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Robust Results From US Majors

 

The Boeing Company

Lockheed Martin

Raytheon

UTC

The Boeing Company

boeing21 Oct 15. The Boeing Company [NYSE: BA] reported third-quarter revenue increased 9 percent to $25.8bn on record commercial deliveries. Core earnings per share (non-GAAP) for the quarter increased 18 percent to $2.52, reflecting strong performance across the company, and GAAP earnings per share was $2.47.

Core earnings per share (non-GAAP) guidance for 2015 increased to between $7.95 and $8.15, from $7.70 and $7.90 on continued strong operating performance. GAAP earnings per share guidance for 2015 increased to between $7.65 and $7.85, from $7.60 and $7.80. Operating cash flow guidance increased to approximately $9.5 bn. Revenue guidance increased $0.5bn to between $95.0bn and $97.0bn on higher commercial airplane deliveries. Defense, Space & Security operating margin guidance increased to approximately 10 percent.

“By continuing to profitably deliver on our large and diverse backlog, we are driving strong growth in revenue, earnings and cash flow,” said Boeing President and Chief Executive Officer Dennis Muilenburg. “Solid operating performance across our commercial and defense businesses during the quarter also supported our continued investment in innovation and our people, and our commitment to return cash to shareholders.”

“Three quarters of solid results and confidence in our continued operating performance enabled us to raise our revenue, earnings per share and operating cash flow guidance for the year. Looking ahead, our teams remain focused on improving productivity and quality and delivering improved capabilities to meet our customers’ expectations.”

Operating cash flow in the quarter was $2.9bn, reflecting commercial airplane production rates and strong operating performance. During the quarter, the company repurchased 11 m shares for $1.5bn, leaving $6.0bn remaining under the current repurchase authorization. Year to date, the company repurchased 41m shares for $6.0 bn. The company also paid $0.6bn in dividends in the quarter, reflecting an approximately 25 percent increase in dividends per share compared to the same period of the prior year.

Cash and investments in marketable securities totaled $9.9bn, up from $9.6bn at the beginning of the quarter. Debt was $9.0bn, unchanged from the beginning of the quarter.

Total company backlog at quarter-end was $485bn, down from $489bn at the beginning of the quarter, and included net orders for the quarter of $22bn.

Segment Results

Commercial Airplanes

Commercial Airplanes third-quarter revenue increased 10 percent to $17.7bn on higher delivery volume and mix. Third-quarter operating margin was 10 percent, reflecting higher R&D and the dilutive impact of higher 787 deliveries partially offset by strong performance on production programs.

During the quarter, the company began final assembly and achieved power-on of the first 737 MAX airplane. In total, the 737 program has won nearly 2,900 firm orders for the 737 MAX since launch. Also during the quarter, the company completed firm configuration for the 777X. The 777X program is on schedule for first delivery in 2020.

Commercial Airplanes booked 166 net orders during the quarter. Backlog remains strong with nearly 5,700 airplanes valued at $426bn.

Defense, Space & Security

Defense, Space & Security’s third-quarter revenue was $8.4bn with an operating margin of 12.2 percent.

Boeing Military Aircraft (BMA) third-quarter revenue increased 15 percent to $4.1bn primarily as a result of F-15 contract negotiations and BMA operating margin was 12.2 percent. During the quarter, BMA was awarded contracts for 13 P-8A Poseidon aircraft, 22 Apache helicopters, and 15 Chinook helicopters. Also during the quarter, the company and the U.S. Air Force team completed the first flight of a KC-46A tanker aircraft.

Network & Space Systems (N&SS) third-quarter revenue was $2.1bn, reflecting higher volume on the Commercial Crew program. Operating margin increased to 11.5 percent, reflecting favorable program mix. During the quarter, NASA extended Boeing’s international space station contract.

Global Services & Support (GS&S) third-quarter revenue decreased to $2.2bn, reflecting the timing of Airborne Early Warning and Control deliveries. Operating margin increased to 12.9 percent on strong performance. During the quarter, GS&S was awarded a contract to develop and provide the next-generation communications system for the Australian Defence Force.

Backlog at Defense, Space & Security was $59bn, of which 40 percent represents orders from international customers.

At quarter-end, Boeing Capital’s net portfolio balance was $3.4bn, up from $3.3bn at the beginning of the quarter. Total pension expense for the third quarter was $529 m, down from $715 m in the same period of the prior year.

