<PAGE>
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Plan period ended December 31, 1998
Commission File Number 1-812
UNITED TECHNOLOGIES CORPORATION
EMPLOYEE SAVINGS PLAN
UNITED TECHNOLOGIES CORPORATION
One Financial Plaza
Hartford, Connecticut 06101
<PAGE>
FINANCIAL STATEMENTS OF THE UNITED TECHNOLOGIES CORPORATION
EMPLOYEE SAVINGS PLAN
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of the
United Technologies Corporation
Employee Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
with fund information and the related statement of changes in net assets
available for benefits with fund information present fairly, in all material
respects, the net assets available for benefits of the United Technologies
Corporation Employee Savings Plan at December 31, 1998 and December 31, 1997,
and the changes in net assets available for benefits for the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Plan's management; 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.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statement of
net assets available for benefits and the statement of changes in net assets
available for benefits is presented for purposes of additional analysis rather
than to present the net assets available for plan benefits and changes in net
assets available for benefits of each fund. The fund information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
June 28, 1999
<PAGE>
<TABLE>
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN
Statement of Net Assets Available for Benefits With Fund Information
December 31, 1998
(Thousands of Dollars, except unit amounts)
<CAPTION>
Small UTC INVESCO
Company International Common Total
Income Equity Stock Index Equity Index Global Stock Return
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value:
Beneficial interests in Bankers Trust
Company Pyramid:
Large Capitalization Equity Index Fund $ - $ 985,696 $ - $ - $ 29,820 $ - $ -
Russell 2000 Equity Index Fund - - 21,589 - - - -
Daily Japanese Equity Index Fund - - - 1,427 - - -
Daily Non Japanese Equity Index Fund - - - 5,357 - - -
Government/Corporate Fixed Income
Index Fund - - - - 24,304 - -
Daily International Equity Index Fund - - - - 29,505 - -
United Technologies Corporation Common
Stock - - - - - 457,714 -
United Technologies Corporation ESOP
Preferred Stock - - - - - - -
Shares of respective registered
investment companies - - - - - - 15,879
Investments, at contract value or cost:
Beneficial interests in investment
contracts, at contract value 3,205,795 - - - - - -
Participant loans, at cost - - - - - - -
Temporary investments, at cost plus
accrued interest - - - - - 2,282 -
Total Investments 3,205,795 985,696 21,589 6,784 83,629 459,996 15,879
Plan receivables 2,859 249 7 2 31 5,243 6
Accrued ESOP contribution receivable - - - - - - -
Total Assets 3,208,654 985,945 21,596 6,786 83,660 465,239 15,885
Liabilities:
Accrued expenses - - - - - 1,172 -
Loans payable, net - - - - - - -
Accrued interest on ESOP debt and notes
payable - - - - - - -
ESOP debt - - - - - - -
Notes payable to United Technologies
Corporation - - - - - - -
Total Liabilities - - - - - 1,172 -
Net Assets Available for Benefits $3,208,654 $ 985,945 $ 21,596 $ 6,786 $ 83,660 $ 464,067 $ 15,885
Units of participation 47,947,610 36,435,523 1,810,201 535,194 29,149,693 25,470,182 506,543
Unit value $ 66.92 $ 27.06 $ 11.93 $ 12.68 $ 2.87 $ 18.22 $ 31.36
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN
Statement of Net Assets Available for Benefits With Fund Information (Continued)
December 31, 1998
(Thousands of Dollars, except unit amounts)
<CAPTION>
Putnam
Fidelity Putnam New SoGen
Growth & Fund for Fidelity Low- PBHG Opportun- Interna-
Income Growth Fidelity Priced Stock Growth ities tional
Portfolio and Income Contrafund Fund Fund Fund Fund, Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value:
Beneficial interests in Bankers Trust
Company Pyramid:
Large Capitalization Equity Index Fund $ - $ - $ - $ - $ - $ - $ -
Russell 2000 Equity Index Fund - - - - - - -
Daily Japanese Equity Index Fund - - - - - - -
Daily Non Japanese Equity Index Fund - - - - - - -
Government/Corporate Fixed Income
Index Fund - - - - - - -
Daily International Equity Index Fund - - - - - - -
United Technologies Corporation Common
Stock - - - - - - -
United Technologies Corporation ESOP
Preferred Stock - - - - - - -
Shares of respective registered
investment companies 154,316 29,538 56,616 36,572 40,472 60,762 8,299
Investments, at contract value or cost:
Beneficial interests in investments
contracts, at contract value - - - - - - -
