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| 8-K - 8-K - Otis Worldwide Corp | otis-20210201.htm |
Exhibit 99
OTIS REPORTS FOURTH QUARTER AND FULL YEAR 2020 RESULTS
Delivers strong fourth quarter results with organic sales growth; announces 2021 outlook
•4Q Net sales up 4.2% with organic growth of 1.3%; FY net sales down 2.8% with organic down 2.1%
•4Q GAAP operating profit up $4 million with 40 bps of margin contraction; FY down $175 million with 100 bps of margin contraction
•4Q Adjusted operating profit up $36 million with 50 bps of margin expansion; FY up $47 million with 70 bps of margin expansion
•4Q New Equipment orders down 3.5%; FY down 2.7%; backlog up 6%, 2% at constant currency
•FY GAAP cash flow from operations of $1.5 billion; free cash flow of $1.3 billion
•Announcing 2021 outlook* with organic sales up 2 to 4%, adjusted earnings per share of $2.67 to $2.77 and free cash flow conversion ~120%
FARMINGTON, Conn., February 1, 2021 – Otis Worldwide Corporation (NYSE:OTIS) reported fourth quarter 2020 net sales of $3.5 billion with 1.3% organic growth. GAAP diluted earnings per share (EPS) increased 16.0% to $0.58 and adjusted diluted EPS increased 40.4% to $0.66. Full year net sales of $12.8 billion decreased 2.1% organically with GAAP diluted EPS decreasing 19.4% to $2.08 and adjusted diluted EPS increasing 12.5% to $2.52.
"Otis delivered a strong fourth quarter, ending a solid first year as an independent company. We returned to growth in the quarter while continuing to grow share, expand adjusted margin and generate robust cash flow demonstrating the dedication of our colleagues around the world to meet our commitments, even in trying economic times," said President and CEO Judy Marks. "By combining this positive momentum with improvements in our end markets, we expect to deliver 2% to 4% organic sales growth with high single-digit adjusted EPS growth and free cash flow conversion of about 120% in 2021*. This outlook reflects the resiliency of the business model, strength of our long-term strategy and a commitment to create value for our customers and shareholders."
Key Figures
| ($ millions, except per share amounts) | Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Y/Y | Y/Y (CFX) | 2020 | 2019 | Y/Y | Y/Y (CFX) | ||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 3,493 | $ | 3,353 | 4.2 | % | 1.6 | % | $ | 12,756 | $ | 13,118 | (2.8) | % | (2.4) | % | |||||||||||||||||||||||||||||||
| Organic sales | 1.3 | % | (2.1) | % | |||||||||||||||||||||||||||||||||||||||||||
| GAAP | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating profit | $ | 440 | $ | 436 | $ | 4 | $ | 1,639 | $ | 1,814 | $ | (175) | |||||||||||||||||||||||||||||||||||
| Operating profit margin | 12.6 | % | 13.0 | % | (40) bps | 12.8 | % | 13.8 | % | (100) bps | |||||||||||||||||||||||||||||||||||||
| Net income | $ | 251 | $ | 218 | 15.1 | % | $ | 906 | $ | 1,116 | (18.8) | % | |||||||||||||||||||||||||||||||||||
| Earnings per share | $ | 0.58 | $ | 0.50 | 16.0 | % | $ | 2.08 | $ | 2.58 | (19.4) | % | |||||||||||||||||||||||||||||||||||
| Adjusted non-GAAP comparison | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating profit | $ | 509 | $ | 473 | $ | 36 | $ | 19 | $ | 1,919 | $ | 1,872 | $ | 47 | $ | 52 | |||||||||||||||||||||||||||||||
| Operating profit margin | 14.6 | % | 14.1 | % | 50 bps | 30 bps | 15.0 | % | 14.3 | % | 70 bps | 70 bps | |||||||||||||||||||||||||||||||||||
| Net income | $ | 288 | $ | 205 | 40.5 | % | $ | 1,096 | $ | 971 | 12.9 | % | |||||||||||||||||||||||||||||||||||
| Earnings per share | $ | 0.66 | $ | 0.47 | 40.4 | % | $ | 2.52 | $ | 2.24 | 12.5 | % | |||||||||||||||||||||||||||||||||||
Fourth quarter net sales of $3.5 billion increased 4.2% with a 1.3% increase in organic sales. Organic sales increased 4.8% in the New Equipment segment and decreased 1.4% in the Service segment.
Fourth quarter GAAP operating profit of $440 million increased $4 million from the prior year. Adjusted operating profit of $509 million increased $36 million and $19 million at constant currency. Adjusted operating profit growth at constant currency was primarily driven by segment profit growth of $15 million. In addition, GAAP operating profit growth was impacted by higher restructuring and incremental public company standalone costs, partially offset by net non-recurring items. GAAP operating profit margin contracted 40 basis points to 12.6% and adjusted operating profit margin expanded 50 basis points to 14.6%, with margin expansion in both segments.
GAAP EPS of $0.58 increased $0.08 and adjusted EPS of $0.66 increased $0.19, driven by operating profit growth and a lower effective tax rate. In addition, GAAP EPS growth was partially offset by higher interest expense.
Full year net sales declined 2.8% versus the prior year, with a 2.1% decline in organic sales. GAAP operating profit decreased $175 million while adjusted operating profit increased $47 million and $52 million at constant currency. Adjusted operating profit growth at constant currency was driven by strong performance in the Service segment, lower corporate costs and favorable transactional foreign exchange, partially offset by decline in the New Equipment segment. GAAP operating profit was also impacted by higher non-recurring separation costs, incremental public company standalone costs and non-recurring asset charges. GAAP operating profit margin contracted 100 basis points to 12.8% and adjusted operating profit margin expanded 70 basis points to 15.0%.