Lockheed Martin

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20 Oct 15. Lockheed Martin (NYSE: LMT)  reported third quarter 2015 net sales of $11.5bn, compared to $11.1bn in the third quarter of 2014. Net earnings in the third quarter of 2015 were $865 m, or $2.77 per share, compared to $888 m, or $2.76 per share, in the third quarter of 2014. Cash from operations in the third quarter of 2015 was $1.5bn, compared to $990 m in the third quarter of 2014.

“Our strong operating results this quarter are a reflection of our corporate-wide focus on program execution and delivery of value to customers and shareholders,” said Lockheed Martin Chairman, President and CEO Marillyn Hewson.  “As we look ahead to 2016, we will remain focused on performing with excellence and providing affordable and innovative solutions for our customers, while strategically positioning our business portfolio on the best path to long-term growth and value for the corporation.”

 

2015 Financial Outlook

The following table and other sections of this news release contain forward-looking statements, which are based on the Corporation’s current expectations. Actual results may differ materially from those projected. It is the Corporation’s practice not to incorporate adjustments into its financial outlook for proposed acquisitions, divestitures, ventures, changes in law and restructuring activities until such items have been consummated or enacted. Accordingly, the Corporation’s outlook for 2015 does not reflect any impact from the strategic review of the government IT infrastructure services and technical services businesses (strategic review) or its pending acquisition of Sikorsky Aircraft Corporation (Sikorsky).

The Corporation may determine to fund customer programs itself pending government appropriations and is doing so with increased frequency. If the Corporation incurs costs in excess of funds obligated on a contract, it may be at risk for reimbursement of the excess costs. In 2014, the Corporation received customer authorization and initial customer funding to begin production of C-130J aircraft to be procured under the Multiyear II contract. Similarly, in 2014 and 2015, the Corporation received customer authorization and initial funding to begin producing F-35 aircraft to be acquired under low-rate initial production (LRIP) 9 and 10 contracts, respectively. The Corporation continues to negotiate these contracts with its customer. Throughout the negotiations process the Corporation has incurred costs in excess of funds obligated and has provided notification to its customer that current funding is insufficient to cover the production process. Despite not yet receiving additional funding, the Corporation continued work in an effort to meet its customer’s desired aircraft delivery dates. As a result, as of Sept. 27, 2015, the Corporation has $2.4bn in potential cost and termination liability exposure related to the C-130J Multiyear II and F-35 LRIP 9 and 10 contracts. The Corporation is currently negotiating final contract terms with its customer and expects to receive additional funding by the end of 2015. Depending on when the Corporation receives the additional funding, approximately $750m of cash the Corporation expects to collect in 2015 may be delayed until 2016.

2016 Financial Trends

The Corporation expects its 2016 net sales will be comparable with 2015 and that total business segment operating margin will be in the 11.0 percent to 11.5 percent range. The Corporation also expects its 2016 cash from operations will be comparable with 2015. The Corporation’s preliminary outlook for 2016 does not reflect any impacts from the ongoing strategic review or its pending acquisition of Sikorsky.  The Corporation’s outlook for 2016 will be updated at the conclusion of its strategic review, and when the acquisition of Sikorsky closes. In addition, the preliminary outlook assumes the U.S. Government continues to support and fund the Corporation’s key programs, consistent with the continuing resolution funding measure through Dec. 11, 2015, and Congress approves budget legislation for government fiscal year (GFY) 2016 soon. Changes in circumstances may require the Corporation to revise its assumptions, which could materially change its current estimate of 2016 net sales, operating margin and cash flows.

The Corporation expects the 2016 FAS/CAS benefit to be approximately $810m assuming a 4.25 percent discount rate at the end of 2015, a 25 basis points increase from 2014, and zero return on plan assets in 2015, among other assumptions. The Corporation does not expect to make contributions to its qualified defined benefit pension plans in 2016. A change of plus or minus 25 basis points to the assumed discount rate, with all other assumptions held constant, would result in an incremental increase or decrease of approximately $120 m to the estimated 2016 FAS/CAS pension adjustment. The Corporation will finalize the postretirement benefit plan assumptions and determine the 2015 actual return on plan assets on Dec. 31, 2015. The final assumptions and actual investment returns for 2015 may differ materially from those discussed above.

Cash Deployment Activities

The Corporation’s cash deployment activities in the third quarter of 2015 consisted of the following:

  • repurchasing 4.1m shares for $823m, compared to 2.6m shares for $446m in the third quarter of 2014;
  • paying cash dividends of $462m, compared to $421m in the third quarter of 2014;
  • making capital expenditures of $191m, compared to $203m in the third quarter of 2014; and
  • making no contributions to the Corporation’s pension trust, compared to $485m during the third quarter of 2014.

