FARMINGTON, Conn., July 24, 2018 /PRNewswire/ -- United
Technologies Corp. (NYSE: UTX) today reported second quarter 2018
results and increased its full year sales and adjusted EPS
outlook.
"Our second quarter results demonstrated continued positive
momentum for United Technologies," said UTC Chairman and Chief
Executive Officer Gregory Hayes.
"This was our fourth consecutive quarter of delivering organic
sales growth of 5 percent or better, which is a result of our
investments in innovation across the portfolio. Earnings and free
cash flow were also strong in the quarter."
"Based on our solid year-to-date performance, we are raising the
low end of our 2018 sales outlook and now expect $63.5 to $64.5
billion of sales on improved organic growth of 5 to 6
percent.* We are also raising our adjusted EPS outlook range and
now expect $7.10 to $7.25,* excluding 10 to 15
cents of projected dilution from the pending acquisition of
Rockwell Collins, which we expect to close in the third quarter,"
Hayes concluded.
Second quarter sales of $16.7
billion were up 9 percent over the prior year, including 6
points of organic sales growth and 2 points of foreign exchange
benefit. GAAP EPS of $2.56 was up 42
percent versus the prior year and included 59 cents of net restructuring charges and other
significant items, including a one-time gain from the sale of
Taylor Company in the quarter. Adjusted EPS of $1.97 was up 6 percent.
Net income in the quarter was $2.0
billion, up 42 percent versus the prior year. Net income
excluding the gain on the sale of Taylor Company was $1.5 billion. Cash flow from operations was
$2.1 billion and capital expenditures
were $372 million, resulting in free
cash flow of $1.7 billion. UTC
continues to expect $4.5 to
$5.0 billion* of free cash flow in
2018.
In the quarter, commercial aftermarket sales were up 12 percent
at both Pratt & Whitney and UTC Aerospace Systems. Otis new
equipment orders were up 10 percent organically versus the prior
year. Equipment orders at UTC Climate, Controls & Security
increased 8 percent organically.
UTC updates its 2018 outlook and now anticipates:
- Adjusted EPS of $7.10 to
$7.25,* excluding Rockwell Collins,
up from $6.95 to $7.15;
- Adjusted EPS dilution of $0.10 to
$0.15 from the pending acquisition of
Rockwell Collins, assuming a third quarter close;
- Sales of $63.5 to $64.5 billion, up from $63.0 to $64.5
billion;
- Organic sales growth of 5 to 6 percent,* up from 4 to 6
percent;
- There is no change in the Company's previously provided 2018
expectations for free cash flow of $4.5 to $5.0
billion.*
*Note: When we provide expectations for adjusted EPS, organic
sales and free cash flow on a forward-looking basis, a
reconciliation of the differences between the non-GAAP expectations
and the corresponding GAAP measures generally is not available
without unreasonable effort. See "Use and Definitions of
Non-GAAP Financial Measures" below for additional information.
United Technologies Corp., based in Farmington, Connecticut, provides high
technology products and services to the building and aerospace
industries. By combining a passion for science with precision
engineering, the company is creating smart, sustainable solutions
the world needs. Additional information, including a webcast, is
available at www.utc.com or
https://edge.media-server.com/m6/p/bd5qaacp, or to listen to the
earnings call by phone, dial (877) 280-7280 between 8:10 a.m. and 8:30 a.m. ET. To learn more
about UTC, visit the website or follow the company on Twitter:
@UTC
Use and Definitions of Non-GAAP Financial Measures
United Technologies Corporation reports its financial results in
accordance with accounting principles generally accepted in
the United States ("GAAP").
We supplement the reporting of our financial information
determined under GAAP with certain non-GAAP financial
information. The non-GAAP information presented provides
investors with additional useful information, but should not be
considered in isolation or as substitutes for the related GAAP
measures. Moreover, other companies may define non-GAAP
measures differently, which limits the usefulness of these measures
for comparisons with such other companies. We encourage
investors to review our financial statements and publicly-filed
reports in their entirety and not to rely on any single financial
measure.
Adjusted net sales, organic sales, adjusted operating profit,
adjusted net income and adjusted earnings per share ("EPS") are
non-GAAP financial measures. Adjusted net sales represents
consolidated net sales from continuing operations (a GAAP measure),
excluding significant items of a non-recurring and/or
nonoperational nature (hereinafter referred to as "other
significant items"). Organic sales represents consolidated
net sales (a GAAP measure), excluding the impact of foreign
currency translation, acquisitions and divestitures completed in
the preceding twelve months and other significant items.
Adjusted operating profit represents income from continuing
operations (a GAAP measure), excluding restructuring costs and
other significant items. Adjusted net income represents net income
from continuing operations (a GAAP measure), excluding
restructuring costs and other significant items. Adjusted EPS
represents diluted earnings per share from continuing operations (a
GAAP measure), excluding restructuring costs and other significant
items. For the business segments, when applicable,
adjustments of net sales, operating profit and margins similarly
reflect continuing operations, excluding restructuring and other
significant items. Management believes that the non-GAAP
measures just mentioned are useful in providing period-to-period
comparisons of the results of the Company's ongoing operational
performance.
Free cash flow is a non-GAAP financial measure that represents
cash flow from operations (a GAAP measure) less capital
expenditures. Management believes free cash flow is a useful
measure of liquidity and an additional 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.
A reconciliation of the non-GAAP measures to the corresponding
amounts prepared in accordance with GAAP appears in the tables in
this Appendix. The tables provide additional information as
to the items and amounts that have been excluded from the adjusted
measures.
