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Form 8-K UNITED TECHNOLOGIES CORP For: Apr 27

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April 27, 2016 7:30 AM EDT


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________ 
FORM 8-K
____________________________________ 

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 27, 2016
____________________________________ 
UNITED TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________ 

Delaware
1-812
06-0570975
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
10 Farm Springs Road
Farmington, Connecticut 06032
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code
(860) 728-7000
N/A
(Former name or former address, if changed since last report)
____________________________________ 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




 
Section 2—Financial Information
Item 2.02. Results of Operations and Financial Condition.
On April 27, 2016, United Technologies Corporation (“UTC” or “the Company”) issued a press release announcing its first quarter 2016 results.
The press release issued April 27, 2016 is furnished herewith as Exhibit No. 99 to this Report, and shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be deemed to be incorporated by reference into any filing by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Section 9—Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number
Exhibit Description
99
Press release, dated April 27, 2016, issued by United Technologies Corporation.





 
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
UNITED TECHNOLOGIES CORPORATION
 
(Registrant)
 
 
 
Date: April 27, 2016
By:
/S/ AKHIL JOHRI        
 
 
Akhil Johri
 
 
Executive Vice President & Chief Financial Officer




 
EXHIBIT INDEX
 
Exhibit
Number
Exhibit Description
99
Press release, dated April 27, 2016, issued by United Technologies Corporation.





Exhibit 99

UTC REPORTS FIRST QUARTER 2016 RESULTS


•
Adjusted EPS of $1.47, up 2 percent versus the prior year
•
Sales were $13.4 billion, with 2 percent organic sales growth
•
GAAP EPS of $1.42 (including $0.05 in restructuring charges), versus $1.51 in the prior year
•
Reaffirms 2016 Adjusted EPS expectations of $6.30 to $6.60 on sales of $56 billion to $58 billion


FARMINGTON, Conn., April 27, 2016 - United Technologies Corp. (NYSE: UTX) today reported first quarter 2016 results. All results in this release reflect continuing operations unless otherwise noted.
First quarter Adjusted EPS of $1.47 was up 2 percent versus the prior year. GAAP EPS for the first quarter was $1.42 per share, which included $0.05 of restructuring charges. Sales of $13.4 billion were flat year-over-year as 2 points of organic growth in the quarter was offset by 2 points of unfavorable foreign exchange.
“We are off to a solid start in 2016,” said UTC President and Chief Executive Officer Gregory Hayes. “UTC delivered strong operational performance in the first quarter with organic sales growth of 2 percent. We are also making progress on our strategic priorities, particularly our ability to invest in innovation as we continue to focus on structural cost reduction.”
Cash flow from operations for the quarter was $795 million and capital expenditures were $286 million. Free cash flow of 43 percent to net income was pressured by inventory build in support of the aerospace production ramp and included a payment of $237 million, the first of four annual payments related to the Canadian government settlement that was booked in the fourth quarter of 2015. For 2016, UTC continues to anticipate free cash flow in the range of 90 to 100 percent of net income attributable to common shareowners.
Otis new equipment orders in the quarter increased 1 percent over the prior year at constant currency, and grew 6 percent excluding China. Equipment orders at UTC Climate, Controls & Security decreased by 8 percent, primarily driven by a difficult compare in the refrigeration business. At Pratt & Whitney, commercial aftermarket sales were up 19 percent, and up 1 percent at UTC Aerospace Systems.
“Notwithstanding a slow-growth global macro environment, we remain confident in our full-year 2016 EPS outlook of $6.30 to $6.60 per share,” Hayes added. “As we look to the future, our focused portfolio of industry leading franchises is well-positioned to deliver on our commitments and create significant long-term shareowner value.”
UTC reiterated its 2016 outlook and continues to anticipate:
•
Adjusted EPS of $6.30 to $6.60 on sales of $56 billion to $58 billion;
•
Organic sales growth of 1% to 3%;
•
Free cash flow in the range of 90 to 100 percent of net income attributable to common shareowners;
•
Share repurchases of $3 billion in 2016, beyond the repurchases that will be completed in 2016 under the previously announced $6 billion accelerated share repurchase program; and
•
A $1 billion to $2 billion placeholder for acquisitions.





