otis-20251231
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
____________________________________
FORM 10-K
____________________________________
For the fiscal year ended December 31, 2025
or
For the transition period from ______ to ______.
Commission file number 001-39221
____________________________________
OTIS WORLDWIDE CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________
One Carrier Place, Farmington, Connecticut06032
(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
0.318% Notes due 2026 OTIS/26 New York Stock Exchange
2.875% Notes due 2027 OTIS/27 New York Stock Exchange
0.934% Notes due 2031 OTIS/31 New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesý. No ̈.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐. Noý.
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. Yesý. 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). Yesý. No ̈.
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. § 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ý.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ̈.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ̈.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐. No ý.
The aggregate market value of the voting Common Stock held by non-affiliates as of June 30, 2025 was $38,824,474,742based on the New York Stock Exchange closing price for such shares on that date. For purposes of this calculation, the Registrant has assumed that its directors and executive officers are affiliates.
As of January 22, 2026, there were 388,720,773 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III hereof incorporates by reference portions of the Otis Worldwide Corporation Proxy Statement for the 2026 Annual Meeting of Shareholders (the "2026 Proxy Statement"). The 2026 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
OTIS WORLDWIDE CORPORATION
Form 10-K
For the Year Ended December 31, 2025
TABLE OF CONTENTS
Page
PART I
Item 1. Business 1
Cautionary Note Concerning Factors That May Affect Future Results 9
Item 1A. Risk Factors 10
Item 1B. Unresolved Staff Comments 22
Item 1C. Cybersecurity 22
Item 2. Properties 24
Item 3. Legal Proceedings 24
Item 4. Mine Safety Disclosures 24
PART II
Item 6. [Reserved] 26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 48
Item 8. Financial Statements and Supplementary Data 50
Item 9A. Controls and Procedures 100
Item 9B. Other Information 100
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 100
PART III
Item 10. Directors, Executive Officers and Corporate Governance 101
Item 11. Executive Compensation 103
Item 14. Principal Accounting Fees and Services 105
PART IV
Item 15. Exhibits and Financial Statement Schedule 106
Table of Contents
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 product 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 websites in this Form 10-K are provided for convenience only. Information available through these websites is not incorporated by reference into this Form 10-K.
PART I
Item 1. Business
Our Company
Otis is the world’s leading elevator and escalator manufacturing, installation, service and modernization company. We serve customers in over 200 countries and territories around the world. Otis has global scale and local focus, with more than 1,400 branches and offices, and a direct physical presence in more than 70 countries.
The following description of our business should be read in conjunction with Item 7 in this Form 10-K, including the information contained therein under the heading "Business Overview."
Description of Business by Segment
Our Company is organized into two segments, New Equipment and Service, which, for 2025, contributed 35% and 65% of our net sales, and 9% and 91% of our segment operating profit, respectively. Our international operations represented approximately 71% of our net sales for 2025.
New Equipment
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, commercial 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 also sell New Equipment to government agencies, particularly, to support infrastructure projects, such as airports, railways or metros. We generally sell directly to our customers through our New Equipment sales personnel. Due to the nature of the customer base in China and certain other geographies, our direct sales force is augmented by agents and distributors. Given the breadth of our customer base and the large number of customers to whom we deliver new equipment on an annual basis, we are not dependent on any single customer and do not have any contracts material to Otis as a whole with any single customer. The same is true for our broad and geographically dispersed network of agents and distributors.
New Equipment customers typically engage with us at an early stage during the construction cycle. The timing of order placement depends on factors including project complexity and customer requirements. Elevator installation usually occurs midway through building construction.
New Equipment orders are generally delivered within 12 months of booking, although larger projects can take longer to deliver based on customer construction schedules, and in some regions, mostly in China, the order to delivery window is shorter. When placing New Equipment orders, customers typically make an advance payment to cover costs including design and contract engineering. These advance payments are typically followed by periodic progress payments at specified milestones, such as delivery of materials at the job site and completion of installation and equipment commissioning. Installation is carried out by our installation technicians or through subcontractors, in which case we typically complete the final inspection and commissioning to ensure that our quality standards are met. Revenues are recognized based on percentage of completion. Once commissioned, New Equipment units are typically supported by a warranty for a limited period of time.
We have developed a range of elevator and escalator solutions to meet the varying needs and objectives of our diverse customers, primarily centered around the following elevator platforms: Gen2, Gen3, Gen360 and SkyRise. Our primary elevator and escalator solutions are described below.
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Gen2
Gen2 has been our principal low-and mid-rise elevator solution. Since its launch in 2000, we have sold over one million units, making it our best-selling elevator platform.
Gen3
The successor to the Gen2 family of elevators, the Gen3 platform enhances the space-saving, energy-efficient design of the Gen2 elevator with the connectivity of the Otis ONE IoT (Internet of Things) digital service platform, while offering additional safety features for passengers and our colleagues who maintain the elevator.
Gen360
The Gen360 elevator frees hoistway space to accommodate larger cabins and features a new electronic architecture, with many mechanical components replaced by electronic components that, when combined with our service, increase reliability and reduce the potential for entrapments. A foldable, in-ceiling platform allows maintenance operations to be performed safely from within the car rather than on top of it and, depending on local regulations, eliminates the need for a refuge space above the car and the protrusion on the roof allowing for a flat roof design. With optional 360-degree cameras in the hoistway, Otis service teams can visually confirm, fine-tune, diagnose and solve many issues remotely without stopping the elevator. Otis ONE is our IoT solution that connects elevators to the cloud for real-time monitoring, predictive maintenance, and enhanced, transparent communication.
SkyRise
For taller, high-rise buildings, the SkyRise advanced elevator platform combines cutting-edge technologies and precision engineering to deliver solutions for residential, commercial and mixed-use skyscrapers.
Escalators and Moving Walkways
In addition to elevator solutions, we also offer escalators and moving walkways. With a range of finishes and aesthetics, Otis escalators integrate easily with any building design. Our smart design and features enhance sustainability and passenger safety, such as sensor-equipped escalators and moving walkways that efficiently run only when passengers approach, or operate at reduced speeds to conserve energy when there are no riders.
Service
Through our Service segment, we perform maintenance and repair services, as well as modernization services to upgrade elevators and escalators. We have a maintenance portfolio of approximately 2.5 million units globally, which includes Otis equipment manufactured and sold by us, as well as equipment from other original equipment manufacturers. Through our network of service sales personnel, we sell our services directly to customers in all significant elevator and escalator verticals around the world.
Service customers typically comprise building owners, facility managers, housing associations and government agencies that operate buildings where elevators and escalators are installed. Customers securing services for elevators are frequently different from those who initially make purchasing decisions with respect to New Equipment solutions. As the largest service provider in the industry worldwide, we have a wide range of customers in our Service segment and do not have any single service contract that is material to Otis as a whole. Contract duration depends on several factors, including customer needs, regulatory requirements and industry/geography dynamics. We work closely with our customers to renew these contracts as appropriate. Certain types of customers, such as those owning or operating large properties or portfolios of properties, tend to execute long-term maintenance agreements.
