UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________________

FORM 10-Q

____________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-39221

____________________________________

OTIS WORLDWIDE CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________


Delaware						83-3789412
(State or other jurisdiction of incorporation)						(I.R.S. Employer Identification No.)

One Carrier Place, Farmington, Connecticut 06032

(Address of principal executive offices, including zip code)

(860) 674-3000

(Registrant's telephone number, including area code)

____________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.01 par value)	OTIS	New York Stock Exchange
0.000% Notes due 2023	OTIS/23	New York Stock Exchange
0.318% Notes due 2026	OTIS/26	New York Stock Exchange
0.934% Notes due 2031	OTIS/31	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý. No ¨.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý. No ¨.

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	ý	Accelerated Filer	¨

Non-accelerated Filer	¨	Smaller Reporting Company	☐

		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐. No ý.

At July ~~16, 2021~~15, 2022 there were ~~426,778,666~~420,231,614 shares of Common Stock outstanding.

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OTIS WORLDWIDE CORPORATION

CONTENTS OF QUARTERLY REPORT ON FORM 10-Q

Quarter Ended June 30, ~~2021~~2022


			Page

PART I – FINANCIAL INFORMATION			4

Item 1. Unaudited Financial Statements:			4

Condensed Consolidated Statements of Operations for the quarters ended June 30, ~~2021~~2022 and ~~2020~~2021			4

Condensed Consolidated Statements of Operations for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021			5

Condensed Consolidated Statements of Comprehensive Income for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021			6

Condensed Consolidated Balance Sheets atas of June 30, ~~2021~~2022 and December 31, ~~2020~~2021			7

Condensed Consolidated Statements of Changes in Equity for the quarters ended June 30, ~~2021~~2022 and ~~2020~~2021			8

Condensed Consolidated Statements of Changes in Equity for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021			9

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021			10



Notes to Condensed Consolidated Financial Statements			11

Report of Independent Registered Public Accounting Firm			3129

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			3230

Item 3. Quantitative and Qualitative Disclosures About Market Risk			4644

Item 4. Controls and Procedures			4644

PART II – OTHER INFORMATION			4947

Item 1. Legal Proceedings			4947

Item 1A. Risk Factors			4947

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4947



Item 6. Exhibits			5048

SIGNATURES			5149

Otis Worldwide Corporation's and its subsidiaries' names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or tradenames of Otis Worldwide Corporation and its subsidiaries. Names, abbreviations of names, logos, and products and service designators of other companies are either the registered or unregistered trademarks or tradenames of their respective owners. As used herein, the terms "we", "us", "our", "the Company" or "Otis", unless the context otherwise requires, mean Otis Worldwide Corporation and its subsidiaries. References to ~~internet~~Internet websites in this Form 10-Q are provided for convenience only. Information available through these websites is not incorporated by reference into this Form 10-Q.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Quarter Ended June 30,					Quarter Ended June 30,
(amounts in millions, except per share amounts)	(amounts in millions, except per share amounts)	2021		2020		(amounts in millions, except per share amounts)	2022		2021
Net sales:	Net sales:					Net sales:
Product sales	Product sales	$	1,727	$	1,294	Product sales	$	1,534	$	1,727
Service sales	Service sales	1,974		1,735		Service sales	1,954		1,974
		3,701		3,029			3,488		3,701
Costs and expenses:	Costs and expenses:					Costs and expenses:
Cost of products sold	Cost of products sold	1,418		1,072		Cost of products sold	1,291		1,418
Cost of services sold	Cost of services sold	1,208		1,066		Cost of services sold	1,214		1,208
Research and development	Research and development	39		37		Research and development	38		39
Selling, general and administrative	Selling, general and administrative	484		441		Selling, general and administrative	439		484
		3,149		2,616			2,982		3,149
Other income (expense), net	Other income (expense), net	9		3		Other income (expense), net	(19)		9
Operating profit	Operating profit	561		416		Operating profit	487		561
Non-service pension cost (benefit)	Non-service pension cost (benefit)	2		1		Non-service pension cost (benefit)	1		2
Interest expense (income), net	Interest expense (income), net	27		41		Interest expense (income), net	35		27
Net income before income taxes	Net income before income taxes	532		374		Net income before income taxes	451		532
Income tax expense	Income tax expense	153		109		Income tax expense	103		153
Net income	Net income	379		265		Net income	348		379
Less: Noncontrolling interest in subsidiaries' earnings		53		41

Less: Noncontrolling interest in subsidiaries' earnings						Less: Noncontrolling interest in subsidiaries' earnings	27		53
Net income attributable to Otis Worldwide Corporation						Net income attributable to Otis Worldwide Corporation	$	321	$	326

Net income attributable to common shareholders		$	326	$	224

Earnings per share (Note 3):

Earnings per share (Note 2):						Earnings per share (Note 2):
Basic	Basic	$	0.76	$	0.52	Basic	$	0.76	$	0.76
Diluted	Diluted	$	0.76	$	0.52	Diluted	$	0.76	$	0.76

Weighted average number of shares outstanding	Weighted average number of shares outstanding					Weighted average number of shares outstanding
Basic shares	Basic shares	427.9		433.1		Basic shares	421.4		427.9
Diluted shares	Diluted shares	431.6		434.1		Diluted shares	424.2		431.6

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements.

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OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
(amounts in millions, except per share amounts)	(amounts in millions, except per share amounts)	2021		2020		(amounts in millions, except per share amounts)	2022		2021
Net sales:	Net sales:					Net sales:
Product sales	Product sales	$	3,185	$	2,417	Product sales	$	2,956	$	3,185
Service sales	Service sales	3,924		3,578		Service sales	3,946		3,924
		7,109		5,995			6,902		7,109
Costs and expenses:	Costs and expenses:					Costs and expenses:
Cost of products sold	Cost of products sold	2,605		1,986		Cost of products sold	2,481		2,605
Cost of services sold	Cost of services sold	2,410		2,221		Cost of services sold	2,432		2,410
Research and development	Research and development	74		75		Research and development	75		74
Selling, general and administrative	Selling, general and administrative	966		906		Selling, general and administrative	898		966
		6,055		5,188			5,886		6,055
Other income (expense), net	Other income (expense), net	16		(62)		Other income (expense), net	(3)		16
Operating profit	Operating profit	1,070		745		Operating profit	1,013		1,070
Non-service pension cost (benefit)	Non-service pension cost (benefit)	4		(2)		Non-service pension cost (benefit)	1		4
Interest expense (income), net	Interest expense (income), net	59		46		Interest expense (income), net	72		59
Net income before income taxes	Net income before income taxes	1,007		701		Net income before income taxes	940		1,007
Income tax expense	Income tax expense	276		234		Income tax expense	239		276
Net income	Net income	731		467		Net income	701		731
Less: Noncontrolling interest in subsidiaries' earnings	Less: Noncontrolling interest in subsidiaries' earnings	97		78		Less: Noncontrolling interest in subsidiaries' earnings	69		97

Net income attributable to common shareholders		$	634	$	389
Net income attributable to Otis Worldwide Corporation						Net income attributable to Otis Worldwide Corporation	$	632	$	634

Earnings per share (Note 3):
Earnings per share (Note 2):						Earnings per share (Note 2):

Basic	Basic	$	1.48	$	0.90	Basic	$	1.49	$	1.48
Diluted	Diluted	$	1.47	$	0.90	Diluted	$	1.48	$	1.47

Weighted average number of shares outstanding	Weighted average number of shares outstanding					Weighted average number of shares outstanding
Basic shares	Basic shares	429.8		433.1		Basic shares	422.8		429.8
Diluted shares	Diluted shares	432.7		433.6		Diluted shares	425.9		432.7

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements.

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OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021

Net income	Net income	$	379	$	265	$	731	$	467	Net income	$	348	$	379	$	701	$	731
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	20		38		(2)		(84)		Foreign currency translation adjustments	(95)		20		(95)		(2)
Pension and postretirement benefit plan adjustments	Pension and postretirement benefit plan adjustments	3		3		7		4		Pension and postretirement benefit plan adjustments	2		3		4		7

Change in unrealized cash flow hedging	Change in unrealized cash flow hedging	1		(12)		(3)		(1)		Change in unrealized cash flow hedging	—		1		—		(3)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	24		29		2		(81)		Other comprehensive income (loss), net of tax	(93)		24		(91)		2
Comprehensive income (loss), net of tax	Comprehensive income (loss), net of tax	403		294		733		386		Comprehensive income (loss), net of tax	255		403		610		733
Less: Comprehensive income attributable to noncontrolling interest		(57)		(51)		(87)		(82)
Comprehensive income attributable to common shareholders		$	346	$	243	$	646	$	304
Less: Comprehensive (income) loss attributable to noncontrolling interest										Less: Comprehensive (income) loss attributable to noncontrolling interest	14		(57)		37		(87)
Comprehensive income attributable to Otis Worldwide Corporation										Comprehensive income attributable to Otis Worldwide Corporation	$	269	$	346	$	647	$	646

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements.

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OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

~~(Unaudited)~~

(dollars in millions) June 30, 2021 December 31, 2020
Assets
Cash and cash equivalents $ 1,923 $ 1,782
Accounts receivable (net of allowance for expected credit losses of $170 and $161) 3,194 3,148
Contract assets 492 458
Inventories, net 673 659
Other current assets 399 446
Total Current Assets 6,681 6,493
Future income tax benefits 334 334
Fixed assets (net of accumulated depreciation of $1,163 and $1,197) 781 774
Operating lease right-of-use assets 571 542
Intangible assets, net 458 484
Goodwill 1,742 1,773
Other assets 290 310
Total Assets $ 10,857 $ 10,710
Liabilities and (Deficit) Equity
Short-term borrowings $ 343 $ 701
Accounts payable 1,569 1,453
Accrued liabilities 1,989 1,977
Contract liabilities 2,815 2,542
Total Current Liabilities 6,716 6,673
Long-term debt 5,457 5,262
Future pension and postretirement benefit obligations 643 654
Operating lease liabilities 386 367
Future income tax obligations 285 321
Other long-term liabilities 624 634
Total Liabilities 14,111 13,911
Commitments and contingent liabilities (Note 18) 0 0
Redeemable noncontrolling interest 63 83
Shareholders' (Deficit) Equity:
Common Stock and additional paid-in capital 86 59
Treasury Stock (506) 0
Accumulated deficit (2,633) (3,076)
Accumulated other comprehensive income (loss) (803) (815)
Total Shareholders' (Deficit) Equity (3,856) (3,832)
Noncontrolling interest 539 548
Total (Deficit) Equity (3,317) (3,284)
Total Liabilities and (Deficit) Equity $ 10,857 $ 10,710


(dollars in millions)	June 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	1,218	$	1,565
Restricted cash	12		1,910
Accounts receivable (net of allowance for expected credit losses of $166 and $175)	3,189		3,232
Contract assets	608		550
Inventories	596		622
Other current assets	527		382

Total Current Assets	6,150		8,261
Future income tax benefits	306		335
Fixed assets (net of accumulated depreciation of $1,141 and $1,156)	724		774
Operating lease right-of-use assets	512		526
Intangible assets, net	385		419
Goodwill	1,550		1,667
Other assets	286		297
Total Assets	$	9,913	$	12,279
Liabilities and Equity (Deficit)
Short-term borrowings	$	81	$	24
Accounts payable	1,616		1,556
Accrued liabilities	1,903		1,993
Contract liabilities	2,738		2,674


Total Current Liabilities	6,338		6,247
Long-term debt	6,602		7,249
Future pension and postretirement benefit obligations	531		558
Operating lease liabilities	359		336
Future income tax obligations	251		267
Other long-term liabilities	584		606
Total Liabilities	14,665		15,263
Commitments and contingent liabilities (Note 16)	0		0
Redeemable noncontrolling interest	136		160
Shareholders' Equity (Deficit):

Common Stock and additional paid-in capital	121		119

Treasury Stock	(1,125)		(725)
Accumulated deficit	(3,245)		(2,256)

Accumulated other comprehensive income (loss)	(748)		(763)
Total Shareholders' Equity (Deficit)	(4,997)		(3,625)
Noncontrolling interest	109		481
Total Equity (Deficit)	(4,888)		(3,144)
Total Liabilities and Equity (Deficit)	$	9,913	$	12,279

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements.

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OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


		Common Stock and Additional Paid-In Capital	Treasury Stock		Accumulated Deficit				UTC Net (Deficit) Investment		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' (Deficit) Equity				Noncontrolling Interest				Total (Deficit) Equity					Redeemable Noncontrolling Interest													Common Stock and Additional Paid-In Capital			Treasury Stock			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' (Deficit) Equity			Noncontrolling Interest			Total (Deficit) Equity			Redeemable Noncontrolling Interest
																								Common Stock and Additional Paid-In Capital				Treasury Stock			Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)			Total Shareholders' (Deficit) Equity	Noncontrolling Interest			Total (Deficit) Equity			Redeemable Noncontrolling Interest
(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)																			(dollars in millions, except per share amounts)																										Redeemable Noncontrolling Interest
Quarter Ended June 30, 2021
Balance at April 1, 2021			$	68			$	(300)			$	(2,855)			$	—			$	(823)			$		(3,910)				$	559				$	(3,351)			$	65
Quarter Ended June 30, 2022																														Quarter Ended June 30, 2022
Balance as of March 31, 2022																														Balance as of March 31, 2022											$	121		$	(925)		$	(3,529)		$	(696)		$	(5,029)		$	107		$	(4,922)		$	1,572
Net income	Net income		—		—				326		—		—				326				53					379					—					Net income									—				—			321			—			321			25			346		2
Other comprehensive income (loss), net of tax			—		—				—		—		20				20				5					25					(1)
Other comprehensive income (loss), net of tax, and foreign currency reclassifications (Note 10)																														Other comprehensive income (loss), net of tax, and foreign currency reclassifications (Note 10)											—			—			—			(52)			(52)			(7)			(59)			(34)
Stock-based compensation and Common Stock issued under employee plans	Stock-based compensation and Common Stock issued under employee plans		18		—				(1)		—		—				17				—					17					—					Stock-based compensation and Common Stock issued under employee plans									14			—			(1)			—			13			—			13		—

Cash dividends declared ($0.24 per common share)			—		—				(102)		—		—				(102)				—					(102)					—
Cash dividends declared ($0.29 per Common Share)																														Cash dividends declared ($0.29 per Common Share)											—			—			(122)			—			(122)			—			(122)			—
Repurchase of Common Shares	Repurchase of Common Shares		—		(206)				—		—		—				(206)				—					(206)					—					Repurchase of Common Shares									—			(200)			—			—			(200)			—			(200)		—
Dividends attributable to noncontrolling interest	Dividends attributable to noncontrolling interest		—		—				—		—		—				—				(75)					(75)					(1)					Dividends attributable to noncontrolling interest									—			—			—			—			—			(9)			(9)		(1)

Acquisitions, disposals and other changes	Acquisitions, disposals and other changes		—		—				(1)		—		—				(1)				(3)					(4)					—					Acquisitions, disposals and other changes									(14)			—			86			—			72			(7)			65		(1,403)

Balance at June 30, 2021			$	86	$	(506)			$	(2,633)	$	—	$	(803)			$	(3,856)			$	539				$	(3,317)				$	63
Balance as of June 30, 2022																														Balance as of June 30, 2022											$	121		$	(1,125)		$	(3,245)		$	(748)		$	(4,997)		$	109		$	(4,888)		$	136

Quarter Ended June 30, 2020
Balance April 1, 2020			$	0	$	—			$	0	$	(3,959)	$	(862)			$	(4,821)			$	537				$	(4,284)				$	95
Net transfers (to) from UTC			—		—				—		407		—				407				—					407					—
Issuance of common stock and reclassification of deficit			4		—				(3,556)		3,552		—				—				—					0					—
Quarter Ended June 30, 2021																														Quarter Ended June 30, 2021
Balance as of March 31, 2021																														Balance as of March 31, 2021											$	68		$	(300)		$	(2,885)		$	(823)		$	(3,940)		$	491		$	(3,449)		$	163
Net income	Net income		—		—				224		—		—				224				41					265					—					Net income									—			—			326			—			326			51			377		2
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax		—		—				—		—		19				19				11					30					(1)					Other comprehensive income (loss), net of tax									—			—			—			20			20			4			24		—
Stock-based compensation			15		—				—		—		—				15				—					15					—
Cash dividends declared ($0.20 per common share)			—		—				(87)		—		—				(87)				—					(87)					—
Stock-based compensation and Common Stock issued under employee plans																														Stock-based compensation and Common Stock issued under employee plans											18			—			(1)			—			17			—			17			—
Cash dividends declared ($0.24 per Common Share)																														Cash dividends declared ($0.24 per Common Share)											—			—			(102)			—			(102)			—			(102)			—
Repurchase of Common Shares																														Repurchase of Common Shares											—			(206)			—			—			(206)			—			(206)			—
Dividends attributable to noncontrolling interest	Dividends attributable to noncontrolling interest		—		—				—		—		—				—				(18)					(18)					—					Dividends attributable to noncontrolling interest									—			—			—			—			—			(75)			(75)		(1)
Acquisitions, disposals and other changes			—		—				1		—		—				1				(1)					0					2

Balance at June 30, 2020			$	19	$	—			$	(3,418)	$	0	$	(843)			$	(4,242)			$	570				$	(3,672)				$	96
Acquisition, disposal and other changes																														Acquisition, disposal and other changes											—			—			—			—			—			(3)			(3)			(1)
Balance as of June 30, 2021																														Balance as of June 30, 2021											$	86		$	(506)		$	(2,662)		$	(803)		$	(3,885)		$	468		$	(3,417)		$	163

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements.

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OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


		Common Stock and Additional Paid-In Capital				Treasury Stock		Accumulated Deficit				UTC Net Investment (Deficit)		Accumulated Other Comprehensive Income (Loss)				Total Shareholders' (Deficit) Equity			Noncontrolling Interest				Total (Deficit) Equity			Redeemable Noncontrolling Interest					Common Stock and Additional Paid-In Capital				Treasury Stock				Accumulated Deficit				Accumulated Other Comprehensive Income (Loss)					Total Shareholders' (Deficit) Equity			Noncontrolling Interest			Total (Deficit) Equity			Redeemable Noncontrolling Interest

(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)															(dollars in millions, except per share amounts)
Six Months Ended June 30, 2022																														Six Months Ended June 30, 2022
Balance December 31, 2021																														Balance December 31, 2021			$	119			$	(725)			$	(2,256)			$	(763)				$	(3,625)		$	481		$	(3,144)		$	160
Net income																														Net income			—				—				632				—					632			58			690			11
Other comprehensive income (loss), net of tax, and foreign currency reclassifications (Note 10)																														Other comprehensive income (loss), net of tax, and foreign currency reclassifications (Note 10)			—				—				—				15					15			(8)			7			(98)
Stock-based compensation and Common Stock issued under employee plans																														Stock-based compensation and Common Stock issued under employee plans			19				—				(1)				—					18			—			18			—
Cash dividends declared ($0.53 per common share)																														Cash dividends declared ($0.53 per common share)			—				—				(224)				—					(224)			—			(224)			—
Repurchase of Common Shares																														Repurchase of Common Shares			—				(400)				—				—					(400)			—			(400)			—
Dividends attributable to noncontrolling interest																														Dividends attributable to noncontrolling interest			—				—				—				—					—			(12)			(12)			(11)
Reclassification of noncontrolling interest to forward purchase agreement and redeemable noncontrolling interest (Note 1)																														Reclassification of noncontrolling interest to forward purchase agreement and redeemable noncontrolling interest (Note 1)			—				—				(1,482)				—					(1,482)			(403)			(1,885)			1,476
Acquisitions, disposals and other changes in noncontrolling interest																														Acquisitions, disposals and other changes in noncontrolling interest			(17)				—				86				—					69			(7)			62			(1,402)

Balance at June 30, 2022																														Balance at June 30, 2022			$	121			$	(1,125)			$	(3,245)			$	(748)				$	(4,997)		$	109		$	(4,888)		$	136

Six Months Ended June 30, 2021	Six Months Ended June 30, 2021																																															Six Months Ended June 30, 2021
Balance January 1, 2021				$	59					$	0					$	(3,076)						$	—						$	(815)			$	(3,832)			$	548			$	(3,284)			$	83
Balance December 31, 2020																														Balance December 31, 2020			$	59			$	—			$	(3,106)			$	(815)				$	(3,862)		$	467		$	(3,395)		$	194
Net income	Net income			—						—				634						—							—					634				97				731				—	Net income				—			—			634			—			634	92	726	5
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	—				—		—				—		12				12			(8)				4			(2)		Other comprehensive income (loss), net of tax			—				—				—				12					12			(3)			9			(7)
Stock-based compensation and Common Stock issued under employee plans	Stock-based compensation and Common Stock issued under employee plans	27				—		(1)				—		—				26			—				26			—		Stock-based compensation and Common Stock issued under employee plans			27				—				(1)				—					26			—			26			—
Cash dividends declared ($0.44 per common share)	Cash dividends declared ($0.44 per common share)	—				—		(189)				—		—				(189)			—				(189)			—		Cash dividends declared ($0.44 per common share)			—				—				(189)				—					(189)			—			(189)			—
Repurchase of Common Shares	Repurchase of Common Shares	—				(506)		—				—		—				(506)			—				(506)			—		Repurchase of Common Shares			—				(506)				—				—					(506)			—			(506)			—
Dividends attributable to noncontrolling interest	Dividends attributable to noncontrolling interest	—				—		—				—		—				—			(107)				(107)			(1)		Dividends attributable to noncontrolling interest			—				—				—				—					—			(97)			(97)			(11)
Acquisitions, disposals and other changes	Acquisitions, disposals and other changes	—				—		(1)				—		—				(1)			9				8			(17)		Acquisitions, disposals and other changes			—				—				—				—					—			9			9			(18)

Balance at June 30, 2021	Balance at June 30, 2021	$	86			$	(506)	$	(2,633)			$	—	$	(803)			$	(3,856)		$	539			$	(3,317)		$	63	Balance at June 30, 2021			$	86			$	(506)			$	(2,662)			$	(803)				$	(3,885)		$	468		$	(3,417)		$	163

Six Months Ended June 30, 2020
Balance January 1, 2020		$	0			$	—	$	0			$	2,458	$	(758)			$	1,700		$	531			$	2,231		$	95
Net transfers (to) from UTC		—				—		—				(6,150)		—				(6,150)			—				(6,150)			—
Issuance of common stock and reclassification of deficit		4				—		(3,556)				3,552		—				—			—				0			—
Net income		—				—		224				165		—				389			78				467			—
Other comprehensive income (loss), net of tax		—				—		—				—		(85)				(85)			7				(78)			(3)
Stock-based compensation		15				—		—				—		—				15			—				15			—
Cash dividends declared ($0.20 per common share)		—				—		(87)				—		—				(87)			—				(87)			—
Dividends attributable to noncontrolling interest		—				—		—				—		—				—			(39)				(39)			—
Acquisitions, disposals and other changes		—				—		1				—		—				1			(7)				(6)			4

Adoption of credit loss standard, net of tax (Note 6)		—				—		—				(25)		—				(25)			—				(25)			—
Balance at June 30, 2020		$	19			$	—	$	(3,418)			$	0	$	(843)			$	(4,242)		$	570			$	(3,672)		$	96

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements.

