otis-20201026
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________ 
FORM 8-K
____________________________________ 

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 2020
____________________________________ 
OTIS WORLDWIDE CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________ 
Delaware001-3922183-3789412
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
One Carrier Place
Farmington, Connecticut 06032
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code
(860) 233-6847
N/A
(Former name or former address, if changed since last report)
____________________________________ 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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.   ¨






Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock ($0.01 par value)OTISNew York Stock Exchange

Section 2—Financial Information
Item 2.02. Results of Operations and Financial Condition.
On October 26, 2020, Otis Worldwide Corporation (“Otis”) issued a press release announcing its third quarter 2020 results.
The press release issued October 26, 2020 is furnished herewith as Exhibit No. 99 to this Report, and shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be deemed to be incorporated by reference into any filing by Otis under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Section 9—Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number
Exhibit Description
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
OTIS WORLDWIDE CORPORATION
(Registrant)
Date: October 26, 2020By:
/s/ RAHUL GHAI     
Rahul Ghai
Executive Vice President & Chief Financial Officer


Document

Exhibit 99

OTIS REPORTS THIRD QUARTER 2020 RESULTS

Delivers strong third quarter results; improves 2020 outlook

Net sales down 1.4%; organic sales down 1.2%
GAAP operating profit down $28 million with 60 basis points of margin contraction
Adjusted operating profit up $33 million with 120 basis points of margin expansion
New Equipment orders up slightly; backlog up 5%, 3% at constant currency
GAAP cash flow from operations of $348 million; free cash flow of $311 million
Improved outlook* for full-year organic sales, adjusted operating profit, adjusted EPS and free cash flow

FARMINGTON, Conn., October 26, 2020 – Otis Worldwide Corporation (NYSE:OTIS) reported third quarter 2020 net sales of $3.3 billion, a decrease of 1.2% organically versus the prior year. GAAP diluted earnings per share (EPS) decreased 16.4% to $0.61 and adjusted diluted EPS increased 25.5% to $0.69.

"Otis had another strong quarter as we continued to grow share, build backlog, expand adjusted margin and generate robust cash flow. These outcomes again demonstrate the resiliency of our business, the strength of our strategy and the dedication of our colleagues around the world to provide essential services to our customers while introducing innovative solutions to grow our business," said President and CEO Judy Marks. "We are improving our 2020 outlook reflecting our ability to deliver on near-term commitments and execute our long-term strategy."

Key Figures
($ millions, except per share amounts)Quarter Ended September 30,Nine Months Ended September 30,
20202019Y/YY/Y (CFX)20202019Y/YY/Y (CFX)
Net sales$3,268 $3,313 (1.4)%(1.6)%$9,263 $9,765 (5.1)%(3.7)%
Organic sales(1.2)%(3.3)%
GAAP
Operating profit$454 $482 $(28)$1,199 $1,378 $(179)
Operating profit margin13.9 %14.5 %(60) bps12.9 %14.1 %(120) bps
Net income$266 $317 (16.1)%$655 $898 (27.1)%
Earnings per share$0.61 $0.73 (16.4)%$1.51 $2.07 (27.1)%
Adjusted non-GAAP comparison
Operating profit$503 $470 $33 $30 $1,410 $1,399 $11 $33 
Operating profit margin15.4 %14.2 %120 bps110 bps15.2 %14.3 %90 bps90 bps
Net income$302 $241 25.3 %$808 $766 5.5 %
Earnings per share$0.69 $0.55 25.5 %$1.86 $1.77 5.1 %

Third quarter net sales of $3.3 billion decreased 1.4% versus the prior year, with a 1.2% decline in organic sales. Organic sales declined low single digits in both the New Equipment and Service segments.




Third quarter GAAP operating profit of $454 million decreased $28 million from the prior year driven by segment operating profit decline of $18 million, including incremental public company standalone costs, and non-recurring separation costs, partially offset by favorable transactional foreign exchange. GAAP operating profit margin contracted 60 basis points to 13.9%.