We provide our Service offerings to our customers through a global network of 37,000 Service mechanics operating out of more than 1,400 branches and offices typically located in close proximity to concentrations of customers. Our mechanics are critical to our ability to deliver a high level of service to our customers. Our OTISLINE operations provide personalized customer support 24/7. They receive customer service requests and assign and dispatch field technicians, as necessary, to respond to service requests. We support our customers with our network of service parts centers and repair centers.
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Our services include inspections, preventive maintenance offerings and other customized maintenance offerings tailored to meet customer needs. A basic maintenance contract provides for inspection consistent with local regulatory needs. We offer incremental, tiered maintenance and service offerings, with varying levels of coverage up to and including comprehensive component replacement coverage. We also provide customers with repair services to address equipment and component wear and tear, as well as breakdowns.
We seek to grow our maintenance portfolio through conversion of newly installed units into maintenance contracts, through prospecting and winning units already in service from customers using another service provider and through acquisitions. Our Service sales personnel seek to win service contracts upon the expiration or termination of existing service contracts from customers by offering a superior value proposition through service excellence, an engaged and technically sophisticated group of field service technicians, a streamlined customer experience and reliable elevator and escalator operating performance.
Similar to most other electro-mechanical equipment, elevators and escalators are subject to wear and tear over time, which can erode equipment functionality. As equipment ages, we work with customers to help renew and refresh their elevators and escalators through modernization solutions that enhance operational performance, improve overall building functionality, and support more sustainable building systems. Modernization offerings range from relatively simple upgrades of interior finishes and aesthetics to complex upgrades of larger components and sub-systems, including the machine, ropes or belts, safety systems and the entire car or escalator.
Digital Technology initiatives
Otis offers a range of technologies for improving the passenger experience and we have been using technology to monitor elevator performance remotely for decades. As of December 31, 2025, approximately 1.1 million units of our global portfolio, including units under the warranty period, are connected. In 2026, we expect to continue to innovate and expand our digital ecosystem and suite of digital solutions for both our existing service portfolio customers and for new equipment shipments from our factories.
Otis ONE is our latest cloud-based IoT technology, designed to continuously monitor equipment health and performance in real time to provide proactive, predictive and transparent information to our technicians and customers. The technology expands predictive and remote maintenance capabilities to support improved elevator up-time and service productivity.
We offer additional technology and multimedia options to customers with voice, data and video digital services, leveraging our IoT technologies, as described below. These are often incorporated as an optional upgrade on maintenance contracts.
eView In-Car Display
Our in-car display streams live, customizable infotainment to passengers and can connect them to OTISLINE, Otis' 24-hour service call center, during an emergency.
Compass 360 Destination Management System
Our proprietary destination management system groups passengers by their desired destination and directs them to an assigned car that minimizes waiting and ride time. The system's algorithms anticipate traffic demand within a building and improve traffic flow.
eCall Plus Smartphone App
Otis' smartphone app enables passengers to summon their elevator remotely for a touchless experience.
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Research and Development & Intellectual Property
Innovation is a fundamental characteristic of our history and is central to our strategy. For 2025, research and development ("R&D") expense was $152 million and 1.1% as a percentage of net sales. In addition to R&D expense, we made investments in digital and strategic initiatives of $45 million, which in combination with R&D expense was 1.4% as a percentage of net sales. We coordinate our R&D efforts globally through an operating model that sets global and local priorities based on customer and segment needs. We have 11 R&D centers and 16 factories around the world, including major locations in China, India, Japan, France, Germany, Spain and the United States. The R&D centers are strategically located close to concentrations of customers and factories to enable efficient development of engineering solutions that can serve as global model products and adapt quickly and efficiently to local customer needs and local demographic and construction trends. We have 1,300 engineers globally, with increasing focus on digital initiatives, software, design of the user interface and the user experience.
We maintain a portfolio of patents, trademarks, copyrights, trade secrets, licenses and franchises related to the Otis business to protect our R&D investments in products and services. We currently own approximately 4,600 patents issued in various jurisdictions, and we have approximately 1,300 patent applications pending globally. We filed approximately 900 patent applications in the last three years. Our patents are primarily filed in Europe, the United States and Asia. We believe that our patents and trade secrets create a competitive advantage and that we have taken reasonable measures to build a portfolio of valid and enforceable intellectual property rights. However, these intellectual property rights might be challenged and could be found invalid or unenforceable. Loss of strategic patents and trade secrets could significantly affect our competitiveness. See Item 1A in this Form 10-K for further discussion of intellectual property matters.
Joint Ventures and Non-Wholly Owned Subsidiaries
Our international strategic relationships, joint ventures and non-wholly owned subsidiaries are an important part of our business as they support our access to international markets and customers. Results of these entities are consolidated with our financial and operational results. Our largest joint venture is located in China with the remainder of our joint ventures and non-wholly owned subsidiaries located in various other countries.
Prior to October 2025, we operated in China through two principal joint ventures: Otis Elevator (China) Investment Company Limited ("Otis China") and Otis Electric Elevator Company Limited ("Otis Electric"). Otis China is a joint venture established in 1998 for the purpose of manufacturing, installing and servicing elevators, escalators and related equipment. We are the majority owner of Otis China, and Tianjin Tai Kang Investment Co. Ltd. is our joint venture partner. Otis Electric, a subsidiary of Otis China, is a joint venture established in 1997 for the purpose of manufacturing, installing and servicing elevators, escalators and related equipment. Otis China owns a controlling equity stake in Otis Electric. Otis China’s partner in Otis Electric was Xizi Elevator Group Co.
In October 2025, we purchased all of the outstanding shares of the noncontrolling shareholder of Otis Electric. Otis Electric is now 100% owned by Otis China and one of its subsidiaries. See "Note 1: Business Overview" in Item 8 in this Form 10-K for further details regarding this transaction.
Competition
We operate in a highly competitive industry. Due to the global and localized nature of the industry, there are numerous participants of varying size that operate in our industry. According to industry estimates, there are hundreds of participants that offer New Equipment solutions and several thousand participants that offer maintenance and service solutions. In both the New Equipment and Service segments, major competitors globally include KONE Oyj, Schindler Group and TK Elevator, while there are a number of additional competitors in the Asia Pacific region. Competitive dynamics vary significantly by segment and geography. In the Service segment, independent service providers and other small operators are significant competitors in most of our local geographies. These independent service providers have an aggregate portfolio of about 50% of service units, but account for a smaller percentage of the service business when measured by value because of the types of units and level of maintenance covered by these providers.
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There are several factors that determine competitiveness in the industry, including local codes and compliance requirements, customer preferences, price, reputation, delivery and execution, product quality, equipment performance, reliability and long-term service and product support.Our success in both our New Equipment and Service segments depends upon our ability to develop and market our products, services and solutions, as well as our ability to provide the people, technologies, facilities, equipment and financial capacity needed to deliver those products and services with maximum efficiency and at quality levels expected by our customers. We believe our global presence, local relationships and proven track record in executing complex elevator and escalator solutions contribute to our iconic brand, reputation and competitive position in the industry.
We believe our business strategies allow us to:
•Sustain New Equipment growth;
•Accelerate Service portfolio growth;
•Deliver modernization value;
•Advance the digitalization of Otis; and
•Focus and empower the organization.
We believe these results of our business strategies support our ability to successfully compete across the New Equipment and Service segments, and help deliver sustainable earnings growth.