United Technologies Corp., based in Farmington, Connecticut, provides high technology products and services to the building and aerospace industries. Additional information, including a webcast, is available on the Internet at
http://www.utc.com. To learn more about UTC, visit the website or follow the company on Twitter: @UTC

Use of Non-GAAP Financial Measures
Adjusted EPS, adjusted segment margins and free cash flow are non-GAAP financial measures that are used in UTC’s financial press releases and webcasts. A reconciliation of these non-GAAP measures to the corresponding amounts prepared in accordance with generally accepted accounting principles (GAAP) is included in the tables to this press release.
Adjusted EPS and adjusted segment margin reflect continuing operations, excluding restructuring costs and other significant items of a non-recurring and/or non-operational nature (often referred to as “other significant items”). Management believes Adjusted EPS and adjusted segment margin are both useful in providing period to period comparisons of the results of the Company’s operational performance. The tables attached to this press release provide additional information as to the items and amounts that have been excluded from Adjusted EPS and adjusted segment margin.
Free cash flow represents cash flow from operations less capital expenditures. Management believes free cash flow provides a relevant measure of liquidity and a useful basis for assessing UTC’s ability to fund its activities, including the financing of acquisitions, debt service, repurchases of the Company’s Common Stock and distribution of earnings to shareowners.
When we provide our expectations for Adjusted EPS and/or free cash flow on a forward-looking basis, the closest corresponding GAAP measures (expected EPS from continuing operations and expected cash flow from operations) and a reconciliation of the differences between the non-GAAP expectation and the corresponding GAAP measure generally are not available (except as otherwise indicated) 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. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results.
Adjusted EPS, adjusted segment margins and free cash flow should not be considered in isolation or as substitutes for analysis of the Company’s results as reported under GAAP. Other companies may calculate adjusted EPS, adjusted segment margins and free cash flow differently than the Company does, limiting the usefulness of those measures for comparisons with such other companies.

Cautionary Statement
This press release includes statements that constitute “forward-looking statements” under the securities laws. Forward-looking statements often contain words such as “believe,” “expect,” “plans,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “confident” and similar terms. Forward-looking statements may include, among other things, statements relating to future and estimated sales, earnings, cash flow, charges, expenditures, share repurchases, acquisitions and divestitures, orders, foreign exchange rate assumptions and other measures of financial performance. All forward-looking statements involve risks, uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Risks and uncertainties include, without limitation, the effect of economic conditions in the markets in which we operate, including financial market conditions, fluctuation in commodity prices, interest rates and foreign currency exchange rates; future levels of research and development spending; levels of end market demand in construction and in the aerospace industry; levels of air travel; financial condition of commercial airlines; the impact of




government budget and funding decisions on the economy; changes in government procurement priorities and funding; weather conditions and natural disasters; delays and disruption in delivery of materials and services from suppliers; company and customer directed cost reduction efforts and restructuring costs and consequences thereof; the impact of acquisitions, dispositions, joint ventures and similar transactions; the development and production of new products and services; the impact of diversification across product lines, regions and industries; the impact of legal proceedings, investigations and other contingencies; pension plan assumptions and future contributions; the effect of changes in tax, environmental and other laws and regulations and political conditions; and other factors beyond our control. The level and timing of discretionary share repurchases (those outside the company’s current accelerated share repurchase program) depend upon market conditions, the level of other investing activities and uses of cash, and discretionary share repurchases may be suspended at any time. The forward-looking statements speak only as of the date of this press release and we undertake no obligation to update or revise any forward-looking statements as of a later date. For additional information identifying factors that may cause actual results to vary materially from those stated in forward-looking statements, see our reports on Forms 10-K, 10-Q and 8-K filed with the SEC from time to time, including, but not limited to, the information included in UTC's Forms 10-K and 10-Q under the headings “Business,” “Risk Factors,” “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Legal Proceedings” and in the notes to the financial statements included in UTC's Forms 10-K and 10-Q.

