UTC Investor and Analyst Meeting. March 10, 2016

Transcription

1 UTC Investor and Analyst Meeting March 10, 2016

2 Note: All results and expectations in this presentation reflect continuing operations unless otherwise noted. Cautionary Statement: This presentation includes statements that constitute forward-looking statements under the securities laws. Forward-looking statements often contain words such as believe, expect, expectations, plans, strategy, project, prospects, estimate, target, anticipate, will, should, see, guidance, confident and similar terms. 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. Such risks, uncertainties and other factors include, without limitation: 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, changes in government procurement priorities and funding, the impact of weather conditions and natural disasters and the financial condition of our customers and suppliers; challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services; future levels of indebtedness and capital spending and research and development spending; future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure; delays and disruption in delivery of materials and services from suppliers; customer- and company-directed cost reduction efforts and restructuring costs and savings and other consequences thereof; 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; new business opportunities; our ability to realize the intended benefits of organizational changes; the anticipated benefits of diversification and balance of operations across product lines, regions and industries; the timing and scope of future repurchases of our common stock; the outcome of legal proceedings, investigations and other contingencies; pension plan assumptions and future contributions; the impact of the negotiation of collective bargaining agreements and labor disputes; the effect of changes in political conditions in the U.S. and other countries in which we operate; and 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. The forward-looking statements speak only as of the date of this presentation and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our reports on Forms 10-K, 10-Q and 8-K filed with or furnished to the SEC from time to time, including, but not limited to, the information included in UTC's Forms 10-K and 10-Q under the headings Business, Risk Factors, Management's Discussion and Analysis of Financial Condition and Results of Operations and Legal Proceedings and in the notes to the financial statements included in UTC's Forms 10-K and 10-Q.

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4 United Technologies Priorities Flawless execution Innovation for growth Structural cost reduction Disciplined capital allocation

5 United Technologies Agenda 2:00 2:05 Opening Remarks Hayes 2:05 2:20 Financial Overview Johri 2:20 2:50 Otis / Q&A Delpech 2:50 3:20 CCS / Q&A McDonough 3:20 3:35 Break 3:35 4:05 UTAS / Q&A Gitlin 4:05 4:35 Pratt & Whitney / Q&A Leduc 4:35 5:00 Closing Remarks / Q&A Hayes / Johri 5:00 6:00 Reception All

6 Akhil Johri Chief Financial Officer March 10, 2016

7 Positioned for Growth Mega-trends Urban Population (billions) Mega-cities (population >1 million) Revenue Passenger Miles (billions) ~500 ~660 9,000 8,000 7,000 6,000 ~6% CAGR Middle class ~6% CAGR ~360 5,000 58% 4,000 ~225 3,000 27% E 2020E 2025E 2030E E 2030E 2,000 1, E 2030E Powerful mega-trends provide significant growth opportunities for UTC core business segments 1 Source: United Nations: World Urbanization Prospects, 2014 revision; The Brookings Institution; Airline Monitor

8 Positioned for Growth Organic Sales Outlook (2016E E CAGR) 10%+ ~7,000 engine orders* with industry leading GTF technology 5-7% 30+ systems nose to tail content per platform up 2x 4-5% World-class brands strong replacement demand 4-5% Leveraging global scale with increased innovation spending See appendix for definition and reconciliation of organic sales *Announced and unannounced firm & option orders 2

9 Growth / Productivity Achieving Competitive Excellence (ACE) Roadmap ACE Sites (% Gold & Silver) Feedback Comments SIPOC Turnback Trend Customers Control Tower Supplier Gold Impact/Maturity Progressing / Underperforming Competency D I V E Performing / Gold Operating management system driving continuous improvement 3

10 Productivity SG&A Productivity 23.2% (2015 % of sales) 20.4% 7.0 (% indexed to 1996*) 15.1% 17.2% Segment profit 13.0% 13.7% % 3.0 Segment sales Headcount (Industrial) Restructuring E Cumulative cost ~$1.5B Annualized savings ~$900M Source: Public company records and internal estimates *Excludes restructuring and other significant items of a non-recurring and/or non-operational nature (referred to as other significant items ). excludes Sikorsky and years have not been restated for discontinued operations for businesses disposed in

11 Productivity UTC Segment Margins 2015 Operating Margins (% operating margin*) 17% Highest peer (% operating margin*) Otis 13% CCS 8% UTAS P&W World-class margins with upside Source: Public company records and internal estimates 5 *1995 & 2005 reported operating margins, 1995 & 2005 have not been restated for discontinued operations for businesses disposed of in ; 2015 adjusted for restructuring and other significant items. See appendix for reconciliation.

12 Cash Generation Free Cash Flow to Net Income (%) % Capex / Depreciation 180% 160% 140% 120% 120% 100% 80% 100% 80% % 10 Net Inventory Turns 40% % 4 0% Strong cash generator through the investment cycles Years have not been restated for discontinued operations for businesses disposed in See free cash flow definition and reconciliation in appendix 6

13 Capital Allocation Value Disconnect Pratt & Whitney large commercial engines* Return to Shareholders ($ billions) P/E view Cash flow view Dividends Share repurchase 22 ~($12) / share ~$8 / share 6 ~7B '00-02 '03-05 '06-08 '09-11 '12-14 '15-17E (~10B) Disciplined capital deployment 7 *Based on ~7000 firm and option GTF orders to date

14 Shareholder Value Creation Focused portfolio of global franchises Resilient business model Innovative products and services Strong performance culture Disciplined capital allocation 8

