HARTFORD, Conn., Jan. 27 /PRNewswire-FirstCall/ -- United Technologies Corp. 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 http://www.utc.com/ United Technologies Corporation Condensed Consolidated Statement of Operations Quarter Ended Year Ended December 31, 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 Year Ended December 31, 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 Year Ended December 31, December 31, (Unaudited) (Unaudited) ----------- ----------- (Millions) 2009 2008 2009 2008 ---- ---- ---- ---- Otis $27 $10 $158 $21 Carrier(1) 71 49 210 140 UTC Fire & Security 5 30 112 63 Pratt & Whitney(2) 13 33 190 116 Hamilton Sundstrand 19 13 88 16 Sikorsky - - 7 - Eliminations and other(3) - 1 62 1 General corporate expenses - - 3 - -- -- -- -- 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 Year Ended December 31, 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) 5 (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 Year Ended December 31, 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) 2 (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 137 % 176 % net income attributable to common shareowners Capital expenditures (325) (406) ---- ---- Capital expenditures as a percentage of net income (30)% (35)% attributable to common shareowners ---- ---- Free cash flow $1,150 $1,614 ====== ====== Free cash flow as a percentage of net income 107 % 141 % attributable to common shareowners === === 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 140 % 131 % net income attributable to common shareowners Capital expenditures (826) (1,216) ---- ------ Capital expenditures as a percentage of net income (22)% (26)% attributable to common shareowners ---- ---- Free cash flow $4,527 $4,945 ====== ====== Free cash flow as a percentage of net income 118 % 105 % attributable to common shareowners === ===
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.
United Technologies Corp.
CONTACT: John Moran, United Technologies Corp., +1-860-728-7062
Web Site: http://www.utc.com/
