1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 1-812
UNITED TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06 0570975
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Financial Plaza, Hartford, Connecticut 06101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 728-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
Medium-Term Notes, Series B, New York Stock Exchange
PEN Notes due September 8, 1997
Common Stock ($5 par value) New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and is not to be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
At January 31, 1997, there were 237,346,954 shares of Common Stock outstanding;
the aggregate market value of the voting Common Stock held by non affiliates at
January 31, 1997 was approximately $16,554,950,042.
List hereunder documents incorporated by reference and the Part of the Form 10-K
into which the document is incorporated: (1) United Technologies Corporation
1996 Annual Report to Shareowners, Parts I, II and IV; and (2) United
Technologies Corporation Proxy Statement for the 1997 Annual Meeting of
Shareowners, Part III.
2
UNITED TECHNOLOGIES CORPORATION
_______________________________
Index to Annual Report
on Form 10-K
Year Ended December 31, 1996
PART I Page
Item 1. Business .................................. 1
Item 2. Properties ................................ 8
Item 3. Legal Proceedings ......................... 8
Item 4. Submission of Matters to a Vote of Security
Holders.................................... 10
- ----- Executive Officers of the Registrant ...... 10
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters ........... 12
Item 6. Selected Financial Data ................... 12
Item 7. Management's Discussion and Analysis of
Results of Operations and Financial
Position .................................. 12
Item 8. Financial Statements and Supplementary
Data ...................................... 12
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure ................................ 12
PART III
Item 10. Directors and Executive Officers of the
Registrant ................................ 12
Item 11. Executive Compensation .................... 12
Item 12. Security Ownership of Certain Beneficial
Owners and Management ..................... 13
Item 13. Certain Relationships and Related
Transactions .............................. 13
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K ....................... 13
3
Item 1. Business
United Technologies Corporation was incorporated in Delaware in 1934.
Growth has been enhanced by acquisitions and by the internal growth of existing
businesses of the Corporation*.
Management's Discussion and Analysis of the Corporation's Results of
Operations for 1996 compared to 1995, and for 1995 compared to 1994, and its
Financial Position at December 31, 1996 and 1995, and Selected Financial Data
for each year in the five year period ended December 31, 1996 are set forth on
pages 21 through 27 of the Corporation's 1996 Annual Report to Shareowners.
Whenever reference is made in this report to specific pages in the 1996 Annual
Report to Shareowners, such pages are incorporated herein by reference.
Operating Units and Industry Segments
The Corporation conducts its business within five principal industry
segments. The principal products of operating units reported within each
industry segment are as follows:
Industry Segment Principal Products
Otis --Otis elevators, escalators and service
Carrier --Carrier heating, ventilating, air conditioning,
and transport and commercial refrigeration
equipment and service
Automotive --Automotive components and systems
Pratt & Whitney --Pratt & Whitney engines, service and space
propulsion
Flight Systems --Sikorsky helicopters, parts and service
--Hamilton Standard engine controls, environmental
controls, propellers and other flight systems
Business segment financial data for the years 1994 through 1996 is included
in Note 15 of Notes to Consolidated Financial Statements on pages 41 through 43
of the Corporation's 1996 Annual Report to Shareowners.
Description of Business by Industry Segment
The following description of the Corporation's business by industry segment
should be read in conjunction with Management's Discussion and Analysis of
Results of Operations and Financial Position appearing in the Corporation's 1996
Annual Report to Shareowners, especially the information contained therein under
the heading "Business Environment".
Otis
Otis is the world's leader in production, installation and service in the
elevator industry, defined as elevators, escalators and moving sidewalks. Otis
designs, manufactures, sells and installs a wide range of passenger and freight
elevators, including hydraulic and geared elevators for low and medium speed
applications and gearless elevators for high-speed passenger operations in high-
rise buildings. Otis also produces a broad line of escalators, moving sidewalks
and shuttle systems for horizontal transportation. In addition to new
equipment, Otis provides modernization products and services to upgrade
elevators and escalators.
___________
* "Corporation", unless the context otherwise requires, means United
Technologies Corporation and its consolidated subsidiaries.
- 1 -
4
Otis provides maintenance services for a substantial portion of the
elevators and escalators which it sells and also services elevators and
escalators of other manufacturers. Otis conducts its business principally
through various affiliated companies worldwide. In some cases, consolidated
affiliates have significant minority interests. In addition, Otis continues to
invest in emerging markets in Central and Eastern Europe (such as Russia and
Ukraine) and Asia (such as the People's Republic of China). These investments
carry a higher level of currency, political and economic risk than investments
in developed markets.
Otis' business is subject to changes in economic, industrial and
international conditions, including possible changes in interest rates, which
could affect the demand for elevators, escalators and services; changes in
legislation and in government regulations; changes in technology; changes in
construction starts; and substantial competition from a large number of
companies including other major domestic and foreign manufacturers and service
providers. The principal methods of competition are price, delivery schedule,
product performance, service and other terms and conditions of sale. Otis'
products and services are sold principally to builders and building contractors
and owners.
Revenues generated by Otis' international operations were approximately 85
percent of total Otis segment revenues in 1996 and 1995. International
operations are subject to local government regulations (including regulations
relating to capital contributions, currency conversion and repatriation of
earnings), as well as to varying currency, political and economic risks.
At December 31, 1996, the Otis business backlog amounted to $3,718 million
as compared to $3,644 million at December 31, 1995. Of the total business
backlog at December 31, 1996, approximately $3,431 million is expected to be
realized as sales in 1997.
Carrier
Carrier is the world's largest manufacturer of heating, ventilating and air
conditioning (HVAC) systems and equipment. Carrier also participates in the
commercial and transport refrigeration businesses.
