United Technologies Corporation
UNITED TECHNOLOGIES CORP /DE/ (Form: 10-Q, Received: 10/27/2017 06:59:34)
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
  ____________________________________ 
FORM 10-Q
____________________________________ 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission file number 1-812
____________________________________ 
UNITED TECHNOLOGIES CORPORATION
____________________________________ 
DELAWARE
 
06-0570975
10 Farm Springs Road, Farmington, Connecticut 06032
(860) 728-7000

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý .    No   ¨ .
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ý .    No   ¨ .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
ý
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨
 
 
 
 
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨ .    No   ý .
At September 30, 2017 there were 798,569,921 shares of Common Stock outstanding.


Table of Contents

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended September 30, 2017
 
 
Page
 
 
 
 
 
 
Condensed Consolidated Statement of Operations for the quarters ended September 30, 2017 and 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

United Technologies Corporation and its subsidiaries' names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or tradenames of United Technologies Corporation and its subsidiaries. Names, abbreviations of names, logos, and products and service designators of other companies are either the registered or unregistered trademarks or tradenames of their respective owners. As used herein, the terms "we," "us," "our," "the Company," or "UTC," unless the context otherwise requires, mean United Technologies Corporation and its subsidiaries. References to internet web sites in this Form 10-Q are provided for convenience only. Information available through these web sites is not incorporated by reference into this Form 10-Q.

2

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 
 
Quarter Ended September 30,
(Dollars in millions, except per share amounts)
2017
 
2016
Net Sales:
 
 
 
Product sales
$
10,378

 
$
10,194

Service sales
4,684

 
4,160

 
15,062

 
14,354

Costs and Expenses:
 
 
 
Cost of products sold
7,750

 
7,522

Cost of services sold
3,293

 
2,820

Research and development
582

 
582

Selling, general and administrative
1,524

 
1,390

 
13,149

 
12,314

Other income, net
250

 
211

Operating profit
2,163

 
2,251

Interest expense, net
223

 
225

Income from continuing operations before income taxes
1,940

 
2,026

Income tax expense
506

 
492

Net income from continuing operations
1,434

 
1,534

Less: Noncontrolling interest in subsidiaries' earnings from continuing operations
104

 
91

Income from continuing operations attributable to common shareowners
1,330

 
1,443

Discontinued operations (Note 2):
 
 
 
Income from operations

 
1

Loss on disposal

 
(4
)
Income tax benefit

 
40

Income from discontinued operations attributable to common shareowners

 
37

Net income attributable to common shareowners
$
1,330

 
$
1,480

Earnings Per Share of Common Stock - Basic:
 
 
 
Income from continuing operations attributable to common shareowners
$
1.69

 
$
1.76

Net income attributable to common shareowners
$
1.69

 
$
1.80

Earnings Per Share of Common Stock - Diluted:
 
 
 
Income from continuing operations attributable to common shareowners
$
1.67

 
$
1.74

Net income attributable to common shareowners
$
1.67

 
$
1.78

See accompanying Notes to Condensed Consolidated Financial Statements

3

Table of Contents

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 
 
Nine Months Ended September 30,
(Dollars in millions, except per share amounts)
2017
 
2016
Net Sales:
 
 
 
Product sales
$
30,676

 
$
30,247

Service sales
13,481

 
12,338

 
44,157

 
42,585

Costs and Expenses:
 
 
 
Cost of products sold
22,920

 
22,542

Cost of services sold
9,300

 
8,195

Research and development
1,768

 
1,711

Selling, general and administrative
4,544

 
4,204

 
38,532

 
36,652

Other income, net
1,095

 
600

Operating profit
6,720

 
6,533

Interest expense, net
662

 
673

Income from continuing operations before income taxes
6,058

 
5,860

Income tax expense
1,624

 
1,548

Net income from continuing operations
4,434

 
4,312

Less: Noncontrolling interest in subsidiaries' earnings from continuing operations
279

 
271

Income from continuing operations attributable to common shareowners
4,155

 
4,041

Discontinued operations (Note 2):
 
 
 
Income from operations

 
2

Gain on disposal

 
11

Income tax expense

 
(12
)
Income from discontinued operations attributable to common shareowners

 
1

Net income attributable to common shareowners
$
4,155

 
$
4,042

Earnings Per Share of Common Stock - Basic:
 
 
 
Income from continuing operations attributable to common shareowners
$
5.26

 
$
4.90

Net income attributable to common shareowners
$
5.26

 
$
4.91

Earnings Per Share of Common Stock - Diluted:
 
 
 
Income from continuing operations attributable to common shareowners
$
5.20

 
$
4.86

Net income attributable to common shareowners
$
5.20

 
$
4.86

See accompanying Notes to Condensed Consolidated Financial Statements


4

Table of Contents

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)

 
Quarter Ended
September 30,
 
Nine Months Ended
September 30,
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Net income from continuing operations
$
1,434

 
$
1,534

 
$
4,434

 
$
4,312

Net income from discontinued operations

 
37

 

 
1

Net income
1,434

 
1,571

 
4,434

 
4,313

Other comprehensive income (loss), net of tax (expense) benefit:
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
 
 
 
 
 
 
Foreign currency translation adjustments arising during period
514

 
(359
)
 
909

 
(596
)
Less: Reclassification adjustments for gain on sale of an investment in a foreign entity recognized in Other income, net
(3
)
 
(1
)
 
(3
)
 

 
511

 
(360
)
 
906

 
(596
)
Pension and postretirement benefit plans
 
 
 
 
 
 
 
Pension and postretirement benefit plans adjustments during the period
(50
)
 
7

 
(54
)
 
(30
)
Amortization of actuarial loss and prior service cost
132

 
127

 
395

 
381

 
82

 
134

 
341

 
351

Tax expense
(53
)
 
(50
)
 
