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
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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. |