The products manufactured by Carrier include chillers and airside equipment,
commercial unitary systems, residential split systems (cooling only and heat
pump), duct-free split systems, transport refrigeration equipment, window and
portable room air conditioners and furnaces.
Carrier continues to invest in emerging markets primarily in Asia (such as
the People's Republic of China). These investments carry a higher level of
currency, political and economic risk than investments in developed markets.
Carrier's business is subject to changes in economic, industrial, international
and climate conditions, including possible changes in interest rates, which
could affect the demand for HVAC systems and equipment; changes in legislation
and government regulations, including those relating to refrigerants and their
effect on global environmental conditions; changes in technology; changes in
construction starts; and competition from a large number of companies, including
other major domestic and foreign manufacturers. The principal methods of
competition are delivery schedule, product performance, price, service and other
terms and conditions of sale.
Carrier's products and services are sold principally to builders and
building contractors and owners. Sales are made both directly to the customer
and by or through manufacturers' representatives, distributors, dealers,
individual wholesalers and retail outlets.
Revenues generated by Carrier's international operations, including U.S.
export sales, were approximately 55 percent of total Carrier segment revenues in
1996 and 1995. International operations are subject to local government
regulations (including regulations relating to capital contributions, currency
conversion and repatriation of earnings), as well as to varying currency,
political and economic risks.
At December 31, 1996, the Carrier business backlog amounted to $960 million,
as compared to $926 million at December 31, 1995. Substantially all of the
business backlog at December 31, 1996 is expected to be realized as sales in
1997.
- 2 -
5
Automotive
The Corporation's Automotive business is conducted through United
Technologies Automotive, Inc. ("UTA"). UTA is a leading independent supplier of
automotive electrical distribution systems in both North America and Europe.
Also, UTA is a leading independent supplier in North America of modular
headliners, door trim assemblies, vehicle remote entry systems, and fractional
horsepower DC electric motors used in automotive applications. UTA competes
worldwide to sell products to automotive manufacturers.
UTA also produces other products such as interior trim (instrument panels,
sun visors, armrests, package trays and consoles), mirrors, thermal and
acoustical barriers, airbag covers, electronic controls and modules, relays,
interior lighting systems, switches, terminals and connectors, windshield wiper
systems, and electrical starters for commercial applications. In the fourth
quarter of 1996 UTA sold its steering wheels business.
Sales to the major domestic automotive manufacturers are made against
periodic short-term releases issued by the automotive manufacturers under
contracts generally awarded for a particular car or light truck model. To serve
its worldwide customer base, UTA maintains over 120 principal facilities in
North America, Europe, Asia and South America.
In 1996, sales to Ford Motor Company were $1,224 million, or approximately
38 percent of total UTA revenues. In 1995 and 1994, sales to Ford Motor Company
were $1,238 million (approximately 40 percent of total UTA revenues) and $1,004
million (approximately 37 percent of total UTA revenues), respectively.
UTA's business is subject to changes in economic, industrial and
international conditions; changes in interest rates and in the level of
automotive production which could affect the demand for many of its products;
changes in the prices of essential raw materials and petroleum-based
materials; changes in legislation and in government regulations; changes in
technology; and substantial competition from a large number of companies
including other major domestic and foreign manufacturers. The principal
methods of competition are price, delivery schedule, quality and product
performance.
Automotive manufacturers apply significant pricing pressures on their
suppliers such as UTA, requiring continuing cost reductions and value
engineering to maintain and improve profit margins. Suppliers have also been
required to bear an increasing portion of engineering, design, development and
tooling expenditures. While recognizing the increased risks and
responsibilities associated with providing these services, UTA plans to position
itself among the first tier suppliers providing these services. UTA has entered
into long term supply agreements with many of its customers which require price
reductions which anticipate future productivity improvements that must be
realized in order for such arrangements to be profitable.
Revenues generated by UTA's international operations, including U.S. export
sales (excluding revenues from certain non-U.S. operations which manufacture
exclusively for the U.S. market), were approximately 35 percent of total
Automotive segment revenues in 1996 and 1995. International operations are
subject to local government regulations (including regulations relating to
capital contributions, currency conversion and repatriation of earnings), as
well as to varying currency, political and economic risks.
At December 31, 1996, the UTA business backlog amounted to $774 million as
compared to $703 million at December 31, 1995. Substantially all of the
business backlog at December 31, 1996 is expected to be realized as sales in
1997.
Aerospace and Defense Businesses
The Corporation's aerospace and defense businesses are conducted through
its Pratt & Whitney and Flight Systems business segments. These business
segments are subject to rapid changes in technology; lengthy and costly
development cycles; the effects of the continuing consolidation within the
aerospace and defense industry; heavy dependence on a small number of products
and programs; changes in legislation and in government procurement and other
regulations and procurement practices; procurement preferences and policies of
some foreign customers which require in-country manufacture through co-
production, offset programs
- 3 -
6
(where in-country purchases and financial support projects are required as a
condition to obtaining orders), joint ventures and production sharing,
licensing or other arrangements; substantial competition from major domestic
manufacturers and from foreign manufacturers whose governments sometimes give
them direct and indirect research and development, marketing subsidies and
other assistance for their commercial products; and changes in economic,
industrial and international conditions.
The principal methods of competition in the Corporation's aerospace and
defense businesses are price, product performance, service, delivery schedule
and other terms and conditions of sale, including fleet introductory allowances
and performance and operating cost guarantees, and the participation by the
Corporation and its finance subsidiaries in customer financing arrangements in
connection with sales of commercial jet engines and helicopters. Fleet
introductory allowances are financial incentives offered by the Corporation to
airline customers in order to make engine sales which lead, in turn, to the sale
of parts and services.
