UTC Investor and Analyst Meeting
March 10, 2017
Note: All results and expectations in this presentation reflect continuing operations unless otherwise noted.
Cautionary Statement:
This presentation 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 information released to the public. These forward-looking statements are intended to provide management’s current expectations or
plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "believe,"
"expect," "expectations," "plans," "strategy," "prospects," "estimate," "project," "target," "anticipate," "will," "should," "see," "guidance," "confident" and other words of similar meaning in connection with a
discussion of future operating or financial performance. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses
of cash, share repurchases and other measures of financial performance or potential future plans, strategies or transactions. All forward-looking statements involve risks, uncertainties and other factors
that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking
statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation: (1) the effect of economic conditions in the
industries and markets in which we operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency
exchange rates, levels of end market demand in construction and in both the commercial and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines,
the impact of weather conditions and natural disasters and the financial condition of our customers and suppliers; (2) challenges in the development, production, delivery, support, performance and
realization of the anticipated benefits of advanced technologies and new products and services; (3) future levels of indebtedness and capital spending and research and development spending; (4)
future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure; (5) the timing and scope of future repurchases of our common stock,
which may be suspended at any time due to various factors, including market conditions and the level of other investing activities and uses of cash; (6) delays and disruption in delivery of materials and
services from suppliers; (7) company and customer- directed cost reduction efforts and restructuring costs and savings and other consequences thereof; (8) the scope, nature, impact or timing of
acquisition and divestiture activity, including among other things integration of acquired businesses into our existing businesses and realization of synergies and opportunities for growth and innovation;
(9) new business opportunities; (10) our ability to realize the intended benefits of organizational changes; (11) the anticipated benefits of diversification and balance of operations across product lines,
regions and industries; (12) the outcome of legal proceedings, investigations and other contingencies; (13) pension plan assumptions and future contributions; (14) the impact of the negotiation of
collective bargaining agreements and labor disputes; (15) the effect of changes in political conditions in the U.S. and other countries in which we operate, including the effect of changes in U.S. trade
policies or the U.K.'s pending withdrawal from the EU, on general market conditions, global trade policies and currency exchange rates in the near term and beyond; and (16) the effect of changes in
tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which we operate. For additional information identifying
factors that may cause actual results to vary materially from those stated in forward-looking statements, see our reports on Forms 10-K, 10-Q and 8-K filed with or furnished to the SEC from time to
time. Any forward-looking statement speaks only as of the date on which it is made, and we assume no obligation to update or revise such statement, whether as a result of new information, future
events or otherwise, except as required by applicable law.
Akhil Johri EVP & Chief Financial Officer
8:00 – 8:05 Opening Remarks Johri
8:05 – 8:50 CCS / Q&A McDonough
8:50 – 9:30 Otis / Q&A Delpech
9:30 – 9:35 Closing Remarks Johri
9:35 – 9:45 Tour Overview Vining
9:45 – 10:00 Break
10:00 – 11:00 Showroom / Tour All
United Technologies
Agenda
Bob McDonough President, UTC Climate, Controls & Security
UTC Climate, Controls & Security (2016 @ afx)
*Excludes unconsolidated JV sales of ~$6B
**Excludes restructuring and other significant items – see appendix for definition and reconciliation 1
Sales* $16.9 billion
Operating profit** $3.1 billion
Operating margin 18.1%
Employees ~56,500
New equipment
Aftermarket
Segment
Geography
Product Line
Minority JVs
~$6B
Americas
Asia
EMEA
New equipment
Aftermarket Fire &
Security
Refrigeration
HVAC
Asia
EMEA Americas
Industry Leadership Positions
HVAC Refrigeration Fire & Security
$8B $5B $4B
(2016 @ afx)
2
Value Creation
*See appendix for definition and reconciliation of free cash flow 3
Iconic brands Building solutions M&A opportunities Innovation
Growth
Cost leadership Operations excellence Cash generation Market fundamentals
Performance
2012 2013 2014 2015 2016
Free cash flow*
~100% of NI
2012 2016
Engineering headcount
2012 2013 2014 2015 2016
Cumulative restructuring spend
15%
~$500M
2012 2016
Overhead % of sales
~150 bps
CCS Priorities ($ billions @ cfx)
Organic revenue growth
Innovation
Sales force investment
Cash generation
4
12% 9% 10% 7% 7%
See appendix for reported sales and adjusted operating profit (afx)
*Excludes restructuring and other significant items – see appendix for definition and reconciliation
**See appendix for definition and reconciliation of organic sales
15.1 15.3 16.2 16.6
2.4 2.6
2.8 3.0
2013 2014 2015 2016 2017E
ROS* 16.0% 17.3% 17.4% 18.1%
(1%) 3% 3% 1%
Sales
