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News Article

United Technologies Reports Third Quarter 2018 Results; Raises 2018 Outlook

  • Organic sales growth momentum continues in Q3; Raises sales and adjusted EPS outlook for 2018*
  • Sales of $16.5 billion, up 10 percent versus prior year including 8 percent organic growth
  • GAAP EPS of $1.54, down 8 percent versus prior year
  • Adjusted EPS of $1.93, up 12 percent versus prior year

FARMINGTON, Conn., Oct. 23, 2018 /PRNewswire/ -- United Technologies Corp. (NYSE: UTX) today reported third quarter 2018 results and increased its full year sales and adjusted EPS outlook.

"Organic sales growth of 8 percent is further proof that our investments in innovation are paying off across all of our businesses," said UTC Chairman and Chief Executive Officer Gregory Hayes. "We are well positioned to close out the year as we continue to execute on our strategic priorities. The acquisition of Rockwell Collins, once complete, will further strengthen our position as a premier systems supplier to the aerospace industry."

"Based on the continued positive momentum year-to-date, we are again raising our adjusted EPS outlook range and now expect $7.20 to $7.30 for 2018.* We are also raising the low end of our 2018 sales outlook and now expect $64.0 to $64.5 billion of sales on an improved organic growth outlook of 6 percent,"* Hayes concluded.  

Third quarter sales of $16.5 billion were up 10 percent over the prior year, including 8 points of organic sales growth, 3 points from the absence of the nonrecurring charge incurred at Pratt & Whitney in Q3 2017 and 1 point of foreign exchange headwind. GAAP EPS of $1.54 was down 8 percent versus the prior year and included 39 cents of net restructuring charges and other significant items. Adjusted EPS of $1.93 was up 12 percent.

Net income in the quarter was $1.2 billion, down 7 percent versus the prior year. Cash flow from operations was $1.8 billion and capital expenditures were $413 million, resulting in free cash flow of $1.3 billion.

In the quarter, commercial aftermarket sales were up 9 percent at Pratt & Whitney and up 12 percent at UTC Aerospace Systems. Otis new equipment orders were up 9 percent organically versus the prior year. Equipment orders at UTC Climate, Controls & Security increased 13 percent organically.

UTC updates its 2018 outlook* and now anticipates:

  • Adjusted EPS of $7.20 to $7.30, up from $7.10 to $7.25;
  • Sales of $64.0 to $64.5 billion, up from $63.5 to $64.5 billion;
  • Organic sales growth of approximately 6 percent, up from 5 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.

*Notes: Excludes the impact of the pending acquisition of Rockwell Collins. 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/e59ddgx3, 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 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 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

United Technologies Corporation

Condensed Consolidated Statement of Operations



Quarter Ended September 30,


Nine Months Ended September 30,


(Unaudited)


(Unaudited)

(dollars in millions, except per share amounts)

2018


2017


2018


2017

Net Sales

$

16,510


$

15,062


$

48,457


$

44,157

Costs and Expenses:








Cost of products and services sold

12,536


11,106


36,238


32,406

Research and development

586


592


1,729


1,797

Selling, general and administrative

1,681


1,582


5,151


4,709

Total Costs and Expenses

14,803


13,280


43,118


38,912

Other income, net

131


250


1,303


1,095

Operating profit

1,838


2,032


6,642


6,340

Non-service pension (benefit)

(188)


(131)


(571)


(380)

Interest expense, net

258


223


721


662

Income from operations before income taxes

1,768


1,940


6,492


6,058

Income tax expense

419


506


1,636


1,624

Net income from operations

1,349


1,434


4,856


4,434

Less: Noncontrolling interest in subsidiaries' earnings
from operations

111


104


273


279

Net income attributable to common shareowners

$

1,238


$

1,330


$

4,583


$

4,155

Earnings Per Share of Common Stock:








Basic

$

1.56


$

1.69


$

5.80


$

5.26

Diluted

$

1.54


$

1.67


$

5.72


$

5.20

Weighted Average Number of Shares Outstanding:








Basic shares

791


788


791


790

Diluted shares

802


797


801


799


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 September 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 September 30,


