UTC Reports Fourth Quarter and Full Year EPS of $1.15 and $4.12; Affirms 2010 Outlook of 7 to 13 Percent Earnings Growth

HARTFORD, Conn., Jan. 27 /PRNewswire-FirstCall/ -- United Technologies Corp. (NYSE: UTX) today reported fourth quarter 2009 earnings per share of $1.15 and net income attributable to common shareowners of $1.1 billion, down 7 percent and 6 percent, respectively, over the year ago quarter.  Results for the current quarter include an $0.08 per share charge for restructuring costs net of one time items.  In 2008, there was a net benefit of $0.06 per share from one time gains in excess of restructuring costs. Before these items, earnings per share grew 5 percent, or $0.06.  Foreign currency translation contributed $0.04 of the earnings per share growth.

Consolidated revenues for the quarter of $14.1 billion were 5 percent below prior year, including 6 points of organic decline and 1 point of net divestitures, offset by 3 points of favorable foreign currency translation.  Segment operating margin at 13.7 percent was 110 basis points higher than prior year.  Adjusted for restructuring costs and one time items, segment operating margin was 150 basis points higher than prior year.  Cash flow from operations was $1.5 billion, including $637 million of global pension contributions.  Capital expenditures were $325 million in the quarter.

Full year earnings per share of $4.12 and net income attributable to common shareowners of $3.8 billion declined 16 and 18 percent, respectively, from 2008 results.  Revenues of $52.9 billion were 11 percent below prior year including organic decline (7 points), adverse foreign currency translation (3 points), and net divestitures (1 point).  Cash flow from operations was $5.4 billion and capital expenditures were $826 million.

"UTC closed the year with solid performance in the face of continuing difficult end markets," said Louis Chenevert, UTC Chairman & Chief Executive Officer.  "Relentless focus on costs across the business contributed to strong margin expansion in the quarter.  Strong working capital performance led full year cash flow from operations less capital expenditures to be 118 percent of net income attributable to common shareowners, including $1.3 billion of global pension contributions."

Restructuring and other charges for the quarter were $135 million, bringing the full year to $830 million. For the year, restructuring and other charges were $0.46 of earnings per share, net of one-time gains.

"Year over year order rates have remained stable, although at low levels, and we saw increases in some Asian economies, notably China,"  Chenevert continued.  "While order rates will keep pressure on our top line, particularly in the first half of 2010, we anticipate that benefits from structural cost actions will allow us to deliver earnings growth of 7 percent to 13 percent with 2010 earnings per share of $4.40 to $4.65.

"We expect our usual standard of cash flow from operations less capital expenditures equal to or exceeding net income attributable to common shareowners in 2010.  Our acquisition placeholder is $3 billion including the GE Security transaction, and share repurchase is expected to be $1.5 billion," Chenevert added.

Share repurchase in the quarter was $320 million and totaled $1.1 billion for the year.  Acquisition spending was $703 million for the year with $146 million in the fourth quarter.  

The accompanying tables include information integral to assessing the company's financial position, operating performance, and cash flow.

United Technologies Corp., based in Hartford, Connecticut, is a diversified company providing 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.

This release includes "forward looking statements" concerning expected revenue, earnings, cash flow, share repurchases, restructuring; anticipated benefits of UTC's diversification, cost reduction efforts and business model; and other matters that are subject to risks and uncertainties. These statements often contain words such as "expect", "anticipate", "plan", "estimate", "believe", "will", "should", "see", "guidance" and similar terms. Important factors that could cause actual results to differ materially from those anticipated or implied in forward looking statements include extended weakness in global economic conditions; extended contraction in credit conditions; the impact of volatility and deterioration in financial markets on overall levels of economic activity; declines in end market demand in construction and in both the commercial and defense segments of the aerospace industry; fluctuation in commodity prices, interest rates, foreign currency exchange rates, and the impact of weather conditions; and company specific items including the impact of further deterioration and extended weakness in global economic conditions on demand for our products and services, the financial strength of customers and suppliers and on levels of air travel; financial difficulties, including bankruptcy, of commercial airlines; the availability and impact of acquisitions; the rate and ability to effectively integrate these acquired businesses; the ability to achieve cost reductions at planned levels; challenges in the design, development, production and support of advanced technologies and new products and services; delays and disruption in delivery of materials and services from suppliers; labor disputes; and the outcome of legal proceedings. The level of share repurchases may vary depending on the level of other investing activities. For information identifying other important economic, political, regulatory, legal, technological, competitive and other uncertainties, see UTC's SEC filings as submitted from time to time, including but not limited to, the information included in UTC's 10-K and 10-Q Reports under the headings "Business", "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Cautionary Note Concerning Factors that May Affect Future Results", as well as the information included in UTC's Current Reports on Form 8-K.

UTC-IR

www.utc.com

Q4-2009

Carrier:  Approximately $27 million of gains related to divestiture activity.

Q3-2009

Carrier:  Approximately $57 million gain recognized from the contribution of the majority of Carrier's U.S. residential sales and distribution business into a new venture formed with Watsco, Inc.

Eliminations and other:  Approximately $17 million of favorable pretax interest adjustments related to global tax examination activity in the quarter, primarily reflecting the completion of our review of the 2004 to 2005 Internal Revenue Service (IRS) audit report.

Income Taxes:  Favorable income tax adjustments of approximately $38 million based on global examination activity in the quarter, including completion of our review of the 2004 to 2005 IRS audit report.

Income Taxes:  Approximately $32 million adverse tax impact associated with a foreign reorganization. 

Q2-2009

Otis:  Approximately $52 million non-cash, non-taxable gain recognized on the remeasurement to fair value of a previously held equity interest in a joint venture resulting from the purchase of a controlling interest.

