Otis Worldwide Corp

Previous wording

For discussion of Otis’ ESG goals and risks associated therewith, see the discussion under "Environmental, Social and Governance ("ESG")" in Item 1 and under Item 1A. "Risk Factors"in our 2024 Form 10-K.

Current wording

For discussion of Otis’ sustainability and other corporate responsibility-related risks, see the discussion under "Environmental, Social and Governance ("ESG")" in Item 1 and under Item 1A. "Risk Factors"in our 2024 Form 10-K. Further information related to our sustainability and responsibility initiatives can be found in the Investor section of our corporate website (http://www.otis.com) under the heading "Sustainability & Responsibility", which we update from time to time.

Previous wording

Announced in July 2023, UpLift is a program with the goal of transforming our operating model. UpLift includes the standardization of our processes and improvement of our supply chain procurement, among other aspects of the program, as well as organizational changes which result in restructuring actions. We expect UpLift to generate approximately $200 million in annual run-rate savings by second half of 2025, with restructuring and other incremental costs to complete the transformation ("UpLift transformation costs") of approximately $300 million.

Current wording

Announced in July 2023, UpLift is a program to transform our operating model. UpLift includes the standardization of our processes and improvement of our supply chain procurement, among other aspects of the program, as well as organizational changes which result in restructuring actions. We expect UpLift to generate approximately $200 million in annual run-rate savings by second half of 2025, with restructuring and other incremental costs to complete the transformation ("UpLift transformation costs") of approximately $300 million.

Previous wording

UpLift costs incurred in thequarters ended March 31, 2025 and 2024 are as follows:

Current wording

UpLift costs incurred in thequarters and six months ended June 30, 2025 and 2024 are as follows:

Previous wording

Total UpLift costs incurred to date are $180 million, including $76 million of UpLift restructuring costs and $104 million of UpLift transformation costs.

Current wording

Total UpLift costs incurred to date are $223 million, including $101 million of UpLift restructuring costs and $122 million of UpLift transformation costs.

Previous wording

In August 2024, we received a favorable ruling regarding a German tax litigation. As a result, we recorded income tax benefits of approximately $185 million and related interest income of approximately $200 million, which were included in Income tax expense (benefit), net and Interest expense (income), net, respectively, in the Consolidated Statements of Operations for the year ended December 31, 2024. Additionally, pursuant to the Tax Matters Agreement ("TMA") with RTX Corporation ("RTX", our former parent) and based on the facts and contractual provisions at the time, the Company recorded indemnification expense and payable of $194 million for amounts due to RTX resulting from the outcome of the German tax litigation. This expense was included in Other income (expense), net in the Consolidated Statements of Operations for the year ended December 31, 2024.

Current wording

In August 2024, we received a favorable ruling regarding a German tax litigation. As a result, we recorded income tax benefits of approximately $185 million and related interest income of approximately $200 million, which were included in Income tax expense (benefit), net and Interest expense (income), net, respectively, in the Consolidated Statements of Operations for the year ended December 31, 2024. Additionally, pursuant to the Tax Matters Agreement ("TMA") with UTC, our former parent, subsequently renamed RTX Corporation, and based on the facts and contractual provisions at the time, the Company recorded indemnification expense and payable of $194 million for amounts due to RTX resulting from the outcome of the German tax litigation. This expense was included in Other income (expense), net in the Consolidated Statements of Operations for the year ended December 31, 2024.

Previous wording

Based on additional information received from RTX during the quarter ended March 31, 2025, the Company now estimates the amount payable to RTX to be $246 million, resulting in indemnification expense of $52 million in the quarter ended March 31, 2025. This indemnification expense is included in Other income (expense), net in the Condensed Consolidated Statements of Operations for the quarter ended March 31, 2025. This estimate could further change due to the Company's limited access to information held by RTX and the parties' continuing discussion to resolve the scope of the indemnity obligation and the final indemnity amount.

Current wording

Based on indemnity payments made to RTX and adjustments to indemnity payable in the quarter ended June 30, 2025, the Company now estimates the amount payable to RTX to be $233 million, resulting in indemnification expense of $6 million and $58 million in the quarter ended and six months ended June 30, 2025. This indemnification expense is included in Other income (expense), net in the Condensed Consolidated Statements of Operations for the quarter ended and six months ended June 30, 2025. This estimate could further change due to the parties' continuing efforts to resolve the scope of the final indemnity amount pursuant to the procedures set forth in the TMA.

