RTX CORPORATION FARMINGTON, Conn., Jan. 24, 2018 /PRNewswire/ -- United Technologies Corp. (NYSE: UTX) reported fourth quarter and full year 2017 results above expectations and expects continued growth in 2018. In a conference call with investors and analysts today, Chairman and Chief Executive Officer Gregory Hayes will discuss the 2017 results and the company's expectations for 2018.
"UTC had a strong finish to 2017," said Hayes. "Sales, adjusted EPS and free cash flow were all above the top end of our expectations. Our focus on innovation, execution and cost reduction led to our best year of organic sales growth since 2014, with all businesses contributing. We gained share in our commercial businesses and continued to execute on our growing aerospace backlog. UTC also announced the transformative Rockwell Collins acquisition which will create a premier aerospace supplier. As a result of this proposed transaction, together with the investments in our businesses and in our digital strategies, we are positioned well for years to come."
Hayes continued, "In 2018, we expect accelerating organic sales and adjusted earnings per share growth along with strong cash generation."
Fourth Quarter 2017
Fourth quarter sales of $15.7 billion were up 7 percent over the prior year including 5 points of organic sales growth and 2 points of foreign exchange.
GAAP EPS was $0.50 (down from $1.26 in the fourth quarter of 2016) and included 90 cents for a charge related to tax law changes and 20 cents of net restructuring and other significant items. Associated with the tax law change is an estimated, cumulative net cash payment of $1.5 billion to be paid through 2026. Adjusted EPS of $1.60 was up 3 percent versus the prior year.
Each of United Technologies' businesses grew sales in the fourth quarter. Commercial aftermarket sales were up 25 percent at Pratt & Whitney, and up 10 percent at UTC Aerospace Systems. Otis new equipment orders increased 1 percent versus the prior year at constant currency, with solid growth in the U.S. and Europe and continued pricing pressure in China. Equipment orders at UTC Climate, Controls & Security increased 9 percent organically.
Full Year 2017
Full year sales of $59.8 billion were up 5 percent versus the prior year with 4 points of organic sales growth and 1 point of net acquisitions impact.
Full year 2017 GAAP EPS of $5.70 was down 7 percent versus prior year. 2017 results included 90 cents for the fourth quarter tax charge and 5 cents of net restructuring and other significant items, as compared with 48 cents in 2016. Adjusted EPS of $6.65 increased 1 percent year over year. Net income for the year was $4.6 billion, down 10 percent versus the prior year. Cash flow from operations for the year was $5.6 billion and capital expenditures were $2.0 billion.
In 2017, United Technologies invested in digital initiatives to drive operational efficiency and generate long-term value for its customers. Investments included the United Technologies Digital Accelerator, new digital solutions within UTC Climate, Controls & Security, and new tools for more than 15,000 Otis technicians worldwide. Pratt & Whitney's Geared Turbofan™ Engine was selected to power Delta Air Lines' order of 100 A321neo aircraft. Additionally, the proposed acquisition of Rockwell Collins, announced in 2017, will lead to a new era of innovative aerospace products and solutions for UTC's customers.
Outlook for 2018
UTC provides the following 2018 outlook (excluding the impact of the proposed Rockwell Collins acquisition):
- Adjusted EPS of $6.85 to $7.10*;
- Total sales of $62.5 to $64.0 billion, including organic sales growth of 4 to 6 percent*;
- Free cash flow in the range of $4.5 to $5.0 billion.*
"Our outlook demonstrates how our strategic investments are paying off," said Hayes. "We are innovating for growth and expect all of our businesses to grow sales and earnings in 2018."
As a global technology company delivering essential products and services for a better life, United Technologies' businesses are well aligned with the world's megatrends, such as urbanization, digitization, and an expanding middle class. These advantages, combined with an improving global macro-economic environment, solidify the company's confidence in generating sustained value creation.