UTC-IR
# # #




United Technologies Corporation
Condensed Consolidated Statement of Operations
 
 
Quarter Ended March 31,
 
 
(Unaudited)
(Millions, except per share amounts)
2016
 
2015
Net Sales
$
13,357

 
$
13,320

Costs and Expenses:
 
 
 
 
Cost of products and services sold
9,654

 
9,506

 
Research and development
541

 
564

 
Selling, general and administrative
1,363

 
1,476

 
Total Costs and Expenses
11,558

 
11,546

Other income, net
146

 
408

Operating profit
1,945

 
2,182

 
Interest expense, net
223

 
217

Income from continuing operations before income taxes
1,722

 
1,965

 
Income tax expense
461

 
530

Income from continuing operations
1,261

 
1,435

 
Less: Noncontrolling interest in subsidiaries' earnings from continuing operations
81

 
71

Income from continuing operations attributable to common shareowners
1,180

 
1,364

Discontinued operations:
 
 
 
 
Income from operations
—

 
91

 
Gain on disposal
18

 
—

 
Income tax expense
(7
)
 
(28
)
 
Income from discontinued operations
11

 
63

 
Less: Noncontrolling interest in subsidiaries' earnings from discontinued operations
—

 
1

Income from discontinued operations attributable to common shareowners
11

 
62

Net income attributable to common shareowners
$
1,191

 
$
1,426

Earnings Per Share of Common Stock - Basic:
 
 
 
 
From continuing operations attributable to common shareowners
$
1.43

 
$
1.53

 
From discontinued operations attributable to common shareowners
0.01

 
0.07

Earnings Per Share of Common Stock - Diluted:
 
 
 
 
From continuing operations attributable to common shareowners
$
1.42

 
$
1.51

 
From discontinued operations attributable to common shareowners
0.01

 
0.07

Weighted Average Number of Shares Outstanding:
 
 
 
 
Basic shares
825

 
890

 
Diluted shares
831

 
904

As described on the following pages, consolidated results for the quarters ended March 31, 2016 and 2015 include restructuring costs and significant non-recurring and non-operational items that management believes should be considered 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 March 31,
 
(Unaudited)
(Millions)
2016
 
2015
Net Sales
 
 
 
Otis
$
2,715

 
$
2,745

UTC Climate, Controls & Security
3,728

 
3,852

Pratt & Whitney
3,588

 
3,332

UTC Aerospace Systems
3,505

 
3,548

Segment Sales
13,536

 
13,477

Eliminations and other
(179
)
 
(157
)
Consolidated Net Sales
$
13,357

 
$
13,320

 
 
 
 
Operating Profit
 
 
 
Otis
$
466

 
$
527

UTC Climate, Controls & Security
606

 
729

Pratt & Whitney
410

 
419

UTC Aerospace Systems
538

 
569

Segment Operating Profit
2,020

 
2,244

Eliminations and other
16

 
48

General corporate expenses
(91
)
 
(110
)
Consolidated Operating Profit
$
1,945

 
$
2,182

Segment Operating Profit Margin
 
 
 
Otis
17.2
%
 
19.2
%
UTC Climate, Controls & Security
16.3
%
 
18.9
%
Pratt & Whitney
11.4
%
 
12.6
%
UTC Aerospace Systems
15.3
%
 
16.0
%
Segment Operating Profit Margin
14.9
%
 
16.7
%

As described on the following pages, consolidated results for the quarters ended March 31, 2016 and 2015 include restructuring costs and significant non-recurring and non-operational items that management believes should be considered when evaluating the underlying financial performance.




United Technologies Corporation
Reconciliation of Reported to Adjusted Results

 
Quarter Ended March 31,
 
(Unaudited)
In Millions - Income (Expense)
2016
 
2015
Income from continuing operations attributable to common shareowners
$
1,180

 
$
1,364

Restructuring Costs included in Operating Profit:
 
 
 
Otis
(15
)
 
(6
)
UTC Climate, Controls & Security
(28
)
 
(24
)
Pratt & Whitney
(5
)
 
(13
)
UTC Aerospace Systems
(13
)
 
(50
)
Eliminations and other
(1
)
 
—

 
(62
)
 
(93
)
Significant non-recurring and non-operational items included in Operating Profit:
 
 
 
UTC Climate, Controls & Security:
 
 
 
Gain on fair value adjustment on acquisition of controlling interest in a joint venture
—

 
126

Total impact on Consolidated Operating Profit
(62
)
 
33

Tax effect of restructuring and significant non-recurring and non-operational items above
20

 
30

Less: Impact on Net Income from Continuing Operations Attributable to Common Shareowners
(42
)
 
63

Adjusted income from continuing operations attributable to common shareowners
$
1,222