Op profit*
Organic**
Performance
CAGR 2013 - 2016
Sales: 3%
Op Profit*: 8%
Op Profit* expectation
$150 – 200M @ cfx
$100 – 150M @ afx
Organic** expectation
Low single digit
2017 Organic Sales Outlook
Transport refrigeration
Commercial refrigeration
F&S field
F&S products
Commercial HVAC
NA Residential HVAC up mid single digit
up low single digit
up low single digit
up low single digit
flat
Segment
up low single digit
Refrigeration
Up low single digit Asia
Up low single
digit
EMEA
Up low single
digit
Americas
Up low single
digit
Geographic
5 See appendix for definition and reconciliation of organic sales
North America Residential HVAC
Growth drivers
6
Split systems segment
Market fundamentals
Source: AHRI, Internal estimates
0.0
0.0
0.0
0.0
0.0
0.0
0.0
01 03 05 07 09 11 13 15 17E
10
8
6
4
2
0
Add-on replacement
New construction
100
80
60
40
20
0
Installed base, units, M Segment, units, M 120 12
01
Growing installed base
New construction momentum
Continue share growth
Develop new customers and channels
Commercial HVAC
Growth drivers Market fundamentals
U.S. non-residential construction
Europe non-residential construction
(VPY %)
(25%)
(15%)
(5%)
5%
15%
25%
09 10 11 12 13 14 15 16 17E
(10%)
(5%)
0%
5%
10%
09 10 11 12 13 14 15 16 17E
(VPY %)
Source: FW Dodge/McGraw Hill, Euroconstruct 7
Light commercial segment growth
Product platform revitalization
Regulatory changes
Broaden service portfolio
Fire & Security
8
Fire & Security
Field Fire & Security
Products
$5B
Field sales (% of total)
2012 2016
Service
Install 2012 - 2016
6 pts
Growth drivers Fire & Security
New products
Oil and gas stabilization
Recurring service focus
Vertical / geographic market focus
Refrigeration
Europe Truck / Trailer
Emerging market penetration
New product introductions
Expand into new channels
Growth drivers
9 Source: ACT, Drewry, Planet Retail, internal estimates
(10)
(5)
0
5
10
11 12 13 14 15 16 17E
Shipping industry profitability ($B)
Market fundamentals
U.S. Class 8 truck shipments
0
10
20
30
40
11 12 13 14 15 16 17E
30
35
40
45
50
11 12 13 14 15 16 17E
Global hypermarkets and supermarkets
(000 units)
(000 units)
v
Innovation
Large tonnage centrifugal
Low GWP chiller
Enterprise access
Smart home system
2012 2014 2016
2014 2015 2017E
E&D investment ($B)
Product vitality* (% of sales)
VRF
2014 - 2017E
~10%
2012 - 2016
~15%
*Products released in past 36 months, excluding transport refrigeration 10
Digital Innovation
Connected Home Intelligent Buildings Smart Cold Chain
Trace forward
Trace back
2012 2013 2014 2015 2016 2017E
Electro-mechanical
Software
- based Mechanical
CCS Sales Digital Engineering Headcount
2012 - 2017E
~45%
11
Strategic accounts / verticals
Consultative selling
Advanced building solutions
UTC Building Solutions Growth
Intelligent products Connected systems Integrated buildings
High temperature
district heating solution
World’s first combined HVAC
recovery for data centers
12
Market Growth Fundamentals
13 Source: United Nations: World Urbanization Prospects, 2014 revision; Green Market Size: McGraw Hill Construction Dodge, 2014; Internal estimates
2.6 2.9
3.2 3.6
4.0 4.3
4.7
95 00 05 10 15 20E 25E
2012 2015 2018E
U.S. Europe China
Urbanization
Energy efficiency
Adoption (Commercial fire detection spend per capita) (Global urban population, billions)
Doubling every
3 years
(Global green building construction spend)
0
25
50
75
100
75 80 85 90 95 00 05 10 15
Replacement (U.S. splits installed base, units M) Avg life
~15 yrs
16
CCS 2020 Outlook
Growth
Innovation
Commercial excellence
Financial performance
14
2.6 2.8
3.0
15.3 16.2
16.6
-
5.00
10.00
15.00
20.00
-
0.0
0.0
0.0
0.0
0.0
0.0
2014 2015 2016 2017E 2020E
2016 – 20E
CAGR
See appendix for reported sales and adjusted operating profit (afx)
*Excludes restructuring and other significant items – see appendix for definition and reconciliation
**See appendix for definition and reconciliation of organic sales
Sales ($B, cfx)
Operating profit* ($B, afx)
Operating profit* ($B, cfx)
Actual FX (afx)
Reported sales: up slightly
Operating profit*: $100 – 150M
Constant FX (cfx)
Organic sales**: up low single
Operating profit*: $150 – 200M
2017 expectations
3 - 5%
6 - 8%
Philippe Delpech President, Otis
Note: Comparable 2015 industry sales: ~$70 billion; A, B, C represent industry peers
Source: Public company reports & internal estimates
2016 sales: ~$69 billion
A
B C
All
others
17%
Industry Leadership
(units, millions)
+30%
A C B
Portfolio
Industry
Global scale and balance
Large and growing portfolio
Productivity runway on service
Attractive growth fundamentals
Best-in-class cash flow
2016 sales: $11.9 billion
Asia EMEA
Otis
Americas 1.9
11.9
2.1
($ billions)
($ billions)
+20%
+50%
A B C
B A C
Sales
Operating profit
($ billions)
1
Strategy
Initiatives
2010 2013 2016
(in units)
Source: Internal estimates
Accelerate innovation
Operations excellence
New equipment growth
Service transformation
2
Otis NE share of segment
1.1% 1.1%
1.4% 1.6%
2014 2015 2016 2017E
R&D spend, $ millions, @ cfx
% of sales
Accelerate Innovation
New lead design center in China
3 lead design centers
Engineering FTE leverage
10 sustaining
centers
2014 2015 2016 2017E
New product launches China platform rationalization
2016 2017E 2018E
Leverage capabilities
Accelerate programs
Address product gaps
Design for service
Priorities
~4X
vs. ‘14
Down ~66%
vs. ‘16
3
Operations Excellence
2015 2016 Target
Supply chain Global operations footprint
(Field product spend example)
Down
10% Down
20%
(Manufacturing sq. ft.) (Number of suppliers)
0
10
20
$M per
supplier 22K suppliers
~80% less than $10K / supplier
High
cost
Low
cost
2015
2015 2016 Target
Down
11% Down
15%
(Location mix, sq. ft.)
