United Technologies 2011 Annual Report Download - page 80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information about equity awards outstanding that are vested and expected to vest and equity
awards outstanding that are exercisable at December 31, 2011:
EQUITY AWARDS VESTED AND EXPECTED TO VEST EQUITY AWARDS THAT ARE EXERCISABLE
(shares in thousands, aggregate intrinsic value in millions) Awards
Average
Price*
Aggregate
Intrinsic
Value
Remaining
Term** Awards
Average
Price*
Aggregate
Intrinsic
Value
Remaining
Term**
Stock Options/Stock Appreciation Rights 54,779 $59.01 $ 771 5.0 37,362 $55.03 $675 3.6
Performance Share Units/Restricted Stock 3,065 — 224 1.3
* weighted-average exercise price per share
** weighted-average contractual remaining term in years
The fair value of each option award is estimated on the date
of grant using a binomial lattice model. The following table
indicates the assumptions used in estimating fair value for the
years ended December 31, 2011, 2010 and 2009. Because
lattice-based option models incorporate ranges of
assumptions for inputs, those ranges are as follows:
2011 2010 2009
Expected volatility 26% - 32% 24% - 28% 30% - 42%
Weighted-average volatility 26% 25% 30%
Expected term (in years) 7.5 - 8.0 7.4 - 7.9 7.4 - 7.9
Expected dividends 2.4% 2.7% 2.1%
Risk-free rate 0.1% - 3.5% 0.1% - 4.0% 0% - 2.5%
Expected volatilities are based on the returns of our stock,
including implied volatilities from traded options on our stock
for the binomial lattice model. We use historical data to
estimate equity award exercise and employee termination
behavior within the valuation model. Separate employee
groups and equity award characteristics are considered
separately for valuation purposes. The expected term
represents an estimate of the period of time equity awards
are expected to remain outstanding. The risk-free rate is
based on the term structure of interest rates at the time of
equity award grant.
NOTE 12: RESTRUCTURING COSTS
During 2011, we recorded net pre-tax restructuring costs
totaling $336 million for new and ongoing restructuring
actions. We recorded charges in the segments as follows:
(Dollars in millions)
Otis $ 73
Carrier 46
UTC Fire & Security 80
Pratt & Whitney 67
Hamilton Sundstrand 16
Sikorsky 53
Eliminations and other 1
Total $336
The net costs consist of $180 million recorded in cost of sales,
$154 million in selling, general and administrative expenses
and $2 million in other income, net. As described below, these
charges primarily relate to actions initiated during 2011 and
2010.
2011 Actions. During 2011, we initiated restructuring actions
relating to ongoing cost reduction efforts, including
workforce reductions and consolidation of field operations.
We recorded net pre-tax restructuring costs totaling $286
million for restructuring actions initiated in 2011, consisting of
$136 million in cost of sales, $147 million in selling, general and
administrative expenses and $3 million in other income, net.
We expect the actions that were initiated in 2011 to result in
net workforce reductions of approximately 5,000 hourly and
salaried employees, the exiting of approximately 2 million net
square feet of facilities and the disposal of assets associated
with exited facilities. As of December 31, 2011, we have
completed, with respect to the actions initiated in 2011, net
workforce reductions of approximately 2,200 employees and
50,000 net square feet of facilities have been exited. We are
targeting to complete in 2012 the majority of the remaining
workforce and all facility related cost reduction actions
initiated in 2011. No specific plans for significant other actions
have been finalized at this time.
78 UNITED TECHNOLOGIES CORPORATION