(149
)
 
(131
)
 
29

 
84

 
192

 
220

Unrealized gain (loss) on available-for-sale securities
 
 
 
 
 
 
 
Unrealized holding gain (loss) arising during period
19

 
49

 
17

 
139

Reclassification adjustments for gain included in Other income, net
(138
)
 
(20
)
 
(545
)
 
(72
)
 
(119
)
 
29

 
(528
)
 
67

Tax benefit (expense)
43

 
(11
)
 
199

 
(25
)
 
(76
)
 
18

 
(329
)
 
42

Change in unrealized cash flow hedging
 
 
 
 
 
 
 
Unrealized cash flow hedging gain (loss) arising during period
310

 
(7
)
 
440

 
188

(Gain) loss reclassified into Product sales
(24
)
 
32

 
(14
)
 
139

 
286

 
25

 
426

 
327

Tax expense
(73
)
 
(7
)
 
(105
)
 
(87
)
 
213

 
18

 
321

 
240

Other comprehensive income (loss), net of tax
677

 
(240
)
 
1,090

 
(94
)
Comprehensive income
2,111

 
1,331

 
5,524

 
4,219

Less: Comprehensive income attributable to noncontrolling interest
(144
)
 
(96
)
 
(362
)
 
(287
)
Comprehensive income attributable to common shareowners
$
1,967

 
$
1,235

 
$
5,162

 
$
3,932

See accompanying Notes to Condensed Consolidated Financial Statements

5

Table of Contents

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
 
(Dollars in millions)
September 30, 2017
 
December 31, 2016
Assets
 
 
 
Cash and cash equivalents
$
8,523

 
$
7,157

Accounts receivable, net
13,128

 
11,481

Inventories and contracts in progress, net
10,083

 
8,704

Other assets, current
1,229

 
1,208

Total Current Assets
32,963

 
28,550

Customer financing assets
2,184

 
1,398

Future income tax benefits
1,723

 
1,809

Fixed assets
20,975

 
19,469

Less: Accumulated depreciation
(11,212
)
 
(10,311
)
Fixed assets, net
9,763

 
9,158

Goodwill
27,916

 
27,059

Intangible assets, net
15,955

 
15,684

Other assets
5,848

 
6,048

Total Assets
$
96,352

 
$
89,706

Liabilities and Equity
 
 
 
Short-term borrowings
$
1,077

 
$
601

Accounts payable
8,999

 
7,483

Accrued liabilities
13,053

 
12,219

Long-term debt currently due
2,120

 
1,603

Total Current Liabilities
25,249

 
21,906

Long-term debt
24,063

 
21,697

Future pension and postretirement benefit obligations
3,227

 
5,612

Other long-term liabilities
11,693

 
11,026

Total Liabilities
64,232

 
60,241

Commitments and contingent liabilities (Note 15)

 

Redeemable noncontrolling interest
429

 
296

Shareowners' Equity:
 
 
 
Common Stock
17,486

 
17,285

Treasury Stock
(35,575
)
 
(34,150
)
Retained earnings
55,385

 
52,873

Unearned ESOP shares
(88
)
 
(95
)
Accumulated other comprehensive loss
(7,327
)
 
(8,334
)
Total Shareowners' Equity
29,881

 
27,579

Noncontrolling interest
1,810

 
1,590

Total Equity
31,691

 
29,169

Total Liabilities and Equity
$
96,352

 
$
89,706

See accompanying Notes to Condensed Consolidated Financial Statements

6

Table of Contents

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
(Dollars in millions)
2017
 
2016
Operating Activities of Continuing Operations:
 
 
 
Net income from continuing operations
$
4,434

 
$
4,312

Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities of continuing operations:
 
 
 
Depreciation and amortization
1,582

 
1,456

Deferred income tax provision
724

 
273

Stock compensation cost
145

 
112

Change in:
 
 
 
Accounts receivable
(1,051
)
 
(636
)
Inventories and contracts in progress
(1,249
)
 
(810
)
Other current assets
78

 
(27
)
Accounts payable and accrued liabilities
1,864

 
774

Global pension contributions
(2,008
)
 
(125
)
Canadian government settlement
(246
)
 
(237
)
Other operating activities, net
(1,163
)
 
(525
)
Net cash flows provided by operating activities of continuing operations
3,110

 
4,567

Investing Activities of Continuing Operations:
 
 
 
Capital expenditures
(1,214
)
 
(1,043
)
Investments in businesses
(196
)
 
(535
)
Dispositions of businesses
37

 
148

Proceeds from sale of investments in Watsco, Inc.
596

 

Increase in customer financing assets, net
(525
)
 
(128
)
Increase in collaboration intangible assets
(290
)
 
(301
)
Payments from settlements of derivative contracts
(183
)
 
(29
)
Other investing activities, net
117

 
(11
)
Net cash flows used in investing activities of continuing operations
(1,658
)
 
(1,899
)
Financing Activities of Continuing Operations:
 
 
 
Issuance of long-term debt
4,044

 
2,482

Repayment of long-term debt
(1,587
)
 
(201
)
Increase (decrease) in short-term borrowings, net
400

 
(63
)
Proceeds from Common Stock issued under employee stock plans
25

 
6

Dividends paid on Common Stock
(1,541
)
 
(1,561
)
Repurchase of Common Stock
(1,430
)
 
(528
)
Other financing activities, net
(204
)
 
(338
)
Net cash flows used in financing activities of continuing operations
(293
)
 
(203
)
Discontinued Operations:
 
 
 
Net cash used in operating activities

 
(2,486
)
Net cash provided by investing activities

 
6

Net cash flows used in discontinued operations

 
(2,480
)
Effect of foreign exchange rate changes on cash and cash equivalents
208