On Sept. 24, 2015, the Corporation increased its share repurchase program by $3.0bn. Inclusive of this increase, the total remaining authorization for future common share repurchases under the program was $4.3bn as of Sept. 27, 2015. The Corporation anticipates at least $2.0bn of share repurchases in 2016, which is consistent with the Corporation’s plan to reduce its total outstanding share count to below 300 m shares by the end of 2017, subject to market conditions and fiduciary obligations permitting.

On Sept. 24, 2015, the Corporation increased its quarterly dividend 10 percent, or $0.15 per share, to $1.65 per share beginning with the payment to be made on Dec. 24, 2015 to stockholders of record as of the close of business on Dec. 1, 2015.

Segment Results

The Corporation currently operates in five business segments: Aeronautics, IS&GS, Missiles and Fire Control (MFC), Mission Systems and Training (MST) and Space Systems. The Corporation organizes its business segments based on the nature of products and services offered.  The Corporation’s segment results for the third quarter of 2015 do not reflect any impacts from the ongoing strategic review or the pending acquisition of Sikorsky.

Operating profit of the business segments includes the Corporation’s share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of the Corporation’s business segments. United Launch Alliance (ULA), which is part of the Space Systems business segment, is the Corporation’s primary equity method investee. Operating profit of the Corporation’s business segments excludes the FAS/CAS pension adjustment, which represents the difference between total pension expense recorded in accordance with U.S. generally accepted accounting principles (GAAP) (FAS) and pension costs recoverable on U.S. Government contracts as determined in accordance with U.S. Government Cost Accounting Standards (CAS); expense for stock-based compensation; the effects of items not considered part of management’s evaluation of segment operating performance, such as charges related to significant severance actions and goodwill impairments; gains or losses from divestitures; the effects of certain legal settlements; corporate costs not allocated to the Corporation’s business segments; and other miscellaneous corporate activities.

Changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Changes in volume also include the effect of fluctuations in contract profit booking rates that have occurred in reporting periods other than those presented in the comparative segment results. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract.

In addition, comparability of the Corporation’s segment sales, operating profit and operating margins may be impacted favorably or unfavorably by changes in profit booking rates on the Corporation’s contracts accounted for using the percentage-of-completion method of accounting. Increases in the profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate resulting in an increase in the estimated total costs to complete and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes. Segment operating profit and margins may also be impacted favorably or unfavorably by other items. Favorable items may include the positive resolution of contractual matters, cost recoveries on restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions which are excluded from segment operating results; reserves for disputes; asset impairments; and losses on sales of assets. Segment operating profit and items such as risk retirements, reductions of profit booking rates or other matters are presented net of state income taxes.

The Corporation’s consolidated net adjustments not related to volume, including net profit booking rate adjustments and other matters, represented approximately 32 percent of total segment operating profit for the third quarter of 2015, compared to approximately 30 percent in the third quarter of 2014.

Aeronautics

Aeronautics’ net sales for the third quarter of 2015 increased $377m, or 11 percent, compared to the same period in 2014. The increase was attributable to higher net sales of approximately $500 m for F-35 contracts due to increased volume on aircraft production and sustainment activities. These increases were partially offset by lower net sales of approximately $140m due to decreased volume on various other programs. Net sales for F-35 development contracts were comparable.

Aeronautics’ operating profit for the third quarter of 2015 increased $56m, or 15 percent, compared to the same period in 2014. Operating profit increased by approximately $85 m for F-35 production contracts attributable to higher volume and risk retirements; and about $25m for the C-5 program due to improved program performance.  This increase was partially offset by lower operating profit of approximately $30m for the F-22 program due to decreased risk retirements; and about $15 m related to the write-off of fixed assets resulting from the consolidation of the Commercial Engine Solutions operations. Adjustments not related to volume, including net profit booking rate adjustments and other matters, were $35m higher for the third quarter of 2015 compared to the same period in 2014.

Information Systems & Global Solutions

IS&GS’ net sales for the third quarter of 2015 decreased $79m, or 4 percent, compared to the same period in 2014. The decrease was attributable to lower net sales of approximately $190m driven by the impact of in-theater force reductions (including Persistent Threat Detection System), lower volume on certain government IT support service programs, and increased competition coupled with the fragmentation of existing large contracts into multiple smaller contracts that are awarded primarily on the basis of price when re-competed (including CMS-CITIC). The decreases were partially offset by higher net sales of approximately $60m for a business acquired during 2014; and about $50m due to increased volume on recently awarded programs.

