Exhibit 13

Five-Year Summary

(dollars in millions, except per share amounts; shares in millions)	2019			2018			2017			2016			2015
For The Year
Net sales	$	77,046		$	66,501		$	59,837		$	57,244		$	56,098
Research and development	3,015			2,462			2,427			2,376			2,262
Restructuring costs	425			307			253			290			396
Net income from continuing operations 1	5,948			5,654			4,920			5,436			4,356
Net income from continuing operations attributable to common shareowners 1	5,537			5,269			4,552			5,065			3,996
Basic earnings per share—Net income from continuing operations attributable to common shareowners	6.48			6.58			5.76			6.19			4.58
Diluted earnings per share—Net income from continuing operations attributable to common shareowners	6.41			6.50			5.70			6.13			4.53
Cash dividends per common share	2.94			2.84			2.72			2.62			2.56
Average number of shares of Common Stock outstanding:
Basic 2	855			800			790			818			873
Diluted 2	864			810			799			826			883
Cash flows provided by operating activities of continuing operations	8,883			6,322			5,631			6,412			6,755
Capital expenditures 3	2,256			1,902			2,014			1,699			1,652
Acquisitions, including debt assumed & equity issued	56			31,142			231			712			556
Repurchases of Common Stock 3	151			325			1,453			2,254			10,000
Dividends paid on Common Stock (excluding ESOP)	2,442			2,170			2,074			2,069			2,184
At Year End
Working capital 4	$	2,911		$	4,135		$	8,467		$	6,644		$	4,088
Total assets	139,716			134,211			96,920			89,706			87,484
Long-term debt, including current portion 5	41,284			44,068			27,093			23,300			19,499
Total debt 5	43,648			45,537			27,485			23,901			20,425
Total debt to total capitalization 5	50		%	53		%	47		%	45		%	41		%
Total equity 5, 6	44,231			40,610			31,421			29,169			28,844
Number of employees 7	243,200			240,200			204,700			201,600			197,200

Note 1 2019 amounts include pre-tax charges associated with the Company's intention to separate its commercial business of approximately $600 million and tax charges of approximately $730 million. 2018 amounts include unfavorable tax charges of approximately $744 million primarily related to non U.S. taxes that will become due when earnings of certain international subsidiaries are remitted, a $300 million pre-tax charge resulting from customer contract matters, partially offset by a $799 million pre-tax gain on the sale of Taylor. 2017 amounts include unfavorable tax charges of approximately $690 million related to U.S. tax reform legislation enacted in December, 2017, commonly referred to as the Tax Cuts and Jobs Act of 2017 (TCJA) and a $196 million pre-tax charge resulting from customer contract matters, partially offset by pre-tax gains of approximately $500 million on sales of available for sale securities. 2016 amounts include a $423 million pre-tax pension settlement charge resulting from defined benefit plan de-risking actions. 2015 amounts include pre-tax charges of: $867 million as a result of a settlement with the Canadian government, $295 million from customer contract negotiations at Collins Aerospace Systems, and $237 million related to pending and future asbestos claims.

Note 2 Increase in average number of Common Stock outstanding is due to additional shares issued in connection with the Rockwell Collins acquisition.

Note 3 The decrease in 2019 is due to restrictions arising from the pending merger transaction with Raytheon. The decrease in share repurchases in 2018 is due to the temporary suspension of activity in connection with the acquisition of Rockwell Collins announced on September 4, 2017, excluding activity relating to our employee savings plans. Share repurchases in 2015 include share repurchases under accelerated repurchase agreements of $2.6 billion in the first quarter of 2015 and $6.0 billion in the fourth quarter of 2015.

Note 4 Working capital in 2019 includes tax costs accrued associated with the Company's intention to separate its commercial business of $634 million and Operating lease liabilities, current of $544 million. Working capital in 2018 includes the addition of contract assets and liabilities of $3.5B and $5.7B, respectively in accordance with the New Revenue Standard as well as an increase in current borrowings of $1.8 billion. Working capital in 2015 includes approximately $2.4 billion of taxes payable related to the gain on the sale of Sikorsky, which were paid in 2016. 2015 working capital also reflects the reclassification of current deferred tax assets and liabilities to non-current assets and liabilities in connection with the adoption of Accounting Standards Update 2015-17.

Note 5 The decrease in debt to total capitalization ratio primarily reflects debt repayments in 2019. The increase in the 2018 debt to total capitalization ratio primarily reflects additional borrowings in 2018 used to finance the acquisition of Rockwell Collins. The increase in the 2017 and 2016 debt to total capitalization ratio primarily reflects additional borrowings to fund share repurchases, the 2017 discretionary pension contributions, and for general corporate purposes.

Note 6 The increase in total equity in 2018 is due to UTC common stock issued as Merger Consideration for Rockwell Collins.

Note 7 The increase in employees in 2018 is due to the addition of approximately 30,000 of Rockwell Collins employees.

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Management's Discussion and Analysis of Financial Condition and Results of Operations

BUSINESS OVERVIEW

We are a global provider of high technology products and services to the building systems and aerospace industries. Our operations for the periods presented herein are classified into four principal business segments: Otis, Carrier, Pratt & Whitney, and Collins Aerospace Systems. Otis and Carrier are referred to as the "commercial businesses," while Pratt & Whitney and Collins Aerospace Systems are referred to as the "aerospace businesses."