The Company may not be able to compete effectively on all of these fronts and with all of its competitors, and the failure to do so could have a material adverse effect on our sales and profit margins and reputation. For further discussion of risks related to the competitive environment of our business, see Item 1A in this Form 10-K.
Compliance with Government Regulations
We conduct our business through subsidiaries and affiliates worldwide. Any changes in legislation or government policies impacting our industry, including with respect to employee safety, labor-related regulations, industrial equipment, licensing requirements, foreign ownership limitations and building and elevator safety codes, can affect our operations. We closely monitor local legislation and government policies in the locations in which we operate.
United States (the "U.S.") laws, regulations, orders, and other measures concerning the export or re-export of products, software, services and technology to, and other trade-related activities involving, non-U.S. countries and parties affect the operations of Otis and its affiliates, as do those of other countries pertaining to similar matters.
In addition, our operations are subject to and affected by environmental regulations promulgated by federal, state and local authorities in the United States and regulatory authorities with jurisdiction over our foreign operations. We have incurred and will likely continue to incur liabilities under various government statutes and regulations for the cleanup of pollutants previously released into the environment. We do not anticipate that compliance with current provisions relating to the protection of the environment or that any payments we may be required to make for cleanup liabilities will have a material adverse effect upon our competitive position, cash flows, results of operations or financial condition.
For further discussion of risks related to international trade compliance, environmental matters and other government regulations, see in this Form 10-K Item 1A, Item 7 and "Note 2: Summary of Significant Accounting Policies" and "Note 20: Contingent Liabilities" in Item 8 in this Form 10-K.
Seasonality
Our business and operating results are generally not subject to significant fluctuations as a result of seasonality, although we have experienced lower New Equipment net sales in Asia in the first calendar quarter, coinciding with Lunar New Year celebrations. In addition, we have also experienced lower New Equipment net sales in the fourth quarter in China, due to a national holiday that occurs during the first week of October which may impact the relative mix of net sales within the quarter.
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Raw Materials and Supplies
Due to the global and distributed nature of our operations, we partner with a diverse network of several thousand suppliers globally. These include product and non-product suppliers, as well as subcontractors. We rely on approximately 400 key suppliers for our manufacturing supply chain.
Components and systems necessary to effectively complete our New Equipment projects, as well as to satisfy our maintenance and repair obligations, are often available from two or more sources within the industry. While we believe no single supplier is material to our business, some components or applications require particular specifications or qualifications. In those cases, there may be a single supplier or a limited number of suppliers that can readily provide such components, which have in the past, and could in the future, result in supply constraints or cost pressures due to an issue with such a supplier, including financial or operational difficulties or a contract dispute. We implement mitigation actions to address potential disruption in and other risks relating to our supply chain, including the use of safety stock and alternative materials, as well as risk assessments, qualification of multiple supply sources and use of long-term supplier agreements.
Although at times high prices for some important raw materials have caused margin and cost pressures for our business, we do not expect near-term unavailability or pricing of materials, components or supplies that would have a material adverse effect on our business. We seek to manage commodity price risk through locking and hedging strategies, as well as passing the increases onto our customers through pricing. See Item 1A in this Form 10-K for risks associated with raw material and supply chain.
Sustainability and Responsibility
At Otis, sustainability and responsibility are strategically woven into each of our core business functions in support of our vision and our commitment to living our Otis mission as a world-class, customer-centric, service-oriented company. Together with our Otis Absolutes of Safety, Ethics and Quality and our Leading at Otis Behaviors, our projects and programs under our four pillars of Health & Safety, Governance & Accountability, Environment & Impact and People & Communities advance our five strategic objectives – of sustaining New Equipment growth, accelerating our Service portfolio growth, delivering modernization value, and focusing and empowering our organization while advancing digitalization – to create value for our stakeholders and the broader communities where we live and work. We are committed to the health and safety of our colleagues and the riding public. We are committed to environmental sustainability as a business strategy, advancing digitalization and leveraging smart technology to create products and services that meet customer expectations. We proactively engage in the communities where we live and work. We position ourselves to attract, develop and retain the best talent in the market. See "Human Capital" below for additional information regarding certain initiatives related to our Otis colleagues.
In April 2024, the Science Based Target Initiative ("SBTi") validated our near-term science-based greenhouse gas emissions reduction targets (SBTs). Our SBTs are: (i) reduce absolute scope 1 and 2 greenhouse gas emissions 55% by 2033 from 2021 base year (the target boundary includes biogenic land-related emissions and removals from bioenergy feedstocks) and (ii) reduce absolute scope 3 greenhouse gas emissions from purchased goods and services, business travel, and use of sold products 33% by 2033 from 2021 base year. Our climate strategy is designed to build resiliency and strengthen the operational efficiency of our business and supply chain. It is based on our climate scenario analysis under the Task Force on Climate-related Financial Disclosures (TCFD), near-term SBTs and the implementation of major initiatives in the near-term, medium-term and long-term focused on energy management and operational efficiency across our factories, real estate portfolio and fleet, real estate portfolio climate resilience, product sustainability through the advancement of digitalization and innovation and responsible climate resilient sourcing.
In June 2025, we published our fourth annual voluntary report describing our sustainability-related strategies, programs, and actions in alignment with our business strategies, and providing performance data and metrics under our four pillars. It was drafted in accordance with the Global Reporting Initiative Standards, the Sustainability Accounting Standards Board guidelines for the Resource Transformation sector (with Electrical and Electronic Equipment and Industrial Machinery and Goods as subsectors, when applicable), and the TCFD recommendations. We also engaged third parties for limited or reasonable assurance assessment of certain of our health and safety and environmental metrics under our voluntary reporting. This annual report – now called "Connect & Thrive" can be found on our company website (http://www.otis.com) under the heading "Sustainability & Responsibility", which we update from time to time. Neither our Connect & Thrive report nor our company website are incorporated by reference into this Form 10-K.
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Underscoring the integration of sustainability and responsibility into our core business operations Otis has enhanced its sustainability-related governance model by further rooting sustainability within each business function. Functional leads are responsible for sustainability-related topics within their respective functions, with direct oversight by the CEO and, ultimately, the Board of Directors (including the Nominations and Governance Committee). These functional leaders are supported by functional committees and workstreams that oversee sustainability-related strategies at the functional level. These groups collaborate with subject matter experts across their functions to develop and implement sustainable-related strategies that align with our vision.
There have been no, and we do not expect there to be in the near term, material impacts on our business, financial condition or results of operations as a result of compliance with legislation or regulatory rules regarding climate change, from the known physical effects of climate change, as a result of implementing our sustainability-related initiatives or from transitional risks such as increased regulations or customer shifting preferences toward low carbon products, as determined under our climate scenarios analysis. For a discussion of risks associated with sustainability-related matters, see Item 1A in this Form 10-K.
Human Capital
As of December 31, 2025, our global workforce consists of approximately 72,000 colleagues (including approximately 45,000 field professionals), with 45% in Asia, 34% in Europe, the Middle East and Africa ("EMEA") and 21% in the Americas.
Approximately 64% of our U.S. workforce is covered by a collective bargaining agreement. Outside of the U.S., our colleagues are represented by workers' councils or statutory labor unions as may be customary or required in those jurisdictions. While we strive to maintain good relationships with our employee representative bodies, our business may be adversely affected by work stoppages, union negotiations, labor disputes and other matters associated with our labor force. The collective bargaining agreement for most of our bargaining unit colleagues in the U.S. was renewed without disruption in July 2022 and is set to expire in July 2027. For a discussion of risks associated with employment-related matters, see Item 1A in this Form 10-K.
