# RTX Corp: Form 10-Q for the period ended Mar 31, 2019

- Company: [RTX Corp](/companies/rtx.md) (CIK 101829)
- Form: 10-Q
- Filed: 2019-04-26
- Accepted by EDGAR: Apr 26, 2019, 07:11 ET
- Period: 2019-03-31
- Accession: 0000101829-19-000016
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/101829/000010182919000016/a2019-03x3110xq.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/101829/000010182919000016/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2019-01-01 to 2019-03-31 | $18.36bn | us-gaap:Revenues |
| Research and development | 3 months, 2019-01-01 to 2019-03-31 | $728.0m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2019-01-01 to 2019-03-31 | $2.00bn | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2019-01-01 to 2019-03-31 | $2.04bn | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2019-01-01 to 2019-03-31 | $431.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2019-01-01 to 2019-03-31 | $397.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2019-01-01 to 2019-03-31 | $1.35bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2019-01-01 to 2019-03-31 | $1.56 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2019-01-01 to 2019-03-31 | $1.58 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2019-01-01 to 2019-03-31 | 860,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2019-01-01 to 2019-03-31 | $1.50bn | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Capital expenditure | 3 months, 2019-01-01 to 2019-03-31 | $363.0m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2019-01-01 to 2019-03-31 | $609.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2019-01-01 to 2019-03-31 | $29.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2019-03-31 | $6.24bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2019-03-31 | $35.40bn | us-gaap:AssetsCurrent |
| Total assets | at 2019-03-31 | $137.38bn | us-gaap:Assets |
| Current liabilities | at 2019-03-31 | $31.40bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2019-03-31 | $95.33bn | us-gaap:Liabilities |
| Short-term borrowings | at 2019-03-31 | $1.11bn | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2019-03-31 | $39.74bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2019-03-31 | 862,291,415 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 48,938 characters.

### BUSINESS OVERVIEW

We are a global provider of high technology products and services to the building systems and aerospace industries. Our operations for the periods presented herein are classified into four principal business segments: Otis, Carrier, Pratt & Whitney, and Collins Aerospace Systems. Otis and Carrier are referred to as the "commercial businesses," while Pratt & Whitney and Collins Aerospace Systems are referred to as the "aerospace businesses."

The current status of significant factors affecting our business environment in 2019 is discussed below. For additional discussion, refer to the "Business Overview" section in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2018 Annual Report, which is incorporated by reference in our 2018 Form 10-K.

### General

Our worldwide operations can be affected by industrial, economic and political factors on both a regional and global level. Our operations include original equipment manufacturing (OEM) and extensive related aftermarket parts and services in both our commercial and aerospace businesses. Our business mix also reflects the combination of shorter cycles at Carrier and in our commercial aerospace spares businesses, and longer cycles at Otis and in our aerospace OEM and aftermarket maintenance businesses. Our customers are in the public and private sectors, and our businesses reflect an extensive geographic diversification that has evolved with continued globalization.

Our military businesses' sales are affected by U.S. Department of Defense budget and spending levels, changes in market demand and the global political environment. Total sales to the U.S. Government were $2.4 billion and $1.6 billion for the quarters ended March 31, 2019 and 2018, 13% and 10% of total UTC sales for those periods, respectively. Our participation in long-term production, development and sustainment programs for the U.S. Government has and is expected to contribute positively to our results in 2019.

As has been previously disclosed, on November 26, 2018, the Company announced its intention to separate into three independent companies. Following the separations, the Company will operate as an aerospace company comprised of Collins Aerospace Systems and the Pratt & Whitney businesses, and Otis and Carrier will become independent companies. The proposed separations are expected to be effected through spin-offs of Otis and Carrier that are intended to be tax-free for the Company’s shareowners for U.S. federal income tax purposes, and are expected to be completed in the first half of 2020. Separation of Otis and Carrier from UTC via spin-off transactions will be subject to the satisfaction of customary conditions, including, among others, final approval by the Company’s Board of Directors, receipt of tax rulings in certain jurisdictions and/or a tax opinion from external counsel (as applicable), the filing with the Securities and Exchange Commission (SEC) and effectiveness of Form 10 registration statements, and satisfactory completion of financing.

### Acquisition Activity

Our growth strategy contemplates acquisitions. Our operations and results can be affected by the rate and extent to which appropriate acquisition opportunities are available, acquired businesses are effectively integrated, and anticipated synergies or cost savings are achieved. During the quarter ended March 31, 2019, our investment in business acquisitions was $19 million, which includes a number of small acquisitions at Otis.

### Other

Government legislation, policies and regulations can have a negative impact on our worldwide operations. Government regulation of refrigerants and energy efficiency standards, elevator safety codes and fire protection regulations are important to our commercial businesses. Government and market-driven safety and performance regulations, restrictions on aircraft engine noise and emissions, and government procurement practices can impact our aerospace and defense businesses.

Global economic and political conditions, changes in raw material and commodity prices, interest rates, foreign currency exchange rates, energy costs, levels of end market demand in construction, levels of air travel, the financial condition of commercial airlines, and the impact from natural disasters and weather conditions create uncertainties that could impact our earnings outlook for the remainder of 2019. See Part I, Item 1A, "Risk Factors" in our 2018 Form 10-K for further discussion.

### CRITICAL ACCOUNTING ESTIMATES

Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses. We believe the most complex and sensitive judgments, because of their significance to the Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 1 to the Consolidated Financial Statements in our 2018 Annual Report, incorporated by reference in our 2018 Form 10-K, describe the significant accounting estimates and policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management's estimates. There have been no significant changes in our critical accounting estimates during the quarter ended March 31, 2019.