On June 9, 2019, UTC entered into a merger agreement with Raytheon Company (Raytheon) providing for an all-stock merger of equals transaction.  The Raytheon merger agreement provides, among other things, that each share of Raytheon common stock issued and outstanding immediately prior to the closing of the Raytheon merger (except for shares held by Raytheon as treasury stock) will be converted into the right to receive 2.3348 shares of UTC common stock.  Upon the closing of the Raytheon merger, Raytheon will become a wholly-owned subsidiary of UTC, and UTC will change its name to Raytheon Technologies Corporation. On October 11, 2019, the shareowners of each of UTC and Raytheon approved the proposals necessary to complete the Raytheon merger. The Raytheon merger is expected to close early in the second quarter of 2020 and is subject to customary closing conditions, including receipt of required regulatory approvals, as well as the completion of UTC's separation of its Otis and Carrier businesses.

As has been previously disclosed, in November 2018, the Company announced its intention to separate into three independent companies. The separation will result in three global, industry-leading companies:  

United Technologies, comprised of Collins Aerospace Systems and Pratt & Whitney, will be the preeminent systems supplier to the aerospace and defense industry;

•Otis, the world's leading manufacturer of elevators, escalators and moving walkways; and

•Carrier, a global provider of HVAC, refrigeration, building automation, fire safety and security products with leadership positions across its portfolio.

The proposed separations are expected to be effected through spin-offs of Otis and Carrier that are intended to be tax-free for the Company’s shareowners for U.S. federal income tax purposes, and are expected to be completed early in the second quarter of 2020. Separation of Otis and Carrier from UTC via spin-off transactions will be subject to the satisfaction of customary conditions, including, among others, final approval by the Company’s Board of Directors, receipt of tax rulings and a tax opinion from external counsel, the filing with the Securities and Exchange Commission (SEC) and effectiveness of Form 10 registration statements, and satisfactory completion of financing (subject to UTC’s agreement to consummate the distributions pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement discussed below).

        On November 26, 2018, we completed the acquisition of Rockwell Collins (the "Rockwell Acquisition"), a leader in aviation and high-integrity solutions for commercial and military customers as well as leading-edge avionics, flight controls, aircraft interior and data connectivity solutions. The total aggregate consideration payable in the Rockwell Acquisition was $15.5 billion in cash ($14.9 billion net of cash acquired) and 62.2 million shares of Company common stock. In addition, $7.8 billion of Rockwell Collins debt was outstanding at the time of the Rockwell Acquisition. Refer to Note 2 of the Consolidated Financial Statements for additional discussion on the Rockwell Acquisition.

The commercial businesses generally serve customers in the worldwide commercial and residential property industries, with Carrier also serving customers in the commercial and transport refrigeration industries. The aerospace businesses serve commercial and government aerospace customers in both the original equipment and aftermarket parts and services markets. Our consolidated net sales were derived from the commercial and aerospace businesses as follows:

	2019		2018		2017
Commercial and industrial	41	%	47	%	50	%
Military aerospace and space	17	%	14	%	13	%
Commercial aerospace	42	%	39	%	37	%
	100	%	100	%	100	%

Our consolidated net sales were derived from original equipment manufacturing (OEM) and aftermarket parts and services as follows:

	2019		2018		2017
OEM	54	%	54	%	53	%
Aftermarket parts and services	46	%	46	%	47	%
	100	%	100	%	100	%

Our worldwide operations can be affected by industrial, economic and political factors on both a regional and global level. Our operations include original equipment manufacturing and extensive related aftermarket parts and services in both our

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commercial and aerospace businesses. Our business mix also reflects the combination of shorter cycles at Carrier and in our commercial aerospace spares businesses, and longer cycles at Otis and in our aerospace OEM and aftermarket maintenance businesses. Our customers are in both the public and private sectors, and our businesses reflect an extensive geographic diversification that has evolved with continued globalization. Refer to Note 20 of the Consolidated Financial Statements for additional discussion of sales attributed to geographic regions.

As part of our growth strategy, we invest in businesses in certain countries that carry high levels of currency, political and/or economic risk, such as Argentina, Brazil, China, India, Indonesia, Mexico, Poland, Russia, South Africa, Turkey, Ukraine and countries in the Middle East and Central Asia. As of December 31, 2019, the net assets in any one of these countries did not exceed 5% of consolidated shareowners' equity.

In a referendum on June 23, 2016, voters in the United Kingdom (the U.K.) voted in favor of the U.K.'s exiting the European Union (the EU). The manner in which the U.K. decides to exit the EU could have negative macroeconomic consequences. Our 2019 full year sales in and from the U.K. were approximately $4 billion and represented less than 5% of our overall sales, and we do not believe the U.K.'s withdrawal from the EU will significantly impact our businesses in the near term.

Organic sales growth was 5% in 2019, reflecting growth across all segments driven by:

•Higher sales across all channels at Pratt & Whitney;

•Higher commercial aftermarket and military sales, partially offset by lower commercial aerospace OEM sales at Collins Aerospace Systems;

•Higher service sales across all regions and higher new equipment sales driven by growth in Asia at Otis;

•Higher commercial and residential HVAC sales at Carrier.

