UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C.
20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
from____________________________to__________________________
Commission file number 1-812
UNITED TECHNOLOGIES CORPORATION
DELAWARE 06-0570975
United Technologies Building, Hartford, Connecticut 06101
(203) 728-7000
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 .
At March 31, 1995 there were 123,373,992 shares of Common Stock outstanding.
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended March 31, 1995
PAGE
<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Page
Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Statement of
Operations for the three months ended 1
March 31, 1995 and 1994
Condensed Consolidated Balance Sheet at March
31, 1995 and December 31, 1994 2
Condensed Consolidated Statement of Cash
Flows for the three months ended March 31, 3
1995 and 1994
Notes to Condensed Consolidated Financial 4
Statements
Report of Independent Accountants 7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Position 8
Part II - Other Information
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index
PAGE
<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
In Millions of Dollars (except per share amounts) 1995 1994
<S> <C> <C>
Revenues:
Product sales $ 4,252 $ 3,782
Service sales 1,066 963
Financing revenues and other income, net 26 40
5,344 4,785
Costs and expenses:
Cost of products sold 3,528 3,126
Cost of services sold 655 609
Research and development 218 240
Selling, general and administrative 629 603
Interest 62 66
5,092 4,644
Income before income taxes and minority interests 252 141
Income taxes 88 51
Minority interests 29 23
Net Income $ 135 $ 67
Preferred Stock Dividend Requirement 6 5
Earnings Applicable to Common Stock $ 129 $ 62
Earnings per share of common stock and common stock
equivalents $ 1.03 $ 0.50
Dividends per share of common stock $ .50 $ .45
Average common and equivalent shares outstanding (in
thousands) 130,071 132,938
</TABLE>
<PAGE>
See Accompanying Notes
1<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<CAPTION>
<S> <C> <C>
March 31, December 31,
In Millions of Dollars 1995 1994
</TABLE>
Assets
<TABLE><CAPTION>
<S> <C> <C>
Cash and cash equivalents $ 461 $ 386
Accounts receivable, net 3,612 3,745
Inventories and contracts in progress, net 3,174 2,955
Future income tax benefits 902 929
Other current assets 252 213
Total Current Assets 8,401 8,228
Fixed assets 10,253 10,193
Less - accumulated depreciation (5,764) (5,661)
4,489 4,532
Other assets 2,805 2,864
Total Assets $ 15,695 $ 15,624
</TABLE>
Liabilities and Shareowners' Equity
<TABLE><CAPTION>
<S> <C> <C>
Short-term borrowings $ 517 $ 402
Accounts payable 1,823 1,924
Accrued liabilities 3,966 4,071
Long-term debt currently due 147 156
Total Current Liabilities 6,453 6,553
Long-term debt 1,885 1,885
Future pension and postretirement benefit obligations 1,417 1,389
Other long-term liabilities 1,779 1,706
Series A ESOP Convertible Preferred Stock 905 905
ESOP deferred compensation (548) (566)
357 339
Shareowners' Equity:
Common Stock 2,171 2,148
Treasury stock (964) (947)
Retained earnings 2,856 2,790
Currency translation and pension liability
adjustments (259) (239)
3,804 3,752
Total Liabilities and Shareowners' Equity $ 15,695 $ 15,624
</TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE><CAPTION>
<PAGE>
See Accompanying Notes
2<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Three Months Ended
March 31,
In Millions of Dollars 1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 135 $ 67
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 207 204
Change in:
Accounts receivable 129 80
Inventories and contracts in progress (239) (180)
Accounts payable and accrued liabilities (180) (343)
Future income taxes payable and future income
tax benefits 33 41
ESOP deferred compensation 11 79
Other, net 9 53
Net Cash Flows from Operating Activities 105 1
Cash flows from investing activities:
Capital expenditures (148) (128)
Acquisitions of business units, net (9) -
Decrease in customer financing assets, net 90 9
Other, net 12 6
Net Cash Flows from Investing Activities (55) (113)
Cash flows from financing activities:
Issuance of long-term debt - 8
Repayments of long-term debt (27) (12)
Increase in short-term borrowings, net 116 132
Dividends paid on Common Stock (62) (57)
Common Stock repurchase (17) -
Other, net 10 36
Net Cash Flows from Financing Activities 20 107
Effect of foreign exchange rate changes on cash and
cash equivalents 5 (17)
Net Increase (Decrease) in Cash and Cash
Equivalents 75 (22)
Cash and Cash Equivalents, Beginning of year 386 421
Cash and Cash Equivalents, End of period $ 461 $ 399
</TABLE>
<PAGE>
See Accompanying Notes
3<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The condensed consolidated financial statements at March 31, 1995 and for the
three-month periods ended March 31, 1995 and 1994 are unaudited, but in the
opinion of the Corporation include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for the
interim periods. Certain 1994 amounts have been reclassified to conform with
the presentation at March 31, 1995.