4
New Equipment Growth – China
ROW
2016 sales: ~$34B Infrastructure development
Source: Internal estimates
China
Otis position
#1 #2
Deploy segmentation
Leverage multiple brands
Maximize operations scale
China transformation Global segment
China metro segment - 2016
Otis
2015 2016 2017E
China
segment
China segment (unit bookings)
(5%) Down
low-mid
single
Otis
+4%
5
Expand sales coverage & efficiency
Enhance product offering
Align incentives for profitable growth
13% 11%
2%
(28%)
Europe Asia(ex. China)
Americas MEA
Otis ex. China
5%
Asia
(ex. China)
Europe
Americas
MEA
(@ cfx)
New Equipment Growth – Rest of World
Growth strategy
2016 sales: ~$19B
#1
#1
#1
#1
ROW segment
Otis position
2016 orders VPY
Source: Internal estimates 6
Maintenance
(Financial performance per unit, indexed)
100 103
90
2010 2013 2016
EMEA Americas
China
ROW
2016: 1.9M units
Revenue
Cost
Europe maintenance Portfolio
(@ cfx)
2010 2013 2016
Portfolio growth
CAGR 2%
7
Service Transformation
Customer retention
Deploy enhanced digital tools
Value
added
Non-value
added
8
Mechanic time
Field productivity
Portfolio dynamics
Conversions
Recaptures
Cancellations
+ + -
~60 million hours
Strategy
Execution
Preparation
2018 2016 2017
3/10
Deployment
(New mobility devices)
2016 2017E 2018E
Mobility & Apps
Productivity
Smart Service
Enterprise Systems
Customer Retention
Remote / IoT
2017 - 2018 objectives
1,300
~16,000
~31,000
Mobility & Apps Pilot Deployment
Remote / IoT Development Pilot Deployment
Enterprise Systems Development Pilot Deployment
9
Service Transformation Schedule
Service Transformation Impact
Expected benefits Hong Kong deployment
Cancellations
Callbacks
Maintenance hours
Overhead
Recaptures
10
2010 2015 2016 2020E
2010 2015 2016 2020E2010 2015 2016 2020E
2010 2015 2016 2020E
(units)
7%
33%
>50%
~3%
2% ~15% China flat
ROW ~5%
(5-year CAGR)
Key Metrics
(@ cfx)
24%
(@ cfx) New equipment growth
(Orders)
Service transformation (Maintenance portfolio)
Service transformation (China service conversion rate)
Accelerate innovation (R&D investment)
(5-year CAGR)
(5-year CAGR)
2%
11
2.3 2.3 2.1
11.2 11.5 11.7
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
2014 2015 2016 2017E 2020E
2016-20
CAGR
3 - 5%
3 - 5%
Otis 2020 Outlook
2016 – 20E
CAGR
Actual FX (afx)
Reported sales: up slightly
Operating profit*: ($175) – (125M)
Constant FX (cfx)
Organic sales**: up low single
Operating profit*: ($100) – (50M)
2017 expectations
Accelerate innovation
Operations excellence
New equipment growth
Service transformation
12
See appendix for reported sales and adjusted operating profit (afx)
*Excludes restructuring and other significant items – see appendix for definition and reconciliation
**See appendix for definition and reconciliation of organic sales
Sales ($B, cfx)
Operating profit* ($B, afx)
Operating profit* ($B, cfx)
Factory Tour
North America
100
144
332
2010 2013 2016
Total sales
New equipment backlog
Performance
Deliver service & digital transformation
Execute NE backlog & service
Continue NE & Mod orders growth
(@ cfx)
New
equipment
Service
Profit contribution
Priorities
(2016) (Indexed)
Texas Children’s Hospital LAX Midfield Terminal* Willis Tower Mod
*Photograph provided by Los Angeles World Airports
Otis awards (2016)
1
North America Operations Transformation
2016 2011
Changing the Status Quo
Stabilization Transformation
2000 2004 2008 2012
Contract factoryVertically integrated
Traditional Organization
Expensive and Rigid
Outsourcing
Nogales
Cost reduction
Modularity
disturbances
Structure
Nogales/Bloomington
Growth
Scattered Org
Logistic
Environment
Re-engineering
Florence SC
Models
Gen2 platforms
Collocation
Global Systems
COMPETITIVENESS
Gen2
Center
Bloomington
Units booked
Florence SC
Nogales 3
Nogales 2 Nogales 1
Bloomington, IN
1.0 Direct employees 0.8
1.0 Floor space 0.9
1.0 Actual hours 0.6
1.0 Shipments 1.5
7 Platforms 3
(Indexed)
Florence, SC
2
2013
2016
Results Florence factory
100 133
2013 2016
100 139
2013 2016
100 65
2013 2016
(Shipment units, indexed)
(Factory sales, indexed)
(Cost of poor quality, indexed)
North America Transformation Results
3
Appendix and GAAP Reconciliations
Use and Definitions of Non-GAAP Financial Measures
We supplement the reporting of our financial information determined under accounting principles generally accepted in the United States ("GAAP") with certain non-GAAP financial information. The
non-GAAP information presented provides investors with additional useful information, but should not be considered in isolation or as substitutes for the related GAAP measures. Moreover, other
companies may define non-GAAP measures differently, which limits the usefulness of these measures for comparisons with such other companies. We encourage investors to review our financial
statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
Adjusted net sales, organic sales, adjusted operating profit and adjusted diluted EPS are non-GAAP financial measures. Adjusted net sales represents consolidated net sales from continuing
operations (a GAAP measure), excluding significant items of a non-recurring and/or nonoperational nature (hereinafter referred to as “other significant items”). Organic sales represents consolidated
net sales (a GAAP measure), excluding the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and other significant items. Adjusted
operating profit represents income from continuing operations (a GAAP measure), excluding restructuring costs and other significant items. Adjusted diluted EPS represents diluted earnings per share
from continuing operations (a GAAP measure), excluding restructuring costs and other significant items. For the business segments, when applicable, adjustments of net sales, operating profit and
margins similarly reflect continuing operations, excluding restructuring and other significant items. Management believes that the non-GAAP measures just mentioned are useful in providing period-to-
period comparisons of the results of the Company’s ongoing operational performance.
Free cash flow is a non-GAAP financial measure that represents cash flow from operations (a GAAP measure) less capital expenditures. Management believes free cash flow is a useful measure of
liquidity and an additional basis for assessing UTC's ability to fund its activities, including the financing of acquisitions, debt service, repurchases of UTC's common stock and distribution of earnings to
shareholders.
A reconciliation of the non-GAAP measures to the corresponding amounts prepared in accordance with GAAP appears in the tables in this Appendix. The tables provide additional information as to the
items and amounts that have been excluded from the adjusted measures.
When we provide our expectation for adjusted EPS, adjusted operating profit, organic sales and/or free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP
expectations and the corresponding GAAP measures (expected diluted EPS and operating profit from continuing operations, expected cash flow from operations and sales) generally is not available
without unreasonable effort due to potentially high variability, complexity and low visibility as to the items that would be excluded from the GAAP measure in the relevant future period, such as unusual
gains and losses, the ultimate outcome of pending litigation, fluctuations in foreign currency exchange rates, the impact and timing of potential acquisitions and divestitures, and other structural changes
or their probable significance. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results.