We continue to invest in new platforms and new markets to position the Company for long-term growth, while remaining focused on innovation, structural cost reduction, disciplined capital allocation and execution to meet or exceed customer and shareowner commitments.

As discussed below in "Results of Operations," operating profit in both 2019 and 2018 includes the impact from activities that are not expected to recur often or that are not otherwise reflective of the underlying operations, such as the beneficial impact of net gains from sales of investments, the unfavorable impact of contract matters with customers, transaction, acquisition and integration costs, costs associated with the Company's intention to separate its commercial businesses, and other significant non-recurring and non-operational items. Our earnings growth strategy contemplates earnings from organic sales growth, including growth from new product development and product improvements, structural cost reductions, operational improvements, and incremental earnings from our investments in acquisitions.

        In total, our investments in businesses in 2019 and 2018 totaled $56 million and $31,142 million, (including debt assumed of $7,784 million and stock issued of $7,960 million) respectively. Our investments in businesses in 2019 included a number of small acquisitions primarily at Otis. In addition to Rockwell Collins, acquisitions completed in 2018 primarily include an acquisition at Carrier and at Pratt & Whitney.

Both acquisition and restructuring costs associated with business combinations are expensed as incurred. Depending on the nature and level of acquisition activity, earnings could be adversely impacted due to acquisition and restructuring actions initiated in connection with the integration of businesses acquired. For additional discussion of acquisitions and restructuring, see "Liquidity and Financial Condition," "Restructuring Costs" and Notes 2 and 13 to the Consolidated Financial Statements.

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RESULTS OF OPERATIONS

Net Sales

(dollars in millions)	2019			2018			2017
Net sales	$	77,046		$	66,501		$	59,837
Percentage change year-over-year	16		%	11		%	5		%

The factors contributing to the total percentage change year-over-year in total net sales are as follows:

	2019		2018
Organic volume	5	%	8	%
Foreign currency translation	(1)	%	1	%
Acquisitions and divestitures, net	12	%	1	%
Other	—	%	1	%
Total % Change	16	%	11	%

All four segments experienced organic sales growth during 2019. Pratt & Whitney sales grew 8% organically, reflecting higher military, commercial OEM, and commercial aftermarket sales. Collins Aerospace Systems grew 6% organically, driven by higher commercial aftermarket and military sales, partially offset by lower commercial aerospace OEM sales. Organic sales growth of 5% at Otis reflects higher service sales, driven by broad-based growth across all regions, and higher new equipment sales driven by growth in Asia. Carrier sales grew 1% organically, driven by higher commercial and residential HVAC sales. The 12% increase in Acquisitions and divestitures, net primarily reflects the increase in sales attributed to the Rockwell Acquisition.

All four segments experienced organic sales growth during 2018. Pratt & Whitney sales grew 14% organically, reflecting higher commercial aftermarket, commercial OEM, and military sales. Collins Aerospace Systems grew 8% organically, driven by higher commercial aftermarket and military sales, and higher commercial OEM sales. Organic sales growth of 6% at Carrier was driven by growth in North America residential HVAC, global commercial HVAC, and transport refrigeration sales. Otis sales grew 3% organically, reflecting higher service sales in North America and Asia, and higher new equipment sales in Europe, Asia excluding China, and North America, partially offset by a decline in China.

Cost of Products and Services Sold 

(dollars in millions)	2019			2018			2017
Total cost of products and services sold	$	57,065		$	49,985		$	44,201
Percentage change year-over-year	14		%	13		%	7		%

The factors contributing to the total percentage change year-over-year in total cost of products and services sold are as follows:

	2019		2018
Organic volume	5	%	9	%
Foreign currency translation	(1)	%	1	%
Acquisitions and divestitures, net	11	%	1	%
Other	(1)	%	2	%
Total % Change	14	%	13	%

The organic increase in total cost of products and services sold in 2019 was primarily driven by the organic sales increases noted above. The 11% increase in Acquisitions and divestitures, net primarily reflects the increase in cost of products and services sold attributed to the Rockwell Acquisition. The 1% decline in Other primarily reflects the absence of a prior year customer contract settlement at Pratt & Whitney (1%).

The organic increase in total cost of products and services sold in 2018 was primarily driven by the organic sales increases noted above. The 2% increase in Other primarily reflects the impact of the adoption of the New Revenue Standard (1%) and a customer contract settlement at Pratt & Whitney (1%), partially offset by the absence of a prior year customer contract matter at Pratt & Whitney.

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Gross Margin

(dollars in millions)	2019			2018			2017
Gross margin	$	19,981		$	16,516		$	15,636
Percentage of net sales	25.9		%	24.8		%	26.1		%

The 110 basis point increase in gross margin as a percentage of sales in 2019, includes a 230 basis point increase at Collins Aerospace Systems driven by higher commercial aftermarket volumes and cost reduction, partially offset by adverse commercial OEM mix. Pratt & Whitney's gross margin increased 120 basis points primarily reflecting continued year-over-year cost reduction and favorable mix on large commercial engine shipments. Gross margin at Otis increased 30 basis points largely driven by favorable service contribution. These increases were partially offset by a 30 basis point decline in Carrier's gross margin primarily driven by unfavorable mix, the absence of a favorable prior year contract adjustment related to a large commercial project at Carrier, and the unfavorable year-over-year impact resulting from the revaluation of certain long-term liabilities.

