<PAGE>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, 1995
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, PEN New York Stock Exchange
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 February 1, 1996, there were 121,724,402 shares of Common Stock outstanding;
the aggregate market value of the voting Common Stock held by non affiliates at
February 1, 1996 was approximately $12,324,595,703.
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K into which the document is incorporated: (1) United
Technologies Corporation 1995 Annual Report to Shareowners, Parts I, II and IV;
and (2) United Technologies Corporation Proxy Statement for the 1996 Annual
Meeting of Shareowners, Part III.
<PAGE>2
UNITED TECHNOLOGIES CORPORATION
________________________________
Index to Annual Report
on Form 10-K
Year Ended December 31, 1995
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 9
Holders
- ----- Executive Officers of the Registrant 9
PART II
Item 5. Market for the Registrant's Common Equity and 10
Related Stockholder Matters
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Results of 11
Operations and Financial Position
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on 11
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant 11
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial Owners 11
and Management
Item 13. Certain Relationships and Related Transactions 11
PART IV
Item 14. Exhibits, Financial Statement Schedules, and 12
Reports on Form 8-K
<PAGE>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 1995 compared to 1994, and for 1994 compared to 1993, and its
Financial Position at December 31, 1995 and 1994, and Selected Financial Data
for each year in the five year period ended December 31, 1995 are set forth on
pages 19 through 27 of the Corporation's 1995 Annual Report to Shareowners.
Whenever reference is made in this report to specific pages in the 1995 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 and parts
--Hamilton Standard engine controls, environmental
systems, propellers and other flight systems
Business segment financial data for the years 1993 through 1995 is included
in footnote 16 of Notes to Consolidated Financial Statements on pages 44 through
45 of the Corporation's 1995 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 1995
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.
<PAGE>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 risks 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 1995 and 1994. 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 political and economic risks.
At December 31, 1995, the Otis business backlog amounted to $3,644 million
as compared to $3,325 million at December 31, 1994. Of the total business
backlog at December 31, 1995, approximately $3,435 million is expected to be
realized as sales in 1996.
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.
Carrier manufactures and sells 15 major global product lines. The products
manufactured 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 risks 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 were approximately
55 percent and 51 percent of total Carrier segment revenues in 1995 and 1994,
respectively. 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 political and
economic risks.
At December 31, 1995, the Carrier business backlog amounted to $926 million,
as compared to $940 million at December 31, 1994. Substantially all of the
business backlog at December 31, 1995 is expected to be realized as sales in
1996.
Automotive
The Corporation's Automotive business is conducted through United
Technologies Automotive, Inc. ("UTA"). UTA is a leading independent supplier of
wire harnesses in both North America and Europe. Also, UTA
- 2 -
<PAGE>5
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, steering wheels, electronic controls and
modules, relays, interior lighting systems, switches, terminals and connectors,
and windshield wiper systems.
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 100 facilities in North America,
Europe and Asia.
In 1995, sales to Ford Motor Company were $1,238 million, or approximately
40 percent of total UTA revenues. In 1994, sales to Ford Motor Company were
$1,004 million, or approximately 37 percent of total UTA revenues. In 1993,
sales to Ford Motor Company were $965 million, or approximately 41 percent of
total UTA revenues.
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.
Revenue generated by UTA's international operations (excluding revenues from
certain non-U.S. operations which manufacture exclusively for the U.S. market)
were approximately 35 percent and 32 percent of total Automotive segment
revenues in 1995 and 1994, respectively. 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 political and economic risks.
At December 31, 1995, the UTA business backlog amounted to $703 million as
compared to $847 million at December 31, 1994. Substantially all of the
business backlog at December 31, 1995 is expected to be realized as sales in
1996.
Aerospace and Defense Businesses
The Corporation's aerospace and defense businesses are subject to rapid
changes in technology; lengthy and costly development cycles; 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 procurement (where in-country
purchases 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 assistance
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
- 3 -
<PAGE>6
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 of 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 also provides overhaul and repair services. Pratt & Whitney
also produces propulsion systems and solid rocket boosters for the United States
Air Force ("USAF") and the National Aeronautics and Space Administration
("NASA") and 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.
Sales to the Boeing Company, Airbus Industrie and McDonnell Douglas Corporation,
consisting primarily of commercial aircraft jet engines, amounted to
approximately 26 percent of total Pratt & Whitney revenues in 1995. Pratt &
Whitney's major competitors are the aircraft engine businesses of General
Electric Company ("GE") and Rolls-Royce plc.
Jet engines currently in production at Pratt & Whitney for installation in
commercial aircraft are as follows:
Commercial Current Production
Engine Aircraft in which
Designation Installed
JT8D-200 Douglas MD-80*
PW2000 Boeing 757-200/PF**
PW4000 Airbus A310-300, A300-600, A330-300**
Boeing 747-400, 767-200/-300, 777-200**
Douglas MD-11**
IAE V2500 Airbus A319/A320/A321**
Douglas MD-90*
______________________
* Powered exclusively by Pratt & Whitney or International Aero Engines, AG
("IAE")
** Powered by Pratt & Whitney or IAE as well as competitive engines
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 commitments, participation in
guarantees of customer financing arrangements and performance and operating cost
guarantees, see Notes 1, 4, 14 and 15 of Notes to Consolidated Financial
Statements at pages 32 to 33 and 41 to 43, of the Corporation's 1995 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, 1995, other participants in these
alliances represented 29 percent and 22 percent of the PW2000 and PW4000
programs, respectively, and 31 percent of the PW4084 program.
- 4 -
<PAGE>7
IAE, a corporation whose shareholders consist of Pratt & Whitney, Rolls-
Royce plc of England, Japanese Aero Engines Corporation, Motoren-und-Turbinen-
Union Munchen GmbH ("MTU"), and Fiat Aviazione SpA of Italy, manufactures the
V2500 engine. Pratt & Whitney has a 33 percent interest in IAE.
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 competes with GE for F-16
engine orders. Presently, Pratt & Whitney is the exclusive provider of engines
which power the F-15 aircraft. During 1995, the USAF issued a contract to GE
that could result in qualification of a GE engine for use on F-15s. Pratt &
Whitney is presently the sole source for C-17 engines.
Pratt & Whitney is under contract with the USAF to develop the F119 engine.
The F119 is the only anticipated source of propulsion for the two-engine F-22
fighter aircraft being developed by Lockheed Martin Corporation and the Boeing
Company. Management cannot predict with certainty whether, when, and in what
quantities Pratt & Whitney will produce F119 engines.
Pratt & Whitney Space Propulsion Operations produces the RL10 Liquid
Hydrogen-Fueled rocket engines used for upper stage propulsion for certain NASA
launch vehicles. The Chemical Systems Division ("CSD"), which is within Pratt &
Whitney Space Propulsion Operations, manufactures and provides launch services
for solid rocket propellant boosters producing more than one million pounds of
thrust which, when used in pairs, currently constitute the initial booster stage
for the USAF's Titan IV launch vehicle. CSD's solid rocket motors ("SRM") on
Titan IV are expected to be phased out during the later portion of the decade by
an upgraded, higher performing booster SRM, which is being made by another
company. In addition, CSD produces other propulsion systems. USBI, also within
Pratt & Whitney Space Propulsion Operations, is under contract with NASA for the
Space Shuttle Solid Rocket Boosters and is responsible for the design, assembly,
test, launch operations support and refurbishment of the solid rocket boosters.
Gas turbine engines manufactured by Pratt & Whitney Canada ("PWC") include
the PT6 series of turboprop/turboshaft engines, the JT15D series of turbofan
engines, the PW100 series turboprop engines, the PW200 series turboshaft engines
developed to power light and intermediate helicopters, and the PW300 turbofan
engines, developed for mid-size business jets under a collaboration agreement
with MTU of Germany. The PW500 turbofan engines are also being developed in
conjunction with MTU. Typical applications are six to eighty passenger business
and regional airline aircraft and light and medium helicopters.
Pratt & Whitney sales in the U.S. and Canada are made directly to the
customer by the Corporation and, to a limited extent, through independent
distributors. Other export sales from the U.S. are made with the assistance of
an overseas network of independent foreign representatives outside the U.S.
Revenues from Pratt & Whitney's international locations which consist
primarily of small gas turbine engines and parts manufactured in the
Corporation's plants in Canada were approximately 19 percent of total Pratt &
Whitney segment revenues in 1995 and 1994. Such operations are subject to local
government regulations as well as to varying political and economic risks.
At December 31, 1995, the business backlog for Pratt & Whitney amounted to
$9,496 million, including $1,563 million of U.S. Government funded contracts and
subcontracts, as compared to $9,517 million and $1,951 million, respectively, at
December 31, 1994. Of the total Pratt & Whitney business backlog at December
31, 1995, approximately $4,036 million is expected to be realized as sales in
1996. Pratt & Whitney's backlog is based on the terms of firm orders received
and is not reduced by discounts granted directly to airline and other customers.
Flight Systems
The Corporation's Flight Systems business is conducted through Sikorsky
Aircraft and Hamilton Standard. Effective January 1, 1995, Sikorsky Aircraft
Division of United Technologies Corporation was incorporated as a separate
wholly-owned subsidiary identified as Sikorsky Aircraft Corporation.
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. Sikorsky is also producing helicopters for a
variety of uses including passenger, utility/transport, cargo, anti-submarine
warfare, search and rescue and heavy-lift
- 5 -
<PAGE>8
operations. In addition to all branches of the U.S. military, Sikorsky
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 and Westland.
Current production programs at Sikorsky include the BLACK HAWK medium-
transport helicopter for the U.S. Army and derivatives for foreign governments;
the SEAHAWK medium-sized helicopter for anti-submarine warfare missions for the
U.S. Navy and derivatives for both the U.S. and 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 in 1992 Sikorsky was awarded a U.S. Government contract for 300
BLACK HAWK helicopters through June 1997, declining Defense Department budgets
make Sikorsky increasingly dependent upon expanding its international position.
Such sales sometimes require the development of in-country co-production
programs such as the one Sikorsky has in South Korea.
During 1995, Sikorsky commenced 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 teamed 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 the cost reimbursement contract awarded in
1991. The first prototype aircraft performed a successful flight in January
1996 and will undergo further flight testing. Sikorsky and Boeing are working
with the Army Comanche Program Office to restructure the program to provide for
early operational capability to be used by the U.S. Army in field tests. The
Corporation cannot predict whether the Comanche will go into production or
predict the quantity of aircraft that ultimately will be built.
Hamilton Standard is a leading domestic producer of a number of Flight
Systems products. Major production programs include engine controls,
environmental controls, flight controls and propellers for commercial and
military aircraft. Hamilton Standard also produces the space suit for the NASA
space shuttle astronauts and environmental controls for the shuttle's orbiter.
International Fuel Cells Corporation ("IFC"), also within Flight Systems
business segment, develops, manufactures and sells fuel cell power plants and
fuel cell components to commercial, aerospace and military customers. In 1995,
IFC's subsidiary ONSI Corporation delivered the first production units of its
200 kilowatt PC25 Trademark Model C fuel cell power plant.
At December 31, 1995, the Flight Systems business backlog amounted to $2,954
million, including $1,936 million under funded contracts and subcontracts with
the U.S. Government, as compared to $3,832 million and $2,646 million,
respectively, at December 31, 1994. Of the total Flight Systems business
backlog at December 31, 1995, approximately $2,111 million is expected to be
realized as sales in 1996.
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 $963 million or 4.2 percent of total
revenues in 1995, as compared with $978 million or 4.6 percent of total revenues
in 1994 and $1,137 million or 5.4 percent of total revenues in 1993. The
Corporation also performs research and development work under contracts funded
by the U.S. Government and some 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 $871 million in
1995, as compared with $838 million in 1994 and $918 million in 1993.
- 6 -
<PAGE>9
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 1995 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.
The Corporation purchases substantial quantities of materials, components
and supplies from a large number of sources. Like other users in the U.S., the
Corporation is largely dependent on foreign sources located in Africa for its
requirements of cobalt, and on sources located in Africa, Eastern and Central
Europe and the countries of the former U.S.S.R. for its requirements of
chromium. The Corporation does not foresee any unavailability of materials or
components which will have any material adverse effect on its overall business,
or on any of its business segments, in the near term. To alleviate possible
longer term effects, the Corporation has a number of ongoing programs which
include the expansion of its internal production capacity for precision parts;
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.
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 beginning at
page 8 of this Report, and are further addressed in "Management's Discussion and
Analysis of Results of Operations and Financial Position" at page 26 and Note 15
of Notes to Consolidated Financial Statements at pages 42 and 43 of the
Corporation's 1995 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, 1995, the Corporation's total employment was approximately
170,600, a reduction of approximately 900 over the prior year.
- 7 -
<PAGE>10
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 modern 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, 1995, suitable and adequate for the
respective industry segment's operations in the current business environment.
For a further discussion of management's effort to achieve cost reduction, see
"Management's Discussion and Analysis of Results of Operations and Financial
Position" appearing in the Corporation's 1995 Annual Report to Shareowners,
especially the information contained under the heading "Cost Reduction Actions".
The square footage numbers set forth in the succeeding paragraph of this Item 2
are approximations.
At December 31, 1995, the Corporation operated (a) plants in the U.S. which
had 34 million square feet, of which 5.9 million square feet were leased; (b)
plants outside the U.S. which had 19.7 million square feet, of which 2 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 5.5 million square feet, of which 3.6 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.
The Corporation's Pratt & Whitney unit is 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. Pratt & Whitney made a voluntary payment of
$13.9 million to the U.S. Government on December 23, 1992. The Corporation has
produced documents and employees have testified before a grand jury in the
District of Connecticut. The Corporation has filed an action with the Armed
Services Board of Contract Appeals which seeks to confirm that its accounting
treatment is correct.
In March 1992, the Corporation received a subpoena 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.
A federal grand jury 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. A related civil suit filed by a former employee has been settled.
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.
- 8 -
<PAGE>11
In February, 1996, a principal customer of United Technologies Automotive
("UTA") informed UTA that several lawsuits had been filed covering purchasers
of numerous vehicle lines of the customer. These lawsuits allege that the
ignition switch in these North American produced vehicles is defective and that
the defect could result in a vehicle fire. Plaintiffs seek injunctive relief
requiring replacement of the ignition switch in all affected vehicles,
compensatory and punitive damages and other relief. UTA supplies the ignition
switch in question. UTA is not a party to the lawsuits and disagrees with the
allegations that the ignition switch is defective. Management does not believe,
based on currently available information, that this matter will have a material
adverse effect on the Corporation.
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 15 of the Notes to Consolidated Financial
Statements at pages 42 and 43 of the Corporation's 1995 Annual Report to
Shareowners.)
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, 1995.
- ----- 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, 1991, and their ages, are as follows:
Other Business Age
Name Title Experience 2/1/96
Since 1/1/91
Jonathan Ayers Vice President, Principal - Morgan 39
Strategic Planning Stanley Corporate
(since 1995) Finance
Norman R. President, UT President, Electrical 53
Bodine Automotive (since Systems & Components;
1992) President, Automotive
Products Division, UT
Automotive
Eugene Buckley President, Sikorsky President, Sikorsky 65
Aircraft Corporation Aircraft Division
(since 1995)
- 9 -
<PAGE>12
Other Business Age
Name Title Experience 2/1/96
Since 1/1/91
Kevin Conway Vice President, Director of Taxes, 47
Taxes (since United Technologies
1995) Corporation
Mark S. Coran Executive Vice Vice President, 52
President, Controller, United
Operations, Pratt & Technologies; Vice
Whitney (since 1991) President, Group
Finance, Pratt & Whitney
Robert F. Chairman (since Chief Executive Officer; 62
Daniell 1987) President and Chief
Operating Officer
George David President and Chief President and Chief 53
Executive Officer Operating Officer;
(since 1994) Executive Vice President
and President,
Commercial/Industrial
Thomas J. Fay Senior Vice ------- 62
President,
Communications
(since 1990)
Bruno Grob President, European President, Otis France 46
&
Transcontinental
Operations
Otis Elevator (since
1992)
Karl J. Krapek President, Pratt & Chairman, President and 47
Whitney Chief
(since 1992) Executive Officer,
Carrier Corporation
John R. Lord President, Carrier President, Carrier NAO, 52
Corporation Vice President,
(since 1995) Residential Products
Group, Carrier NAO
George E. Vice President, Partner - Price 46
Minnich Controller Waterhouse
(since 1993)
William F. Paul Executive Vice Senior Vice President, 59
President (since Government Affairs
1995)
William H. Vice President, Vice President and 52
Trachsel Secretary and Deputy Deputy General Counsel
General Counsel
(since 1993)
Jean-Pierre van President, Otis 61
Rooy Elevator (since -------
1991)
Irving B. Executive Vice ------- 50
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.
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
See "Comparative Stock Data" appearing on page 46 of the Corporation's 1995
Annual Report to its Shareowners containing the following data relating to the
Corporation's Common Stock: principal market,
- 10 -
<PAGE>13
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 19 of the Corporation's 1995
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 20 through 27 of the Corporation's 1995
Annual Report to its Shareowners; such discussion and analysis is incorporated
by reference in this Report.
Item 8. Financial Statements and Supplementary Data
The 1995 and 1994 Balance Sheets, and other financial statements for the
years 1995, 1994 and 1993, together with the report thereon of Price Waterhouse
LLP dated January 24, 1996, appearing on pages 28 through 45 in the
Corporation's 1995 Annual Report to its Shareowners are incorporated by
reference in this Report.
The 1995 and 1994 Selected Quarterly Financial Data appearing on page 46 in
the Corporation's 1995 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 1996 Annual Meeting of Shareowners. Information
regarding executive officers is contained in Part I of this Report at pages 9
and 10, and the section entitled "Compliance with Section 16(a) of the
Securities Exchange Act" at page 8 of the 1996 Proxy Statement.
Item 11. Executive Compensation
The information required by Item 11 is incorporated herein by reference from
pages 13 through 21 of the Corporation's Proxy Statement for the 1996 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.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is incorporated herein by reference from
pages 7 and 8 of the Corporation's Proxy Statement for the 1996 Annual Meeting
of Shareowners.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 is incorporated herein by reference from
page 8 of the Corporation's Proxy Statement for the 1996 Annual Meeting of
Shareowners.
- 11 -
<PAGE>14
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Page No. in
Annual Report
(a) Financial Statements, Financial Statement
Schedules and Exhibits
(1) Financial Statements (incorporated by
reference from the
1995 Annual Report to Shareowners):
Report of Independent Accountants 28
Consolidated Statement of Operations for the
Three Years 29
ended December 31, 1995
Consolidated Balance Sheet--December 31, 30
1995 and 1994
Consolidated Statement of Cash Flows for the
Three Years 31
ended December 31, 1995
Notes to Consolidated Financial 32
Statements
Selected Quarterly Financial Data 46
(Unaudited)
Page No. in
Form 10-K
(2) Financial Statement Schedule:
For the three years ended December 31, 1995:
Report of Independent Accountants on S-1
Financial Statement 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.*
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. *
- 12 -
<PAGE>15
Exhibit
Number
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,
1995 (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., Pehr G. Gyllenhammar, Gerald D. Hines,
Charles R. Lee, Robert H. Malott, 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.
**** 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.
(b) No reports on Form 8-K were filed by the Registrant during
the fourth quarter of 1995.
- 13 -
<PAGE>16
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: March 28, 1996 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
(George David) Executive Officer; March 28, 1996
Director
/s/ GEORGE E. MINNICH Vice President- March 28, 1996
(George E. Minnich) Controller;
Principal Accounting
Officer
/s/ STEPHEN F. PAGE Executive Vice March 28, 1996
(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.)
PEHR G. GYLLENHAMMAR * Director ) *By:/s/William H. Trachsel
(Pehr G. Gyllenhammar) (William H. Trachsel)
Attorney-in Fact
Date: March 28, 1996
GERALD D. HINES * Director )
(Gerald D. Hines)
CHARLES R. LEE * Director )
(Charles R. Lee)
ROBERT H. MALOTT * Director )
(Robert H. Malott)
HAROLD A. WAGNER * Director )
(Harold A. Wagner)
JACQUELINE G. WEXLER * Director )
(Jacqueline G. Wexler)
- 14 -
<PAGE>17
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 24, 1996 appearing on page 28 of the 1995 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 24, 1996
S-1
<PAGE>18
<TABLE><CAPTION> SCHEDULE II
UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
Three Years Ended December 31, 1995
(Millions of Dollars)
Allowances for Doubtful Accounts and Other Customer Financing Activity:
<S> <C>
Balance December 31, 1992 $ 524
Provision charged to income 40
Doubtful accounts written off (net) (72)
Other adjustments (26)
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
Future Income Tax Benefits - Valuation allowance:
Balance December 31, 1992 $ 217
Additions charged to income tax expense 130
Reductions credited to income tax expense (50)
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
</TABLE>
<PAGE>19
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 24, 1996 appearing on page 28 of the 1995 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
March 28, 1996
F-1
Exhibit 10.2
UNITED TECHNOLOGIES CORPORATION
ANNUAL EXECUTIVE INCENTIVE COMPENSATION PLAN
AMENDMENT 1
VI. COVERED EMPLOYEE PERFORMANCE POOL
A. INTRODUCTION. The Covered Employee Performance Pool shall be added to
the Annual Incentive Plan, effective January 1, 1995, for the purpose of
establishing a fund from which annual incentive awards to the Corporation's
Chief Executive Officer and four other most highly compensated executives
who are considered "covered employees" within the meaning of Internal
Revenue Code Section 162(m) shall be paid. The five individuals who will
participate in the Covered Employee Performance Pool shall be determined as
of the last day of each fiscal year and shall be referred to as the
"Performance Pool Participants." The Covered Employee Performance Pool
shall be the exclusive source of Annual Incentive Plan Awards for
Performance Pool Participants. In no event will a Performance Pool
Participant be eligible to receive an Annual Incentive Award from either the
Corporate Fund or the Operating Unit Funds.
B. DEFINITIONS. For purposes of this Section VI the following terms
shall have the following meanings:
Committee means the Corporation's Board of Directors Committee on
Compensation and Executive Development.
Adjusted Net Income means, for each fiscal year of the Corporation,
net income reported on its consolidated financial statement included
in its Annual Report on Form 10-K for such year, adjusted to
eliminate: (i) restructuring charges to the extent they are
separately disclosed in the Corporation's Annual Report; (ii) the
effects of changes in accounting principles; and (iii) "extraordinary
items" determined under generally accepted accounting principles.
C. ALLOCATIONS TO THE COVERED EMPLOYEE PERFORMANCE POOL
(i) Aggregate Annual Allocation.
Each year an amount equal to 0.75% of the Corporation's Adjusted
Net Income shall be allocated to the Covered Employee Performance
Pool. Such amount is the maximum amount that may be distributed
from the Covered Employee Performance Pool to the Performance
Pool Participants.
(ii) Allocation of Individual Awards.
Each year the maximum award payable to a Performance Pool
Participant shall be as follows: the Chief Executive Officer -
30% of the amount allocated to the Covered Employee Performance
Pool; and the four other Covered Employee Pool Participants -
17.5% of the amount allocated to the Covered Employee Performance
Pool.