*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/sec6ou3c, or to listen to the earnings call by phone, dial (877) 280-7280 between 7:10 a.m. and 7:30 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 press release. 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' proposed acquisition of Rockwell Collins, the anticipated benefits of the proposed acquisition, including estimated synergies, the expected timing of 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 acquisition and divestiture activity, including among other things integration of acquired businesses, including Rockwell Collins, into United Technologies' existing businesses and realization of synergies and opportunities for growth and innovation; (4) future levels of indebtedness, including indebtedness expected to be incurred by United Technologies in connection with the posed Rockwell Collins merger, and capital spending and research and development spending; (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 market conditions and the level of other investing activities and uses of cash, including in connection with the proposed acquisition of Rockwell; (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 or 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 the recently enacted Tax Cuts and Jobs Act in the U.S.), 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 transaction) and to satisfy the other conditions to the closing of the transaction 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, including on circumstances that might require Rockwell Collins to pay a termination fee of $695 million to United Technologies or $50 million of expense reimbursement; (19) negative effects of the announcement or the consummation of the transaction 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 its operation of the business while the merger agreement is in effect; (21) risks relating to the value of the United Technologies' shares to be issued in the transaction, significant transaction costs and/or unknown liabilities; (22) risks associated with third party contracts containing consent and/or other provisions that may be triggered by United Technologies' proposed acquisition of Rockwell Collins; (23) risks associated with merger-related litigation or appraisal proceedings; 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' proposed 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.
UTC-IR
United Technologies Corporation Condensed Consolidated Statement of Operations | ||||||||||||||||
Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
(Millions, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net Sales | $ | 15,680 | $ | 14,659 | $ | 59,837 | $ | 57,244 | ||||||||
Costs and Expenses: | ||||||||||||||||
Cost of products and services sold | 11,733 | 10,723 | 43,953 | 41,460 | ||||||||||||
Research and development | 619 | 626 | 2,387 | 2,337 | ||||||||||||
Selling, general and administrative | 1,639 | 1,856 | 6,183 | 6,060 | ||||||||||||
Total Costs and Expenses | 13,991 | 13,205 | 52,523 | 49,857 | ||||||||||||
Other income, net | 263 | 185 | 1,358 | 785 | ||||||||||||
Operating profit | 1,952 | 1,639 | 8,672 | 8,172 | ||||||||||||
Interest expense, net | 247 | 366 | 909 | 1,039 | ||||||||||||
Income from continuing operations before income taxes | 1,705 | 1,273 | 7,763 | 7,133 | ||||||||||||
Income tax expense | 1,219 | 149 | 2,843 | 1,697 | ||||||||||||
Income from continuing operations | 486 | 1,124 | 4,920 | 5,436 | ||||||||||||
Less: Noncontrolling interest in subsidiaries' earnings | 89 | 100 | 368 | 371 | ||||||||||||
