United Technologies Corporation
UNITED TECHNOLOGIES CORP /DE/(Form: 10-K, Received: 12 February 2001, 02:32:54 PM)      
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

Commission file number 1-812

UNITED TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)

           DELAWARE                       06 0570975
(State or other jurisdiction of        (I.R.S. Employer
Incorporation or organization)        Identification No.)

One Financial Plaza, Hartford, Connecticut 06103
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (860) 728-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class              Name of each exchange on which
                                           registered

Common Stock ($1 par                 New York Stock Exchange
       value)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X . No .

At January 31, 2001, there were 470,686,714 shares of Common Stock outstanding. The aggregate market value of the voting Common Stock held by non-affiliates at January 31, 2001 was approximately $35,214,250,453, based on the New York Stock Exchange closing price for such shares on that date. For purposes of this calculation, the Registrant has assumed that its directors and executive officers are affiliates.

List hereunder documents incorporated by reference and the Part of the Form 10-K into which the document is incorporated: (1) Portions of the United Technologies Corporation 2000 Annual Report to Shareowners are incorporated by reference in Parts I, II and IV hereof; and (2) Portions of the United Technologies Corporation Proxy Statement for the 2001 Annual Meeting of Shareowners are incorporated by reference in Part III hereof.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and is not to be contained, to the best of Registrant's knowledge, in definitive proxy or information statements


incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [ ]


UNITED TECHNOLOGIES CORPORATION

Index to Annual Report on Form 10-K for Year Ended December 31, 2000

PART I                                                        Page

Item 1.    Business  .............................................  1

Item 2.    Properties ............................................  8

Item 3.    Legal Proceedings .....................................  9

Item 4.    Submission of Matters to a Vote of Security Holders ... 10

-----      Executive Officers of the Registrant .................. 10

 

PART II

Item 5.    Market for the Registrant's Common Equity and Related
           Stockholder Matters ................................... 12

Item 6.    Selected Financial Data ............................... 12

Item 7.    Management's Discussion and Analysis of Results of
           Operations and Financial Position ..................... 12

Item 7A    Quantitative and Qualitative Disclosures About Market
           Risk .................................................. 12

Item 8.    Financial Statements and Supplementary Data ........... 12

Item 9.    Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure ................... 12

 

PART III

 

Item 10.   Directors and Executive Officers of the Registrant .... 12

Item 11.   Executive Compensation ................................ 12

Item 12.   Security Ownership of Certain Beneficial Owners and
           Management ............................................ 13

Item 13.   Certain Relationships and Related Transactions ........ 13

 

PART IV

 
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K ............................................. 13


 
Item 1. Business

United Technologies Corporation was incorporated in Delaware in 1934. Growth is attributable to acquisitions and the internal development of existing businesses of the Corporation.*

Management's Discussion and Analysis of the Corporation's Results of Operations and Financial Position at December 31, 2000, with comparisons of 2000 to 1999 and 1999 to 1998, as well as Selected Financial Data for each year in the five year period ended December 31, 2000 are set forth on pages 1 through 8 of the Corporation's 2000 Annual Report to Shareowners. Whenever reference is made in this Form 10-K to specific pages in the 2000 Annual Report to Shareowners, such pages are incorporated herein by reference.

Operating Segments

The Corporation conducts its business through four principal operating segments. The segments were generally determined based on the management of the businesses and on the basis of separate groups of operating companies, each with general operating autonomy over diversified products and services. The principal products of each segment are as follows:

Operating
Segment          Principal Products

Otis             --Otis elevators, escalators, automated people
                 movers and service.

Carrier          --Carrier commercial and residential heating,
                 ventilating and air conditioning ("HVAC") systems
                 and equipment, commercial and transport
                 refrigeration equipment, aftermarket service and
                 components.

Pratt & Whitney  --Pratt & Whitney commercial, general aviation
                 and military aircraft engines, parts, service,
                 industrial gas turbines and space propulsion.

Flight Systems   --Sikorsky commercial and military helicopters,
                 parts and service.
                 --Hamilton Sundstrand aerospace and industrial
                 products, including aircraft power generation and
                 management systems, engine and flight controls,
                 auxiliary power units, environmental control
                 systems and propeller systems (aerospace), and
                 air compressors, metering devices, fluid handling
                 equipment and enclosed gear drives (industrial).

Segment financial data for the years 1998 through 2000, including financial information about foreign and domestic operations and export sales, is included in Note 15 of Notes to Consolidated Financial Statements on pages 22 through 24 of the Corporation's 2000 Annual Report to Shareowners.

Description of Business by Operating Segment

The following description of the Corporation's business by operating segment should be read in conjunction with Management's Discussion and Analysis of Results of Operations and Financial Position appearing in the Corporation's 2000 Annual Report to Shareowners, especially the information contained therein under the heading "Business Environment."

Otis
Otis is the world's largest elevator and escalator manufacturing, installation and service company. Otis designs, manufactures, sells and installs a wide range of passenger and freight elevators, including hydraulic and traction elevators for low- and medium-speed applications and gearless elevators for high-speed passenger operations in high-rise buildings. In February 2000, Otis announced its new Gen2 (trademark symbol) elevator system for low- to mid-rise buildings, the first elevator to use flat, coated steel belts. Installations of this new machine room-less elevator began in February 2000. Otis also produces a broad line of escalators and, for horizontal transportation, moving walks and automated people movers and shuttles. In addition to new equipment, Otis provides modernization products and services to upgrade elevators and escalators. Otis also provides maintenance services for a substantial portion of the elevators and escalators which it sells, as well as those of other manufacturers. Otis' products and services are sold principally to building contractors and owners.

* "Corporation," unless the context otherwise requires, means United Technologies Corporation or UTC and its subsidiaries.

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In 1999, LG-Otis Elevator Company was formed in Korea to acquire the Building Facilities Group of LG Industrial Systems Co. Inc. The Corporation has an 80 percent equity interest in LG-Otis Elevator Company.

Revenues generated by Otis' international operations were 77 and 78 percent of total Otis segment revenues in 2000 and 1999, respectively. At December 31, 2000, Otis' business backlog was $3,770 million, as compared to $3,782 million at December 31, 1999. Substantially all of the business backlog at December 31, 2000 is expected to be realized as sales in 2001.

Carrier
Carrier is the world's largest manufacturer of commercial and residential heating, ventilating and air conditioning systems and equipment. Carrier is also a leading producer of commercial and transport refrigeration equipment, and provides aftermarket service and components for its products and those of other manufacturers. The products manufactured by Carrier include chillers and airside equipment, commercial unitary systems, residential split systems (cooling only and heat pump), duct-free split systems, window and portable room air conditioners and furnaces, as well as transport refrigeration and commercial refrigeration equipment. Carrier's products and services are sold under Carrier and other brand names principally to building contractors and owners, homeowners, shipping and trucking companies, supermarkets and food service companies. Sales are made both directly to the customer and through manufacturers' representatives, distributors, dealers, individual wholesalers and retail outlets.

In April 1999, Carrier formed an alliance with Toshiba Corporation to combine and coordinate certain air conditioning manufacturing and distribution operations. Toshiba Carrier Corporation is based in Japan and owned 40 percent by Carrier and 60 percent by Toshiba. Carrier and Toshiba Carrier Corporation formed manufacturing joint ventures in the U.K., with Carrier holding a majority interest, and in Thailand with Carrier and Toshiba Carrier owning equal interests. In August 1999, Carrier expanded its North American presence in residential and light commercial heating and air conditioning equipment by acquiring International Comfort Products Corporation.

In February 2000, Carrier expanded its European commercial refrigeration operations by acquiring the Electrolux Group's commercial refrigeration business. In November 2000, Carrier acquired Specialty Equipment Companies, a manufacturer of commercial refrigeration and food service equipment in the United States and Europe.

Revenues generated by Carrier's international operations, including U.S. export sales, were 48 percent of total Carrier segment revenues in each of 2000 and 1999. At December 31, 2000, Carrier's business backlog was $1,004 million, as compared to $978 million at December 31, 1999. Substantially all of the business backlog at December 31, 2000 is expected to be realized as sales in 2001.

Otis and Carrier Worldwide Operations
Otis and Carrier conduct their businesses through subsidiaries and affiliates worldwide, some of which have significant minority interests. In addition, their global growth strategies include investments in markets worldwide, including those in Central and Eastern Europe, the People's Republic of China, Russia, Brazil, South Korea and other countries, which involve a higher degree of currency, political and economic risk than investments in more developed markets.

The U.S. and worldwide operations of Otis and Carrier can be affected by changes in economic, industrial, political, weather and international conditions, including changes in interest rates (which can affect demand for products and services), changes in technology, changes in legislation and government policies (including those related to investments, exchange controls, repatriation of earnings and, in the case of Carrier, regulation of refrigerants), changes in the level of construction activity, changes in exchange rates, changes in labor costs (which can affect Otis service and maintenance margins) and raw material costs, and competition from a large number of companies in the United States and other countries. Carrier's operations can also be affected by changes in the level of production and utilization of transport equipment, in the level of retail sales of perishable food products, and in fuel prices. The principal methods of competition are price, delivery schedule, product performance and service.

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Pratt & Whitney and Flight Systems Aerospace and Defense Products Pratt & Whitney and Flight Systems produce aerospace and defense products. Sales of these products are subject to changes in technology; lengthy and costly development cycles; the effects of consolidation in the aerospace and defense industry; heavy dependence on a small number of products and programs; changes in legislation (including restrictions on aircraft engine noise and emissions) and in government procurement practices; policies of some foreign customers which require offset programs (in-country purchases, manufacturing and financial support projects required as a condition to obtaining orders) or other arrangements; substantial competition from domestic manufacturers, foreign manufacturers (whose governments sometimes provide research and development assistance, marketing subsidies and other assistance for their commercial products) and companies that obtain regulatory agency approval to manufacture spare parts; and changes in economic, industrial and international conditions. In addition, the financial performance of these two segments can be affected in a number of respects by the general level of activity and performance of the commercial airline industry and the aviation industry and by changes in fuel prices. The international operations of these segments are subject to local government regulations (including regulations relating to investments, exchange controls and repatriation of earnings) as well as to varying currency, political and economic risks. Sales of military products are affected by defense budgets (both in the U.S. and abroad) and U.S. foreign policy. Military spare parts sales are also affected by policies of the U.S. and foreign governments of purchasing parts from suppliers other than the original equipment manufacturers.

The principal methods of competition in the Corporation's aerospace and defense businesses are price, product performance, service, delivery schedule and other terms and conditions of sale, including discounts and other financial incentives, performance and operating cost guarantees, maintenance agreements and participation in financing arrangements for commercial jet engines and helicopters. Engine selections by airlines, airframe manufacturers and operators can have a significant impact on sales of spare parts and maintenance services. Significant elements of Pratt & Whitney's and Flight Systems' business, such as spare parts sales for engines and aircraft in service, have short lead times. Therefore, backlog information may not be indicative of future demand. Also, since a substantial portion of the backlog for commercial customers is scheduled for delivery beyond 2001, changes in economic conditions may cause customers to request that firm orders be rescheduled or canceled.

In 2000, the Corporation announced its participation in the formation of MyAircraft, a joint venture to develop a business-to-business e-commerce marketplace for aerospace aftermarket products and services.
E-commerce business models are subject to significant risks due to rapid changes in technology, business practices and customer acceptance, as well as substantial competition from other e-commerce initiatives. These e-commerce exchanges can also have a significant impact on the manner in which the Corporation sells parts and services.

Pratt & Whitney
Pratt & Whitney is one of the world's leading producers of commercial, general aviation and military aircraft engines. Pratt & Whitney provides overhaul and repair services, spare parts, and fleet management services for the engines it produces, as well as for many other models of commercial and military jet and gas turbine engines. Pratt & Whitney also produces power generation equipment, liquid rocket propulsion systems and solid rocket motors.

Pratt & Whitney currently produces three families of large commercial jet engines: the JT8D-200 series, the PW2000 series and the PW4000 series. JT8D- 200 series engines power the Boeing MD-80 aircraft. Applications for the PW2000 series include the Boeing 757-200/PF aircraft and the Iluyshin IL-96 aircraft. The PW4000 engine family powers the Airbus A310-300, A300-600 and A330-200/300 series; the Boeing 747-400, 767-200/300 and 777-200/300 series of aircraft; and the Boeing MD-11 aircraft. (The Boeing Company ("Boeing") phased out production of MD-80 aircraft in December 1999 and has announced that MD-11 production would be phased out in 2001.) Pratt & Whitney has entered into a Memorandum of Understanding with Airbus Industrie ("Airbus") to develop, market and sell PW6000 series engines for installation on Airbus A318 aircraft, currently expected to enter service in the fourth quarter of 2002.

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In view of the risk and cost associated with developing new engines, Pratt & Whitney has entered into commercial engine collaboration arrangements in which costs, revenues and risks are shared. At December 31, 2000, the interests of other participants in these items were approximately as follows: 24 percent of the JT8D-200 series engine program, 29 percent of the PW2000 series engine program, 14 percent of the 94 and 100 inch fan models of the PW4000, 26 percent of the PW4084 and PW4090 models and 24 percent of the PW4098 model. IAE International Aero Engines AG, a collaboration in which Pratt & Whitney has a 33 percent interest, markets and supports the V2500 engine. Applications for the V2500 engine include Airbus' A319, A320 and A321 aircraft and Boeing's MD-90. (Boeing phased out production of MD-90 aircraft in 2000.) Pratt & Whitney also has a 50 percent interest in GE-P&W Engine Alliance, LLC, an alliance formed in 1996 with GE Aircraft Engines to develop, market and manufacture a new jet engine known as the GP7000. The new engine is intended to power Boeing 767- 400ERX, Boeing 747X and Airbus A380 aircraft. In December 2000, Airbus announced the launch of the A380 aircraft (formerly known as the A3XX), with first deliveries scheduled for 2006.

Manufacturers of many commercial aircraft offer their customers a choice of engines, giving rise to competition among engine manufacturers at the time of sale of aircraft. This competition is intense, particularly for new commercial airframe/engine combinations, and can result in offers by engine suppliers of substantial financial incentives, performance and operating cost guarantees and maintenance agreements. Pratt & Whitney's major competitors in the sale of engines are the aircraft engine businesses of General Electric Company and Rolls Royce plc. (For information regarding customer financing commitments, participation in guarantees of customer financing arrangements and performance and operating cost guarantees, see Notes 4 and 13 of Notes to Consolidated Financial Statements on pages 16 and 21 to 22 of the Corporation's 2000 Annual Report to Shareowners.)

Pratt & Whitney products are sold principally to aircraft manufacturers, airlines and other aircraft operators, aircraft leasing companies and the U.S. and foreign governments. Pratt & Whitney sales in the U.S. and Canada are also made directly to the customer and, to a limited extent, through independent distributors. Other export sales are made with the assistance of independent sales representatives. Sales to Boeing and Airbus were each 15 percent of total Pratt & Whitney revenues in 2000, before taking into account discounts or financial incentives offered to customers.

Pratt & Whitney currently produces two military aircraft engines, the F100 (powering F-15 and F-16 fighter aircraft) and the F117 (powering C-17 transport aircraft). All of Pratt & Whitney's F100 sales contracts are with the United States Air Force ("USAF") or with foreign governments. All of Pratt & Whitney's F117 sales contracts are with either the USAF or Boeing. Pratt & Whitney is also under contract with the USAF to develop the F119 engine, the only anticipated source of propulsion for the two-engine F-22 fighter aircraft being developed by Lockheed Martin Corporation ("Lockheed Martin") and Boeing. In addition, both contractors (Boeing and Lockheed Martin) that were selected to proceed into the next phase of the Joint Strike Fighter development program have selected derivatives of Pratt & Whitney's F119 engine to power their competing demonstration aircraft. Management cannot predict with certainty whether, when, and in what quantities Pratt & Whitney will produce F119 engines.

Pratt & Whitney Canada ("PWC") is one of the world's leading manufacturers of turbofan, turboprop and turboshaft engines used in a variety of aircraft, including up to seventy passenger business and regional/commuter airline aircraft, general aviation aircraft and light and medium helicopters. PWC also provides auxiliary power units for large commercial aircraft, advanced gas turbine engines for industrial and power generation applications and worldwide engine maintenance services.

Pratt & Whitney Space Propulsion ("SP") produces hydrogen fueled rocket engines for commercial and U.S. Government space applications and advanced turbo pumps for NASA's Space Shuttle program. SP, together with NPO Energomash, is providing a new Lox-Kerosene RD-180 booster engine for two launch vehicles being marketed by Lockheed Martin. Chemical Systems, a unit of SP, manufactures solid fuel propulsion systems and booster motors for commercial and civil applications and several U.S. military launch vehicles and missiles.

Pratt & Whitney Power Systems ("PWPS") supplies industrial power generation and mechanical drive equipment in the 300 kilowatts to 50 megawatts range. In October 2000, PWPS established a service agreement with Power Industry Consultants of Atlanta, Georgia to provide operations, maintenance, field services and turnkey services for PWPS industrial gas turbine products.

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Revenues from Pratt & Whitney's international operations, including U.S. export sales, were 50 percent and 48 percent of total Pratt & Whitney segment revenues in 2000 and 1999, respectively. At December 31, 2000, Pratt & Whitney's business backlog was $9,866 million, including $1,434 million of U.S. Government funded contracts and subcontracts, as compared to $8,256 million and $1,394 million, respectively, at December 31, 1999. Of the total Pratt & Whitney backlog at December 31, 2000, approximately $4,055 million is expected to be realized as sales in 2001.

Flight Systems
The Corporation's Flight Systems business is conducted through Sikorsky Aircraft and Hamilton Sundstrand. The Corporation acquired Sundstrand Corporation in 1999 and combined it with the operations of the former Hamilton Standard.

Sikorsky is one of the world's largest manufacturers of military and commercial helicopters and the primary supplier of transport helicopters to the U.S. Army and Navy. Sikorsky also supplies helicopters to foreign governments and the worldwide commercial market. Sikorsky produces helicopters for passenger, utility/transport, cargo, anti-submarine warfare, and search and rescue operations. Sikorsky's business base also includes remanufacturing of used aircraft, spare parts sales, overhaul and repair, and service contracts.

Current production programs at Sikorsky include the Black Hawk medium- transport helicopter for the U.S. and foreign governments; the CH-60 Fleet Combat Support helicopter for the U.S. Navy; the International Naval Hawk, a derivative of the U.S. Navy's Seahawk medium-sized helicopter for multiple naval missions; and the S-76 intermediate-sized helicopter for executive transport, offshore oil platform support, search and rescue, emergency medical service and other utility operations.

In July 1997, Sikorsky signed a multi-year contract with the U.S. Government to deliver 108 Black Hawk family helicopters from July 1997 through June 2002. Under the contract as it has been amended through December 2000, the purchase commitment has been increased to 207 helicopters. As of December 31, 2000, 141 helicopters have been delivered under the contract. While Sikorsky is pursuing opportunities for additional sales to the U.S. Government, Sikorsky's production of Black Hawk family helicopters is increasingly dependent upon obtaining foreign sales. In 2000, Sikorsky signed contracts to sell 47 Black Hawks and variants to several foreign government customers for delivery from 2000 through 2004.

Sikorsky is engaged in development of the S-92 aircraft, a large cabin derivative of the Black Hawk helicopter, for commercial and military markets. A significant portion of the development is being carried out by companies in Brazil, the People's Republic of China, Japan, Spain and Taiwan under collaborative arrangements. Regulatory certification of the S-92 is expected in 2002. While marketing efforts for the S-92 have commenced, management cannot predict with certainty whether, when, and in what quantities the S-92 will be produced.

Sikorsky has a 50 percent interest in a joint venture with Boeing for the development of the U.S. Army's next generation light attack and reconnaissance helicopter, the RAH-66 Comanche. The Sikorsky-Boeing joint venture is performing under a cost reimbursement contract awarded in 1991. The first two prototype aircraft are undergoing flight testing, and the Sikorsky-Boeing joint venture has entered into a $3.1 billion Engineering and Manufacturing Development program with the U.S. Army to deliver thirteen Comanche helicopters in 2004 and 2005 for test and evaluation purposes. The first U.S. Army Comanche unit is scheduled to be operationally equipped in 2006. Management cannot predict with certainty whether, when, and in what quantities any additional Comanche aircraft will be produced.

Hamilton Sundstrand primarily sells products and services for use by aerospace customers worldwide. Industrial products are also sold to a diversified group of basic industries. Hamilton Sundstrand's principal aerospace systems, subsystems and components include electric power generating, distribution, management and control systems; fuel and special fluid pumps; engine control systems; gearboxes; actuation systems; ram air turbine emergency systems; auxiliary power units; environmental control systems; propeller systems; launch vehicle hydraulic power units; and electronic controls and components. Hamilton Sundstrand is also the prime contractor for NASA's space suit/life support system and produces environmental control, life support, mechanical systems and thermal control systems for international space programs. Hamilton Sundstrand's principal industrial products include enclosed gear drives; flexible shaft couplings; large ring gears; metering and specialty pumps; rotary screw industrial and portable air compressors; pneumatic tools; dryers and filters; high-speed centrifugal pumps and compressors and leak proof pumps.