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OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(dollars in millions)	2022		2021
Operating Activities:
Net income	$	701	$	731
Adjustments to reconcile net income to net cash flows provided by operating activities, net of acquisitions:
Depreciation and amortization	97		102
Deferred income tax expense (benefit)	6		(39)
Stock compensation cost	28		31



Change in operating assets and liabilities:
Accounts receivable, net	(104)		(54)
Contract assets and liabilities, current	134		225
Inventories	(39)		(17)
Other current assets	—		55
Accounts payable	135		124
Accrued liabilities	(140)		(23)


Pension contributions	(21)		(18)
Other operating activities, net	60		1
Net cash flows provided by operating activities	857		1,118
Investing Activities:
Capital expenditures	(57)		(84)
Investments in businesses and intangible assets, net of cash acquired (Note 6)	(28)		(51)
Proceeds from the sale of (investments in) marketable securities	(7)		40


Receipts (payments) on settlements of derivative contracts	78		17
Other investing activities, net	4		11
Net cash flows used in investing activities	(10)		(67)
Financing Activities:
Net proceeds from (repayments of) borrowings (maturities of 90 days or less)	57		(70)
Proceeds from borrowings (maturities longer than 90 days)	—		152
Repayments of borrowings (maturities longer than 90 days)	—		(427)
Proceeds from issuance of long-term debt	—		199
Payment of debt issuance costs	—		(2)
Repayment of long-term debt	(500)		—


Dividends paid on Common Stock	(224)		(189)
Repurchases of Common Stock	(400)		(506)
Dividends paid to noncontrolling interest	(41)		(55)
Acquisition of Zardoya Otis shares (Note 1)	(1,802)		—
Other financing activities, net	(27)		(18)
Net cash flows provided by (used in) financing activities	(2,937)		(916)





Effect of foreign exchange rate changes on cash and cash equivalents	(122)		8
Net increase (decrease) in cash, cash equivalents and restricted cash	(2,212)		143
Cash, cash equivalents and restricted cash, beginning of year	3,477		1,801
Cash, cash equivalents and restricted cash, end of period	1,265		1,944
Less: Restricted cash	13		21
Less: Cash and cash equivalents held for sale included in Other current assets (Note 6)	34		—
Cash and cash equivalents, end of period	$	1,218	$	1,923

~~(Unaudited)~~

Six Months Ended June 30,
(dollars in millions) 2021 2020
Operating Activities:
Net income $ 731 $ 467
Adjustments to reconcile net income to net cash flows provided by operating activities, net of acquisitions:
Depreciation and amortization 102 92
Deferred income tax expense (benefit) (39) (21)
Stock compensation cost 31 27
Loss on fixed asset impairment 0 55
Change in operating assets and liabilities:
Accounts receivable, net (54) (59)
Contract assets and liabilities, current 225 266
Inventories, net (17) (71)
Other current assets 55 (67)
Accounts payable 124 17
Accrued liabilities (23) 62
Pension contributions (18) (20)
Other operating activities, net 1 75
Net cash flows provided by operating activities 1,118 823
Investing Activities:
Capital expenditures (84) (75)
Investments in businesses and intangible assets, net of cash acquired (Note 8) (51) (16)
Investments in equity securities (18) (51)
Proceeds from sale of equity securities 58 0
Receipts (payments) on settlements of derivative contracts 17 (7)
Other investing activities, net 11 7
Net cash flows used in investing activities (67) (142)
Financing Activities:
Net proceeds from (repayments of) borrowings (maturities of 90 days or less) (70) 1
Proceeds from borrowings (maturities longer than 90 days) 152 0
Repayments of borrowings (maturities longer than 90 days) (427) 0
Proceeds from issuance of long-term debt 199 6,300
Payment of long-term debt issuance costs (2) (43)
Net transfers to UTC 0 (6,330)
Dividends paid on Common Stock (189) (87)
Repurchases of Common Stock (506) 0
Dividends paid to noncontrolling interest (55) (43)
Other financing activities, net (18) 22
Net cash flows used in financing activities (916) (180)
Effect of foreign exchange rate changes on cash and cash equivalents 8 (33)
Net increase in cash and cash equivalents 143 468
Cash, cash equivalents and restricted cash, beginning of year 1,801 1,459
Cash, cash equivalents and restricted cash, end of period 1,944 1,927
Less: Restricted cash 21 15
Cash and cash equivalents, end of period $ 1,923 $ 1,912

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements.

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OTIS WORLDWIDE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: General

The Condensed Consolidated Financial Statements atas of June 30, ~~2021~~2022 and for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods. The Condensed Consolidated Balance Sheet atas of December 31, ~~2020~~2021 was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles ("GAAP") in the United States ("U.S."). The results reported in these Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the Company's annual consolidated financial statements and accompanying notes included in our Annual Report ~~to Shareholders ("2020 Annual Report") incorporated by reference in our Annual Report~~ on Form 10-K for fiscal year ~~2020~~2021 ("~~2020~~2021 Form 10-K" or "Form 10-K").

~~Note 1: Description of Business~~There have been no changes to the Company's significant accounting policies described in the Company's Form 10-K that have a material impact on the Company's Condensed Consolidated Financial Statements and ~~Separation from United Technologies Corporation~~the related notes.

Otis (as defined below) is the world’s leading elevator and escalator manufacturing, installation and service company. Our operations are classified into 2 segments: New Equipment and Service. Through the New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators, as well as escalators and moving walkways, for residential and commercial building and infrastructure projects. The Service segment provides maintenance and repair services for both our products and those of other manufacturers, and provides modernization services to upgrade elevators and escalators.Revisions

~~On November 26, 2018, United Technologies Corporation, subsequently renamed~~The Company adjusted a misclassification between noncontrolling interest and redeemable noncontrolling interest in the Condensed Consolidated Statements of Changes in Equity as of June 30, 2021, resulting in an increase to ~~Raytheon Technologies Corporation~~Redeemable noncontrolling interest of $100 million, a decrease to Noncontrolling interest of $71 million and a decrease to Accumulated deficit of $29 million. Refer to Note 2 of the Company’s audited consolidated financial statements and notes thereto included in our 2021 Form 10-K.

Additionally, following the filing of the Company’s Form 10-Q for the quarterly period ended March 31, 2022, we identified an error in the presentation of the shares of Zardoya Otis, S.A. ("Zardoya Otis") owned by Euro Syns, S.A. As noted in the Form 10-Q for the quarterly period ended March 31, 2022 and herein, the Company previously announced a tender offer to acquire all of the issued and outstanding shares of Zardoya Otis not owned by the Company for cash (the "Tender Offer") in September 2021 and the Tender Offer received regulatory approval on ~~April 3, 2020 ("UTC"~~February 28, 2022. As noted in the 2021 Form 10-K, the Company reached an agreement in December 2021 for Euro Syns S.A. to irrevocably tender its Zardoya Otis shares in the Tender Offer. Upon revisiting the accounting for the shares as of March 31, 2022, considering all the relevant facts and circumstances and upon review of the relevant accounting guidance, the Company has determined that upon regulatory approval of the Tender Offer, the shares owned by Euro Syns, S.A. and subject to the agreement reached between the parties that were recorded in Redeemable non-controlling interest for $409 million should have been classified in Forward purchase agreement (a separate new financial statement line item within current liabilities), resulting in a net decrease in Redeemable noncontrolling interest of $409 million. Please refer to the table below for a summary of the impacts to each relevant financial statement line item of the Condensed Consolidated Balance Sheet as of March 31, 2022 to reflect the correct accounting. The effects of these corrections are reflected in these Condensed Consolidated Financial Statements for the quarter and six months ended June 30, 2022, including in the Condensed Consolidated Statement of Changes in Equity, and will be reflected in future filings, as applicable.


	As of March 31, 2022
(dollars in millions)	As Previously Reported		Correction of Error		As Revised
Liabilities and Equity (Deficit)
Forward purchase agreement	$	—	$	409	$	409
Total Current Liabilities	6,242		409		6,651
Total Liabilities	14,736		409		15,145
Redeemable noncontrolling interest	1,981		(409)		1,572
Total Liabilities and Equity (Deficit)	$	11,795	$	—	$	11,795

There was no impact of this error on the Condensed Consolidated Statement of Operations, Comprehensive Income or ~~"RTX", as applicable), announced its intention to spin-off its Otis reportable segment and its Carrier reportable segment into two separate publicly-traded companies (the "Separation").~~ the Statement of Cash Flows for the quarter ended March 31, 2022.

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Separation

On April 3, 2020, the Company became an independent publicly-traded company (the "Separation") through a pro-rata distribution of 0.5 shares of Common Stock for every share of ~~UTC~~United Technologies Corporation, subsequently renamed to Raytheon Technologies Corporation ("UTC" or "RTX", as applicable), common stock held at the close of business on the record date of March 19, ~~2020 (the "Distribution").~~2020. Otis began to trade as a separate public company (New York Stock ~~Exchange ("NYSE"):~~Exchange: OTIS) on April 3, 2020.

Unless the context otherwise requires, references to "Otis", "we", "us", "our" and "the Company" refer to ~~(i) Otis Worldwide Corporation's business (the "Business") prior to the Separation and (ii)~~ Otis Worldwide Corporation and its ~~subsidiaries following the Separation, as applicable. References to "UTC" relate to pre-Separation matters, and references to "RTX" relate to post-Separation matters.~~subsidiaries.

Zardoya Otis Tender Offer

The ~~Separation was completed pursuant~~Company previously announced its Tender Offer to ~~a Separation~~acquire all of the issued and ~~Distribution Agreement ("Separation Agreement")~~outstanding shares of Zardoya Otis not owned by the Company in cash, and ~~other agreements with our former parent, UTC, related~~its intention to delist the shares of Zardoya Otis from the Spanish stock exchanges subsequent to the ~~Separation, including but~~Tender Offer. The price per share of the Tender Offer was €7.07 in cash as of March 31, 2022, after adjustments for dividends paid. The Tender Offer was approved by the Spanish regulator on February 28, 2022. As a result of the Tender Offer approval, the issued and outstanding shares of Zardoya Otis owned by Euro Syns, S.A. were reclassified to current liabilities as Forward purchase agreement, and the remaining shares not ~~limited~~owned by the Company were deemed redeemable at the option of the other shareholders and were reclassified from Noncontrolling interest to a transition services agreement (the "Transition Service Agreement" or "TSA"), a tax matters agreement (the "Tax Matters Agreement" or "TMA"), an employee matters agreement (the "Employee Matters Agreement" or "EMA")Redeemable noncontrolling interest on our Condensed Consolidated Balance Sheets. The difference between the historical noncontrolling interest carrying value in the balance sheet and ~~an intellectual property agreement (the "Intellectual Property Agreement"). For further discussion on these agreements, see Note 5.~~the fair value of the Tender Offer was recorded to Accumulated deficit.

~~Note 2: Basis~~The results of ~~Presentation~~the Tender Offer were announced on April 7, 2022, with tenders, including of the Euro Syns, S.A.' shares, of 45.49% of the shares outstanding accepted, resulting in the Company owning 95.51% of Zardoya Otis. The shares tendered to the Company were settled in cash on April 12, 2022 for approximately €1.5 billion from the Company's restricted cash held in escrow. The acquisition and settlement of the remaining issued and outstanding shares of Zardoya Otis not owned by the Company for approximately €150 million occurred in the second quarter, with the automatic delisting of Zardoya Otis shares on May 9, 2022.

~~Prior to~~The Company owned a controlling interest and had operational control of Zardoya Otis as of and for the ~~Separation on April 3, 2020, our historical~~periods ended June 30, 2022 and 2021, and therefore its financial statements were prepared on a standalone combined basis and were derived from the consolidated financial statements and accounting records of our former parent, UTC. For the period subsequent to April 3, 2020, our financial statementsresults are presented on a consolidated basis as the Company became a standalone public company (collectively, the financial statements for all periods presented, including the historical results of the Company prior to April 3, 2020, are now referred to as "Condensed Consolidated Financial Statements" to reflect this change). They have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted.

Prior to the Separation on April 3, 2020, the Condensed Consolidated Statements of Operations included all revenues and costs directly attributable to Otis, including costs for facilities, functions and services used by Otis. Costs for certain functions and services performed by centralized UTC organizations were directly charged to Otis based on specific identification when possible or based on a reasonable allocation driver such as net sales, headcount, usage or other allocation methods. All charges and allocations for facilities, functions and services performed by UTC organizations have been deemed settled in cash by Otis to our former parent, UTC, in the period in which the cost was recorded on the Condensed Consolidated Statements of

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~~Operations. Current and deferred income taxes were determined based on the standalone results of Otis. However, because the Company was~~ included in our ~~former parent UTC’s tax group in certain jurisdictions,~~Condensed Consolidated Financial Statements. As of March 31 and June 30, 2022, the ~~Company's actual tax balances may differ from those reported. The Company's portion~~Company owned 50.02% and 100% of ~~its domestic income taxes and certain income taxes for jurisdictions outside the U.S. are deemed to have been settled in the period the related tax expense was recorded prior to the Separation.~~Zardoya Otis, respectively.

All significant intracompany accounts and transactions within the Company have been eliminated in the preparation of the Condensed Consolidated Financial Statements. Prior to the Separation, the Condensed Consolidated Financial St~~atements of the Company include assets and liabilities that have been determined to be specifically or otherwise attributable to the Company.~~

UseUse of Estimates. The preparation of these Condensed Consolidated Financial Statements and accompanying notes in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates.

We assessed certain accounting matters that generally require consideration of forecasted financial information in the context of the information reasonably available to us and the unknown future impacts of COVID-19 atas of June 30, ~~2021~~2022 and through the date of this report. The accounting matters assessed included, but were not limited to, our allowance for credit losses, the carrying value of our goodwill and other long-lived assets, financial assets and revenue recognition. While there was not a material impact to our Condensed Consolidated Financial Statements as of June 30, ~~2021~~2022 and for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, resulting from our assessments of these matters, future assessment of our current expectations at that time of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to our Condensed Consolidated Financial Statements in future reporting periods.

~~Certain amounts presented in the prior period have been reclassified to conform~~We also assessed certain accounting matters as they relate to the current ~~period presentation, which are immaterial.~~crisis in Ukraine and Russia, including, but not limited to our allowance for credit losses, the carrying value of long-lived assets, revenue recognition and the classification of assets. There was not a material impact to our Condensed Consolidated Financial Statements as of June 30, 2022 and for the quarter and six months ended June 30, 2022 resulting from our assessment of these matters. We continue to assess the impact on our results of operations, financial position and overall performance as the situation develops and any broader implications it may have on the global economy. Additionally, the Company determined its business in Russia met the criteria to be classified as held for sale during the quarter ended June 30, 2022, and recorded an impairment loss related to the net assets held for sale. See Note 6, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding the Company's accounting for its Russia business. Also see Note 19, "Subsequent Events" for details on the completed sale of our business in Russia in July 2022.

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Note 3:2: Earnings per Share

On April 3, 2020, the date of consummation of the Separation, 433,079,455 shares of the Company's common stock, par value $0.01 per share, were distributed to UTC shareholders of record as of March 19, 2020. This share amount is being utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Separation as all common stock was owned by UTC prior to the Separation. For the quarter and six months ended June 30, 2020, these shares are treated as issued and outstanding at January 1, 2020 for purposes of calculating historical basic and diluted earnings per share.


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions, except per share amounts; shares in millions)		2021		2020		2021		2020
(amounts in millions, except per share amounts)										(amounts in millions, except per share amounts)	2022		2021		2022		2021

Net income attributable to Otis Worldwide Corporation										Net income attributable to Otis Worldwide Corporation	$	321	$	326	$	632	$	634
Impact of redeemable noncontrolling interest										Impact of redeemable noncontrolling interest	—		—		—		—
Net income attributable to common shareholders	Net income attributable to common shareholders	$	326	$	224	$	634	$	389	Net income attributable to common shareholders	$	321	$	326	$	632	$	634

Basic weighted average number of shares outstanding	Basic weighted average number of shares outstanding	427.9		433.1		429.8		433.1		Basic weighted average number of shares outstanding	421.4		427.9		422.8		429.8
Stock awards and equity units (share equivalent)	Stock awards and equity units (share equivalent)	3.7		1.0		2.9		0.5		Stock awards and equity units (share equivalent)	2.8		3.7		3.1		2.9
Diluted weighted average number of shares outstanding	Diluted weighted average number of shares outstanding	431.6		434.1		432.7		433.6		Diluted weighted average number of shares outstanding	424.2		431.6		425.9		432.7

Earnings Per Share of Common Stock:	Earnings Per Share of Common Stock:									Earnings Per Share of Common Stock:
Basic:		$	0.76	$	0.52	$	1.48	$	0.90
Diluted:		$	0.76	$	0.52	$	1.47	$	0.90

Basic										Basic	$	0.76	$	0.76	1.49		1.48

Diluted										Diluted	$	0.76	$	0.76	1.48		1.47

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock appreciation rights and stock options, when the average market price of the ~~common stock~~Common Stock is lower than the exercise price of the related stock awards during the period because the effect would be anti-dilutive. In addition, the computation of diluted earnings per share excludes the effect of the potential exercise of stock awards when the awards' assumed proceeds exceed the average market price of the common shares during the period. There were ~~2.1~~2.7 million and ~~9.3~~2.1 million of anti-dilutive stock awards excluded from the computation for the quarters ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~2.1~~2.5 million and ~~9.3~~2.1 million for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

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Note 4:3: Revenue Recognition

We account for revenue in accordance with Accounting Standards Codification ("ASC") Topic 606: Revenue from Contracts with Customers.

~~Performance Obligations.~~ The Company's revenue streams include new equipment, maintenance and repair and modernization (including related installation). New equipment, modernization and repair services revenue is typically recognized over time as we are enhancing an asset the customer controls. Maintenance revenue is recognized on a straight-line basis over the life of the maintenance contract.

For new equipment and modernization transactions, equipment and installation are typically procured in a single contract providing the customer with a complete installed elevator or escalator unit. The combination of equipment and installation are typically a single performance obligation. For repair services, the customer typically contracts for specific short-term services which form a single performance obligation. For these performance obligations, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion in order to measure progress.

For maintenance contracts, given the continuous nature of the maintenance services throughout the year, we recognize revenue on maintenance contracts on a straight-line basis which aligns with the cost profile of these services.

Contract Assets and Liabilities. Contract assets reflect revenue recognized in advance of customer billing. Contract liabilities are recognized when a customer pays consideration, or we have a right to receive an amount of unconditional consideration, in advance of the satisfaction of performance obligations under the contract. We typically receive progress payments from our customers as we perform our work over time.

Total Contract assets and Contract liabilities atas of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are as follows:


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
Contract assets, current	Contract assets, current	$	492	$	458	Contract assets, current	$	608	$	550

Total contract assets	Total contract assets	492		458		Total contract assets	608		550

Contract liabilities, current	Contract liabilities, current	2,815		2,542		Contract liabilities, current	2,738		2,674
Contract liabilities, non-current (included within Other long-term liabilities)	Contract liabilities, non-current (included within Other long-term liabilities)	40		44		Contract liabilities, non-current (included within Other long-term liabilities)	48		52
Total contract liabilities	Total contract liabilities	2,855		2,586		Total contract liabilities	2,786		2,726
Net contract liabilities	Net contract liabilities	$	2,363	$	2,128	Net contract liabilities	$	2,178	$	2,176

Contract assets increased by ~~$34~~$58 million during the six months ended June 30, ~~2021~~2022 as a result of the progression of current contracts and timing of billing on customer contracts. Contract liabilities increased by ~~$269~~$60 million during the six months ended June 30, ~~2021~~2022 primarily due to contract billings in excess of revenue ~~earned.~~ earned, partially offset by the reclassification of $109 million of contract liabilities, current to liabilities held for sale during the second quarter of 2022. See Note 6, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding the Company's accounting for its Russia business.

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In the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, we recognized revenue of ~~$1.7~~$1.6 billion and ~~$1.3~~$1.7 billion related to contract liabilities as of January 1, ~~2021~~2022 and ~~2020,~~2021, respectively.

Remaining Performance Obligations ("RPO"). RPO represents the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied. As of June 30, ~~2021,~~2022, our total RPO was ~~$17.5 billion.~~ $17.7 billion, including approximately $200 million for our held for sale business in Russia. See Note 6, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding the Company's accounting for its Russia business.

Of the total RPO as of June 30, ~~2021,~~2022, we expect ~~89%~~90% will be recognized as sales over the following 24 months.

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~~Note 5: Related Parties~~

In connection with the Separation as further described in Note 1, the Company entered into several agreements with our former parent, UTC, and Carrier. These agreements include the Separation Agreement that sets forth certain agreements with UTC and Carrier regarding the principal actions to be taken in connection with the Separation, including identifying the assets transferred, the liabilities assumed and the contracts transferred to each of UTC, Carrier and Otis as part of the Separation, and when and how these transfers and assumptions occurred.

Other agreements that we entered into that govern aspects of our relationship with RTX and Carrier following the Separation include the TSA, TMA, EMA and Intellectual Property Agreement. Under the TSA, RTX provides the Company certain services and we provide certain services to RTX for a limited time, which is expected to end during the second half of 2021. The TMA governs the parties' respective rights, responsibilities and obligations with respect to tax matters, and among other things imposes restrictions on Otis during the two-year period following the Distribution that are intended to prevent certain transactions from failing to qualify as transactions that are generally tax-free. The EMA allocates among Otis, UTC, and Carrier the liabilities and responsibilities relating to employment matters, employee compensation and benefit plans, benefit programs and other related matters.

~~Net Transfers from (to) UTC and Separation Transactions.~~ In connection with the Separation, certain assets and liabilities were contributed to the Company by our former parent, UTC, leading up to and at the time of the Separation. During the quarter ended March 31, 2020, net liabilities of $43 million were contributed to the Company by our former parent, UTC, primarily consisting of deferred tax assets and liabilities and fixed assets. Prior to the Separation, these non-cash contributions were recorded as Net transfers (to) from UTC on the Condensed Consolidated Statements of Changes in Equity through UTC Net Investment during the quarter ended March 31, 2020.