Income from continuing operations attributable to common | 397 | 1,024 | 4,552 | 5,065 | ||||||||||||
Discontinued operations: | ||||||||||||||||
(Loss) income from operations | — | (1) | — | 1 | ||||||||||||
Gain on disposal | — | 2 | — | 13 | ||||||||||||
Income tax expense | — | (12) | — | (24) | ||||||||||||
Loss from discontinued operations attributable to common | — | (11) | — | (10) | ||||||||||||
Net income attributable to common shareowners | $ | 397 | $ | 1,013 | $ | 4,552 | $ | 5,055 | ||||||||
Earnings Per Share of Common Stock - Basic: | ||||||||||||||||
From continuing operations attributable to common | $ | 0.50 | $ | 1.28 | $ | 5.76 | $ | 6.19 | ||||||||
From discontinued operations attributable to common | — | (0.01) | — | (0.01) | ||||||||||||
Total attributable to common shareowners | $ | 0.50 | $ | 1.26 | $ | 5.76 | $ | 6.18 | ||||||||
Earnings Per Share of Common Stock - Diluted: | ||||||||||||||||
From continuing operations attributable to common | $ | 0.50 | $ | 1.26 | $ | 5.70 | $ | 6.13 | ||||||||
From discontinued operations attributable to common | — | (0.01) | — | (0.01) | ||||||||||||
Total attributable to common shareowners | $ | 0.50 | $ | 1.25 | $ | 5.70 | $ | 6.12 | ||||||||
Weighted Average Number of Shares Outstanding: | ||||||||||||||||
Basic shares | 789 | 802 | 790 | 818 | ||||||||||||
Diluted shares | 798 | 810 | 799 | 826 | ||||||||||||
As described on the following pages, consolidated results for the quarters and years ended December 31, 2017 and 2016 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 December 31, | Year Ended December 31, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
(Millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net Sales | |||||||||||||||
Otis | $ | 3,250 | $ | 3,063 | $ | 12,341 | $ | 11,893 | |||||||
UTC Climate, Controls & Security | 4,520 | 4,249 | 17,812 | 16,851 | |||||||||||
Pratt & Whitney | 4,461 | 3,992 | 16,160 | 14,894 | |||||||||||
UTC Aerospace Systems | 3,803 | 3,598 | 14,691 | 14,465 | |||||||||||
Segment Sales | 16,034 | 14,902 | 61,004 | 58,103 | |||||||||||
Eliminations and other | (354) | (243) | (1,167) | (859) | |||||||||||
Consolidated Net Sales | $ | 15,680 | $ | 14,659 | $ | 59,837 | $ | 57,244 | |||||||
Operating Profit | |||||||||||||||
Otis | $ | 470 | $ | 516 | $ | 2,021 | $ | 2,147 | |||||||
UTC Climate, Controls & Security | 636 | 677 | 3,300 | 2,956 | |||||||||||
Pratt & Whitney | 436 | 409 | 1,460 | 1,545 | |||||||||||
UTC Aerospace Systems | 599 | 578 | 2,370 | 2,298 | |||||||||||
Segment Operating Profit | 2,141 | 2,180 | 9,151 | 8,946 | |||||||||||
Eliminations and other | (63) | (415) | (38) | (368) | |||||||||||
General corporate expenses | (126) | (126) | (441) | (406) | |||||||||||
Consolidated Operating Profit | $ | 1,952 | $ | 1,639 | $ | 8,672 | $ | 8,172 | |||||||
Segment Operating Profit Margin | |||||||||||||||
Otis | 14.5 | % | 16.8 | % | 16.4 | % | 18.1 | % | |||||||
UTC Climate, Controls & Security | 14.1 | % | 15.9 | % | 18.5 | % | 17.5 | % | |||||||
Pratt & Whitney | 9.8 | % | 10.2 | % | 9.0 | % | 10.4 | % | |||||||
UTC Aerospace Systems | 15.8 | % | 16.1 | % | 16.1 | % | 15.9 | % | |||||||
Segment Operating Profit Margin | 13.4 | % | 14.6 | % | 15.0 | % | 15.4 | % | |||||||
As described on the following pages, consolidated results for the quarters and years ended December 31, 2017 and 2016 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 December 31, | Year Ended December 31, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
