United Technologies 2012 Annual Report Download - page 71

Notes to Consolidated Financial Statements 2012 ANNUAL REPORT 69
entity. Midea owns 51% of the venture and UTC Climate, Con-
trols & Security 49%. This joint venture strengthened UTC Climate,
Controls & Security’s global strategic relationship with Midea and
expands the manufacturing and distribution of residential and light
commercial HVAC systems in Brazil, Argentina, and Chile. UTC
Climate, Controls & Security recognized a gain of approximately
$80 million in 2011 as a result of this transaction.
During 2011, we recorded an other-than-temporary impair-
ment charge totaling $66 million on an equity investment held by
UTC Climate, Controls & Security, in order to write-down our
investment to market value as of December 31, 2011. This impair-
ment is recorded within “Other income, net” on our Consolidated
Statement of Operations.
On March 1, 2010, we completed the acquisition of the GE
Security business for approximately $1.8 billion, including debt
assumed of $32 million. The GE Security business supplies security
and fire safety technologies for commercial and residential applica-
tions through a broad product portfolio that includes fire detection
and life safety systems, intrusion alarms, and video surveillance and
access control systems. This business, which has been integrated
into our UTC Climate, Controls & Security segment, enhanced UTC
Climate, Controls & Security’s geographic diversity through GE
Security’s strong North American presence, while increasing total
product and technology offerings. In connection with the acquisition
of GE Security, we recorded approximately $600 million of identifi-
able intangible assets and $1.1 billion of goodwill. The goodwill
recorded reflects synergies expected to be realized through the
combination of GE Security’s products, resources and manage-
ment talent with those of the existing UTC Climate, Controls &
Security business to enhance competitiveness, accelerate the
development of certain product offerings, drive improved opera-
tional performance and secure additional service channels.
Additionally, the combined business has provided the opportunity
for significant improvements to the cost structure through the
rationalization of general and administrative expenditures as well as
research and development efforts.
During 2010, we recorded approximately $86 million of
asset impairment charges, for assets that have met the “held-for-
sale” criteria, related to disposition activity within both UTC Climate,
Controls & Security and UTC Aerospace Systems. These asset
impairment charges are recorded within Cost of products sold on
our Consolidated Statement of Operations. The asset impairment
charges consist of an approximately $58 million charge associated
with UTC Climate, Controls & Security’s ongoing portfolio trans-
formation and an approximately $28 million charge at UTC Aero-
space Systems related to the disposition of an aerospace business
as part of UTC Aerospace System’s efforts to implement low cost
sourcing initiatives.
During 2010, we completed the acquisition of Clipper. In
2010, we recorded net charges related to declines in fair value
related to our investment in Clipper of approximately $138 million.
These amounts remain in 2010 Other income, net in results of con-
tinuing operations, as Clipper was accounted for as an equity-
method investment through December 2010. Clipper has been
reclassified to discontinued operations for 2012 and 2011, as it was
a wholly-owned entity of UTC, and was sold in the third quarter of
2012. See additional discussion at Note 3.
Goodwill.The changes in the carrying amount of goodwill,
by segment, are as follows:
(DOLLARS IN MILLIONS)
Balance as of
January 1,
2012
Goodwill
resulting from
business
combinations
Foreign
currency
translation
and other
Balance as of
December 31,
2012
Otis $ 1,516 $ 24 $ 43 $ 1,583
UTC Climate,
Controls & Security 9,758 89 21 9,868
Pratt & Whitney 1,223 280 (265) 1,238
UTC Aerospace
Systems 4,475 11,283 (1,004) 14,754
Sikorsky 348 — 5 353
Total Segments 17,320 11,676 (1,200) 27,796
Eliminations and other 623 4 (622) 5
Total $ 17,943 $ 11,680 $ (1,822) $ 27,801
UTC Aerospace Systems goodwill increased $11.3 billion
principally as a result of the Goodrich acquisition. The goodwill
results from the workforce acquired with the business as well as the
significant synergies that are expected to be realized through the
consolidation of manufacturing facilities and overhead functions. No
amount of this goodwill is deductible for tax purposes. The goodwill
acquired has been allocated to the two reporting units within the
UTC Aerospace Systems segment.
Pratt & Whitney goodwill increased $280 million due to the
increase in ownership interest and consolidation of IAE. The good-
will is deductible for tax purposes.
The approximately $1.8 billion decrease reflected under
“Foreign currency translation and other” in the table above primarily
reflects the decision to divest a number of non-core businesses and
the resulting reclassification to assets held for sale. See Note 3 for
further discussion. In addition, approximately $360 million of good-
will was transferred from UTC Aerospace Systems to Pratt & Whit-
ney in connection with the transfer of the auxiliary power unit (APU)
business from UTC Aerospace Systems to Pratt & Whitney. See
Note 19 for further discussion of the transfer of the APU business.
We early adopted FASB ASU No. 2012-02, “Testing
Indefinite-Lived Intangible Assets for Impairment” in connection
with the performance of our annual goodwill and indefinite-lived
intangible assets impairment tests. This ASU intends to align
impairment testing guidance among long-lived asset categories.
This ASU allows for an assessment based on qualitative factors to
determine whether it is more likely than not that an indefinite-lived