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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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DELAWARE
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06-0570975
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10 Farm Springs Road, Farmington, Connecticut 06032
(860) 728-7000
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock ($1 par value)
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UTX
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New York Stock Exchange
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(CUSIP 913017 10 9)
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1.125% Notes due 2021
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UTX 21D
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New York Stock Exchange
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(CUSIP 913017 CD9)
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1.250% Notes due 2023
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UTX 23
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New York Stock Exchange
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(CUSIP U91301 AD0)
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1.150% Notes due 2024
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UTX 24A
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New York Stock Exchange
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(CUSIP 913017 CU1)
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1.875% Notes due 2026
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UTX 26
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New York Stock Exchange
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(CUSIP 913017 CE7)
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2.150% Notes due 2030
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UTX 30
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New York Stock Exchange
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(CUSIP 913017 CV9)
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Floating Rate Notes due 2019
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UTX 19C
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New York Stock Exchange
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(CUSIP 913017 CS6)
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Floating Rate Notes due 2020
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UTX 20B
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New York Stock Exchange
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(CUSIP 913017 CT4)
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Page
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Item 1.
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Financial Statements
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Quarter Ended June 30,
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||||||
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(dollars in millions, except per share amounts)
|
2019
|
|
2018
|
||||
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Net Sales:
|
|
|
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||||
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Product sales
|
$
|
14,033
|
|
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$
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11,520
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Service sales
|
5,601
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|
|
5,185
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|
19,634
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|
|
16,705
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Costs and Expenses:
|
|
|
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||||
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Cost of products sold
|
10,863
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|
9,154
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||
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Cost of services sold
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3,550
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|
3,268
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Research and development
|
743
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|
589
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Selling, general and administrative
|
2,106
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|
1,759
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|
17,262
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|
14,770
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Other income, net
|
212
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|
|
941
|
|
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Operating profit
|
2,584
|
|
|
2,876
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|
||
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Non-service pension (benefit)
|
(216
|
)
|
|
(192
|
)
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||
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Interest expense, net
|
360
|
|
|
234
|
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||
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Income from operations before income taxes
|
2,440
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|
|
2,834
|
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||
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Income tax expense
|
441
|
|
|
695
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||
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Net income from operations
|
1,999
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|
|
2,139
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||
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Less: Noncontrolling interest in subsidiaries' earnings from operations
|
99
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|
|
91
|
|
||
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Net income attributable to common shareowners
|
$
|
1,900
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|
|
$
|
2,048
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Earnings Per Share of Common Stock - Basic:
|
|
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||||
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Net income attributable to common shareowners
|
$
|
2.22
|
|
|
$
|
2.59
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Earnings Per Share of Common Stock - Diluted:
|
|
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||||
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Net income attributable to common shareowners
|
$
|
2.20
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|
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$
|
2.56
|
|
|
|
Six Months Ended June 30,
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||||||
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(dollars in millions, except per share amounts)
|
2019
|
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2018
|
||||
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Net Sales:
|
|
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|
||||
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Product sales
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$
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26,908
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$
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21,778
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Service sales
|
11,091
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|
|
10,169
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||
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|
37,999
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|
|
31,947
|
|
||
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Costs and Expenses:
|
|
|
|
||||
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Cost of products sold
|
21,149
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|
|
17,170
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||
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Cost of services sold
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6,971
|
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|
6,532
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||
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Research and development
|
1,471
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|
|
1,143
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||
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Selling, general and administrative
|
4,103
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|
|
3,470
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||
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|
33,694
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28,315
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Other income, net
|
324
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|
|
1,172
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|
||
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Operating profit
|
4,629
|
|
|
4,804
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|
||
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Non-service pension (benefit)
|
(424
|
)
|
|
(383
|
)
|
||
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Interest expense, net
|
791
|
|
|
463
|
|
||
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Income from operations before income taxes
|
4,262
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|
|
4,724
|
|
||
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Income tax expense
|
838
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|
|
1,217
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|
||
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Net income from operations
|
3,424
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|
3,507
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||
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Less: Noncontrolling interest in subsidiaries' earnings from operations
|
178
|
|
|
162
|
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Net income attributable to common shareowners
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$
|
3,246
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|
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$
|
3,345
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Earnings Per Share of Common Stock - Basic:
|
|
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|
||||
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Net income attributable to common shareowners
|
$
|
3.80
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|
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$
|
4.23
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Earnings Per Share of Common Stock - Diluted:
|
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Net income attributable to common shareowners
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$
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3.76
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$
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4.18
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Quarter Ended June 30,
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Six Months Ended June 30,
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||||||||||||
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(dollars in millions)
|
2019
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|
2018
|
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2019
|
|
2018
|
||||||||
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Net income from operations
|
$
|
1,999
|
|
|
$
|
2,139
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|
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$
|
3,424
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|
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$
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3,507
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|
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Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
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|
||||||||
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Foreign currency translation adjustments
|
(423
|
)
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(679
|
)
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|
98
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(140
|
)
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Pension and postretirement benefit plans adjustments
|
24
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|
|
80
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|
|
57
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|
|
153
|
|
||||
|
ASU 2016-01 adoption impact (Note 12)
|
—
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—
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—
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(5
|
)
|
||||
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Change in unrealized cash flow hedging
|
25
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(186
|
)
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33
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(172
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)
|
||||
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Other comprehensive (loss) income, net of tax
|
(374
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)
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(785
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)
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188
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|
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(164
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)
|
||||
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Comprehensive income
|
1,625
|
|
|
1,354
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|
|
3,612
|
|
|
3,343
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|
||||
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Less: Comprehensive income attributable to noncontrolling interest
|
(100
|
)
|
|
(53
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)
|