 
28

Net increase in cash, cash equivalents and restricted cash
1,367

 
13

Cash, cash equivalents and restricted cash, beginning of year
7,189

 
7,120

Cash, cash equivalents and restricted cash, end of period
8,556

 
7,133

Less: Restricted cash, included in Other assets
33

 
26

Cash and cash equivalents, end of period
$
8,523

 
$
7,107

See accompanying Notes to Condensed Consolidated Financial Statements

7

Table of Contents

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Condensed Consolidated Financial Statements at September 30, 2017 and for the quarters and nine months ended September 30, 2017 and 2016 are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods. The results reported in these Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the financial statements and notes in our Annual Report to Shareowners ( 2016 Annual Report) incorporated by reference in our Annual Report on Form 10-K for calendar year 2016 ( 2016 Form 10-K).
Certain reclassifications have been made to the prior year amounts to conform to the current year presentation. As previously disclosed in our 2016 Form 10-K, in 2016 we early adopted Accounting Standards Update (ASU) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments and ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . Amounts previously reported for the quarter and nine months ended September 30, 2016 have been restated as required upon adoption of these ASUs. These restatements had an immaterial impact on the Condensed Consolidated Financial Statements as of September 30, 2016, and for the quarter and nine months then ended.
Note 1: Acquisitions, Dispositions, Goodwill and Other Intangible Assets
Business Acquisitions and Dispositions. During the nine months ended September 30, 2017 , our investment in business acquisitions was $196 million , and consisted of a number of small acquisitions, primarily in our commercial businesses.
On September 4, 2017 , we announced that we had entered into a merger agreement with Rockwell Collins, Inc. (Rockwell Collins) , under which we agreed to acquire Rockwell Collins. Under the terms of the merger agreement, each Rockwell Collins shareowner will receive $93.33 per share in cash and a fraction of a share of UTC common stock equal to the quotient obtained by dividing $46.67 by the average of the volume-weighted average prices per share of UTC common stock on the NYSE on each of the 20 consecutive trading days ending with the trading day immediately prior to the closing date, (the “UTC Stock Price”), subject to adjustment based on a two-way collar mechanism as described below (the “Stock Consideration”). The cash and UTC stock payable in exchange for each such share of Rockwell Collins common stock are collectively the “Merger Consideration.” The fraction of a share of UTC common stock into which each such share of Rockwell Collins common stock will be converted is the “Exchange Ratio.” The Exchange Ratio will be determined based upon the UTC Stock Price. If the UTC Stock Price is greater than $107.01 but less than $124.37, the Exchange Ratio will be equal to the quotient of (i) $46.67 divided by (ii) the UTC Stock Price, which, in each case, will result in the Stock Consideration having a value equal to $46.67. If the UTC Stock Price is less than or equal to $107.01 or greater than or equal to $124.37, then a two-way collar mechanism will apply, pursuant to which, (x) if the UTC Stock Price is greater than or equal to $124.37, the Exchange Ratio will be fixed at 0.37525 and the value of the Stock Consideration will be greater than $46.67, and (y) if the UTC Stock Price is less than or equal to $107.01, the Exchange Ratio will be fixed at 0.43613 and the value of the Stock Consideration will be less than $46.67. We currently expect that the merger will be completed in the third quarter of 2018, subject to approval by Rockwell Collins’ shareowners, as well as other customary closing conditions, including the receipt of required regulatory approvals.
We anticipate that approximately $15 billion will be required to pay the aggregate cash portion of the Merger Consideration. We expect to fund the cash portion of the Merger Consideration through debt issuances and cash on hand. Additionally, we have entered into a $6.5 billion 364-day unsecured bridge loan credit agreement that would be funded only to the extent certain anticipated debt issuances are not completed prior to the completion of the merger. We expect to assume approximately $7 billion of existing Rockwell Collins long-term debt upon completion of the merger.

8


Goodwill. Changes in our goodwill balances for the nine months ended September 30, 2017 were as follows:
(Dollars in millions)
Balance as of
January 1, 2017
 
Goodwill 
Resulting from Business Combinations
 
Foreign Currency Translation and Other
 
Balance as of September 30, 2017
Otis
$
1,575

 
$
3

 
$
114

 
$
1,692

UTC Climate, Controls & Security
9,487

 
110

 
443

 
10,040

Pratt & Whitney
1,511

 

 

 
1,511

UTC Aerospace Systems
14,483

 

 
187

 
14,670

Total Segments
27,056

 
113

 
744

 
27,913

Eliminations and other
3

 

 

 
3

Total
$
27,059

 
$
113

 
$
744

 
$
27,916

Intangible Assets. Identifiable intangible assets are comprised of the following:
 
September 30, 2017
 
December 31, 2016
(Dollars in millions)
Gross Amount
 
Accumulated
Amortization
 
Gross Amount
 
Accumulated
Amortization
Amortized:
 
 
 
 
 
 
 
Service portfolios
$
2,197

 
$
(1,531
)
 
$
1,995

 
$
(1,344
)
Patents and trademarks
401

 
(228
)
 
378

 
(201
)
Collaboration intangible assets
4,023

 
(342
)
 
3,724

 
(211
)
Customer relationships and other
13,323

 
(3,999
)
 
12,798

 
(3,480
)
 
19,944

 
(6,100
)
 
18,895

 
(5,236
)
Unamortized:
 
 
 
 
 
 
 
Trademarks and other
2,111

 

 
2,025

 

Total
$
22,055

 
$
(6,100
)
 