UTC 2017 Expectations
*Excludes restructuring & certain other items
Adjusted EPS* $6.30 – $6.60
Sales $57.5 – $59B
Organic Sales** 2 – 4%
Free cash flow*** 90 – 100% of net income attributable to
common shareowners
*Excludes restructuring and other significant items – see the Use and Definitions of Non-GAAP Financial Measures in this appendix for definition
**See the Use and Definitions of Non-GAAP Financial Measures in this appendix for definition of organic sales
***See the Use and Definitions of Non-GAAP Financial Measures in this appendix for definition of free cash flow
2017 Expectations
Commercial sales (% organic sales change)
Americas EMEA Asia Total
Elevator new equipment up mid teens up low/mid single digit down mid single digit up low single digit
Elevator service up mid single digit up slightly up high single digit up low/mid single digit
Total Otis up high single digit up low single digit flat up low single digit
Americas EMEA Asia Total
Residential HVAC up mid single digit up mid single digit
Commercial HVAC up low single digit flat up mid single digit up low single digit
Fire & Security product up mid single digit up low single digit up low single digit up low single digit
Fire & Security field up low single digit up low single digit up low single digit
Transport refrigeration flat
Commercial refrigeration up low single digit
Total CCS up low single digit up low single digit up low single digit up low single digit
Adjusted Operating Profit* Drivers
Adjusted Operating Profit*
Sales
Excluding FX ($100) – (50M)
Including FX ($175) – (125M)
Volume + 75 – 125
Net productivity / restructuring + ~75
Price / mix – ~175
Strategic investment / R&D – ~75
2017 expectations (Excluding FX) – ($100) – (50M)
FX – ~75
2017 expectations (Including FX) – ($175) – (125M)
Reported up slightly
Organic up low single digit
Otis 2017 Expectations ($ millions)
*Excludes restructuring and other significant items – see the Use and Definitions of Non-GAAP Financial Measures in this appendix for definition
Adjusted Operating Profit* Drivers
Adjusted Operating Profit*
Sales
Excluding FX + $150 – 200M
Including FX + $100 – 150M
Volume / mix + 100 – 150
Net productivity / restructuring + ~50
Commodities / price + ~25
Pension + ~25
R&D / other – ~50
2017 expectations (Excluding FX) + $150 – 200M
FX – ~50
2017 expectations (Including FX) + $100 – 150M
Reported up slightly
Organic up low single digit
CCS 2017 Expectations ($ millions)
*Excludes restructuring and other significant items – see the Use and Definitions of Non-GAAP Financial Measures in this appendix for definition
Adjusted Operating Profit**
down ($200) – (150M)
Reported Sales
up high single digit Organic – up high single digit
Pratt & Whitney 2017 Expectations ($ millions)
Commercial OE mix
Commercial aftermarket
Military
Pension
2016 contract agreements / other
2017 expectations (Excluding FX)
FX
2017 expectations (Including FX)
– ~350
+ 50 – 75
+ 50 – 75
+ ~35
– ~110
($325) – (275M)
+ ~125
($200) – (150M)
Military AM
Military OE
Commercial AM*
Commercial OE* up ~20%
up low single
digit
up mid-teens
up mid single
digit
*Includes large commercial and P&W Canada
**Excludes restructuring and other significant items – see the Use and Definitions of Non-GAAP Financial Measures in this appendix for definition
Aerospace Systems 2017 Expectations
up low single
digit
up low/mid single
digit
up mid single
digit
Bar chart is organic sales
Reported Sales
up low single digit Organic – up low single digit
($ millions)
up low single
digit
Adjusted Operating Profit*
up $50 – 100M
Commercial OE mix
Product cost reduction
Commercial AM / Military
R&D
Pension
2017 expectations (Excluding FX)
FX
2017 expectations (Including FX)
– 350 – 325
+ ~250
+ 75 – 100
+ ~25
+ ~25
$25 – 75M
+ ~25
$50 – 100M
Military AM
Military OE
Commercial AM
Commercial OE
*Excludes restructuring and other significant items – see the Use and Definitions of Non-GAAP Financial Measures in this appendix for definition
Segment Data – GAAP UNITED TECHNOLOGIES CORPORATIONSEGMENT DATA - Reported
($ Millions except per share amounts) 1st 2nd 3rd 4th 2016 1st 2nd 3rd 4th 2015 Qtr. Qtr. Qtr. Qtr. Total Qtr. Qtr. Qtr. Qtr. Total
Otis
Net Sales 2,715 3,097 3,018 3,063 11,893 2,745 3,098 3,043 3,094 11,980
Operating Profit (a) 466 581 584 516 2,147 527 627 642 542 2,338
Operating Profit % 17.2% 18.8% 19.4% 16.8% 18.1% 19.2% 20.2% 21.1% 17.5% 19.5%
UTC Climate, Controls & Security
Net Sales 3,728 4,459 4,415 4,249 16,851 3,852 4,454 4,279 4,122 16,707
Operating Profit (a), (b), (e), (n), (o), (s) 606 872 801 677 2,956 729 823 771 613 2,936
Operating Profit % 16.3% 19.6% 18.1% 15.9% 17.5% 18.9% 18.5% 18.0% 14.9% 17.6%
Pratt & Whitney
Net Sales (g), (p) 3,588 3,813 3,501 3,992 14,894 3,332 3,677 3,234 3,839 14,082
Operating Profit (a), (f), (g), (p) 410 386 340 409 1,545 419 487 419 (464) 861
Operating Profit % 11.4% 10.1% 9.7% 10.2% 10.4% 12.6% 13.2% 13.0% -12.1% 6.1%
UTC Aerospace Systems
Net Sales (h) 3,505 3,716 3,646 3,598 14,465 3,548 3,632 3,457 3,457 14,094
Operating Profit (a), (h), (i) 538 582 600 578 2,298 569 580 572 167 1,888
Operating Profit % 15.3% 15.7% 16.5% 16.1% 15.9% 16.0% 16.0% 16.5% 4.8% 13.4%