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Hamilton Sundstrand's aerospace businesses serve commercial, military, regional, business and general aviation, as well as space and undersea applications. Aftermarket services include spare parts, overhaul and repair and engineering and technical support. Hamilton Sundstrand aerospace products are sold directly to airframe manufacturers, the U.S. Government, aircraft operators and independent distributors. Hamilton Sundstrand sales of aerospace products to Boeing, Pratt & Whitney and Airbus, including sales where the U.S. Government was the ultimate customer, were 11 percent of Flight Systems segment sales in 2000.

Hamilton Sundstrand's industrial products serve industries involved with raw material processing, bulk material handling and construction (including mining; metal and other material processing; hydrocarbon and chemical processing; water and waste water treatment). These industrial products are sold directly to end- users, through manufacturer representatives and distributors and through engineering contractors. Demand for Hamilton Sundstrand's industrial products is tied closely to the level of general economic activity. Hamilton Sundstrand has competitors or potential competitors in both its aerospace and industrial businesses. Hamilton Sundstrand believes that its research and development, proprietary technology, and product and service reputations have been significant in maintaining its competitive standing.

Revenues generated by the Flight Systems segment's international operations, including export sales, were 44 percent and 41 percent of total Flight Systems segment revenues in 2000 and 1999, respectively. At December 31, 2000, Flight Systems' business backlog was $4,593 million, including $2,532 million under funded contracts and subcontracts with the U.S. Government, as compared to $3,930 million and $1,011 million, respectively, at December 31, 1999. Of the total Flight Systems segment backlog at December 31, 2000, approximately $2,985 million is expected to be realized as sales in 2001.

Other
The Corporation's International Fuel Cells unit ("IFC") is a world leader in fuel cell production and development for commercial, transportation, residential and space applications. IFC is the sole supplier of fuel cells for U.S. space missions and also offers a commercially available fuel cell power plant, known as the PC25 (trademark symbol).

The PC25 is a 200 kilowatt stationary fuel cell power plant with a phosphoric acid cell stack. Over 200 PC25 units have been delivered around the world. Fuel cell power plants using proton exchange membrane technology (PEM) are currently in development for transportation, commercial stationary, and residential applications. IFC is working with five automakers and two bus manufacturers, as well as the U.S. Department of Energy, on development and demonstration programs for automobiles.

Although fuel cells are believed to be superior to conventional power generators in terms of efficiency and environmental characteristics, current production rates remain low across the industry. Continued technology advancement and wider market acceptance are required to reduce the production cost of fuel cell components and power plants. There is still significant uncertainty as to whether and when commercially viable PEM fuel cells will be produced. IFC continues to seek strategic partners to develop sources of supply, as well as marketing and distribution channels. Toshiba Corporation owns a 13 percent equity interest in IFC.

The results of IFC are included in the "Eliminations and other" category in the segment financial data in Note 15 of Notes to Consolidated Financial Statements on pages 22 to 24 of the Corporation's 2000 Annual Report to Shareowners.

Other Matters Relating to the Corporation's Business as a Whole

Research and Development
To maintain its competitive position, the Corporation spends substantial amounts of its own funds on research and development. Such expenditures, which are charged to income as incurred, were $1,302 million or 5.0 percent of total sales in 2000, as compared with $1,292 million or 5.4 percent of total sales in 1999 and $1,168 million or 5.1 percent of total sales in 1998. The Corporation also performs research and development work under contracts funded by the U.S. Government and other customers. Such contract research and development, which is performed principally in the Pratt & Whitney segment and to a lesser extent in the Flight Systems segment, amounted to $1,004 million in 2000, as compared with $1,044 million in 1999 and $1,065 million in 1998.

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Contracts, Other Risk Factors, Environmental and Other Matters Government contracts are subject to termination at the convenience of the Government, in which event the Corporation normally would be entitled to reimbursement for its allowable costs incurred plus a reasonable profit. Most of the Corporation's sales are made under fixed-price type contracts; only 4 percent of the Corporation's total sales for 2000 were made under cost- reimbursement type contracts.

Like many defense contractors, the Corporation has received allegations from the U.S. Government that some contract prices should be reduced because cost or pricing data submitted in negotiation of the contract prices may not have been in conformance with government regulations. The Corporation has made voluntary refunds in those cases it believes appropriate, has settled some allegations, and does not believe that any further price reductions that may be required will have a material effect upon its financial position, results of operations or cash flows.

The Corporation is now, and believes that in light of the current government contracting environment it will be, the subject of one or more government investigations. See Item 3 - Legal Proceedings on pages 9 and 10 of this Form 10-K and Note 14 of Notes to Consolidated Financial Statements on page 22 of the Corporation's 2000 Annual Report to Shareowners for further discussion.

The diversification of the Corporation's businesses across industries and geographically throughout the world has helped to limit in varying degrees the effect of adverse conditions in any one industry or the economy of any country or region on the consolidated results of the Corporation. There can be no assurance, however, that the effect of adverse conditions in one or more industries or regions will be limited or offset in the future.

Like other users in the U.S., the Corporation is largely dependent upon foreign sources for certain of its raw materials requirements such as cobalt (Africa) and chromium (Africa, Eastern and Central Europe and the countries of the former Soviet Union). To alleviate this dependence and accompanying risk, the Corporation has a number of on-going programs which include the development of new suppliers; the increased use of more readily available materials through material substitutions and the development of new alloys; and the conservation of materials through scrap reclamation and new manufacturing processes such as net shape forging.

The Corporation has sought cost reductions in its purchases of certain other materials, components, and supplies by consolidating its purchases, reducing the number of suppliers and using online bidding competitions among potential suppliers. In some instances, the Corporation is reliant upon a single source of supply. A disruption in deliveries from its suppliers, therefore, could have an adverse effect on the Corporation's ability to meet its commitments to customers. The Corporation believes that it has appropriately balanced the risks against the costs of sustaining a greater number of suppliers. The Corporation does not foresee any unavailability of materials, components, or supplies which will have any material adverse effect on its overall business, or on any of its business segments, in the near term.

The Corporation does not anticipate that compliance with current federal, state and local provisions relating to the protection of the environment will have a material adverse effect upon its cash flows, competitive position, financial position or results of operations. (Environmental matters are the subject of certain of the legal matters described in Item 3 - Legal Proceedings on pages 9 and 10 of this Form 10-K, and are further addressed in Management's Discussion and Analysis of Results of Operations and Financial Position on page 7 and Notes 1 and 14 of Notes to Consolidated Financial Statements on pages 15 and 22 of the Corporation's 2000 Annual Report to Shareowners.)

Most of the laws governing environmental matters include criminal provisions. If the Corporation were convicted of a violation of the federal Clean Air Act or the Clean Water Act, the facility or facilities involved in the violation would be listed on the Environmental Protection Agency's ("EPA") List of Violating Facilities. The listing would continue until the EPA concluded that the cause of the violation had been cured. Listed facilities cannot be used in performing any U.S. Government contract awarded to the Corporation during any period of listing by the EPA.

While the Corporation's patents, trademarks, licenses and franchises are cumulatively important to its business, the Corporation does not believe that the loss of any one or group of related patents, trademarks, licenses or franchises would have a material adverse effect on the overall business of the Corporation or on any of its operating segments.

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Cautionary Note Concerning Factors That May Affect Future Results This Form 10-K 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 materials released to the public. These forward-looking statements are intended to provide Management's current expectations or plans for the future operating and financial performance of the Corporation, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "believe," "expect," "plans," "strategy," "prospects," "estimate," "project," "anticipate" and other words of similar meaning in connection with a discussion of future operating or financial performance. These include, among others, statements relating to:

. Future earnings and other measurements of financial performance . Future cash flow and uses of cash
. The effect of economic downturns or growth in particular regions . The effect of changes in the level of activity in particular industries or markets
. The scope, nature or impact of acquisition activity . Product developments and new business opportunities, including e-business . Restructuring costs and savings
. The outcome of contingencies
. The transition to the use of the euro as a currency.

All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. This Annual Report on Form 10-K for 2000 includes important information as to risk factors in the "Business" section under the headings "Description of Business by Operating Segment," "Other Matters Relating to the Corporation's Business as a Whole" and "Legal Proceedings." Additional important information as to risk factors is included in the Corporation's 2000 Annual Report to Shareowners in the section titled "Management's Discussion and Analysis of Results of Operations and Financial Position" under the headings "Business Environment," "Results of Continuing Operations," "Business Acquisitions," "Restructuring and Other Costs," "Liquidity and Financing Commitments," "Market Risk and Risk Management," "Environmental Matters," "U.S. Government," "New Accounting Pronouncements," and "Euro Conversion," which is incorporated by reference in this Form 10-K. For additional information identifying factors that may cause actual results to vary materially from those stated in the forward-looking statements, see the Corporation's reports on Forms 10-Q and 8-K filed with the Securities and Exchange Commission from time to time.

Employees
At December 31, 2000, the Corporation's total employment was approximately 153,800. For discussion of the effects of the Corporation's restructuring actions on employment, see Management's Discussion and Analysis of Results of Operations and Financial Position on page 4 and Note 11 of Notes to Consolidated Financial Statements on pages 20 to 21 of the Corporation's 2000 Annual Report to Shareowners.

 
Item 2. Properties

The Corporation's fixed assets as of December 31, 2000 include the plants and warehouses described below and a substantial quantity of machinery and equipment, most of which is general purpose machinery and equipment using special jigs, tools and fixtures and in many instances having automatic control features and special adaptations. The plants, warehouses, machinery and equipment in use as of December 31, 2000 are in good operating condition, are well maintained, and substantially all are in regular use.

The following square footage numbers are approximations. At December 31, 2000, the Corporation operated (a) plants in the U.S. which had 30.6 million square feet, of which 3.3 million square feet were leased; (b) plants outside the U.S. which had 18.8 million square feet, of which 1.8 million square feet were leased; (c) warehouses in the U.S. which had 8.9 million square feet, of which 5.5 million square feet were leased; and (d) warehouses outside the U.S. which had 8.5 million square feet, of which 6.1 million square feet were leased.

For discussion of the effect of the Corporation's restructuring actions on production facilities, see Management's Discussion and Analysis of Results of Operations and Financial Position on page 4 and Note 11 of Notes to the Consolidated Financial Statements on pages 20 to 21 of the Corporation's 2000 Annual Report to Shareowners.

- 8 -

Management believes that the fixed assets capitalized and the facilities in operation at December 31, 2000 for the production of the Corporation's products are suitable and adequate for the business conducted therein in the current business environment, are being appropriately utilized consistent with experience and have sufficient production capacity for their present intended purposes. Utilization of the facilities varies based on demand for the products. The Corporation continuously reviews its anticipated requirements for facilities and, based on that review, may from time to time acquire additional facilities and/or dispose of existing facilities.

 
Item 3. Legal Proceedings

As previously reported, the Department of Defense and the Corporation are litigating whether Pratt & Whitney's accounting practices for certain engine parts are acceptable. The litigation, filed with the Armed Services Board of Contract Appeals ("ASBCA"), No. 47416 et al., relates to the accounting for engine parts produced by foreign companies under commercial engine collaboration programs from 1984 through 1995. In December 1996 the Government claimed damages of $157.6 million, plus $102.7 million in interest through 1996. Pratt & Whitney believes its accounting practices are proper and has not modified them. In March and April 1998, the matter was tried before an ASBCA judge. A decision is anticipated in 2001. Should the Government prevail on liability, damages could be larger than initially claimed because the Government may amend its claim to include the period after 1995 and interest continues to accrue on the claim asserted in 1996.

As previously reported, a jury in Chromalloy Gas Turbine Corporation v. United Technologies Corporation, No. 95-CI-12541, a Texas state action, found that Pratt & Whitney did not monopolize any relevant market but did willfully attempt to monopolize an unspecified market. In May 1997, the court entered a Final Judgment denying Chromalloy's request for damages, injunctive relief and declaratory relief. In October 1998, the Texas Fourth Court of Appeals affirmed the decision of the trial court, declining to grant injunctive relief to Chromalloy. In November 1999, the appellate court denied Chromalloy's motions for rehearing and rehearing en banc. In March 2000, Chromalloy filed a petition for review with the Texas Supreme Court. In December 2000, the Texas Supreme Court denied Chromalloy's petition for review. In January 2001, Chromalloy filed a motion for rehearing with the Texas Supreme Court.

As previously reported, the Corporation has been served with two qui tam complaints under the civil False Claims Act in United States District Court for the District of Connecticut: U.S. ex rel. Drake v. Norden Systems, Inc. and UTC, No.394CV00963 (filed July 1997, and involving allegations of improper accounting for fixed assets) and U.S. ex rel. Capella v. UTC and Norden Systems Inc., No. 394CV02063 (filed December 1994, and involving allegations of improper accounting for insurance costs). The civil False Claims Act provides for penalties in a civil case of up to $10,000 per false claim submitted. The number of false claims implicated by the foregoing qui tam complaints cannot currently be ascertained; however, if determined adversely to the Corporation, the number could result in significant penalties. The qui tam relator in each case has claimed unspecified damages (trebled) and penalties, and the Department of Justice in each case has declined to take over the litigation. In August 2000, the court dismissed portions of the complaints.

In March 1999, the Department of Justice filed a civil False Claims Act complaint against the Corporation in United States District Court for the Southern District of Ohio (Western Division), No. C-3-99-093. This lawsuit is related to the "Fighter Engine Competition" between Pratt & Whitney's F100 engine and GE's F110 engine, for contracts awarded by the U.S. Air Force between fiscal years 1985 and 1990, inclusive. The Government alleges that Pratt & Whitney inflated its estimated costs for purchased parts and withheld data that would have revealed the overstatements. The Government seeks damages of at least $95 million (some portion of which would be trebled plus penalties of up to $10,000 per claim submitted).

The Corporation does not believe that resolution of any of the foregoing legal matters will have a material adverse effect upon the Corporation's competitive position, results of operations, cash flows, or financial position.

The Corporation is now, and believes that in light of the current government contracting environment it will be, the subject of one or more government investigations. If the Corporation or one of its business units were charged with wrongdoing as a result of any of these investigations, the Corporation or one of its business units could be suspended from bidding on or receiving awards of new government contracts pending the completion of legal proceedings. If convicted or found liable, the Corporation could be fined and debarred from new government contracting for a period generally not to exceed three years. Any contracts found to be tainted by fraud could be voided by the Government.

- 9 -

The Corporation has incurred and will likely continue to incur liabilities under various state and federal statutes for the cleanup of pollutants previously released into the environment. The Corporation believes that any payments it may be required to make as a result of these claims will not have a material effect upon the cash flows, competitive or financial position, or results of operations of the Corporation. (For information regarding the matters discussed in this paragraph, see "Environmental Matters" in Management's Discussion and Analysis of Results of Operations and Financial Position on page 7 and Notes 1 and 14 of Notes to Consolidated Financial Statements on pages 15 and 22 of the Corporation's 2000 Annual Report to Shareowners.)

 
Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to security holders for a vote during the fourth quarter ended December 31, 2000.

----- Executive Officers of the Registrant

The executive officers of United Technologies Corporation, together with the offices presently held by them, their business experience since January 1, 1996, and their ages, are as follows:

                                   Other Business
                                   Experience                Age
Name           Title               Since 1/1/96             2/1/01

Jonathan W.    President,          President, Carrier        44
Ayers          Carrier             Asia Pacific
               Corporation         Operations; Vice
               (since 2000)        President-Strategic
                                   Planning, United
                                   Technologies
                                   Corporation

Dean C.        President,          Senior Vice President,    59
Borgman        Sikorsky Aircraft   The Boeing Company;
               (since 1998)        President, McDonnell
                                   Douglas Helicopter
                                   Company

Ari Bousbib    Executive Vice      Vice President,           39
               President and       Corporate Strategy and
               Chief Operating     Development; Vice
               Officer, Otis       President, Strategic
               (since January      Planning, United
               2001)               Technologies
                                   Corporation; Managing
                                   Director, The
                                   Strategic Partners
                                   Group

William L.     Senior Vice                                   58
Bucknall, Jr.  President, Human           -------
               Resources and
               Organization
               (since 1992)

John F.        Senior Vice         Vice President, United    57
Cassidy, Jr.   President -         Technologies Research
               Science and         Center
               Technology (since
               1998) and Vice
               President, United
               Technologies
               Research Center

Louis          President, Pratt    Executive Vice            43
Chenevert      & Whitney (since    President-Operations,
               1999)               Pratt & Whitney; Vice
                                   President -
                                   Operations, Pratt &
                                   Whitney Canada

George David   Chairman (since     President (1992-1999)     58
               1997) and Chief
               Executive Officer
               (since 1994)

John E.        Vice President,     Senior Vice President     54
Evard, Jr.     Taxes               Corporate Development
               (since August       & General Tax Counsel,
               2000)               Senior Vice President
                                   & General Tax Counsel,
                                   CNH Global N.V.; Vice
                                   President & General
                                   Tax Counsel, Case
                                   Corporation

- 10 -

                                   Other Business
                                   Experience                Age
Name           Title               Since 1/1/96             2/1/01

David J.       Senior Vice         Senior Vice President     46
FitzPatrick    President, Chief    & Chief Financial
               Financial Officer   Officer, United
               and Treasurer       Technologies
               (since June 2000)   Corporation; Vice
                                   President and
                                   Controller, Eastman
                                   Kodak Co.

Ruth R.        Senior Vice         President and Chief       56
Harkin         President,          Executive Officer,
               International       Overseas Private
               Affairs and         Investment Corporation
               Government
               Relations, United
               Technologies
               Corporation and
               Chair, United
               Technologies
               International
               (since 1997)

Karl J.        President and       Executive Vice            52
Krapek         Chief Operating     President, United
               Officer (since      Technologies
               1999)               Corporation (1997-
                                   1999) and President,
                                   Pratt & Whitney
                                   (1992-1999)

Robert F.      Executive Vice      Executive Vice            44
Leduc          President and       President, Pratt &
               Chief Operating     Whitney
               Officer, Pratt &
               Whitney (since
               September 2000)

Ronald F.      President,          Executive Vice            60
McKenna        Hamilton            President, Sundstrand
               Sundstrand          Corporation and Chief
               Corporation         Operating Officer,
               (since 1999)        Sundstrand Aerospace

Angelo J.      Vice President,     Vice President,           47
Messina        Corporate           Financial Planning and
               Strategy and        Analysis; Director,
               Development         Financial Planning and
               (since January      Analysis, United
               2001)               Technologies
                                   Corporation; Vice
                                   President, Group
                                   Strategic Planning,
                                   Pratt & Whitney;
                                   Director, Investor
                                   Relations, United
                                   Technologies
                                   Corporation

David G. Nord  Vice President,     Acting Controller;        43
               Controller          Assistant Controller,
               (since October      Financial Reporting
               2000)               and Accounting, United
                                   Technologies
                                   Corporation;
                                   Corporate Controller,
                                   Pittston Co.

Stephen F.     Executive Vice      Executive Vice            61
Page           President, United   President and Chief
               Technologies        Financial Officer,
               Corporation and     United Technologies
               President and       Corporation
               Chief Executive
               Officer, Otis
               (since 1997)

William H.     Senior Vice         Vice President,           57
Trachsel       President,          Secretary and Deputy
               General Counsel     General Counsel
               and Secretary
               (since 1998)

All of the officers serve at the pleasure of the Board of Directors of United Technologies Corporation or the subsidiary designated.

- 11 -

 
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters

See Comparative Stock Data appearing on page 24 of the Corporation's 2000 Annual Report to Shareowners containing the following data relating to the Corporation's Common Stock: principal market, quarterly high and low sales prices, approximate number of shareowners and frequency and amount of dividends. All such data are incorporated by reference in this Form 10-K.

 
Item 6. Selected Financial Data

See the Five Year Summary appearing on page 1 of the Corporation's 2000 Annual Report to Shareowners containing the following data: revenues, net income, basic and diluted earnings per share, cash dividends per common share, total assets and long-term debt. All such data are incorporated by reference in this Form 10-K. See Notes to Consolidated Financial Statements appearing on pages 14 to 24 of the Corporation's 2000 Annual Report to Shareowners for a description of any accounting changes and acquisitions or dispositions of businesses materially affecting the comparability of the information reflected in such Five Year Summary.

 
Item 7. Management's Discussion and Analysis of Results of Operations and Financial Position

See Management's Discussion and Analysis of Results of Operations and Financial Position appearing on pages 2 through 8 of the Corporation's 2000 Annual Report to Shareowners; such discussion and analysis is incorporated by reference in this Form 10-K.