Nine Months Ended September 30,


(Unaudited)


(Unaudited)

(dollars in millions)

2018


2017


2018


2017

Net Sales








Otis

$

3,223


$

3,156


$

9,604


$

9,091

UTC Climate, Controls & Security

4,880


4,688


14,291


13,292

Pratt & Whitney

4,789


3,871


13,854


11,699

UTC Aerospace Systems

3,955


3,637


11,734


10,888

Segment Sales

16,847


15,352


49,483


44,970

Eliminations and other

(337)


(290)


(1,026)


(813)

Consolidated Net Sales

$

16,510


$

15,062


$

48,457


$

44,157









Operating Profit








Otis

$

486


$

550


$

1,424


$

1,536

UTC Climate, Controls & Security

844


794


3,081


2,562

Pratt & Whitney

109


188


919


908

UTC Aerospace Systems

610


572


1,767


1,637

Segment Operating Profit

2,049


2,104


7,191


6,643

Eliminations and other

(102)


32


(210)


9

General corporate expenses

(109)


(104)


(339)


(312)

Consolidated Operating Profit

$

1,838


$

2,032


$

6,642


$

6,340

Segment Operating Profit Margin








Otis

15.1%


17.4%


14.8%


16.9%

UTC Climate, Controls & Security

17.3%


16.9%


21.6%


19.3%

Pratt & Whitney

2.3%


4.9%


6.6%


7.8%

UTC Aerospace Systems

15.4%


15.7%


15.1%


15.0%

Segment Operating Profit Margin

12.2%


13.7%


14.5%


14.8%


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 September 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 September 30,


Nine Months Ended September 30,


(Unaudited)


(Unaudited)

dollars in millions - Income (Expense)

2018


2017


2018


2017

Net Sales

$

16,510


$

15,062


$

48,457


$

44,157

Significant non-recurring and non-operational items
included in Net Sales:








Pratt & Whitney - charge resulting from customer
contract matters


(385)



(385)

Adjusted Net Sales

$

16,510


$

15,447


$

48,457


$

44,542









Income from operations attributable to common
shareowners

$

1,238


$

1,330


$

4,583


$

4,155

Restructuring Costs included in Operating Profit:








Otis

(3)


(6)


(52)


(23)

UTC Climate, Controls & Security

(17)


(43)


(52)


(84)

Pratt & Whitney


2


(3)


(4)

UTC Aerospace Systems

(17)


(15)


(77)


(61)

Eliminations and other


(1)


(4)


(2)


(37)


(63)


(188)


(174)

Non-service pension cost


(2)


2


(3)

Total Restructuring Costs

(37)


(65)


(186)


(177)









Significant non-recurring and non-operational items
included in Operating Profit:








UTC Climate, Controls & Security








Gain on sale of Taylor Company

4



799


Gain on sale of investments in Watsco, Inc.




379

Pratt & Whitney








Charge resulting from customer contract matters

(300)


(196)


(300)


(196)

UTC Aerospace Systems




Asset Impairment



(48)


Eliminations and other








Transaction and integration costs related to merger
agreement with Rockwell Collins, Inc.

(21)


(27)


(71)


(27)

Costs associated with portfolio review

(23)



(23)


Gain on sale of available-for-sale securities


120



121


(340)


(103)


357


277

Total impact on Consolidated Operating Profit

(377)


(168)


171


100

Significant non-recurring and non-operational items
included in Interest Expense, Net








Favorable pre-tax interest adjustments related to
expiration of tax statute of limitations


9



9

Collins pre-acquisition interest

(22)



(22)


Tax effect of restructuring and significant non-
recurring and non-operational items above

96


54


(58)


(50)

Significant non-recurring and non-operational items
included in Income Tax Expense








Favorable income tax adjustments related to expiration
of tax statute of limitations


55



55

Unfavorable income tax adjustments related to the
estimated impact of the U.S. tax reform legislation
enacted on December 22, 2017

(6)



(52)


Less: Impact on Net Income Attributable to Common
Shareowners

(309)


(50)