Participant loans, at cost - - - - - - -
Temporary investments, at cost plus
accrued interest - - - - - - -
Total investments 154,316 29,538 56,616 36,572 40,472 60,762 8,299
Plan receivables 113 19 35 17 31 42 4
Accrued ESOP contribution receivable - - - - - - -
Total Assets 154,429 29,557 56,651 36,589 40,503 60,804 8,303
Liabilities:
Accrued expenses - - - - - - -
Loans payable, net - - - - - - -
Accrued interest on ESOP debt and notes
payable - - - - - - -
ESOP debt - - - - - - -
Notes payable to United Technologies
Corporation - - - - - - -
Total Liabilities - - - - - - -
Net Assets Available for Benefits $ 154,429 $ 29,557 $ 56,651 $ 36,589 $ 40,503 $ 60,804 $ 8,303
Units of participation 3,368,880 1,440,398 997,554 1,601,271 1,585,848 1,028,135 360,521
Unit value $ 45.84 $ 20.52 $ 56.79 $ 22.85 $ 25.54 $ 59.14 $ 23.03
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN
Statement of Net Assets Available for Benefits With Fund Information (Continued)
December 31, 1998
(Thousands of Dollars, except unit amounts)
<CAPTION>
Templeton
Templeton Developing
Foreign Markets
Fund A Trust A Loan Fund ESOP Fund Total
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value:
Beneficial interests in Bankers Trust
Company Pyramid:
Large Capitalization Equity Index Fund $ - $ - $ - $ - $1,015,516
Russell 2000 Equity Index Fund - - - - 21,589
Daily Japanese Equity Index Fund - - - - 1,427
Daily Non Japanese Equity Index Fund - - - - 5,357
Government/Corporate Fixed Income
Index Fund - - - - 24,304
Daily International Equity Index Fund - - - - 29,505
United Technologies Corporation Common
Stock - - - 336 458,050
United Technologies Corporation ESOP
Preferred Stock - - - 2,736,411 2,736,411
Shares of respective registered
investment companies 15,458 7,677 - - 425,589
Investments, at contract value or cost:
Beneficial interests in investment
contracts, at contract value - - - - 3,205,795
Participant loans, at cost - - 62,640 - 62,640
Temporary investments, at cost plus
accrued interest - - - 4,023 6,305
Total Investments 15,458 7,677 62,640 2,740,770 7,992,488
Plan receivables 6 4 - 87 8,755
Accrued ESOP contribution receivable - - - 101,138 101,138
Total Assets 15,464 7,681 62,640 2,841,995 8,102,381
Liabilities:
Accrued expense - - - 30 1,202
Loans payable, net - - - - -
Accrued interest on ESOP debt and notes
payable - - - 2,206 2,206
ESOP debt - - - 372,600 372,600
Notes payable to United Technologies
Corporation - - - 104,033 104,033
Total Liabilities - - - 478,869 480,041
Net Assets Available for Benefits $ 15,464 $ 7,681 $ 62,640 $ 2,363,126 $7,622,340
Units of participation 1,843,164 745,681 62,639,478 258,919,085
Unit value $ 8.39 $ 10.30 $ 1.00 $ 9.13
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN
Statement of Net Assets Available for Benefits With Fund Information
December 31, 1997
(Thousands of Dollars, except unit amounts)
<CAPTION>
Small UTC INVESCO
Company International Common Total
Income Equity Stock Index Equity Index Global Stock Return
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value:
Beneficial interests in Bankers Trust
Company Pyramid:
Large Capitalization Equity Index Fund $ - $ 809,958 $ - $ - $ 29,900 $ - $ -
Russell 2000 Equity Index Fund - - 20,980 - - - -
Daily Japanese Equity Index Fund - - - 1,227 - - -
Daily Non Japanese Equity Index Fund - - - 3,681 - - -
Government/Corporate Fixed Income
Index Fund - - - - 24,463 - -
Daily International Equity Index Fund - - - - 28,688 - -
United Technologies Corporation Common
Stock - - - - - 388,403 -
United Technologies Corporation ESOP
Preferred Stock - - - - - - -
Shares of respective registered
investment companies - - - - - - 11,352
Investments, at contract value or cost:
Beneficial interests in investment
contracts, at contract value 2,815,491 - - - - - -
Participant loans, at cost - - - - - - -
Temporary investments, at cost plus
accrued interest - - - - - 5,833 -
Total Investments 2,815,491 809,958 20,980 4,908 83,051 394,236 11,352
Plan receivables 1,996 676 25 8 88 1,078 17
Accrued ESOP contribution receivable - - - - - - -
Total Assets 2,817,487 810,634 21,005 4,916 83,139 395,314 11,369
Liabilities:
Accrued expenses - - - - - 2,509 -
Loans payable, net - - - - - - -
Accrued interest on ESOP debt and notes
payable - - - - - - -
ESOP debt - - - - - - -
Notes payable to United Technologies
Corporation - - - - - - -
Total Liabilities - - - - - 2,509 -
Net Assets Available for Benefits $2,817,487 $ 810,634 $ 21,005 $ 4,916 $ 83,139 $ 392,805 $ 11,369
Units of participation 45,664,290 38,564,887 1,735,924 466,827 34,932,354 32,516,958 390,823