New Equipment Segment
| Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ millions) | 2020 | 2019 | Y/Y | Y/Y (CFX) | 2020 | 2019 | Y/Y | Y/Y (CFX) | |||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 1,531 | $ | 1,427 | 7.3 | % | 5.0 | % | $ | 5,371 | $ | 5,648 | (4.9) | % | (4.1) | % | |||||||||||||||||||||||||||||||
| Organic sales | 4.8 | % | (4.0) | % | |||||||||||||||||||||||||||||||||||||||||||
| GAAP | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating profit | $ | 80 | $ | 81 | $ | (1) | $ | 318 | $ | 393 | $ | (75) | |||||||||||||||||||||||||||||||||||
| Operating profit margin | 5.2 | % | 5.7 | % | (50) bps | 5.9 | % | 7.0 | % | (110) bps | |||||||||||||||||||||||||||||||||||||
| Adjusted non-GAAP comparison | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating profit | $ | 90 | $ | 82 | $ | 8 | $ | 7 | $ | 348 | $ | 402 | $ | (54) | $ | (45) | |||||||||||||||||||||||||||||||
| Operating profit margin | 5.9 | % | 5.7 | % | 20 bps | 20 bps | 6.5 | % | 7.1 | % | (60) bps | (50) bps | |||||||||||||||||||||||||||||||||||
In the fourth quarter, net sales of $1.5 billion increased 7.3% with a 4.8% increase in organic sales. Organic sales were up 17.7% and 5.4% in the Americas and EMEA, respectively, partially offset by a 3.8% decline in Asia.
GAAP operating profit decreased $1 million to $80 million. Adjusted operating profit increased $8 million to $90 million as higher volume and material productivity were partially offset by unfavorable rate driven by incremental channel investments in China, field inefficiencies, price/mix and higher bad debt expense. GAAP operating profit was also impacted by incremental public company standalone costs and higher restructuring
costs. GAAP operating profit margin contracted 50 basis points and adjusted operating profit margin expanded 20 basis points.
New Equipment orders were down 3.5% at constant currency as decline in the Americas was partially offset by growth in EMEA and Asia. Orders in China were strong, up approximately 10%. New equipment backlog at constant currency increased 2% versus prior year.
Full year net sales declined 4.9% with a 4.0% organic decline. GAAP operating profit declined $75 million and adjusted operating profit declined $54 million as strong material productivity and cost containment actions were more than offset by the impact of lower volume and unfavorable rate from under-absorption, field inefficiencies, price/mix and higher bad debt expense. GAAP operating profit was also impacted by incremental public company standalone costs and higher restructuring costs. GAAP and adjusted operating profit margin contracted 110 basis points and 60 basis points, respectively.
Service Segment
| Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ millions) | 2020 | 2019 | Y/Y | Y/Y (CFX) | 2020 | 2019 | Y/Y | Y/Y (CFX) | |||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 1,962 | $ | 1,926 | 1.9 | % | (1.0) | % | $ | 7,385 | $ | 7,470 | (1.1) | % | (1.0) | % | |||||||||||||||||||||||||||||||
| Organic sales | (1.4) | % | (0.7) | % | |||||||||||||||||||||||||||||||||||||||||||
| GAAP | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating profit | $ | 421 | $ | 422 | $ | (1) | $ | 1,611 | $ | 1,603 | $ | 8 | |||||||||||||||||||||||||||||||||||
| Operating profit margin | 21.5 | % | 21.9 | % | (40) bps | 21.8 | % | 21.5 | % | 30 bps | |||||||||||||||||||||||||||||||||||||
| Adjusted non-GAAP comparison | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating profit | $ | 442 | $ | 419 | $ | 23 | $ | 8 | $ | 1,658 | $ | 1,599 | $ | 59 | $ | 55 | |||||||||||||||||||||||||||||||
| Operating profit margin | 22.5 | % | 21.8 | % | 70 bps | 60 bps | 22.5 | % | 21.4 | % | 110 bps | 100 bps | |||||||||||||||||||||||||||||||||||
In the fourth quarter, net sales of $2.0 billion increased 1.9%, with a 1.4% decline in organic sales. Organic maintenance and repair sales declined 1.1% and organic modernization sales declined 2.5%.
GAAP operating profit decreased $1 million to $421 million. Adjusted operating profit of $442 million increased $23 million and $8 million at constant currency as the benefit from productivity was partially offset by the impact from lower volume. GAAP operating profit was also impacted by incremental public company standalone costs and higher restructuring costs. GAAP operating profit margin contracted 40 basis points and adjusted operating profit margin expanded 70 basis points.
Full year net sales declined 1.1% with a 0.7% organic decline. GAAP operating profit increased $8 million and adjusted operating profit increased $59 million as the benefit from productivity and cost containment actions more than offset the impact from lower volume and higher bad debt expense. GAAP and adjusted operating profit margin expanded 30 basis points and 110 basis points, respectively.
Cash flow
| Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| ($ millions) | 2020 | 2019 | Y/Y | 2020 | 2019 | Y/Y | |||||||||||||||||||||||||||||
| Cash flow from operations | $ | 309 | $ | 454 | $ | (145) | $ | 1,480 | $ | 1,469 | $ | 11 | |||||||||||||||||||||||
| Free cash flow | $ | 238 | $ | 407 | $ | (169) | $ | 1,297 | $ | 1,324 | $ | (27) | |||||||||||||||||||||||
| Free cash flow conversion | 95 | % | 187 | % | 143 | % | 119 | % | |||||||||||||||||||||||||||
Fourth quarter cash from operations of $309 million decreased $145 million. Fourth quarter free cash flow decreased $169 million to $238 million as working capital headwinds, timing of pension contributions and tax payments and a $26 million increase in capital expenditures was partially offset by higher GAAP net income.
Full year cash from operations of $1.5 billion increased $11 million. Full year free cash flow decreased $27 million to $1.3 billion as lower GAAP net income, including higher separation costs and interest expense, and a $38 million increase in capital expenditures was partially offset by favorable working capital performance and other operating activities.
