UTC Investor and Analyst Meeting · Transport refrigeration ... Connected Home Intelligent...

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




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




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)


Adjusted Operating Profit* Drivers


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)


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


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


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


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


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


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


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


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


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


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


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


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


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 - - - - -



Other significant items of a non-recurring/non-operational nature - - - - -

Restructuring 164 88 87 51 59




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 - - - - -



Other significant items of a non-recurring/non-operational nature 1 (157) (55) (30) (121) 32






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 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






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 operating profit 944 2,018 2,355 1,888 2,298

Other significant items of a non-recurring/non-operational nature 1 - - - 356 -






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.

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