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News Article

United Technologies Reports Second Quarter 2018 Results Raises 2018 Outlook

  • Organic sales growth momentum continues in Q2; Robust cash generation in the quarter; Raises sales and adjusted EPS outlook for 2018, excluding Rockwell Collins
  • Sales of $16.7 billion, up 9 percent versus prior year including 6 percent organic growth
  • GAAP EPS of $2.56, up 42 percent versus prior year including a one-time gain on the sale of Taylor Company in the quarter
  • Adjusted EPS of $1.97, up 6 percent versus prior year

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 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



(860) 728-7608


 

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


 

SOURCE United Technologies Corp.