Unit value $ 61.70 $ 21.02 $ 12.10 $ 10.53 $ 2.38 $ 12.08 $ 29.09
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN
Statement of Net Assets Available for Benefits With Fund Information (Continued)
December 31, 1997
(Thousands of Dollars, except unit amounts)
<CAPTION>
Putnam
Fidelity Putnam New SoGen
Growth & Fund for Fidelity Low- PBHG Opportun- Interna-
Income Growth Fidelity Priced Stock Growth ities tional
Portfolio and Income Contrafund Fund Fund Fund Fund, Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value:
Beneficial interests in Bankers Trust
Company Pyramid:
Large Capitalization Equity Index Fund $ - $ - $ - $ - $ - $ - $ -
Russell 2000 Equity Index Fund - - - - - - -
Daily Japanese Equity Index Fund - - - - - - -
Daily Non Japanese Equity Index Fund - - - - - - -
Government/Corporate Fixed Income
Index Fund - - - - - - -
Daily International Equity Index Fund - - - - - - -
United Technologies Corporation Common
Stock - - - - - - -
United Technologies Corporation ESOP
Preferred Stock - - - - - - -
Shares of respective registered
investment companies 88,982 29,327 35,471 38,276 55,770 42,073 9,434
Investments, at contract value or cost:
Beneficial interests in investments
contracts, at contract value - - - - - - -
Participant loans, at cost - - - - - - -
Temporary investments, at cost plus
accrued interest - - - - - - -
Total investments 88,982 29,327 35,471 38,276 55,770 42,073 9,434
Plan receivables 127 42 60 53 107 72 18
Accrued ESOP contribution receivable - - - - - - -
Total Assets 89,109 29,369 35,531 38,329 55,877 42,145 9,452
Liabilities:
Accrued expenses - - - - - - -
Loans payable, net - - - - - - -
Accrued interest on ESOP debt and notes
payable - - - - - - -
ESOP debt - - - - - - -
Notes payable to United Technologies
Corporation - - - - - - -
Total Liabilities - - - - - - -
Net Assets Available for Benefits $ 89,109 $ 29,369 $ 35,531 $ 38,329 $ 55,877 $ 42,145 $ 9,452
Units of participation 2,338,837 1,501,494 761,983 1,525,236 2,200,755 858,340 371,399
Unit value $ 38.10 $ 19.56 $ 46.63 $ 25.13 $ 25.39 $ 49.10 $ 25.45
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN
Statement of Net Assets Available for Benefits With Fund Information (Continued)
December 31, 1997
(Thousands of Dollars, except unit amounts)
<CAPTION>
Templeton
Templeton Developing
Foreign Markets
Fund A Trust A Loan Fund ESOP Fund Total
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value:
Beneficial interests in Bankers Trust
Company Pyramid:
Large Capitalization Equity Index Fund $ - $ - $ - $ - $ 839,858
Russell 2000 Equity Index Fund - - - - 20,980
Daily Japanese Equity Index Fund - - - - 1,227
Daily Non Japanese Equity Index Fund - - - - 3,681
Government/Corporate Fixed Income
Index Fund - - - - 24,463
Daily International Equity Index Fund - - - - 28,688
United Technologies Corporation Common
Stock - - - 340 388,743
United Technologies Corporation ESOP
Preferred Stock - - - 1,897,956 1,897,956
Shares of respective registered
investment companies 17,216 8,766 - - 336,667
Investments, at contract value or cost:
Beneficial interests in investment
contracts, at contract value - - - - 2,815,491
Participant loans, at cost - - 62,048 - 62,048
Temporary investments, at cost plus
accrued interest - - - 1,402 7,235
Total Investments 17,216 8,766 62,048 1,899,698 6,427,037
Plan receivables 31 18 - 962 5,378
Accrued ESOP contribution receivable - - - 87,188 87,188
Total Assets 17,247 8,784 62,048 1,987,848 6,519,603
Liabilities:
Accrued expenses - - - 171 2,680
Loans payable, net - - - - -
Accrued interest on ESOP debt and notes
payable - - - 2,271 2,271
ESOP debt - - - 408,900 408,900
Notes payable to United Technologies
Corporation - - - 89,633 89,633
Total Liabilities - - - 500,975 503,484
Net Assets Available for Benefits $ 17,247 $ 8,784 $ 62,048 $ 1,486,873 $6,016,119
Units of participation 1,733,322 678,876 62,047,682 263,507,383
Unit value $ 9.95 $ 12.94 $ 1.00 $ 5.64
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits With Fund Information
Period Ended December 31, 1998
(Thousands of Dollars)
<CAPTION>
Small
Company UTC INVESCO
Stock International Common Total
Income Equity Index Equity Index Global Stock Return
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment Income:
Net appreciation / (depreciation) in fair
value of investments $ - $222,116 $ (59) $ 1,016 $ 15,291 $178,423 $ 902
Interest 244,567 - - - - - -
Dividends - - - - - - 774
Total Investment Income 244,567 222,116 (59) 1,016 15,291 178,423 1,676
Contributions
Participants' 73,266 42,835 2,159 647 5,605 17,683 1,396
Employer's 149 51 4 1 8 7 4