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(182
|
)
|
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(157
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)
|
||||
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Comprehensive income attributable to common shareowners
|
$
|
1,525
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|
|
$
|
1,301
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|
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$
|
3,430
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|
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$
|
3,186
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(dollars in millions)
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June 30, 2019
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|
December 31, 2018
|
||||
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Assets
|
|
|
|
||||
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Cash and cash equivalents
|
$
|
6,819
|
|
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$
|
6,152
|
|
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Accounts receivable, net
|
13,695
|
|
|
14,271
|
|
||
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Contract assets, current
|
4,334
|
|
|
3,486
|
|
||
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Inventory, net
|
10,934
|
|
|
10,083
|
|
||
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Other assets, current
|
1,276
|
|
|
1,511
|
|
||
|
Total Current Assets
|
37,058
|
|
|
35,503
|
|
||
|
Customer financing assets
|
3,293
|
|
|
3,023
|
|
||
|
Future income tax benefits
|
1,712
|
|
|
1,646
|
|
||
|
Fixed assets
|
24,689
|
|
|
24,084
|
|
||
|
Less: Accumulated depreciation
|
(12,397
|
)
|
|
(11,787
|
)
|
||
|
Fixed assets, net
|
12,292
|
|
|
12,297
|
|
||
|
Operating lease right-of-use assets
|
2,740
|
|
|
—
|
|
||
|
Goodwill
|
48,358
|
|
|
48,112
|
|
||
|
Intangible assets, net
|
25,963
|
|
|
26,424
|
|
||
|
Other assets
|
7,574
|
|
|
7,206
|
|
||
|
Total Assets
|
$
|
138,990
|
|
|
$
|
134,211
|
|
|
Liabilities and Equity
|
|
|
|
||||
|
Short-term borrowings
|
$
|
1,139
|
|
|
$
|
1,469
|
|
|
Accounts payable
|
11,109
|
|
|
11,080
|
|
||
|
Accrued liabilities
|
10,753
|
|
|
10,223
|
|
||
|
Contract liabilities, current
|
6,219
|
|
|
5,720
|
|
||
|
Long-term debt currently due
|
6,202
|
|
|
2,876
|
|
||
|
Total Current Liabilities
|
35,422
|
|
|
31,368
|
|
||
|
Long-term debt
|
37,910
|
|
|
41,192
|
|
||
|
Future pension and postretirement benefit obligations
|
3,663
|
|
|
4,018
|
|
||
|
Operating lease liabilities
|
2,258
|
|
|
—
|
|
||
|
Other long-term liabilities
|
16,651
|
|
|
16,914
|
|
||
|
Total Liabilities
|
95,904
|
|
|
93,492
|
|
||
|
Commitments and contingent liabilities (Note 15)
|
|
|
|
||||
|
Redeemable noncontrolling interest
|
109
|
|
|
109
|
|
||
|
Shareowners' Equity:
|
|
|
|
||||
|
Common Stock
|
22,718
|
|
|
22,514
|
|
||
|
Treasury Stock
|
(32,549
|
)
|
|
(32,482
|
)
|
||
|
Retained earnings
|
60,548
|
|
|
57,823
|
|
||
|
Unearned ESOP shares
|
(71
|
)
|
|
(76
|
)
|
||
|
Accumulated other comprehensive loss
|
(9,892
|
)
|
|
(9,333
|
)
|
||
|
Total Shareowners' Equity
|
40,754
|
|
|
38,446
|
|
||
|
Noncontrolling interest
|
2,223
|
|
|
2,164
|
|
||
|
Total Equity
|
42,977
|
|
|
40,610
|
|
||
|
Total Liabilities and Equity
|
$
|
138,990
|
|
|
$
|
134,211
|
|
|
|
Six Months Ended June 30,
|
||||||
|
(dollars in millions)
|
2019
|
|
2018
|
||||
|
Operating Activities:
|
|
|
|
||||
|
Net income from operations
|
$
|
3,424
|
|
|
$
|
3,507
|
|
|
Adjustments to reconcile net income from operations to net cash flows provided by operating activities:
|
|
|
|
||||
|
Depreciation and amortization
|
1,864
|
|
|
1,173
|
|
||
|
Deferred income tax provision
|
6
|
|
|
45
|
|
||
|
Stock compensation cost
|
156
|
|
|
117
|
|
||
|
Gain on sale of Taylor Company
|
—
|
|
|
(795
|
)
|
||
|
Change in:
|
|
|
|
||||
|
Accounts receivable
|
769
|
|
|
(1,661
|
)
|
||
|
Contract assets, current
|
(491
|
)
|
|
(617
|
)
|
||
|
Inventory
|
(1,108
|
)
|
|
(962
|
)
|
||
|
Other current assets
|
51
|
|
|
301
|
|
||
|
Accounts payable and accrued liabilities
|
(58
|
)
|
|
2,010
|
|
||
|
Contract liabilities, current
|
381
|
|
|
440
|
|
||
|
Global pension contributions
|
(79
|
)
|
|
(59
|
)
|
||
|
Canadian government settlement
|
(38
|
)
|
|
(221
|
)
|
||
|
Other operating activities, net
|
(1,266
|
)
|
|
(723
|
)
|
||
|
Net cash flows provided by operating activities
|
3,611
|
|
|
2,555
|
|
||
|
Investing Activities:
|
|
|
|
||||
|
Capital expenditures
|
(830
|
)
|
|
(709
|
)
|
||
|
Investments in businesses (Note 1)
|
(32
|
)
|
|
(134
|
)
|
||
|
Dispositions of businesses (Note 1)
|
133
|
|
|
1,094
|
|
||
|
Increase in customer financing assets, net
|
(331
|
)
|
|
(344
|
)
|
||
|
Increase in collaboration intangible assets
|
(169
|
)
|
|
(181
|
)
|
||
|
Receipts from settlements of derivative contracts
|
61
|
|
|
82
|
|
||
|
Other investing activities, net
|
(49
|
)
|
|
(46
|
)
|
||
|
Net cash flows used in investing activities
|
(1,217
|
)
|
|
(238
|
)
|
||
|
Financing Activities:
|
|
|
|
||||
|
Issuance of long-term debt
|
56
|
|
|
2,429
|
|
||
|
Repayment of long-term debt
|
(65
|
)
|
|
(2,092
|
)
|
||
|
(Decrease) increase in short-term borrowings, net
|
(327
|
)
|
|
642
|
|
||
|
Proceeds from Common Stock issued under employee stock plans
|
11
|
|
|
6
|
|
||
|
Dividends paid on Common Stock
|
(1,219
|
)
|
|
(1,070
|
)
|
||
|
Repurchase of Common Stock
|
(69
|
)
|
|
(52
|
)
|
||
|
Other financing activities, net
|
(153
|
)
|
|
(74
|
)
|
||
|
Net cash flows used in financing activities
|
(1,766
|
)
|
|
(211
|
)
|
||
|
Effect of foreign exchange rate changes on cash and cash equivalents
|
16
|
|
|
(18
|
)
|
||
|
Net increase in cash, cash equivalents and restricted cash
|
644
|
|
|
2,088
|
|
||
|
Cash, cash equivalents and restricted cash, beginning of year
|
6,212
|
|
|
9,018
|
|
||
|
Cash, cash equivalents and restricted cash, end of period
|
6,856
|
|
|
11,106
|
|
||
|
Less: Restricted cash
|
37
|
|
|
38
|
|
||
|
Cash and cash equivalents, end of period
|
$
|
6,819
|
|
|
$
|
11,068
|
|
|
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions, except per share amounts; shares in thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Equity beginning balance
|
|
$
|
41,946
|
|
|
$
|
32,492
|
|
|
$
|
40,610
|
|
|
$
|
31,421
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
||||||||
|
Beginning balance
|
|
22,564
|
|
|
17,641
|
|
|
22,514
|
|
|
17,574
|
|
||||
|
Common Stock issued under employee plans
|
|
154
|
|
|
106
|
|
|
211
|
|
|
174
|
|
||||
|
Purchase of subsidiary shares from noncontrolling interest, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||
|
Redeemable noncontrolling interest fair value adjustment
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
||||
|
Ending balance
|
|
22,718
|
|
|
17,747
|
|
|
22,718
|
|
|
17,747
|
|
||||
|
Treasury Stock
|
|
|
|
|
|
|
|
|
||||||||
|
Beginning balance
|
|
(32,511
|
)
|
|
(35,619
|
)
|
|
(32,482
|
)
|
|
(35,596
|
)
|
||||
|
Common Stock issued under employee plans
|
|
1
|
|
|
1
|
|
|
4
|
|
|
3
|
|
||||
|
Common Stock repurchased
|
|
(39
|
)
|
|
(27
|
)
|
|
(71
|
)
|
|
(52
|
)
|
||||
|
Ending balance
|
|
(32,549
|
)
|
|
(35,645
|
)
|
|
(32,549
|
)
|
|
(35,645
|
)
|
||||
|
Retained Earnings
|
|
|
|
|
|
|
|
|
||||||||
|
Beginning balance
|
|
59,279
|
|
|
55,533
|
|
|
57,823
|
|
|
55,242
|
|
||||
|
Net Income
|
|
1,900
|
|
|
2,048
|
|
|
3,246
|
|
|
3,345
|
|
||||
|
Dividends on Common Stock
|
|
(610
|
)
|
|
(535
|
)
|
|
(1,219
|
)
|
|
(1,070
|
)
|
||||
|
Dividends on ESOP Common Stock
|
|
(18
|
)
|
|
(17
|
)
|
|
(36
|
)
|
|
(35
|
)
|
||||
|
Redeemable noncontrolling interest fair value adjustment
|
|
(11
|
)
|
|
—
|
|
|
(7
|
)
|
|
(2
|
)
|
||||
|
New Revenue Standard adoption impact
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(480
|
)
|
||||
|
ASU 2018-02 adoption impact (Note 12)
|
|
—
|
|
|
—
|
|
|
745
|
|
|
—
|
|
||||
|
Other
|
|
8
|
|
|
(2
|
)
|
|
(4
|
)
|
|
27
|
|
||||
|
Ending balance
|
|
60,548
|
|
|
57,027
|
|
|
60,548
|
|
|
57,027
|
|
||||
|
Unearned ESOP Shares
|
|
|
|
|
|
|
|
|
||||||||
|
Beginning balance
|
|
(75
|
)
|
|
(84
|
)
|
|
(76
|
)
|
|
(85
|
)
|
||||
|
Common Stock issued under employee plans
|
|
4
|
|
|
3
|
|
|
5
|
|
|
4
|
|
||||
|
Ending balance
|
|
(71
|
)
|
|
(81
|
)
|
|
(71
|
)
|
|
(81
|
)
|
||||
|
Accumulated Other Comprehensive (Loss) Income
|
|
|
|
|
|
|
|
|
||||||||
|
Beginning balance
|
|
(9,519
|
)
|
|
(6,937
|
)
|
|
(9,333
|
)
|
|
(7,525
|
)
|
||||
|
Other comprehensive (loss) income, net of tax
|
|
(373
|
)
|
|
(747
|
)
|
|
186
|
|
|
(159
|
)
|
||||
|
ASU 2018-02 adoption impact (Note 12)
|
|
—
|
|
|
—
|
|
|
(745
|
)
|
|
—
|
|
||||
|
Ending balance
|
|
(9,892
|
)
|
|
(7,684
|
)
|
|
(9,892
|
)
|
|
(7,684
|
)
|
||||
|
Noncontrolling Interest
|
|
|
|
|
|
|
|
|
||||||||
|
Beginning balance
|
|
2,208
|
|
|
1,958
|
|
|
2,164
|
|
|
1,811
|
|
||||
|
Net Income
|
|
99
|
|
|
91
|
|
|
178
|
|
|
162
|
|
||||
|
Redeemable noncontrolling interest in subsidiaries' earnings
|
|
2
|
|
|
(3
|
)
|
|
5
|
|
|
(5
|
)
|
||||
|
Other comprehensive income (loss), net of tax
|
|
1
|
|
|
(38
|
)
|
|
4
|
|
|
(5
|
)
|
||||
|
Dividends attributable to noncontrolling interest
|
|
(101
|
)
|
|
(73
|
)
|
|
(145
|
)
|
|
(139
|
)
|
||||
|
Purchase of subsidiary shares from noncontrolling interest, net
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||
|
Disposition of noncontrolling interest, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
||||
|
Capital contributions
|
|
18
|
|
|
42
|
|
|
18
|
|
|
162
|
|
||||
|
Other
|
|
(3
|
)
|
|
5
|
|
|
—
|
|
|
5
|
|
||||
|
Ending balance
|
|
2,223
|
|
|
1,982
|
|
|
2,223
|
|
|
1,982
|
|
||||
|
Equity at June 30
|
|
$
|
42,977
|
|
|
$
|
33,346
|
|
|
$
|
42,977
|
|
|
$
|
33,346
|
|
|
|
|
|
|
|
||||||||||||
|
Supplemental share information
|
||||||||||||||||
|
Shares of Common Stock issued under employee plans
|
|
799
|
|
|
235
|
|
|
1,827
|
|
|
1,310
|
|
||||
|
Shares of Common Stock repurchased
|
|
297
|
|
|
214
|
|
|
553
|
|
|
402
|
|
||||
|
Dividends per share of Common Stock
|
|
$
|
0.740
|
|
|
$
|
0.700
|
|
|
$
|
1.470
|
|
|
$
|
1.400
|
|
|
(dollars in millions)
|
|
Amount
|
||
|
Cash consideration paid for Rockwell Collins outstanding common stock & equity awards
|
|
$
|
15,533
|
|
|
Fair value of UTC common stock issued for Rockwell Collins outstanding common stock & equity awards
|
|
7,960
|
|
|
|
Total consideration transferred
|
|
$
|
23,493
|
|
|
(dollars in millions)
|
Estimated
Fair Value
|
|
Estimated
Life
|
||
|
Acquired customer relationships
|
$
|
8,220
|
|
|
10-20 years
|
|
Acquired tradenames/trademarks
|
1,870
|
|
|
Indefinite
|
|
|
Acquired developed technology
|
600
|
|
|
15 years
|
|
|
|
$
|
10,690
|
|
|
|
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions, except per share amounts)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Net sales
|
$
|
19,634
|
|
|
$
|
18,810
|
|
|
$
|
37,994
|
|
|
$
|
36,131
|
|
|
Net income attributable to common shareowners
|
$
|
1,901
|
|
|
$
|
2,266
|
|
|
$
|
3,385
|
|
|
$
|
3,742
|
|
|
Basic earnings per share of common stock
|
$
|
2.22
|
|
|
$
|
2.66
|
|
|
$
|
3.96
|
|
|
$
|
4.39
|
|
|
Diluted earnings per share of common stock
|
$
|
2.20
|
|
|
$
|
2.63
|
|
|
$
|
3.92
|
|
|
$
|
4.34
|
|
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Amortization of inventory and fixed asset fair value adjustment 1
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
$
|
141
|
|
|
$
|
(10
|
)
|
|
Amortization of acquired Rockwell Collins intangible assets, net 2
|
—
|
|
|
(53
|
)
|
|
—
|
|
|
(106
|
)
|
||||
|
Utilization of contractual customer obligation 3
|
—
|
|
|
8
|
|
|
—
|
|
|
10
|
|
||||
|
UTC/Rockwell Collins fees for advisory, legal, accounting services 4
|
1
|
|
|
17
|
|
|
3
|
|
|
43
|
|
||||
|
Interest expense incurred on acquisition financing, net 5
|
—
|
|
|
(76
|
)
|
|
—
|
|
|
(152
|
)
|
||||
|
Elimination of capitalized pre-production engineering amortization 6
|
—
|
|
|
17
|
|
|
—
|
|
|
32
|
|
||||
|
Adjustment to net periodic pension cost 7
|
—
|
|
|
11
|
|
|
—
|
|
|
22
|
|
||||
|
Adjustment to reflect the adoption of ASC 606 8
|
—
|
|
|
29
|
|
|
—
|
|
|
58
|
|
||||
|
Elimination of entities held for sale 9
|
—
|
|
|
(5
|
)
|
|
(5
|
)
|
|
(12
|
)
|
||||
|
|
$
|
1
|
|
|
$
|
(57
|
)
|
|
$
|
139
|
|
|
$
|
(115
|
)
|
|
1
|
Reflects the elimination of the inventory step-up amortization recorded by UTC in 2019 as this would have been completed within the first two quarters of 2017. Additionally, this adjustment reflects the amortization of the fixed asset fair value adjustment as of the acquisition date.
|
|
2
|
Reflects the additional amortization of the acquired Rockwell Collins' intangible assets recognized at fair value in purchase accounting and eliminates the historical Rockwell Collins intangible asset amortization expense.
|
|
3
|
Reflects the additional amortization of liabilities recognized for acquired contracts with terms less favorable than could be realized in market transactions as of the acquisition date and eliminates Rockwell Collins historical amortization of these liabilities.
|
|
4
|
Reflects the elimination of transaction-related fees incurred by UTC and Rockwell Collins in connection with the acquisition and assumes all of the fees were incurred during the first quarter of 2017.
|
|
5
|
Reflects the additional interest expense incurred on debt to finance our acquisition of Rockwell Collins and reduces interest expense for the debt fair value adjustment which would have been amortized.
|
|
6
|
Reflects the elimination of Rockwell Collins capitalized pre-production engineering amortization to conform to UTC policy.
|
|
7
|
Reflects adjustments for the elimination of amortization of prior service cost and actuarial loss amortization, which was recorded by Rockwell Collins, as a result of fair value purchase accounting, net of the impact of the revised pension and post-retirement benefit (expense) as determined under UTC’s plan assumptions.
|
|
8
|
Reflects adjustments to Rockwell Collins revenue recognition as if they adopted the New Revenue Standard as of January 1, 2018 and primarily relates to capitalization of contract costs and changes in timing of sales recognition for contracts requiring an over time method of revenue recognition, partially offset by deferral of revenue recognized on OEM product engineering and development.
|
|
9
|
Reflects the elimination of entities required to be sold for regulatory approvals.