D. Discretion to Reduce Annual Incentive Plan Awards for Performance
Pool Participants.
Performance Pool Participants will be eligible to receive Annual
Incentive Plan Awards with respect to each year for which an amount is
allocated to the Covered Employee Performance Pool. The Committee
may, in its sole discretion, reduce the amount of any Performance Pool
Participant's Annual Incentive Plan Award, taking into account such
factors as it deems relevant, including, without limitation: (i) the
Corporation's Adjusted Net Income; (ii) other significant financial
or strategic achievements during the year; (iii) its subjective
assessment of each Performance Pool Participant's overall performance
for the year; and (iv) information about compensation practices at
other peer group companies for the purpose of evaluating competitive
compensation levels so that the Committee may determine that the
amount of the annual incentive award is within the targeted
competitive compensation range of the Corporation's executive
compensation program.
The Committee shall determine the amount of any reduction in a
Performance Pool Participant's Award on the basis of the foregoing and
other factors it deems relevant and shall not be required to establish
any allocation or weighting formula with respect to the factors it
considers. The Committee shall have no obligation to disburse the
full amount allocated to the Covered Employee Performance Pool.
Amounts allocated but not actually disbursed to a Performance Pool
Participant may not be re-allocated to other Performance Pool
Participants or utilized for awards in respect of other years. In no
event shall any Performance Pool Participant's Annual Incentive Plan
Award exceed the amount allocated to the Covered Employee Performance
Pool with respect to such Participant.
E. ADMINISTRATION. The Committee shall have exclusive authority to
interpret this Section VI and to administer the Covered Employee
Performance Pool. The Committee shall be responsible for certifying
the amount of Adjusted Net Income to be allocated to the Covered
Employee Pool each year. The Committee shall rely on such financial
information and other materials as it deems necessary and appropriate
to certify the amount of Adjusted Net Income to be allocated to the
Covered Employee Performance Pool. The Committee shall administer the
Covered Employee Performance Pool so that Annual Incentive Plan Awards
paid therefrom will meet the requirements of "performance-based
compensation" as defined in Code Section 162(m).
F. AMENDMENT. The Committee shall have the authority to amend the Annual
Incentive Plan, provided however, that the Committee may not amend the
Annual Incentive Plan after the first 90 days of any award year in a
manner that would, directly or indirectly: (i) change the method of
calculating the amount allocated to the Covered Employee Performance
Pool for that year; (ii) increase the maximum award payable to any
Performance Pool Participant for that year; or (iii) remove the
amendment restriction set forth in this sentence with respect to that
year.
Exhibit 10.7
UNITED TECHNOLOGIES CORPORATION
DEFERRED COMPENSATION PLAN
(As amended and restated as of December 15, 1993)
ARTICLE I - PREAMBLE
United Technologies Corporation established the United Technologies Deferred
Compensation Plan effective April 1, 1985. Pursuant to such Plan, certain
eligible executives of the Corporation were permitted to defer all or a portion
of their compensation earned with respect to 1985 and 1986. No compensation
earned after 1986 has been deferred under the Plan. The Corporation has
determined to offer eligible executives the opportunity to defer under the Plan
all or a portion of compensation earned or otherwise payable in 1994 and
subsequent years. However, such deferrals will be subject to the terms and
conditions set forth herein, which terms and conditions differ from those that
applied to previous deferrals under the Plan. Accordingly, the Plan is hereby
restated in its entirety for the purpose of facilitating future elections to
defer compensation under the Plan. Any amounts previously deferred under the
Plan will continue to be maintained, administered and distributed in accordance
with the terms of the Plan as in effect prior to December 15, 1993.
ARTICLE II - DEFINITIONS
Beneficiary means the person, persons or entity designated by the
Participant to receive the value of the Plan Accounts credited to such
Participant in the event of the death of the Participant. If the Participant
fails to designate a Beneficiary, or if the Beneficiary (and any contingent
Beneficiary) does not survive the Participant, the value of all of the
Participant's Plan Accounts will be paid to the estate of the Participant.
Benefit Reduction means either a reduction in a Participant's (or the
Participant's beneficiary's) benefit under any of the Corporation's deferred
benefit pension plans, or a reduction in the value of employer matching
contributions under any of the Corporation's savings plans, as a result of the
reduction of such Participant's Compensation pursuant to the Plan.
Class Year means each calendar year for which compensation may be deferred
pursuant to the Plan.
Class Year Account means the Account established for each Participant for
each Class Year for which compensation is deferred pursuant to the Plan. Each
Class Year Account may consist of a Credited Interest Account and a UTC Stock
Unit Account credited with deferred amounts in accordance with the Participant's
election. A Supplemental Account is not a Class Year Account.
Committee means the United Technologies Corporation Deferred Compensation
Committee, which is responsible for the administration of the Plan. Members of
the Committee shall be appointed from time to time by the Corporation's Pension
Administration Committee.
Compensation means base salary and Incentive Compensation Payments paid to a
Participant with respect to a Class Year and considered to be wages for purposes
of federal income tax withholding, but before any deferral of Compensation
deferred pursuant to the Plan. Compensation does not include foreign service
premiums and allowances, compensation realized from Long Term Incentive Plan
Awards or other types of awards.
Corporation means United Technologies Corporation, its divisions, affiliates
and subsidiaries.
Credited Interest Account means the sub-account that is valued in the manner
set forth in Section 5.2.
Deferral Period means the period for which the receipt of compensation
deferred under the Plan shall be deferred.
Distribution Date means on or about April 1 of the year following the last
year of a Deferral Period.
Election Agreement means the Participation and Deferral Election Agreement
provided by the Committee to Participants for the purpose of deferring
compensation under the Plan. Each Participant's Election Agreement must specify
the amount to be deferred, the respective amounts to be allocated to the
Credited Interest and UTC Stock Unit Accounts and the Deferral Period. There
will be a separate Election Agreement for each Class Year.
Incentive Compensation Payment means amounts awarded to a Participant
pursuant to the Corporation's Annual Executive Incentive Compensation Plan.
Interim Valuation Date means the last business day of each month except
December.
Participant means an executive of the Corporation who files a U.S. income
tax return and who elects to defer Compensation under the Plan with respect to
any Class Year.
Plan means the United Technologies Corporation Deferred Compensation Plan as
amended and restated effective December 15, 1993, and as amended from time to
time thereafter.
Plan Account means the aggregate value of all Class Year Accounts, but
excluding accounts under the Prior Plan. Such accounts will be valued
separately in accordance with the terms and procedures in effect under the Prior
Plan.
Prior Plan means the United Technologies Corporation Deferred Compensation
Plan, as in effect prior to December 15, 1993. All amounts deferred and
credited under the Prior Plan shall continue to be subject to the terms and
conditions of the Prior Plan and shall not be affected by this amendment and
restatement.
Retirement Date means the date a Participant terminates employment from the
Corporation and qualifies for either a normal retirement benefit, early
retirement benefit or rule of 65 retirement benefit under one of the
Corporation's tax-qualified deferred benefit retirement plans.
Supplemental Account means the Account established by the Committee for the
purpose of providing the amount of any Benefit Reduction incurred by a
Participant under a deferred benefit retirement plan as a result of
participating in the Plan.
Except where indicated otherwise, all references herein to "Section" or
Sections are to a Section or Sections of the Plan.
UTC Stock Unit Account means the sub-account that is valued in the manner
set forth in Section 5.3.
Valuation Date means the last business day of each calendar year.
UTC Common Stock means the common stock of United Technologies Corporation.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
Section 3.1 - Eligibility
Each employee of the Corporation who is classified as a UTC executive as
of December 31 prior to a Class Year and who is required to file a U.S.
income tax return for such Class Year will be eligible to elect to defer
Compensation under the Plan for such Class Year.
Section 3.2 - Participation
Each eligible executive may elect to participate in the Plan with
respect to any Class Year for which the Committee offers the opportunity to
defer Compensation by timely filing with the Committee an Election
Agreement, properly completed and signed, in accordance with Section 4.1
hereof. Participation in the Plan is entirely voluntary.
ARTICLE IV - PARTICIPATION ELECTIONS
Section 4.1 - Election Agreement
Each eligible executive will be furnished with an Election Agreement
prior to the beginning of each Class Year for which Compensation may be
deferred. An eligible executive may participate by executing the Election
Agreement and by designating the dollar amount (if any) of base salary that
will be deferred during such Class Year, and the percentage or dollar amount
(if any) of any Incentive Compensation Payment otherwise payable during such
Class Year that will be deferred under the Plan. The minimum dollar amount
that a Participant may defer under the Plan for any Class Year is $5,000.
Any deferral election made under the Election Agreement is irrevocable and
must be completed and returned to the Committee no later than the December
31 immediately preceding such Class Year or such earlier date as the
Committee may specify. If an eligible executive fails to sign and return a
properly completed Election Agreement by such date, the executive will be
ineligible to defer compensation under the Plan for the following Class
Year.
Section 4.2 - Allocation of Deferred Amounts
When completing the Election Agreement, the Participant must allocate
the amounts to be deferred, in integral multiples of 25% between the
Credited Interest Account and the UTC Stock Unit Account.
Section 4.3 - Designation of Beneficiary
Each Participant shall designate a Beneficiary on a form provided by the
Committee. Any such designation may be changed in writing on a form
acceptable to the Committee at any time by the Participant. In the event
that no Beneficiary Designation Form is filed with the Committee or if the
Beneficiary (and contingent beneficiary) does not survive the Participant,
all amounts deferred hereunder will be paid to the estate of the
Participant. If a Participant designates the Participant's spouse as the
Participant's Beneficiary, that designation shall not be revoked or
otherwise altered or affected by any (a) change in the marital status of the
Participant and such spouse, (b) agreement between the Participant and such
spouse, or (c) judicial decree (such as a divorce decree) affecting any
rights that the Participant and such spouse might have as a result of their
marriage, separation, or divorce, it being the intent of the Plan that any
change in the designation of a Beneficiary hereunder may be made by the
Participant only in accordance with the provisions of this paragraph. In
the event of the death of a Participant, Class Year Accounts shall be
distributed in accordance with Section 6.4.
Section 4.4 - Deferral Period
Each Participant shall specify on the Election Agreement the Deferral
Period for amounts to be deferred in the following Class Year. The minimum
Deferral Period is five (5) years following the end of Class Year in which
the compensation is deferred. Participants may elect to defer compensation
until their Retirement Date or until a specific year. Amounts deferred to a
specific year will be distributed on the Distribution Date in that year.
Section 4.5 - Distribution Schedule
Each Participant shall specify on the Election Agreement whether the
value of the Participant's Class Year Account shall be distributed in a
single lump-sum cash payment or in a series of annual cash installment
payments for a specified number of years (not to exceed 15 years) in
accordance with Sections 6.2 and 6.4. If the Participant fails to make
such a specification, the Participant shall be deemed to have elected to
have the distribution made in a single lump-sum cash payment.
ARTICLE V
Section 5.1 - Accounts
The Committee will establish a Class Year Account for each Participant
with respect to each Class Year for which the Participant elects to defer
compensation under the Plan. Class Year Accounts will be maintained
separately from Class Year Accounts maintained with respect to amounts
deferred during other Class Years. Deferred amounts will be allocated to a
Credited Interest Account, to a UTC Stock Unit Account, or to a combination
of both, which sub-accounts will be part of the Class Year Account.
Credited Interest and UTC Stock Unit Accounts will be valued as set forth in
Sections 5.3 and 5.4. The value of each Class Year Account will equal the
sum of the values of the Credited Interest and UTC Stock Unit Accounts
established with respect to such Class Year.
Section 5.2 - Valuation of Credited Interest Account
Amounts allocated to the Credited Interest Account will be credited with
a rate of interest equal to the average interest rate on 10-Year Treasury
Bonds plus 1% (ie. 100 basis points) as of the January through October
Interim Valuation Dates in the year prior to the Class Year in which the
deferral occurs. This rate will be credited for all amounts deferred in the
Class Year and allocated to the Credited Interest Account. The amount of
interest credited will be adjusted each year to equal the average 10-Year
Treasury Bond rate plus 1% for the prior calendar year, determined in the
same manner as described above.
Section 5.3 - UTC Stock Unit Account
Deferred Compensation allocated to the UTC Stock Unit Account will be
converted to "Stock Units" or fractional Stock Units. The number of Stock
Units will be calculated by dividing the amount of Compensation deferred
each month during the Class Year in which the deferral occurs by the closing
price of UTC Common Stock on each Interim Valuation or Valuation Date. Each
Stock Unit will have a value equivalent to one share of UTC Common Stock.
Stock Units held in the UTC Stock Unit Account will be credited with a
dividend payment equal to the Corporation's declared dividend on Common
Stock (if any), as of the date such dividends are paid. Such dividend
equivalent payments will be converted to additional Stock Units or
fractional units on the Interim Valuation or Valuation Date of the month in
which the dividend was paid, determined on the basis of the closing price of
UTC Common Stock on that date. During the Deferral Period, the value of a
Stock Unit will be equal to the closing price of a share of Common Stock as
of the most recent Interim Valuation Date or Valuation Date, and therefore
is variable.
The closing price of UTC Common Stock on the last business day prior to
the Distribution Date (i.e., the March Interim Valuation Date, except for
hardship distributions which may be made at other times during the year
where the closing price on the most recent Interim Valuation date will
apply) will be used to value the Stock Units included in the distribution.
Section 5.4 - Allocation to Accounts
During the year of deferral, deferred amounts will be allocated to the
Class Year Account as of each Interim Valuation Date (or if applicable, the
Valuation Date) for the month in which the deferred amounts otherwise would
have been paid. With respect to the Credited Interest Account during the
initial Class Year, interest will be credited to deferred amounts for the
period from the Interim Valuation Date when amounts are first allocated to
the class year account until the Valuation Date for such Class Year. With
respect to the UTC Stock Unit Account, Stock Units will be credited and will
accumulate each month in accordance with Section 5.3.
ARTICLE VI - DISTRIBUTION OF ACCOUNTS
Section 6.1 - Timing of Plan Distributions
Accounts will be distributed (or begin to be distributed) on or about
April 1 of the year following the last year of the Deferral Period. This
means that, for example, if a deferral election specifies a Deferral Period
until 2005, distribution will occur on or about April 1, 2005. In the case
of termination or death during the Deferral Period, amounts will be
distributed on the Distribution Date next following the date of termination
or the date of death.
Section 6.2 - Method of Distribution
Each Class Year Account will be distributed in a single lump-sum cash
payment, or in a series of annual cash installment payments, in accordance
with the method set forth on the Election Agreement with respect to each
Class Year. In the case of an installment distribution, the balance
credited to the Participant's Account during the installment period will be
credited with interest at the applicable Credited Interest Account rate.
Such amounts will not be subject to the UTC Stock Unit rate of return, even
if such amounts had been in the UTC Stock Unit Account prior to the initial
distribution date. All Stock Units will automatically be converted to their
equivalent cash value as of the Interim Valuation Date preceding the initial
Distribution Date, and the equivalent cash value will then be allocated to
the Credited Interest Account.
Section 6.3 - Termination of Employment
In the event of termination of employment prior to a Participant's
Retirement Date, during or after the Deferral Period with respect to any
Class Year, the full value of the Participant's Plan Accounts will be
distributed in a lump-sum cash payment on the Distribution Date following
the year of termination, regardless of the distribution option elected.
Section 6.4 - Distribution in the Event of Death
In the event of the death of a Participant before the end of the
Deferral Period with respect to any Class Year, the full value of the
Participant's Class Year Account for that Class Year will be distributed to
the designated Beneficiary or to the estate of the Participant in a lump-sum
on the Distribution Date following the date of death. In the event of death
after the end of a Deferral Period with respect to any Class Year (or after
attaining eligibility for retirement), the full value of the Participant's
Class Year Accounts for that Class Year will be distributed to the
Beneficiary in accordance with the Participant's election in the Election
Agreement with respect to the Class Year.
Section 6.5 - Hardship Distribution
The Committee may, in its sole discretion, upon finding that the
Participant has suffered an unforeseen, severe and immediate financial
emergency, permit such Participant to withdraw a portion of the value of the
Participant's Plan Account in an amount sufficient to eliminate the
hardship. Financial hardship distributions will be made only if the
Committee determines that the Participant is unable to resolve the financial
emergency through other means reasonably available to the Participant.
Financial hardship distributions will be made following the Committee's
determination of a qualifying financial emergency on the basis of the value
of the Participant's Plan Account as of the most recent Interim Valuation
Date. The Committee will determine from which Class Year Account and
Credited Interest and UTC Stock Unit sub-accounts hardship distributions
shall be made.
Section 6.6 - Disability
In the event of the disability of a Participant, as determined under the
Corporation's Long Term Disability Plan, Class Year Accounts will be
maintained and distributed in accordance with the Participant's Election
Agreement.
Section 6.7 - Valuation on Distribution Date
All Plan Accounts will be valued on the basis of the Interim Valuation
Date prior to the Distribution Date.
Section 6.8 - Distribution from Supplemental Account
The Committee will effect distributions from Supplemental Accounts with
respect to Benefit Reductions incurred in any of the Corporation's defined
benefit pension plans at the same time, in the same manner and in the
required amounts such that when combined with amounts distributed from the
Pension Plans in which a Participant incurred a Benefit Reduction, the total
amount received by a Participant (or beneficiary) will equal the amount of
pension benefit that would otherwise have been paid had the Participant not
participated in this Plan. Each Class Year the Committee will determine if
any Benefit Reduction has been incurred with respect to any of the
Corporation's Savings Plans and will credit the amount of such Benefit
Reduction to the affected Participant's Class Year Account as of the
Valuation Date for such Class Year. Any such amounts will be allocated to
the Participant's Credited Interest and UTC Stock Unit Accounts in
accordance with the Election Agreement for such Class Year.
ARTICLE VII - AMENDMENT AND TERMINATION OF PLAN
Section 7.1 - Amendment
The Corporation may, at any time, amend the Plan in whole or in part,
provided that no amendment may decrease the balance in any Plan Account as
of the date of such amendment.
Section 7.2 - Plan Suspension and Termination
The Corporation's Pension Administration Committee may, at any time,
suspend or terminate the Plan with respect to new or existing Election
Agreements if, in its sole judgment, the continuance of the Plan, the tax,
accounting, or other effects thereof, or potential payments thereunder would
not be in the best interests of the Corporation or for any other reason. In
the event of the suspension of the Plan, no additional deferral shall be
made under the Plan, but all previous deferrals shall accumulate and be
distributed in accordance with the otherwise applicable provisions of the
Plan and the applicable Election Agreements. In the event of the
termination of the Plan, each Participant will receive, in a lump sum, the
balance of all Class Year Accounts.
Section 7.3 - No Consent Required
The consent of any Participant, Beneficiary, or other person shall not
be a requisite to such amendment, suspension, or termination of the Plan.
ARTICLE VIII - GENERAL PROVISIONS
Article 8.1 - Unsecured General Creditor
The Corporation will not establish a trust or otherwise set aside or
segregate assets from other assets of the Corporation or otherwise fund its
obligations under the Plan for the benefit of Participants and
Beneficiaries. The Corporation's obligations under the Plan constitute an
unfunded and unsecured promise to pay money in the future. Participants'
and Beneficiaries' rights under the Plan are those of a general unsecured
creditor of the Corporation.
Section 8.2 - Nonassignability
No Participant or Beneficiary or any other person shall have right to
sell, assign, transfer, pledge, or otherwise encumber any interest in the
Plan. All Plan Accounts and the rights to all payments are unassignable and
non-transferable. No Plan Account or payment hereunder, prior to actual
payment, will be subject to attachment or seizure for the payment of any
debts, judgments or other obligations. No Plan Account or other Plan
benefit will be transferred by operation of law in the event of a
Participant's or any Beneficiary's bankruptcy or insolvency.
Section 8.3 - No Contract of Employment
Participation in the Plan shall not be construed to constitute a direct
or indirect contract of employment between the Corporation and the
Participant. The Participants and Beneficiaries will have no rights against
the Corporation resulting from participation in this Plan other than as
specifically provided herein. Nothing in this Plan shall be deemed to give
a Participant the right to be retained in the service of the Corporation for
any length of time or to interfere with the right of the Corporation to
terminate a Participant's employment prior to the end of any Deferral
Period.
Section 8.4 - Governing Law
The provisions of this Plan will be construed and interpreted according
to the Employee Retirement Income Security Act of 1974, as amended from time
to time, other applicable federal laws, and to the extent not preempted by
federal law, the laws of the State of Connecticut.
Section 8.5 - Validity
If any provision of the Plan is held to be illegal or invalid for any
reason, the remaining provisions of the Plan will be construed and enforced
as if such illegal and invalid provision had never been inserted herein.
Section 8.6 - Notice
Any notice or filing required or permitted to be given to the Committee
under this Plan shall be sufficient if in writing and hand delivered, or sent by
first class mail, to the United Technologies Corporation Deferred Compensation
Committee, UTC Building, Hartford, Connecticut 06101, Attn: Michael D. Smith,
Director, Compensation, MS-504. Any notice or filing required or permitted to
be given to any Participant or Beneficiary under the Plan shall be sufficient if
given in writing and hand-delivered, or, if sent by first-class mail, mailed to
the address of the Participant or Beneficiary then listed on the records of the
Corporation. Any such notice will be deemed given as of the date of delivery
or, if delivery is made by mail, as of the date shown on the postmark.
Section 8.7 - Successors
The provisions of the Plan shall bind and inure to the benefit of the
Corporation and its successors and assigns. The term successors as used
herein shall include any corporate or other business entity which by merger,
consolidation, purchase or otherwise acquires all or substantially all of
the business and assets of the Corporation, and successors of any such
corporation or other business entity.
Section 8.8 - Incompetence
If the Committee determines, upon evidence satisfactory to the
Committee, that any Participant or Beneficiary to whom a benefit is payable
under the Plan is unable to care for their affairs because of illness or
accident, any payment due (unless prior claim therefor shall have been made
by a duly authorized guardian or other legal representative, may be paid,
upon appropriate indemnification of the Committee and the Corporation, to
the Spouse of the Participant or other person deemed by the Committee to
have incurred expenses for the benefit of and on behalf of such Participant
or Beneficiary. Any such payment from a Participant's Plan Account shall be
a complete discharge of any liability under the Plan with respect to the
amount so paid.
ARTICLE IX - ADMINISTRATION and CLAIMS
9.1 - Plan Administration
The Committee shall be solely responsible for the administration and
operation of the Plan. The Committee shall have full and exclusive
authority and discretion to interpret the provisions of the Plan and to
establish such administrative procedures as it deems necessary and
appropriate to carry out the purposes of the Plan.
Any person claiming a benefit, requesting an interpretation or ruling
under the Plan, or requesting information under the Plan shall present the
request in writing to the Committee which shall respond in writing as soon
as practicable.