In Millions - Income (Expense) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net Sales | $ | 15,680 | $ | 14,659 | $ | 59,837 | $ | 57,244 | |||||||
Significant non-recurring and non-operational items | |||||||||||||||
Pratt & Whitney - charge resulting from customer | — | — | (385) | (184) | |||||||||||
Adjusted Net Sales | $ | 15,680 | $ | 14,659 | $ | 60,222 | $ | 57,428 | |||||||
Income from continuing operations attributable to | $ | 397 | $ | 1,024 | $ | 4,552 | $ | 5,065 | |||||||
Restructuring Costs included in Operating Profit: | |||||||||||||||
Otis | (27) | (18) | (50) | (59) | |||||||||||
UTC Climate, Controls & Security | (27) | 6 | (111) | (65) | |||||||||||
Pratt & Whitney | (1) | (61) | (5) | (111) | |||||||||||
UTC Aerospace Systems | (16) | (17) | (80) | (49) | |||||||||||
Eliminations and other | (5) | 1 | (7) | (6) | |||||||||||
(76) | (89) | (253) | (290) | ||||||||||||
Significant non-recurring and non-operational items | |||||||||||||||
UTC Climate, Controls & Security | (96) | (9) | 283 | (32) | |||||||||||
Pratt & Whitney | — | — | (196) | (95) | |||||||||||
Eliminations and other | (38) | (423) | 56 | (423) | |||||||||||
(134) | (432) | 143 | (550) | ||||||||||||
Total impact on Consolidated Operating Profit | (210) | (521) | (110) | (840) | |||||||||||
Significant non-recurring and non-operational items | (6) | (142) | 3 | (140) | |||||||||||
Tax effect of restructuring and significant non- | 61 | 242 | 11 | 354 | |||||||||||
Significant non-recurring and non-operational items | (722) | 175 | (667) | 231 | |||||||||||
Less: Impact on Net Income from Continuing Operations | (877) | (246) | (763) | (395) | |||||||||||
Adjusted income from continuing operations | $ | 1,274 | $ | 1,270 | $ | 5,315 | $ | 5,460 | |||||||
Diluted Earnings Per Share from Continuing | $ | 0.50 | $ | 1.26 | $ | 5.70 | $ | 6.13 | |||||||
Impact on Diluted Earnings Per Share from Continuing | (1.10) | (0.30) | (0.95) | (0.48) | |||||||||||
Adjusted Diluted Earnings Per Share from Continuing | $ | 1.60 | $ | 1.56 | $ | 6.65 | $ | 6.61 | |||||||
Effective Tax Rate - Continuing Operations | 71.5 | % | 11.7 | % | 36.6 | % | 23.8 | % | |||||||
Impact on Effective Tax Rate - Continuing Operations | (42.5) | % | 17.5 | % | (8.8) | % | 4.3 | % | |||||||
Adjusted Effective Tax Rate - Continuing Operations | 29.0 | % | 29.2 | % | 27.8 | % | 28.1 | % | |||||||
Details of the significant non-recurring and non-operational items included within operating profit, interest and income tax of continuing operations for the quarter and years ended December 31, 2017 and 2016 above are as follows:
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
In Millions - Income (Expense) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Significant non-recurring and non-operational items | |||||||||||||||
UTC Climate, Controls & Security | |||||||||||||||
Charge related to product recall program | $ | (96) | $ | — | $ | (96) | $ | — | |||||||
Gain on sale of investments in Watsco, Inc. | — | — | 379 | — | |||||||||||
Acquisition and integration costs | — | (9) | — | (32) | |||||||||||
Pratt & Whitney | |||||||||||||||
Charge resulting from customer contract matters | — | — | (196) | (95) | |||||||||||
Eliminations & other | |||||||||||||||
Transaction and integration costs related to merger | (38) | — | (65) | — | |||||||||||
Gain on sale of available-for-sale securities | — | — | 121 | — | |||||||||||
Pension settlement charge resulting from defined benefit | — | (423) | — | (423) | |||||||||||
$ | (134) | $ | (432) | $ | 143 | $ | (550) | ||||||||