Total Contributions 73,415 42,886 2,163 648 5,613 17,690 1,400
Repayments on loans 17,879 7,517 232 86 1,056 3,258 142
Deductions from net assets attributed to:
Distributions to participants 156,463 34,952 415 51 3,731 16,731 381
Loans to participants 16,040 7,610 208 38 872 3,966 54
Administrative expenses 123 21 2 - 5 5 -
Interest expense - - - - - - -
Total Deductions 172,626 42,583 625 89 4,608 20,702 435
Net increase / (decrease) prior to transfers 163,235 229,936 1,711 1,661 17,352 178,669 2,783
Inter-fund transfers 224,272 (54,781) (1,120) 209 (16,832) (107,439) 1,733
Assets transferred into Plan 3,660 156 - - 1 32 -
Net increase / (decrease) 391,167 175,311 591 1,870 521 71,262 4,516
Net Assets Available for Benefits
December 31, 1997 2,817,487 810,634 21,005 4,916 83,139 392,805 11,369
Net Assets Available for Benefits
December 31, 1998 $3,208,654 $985,945 $21,596 $ 6,786 $ 83,660 $464,067 $ 15,885
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits With Fund Information (Continued)
Period Ended December 31, 1998
(Thousands of Dollars)
<CAPTION>
Putnam
Fidelity Putnam New SoGen
Growth & Fund Fidelity Low- PBHG Opportun- Interna-
Income for Growth Fidelity Priced Stock Growth ities tional
Portfolio and Income Contrafund Fund Fund Fund Fund, Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment Income:
Net appreciation / (depreciation) in fair
value of investments $ 22,710 $ 1,275 $ 7,738 $ (3,280) $ (164) $ 8,265 $ (894)
Interest - - - - - - -
Dividends 7,819 2,777 4,162 3,211 - 1,861 850
Total Investment Income 30,529 4,052 11,900 (69) (164) 10,126 (44)
Contributions:
Participants' 11,207 3,118 4,788 3,860 5,669 5,433 1,002
Employer's 24 4 8 6 6 7 1
Total Contributions 11,231 3,122 4,796 3,866 5,675 5,440 1,003
Repayments on loans 1,170 365 471 361 660 663 81
Deductions from net assets attributed to:
Distributions to participants 4,887 1,441 1,793 1,018 1,254 1,641 426
Loans to participants 1,026 261 368 293 467 419 68
Administrative expenses - 1 1 13 3 1 -
Interest expense - - - - - - -
Total Deductions 5,913 1,703 2,162 1,324 1,724 2,061 494
Net increase / (decrease) prior
to transfers 37,017 5,836 15,005 2,834 4,447 14,168 546
Inter-fund transfers 28,300 (5,649) 6,113 (4,575) (19,822) 4,490 (1,695)
Assets transferred into Plan 3 1 2 1 1 1 -
Net increase / (decrease) 65,320 188 21,120 (1,740) (15,374) 18,659 (1,149)
Net Assets Available for Benefits
December 31, 1997 89,109 29,369 35,531 38,329 55,877 42,145 9,452
Net Assets Available for Benefits
December 31, 1998 $ 154,429 $ 29,557 $ 56,651 $ 36,589 $ 40,503 $ 60,804 $ 8,303
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits With Fund Information (Continued)
Period Ended December 31, 1998
(Thousands of Dollars)
<CAPTION>
Templeton
Templeton Developing
Foreign Markets
Fund A Trust A Loan Fund ESOP Fund Total
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment Income:
Net appreciation / (depreciation) in fair
value of investments $ (2,721) $ (1,859) $ - $ 920,706 $1,369,465
Interest - - 5,431 555 250,553
Dividends 1,649 180 - 61,274 84,557
Total Investment Income (1,072) (1,679) 5,431 982,535 1,704,575
Contributions:
Participants' 1,770 1,056 - - 181,494
Employer's 3 2 - 16,673 16,958
Total Contributions 1,773 1,058 - 16,673 198,452
Repayments on loans 174 113 (34,228) - -
Deductions from net assets attributed to:
Distributions to participants 667 196 2,463 32,048 260,558
Loans to participants 98 64 (31,852) - -
Administrative expenses - - - - 175
Interest expense - - - 39,931 39,931
Total Deductions 765 260 (29,389) 71,979 300,664
Net increase / (decrease) prior to transfers 110 (768) 592 927,229 1,602,363
Inter-fund transfers (1,893) (335) - (50,976) -
Assets transferred into Plan - - - - 3,858
Net increase / (decrease) (1,793) (1,103) 592 876,253 1,606,221
Net Assets Available for Benefits
December 31, 1997 17,247 8,784 62,048 1,486,873 6,016,119
Net Assets Available for Benefits
December 31, 1998 $ 15,464 $ 7,681 $ 62,640 $ 2,363,126 $7,622,340
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
NOTE 1 - DESCRIPTION OF THE PLAN
General. The United Technologies Corporation (UTC) Employee Savings Plan (the
Plan) is a defined contribution savings plan administered by UTC. It is subject
to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA). Generally, non-represented employees in participating business units
of UTC are eligible to participate in the Plan after completing one year of
service. The following is a brief description of the Plan. For more complete
information, participants should refer to the Plan document which is available
from UTC.