Sales of military products are affected by defense budgets (both in the U.S.
and, to some extent, abroad) and the presence of competitors. Military spare
parts sales have been, and will continue to be, affected by the decline in
overall procurement by the U.S. and foreign governments and, to a lesser extent,
by the U.S. and foreign governments' policy of increasing parts purchases from
suppliers other than the original equipment manufacturers.
Pratt & Whitney
Pratt & Whitney is one of the world's leading producers and service
providers for large turbofan (jet) engines and jet engine parts for commercial
and military aircraft and small gas turbine engines and parts for business and
regional/commuter aircraft. Pratt & Whitney provides overhaul and repair
services and fleet management services for many models of commercial and
military jet and gas turbine engines. In addition, Pratt & Whitney produces
propulsion systems and solid rocket boosters for the United States Air Force
("USAF") and the National Aeronautics and Space Administration ("NASA") and
provides land based power generation equipment.
Pratt & Whitney products are sold principally to aircraft manufacturers,
airlines and other aircraft operators, aircraft leasing companies, and the U.S.
and foreign governments. Pratt & Whitney sales in the U.S. and Canada are made
directly to the customer and, to a limited extent, through independent
distributors. Other export sales are made with the assistance of an overseas
network of independent foreign representatives. Sales to the Boeing Company
("Boeing"), Airbus Industrie ("Airbus") and McDonnell Douglas Corporation
("Douglas"), consisting primarily of commercial aircraft jet engines, amounted
to approximately 23 percent of total Pratt & Whitney revenues in 1996. Pratt &
Whitney's major competitors are the aircraft engine businesses of General
Electric Company ("GE") and Rolls-Royce plc.
Pratt & Whitney currently produces three families of large commercial jet
engines; the JT8D-200, the PW2000 series and the PW4000 series. Pratt &
Whitney's JT8D-200 powers the Douglas MD-80 aircraft. Applications for the
PW2000 series include the Boeing 757-200/PF aircraft. Pratt & Whitney's PW4000
engine family powers the Airbus A310-300, A300-600 and A330-300 series; Boeing's
747-400, 767-200/-300 and 777-200 aircraft; and Douglas' MD-11.
International Aero Engines AG, a Swiss corporation in which Pratt & Whitney
has a 33 percent interest, manufactures the V2500 engine. Applications for the
V2500 engine include Airbus' A319, A320 and A321 aircraft and Douglas' MD-90.
In the case of most commercial aircraft today, aircraft manufacturers offer
their customers a choice of engines, giving rise to substantial competition
among engine manufacturers at the time of the sale of aircraft. This
competition has become increasingly intense particularly where new commercial
airframe/engine combinations are first introduced to the market and into the
fleets of individual airlines. Financial incentives granted by engine
suppliers, and performance and operating cost guarantees on their part, are
frequently important factors in such sales and can be substantial. (For
information regarding customer financing
- 4 -
7
commitments, participation in guarantees of customer financing arrangements
and performance and operating cost guarantees, see Notes 1, 3, 13 and 14 of
Notes to Consolidated Financial Statements at pages 32 to 33 and 39 to 41 of
the Corporation's 1996 Annual Report to Shareowners.)
In view of the global nature of the commercial aircraft industry and the
risk and cost associated with launching new engine development programs, Pratt &
Whitney has developed strategic alliances and collaboration arrangements on
commercial engine programs. At December 31, 1996, other participants in these
alliances represented 29 percent of the PW2000 program, 22 percent of the PW4000
program, 31 percent of the PW4084 and PW4090 programs, and 29 percent of the
PW4098 program.
GE-P&W Engine Alliance, LLC, an alliance between GE Aircraft Engines and
Pratt & Whitney where Pratt & Whitney has a 50 percent interest, was formed
during 1996 to develop, market and manufacture a new jet engine that is intended
to power super-jumbo aircraft.
Pratt & Whitney currently produces two military aircraft engines, the F100
(powering F-15 and F-16 fighter aircraft) and the F117 (powering C-17 transport
aircraft). All of Pratt & Whitney's F100 and F117 sales contracts are with the
USAF or with foreign governments.
Pratt & Whitney is under contract with the USAF to develop the F119 engine,
the only anticipated source of propulsion for the two-engine F-22 fighter
aircraft being developed by Lockheed Martin Corporation ("Lockheed Martin") and
Boeing. The F-22 is scheduled for its first flight in May 1997. In addition,
the Department of Defense selected two weapon systems contractors, Boeing and
Lockheed Martin, to proceed into the next phase of the Joint Strike Fighter
program development. Both companies have selected derivatives of Pratt &
Whitney's F119 engine as their engine of choice to provide power for the Joint
Strike Fighter demonstration aircraft. Management cannot predict with certainty
whether, when, and in what quantities Pratt & Whitney will produce F119 engines.
Pratt & Whitney Space Propulsion Division (``SPD'') produces hydrogen fueled
rocket engines and pumps for the U.S. Government and, together with NPO
Energomash, is developing a new RD-180 booster engine for two launch vehicles
being marketed by Lockheed Martin. Chemical Systems, a unit of SPD,
manufactures propulsion systems and booster motors for several U.S. military
launch vehicles and missiles. SPD's USBI unit provides services for the NASA
shuttle solid rocket booster.
Gas turbine engines manufactured by Pratt & Whitney Canada, including
various turbo prop and turbo shaft engines, are used in a variety of aircraft
including six to eighty passenger business and regional airline aircraft and
light and medium helicopters.
Revenues from Pratt & Whitney's international operations, including U.S.
export sales, were approximately 54 percent and 53 percent of total Pratt &
Whitney segment revenues in 1996 and 1995, respectively. Such operations are
subject to local government regulations as well as to varying political and
economic risks.