2021 Outlook*
Otis is announcing its full year outlook:
•Net sales of $13.3 to $13.6 billion, up 4.5 to 6.5%
•Organic sales up 2 to 4%
◦Organic New Equipment sales up 2 to 5%
◦Organic Service sales up 2 to 4%
•Adjusted operating profit of $2.05 to $2.1 billion, up $125 to $175 million at actual currency; up $75 to $125 million at constant currency
•Adjusted EPS $2.67 to $2.77, up 6 to 10%; adjusted effective tax rate of approximately 29.5%
•Free cash flow of $1.3 to $1.4 billion with conversion of approximately 120% of GAAP net income
*Note: When we provide outlook for organic sales, adjusted operating profit, adjusted EPS, adjusted effective tax rate and free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures generally is not available without unreasonable effort. See “Use and Definitions of Non-GAAP Financial Measures” below for additional information.
About Otis
Otis is the world's leading elevator and escalator manufacturing, installation and service company. We move 2 billion people a day and maintain more than 2 million customer units worldwide, the industry's largest Service portfolio. Headquartered in Connecticut, USA, Otis is 69,000 people strong, including 40,000 field professionals, all committed to meeting the diverse needs of our customers and passengers in more than 200 countries and territories worldwide. For more information, visit www.otis.com and follow us on LinkedIn, Instagram, Facebook and Twitter @OtisElevatorCo.
Use and Definitions of Non-GAAP Financial Measures
Otis Worldwide Corporation (“Otis”) reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under GAAP with certain non-GAAP financial information. The non-GAAP information presented provides investors with additional useful information, but should not be considered in isolation or as substitutes for the related GAAP measures. Moreover, other companies may define non-GAAP measures differently, which limits the usefulness of these measures for comparisons with such other companies. We encourage investors to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. A reconciliation of the non-GAAP measures (referenced in this press release) to the corresponding amounts prepared in accordance with GAAP appears in the attached tables. These tables provide additional information as to the items and amounts that have been excluded from the adjusted measures.
Organic sales, adjusted selling, general and administrative (“SG&A”) expense, earnings before interest taxes and depreciation (“EBITDA”), adjusted EBITDA, adjusted operating profit, adjusted net income, adjusted diluted earnings per share (“EPS”), adjusted effective tax rate and free cash flow are non-GAAP financial measures.
Organic sales represents consolidated net sales (a GAAP measure), excluding the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and other significant items of a non-recurring and/or nonoperational nature (“other significant items”). Management believes organic sales is a useful measure in providing period-to-period comparisons of the results of the Company’s ongoing operational performance.
Adjusted SG&A expense represents SG&A expense (a GAAP measure), excluding restructuring costs, other significant items and allocated costs for certain functions and services previously performed by United Technologies Corporation (“UTC”) prior to our separation (“UTC allocated costs”) and including estimated standalone public company costs, as though Otis’ operations had been conducted independently from UTC (“standalone costs”). Standalone costs for the 2019 fiscal year are based on quarterly estimates determined during Otis’ annual planning process for the 2020 fiscal year.
Adjusted operating profit represents income from continuing operations (a GAAP measure), excluding restructuring costs, other significant items and allocated costs for certain functions and UTC allocated costs and including estimated standalone public company costs.
Adjusted net income represents net income from continuing operations (a GAAP measure), excluding restructuring costs and other significant items and UTC allocated costs and including estimated standalone public company costs, estimated adjustments to non-service pension expense, net interest expense and income tax
expense as if Otis was a standalone public company (“standalone operating income adjustments”). Adjusted EPS represents diluted earnings per share from continuing operations (a GAAP measure), adjusted for the per share impact of restructuring, other significant items and standalone operating income adjustments.
The adjusted effective tax rate represents the effective tax rate (a GAAP measure) adjusted for the tax impact of restructuring costs, significant items and the tax impact of the additional adjustments (estimated standalone public company costs, interest expense and non-service pension expense).
EBITDA represents net income from operations (a GAAP measure), adjusted for noncontrolling interests, income tax expense, net interest expense, non-service pension expense and depreciation and amortization. Adjusted EBITDA represents EBITDA, as calculated above, adjusted for the impact of restructuring, other significant items and UTC allocated costs, including estimated standalone public company costs. Management believes that adjusted SG&A, EBITDA, adjusted EBITDA, adjusted operating profit, adjusted net income, adjusted EPS and the adjusted effective tax rate are useful measures in providing period-to-period comparisons of the results of the Company’s ongoing operational performance as if it had been a standalone public company.
Additionally, GAAP financial results include the impact of changes in foreign currency exchange rates ("AFX"). We use the non-GAAP measure “at constant currency” or “CFX” to show changes in our financial results without giving effect to period-to-period currency fluctuations. Under U.S. GAAP, income statement results are translated in U.S. dollars at the average exchange rate for the period presented. Management believes that this non-GAAP measure is useful in providing period-to-period comparisons of the results of the Company’s ongoing operational performance.
Free cash flow is a non-GAAP financial measure that represents cash flow from operations (a GAAP measure) less capital expenditures. Management believes free cash flow is a useful measure of liquidity and an additional basis for assessing Otis’ ability to fund its activities, including the financing of acquisitions, debt service, repurchases of common stock and distribution of earnings to shareholders.
When we provide our expectations for organic sales, adjusted operating profit, adjusted net income, adjusted effective tax rate, adjusted EPS and free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures (expected diluted EPS from continuing operations, operating profit, the effective tax rate, net sales and expected cash flow from operations) generally is not available without unreasonable effort due to potentially high variability, complexity and low visibility as to the items that would be excluded from the GAAP measure in the relevant future period, such as unusual gains and losses, the ultimate outcome of pending litigation, fluctuations in foreign currency exchange rates, the impact and timing of potential acquisitions and divestitures, and other structural changes or their probable significance. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results.
