Otis Reports Fourth Quarter And Full Year 2020 Results

FARMINGTON, Conn., Feb. 1, 2021 /PRNewswire/ — Otis Worldwide Corporation (NYSE:OTIS) reported fourth quarter 2020 web gross sales of $3.5 billion with 1.3% natural development. GAAP diluted earnings per share (EPS) elevated 16.0% to $0.58 and adjusted diluted EPS elevated 40.4% to $0.66. Full yr web gross sales of $12.8 billion decreased 2.1% organically with GAAP diluted EPS lowering 19.4% to $2.08 and adjusted diluted EPS rising 12.5% to $2.52.

“Otis delivered a powerful fourth quarter, ending a strong first yr as an unbiased firm. We returned to development within the quarter whereas persevering with to develop share, increase adjusted margin and generate sturdy money circulation demonstrating the dedication of our colleagues world wide to fulfill our commitments, even in making an attempt financial occasions,” stated President and CEO Judy Marks. “By combining this constructive momentum with enhancements in our finish markets, we count on to ship 2% to 4% natural gross sales development with excessive single-digit adjusted EPS development and free money circulation conversion of about 120% in 2021*. This outlook displays the resiliency of the enterprise mannequin, power of our long-term technique and a dedication to create worth for our clients and shareholders.”

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Fourth quarter web gross sales of $3.5 billion elevated 4.2% with a 1.3% enhance in natural gross sales. Natural gross sales elevated 4.8% within the New Tools phase and decreased 1.4% within the Service phase.

Fourth quarter GAAP working revenue of $440 million elevated $4 million from the prior yr. Adjusted working revenue of $509 million elevated $36 million and $19 million at fixed foreign money. Adjusted working revenue development at fixed foreign money was primarily pushed by phase revenue development of $15 million. As well as, GAAP working revenue development was impacted by increased restructuring and incremental public firm standalone prices, partially offset by web non-recurring gadgets. GAAP working revenue margin contracted 40 foundation factors to 12.6% and adjusted working revenue margin expanded 50 foundation factors to 14.6%, with margin growth in each segments.

GAAP EPS of $0.58 elevated $0.08 and adjusted EPS of $0.66 elevated $0.19, pushed by working revenue development and a decrease efficient tax price. As well as, GAAP EPS development was partially offset by increased curiosity expense.

Full yr web gross sales declined 2.8% versus the prior yr, with a 2.1% decline in natural gross sales. GAAP working revenue decreased $175 million whereas adjusted working revenue elevated $47 million and $52 million at fixed foreign money. Adjusted working revenue development at fixed foreign money was pushed by robust efficiency within the Service phase, decrease company prices and favorable transactional overseas change, partially offset by decline within the New Tools phase. GAAP working revenue was additionally impacted by increased non-recurring separation prices, incremental public firm standalone prices and non-recurring asset fees. GAAP working revenue margin contracted 100 foundation factors to 12.8% and adjusted working revenue margin expanded 70 foundation factors to fifteen.0%.

Within the fourth quarter, web gross sales of $1.5 billion elevated 7.3% with a 4.8% enhance in natural gross sales. Natural gross sales have been up 17.7% and 5.4% within the Americas and EMEA, respectively, partially offset by a 3.8% decline in Asia.

GAAP working revenue decreased $1 million to $80 million. Adjusted working revenue elevated $8 million to $90 million as increased quantity and materials productiveness have been partially offset by unfavorable price pushed by incremental channel investments in China, subject inefficiencies, value/combine and better dangerous debt expense. GAAP working revenue was additionally impacted by incremental public firm standalone prices and better restructuring prices. GAAP working revenue margin contracted 50 foundation factors and adjusted working revenue margin expanded 20 foundation factors. 

New Tools orders have been down 3.5% at fixed foreign money as decline within the Americas was partially offset by development in EMEA and Asia. Orders in China have been robust, up roughly 10%. New tools backlog at fixed foreign money elevated 2% versus prior yr.

Full yr web gross sales declined 4.9% with a 4.0% natural decline. GAAP working revenue declined $75 million and adjusted working revenue declined $54 million as robust materials productiveness and price containment actions have been greater than offset by the impression of decrease quantity and unfavorable price from under-absorption, subject inefficiencies, value/combine and better dangerous debt expense. GAAP working revenue was additionally impacted by incremental public firm standalone prices and better restructuring prices. GAAP and adjusted working revenue margin contracted 110 foundation factors and 60 foundation factors, respectively.