During 1996, the Corporation revised its method of calculating Pratt &
Whitney's backlog to eliminate collaboration participants' share of engine
program revenues and to reduce firm orders received by the discounts granted
directly to airline and other customers. At December 31, 1996, the business
backlog for Pratt & Whitney amounted to $8,889 million, including $1,927 million
of U.S. Government funded contracts and subcontracts. Of the total Pratt &
Whitney business backlog at December 31, 1996, approximately $4,242 million is
expected to be realized as sales in 1997. Pratt & Whitney's December 31, 1996
backlog calculated under the previous method of presentation would have amounted
to $10,745 million, including $1,974 million of U.S. Government funded contracts
and subcontracts as compared to $9,496 million and $1,563 million, respectively,
at December 31, 1995. Significant elements of Pratt & Whitney's business, such
as spare parts sales for engines in service, generally have short lead times.
Therefore, backlog may not be indicative of future demand. Also, since a
substantial portion of the backlog for commercial customers is scheduled for
delivery beyond 1997, changed economic conditions may cause customers to request
that firm orders be rescheduled or canceled.
- 5 -
8
Flight Systems
The Corporation's Flight Systems business is conducted through Sikorsky
Aircraft and Hamilton Standard.
Sikorsky is one of the world's leading manufacturers of military and
commercial helicopters. Sikorsky is the primary supplier of transport
helicopters to the U.S. Army. All branches of the U.S. military operate
Sikorsky helicopters. Sikorsky is also producing helicopters for a variety of
uses including passenger, utility/transport, cargo, anti-submarine warfare,
search and rescue and heavy-lift operations. Sikorsky also supplies helicopters
to foreign governments and the worldwide commercial market. Sikorsky's business
base also encompasses spare parts for past and current helicopters produced by
Sikorsky, and, through its subsidiary, Sikorsky Support Services, Inc., the
repair and retrofit of helicopters in the U.S. military fleet. Other major
helicopter manufacturers include Bell Helicopters, Eurocopter, Boeing
Helicopters, McDonnell Douglas, Agusta, Westland and Mil.
Current production programs at Sikorsky include the BLACK HAWK medium-
transport helicopter for the U.S. Army and derivatives for foreign governments;
the international NAVAL HAWK, a derivative of the SEAHAWK medium-sized
helicopter for multiple naval missions for foreign governments; the CH-53E SUPER
STALLION heavy-lift helicopter for the U.S. Marine Corps; and the S-76
intermediate-sized helicopter for executive transport, offshore oil platform
support, search and rescue, emergency medical service and other utility
operations.
Although Sikorsky is under contract with the U.S. Government to deliver 60
BLACK HAWK helicopters through June 1997 (of which 30 had been delivered through
December 31, 1996), declining Defense Department budgets make Sikorsky
increasingly dependent upon expanding its international market position. Such
sales sometimes require the development of in-country co-production programs
such as the one Sikorsky operates in South Korea.
Sikorsky is engaged in full scale development of the S-92 aircraft, a large
cabin helicopter for commercial and military markets. Certification of the
first S-92 is expected in the year 2000. A significant portion of the
development will be carried out by companies in Brazil, the People's Republic of
China, Japan, Spain and Taiwan under collaborative arrangements.
Sikorsky is collaborating with Boeing Helicopters for the development of the
U.S. Army's next generation light helicopter, the RAH-66 Comanche. The Boeing
Sikorsky Team is performing under a cost reimbursement contract awarded in 1991.
In December 1996, Sikorsky and Boeing signed a modification to the contract
which includes additional development and testing and the fabrication of six
early operational capability aircraft. The first prototype aircraft performed a
successful flight in January 1996 and is undergoing further flight testing. The
Corporation cannot predict whether the Comanche will go into production or
predict the quantity of aircraft that ultimately may be built.
Hamilton Standard is a global producer of a number of flight systems for
both commercial and military aircraft. Major production programs include engine
controls, environmental controls, flight controls and propellers. Hamilton
Standard also supplies NASA's space suit/life support system and produces
environmental control and thermal control systems for international space
programs. Other Hamilton Standard products include fuel cell power plants,
microelectronic circuitry and advanced optical systems.
At December 31, 1996, the Flight Systems business backlog amounted to $2,606
million, including $1,646 million under funded contracts and subcontracts with
the U.S. Government, as compared to $2,954 million and $1,936 million,
respectively, at December 31, 1995. Of the total Flight Systems business
backlog at December 31, 1996, approximately $1,885 million is expected to be
realized as sales in 1997.
- 6 -
9
Other Matters Relating to the Corporation's
Business as a Whole
Research and Development
To maintain its competitive position, the Corporation spends substantial
amounts of its own funds on research and development. Such expenditures, which
are charged to income as incurred, were $1,122 million or 4.8 percent of total
revenues in 1996, as compared with $963 million or 4.2 percent of total revenues
in 1995 and $978 million or 4.6 percent of total revenues in 1994. The
Corporation also performs research and development work under contracts funded
by the U.S. Government and other customers. Such contract research and
development, which is performed principally in the Pratt & Whitney segment and
to a lesser extent in the Flight Systems segment, amounted to $870 million in
1996, as compared with $871 million in 1995 and $838 million in 1994.
Contracts, Environmental and Other Matters
Government contracts are subject to termination for the convenience of the
government, in which event the Corporation normally would be entitled to
reimbursement for its allowable costs incurred plus a reasonable profit. Most
of the Corporation's sales are made under fixed-price type contracts; only 5
percent of the Corporation's total sales for 1996 were made under cost-
reimbursement type contracts.
Like many defense contractors, the Corporation has received allegations from
the U.S. Government that some contract prices should be reduced because cost or
pricing data submitted in negotiation of the contract prices may not have been
in conformance with government regulations. The Corporation has made voluntary
refunds in those cases it believes appropriate, has settled some allegations,
and does not believe that any further price reductions that may be required will
have a material effect upon its financial position or results of operations.
