01—Abstract
Summary
Summary of the 10-K filed February 3, 2023. Cited figures are marked; the original filing is the authoritative source.
Otis Worldwide Corporation's 2022 Form 10-K reports net sales of $13.69 billiona, down from $14.30 billion in 2021, with operating profit of $2.03 billion versus $2.11 billion.
Net income attributable to Otis was $1.25 billionb, roughly flat with $1.25 billion in 2021 (1,246 million). The filing attributes the sales decline mainly to foreign currency translation (-5.9%) and includes organic volume growth of 2.5%. Service was the larger segment at $7.82 billion in sales and $1.79 billion in operating profit (22.9% margin), while New Equipment sales fell to $5.86 billion with operating profit of $358 million (6.1% margin), affected by a 10% decline in China and higher commodity costs of $107 million, primarily steel.
The company completed the acquisition of the remaining Zardoya Otis shares in 2022 through a tender offer, which required approximately €1.5 billion for the initial tranche and about €150 million for the remainder, and it sold its Russia business in July 2022 with total losses and conflict-related charges of $28 millionc. Total debt stood at $6.77 billion at year-end, with cash of $1.19 billion, and shareholders' equity was a deficit of $4.87 billion. Cash flow from operations was $1.56 billion, and the company repurchased $850 million of common stock while paying $465 million in common dividends.
A new $2.0 billiond share repurchase program was authorized on December 1, 2022. Key risks highlighted include exposure to China (about 35% of New Equipment sales), foreign currency fluctuations (about 72% of net sales from international operations), the Russia-Ukraine conflict, and ongoing German tax litigation involving approximately €215 million of disallowed tax benefits.
02—Key points
Key Highlights
- Net sales of $13.69 billion in 2022, down 4.3% year over year, with foreign currency translation the main drag at (5.9)%
- Service segment net sales of $7.82 billion and operating profit of $1.79 billion (22.9% margin); New Equipment net sales of $5.86 billion and operating profit of $358 million (6.1% margin)
- Operating profit of $2.03 billion, versus $2.11 billion in 2021; net income attributable to Otis of $1.25 billion, versus $1.25 billion in 2021
- Completed the Zardoya Otis tender offer, bringing ownership to 100%; the Tender Offer financing and related cash settlement totaled $1.80 billion (€1.66 billion) in 2022
- Returned capital through $850 million of share repurchases and $465 million of common dividends; a new $2.0 billion repurchase program was approved December 1, 2022
- Total debt of $6.77 billion and cash of $1.19 billion at December 31, 2022; shareholders' equity was a deficit of $4.87 billion
- Remaining business exposures include China (approximately 35% of New Equipment net sales), the Russia-Ukraine conflict, and German tax litigation over approximately €215 million of disallowed tax benefits
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 3, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $13.69B$14.30B | −4.3% |
| R&D Expenses | $150.00M$159.00M | −5.7% |
| SG&A Expenses | $1.76B$1.95B | −9.5% |
| Operating Expenses | $11.68B$12.21B | −4.4% |
| Operating Income | $2.03B$2.11B | −3.6% |
| Interest Expense | $140.00M$136.00M | +2.9% |
| Net Income | $1.25B$1.25B | +0.6% |
| EPS (Basic) | $2.98$2.91 | +2.4% |
| EPS (Diluted) | $2.96$2.89 | +2.4% |
| Shares Outstanding (Basic) | 420.00M427.70M | −1.8% |
| Shares Outstanding (Diluted) | 423.00M431.40M | −1.9% |
05—Questions
Frequently Asked Questions
How did Otis's revenue and profitability change in 2022?
Net sales fell to $13.69 billion from $14.30 billion, a 4.3% decline, mainly because of foreign currency translation (-5.9%) and despite organic volume growth of 2.5%. Operating profit declined to $2.03 billion from $2.11 billion, and net income attributable to Otis Worldwide Corporation was $1.25 billion, roughly flat with 2021.
Which segment drives Otis's results?
The Service segment generated $7.82 billion of 2022 net sales (57% of the total) and $1.79 billion of operating profit, a 22.9% margin. New Equipment generated $5.86 billion of sales but only $358 million of operating profit, a 6.1% margin, which the filing attributes to a 10% decline in China and higher commodity costs of $107 million, mainly steel.
What did Otis do with its capital in 2022?
Otis completed the tender offer for the Zardoya Otis shares it did not own, paying about $1.80 billion in cash. It also repurchased $850 million of common stock and paid $465 million in common dividends. Its board authorized a new $2.0 billion share repurchase program on December 1, 2022, none of which had been used by year-end.
What are the main risks flagged in the filing?
The filing highlights China's importance (about 35% of New Equipment net sales), foreign currency exposure (about 72% of net sales from international operations), the Russia-Ukraine conflict and supply chain disruptions, and the German tax litigation over approximately €215 million of disallowed tax benefits. The company also cites exposure to indemnities under its separation agreements with RTX and Carrier.
How much debt does Otis carry and what are its credit ratings?
Total debt was $6.77 billion at December 31, 2022, including $670 million of short-term borrowings and current portion of long-term debt, and long-term debt of $6.10 billion. The company states it holds investment grade credit ratings from Moody's and S&P, though it cannot assure it will maintain them.
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