 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk

For information concerning market risk sensitive instruments, see discussion under the headings "Market Risk and Risk Management" in Management's Discussion and Analysis of Results of Operations and Financial Position on page 7 and "Hedging Activity" at Note 1 and Notes 12 and 13 on pages 14 to 15 and 21 to 22 of the Corporation's 2000 Annual Report to Shareowners. Such information is incorporated by reference in this Form 10-K.

 
Item 8. Financial Statements and Supplementary Data

The 2000 and 1999 Consolidated Balance Sheet, and other financial statements for the years 2000, 1999 and 1998, together with the report thereon of PricewaterhouseCoopers LLP dated January 18, 2001, appearing on pages 9 through 13 in the Corporation's 2000 Annual Report to Shareowners are incorporated by reference in this Form 10-K. The 2000 and 1999 Selected Quarterly Financial Data appearing on page 24 in the Corporation's 2000 Annual Report to Shareowners are incorporated by reference in this Form 10-K.

 
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

 
Item 10. Directors and Executive Officers of the Registrant

The information required by Item 10 with respect to directors is incorporated herein by reference to the section of the Corporation's Proxy Statement for the 2001 Annual Meeting of Shareowners entitled "General Information Concerning the Board of Directors Nominees." Information regarding executive officers is contained in Part I of this Form 10-K under the heading "Executive Officers." Information concerning Section 16(a) compliance is contained in the section of the Corporation's Proxy Statement for the 2001 Annual Meeting of Shareowners entitled "Section 16(a) Beneficial Ownership Reporting Compliance."

 
Item 11. Executive Compensation

The information required by Item 11 is incorporated herein by reference to the sections of the Corporation's Proxy Statement for the 2001 Annual Meeting of Shareowners entitled "Report of Committee on Compensation and Executive Development" and "Compensation of Executive Officers." Such incorporation by reference shall not be deemed to specifically incorporate by reference the information referred to in Item 402(a)(8) of Regulation S-K.

- 12 -

 
Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by Item 12 is incorporated herein by reference to the section of the Corporation's Proxy Statement for the 2001 Annual Meeting of Shareowners entitled "Security Ownership of Directors, Nominees and Executive Officers."

 
Item 13. Certain Relationships and Related Transactions

The information required by Item 13 is incorporated herein by reference to the section of the Corporation's Proxy Statement for the 2001 Annual Meeting of Shareowners entitled "Compensation of Executive Officers--Certain Business Relationships."

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) Financial Statements, Financial Statement
    Schedules and Exhibits

   (1) Financial Statements (incorporated by           Page Number
       reference from the 2000 Annual Report to         in Annual
       Shareowners):                                      Report


        Report of Independent Accountants .................  9

        Consolidated Statement of Operations for the
        three years ended December 31, 2000 ............... 10

        Consolidated Balance Sheet-December 31, 2000
        and 1999 .......................................... 11

        Consolidated Statement of Cash Flows for the
        three years ended December 31, 2000 ............... 12

        Notes to Consolidated Financial Statements ........ 14

        Selected Quarterly Financial Data (Unaudited) ..... 24

                                                       Page Number
   (2) Financial Statement Schedule for the three        in Form
       years ended December 31, 2000:                      10-K

        Report of Independent Accountants on Financial Statement
        Schedule .......................................... S-I

        Schedule II Valuation and Qualifying Accounts ..... S-II

        Consent of Independent Accountants ................ F-1

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.

(3)Exhibits:

The following list of exhibits includes exhibits submitted with this Form 10-K as filed with the SEC and those incorporated by reference to other filings.

Exhibit Number
3(i) Restated Certificate of Incorporation, incorporated by reference to Exhibit 3(i) to United Technologies Corporation Quarterly Report on Form 10-Q (Commission File number 1-812) for quarterly period ended June 30, 2000.

3(ii) Bylaws as amended and restated effective February 8, 1999, incorporated by reference to Exhibit 3(ii) to United Technologies Corporation Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1999.

- 13 -

Exhibit Number
4(a) Indenture, dated as of April 1, 1990, between the Corporation and State Street Bank and Trust Company (as successor to The Connecticut National Bank), as trustee (incorporated by reference to Exhibit 4(a) to the Corporation's Registration Statement on Form S-3, File No. 333-74195, filed with the SEC on March 10, 1999). The Corporation hereby agrees to furnish to the Commission upon request a copy of each other instrument defining the rights of holders of long- term debt of the Corporation and its consolidated subsidiaries and any unconsolidated subsidiaries.

10.1 United Technologies Corporation 1979 Long Term Incentive Plan, incorporated by reference to Exhibit
10(i) to United Technologies Corporation Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992.

10.2 United Technologies Corporation Annual Executive Incentive Compensation Plan, as amended.*

10.3 United Technologies Corporation Disability Insurance Benefits for Executive Control Group, incorporated by reference to Exhibit 10 (iii) to United Technologies Corporation Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992.

10.4 United Technologies Corporation Executive Estate Preservation Program, incorporated by reference to Exhibit 10(iv) to United Technologies Corporation Annual Report on Form 10-K (Commission file number 1- 812) for fiscal year ended December 31, 1992.

10.5 United Technologies Corporation Pension Preservation Plan, incorporated by reference to Exhibit 10(v) for United Technologies Corporation Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992.

10.6 United Technologies Corporation Senior Executive Severance Plan, incorporated by reference to Exhibit
10(vi) to United Technologies Corporation Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992.

10.7 United Technologies Corporation Deferred Compensation Plan, as amended.*

10.8 Otis Elevator Company Incentive Compensation Plan, incorporated by reference to Exhibit 10(viii) to United Technologies Corporation Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992.

10.9 United Technologies Corporation Directors Retirement Plan, as amended.*

10.10 United Technologies Corporation Deferred Compensation Plan for Non-Employee Directors, incorporated by reference to Exhibit 10(x) to United Technologies Corporation Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992.

10.11 United Technologies Corporation Long Term Incentive Plan, as amended.*

10.12 United Technologies Corporation Executive Disability, Income Protection and Standard Separation Agreement Plan, incorporated by reference to Exhibit 10(xii) to United Technologies Corporation Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992.

10.13 United Technologies Corporation Directors' Restricted Stock/Unit Program, incorporated by reference to Exhibit 10(xiii) to United Technologies Corporation Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1992.

10.14 United Technologies Corporation Board of Directors Deferred Stock Unit Plan*, and Amendment 1 thereto
(incorporated by reference to Exhibit (10)(iii)(A)(1) to United Technologies Corporation Report on Form 10-Q (Commission file number 1-812) for quarterly period ended June 30, 2000).

- 14 -

Exhibit Number
10.15 United Technologies Corporation Pension Replacement Plan, incorporated by reference to Exhibit 10(xv) to United Technologies Corporation Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1993.

10.16 United Technologies Corporation Special Retention and Stock Appreciation Program, incorporated by reference to Exhibit 10(xvi) to United Technologies Corporation Report on Form 10-Q (Commission file number 1-812) for quarterly period ended September 30, 1995.

10.17 United Technologies Corporation Nonemployee Director Stock Option Plan*, and Amendment 1 thereto
(incorporated by reference to Exhibit (10)(iii)(A)(2) to United Technologies Corporation Report on Form 10-Q (Commission file number 1-812) for quarterly period ended June 30, 2000).

10.18 Merger Agreement, dated as of February 21, 1999, among United Technologies Corporation, HSSail Inc. and Sundstrand Corporation, incorporated by reference to Exhibit 2.1 to United Technologies Corporation Report on Form 8-K (Commission file number 1-812) dated February 21, 1999 and filed with the SEC on February 23, 1999.

10.19 Stock Purchase Agreement, dated as of March 16, 1999, by and between Nevada Bond Investment Corp. II and Lear Corporation, incorporated by reference to Exhibit 99.1 to United Technologies Corporation Report on Form 8-K (Commission file number 1-812) dated March 16, 1999 and filed with the SEC on March 19, 1999.

10.20 Incentive compensation letter agreement dated December 21, 1998 and signed April 1, 1999 between the Corporation and C. Scott Greer, President of UT Automotive, incorporated by reference to Exhibit 10.1 to United Technologies Corporation Report on Form 10-Q (Commission file number 1-812) for the Quarter ended June 30, 1999.

11 Statement re: Computation of Per Share Earnings.**

12 Statement re: Computation of Ratio of Earnings to Fixed Charges.**

13 Annual Report to Shareowners for year ended December 31, 2000 (except for the pages and information thereof expressly incorporated by reference in this Form 10-K, the Annual Report to Shareowners is provided solely for the information of the Securities and Exchange Commission and is not to be deemed "filed" as part of this Form 10-K).**

21 Subsidiaries of the Registrant.**

23 Consent of PricewaterhouseCoopers LLP, included as page F-1 of this Form 10-K.

24 Powers of Attorney of Antonia Handler Chayes, Jean- Pierre Garnier, Jamie S. Gorelick, Charles R. Lee, Richard D. McCormick, Frank P. Popoff, Andre Villeneuve, Harold A. Wagner and Sanford I. Weill.**

Notes to Exhibits List:

* Incorporated by reference to Exhibit of the same number to United Technologies Corporation Annual Report on Form 10-K (Commission file number 1-812) for fiscal year ended December 31, 1995. ** Submitted electronically herewith.

Exhibits 10.1 through 10.20 are contracts or compensatory plans required to be filed as exhibits pursuant to Item 14(c) of the requirements for Form 10-K reports.

(b) No reports on Form 8-K were filed by the Corporation during the quarter ended December 31, 2000.

- 15 -

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UNITED TECHNOLOGIES CORPORATION
(Registrant)


                           By /s/ David J. FitzPatrick
                              David J. FitzPatrick
Date:  February 12, 2001      Senior Vice President, Chief Financial
                              Officer and Treasurer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on the date set forth below.


Signature                  Title                  Date

/s/ George David           Chairman, Director     February 12, 2001
    George David           and Chief Executive
                           Officer

/s/ Karl J. Krapek         Director, President    February 12, 2001
    Karl J. Krapek         and Chief Operating
                           Officer

/s/ David J. Fitzpatrick   Senior Vice            February 12, 2001
    David J. Fitzpatrick   President, Chief
                           Financial Officer
                           and Treasurer

/s/ David G. Nord          Vice President,        February 12, 2001
    David G. Nord          Controller

ANTONIA HANDLER CHAYES*    Director    )
(Antonia Handler Chayes)
                                                  *By:/s/William H. Trachsel
JEAN-PIERRE GARNIER*       Director    )                 William H. Trachsel
(Jean-Pierre Garnier)                                    Attorney-in-Fact
                                                   Date: February 12, 2001


JAMIE S. GORELICK*
(Jamie S. Gorelick) Director )

CHARLES R. LEE*            Director    )
(Charles R. Lee)

RICHARD D. MCCORMICK*      Director    )
(Richard D. McCormick)

FRANK P. POPOFF*           Director    )
(Frank P. Popoff)

ANDRE VILLENEUVE*          Director    )
(Andre Villeneuve)

HAROLD A. WAGNER*          Director    )
(Harold A. Wagner)

SANFORD I. WEILL*
(Sanford I. Weill) Director )

- 16 -

 
REPORT OF INDEPENDENT ACCOUNTANTS ON

FINANCIAL STATEMENT SCHEDULE

To the Shareowners
of United Technologies Corporation

Our audits of the consolidated financial statements referred to in our report dated January 18, 2001 appearing on page 9 of the 2000 Annual Report to Shareowners of United Technologies Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.


/s/  PricewaterhouseCoopers LLP
     PricewaterhouseCoopers LLP
     Hartford, Connecticut
     January 18, 2001


S-I



      UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES
      Schedule II - Valuation and Qualifying Accounts
            Three Years Ended December 31, 2000
                   (Millions of Dollars)

Allowances for Doubtful Accounts and Other Customer Financing Activity:
Balance December 31, 1997                    $     381
  Provision charged to income                       67
  Doubtful accounts written off (net)              (32)
  Other adjustments                                (21)


Balance December 31, 1998                          395
  Provision charged to income                       46
  Doubtful accounts written off (net)              (14)
  Other adjustments                                 56


Balance December 31, 1999                          483
  Provision charged to income                       41
  Doubtful accounts written off (net)              (27)
  Other adjustments                                 (6)


Balance December 31, 2000                    $     491





Future Income Tax Benefits - Valuation allowance:

Balance December 31, 1997                    $     277
  Additions charged to income tax expense           35
  Reductions credited to income tax expense        (93)


Balance December 31, 1998                          219
  Additions charged to income tax expense           70
  Reductions credited to income tax expense        (56)


Balance December 31, 1999                          233
  Additions charged to income tax expense           24
  Reductions credited to income tax expense        (49)


Balance December 31, 2000                    $     208






                                      S-II


CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-3 (Nos. 333- 51830, 333-89041 and 333-91959), in the Registration Statement on Form S-4 (No. 333-77991) as amended by Post-Effective Amendment No. 1 on Form S-8 (No. 333-77991-01) and in the Registration Statements on Form S-8 (Nos. 333- 21853, 333-18743, 333-21851, 33-57769, 33-45440, 33-11255, 33-26580, 33- 26627, 33-28974, 33-51385, 33-58937, 2-87322, 333-77817 and 333-82911) of United Technologies Corporation of our report dated January 18, 2001 relating to the financial statements, which appears on page 9 of the 2000 Annual Report to Shareowners, which is incorporated by reference in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated January 18, 2001 on the Financial Statement Schedule, which appears on page S-I of this Form 10-K.


/s/  PricewaterhouseCoopers LLP
     PricewaterhouseCoopers LLP
     Hartford, Connecticut
     February 12, 2001


F-1

 


 

                               UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                    Computations of Basic Earnings Per Share and Diluted Earnings Per Share

                                  For the Five Years Ended December 31, 2000
                                (Millions of Dollars, except per share amounts)


                                                            2000         1999        1998        1997        1996

Net Income                                             $    1,808   $    1,531   $   1,255   $   1,072   $     906

ESOP Convertible Preferred Stock dividend                     (32)         (33)        (33)        (32)        (30)

Basic earnings for period                              $    1,776   $    1,498  $    1,222   $   1,040   $     876

ESOP Convertible Preferred Stock adjustment                    28           28          28          27          24

Diluted earnings for period                            $    1,804   $    1,526  $    1,250   $   1,067   $     900


Basic average number of shares outstanding during the
  period (thousands)                                      470,124      465,611     455,534     468,886     482,908

Stock awards (thousands)                                   11,256       13,806      11,944      11,756       9,754
ESOP Convertible Preferred Stock (thousands)               26,630       27,287      27,282      26,468      24,550

Diluted average number of shares outstanding during
  the period (thousands)                                  508,010      506,704     494,760     507,110     517,212


Basic earnings per common share                        $     3.78   $     3.22  $     2.68  $     2.22   $    1.81

Diluted earnings per common share                      $     3.55   $     3.01  $     2.53  $     2.10   $    1.74



 
 

 


                               UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                         Statement RE Computation of Ratio of Earnings to Fixed Charges
                                              (Millions of Dollars)





                                                            2000          1999         1998         1997         1996
Fixed Charges:
  Interest expense                                     $       382  $       260  $       197  $       188  $       213
  Interest capitalized                                          18           15           12           10           16
  One-third of rents*                                           64           64           77           80           80

  Total Fixed Charges                                  $       464  $       339  $       286  $       278  $       309

Earnings:
  Income from continuing operations
    before income taxes and minority interests         $     2,758  $     1,257  $     1,810  $     1,574  $     1,317

  Fixed charges per above                                      464          339          286          278          309
  Less: interest capitalized                                   (18)         (15)         (12)         (10)         (16)
                                                               446          324          274          268          293

  Amortization of interest capitalized                          21           25           31           34           35

  Total Earnings                                       $     3,225  $     1,606  $     2,115  $     1,876  $     1,645

Ratio of Earnings to Fixed Charges                            6.95         4.74         7.40         6.75         5.32



* Reasonable approximation of the interest factor.




 
 

EXHIBIT 13

Five Year Summary

IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS             2000       1999       1998       1997       1996
-------------------------------------------------------  --------  ------------------------------------------
For the year
Revenues                                                 $ 26,583   $ 24,127   $ 22,809   $ 21,288   $ 19,872
Research and development                                    1,302      1,292      1,168      1,069      1,014
Income from continuing operations                           1,808        841      1,157        962        788
Net income                                                  1,808      1,531      1,255      1,072        906
Earnings per share:
  Basic:
    Continuing operations                                    3.78       1.74       2.47       1.98       1.57
    Net earnings                                             3.78       3.22       2.68       2.22       1.81
  Diluted:
    Continuing operations                                    3.55       1.65       2.33       1.89       1.51
    Net earnings                                             3.55       3.01       2.53       2.10       1.74
Cash dividends per common share                              .825        .76       .695        .62        .55
Average number of shares of Common Stock outstanding:
  Basic                                                     470.1      465.6      455.5      468.9      482.9
  Diluted                                                   508.0      506.7      494.8      507.1      517.2
Return on average common shareowners' equity, after tax     24.4%      24.6%      28.6%      24.5%      21.1%
Operating cash flows                                        2,503      2,310      2,314      1,903      1,886
Acquisitions, including debt assumed                        1,340      6,268      1,237        605        335
Share repurchase                                              800        822        650        849        459

At year end
Working capital, continuing operations                   $  1,318   $  1,412   $  1,359   $  1,712   $  2,168
Total assets                                               25,364     24,366     17,768     15,697     15,566
Long-term debt, including current portion                   3,772      3,419      1,669      1,389      1,506
Total debt                                                  4,811      4,321      2,173      1,567      1,709
  Debt to total capitalization                                39%        38%        33%        28%        28%
ESOP Preferred Stock, net                                     432        449        456        450        434
Shareowners' equity                                         7,662      7,117      4,378      4,073      4,306
-------------------------------------------------------  --------  ------------------------------------------
Number of employees - continuing operations               153,800    148,300    134,400    130,400    123,800
-------------------------------------------------------  --------  ------------------------------------------

UNITED TECHNOLOGIES 1

Management's Discussion and Analysis

> Management's Discussion and Analysis of Results of Operations and Financial Position

The Corporation's operations are classified into four principal operating segments: Otis, Carrier, Pratt & Whitney and Flight Systems. Otis and Carrier serve customers in the commercial and residential property industries. Carrier also serves commercial and transport refrigeration customers. Pratt & Whitney and the Flight Systems segment, which includes Sikorsky Aircraft ("Sikorsky") and Hamilton Sundstrand, primarily serve commercial and government customers in the aerospace industry. The Corporation's segment operating results are discussed in the Segment Review and Note 15 of the Notes to Consolidated Financial Statements.

> Business Environment

As worldwide businesses, the Corporation's operations are affected by regional and industry economic factors. However, the Corporation's geographic and industry diversity has helped limit the impact of any one industry or the economy of any single country on the consolidated results.

Revenues from outside the U.S., including U.S. export sales, in dollars and as a percentage of total segment revenues, are as follows:

IN MILLIONS OF DOLLARS       2000     1999     1998  2000  1999  1998
------------------------- -------  -------  -------  ----  ----  ----
Europe                    $ 4,413  $ 4,433  $ 4,252   17%   18%   18%
Asia Pacific                3,319    2,615    2,487   12%   11%   11%
Other foreign               2,820    2,472    2,517   11%   10%   11%
U.S. Exports                4,134    3,642    4,097   15%   15%   17%
------------------------- -------  -------  -------  ----  ----  ----
International
 Segment Revenues         $14,686  $13,162  $13,353   55%   54%   57%
------------------------- -------  -------  -------  ----  ----  ----

The economic recovery in the Asia Pacific region continued during 2000, however, the recovery has varied by industry. In particular, growth in the construction and related industries proceeded at a slower pace than overall growth in the region. Vacancy rates generally remain high and it may take several years for the market to absorb the excess space. Although substantial projects have recently been initiated, overall construction spending in the region remains below the levels experienced immediately before the 1997 economic downturn. Management believes that the long-term economic growth prospects of the region remain intact and, consequently, the Corporation's Asia Pacific investment strategy continues to focus on the long-term infrastructure requirements of the region.

As part of its globalization strategy, the Corporation has invested in businesses in other countries, including the People's Republic of China, Russia, Brazil and South Korea, which carry higher levels of currency, political and economic risk. At December 31, 2000, the Corporation's net investment in any one of these countries was less than 5% of consolidated equity.

During 2000, the decline in the euro had a negative impact on the translation of euro-denominated operating results into U.S. dollars.

OTIS is the world's largest elevator and escalator manufacturing and service company. It serves an international customer base, principally in commercial real estate. In 2000, 77% of its revenues were generated outside the U.S. Otis' results can be impacted by various economic factors, including fluctuations in commercial construction (which can affect new equipment installations), labor costs (which can impact service and maintenance margins on installed elevators and escalators), interest rates and foreign currency exchange rates.

