Summary
United Technologies Corporation (UTC) reported its first quarter 2018 financial results, showing a year-over-year increase in net sales to $15.24 billion, up from $13.82 billion in the prior year quarter. This growth was primarily driven by organic sales increases across all four segments, particularly in commercial aftermarket sales and higher military sales within the aerospace businesses. Operating profit, however, saw a decline to $1.93 billion from $2.14 billion, impacted by a decrease in gross margin as a percentage of sales, notably at Pratt & Whitney due to higher negative engine margins and customer support provisions, as well as pricing pressure in China impacting Otis. The company also provided an update on its pending acquisition of Rockwell Collins, which is expected to close mid-year 2018. To finance this significant transaction, UTC anticipates requiring approximately $15 billion for the cash portion, to be funded through debt issuances and existing cash. To manage liquidity and cash flow for the acquisition, UTC has suspended its share repurchase program. While overall sales grew, the decrease in operating profit warrants investor attention, alongside the strategic move towards the Rockwell Collins acquisition.
Financial Highlights
50 data points| Revenue | $15.24B |
| Cost of Revenue | $8.02B |
| Gross Profit | $3.96B |
| R&D Expenses | $554.00M |
| SG&A Expenses | $1.71B |
| Operating Expenses | $13.54B |
| Operating Income | $1.93B |
| Interest Expense | $229.00M |
| Net Income | $1.30B |
| EPS (Basic) | $1.64 |
| EPS (Diluted) | $1.62 |
| Shares Outstanding (Basic) | 789.90M |
| Shares Outstanding (Diluted) | 800.40M |
Key Highlights
- 1Net sales increased by 10% to $15.24 billion, driven by broad-based organic growth across all segments.
- 2Operating profit decreased by 10% to $1.93 billion, primarily due to lower gross margins, particularly at Pratt & Whitney and Otis.
- 3The company is actively pursuing the acquisition of Rockwell Collins, with an expected closing in mid-2018 and plans to fund the cash portion through debt and cash on hand.
- 4Share repurchases have been suspended to manage liquidity for the Rockwell Collins acquisition.
- 5Effective January 1, 2018, UTC adopted the new revenue recognition standard (ASC 606), which impacted the classification of revenues and expenses and the establishment of new balance sheet accounts like contract assets and liabilities.
- 6Pratt & Whitney experienced a significant decline in its gross margin percentage, impacted by higher negative engine margins and customer support provisions.
- 7Restructuring costs of $69 million were recorded in the quarter, primarily related to workforce reductions and facility consolidations across various segments.