9.2 - Claim Procedures
If a Participant or Beneficiary requests a benefit or payment under the
Plan and such claim or request is denied, the Committee will provide a
written notice of denial which will specify (a) the reason for denial, with
specific reference to the Plan provisions on which the denial is based, and
(b) a description of any additional material or information that may be
required with respect to the claim and an explanation of why such
information is necessary.
If a claim or request is denied or if no response is received by the
Participant or Beneficiary within 60 days, the Participant or Beneficiary
may request review by writing to the Committee. The claim or request will
be reviewed by the Committee, which may request additional information or
materials which it deems appropriate to the resolution of any issues
presented. The decision on review will normally be made by the Committee
within 60 days of its receipt of the request for review but may be extended
up to 120 days from such date. The Committee's decision will be in writing
and will state the basis for its decision and shall be conclusive and
binding on all parties.
Exhibit 10.9
Directors Retirement Plan, as amended
The United Technologies Corporation Directors Retirement Plan, Exhibit 10-9
to the United Technologies Corporation Annual Report on Form 10K (Commission
file number 1-812) for fiscal year 1992, was terminated effective December
31, 1995, by resolutions duly adopted by the Board of Directors of the
Corporation at a meeting duly called and held on November 29, 1995, at which
a quorum was present and acting throughout. The text of the resolutions
follows:
RESOLVED, that the Directors Retirement Plan be terminated effective
December 31, 1995, and that each Director's accrued benefit, as
determined by the actuarial firm of Towers Perrin, be converted to tax
deferred Stock Units with the value of each such Stock Unit, for
purposes of this conversion, to equal the average daily price of United
Technologies Corporation's Common Stock from January 1, 1995 through
October 31, 1995 and that the resulting tax-deferred Stock Units shall
be distributed following retirement in either a lump sum or up to
fifteen annual installments, at the election of the Director.
RESOLVED, that for purposes of the foregoing resolutions, a "tax-
deferred Stock Unit" shall: (I) equal the value of one share of United
Technologies Corporation's Common Stock; (ii) accrue dividends in the
form of additional tax-deferred Stock Units; (iii) shall be payable
only in cash and may not be converted to shares of Stock; and, (iv) may
not be distributed until the earlier of retirement, death, disability
or termination. The foregoing definition shall be applicable to all
future Stock Units awarded to Directors under this and any other
programs or arrangements.
RESOLVED, that any previous Board resolutions pertaining to the
compensation and benefits of non-employee Directors be rescinded to the
extend that such resolutions are inconsistent with the foregoing
resolutions.
Exhibit 10.11
UNITED TECHNOLOGIES CORPORATION LONG TERM INCENTIVE PLAN
AMENDMENT 1
The United Technologies Corporation Long Term Incentive Plan (the
"LTIP") is hereby amended, effective January 1, 1995, subject to the
approval of shareowners at the Corporation's Annual Meeting to be held
April 25, 1995.
1. Section 5(e) is amended and restated as follows:
Dividend Equivalents. A Dividend Equivalent is the right to receive a
cash payment equal to the amount of dividends paid on Common Stock for a
period of time, as specified in the Award Agreement. Dividend
Equivalent Awards are subject to performance based vesting criteria.
2. Section 6, "Limitation on Number of Shares" is amended by adding the
following sub-section (c) thereto:
(c) The Plan shall be subject to an individual share award limitation of
1.5 million shares over any consecutive 36 month period. For
purposes of this limitation, all awards of shares of stock, options
to acquire shares of stock or any other award which can be converted
into shares shall be subject to this limit, determined in a manner
consistent with Section 6(b) hereof. Any award that is forfeited
or canceled within a thirty-six month period shall continue to count
against this limitation for the remainder of the thirty-six month
period.
3. Section 17 is hereby added to the Plan as follows:
17. Continuous Improvement Incentive Plan.
(a) Introduction. The Committee has approved the Continuous
Improvement Incentive Program (the "CIIP"), a performance based
program of Plan Awards. Under the CIIP, Dividend Equivalent
Awards ("DEs") are granted subject to performance based vesting
criteria related to key financial performance measurements of the
Corporation and the business units. Non-qualified stock options
awarded along with DEs become exercisable three years after the
date of grant. Exercisability of stock options is not contingent
upon achievement of CIIP performance based vesting criteria
because the value of stock option awards is directly linked to
share price appreciation measured from the date of grant and is
therefore performance based independent of CIIP vesting criteria.
(b) Performance Targets. Under the CIIP, Participants shall be
eligible to receive awards of dividend equivalents ("DEs"), with
one DE granted for each stock option granted. A DE is the right
to receive a cash payment equal to the amount of dividends paid
on Common Stock for a period of time as specified in the Award
Agreement, but in no event more than seven years, provided,
however, that DE payments will cease if the stock option
associated with the vested DE is exercised. The vesting of DEs
shall be contingent upon the achievement of certain minimum
performance targets measured over a period of time of not less
than one year, as established by the Committee. DEs that do not
vest will be forfeited without value. The vesting of each years
award shall be based upon the achievement of pre-established
performance targets as established by the Committee for one or
more of the following performance measurements: earnings per
share ("EPS"); total shareholder return ("TSR"); return on equity
("ROE"); return on sales ("ROS"); return on net operating asset
("RNOA") and working capital turnover ("WCT"). ROS, RNOA and WCT
targets may be specifically formulated for each business unit.
Business unit Participants may be subject to performance targets
specifically applicable to their business unit or to a
combination of corporate and business unit performance targets.
If vesting is subject to more than one performance target, the
relative weighting of each performance target to be used for
determining the cumulative vesting percentage shall be as
determined by the Committee.
Performance targets shall be measured on the basis of audited
consolidated financial statements of the Corporation and financial
statements of the business units which are used in the audited
consolidated financial statements of the Corporation. For purposes of
this Section 17, performance targets shall be defined as follows:
Earnings Per Share means primary or fully diluted earnings per share
determined under generally accepted accounting principles.
Return on Equity means net income available to Common Stock owners
divided by average equity.
Return on Sales means operating profit before interest expense and
income taxes divided by sales.
Return on Net Operating Assets means operating profit before interest
expense and income taxes divided by average net operating assets.
Total Shareholder Return means the percentage change in the value of a
share of Common Stock between the beginning and end of the measurement
period, including the amount of dividends paid during the measurement
period.
Working Capital Turnover means the ratio obtained by dividing sales by
average working capital. For purposes of this definition, working
capital means external accounts receivable plus net inventory less
external accounts payable and advances on sales contracts.
(c) Establishment of Performance Targets. The Committee shall be
exclusively responsible for establishing performance targets
applicable to CIIP Awards with respect to EPS, ROE, ROS, RNOA, TSR,
and WCT, as the case may be. The Committee shall grant CIIP awards
and establish performance targets no later than 90 days following
the commencement of the performance measurement period. The
Committee shall also establish the relative weightings of multiple
performance targets no later than 90 days following the commencement
of the performance measurement period.
(d) Measurement of Achievement of Performance Targets. The Committee
shall certify to the measurement of performance by the Corporation
and the business units relative to CIIP performance targets and the
resulting vesting percentage. The Committee shall rely on such
financial information and other materials as it deems necessary and
appropriate to enable it to certify to the percentage of achievement
of CIIP performance targets. Performance targets will be adjusted
by the Committee to eliminate: (i) restructuring charges to the
extent they are separately disclosed in the Corporation's Annual
Report on Form 10K; (ii) the effects of changes in accounting
methods; (iii) the translation impact of changes in foreign
currency exchange rates; and (iv) "extraordinary items" determined
under generally accepted accounting principles. The Committee shall
make its vesting determination not later than the end of the first
quarter following the end of the performance measurement period.
(e) Vesting Schedule. DE payments will commence following the vesting
determination date. CIIP Participants shall vest in 100% of their
DEs if 100% of their applicable CIIP performance targets are
achieved as of the end of the three year performance measurement
period. If the cumulative weighted achievement equals 90% of
target, 50% of associated DEs will vest. To the extent that
cumulative weighted achievement is greater than 90% but less than
100%, the vesting percentage will be determined in accordance with
the following formula:
Vesting Percentage = (Cumulative Weighted Performance Achievement
Percentage -90) X 5 + 50
If the cumulative weighted performance achievement percentage is
less than 90, all DEs will be forfeited without value.
(f) Transfers. If a Participant transfers from one business unit to
another business unit (for this purpose including Corporate
Headquarters as a business unit) after the date of a CIIP Award but
before the end of the three-year measurement period applicable to
the Award, the number of vested DE's will equal the sum of (i) plus
(ii) where:
(i) equals DEs granted, multiplied by a fraction, where the numerator
equals the number of months in the unit where the Participant was
employed at the time the Award was granted and the denominator
equals 36, multiplied by the performance achievement percentage
applicable to such business unit; and
(ii) equals DEs granted, multiplied by a fraction where the
numerator equals the number of months employed in the unit to
which the Participant was transferred and the denominator equals
36, multiplied by the performance achievement percentage
applicable to such business unit.
If there are subsequent transfers to other business units, vesting
calculations will be done using the same formula.
(g) Amendment. The Committee shall have the authority to amend the
CIIP, provided however, that the Committee may not amend the CIIP
after the first 90 days of a performance measurement period in a
manner that would, directly or indirectly: (i) change the method
of measuring performance for that year's CIIP award; (ii) increase
the maximum amount payable to any CIIP Participant for that year; or
(iii) remove the amendment restriction set forth in this sentence
with respect to that year.
Exhibit 10.14
Director's Stock and Deferred Stock Unit Plan, as amended
The United Technologies Corporation Director's Stock and Deferred Stock Unit
Program, filed as Exhibit 10-14 to the United Technologies Corporation
Annual Report on Form 10K (Commission file number 1-812) for fiscal year
1993, was amended and rescinded in part by Board resolutions of November 29,
1995 , as follows:
RESOLVED, that an annual retainer fee of $60,000 will be paid to each
non-employee Director, to be increased to $65,000 in the case of any
Director who is Chairman of a Committee, payable either 60% in tax-
deferred Stock Units and 40% in cash or 100% in tax-deferred Stock
Units, at the election of the Director.
RESOLVED, that for purposes of the foregoing resolutions, a "tax-
deferred Stock Unit" shall: (i) equal the value of one share of United
Technologies Corporation's Common Stock; (ii) accrue dividends in the
form of additional tax-deferred Stock Units; (iii) shall be payable
only in cash and may not be converted to shares of Stock; and (iv) may
not be distributed until the earlier of retirement, death, disability
or termination. The foregoing definition shall be applicable to all
future Stock Units awarded to Directors under this and any other
programs or arrangements.
RESOLVED, that any previous Board resolutions pertaining to the
compensation and benefits of non-employee Directors be rescinded to the
extent that such resolutions are inconsistent with the foregoing
resolutions.
____________________________________
The text of the United Technologies Corporation Board of Directors Deferred
Stock Unit Plan, effective January 1, 1996 follows:
UNITED TECHNOLOGIES CORPORATION
BOARD OF DIRECTORS
DEFERRED STOCK UNIT PLAN
Effective January 1, 1996
UNITED TECHNOLOGIES CORPORATION
DEFERRED STOCK UNIT PLAN
Table of Contents
Page
ARTICLE I INTRODUCTION
1.01 Purpose of Plan 1
1.02 Effective Date of Plan 1
ARTICLE II DEFINITIONS 2
ARTICLE III CREDITS
3.01 Transition Credits 4
3.02 Automatic Credits 4
3.03 Elective Credits 4
ARTICLE IV ACCOUNTS AND INVESTMENTS
4.01 Accounts 6
4.02 Stock Units 6
4.03 Hypothetical Nature of Accounts and 8
Investments
ARTICLE V PAYMENTS
5.01 Entitlement to Payment 9
5.02 Payment Commencement Date 9
5.03 Form and Amount of Payment 9
ARTICLE VI ADMINISTRATION
6.01 In General 11
6.02 Plan Amendment and Termination 11
6.03 Reports to Participants 12
6.04 Delegation of Authority 12
ARTICLE VII MISCELLANEOUS
7.01 Rights Not Assignable 13
7.02 Certain Rights Reserved 13
7.03 Withholding Taxes 14
7.04 Incompetence 14
7.05 Inability to Locate Participants 14
and Beneficiaries
7.06 Successors 15
7.07 Usage 15
7.08 Severability 15
7.09 Governing Law 16
<PAGE>
ARTICLE I
INTRODUCTION
1.01 Purpose of Plan
The purpose of the Plan is to enhance the Company's ability to attract and
retain nonemployee members of the Board whose training, experience and ability
will promote the interests of the Company and to directly align the interests of
such nonemployee Directors with the interests of the Company's shareowners by
providing compensation based on the value of UTC Common Stock. The Plan is
designed to permit such nonemployee directors to defer the receipt of all or a
portion of the cash compensation otherwise payable to them for services to the
Company as members of the Board.
1.02 Effective Date of Plan
Except as otherwise provided by Section 3.01, the Plan shall apply only to
a Participant's annual Director's retainer Fees with respect to service on and
after January 1, 1996.
<PAGE>
ARTICLE II
DEFINITIONS
Unless the context clearly indicates otherwise, the following terms, when
used in capitalized form in the Plan, shall have the meanings set forth below:
Account shall mean a bookkeeping account established for a Participant
under Section 4.01.
Article shall mean an article of the Plan.
Beneficiary shall mean a Participant's beneficiary, designated in writing
and in a form and manner satisfactory to the Committee, or if a Participant
fails to designate a beneficiary, or if the Participant's designated Beneficiary
predeceases the Participant, the Participant's estate.
Board shall mean the Board of Directors of the Company.
Closing Price shall mean, with respect to any date specified by the Plan,
the closing price of UTC Common Stock on the composite tape of New York Stock
Exchange issues (or if there was no reported sale of UTC Common Stock on such
date, on the next preceding day on which there was such a reported sale).
Committee shall mean the Nominating Committee of the Board.
Company shall mean United Technologies Corporation.
<PAGE>
Director's Fees shall mean the annual retainer fee payable to a Participant
for services to the Company as a member of the Board. Director's Fees do not
include special meeting fees.
Participant shall mean each member of the Board (other than a member of the
Board who is also an employee of the Company or a subsidiary thereof) who is or
becomes a member of the Board on or after January 1, 1996.
Payment Anniversary Date shall mean an anniversary of the Payment
Commencement Date.
Payment Commencement Date shall mean the first business day of the first
month following the month in which the Participant terminates service as a
member of the Board.
Plan shall mean this United Technologies Corporation Board of Directors
Deferred Stock Unit Plan, as set forth herein and as amended from time to time.
Plan Year shall mean the calendar year.
Section shall mean a section of the Plan.
Stock Unit shall mean a hypothetical share of UTC Common Stock as described
in Section 4.02.
UTC Common Stock shall mean the common stock of the Company.
<PAGE>
ARTICLE III
CREDITS
3.01 Transition Credits
As soon as practicable on or after January 1, 1996, the Company shall
credit to the Account of each Participant a number of Stock Units determined in
accordance with the schedules set forth in Appendix I and Appendix II to the
Plan. The credits set forth in Appendix I shall be provided in lieu of any
benefits to which the Participant otherwise would have been entitled under the
United Technologies Corporation Directors Retirement Plan as of its termination
on December 31, 1995. The credits set forth in Appendix II shall be provided
in lieu of any benefits to which the Participant otherwise would be entitled
under certain deferred compensation arrangements entered into prior to January
1, 1996. The number of units set forth in Appendix II shall equal the number
of tax deferred stock units (if any) credited to the Participant under any such
prior deferred compensation arrangement, determined as of December 31, 1995.
3.02 Automatic Credits
As of the beginning of each Plan Year, the Company shall credit Stock Units
to each Participant's Account equal in value to 60% of the Participant's
Director's Fees for the Plan Year, as determined in accordance with Section
4.02(a)(1).
3.03 Elective Credits
A Participant may elect, with respect to each Plan Year, to defer the
entire portion (but not a partial portion) of the 40% of the Participant's
<PAGE>
Director's Fees that are not automatically deferred in accordance with Section
3.02 and that otherwise would be paid to the Participant in cash. If the
Participant makes such an election, the Company shall credit Stock Units to the
Participant's Account equal in value to 40% of the Participant's Director's Fees
for the Plan Year, as determined in accordance with Section 4.02(a)(1), as of
the beginning of the Plan Year with respect to which the election is made (or,
if later, as of the first day in the Plan Year on which the individual becomes a
Participant). An election under this Section 3.03 shall be made in a form and
manner satisfactory to the Committee and shall be effective for a Plan Year only
if made before the beginning of the Plan Year; provided that an individual who
becomes a Participant after the first day of a Plan Year may make the election
for that Plan Year within 30 days of becoming a Participant.
<PAGE>
ARTICLE IV
ACCOUNTS AND INVESTMENTS
4.01 Accounts
A separate Account under the Plan shall be established for each
Participant. Such Account shall be (a) credited with the amounts credited in
accordance with Article Ill, (b) credited (or charged, as the case may be) with
the investment results determined in accordance with Section 4.02, and (c)
charged with the amounts paid by the Plan to or on behalf of the Participant in
accordance with Article V. Within each Participant's Account, separate
subaccounts shall be maintained to the extent the Committee determines them to
be necessary or useful in the administration of the Plan.
4.02 Stock Units
(a) Deemed Investment in UTC Common Stock. Except as provided in
subsection (b), below, a Participant's Account shall be treated as if it were
invested in Stock Units that are equivalent in value to the fair market value of
shares of UTC Common Stock in accordance with the following rules:
(1) Conversion into Stock Units. Any Director's Fees
credited to a Participant's Account for a Plan Year under Section 3.02 or
3.03 shall be converted into Stock Units (including fractional Stock Units)
by dividing the amount credited by the Closing Price on the first business
day of the Plan Year; provided that in the case of an individual who
becomes a Participant after the first day of a Plan Year, the Closing
Price
<PAGE>
shall be determined as of the day on which the individual becomes a
Participant.
(2) Deemed Reinvestment Of Dividends. The number of Stock Units
credited to a Participant's Account shall be increased on each date on
which a dividend is paid on UTC Common Stock. The number of additional
Stock Units credited to a Participant's Account as a result of such
increase shall be determined by (i) multiplying the total number of Stock
Units (excluding fractional Stock Units) credited to the Participant's
Account immediately before such increase by the amount of the dividend paid
per share of UTC Common Stock on the dividend payment date, and (ii)
dividing the product so determined by the Closing Price on the dividend
payment date.
(3) Conversion Out of Stock Units. The dollar value of the Stock
Units credited to a Participant's Account on any date shall be determined
by multiplying the number of Stock Units (including fractional Stock Units)
credited to the Participant's Account by the Closing Price on that date.
(4) Effect of Recapitalization. In the event of a transaction or
event described in this paragraph (4), the number of Stock Units credited
to a Participant's Account shall be adjusted in such manner as the
Committee, in its sole discretion, deems equitable. A transaction or
event is described in this paragraph (4) if (i) it is a dividend (other
than regular quarterly dividends) or other distribution (whether in the
form of cash, shares, other securities, or other property), extraordinary
cash dividend, recapitalization, stock split, reverse stock split
reorganization, merger, consolidation, split-up, spin-off, repurchase, or
exchange of shares or other securities, the issuance or exercisability of
<PAGE>
stock purchase rights, the issuance of warrants or other rights to purchase
shares or other securities, or other similar corporate transaction or event
and (ii) the Committee determines that such transaction or event affects
the shares of UTC Common Stock, such that an adjustment pursuant to this
paragraph (4) is appropriate to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the
Plan.
(b) Change in Deemed Investment Election. A Participant
who elects to receive distribution of his or her Accounts in annual installments
will continue to have such Account credited with Stock Units during the
installment period unless the Participant irrevocably elects to have his or her
Account treated, as of the Payment Commencement Date, as if the Account were
invested in cash. If a Participant makes such election, the Account will be
credited with a rate of interest equal to the average interest rate on 10-Year
Treasury Bonds as of the January through October Period in the calendar year
prior to the Plan Year in which the interest is credited, plus 1%. An election
under this subsection (b) shall be made in a form and manner satisfactory to the
Committee and shall be effective only if made before the Payment Commencement
Date.
4.03 Hypothetical Nature of Accounts and Investments
Each Account established under this Article IV shall be maintained for
bookkeeping purposes only. Neither the Plan nor any of the Accounts
established under the Plan shall hold any actual funds or assets. The Stock
Units established hereunder shall be used solely to determine the amounts to be
paid hereunder, shall not be or represent an equity security of the Company,
shall not be convertible into or otherwise entitle a Participant to acquire an
<PAGE>
equity security of the Company and shall not carry any voting or dividend
rights.
<PAGE>
ARTICLE V
PAYMENTS
5.01 Entitlement to Payment
Credits to a Participant's Account under Section 3.02 or 3.03 shall be in
lieu of payment to the Participant of the related Director's Fees. Any payment
under the Plan with respect to an Account shall be made solely in cash and as
further provided in this Article V. The right of any person to receive one or
more payments under the Plan shall be an unsecured claim against the general
assets of the Company.
5.02 Payment Commencement Date
Payments to a Participant with respect to the Participant's Account shall
begin as of the Participant's Payment Commencement Date; provided that if a
Participant dies before the Participant's Payment Commencement Date, payment of
the entire value of the Participant's Account shall be made in a lump sum to the
Participant's Beneficiary as soon as practicable after the Committee receives
all documents and other information that it requests in connection with the
payment.
5.03 Form and Amount of Payment
(a) Fifteen Annual Installments. A Participant shall receive his or her
benefits in 15 annual installments unless the Participant elects to receive his
or her benefits under the Plan in the form of a lump-sum payment or in less
than
<PAGE>
15 annual installments in accordance with subsection (b), below. Annual
installments shall be payable to the Participant in cash beginning as of the
Payment Commencement Date and continuing as of each Payment Anniversary Date
thereafter until all installments have been paid. The first annual installment
shall equal one- fifteenth (1/15th) of the value of the Stock Units credited to
the Participant's Account, determined as of the Payment Commencement Date. Each
successive annual installment shall equal the value of the Stock Units credited
to the Participant's Account, determined as of the Payment Anniversary Date,
multiplied by a fraction, the numerator of which is one, and the denominator of
which is the excess of 15 over the number of installment payments previously
made (i.e., 1/14th, 1/13th, etc.). If the Participant dies after the
Participant's Payment Commencement Date but before all 15 installments have been
paid, the remaining installments shall be paid to the Participant's Beneficiary
in accordance with the schedule in this subsection (a).
(b) Lump Sum, or Less Than 15 Annual Installments. A Participant may
elect to receive his or her benefits under the Plan in the form of a lump-sum
payment or in two to fourteen installments in lieu of the fifteen installment
payments determined under subsection (a), above. The lump sum shall be payable
to the Participant in cash as of the Payment Commencement Date and shall equal
the value of the Stock Units credited to the Participant's Account, determined
as of the Payment Commencement Date. Installments shall be paid in the manner
set forth in subsection (a) above, except that for purposes of determining the
amount of the first annual installment, the denominator of the fraction shall
equal the number of scheduled annual installments. An election under this
subsection (b) shall be made in a form and manner satisfactory to the Committee
and shall be effective only if made at least two years before the Participant's
Payment Commencement Date.