Accounting and Reporting Changes
In the fourth quarter of 1994 the Corporation adopted, effective January 1,
1994, AICPA Statement of Position (SOP) 93-6, "Employers' Accounting for
Employee Stock Ownership Plans." The principal impact of the accounting change
on ongoing results is to consider as outstanding only those ESOP Convertible
Preferred shares committed to employee accounts, to report as interest expense
all interest on the debt of the ESOP trust and to report preferred stock
dividends only on those shares considered as outstanding.
As this accounting change was adopted in the fourth quarter of 1994,
previously reported 1994 quarterly information has been restated to reflect the
change effective January 1, 1994.
As a result of this change, the Corporation's pretax income for the three
month period ended March 31, 1994 was reduced by $63 million, including a one-
time charge of $51 million ($31 million after tax or $.23 per share). This one-
time charge represents the cumulative difference between the expense determined
under the new accounting method and that previously recognized from inception of
the ESOP through January 1, 1994. The one-time charge has been recorded in
Financing revenues and other income, less other deductions in the Consolidated
Statement of Operations.
The 1994 ESOP accounting change, excluding the one-time charge, reduced
pretax income by $12 million or $8 million after tax, and reduced reported
preferred stock dividends by $6 million for the three month period ended March
31, 1994. Those reductions in net income and preferred stock dividend
requirements, and the reduction in ESOP shares considered outstanding of 9.0
million shares, have the combined effect of increasing earnings per share by
$.02 excluding the one time charge for the three month period ended March 31,
1994. Overall, earnings per share for the three month period ended March 31,
1994 was reduced by $.21 as a result of this accounting change.
Contingent Liabilities
While there has been no significant change in the Corporation's material
contingencies during 1995, the matters previously described in Note 14 of Notes
to Financial Statements in the Corporation's Annual Report on Form 10K for
calendar year 1994 are summarized below.
Environmental
The Corporation's operations are subject to environmental regulation by
federal, state, and local authorities in the United States and regulatory
authorities with jurisdiction over its foreign operations.
It is the Corporation's policy to accrue environmental investigatory and
remediation costs when it is probable that a liability has been incurred by the
Corporation for known sites and the amount of loss can be reasonably estimated.
<PAGE>4<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Where no amount within a range of estimates is more likely, the minimum is
accrued. Otherwise, the most likely cost to be incurred is accrued. The
measurement of the liability is based on an evaluation of currently available
facts with respect to each individual site and takes into account factors such
as existing technology, presently enacted laws and regulations, and prior
experience in remediation of contaminated sites.
Where the Corporation is not the only party responsible for the remediation
of a site, the Corporation considers its likely proportionate share of the
anticipated remediation expense in establishing a provision for those costs.
Included within the sites known to the Corporation are those sites at which the
Corporation has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"
or Superfund). Under the provisions of this statute, the Corporation may be
held liable for all costs of environmental remediation without regard to the
legality of the Corporation's actions resulting in the contamination. In
estimating its liability for remediation, the Corporation considers its likely
proportionate share of the anticipated remediation expense and the ability of
the other potentially responsible parties to fulfill their obligations.
Some of the Corporation's liabilities, including certain Superfund
liabilities, relate to facilities that were acquired by the Corporation with
indemnities from the sellers or former owners. In estimating the potential
liability at these sites, the Corporation has considered the indemnification
separately from the liability.