Significant non-recurring and non-operational items | |||||||||||||||
Unfavorable pre-tax interest adjustments related to tax | $ | (6) | $ | — | $ | (6) | $ | — | |||||||
Favorable pre-tax interest adjustments related to | — | — | 9 | — | |||||||||||
Net extinguishment loss from early redemption of debt | — | (164) | — | (164) | |||||||||||
Favorable pre-tax interest adjustments, primarily related | — | 22 | — | 22 | |||||||||||
Favorable pre-tax interest adjustments, primarily related | — | — | — | 2 | |||||||||||
$ | (6) | $ | (142) | $ | 3 | $ | (140) | ||||||||
Significant non-recurring and non-operational items | |||||||||||||||
Unfavorable income tax adjustments related to the | $ | (690) | $ | — | $ | (690) | $ | — | |||||||
Net unfavorable tax adjustments related to tax law | (32) | — | (32) | — | |||||||||||
Favorable income tax adjustments related to expiration | — | — | 55 | — | |||||||||||
Favorable income tax adjustments, primarily related to | — | 150 | — | 150 | |||||||||||
Favorable income tax adjustments related to reductions | — | 25 | — | 25 | |||||||||||
Favorable income tax adjustments, primarily related to | — | — | — | 56 | |||||||||||
$ | (722) | $ | 175 | $ | (667) | $ | 231 | ||||||||
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 December 31, | Year Ended December 31, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
(Millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Adjusted Net Sales | |||||||||||||||
Otis | $ | 3,250 | $ | 3,063 | $ | 12,341 | $ | 11,893 | |||||||
UTC Climate, Controls & Security | 4,520 | 4,249 | 17,812 | 16,851 | |||||||||||
Pratt & Whitney | 4,461 | 3,992 | 16,545 | 15,078 | |||||||||||
UTC Aerospace Systems | 3,803 | 3,598 | 14,691 | 14,465 | |||||||||||
Segment Sales | 16,034 | 14,902 | 61,389 | 58,287 | |||||||||||
Eliminations and other | (354) | (243) | (1,167) | (859) | |||||||||||
Adjusted Consolidated Net Sales | $ | 15,680 | $ | 14,659 | $ | 60,222 | $ | 57,428 | |||||||
Adjusted Operating Profit | |||||||||||||||
Otis | $ | 497 | $ | 534 | $ | 2,071 | $ | 2,206 | |||||||
UTC Climate, Controls & Security | 759 | 680 | 3,128 | 3,053 | |||||||||||
Pratt & Whitney | 437 | 470 | 1,661 | 1,751 | |||||||||||
UTC Aerospace Systems | 615 | 595 | 2,450 | 2,347 | |||||||||||
Segment Operating Profit | 2,308 | 2,279 | 9,310 | 9,357 | |||||||||||
Eliminations and other | (22) | 7 | (91) | 60 | |||||||||||
General corporate expenses | (124) | (126) | (437) | (405) | |||||||||||
Adjusted Consolidated Operating Profit | $ | 2,162 | $ | 2,160 | $ | 8,782 | $ | 9,012 | |||||||
Adjusted Segment Operating Profit Margin | |||||||||||||||
Otis | 15.3 | % | 17.4 | % | 16.8 | % | 18.5 | % | |||||||
UTC Climate, Controls & Security | 16.8 | % | 16.0 | % | 17.6 | % | 18.1 | % | |||||||
Pratt & Whitney | 9.8 | % | 11.8 | % | 10.0 | % | 11.6 | % | |||||||
UTC Aerospace Systems | 16.2 | % | 16.5 | % | 16.7 | % | 16.2 | % | |||||||
Adjusted Segment Operating Profit Margin | 14.4 | % | 15.3 | % | 15.2 | % | 16.1 | % | |||||||
United Technologies Corporation Components of Changes in Net Sales | ||||||||||
Quarter Ended December 31, 2017 Compared with Quarter Ended December 31, 2016 | ||||||||||
Factors Contributing to Total % Change in Net Sales | ||||||||||
Organic | FX | Acquisitions / | Other | Total | ||||||
Otis | 3% | 3% | — | — | 6% | |||||
UTC Climate, Controls & Security | 3% | 3% | — | — | 6% | |||||
Pratt & Whitney | 11% | 1% | — | — | 12% | |||||
UTC Aerospace Systems | 5% | 1% | — | — | 6% | |||||
Consolidated | 5% | 2% | — | — | 7% | |||||
Year Ended December 31, 2017 Compared with Year Ended December 31, 2016 | ||||||||||