The Corporation is now and believes that, in light of the current government
contracting environment, it will be the subject of one or more government
investigations. See Item 3 Legal Proceedings at page 8 of this Report for
further discussion.
The Corporation does not currently believe that Defense Department budget
cutbacks will have a material adverse effect on the profitability of the
Corporation due in part to the Corporation's long term efforts to reduce its
reliance on defense contracts.
Like other users in the U.S., the Corporation is largely dependent upon
foreign sources for certain of its raw materials requirements such as cobalt
(Africa), and chromium (Africa, Eastern and Central Europe and the countries of
the former U.S.S.R.). To alleviate this dependence and accompanying risk, the
Corporation has a number of on-going programs which include the development of
new vendor sources; the increased use of more readily available materials
through material substitutions and the development of new alloys; and
conservation of materials through scrap reclamation and new manufacturing
processes such as net shape forging.
The Corporation has sought cost reductions in its purchases of certain other
materials, components, and supplies by consolidating its purchases and reducing
the number of suppliers. In some instances the Corporation is reliant upon a
single source of supply. A disruption in deliveries from its suppliers,
therefore, could have an adverse effect on the Corporation's ability to meet its
commitments to customers. The Corporation believes that it has appropriately
balanced the risks against the costs of sustaining a greater number of
suppliers.
The Corporation does not foresee any unavailability of materials,
components, or supplies which will have any material adverse effect on its
overall business, or on any of its business segments, in the near term.
- 7 -
10
While the Corporation's patents, trademarks, licenses and franchises are
cumulatively important to its business, the Corporation does not believe that
the loss of any one or group of related patents, trademarks, licenses or
franchises would have a material adverse effect on the overall business of the
Corporation or on any of its business segments.
The Corporation does not anticipate that compliance with federal, state and
local provisions relating to the protection of the environment will have a
material adverse effect upon its capital expenditures, competitive position,
financial position or results of operations. (Environmental matters are the
subject of certain of the Legal Proceedings described in Item 3 below, and are
further addressed in "Management's Discussion and Analysis of Results of
Operations and Financial Position" at page 26 and Note 14 of Notes to
Consolidated Financial Statements at page 41 of the Corporation's 1996 Annual
Report to Shareowners.)
Most of the laws governing environmental matters include criminal
provisions. If the Corporation were convicted of a violation of the federal
Clean Air Act or the Clean Water Act, the facility or facilities involved in the
violation would be listed on the Environmental Protection Agency's (EPA) List of
Violating Facilities. The listing would continue until the EPA concluded that
the cause of the violation had been cured. Any listed facility cannot be used
in performing any U.S. Government contract awarded to the Corporation during any
period of listing by the EPA.
Employees
At December 31, 1996, the Corporation's total employment was approximately
173,800.
Item 2. Properties
The Corporation's fixed assets include the plants and warehouses described
below and a substantial quantity of machinery and equipment, most of which is
general purpose machinery and equipment using special jigs, tools and fixtures
and in many instances having automatic control features and special adaptations.
The Corporation's plants, warehouses, machinery and equipment are in good
operating condition, are well maintained, and substantially all of its
facilities are in regular use. The Corporation considers the present level of
fixed assets capitalized as of December 31, 1996, suitable and adequate for the
respective industry segments' operations in the current business environment.
The following square footage numbers are approximations:
At December 31, 1996, the Corporation operated (a) plants in the U.S. which
had 33.1 million square feet, of which 5 million square feet were leased; (b)
plants outside the U.S. which had 20.1 million square feet, of which 2.4 million
square feet were leased; (c) warehouses in the U.S. which had 4.2 million square
feet, of which 2.7 million square feet were leased; and (d) warehouses outside
the U.S. which had 5.2 million square feet, of which 3.3 million square feet
were leased.
Management believes that the facilities for the production of its products
are suitable and adequate for the business conducted therein, are being
appropriately utilized in line with experience and have sufficient production
capacity for their present intended purposes. Utilization of the facilities
varies based on demand for the products. The Corporation continuously reviews
its anticipated requirements for facilities and, based on that review, may from
time to time acquire additional facilities and/or dispose of existing
facilities.
Item 3. Legal Proceedings
In June 1992, the Department of Justice filed a Civil False Claims Act
complaint in the United States District Court for the District of Connecticut,
No. 592CV375, against Sikorsky Aircraft alleging that the government was
overcharged by nearly $4 million in connection with the pricing of parts
supplied for the reconditioning of the Navy's Sea King helicopter. The
Complaint seeks treble damages plus a $10,000 penalty for each false claim
submitted. Trial is scheduled for July 1997.
- 8 -
11
The Corporation's Pratt & Whitney unit was advised that it is no longer the
subject of a Department of Justice investigation relating to its government
contracts accounting practices for aircraft engine parts produced by foreign
companies under certain commercial engine collaboration programs. With respect
to these issues, however, the Department of Defense has issued a contracting
officer's "final decision", which states that the Corporation failed to comply
with various accounting requirements incorporated in its contracts with the
government. The final decision covered years from 1984-95, inclusive, and
claimed contract damages of $260.3 million, of which $102.7 million is interest.
The Corporation believes its accounting practices comply with contract
requirements and has not changed its accounting practices in response to the
government's claim. On December 24, 1996, the Corporation filed a notice of
appeal with the Armed Services Board of Contract Appeals. The government has
reserved its right to file additional claims for 1996 (and later years if the
accounting practices are unchanged) plus additional interest.