Total Segments
Net Sales 13,536 15,085 14,580 14,902 58,103 13,477 14,861 14,013 14,512 56,863
Operating Profit 2,020 2,421 2,325 2,180 8,946 2,244 2,517 2,404 858 8,023
Operating Profit % 14.9% 16.0% 15.9% 14.6% 15.4% 16.7% 16.9% 17.2% 5.9% 14.1%
Corporate, Eliminations, and Other
Net Sales:
Other (179) (211) (226) (243) (859) (157) (171) (225) (212) (765)
Operating Profit:
General corporate expenses (a) (91) (97) (92) (126) (406) (110) (120) (101) (133) (464)
Eliminations and other (a), (j), (k), (t) 16 13 18 (415) (368) 48 18 (1) (333) (268)
Consolidated
Net Sales 13,357 14,874 14,354 14,659 57,244 13,320 14,690 13,788 14,300 56,098
Operating Profit 1,945 2,337 2,251 1,639 8,172 2,182 2,415 2,302 392 7,291
Operating Profit % 14.6% 15.7% 15.7% 11.2% 14.3% 16.4% 16.4% 16.7% 2.7% 13.0%
Interest expense, net (q), (u), (v) (223) (225) (225) (366) (1,039) (217) (217) (184) (206) (824)
Income from continuing operations before income taxes 1,722 2,112 2,026 1,273 7,133 1,965 2,198 2,118 186 6,467
Income tax expense (l), (m), (r), (w), (x) (469) (587) (492) (149) (1,697) (530) (626) (592) (363) (2,111)
Income from continuing operations 1,253 1,525 1,534 1,124 5,436 1,435 1,572 1,526 (177) 4,356
Income (loss) from discontinued operations (c), (d) 11 (47) 37 (11) (10) 63 80 (65) 3,532 3,610
Net income 1,264 1,478 1,571 1,113 5,426 1,498 1,652 1,461 3,355 7,966
Less: Noncontrolling interest in subsidiaries' earnings (81) (99) (91) (100) (371) (72) (110) (99) (77) (358)
Net income attributable to common shareowners 1,183 1,379 1,480 1,013 5,055 1,426 1,542 1,362 3,278 7,608
Net income attributable to common shareowners:
Income from continuing operations 1,172 1,426 1,443 1,024 5,065 1,364 1,461 1,427 (256) 3,996
Income (loss) from discontinued operations 11 (47) 37 (11) (10) 62 81 (65) 3,534 3,612
1st 2nd 3rd 4th 2016 1st 2nd 3rd 4th 2015
Qtr. Qtr. Qtr. Qtr. Total Qtr. Qtr. Qtr. Qtr. Total
Continuing Operations
Earnings per share - basic 1.42 1.73 1.76 1.28 6.19 1.53 1.67 1.63 (0.30) 4.58
Earnings per share - diluted 1.41 1.71 1.74 1.26 6.13 1.51 1.64 1.61 (0.30) 4.53
Discontinued Operations
Earnings (loss) per share - basic 0.01 (0.06) 0.04 (0.01) (0.01) 0.07 0.09 (0.07) 4.16 4.14
Earnings (loss) per share - diluted 0.01 (0.06) 0.04 (0.01) (0.01) 0.07 0.09 (0.07) 4.16 4.09
Total EPS attributable to common shareowners
Total basic earnings per share 1.43 1.67 1.80 1.26 6.18 1.60 1.76 1.55 3.86 8.72
Total diluted earnings per share 1.42 1.65 1.78 1.25 6.12 1.58 1.73 1.54 3.86 8.61
Weighted average number of shares outstanding (millions)
Basic shares 825.0 825.3 822.4 802.0 818.2 890.3 877.3 876.4 849.6 872.7
Diluted shares 831.3 833.6 831.2 810.3 826.1 904.2 889.4 885.0 849.6 883.2
Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total
Effective Tax Rate - continuing ops 27.2% 27.8% 24.3% 11.7% 23.8% 27.0% 28.5% 28.0% 194.8% 32.6%
20152016
Segment Data – Notes The earnings release and conference-call discussion adjust 2016 and 2015 segment results for Restructuring costs as well as certain Significant non-recurring and non-operational items.
(a) Restructuring costs as included in 2016 and 2015 results:
2015
Restructuring Costs Restructuring Costs
Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total
Operating Profit:
Otis (15) (16) (10) (18) (59) (6) (8) (18) (19) (51)
UTC Climate, Controls & Security (28) (25) (18) 6 (65) (24) (28) (15) (41) (108)
Pratt & Whitney (5) (66) 21 (61) (111) (13) (2) (22) (68) (105)
UTC Aerospace Systems (13) (8) (11) (17) (49) (50) - (14) (47) (111)
Total Segments (61) (115) (18) (90) (284) (93) (38) (69) (175) (375)
General corporate expenses - - (1) - (1) - - (4) (5) (9)
Eliminations and other (1) (1) (4) 1 (5) - (1) - (11) (12)
Total within continuing operations (62) (116) (23) (89) (290) (93) (39) (73) (191) (396)
Total within discontinued operations - - - - - - (23) (116) - (139)
Total UTC (62) (116) (23) (89) (290) (93) (62) (189) (191) (535)
(q) Q3 2016: Approximately $2 million of favorable pre-tax interest adjustments related to the IRS conclusion of Goodrich Corporation's 2011-2012 tax years.
(r) Q3 2016: Approximately $56 million of favorable income tax adjustments related to the IRS conclusion of Goodrich Corporation's 2011-2012 tax years.
(x) Q4 2016: Approximately $25 million of favorable income tax adjustments related to changes in French tax laws
(s) Q4 2016: Approximately $9 million of acquisition and integration costs related to UTC Climate, Controls & Security.
(t) Q4 2016: Approximately $423 million of pension settlement charges resulting from defined benefit plan derisking actions.
(u) Q4 2016: Approximately $164 million of net extinguishment loss from early redemption of debt.
(v) Q4 2016: Approximately $22 million of favorable pre-tax interest adjustments related to the IRS conclusion of 2011-2012 tax years.
(w) Q4 2016: Approximately $150 million of favorable income tax adjustments related to the IRS conclusion of 2011-2012 tax years.
(p) Q3 2016: Approximately $184 million to record in sales and $95 million in losses from Pratt & Whitney on-going customer contract negotiations.