During 2000, U.S. office building construction starts continued to gradually decline from their 1998 peak, but remained at high levels. In response to tight market conditions and the resulting demand for space, construction order activity remained strong but showed some signs of slowing. National office vacancy rates remained low, but increased slightly as market conditions eased.

CARRIER is the world's largest manufacturer of commercial and residential heating, ventilating and air conditioning ("HVAC") systems and equipment. Carrier is also a leading producer of commercial and transport refrigeration equipment and provides aftermarket service and components for both the HVAC and refrigeration industries. During 2000, 48% of Carrier's revenues were generated outside the U.S. and by U.S. exports. Carrier's results can be impacted by a number of external factors, including commercial and residential construction activity, production and utilization of transport equipment, weather conditions, fuel prices, interest rates and foreign currency exchange rates.

During 2000, a cooler summer selling season in many regions of the U.S. adversely impacted North American residential operations during a portion of the year. U.S. residential housing and commercial construction starts decreased slightly in 2000 compared to 1999. Higher fuel prices and interest rates contributed to a weakness in the North American truck/trailer transport refrigeration market during 2000 that is expected to continue into 2001.

PRATT & WHITNEY and the FLIGHT SYSTEMS segments comprise the Corporation's aerospace businesses and produce commercial and government aerospace and defense products. The financial performance of those segments is directly tied to the aviation and defense industries. Traffic growth, load factors, worldwide airline profits and general economic activity have been reliable indicators for new aircraft and aftermarket orders. Spare part sales and aftermarket service trends can be impacted by many factors, including usage, pricing, regulatory changes and retirement of older aircraft. Growth in the general aviation sector has been closely tied to the overall health of the economy and is positively correlated to corporate profits.

During 2000, traffic growth and load factors increased. Airlines discussed potential consolidation as worldwide airline profits decreased, in part due to rising fuel costs and labor issues. Aircraft manufacturers and airlines continued to reduce supplier bases and seek lower cost packages. Backlog in the general aviation and corporate sectors continued to grow. Future growth in those sectors is expected to slow.

The defense portion of the Corporation's aerospace businesses continues to respond to a changing global political environment. The U.S. and European defense industries continue to reduce costs and consolidate in response to continued pressure on U.S. and global defense spending. Customers have ongoing efforts to review and reprioritize research and procurement initiatives and foreign

2 UNITED TECHNOLOGIES


military programs have been delayed. During 2000, the Corporation's total sales to the U.S. Government were $2,875 million or 11% of total sales, compared with $3,342 million or 14% of total sales in 1999 and $3,264 million or 14% of total sales in 1998.

PRATT & WHITNEY is a major supplier of commercial, general aviation and military aircraft engines, along with spare parts, product support and a full range of aftermarket and fleet management services. Pratt & Whitney is responding to market pressures by diversifying its product base for large commercial engines from the wide-bodied aircraft market to include engines designed specifically for the narrow-bodied aircraft market. In addition, the aftermarket business is being impacted by technological improvements to newer generation engines that increase reliability and by increased competition. In response, Pratt & Whitney continues to enhance its aftermarket business through acquisitions and repositioning actions aimed at improving efficiency.

Pratt & Whitney continues to provide engines and aftermarket products and services to both U.S. and foreign governments. Pratt & Whitney's engines have been selected to power the Air Force's F22 fighter aircraft and demonstration aircraft of the Joint Strike Fighter program. The Joint Strike Fighter program is intended to lead to the development of a single aircraft, with configurations for conventional and short take off and landing, for the U.S. Navy, Air Force and Marine Corps and the United Kingdom Royal Navy.

FLIGHT SYSTEMS SEGMENT provides global products and service through Hamilton Sundstrand and Sikorsky. Hamilton Sundstrand provides aerospace and industrial products and aftermarket services for diversified industries. Aerospace products include aircraft power generation management and distribution systems, and environmental, flight and fuel control systems. Hamilton Sundstrand has been responding to industry pressures by focusing on the development of new product and service offerings, acquisitions and actions aimed at improving efficiency.

Sikorsky manufactures commercial and military helicopters, and provides aftermarket products and services. It has responded to continued overcapacity among helicopter manufacturers by improving its cost structure, expanding the capabilities of its existing products and developing new product and service offerings. Sikorsky is leading an international team in developing the S-92, a large cabin derivative of the Black Hawk. In its government business, Sikorsky will continue to supply Black Hawk helicopters and derivatives thereof to the U.S. and foreign governments extending into 2004. A Sikorsky-Boeing joint venture is also under contract with the U.S. Army to develop the RAH-66 Comanche, thirteen of which are contracted for delivery in 2004-2005 under the current phase of the program.

>  Results of Continuing Operations

In Millions of Dollars                       2000     1999     1998
----------------------------------------  -------  ----------------
Sales                                     $26,206  $23,844  $22,787
Financing revenues and other income, net      377      283       22
----------------------------------------  -------  ----------------
Revenues                                  $26,583  $24,127  $22,809
----------------------------------------  -------  ----------------

Consolidated revenues increased 10% in 2000 and 6% in 1999. Excluding the unfavorable impact of foreign currency translation, consolidated revenues increased by 13% in 2000 and 7% in 1999. Revenue growth in 2000 reflects the impact of acquisitions as well as growth at Otis and Carrier. The 1999 increase was primarily due to revenue increases at Carrier and Otis and the acquisition of Sundstrand Corporation ("Sundstrand") in the Flight Systems segment. The increases in both years more than offset decreases at Pratt & Whitney.

Financing revenues and other income, net, increased $94 million and $261 million in 2000 and 1999. Included in 2000 is interest income on prior period income tax credits resulting from an industry related court decision. Included in 1998 were costs associated with Pratt & Whitney's repurchases of participant interests in commercial engine programs, partially offset by the favorable settlement of a contract dispute with the U.S. Government.

IN MILLIONS OF DOLLARS                       2000     1999     1998
----------------------------------------  -------  ----------------
Cost of sales                             $18,970  $18,185  $16,897
Gross margin percent                        27.6%    23.7%    25.8%
----------------------------------------  -------  ----------------

Gross margin as a percentage of sales increased 3.9 percentage points in 2000 and decreased 2.1 percentage points in 1999 due primarily to restructuring and other charges of $865 million recorded in cost of sales in 1999. Modest benefits in 2000 resulted from restructuring savings that were offset by costs not originally accruable.

IN MILLIONS OF DOLLARS                       2000     1999     1998
----------------------------------------  -------  ----------------
Research and development                   $1,302   $1,292   $1,168
Percent of sales                             5.0%     5.4%     5.1%


Research and development spending increased $10 million (1%) in 2000 and $124 million (11%) in 1999 primarily due to the inclusion of the operations of Sundstrand in the Flight Systems segment beginning in the second quarter of 1999. The 1999 increase also included costs related to product development and aircraft systems integration at Pratt & Whitney. Both years include the Corporation's continued funding of research and development at its fuel cell unit, with increased funding in 2000. Total research and development expenses are expected to remain at approximately 5% of sales in 2001.

IN MILLIONS OF DOLLARS                       2000     1999     1998
----------------------------------------  -------  ----------------
Selling, general and administrative        $3,171   $3,133   $2,737
Percent of sales                            12.1%    13.1%    12.0%


Selling, general and administrative expenses as a percentage of sales decreased 1 percentage point in 2000 and increased 1.1 percentage points in 1999 primarily due to 1999 restructuring and other charges of $151 million. The decrease in 2000 also reflects cost reductions resulting from restructuring actions, partially offset by the impact of acquisitions.

IN MILLIONS OF DOLLARS 2000 1999 1998

Interest expense $382 $260 $197

UNITED TECHNOLOGIES 3

Interest expense increased 47% in 2000 and 32% in 1999 primarily related to the impact of the issuance of $500 million of 7.125% notes in November 2000, $325 million of 6.625% notes in November 1999, $1 billion of 6.4% notes in September 1999 and $400 million of 6.5% notes in May 1999 and an increased level of foreign borrowing, partially offset by debt repayments of $435 million in 2000 and $557 million in 1999. Interest expense is expected to increase in 2001 as a result of the full year impact of the 2000 debt issuances.

                                             2000     1999     1998
----------------------------------------  -------  ----------------
Average interest rate:
  Short-term borrowings                      9.9%      8.7%   10.4%
  Total debt                                 8.1%      7.7%    8.3%


The average interest rate for the year on short-term borrowings exceeded that of total debt due to higher short-term borrowing rates in certain foreign operations. The weighted-average interest rate applicable to debt outstanding at December 31, 2000 was 7.6% for short-term borrowings and 7.5% for total debt.

2000 1999 1998


Effective income tax rate 30.9% 25.9% 31.4%

The 2000 effective tax rate includes the impact of two discrete items: the revaluation of the Corporation's state deferred tax asset resulting from the enactment of Connecticut tax law changes and the benefits of income tax credits for prior periods associated with an industry related court decision. The Internal Revenue Service is reviewing all of the Corporation's claims for prior periods' benefits as part of the routine examination of the Corporation's income tax returns and any additional impact on the Corporation's liability for income taxes cannot presently be determined.

Excluding the discrete tax items in 2000 discussed above and the 1999 restructuring actions, the effective tax rate for 2000 decreased to 30.5% from 30.9% for 1999. The Corporation has continued to lower its effective tax rate by implementing tax reduction strategies.

The future tax benefit arising from net deductible temporary differences and tax carryforwards is $2,504 million. The net deductible temporary differences relate to expenses recognized for financial reporting purposes which will result in tax deductions over varying future periods. Management believes that the Corporation's earnings during the periods when the temporary differences become deductible will be sufficient to realize the related future income tax benefits. While some tax credit and loss carryforwards have no expiration date, certain foreign and state tax loss carryforwards arise in a number of different tax jurisdictions with expiration dates beginning in 2001. For those jurisdictions where the expiration date or the projected operating results indicate that realization is not likely, a valuation allowance has been provided.

For additional discussion of income taxes, see Note 9 of the Notes to Consolidated Financial Statements.

> Business Acquisitions

During 2000, the Corporation invested $1,340 million, including debt assumed, in the acquisition of more than 30 businesses. The largest acquisition was Carrier's purchase of Specialty Equipment Companies, a North American based company that designs, manufactures and markets a broad array of refrigeration and food service products globally, for $708 million.

During 1999, the Corporation invested $6,268 million, including debt assumed, in business acquisitions. That amount includes the acquisition of Sundstrand for approximately $4.3 billion.

For additional discussion of 2000 acquisitions, see Liquidity and Financing Commitments and Note 2 of the Notes to Consolidated Financial Statements.

> Dispositions of Businesses

In May 1999, the Corporation sold its UT Automotive unit to Lear Corporation for $2.3 billion, which resulted in an after-tax gain of $650 million. UT Automotive results, through the date of disposition, appear as income from operations of the discontinued UT Automotive unit in the Consolidated Statement of Operations.

> Restructuring and Other Costs

As described in Note 11 of the Notes to Consolidated Financial Statements, the Corporation's operating segments initiated a variety of actions in 1999 aimed at further strengthening their future profitability and competitive position. The 1999 actions totaled $1,120 million, before income taxes and minority interests, and included accrued restructuring charges of $842 million, related charges of $141 million that were not accruable when initiated, and charges associated with product development and aircraft systems integration and non-product purchasing. Those amounts were recorded at each of the Corporation's operating segments as follows:

IN MILLIONS OF DOLLARS

Otis                                  $  186
Carrier                                  196
Pratt & Whitney                          534
Flight Systems                           161
Other                                     43
------------------------------------  ------
                                      $1,120
------------------------------------  ------

In February 2000, a Federal District Court issued an injunction relative to certain restructuring actions planned by Pratt & Whitney that would move work from Connecticut to Arkansas, Texas and Oklahoma. After a subsequent ruling by the Second Circuit Court of Appeals, the injunction remains in place until the end of the Collective Bargaining Agreement in December 2001. The Corporation does not believe that this resolution of the litigation will materially impact the Corporation's restructuring program.

During 2000, the Corporation incurred and recognized $317 million of additional costs that were not accruable or contemplated when the 1999 actions were initiated. Those additional costs have been more than offset by savings relating to this program and adjustments to the 1999 restructuring liability, resulting in a modest benefit at the end of 2000. Net restructuring savings are expected to increase in 2001. Recurring savings, associated primarily with a net reduction in workforce and facility closures, are expected to increase over the next two years to approximately $750 million pre-tax annually, primarily benefitting cost of sales.

The Corporation had pre-tax cash outflows related to these programs of $537 million, including $302 million of additional costs that were not accruable or contemplated when the actions were initiated. The Corporation expects to incur as much as $100 million in non-accruable costs in the next year associated with finalization of the 1999 restructuring and other actions.

For additional discussion of restructuring, see Note 11 of the Notes to Consolidated Financial Statements.

4 UNITED TECHNOLOGIES


> Segment Review

                                         Revenues           Operating Profits     Operating Profit Margin
IN MILLIONS OF DOLLARS             2000    1999    1998      2000  1999    1998     2000    1999    1998
-------------------------------- ------  --------------   -------  ------------  -------  --------------
Otis                             $6,153  $5,654  $5,572    $  798  $493  $  533    13.0%   8.7%     9.6%
Carrier                           8,430   7,353   6,922       795   459     495     9.4%   6.2%     7.2%
Pratt & Whitney                   7,366   7,674   7,876     1,200   634   1,024    16.3%   8.3%    13.0%
Flight Systems                    4,992   3,810   2,891       614   247     287    12.3%   6.5%     9.9%
-------------------------------- ------  --------------   -------  ------------  -------  --------------

Operating segment and geographic data of the Corporation's principal operating segments include the results of all majority-owned subsidiaries, consistent with the management of these businesses. For certain of these subsidiaries, minority shareholders have rights which overcome the presumption of consolidation. In the Corporation's consolidated results, these subsidiaries are accounted for using the equity method of accounting.

> 2000 Compared to 1999

OTIS revenues increased $499 million (9%) in 2000. Excluding the unfavorable impact of foreign currency translation, 2000 revenues increased 14%, reflecting the impact of the acquisition of LG Industrial Systems' Building Facilities Group in the fourth quarter of 1999 and increased sales in all regions, led by North America where construction activity remained strong.

Otis operating profits increased $305 million (62%) in 2000 largely due to restructuring charges of $186 million recorded during 1999. Excluding restructuring charges and the unfavorable impact of foreign currency translation, operating profits increased 27%, reflecting profit improvements in all regions resulting from cost reduction actions as well as the impact of the acquisition of LG Industrial Systems' Building Facilities Group.

CARRIER revenues increased $1,077 million (15%) in 2000. Excluding the unfavorable impact of foreign currency translation, 2000 revenues increased 17%, reflecting the impact of the acquisitions of International Comfort Products ("ICP") during the third quarter of 1999 and the commercial refrigeration business of Electrolux AB early in 2000 as well as growth in the North American commercial businesses. A decline in the North American truck/trailer transport refrigeration operation associated with higher fuel prices and interest rates partially offset the increase.

Carrier operating profits increased $336 million (73%) compared to 1999 in part due to 1999 restructuring charges of $196 million. Excluding restructuring charges and the unfavorable impact of foreign currency translation, operating profits increased 24%. That increase is primarily due to the impact of the acquisition of ICP and improved operating performance in the North American commercial and residential HVAC businesses. The increase was partially offset by a decrease in the North American truck/trailer transport refrigeration operation associated with higher fuel prices and interest rates and by the transaction impact of a weaker euro.

PRATT & WHITNEY revenues decreased $308 million (4%) in 2000. The decrease was due primarily to fewer commercial and large military engine shipments and lower revenues in government funded development programs, partially offset by higher sales in the small engine business at Pratt & Whitney Canada.

Pratt & Whitney operating profits increased $566 million (89%) in 2000, primarily due to 1999 restructuring and other charges of $534 million. Excluding restructuring and other charges, operating profit increased 3%, reflecting improved performance and lower costs in the commercial engine business, favorable volume at Pratt & Whitney Canada and a slight increase in the aftermarket businesses, due primarily to military spares. Those increases were partially offset by lower military engine volume.

FLIGHT SYSTEMS revenues increased $1,182 million (31%) and operating profits increased $367 million in 2000. Both increases are largely the result of including the full year results of Sundstrand, acquired in the second quarter of 1999. Revenues also include growth at Sikorsky associated with increased helicopter shipments. Operating profit also increased due to 1999 restructuring and other charges of $161 million.

> 1999 Compared to 1998

OTIS revenues increased $82 million (1%) in 1999. Excluding the unfavorable impact of foreign currency translation, 1999 revenues increased 3%, reflecting increases in North American and European operations, partially offset by a decrease in Asia Pacific operations.

Otis operating profits decreased $40 million (8%) in 1999. Excluding the unfavorable impact of foreign currency translation, 1999 operating profits decreased 6%, due primarily to 1999 restructuring and other charges of $186 million that were in excess of 1998 restructuring charges. Restructuring charges were associated with facility consolidations and workforce reductions. The 1999 charges were partially offset by improved operating performance, particularly in North American operations, which benefited from increased orders and an increase in construction activity, and in Asia Pacific and European operations. Operating profits suffered in Latin American operations, which continued to face pressure from the devaluation of the Real in Brazil. Excluding restructuring in 1999 and 1998, operating profits increased.

CARRIER revenues increased $431 million (6%) in 1999. Excluding the unfavorable impact of foreign currency translation, 1999 revenues increased 8%. The 1999 increase reflects the positive impact of acquisitions, as well as increases in the North American, European and Refrigeration operations, partially offset by declines in Asia Pacific and Latin American operations.

Carrier operating profits decreased $36 million (7%) in 1999. Excluding the unfavorable impact of foreign currency translation, 1999 operating profits decreased 1% due to 1999 restructuring and other charges of $196 million, which surpassed those in 1998. The 1999 charges were partially offset by the impact of acquisitions and increased operating performance in most segments, with particularly strong performance in the North American, European and Refrigeration operations. Restructuring charges related to worldwide facility closures and workforce reductions. Excluding restructuring in 1999 and 1998, operating profits increased.

UNITED TECHNOLOGIES 5

PRATT & WHITNEY revenues decreased $202 million (3%) in 1999. The decrease reflects fewer military and commercial engine shipments and lower commercial spare parts volumes, partially offset by increases in the commercial overhaul and repair business, military aftermarket and Pratt & Whitney Canada. In addition, the 1998 revenues included a favorable settlement of a contract dispute with the U.S. Government and costs to repurchase interests from participants in commercial engine programs.

Pratt & Whitney operating profits decreased $390 million (38%), primarily reflecting 1999 restructuring and other charges of $534 million that exceeded those in 1998. Lower military and commercial engine and commercial spare parts volumes and the absence of a nonrecurring 1998 gain were partially offset by higher overhaul and repair and military aftermarket volume, improved operating profits at Pratt & Whitney Canada and the absence of 1998 costs to repurchase interests from participants in commercial engine programs. The 1999 restructuring and other charges were associated with workforce reductions, consolidation of facilities and costs associated with product development and aircraft systems integration. The 1998 restructuring charges related to workforce reductions in the U.S. and Canada.

FLIGHT SYSTEMS revenues increased $919 million (32%) in 1999, reflecting the inclusion of Sundstrand's operations for the second half of 1999, partially offset by the effects of fewer helicopter deliveries at Sikorsky.

Flight Systems operating profits decreased $40 million (14%) in 1999, due primarily to 1999 restructuring and other charges of $161 million, which were in excess of charges recorded in 1998, and fewer helicopter deliveries at Sikorsky. Those items were partially offset by the inclusion of Sundstrand results for the second half of 1999. The 1999 restructuring charges related to closing facilities, consolidating functions, reducing workforce and rationalizing customer support.

>  Liquidity and Financing Commitments

IN MILLIONS OF DOLLARS                     2000    1999
---------------------------------------- ------  ------
Cash and cash equivalents                $  748  $  957
Total debt                                4,811   4,321
Net debt (total debt less cash)           4,063   3,364
Shareowners' equity                       7,662   7,117
Debt to total capitalization                39%     38%
Net debt to total capitalization            35%     32%
---------------------------------------- ------  ------

Management assesses the Corporation's liquidity in terms of its overall ability to generate cash to fund its operating and investing activities. Significant factors affecting the management of liquidity are: cash flows generated from operating activities, capital expenditures, customer financing requirements, acquisitions, dividends, Common Stock repurchases, adequate bank lines of credit and the ability to attract long-term capital with satisfactory terms.

Net cash provided by operating activities in 2000 was $2,503 million compared to $2,310 million in 1999. The increase resulted primarily from improved operating performance, in part due to lower restructuring charges in 2000. Pre-tax cash outflows associated with the 1999 restructuring and other actions, including costs not accruable or contemplated when the actions were initiated, were $537 million in 2000 and $366 million in 1999.

