UTC Reports Third Quarter EPS From Continuing Operations of $1.37; Affirms 2012 EPS Outlook of $5.25 to $5.35 and Increases Restructuring to $600 Million — Press Release
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HARTFORD, Conn., Oct. 23, 2012 /PRNewswire/ — United Technologies Corp. (NYSE: UTX) today reported third quarter 2012 results. All results in this release reflect continuing operations unless otherwise noted.
Earnings per share of $1.37 and net income attributable to common shareowners of $1.2 billion were down 4 percent and 3 percent, respectively, over the year ago quarter. Results for the current quarter include $0.09 per share of restructuring costs, offset by $0.09 of favorable one-time items. Earnings per share in the year ago quarter included $0.06 of restructuring costs, partially offset by $0.04 per share of net favorable one-time items. Before these items, earnings per share decreased 6 percent year over year. The effective tax rate for the quarter was 26.6 percent. Foreign currency translation, and hedges at Pratt & Whitney Canada, had an adverse impact of $0.07.
The acquisition of Rolls-Royce’s share of the International Aero Engines joint venture closed on June 29 and provided $0.03 of EPS accretion in the quarter. Net of transaction and financing costs, the acquisition of Goodrich Corporation, which closed on July 26, did not have an impact on EPS.
“The integration of Goodrich and IAE is off to a good start with solid underlying performance at both businesses,” said Louis Chenevert, UTC Chairman & Chief Executive Officer. “We now expect just $0.10 of EPS dilution from the Goodrich acquisition in 2012 versus our prior estimate of $0.20.”
Sales for the quarter of $15.0 billion were 6 percent above prior year. Net acquisitions provided 11 points of growth. Organic sales decreased 2 percent over the year ago quarter and foreign currency translation also had an adverse impact of 3 points. Third quarter segment operating margin at 14.2 percent was 160 basis points lower than prior year. Adjusted for restructuring costs and net one-time items, segment operating margin at 15.0 percent was 100 basis points lower than prior year, including the impact from the Goodrich acquisition. Research and development costs increased $125 million in the quarter to $590 million, including $101 million at Goodrich. Cash flow from operations was $1.6 billion and, less capital expenditures of $317 million, exceeded net income attributable to common shareowners.
“We expect earnings per share of $5.25 to $5.35 for 2012. Faced with a challenging economic environment, we are increasing our investment in restructuring this year to $600 million, up from our prior plan of $500 million, and continue to expect net one-time gains of $600 million,” Chenevert added. “Strong cash flow is a hallmark of UTC, and we now expect free cash flow to exceed net income for the full year.”
New equipment orders at Otis were up 7 percent over the year ago third quarter, including unfavorable foreign exchange of 4 percentage points. North American Residential HVAC new equipment orders at UTC Climate, Controls & Security grew 3 percent. Commercial spares orders were up 14 percent at Pratt & Whitney’s large engine business including the impact from the incremental IAE share. Organically, commercial spares orders were down 21 percent at Pratt & Whitney and down 6 percent at UTC Aerospace Systems.
“Due to the lack of recovery in the commercial aerospace aftermarket and continued uncertainty in the global economy, we now expect 2012 sales of $58 billion,” Chenevert added. “The portfolio transformation is substantially complete, and we are focused on integration and execution.”
As previously announced, the company does not anticipate share repurchase in 2012 due to the Goodrich transaction. UTC expects a full year effective tax rate of 29 percent excluding one-time items, down from the prior estimate of 29.5 percent.
Earnings per share from discontinued operations were $0.19 in the quarter. Results included $127 million of positive income tax adjustments associated with the legacy Hamilton Sundstrand Industrials businesses.
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.
The accompanying tables include information integral to assessing the company’s financial position, operating performance, and cash flow, including a reconciliation of differences between non-GAAP measures used in this release and the comparable financial measures calculated in accordance with generally accepted accounting principles in the United States.
This release includes statements that constitute “forward-looking statements” under the securities laws. Forward-looking statements often contain words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “estimate,” “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, financing plans, charges, expenditures, anticipated benefits of acquisitions and divestitures, results of operations, uses of cash 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 indebtedness and capital and research and development spending; levels of end market demand in construction and in the aerospace industry; levels of air travel; financial difficulties of commercial airlines; the impact of weather conditions and natural disasters; the financial condition of our customers and suppliers; delays and disruption in delivery of materials and services from suppliers; cost reduction efforts and restructuring costs and savings and other consequences thereof; the scope, nature or impact of acquisitions, dispositions, joint ventures and other business arrangements, including integration of acquired businesses; the timing and impact of anticipated dispositions of businesses; the timing and amount of anticipated gains, losses, impairments and charges related to such dispositions; the timing and impact of anticipated debt reduction following the Goodrich acquisition; the development and production of new products and services; the anticipated benefits of diversification and balance of operations across product lines, regions and industries; the impact of the negotiation of collective bargaining agreements and labor disputes; the outcome of legal proceedings and other contingencies; future availability of credit; pension plan assumptions and future contributions; and the effect of changes in tax, environmental and other laws and regulations and political conditions in countries in which we operate and other factors beyond our control. The completion of the proposed divestitures of businesses is subject to uncertainties, including the ability to secure disposition agreements and regulatory approvals on acceptable terms; the satisfaction of information, consultation, and / or negotiation obligations, if any, with employee representatives; and satisfaction of other customary conditions. These forward-looking statements speak only as of the date of this release and we undertake no obligation to update or revise any forward-looking statements after we distribute this release. For additional information identifying factors that may cause actual results to vary materially from those stated in the 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.