Previous wording

Global macroeconomic conditions have impacted, and continue to impact, aspects of the Company's operations and overall financial performance during the quarters ended March 31, 2025 and 2024. These macroeconomic conditions include, among others, inflationary pressures, high interest rates, tighter credit conditions and changes in global trade policies including higher tariffs in the U.S. and other countries. These macroeconomic trends could continue to impact our business, including impacts to overall financial performance during the remainder of 2025, as a result of the following, among other things:

Current wording

Global macroeconomic conditions 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, 2025 and 2024. These macroeconomic conditions include, among others, inflationary pressures, high interest rates, tighter credit conditions and changes in global trade policies including higher tariffs in the U.S. and other countries. These macroeconomic trends could continue to impact our business, including impacts to overall financial performance during the remainder of 2025, as a result of the following, among other things:

Previous wording

Other than the estimated potential impact from new tariffs currently in effect of approximately $45 million to $75 million, we currently do not expect any significant impact to our capital and financial resources from these macroeconomic conditions, including to our overall liquidity position based on our available cash and cash equivalents and our access to credit facilities and the capital markets.

Current wording

Other than the estimated potential impact from new tariffs currently in effect of approximately $25 million to $35 million during 2025, we currently do not expect any significant impact to our capital and financial resources from these macroeconomic conditions, including to our overall liquidity position based on our available cash and cash equivalents and our access to credit facilities and the capital markets.

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 quarter ended March 31, 2025 and year ended December 31, 2024.

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 six months ended June 30, 2025 and year ended December 31, 2024.

Previous wording

The factors contributing to the total percentage change year-over-year in total Net sales for the quarter ended March 31, 2025 are as follows:

Current 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, 2025 are as follows:

Previous wording

The factors contributing to the percentage change year-over-year for the quarter ended March 31, 2025 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 six months ended June 30, 2025 in total cost of products and services sold are as follows:

Previous wording

The Organic volume was flat for total cost of products and services sold for the quarter ended March 31, 2025 primarily driven by the organic sales changes noted above. Productivity and lower commodity prices, primarily steel, were offset by inflationary pressures, including higher labor costs and higher Service-related material costs.

Current wording

The Organic volume decrease of (2)% and (1)% for total cost of products and services sold for the quarter and six months ended June 30, 2025, respectively, was primarily driven by the organic sales changes noted above. Productivity was partially offset by inflationary pressures, including higher labor costs.

Previous wording

Gross margin percentage was flat for the quarter ended March 31, 2025, when compared to the same period in 2024, due to Service sales growing faster than New Equipment sales, the benefits from productivity and lower commodity prices, offset by the inflationary pressures described above.

Current wording

Gross margin percentage increased 30 and 20 basis points for the quarter and six months ended June 30, 2025, respectively, when compared to the same periods in 2024, due to the increase in Service sales and decrease in New Equipment sales and the benefits from productivity, partially offset by the inflationary pressures described above.

Previous wording

Research and development was relatively flat for the quarter ended March 31, 2025, when compared to the same period in 2024.

Current wording

Research and development was relatively flat for the quarter and six months ended June 30, 2025, when compared to the same periods in 2024.

Previous wording

Selling, general and administrative expenses increased $2 million for the quarter ended March 31, 2025, when compared to the same period in 2024, driven by annual wage increases and higher restructuring costs, partially offset by savings resulting from UpLift, lower credit loss reserves, and favorable foreign exchange impacts.

Current wording

Selling, general and administrative expenses increased $50 million and $52 million for the quarter and six months ended June 30, 2025, respectively, when compared to the same periods in 2024, driven by higher restructuring costs, annual wage increases and other employment costs, partially offset by savings resulting from UpLift and lower credit loss reserves. The quarter and six months ended June 30, 2025, also included the impacts from foreign exchange.

Previous wording

Selling, general and administrative expenses as a percentage of Net sales increased 50 basis points for the quarter ended March 31, 2025, when compared to the same period in 2024.

Current wording

Selling, general and administrative expenses as a percentage of Net sales increased 140 basis points and 100 basis points for the quarter and six months ended June 30, 2025, respectively, when compared to the same periods in 2024.