### RESULTS OF OPERATIONS

### Net Sales

*(dollars in millions)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Net Sales | $18,365 | $15,242 |

The factors contributing to the total percentage change year-over-year in total net sales for the quarter ended March 31, 2019 are as follows:

|  | Quarter Ended March 31, 2019 |
| --- | ---: |
| Organic change | 8% |
| Foreign currency translation | (3)% |
| Acquisitions and divestitures, net | 15% |
| Total % change | 20% |

All four segments experienced organic sales growth for the quarter ended March 31, 2019. Pratt & Whitney sales grew 12% organically, driven by higher commercial OEM and military sales. Collins Aerospace Systems grew 10% organically primarily driven by higher commercial OEM and aftermarket sales, and higher military sales. Otis sales grew 7% organically, reflecting new equipment sales growth in China, North America, Europe and Asia excluding China, and higher service sales primarily driven by growth in North America and Asia. Organic sales growth of 3% at Carrier was driven by growth in transport refrigeration, heating, ventilation and air conditioning (HVAC) businesses and commercial refrigeration. The 15% increase in Acquisitions and divestitures, net for the quarter ended March 31, 2019 primarily reflects the impact of the November 26, 2018 acquisition of Rockwell Collins.

### Cost of Products and Services Sold

*(dollars in millions)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Total cost of products and services sold | $13,707 | $11,280 |
| Percentage of net sales | 74.6% | 74.0% |

The factors contributing to the percentage change year-over-year for the quarter ended March 31, 2019 in total cost of products and services sold are as follows:

|  | Quarter Ended March 31, 2019 |
| --- | ---: |
| Organic change | 9% |
| Foreign currency translation | (2)% |
| Acquisitions and divestitures, net | 15% |
| Total % change | 22% |

The organic increase in total cost of products and services sold for the quarter ended March 31, 2019 was primarily driven by the organic sales increases noted above. The 15% increase in Acquisitions and divestitures, net for the quarter ended March 31, 2019 primarily reflects the impact of the acquisition of Rockwell Collins.

### Gross Margin

*(dollars in millions)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Gross margin | $4,658 | $3,962 |
| Percentage of net sales | 25.4% | 26.0% |

The decrease in gross margin as a percentage of sales for the quarter ended March 31, 2019 includes a 125 basis point decline at Collins Aerospace Systems primarily driven by inventory step-up amortization of $181 million. Otis gross margin declined 60 basis points primarily driven by lower new equipment margin. Gross margin at Carrier was down 50 basis points primarily driven by higher commodities, tariffs, and logistics costs. Pratt & Whitney's gross margin declined 30 basis points primarily driven by higher negative engine margin as a result of increased volumes.

### Research and Development

*(dollars in millions)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Company-funded | $728 | $554 |
| Percentage of net sales | 4.0% | 3.6% |
| Customer-funded | $551 | $323 |
| Percentage of net sales | 3.0% | 2.1% |

Research and development spending is subject to the variable nature of program development schedules and, therefore, year-over-year fluctuations in spending levels are expected. The majority of the company-funded spending is incurred by the aerospace businesses. The year-over-year increase (31%) in company-funded research and development for the quarter ended March 31, 2019 was primarily driven by the impact of the Rockwell Collins acquisition (25%). The remaining increase primarily reflects higher expenses across various commercial programs at Pratt & Whitney (5%).

The increase (71%) in customer-funded research and development for the quarter ended March 31, 2019 was primarily driven by the impact of the Rockwell Collins acquisition (66%). The remaining increase primarily reflects higher expenses across various programs at Collins Aerospace Systems.

### Selling, General and Administrative

*(dollars in millions)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Selling, general and administrative expenses | $1,997 | $1,711 |
| Percentage of net sales | 10.9% | 11.2% |

Selling, general and administrative expenses increased 17% in the quarter ended March 31, 2019, but decreased 30 basis points as a percentage of net sales. The increase in expenses includes the impact of the Rockwell Collins acquisition (10%), and costs associated with a strategic review of the Company's portfolio of businesses (3%). The increase also reflects higher expenses at Collins Aerospace Systems (2%) and at Pratt & Whitney (1%) primarily driven by increased headcount and employee compensation related expenses; and an increase at Carrier (1%) primarily driven by employee compensation related expenses.

We are continuously evaluating our cost structure and have implemented restructuring actions as a method of keeping our cost structure competitive. As appropriate, the amounts reflected above include the beneficial impact of restructuring actions on Selling, general and administrative expenses. See Note 8: Restructuring Costs and the Restructuring Costs section of this Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion.

### Other Income, Net

*(dollars in millions)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Other income, net | $112 | $231 |

34

Other income, net includes equity earnings in unconsolidated entities, royalty income, foreign exchange gains and losses, as well as other ongoing and nonrecurring items. The year-over-year decrease in Other income (52%) for the quarter ended March 31, 2019 primarily reflects the absence of the favorable impact of prior year insurance settlements (23%), a loss on the sale of a business at Collins Aerospace Systems (11%), and the net unfavorable year-over-year impact of foreign exchange gains and losses (11%).

### Interest Expense, Net

*(dollars in millions)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Interest expense | $450 | $256 |
| Interest income | (19) | (27) |
| Interest expense, net | $431 | $229 |
| Average interest expense rate | 3.6% | 3.4% |

Interest expense, net increased 88% for the quarter ended March 31, 2019. The increase in interest expense reflects the impact of the August 16, 2018 issuance of notes representing $11 billion in aggregate principal and the May 18, 2018 issuance of Euro-denominated notes representing €2 billion in aggregate principal. These increases were partially offset by the favorable impact of the repayment at maturity of the following: the 6.8% notes in February 2018 representing $99 million of aggregate principal; the Euro-denominated floating rate notes in February 2018 representing €750 million in aggregate principal; and the 1.778% notes in May 2018 representing $1.1 billion of aggregate principal. The average maturity of our long-term debt at March 31, 2019 is approximately 11 years.

