Otis Worldwide Corp

Previous wording

Announced in July 2023, UpLift is a program with the goal of transforming our operating model. UpLift will include the standardization of our processes and improvement of our supply chain procurement, among other aspects of the program, as well as restructuring actions. We expect UpLift to generate approximately $175 million in annual savings by mid-year 2025, with restructuring and other incremental costs to complete the transformation ("UpLift transformation costs") over that period of approximately the same amount.

Current wording

Announced in July 2023, UpLift is a program with the goal of transforming our operating model. UpLift will include the standardization of our processes and improvement of our supply chain procurement, among other aspects of the program, as well as restructuring actions. We expect UpLift to generate approximately $175 million in annual savings by mid-year 2025, with restructuring and other incremental costs to complete the transformation ("UpLift transformation costs") over that period of at least the same amount.

Previous wording

UpLift costs incurred in thequarters and six months ended June 30, 2024 and 2023 are as follows:

Current wording

UpLift costs incurred in thequarters and nine months ended September 30, 2024 and 2023 are as follows:

Previous wording

Total UpLift costs incurred to date are $75 million, including $32 million of restructuring costs and $43 million of transformation costs.

Current wording

Total UpLift costs incurred to date are $97 million, including $36 million of restructuring costs and $61 million of transformation costs.

Previous wording

Global macroeconomic developments have impacted, and continue to impact, aspects of the Company's operations and overall financial performance during the quarters and six months ended June 30, 2024 and 2023. These macroeconomic developments include, among others, inflationary pressures, higher interest rates and tighter credit conditions. These macroeconomic trends could continue to impact our business, including impacts to overall financial performance during the remainder of 2024, as a result of the following, among other things:

Current wording

Global macroeconomic developments have impacted, and continue to impact, aspects of the Company's operations and overall financial performance during the quarters and nine months ended September 30, 2024 and 2023. These macroeconomic developments include, among others, inflationary pressures, high interest rates and tighter credit conditions. These macroeconomic trends could continue to impact our business, including impacts to overall financial performance during the remainder of 2024, as a result of the following, among other things:

Previous wording

To the extent possible, we continue to operate our business in Ukraine, which represented less than 1% of our revenue and operating profit for the six months ended June 30, 2024 and year ended December 31, 2023.

Current wording

To the extent possible, we continue to operate our business in Ukraine, which represented less than 1% of our revenue and operating profit for the nine months ended September 30, 2024 and year ended December 31, 2023.

Previous wording

Additionally, we do not have operations or material net sales in Israel or Gaza. Although we transport products through the Red Sea, we currently do not expect the recent hostilities in that region to have a material impact on our business.

Current wording

Additionally, we do not have operations or material net sales in Israel or Gaza. Although we have operations in the Middle East and transport products through the Red Sea, we currently do not expect the recent conflicts in that region to have a material impact on our business.

Previous wording

The factors contributing to the total percentage change year-over-year in total Net sales for the quarter and six months ended June 30, 2024 are as follows:

Current wording

The factors contributing to the total percentage change year-over-year in total Net sales for the quarter and nine months ended September 30, 2024 are as follows:

Previous wording

The Organic volume decrease of (1.2)% for the quarter ended June 30, 2024 was driven by a decrease of (9.4)% in New Equipment, partially offset by an increase of 5.1% in Service. The Organic volume increase of 1.2% for the six months ended June 30, 2024 was driven by an increase of 5.8% in Service, partially offset by a decrease of (5.4)% in New Equipment.

Current wording

The Organic volume increase of 1.2% for the quarter ended September 30, 2024 was driven by an increase of 7.7% in Service, partially offset by a decrease of (8.2)% in New Equipment. The Organic volume increase of 1.2% for the nine months ended September 30, 2024 was driven by an increase of 6.4% in Service, partially offset by a decrease of (6.3)% in New Equipment.

Previous wording

The factors contributing to the percentage change year-over-year for the quarter and six months ended June 30, 2024 in total cost of products and services sold are as follows:

Current wording

The factors contributing to the percentage change year-over-year for the quarter and nine months ended September 30, 2024 in total cost of products and services sold are as follows:

Previous wording

The organic decreasein total cost of products and services sold for the quarter and six months ended June 30, 2024 was primarily driven by the organic sales changes noted above. Productivity and lower commodity prices, primarily steel were partially offset by inflationary pressures, including annual wage increases.

Current wording

The organic increase in total cost of products and services sold for the quarter and nine months ended September 30, 2024 was primarily driven by the organic sales changes noted above. Productivity and lower commodity prices, primarily steel, were partially offset by inflationary pressures, including annual wage increases and higher Service-related material costs.