Contributions and Vesting. Participants may elect to contribute, through
payroll deductions, between 2 and 16 percent of their total compensation.
Participant contributions, plus actual earnings thereon, are fully vested at all
times under the Plan.
UTC has established a leveraged Employee Stock Ownership Plan (ESOP) to fund the
employer matching contributions to the Plan. The ESOP is primarily invested in
UTC Series A ESOP Convertible Preferred Stock. UTC will match 60 percent of a
participant's contributions, up to specified limits, in ESOP Preferred Stock
(See Note 4). However, participants who have reached at least age 55 and have
completed at least 10 years of continuous service may direct up to 50 percent,
in multiples of 25 percent, of their ESOP account balances and future employer
contributions to be invested in the other investment funds offered through the
Plan (See Note 10). Generally, employer contributions, plus actual earnings
thereon, become fully vested after two years of Plan participation.
Participant Accounts. Each participant's account is credited with the
participant's contributions and allocations of (a) UTC's contributions based on
a percentage of the participant's contribution and (b) Plan earnings based on
account balances. The benefit to which a participant is entitled is the benefit
that can be provided from the participant's vested account. Forfeited balances
of terminated participants' nonvested amounts are used to reduce future UTC
contributions. For the period ended December 31, 1998, approximately $482,000
of forfeitures were used to fund UTC's contributions. In addition,
approximately $26,000 of forfeitures is available to offset future UTC
contributions.
Trustee and Recordkeeper. All of the Plan's assets are held by Bankers Trust
Company, the Plan Trustee. Fidelity Institutional Retirement Services Company
performs participant account recordkeeping responsibilities.
Investment Options. Participants may elect to allocate their contributions in
any whole percentage among the following funds. Participants are permitted to
transfer their accounts between investment funds daily in any whole percentage
or whole dollar amount. The investment funds are as follows:
. The Income Fund invests in contracts issued by five insurance companies. See
Note 3. In December of 1997, UTC approved a reverse unit split of the units
of participation and the unit value of the Income Fund effective as of
January 1, 1998. As a result, the units of participation and the unit value
was decreased and increased, respectively, by a factor of ten. All units of
participation and unit value amounts presented herein have been restated to
reflect the reverse unit split.
. The Equity Fund invests in a portfolio of common stocks replicating the
Standard & Poor's Composite Index of 500 stocks (S&P 500).
. The Small Company Stock Index Fund invests in a portfolio of common stocks
replicating the Russell 2000 Index.
. The International Equity Index Fund invests in the equities of a mix of stock
markets outside the U.S.
. The Global Fund invests in both U.S. and foreign investments to replicate the
performance, in approximately equal portions, of three indices: the S&P 500,
the EAFE Index (an international stock index of large companies in Europe,
Australia and the Far East), and the Lehman Brothers Government/Corporate
Index.
. The UTC Common Stock Fund consists principally of 4,208,868 and 5,334,294
shares of UTC Common Stock at December 31, 1998 and 1997 respectively. See
Note 10.
. The INVESCO Total Return Fund, a registered investment company, principally
invests in both equity and fixed or variable income securities to achieve a
moderate total return from capital appreciation and current income.
. The Fidelity Growth & Income Portfolio, a registered investment company,
principally invests in U.S. and foreign equity securities that pay current
dividends and show potential earnings growth.