The 130 basis point decrease in gross margin as a percentage of sales in 2018, includes a 300 basis point decline in Pratt & Whitney's gross margin driven by the unfavorable year-over-year impact of customer contract matters and higher negative engine margin from higher engine deliveries. Collins Aerospace Systems' gross margin declined 40 basis points as the benefits of higher commercial aftermarket volumes and cost reduction were more than offset by adverse commercial OEM and military OEM mix, and higher warranty expense. Gross margin at Otis declined 140 basis points largely driven by unfavorable price and mix, primarily in China. These declines were partially offset by a 40 basis point increase in Carrier's gross margin as favorable pricing and the favorable year-over-year impact of contract adjustments related to a large commercial project and a prior year product recall program were partially offset by increased commodities and logistics costs.

Research and Development

(dollars in millions)	2019			2018			2017
Company-funded	$	3,015		$	2,462		$	2,427
Percentage of net sales	3.9		%	3.7		%	4.1		%
Customer-funded	$	2,283		$	1,517		$	1,514
Percentage of net sales	3.0		%	2.3		%	2.5		%

Research and development spending is subject to the variable nature of program development schedules and, therefore, year-over-year variations in spending levels are expected. The majority of the company-funded spending is incurred by the aerospace businesses and relates largely to the next generation engine product family at Pratt & Whitney and systems being developed to support new aircraft and other program introductions at Collins Aerospace Systems. In 2019, company-funded research and development increased 22% over the prior year. This increase was primarily driven by the impact of the Rockwell Acquisition (18%). Excluding this impact, an increase in company-funded research and development at Collins Aerospace Systems (3%) was driven by higher spend across various commercial programs. Company-funded research and development expense at Pratt & Whitney also increased (2%) driven by higher spend across various commercial programs partially offset by a decline in military program spend.

Customer-funded research and development increased 50% over the prior year, primarily reflecting the impact of the Rockwell Acquisition (53%). Excluding this impact, customer-funded research and development declined year-over-year as a decrease at Pratt & Whitney (4%), primarily driven by lower research and development expenses on military development programs, was partially offset by an increase at Collins Aerospace Systems (2%), primarily driven by higher expenses on various military development programs.

In 2018, company-funded research and development increased 1% over the prior year. This increase was primarily driven by Collins Aerospace Systems (1%) as higher spend across various commercial programs was largely offset by the deferral of certain development costs as contract fulfillment costs in accordance with the New Revenue Standard. Company-funded research and development expense at Pratt & Whitney was consistent with the prior year.

Customer-funded research and development in 2018 was consistent with 2017, as a decrease at Collins Aerospace Systems, primarily driven by the deferral of certain development costs as contract fulfillment costs in accordance with the New Revenue Standard, was offset by an increase at Pratt & Whitney, primarily driven by higher research and development expenses on military development programs.

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Selling, General and Administrative

(dollars in millions)	2019			2018			2017
Selling, general and administrative	$	8,521		$	7,066		$	6,429
Percentage of net sales	11.1		%	10.6		%	10.7		%

Selling, general and administrative expenses increased 21% in 2019. This increase primarily reflects the impact of incremental selling, general and administrative expenses resulting from the Rockwell Acquisition (9%), costs associated with the Company's intention to separate its commercial businesses (8%), and costs associated with the Raytheon merger (1%). In addition, 2019 reflects higher expenses at Pratt & Whitney (1%) driven by increased headcount and employee compensation related expenses and costs to support higher volumes as well as higher restructuring costs; higher expenses at Collins Aerospace Systems (1%) primarily driven by increased headcount and employee compensation related expenses partially offset by synergy capture related to the Rockwell Acquisition; higher expenses at Otis (1%) resulting from higher labor and information technology cost; and an increase at Carrier (1%) primarily driven by higher costs related to productivity initiatives and higher employee compensation related expenses.

Selling, general and administrative expenses increased 10% in 2018, but decreased 10 basis points as a percentage of net sales. The increase reflects the impact of incremental selling, general and administrative expenses resulting from the acquisition of Rockwell Collins (1%). In addition, 2018 reflects higher expenses at Collins Aerospace Systems (3%) primarily driven by increased headcount and employee compensation related expenses; an increase at Carrier (2%) primarily driven by employee compensation related expenses; higher expenses at Pratt & Whitney (1%) driven by increased headcount and employee compensation related expenses and costs to support higher volumes; and higher expenses at Otis (1%) resulting from higher labor and information technology costs. The remaining increase includes transaction costs related to the acquisition of Rockwell Collins and the proposed separation of our commercial businesses into independent entities.

We are continuously evaluating our cost structure and have implemented restructuring actions as a method of keeping our cost structure competitive. As appropriate, the amounts reflected above include the beneficial impact of restructuring actions on Selling, general and administrative expenses. See Note 13 "Restructuring Costs" and the "Restructuring Costs" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" for further discussion.