~~Upon Separation, the following were recorded as Net transfers (to) from UTC and Separation-related transactions on the Consolidated Statements of Changes in Equity through UTC Net Investment:~~


~~(dollars in millions)~~
~~Cash and cash equivalents~~	$	~~220~~
~~Taxes and other~~	~~187~~
~~Total~~	$	~~407~~

~~Prior to the Separation, our former parent ,UTC, paid Otis Cash and cash equivalents of $190 million in connection with the Separation Agreement, and approximately $30 million as settlement of related party receivables due from UTC to Otis as a result of a cash overdraft as of March 31, 2020.~~

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Additionally, the Tax Cuts and Jobs Act (the "TCJA") imposed a non-recurring toll charge, paid in installments over an 8-year period on deemed repatriated earnings of foreign subsidiaries as of December 31, 2017. Under the terms of the TMA, Otis will indemnify RTX for a percentage of the toll charge installment payments due after April 3, 2020. As a result, a portion of Otis' future income tax obligations corresponding to the toll charge was reclassified as a contractual indemnity obligation within Other long-term liabilities on the Condensed Consolidated Balance Sheet. The TMA also provides for RTX to indemnify Otis for certain foreign tax obligations as a result of Otis' inclusion in certain foreign consolidated tax returns prior to the Separation. As a result, Otis has reflected this contractual indemnification asset within Other current assets and the related tax obligations within Accrued liabilities on the Condensed Consolidated Balance Sheet. As a result of the Separation and the provisions of the TMA, Otis' total net ~~tax-related liabilities on April 3, 2020 were reduced by $191 million, comprising the following impacts to the Condensed Consolidated Balance Sheet:~~


~~(dollars in millions)~~	~~Increase (Decrease)~~
~~Assets~~
~~Other current assets~~	$	~~167~~
~~Total Current Assets~~	~~167~~
~~Future income tax benefits~~	~~(4)~~
~~Total Assets~~	$	~~163~~

~~Liabilities and (Deficit) Equity~~
~~Accrued liabilities~~	$	~~110~~
~~Total Current Liabilities~~	~~110~~
~~Future income tax obligations~~	~~(377)~~
~~Other long-term liabilities~~	~~239~~
~~Total Liabilities~~	~~(28)~~
~~Total Shareholders' (Deficit) Equity~~	~~191~~
~~Total (Deficit) Equity~~	~~191~~
~~Total Liabilities and (Deficit) Equity~~	$	~~163~~

~~There were also $4 million of Other long-term liabilities recorded upon Separation on the Condensed Consolidated Balance Sheet.~~

~~Shared Costs.~~The Condensed Consolidated Financial Statements have been prepared on a standalone basis for the periods prior to the Separation on April 3, 2020, and for those periods are derived from the consolidated financial statements and accounting records of UTC. Prior to the Separation, the Company had been managed and operated in the normal course of business with other affiliates of UTC, and UTC incurred significant corporate costs such as treasury, tax, accounting, human resources, audit, legal, purchasing, information technology and other such services. The costs associated with these services generally included all payroll and benefit costs, as well as overhead costs related to certain functions. All such amou~~nts have been deemed to have been incurred and settled by the Company in the period in which the costs were recorded.~~

Accordingly, for periods prior to the Separation, shared costs of $16 million were allocated to the Company and reflected as expenses in Selling, general and administrative expense on the Condensed Consolidated Statements of Operations for the six months ended June 30, 2020. There were 0 allocated centralized costs for the periods after the Separation.

~~Separation Costs, net.~~ ~~We have incurred non-recurring Separation costs, net as follows:~~

Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Separation costs, net $ 0 $ 21 $ 9 $ 53

Separation-related costs, net are primarily recorded in Selling, general and administrative expense on the Condensed Consolidated Statements of Operations. The Selling, general and administrative expenses prior to the Separation primarily consisted of employee-related costs, costs to establish certain standalone functions and information technology systems, professional services fees, costs to exit from certain services previously provided under the TSA and other transaction-related

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costs to transition to being a standalone public company. The Selling, general and administrative expenses after the Separation primarily consist of costs to exit from certain services previously provided under the TSA and other transaction-related costs to transition to being a standalone public company. Additional Separation-related items, which are recorded in Other income (expense), net include indemnification payments received from RTX related to finalization of a tax settlement in accordance with the TMA and other Separation related costs. The TMA indemnification benefit is fully offset by related costs in the income tax provision.

~~Long-Term Debt, Accounts Receivable and Accounts Payable.~~ Certain related party transactions between the Company and our former parent, UTC, have been included within UTC Net Investment on the Condensed Consolidated Balance Sheets in the historical periods presented. The total effect of the settlement of these related party transactions is reflected as a financing activity on the Condensed Consolidated Statements of Cash Flows.

Note 6:4: Accounts Receivable, Net

Accounts receivable, net consisted of the following atas of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
Trade receivables	Trade receivables	$	3,028	$	2,987	Trade receivables	$	3,066	$	3,117
Customer financing notes receivable		125		130
Unbilled receivables	Unbilled receivables	118		104		Unbilled receivables	115		109
Miscellaneous receivables	Miscellaneous receivables	93		88		Miscellaneous receivables	96		88
Customer financing notes receivable						Customer financing notes receivable	78		93
		3,364		3,309			3,355		3,407
Less: allowance for expected credit losses	Less: allowance for expected credit losses	170		161		Less: allowance for expected credit losses	166		175
Accounts receivable, net	Accounts receivable, net	$	3,194	$	3,148	Accounts receivable, net	$	3,189	$	3,232

The changes in allowance for expected credit losses related to Accounts receivable, net for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, are as follows:

Six Months Ended June 30,
(dollars in millions) 2021 2020
Balance as of January 1 $ 161 $ 83
Impact of credit standard adoption 0 28
Provision for expected credit losses 15 13
Write-offs charged against the allowance for expected credit losses (5) (6)
Foreign exchange and other (1) 22
Balance as of June 30 $ 170 $ 140

For the quarter and six months ended June 30, 2020, there was approximately $22 million of previously reserved balances reclassified to allowance for credit losses. As a result, there was no impact to the Consolidated Statements of Operations for the quarter and six months ended June 30, 2020.


	Six Months Ended June 30,
(dollars in millions)	2022		2021
Balance as of January 1	$	175	$	161
Provision for expected credit losses	4		15
Write-offs charged against the allowance for expected credit losses	(13)		(5)
Foreign exchange and other	—		(1)
Balance as of June 30	$	166	$	170

Note 7:5: Inventories ~~net~~


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
Raw materials and work-in-process	Raw materials and work-in-process	$	121	$	113	Raw materials and work-in-process	$	135	$	140
Finished goods	Finished goods	552		546		Finished goods	461		482
Total	Total	$	673	$	659	Total	$	596	$	622

Raw materials, work-in-process and finished goods are net of valuation reserves of ~~$109 million and $112~~$99 million as of June 30, ~~2021~~2022 and December 31, ~~2020, respectively.~~2021.

Inventories decreased during the six months ended June 30, 2022 due to the reclassification of $19 million of raw materials and work-in-process and $31 million of finished goods to assets held for sale during the second quarter of 2022. See Note 6, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding the Company's accounting for its Russia business.

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Note 8:6: Business Acquisitions, Dispositions, Goodwill and Intangible Assets

Business Acquisitions. Our investments in businesses and intangibles assets, net of cash acquired, totaled ~~$51~~$28 million and ~~$16~~$51 million in the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The acquisitions and investments consisted of a number of acquisitions primarily in our Service segment. Transaction costs incurred were not considered significant.

Goodwill. Changes in our Goodwill balances during the six months ended June 30, ~~2021~~2022 were as follows:


(dollars in millions)	(dollars in millions)	Balance as of January 1, 2021		Goodwill Resulting From Business Combinations		Foreign Currency Translation and Other		Balance as of June 30, 2021		(dollars in millions)	Balance as of January 1, 2022		Goodwill Resulting From Business Combinations		Foreign Currency Translation and Other 1		Balance as of June 30, 2022
New Equipment	New Equipment	$	357	$	0	$	(6)	$	351	New Equipment	$	336	$	—	$	(45)	$	291
Service	Service	1,416		1		(26)		1,391		Service	1,331		10		(82)		1,259
Total	Total	$	1,773	$	1	$	(32)	$	1,742	Total	$	1,667	$	10	$	(127)	$	1,550

1 Includes reclassification of $29 million of goodwill to assets held for sale during the second quarter of 2022, primarily New Equipment. For additional information, refer to the subheading "Held For Sale Assets and Liabilities" below.

Intangible Assets. ~~Identifiable intangible~~Intangible assets ~~are comprised~~cost and accumulated amortization were $2,014 million and $1,629 million, respectively, as of ~~the following:~~

June 30, 2022, and $2,117 million and $1,698 million, respectively, as of December 31, 2021.

June 30, 2021 December 31, 2020
(dollars in millions) Gross Amount Accumulated
Amortization Gross Amount Accumulated
Amortization
Amortized:
Purchased service portfolios $ 2,092 $ (1,672) $ 2,123 $ (1,661)
Patents, trademarks/trade names 22 (17) 22 (16)
Customer relationships and other 70 (44) 54 (45)
2,184 (1,733) 2,199 (1,722)
Unamortized:
Trademarks and other 7 — 7 —
Total $ 2,191 $ (1,733) $ 2,206 $ (1,722)

Amortization of intangible assets for the quarter and six months ended June 30, ~~2021~~2022 was ~~$22~~$18 million and ~~$45~~$37 million, respectively, compared to ~~$23~~$22 million and $45 million for the same periods in ~~2020.~~2021. Excluding the impact of currency translation adjustments, there were no other significant changes in our Intangible Assets during the quarters and six months ended June 30, 2022 and 2021.

Held For Sale Assets and Liabilities. As of June 30, 2022, assets and liabilities held for sale were $166 million and $136 million, respectively, and are included in Other current assets and Accrued liabilities in the Condensed Consolidated Balance Sheets, respectively. There were no balances as of December 31, 2021.

In June 2022, we entered into an agreement to sell our business in Russia to a third party. As of June 30, 2022, our operations in Russia, primarily in the New Equipment segment, are classified as assets and liabilities held for sale. It is the Company's intention to complete the sale of these assets and liabilities within the next 12 months. Our Russia operations included assets held for sale of $157 million and liabilities held for sale of $136 million, respectively, as of June 30, 2022. The Company recorded an impairment loss of $18 million related to the net assets held for sale in Other expense (income), net in the Condensed Consolidated Statements of Operations for the quarter and six months ended June 30, 2022.

See Note 19, "Subsequent Events" for details on the completed sale of our business in Russia in July 2022.

Note 9:7: Borrowings and Lines of Credit


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
Commercial paper	Commercial paper	$	304	$	664	Commercial paper	$	55	$	—
Other borrowings	Other borrowings	39		37		Other borrowings	26		24
Total short-term borrowings	Total short-term borrowings	$	343	$	701	Total short-term borrowings	$	81	$	24

Commercial Paper. As of June 30, ~~2021, we had an aggregate~~2022, there were $55 million in borrowings outstanding under the Company's $1.5 billion ~~unsecured, unsubordinated~~ commercial paper ~~programs in place.~~programs. We use our commercial paper borrowings for general corporate purposes including to finance acquisitions, pay dividends, repurchase shares and for debt refinancing. The need for commercial paper borrowings may arise if the use of domestic cash for general corporate purposes exceeds the sum of domestic cash generation and foreign cash repatriated to the U.S.

~~In September 2020, we issued €420 million~~For details regarding the Company's short-term borrowings activity in 2021, refer to Note 10 of ~~Euro denominated commercial paper, €166 million~~the Company's financial statements as of ~~which was repaid in~~and for the ~~six months~~year ended ~~June 30,~~December 31, 2021. ~~The Euro denominated commercial paper qualifies as a net investment hedge against our investments in European businesses. As of June 30, 2021, the net investment hedge is deemed to be effective.~~

We also issued $150 million of U.S. Dollar commercial paper in November 2020, which was fully repaid during the six months ended June 30, 2021. The commercial paper issued in 2020 was used to pay down the term loan described further below.

1715

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Long-term debt. As of June 30, ~~2021,~~2022, we ~~had~~have a credit agreement, as amended, with various banks providing for a $1.5 billion unsecured, unsubordinated, 5-year revolving credit facility, ~~effective as of April 3, 2020,~~ with an interest rate of LIBOR plus 125 basis points and a commitment fee rate of 12.5 basis ~~points.~~points, that matures in April 2025. As of June 30, ~~2021,~~2022, there were 0no borrowings under the Company's revolving credit facility. ~~The undrawn portion of the revolving credit facility serves as a backstop for the issuance of commercial paper.~~

On February 10, 2020, the Company entered into a term loan credit agreement, as amended, providing for a $1.0 billion unsecured, unsubordinated 3-year term loan credit facility (the "term loan"). The Company drew on the full amount of the term loan on March 27, 2020 and then prepaid the full amount during 2020, resulting in the termination of the term loan credit agreement. Additionally, on February 27, 2020, we issued $5.3 billion unsecured, unsubordinated notes. ~~The net proceeds of the term loan and the notes of approximately $6.3 billion were distributed to our former parent, UTC, during the~~ ~~quarter ended March 31, 2020.~~

~~On March 11, 2021, we issued ¥21.5 billion Japanese Yen denominated ($199 million), unsecured, unsubordinated 5-year notes~~ ~~due March 2026 ("Yen Notes").~~ The net proceeds of the Yen Notes were used to repay a portion of our outstanding Euro denominated commercial paper. The Yen Notes qualify as a net investment hedge against our investments in Japanese businesses. As of June 30, ~~2021,~~2022, the ~~net investment hedge is deemed to be effective.~~

~~The~~ Company is in compliance with all covenants in the revolving credit agreement and the ~~indenture~~indentures governing ~~the notes as of June 30, 2021.~~

all outstanding long-term debt. Long-term debt consisted of the following:


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
LIBOR plus 45 bps floating rate notes due 2023 1,2		$	500	$	500
LIBOR plus 45 bps floating rate notes due 2023 1,2,3						LIBOR plus 45 bps floating rate notes due 2023 1,2,3	$	—	$	500
0.000% notes due 2023 (€500 million principal value) 2						0.000% notes due 2023 (€500 million principal value) 2	526		565
2.056% notes due 2025 2	2.056% notes due 2025 2	1,300		1,300		2.056% notes due 2025 2	1,300		1,300
0.37% notes due 2026 (¥21.5 billion principal value) 2	0.37% notes due 2026 (¥21.5 billion principal value) 2	195		0		0.37% notes due 2026 (¥21.5 billion principal value) 2	159		189
0.318% notes due 2026 (€600 million principal value) 2						0.318% notes due 2026 (€600 million principal value) 2	631		677
2.293% notes due 2027 2	2.293% notes due 2027 2	500		500		2.293% notes due 2027 2	500		500
2.565% notes due 2030 2	2.565% notes due 2030 2	1,500		1,500		2.565% notes due 2030 2	1,500		1,500
0.934% notes due 2031 (€500 million principal value) 2						0.934% notes due 2031 (€500 million principal value) 2	526		565
3.112% notes due 2040 2	3.112% notes due 2040 2	750		750		3.112% notes due 2040 2	750		750
3.362% notes due 2050 2	3.362% notes due 2050 2	750		750		3.362% notes due 2050 2	750		750
Other (including finance leases)	Other (including finance leases)	4		5		Other (including finance leases)	5		4
Total principal long-term debt	Total principal long-term debt	5,499		5,305		Total principal long-term debt	6,647		7,300
Other (discounts and debt issuance costs)	Other (discounts and debt issuance costs)	(42)		(43)		Other (discounts and debt issuance costs)	(45)		(51)
Total long-term debt	Total long-term debt	5,457		5,262		Total long-term debt	6,602		7,249
Less: current portion	Less: current portion	0		0		Less: current portion	—		—
Long-term debt, net of current portion	Long-term debt, net of current portion	$	5,457	$	5,262	Long-term debt, net of current portion	$	6,602	$	7,249

1 The three-month LIBOR rate ~~at June 30,~~as of December 31, 2021 was approximately ~~0.15%~~0.21%.

2We may redeem these notes at our option pursuant to certain terms.

3 The Company redeemed its $500 million floating rate notes due in 2023, at par, using cash on hand in January 2022.

For additional details regarding the Company's debt in 2021, refer to Note 10 of the Company's financial statements as of and for the year ended December 31, 2021.

Debt discounts and debt issuance costs are presented as a reduction of debt on the Condensed Consolidated Balance Sheets and are amortized as a component of interest expense over the term of the related debt using the effective interest method. The Condensed Consolidated Statements of Operations for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 reflects the following:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Debt issuance costs amortization	Debt issuance costs amortization	$	2	$	3	$	3	$	3	Debt issuance costs amortization	$	2	$	2	$	5	$	3
Total interest expense on external debt	Total interest expense on external debt	34		42		67		55		Total interest expense on external debt	35		34		71		67

The unamortized debt issuance costs atas of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 were ~~$42~~$45 million and ~~$43~~$51 million, respectively.

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The average maturity of our long-term debt atas of June 30, ~~2021~~2022 is approximately ~~10.5~~9.1 years. The average interest expense rate on our borrowings ~~for~~outstanding as of June 30, 2022 and December 31, 2021 was as follows:


	June 30, 2022		December 31, 2021
Short-term borrowings	1.9	%	—	%
Total long-term debt	2.0	%	1.9	%

The average interest expense rate on our borrowings during the quarters and six months ended June 30, ~~2021~~2022 and ~~2020, and as of June 30,~~ 2021 ~~and December 31, 2020~~ was as follows:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Average interest rate - average outstanding during period:
Short-term borrowings	Short-term borrowings	(0.3)	%	0	%	(0.3)	%	0	%	Short-term borrowings	1.1	%	(0.3)	%	0.7	%	(0.3)	%
Total long-term debt	Total long-term debt	2.3	%	2.5	%	2.4	%	2.5	%	Total long-term debt	2.0	%	2.3	%	2.0	%	2.4	%

Average interest rate - average as of:		June 30, 2021				December 31, 2020
Short-term borrowings		(0.3)			%	(0.2)			%
Total long-term debt		2.4			%	2.4			%

Note ~~10:~~8: Employee Benefit Plans

Pension and Postretirement Plans. The Company sponsors both funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit plans, and defined contribution plans. Contributions to our plans were as follows:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Defined benefit plans	Defined benefit plans	$	5	$	10	$	18	$	20	Defined benefit plans	$	9	$	5	$	21	$	18
Defined contribution plans	Defined contribution plans	14		14		33		30		Defined contribution plans	15		14		35		33
Multi-employer pension and postretirement plans	Multi-employer pension and postretirement plans	42		36		80		73		Multi-employer pension and postretirement plans	38		42		61		80

The following table illustrates the components of net periodic benefit cost for the Company's defined benefit pension plans:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Service cost	Service cost	$	11	$	10	$	22	$	20	Service cost	$	10	$	11	$	20	$	22
Interest cost	Interest cost	4		4		7		8		Interest cost	5		4		9		7
Expected return on plan assets	Expected return on plan assets	(6)		(6)		(12)		(13)		Expected return on plan assets	(7)		(6)		(13)		(12)

Recognized actuarial net loss	Recognized actuarial net loss	4		3		9		7		Recognized actuarial net loss	2		4		5		9

Total net periodic benefit cost	Total net periodic benefit cost	$	13	$	11	$	26	$	22	Total net periodic benefit cost	$	10	$	13	$	21	$	26

Postretirement Benefit Plans. The Company sponsors postretirement benefit plans that provide health benefits to eligible retirees. The postretirement plans are unfunded. The net periodic benefit cost was less than $1 million for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

~~UTC Sponsored Defined Benefit Plans.~~ Defined benefit pension and postretirement benefit plans were sponsored by our former parent, UTC, have been accounted for as multi-employer plans in these Condensed Consolidated Financial Statements. The Company's participation in the defined pension and postretirement benefit plans sponsored by our former parent, UTC, concluded upon the completion of the Separation. The amounts for pension and postretirement expenses for the six months ended June 30, 2020 for Service cost and Non-service pension benefit were $1 million and $5 million, respectively, all prior to the Separation.

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Stock-based Compensation. ~~In conjunction with the Separation, the~~The Company adopted the 2020 Long-Term Incentive Plan (the "Plan")~~. The Plan became~~ effective on April 3, 2020. As of June 30, ~~2021,~~2022, approximately 2624 million shares remain available for awards under the Plan.

Stock-based Compensation Expense

The Company measures the cost of all share-based payments, including stock options, at fair value on the grant date and ~~recognize~~recognizes this cost in the Condensed Consolidated Statements of Operations. A forfeiture rate assumption is applied on grant date to adjust the expense recognition for awards that are not expected to vest. For the quarter and six months ended June 30, 2020, stock-based compensation expense includes expense attributable to Otis, which is based on the awards and terms previously granted under the UTC incentive compensation plan to Otis employees. Accordingly, the amounts presented for the quarter and six months ended June 30, 2020 are not necessarily indicative

Table of ~~future awards and do not necessarily reflect the results that Otis would have experienced as an independent publicly-traded company.~~Contents

Stock-based compensation expense and the resulting tax benefits were as follows:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Stock-based compensation expense (Share Based)	Stock-based compensation expense (Share Based)	$	17	$	15	$	31	$	27	Stock-based compensation expense (Share Based)	$	15	$	17	$	28	$	31
Stock-based compensation expense (Cash Based)		1		1		1		(7)
Stock-based compensation expense (income) (Liability Awards)										Stock-based compensation expense (income) (Liability Awards)	—		1		(1)		1
Total gross stock-based compensation expense	Total gross stock-based compensation expense	18		16		32		20		Total gross stock-based compensation expense	15		18		27		32
Less: future tax benefit	Less: future tax benefit	2		2		4		4		Less: future tax benefit	2		2		3		4
Stock-based compensation expense, net of tax	Stock-based compensation expense, net of tax	$	16	$	14	$	28	$	16	Stock-based compensation expense, net of tax	$	13	$	16	$	24	$	28

As of June 30, ~~2021,~~2022, there was approximately ~~$85~~$86 million of total unrecognized compensation cost related to non-vested equity awards granted under the Plan. This cost is expected to be recognized ratably over a weighted-average period of ~~2.0~~2.1 years.