In April 1995, the Department of Justice filed a Civil False Claims Act
complaint against the Corporation in the United States District Court for the
Southern District of Florida, No. 95-8251, alleging misuse of $10 million of
foreign military financing funds. The complaint seeks treble damages plus a
$10,000 penalty for each false claim submitted.
The Justice Department continues to investigate alleged violations of law in
connection with marketing and sale of helicopters and related services to the
Government of the Kingdom of Saudi Arabia. The Corporation has responded to a
grand jury subpoena requesting documents in connection with this matter, and
several current and former employees and business associates have been
interviewed.
In November 1996, a jury reached a verdict in Chromalloy Gas Turbine
Corporation v. United Technologies Corporation, No. 95-CI-12541, a Texas state
action which was instituted by Chromalloy in August of 1995. The jury found
that Pratt & Whitney did not monopolize any relevant market but did willfully
attempt to monopolize an unspecified market. It found, however, that Chromalloy
suffered neither monetary damage nor irreparable injury. Chromalloy has
requested an injunction and moved for judgment in its favor notwithstanding the
verdict.
The Corporation does not believe that resolution of any of the matters
listed above will have a material adverse effect upon the Corporation's
competitive position, results of operations, cash flows, or financial position.
The Corporation is now, and believes that, in light of the current
government contracting environment, it will be the subject of one or more
government investigations. If the Corporation or one of its business units were
charged with wrongdoing as a result of any of these investigations, the
Corporation or one of its business units could be suspended from bidding on or
receiving awards of new government contracts pending the completion of legal
proceedings. If convicted or found liable, the Corporation could be fined and
debarred from new government contracting for a period generally not to exceed
three years. Any contracts found to be tainted by fraud could be voided by the
Government.
The Corporation has incurred and will likely continue to incur liabilities
under various state and federal statutes for the cleanup of pollutants
previously released into the environment. The Corporation believes that any
payments it may be required to make as a result of these claims will not have a
material effect upon the capital expenditures, competitive or financial
position, or results of operations of the Corporation. The Corporation has had
liability and property insurance in force over its history with a number of
insurance companies, and the Corporation has commenced litigation seeking
indemnity and defense under these insurance policies in relation to its
environmental liabilities. Settlements to date, which have not been material,
have been recorded upon receipt. While the litigation against the Corporation's
historic liability insurers has concluded, it is expected that the case against
the Corporation's property insurers will last several years. (For information
regarding the matters discussed in this paragraph, see "Environmental Matters"
in Management's Discussion and Analysis of Results of Operations and Financial
Position at page 26 and Note 14 of the Notes to Consolidated Financial
Statements at page 41 of the Corporation's 1996 Annual Report to Shareowners.)
- 9 -
12
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to security holders for a vote during the fourth
quarter ended December 31, 1996.
- ----- Executive Officers of the Registrant
The executive officers of United Technologies Corporation, together with the
offices in United Technologies Corporation presently held by them, their
business experience since January 1, 1992, and their ages, are as follows:
Other Business Age
Name Title Experience 2/1/97
Since 1/1/92
Jonathan W. Vice President, Principal - Morgan 40
Ayers Strategic Planning Stanley Corporate
(since 1995) Finance
Norman R. Senior Vice President, UT 54
Bodine President Automotive; President,
(since 1997) Electrical Systems &
Components; President,
Automotive Products
Division, UT Automotive
Eugene Buckley President, Sikorsky President, Sikorsky 66
Aircraft Corporation Aircraft Division
(since 1995)
William L. Senior Vice Vice President, Human 54
Bucknall, Jr. President, Human Resources &
Resources & Organization, United
Organization Technologies
(since 1992) Corporation
Kevin G. Conway Vice President, Director of Taxes, 48
Taxes United Technologies
(since 1995) Corporation
Mark S. Coran Executive Vice 53
President, -------
Operations, Pratt &
Whitney (since 1991)
Robert F. Chairman (since Chief Executive Officer; 63
Daniell 1987) President and Chief
Operating Officer
George David President and Chief President and Chief 54
Executive Officer Operating Officer;
(since 1994) Executive Vice President
and President,
Commercial/Industrial
C. Scott Greer President, UT President, Chief 46
Automotive Operating Officer
(since 1997) Echlin, Inc.
Bruno Grob President, European President, Otis France 47
&
Transcontinental
Operations
Otis Elevator (since
1992)
- 10 -
13
Other Business Age
Name Title Experience 2/1/97
Since 1/1/92
Jay L. Vice President- Director, Internal 46
Haberland Controller Audit;
(since 1996) Vice President, Finance,
Commercial & Industrial
Group
The Black & Decker
Corporation
Robert J. Senior Vice ------- 63
Hermann President, Science &
Technology (since
1992)
Karl J. Krapek Executive Vice Chairman, President and 48
President and Chief
President, Pratt & Executive Officer,
Whitney Carrier Corporation
(since 1997)
Raymond P. President, Hamilton Executive Vice 53
Kurlak Standard (since President, Sikorsky
1995)
John R. Lord President, Carrier President, Carrier NAO, 53
Corporation Vice President,
(since 1995) Residential Products
Group, Carrier NAO
Stephen F. Page Executive Vice Executive Vice President 57
President and Chief and Chief Financial
Financial Officer Officer, The Black &
(since 1993) Decker Corporation
William F. Paul Executive Vice Senior Vice President, 60
President Government Affairs
(since 1995)
Gilles A. H. Vice President - Vice President, Finance 50
Renaud Treasurer Carrier Corporation
(since 1996)
William H. Vice President, Vice President and 53
Trachsel Secretary and Deputy Deputy General Counsel
General Counsel
(since 1993)
Jean-Pierre van President, Otis ------- 62
Rooy Elevator
(since 1991)
Robert A. Wolfe Executive Vice Executive Vice 58
President, Pratt & President, Military and
Whitney and Space Aero Propulsion
President, Large
Commercial Engines
(since 1994)
Irving B. Executive Vice ------- 51
Yoskowitz President and
General Counsel
(since 1990)
All of the officers serve at the pleasure of the Board of Directors of United
Technologies Corporation or the subsidiary designated.