Previous wording

UpLift restructuring costs were $20 million and $1 million in the quarters ended March 31, 2025 and 2024, respectively. We also incurred $23 million and $12 million of UpLift transformation costs in the quarters ended March 31, 2025 and 2024, respectively, which are primarily for consultants, third-party service providers and personnel focused on designing and implementing a centralized service delivery model that supports our new organizational structure, including the standardization of our supply chain and digital technology procurement. These costs are recorded in Other income (expense), net in the Condensed Consolidated Statements of Operations.

Current wording

UpLift restructuring costs were $45 million and $7 million in the six months ended June 30, 2025 and 2024, respectively. We also incurred $41 million and $27 million of UpLift transformation costs in the six months ended June 30, 2025 and 2024, respectively, which are primarily for consultants, third-party service providers and personnel focused on designing and implementing a centralized service delivery model that supports our new organizational structure, including the standardization of our supply chain and digital technology procurement. These UpLift transformation costs are recorded in Other income (expense), net in the Condensed Consolidated Statements of Operations.

Previous wording

Other restructuring costs were $23 million for the quarter ended March 31, 2025 and included $12 million of costs related to 2025 actions and $11 million of costs related to 2024 actions.

Current wording

Other restructuring costs were $35 million for the six months ended June 30, 2025 and included $20 million of costs related to 2025 actions and $15 million of costs related to 2024 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 quarter ended March 31, 2025, 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 six months ended June 30, 2025, and the expected cash payments to complete the actions announced:

Previous wording

The approved UpLift restructuring actions are expected to generate approximately $95 million in annual recurring savings by 2025, primarily in Selling, general and administrative expenses, and of which approximately $19 million was realized during the quarter ended March 31, 2025.

Current wording

The approved UpLift restructuring actions are expected to generate approximately $102 million in annual recurring savings by 2025, primarily in Selling, general and administrative expenses, and of which approximately $39 million was realized during the six months ended June 30, 2025, including $23 million of incremental savings compared to the same period in 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 $27 million for the 2025 actions and $27 million for the 2024 actions, of which approximately 80% relates to Cost of products and services sold and 20% relates to Selling, general and administrative expenses. Approximately $8 million of savings was realized for the 2025 and 2024 actions during the quarter ended March 31, 2025.

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 $28 million for the 2025 actions and $27 million for the 2024 actions, of which approximately 70% relates to Cost of products and services sold and 30% relates to Selling, general and administrative expenses. Approximately $17 million of savings was realized for the 2025 and 2024 actions during the six months ended June 30, 2025.

Previous wording

The changes in Other income (expense), net, of $(103) million for the quarter ended March 31, 2025, compared to the same period in 2024, were primarily driven by Separation-related adjustments of $52 million, UpLift transformation costs of $23 million, non-recurring litigation-related settlement costs of $21 million and impairment loss related to net assets held for sale of $10 million, partially offset by foreign currency mark-to-market adjustments and gain on sale of fixed assets. Other Income was also impacted by lower Separation-related adjustments, lower UpLift transformation costs, and other reserve adjustments during the same period in 2024.

Current wording

The change in Other income (expense), net of $(87) million for the six months ended June 30, 2025 compared to the same period in 2024, was primarily driven by Separation-related adjustments of $61 million, UpLift transformation costs of $41 million, non-recurring litigation-related settlement costs of $21 million and impairment loss related to net assets held for sale of $10 million, partially offset by gains on the sale of fixed assets of $14 million and foreign currency mark-to-market adjustments.

Previous wording

Interest expense (income), net was relatively flat for the quarter ended March 31, 2025, compared to the same period in 2024, as higher interest expense related to the $600 million and €850 million unsecured, unsubordinated debt issued in November 2024 was offset by higher interest income.

Current wording

Interest expense (income), net was relatively flat for the quarter and six months ended June 30, 2025, compared to the same periods in 2024, as higher interest expense related to the $600 million and €850 million unsecured, unsubordinated debt issued in November 2024 was offset by interest reserve adjustments related to non-recurring tax items, lower interest expense related to the repayment of the $1.3 billion unsecured, unsubordinated debt in April 2025 and higher interest income.

