United Technologies 2012 Annual Report Download - page 67

Notes to Consolidated Financial Statements 2012 ANNUAL REPORT 65
Asset Retirement Obligations. We record the fair value
of legal obligations associated with the retirement of tangible long-
lived assets in the period in which it is determined to exist, if a rea-
sonable estimate of fair value can be made. Upon initial recognition
of a liability, we capitalize the cost of the asset retirement obligation
by increasing the carrying amount of the related long-lived asset.
Over time, the liability is increased for changes in its present value
and the capitalized cost is depreciated over the useful life of the
related asset. We have determined that conditional legal obligations
exist for certain of our worldwide owned and leased facilities related
primarily to building materials. As of December 31, 2012 and 2011,
the outstanding liability for asset retirement obligations was $174
million and $164 million, respectively.
Pension and Postretirement Obligations. Guidance
under the FASB ASC Topic Compensation—Retirement Benefits
requires balance sheet recognition of the overfunded or under-
funded status of pension and postretirement benefit plans. Under
this guidance, actuarial gains and losses, prior service costs or
credits, and any remaining transition assets or obligations that have
not been recognized under previous accounting standards must be
recognized in other comprehensive income, net of tax effects, until
they are amortized as a component of net periodic benefit cost.
NOTE 2: BUSINESS ACQUISITIONS, DISPOSITIONS, GOODWILL
AND INTANGIBLE ASSETS
Business Acquisitions and Dispositions. Our investments in
businesses in 2012, 2011 and 2010 totaled $18.6 billion (including
debt assumed of $2.6 billion), $372 million (including debt assumed
of $15 million) and $2.8 billion (including debt assumed of $39
million), respectively.
On July 26, 2012, we completed the acquisition of Good-
rich, a global supplier of systems and services to the aerospace
and defense industry with 2011 sales of $8.1 billion. Goodrich
products include aircraft nacelles and interior, actuation, landing
and electronic systems. Under the terms of the agreement, Good-
rich shareholders received $127.50 in cash for each share of Good-
rich common stock they owned on July 26, 2012. This equated to a
total enterprise value of $18.3 billion, including $1.9 billion in net
debt assumed. The acquired Goodrich businesses were combined
with the legacy Hamilton Sundstrand businesses to form the new
UTC Aerospace Systems segment. The Goodrich acquisition and
the formation of UTC Aerospace Systems provide increased scale,
financial strength and complementary product offerings, allowing us
to significantly strengthen our position in the aerospace and
defense industry, create aftermarket efficiencies for our customers,
accelerate our ability to drive innovation within the aerospace
industry, and enhance our ability to support our customers with
more integrated systems. This acquisition, coupled with our acquis-
ition of an additional interest in IAE, as discussed below, further
advances UTC’s strategy of focusing on our core businesses.
To finance the cash consideration for the Goodrich acquis-
ition and pay related fees, expenses and other amounts due and
payable, we utilized the previously disclosed net proceeds of
approximately $9.6 billion from the $9.8 billion of long-term notes
issued on June 1, 2012, the net proceeds of approximately $1.1
billion from the equity units issued on June 18, 2012, $3.2 billion
from the issuance of commercial paper during July 2012, and $2.0
billion of proceeds borrowed under our April 24, 2012 term loan
credit agreement. For the remainder of the cash consideration, we
utilized approximately $0.5 billion of cash and cash equivalents
generated from operating activities.