$
20,920

 
$
(5,236
)
Customer relationship intangible assets include payments made to our customers to secure certain contractual rights. Such payments are capitalized when distinct rights are obtained and sufficient incremental cash flows to support the recoverability of the assets have been established. Otherwise, the applicable portion of the payments are expensed. We amortize these intangible assets based on the underlying pattern of economic benefit, which may result in an amortization method other than straight-line. In the aerospace industry, amortization based on the pattern of economic benefit generally results in lower amortization expense during the development period with amortization expense increasing as programs enter full production and aftermarket cycles. If a pattern of economic benefit cannot be reliably determined, a straight-line amortization method is used. We classify amortization of such payments as a reduction of sales. The collaboration intangible assets are amortized based upon the pattern of economic benefits as represented by the underlying cash flows.
Amortization of intangible assets for the quarter and nine months ended September 30, 2017 was $211 million and $626 million , respectively, compared with $197 million and $578 million for the same periods of 2016. The following is the expected amortization of intangible assets for the years 2017 through 2022 , which reflects the pattern of expected economic benefit on certain aerospace intangible assets.  
(Dollars in millions)
 
Remaining 2017
 
2018
 
2019
 
2020
 
2021
 
2022
Amortization expense
 
$
210

 
$
879

 
$
866

 
$
888

 
$
898

 
$
893

Note 2: Discontinued Operations
On November 6, 2015, we completed the sale of Sikorsky to Lockheed Martin Corp. In the nine months ended September 30, 2016 , we recognized approximately $11 million of additional gain on the disposal, primarily resulting from the settlement of working capital adjustments. In the quarter and nine months ended September 30, 2016 , we recognized approximately $40 million of income tax benefit and $12 million of additional income tax expense, respectively, including the impacts related to filing Sikorsky's 2015 tax returns. Net cash outflows from discontinued operations of approximately $2.5 billion resulted from the payment of taxes related to the 2015 gain realized on the sale of Sikorsky.

9


Note 3: Earnings Per Share
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions, except per share amounts; shares in millions)
2017
 
2016
 
2017
 
2016
Net income attributable to common shareowners:
 
 
 
 
 
 
 
Net income from continuing operations
$
1,330

 
$
1,443

 
$
4,155

 
$
4,041

Income from discontinued operations

 
37

 

 
1

Net income attributable to common shareowners
$
1,330

 
$
1,480

 
$
4,155

 
$
4,042

Basic weighted average number of shares outstanding
788.3

 
822.4

 
790.3

 
824.0

Stock awards and equity units
8.8

 
8.8

 
9.1

 
7.8

Diluted weighted average number of shares outstanding
797.1

 
831.2

 
799.4

 
831.8

Earnings Per Share of Common Stock - Basic:
 
 
 
 
 
 
 
Net income from continuing operations
$
1.69

 
$
1.76

 
$
5.26

 
$
4.90

Income from discontinued operations

 
0.04

 

 

Net income attributable to common shareowners
1.69

 
1.80

 
5.26

 
4.91

Earnings Per Share of Common Stock - Diluted:
 
 
 
 
 
 
 
Net income from continuing operations
$
1.67

 
$
1.74

 
$
5.20

 
$
4.86

Income from discontinued operations

 
0.04

 

 

Net income attributable to common shareowners
1.67

 
1.78

 
5.20

 
4.86

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock appreciation rights and stock options, when the average market price of the common stock is lower than the exercise price of the related stock awards during the period because the effect would be anti-dilutive. For the quarter and nine months ended September 30, 2017 , the number of stock awards excluded from the computation was approximately 5.8 million and 6.4 million , respectively. For the quarter and nine months ended September 30, 2016 , the number of stock awards excluded from the computation was approximately 12.2 million and 15.0 million , respectively.
Note 4: Inventories and Contracts in Progress
(Dollars in millions)
September 30, 2017
 
December 31, 2016
Raw materials
$
2,189

 
$
2,040

Work-in-process
3,453

 
2,787

Finished goods
3,715

 
3,305

Contracts in progress
10,417

 
9,395

 
19,774

 
17,527

Less:
 
 
 
Progress payments, secured by lien, on U.S. Government contracts
(224
)
 
(130
)
Billings on contracts in progress
(9,467
)
 
(8,693
)
 
$
10,083

 
$
8,704

Inventories include capitalized contract development costs related to certain aerospace programs at UTC Aerospace Systems. As of September 30, 2017 and December 31, 2016 , these capitalized costs were $130 million and $140 million , respectively, which will be liquidated as production units are delivered to customers. Within commercial aerospace, inventory costs attributable to new engine offerings are recognized based on the average cost per unit expected over the life of each contract using the units-of-delivery method of percentage of completion accounting. Under this method, costs of initial engine deliveries in excess of the projected contract per unit average cost are capitalized, and these capitalized amounts are subsequently expensed as additional engine deliveries occur for engines with costs below the projected contract per unit average cost over the life of the contract. As of September 30, 2017 and December 31, 2016 , inventory included $357 million and $233 million , respectively, of such capitalized amounts.

10


Note 5: Borrowings and Lines of Credit
(Dollars in millions)
September 30, 2017
 
December 31, 2016
Commercial paper
$
943

 
$
522

Other borrowings
134

 
79

Total short-term borrowings
$
1,077

 
$
601

At September 30, 2017 , we had revolving credit agreements with various banks permitting aggregate borrowings of up to $4.35 billion , pursuant to a $2.20 billion revolving credit agreement and a $2.15 billion multicurrency revolving credit agreement, both of which expire in August 2021 . As of September 30, 2017 , there were no borrowings under these revolving credit agreements. The undrawn portions of these revolving credit agreements are also available to serve as backup facilities for the issuance of commercial paper. As of September 30, 2017 , our maximum commercial paper borrowing limit was $4.35 billion . Commercial paper borrowings at September 30, 2017 include approximately €500 million ( $594 million ) of euro-denominated commercial paper. We use our commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, discretionary pension contributions, debt refinancing, dividend payments and repurchases of our common stock. The need for commercial paper borrowings arises when the use of domestic cash for general corporate purposes exceeds the sum of domestic cash generation and foreign cash repatriated to the U.S.
In connection with the merger agreement with Rockwell Collins announced on September 4, 2017, we have entered into a $6.5 billion 364-day unsecured bridge loan credit agreement that would be funded only to the extent certain anticipated debt issuances are not completed prior to the completion of the merger. See Note 1 for additional discussion.
On May 4, 2017, we issued $1.0 billion aggregate principal amount of 1.900% notes due 2020, $500 million aggregate principal amount of 2.300% notes due 2022, $800 million aggregate principal amount of 2.800% notes due 2024, $1.1 billion aggregate principal amount of 3.125% notes due 2027 and $600 million aggregate principal amount of 4.050% notes due 2047. The net proceeds received from these debt issuances were used to fund the repayment at maturity of our 1.800% notes due 2017, representing $1.5 billion in aggregate principal, and for other general corporate purposes.