Previous wording

Gross margin percentage increased 90 and 50 basis points for the quarter and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, due to Service sales growing faster than New Equipment sales, the benefits from productivity and lower commodity prices, partially offset by the inflationary pressures described above.

Current wording

Gross margin percentage increased 70 and 60 basis points for the quarter and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, due to Service sales growing faster than New Equipment sales, the benefits from productivity and lower commodity prices, partially offset by the inflationary pressures described above.

Previous wording

Research and development was relatively flat for the quarter and six months ended June 30, 2024, when compared to the same periods in 2023.

Current wording

Research and development was relatively flat for the quarter and nine months ended September 30, 2024, when compared to the same periods in 2023.

Previous wording

Selling, general and administrative expenses decreased $(30) million and $(23) million for the quarter and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, driven by savings resulting from UpLift, cost containment actions, favorable foreign exchange impacts, and lower credit loss reserves. Selling, general and administrative expenses was also impacted by lower restructuring costs for the quarter and higher restructuring costs for the six months ended June 30, 2024, when compared to the same periods in 2023.

Current wording

Selling, general and administrative expenses increased $3 million for the quarter ended September 30, 2024, when compared to the same period in 2023, driven by annual wage increases, higher other employment-related costs, and higher credit loss reserves, partially offset by savings resulting from UpLift, lower restructuring costs and favorable foreign exchange impacts.

Previous wording

Selling, general and administrative expenses as a percentage of Net sales decreased (40) basis points and (30) basis points for the quarter and six months ended June 30, 2024, respectively, when compared to the same periods in 2023.

Current wording

Selling, general and administrative expenses as a percentage of Net sales were flat and decreased (20) basis points for the quarter and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023.

Previous wording

There were $7 million of UpLift restructuring costs for the six months ended June 30, 2024. We also incurred $27 million of UpLift transformation costs in the six months ended June 30, 2024, primarily consulting and incremental personnel costs, which are recorded in Other income (expense), net in the Condensed Consolidated Statements of Operations.

Current wording

There were $11 million of UpLift restructuring costs for the nine months ended September 30, 2024. We also incurred $45 million of UpLift transformation costs in the nine months ended September 30, 2024, primarily consulting and incremental personnel costs, which are recorded in Other income (expense), net in the Condensed Consolidated Statements of Operations.

Previous wording

Other restructuring costs were $24 million for the six months ended June 30, 2024 and included $12 million of costs related to 2024 actions and $12 million of costs related to 2023 actions.

Current wording

Other restructuring costs were $29 million for the nine months ended September 30, 2024 and included $17 million of costs related to 2024 actions and $12 million of costs related to 2023 actions.

Previous wording

Most of the expected charges will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. The table below presents approximate cash outflows related to the restructuring actions during the six months ended June 30, 2024, and the expected cash payments to complete the actions announced:

Current wording

Most of the expected charges will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. The table below presents approximate cash outflows related to the restructuring actions during the nine months ended September 30, 2024, and the expected cash payments to complete the actions announced:

Previous wording

The approved UpLift restructuring actions are expected to generate approximately $58 million in annual recurring savings by 2025, primarily in Selling, general and administrative expenses, and of which approximately $16 million was realized during the six months ended June 30, 2024.

Current wording

The approved UpLift restructuring actions are expected to generate approximately $55 million in annual recurring savings by 2025, primarily in Selling, general and administrative expenses, and of which approximately $26 million was realized during the nine months ended September 30, 2024.

Previous wording

For other restructuring actions, we generally expect to achieve annual recurring savings within the two-year period subsequent to initiating the actions, including $12 million for the 2024 actions and $43 million for the 2023 actions, split evenly in Cost of Products and Services Sold and in Selling, general and administrative expenses. Approximately $20 million of savings was realized for the 2024 and 2023 actions during the six months ended June 30, 2024.

Current wording

For other restructuring actions, we generally expect to achieve annual recurring savings within the two-year period subsequent to initiating the actions, including $12 million for the 2024 actions and $42 million for the 2023 actions, split evenly in Cost of Products and Services Sold and in Selling, general and administrative expenses. Approximately $34 million of savings was realized for the 2024 and 2023 actions during the nine months ended September 30, 2024.

Previous wording

The changes in Other income (expense), net, of $(33) million and $(26) million for the quarter and six months ended June 30, 2024, respectively, compared to the same periods in 2023, were primarily driven by UpLift transformation costs of $15 million and $27 million, respectively, $18 million of non-recurring litigation-related settlement costs and foreign currency mark-to-market adjustments. The six months ended June 30, 2024 was also impacted by other reserve adjustments and the reduction of our indemnity payable to RTX that resulted from the TMA, when compared to the same period in 2023.

