United Technologies (UTX)

UTX has six operating segments. Three of the segments - Otis, Carrier and UTC Fire & Security - are collectively referred to as its commercial businesses and they serve customers in the commercial and residential property industries worldwide moreover, Carrier also serves commercial, industrial, transport refrigeration and food service equipment customers. The other three segments - Pratt & Whitney, Hamilton Sundstrand and Sikorsky are collectively referred to as its aerospace businesses and serve primarily commercial and government customers in the aerospace industry further, Hamilton Sundstrand and Pratt & Whitney also serve customers in industrial markets.

In 2007, commercial and industrial revenues were approximately 63 percent of total revenues, commercial aerospace revenues were approximately 21 percent of total revenues and military aerospace revenues were approximately16 percent of total revenues. 2007 revenues from outside the United States, including U.S. export sales, were 62 percent of total segment revenues.

Otis designs, manufactures, sells and installs a wide range of passenger and freight elevators for low-, medium- and high-speed applications, as well as a broad line of escalators and moving walkways. In addition to new equipment, Otis provides modernization products to upgrade elevators and escalators as well as maintenance services for both its products and those of other manufacturers. Otis serves customers in the commercial and residential property industries around the world. Otis sells directly to the end customer and, to a limited extent, through sales representatives and distributors.

Revenues generated by Otis' international operations were 81 percent and 80 percent of total Otis segment revenues in 2007 and 2006, respectively. Otis' backlog at December 31, 2007 was $14,146 million as compared to $12,549 million at December 31, 2006.

Carrier manufactures and distributes HVAC and refrigeration systems. It also produces food service equipment and HVAC and refrigeration-related controls for residential, commercial, industrial and transportation applications. In addition, Carrier provides installation, retrofit and aftermarket services and components for the products it sells and those of other manufacturers in the HVAC and refrigeration industries. Carrier's products and services are sold under Carrier and other brand names to building contractors and owners, homeowners, transportation companies, retail stores and food service companies. Carrier sells directly to the end customer and through manufacturers' representatives, distributors, wholesalers, dealers and retail outlets.

Revenues generated by Carrier's international operations, including U.S. export sales, were 59 percent and 54 percent of total Carrier segment revenues in 2007 and 2006, respectively. At December 31, 2007, Carrier's business backlog was $2,097 million as compared to $1,852 million at December 31, 2006.

UTC Fire & Security (UTC F&S) is a global-provider of security and fire safety products and services. In the electronic security industry, UTC F&S provides system integration, installation and service of intruder alarms, access control systems and video surveillance systems under several brand names. In the fire safety industry, UTC F&S designs, manufactures, integrates, installs, sells and services a wide range of specialty hazard detection and fixed suppression products and systems and manufactures, sells and services portable fire extinguishers and other fire fighting equipment under several brand names. UTC F&S also provides monitoring, response and security personnel services, including cash-in-transit security, to complement its electronic security and fire safety businesses. Its products and services are used by governments, financial institutions, architects, building owners and developers, security and fire consultants and other end-users requiring a high level of security and fire protection for their businesses and residences.

UTC F&S provides its products and services under Chubb, Kidde, Lenel and other brand names and sells directly to the customer as well as through manufacturer representatives, distributors and dealers. Revenues generated by UTC F&S's international operations were 82 percent and 84 percent of total UTC F&S segment revenues in 2007 and 2006, respectively. At December 31, 2007, UTC F&S's business backlog was $1,084 million as compared to $692 million at December 31, 2006.

Pratt & Whitney is a supplier of commercial, general aviation and military aircraft engines. Pratt & Whitney's Global Service Partners provides maintenance, repair and overhaul services, including the sale of spare parts, as well as fleet management services for large commercial engines. Pratt & Whitney produces families of engines for wide, narrow body and military aircraft. Pratt & Whitney also sells engines for auxiliary power units, industrial applications and space propulsion systems. Pratt & Whitney Canada (P&WC) produces engine that power business, regional, light jet, utility and military aircraft and helicopters. Pratt & Whitney Rocketdyne (PWR) is involved in the design, development and manufacture of sophisticated aerospace propulsion systems for military and commercial applications, including the space shuttle.

Pratt & Whitney's products are sold principally to aircraft manufacturers, airlines and other aircraft operators, aircraft leasing companies, space launch vehicle providers and the U.S. and foreign governments. The vast majority of sales are made directly to the end customer and, to a limited extent, through independent distributors and service providers. Sales to Airbus and Boeing were 9.5 and 6.4 percent, respectively, of total Pratt & Whitney revenues in 2007. Sales to the U.S. government were 29.5 percent of total Pratt & Whitney segment revenues in 2007.

Revenues from Pratt & Whitney's international operations, including U.S. exports, were 56 percent and 53 percent of total Pratt & Whitney segment revenues in 2007 and 2006, respectively. At December 31, 2007, Pratt & Whitney's business backlog was $23,607 million, including $5,334 million of U.S. government-funded contracts and subcontracts, as compared to $16,893 million and $2,895 million, respectively, at December 31, 2006.