The Corporation has instituted legal proceedings against its insurers seeking
insurance coverage for liability to third parties for remediation costs, defense
costs, physical loss or damage to the Corporation's property, and related costs.
Settlements to date, which have not been material, have been recorded upon
receipt. It is expected that one or more of these cases will last several
years. Environmental liabilities are not reduced by potential insurance
reimbursements.
U.S. Government
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's contracts with the U.S. Government are also subject to
audits. Like many defense contractors, the Corporation has received audit
reports which recommend that certain contract prices should be reduced to comply
with various government regulations. Some of these audit reports involve
substantial amounts. The Corporation has made voluntary refunds in those cases
it believes appropriate.
Other
The Corporation extends performance and operating cost guarantees, which are
beyond its normal warranty and service policies, for extended periods on some of
its products, particularly commercial aircraft engines. Liability under such
guarantees is contingent upon future product performance and durability. The
<PAGE>5<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Corporation has accrued its estimated liability that may result under these
guarantees.
The Corporation also has other commitments and contingent liabilities related
to legal proceedings and matters arising out of the normal course of business.
The Corporation has accrued its liability for environmental investigation and
remediation, performance guarantees, and other litigation and claims based on
management's estimate of the probable outcome of these matters. While it is
possible that the outcome of these matters may differ from the recorded
liability, management believes that resolution of these matters will not have a
material adverse effect upon either results of operations, cash flows, or
financial position of the Corporation.
<PAGE>6<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
With respect to the unaudited condensed consolidated financial information of
United Technologies Corporation for the three month periods ended March 31, 1995
and 1994, Price Waterhouse LLP ("Price Waterhouse") reported that they have
applied limited procedures in accordance with professional standards for a
review of such information. However, their separate report dated April 24, 1995
appearing below, states that they did not audit and they do not express an
opinion on that unaudited condensed consolidated financial information. Price
Waterhouse has not carried out any significant or additional audit tests beyond
those which would have been necessary if their report had not been included.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
Price Waterhouse is not subject to the liability provisions of section 11 of the
Securities Act of 1933 for their report on the unaudited condensed consolidated
financial information because that report is not a "report" or a "part" of the
registration statement prepared or certified by Price Waterhouse within the
meaning of sections 7 and 11 of the Act.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
United Technologies Corporation
We have reviewed the accompanying condensed consolidated statement of
operations of United Technologies Corporation and consolidated subsidiaries for
the three month periods ended March 31, 1995 and 1994, the condensed
consolidated statement of cash flows for the three months ended March 31, 1995
and 1994, and the condensed consolidated balance sheet as of March 31, 1995.
This financial information is the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial information for it to be in
conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1994, and the
related consolidated statements of operations, of cash flows and of changes in
shareowners' equity for the year then ended (not presented herein), and in our
report dated January 26, 1995, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 1994,
when read in conjunction with the consolidated financial statements from which
it has been derived, is fairly stated in all material respects in relation
thereto.
PRICE WATERHOUSE LLP
Hartford, Connecticut
April 24, 1995
<PAGE>7<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL POSITION
OVERVIEW
For the three month period ended March 31, 1995 the Corporation reported net
income of $135 million or $1.03 per share compared to $67 million or $.50 per
share for the same period last year. Results for the first quarter of 1994 have
been restated for the adoption of AICPA Statement of Position (SOP) 93-6,
"Employers' Accounting for Employee Stock Ownership Plans". Excluding the
cumulative impact of this accounting change, 1994 first quarter net income was
$98 million or $.73 per share.
BUSINESS ENVIRONMENT
The Corporation's Otis, Carrier and UT Automotive subsidiaries serve
customers in the commercial property, residential housing and automotive
businesses. Additionally, the Corporation's Pratt & Whitney, Sikorsky and
Hamilton Standard businesses serve commercial and government customers in the
aerospace industry. As world-wide businesses, these operations are affected by
global as well as regional economic factors.