15 2016 Organic Sales Expectations (% VPY) Commercial* Americas E 6% 4-6% EMEA (2%) 1-3% Asia (ex-china) 6% 5-7% China (5%) (7) (10%) Aerospace Commercial OE 1% 4-6% Commercial aftermarket 5% 0-2% Military (5%) 2-4% 2016 outlook reaffirmed Sales $56 - $58B (organic growth 1-3%) Adjusted EPS** range $ $6.60 Free cash flow*** % of net income attributable to common shareowners See appendix for definition of organic growth *Excludes refrigeration **Adjusted for restructuring and other significant items. See appendix for reconciliation. ***See free cash flow reconciliation and definition in appendix 9

16 Philippe Delpech President Otis March 10, 2016

17 Industry Leadership 2015 Industry 18% All others A C B 2015: ~$65 billion Sales Portfolio EBIT EBIT ROS ($ billions) (units, millions) ($ billions) ($ billions) % +36% % % +6 pts 14% 11% 11% A B C B C A * A B C * A C B Note: A, B, C represent industry peers Source: Public company reports & internal estimates *Otis operating profit adjusted for restructuring and other significant items. See appendix for reconciliation. 1

18 Otis Global scale and balance Operating profit % Sales ($ billions) 20% (@ afx) Large and growing maintenance base 12% Productivity runway on service 12.0 Attractive growth fundamentals 6.1 Best-in-class cash flow * 2015* Industry leader *Adjusted for restructuring and other significant items. See appendix for reconciliation. 2

19 Challenges Maintenance New equipment Service conversion Service year lifecycle with retention Repair Modernization Otis Share of Segment (in units) Otis Europe Otis ROW Service Profit (indexed) Source: Internal estimates

20 Strategic Initiatives New equipment growth Accelerate innovation Service transformation Operations excellence 4

21 New Equipment Growth China Global Segment China Transformation Strengthen core brands Otis position Leverage scale Customer segment focus ROW China #1 #2 2015: ~$35B Continued urbanization Infrastructure development 5 Source: Internal estimates

22 New Equipment Growth Rest of World ROW Segment Growth Strategy Expand sales coverage Otis position #1 Enhance product offering #1 Americas MEA Asia (ex. China) #1 Align incentives for profitable growth 2015 Orders VPY cfx) Europe 53% 24% Otis ex. China 17% #1 15% 2015: ~$17B (1%) MEA Americas Europe Asia (ex. China) Source: Internal estimates 6

23 Innovation (R&D spend, $ cfx) (% of sales) 1.1% 130 Priorities Leverage capabilities Accelerate programs Address product gaps Design for service E New lead design center in China Design next generation elevator 7

24 Service Transformation Mechanic Time Non-value added Value added Differentiated offerings Field productivity Customer retention Deploy enhanced digital tools 8

25 Service Transformation China Segment Service Base (units, indexed 2005 = 1.0) 5.8x Priorities Service conversion Otis portfolio Segmented offering 1.0x Repair and modernization growth Portfolio acquisitions Service Segment Major OEM s ISP s* and OEM agents Regulations & enforcement Higher customer expectations Industry fragmentation Source: Internal estimates *Independent service providers 9

26 Operations Excellence Factories Sub-systems Global Factory Footprint Sourcing China Supply Base (# of suppliers) Common across Otis Europe Field Sourcing (% centralized procurement) High cost Low cost France Rest of Europe 10

27 Key Metrics (5-year CAGR) New Equipment Growth (orders) cfx) (5-year CAGR) Accelerate Innovation (R&D investment) cfx) 8% China flat ROW ~5% 2% ~15% E E Service Transformation (China service conversion rate) (5-year CAGR) Service Transformation (maintenance portfolio) (units) >50% 24% 33% 2% ~3% E E 11

28 Otis 2020 Outlook Operating profit* ($B, cfx) Operating profit* ($B, afx) Sales* ($B, cfx) $11.4 $11.6 $ E 20E CAGR CAGR 4-5% % 10.0 Key Strategies New equipment growth Accelerate innovation $2.3 $2.4 $ Service transformation 4.0 Operations excellence E 2020E expectations* Actual FX (afx) Constant FX (cfx) Sales: down low single Sales: up low single Operating profit: ($250) (200M) Operating profit*: ($125) (75M) See appendix for reported sales and operating profit (afx) *Adjusted for restructuring and other significant items. See appendix for reconciliation. 12

29 Bob McDonough President UTC Climate, Controls & Security March 10, 2016

30 UTC Climate, Controls & Security (2015 afx) North America Residential HVAC Commercial HVAC Asia F&S products F&S field Commercial HVAC Refrigeration EMEA Americas Fire & Security Transicold Commercial refrigeration Residential HVAC Sales $16.7 billion Operating profit* $2.9 billion Operating profit* % 17.5% Field services Employees 55,000 New equipment *Adjusted for restructuring and other significant items. See appendix for reconciliation. 1

31 CCS Priorities Operating profit* (%) Operating profit* CAGR Organic 3% ($ billions) Organic growth Profit* 9% 15.7% 17.0% 17.5% 2016 profit expectations* Innovation 14.1% $175 cfx $100 afx 10.8% 12.2% Cash generation 1.9 Cost leadership cfx 18% 7% 11% 10% 7% 7% E 2 *Adjusted for restructuring and other significant items. See appendix for reconciliation.