|
|
(dollars in millions)
|
Balance as of
January 1, 2019 |
|
Goodwill
Resulting from Business Combinations
|
|
Foreign Currency Translation and Other
|
|
Balance as of
June 30, 2019 |
||||||||
|
Otis
|
$
|
1,688
|
|
|
$
|
7
|
|
|
$
|
(16
|
)
|
|
$
|
1,679
|
|
|
Carrier
|
9,835
|
|
|
1
|
|
|
3
|
|
|
9,839
|
|
||||
|
Pratt & Whitney
|
1,567
|
|
|
—
|
|
|
(4
|
)
|
|
1,563
|
|
||||
|
Collins Aerospace Systems
|
35,001
|
|
|
255
|
|
|
—
|
|
|
35,256
|
|
||||
|
Total Segments
|
48,091
|
|
|
263
|
|
|
(17
|
)
|
|
48,337
|
|
||||
|
Eliminations and other
|
21
|
|
|
—
|
|
|
—
|
|
|
21
|
|
||||
|
Total
|
$
|
48,112
|
|
|
$
|
263
|
|
|
$
|
(17
|
)
|
|
$
|
48,358
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
||||||||||||
|
(dollars in millions)
|
Gross Amount
|
|
Accumulated
Amortization
|
|
Gross Amount
|
|
Accumulated
Amortization
|
||||||||
|
Amortized:
|
|
|
|
|
|
|
|
||||||||
|
Service portfolios
|
$
|
2,179
|
|
|
$
|
(1,656
|
)
|
|
$
|
2,164
|
|
|
$
|
(1,608
|
)
|
|
Patents and trademarks
|
361
|
|
|
(245
|
)
|
|
361
|
|
|
(236
|
)
|
||||
|
Collaboration intangible assets
|
4,681
|
|
|
(779
|
)
|
|
4,509
|
|
|
(649
|
)
|
||||
|
Customer relationships and other
|
22,598
|
|
|
(5,099
|
)
|
|
22,525
|
|
|
(4,560
|
)
|
||||
|
|
29,819
|
|
|
(7,779
|
)
|
|
29,559
|
|
|
(7,053
|
)
|
||||
|
Unamortized:
|
|
|
|
|
|
|
|
||||||||
|
Trademarks and other
|
3,923
|
|
|
—
|
|
|
3,918
|
|
|
—
|
|
||||
|
Total
|
$
|
33,742
|
|
|
$
|
(7,779
|
)
|
|
$
|
33,477
|
|
|
$
|
(7,053
|
)
|
|
(dollars in millions)
|
|
Remaining 2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
||||||||||||
|
Amortization expense
|
|
$
|
742
|
|
|
$
|
1,427
|
|
|
$
|
1,408
|
|
|
$
|
1,407
|
|
|
$
|
1,398
|
|
|
$
|
1,378
|
|
|
(dollars in millions)
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
Contract assets, current
|
$
|
4,334
|
|
|
$
|
3,486
|
|
|
Contract assets, noncurrent (included within Other assets)
|
1,215
|
|
|
1,142
|
|
||
|
Total contract assets
|
5,549
|
|
|
4,628
|
|
||
|
Contract liabilities, current
|
(6,219
|
)
|
|
(5,720
|
)
|
||
|
Contract liabilities, noncurrent (included within Other long-term liabilities)
|
(5,190
|
)
|
|
(5,069
|
)
|
||
|
Total contract liabilities
|
(11,409
|
)
|
|
(10,789
|
)
|
||
|
Net contract liabilities
|
$
|
(5,860
|
)
|
|
$
|
(6,161
|
)
|
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions, except per share amounts; shares in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Net income attributable to common shareowners
|
$
|
1,900
|
|
|
$
|
2,048
|
|
|
$
|
3,246
|
|
|
$
|
3,345
|
|
|
Basic weighted average number of shares outstanding
|
854.4
|
|
|
790.5
|
|
|
853.8
|
|
|
790.2
|
|
||||
|
Stock awards and equity units (share equivalent)
|
9.3
|
|
|
9.1
|
|
|
8.5
|
|
|
9.8
|
|
||||
|
Diluted weighted average number of shares outstanding
|
863.7
|
|
|
799.6
|
|
|
862.3
|
|
|
800.0
|
|
||||
|
Earnings Per Share of Common Stock:
|
|
|
|
|
|
|
|
||||||||
|
Basic
|
$
|
2.22
|
|
|
$
|
2.59
|
|
|
$
|
3.80
|
|
|
$
|
4.23
|
|
|
Diluted
|
$
|
2.20
|
|
|
$
|
2.56
|
|
|
$
|
3.76
|
|
|
$
|
4.18
|
|
|
(dollars in millions)
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
Raw materials
|
$
|
3,024
|
|
|
$
|
3,052
|
|
|
Work-in-process
|
2,863
|
|
|
2,673
|
|
||
|
Finished goods
|
5,047
|
|
|
4,358
|
|
||
|
|
$
|
10,934
|
|
|
$
|
10,083
|
|
|
(dollars in millions)
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
Commercial paper
|
$
|
855
|
|
|
$
|
1,257
|
|
|
Other borrowings
|
284
|
|
|
212
|
|
||
|
Total short-term borrowings
|
$
|
1,139
|
|
|
$
|
1,469
|
|
|
(dollars in millions)
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
LIBOR plus 0.350% floating rate notes due 2019 3
|
$
|
350
|
|
|
$
|
350
|
|
|
1.500% notes due 2019 1
|
650
|
|
|
650
|
|
||
|
1.950% notes due 2019 4
|
300
|
|
|
300
|
|
||
|
EURIBOR plus 0.15% floating rate notes due 2019 (€750 million principal value) 2
|
855
|
|
|
858
|
|
||
|
5.250% notes due 2019 4
|
300
|
|
|
300
|
|
||
|
8.875% notes due 2019
|
271
|
|
|
271
|
|
||
|
4.875% notes due 2020 1
|
171
|
|
|
171
|
|
||
|
4.500% notes due 2020 1
|
1,250
|
|
|
1,250
|
|
||
|
1.900% notes due 2020 1
|
1,000
|
|
|
1,000
|
|
||
|
EURIBOR plus 0.20% floating rate notes due 2020 (€750 million principal value) 2
|
855
|
|
|
858
|
|
||
|
8.750% notes due 2021
|
250
|
|
|
250
|
|
||
|
3.100% notes due 2021 4
|
250
|
|
|
250
|
|
||
|
3.350% notes due 2021 1
|
1,000
|
|
|
1,000
|
|
||
|
LIBOR plus 0.650% floating rate notes due 2021 1,3
|
750
|
|
|
750
|
|
||
|
1.950% notes due 2021 1
|
750
|
|
|
750
|
|
||
|
1.125% notes due 2021 (€950 million principal value) 1
|
1,082
|
|
|
1,088
|
|
||
|
2.300% notes due 2022 1
|
500
|
|
|
500
|
|
||
|
2.800% notes due 2022 4
|
1,100
|
|
|
1,100
|
|
||
|
3.100% notes due 2022 1
|
2,300
|
|
|
2,300
|
|
||
|
1.250% notes due 2023 (€750 million principal value) 1
|
855
|
|
|
858
|
|
||
|
3.650% notes due 2023 1
|
2,250
|
|
|
2,250
|
|
||
|
3.700% notes due 2023 4
|
400
|
|
|
400
|
|
||
|
2.800% notes due 2024 1
|
800
|
|
|
800
|
|
||
|
3.200% notes due 2024 4
|
950
|
|
|
950
|
|
||
|
1.150% notes due 2024 (€750 million principal value) 1
|
855
|
|
|
858
|
|
||
|
3.950% notes due 2025 1
|
1,500
|
|
|
1,500
|
|
||
|
1.875% notes due 2026 (€500 million principal value) 1
|
569
|
|
|
573
|
|
||
|
2.650% notes due 2026 1
|
1,150
|
|
|
1,150
|
|
||
|
3.125% notes due 2027 1
|
1,100
|
|
|
1,100
|
|
||
|
3.500% notes due 2027 4
|
1,300
|
|
|
1,300
|
|
||
|
7.100% notes due 2027
|
141
|
|
|
141
|
|
||
|
6.700% notes due 2028
|
400
|
|
|
400
|
|
||
|
4.125% notes due 2028 1
|
3,000
|
|
|
3,000
|
|
||
|
7.500% notes due 2029 1
|
550
|
|
|
550
|
|
||
|
2.150% notes due 2030 (€500 million principal value) 1
|
569
|
|
|
573
|
|
||
|
5.400% notes due 2035 1
|
600
|
|
|
600
|
|
||
|
6.050% notes due 2036 1
|
600
|
|
|
600
|
|
||
|
6.800% notes due 2036 1
|
134
|
|
|
134
|
|
||
|
7.000% notes due 2038
|
159
|
|
|
159
|
|
||
|
6.125% notes due 2038 1
|
1,000
|
|
|
1,000
|
|
||
|
4.450% notes due 2038 1
|
750
|
|
|
750
|
|
||
|
5.700% notes due 2040 1
|
1,000
|
|
|
1,000
|
|
||
|
4.500% notes due 2042 1
|
3,500
|
|
|
3,500
|
|
||
|
4.800% notes due 2043 4
|
400
|
|
|
400
|
|
||
|
4.150% notes due 2045 1
|
850
|
|
|
850
|
|
||
|
3.750% notes due 2046 1
|
1,100
|
|
|
1,100
|
|
||
|
4.050% notes due 2047 1
|
600
|
|
|
600
|
|
||
|
4.350% notes due 2047 4
|
1,000
|
|
|
1,000
|
|
||
|
4.625% notes due 2048 1
|
1,750
|
|
|
1,750
|
|
||
|
Project financing obligations 5
|
335
|
|
|
287
|
|
||
|
Other (including finance leases)
|
295
|
|
|
287
|
|
||
|
Total principal long-term debt
|
44,446
|
|
|
44,416
|
|
||
|
Other (fair market value adjustments, discounts and debt issuance costs)
|
(334
|
)
|
|
(348
|
)
|
||
|
Total long-term debt
|
44,112
|
|
|
44,068
|
|
||
|
Less: current portion
|
6,202
|
|
|
2,876
|
|
||
|
Long-term debt, net of current portion
|
$
|
37,910
|
|
|
$
|
41,192
|
|
|
1
|
We may redeem these notes at our option pursuant to their terms.
|
|
2
|
The three-month EURIBOR rate as of June 30, 2019 was approximately -0.345%. The notes may be redeemed at our option in whole, but not in part, at any time in the event of certain developments affecting U.S. taxation.
|
|
3
|
The three-month LIBOR rate as of June 30, 2019 was approximately 2.319%.
|
|
4
|
Rockwell Collins debt which remained outstanding following the Rockwell Merger.
|
|
5
|
Project financing obligations are associated with the sale of rights to unbilled revenues related to the ongoing activity of an entity owned by Carrier.
|
|
(dollars and Euro in millions)
|
|
|
|
|
|
Issuance Date
|
Description of Notes
|
Aggregate Principal Balance
|
||
|
August 16, 2018:
|
3.350% notes due 20211
|
$
|
1,000
|
|
|
|
3.650% notes due 20231
|
2,250
|
|
|
|
|
3.950% notes due 20251
|
1,500
|
|
|
|
|
4.125% notes due 20281
|
3,000
|
|
|
|
|
4.450% notes due 20381
|
750
|
|
|
|
|
4.625% notes due 20482
|
1,750
|
|
|
|
|
LIBOR plus 0.65% floating rate notes due 20211
|
750
|
|
|
|
|
|
|
||
|
May 18, 2018:
|
1.150% notes due 20243
|
€
|
750
|
|
|
|
2.150% notes due 20303
|
500
|
|
|
|
|
EURIBOR plus 0.20% floating rate notes due 20203
|
750
|
|
|
|
1
|
The net proceeds received from these debt issuances were used to partially finance the cash consideration portion of the purchase price for Rockwell Collins and fees, expenses and other amounts related to the acquisition of Rockwell Collins.
|
|
2
|
The net proceeds from these debt issuances were used to fund the repayment of commercial paper and for other general corporate purposes.