Adjusted operating profit of $503 million increased $33 million and $30 million at constant currency. Operating profit growth at constant currency was driven by profit growth of $19 million in the Service segment, lower corporate costs and favorable transactional foreign exchange, partially offset by profit decline of $9 million in the New Equipment segment. Adjusted operating profit margin expanded 120 basis points to 15.4%, with continued margin expansion in the Service segment.

GAAP EPS of $0.61 decreased $0.12, driven by the decline in operating profit and higher interest expense. Adjusted EPS of $0.69 increased $0.14, driven by adjusted operating profit growth and a lower adjusted tax rate.

Year-to-date net sales declined 5.1% versus the prior year, with a 3.3% decline in organic sales and 1.8% headwind from foreign exchange and the impact from divestitures. GAAP operating profit decreased $179 million, with margin contraction of 120 basis points primarily due to higher non-recurring separation costs, incremental public company standalone costs and a one-time charge taken in the first quarter. Adjusted operating profit increased $33 million at constant currency and margin expanded 90 basis points driven by strong performance in the Service segment.


New Equipment Segment
Quarter Ended September 30,Nine Months Ended September 30,
($ millions)20202019Y/YY/Y (CFX)20202019Y/YY/Y (CFX)
Net sales$1,423 $1,450 (1.9)%(1.6)%$3,840 $4,221 (9.0)%(7.3)%
Organic sales(1.0)%(7.0)%
GAAP
Operating profit$95 $115 $(20)$238 $312 $(74)
Operating profit margin6.7 %7.9 %(120) bps6.2 %7.4 %(120) bps
Adjusted non-GAAP comparison
Operating profit$102 $114 $(12)$(9)$258 $320 $(62)$(52)
Operating profit margin7.2 %7.9 %(70) bps(50) bps6.7 %7.6 %(90) bps(80) bps

In the third quarter, net sales of $1.4 billion decreased 1.9% with a 1.0% decline in organic sales. Organic sales were down low single digits in EMEA and down slightly in Asia and the Americas. China organic sales were up mid-single digits as the business continued to recover from the impacts of COVID-19.

GAAP operating profit decreased $20 million to $95 million. Adjusted operating profit decreased $12 million to $102 million as material productivity and cost containment actions were more than offset by under-absorption, other field inefficiencies, unfavorable mix and headwinds from foreign exchange. GAAP operating



profit was also impacted by incremental public company standalone costs and higher restructuring costs. GAAP and adjusted operating profit margin contracted 120 and 70 basis points, respectively.

New Equipment orders were up slightly at constant currency with low single digit growth in EMEA and Asia, partially offset by low single digit decline in the Americas. New Equipment orders in China were strong, up high single digits. New equipment backlog at constant currency increased 3% versus prior year.

Year-to-date net sales declined 9.0% with a 7.0% organic decline. GAAP operating profit declined $74 million with margin contraction of 120 basis points and adjusted operating profit, at constant currency, declined $52 million and margin contracted 80 basis points.

Service Segment
Quarter Ended September 30,Nine Months Ended September 30,
($ millions)20202019Y/YY/Y (CFX)20202019Y/YY/Y (CFX)
Net sales$1,845 $1,863 (1.0)%(1.7)%$5,423 $5,544 (2.2)%(1.1)%
Organic sales(1.4)%(0.5)%
GAAP
Operating profit$409 $407 $$1,190 $1,181 $
Operating profit margin22.2 %21.8 %40 bps21.9 %21.3 %60 bps
Adjusted non-GAAP comparison
Operating profit$422 $397 $25 $19 $1,216 $1,180 $36 $47 
Operating profit margin22.9 %21.3 %160 bps140 bps22.4 %21.3 %110 bps110 bps

In the third quarter, net sales of $1.8 billion decreased 1.0%, with a 1.4% decline in organic sales. Organic maintenance and repair sales declined 1.3% and organic modernization sales declined 2.1%.

GAAP operating profit increased $2 million to $409 million. Adjusted operating profit increased $25 million to $422 million as the benefit from productivity and cost containment actions and a $6 million tailwind from foreign exchange more than offset the impact from lower volume and price concessions. GAAP operating profit was also impacted by incremental public company standalone costs and higher restructuring costs. GAAP and adjusted operating profit margin expanded 40 and 160 basis points, respectively.

