United Technologies 2012 Annual Report Download - page 44

42 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 $ 6,791 $ 7,355 $ 6,684 $ (564) (8)% $ 671 10%
Cost of Sales 5,643 6,120 5,539 (477) (8)% 581 10%
1,148 1,235 1,145
Operating Expenses and Other 436 395 429
Operating Profits $ 712 $ 840 $ 716 $ (128) (15)% $ 124 17%
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 (8)% (8)% (7)% 10% 10% 12 %
Restructuring costs –––– – (5)%
Other – – (8)% – – 10 %
Total % change (8)% (8)% (15)% 10% 10% 17 %
2012 Compared with 2011
The organic sales decrease (8%) reflects reduced aircraft deliveries
and completions from foreign military operations (6%) across various
programs including four fewer CH-148 aircraft for the Canadian Gov-
ernment, reduced U.S. Government sales (2%) and lower volume from
customer funded development programs (2%). These decreases were
partially offset by increased commercial aircraft volume (2%) due
primarily to increased S-92 sales, which were partially offset by lower
S-76 sales as Sikorsky transitions to the new S-76D model.
The operational profit decrease (7%) is a result of lower
sales to the U.S. Government (12%), higher engineering and
development costs (1%) and lower profits from foreign military oper-
ations (8%) due in large part to the previously noted $157 million loss
provision for the CH-148 contract with the Canadian Government,
partially offset by favorable aircraft mix within the foreign military
operations business. These decreases were partially offset by an
increase in commercial profits (10%) due primarily to strong S-92
volume and profitability, and increased aftermarket support (5%) due
primarily to increased U.S. Government spares sales, favorable con-
tract performance and savings from restructuring initiatives. The 8%
decrease in “Other” primarily reflects the absence of a gain recog-
nized on the contribution of a business to a venture in the United
Arab Emirates in 2011.
2011 Compared with 2010
The increase in organic sales (10%) was primarily attributable to
higher military aircraft sales including higher international develop-
ment aircraft sales and favorable military aircraft configuration mix
(8% combined), which more than offset a decrease from commer-
cial operations (2%) due to fewer aircraft deliveries. Net sales from
aftermarket support increased (4%) primarily driven by higher
spares volume.
The operational profit improvement (12%) was primarily
attributable to an increase in aftermarket support (10%) driven by
higher spares volume. Operating profits in the military business
increased as higher aircraft deliveries and favorable aircraft config-
uration mix more than offset the adverse impact of losses associated
with higher than expected development costs on international mili-
tary development aircraft sales (2% combined). The remainder of the
operational profit increase was primarily driven by lower manufactur-
ing costs, higher volume on customer funded development and
lower research and development costs, which more than offset the
impact of fewer aircraft deliveries from commercial operations. The
10% increase contributed by “Other” reflects the gain recognized on
contribution of a business to a venture in the United Arab Emirates.
Eliminations and other
Eliminations and other reflects the elimination of sales, other income
and operating profit transacted between segments, as well as the
operating results of certain smaller businesses. We have previously
reported the results of UTC Power and Clipper within eliminations and
other but have reclassified the results of these businesses to dis-
continued operations for all periods presented. The change in sales in
2012, as compared with 2011, reflects an increase in the amount of
inter-segment sales eliminations due to our acquisition of Goodrich.
The change in the operating profit elimination in 2012, as compared
with 2011, primarily reflects the benefit of lower insurance and legal
costs and gains on corporate-held investments.
LIQUIDITY AND FINANCIAL CONDITION
(DOLLARS IN MILLIONS) 2012 2011
Cash and cash equivalents $ 4,819 $ 5,960
Total debt 23,221 10,260
Net debt (total debt less cash and cash equivalents) 18,402 4,300
Total equity 27,069 22,820
Total capitalization (total debt plus total equity) 50,290 33,080
Net capitalization (total debt plus total equity less
cash and cash equivalents) 45,471 27,120
Total debt to total capitalization 46% 31%
Net debt to net capitalization 40% 16%