Cash used in investing activities was $2,101 million in 2000 compared to $4,411 million in 1999. The most significant component of investing cash flows related to business acquisitions. In 2000, the Corporation invested $1,340 million in the acquisition of businesses, consisting of $1,168 million of cash and $172 million of assumed debt. The most significant acquisition was Carrier's acquisition of Specialty Equipment Companies for $601 million of cash and $107 million of debt assumed. The Corporation invested $6.3 billion in the acquisition of businesses in 1999, consisting of approximately $3.5 billion of cash, $900 million of assumed debt and $1.9 billion of common stock issued from Treasury. That amount includes the acquisition of Sundstrand for approximately $4.3 billion. Capital expenditures increased $175 million to $937 million in 2000. The Corporation expects 2001 capital spending to remain comparable to 2000. Customer financing activities used cash of $40 million in 2000, compared to $188 million in 1999, and reflect decreased demands for customer financing. While the Corporation expects that customer financing will be a use of cash in 2001, actual funding is subject to usage under existing customer financing requirements. At December 31, 2000, the Corporation had financing and rental commitments of $1,218 million related to commercial aircraft, of which as much as $268 million may be required to be disbursed in 2001. The Corporation may also arrange for third-party investors to assume a portion of its commitments. Refer to Note 4 of the Notes to Consolidated Financial Statements for additional discussion of the Corporation's commercial airline industry assets and commitments.

Financing cash outflows include the Corporation's repurchase of $800 million and $822 million of Common Stock during 2000 and 1999, representing 13.6 million and 13.2 million shares, under previously announced share repurchase programs. Share repurchase continues to be a significant use of the Corporation's strong cash flows and has more than offset the dilutive effect resulting from the issuance of stock under stock-based employee benefit programs. At December 31, 2000, 11.3 million shares remained available for repurchase under the announced program.

As described in Note 2 of the Notes to Consolidated Financial Statements, on May 4, 1999, the Corporation sold its UT Automotive unit to Lear Corporation. The discontinued UT Automotive operation and its subsequent sale provided $2,159 million of cash in 1999.

At December 31, 2000, the Corporation had credit commitments from banks totaling $1.5 billion under a Revolving Credit Agreement, which serves as a back-up facility for issuance of commercial paper. At December 31, 2000, there were no borrowings under the Revolving Credit Agreement. In addition, at December 31, 2000, approximately $1.2 billion was available under short-term lines of credit with local banks at the Corporation's various international subsidiaries.

As described in Note 8 of the Notes to Consolidated Financial Statements, the Corporation issued $500 million of notes in 2000 and $1,725 million in 1999. The proceeds of those issuances were used to finance acquisitions, including Specialty Equipment Companies in 2000 and Sundstrand in 1999, and for general corporate purposes, including repurchases of the Corporation's Common Stock. At December 31, 2000, up to $1 billion of additional medium-term and long-term debt could be issued under a shelf registration statement on file with the Securities and Exchange Commission.

The Corporation's shareowners' equity is impacted by a variety of factors, including those items that are not reported in earnings but are reported directly in equity, such as foreign currency translation, minimum pension liability adjustments and unrealized holding

6 UNITED TECHNOLOGIES


gains and losses on available-for-sale securities. See the Consolidated Statement of Changes in Shareowners' Equity for information on such non-shareowners' changes.

The Corporation believes that existing sources of liquidity are adequate to meet anticipated borrowing needs at comparable risk-based interest rates for the foreseeable future. Although uncertainties in acquisition spending could cause modest variations at times, management anticipates that the level of debt to capital will remain generally consistent with recent levels. The anticipated level of debt to capital is expected to be sufficient to satisfy the Corporation's various cash flow requirements, including acquisition spending and continued share repurchases.

> Market Risk and Risk Management

The Corporation is exposed to fluctuations in foreign currency exchange rates, interest rates and commodity prices. To manage certain of those exposures, the Corporation uses derivative instruments, including swaps, forward contracts and options. Derivative instruments utilized by the Corporation in its hedging activities are viewed as risk management tools, involve little complexity and are not used for trading or speculative purposes. The Corporation diversifies the counterparties used and monitors the concentration of risk to limit its counterparty exposure.

The Corporation has evaluated its exposure to changes in foreign currency exchange, interest rates and commodity prices in its market risk sensitive instruments, which are primarily cash, debt and derivative instruments, using a value at risk analysis. Based on a 95% confidence level and a one-day holding period, at December 31, 2000, the potential loss in fair value of the Corporation's market risk sensitive instruments was not material in relation to the Corporation's financial position, results of operations or cash flows. The Corporation's calculated value at risk exposure represents an estimate of reasonably possible net losses based on historical market rates, volatilities and correlations and is not necessarily indicative of actual results. Refer to Notes 1, 12 and 13 of the Notes to Consolidated Financial Statements for additional discussion of foreign exchange and financial instruments.

FOREIGN CURRENCY EXPOSURES. The Corporation has a large volume of foreign currency exposures that result from its international sales, purchases, investments, borrowings and other international transactions. International segment revenues from continuing operations, including U.S. export sales, averaged approximately $14 billion over the last three years. The Corporation actively manages foreign currency exposures that are associated with committed foreign currency purchases and sales and other assets and liabilities created in the normal course of business at the operating unit level. Exposures that cannot be naturally offset within an operating unit to an insignificant amount are hedged with foreign currency derivatives. The Corporation also has a significant amount of foreign currency net asset exposures. Currently, the Corporation does not hold any derivative contracts that hedge its foreign currency net asset exposures but may consider such strategies in the future.

The Corporation's cash position includes amounts denominated in foreign currencies. The Corporation manages its worldwide cash requirements considering available funds among its many subsidiaries and the cost effectiveness with which these funds can be accessed. The repatriation of cash balances from certain of the Corporation's subsidiaries could have adverse tax consequences. However, those balances are generally available without legal restrictions to fund ordinary business operations. The Corporation has and will continue to transfer cash from those subsidiaries to the parent and to other international subsidiaries when it is cost effective to do so.

INTEREST RATE EXPOSURES. The Corporation's long-term debt portfolio consists mostly of fixed-rate instruments in order to minimize earnings volatility related to interest expense. From time to time the Corporation issues commercial paper, which exposes the Corporation to changes in interest rates. The Corporation currently does not hold interest rate derivative contracts.

COMMODITY PRICE EXPOSURES. The Corporation is exposed to volatility in the prices of raw materials used in some of its products and uses forward contracts in limited circumstances to manage some of those exposures.

> Environmental Matters

The Corporation's operations are subject to environmental regulation by federal, state and local authorities in the United States and regulatory authorities with jurisdiction over its foreign operations. As a result, the Corporation has established, and continually updates, policies relating to environmental standards of performance for its operations worldwide. The Corporation believes that expenditures necessary to comply with the present regulations governing environmental protection will not have a material effect upon its competitive position, financial position, results of operations or cash flows.

The Corporation has identified approximately 450 locations, mostly in the United States, at which it may have some liability for remediating contamination. The Corporation does not believe that any individual location's exposure will have a material effect on the results of operations of the Corporation. Sites in the investigation or remediation stage represent approximately 98% of the Corporation's recorded liability. The remaining 2% of the recorded liability consists of sites where the Corporation may have some liability but investigation is in the initial stages or has not begun.

The Corporation has been identified as a potentially responsible party under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA" or Superfund) at approximately 100 sites. The number of Superfund sites, in and of itself, does not represent a relevant measure of liability because the nature and extent of environmental concerns vary from site to site and the Corporation's share of responsibility varies from sole responsibility to very little responsibility. In estimating its liability for remediation, the Corporation considers its likely proportionate share of the anticipated remediation expense and the ability of other potentially responsible parties to fulfill their obligations.

At December 31, 2000, the Corporation had $459 million reserved for environmental remediation. Cash outflows for environmental remediation were $54 million in 2000, $36 million in 1999 and $36 million in 1998. The Corporation estimates that ongoing environmental remediation expenditures in each of the next two years will not exceed $65 million.

Additional discussion of the Corporation's environmental matters is included in Notes 1 and 14 of the Notes to Consolidated Financial Statements.

UNITED TECHNOLOGIES 7

> U.S. Government

The Corporation's contracts with the U.S. Government are subject to audits. Like many defense contractors, the Corporation has received audit reports which recommend that certain contract prices should be reduced to comply with various government regulations. Some of these audit reports involve substantial amounts. The Corporation has made voluntary refunds in those cases it believes appropriate.

> New Accounting Pronouncements

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, is currently effective January 1, 2001 for the Corporation. The standard requires that all derivative instruments be recorded on the balance sheet at fair value. Gains and losses on derivatives used to hedge foreign-currency-denominated balance sheet items will be reported directly in earnings along with the offsetting transaction gains and losses on the item being hedged. Derivatives used to hedge forecasted cash flows associated with committed foreign currency transactions or forecasted commodity purchases will be accounted for as cash flow hedges. Gains and losses on derivatives designated as cash flow hedges will be recorded in other comprehensive income. Those gains and losses will be reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions. The ineffective portion of all hedges will be recognized currently in earnings.

Management believes adoption of this standard and related transition adjustments will not have a material impact on the Corporation's consolidated financial position, results of operations or cash flows.

> Euro Conversion

On January 1, 1999, the European Economic and Monetary Union entered a three-year transition phase during which the euro was introduced as a common currency in participating countries. The euro is currently used for wholesale financial transactions and will replace the legacy currencies that will be withdrawn between January 1, 2002 and July 1, 2002. The Corporation began preparing for the euro in December 1996 and plans to complete its transition to the euro by the end of 2001.

Based on its evaluation to date, management believes that the introduction of the euro, including the total costs for the conversion, will not have a material adverse impact on the Corporation's financial position, results of operations or cash flows. However, uncertainty exists as to the effects the euro will have on the marketplace and there is no guarantee that all issues will be foreseen and corrected or that third parties will address the conversion successfully.

> Cautionary Note Concerning Factors
That May Affect Future Results

This Annual Report 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 materials released to the public. These forward-looking statements are intended to provide management's current expectations or plans for the future operating and financial performance of the Corporation, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as: "believe," "expect," "plans," "strategy," "prospects," "estimate," "project," "anticipate" and other words of similar meaning in connection with a discussion of future operating or financial performance. These include, among others, statements relating to:

o Future earnings and other measurements of financial performance

o Future cash flow and uses of cash

o The effect of economic downturns or growth in particular regions

o The effect of changes in the level of activity in particular industries or markets

o The scope, nature or impact of acquisition activity

o Product developments and new business opportunities

o Restructuring costs and savings

o The outcome of contingencies

o The transition to the use of the euro as a currency.

All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For additional information identifying factors that may cause actual results to vary materially from those stated in the forward-looking statements, see the Corporation's reports on Forms 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission from time to time. The Corporation's Annual Report on Form 10-K for 2000 includes important information as to risk factors in the "Business" section under the headings "Description of Business by Operating Segment" and "Other Matters Relating to the Corporation's Business as a Whole."

8 UNITED TECHNOLOGIES


Management's Responsibility
for Financial Statements

The financial statements of United Technologies Corporation and its subsidiaries are the responsibility of the Corporation's management and have been prepared in accordance with generally accepted accounting principles.

Management is responsible for the integrity and objectivity of the financial statements, including estimates and judgments reflected in them and fulfills this responsibility primarily by establishing and maintaining accounting systems and practices adequately supported by internal accounting controls. These controls are designed to provide reasonable assurance that the Corporation's assets are safeguarded, that transactions are executed in accordance with management's authorizations and that the financial records are reliable for the purpose of preparing financial statements. Self-monitoring mechanisms are also a part of the control environment whereby, as deficiencies are identified, corrective actions are taken. Even an effective internal control system, no matter how well designed, has inherent limitations including the possibility of the circumvention or overriding of controls and, therefore, can provide only reasonable assurance with respect to financial statement preparation and such safeguarding of assets. Further, because of changes in conditions, internal control system effectiveness may vary over time.

The Corporation assessed its internal control system as of December 31, 2000. Based on this assessment, management believes the internal accounting controls in use provide reasonable assurance that the Corporation's assets are safeguarded, that transactions are executed in accordance with management's authorizations, and that the financial records are reliable for the purpose of preparing financial statements.

Independent accountants are appointed annually by the Corporation's shareowners to audit the financial statements in accordance with generally accepted auditing standards. Their report appears below. Their audits, as well as those of the Corporation's internal audit department, include a review of internal accounting controls and selective tests of transactions.

The Audit Committee of the Board of Directors, consisting of directors who are not officers or employees of the Corporation, meets regularly with management, the independent accountants and the internal auditors, to review matters relating to financial reporting, internal accounting controls and auditing.


/s/ George David

George David
Chairman and Chief Executive Officer


/s/ Karl Krapek

Karl Krapek
President and Chief Operating Officer


/s/ David J. FitzPatrick

David J. FitzPatrick
Senior Vice President,
Chief Financial Officer and Treasurer


Report of Independent Accountants

To the Shareowners of United Technologies Corporation

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of changes in shareowners' equity and of cash flows present fairly, in all material respects, the financial position of United Technologies Corporation and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Hartford, Connecticut
January 18, 2001


UNITED TECHNOLOGIES 9

Consolidated Statement of Operations

 

IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS                   2000     1999     1998
--------------------------------------------------------------  -------  ----------------
Revenues
Product sales                                                   $20,174  $18,021  $17,348
Service sales                                                     6,032    5,823    5,439
Financing revenues and other income, net                            377      283       22
--------------------------------------------------------------  -------  -------  -------
                                                                 26,583   24,127   22,809
Costs and Expenses
Cost of products sold                                            15,227   14,500   13,436
Cost of services sold                                             3,743    3,685    3,461
Research and development                                          1,302    1,292    1,168
Selling, general and administrative                               3,171    3,133    2,737
Interest                                                            382      260      197
--------------------------------------------------------------  -------  -------  -------
                                                                 23,825   22,870   20,999
Income from continuing operations
  before income taxes and minority interests                      2,758    1,257    1,810
Income taxes                                                        853      325      568
Minority interests in subsidiaries' earnings                         97       91       85
--------------------------------------------------------------  -------  -------  -------
Income from continuing operations                                 1,808      841    1,157
Discontinued operation:
  Income from operations of discontinued UT Automotive
    unit (net of applicable income tax provisions
    of $28 and $55 in 1999 and 1998)                                 --       40       98
  Gain on sale of UT Automotive unit (net of applicable income
    tax provision of $112)                                           --      650       --
--------------------------------------------------------------  -------  -------  -------
Net Income                                                      $ 1,808  $ 1,531  $ 1,255
--------------------------------------------------------------  -------  -------  -------

Earnings per Share of Common Stock
Basic:
  Continuing operations                                         $  3.78  $  1.74  $  2.47
  Discontinued operation                                             --      .08      .21
  Gain on sale of discontinued operation                             --     1.40       --
--------------------------------------------------------------  -------  -------  -------
  Net Earnings                                                  $  3.78  $  3.22  $  2.68
--------------------------------------------------------------  -------  -------  -------

Diluted:
  Continuing operations                                         $  3.55  $  1.65  $  2.33
  Discontinued operation                                             --      .08      .20
  Gain on sale of discontinued operation                             --     1.28       --
--------------------------------------------------------------  -------  -------  -------
  Net Earnings                                                  $  3.55  $  3.01  $  2.53
--------------------------------------------------------------  -------  ----------------

See accompanying Notes to Consolidated Financial Statements

10 UNITED TECHNOLOGIES


Consolidated Balance Sheet

 

IN MILLIONS OF DOLLARS, EXCEPT PER SHARE (shares in thousands)                                     2000      1999
----------------------------------------------------------------------------------------------  -------   -------
Assets
Cash and cash equivalents                                                                       $   748   $   957
Accounts receivable (net of allowance for doubtful accounts of $412 and $406)                     4,445     4,337
Inventories and contracts in progress                                                             3,756     3,504
Future income tax benefits                                                                        1,439     1,563
Other current assets                                                                                274       266
----------------------------------------------------------------------------------------------  -------   -------
  Total Current Assets                                                                           10,662    10,627
Customer financing assets                                                                           550       553
Future income tax benefits                                                                        1,065       873
Fixed assets                                                                                      4,487     4,460
Goodwill (net of accumulated amortization of $681 and $507)                                       6,771     5,641
Other assets                                                                                      1,829     2,212
----------------------------------------------------------------------------------------------  -------   -------
  Total Assets                                                                                  $25,364   $24,366
----------------------------------------------------------------------------------------------  -------   -------

Liabilities and Shareowners' Equity
Short-term borrowings                                                                           $ 1,039   $   902
Accounts payable                                                                                  2,261     1,957
Accrued liabilities                                                                               5,748     6,023
Long-term debt currently due                                                                        296       333
----------------------------------------------------------------------------------------------  -------   -------
  Total Current Liabilities                                                                       9,344     9,215
Long-term debt                                                                                    3,476     3,086
Future pension and postretirement benefit obligations                                             1,636     1,601
Future income taxes payable                                                                         112       126
Other long-term liabilities                                                                       2,205     2,245
Commitments and contingent liabilities (Notes 4 and 14)
Minority interests in subsidiary companies                                                          497       527

Series A ESOP Convertible Preferred Stock, $1 par value
  Authorized-20,000 shares
  Outstanding-11,642 and 12,237 shares                                                              767       808
ESOP deferred compensation                                                                         (335)     (359)
----------------------------------------------------------------------------------------------  -------   -------
                                                                                                    432       449
Shareowners' Equity:
  Capital Stock:
    Preferred Stock, $1 par value; Authorized-230,000 shares; None issued or outstanding             --        --
    Common Stock, $1 par value; Authorized-1,000,000 shares; Issued 597,213 and 588,737 shares    4,665     4,227
  Treasury Stock-126,907 and 114,191 common shares at cost                                       (3,955)   (3,182)
  Retained earnings                                                                               7,743     6,463
  Accumulated other non-shareowners' changes in equity:
    Foreign currency translation                                                                   (747)     (563)
    Minimum pension liability                                                                       (44)      (41)
    Unrealized holding gain on marketable equity securities                                          --       213
----------------------------------------------------------------------------------------------  -------   -------
                                                                                                   (791)     (391)
----------------------------------------------------------------------------------------------  -------   -------
  Total Shareowners' Equity                                                                       7,662     7,117
----------------------------------------------------------------------------------------------  -------   -------
  Total Liabilities and Shareowners' Equity                                                     $25,364   $24,366
----------------------------------------------------------------------------------------------  -------   -------

See accompanying Notes to Consolidated Financial Statements

UNITED TECHNOLOGIES 11

Consolidated Statement of Cash Flows

 

IN MILLIONS OF DOLLARS                                                             2000      1999      1998
------------------------------------------------------------------------------  -------   -----------------
Operating Activities
Income from continuing operations                                               $ 1,808   $   841   $ 1,157
Adjustments to reconcile income from continuing operations
  to net cash flows provided by operating activities:
    Depreciation and amortization                                                   859       819       730
    Deferred income tax provision (benefit)                                         108         4      (264)
    Minority interests in subsidiaries' earnings                                     97        91        85
  Change in:
    Accounts receivable                                                             (69)     (256)       44
    Inventories and contracts in progress                                          (184)      331      (113)
    Other current assets                                                             19       (66)      213
    Accounts payable and accrued liabilities                                       (184)      595       135
  Other, net                                                                         49       (49)      327
------------------------------------------------------------------------------  -------   -------   -------
  Net Cash Provided by Operating Activities                                       2,503     2,310     2,314

Investing Activities
Capital expenditures                                                               (937)     (762)     (673)
Increase in customer financing assets                                              (339)     (383)     (356)
Decrease in customer financing assets                                               299       195       143
Business acquisitions                                                            (1,168)   (3,547)   (1,228)
Dispositions of businesses                                                           --        43        --
Other, net                                                                           44        43        43
------------------------------------------------------------------------------  -------   -------   -------
  Net Cash Used in Investing Activities                                          (2,101)   (4,411)   (2,071)

Financing Activities
Issuance of long-term debt                                                          712     1,727       402
Repayment of long-term debt                                                        (435)     (557)     (146)
Increase in short-term borrowings                                                    83       185       293
Common Stock issued under employee stock plans                                      438       354       220
Dividends paid on Common Stock                                                     (387)     (353)     (316)
Repurchase of Common Stock                                                         (800)     (822)     (650)
Dividends to minority interests and other                                          (193)     (159)     (138)
------------------------------------------------------------------------------  -------   -------   -------
  Net Cash (Used in) Provided by Financing Activities                              (582)      375      (335)

  Net Cash Provided by (Used in) Discontinued Operation                              --     2,159        (9)

Effect of foreign exchange rate changes on Cash and cash equivalents                (29)      (26)       (4)

  Net (decrease) increase in Cash and cash equivalents                             (209)      407      (105)
Cash and cash equivalents, beginning of year                                        957       550       655
------------------------------------------------------------------------------  -------   -------   -------
Cash and cash equivalents, end of year                                          $   748   $   957   $   550
------------------------------------------------------------------------------  -------   -------   -------