. The Putnam Fund for Growth and Income, a registered investment company,
principally invests in equity securities of companies that pay regular
dividends to shareowners.
. The Fidelity Contrafund, a registered investment company, principally invests
in equity securities of U.S. and foreign companies believed to be undervalued
or out of favor.
. The Fidelity Low-Priced Stock Fund, a registered investment company,
principally invests in equity securities of companies believed to be
undervalued, overlooked or out of favor, which are generally priced at $35 or
less.
. The PBHG Growth Fund, a registered investment company, principally invests in
equity securities of companies believed to have an outlook for strong
earnings growth.
. The Putnam New Opportunities Fund, a registered investment company,
principally invests in equity securities of companies in certain emerging
industry groups.
. The SoGen International Fund, Inc., a registered investment company, invests
in U.S. and foreign equity, fixed income and gold-related securities and
cash.
. The Templeton Foreign Fund A (formerly the Templeton Foreign Fund I), a
registered investment company, principally invests in equity securities of
companies in developed and developing countries outside the U.S.
. The Templeton Developing Markets Trust A (formerly the Templeton Developing
Markets I), a registered investment company, principally invests in equity
securities of companies in developing countries.
Participant Loans. Participants with at least two years of Plan participation
are allowed to borrow up to 50 percent of their vested account balances
(excluding their ESOP account balance). Loan amounts can range from $1,000 to
$50,000 and must be repaid within 5 years. The loans are secured by the balance
in the participant's account and bear interest at Bankers Trust's prime rate
plus one percent. Principal and interest are paid ratably through payroll
deductions.
Payment of Benefits. Generally, benefits are paid in a lump sum to a
terminating participant. A participant terminating due to retirement may elect
to receive benefits in installments over two to twenty years. At the
participant's election, the portion of a lump sum distribution attributable to
the UTC Common Stock Fund and ESOP may be paid in shares of UTC Common Stock
instead of cash. Distributions in UTC Common Stock for the period ended
December 31,1998 were approximately $5,439,000.
Other. Participants who transfer to a new UTC location with a different savings
plan may have the option of transferring their account balances in accordance
with the provisions of the new savings plan.
NOTE 2 - SUMMARY OF ACCOUNTING PRINCIPLES
Basis of Accounting. The financial statements of the Plan are prepared under
the accrual method of accounting, except for benefits which are recorded when
paid.
Master Trust. The Plan's assets are kept in a Master Trust maintained by the
Trustee. Under the Master Trust agreement, the assets of certain employee
savings plans of UTC and its subsidiaries are combined. Participating Plans
purchase units of participation in the investment funds based on their
contribution to such funds and the unit value of the applicable investment fund
at the end of the trading day in which a transaction occurs. The unit value of
each fund is determined at the close of each day by dividing the sum of
uninvested cash, accrued income and the current value of investments by the
total number of outstanding units in such funds. Income from the funds'
investments increases the Plans' unit values. Distributions to participants
reduce the number of participation units held by the Plans.
At December 31, 1998, the Plan's interest in the Master Trust comprised
476,384,961 units of the 522,172,913 total units of participation, or 91.23%. At
December 31, 1997, the Plan's interest in the Master Trust comprised 491,797,370
units of the total 534,787,672 units of participation, or 91.96%.
Investment Valuation. The Income Fund's investment contracts are stated at
contract value which represents contributions plus earnings, less Plan
withdrawals. The ESOP Preferred Stock's fair value is the higher of the
guaranteed value ($65) or, prior to the May 17, 1999 stock split, twice the
market value of UTC's Common Stock (See Notes 4 and 10). All other funds are
stated at fair value, as determined by the Trustee, typically by reference to
published market data.
Plan Expenses. Plan administrative expenses, including Trustee and recordkeeper
fees were paid directly by the employer in 1998. The employer also paid certain
investment management fees for the Bankers Trust managed funds. All other
administrative and investment expenses were paid out of Plan assets.
Use of Estimates. The preparation of financial statements requires UTC to make
estimates and assumptions that affect the reported amounts in the financial
statements. Actual results could differ from those estimates.