Current wording

The changes in Other income (expense), net, of $(233) million and $(259) million for the quarter and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, were primarily driven by Separation-related adjustments of $193 million and $177 million, respectively, UpLift transformation costs of $18 million and $45 million, respectively, $18 million of impairment loss related to net assets held for sale and foreign currency mark-to-market adjustments. The nine months ended September 30, 2024 was also impacted by non-recurring litigation-related settlement costs, including $18 million in the second quarter of 2024.

Previous wording

Interest expense (income), net decrease of $(10) million and increase of $1 million for the quarter and six months ended June 30, 2024, respectively, compared to the same periods in 2023, were primarily driven by interest reserve adjustments related to non-recurring tax items, offset by higher interest expense related to the $750 million unsecured, unsubordinated debt issued in August 2023.

Current wording

The changes in Interest expense (income), net of $(189) million and $(188) million for the quarter and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, were primarily driven by $200 million related to a favorable ruling received in August 2024 regarding a tax litigation in Germany, partially offset by higher interest expense related to the $750 million unsecured, unsubordinated debt issued in August 2023. The nine months ended September 30, 2024 was also impacted by interest reserve adjustments related to non-recurring tax items, when compared to the same period in 2023.

Previous wording

The average interest rate on our long-term debt for the quarters and six months ended June 30, 2024 and 2023, was 2.5% and 2.0%, respectively. For additional discussion of borrowings, see Note 7 to the Condensed Consolidated Financial Statements.

Current wording

The average interest rate on our long-term debt for the quarters and nine months ended September 30, 2024 and 2023, was 2.5% and 2.1%, respectively. For additional discussion of borrowings, see Note 7 to the Condensed Consolidated Financial Statements.

Previous wording

The decrease in the effective tax rate for the quarter and six months ended June 30, 2024, is primarily due to the reduction in a deferred tax liability related to the mitigation of future repatriation costs and the release of a non-U.S. tax reserve recorded in the quarter ended June 30, 2024.

Current wording

The decrease in the effective tax rate for the quarter and nine months ended September 30, 2024 is primarily due to recognition of estimated tax benefits arising as a result of the resolution of the German tax litigation. The effective tax rate for the nine months ended September 30, 2024 was also impacted by the reduction in a deferred tax liability related to the mitigation of future repatriation costs.

Previous wording

Noncontrolling interest in subsidiaries' earnings were relatively flat for the quarter and six months ended June 30, 2024, compared to the same periods in 2023. Ownership interest in the underlying non-wholly owned subsidiaries has remained generally consistent year-over-year. For a discussion of our acquisition of the noncontrolling shares of our subsidiary in Japan during the second quarter of 2024, see Note 1 to the Condensed Consolidated Financial Statements.

Current wording

Noncontrolling interest in subsidiaries' earnings were relatively flat for the quarter and nine months ended September 30, 2024, compared to the same periods in 2023. Other than our acquisition of the noncontrolling shares of our subsidiary in Japan during the second quarter of 2024, ownership interest in the underlying non-wholly owned subsidiaries has remained generally consistent year-over-year. See Note 1 to the Condensed Consolidated Financial Statements for further discussion of the noncontrolling interest acquisition.

Previous wording

Net income attributable to Otis Worldwide Corporation increased for the quarter ended June 30, 2024, compared to the same period in 2023, due to a lower effective tax rate and lower interest expense, partially offset by lower operating profit (including the impact of foreign exchange rates).

Current wording

Net income attributable to Otis Worldwide Corporation increased for the quarter and nine months ended September 30, 2024, compared to the same periods in 2023, due to a lower effective tax rate and lower interest expense, partially offset by lower operating profit (including the impact of foreign exchange rates).

Previous wording

Summary performance for our operating segments, reconciled to total operating profit, for the six months ended June 30, 2024 and 2023 was as follows:

Current wording

Summary performance for our operating segments, reconciled to total operating profit, for the nine months ended September 30, 2024 and 2023 was as follows:

Previous wording

Summary performance for New Equipment for the quarters and six months ended June 30, 2024 and 2023 was as follows:

Current wording

Summary performance for New Equipment for the quarters and nine months ended September 30, 2024 and 2023 was as follows:

Previous wording

Summary analysis of the Net sales change for New Equipment for the quarter and six months ended June 30, 2024 compared with the quarter and six months ended June 30, 2023 was as follows:

Current wording

Summary analysis of the Net sales change for New Equipment for the quarter and nine months ended September 30, 2024 compared with thesame periods in 2023 was as follows:

Previous wording

The organic sales decrease of (9.4)% was primarily driven by a double digit decline in China and low single-digit decline in EMEA, partially offset by approximately 10% organic sales growth in Asia Pacific and low single-digit organic sales growth in Americas.