- 11 -
14
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
See "Comparative Stock Data" appearing on page 43 of the Corporation's 1996
Annual Report to its Shareowners containing the following data relating to the
Corporation's Common Stock: principal market, quarterly high and low sales
prices, approximate number of shareowners and frequency and amount of dividends.
All such data are incorporated by reference in this Report.
Item 6. Selected Financial Data
See the Five Year Summary appearing on page 21 of the Corporation's 1996
Annual Report to its Shareowners containing the following data: sales, net
income, primary and fully diluted earnings per share, cash dividends on Common
Stock, total assets and long-term debt. All such data are incorporated by
reference in this Report.
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Position
See "Management's Discussion and Analysis of Results of Operations and
Financial Position" appearing on pages 22 through 27 of the Corporation's 1996
Annual Report to its Shareowners; such discussion and analysis is incorporated
by reference in this Report.
Item 8. Financial Statements and Supplementary Data
The 1996 and 1995 Balance Sheets, and other financial statements for the
years 1996, 1995 and 1994, together with the report thereon of Price Waterhouse
LLP dated January 23, 1997, appearing on pages 28 through 43 in the
Corporation's 1996 Annual Report to its Shareowners are incorporated by
reference in this Report.
The 1996 and 1995 Selected Quarterly Financial Data appearing on page 43 in
the Corporation's 1996 Annual Report to its Shareowners are incorporated by
reference in this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 10. Directors and Executive Officers of the Registrant
The information required by Item 10 with respect to directors is
incorporated herein by reference from pages 4 through 7 of the Corporation's
Proxy Statement for the 1997 Annual Meeting of Shareowners. Information
regarding executive officers is contained in Part I of this Report at pages 10
and 11, and the section entitled "Section 16(a) Beneficial Ownership Reporting
Compliance" at page 9 of the 1997 Proxy Statement.
Item 11. Executive Compensation
The information required by Item 11 is incorporated herein by reference from
pages 15 through 22 of the Corporation's Proxy Statement for the 1997 Annual
Meeting of Shareowners. Such incorporation by reference shall not be deemed to
specifically incorporate by reference the information referred to in Item
402(a)(8) of Regulation S-K.
- 12 -
15
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is incorporated herein by reference from
pages 8 and 9 of the Corporation's Proxy Statement for the 1997 Annual Meeting
of Shareowners.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 is incorporated herein by reference from
page 9 of the Corporation's Proxy Statement for the 1997 Annual Meeting of
Shareowners.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Page Number
in Annual
Report
(a) Financial Statements, Financial Statement
Schedules and Exhibits
(1) Financial Statements (incorporated by
reference from the
1996 Annual Report to Shareowners):
Report of Independent Accountants ......... 28
Consolidated Statement of Operations for the
Three Years 29
ended December 31, 1996 ..............
Consolidated Balance Sheet--December 31, 30
1996 and 1995 ...........................
Consolidated Statement of Cash Flows for the
Three Years 31
ended December 31, 1996 ..............
Notes to Consolidated Financial Statements 32-43
Selected Quarterly Financial Data 43
(Unaudited) ...............................
Page Number
in Form 10-K
(2) Financial Statement Schedule
For the three years ended December 31, 1996:
Report of Independent Accountants on
Financial Statement ..................... S-1
Schedule II Valuation and Qualifying
Accounts ................................ S-2
Consent of Independent Accountants ........ F-1
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
the notes thereto.
(3) Exhibits:
The following list of exhibits includes
exhibits submitted with this Form 10K as
filed with the SEC and those incorporated by
reference to other filings.
Exhibit Number
3.1 Restated Certificate of Incorporation *
3.2 Bylaws**
4 The Corporation hereby agrees to furnish upon
request to the Commission a copy of each
instrument defining the rights of holders of long-
term debt of the Corporation and its consolidated
subsidiaries and any unconsolidated subsidiaries.*
10.1 United Technologies Corporation 1979 Long Term
Incentive Plan. *
- 13 -
16
Exhibit Number
10.2 United Technologies Corporation Annual
Executive Incentive Compensation Plan, as
amended. *****
10.3 United Technologies Corporation Disability
Insurance Benefits for Executive Control
Group. *
10.4 United Technologies Corporation Executive
Estate Preservation Program. *
10.5 United Technologies Corporation Pension
Preservation Plan. *
10.6 United Technologies Corporation Senior
Executive Severance Plan. *
10.7 United Technologies Corporation Deferred
Compensation Plan, as amended. *****
10.8 Otis Elevator Company Incentive Compensation
Plan. *
10.9 United Technologies Corporation Directors
Retirement Plan, as amended. *****
10.10 United Technologies Corporation Deferred
Compensation Plan for Non-Employee Directors.*
10.11 United Technologies Corporation Long Term
Incentive Plan, as amended. *****
10.12 United Technologies Corporation Executive
Disability, Income Protection and Standard
Separation Agreement Plan. *
10.13 United Technologies Corporation Directors'
Restricted Stock/Unit Program. *
10.14 United Technologies Corporation Board of
Directors Deferred Stock Unit Plan. *****
10.15 United Technologies Corporation Pension
Replacement Plan. ***
10.16 United Technologies Corporation Special
Retention and Stock Appreciation Program. ****
10.17 United Technologies Corporation Nonemployee
Director Stock Option Plan. *****
11 Statement re Computation of Per Share
Earnings. #
12 Computation of Ratio of Earnings to Fixed
Charges. #
13 Annual Report to Shareowners for year ended
December 31, 1996 (except for the pages and
information thereof expressly incorporated by
reference in this Form 10-K, the Annual Report
to Shareowners is provided solely for the
information of the Securities and Exchange
Commission and is not to be deemed "filed" as
part of this Form 10-K). #
21 Subsidiaries of the Registrant. #
24 Powers of Attorney of Howard H. Baker, Jr.,
Antonia Handler Chayes, Robert F. Daniell,
Robert F. Dee, Charles W. Duncan, Jr., Jean-
Pierre Garnier, Pehr G. Gyllenhammar, Gerald
D. Hines, Charles R. Lee, Robert H. Malott,
Frank P. Popoff, Harold A. Wagner and
Jacqueline G. Wexler. #
27 Financial Data Schedule. #
Notes to exhibits:
# Submitted electronically herewith.
* Incorporated by reference to Exhibit of the
same number to United Technologies Corporation
Annual Report on Form 10K (Commission file
number 1-812) for fiscal year ended December
31, 1992.
** Incorporated by reference to Exhibit of the
same number to United Technologies Corporation
Annual Report on Form 10K (Commission file
number 1-812) for fiscal year ended December
31, 1994.
*** Incorporated by reference to Exhibit of the
same number to United Technologies Corporation
Annual Report on Form 10K (Commission file
number 1-812) for fiscal year ended December
31, 1993.
- 14 -
17
Notes to exhibits:
**** Incorporated by reference to Exhibit of the
same number to United Technologies Corporation
Form 10Q (Commission file number 1-812) for
the quarter ended September 30, 1995.
***** Incorporated by reference to Exhibit of the
same number to United Technologies Corporation
Annual Report on Form 10K (Commission file
number 1-812) for fiscal year ended December
31, 1995.
(b) No reports on Form 8-K were filed by the Registrant during
the fourth quarter of 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
UNITED TECHNOLOGIES CORPORATION
(Registrant)
By Stephen F. Page,
Date: February 7, 1997 Executive Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, on the date set forth below.
Signature Title Date
/s/ GEORGE DAVID President and Chief February 7, 1997
(George David) Executive Officer;
Director
/s/ JAY L. HABERLAND Vice President - February 7, 1997
(Jay L. Haberland) Controller
/s/ STEPHEN F. PAGE Executive Vice February 7, 1997
(Stephen F. Page) President
and Chief Financial
Officer
ROBERT F. DANIELL * Chairman, Director)
(Robert F. Daniell)
HOWARD H. BAKER, JR. * Director )
(Howard H. Baker, Jr.)
ANTONIA HANDLER CHAYES * Director )
(Antonia Handler Chayes)
ROBERT F. DEE * Director )
(Robert F. Dee)
CHARLES W. DUNCAN, JR. * Director )
(Charles W. Duncan, Jr.)
JEAN-PIERRE GARNIER * Director )
(Jean-Pierre Garnier)
PEHR G. GYLLENHAMMAR * Director ) *By:/s/William H. Trachsel
(Pehr G. Gyllenhammar) (William H. Trachsel)
Attorney-in Fact
Date: February 7, 1997
- 15 -
18
Signature Title Date
GERALD D. HINES * Director )
(Gerald D. Hines)
CHARLES R. LEE * Director )
(Charles R. Lee)
ROBERT H. MALOTT * Director )
(Robert H. Malott)
FRANK P. POPOFF * Director ) *By:/s/William H.
(Frank P. Popoff) (William H. Trachsel)
Attorney-in Fact
HAROLD A. WAGNER * Director ) Date: February 7, 1997
(Harold A. Wagner)
JACQUELINE G. WEXLER * Director )
(Jacqueline G. Wexler)
/s/ KARL J. KRAPEK Executive Vice February 7, 1997
(Karl J. Krapek) President, Director
- 16 -
19
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of United Technologies Corporation
Our audits of the consolidated financial statements referred to in our
report dated January 23, 1997 appearing on page 28 of the 1996 Annual Report to
Shareowners of United Technologies Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, the Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
Price Waterhouse LLP
Hartford, Connecticut
January 23, 1997
S-1
20
SCHEDULE II
UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
Three Years Ended December 31, 1996
(Millions of Dollars)
Allowances for Doubtful Accounts and Other Customer Financing Activity:
Balance December 31, 1993 $ 466
Provision charged to income 107
Doubtful accounts written off (net) (52)
Other adjustments (12)
Balance December 31, 1994 509
Provision charged to income 1
Doubtful accounts written off (net) (88)
Other adjustments 8
Balance December 31, 1995 430
Provision charged to income 40
Doubtful accounts written off (net) (57)
Other adjustments (1)
Balance December 31, 1996 $ 412
Future Income Tax Benefits - Valuation Allowance:
Balance December 31, 1993 $ 297
Additions charged to income tax expense 109
Reductions credited to income tax expense (51)
Balance December 31, 1994 355
Additions charged to income tax expense 49
Reductions credited to income tax expense (52)
Balance December 31, 1995 352
Additions charged to income tax expense 30
Reductions credited to income tax expense (48)
Balance December 31, 1996 $ 334
S-2
21
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 33-46916,
33-40163, 33-34320, 33-31514, 33-29687 and 33-6452) and in the Registration
Statements on Form S-8 (Nos. 33-57769, 33-45440, 33-11255, 33-26580, 33-
26627, 33-28974, 33-51385, 33-58937, and 2-87322) of United Technologies
Corporation of our report dated January 23, 1997 appearing on page 28 of the
1996 Annual Report to Shareowners which is incorporated by reference in this
Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears
on page S-1 of this Form 10-K.
Price Waterhouse LLP
Hartford, Connecticut
February 7, 1997
F-1