Within the fourth quarter, web gross sales of $2.0 billion elevated 1.9%, with a 1.4% decline in natural gross sales. Natural upkeep and restore gross sales declined 1.1% and natural modernization gross sales declined 2.5%.

GAAP working revenue decreased $1 million to $421 million. Adjusted working revenue of $442 million elevated $23 million and $8 million at fixed foreign money because the profit from productiveness was partially offset by the impression from decrease quantity. GAAP working revenue was additionally impacted by incremental public firm standalone prices and better restructuring prices. GAAP working revenue margin contracted 40 foundation factors and adjusted working revenue margin expanded 70 foundation factors.

Full yr web gross sales declined 1.1% with a 0.7% natural decline. GAAP working revenue elevated $8 million and adjusted working revenue elevated $59 million because the profit from productiveness and price containment actions greater than offset the impression from decrease quantity and better dangerous debt expense. GAAP and adjusted working revenue margin expanded 30 foundation factors and 110 foundation factors, respectively.

Fourth quarter money from operations of $309 million decreased $145 million. Fourth quarter free money circulation decreased $169 million to $238 million as working capital headwinds, timing of pension contributions and tax funds and a $26 million enhance in capital expenditures was partially offset by increased GAAP web earnings.

Full yr money from operations of $1.5 billion elevated $11 million. Full yr free money circulation decreased $27 million to $1.3 billion as decrease GAAP web earnings, together with increased separation prices and curiosity expense, and a $38 million enhance in capital expenditures was partially offset by favorable working capital efficiency and different working actions.

2021 Outlook*

Otis is saying its full yr outlook:

• Web gross sales of $13.3 to $13.6 billion, up 4.5 to six.5%
• Natural gross sales up 2 to 4%
• Natural New Tools gross sales up 2 to five%
• Natural Service gross sales up 2 to 4%
• Adjusted working revenue of $2.05 to $2.1 billion, up $125 to $175 million at precise foreign money; up $75 to $125 million at fixed foreign money
• Adjusted EPS $2.67 to $2.77, up 6 to 10%; adjusted efficient tax price of roughly 29.5%
• Free money circulation of $1.3 to $1.4 billion with conversion of roughly 120% of GAAP web earnings

*Be aware: After we present outlook for natural gross sales, adjusted working revenue, adjusted EPS, adjusted efficient tax price and free money circulation on a forward-looking foundation, a reconciliation of the variations between the non-GAAP expectations and the corresponding GAAP measures typically is just not obtainable with out unreasonable effort. See “Use and Definitions of Non-GAAP Monetary Measures” under for extra data.

About Otis

Otis is the world’s main elevator and escalator manufacturing, set up and repair firm. We transfer 2 billion individuals a day and keep greater than 2 million buyer models worldwide, the trade’s largest Service portfolio. Headquartered in Connecticut, USA, Otis is 69,000 individuals robust, together with 40,000 subject professionals, all dedicated to assembly the varied wants of our clients and passengers in additional than 200 nations and territories worldwide. For extra data, go to www.otis.com and comply with us on LinkedIn, Instagram, Facebook  and Twitter @OtisElevatorCo.

Use and Definitions of Non-GAAP Monetary Measures

Otis Worldwide Company (“Otis”) reviews its monetary leads to accordance with accounting ideas typically accepted in the US (“GAAP”). We complement the reporting of our monetary data decided below GAAP with sure non-GAAP monetary data. The non-GAAP data introduced offers traders with extra helpful data, however shouldn’t be thought-about in isolation or as substitutes for the associated GAAP measures. Furthermore, different firms might outline non-GAAP measures in a different way, which limits the usefulness of those measures for comparisons with such different firms. We encourage traders to assessment our monetary statements and publicly filed reviews of their entirety and to not depend on any single monetary measure. A reconciliation of the non-GAAP measures (referenced on this press launch) to the corresponding quantities ready in accordance with GAAP seems within the connected tables. These tables present extra data as to the gadgets and quantities which have been excluded from the adjusted measures. 

Natural gross sales, adjusted promoting, common and administrative (“SG&A”) expense, earnings earlier than curiosity taxes and depreciation (“EBITDA”), adjusted EBITDA, adjusted working revenue, adjusted web earnings, adjusted diluted earnings per share (“EPS”), adjusted efficient tax price and free money circulation are non-GAAP monetary measures.