Compensation and Benefits
Our colleagues are vital to our success, and we offer pay and benefits designed to attract, retain and motivate our colleagues and align their compensation with both individual and our overall performance. We offer fair employment conditions and follow local labor laws that address minimum wages, insurance coverage of work-related accidents, severance pay and other employment provisions, including overtime and sick pay. While our programs vary by location and eligibility, they generally include base and overtime pay, short-term incentive bonuses, long-term incentive pay in the form of stock awards, retirement plan benefits, health care and insurance benefits, tuition assistance through our Employee Scholar program, paid sick, bereavement, vacation, parental and family leaves, and wellness and employee assistance programs.
Health and Safety
Safety is one of the Otis Absolutes. For that reason, safety measures and indicators are regularly monitored by management and reported to our Board of Directors. To promote safety, we have a health and safety management system and regularly measure the effectiveness of our health and safety programs. We also provide regular health and safety training to our field professionals and we regularly enhance our learning tools to support the success of our health and safety programs. We follow local labor laws that address maximum working hours. We empower all of our colleagues and subcontractors with stop work authority if they perceive an unsafe condition or behavior that may cause injury. We also seek to promote a culture where stop work authority can be freely exercised without the fear of retribution or retaliation, and a learning culture to enhance the quality and delivery of safety and technical training. Health and Safety is one of the four focus areas of our sustainability and responsibility projects and programs. See the "Sustainability and Responsibility" section of this Form 10-K above for more information regarding our sustainability-related strategies and actions.
We are focused on our colleagues' mental and physical well-being. We provide employee assistance plan benefits to all of our colleagues worldwide. We also offer flexible work arrangements to many salaried colleagues.
Hiring, Training, Development and Retention
We position ourselves to attract and retain the best talent in the market and interact meaningfully in the global communities where we live and work. We perform strategic talent outreach to expand our applicant pool and ensure access to top-qualified candidates. When seeking candidates or promoting Otis colleagues, we focus on matching the best talent to open roles in support of our organizational model and business needs, thereby driving value for our company and its stakeholders.
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We seek others’ ideas, encourage innovation and empower our colleagues through various learning and development programs that are aligned with our business strategy and are designed to contribute to our broader success such as our "Employee Scholar Program", a company-sponsored education program that allows colleagues to expand their skills through degree or certification programs.Our mechanics receive extensive training to service and install equipment safely. This training consists of live, virtual, and on-the-job modules with experienced mechanics. We also offer various programs to build leadership and functional capabilities and provide development initiatives through our colleague-led Business Resource Groups (BRGs). Our BRGs have evolved to ensure global alignment and greater accountability for business goals while offering programming for our Otis colleagues relevant to our "4C pillars" of Career, Culture, Customer, and Community.
We track our colleagues’ voluntary attrition rate to help us assess our workplace initiatives. We also track our colleagues’ satisfaction through colleague engagement surveys to anticipate attrition, as discussed further below. Our commitment to building and fostering a sense of belonging and an inclusive workplace strengthens employee engagement and supports the retention of top talent.
Colleague Engagement
We believe that engaged colleagues deliver better service to our customers. We measure engagement by conducting annual colleague engagement surveys. The results, which are reported to our Board of Directors and management, help us assess how our colleagues feel about working for us. We use the survey results to develop action plans to address areas of concern. The engagement survey, which anonymizes the data, covers topics such as safety, ethics, belonging, quality, company prospects, inclusion, success, growth and managerial effectiveness.
Corporate Information
Otis is a Delaware corporation and was incorporated on March 1, 2019 in connection with the separation and distribution ("Separation") of each of Otis and Carrier Global Corporation ("Carrier") from United Technologies Corporation, subsequently renamed RTX Corporation ("UTC" or "RTX", as applicable) into separate independent publicly traded companies. The Separation occurred on April 3, 2020. References to "UTC" relate to pre-Separation matters, and references to "RTX" relate to post-Separation matters.
The Separation was completed pursuant to a Separation and Distribution Agreement ("Separation Agreement") and other agreements with UTC and Carrier related to the Separation, including but not limited to a tax matters agreement ("TMA"), an employee matter agreement ("EMA") and an intellectual property agreement (the "Intellectual Property Agreement").For further discussion of these agreements, see Item 1A, "Note 1: Business Overview" in Item 8 and Item 15 in this Form 10-K.
Available Information
This Form 10-K and our quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports are available free of charge through the Investors section of our Internet website (http://www.otis.com) under the heading "Financial Information" as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the SEC. In addition, the SEC maintains a website (http://www.sec.gov) containing reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
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Cautionary Note Concerning Factors That May Affect Future Results
This Form 10-K 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" and other words of similar meaning in connection with a discussion of future operating or financial performance. 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, restructuring or transformation actions (including UpLift and related reorganization and outsourcing activities and such actions with respect to our business in China), credit ratings, net indebtedness and other measures of financial performance or potential future plans, strategies or transactions, or statements that relate to climate change and our intent to achieve certain sustainability targets or other corporate responsibility initiatives, including operational impacts and costs associated 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 and any changes therein, including financial market conditions, fluctuations in commodity prices, and other inflationary pressures, interest rates and foreign currency exchange rates, levels of end market demand in construction, pandemic health issues, 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 in other countries in which Otis and its businesses operate, including tensions between the U.S. and China and geopolitical conflicts, including the ongoing conflict between Russia and Ukraine and instability in the Middle East, on general market conditions, commodity costs, global trade policies and related sanctions, export controls and tariffs, and currency exchange rates in the near term and beyond;
•challenges in the development, production, delivery, support, employee adoption, 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 or costs thereof, including credit market conditions and Otis’ capital structure;
•the timing and scope of future repurchases of 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 disruptions in delivery of materials and services from suppliers, whether as a result of changes in general economic conditions, geopolitical conflicts or otherwise;
•cost reduction or containment actions, restructuring or transformation costs and related savings and other consequences thereof, including with respect to UpLift and our China business and related impacts of reorganization, change management and outsourcing activities, as applicable;
•new business and investment opportunities and the realization of anticipated benefits, including meeting customer expectations and maintaining our competitiveness;
•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, labor actions, including strikes or work stoppages, and labor inflation in the markets in which Otis and its businesses operate globally;
•the effect of changes in laws, regulations and enforcement priorities in the U.S. and other countries in which Otis and its businesses operate;
•the ability of Otis to retain and hire key personnel;
•the scope, nature, impact or timing of acquisition and divestiture activity, the integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs;
•the determination by the Internal Revenue Service (the "IRS") and other tax authorities that the distribution or certain related transactions in connection with the Separation should be treated as taxable transactions; and
•our obligations and disputes that have or may hereafter arise under the agreements we entered into with RTX and Carrier in connection with the Separation.
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These and other factors are more fully discussed in the "Business", "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" sections and elsewhere in this Form 10-K and may cause actual results to differ materially from those expressed or implied in the forward-looking statements. The forward-looking statements speak only as of the date of this report, or in the case of any document incorporated by 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.