Year-to-date net sales declined 2.2% from a slight decline in organic sales and a 1.7% headwind from foreign exchange and the impact of net acquisitions and divestitures. GAAP operating profit increased $9 million with margin expansion of 60 basis points and adjusted operating profit, at constant currency, increased $47 million with margin expansion of 110 basis points.








Cash flow
Quarter Ended September 30,Nine Months Ended September 30,
($ millions)20202019Y/Y20202019Y/Y
Cash flow from operations$348 $364 $(16)$1,171 $1,015 $156 
Free cash flow$311 $329 $(18)$1,059 $917 $142 
Free cash flow conversion117 %104 %162 %102 %


Third quarter cash from operations of $348 million decreased $16 million versus prior year primarily driven by lower GAAP net income. Third quarter free cash flow of $311 million decreased $18 million versus prior year.

Year-to-date cash from operations of $1.2 billion increased $156 million and free cash flow increased $142 million to $1.1 million.

2020 Outlook*
Otis is improving its full year outlook to reflect strong year-to-date performance and anticipated recovery profile.
Net sales down 3 to 4%
Organic sales down 2 to 3%
Organic New Equipment sales down mid to high single digits
Organic Service sales flat to down slightly
Adjusted operating profit up $30 to $40 million at constant currency and up $5 to $15 million at actual currency
Adjusted EPS of approximately $2.42; adjusted effective tax rate of ~30.5%
Free cash flow of approximately $1.15 billion with conversion of approximately 135% of GAAP net income

*Note: When we provide outlook for organic sales, adjusted operating profit, adjusted effective tax rate and free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures generally is not available without unreasonable effort. See “Use and Definitions of Non-GAAP Financial Measures” below for additional information.





About Otis
Otis is the world's leading elevator and escalator manufacturing, installation and service company. We move 2 billion people a day and maintain more than 2 million customer units worldwide, the industry's largest maintenance portfolio. Headquartered in Connecticut, USA, Otis is 69,000 people strong, including 40,000 field professionals, all committed to meeting the diverse needs of our customers and passengers in more than 200 countries and territories worldwide. For more information, visit www.otis.com and follow us on LinkedIn, Instagram, Facebook and Twitter @OtisElevatorCo.

Use and Definitions of Non-GAAP Financial Measures
Otis Worldwide Corporation (“Otis”) reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under 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. A reconciliation of the non-GAAP measures (referenced in this press release) to the corresponding amounts prepared in accordance with GAAP appears in the attached tables. These tables provide additional information as to the items and amounts that have been excluded from the adjusted measures.

Organic sales, adjusted selling, general and administrative (“SG&A”) expense, earnings before interest taxes and depreciation (“EBITDA”), adjusted EBITDA, adjusted operating profit, adjusted net income, adjusted diluted earnings per share (“EPS”), adjusted effective tax rate and free cash flow are non-GAAP financial measures.

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 of a non-recurring and/or nonoperational nature (“other significant items”). Management believes organic sales is a useful measure in providing period-to-period comparisons of the results of the Company’s ongoing operational performance.

Adjusted SG&A expense represents SG&A expense (a GAAP measure), excluding restructuring costs, other significant items and allocated costs for certain functions and services previously performed by United Technologies Corporation (“UTC”) prior to our separation (“UTC allocated costs”) and including estimated standalone public company costs, as though Otis’ operations had been conducted independently from UTC (“standalone costs”). Standalone costs for the 2019 fiscal year are based on quarterly estimates determined during Otis’ annual planning process for the 2020 fiscal year.

Adjusted operating profit represents income from continuing operations (a GAAP measure), excluding restructuring costs, other significant items and allocated costs for certain functions and UTC allocated costs and including estimated standalone public company costs.

Adjusted net income represents net income from continuing operations (a GAAP measure), excluding restructuring costs and other significant items and UTC allocated costs and including estimated standalone public company costs, estimated adjustments to non-service pension expense, net interest expense and income tax



expense as if Otis was a standalone public company (“standalone operating income adjustments”). Adjusted EPS represents diluted earnings per share from continuing operations (a GAAP measure), adjusted for the per share impact of restructuring, other significant items and standalone operating income adjustments.