Current wording

The organic sales decrease of (8.2)% was primarily driven by a greater than 20% decline in China, partially offset by low single-digit organic sales growth in Americas and Asia Pacific.

Previous wording

New Equipment operating profit decreased $(9) million including foreign exchange headwinds of $(3) million. The impacts of lower volume and unfavorable regional mix were partially offset by productivity and commodity tailwinds. Operating margin increased 30 basis points.

Current wording

New Equipment operating profit decreased $(20) million. The impacts of lower volume and unfavorable regional and product mix were partially offset by favorable price, productivity, and commodity tailwinds. Operating margin decreased 80 basis points.

Previous wording

The organic sales decrease of (5.4)% was driven by a double digit decline in China, partially offset by high single-digit organic sales growth in Americas and mid single-digit organic sales growth in Asia Pacific.

Current wording

The organic sales decrease of (6.3)% was driven by a greater than 20% decline in China, partially offset by mid single-digit organic sales growth in Americas and Asia Pacific.

Previous wording

New Equipment operating profit decreased $(7) million including foreign exchange headwinds of $(7) million. Favorable price, productivity and commodity tailwinds were offset by the impacts of lower volume and unfavorable regional mix. Operating margin increased 20 basis points.

Current wording

New Equipment operating profit decreased $(27) million including foreign exchange headwinds of $(7) million. The impacts of lower volume and unfavorable regional and product mix were partially offset by favorable price, productivity, and commodity tailwinds. Operating margin decreased 10 basis points.

Previous wording

Summary performance for Service for thequarters and six months ended June 30, 2024 and 2023 was as follows:

Current wording

Summary performance for Service for thequarters and nine months ended September 30, 2024 and 2023 was as follows:

Previous wording

Summary analysis of Service Net sales change for the quarter and six months ended June 30, 2024 compared with the quarter and six months ended June 30, 2023 was as follows:

Current wording

Summary analysis of Service Net sales change for the quarter and nine months ended September 30, 2024 compared with thesame periods in 2023 was as follows:

Previous wording

The organic sales increase of 5.8% is due to organic sales increases in maintenance and repair of 5.4% and in modernization of 7.7%.

Current wording

The organic sales increase of 7.7% is due to organic sales increases in maintenance and repair of 6.4% and in modernization of 13.7%.

Previous wording

Service operating profit increased $83 million including foreign exchange headwinds of ($15) million. Higher volume, improved pricing on maintenance contracts and productivity were partially offset by inflationary pressures, including annual wage increases. Operating margin increased 100 basis points.

Current wording

Service operating profit increased $37 million including foreign exchange headwinds of ($3) million. Higher volume, improved pricing on maintenance contracts, and productivity were partially offset by inflationary pressures, including annual wage increases and higher material costs. Operating margin was flat.

Previous wording

The organic sales increase of 5.1% is due to organic sales increases in maintenance and repair of 4.9% and in modernization of 5.8%.

Current wording

The organic sales increase of 6.4% is due to organic sales increases in maintenance and repair of 5.7% and in modernization of 9.7%.

Previous wording

Service operating profit increased $39 million including foreign exchange headwinds of ($12) million. Higher volume, improved pricing on maintenance contracts and productivity were partially offset by inflationary pressures, including annual wage increases. Operating margin increased 110 basis points.

Current wording

Service operating profit increased $120 million including foreign exchange headwinds of ($18) million. Higher volume, improved pricing on maintenance contracts, and productivity were partially offset by inflationary pressures, including annual wage increases and higher material costs. Operating margin increased 60 basis points.

Previous wording

General corporate expenses and other for thequarter and six months ended June 30, 2024 increased $7 million and $10 million, respectively, compared to the same quarters in 2023, primarily due to the impact of foreign currency mark-to-market adjustments. UpLift and costs related to the program began in the third quarter of 2023. Additionally, other restructuring costs and litigation-related settlement costs were partially offset by the reduction of our indemnity payable to RTX that resulted from the TMA.

Current wording

General corporate expenses and other for the quarter and nine months ended September 30, 2024 increased $13 million and $23 million, respectively, compared to the same periods in 2023, primarily due to the impact of foreign currency mark-to-market adjustments and higher corporate costs.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $942 million, of which approximately 96% 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, 2024 and December 31, 2023, the amount of such restricted cash was approximately $9 million and $6 million, respectively.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $827 million, of which approximately 95% 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 September 30, 2024 and December 31, 2023, the amount of such restricted cash was approximately $5 million and $6 million, respectively.