Q1-2009

Income Taxes:  Favorable tax impact of approximately $25 million related to the formation of a commercial venture.

Q4-2008

Carrier:  Approximately $67 million gain from the contribution of a business into a new venture operating in the Middle East and the Commonwealth of Independent States.

Hamilton Sundstrand:  Approximately $25 million gain on the completion of a divestiture of a business.

Eliminations and other:  Approximately $38 million gain from the sale of marketable securities and an approximately $12 million favorable pretax interest adjustment related to settlement of disputed adjustments from the 2000 through 2003 examination with the Appeals Division of the IRS.

Income Taxes:  Favorable income tax adjustments of approximately $62 million related to settlement of disputed adjustments from the 2000 through 2003 examination with the Appeals Division of the IRS.

Q3-2008

Pratt & Whitney:  Approximately $37 million non-cash gain on a partial sale of an investment.

The following page provides segment revenues, operating profits and operating profit margins as adjusted for restructuring and other charges, and the aforementioned non-recurring items.  Management believes these adjusted results more accurately portray the ongoing operational performance and fundamentals of the underlying businesses.  The amounts and timing of restructuring and other charges and non-recurring activity can vary substantially from period to period with no assurances of comparable activity or amounts being incurred in future periods.  The $830 million of restructuring and other charges in 2009 is significantly in excess of that incurred in prior years and reflects the severity of the current global recession.  These amounts have therefore been adjusted out in the following schedule in order to provide a more representative comparison of current year operating performance to prior year performance.

Free cash flow, which represents cash flow from operations less capital expenditures, is the principal cash performance measure used by the Company. Management believes free cash flow provides a relevant measure of liquidity and a useful basis for assessing the Corporation's ability to fund its activities, including the financing of acquisitions, debt service, repurchases of the Corporation's Common Stock and distribution of earnings to shareholders.  Others that use the term free cash flow may calculate it differently.  The reconciliation of net cash flow provided by operating activities, prepared in accordance with Generally Accepted Accounting Principles, to free cash flow is above.

United Technologies Corporation

Notes to Condensed Consolidated Financial Statements

    
    
    
    (1) Certain reclassifications have been made to the prior year 
        amounts to conform to the current year presentation of 
        noncontrolling interests and collaborative arrangements as 
        required by the Consolidation and Distinguishing Liabilities from 
        Equity Topics and the Collaborative Arrangements Topic, respectively,
        of the FASB Accounting Standards Codification ("FASB ASC").  
        Effective January 1, 2009, we adopted the provisions under the 
        Consolidation Topic and Distinguishing Liabilities from Equity 
        Topic as it relates to the accounting for noncontrolling interests
        in consolidated financial statements, both of which were applied 
        retrospectively to all periods presented.  Such provisions of the 
        Consolidation Topic include a requirement that the carrying value 
        of noncontrolling interest (previously referred to as minority 
        interest) be removed from the mezzanine section of the balance sheet
        and reclassified as equity, unless it is subject to the provisions of
        the Distinguishing Liabilities from Equity Topic; and consolidated net
        income to be recast to include net income attributable to the 
        noncontrolling interest.  The Distinguishing Liabilities from Equity
        Topic requires certain noncontrolling interests where the company is
        subject to a put option under which it may be required to purchase an
        interest in a consolidated subsidiary from the noncontrolling interest
        holder to be recorded at the greater of redemption value or
        noncontrolling interest carrying value within the mezzanine section
        of the balance sheet.
    
        The Collaborative Arrangements Topic, which we adopted as of January
        1, 2009, has been applied retrospectively to all prior periods 
        presented for all collaborative arrangements existing as of the 
        effective date.  The Collaborative Arrangements Topic requires that
        participants in a collaborative arrangement report costs incurred and
        revenues generated from these transactions on a gross basis and in the
        appropriate line item in each company's financial statement.  Under 
        this Topic, revenues were increased approximately $213 million and
        $271 million for the quarters ended December 31, 2009 and 2008 and
        $801 million and $1,076 million for the years ended December 31, 2009
        and 2008, respectively, with an offsetting increase to cost of sales
        to reflect the collaborators' share of revenues on a gross basis.
        Additionally, both accounts receivable and accounts payable were 
        increased by $368 million as of December 31, 2008 in order to reflect
        the amounts owed to our collaborative partners for their share of
        revenues on a gross basis.
    
    (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 growth 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 items.  Non-recurring 
        items that are not included in organic growth in 2009 include an 
        approximately $57 million gain recognized from the contribution of the
        majority of Carrier's U.S. residential sales and distribution business
        into a new venture formed with Watsco, Inc., approximately $52 million
        related to a non-cash, non-taxable gain recognized on the 
        remeasurement to fair value of a previously held equity interest 
        in a joint venture as a result of the purchase of a controlling 
        interest, approximately $17 million of favorable pretax interest 
        adjustments related to global tax examination activity during the
        year, primarily reflecting the completion of our review of the 2004 
        to 2005 Internal Revenue Service (IRS) audit report and approximately
        $27 million of gains related to divestiture activity at Carrier.  Not 
        included within organic growth for 2008 is an approximately $67 
        million gain from the contribution of a business into a new venture
        operating in the Middle East and the Commonwealth of Independent 
        States, an approximately $25 million gain on the completion of a 
        divestiture of a business at Hamilton Sundstrand, an approximately 
        $37 million non-cash gain on a partial sale of an investment at Pratt
        & Whitney, an approximately $38 million gain from the sale of 
        marketable securities, and approximately $12 million of favorable 
        pretax interest adjustments related to settlement of disputed 
        adjustments resulting from the 2000 through 2003 examination with 
        the Appeals Division of the IRS.
    

SOURCE United Technologies Corp.

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