Previous wording

The average interest rate on our long-term debt for the quarters ended March 31, 2025 and 2024, was 2.7% and 2.5%, 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 was 2.8% for the quarter and six months ended June 30, 2025 and 2.5% for the same periods in 2024. For additional discussion of borrowings, see Note 7 to the Condensed Consolidated Financial Statements.

Previous wording

The increase in the effective tax rate for the quarter ended March 31, 2025, is primarily the result of the tax effect of the increase in our estimated nondeductible TMA indemnity obligation payable to RTX, partially offset by a foreign valuation allowance release.

Current wording

The increase in the effective tax rate for the quarter and six months ended June 30, 2025, compared to the same periods in 2024, is primarily due to the absence of the reduction in a deferred tax liability related to the mitigation of future repatriation costs recorded in 2024, partially offset by an incremental benefit related to foreign-derived intangible income and foreign valuation allowance releases recorded in the quarter ended June 30, 2025. The increase in the effective tax rate for the six months ended June 30, 2025, compared to the same period in 2024, is also due to the result of the tax effect of the increase in our estimated nondeductible TMA indemnity obligation payable to RTX recorded in the quarter ended March 31, 2025.

Previous wording

Noncontrolling interest in subsidiaries' earnings decreased $8 million for the quarter ended March 31, 2025, compared to the same period in 2024, primarily driven by increased ownership of our subsidiary in Japan during the second quarter of 2024 and lower net income from non-wholly owned subsidiaries. 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.

Current wording

Noncontrolling interest in subsidiaries' earnings decreased $5 million and $13 million for the quarter and six months ended June 30, 2025, respectively, compared to the same periods in 2024, primarily driven by increased ownership of our subsidiary in Japan during the second quarter of 2024 and lower net income from non-wholly owned subsidiaries. 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.

Previous wording

Net income attributable to Otis Worldwide Corporation decreased for the quarter ended March 31, 2025, compared to the same period in 2024, due to lower operating profit (including the unfavorable impact of foreign exchange rates) and a higher effective tax rate, partially offset by lower noncontrolling interest in subsidiaries' earnings.

Current wording

Net income attributable to Otis Worldwide Corporation decreased for the quarter and six months ended June 30, 2025, compared to the same periods in 2024, due to lower operating profit (including the impact of foreign exchange rates) and a higher effective tax rate, partially offset by lower noncontrolling interest in subsidiaries' earnings.

Previous wording

Summary performance for New Equipment for the quarters ended March 31, 2025 and 2024 was as follows:

Current wording

Summary performance for New Equipment for the quarters and six months ended June 30, 2025 and 2024 was as follows:

Previous wording

Summary analysis of the Net sales change for New Equipment for the quarter ended March 31, 2025 compared with thesame period in 2024 was as follows:

Current wording

Summary analysis of the Net sales change for New Equipment for the quarter and six months ended June 30, 2025 compared with thesame periods in 2024 was as follows:

Previous wording

New Equipment operating profit decreased $(5) million, including foreign exchange headwinds of ($1) million. The impacts of lower volume and unfavorable regional mix were partially offset by productivity and lower commodity prices, with price relatively flat. Operating margin increased 20 basis points.

Current wording

New Equipment operating profit decreased $(42) million. The impacts of lower volume, unfavorable price and regional and product mix, were partially offset by productivity, including the benefits of UpLift and Other restructuring actions including the reorganization of our operations in China. Operating margin decreased (240) basis points.

Previous wording

The organic sales decrease of (7)% was primarily driven by a greater than 20% decline in China and high single-digit decline in Americas, partially offset by approximately 10% growth in Asia Pacific and mid single-digit growth in EMEA.

Current wording

The organic sales decrease of (9)% was primarily driven by a greater than (20)% decline in China and high single-digit decline in Americas, partially offset by high single-digit growth in EMEA and mid single-digit growth in Asia Pacific.

Previous wording

Summary performance for Service for thequarters ended March 31, 2025 and 2024 was as follows:

Current wording

Summary performance for Service for thequarters and six months ended June 30, 2025 and 2024 was as follows:

Previous wording

Summary analysis of Service Net sales change for the quarter ended March 31, 2025 compared with thesame period in 2024 was as follows:

Current wording

Summary analysis of Service Net sales change for the quarter and six months ended June 30, 2025 compared with thesame periods in 2024 was as follows:

Previous wording

Service operating profit increased $14 million including foreign exchange headwinds of ($15) million. Higher volume, improved pricing on maintenance contracts, and productivity were partially offset by inflationary pressures, including higher labor costs and higher material costs and mix. Operating margin increased 40 basis points.