U.S. residential housing starts decreased approximately 5% over the same
period in 1994, while commercial construction starts remain weak. U.S.
commercial vacancy rates have improved only marginally from the 1992 peak.
North American car and light truck production increased approximately 5% in
the first three months of 1995 over the comparable period in 1994, and European
car sales also increased this period.
Worldwide airline profits in 1994 were nominal despite load factors at
historical high levels. Competitive pricing strategies and disparate cost
structures continue to make it difficult for the U.S. airlines to achieve the
financial condition necessary to make significant investments in new aircraft.
For many international airlines, increasing competition, higher cost structures
and privatization initiatives will strain financial results and resources in the
near term. While airlines have historically begun ordering new equipment
approximately 18 months after returning to profitability, management believes
the current recovery may be slower.
The U.S. Defense industry continues to experience significant downsizing, and
further consolidation within the industry is expected. As a result, the
Corporation has continued to reduce its reliance on U.S. Defense contracts over
the past few years.
During December 1994 and the first quarter of 1995 the Mexican peso devalued
significantly against the U.S dollar. This had a slightly positive impact on
earnings for some of the Corporation's businesses which manufacture in Mexico
for export. This devaluation however has created economic instability within
Mexico which can have uncertain effects on future operations. Revenues
generated from Mexican operations in the full year 1994 were less than 1% of
consolidated revenues.
<PAGE>8<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
RESULTS OF OPERATIONS
Consolidated revenues are as follows:
<TABLE><CAPTION>
Three Months Ended
March 31,
In Millions of Dollars 1995 1994
<S> <C> <C>
Product sales $ 4,252 $ 3,782
Service sales 1,066 963
Financing revenues and
other income, net 26 40
</TABLE>
Consolidated revenues in the first quarter of 1995 increased 12% over the
comparable period of 1994. Foreign exchange translation had a favorable effect
on revenue; excluding this effect first quarter 1995 consolidated revenues
increased 9% over the comparable 1994 period. All segments reported increased
revenues in the first quarter as UTC's commercial and industrial segments
increased 14% and the aerospace segments increased 6%.
Financing revenues and other income in 1994 include a $51 million charge
relating to the adoption of SOP 93-6, "Employers' Accounting for Employee Stock
Ownership Plans". Excluding this effect financing revenues and other income
decreased due to lower financing revenues in 1995 on a lower customer financing
asset base, the absence of foreign exchange gains in the first quarter of 1994
and a decrease in royalty and joint venture income.
Cost of products and services sold as a percentage of sales are as follows:
<TABLE><CAPTION>
Three Months Ended
March 31,
In Millions of Dollars 1995 1994
<S> <C> <C>
Cost of products sold $ 3,528 $ 3,126
Product margin % 17.0% 17.3%
Cost of services sold 655 609
Service margin % 38.6% 36.8%
</TABLE>
Product margin as a percentage of sales remained essentially flat to last
year as improved margin percentages in Carrier and Hamilton Standard were offset
by costs associated with closing the wafer fabrication facility of Hamilton
Standard's Microelectronics Center and charges for a workforce reduction at
Sikorsky. Service margins as a percentage of sales improved in most of the
Corporation's businesses.
Research and development expenses decreased $22 million (9%) in the first
quarter of 1995 as compared to 1994. As a percentage of revenue research and
development was 4.1% in the first quarter of 1995 compared to 5.0% in the
corresponding period last year. These decreases primarily occurred in the Pratt
& Whitney segments as the PW 4084 and PW 4168 commercial engine development
programs have reached maturity. Research and development expenses in 1995 are
expected to be slightly below the spending level of 1994.
Selling, general and administrative expenses in the first quarter of 1995
increased by $26 million (4%) over the 1994 first quarter. However, as a
<PAGE>9<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
percentage of revenues these expenses decreased almost a full percentage point
from 12.6% to 11.8% as the Corporation achieved increased sales while continuing
to control expenses.