Factors Contributing to Total % Change in Net Sales | ||||||||||
Organic | FX | Acquisitions / | Other | Total | ||||||
Otis | 2% | — | 1% | 1% | 4% | |||||
UTC Climate, Controls & Security | 4% | 1% | 1% | — | 6% | |||||
Pratt & Whitney | 9% | 1% | — | (1)% | 9% | |||||
UTC Aerospace Systems | 2% | — | — | — | 2% | |||||
Consolidated | 4% | — | 1% | — | 5% | |||||
United Technologies Corporation Condensed Consolidated Balance Sheet | |||||||
December 31, | December 31, | ||||||
2017 | 2016 | ||||||
(Millions) | (Unaudited) | (Unaudited) | |||||
Assets | |||||||
Cash and cash equivalents | $ | 8,985 | $ | 7,157 | |||
Accounts receivable, net | 12,595 | 11,481 | |||||
Inventories and contracts in progress, net | 9,881 | 8,704 | |||||
Other assets, current | 1,397 | 1,208 | |||||
Total Current Assets | 32,858 | 28,550 | |||||
Fixed assets, net | 10,186 | 9,158 | |||||
Goodwill | 27,910 | 27,059 | |||||
Intangible assets, net | 15,883 | 15,684 | |||||
Other assets | 10,083 | 9,255 | |||||
Total Assets | $ | 96,920 | $ | 89,706 | |||
Liabilities and Equity | |||||||
Short-term debt | $ | 2,496 | $ | 2,204 | |||
Accounts payable | 9,579 | 7,483 | |||||
Accrued liabilities | 12,316 | 12,219 | |||||
Total Current Liabilities | 24,391 | 21,906 | |||||
Long-term debt | 24,989 | 21,697 | |||||
Other long-term liabilities | 15,988 | 16,638 | |||||
Total Liabilities | 65,368 | 60,241 | |||||
Redeemable noncontrolling interest | 131 | 296 | |||||
Shareowners' Equity: | |||||||
Common Stock | 17,489 | 17,190 | |||||
Treasury Stock | (35,596) | (34,150) | |||||
Retained earnings | 55,242 | 52,873 | |||||
Accumulated other comprehensive loss | (7,525) | (8,334) | |||||
Total Shareowners' Equity | 29,610 | 27,579 | |||||
Noncontrolling interest | 1,811 | 1,590 | |||||
Total Equity | 31,421 | 29,169 | |||||
Total Liabilities and Equity | $ | 96,920 | $ | 89,706 | |||
Debt Ratios: | |||||||
Debt to total capitalization | 47 | % | 45 | % | |||
Net debt to net capitalization | 37 | % | 36 | % | |||
See accompanying Notes to Condensed Consolidated Financial Statements.
United Technologies Corporation Condensed Consolidated Statement of Cash Flows | |||||||||||||||
Quarter Ended | Year Ended | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
(Millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Operating Activities of Continuing Operations: | |||||||||||||||
Net income from continuing operations | $ | 486 | $ | 1,124 | $ | 4,920 | $ | 5,436 | |||||||
Adjustments to reconcile net income from continuing operations to net | |||||||||||||||
Depreciation and amortization | 558 | 506 | 2,140 | 1,962 | |||||||||||
Deferred income tax (benefit) provision | (662) | 125 | 62 | 398 | |||||||||||
Stock compensation cost | 47 | 40 | 192 | 152 | |||||||||||
Change in working capital | 306 | (462) | (52) | (1,161) | |||||||||||
Global pension contributions | (104) | (178) | (2,112) | (303) | |||||||||||
Canadian government settlement | (39) | — | (285) | (237) | |||||||||||
Other operating activities, net | 1,929 | 690 | 766 | 165 | |||||||||||
Net cash flows provided by operating activities of continuing operations | 2,521 | 1,845 | 5,631 | 6,412 | |||||||||||
Investing Activities of Continuing Operations: | |||||||||||||||
Capital expenditures | (800) | (656) | (2,014) | (1,699) | |||||||||||
Acquisitions and dispositions of businesses, net | (2) | (112) | (161) | (499) | |||||||||||
Proceeds from sale of investments in Watsco, Inc. | — | — | 596 | — | |||||||||||