 
$
1,301

 


 

Diluted Earnings Per Share from Continuing Operations
$
1.42

 
$
1.51

Impact on Diluted Earnings Per Share from Continuing Operations
(0.05
)
 
0.07

Adjusted Diluted Earnings Per Share from Continuing Operations
$
1.47

 
$
1.44

 
 
 
 
 
 
 
 




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 page)

 
Quarter Ended March 31,
 
(Unaudited)
(Millions)
2016
 
2015
Net Sales
 
 
 
Otis
$
2,715

 
$
2,745

UTC Climate, Controls & Security
3,728

 
3,852

Pratt & Whitney
3,588

 
3,332

UTC Aerospace Systems
3,505

 
3,548

Segment Sales
13,536

 
13,477

Eliminations and other
(179
)
 
(157
)
Consolidated Net Sales
$
13,357

 
$
13,320

 
 
 
 
Adjusted Operating Profit
 
 
 
Otis
$
481

 
$
533

UTC Climate, Controls & Security
634

 
627

Pratt & Whitney
415

 
432

UTC Aerospace Systems
551

 
619

Segment Operating Profit
2,081

 
2,211

Eliminations and other
17

 
48

General corporate expenses
(91
)
 
(110
)
Adjusted Consolidated Operating Profit
$
2,007

 
$
2,149

Adjusted Segment Operating Profit Margin
 
 
 
Otis
17.7
%
 
19.4
%
UTC Climate, Controls & Security
17.0
%
 
16.3
%
Pratt & Whitney
11.6
%
 
13.0
%
UTC Aerospace Systems
15.7
%
 
17.4
%
Adjusted Segment Operating Profit Margin
15.4
%
 
16.4
%





United Technologies Corporation
Condensed Consolidated Balance Sheet
 
March 31,
 
December 31,
 
2016
 
2015
(Millions)
(Unaudited)
 
(Unaudited)
Assets
 
 
 
Cash and cash equivalents
$
7,215

 
$
7,075

Accounts receivable, net
10,899

 
10,653

Inventories and contracts in progress, net
8,507

 
8,135

Other assets, current
906

 
843

Total Current Assets
27,527

 
26,706

Fixed assets, net
8,763

 
8,732

Goodwill
27,408

 
27,301

Intangible assets, net
15,719

 
15,603

Other assets
9,154

 
9,142

Total Assets
$
88,571

 
$
87,484

 
 
 
 
Liabilities and Equity
 
 
 
Short-term debt
$
1,363

 
$
1,105

Accounts payable
6,579

 
6,875

Accrued liabilities
12,581

 
14,638

Total Current Liabilities
20,523

 
22,618

Long-term debt
21,688

 
19,320

Other long-term liabilities
16,330

 
16,580

Total Liabilities
58,541

 
58,518

Redeemable noncontrolling interest
127

 
122

Shareowners' Equity:
 
 

Common Stock
16,154

 
15,928

Treasury Stock
(31,082
)
 
(30,907
)
Retained earnings
50,625

 
49,956

Accumulated other comprehensive loss
(7,344
)
 
(7,619
)
Total Shareowners' Equity
28,353

 
27,358

Noncontrolling interest
1,550

 
1,486

Total Equity
29,903

 
28,844

Total Liabilities and Equity
$
88,571

 
$
87,484

Debt Ratios:
 
 
 
Debt to total capitalization
44
%
 
41
%
Net debt to net capitalization
35
%
 
32
%

See accompanying Notes to Condensed Consolidated Financial Statements.




United Technologies Corporation
Condensed Consolidated Statement of Cash Flows
 
Quarter Ended
March 31,
 
(Unaudited)
(Millions)
2016
 
2015
Operating Activities of Continuing Operations:
 
 
 
Net income from continuing operations
$
1,261

 
$
1,435

Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities of continuing operations:
 
 
 
Depreciation and amortization
466

 
458

Deferred income tax provision
134

 
153

Stock compensation cost
48

 
46

Change in working capital
(640
)
 
(273
)
Global pension contributions
(75
)
 
(45
)
Canadian government settlement
(237
)
 
—

Other operating activities, net
(162
)
 
(128
)
Net cash flows provided by operating activities of continuing operations
795

 
1,646

Investing Activities of Continuing Operations:
 
 
 