|
|
3
|
The net proceeds received from these debt issuances were used for general corporate purposes.
|
|
(dollars and Euro in millions)
|
|
|
||
|
Repayment Date
|
Description of Notes
|
Aggregate Principal Balance
|
||
|
December 14, 2018
|
Variable-rate term loan due 2020 (1 month LIBOR plus 1.25%)1
|
$
|
482
|
|
|
May 4, 2018
|
1.778% junior subordinated notes
|
$
|
1,100
|
|
|
February 22, 2018
|
EURIBOR plus 0.80% floating rate notes
|
€
|
750
|
|
|
February 1, 2018
|
6.80% notes
|
$
|
99
|
|
|
1
|
This term loan was assumed in connection with the Rockwell Collins acquisition and subsequently repaid.
|
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
|
Average interest expense rate
|
3.6
|
%
|
|
3.5
|
%
|
|
3.7
|
%
|
|
3.5
|
%
|
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Defined benefit plans
|
$
|
47
|
|
|
$
|
22
|
|
|
$
|
79
|
|
|
$
|
59
|
|
|
Defined contribution plans
|
134
|
|
|
105
|
|
|
287
|
|
|
199
|
|
||||
|
|
Pension Benefits
Quarter Ended June 30, |
|
Other Postretirement Benefits
Quarter Ended June 30, |
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Service cost
|
$
|
89
|
|
|
$
|
93
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
Interest cost
|
340
|
|
|
278
|
|
|
8
|
|
|
6
|
|
||||
|
Expected return on plan assets
|
(608
|
)
|
|
(562
|
)
|
|
—
|
|
|
—
|
|
||||
|
Amortization of prior service cost (credit)
|
4
|
|
|
(10
|
)
|
|
(11
|
)
|
|
(1
|
)
|
||||
|
Recognized actuarial net loss (gain)
|
53
|
|
|
101
|
|
|
(3
|
)
|
|
(2
|
)
|
||||
|
Net settlement and curtailment loss (gain)
|
1
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
||||
|
Total net periodic benefit (income) cost
|
$
|
(121
|
)
|
|
$
|
(102
|
)
|
|
$
|
(5
|
)
|
|
$
|
3
|
|
|
|
Pension Benefits
Six Months Ended June 30,
|
|
Other Postretirement Benefits
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Service cost
|
$
|
176
|
|
|
$
|
186
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
Interest cost
|
680
|
|
|
557
|
|
|
16
|
|
|
12
|
|
||||
|
Expected return on plan assets
|
(1,215
|
)
|
|
(1,125
|
)
|
|
(1
|
)
|
|
—
|
|
||||
|
Amortization of prior service cost (credit)
|
9
|
|
|
(20
|
)
|
|
(22
|
)
|
|
(2
|
)
|
||||
|
Recognized actuarial net loss (gain)
|
106
|
|
|
202
|
|
|
(6
|
)
|
|
(4
|
)
|
||||
|
Net settlement and curtailment loss (gain)
|
9
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
||||
|
Total net periodic benefit (income) cost
|
$
|
(235
|
)
|
|
$
|
(203
|
)
|
|
$
|
(11
|
)
|
|
$
|
7
|
|
|
(dollars in millions)
|
|
||
|
Otis
|
$
|
40
|
|
|
Carrier
|
63
|
|
|
|
Pratt & Whitney
|
17
|
|
|
|
Collins Aerospace Systems
|
56
|
|
|
|
Eliminations and other
|
2
|
|
|
|
Total
|
$
|
178
|
|
|
(dollars in millions)
|
Severance
|
|
Facility Exit, Lease Termination and Other Costs
|
|
Total
|
||||||
|
Quarter Ended June 30, 2019
|
|
|
|
|
|
||||||
|
Restructuring accruals at March 31, 2019
|
$
|
53
|
|
|
$
|
15
|
|
|
$
|
68
|
|
|
Net pre-tax restructuring costs
|
42
|
|
|
—
|
|
|
42
|
|
|||
|
Utilization, foreign exchange and other costs
|
(38
|
)
|
|
(4
|
)
|
|
(42
|
)
|
|||
|
Balance at June 30, 2019
|
$
|
57
|
|
|
$
|
11
|
|
|
$
|
68
|
|
|
|
|
|
|
|
|
||||||
|
Six Months Ended June 30, 2019
|
|
|
|
|
|
||||||
|
Net pre-tax restructuring costs
|
$
|
110
|
|
|
$
|
5
|
|
|
$
|
115
|
|
|
Utilization, foreign exchange and other costs
|
(53
|
)
|
|
6
|
|
|
(47
|
)
|
|||
|
Balance at June 30, 2019
|
$
|
57
|
|
|
$
|
11
|
|
|
$
|
68
|
|
|
(dollars in millions)
|
Expected
Costs
|
|
Costs Incurred Quarter Ended
March 31, 2019
|
|
Costs Incurred Quarter Ended
June 30, 2019
|
|
Remaining Costs at
June 30, 2019
|
||||||||
|
Otis
|
$
|
48
|
|
|
$
|
(19
|
)
|
|
$
|
(14
|
)
|
|
$
|
15
|
|
|
Carrier
|
77
|
|
|
(25
|
)
|
|
(24
|
)
|
|
28
|
|
||||
|
Pratt & Whitney
|
17
|
|
|
(14
|
)
|
|
(3
|
)
|
|
—
|
|
||||
|
Collins Aerospace Systems
|
44
|
|
|
(14
|
)
|
|
—
|
|
|
30
|
|
||||
|
Eliminations and other
|
2
|
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
||||
|
Total
|
$
|
188
|
|
|
$
|
(73
|
)
|
|
$
|
(42
|
)
|
|
$
|
73
|
|
|
(dollars in millions)
|
Severance
|
|
Facility Exit,
Lease
Termination and
Other Costs
|
|
Total
|
||||||
|
Quarter Ended June 30, 2019
|
|
|
|
|
|
||||||
|
Restructuring accruals at March 31, 2019
|
$
|
62
|
|
|
$
|
9
|
|
|
$
|
71
|
|
|
Net pre-tax restructuring costs
|
14
|
|
|
2
|
|
|
16
|
|
|||
|
Utilization, foreign exchange and other costs
|
(28
|
)
|
|
(2
|
)
|
|
(30
|
)
|
|||
|
Balance at June 30, 2019
|
$
|
48
|
|
|
$
|
9
|
|
|
$
|
57
|
|
|
|
|
|
|
|
|
||||||
|
Six Months Ended June 30, 2019
|
|
|
|
|
|
||||||
|
Restructuring accruals at December 31, 2018
|
$
|
115
|
|
|
$
|
23
|
|
|
$
|
138
|
|
|
Net pre-tax restructuring costs
|
35
|
|
|
4
|
|
|
39
|
|
|||
|
Utilization, foreign exchange and other costs
|
(102
|
)
|
|
(18
|
)
|
|
(120
|
)
|
|||
|
Balance at June 30, 2019
|
$
|
48
|
|
|
$
|
9
|
|
|
$
|
57
|
|
|
(dollars in millions)
|
Expected
Costs
|
|
Costs Incurred in 2018
|
|
Costs Incurred Quarter Ended
March 31, 2019
|
|
Costs Incurred Quarter Ended
June 30, 2019
|
|
Remaining Costs at
June 30, 2019
|
||||||||||
|
Otis
|
$
|
58
|
|
|
$
|
(48
|
)
|
|
$
|
(5
|
)
|
|
$
|
(1
|
)
|
|
$
|
4
|
|
|
Carrier
|
85
|
|
|
(64
|
)
|
|
(7
|
)
|
|
(6
|
)
|
|
8
|
|
|||||
|
Pratt & Whitney
|
3
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
Collins Aerospace Systems
|
115
|
|
|
(87
|
)
|
|
(11
|
)
|
|
(9
|
)
|
|
8
|
|
|||||
|
Eliminations and other
|
5
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
Total
|
$
|
266
|
|
|
$
|
(207
|
)
|
|
$
|
(23
|
)
|
|
$
|
(16
|
)
|
|
$
|
20
|
|
|
(dollars in millions)
|
Balance Sheet Location
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
Derivatives designated as hedging instruments:
|
|
|
|
|
||||
|
Foreign exchange contracts
|
Asset Derivatives:
|
|
|
|
||||
|
|
Other assets, current
|
$
|
16
|
|
|
$
|
10
|
|
|
|
Other assets
|
19
|
|
|
12
|
|
||
|
|
Total asset derivatives
|
$
|
35
|
|
|
$
|
22
|
|
|
|
Liability Derivatives:
|
|
|
|
||||
|
|
Accrued liabilities
|
(59
|
)
|
|
(83
|
)
|
||
|
|
Other long-term liabilities
|
(90
|
)
|
|
(111
|
)
|
||
|
|
Total liability derivatives
|
$
|
(149
|
)
|
|
$
|
(194
|
)
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
||||
|
Foreign exchange contracts
|
Asset Derivatives:
|
|
|
|
||||
|
|
Other assets, current
|
$
|
79
|
|
|
$
|
44
|
|
|
|
Other assets
|
7
|
|
|
19
|
|
||
|
|
Total asset derivatives
|
$
|
86
|
|
|
$
|
63
|
|
|
|
Liability Derivatives:
|
|
|
|
||||
|
|
Accrued liabilities
|
(80
|
)
|
|
(89
|
)
|
||
|
|
Other long-term liabilities
|
(2
|
)
|
|
(3
|
)
|
||
|
|
Total liability derivatives
|
$
|
(82
|
)
|
|
$
|
(92
|
)
|
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Gain (loss) recorded in Accumulated other comprehensive loss
|
$
|
21
|
|
|
$
|
(245
|
)
|
|
$
|
28
|
|
|
$
|
(200
|
)
|
|
Loss (gain) reclassified from Accumulated other comprehensive loss into Product sales
|
16
|
|
|
(1
|
)
|
|
20
|
|
|
(28
|
)
|
||||
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Foreign exchange contracts
|
$
|
18
|
|
|
$
|
19
|
|
|
$
|
36
|
|
|
$
|
70
|
|
|
|
June 30, 2019
|
||||||||||||||
|
(dollars in millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
Recurring fair value measurements:
|
|
|
|
|
|
|
|
||||||||
|
Available-for-sale securities
|
$
|
60
|
|
|
$
|
60
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Derivative assets
|
121
|
|
|
—
|
|
|
121
|
|
|
—
|
|
||||
|
Derivative liabilities
|
(231
|
)
|
|
—
|
|
|
(231
|
)
|
|
—
|
|
||||
|
|
December 31, 2018
|
||||||||||||||
|
(dollars in millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
Recurring fair value measurements:
|
|
|
|
|
|
|
|
||||||||
|
Available-for-sale securities
|
$
|
51
|
|
|
$
|
51
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Derivative assets
|
85
|
|
|
—
|
|
|
85
|
|
|
—
|
|
||||
|
Derivative liabilities
|
(286
|
)
|
|
—
|
|
|
(286
|
)
|
|
—
|
|
||||
|
|
June 30, 2019
|
|
December 31, 2018
|
||||||||||||
|
(dollars in millions)
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
|
Long-term receivables
|
$
|
384
|
|
|
$
|
370
|
|
|
$
|
334
|
|
|
$
|
314
|
|
|
Customer financing notes receivable
|
283
|
|
|
282
|
|
|
272
|
|
|
265
|
|
||||
|
Short-term borrowings
|
(1,139
|
)
|
|
(1,139
|
)
|
|
(1,469
|
)
|
|
(1,469
|
)
|
||||
|
Long-term debt (excluding finance leases)
|
(44,027
|
)
|
|
(47,458
|
)
|
|
(43,996
|
)
|
|
(44,003
|
)
|
||||
|
Long-term liabilities
|
(422
|
)
|
|
(399
|
)
|
|
(508
|