Cautionary Statement
This communication contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for Otis’ future operating and
financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “outlook,” “confident” and other words of similar meaning in connection with a discussion of future operating or financial performance or the separation and distribution. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, dividends, share repurchases, tax rates and other measures of financial performance or potential future plans, strategies or transactions of Otis following its separation from United Technologies Corporation, including the estimated costs associated with the separation and distribution and other statements that are not historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, Otis claims the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation: (1) the effect of economic conditions in the industries and markets in which Otis and its businesses operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction, the impact of weather conditions, pandemic health issues (including COVID-19 and its effects, among other things, on global supply, demand, and distribution disruptions as the outbreak continues and results in an increasingly prolonged period of travel, commercial and/or other similar restrictions and limitations), natural disasters and the financial condition of Otis’ customers and suppliers; (2) challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services; (3) future levels of indebtedness and capital spending and research and development spending; (4) future availability of credit and factors that may affect such availability, including credit market conditions and Otis’ capital structure; (5) the timing and scope of future repurchases of Otis’ common stock, which, if commenced, may be suspended at any time due to various factors, including market conditions and the level of other investing activities and uses of cash; (6) delays and disruption in delivery of materials and services from suppliers; (7) cost reduction efforts and restructuring costs and savings and other consequences thereof; (8) new business and investment opportunities; (9) the anticipated benefits of moving away from diversification and balance of operations across product lines, regions and industries; (10) the outcome of legal proceedings, investigations and other contingencies; (11) pension plan assumptions and future contributions; (12) the impact of the negotiation of collective bargaining agreements and labor disputes; (13) the effect of changes in political conditions in the U.S., including the new U.S. Administration, and other countries in which Otis and its businesses operate, including the United Kingdom’s recent withdrawal from the European Union, on general market conditions, global trade policies and currency exchange rates in the near term and beyond; (14) the effect of changes in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which Otis and its businesses operate, including changes as a result of the new U.S. Administration; (15) the ability of Otis to retain and hire key personnel; (16) the scope, nature, impact or timing of acquisition and divestiture activity, including among other things integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs; (17) the expected benefits of the separation and the timing thereof; (18) the determination by the Internal Revenue Service and other tax authorities that the distribution or certain related transactions should be treated as taxable transactions; (19) risks associated with indebtedness incurred as a result of financing transactions undertaken in connection with the separation; (20) the risk that dis-synergy costs, costs of restructuring transactions and other costs incurred in connection with the separation will exceed Otis’ estimates; and (21) the impact of the separation on Otis’ businesses, resources, systems, procedures and
controls, diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties. The above list of factors is not exhaustive or necessarily in order of importance. For additional information on identifying factors that may cause actual results to vary from those stated in forward-looking statements, see Otis’ registration statements on Form 10 and Form S-3 and the reports of Otis on Forms 10-K, 10-Q and 8-K filed with or furnished to the SEC from time to time. Any forward-looking statement speaks only as of the date on which it is made, and Otis assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
Otis Worldwide Corporation
Consolidated Statements of Operations
| Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||||||||||||
| (amounts in millions, except per share amounts) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||
| Net Sales | $ | 3,493 | $ | 3,353 | $ | 12,756 | $ | 13,118 | ||||||||||||||||||
| Costs and Expenses: | ||||||||||||||||||||||||||
| Cost of products and services sold | 2,481 | 2,387 | 8,977 | 9,292 | ||||||||||||||||||||||
| Research and development | 40 | 45 | 152 | 163 | ||||||||||||||||||||||
| Selling, general and administrative | 537 | 481 | 1,924 | 1,810 | ||||||||||||||||||||||
| Total Costs and Expenses | 3,058 | 2,913 | 11,053 | 11,265 | ||||||||||||||||||||||
| Other income (expense), net | 5 | (4) | (64) | (39) | ||||||||||||||||||||||
| Operating profit | 440 | 436 | 1,639 | 1,814 | ||||||||||||||||||||||
| Non-service pension expense (benefit) | 6 | 5 | 6 | (33) | ||||||||||||||||||||||
| Interest expense (income), net | 37 | (6) | 122 | (14) | ||||||||||||||||||||||
| Net income before income taxes | 397 | 437 | 1,511 | 1,861 | ||||||||||||||||||||||
| Income tax expense | 118 | 183 | 455 | 594 | ||||||||||||||||||||||
| Net income | 279 | 254 | 1,056 | 1,267 | ||||||||||||||||||||||
| Less: Noncontrolling interest in subsidiaries' earnings | 28 | 36 | 150 | 151 | ||||||||||||||||||||||
| Net income attributable to common shareholders | $ | 251 | $ | 218 | $ | 906 | $ | 1,116 | ||||||||||||||||||
