United Technologies Corporation (UTX)

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United Technologies Corporation (UTX)

December 13, 2012 5:00 pm ET


Louis R. Chenevert - Chairman, Chief Executive Officer, President, Chairman of Executive Committee and Member of Finance Committee

Gregory J. Hayes - Chief Financial Officer and Senior Vice President


Jeffrey T. Sprague - Vertical Research Partners, LLC

Deane M. Dray - Citigroup Inc, Research Division

Carter Copeland - Barclays Capital, Research Division

Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division

Noah Poponak - Goldman Sachs Group Inc., Research Division

Julian Mitchell - Crédit Suisse AG, Research Division

Joseph B. Nadol - JP Morgan Chase & Co, Research Division

Cai Von Rumohr - Cowen and Company, LLC, Research Division



Good evening. Welcome to the United Technologies Investor and Analyst Meeting. This presentation is being carried live on the Internet, and there is a presentation available for download at utc.com.

Please note the company will speak to results from continuing operations except where otherwise noted. They will also speak to segment results adjusted for restructuring and one-time items, as they usually do.

The company also reminds listeners that the presentation contains forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially from anticipated results. UTC's SEC filings, including its 10-Q and 10-K reports, provide details on important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements.

With that, let me introduce Chairman and CEO, Louis Chenevert.

Louis R. Chenevert

Well, good evening, and thank you all for joining me this evening. Welcome again to this society. It's nice to be back here.

I'm really proud of what we've accomplished over the past year. So we closed on the big acquisitions on our own timetable, and integration is off to a great start. We've also streamlined the portfolio, diversifying non-core businesses, and our new organization structure is really starting to pay big dividends.

So it's been a very busy year, but the transformation is essentially complete. The team is now focused on integration and execution to really deliver UTC-style earnings growth and strong cash flow.

So let me start this evening by quickly reviewing our expectation for 2012 as we close out the year.

Not much change from what we disclosed in the third quarter earnings release. CMHP is still an open item. I'll talk more about it in a couple of minutes.

At the macro level, the environment remains mixed. We still expect flattish organic sales. I'm confident that we'll achieve sales of about $58 billion, and that includes after a year of Goodrich and IAE. I expect Goodrich to be $0.10 dilutive because of lower utilization, deal costs, better underlying performance. The euro, perhaps it's a little better than what we expected earlier in the year. The back half is coming in at a better level.

With a few weeks left in the year, I'm comfortable with your consensus of $5.32 plus or minus a few pennies. As always, earnings will come with strong cash. We'll exceed net income. And it's on track. At this point, we're going to pay down 1/3 of the Goodrich debt this year. So really no surprises.

Before I get into 2013, I'd want to walk you through some of UTC's long-term strategy. UTC is very well positioned to take advantage of 2 large megatrends: urbanization and the fast-growing commercial aerospace market. Just a few facts to highlight the opportunities that are right in front of us. As I speak here tonight, only 15% of the world's population has ever flown. That's a huge potential. And every year for the next 20 years, 15 to 20 million people will move to urban centers. Our strategy is to capitalize on these opportunities, driving top line growth by investing in the game-changing technologies and keeping our focus on our core businesses. While focused on top line growth, leveraging UTC's operating system will allow us to achieve and sustain best-in-class margins, which is a hallmark in UTC.

The final piece of strategy is effective deployment of our strong cash flow through dividends, share repurchase and M&A to strengthen our core. To execute our strategy, we needed an organizational structure that allowed us to really leverage these strengths across the portfolio.

So opportunities to realize synergies with our existing businesses. At Climate, Controls & Security, Geraud and the team are applying the same experience that they've applied to the Carrier Enterprise to transform the F&S portfolio. The reorganization also combines the building controls business, which is a growth driver particularly in emerging markets. I already see great results, strong results. I mean this year, $100 million of synergies that have been accomplished, growing profits on flat organic sales. And I know that looking ahead with this streamlined portfolio, we're well positioned as the markets begin to recover.

Turning to Propulsion and Aerospace Systems, we see synergies with E&D and technology, the ability to leverage the experience with program execution and leveraging our supply chain. Today, we buy $20 billion of product and non-product. Alain and the team are taking costs out and really leveraging the multiple aerospace platforms we've won on, if you think about GTF, JSF, 53, et cetera and add Goodrich. All of a sudden you have an incredible leverage to go in the supply chain, improve the performance and improve the cost structure as to how we flow material in the future.

Today, CCS and PSCs are in place and focused on execution.

Read the rest of this transcript for free on seekingalpha.com