11


Long-term debt consisted of the following:
(Dollars in millions)
September 30, 2017
 
December 31, 2016
1.800% notes due 2017 1
$

 
$
1,500

6.800% notes due 2018
99

 
99

EURIBOR plus 0.800% floating rate notes due 2018 (€750 million principal value) 2
890

 
783

1.778% junior subordinated notes due 2018
1,100

 
1,100

LIBOR plus 0.350% floating rate notes due 2019 3
350

 
350

1.500% notes due 2019 1
650

 
650

8.875% notes due 2019
271

 
271

4.875% notes due 2020 1
171

 
171

4.500% notes due 2020 1
1,250

 
1,250

1.900% notes due 2020 1
1,000

 

8.750% notes due 2021
250

 
250

1.950% notes due 2021 1
750

 
750

1.125% notes due 2021 (€950 million principal value) 1
1,128

 
992

2.300% notes due 2022 1
500

 

3.100% notes due 2022 1
2,300

 
2,300

1.250% notes due 2023 (€750 million principal value) 1
890

 
783

2.800% notes due 2024 1
800

 

1.875% notes due 2026 (€500 million principal value) 1
594

 
522

2.650% notes due 2026 1
1,150

 
1,150

3.125% notes due 2027 1
1,100

 

7.100% notes due 2027
141

 
141

6.700% notes due 2028
400

 
400

7.500% notes due 2029 1
550

 
550

5.400% notes due 2035 1
600

 
600

6.050% notes due 2036 1
600

 
600

6.800% notes due 2036 1
134

 
134

7.000% notes due 2038
159

 
159

6.125% notes due 2038 1
1,000

 
1,000

5.700% notes due 2040 1
1,000

 
1,000

4.500% notes due 2042 1
3,500

 
3,500

4.150% notes due 2045 1
850

 
850

3.750% notes due 2046 1
1,100

 
1,100

4.050% notes due 2047 1
600

 

Project financing obligations
137

 
155

Other (including capitalized leases)
195

 
189

Total principal long-term debt
26,209

 
23,299

Other (fair market value adjustments and discounts)
(26
)
 
1

Total long-term debt
26,183

 
23,300

Less: current portion
2,120

 
1,603

Long-term debt, net of current portion
$
24,063

 
$
21,697

1
We may redeem these notes at our option pursuant to their terms.
2
The three-month EURIBOR rate as of September 30, 2017 was approximately -0.329%. The notes may be redeemed at our option in whole, but not in part, at any time in the event of certain developments affecting U.S. taxation.
3
The three-month LIBOR rate as of September 30, 2017 was approximately 1.334%.

12


The average maturity of our long-term debt at September 30, 2017 is approximately twelve years . The average interest expense rate on our total borrowings for the quarters and nine months ended September 30, 2017 and 2016 was as follows:
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Average interest expense rate
3.6
%
 
4.0
%
 
3.6
%
 
4.1
%
We have an existing universal shelf registration statement filed with the Securities and Exchange Commission (SEC) for an indeterminate amount of equity and debt securities for future issuance, subject to our internal limitations on the amount of equity and debt to be issued under this shelf registration statement.
Note 6: Income Taxes
We conduct business globally and, as a result, UTC or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, Mexico, Netherlands, Poland, Singapore, South Korea, Spain, Switzerland, the United Kingdom, and the United States. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2005.
In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. It is reasonably possible that a net reduction within the range of $30 million to $435 million of unrecognized tax benefits may occur within the next 12 months as a result of additional worldwide uncertain tax positions, the revaluation of current uncertain tax positions arising from developments in examinations, in appeals, in the courts, or the closure of tax statutes. See Note 15, Contingent Liabilities, for discussion regarding uncertain tax positions, included in the above range, related to pending litigation with respect to certain deductions claimed in Germany.
The Examination Division of the Internal Revenue Service is currently auditing UTC tax years 2014 and 2015, which is expected to continue beyond the next 12 months.
As a result of federal, state and non-U.S. tax year closures related to audit resolutions and the expiration of applicable statutes of limitation during the quarter, including expiration of the U.S. federal income tax statute of limitations for UTC’s 2013 tax year, we recognized non-cash gains of approximately $ 55 million of income tax and $9 million of related interest, in the quarter ended September 30, 2017 .
Note 7: Employee Benefit Plans
Pension and Postretirement Plans. We sponsor both funded and unfunded domestic and foreign defined pension and other postretirement benefit plans, and defined contribution plans. Contributions to our plans were as follows:
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Defined benefit plans
$
1,929

 
$
18

 
$
2,008

 
$
125

Defined contribution plans
86

 
79

 
262

 
235

There was a $1.9 billion contribution to our domestic defined benefit pension plans in the quarter and nine months ended September 30, 2017 . There were no contributions to our domestic defined benefit pension plans in the quarter and nine months ended September 30, 2016 . The following table illustrates the components of net periodic benefit cost for our defined pension and other postretirement benefit plans:

13


 
Pension Benefits
Quarter Ended September 30,
 
Other Postretirement Benefits
Quarter Ended September 30,
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Service cost
$
94

 
$
96

 
$

 
$
1

Interest cost
281

 
302

 
9

 
9

Expected return on plan assets
(555
)
 
(554
)
 

 

Amortization of prior service credit
(9
)
 
(7
)
 
(1
)
 

Recognized actuarial net loss (gain)
144

 
135

 
(2
)
 
(1
)
Net settlement and curtailment loss
2

 
3

 

 

Total net periodic benefit (income) cost
$
(43
)
 
$
(25
)
 
$
6

 
$
9

 
Pension Benefits
Nine Months Ended September 30,
 
Other Postretirement Benefits
Nine Months Ended September 30,
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Service cost
$
280

 
$
287

 
$
2

 
$
3

Interest cost
838

 
908

 
22

 
25

Expected return on plan assets
(1,636
)
 
(1,669
)
 

 

Amortization of prior service credit
(27
)
 
(22
)
 
(1
)
 

Recognized actuarial net loss (gain)
430

 
406

 
(7
)
 
(3
)
Net settlement and curtailment loss
1

 
18

 

 

Total net periodic benefit (income) cost
$
(114
)
 
$
(72
)
 
$
16

 
$
25

Effective January 1, 2017, a voluntary lump-sum option is available for the frozen final average earnings benefits of certain U.S. salaried employees upon termination of employment after 2016. This option provides participants with the choice of electing to receive a lump-sum payment in lieu of receiving a future monthly pension benefit. This plan change reduced the projected benefit obligation by $170 million .
Note 8: Restructuring Costs
During the nine months ended September 30, 2017 , we recorded net pre-tax restructuring costs totaling $177 million for new and ongoing restructuring actions. We recorded charges in the segments as follows:
(Dollars in millions)
 
Otis
$
23

UTC Climate, Controls & Security
84

Pratt & Whitney
4

UTC Aerospace Systems
64

Eliminations and other
2

Total
$
177

Restructuring charges incurred during the nine months ended September 30, 2017 primarily relate to actions initiated during 2017 and 2016 , and were recorded as follows:
(Dollars in millions)
 
Cost of sales
$
81

Selling, general and administrative
96

Total
$
177

2017 Actions . During the nine months ended September 30, 2017 , we recorded net pre-tax restructuring costs of $114 million , comprised of $40 million in cost of sales and $74 million in selling, general and administrative expenses. The 2017 actions relate to ongoing cost reduction efforts, including workforce reductions and the consolidation of field operations.

14


We are targeting to complete the majority of the remaining workforce and facility related cost reduction actions during 2017 and 2018 . No specific plans for significant other actions have been finalized at this time. The following table summarizes the accrual balance and utilization for the 2017 restructuring actions for the quarter and nine months ended September 30, 2017 :
(Dollars in millions)
Severance
 
Facility Exit, Lease Termination and Other Costs
 
Total
Quarter Ended September 30, 2017
 
 
 
 
 
Restructuring accruals at June 30, 2017
$
43

 
$

 
$
43

Net pre-tax restructuring costs
49

 
2

 
51

Utilization and foreign exchange
(20
)
 
(2
)
 
(22
)
Balance at September 30, 2017
$
72

 
$

 
$
72

 
 
 
 
 
 
Nine Months Ended September 30, 2017
 
 
 
 
 
Net pre-tax restructuring costs
$
106

 
$
8

 
$
114

Utilization and foreign exchange
(34
)
 
(8
)
 
(42
)
Balance at September 30, 2017
$
72

 
$

 
$
72

The following table summarizes expected, incurred and remaining costs for the 2017 restructuring actions by segment:
(Dollars in millions)
Expected
Costs
 
Costs Incurred Quarter Ended
March 31, 2017
 
Costs Incurred Quarter Ended
June 30, 2017
 
Costs Incurred Quarter Ended
September 30, 2017
 
Remaining Costs at
September 30, 2017
Otis
$
71

 
$
(2
)
 
$
(12
)
 
$
(5
)
 
$
52

UTC Climate, Controls & Security
83

 
(12
)
 
(11
)
 
(35
)
 
25

Pratt & Whitney
8

 

 
(6
)
 

 
2

UTC Aerospace Systems
54

 
(9
)
 
(10
)
 
(10
)
 
25

Eliminations and other
2

 
(1
)
 

 
(1
)
 

Total
$
218

 
$
(24
)
 
$
(39
)
 
$
(51
)
 
$
104

2016 Actions . During the nine months ended September 30, 2017 , we recorded net pre-tax restructuring costs totaling $48 million for restructuring actions initiated in 2016 , including $20 million in cost of sales and $28 million in selling, general and administrative expenses. The 2016 actions relate to ongoing cost reduction efforts, including workforce reductions, consolidation of field operations, and costs to exit legacy programs. The following table summarizes the accrual balances and utilization for the 2016 restructuring actions for the quarter and nine months ended September 30, 2017 :
(Dollars in millions)
Severance
 
Facility Exit,
Lease
Termination and
Other Costs
 
Total
Quarter Ended September 30, 2017
 
 
 
 
 
Restructuring accruals at June 30, 2017
$
49

 
$
48

 
$
97

Net pre-tax restructuring costs
3

 
5

 
8

Utilization and foreign exchange
(12
)
 
(1
)
 
(13
)
Balance at September 30, 2017
$
40

 
$
52

 
$
92

 
 
 
 
 
 
Nine Months Ended September 30, 2017
 
 
 
 
 
Restructuring accruals at December 31, 2016
$
63

 
$
46

 
$
109

Net pre-tax restructuring costs
29

 
19

 
48

Utilization and foreign exchange
(52
)
 
(13
)
 