IS&GS’ operating profit for the third quarter of 2015 decreased $12m, or 7 percent, compared to the same period in 2014. The decrease was primarily attributable to the activities mentioned above for net sales.  Adjustments not related to volume, including net profit booking rate adjustments and other matters, for the third quarter of 2015 were comparable to the same period in 2014.

Missiles and Fire Control

MFC’s net sales for the third quarter of 2015 increased $30m, or 2 percent, compared to the same period in 2014. The increase was primarily attributable to higher net sales of approximately $40m for fire control programs due to increased deliveries (primarily LANTIRN® and Sniper®).

MFC’s operating profit for the third quarter of 2015 was comparable to the same period in 2014. Operating profit increased by approximately $25m for various technical services programs due to reserves recorded on certain programs in the third quarter of 2014 that were not repeated in 2015 and improved program performance.  These increases were mostly offset by lower operating profit of approximately $25m for tactical missile programs due to decreased risk retirements (primarily Hellfire) and fewer deliveries (primarily Guided Multiple Launch Rocket System). Adjustments not related to volume, including net profit booking rate adjustments and other matters, for the third quarter of 2015 were comparable to the same period in 2014.

Mission Systems and Training

MST’s net sales for the third quarter of 2015 increased $123m, or 7 percent, compared to the same period in 2014. Net sales increased by approximately $85m for integrated warfare systems and sensors programs due to the start of new programs (primarily Space Fence) and higher volume (including radar surveillance programs); and about $65m for ship and aviation systems programs attributable to higher volume (including MH-60).

MST’s operating profit for the third quarter of 2015 increased $27m, or 14 percent compared to the same period in 2014. Operating profit increased by approximately $30m for certain ship and aviation systems programs due to higher risk retirements (primarily MH-60); and about $25m for integrated warfare systems and sensors programs due to higher risk retirements (primarily Halifax Class Modernization) and increased volume.  These increases were partially offset by lower operating profit of approximately $25m due to reserves recorded on certain ship and aviation programs (primarily Littoral Combat Ship). Adjustments not related to volume, including net profit booking rate adjustments and other matters, for the third quarter of 2015 were comparable to the same period in 2014.

Space Systems

Space Systems’ net sales for the third quarter of 2015 decreased $104m, or 5 percent, compared to the same period in 2014. The decrease was attributable to lower net sales of approximately $145m for commercial space transportation programs due to fewer launch-related activities; and about $70m for various government satellite programs due to decreased volume (primarily Space Based Infrared System).  This decrease was partially offset by higher net sales of approximately $70m for businesses acquired during the third quarter of 2014; and about $65 m for the Orion program due to increased volume.

Space Systems’ operating profit for the third quarter of 2015 decreased $49m, or 17 percent, compared to the same period in 2014. The decrease was attributable to lower operating profit of approximately $20m due to decreased equity earnings for joint ventures; and about $10m for various other programs due to lower risk retirements (including strategic and defensive missile systems).  Adjustments not related to volume, including net profit booking rate adjustments and other matters, for the third quarter of 2015 were comparable to the same period in 2014.

Total equity earnings recognized by Space Systems (primarily ULA) represented approximately $70m, or 30 percent, of this business segment’s operating profit for the third quarter of 2015, compared to approximately $90m, or 32 percent, in the third quarter of 2014.

Income Taxes

The Corporation’s effective income tax rate was 30.9 percent for the third quarter of 2015, compared to 32.3 percent for the third quarter of 2014. The rates for both periods benefited from tax deductions for U.S. manufacturing activities and for dividends paid to the Corporation’s defined contribution plans with an employee stock ownership plan feature. The effective rates during both periods did not include a benefit from the U.S. research and development tax credit because the credit had expired.

Raytheon

RAYTHEON22 Oct 15. Raytheon Reports Solid Third Quarter 2015 Results

— Solid bookings of $5.3bn

— Net sales of $5.8bn, up 6 percent

— EPS from continuing operations of $1.47

— Strong operating cash flow from continuing operations of $1.1bn

Raytheon Company (NYSE: RTN) announced net sales for the third quarter 2015 of $5.8bn compared to $5.5bn in the third quarter 2014. Third quarter 2015 EPS from continuing operations was $1.47 compared to $1.65 in the third quarter 2014. Third quarter 2015 EPS from continuing operations included, as expected, a $0.09 unfavorable impact associated with Raytheon|Websense (RW) acquisition accounting adjustments discussed in further detail below.