<PAGE>
ARTICLE VI
ADMINISTRATION
6.01 In General
The Committee shall have the discretionary authority to interpret the Plan
and to decide any and all matters arising under the Plan, including without
limitation the right to determine eligibility for participation, benefits, and
other rights under the Plan; the right to determine whether any election or
notice requirement or other administrative procedure under the Plan has been
adequately observed; the right to determine the proper recipient of any
distribution under the Plan; the right to remedy possible ambiguities,
inconsistencies, or omissions by general rule or particular decision; and the
right otherwise to interpret the Plan in accordance with its terms. Except as
otherwise provided in Section 6.03, the Committee's determination on any and all
questions arising out of the interpretation or administration of the Plan shall
be final, conclusive, and binding on all parties.
6.02 Plan Amendment and Termination
The Committee may amend, suspend, or terminate the Plan at any time;
provided that no amendment, suspension, or termination of the Plan shall,
without a Participant's consent, reduce the Participant's benefits accrued under
the Plan before the date of such amendment, suspension, or termination. If the
Plan is terminated in accordance with this Section 6.02, the terms of the Plan
as in effect immediately before termination shall determine the right to payment
in respect of any amounts that remain credited to a Participant's or
Beneficiary's Account upon termination.
<PAGE>
6.03 Reports to Participants
The Committee shall furnish an annual statement to each Participant (or
Beneficiary) reporting the value of the Participant's (or Beneficiary's) Account
as of the end of the most recent Plan Year.
6.04 Delegation of Authority
The Committee may delegate to officers of the Company any and all authority
with which it is vested under the Plan, and the Committee may allocate its
responsibilities under the Plan among its member.
<PAGE>
ARTICLE VII
MISCELLANEOUS
7.01 Rights Not Assignable
No payment due under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge in any other way. Any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber, or charge such payment in any other way shall be void.
No such payment or interest therein shall be liable for or subject to the debts,
contracts, liabilities, or torts of any Participant or Beneficiary. If any
Participant or Beneficiary becomes bankrupt or attempts to anticipate, alienate,
sell, transfer, assign, pledge, encumber, or charge in any other way any payment
under the Plan, the Committee may direct that such payment be suspended and that
all future payments to which such Participant or Beneficiary otherwise would be
entitled be held and applied for the benefit of such person, the person's
children or other dependents, or any of them, in such manner and in such
proportions as the Committee may deem proper.
7.02 Certain Rights Reserved
Nothing in the Plan shall confer upon any person the right to continue to
serve as a member of the Board or to participate in the Plan other than in
accordance with its terms.
7.03 Withholding Taxes
<PAGE>
The Committee may make any appropriate arrangements to deduct from all
credits and payments under the Plan any taxes that the Committee reasonably
determines to be required by law to be withheld from such credits and payments.
7.04 Incompetence
If the Committee determines, upon evidence satisfactory to the Committee,
that any Participant or Beneficiary to whom a benefit is payable under the Plan
is unable to care for his or her affairs because of illness or accident or
otherwise, any payment due under the Plan (unless prior claim therefor shall
have been made by a duly authorized guardian or other legal representative) may
be paid, upon appropriate indemnification of the Committee and the Company, to
the spouse of the Participant or Beneficiary or other person deemed by the
Committee to have incurred expenses for the benefit of and on behalf of such
Participant or Beneficiary. Any such payment shall be a complete discharge of
any liability under the Plan with respect to the amount so paid.
7.05 Inability to Locate Participants and Beneficiaries
Each Participant and Beneficiary entitled to receive a payment under the
Plan shall keep the Committee advised of his or her current address. If the
Committee is unable for a period of 36 months to locate a Participant or
Beneficiary to whom a payment is due under the Plan, commencing with the first
day of the month as of which such payment first comes due, the total amount
payable to such Participant or Beneficiary shall be forfeited. Should such a
Participant or Beneficiary subsequently contact the Committee requesting
payment, the Committee shall, upon receipt of all documents and other
information that it might request in connection with the payment, restore and
pay the forfeited payment in a lump sum, the value of which shall not be
<PAGE>
adjusted to reflect any interest or other type of investment earnings or gains
for the period of forfeiture.
7.06 Successors
The provisions of the Plan shall bind and inure to the benefit of the
Company and its successors and assigns. The term "successors" as used in the
preceding sentence shall include any corporation or other business entity that
by merger, consolidation, purchase, or otherwise acquires all or substantially
all of the business and assets of the Company, and any successors and assigns of
any such corporation or other business entity.
7.07 Usage
(a) Titles and Headings. The titles to Articles and the headings of
Sections, subsections, and paragraphs in the Plan are placed herein for
convenience of reference only and shall be of no force or effect in the
interpretation of the Plan
(b) Number. The singular form shall include the plural, where
appropriate.
7.08 Severability
If any provision of the Plan is held unlawful or otherwise invalid or
unenforceable in whole or in part, such unlawfulness, invalidity, or
unenforceability shall not affect any other provision of the Plan or part
thereof, each of which shall remain in full force and effect. If the making of
any payment or the provision of any other benefit required under the Plan is
held unlawful or otherwise invalid or unenforceable, such unlawfulness,
<PAGE>
invalidity or unenforceability shall not prevent any other payment or benefit
from being made or provided under the Plan, and if the making of any payment in
full or the provision of any other benefit required under the Plan in full would
be unlawful or otherwise invalid or unenforceable, then such unlawfulness,
invalidity, or unenforceability shall not prevent such payment or benefit from
being made or provided in part, to the extent that it would not be unlawful,
invalid, or unenforceable, and the maximum payment or benefit that would not be
unlawful, invalid, or unenforceable shall be made or provided under the Plan.
7.09 Governing Law
The Plan and all determinations made and actions taken under the Plan shall
be governed by and construed in accordance with the laws of the State of
Connecticut.
UNITED TECHNOLOGIES CORPORATION
by __________________________
Attest:
____________________________
Date:
____________________________
<PAGE>
<TABLE><CAPTION>
UTC BOARD OF DIRECTORS STOCK UNIT PLAN - APPENDIX I
PENSION BENEFIT CONVERSION TO STOCK UNITS
EFFECTIVE DATE PRESENT VALUE NUMBER OF STOCK
OF ELECTION OF ACCRUED UNITS (1) AT
DIRECTOR AS DIRECTOR BENEFIT AS OF 12/31/95
12/31/95 CONVERSION (2)
<S> <C> <C> <C>
BAKER 1/29/90 $137,735 1821.2
CHAYES 2/2/81 $229,544 3035.2
DEE 2/2/81 $229,544 3035.2
DUNCAN 3/23/81 $229,544 3035.2
GYLLENHAMMAR 3/23/81 $229,544 3035.2
HINES 12/18/89 $137,735 1821.2
LEE 1/31/94 $34,963 462.3
MALOTT 10/20/80 $229,544 3035.2
WAGNER 7/1/94 $37,586 497.0
WEXLER 10/16/78 $229,544 3035.2
(1) Stock Units payable in Cash only
(2) Number of Stock Units equals PV of accrued benefit divided by UTC daily average
Closing Stock Price from 1/1/95 through 10/31/95.
</TABLE>
<PAGE>
<TABLE><CAPTION>
UTC BOARD OF DIRECTORS DEFERRED STOCK UNIT PLAN - APPENDIX II
TRANSITION CREDITS: TAX DEFERRED STOCK UNITS AS OF JANUARY 1, 1996 (1)
STOCK UNITS ATTRIBUTABLE TO COMPENSATION DEFERRED IN 1994 & 1995
NUMBER OF TAX DEFERRED
DIRECTOR STOCK UNITS (2)
<S> <C>
BAKER 509.0
DEE 509.0
DUNCAN 509.0
GYLLENHAMMAR 509.0
LEE 244.8
MALOTT 264.3
(1) To be credited to the Director's Account in accordance with Plan Section 3.01,
effective January 1, 1996.
(2) Units to be distributed in Cash or Common Stock, at the election of the Director
All deemed reinvestment of dividends attributable to these Units after January 1,
to be reinvested in Stock Units as defined in Section 4.02 of the Plan and payable
solely in Cash.
</TABLE>
<PAGE>
Exhibit 10.17
UNITED TECHNOLOGIES CORPORATION
Nonemployee Director Stock Option Plan
1. Purpose.
The purpose of the Nonemployee Director Stock Option Plan (the "Plan")
is to attract, retain and compensate the members of the Board of Directors
(the "Board") of United Technologies Corporation (the "Corporation") who are
not employees of the Corporation or any of its subsidiaries and to secure
for the Corporation and its shareholders the benefits associated with an
increased equity interest in the Corporation of such nonemployee directors.
2. Administration.
The Plan shall be administered by a committee comprised of the Chief
Executive Officer, the Senior Vice President, Human Resources and
Organization and the Corporate Secretary (the "Committee"). The Committee
shall have the full authority to construe the Plan, to determine all
questions arising under the Plan, and to adopt such rules and procedures for
the administration of the Plan as the Committee may deem necessary or
desirable. All decisions of the Committee in the administration of the Plan
shall be conclusive and binding on all parties concerned, including the
Corporation and the holders of options granted under the Plan. The Committee
may authorize any one or more members of the Committee, or any one or more
officers of the Corporation, to execute and deliver any documents that are
necessary or desirable for the proper administration of the Plan. To the
fullest extent permitted by law, no member of the Committee shall be liable,
except by reason of such member's willful misconduct, for anything that is
done or omitted by such member or by any other person in connection with the
administration of the Plan.
3. Stock Subject to the Plan.
The total number of shares of common stock of the Corporation ("Common
Stock") for which stock options may be granted under the Plan in any year
shall not exceed a number of shares equal to 1000 multiplied by the number
of Nonemployee Directors incumbent as of the date of the Corporation's
Annual Meeting of shareowners, subject to adjustment as provided in Section
8 below. Such shares of Common Stock may be either authorized and unissued
shares or previously issued shares that have been reacquired by the
Corporation or any of its subsidiaries.
4. Eligibility
Each member of the Board who is not an employee of the Corporation or
any of its subsidiaries (a "Nonemployee Director") shall be eligible to
receive Options in accordance with Section 5.
5. Grant of Stock Options.
On the date of the Corporation's Annual Meeting of Shareowners in each
year for so long as the Plan remains in effect (the "Grant Date"), each
nonemployee Director who is elected as a director at such meeting, or whose
term of office shall continue after the date of such meeting, automatically
shall be granted an option to purchase 1,000 shares of Common Stock (an
"Option") .
6. Terms and Conditions of Stock Options.
<PAGE>
Each Option shall have the following terms and conditions:
(a) Exercise Price. The exercise price per share of Common Stock
of the Option shall be equal to the Fair Market Value of the Common Stock on
the Grant Date.
(b) Vesting. The Option shall vest and become exercisable on the
third anniversary of the Grant Date, except that, in the event the recipient
ceases to be a director by reason of Retirement, Disability, death, or if a
director leaves the Board to accept full time employment with a charity, a
not-for-profit institution or state, federal or local government, an Option
held for at least one year from the Grant Date shall become immediately
exercisable in full.
(c) Term. The Option shall have a term of ten years commencing on
the Grant Date, but shall expire earlier under the following circumstances:
(i) if the recipient shall cease to be a director of the Corporation for
reasons other than Retirement, Disability or death, a non-vested Option
shall be canceled without value and a vested Option shall continue to be
exercisable for 90 days following the date on which the recipient ceases to
be a director. An Option not exercised during this 90 day period shall
expire without value (unless the recipient dies within such 90 day period in
which event the Option shall expire in accordance with the provisions of
clause (ii) below); and (ii) in the event of the death of the recipient
(whether or not the recipient at the time is a director of the Corporation),
the Option shall expire one year following the date of death.
(d) Restrictions on Transfer. The Option shall not be transferable
by the recipient other than by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the recipient
only by the recipient or the recipient's legal representative. In the event
that an Option is exercised by an executor, administrator, legatee or
distributee of the estate of a deceased recipient, the Corporation shall be
under no obligation to issue the shares of Common Stock being purchased
unless and until the Corporation is satisfied that the person or persons
exercising the Option are the duly appointed legal representatives of the
deceased recipient's estate or the proper legatees or distributees thereof.
(e) Exercise Notice and Payment. The Option may be exercised, in
whole or in part, by delivery to the Secretary of the Corporation of a
written notice specifying the number of shares to be purchased and by
payment in full of the aggregate exercise price of the shares of Common
Stock being purchased. Payment of the exercise price shall be made (i) in
United States dollars by check or bank draft, (ii) by tendering to the
Corporation shares of Common Stock owned by the person exercising the Option
having a Fair Market Value (determined as of the date of exercise) equal to
the aggregate exercise price, (iii) by a combination of United States
dollars and Common Stock; or (iv) by such other methods as the Committee
shall authorize.
(f) Definitions. As used in the Plan:
(i) the term "Disability" means a medical condition or physical
limitation affecting the Nonemployee Director that (A) is expected to be of
long and continued duration and (B) renders the Nonemployee Director unable
to perform his or her duties.
<PAGE>
(ii) the term "Fair Market Value" means the closing price of the
Common Stock as reported on the New York Stock Exchange Composite
Transactions Tape or, if the New York Stock Exchange is closed or there are
no reported transactions on the date of determination, then Fair Market
Value shall mean the closing price on the last preceding date on which a
closing price is so reported.
(iii) the term "Retirement" means termination of service on the
Board by reason of resignation from the Board or by reason of not standing
for reelection on or after age 55 with five or more years of service, but
shall not include (A) the removal of the individual as a director for cause,
or (B) any other termination of service on the Board resulting from an act
of fraud, misrepresentation, embezzlement, misappropriation or conversion of
assets or opportunities of the Corporation or any subsidiary of the
Corporation.
7. Stock Option Agreements.
Each Option shall be evidenced by a written agreement between the
Corporation and the recipient of the Option in such form as the Committee
shall prescribe.
8. Adjustments for Changes in Outstanding Common Stock or a Restructuring
Event.
(a) In the event of any change in the outstanding shares of Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination or exchange of shares or any other material change in the
capital structure of the Corporation resulting from: the payment of a
special dividend (other than regular quarterly dividends) or other
distributions to shareowners without the Corporation receiving
consideration therefor; the spin-off of a subsidiary; the sale of a
substantial portion of the Corporation's assets; a merger or consolidation
in which the Corporation is the surviving entity; or other extraordinary,
non-recurring events affecting the Corporation's capital structure or the
value of the Common Stock, equitable adjustments shall be made in the terms
of the Plan and outstanding Options , including an adjustment in the maximum
number of shares referred to in Section 3 and the number of shares of Common
Stock subject to an Option, as the Committee, in its sole discretion,
determines are necessary or appropriate to prevent the dilution or
enlargement of the rights of Plan participants.
(b) In the event that the Corporation enters into an agreement to
merge or consolidate with another company and the Corporation is not the
surviving entity, the Corporation effects a sale of all or substantially all
of its assets or the Corporation dissolves and liquidates, then the
Committee, in its sole discretion, may (i) cause the Corporation to offer to
acquire any or all vested Options at a price per underlying share of Common
Stock equal to the difference between the exercise price per share and the
Fair Market Value per share of the Common Stock or (ii) make such other
modifications to outstanding Options as the Committee deems necessary or
appropriate to maintain and protect the rights and benefits of the holders
of Options.
9. Change of Control.
Notwithstanding any other provision herein to the contrary, in the
event of a Change of Control of the Corporation, all outstanding Options
shall become immediately exercisable for the remainder of their respective
terms as provided in Section 6(c). The term "Change of Control" shall mean:
(i) the acquisition by any person of voting shares of the Corporation if, as
<PAGE>
a result of the acquisition, such person, or any "group" as defined in
Section 13 (d) (3) of the Securities Exchange Act of 1934 of which such
person is a part, owns at least 20% of the outstanding voting shares of the
Corporation, or (ii) a change in the composition of the Board such that,
within any period of two consecutive years, persons who (A) at the beginning
of such period constitute the Board or (B) become directors after the
beginning of such period and whose election, or nomination for election by
the shareholders of the Corporation, was approved by a vote of at least two-
thirds of the persons who were either directors at the beginning of such
period or whose subsequent election or nomination was previously approved in
accordance with this clause (B) cease to constitute at least a majority of
the Board.
10. Miscellaneous Provisions.
(a) No Right to Continue as Director. Neither the existence of the
Plan nor any action taken under the Plan shall be construed as giving any
Nonemployee Director any right to continue to serve as a director of the
Corporation.
(b) Restrictions on Assignment. The rights and benefits of a
Nonemployee Director under the Plan may not be assigned or transferred in
whole or in part, whether directly, by operation of law or otherwise
(except, in the event of a Nonemployee Director's death, by will or the laws
of descent and distribution), including by execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner. Any attempt to
assign a recipient's interest in any Option (whether voluntary or
involuntary) shall be void and shall be without force or effect.
(c) Restriction of Issuance of Common Stock. No shares of Common
Stock shall be issued under the Plan unless counsel for the Corporation
shall be satisfied that such issuance will comply with all applicable laws,
including federal and state securities laws and regulations.
(d) Tax Withholding. It shall be a condition to the obligation of
the Corporation to issue shares of Common Stock upon exercise of an Option
that the Nonemployee Director (or other person permitted to exercise the
Option) pay to the Corporation, upon demand, such amount as may be requested
by the Corporation for the purpose of satisfying any obligation of the
Corporation to withhold federal, state, local or foreign income or other
taxes. The Committee shall prescribe the manner in which such payment shall
be made, which may include payment by means of the delivery or withholding
of shares of Common Stock valued at the Fair Market Value thereof. If the
amount requested is not paid in such manner as the Committee shall
prescribe, the Corporation may refuse to issue the shares of Common Stock.
(e) No Funding Requirement. The Plan shall be unfunded. The
Corporation shall not be required to establish any special or separate fund
or to make any other segregation of assets to assure the issuance of shares
of Common Stock upon exercise of any Option. No obligation under the Plan
shall be deemed to be secured by any pledge or other encumbrance on any
property of the Corporation.
(f) Acceptance and Ratification. By accepting an Option or other
benefit under the Plan, each Nonemployee Director (and each person claiming
under or through such Nonemployee Director) shall be conclusively deemed to
have indicated his or her acceptance and ratification of, and consent to,
any action taken under the Plan by the Corporation, the Board or the
Committee.
<PAGE>
(g) Notices. Any notice to the Corporation required or permitted
under any provision of the Plan shall be in writing addressed to the
Secretary of the Corporation and shall be effective when it is received.
(h) No Shareholder Rights. A recipient of an Option shall have no
rights as a shareholder with respect to any shares of Common Stock issued
upon the exercise of an Option until such time as the Option is exercised
and such shares of Common Stock are issued.
(I) Governing Law. The Plan and all determinations made and
actions taken under the Plan shall be governed by, and construed in
accordance with, the laws of the State of Connecticut and, to the extent
applicable, the laws of the United States.
11. Amendment of Plan.
The Plan may be amended by the Board from time to time as the Board
shall deem advisable; provided, however, that (i) no amendment shall become
effective without the approval of the shareowners of the Corporation if such
shareowner approval is required by law and (ii) to the extent required by
Rule 16b-3, as in effect from time to time under Section 16 of the
Securities Exchange Act of 1934, as amended, the Plan provisions governing
the amount, price and timing of Options granted under the Plan shall not be
amended more frequently than once every six months, other than to comport
with changes in the Internal Revenue Code of 1986, or the rules thereunder,
as in effect from time to time. No amendment of the Plan not required by
law shall adversely affect the rights of any holder with respect to any
outstanding Option without such holder's written consent.
12. Effective Date of Plan.
The Plan shall become effective upon the approval of the Plan by the
shareowners of the Corporation by the holders of a majority of the shares of
Common Stock present and entitled to vote at a meeting of shareowners called
for such purpose.
13. Termination of Plan.
The Plan shall continue in effect until such time as the Board acts to
terminate the Plan.
<PAGE>
<TABLE><CAPTION> EXHIBIT 11
UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES
Computations of Earnings Per Share and Fully Diluted Earnings Per Share
Assuming All Outstanding Dilutive Convertible Securities Had Been Converted
For the Five Years Ended December 31, 1995
(Millions of Dollars, except per share amounts)
1995 (1) 1994 (2) 1993 (3) 1992 (3) 1991 (3)
<S> <C> <C> <C> <C> <C>
Earnings (loss) applicable to Common Stock $ 723 $ 563 $ 444 $ (329) $ (1,083)
ESOP Convertible Preferred Stock adjustment 21 17 - - -
Primary net earnings (loss) for period $ 744 $ 580 $ 444 $ (329) $ (1,083)
Earnings (loss) applicable to Common Stock $ 723 $ 563 $ 444 $ (329) $ (1,083)
ESOP Convertible Preferred Stock adjustment 21 17 16 16 23
Fully diluted net earnings (loss) for period $ 744 $ 580 $ 460 $ (313) $ (1,060)
Average number of common shares and common stock equivalents
outstanding during period (thirteen month-end average)
(thousands) 130,478 131,793 125,997 123,238 121,537
Fully diluted average number of common shares outstanding,
assuming all outstanding convertible securities had been
converted on the dates of issue (thousands) 131,499 131,905 139,614 137,157 136,012
Primary earnings (loss) per common share $ 5.70 $ 4.40 $ 3.53 $ (2.67) $ (8.91)
Fully diluted earnings (loss) per common share $ 5.65 $ 4.40 $ 3.30 $ (2.67) $ (8.91)
(1) Fully diluted earnings per common share is less than 3% dilutive and is not shown separately
on the Consolidated Statement of Operations.
(2) In 1994, the Corporation adopted AICPA Statement of Position (SOP) 93-6, "Employers' Accounting for
Employee Stock Ownership Plans." The Corporation conformed its calculations of earnings per common share
to the requirements of this SOP. See Note 2 of the Corporation's 1995 Annual Report to Shareowners
concerning the adoption of SOP 93-6.
(3) During 1991 - 1993, each share of the ESOP Preferred Stock is convertible into one share of Common Stock.
A reduction in earnings applicable to Common Stock is required in the calculation of fully diluted earnings
per share representing the Corporation's additional contribution to the ESOP to enable it to meet its debt
repayment responsibilities were the preferred dividends not available for this purpose. The adjustment
also reflects the adding back of the ESOP Preferred Stock dividend.
</TABLE>
<PAGE>
<TABLE><CAPTION> EXHIBIT 12
UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Millions of Dollars)
Years Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Fixed Charges:
Interest on indebtedness $ 244 $ 275 $ 251 $ 282 $ 339
Interest capitalized 16 19 29 52 70
One-third of rents* 88 101 115 135 130
Total Fixed Charges $ 348 $ 395 $ 395 $ 469 $ 539
Earnings:
Income (loss) before income taxes
and minority interests $ 1,344 $ 1,076 $ 909 $ 200 $ (891)
Fixed charges per above 348 395 395 469 539
Less: interest capitalized (16) (19) (29) (52) (70)
332 376 366 417 469
Amortization of interest capitalized 41 43 42 43 40
Total Earnings $ 1,717 $ 1,495 $ 1,317 $ 660 $ (382)
Ratio of Earnings to Fixed Charges 4.93 3.78 3.33 1.41 **
* Reasonable approximation of the interest factor.