Supplemental Disclosure of Cash Flow Information:
  Interest paid, net of amounts capitalized                                     $   432   $   217   $   170
  Income taxes paid, net of refunds                                                 496       368       888
Non-cash investing activities:
  The Corporation issued $1.9 billion of Treasury Stock in connection with the
   acquisition of Sundstrand Corporation in 1999
------------------------------------------------------------------------------  -------   -----------------

See accompanying Notes to Consolidated Financial Statements

12 UNITED TECHNOLOGIES


Consolidated Statement of Changes in Shareowners' Equity

                                                                                               Accumulated           Non-
                                                                                                Other Non-   Shareowners'
                                                                                              Shareowners'     Changes in
                                                                Common  Treasury   Retained        Changes     Equity for
IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS                 Stock     Stock   Earnings      in Equity     the Period
--------------------------------------------------------------- ---------------------------------------------------------
December 31, 1997                                                $2,488  $(2,472)    $4,558          $(501)
Common Stock issued under employee plans (6.6 million shares)       220        5        (53)
Common Stock repurchased (14.8 million shares)                              (650)
Dividends on Common Stock ($.695 per share)                                            (316)
Dividends on ESOP Stock ($4.80 per share)                                               (33)

Non-Shareowners' Changes in Equity:
  Net income                                                                          1,255                        $1,255
  Foreign currency translation:
    Foreign currency translation adjustments                                                             4              4
    Income taxes                                                                                        (7)            (7)
  Minimum pension liability:
    Pension adjustment                                                                                (187)          (187)
    Income tax benefits                                                                                 67             67
---------------------------------------------------------------  -----------------------------------------         ------
December 31, 1998                                                 2,708   (3,117)     5,411           (624)        $1,132
---------------------------------------------------------------                                                    ------
Common Stock issued under employee plans (7.2 million shares)       354       16        (93)
Common Stock issued in conjunction with
  a business combination (30.4 million shares)                    1,165      741
Common Stock repurchased (13.2 million shares)                              (822)
Dividends on Common Stock ($.76 per share)                                             (353)
Dividends on ESOP Stock ($4.80 per share)                                               (33)
Non-Shareowners' Changes in Equity:
  Net income                                                                          1,531                        $1,531
  Foreign currency translation:
    Foreign currency translation adjustments                                                           (92)           (92)
    Income tax benefits                                                                                 16             16
  Minimum pension liability:
    Pension adjustment                                                                                 150            150
    Income taxes                                                                                       (54)           (54)
  Unrealized holding gain on marketable equity securities:
    Unrealized holding gain                                                                            328            328
    Income taxes                                                                                      (115)          (115)
---------------------------------------------------------------  -----------------------------------------         ------
December 31, 1999                                                 4,227   (3,182)     6,463           (391)        $1,764
---------------------------------------------------------------

Common Stock issued under employee plans (9.4 million shares)       438       27       (109)
Common Stock repurchased (13.6 million shares)                              (800)
Dividends on Common Stock ($.825 per share)                                            (387)
Dividends on ESOP Stock ($4.80 per share)                                               (32)
Non-Shareowners' Changes in Equity:
  Net income                                                                          1,808                        $1,808
  Foreign currency translation:
    Foreign currency translation adjustments                                                          (202)          (202)
    Income tax benefits                                                                                 18             18
  Minimum pension liability:
    Pension adjustment                                                                                  (8)            (8)
    Income tax benefits                                                                                  5              5
  Unrealized holding loss on marketable equity securities:
    Unrealized holding loss                                                                           (328)          (328)
    Income tax benefits                                                                                115            115
---------------------------------------------------------------  -----------------------------------------         ------
December 31, 2000                                                $4,665  $(3,955)    $7,743          $(791)        $1,408
---------------------------------------------------------------  --------------------------------------------------------

See accompanying Notes to Consolidated Financial Statements

UNITED TECHNOLOGIES 13

Notes to Consolidated Financial Statements

Note 1 Summary of Accounting Principles

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates.

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

CONSOLIDATION. The consolidated financial statements include the accounts of the Corporation and its controlled subsidiaries. Intercompany transactions have been eliminated.

CASH AND CASH EQUIVALENTS. Cash and cash equivalents includes cash on hand, demand deposits and short-term cash investments which are highly liquid in nature and have original maturities of three months or less.

ACCOUNTS RECEIVABLE. Current and long-term accounts receivable include retainage and unbilled costs of approximately $169 million and $149 million at December 31, 2000 and 1999. Retainage represents amounts which, pursuant to the contract, are not due until project completion and acceptance by the customer. Unbilled costs represent revenues that are not currently billable to the customer under the terms of the contract. These items are expected to be collected in the normal course of business. Long-term accounts receivable are included in Other assets in the Consolidated Balance Sheet.

MARKETABLE EQUITY SECURITIES. Equity securities that have a readily determinable fair value and management does not intend to hold are classified as available for sale and carried at fair value. Unrealized holding gains and losses are recorded as a separate component of shareowners' equity, net of the deferred income tax effect.

INVENTORIES AND CONTRACTS IN PROGRESS. Inventories and contracts in progress are stated at the lower of cost or estimated realizable value and are primarily based on first-in, first-out ("FIFO") or average cost methods; however, certain subsidiaries use the last-in, first-out ("LIFO") method. Costs accumulated against specific contracts or orders are at actual cost. Materials in excess of requirements for contracts and current or anticipated orders have been reserved and written-off when appropriate.

Manufacturing tooling costs are charged to inventories or to fixed assets depending upon their nature, general applicability and useful lives. Tooling costs included in inventory are charged to cost of sales based on usage, generally within two years after they enter productive use.

Manufacturing costs are allocated to current production and firm contracts. General and administrative expenses are charged to expense as incurred.

FIXED ASSETS. Fixed assets are stated at cost. Depreciation is computed over the assets' useful lives generally using the straight-line method, except for aerospace assets acquired prior to January 1, 1999, which are depreciated using accelerated methods. The change to straight-line depreciation for aerospace assets did not have a material impact on the Corporation's financial position, results of operations or cash flows.

GOODWILL AND OTHER LONG-LIVED ASSETS. Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired companies and is generally amortized using the straight-line method over periods ranging from 10 to 40 years.

The Corporation evaluates potential impairment of goodwill on an ongoing basis and of other long-lived assets when appropriate. If the carrying amount of an asset exceeds the sum of its undiscounted expected future cash flows, the asset's carrying value is written down to fair value.

REVENUE RECOGNITION. Sales under government and commercial fixed-price contracts and government fixed-price-incentive contracts are recorded at the time deliveries are made or, in some cases, on a percentage-of-completion basis. Sales under cost-reimbursement contracts are recorded as work is performed and billed. Sales of commercial aircraft engines sometimes require participation by the Corporation in aircraft financing arrangements; when appropriate, such sales are accounted for as operating leases. Sales under elevator and escalator installation and modernization contracts are accounted for under the percentage-of-completion method.

Losses, if any, on contracts are provided for when anticipated. Loss provisions are based upon excess inventoriable manufacturing, engineering, estimated warranty and product guarantee costs over the net revenue from the products contemplated by the specific order. Contract accounting requires estimates of future costs over the performance period of the contract. These estimates are subject to change and result in adjustments to margins on contracts in progress.

Service sales, representing aftermarket repair and maintenance activities, are recognized over the contractual period or as services are performed.

RESEARCH AND DEVELOPMENT. Research and development costs, not specifically covered by contracts and those related to the Corporation-sponsored share of research and development activity in connection with cost-sharing arrangements, are charged to expense as incurred.

HEDGING ACTIVITY. The Corporation uses derivative instruments, including swaps, forward contracts and options, to manage certain foreign currency and commodity price exposures. Derivative instruments are viewed by the Corporation as risk management tools and are not used for trading or speculative purposes. Derivatives used for hedging purposes must be designated as, and effective as, a hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in the fair value of the derivative contract must be highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.

Gains and losses from instruments that are effective hedges of foreign currency firm commitments or anticipated commodity transactions are deferred and recognized as part of the economic basis of the transactions underlying the commitments when the

14 UNITED TECHNOLOGIES


associated hedged transaction occurs. Gains and losses from instruments that hedge foreign-currency-denominated assets or liabilities are reported in earnings and offset the effects of foreign exchange transaction gains and losses from the associated hedged assets or liabilities. Cash flows from derivative instruments designated as hedges are classified consistent with the items being hedged. Gains and losses on derivatives no longer effective as a hedge are recognized in earnings.

Carrying amounts of foreign exchange contracts are included in accounts receivable, other current assets, other assets, accrued liabilities and other long-term liabilities.

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, is currently effective January 1, 2001 for the Corporation. The standard requires that all derivative instruments be recorded on the balance sheet at fair value. Gains and losses on derivatives used to hedge foreign-currency-denominated assets or liabilities will be reported directly in earnings along with the offsetting transaction gains and losses on the item being hedged. Derivatives used to hedge forecasted cash flows associated with foreign currency commitments or forecasted commodity purchases will be accounted for as cash flow hedges. Gains and losses on derivatives designated as cash flow hedges will be recorded in other comprehensive income and will be reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions. The ineffective portion of all hedges will be recognized currently in earnings.

Management believes adoption of this standard and related transition adjustments will not have a material impact on the Corporation's consolidated financial position, results of operations or cash flows.

ENVIRONMENTAL. Environmental investigatory, remediation, operating and maintenance costs are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of currently available facts with respect to each individual site, including existing technology, current laws and regulations and prior remediation experience. Where no amount within a range of estimates is more likely, the minimum is accrued. For sites with multiple responsible parties, the Corporation considers its likely proportionate share of the anticipated remediation costs and the ability of the other parties to fulfill their obligations in establishing a provision for those costs. Liabilities with fixed or reliably determinable future cash payments are discounted. Accrued environmental liabilities are not reduced by potential insurance reimbursements.

Note 2 Business Acquisitions and Dispositions

ACQUISITIONS. The Corporation completed acquisitions in 2000, 1999, and 1998 for $1,340 million, $6,268 million, and $1,237 million, including debt assumed of $172 million, $900 million, and $9 million. The 2000 amount includes the acquisition of Specialty Equipment Companies for $708 million, including debt assumed. The 1999 amounts include the acquisition of Sundstrand Corporation for approximately $4.3 billion, including debt assumed.

In connection with the acquisition of Sundstrand, the Corporation has undertaken actions to combine the operations of Sundstrand and Hamilton Standard, including consolidating headquarters, closing facilities, relocating salary and hourly employees and reducing workforce. Costs relating to those actions that directly impact Sundstrand facilities and employees amounted to approximately $53 million, including $28 million recorded in 2000, and were accounted for as a purchase price adjustment.

The Corporation's unaudited consolidated results of operations on a pro forma basis for the Sundstrand transaction, assuming it had occurred at the beginning of 1999 and 1998, respectively, are: revenues of $24,996 million and $24,799 million, net income of $1,558 million and $1,363 million, net income per basic common share of $3.18 and $2.74 and net income per diluted common share of $2.99 and $2.58. The pro forma results are for information purposes only and are not necessarily indicative of the operating results that would have occurred had the Sundstrand acquisition been consummated at the beginning of the year or of future operating results. The 2000, 1999 and 1998 pro forma results for acquisitions other than Sundstrand, assuming those acquisitions had been made at the beginning of the year, would not be materially different from reported results.

The assets and liabilities of the acquired businesses accounted for under the purchase method are recorded at their fair values at the dates of acquisition. The excess of the purchase price over the estimated fair values of the net assets acquired was recorded as an increase in goodwill of $1,412 million in 2000, $4,396 million in 1999, and $855 million in 1998, and is being amortized over estimated useful lives that range from 10 to 40 years. The results of operations of acquired businesses have been included in the Consolidated Statement of Operations beginning on the effective date of acquisition.

The cost of 2000 acquisitions and allocations of cost may require adjustment based upon information that may come to the attention of the Corporation which is not currently available.

DISPOSITIONS. In May 1999, the Corporation sold its UT Automotive unit to Lear Corporation for $2.3 billion, resulting in a $2.2 billion source of cash and a $650 million after tax gain. Related results, through the date of disposition, appear as income from operations of the discontinued UT Automotive unit in the Consolidated Statement of Operations for 1999 and 1998. UT Automotive revenues prior to the disposition were $1,115 million and $2,962 million in 1999 and 1998.

UNITED TECHNOLOGIES 15

Note 3   Earnings Per Share

                                                            Average
                                                Income      Shares     Per Share
                                              (MILLIONS)  (THOUSANDS)   Amount
--------------------------------------------- ----------------------------------
December 31, 2000
Income from continuing operations
 and net income                                   $1,808
Less: ESOP Stock dividends                           (32)
---------------------------------------------     ------
Basic earnings from
 continuing operations and net earnings            1,776        470.1      $3.78
Stock awards                                          --         11.3
ESOP Stock adjustment                                 28         26.6
---------------------------------------------     ------        -----
Diluted earnings from
 continuing operations and net earnings           $1,804        508.0      $3.55
--------------------------------------------- ----------------------------------

December 31, 1999
Income from continuing operations                 $  841
Less: ESOP Stock dividends                           (33)
---------------------------------------------     ------
Basic earnings from
 continuing operations                               808        465.6      $1.74
Stock awards                                          --         13.8
ESOP Stock adjustment                                 28         27.3
---------------------------------------------     ------        -----
Diluted earnings from
 continuing operations                            $  836        506.7      $1.65
---------------------------------------------     ------        -----

Net income                                        $1,531
Less: ESOP Stock dividends                           (33)
---------------------------------------------     ------
Basic earnings                                     1,498        465.6      $3.22
Stock awards                                          --         13.8
ESOP Stock adjustment                                 28         27.3
---------------------------------------------     ------        -----
Diluted earnings                                  $1,526        506.7      $3.01
--------------------------------------------- ----------------------------------

December 31, 1998
Income from continuing operations                 $1,157
Less: ESOP Stock dividends                           (33)
---------------------------------------------     ------
Basic earnings from
 continuing operations                             1,124        455.5      $2.47
Stock awards                                          --         12.0
ESOP Stock adjustment                                 28         27.3
---------------------------------------------     ------        -----
Diluted earnings from
 continuing operations                            $1,152        494.8      $2.33
---------------------------------------------     ------        -----

Net income                                        $1,255
Less: ESOP Stock dividends                           (33)
---------------------------------------------     ------
Basic earnings                                     1,222        455.5      $2.68
Stock awards                                          --         12.0
ESOP Stock adjustment                                 28         27.3
---------------------------------------------     ------        -----
Diluted earnings                                  $1,250        494.8      $2.53


Note 4 Commercial Airline Industry Assets
and Commitments

The Corporation has receivables and other financing assets with commercial airline industry customers totaling $1,614 million and $1,598 million at December 31, 2000 and 1999, net of allowances of $226 million and $243 million.

Customer financing assets consist of products under lease of $333 million and notes and leases receivable of $385 million. The notes and leases receivable are scheduled to mature as follows: $168 million in 2001, $45 million in 2002, $52 million in 2003, $37 million in 2004, $28 million in 2005 and $55 million thereafter.

Financing commitments, in the form of secured debt, guarantees or lease financing, are provided to commercial aircraft engine customers. The extent to which the financing commitments will be utilized cannot currently be predicted, since customers may be able to obtain more favorable terms from other financing sources. The Corporation may also arrange for third-party investors to assume a portion of its commitments. If financing commitments are exercised, debt financing is generally secured by assets with fair market values equal to or exceeding the financed amounts with interest rates established at the time of funding. The Corporation also may lease aircraft and subsequently sublease the aircraft to customers under long-term noncancelable operating leases. In some instances, customers may have minimum lease terms which result in sublease periods shorter than the Corporation's lease obligation. Lastly, the Corporation has residual value and other guarantees related to various commercial aircraft engine customer financing arrangements. The estimated fair market values of the guaranteed assets equal or exceed the value of the related guarantees, net of existing reserves.

The Corporation's financing and rental commitments as of December 31, 2000 were $804 million and are exercisable as follows: $229 million in 2001, $42 million in 2002, $97 million in 2003, $93 million in 2004, $75 million in 2005 and $268 million thereafter. The Corporation's financing obligations with customers are contingent upon maintenance of certain levels of financial condition by the customers.

In addition, the Corporation had net residual value and other guarantees of $133 million as of December 31, 2000.

The Corporation has a 33% interest in International Aero Engines AG ("IAE"), an international consortium of four shareholders organized to support the V2500 commercial aircraft engine program. IAE may offer customer financing in the form of guarantees, secured debt or lease financing in connection with V2500 engine sales. At December 31, 2000, IAE had financing commitments of $1,205 million. The Corporation's share of IAE's financing commitments was approximately $414 million at December 31, 2000. In addition, IAE had lease obligations under long-term noncancelable leases of approximately $352 million through 2021 related to aircraft which are subleased to customers under long- term leases. These aircraft have fair market values which approximate the financed amounts. The shareholders of IAE have guaranteed IAE's financing arrangements to the extent of their respective ownership interests. In the event any shareholder was to default on certain of these financing arrangements, the other shareholders would be proportionately responsible.

16 UNITED TECHNOLOGIES


Note 5 Inventories and Contracts in Progress

IN MILLIONS OF DOLLARS                             2000      1999
----------------------------------------------- -------   -------
Inventories consist of the following:
  Raw material                                  $   738   $   702
  Work-in-process                                 1,179     1,158
  Finished goods                                  2,099     1,871
  Contracts in progress                           1,849     1,561
----------------------------------------------- -------   -------
                                                  5,865     5,292
Less:
  Progress payments, secured by lien,
  on U.S. Government contracts                     (137)      (87)
  Billings on contracts in progress              (1,972)   (1,701)
----------------------------------------------- -------   -------
                                                $ 3,756   $ 3,504
----------------------------------------------- -------   -------

Contracts in progress principally relate to elevator and escalator contracts and include costs of manufactured components, accumulated installation costs and estimated earnings on incomplete contracts.

The Corporation's sales contracts in many cases are long-term contracts expected to be performed over periods exceeding twelve months. Approximately 54% and 51% of total inventories and contracts in progress have been acquired or manufactured under such long-term contracts at December 31, 2000 and 1999, a portion of which is not scheduled for delivery under long-term contracts within the next twelve months.

If inventories which were valued using the LIFO method had been valued under the FIFO method, they would have been higher by $106 million and $111 million at December 31, 2000 and 1999.

Note 6   Fixed Assets

                                            Estimated
IN MILLIONS OF DOLLARS                     Useful Lives      2000        1999
--------------------------------------------------------   ------      ------
Land                                                 --    $  193      $  218
Buildings and improvements                  20-40 years     3,403       3,225
Machinery, tools and equipment               3-12 years     6,292       6,645
Other, including under construction                  --       467         367
--------------------------------------------------------   ------      ------
                                                           10,355      10,455
Accumulated depreciation                                   (5,868)     (5,995)
--------------------------------------------------------   ------      ------
                                                           $4,487      $4,460
--------------------------------------------------------   ------      ------

Depreciation expense was $608 million in 2000, $633 million in 1999 and $613 million in 1998.

Note 7   Accrued Liabilities

IN MILLIONS OF DOLLARS                           2000    1999
---------------------------------------------  ------  ------
Accrued salaries, wages and employee benefits  $  923  $  861
Accrued restructuring costs                       145     525
Service and warranty accruals                     453     480
Advances on sales contracts                       959     964
Income taxes payable                              659     602
Other                                           2,609   2,591
---------------------------------------------  ------  ------
                                               $5,748  $6,023
---------------------------------------------  ------  ------

Note 8 Borrowings and Lines of Credit

Short-term borrowings consist of the following:

IN MILLIONS OF DOLLARS                           2000    1999
---------------------------------------------  ------  ------
Domestic borrowings                            $   65    $ --
Foreign bank borrowings                           361     629
Commercial paper                                  613     273
---------------------------------------------  ------  ------
                                               $1,039    $902
---------------------------------------------  ------  ------

The weighted-average interest rates applicable to short-term borrowings outstanding at December 31, 2000 and 1999 were 7.6% and 7.5%. At December 31, 2000, approximately $1.2 billion was available under short-term lines of credit with local banks at the Corporation's various international subsidiaries.

At December 31, 2000, the Corporation had credit commitments from banks totaling $1.5 billion under a Revolving Credit Agreement, which serves as a back-up facility for issuance of commercial paper. There were no borrowings under the Revolving Credit Agreement at December 31, 2000.

