united technologies united corporation technologies annual corporation report annual report 2010 United Technologies Building financial Hartford, Connecticut 06101 Big goals. U.S.A. www.utc.com and c Carrier orporate Big results. Hamilton Sundstrand Otis Pratt & Whitney responsi Sikorsky UTC Fire & Security UTC Power B ility performance 2010 financial and corporate responsiBility performance 408289 Cover Sheetfed.cs5_SVP_2-8.indd 1 2/9/11 6:16 PM aWardS/reCognItIon UTC named No. 1 most admired aerospace and defense Stakeholder engagement company by Fortune magazine. For six years, UTC has sought feedback on its corporate UTC included in World’s most respected Companies responsibility reporting and performance. In 2010, we asked stakeholders in Europe and the United States to provide by magazine. Barron’s analysis and commentary on UTC’s environmental efforts. They commended our efforts but asked for more details UTC’s chief executive officer, chief financial officer and investor on the development of our environmental strategy and its 2010 all-america integration with our business efforts. We also met with relations team given top rankings in the stakeholders on issues ranging from human rights policies executive team, Aerospace & Defense Electronics sector, by to community engagement and worked to incorporate Institutional Investor magazine. feedback into our approach and ongoing efforts. This report and its associated web content at utc.com pro- UTC named to the dow Jones Sustainability Index for the vide detailed examples of how our approach to integrating 12th consecutive year. responsibility into our operations drives results. Your feedback is important to us. Please tell us what you UTC ranked first in the U.S. Transportation and Aerospace think of our financial and corporate responsibility perfor- category and 28th overall in the 2010 green rankings by mance and reporting. A response form is available at www.utc.com/responsibility. Newsweek magazine. UTC ranked 14th in the 2010 top 50 organizations for multicultural Business opportunities United Technologies Corporation and its subsidiaries’ by DiversityBusiness.com. names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered United technologies Corporation (UtC) is a diversified company Pratt & Whitney’s PurePower UTC ranked 28th in the top 50 Companies for Women trademarks or trade names of United Technologies Corporation and its subsidiaries. that provides a broad range of high-technology products and PW1000g engine is just one exam- engineers readers’ Choice award by Woman Engineer ple of how UtC businesses set big services to the global aerospace and building systems industries. goals and deliver big results. When magazine. Names of other companies, abbreviations thereof, logos of Its businesses include Carrier heating, air-conditioning and it goes into service in 2013, the other companies, and product and service designators of other companies are either the registered or unregistered refrigeration solutions; Hamilton Sundstrand aerospace and PurePower PW1000g engine will UTC inducted into the Hall of Fame of the Business be the cleanest, quietest, and most trademarks or trade names of their respective owners. industrial systems; Otis elevators and escalators; Pratt & Whitney cost- and energy-efficient engine Committee for the arts in recognition of UTC’s contributions engines; Sikorsky helicopters; and UTC Fire & Security systems. on the market. the engine has been of more than $55 million over time for art exhibitions in All paper used in this report is certified to the Forest Stewardship Council (FSC) standards. The cover and narra- The company also operates a central research organization chosen to power the Bombardier 13 countries on four continents. CSeries, the mitsubishi aircraft tive section are printed on Monadnock Astrolite PC FSC, that pursues technologies for improving the performance, energy Corporation’s new regional jet, made with 100 percent post-consumer recycled content, efficiency and cost of UTC products and processes. UTC is a Irkut Corporation’s new mC-21 Chairman & CEO Louis Chênevert honored with the using 100 percent renewable electricity and manufactured carbon neutral. The financial section is printed on Domtar and the airbus a320neo aircraft. Fire Commissioner’s humanitarian award given by the member of the Fortune 50, the Dow Jones Industrial Average PCW Opaque Recycled FSC, utilizing up to 30 percent and the Dow Jones Sustainability Indexes. FDNY Foundation (New York City Fire Department) post-consumer recycled content and made with improved in recognition of UTC’s generous and longtime support energy efficiency and the use of cogeneration and hydroelectricity. for fire prevention and