### Income Taxes

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Effective tax rate | 21.8% | 27.6% |

The decrease in the effective tax rate for the quarter ended March 31, 2019 is primarily the result of Tax Cuts and Jobs Act of 2017 (TCJA) interpretive guidance and the absence of a TCJA tax charge recorded in the first quarter of 2018. In addition, the Company recognized a non-cash gain of approximately $40 million, primarily tax, as a result of the closure of a 2014 IRS audit of a subsidiary acquired as part of the Rockwell Collins acquisition. This gain was partially offset by the unfavorable pre-tax impact of a reversal of a related indemnity asset during the quarter of approximately $23 million.

The Company will continue to review and incorporate as necessary TCJA changes related to forthcoming U.S. Treasury Regulations, other updates, and the finalization of the deemed inclusions to be reported on the Company’s 2018 U.S. federal income tax return.

As shown in the table above, the effective tax rate for the three months ended March 31, 2019 is 21.8%; the effective income tax rate for the same period, excluding restructuring, non-operational nonrecurring items is 21.7%. The rate is still subject to change as guidance and interpretations related to the TCJA continue to be finalized. We anticipate some variability in the tax rate quarter to quarter from potential discrete items. The Company expects to incur tax costs associated with the portfolio separation transactions beginning in the second quarter of 2019 through the final spin-off transactions in 2020.

### Net Income Attributable to Common Shareowners

*(dollars in millions, except per share amounts)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Net income attributable to common shareowners | $1,346 | $1,297 |
| Diluted earnings per share from operations | $1.56 | $1.62 |

Net income attributable to common shareowners for the quarter ended March 31, 2019 includes restructuring charges, net of tax benefit, of $83 million as well as a net charge for significant non-operational and/or nonrecurring items, net of tax, of $218 million. The effect of restructuring charges and significant non-operational and/or nonrecurring items on diluted earnings per share for the quarter ended March 31, 2019 was a charge of $0.35 per share while the effect of foreign currency translation and Pratt &Whitney Canada hedging generated an unfavorable impact of $0.03 per diluted share.

Net income attributable to common shareowners for the quarter ended March 31, 2018 includes restructuring charges, net of tax benefit, of $52 million as well as a net charge for significant non-operational and/or nonrecurring items, including the impact of taxes, of $72 million. The effect of restructuring charges and significant non-operational and/or nonrecurring items on diluted earnings per share for the quarter ended March 31, 2018 was a charge of $0.15 per share while the effect of foreign currency translation and Pratt &Whitney Canada hedging generated a favorable impact of $0.04 per diluted share.

### Restructuring Costs

*(dollars in millions)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Restructuring costs | $112 | $69 |

Restructuring actions are an essential component of our operating margin improvement efforts and relate to existing and recently acquired operations. Charges generally arise from severance related to workforce reductions, facility exit and lease termination costs associated with the consolidation of field and manufacturing operations and costs to exit legacy programs. We continue to closely monitor the economic environment and may undertake further restructuring actions to keep our cost structure aligned with the demands of the prevailing market conditions.

**2019 Actions.** During the quarter ended March 31, 2019, we recorded net pre-tax restructuring charges of $73 million relating to ongoing cost reduction actions initiated in 2019. We expect to incur additional restructuring charges of $31 million to complete these actions. We are targeting to complete in 2019 and 2020 the majority of the remaining workforce and facility related cost reduction actions initiated in 2019. We expect recurring pre-tax savings in continuing operations to increase to approximately $110 million annually over the two-year period subsequent to initiating the actions. Approximately 93% of the total expected pre-tax charges will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. During the quarter ended March 31, 2019, we had cash outflows of approximately $15 million related to the 2019 actions.

**2018 Actions.** During the quarters ended March 31, 2019 and 2018, we recorded net pre-tax restructuring charges of $23 million and $12 million, respectively, for actions initiated in 2018. We expect to incur additional restructuring charges of $56 million to complete these actions. We are targeting to complete in 2019 the majority of the remaining workforce and facility related cost reduction actions initiated in 2018. We expect recurring pre-tax savings in continuing operations to increase over the two-year period subsequent to initiating the actions to approximately $260 million annually, of which, approximately $35 million was realized during the quarter ended March 31, 2019. Approximately 94% of the total expected pre-tax charges will require cash payments, which we have and expect to continue to fund with cash generated from operations. During the quarter ended March 31, 2019, we had cash outflows of approximately $75 million related to the 2018 actions.

In addition, during the quarter ended March 31, 2019, we recorded net pre-tax restructuring costs totaling $16 million for restructuring actions initiated in 2017 and prior. For additional discussion of restructuring, see Note 8 to the Condensed Consolidated Financial Statements.

### Segment Review

Segments are generally based on the management structure of the businesses and the grouping of similar operating companies, where each management organization has general operating autonomy over diversified products and services. Adjustments to reconcile segment reporting to the consolidated results for the quarters ended March 31, 2019 and 2018 are included in "Eliminations and other", which also includes certain smaller subsidiaries. We attempt to quantify material factors within our discussion of the results of each segment whenever those factors are determinable. However, in some instances, the factors we cite within our segment discussion are based upon input measures or qualitative information that does not lend itself to quantification when discussed in the context of the financial results measured on an output basis and are not, therefore, quantified in the below discussions.

### Commercial Businesses

Our commercial businesses generally serve customers in the worldwide commercial and residential property industries, and Carrier also serves customers in the commercial and transport refrigeration industries. Sales in the commercial businesses are influenced by a number of external factors, including fluctuations in residential and commercial construction activity, regulatory changes, interest rates, labor costs, foreign currency exchange rates, customer attrition, raw material and energy costs, credit markets and other global and political factors. Carrier's financial performance can also be influenced by production and utilization of transport equipment and, in the case of its residential business, weather conditions. To ensure adequate supply of products in the distribution channel, Carrier customarily offers its customers incentives to purchase products. The principal incentive program provides reimbursements to distributors for offering promotional pricing on Carrier products. We account for incentive payments made as a reduction to sales.