Item 1A. Risk Factors
Risks Related to Our Business
We may be affected by global economic conditions in general and conditions in the construction and infrastructure industries in particular.
Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions, including levels of consumer and business confidence, commodity prices, raw material and energy costs, supply chain issues, trade policies (including tariffs and trade barriers), foreign currency exchange rates, interest rates, labor costs, levels of government spending and deficits, actual or anticipated default on sovereign debt, political conditions in the U.S. or otherwise, regulatory changes and other challenges that could affect the global economy. In addition, the current global economic environment has resulted, and may continue to result, in increased levels of commodity, materials and wage inflation. These various global economic conditions have affected and may continue to affect our business in a number of ways as discussed in more detail in this Item 1A and elsewhere in this Form 10-K. More particularly, a slowdown in building and remodeling activity, whether due to remote work or otherwise, or decreased public spending on infrastructure projects could adversely affect our financial performance.
Our operations are subject to natural and man-made unexpected events that may increase our costs, limit access to building sites, interrupt production or our supply chain or otherwise adversely affect our business, results of operations or financial condition.
The occurrence of one or more unexpected events, including war (see discussion below regarding ongoing conflicts), acts of terrorism or violence, civil unrest, pandemics, fires, tornadoes, hurricanes, earthquakes, floods and other forms of natural disasters or severe weather, whether as a result of climate change or otherwise, in the United States or in other countries in which we operate or in which our suppliers are located could result in physical damage to and complete or partial closure of one or more of our manufacturing facilities or temporary or long-term disruption in the supply of component products from some of our suppliers, disruption and delay in the transport of our products to customers or limit our access to building sites to install our products or perform our services. Existing insurance coverage may not provide protection for all of the costs that may arise from such events. The impacts of these unexpected events are difficult to predict, but could result in higher costs or delays in our operations and/or adversely affect economic conditions in the regions where we operate and our financial performance.
Our international operations subject us to risk as our results of operations may be adversely affected by changes in local and regional economic conditions, such as fluctuations in exchange rates and changes in credit conditions.
We conduct our business on a global basis, with approximately 71% of our 2025 net sales derived from international operations. Changes in local and regional economic conditions, including credit conditions and fluctuations in exchange rates, may affect product demand and reported profits in our non-U.S. operations, where transactions are generally denominated in local currencies. In addition, currency fluctuations may affect the prices we pay for the materials used in our products. Though we engage in hedging strategies to manage foreign currency exposures in connection with certain cross-border transactions, our operating margins may be negatively impacted by currency fluctuations that result in higher costs or lower revenues for certain cross-border transactions. Our financial statements are denominated in U.S. dollars. Accordingly, fluctuations in exchange rates have given and may continue to give rise to gains or losses when financial statements of non-U.S. operating units are translated into U.S. dollars. Given that the majority of our net sales are non-U.S. based, a strengthening of the U.S. dollar against other major foreign currencies has adversely affected and could in the future adversely affect our results of operations. Additionally, limitations on the ability of our customers and suppliers to access credit at interest rates and on terms that are acceptable to them could lead to customer and supplier defaults and cancellations of existing orders, limit or prevent customers from being able to finance purchases of our products and services in the future, and cause delays in the delivery of key products from suppliers.
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Our international operations subject us to risks associated with government policies on international trade and investments and risks in general and particularly in China.
Our international sales and operations are subject to risks associated with changes in local government laws, regulations and policies, including those related to investments and limitations on foreign ownership of businesses, taxation, foreign exchange controls, capital controls, local manufacturing, product content or supplier requirements, employment regulations and the repatriation of earnings. Government policies on international trade and investments such as import quotas, capital controls, punitive taxes or tariffs or similar trade barriers, whether imposed by individual governments or regional trade blocs, can affect demand for our products and services, impact the competitive position of our products or services, or encumber our ability to manufacture or sell products in certain countries. International transactions also involve increased financial and legal risks due to differing legal systems and customs in foreign countries, which could result in increased costs, risk of fines or penalties as well as reputational harm. Our international sales and operations are also sensitive to changes in foreign nations’ priorities, including government budgets, as well as to political and economic instability.
The implementation of more restrictive trade policies, including tariffs and retaliatory actions in response thereto, or the renegotiation of existing trade agreements with the U.S. or countries where we sell large quantities of products and services, procure materials incorporated into our products, manufacture products or recruit and employ employees (see discussion on China below), could have a material adverse effect on our business, results of operations and financial condition.These impacts may include hindering our ability to recruit and retain employees or deploy certain employees to the geographies where their skills are best utilized,increased costs for our customers, declining consumer confidence, significant inflation and diminished economic expectations, which could ultimately reduce demand for our products. While we take steps to mitigate or avoid these increased costs, disruptions and legal risks due to changes in trade policies, our ability to do so may be limited by operational and supply chain constraints, especially in the short term. In addition, our ability to recover cost increases and maintain profitability levels through price adjustments may be limited by competitive pressures, customer acceptance, and contractual limitations. Tariff actions by the U.S. and retaliatory actions by other countries have caused, and may in the future cause, significant disruption and volatility in the financial markets, which could adversely affect the availability, terms and cost of capital, including with respect to refinancing our existing debt, and which in turn could reduce our cash flows and harm our business.
China is currently the largest end market for sales of new equipment in our industry, with our New Equipment net sales in China representing approximately one fifth of our global New Equipment net sales and over half of our global New Equipment unit volume and a growing part of our Service segment. Changes to market and economic conditions in China, including credit conditions for our customers, have recently impacted and may continue to impact our ability to maintain New Equipment net sales in China at rates consistent with prior years as well as future growth of our Service segment. Additionally, the escalation of trade conflicts between the U.S. and China could further impact economic conditions in the U.S. and China. Furthermore, as is the case in many countries where we operate, China could impose additional regulatory and legal requirements, including requirements that could increase costs in China and/or restrict access to Chinese markets, which could negatively impact our overall financial performance.
Our international operations subject us to risks associated with emerging markets.
We expect that net sales to emerging markets will continue to account for a significant portion of our net sales as those and other developing nations and regions around the world increase their demand for our products and services. A slowdown in urbanization in emerging countries, such as China or India, have and could continue to adversely affect our financial performance. In addition, as part of our global business model, we operate in certain countries, including Argentina, Brazil, China, India, Indonesia, Malaysia, Mexico, Poland, South Africa, Ukraine, Turkey and certain countries in the Middle East, that carry high levels of currency, political, compliance and economic risk. Our emerging market operations can present many risks, including differences in culturally accepted practices (such as employment and business practices), compliance risks, economic and government instability, currency fluctuations, and the imposition of foreign exchange and capital controls. While these factors and their impact are difficult to predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
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Our international operations subject us to risks associated with geopolitical conflicts.
Our international sales and operations are subject to risks associated with geopolitical conflicts, including the ongoing conflicts between Russia and Ukraine and instability in the Middle East. Geopolitical conflicts, including threats related thereto, have resulted in worldwide geopolitical and macroeconomic uncertainty, and we cannot predict how conflicts will evolve or the timing thereof. If current geopolitical conflicts expand to other countries and depending on the ultimate outcomes of these conflicts, which remain uncertain, they or new geopolitical conflicts could have additional adverse effects on macroeconomic conditions, including but not limited to, increased costs, constraints on the availability of commodities, supply chain disruptions and decreased business spending. Furthermore, continuation of the conflicts could give rise to disruptions to our or our business partners’ global technology infrastructure, including through cyberattack or cyber-intrusion; adverse changes in international trade policies and relations; regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to foreign currency fluctuations; 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.