39


114

Adjusted income attributable to common shareowners

$

1,547


$

1,380


$

4,544


$

4,041









Diluted Earnings Per Share

$

1.54


$

1.67


$

5.72


$

5.20

Impact on Diluted Earnings Per Share

(0.39)


(0.06)


0.05


0.14

Adjusted Diluted Earnings Per Share

$

1.93


$

1.73


$

5.67


$

5.06









Effective Tax Rate

23.7%


26.1%


25.2%


26.8%

Impact on Effective Tax Rate

(0.2)%


3.2%


(1.1)%


0.6%

Adjusted Effective Tax Rate

23.5%


29.3%


24.1%


27.4%

 

 

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 September 30,


Nine Months Ended September 30,


(Unaudited)


(Unaudited)

(dollars in millions)

2018


2017


2018


2017

Adjusted Net Sales








Otis

$

3,223


$

3,156


$

9,604


$

9,091

UTC Climate, Controls & Security

4,880


4,688


14,291


13,292

Pratt & Whitney

4,789


4,256


13,854


12,084

UTC Aerospace Systems

3,955


3,637


11,734


10,888

Segment Sales

16,847


15,737


49,483


45,355

Eliminations and other

(337)


(290)


(1,026)


(813)

Adjusted Consolidated Net Sales

$

16,510


$

15,447


$

48,457


$

44,542









Adjusted Operating Profit








Otis

$

489


$

556


$

1,476


$

1,599

UTC Climate, Controls & Security

857


837


2,334


2,267

Pratt & Whitney

409


382


1,222


1,108

UTC Aerospace Systems

627


587


1,892


1,698

Segment Operating Profit

2,382


2,362


6,924


6,672

Eliminations and other

(58)


(61)


(116)


(85)

General corporate expenses

(109)


(103)


(335)


(310)

Adjusted Consolidated Operating Profit

$

2,215


$

2,198


$

6,473


$

6,277

Adjusted Segment Operating Profit Margin








Otis

15.2%


17.6%


15.4%


17.6%

UTC Climate, Controls & Security

17.6%


17.9%


16.3%


17.1%

Pratt & Whitney

8.5%


9.0%


8.8%


9.2%

UTC Aerospace Systems

15.9%


16.1%


16.1%


15.6%

Adjusted Segment Operating Profit Margin

14.1%


15.0%


14.0%


14.7%

 

 

United Technologies Corporation

Components of Changes in Net Sales



Quarter Ended September 30, 2018 Compared with Quarter Ended September 30, 2017




Factors Contributing to Total % Change in Net Sales



Organic


FX
Translation


Acquisitions /
Divestitures, net


Other


Total

Otis


4%


(2)%


—%


—%


2%

UTC Climate, Controls & Security


7%


(1)%


(2)%


—%


4%

Pratt & Whitney


13%


—%


—%


11%


24%

UTC Aerospace Systems


9%


—%


—%


—%


9%












Consolidated


8%


(1)%


—%


3%


10%























Nine Months Ended September 30, 2018 Compared with Nine Months Ended September 30, 2017






Factors Contributing to Total % Change in Net Sales



Organic


FX
Translation


Acquisitions /
Divestitures, net


Other


Total

Otis


2%


3%


—%


1%


6%

UTC Climate, Controls & Security


6%


3%


(1)%


—%


8%

Pratt & Whitney


11%


1%


—%


6%


18%

UTC Aerospace Systems


7%


1%


—%


—%


8%












Consolidated


7%


1%


—%


2%


10%

 

 

United Technologies Corporation

Condensed Consolidated Balance Sheet



September 30,


December 31,


2018


2017

(dollars in millions)

(Unaudited)


(Unaudited)

Assets




Cash and cash equivalents

$

13,799


$

8,985

Accounts receivable, net

12,550


12,595

Contract assets, current

3,450


Inventories and contracts in progress, net

9,068


9,881

Other assets, current

1,337


1,397

Total Current Assets

40,204


32,858

Fixed assets, net

10,236


10,186

Goodwill

27,679


27,910

Intangible assets, net

15,701


15,883

Restricted cash

9,205


5

Other assets

11,914


10,078

Total Assets

$

114,939


$

96,920





Liabilities and Equity




Short-term debt

$

1,668


$

2,496

Accounts payable

10,509


9,579

Accrued liabilities

8,867


12,316

Contract liabilities, current

5,460


Total Current Liabilities

26,504


24,391

Long-term debt

38,275


24,989

Other long-term liabilities

15,785


15,988

Total Liabilities

80,564


65,368

Redeemable noncontrolling interest

125


131

Shareowners' Equity:




Common Stock

17,790


17,489

Treasury Stock

(35,667)


(35,596)

Retained earnings

57,706


55,242

Accumulated other comprehensive loss

(7,723)


(7,525)

Total Shareowners' Equity

32,106


29,610

Noncontrolling interest

2,144


1,811

Total Equity

34,250


31,421

Total Liabilities and Equity

$

114,939


$

96,920

Debt Ratios:






Debt to total capitalization


54%



47%

Net debt to net capitalization


33%



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
September 30,


Nine Months Ended
September 30,


(Unaudited)


(Unaudited)

(dollars in millions)

2018


2017


2018


2017

Operating Activities:








Net income from operations

$

1,349


$

1,434


$

4,856


$

4,434

Adjustments to reconcile net income from operations to net cash flows
provided by operating activities:








Depreciation and amortization

593


543


1,766


1,582

Deferred income tax provision

25


222


70


724

Stock compensation cost

64


49


181


145

Gain on sale of Taylor Company

(4)



(799)


Change in working capital

(154)


196


(643)


(358)

Global pension contributions

(13)


(1,929)


(72)


(2,008)

Canadian government settlement



(221)


(246)

Other operating activities, net

(98)


(544)


(821)


(1,163)

Net cash flows provided by (used in) operating activities

1,762


(29)


4,317


3,110

Investing Activities:








Capital expenditures

(413)


(443)


(1,122)


(1,214)

Acquisitions and dispositions of businesses, net

(38)


(10)


922


(159)

Proceeds from sale of investments in Watsco, Inc.




596

Increase in collaboration intangible assets

(121)


(95)


(302)


(290)

Proceeds (payments) from settlements of derivative contracts

(11)


111


71


(183)

Other investing activities, net

(198)


(231)


(588)


(408)

Net cash flows provided by (used in) investing activities

(781)


(668)


(1,019)


(1,658)

Financing Activities:








Issuance of long-term debt, net

10,979


55


11,316


2,457

(Decrease) increase in short-term borrowings, net

586


368


1,228


400

Dividends paid on Common Stock

(536)


(533)


(1,606)


(1,541)

Repurchase of Common Stock

(20)


(60)


(72)


(1,430)

Other financing activities, net

41


(71)


(27)


(179)

Net cash flows provided by (used in) financing activities

11,050


(241)


10,839


(293)

Effect of foreign exchange rate changes on cash and cash equivalents

(93)


113


(111)


208

Net increase (decrease) in cash, cash equivalents and restricted cash

11,938


(825)


14,026


1,367

Cash, cash equivalents and restricted cash, beginning of period

11,106


9,381


9,018


7,189

Cash, cash equivalents and restricted cash, end of period

23,044


8,556


23,044


8,556

Less: Restricted cash

9,245


33


9,245


33

Cash and cash equivalents, end of period

$

13,799


$

8,523


$

13,799


$

8,523


See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

United Technologies Corporation

Free Cash Flow Reconciliation



Quarter Ended September 30,


(Unaudited)

(dollars in millions)

2018


2017









Net income attributable to common shareowners

$

1,238




$

1,330



Net cash flows provided by operating activities

$

1,762




$

(29)



Net cash flows provided by operating activities as a percentage of net
income attributable to common shareowners



142%




(2)%

Capital expenditures

(413)




(443)



Capital expenditures as a percentage of net income attributable to
common shareowners



(33)%




(33)%

Free cash flow

$

1,349




$

(472)



Free cash flow as a percentage of net income attributable to common
shareowners



109%




(35)%














Nine Months Ended September 30,


(Unaudited)

(dollars in millions)

2018


2017









Net income attributable to common shareowners

$

4,583




$

4,155



Net cash flows provided by operating activities of continuing operations

$

4,317




$

3,110



Net cash flows provided by operating activities of continuing
operations as a percentage of net income attributable to common
shareowners from continuing operations



94%




75%

Capital expenditures

(1,122)




(1,214)



Capital expenditures as a percentage of net income attributable to
common shareowners



(24)%




(29)%

Free cash flow

$

3,195




$

1,896



Free cash flow as a percentage of net income attributable to common
shareowners



70%




46%


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 and cash designated for the acquisition of Rockwell Collins, Inc. ("restricted cash") divided by total debt plus equity less cash and cash equivalents and restricted cash.