(65
)
Balance at September 30, 2017
$
40

 
$
52

 
$
92


15


The following table summarizes expected, incurred and remaining costs for the 2016 restructuring actions by segment:
(Dollars in millions)
Expected
Costs
 
Costs Incurred in 2016
 
Costs Incurred Quarter Ended
March 31, 2017
 
Costs Incurred Quarter Ended
June 30, 2017
 
Costs Incurred Quarter Ended
September 30, 2017
 
Remaining Costs at
September 30, 2017
Otis
$
55

 
$
(48
)
 
$
(3
)
 
$
1

 
$

 
$
5

UTC Climate, Controls & Security
80

 
(45
)
 
(6
)
 
(7
)
 
(3
)
 
19

Pratt & Whitney
118

 
(118
)
 

 

 

 

UTC Aerospace Systems
87

 
(31
)
 
(13
)
 
(12
)
 
(5
)
 
26

Total
$
340

 
$
(242
)
 
$
(22
)
 
$
(18
)
 
$
(8
)
 
$
50

2015 and Prior Actions. During the nine months ended September 30, 2017 , we recorded net pre-tax restructuring costs totaling $15 million for restructuring actions initiated in 2015 and prior. As of September 30, 2017 , we have approximately $52 million of accrual balances remaining related to 2015 and prior actions.
Note 9: Financial Instruments
We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments under the Derivatives and Hedging Topic of the FASB ASC and those utilized as economic hedges. We operate internationally and, in the ordinary course of business, we are 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. We have used derivative instruments, including swaps, forward contracts and options to manage certain foreign currency, interest rate and commodity price exposures.
The four quarter rolling average of the notional amount of foreign exchange contracts hedging foreign currency transactions was $18.6 billion and $18.3 billion at September 30, 2017 and December 31, 2016 , respectively.
The following table summarizes the fair value of derivative instruments as of September 30, 2017 and December 31, 2016 , which consist solely of foreign exchange contracts:
 
Asset Derivatives
 
Liability Derivatives
(Dollars in millions)
September 30, 2017
 
December 31, 2016
 
September 30, 2017
 
December 31, 2016
Derivatives designated as hedging instruments
$
295

 
$
15

 
$
15

 
$
196

Derivatives not designated as hedging instruments
95

 
155

 
75

 
158

As discussed in Note 5, we have issued approximately €2.95 billion of euro-denominated long-term debt and €500 million of outstanding euro-denominated commercial paper borrowings, which qualify as a net investment hedge against our investments in European businesses . As of September 30, 2017, the net investment hedge is deemed to be effective.
The amount of gains and losses related to the Company's derivative financial instruments was as follows:
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Gain (loss) recorded in Accumulated other comprehensive loss
$
310

 
$
(7
)
 
$
440

 
$
188

(Gain) loss reclassified from Accumulated other comprehensive loss into Product sales (effective portion)
(24
)
 
32

 
(14
)
 
139

Assuming current market conditions continue, a $80 million pre-tax loss is expected to be reclassified from Accumulated other comprehensive loss into Product sales to reflect the fixed prices obtained from foreign exchange hedging within the next 12 months. At September 30, 2017 , all derivative contracts accounted for as cash flow hedges will mature by November 2022 .
The effect on the Condensed Consolidated Statement of Operations of foreign exchange contracts not designated as hedging instruments was as follows:
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Gain recognized in Other income, net
$
10

 
$
19

 
$
50

 
$
49


16


We paid $183 million and $29 million for settlements of derivative contracts during the nine months ended September 30, 2017 and 2016 , respectively.
Note 10: Fair Value Measurements
In accordance with the provisions of ASC 820, the following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring and nonrecurring basis in our Condensed Consolidated Balance Sheet as of September 30, 2017 and December 31, 2016 :  
September 30, 2017 (Dollars in millions)
Total
 
Level 1
 
Level 2
 
Level 3
Recurring fair value measurements:
 
 
 
 
 
 
 
Available-for-sale securities
$
120

 
$
120

 
$

 
$

Derivative assets
390

 

 
390

 

Derivative liabilities
(90
)
 

 
(90
)
 

December 31, 2016 (Dollars in millions)
Total
 
Level 1
 
Level 2
 
Level 3
Recurring fair value measurements:
 
 
 
 
 
 
 
Available-for-sale securities
$
987

 
$
987

 
$

 
$

Derivative assets
170

 

 
170

 

Derivative liabilities
(354
)
 

 
(354
)
 

The reduction in value of available-for-sale securities as of September 30, 2017 , as compared to December 31, 2016 , is primarily the result of sales of these securities in the nine months ended September 30, 2017 , including UTC Climate, Controls & Security's sale of investments in Watsco, Inc. during the quarter ended March 31, 2017.
Valuation Techniques. Our available-for-sale securities include equity investments that are traded in active markets, either domestically or internationally, and are measured at fair value using closing stock prices from active markets. Our derivative assets and liabilities include foreign exchange contracts and commodity derivatives that are measured at fair value using internal models based on observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties' credit risks. As of September 30, 2017 , there were no significant transfers in and out of Level 1 and Level 2.
As of September 30, 2017 , there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk. Similarly, there has not been any significant adverse impact to our derivative assets based on our evaluation of our counterparties' credit risks.
The following table provides carrying amounts and fair values of financial instruments that are not carried at fair value in our Condensed Consolidated Balance Sheet at September 30, 2017 and December 31, 2016 :
 
September 30, 2017
 
December 31, 2016
(Dollars in millions)
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Long-term receivables
$
147

 
$
139

 
$
127

 
$
121

Customer financing notes receivable
430

 
414

 
437

 
420

Short-term borrowings
(1,077
)
 
(1,077
)
 
(601
)
 
(601
)
Long-term debt (excluding capitalized leases)
(26,161
)
 
(28,052
)
 
(23,280
)
 
(25,110
)
Long-term liabilities
(363
)
 