We use a variety of raw materials, supplier-provided parts, components, sub-systems and third-party manufacturing services in our business, and significant shortages, supplier capacity constraints, supplier production disruptions or price increases could increase our operating costs and adversely impact the competitive positions of our products.
Our reliance on suppliers (including third-party manufacturers) and commodity markets to secure the raw materials and components used in our products exposes us to volatility in the prices and availability of these materials. Issues with suppliers, (such as a disruption in deliveries, capacity and credit constraints, production disruptions, quality issues and supplier closings or bankruptcies), price increases or decreased availability of raw materials or commodities (particularly steel) have in the past had and could in the future have a material adverse effect on our ability to meet our commitments to customers or could increase our operating costs, either of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
Adverse changes in our relationships with, or the financial condition, performance or purchasing patterns, or compliance practices of, key distributors and agents could adversely affect us.
Certain of our businesses sell a significant amount of their products to distributors and agents, particularly in China, that have valuable relationships with customers. Some of these distributors and agents also sell our competitors’ products, and if they favor competing products for any reason they may fail to market our products effectively. Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance or purchasing patterns, or compliance practices, could adversely affect our reputation, competitive position, results of operations, cash flows or financial condition.
We design, manufacture, install and service products that incorporate advanced technologies; the introduction of new products and technologies, including artificial intelligence, involves risks, and we may not realize the degree or timing of benefits initially anticipated.
We seek to grow our business through the design, development, production, sale and support of innovative products that incorporate advanced technologies. The product and service needs of our customers change and evolve regularly, and we invest substantial amounts in research and development efforts to pursue advancements in technologies, products and services. Our ability to realize the anticipated benefits of our technological advancements, such as the development and execution of advanced technologies, including artificial intelligence ("AI"), for the benefit of our New Equipment or Service segment or the development of new products depends on a variety of factors, including meeting development, production, certification and regulatory approval schedules; execution of internal and external performance plans; availability of supplier and internally produced parts and materials; performance of suppliers and subcontractors; hiring and training of qualified personnel; employee adoption of new technologies; achieving cost and production efficiencies; validation of innovative technologies; our ability to maintain new products at the Service levels and costs anticipated; and customer interest in new technologies and products and acceptance of products we manufacture or that incorporate technologies we develop.
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Our research and development efforts may not result in innovative products or services that incorporate new technologies for our New Equipment and Service segments, or products or services being developed on a timely basis or that meet the needs of our customers as effectively as competitive offerings. In addition, the markets for our products or services, or products that incorporate our technologies, may not develop or grow as we anticipate. We or our suppliers or subcontractors may encounter difficulties in developing and producing new products and services, and may not realize the degree or timing of benefits initially anticipated or may otherwise suffer significant adverse financial consequences. Due to the design complexity of our products, we may experience delays in completing the development and introduction of new products. Any delays could result in increased development costs or divert resources from other projects. If we are unable to successfully develop and timely introduce new products, services and technologies, our competitors may develop competing technologies that gain market acceptance in advance of or instead of our products or services that might cause our existing technology and offerings to become obsolete, which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
Further, as we integrate emerging and rapidly evolving technologies, including AI, into our products and services, we face evolving risks related to safety, data governance, regulatory compliance and intellectual property and may not be able to anticipate or identify vulnerabilities, design flaws or security threats resulting from the use of such technology and develop adequate protection measures, which could lead to unintended consequences and significantly impact our business, reputation, and financial results.
We operate in a competitive environment and our profitability depends on our ability to accurately estimate the costs and timing of providing our products and services.
Our contracts are typically awarded on a competitive basis. Our quotations and bids are based upon, among other items, the cost to provide the products and services. To generate an acceptable return on our investment on these contracts, we must be able to accurately estimate our costs to provide the services and deliver the products required by the contract and to be able to complete the contracts in a timely manner. If we fail to accurately estimate our costs or the time required to complete a new equipment order, or the extent of required maintenance pursuant to a service contract, or execute on our productivity initiatives, the profitability of our contracts may be materially and adversely affected. Some of our contracts provide for liquidated damages if we do not perform in accordance with the contract. As a result of these and other factors, we may not be able to provide products and services at competitive prices while maintaining anticipated levels of profitability, which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
We may not realize expected benefits from our cost reduction, restructuring and transformation efforts, including UpLift, and our profitability may be negatively impacted or our business otherwise might be adversely affected.
In order to operate more efficiently and cost effectively, we have and may continue to adjust employment, optimize our footprint or undertake other restructuring or transformation activities, including in connection with UpLift and our China business, and related reorganization, transformation and outsourcing activities, as applicable. These activities are complex and may involve or require significant changes to our operations. If we do not successfully manage restructuring and other transformation activities, expected efficiencies and benefits might be delayed or not realized, and our operations and business could be disrupted. Risks associated with these actions and other workforce management issues include unfavorable political responses, unforeseen delays in the implementation of anticipated workforce reductions, additional unexpected costs, challenges in change management, adverse effects on employee morale and capacity, and the failure to meet operational targets due to the loss of employees or work stoppages or transitioning work to third parties, any of which may impair our ability to achieve anticipated cost reductions, otherwise harm our business or have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
We operate in challenging markets for talent and may fail to attract, develop and retain key personnel.
We depend on the skills, institutional knowledge, working relationships, and continued services and contributions of key personnel, including our leadership team, engineers, field professionals, and others at all levels of the company. In addition, our ability to achieve our operating and strategic goals depends on our ability to identify, hire, train and retain qualified individuals. We compete with other companies both within and outside of our industry for talented personnel in a highly competitive labor market, and we may lose key personnel or fail to attract sufficient skilled personnel and incur additional labor costs. Any such losses, failures or increased costs could have material adverse effects on our results of operations, financial condition and cash flows.
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Our debt levels and related debt service obligations could have negative consequences; we may need additional debt or equity financing in the future to meet our capital needs, and such financing may not be available on favorable terms, if at all, due to changes in global capital markets, our financial performance or outlook or our credit ratings and may be dilutive to existing shareholders.
As of December 31, 2025, we had $7.7 billion outstanding long-term debt. Our debt level and related debt service obligations could have negative consequences, including, among others:
•requiring us to dedicate significant cash flow from operations to the payment of principal and interest on our debt, which would reduce funds we have available for other purposes, such as acquisitions and reinvestment in our businesses; and
•reducing our flexibility in planning for or reacting to changes in our business and market conditions.
We may need additional financing for general corporate purposes. For example, we may need funds to increase our investment in research and development activities, to refinance or repay existing debt, or to make a strategic acquisition. We may be unable to obtain additional financing on terms favorable to us, if at all. Volatility in the world financial markets could further increase borrowing costs or affect our ability to access the capital markets. Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or services, or in the solvency of our customers, suppliers or distributors or other significantly unfavorable changes in economic conditions.