Segment revenues and operating profits in the Corporation's principal
business segments are as follows:
<TABLE><CAPTION>
Operating
Revenues Operating Profits Profit Margin
Quarter Ended Quarter Ended Quarter Ended
March 31, March 31, March 31,
In Millions of Dollars 1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Otis $ 1,185 $ 1,054 $ 110 $ 97 9.3% 9.2%
Carrier 1,131 1,012 29 18 2.6% 1.8%
Automotive 750 613 51 44 6.8% 7.2%
Pratt & Whitney 1,491 1,360 125 84 8.4% 6.2%
Flight Systems 813 806 45 47 5.5% 5.8%
</TABLE>
Otis segment revenues for the first quarter of 1995 were 12% higher than the
first quarter of 1994. Excluding the favorable impact of foreign exchange, 1995
revenues increased 6% over 1994 with all geographic regions showing an increase
to last year.
Operating profit at Otis increased $13 million in the first quarter of 1995
compared to 1994 with approximately $8 million of this increase due to the
favorable foreign exchange translation effects. The operating profit increase
came from North American and Pacific Region operations and was primarily due to
the increased sales volumes.
Carrier first quarter 1995 revenues increased 12% from the first quarter of
1994. Excluding the favorable impact of foreign exchange, 1995 revenues
increased 9% over 1994. Revenues increased in all major geographic areas as
well as Carrier's Transicold business, as compared to last year. Increases in
Europe and Brazil were particularly strong as these economies continue to
improve.
Operating profit for the first quarter of 1995 at Carrier increased both in
dollar terms and as a percentage of sales as compared to the same period last
year, in a seasonally weak quarter. Foreign exchange had a favorable effect and
accounted for approximately $4 million of the $11 million operating income
increase. Higher volumes and continued cost reductions more than offset cost
increases in raw materials such as copper and aluminum. Brazilian operations
had improved profits on a strong summer selling season.
Automotive segment revenues increased 22% in the first quarter of 1995 as
compared to the comparable quarter of 1994. Revenues increased in Europe as a
result of continued improvement in the European automotive market and increased
market penetration. Revenue increases in North America are a result of higher
vehicle content, favorable product mix, and increased light vehicle production.
Operating profits at the Automotive segment increased $7 million in the first
quarter of 1995 compared to the same quarter in 1994 led by sales volume
increases in Europe versus weak European sales last year. Operating income from
North American operations was essentially the same as last year. The positive
effects of higher volumes and reduced labor costs were offset by a higher level
of investment in support of new model awards and increased raw material costs.
The reduced labor costs were an effect of the devaluation of the Mexican peso on
<PAGE>10<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
labor costs incurred in Mexico, although future effects of volatility in
exchange rates, inflation and general business conditions resulting from the
economic events in Mexico are uncertain.
Pratt & Whitney revenue during the first quarter of 1995 increased 10% as
compared to the comparable quarter in 1994, however, revenues for the full year
are expected to be essentially the same as last year. The increase in the first
quarter is due to increased shipments of large commercial engines versus a weak
first quarter shipment schedule last year and increased shipments of general
aviation engines and spare parts from Pratt & Whitney Canada.
Operating profit for Pratt & Whitney in the first quarter of 1995 increased
$41 million over the comparable quarter of 1994. This increase is due to the
volume increases in Pratt & Whitney Canada, and reduced research and development
expenses compared to last year.
Flight Systems revenues increased 1% in the first quarter of 1995 compared to
the first quarter of 1994. Revenue increases at Hamilton Standard and Sikorsky
were offset by the absence of Norden revenue due to the divestiture of this
business in the second quarter of 1994. Hamilton Standard revenues in 1995 are
expected to remain flat to last year while revenues at Sikorsky are expected to
decrease versus last year due to lower scheduled deliveries of helicopters.
Operating profit for Flight Systems decreased $2 million in the first quarter
of 1995 as compared to the first quarter of 1994. Results reflect continued
strong performance at Sikorsky and operating profit at Hamilton, offset by costs
associated with closing the wafer fabrication facility of Hamilton Standard's
Microelectronics Center, charges for a workforce reduction at Sikorsky, and the
absence of Norden following its divestiture in the second quarter last year.
Interest expense decreased $4 million to $62 million for the first quarter of
1995 from $66 million last year. This decrease is mainly due to a reduced
average borrowing level during the quarter as compared to last year, partially
offset by increased interest rates.
