United Technologies Reports Second Quarter 2018 Results Raises 2018 Outlook
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 https://edge.media-server.com/m6/p/bd5qaacp, 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 91 93 162 175
from operations
---
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 $2,048 $1,439 $3,345 $2,825
shareowners
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 (20) - (50) -
agreement with Rockwell Collins, Inc.
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- (173) 20 (154) (104)
recurring and non-operational items above
Significant non-recurring and non-operational items
included in Income Tax Expense
Unfavorable income tax adjustments related to the (2) - (46) -
estimated impact of the U.S. tax reform legislation
enacted on December 22, 2017
Less: Impact on Net Income Attributable to Common 472 (40) 348 164
Shareowners
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 Acquisitions / Other Total
Translation Divestitures, net
----------- -----------------
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 Acquisitions / Other Total
Translation Divestitures, net
----------- -----------------
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 Six Months Ended
June 30, 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 103% 149%
income attributable to common shareowners
Capital expenditures (372) (446)
---- ----
Capital expenditures as a percentage of net income attributable to (18)% (31)%
common shareowners
Free cash flow $1,730 $1,700
====== ======
Free cash flow as a percentage of net income attributable to common 84% 118%
shareowners
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 76% 111%
operations as a percentage of net income attributable to common
shareowners from continuing operations
Capital expenditures (709) (771)
---- ----
Capital expenditures as a percentage of net income attributable to (21)% (27)%
common shareowners
Free cash flow $1,846 $2,368
====== ======
Free cash flow as a percentage of net income attributable to common 55% 84%
shareowners
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 Effect of the Quarter Ended
June 30, 2018, New Revenue June 30, 2018
under previous Standard as reported
standard
--- --------
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 Effect of the Six Months
Ended June 30, New Revenue Ended June 30,
2018 as
Standard
2018, under reported
previous
standard
--- ---------
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, Effect of the June 30, 2018
under previous New Revenue as reported
standard Standard
--- -------- --------
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
View original content:http://www.prnewswire.com/news-releases/united-technologies-reports-second-quarter-2018-results-raises-2018-outlook-300685205.html
SOURCE United Technologies Corp.