The following Restructuring costs and Significant non-recurring and/or non-operational items are included in current and prior year GAAP results and have been excluded from the adjusted results (non-GAAP
measures) presented in the earnings release and conference-call discussion.
(d) Q3 2015: Approximately $68 million of tax provision related to the undistributed earnings of Sikorsky's foreign subsidiaries, which will no longer be permanently reinvested as a result of the announced sale of
Sikorsky to Lockheed Martin Corp.
(f) Q4 2015: Approximately $867 million charge related to a Pratt & Whitney research and development support agreement with the Canadian government.
(g) Q4 2015: Approximately $142 million to record in sales and $80 million in losses from Pratt & Whitney customer contract renegotiations.
(h) Q4 2015: Approximately $210 million to record in sales and $295 million in losses from UTC Aerospace Systems customer contract renegotiations.
(c) Q2 2015: Approximately $28 million of transaction and separation costs related to the planned sale or spin-off of Sikorsky.
(n) Q2 2016: Approximately $12 million of acquisition and integration costs related to UTC Climate, Controls & Security.
(o) Q3 2016: Approximately $11 million of acquisition and integration costs related to UTC Climate, Controls & Security.
2016
(l) Q4 2015: Approximately $274 million of unfavorable income tax accruals related to the repatriation of foreign earnings.
(m) Q4 2015: Approximately $69 million of unfavorable income tax accruals related to a change in tax laws.
(j) Q4 2015: Approximately $237 million charge for pending and future asbestos-related claims.
(k) Q4 2015: Approximately $27 million charge from agreement with a state taxing authority for monetization of tax credits.
(e) Q4 2015: Approximately $5 million charge related to UTC Climate, Controls & Security acquisitions and integration costs.
(i) Q4 2015: Approximately $61 million charge to UTC Aerospace Systems for impairment of assets held for sale.
(b) Q1 2015: Approximately $126 million gain as a result of a fair value adjustment related to the acquisition of a controlling interest in a UTC Climate, Controls & Security joint venture investment.
Segment Data – Adjusted UNITED TECHNOLOGIES CORPORATION 2016 2015
SEGMENT DATA - Adjusted/Non-GAAP (Unaudited) Ex Rest & Significant non-recurring and non-operational
items
($ Millions except per share amounts) 1st 2nd 3rd 4th 2016 1st 2nd 3rd 4th 2015Qtr. Qtr. Qtr. Qtr. FY Qtr. Qtr. Qtr. Qtr. FY
Otis
Net Sales 2,715 3,097 3,018 3,063 11,893 2,745 3,098 3,043 3,094 11,980
Operating Profit (a) 481 597 594 534 2,206 533 635 660 561 2,389
Operating Profit % 17.7% 19.3% 19.7% 17.4% 18.5% 19.4% 20.5% 21.7% 18.1% 19.9%
UTC Climate, Controls & Security
Net Sales 3,728 4,459 4,415 4,249 16,851 3,852 4,454 4,279 4,122 16,707
Operating Profit (a), (b), (e), (n), (o), (s) 634 909 830 680 3,053 627 851 786 659 2,923
Operating Profit % 17.0% 20.4% 18.8% 16.0% 18.1% 16.3% 19.1% 18.4% 16.0% 17.5%
Pratt & Whitney
Net Sales (g), (p) 3,588 3,813 3,685 3,992 15,078 3,332 3,677 3,234 3,981 14,224
Operating Profit (a), (f), (g), (p) 415 452 414 470 1,751 432 489 441 551 1,913
Operating Profit % 11.6% 11.9% 11.2% 11.8% 11.6% 13.0% 13.3% 13.6% 13.8% 13.4%
UTC Aerospace Systems
Net Sales (h) 3,505 3,716 3,646 3,598 14,465 3,548 3,632 3,457 3,667 14,304
Operating Profit (a), (h), (i) 551 590 611 595 2,347 619 580 586 570 2,355
Operating Profit % 15.7% 15.9% 16.8% 16.5% 16.2% 17.4% 16.0% 17.0% 15.5% 16.5%
Total Segments
Net Sales 13,536 15,085 14,764 14,902 58,287 13,477 14,861 14,013 14,864 57,215
Operating Profit 2,081 2,548 2,449 2,279 9,357 2,211 2,555 2,473 2,341 9,580
Operating Profit % 15.4% 16.9% 16.6% 15.3% 16.1% 16.4% 17.2% 17.6% 15.7% 16.7%
Corporate, Eliminations, and Other
Net Sales:
Other (179) (211) (226) (243) (859) (157) (171) (225) (212) (765) Operating Profit:
General corporate expenses (a) (91) (97) (91) (126) (405) (110) (120) (97) (128) (455)
Eliminations and other (a), (j), (k), (t) 17 14 22 7 60 48 19 (1) (58) 8
Task/(Contingency) - - - - - - - - - -
Consolidated Net Sales 13,357 14,874 14,538 14,659 57,428 13,320 14,690 13,788 14,652 56,450
Operating Profit 2,007 2,465 2,380 2,160 9,012 2,149 2,454 2,375 2,155 9,133
Operating Profit % 15.0% 16.6% 16.4% 14.7% 15.7% 16.1% 16.7% 17.2% 14.7% 16.2%
Interest expense, net (q), (u), (v) (223) (225) (227) (224) (899) (217) (217) (184) (206) (824)
Income from continuing operations before income taxes 1,784 2,240 2,153 1,936 8,113 1,932 2,237 2,191 1,949 8,309
Income tax expense (l), (m), (r), (w), (x) (489) (627) (600) (566) (2,282) (560) (641) (613) (572) (2,386)
Income from continuing operations 1,295 1,613 1,553 1,370 5,831 1,372 1,596 1,578 1,377 5,923
Income (loss) from discontinued operations (c), (d) 11 (47) 37 (11) (10) 63 80 (65) 3,532 3,610
Net income 1,306 1,566 1,590 1,359 5,821 1,435 1,676 1,513 4,909 9,533
Less: Noncontrolling interest in subsidiaries' earnings (81) (99) (91) (100) (371) (72) (110) (99) (77) (358)