** Not relevant.
</TABLE>
<PAGE>
EXHIBIT 13
FINANCIAL
SECTION
19
FIVE YEAR SUMMARY
20
MANAGEMENT'S
DISCUSSION AND ANALYSIS
28
MANAGEMENT'S
RESPONSIBILITY FOR
FINANCIAL STATEMENTS
28
REPORT OF INDEPENDENT
ACCOUNTANTS
29
CONSOLIDATED
FINANCIAL STATEMENTS
AND NOTES
46
SELECTED QUARTERLY
FINANCIAL DATA
46
COMPARATIVE STOCK
DATA
<PAGE>19
<TABLE>
<CAPTION>
FIVE YEAR SUMMARY
In Millions of Dollars (except per share amounts) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Sales $ 22,624 $ 20,801 $ 20,736 $ 21,641 $ 20,840
Research and development 963 978 1,137 1,221 1,133
Net income (loss) before cumulative effect
of accounting principle changes 750 585 487 35 (1,021)
Net income (loss) 750 585 487 (287) (1,021)
Earnings (loss) per share before cumulative effect of
accounting principle changes:
Primary 5.70 4.40 3.53 (.05) (8.91)
Fully diluted 5.70 4.40 3.30 (.05) (8.91)
Earnings (loss) per share:
Primary 5.70 4.40 3.53 (2.67) (8.91)
Fully diluted 5.70 4.40 3.30 (2.67) (8.91)
Cash dividends per common share 2.05 1.90 1.80 1.80 1.80
Average number of shares of Common Stock
outstanding (thousands):
Primary 130,478 131,793 125,997 123,238 121,537
Fully diluted 130,478 131,793 139,614 137,157 136,012
Return on average common shareowners'
equity, after tax 18.6% 15.4% 13.1% (8.7)% (20.9)%
AT YEAR END
Net working capital $ 2,293 $ 1,675 $ 786 $ 1,064 $ 2,354
Current asset ratio 1.3 to 1 1.3 to 1 1.1 to 1 1.2 to 1 1.4 to 1
Total assets 15,958 15,624 15,618 15,928 15,985
Long-term debt, including current portion 1,747 2,041 2,179 2,769 3,101
Total debt 2,041 2,443 2,959 3,146 3,393
Debt to total capitalization 34% 39% 45% 48% 46%
Net debt (total debt less cash) 1,141 2,057 2,538 2,792 2,870
Net debt to total capitalization 22% 35% 41% 45% 42%
ESOP Preferred Stock, net 398 339 176 151 126
Shareowners' equity 4,021 3,752 3,598 3,370 3,961
Equity per common share 32.94 30.47 28.54 27.23 32.49
Business backlog 17,736 18,328 18,414 21,175 20,700
Number of employees:
United States 70,900 75,900 81,700 91,400 98,000
Europe 40,700 41,500 40,300 40,600 41,800
Asia Pacific 25,600 21,000 15,900 17,300 17,000
Other 33,400 33,100 30,700 28,700 28,300
Total 170,600 171,500 168,600 178,000 185,100
<FN>
Equity per common share is based on shares outstanding at each year end.
See Note 2 of Notes to Consolidated Financial Statements for discussion of 1994 accounting change.
For Pratt and Whitney, backlog is based on the terms of firm orders received and does not include discounts granted directly to
airline and other customers.
1991 results include the effect of $1,275 million of restructuring charges.
</TABLE>
<PAGE>20
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL POSITION
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.
See Note 16 of Notes to Consolidated Financial Statements for the operating
results of the Corporation's business segments.
BUSINESS ENVIRONMENT
A principal strategic objective of the Corporation has been to expand its
business operations overseas to gain market access and to extend global market
leadership. Growth has been particularly strong in the Asia Pacific region as
the Corporation continues to see the benefits of early investment in this area.
As worldwide businesses, the Corporation's operations are affected by global as
well as regional economic factors. Revenues from outside the U.S., including
U.S. export sales, and as a percentage of consolidated revenues are as follows:
In Millions of
Dollars 1995 1994 1993 1995 1994 1993
- -------------------------------------------------------------------------
Europe $ 4,599 $ 3,975 $ 3,896 20% 19% 18%
Asia Pacific 2,707 2,281 1,935 12% 11% 9%
Other 2,042 1,825 1,796 9% 8% 9%
U.S. Exports 3,267 3,108 3,503 14% 15% 17%
- -------------------------------------------------------------------------
International
Revenues $12,615 $11,189 $11,130 55% 53% 53%
As part of its overseas initiatives, the Corporation has increased its
investments in the People's Republic of China (PRC), the former Soviet Union and
other emerging nations which carry higher levels of currency, political and
economic risks. At December 31, 1995, the Corporation's net investment in any of
these countries is less than 3% of consolidated equity. The Corporation's com-
bined revenues in the PRC and Hong Kong, including U.S. export sales, were $901
million, $742 million and $566 million in 1995, 1994 and 1993, respectively.
OTIS is the world's largest elevator and escalator manufacturing and service
company. Otis' business is impacted by global and regional economic factors,
particularly fluctuations in commercial construction which impact new equipment
installations, and labor costs which can impact service and maintenance margins
on installed elevators and escalators. Additionally, because of the global scope
of Otis' business operations (85% of 1995 revenues were outside the U.S.),
changes in foreign currency rates affect the translation of Otis' operating
results into U.S. dollars for financial reporting purposes.
While commercial construction starts during 1995 in the U.S. were higher
than last year, they remain weak. Commercial vacancy rates in some cities have
made modest improvements. In Europe, new equipment sales have been sluggish, but
a growing base of service business has enabled Otis to maintain solid
performance. Otis continues to benefit from its investment strategy in the Asia
Pacific region where, except for Japan, construction activity and economic
growth rates remain strong.
CARRIER is the world's largest manufacturer of commercial and residential heat-
ing, ventilating and air conditioning (HVAC) systems and equipment. Carrier is
also an important supplier of ship container and trailer transportation cooling
equipment. With 55% of its sales outside the U.S., Carrier is impacted by
commercial and residential construction activity worldwide, as well as changes
in foreign currency rates, which impact the translation of Carrier's operating
results into U.S. dollars for financial reporting purposes.
U.S. residential housing starts in 1995 decreased approximately 7% from
1994 after three consecutive years of strong growth. Commercial construction
starts in the U.S. are higher than last year, however, they remain historically
weak. Construction activity in Europe remained weak.
UT AUTOMOTIVE (UTA) develops and manufactures a wide variety of systems and com-
ponents for original equipment manufacturers (OEMs) in the automotive industry.
Sales to Ford Motor Company, UTA's largest customer, comprised approximately 40%
of UTA's revenues in 1995. UTA also has important relationships with Chrysler
Corporation and General Motors Corporation as well as Renault, PSA, Volvo and
Fiat in Europe and the New American Manufacturing divisions of Japanese
automotive OEMs.
<PAGE>21
The automotive OEMs apply significant pricing pressures on their
suppliers such as UTA, and have required suppliers to bear an increasing portion
of engineering, development and tooling expenditures. During 1995 UTA continued
to experience an unusually heavy new product launch schedule, which began in
1994, as its largest unit, North American Wiring Systems, launched new and
replacement business for new North American car and light truck models for
delivery in 1995 and beyond.
North American car and light truck production and European car sales
were essentially flat for 1995 compared to 1994. UTA's revenues benefited from
higher content per vehicle and increased market penetration.
COMMERCIAL AEROSPACE
The financial performance of the Corporation's Pratt & Whitney and Flight
Systems segments is directly tied to the aviation industry. The Pratt & Whitney
segment is a major supplier of commercial, general aviation and military air-
craft engines, along with spare parts, and product support. The Flight Systems
segment, through Hamilton Standard, provides fuel and environmental control
systems and propellers for commercial aircraft. The poor financial condition of
the commercial airline industry has had an adverse impact on the Corporation's
results since 1991.
Worldwide airline profits improved during 1995 as a result of increased
load factors. 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
European airlines, increasing competition, higher cost structures and privatiza-
tion initiatives will strain financial results and resources in the near term.
Strong economic growth in the Asia Pacific region has contributed to an increase
in new aircraft orders from that market that began in 1994 and has continued
through 1995.
Pratt & Whitney's mix of large commercial engine shipments has shifted
to newer, higher thrust engines for wide-bodied aircraft. This market is very
competitive and the newer engines, through technological improvements and fewer
parts, will have fewer spare parts requirements than older engines.
The follow-on spare parts sales for Pratt & Whitney engines in service
have traditionally been an important source of profit to the Corporation. The
large investment required for new aircraft, performance improvements, and hush-
kit upgrades to older aircraft and engines have resulted in lengthened lives of
older aircraft in operation, including those with Pratt & Whitney engines.
GOVERNMENT BUSINESS
During 1995, the Corporation's sales to the U.S. Government were $3,651 million
or 16% of sales, a decline from $3,809 million or 18% of total sales in 1994 and
$4,007 million or 19% of total sales in 1993.
The defense portion of the Corporation's aerospace businesses continues
to respond to a changing global political environment. The U.S. defense industry
is continuing its downsizing in response to the reductions in the U.S. defense
budget. International orders for defense programs have also declined and some
important foreign orders have been delayed.
Sikorsky will continue to supply Black Hawk helicopters to the U.S. and
foreign governments under contracts extending through 1997, albeit at lower
volumes than in the past. The program plan for the development of the U.S. Army
Comanche helicopter now supports completion of the prototype development and
flight testing. A commitment to production has been deferred.
The significant decrease in the U.S. defense procurement of helicopters
in recent years has placed the four U.S. helicopter manufacturers under some of
the same pressures that have led to industry consolidation in other segments of
the U.S. defense industry. It is not clear if or when such consolidation will
occur or the form it will take. Sikorsky expects to maintain its market position
by improving its products for the continued procurement by both the U.S. and
foreign governments. In addition, development on the S-92, a large cabin deriva-
tive of the Black Hawk family for commercial and military markets was started in
1995 by an international team led by Sikorsky.
Pratt & Whitney continues to deliver F100 engines and military spare
parts to both U.S. and foreign governments. Pratt & Whitney's engines will power
the two primary U.S. Air Force programs of the future, the F-22 fighter, powered
by the Pratt & Whitney F119 engine and the C-17 airlifter, powered by the Pratt
& Whitney F117 engine. During 1995 the U.S. Air Force Defense Acquisition Board
announced its decision to order 80 additional C-17 aircraft to bring the total
fleet to 120 aircraft. While these programs are expected to retain support by
the U.S. military and Congress, these and other U.S. military programs will
continue to compete for available defense funds.
[Bar Charts - Page 21]
1991 1992 1993 1994 1995
GLOBAL GROWTH ($ Billions)
International Revenues $11.0 $11.4 $11.1 $11.2 $12.6
Domestic Revenues $10.3 $10.6 $10.0 $10.0 $10.2
GROSS MARGIN (% of Sales)
Product Sales 16.0% 16.6% 18.0% 17.4% 17.7%
Service Sales 36.4% 36.5% 36.8% 38.1% 39.7%
<PAGE>22
COST REDUCTION ACTIONS
Cost reduction continues to be a corporate-wide imperative, implemented by each
business unit. Manufacturing costs must continue to be reduced to remain
competitive in all of our businesses, but particularly in the aerospace segments
where these cost reductions are needed to offset the effects of lower volumes.
As a result of cost reduction measures since 1991, Pratt & Whitney's workforce
was reduced from 44,600 to 29,900 employees and floor space has been reduced by
4.5 million square feet. Additionally, during that period, the workforce of the
Hamilton Standard and Sikorsky businesses of the Flight Systems segment has been
reduced from 23,500 to 16,400 employees. Since 1991, 33,300 workforce positions
have been eliminated corporate-wide, partially offset by the addition of
positions through acquisitions and internal growth, principally in the Asia
Pacific region and Mexico. Floor space totaling 1.9 million and 10.1 million
square feet has been eliminated during 1995 and from 1991 to date, respectively.
These reductions exceed our goals established in 1991.
RESULTS OF OPERATIONS
Revenues:
Increased 8% or $1,605 million from 1994 to 1995.
Increased 1% or $116 million from 1993 to 1994.
In Millions of Dollars 1995 1994 1993
- -------------------------------------------------------
Product sales $17,972 $16,670 $16,671
Service sales 4,652 4,131 4,065
Financing revenues
and other 178 396 345
Revenues increased 13% during 1995 in the combined Otis, Carrier and
Automotive segments, while combined revenues in the Pratt & Whitney and Flight
Systems segments were essentially flat. It is estimated that increases in sell-
ing prices to customers averaged approximately 2% in 1995 and 1% in 1994. The
net impact of translating sales of foreign subsidiaries increased sales by 2% in
1995 and decreased sales by 1% in 1994, indicating that the real volume of sales
increased 5% in 1995 and was essentially unchanged in 1994.
Financing revenues and other income, less other deductions decreased
$218 million in 1995 and increased $51 million in 1994. Financing revenues and
other income decreased in 1995 principally as a result of the absence of the $87
million gain realized on the 1994 sale of the interest in Westland Group plc,
the sale of an additional participation interest in the PW4000 engine program by
Pratt & Whitney and insurance litigation settlements, partially offset by a $51
million charge relating to the adoption of AICPA Statement of Position (SOP)
93-6, "Employers' Accounting for Employee Stock Ownership Plans," which all
occurred in 1994. Financing revenues were also lower in 1995 due to a lower
customer financing asset base. Financing revenues and other income, less other
deductions increased $51 million in 1994 from 1993, principally due to the $87
million gain realized on the sale of the equity share holdings in Westland
Group plc.
In Millions of Dollars 1995 1994 1993
- -------------------------------------------------------
Cost of products sold $14,793 $13,773 $13,666
Product margin % 17.7% 17.4% 18.0%
Cost of services sold $ 2,807 $ 2,559 $ 2,571
Service margin % 39.7% 38.1% 36.8%
The 1994 product margin as a percentage of sales, excluding the impact
of $85 million in downsizing charges recorded during that year, was 17.9%.
Product margins as a percent of sales are relatively flat over the three year
period with lower margins in Flight Systems offset by improvements at Pratt &
Whitney. The Corporation's cost reduction programs have enabled product margins
to remain relatively constant despite an 8% reduction in combined Pratt &
Whitney and Flight Systems revenues in each of the years 1995 and 1994 from 1993
levels. Service margins as a percentage of sales improved in most of the
Corporation's businesses.
In Millions of Dollars 1995 1994 1993
- -------------------------------------------------------
Research and development $963 $978 $1,137
Percent of sales 4.3% 4.7% 5.5%
Research and development expenses decreased $15 million (2%) and $159
million (14%) in 1995 and 1994, respectively, from each of the prior years. The
decrease in 1995 occurred principally in the Flight Systems segment as several
development programs at Hamilton Standard reached completion, while the 1994
decrease occurred principally at Pratt & Whitney due to the completion of the
development phases of the PW4084 commercial engine which was certified in 1994.
Research and development expenses in 1996 are expected to remain between 4% and
5% of sales.
In Millions of Dollars 1995 1994 1993
- -------------------------------------------------------
Selling, general and
administrative $2,651 $2,536 $2,547
Percent of sales 11.7% 12.2% 12.3%
Selling, general and administrative expenses decreased one-half of a
percentage point as a percent of sales during 1995 and decreased one-tenth of
a percentage point during 1994 from each of the prior years. Selling, general
and administrative expense as a percent of sales decreased in most of the
Corporation's businesses. The decreases resulted principally from the effects
of the Corporation's cost reduction efforts and the leveraging of current cost
structures on increased volumes in certain of the businesses.
<PAGE>23
<TABLE>
<CAPTION>
Revenues Operating Profits Operating Profit Margin
- -------------------------------------------------------------------------------------------------------------------
In Millions of Dollars 1995 1994 1993 1995 1994 1993 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Otis $5,287 $4,644 $4,418 $511 $421 $377 9.7% 9.1% 8.5%
Carrier 5,456 4,919 4,480 354 278 226 6.5% 5.7% 5.0%
Automotive 3,061 2,683 2,378 180 182 148 5.9% 6.8% 6.2%
Pratt & Whitney 6,170 5,846 6,317 530 380 186 8.6% 6.5% 2.9%
Flight Systems 2,947 3,218 3,555 209 282 355 7.1% 8.8% 10.0%
</TABLE>
SEGMENT REVIEW
1995 COMPARED TO 1994
OTIS segment revenues for 1995 increased $643 million (14%) over 1994. Excluding
the favorable impact of foreign exchange translation effects, 1995 revenues
increased approximately 8% over 1994 with all geographic regions showing an
increase compared to last year, led by the Asia Pacific region.
Segment operating profits for Otis in 1995 increased $90 million (21%)
compared to 1994. Approximately one-third of the increase was due to favorable
foreign exchange translation effects with the balance due to improved
performance, principally in the service businesses. All geographic regions
registered increases over the prior year with the strongest gain coming from the
Asia Pacific region.
CARRIER segment revenues for 1995 increased $537 million (11%) over 1994.
Excluding the favorable impact of foreign exchange translation effects, 1995
revenues increased approximately 8% over 1994. Revenues increased in all
businesses led by strong growth in the Asia Pacific region and a strong summer
selling season in North America.
Carrier segment operating profits for 1995 increased $76 million (27%)
compared to 1994. Approximately one-fourth of the increase was due to favorable
foreign exchange translation effects with the balance due to improved perform-
ance in all businesses compared to last year. Results also include a gain from
selling a joint venture interest in its Arkadelphia scroll compressor plant,
which was substantially offset by charges for closure and consolidation of
certain facilities and start-up costs of four new joint ventures in the PRC.
AUTOMOTIVE segment revenues increased $378 million (14%) in 1995, on relatively
flat industry volumes, primarily due to higher vehicle content and new vehicle
launches in North America and increased European market penetration.
Automotive segment operating profits for 1995 decreased $2 million from
1994. The positive effects of higher revenues in Europe and North America were
partially offset by global increases in raw material costs and continuing costs
in support of new vehicle model awards in North America. Segment results are
lower year to year due to a fourth quarter 1995 provision for cost reduction
actions, including consolidation of certain production facilities to enhance
Automotive's cost structure and competitive position. The cost reduction actions
should help mitigate the effect of future price reductions under long-term
agreements with OEM customers.
PRATT & WHITNEY segment revenues for 1995 increased $324 million (6%) from 1994.
The increase reflects higher volumes in Pratt & Whitney's commercial and general
aviation businesses.
Pratt & Whitney segment operating profits increased $150 million (39%)
from 1994, $50 million being attributable to the absence of the 1994 downsizing
charge. Excluding the 1994 downsizing charge, the increase was $100 million or
23%, reflecting higher revenues and improved margins. Improved results were
partially offset by increases to manufacturing cost estimates on commercial
engine contracts, principally higher than anticipated production costs on the
PW4084 engine, and the absence of the 1994 sale of a participation interest in
the PW4000 engine program.
FLIGHT SYSTEMS segment revenues for 1995 decreased $271 million (8%) from 1994.
The decrease reflects the absence of the 1994 sale of shares of Westland Group
plc, the 1994 Norden divestiture and lower 1995 revenues at Sikorsky.
Flight Systems operating profits decreased $73 million (26%) in 1995.
The 1994 results include an $87 million gain realized on the sale of shares of
Westland Group plc and $35 million in downsizing charges at Hamilton Standard.
Operating profits excluding those items decreased $21 million. The 1995 results
reflect improved operating performance at Hamilton Standard, offset by a service
and warranty provision for a Hamilton Standard propeller, costs associated with
selling the wafer fabrication facility of Hamilton Standard's Microelectronics
Center and
[Bar Charts - Page 23]
1991 1992 1993 1994 1995
RESEARCH AND DEVELOPMENT
(% of Sales) 5.4% 5.6% 5.5% 4.7% 4.3%
SELLING, GENERAL AND ADMINISTRATIVE
(% of Sales) 12.8% 13.9% 12.3% 12.2% 11.7%
<PAGE>24
lower helicopter volumes and workforce reduction charges at Sikorsky.
1994 COMPARED TO 1993
OTIS segment revenues for 1994 increased $226 million (5%) over 1993. Increased
revenues in the Asia Pacific region and North America were partially offset by
slightly lower revenues in Europe and Latin America. Revenue increases in the
Asia Pacific region were particularly significant during 1994, in part from the
increased investment made in the PRC earlier in the year which allowed for full
consolidation. While lower new equipment volumes negatively affected revenues in
Europe and Latin America, the reduction was partially offset by higher service
revenues. The impact of the translation of foreign currency revenues into U.S.
dollars was a negative $19 million for 1994.
Segment operating profits for Otis in 1994 increased $44 million (12%),
improving in all regions with the exception of Latin America. Increases in the
Asia Pacific region resulted primarily from the consolidation of the PRC opera-
tions and the growth of the Asian market. European results improved due to the
higher service volumes.
CARRIER segment revenues for 1994 increased $439 million (10%) over 1993.
Revenues were higher at Carrier Transicold and in all geographic regions except
Europe where volumes were lower. Revenue increases were particularly strong in
North America reflecting the impact of significant volume increases. The impact
of the translation of foreign currency revenues into U.S. dollars was not
significant during 1994.
Carrier segment operating profits for 1994 increased $52 million (23%)
primarily due to improved results in North America and at Carrier's Transicold
business. Operations in the PRC also showed continued strength and accounted for
approximately 15% of Carrier's operating profits over the last three years.
AUTOMOTIVE segment revenues increased $305 million (13%) in 1994 primarily due
to higher North American industry volumes and increased European market
penetration.
Automotive segment operating profits for 1994 increased $34 million
(23%) over 1993. The increase is primarily attributable to higher sales volumes
and the absence of the 1993 charges to rationalize certain manufacturing
operations in Europe. Partially offsetting the 1994 increases were higher launch
costs in support of new model awards in North America.
PRATT & WHITNEY segment revenues for 1994 decreased $471 million (8%). During
1994, shipments of commercial engines and sales of government spare parts were
lower than those in the previous year. These reductions during 1994 were
partially offset by higher commercial airline spare part sales and military
engine shipments. Also, the 1993 results included revenues resulting from the
renegotiation of certain aircraft leases.
Pratt & Whitney segment operating profits increased $194 million (104%)
from 1993. Despite the reduction in revenue, Pratt's operating profit increased
as a result of the benefits of continuing cost reduction programs, lower
research and development spending driven by engine certification schedules and
higher commercial spare parts sales. The impact of higher manufacturing cost
estimates on commercial engine contracts in the 1994 second quarter, principally
related to higher initial production costs on the PW4084 engine, partially
offset these improvements. In addition, Pratt & Whitney recorded approximately
$50 million of charges during the second quarter of 1994 for certain volume
related downsizing actions.