)
|
|
(467
|
)
|
||||
|
|
June 30, 2019
|
||||||||||||||
|
(dollars in millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
Long-term receivables
|
$
|
370
|
|
|
$
|
—
|
|
|
$
|
370
|
|
|
$
|
—
|
|
|
Customer financing notes receivable
|
282
|
|
|
—
|
|
|
282
|
|
|
—
|
|
||||
|
Short-term borrowings
|
(1,139
|
)
|
|
—
|
|
|
(855
|
)
|
|
(284
|
)
|
||||
|
Long-term debt (excluding finance leases)
|
(47,458
|
)
|
|
—
|
|
|
(47,035
|
)
|
|
(423
|
)
|
||||
|
Long-term liabilities
|
(399
|
)
|
|
—
|
|
|
(399
|
)
|
|
—
|
|
||||
|
|
December 31, 2018
|
||||||||||||||
|
(dollars in millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
Long-term receivables
|
$
|
314
|
|
|
$
|
—
|
|
|
$
|
314
|
|
|
$
|
—
|
|
|
Customer financing notes receivable
|
265
|
|
|
—
|
|
|
265
|
|
|
—
|
|
||||
|
Short-term borrowings
|
(1,469
|
)
|
|
—
|
|
|
(1,258
|
)
|
|
(211
|
)
|
||||
|
Long-term debt (excluding finance leases)
|
(44,003
|
)
|
|
—
|
|
|
(43,620
|
)
|
|
(383
|
)
|
||||
|
Long-term liabilities
|
(467
|
)
|
|
—
|
|
|
(467
|
)
|
|
—
|
|
||||
|
(dollars in millions)
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
Long-term trade accounts receivable
|
$
|
294
|
|
|
$
|
269
|
|
|
Notes and leases receivable
|
256
|
|
|
258
|
|
||
|
Total long-term receivables
|
$
|
550
|
|
|
$
|
527
|
|
|
(dollars in millions)
|
Foreign
Currency
Translation
|
|
Defined
Benefit
Pension and
Post-
retirement
Plans
|
|
Unrealized Gains
(Losses) on
Available-for-Sale
Securities
|
|
Unrealized
Hedging
(Losses)
Gains
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
||||||||||
|
Quarter Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Balance at March 31, 2019
|
$
|
(2,932
|
)
|
|
$
|
(6,422
|
)
|
|
$
|
—
|
|
|
$
|
(165
|
)
|
|
$
|
(9,519
|
)
|
|
Other comprehensive (loss) income before
reclassifications, net |
(435
|
)
|
|
(13
|
)
|
|
—
|
|
|
21
|
|
|
(427
|
)
|
|||||
|
Amounts reclassified, pre-tax
|
(1
|
)
|
|
43
|
|
|
—
|
|
|
16
|
|
|
58
|
|
|||||
|
Tax expense (benefit) reclassified
|
14
|
|
|
(6
|
)
|
|
—
|
|
|
(12
|
)
|
|
(4
|
)
|
|||||
|
Balance at June 30, 2019
|
$
|
(3,354
|
)
|
|
$
|
(6,398
|
)
|
|
$
|
—
|
|
|
$
|
(140
|
)
|
|
$
|
(9,892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Six Months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Balance at December 31, 2018
|
$
|
(3,442
|
)
|
|
$
|
(5,718
|
)
|
|
$
|
—
|
|
|
$
|
(173
|
)
|
|
$
|
(9,333
|
)
|
|
Other comprehensive income (loss) before
reclassifications, net |
95
|
|
|
(14
|
)
|
|
—
|
|
|
28
|
|
|
109
|
|
|||||
|
Amounts reclassified, pre-tax
|
—
|
|
|
87
|
|
|
—
|
|
|
20
|
|
|
107
|
|
|||||
|
Tax expense (benefit) reclassified
|
1
|
|
|
(16
|
)
|
|
—
|
|
|
(15
|
)
|
|
(30
|
)
|
|||||
|
ASU 2018-02 adoption impact
|
(8
|
)
|
|
(737
|
)
|
|
—
|
|
|
—
|
|
|
(745
|
)
|
|||||
|
Balance at June 30, 2019
|
$
|
(3,354
|
)
|
|
$
|
(6,398
|
)
|
|
$
|
—
|
|
|
$
|
(140
|
)
|
|
$
|
(9,892
|
)
|
|
(dollars in millions)
|
Foreign
Currency
Translation
|
|
Defined
Benefit
Pension and
Post-
retirement
Plans
|
|
Unrealized Gains
(Losses) on
Available-for-Sale
Securities
|
|
Unrealized
Hedging
(Losses)
Gains
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
||||||||||
|
Quarter Ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Balance at March 31, 2018
|
$
|
(2,444
|
)
|
|
$
|
(4,579
|
)
|
|
$
|
—
|
|
|
$
|
86
|
|
|
$
|
(6,937
|
)
|
|
Other comprehensive (loss) income before
reclassifications, net |
(564
|
)
|
|
18
|
|
|
—
|
|
|
(245
|
)
|
|
(791
|
)
|
|||||
|
Amounts reclassified, pre-tax
|
(3
|
)
|
|
88
|
|
|
—
|
|
|
(1
|
)
|
|
84
|
|
|||||
|
Tax (benefit) expense reclassified
|
(74
|
)
|
|
(26
|
)
|
|
—
|
|
|
60
|
|
|
(40
|
)
|
|||||
|
Balance at June 30, 2018
|
$
|
(3,085
|
)
|
|
$
|
(4,499
|
)
|
|
$
|
—
|
|
|
$
|
(100
|
)
|
|
$
|
(7,684
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Six Months Ended June 30, 2018
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Balance at December 31, 2017
|
$
|
(2,950
|
)
|
|
$
|
(4,652
|
)
|
|
$
|
5
|
|
|
$
|
72
|
|
|
$
|
(7,525
|
)
|
|
Other comprehensive (loss) income before
reclassifications, net |
(188
|
)
|
|
26
|
|
|
—
|
|
|
(200
|
)
|
|
(362
|
)
|
|||||
|
Amounts reclassified, pre-tax
|
(3
|
)
|
|
176
|
|
|
—
|
|
|
(28
|
)
|
|
145
|
|
|||||
|
Tax expense (benefit) reclassified
|
56
|
|
|
(49
|
)
|
|
—
|
|
|
56
|
|
|
63
|
|
|||||
|
ASU 2016-01 adoption impact
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|||||
|
Balance at June 30, 2018
|
$
|
(3,085
|
)
|
|
$
|
(4,499
|
)
|
|
$
|
—
|
|
|
$
|
(100
|
)
|
|
$
|
(7,684
|
)
|
|
(dollars in millions)
|
June 30, 2019
|
|
December 31, 2018
|
||||
|
Current assets
|
$
|
4,484
|
|
|
$
|
4,732
|
|
|
Noncurrent assets
|
1,700
|
|
|
1,600
|
|
||
|
Total assets
|
$
|
6,184
|
|
|
$
|
6,332
|
|
|
|
|
|
|
||||
|
Current liabilities
|
$
|
5,121
|
|
|
$
|
4,946
|
|
|
Noncurrent liabilities
|
1,884
|
|
|
1,898
|
|
||
|
Total liabilities
|
$
|
7,005
|
|
|
$
|
6,844
|
|
|
(dollars in millions)
|
|
2019
|
|
2018
|
||||
|
Balance as of January 1
|
|
$
|
1,449
|
|
|
$
|
1,146
|
|
|
Warranties and performance guarantees issued
|
|
309
|
|
|
233
|
|
||
|
Settlements made
|
|
(241
|
)
|
|
(200
|
)
|
||
|
Other
|
|
5
|
|
|
(7
|
)
|
||
|
Balance as of June 30
|
|
$
|
1,522
|
|
|
$
|
1,172
|
|
|
(dollars in millions)
|
Quarter Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
||||
|
Operating cash flows for the measurement of operating lease liabilities
|
$
|
(192
|
)
|
|
$
|
(337
|
)
|
|
Operating lease right-of-use assets obtained in exchange for operating lease obligations
|
174
|
|
|
201
|
|
||
|
(dollars in millions, except lease term and discount rate)
|
June 30, 2019
|
||
|
Operating lease right-of-use assets
|
$
|
2,740
|
|
|
|
|
||
|
Accrued liabilities
|
$
|
(580
|
)
|
|
Operating lease liabilities
|
(2,258
|
)
|
|
|
Total operating lease liabilities
|
$
|
(2,838
|
)
|
|
|
June 30, 2019
|
|
|
Weighted Average Remaining Lease Term (in years)
|
6.8
|
|
|
Weighted Average Discount Rate
|
3.6
|
%
|
|
(dollars in millions)
|
Operating 1
|
|
|
|
2019
|
$
|
344
|
|
|
2020
|
629
|
|
|
|
2021
|
543
|
|
|
|
2022
|
412
|
|
|
|
2023
|
287
|
|
|
|
Thereafter
|
878
|
|
|
|
Total undiscounted lease payments
|
3,093
|
|
|
|
Less imputed interest
|
(255
|
)
|
|
|
Total discounted lease payments
|
$
|
2,838
|
|
|
|
Net Sales
|
|
Operating Profits
|
|
Operating Profit Margins
|
||||||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||
|
Otis
|
$
|
3,348
|
|
|
$
|
3,344
|
|
|
$
|
515
|
|
|
$
|
488
|
|
|
15.4
|
%
|
|
14.6
|
%
|
|
Carrier
|
4,962
|
|
|
5,035
|
|
|
836
|
|
|
1,645
|
|
|
16.8
|
%
|
|
32.7
|
%
|
||||
|
Pratt & Whitney
|
5,150
|
|
|
4,736
|
|
|
424
|
|
|
397
|
|
|
8.2
|
%
|
|
8.4
|
%
|
||||
|
Collins Aerospace Systems
|
6,576
|
|
|
3,962
|
|
|
1,172
|
|
|
569
|
|
|
17.8
|
%
|
|
14.4
|
%
|
||||
|
Total segments
|
20,036
|
|
|
17,077
|
|
|
2,947
|
|
|
3,099
|
|
|
14.7
|
%
|
|
18.1
|
%
|
||||
|
Eliminations and other
|
(402
|
)
|
|
(372
|
)
|
|
(239
|
)
|
|
(97
|
)
|
|
|
|
|
||||||
|
General corporate expenses
|
—
|
|
|
—
|
|
|
(124
|
)
|
|
(126
|
)
|
|
|
|
|
||||||
|
Consolidated
|
$
|
19,634
|
|
|
$
|
16,705
|
|
|
$
|
2,584
|
|
|
$
|
2,876
|
|
|
13.2
|
%
|
|
17.2
|
%
|
|
|
Net Sales
|
|
Operating Profits
|
|
Operating Profit Margins
|
||||||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||
|
Otis
|
$
|
6,444
|
|
|
$
|
6,381
|
|
|
$
|
941
|
|
|
$
|
938
|
|
|
14.6
|
%
|
|
14.7
|
%
|
|
Carrier
|
9,285
|
|
|
9,411
|
|
|
1,365
|
|
|
2,237
|
|
|
14.7
|
%
|
|
23.8
|
%
|
||||
|
Pratt & Whitney
|
9,967
|
|
|
9,065
|
|
|
857
|
|
|
810
|
|
|
8.6
|
%
|
|
8.9
|
%
|
||||
|
Collins Aerospace Systems
|
13,089
|
|
|
7,779
|
|
|
2,028
|
|
|
1,157
|
|
|
15.5
|
%
|
|
14.9
|
%
|
||||
|
Total segments
|
38,785
|
|
|
32,636
|
|
|
5,191
|
|
|
5,142
|
|
|
13.4
|
%
|
|
15.8
|
%
|
||||
|
Eliminations and other
|
(786
|
)
|
|
(689
|
)
|
|
(340
|
)
|
|
(108
|
)
|
|
|
|
|
||||||
|
General corporate expenses
|
—
|
|
|
—
|
|
|
(222
|
)
|
|
(230
|
)
|
|
|
|
|
||||||
|
Consolidated
|
$
|
37,999
|
|
|
$
|
31,947
|
|
|
$
|
4,629
|
|
|
$
|
4,804
|
|
|
12.2
|
%
|
|
15.0
|
%
|
|
|
2019
|
|
2018
|
||||||||||||||||||||||||||||
|
(dollars in millions)
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
||||||||||||||||||||
|
United States
|
$
|
904
|
|
$
|
2,707
|
|
$
|
3,967
|
|
$
|
4,797
|
|
$
|
12,375
|
|
|
$
|
859
|
|
$
|
2,618
|
|
$
|
3,652
|
|
$
|
2,776
|
|
$
|
9,905
|
|
|
Europe
|
992
|
|
1,301
|
|
112
|
|
988
|
|
3,393
|
|
|
1,054
|
|
1,455
|
|
126
|
