UTC Reports Fourth Quarter EPS Up 16 Percent To $0.71 and Full Year EPS Up 18 Percent To $3.12 Before Adopting FIN 47; 2005 Cash Flow From Operations27 January 2006
United Technologies Corp. (NYSE: UTX) today reported fourth quarter 2005 earnings per share of $0.71 and net income of $721 million, up 16 percent and 18 percent, respectively. References in this release to net income and earnings per share are before the cumulative effect of a change in accounting related to the adoption of FASB Interpretation No. 47 (Accounting for Conditional Asset Retirement Obligations) which resulted in a non-cash after tax cumulative impact of $95 million or $0.09 per share and was recorded in fourth quarter results. Consolidated revenues for the quarter increased 14 percent to $11.3 billion, reflecting organic growth of 9 percent and the addition of recent acquisitions, principally Kidde and Rocketdyne.
In the quarter, foreign currency translation reduced earnings by $0.02 per share and revenues by 1 percent.
Full year earnings per share of $3.12 and net income of $3.16 billion were both 18 percent higher than 2004 results. Revenues increased 14 percent to $42.7 billion, including 7 points of organic growth and the benefit of acquisitions.
Cash flow from operations after capital expenditures exceeded net income for both the quarter and the full year. In the fourth quarter, cash flow from operations was $1.15 billion and capital expenditures were $345 million. For the full year, cash flow from operations was $4.33 billion and capital expenditures were $929 million. Voluntary contributions to pension plans were $298 million in the fourth quarter and $663 million for the year.
"We had an exceptional year in 2005 and see more of the same in 2006," said UTC Chairman and Chief Executive Officer George David.
"Organic growth for the year was a solid 7 percent, and we ended the year on an up quarter at 9 percent. Following 2004's 8 percent, these rates reflect favorable conditions in most of our markets and UTC's currently strong product line-up. All UTC segments delivered double digit operating profit increases for the year. Cash flow after capital expenditures exceeded net income in both the quarter and year, our usual standard."
"We're starting 2006 with lots of momentum," David added. "We confirm expectations for earnings per share in the range of $3.40 to $3.55 and for cash flow after capital expenditures equal to net income for the year. We also expect to continue the current share repurchase rate into 2006 taking the total to approximately $1.5 billion for the year."
Share repurchase in the quarter was $421 million and brought the year's total to $1.18 billion. Acquisition spending, including debt assumed, was $4.6 billion for the year with approximately $500 million in the fourth quarter. Debt to capital ended the year at 33 percent.
Fourth quarter results include restructuring costs of $97 million. For the year, restructuring costs totaled $267 million and slightly exceeded the impact of favorable items. Additional favorable items are anticipated in 2006 to offset trailing costs from previous restructuring actions as well as to fund potential new actions initiated throughout the year.
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 that provides a broad range of high technology products and support services to the building systems and aerospace industries.
This release is supplemented by presentation materials that are available on UTC's website at http://www.utc.com, and includes "forward-looking statements" concerning expected revenue, earnings, cash flow and other matters that are subject to risks and uncertainties. Important factors that could cause actual results to differ materially from those anticipated or implied in forward looking statements include the health of the global economy; strength of end market demand in building 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 availability and impact of acquisitions, the rate and ability to effectively integrate these acquired businesses, the ability to achieve cost reductions at planned levels, and the outcome of legal proceedings. 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 in the "Business" section of UTC's Annual Report on Form 10-K, the information included in UTC's 10-K and 10-Q Reports under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the information included in Current Reports on Form 8-K.
United Technologies Corporation
Condensed Consolidated Statement of Operations
(Millions, except per Quarter Ended Year Ended
share amounts) December 31, December 31,
(Unaudited) (Unaudited)
2005 2004 2005 2004
Revenues $11,261 $9,838 $42,725 $37,445
Cost and Expenses
Cost of goods and
services sold 8,239 7,189 30,935 27,242
Research and development 423 342 1,367 1,267
Selling, general and
administrative 1,378 1,273 5,241 4,635
Operating Profit 1,221 1,034 5,182 4,301
Interest expense 143 96 498 363
Income before income
taxes and minority
interests 1,078 938 4,684 3,938
Income taxes 294 266 1,253 1,031
Minority interests 63 60 267 234
Income before cumulative
effect of a change in
accounting principle 721 612 3,164 2,673
Cumulative effect of
change in accounting
principle- net of tax (95) - (95) -
Net Income $626 $612 $3,069 $2,673
Net Earnings Per Share of Common Stock
Basic:
Income before cumulative
effect of a change in
accounting principle $0.73 $0.62 $3.19 $2.69
Cumulative effect of change
in accounting principle-
net of tax $(0.09) $ - $(0.09) $ -
Net Income $ 0.64 $0.62 $ 3.10 $2.69
Diluted:
Income before cumulative
effect of a change in
accounting principle $0.71 $0.61 $3.12 $2.64
Cumulative effect of
change in accounting
principle- net of tax $(0.09) $ - $(0.09) $ -
Net Income $0.62 $0.61 $3.03 $2.64
Average Shares
Basic 987 990 991 993
Diluted 1,010 1,008 1,014 1,011
As described on the following pages, consolidated results for the years and quarters ended December 31, 2005 and 2004 include restructuring and related charges and non-recurring items.