FLIGHT SYSTEMS segment revenues for 1994 decreased $337 million (10%) from 1993.
Excluding the 1994 second quarter gain on the sale of the equity share holdings
in Westland Group plc, segment revenues decreased $424 million (12%) from 1993.
Revenues decreased primarily as a result of lower international helicopter
shipments at Sikorsky, continuing reductions in commercial aerospace volumes
at Hamilton Standard, and the absence of Norden revenues after its sale in
May 1994.
Flight Systems operating profits decreased $73 million (21%) in 1994.
Excluding the gain on the equity share holdings in Westland Group plc, segment
operating profits decreased $160 million (45%) from 1993. Operating profits
decreased primarily as a result of higher costs associated with the introduction
of new products and continuing lower commercial aerospace volumes at Hamilton
Standard, and the absence of Norden results. In addition, Hamilton Standard
recorded approximately $35 million of charges during the second quarter of 1994
for certain volume related downsizing actions.
Interest expense:
Decreased 11% or $31 million from 1994 to 1995.
Increased 10% or $24 million from 1993 to 1994.
The decrease in interest expense in 1995 is mainly due to a reduced
average borrowing level compared to last year as the Corporation continued to
retire or extinguish debt with its improved cash flow, partially offset by
increased interest rates. Interest expense includes $39 million and $41 million
of expense in 1995 and 1994, respectively, resulting from the 1994 change in
accounting for the Corporation's ESOP. Excluding this effect, interest expense
decreased $17 million or 7% in 1994 compared to 1993.
<PAGE>25
1995 1994 1993
- ----------------------------------------------------------
Weighted-average interest
rate on short-term
borrowings 8.8% 6.3% 5.5%
Weighted-average interest
rate on total debt
(including the effect of
interest rate swaps) 8.5% 7.6% 7.2%
The average rate applicable to debt outstanding at December 31, 1995 was
10.5% for short-term borrowings and 8.2% for total debt including the effect of
interest rate hedges. Short-term borrowing rates exceed those of total debt due
to higher short-term borrowing rates in certain foreign operations.
1995 1994 1993
- ----------------------------------------------------------
Effective income tax rate 34.5% 35.7% 37.0%
The Corporation has reduced its effective income tax rate over the last
three years by implementing tax reduction strategies.
The future tax benefit arising from net deductible temporary differences
is $1,505 million and relates to expenses recognized for financial reporting
purposes which will result in tax deductions over varying future periods. The
realization of this amount is dependent upon the generation of sufficient
taxable income, primarily in the United States, over these future periods,
including applicable carryforward periods. Based on the Corporation's business
plans, and the tax planning strategies available, management believes that the
Corporation's earnings during the periods when the temporary differences turn
around will be sufficient to realize those future income tax benefits.
Minimum tax credit and certain state tax credit carryforwards have no
expiration date. Foreign and state tax loss carryforwards arise in a number of
different taxing jurisdictions with expiration dates ranging from 1996 to 2010.
For those jurisdictions where the expiration date or the projected operating
results indicate that realization is not likely, a valuation allowance has been
provided. U.S. foreign tax credit carryforwards, which require future foreign
source income to be utilized, expire after five years and are reserved through
valuation allowances.
The Corporation believes, based upon a review of prior period income tax
returns, that it is entitled to income tax refunds for prior periods. These
potential refunds will be reviewed as part of the examination of the
Corporation's income tax returns by the Internal Revenue Service and the impact
on the Corporation's liability for income taxes for these years cannot presently
be determined.
Net income:
Increased 28% or $165 million from 1994 to 1995.
Increased 20% or $98 million from 1993 to 1994.
The Corporation adopted AICPA Statement of Position (SOP) 93-6,
"Employers' Accounting for Employee Stock Ownership Plans," in the fourth
quarter of 1994, effective January 1, 1994. As a result of this change, net
income for 1994 was reduced by $59 million, including a $31 million one-time
cumulative after tax charge. The reductions to net income, preferred stock
dividend requirements, and ESOP shares considered outstanding (8.5 million
shares) in 1994 have the combined effect of decreasing 1994 earnings per share
by $.05. See Note 2 of Notes to Consolidated Financial Statements for additional
information on the ESOP accounting change.
LIQUIDITY AND FINANCING COMMITMENTS
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 require-
ments, adequate bank lines of credit, and financial flexibility to attract
long-term capital with satisfactory terms.
In Millions of Dollars 1995 1994 1993
- ----------------------------------------------------------------------------
Net Cash Flows from
Operating Activities $2,044 $1,357 $1,508
Capital expenditures (780) (759) (846)
(Increase) decrease in
customer financing
assets, net 235 297 (208)
Common Stock repurchase (221) (270) --
Change in total debt (402) (516) (187)
Change in net debt (916) (481) (254)
Cash flows from operating activities increased $687 million in 1995
compared to 1994. The improvement resulted primarily from improved operating
performance and working capital management, and the absence of a $150 million
payment to the U.S. Government made in the second quarter of 1994 for a
previously recorded settlement by Sikorsky Aircraft.
Cash flows from investing activities were a use of funds of $654 million
during 1995 compared to a $289 million use in 1994. Purchases of fixed assets in
1995 increased slightly from 1994, however, as a percentage of sales they have
declined over the past three years. The Corporation expects 1996 capital spend-
ing to be comparable to 1995. Customer financing activity was a net source of
funds during 1995. This was a result of both lower funding requirements in 1995
and the sale of certain of these assets to third parties. The Corporation
expects that customer financing will be a net use of funds in 1996. Acquisitions
and dispositions of business units were a net use of investment funds in 1995
compared to a net source of funds in 1994. Proceeds from
<PAGE>26
the disposition of business units in 1994 primarily included the sale of shares
of Westland Group plc and the net operating assets of Norden. Proceeds in 1995
primarily include the sale of a joint venture interest in Arkadelphia. The
increase in funding for acquisitions in 1995 is primarily attributable to the
acquisition of Boral Building Technologies, an Australian elevator company.
Financing cash flows include the Corporation's repurchase of $221
million of Common Stock during 1995, representing 2.8 million shares, under
previously announced stock repurchase programs. These stock repurchase programs
were undertaken to counter the dilutive effects of shares issued under employee
compensation and benefit programs.
In Millions of Dollars 1995 1994
- ----------------------------------------------------------
Cash and cash equivalents $ 900 $ 386
Total debt 2,041 2,443
Net debt (total debt less cash) 1,141 2,057
Shareowners' equity 4,021 3,752
Debt to total capitalization 33.7% 39.4%
Net debt to total capitalization 22.1% 35.4%
The Corporation manages its worldwide cash requirements with considera-
tion of available funds among the many subsidiaries through which it conducts
its business and the cost effectiveness with which those funds can be accessed.
The repatriation of cash balances from certain of the Corporation's subsidiaries
could have adverse tax consequences, however, those balances are generally
available without legal restrictions to fund ordinary business operations. The
Corporation has and will continue to transfer cash from those subsidiaries to
the parent and to other international subsidiaries as it is cost effective to
do so.
At December 31, 1995, the Corporation had credit commitments from banks
totaling $1.1 billion under a Revolving Credit Agreement. The agreement provides
for borrowings at prevailing interest rates up to the prime rate and expires
September 30, 1999. At December 31, 1995, there were no borrowings under the
Revolving Credit Agreement. Long-term financing will continue to be considered
in the future if conditions are advantageous, and in that regard, under an
effective Registration Statement on file with the Securities and Exchange
Commission at December 31, 1995, up to $871 million of medium-term and
long-term debt of the Corporation could be issued.
During 1995, the Corporation canceled $600 million of outstanding
interest rate swap contracts to fix interest rates on the Corporation's debt at
favorable rates. As a result of debt reduction and these contract cancellations,
the Corporation's ratio of floating-rate debt to total debt, after taking
interest rate hedges into account, was 18% at December 31, 1995 compared to 42%
at December 31, 1994.
In addition to the requirements discussed above, at December 31, 1995,
the Corporation had commitments to finance or arrange financing for approxi-
mately $990 million of commercial aircraft, of which as much as $342 million may
be required to be disbursed in 1996. The Corporation cannot currently predict
the extent to which these commitments will be utilized, since certain customers
may be able to obtain more favorable terms from other financing sources. From
time to time, the Corporation also arranges for third party investors to assume
a portion of its commitments.
The Corporation believes that existing sources of liquidity are adequate
to meet anticipated short-term borrowing needs at comparable risk-based interest
rates for the foreseeable future.
ENVIRONMENTAL MATTERS
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. As a result of this, the Corpora-
tion has established certain policies and continually updates its policies
relating to environmental standards of performance for its operations worldwide.
The Corporation has identified approximately 350 locations, most of
which are in the United States, at which it may have some liability for
remediating contamination. The Corporation does not believe that any single
location's exposure is individually material to the Corporation. Sites in the
investigation or remediation stage represent approximately 97% of the
Corporation's recorded liability. The remaining 3% of the recorded liability
consists of sites identified where the Corporation may have some liability but
investigation is in the initial stages or has not begun. Expenditures for
environmental remediation activities were $40 million in 1995, $57 million in
1994 and $64 million in 1993. It is estimated that expenditures in each of the
next two years will not exceed $75 million in the aggregate for these sites.
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). The Corporation has been identified as a potentially
responsible party at approximately 88 such federal Superfund sites. The number
of Superfund sites in and of itself does not represent a relevant measure of
liability, because the nature and extent of environmental concerns vary from
site to site and the Corporation's share of responsibility varies from sole
responsibility to very little responsibility. In estimating its liability for
remediation, the Corporation considers its likely proportionate share of the
anticipated remediation expense and
<PAGE>27
the ability of 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 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 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. Environmental liabilities are not reduced by potential insurance
reimbursements.
Notwithstanding the uncertainties discussed above, and taking into
account the Corporation's policies, standards of performance and programs
related to the environment, the Corporation believes that expenditures necessary
to comply with the present regulations governing environmental protection will
not have a material effect upon its capital expenditures, competitive position,
financial position or results of operations.
U.S. GOVERNMENT
The Corporation's contracts with the U.S. Government are 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.
DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation uses derivative financial instruments to manage foreign
currency, interest rate and raw material price exposures in the following five
areas: foreign currency transactions, foreign net assets, customer financing
assets, debt and raw material requirements. Derivative financial instruments
utilized by the Corporation in its hedging activities are Over The Counter
instruments, involve little complexity and are viewed as risk management tools.
The Corporation prohibits the use of derivative financial instruments for
speculative purposes. The Corporation diversifies the counterparties used and
monitors the concentration of risk to limit its counterparty exposure.
International operations, including U.S. export sales, constitute a sig-
nificant portion of the revenues and identifiable assets of the Corporation,
averaging approximately $11.6 billion and $5.0 billion, respectively, over the
last three years. These operations result in a large volume of foreign currency
commitment and transaction exposures and significant foreign currency net asset
exposures. Foreign currency commitment and transaction exposures are managed at
the operating unit level as an integral part of the business. To the extent that
foreign currency exposures cannot be offset or managed to an insignificant
amount, it is the Corporation's policy to hedge these residual foreign currency
commitment and transaction exposures. These hedges are scheduled to mature
coincident with the timing of the underlying foreign currency commitments and
transactions.
The Corporation manages the relative proportions of its fixed rate and
floating rate debt in the context of the interest rate environment, expected
cash flow and anticipated debt retirements. While the hedging strategies on both
debt and customer financing assets are an integral portion of the Corporation's
risk management, the impact on earnings during the periods was not material.
FUTURE ACCOUNTING CHANGES
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based
Compensation." The Corporation does not intend to adopt the new compensation
expense provisions of FAS 123 but will adopt the disclosure provisions in 1996.
[Bar Charts - Page 27]
1991 1992 1993 1994 1995
CAPITAL EXPENDITURES
AND DEPRECIATION ($ Millions)
Depreciation $735 $777 $777 $793 $792
Capital Expenditures $1,048 $920 $846 $759 $780
OPERATING CASH FLOWS
($ Billions) $1.9 $1.2 $1.5 $1.4 $2.0
<PAGE>28
MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
The financial statements of United Technologies Corporation and its subsidiaries
are the responsibility of the Corporation's management and have been prepared in
accordance with generally accepted accounting principles.
Management is responsible for the integrity and objectivity of the
financial statements, including estimates and judgments reflected in them. It
fulfills this responsibility primarily by establishing and maintaining
accounting systems and practices adequately supported by internal accounting
controls. These controls are designed to provide reasonable assurance that the
Corporation's assets are safeguarded, that transactions are executed in accor-
dance with management's authorizations, and that the financial records are
reliable for the purpose of preparing financial statements. Self-monitoring
mechanisms are also a part of the control environment whereby, as deficiencies
are identified, corrective actions are taken. Even an effective internal control
system, no matter how well designed, has inherent limitations -- including the
possibility of the circumvention or overriding of controls -- and, therefore,
can provide only reasonable assurance with respect to financial statement
preparation and such safeguarding of assets. Further, because of changes in
conditions, internal control system effectiveness may vary over time.
The Corporation assessed its internal control system as of December 31,
1995. Based on this assessment, management believes the internal accounting
controls in use provide reasonable assurance that the Corporation's assets are
safeguarded, that transactions are executed in accordance with management's
authorizations, and that the financial records are reliable for the purpose of
preparing financial statements.
Independent accountants are appointed annually by the Corporation's
shareowners to audit the financial statements in accordance with generally
accepted auditing standards. Their report appears in this Annual Report. Their
audits, as well as those of the Corporation's internal audit department, include
a review of internal accounting controls and selective tests of transactions.
The Audit Review Committee of the Board of Directors, consisting of six
directors who are not officers or employees of the Corporation, meets regularly
with management, the independent accountants, and the internal auditors, to
review matters relating to financial reporting, internal accounting controls and
auditing.
/s/ GEORGE DAVID
George David
President and Chief Executive Officer
/s/ STEPHEN F. PAGE
Stephen F. Page
Executive Vice President and Chief Financial Officer
REPORT OF INDEPENDENT
ACCOUNTANTS
To the Shareowners of
United Technologies Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and of cash flows present fairly, in all
material respects, the financial position of United Technologies Corporation and
its subsidiaries at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Corporation's manage-
ment; our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 2, the Corporation changed its method of accounting
for its Employee Stock Ownership Plan in 1994.
/s/ PRICE WATERHOUSE LLP
One Financial Plaza
Hartford, Connecticut
January 24, 1996
<PAGE>29
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
In Millions of Dollars (except per share amounts) Years Ended December 31 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Product sales $17,972 $16,670 $16,671
Service sales 4,652 4,131 4,065
Financing revenues and other income, less other deductions 178 396 345
- ---------------------------------------------------------------------------------------------------------------------------------
22,802 21,197 21,081
- ---------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of products sold 14,793 13,773 13,666
Cost of services sold 2,807 2,559 2,571
Research and development 963 978 1,137
Selling, general and administrative 2,651 2,536 2,547
Interest 244 275 251
- ---------------------------------------------------------------------------------------------------------------------------------
21,458 20,121 20,172
- ---------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and minority interests 1,344 1,076 909
Income taxes 464 384 336
Minority interests in subsidiaries' earnings 130 107 86
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 750 $ 585 $ 487
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK
Primary earnings $ 5.70 $ 4.40 $ 3.53
Fully diluted earnings 5.70 4.40 3.30
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>30
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
In Millions of Dollars December 31 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 900 $ 386
Accounts receivable (net of allowance for doubtful accounts of $347 and $336) 3,682 3,745
Inventories and contracts in progress (net of progress payments and billings) 2,954 2,955
Future income tax benefits 950 929
Other current assets 466 213
- ---------------------------------------------------------------------------------------------------------------------------------
Total Current Assets 8,952 8,228
Customer financing assets 321 620
Future income tax benefits 552 594
Fixed assets 4,420 4,532
Other assets 1,713 1,650
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $15,958 $15,624
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 294 $ 402
Accounts payable 2,084 1,924
Accrued liabilities 4,183 4,071
Long-term debt currently due 98 156
- ---------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 6,659 6,553
Long-term debt 1,649 1,885
Future pension and postretirement benefit obligations 1,399 1,389
Future income taxes payable 130 196
Other long-term liabilities 1,233 1,110
Commitments and contingent liabilities (Notes 4 and 15)
Minority interests in subsidiary companies 469 400
Series A ESOP Convertible Preferred Stock, $1 par value (Authorized-20,000,000 shares)
Outstanding-13,407,056 and 13,619,115 shares 892 905
ESOP deferred compensation (494) (566)
---------- ----------
398 339
Shareowners' Equity:
Capital Stock:
Preferred Stock, $1 par value (Authorized-230,000,000 shares; none issued or outstanding) -- --
Common Stock, $5 par value (Authorized-500,000,000 shares)
Issued-141,919,740 and 140,154,766 shares 2,249 2,148
Treasury Stock (19,848,487 and 17,018,899 common shares at cost) (1,168) (947)
Retained earnings 3,252 2,790
Currency translation and pension liability adjustments (312) (239)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREOWNERS' EQUITY 4,021 3,752
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $15,958 $15,624
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>31
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
In Millions of Dollars Years Ended December 31 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 750 $ 585 $ 487
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and amortization 844 840 815
Minority interests in subsidiaries' earnings 130 107 86
Gain on sale of Westland Group plc -- (87) --
Change in:
Accounts receivable 149 (756) 45
Inventories and contracts 2 290 335
Other current assets (179) 161 (55)
Accounts payable and accrued liabilities 283 239 73
Restructuring liabilities (106) (233) (393)
ESOP deferred compensation 45 119 --
Other, net 126 92 115
- ---------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 2,044 1,357 1,508
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (780) (759) (846)
Increase in customer financing assets (138) (248) (356)
Decrease in customer financing assets 373 545 148
Acquisitions of business units (204) (125) --
Dispositions of business units 103 282 --
Other (8) 16 28
- ---------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (654) (289) (1,026)
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt -- 25 27
Repayment of long-term debt (299) (207) (636)
Increase (decrease) in short-term borrowings (92) (379) 403
Common Stock issued for employee stock plans and other 101 73 110
Dividends paid on Common and ESOP Preferred Stock (252) (238) (267)
Common Stock repurchase (221) (270) --
Dividends to minority interests and other (111) (102) (16)
- ---------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES (874) (1,098) (379)
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash and cash equivalents (2) (5) (36)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 514 (35) 67
Cash and Cash Equivalents, Beginning of year 386 421 354
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of year $ 900 $ 386 $ 421
- ---------------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of amounts capitalized $ 220 $ 237 $ 239
Income taxes paid, net of refunds 461 248 179
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING PRINCIPLES
The consolidated financial statements include the accounts of the Corporation
and its subsidiaries. International operating subsidiaries are included
generally on the basis of fiscal years ending November 30. Intercompany
transactions have been eliminated. Certain reclassifications have been made to
prior year amounts to conform to the current year presentation. The preparation
of financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents includes cash on hand,
demand deposits and short-term cash investments which are highly liquid in
nature and have original maturities of three months or less.
INVENTORIES AND CONTRACTS IN PROGRESS: Inventories and contracts in progress are
stated at the lower of cost or estimated realizable value and are primarily
based on first-in, first-out (FIFO) cost or average cost methods; however,
certain subsidiaries use the last-in, first-out (LIFO) method. Costs accumulated
against specific contracts or orders are at actual costs. Materials in excess of
requirements for contracts and orders currently in effect or anticipated have
been written off.
Manufacturing tooling costs are charged to inventories or to fixed
assets depending upon their nature, general applicability and useful lives.
Tooling costs included in inventory are charged to cost of sales based on usage,
generally within two years after they enter productive use.
Manufacturing costs are allocated to current production and firm con-
tracts. General and administrative expenses are charged to expense as incurred.
FIXED ASSETS: Fixed assets are stated at cost. Depreciation is computed over the
assets' useful lives using accelerated methods for aerospace operations and the
straight-line method for other operations.
GOODWILL: Costs in excess of values assigned to the underlying net assets of
acquired companies are included in other assets and are generally being
amortized over periods ranging up to 40 years. On a periodic basis, the
Corporation estimates the future undiscounted cash flows of the businesses to
which goodwill relates to ensure that the carrying value of such goodwill has
not been impaired.
REVENUE RECOGNITION: Sales under government and commercial fixed-price contracts
and government fixed-price-incentive contracts are recorded at the time
deliveries are made or, in some cases, on a percentage of completion basis.
Sales under cost-reimbursement contracts are recorded as work is performed and
billed. Sales of commercial aircraft engines sometimes require significant
participation by the Corporation in aircraft financing arrangements; when
appropriate, such sales are accounted for as operating leases. Sales under
elevator and escalator installation and modernization contracts are accounted
for under the percentage of completion method.
Prospective losses, if any, on contracts are provided for when the
losses become anticipated. Loss provisions are based upon any excess of
inventoriable manufacturing or engineering costs and estimated warranty and
product guarantee costs over the net revenue from the products contemplated by
the specific order. Contract accounting requires estimates of future costs over
the performance period of the contract. These estimates are subject to change
which can result in adjustments to margins on contracts in progress.
Service sales, representing aftermarket repair and maintenance activ-
ities, are recognized over the contractual period or as services are performed.
RESEARCH AND DEVELOPMENT: Research and development costs not specifically
covered by contracts and those related to the Corporation-sponsored share of
research and development activity in connection with cost-sharing arrangements
are charged to operations as incurred.
HEDGING ACTIVITY: The Corporation uses derivative financial instruments,
including swaps, forward contracts, and options, to manage foreign currency,
interest rate, and raw material price exposures in the following five areas:
foreign currency transactions (Note 13), foreign net assets (Note 13), customer
financing assets (Note 4), debt (Note 9), and raw material requirements
(Note 5). These derivative financial instruments are accounted for on an accrual
basis and income and expense is generally recorded in the same category as that
arising from the related asset or liability. Derivative financial instruments
are viewed by the Corporation as risk management tools and are not used for
speculative purposes.
<PAGE>33
Gains and losses on hedges of foreign currency exposure of net invest-
ments in subsidiaries are recorded in the currency translation account in
Shareowners' equity.
For derivatives that hedge firm commitments, gains and losses are
deferred and recognized when the associated hedged transaction occurs. For
derivative instruments that hedge foreign currency denominated receivables and
payables, gains and losses offset the effects of foreign exchange gains and
losses from the associated hedged receivables and payables.
EARNINGS PER SHARE: In 1995 and 1994, primary earnings per share and fully
diluted earnings per share computations are based on the average number of
shares of Common Stock and common stock equivalents outstanding during the year.
ESOP Convertible Preferred shares of the Corporation are considered common stock
equivalents when committed to employees' savings plan accounts. See Note 2 below
for discussion of the 1994 ESOP accounting change.
In 1993, primary earnings per share is computed on the average number of
shares of Common Stock and common stock equivalents outstanding, with ESOP
Convertible Preferred shares excluded from common stock equivalents. Fully
diluted earnings per share reflects the maximum dilution of earnings per share
where all of the ESOP Convertible Preferred shares of the Corporation are
treated as if-converted.