32 2016 Outlook CCS Sales Organic Sales Growth Asia ex China up mid single Refrigeration up slightly Americas up mid single digit NA Residential HVAC Commercial HVAC up mid single digit up mid single digit China EMEA up low single digit F&S products up low single digit F&S field up low single digit 2016 expectations Organic sales: up low single digit Operating profit* (cfx): $ M Operating profit* (afx): $ M Commercial refrigeration Transport refrigeration up slightly flat 3 *Adjusted for restructuring and other significant items. See appendix for reconciliation.

33 Value Creation Growth Innovation Iconic brands Building solutions M&A opportunities Performance Lower cost (hours) Higher cost (hours) Footprint reduction ( ) 28% 23% 15% Free cash flow* ~100% of NI Low cost manufacturing R&D centers Factories Branches E Market fundamentals Cost leadership Operations excellence Cash generation *See free cash flow definition and reconciliation in appendix 4

34 Market Growth Fundamentals Urbanization (global urban population, billions) Adoption (commercial fire detection spend per capita) E 20E 25E Replacement (U.S. splits installed base, units in millions) U.S. Europe China Energy Efficiency (U.S. green building construction, $ billions) Source: United Nations: World Urbanization Prospects, 2014 revision; Green Market Size: McGraw Hill Construction Dodge, 2014; internal estimates

35 North America Residential HVAC Market Fundamentals (units, millions) 2.4 Housing Starts Growth Drivers Industry-leading brands 1.6 Innovation Low-cost footprint Best-in-class distribution 8 6 Industry Shipments (U.S. splits, units in millions) Add-on / replacement New construction Source: U.S. Census Bureau; Global Insight; internal estimates 6

36 Commercial HVAC Market Fundamentals Growth Drivers Urbanization (global urban population, billions) Innovation and efficiency Product breadth Global footprint E 2020E 2025E Automation and controls 40% Global Green Buildings (respondents with >60% green building projects) 2X 2X 0% E Source: United Nations: World Urbanization Prospects, 2014 revision; World Green Building Trends 2016, Dodge Data & Analytics 7

37 Refrigeration Market Fundamentals Refrigeration Spend Per Capita Growth Drivers Innovation Commercial refrigeration capability Product line expansion U.S. Europe China India 125 Refrigerated Seaborne Trade (tons, millions) Source: Global Insight; internal estimates

38 Fire & Security Market Fundamentals Access Control Adoption (spend per capita) Growth Drivers High technology products Field footprint Security product breadth Strong brand portfolio U.S. Europe China Commercial Fire Control Adoption (spend per capita) Source: internal estimates U.S. Europe China 9

39 Building Solutions Growth Intelligent products Connected systems Integrated buildings Consultative selling Strategic accounts Integrated solutions 10

40 CCS 2020 Outlook ($ billions) Sales* (cfx) Operating profit* (cfx) Operating profit* (afx) 2016E 20E CAGR 4-5% Key Strategies Organic growth 0.0 $15.3 $15.5 $ % Innovation 0.0 Cash generation 0.0 $2.4 $2.7 $ Cost leadership M&A actions E 2020E - Actual FX (afx) Sales: flat Operating profit: $ M 2016 expectations* Constant FX (cfx) Sales: up low single Operating profit: $ M *Adjusted for restructuring and other significant items. See appendix for reconciliation. See appendix for sales and operating profit at actual FX (afx) 11

41 Dave Gitlin President UTC Aerospace Systems March 10, 2016

42 UTC Aerospace Systems Industry-leading portfolio Well-positioned on new platforms Deep customer relationships Proven track record to drive continued cost reduction Strategies in place position us for long-term growth 90 product lines supporting 1,500 operators on 70,000 aircraft 1

43 Sales Drivers CAGR 2016E 2020E Military Comm OEM Driver Large commercial Regional Bizjet / rotorcraft Trend Mid to high single digit Commercial aftermarket Commercial OEM Comm AM Driver RPMs Fuel prices / airline profitability New program EIS Trend Mid single digit Surplus availability 2015 sales: $14.3B* Military Driver Military OEM platforms ISR Trend Low single digit Defense spending 2 *Adjusted for restructuring and other significant items. See appendix for reconciliation.

44 Program Execution A B777X A330neo A321neo 737MAX C919 MC-21 CSeries E2 MRJ G500/600 KC-390 KC-46A CH-53K $240B+ expected life of program sales 3

45 New Program Introduction OEM Mix Cost Reduction Target Large commercial / regional aircraft sales ($ millions) 500 New programs Legacy programs E 2017E 2018E 2016E 2017E 2018E 4

46 Cost Reduction Productivity Footprint Supply Chain Legacy program New program UTAS COE UTAS supplier Nacelle shipset cost (indexed) Wroclaw, Poland Poland Center of excellence model Localized supply base Year Low-cost make Low-cost buy 5

47 Commercial Aftermarket Sustained Growth Key Strategies Spare parts Repair Provisioning CAGR 4-6% Expand surplus capability $4.4B 5-7% Increase operator long-term agreements 3-5% Grow partnerships with independent service providers (ISPs) 2-4% Provide more comprehensive offerings E 2017E 2018E 6

48 Growth Platforms Technology Advancements Military / Retrofits Advanced nacelle Next-generation ejection seats $240B+ expected life of program sales Variable-speed constant frequency generator Blended night vision goggles 7

49 Growth Hamilton Standard Hamilton Sundstrand UTC Aerospace Systems $1B sales $6B sales $15B sales Components Systems Integrated systems B767 2 systems B777 6 systems B systems 15 product lines 40 product lines 90 product lines What s next: Continued focus on expanding aerospace systems offerings 8

50 UTC Aerospace Systems 2020 Outlook 4.5E-09 4E E-09 Operating profit* ($B) Sales* ($B) E 20E CAGR % Key Strategies Industry-leading portfolio 3E E-09 2E E-09 $13.3 $2.1 $14.2 $14.3 $2.4 $ % Well-positioned on new platforms Deep customer relationships 1E-09 5E E 2020E Proven track record to drive continued cost reduction Strategies in place position us for long-term growth 2016 expectations* Sales: up low single digit Operating profit: ($50) 0M 9 *Adjusted for restructuring and other significant items. See appendix for reconciliation.