      Long-term debt consists of the following:

                                         Weighted-
                                           Average
IN MILLIONS OF DOLLARS                  Interest Rate  Maturity     2000    1999
----------------------------------------------------------------  ------  ------
Notes and other debt denominated in:
  U.S. dollars                                   7.3%  2001-2029  $3,195  $2,844
  Foreign currency                              10.6%  2001-2018     212      15
Capital lease obligations                        7.1%  2001-2015      64     223
ESOP debt                                        7.7%  2001-2009     301     337
----------------------------------------------------------------  ------  ------
                                                                   3,772   3,419
Less: Long-term debt
 currently due                                                       296     333
----------------------------------------------------------------  ------  ------
                                                                  $3,476  $3,086
----------------------------------------------------------------  ------  ------

Principal payments required on long-term debt for the next five years are:
$296 million in 2001, $141 million in 2002, $140 million in 2003, $364 million in 2004, and $35 million in 2005.

The Corporation issued a total of $500 million and $1,725 million of notes under shelf registration statements previously filed with the Securities and Exchange Commission in 2000 and 1999. The 2000 notes carry an interest rate of
7.125%. The weighted-average interest rate on the 1999 notes is 6.9%. Proceeds from the debt issuances were used for general corporate purposes, including financing a portion of the 2000 acquisition of Specialty Equipment Companies and the 1999 acquisition of Sundstrand, funding other acquisitions and repurchasing the Corporation's Common Stock.

At December 31, 2000, up to $1 billion of additional medium-term and long-term debt could be issued under a shelf registration statement on file with the Securities and Exchange Commission. The percentage of total debt at floating interest rates was 22% and 24% at December 31, 2000 and 1999.

UNITED TECHNOLOGIES 17

Note 9 Taxes on Income

Significant components of income tax provision (benefit) for each year are as follows:

IN MILLIONS OF DOLLARS          2000  1999  1998
-----------------------------  -----  ----  ----
Current:
  United States:
    Federal                    $  55  $ 32  $347
    State                         37    26    23
  Foreign                        387   323   337
-----------------------------  -----  ----  ----
                                 479   381   707
Future:
  United States:
    Federal                        8    67  (214)
    State                         73   (61)  (25)
  Foreign                         27    (2)  (25)
-----------------------------  -----  ----  ----
                                 108     4  (264)
-----------------------------  -----  ----  ----
                                 587   385   443
Attributable to items
 credited (charged) to equity    266   (60)  125
-----------------------------  -----  ----  ----
                               $ 853  $325  $568
-----------------------------  -----  ----  ----

Future income taxes represent the tax effects of transactions which are reported in different periods for tax and financial reporting purposes. These amounts consist of the tax effects of temporary differences between the tax and financial reporting balance sheets and tax carryforwards. The tax effects of temporary differences and tax carryforwards which gave rise to future income tax benefits and payables at December 31, 2000 and 1999 are as follows:

IN MILLIONS OF DOLLARS                     2000    1999
---------------------------------------- ------  ------
Future income tax benefits:
  Insurance and employee benefits        $  685  $  669
  Other asset basis differences             313     263
  Other liability basis differences       1,332   1,413
  Tax loss carryforwards                    165     169
  Tax credit carryforwards                  217     155
  Valuation allowance                      (208)   (233)
---------------------------------------- ------  ------
                                         $2,504  $2,436
---------------------------------------- ------  ------
Future income taxes payable:
  Fixed assets                           $   67  $   94
  Other items, net                           81      55
---------------------------------------- ------  ------
                                         $  148  $  149
---------------------------------------- ------  ------

Current and non-current future income tax benefits and payables within the same tax jurisdiction are generally offset for presentation in the Consolidated Balance Sheet. Valuation allowances have been established primarily for tax credit and tax loss carryforwards to reduce the future income tax benefits to amounts expected to be realized.

The sources of income from continuing operations before income taxes and minority interests are:

IN MILLIONS OF DOLLARS                2000    1999    1998
----------------------------------- ------  ------  ------
United States                       $1,511  $  352  $  924
Foreign                              1,247     905     886
----------------------------------- ------  ------  ------
                                    $2,758  $1,257  $1,810
----------------------------------- ------  ------  ------

United States income taxes have not been provided on undistributed earnings of international subsidiaries. The Corporation's intention is to reinvest these earnings permanently or to repatriate the earnings only when it is tax effective to do so. Accordingly, the Corporation believes that any U.S. tax on repatriated earnings would be substantially offset by U.S. foreign tax credits.

Differences between effective income tax rates and the statutory U.S. federal income tax rates are as follows:

                                           2000    1999    1998
----------------------------------------- -----   -------------
Statutory U.S. federal income tax rate    35.0%   35.0%   35.0%
Varying tax rates of consolidated
 subsidiaries (including Foreign
 Sales Corporation)                       (6.0)   (7.5)   (4.9)
Goodwill                                   1.7     2.5      .4
Enacted tax law changes                    1.9     (.3)     .1
Other                                     (1.7)   (3.8)     .8
----------------------------------------- -----   -----   -----
Effective income tax rate                 30.9%   25.9%   31.4%


The 2000 effective tax rate includes the impact of two discrete items: the revaluation of the Corporation's state deferred tax asset resulting from the enactment of the Connecticut tax law changes and the benefits of income tax credits for prior periods associated with an industry related court decision. Excluding the discrete items, the 2000 effective tax rate was 30.5%.

The 1999 effective tax rate includes the impact of the Corporation's 1999 restructuring actions. Excluding restructuring, the 1999 effective tax rate was 30.9%.

Tax credit carryforwards at December 31, 2000 were $217 million of which $24 million expires as follows: $16 million from 2001-2005 and $8 million in 2015.

Tax loss carryforwards, principally state and foreign, at December 31, 2000 were $818 million of which $548 million expire as follows: $206 million from 2001-2005, $175 million from 2006-2010, $167 million from 2011-2020.

Note 10 Employee Benefit Plans

The Corporation and its subsidiaries sponsor numerous domestic and foreign employee benefit plans. Those plans are discussed below.

EMPLOYEE SAVINGS PLANS. The Corporation and certain subsidiaries sponsor various employee savings plans. Total contribution expenses were $90 million, $87 million and $81 million for 2000, 1999 and 1998.

The Corporation's nonunion domestic employee savings plan uses an Employee Stock Ownership Plan ("ESOP") for employer contributions. External borrowings, guaranteed by the Corporation and reported as debt in the Consolidated Balance Sheet, were used by the ESOP to fund a portion of its purchase of ESOP Stock from the Corporation. Each share of ESOP Stock is convertible into four shares of Common Stock, has a guaranteed value of $65, a $4.80 annual dividend and is redeemable at any time for $65 per share. Upon notice of redemption by the Corporation, the Trustee has the right to convert the ESOP Stock into Common Stock. Because of its guaranteed value, the ESOP Stock is classified outside of permanent equity.

Shares of ESOP Stock are committed to employees at fair value on the date earned. The ESOP Stock's cash dividends are used for debt service payments. Participants receive shares in lieu of the cash

18 UNITED TECHNOLOGIES


dividends. As debt service payments are made, ESOP Stock is released from an unreleased shares account. If share releases do not meet share commitments, the Corporation will contribute additional ESOP Stock, Common Stock or cash. At December 31, 2000, 6.5 million shares had been committed to employees, leaving
5.1 million shares in the ESOP Trust, with an approximate fair value of $1,602 million based on equivalent common shares.

Upon withdrawal, shares of the ESOP Stock must be converted into the Corporation's Common Stock or, if the value of the Common Stock is less than the guaranteed value of the ESOP Stock, the Corporation must repurchase the shares at their guaranteed value.

PENSION AND POSTRETIREMENT PLANS. The Corporation and its subsidiaries sponsor many domestic and foreign defined benefit pension and other postretirement plans with balances as follows:

                                                           Other
                                                      Postretirement
                                 Pension Benefits        Benefits

IN MILLIONS OF DOLLARS             2000      1999      2000      1999
------------------------------- -------   -------   -------   -------

Change in Benefit
 Obligation:
Beginning balance               $11,830   $11,075   $ 1,118   $   771
Service cost                        238       264        13        13
Interest cost                       839       727        82        56
Actuarial loss (gain)               133      (495)        8       (75)
Total benefits paid                (830)     (687)     (100)      (73)
Net settlement and
 curtailment (gain) loss             (6)       73        --       106
Acquisitions                         84       800        39       312
Other                               (56)       73        15         8
------------------------------- -------   -------   -------   -------
Ending balance                  $12,232   $11,830   $ 1,175   $ 1,118
------------------------------- -------   -------   -------   -------

Change in Plan Assets:
Beginning balance               $12,196   $ 9,945   $    78   $    81
Actual return on plan assets      1,669     1,989         4         5
Employer contributions               47        46         1         1
Benefits paid from plan assets     (798)     (657)      (11)      (11)
Acquisitions                         52       965        --        --
Other                               (47)      (92)        4         2
------------------------------- -------   -------   -------   -------
Ending balance                  $13,119   $12,196   $    76   $    78
------------------------------- -------   -------   -------   -------

Funded status                   $   887   $   366   $(1,099)  $(1,040)
Unrecognized net actuarial
(gain)                           (1,035)     (529)       (9)      (19)
Unrecognized prior
 service cost                       284       292      (111)     (127)
Unrecognized net liability
 (asset) at transition                6       (12)       --        --
------------------------------- -------   -------   -------   -------
Net amount recognized           $   142   $   117   $(1,219)  $(1,186)
------------------------------- -------   -------   -------   -------

Amounts Recognized in
 the Consolidated
 Balance Sheet
 Consist of:
Prepaid benefit cost            $   482      $422   $    --   $    --
Accrued benefit liability          (449)     (398)   (1,219)   (1,186)
Intangible asset                     37        29        --        --
Accumulated other
 non-shareowners'
 changes in equity                   72        64        --        --
------------------------------- -------   -------   -------   -------
Net amount recognized           $   142   $   117   $(1,219)  $(1,186)
------------------------------- -------   -------   -------   -------

The pension funds are valued at September 30 of the respective years in the preceding table. Major assumptions used in the accounting for the employee benefit plans are shown in the following table as weighted-averages:

                                    2000  1999  1998
---------------------------------- -----  ----------
Pension Benefits:
  Discount rate                     7.4%  7.3%  6.6%
  Expected return on plan assets    9.7%  9.6%  9.6%
  Salary scale                      4.9%  4.8%  4.8%

Other Postretirement Benefits:
  Discount rate                     7.5%  7.5%  6.7%
  Expected return on plan assets    9.6%  9.6%  9.6%
---------------------------------- -----  ----------

For measurement purposes, a 7.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2001. The rate is assumed to remain at that level thereafter.

IN MILLIONS OF DOLLARS                      2000    1999    1998
---------------------------------------- -------   -------------
Components of Net
 Periodic Benefit Cost:
Pension Benefits:
  Service cost                           $   238   $ 264   $ 222
  Interest cost                              839     727     695
  Expected return on plan assets          (1,060)   (926)   (856)
  Amortization of prior service cost          34      33      26
  Amortization of unrecognized net
   transition asset                          (20)    (23)    (23)
  Recognized actuarial net loss               11      16       8
  Net settlement and curtailment
   (gain) loss                                (2)     82      73
  Discontinued operation benefit (cost)       --      16      (4)
---------------------------------------- -------   -----   -----
  Net periodic pension benefit cost -
   continuing operations                 $    40   $ 189   $ 141
---------------------------------------- -------   -----   -----

  Net periodic pension benefit cost
   of multiemployer plans                $    30   $  33   $  25
---------------------------------------- -------   -----   -----

Other Postretirement Benefits:
  Service cost                           $    13   $  13   $  10
  Interest cost                               82      56      51
  Expected return on plan assets              (7)     (7)     (6)
  Amortization of prior service cost         (16)    (18)    (18)
  Net settlement and curtailment
   (gain) loss                                --     (13)     10
  Discontinued operation benefit (cost)       --       5      (2)
---------------------------------------- -------   -----   -----
  Net periodic other postretirement
   benefit cost - continuing operations  $    72   $  36   $  45


The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $810 million, $653 million and $236 million, as of December 31, 2000 and $699 million, $556 million and $173 million, as of December 31, 1999.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would change the accumulated postretirement benefit obligation as of December 31, 2000 by approximately 6%. The effects of this change on the service expense and the interest expense components of the net postretirement benefit expense for 2000 would be 8%.

UNITED TECHNOLOGIES 19

LONG-TERM INCENTIVE PLANS. The Corporation has long-term incentive plans authorizing various types of market and performance based incentive awards, which may be granted to officers and employees. The 1989 Long-Term Incentive Plan provides for the annual grant of awards in an amount not to exceed 2% of the aggregate shares of Common Stock, treasury shares and potentially dilutive common shares for the preceding year. In addition, up to 3 million options on Common Stock may be granted annually under the Corporation's Employee Stock Option Plan. The exercise price of stock options, set at the time of the grant, is not less than the fair market value per share at the date of grant. Options have a term of ten years and generally vest after three years.

A summary of the transactions under all plans for the three years ended December 31, 2000 follows:

                                     Stock Options
                                    ---------------     Other
                                            Average   Incentive
SHARES AND UNITS IN THOUSANDS       Shares   Price   Shares/Units
--------------------------------- -------------------------------
Outstanding at:
December 31, 1997                   40,054   $21.68        2,526
  Granted                            8,648    38.93           52
  Exercised/earned                  (6,708)   14.94         (550)
  Canceled                            (772)   32.34           (8)
---------------------------------   ------    -----        -----
December 31, 1998                   41,222    26.20        2,020
  Granted                           12,259    52.49          139
  Exercised/earned                  (7,385)   21.59         (880)
  Canceled                          (1,428)   47.51          (29)
---------------------------------   ------    -----        -----
December 31, 1999                   44,668    33.49        1,250
  Granted                            8,167    64.55           86
  Exercised/earned                  (9,412)   24.99         (840)
  Canceled                          (1,031)   51.55          (13)
---------------------------------   ------    -----        -----
December 31, 2000                   42,392   $40.93          483


Granted options in the above table include options issued in connection with business combinations. The 1999 grant amount includes the issuance of 2.6 million options associated with the purchase of Sundstrand in exchange for vested Sundstrand options.

The Corporation applies APB Opinion 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its long-term incentive plans. Accordingly, no compensation cost has been recognized for its fixed stock options. The compensation cost that has been recorded for stock-based performance awards was $10 million, $26 million and $31 million for 2000, 1999 and 1998.

The following table summarizes information about stock options outstanding (in thousands) at December 31, 2000:

                                 Options Outstanding   Options Exercisable
                        --------------------------------------------------
                                  Average   Remaining            Average
Exercise Price           Shares    Price      Term      Shares    Price
------------------------ -------------------------------------------------
$10.01-$25.00            11,677   $18.50      3.81      11,675   $18.50
$25.01-$40.00            12,146    35.31      6.40       7,486    34.51
$40.01-$55.00             8,284    51.58      7.78       1,396    48.58
$55.01-$70.00             7,057    61.51      8.73         309    60.15
$70.01-$85.00             3,228    70.92      9.55          --       --


Had compensation cost for the Corporation's stock-based compensation plans been determined based on the fair value at the grant date for awards under those plans consistent with the requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," the Corporation's net income and earnings per share would have been reduced as follows:

IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS          2000     1999     1998
------------------------------------------------------- ------   ---------------
Net income:
  As reported                                           $1,808   $1,531   $1,255
  Pro forma                                              1,734    1,470    1,208

Basic earnings per share:
  As reported                                           $ 3.78   $ 3.22   $ 2.68
  Pro forma                                               3.62     3.09     2.58

Diluted earnings per share:
  As reported                                           $ 3.55   $ 3.01   $ 2.53
  Pro forma                                               3.41     2.89     2.44


The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

                                                          2000     1999     1998
------------------------------------------------------- ------   ---------------
Risk-free interest rate                                   6.1%     4.8%     5.4%
Expected life                                          5 years  6 years  6 years
Expected volatility                                        30%      25%      23%
Expected dividend yield                                   1.0%     1.2%     1.5%


The weighted-average grant date fair values of options granted during 2000, 1999 and 1998 were $21.33, $17.20 and $11.33.

Note 11 Restructuring

1999 ACTIONS. During 1999, the Corporation's operating segments initiated a variety of actions aimed at further strengthening their future profitability and competitive position. Those actions focused principally on rationalizing manufacturing processes and improving the overall level of organizational efficiency, including the removal of management layers. Restructuring charges accrued in 1999 were $842 million before income taxes and minority interests and were planned to result in net reductions of approximately 15,000 salary and hourly employees and approximately 8 million square feet of facilities. Significant 1999 actions by operating segment included:

o Otis: Worldwide facility consolidations and workforce reductions

o Carrier: Worldwide facility closures and workforce reductions

o Pratt & Whitney: Workforce reductions; consolidation of military engine operations, manufacturing operations and the component repair business

o Flight Systems: Facility closures and consolidation of functions in Connecticut; workforce reductions; rationalization of customer support.

20 UNITED TECHNOLOGIES


The 1999 accrued costs were recorded at each of the Corporation's operating segments as follows:

IN MILLIONS OF DOLLARS

Otis                                  $  178
Carrier                                  182
Pratt & Whitney                          345
Flight Systems                           131
Other                                      6
----------------------------------    ------
                                      $  842
----------------------------------    ------

The following table summarizes the accrued costs associated with the 1999 restructuring actions by type and related activity through December 31, 2000:

                                                              Accrued
                          Accrued             Accrued Exit     Site
                         Severance   Asset      & Lease     Restoration
                        and Related  Write-   Termination     & Other
IN MILLIONS OF DOLLARS    Costs      downs       Costs          Costs     Total
----------------------- ---------------------------------------------------------
1999 Charges:
  Staff reductions         $ 433     $  --       $ --           $ --      $ 433
  Facility closures          149       160         44             56        409
-----------------------    -----     -----       ----           ----      -----
Total accrued
 charges                     582       160         44             56        842
Adjustments                  (49)       --        (10)             1        (58)
Utilized to date:
  Cash                      (348)       --        (15)           (23)      (386)
  Non-cash                  (111)     (160)        (8)            --       (279)
-----------------------    ----------------------------------------------------
Balance at
 December 31, 2000         $  74     $  --       $ 11           $ 34      $ 119
-----------------------    ----------------------------------------------------

The 1999 accrued costs were recorded in cost of sales (87%) and selling, general and administrative expenses (13%) and related to:

o Workforce reductions of approximately 15,000 employees, primarily at Pratt & Whitney (5,200 employees), Otis (4,000 employees) and Carrier (3,200 employees)

o Plant closings that were planned to result in the reduction of approximately 8 million square feet of facilities, primarily at Pratt & Whitney (3 million square feet) and Carrier (2.9 million square feet) and charges associated with the write-down of property, plant and equipment to fair value, where fair value is based on appraised value, primarily at Pratt & Whitney ($70 million) and Carrier ($41 million).

The adjustments to the 1999 restructuring liability result from completion of actions for amounts lower than originally estimated and revision of several of the original programs. These adjustments were more than offset by additional restructuring charges in 2000 associated with the 1999 actions that were not accruable or contemplated when the actions were initiated.

As of December 31, 2000, workforce reductions of approximately 12,200 employees were completed and approximately 4.4 million square feet were eliminated. The remaining actions are expected to be substantially complete in early 2001.

In total the Corporation incurred and recognized costs of $317 million and $141 million in 2000 and 1999 associated with the restructuring actions that were not accruable or contemplated when the actions were initiated.

1998 ACTIONS. During 1998, the Corporation accrued pre-tax charges totaling $320 million related to ongoing efforts to reduce the costs of its continuing operations in response to an increasingly competitive business environment. Charges were recorded in each of the Corporation's operating segments with the majority relating to the Pratt & Whitney, Otis and Carrier operations. The amounts were primarily recorded in cost of sales and related to workforce reductions of approximately 7,500 employees, plant closings and charges associated with asset impairments. As of December 31, 2000 these actions have been completed, substantially as planned.

Note 12 Foreign Exchange

The Corporation conducts business in many different currencies and, accordingly, is subject to the inherent risks associated with foreign exchange rate movements. The financial position and results of operations of substantially all of the Corporation's foreign subsidiaries are measured using the local currency as the functional currency. The aggregate effects of translating the balance sheets of these subsidiaries are deferred as a separate component of shareowners' equity. The Corporation had foreign currency net assets in more than forty currencies, aggregating $2.5 billion and $2.1 billion at December 31, 2000 and 1999. The Corporation's net assets in the Asia Pacific region were $1 billion at December 31, 2000 and 1999.

At December 31, the Corporation had the following amounts related to foreign exchange contracts hedging foreign currency transactions:

IN MILLIONS OF DOLLARS                     2000   1999
---------------------------------------- ------ ------
Notional amount                          $2,709 $2,569
Gains and losses explicitly deferred
 as a result of hedging firm commitments:
  Gains deferred                         $  32  $   15
  Losses deferred                          (55)    (26)
---------------------------------------- ------ ------
                                         $ (23) $  (11)
---------------------------------------- ------ ------

Note 13 Financial Instruments

The Corporation operates internationally and, in the normal course of business, is 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. The Corporation manages its foreign currency transaction risks and some commodity exposures to acceptable limits through the use of derivatives designated as hedges.