When we provide our expectation for adjusted EPS, adjusted
operating profit, organic sales and free cash flow on a
forward-looking basis, a reconciliation of the differences between
the non-GAAP expectations and the corresponding GAAP measures
(expected diluted EPS from continuing operations, operating profit,
sales and expected cash flow from operations) generally is not
available without unreasonable effort due to potentially high
variability, complexity and low visibility as to the items that
would be excluded from the GAAP measure in the relevant future
period, such as unusual gains and losses, the ultimate outcome of
pending litigation, fluctuations in foreign currency exchange
rates, the impact and timing of potential acquisitions and
divestitures, and other structural changes or their probable
significance. The variability of the excluded items may have
a significant, and potentially unpredictable, impact on our future
GAAP results.
Cautionary Statement
This communication 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
information 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," "expectations," "plans," "strategy,"
"prospects," "estimate," "project," "target," "anticipate," "will,"
"should," "see," "guidance," "outlook," "confident" and other words
of similar meaning in connection with a discussion of future
operating or financial performance. Forward-looking statements may
include, among other things, statements relating to future sales,
earnings, cash flow, results of operations, uses of cash, share
repurchases, tax rates and other measures of financial performance
or potential future plans, strategies or transactions of United
Technologies or the combined company following United Technologies'
pending acquisition of Rockwell Collins, the anticipated benefits
of the pending acquisition, including estimated synergies, the
expected timing of financing and completion of the transaction and
other statements that are not historical facts. All forward-looking
statements involve risks, uncertainties and other factors that may
cause actual results to differ materially from those expressed or
implied in the forward-looking statements. For those statements, we
claim the protection of the safe harbor for forward-looking
statements contained in the U.S. Private Securities Litigation
Reform Act of 1995. Such risks, uncertainties and other factors
include, without limitation: (1) the effect of economic conditions
in the industries and markets in which United Technologies and
Rockwell Collins operate in the U.S. and globally and any changes
therein, including financial market conditions, fluctuations 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 condition of commercial airlines, the
impact of weather conditions and natural disasters and the
financial condition of our customers and suppliers; (2) challenges
in the development, production, delivery, support, performance and
realization of the anticipated benefits of advanced technologies
and new products and services; (3) the scope, nature, impact or
timing of the pending Rockwell Collins acquisition and other
acquisition and divestiture or restructuring activity, including
among other things integration of acquired businesses into United
Technologies' existing businesses and realization of synergies and
opportunities for growth and innovation; (4) future timing and
levels of indebtedness, including indebtedness expected to be
incurred by United Technologies in connection with the pending
Rockwell Collins acquisition, and capital spending and research and
development spending, including in connection with the pending
Rockwell Collins acquisition; (5) future availability of credit and
factors that may affect such availability, including credit market
conditions and our capital structure; (6) the timing and scope of
future repurchases of United Technologies' common stock, which may
be suspended at any time due to various factors, including market
conditions and the level of other investing activities and uses of
cash, including in connection with the pending acquisition of
Rockwell Collins; (7) delays and disruption in delivery of
materials and services from suppliers; (8) company and
customer-directed cost reduction efforts and restructuring costs
and savings and other consequences thereof; (9) new business and
investment opportunities; (10) our ability to realize the intended
benefits of organizational changes; (11) the anticipated benefits
of diversification and balance of operations across product lines,
regions and industries; (12) the outcome of legal proceedings,
investigations and other contingencies; (13) pension plan
assumptions and future contributions; (14) the impact of the
negotiation of collective bargaining agreements and labor disputes;
(15) the effect of changes in political conditions in the U.S. and
other countries in which United Technologies and Rockwell Collins
operate, including the effect of changes in U.S. trade policies or
the U.K.'s pending withdrawal from the EU, on general market
conditions, global trade policies and currency exchange rates in
the near term and beyond; (16) the effect of changes in tax
(including U.S. tax reform enacted on December 22, 2017, which is commonly referred to
as the Tax Cuts and Jobs Act of 2017), environmental, regulatory
(including among other things import/export) and other laws and
regulations in the U.S. and other countries in which United
Technologies and Rockwell Collins operate; (17) the ability of
United Technologies and Rockwell Collins to receive the required
regulatory approvals (and the risk that such approvals may result
in the imposition of conditions that could adversely affect the
combined company or the expected benefits of the merger) and to
satisfy the other conditions to the closing of the pending
acquisition on a timely basis or at all; (18) the occurrence of
events that may give rise to a right of one or both of United
Technologies or Rockwell Collins to terminate the merger agreement;
(19) negative effects of the announcement or the completion of the
merger on the market price of United Technologies' and/or Rockwell
Collins' common stock and/or on their respective financial
performance; (20) risks related to Rockwell Collins and United
Technologies being restricted in their operation of their
businesses while the merger agreement is in effect; (21) risks
relating to the value of the United Technologies' shares to be
issued in connection with the pending Rockwell Collins acquisition,
significant merger costs and/or unknown liabilities; (22) risks
associated with third party contracts containing consent and/or
other provisions that may be triggered by the Rockwell Collins
merger agreement; (23) risks associated with merger-related
litigation; and (24) the ability of United Technologies and
Rockwell Collins, or the combined company, to retain and hire key
personnel. There can be no assurance that United Technologies'
pending acquisition of Rockwell Collins or any other transaction
described above will in fact be consummated in the manner described
or at all. For additional information on identifying factors that
may cause actual results to vary materially from those stated in
forward-looking statements, see the reports of United Technologies
and Rockwell Collins on Forms S-4, 10-K, 10-Q and 8-K filed with or
furnished to the SEC from time to time. Any forward-looking
statement speaks only as of the date on which it is made, and
United Technologies and Rockwell Collins assume no obligation to
update or revise such statement, whether as a result of new
information, future events or otherwise, except as required by
applicable law. In addition, in connection with the pending
Rockwell Collins acquisition, UTC has filed a registration
statement, that includes a prospectus from UTC and a proxy
statement from Rockwell Collins, which is effective and contains
important information about UTC, Rockwell Collins, the transaction
and related matters.
