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April 23, 2019

UTC's 1Q profits up 4%; separation on track

Photo | Contributed Raytheon Co. CEO Gregory Hayes.

Farmington conglomerate United Technologies Corp., which is still on track to split into three separate companies by 2020, on Tuesday said its first-quarter profits climbed 4 percent on continued high demand for aeroparts.

For the quarter ended March 31, the maker of Pratt & Whitney jet engines, Otis Elevators and Carrier air conditioners posted net income of $1.3 billion, or $1.56 a diluted share, up from $1.2 billion, or $1.62 a diluted share, in the year-ago period.

Net sales soared to $18.3 billion, up 20 percent from $15.2 billion a year earlier due to sales growth in three of four business segments. The first-quarter revenues exceeded Wall Street's expectation of $17.9 billion.

"United Technologies is off to a strong start in 2019," UTC CEO and Chairman Gregory Hayes said Tuesday, adding that the conglomerate has made substantial progress integrating Iowa-based aviation system maker Rockwell Collins. Hayes also said the company is on pace to spin Farmington-based Otis and North Carolina's Carrier into independent companies by the first half of 2020.

UTC continues benefiting from the booming aviation market, with Rockwell Collins again leading its first-quarter sales growth with $6.5 billion in revenues, up more than 70 percent vs. $3.8 billion a year prior.

Hayes, in a conference call with investors, said Rockwell Collins -- which will be reorganized with Pratt and UTC Aerospace Systems as UTC’s largest segment known as Collins Aerospace Systems -- will deliver $150 million in cost savings this year, and is projected to tally $500 million in total cost savings over the long term.

“Having worked as a combined team for a full quarter, I’m even more confident in the long term value the acquisition is going to bring our shareholders and employees,” he said. “We are happy with the execution at Collins thus far, and expect continued strong performance as we progress through the year.”

Among UTC’s other business segments, East Hartford's Pratt & Whitney posted $4.8 billion in sales, up 11 percent; Otis reported $3.1 billion in sales, up 2 percent; and Carrier posted a slight dip in sales to $4.3 billion.

In premarket trading, UTC shares were up 2.8 percent at $140.80.

Separation on pace

During the conference call, Hayes offered only a few details about UTC’s plans to split into three separate companies, but said the spinoffs are still on track to be completed during the first six months next year.

More than 500 employees are currently dedicated to preparing Otis and Carrier to operate as stand-alone companies, according to Hayes, who said the producers will be ready for separation by year-end 2019.

UTC’s separation timeline will be driven by its tax filings in the U.S. and Canada, which Hayes said have both been submitted to federal tax authorities. Rulings from the IRS (Internal Revenue Service) and the Canada Revenue Agency are expected in the next six to nine months, he said.

“That should all happen this year, which should allow us to then finish the final restructuring to complete the separation activities,” he said. “It’s all on track to what we expect.”

UTC plans to name management teams that will lead each segment by the end of the second quarter, with board of directors named by the start of the fourth quarter. Hayes said the management teams will help the conglomerate prepare for its official separation next year.

When asked Tuesday about future divestitures, Hayes said there remain opportunities for potential transactions, suggesting a deal wouldn’t be done if it impacts their separation timeline or doesn’t offer full immediate value to the company.

“Those opportunities that exist today will also exist the day the businesses get spun off,” Hayes said.

This story has been updated

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