Hamilton Sundstrand supplies advanced-technology aerospace and industrial products and aftermarket services for diversified industries worldwide. Hamilton Sundstrand's aerospace products - such as power generation management and distribution systems, flight systems, engine control systems, environmental control systems, fire protection and detection systems, auxiliary power units and propeller systems - serve commercial, military, regional, business and general aviation, as well as space and undersea applications. Aftermarket services include spare parts, overhaul and repair, engineering and technical support and fleet maintenance programs. Hamilton Sundstrand sells aerospace products to airframe manufacturers, the U.S. and foreign governments, aircraft operators and independent distributors. Hamilton Sundstrand sales of aerospace products to Boeing, Airbus and Pratt & Whitney, collectively, including sales where the U.S. government was the ultimate customer, were 16.6 percent of Hamilton Sundstrand segment sales in 2007.

Hamilton Sundstrand is engaged in development programs for the Boeing 787 aircraft, the Lockheed Martin F-35 Lightning II military aircraft and the Airbus A400M military aircraft, and has developed and delivered systems for the Airbus A380 aircraft. Hamilton Sundstrand is also the prime contractor for NASA's space suit/life support system and produces environmental monitoring and control, life support, mechanical systems and thermal control systems for the space shuttle, international space station and the Orion crew exploration vehicle.

Hamilton Sundstrand's principal industrial products, such as air compressors, metering pumps and fluid handling equipment, serve industries involved with raw material processing, bulk material handling, construction, hydrocarbon and chemical processing, and water and wastewater treatment. Hamilton Sundstrand sells these products under the Sullair, Sundyne, Milton Roy and other brand names directly to end-users, and through manufacturer representatives and distributors.

Revenues generated by Hamilton Sundstrand's international operations, including U.S. export sales, were 50 percent and 47 percent of total Hamilton Sundstrand segment revenues in 2007 and 2006, respectively. At December 31, 2007, Hamilton Sundstrand's business backlog was $5,152 million, including $823 million under U.S. government-funded contracts and subcontracts, as compared to $4,527 million and $725 million, respectively, at December 31, 2006.

Sikorsky is one of the world's largest manufacturers of military and commercial helicopters and also provides aftermarket helicopter and aircraft parts and services.

Current major production programs at Sikorsky include the UH-60L and UH-60M Black Hawk medium-transport helicopters for the U.S. and foreign governments, the MH-60S and MH-60R helicopters for the U.S. Navy, the International Naval Hawk for multiple naval missions, and the S-76 and S-92 helicopters for commercial operations. In December 2007, the U.S. government and Sikorsky signed a five-year multi-service contract for 537 H-60 helicopters to be delivered to the U.S. Army and U.S. Navy. In April 2006, Sikorsky was awarded a System Development and Demonstration contract for the U.S. Marine Corps CH-53K next generation heavy lift helicopter. Development of the H-92 helicopter for military markets and the S-76D helicopter, which is expected to be the next generation of the S-76 helicopter, is in process.

In March 2007, UTC acquired the Polish aircraft manufacturer, PZL Mielec, which is intended to form the foundation for Sikorsky's European operations. Sikorsky's aftermarket business includes spare parts sales, overhaul and repair services, maintenance contracts, and logistics support programs for helicopters and other aircraft. Sales are made directly by Sikorsky and by its subsidiaries and joint ventures. Sikorsky is increasingly engaging in logistics support programs and partnering with its government and commercial customers to manage and provide maintenance and repair services.

Revenues generated by Sikorsky's international operations, including U.S. export sales, were 34 percent of total Sikorsky revenues in 2007 and in 2006. At December 31, 2007, Sikorsky's business backlog was $11,445 million, including $5,180 million under U.S. government-funded contracts and subcontracts, as compared to $8,789 million and $3,257 million, respectively, at December 31, 2006.

UTC Power develops and markets distributed generation power systems and fuel cell power plants for stationary, transportation, space and defense applications. UTC Power's three primary distributed generation product lines, PureCell 200 fuel cell power plants, PureComfort combined cooling, heat and power systems and PureCycle geothermal organic Rankine cycle power systems, are designed to provide reliable, efficient and environmentally responsible energy solutions for customers.

UTC Power's automotive and bus transportation fuel cell power plants are based on proton exchange membrane (PEM) technology, including its PureMotion 120 power plant, which is currently used in revenue service in transit bus applications. UTC Power is currently developing PEM fuel cells for submarine applications. UTC Power's alkaline-based fuel cells are used on NASA's space shuttle program.

Although fuel cells are believed to be superior to conventional power generation technologies in terms of efficiency and environmental characteristics, the technology is still in development and continued technology advancement and cost reduction of key fuel cell components are required to achieve wide-scale market acceptance. Government support is needed to advance fuel cell technology to a truly commercial stage. There is still significant uncertainty as to whether and when commercially viable PEM fuel cells will be produced.