UTC-IR
Contact:
|
Media Inquiries,
UTC
|
|
|
(860)
493-4149
|
|
|
|
|
|
Investor Relations,
UTC
|
|
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(860)
728-7608
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United
Technologies Corporation
|
Condensed
Consolidated Statement of Operations
|
|
|
|
|
|
|
|
Quarter Ended June
30,
|
|
Six Months Ended
June 30,
|
|
|
(Unaudited)
|
|
(Unaudited)
|
(dollars in
millions, except per share amounts)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net
Sales
|
$
|
16,705
|
|
|
$
|
15,280
|
|
|
$
|
31,947
|
|
|
$
|
29,095
|
|
Costs and
Expenses:
|
|
|
|
|
|
|
|
|
Cost of products and
services sold
|
12,422
|
|
|
11,164
|
|
|
23,702
|
|
|
21,300
|
|
|
Research and
development
|
589
|
|
|
619
|
|
|
1,143
|
|
|
1,205
|
|
|
Selling, general and
administrative
|
1,759
|
|
|
1,590
|
|
|
3,470
|
|
|
3,127
|
|
|
Total Costs and
Expenses
|
14,770
|
|
|
13,373
|
|
|
28,315
|
|
|
25,632
|
|
Other income,
net
|
941
|
|
|
257
|
|
|
1,172
|
|
|
845
|
|
Operating
profit
|
2,876
|
|
|
2,164
|
|
|
4,804
|
|
|
4,308
|
|
|
Non-service pension
(benefit)
|
(192)
|
|
|
(126)
|
|
|
(383)
|
|
|
(249)
|
|
|
Interest expense,
net
|
234
|
|
|
226
|
|
|
463
|
|
|
439
|
|
Income from
operations before income taxes
|
2,834
|
|
|
2,064
|
|
|
4,724
|
|
|
4,118
|
|
|
Income tax
expense
|
695
|
|
|
532
|
|
|
1,217
|
|
|
1,118
|
|
Net income from
operations
|
2,139
|
|
|
1,532
|
|
|
3,507
|
|
|
3,000
|
|
|
Less: Noncontrolling
interest in subsidiaries' earnings
from
operations
|
91
|
|
|
93
|
|
|
162
|
|
|
175
|
|
Net income
attributable to common shareowners
|
$
|
2,048
|
|
|
$
|
1,439
|
|
|
$
|
3,345
|
|
|
$
|
2,825
|
|
Earnings Per Share
of Common Stock:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
2.59
|
|
|
$
|
1.83
|
|
|
$
|
4.23
|
|
|
$
|
3.57
|
|
|
Diluted
|
$
|
2.56
|
|
|
$
|
1.80
|
|
|
$
|
4.18
|
|
|
$
|
3.53
|
|
Weighted Average
Number of Shares Outstanding:
|
|
|
|
|
|
|
|
|
Basic
shares
|
791
|
|
|
789
|
|
|
790
|
|
|
791
|
|
|
Diluted
shares
|
800
|
|
|
798
|
|
|
800
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We adopted ASU
2014-09, Revenue from Contracts with Customers, and its
related amendments (collectively, the New Revenue Standard)
effective January 1, 2018 and elected the modified retrospective
approach. The results for periods before 2018 were not adjusted for
the new standard and the cumulative effect of the change in
accounting was recognized through retained earnings at the date of
adoption. See "The New Revenue Standard Adoption Impact" for
further details. As described on the following pages, consolidated
results for the quarters ended June 30, 2018 and 2017 include
restructuring costs and significant non-recurring and
non-operational items. See discussion above, "Use and Definitions
of Non-GAAP Financial Measures," regarding consideration of such
costs and items 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)
|
(dollars in
millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net
Sales
|
|
|
|
|
|
|
|
Otis
|
$
|
3,344
|
|
|
$
|
3,131
|
|
|
$
|
6,381
|
|
|
$
|
5,935
|
|
UTC Climate, Controls
& Security
|
5,035
|
|
|
4,712
|
|
|
9,411
|
|
|
8,604
|
|
Pratt &
Whitney
|
4,736
|
|
|
4,070
|
|
|
9,065
|
|
|
7,828
|
|
UTC Aerospace
Systems
|
3,962
|
|
|
3,640
|
|
|
7,779
|
|
|
7,251
|
|
Segment
Sales
|
17,077
|
|
|
15,553
|
|
|
32,636
|
|
|
29,618
|
|
Eliminations and
other
|
(372)
|
|
|
(273)
|
|
|
(689)
|
|
|
(523)
|
|
Consolidated Net
Sales
|
$
|
