2012 Annual Report Financial and Corporate Responsibility Performance Accelerate A United Airlines Airbus A320 approaches the United Technologies Corporation (UTC) is Our aerospace businesses are Sikorsky runway powered by IAE V2500 engines and a diversified company that provides a broad helicopters, Pratt & Whitney aircraft engines equipped with nacelles and more than a dozen range of high-technology products and services and UTC Aerospace Systems. The company systems from UTC Aerospace Systems, including to the global aerospace and building systems also operates a central research organization flight controls, electric power, lighting, air data industries. Our commercial businesses are that pursues technologies for improving the systems, ice detection, cockpit controls, and Otis elevators and escalators, and UTC Climate, performance, energy efficiency and cost of wheels and brakes. Our acquisition of Goodrich Controls & Security, which includes Carrier UTC products and processes. Corp. and our majority ownership in the IAE heating, air-conditioning and refrigeration To learn more, visit www.utc.com. International Aero Engines AG collaboration systems, as well as fire and security solutions reshaped our portfolio and strengthened from brands such as Kidde and Chubb. our position in the fast-growing commercial aerospace market. Accelerating Growth The portfolio transformation we completed in 2012 made us a better, stronger, more focused company. Our big investments in commercial aerospace, our streamlined portfolio and new organizational structure, combined with our global scale and experienced leadership team, position us to deliver strong growth in 2013 and well into the future. Contents 2 14 53 Shareowner Letter Accelerate Our Approach Cautionary Note Concerning Factors 6 18 That May Affect Future Results Accelerate Growth At a Glance 98 8 20 Board of Directors Accelerate Performance Business Highlights 99 10 24 Leadership Accelerate Productivity Our Commitments 100 12 25 Shareowner Information Accelerate Success Financials Inside Back Cover Recognition 02 | UNITED TECHNOLOGIES CORPORATION Louis R. CHÊNevert Chairman & Chief EXecutiVE Officer Today China accounts for half of the world’s elevator market and continues to grow. In 2012, Otis expanded its leading presence in China, opening a new factory in Chongqing, one of the world’s fastest-growing megacities and the manufacturing and transportation hub for the southwestern region of the country. 2012 ANNUAL REPORT | 03 Dear Shareowner 2012 was a year of transformation and accomplishment for United Technologies. By acquiring Goodrich and majority ownership in the IAE International Aero Engines collaboration, we strengthened our position in the fast-growing commercial aerospace market. These acquisitions brought tremendous new capabilities, technologies and leadership talent to our company. We further strengthened and streamlined our fire and security portfolio by divesting non-core businesses and applying Carrier’s successful portfolio transformation strategy to our portfolio. These actions enable us to better focus on growth opportunities in our core aerospace and building systems markets. Our reshaped portfolio, investments in game-changing technologies and expanding emerging market presence — combined with our relentless drive to improve productivity, reduce costs and leverage our global scale — position us well to return to double-digit earnings growth in 2013 and beyond. While the global economy remained challenging during this next two decades, 15 million to 20 million people are expected year of portfolio transformation, United Technologies delivered to move to urban centers. Around the world, more skyscrapers, solid financial performance in 2012, highlighted by strong schools, hospitals and stadiums are being built, driving the cash generation. For the year, cash flow from operations less demand for elevators, air-conditioning, and fire and security capital expenditures once again exceeded net income. This systems, as well as for air travel between cities. United strong cash performance, as well as solid execution of the Technologies is well positioned to capitalize on this rapid portfolio transformation, enabled us to pay down approximately urbanization and strong commercial aerospace growth with one-third of the debt from the Goodrich acquisition and our game-changing technologies and products that provide allowed us to resume our share repurchase program in 2013. greater energy efficiency and meet local market demands. We also increased our dividend by 11.5 percent in 2012, mark- The benefits of the new organizational structure we announced ing the 76th consecutive year United Technologies has paid in the fall of 2011 became clear in 2012, allowing us to better a dividend to shareowners. Our long-term total shareowner leverage our global scale, talent and operating system to drive return continued to exceed that of our peers and key market margin growth across the portfolio. UTC Climate, Controls indices. For the past decade, from December 31, 2002, through & Security — the combination of our Carrier and UTC Fire & December 31, 2012, UTC delivered total shareowner return of Security businesses — achieved record, industry-leading profit 225 percent, more than double either the Dow Jones Industrials margins by successfully executing its portfolio transformation or the S&P 500. strategy, focusing on core businesses to drive organic growth and generating more than $100 million in integration synergies. With our portfolio transformation substantially complete, At UTC Propulsion & Aerospace Systems, the team is focused United Technologies begins 2013 focused on integration and on exceeding our target of delivering $400 million of annual execution. Even with a soft European economy and a decline in savings related to the Goodrich acquisition. We expect to U.S. defense spending, the growth opportunities available for achieve approximately half of these savings by the end of 2013. UTC are truly amazing. Two simple facts highlight the scale Additional synergies will come from leveraging a common supply of these opportunities. Today only an estimated 15 percent of base and greater UTC content on newer aircraft platforms. the world's population has ever flown, and every year for the 04 | UNITED TECHNOLOGIES CORPORATION Across the portfolio, there were many other accomplishments a 10-year, sealed-in battery. UTC Climate, Controls & Security in 2012. Among them, Sikorsky achieved a major milestone by also strengthened its emerging market presence by increasing certifying the S-76D helicopter, which provides customers with product localization, expanding its distribution footprint and higher cruise speeds, better fuel efficiency, greater reliability, establishing joint ventures in key markets. Highlighting this and future capabilities, including rotor de-icing. Pratt & approach was the new joint venture in India with Midea and the Whitney continued to win significant orders for its revolution- opening of a new India manufacturing facility to take advantage ary PurePower Geared Turbofan engine, with nearly 3,000 of that nation’s fast-growing residential air-conditioning market. announced engine orders, including options, as of the end of 2012. Engine testing has been completed for the Bombardier As always, United Technologies’ performance over the past CSeries and has begun for the Airbus A320neo. Ground and year reflects the dedication and hard work of our leadership flight testing has validated the expected improvements in fuel team and our nearly 220,000 employees around the world. burn, emissions and noise reduction. In January 2013, Embraer On behalf of our shareowners, I thank all employees for their became the fifth aircraft manufacturer to select the PurePower many contributions, and in particular, I want to recognize the engine when it announced the Geared Turbofan as the exclusive 27,000 Goodrich employees who joined UTC this past July for power for its new second-generation E-Jet aircraft family. This their willingness to embrace change. The talent, skills and selection will greatly enhance Pratt & Whitney’s position in the teamwork displayed during the integration process have been commercial aerospace market for decades to come. truly extraordinary, setting the stage for a bright new chapter for our company. On the commercial side, Otis continues to significantly strengthen its position by introducing new products tailored I also thank our customers. We are grateful for the confidence to specific end markets, including a Gen2 elevator application and trust they place in our products and our people. We recog- for the fast-growing social housing segment in China and an nize customers have choices, and how we perform determines upcoming Gen2 application with a battery-backup system whether they choose us. We are committed to delivering the for the Indian and South Asian markets. Otis also significantly very best value to our customers by finding better, faster and expanded its presence in China by opening a new manufac- more efficient ways to support their success. turing facility in Chongqing, supporting growth in central and western China. This factory and new factories scheduled In closing, I am proud of what United Technologies accom- to open in Bengaluru and São Paulo in 2013 highlight Otis’ plished over the past year and excited about the momentum customer-focused strategy of investing in key growth markets we have created. The entire team is now focused