At constant currency and excluding the effect of acquisitions and divestitures, Carrier equipment orders in the quarter ended March 31, 2019 decreased 2% in comparison to the same period of the prior year, as decreases in transport refrigeration (26%) and commercial refrigeration (2%), were partially offset by increases in North America residential HVAC equipment (7%) and fire and security products (5%). Commercial HVAC equipment orders were consistent with the prior year. At constant currency, Otis new equipment orders in the quarter decreased 1% in comparison to the prior year, as increases in Asia excluding China (11%) and China (8%) were more than offset by decreased orders in North America (16%) and the Middle East (26%).

Summary performance for each of the commercial businesses for the quarters ended March 31, 2019 and 2018 was as follows:

*(dollars in millions)*

|  | Otis 2019 | 2018 | Change | Carrier 2019 | 2018 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net Sales | $3,096 | $3,037 | 2% | $4,323 | $4,376 | (1)% |
| Cost of Sales | 2,195 | 2,134 | 3% | 3,088 | 3,104 | (1)% |
|  | 901 | 903 | —% | 1,235 | 1,272 | (3)% |
| Operating Expenses and Other | 475 | 453 | 5% | 706 | 680 | 4% |
| Operating Profits | $426 | $450 | (5)% | $529 | $592 | (11)% |

Operating Profit Margins 13.8 % 14.8 % 12.2 % 13.5 %

### Otis –

### Quarter Ended March 31, 2019 Compared with Quarter Ended March 31, 2018

|  | Factors Contributing to Total % Change Organic / Operational | FX Translation | Acquisitions / Divestitures, net | Restructuring Costs | Other |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net Sales | 7% | (5)% | —% | —% | —% |
| Cost of Sales | 9% | (6)% | —% | —% | —% |
| Operating Profits | —% | (5)% | —% | —% | —% |

The organic sales increase of 7% reflects higher new equipment sales (4%) driven by growth in China (2%), North America (1%), and Europe and Asia excluding China (combined, 1%), and higher service sales (3%), driven by growth in North America (1%) and Asia (1%).

Operational profit was consistent with the prior year, reflecting:

- margin contribution from the higher sales volumes noted above (8%)
- favorable price and mix (2%)

These increases were partially offset by:

- unfavorable transactional foreign exchange from mark-to-market adjustments and embedded foreign currency derivatives within certain new equipment contracts (7%)
- higher selling, general and administrative expenses (3%)

37

### Carrier –

### Quarter Ended March 31, 2019 Compared with Quarter Ended March 31, 2018

|  | Factors Contributing to Total % Change Organic / Operational | FX Translation | Acquisitions / Divestitures, net | Restructuring Costs | Other |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net Sales | 3% | (3)% | (1)% | —% | —% |
| Cost of Sales | 5% | (4)% | (2)% | —% | —% |
| Operating Profits | (6)% | (2)% | (2)% | (3)% | 2% |

The organic sales increase of 3% was primarily driven by growth in transport refrigeration (1%) and North America residential HVAC (1%), as well as increases in commercial HVAC and commercial refrigeration (1%, combined).

Operational profit decreased 6% in comparison to the prior year as the impact of favorable pricing (9%) and higher volumes, net of mix (1%) were more than offset by the unfavorable impact of commodity costs, tariffs, and logistics (8%), increased selling, general and administrative costs, net of restructuring savings (4%), increased research and development costs (1%), and decreased joint venture equity income (1%).

The 2% increase in Other primarily reflects the absence of the prior year impact of period costs associated with a product recall program (2%).

### Aerospace Businesses

The aerospace businesses serve both commercial and government aerospace customers. Revenue passenger miles (RPMs), U.S. Government military and space spending, and the general economic health of airline carriers are all barometers for our aerospace businesses. Performance in the general aviation sector is closely tied to the overall health of the economy and is positively correlated to corporate profits.

We continue to see growth in a strong commercial airline industry which is benefiting from traffic growth and stronger economic conditions. Airline traffic, as measured by RPMs, grew approximately 6% in the first two months of 2019.

Our commercial aftermarket businesses continue to evolve as a significant portion of our aerospace businesses' customers are covered under long-term aftermarket service agreements at Pratt & Whitney and Collins Aerospace Systems. These agreements are comprehensive long-term spare part and service agreements with our customers. We expect a continued shift to long-term aftermarket service agreements in lieu of transactional spare part sales as new aerospace products enter our customers' fleets under long-term service agreements and legacy fleets are retired. For the first three months of 2019, as compared with 2018, total commercial aerospace aftermarket sales increased 64% at Collins Aerospace Systems (up 8% excluding the impact of the Rockwell Collins acquisition). Pratt & Whitney commercial aerospace aftermarket sales for the first three months of 2019 were consistent with the prior year.

Operating profit in the quarter ended March 31, 2019 included net unfavorable changes in aerospace contract estimates totaling $12 million, primarily reflecting net unfavorable contract adjustments at Pratt & Whitney. Operating profit in the quarter ended March 31, 2018 included significant net unfavorable changes in aerospace contract estimates totaling $41 million, primarily reflecting net unfavorable contract adjustments recorded at Pratt & Whitney and Collins Aerospace Systems.