16,705
|
|
|
$
|
15,280
|
|
|
$
|
31,947
|
|
|
$
|
29,095
|
|
|
|
|
|
|
|
|
|
Operating
Profit
|
|
|
|
|
|
|
|
Otis
|
$
|
488
|
|
|
$
|
539
|
|
|
$
|
938
|
|
|
$
|
986
|
|
UTC Climate, Controls
& Security
|
1,645
|
|
|
837
|
|
|
2,237
|
|
|
1,768
|
|
Pratt &
Whitney
|
397
|
|
|
364
|
|
|
810
|
|
|
720
|
|
UTC Aerospace
Systems
|
569
|
|
|
534
|
|
|
1,157
|
|
|
1,065
|
|
Segment Operating
Profit
|
3,099
|
|
|
2,274
|
|
|
5,142
|
|
|
4,539
|
|
Eliminations and
other
|
(97)
|
|
|
(5)
|
|
|
(108)
|
|
|
(23)
|
|
General corporate
expenses
|
(126)
|
|
|
(105)
|
|
|
(230)
|
|
|
(208)
|
|
Consolidated
Operating Profit
|
$
|
2,876
|
|
|
$
|
2,164
|
|
|
$
|
4,804
|
|
|
$
|
4,308
|
|
Segment Operating
Profit Margin
|
|
|
|
|
|
|
|
|
|
|
|
Otis
|
14.6 %
|
|
|
17.2 %
|
|
|
14.7 %
|
|
|
16.6 %
|
|
UTC Climate, Controls
& Security
|
32.7 %
|
|
|
17.8 %
|
|
|
23.8 %
|
|
|
20.5 %
|
|
Pratt &
Whitney
|
8.4 %
|
|
|
8.9 %
|
|
|
8.9 %
|
|
|
9.2 %
|
|
UTC Aerospace
Systems
|
14.4 %
|
|
|
14.7 %
|
|
|
14.9 %
|
|
|
14.7 %
|
|
Segment Operating
Profit Margin
|
18.1 %
|
|
|
14.6 %
|
|
|
15.8 %
|
|
|
15.3 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We adopted ASU
2014-09, Revenue from Contracts with Customers, and its
related amendments (collectively, the New Revenue Standard)
effective January 1, 2018 and elected the modified retrospective
approach. The results for periods before 2018 were not adjusted for
the new standard and the cumulative effect of the change in
accounting was recognized through retained earnings at the date of
adoption. See "The New Revenue Standard Adoption Impact" for
further details. As described on the following pages, consolidated
results for the quarters ended June 30, 2018 and 2017 include
restructuring costs and significant non-recurring and
non-operational items. See discussion above, "Use and Definitions
of Non-GAAP Financial Measures," regarding consideration of such
costs and items when evaluating the underlying financial
performance.
|
United
Technologies Corporation
|
Reconciliation of
Reported (GAAP) to Adjusted (Non-GAAP) Results
|
|
|
|
|
|
Quarter Ended June
30,
|
|
Six Months Ended
June 30,
|
|
(Unaudited)
|
|
(Unaudited)
|
dollars in
millions - Income (Expense)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Income from
operations attributable to common
shareowners
|
$
|
2,048
|
|
|
$
|
1,439
|
|
|
$
|
3,345
|
|
|
$
|
2,825
|
|
Restructuring
Costs included in Operating Profit:
|
|
|
|
|
|
|
|
Otis
|
(23)
|
|
|
(12)
|
|
|
(49)
|
|
|
(17)
|
|
UTC Climate, Controls
& Security
|
(21)
|
|
|
(18)
|
|
|
(35)
|
|
|
(41)
|
|
Pratt &
Whitney
|
(3)
|
|
|
(6)
|
|
|
(3)
|
|
|
(6)
|
|
UTC Aerospace
Systems
|
(33)
|
|
|
(23)
|
|
|
(60)
|
|
|
(46)
|
|
Eliminations and
other
|
(2)
|
|
|
—
|
|
|
(4)
|
|
|
(1)
|
|
|
(82)
|
|
|
(59)
|
|
|
(151)
|
|
|
(111)
|
|
Non-service pension
cost
|
2
|
|
|
(1)
|
|
|
2
|
|
|
(1)
|
|
Total
Restructuring Costs
|
(80)
|
|
|
(60)
|
|
|
(149)
|
|
|
(112)
|
|
|
|
|
|
|
|
|
|
Significant
non-recurring and non-operational items
included in
Operating Profit:
|
|
|
|
|
|
|
|
UTC Climate, Controls
& Security
|
|
|
|
|
|
|
|
Gain on sale of
Taylor Company
|
795
|
|
|
—
|
|
|
795
|
|
|
—
|
|
Gain on sale of
investments in Watsco, Inc.
|
—
|
|
|
—
|
|
|
—
|
|
|
379
|
|
UTC Aerospace
Systems
|
|
|
|
|
|
|
|
Asset
Impairment
|
(48)
|
|
|
—
|
|
|
(48)
|
|
|
—
|
|
Eliminations and
other
|
|
|
|
|
|
|
|
Transaction and
integration costs related to merger
agreement with
Rockwell Collins, Inc.