Note ~~11:~~9: Stock

Preferred Stock. There are 125 million shares of $0.01 par value authorized Preferred Stock, of which ~~NaN~~none were issued or outstanding as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Common Stock. There are 2 billion shares of $0.01 par value Common Stock authorized. As of June 30, ~~2021, 434.1~~2022, 435.2 million shares of Common Stock were issued, which includes ~~7.3~~15.0 million shares of treasury stock. As of December 31, ~~2020, 433.4~~2021, 434.7 million shares of Common Stock were ~~issued and outstanding.~~issued, which included 9.7 million shares of treasury stock.

Share Repurchase Program. As of ~~June 30,~~December 31, 2021, the Company was authorized by the Board of Directors to purchase up to $1 billion of Common Stock under a share repurchase program, of which ~~$506~~$275 million ~~has~~was remaining at such time.

As a result of the increased debt incurred in 2021 to fund the Tender Offer, we temporarily suspended our share repurchases as we focused on deleveraging. During the quarter ended March 31, 2022, we repaid certain debt and resumed our share repurchases. During the quarter and six months ended June 30, ~~2021~~ 2022, the Company repurchased 2.7 million and 5.3 million shares, respectively, for approximately $200 million and $400 million, respectively, compared to 2.6 million and 7.3 million shares in the same periods of ~~Common Stock, respectively,~~2021 for approximately $206 million and $506 million, respectively.

The Company's share repurchase program does not obligate it to acquire any specific number of shares. Under this program, shares may be purchased onin the open market, in privately negotiated transactions, under accelerated share repurchase programs or under plans complying with rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

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Note ~~12:~~10: Accumulated Other Comprehensive Income (Loss)

A summary of the changes in each component of Accumulated other comprehensive income (loss), net of tax, for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 is provided below:


(dollars in millions)	(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)		(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Quarter Ended June 30, 2021
Balance at March 31, 2021		$	(624)	$	(199)	$	0	$	(823)
Quarter Ended June 30, 2022										Quarter Ended June 30, 2022
Balance as of March 31, 2022										Balance as of March 31, 2022	$	(577)	$	(126)	$	7	$	(696)
Other comprehensive income (loss) before reclassifications, net	Other comprehensive income (loss) before reclassifications, net	16		0		2		18		Other comprehensive income (loss) before reclassifications, net	15		—		(1)		14
Amounts reclassified upon change in Otis' share of Zardoya Otis ownership (Note 1)										Amounts reclassified upon change in Otis' share of Zardoya Otis ownership (Note 1)	(69)		—		—		(69)
Amounts reclassified, pre-tax										Amounts reclassified, pre-tax	—		2		1		3

Balance as of June 30, 2022										Balance as of June 30, 2022	$	(631)	$	(124)	$	7	$	(748)

Six Months Ended June 30, 2022										Six Months Ended June 30, 2022
Balance as of December 31, 2021										Balance as of December 31, 2021	$	(642)	$	(128)	$	7	$	(763)
Other comprehensive income (loss) before reclassifications, net										Other comprehensive income (loss) before reclassifications, net	80		—		3		83
Amounts reclassified upon change in Otis' share of Zardoya Otis ownership (Note 1)										Amounts reclassified upon change in Otis' share of Zardoya Otis ownership (Note 1)	(69)		—		—		(69)
Amounts reclassified, pre-tax	Amounts reclassified, pre-tax	0		4		(1)		3		Amounts reclassified, pre-tax	—		5		(3)		2
Tax benefit reclassified	Tax benefit reclassified	0		(1)		0		(1)		Tax benefit reclassified	—		(1)		—		(1)

Balance at June 30, 2021		$	(608)	$	(196)	$	1	$	(803)

Six Months Ended June 30, 2021
Balance at December 31, 2020		$	(616)	$	(203)	$	4	$	(815)
Other comprehensive income (loss) before reclassifications, net		8		0		(7)		1
Amounts reclassified, pre-tax		0		9		4		13
Tax benefit reclassified		0		(2)		0		(2)

Balance at June 30, 2021		$	(608)	$	(196)	$	1	$	(803)
Balance as of June 30, 2022										Balance as of June 30, 2022	$	(631)	$	(124)	$	7	$	(748)


(dollars in millions)	(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)		(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Quarter Ended June 30, 2020
Balance at March 31, 2020		$	(704)	$	(166)	$	8	$	(862)
Quarter Ended June 30, 2021										Quarter Ended June 30, 2021
Balance as of March 31, 2021										Balance as of March 31, 2021	$	(624)	$	(199)	$	—	$	(823)
Other comprehensive income (loss) before reclassifications, net	Other comprehensive income (loss) before reclassifications, net	28		(1)		(12)		15		Other comprehensive income (loss) before reclassifications, net	16		—		2		18
Amounts reclassified, pre-tax	Amounts reclassified, pre-tax	0		3		0		3		Amounts reclassified, pre-tax	—		4		(1)		3
Tax benefit reclassified	Tax benefit reclassified	0		1		0		1		Tax benefit reclassified	—		(1)		—		(1)

Balance at June 30, 2020		$	(676)	$	(163)	$	(4)	$	(843)
Balance as of June 30, 2021										Balance as of June 30, 2021	$	(608)	$	(196)	$	1	$	(803)

Six Months Ended June 30, 2020
Balance at December 31, 2019		$	(588)	$	(167)	$	(3)	$	(758)
Six Months Ended June 30, 2021										Six Months Ended June 30, 2021
Balance as of December 31, 2020										Balance as of December 31, 2020	$	(616)	$	(203)	$	4	$	(815)
Other comprehensive income (loss) before reclassifications, net	Other comprehensive income (loss) before reclassifications, net	(88)		(1)		(1)		(90)		Other comprehensive income (loss) before reclassifications, net	8		—		(7)		1
Amounts reclassified, pre-tax	Amounts reclassified, pre-tax	0		7		0		7		Amounts reclassified, pre-tax	—		9		4		13
Tax benefit reclassified	Tax benefit reclassified	0		(2)		0		(2)		Tax benefit reclassified	—		(2)		—		(2)

Balance at June 30, 2020		$	(676)	$	(163)	$	(4)	$	(843)
Balance as of June 30, 2021										Balance as of June 30, 2021	$	(608)	$	(196)	$	1	$	(803)

Amounts reclassified that relate to defined benefit pension and postretirement plans include amortization of prior service costs and actuarial net losses recognized during each period presented. These costs are recorded as components of net periodic pension cost for each period presented. See Note 10 8, "Employee Benefit Plans"~~– Employee Benefit Plans~~ for additional information.

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Note ~~13:~~11: Income Taxes

The decrease in the effective tax rate for the quarter ended June 30, ~~2021~~2022, is primarily due to the elimination of Base Erosion Anti Abuse Tax (“BEAT”) in the U.S., and the release of a tax ~~benefit~~reserve related to a forward transfer pricing agreement with a European tax authority. In addition, the ~~incorporation of TCJA tax regulations that were enacted in the third~~ quarter ~~of 2020, partially offset by~~ended June 30, 2021, included an income tax settlement related to the ~~Separation as discussed in Note 5, “Related Parties”. In addition, the~~Separation. The decrease in the effective tax rate for the six months ended June 30, ~~2021~~2022, is ~~due to~~partially offset by the absence of ~~the tax cost relating to Separation-related expenses and a fixed asset impairment incurred in the first quarter of 2020, as well as~~ a reduction in the deferred tax liability related to repatriation of foreign earnings ~~as a result of changes to the Company’s planned debt repayments and changes in estimates related to Otis’ pre-Separation tax attributes~~ recorded in the quarter ended March 31, 2021.

The Company conducts business globally and, as a result, the Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Austria, Belgium, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, Mexico, Netherlands, Portugal, ~~Russia,~~ South Korea, Spain, Switzerland, the United Kingdom and the United States. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2010.

In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. The evaluation considers any additional worldwide uncertain tax positions, the closure of tax statutes or the re-valuation of current uncertain tax positions arising from the issuance of legislation, regulatory or other guidance or developments in examinations, in appeals, or in the courts. Based on the preceding factors, it is reasonably possible that within the next 12 months unrecognized tax benefits could change within the range of a ~~$10~~$20 million increase to a ~~$380~~$330 million decrease and associated interest could change within the range of a $5 million increase to a ~~$160~~$150 million decrease.

See Note ~~18,~~16, “Contingent Liabilities” for discussion regarding uncertain tax positions, included in the above range, related to pending litigation with respect to certain deductions claimed in Germany.

Note ~~14:~~12: Restructuring Costs

During the quarter and six months ended June 30, ~~2021,~~2022, we recorded restructuring costs totaling ~~$11~~$25 million and ~~$26~~$39 million, respectively, for new and ongoing restructuring ~~actions, compared to~~ ~~$20 million and $26 million, respectively, for the same periods of 2020.~~actions. We recorded these charges as follows:

Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Cost of products and services sold $ 10 $ 10 $ 14 $ 10
Selling, general and administrative 1 10 12 16
Total $ 11 $ 20 $ 26 $ 26


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2022		2021		2022		2021
Cost of products and services sold	$	11	$	10	$	14	$	14
Selling, general and administrative	14		1		25		12

Total	$	25	$	11	$	39	$	26

~~2021~~Restructuring ~~and 2020~~ Actions. During the six months ended June 30, ~~2021,~~2022, we recorded the following restructuring ~~costs of $16~~costs: $37 million for restructuring actions initiated in ~~2021~~2022, consisting of $6$14 million in Cost of products and services sold and ~~$10~~$23 million in Selling, general and administrative ~~expenses. During the~~expenses; ~~six months ended June 30, 2021, we recorded pre-tax restructuring costs totaling $10~~$1 million for restructuring actions initiated in ~~2020, consisting of $9 million in Cost of products and services sold and $1 million~~2021 primarily in Selling, general and administrative ~~expenses.~~ expenses; and $1 million for restructuring actions initiated prior to 2021.

~~The 2021 and~~ ~~2020,~~ ~~actions relate to ongoing cost-reduction efforts, including workforce reductions.~~ We are targeting to complete in ~~2021~~2022 the majority of remaining restructuring actions initiated in ~~2021~~2022 and ~~2020,~~2021, with certain utilization beyond ~~2021.~~ 2022.

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The following table summarizes expected, incurred and remaining costs for the 2022 and 2021 restructuring actions:


(dollars in millions)	Expected Costs		Costs Incurred During 2021		Costs Incurred Quarter Ended March 31, 2022		Costs Incurred Quarter Ended June 30, 2022		Remaining Costs as of June 30, 2022



Total 2022 Actions	$	58	$	—	$	(13)	$	(24)	$	21
Total 2021 Actions	$	47	$	(41)	$	(1)	$	—	$	5

The following table summarizes the accrual balance and utilization for the ~~2021~~2022 and ~~2020~~2021 restructuring actions, which are primarily for severance costs:

(dollars in millions) 2021 Actions 2020 Actions
Quarter Ended June 30, 2021
Restructuring accruals at March 31, 2021 $ 10 $ 29
Net pre-tax restructuring costs 3 8
Utilization, foreign exchange and other costs (6) (7)
Balance at June 30, 2021 $ 7 $ 30
Six Months Ended June 30, 2021
Restructuring accruals at December 31, 2020 $ 0 $ 42
Net pre-tax restructuring costs 16 10
Utilization, foreign exchange and other costs (9) (22)
Balance at June 30, 2021 $ 7 $ 30


(dollars in millions)	2022 Actions		2021 Actions
Quarter Ended June 30, 2022
Restructuring accruals as of March 31, 2022	$	11	$	13
Net restructuring costs	24		—
Utilization, foreign exchange and other costs	(11)		(5)
Balance as of June 30, 2022	$	24	$	8

Six Months Ended June 30, 2022
Restructuring accruals as of December 31, 2021	$	—	$	22
Net restructuring costs	37		1
Utilization, foreign exchange and other costs	(13)		(15)
Balance as of June 30, 2022	$	24	$	8

~~The following table summarizes expected, incurred and remaining costs for the 2021 and~~Additionally, there is a $16 million accrual balance as of ~~2020~~ ~~restructuring actions:~~

(dollars in millions) Expected Costs Costs Incurred During 2020 Costs Incurred Quarter Ended March 31, 2021 Costs Incurred Quarter Ended June 30, 2021 Remaining Costs at June 30, 2021
Total 2021 Actions $ 24 $ 0 $ (13) $ (3) $ 8
Total 2020 Actions $ 86 $ (71) $ (2) $ (8) $ 5

~~2019 and Prior Actions.~~ ~~During the six months ended~~ June 30, ~~2021, no restructuring costs were recorded~~2022 for restructuring actions initiated ~~in 2019 and prior.~~prior to 2021 remaining to be utilized. Most of the expected charges will require cash payment.

Note ~~15:~~13: Financial Instruments

We enter into derivative instruments primarily for risk management purposes, including derivatives designated as hedging instruments under ASC 820, Fair Value Measurement. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, commodity prices and foreign exchange rates. These fluctuations can increase the costs of financing, investing in and operating the business. We may use derivative instruments, including swaps, forward contracts and options, to manage certain foreign currency, commodity price and interest rate exposures.

The average of the notional amount of foreign exchange contracts hedging foreign currency transactions was ~~$3.0~~$3.5 billion atand $3.3 billion as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021, respectively. The average of the notional amount of contracts hedging commodity purchases was $4$17 million and $0$16 million atas of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

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The following table summarizes the fair value and presentation on the Condensed Consolidated Balance Sheets for derivative instruments as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(dollars in millions)	(dollars in millions)	Balance Sheet Classification	June 30, 2021		December 31, 2020		(dollars in millions)	Balance Sheet Classification	June 30, 2022		December 31, 2021
Derivatives designated as Cash flow hedging instruments:	Derivatives designated as Cash flow hedging instruments:						Derivatives designated as Cash flow hedging instruments:
		Asset Derivatives:						Asset Derivatives:
Foreign exchange contracts	Foreign exchange contracts	Other current assets	$	9	$	9	Foreign exchange contracts	Other current assets	$	6	$	7
Foreign exchange contracts	Foreign exchange contracts	Other assets	4		4		Foreign exchange contracts	Other assets	2		1
		Total asset derivatives	$	13	$	13		Total asset derivatives	$	8	$	8

		Liability Derivatives:						Liability Derivatives:
Foreign exchange contracts	Foreign exchange contracts	Accrued liabilities	$	(9)	$	(7)	Foreign exchange contracts	Accrued liabilities	$	(3)	$	(3)
Foreign exchange contracts		Other long-term liabilities	(4)		(4)

		Total liability derivatives	$	(13)	$	(11)		Total liability derivatives	$	(3)	$	(3)
Derivatives not designated as Cash flow hedging instruments:	Derivatives not designated as Cash flow hedging instruments:						Derivatives not designated as Cash flow hedging instruments:
		Asset Derivatives:						Asset Derivatives:
Foreign exchange contracts	Foreign exchange contracts	Other current assets	$	12	$	23	Foreign exchange contracts	Other current assets	$	19	$	23

Foreign exchange contracts	Foreign exchange contracts	Other assets	4		10		Foreign exchange contracts	Other assets	3		5

		Total asset derivatives	$	16	$	33		Total asset derivatives	$	22	$	28

		Liability Derivatives:						Liability Derivatives:
Foreign exchange contracts	Foreign exchange contracts	Accrued liabilities	$	(5)	$	(24)	Foreign exchange contracts	Accrued liabilities	$	(37)	$	(11)

Commodity contracts							Commodity contracts	Accrued liabilities	(3)		—
Foreign exchange contracts	Foreign exchange contracts	Other long-term liabilities	0		(8)		Foreign exchange contracts	Other long-term liabilities	(2)		(2)

		Total liability derivatives	$	(5)	$	(32)		Total liability derivatives	$	(42)	$	(13)

Derivatives designated as Cash flow hedging instruments

The amounts of gain or (loss) ~~are~~ attributable to foreign exchange contract activity reclassified from Accumulated other comprehensive income (loss) ~~and~~ were immaterial for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

The effect of cash flow hedging relationships on Accumulated other comprehensive income (loss) as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are presented in the table below:


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
Gain (loss) recorded in Accumulated other comprehensive income (loss)	Gain (loss) recorded in Accumulated other comprehensive income (loss)	$	1	$	4	Gain (loss) recorded in Accumulated other comprehensive income (loss)	$	7	$	7

The Company utilizes the critical terms match method in assessing firm commitment derivatives for hedge effectiveness. Accordingly, the hedged items and derivatives designated as hedging instruments are highly effective.

Assuming current market conditions continue, a pre-tax ~~loss~~gain of ~~less than $1~~$3 million is expected to be reclassified from Accumulated other comprehensive ~~loss~~income (loss) into Cost of products sold to reflect the fixed prices obtained from foreign exchange hedging within the next 12 months. ~~At June 30, 2021, all~~All derivative contracts accounted for as cash flow hedges as of June 30, 2022 will mature by ~~December 2024.~~October 2025.

~~Table of Contents~~

Net Investment ~~Hedges~~

Hedges.

We have foreign-denominated ~~commercial paper and~~ long-term debt balances that qualify as net investment hedges. Changes in the value of these net investment hedges due to foreign currency gains or losses are deferred as foreign currency translation adjustments in Other comprehensive income (loss) on the Condensed Consolidated Statements of Comprehensive Income, and will remain in Accumulated other comprehensive income (loss) until the hedged ~~investments are~~investment is sold or substantially liquidated.

We ~~have €254 million~~evaluate the effectiveness of ~~Euro denominated commercial paper, which qualifies as a net investment hedge against our investments in European businesses. As of~~ ~~June 30, 2021~~, the net investment ~~hedge is deemed to be effective. During the quarter and six months ended June 30, 2021, we have recognized~~ ~~losses~~ ~~of $5 million and gains of $12 million, respectively, associated with this net investment hedge in Other comprehensive income (loss).~~hedges each quarter.

We have ¥21.5 billion of Japanese Yen denominated long-term debt, which qualifies as a net investment hedge against our investments in Japanese businesses. As of June 30, ~~2021~~2022, the net investment hedge is deemed to be effective. During the

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quarter and six months ended June 30, 2022, we recognized gains of $18 million and $30 million, respectively, compared to gains of $1 million and $4 million, respectively, in the same periods of 2021, associated with this net investment hedge in Other comprehensive income (loss).

In September 2020, we issued €420 million of Euro denominated commercial paper. The Euro denominated commercial paper while outstanding qualified as a net investment hedge against our investments in European businesses. During 2021, we fully repaid the Euro denominated commercial paper, and there is no longer a net investment hedge against our investments in European businesses as of June 30, 2022 or December 31, 2021. During the quarter and six months ended June 30, 2021, we ~~have~~ recognized ~~gains~~losses of $1$5 million and $4gains of $12 million, respectively, associated with this net investment hedge in Other comprehensive income (loss).

Derivatives not designated as Cash flow hedging ~~instruments~~

instruments.

The net effect of derivatives not designated as Cash flow hedging instruments primarily within Other income (expense) net, onon the Condensed Consolidated Statements of Operations was as follows:


		Quarter Ended June 30,		Six Months Ended June 30,			Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021	2020	2021	2020	(dollars in millions)	2022		2021		2022	2021

Foreign exchange contracts	Foreign exchange contracts	0	(1)	(1)	(2)	Foreign exchange contracts	$	(3)	$	—	3	(1)

Note ~~16:~~14: Fair Value Measurements

~~In accordance with the provisions of ASC 820:~~ ~~Fair Value Measurements~~, the following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring and non-recurring basis in our Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020:

June 30, 2021
(dollars in millions) Total Level 1 Level 2 Level 3
Recurring fair value measurements:
Equity securities $ 24 $ 24 $ 0 $ 0
Derivative assets 29 0 29 0
Derivative liabilities (18) 0 (18) 0

December 31, 2020
(dollars in millions) Total Level 1 Level 2 Level 3
Recurring fair value measurements:
Equity securities $ 59 $ 59 $ 0 $ 0
Derivative assets 46 0 46 0
Derivative liabilities (43) 0 (43) 0

Valuation Techniques. Our equity securities include equity investments that are traded in active markets, either domestically or internationally, and are measured at fair value using closing stock prices from active markets. The fair value gains or losses related to our equity securities are recorded through ~~Other income (expense), net.~~net income. Our derivative assets and liabilities include foreign exchange and commodity contracts that are measured at fair value using internal models based on observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties' credit risks. ~~Our notes, as described in Note 9, "Borrowings and Lines of Credit", are measured at fair value using closing bond prices from active markets.~~

~~Table of Contents~~

As of June 30, ~~2021,~~2022, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk. Similarly, there has not been any significant adverse impact to our derivative assets based on our evaluation of our counterparties' credit risks.

The fair values of the current portion of the Company's financial instruments that are not carried at fair value approximated their carrying values because of the short-term nature of the current portion. The fair value of receivables, including customer financing notes receivable, net, that were issued long-term are based on the discounted values of their related cash flows at interest rates reflecting the attributes of the counterparties, including geographic location. Customer-specific risk, including credit risk, is already considered in the carrying value of those receivables. Our notes, as described in Note 7, "Borrowings and Lines of Credit", are measured at fair value using closing bond prices from active markets.