51 Bob Leduc President Pratt & Whitney March 10, 2016

52 Pratt & Whitney Positioned on leading platforms High quality and diverse backlog Industry leading technologies Extensive aftermarket services network 1

53 Accomplishments in Last 15 Months Large Commercial Engines Pratt & Whitney Canada Military Engines Photo: Airbus Photo: Bombardier Photo: Gulfstream First A320neo deliveries to IndiGo and Lufthansa C Series certified Gulfstream G500 first flight KC-46A Tanker first refueling flight Photo: Dassault Photo: Lockheed Martin E-Jets E2 roll out ceremony MRJ first flight Dassault Falcon 8X first flight F-35B Initial Operational Capability 2

54 High Quality and Diverse Backlog GTF Engine Orders Orders by Platform (number of Geared Turbofan TM engines * ) Cumulative Customer Launches ~7,000 New customers Existing customers 59 MC-21 MRJ CSeries A320neo 32 E-Jets E YTD ~7, E 2017E 2018E 3 *Announced and unannounced firm engine orders, including options

55 Commercial Engines GTF V2500 All other Large Engine Shipments Cost Reduction Installed Base (number of engines) E CAGR ~19% ~1,200 (PW1100G-JM engine cost) Objective Actual engine cost/ engine 25,000 20,000 (number of large commercial engines) 15,000 GTF 558 ~650 10,000 GP % V % learning curve 5,000 P&W legacy E 2020E Engines E 2025E 2030E 4

56 Pratt & Whitney Canada Business Aviation Turboprop / General Aviation Civil Helicopter Auxiliary Power Unit Photo: ATR Photo: Airbus Growth platforms Cessna Latitude PW300 ATR PW100 H135 PW206 A320ceo family APS3200 Photo: Gulfstream Photo: Air Tractor Photo: Boeing Gulfstream G500/G600 AT502XP AW169 B787 PW800 PT6A PW210 APS5000 Position #2 #1 #1 #2 5

57 Pratt & Whitney Canada Engine Shipments Installed Engine Base APU 80,000 Helicopter Business jet Regional General aviation ~3, E CAGR ~4% 70,000 60,000 3,005 ~2,850 50,000 APU Helicopter 40,000 30,000 Business jet 20,000 Regional 10,000 General aviation E 2020E E 2030E 6

58 Pratt & Whitney Military Engines Tactical Mobility / Tanker Auxiliary Power Unit Future Opportunities Photo: Lockheed Martin Photo: Airbus F-35 Joint Strike Fighter KC-46A Pegasus A400M Atlas Long Range Strike Bomber Photo: Embraer F-22 Raptor KC-390 V-22 Osprey Helicopters Photo: Sikorsky F-15 / F-16 C-17 Globemaster CH-53K King Stallion UAV 7

59 Pratt & Whitney Military Engines Engine Shipments (engines) Cost Reduction (F135 engine cost) Installed Base (engines*) 10,000 F100 Tanker F117 F E CAGR ~17% Objective Actual engine cost / engine 8,000 ~ % Mobility / tanker 6,000 Legacy bomber / special mission / trainers 96 ~100 49% 4,000 89% learning curve 2,000 Tactical E 2020E Engines E *Excludes 8,800 APUs growing to 15,500 in

60 Aftermarket Growing Engine Services Shop Visits (number of shop visits) 2016E-2020E CAGR ~3% Service Model (commercial fleet coverage) 80% Global Service Network Aftermarket service centers Large commercial engine Pratt & Whitney Canada 75% 8,071 ~8,400 APU 60% Regional 40% GA Helo Biz GTF GP7000 V2500 Legacy E 2020E PW4000 V2500 GP7000 GTF new Average engine age (years) ~12,400 Operators ~70,000 Engines in service P&W PROPRIETARY This document/page does not contain any export regulated technical data 9

61 Operations Delivery Assurance JSF Large Engine Shipments (2016E) Part Buffer (average % availability) Supplier Gold (% of spend in program) Legacy V2500 GTF Suppliers in program ~425 ~220 ~185 ~190 ~190 Strategic buffer in place Gold 23% 21% 21% 99% Building a buffer 1% Performing 34% 39% 54% Progressing 17% 18% ~1,500 GTF engine part numbers Underperforming 26% 22% 15% 10% Q1 Q2 Q3 Q E P&W PROPRIETARY This document/page does not contain any export regulated technical data 10

62 Pratt & Whitney 2020 Outlook ($ billions) Sales* Operating profit* E - 20E CAGR 10+% Key Strategies Successful IOC / service entries Industrial plan execution $14.5 $14.5 $14.2 $2.1 $1.9 $ % Manufacturing cost reduction E&D stabilization Aftermarket growth E 2020E expectations* Actual FX (afx) Constant FX (cfx) Sales: up low single Sales: up low single Operating profit: ($50) 0M Operating profit: ($125) (75M) 11 *Adjusted for restructuring and other significant items. See appendix for reconciliation.