(331
)
 
(457
)
 
(427
)
The following table provides the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Condensed Consolidated Balance Sheet as of September 30, 2017 :
(Dollars in millions)
Total
 
Level 1
 
Level 2
 
Level 3
Long-term receivables
$
139

 
$

 
$
139

 
$

Customer financing notes receivable
414

 

 
414

 

Short-term borrowings
(1,077
)
 

 
(943
)
 
(134
)
Long-term debt (excluding capitalized leases)
(28,052
)
 

 
(27,827
)
 
(225
)
Long-term liabilities
(331
)
 

 
(331
)
 


17


We had commercial aerospace financing and other contractual commitments totaling approximately $13.9 billion and $14.4 billion as of September 30, 2017 and December 31, 2016 , respectively, related to commercial aircraft and certain contractual rights to provide product on new aircraft platforms. Risks associated with changes in interest rates on these commitments are mitigated 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.
Note 11: Long-Term Financing Receivables
Our long-term financing receivables primarily represent balances related to our aerospace businesses, such as long-term trade accounts receivable, notes receivable, and leases receivable. We also have other long-term receivables related to our commercial businesses; however, both the individual and aggregate amounts of those other receivables are not significant.
Long-term trade accounts receivable, including unbilled receivables related to long-term aftermarket contracts, are principally amounts arising from the sale of goods and the delivery of services with a contractual maturity date or realization period of greater than one year, and are recognized as "Other assets" in our Condensed Consolidated Balance Sheet. Notes and leases receivable represent notes and lease receivables other than receivables related to operating leases, and are recognized as "Customer financing assets" in our Condensed Consolidated Balance Sheet. The following table summarizes the balance by class of aerospace business related long-term receivables as of September 30, 2017 and December 31, 2016 .
(Dollars in millions)
September 30, 2017
 
December 31, 2016
Long-term trade accounts receivable
$
1,101

 
$
926

Notes and leases receivable
435

 
430

Total long-term receivables
$
1,536

 
$
1,356

Customer credit ratings range from customers with an extremely strong capacity to meet financial obligations to customers whose uncollateralized receivables are in default. There can be no assurance that actual results will not differ from estimates or that consideration of these factors in the future will not result in an increase or decrease to the allowance for credit losses on long-term receivables. Based upon the customer credit ratings, approximately 11% and 13% of our total long-term receivables were considered to bear high credit risk as of September 30, 2017 and December 31, 2016 , respectively.
For long-term trade accounts receivable, we evaluate credit risk and collectability individually to determine if an allowance is necessary. Our long-term receivables reflected in the table above, which include reserves of $17 million as of September 30, 2017 and December 31, 2016 , are individually evaluated for impairment. At September 30, 2017 and December 31, 2016 , we did not have any significant balances that are considered to be delinquent, on non-accrual status, past due 90 days or more, or considered to be unrecoverable.

18


Note 12: Shareowners' Equity and Noncontrolling Interest
A summary of the changes in shareowners' equity and noncontrolling interest comprising total equity for the quarters and nine months ended September 30, 2017 and 2016 is provided below:
 
Quarter Ended September 30,
 
2017
 
2016
(Dollars in millions)
Share-owners'
Equity
 
Non-controlling Interest
 
Total
Equity
 
Share-owners'
Equity
 
Non-controlling Interest
 
Total
Equity
Equity, beginning of period
$
28,442

 
$
1,713

 
$
30,155

 
$
29,090

 
$
1,558

 
$
30,648

Comprehensive income for the period:
 
 
 
 
 
 
 
 
 
 
 
Net income
1,330

 
104

 
1,434

 
1,480

 
91

 
1,571

Total other comprehensive income (loss)
637

 
40

 
677

 
(245
)
 
5

 
(240
)
Total comprehensive income for the period
1,967

 
144

 
2,111

 
1,235

 
96

 
1,331

Common Stock issued under employee plans
86

 

 
86

 
54

 

 
54

Common Stock repurchased
(60
)
 

 
(60
)
 
(649
)
 

 
(649
)
Dividends on Common Stock
(533
)
 

 
(533
)
 
(526
)
 

 
(526
)
Dividends on ESOP Common Stock
(19
)
 

 
(19
)
 
(19
)
 

 
(19
)
Dividends attributable to noncontrolling interest
 
 
(51
)
 
(51
)
 


 
(129
)
 
(129
)
Sale of subsidiary shares from noncontrolling interest, net
5

 
9

 
14

 
2

 
22

 
24

Acquisition of noncontrolling interest

 
14

 
14

 

 
29

 
29

Redeemable noncontrolling interest fair value adjustment
(4
)
 

 
(4
)
 

 

 

Other
(3
)
 
(19
)
 
(22
)
 

 
1

 
1

Equity, end of period
$
29,881

 
$
1,810

 
$
31,691

 
$
29,187

 
$
1,577

 
$
30,764

 
Nine Months Ended September 30,
 
2017
 
2016
(Dollars in millions)
Share-owners'
Equity
 
Non-controlling
Interest
 
Total
Equity
 
Share-owners'
Equity
 
Non-controlling
Interest
 
Total
Equity
Equity, beginning of period
$
27,579

 
$
1,590

 
$
29,169

 
$
27,358

 
$
1,486

 
$
28,844

Comprehensive income for the period:
 
 
 
 
 
 
 
 
 
 
 
Net income
4,155

 
279

 
4,434

 
4,042

 
271

 
4,313

Total other comprehensive income (loss)
1,007

 
83

 
1,090

 
(110
)
 
16

 
(94
)
Total comprehensive income for the period
5,162

 
362

 
5,524

 
3,932

 
287

 
4,219

Common Stock issued under employee plans
256

 

 
256

 
200

 

 
200

Common Stock repurchased
(1,430
)
 


 
(1,430
)