This summary is based on the fourth quarter fiscal 2008 earnings call conducted by United Technologies Corp. (UTX) on January 21, 2009.
Management:
SVP and CFO: Gregory Hayes
VP, Investor Relations: Akhil Johri
Key Investor Issues:
- Full year revenues increased 7% to approximately $59 billion.
- Full year EPS were $4.90, a 15% growth versus 2007.
- Fiscal 2009 guidance range of $4.65 to $5.15.
Fourth Quarter Financial Highlights:
Cash flow was reportedly very strong during the year, being 105% of net income.
- Despite the world wide economic slowdown, the management continues to make investments in the long term growth of the business.
- The company also continues to reduce costs engineering the development spending total of $1.8 billion last year.
- This is an increase of nearly $100 million over 2007.
- The management continued the aggressive restructuring actions preparing for tougher times ahead.
- Total restructuring expenditures was $357 million, strong evidence that UTC can continue to outperform.
The company began 2008 with most markets in a relatively good position with the exception of the U.S. residential market.
- The early concerns about commercial construction slow down in the U.S. and Western Europe ended in the broad based slowdowns across all industries and geographies.
- The net rate of decline accelerated in those end markets in the last couple of months.
- Combined with a strong U.S. dollar, this has created unique challenges with global businesses.
- Despite this, UTC reported fourth quarter EPS at $1.23, an increase of 14% over last year.
- Foreign exchange translation combined with Canada''s currency hedging adversely impacted UTC by 6 cents.
- The third quarter results also include 6 cents net benefit of one time gains of excess of restructuring costs.
- Last year''s quarter had a net 4 cents charge for restructuring and other costs in excess of gains.
Revenues were $14.5 billion in the quarter, a 1% decline versus a year ago.
- Foreign currency translation reduced revenue by $700 million or 5%.
- Organic growth was 3%.
- Sikorsky was the highlight in the quarter with 25% organic revenue growth.
- The unit delivered 204 large helicopters through the year, a 17% increase from 2007 consistent with its commitment of delivering more than 200 aircraft a year.
- On the other hand, short cycle businesses organic revenues declined by 7%.
- First quarter order rates indicate that revenues will decline at a faster rate in the first half of 2009.
Otis new equipment orders declined 14% globally including the impact of foreign currency.
- Carrier''s commercial HVAC equipment orders declined 7% worldwide, also including the impact of CapEx.
- Otis transport refrigeration orders declined over 50% in the quarter.
Pratt & Whitney book to bill for large commercial spares was just below one and a quarter.
- Commercial spares revenues were down just slightly.
- Hamilton Sundstrand commercials spares book to bill was just above normal.
While the business environment is challenging, UTC continues to focus on taking out costs through restructuring.
- The management spent $136 million on restructuring in the quarter and a total of $357 million for the year.
- Aggressive cost control and benefits from early restructuring led to market expansion of four of the six business units adjusting for restructuring of one time gains.
- Otis margins were down in the quarter but would have been up slightly except for accounting adjustments related to a subsidiary.
Cash flow in the quarter was strong with free cash flow at 147% net income.
- This was a result of seasonal inventory reductions and strong collections.
- The company repurchased $690 million of its shares in the quarter bringing the year to date total to $3.2 billion.
- In 2009, the company will begin targeting share repurchase and acquisition at $2 billion each.
