United Technologies 2012 Annual Report Download - page 42

40 UNITED TECHNOLOGIES CORPORATION
Total Increase (Decrease) Year-Over-Year for:
(DOLLARS IN MILLIONS) 2012 2011 2010 2012 Compared with 2011 2011 Compared with 2010
Net Sales $ 13,964 $ 12,711 $ 12,150 $ 1,253 10 % $ 561 5 %
Cost of Sales 10,600 9,282 9,011 1,318 14 % 271 3 %
3,364 3,429 3,139
Operating Expenses and Other 1,775 1,562 1,254
Operating Profits $ 1,589 $ 1,867 $ 1,885 $ (278) (15)% $ (18) (1)%
Factors Contributing to Total % Increase (Decrease) Year-Over-Year in:
2012 2011
Net Sales Cost of Sales
Operating
Profits Net Sales Cost of Sales
Operating
Profits
Organic* / Operational* 2 % 5 % (16)% 6 % 3% (3)%
Foreign currency (including P&WC net hedging)* (1)% – (3)% (1)% – (2)%
Acquisitions and divestitures, net 9% 9% 6% –––
Restructuring costs – – (2)% ––2%
Other –––––2%
Total % change 10 % 14 % (15)% 5 % 3% (1)%
* As discussed further in the “Business Overview” and “Results of Operations” sections, for Pratt & Whitney only, the transactional impact of foreign exchange hedging at P&WC
has been netted against the translational foreign exchange impact for presentation purposes in the above table. For all other segments, these foreign exchange transactional
impacts are included within the organic sales/operational operating profit caption in their respective tables. Due to its significance to Pratt & Whitney’s overall operating results,
we believe it is useful to segregate the foreign exchange transactional impact in order to clearly identify the underlying financial performance.
2012 Compared with 2011
Organic sales growth (2%) was driven by higher military engine deliv-
eries and aftermarket sales (5%), higher P&WC engine and spares
volume (1%), and higher industrial volume at Pratt & Whitney Power
Systems (1%), offset by a decrease in commercial aftermarket (6%).
Sales increased (9%) as a result of the consolidation of IAE and the
transfer of the APU business to Pratt & Whitney from UTC Aero-
space Systems.
The operational profit decrease (16%) was primarily driven
by lower profit on commercial aftermarket (17%), higher research
and development (8%), partially offset by favorable P&WC engine
volume and delivery mix (3%), higher military engine and spares
volume (3%) and an increase in contract settlements and close outs
(3%). Operating profit increased due to net acquisitions
(6%) primarily as a result of the consolidation of IAE.
2011 Compared with 2010
Organic sales growth (6%) was driven by growth in the large
commercial engine business (5%), higher spares volume across the
business (combined 2%), and higher industrial volume at Pratt &
Whitney Power Systems (1%). These increases were partially offset
by lower military engine sales.
The operational profit decline (3%) primarily reflects higher
year-over-year research and development costs (14%), unfavorable
commercial engine business mix and fewer military engine business
deliveries (combined 7%), partially offset by higher commercial
spares and aftermarket volume (14%). Additionally, gains recorded
on contract settlements and contract close-outs were offset, in
part, by losses incurred as a result of increased airline industry
exposures during the year (combined 4%). The 2% contributed by
“Other” primarily reflects the gain on a sale of an equity investment.
UTC Aerospace Systems On July 26, 2012, UTC acquired Good-
rich, pursuant to a merger agreement dated September 21, 2011.
As a result of the acquisition, Goodrich became a wholly-owned
subsidiary of UTC. The acquired Goodrich business and the former
Hamilton Sundstrand segment have been combined to form the
new UTC Aerospace Systems segment. UTC Aerospace Systems is
among the world’s leading suppliers of technologically advanced
aerospace products and aftermarket services for diversified
industries worldwide. UTC Aerospace Systems’ aerospace prod-
ucts include electric power generation, management and dis-
tribution systems, flight control systems, engine control systems,
intelligence, surveillance and reconnaissance systems, engine
components, environmental control systems, fire protection and
detection systems, propeller systems, aircraft nacelles, and interior,
actuation, landing and electronic systems. UTC Aerospace Systems
products serve commercial, military, regional, business and general
aviation, as well as military ground vehicle, space and undersea
applications. Aftermarket services include spare parts, overhaul and
repair, engineering and technical support and fleet maintenance
programs. UTC Aerospace Systems sells aerospace products to
airframe manufacturers, the U.S. and foreign governments, aircraft
operators, maintenance, repair and overhaul providers, and
independent distributors.