10-QPeriod: Q3 FY2012

RTX Corp Quarterly Report for Q3 Ended Sep 30, 2012

Filed October 26, 2012For Securities:RTX

Summary

United Technologies Corporation (UTC) reported its third-quarter and nine-month results for the period ending September 30, 2012. The company's financial performance was significantly impacted by its acquisition of Goodrich Corporation in July 2012, which contributed $1.5 billion in sales for the partial period. This major acquisition, along with others, led to a substantial increase in debt and goodwill. Despite a slight decline in net sales for the quarter, the company saw an increase in net income attributable to common shareholders from continuing operations for the nine-month period. However, the company also reported significant restructuring costs and charges related to the divestiture of non-core businesses. Investors should note the company's strategic shift towards core businesses and the associated financial implications, including increased leverage and integration efforts for acquired entities.

Financial Highlights

46 data points
Beta

Revenue

$15.04B

26.9% Gross Margin

Net Income

$1.42B

9.4% Net Margin

EPS (Diluted)

$1.56

Total Assets

$91.95B

Free Cash Flow

$1.63B

Financial Statements
Beta
Revenue$15.04B
Cost of Revenue$8.28B
Gross Profit$4.04B
R&D Expenses$590.00M
SG&A Expenses$1.62B
Operating Expenses$13.21B
Operating Income$2.04B
Net Income$1.42B
EPS (Basic)$1.58
EPS (Diluted)$1.56
Shares Outstanding (Basic)896.30M
Shares Outstanding (Diluted)907.20M

Key Highlights

  • 1Acquisition of Goodrich Corporation for $18.3 billion enterprise value, significantly increasing assets, goodwill, and debt.
  • 2Net sales for the third quarter increased by 6% to $15.04 billion, driven by acquisitions, though organic sales declined.
  • 3Net income attributable to common shareholders from continuing operations was $1.247 billion for the quarter and $3.902 billion for the nine months, a decrease and an increase respectively compared to the prior year.
  • 4Significant increase in total debt to $28.7 billion due to financing for the Goodrich acquisition.
  • 5Company is undertaking divestitures of non-core businesses to generate cash and repay acquisition-related debt, impacting discontinued operations.
  • 6Research and development expenses increased by 27% in the quarter, driven by higher spending in UTC Aerospace Systems and Pratt & Whitney.
  • 7Restructuring costs totaled $360 million for the nine-month period, primarily related to workforce reductions and facility consolidation.

Frequently Asked Questions

The primary driver was the acquisition of Goodrich Corporation, which was completed on July 26, 2012. This acquisition had an enterprise value of $18.3 billion, including $1.9 billion in net debt assumed, and resulted in an $11.2 billion increase in goodwill.

The Goodrich acquisition significantly increased the company's total assets and liabilities. It contributed $1.5 billion in sales in the third quarter of 2012, but also led to a substantial increase in debt to $28.7 billion and goodwill to $27.6 billion as of September 30, 2012. The integration of Goodrich also impacted operating expenses and research and development.

UTC has approved plans to divest a number of non-core businesses, including the legacy Hamilton Sundstrand Industrial businesses, Pratt & Whitney Rocketdyne, Clipper Windpower, and UTC Power. The proceeds from these divestitures are intended to be used to repay debt incurred to finance the Goodrich acquisition.

The company faces an uneven global economic outlook, particularly in Europe, and potential impacts from U.S. government deficit reduction measures. The company is focusing on cost reduction, investing in new product launches and growth markets, and managing the integration of Goodrich. While net income from continuing operations for the nine months showed an increase, the company anticipates ongoing restructuring costs and the financial implications of its large acquisition.