NOTE 3 - INVESTMENT CONTRACTS
Under these contracts, each insurance company guarantees repayment in full of
the principal amount invested plus interest credited at a fixed rate for a
specified period. Interest is credited to each contract based on an annual
interest rate set each year by the individual insurance companies. This rate,
which differs among contracts, takes into account any difference between prior
year credited interest and the actual amount of investment earnings allocable to
the contract in accordance with the established allocation procedures of the
insurance company. The interest rates earned for 1998 and 1997 were 8.5% and
8.1%, respectively. The following is a summary of the investment contracts
held in the Income Fund and the portion allocable to the Plan:
<TABLE>
<CAPTION>
(Thousands of Dollars) December 31, December 31,
1998 1997
<S> <C> <C>
CIGNA $ 1,590,214 $ 1,456,404
Aetna 471,765 437,582
Travelers 398,146 367,509
Prudential 252,192 231,133
Metropolitan Life 1,019,272 780,096
$ 3,731,589 $ 3,272,724
Amount of the contracts allocable to the Plan $ 3,205,795 $ 2,815,491
</TABLE>
NOTE 4 - EMPLOYEE STOCK OWNERSHIP PLAN
The ESOP has purchased approximately 14.5 million shares of $1.00 par value
Series A ESOP Convertible Preferred Stock ("ESOP Shares"), with a $4.80 per
share annual dividend from UTC. Following the split of UTC Common Stock
announced on April 30, 1999 and effective on May 17, each ESOP share is
convertible into four shares of UTC's Common Stock. For 1998, ESOP shares were
convertible into two shares of UTC's Common Stock. The ESOP financed the ESOP
Share purchases with interest bearing promissory notes. See Notes 5 and 6.
Participants are allocated ESOP Shares as they earn UTC's matching
contributions. For the period ended December 31, 1998, participants were
credited with matching contributions of $61.2 million representing approximately
332,800 shares. Additionally, in lieu of receiving cash, participants are
allocated ESOP Shares for dividends paid on their shares. During 1998,
participants earned dividends of approximately $32.7 million representing
approximately 163,200 shares. ESOP Shares allocated are calculated at the
higher of four times the daily ending price of UTC Common Stock (giving effect
to the May 17, 1999 stock split) or the $65 guaranteed value.
ESOP Shares are released for allocation to participants as principal and
interest payments are made on the debt. The ESOP uses the ESOP Shares' cash
dividends and additional contributions from UTC to repay the principal and
interest. The Employer Contributions presented in the Statement of Changes in
Net Assets Available for Benefits include approximately $3.4 million of
additional cash contributions from UTC plus $13.3 million of Employer
Contributions Receivable from UTC at December 31, 1998. The $ 13.3 million is
due to share allocations exceeding share releases during 1998. The number of
ESOP Shares allocated to participants' accounts is equal in value to the fixed
matching contributions specified by the Plan. To the extent that ESOP Shares
released through debt service payments are not sufficient to meet the matching
contribution requirement, UTC will contribute additional ESOP Shares, UTC Common
Stock or cash. To the extent that ESOP Shares released through debt service
exceed the matching contribution requirement, the debt will be restructured so
that the value of the released ESOP Shares does not exceed the Plan's matching
contribution requirement.
Shares allocated to a participant generally may not be distributed until the
participant's termination, disability, retirement or death. Upon distribution,
a participant may elect to receive either cash or four shares (giving effect to
the May 17, 1999 stock split) of UTC Common Stock for each ESOP Share. Each ESOP
share is valued at the higher of four times the market value of UTC's Common
Stock (giving effect to the May 17,1999 stock split) or $65. A participant
cannot elect to receive the distribution in ESOP Shares. The ESOP Fund's
investment in ESOP Shares at period end is as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars, December 31, 1998 December 31, 1997
except share amounts) Allocated Total Allocated Total
<S> <C> <C> <C> <C>
Number of Shares 6,869,316 12,581,201 6,826,380 13,033,172
Guaranteed Value $ 446,506 $ 817,778 $ 443,715 $ 847,156
Market $ 1,494,076 $ 2,736,411 $ 994,092 $ 1,897,956
</TABLE>
As discussed above, market value is represented by the higher of the guaranteed
value of $65 per share or the daily closing price of four shares of UTC's Common
Stock (giving effect to the May 17, 1999 stock split). As such, the market
value of the ESOP Shares was $217.50 and $145.625 per share at December 31, 1998
and 1997, respectively. Further, the Net Assets Available for Benefits in the
ESOP Fund at December 31, 1998 and 1997 include unrealized appreciation of
approximately $1.9 billion and $1.05 billion, of which $871.1 million and $500.4
million is on unallocated shares.
The ESOP Shares are redeemable, in whole or in part, at the option of UTC at a
redemption price of $65.48 per share plus accrued and unpaid dividends. The
redemption price decreases annually until it reaches $65. However, upon notice
to the Trustee of UTC's intention to redeem, the Trustee can convert each
preferred share into four shares, (giving effect to the May 17, 1999 stock
split) of UTC Common Stock if more beneficial to participants.
