United Technologies 2012 Annual Report Download - page 46

44 UNITED TECHNOLOGIES CORPORATION
acquisition spending may vary depending on the timing, availability
and appropriate value of acquisition opportunities.
On June 1, 2012, we issued a total of $9.8 billion of long-
term debt, which is comprised of $1.0 billion aggregate principal
amount of 1.200% notes due 2015, $1.5 billion aggregate principal
amount of 1.800% notes due 2017, $2.3 billion aggregate principal
amount of 3.100% notes due 2022, $3.5 billion aggregate principal
amount of 4.500% notes due 2042, $1.0 billion aggregate principal
amount of three-month LIBOR plus 0.270% floating rate notes due
2013, and $0.5 billion aggregate principal amount of three-month
LIBOR plus 0.500% floating rate notes due 2015. The three-month
LIBOR rate as of December 31, 2012 was approximately 0.3%.
On June 18, 2012, we issued 22,000,000 equity units and
received approximately $1.1 billion in net proceeds. Each equity
unit has a stated amount of $50 and initially is in the form of a
corporate unit consisting of (a) a freestanding stock purchase con-
tract under which the holder will purchase from us on August 1,
2015, a number of shares of our common stock determined pur-
suant to the terms of the agreement and (b) a 1/20, or 5.0%,
undivided beneficial ownership interest in $1,000 principal amount
on our 1.55% junior subordinated notes due 2022. Holders of the
equity units are entitled to receive quarterly contract adjustment
payments at a rate of 5.95% per year of the stated amount of $50
per equity unit, subject to our right to defer such payments.
At December 31, 2012, we had revolving credit agreements
with various banks permitting aggregate borrowings of up to $4.0
billion pursuant to a $2.0 billion revolving credit agreement and a
$2.0 billion multicurrency revolving credit agreement, both of which
expire in November 2016. As of December 31, 2012 and 2011,
there were no borrowings under either of these revolving credit
agreements. The undrawn portions of our revolving credit agree-
ments are also available to serve as backup facilities for the issuance
of commercial paper. As of December 31, 2012, our maximum
commercial paper borrowing authority as set by our Board of Direc-
tors was $4 billion. We generally use our commercial paper borrow-
ings for general corporate purposes, including the funding of
potential acquisitions and repurchases of our common stock.
We continue to have access to the commercial paper mar-
kets and our existing credit facilities, and expect to continue to gen-
erate strong operating cash flows. While the impact of market
volatility cannot be predicted, we believe we have sufficient operating
flexibility, cash reserves and funding sources to maintain adequate
amounts of liquidity and to meet our future operating cash needs.
Given our extensive international operations, most of our
cash is denominated in foreign currencies. We manage our world-
wide cash requirements by reviewing available funds among the
many subsidiaries through which we conduct our business and the
cost effectiveness with which those funds can be accessed. The
repatriation of cash balances from certain of our subsidiaries could
have adverse tax consequences or be subject to capital controls;
however, those balances are generally available without legal
restrictions to fund ordinary business operations. As discussed in
Note 11, with few exceptions, U.S. income taxes have not been
provided on undistributed earnings of international subsidiaries. Our
intention is to reinvest these earnings permanently or to repatriate
the earnings only when it is tax effective to do so.
On occasion, we are required to maintain cash deposits
with certain banks with respect to contractual obligations related to
acquisitions or divestitures or other legal obligations. As of
December 31, 2012 and 2011, the amount of such restricted cash
was approximately $35 million and $37 million, respectively, and is
included in current assets.
We believe our future operating cash flows will be sufficient
to meet our future operating cash needs. Further, our ability to
obtain debt or equity financing, as well as the availability under
committed credit lines, provides additional potential sources of liq-
uidity should they be required or appropriate.
Cash Flow—Operating Activities of Continuing Operations
(DOLLARS IN MILLIONS) 2012 2011
Net cash flows provided by operating activities of
continuing operations $ 6,605 $ 6,460
The increase in net cash flows provided by operating activ-
ities of continuing operations in 2012 as compared with 2011 was
driven primarily by lower working capital cash requirements, and a
decrease in global pension contributions of $121 million. Included in
income from continuing operations in 2012 were approximately
$157 million of net non-cash gains from the portfolio transformation
activities at UTC Climate, Controls & Security, an approximately
$218 million non-cash tax and interest benefit from the conclusion
of the examination by the Internal Revenue Service (IRS) of our
2006 – 2008 tax years and an approximately $59 million non-cash
tax and interest benefit from the resolution of disputes with the
Appeals Division of the IRS for our 2004 – 2005 tax years. In 2012,
the net decrease in working capital provided positive cash flow of
$103 million, including a $157 million loss provision recorded on the
CH-148 contract at Sikorsky, compared to a cash outflow of $291
million in 2011. This increase of $394 million was primarily driven by
a decrease in accounts receivable due to strong collections, parti-
ally offset by an increase in inventories largely associated with
anticipated volume changes at Sikorsky and Pratt & Whitney.
The funded status of our defined benefit pension plans is
dependent upon many factors, including returns on invested assets
and the level of market interest rates. We can contribute cash or
UTC shares to our plans at our discretion, subject to applicable
regulations. Total cash contributions to our global defined benefit
pension plans were $430 million and $551 million during 2012 and
2011, respectively. During 2011, we also contributed $450 million in
UTC common stock to our defined benefit pension plans. As of
December 31, 2012, the total investment by the global defined
benefit pension plans in our securities was approximately 3% of total