63 Appendix

64 2016 Segment Outlook Organic sales change Reported sales change Operating profit change* (ex FX) Operating profit change* Climate, Controls & Security up low single digit flat $ M $ M Otis up low single digit down low single digit ($125) (75M) ($250) (200M) Pratt & Whitney up low single digit up low single digit ($125) (75M) ($50) 0M Aerospace Systems up low single digit up low single digit ($50) 0M ($50) 0M *Excludes *Adjusted restructuring for restructuring & certain and other other significant items items 1

65 2016 Otis Sales Expectations Outlook (% organic sales change) New equipment flat Americas ~ 10% Asia down low single digit Americas up high single digit EMEA Asia* up low single digit down high single digit EMEA up slightly Service up low single digit Americas up mid single digit up low single digit EMEA flat Asia up high single digit * China down ~10%

66 Otis 2016 Expectations ($ millions) Sales Profit Drivers Organic up low single digit Volume Actual FX down low single digit Net productivity / restructuring + ~125 Operating Profit Pension + ~25 Price / mix ~250 Constant FX Actual FX ($125) (75M) ($250) (200M) R&D / other ~50 Constant FX ($125) (75M) FX ~ 125M Actual FX ($250) (200M) Adjusted for restructuring and other significant items

67 CCS 2016 Expectations ($ millions) Sales Profit Drivers Organic up low single digit Organic volume / mix Actual FX flat Net productivity / restructuring + ~75 Operating Profit Commodities / price + ~50 Pension + ~50 Constant FX Actual FX + $ M + $ M Non-recurring / other ~50 Constant FX + $ M FX ~ 75M Actual FX + $ M Adjusted for restructuring and other significant items

68 Pratt & Whitney 2016 Expectations ($ millions) Sales up low-single digit Operating Profit down $0 50M Pension + ~175 Commercial OE* up low single digits E&D Commercial AM* flat Commercial aftermarket Commercial OE mix ~225 Military OE up high single digits Military 2016 expectations (@ constant FX) ~75 ($125) (75M) Military AM up double digits FX + 75M 2016 expectations ($50) 0M Adjusted for restructuring and other significant items. *Includes large commercial and P&W Canada

69 Aerospace Systems 2016 Expectations ($ millions) Sales up low-single digit Operating Profit down $0 50M Commercial OE up mid single digit Volume / mix Commercial AM up low single digit Product cost reduction contract / license agreements ~150 Military OE down low single digit R&D / cost actions + ~125 Military AM down high single digit Pension + ~125 Adjusted for restructuring and other significant items.

70 2015 Full Year Sales Change Total Organic FX Net Acquisitions Other Otis (8%) 1% (9%) 0% 0% CCS (1%) 3% (6%) 2% 0% Pratt & Whitney (3%) (1%) (1%) 0% (1%) Aerospace Systems (1%) 3% (2%) (1%) (1%) Total UTC* (3%) 1% (4%) 1% (1%) Organic sales growth represents the total reported consolidated net sales increase/(decrease) within the Corporation s ongoing businesses less the impact of foreign currency translation, and acquisitions and divestitures completed in the preceding twelve months and significant items of a non-recurring and/or nonoperational nature. Organic growth includes the net impact of transactional foreign exchange hedging. *Reflects consolidated net sales

71 Free Cash Flow Reconciliation Net income attributable to common shareowners from continuing operations FY 15 FY14 3,996 6,066 ($ millions) Depreciation & amortization 1,863 1,820 Change in working capital (847) (729) Other 1,686 (163) Cash flow from operations 6,698 6,994 Capital expenditures (1,652) (1,594) Free cash flow 5,046 5,400 Free cash flow as a % of net income attributable to common shareowners from continuing operations 126% 89% Free cash flow represents cash flow from operations less capital expenditures. Management believes free cash flow provides a relevant measure of liquidity and a useful basis for assessing the Corporation s ability to fund its activities, including the financing of acquisitions, debt service, repurchases of the Corporation s Common Stock and distribution of earnings to shareholders. Others that use the term free cash flow may calculate it differently. The reconciliation of net cash flow provided by operating activities prepared in accordance with Generally Accepted Accounting Principles to free cash flow is above.

72 UTC Operating Results Reconciliation ($ millions) Segment Sales 1 51,932 44,586 46,004 48,772 51,443 57,141 58,528 56,863 Other significant items of a non-recurring/non-operational nature Segment sales - adjusted 51,932 44,586 46,004 48,772 51,443 57,141 58,528 57,215 Segment operating profit 7,230 6,074 6,890 7,653 7,470 9,074 9,777 8,023 Other significant items of a non-recurring/non-operational nature 2 (129) (136) 33 (84) (157) (223) (31) 1,182 Restructuring Segment operating profit - adjusted 7,428 6,656 7,282 7,831 7,831 9,282 10,095 9,580 Segment operating margin 13.9% 13.6% 15.0% 15.7% 14.5% 15.9% 16.7% 14.1% Segment operating margin - adjusted 14.3% 14.9% 15.8% 16.1% 15.2% 16.2% 17.2% 16.7% 1 Segment sales for periods prior to 2009 reflect the retrospective adoption of Accounting for Collaborative Arrangements. 2 Details of other significant items of a non-recurring/non-operational nature See Segment operating results reconciliation slides for additional information.