NOTE 5 - ESOP DEBT
In 1990, the Master Trust, with UTC as guarantor, executed a Note and Guaranty
Agreement and issued $660,000,000 of Series A, B, C and D notes (described
below) representing the ESOP's permanent financing. The amounts outstanding
under the Agreement, with interest rates and maturity dates, are as follows at
December 31, 1998:
<TABLE>
<CAPTION>
Principal Rate of
Note Series (000's) Interest Due
<S> <C> <C> <C>
A $ 36,000 7.24% 1999
B 286,600 7.68% 2000 - 2008
C 17,300 7.68% 2008
D 32,700 7.68% 2009
$ 372,600
</TABLE>
Required payments on these Notes, in aggregate, for the next five plan years are
$36.0 million in 1999, $35.5 million in 2000, $35.0 million in 2001, $34.5
million in 2002, and $34.0 million in 2003.
NOTE 6 - NOTES PAYABLE
In conjunction with the ESOP financing discussed in Note 5, UTC issued a
promissory note in 1990 bearing interest at 10.5%, and due over the period 1999
to 2009. At December 31, 1998, $70,033,000 was outstanding. Required principal
payments on the Note for the next five plan years are $4.8 million in 1999, $4.9
million in 2000, $5.0 million in 2001, $ 5.2 million in 2002, and $5.5 million
in 2003.
The Trustee executed an additional $15,000,000 and $19,000,000 promissory note
to UTC on December 10, 1997 and 1998, respectively. The notes bear an interest
rate of 6.35% and 5.50% and mature on December 10, 2007 and 2008, respectively.
Both promissory notes replace a portion of the 1990 ESOP Debt notes described
in Note 5 above.
NOTE 7 - PLAN TERMINATION
Although it has not expressed any intent to do so, UTC has the right under the
Plan to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA and to certain Plan provisions that limit
this right when certain ESOP loans remain outstanding. In the event of Plan
termination, participants will become 100 percent vested in their accounts.
NOTE 8 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following are reconciliations of net assets available for benefits and
benefits paid from the financial statements to the Form 5500:
<TABLE>
<CAPTION>
(Thousands of Dollars) December 31,
1998 1997
<S> <C> <C>
Net assets available for benefits
per the financial statements $ 7,622,340 $ 6,016,119
Amounts allocated to participant
withdrawals (659) (907)
Net assets available for benefits
per Form 5500 $ 7,621,681 $ 6,015,212
</TABLE>
Year
Ended
December
31, 1998
Benefits paid to participants per the
financial statements $ 260,558
Add: Amounts allocated to participant
withdrawals at December 31, 1998 659
Less: Amounts allocated to participant
withdrawals at December 31, 1997 (907)
Benefits paid to participants per Form
5500 $ 260,310
Amounts allocated to participant withdrawals are recorded on Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31, but not yet paid as of that date.
NOTE 9 - TAX STATUS
The Internal Revenue Service has determined and informed UTC by letter dated
September 23, 1996 that the Plan and related trust are designed in accordance
with applicable sections of the Internal Revenue Code (IRC). The Plan has been
amended since receiving the determination letter. However, the Plan
administrator and tax counsel believe that the Plan is designed and is currently
being operated in compliance with the applicable requirements of the IRC.
NOTE 10 - SUBSEQUENT EVENTS
Effective January 1, 1999, the Plan was amended to allow all new salaried
employees to participate in the Plan immediately after date of hire. In
addition, non-highly compensated participants in the Plan may elect to
contribute up to 20% of their compensation, effective January 1, 1999.
On January 1, 1999, the Employee Stock Ownership Plan (ESOP) was amended to no
longer require participants to complete at least 10 years of continuous service
prior to directing their ESOP account balances and future employer contributions
in other investment funds offered through the Plan.
On April 30, 1999, the Board of Directors of UTC declared a 2 for 1 stock split
in the form of a stock dividend payable May 17, 1999 to shareowners of record at
the close of business on May 7, 1999. The share amounts reflected herein do not
reflect the stock split.
On May 4, 1999, UTC completed the sale of its UT Automotive Corporation (UTA)
subsidiary to Lear Corporation. Plan participants include employees of UTA.
UTA employees have the option to transfer their account balances or leave their
investments in the Plan. These employees were permitted to continue making
contributions to the Plan through May 31, 1999.
<PAGE>
SIGNATURES
The Plan (or persons who administer the employee benefit plan), pursuant to the
requirements of the Securities Exchange Act of 1934, has duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
UNITED TECHNOLOGIES CORPORATION
EMPLOYEE SAVINGS PLAN
Dated: June 28, 1999 By: /s/ Daniel P. O'Connell
Daniel P. O'Connell
Corporate Director, Employee Benefits and Human
Resources Systems
United Technologies Corporation
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-26627) of United Technologies Corporation of our
report dated June 28, 1999 appearing in the United Technologies Corporation
Employee Savings Plan's Annual Report on Form 11-K for the year ended December
31, 1998.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
June 28, 1999