|
(20)
|
|
|
—
|
|
|
(50)
|
|
|
—
|
|
Gain on sale of
available-for-sale securities
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
727
|
|
|
—
|
|
|
697
|
|
|
380
|
|
Total impact on
Consolidated Operating Profit
|
647
|
|
|
(60)
|
|
|
548
|
|
|
268
|
|
Tax effect of
restructuring and significant non-
recurring and
non-operational items above
|
(173)
|
|
|
20
|
|
|
(154)
|
|
|
(104)
|
|
Significant
non-recurring and non-operational items
included in Income
Tax Expense
|
|
|
|
|
|
|
|
Unfavorable income
tax adjustments related to the
estimated impact of
the U.S. tax reform legislation
enacted on December
22, 2017
|
(2)
|
|
|
—
|
|
|
(46)
|
|
|
—
|
|
Less: Impact on Net
Income Attributable to Common
Shareowners
|
472
|
|
|
(40)
|
|
|
348
|
|
|
164
|
|
Adjusted income
attributable to common shareowners
|
$
|
1,576
|
|
|
$
|
1,479
|
|
|
$
|
2,997
|
|
|
$
|
2,661
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
Per Share
|
$
|
2.56
|
|
|
$
|
1.80
|
|
|
$
|
4.18
|
|
|
$
|
3.53
|
|
Impact on Diluted
Earnings Per Share
|
0.59
|
|
|
(0.05)
|
|
|
0.44
|
|
|
0.20
|
|
Adjusted Diluted
Earnings Per Share
|
$
|
1.97
|
|
|
$
|
1.85
|
|
|
$
|
3.74
|
|
|
$
|
3.33
|
|
|
|
|
|
|
|
|
|
Effective Tax
Rate
|
24.5
|
%
|
|
25.7
|
%
|
|
25.8
|
%
|
|
27.1
|
%
|
Impact on Effective
Tax Rate
|
(0.7)
|
%
|
|
0.3
|
%
|
|
(1.4)
|
%
|
|
(0.8)
|
%
|
Adjusted Effective
Tax Rate
|
23.8
|
%
|
|
26.0
|
%
|
|
24.4
|
%
|
|
26.3
|
%
|
United
Technologies Corporation
|
Segment Net Sales
and Operating Profit Adjusted for Restructuring Costs
and
|
Significant
Non-recurring and Non-operational Items (as reflected on the
previous two pages)
|
|
|
|
|
|
Quarter Ended June
30,
|
|
Six Months Ended
June 30,
|
|
(Unaudited)
|
|
(Unaudited)
|
(dollars in
millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Adjusted Net
Sales
|
|
|
|
|
|
|
|
Otis
|
$
|
3,344
|
|
|
$
|
3,131
|
|
|
$
|
6,381
|
|
|
$
|
5,935
|
|
UTC Climate, Controls
& Security
|
5,035
|
|
|
4,712
|
|
|
9,411
|
|
|
8,604
|
|
Pratt &
Whitney
|
4,736
|
|
|
4,070
|
|
|
9,065
|
|
|
7,828
|
|
UTC Aerospace
Systems
|
3,962
|
|
|
3,640
|
|
|
7,779
|
|
|
7,251
|
|
Segment
Sales
|
17,077
|
|
|
15,553
|
|
|
32,636
|
|
|
29,618
|
|
Eliminations and
other
|
(372)
|
|
|
(273)
|
|
|
(689)
|
|
|
(523)
|
|
Adjusted
Consolidated Net Sales
|
$
|
16,705
|
|
|
$
|
15,280
|
|
|
$
|
31,947
|
|
|
$
|
29,095
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Profit
|
|
|
|
|
|
|
|
Otis
|
$
|
511
|
|
|
$
|
551
|
|
|
$
|
987
|
|
|
$
|
1,003
|
|
UTC Climate, Controls
& Security
|
871
|
|
|
855
|
|
|
1,477
|
|
|
1,430
|
|
Pratt &
Whitney
|
400
|
|
|
370
|
|
|
813
|
|
|
726
|
|
UTC Aerospace
Systems
|
650
|
|
|
557
|
|
|
1,265
|
|
|
1,111
|
|
Segment Operating
Profit
|
2,432
|
|
|
2,333
|
|
|
4,542
|
|
|
4,270
|
|
Eliminations and
other
|
(77)
|
|
|
(5)
|
|
|
(58)
|
|
|
(24)
|
|
General corporate
expenses
|
(124)
|
|
|
(105)
|
|
|
(226)
|
|
|
(207)
|
|
Adjusted
Consolidated Operating Profit
|
$
|
2,231
|
|
|
$
|
2,223
|
|
|
$
|
4,258
|
|
|
$
|
4,039
|
|
Adjusted Segment
Operating Profit Margin
|
|
|
|
|
|
|
|
|
|
|
|
Otis
|
15.3 %
|
|
|
17.6 %
|
|
|
15.5 %
|
|
|
16.9 %
|
|
UTC Climate, Controls
& Security
|
17.3 %
|
|
|
18.1 %
|
|
|
15.7 %
|
|
|
16.6 %
|
|
Pratt &
Whitney
|
8.4 %
|
|
|
9.1 %
|
|
|
9.0 %
|
|
|
9.3 %
|
|
UTC Aerospace
Systems
|
16.4 %
|
|
|
15.3 %
|
|
|
16.3 %
|
|
|
15.3 %
|
|
Adjusted Segment
Operating Profit Margin
|
14.2%
|
|
|
15.0 %
|
|
|
13.9 %
|
|
|
14.4 %
|
|
United
Technologies Corporation
|
Components of
Changes in Net Sales
|
|
|
|
Quarter Ended
June 30, 2018 Compared with Quarter Ended June 30,
2017
|
|
|
|
|
|
|
|
|
|
|
|
Factors
Contributing to Total % Change in Net Sales
|
|
|
Organic
|
|
FX
Translation
|
|
Acquisitions
/ Divestitures,
net
|
|
Other
|
|
Total
|
Otis
|
|
3%
|
|
4%
|
|
—
|
|
—
|
|
7%
|
UTC Climate, Controls
& Security
|
|
4%
|
|
3%
|
|
—
|
|
—
|
|
7%
|
Pratt &
Whitney
|
|
12%
|
|
—
|
|
—
|
|
4%
|
|
16%
|
UTC Aerospace
Systems
|
|
8%
|
|
1%
|
|
—
|
|
—
|
|
9%
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
6%
|
|
2%
|
|
—
|
|
1%
|
|
9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended June 30, 2018 Compared with Six Months Ended June 30,