“I’m very pleased with our strong revenue growth and cash flow generation in the third quarter,” said Thomas A. Kennedy, Raytheon Chairman and CEO.  “The Raytheon team remains focused on driving future growth by developing and delivering innovative solutions that address our global customers’ most complex challenges.”

Operating cash flow from continuing operations for the third quarter 2015 was $1.1bn compared to $0.4bn for the third quarter 2014. The increase in operating cash flow from continuing operations in the third quarter 2015 was primarily due to favorable working capital in the quarter and the timing of cash taxes. Year-to-date operating cash flow from continuing operations was $1.5bn in 2015 versus $1.2bn for the comparable period in 2014. The increase in operating cash flow from continuing operations in 2015 was primarily due to the timing of required pension contributions and the collection of the eBorders settlement with the U.K. Home Office, which was resolved in the first quarter 2015, partially offset by higher cash taxes.

The Company had bookings of $5.3bn in the third quarter 2015 compared to $5.9bn in the third quarter 2014. Year-to-date 2015 bookings were $17.4bn, resulting in a year-to-date book-to-bill ratio of 1.03 and 1.06 on a trailing four quarter basis. Year-to-date 2014 bookings were $16.9 bn.

In the third quarter 2015, the Company repurchased 2.4m shares of common stock for $250m. Year-to-date 2015, the Company repurchased 7.0 m shares of common stock for $750m.

The Company ended the third quarter 2015 with $2.3bn of net debt. Net debt is defined as total debt less cash and cash equivalents and short-term investments.

Third quarter 2015 results include items related to the Raytheon|Websense transaction which are excluded from segment operating performance since management does not consider those items in evaluating the segment.

Backlog

Backlog at the end of the third quarter 2015 was $33.6bn, an increase of approximately $0.3bn compared to the third quarter 2014. Funded backlog was $24.4bn, an increase of approximately $1.5bn compared to the third quarter 2014.

Outlook

The Company has updated its financial outlook for 2015 for higher sales and to reflect actuarial updates to its pension plans. Charts containing additional information on the Company’s 2015 outlook are available on the Company’s website at www.raytheon.com/ir.

Segment Results

The Company’s reportable segments are: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS); and Raytheon|Websense (RW).

Integrated Defense Systems

Integrated Defense Systems (IDS) had third quarter 2015 net sales of $1,533m, up 7 percent compared to $1,428m in the third quarter 2014. The increase in net sales was primarily driven by higher sales on international Patriot programs.

IDS recorded $212m of operating income in the third quarter 2015 compared to $230m in the third quarter 2014. The change in operating income in the third quarter 2015 was primarily due to a change in program mix.

During the quarter, IDS booked $158m to continue development on the Air Defense Operations Center (ADOC) for Qatar.

Intelligence, Information and Services (IIS)

Intelligence, Information and Services (IIS) had third quarter 2015 net sales of $1,438m compared to $1,450m in the third quarter 2014.

IIS recorded $108 m of operating income in the third quarter 2015 compared to $118m in the third quarter 2014. The change in operating income was primarily due to lower volume, a change in program mix, and acquisition-related costs.

During the quarter, IIS booked $295m on domestic and foreign training programs in support of Warfighter FOCUS activities. IIS booked $98m to provide development and sustainment support for the National Cybersecurity Protection System (NCPS) for the U.S. Department of Homeland Security (DHS). This award was protested on October 5, 2015. IIS also booked $555m on a number of classified contracts.

Missile Systems

Missile Systems (MS) had third quarter 2015 net sales of $1,645m, up 11 percent compared to $1,477m in the third quarter 2014. The increase in net sales was driven by higher sales spread across various production programs, including the Tube-launched, Optically-tracked, Wireless-guided (TOW®) missiles program, and certain missile defense programs.

MS recorded $219m of operating income in the third quarter 2015 compared to $190m in the third quarter 2014. The increase in operating income was primarily due to higher volume in the third quarter 2015 and a change in program mix.

During the quarter, MS booked $490 m for AIM-9X® Sidewinder short-range air-to-air missiles for U.S. and international customers and $480m for Paveway™ for the U.S. Air Force and international customers. MS also booked $183m for the Joint Standoff Weapon (JSOW) for the U.S. Navy, U.S. Air Force and an international customer, and $93 m for Standard Missile-3 (SM-3®) for the Missile Defense Agency (MDA) and an international customer.

