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RTX Annual Report, Year Ended Dec 31, 1998

Filing Date
Filed February 16, 1999
Period End
December 31, 1998
Security
RTX
In the record · 2016–202610-K1210-Q338-K139

RTX filed 12 annual reports (10-K), 33 quarterly reports (10-Q) and 139 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Jan ’19Jan ’19
  2. Leadership change8-K · Mar ’21Mar ’21
  3. Leadership change8-K · Feb ’23Feb ’23
  4. FY2024 annual report10-K · Feb ’25Feb ’25

01—Abstract

Summary

Summary of the 10-K filed February 16, 1999. Cited figures are marked; the original filing is the authoritative source.

United Technologies Corporation (filed as 'RTX Corp' in the request; this 10-K is UTC's annual report for fiscal 1998, filed February 16, 1999) reported record results for 1998.

Revenues rose 6% to $25.7 billiona, net income increased 17% to $1.255 billion, and diluted EPS reached $5.05 versus $4.21 in 1997. Segment operating profit margin improved to 9.6% from 8.9%, led by a sharp recovery at Pratt & Whitney, where operating profit rose 25% on a 13.0% margin. Return on average shareowners' equity was 28.6%, and operating cash flow climbed to $2.5 billion.

The main investor considerations are portfolio changes and balance-sheet shifts. Management has retained an investment bank to explore strategic alternatives for UT Automotive, including a possible divestiture, after a 1998 decline in segment profit and pressure from automakers. Acquisitions of $1.24 billionb and $650 million of share repurchases pushed total debt up to $2.19 billion from $1.59 billion, and net debt to capitalization rose to 27% from 19%.

Management expects debt-to-capital to rise moderately as the company continues acquisitions and buybacks. Risk factors include the Asian economic downturn, weakness in the commercial airline industry (affecting Pratt & Whitney and Flight Systems), and government contracting exposure.

The filing discloses several pending legal matters, including a Pratt & Whitney ASBCA damages claim initially at $260.3 millionc, a False Claims Act complaint against Sikorsky, multiple qui tam suits, and a possible DOJ action related to the Fighter Engine Competition. Management believes none will have a material adverse effect.

02—Key points

Key Highlights

  1. Revenue grew 6% to $25,715 million in 1998, and net income rose 17% to $1,255 million.
  2. Diluted EPS of $5.05 in 1998, up from $4.21 in 1997; return on average shareowners' equity was 28.6%.
  3. Pratt & Whitney was the standout segment: revenues of $7,876 million and operating profit up 25% to $1,024 million, a 13.0% margin.
  4. Carrier revenues rose 14% to $6,922 million, largely from acquisitions, though its operating margin slipped to 7.2%.
  5. Management is exploring strategic alternatives for UT Automotive, including a possible sale of all or part of the business.
  6. Total debt increased to $2,187 million from $1,587 million after $1.24 billion of acquisitions; net debt to capitalization rose to 27%.
  7. Share repurchases of $650 million in 1998 and an additional 15 million-share authorization in October 1998.

03—Questions

Frequently Asked Questions

  1. How did the company's core segments perform in 1998?

    Pratt & Whitney led, with operating profit up 25% on higher engine margins, stronger after-market volumes and military development work. Otis's operating profit rose 15% to $533 million, while UT Automotive's declined 2% and Flight Systems' fell 5%, mainly because of lower Sikorsky volumes and cost reduction charges.

  2. Why is the company considering selling UT Automotive?

    Consolidation among automotive OEM suppliers and continuing price pressure from automakers, along with a strike at General Motors and a decline in segment profit, led management to hire an investment bank to explore strategic alternatives, including a sale of all or part of the business.

  3. How is the company's leverage changing?

    Total debt rose to $2,187 million at year-end 1998 from $1,587 million, mainly to fund $1,241 million of acquisitions and $650 million of share buybacks. Debt-to-total-capitalization rose to 33% from 28%, and management expects it to increase moderately further.

  4. What are the main risks to future earnings?

    Key risks include the Asian economic slowdown, a downturn in commercial aviation (which would hit Pratt & Whitney and Flight Systems), declining U.S. defense budgets, pressure on automotive suppliers, and government contracting issues. Several legal matters are pending, including a Pratt & Whitney damages claim initially at $260.3 million, though management does not expect them to be material.

04—Continue

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