2. 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 a result of this change, the Corporation's pretax income for 1994 was
reduced by $95 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
1994 pretax income by $44 million or $28 million after tax and reduced 1994
reported preferred stock dividends by $22 million. Those reductions in net
income and preferred stock dividend requirements, and the reduction in ESOP
shares considered outstanding of 8.5 million shares in 1994, have the combined
effect of increasing 1994 earnings per share by $.18, excluding the one-time
charge. Overall, earnings per share in 1994 was reduced by $.05 as a result of
this accounting change.
3. BUSINESS DISPOSITIONS
During the second quarter of 1994, the Corporation sold its equity share
holdings in Westland Group plc and the net operating assets (excluding real
property) of its Norden subsidiary for proceeds totaling approximately $227
million. The Corporation recorded a pretax gain of $87 million on the Westland
sale which is included in Financing revenues and other income, less other
deductions in the Consolidated Statement of Operations. The impact of the Norden
sale on the Corporation's results was not significant.
4. AIRLINE INDUSTRY AND CUSTOMER FINANCING ASSETS
The Corporation has significant receivables and other financing assets which
result from its business activities with commercial airline industry customers
totaling $1,637 million and $2,290 million at December 31, 1995 and 1994,
respectively. These amounts primarily relate to Pratt & Whitney, UT Finance
Corporation and Hamilton Standard.
Customer financing assets consist of the following:
In Millions of Dollars 1995 1994
- -----------------------------------------------------------
Notes receivable $193 $274
Leases receivable, less unearned
income of $42 and $265 63 288
Products under lease 150 92
- -----------------------------------------------------------
406 654
Less: receivables due within one year 85 34
- -----------------------------------------------------------
$321 $620
Scheduled maturities of notes and leases receivable due after one year
are as follows: $74 million in 1997, $26 million in 1998, $17 million in 1999,
$16 million in 2000 and $38 million in 2001 and thereafter.
Customer aircraft financing activities are conducted principally through
UT Finance Corporation, its consolidated subsidiaries and certain other
customer financing operations.
The Corporation may sell customer financing assets from time to time
based on current market conditions and other factors. To mitigate the exposure
on certain fixed rate customer financing assets, the Corporation had entered
into interest rate swap contracts related to receivables of $206 million at
December 31, 1994. The expiration dates of the swap contracts were tied to the
specific customer financing assets. The Corporation has no interest rate swap
contracts related to customer financing assets at December 31, 1995.
The competitive commercial aircraft engine market often requires
customer financing commitments. These commitments may be in the form of
guarantees, secured debt or
<PAGE>34
lease financing. At December 31, 1995, the Corporation had commitments to
finance or arrange financing for approximately $990 million of commercial
aircraft. The Corporation cannot currently predict the extent to which these
commitments will be utilized, since certain customers may be able to obtain more
favorable terms from other financing sources. From time to time, the Corporation
also arranges for third party investors to assume a portion of its commitments.
However, should all current commitments be exercised as scheduled, the maximum
amounts that will be disbursed are as follows: $342 million in 1996, $357
million in 1997, $168 million in 1998 and $123 million in 1999. If exercised,
the financing arrangements will be secured by assets with fair values exceeding
the financed amounts. The interest rates on the financing commitments are
established at the time they are funded.
The Corporation's customer financing activities also include leasing
aircraft and subleasing the aircraft to customers. At December 31, 1995, the
Corporation's rental commitments under long-term noncancelable operating leases
aggregated $133 million ($10 million in each of the years 1996 through 2000, and
$83 million through 2008) and $265 million at December 31, 1994. In some
instances, customers have minimum lease terms which may result in sublease
periods shorter than the Corporation's lease obligation.
At December 31, 1995, the Corporation also had approximately $176
million ($273 million at December 31, 1994) of residual value and other
guarantees related to various commercial aircraft engine customer financing
arrangements. Where applicable, the estimated fair market value of the assets
securing these guarantees equaled or exceeded the related guarantees, after
considering existing reserves.
The Corporation has a 33% interest in International Aero Engines AG
(IAE), an international consortium of five shareholders for the V2500 commercial
aircraft engine program. IAE may offer customer financing in support of V2500
engine sales. As of December 31, 1995, IAE has lease obligations under long-term
noncancelable leases of approximately $365 million through 2021. These lease
obligations are secured by aircraft which are subleased to customers under long-
term leases, with short-term cancellation provisions, and whose fair values
exceed the financed amounts. IAE has remaining commitments to provide
approximately $400 million of similar lease financing. The shareholders of IAE
have guaranteed IAE's lease obligations to the extent of their respective
ownership interests. In the event any shareholder were to default on such
guarantees, the other shareholders would be proportionately responsible. The
Corporation's share of IAE lease commitments and guarantees is approximately
$250 million at December 31, 1995 and 1994.
Allowances for possible losses relating to financing activities with
commercial airline customers decreased to $274 million at December 31, 1995,
from $373 million at December 31, 1994. The reduction is primarily due to the
realization in 1995 of previously reserved losses on the disposition of customer
financing assets and lease obligations.
5. INVENTORIES AND CONTRACTS IN PROGRESS
Inventories and contracts in progress consist of the following:
In Millions of Dollars 1995 1994
- ---------------------------------------------------------------
Inventories $ 3,278 $ 3,357
Elevator and escalator
contracts in progress 1,203 1,023
- ---------------------------------------------------------------
4,481 4,380
Less:
Progress payments, secured
by lien, on United States
Government contracts (154) (204)
Billings on contracts in progress (1,373) (1,221)
- ---------------------------------------------------------------
$ 2,954 $ 2,955
The methods of accounting followed by the Corporation do not permit
classification of inventories by categories, however, inventories consist
primarily of raw materials and work in process. Contracts in progress relate to
elevator and escalator contracts and include costs of manufactured components,
accumulated installation costs and estimated earnings on incomplete contracts.
The Corporation's sales contracts in many cases are long-term contracts
expected to be performed over periods exceeding twelve months. Approximately 55%
and 58% of the total inventories and contracts in progress have been acquired or
manufactured under such long-term contracts at December 31, 1995 and 1994,
respectively. It is impracticable for the Corporation to determine the amounts
of inventory scheduled for delivery under long-term contracts within the next
twelve months.
If inventories which are valued using the LIFO method had been valued
under the FIFO method, they would have been higher by $135 million at December
31, 1995 ($138 million at December 31, 1994).
To mitigate the exposure to certain raw material price changes, the
Corporation has entered into raw material swap and option contracts of $136
million at December 31, 1995, that mature in 1996 and 1997.
<PAGE>35
6. FIXED ASSETS
Fixed assets consist of the following:
In Millions of Dollars 1995 1994
- ---------------------------------------------------------
Land $ 180 $ 164
Buildings and improvements 3,075 2,988
Machinery, tools and equipment 6,753 6,690
Under construction 318 351
- ---------------------------------------------------------
10,326 10,193
Accumulated depreciation (5,906) (5,661)
- ---------------------------------------------------------
$ 4,420 $ 4,532
Depreciation expense was $792 million in 1995, $793 million in 1994 and
$777 million in 1993.
7. OTHER ASSETS
Other assets consist of the following:
In Millions of Dollars 1995 1994
- ---------------------------------------------------------
Goodwill (net of accumulated
amortization of $337 and $300) $ 587 $ 582
Receivables due after one year 220 227
Investments 261 204
Prepaid pension costs and other 645 637
- ---------------------------------------------------------
$1,713 $1,650
Current and long-term accounts receivable at December 31, 1995 and 1994
include approximately $103 million and $96 million, respectively, representing
retainage under contract provisions and amounts which are not presently billable
because of lack of funding, final prices or contractual documents under govern-
ment contracts or for other reasons. These items are expected to be collected in
the normal course of business.
8. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
In Millions of Dollars 1995 1994
- ---------------------------------------------------------
Accrued salaries, wages and
employee benefits $ 994 $ 938
Service and warranty accruals 510 519
Advances on sales contracts 611 608
Income taxes payable 435 445
Other 1,633 1,561
- ---------------------------------------------------------
$4,183 $4,071
9. BORROWINGS AND LINES OF CREDIT
Short-term borrowings consist of the following:
In Millions of Dollars 1995 1994
- ---------------------------------------------------------
Foreign bank borrowings $219 $243
Commercial paper and notes 75 159
- ---------------------------------------------------------
$294 $402
The weighted-average interest rates applicable to short-term borrowings
outstanding at December 31, 1995 and 1994 were 10.5% and 8.5%, respectively.
At December 31, 1995, the Corporation had credit commitments from banks
totaling $1.1 billion under a Revolving Credit Agreement. The agreement provides
for borrowings at prevailing interest rates up to the prime rate. The expiration
date for the agreement is September 30, 1999 with a facility fee of .1% per year
on the aggregate commitment. There were no borrowings under Revolving Credit
Agreements during the two years ended December 31, 1995.
Principal payments required on long-term debt for the next five years
are $98 million in 1996, $174 million in 1997, $91 million in 1998, $158 million
in 1999 and $209 million in 2000. Long-term debt consists of the following:
1995 Debt
Weighted Average
In Millions of Dollars Interest Rate Maturity 1995 1994
- -------------------------------------------------------------------------------
Notes and other debt:
Denominated in U.S. dollars 8.2% 1996-2021 $ 828 $1,025
Denominated in foreign currency 7.7% 1996-2030 28 42
Capital lease obligations 7.4% 1996-2029 409 457
ESOP debt 7.5% 1996-2009 482 517
- -------------------------------------------------------------------------------
1,747 2,041
Less: long-term debt currently due 98 156
- -------------------------------------------------------------------------------
$1,649 $1,885
<PAGE>36
During 1995 the Corporation executed in-substance defeasances relating
to $130 million of its debt. The Corporation deposited U.S. Government
Securities into irrevocable trusts to cover the interest and principal payments
on this debt. For financial reporting purposes, the debt has been considered
extinguished, and the loss on these transactions, which was immaterial, is
included in Financing revenues and other income, less other deductions.
The Corporation enters into interest rate contracts to decrease funding
costs by managing the relative proportion of fixed and floating rate debt, to
diversify sources of funding and to manage the scheduled maturities of debt. The
Corporation had $18 million and $621 million of interest rate contracts which
swap fixed interest rates for floating rates at December 31, 1995 and 1994,
respectively. The expiration dates of the various contracts are tied to
scheduled debt and capital lease obligation payment dates and extend to 2002.
In 1991, the Corporation entered into a $75 million structured financing
arrangement. Under this arrangement, noteholders are entitled to receive the
original principal plus an amount based on the appreciation in the Standard &
Poors Pharmaceutical Index. The Corporation has hedged the appreciation portion
of this obligation through an option and a swap which effectively converts the
payments to floating short-term interest rates at a discount to that of
commercial paper.
At December 31, 1994, the Corporation had a $100 million outstanding
option which gave the counterparty the right to receive a fixed rate and pay a
floating rate. This option mirrored the call provision in one of the Corpora-
tion's outstanding debt issues and effectively fixed the interest rate to the
stated final maturity of the related debt. The option was terminated in 1995
when the underlying debt instrument was extinguished through an in-substance
defeasance.
The percentage of total debt at floating interest rates after taking
effect of the interest rate contracts is 18% and 42% at December 31, 1995 and
1994, respectively. The weighted average interest rates on long-term debt
presented in the table include the effect of interest rate swap agreements.
CAPITALIZED INTEREST: During 1995, the Corporation and its consolidated subsid-
iaries capitalized $16 million ($19 million in 1994 and $29 million in 1993)
of interest, to be depreciated over the lives of the related fixed assets.
10. TAXES ON INCOME
Significant components of income taxes (benefits) for each year are as follows:
In Millions of Dollars 1995 1994 1993
- -------------------------------------------------------------
Current:
United States:
Federal $105 $ 112 $ 6
State 21 25 22
Foreign 360 351 226
- -------------------------------------------------------------
486 488 254
- -------------------------------------------------------------
Future:
United States:
Federal (78) (133) 4
State (6) 2 22
Foreign 5 1 27
- -------------------------------------------------------------
(79) (130) 53
- -------------------------------------------------------------
407 358 307
Benefits attributable to
items credited to
equity and goodwill 57 26 29
- -------------------------------------------------------------
$464 $ 384 $336
Future income taxes represent the tax effects of transactions which are
reported in different periods for financial and tax reporting purposes. These
differences consist of temporary differences, which are the tax effects of
differences between the tax and financial reporting balance sheets, and tax
carryforwards. The tax effects of temporary differences and carryforwards which
gave rise to future income tax benefits and payables at December 31, 1995 and
1994 are as follows:
In Millions of Dollars 1995 1994
- ------------------------------------------------------------
Future income tax benefits:
Inventories and contracts $ 393 $ 443
Fixed assets (221) (211)
Insurance and employee benefits 596 604
Warranty liability 191 217
Environmental and restructuring
liabilities 238 258
Other items, net 308 193
Tax loss carryforwards 125 153
Tax credit carryforwards 224 221
Valuation allowance (352) (355)
- ------------------------------------------------------------
$1,502 $1,523
- ------------------------------------------------------------
Future income taxes payable:
Insurance and employee benefits $ 7 $ 37
Fixed assets 99 117
Other items, net 36 62
- ------------------------------------------------------------
$ 142 $ 216
<PAGE>37
Current and non-current future income tax benefits and payables within
the same tax jurisdiction are offset for presentation in the Consolidated
Balance Sheet. Valuation allowances have been established primarily for tax
credit and tax loss carryforwards to reduce the future income tax benefits to
amounts expected to be realized. Federal loss carryforwards arise from business
acquisitions with significant restrictions as to their future realization and
consequently are fully reserved.
The sources of income before income taxes and minority interests were:
In Millions of Dollars 1995 1994 1993
- ------------------------------------------------------------
United States $ 346 $ 244 $291
Foreign 998 832 618
- ------------------------------------------------------------
$1,344 $1,076 $909
United States income taxes have not been provided on undistributed
earnings of international subsidiaries. The Corporation's intention is to
reinvest these earnings permanently or to repatriate the earnings only when it
is tax effective to do so. Accordingly, the Corporation believes that any United
States tax on repatriated earnings would be substantially offset by U.S. foreign
tax credits.
Differences between effective income tax rates and the statutory U.S.
federal income tax rates are as follows:
1995 1994 1993
- ------------------------------------------------------------
Statutory U.S. federal
income tax rate 35.0% 35.0% 35.0%
State and local income
taxes, net of federal
tax benefit 1.3 1.8 3.4
Varying tax rates of
consolidated
subsidiaries (including
Foreign Sales
Corporation) (3.7) (4.7) (1.0)
Amortization of
goodwill, without
tax effect 0.5 0.6 0.5
Foreign tax credits (1.7) 1.3 (0.4)
Other 3.1 1.7 (0.5)
- ------------------------------------------------------------
Effective income tax rates 34.5% 35.7% 37.0%
Tax credit carryforwards at December 31, 1995 are $224 million and
expire as follows: $21 million in 1998, $8 million in 1999, $1 million in 2000
and $194 million over an indefinite carry-forward period. Tax loss carryforwards
at December 31, 1995 are $804 million and expire as follows:
In Millions of Dollars Federal State Foreign
- ------------------------------------------------------------
1996-2000 $ 5 $349 $60
2001-2005 26 99 2
2006-2010 -- 205 --
Indefinite -- -- 58
11. EMPLOYEE BENEFIT PLANS
EMPLOYEE PENSION BENEFITS: The Corporation and its domestic subsidiaries have a
number of defined benefit pension plans covering substantially all U.S.
employees. Plan benefits are generally based on years of service and the
employee's compensation during the last several years of employment. The
Corporation's funding policy is based on an actuarially determined cost method
allowable under Internal Revenue Service regulations. The funds are invested
either in various securities by trustees or in insurance annuity contracts.
Certain foreign subsidiaries have defined benefit pension plans or severance
indemnity plans covering their employees.
In addition to the defined benefit plans covering U.S. and foreign
employees discussed above, the Corporation makes contributions to multiemployer
plans (predominantly defined benefit plans) covering certain employees in some
of its U.S. operations.
Summarized below are the components of pension expense for defined
benefit plans and multiemployer plans:
In Millions of Dollars 1995 1994 1993
- -----------------------------------------------------------------
Defined benefit plans:
Service expense $ 181 $ 192 $ 204
Interest expense 621 586 573
Actual return on assets (1,279) (193) (1,024)
Net amortization and
deferral of actuarial
gains (losses) 576 (506) 305
- -----------------------------------------------------------------
Pension expense $ 99 $ 79 $ 58
- -----------------------------------------------------------------
Pension expense of
multiemployer plans $ 25 $ 21 $ 19
<PAGE>38
The following table summarizes the funded status of the defined benefit
pension plans:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
In Millions of Dollars Benefits Exceed Assets Benefits Exceed Assets
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested $5,311 $1,851 $4,536 $1,619
Nonvested 467 157 557 107
- --------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 5,778 2,008 5,093 1,726
Effect of projected future salary increases 930 128 830 87
- --------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation for services rendered to date 6,708 2,136 5,923 1,813
Plan assets available for benefits 6,537 1,584 5,786 1,443
- --------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets (171) (552) (137) (370)
Unrecognized net loss 416 226 321 127
Unrecognized prior service cost 43 141 49 126
Unrecognized net asset at transition (78) (16) (93) (21)
Additional minimum liability recognized -- (245) -- (163)
- --------------------------------------------------------------------------------------------------------------------------------
Pension asset (liability) included in the Consolidated Balance Sheet $ 210 $ (446) $ 140 $ (301)
</TABLE>
The pension funds are valued at September 30 of the respective years in
the table above. Major assumptions used in the accounting for the defined
benefit pension plans are shown in the following table as weighted averages.
December 31 1995 1994 1993
- ------------------------------------------------------
Discount rate 7.6% 8.3% 7.3%
Salary scale 5.0% 4.9% 5.1%
Expected return on assets 9.7% 9.7% 9.7%
EMPLOYEE HEALTH CARE AND INSURANCE BENEFITS: Substantially all domestic full-
time employees who retire from the Corporation between age 55 and age 65, and
certain foreign employees, are eligible to receive postretirement health care
and life insurance benefits under various plans. Certain of these plans call for
defined dollar benefits. Other plans are contributory defined benefit plans and
include certain cost sharing features such as deductibles and co-payments. These
benefits are generally funded on a pay-as-you-go basis. Certain retired
employees of businesses acquired by the Corporation are covered under other
health care plans that differ from current plans in coverage, deductibles, and
retiree contributions.
Summary information on the Corporation's plans is as follows:
In Millions of Dollars December 31 1995 1994
- --------------------------------------------------------------
Accumulated postretirement
benefit obligation (APBO):
Retirees $461 $517
Fully eligible, active participants 11 27
Other active participants 216 244
- --------------------------------------------------------------
688 788
Less: plan assets at fair value 85 85
- --------------------------------------------------------------
Postretirement benefit obligation in
excess of plan assets 603 703
Unrecognized net gain 57 18
Unrecognized net reduction
in prior service expense 244 210
- --------------------------------------------------------------
Accrued postretirement
benefit liability $904 $931
<PAGE>39
The components of postretirement benefit expense are as follows:
In Millions of Dollars 1995 1994 1993
- --------------------------------------------------------------
Service expense $ 9 $ 12 $ 17
Interest expense 57 60 65
Actual return on
plan assets (6) (7) (7)
Net amortization and
deferral of actuarial
(gains) losses (17) (17) (17)
- --------------------------------------------------------------
Net postretirement
benefit expense $ 43 $ 48 $ 58
Discount rates of 7.7%, 8.4% and 7.4% were used to calculate the
accumulated postretirement benefit obligation at December 31, 1995, 1994 and
1993, respectively. The assumed health care cost trend rate used in measuring
the accumulated postretirement benefit obligation was 13.00% in 1995, declining
by .75% per year to an ultimate rate of 8.25%. If the health care cost trend
rate assumptions were increased by 1% per year, the APBO as of December 31, 1995
would be increased by approximately 7%. The effect of this change on the sum of
the service expense and interest expense components of the postretirement
benefit expense for 1995 would also be an increase of 7%.
CURTAILMENT: During 1995, 1994 and 1993, the Corporation recognized net pension
and postretirement benefit curtailment losses of $10 million, $7 million and $56
million, respectively. These losses resulted from the net increase in the
Corporation's benefit obligation for pension and postretirement benefits for
certain employees affected by workforce reductions at several operating units
and from enhanced early retirement benefits.
EMPLOYEE SAVINGS PLANS: In 1989, the Corporation established an Employee Stock
Ownership Plan (ESOP) to fund the Corporation's match of employee contributions
within its savings plan covering substantially all nonunion domestic employees.
At that time, the Corporation's Board of Directors authorized 20,000,000 shares
of Series A ESOP Convertible Preferred Stock (ESOP Preferred Stock), par value
$1.00 per share, having a $4.80 dividend per year. Each share is convertible
into one share of Common Stock and has a guaranteed value of $65. Because of the
guaranteed value, the ESOP Preferred Stock is classified outside of permanent
equity in the Consolidated Balance Sheet. The ESOP Preferred Stock is
redeemable, by the Corporation, at a price of $66.92 per share. Upon notice of
redemption, the ESOP Trustee has the right to convert each share of ESOP
Preferred Stock into one share of Common Stock.
Since its inception, the ESOP has purchased approximately 14.5 million
shares of Preferred Stock to fulfill the Corporation's current and estimated
future matching requirements. External borrowing, guaranteed by the Corporation,
was obtained for a portion of the share purchases and is reported as debt on the
Consolidated Balance Sheet. Shares of ESOP Preferred Stock are committed to each
employee based upon fair value at the date earned. To the extent that shares are
not sufficient to fulfill the matching commitment, the Corporation must
contribute additional ESOP Preferred Stock, Common Stock or cash. At
December 31, 1995, 5.9 million shares had been committed to employees, leaving
7.5 million uncommitted shares in the ESOP trust, with an approximate fair value
of $700 million.
Shares committed to employees generally may not be withdrawn until the
employee's termination, disability, retirement or death. Upon withdrawal, shares
of the ESOP Preferred Stock must be converted into the Corporation's Common
Stock or, if the value of the Common Stock is less than the guaranteed value of
the ESOP Preferred Stock, the Corporation must repurchase the shares at their
guaranteed value.
The Corporation and a number of its subsidiaries have additional savings
plans in which a portion of employee contributions is matched in cash by the
employer. The amount expensed relating to contributions for all savings plans
totaled $72 million, $84 million and $77 million for 1995, 1994, and 1993,
respectively.
<PAGE>40
LONG-TERM INCENTIVE PLANS: The Corporation has a Long-Term Incentive Plan (1989
Plan) under which shares of Common Stock may be sold or awarded to officers and
key employees.
The 1989 Plan authorizes various types of market-based incentive and
performance-based awards. The exercise price of a stock option, as set at the
time of the grant, will not be less than the fair market value of the shares on
the date of grant. The maximum number of shares which may be utilized for awards
granted during a given calendar year may not exceed 2% of the aggregate shares
of Common Stock, common stock equivalents and treasury shares for the preceding
year.