2017
|
|
|
|
|
|
|
|
|
|
|
|
Factors
Contributing to Total % Change in Net Sales
|
|
|
Organic
|
|
FX
Translation
|
|
Acquisitions
/ Divestitures,
net
|
|
Other
|
|
Total
|
Otis
|
|
2%
|
|
5%
|
|
—
|
|
1%
|
|
8%
|
UTC Climate, Controls
& Security
|
|
5%
|
|
4%
|
|
—
|
|
—
|
|
9%
|
Pratt &
Whitney
|
|
11%
|
|
—
|
|
—
|
|
5%
|
|
16%
|
UTC Aerospace
Systems
|
|
7%
|
|
1%
|
|
—
|
|
(1)%
|
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
6%
|
|
2%
|
|
—
|
|
2%
|
|
10%
|
United
Technologies Corporation
|
Condensed
Consolidated Balance Sheet
|
|
|
|
|
|
June
30,
|
|
December 31,
|
|
2018
|
|
2017
|
(dollars in
millions)
|
(Unaudited)
|
|
(Unaudited)
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
|
11,068
|
|
|
$
|
8,985
|
|
Accounts receivable,
net
|
11,973
|
|
|
12,595
|
|
Contract assets,
current
|
3,273
|
|
|
—
|
|
Inventories and
contracts in progress, net
|
8,979
|
|
|
9,881
|
|
Other assets,
current
|
1,263
|
|
|
1,397
|
|
Total Current
Assets
|
36,556
|
|
|
32,858
|
|
Fixed assets,
net
|
10,115
|
|
|
10,186
|
|
Goodwill
|
27,699
|
|
|
27,910
|
|
Intangible assets,
net
|
15,739
|
|
|
15,883
|
|
Other
assets
|
11,460
|
|
|
10,083
|
|
Total
Assets
|
$
|
101,569
|
|
|
$
|
96,920
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Short-term
debt
|
$
|
1,063
|
|
|
$
|
2,496
|
|
Accounts
payable
|
9,623
|
|
|
9,579
|
|
Accrued
liabilities
|
8,730
|
|
|
12,316
|
|
Contract liabilities,
current
|
5,652
|
|
|
—
|
|
Total Current
Liabilities
|
25,068
|
|
|
24,391
|
|
Long-term
debt
|
27,246
|
|
|
24,989
|
|
Other long-term
liabilities
|
15,779
|
|
|
15,988
|
|
Total
Liabilities
|
68,093
|
|
|
65,368
|
|
Redeemable
noncontrolling interest
|
130
|
|
|
131
|
|
Shareowners'
Equity:
|
|
|
|
Common
Stock
|
17,666
|
|
|
17,489
|
|
Treasury
Stock
|
(35,645)
|
|
|
(35,596)
|
|
Retained
earnings
|
57,027
|
|
|
55,242
|
|
Accumulated other
comprehensive loss
|
(7,684)
|
|
|
(7,525)
|
|
Total Shareowners'
Equity
|
31,364
|
|
|
29,610
|
|
Noncontrolling
interest
|
1,982
|
|
|
1,811
|
|
Total
Equity
|
33,346
|
|
|
31,421
|
|
Total Liabilities
and Equity
|
$
|
101,569
|
|
|
$
|
96,920
|
|
Debt
Ratios:
|
|
|
|
|
|
Debt to total
capitalization
|
46 %
|
|
|
47 %
|
|
Net debt to net
capitalization
|
34 %
|
|
|
37 %
|
|
|
|
|
|
|
|
We adopted ASU
2014-09, Revenue from Contracts with Customers, and its
related amendments (collectively, the New Revenue Standard)
effective January 1, 2018 and elected the modified retrospective
approach. The results for periods before 2018 were not adjusted for
the new standard and the cumulative effect of the change in
accounting was recognized through retained earnings at the date of
adoption. See "The New Revenue Standard Adoption Impact" for
further details. See accompanying Notes to Condensed Consolidated
Financial Statements.
|
United
Technologies Corporation
|
Condensed
Consolidated Statement of Cash Flows
|
|
|
|
|
|
Quarter Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
(Unaudited)
|
|
(Unaudited)
|
(dollars in
millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating
Activities:
|
|
|
|
|
|
|
|
Net income from
operations
|
$
|
2,139
|
|
|
$
|
1,532
|
|
|
$
|
3,507
|
|
|
$
|
3,000
|
|
Adjustments to
reconcile net income from operations to net cash flows
provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
592
|
|
|
527
|
|
|
1,173
|
|
|
1,039
|
|
Deferred income tax
provision
|
3
|
|
|
393
|
|
|
45
|
|
|
502
|
|
Stock compensation
cost
|
62
|
|
|
49
|
|
|
117
|
|
|
96
|
|
Gain on sale of
Taylor Company
|
(795)
|
|
|
—
|
|
|
(795)
|
|
|
—
|
|
Change in working
capital
|
483
|
|
|
(79)
|
|
|
(489)
|
|
|
(554)
|
|
Global pension
contributions
|
(22)
|
|
|
(33)
|
|
|
(59)
|
|
|
(79)
|
|
Canadian government
settlement
|
—
|
|
|
—
|
|
|
(221)
|
|
|
(246)
|
|
Other operating
activities, net
|
(360)
|
|
|
(243)
|
|
|
(723)
|
|
|
(619)
|
|
Net cash flows
provided by operating activities
|
2,102
|
|
|
2,146
|
|
|
2,555
|
|
|
3,139
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
(372)
|
|
|
(446)
|
|
|
(709)
|
|
|
(771)
|
|
Acquisitions and
dispositions of businesses, net
|
1,050
|
|
|
(49)
|
|
|
960
|
|
|
(149)
|
|
Proceeds from sale of
investments in Watsco, Inc.