See accompanying Notes to Condensed Consolidated Financial Statements.
United Technologies Corporation
Segment Revenues and Operating Profit
(Millions) Quarter Ended Year Ended
December 31, December 31,
(Unaudited) (Unaudited)
2005 2004 2005 2004
Revenues
Otis $2,476 $2,414 $9,575 $8,937
Carrier 3,043 2,697 12,512 10,620
UTC Fire & Security 1,203 773 4,250 2,879
Pratt & Whitney 2,595 2,162 9,295 8,281
Hamilton Sundstrand 1,151 1,080 4,382 3,921
Sikorsky 854 644 2,802 2,506
Segment Revenues 11,322 9,770 42,816 37,144
Eliminations and other (61) 68 (91) 301
Consolidated Revenues $11,261 $9,838 $42,725 $37,445
Operating Profit
Otis $426 $384 $1,712 $1,413
Carrier 192 113 1,104 830
UTC Fire & Security 87 34 235 130
Pratt & Whitney 362 280 1,449 1,083
Hamilton Sundstrand 174 152 675 583
Sikorsky 70 50 250 200
Segment Operating Profit 1,311 1,013 5,425 4,239
Eliminations and other (6) 103 81 368
General corporate
expenses (84) (82) (324) (306)
Consolidated Operating
Profit $1,221 $1,034 $5,182 $4,301
As described on the following pages, consolidated results for the years and quarters ended December 31, 2005 and 2004 include restructuring and related charges and non-recurring items.
United Technologies Corporation
Consolidated Operating Profit
Consolidated operating profit for the years and quarters ended December 31, 2005 and 2004 includes restructuring and related charges as follows:
Quarter Ended Year Ended
December 31, December 31,
(Unaudited) (Unaudited)
Restructuring and 2005 2004 2005 2004
Related Charges
Otis $ 22 $ 27 $ 52 $ 144
Carrier 18 39 80 241
UTC Fire & Security 10 - 21 -
Pratt & Whitney 23 55 39 152
Hamilton Sundstrand 24 36 66 71
Sikorsky - 1 3 9
Segment Operating Profit 97 158 261 617
Eliminations and other - 1 6 15
General corporate expenses - - - -
Consolidated Operating
Profit $ 97 $159 $267 $632
Consolidated results for the years and quarters ended December 31, 2005 and 2004 include the following non-recurring items:
2005
Q2
-- Eliminations and Other: Approximately $75 million non-cash gain on
shares held in Snecma, a French aerospace company, upon its merger
with SAGEM. Approximately $45 million interest income related to
1994-1999 U.S. federal tax audits.
-- Income Taxes: Net favorable income tax adjustment of approximately
$60 million, principally related to 1994-1999 U.S. federal tax
audits. The tax impact of Hamilton Sundstrand's divestiture of its
Falk business was substantially offset by the tax benefit arising
from the sale of a non-core Carrier refrigeration business. Neither
transaction significantly impacted pre-tax earnings.
In the second quarter, the net impact of the above favorable items ($0.14 per share), together with $70 million of pre-tax restructuring and related charges ($0.05 per share), contributed $0.09 to earnings per share.
Q1
-- Eliminations and Other: Approximately $30 million gain from the sale
of a portion of the shares held in Snecma.
2004
Q4
-- Eliminations and Other: Approximately $100 million of income relating
to the disposition of an interest in a joint venture and interest
income related to 1986 - 1993 U.S. federal tax audits.
Q2
-- Eliminations and Other: Approximately $125 million interest income
related to settlement of 1986-1993 U.S. federal tax audits.
-- Income Taxes: Favorable income tax adjustment of approximately $80
million, related to settlement of 1986-1993 U.S. federal tax audits.
In the second quarter, the net impact of the above favorable items, together with $156 million of pre-tax restructuring and related charges, contributed $0.07 to earnings per share.
Q1
-- Eliminations and Other: $250 million gain following a payment from
DaimlerChrysler in consideration for the Corporation's release of
certain commitments made by DaimlerChrysler in support of MTU Aero
Engines GmbH.