|
585
|
|
3,220
|
|
||||||||||
|
Asia Pacific
|
1,200
|
|
737
|
|
294
|
|
210
|
|
2,441
|
|
|
1,169
|
|
720
|
|
312
|
|
85
|
|
2,286
|
|
||||||||||
|
Other
|
252
|
|
217
|
|
777
|
|
581
|
|
1,827
|
|
|
262
|
|
242
|
|
646
|
|
516
|
|
1,666
|
|
||||||||||
|
Total segment
|
$
|
3,348
|
|
$
|
4,962
|
|
$
|
5,150
|
|
$
|
6,576
|
|
$
|
20,036
|
|
|
$
|
3,344
|
|
$
|
5,035
|
|
$
|
4,736
|
|
$
|
3,962
|
|
$
|
17,077
|
|
|
|
2019
|
|
2018
|
||||||||||||||||||||||||||||
|
(dollars in millions)
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
||||||||||||||||||||
|
United States
|
$
|
1,816
|
|
$
|
4,921
|
|
$
|
7,699
|
|
$
|
9,527
|
|
$
|
23,963
|
|
|
$
|
1,704
|
|
$
|
4,713
|
|
$
|
6,773
|
|
$
|
5,430
|
|
$
|
18,620
|
|
|
Europe
|
1,947
|
|
2,593
|
|
221
|
|
2,011
|
|
6,772
|
|
|
2,059
|
|
2,839
|
|
299
|
|
1,192
|
|
6,389
|
|
||||||||||
|
Asia Pacific
|
2,176
|
|
1,349
|
|
549
|
|
399
|
|
4,473
|
|
|
2,091
|
|
1,405
|
|
680
|
|
169
|
|
4,345
|
|
||||||||||
|
Other
|
505
|
|
422
|
|
1,498
|
|
1,152
|
|
3,577
|
|
|
527
|
|
454
|
|
1,313
|
|
988
|
|
3,282
|
|
||||||||||
|
Total segment
|
$
|
6,444
|
|
$
|
9,285
|
|
$
|
9,967
|
|
$
|
13,089
|
|
$
|
38,785
|
|
|
$
|
6,381
|
|
$
|
9,411
|
|
$
|
9,065
|
|
$
|
7,779
|
|
$
|
32,636
|
|
|
|
2019
|
|
2018
|
||||||||||||||||||||||||||||
|
(dollars in millions)
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
||||||||||||||||||||
|
Commercial and industrial, non aerospace
|
$
|
3,348
|
|
$
|
4,962
|
|
$
|
5
|
|
$
|
12
|
|
$
|
8,327
|
|
|
$
|
3,344
|
|
$
|
5,035
|
|
$
|
5
|
|
$
|
15
|
|
$
|
8,399
|
|
|
Commercial aerospace
|
—
|
|
—
|
|
3,538
|
|
4,855
|
|
8,393
|
|
|
—
|
|
—
|
|
3,369
|
|
3,024
|
|
6,393
|
|
||||||||||
|
Military aerospace
|
—
|
|
—
|
|
1,607
|
|
1,709
|
|
3,316
|
|
|
—
|
|
—
|
|
1,362
|
|
923
|
|
2,285
|
|
||||||||||
|
Total segment
|
$
|
3,348
|
|
$
|
4,962
|
|
$
|
5,150
|
|
$
|
6,576
|
|
$
|
20,036
|
|
|
$
|
3,344
|
|
$
|
5,035
|
|
$
|
4,736
|
|
$
|
3,962
|
|
$
|
17,077
|
|
|
|
2019
|
|
2018
|
||||||||||||||||||||||||||||
|
(dollars in millions)
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
||||||||||||||||||||
|
Commercial and industrial, non aerospace
|
$
|
6,444
|
|
$
|
9,285
|
|
$
|
28
|
|
$
|
26
|
|
$
|
15,783
|
|
|
$
|
6,381
|
|
$
|
9,411
|
|
$
|
26
|
|
$
|
30
|
|
$
|
15,848
|
|
|
Commercial aerospace
|
—
|
|
—
|
|
6,913
|
|
9,683
|
|
16,596
|
|
|
—
|
|
—
|
|
6,568
|
|
5,935
|
|
12,503
|
|
||||||||||
|
Military aerospace
|
—
|
|
—
|
|
3,026
|
|
3,380
|
|
6,406
|
|
|
—
|
|
—
|
|
2,471
|
|
1,814
|
|
4,285
|
|
||||||||||
|
Total segment
|
$
|
6,444
|
|
$
|
9,285
|
|
$
|
9,967
|
|
$
|
13,089
|
|
$
|
38,785
|
|
|
$
|
6,381
|
|
$
|
9,411
|
|
$
|
9,065
|
|
$
|
7,779
|
|
$
|
32,636
|
|
|
|
2019
|
|
2018
|
||||||||||||||||||||||||||||
|
(dollars in millions)
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
||||||||||||||||||||
|
Product
|
$
|
1,511
|
|
$
|
4,138
|
|
$
|
3,305
|
|
$
|
5,440
|
|
$
|
14,394
|
|
|
$
|
1,525
|
|
$
|
4,213
|
|
$
|
2,775
|
|
$
|
3,340
|
|
$
|
11,853
|
|
|
Service
|
1,837
|
|
824
|
|
1,845
|
|
1,136
|
|
5,642
|
|
|
1,819
|
|
822
|
|
1,961
|
|
622
|
|
5,224
|
|
||||||||||
|
Total segment
|
$
|
3,348
|
|
$
|
4,962
|
|
$
|
5,150
|
|
$
|
6,576
|
|
$
|
20,036
|
|
|
$
|
3,344
|
|
$
|
5,035
|
|
$
|
4,736
|
|
$
|
3,962
|
|
$
|
17,077
|
|
|
|
2019
|
|
2018
|
||||||||||||||||||||||||||||
|
(dollars in millions)
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
|
Otis
|
Carrier
|
Pratt & Whitney
|
Collins Aerospace Systems
|
Total
|
||||||||||||||||||||
|
Product
|
$
|
2,791
|
|
$
|
7,705
|
|
$
|
6,278
|
|
$
|
10,846
|
|
$
|
27,620
|
|
|
$
|
2,744
|
|
$
|
7,811
|
|
$
|
5,312
|
|
$
|
6,528
|
|
$
|
22,395
|
|
|
Service
|
3,653
|
|
1,580
|
|
3,689
|
|
2,243
|
|
11,165
|
|
|
3,637
|
|
1,600
|
|
3,753
|
|
1,251
|
|
10,241
|
|
||||||||||
|
Total segment
|
$
|
6,444
|
|
$
|
9,285
|
|
$
|
9,967
|
|
$
|
13,089
|
|
$
|
38,785
|
|
|
$
|
6,381
|
|
$
|
9,411
|
|
$
|
9,065
|
|
$
|
7,779
|
|
$
|
32,636
|
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Net Sales
|
$
|
19,634
|
|
|
$
|
16,705
|
|
|
$
|
37,999
|
|
|
$
|
31,947
|
|
|
|
Quarter Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
||
|
Organic change
|
6
|
%
|
|
7
|
%
|
|
Foreign currency translation
|
(1
|
)%
|
|
(2
|
)%
|
|
Acquisitions and divestitures, net
|
13
|
%
|
|
14
|
%
|
|
Total % change
|
18
|
%
|
|
19
|
%
|
|
|
Quarter Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Total cost of products and services sold
|
$
|
14,413
|
|
|
$
|
12,422
|
|
|
$
|
28,120
|
|
|
$
|
23,702
|
|
|
Percentage of net sales
|
73.4
|
%
|
|
74.4
|
%
|
|
74.0
|
%
|
|
74.2
|
%
|
||||
|
|
Quarter Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
||
|
Organic change
|
6
|
%
|
|
7
|
%
|
|
Foreign currency translation
|
(2
|
)%
|
|
(2
|
)%
|
|
Acquisitions and divestitures, net
|
12
|
%
|
|
14
|
%
|
|
Total % change
|
16
|
%
|
|
19
|
%
|
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Gross margin
|
$
|
5,221
|
|
|
$
|
4,283
|
|
|
$
|
9,879
|
|
|
$
|
8,245
|
|
|
Percentage of net sales
|
26.6
|
%
|
|
25.6
|
%
|
|
26.0
|
%
|
|
25.8
|
%
|
||||
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Company-funded
|
$
|
743
|
|
|
$
|
589
|
|
|
$
|
1,471
|
|
|
$
|
1,143
|
|
|
Percentage of net sales
|
3.8
|
%
|
|
3.5
|
%
|
|
3.9
|
%
|
|
3.6
|
%
|
||||
|
Customer-funded
|
$
|
573
|
|
|
$
|
365
|
|
|
$
|
1,124
|
|
|
$
|
688
|
|
|
Percentage of net sales
|
2.9
|
%
|
|
2.2
|
%
|
|
3.0
|
%
|
|
2.2
|
%
|
||||
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Selling, general and administrative expenses
|
$
|
2,106
|
|
|
$
|
1,759
|
|
|
$
|
4,103
|
|
|
$
|
3,470
|
|
|
Percentage of net sales
|
10.7
|
%
|
|
10.5
|
%
|
|
10.8
|
%
|
|
10.9
|
%
|
||||
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Other income, net
|
$
|
212
|
|
|
$
|
941
|
|
|
$
|
324
|
|
|
$
|
1,172
|
|
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Interest expense
|
$
|
438
|
|
|
$
|
258
|
|
|
$
|
888
|
|
|
$
|
514
|
|
|
Interest income
|
(78
|
)
|
|
(24
|
)
|
|
(97
|
)
|
|
(51
|
)
|
||||
|
Interest expense, net
|
$
|
360
|
|
|
$
|
234
|
|
|
$
|
791
|
|
|
$
|
463
|
|
|
Average interest expense rate
|
3.6
|
%
|
|
3.5
|
%
|
|
3.7
|
%
|
|
3.5
|
%
|
||||
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
|
Effective tax rate
|
18.1
|
%
|
|
24.5
|
%
|
|
19.7
|
%
|
|
25.8
|
%
|
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions, except per share amounts)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Net income attributable to common shareowners
|
$
|
1,900
|
|
|
$
|
2,048
|
|
|
$
|
3,246
|
|
|
$
|
3,345
|
|
|
Diluted earnings per share from operations
|
$
|
2.20
|
|
|
$
|
2.56
|
|
|
$
|
3.76
|
|
|
$
|
4.18
|
|
|
|
Six Months Ended June 30,
|
||||||
|
(dollars in millions)
|
2019
|
|
2018
|
||||
|
Restructuring costs
|
$
|
178
|
|
|
$
|
149
|
|
|
|
Otis
|
|
Carrier
|
||||||||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||
|
Net Sales
|
$
|
3,348
|
|
|
$
|
3,344
|
|
|
—
|
%
|
|
$
|
4,962
|
|
|
$
|
5,035
|
|
|
(1
|
)%
|
|
Cost of Sales
|
2,374
|
|
|
2,389
|
|
|
(1
|
)%
|
|
3,487
|
|
|
3,521
|
|
|
(1
|
)%
|
||||
|
|
974
|
|
|
955
|
|
|
2
|
%
|
|
1,475
|
|
|
1,514
|
|
|
(3
|
)%
|
||||
|
Operating Expenses and Other
|
459
|
|
|
467
|
|
|
(2
|
)%
|
|
639
|
|
|
(131
|
)
|
|
(588
|
)%
|
||||
|
Operating Profits
|
$
|
515
|
|
|
$
|
488
|
|
|
6
|
%
|
|
$
|
836
|
|
|
$
|
1,645
|
|
|
(49
|
)%
|
|
Operating Profit Margins
|
15.4
|
%
|
|
14.6
|
%
|
|
|
|
16.8
|
%
|
|
32.7
|
%
|
|
|
|
|
Otis
|
|
Carrier
|
||||||||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||
|
Net Sales
|
$
|
6,444
|
|
|
$
|
6,381
|
|
|
1
|
%
|
|
$
|
9,285
|
|
|
$
|
9,411
|
|
|
(1
|
)%
|
|
Cost of Sales
|
4,569
|
|
|
4,523
|
|
|
1
|
%
|
|
6,575
|
|
|
6,625
|
|
|
(1
|
)%
|
||||
|
|
1,875
|
|
|
1,858
|
|
|
1
|
%
|
|
2,710
|
|
|
2,786
|
|
|
(3
|
)%
|
||||
|
Operating Expenses and Other
|
934
|
|
|
920
|
|
|
2
|
%
|
|
1,345
|
|
|
549
|
|
|
145
|
%
|
||||
|
Operating Profits
|
$
|
941
|
|
|
$
|
938
|
|
|
—
|
%
|
|
$
|
1,365
|
|
|
$
|
2,237
|
|
|
(39
|
)%
|
|
Operating Profit Margins
|
14.6
|
%
|
|
14.7
|
%
|
|
|
|
14.7
|
%
|
|
23.8
|
%
|
|
|
|
|
Factors Contributing to Total % Change
|
|||||||||||||
|
|
Organic /
Operational
|
|
FX
Translation
|
|
Acquisitions /
Divestitures, net
|
|
Restructuring
Costs
|
|
Other
|
|||||
|
Net Sales
|
4
|
%
|
|
(4
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Cost of Sales
|
4
|
%
|
|
(5
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Operating Profits