UTC Power merged with UTC Fuel Cells, effective January 1, 2007, with UTC Power continuing as the surviving entity. The results of UTC Power and UTC Fuel Cells are included in the "Eliminations and Other" category in the segment financial data.

HISTORICAL FINANCIAL INFORMATION

UTX (Dec F/Y)

($ in millions x/EPS)

2003

2004

2005

2006

2007

Revenues

$31,034

$37,445

$42,725

$47,829

$54,759

Cost of revenues

(22,531)

(27,242)

(30,935)

(34,740)

(39,922)

Gross Profit

8,503

10,203

11,790

13,089

14,837

R,D,T&E

(1,040)

(1,267)

(1,367)

(1,529)

(1,678)

S,G&A

(3,816)

(4,635)

(5,241)

(5,462)

(6,109)

Operating Profit

3,647

4,301

5,182

6,098

7,050

Interest

(375)

(363)

(498)

(606)

(666)

IBIT

3,272

3,938

4,684

5,492

6,384

Income Taxes

(868)

(1,031)

(1,253)

(1,494)

(1,836)

Minority Interest

(168)

(234)

(267)

(266)

(324)

Net Income

$2,236

$2,673

$3,164

$3,732

$4,224

EPS Diluted

$2.22

$2.64

$3.12

$3.71

$4.27

Shares - Diluted (mlns)

1,006

1,011

1,014

1,006

989

Percentages

Gross Profit

27.4%

27.2%

27.6%

27.4%

27.1%

R,D,T&E

-3.4%

-3.4%

-3.2%

-3.2%

-3.1%

S,G&A

-12.3%

-12.4%

-12.3%

-11.4%

-11.2%

Operating Profit

11.8%

11.5%

12.1%

12.7%

12.9%

IBIT

10.5%

10.5%

11.0%

11.5%

11.7%

Income Taxes

-26.5%

-26.2%

-26.8%

-27.2%

-28.8%

Net Income

7.2%

7.1%

7.4%

7.8%

7.7%

Segment Data

Revenues

Otis

$7,882

$8,937

$9,575

$10,290

$11,885

Carrier

9,232

10,620

12,512

13,481

14,644

Fire & Security

1,135

2,879

4,250

4,747

5,754

Pratt & Whitney

7,484

8,281

9,295

11,112

12,129

Hamilton Sundstrand

3,598

3,921

4,382

4,995

5,636

Sikorsky

2,184

2,506

2,802

3,230

4,789

Eliminations & Other

(481)

301

(91)

(26)

(78)

Revenues

$31,034

$37,445

$42,725

$47,829

$54,759

Operating Profit

Otis

$1,301

$1,413

$1,712

$1,888

$2,321

Carrier

853

830

1,104

1,237

1,381

Fire & Security

53

130

235

301

443

Pratt & Whitney

1,063

1,083

1,449

1,817

2,011

Hamilton Sundstrand

554

583

675

832

967

Sikorsky

190

200

250

173

373

Eliminations & Other

(92)

368

81

187

(60)

General Corporate

(275)

(306)

(324)

(337)

(386)

Operating Profit

$3,647

$4,301

$5,182

$6,098

$7,050

Operating Profit Margin

Otis

16.5%

15.8%

17.9%

18.3%

19.5%

Carrier

9.2%

7.8%

8.8%

9.2%

9.4%

Fire & Security

4.7%

4.5%

5.5%

6.3%

7.7%

Pratt & Whitney

14.2%

13.1%

15.6%

16.4%

16.6%

Hamilton Sundstrand

15.4%

14.9%

15.4%

16.7%

17.2%

Sikorsky

8.7%

8.0%

8.9%

5.4%

7.8%

General Corporate

-0.9%

-0.8%

-0.8%

-0.7%

-0.7%

Operating Profit Margin

11.8%

11.5%

12.1%

12.7%

12.9%

Balance Sheet Items

Cash & Equivalents

$1,623

$2,265

$2,247

$2,546

$2,904

A/R

5,187

6,315

7,240

7,679

8,844

Inventories

4,420

5,078

5,659

6,657

8,101

Current Assets

12,990

15,670

17,206

18,844

22,071

Goodwill + Intangibles

11,224

12,127

16,066

17,362

19,877

Current Liabilities

10,921

13,095

15,345

15,208

17,469

LTD

4,257

4,231

5,935

7,037

8,015

Equity

$11,707

$14,266

$16,991

$17,297

$21,355

Statistics

Days in A/R

61

62

62

59

59

Days in Inventory

72

68

67

70

74

Current Ratio (:1)

1.2

1.2

1.1

1.2

1.3

G+I/Equity

96%

85%

95%

100%

93%

Net LDT/Equity

22%

14%

22%

26%

24%

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