The adjusted effective tax rate represents the effective tax rate (a GAAP measure) adjusted for the tax impact of restructuring costs, significant items and the tax impact of the additional adjustments (estimated standalone public company costs, interest expense and non-service pension expense).

EBITDA represents net income from operations (a GAAP measure), adjusted for noncontrolling interests, income tax expense, net interest expense, non-service pension expense and depreciation and amortization. Adjusted EBITDA represents EBITDA, as calculated above, adjusted for the impact of restructuring, other significant items and UTC allocated costs, including estimated standalone public company costs. Management believes that adjusted SG&A, EBITDA, adjusted EBITDA, adjusted operating profit, adjusted net income, adjusted EPS and the adjusted effective tax rate are useful measures in providing period-to-period comparisons of the results of the Company’s ongoing operational performance as if it had been a standalone public company.

Additionally, GAAP financial results include the impact of changes in foreign currency exchange rates ("AFX"). We use the non-GAAP measure “at constant currency” or “CFX” to show changes in our financial results without giving effect to period-to-period currency fluctuations. Under U.S. GAAP, income statement results are translated in U.S. dollars at the average exchange rate for the period presented. Management believes that this non-GAAP measure is 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 Otis’ ability to fund its activities, including the financing of acquisitions, debt service, repurchases of common stock and distribution of earnings to shareholders.

When we provide our expectations for organic sales, adjusted operating profit, adjusted net income, adjusted effective tax rate, adjusted EPS and 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 from continuing operations, operating profit, the effective tax rate, net sales and expected cash flow from operations) 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.

Cautionary Statement
This communication 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 Otis’ 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,” “outlook,” “confident” and other words of similar meaning in connection with a discussion of future operating or financial performance or the separation and distribution. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, dividends, share repurchases, tax rates and other measures of financial performance or potential future plans, strategies or transactions of Otis following its separation from United Technologies Corporation, including the estimated costs associated with the separation and distribution and other statements that are not historical facts. 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, Otis claims 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 Otis and its businesses 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, the impact of weather conditions, pandemic health issues (including COVID-19 and its effects, among other things, on global supply, demand, and distribution disruptions as the outbreak continues and results in an increasingly prolonged period of travel, commercial and/or other similar restrictions and limitations), natural disasters and the financial condition of Otis’ 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 Otis’ capital structure; (5) the timing and scope of future repurchases of Otis’ 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) cost reduction efforts and restructuring costs and savings and other consequences thereof; (8) new business and investment opportunities; (9) the anticipated benefits of moving away from diversification and balance of operations across product lines, regions and industries; (10) the outcome of legal proceedings, investigations and other contingencies; (11) pension plan assumptions and future contributions; (12) the impact of the negotiation of collective bargaining agreements and labor disputes; (13) the effect of changes in political conditions in the U.S. and other countries in which Otis and its businesses operate, including the effect of changes in U.S. trade policies or the United Kingdom’s withdrawal from the European Union, on general market conditions, global trade policies and currency exchange rates in the near term and beyond; (14) 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 Otis and its businesses operate; (15) the ability of Otis to retain and hire key personnel; (16) the scope, nature, impact or timing of acquisition and divestiture activity, including among other things integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs; (17) the expected benefits of the separation and distribution; (18) the determination by the Internal Revenue Service and other tax authorities that the distribution or certain related transactions should be treated as taxable transactions; (19) risks associated with indebtedness incurred as a result of financing transactions undertaken in connection with the separation; (20) the risk that dis-synergy costs, costs of restructuring transactions and other costs incurred in connection with the separation will exceed Otis’ estimates; and (21) the impact of the separation on Otis’ businesses and Otis’ resources, systems, procedures and controls, diversion of management’s attention and



the impact on relationships with customers, suppliers, employees and other business counterparties. The above list of factors is not exhaustive or necessarily in order of importance. For additional information on identifying factors that may cause actual results to vary from those stated in forward-looking statements, see Otis’ registration statements on Form 10 and Form S-3 and the reports of Otis 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 Otis assumes 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.