Net income attributable to common shareowners 1,225 1,467 1,499 1,259 5,450 1,363 1,566 1,414 4,832 9,175
Net income attributable to common shareowners:
From continuing operations 1,214 1,514 1,462 1,270 5,460 1,301 1,485 1,479 1,298 5,563
From discontinued operations 11 (47) 37 (11) (10) 62 81 (65) 3,534 3,612
Ex Rest & Significant non-recurring and non-operational
items
2016 Full Year Sales Reconciliation
*Reflects consolidated net sales
Total Growth Organic FX Net Acquisitions Other
Otis (1%) 1% (2%) 0% 0%
CCS 1% (1%) (1%) 3% 0%
Pratt & Whitney 6% 6% 0% 0% 0%
Aerospace Systems 3% 2% 0% 0% 1%
Total UTC* 2% 2% (1%) 1% 0%
EPS Reconciliation Reconciliation of Diluted Earnings per Share to Adjusted Diluted Earnings per Share
(dollars in millions except per share amounts)
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
1.42$ 1.65$ 1.78$ 1.25$ 6.12$ 1.58$ 1.73$ 1.54$ 3.86$ 8.61$
0.01 (0.06) 0.04 (0.01) (0.01) 0.07 0.09 (0.07) 4.16 4.09
1.41$ 1.71$ 1.74$ 1.26$ 6.13$ 1.51$ 1.64$ 1.61$ (0.30)$ 4.53$
1,183$ 1,379$ 1,480$ 1,013$ 5,055$ 1,426$ 1,542$ 1,362$ 3,278$ 7,608$
Less: Income (loss) from discontinued operations attributable to common shareowners 11 (47) 37 (11) (10) 62 81 (65) 3,534 3,612
1,172 1,426 1,443 1,024 5,065 1,364 1,461 1,427 (256) 3,996
(62) (116) (23) (89) (290) (93) (39) (73) (191) (396)
- - - - - 126 - - - 126
- (12) (11) (9) (32) - - - (5) (5)
- - - - - - - - (867) (867)
- - (95) - (95) - - - (375) (375)
- - - - - - - - (61) (61)
- - - - - - - - (237) (237)
- - - - - - - - (27) (27)
- - - (423) (423) - - - - -
- - - (164) (164) - - - - -
- - 2 22 24 - - - - -
20 40 52 242 354 30 15 21 551 617
- - 56 175 231 - - - (342) (342)
(42) (88) (19) (246) (395) 63 (24) (52) (1,554) (1,567)
1,214$ 1,514$ 1,462$ 1,270$ 5,460$ 1,301$ 1,485$ 1,479$ 1,298$ 5,563$
(0.05)$ (0.11)$ (0.02)$ (0.30)$ (0.48)$ 0.07$ (0.03)$ (0.06)$ (1.83)$ (1.77)$
1.46$ 1.82$ 1.76$ 1.56$ 6.61$ 1.44$ 1.67$ 1.67$ 1.53$ 6.30$
Net extinguishment loss from early redemption of debt, included in interest expense,
net
Less: Impact of total adjustments on diluted earnings per share
Adjusted diluted earnings per share - Net income from continuing operations attributable
to common shareowners (Non-GAAP)
2016
Charge resulting from customer contract negotiations
Charge for impairment of assets held for sale
Charge for pending and future asbestos-related claims
Charge from agreement with a state taxing authority for monetization of tax credits
Income tax benefit on restructuring costs and significant non-recurring and non-
operational items
Significant non-recurring and non-operational gains (charges) recorded within income
tax expense
Pension settlement charge resulting from defined benefit plan de-risking actions
Total adjustments to net income from continuing operations attributable to common
shareowners
Adjusted net income from continuing operations attributable to common shareowners
Other significant non-recurring and non-operational items included in interest expense,
net
Diluted earnings per share - Net income from continuing operations attributable to
common shareowners (GAAP)
Net income attributable to common shareowners
2015
Restructuring costs
Gain on fair value adjustment on acquisition of controlling interest in a joint venture
Acquisition and integration costs related to current period acquisitions
Charge related to a research and development support agreement with Canadian
government agencies
Adjustments to net income from continuing operations attributable to common
shareowners:
Net income from continuing operations attributable to common shareowners
Diluted earnings per share attributable to common shareowners
Less: diluted earnings (loss) per share from discontinued operations attributable to
common shareowners
Free Cash Flow Reconciliation ($ millions)
FY 16 FY 15
Net income attributable to common shareowners 5,065 3,996
from continuing operations
Depreciation & amortization 1,962 1,863
Change in working capital (1,161) (769)
Other 546 1,665
Cash flow from operations 6,412 6,755
Capital expenditures (1,699) (1,652)
Free cash flow 4,713 5,103
Free cash flow as a % of net income
attributable to common shareowners from continuing operations 93% 128%
UTC Operating Results Reconciliation ($ millions)
2012 2013 2014 2015 2016
Segment Sales 51,443 57,141 58,528 56,863 58,103
Other significant items of a non-recurring/non-operational nature 1 - - - 352 184
Segment sales - adjusted 51,443 57,141 58,528 57,215 58,287
Segment operating profit 7,470 9,074 9,777 8,023 8,946
Other significant items of a non-recurring/non-operational nature 1 (157) (223) (31) 1,182 127
Restructuring 518 431 349 375 284
Segment operating profit - adjusted 7,831 9,282 10,095 9,580 9,357
Segment operating margin 14.5% 15.9% 16.7% 14.1% 15.4%
Segment operating margin - adjusted 15.2% 16.2% 17.2% 16.7% 16.1%
1 Details of other significant items of a non-recurring/non-operational nature
See Segment operating results reconciliation slides for additional information.
