8-KFinancial EventsExhibits & Filings

RTX Corp 8-K Report, Material Impairment (Mar 15, 2012)

Filed March 15, 2012For Securities:RTX

Summary

United Technologies Corporation (UTC), now RTX Corp, announced on March 14, 2012, its strategic decision to divest several non-core businesses, including Hamilton Sundstrand's Industrial businesses, Pratt & Whitney Rocketdyne (Rocketdyne), and Clipper Windpower. This move is designed to generate approximately $3 billion in net cash, which will be primarily used to reduce short-term debt incurred for the proposed acquisition of Goodrich Corporation and to minimize the need for equity issuance. The divestitures are largely expected to be completed in the second half of 2012, subject to customary closing conditions. As a consequence of this divestiture plan, UTC anticipates recording significant pre-tax goodwill impairment charges totaling $950 million in the first quarter of 2012. Specifically, Rocketdyne will incur a charge of approximately $360 million, and Clipper Windpower will account for $590 million. These impairments stem from management's decision to dispose of these businesses shortly after acquisition, preventing sufficient time for their long-term operations to recover the initial goodwill value. Up to $200 million of these impairment charges could involve future cash expenditures.

Key Highlights

  • 1UTC is divesting non-core businesses to generate approximately $3 billion in net cash.
  • 2Proceeds from divestitures will be used to repay debt related to the proposed Goodrich acquisition and reduce equity financing.
  • 3Key businesses to be divested include Hamilton Sundstrand's Industrial businesses, Pratt & Whitney Rocketdyne, and Clipper Windpower.
  • 4The company expects to record pre-tax goodwill impairment charges of $950 million ($360 million for Rocketdyne, $590 million for Clipper).
  • 5These impairment charges are due to the decision to divest these businesses relatively soon after acquisition.
  • 6The divestitures are expected to be substantially completed in the second half of 2012.
  • 7The acquisition of Goodrich Corporation is still subject to customary closing conditions and regulatory approval.

Frequently Asked Questions

The primary financial impacts include the expected generation of approximately $3 billion in net cash from asset sales, which will be used to reduce acquisition-related debt and equity financing. Additionally, the company anticipates recording a substantial pre-tax goodwill impairment charge of $950 million related to the businesses being divested.

United Technologies Corporation is divesting Hamilton Sundstrand's Industrial businesses, Pratt & Whitney Rocketdyne (Rocketdyne), and Clipper Windpower. These are considered non-core to the company's strategic direction.

Goodwill impairment charges of $950 million are being recorded because UTC has decided to dispose of Rocketdyne and Clipper Windpower shortly after acquiring them. This rapid decision means there hasn't been sufficient time for the long-term operations of these businesses to recover the value attributed to goodwill at the time of acquisition.

The cash generated from these divestitures is intended to help finance the proposed acquisition of Goodrich Corporation. Specifically, the funds will be used to repay short-term debt incurred for the acquisition and reduce the amount of equity that might otherwise need to be issued, thereby potentially improving the financing structure for the Goodrich deal.