73 Otis Operating Results Reconciliation ($ millions) Segment Sales 12,884 11,723 11,579 12,437 12,056 12,484 12,982 11,980 Other significant items of a non-recurring/non-operational nature Segment sales - adjusted 12,884 11,723 11,579 12,437 12,056 12,484 12,982 11,980 Segment operating profit 2,477 2,447 2,575 2,815 2,512 2,590 2,640 2,338 Other significant items of a non-recurring/non-operational nature 1 - (52) Restructuring Segment operating profit - adjusted 2,498 2,553 2,658 2,888 2,676 2,678 2,727 2,389 Segment operating margin 19.2% 20.9% 22.2% 22.6% 20.8% 20.7% 20.3% 19.5% Segment operating margin - adjusted 19.4% 21.8% 23.0% 23.2% 22.2% 21.5% 21.0% 19.9% 1 Details of other significant items of a non-recurring/non-operational nature 2009: Approximately $52 million non-cash, non-taxable gain recognized on the remeasurement to fair value of a previously held equity interest in a joint venture resulting from the purchase of a controlling interest.

74 CCS Operating Results Reconciliation Segment Sales 21,263 16,838 17,876 18,864 17,090 16,809 16,823 16,707 Other significant items of a non-recurring/non-operational nature Segment sales - adjusted 21,263 16,838 17,876 18,864 17,090 16,809 16,823 16,707 ($ millions) Segment operating profit 1,858 1,233 1,776 2,212 2,425 2,590 2,782 2,936 Other significant items of a non-recurring/non-operational nature 1 (67) (84) 5 (43) (157) (55) (30) (121) Restructuring Segment operating profit - adjusted 1,994 1,471 1,934 2,295 2,411 2,632 2,868 2,923 Segment operating margin 8.7% 7.3% 9.9% 11.7% 14.2% 15.4% 16.5% 17.6% Segment operating margin - adjusted 9.4% 8.7% 10.8% 12.2% 14.1% 15.7% 17.0% 17.5% 1 Details of other significant items of a non-recurring/non-operational nature 2008: Approximately $67 million gain from the contribution of a business into a new venture operating in the Middle East and the Commonwealth of Independent States. 2009: Approximately $57 million gain recognized from the contribution of the majority of Carrier s U.S. residential sales and distribution business into a new venture formed with Watsco, Inc. and approximately $27 million of gains related to divesiture activity. 2010: Approximately $47 million net charge resulting from dispositions associated with Carrier s ongoing portfolio transformation. Included in this net charge is an approximately $58 million asset impairment charge associated with the expected disposition of a business, partially offset by an approximately $11 million gain on the sale of another business. Approximately $42 million net gain resulting from dispositions associated with Carrier s ongoing portfolio transformation. 2011: Approximately $28 million net gain resulting from dispositions associated with Carrier s ongoing portfolio transformation. Approximately $81 million net gain resulting from Carrier s ongoing portfolio transformation primarily as a result of the contribution by Carrier's heating, air-conditioning and ventilation operations in Brazil, Argentina and Chile into a new joint venture controlled by Midea Group of China. Approximately $20 million other-than-temporary impairment charge on an equity investment. Approximately $46 million other-than-temporary impairment charge on an equity investment. 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.

75 Pratt & Whitney Operating Results Reconciliation Segment Sales 1 13,053 11,584 12,150 12,711 13,964 14,501 14,508 14,082 Other significant items of a non-recurring/non-operational nature Segment sales - adjusted 13,053 11,584 12,150 12,711 13,964 14,501 14,508 14,224 ($ millions) Segment operating profit 1 2,047 1,735 1,885 1,867 1,589 1,876 2, Other significant items of a non-recurring/non-operational nature 2 (37) - - (41) - (168) (1) 947 Restructuring Segment operating profit - adjusted 2,104 1,916 1,984 1,878 1,685 1,862 2,063 1,913 Segment operating margin 15.7% 15.0% 15.5% 14.7% 11.4% 12.9% 13.8% 6.1% Segment operating margin - adjusted 16.1% 16.5% 16.3% 14.8% 12.1% 12.8% 14.2% 13.4% 1 Segment sales for periods prior to 2009 reflect the retrospective adoption of Accounting for Collaborative Arrangements. 2 Details of other significant items of a non-recurring/non-operational nature 2008: Approximately $37 million non-cash gain on a partial sale of an investment. 2011: Approximately $41 million gain recognized from the sale of an equity investment. 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.

76 UTAS Operating Results Reconciliation ($ millions) Segment Sales 4,732 4,441 4,399 4,760 8,334 13,347 14,215 14,094 Other significant items of a non-recurring/non-operational nature Segment sales - adjusted 4,732 4,441 4,399 4,760 8,334 13,347 14,215 14,304 Segment operating profit ,018 2,355 1,888 Other significant items of a non-recurring/non-operational nature 1 (25) Restructuring Segment operating profit - adjusted ,059 2,110 2,437 2,355 Segment operating margin 17.9% 14.8% 14.9% 15.9% 11.3% 15.1% 16.6% 13.4% Segment operating margin - adjusted 17.6% 16.1% 16.0% 16.2% 12.7% 15.8% 17.1% 16.5% 1 Details of other significant items of a non-recurring/non-operational nature 2008: Approximately $25 million gain on the completion of a divestiture of a business. 2010: Approximately $28 million of asset impairment charges related primarily to the expected disposition of an aerospace business as part of Hamilton Sundstrand s ongoing low cost sourcing initiatives. 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.

