United Technologies 2011 Annual Report Download - page 5

32011 ANNUAL REPORT
Our focus on operating performance in 2011 drove organic
growth across UTC, with all business segments achieving
double-digit operating margins. Most notable, Carrier
achieved its 12 percent margin goal in 2011, one year
ahead of our target. This success was the result of strong
operational focus, cost containment eorts and execution
of its business transformation strategy.
Along with strong operating performance came strong
cash generation, with cash flow from operations less
capital expenditures again exceeding net income. Strong
cash performance during the year enabled us to raise
our dividend by 12.9 percent. This year also marked the
75th consecutive year that United Technologies has paid
a dividend. Through dividend payments and share
repurchase, United Technologies returned 67 percent
of its cash flow to our shareowners.*
UTC’s long-term total shareowner return continued to
exceed that of peers and key market indices. For the period
from December 31, 2001, through December 31, 2011, UTC
delivered total shareowner return of 175 percent, more
than three times the Dow Jones industrials and more
than five times the S&P 500.
While the near-term global economic outlook remains
challenging, we look to the future with confidence. We
believe our announced agreement to acquire Goodrich,
the largest acquisition in United Technologies’ history,
marks the start of a bright new chapter for UTC and will
significantly strengthen our position in the fast-growing
commercial aerospace market. Goodrich, a leading global
supplier of systems and services to the aerospace and
defense industry, will be an excellent strategic fit with
UTC’s existing aerospace portfolio. Goodrich has a well-
established presence in areas where we do not, such
as aircraft landing gear, braking systems and nacelles.
Together, Goodrich and United Technologies will be well
positioned to provide greater value to our customers
with better, more integrated products and services for
the next-generation aircraft at a more competitive price.
Since the agreement was announced, customer feedback
has been overwhelmingly positive, and integration plan-
ning is progressing very smoothly. We anticipate closing
the transaction in mid-2012 and are excited to welcome
the Goodrich employees to United Technologies. We are
also excited about the opportunity to bring together the
complementary capabilities of our two great companies
to provide additional value to our customers.
Further strengthening our position in the commercial
aerospace market was the agreement to purchase
Rolls-Royce’s share of IAE, which produces the V2500
engine for the A320 family of aircraft. Upon closing, which
is expected in mid-2012, UTC will become the majority
shareholder of IAE. This new ownership structure positions
Pratt & Whitney for strong growth in the important single-
aisle aircraft segment, as IAE has more than 4,500 V2500
engines in service today and nearly 2,000 engines on
order. The new structure will also allow customers to
transition smoothly from the current V2500 engine to
Pratt & Whitney’s new Geared Turbofan engine for the
Airbus A320neo aircraft family.
In 2011, we also positioned UTC for long-term growth with
the announcement of significant organizational changes
that will group a number of UTC business units into new
aerospace and commercial building organizations. This new
structure will allow United Technologies to more eciently
serve our global customer base through greater integra-
tion across product lines and drive growth by taking full
advantage of technology investments and the company’s
footprint in emerging markets.
On the aerospace side, we created UTC Propulsion &
Aerospace Systems, which brings the Pratt & Whitney and
Hamilton Sundstrand businesses under a new leadership
structure. As we position ourselves for a growth phase in
the aerospace cycle, this new organizational structure will
allow us to leverage the long-term investments we have
made in aerospace systems, including systems developed
for the Boeing 787 and in the Geared Turbofan technol-
ogy. Closer coordination by Pratt & Whitney and Hamilton
Sundstrand, two world-class franchises, will also position
UTC to win increased content on next-generation aircraft
Chairman & Chief Executive Ocer Louis R. Chênevert visits
Pratt & Whitney’s manufacturing facility in Middletown, Conn.
Background at left, downtown Shanghai.
* This represents funds returned to shareowners as a percentage of a cash
flow measure we call free cash flow. We define free cash flow as cash flow
from operations less capital expenditures. In 2011, UTC generated cash flow
from operations of $6.6 billion, and capital expenditures were $983 million,
resulting in free cash flow of $5.6 billion. We returned approximately
57 percent of cash flow from operations to shareowners through dividends
and share repurchases.