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| 03
2012 ANNUAL REPORT
Dear
Shareowner
2012 was a year of transformation and accomplishment for
United Technologies. By acquiring Goodrich and majority
ownership in the IAE International Aero Engines collaboration,
we strengthened our position in the fast-growing commercial
aerospace market. These acquisitions brought tremendous new
capabilities, technologies and leadership talent to our company.
We further strengthened and streamlined our fire and security
portfolio by divesting non-core businesses and applying Carrier’s
successful portfolio transformation strategy to our portfolio.
These actions enable us to better focus on growth opportunities
in our core aerospace and building systems markets.
Our reshaped portfolio, investments in game-changing technologies
and expanding emerging market presence — combined with our
relentless drive to improve productivity, reduce costs and leverage
our global scale — position us well to return to double-digit
earnings growth in 2013 and beyond.
While the global economy remained challenging during this
year of portfolio transformation, United Technologies delivered
solid financial performance in 2012, highlighted by strong
cash generation. For the year, cash flow from operations less
capital expenditures once again exceeded net income. This
strong cash performance, as well as solid execution of the
portfolio transformation, enabled us to pay down approximately
one-third of the debt from the Goodrich acquisition and
allowed us to resume our share repurchase program in 2013.
We also increased our dividend by 11.5 percent in 2012, mark-
ing the 76th consecutive year United Technologies has paid
a dividend to shareowners. Our long-term total shareowner
return continued to exceed that of our peers and key market
indices. For the past decade, from December 31, 2002, through
December 31, 2012, UTC delivered total shareowner return of
225 percent, more than double either the Dow Jones Industrials
or the S&P 500.
With our portfolio transformation substantially complete,
United Technologies begins 2013 focused on integration and
execution. Even with a soft European economy and a decline in
U.S. defense spending, the growth opportunities available for
UTC are truly amazing. Two simple facts highlight the scale
of these opportunities. Today only an estimated 15 percent of
the world's population has ever flown, and every year for the
next two decades, 15 million to 20 million people are expected
to move to urban centers. Around the world, more skyscrapers,
schools, hospitals and stadiums are being built, driving the
demand for elevators, air-conditioning, and fire and security
systems, as well as for air travel between cities. United
Technologies is well positioned to capitalize on this rapid
urbanization and strong commercial aerospace growth with
our game-changing technologies and products that provide
greater energy efficiency and meet local market demands.
The benefits of the new organizational structure we announced
in the fall of 2011 became clear in 2012, allowing us to better
leverage our global scale, talent and operating system to drive
margin growth across the portfolio. UTC Climate, Controls
& Security — the combination of our Carrier and UTC Fire &
Security businesses — achieved record, industry-leading profit
margins by successfully executing its portfolio transformation
strategy, focusing on core businesses to drive organic growth
and generating more than $100 million in integration synergies.
At UTC Propulsion & Aerospace Systems, the team is focused
on exceeding our target of delivering $400 million of annual
savings related to the Goodrich acquisition. We expect to
achieve approximately half of these savings by the end of 2013.
Additional synergies will come from leveraging a common supply
base and greater UTC content on newer aircraft platforms.