Summary performance for each of the aerospace businesses for the quarters ended March 31, 2019 and 2018 was as follows:

*(dollars in millions)*

|  | Pratt & Whitney 2019 | 2018 | Change | Collins Aerospace Systems 2019 | 2018 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net Sales | $4,817 | $4,329 | 11% | $6,513 | $3,817 | 71% |
| Cost of Sales | 3,931 | 3,521 | 12% | 4,830 | 2,783 | 74% |
|  | 886 | 808 | 10% | 1,683 | 1,034 | 63% |
| Operating Expenses and Other | 453 | 395 | 15% | 827 | 446 | 85% |
| Operating Profits | $433 | $413 | 5% | $856 | $588 | 46% |

Operating Profit Margins 9.0 % 9.5 % 13.1 % 15.4 %

38

### Pratt & Whitney –

### Quarter Ended March 31, 2019 Compared with Quarter Ended March 31, 2018

|  | Factors Contributing to Total % Change Organic / Operational | FX Translation\* | Acquisitions / Divestitures, net | Restructuring Costs | Other |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net Sales | 12% | (1)% | —% | —% | —% |
| Cost of Sales | 12% | —% | —% | —% | —% |
| Operating Profits | 8% | (2)% | —% | (3)% | 2% |

\* *For Pratt & Whitney only, the transactional impact of foreign exchange hedging at Pratt & Whitney Canada has been netted against the translational foreign exchange impact for presentation purposes in the table above. For all other segments these foreign exchange transactional impacts are included within the organic/operational caption in their respective tables. Due to its significance to Pratt & Whitney's overall operating results, we believe it is useful to segregate the foreign exchange transactional impact in order to clearly identify the underlying financial performance.*

The organic sales increase of 12% primarily reflects higher commercial OEM sales (6%), higher military sales (5%), and higher commercial aftermarket sales (1%).

The operational profit increase of 8% primarily reflects:

- higher military margin contribution (16%), driven by the sales increase noted above
- higher commercial aftermarket margin contribution (4%), driven by favorable content/mix on legacy platforms
- commercial OEM margin contribution consistent with the prior year as negative engine margin resulting from higher volumes was offset by cost reduction initiatives

These items were partially offset by:

- higher selling, general and administrative expenses and other ramp-related costs (5%)
- higher research and development costs (7%)

The 2% increase in Other primarily reflects the sale of a license (4%), partially offset by the unfavorable year-over-year impact of divestiture activity (2%).

### Collins Aerospace Systems –

### Quarter Ended March 31, 2019 Compared with Quarter Ended March 31, 2018

|  | Factors Contributing to Total % Change Organic / Operational | FX Translation | Acquisitions / Divestitures, net | Restructuring Costs | Other |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net Sales | 10% | —% | 61% | —% | —% |
| Cost of Sales | 12% | (1)% | 62% | 1% | —% |
| Operating Profits | 3% | 2% | 48% | (2)% | (5)% |

The organic sales growth of 10% primarily reflects higher commercial OEM and aftermarket sales (8%), and higher military sales (2%).

The increase in operational profit of 3% primarily reflects:

- higher commercial aftermarket margin contribution driven by the sales growth noted above (14%)

This increase was partially offset by:

- higher selling, general and administrative expenses (6%)
- higher research and development spending (2%)
- higher warranty costs (2%)

The 5% increase in Other primarily reflects a loss on the sale of a business.

### Eliminations and other –

*(dollars in millions)*

|  | Net Sales Quarter Ended March 31, 2019 | 2018 | Operating Profits Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: | ---: | ---: |
| Eliminations and other | $(384) | $(317) | $(101) | $(11) |
| General corporate expenses | — | — | (98) | (104) |

Eliminations and other reflects the elimination of sales, other income and operating profit transacted between segments, as well as the operating results of certain smaller businesses. The year-over-year increase in sales eliminations for the quarter ended March 31, 2019, as compared to the same periods of 2018, reflects an increase in the amount of inter-segment eliminations, principally between our aerospace businesses. The decrease in operating profits for the quarter ended March 31, 2019, is primarily driven by costs associated with a strategic review of the Company's portfolio of businesses and the absence of the favorable impact of prior year insurance settlements, partially offset by lower transaction costs related to the acquisition of Rockwell Collins.

### LIQUIDITY AND FINANCIAL CONDITION

*(dollars in millions)*

|  | March 31, 2019 | December 31, 2018 | March 31, 2018 |
| --- | ---: | ---: | ---: |
| Cash and cash equivalents | $6,240 | $6,152 | $7,667 |
| Total debt | 45,186 | 45,537 | 27,347 |
| Net debt (total debt less cash and cash equivalents) | 38,946 | 39,385 | 19,680 |
| Total equity | 41,946 | 40,610 | 32,492 |
| Total capitalization (total debt plus total equity) | 87,132 | 86,147 | 59,839 |
| Net capitalization (total debt plus total equity less cash and cash equivalents) | 80,892 | 79,995 | 52,172 |

|  |  |  |  |
| --- | ---: | ---: | ---: |
| Total debt to total capitalization | 52% | 53% | 46% |
| Net debt to net capitalization | 48% | 49% | 38% |

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our principal source of liquidity is operating cash flows. For 2019, we expect cash flows from operations, net of capital expenditures, to approximate $4.5 billion to $5.0 billion, including $1.5 billion of one-time cash payments related to the portfolio separation. In addition to operating cash flows, other significant factors that affect our overall management of liquidity include: capital expenditures, customer financing requirements, investments in businesses, dividends, common stock repurchases, pension funding, access to the commercial paper markets, adequacy of available bank lines of credit, redemptions of debt, and the ability to attract long-term capital at satisfactory terms.

At March 31, 2019, we had cash and cash equivalents of $6,240 million, of which approximately 66% was held by UTC's foreign subsidiaries. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. The Company no longer intends to reinvest certain undistributed earnings of its international subsidiaries that have been previously taxed in the U.S. As such, in the fourth quarter of 2018, it has recorded the taxes therewith. For the remainder of the Company’s undistributed international earnings, unless tax effective to repatriate, UTC will continue to permanently reinvest these earnings. We have repatriated $812 million of cash for the quarter ended March 31, 2019.