|
7
|
%
|
|
(6
|
)%
|
|
—
|
%
|
|
2
|
%
|
|
3
|
%
|
|
•
|
margin contribution from the higher sales volumes noted above (9%)
|
|
•
|
favorable productivity (1%)
|
|
•
|
higher selling, general and administrative expenses (3%)
|
|
•
|
unfavorable transactional foreign exchange gains and losses from mark-to-market adjustments and embedded foreign currency derivatives within certain new equipment contracts (1%)
|
|
|
Factors Contributing to Total % Change
|
|||||||||||||
|
|
Organic /
Operational
|
|
FX
Translation
|
|
Acquisitions /
Divestitures, net
|
|
Restructuring
Costs
|
|
Other
|
|||||
|
Net Sales
|
6
|
%
|
|
(5
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Cost of Sales
|
6
|
%
|
|
(5
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Operating Profits
|
3
|
%
|
|
(5
|
)%
|
|
—
|
%
|
|
1
|
%
|
|
1
|
%
|
|
•
|
margin contribution from the higher sales volumes noted above (8%)
|
|
•
|
favorable productivity (1%)
|
|
•
|
higher selling, general and administrative expenses (3%)
|
|
•
|
unfavorable transactional foreign exchange gains and losses from mark-to-market adjustments and embedded foreign currency derivatives within certain new equipment contracts (4%)
|
|
|
Factors Contributing to Total % Change
|
|||||||||||||
|
|
Organic /
Operational
|
|
FX
Translation
|
|
Acquisitions /
Divestitures, net
|
|
Restructuring
Costs
|
|
Other
|
|||||
|
Net Sales
|
2
|
%
|
|
(2
|
)%
|
|
(1
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
Cost of Sales
|
3
|
%
|
|
(3
|
)%
|
|
(1
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
Operating Profits
|
(1
|
)%
|
|
(1
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
(47
|
)%
|
|
|
Pratt & Whitney
|
|
Collins Aerospace Systems
|
||||||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||
|
Net Sales
|
$
|
5,150
|
|
|
$
|
4,736
|
|
|
9%
|
|
$
|
6,576
|
|
|
$
|
3,962
|
|
|
66%
|
|
Cost of Sales
|
4,237
|
|
|
3,893
|
|
|
9%
|
|
4,654
|
|
|
2,922
|
|
|
59%
|
||||
|
|
913
|
|
|
843
|
|
|
8%
|
|
1,922
|
|
|
1,040
|
|
|
85%
|
||||
|
Operating Expenses and Other
|
489
|
|
|
446
|
|
|
10%
|
|
750
|
|
|
471
|
|
|
59%
|
||||
|
Operating Profits
|
$
|
424
|
|
|
$
|
397
|
|
|
7%
|
|
$
|
1,172
|
|
|
$
|
569
|
|
|
106%
|
|
Operating Profit Margins
|
8.2
|
%
|
|
8.4
|
%
|
|
|
|
17.8
|
%
|
|
14.4
|
%
|
|
|
|
|
Pratt & Whitney
|
|
Collins Aerospace Systems
|
||||||||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||
|
Net Sales
|
$
|
9,967
|
|
|
$
|
9,065
|
|
|
10
|
%
|
|
$
|
13,089
|
|
|
$
|
7,779
|
|
|
68
|
%
|
|
Cost of Sales
|
8,168
|
|
|
7,414
|
|
|
10
|
%
|
|
9,484
|
|
|
5,705
|
|
|
66
|
%
|
||||
|
|
1,799
|
|
|
1,651
|
|
|
9
|
%
|
|
3,605
|
|
|
2,074
|
|
|
74
|
%
|
||||
|
Operating Expenses and Other
|
942
|
|
|
841
|
|
|
12
|
%
|
|
1,577
|
|
|
917
|
|
|
72
|
%
|
||||
|
Operating Profits
|
$
|
857
|
|
|
$
|
810
|
|
|
6
|
%
|
|
$
|
2,028
|
|
|
$
|
1,157
|
|
|
75
|
%
|
|
Operating Profit Margins
|
8.6
|
%
|
|
8.9
|
%
|
|
|
|
15.5
|
%
|
|
14.9
|
%
|
|
|
|
|
Factors Contributing to Total % Change
|
|||||||||||||
|
|
Organic /
Operational
|
|
FX
Translation*
|
|
Acquisitions /
Divestitures, net
|
|
Restructuring
Costs
|
|
Other
|
|||||
|
Net Sales
|
9
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Cost of Sales
|
9
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Operating Profits
|
4
|
%
|
|
2
|
%
|
|
—
|
%
|
|
—
|
%
|
|
1
|
%
|
|
•
|
higher commercial OEM margin contribution (18%) primarily driven by continued year-over-year cost reduction and favorable mix on large commercial engine shipments
|
|
•
|
higher military margin contribution (4%) driven by the sales increase noted above and favorable mix
|
|
•
|
higher research and development costs (9%)
|
|
•
|
higher selling, general and administrative expenses and other ramp-related costs (5%)
|
|
•
|
lower commercial aftermarket margin contribution (4%) primarily driven by net unfavorable changes in contract estimates
|
|
|
Factors Contributing to Total % Change
|
|||||||||||||
|
|
Organic /
Operational
|
|
FX
Translation*
|
|
Acquisitions /
Divestitures, net
|
|
Restructuring
Costs
|
|
Other
|
|||||
|
Net Sales
|
11
|
%
|
|
(1
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Cost of Sales
|
11
|
%
|
|
(1
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Operating Profits
|
6
|
%
|
|
—
|
%
|
|
—
|
%
|
|
(2
|
)%
|
|
2
|
%
|
|
•
|
higher military profit contribution (10%), driven by the sales increase noted above
|
|
•
|
higher OEM margin contribution (7%) primarily driven by continued year-over-year cost reduction, favorable mix on large commercial engine shipments, and lower customer support costs
|
|
•
|
higher research and development costs (8%)
|
|
•
|
higher selling, general and administrative expenses and other ramp-related costs (3%)
|
|
|
Factors Contributing to Total % Change
|
|||||||||||||
|
|
Organic /
Operational
|
|
FX
Translation
|
|
Acquisitions /
Divestitures, net
|
|
Restructuring
Costs
|
|
Other
|
|||||
|
Net Sales
|
9
|
%
|
|
—
|
%
|
|
57
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Cost of Sales
|
8
|
%
|
|
(1
|
)%
|
|
53
|
%
|
|
(1
|
)%
|
|
—
|
%
|
|
Operating Profits
|
21
|
%
|
|
2
|
%
|
|
75
|
%
|
|
3
|
%
|
|
5
|
%
|
|
•
|
higher commercial aerospace aftermarket margin contribution driven by the sales growth noted above, partially offset by lower commercial aerospace OEM margin contribution (net, 23%)
|
|
•
|
lower selling, general and administrative expenses (1%)
|
|
•
|
higher research and development costs (4%)
|
|
|
Factors Contributing to Total % Change
|
|||||||||||||
|
|
Organic /
Operational
|
|
FX
Translation
|
|
Acquisitions /
Divestitures, net
|
|
Restructuring
Costs
|
|
Other
|
|||||
|
Net Sales
|
10
|
%
|
|
(1
|
)%
|
|
59
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Cost of Sales
|
10
|
%
|
|
(1
|
)%
|
|
57
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Operating Profits
|
12
|
%
|
|
2
|
%
|
|
61
|
%
|
|
—
|
%
|
|
—
|
%
|
|
•
|
higher commercial aerospace aftermarket margin contribution driven by the sales growth noted above, partially offset by lower commercial aerospace OEM margin contribution (net, 19%)
|
|
•
|
higher selling, general and administrative expenses (3%)
|
|
•
|
higher research and development costs (3%)
|
|
|
Net Sales
|
|
Operating Profits
|
||||||||||||
|
|
Quarter Ended June 30,
|
|
Quarter Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Eliminations and other
|
$
|
(402
|
)
|
|
$
|
(372
|
)
|
|
$
|
(239
|
)
|
|
$
|
(97
|
)
|
|
General corporate expenses
|
—
|
|
|
—
|
|
|
(124
|
)
|
|
(126
|
)
|
||||
|
|
Net Sales
|
|
Operating Profits
|
||||||||||||
|
|
Six Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Eliminations and other
|
$
|
(786
|
)
|
|
$
|
(689
|
)
|
|
$
|
(340
|
)
|
|
$
|
(108
|
)
|
|
General corporate expenses
|
—
|
|
|
—
|
|
|
(222
|
)
|
|
(230
|
)
|
||||
|
(dollars in millions)
|
|
June 30, 2019
|
|
December 31, 2018
|
|
June 30, 2018
|
||||||
|
Cash and cash equivalents
|
|
$
|
6,819
|
|
|
$
|
6,152
|
|
|
$
|
11,068
|
|
|
Total debt
|
|
45,251
|
|
|
45,537
|
|
|
28,309
|
|
|||
|
Net debt (total debt less cash and cash equivalents)
|
|
38,432
|
|
|
39,385
|
|
|
17,241
|
|
|||
|
Total equity
|
|
42,977
|
|
|
40,610
|
|
|
33,346
|
|
|||
|
Total capitalization (total debt plus total equity)
|
|
88,228
|
|
|
86,147
|
|
|
61,655
|
|
|||
|
Net capitalization (total debt plus total equity less cash and cash equivalents)
|
|
81,409
|
|
|
79,995
|
|
|
50,587
|
|
|||
|
Total debt to total capitalization
|
|
51
|
%
|
|
53
|
%
|
|
46
|
%
|
|
Net debt to net capitalization
|
|
47
|
%
|
|
49
|
%
|
|
34
|
%
|
|
(dollars and Euro in millions)
|
|
|
||
|
Issuance Date
|
Description of Notes
|
Aggregate Principal Balance
|
||
|
August 16, 2018:
|
3.350% notes due 20211
|
$
|
1,000
|
|
|
|
3.650% notes due 20231
|
2,250
|
|
|
|
|
3.950% notes due 20251
|
1,500
|
|
|
|
|
4.125% notes due 20281
|
3,000
|
|
|
|
|
4.450% notes due 20381
|
750
|
|
|
|
|
4.625% notes due 20482
|
1,750
|
|
|
|
|
LIBOR plus 0.65% floating rate notes due 20211
|
750
|
|
|
|
|
|
|
||
|
May 18, 2018:
|
1.150% notes due 20243
|
€
|
750
|
|
|
|
2.150% notes due 20303
|
500
|
|
|
|
|
EURIBOR plus 0.20% floating rate notes due 20203
|
750
|
|
|
|
1
|
The net proceeds received from these debt issuances were used to partially finance the cash consideration portion of the purchase price for Rockwell Collins and fees, expenses and other amounts related to the acquisition of Rockwell Collins.