 

 

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 nine months ended September 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
September 30,
2018, under
previous
standard


Effect of the
New Revenue
Standard


Quarter Ended
September 30,
2018 as
reported

Net Sales

$

16,461


$

49


$

16,510

Costs and Expenses:






Cost of products and services sold

12,561


(25)


12,536

Research and development

614


(28)


586

Selling, general and administrative

1,681



1,681

       Total Costs and Expenses

14,856


(53)


14,803

Other income, net

132


(1)


131

Operating profit

1,737


101


1,838

Non-service pension (benefit)

(188)



(188)

Interest expense, net

258



258

Income from operations before income taxes

1,667


101


1,768

Income tax expense

394


25


419

Net income

1,273


76


1,349

Less: Noncontrolling interest in subsidiaries' earnings

113


(2)


111

Net income attributable to common shareowners

$

1,160


$

78


$

1,238



(dollars in millions)

Nine Months
Ended
September 30,
2018, under
previous
standard


Effect of the
New Revenue
Standard


Nine Months
Ended
September 30,
2018 as
reported

Net Sales

$

48,002


$

455


$

48,457

Costs and Expenses:






Cost of products and services sold

35,818


420


36,238

Research and development

1,794


(65)


1,729

Selling, general and administrative

5,151



5,151

       Total Costs and Expenses

42,763


355


43,118

Other income, net

1,307


(4)


1,303

Operating profit

6,546


96


6,642

Non-service pension (benefit)

(571)



(571)

Interest expense, net

721



721

Income from operations before income taxes

6,396


96


6,492

Income tax expense

1,612


24


1,636

Net income

4,784


72


4,856

Less: Noncontrolling interest in subsidiaries' earnings

269


4


273

Net income attributable to common shareowners

$

4,515


$

68


$

4,583



The following schedules quantify the impact of adopting the New Revenue Standard on segment net sales and operating profit for the quarter and nine months ended September 30, 2018.


(dollars in millions)




Effect of the New Revenue
Standard for the Quarter Ended
September 30, 2018




Net sales


Operating
Profit

Otis




$

16


$

(4)

UTC Climate, Controls & Security





Pratt & Whitney




43


87

UTC Aerospace Systems




(10)


18

Consolidated




$

49


$

101



(dollars in millions)




Effect of the New Revenue
Standard for the Nine Months
Ended September 30, 2018




Net sales


Operating
Profit

Otis




$

64


$

(5)

UTC Climate, Controls & Security





Pratt & Whitney




412


73

UTC Aerospace Systems




(21)


28

Consolidated




$

455


$

96



The following schedule reflects the effect of the New Revenue Standard on our balance sheet as of September 30, 2018.


(dollars in millions)

September 30,
2018, under
previous
standard


Effect of the
New Revenue
Standard


September 30,
2018 as
reported

Assets






Accounts receivable, net

$

13,988


$

(1,438)


$

12,550

Contract assets, current


3,450


3,450

Inventories

11,337


(2,269)


9,068

Other assets, current

1,305


32


1,337

Intangible assets, net

15,771


(70)


15,701

Other assets

10,799


1,115


11,914







Liabilities and Equity






Accrued liabilities

$

14,153


$

(5,286)


$

8,867

Contract liabilities, current


5,460


5,460

Other long term liabilities

14,769


1,016


15,785

Noncontrolling interest

2,138


6


2,144







Retained earnings

58,118


(412)


57,706

 

 

Contact:

Media Inquiries, UTC


(860) 493-4149




Investor Relations, UTC


(860) 728-7608

 

SOURCE United Technologies Corp.