|
—
|
|
|
—
|
|
|
—
|
|
|
596
|
|
Increase in
collaboration intangible assets
|
(103)
|
|
|
(94)
|
|
|
(181)
|
|
|
(195)
|
|
Payments from
settlements of derivative contracts
|
303
|
|
|
(181)
|
|
|
82
|
|
|
(294)
|
|
Other investing
activities, net
|
(140)
|
|
|
(81)
|
|
|
(390)
|
|
|
(177)
|
|
Net cash flows
provided by (used in) investing activities
|
738
|
|
|
(851)
|
|
|
(238)
|
|
|
(990)
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
Issuance of long-term
debt, net
|
1,312
|
|
|
2,429
|
|
|
337
|
|
|
2,402
|
|
(Decrease) increase
in short-term borrowings, net
|
(24)
|
|
|
(535)
|
|
|
642
|
|
|
32
|
|
Dividends paid on
Common Stock
|
(535)
|
|
|
(503)
|
|
|
(1,070)
|
|
|
(1,008)
|
|
Repurchase of Common
Stock
|
(27)
|
|
|
(437)
|
|
|
(52)
|
|
|
(1,370)
|
|
Other financing
activities, net
|
(27)
|
|
|
(77)
|
|
|
(68)
|
|
|
(108)
|
|
Net cash flows
provided by (used in) financing activities
|
699
|
|
|
877
|
|
|
(211)
|
|
|
(52)
|
|
Effect of foreign
exchange rate changes on cash and cash equivalents
|
(137)
|
|
|
26
|
|
|
(18)
|
|
|
95
|
|
Net increase in cash,
cash equivalents and restricted cash
|
3,402
|
|
|
2,198
|
|
|
2,088
|
|
|
2,192
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
7,704
|
|
|
7,183
|
|
|
9,018
|
|
|
7,189
|
|
Cash, cash
equivalents and restricted cash, end of period
|
11,106
|
|
|
9,381
|
|
|
11,106
|
|
|
9,381
|
|
Less: Restricted
cash, included in Other assets
|
38
|
|
|
36
|
|
|
38
|
|
|
36
|
|
Cash and cash
equivalents, end of period
|
$
|
11,068
|
|
|
$
|
9,345
|
|
|
$
|
11,068
|
|
|
$
|
9,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying
Notes to Condensed Consolidated Financial Statements.
|
United
Technologies Corporation
|
Free Cash Flow
Reconciliation
|
|
|
|
Quarter Ended June
30,
|
|
(Unaudited)
|
(dollars in
millions)
|
2018
|
|
2017
|
|
|
|
|
|
|
Net income
attributable to common shareowners
|
$
|
2,048
|
|
|
|
$
|
1,439
|
|
|
Net cash flows
provided by operating activities
|
$
|
2,102
|
|
|
|
$
|
2,146
|
|
|
Net cash flows
provided by operating activities as a percentage of net
income attributable
to common shareowners
|
|
103
|
%
|
|
|
149
|
%
|
Capital
expenditures
|
(372)
|
|
|
|
(446)
|
|
|
Capital expenditures
as a percentage of net income attributable to
common
shareowners
|
|
(18)
|
%
|
|
|
(31)
|
%
|
Free cash
flow
|
$
|
1,730
|
|
|
|
$
|
1,700
|
|
|
Free cash flow as a
percentage of net income attributable to common
shareowners
|
|
84
|
%
|
|
|
118
|
%
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
(Unaudited)
|
(dollars in
millions)
|
2018
|
|
2017
|
|
|
|
|
|
|
Net income
attributable to common shareowners
|
$
|
3,345
|
|
|
|
$
|
2,825
|
|
|
Net cash flows
provided by operating activities of continuing
operations
|
$
|
2,555
|
|
|
|
$
|
3,139
|
|
|
Net cash flows
provided by operating activities of continuing
operations as a
percentage of net income attributable to common
shareowners from
continuing operations
|
|
76
|
%
|
|
|
111
|
%
|
Capital
expenditures
|
(709)
|
|
|
|
(771)
|
|
|
Capital expenditures
as a percentage of net income attributable to
common
shareowners
|
|
(21)
|
%
|
|
|
(27)
|
%
|
Free cash
flow
|
$
|
1,846
|
|
|
|
$
|
2,368
|
|
|
Free cash flow as a
percentage of net income attributable to common
shareowners
|
|
55
|
%
|
|
|
84
|
%
|
|
|
|
Notes to Condensed
Consolidated Financial Statements
|
Certain
reclassifications have been made to the prior year amounts to
conform to the current year presentation.
|
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.
|
United
Technologies Corporation
|
The New Revenue
Standard Adoption Impact
|
The following
schedules quantify the impact of adopting the New Revenue Standard
on the statement of operations for the quarter and six months ended
June 30, 2018. The effect of the new standard represents the
increase (decrease) in the line item based on the adoption of the
New Revenue Standard.