Recurring Fair Value Measurements. In accordance with the provisions of ASC 820: Fair Value Measurements, the following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring and non-recurring basis in our Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021:


	June 30, 2022
(dollars in millions)	Total		Level 1		Level 2		Level 3
Recurring fair value measurements:
Equity securities	$	28	$	28	$	—	$	—
Derivative assets	30		—		30		—
Derivative liabilities	(45)		—		(45)		—

Table of Contents


	December 31, 2021
(dollars in millions)	Total		Level 1		Level 2		Level 3
Recurring fair value measurements:
Equity securities	$	25	$	25	$	—	$	—
Derivative assets	36		—		36		—
Derivative liabilities	(16)		—		(16)		—

Fair Value of Financial Instruments. The following table provides carrying amounts and fair values of financial instruments that are not carried at fair value atas of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		June 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
(dollars in millions)	(dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term receivables, net	Long-term receivables, net	$	71	$	70	$	65	$	62	Long-term receivables, net	$	64	$	63	$	65	$	63
Customer financing notes receivable, net	Customer financing notes receivable, net	121		120		128		126		Customer financing notes receivable, net	46		45		77		76
Short-term borrowings	Short-term borrowings	(343)		(343)		(701)		(701)		Short-term borrowings	(81)		(81)		(24)		(24)
Long-term debt (excluding leases and other)	Long-term debt (excluding leases and other)	(5,494)		(5,682)		(5,300)		(5,717)		Long-term debt (excluding leases and other)	(6,642)		(5,946)		(7,296)		(7,420)
Long-term liabilities (including current portion)	Long-term liabilities (including current portion)	(261)		(252)		(263)		(234)		Long-term liabilities (including current portion)	(233)		(214)		(253)		(240)

The following tables provide the valuation hierarchy classification of assets and liabilities that are not carried at fair value in the Condensed Consolidated Balance ~~Sheet at~~Sheets as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		June 30, 2021									June 30, 2022
(dollars in millions)	(dollars in millions)	Total		Level 1		Level 2		Level 3		(dollars in millions)	Total		Level 1		Level 2		Level 3
Long-term receivables, net	Long-term receivables, net	$	70	$	0	$	70	$	0	Long-term receivables, net	$	63	$	—	$	63	$	—
Customer financing notes receivable, net	Customer financing notes receivable, net	120		0		120		0		Customer financing notes receivable, net	45		—		45		—
Short-term borrowings	Short-term borrowings	(343)		0		(343)		0		Short-term borrowings	(81)		—		(81)		—
Long-term debt (excluding leases and other)	Long-term debt (excluding leases and other)	(5,682)		0		(5,682)		0		Long-term debt (excluding leases and other)	(5,946)		—		(5,946)		—
Long-term liabilities (including current portion)	Long-term liabilities (including current portion)	(252)		0		(252)		0		Long-term liabilities (including current portion)	(214)		—		(214)		—


		December 31, 2020									December 31, 2021
(dollars in millions)	(dollars in millions)	Total		Level 1		Level 2		Level 3		(dollars in millions)	Total		Level 1		Level 2		Level 3
Long-term receivables, net	Long-term receivables, net	$	62	$	0	$	62	$	0	Long-term receivables, net	$	63	$	—	$	63	$	—
Customer financing notes receivable, net	Customer financing notes receivable, net	126		0		126		0		Customer financing notes receivable, net	76		—		76		—
Short-term borrowings	Short-term borrowings	(701)		0		(701)		0		Short-term borrowings	(24)		—		(24)		—
Long-term debt (excluding leases and other)	Long-term debt (excluding leases and other)	(5,717)		0		(5,717)		0		Long-term debt (excluding leases and other)	(7,420)		—		(7,420)		—
Long-term liabilities (including current portion)	Long-term liabilities (including current portion)	(234)		0		(234)		0		Long-term liabilities (including current portion)	(240)		—		(240)		—

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Note ~~17:~~15: Guarantees

The Company provides service and warranty on its products beyond normal service and warranty policies. The changes in the carrying amount of service and product guarantees for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


(dollars in millions)	(dollars in millions)	2021		2020		(dollars in millions)	2022		2021
Balance as of December 31	Balance as of December 31	$	25	$	27	Balance as of December 31	$	20	$	25
Warranties	Warranties	2		8		Warranties	—		2
Settlements made	Settlements made	(7)		(7)		Settlements made	(6)		(7)
Foreign exchange and other	Foreign exchange and other	3		(1)		Foreign exchange and other	—		3
Balance as of June 30	Balance as of June 30	$	23	$	27	Balance as of June 30	$	14	$	23

The Company provides certain financial guarantees to third parties. As of June 30, ~~2021,~~2022, Otis has stand-by letters of credit with maximum potential payment totaling ~~$155~~$142 million. We accrue costs associated with guarantees when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on

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an evaluation of currently available facts, and where no amount within a range of estimates is more likely, the minimum is accrued. In accordance with ~~the FASB~~ ASC Topic 460: Guarantees, we record these liabilities at fair value. As of June 30, ~~2021,~~2022, Otis has determined there are no estimated costs probable under these guarantees.

Note ~~18:~~16: Contingent Liabilities

Except as otherwise noted, while we are unable to predict the final outcome, based on information currently available, we do not believe that resolution of any of the following matters will have a material adverse effect upon our competitive position, results of operations, cash flows or financial condition. In addition to the specific amounts noted below, where we have recorded loss contingency accruals for the below and other ~~below~~ matters, the amounts in aggregate are not material. Legal costs generally are expensed when incurred.

Environmental. As previously disclosed, the Company's operations are subject to environmental regulation by authorities with jurisdiction over its operations. The Company has accrued for the costs of environmental remediation activities, including, but not limited to, investigatory, remediation, operating and maintenance costs and performance guarantees, and periodically reassesses these amounts. Management believes that the likelihood of incurring losses materially in excess of amounts accrued is remote. The outstanding liability for environmental obligations was $12 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, and is principally included in ~~Accrued liabilities and~~ Other long-term liabilities on the Condensed Consolidated Balance Sheets.

Legal Proceedings.

German Tax Litigation

As previously disclosed, we have been involved in administrative review proceedings with the German Tax Office, which concern approximately €215 million (approximately ~~$258~~$227 million as of June 30, ~~2021)~~2022) of tax benefits that we have claimed related to a 1998 reorganization of the corporate structure of our operations in Germany. Upon audit, these tax benefits were disallowed by the German Tax Office. We estimate interest associated with the aforementioned tax benefits is an additional approximately €118 million (approximately ~~$142~~$125 million as of June 30, ~~2021)~~2022).

OnIn August 3, 2012, a suit was filed in the local German Tax Court (Berlin-Brandenburg). In 2015, our former parent, UTC, now RTX, made tax and interest payments to German tax authorities of €275 million (approximately $300 million) in order to avoid additional interest accruals pending final resolution of this matter. In March 2016, the local German Tax Court dismissed the suit, and we appealed this decision to the German Federal Tax Court. Following a hearing onin July ~~24,~~ 2018, the German Federal Tax Court remanded the matter to the local German Tax Court for further proceedings. OnIn December 7, 2020, the local German Tax Court ruled against the Company. ~~We have~~

On January 26, 2021, the Company filed an appeal with the ~~German~~ Federal Tax Court. ~~There~~On February 8, 2022, the Company received the decision of the Federal Tax Court, in which the Court remanded the case for reconsideration by the local German Tax Court. The local Tax Court has not yet set a hearing date. Despite the remand, there is no assurance ~~however,~~ that the ~~German Federal~~local Tax Court will ~~agree to hear the appeal or, if it does,~~ rule in the Company's favor, and the decision of the German Tax Office ultimately could be sustained.

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Pursuant to the ~~TMA,~~Tax Matters Agreement ("TMA") with our former parent, UTC, the Company retains the liability associated with the remaining interest, and has recorded an interest accrual of €45 million (approximately ~~$53~~$49 million as of June 30, ~~2021)~~2022), net of payments and other deductions, included within Accrued liabilities on the Condensed Consolidated Balance Sheets atas of June 30, ~~2021. In the event that~~2022. If the Company prevails in this matter, any recoveries would be allocated between RTX and the Company pursuant to the terms of the TMA.

Asbestos Matters

As previously disclosed, we have been named as defendants in lawsuits alleging personal injury as a result of exposure to asbestos. While we have never manufactured any asbestos-containing component parts, and no longer incorporate asbestos in any current products, certain of our historical products have contained components manufactured by third parties incorporating asbestos. A substantial majority of these asbestos-related claims have been dismissed without payment or were covered in full or in part by insurance or other forms of indemnity. Additional cases were litigated and settled without any insurance reimbursement. The amounts involved in asbestos ~~relate~~drelated claims were not material individually or in the aggregate as of and for the periods ended June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

The estimated range of total liabilities to resolve all pending and unasserted potential future asbestos claims through 2059 is approximately ~~$23~~$22 million to $45 million as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. Because no amount within the range of estimates is more likely to occur than any other, we have recorded the minimum amount of ~~$23~~$22 million, which is principally recorded in Other long-term liabilities on our Condensed Consolidated Balance Sheets as of June 30, ~~2021~~2022 and December 31,

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~~2020.~~ 2021. Amounts are on a pre-tax basis, not discounted, and ~~excludes~~exclude the Company's legal fees to defend the asbestos claims (which will continue to be expensed as they are incurred). In addition, the Company has an insurance recovery receivable for probable asbestos-related recoveries of approximately $5 million, which is principally included in Other assets on our Condensed Consolidated Balance Sheets as of June 30, ~~2021~~2022 and December 31, ~~2020~~.2021.

Putative Class Action Lawsuit

On August 12, 2020, a putative class action lawsuit, (Geraud Darnis et al. v. Raytheon Technologies Corporation et al.), was filed in the United States District Court for the District of Connecticut against Otis, ~~Raytheon Technologies~~RTX, Carrier Global Corporation ("~~RTX"~~Carrier"), ~~Carrier,~~which was also separated from UTC in the Separation, each of their directors, and various incentive and deferred compensation plans. On September 13, 2021, plaintiffs filed an amended complaint against the three company defendants only. The named plaintiffs are former employees of UTC and its current and former subsidiaries, including Otis and Carrier. They seek to recover monetary damages, as well as related declaratory and equitable relief, based on claimed decreases in the value of long-term incentive awards and deferred co~~mpensation~~compensation under nonqualified ~~deferred~~deferred compensation plans allegedly caused by the formula used to calculate the adjustments to such awards and deferred compensation from RTX, Carrier, and Otis following the spin-offs of Carrier and Otis and the subsequent combination of UTC and Raytheon Company. Otis believes that the claims against the Company are without merit. At this time, Otis is unable to predict the outcome, or reasonably estimate the possible loss or range of loss, if any, which could result from this action.

Other.

As previously disclosed, we have commitments and contingent liabilities related to legal proceedings, self-insurance programs and matters arising out of the normal course of business. We accrue contingencies based on a range of possible outcomes. If no amount within this range is a better estimate than any other, we accrue the minimum amount. While it is not possible to determine the ultimate disposition of each of these claims and whether they will be resolved consistent with our beliefs, we expect that the outcome of such claims, individually or in the aggregate, will not have a material adverse effect on our business, financial condition, cash flows or results of operations.

As previously disclosed, in certain European countries, claims for overcharges on elevators and escalators related to civil cartel cases have been made, which we have accrued for based on our evaluation of the claims. While it is not possible to determine the ultimate disposition of each of these claims and whether they will be resolved consistent with our beliefs, historical settlement experience of these cases ~~have~~has not been material to the business, financial condition, cash flows or results of operations, however the future outcome of these cases cannot be determined.

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As previously disclosed, in the ordinary course of business, the Company is also routinely a defendant in, party to or otherwise subject to many pending and threatened legal actions, claims, disputes and proceedings. These matters are often based on alleged violations of contract, product liability, warranty, regulatory, environmental, health and safety, employment, intellectual property, tax and other laws. In some of these proceedings, claims for substantial monetary damages are asserted against the Company and its subsidiaries and could result in fines, penalties, compensatory or treble damages or non-monetary relief. We do not believe that these matters will have a material adverse effect upon our competitive position, results of operations, cash flows or financial condition.

Note ~~19:~~17: Segment Financial Data

Our operations are classified into 2 operating segments: New Equipment and Service. Through the New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators as well as escalators and moving walkways to customers in the residential and commercial building and infrastructure projects. The Service segment provides maintenance and repair services for both our products and those of other manufacturers, and provides modernization services to upgrade elevators and escalators. The operating segments are generally based on the management structure of the Company, how management allocates resources, assesses performance and makes strategic and operational decisions.

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Segment Information. Segment information for the quarters ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		Net Sales				Operating Profit				Operating Profit Margin					Net Sales				Operating Profit				Operating Profit Margin
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021		2022		2021
New Equipment	New Equipment	$	1,727	$	1,294	$	147	$	79	8.5	%	6.1	%	New Equipment	$	1,534	$	1,727	$	99	$	147	6.5	%	8.5	%
Service	Service	1,974		1,735		441		381		22.3	%	22.0	%	Service	1,954		1,974		435		441		22.3	%	22.3	%
Total segments	Total segments	3,701		3,029		588		460		15.9	%	15.2	%	Total segments	3,488		3,701		534		588		15.3	%	15.9	%

General corporate expenses and other	General corporate expenses and other	0		0		(27)		(44)		0		0		General corporate expenses and other	—		—		(47)		(27)		—		—
Total	Total	$	3,701	$	3,029	$	561	$	416	15.2	%	13.7	%	Total	$	3,488	$	3,701	$	487	$	561	14.0	%	15.2	%

Segment information for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		Net Sales				Operating Profit				Operating Profit Margin					Net Sales				Operating Profit				Operating Profit Margin
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021		2022		2021
New Equipment	New Equipment	$	3,185	$	2,417	$	251	$	143	7.9	%	5.9	%	New Equipment	$	2,956	$	3,185	$	192	$	251	6.5	%	7.9	%
Service	Service	3,924		3,578		871		781		22.2	%	21.8	%	Service	3,946		3,924		882		871		22.4	%	22.2	%
Total segments	Total segments	7,109		5,995		1,122		924		15.8	%	15.4	%	Total segments	6,902		7,109		1,074		1,122		15.6	%	15.8	%
General corporate expenses and other														General corporate expenses and other	—		—		(61)		(52)		—		—
Total														Total	$	6,902	$	7,109	$	1,013	$	1,070	14.7	%	15.1	%

General corporate expenses and other 1		0		0		(52)		(179)		0		0
Total		$	7,109	$	5,995	$	1,070	$	745	15.1	%	12.4	%

1 ~~The decrease in~~ General corporate expenses and other includes an impairment loss of $18 million for the quarter and six months ended June 30, 2022, related to the net assets held for sale related to our operations in Russia. See Note 6, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding the Company's accounting for its Russia business.

General corporate expenses and other also includes non-recurring Separation-related costs during the six months ended June 30, 2022 and 2021 ~~compared to~~of $2 million and $9 million, respectively. There were no non-recurring Separation-related costs during the ~~six months~~quarters ended June 30, ~~2020 is primarily driven by a fixed asset impairment charge~~2022 and related costs of $67 million in the six months ended June 30, 2020, as well as lower non-recurring Separation-related and shared costs of $60 million in the six months ended June 30, 2021 compared to the same period in 2020. For further discussion on these Separation-related and shared costs, see Note 5.2021.

Total assets are not presented for each segment as they are not presented to, or reviewed by, the Chief Operating Decision Maker.

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Geographic ~~External~~ Sales. Geographic Net sales are attributed to the geographic regions based on their location of origin. With the exception of the U.S. and China, there were no individually significant countries with sales exceeding 10% of Net sales during the quarters and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.


		External Net Sales
		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
United States Operations	United States Operations	$	939	$	805	$	1,875	$	1,695	United States Operations	$	953	$	939	$	1,930	$	1,875
International Operations	International Operations									International Operations
China	China	803		613		1,365		933		China	711		803		1,279		1,365
Other	Other	1,959		1,611		3,869		3,367		Other	1,824		1,959		3,693		3,869
Total	Total	$	3,701	$	3,029	$	7,109	$	5,995	Total	$	3,488	$	3,701	$	6,902	$	7,109

~~Table of Contents~~Disaggregated Sales by Type

. Segment Net sales disaggregated by product and service type for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Disaggregated Net sales by type

New Equipment	New Equipment	$	1,727	$	1,294	$	3,185	$	2,417	New Equipment	$	1,534	$	1,727	$	2,956	$	3,185

Maintenance and Repair	Maintenance and Repair	1,617		1,423		3,220		2,933		Maintenance and Repair	1,596		1,617		3,229		3,220
Modernization	Modernization	357		312		704		645		Modernization	358		357		717		704
Total Service	Total Service	1,974		1,735		3,924		3,578		Total Service	1,954		1,974		3,946		3,924
Total	Total	$	3,701	$	3,029	$	7,109	$	5,995	Total	$	3,488	$	3,701	$	6,902	$	7,109

Major Customers. There were no customers that individually accounted for 10% or more of the Company's consolidated Net sales for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

Note ~~20:~~18: Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update remove certain exceptions of Topic 740 including: exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or gain from other items; exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. There are also additional areas of guidance in regards to: franchise and other taxes partially based on income and the interim recognition of enactment of tax laws and rate changes. The provisions of this ASU are effective for years beginning after December 15, 2020, with early adoption permitted. The Company adopted this standard effective January 1, 2021. The adoption of this ASU did not have a material impact on our Condensed Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. We are currently evaluating the impact of adopting this standard but do not expect it to have a material impact on our Condensed Consolidated Financial Statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, with early application permitted. We are currently evaluating the impact of adopting this standard, however we do not expect it to have a material impact on our Condensed Consolidated Financial Statements.

Other new accounting pronouncements ~~adopted and~~ issued but not effective until after June 30, ~~2021~~2022 did not and are not expected to have a material impact on our financial position, results of operations or liquidity.

Note 19: Subsequent Events

In June 2022, we entered into an agreement to sell our business in Russia to a third party. The sale was completed on July 27, 2022.

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With respect to the unaudited condensed consolidated financial information of Otis Worldwide Corporation for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, PricewaterhouseCoopers LLP (PricewaterhouseCoopers) reported that it has applied limited procedures in accordance with professional standards for a review of such information. However, its report dated July 28, ~~2021,~~2022, appearing below, states that the firm did not audit and does not express an opinion on that unaudited condensed consolidated financial information. PricewaterhouseCoopers has not carried out any significant or additional ~~audit tests~~review procedures beyond those that would have been necessary if their report had not been included. Accordingly, the degree of reliance on its report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the Act) for its report on the unaudited condensed consolidated financial information because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers within the meaning of Sections 7 and 11 of the Act.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Otis Worldwide Corporation

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Otis Worldwide Corporation and its subsidiaries (the “Company”) as of June 30, ~~2021~~2022, and the related condensed consolidated statements of operations, of comprehensive income and of changes in equity for the three-month and six-month periods ended June 30, ~~2021~~2022 and ~~2020~~2021 and the condensed consolidated ~~statement~~statements of cash flows for the six-month periods ended June 30, ~~2021~~2022 and ~~2020~~2021, including the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, ~~2020,~~2021, and the related consolidated statements of operations, of comprehensive income, of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February ~~5, 2021,~~4, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2020,~~2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut

July 28, ~~2021~~2022

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

BUSINESS OVERVIEW

Business Summary

We are the world’s leading elevator and escalator manufacturing, installation and service company. Our Company is organized into two segments, New Equipment and Service. Through our New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators, as well as escalators and moving walkways for residential and commercial buildings and infrastructure projects. Our New Equipment customers include real-estate and building developers and general contractors who develop and/or design buildings for residential, commercial, retail or mixed-use activity. We sell our New Equipment directly to customers, as well as through agents and distributors.

Through our Service segment, we perform maintenance and repair services for both our own products and those of other manufacturers and provide modernization services to upgrade elevators and escalators. Maintenance services include inspections to ensure code compliance, preventive maintenance offerings and other customized maintenance offerings tailored to meet customer needs, as well as repair services to address equipment and component wear and tear and breakdowns. Modernization services enhance equipment operation and improve building functionality. Modernization offerings can range from relatively simple upgrades of interior finishes and aesthetics to complex upgrades of larger components and sub-systems. Our typical Service customers include building owners, facility managers, housing associations and government agencies that operate buildings where elevators and escalators are installed.

We serve our customers through a global network of ~~approximately 69,000~~ employees. These include sales personnel, field technicians with separate skills in performing installation and service, as well as engineers driving our continued product development and innovation. We function under a centralized operating model whereby a global strategy is set around New Equipment and Service because we seek to grow our maintenance portfolio, in part, through the conversion of new elevator and escalator installations into service contracts. Accordingly, we benefit from an integrated global strategy, which sets priorities and establishes accountability across the full product lifecycle.

The current status of significant factors affecting our business environment in ~~2021~~2022 is discussed below. For additional discussion, refer to the "Business Overview" section in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K.

~~Separation from United Technologies Corporation~~Recent Developments

Risks associated with the ongoing conflict between Russia and Ukraine

The ongoing conflict between Russia and Ukraine has resulted in worldwide geopolitical and macroeconomic uncertainty, including volatile commodity markets, foreign exchange fluctuations, supply chain disruptions, increased risk of cyber incidents, reputational risk, increased operating costs (including fuel and other input costs), environmental, health and safety risks related to securing and maintaining facilities, additional sanctions and other regulations (including restrictions on the transfer of funds to and from Russia).

As previously disclosed, ~~on April 3, 2020, Otis became~~in March 2022 we stopped taking new equipment orders in Russia and making new investments in the country, and reassessed our operations in Russia, which represented approximately 2% of our 2021 revenue and operating profit, comprised mostly of New Equipment. In June 2022 we entered into an ~~independent, publicly-traded company and its Common Stock is listed under~~agreement to sell our business in Russia to a third party, which was subject to customary closing conditions. The sale was completed in July 2022. See Note 19, "Subsequent Events" to the symbol "OTIS" on the New York Stock Exchange ("NYSE") as a result of the separation ("the Separation") of each of Otis and Carrier Global Corporation ("Carrier") from United Technologies Corporation, subsequently renamed Raytheon Technologies Corporation ("UTC" or "RTX", as applicable).Condensed Consolidated Financial Statements, for further details.

Prior to the ~~Separation,~~closing of the sale, we continued to fulfill our ~~historical financial statements were prepared on a standalone combined basis~~existing contracts and ~~were derived from~~provide essential services in Russia, when possible, while remaining in compliance with applicable laws, including applicable sanctions and export controls. As of June 30, 2022, the ~~consolidated financial statements~~Company's business in Russia had remaining performance obligations for contracts with customers of approximately $230 million, including customary performance guarantees and ~~accounting records~~purchase obligations to suppliers. The Company estimates that, as of ~~our former parent, UTC. For~~June 30, 2022, its Russia business had the ~~period subsequent~~net assets, cash flows and liquidity to April 3, 2020, our financial statements are presented on a consolidated basis as the Company became a standalone public company. The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

~~We entered into a transition services agreement ("TSA") and tax matters agreement ("TMA") with our former parent, UTC, and Carrier on April 2, 2020. We received and~~ continue to ~~receive services for information technology, technical~~fulfill contractual obligations to customers, suppliers and engineering support, application support for operations, general administrative services and other support services under the TSA. The TSA and the related trailing exit costs are expected to wind-down during the second half of 2021. For additional discussion, see Note 5 "Related Parties" to the Condensed Consolidated Financial Statements.

employees.

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To the extent possible, we continue to operate our business in Ukraine, which represented less than 1% of our full year 2021 and six months ended June 30, 2022 revenue and operating profit.

