash flow from operations less capital expenditures to meet or exceed net income attributable to common shareowners for the year," Chenevert said.  "With year to date share repurchases already over $1.1 billion, we now expect share repurchases for the year to be around $2 billion, up from our prior guidance of $1.5 billion."  

Acquisition spend was $260 million in the quarter and $2.4 billion year to date.  UTC continues to anticipate that acquisition spend for the year will be around $3 billion.

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 uncertainties that could cause actual results to differ materially from those anticipated or implied in forward looking statements include the severity and duration of global recessionary conditions, including limited availability of credit; 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 foreign currency exchange rates, commodity prices, interest rates, and the impact of weather conditions; and company specific items including the impact of further deterioration or  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

As described on the following pages, consolidated results for the quarters and six months ended June 30, 2010 and 2009 include non-recurring items, restructuring and other costs.

See accompanying Notes to Condensed Consolidated Financial Statements.

As described on the following pages, consolidated results for the quarters and six months ended June 30, 2010 and 2009 include non-recurring items, restructuring and other costs.

United Technologies Corporation

Restructuring and Other Costs

Consolidated operating profit for the quarters and six months ended June 30, 2010 and 2009 includes restructuring and other costs as follows:

Non-Recurring Items

Consolidated results for the quarters and six months ended June 30, 2010 and 2009 includes the following non-recurring items:

Q2-2010

Carrier: Approximately $47 million net charge resulting from dispositions associated with Carrier's ongoing portfolio transformation.  Included in this net charge is an approximately $58 million asset impairment charge associated with the expected disposition of a business, partially offset by an approximately $11 million gain on the sale of another business.

Hamilton Sundstrand: Approximately $28 million of asset impairment charges.  These charges relate primarily to the expected disposition of an aerospace business as part of Hamilton Sundstrand's ongoing low cost sourcing initiatives.

Eliminations and other: Favorable pretax interest adjustment of approximately $24 million associated with the resolution of an uncertain temporary tax item in the quarter.

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

The following page provides segment revenues, operating profits and operating profit margins as adjusted for restructuring and other costs, 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 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.  The amount of restructuring and other costs in 2009 was significantly in excess of that incurred in prior years as well as the levels expected to be incurred in 2010 and reflected the severity of the 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.

Free cash flow, which represents cash flow from operations less capital expenditures, is the principal cash performance measure used by the Corporation. 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) 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 revenue 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 within organic revenue growth in 2010 include an approximately $11 million gain on the sale of a business associated with Carrier's ongoing portfolio transformation and a favorable pretax interest adjustment of approximately $24 million associated with the resolution of an uncertain temporary tax item.  Not included within organic revenue growth for 2009 is a non-recurring item of 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.

SOURCE United Technologies Corp.