Otis Worldwide Corporation
Condensed Consolidated Statements of Operations
Quarter Ended September 30,Nine Months Ended September 30,
(Unaudited)(Unaudited)
(amounts in millions, except per share amounts)2020201920202019
Net Sales$3,268 $3,313 $9,263 $9,765 
Costs and Expenses:
Cost of products and services sold2,289 2,338 6,496 6,905 
Research and development37 39 112 118 
Selling, general and administrative481 444 1,387 1,329 
Total Costs and Expenses2,807 2,821 7,995 8,352 
Other income (expense), net(7)(10)(69)(35)
Operating profit454 482 1,199 1,378 
Non-service pension expense (benefit)(16)— (38)
Interest expense (income), net39 (6)85 (8)
Net income before income taxes413 504 1,114 1,424 
Income tax expense103 143 337 411 
Net income310 361 777 1,013 
Less: Noncontrolling interest in subsidiaries' earnings44 44 122 115 
Net income attributable to common shareholders$266 $317 $655 $898 
Earnings Per Share of Common Stock:
Basic$0.61 $0.73 $1.51 $2.07 
Diluted$0.61 $0.73 $1.51 $2.07 
Weighted Average Number of Shares Outstanding:
Basic shares433.2 433.1 433.1 433.1 
Diluted Shares435.1 433.1 434.1 433.1 





Otis Worldwide Corporation
Segment Net Sales and Operating Profit


Quarter Ended September 30,Quarter Ended September 30,
(Unaudited)(Unaudited)
(dollars in millions)20202019
Reported AdjustedReportedAdjusted
Net Sales
New Equipment$1,423 $1,423 $1,450 $1,450 
Service1,845 1,845 1,863 1,863 
Consolidated Net Sales$3,268 $3,268 $3,313 $3,313 
Operating Profit
New Equipment$95 $102 $115 $114 
Service409 422 407 397 
Segment Operating Profit504 524 522 511 
General corporate expenses and other(50)(21)(40)(41)
Consolidated Operating Profit$454 $503 $482 $470 
Segment Operating Profit Margin
New Equipment6.7 %7.2 %7.9 %7.9 %
Service22.2 %22.9 %21.8 %21.3 %
Total Operating Profit Margin13.9 %15.4 %14.5 %14.2 %

Nine Months Ended September 30,Nine Months Ended September 30,
(Unaudited)(Unaudited)
(dollars in millions)20202019
ReportedAdjustedReportedAdjusted
Net Sales
New Equipment$3,840 $3,840 $4,221 $4,221 
Service5,423 5,423 5,544 5,544 
Consolidated Net Sales$9,263 $9,263 $9,765 $9,765 
Operating Profit
New Equipment$238 $258 $312 $320 
Service1,190 1,216 1,181 1,180 
Segment Operating Profit1,428 1,474 1,493 1,500 
General corporate expenses and other(229)(64)(115)(101)
Consolidated Operating Profit$1,199 $1,410 $1,378 $1,399 
Segment Operating Profit Margin
New Equipment6.2 %6.7 %7.4 %7.6 %
Service21.9 %22.4 %21.3 %21.3 %
Total Operating Profit Margin12.9 %15.2 %14.1 %14.3 %






Otis Worldwide Corporation
Reconciliation of Reported (GAAP) to Adjusted Operating Profit & Operating Profit Margin


Quarter Ended September 30,Nine Months Ended September 30,
(Unaudited)(Unaudited)
(dollars in millions)2020201920202019
New Equipment
Net sales$1,423 $1,450 $3,840 $4,221 
GAAP Operating profit95 115 238 312 
Restructuring20 16 
  UTC allocated corporate expenses— — 
  Public company standalone costs1
— (5)— (12)
  Other
— — — 
Adjusted New Equipment Operating Profit$102 $114 $258 $320 
Adjusted operating profit margin7.2 %7.9 %6.7 %7.6 %
Service
Net sales$1,845 $1,863 $5,423 $5,544 
GAAP Operating profit409 407 1,190 1,181 
Restructuring13 26 28 
  UTC allocated corporate expenses— — 10 
  Public company standalone costs1
— (15)— (40)
  Other
— — 
Adjusted Service Operating Profit$422 $397 $1,216 $1,180 
Adjusted Operating Profit Margin22.9 %21.3 %22.4 %21.3 %
General corporate expenses and other
General corporate expenses and other$(21)$(41)$(64)$(101)
Adjusted Total Operating Profit$503 $470 $1,410 $1,399 
Total Otis
GAAP Operating profit$454 $482 $1,199 $1,378 
Restructuring20 46 44 
   Loss on disposal of business— (1)— 18 
   One-time separation costs29 82 10 
   Fixed asset impairment
— — 67 — 
   UTC allocated corporate expenses— 20 16 56 
  Public company standalone costs1
— (41)— (105)
Other— (1)— (2)
Adjusted Total Operating Profit$503 $470 $1,410 $1,399 
Adjusted Operating Profit Margin15.4 %14.2 %15.2 %14.3 %