Natural gross sales represents consolidated web gross sales (a GAAP measure), excluding the impression of overseas foreign money translation, acquisitions and divestitures accomplished within the previous twelve months and different important gadgets of a non-recurring and/or nonoperational nature (“different important gadgets”). Administration believes natural gross sales is a helpful measure in offering period-to-period comparisons of the outcomes of the Firm’s ongoing operational efficiency.

Adjusted SG&A expense represents SG&A expense (a GAAP measure), excluding restructuring prices, different important gadgets and allotted prices for sure capabilities and providers beforehand carried out by United Applied sciences Company (“UTC”) previous to our separation (“UTC allotted prices”) and together with estimated standalone public firm prices, as if Otis’ operations had been carried out independently from UTC (“standalone prices”). Standalone prices for the 2019 fiscal yr are primarily based on quarterly estimates decided throughout Otis’ annual planning course of for the 2020 fiscal yr.

Adjusted working revenue represents earnings from persevering with operations (a GAAP measure), excluding restructuring prices, different important gadgets and allotted prices for sure capabilities and UTC allotted prices and together with estimated standalone public firm prices.

Adjusted web earnings represents web earnings from persevering with operations (a GAAP measure), excluding restructuring prices and different important gadgets and UTC allotted prices and together with estimated standalone public firm prices, estimated changes to non-service pension expense, web curiosity expense and earnings tax expense as if Otis was a standalone public firm (“standalone working earnings changes”). Adjusted EPS represents diluted earnings per share from persevering with operations (a GAAP measure), adjusted for the per share impression of restructuring, different important gadgets and standalone working earnings changes.

The adjusted efficient tax price represents the efficient tax price (a GAAP measure) adjusted for the tax impression of restructuring prices, important gadgets and the tax impression of the extra changes (estimated standalone public firm prices, curiosity expense and non-service pension expense).

EBITDA represents web earnings from operations (a GAAP measure), adjusted for noncontrolling pursuits, earnings tax expense, web curiosity expense, non-service pension expense and depreciation and amortization. Adjusted EBITDA represents EBITDA, as calculated above, adjusted for the impression of restructuring, different important gadgets and UTC allotted prices, together with estimated standalone public firm prices. Administration believes that adjusted SG&A, EBITDA, adjusted EBITDA, adjusted working revenue, adjusted web earnings, adjusted EPS and the adjusted efficient tax price are helpful measures in offering period-to-period comparisons of the outcomes of the Firm’s ongoing operational efficiency as if it had been a standalone public firm.

Moreover, GAAP monetary outcomes embody the impression of modifications in overseas foreign money change charges (“AFX”). We use the non-GAAP measure “at fixed foreign money” or “CFX” to indicate modifications in our monetary outcomes with out giving impact to period-to-period foreign money fluctuations. Underneath U.S. GAAP, earnings assertion outcomes are translated in U.S. {dollars} on the common change price for the interval introduced. Administration believes that this non-GAAP measure is helpful in offering period-to-period comparisons of the outcomes of the Firm’s ongoing operational efficiency.

Free money circulation is a non-GAAP monetary measure that represents money circulation from operations (a GAAP measure) much less capital expenditures. Administration believes free money circulation is a helpful measure of liquidity and a further foundation for assessing Otis’ capacity to fund its actions, together with the financing of acquisitions, debt service, repurchases of widespread inventory and distribution of earnings to shareholders.

After we present our expectations for natural gross sales, adjusted working revenue, adjusted web earnings, adjusted efficient tax price, adjusted EPS and free money circulation on a forward-looking foundation, a reconciliation of the variations between the non-GAAP expectations and the corresponding GAAP measures (anticipated diluted EPS from persevering with operations, working revenue, the efficient tax price, web gross sales and anticipated money circulation from operations) typically is just not obtainable with out unreasonable effort as a consequence of probably excessive variability, complexity and low visibility as to the gadgets that might be excluded from the GAAP measure within the related future interval, equivalent to uncommon positive factors and losses, the final word end result of pending litigation, fluctuations in overseas foreign money change charges, the impression and timing of potential acquisitions and divestitures, and different structural modifications or their possible significance. The variability of the excluded gadgets might have a major, and probably unpredictable, impression on our future GAAP outcomes.