Additionally, we cannot predict how the conflict will evolve. If the conflict continues for a significant time or expands to other countries, it could heighten certain risks disclosed in Item 1A "Risk Factors" in our 2021 Form 10-K, including but not limited to, adverse effects on macroeconomic conditions, including increased inflation, constraints on the availability of commodities, supply chain disruption and decreased business spending; cyber-incidents; disruptions to our or our business partners’ global technology infrastructure, including through cyber-attack or cyber-intrusion; adverse changes in international trade policies and relations; claims, litigation and regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to foreign currency fluctuations; reputational risk; and constraints, volatility, or disruption in the capital markets, any of which could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Consistent with our risk management process, the Otis Board of Directors and its Audit Committee have received, and continues to receive, numerous updates on the ongoing conflict between Russia and Ukraine and reviewed, and continues to review, with management the financial, operational, compliance, reputational and cyber risks associated therewith and related mitigation actions. The Otis Board of Directors oversaw the process of selling our business in Russia, including reviewing the terms and conditions thereof, and the Audit Committee approved the sale. The Otis Board of Directors continued to receive updates on the sale process until the completion of the sale, including with respect to the satisfaction of the closing conditions.

Russia Held for Sale Business

As a result of our decision during the second quarter of 2022 to sell our business in Russia, and the expectation that the sale of the business will be completed within the next twelve months, we have classified the business' assets and liabilities as held for sale as of June 30, 2022. The Company recorded an impairment loss of $18 million related to the net assets held for sale in Other expense (income), net in the Condensed Consolidated Statements of Operations for the quarter and six months ended June 30, 2022.

See Note 6, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" and Note 19, "Subsequent Events" to the Condensed Consolidated Financial Statements for further details, including the completion of the sale in July 2022.

Zardoya Otis Tender Offer

As previously disclosed, the Company announced the Tender Offer to acquire all of the issued and outstanding shares of Zardoya Otis not owned by Otis, at an offer price of €7.07 per share in cash, after adjusting for dividends. The results of the Tender Offer were announced on April 7, 2022, with tenders of 45.49% of the shares outstanding accepted. The shares tendered to the Company were settled in cash on April 12, 2022 for approximately €1.5 billion from the Company's restricted cash held in escrow, resulting in the Company owning 95.51% of Zardoya Otis. The acquisition and settlement of the remaining issued and outstanding shares not owned by the Company for approximately €150 million (based on the adjusted tender price of €7.07 per share) and the automatic delisting of Zardoya Otis shares occurred during the second quarter of 2022.

See Note 1, "General" to the Condensed Consolidated Financial Statements, for further details regarding this transaction and financing arrangements entered into in connection with the Tender Offer.

Impact of COVID-19 on our Company

The results of our operations and overall financial performance were impacted due to the COVID-19 pandemic during the quarters and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021. COVID-19 has had and could continue to have ~~a negative~~an impact on our business in the future, including impacts to overall financial performance during the remainder of ~~2021,~~2022, as a result of the following, among other things:

•Customer demand impacting our new equipment, maintenance and repair, and modernization businesses

•Cancellations or delays of customer orders

•Customer liquidity constraints and related credit reserves

•Supplier and raw material capacity constraints, delays and related costs

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We currently do not expect any significant impact to our capital and financial resources from the COVID-19 pandemic, including to our overall liquidity position based on our available cash and cash equivalents and our access to credit facilities and the capital markets. We are focused on navigating these challenges presented by COVID-19 by continuing to preserve our liquidity and managing our cash flow by taking the necessary measures to meet our short-term liquidity needs.

See the Liquidity and Financial Condition section in this Form 10-Q for further detail and Item 1A. Risk Factors in our Form 10-K for additional risks related to COVID-19.

CRITICAL ACCOUNTING ESTIMATES

Preparation of our Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The accounting policies that involve the most significant estimates, assumptions and management judgments used in preparation of the Condensed Consolidated Financial Statements, or are the most sensitive to change due to outside factors, are discussed in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates" included in our Form 10-K. Except as disclosed in Note 2018 to our Condensed Consolidated Financial Statements in this Form 10-Q, pertaining to adoption of new accounting pronouncements, there have been no material changes in these policies.

As a result of our business in Russia meeting the criteria for held for sale in the quarter ended June 30, 2022, we are excluding the results of our operations in Russia from the organic/operational volume changes in the current and prior year comparison in our Results of Operations and net sales and operating profit changes in our Segment Review of the Management’s Discussion and Analysis in this Form 10-Q and as noted below. See Note 6, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" to the Condensed Consolidated Financial Statements, for further details. In future filings, after the business in Russia is sold, the results of the operations in Russia will be excluded through Acquisitions and divestitures.

RESULTS OF OPERATIONS

Net Sales


		Quarter Ended June 30,					Six Months Ended June 30,						Quarter Ended June 30,					Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021			2020		2021			2020		(dollars in millions)	2022			2021		2022			2021
Net sales	Net sales	$	3,701		$	3,029	$	7,109		$	5,995	Net sales	$	3,488		$	3,701	$	6,902		$	7,109
Percentage change year-over-year	Percentage change year-over-year	22.2		%			18.6		%			Percentage change year-over-year	(5.8)		%			(2.9)		%

The factors contributing to the total percentage change year-over-year in total Net sales for the quarter and six months ended June 30, ~~2021~~2022 are as follows:


		Quarter Ended June 30, 2021		Six Months Ended June 30, 2021
Components of Net sales change:						Components of Net sales change:	Quarter Ended June 30, 2022		Six Months Ended June 30, 2022
Organic volume	Organic volume	15.4	%	12.9	%	Organic volume	0.4	%	1.6	%
Foreign currency translation	Foreign currency translation	6.5	%	5.5	%	Foreign currency translation	(5.3)	%	(4.1)	%
Russia						Russia	(1.0)	%	(0.5)	%
Acquisitions and divestitures, net	Acquisitions and divestitures, net	0.3	%	0.2	%	Acquisitions and divestitures, net	0.1	%	0.1	%

Total % change	Total % change	22.2	%	18.6	%	Total % change	(5.8)	%	(2.9)	%

The Organic volume increase of ~~15.4%~~0.4% for the quarter ended June 30, ~~2021~~2022 was driven by ~~increases~~an increase in organic sales of ~~25.4%~~5.2% in Service, largely offset by a decrease of (5.0)% in New Equipment ~~and~~ ~~7.8%~~ ~~in Service.~~organic sales.

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The Organic volume increase ~~of 12.9%~~ of 1.6% for the six months ended June 30, ~~2021~~2022 was driven by ~~increases~~an increase in organic sales of ~~25.3%~~5.5% in Service, partially offset by a decrease of (3.2)% in New Equipment ~~and 4.5% in Service.~~organic sales.

See "Segment Review" section for a discussion of Net sales by segment.

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Cost of Products and Services Sold
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Total cost of products and services sold $ 2,626 $ 2,138 $ 5,015 $ 4,207
Percentage change year-over-year 22.8 % 19.2 %


	Quarter Ended June 30,					Six Months Ended June 30,
(dollars in millions)	2022			2021		2022			2021
Total cost of products and services sold	$	2,505		$	2,626	$	4,913		$	5,015
Percentage change year-over-year	(4.6)		%			(2.0)		%

The factors contributing to the percentage change year-over-year for the quarter and six months ended June 30, ~~2021~~2022 in total cost of products and services sold are as follows:


Components of Cost of Products and Services Sold change:						Components of Cost of Products and Services Sold change:	Quarter Ended June 30, 2022		Six Months Ended June 30, 2022
Organic volume						Organic volume	1.8	%	2.4	%
Foreign currency translation						Foreign currency translation	(5.3)	%	(4.0)	%
Russia						Russia	(0.9)	%	(0.3)	%

		Quarter Ended June 30, 2021		Six Months Ended June 30, 2021
Organic volume		15.6	%	13.1	%
Foreign currency translation		6.9	%	5.8	%
Acquisitions and divestitures, net		0.3	%	0.2	%
Restructuring		—	%	0.1	%

Other						Other	(0.2)	%	(0.1)	%
Total % change	Total % change	22.8	%	19.2	%	Total % change	(4.6)	%	(2.0)	%

The ~~organic~~organic increase in total cost of products and services sold for the quarter and six months ended June 30, ~~2021~~2022 was primarily driven by the organic sales increases noted above and ~~overall segment mix between New Equipment~~inflationary pressures, including higher commodity prices of $35 million and ~~Service.~~$71 million, respectively, primarily driven by steel, as well as higher freight and fuel costs and annual wage increases, partially mitigated by productivity.

Gross Margin
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Gross margin $ 1,075 $ 891 $ 2,094 $ 1,788
Gross margin percentage 29.0 % 29.4 % 29.5 % 29.8 %


	Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2022			2021			2022			2021
Gross margin	$	983		$	1,075		$	1,989		$	2,094
Gross margin percentage	28.2		%	29.0		%	28.8		%	29.5		%

Gross ~~margin~~margin percentage decreased 4080 and ~~30 basi~~s70 basis points for the quarter and six months ended June 30, ~~2021,~~2022, respectively, when compared to the same periods for ~~2020, as improvement in gross margins in~~2021, due to the inflationary pressures described above, partially offset by favorable service pricing and productivity and the benefit from Service sales growing faster than New Equipment ~~and Service was more than offset by overall segment mix.~~sales.

See the "Segment Review" section for discussion of operating results by segment.

Research and Development
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Research and development $ 39 $ 37 $ 74 $ 75
Percentage of Net sales 1.1 % 1.2 % 1.0 % 1.3 %


	Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2022			2021			2022			2021
Research and development	$	38		$	39		$	75		$	74
Percentage of Net sales	1.1		%	1.1		%	1.1		%	1.0		%

Research and development was relatively flat for the quarter and six months ended June 30, ~~2021,~~2022, when compared to the same ~~periods~~period for ~~2020~~.~~We continue to fund our strategic investment projects, including investments in Internet of Things technologies.~~2021.

~~Research and development expense as a percentage of net sales decreased for the quarter and six months ended June 30, 2021,when compared to the same periods in 2020, primarily as a result of the increase in net sales in the current year.~~

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Selling, General and Administrative
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Selling, general and administrative $ 484 $ 441 $ 966 $ 906
Percentage of Net sales 13.1 % 14.6 % 13.6 % 15.1 %


	Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2022			2021			2022			2021
Selling, general and administrative	$	439		$	484		$	898		$	966
Percentage of Net sales	12.6		%	13.1		%	13.0		%	13.6		%

Selling, general and administrative expenses ~~increased approximately $43~~decreased $45 million and ~~$60~~$68 million for the quarter and six months ended June 30, ~~2021,~~2022, respectively, when compared to the same periods in ~~2020, primarily due to the following:~~

•~~Higher employment and information technology costs, including incremental standalone public company costs, and the absence of~~2021, as cost containment actions, ~~taken during 2020 in response to COVID-19,~~other employment related cost reductions, lower credit loss reserves and the impact from foreign exchange were partially offset by annual wage increases and higher restructuring costs.

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•Lower non-recurring Separation-related costs and the absence of corporate allocations from UTC of $18 million and $57 million for the quarter and six months ended June 30, 2021, respectively, compared to the same periods in 2020.

•Selling, general and administrative expenses also reflected the impact from unfavorable foreign exchange of $21 million and $37 million for the quarter and six months ended June 30, 2021, respectively, compared to the same periods in 2020.

~~The quarter ended June 30, 2021, compared to the same period in 2020, also benefited from lower credit loss reserves.~~

Selling, general and administrative expenses as a percentage of Net sales decreased ~~150~~50 and 60 basis points for the quarter and six months ended June 30, ~~2021,~~2022, respectively, compared to the same periods in ~~2020, primarily driven by higher net sales.~~2021.

We are continuously evaluating our cost structure and have implemented restructuring actions as a method of keeping our cost structure competitive. For further discussion, see “Restructuring Costs” below and Note 14 in the Notes to the Condensed Consolidated Financial Statements.Restructuring Costs

~~Restructuring Cos~~ts


		Six Months Ended June 30,					Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		(dollars in millions)	2022		2021
Restructuring costs	Restructuring costs	$	26	$	26	Restructuring costs	$	39	$	26

We initiate restructuring actions to keep our cost structure competitive. Charges generally arise from severance related to workforce reductions, and to a lesser degree, facility exit and lease termination costs associated with the consolidation of ~~field~~office and manufacturing operations. 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.

Total restructuring costs were ~~$26~~$39 million for the six months ended June 30, ~~2021~~2022 and included ~~$16~~$37 million of costs related to 2022 actions, $1 million of costs related to 2021 actions and ~~$10~~$1 million of costs related to ~~2020~~pre-2021 actions.

~~All~~Most of the expected ~~pre-tax~~ charges will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. During the six months ended June 30, ~~2021,~~2022, we had cash outflows of approximately ~~$28~~$34 million related to the restructuring actions and ~~remaining~~expect to make cash payments of ~~$50~~$70 million ~~are expected, including $13~~to complete the actions announced, which will be comprised of the utilization of existing restructuring accruals and $26 million of additional restructuring expenses to ~~complete the actions and $37 million of restructuring accruals as of June 30, 2021.~~be recognized.

We generally expect to achieve annual recurring savings within the two-year period subsequent to initiating the actions, including ~~$26~~$57 million for the 2022 actions and $39 million for the 2021 actions, ~~and $58 million for the 2020 actions,~~ of which approximately ~~$15~~$23 million was realized for the 2022 and 2021 actions during the six months ended June 30, ~~2021.~~2022.

For additional discussion of restructuring, see Note 1412 to the Condensed Consolidated Financial Statements.

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Other Income (Expense), Net


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2022		2021		2022		2021
Other income (expense), net	$	(19)	$	9	$	(3)	$	16

The change in Net Other Income (Expense), ~~Net~~of
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Other income (expense), net $ 9 $ 3 $ 16 $ (62)
$(28) million and $(19) million for the quarter and six months ended June 30, 2022, respectively, compared to the same periods in 2021, was primarily driven by an impairment of our Russia investment of $(18) million and unfavorable foreign currency mark-to-market adjustments related to Russia operations.

For additional discussion of the Russia impairment, see Note 6 to the Condensed Consolidated Financial Statements.

~~Other income (expense)~~

Interest Expense (Income), ~~net primarily includes the impact of changes in the fair value and settlement of embedded and foreign exchange de~~rivatives, gains or losses on sale of businesses and fixed assets, earnings from equity method investments, fair value changes on equity securities, impairments, non-recurring Separation-related expenses and certain other operating items.Net


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2022		2021		2022		2021


Interest expense (income), net	$	35	$	27	$	72	$	59

The increase in ~~Other income (expense)~~Net Interest Expense (Income), ~~net~~ of $6$8 million ~~for~~and $13 million in the quarter ~~ended June 30, 2021, when compared to the same period in 2020, is primarily due to the impact of changes in fair value~~ and ~~settlement of embedded and foreign exchange derivatives.~~

~~The increase in Other income (expense), net of $78 million for the~~ six months ended June 30, ~~2021,~~ ~~when~~2022, respectively, compared to the same ~~period~~periods in 2020, is primarily due to a fixed asset impairment of $(55) million and related licensing costs of $(12) million recognized during the quarter ended March 31, 2020 as well as the impact of changes in fair value and settlement of embedded derivatives and foreign exchange derivatives.

~~Interest Expense (Income), Net~~
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Interest expense (income), net $ 27 $ 41 $ 59 $ 46

~~Interest expens~~e (income), net primarily relates to interest expense on our external debt, offset by interest income earned on cash balances, short-term investments and, in the prior year, related party activity between Otis and our former parent, UTC, in the prior year.

~~The decrease in Interest expense (income), net of $(14) million in the quarter ended June 30,~~ 2021, ~~compared to the same period in 2020,~~ was primarily driven by interest expense related to the Tender Offer for Zardoya Otis and lower interest ~~expense as a result of the debt refinancing and debt repayments during 2021 and 2020.~~

The increase in Interest expense (income), net of $13 million for the six months ended June 30, 2021, compared to the same period in 2020, was primarily driven by a full six months impact of interest expense on the external debt associated with the Separation, which was not outstanding for the full six months ended June 30, 2020, offset by the favorable activity noted above.income year-over-year.

The average interest rate on our ~~external~~long-term debt for the quarter and six months ended June 30, ~~2021~~2022 is ~~2.3% and 2.4%, respectively~~2.0% and for the same periods in ~~2020 is 2.5%.~~2021 was2.3% and 2.4%, respectively.

For additional discussion of borrowings, see Note 97 to the Condensed Consolidated Financial Statements.

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Income Taxes
Quarter Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Effective tax rate 28.8 % 29.1 % 27.4 % 33.4 %


	Quarter Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Effective tax rate	22.8	%	28.8	%	25.4	%	27.4	%

The decrease in the effective tax rate for the quarter ended June 30, ~~2021~~2022, is primarily due to the elimination of Base Erosion Anti Abuse Tax (“BEAT”) in the U.S., and the release of a tax ~~benefit~~reserve related to a forward transfer pricing agreement with a European tax authority. In addition, the ~~incorporation of TCJA tax regulations that were enacted in the third~~ quarter ~~of 2020, partially offset by~~ended June 30, 2021, included an income tax settlement related to the Separation. ~~In addition, the~~The decrease in the effective tax rate for the six months ended June 30, ~~2021~~2022, is ~~also due to~~partially offset by the absence of ~~the tax cost relating to Separation-related expenses and a fixed asset impairment incurred in the first quarter of 2020, as well as~~ a reduction in the deferred tax liability related to repatriation of foreign earnings ~~as a result of changes to the Company’s planned debt repayments and changes in estimates related to Otis’ pre-Separation tax attributes~~

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recorded in the quarter ended March 31, 2021.

We anticipate some variability in the tax rate quarter to quarter from potential discrete items.

For additional discussion of income taxes and the effective income tax rate, see Note 1311 to the Condensed Consolidated Financial Statements.

Noncontrolling Interest in Subsidiaries' Earnings
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Noncontrolling interest in subsidiaries' earnings $ 53 $ 41 $ 97 $ 78
and Net Income Attributable to Otis Worldwide Corporation


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2022		2021		2022		2021
Noncontrolling interest in subsidiaries' earnings	$	27	$	53	$	69	$	97
Net income attributable to Otis Worldwide Corporation	$	321	$	326	$	632	$	634

Noncontrolling interest in subsidiaries' earnings increased for the quarter ended June 30, 2021 and for six months ended June 30, 2021 in comparison to the same periods in 2020 due primarily to an increase in net income from subsidiaries and the impact from foreign exchange. Th~~ere was no other significant activity~~were lower for the quarter and six months ended June 30, ~~2021.~~2022, respectively, compared to the same periods in 2021 primarily due to Otis' increased ownership in Zardoya Otis in the second quarter of 2022. For details on the results of the Tender Offer and purchases of shares of Zardoya Otis not previously owned by the Company, see Note 1 to the Condensed Consolidated Financial Statements.

~~Net Income Attributable to Common Shareholders~~
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions, except per share amounts) 2021 2020 2021 2020
Net income attributable to common shareholders $ 326 $ 224 $ 634 $ 389
Diluted earnings per share from operations $ 0.76 $ 0.52 $ 1.47 $ 0.90

Net income attributable to ~~common shareholders increased~~Otis Worldwide Corporation was relatively flat for the quarter and six months ended June 30, ~~2021,~~2022, respectively, compared to the same periods in ~~2020, primarily due to the following:~~

•~~Higher operating profit partially offset by higher noncontrolling interest in subsidiaries' earnings;~~

•~~The benefit of a lower effective tax rate; and~~

•~~The benefit of lower interest expense for the quarter ended June 30, 2021, and partially offset by higher interest expense for the six months ended June 30,~~ 2021.

~~Net income attributable to common shareholders for the quarter and six months ended June 30, 2021 includes:~~

•~~Restructuring charges, net of taxes, of $8 million ($11 million pre-tax) and $21 million ($26 million pre-tax), respectively;~~

•~~Non-recurring Separation-related expenses (benefit), net of taxes, of approximately $(2) million ($0 million pre-tax), and $5 million ($9 million pre-tax), respectively;~~

•~~Non-recurring tax expenses of $11 million and a tax benefit of $6 million, respectively, related to the Separation;~~

•~~The restructuring charges and non-recurring items described in the three immediately preceding bullets resulted in an impact of $0.03 and $0.04, respectively, on diluted earnings per share.~~

~~Net income attributable to common shareholders for the quarter and six months ended June 30, 2020 includes:~~

•~~Restructuring charges, net of taxes, of $15 million ($20 million pre-tax) and $19 million ($26 million pre-tax), respectively;~~

•With respect to the quarter ended June 30, 2020, non-recurring Separation-related expenses, net of taxes, of approximately $5 million ($21 million pre-tax), which includes the non-recurring Separation-related costs and a non-recurring tax benefit of $13 million related to the Separation, and with respect to the six months ended June 30, 2020, $98 million ($136 million pre-tax) which include the non-recurring Separation costs and a fixed asset impairment, respectively;

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•~~The restructuring charges and non-recurring items described in the two immediately preceding bullets resulted in an impact of $0.04 and $0.27, respectively, on diluted earnings per share.~~

Segment Review

Summary performance for our operating segments for the quarters ended June 30, ~~2021~~2022 and ~~2020~~2021 was as follows:

Net Sales Operating Profit Operating Profit Margin
(dollars in millions) 2021 2020 2021 2020 2021 2020
New Equipment $ 1,727 $ 1,294 $ 147 $ 79 8.5 % 6.1 %
Service 1,974 1,735 441 381 22.3 % 22.0 %
Total segment 3,701 3,029 588 460 15.9 % 15.2 %
General corporate expenses and other — — (27) (44) — —
Total $ 3,701 $ 3,029 $ 561 $ 416 15.2 % 13.7 %


	Net Sales				Operating Profit				Operating Profit Margin
(dollars in millions)	2022		2021		2022		2021		2022		2021
New Equipment	$	1,534	$	1,727	$	99	$	147	6.5	%	8.5	%
Service	1,954		1,974		435		441		22.3	%	22.3	%
Total segment	3,488		3,701		534		588		15.3	%	15.9	%
General corporate expenses and other	—		—		(47)		(27)		—		—
Total	$	3,488	$	3,701	$	487	$	561	14.0	%	15.2	%

Summary performance for our operating segments for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 was as follows:

Net Sales Operating Profit Operating Profit Margin
(dollars in millions) 2021 2020 2021 2020 2021 2020
New Equipment $ 3,185 $ 2,417 $ 251 $ 143 7.9 % 5.9 %
Service 3,924 3,578 871 781 22.2 % 21.8 %
Total segment 7,109 5,995 1,122 924 15.8 % 15.4 %
General corporate expenses and other — — (52) (179) — —
Total $ 7,109 $ 5,995 $ 1,070 $ 745 15.1 % 12.4 %


	Net Sales				Operating Profit				Operating Profit Margin
(dollars in millions)	2022		2021		2022		2021		2022		2021
New Equipment	$	2,956	$	3,185	$	192	$	251	6.5	%	7.9	%
Service	3,946		3,924		882		871		22.4	%	22.2	%
Total segment	6,902		7,109		1,074		1,122		15.6	%	15.8	%
General corporate expenses and other	—		—		(61)		(52)		—		—
Total	$	6,902	$	7,109	$	1,013	$	1,070	14.7	%	15.1	%

Beginning in this Quarterly Report on Form 10-Q, we are changing how we present and discuss operating profit in our Segment Review of the Management’s Discussion and Analysis. Previously, we presented and discussed the percentage change in segment operating profit between periods using organic/operational profit, which excluded the impact of foreign currency translation, acquisitions and divestitures and restructuring costs. We are now presenting and discussing the change in the total dollar amount of segment operating profit and the percentage change in operating profit margin between periods. There is no change in the amounts of operating profit that we have previously disclosed. We will continue to use the same key metrics to explain the changes in our operating performance that we previously used. For example, as discussed below, the drivers of the changes in the second quarter relative to the prior year quarter are volume, rate drivers, selling general and administrative expense, foreign exchange and restructuring which are consistent with what we have disclosed in the past where applicable. In addition, we will discuss the impact of foreign currency translation, acquisitions and divestitures and restructuring to the extent they are meaningful to understanding our performance. We believe this changed approach aligns better with how we measure our performance.