| Earnings Per Share of Common Stock: | ||||||||||||||||||||||||||
| Basic | $ | 0.58 | $ | 0.50 | $ | 2.09 | $ | 2.58 | ||||||||||||||||||
| Diluted | $ | 0.58 | $ | 0.50 | $ | 2.08 | $ | 2.58 | ||||||||||||||||||
| Weighted Average Number of Shares Outstanding: | ||||||||||||||||||||||||||
| Basic shares | 433.4 | 433.1 | 433.2 | 433.1 | ||||||||||||||||||||||
| Diluted Shares | 435.8 | 433.1 | 434.6 | 433.1 | ||||||||||||||||||||||
Otis Worldwide Corporation
Segment Net Sales and Operating Profit
| Quarter Ended December 31, | Quarter Ended December 31, | ||||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| (dollars in millions) | 2020 | 2019 | |||||||||||||||||||||
| Reported | Adjusted | Reported | Adjusted | ||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||
| New Equipment | $ | 1,531 | $ | 1,531 | $ | 1,427 | $ | 1,427 | |||||||||||||||
| Service | 1,962 | 1,962 | 1,926 | 1,926 | |||||||||||||||||||
| Consolidated Net Sales | $ | 3,493 | $ | 3,493 | $ | 3,353 | $ | 3,353 | |||||||||||||||
| Operating Profit | |||||||||||||||||||||||
| New Equipment | $ | 80 | $ | 90 | $ | 81 | $ | 82 | |||||||||||||||
| Service | 421 | 442 | 422 | 419 | |||||||||||||||||||
| Segment Operating Profit | 501 | 532 | 503 | 501 | |||||||||||||||||||
| General corporate expenses and other | (61) | (23) | (67) | (28) | |||||||||||||||||||
| Consolidated Operating Profit | $ | 440 | $ | 509 | $ | 436 | $ | 473 | |||||||||||||||
| Segment Operating Profit Margin | |||||||||||||||||||||||
| New Equipment | 5.2 | % | 5.9 | % | 5.7 | % | 5.7 | % | |||||||||||||||
| Service | 21.5 | % | 22.5 | % | 21.9 | % | 21.8 | % | |||||||||||||||
| Total Operating Profit Margin | 12.6 | % | 14.6 | % | 13.0 | % | 14.1 | % | |||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| (dollars in millions) | 2020 | 2019 | |||||||||||||||||||||
| Reported | Adjusted | Reported | Adjusted | ||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||
| New Equipment | $ | 5,371 | $ | 5,371 | $ | 5,648 | $ | 5,648 | |||||||||||||||
| Service | 7,385 | 7,385 | 7,470 | 7,470 | |||||||||||||||||||
| Consolidated Net Sales | $ | 12,756 | $ | 12,756 | $ | 13,118 | $ | 13,118 | |||||||||||||||
| Operating Profit | |||||||||||||||||||||||
| New Equipment | $ | 318 | $ | 348 | $ | 393 | $ | 402 | |||||||||||||||
| Service | 1,611 | 1,658 | 1,603 | 1,599 | |||||||||||||||||||
| Segment Operating Profit | 1,929 | 2,006 | 1,996 | 2,001 | |||||||||||||||||||
| General corporate expenses and other | (290) | (87) | (182) | (129) | |||||||||||||||||||
| Consolidated Operating Profit | $ | 1,639 | $ | 1,919 | $ | 1,814 | $ | 1,872 | |||||||||||||||
| Segment Operating Profit Margin | |||||||||||||||||||||||
| New Equipment | 5.9 | % | 6.5 | % | 7.0 | % | 7.1 | % | |||||||||||||||
| Service | 21.8 | % | 22.5 | % | 21.5 | % | 21.4 | % | |||||||||||||||
| Total Operating Profit Margin | 12.8 | % | 15.0 | % | 13.8 | % | 14.3 | % | |||||||||||||||
Otis Worldwide Corporation
Reconciliation of Reported (GAAP) to Adjusted Operating Profit & Operating Profit Margin
| Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| (dollars in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| New Equipment | |||||||||||||||||||||||
| Net sales | $ | 1,531 | $ | 1,427 | $ | 5,371 | $ | 5,648 | |||||||||||||||
| GAAP Operating profit | 80 | 81 | 318 | 393 | |||||||||||||||||||
| Restructuring | 10 | 3 | 30 | 19 | |||||||||||||||||||
| UTC allocated corporate expenses | — | 2 | — | 6 | |||||||||||||||||||
Public company standalone costs1 | — | (4) | — | (16) | |||||||||||||||||||
Other | — | — | — | — | |||||||||||||||||||
| Adjusted New Equipment Operating Profit | $ | 90 | $ | 82 | $ | 348 | $ | 402 | |||||||||||||||
| Adjusted operating profit margin | 5.9 | % | 5.7 | % | 6.5 | % | 7.1 | % | |||||||||||||||
| Service | |||||||||||||||||||||||
| Net sales | $ | 1,962 | $ | 1,926 | $ | 7,385 | $ | 7,470 | |||||||||||||||
| GAAP Operating profit | 421 | 422 | 1,611 | 1,603 | |||||||||||||||||||
| Restructuring | 21 | 7 | 47 | 35 | |||||||||||||||||||
| UTC allocated corporate expenses | — | 4 | — | 14 | |||||||||||||||||||
Public company standalone costs1 | — | (16) | — | (56) | |||||||||||||||||||
Other | — | 2 | — | 3 | |||||||||||||||||||
| Adjusted Service Operating Profit | $ | 442 | $ | 419 | $ | 1,658 | $ | 1,599 | |||||||||||||||
| Adjusted Operating Profit Margin | 22.5 | % | 21.8 | % | 22.5 | % | 21.4 | % | |||||||||||||||
| General corporate expenses and other | |||||||||||||||||||||||
| General corporate expenses and other | $ | (23) | $ | (28) | $ | (87) | $ | (129) | |||||||||||||||
| Adjusted Total Operating Profit | $ | 509 | $ | 473 | $ | 1,919 | $ | 1,872 | |||||||||||||||
| Total Otis | |||||||||||||||||||||||
| GAAP Operating profit | $ | 440 | $ | 436 | $ | 1,639 | $ | 1,814 | |||||||||||||||
| Restructuring | 31 | 10 | 77 | 54 | |||||||||||||||||||
| Loss on disposal of business | — | 8 | — | 26 | |||||||||||||||||||
| One-time separation costs | 37 | 33 | 119 | 43 | |||||||||||||||||||
| Expected insurance recovery | (17) | — | (17) | — | |||||||||||||||||||
Fixed asset impairment | 18 | — | 85 | — | |||||||||||||||||||
| UTC allocated corporate expenses | — | 24 | 16 | 80 | |||||||||||||||||||
Public company standalone costs1 | — | (42) | — | (147) | |||||||||||||||||||
| Other | — | 4 | — | 2 | |||||||||||||||||||
| Adjusted Total Operating Profit | $ | 509 | $ | 473 | $ | 1,919 | $ | 1,872 | |||||||||||||||
| Adjusted Operating Profit Margin | 14.6 | % | 14.1 | % | 15.0 | % | 14.3 | % | |||||||||||||||
1 - Public company standalone costs represent estimated costs such as personnel costs, risk management and incentive compensation that have been incurred and are reflected in results for the quarter and year ended December 31, 2020 and are not adjusted. For the quarter ended and year ended December 31, 2019, these standalone costs have been included in the adjustments, as though Otis' operations had been conducted independently from our former parent UTC.