On occasion, we are required to maintain cash deposits with certain banks with respect to contractual obligations related to acquisitions or divestitures or other legal obligations. As of March 31, 2019 and December 31, 2018, the amount of such restricted cash was approximately $42 million and $60 million, respectively.

Historically, our strong debt ratings and financial position have enabled us to issue long-term debt at favorable market rates. Our ability to obtain debt financing at comparable risk-based interest rates is partly a function of our existing debt-to-total-capitalization level as well as our credit standing. Our debt-to-total-capitalization of 52% at March 31, 2019 is consistent with December 31, 2018 and increased 600 basis points from March 31, 2018, primarily reflecting additional borrowings used to finance the acquisition of Rockwell Collins as well as the acquisition of Rockwell Collins' outstanding debt.

At March 31, 2019, we had credit agreements with various banks permitting aggregate borrowings of up to $10.35 billion, including: a $2.20 billion revolving credit agreement and a $2.15 billion multicurrency revolving credit agreement, both of which expire in August 2021, a $2.0 billion revolving credit agreement and a $4.0 billion term credit agreement, both of which we entered into on March 15, 2019 and which will expire on March 15, 2021 or, if earlier, the date that is 180 days after the date on which each of the separations of Otis and Carrier have been consummated. On March 15, 2019, we terminated the $1.5 billion revolving credit agreement that we entered into on November 26, 2018. As of March 31, 2019, there were no borrowings under any of these agreements. As of March 31, 2019, the undrawn portions of the $2.20 billion revolving credit facility and $2.15 billion multicurrency revolving credit agreement were available to serve as backup facilities for the issuance of commercial paper.

As of March 31, 2019, our maximum commercial paper borrowing limit was $4.35 billion with borrowing of €750 million ($849 million). In April 2019, we increased our commercial paper borrowing limit to $6.35 billion with the undrawn portion of the March 15, 2019 $2.0 billion revolving credit agreement serving as additional backup for the issuance of commercial paper. We use our commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, discretionary pension contributions, debt refinancing, dividend payments and repurchases of our common stock. The need for commercial paper borrowings arises when the use of domestic cash for general corporate purposes exceeds the sum of domestic cash generation and foreign cash repatriated to the U.S.

We had no debt issuances during the quarter ended March 31, 2019 and had the following issuances of debt in 2018:

*(dollars and Euro in millions)*

| Issuance Date | Description of Notes | Aggregate Principal Balance |
| --- | --- | ---: |
| August 16, 2018: | 3.350% notes due 20211 | $1,000 |
|  | 3.650% notes due 20231 | 2,250 |
|  | 3.950% notes due 20251 | 1,500 |
|  | 4.125% notes due 20281 | 3,000 |
|  | 4.450% notes due 20381 | 750 |
|  | 4.625% notes due 20482 | 1,750 |
|  | LIBOR plus 0.65% floating rate notes due 20211 | 750 |
| May 18, 2018: | 1.150% notes due 20243 | €750 |
|  | 2.150% notes due 20303 | 500 |
|  | EURIBOR plus 0.20% floating rate notes due 20203 | 750 |

1 The net proceeds received from these debt issuances were used to partially finance the cash consideration portion of the purchase price for Rockwell Collins and fees, expenses and other amounts related to the acquisition of Rockwell Collins.

2 The net proceeds from these debt issuances were used to fund the repayment of commercial paper and for other general corporate purposes.

3 The net proceeds received from these debt issuances were used for general corporate purposes.

We had no debt payments during the quarter ended March 31, 2019 and made the following repayments of debt in 2018:

*(dollars and Euro in millions)*

| Repayment Date | Description of Notes | Aggregate Principal Balance |
| --- | --- | ---: |
| December 14, 2018 | Variable-rate term loan due 2020 (1 month LIBOR plus 1.25%)1 | $482 |
| May 4, 2018 | 1.778% junior subordinated notes | $1,100 |
| February 22, 2018 | EURIBOR plus 0.80% floating rate notes | €750 |
| February 1, 2018 | 6.80% notes | $99 |

1 This term loan was assumed in connection with the Rockwell Collins acquisition and subsequently repaid.

We believe our future operating cash flows will be sufficient to meet our future operating cash needs. Further, we continue to have access to the commercial paper markets and our existing credit facilities, and our ability to obtain debt or equity financing, as well as the availability under committed credit lines, provides additional potential sources of liquidity should they be required or appropriate.

### Cash Flow - Operating Activities

*(dollars in millions)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Net cash flows provided by operating activities | $1,500 | $453 |

Cash generated from operating activities in the quarter ended March 31, 2019 was $1,047 million higher than the same period in 2018 driven by improvement in working capital and lower payments related to the Canadian government settlement. Cash outflows for working capital decreased $527 million in the quarter ended March 31, 2019 over the prior period, primarily resulting from improved collections of accounts receivable at Pratt & Whitney. Factoring activity resulted in a decrease of approximately $380 million in cash generated from operating activities during the quarter ended March 31, 2019, as compared to the prior year. This decrease was primarily driven by Pratt & Whitney partially offset by increased factoring at Collins Aerospace Systems. Factoring activity does not reflect the factoring of certain receivables performed at customer request for which we are compensated by the customer for the extended collection cycle.

In the quarter ended March 31, 2019, cash outflows from working capital were $445 million. Contract assets, current increased $215 million due to work performed in excess of billings at Collins Aerospace Systems, Pratt & Whitney, and Carrier. Inventory increased $697 million primarily driven by an increase in production work in process for the Geared Turbo Fan at Pratt & Whitney, seasonal build in the HVAC businesses at Carrier, and increases at Collins Aerospace Systems. Other assets increased $165 million due to an increase in prepaid expense. Accounts payable and accrued liabilities decreased $588 million primarily due to higher collaborator share payments at Pratt & Whitney. These outflows were partially offset by decreases in Accounts receivable of $849 million primarily due to improved collections at Pratt & Whitney and increases in Contract liabilities, current of $371 million driven by seasonality of billings at Otis.