77 2015 Adjusted EPS United Technologies Corporation Reconciliation of Diluted Earnings per Share to Adjusted Diluted Earnings per Share (dollars in millions, except share amounts) Diluted earnings per share--net income from continuing operations attributable to common shareowners $ 1.51 $ 1.64 $ 1.61 $ (0.30 ) $ 4.53 Net income from continuing attributable to common shareowners $ 1,364 $ 1,461 $ 1,427 $ (256 ) $ 3,996 Adjustments to net income from continuing operations attributable to common shareowners: Restructuring costs Gain on fair value adjustment on acquisition of controlling interest in a joint venture 93 (126 ) (126 ) Acquisition and integration costs related to current period acquisitions Charge related to a research and development support agreement with Canadian government agencies Charge resulting from customer contract negotiations Charge for impairment of assets held for sale Charge for pending and future asbestos-related claims Charge (gain) from agreement with a state taxing authority for monetization of tax credits Income tax expense (benefit) on restructuring costs and significant nonrecurring and non-operational items (30 ) (15 ) (21 ) (551 ) (617 ) Significant non-recurring and non-operational charges (gains) recorded within income tax expense Total adjustments to net income from continuing operations attributable to common shareowners (63 ) ,554 1,567 Adjusted net income from continuing operations attributable to common shareowners $ 1,301 $ 1,485 $ 1,479 $ 1,298 $ 5,563 Less: Impact of total adjustments on diluted earnings per share $ 0.07 $ (0.03 ) $ (0.06 ) $ (1.83 ) $ (1.77 ) Adjusted diluted earnings per share--net income from continuing operations attributable to common shareowners Q Q Q Q Full Year 2015 $ 1.44 $ 1.67 $ 1.67 $ 1.53 $ 6.30

78 Segment Data SEGMENT DATA - Reported ($ Millions except per share amounts) Q1 Q2 Q3 Q YTD Q1 Q2 Q3 Q YTD Otis Net Sales 2,745 3,098 3,043 3,094 11,980 2,955 3,365 3,326 3,336 12,982 Operating Profit (a) , ,640 Operating Profit % 19.2% 20.2% 21.1% 17.5% 19.5% 19.3% 20.6% 21.1% 20.2% 20.3% UTC Climate, Controls & Security Net Sales 3,852 4,454 4,279 4,122 16,707 3,851 4,429 4,351 4,192 16,823 Operating Profit (a), (i), (q), (t) , ,782 Operating Profit % 18.9% 18.5% 18.0% 14.9% 17.6% 13.9% 18.4% 18.5% 14.9% 16.5% Pratt & Whitney Net Sales (v) 3,332 3,677 3,234 3,839 14,082 3,329 3,592 3,564 4,023 14,508 Operating Profit (a), (b), (c), (j), (u), (v) (464) ,000 Operating Profit % 12.6% 13.2% 13.0% -12.1% 6.1% 11.7% 12.0% 17.8% 13.6% 13.8% UTC Aerospace Systems Net Sales (w) 3,548 3,632 3,457 3,457 14,094 3,450 3,636 3,535 3,594 14,215 Operating Profit (a), (w), (x) , ,355 Operating Profit % 16.0% 16.0% 16.5% 4.8% 13.4% 17.1% 16.6% 16.3% 16.4% 16.6% Total Segments Net Sales 13,477 14,861 14,013 14,512 56,863 13,585 15,022 14,776 15,145 58,528 Operating Profit 2,244 2,517 2, ,023 2,085 2,542 2,718 2,432 9,777 Operating Profit % 16.7% 16.9% 17.2% 5.9% 14.1% 15.3% 16.9% 18.4% 16.1% 16.7% Corporate, Eliminations, and Other Net Sales: Other (157) (171) (225) (212) (765) (146) (154) (163) (165) (628) Operating Profit: General corporate expenses (110) (120) (101) (133) (464) (112) (119) (124) (133) (488) Eliminations and other (a), (f), (y), (z) (1) (333) (268) (19) 304 Consolidated Net Sales 13,320 14,690 13,788 14,300 56,098 13,439 14,868 14,613 14,980 57,900 Operating Profit 2,182 2,415 2, ,291 2,021 2,680 2,612 2,280 9,593 Operating Profit % 16.4% 16.4% 16.7% 2.7% 13.0% 15.0% 18.0% 17.9% 15.2% 16.6% Interest expense, net (g), (k), (m), (n) (217) (217) (184) (206) (824) (224) (206) (185) (266) (881) Income from continuing operations before income taxes 1,965 2,198 2, ,467 1,797 2,474 2,427 2,014 8,712 Income tax expense (h), (l), (o), (p), (aa), (bb) (530) (626) (592) (363) (2,111) (549) (486) (575) (634) (2,244) Income from continuing operations 1,435 1,572 1,526 (177) 4,356 1,248 1,988 1,852 1,380 6,468 Income (loss) from discontinued operations (d), (e), (r), (s) (65) 3,532 3, (198) Net income 1,498 1,652 1,461 3,355 7,966 1,306 1,790 1,952 1,575 6,623 Less: Noncontrolling interest in subsidiaries' earnings (72) (110) (98) (78) (358) (93) (110) (98) (102) (403) Net income attributable to common shareowners 1,426 1,542 1,363 3,277 7,608 1,213 1,680 1,854 1,473 6,220 Net income attributable to common shareowners: Income from continuing operations 1,364 1,461 1,427 (256) 3,996 1,155 1,878 1,755 1,278 6,066 Income (loss) from discontinued operations (64) 3,533 3, (198) Continuing Operations Q1 Q2 Q3 Q YTD Q1 Q2 Q3 Q YTD Earnings per share - basic 1.53 $ 1.66 $ 1.63 $ (0.30) Earnings per share - diluted $ (0.30) Discontinued Operations Earnings (loss) per share - basic $ 0.07 $ 0.09 $ (0.07) $ (0.22) Earnings (loss) per share - diluted (0.07) (0.22) Weighted average number of shares outstanding: (In Millions) Basic shares Diluted shares Q1 Q2 Q3 Q4 Total YTD Q1 Q2 Q3 Q4 Total YTD Effective Tax Rate - continuing ops 27.0% 28.5% 28.0% 194.8% 32.6% 30.6% 19.6% 23.7% 31.5% 25.8%