Space and Airborne Systems (SAS)

Space and Airborne Systems (SAS) had third quarter 2015 net sales of $1,446m compared to $1,509m in the third quarter 2014. The change in net sales was primarily due to lower sales on international tactical radar systems programs.

SAS recorded $204m of operating income in the third quarter 2015 compared to $237m in the third quarter 2014. The change in operating income was primarily due to higher net program efficiencies in the third quarter 2014.

During the quarter, SAS booked $106m for the production of Active Electronically Scanned Array (AESA) radars for the U.S. Air Force and $92m to provide radar spares for an international customer. SAS also booked $382m on a number of classified contracts.

Raytheon|Websense

Raytheon|Websense (RW) had third quarter 2015 net sales of $114m compared to $30m in the third quarter 2014. RW recorded $20m of operating income in the third quarter 2015 compared to $5m in the third quarter 2014. The increase in net sales and operating income in the third quarter 2015 was primarily due to the acquisition of Websense.

United Technologies Corp.

UTC20 Oct 15. United Technologies Corp. (NYSE: UTX) reported third quarter 2015 results. All results in this release reflect continuing operations unless otherwise noted.

Third quarter earnings per share of $1.61 and net income attributable to common shareowners of $1.4bn were down 17 percent and 19 percent, respectively, versus the third quarter of 2014.  Results for the current quarter include restructuring costs of $0.06 per share, while earnings per share in the year ago quarter included$0.22 of favorable one-time items net of restructuring.  Excluding these items in both quarters, earnings per share of $1.67 decreased 2 percent year-over-year.  Foreign currency had an unfavorable impact of $0.05, or 3 percent in the quarter.  Excluding the impact of both unfavorable foreign exchange rate changes and restructuring and one-time items, earnings per share were up 1 percent year-over-year.

Sales of $13.8bn decreased by 6 percent in the quarter, driven by 5 points of adverse foreign exchange and a 1 point decline in organic sales primarily attributed to a delay in engine deliveries as a result of the transition to a new logistics center at Pratt & Whitney.  These deliveries should largely be recovered in the fourth quarter.  Third quarter segment operating margin was 17.2 percent, and 17.6 percent when adjusted for restructuring costs.

“United Technologies is executing the strategic plan set forth earlier this year and is focused on maximizing the performance of our core building and aerospace systems businesses under a flatter and more transparent organizational structure,” said Gregory Hayes, UTC President and Chief Executive Officer. “We are on track to deliver results within our previous guidance ranges for full-year EPS of $6.15 to $6.30 and sales between $57 and $58bn.”

Otis new equipment orders in the quarter increased 2 percent over the prior year at constant currency. Equipment orders at UTC Climate, Controls & Security decreased 2 percent. Commercial aerospace aftermarket sales were up 8 percent at Pratt & Whitney and up 1 percent at UTC Aerospace Systems on an organic basis.

“Our long-term growth outlook remains strong and we are well-positioned to continue creating value for our shareholders,” Mr. Hayes added. “UTC has world class, industry-leading franchises that provide differentiated technologies to very attractive end markets, create a strong base of recurring revenues, and generate a reliable stream of cash flow through cycles.  Our approach to capital allocation remains balanced as we successfully reinvest in our business, evaluate M&A opportunistically and return cash to shareholders.”

UTC expects the previously announced sale of its Sikorsky unit to close in the fourth quarter of 2015.  The Board of Directors has authorized a new $12bn share repurchase program, including the $6bn accelerated share repurchase using the net proceeds from the Sikorsky sale. The new share repurchase program replaces the previous program announced on July 20, 2015.  The timing and amount of repurchases will be determined based on the Company’s evaluation of market conditions and other factors.  The program may be suspended or discontinued at any time.

“United Technologies’ shares are an attractive investment opportunity which we are going to take advantage of in order to increase value for our shareholders,” said Mr. Hayes.  “Including the $4bn in repurchases made to date in 2015, we now expect to complete $16bn of share repurchases through 2017.”

Cash flow from operations was $1.0bn and capital expenditures were $390m in the quarter. Share repurchase in the quarter was $1.0bn and takes the year to date total to $4.0 bn.  UTC continues to assume a placeholder for full year acquisition spend of $1bn and expects cash flow from operations less capital expenditures in the range of 90 to 100 percent of net income attributable to common shareowners for 2015.

 

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