Otis Worldwide Corporation
Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Net Income, Earnings Per Share, and Effective Tax Rate
| Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| (dollars in millions, except per share amounts) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Adjusted Operating Profit | $ | 509 | $ | 473 | $ | 1,919 | $ | 1,872 | |||||||||||||||
Non-service pension cost3 | (5) | (4) | (5) | (9) | |||||||||||||||||||
Net interest expense2 | (38) | (49) | (123) | (160) | |||||||||||||||||||
| Adjusted income from operations before income taxes | 466 | 420 | 1,791 | 1,703 | |||||||||||||||||||
| Income tax expense | 118 | 183 | 455 | 594 | |||||||||||||||||||
| Tax impact on restructuring and non-recurring items | 11 | 7 | 58 | 18 | |||||||||||||||||||
| Tax impact on other adjustments | — | (12) | — | (41) | |||||||||||||||||||
| Non-recurring tax items | 21 | 1 | 32 | 10 | |||||||||||||||||||
| Adjusted net income from operations | 316 | 241 | 1,246 | 1,122 | |||||||||||||||||||
| Noncontrolling interest | 28 | 36 | 150 | 151 | |||||||||||||||||||
| Adjusted net income attributable to common shareholders | $ | 288 | $ | 205 | $ | 1,096 | $ | 971 | |||||||||||||||
| GAAP income attributable to common shareholders | $ | 251 | $ | 218 | $ | 906 | $ | 1,116 | |||||||||||||||
| Restructuring | 31 | 10 | 77 | 54 | |||||||||||||||||||
| Loss on disposal of business | — | 8 | — | 26 | |||||||||||||||||||
| One-time separation costs | 37 | 33 | 119 | 43 | |||||||||||||||||||
| Expected insurance recovery | (17) | — | (17) | — | |||||||||||||||||||
| Fixed asset impairment | 18 | — | 85 | — | |||||||||||||||||||
| UTC allocated corporate expenses | — | 24 | 16 | 80 | |||||||||||||||||||
Public company standalone costs1 | — | (42) | — | (147) | |||||||||||||||||||
Non-service pension cost3 | — | 1 | — | (42) | |||||||||||||||||||
Net interest expense2 | — | (55) | — | (174) | |||||||||||||||||||
| Other | — | 4 | — | 2 | |||||||||||||||||||
| Tax effects of restructuring, non-recurring items and other adjustments | (11) | 5 | (58) | 23 | |||||||||||||||||||
| Non-recurring tax items | (21) | (1) | (32) | (10) | |||||||||||||||||||
| Adjusted net income attributable to common shareholders | $ | 288 | $ | 205 | $ | 1,096 | $ | 971 | |||||||||||||||
| Diluted Earnings Per Share | $ | 0.58 | $ | 0.50 | $ | 2.08 | $ | 2.58 | |||||||||||||||
| Impact to diluted earnings per share | 0.08 | (0.03) | 0.44 | (0.34) | |||||||||||||||||||
| Adjusted Diluted Earnings Per Share | $ | 0.66 | $ | 0.47 | $ | 2.52 | $ | 2.24 | |||||||||||||||
| Effective Tax Rate | 29.8 | % | 41.9 | % | 30.1 | % | 31.9 | % | |||||||||||||||
| Impact of adjustments on effective tax rate | 2.3 | % | 0.7 | % | 0.3 | % | 2.2 | % | |||||||||||||||
| Adjusted Effective Tax Rate | 32.1 | % | 42.6 | % | 30.4 | % | 34.1 | % | |||||||||||||||
1 - Public company standalone costs represent estimated costs such as personnel costs, risk management and incentive compensation that have been incurred and are reflected in results for the quarter ended and year ended December 31, 2020 and are not adjusted. For the quarter ended and year ended December 31, 2019, these standalone costs have been included in the adjustments, as though Otis' operations had been conducted independently from UTC.
2 - Otis issued debt and began to incur interest expenses in February 2020 associated with the debt issuance. The current quarter and year-to-date actual interest expense incurred has been reflected in the comparative period in 2019 as though Otis incurred those expenses in the prior year.
3 - Non-service pension included in GAAP net income attributable to Otis includes amounts associated with Otis' participation in our former parent' UTC's retained pension plans. The amounts related to these plans are removed from Otis' results in 2019, as though Otis' operations had been conducted independently from UTC.
Otis Worldwide Corporation
Components of Changes in Net Sales
| Quarter Ended December 31, 2020 Compared with Quarter Ended December 31, 2019 | ||||||||||||||||||||||||||||||||
| Factors Contributing to Total % Change in Net Sales | ||||||||||||||||||||||||||||||||
| Organic | FX Translation | Acquisitions / Divestitures, net | Other | Total | ||||||||||||||||||||||||||||
| New Equipment | 4.8% | 2.3% | 0.2% | —% | 7.3% | |||||||||||||||||||||||||||
| Service | (1.4)% | 2.9% | 0.4% | —% | 1.9% | |||||||||||||||||||||||||||
| Maintenance and Repair | (1.1)% | 2.8% | 0.4% | —% | 2.1% | |||||||||||||||||||||||||||
| Modernization | (2.5)% | 3.0% | 0.3% | —% | 0.8% | |||||||||||||||||||||||||||
| Total Net Sales | 1.3% | 2.6% | 0.3% | —% | 4.2% | |||||||||||||||||||||||||||
| Year Ended December 31, 2020 Compared with Year Ended December 31, 2019 | ||||||||||||||||||||||||||||||||
| Factors Contributing to Total % Change in Net Sales | ||||||||||||||||||||||||||||||||
| Organic | FX Translation | Acquisitions / Divestitures, net | Other | Total | ||||||||||||||||||||||||||||
| New Equipment | (4.0)% | (0.8)% | —% | (0.1)% | (4.9)% | |||||||||||||||||||||||||||
| Service | (0.7)% | (0.1)% | (0.3)% | —% | (1.1)% | |||||||||||||||||||||||||||