Current wording

Service operating profit increased $40 million including foreign exchange tailwinds of $14 million. Higher volume, improved pricing on maintenance contracts and productivity including the benefits of UpLift, were partially offset by inflationary pressures including higher labor costs, and mix. Operating margin increased 20 basis points.

Previous wording

The organic sales increase of 4% is due to organic sales increases in maintenance and repair of 3% and in modernization of 10%.

Current wording

The organic sales increase of 4% is due to organic sales increases in maintenance and repair of 3% and in modernization of 7%.

Previous wording

General corporate expenses and other for the quarter ended March 31, 2025 increased $10 million, compared to the same period in 2024, primarily due to higher corporate costs, partially offset by the impact of foreign currency mark-to-market adjustments.

Current wording

General corporate expenses and other decreased $(1) million for the quarter ended June 30, 2025 compared to the same period in 2024, primarily due to gains on the sale of fixed assets during the quarter ended June 30, 2025 and foreign currency mark-to-market adjustments, partially offset by higher corporate costs.

Previous wording

As of March 31, 2025, we had cash and cash equivalents of approximately $1.9 billion, of which approximately 37% was held by the Company's foreign subsidiaries. Domestic cash and cash equivalents as of March 31, 2025 includes amounts that were used on April 7, 2025, to fund the repayment at maturity of the $1.3 billion principal amount of 2.056% notes due April 5, 2025. 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 March 31, 2025 and December 31, 2024, the amount of such restricted cash was approximately $11 million and $21 million, respectively.

Current wording

As of June 30, 2025, we had cash and cash equivalents of $688 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 June 30, 2025 and December 31, 2024, the amount of such restricted cash was $15 million and $21 million, respectively.

Previous wording

There were no borrowings outstanding under the Company's $1.5 billion commercial paper program as of March 31, 2025. For additional discussion of borrowings, see Note 7 to the Condensed Consolidated Financial Statements.

Current wording

As of June 30, 2025, there were $472 million borrowings outstanding under the Company's $1.5 billion commercial paper program, including, €205 million of Euro denominated commercial paper. For additional discussion of borrowings, see Note 7 to the Condensed Consolidated Financial Statements.

Previous wording

On January 16, 2025, 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 $2.0 billion of Common Stock, of which approximately $1.8 billion was remaining as of March 31, 2025.

Current wording

On January 16, 2025, 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 $2.0 billion of Common Stock, of which approximately $1.5 billion was remaining as of June 30, 2025.

Previous wording

The year-over-year increase in net cash provided by operating activities was primarily driven by working capital balances during the periods, including an increase in Accrued Liabilities in the quarter ended March 31, 2025 compared to a decrease in the same period in 2024, driven by an increase in indemnity obligation to RTX, an increase in litigation-related settlement reserves and the timing of restructuring payments, as well as a smaller increase in Accounts receivable, net, in the quarter ended March 31, 2025 compared to the same period in 2024 due to the timing of billings and collections. These were partially offset by lower net income, a larger decrease in Accounts payable in the quarter ended March 31, 2025 compared to a decrease in the same period in 2024, driven by the timing of payments to suppliers. Additionally, UpLift-related payments were approximately $30 million in the quarter ended March 31, 2025, compared to approximately $15 million in the same period in 2024.

Current wording

The year-over-year decrease in net cash provided by operating activities was primarily driven by lower net income and changes to working capital balances during the periods, including a larger decrease in Accounts Payables in the six months ended June 30, 2025 compared to the decrease in the same period in 2024, driven by the timing of payments to suppliers. These were partially offset by an increase in Accrued Liabilities in the six months ended June 30, 2025 compared to a decrease in the same period in 2024, due to the timing of payments of employee-related benefits and the timing of tax payments and the related income tax expense, and a decrease in Other current assets in the six months ended June 30, 2025 compared to the increase in the same period in 2024, due to timing of payments. Additionally, UpLift-related payments were approximately $52 million in the six months ended June 30, 2025, compared to approximately $35 million in the same period in 2024.