1 - Public company standalone costs represent estimated costs such as personnel costs, risk management and incentive compensation that have been incurred and are reflected in results for the quarter and nine months ended September 30, 2020 and are not adjusted. For the quarter ended and nine months ended September 30, 2019, these standalone costs have been included in the adjustments, as though Otis' operations had been conducted independently from UTC.




Otis Worldwide Corporation
Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Net Income, Earnings Per Share, and Effective Tax Rate
Quarter Ended September 30,Nine Months Ended September 30,
(Unaudited)(Unaudited)
(dollars in millions, except per share amounts)2020201920202019
Adjusted Operating Profit$503 $470 $1,410 $1,399 
Non-service pension cost (benefit)3
(4)— (5)
Net interest expense2
(39)(48)(85)(111)
Adjusted income from operations before income taxes462 418 1,325 1,283 
Income tax expense103 143 337 411 
Tax impact on restructuring and non-recurring items47 11 
Tax impact on other adjustments— (14)— (29)
Non-recurring tax items11 
Adjusted net income from operations 346 285 930 881 
Noncontrolling interest44 44 122 115 
Adjusted net income attributable to common shareholders$302 $241 $808 $766 
GAAP income attributable to common shareholders$266 $317 $655 $898 
Restructuring20 46 44 
Loss on disposal of business— (1)— 18 
One-time separation costs29 82 10 
Fixed asset impairment— — 67 — 
UTC allocated corporate expenses— 20 16 56 
Public company standalone costs1
— (41)— (105)
Non-service pension cost3
— (20)— (43)
Net interest expense2
— (54)— (119)
Other— (1)— (2)
Tax effects of restructuring, non-recurring items and other adjustments(8)12 (47)18 
Non-recurring tax items(5)(2)(11)(9)
Adjusted net income attributable to common shareholders$302 $241 $808 $766 
Diluted Earnings Per Share$0.61 $0.73 $1.51 $2.07 
  Impact to diluted earnings per share0.08 (0.18)0.35 (0.30)
Adjusted Diluted Earnings Per Share$0.69 $0.55 $1.86 $1.77 
Effective Tax Rate24.9 %28.4 %30.2 %28.9 %
  Impact of adjustments on effective tax rate0.3 %3.4 %(0.4)%2.4 %
Adjusted Effective Tax Rate25.2 %31.8 %29.8 %31.3 %

1 - Public company standalone costs represent estimated costs such as personnel costs, risk management and incentive compensation that have been incurred and are reflected in results for the quarter ended and nine months ended September 30, 2020 and are not adjusted. For the quarter ended and nine months ended September 30, 2019, these standalone costs have been included in the adjustments, as though Otis' operations had been conducted independently from UTC.

2 - Otis issued debt and began to incur interest expenses in February 2020 associated with the debt issuance. The current quarter year-to-date actual interest expense incurred has been reflected in the comparative period in 2019 as though Otis incurred those expenses in the prior year.

3 - Non-service pension included in GAAP net income attributable to Otis includes amounts associated with Otis' participation in UTC retained pension plans. The amounts related to these plans are removed from Otis' results in 2019, as though Otis' operations had been conducted independently from UTC.




