United Technologies 2011 Annual Report Download - page 40

MANAGEMENT’S DISCUSSION AND ANALYSIS
In September 2011, to better serve customers and to drive growth and achieve efficiencies through greater integration across
certain product lines, we announced a new organizational structure which combines UTC Fire & Security with Carrier into a new
segment called UTC Climate, Controls & Security. This new segment will report combined financial and operational results
beginning with the first quarter of 2012.
TOTAL CHANGE YEAR-OVER-YEAR FOR:
2011 Compared with 2010 2010 Compared with 2009
(Dollars in millions) 2011 2010 2009 $% $%
Net Sales $6,895 $6,490 $5,503 $405 6 % $987 18%
Cost of Sales 4,603 4,308 3,831 295 7 % 477 12%
2,292 2,182 1,672
Operating Expenses and Other 1,600 1,468 1,179
Operating Profits $692 $ 714 $ 493 $(22) (3)% $ 221 45%
FACTORS CONTRIBUTING TO TOTAL % CHANGE YEAR-OVER-YEAR IN:
2011 2010
Net Sales Cost of Sales
Operating
Profits Net Sales Cost of Sales
Operating
Profits
Organic / Operational 2 % 4 % (8)% (3)% (4)% 2%
Foreign currency translation 4% 4% 4% 2% 1% 2%
Acquisitions and divestitures, net 1% — — 19 % 15 % 34%
Restructuring costs ————— 7%
Other (1)% (1)% 1 % —— —
Total % change 6 % 7 % (3)% 18 % 12 % 45%
2011 Compared with 2010
Organically, the 2% growth in sales was driven by increased
volumes in the products businesses, while the service and
install businesses remained flat. Geographically, the organic
growth was driven by stronger volume in the product
businesses, partially offset by declines in the U.K. and U.S.
service businesses.
The operational profit decline (8%) reflects lower margins on
projects and unfavorable sales mix, led by the U.K. on lower
sales and productivity, with a partial offset from the benefits
from higher sales volume and cost reductions. The increase
contributed by “Other” was primarily related to the favorable
resolution of litigation and gains on the dispositions of U.K.
security businesses, which were largely offset by a $66 million
other-than-temporary impairment charge recorded on an
equity investment in Asia in 2011.
2010 Compared with 2009
Organically, the 3% sales contraction was driven by declines
in the service and install businesses, while the products
businesses were flat year-over-year. Geographically, the
service and install businesses experienced weakness in
Europe and the Americas in 2010 as a result of poor
economic conditions, partially offset by growth in Asia. The
increase contributed by “Acquisitions and divestitures, net”
reflects the net year-over-year impact from acquisition and
divestitures completed in the preceding twelve months, led
by the acquisition in March 2010 of the GE Security business.
The organic cost of sales decline (4%) exceeded the organic
sales decline (3%), generating incremental profits from the
benefits of integrating operations, productivity initiatives, and
the benefits of prior restructuring actions taken, which were
partially offset by the impact of organic volume contraction.
The increase contributed by “Acquisitions and divestitures,
net” primarily reflects the acquisition in March 2010 of the GE
Security business.
38 UNITED TECHNOLOGIES CORPORATION