Note 2: Discontinued Operations

6 Months Ended

Jun. 30, 2012

Notes to Condensed Consolidated Financial Statements [Abstract]

Note 2: Discontinued Operations

Note 2: Discontinued Operations

In 2012, the Company approved plans for the divestiture of a number of non-core businesses. Cash generated from these divestitures is intended to be used to repay a portion of the short-term debt we expect to incur as part of the financing for the proposed acquisition of Goodrich. These divestitures are expected to generate approximately $3 billion in net cash, on an after-tax basis.

In the first quarter of 2012, the Hamilton Sundstrand Industrial businesses, Pratt & Whitney Rocketdyne (Rocketdyne), and Clipper Windpower (Clipper) all met the held-for-sale criteria. On June 29, 2012, management approved a plan for the divestiture of UTC Power. The operating results of Clipper and UTC Power had previously been reported within “Eliminations & other” in our segment disclosure. The results of operations, including the net lossesexpected on disposition, and the related cash flows which result from these non-core businesses have been reclassified to Discontinued Operations in our Condensed Consolidated Statement of Comprehensive Income and Condensed Consolidated Statement of Cash Flows for all periods presented. The assets and liabilities of these non-core businesses have been reclassified to Assets of discontinued operations and Liabilities of discontinued operations in our Condensed Consolidated Balance Sheet as ofJune 30, 2012. Cash flows from the operation of these discontinued businesses will continue until their disposals,most of which are expected to occur in the second half of 2012.

As a result of the decision to dispose of these businesses, the Company has recorded pre-tax goodwill impairment charges of approximately $360 million and $590 million related to Rocketdyne and Clipper, respectively, in discontinued operations during the first quarter of 2012, and pre-tax net asset impairment charges of approximately $179 million related to UTC Power in discontinued operations during the second quarter of 2012. The goodwill impairment charges result from thedecision to dispose of both Rocketdyne and Clipper within a relatively short period after acquiring the businesses. Consequently, there has not been sufficient opportunity for the long-term operations to recover the value implicit in goodwill at the initial date of acquisition. The impairment charge at UTC Power results from adjusting the net assets of the business to the estimated fair value less cost to sell the business expected to be realized upon sale and reflects the loss in value from the disposition of the business before the benefits of the technology investments could be fully realized. The fair value of these businesses has been estimated using information available in the marketplace as we market these businesses for sale. There could be gains or additional losses recorded upon final disposition of these businesses based upon the values, terms and conditions that are ultimately negotiated.

The following summarized financial information related to these non-core businesseshas been segregated from continuing operations and will be reported as discontinued operations through the dates of disposition:

			Quarter Ended June 30,				Six Months Ended June 30,
(Dollars in millions)			2012		2011		2012		2011
Discontinued Operations:
	Net sales		$	562	$	606	$	1,086	$	1,278
	(Loss) income from operations		$	(3)	$	70	$	27	$	149
	Income tax benefit (expense)			1		(37)		(9)		(75)
		(Loss) income from operations, net of income taxes		(2)		33		18		74
	Loss on disposal			(210)		-		(1,171)		-
	Income tax benefit			76		-		160		-
	Net (loss) income on discontinued operations		$	(136)	$	33	$	(993)	$	74

The income tax benefit for the sixmonths ended June 30, 2012 includes approximately $235 million of unfavorable income tax adjustments related to the recognition of a deferred tax liability on the existing difference between the accounting versus tax gain on the planned disposition of Hamilton Sundstrand's Industrial businesses.

The assets and liabilities of discontinued operations on the Condensed Consolidated Balance Sheet as of June 30, 2012are as follows:

(Dollars in millions)
Assets
Cash and cash equivalents		$	84
Accounts receivable, net			357
Inventories and contracts in progress, net			164
Future income tax benefits, current			18
Other assets, current			13
Future income tax benefits			7
Fixed assets, net			295
Goodwill			905
Intangible assets, net			103
Other assets			43
	Assets of discontinued operations	$	1,989
Liabilities
Short-term borrowings		$	1
Accounts payable			156
Accrued liabilities			628
Future pension and postretirement benefit obligations			1
Other long-term liabilities			131
	Liabilities of discontinued operations	$	917

We announced agreements for the sale of Rocketdyne on July 23, 2012 and for the sale of the Hamilton Sundstrand Industrial businesses on July 25, 2012. See Note 17 for discussion of subsequent events.