79 Segment Data Notes The earnings release and conference-call discussion adjust 2015 and 2014 segment results for restructuring costs as well as significant items of a non-recurring and/or non-operational nature. The following items are included in current and prior year results: (a) Restructuring costs as included in 2015 and 2014 results: Restructuring Costs Restructuring Costs Q1 Q2 Q3 Q4 Total YTD Q1 Q2 Q3 Q4 Total YTD Operating Profit: Otis UTC Climate, Controls & Security Pratt & Whitney UTC Aerospace Systems Total Segments General corporate expenses Eliminations and other Total within continuing operations Total within discontinued operations (3) 14 Total UTC (b) Q2 2014: Approximately $60 million charge to adjust the fair value of a Pratt & Whitney joint venture investment. (c) Q2 2014: Approximately $22 million charge for impairment of assets related to a joint venture. (d) Q2 2014: A cumulative adjustment to record $830 million in sales and $438 million in losses based upon the change in estimate required for the contractual amendments signed with the Canadian Government on the Maritime Helicopter program. (e) Q2 1014: Approximately $28 million charge for the impairment of a Sikorsky joint venture investment. (f) Q2 2014: Approximately $220 million gain on an agreement with a state taxing authority for the monetization of tax credits. (g) Q2 2014: Approximately $21 million of favorable pre-tax interest adjustments, primarily related to the conclusion of the IRS's examination of the Company's 2009 and 2010 tax years. (h) Q2 2014: Approximately $253 million of favorable income tax adjustments related to the conclusion of the IRS's examination of the Company's 2009 and 2010 tax years, as well as the settlement of state income taxes related to the disposition of the Hamilton Sundstrand Industrials (i) Q3 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. (j) Q3 2014: Approximately $83 million net gain, primarily as a result of fair value adjustments related to a business acquisition. (k) Q3 2014: Approximately $23 million of favorable pre-tax interest adjustments, primarily related to the resolution of disputes with the Appeals Division of the IRS for the Company's tax years. (l) Q3 2014: Approximately $118 million of favorable income tax adjustments, primarily related to the resolution of disputes with the Appeals Division of the IRS for the Company's tax years. (m) Q4 2014: Approximately $143 million of unfavorable pre-tax interest accruals related to the ongoing dispute with German tax authorities concerning a 1998 reorganization of the corporate structure of Otis operations in Germany. (n) Q4 2014: Approximately $88 million of favorable pre-tax interest adjustments, primarily related to conclusion of litigation and the resolution of disputes with the Appeals Division of the IRS regarding Goodrich Corporation s 2000 to 2010 tax years. (o) Q4 2014: Approximately $267 million of unfavorable income tax accruals related to the ongoing dispute with German tax authorities concerning a 1998 reorganization of the corporate structure of Otis operations in Germany. (p) Q4 2014: Approximately $180 million favorable tax adjustment primarily associated with management s decision to repatriate additional high taxed dividends in (q) 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. (r) Q2 2015: Approximately $28 million of transaction and separation costs related to the planned sale or spin-off of Sikorsky. (s) 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. (t) Q4 2015: Approximately $5 million charge related to UTC Climate, Controls & Security acquisitions and integration costs. (u) Q4 2015: Approximately $867 million charge related to a Pratt & Whitney research and development support agreements with Canadian government agencies. (v) Q4 2015: Approximately $142 million to record in sales and $80 million in losses from Pratt & Whitney customer contract renegotiations. (w) Q4 2015: Approximately $210 million to record in sales and $295 million in losses from UTC Aerospace Systems customer contract renegotiations. (x) Q4 2015: Approximately $61 million charge to UTC Aerospace Systems for impairment of assets held for sale. (y) Q4 2015: Approximately $237 million charge for pending and future asbestos-related claims. (z) Q4 2015: Approximately $27 million charge from agreement with a state taxing authority for monetization of tax credits. (aa) Q4 2015: Approximately $274 million of unfavorable income tax accruals related to the repatriation of foreign earnings. (bb) Q4 2015: Approximately $69 million of unfavorable income tax accruals related to a change in tax laws.

80 Climate, Controls & Security Financials CCS Sales & Operating Profit afx* Op afx cfx** Op cfx *afx is at actual FX **cfx is at constant FX

81 Otis Financials Otis Sales & Operating Profit afx* Op afx cfx** Op cfx *afx is at actual FX **cfx is at constant FX

82