A senior United Technologies Corp. executive scoffed at any rumors UTC might put Stratford-based Sikorsky Aircraft Corp. up for sale, but said UTC could auction off “non-core” units as it scrapes together cash to pay for its pending acquisition of Goodrich Corp.
“I think obviously as part of the Goodrich deal, we had hoped to issue about $4 billion of equity and $12 billion of debt ”“ and we all know we hate to issue equity,” said Greg Hayes, CFO of Hartford-based UTC, in a conference call with investment analysts. “At the same time, I hate to lose my credit rating, so we”™re going to go after this in a methodical fashion ”¦ We”™re looking at non-core assets across UTC both on the commercial side and on the aero side. Let me just say that Sikorsky, as far as I can tell, is a core asset of UTC though ”“ so I think we can probably put that speculation to bed.”
Even as Sikorsky Aircraft Corp. deals with reduced Pentagon demand in the short run, plans to cut the size of the U.S. Army could bode well for the Stratford-based manufacturer with the Army possibly needing more helicopters to move troops to where they are needed.
For the time being, however, Sikorsky anticipates reduced demand as it negotiates future delivery orders with the U.S. Department of Defense.
“Nothing’s fundamentally wrong with the business,” Hayes said. “It will perform this year. We said military is down, but we”™re seeing good strength on the commercial side and ”¦ especially on the international military side.”
In the fourth quarter, Sikorsky saw operating profits tail off 13 percent from a year ago to $207 million, despite a slight increase in revenue to just above $2.1 million.
Of UTC”™s six major divisions, only UTC Fire and Security fared worse, an unaccustomed position for Sikorsky, which was UTC”™s star performer throughout the recession due to military demand for helicopters. For all 2011, Sikorsky shipped nearly 275 helicopters as it increased its operating profit 17 percent to $840 million on sales just short of $7.4 billion, up 10 percent from 2010. UTC sales totaled $52.2 billion for the year, up 7 percent, and net earnings increased at double that pace, coming in just short of $5 billion.
Sikorsky”™s fourth-quarter operating profit shortfall was partly the result of $37 million spent in restructuring its operations, including more than 400 layoffs at its Stratford area headquarters operations where it is the largest employer in Fairfield County. Sikorsky also cut jobs in upstate New York and Troy, Ala. in January.
“I think that right-sizes the business for right now,” Hayes said. “If you see any further deterioration, obviously, I think there”™s always opportunity for additional restructuring; but I think, again, that $37 million was really to be preemptive, to position us to grow earnings in 2012.”
