United Technologies 2011 Annual Report Download - page 71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In December 2011, we redeemed the entire $500 million
outstanding principal amount of our 6.100% notes that would
otherwise have been due May 15, 2012. In February 2010, we
issued two series of fixed rate notes that pay interest
semiannually, in arrears, on April 15 and October 15 of each
year beginning October 15, 2010. The $1.25 billion principal
amount of fixed rate notes bears interest at a rate equal to
4.500% per year and matures on April 15, 2020. The $1.0
billion principal amount of fixed rate notes bears interest at a
rate equal to 5.700% per year and matures on April 15, 2040.
The proceeds from these notes were used primarily to fund a
portion of the acquisition of the GE Security business, and to
repay commercial paper borrowings.
The project financing obligations noted above are associated
with the sale of rights to unbilled revenues related to the
ongoing activity of an entity owned by Carrier. The
percentage of total short-term borrowings and long-term
debt at variable interest rates was 7% and 2% at December 31,
2011 and 2010, respectively. Interest rates on our commercial
paper borrowings are considered variable due to their short-
term duration and high-frequency of turnover.
The schedule of principal payments required on long-term
debt for the next five years and thereafter is:
(Dollars in millions)
2012 $ 129
2013 20
2014 26
2015 1,221
2016 10
Thereafter 8,224
Total $9,630
We have an existing universal shelf registration statement
filed with the Securities and Exchange Commission (SEC) for
an indeterminate amount of securities for future issuance,
subject to our internal limitations on the amount of debt to be
issued under this shelf registration statement.
NOTE 9: EQUITY
Changes in non-controlling interests that do not result in a
change of control, and where there is a difference between
fair value and carrying value, are accounted for as equity
transactions. A summary of these changes in ownership
interests in subsidiaries and the pro-forma effect on Net
income attributable to common shareowners had they been
recorded through net income is provided below:
(Dollars in millions) 2011 2010 2009
Net income attributable to common
shareowners $4,979 $4,373 $3,829
Transfers to non-controlling interests:
Increase in common stock for sale of
subsidiary shares 3——
Decrease in common stock for purchase
of subsidiary shares (54) (12) (67)
Net income attributable to common
shareowners after transfers to
non-controlling interests $4,928 $4,361 $3,762
NOTE 10: INCOME TAXES
The income tax expense (benefit) for the years ended
December 31, consisted of the following components:
(Dollars in millions) 2011 2010 2009
Current:
United States:
Federal $ 428 $ 122 $ 239
State 99 128 54
Foreign 1,373 1,164 837
1,900 1,414 1,130
Future:
United States:
Federal 528 461 370
State 27 —41
Foreign (224) (48) 40
331 413 451
Income tax expense $2,231 $1,827 $1,581
Attributable to items credited (charged)
to equity and goodwill $ 864 $ 276 $(782)
Future income taxes represent the tax effects of transactions,
which are reported in different periods for tax and financial
reporting purposes. These amounts consist of the tax effects
of temporary differences between the tax and financial
reporting balance sheets and tax carryforwards. Current and
non-current future income tax benefits and payables within
the same tax jurisdiction are generally offset for presentation
in the Consolidated Balance Sheet.
The tax effects of net temporary differences and tax
carryforwards which gave rise to future income tax benefits
and payables at December 31, 2011 and 2010 are as follows:
(Dollars in millions) 2011 2010
Future income tax benefits:
Insurance and employee benefits $2,579 $ 1,986
Other asset basis differences (569) (540)
Other liability basis differences 1,046 958
Tax loss carryforwards 723 729
Tax credit carryforwards 1,247 1,371
Valuation allowances (977) (911)
$4,049 $3,593
Future income taxes payable:
Fixed assets $667 $ 647
Other items, net 248 190
$915 $ 837
Valuation allowances have been established primarily for tax
credit carryforwards, tax loss carryforwards, and certain
foreign temporary differences to reduce the future income
tax benefits to expected realizable amounts.
It is reasonably possible that over the course of 2012, the
amount of valuation allowances may decrease within a range
of $150 million to $200 million resulting from potential
internal reorganizations that may occur in 2012. These internal
reorganizations are separate from the creation of the UTC
2011 ANNUAL REPORT 69