Other Income, Net

(dollars in millions)	2019		2018		2017
Other income, net	$	521	$	1,565	$	1,358

Other income, net includes the operational impact of equity earnings in unconsolidated entities, royalty income, foreign exchange gains and losses as well as other ongoing and infrequently occurring items. In 2019, the year-over-year decrease in Other income, net (67%) primarily reflects the absence of the prior year gain on the sale of Taylor Company (51%), the impairment of an investment at Carrier (7%) and the net unfavorable year-over-year impact of foreign exchange gains and losses (5%).

In 2018, the year-over-year increase in Other income, net (15%) is primarily driven by the gain on the sale of Taylor Company (59%), partially offset by the absence of a prior year gain from the sale of Carrier's investments in Watsco, Inc. (28%), lower year-over-year gains on the sale of securities (11%), an impairment of assets related to a previously acquired Collins Aerospace Systems business (4%) and the absence of a prior year gain on the sale of a Carrier business (2%).

Interest Expense, Net

(dollars in millions)	2019			2018			2017
Interest expense	$	1,773		$	1,225		$	1,017
Interest income	(162)			(187)			(108)
Interest expense, net	$	1,611		$	1,038		$	909
Average interest expense rate - average outstanding borrowings during the year:
Short-term borrowings	1.9		%	1.5		%	1.1		%
Total debt	3.7		%	3.5		%	3.5		%
Average interest expense rate - outstanding borrowings as of December 31:
Short-term borrowings	3.1		%	1.2		%	2.3		%
Total debt	3.7		%	3.5		%	3.5		%

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Interest expense, net increased 55% in 2019 as compared with 2018. The increase in interest expense primarily reflects interest on debt acquired from the Rockwell Collins acquisition and the impact of the August 16, 2018 issuance of notes representing $11 billion in aggregate principal. The average maturity of our long-term debt at December 31, 2019 is approximately 10 years. The decrease in interest income in 2019 as compared to 2018 primarily reflects the absence of interest earned on higher cash balances held in the prior year in advance of funding the Rockwell Acquisition.

Interest expense, net increased 14% in 2018 as compared with 2017. The increase in interest expense reflects the impact of the August 16, 2018 issuance of notes representing $11 billion in aggregate principal; the May 4, 2017 issuance of notes representing $4 billion in aggregate principal; and the May 18, 2018 issuance of Euro-denominated notes representing €2 billion in aggregate principal. These increases were partially offset by the favorable impact of the repayment at maturity of the following: 1.800% notes in June 2017 representing $1.5 billion in aggregate principal; the 6.8% notes in February 2018 representing $99 million of aggregate principal; the Euro-denominated floating rate notes in February 2018 representing €750 million in aggregate principal; and the 1.778% notes in May 2018 representing $1.1 billion of aggregate principal. The average maturity of our long-term debt at December 31, 2018 is approximately 11 years.

The $11 billion in aggregate principal amount of notes issued on August 16, 2018 was primarily used to fund the cash consideration in the acquisition of Rockwell Collins and related fees, expenses and other amounts. The increase in interest income in 2018 as compared with 2017 primarily reflects interest earned on higher cash balances, including interest earned on cash from the $11 billion of notes issued and held prior to funding the Rockwell Acquisition.

The year-over-year increase in the average interest expense rate for short-term borrowings was primarily driven by increased borrowings under our term credit agreement. In 2018, the year-over-year increase in the average interest expense rate for short-term borrowings was primarily driven by increases in LIBOR rates.

Income Taxes

	2019		2018		2017
Effective income tax rate	27.8	%	31.7	%	36.6	%

The 2019 effective tax rate includes $729 million of income tax charges associated with the Company’s portfolio separation transactions, offset in part by amounts associated with the conclusion of the audit by the Examination Division of the Internal Revenue Service for the UTC 2014, 2015 and 2016 tax years, the filing by a subsidiary of the Company to participate in an amnesty program offered by the Italian Tax Authority.

On December 22, 2017 Public Law 115-97 “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” was enacted. This law is commonly referred to as the Tax Cuts and Jobs Act of 2017 (TCJA).

The 2018 effective tax rate reflects a net charge of $744 million of TCJA related adjustments. The amount primarily relates to accounting completed under SAB 118 for non-U.S. taxes that will become due when previously reinvested earnings of certain international subsidiaries are remitted.

The 2017 effective tax rate reflects a tax charge of $690 million attributable to the passage of the TCJA. This amount relates to U.S. income tax attributable to previously undistributed earnings of UTC's international subsidiaries and equity investments, net of foreign tax credits, and the revaluation of U.S. deferred income taxes.

The effective income tax rate for 2017 also includes tax benefits associated with lower tax rates on international earnings and the expiration of statutes of limitations during 2017 resulted in a favorable adjustment of $55 million largely offset by the unfavorable impact related to a retroactive Quebec tax law change.

For additional discussion of income taxes and the effective income tax rate, see "Critical Accounting Estimates—Income Taxes" and Note 11 to the Consolidated Financial Statements.