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New Equipment

The New Equipment segment designs, manufactures, sells and installs a wide range of passenger and freight elevators, as well as escalators and moving walkways in residential and commercial buildings and infrastructure projects. Our New Equipment customers include real-estate and building developers ~~government agencies~~ and general contractors who develop and/or design buildings for residential, infrastructure, commercial, retail or mixed-use activity. We sell directly to customers as well as through agents and distributors. We also sell New Equipment to government agencies to support infrastructure projects, such as airports, railways or metros.

Summary performance for New Equipment for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 was as follows:
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 Change Change 2021 2020 Change Change
Net sales $ 1,727 $ 1,294 $ 433 33.5 % $ 3,185 $ 2,417 $ 768 31.8 %
Cost of sales 1,418 1,072 346 32.3 % 2,605 1,986 619 31.2 %
309 222 87 39.2 % 580 431 149 34.6 %
Operating expenses 162 143 19 13.3 % 329 288 41 14.2 %
Operating profit $ 147 $ 79 $ 68 86.1 % $ 251 $ 143 $ 108 75.5 %
Operating profit margin 8.5 % 6.1 % 7.9 % 5.9 %



	Quarter Ended June 30,										Six Months Ended June 30,
(dollars in millions)	2022			2021			Change		Change		2022			2021			Change		Change
Net sales	$	1,534		$	1,727		$	(193)	(11.2)	%	$	2,956		$	3,185		$	(229)	(7.2)	%
Cost of sales	1,291			1,418			(127)		(9.0)	%	2,481			2,605			(124)		(4.8)	%
	243			309			(66)		(21.4)	%	475			580			(105)		(18.1)	%
Operating expenses	144			162			(18)		(11.1)	%	283			329			(46)		(14.0)	%
Operating profit	$	99		$	147		$	(48)	(32.7)	%	$	192		$	251		$	(59)	(23.5)	%
Operating profit margin	6.5		%	8.5		%					6.5		%	7.9		%

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Summary analysis of the ~~New Equipment~~ Net sales change for New Equipment for the quarter and six months ended June 30, ~~2021~~2022 compared with the quarter and six months ended June 30, ~~2020~~2021 was as follows:


Components of Net sales change:	Components of Net sales change:	Quarter Ended June 30, 2021		Six Months Ended June 30, 2021		Components of Net sales change:	Quarter Ended June 30, 2022		Six Months Ended June 30, 2022
Organic		25.4	%	25.3	%
Organic volume						Organic volume	(5.0)	%	(3.2)	%
Foreign currency translation	Foreign currency translation	7.9	%	6.3	%	Foreign currency translation	(3.8)	%	(2.7)	%
Acquisitions/Divestitures, net		0.2	%	0.2	%
Russia						Russia	(1.9)	%	(1.0)	%
Acquisitions/Divestitures, net and Other						Acquisitions/Divestitures, net and Other	(0.5)	%	(0.3)	%

Total % change	Total % change	33.5	%	31.8	%	Total % change	(11.2)	%	(7.2)	%

Quarter Ended June 30, ~~2021~~2022

Net sales

~~The organic~~Organic sales ~~increase of 25.4% was driven by double~~declined (5.0)% as high single digit growth in Asia ~~Americas~~Pacific and low single digit growth in EMEA ~~partially due to the ongoing recovery from COVID-19.~~was more than offset by declines in China and Americas.

Operating profit

New Equipment operating profit ~~increased $68~~decreased $(48) million. Lower volume of $(7) million, under absorption from lower volume, higher commodity costs of $(35) million, primarily ~~due to higher volume of $70 million, with an operating margin increase of 240 basis points. Favorable material~~steel, and ~~field installation~~increased freight costs were partially mitigated by favorable productivity ~~were mostly offset by commodity headwinds and unfavorable price and mix. Foreign currency tailwinds of $10 million~~ and lower ~~restructuring costs of $5 million largely offset higher~~ selling, general and administrative ~~costs~~costs. Operating profit was also impacted by operations in Russia of ~~$20 million.~~$(15) million and higher restructuring costs. Operating margin decreased 200 basis points.

Six Months Ended June 30, ~~2021~~2022

Net sales

~~The organic~~Organic sales ~~increase of 25.3% was driven by double~~declined (3.2)% as mid single digit growth in Asia ~~Americas~~Pacific and low single digit growth in EMEA ~~partially due to the ongoing recovery from COVID-19.~~was more than offset by declines in China and Americas.

Operating profit

New Equipment operating profit ~~increased $108~~decreased $(59) million. Lower volume of $(10) million, under absorption from lower volume, higher commodity costs of ($71) million, primarily ~~due to~~steel, and increased freight costs were partially mitigated by favorable productivity and lower bad debt expense. Operating profit was also impacted by operations in Russia of $(22) million and higher ~~volume of $120 million, with an operating~~restructuring costs. Operating margin ~~increase of 200~~decreased 140 basis points. ~~Favorable material and field installation productivity were mostly offset by commodity headwinds and unfavorable price and mix. Foreign currency tailwinds of $15 million, were more than offset by~~

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~~higher selling, general and administrative costs of $25 million.~~

Service

The Service segment performs maintenance and repair services for both our products, and those of other manufacturers, and provides modernization services to upgrade elevators and escalators. Maintenance services include inspections to ensure code compliance, preventive maintenance offerings and other customized maintenance offerings tailored to meet customer needs, as well as repair services that address equipment and component wear and tear, and breakdowns. Modernization services enhance equipment operation and improve building functionality. Modernization offerings can range from relatively simple upgrades of interior finishes and aesthetics, to complex upgrades of larger components and sub-systems. Our typical Service customers include building owners, facility managers, housing associations and government agencies that operate buildings where elevators and escalators are installed.

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Summary performance for Service for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 was as follows:
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 Change Change 2021 2020 Change Change
Net sales $ 1,974 $ 1,735 $ 239 13.8 % $ 3,924 $ 3,578 $ 346 9.7 %
Cost of sales 1,208 1,066 142 13.3 % 2,410 2,221 189 8.5 %
766 669 97 14.5 % 1,514 1,357 157 11.6 %
Operating expenses 325 288 37 12.8 % 643 576 67 11.6 %
Operating profit $ 441 $ 381 $ 60 15.7 % $ 871 $ 781 $ 90 11.5 %
Operating profit margin 22.3 % 22.0 % 22.2 % 21.8 %



	Quarter Ended June 30,										Six Months Ended June 30,
(dollars in millions)	2022			2021			Change		Change		2022			2021			Change		Change
Net sales	$	1,954		$	1,974		$	(20)	(1.0)	%	$	3,946		$	3,924		$	22	0.6	%
Cost of sales	1,214			1,208			6		0.5	%	2,432			2,410			22		0.9	%
	740			766			(26)		(3.4)	%	1,514			1,514			—		—	%
Operating expenses	305			325			(20)		(6.2)	%	632			643			(11)		(1.7)	%
Operating profit	$	435		$	441		$	(6)	(1.4)	%	$	882		$	871		$	11	1.3	%
Operating profit margin	22.3		%	22.3		%					22.4		%	22.2		%

Summary analysis of Service Net sales change for the quarter and six months ended June 30, ~~2021~~2022 compared with the quarter and six months ended June 30, ~~2020~~2021 was as follows:


Components of Net sales change:	Components of Net sales change:	Quarter Ended June 30, 2021		Six Months Ended June 30, 2021		Components of Net sales change:	Quarter Ended June 30, 2022		Six Months Ended June 30, 2022
Organic		7.8	%	4.5	%
Organic volume						Organic volume	5.2	%	5.5	%
Foreign currency translation	Foreign currency translation	5.7	%	4.9	%	Foreign currency translation	(6.5)	%	(5.1)	%
Russia						Russia	0.1	%	—	%
Acquisitions/Divestitures, net	Acquisitions/Divestitures, net	0.3	%	0.3	%	Acquisitions/Divestitures, net	0.2	%	0.2	%

Total % change	Total % change	13.8	%	9.7	%	Total % change	(1.0)	%	0.6	%

Quarter Ended June 30, ~~2021~~2022

Net sales

The organic sales increase of ~~7.8%~~5.2% is due to organic sales increases in maintenance and repair of ~~7.5%~~4.9% and modernization of ~~9.3%~~6.4%.

Maintenance and repair net sales increased 13.6% as a result of an organic sales increase of 7.5%, partially due to the ongoing recovery from COVID-19, foreign currency tailwinds of 5.7% and the impact from net acquisitions and divestitures of 0.4%.

Modernization net sales increased 14.4% as a result of organic sales increase of 9.3%, partially due to the ongoing recovery from COVID-19, foreign currency tailwinds of 4.8% and the impact from net acquisitions and divestitures of 0.3%.




Components of Net sales change:	Maintenance and Repair		Modernization
Organic volume	4.9	%	6.4	%
Foreign currency translation	(6.5)	%	(6.1)	%
Russia	0.1	%	—	%
Acquisitions/Divestitures, net	0.2	%	—	%


Total % change	(1.3)	%	0.3	%

Operating profit

Service operating profit ~~increased $60~~decreased $(6) million ~~primarily due to~~with higher volume of ~~$50~~$29 million ~~with an operating margin increase of 30 basis points. Favorable pricing and lower bad debt were partially~~ offset by foreign exchange headwinds ~~from prior year cost containment~~of $(34) million. Annual wage increases and ~~field actions in response to COVID-19. Foreign exchange tailwinds of $25 million and lower restructuring~~other inflationary pressures, including higher fuel costs, ~~of $5 million,~~ were more than offset by ~~higher selling general~~improved pricing on maintenance contracts, productivity, and ~~administrative costs of $30 million.~~other employment related cost reductions. Operating margin was flat.

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Six Months Ended June 30, ~~2021~~2022

Net sales

The organic sales increase of ~~4.5%~~5.5% is due to organic sales increases in maintenance and repair of ~~4.4%~~5.2% and modernization of ~~4.7%~~6.7%.

Maintenance and repair net sales increased 9.8% as a result of an organic sales increase of 4.4%, partially due to the ongoing recovery from COVID-19, foreign currency tailwinds of 5.1% and the impact from net acquisitions and divestitures of 0.3%.

Modernization net sales increased 9.1% as a result of organic sales increase of 4.7%, partially due to the ongoing recovery from COVID-19, foreign currency tailwinds of 4.2% and the impact from net acquisitions and divestitures of 0.2%.


Components of Net sales change:	Maintenance and Repair		Modernization
Organic volume	5.2	%	6.7	%
Foreign currency translation	(5.1)	%	(4.9)	%

Acquisitions/Divestitures, net	0.2	%	—	%


Total % change	0.3	%	1.8	%

Operating profit

Service operating profit increased ~~$90~~$11 million ~~primarily~~ due to higher volume of ~~$60~~$63 million, ~~with an operating margin increase of 40 basis points. Favorable~~favorable pricing on maintenance contracts and ~~lower bad debt were~~productivity, partially offset by foreign exchange headwinds ~~from prior year cost containment~~of $(58) million, annual wage increases and ~~field actions in response to COVID-19. Foreign exchange tailwinds of $44 million, were more than offset by~~other inflationary pressures, including higher ~~selling general and administrative costs of $50 million.~~fuel costs. Operating margin increased 20 basis points.

General Corporate Expenses and Other
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
General corporate expenses and other $ (27) $ (44) $ (52) $ (179)


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2022		2021		2022		2021

General corporate expenses and other	$	(47)	$	(27)	$	(61)	$	(52)

General corporate expenses and other for the quarter ended June 30, ~~2021 decreased $(17)~~2022 increased $20 million primarily due to an impairment of our Russia investment of $18 million when compared to the same quarter in 2021.

General corporate expenses and other for the six months ended June 30, 2022 increased $9 million primarily due to an impairment of our Russia investment of $18 million, partially offset by lower non-recurring Separation costs incurred when compared to the same ~~quarter~~period in ~~2020.~~2021.

~~The decrease~~

LIQUIDITY AND FINANCIAL CONDITION


(dollars in millions)	June 30, 2022			December 31, 2021
Cash and cash equivalents	$	1,218		$	1,565
Total debt	6,683			7,273
Net debt (total debt less cash and cash equivalents)	5,465			5,708
Total equity 1	(4,888)			(3,144)
Total capitalization (total debt plus total equity)	1,795			4,129
Net capitalization (total debt plus total equity less cash and cash equivalents)	577			2,564

Total debt to total capitalization 1	372		%	176		%
Net debt to net capitalization 1	947		%	223		%

1 Our total debt to total capitalization ratio and net debt to net capitalization ratio increased in ~~General corporate expenses and other of $(127) million for~~ the six months ended June 30, ~~2021, when compared to the same period in 2020, is primarily~~2022 due to the ~~absence~~$1.5 billion reduction in equity upon the Tender Offer being approved by the Spanish regulator, and the resulting reclassification of our noncontrolling interest in Zardoya Otis to a ~~fixed asset impairment~~forward purchase agreement in part and to redeemable noncontrolling interest in part, based on the value of ~~$(55) million and related licensing costs~~the Tender Offer. For more information on the impact of ~~$(12) million recognized during~~ the ~~quarter ended March 31, 2020 and lower non-recurring Separation costs and prior year UTC allocations of $(60) million when compared~~Zardoya Otis noncontrolling interest reclassification, see Note 1 to the ~~same period in 2020.~~

Condensed Consolidated Financial Statements.

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~~LIQUIDITY AND FINANCIAL CONDITION~~

(dollars in millions) June 30, 2021 December 31, 2020
Cash and cash equivalents $ 1,923 $ 1,782
Total debt 5,800 5,963
Net debt (total debt less cash and cash equivalents) 3,877 4,181
Total equity (3,317) (3,284)
Total capitalization (total debt plus total equity) 2,483 2,679
Net capitalization (total debt plus total equity less cash and cash equivalents) 560 897
Total debt to total capitalization 234 % 223 %
Net debt to net capitalization 692 % 466 %

AtAs of June 30, ~~2021,~~2022, we had cash and cash equivalents of approximately ~~$1.9~~$1.2 billion, of which approximately ~~86%~~97% was held by the Company's foreign subsidiaries. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct our business and the cost-effectiveness with which those funds can be accessed. On occasion, we are required to maintain cash deposits with certain banks with respect to contractual obligations related to acquisitions and divestitures or other legal obligations. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the amount of such restricted cash was approximately ~~$21~~$13 million an~~d $15 million,~~ ~~respectively.~~and $1.9 billion, respectively, including cash held in escrow to fund the Tender Offer as of December 31, 2021. For information on the results of the Tender Offer and use of the cash held in escrow for the Tender Offer, see Note 1 to the Condensed Consolidated Financial Statements.

From time-to-time we may need to access the capital markets to obtain financing. We may incur indebtedness or issue equity as needed. Although we believe that the arrangements in place as of June 30, ~~2021~~2022 permit us to finance our operations on acceptable terms and conditions, our access to, and the availability of, financing on acceptable terms and conditions in the future could be impacted by many factors, including (1) our credit ratings or absence of a credit rating, (2) the liquidity of the overall capital markets and (3) the current state of the ~~economy, including the impact of COVID-19.~~economy. There can be no assurance that we will continue to have access to the capital markets on terms acceptable to us.

~~The following is a summary of the~~There were no long-term debt issuances for the six months ended June 30, ~~2021:~~

~~(dollars in millions)~~

~~Issuance Date~~

~~Description of Debt~~

~~Aggregate Principal Balance~~

~~March 11, 2021~~

~~Japanese Yen Notes (¥21,500 million principal value)~~

~~199~~

2022. The ~~proceeds from~~Company redeemed the ~~issuance of~~$500 million floating notes originally due in 2023 during the ~~Japanese Yen Notes were used to repay a portion of our outstanding Euro denominated commercial paper.~~ six months ended June 30, 2022. For additional discussion of borrowings, see Note 97 to the Condensed Consolidated Financial Statements.

~~Following the enactment of the TCJA, and after reassessing as part of the Separation, the~~The Company ~~determined that it no longer intends~~does not intend to reinvest certain undistributed earnings of our international subsidiaries that have been previously taxed in the U.S. For the remainder of the Company’s undistributed international earnings, unless tax effective to repatriate, we will continue to permanently reinvest these earnings.

We expect to fund our ongoing operating, investing and financing requirements mainly through cash flows from operations, available liquidity through cash on hand and available bank lines of credit and access to capital markets.

As a result of the increased debt incurred in 2021 to fund the Tender Offer, we temporarily suspended share repurchases as we focused on deleveraging. During the quarter ended March 31, 2022, we repaid certain debt and resumed our share repurchases. On ~~April 27, 2020,~~March 9, 2022, our Board of Directors ~~authorized~~revoked any remaining share repurchase authority under the prior share repurchase program and approved a new share repurchase program for up to ~~$1.0~~$1 billion of Common Stock, of which ~~approximately $506~~$200 million ~~has~~had been utilized as of June 30, ~~2021.~~2022. Under this program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase programs or under plans complying with rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. ~~During the six months ended June 30, 2021 the Company repurchased 7.3 million shares of Common Stock for approximately $506 million.~~

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Cash Flow - Operating Activities


		Six Months Ended June 30,					Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		(dollars in millions)	2022		2021
Net cash flows provided by operating activities	Net cash flows provided by operating activities	$	1,118	$	823	Net cash flows provided by operating activities	$	857	$	1,118

Cash generated from operating activities in the six months ended June 30, ~~2021~~2022 was ~~$295~~$261 million ~~higher~~lower than the same period in ~~2020,~~2021, primarily due to ~~higher net income of $264 million and increased~~lower cash ~~inflows~~flow related to current assets and current liabilities activity of ~~$162~~$324 million,, as described below. These were partially offset by ~~$59~~$37 million ~~lower~~of higher non-cash adjustments from Net income ~~including~~ ~~the fixed asset impairment~~and $59 million of ~~$55 million~~ ~~in the~~ ~~six months ended June 30, 2020, and $74 million lower~~ higher Other operating activities, net, primarily due to long-term accruals and other ~~activity~~ activities in the six months ended June 30, ~~2020.~~2022.

Six Months Ended June 30, 2022 Changes in Working Capital

Cash outflows related to current assets and current liabilities operating activity for the six months ended June 30, 2022 were $14 million. These cash outflows were primarily driven by:

•Accrued liabilities, which decreased $140 million, primarily due to the timing of payments of employee-related benefits, income taxes and other accruals;

•Accounts receivable, net, which increased $104 million, primarily due to the timing of billings; and

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•Inventories, which increased $39 million, primarily due to the impact of higher production inventory levels related to the timing of deliveries to construction sites; mostly offset by

•Accounts payable, which increased by $135 million, due to the timing of payments to suppliers; and

•Contract assets, current and Contract liabilities, current, net change of $134 million, driven by the timing of billings on contracts compared to the progression on current contracts.

Six Months Ended June 30, 2021 Changes in Working Capital

~~The six months ended June 30, 2021 cash~~Cash inflows related to current assets and current liabilities operating activity for the six months ended June 30, 2021 were $310 million. These cash inflows were primarily driven by:

•Contract assets, current and Contract liabilities, current, net change of $225 million, driven by the timing of billings on contracts compared to the progression on current contracts; ~~and~~

•Accounts payable, which increased by $124 million, primarily due to increased volume and the timing of payments to ~~suppliers.~~suppliers; and

~~The cash inflows were~~•Other current assets, which decreased $55 million, due to prepaid income tax utilization and refunds received; partially offset by ~~cash outflows related to:~~

•Accounts receivable, net, which increased $54 million, due to increased volume;

•Accrued liabilities, which decreased $23 million, primarily due to the timing of payments of income taxes, including the payment of foreign tax obligations pursuant to the TMA; and

•Inventories, ~~net,~~ which increased $17 million, due to the impact of hi~~gher~~higher production inventory related to higher volume and ~~timing.~~

Additionally, Other current assets decreased by $55 million due to prepaid income tax refunds and indemnification payments received pursuant to the TMA in order to pay foreign tax obligations. Accrued liabilities decreased $23 million primarily due to the payment of $23 million in foreign tax obligations pursuant to the TMA described above and income tax liabilities in certain jurisdictions. The receipt and payment of indemnification assets and foreign tax obligations resulted in minimal cash flow for the six months ended June 30, 2021. See Note 5 to the Condensed Consolidated Financial Statements for further discussion on transactions with our former parent, UTC.

~~Six Months Ended June 30, 2020 Changes in Working Capital~~

~~The six months ended June 30, 2020 cash inflows related to current assets and current liabilities operating activity were $148 million. These cash inflows were primarily driven by:~~

•~~Contract assets, current and Contract liabilities, current, net change of $266 million, driven by the~~ timing of ~~billings on contracts compared~~deliveries to ~~the progression on current contracts; and~~construction sites.

•~~Accounts payable, which increased $17 million, primarily due to the timing of payments to suppliers.~~

~~The cash inflows were partially offset by cash outflows related to:~~

•~~Inventories, net, which increased $71 million, due to higher production inventory and purchases of inventory in advance of potential supply chain disruptions due to COVID-19; and~~

•~~Accounts receivable, net, which increased $59 million, due to slower collections from customers in certain industries impacted by COVID-19.~~

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Additionally, Other current assets increased $67 million, primarily due to tax prepayments in certain tax jurisdictions and Accrued liabilities increased $62 million, primarily due to the timing of payments for income tax liabilities in certain tax jurisdictions.