In 1995 the Board of Directors established the Special Retention and
Stock Appreciation Program (the 1995 Plan) for certain key employees whose
continued performance and retention is deemed to be important to the
Corporation. Up to 1,000,000 award units can be granted under the 1995 Plan in
any calendar year.
In June 1995 the Corporation granted a key group of senior executives
600,000 stock appreciation units under the 1995 Plan and 600,000 market-based
incentive awards under the 1989 Plan, with a ten year term. The grant price of
$78.25 represents the market value per share at the date of grant. They become
exercisable only if the closing price of the Corporation's Common Stock averages
$114.00 or higher for thirty consecutive days.
At December 31, 1995, stock options for 3,569,923 shares of Common Stock
were exercisable at an average price of $47.73 per share.
A summary of the transactions under all Plans for the three years ended
December 31, 1995 follows:
Stock Options Other
Average Incentive
Shares Price Awards
- -----------------------------------------------------------------
OUTSTANDING AT:
DECEMBER 31, 1992 8,443,753 $46.30 590,325
Granted 1,395,273 47.36 438,865
Exercised/earned (2,103,123) 44.62 (338,681)
Cancelled (180,846) 48.21 (74,017)
------------- ------------
DECEMBER 31, 1993 7,555,057 46.92 616,492
Granted 2,187,250 65.93 --
Exercised/earned (1,559,085) 45.17 (493,388)
Cancelled (87,086) 58.04 (49,029)
------------- ------------
DECEMBER 31, 1994 8,096,136 52.27 74,075
Granted 2,193,500 66.94 984,500
Exercised/earned (2,061,590) 47.30 (42,325)
Cancelled (193,710) 62.98 (11,000)
------------- ------------
DECEMBER 31, 1995 8,034,336 57.29 1,005,250
12. CHANGES IN SHAREOWNERS' EQUITY
In Millions of Dollars 1995 1994 1993
- ---------------------------------------------------------------
COMMON STOCK
Balance at January 1 $ 2,148 $ 2,075 $ 1,965
Issued under employee
plans (a) 101 73 110
- ---------------------------------------------------------------
BALANCE AT DECEMBER 31 $ 2,249 $ 2,148 $ 2,075
- ---------------------------------------------------------------
TREASURY STOCK
Balance at January 1 $ (947) $ (677) $ (677)
Purchase of shares (b) (221) (270) --
- ---------------------------------------------------------------
BALANCE AT DECEMBER 31 $(1,168) $ (947) $ (677)
- ---------------------------------------------------------------
RETAINED EARNINGS
Balance at January 1 $ 2,790 $ 2,466 $ 2,247
Net income 750 585 487
Dividends on Common
Stock (c) (252) (238) (224)
Dividends on ESOP
Preferred Stock (d) (27) (22) (43)
Other (9) (1) (1)
- ---------------------------------------------------------------
BALANCE AT DECEMBER 31 $ 3,252 $ 2,790 $ 2,466
- ---------------------------------------------------------------
CURRENCY TRANSLATION
ADJUSTMENT
Balance at January 1 $ (219) $ (227) $ (135)
Deferred foreign
currency translation and
hedging adjustments (36) (17) (88)
Income (taxes) benefits 9 25 (4)
- ---------------------------------------------------------------
BALANCE AT DECEMBER 31 $ (246) $ (219) $ (227)
- ---------------------------------------------------------------
MINIMUM PENSION LIABILITY
ADJUSTMENT
Balance at January 1 $ (20) $ (39) $ (30)
Pension adjustment (76) 32 (16)
Income (taxes) benefits 30 (13) 7
- ---------------------------------------------------------------
BALANCE AT DECEMBER 31 $ (66) $ (20) $ (39)
(a) 1,764,974, 1,442,261 and 2,273,625 shares issued, net of 227,561, 200,774,
and 21,409 shares purchased and reissued in 1995, 1994 and 1993, respectively.
(b) 2,829,588 and 4,360,000 shares of Common Stock purchased in 1995 and 1994,
respectively.
(c) $2.05, $1.90 and $1.80 per share in 1995, 1994 and 1993, respectively.
(d) $4.80 per share, net of income tax benefits of $18 million in 1993.
13. FOREIGN EXCHANGE
The Corporation conducts business in many different currencies and, accordingly,
is subject to the inherent risks associated with foreign exchange rate move-
ments. The financial position and results of operations of substantially all of
the Corporation's significant foreign subsidiaries are measured using the local
currency as the functional currency. The aggregate effects of translating the
financial statements of these subsidiaries are deferred as a separate component
of
<PAGE>41
Shareowners' equity. The Corporation had foreign currency net assets in nearly
forty currencies, aggregating $1.5 billion and $1.6 billion at December 31, 1995
and 1994, respectively. The primary foreign currency net assets, each five
percent or more of the Corporation's Shareowners' equity, are set forth below:
In Millions of Dollars 1995 1994
- ----------------------------------------------
Currency:
Canadian dollar $299 $319
Spanish peseta 240 155
Japanese yen 191 190
In addition, the Corporation has net assets in the People's Republic of
China and Hong Kong combined of $156 million and $136 million at December 31,
1995 and 1994, respectively.
At December 31, 1995 and 1994, the Corporation had $244 million and $469
million notional principal amount of outstanding currency swaps and forward
exchange contracts to hedge its foreign net assets. These foreign currency
hedges mature ratably over the period 1996 -- 2001.
Foreign currency commitment and transaction exposures are managed at the
operating unit level as an integral part of the business. To the extent that
foreign currency exposures cannot be offset or managed to an insignificant
amount, then it is the Corporation's policy that these residual foreign currency
commitment and transaction exposures be hedged. These hedges are executed by
authorized management at the operating units and are scheduled to mature
coincident with the timing of the underlying foreign currency commitments and
transactions. Certain of these hedges involve the exchange of two foreign
currencies according to local needs at foreign operations. Transactions that are
hedged include foreign currency denominated receivables and payables on the
balance sheet, firm purchase orders and firm sales commitments.
At December 31, 1995 and 1994, the Corporation had the following
amounts related to forward foreign exchange contracts hedging foreign currency
transaction and firm commitments:
In Millions of Dollars 1995 1994
- ---------------------------------------------------------------
Notional amount:
Buy contracts $2,011 $1,909
Sell contracts 495 485
- ---------------------------------------------------------------
Gains and losses explicitly deferred
as a result of hedging firm
commitments:
Gains deferred $ 24 $ 6
Losses deferred (9) (25)
- ---------------------------------------------------------------
$ 15 $ (19)
The deferred gains and losses are expected to be recognized in income
over the next two years as these transactions are realized.
14. FINANCIAL INSTRUMENTS
The Corporation operates internationally and, in the normal course of business,
is exposed to continuous fluctuations in interest rates, currency values and raw
material prices. These fluctuations can increase the costs of financing, invest-
ing, and operating the business. The Corporation manages this risk to acceptable
limits through the use of derivatives to create offsetting positions in foreign
currency, interest rate and raw materials markets. The Corporation views deriva-
tive financial instruments as risk management tools and is not party to any
leveraged derivatives. The Corporation's policies prohibit speculation in
derivatives.
The notional amounts of derivative contracts are presented in the
applicable note to which the derivatives relate. The notional amounts do not
represent the amounts exchanged by the parties, and thus are not a measure of
the exposure of the Corporation through its use of derivatives. The amounts
exchanged by the parties are normally based on the notional amounts and other
terms of the derivatives, which relate to exchange rates, interest rates or raw
material prices. The value of derivatives is derived from those underlying
parameters and changes in the relevant rates or prices.
By nature, all financial instruments involve market risk and credit
risk. The Corporation enters into derivative financial instruments with major
investment grade financial institutions. The credit exposure is represented by
the fair value of contracts with a positive value in the table below.
The Corporation has policies to monitor its credit risks of counter-
parties to derivative financial instruments. Pursuant to these policies the
Corporation periodically performs mark-to-market valuations of its derivative
instruments. The Corporation diversifies the counterparties used as a means to
limit counterparty exposure and concentration of risk. Credit risk is assessed
prior to entering into transactions and periodically thereafter. The Corporation
does not anticipate nonperformance by any of these counterparties.
The following table presents the carrying amounts and fair values of the
Corporation's financial instruments at December 31, 1995 and 1994. The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. Significant differences can arise between the fair
value and carrying amount of financial instruments at historic cost.
<PAGE>42
The carrying amount and fair value of financial instruments is as
follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Carrying Fair Carrying Fair
In Millions of Dollars Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Long-term receivables $ 126 $ 121 $ 154 $ 136
Customer financing assets 154 153 263 256
Financial liabilities:
Short-term borrowings 294 288 402 398
Long-term debt 1,338 1,588 1,584 1,569
Derivative Financial Instruments:
Customer Financing Interest Rate Swaps (Note 4):
In a receivable position -- -- -- 3
In a payable position -- -- 1 (18)
Raw Materials Hedges (Note 5):
In a receivable position 11 (1) -- --
In a payable position 4 3 -- --
Debt Interest Rate Hedges (Note 9):
In a receivable position 23 30 3 (1)
In a payable position 23 29 7 7
Forward Exchange Contracts (Note 13):
In a receivable position 45 65 36 49
In a payable position 18 14 37 39
Currency Swaps (Note 13):
In a receivable position 1 (16) 1 (2)
In a payable position 89 65 80 77
</TABLE>
The following methods and assumptions were used to estimate the fair
value of those financial instruments included in the following categories:
CASH AND CASH EQUIVALENTS: The carrying amount approximates fair value because
of the short maturity of those instruments.
INVESTMENTS, RECEIVABLES AND CUSTOMER FINANCING ASSETS: The fair values are
based on quoted market prices for those or similar instruments. When quoted
market prices are not available, an approximation of fair value is based upon
projected cash flows discounted at an estimated current market rate of interest.
DEBT: The fair value of the Corporation's debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Corporation for debt of the same remaining maturities.
INTEREST RATE HEDGES, FOREIGN CURRENCY CONTRACTS AND RAW MATERIALS HEDGE AGREE-
MENTS: The fair value is the estimated amount that the Corporation would receive
or pay to terminate the agreements at the reporting date.
FINANCING COMMITMENTS: The Corporation had outstanding financing commitments
totaling approximately $1.0 billion and $1.3 billion at December 31, 1995 and
1994, respectively. Risks associated with changes in interest rates are negated
by the fact that interest rates are variable during the commitment term and are
set at the date of funding based on current market conditions, the fair value of
the underlying collateral and the credit worthiness of the customers. As a
result, the fair value of these financings is expected to equal the amounts
funded. The fair value of the commitment itself is not readily determinable and
is not considered significant. Additional information pertaining to these
commitments is included in Note 4.
15. COMMITMENTS AND CONTINGENT LIABILITIES
LEASES
The Corporation and its consolidated subsidiaries occupy space and use certain
equipment under lease arrangements. Rent expense in 1995, 1994 and 1993 under
such arrangements was $265 million, $302 million and $344 million, respectively.
Rental commitments at December 31, 1995 under long-term noncancelable operating
leases are as follows (see Note 4 for lease commitments associated with customer
financing arrangements):
<PAGE>43
In Millions of Dollars
- ----------------------------------------------
1996 $184
1997 133
1998 92
1999 70
2000 55
After 2000 190
- ----------------------------------------------
$724
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.
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 measure-
ment 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 remedia-
tion 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 had liability and property insurance in force over
its history with a number of insurance companies, and the Corporation has com-
menced 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.
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
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 investiga-
tion 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>44
16. BUSINESS SEGMENT FINANCIAL DATA
The Corporation and its subsidiaries design, develop, manufacture and sell high-
technology products, classified in five principal business segments.
Otis products include elevators and escalators, substantial service,
maintenance and spare parts sold to a diversified international customer base in
commercial real estate development.
Carrier products include heating, ventilating and air conditioning
equipment, and transport and commercial refrigeration equipment and service to
a diversified international customer base in commercial and residential real
estate development.
Automotive products include electrical wiring systems, electromechanical
and hydraulic devices, electric motors, car and truck interior trim components,
steering wheels, instrument panels and other products for the automotive
industry principally in North America and Europe.
Pratt & Whitney products are principally aircraft engines and substan-
tial spare parts sold to a diversified customer base including international and
domestic commercial airlines and aircraft leasing companies, aircraft manufac-
turers, regional and commuter airlines, and U.S. and non-U.S. governments. Pratt
& Whitney also produces modified aircraft engines which are used for electrical
power generation and other applications.
The Flight Systems segment includes Sikorsky Aircraft and Hamilton
Standard, as well as Norden Systems through May 31, 1994. Sikorsky Aircraft
products include helicopters and spare parts sold primarily to U.S. and non-U.S.
governments. Hamilton Standard products include propellers and fuel and
environmental control systems sold primarily to U.S. and non-U.S. governments,
aerospace and defense prime contractors, and airframe and jet engine
manufacturers. Hamilton Standard products also include fuel cells sold primarily
to commercial manufacturers. Norden Systems products included cockpit and
integrated display systems sold primarily to the U.S. Government.
Business segment information for the three years ended December 31,
1995 follows:
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
Total Revenues Operating Profits
In Millions of Dollars 1995 1994 1993 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Otis $ 5,287 $ 4,644 $ 4,418 $ 511 $ 421 $ 377
Carrier 5,456 4,919 4,480 354 278 226
Automotive 3,061 2,683 2,378 180 182 148
Pratt & Whitney 6,170 5,846 6,317 530 380 186
Flight Systems 2,947 3,218 3,555 209 282 355
Corporate items and eliminations (119) (113) (67) 2 1 1
- ----------------------------------------------------------------------------------------------------------------------------
Total $22,802 $21,197 $21,081 1,786 1,544 1,293
- ----------------------------------------------------------------------------------------------------------------------------
Financing revenues and other
income, net (23) (17) 36
Interest expense (244) (275) (251)
General corporate expenses (175) (176) (169)
- ----------------------------------------------------------------------------------------------------------------------------
Consolidated income before income
taxes and minority interests $1,344 $1,076 $ 909
</TABLE>
<TABLE>
<CAPTION>
Identifiable Assets Capital Expenditures Depreciation and Amortization
In Millions of Dollars 1995 1994 1993 1995 1994 1993 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Otis $ 2,613 $ 2,068 $ 1,689 $115 $101 $124 $108 $103 $ 97
Carrier 2,959 2,776 2,639 151 134 176 134 136 132
Automotive 1,875 1,818 1,548 140 151 141 122 106 96
Pratt & Whitney 4,215 4,221 4,437 240 226 256 314 323 320
Flight Systems 1,425 1,720 1,844 106 130 135 127 140 141
Corporate items
and eliminations 2,871 3,021 3,461 28 17 14 39 32 29
- -----------------------------------------------------------------------------------------------------------------------------------
Consolidated total $15,958 $15,624 $15,618 $780 $759 $846 $844 $840 $815
</TABLE>
<PAGE>45
GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
Total Revenues Intergeographic Revenues External Revenues
In Millions of Dollars 1995 1994 1993 1995 1994 1993 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States operations $13,968 $13,545 $13,786 $ 534 $ 457 $ 427 $13,434 $13,088 $13,359
International operations:
Europe 4,769 4,119 3,988 170 144 92 4,599 3,975 3,896
Asia Pacific 3,024 2,461 2,094 317 180 159 2,707 2,281 1,935
Other 2,463 2,210 2,064 421 385 268 2,042 1,825 1,796
Corporate items
and eliminations (1,422) (1,138) (851) (1,442) (1,166) (946) 20 28 95
- -----------------------------------------------------------------------------------------------------------------------------------
Total $22,802 $21,197 $21,081 $ -- $ -- $ -- $22,802 $21,197 $21,081
</TABLE>
<TABLE>
<CAPTION>
Operating Profits Identifiable Assets
In Millions of Dollars 1995 1994 1993 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States operations $ 773 $ 746 $ 619 $ 7,110 $ 7,912 $ 7,849
International operations:
Europe 457 399 348 2,540 2,199 1,839
Asia Pacific 235 200 177 2,078 1,524 1,397
Other 321 204 156 1,357 1,022 1,123
Corporate items
and eliminations -- (5) (7) 2,873 2,967 3,410
- ------------------------------------------------------------------------------------------------
Total $1,786 $1,544 $1,293 $15,958 $15,624 $15,618
</TABLE>
REVENUES: Total revenues by business segment and geographic area include inter-
segment and intergeographic sales and transfers between geographic areas.
Generally, such sales and transfers are made at prices approximating those
which the selling or transferring entity is able to obtain on sales of similar
products to unaffiliated customers.
Revenues include sales under prime contracts and subcontracts to the
U.S. Government, for the most part Pratt & Whitney and Flight Systems products,
as follows:
In Millions of Dollars 1995 1994 1993
- ------------------------------------------------------------
Pratt & Whitney $1,841 $1,830 $1,930
Flight Systems 1,780 1,948 2,042
Sales to Ford Motor Company, Automotive's largest customer, comprised
approximately 40%, 37% and 41% of Automotive's revenues in 1995, 1994 and 1993,
respectively.
Revenues from United States operations include export sales as follows:
In Millions of Dollars 1995 1994 1993
- ------------------------------------------------------------
Europe $ 869 $ 737 $ 932
Asia Pacific 1,686 1,772 1,677
Other 712 599 894
- ------------------------------------------------------------
$3,267 $3,108 $3,503
Export sales include direct sales to commercial customers outside the
United States and sales to the U.S. Government, commercial and affiliated cus-
tomers which are known to be for resale to customers outside the United States.
IDENTIFIABLE ASSETS: Identifiable assets are those which are specifically iden-
tified with the business segments and geographic areas in which operations are
conducted. General corporate assets consist principally of customer financing
subsidiaries, future income tax benefits, and investments in other companies.
ELIMINATIONS: Eliminations made in reconciling business and geographic area data
with the related consolidated amounts include intersegment sales and transfers
between geographic areas, unrealized profits in inventory and similar items.
<PAGE>46
<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
In Millions of Dollars (except per share amounts) Quarter Ended March 31 June 30 September 30 December 31
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Sales $5,318 $5,774 $5,604 $5,928
Gross profit 1,135 1,288 1,279 1,322
Net income 135 218 210 187
Earnings per share of Common Stock and
common stock equivalents 1.03 1.65 1.60 1.42
1994
Sales $4,745 $5,306 $5,135 $5,615
Gross profit 1,010 1,104 1,124 1,231
Net income 67 165 188 165
Earnings per share of Common Stock and
common stock equivalents 0.50 1.23 1.41 1.26
</TABLE>
<TABLE>
<CAPTION>
COMPARATIVE STOCK DATA
1995 1994
Common Stock High Low Dividend High Low Dividend
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter 69 1/2 62 1/4 $ .50 72 58 $ .45
Second Quarter 79 3/8 67 1/2 .50 68 1/4 60 3/4 .45
Third Quarter 88 5/8 78 .50 67 3/4 59 3/4 .50
Fourth Quarter 97 3/4 82 7/8 .55 64 1/2 55 .50
<FN>
The Corporation's Common Stock is listed on the New York Stock Exchange. The high and low prices are based on the Composite
Tape of the New York Stock Exchange. There were approximately 24,000 common shareowners of record at December 31, 1995.
</TABLE>
<PAGE>
Exhibit (21)
SUBSIDIARIES OF THE REGISTRANT
The companies listed below are direct or indirect subsidiaries of the
Registrant. Their names and jurisdictions of incorporation are as follows:
United Technologies Automotive Holdings, Delaware
Inc. ...............................
Carrier Corporation ................ Delaware
Otis Elevator Company .............. New Jersey
Otis Europe S.A. .............. France
Pratt & Whitney Canada Inc. ........ Canada
Sikorsky Aircraft Corporation ...... Delaware
Other subsidiaries of the Registrant have been omitted from this listing
since, considered in the aggregate or as a single subsidiary, they would not
constitute a significant subsidiary.
<PAGE> Exhibit 24
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ HOWARD H. BAKER, JR.
Howard H. Baker, Jr.
<PAGE>
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, her true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ ANTONIA HANDLER CHAYES
Antonia Handler Chayes
<PAGE>
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ ROBERT F. DANIELL
Robert F. Daniell
<PAGE>
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ GEORGE DAVID
George David
<PAGE>
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ ROBERT F. DEE
Robert F. Dee
<PAGE>
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ CHARLES W. DUNCAN, JR.
Charles W. Duncan, Jr.
<PAGE>
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ PEHR G. GYLLENHAMMAR
Pehr G. Gyllenhammar
<PAGE>
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ GERALD D. HINES
Gerald D. Hines
<PAGE>
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ CHARLES R. LEE
Charles R. Lee
<PAGE>
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ ROBERT H. MALOTT
Robert H. Malott
<PAGE>
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, his true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ H. A. WAGNER
H. A. Wagner
<PAGE>
UNITED TECHNOLOGIES CORPORATION
Power of Attorney
The undersigned, as a member of the Board of Directors, or
as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware
corporation (the "Corporation"), or as a member of a committee of
said Board, or in all of said capacities, hereby constitutes and
appoints STEPHEN F. PAGE, IRVING B. YOSKOWITZ, WILLIAM H. TRACHSEL,
AND GEORGE E. MINNICH, or any one of them, her true and lawful
attorneys and agents to do any and all acts and things and execute
any and all instruments which the said attorneys and agents may deem
necessary or advisable to enable the Corporation to comply with the
Securities Exchange Act of 1934 and any rules and regulations and
requirements of the Securities and Exchange Commission in respect
thereof in connection with the filing of the Annual Report of the
Corporation on Form 10-K, including specifically, but without
limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in the capacities aforesaid or in
any other capacity, to the Corporation's Form 10-K Annual Report
filed or to be filed with the Securities and Exchange Commission, and
any and all amendments to the said Form 10-K Annual Report, and any
and all instruments and documents filed as a part of or in connection
with the said Form 10-K Annual Report or any amendments thereto;
hereby ratifying and confirming all that the said attorneys and
agents, or any one of them, have done, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power
of Attorney this 5th day of February, 1996.
/s/ JACQUELINE G. WEXLER
Jacqueline G. Wexler
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheet at December 31, 1995 and the Consolidated Statement
of Operations for the year ended December 31, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 900
<SECURITIES> 0
<RECEIVABLES> 4,029
<ALLOWANCES> 347
<INVENTORY> 2,954
<CURRENT-ASSETS> 8,952
<PP&E> 10,326
<DEPRECIATION> 5,906
<TOTAL-ASSETS> 15,958
<CURRENT-LIABILITIES> 6,659
<BONDS> 1,649
398
0
<COMMON> 2,249
<OTHER-SE> 1,772
<TOTAL-LIABILITY-AND-EQUITY> 15,958
<SALES> 17,972
<TOTAL-REVENUES> 22,802
<CGS> 14,793
<TOTAL-COSTS> 17,600
<OTHER-EXPENSES> 963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 244
<INCOME-PRETAX> 1,344
<INCOME-TAX> 464
<INCOME-CONTINUING> 750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 750
<EPS-PRIMARY> 5.70
<EPS-DILUTED> 5.70
</TABLE>