We have an investment-grade credit rating from each of Moody’s Investors Service, Inc. and Standard & Poor’s. There can be no assurance that we will be able to maintain our credit ratings, and any actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade or similar announcement, could increase the cost of borrowing under any indebtedness we may incur, reduce market capacity for our commercial paper, require the posting of additional collateral under our derivative contracts, or otherwise have a negative impact on our liquidity, capital position and access to the capital markets.
If we raise additional funds through the issuance of equity securities, our shareholders will experience dilution of their ownership interest. If we raise additional funds by issuing debt, we may be subject to limitations on our operations due to restrictive covenants or rating agencies may downgrade our credit rating.
Quarterly cash dividends and share repurchases may be discontinued, accelerated or modified, are subject to a number of uncertainties and may affect the price of Common Stock.
Quarterly cash dividends and share repurchases are a component of our capital allocation strategy, which we fund with operating free cash flow, borrowings and divestitures. In general, dividends and share repurchases may be discontinued, accelerated, suspended or delayed at any time without prior notice. Furthermore, the amount of such dividends and repurchases may be changed, and the amount, timing and frequency of such dividends and repurchases may vary from historical practice or from the Company’s stated expectations. Decisions with respect to dividends and share repurchases are subject to the discretion of our Board of Directors and are based on a variety of factors. Important factors that could cause us to discontinue, limit, suspend, increase or delay our quarterly cash dividends or share repurchases include market conditions, the market price of our Common Stock, the nature and timing of other investment and acquisition opportunities, changes in our business strategy, the terms of our financing arrangements, our outlook as to the ability to obtain financing at attractive rates, the impact on our credit ratings and the availability of domestic cash. The reduction or elimination of our cash dividend or share repurchase program could adversely affect the market price of Common Stock. Although our share repurchase program is intended to enhance long-term shareholder value, changes in laws or regulations related thereto or short-term stock price fluctuations could reduce the program's effectiveness.
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We engage in acquisitions and divestitures, and may encounter difficulties integrating acquired businesses with, or disposing of businesses from, our current operations; therefore, we may not realize the anticipated benefits of these acquisitions and divestitures.
We seek to grow through strategic acquisitions, including of the interests in certain ventures and entities which we do not already wholly own, in addition to internal growth. Our due diligence reviews in connection with our acquisitions may not identify all of the material issues necessary to accurately estimate the cost and potential loss contingencies of a particular transaction, including potential exposure to regulatory sanctions resulting from an acquisition target’s previous activities. For example, we may incur unanticipated costs, expenses or other liabilities as a result of an acquisition target’s violation of applicable laws, such as anti-corruption, antitrust, anti-collusion, environmental or income tax laws. We also may incur unanticipated costs or expenses, including post-closing asset impairment charges, as well as expenses associated with eliminating duplicate facilities, litigation and other liabilities. We may incur unexpected costs associated with labor law, tax or pension matters or to bring acquired assets up to our operating standards. We may encounter difficulties in integrating acquired businesses with our operations, applying our internal controls to these acquired businesses or in managing strategic investments. In addition, accounting requirements relating to business combinations, including the requirement to expense certain acquisition costs as incurred, may cause us to incur greater earnings volatility and generally lower earnings during periods in which we acquire new businesses.
We also make strategic divestitures from time to time. Our divestitures may result in continued financial exposure to the divested businesses, such as through guarantees, other financial arrangements, continued supply and services arrangements, and environmental and product liability claims, following the transaction. Under these arrangements, nonperformance by those divested businesses could result in obligations being imposed on us that could have a material adverse effect on our competitive position, cash flows, results of operations or financial condition.
Additionally, we may not realize the degree or timing of benefits we anticipate when we first enter into a transaction, including as a result of current and proposed changes to U.S. and foreign regulatory approval processes and requirements in connection with an acquisition or divestiture. Any of the foregoing could adversely affect our business and results of operations.
We are party to joint ventures which may not be successful and may expose us to special risks and restrictions.
In certain regions, we operate our business through joint venture relationships or non-wholly owned subsidiaries, including Otis Elevator (China) Investment Limited in China. A significant downturn or deterioration in the business or financial condition of a joint venture partner could affect our results of operations in a particular period. Our joint ventures may experience labor strikes, diminished liquidity or credit unavailability, weak demand for products, delays in the launch of new products or other difficulties in their businesses. Changes in local government laws, regulations and policies, including those related to investments and limitations on foreign ownership of businesses, could adversely impact our ability to participate in and operate our joint ventures, or could result in changes to the ownership structure or allocation of rights in our joint ventures. If we are not successful in maintaining our joint ventures and other strategic partnerships, our financial condition, results of operations and cash flows may be adversely affected.
Joint ventures and non-wholly owned subsidiaries inherently involve special risks. Whether or not we hold a majority interest or maintain operational control in such arrangements, our partners or other shareholders may (1) have economic or business interests or goals that are inconsistent with or contrary to ours, (2) exercise veto or other rights, to the extent available, to block actions that we believe to be in our or the joint venture’s or non-wholly owned subsidiary’s best interests, (3) take action contrary to our policies or objectives with respect to our investments, business or compliance practices or (4) be unable or unwilling (including as a result of financial or other difficulties) to fulfill their obligations, such as contributing capital to expansion or maintenance projects, under the joint venture or other agreement. There can be no assurance that any particular joint venture or non-wholly owned subsidiary will be beneficial to us.
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Additional tax expense or additional tax exposures could affect our future profitability.
We are subject to income taxes in the United States and various international jurisdictions. Changes to tax laws and regulations, as well as changes and conflicts in related interpretations or other tax guidance could materially impact our tax receivables and liabilities and our deferred tax assets and deferred tax liabilities. Additionally, in the ordinary course of business, we are subject to examinations by various tax authorities. In addition, governmental authorities in various jurisdictions could launch new examinations and expand existing examinations. The global and diverse nature of our operations means that these risks will continue and additional examinations, proceedings and contingencies will arise from time to time. Our competitive position, cash flows, results of operation or financial condition may be affected by the outcome of examinations, proceedings and contingencies that cannot be predicted with certainty.
See "Business Overview" and "Results of Operations – Income Taxes" in Item 7 and "Note 2: Summary of Significant Accounting Policies" and "Note 14: Income Taxes" in Item 8 in this Form 10-K, for further discussion on income taxes and related contingencies.
Our defined benefit pension plans are subject to financial market risk that could adversely affect our results.
The performance of the financial markets and interest rates, as well statutory and/or regulatory changes, can impact our defined benefit pension plan expenses and funding obligations. Significant decreases in the discount rate or investment losses on plan assets may increase our funding obligations and adversely impact our financial results. See "Note 11: Employee Benefit Plans" in Item 8 of this Form 10-K for further discussion on pension plans and related obligations and contingencies.
We are subject to litigation, product safety and other legal and compliance risks.
We are subject to a variety of litigation, legal and compliance risks. These risks relate to, among other things, product safety, personal injuries, intellectual property rights, contract-related claims, taxes, environmental matters, competition laws and laws governing improper business practices. We could be charged with wrongdoing in connection with such matters. If convicted or found liable, we could be subject to significant fines, penalties, repayments and other damages (in certain cases, treble damages).