Net Income Attributable to Common Shareowners from Continuing Operations

(dollars in millions, except per share amounts)	2019		2018		2017
Net income from continuing operations attributable to common shareowners	$	5,537	$	5,269	$	4,552
Diluted earnings per share from continuing operations	$	6.41	$	6.50	$	5.70

To help mitigate the volatility of foreign currency exchange rates on our operating results, we maintain foreign currency hedging programs, the majority of which are entered into by Pratt & Whitney Canada (P&WC). In 2019, foreign currency, including hedging at P&WC, had a favorable impact on our consolidated operational results of $0.06 per diluted share. In 2018, foreign currency, including hedging at P&WC, had a favorable impact on our consolidated operational results of $0.02 per diluted share. In 2017, foreign currency, including hedging at P&WC, had a favorable impact on our consolidated operational

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results of $0.13 per diluted share. For additional discussion of foreign currency exposure, see "Market Risk and Risk Management—Foreign Currency Exposures."

Net income from continuing operations attributable to common shareowners for the year ended December 31, 2019 includes restructuring charges, net of tax benefit, of $317 million ($425 million pre-tax) as well as a net charge for significant non-operational and/or nonrecurring items, including the impact of taxes, of $1,282 million. Non-operational and/or nonrecurring items primarily include costs associated with the Company's intention to separate its commercial businesses, amortization of an inventory fair value adjustment associated with the Rockwell Acquisition, an impairment of an investment, transaction expenses associated with the Raytheon Merger, pension curtailment costs, and transaction and integration costs related to the Rockwell Acquisition. The effect of restructuring charges and nonrecurring items on diluted earnings per share for the year ended December 31, 2019 was a charge of $1.85 per share.

Net income from continuing operations attributable to common shareowners for the year ended December 31, 2018 includes restructuring charges, net of tax benefit, of $228 million ($307 million pre-tax) as well as a net charge for significant non-operational and/or nonrecurring items, including the impact of taxes, of $668 million. Non-operational and/or nonrecurring items include a tax charge in connection with the passage of the TCJA as described in Note 11 and the unfavorable impact of a customer contract matter at Pratt & Whitney, partially offset by a gain on Carrier's sale of Taylor Company. The effect of restructuring charges and nonrecurring items on diluted earnings per share for the year ended December 31, 2018 was a charge of $1.11 per share.

Net income from continuing operations attributable to common shareowners for the year ended December 31, 2017 includes restructuring charges, net of tax benefit, of $176 million ($253 million pre-tax) as well as the net unfavorable impact of significant non-operational and/or nonrecurring items, net of tax, of $587 million. Non-operational and/or nonrecurring items include a tax charge in connection with the passage of the TCJA as described in Note 11, the unfavorable impact of customer contract matters at Pratt & Whitney, and the unfavorable impact of a product recall program at Carrier, partially offset by gains resulting from Carrier's sale of its investments in Watsco, Inc. The effect of restructuring charges and nonrecurring items on diluted earnings per share for 2017 was a charge of $0.95 per share.

RESTRUCTURING COSTS

(dollars in millions)	2019		2018		2017
Restructuring costs	$	425	$	307	$	253

Restructuring actions are an essential component of our operating margin improvement efforts and relate to existing and recently acquired operations. Charges generally arise from severance related to workforce reductions, facility exit and lease termination costs associated with the consolidation of field and manufacturing operations and costs to exit legacy programs. We continue to closely monitor the economic environment and may undertake further restructuring actions to keep our cost structure aligned with the demands of the prevailing market conditions.

2019 Actions. During 2019, we recorded net pre-tax restructuring charges of $321 million relating to ongoing cost reduction actions initiated in 2019. We are targeting to complete in 2020 and 2021 the majority of the remaining workforce and facility related cost reduction actions initiated in 2019. Approximately 90% of the total pre-tax charge will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. During 2019, we had cash outflows of approximately $199 million related to the 2019 actions. We expect to incur additional restructuring and other charges of $123 million to complete these actions. We expect recurring pre-tax savings to increase over the two-year period subsequent to initiating the actions to approximately $389 million annually, of which, approximately $125 million was realized in 2019.

2018 Actions. During 2019 and 2018, we recorded net pre-tax restructuring charges of $46 million and $207 million, respectively, for actions initiated in 2018. We are targeting to complete in 2020 the majority of the remaining workforce and all facility related cost reduction actions initiated in 2018. Approximately 96% of the total pre-tax charge will require cash payments, which we have and expect to continue to fund with cash generated from operations. During 2019, we had cash outflows of approximately $143 million related to the 2018 actions. We expect to incur additional restructuring charges of $5 million to complete these actions. We expect recurring pre-tax savings to increase over the two-year period subsequent to initiating the actions to approximately $260 million annually.

In addition, during 2019, we recorded net pre-tax restructuring costs totaling $58 million for restructuring actions initiated in 2017 and prior. For additional discussion of restructuring, see Note 13 to the Consolidated Financial Statements.