United Technologies Corporation
Condensed Consolidated Balance Sheet
(Millions) December 31, December 31,
2005 2004
(Unaudited) (Unaudited)
Assets
Cash and cash equivalents $2,247 $2,265
Accounts receivable, net 7,240 6,315
Inventories and contracts
in progress, net 5,659 5,078
Other current assets 2,060 2,012
Total Current Assets 17,206 15,670
Fixed assets, net 5,623 5,231
Goodwill, net 13,007 10,111
Intangible assets, net 3,059 2,016
Other assets 7,030 7,413
Total Assets $45,925 $40,441
Liabilities and Shareowners' Equity
Short-term debt $2,305 $1,360
Accounts payable 3,820 3,490
Accrued liabilities 9,220 8,245
Total Current Liabilities 15,345 13,095
Long-term debt 5,935 4,231
Other liabilities 6,876 7,939
Total Liabilities 28,156 25,265
Minority interest in subsidiary
companies 778 910
Shareowners' Equity:
Common Stock 8,552 7,850
Treasury Stock (7,418) (6,312)
Retained Earnings 16,051 13,880
Accumulated other non-shareowners'
changes in equity (194) (1,152)
16,991 14,266
Total Liabilities and
Shareowners' Equity $45,925 $40,441
Debt Ratios:
Debt to total capitalization 33% 28%
Net debt to net capitalization 26% 19%
United Technologies Corporation
Condensed Statement of Cash Flows
Quarter Ended Year Ended
December 31, December 31,
(Unaudited) (Unaudited)
2005 2004 2005 2004
Operating Activities
Net Income $626 $612 $3,069 $2,673
Adjustments to reconcile
net income to net cash
flows provided by
operating activities:
Depreciation and
amortization 256 234 984 978
Deferred income taxes
and minority interest 112 83 529 430
Stock compensation cost 34 46 153 169
Changes in working capital 101 190 (437) (87)
Voluntary contributions
to pension plans (298) (347) (663) (906)
Other, net 314 3 699 339
Net Cash Provided by
Operating Activities 1,145 821 4,334 3,596
Investing Activities
Capital expenditures (345) (344) (929) (795)
Acquisitions and disposal
of businesses, net (493) (714) (3,755) (1,048)
Other, net 7 86 35 81
Net Cash Used in
Investing Activities (831) (972) (4,649) (1,762)
Financing Activities
Increase in borrowings, net 442 301 2,106 42
Dividends paid on
Common Stock (207) (164) (832) (660)
Repurchase of Common Stock (421) (304) (1,181) (992)
Other, net 28 142 242 311
Net Cash (Used) Provided
in Financing Activities (158) (25) 335 (1,299)
Effect of foreign exchange
rates (11) 101 (38) 107
Net increase (decrease) in
cash and cash equivalents 145 (75) (18) 642
Cash and cash equivalents
- beginning of period 2,102 2,340 2,265 1,623
Cash and cash equivalents
- end of period $2,247 $2,265 $2,247 $2,265
United Technologies Corporation
Notes to Condensed Consolidated Financial Statements
(1) UTC adopted Statement of Financial Accounting Standards (SFAS) No. 123
(revised 2004), "Share-Based Payment", (SFAS 123(R)) as of January 1,
2005 using the modified retrospective method described in the
standard. This standard requires the cost of stock options to be
measured at fair value and recognized in the statement of operations
on the grant date. In accordance with the standard all periods prior
to January 1, 2005 were restated to reflect the impact of the standard
as if it had been adopted on January 1, 1995, the original effective
date of SFAS No. 123.
(2) Financial Accounting Standards Board (FASB) Interpretation No. 47,
"Accounting for Conditional Asset Retirement Obligations (an
interpretation of FASB Statement No. 143)" was issued in March 2005.
This Interpretation provides clarification with respect to the timing
of liability recognition for legal obligations associated with the
retirement of tangible long-lived assets when the timing and/or method
of settlement of the obligation is conditional on a future event.
This Interpretation requires that the fair value of a liability for a
conditional asset retirement obligation be recognized in the period in
which it occurred if a reasonable estimate of fair value can be made.
UTC has determined that legal obligations exist for certain of its
worldwide owned and leased facilities related primarily to building
materials. We adopted the provision of this Interpretation on
December 31, 2005 and recorded a non-cash transition impact of $95
million, net of taxes, which is reported as a Cumulative Effect of a
Change in Accounting Principle, Net of Tax in the Statement of
Operations.
(3) Certain reclassifications have been made to prior year amounts to
conform to current year presentation.
(4) 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.
(5) Organic growth represents the total reported revenue 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 revenues that are not included in organic growth in 2005
include approximately $45 million of interest income related to 1994-
1999 U.S. federal tax audits and approximately $105 million of
investment gains on shares held in Snecma, a French aerospace company.
Non-recurring revenues that are excluded from organic growth in 2004
include approximately $170 million of interest income associated with
settlement of tax audits, an approximately $60 million non-cash gain
associated with the disposition of an interest in a joint venture and
the first quarter contract related gain of $250 million.
Contact: Paul Jackson
(860) 728-7912
Source: prnewswire
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