In the quarter ended March 31, 2018, cash outflows from working capital were $972 million. Accounts receivable increased due to an increase in sales volume driven by Carrier's North American HVAC Residential business and Collins Aerospace Systems and Pratt & Whitney, timing, and a decrease in factoring activity on receivables, primarily at Pratt & Whitney. Current contract assets increased primarily due to progress and spend on long-term aftermarket service contracts and government contracts at Pratt & Whitney. Inventory increased in the quarter primarily driven by Carrier's seasonal build and an increase in production work in process for the A320neo in the aerospace businesses. These increases were partially offset by increases in accounts payable and accrued liabilities, driven by the higher inventory purchasing activity and customer advances at Pratt & Whitney as well as an increase in current contract liabilities driven by seasonal advanced billings and progress payments on major contracts at Otis and the timing of billings on aftermarket contracts at Pratt & Whitney.

The funded status of our defined benefit pension plans is dependent upon many factors, including returns on invested assets, the level of market interest rates and actuarial mortality assumptions. We can contribute cash or UTC shares to our plans at our discretion, subject to applicable regulations. Total cash contributions to our global defined benefit pension plans during the quarter ended March 31, 2019 and 2018 were approximately $32 million and $37 million, respectively. Although our domestic pension plans are approximately 99% funded on a projected benefit obligation basis as of March 31, 2019, and we are not required to make additional contributions through the end of 2024, we may elect to make discretionary contributions in 2019. We expect to make total contributions of approximately $100 million to our global defined benefit pension plans in 2019. Contributions to our global defined benefit pension plans in 2019 are expected to meet or exceed the current funding requirements.

### Cash Flow - Investing Activities

*(dollars in millions)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Net cash flows used in investing activities | $(394) | $(976) |

Cash flows used in investing activities for the quarters ended March 31, 2019 and 2018 primarily reflect capital expenditures, cash investments in customer financing assets, investments/dispositions of businesses, payments related to our collaboration intangible assets and contractual rights to provide product on new aircraft platforms, and settlements of derivative contracts. The $582 million decrease in cash flows used in investing activities in the quarter ended March 31, 2019 compared to March 31, 2018 primarily relates to receipts on derivatives contracts, the reduction in acquisition activity, and an increase in disposition activity.

Capital expenditures for the quarter ended March 31, 2019 of $363 million primarily relate to investments in production capacity at Pratt & Whitney and several small projects at Collins Aerospace Systems.

Cash investments in businesses in the quarter ended March 31, 2019 of $19 million consisted of small acquisitions at Otis. Dispositions of businesses in the quarter ended March 31, 2019 of $133 million primarily consisted of the businesses held for sale associated with the Rockwell acquisition.

Customer financing activities in the quarter ended March 31, 2019 were a net use of cash of $173 million, primarily driven by additional Geared Turbofan engines to support customer fleets. We may also arrange for third-party investors to assume a portion of our commitments. We had commercial aerospace financing and other contractual commitments of approximately $16.2 billion at March 31, 2019 related to commercial aircraft and certain contractual rights to provide product on new aircraft platforms, of which up to $1.5 billion may be required to be disbursed during the remainder of 2019. We had commercial aerospace financing and other contractual commitments of approximately $15.5 billion at December 31, 2018.

During the quarter ended March 31, 2019, our collaboration intangible assets increased by approximately $87 million, which primarily relates to payments made under our 2012 agreement to acquire Rolls-Royce's collaboration interest in IAE.

As discussed in Note 9 to the Condensed Consolidated Financial Statements, we enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments under the Derivatives and Hedging Topic of the FASB ASC and those utilized as economic hedges. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We have used derivative instruments, including swaps, forward contracts and options to manage certain foreign currency, interest rate and commodity price exposures. The settlement of these derivative instruments resulted in a net cash inflow of approximately $92 million during the quarter end March 31, 2019 compared to a net cash outflow of $221 million during the quarter ended March 31, 2018.

### Cash Flow - Financing Activities

*(dollars in millions)*

|  | Quarter Ended March 31, 2019 | 2018 |
| --- | ---: | ---: |
| Net cash flows used in financing activities | $(1,077) | $(910) |

Our financing activities primarily include the issuance and repayment of short term and long term debt, payment of dividends and stock repurchases. Net cash used in financing activities increased $167 million in the quarter ended March 31, 2019 compared to the quarter ended March 31, 2018 primarily due to a decrease in short term borrowing of $1,015 million and an increase in dividends paid on Common Stock of $74 million, partially offset by a reduction in long term debt payments of $967 million.

Commercial paper borrowings and revolving credit facilities provide short-term liquidity to supplement operating cash flows and are used for general corporate purposes, including the funding of potential acquisitions and repurchases of our stock. We had approximately $849 million of outstanding commercial paper at March 31, 2019.

At March 31, 2019, management had remaining authority to repurchase approximately $1.9 billion of our common stock under the October 14, 2015 share repurchase program. Under this program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase programs, and under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. We may also reacquire shares outside of the program from time to time in connection with the surrender of shares to cover taxes on vesting of restricted stock and as required under our employee savings plan. We made cash payments of approximately $29 million to repurchase approximately 256 thousand shares of our common stock during the quarter ended March 31, 2019.

We paid dividends on common stock of $0.735 per share in the first quarter of 2019, totaling approximately $609 million in the aggregate for the quarter ended March 31, 2019.

We have an existing universal shelf registration statement filed with the SEC, which expires on April 29, 2019. Our ability to use or renew our shelf registration statement may be limited as a result of the separation transactions; accordingly and as noted above, we entered into a new $2.0 billion revolving credit agreement and $4.0 billion term credit agreement on March 15, 2019 to be used for general corporate purposes, including the repayment, repurchase or redemption of existing debt, and to serve as backup facilities to support additional issuances of commercial paper. We expect to renew our shelf registration statement following the separation transactions.

