JUPITER, Fla. -- Let me start today by saying that I am excited and optimistic about UTC’s future, even though 2009 is presenting us with challenges globally.

Since the beginning of the year, global economies have continued to slow and the outlook for commercial aerospace and global construction markets has deteriorated. While UTC remains financially strong, the global recession has had a significant impact on our customers, our end markets and on consumer confidence in general. Today, we don’t see signs of a recovery in 2009.

In anticipation of a slower economy and weaker end markets, UTC has moved aggressively to contain costs. We have launched a number of significant restructuring actions across our global operations. These actions are required to protect UTC’s profitability in 2009, and more importantly, to position the company for resumed earnings growth in 2010.

I’m confident in UTC’s ability to weather the current economic downturn and I believe we’ve positioned UTC to continue to outperform peers in a tough market and will deliver exceptional results when the economy recovers. My confidence comes from UTC’s strong and experienced management team, our remarkable portfolio of products, our global footprint, and over 200,000 great employees who come to work every day ready to embrace change and make a difference.

I’ll turn now to UTC performance in 2008.

Despite a difficult economic environment in the second half of 2008, UTC delivered exceptional results. 2008 Revenues reached $59 billion, 7 percent higher than 2007. Earnings per share grew 15 percent, to $4.90 per share. Cash flow from operations, less capital expenditures, once again exceeded net income. Strength in our long cycle businesses and early restructuring actions offset the adverse impact of a stronger U.S. dollar and a deteriorating global economy in the second half of 2008.

Putting it simply, this is more of the same for UTC. One measure is that we have outperformed stock market indices by three times over the last 15 years. Another is the 20% dividend increase last October, following a string of such increases every five quarters. These results come from UTC’s portfolio of market leading businesses, combined with a relentless focus on costs, productivity and product performance.

Despite strong financial performance in 2008, and a long history of growing earnings and delivering outstanding shareholder value, we saw a 30 percent decrease in our stock price last year. While disappointed with this result, we continued to outperform peers and the broader markets. UTC took advantage of a lower share price – and our strong cash flow – to increase share repurchase to $3.2B, a record for UTC.

Looking ahead, we will sustain growth and profitability with a continuing emphasis on reducing costs and increasing productivity through process improvement. Our ACE operating system will drive these efforts. In 2008, 49 percent of UTC sites reached Gold and Silver status, the highest levels of ACE performance. We are on track to achieve our goal of 70 percent Gold and Silver by the end of 2009 and have now expanded our approach to encompass key suppliers.

We saw significant product development and launches in 2008. Pratt & Whitney’s PurePower Geared Turbofan engine completed an aggressive flight test program. The engine demonstrated its potential to deliver a 12 percent reduction in fuel consumption, a 55 percent reduction in nitrogen oxide emissions, and a 50 percent reduction in engine noise over engines currently in service.

The Geared Turbofan engine is the exclusive power for the Mitsubishi Regional Jet and the Bombardier C-Series. Earlier this year, Aviation Week Magazine recognized the Geared Turbofan by awarding Pratt & Whitney its 2009 Laureate Award for outstanding achievement in Aeronautics and Propulsion. Last month, Lufthansa and Lease Corporation International became launch customers for the C-Series, agreeing to a combined 50 firm and 50 option aircraft.

At Hamilton Sundstrand, work continues at our systems integration lab in Rockford, Illinois, in support of the Boeing 787 launch. In 2008, Hamilton Sundstrand supported “power-on” and is ready to support first flight now scheduled for June. Hamilton Sundstrand provides nine major systems as well as 600 components and subsystems for the 787 - all of which are ready for first flight.

I note that 2009 marks the 10th anniversary of the merger between Hamilton Standard and Sundstrand Corporation, and we can look back with only two words, “Resounding success.” The 787 underscores this, as do comparable Hamilton Sundstrand wins on the Airbus A350, the Bombardier C-Series, the Mitsubishi Regional Jet, and the Joint Strike Fighter.

Sikorsky also enjoyed a strong year, with record sales and the delivery of 204 aircraft up from 174 in 2007. Sikorsky ended 2008 with the largest backlog in their history of more than $13 billion dollars.

Product development went exceptionally well at Sikorsky in 2008, with six program first flights, including the X2 Technology demonstrator. The X2 prototype integrates advanced technologies that have the potential to dramatically change vertical flight. We expect the X2 to demonstrate that a helicopter can cruise comfortably and safely at 250 knots, while retaining excellent low speed handling and efficient hovering capabilities.

On the commercial side, Otis achieved solid growth in 2008 largely due to strong global market penetration in the low and mid rise segments. More than 150,000 Gen2 units have been sold worldwide. Otis also continues to focus on its aftermarket business, maintaining more than 1.6 million elevators and escalators worldwide.

Carrier expanded its service capabilities with the acquisitions of NORESCO, a leading energy services company, and Environmental Market Solutions, Inc., a green building consulting company that helped the Beijing Olympic Village become the first project in China to achieve LEED Neighborhood Development certification. Carrier also grew share in the US residential market with its redesigned SEER 13 product line in a very challenging environment. In addition, Carrier introduced its PrimeLINE container refrigeration unit, the most energy efficient unit ever offered, with lifecycle costs up to 30 percent lower than competitors.

Our newest business, UTC Fire & Security continues to develop leading positions in both the fire safety and electronic security markets. Growth through acquisition and joint venture investments continued with 11 transactions completed in 2008. Notable also were large contract wins and business combinations in China.

Investing in the future remains a hallmark for UTC. Last year we spent $3.8 billion on research and development, and over the past decade we’ve invested $28 billion. We continue to focus on technology and products that will position UTC to take advantage of global megatrends that will shape the world in coming decades, including rapid growth in emerging markets, urbanization, and demand for energy efficient and environmentally sound solutions.

I’d like to close with a few comments on corporate responsibility at UTC.

Our performance in 2008 was achieved with a complete commitment to corporate responsibility, including the highest ethical standards, environmental performance, employee safety, and contributions to the communities wherever we conduct business.

UTC has embraced sustainability not only in our products but also within our operations. Today we use 22 percent less energy than we did in 1997 while revenues are more than two and a half times higher. Water use is down 50 percent during the same time period. These accomplishments are being noticed. For the fifth consecutive year, UTC has been named one of the world's 100 most sustainable companies at the World Economic Forum in Davos.

Last year also marked the second year of our current EH&S goals which extend through 2010. Progress since the beginning of 2007 includes 11 percent reductions in both greenhouse gas emissions and water consumption, well ahead of our goals.

Education and developing talent remain a focus at UTC. Last year, more than 15,000 employees were enrolled UTC’s Employee Scholar Program. Thirty five percent of these employees were international and 31 percent were hourly employees. To date, almost 27,000 degrees have been earned, and UTC’s program investment totals $780 million.

UTC also continues to receive some nice recognition. In January, Forbes named UTC as one of America’s Best Big Companies, and we are one of only 16 “Honor Roll” companies – that have been on the Forbes list every year since 1999. Institutional Investor magazine once again rated us as the "Top Shareholder-Friendly" company in the Aerospace & Defense Electronics sector. Once again we were named to Fortune magazine's list of Most Admired companies. We've been ranked first in the Aerospace sector for eight of the last nine years.

I’ll close by stating again that 2008 was a strong year at UTC. For 2009, we see many challenges and expect difficult and uncertain economic conditions. However, our experienced management team, strong balance sheet and focus on operational excellence allow us to see opportunities in these challenging times; and I’m confident UTC will continue to outperform and deliver superior value to our shareholders.