01—Abstract
Summary
Summary of the 10-K filed March 31, 1994. Cited figures are marked; the original filing is the authoritative source.
United Technologies Corporation (RTX's predecessor, filing as UTC) reported 1993 results that marked a turnaround after a difficult 1991-1992 period.
Sales fell 4% to $20.7 billiona (consolidated revenues $21.1 billion), but net income rose to $487 million, or $3.53 primary EPS, versus a net loss of $287 million in 1992. The improvement came mainly from lower SG&A (down 15%) following restructuring, the absence of the large 1992 charges, and better results at Flight Systems, Otis and Carrier. Pratt & Whitney remained a weak spot: its revenues fell 14% to $5.9 billion and commercial engine shipments dropped to 442 from 610, though its operating profit swung to $156 million from a loss.
Balance sheet and cash flow were stable. Operating cash flow rose to $1.5 billionb, debt-to-total-capitalization improved to 45%, and shareowners' equity reached $3.6 billion.
Management is reducing the company's reliance on U.S. defense work, which fell to 19% of sales, and the company plans to sell a 40% economic interest in its Automotive segment through the UT Automotive IPO, with proceeds estimated at $470 millionc. Investors should weigh the improved 1993 earnings against continuing airline-industry weakness, declining defense budgets, and ongoing government investigations and contract disputes.
02—Key points
Key Highlights
- Net income rose to $487 million ($3.53 per primary share) in 1993, compared with a net loss of $287 million in 1992, which included restructuring and airline-exposure charges.
- Sales declined 4% to $20.7 billion, driven by the commercial airline slump and unfavorable foreign currency translation (about a 3% negative impact).
- Selling, general and administrative expenses fell 15% to $2.5 billion, reflecting restructuring savings and the absence of the 1992 charges.
- Pratt & Whitney revenues dropped 14% to $5.9 billion, and commercial engine shipments fell to 442 from 610, though the segment returned to operating profit of $156 million.
- Operating cash flow increased to $1.5 billion from $1.2 billion, and debt-to-total-capitalization improved to 45% from 48%.
- Planned IPO of 40% of UT Automotive, with an estimated $470 million in proceeds, and the agreed sale of Norden Systems to Westinghouse, subject to government approval.
- Ongoing government investigations and litigation, including Sikorsky's $150 million False Claims Act settlement and a federal grand jury inquiry into Saudi helicopter marketing, add legal and reputational risk.
03—Questions
Frequently Asked Questions
Why did the company swing from a loss in 1992 to a profit in 1993?
The 1992 results included large charges, such as $447 million for airline-industry credit exposures, $169 million for contract matters and $85 million for restructuring, along with the cumulative effect of new accounting standards. In 1993, those one-time charges were absent, SG&A fell 15%, and restructuring savings and better performance at Flight Systems, Otis and Carrier contributed to the improvement.
How exposed is the company to the commercial airline industry and defense budget cuts?
Commercial aircraft engines and spare parts are a major revenue source, and Pratt & Whitney's commercial engine shipments fell sharply in 1993. Pratt & Whitney's backlog declined to $9.5 billion from $11.6 billion. U.S. Government sales made up 19% of total 1993 sales, down from 24% in 1989, and management expects defense budget reductions to continue weighing on military engine and helicopter programs.
What is the planned UT Automotive IPO, and how will it affect the company?
The company plans to sell 40% of the economic interest in its Automotive segment through a public offering of Class A stock in UT Automotive, Inc. It intends to keep 60% of the economic interest and to elect at least 80% of the board. The offering was estimated to raise about $470 million, but the registration statement had not yet been declared effective at the time of filing.
What legal and regulatory risks should investors be aware of?
The company faces a $150 million settlement with the Department of Justice over Sikorsky pricing, a Civil False Claims Act complaint over Navy Sea King parts, and grand jury investigations involving Pratt & Whitney's Israeli sales and helicopter marketing to Saudi Arabia. Management says it expects these matters not to have a material adverse effect, but it also notes that government investigations could lead to suspension from contracting or debarment for up to three years.
04—Continue