10-QPeriod: Q2 FY2016

RTX Corp Quarterly Report for Q2 Ended Jun 30, 2016

Filed July 29, 2016For Securities:RTX

Summary

United Technologies Corporation (RTX) reported mixed financial results for the second quarter and first half of 2016. While overall net sales saw a slight increase year-over-year, driven by organic growth in key segments like Pratt & Whitney and UTC Aerospace Systems, profitability faced pressure. Operating profit and margins declined, particularly within the Pratt & Whitney segment, due to factors like increased negative engine margins and unfavorable sales mix. The company continues to manage its financial position through strategic acquisitions, share repurchases, and disciplined cost management, including significant restructuring efforts. The company is actively managing its liquidity, with strong operating cash flows. Significant events during the period included debt issuances to support corporate purposes and share repurchases, funded partly by the proceeds from the sale of its Sikorsky business in late 2015. Despite some headwinds, including pricing pressures in certain segments and ongoing legal and tax matters, RTX is focused on its long-term growth strategy through innovation and strategic investments.

Financial Highlights

49 data points
Beta

Revenue

$14.87B

27.8% Gross Margin

Net Income

$1.38B

9.3% Net Margin

EPS (Diluted)

$1.65

Total Assets

$89.48B

Cash & Equivalents

$6.79B

Free Cash Flow

$1.81B

Financial Statements
Beta
Revenue$14.87B
Cost of Revenue$7.93B
Gross Profit$4.13B
R&D Expenses$588.00M
SG&A Expenses$1.45B
Operating Expenses$12.78B
Operating Income$2.34B
Interest Expense$225.00M
Net Income$1.38B
EPS (Basic)$1.67
EPS (Diluted)$1.65
Shares Outstanding (Basic)825.30M
Shares Outstanding (Diluted)833.60M

Key Highlights

  • 1Net sales for the quarter ended June 30, 2016, increased by 1% to $14.87 billion compared to the prior year quarter.
  • 2Net sales for the six months ended June 30, 2016, increased by 1% to $28.23 billion compared to the prior year period.
  • 3Operating profit for the quarter declined by 3.2% to $2.337 billion, with operating profit margins decreasing from 16.4% to 15.7%.
  • 4Net income attributable to common shareowners for the quarter decreased by 10.3% to $1.373 billion.
  • 5The company made significant investments in acquisitions, totaling $538 million for the six months ended June 30, 2016.
  • 6Restructuring costs recorded for the six months ended June 30, 2016, totaled $178 million.
  • 7The company's debt-to-total capitalization ratio increased to 42% as of June 30, 2016.

Frequently Asked Questions

For the quarter ended June 30, 2016, RTX reported a slight increase in net sales to $14.87 billion, up from $14.69 billion in the same period last year. However, operating profit decreased to $2.337 billion from $2.415 billion, and net income attributable to common shareowners fell to $1.373 billion from $1.542 billion.

In the second quarter of 2016, Otis saw a slight decrease in operating profit, while UTC Climate, Controls & Security experienced an increase. Both Pratt & Whitney and UTC Aerospace Systems saw declines in operating profit, with Pratt & Whitney experiencing a significant 21% drop due to factors like increased negative engine margins and unfavorable mix. UTC Aerospace Systems' operating profit remained relatively flat.

RTX continued its share repurchase program, with approximately $5,964 million remaining authorized as of June 30, 2016. The company also issued debt, leading to an increase in its debt-to-total capitalization ratio to 42% by the end of the quarter. These actions were partly funded by proceeds from the sale of Sikorsky. The company expects its future operating cash flows to be sufficient for its needs.

Yes, the company is involved in several legal and tax matters. This includes ongoing litigation with the German Tax Office regarding tax benefits from a past reorganization, a claim from the US government related to the F100 engine, and ongoing asbestos claims. The company has accrued liabilities for these matters and continues to litigate or settle them. Additionally, there are ongoing discussions regarding export violations with the U.S. State Department.