Otis Worldwide Corporation

Components of Changes in Net Sales


Quarter Ended September 30, 2020 Compared with Quarter Ended September 30, 2019
Factors Contributing to Total % Change in Net Sales
OrganicFX
Translation
Acquisitions /
Divestitures, net
OtherTotal
New Equipment(1.0)%(0.3)%(0.1)%(0.5)%(1.9)%
Service(1.4)%0.7%(0.3)%—%(1.0)%
Maintenance and Repair(1.3)%0.7%(0.1)%—%(0.7)%
Modernization(2.1)%0.6%(0.9)%—%(2.4)%
Total Net Sales(1.2)%0.2%(0.2)%(0.2)%(1.4)%
Nine Months Ended September 30, 2020 Compared with Nine Months Ended September 30, 2019
Factors Contributing to Total % Change in Net Sales
OrganicFX
Translation
Acquisitions /
Divestitures, net
OtherTotal
New Equipment(7.0)%(1.7)%(0.1)%(0.2)%(9.0)%
Service(0.5)%(1.1)%(0.6)%—%(2.2)%
Maintenance and Repair(0.8)%(1.1)%(0.4)%—%(2.3)%
Modernization0.9%(0.9)%(1.5)%—%(1.5)%
Total Net Sales(3.3)%(1.4)%(0.4)%—%(5.1)%
Components of New Equipment Backlog


Growth %
Q3 2020
New Equipment Backlog increase at actual currency5.0%
Foreign exchange impact to New Equipment Backlog(2.0)%
New Equipment Backlog at constant currency3.0%





Otis Worldwide Corporation
Reconciliation of Adjusted Operating Profit at Constant Currency

Quarter Ended September 30, 2020 Compared with Quarter Ended September 30, 2019
(dollars in millions)20202019Y/Y
New Equipment
Adjusted Operating Profit$102 $114 $(12)
Impact of foreign exchange— 
Adjusted Operating Profit at constant currency$105 $114 $(9)
Service
Adjusted Operating Profit$422 $397 $25 
Impact of foreign exchange(6)— (6)
Adjusted Operating Profit at constant currency$416 $397 $19 
Otis Consolidated
Adjusted Operating Profit$503 $470 $33 
Impact of foreign exchange(3)— (3)
Adjusted Operating Profit at constant currency$500 $470 $30 
Nine Months Ended September 30, 2020 Compared with Nine Months Ended September 30, 2019
(dollars in millions)20202019Y/Y
New Equipment
Adjusted Operating Profit$258 $320 $(62)
Impact of foreign exchange10 — 10 
Adjusted Operating Profit at constant currency$268 $320 $(52)
Service
Adjusted Operating Profit$1,216 $1,180 $36 
Impact of foreign exchange11 — 11 
Adjusted Operating Profit at constant currency$1,227 $1,180 $47 
Otis Consolidated
Adjusted Operating Profit$1,410 $1,399 $11 
Impact of foreign exchange22 — 22 
Adjusted Operating Profit at constant currency$1,432 $1,399 $33 





Otis Worldwide Corporation
Condensed Consolidated Balance Sheet
September 30, 2020December 31, 2019
(amounts in millions, except per share amounts)(Unaudited)(Unaudited)
Assets
Cash and cash equivalents$1,733 $1,446 
Accounts receivable, net 2,958 2,861 
Contract assets481 529 
Inventories, net667 571 
Other current assets432 251 
Total Current Assets6,271 5,658 
Future income tax benefits456 373 
Fixed assets, net721 721 
Operating lease right-of-use assets548 535 
Intangible assets, net489 490 
Goodwill1,700 1,647 
Other assets288 263 
Total Assets$10,473 $9,687 
Liabilities and (Deficit) Equity
Short-term borrowings$538 $34 
Accounts payable1,392 1,331 
Accrued liabilities1,858 1,739 
Contract liabilities2,503 2,270 
Total Current Liabilities6,291 5,374 
Long-term debt5,512 
Future pension and postretirement benefit obligations601 590 
Operating lease liabilities375 386 
Future income tax obligations 448 695 
Other long-term liabilities629 311 
Total Liabilities13,856 7,361 
Redeemable noncontrolling interest98 95 
Shareholders' (Deficit) Equity:
Preferred Stock, $0.01 par value, 125 share authorized; None issued or outstanding— — 
Common Stock, $0.01 par value, 2,000 shares authorized; 433.2 shares issued and outstanding— 
Additional paid-in capital32 — 
Accumulated deficit(3,241)— 
UTC Net Investment— 2,458 
Accumulated other comprehensive loss(819)(758)
Total Shareholders' (Deficit) Equity(4,024)1,700 
Noncontrolling interest543 531 
Total (Deficit) Equity(3,481)2,231 
Total Liabilities and (Deficit) Equity$10,473 $9,687 