### Off-Balance Sheet Arrangements and Contractual Obligations

In our 2018 Annual Report, incorporated by reference in our 2018 Form 10-K, we disclosed our off-balance sheet arrangements and contractual obligations. As of March 31, 2019, there have been no material changes to these off-balance sheet arrangements and contractual obligations outside the ordinary course of business.

## Market risk

As filed, 277 characters.

There has been no significant change in our exposure to market risk during the quarter ended March 31, 2019. For discussion of our exposure to market risk, refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," contained in our 2018 Form 10-K.

## Controls and procedures

As filed, 10,400 characters.

As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation under the supervision and with the participation of our management, including the Chairman, President and Chief Executive Officer (CEO), the Executive Vice President & Chief Financial Officer (CFO) and the Corporate Vice President, Controller (Controller), of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2019. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our CEO, our CFO and our Controller have concluded that, as of March 31, 2019, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our CEO, our CFO and our Controller, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting during the quarter ended March 31, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

### Cautionary Note Concerning Factors That May Affect Future Results

This Form 10-Q contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "believe," "expect," "expectations," "plans," "strategy," "prospects," "estimate," "project," "target," "anticipate," "will," "should," "see," "guidance," "outlook," "confident," "on track" and other words of similar meaning in connection with a discussion of future operating or financial performance or the separation transactions. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases, tax rates and other measures of financial performance or potential future plans, strategies or transactions of United Technologies or the independent companies following United Technologies’ expected separation into three independent companies, the anticipated benefits of the acquisition of Rockwell Collins or of the separation transactions, including estimated synergies resulting from the Rockwell Collins transaction, the expected timing of completion of the separation transactions, estimated costs associated with such transactions and other statements that are not historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation:

- the effect of economic conditions in the industries and markets in which we operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction and in both the commercial and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines, the impact of weather conditions and natural disasters and the financial condition of our customers and suppliers;
- challenges in the development, production, delivery, support, performance and realization of the anticipated benefits (including expected returns under customer contracts) of advanced technologies and new products and services;
- the scope, nature, impact or timing of the expected separation transactions and other acquisition and divestiture activity, including among other things integration of acquired businesses into UTC's existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs and expenses;
- future levels of indebtedness, including indebtedness that may be incurred in connection with the expected separation transactions, and capital spending and research and development spending;
- future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure;
- the timing and scope of future repurchases of our common stock, which may be suspended at any time due to various factors, including market conditions and the level of other investing activities and uses of cash;
- delays and disruption in delivery of materials and services from suppliers;
- company and customer-directed cost reduction efforts and restructuring costs and savings and other consequences thereof;
- new business and investment opportunities;
- our ability to realize the intended benefits of organizational changes;
- the anticipated benefits of diversification and balance of operations across product lines, regions and industries;
- the outcome of legal proceedings, investigations and other contingencies;
- pension plan assumptions and future contributions;
- the impact of the negotiation of collective bargaining agreements and labor disputes;
- the effect of changes in political conditions in the U.S. and other countries in which we operate, including the effect of changes in U.S. trade policies or the U.K.'s pending withdrawal from the European Union (EU), on general market conditions, global trade policies and currency exchange rates in the near term and beyond;
- the effect of changes in tax (including the TCJA), environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which we operate;
- negative effects of the Rockwell Collins acquisition or the announcement or pendency of the separation transactions on the market price of UTC’s common stock and/or on its financial performance;
- risks relating to the integration of Rockwell Collins, including the risk that the integration may be more difficult, time-consuming or costly than expected or may not result in the achievement of estimated synergies within the contemplated time frame or at all;
- our ability to retain and hire key personnel;
- the expected benefits and timing of the separation transactions, and the risk that conditions to the separation transactions will not be satisfied and/or that the separation transactions will not be completed within the expected time frame, on the expected terms or at all;
- the expected qualification of the separation transactions as tax-free transactions for U.S. federal income tax purposes;
- the possibility that any consents or approvals required in connection with the expected separation transactions will not be received or obtained within the expected time frame, on the expected terms or at all;
- expected financing transactions undertaken in connection with the separation transactions and risks associated with additional indebtedness;
- the risk that dissynergy costs, costs of restructuring transactions and other costs incurred in connection with the expected separation transactions will exceed our estimates; and
- the impact of the expected separation transactions on our businesses and the risk that the separation transactions may be more difficult, time-consuming or costly than expected, including the impact on our resources, systems, procedures and controls, diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties.

In addition, this Form 10-Q includes important information as to risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. See the "Notes to Condensed Consolidated Financial Statements" under the heading "Note 15: Contingent Liabilities," the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the headings "Business Overview," "Critical Accounting Estimates," "Results of Operations," and "Liquidity and Financial Condition," and the sections titled "Legal Proceedings" and "Risk Factors" in this Form 10-Q and in our 2018 Annual Report and 2018 Form 10-K. Additional important information as to these factors is included in our 2018 Annual Report in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the headings "Restructuring Costs," "Environmental Matters" and "Governmental Matters", in our 2018 Form 10-K in the "Business" section under the headings "General," "Description of Business by Segment" and "Other Matters Relating to Our Business as a Whole" and in our Form S-4 Registration Statement (Registration No. 333-220883) under the heading "Risk Factors". The forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our other filings with the SEC.

## Risk factors

As filed, 143 characters.

There have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A, Risk Factors, in our 2018 Form 10-K.

Filed Apr 26, 2019.
Source: SEC EDGAR, the filing index for accession 0000101829-19-000016. Last ingested by Listed: Nov 3, 2026, 21:25 ET. No prices; not investment advice.