By nature, all financial instruments involve market and credit risks. The Corporation enters into derivative and other financial instruments with major investment grade financial institutions and has policies to monitor the credit risk of those counterparties. The Corporation limits counterparty exposure and concentration of risk by diversifying counterparties. The Corporation does not anticipate nonperformance by any of these counterparties.

UNITED TECHNOLOGIES 21

The carrying amounts and fair values of financial instruments are as follows:

DECEMBER 31, 2000 DECEMBER 31, 1999

                               Carrying      Fair         Carrying      Fair
IN MILLIONS OF DOLLARS           Amount     Value           Amount     Value
----------------------------- ----------------------------------------------
Financial assets:
  Marketable equity securities  $    48   $    48          $   355   $   355
  Long-term receivables              58        54               54        53
  Customer financing notes          343       340              270       267
Financial liabilities:
  Short-term borrowings          (1,039)   (1,039)            (902)     (902)
  Long-term debt                 (3,708)   (3,879)          (3,196)   (3,163)
Foreign exchange contracts:
  Receivables                        40        40               38        45
  Payables                          (77)      (70)             (38)      (32)
Commodity forward contracts:
  Receivables                         2         2                8        11
  Payables                           (3)       (3)              --        --


The above fair values were computed based on comparable transactions, quoted market prices, discounted future cash flows or an estimate of the amount to be received or paid to terminate or settle the agreement, as applicable.

The values of marketable equity securities represent the Corporation's investment in common stock that is classified as available for sale and is accounted for at fair value.

The Corporation had outstanding financing and rental commitments totaling $1,218 million at December 31, 2000. Risks associated with changes in interest rates on these commitments are negated by the fact that interest rates are variable during the commitment term and are set at the date of funding based on current market conditions, the fair value of the underlying collateral and the credit worthiness of the customers. As a result, the fair value of these financings is expected to equal the amounts funded. The fair value of the commitment itself is not readily determinable and is not considered significant. Additional information pertaining to these commitments is included in Note 4.

Note 14 Commitments and Contingent Liabilities

LEASES. The Corporation occupies space and uses certain equipment under lease arrangements. Rental commitments of $690 million at December 31, 2000 under long-term noncancelable operating leases are as follows: $169 million in 2001, $133 million in 2002, $101 million in 2003, $76 million in 2004, $56 million in 2005 and $155 million thereafter.

Rent expense was $193 million in 2000, $193 million in 1999 and $230 million in 1998.

ENVIRONMENTAL. The Corporation's operations are subject to environmental regulation by federal, state and local authorities in the United States and regulatory authorities with jurisdiction over its foreign operations. As described in Note 1, the Corporation has accrued for the costs of environmental remediation activities and periodically reassesses these amounts. Management believes that losses materially in excess of amounts accrued are not reasonably possible.

The Corporation has had insurance in force over its history with a number of insurance companies and has commenced litigation seeking indemnity and defense under these insurance policies in relation to its environmental liabilities. The litigation is expected to last several years. Accrued environmental liabilities are not reduced by potential insurance reimbursements.

U.S. GOVERNMENT. The Corporation is now, and believes that in light of the current government contracting environment it will be, the subject of one or more government investigations. If the Corporation or one of its business units were charged with wrongdoing as a result of any of these investigations, they could be suspended from bidding on or receiving awards of new government contracts pending the completion of legal proceedings. If convicted or found liable, the Corporation could be fined and debarred from new government contracting for a period generally not to exceed three years. Any contracts found to be tainted by fraud could be voided by the Government.

The Corporation's contracts with the U.S. Government are also subject to audits. Like many defense contractors, the Corporation has received audit reports which recommend that certain contract prices should be reduced to comply with various government regulations. Some of these audit reports involve substantial amounts. The Corporation has made voluntary refunds in those cases it believes appropriate.

OTHER. The Corporation extends performance and operating cost guarantees beyond its normal warranty and service policies for extended periods on some of its products, particularly commercial aircraft engines. Liability under such guarantees is contingent upon future product performance and durability. The Corporation has accrued its estimated liability that may result under these guarantees.

The Corporation also has other commitments and contingent liabilities related to legal proceedings and matters arising out of the normal course of business.

The Corporation has accrued for environmental investigatory, remediation, operating and maintenance costs, performance guarantees and other litigation and claims based on management's estimate of the probable outcome of these matters. While it is possible that the outcome of these matters may differ from the recorded liability, management believes that resolution of these matters will not have a material impact on the Corporation's financial position, results of operations or cash flows.

Note 15 Segment Financial Data

The Corporation's operations are classified in four principal operating segments. Those segments were generally determined based on the management of the businesses and on the basis of separate groups of operating companies, each with general operating autonomy over diversified products and services.

OTIS products include elevators, escalators, service, automated people movers and spare parts sold to a diversified international customer base in commercial real estate development.

CARRIER products include heating, ventilating and air conditioning systems and equipment, commercial and transport refrigeration equipment and service for a diversified international customer base principally in commercial and residential real estate development.

22 UNITED TECHNOLOGIES


PRATT & WHITNEY products include aircraft engines and spare parts sold to a diversified customer base, including international and domestic commercial airlines and aircraft leasing companies, aircraft manufacturers, regional and commuter airlines, and U.S. and non-U.S. governments. Pratt & Whitney also provides product support and a full range of overhaul, repair and fleet management services and produces land-based power generation equipment which is used for electrical power generation and other applications.

FLIGHT SYSTEMS SEGMENT provides global aerospace and industrial products and services through Hamilton Sundstrand and Sikorsky Aircraft. Hamilton Sundstrand provides aerospace and industrial products for diversified industries. Aerospace products include aircraft power generation management and distribution systems, and environmental, flight and fuel control systems. Sikorsky Aircraft products include commercial and military helicopters, aftermarket products and service.

Operating segment and geographic data include the results of all majority-owned businesses, consistent with the management reporting of these businesses. For certain of these subsidiaries, minority shareholders have rights which, under the provisions of EITF 96-16, overcome the presumption of control. In the Corporation's consolidated results, these subsidiaries are accounted for using the equity method of accounting. Adjustments to reconcile segment reporting to consolidated results are included in "Eliminations and other," which also includes certain small subsidiaries.

Operating segment information for the years ended December 31 follows:

> Operating Segments

                                             Total Revenues                  Operating Profits

IN MILLIONS OF DOLLARS                 2000       1999       1998       2000       1999       1998
----------------------------------- -------    ------------------    -------    ------------------
Otis                                $ 6,153    $ 5,654    $ 5,572    $   798    $   493    $   533
Carrier                               8,430      7,353      6,922        795        459        495
Pratt & Whitney                       7,366      7,674      7,876      1,200        634      1,024
Flight Systems                        4,992      3,810      2,891        614        247        287
----------------------------------- -------    -------    -------    -------    --------   -------
Total segment                       $26,941    $24,491    $23,261    $ 3,407    $ 1,833    $ 2,339
Eliminations and other                 (358)      (364)      (452)       (39)       (85)       (89)
General corporate expenses               --         --         --       (228)      (231)      (243)
----------------------------------- -------    -------    -------    -------    --------   -------
Consolidated                        $26,583    $24,127    $22,809    $ 3,140    $ 1,517    $ 2,007
----------------------------------- -------    -------    -------    -------    --------   -------
Interest expense                                                        (382)      (260)      (197)
------------------------------------------------------------------   -------    --------   -------
Income from continuing operations
  before income taxes and
  minority interests                                                 $ 2,758    $ 1,257    $ 1,810
------------------------------------------------------------------   -------    ------------------

                                 Total Assets               Capital Expenditures     Depreciation & Amortization

IN MILLIONS OF DOLLARS      2000      1999      1998      2000      1999      1998      2000      1999      1998
-----------------------  -------   -----------------   -------   -----------------   -------   -----------------
Otis                     $ 3,753   $ 4,036   $ 3,049   $   108   $    84   $    93   $   165   $   145   $   139
Carrier                    6,907     5,592     4,556       231       237       190       206       195       184
Pratt & Whitney            5,951     5,660     5,863       369       243       254       217       250       278
Flight Systems             7,750     7,677     2,154       195       166       105       261       216       118
-----------------------  -------   -------   -------   -------   -------   -------   -------   -------   -------
Total segment            $24,361   $22,965   $15,622   $   903   $   730   $   642   $   849   $   806   $   719
Eliminations and other     1,003     1,401     2,146        34        32        31        10        13        11
-----------------------  -------   -------   -------   -------   -------   -------   -------   -------   -------
Consolidated             $25,364   $24,366   $17,768   $   937   $   762   $   673   $   859   $   819   $   730
-----------------------  -------   -----------------   -------   -----------------   -------   -----------------

SEGMENT REVENUES AND OPERATING PROFIT. Total revenues by operating segment include intersegment sales, which are generally made at prices approximating those that the selling entity is able to obtain on external sales. Operating profits by segment includes income before interest expense, income taxes and minority interest.

> Geographic Areas

                                  External Revenues                Operating Profits                Long-Lived Assets

IN MILLIONS OF DOLLARS         2000       1999       1998       2000       1999       1998       2000      1999      1998
--------------------------  -------    ------------------    -------    ------------------    -------   -----------------
United States operations    $16,231    $14,814    $13,852    $ 1,950    $   757    $ 1,340    $ 8,535   $ 7,465   $ 3,026
International operations:
  Europe                      4,413      4,433      4,252        606        473        516      1,030     1,028       842
  Asia Pacific                3,319      2,615      2,487        368        206        130      1,418     1,464       812
  Other                       2,820      2,472      2,517        483        396        353        534       514       501
Eliminations and other         (200)      (207)      (299)      (267)      (315)      (332)        71        28        --
--------------------------  -------    -------    -------    -------    -------    -------    -------   -------   -------
Consolidated                $26,583    $24,127    $22,809    $ 3,140    $ 1,517    $ 2,007    $11,588   $10,499   $ 5,181
--------------------------  -------    ------------------    -------    ------------------    -------   -----------------

UNITED TECHNOLOGIES 23

GEOGRAPHIC EXTERNAL REVENUES AND OPERATING PROFIT. Geographic external revenues and operating profits are attributed to the geographic regions based on their location of origin. United States external revenues include export sales to commercial customers outside the U.S. and sales to the U.S. Government, commercial and affiliated customers, which are known to be for resale to customers outside the U.S.

Revenues from United States operations include export sales as follows:

IN MILLIONS OF DOLLARS     2000     1999     1998
-----------------------  ------   ---------------
Europe                   $1,606   $1,303   $  967
Asia Pacific              1,632    1,389    1,910
Other                       896      950    1,220
-----------------------  ------   ------   ------
                         $4,134   $3,642   $4,097


GEOGRAPHIC LONG-LIVED ASSETS. Long-lived assets include net fixed assets and intangibles which can be attributed to the specific geographic regions.

MAJOR CUSTOMERS. Revenues include sales under prime contracts and subcontracts to the U.S. Government, primarily related to Pratt & Whitney and Flight Systems products, as follows:

IN MILLIONS OF DOLLARS     2000     1999     1998
-----------------------  ------   ---------------
Pratt & Whitney          $1,616   $2,116   $1,941
Flight Systems            1,207    1,174    1,273


> Selected Quarterly Financial Data (Unaudited)

                                                            2000 Quarters                       1999 Quarters

IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS   First   Second    Third   Fourth    First   Second    Third   Fourth
------------------------------------------------  ---------------------------------   ---------------------------------
Sales                                             $6,307   $6,871   $6,339   $6,689   $5,382   $5,984   $6,068   $6,410
Gross margin                                       1,679    1,884    1,814    1,859    1,405    1,637    1,211    1,406
Income from continuing operations                    377      509      496      426      278      417       90       56
Net income                                           377      509      496      426      308    1,077       90       56
Earnings per share of Common Stock:
  Basic:
    Continuing operations                         $  .78   $ 1.07   $ 1.04   $  .89   $  .60   $  .89   $  .17   $  .10
    Net earnings                                  $  .78   $ 1.07   $ 1.04   $  .89   $  .67   $ 2.33   $  .17   $  .10
  Diluted:
    Continuing operations                         $  .74   $ 1.00   $  .98   $  .84   $  .57   $  .83   $  .16   $  .10
    Net earnings                                  $  .74   $ 1.00   $  .98   $  .84   $  .63   $ 2.15   $  .16   $  .10
------------------------------------------------  ---------------------------------   ---------------------------------

>  Comparative Stock Data

                                  2000                         1999
--------------------  ---------------------------  ---------------------------
Common Stock           High       Low    Dividend    High       Low   Dividend
First quarter         65 1/4    48 1/16    $.20    67 13/16   54        $.18
Second quarter        66 3/16   54 1/2     $.20    74 11/16   61 3/4    $.18
Third quarter         71 1/2    56 11/16   $.20    71 3/16    56        $.20
Fourth quarter        79 3/4    63 1/2     $.225   65         52 5/16   $.20


The Corporation's Common Stock is listed on the New York Stock Exchange. The high and low prices are based on the Composite Tape of the New York Stock Exchange. There were approximately 24,000 common shareowners of record at December 31, 2000.

24 UNITED TECHNOLOGIES


 
 

SUBSIDIARIES OF THE REGISTRANT

The companies listed below are direct or indirect subsidiaries of the Registrant. Their names and jurisdictions of incorporation are as follows:

                                                         State/Country
Entity Name                                              of Incorporation

Ardco, Inc.                                              Illinois
Cade Industries, Inc.                                    Wisconsin
Carrier Air Conditioning Pty. Limited                    Australia
Carrier Corporation                                      Delaware
Carrier Ltd.                                             South Korea
Carrier Mexico S.A. de C.V.                              Mexico
Carrier S.A.                                             France
Carrier S.p.A.                                           Italy
Carrier Singapore (PTE) Limited                          Singapore
Carrier-Espana, SA                                       Spain
CEAM Srl                                                 Italy
China Tianjin Otis Elevator Company, Ltd.                China
Eagle Services Asia Private Limited                      Singapore
Elevadores Otis Ltda.                                    Brazil
Empresas Carrier, S.A. De C.V.                           Mexico
Evans Lifts Limited                                      United Kingdom
Generale Frigorifique                                    France
Hamilton Sundstrand Corporation                          Delaware
Hamilton Sundstrand Pacific Aerospace, Inc.              Singapore
Hamilton Sundstrand Power Systems, Inc.                  Delaware
Helicopter Support, Inc.                                 Connecticut
Homogenous Metals Inc.                                   New York
ICP International Holdings Inc.                          Cayman Islands
Johns Perry Lifts Holdings                               Cayman Islands
LG-Otis Elevator Company                                 South Korea
Microtecnica SRL                                         Italy
Milton Roy Company                                       Pennsylvania
Miraco Development Services & Trading Company, S.A.E.    Egypt
Nevada Bond Investment Corp II                           Nevada
Nippon Otis Elevator Company                             Japan
Otis                                                     France
Otis Elevator Company (H.K.) Limited                     Hong Kong
Otis Elevator Company [New Jersey]                       New Jersey
Otis Elevator Company Pty. Ltd.                          Australia
Otis G.m.b.H. & Co. OHG                                  Germany
Otis Investments Plc                                     United Kingdom
Otis S.p.A.                                              Italy
Pratt & Whitney Canada Corp.                             Canada
Pratt & Whitney Component Solutions, Inc.                Michigan
Pratt & Whitney Compressor Airfoil Holdings, Inc.        Delaware
Pratt & Whitney Engine Services, Inc.                    Delaware
Pratt & Whitney Export, Inc                              Delaware
Pratt & Whitney Holdings LLC                             Cayman Islands
Pratt & Whitney Power Systems, Inc.                      Delaware
Pratt & Whitney Services, Inc.                           Delaware
Profroid Industries S.A.                                 France
Ratier Figeac S.A.                                       France
Sikorsky Aircraft Corporation                            Delaware
Sikorsky Export Corporation                              Delaware
Sikorsky International Operations, Inc.                  Delaware
Sirius (Korea) Ltd.                                      United Kingdom
Springer Carrier S.A.                                    Brazil
Sullair Corporation                                      Indiana
Sundstrand Pacific Acquiring PTE Ltd.                    Singapore
Sundyne Corporation                                      Delaware
The Carmel Forge Limited                                 Israel
The Express Lift Company Limited                         United Kingdom
The Falk Corporation                                     Delaware
Turbine Overhaul Services PTE LTD                        Singapore
Tyler Refrigeration Corporation                          Delaware
United Technologies Electronic Controls, Inc.            Delaware
United Technologies International Operations, Inc.       Delaware
Zardoya Otis, S.A.                                       Spain

Other subsidiaries of the Registrant have been omitted from this listing since, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.

 


 

Exhibit 24

UNITED TECHNOLOGIES CORPORATION
Power of Attorney

The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation"), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints WILLIAM H. TRACHSEL, DAVID J. FITZPATRICK and DAVID G. NORD, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2000, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 5th day of February, 2001.


/s/   Antonia Handler Chayes
      Antonia Handler Chayes



UNITED TECHNOLOGIES CORPORATION
Power of Attorney

The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation"), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints WILLIAM H. TRACHSEL, DAVID J. FITZPATRICK and DAVID G. NORD, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2000, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 5th day of February, 2001.


/s/     George David
        George David



UNITED TECHNOLOGIES CORPORATION
Power of Attorney

The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation"), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints WILLIAM H. TRACHSEL, DAVID J. FITZPATRICK and DAVID G. NORD, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2000, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 5th day of February, 2001.


/s/   Jean-Pierre Garnier
      Jean-Pierre Garnier



UNITED TECHNOLOGIES CORPORATION
Power of Attorney

The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation"), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints WILLIAM H. TRACHSEL, DAVID J. FITZPATRICK and DAVID G. NORD, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2000, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 5th day of February, 2001.


/s/    Karl J. Krapek
       Karl J. Krapek



UNITED TECHNOLOGIES CORPORATION
Power of Attorney

The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation"), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints WILLIAM H. TRACHSEL, DAVID J. FITZPATRICK and DAVID G. NORD, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2000, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 5th day of February, 2001.


/s/     Charles R. Lee
        Charles R. Lee



UNITED TECHNOLOGIES CORPORATION
Power of Attorney

The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation"), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints WILLIAM H. TRACHSEL, DAVID J. FITZPATRICK and DAVID G. NORD, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2000, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 5th day of February, 2001.


/s/  Richard D. McCormick
     Richard D. McCormick



UNITED TECHNOLOGIES CORPORATION
Power of Attorney

The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation"), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints WILLIAM H. TRACHSEL, DAVID J. FITZPATRICK and DAVID G. NORD, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2000, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 5th day of February, 2001.


/s/     Jamie S. Gorelick
        Jamie S. Gorelick



UNITED TECHNOLOGIES CORPORATION
Power of Attorney

The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation"), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints WILLIAM H. TRACHSEL, DAVID J. FITZPATRICK and DAVID G. NORD, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2000, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 5th day of February, 2001.


/s/    Frank P. Popoff
       Frank P. Popoff



UNITED TECHNOLOGIES CORPORATION
Power of Attorney

The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation"), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints WILLIAM H. TRACHSEL, DAVID J. FITZPATRICK and DAVID G. NORD, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2000, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 5th day of February, 2001.


/s/   Andre Villeneuve
      Andre Villeneuve



UNITED TECHNOLOGIES CORPORATION
Power of Attorney

The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation"), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints WILLIAM H. TRACHSEL, DAVID J. FITZPATRICK and DAVID G. NORD, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2000, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 5th day of February, 2001.


/s/     Harold A. Wagner
        Harold A. Wagner



UNITED TECHNOLOGIES CORPORATION
Power of Attorney

The undersigned, as a member of the Board of Directors, or as an officer of UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (the "Corporation"), or as a member of a committee of said Board, or in all of said capacities, hereby constitutes and appoints WILLIAM H. TRACHSEL, DAVID J. FITZPATRICK and DAVID G. NORD, or any one of them, his or her true and lawful attorneys and agents to do any and all acts and things and execute any and all instruments which the said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Securities Exchange Act of 1934 and any rules and regulations and requirements of the Securities and Exchange Commission in respect thereof in connection with the filing of the Annual Report of the Corporation on Form 10-K for the fiscal year ended December 31, 2000, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the undersigned, in the capacities aforesaid or in any other capacity, to such Form 10-K Annual Report filed or to be filed with the Securities and Exchange Commission, and any and all amendments to the said Form 10-K Annual Report, and any and all instruments and documents filed as a part of or in connection with the said Form 10-K Annual Report or any amendments thereto; hereby ratifying and confirming all that the said attorneys and agents, or any one of them, have done, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney this 5th day of February, 2001.


/s/     Sanford I. Weill
        Sanford I. Weill