public safety in New York City. taBle oF ContentS Shareowner Letter 2 At a Glance Our Commitments 24 Board of Directors 86 Photo credits Page 1 1, courtesy Lockheed Martin Commercial 6 18 25 87 Financials Financials Leadership Page 1 3, courtesy Commercial Aircraft Corporation Aerospace 10 Corporate Responsibility 19 Cautionary note Shareowner Information 88 of China Ltd. Our Approach 14 Business Unit Highlights concerning factors that Recognition Inside Back Page 20, top, courtesy ITC Hotel Royal Gardenia Cover Page 22, top, courtesy Gulfstream Aerospace Commercial 20 may affect future results 50 Aerospace 22 408289 Cover Sheetfed.cs5_SVP_2-8.indd 1 2/11/11 7:23 PM United Technologies Corporation We set big goals And deliver big results. We make products that make modern life possible — products that are better, faster, more efficient. 2010 Annual Report 1 408289 Text WEB.cs5_SVP_2-8.indd 1 2/9/11 6:04 PM Louis R. Chênevert CHAIRMAN & CHIEF EXECUTIVE OFFICER louis chênevert stands in front of a mockup of the sikorsky s-97 raider. sikorsky is building two prototype light tactical helicopters based on its revolutionary X2 technology demon- strator. the s-97 raider is expected to deliver significant improvements over other light military helicopters, including better turning radius, speed, payload, flight endurance and hover capability, and reduced acoustic noise. 2 United Technologies Corporation 408289 Text WEB.cs5_SVP_2-8.indd 2 2/11/11 6:11 PM ear Shareowner 2010 was another strong year for United Technologies. Solid execution across our business units D delivered double-digit earnings growth despite numerous challenges in many of our end markets. In addition to meeting our 2010 financial goals, we positioned United Technologies for sustained double-digit earnings growth in the future. We expanded our presence in higher-growth emerging markets, increased our investment in game-changing technologies, and maintained our focus on cost reduction and disciplined cash redeployment. Proactive restructuring and improved productivity drove Looking further ahead, research and development focused exceptional margin expansion across United Technologies on game-changing technologies will continue to drive growth. last year. Along with strong operating performance came Last year, UTC invested more than $3.6 billion in company- strong cash generation, with cash flow from operations less and customer-funded R&D, including the innovative Sikorsky capital expenditures again exceeding net income. We returned X2 Technology demonstrator and Pratt & Whitney’s revolu- approximately 75 percent of this cash flow to shareowners tionary PurePower Geared Turbofan engine. In December, through dividends and share repurchases.* We also increased Airbus became the fourth aircraft manufacturer to select the the dividend 10 percent, marking the 74th consecutive year Geared Turbofan engine when it announced the new engine United Technologies has paid dividends to shareowners. option (neo) for its A320 family of aircraft. We believe this In addition, UTC repurchased $2.2 billion in stock, completed selection will greatly enhance Pratt & Whitney’s position in the nearly $3 billion in acquisitions and contributed more than commercial aircraft market for decades to come and validates $1.5 billion to our global pension plans. our strategy of investing in technologies in anticipation of Over the past decade, United Technologies has continued where our markets are headed. to outperform our peers and key market indices on total Also positioning UTC for long-term growth are the shareowner return. For the period from December 31, 2000, aggressive restructuring and portfolio improvements we through December 31, 2010, UTC has delivered total share- have made. One example is Carrier’s business transformation owner return of 140 percent, nearly four times the Dow Jones over the last few years. Carrier realigned its portfolio by Industrials and more than nine times the S&P 500. divesting low-performing, non-core assets and investing in We look to 2011 with confidence in our ability to again high-technology, energy-efficient, and environmentally deliver solid earnings growth. Despite continued uncertainty sound products and services. As a result, Carrier has become in the strength and timing of the global economic recovery, a stronger, more focused and higher returns business. we see improvement in most of our end markets, with particu- UTC’s portfolio was further strengthened by the $1.8 bil lion lar strength in emerging markets and commercial aerospace. acquisition of GE Security, which closed in March 2010. This These improving markets give us confidence in our ability acquisition added scale, market reach and product offerings, to