Cash Flow - Investing Activities

Cash flows used in investing activities primarily reflect capital expenditures, investments in businesses and securities, proceeds from the sale of fixed assets and settlement of derivative contracts.

Six Months Ended June 30, ~~2021~~2022 compared to Six Months Ended June 30, ~~2020~~2021


		Six Months Ended June 30,							Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		Change		(dollars in millions)	2022		2021		Change
Investing Activities:	Investing Activities:							Investing Activities:
Capital expenditures	Capital expenditures	$	(84)	$	(75)	$	(9)	Capital expenditures	$	(57)	$	(84)	$	27
Investments in businesses and intangible assets, net of cash acquired	Investments in businesses and intangible assets, net of cash acquired	(51)		(16)		(35)		Investments in businesses and intangible assets, net of cash acquired	(28)		(51)		23
Investments in equity securities		(18)		(51)		33
Proceeds from sale of equity securities		58		—		58
Proceeds from the sale of (investments in) marketable securities								Proceeds from the sale of (investments in) marketable securities	(7)		40		(47)

Receipts (payments) on settlements of derivative contracts	Receipts (payments) on settlements of derivative contracts	17		(7)		24		Receipts (payments) on settlements of derivative contracts	78		17		61
Other investing activities, net	Other investing activities, net	11		7		4		Other investing activities, net	4		11		(7)
Net cash flows used in investing activities	Net cash flows used in investing activities	$	(67)	$	(142)	$	75	Net cash flows used in investing activities	$	(10)	$	(67)	$	57

Cash flows used in investing activities in the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020~~2021 decreased ~~$75~~$57 million, including the following drivers:

•$5861 million ~~of proceeds~~higher net cash receipts from the ~~sale~~settlement of ~~equity securities in~~derivative instruments, with net cash receipts of $78 million and $17 million during the six months ended June 30, ~~2021;~~2022 and 2021, respectively; and

•$3327 million in lower ~~investments in equity securities resulting from higher investments made in the six months ended June 30, 2020; these drivers of a decrease were partially offset by~~

•~~$35~~capital expenditures and $23 million ~~of higher payments for~~lower investments in businesses and intangible assets in the six months ended June 30, 2022; partially offset by

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•$7 million of investments in marketable securities in the six months ended June 30, 2022 compared to $40 million of net proceeds from sale of and investments in marketable securities in the six months ended June 30, 2021.

~~Additionally, as~~As discussed in Note 1513 to the Condensed Consolidated Financial Statements, we enter into derivative instruments for risk management purposes. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, ~~and~~ foreign exchange ~~rates.~~rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We use derivative instruments, including forward contracts and options to manage certain foreign currency ~~exposures. The settlement of these derivative instruments resulted in a net cash receipts of $17 million~~exposures and ~~payments of $7 million during the six months ended June 30, 2021 and 2020, respectively.~~commodity prices.

~~Germany Fire~~

~~As previously disclosed, during 2020 there was a fire at the Company’s manufacturing facility in Germany. During the~~ six months ended June 30, 2021, the Company settled the related property damage claim with the insurance company and received final payment of $16 million, as reflected in Other investing activities, net in the Condensed Consolidated Statements of Cash Flows. The Company continues to be in discussions with the insurance company on the business interruption insurance claim. We do not anticipate any material impact to our operations or financial results in the future from this event.

For additional discussion, see “Business Overview" in section "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2020 Annual Report, incorporated by reference in our 2020 ~~Form 10-K~~.

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Cash Flow - Financing Activities

Financing activities primarily include increases or decreases in short-term borrowings, issuance or repayment of long-term debt, dividends paid to common shareholders, repurchases of Common Stock and dividends ~~paid~~or other payments to noncontrolling interests. The prior year activity includes transfers to and from our former parent, UTC, prior to the Separation, consisting of, among other things, cash transfers, distributions, cash investments and changes in receivables and payables. See Note 5 to the Condensed Consolidated Financial Statements for further discussion.

Six Months Ended June 30,
(dollars in millions) 2021 2020 Change
Financing Activities:
Increase (decrease) in short-term borrowings, net $ (345) $ 1 $ (346)
Proceeds from issuance of long-term debt 199 6,300 (6,101)
Payment of long-term debt issuance costs (2) (43) 41
Net transfers to UTC — (6,330) 6,330
Dividends paid on Common Stock (189) (87) (102)
Repurchases of Common Stock (506) — (506)
Dividends paid to noncontrolling interest (55) (43) (12)
Other financing activities, net (18) 22 (40)
Net cash flows used in financing activities $ (916) $ (180) $ (736)


	Six Months Ended June 30,
(dollars in millions)	2022		2021		Change
Financing Activities:

Increase (decrease) in short-term borrowings, net	$	57	$	(345)	$	402

Proceeds from issuance of long-term debt	—		199		(199)
Payment of debt issuance costs	—		(2)		2
Repayment of long-term debt	(500)		—		(500)


Dividends paid on Common Stock	(224)		(189)		(35)
Repurchases of Common Stock	(400)		(506)		106
Dividends paid to noncontrolling interest	(41)		(55)		14
Acquisition of Zardoya Otis shares	(1,802)		—		(1,802)
Other financing activities, net	(27)		(18)		(9)
Net cash flows provided by (used in) financing activities	$	(2,937)	$	(916)	$	(2,021)

Net cash used in financing activities increased ~~$736 million~~$2.0 billion in the six months ended June 30, ~~2021~~2022 compared to the same period in ~~2020~~2021, primarily due to the following:

•~~Repurchase~~Settlement in cash of ~~Common Stock~~the Tender Offer for $1,802 million (€1,663 million) during the second quarter of ~~$506 million and higher dividends paid~~2022. For additional discussion of the Tender Offer, see Note 1 to the Condensed Consolidated Financial Statements.

•Higher net repayments on ~~Common Stock~~borrowings of ~~$102~~$443 million during the six months ended June 30, ~~2021;~~

•~~Net repayments on borrowings of~~2022 compared to $148 million during the same period in 2021, which were made with cash flow from operations and existing cash balances. Net repayments on borrowings are comprised of the following activity:

◦Repayments of long-term debt of $500 million, partially offset by net short-term borrowings of $57 million, during the six months ended June 30, ~~2021, comprised of the following activity:~~2022; and

◦Net repayments of short-term borrowings of $345 million, ~~(compared to net borrowings of $1 million during the six months ended June 30, 2020);~~ partially offset by

◦~~Net~~ net proceeds from the issuance of long-term debt of $197 ~~million;~~

•~~Net transfers to UTC related to the Separation of $6.3 billion~~million, during the six months ended June 30, ~~2020 was primarily funded by~~2021.

•Lower repurchases of Common Stock in the ~~net proceeds from issuance of long-term debt of $6.3 billion.~~six months ended June 30, 2022 compared to the same period in 2021.

For additional discussion of borrowings activity, see Note 97 to the Condensed Consolidated Financial Statements.

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Guaranteed Securities: Summarized Financial Information

The following information is provided in compliance with Rule 13-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended, with respect to the 2023 Euro Notes, the 2026 Euro Notes and the 2031 Euro Notes (together the "Euro Notes"), in each case issued by Highland Holdings S.à r.l. (“Highland”), a private limited liability company (société à responsabilité limitée) incorporated and existing under the laws of the Grand Duchy of Luxembourg ("Luxembourg"). The Euro Notes are fully and unconditionally guaranteed by Otis Worldwide Corporation ("OWC") on an unsecured, unsubordinated basis. Refer to "Note 10: Borrowings and Lines of Credit" in Item 8 in our 2021 Form 10-K, for additional information.

Highland is a wholly-owned, indirect consolidated subsidiary of OWC. OWC is incorporated under the laws of Delaware. As a company incorporated and existing under the laws of Luxembourg, and with its registered office in Luxembourg, Highland is subject to Luxembourg insolvency and bankruptcy laws in the event any insolvency proceedings are initiated against it. Luxembourg bankruptcy law is significantly different from, and may be less favorable to creditors than, the bankruptcy law in effect in the United States and may make it more difficult for creditors to recover the amount they could expect to recover in liquidation under U.S. insolvency and bankruptcy rules.

The Euro Notes are not guaranteed by any of OWC's or Highland's subsidiaries (all OWC subsidiaries other than Highland are referred to herein as "non-guarantor subsidiaries"). Holders of the Euro Notes will have a direct claim only against Highland, as issuer, and OWC, as guarantor.

The following tables set forth the summarized financial information as of and for the quarter ended June 30, 2022 and as of December 31, 2021 of each of OWC and Highland on a standalone basis, which does not include the consolidated impact of the assets, liabilities, and financial results of their subsidiaries except as noted on the tables below, nor does it include any impact of intercompany eliminations as there were no intercompany transactions between OWC and Highland. This summarized financial information is not intended to present the financial position or results of operations of OWC or Highland in accordance with U.S. GAAP.


(dollars in millions)	Six Months Ended June 30, 2022
OWC Statement of Operations - Standalone and Unconsolidated
Revenue	$	—
Cost of revenue	—
Operating expenses	(1)
Income from consolidated subsidiaries	60
Income (loss) from operations excluding income from consolidated subsidiaries	2
Net income (loss) excluding income from consolidated subsidiaries	(49)


(dollars in millions)	June 30, 2022		December 31, 2021
OWC Balance Sheet - Standalone and Unconsolidated
Current assets (excluding intercompany receivables from non-guarantor subsidiaries)	$	85	$	197
Current assets (intercompany receivables from non-guarantor subsidiaries)	—		—
Noncurrent assets, investments in consolidated subsidiaries	1,271		1,271
Noncurrent assets (excluding investments in consolidated subsidiaries)	46		48
Current liabilities (intercompany payables to non-guarantor subsidiaries)	2,455		1,516
Current liabilities (excluding intercompany payables to non-guarantor subsidiaries)	127		73
Noncurrent liabilities	5,184		5,725

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(dollars in millions)	Six Months Ended June 30, 2022
Highland Statement of Operations - Standalone and Unconsolidated
Revenue	$	—
Cost of revenue	—
Operating expenses	—
Income from consolidated subsidiaries	738
Income (loss) from operations excluding income from consolidated subsidiaries	—
Net income (loss) excluding income from consolidated subsidiaries	(4)


(dollars in millions)	June 30, 2022		December 31, 2021
Highland Balance Sheet - Standalone and Unconsolidated
Current assets (excluding intercompany receivables from non-guarantor subsidiaries)	$	—	$	—
Current assets (intercompany receivables from non-guarantor subsidiaries)	2		2
Noncurrent assets (investments in consolidated subsidiaries)	12,524		12,524
Noncurrent assets (intercompany receivables from non-guarantor subsidiaries)	622		666
Noncurrent assets (excluding investments in consolidated subsidiaries)	—		—
Current liabilities (intercompany payables to non-guarantor subsidiaries)	370		171
Current liabilities (excluding intercompany payables to non-guarantor subsidiaries)	5		2

Noncurrent liabilities	1,674		1,795

Off-Balance Sheet Arrangements and Contractual Obligations

~~The section entitled~~Item 5 "Management's Discussion and Analysis of Financial Condition and Results of ~~Operations – Off-Balance Sheet Arrangements and Contractual Obligations"~~Operations" in our ~~2020 Annual Report, incorporated by reference in our 2020~~ 2021 Form 10-K, discloses our off-balance sheet arrangements and contractual obligations. As of June 30, ~~2021,~~2022, there have been no material changes to these off-balance sheet arrangements and contractual obligations, outside the ordinary course of business except for those disclosed in the "Note 9,7, Borrowings and Lines of Credit" within Item 1 of this Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the Company’s market risk during the quarter and six months ended June 30, ~~2021.~~2022. For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in ~~the section entitled "~~Item 7A "Quantitative and Qualitative Disclosures About Market ~~Risk and Risk Management"~~Risk" in our ~~2020 Annual Report, incorporated by reference in our 2020~~2021 Form 10-K.

Item 4. Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation under the supervision and with the participation of our management, including the President and Chief Executive Officer ("CEO"), the Executive Vice President and Chief Financial Officer ("CFO") and the Vice President and Chief Accounting Officer ("CAO"), of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, ~~2021.~~2022. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our CEO, our CFO and our CAO have concluded that, as of June 30, ~~2021,~~2022, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our CEO, our CFO and our CAO, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting during the quarter ended June 30, ~~2021,~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Cautionary Note Concerning Factors That May Affect Future Results

This Form 10-Q 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,” “medium-term,” “near-term,” “confident,” ~~“goals,”~~“goals” and other words of similar meaning in connection with a discussion of future operating or financial performance, orthe sale of Otis' Russian business, the Tender Offer and the Separation. 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, R&D spend, credit ratings, net indebtedness and other measures of financial performance or potential future plans, strategies or transactions of Otis following the Separation or in connection with the sale of Otis' Russian business, the Tender Offer, or statements that relate to climate change and our intent to achieve certain ESG targets or goals, including ~~the estimated~~operational impacts and costs associated ~~with the Separation~~therewith, 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:

•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~~variants thereof and the ongoing economic recovery therefrom and their effects on, among other things, on global supply, demand and ~~distribution disruptions as the coronavirus outbreak continues and results in an increasingly prolonged period of travel, commercial and/or other similar restrictions and limitations)~~distribution), natural disasters, whether as a result of climate change or otherwise, and the financial condition of Otis’ customers and suppliers;

•the effect of changes in political conditions in the U.S. and other countries in which Otis and its businesses operate, including the effects of the ongoing conflict between Russia and Ukraine and related sanctions and export controls, on general market conditions, global trade policies, and currency exchange rates in the near term and beyond;

•challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services;

•future levels of indebtedness, capital spending and research and development spending;

•future availability of credit and factors that may affect such availability, ~~including~~ credit market conditions ~~in the U.S. and other countries in which Otis and its businesses operate~~ and Otis’ capital structure;

•the timing and scope of future repurchases of Otis’ common stock ("Common Stock"), which may be suspended at any time due to various factors, including market conditions and the level of other investing activities and uses of cash;

•fluctuations in prices and delays and disruption in delivery of materials and services from ~~suppliers;~~suppliers, whether as a result of COVID-19, the ongoing conflict between Russia and Ukraine or otherwise;

•cost reduction or containment actions, restructuring costs and related savings and other consequences thereof;

•new business and investment opportunities;

•~~the anticipated benefits of moving away from diversification and balance of operations across product lines, regions and industries;~~

•the outcome of legal proceedings, investigations and other contingencies;

•pension plan assumptions and future contributions;

•the impact of the negotiation of collective bargaining agreements and labor disputes;

•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 China's response to the new U.S. administration and 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;

•~~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;~~ongoing conflict between Russia and Ukraine;

•the ability of Otis to retain and hire key personnel;

•the scope, nature, impact or timing of acquisition and divestiture activity, including ~~among other things~~the sale of Otis' Russian business, the integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs;

•the ability to achieve the expected benefits of the ~~Separation~~Tender Offer and the timing thereof;

•athe ability to achieve the expected benefits of the Separation;

•the determination by the Internal Revenue Service and other tax authorities that the distribution or certain related transactions should be treated as taxable transactions; and

•~~risks associated~~the amount of our obligations and nature of our disputes that have or may hereafter arise under the agreements we entered into with ~~indebtedness incurred as a result of financing transactions undertaken~~RTX and Carrier in connection with the ~~Separation;~~Separation.

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•~~the risk that dis-synergy costs, costs of restructuring transactions~~These and other ~~costs incurred~~factors are more fully discussed in ~~connection with the Separation will exceed Otis’ estimates; and~~

•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.

~~In addition,~~ this Form 10-Q ~~includes important information as to risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied~~ in ~~the forward-looking statements. See~~ the "Notes to Condensed Consolidated Financial Statements" under the headings "Note ~~2: Basis of Presentation"~~1: General" and "Note ~~18:~~16: Contingent Liabilities,~~" the section titled~~ and "Management's Discussion and Analysis of Financial Condition and Results of Operations" ~~under the headings "Business Overview", "Critical Accounting Estimates", "Results of Operations",~~ and ~~"Liquidity and Financial Condition", and the sections titled "Legal Proceedings" and "Risk Factors" in this Form 10-Q and our Form 10-Qfor the quarter ended March 31, 2021. Additional important information as to these factors is included~~ in our ~~2020~~2021 Form 10-K inunder the headings "Item 1. Business", "Item 1A. Risk Factors", "Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" ~~under the headings "Business Overview", "Critical Accounting Estimates" "Results of Operations" and "Liquidity and Financial Condition"~~ and "Item 8. Financial Statements and Supplementary ~~Data~~Data" under the headings "Note 1: ~~Business Overview~~Business Overview" and ~~Separation from United Technologies Corporation" an~~d "Note ~~21:~~22: Contingent Liabilities". and elsewhere in each of these filings. The forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by r~~eference,~~reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our other filings with the SEC.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

See Note ~~18,~~16, Contingent Liabilities to the Condensed Consolidated Financial Statements, for discussion regarding material legal proceedings.

Except as otherwise noted above, there have been no material developments in legal proceedings. For previously reported information about legal proceedings refer to "Part II - Other Information, Item 1. Legal Proceedings" in our

Form 10-Qfor the quarter ended March 31, ~~2021~~2022 and ~~Part I,~~to Item 3 "Legal ~~Proceedings," of~~Proceedings" in our ~~2020~~2021 Form 10-K.

Item 1A. Risk Factors

Additional information regarding risk factors can be found under "Risks associated with the ongoing conflict between Russia and Ukraine" and "Cautionary Note Concerning Factors That May Affect Future Results" in Management's Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-Q.

~~There~~

Except as otherwise noted above, there have been no material changes in the Company's risk factors from those disclosed in Item ~~1A. Risk Factors,~~1A "Risk Factors", in our 2021~~2020~~ Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information about our purchases during the quarter ended June 30, ~~2021~~2022 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act.

2021 Total Number of Shares Purchased
(thousands)
Average Price Paid per Share (1)
Total Number of Shares Purchased as Part of a Publicly Announced Program
(thousands) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
(dollars in millions)
April 1 - April 30 365 $ 78.31 365 $ 671
May 1 - May 31 2,272 78.10 2,272 $ 494
June 1 - June 30 — — — $ 494
Total 2,637 $ 78.13 2,637


2022	Total Number of Shares Purchased (thousands)	Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of a Publicly Announced Program (thousands)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (dollars in millions)
April 1 - April 30	—	$	—	—	$	1,000
May 1 - May 31	2,706	73.91		2,706	$	800
June 1 - June 30	—	—		—	$	800
Total	2,706	$	73.91	2,706

(1) Average price paid per share includes costs associated with the repurchases.

On April 27, 2020, our Board of Directors authorized a share repurchase program for up to $1 billion of Common Stock. AtAs a result of the increased debt incurred in 2021 to fund the Tender Offer, we temporarily suspended our share repurchases as we focused on deleveraging. During the quarter ended March 31, 2022, we repaid certain debt and resumed our share repurchases.

On March 9, 2022, our Board of Directors revoked any remaining share repurchase authority under the prior share repurchase program and approved a new share repurchase program for up to $1 billion of Common Stock. As of June 30, ~~2021,~~2022, the maximum dollar value of shares that may yet be purchased under this current program was ~~approximately $494~~$800 million. Under this program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase programs or under plans complying with rules 10b5-1 and 10b-18 under the Exchange Act.

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Item 6. Exhibits


Exhibit Number						Exhibit Description

10.1						Offer Letter, dated as of June 23, 2022, by and between Anurag Maheshwari and Otis Worldwide Corporation, ~~Amended and Restated Savings Restoration Plan,~~ incorporated by reference to Exhibit ~~10.15 to~~10.1 of Otis’ ~~Amendment No. 1 to Registration Statement~~Current Report on Form 108-K (Commission ~~file number~~File No. 001-39221) filed with the ~~SEC~~Commission on ~~March 11, 2020, is filed herewith to correct an inaccurate hyperlink that was inadvertently included in Exhibit 10.19 of Otis’ 2020 Form 10-K.~~June 27, 2022.

10.2						Termination Letter of ~~Amendment~~ to ~~Service~~the Services Agreement ~~between~~Between Zardoya Otis, ~~S.A~~S.A. and ~~Bernardo Calleja Fernández~~.*

~~10.3~~						Amendment No. 1 to Otis Worldwide Corporation Executive Annual Bonus Plan.*


~~10.4~~						~~Otis Worldwide Corporation Board of Directors Deferred Stock Unit Plan (Amended and Restated effective as of February 4, 2021).~~the Chairman dated May 27, 2022.*

15						Letter re: unaudited interim financial information.*

31.1						Rule 13a-14(a)/15d-14(a) Certification.*

31.2						Rule 13a-14(a)/15d-14(a) Certification.*

31.3						Rule 13a-14(a)/15d-14(a) Certification.*

32						Section 1350 Certifications.*

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*

101.SCH						XBRL Taxonomy Extension Schema Document.*

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document.*

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document.*

101.LAB						XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document.*

104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

Notes to Exhibits List:

* Submitted electronically herewith.

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, (ii) Condensed Consolidated Statements of Comprehensive Income for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, (iii) Condensed Consolidated Balance Sheets as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, (v) Condensed Consolidated Statements of Changes in Equity for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 and (vi) Notes to Condensed Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		OTIS WORLDWIDE CORPORATION (Registrant)

Dated:	July 28, ~~2021~~2022	by:	/s/ RAHUL GHAI
			Rahul Ghai
			Executive Vice President and Chief Financial Officer

			(on behalf of the Registrant and as the Registrant's Principal Financial Officer)

Dated:	July 28, ~~2021~~2022	by:	/s/ MICHAEL P. RYAN
			Michael P. Ryan
			Vice President and Chief Accounting Officer

			(on behalf of the Registrant and as the Registrant's Principal Accounting Officer)

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(dollars in millions)	2021 Actions		2020 Actions
Quarter Ended June 30, 2021
Restructuring accruals at March 31, 2021	$	10	$	29
Net pre-tax restructuring costs	3		8
Utilization, foreign exchange and other costs	(6)		(7)
Balance at June 30, 2021	$	7	$	30

Six Months Ended June 30, 2021
Restructuring accruals at December 31, 2020	$	0	$	42
Net pre-tax restructuring costs	16		10
Utilization, foreign exchange and other costs	(9)		(22)
Balance at June 30, 2021	$	7	$	30


(dollars in millions)	Expected Costs		Costs Incurred During 2020		Costs Incurred Quarter Ended March 31, 2021		Costs Incurred Quarter Ended June 30, 2021		Remaining Costs at June 30, 2021



Total 2021 Actions	$	24	$	0	$	(13)	$	(3)	$	8
Total 2020 Actions	$	86	$	(71)	$	(2)	$	(8)	$	5