|
|
|
|
|
|
|
(dollars in
millions)
|
Quarter
Ended
June 30,
2018,
under
previous
standard
|
|
Effect of
the
New
Revenue
Standard
|
|
Quarter
Ended
June 30,
2018
as
reported
|
Net Sales
|
$
|
16,521
|
|
|
$
|
184
|
|
|
$
|
16,705
|
|
Costs and
Expenses:
|
|
|
|
|
|
Cost of products and
services sold
|
12,203
|
|
|
219
|
|
|
12,422
|
|
Research and
development
|
607
|
|
|
(18)
|
|
|
589
|
|
Selling, general and
administrative
|
1,759
|
|
|
—
|
|
|
1,759
|
|
Total Costs and
Expenses
|
14,569
|
|
|
201
|
|
|
14,770
|
|
Other income,
net
|
943
|
|
|
(2)
|
|
|
941
|
|
Operating
profit
|
2,895
|
|
|
(19)
|
|
|
2,876
|
|
Non-service pension
(benefit)
|
(192)
|
|
|
—
|
|
|
(192)
|
|
Interest expense,
net
|
234
|
|
|
—
|
|
|
234
|
|
Income from
operations before income taxes
|
2,853
|
|
|
(19)
|
|
|
2,834
|
|
Income tax
expense
|
700
|
|
|
(5)
|
|
|
695
|
|
Net income
|
2,153
|
|
|
(14)
|
|
|
2,139
|
|
Less: Noncontrolling
interest in subsidiaries' earnings
|
87
|
|
|
4
|
|
|
91
|
|
Net income
attributable to common shareowners
|
$
|
2,066
|
|
|
$
|
(18)
|
|
|
$
|
2,048
|
|
(dollars in
millions)
|
Six
Months
Ended June
30,
2018,
under
previous standard
|
|
Effect of
the
New
Revenue Standard
|
|
Six
Months
Ended June 30,
2018 as
reported
|
Net Sales
|
$
|
31,541
|
|
|
$
|
406
|
|
|
$
|
31,947
|
|
Costs and
Expenses:
|
|
|
|
|
|
Cost of products and
services sold
|
23,257
|
|
|
445
|
|
|
23,702
|
|
Research and
development
|
1,180
|
|
|
(37)
|
|
|
1,143
|
|
Selling, general and
administrative
|
3,470
|
|
|
—
|
|
|
3,470
|
|
Total Costs and
Expenses
|
27,907
|
|
|
408
|
|
|
28,315
|
|
Other income,
net
|
1,175
|
|
|
(3)
|
|
|
1,172
|
|
Operating
profit
|
4,809
|
|
|
(5)
|
|
|
4,804
|
|
Non-service pension
(benefit)
|
(383)
|
|
|
—
|
|
|
(383)
|
|
Interest expense,
net
|
463
|
|
|
—
|
|
|
463
|
|
Income from
operations before income taxes
|
4,729
|
|
|
(5)
|
|
|
4,724
|
|
Income
tax expense
|
1,218
|
|
|
(1)
|
|
|
1,217
|
|
Net income
|
3,511
|
|
|
(4)
|
|
|
3,507
|
|
Less: Noncontrolling
interest in subsidiaries' earnings
|
156
|
|
|
6
|
|
|
162
|
|
Net income
attributable to common shareowners
|
$
|
3,355
|
|
|
$
|
(10)
|
|
|
$
|
3,345
|
|
The following schedules quantify the impact of adopting the New
Revenue Standard on segment net sales and operating profit for the
quarter and six months ended June 30,
2018.
(dollars in
millions)
|
Effect of the New
Revenue
Standard for the
Quarter Ended
June 30,
2018
|
Net
sales
|
|
Operating
Profit
|
Otis
|
$
|
20
|
|
|
$
|
1
|
|
UTC Climate, Controls
& Security
|
—
|
|
|
—
|
|
Pratt &
Whitney
|
169
|
|
|
(26)
|
|
UTC Aerospace
Systems
|
(5)
|
|
|
6
|
|
Consolidated
|
$
|
184
|
|
|
$
|
(19)
|
|
(dollars in
millions)
|
Effect of the New
Revenue
Standard for the
Six Months
Ended
June 30, 2018
|
Net
sales
|
|
Operating
Profit
|
Otis
|
$
|
48
|
|
|
$
|
(1)
|
|
UTC Climate, Controls
& Security
|
—
|
|
|
—
|
|
Pratt &
Whitney
|
369
|
|
|
(14)
|
|
UTC Aerospace
Systems
|
(11)
|
|
|
10
|
|
Consolidated
|
$
|
406
|
|
|
$
|
(5)
|
|
The following schedule reflects the effect of the New Revenue
Standard on our balance sheet as of June 30,
2018.
(dollars in
millions)
|
June 30,
2018,
under
previous
standard
|
|
Effect of
the
New
Revenue
Standard
|
|
June 30,
2018
as
reported
|
Assets
|
|
|
|
|
|
Accounts receivable,
net
|
$
|
13,432
|
|
|
$
|
(1,459)
|
|
|
$
|
11,973
|
|
Inventories
|
11,093
|
|
|
(2,114)
|
|
|
8,979
|
|
Contract assets,
current
|
—
|
|
|
3,273
|
|
|
3,273
|
|
Other assets,
current
|
1,276
|
|
|
(13)
|
|
|
1,263
|
|
Intangible assets,
net
|
15,807
|
|
|
(68)
|
|
|
15,739
|
|
Other
assets
|
10,461
|
|
|
999
|
|
|
11,460
|
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
|
Accrued
liabilities
|
$
|
14,287
|
|
|
$
|
(5,557)
|
|
|
$
|
8,730
|
|
Contract liabilities,
current
|
—
|
|
|
5,652
|
|
|
5,652
|
|
Other long term
liabilities
|
14,769
|
|
|
1,010
|
|
|
15,779
|
|
Noncontrolling
interest
|
1,977
|
|
|
5
|
|
|
1,982
|
|
|
|
|
|
|
|
Retained
earnings
|
57,517
|
|
|
(490)
|
|
|
57,027
|
|
View original
content:http://www.prnewswire.com/news-releases/united-technologies-reports-second-quarter-2018-results-raises-2018-outlook-300685205.html
SOURCE United Technologies Corp.