Capital expenditures
(286
)
 
(323
)
Acquisitions and dispositions of businesses, net
(63
)
 
(72
)
Increase in collaboration intangible assets
(98
)
 
(132
)
Receipts from settlements of derivative contracts
42

 
569

Other investing activities, net
(78
)
 
164

Net cash flows (used in) provided by investing activities of continuing operations
(483
)
 
206

Financing Activities of Continuing Operations:
 
 
 
Issuance of long-term debt, net
2,324

 
9

Increase in short-term borrowings, net
306

 
2,177

Dividends paid on Common Stock
(509
)
 
(553
)
Repurchase of Common Stock
—

 
(3,000
)
Other financing activities, net
(83
)
 
(16
)
Net cash flows provided by (used in) financing activities of continuing operations
2,038

 
(1,383
)
Discontinued Operations:
 
 
 
Net cash used in operating activities
(2,227
)
 
(336
)
Net cash used in investing activities
—

 
(33
)
Net cash used in financing activities
—

 
(1
)
Net cash flows used in discontinued operations
(2,227
)
 
(370
)
Effect of foreign exchange rate changes on cash and cash equivalents
17

 
(53
)
Net increase in cash and cash equivalents
140

 
46

Cash and cash equivalents, beginning of period
7,075

 
5,235

Cash and cash equivalents of continuing operations, end of period
7,215

 
5,281

Less: Cash and cash equivalents of assets held for sale
—

 
7

Cash and cash equivalents of continuing operations, end of period
$
7,215

 
$
5,274


See accompanying Notes to Condensed Consolidated Financial Statements.




United Technologies Corporation
Free Cash Flow Reconciliation
 
Quarter Ended March 31,
 
(Unaudited)
(Millions)
2016
 
2015
 
 
 
 
 
 
Net income attributable to common shareowners from continuing operations
$
1,180

 
 
$
1,364

 
Net cash flows provided by operating activities of continuing operations
$
795

 
 
$
1,646

 
Net cash flows provided by operating activities of continuing operations as a percentage of net income attributable to common shareowners from continuing operations
 
67
 %
 
 
121
 %
Capital expenditures
(286
)
 
 
(323
)
 
Capital expenditures as a percentage of net income attributable to common shareowners from continuing operations
 
(24
)%
 
 
(24
)%
Free cash flow from continuing operations
$
509

 
 
$
1,323

 
Free cash flow from continuing operations as a percentage of net income attributable to common shareowners from continuing operations
 
43
 %
 
 
97
 %
Notes to Condensed Consolidated Financial Statements
(1)
Adjusted Net Sales, Adjusted Operating Profit and Adjusted EPS are non-GAAP financial measures. Adjusted Net Sales represents Net Sales excluding significant items of a non-recurring and non-operational nature. Adjusted Operating Profit represents operating profit excluding restructuring costs and other significant items of a non-recurring and non-operational nature. Adjusted EPS represents diluted earnings per share from continuing operations, excluding restructuring costs and other significant items of a non-recurring and non-operational nature. Management believes Adjusted Net Sales, Adjusted Operating Profit and Adjusted EPS are useful in providing period to period comparisons of the results of the Company’s ongoing operational performance. A reconciliation of these non-GAAP measures to the corresponding amounts prepared in accordance with generally accepted accounting principles is included in the tables above.
(2)
Debt to total capitalization equals total debt divided by total debt plus equity.  Net debt to net capitalization equals total debt less cash and cash equivalents divided by total debt plus equity less cash and cash equivalents.
(3)
Organic sales growth is a non-GAAP financial measure that represents the total reported increase within the Corporation's ongoing businesses less the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and significant non-recurring and non-operational items.
(4)
Free cash flow is a non-GAAP financial measure that represents cash flow from operations less capital expenditures. Management believes free cash flow provides 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 net cash flow provided by operating activities, prepared in accordance with generally accepted accounting principles, to free cash flow is provided above.
(5)
Adjusted Net Sales, Adjusted Operating Profit, Adjusted EPS and free cash flow should not be considered in isolation or as substitutes for analysis of the Company’s results as reported under GAAP. Other companies may calculate Adjusted Net Sales, Adjusted Operating Profit, Adjusted EPS and free cash flow differently than the Company does, limiting the usefulness of those measures for comparisons with other companies.




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