The effective tax rate for the first quarter of 1995 was 35% compared to an
effective tax rate of 36% in the first quarter of 1994. The Corporation has
reduced its effective income tax rate by implementing tax planning strategies
throughout its operations worldwide.
FINANCIAL POSITION AND LIQUIDITY
Management assesses the Corporation's liquidity in terms of its overall
ability to generate cash to fund its operating and investing activities. Of
particular importance in the management of liquidity are cash flows generated
from operating activities, capital expenditure levels, customer financing
requirements, adequate bank lines of credit, and financial flexibility to
attract long-term capital on satisfactory terms.
<PAGE>11<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Set forth below is selected key cash flow data:
<TABLE><CAPTION>
Three Months Ended
March 31,
In Millions of Dollars 1995 1994
<S> <C> <C>
Net Cash Flows from Operating Activities $ 105 $ 1
Capital expenditures (148) (128)
Decrease in customer financing assets, net 90 9
Common stock repurchase (17) -
Increase in total debt 106 127
Increase in net debt 31 149
</TABLE>
Cash flows from operating activities were $105 million during the first
quarter of 1995 compared to $1 million for the corresponding period of 1994.
The improvement results primarily from improved operating results and working
capital management.
Cash flows from investing activities was a use of funds of $55 million during
the first quarter of 1995 compared to a use of funds of $113 million in the
corresponding period of 1994. Capital expenditures in the first quarter of 1995
were $148 million, a $20 million increase over the first quarter of 1994. The
Corporation expects 1995 full year capital spending to remain at approximately
the same level as 1994. Customer financing activities include a customer
repayment of approximately $100 million in the first quarter of 1995. The
Corporation expects that customer financing will be a net use of funds in 1995.
The Corporation repurchased $17 million of common stock, representing 270,000
shares, in the first quarter of 1995 under previously announced stock repurchase
programs.
Selected financial data as of March 31, 1995, December 31, 1994 and March 31,
1994 follows:
<TABLE><CAPTION>
March 31, December 31, March 31,
In Millions of Dollars 1995 1994 1994
<S> <C> <C> <C>
Cash and cash equivalents $ 461 $ 386 $ 399
Total debt 2,549 2,443 3,086
Net debt (total debt less cash) 2,088 2,057 2,687
Shareowners' equity 3,804 3,752 3,603
Debt to total capitalization 40.1% 39.4% 46.1%
Net debt to total capitalization 35.4% 35.4% 42.7%
</TABLE>
The debt and net debt to total capitalization ratios at March 31, 1995
decreased 6.0% and 7.3%, respectively, from the same date one year earlier as a
result of improved operating results and decreases in total and net debt.
Management believes that its existing cash position and other available
sources of liquidity are sufficient to meet current and anticipated requirements
for the foreseeable future.
<PAGE>12<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
For a description of the Corporation's material contingencies, refer to Notes
to Condensed Consolidated Financial Statements at pages 4 through 6 of this
report and Part I, Item 3 - Legal Proceedings in the Corporation's Annual Report
to Shareowners on Form 10K for calendar year 1994.
<PAGE>13<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Part II - Other Information
Item 1. Legal Proceedings
As previously reported, the Corporation received a subpoena in March 1992
from the Department of Defense Inspector General requesting documents in
connection with Pratt & Whitney's sales of goods and services to the Israeli
Government. The investigation relates to the activities of former Israeli
General Rami Dotan who pleaded guilty in Israel to engaging in corrupt practices
in connection with Israeli Air Force procurements involving another engine
manufacturer. A federal grand jury in the Southern District of Florida is
investigating this matter. In addition, 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. Management believes that resolution of this matter will not have a
material adverse effect upon its competitive position, results of operations,
cash flows, or financial position.
Other than the matter described above, there has been no material change in
legal proceedings during the first quarter of 1995. (For a description of
previously reported legal proceedings, refer to Part 1, Item 3 - Legal
Proceedings of the Corporation's Annual Report on Form 10K for calendar year
1994.)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(11) Computation of per share earnings
(12) Computation of ratio of earnings to fixed charges
(15) Letter re unaudited interim financial information
(27) Financial data schedule (submitted electronically herewith)
(b) No reports on Form 8-K were filed during the quarter ended March 31, 1995.