| Maintenance and Repair | (0.9)% | (0.1)% | (0.2)% | —% | (1.2)% | |||||||||||||||||||||||||||
| Modernization | 0.1% | 0.1% | (1.1)% | —% | (0.9)% | |||||||||||||||||||||||||||
| Total Net Sales | (2.1)% | (0.4)% | (0.2)% | (0.1)% | (2.8)% | |||||||||||||||||||||||||||
Components of New Equipment Backlog
| Growth % | |||||
| Q4 2020 | |||||
| New Equipment Backlog increase at actual currency | 6% | ||||
| Foreign exchange impact to New Equipment Backlog | (4)% | ||||
| New Equipment Backlog at constant currency | 2% | ||||
Otis Worldwide Corporation
Reconciliation of Adjusted Operating Profit at Constant Currency
| Quarter Ended December 31, 2020 Compared with Quarter Ended December 31, 2019 | ||||||||||||||||||||
| (dollars in millions) | 2020 | 2019 | Y/Y | |||||||||||||||||
| New Equipment | ||||||||||||||||||||
| Adjusted Operating Profit | $ | 90 | $ | 82 | $ | 8 | ||||||||||||||
| Impact of foreign exchange | (1) | — | (1) | |||||||||||||||||
| Adjusted Operating Profit at constant currency | $ | 89 | $ | 82 | $ | 7 | ||||||||||||||
| Service | ||||||||||||||||||||
| Adjusted Operating Profit | $ | 442 | $ | 419 | $ | 23 | ||||||||||||||
| Impact of foreign exchange | (15) | — | (15) | |||||||||||||||||
| Adjusted Operating Profit at constant currency | $ | 427 | $ | 419 | $ | 8 | ||||||||||||||
| Otis Consolidated | ||||||||||||||||||||
| Adjusted Operating Profit | $ | 509 | $ | 473 | $ | 36 | ||||||||||||||
| Impact of foreign exchange | (17) | — | (17) | |||||||||||||||||
| Adjusted Operating Profit at constant currency | $ | 492 | $ | 473 | $ | 19 | ||||||||||||||
| Year Ended December 31, 2020 Compared with Year Ended December 31, 2019 | ||||||||||||||||||||
| (dollars in millions) | 2020 | 2019 | Y/Y | |||||||||||||||||
| New Equipment | ||||||||||||||||||||
| Adjusted Operating Profit | $ | 348 | $ | 402 | $ | (54) | ||||||||||||||
| Impact of foreign exchange | 9 | — | 9 | |||||||||||||||||
| Adjusted Operating Profit at constant currency | $ | 357 | $ | 402 | $ | (45) | ||||||||||||||
| Service | ||||||||||||||||||||
| Adjusted Operating Profit | $ | 1,658 | $ | 1,599 | $ | 59 | ||||||||||||||
| Impact of foreign exchange | (4) | — | (4) | |||||||||||||||||
| Adjusted Operating Profit at constant currency | $ | 1,654 | $ | 1,599 | $ | 55 | ||||||||||||||
| Otis Consolidated | ||||||||||||||||||||
| Adjusted Operating Profit | $ | 1,919 | $ | 1,872 | $ | 47 | ||||||||||||||
| Impact of foreign exchange | 5 | — | 5 | |||||||||||||||||
| Adjusted Operating Profit at constant currency | $ | 1,924 | $ | 1,872 | $ | 52 | ||||||||||||||
Otis Worldwide Corporation
Consolidated Balance Sheet
| December 31, 2020 | December 31, 2019 | ||||||||||
| (amounts in millions, except per share amounts) | (Unaudited) | (Unaudited) | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 1,782 | $ | 1,446 | |||||||
| Accounts receivable, net | 3,148 | 2,861 | |||||||||
| Contract assets | 458 | 529 | |||||||||
| Inventories, net | 659 | 571 | |||||||||
| Other current assets | 446 | 251 | |||||||||
| Total Current Assets | 6,493 | 5,658 | |||||||||
| Future income tax benefits | 334 | 373 | |||||||||
| Fixed assets, net | 774 | 721 | |||||||||
| Operating lease right-of-use assets | 542 | 535 | |||||||||
| Intangible assets, net | 484 | 490 | |||||||||
| Goodwill | 1,773 | 1,647 | |||||||||
| Other assets | 310 | 263 | |||||||||
| Total Assets | $ | 10,710 | $ | 9,687 | |||||||
| Liabilities and (Deficit) Equity | |||||||||||
| Short-term borrowings | $ | 701 | $ | 34 | |||||||
| Accounts payable | 1,453 | 1,331 | |||||||||
| Accrued liabilities | 1,977 | 1,739 | |||||||||
| Contract liabilities | 2,542 | 2,270 | |||||||||
| Total Current Liabilities | 6,673 | 5,374 | |||||||||
| Long-term debt | 5,262 | 5 | |||||||||
| Future pension and postretirement benefit obligations | 654 | 590 | |||||||||
| Operating lease liabilities | 367 | 386 | |||||||||
| Future income tax obligations | 321 | 695 | |||||||||
| Other long-term liabilities | 634 | 311 | |||||||||
| Total Liabilities | 13,911 | 7,361 | |||||||||
| Redeemable noncontrolling interest | 83 | 95 | |||||||||
| Shareholders' (Deficit) Equity: | |||||||||||
| Preferred Stock, $0.01 par value, 125 share authorized; None issued or outstanding | — | — | |||||||||
| Common Stock, $0.01 par value, 2,000 shares authorized; 433.4 shares issued and outstanding | 59 | — | |||||||||
| Additional paid-in capital | — | — | |||||||||
| Accumulated deficit | (3,076) | — | |||||||||
| UTC Net Investment | — | 2,458 | |||||||||
| Accumulated other comprehensive income (loss) | (815) | (758) | |||||||||
| Total Shareholders' (Deficit) Equity | (3,832) | 1,700 | |||||||||
| Noncontrolling interest | 548 | 531 | |||||||||
| Total (Deficit) Equity | (3,284) | 2,231 | |||||||||
| Total Liabilities and (Deficit) Equity | $ | 10,710 | $ | 9,687 | |||||||
| Debt Ratios: | |||||||||||
| Debt to total capitalization | 223 | % | 2 | % | |||||||
| Net debt to net capitalization | 466 | % | (171) | % | |||||||
Debt to total capitalization equals total debt divided by total debt plus equity. Net debt to net capitalization equals total debt less cash and cash equivalents divided by total debt plus equity less cash and cash equivalents.