Otis Operating Results Reconciliation ($ millions)
2012 2013 2014 2015 2016
Segment Sales 12,056 12,484 12,982 11,980 11,893
Other significant items of a non-recurring/non-operational nature - - - - -
Segment sales - adjusted 12,056 12,484 12,982 11,980 11,893
Segment operating profit 2,512 2,590 2,640 2,338 2,147
Other significant items of a non-recurring/non-operational nature - - - - -
Restructuring 164 88 87 51 59
Segment operating profit - adjusted 2,676 2,678 2,727 2,389 2,206
Segment operating margin 20.8% 20.7% 20.3% 19.5% 18.1%
Segment operating margin - adjusted 22.2% 21.5% 21.0% 19.9% 18.5%
Otis Constant FX Financials
Otis Sales & Operating Profit
2014 2015 2016
Reported Sales (afx) 13.0 12.0 11.9
Adjusted Operating Profit (afx) 2.7 2.4 2.2
Sales @ Constant FX (cfx) 11.2 11.5 11.7
Adjusted Operating Profit @ Constant FX (cfx) 2.3 2.3 2.1
($ billions)
CCS Operating Results Reconciliation ($ millions)
2012 2013 2014 2015 2016
Segment Sales 17,090 16,809 16,823 16,707 16,851
Other significant items of a non-recurring/non-operational nature 1 - - - - -
Segment sales - adjusted 17,090 16,809 16,823 16,707 16,851
Segment operating profit 2,425 2,590 2,782 2,936 2,956
Other significant items of a non-recurring/non-operational nature 1 (157) (55) (30) (121) 32
Restructuring 143 97 116 108 65
Segment operating profit - adjusted 2,411 2,632 2,868 2,923 3,053
Segment operating margin 14.2% 15.4% 16.5% 17.6% 17.5%
Segment operating margin - adjusted 14.1% 15.7% 17.0% 17.5% 18.1%
1 Details of other significant items of a non-recurring/non-operational nature
2012: Approximately $112 million net gain from UTC Climate, Controls & Security’s ongoing portfolio transformation. This net gain includes approximately $215 million from
the sale of a majority interest in a manufacturing and distribution joint venture in Asia, partially offset by $103 million of impairment charges related to planned business dispositions.
Approximately $110 million net gain from UTC Climate, Controls & Security’s ongoing portfolio transformation. This net gain includes approximately $142 million from the sale
of a controlling interest in its Canadian distribution business, partially offset by $32 million loss on the disposition of its U.S. fire and security branch operations.
Approximately $65 million net charge from UTC Climate, Controls & Security’s ongoing portfolio transformation. This net charge includes approximately $24 million of pension
settlement charges.
2013: Approximately $38 million net gain from UTC Climate, Controls & Security's ongoing portfolio transformation. This net gain primarily relates to the sale of a business in Hong Kong.
Approximately $17 million net gain from UTC Climate, Controls & Security's ongoing portfolio transformation, primarily due to a gain on the sale of a business in Australia.
2014: Approximately $30 million net gain from UTC Climate, Controls & Security's ongoing portfolio transformation, primarily due to a gain on the sale of an interest in a joint venture in North America.
2015: Approximately $126 million gain as a result of a fair value adjustment related to the acquisition of a controlling interest in a UTC Climate, Controls & Security joint venture investment.
Approximately $5 million charge related to UTC Climate, Controls & Security acquisitions and integration costs.
2016: Approximately $12 million of acquisition and integration costs related to UTC Climate, Controls & Security.
Approximately $11 million of acquisition and integration costs related to UTC Climate, Controls & Security.
Approximately $9 million of acquisition and integration costs related to UTC Climate, Controls & Security.
CCS Constant FX Financials
CCS Sales & Operating Profit
2013 2014 2015 2016
Reported Sales (afx) 16.8 16.8 16.7 16.9
Adjusted Operating Profit (afx) 2.6 2.9 2.9 3.1
Sales @ Constant FX (cfx) 15.1 15.3 16.2 16.6
Adjusted Operating Profit @ Constant FX (cfx) 2.4 2.6 2.8 3.0
($ billions)
Pratt & Whitney Operating Results Reconciliation ($ millions)
2012 2013 2014 2015 2016
Segment Sales 13,964 14,501 14,508 14,082 14,894
Other significant items of a non-recurring/non-operational nature 1 - - - 142 184
Segment sales - adjusted 13,964 14,501 14,508 14,224 15,078
Segment operating profit 1,589 1,876 2,000 861 1,545
Other significant items of a non-recurring/non-operational nature 1 - (168) (1) 947 95
Restructuring 96 154 64 105 111
Segment operating profit - adjusted 1,685 1,862 2,063 1,913 1,751
Segment operating margin 11.4% 12.9% 13.8% 6.1% 10.4%
Segment operating margin - adjusted 12.1% 12.8% 14.2% 13.4% 11.6%
1 Details of other significant items of a non-recurring/non-operational nature
2013: Approximately $193 million gain from the sale of the Pratt & Whitney Power Systems business. This gain was not reclassified to "Discontinued Operations" due to our
expected level of continuing involvement in the business post disposition.
2014: Approximately $83 million net gain, primarily as a result of fair value adjustments related to a business acquisition.
Approximately $60 million charge to adjust the fair value of a Pratt & Whitney joint venture investment.
Approximately $22 million charge for impairment of assets related to a joint venture.
2015: Approximately $142 million to record in sales and $80 million in losses from Pratt & Whitney customer contract renegotiations.
Approximately $867 million charge related to a Pratt & Whitney research and development support agreements with Canadian government agencies.
2016: Approximately $184 million to record in sales and $95 million in losses from Pratt & Whitney on-going customer contract negotiations.
Aerospace Systems Operating Results Reconciliation ($ millions)
2012 2013 2014 2015 2016
Segment Sales 8,334 13,347 14,215 14,094 14,465
Other significant items of a non-recurring/non-operational nature 1 - - - 210 -
Segment sales - adjusted 8,334 13,347 14,215 14,304 14,465
Segment operating profit 944 2,018 2,355 1,888 2,298
Other significant items of a non-recurring/non-operational nature 1 - - - 356 -
Restructuring 115 92 82 111 49
Segment operating profit - adjusted 1,059 2,110 2,437 2,355 2,347
Segment operating margin 11.3% 15.1% 16.6% 13.4% 15.9%
Segment operating margin - adjusted 12.7% 15.8% 17.1% 16.5% 16.2%
1 Details of other significant items of a non-recurring/non-operational nature
2015: Approximately $210 million to record in sales and $295 million in losses from UTC Aerospace Systems customer contract renegotiations.
Approximately $61 million charge to UTC Aerospace Systems for impairment of assets held for sale.