<PAGE>14<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements 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
Dated: April 27, 1995 By: /s/ Stephen F. Page
Stephen F. Page
Executive Vice President and
Chief Financial Officer
Dated: April 27, 1995 By: /s/ George E. Minnich
George E. Minnich
Vice President and Controller
Dated: April 27, 1995 By: /s/William H. Trachsel
William H. Trachsel
Vice President and Secretary
<PAGE>
15<PAGE>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit 11 - Computation of per share earnings
Exhibit 12 - Computation of ratio of earnings to fixed charges
Exhibit 15 - Letter re unaudited interim financial information
Exhibit 27 - Financial data schedule (submitted electronically herewith)
<PAGE>
16<PAGE>
<TABLE>
Exhibit 11
<CAPTION>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Three Months Ended
March 31,
In Millions of Dollars (except per share amounts) 1995 1994
<S> <C> <C>
Earnings applicable to Common Stock $ 129 $ 62
ESOP Convertible Preferred Stock adjustment 5 4
Net earnings for calculation of primary and fully
diluted earnings per share $ 134 $ 66
Average number of common shares and common stock
equivalents outstanding during period (four month-
end average) 130,071,357 132,937,635
Fully diluted average number of common shares and
common stock equivalents outstanding during period
(four month-end average) 130,506,775 133,107,166
Primary earnings per common share $ 1.03 $ .50
Fully diluted earnings per common share $ 1.03 $ .50
</TABLE>
PAGE
<PAGE>
<TABLE>
Exhibit 12
<CAPTION>
UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended
March 31,
In Millions of Dollars 1995 1994
<S> <C> <C>
Fixed Charges:
Interest on indebtedness $ 62 $ 66
Interest capitalized 5 7
One-third of rents* 22 25
Total Fixed Charges $ 89 $ 98
Earnings:
Income before income taxes and minority interests $ 252 $ 141
Fixed charges per above 89 98
Less: interest capitalized (5) (7)
84 91
Amortization of interest capitalized 10 11
Total Earnings $ 346 $ 243
Ratio of Earnings to Fixed Charges 3.89 2.48
* Reasonable approximation of the interest factor.
</TABLE>
PAGE
<PAGE>
Exhibit 15
April 27, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Dear Sirs:
We are aware that United Technologies Corporation has incorporated by reference
our report dated April 24, 1995 (issued pursuant to the provisions of Statement
on Auditing Standards No. 71) in the Prospectus constituting part of its
Registration Statements on Form S-3 (Nos. 33-46916, 33-40163, 33-34320, 33-
31514, 33-29687, and 33-6452) and Form S-8 (Nos. 33-57769, 33-45440, 33-11255,
33-26580, 33-26627, 33-28974, 33-51385, and 2-87322). We are also aware of our
responsibilities under the Securities Act of 1933.
Yours very truly,
Price Waterhouse LLP<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Condensed
Consolidated Balance Sheet at March 31, 1995 (Unaudited) and the Condensed
Consolidated Statement of Operations for the three months ended March 31, 1995
(Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 461
<SECURITIES> 0
<RECEIVABLES> 3,951
<ALLOWANCES> (339)
<INVENTORY> 3,174
<CURRENT-ASSETS> 8,401
<PP&E> 10,253
<DEPRECIATION> (5,764)
<TOTAL-ASSETS> 15,695
<CURRENT-LIABILITIES> 6,453
<BONDS> 1,885
<COMMON> 2,171
357
0
<OTHER-SE> 1,633
<TOTAL-LIABILITY-AND-EQUITY> 15,695
<SALES> 4,252
<TOTAL-REVENUES> 5,344
<CGS> 3,528
<TOTAL-COSTS> 4,183
<OTHER-EXPENSES> 218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> 252
<INCOME-TAX> 88
<INCOME-CONTINUING> 135
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