8

SEGMENT REVIEW

	Net Sales						Operating Profits						Operating Profit Margin
(dollars in millions)	2019		2018		2017		2019		2018		2017		2019		2018		2017
Otis	$	13,113	$	12,904	$	12,341	$	1,948	$	1,915	$	2,002	14.9	%	14.8	%	16.2	%
Carrier	18,608		18,922		17,812		2,697		3,777		3,165		14.5	%	20.0	%	17.8	%
Pratt & Whitney	20,892		19,397		16,160		1,668		1,269		1,300		8.0	%	6.5	%	8.0	%
Collins Aerospace Systems	26,028		16,634		14,691		4,100		2,303		2,191		15.8	%	13.8	%	14.9	%
Total segment	78,641		67,857		61,004		10,413		9,264		8,658		13.2	%	13.7	%	14.2	%
Eliminations and other	(1,595)		(1,356)		(1,167)		(932)		(236)		(81)
General corporate expenses	—		—		—		(515)		(475)		(439)
Consolidated	$	77,046	$	66,501	$	59,837	$	8,966	$	8,553	$	8,138	11.6	%	12.9	%	13.6	%

Commercial Businesses

The financial performance of our commercial businesses can be influenced by a number of external factors including fluctuations in residential and commercial construction activity, regulatory changes, interest rates, labor costs, foreign currency exchange rates, customer attrition, raw material and energy costs, credit markets and other global and political factors. Carrier's financial performance can also be influenced by production and utilization of transport equipment, and weather conditions for its residential business. Geographic and industry diversity across the commercial businesses help to balance the impact of such factors on our consolidated operating results, particularly in the face of uneven economic growth. At constant currency, Otis new equipment orders were consistent with the prior year as order growth in Asia (3%) and Europe (2%) was offset by declines in North America (3%) and the Middle East (20%). At constant currency and excluding the effect of acquisitions and divestitures, Carrier equipment orders for 2019 decreased 8% in comparison to 2018 driven by a decline in global refrigeration (32%). Global HVAC and fire & security products equipment orders for 2019 were consistent with the prior year.

Total commercial business sales generated outside the U.S., including U.S. export sales, were 61% and 62% in 2019 and 2018, respectively. The following table shows sales generated outside the U.S., including U.S. export sales, for each of the commercial business segments:

	2019		2018
Otis	73	%	73	%
Carrier	52	%	54	%

9

Otis is the world’s largest elevator and escalator manufacturing, installation and service company. Otis designs, manufactures, sells and installs a wide range of passenger and freight elevators as well as escalators and moving walkways. In addition to new equipment, Otis provides modernization products to upgrade elevators and escalators as well as maintenance and repair services for both its products and those of other manufacturers. Otis serves customers in the commercial, residential and infrastructure property sectors around the world. Otis sells direct and through sales representatives and distributors.

							Total Increase (Decrease) Year-Over-Year for:
(dollars in millions)	2019		2018		2017		2019 Compared with 2018				2018 Compared with 2017
Net Sales	$	13,113	$	12,904	$	12,341	$	209	2	%	$	563	5	%
Cost of Sales	9,291		9,192		8,612		99		1	%	580		7	%
	3,822		3,712		3,729
Operating Expenses and Other	1,874		1,797		1,727
Operating Profits	$	1,948	$	1,915	$	2,002	$	33	2	%	$	(87)	(4)	%

	Factors Contributing to Total % Increase (Decrease) Year-Over-Year in:
	2019						2018
	Net Sales		Cost of Sales		Operating Profits		Net Sales		Cost of Sales		Operating Profits
Organic / Operational	5	%	5	%	4	%	3	%	5	%	(4)	%
Foreign currency translation	(3)	%	(4)	%	(4)	%	1	%	1	%	2	%
Restructuring costs	—		—		1	%	—		—		(1)	%
Other	—		—		1	%	1	%	1	%	(1)	%
Total % change	2	%	1	%	2	%	5	%	7	%	(4)	%

2019 Compared with 2018

The organic sales increase of 5% primarily reflects higher service sales (3%), driven by broad-based growth across all regions, and higher new equipment sales (2%) driven by growth in Asia.

The operational profit increase of 4% was driven by:

•margin contribution from the higher sales volumes noted above (6%)

•favorable price and mix (2%)

•favorable productivity (1%)

These increases were partially offset by:

•higher selling, general and administrative expenses (4%)

•unfavorable transactional foreign exchange gains and losses from mark-to-market adjustments and embedded foreign currency derivatives within certain new equipment contracts (1%)

2018 Compared with 2017

The organic sales increase of 3% primarily reflects higher service sales (2%), driven by growth in North America and Asia, and higher new equipment sales (1%) driven by growth in Europe, Asia excluding China, and North America (combined, 2%), partially offset by a decline in China (1%).

The operational profit decrease of 4% was driven by:

•unfavorable price and mix (8%), primarily in China

•higher selling, general and administrative expenses and research and development costs (3%)

•unfavorable commodity costs (2%)

•unfavorable transactional foreign exchange from mark-to-market adjustments (1%)

These decreases were partially offset by:

•profit contribution from the higher sales volumes noted above (8%)

•favorable productivity (2%)

10

Carrier is a leading provider of heating, ventilating, air conditioning (HVAC), refrigeration, fire, security, and building automation products, solutions, and services for commercial, government, infrastructure, and residential property applications and refrigeration and transportation applications. Carrier provides a wide range of building systems, including cooling, heating, ventilation, refrigeration, fire, flame, gas, and smoke detection, portable fire extinguishers, fire suppression, intruder alarms, access control systems, video surveillance, and building control systems. Carrier also provides a broad array of related building services, including audit, design, installation, system integration, repair, maintenance, and monitoring services. Carrier also provides refrigeration and monitoring products and solutions to the transport industry.