Increase in collaboration intangible assets | (90) | (79) | (380) | (380) | |||||||||||
(Payments) proceeds from settlements of derivative contracts | (134) | 278 | (317) | 249 | |||||||||||
Other investing activities, net | (335) | (42) | (743) | (180) | |||||||||||
Net cash flows used in investing activities of continuing operations | (1,361) | (611) | (3,019) | (2,509) | |||||||||||
Financing Activities of Continuing Operations: | |||||||||||||||
Issuance of long-term debt, net | 893 | 1,736 | 3,350 | 4,017 | |||||||||||
Decrease in short-term borrowings, net | (671) | (268) | (271) | (331) | |||||||||||
Dividends paid on Common Stock | (533) | (508) | (2,074) | (2,069) | |||||||||||
Repurchase of Common Stock | (23) | (1,726) | (1,453) | (2,254) | |||||||||||
Other financing activities, net | (366) | (219) | (545) | (551) | |||||||||||
Net cash flows used in financing activities of continuing operations | (700) | (985) | (993) | (1,188) | |||||||||||
Discontinued Operations: | |||||||||||||||
Net cash used in operating activities | — | (46) | — | (2,532) | |||||||||||
Net cash provided by investing activities | — | — | — | 6 | |||||||||||
Net cash flows used in discontinued operations | — | (46) | — | (2,526) | |||||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | 2 | (148) | 210 | (120) | |||||||||||
Net increase in cash, cash equivalents and restricted cash | 462 | 55 | 1,829 | 69 | |||||||||||
Cash, cash equivalents and restricted cash, beginning of period | 8,556 | 7,134 | 7,189 | 7,120 | |||||||||||
Cash, cash equivalents and restricted cash, end of period | 9,018 | 7,189 | 9,018 | 7,189 | |||||||||||
Less: Restricted cash, included in Other assets | 33 | 32 | 33 | 32 | |||||||||||
Cash and cash equivalents, end of period | $ | 8,985 | $ | 7,157 | $ | 8,985 | $ | 7,157 | |||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
United Technologies Corporation Free Cash Flow Reconciliation | |||||||||||
Quarter Ended December 31, | |||||||||||
(Unaudited) | |||||||||||
(Millions) | 2017 | 2016 | |||||||||
Net income attributable to common shareowners from continuing | $ | 397 | $ | 1,024 | |||||||
Net cash flows provided by operating activities of continuing operations | $ | 2,521 | $ | 1,845 | |||||||
Net cash flows provided by operating activities of continuing | 635 | % | 180 | % | |||||||
Capital expenditures | (800) | (656) | |||||||||
Capital expenditures as a percentage of net income attributable to | (202) | % | (64) | % | |||||||
Free cash flow from continuing operations | $ | 1,721 | $ | 1,189 | |||||||
Free cash flow from continuing operations as a percentage of net | 434 | % | 116 | % | |||||||
Year Ended December 31, | |||||||||||
(Unaudited) | |||||||||||
(Millions) | 2017 | 2016 | |||||||||
Net income attributable to common shareowners from continuing | $ | 4,552 | $ | 5,065 | |||||||
Net cash flows provided by operating activities of continuing operations | $ | 5,631 | $ | 6,412 | |||||||
Net cash flows provided by operating activities of continuing | 124 | % | 127 | % | |||||||
Capital expenditures | (2,014) | (1,699) | |||||||||
Capital expenditures as a percentage of net income attributable to | (44) | % | (34) | % | |||||||
Free cash flow from continuing operations | $ | 3,617 | $ | 4,713 | |||||||
Free cash flow from continuing operations as a percentage of net | 79 | % | 93 | % | |||||||
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.
Contact: | Media Inquiries, UTC |
(860) 728-7907 | |
Investor Relations, UTC | |
(860) 728-7608 |
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SOURCE United Technologies Corp.