Otis Worldwide Corporation
Condensed Consolidated Statement of Cash Flows
| Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| (dollars in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Operating Activities: | |||||||||||||||||||||||
| Net income from operations | $ | 279 | $ | 254 | $ | 1,056 | $ | 1,267 | |||||||||||||||
| Adjustments to reconcile net income to net cash flows provided by operating activities: | |||||||||||||||||||||||
| Depreciation and amortization | 51 | 45 | 191 | 180 | |||||||||||||||||||
| Stock compensation cost | 19 | 8 | 63 | 37 | |||||||||||||||||||
| Loss on fixed asset impairment | 16 | — | 71 | — | |||||||||||||||||||
| Loss on disposal of business | — | 7 | — | 26 | |||||||||||||||||||
| Change in: | |||||||||||||||||||||||
| Accounts receivable, net | (84) | (38) | (163) | (191) | |||||||||||||||||||
| Contract assets and liabilities, current | 5 | (11) | 282 | 97 | |||||||||||||||||||
| Inventories, net | 25 | 29 | (76) | 60 | |||||||||||||||||||
| Accounts payable | 1 | 48 | 20 | 6 | |||||||||||||||||||
| Pension contributions | (36) | (7) | (64) | (32) | |||||||||||||||||||
| Other operating activities, net | 33 | 119 | 100 | 19 | |||||||||||||||||||
| Net cash flows provided by operating activities | 309 | 454 | 1,480 | 1,469 | |||||||||||||||||||
| Investing Activities: | |||||||||||||||||||||||
| Capital expenditures | (71) | (47) | (183) | (145) | |||||||||||||||||||
| Investments in businesses, net of cash acquired | (3) | (8) | (53) | (47) | |||||||||||||||||||
| Investments in equity securities | — | — | (51) | — | |||||||||||||||||||
| Other investing activities, net | 10 | 2 | (66) | (11) | |||||||||||||||||||
| Net cash flows used in investing activities | (64) | (53) | (353) | (203) | |||||||||||||||||||
| Financing Activities: | |||||||||||||||||||||||
| Issuance of long-term debt, net | — | — | 6,300 | — | |||||||||||||||||||
| Payment of long-term debt issuance costs | — | — | (43) | — | |||||||||||||||||||
| Repayment of long-term debt | (250) | — | (1,000) | — | |||||||||||||||||||
| Increase (decrease) in short-term borrowings, net | 137 | (12) | 647 | 6 | |||||||||||||||||||
| Net transfers from (to) UTC | — | (374) | (6,330) | (972) | |||||||||||||||||||
| Dividends paid on common stock | (87) | — | (260) | — | |||||||||||||||||||
| Dividends paid to noncontrolling interest | (24) | (31) | (149) | (163) | |||||||||||||||||||
| Other financing activities, net | (31) | (22) | (9) | (4) | |||||||||||||||||||
| Net cash flows provided by (used in) financing activities | (255) | (439) | (844) | (1,133) | |||||||||||||||||||
| Summary of Activity: | |||||||||||||||||||||||
| Net cash provided by operating activities | 309 | 454 | 1,480 | 1,469 | |||||||||||||||||||
| Net cash used in investing activities | (64) | (53) | (353) | (203) | |||||||||||||||||||
| Net cash provided by (used in) financing activities | (255) | (439) | (844) | (1,133) | |||||||||||||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | 59 | 21 | 59 | (20) | |||||||||||||||||||
| Net increase in cash, cash equivalents and restricted cash | 49 | (17) | 342 | 113 | |||||||||||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 1,752 | 1,476 | 1,459 | 1,346 | |||||||||||||||||||
| Cash, cash equivalents and restricted cash, end of period | 1,801 | 1,459 | 1,801 | 1,459 | |||||||||||||||||||
| Less: Restricted cash | 19 | 13 | 19 | 13 | |||||||||||||||||||
| Cash and cash equivalents, end of period | $ | 1,782 | $ | 1,446 | $ | 1,782 | $ | 1,446 | |||||||||||||||
Otis Worldwide Corporation
Free Cash Flow Reconciliation
| Quarter Ended December 31, | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
(dollars in millions) | 2020 | 2019 | |||||||||||||||
| Net income attributable to common shareholders | $ | 251 | $ | 218 | |||||||||||||
| Net cash flows provided by operating activities | $ | 309 | $ | 454 | |||||||||||||
| Net cash flows provided by operating activities as a percentage of net income attributable to common shareholders | 123 | % | 208 | % | |||||||||||||
| Capital expenditures | (71) | (47) | |||||||||||||||
| Capital expenditures as a percentage of net income attributable to common shareholders | (28) | % | (22) | % | |||||||||||||
| Free cash flow | $ | 238 | $ | 407 | |||||||||||||
| Free cash flow as a percentage of net income attributable to common shareholders | 95 | % | 187 | % | |||||||||||||
| Twelve Months Ended December 31, | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| (dollars in millions) | 2020 | 2019 | |||||||||||||||
| Net income attributable to common shareholders | $ | 906 | $ | 1,116 | |||||||||||||
| Net cash flows provided by operating activities | $ | 1,480 | $ | 1,469 | |||||||||||||
| Net cash flows provided by operating activities as a percentage of net income attributable to common shareholders | 163 | % | 132 | % | |||||||||||||
| Capital expenditures | (183) | (145) | |||||||||||||||
| Capital expenditures as a percentage of net income attributable to common shareholders | (21) | % | (13) | % | |||||||||||||
| Free cash flow | $ | 1,297 | $ | 1,324 | |||||||||||||
| Free cash flow as a percentage of net income attributable to common shareholders | 143 | % | 119 | % | |||||||||||||