Cautionary Assertion

This communication comprises statements which, to the extent they aren’t statements of historic or current truth, represent “forward-looking statements” below the securities legal guidelines. On occasion, oral or written forward-looking statements may additionally be included in different data launched to the general public. These forward-looking statements are meant to supply administration’s present expectations or plans for Otis’ future working and monetary efficiency, primarily based on assumptions at the moment believed to be legitimate. Ahead-looking statements will be recognized by way of phrases equivalent to “consider,” “count on,” “expectations,” “plans,” “technique,” “prospects,” “estimate,” “undertaking,” “goal,” “anticipate,” “will,” “ought to,” “see,” “steerage,” “outlook,” “assured” and different phrases of comparable that means in reference to a dialogue of future working or monetary efficiency or the separation and distribution. Ahead-looking statements might embody, amongst different issues, statements regarding future gross sales, earnings, money circulation, outcomes of operations, makes use of of money, dividends, share repurchases, tax charges and different measures of monetary efficiency or potential future plans, methods or transactions of Otis following its separation from United Applied sciences Company, together with the estimated prices related to the separation and distribution and different statements that aren’t historic info. All forward-looking statements contain dangers, uncertainties and different components that will trigger precise outcomes to vary materially from these expressed or implied within the forward-looking statements. For these statements, Otis claims the safety of the protected harbor for forward-looking statements contained within the U.S. Non-public Securities Litigation Reform Act of 1995. Such dangers, uncertainties and different components embody, with out limitation: (1) the impact of financial situations within the industries and markets through which Otis and its companies function within the U.S. and globally and any modifications therein, together with monetary market situations, fluctuations in commodity costs, rates of interest and overseas foreign money change charges, ranges of finish market demand in development, the impression of climate situations, pandemic well being points (together with COVID-19 and its results, amongst different issues, on world provide, demand, and distribution disruptions because the outbreak continues and leads to an more and more extended interval of journey, industrial and/or different related restrictions and limitations), pure disasters and the monetary situation of Otis’ clients and suppliers; (2) challenges within the improvement, manufacturing, supply, help, efficiency and realization of the anticipated advantages of superior applied sciences and new services; (3) future ranges of indebtedness and capital spending and analysis and improvement spending; (4) future availability of credit score and components that will have an effect on such availability, together with credit score market situations and Otis’ capital construction; (5) the timing and scope of future repurchases of Otis’ widespread inventory, which, if commenced, could also be suspended at any time as a consequence of numerous components, together with market situations and the extent of different investing actions and makes use of of money; (6) delays and disruption in supply of supplies and providers from suppliers; (7) price discount efforts and restructuring prices and financial savings and different penalties thereof; (8) new enterprise and funding alternatives; (9) the anticipated advantages of shifting away from diversification and stability of operations throughout product traces, areas and industries; (10) the result of authorized proceedings, investigations and different contingencies; (11) pension plan assumptions and future contributions; (12) the impression of the negotiation of collective bargaining agreements and labor disputes; (13) the impact of modifications in political situations within the U.S., together with the brand new U.S. Administration, and different nations through which Otis and its companies function, together with the United Kingdom’s latest withdrawal from the European Union, on common market situations, world commerce insurance policies and foreign money change charges within the close to time period and past; (14) the impact of modifications in tax, environmental, regulatory (together with amongst different issues import/export) and different legal guidelines and rules within the U.S. and different nations through which Otis and its companies function, together with modifications on account of the brand new U.S. Administration; (15) the power of Otis to retain and rent key personnel; (16) the scope, nature, impression or timing of acquisition and divestiture exercise, together with amongst different issues integration of acquired companies into present companies and realization of synergies and alternatives for development and innovation and incurrence of associated prices; (17) the anticipated advantages of the separation and the timing thereof; (18) the willpower by the Inner Income Service and different tax authorities that the distribution or sure associated transactions needs to be handled as taxable transactions; (19) dangers related to indebtedness incurred on account of financing transactions undertaken in reference to the separation; (20) the danger that dis-synergy prices, prices of restructuring transactions and different prices incurred in reference to the separation will exceed Otis’ estimates; and (21) the impression of the separation on Otis’ companies, assets, programs, procedures and controls, diversion of administration’s consideration and the impression on relationships with clients, suppliers, workers and different enterprise counterparties. The above record of things is just not exhaustive or essentially so as of significance. For added data on figuring out components that will trigger precise outcomes to fluctuate from these said in forward-looking statements, see Otis’ registration statements on Kind 10 and Kind S-3 and the reviews of Otis on Varieties 10-Okay, 10-Q and 8-Okay filed with or furnished to the SEC infrequently. Any forward-looking assertion speaks solely as of the date on which it’s made, and Otis assumes no obligation to replace or revise such assertion, whether or not on account of new data, future occasions or in any other case, besides as required by relevant legislation.