|
|
2
|
The net proceeds from these debt issuances were used to fund the repayment of commercial paper and for other general corporate purposes.
|
|
3
|
The net proceeds received from these debt issuances were used for general corporate purposes.
|
|
(dollars and Euro in millions)
|
|
|
||
|
Repayment Date
|
Description of Notes
|
Aggregate Principal Balance
|
||
|
December 14, 2018
|
Variable-rate term loan due 2020 (1 month LIBOR plus 1.25%)1
|
$
|
482
|
|
|
May 4, 2018
|
1.778% junior subordinated notes
|
$
|
1,100
|
|
|
February 22, 2018
|
EURIBOR plus 0.80% floating rate notes
|
€
|
750
|
|
|
February 1, 2018
|
6.80% notes
|
$
|
99
|
|
|
1
|
This term loan was assumed in connection with the Rockwell Collins acquisition and subsequently repaid.
|
|
|
Six Months Ended June 30,
|
||||||
|
(dollars in millions)
|
2019
|
|
2018
|
||||
|
Net cash flows provided by operating activities
|
$
|
3,611
|
|
|
$
|
2,555
|
|
|
|
Six Months Ended June 30,
|
||||||
|
(dollars in millions)
|
2019
|
|
2018
|
||||
|
Net cash flows used in investing activities
|
$
|
(1,217
|
)
|
|
$
|
(238
|
)
|
|
|
Six Months Ended June 30,
|
||||||
|
(dollars in millions)
|
2019
|
|
2018
|
||||
|
Net cash flows used in financing activities
|
$
|
(1,766
|
)
|
|
$
|
(211
|
)
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
|
Item 4.
|
Controls and Procedures
|
|
•
|
the effect of economic conditions in the industries and markets in which we and Raytheon operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction and in both the commercial and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines, the impact of weather conditions and natural disasters, the financial condition of our customers and suppliers, and the risks associated with U.S. government sales (including changes or shifts in defense spending due to budgetary constraints, spending cuts resulting from sequestration, a government shutdown, or otherwise, and uncertain funding of programs);
|
|
•
|
challenges in the development, production, delivery, support, performance and realization of the anticipated benefits (including our expected returns under customer contracts) of advanced technologies and new products and services;
|
|
•
|
the scope, nature, impact or timing of the proposed merger with Raytheon and the separation transactions and other merger, acquisition and divestiture activity, including among other things the integration of or with other businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs and expenses;
|
|
•
|
future levels of indebtedness, including indebtedness that may be incurred in connection with the proposed merger with Raytheon and the separation transactions, and capital spending and research and development spending;
|
|
•
|
future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure;
|
|
•
|
the timing and scope of future repurchases of our common stock, which may be suspended at any time due to various factors, including market conditions and the level of other investing activities and uses of cash, including in connection with the proposed merger with Raytheon;
|
|
•
|
delays and disruption in delivery of materials and services from suppliers;
|
|
•
|
company and customer-directed cost reduction efforts and restructuring costs and savings and other consequences thereof (including the potential termination of U.S. government contracts and performance under undefinitized contract awards and the potential inability to recover termination costs);
|
|
•
|
new business and investment opportunities;
|
|
•
|
the ability to realize the intended benefits of organizational changes;
|
|
•
|
the anticipated benefits of diversification and balance of operations across product lines, regions and industries;
|
|
•
|
the outcome of legal proceedings, investigations and other contingencies;
|
|
•
|
pension plan assumptions and future contributions;
|
|
•
|
the impact of the negotiation of collective bargaining agreements and labor disputes;
|
|
•
|
the effect of changes in political conditions in the U.S. and other countries in which we and Raytheon and our businesses each operate, including the effect of changes in U.S. trade policies or the U.K.’s pending withdrawal from the European Union, on general market conditions, global trade policies and currency exchange rates in the near term and beyond;
|
|
•
|
the effect of changes in tax (including U.S. tax reform enacted on December 22, 2017, which is commonly referred to as the Tax Cuts and Jobs Act of 2017), environmental, regulatory and other laws and regulations (including, among other things, export and import requirements such as the International Traffic in Arms Regulations and the Export Administration Regulations, anti-bribery and anti-corruption requirements, including the Foreign Corrupt Practices
|
|
•
|
negative effects of the announcement or pendency of the proposed merger with Raytheon or the separation transactions on the market price of our and/or Raytheon’s respective common stock and/or on our respective financial performance;
|
|
•
|
the ability of UTC and Raytheon to receive the required regulatory approvals for the proposed merger (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction) and approvals of our shareowners and Raytheon’s shareholders and to satisfy the other conditions to the closing of the merger on a timely basis or at all;
|
|
•
|
the occurrence of events that may give rise to a right of one or both of UTC or Raytheon to terminate the merger agreement;
|
|
•
|
risks relating to the value of our shares to be issued in the proposed merger with Raytheon, significant transaction costs and/or unknown liabilities;
|
|
•
|
the possibility that the anticipated benefits from the proposed merger with Raytheon cannot be realized in full or at all or may take longer to realize than expected, including risks associated with third party contracts containing consent and/or other provisions that may be triggered by the proposed transaction;
|
|
•
|
risks associated with merger-related litigation;
|
|
•
|
the possibility that costs or difficulties related to the integration of UTC’s and Raytheon’s operations will be greater than expected;
|
|
•
|
risks relating to completed merger, acquisition and divestiture activity, including UTC’s integration of Rockwell Collins, including the risk that the integration may be more difficult, time-consuming or costly than expected or may not result in the achievement of estimated synergies within the contemplated time frame or at all;
|
|
•
|
the ability of each of UTC, Raytheon, the companies resulting from the separation transactions and the combined company to retain and hire key personnel;
|
|
•
|
the expected benefits and timing of the separation transactions, and the risk that conditions to the separation transactions will not be satisfied and/or that the separation transactions will not be completed within the expected time frame, on the expected terms or at all;
|
|
•
|
the intended qualification of (i) the merger as a tax-free reorganization and (ii) the separation transactions as tax-free to UTC and UTC’s shareowners, in each case, for U.S. federal income tax purposes;
|
|
•
|
the possibility that any opinions, consents, approvals or rulings required in connection with the separation transactions will not be received or obtained within the expected time frame, on the expected terms or at all;
|
|
•
|
expected financing transactions undertaken in connection with the proposed merger with Raytheon and the separation transactions and risks associated with additional indebtedness;
|
|
•
|
the risk that dissynergy costs, costs of restructuring transactions and other costs incurred in connection with the separation transactions will exceed our estimates; and
|
|
•
|
the impact of the proposed merger and the separation transactions on the respective businesses of UTC and Raytheon and the risk that the separation transactions may be more difficult, time-consuming or costly than expected, including the impact on UTC’s resources, systems, procedures and controls and the impact on relationships with customers, suppliers, employees and other business counterparties.
|
|
Item 1A.
|
Risk Factors
|
|
•
|
managing larger combined aerospace systems and defense businesses;
|
|
•
|
maintaining employee morale and retaining key management and other employees;
|
|
•
|
retaining existing business and operational relationships, including customers, suppliers and employees and other counterparties, as may be impacted by contracts containing consent and/or other provisions that may be triggered by the combination, and attracting new business and operational relationships;
|
|
•
|
the possibility of faulty assumptions underlying expectations regarding the integration process;
|
|
•
|
the possibility of significant costs involved in connection with completing the merger, including costs to achieve expected synergies;
|
|
•
|
consolidating corporate and administrative infrastructures and eliminating duplicative operations;
|
|
•
|
coordinating geographically separate organizations;
|
|
•
|
unanticipated issues in integrating information technology, communications and other systems; and
|
|
•
|
unforeseen expenses or delays associated with the combination.
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
2019
|
|
Total Number of Shares Purchased
(000's)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of a Publicly Announced Program
(000's) |
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
(dollars in millions)
|
||||||
|
April 1 - April 30
|
|
95
|
|
|
$
|
137.54
|
|
|
95
|
|
|
$
|
1,919
|
|
|
May 1 - May 31
|
|
104
|
|
|
132.35
|
|
|
104
|
|
|
$
|
1,905
|
|
|
|
June 1 - June 30
|
|
97
|
|
|
128.73
|
|
|
97
|
|
|
$
|
1,893
|
|
|
|
Total
|
|
296
|
|
|
$
|
132.82
|
|
|
296
|
|
|
|
|
|
|
Item 6.
|
Exhibits
|
|
Exhibit
Number
|
|
Exhibit Description
|
|
|
|
|
|
10.1
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
31.1
|
|
|
|
|
|
|
|
31.2
|
|
|
|
|
|
|
|
31.3
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*
(File name: utx-20190630.xml)
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.*
(File name: utx-20190630.xsd)
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.*
(File name: utx-20190630_cal.xml)
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.*
(File name: utx-20190630_def.xml)
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.*
(File name: utx-20190630_lab.xml)
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.*
(File name: utx-20190630_pre.xml)
|
|
*
|
Submitted electronically herewith.
|
|
|
|
UNITED TECHNOLOGIES CORPORATION
(Registrant)
|
|
|
|
|
|
|
|
Dated:
|
July 26, 2019
|
by:
|
/s/ AKHIL JOHRI
|
|
|
|
|
Akhil Johri
|
|
|
|
|
Executive Vice President & Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
(on behalf of the Registrant and as the Registrant's Principal Financial Officer)
|
|
|
|
|
|
|
Dated:
|
July 26, 2019
|
by:
|
/s/ ROBERT J. BAILEY
|
|
|
|
|
Robert J. Bailey
|
|
|
|
|
Corporate Vice President, Controller
|
|
|
|
|
|
|
|
|
|
(on behalf of the Registrant and as the Registrant's Principal Accounting Officer)
|
|
1.
|
Release of Claims.
|
|
2.
|
Restrictive Covenants.
|
|
3.
|
Timing for Consideration.
|
|
4.
|
Effectiveness of Agreement.
|
|
5.
|
Miscellaneous.
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of United Technologies Corporation;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
July 26, 2019
|
|
/s/ GREGORY J. HAYES
|
|
|
|
|
Gregory J. Hayes
|
|
|
|
|
Chairman, President and Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of United Technologies Corporation;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
July 26, 2019
|
|
/s/ AKHIL JOHRI
|
|
|
|
|
Akhil Johri
|
|
|
|
|
Executive Vice President & Chief Financial Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of United Technologies Corporation;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
July 26, 2019
|
|
/s/ ROBERT J. BAILEY
|
|
|
|
|
Robert J. Bailey
|
|
|
|
|
Corporate Vice President, Controller
|
|
Date:
|
July 26, 2019
|
/s/ GREGORY J. HAYES
|
|
|
|
Gregory J. Hayes
|
|
|
|
Chairman, President and Chief Executive Officer
|
|
|
|
|
|
Date:
|
July 26, 2019
|
/s/ AKHIL JOHRI
|
|
|
|
Akhil Johri
|
|
|
|
Executive Vice President & Chief Financial Officer
|
|
|
|
|
|
Date:
|
July 26, 2019
|
/s/ ROBERT J. BAILEY
|
|
|
|
Robert J. Bailey
|
|
|
|
Corporate Vice President, Controller
|