Debt Ratios:
Debt to total capitalization236 %%
Net debt to net capitalization516 %(171)%

Debt to total capitalization equals total debt divided by total debt plus equity. Net debt to net capitalization equals total debt less cash and cash equivalents divided by total debt plus equity less cash and cash equivalents.




Otis Worldwide Corporation
Condensed Consolidated Statement of Cash Flows
Quarter Ended September 30,Nine Months Ended September 30,
(Unaudited)(Unaudited)
(dollars in millions)2020201920202019
Operating Activities:
Net income from operations$310 $361 $777 $1,013 
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization48 44 140 135 
Stock compensation cost17 13 44 29 
Loss on fixed asset impairment— — 55 — 
Loss on disposal of business— — — 19 
Change in:
Accounts receivable, net(20)(59)(79)(153)
Contract assets and liabilities, current11 31 277 108 
Inventories, net(30)(101)31 
Accounts payable(10)19 (42)
Pension contributions (8)(7)(28)(25)
Other operating activities, net18 (16)67 (100)
Net cash flows provided by operating activities348 364 1,171 1,015 
Investing Activities:
Capital expenditures(37)(35)(112)(98)
Investments in businesses, net of cash acquired(34)(7)(50)(39)
Investments in equity securities— — (51)— 
Other investing activities, net(76)(16)(76)(13)
Net cash flows used in investing activities(147)(58)(289)(150)
Financing Activities:
Issuance of long-term debt, net— — 6,300 — 
Payment of long-term debt issuance costs— — (43)— 
Repayment of long-term debt(750)— (750)— 
Increase in short-term borrowings, net509 510 18 
Net transfers from (to) UTC— (268)(6,330)(598)
Dividends paid on common stock(86)— (173)— 
Dividends paid to noncontrolling interest(82)(77)(125)(132)
Other financing activities, net— 22 18 
Net cash flows provided by (used in) financing activities(409)(341)(589)(694)
Summary of Activity:
Net cash provided by operating activities348 364 1,171 1,015 
Net cash used in investing activities(147)(58)(289)(150)
Net cash provided by (used in) financing activities(409)(341)(589)(694)
Effect of foreign exchange rate changes on cash and cash equivalents33 (45)— (41)
Net increase in cash, cash equivalents and restricted cash(175)(80)293 130 
Cash, cash equivalents and restricted cash, beginning of period1,927 1,556 1,459 1,346 
Cash, cash equivalents and restricted cash, end of period1,752 1,476 1,752 1,476 
Less: Restricted cash19 16 19 16 
Cash and cash equivalents, end of period$1,733 $1,460 $1,733 $1,460 







Otis Worldwide Corporation
Free Cash Flow Reconciliation

Quarter Ended September 30,
(Unaudited)
(dollars in millions)
20202019
Net income attributable to common shareholders$266 $317 
Net cash flows provided by operating activities$348 $364 
Net cash flows provided by operating activities as a percentage of net income attributable to common shareholders131 %115 %
Capital expenditures(37)(35)
Capital expenditures as a percentage of net income attributable to common shareholders(14)%(11)%
Free cash flow $311 $329 
Free cash flow as a percentage of net income attributable to common shareholders117 %104 %
Nine Months Ended September 30,
(Unaudited)
(dollars in millions)20202019
Net income attributable to common shareholders$655 $898 
Net cash flows provided by operating activities$1,171 $1,015 
Net cash flows provided by operating activities as a percentage of net income attributable to common shareholders179 %113 %
Capital expenditures(112)(98)
Capital expenditures as a percentage of net income attributable to common shareholders(18)%(11)%
Free cash flow $1,059 $917 
Free cash flow as a percentage of net income attributable to common shareholders162 %102 %