							Total Increase (Decrease) Year-Over-Year for:
(dollars in millions)	2019		2018		2017		2019 Compared with 2018				2018 Compared with 2017
Net Sales	$	18,608	$	18,922	$	17,812	$	(314)	(2)	%	$	1,110	6	%
Cost of Sales	13,180		13,337		12,630		(157)		(1)	%	707		6	%
	5,428		5,585		5,182
Operating Expenses and Other	2,731		1,808		2,017
Operating Profits	$	2,697	$	3,777	$	3,165	$	(1,080)	(29)	%	$	612	19	%

	Factors Contributing to Total % Increase (Decrease) Year-Over-Year in:
	2019						2018
	Net Sales		Cost of Sales		Operating Profits		Net Sales		Cost of Sales		Operating Profits
Organic / Operational	1	%	2	%	(2)	%	6	%	6	%	6	%
Foreign currency translation	(2)	%	(2)	%	(1)	%	1	%	1	%	—
Acquisitions and divestitures, net	(1)	%	(1)	%	(1)	%	(1)	%	(1)	%	(1)	%
Restructuring costs	—		—		(1)	%	—		—		1	%
Other	—		—		(24)	%	—		—		13	%
Total % change	(2)	%	(1)	%	(29)	%	6	%	6	%	19	%

2019 Compared with 2018

The organic sales increase of 1% was primarily driven by growth in commercial and residential HVAC (1%, combined). Sales in global fire & security and global refrigeration were consistent with the prior year.

        Operational profit decreased 2% in comparison to the prior year as the favorable impact of pricing and productivity net of unfavorable commodities and tariffs (4%, combined) were more than offset by lower volume and unfavorable mix (3%), the absence of a favorable prior year contract adjustment related to a large commercial project (1%), and the unfavorable year-over-year impact resulting from the revaluation of certain long-term liabilities (1%).

        The 24% decrease in Other primarily reflects the absence of the prior year gain on the sale of Taylor Company (21%) and a current-year impairment of an investment (3%).

2018 Compared with 2017

The organic sales increase of 6% was driven primarily by growth in North America residential HVAC (2%), global commercial HVAC (2%), and global refrigeration (2%).

The operational profit increase of 6% was driven by:

•profit contribution from the higher sales volumes noted above, net of mix (6%)

•the year-over-year impact of contract adjustments related to a large commercial project (3%)

•favorable pricing, net of commodities (2%)

These increases were partially offset by:

•higher logistics costs (3%)

•higher research and development costs (1%)

The 13% increase in Other primarily reflects the year-over-year impact of gains on sale of businesses and investments (11%), primarily driven by the sale of Taylor Company in 2018 (25%), partially offset by the absence of the prior year sale of investments in Watsco, Inc. (12%). The remaining increase in Other is largely driven by the year-over-year impact of a prior year product recall program (2%).

11

Aerospace Businesses

The financial performance of Pratt & Whitney and Collins Aerospace Systems is directly tied to the economic conditions of the commercial aerospace and defense aerospace industries. In particular, Pratt & Whitney experiences intense competition for new commercial airframe/engine combinations. Engine suppliers may offer substantial discounts and other financial incentives, performance and operating cost guarantees, and participate in financing arrangements in an effort to compete for the aftermarket associated with these engine sales. These OEM engine sales may result in losses on the engine sales, which economically are recovered through the sales and profits generated over the engine's maintenance cycle. At times, the aerospace businesses also enter into development programs and firm fixed-price development contracts, which may require the company to bear cost overruns related to unforeseen technical and design challenges that arise during the development stage of the program. Customer selections of engines and components can also have a significant impact on later sales of parts and service. Predicted traffic levels, load factors, worldwide airline profits, general economic activity and global defense spending have been reliable indicators for new aircraft and aftermarket orders within the aerospace industry. Spare part sales and aftermarket service trends are affected by many factors, including usage, technological improvements, pricing, regulatory changes and the retirement of older aircraft. Our commercial aftermarket businesses continue to evolve as an increasing proportion of our aerospace businesses' customers are covered under long-term aftermarket service agreements. These agreements are comprehensive long-term spare part and service agreements with our customers. We expect a continued shift to long-term aftermarket service agreements in lieu of transactional spare part sales as new aerospace products enter our customers' fleets under long-term aftermarket service agreements and legacy fleets are retired. In 2019, as compared with 2018, total commercial aerospace aftermarket sales increased 2% at Pratt & Whitney and 63% at Collins Aerospace Systems, or 14% excluding the impact of the Rockwell Acquisition.

Our long-term aerospace contracts are subject to strict safety and performance regulations which can affect our ability to estimate costs precisely. Contract cost estimation for the development of complex projects, in particular, requires management to make significant judgments and assumptions regarding the complexity of the work to be performed, availability of materials, the performance by subcontractors, the timing of funding from customers and the length of time to complete the contract. As a result, we review and update our cost estimates on significant contracts on a quarterly basis, and no less frequently than annually for all others, and when circumstances change and warrant a modification to a previous estimate. Changes in estimates relate to the current period