As a global business, we are subject to complex laws and regulations in the U.S. and other countries in which we operate. Those laws and regulations may be interpreted in different ways. They may also change from time to time, as may related interpretations and other guidance. Changes in laws or regulations could result in higher expenses or changes to business operations that could impact our ability to sell our products and services or sell them at expected profit levels. Uncertainty relating to those laws or regulations may also affect how we operate, structure our investments, structure our contracts and comply with the terms of these contracts and/or enforce our rights thereunder.
Product and general liability claims (including claims related to the safety, reliability or maintenance of our products) and accident risks during the production, installation, maintenance and use of our products can result in significant costs, including settlements, punitive damages and other risks such as damage to our reputation, negative publicity and management distraction, which could reduce demand for our products and services.
In addition, we are subject to the U.S. Foreign Corrupt Practices Act (the "FCPA") and other anti-corruption laws that generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. The FCPA applies to companies, individual directors, officers, employees and agents. Under certain anti-corruption laws, companies also may be held liable for the actions of partners or representatives. Certain of our customer relationships are with governmental entities and are, therefore, subject to the FCPA and other anti-corruption laws. Despite meaningful measures that we undertake to seek to ensure lawful conduct, which include training and internal controls, we may not always be able to prevent our employees, partners, joint ventures, agents or distributors from violating the FCPA or other anti-corruption laws. Changes in these laws or their interpretation, administration and/or enforcement may also occur over time. As a result, we could be subject to criminal and civil penalties, disgorgement, changes or enhancements to our compliance measures that could increase our costs, decrease our access to certain sales channels, personnel changes or other remedial actions.
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Moreover, we are subject to antitrust and anti-collusion laws, including mandatory supply laws and bidding regulations, in various jurisdictions throughout the world. Changes in these laws or their interpretation, administration and/or enforcement may occur over time, and any such changes may limit our future acquisitions or operations, or result in changes to our strategies, sales and distribution structures or other business practices. We are subject to ongoing claims related to alleged violations of anti-collusion laws in certain European countries, where we are subject to claims for overcharges on elevators and escalators related to civil cartel cases. Though we have implemented policies, controls and other measures to prevent collusion or anti-competitive behavior, our controls may not always be effective in preventing our employees, partners, joint ventures, agents or distributors from violating antitrust or anti-collusion laws.
Additionally, we provide products and services to government entities. Government contract laws and regulations impose certain risks. If violations of law are found, they could result in civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business. Each of these factors could negatively impact our business, results of operations, financial condition, and reputation.
Violations of the FCPA, antitrust or other anti-corruption or anti-collusion laws, government contract laws, or allegations of such violations, could disrupt our operations, cause reputational harm, involve significant management distraction and result in a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
We also must comply with various laws and regulations relating to the export of products, services and technology from the U.S. and other countries having jurisdiction over our operations. In the U.S., these laws include, among others, the Export Administration Regulations administered by the Department of Commerce and embargoes and sanctions regulations administered by the Department of the Treasury. In addition, U.S. foreign policy may restrict or prohibit business dealings with certain individuals, entities or countries; changes in these prohibitions can happen suddenly and could result in a material adverse effect on our operations. See discussion of other risks associated with our international business, including changes in trade policies, discussed above and elsewhere in this Form 10-K.
For a description of current material legal proceedings, see "Note 20: Contingent Liabilities" in Item 8 of this Form 10-K.
We are impacted by evolving stakeholder interest in sustainability and responsibility matters.
We report on our sustainability and responsibility projects and programs, as required by applicable law and voluntarily. Our strategies reflect our focus on projects and programs that tie to business performance allowing us to adapt to evolving market needs and pursue new opportunities in alignment with our business strategies. Nonetheless, there is no certainty that these projects and programs will deliver the desired outcomes. Our ability to deliver on our sustainability and responsibility initiatives is subject to numerous risks, many of which are outside of our control. Examples of such risks include: (1) the availability and cost of low- or non-carbon-based energy sources and technologies, (2) third-party coordination and alignment over which we do not have control and which may be unpredictable, (3) evolving regulatory requirements affecting sustainability or responsibility related standards or disclosures, (4) the availability of suppliers that can meet our sustainability-related standards, and (5) our ability to recruit, develop, and retain talent in our labor markets. In addition, standards for tracking and reporting on sustainability-related matters have not been harmonized and continue to evolve. Our processes and controls for reporting of sustainability and responsibility matters have been enhanced but may not always comply with evolving and disparate standards for identifying, measuring, and reporting metrics globally, our interpretation of reporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our performance metrics, climate-related targets or reported progress in achieving such targets and increased compliance costs and risks.
If our sustainability and responsibility practices do not meet evolving regulations, investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment, supplier, or business partner could be negatively impacted, or could result in litigation. We may also be subject to penalties for non-compliance under applicable laws. In addition, our failure or perceived failure to pursue or fulfill our climate-related targets within the timelines we announce, or at all, could have similar negative impacts.
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Information security, data privacy and identity protection may require significant resources and present certain risks to our business, reputation and financial condition.
We collect, store, have access to and otherwise process certain company and third-party confidential or sensitive data that may be subject to data privacy and cybersecurity laws, regulations or customer-imposed controls, including proprietary business information, personal data and other information. We also develop products that may in certain cases collect, store, have access to, and otherwise process certain personally identifiable or confidential data of our customers who purchase and use such products either separately or as a part of another product or system or by way of access to our websites or social media accounts. Although we seek to protect such data and design our products to enable our customers to use them while complying with applicable data privacy and cybersecurity laws and/or customer-imposed controls, we have experienced cyberattacks. While these attacks have not to our knowledge had a material adverse impact on the Company to date, our internal systems and products may be vulnerable to further cyberattacks, security breaches, theft, programming errors or employee errors, which could lead to the compromise of confidential and sensitive data, unauthorized access, use, disclosure, modification or destruction of information, improper use of our systems, software solutions or networks, defective products, production downtimes and/or operational disruptions in violation of applicable law and/or contractual obligations. A significant actual or perceived risk of theft, loss, fraudulent use or misuse of customer, employee or other data, whether by us, our suppliers, distributors, customers or other third parties, as a result of employee error or malfeasance, or as a result of the compromise of software, security and other products we incorporate into our products, as well as non-compliance with applicable industry standards or our contractual or other legal obligations or privacy and information security policies regarding such data, could result in costs, fines, litigation or regulatory actions, or could lead customers to select products and services of our competitors. In addition, any such event could harm our reputation, cause unfavorable publicity or otherwise adversely affect certain potential customers’ perceptions of the security and reliability of our services as well as our credibility and reputation, which could result in lost sales. Because of the global nature of our business, both our internal systems and products must comply with the applicable laws, regulations and standards in a number of jurisdictions, which continue to evolve and in certain cases, include provisions that are unclear. Government enforcement actions, including due to geopolitical concerns, and violations of data privacy and cybersecurity laws could be costly or interrupt our business operations. Any of the foregoing factors could result in reputational damage or civil or governmental proceedings and/or substantial monetary damages or fines, which could result in a material adverse effect on our competitive position, results of operations, cash flows or financial condition. As global standards and regulations relating to AI increase and change, they could result in additional costs, regulatory scrutiny, legal liability and reputational harm, including if we fail to comply with such standards and regulations. Additionally, misuse of sensitive data used in AI models may lead to privacy violations or non-compliance with data protection laws.
Our business and financial performance depend on continued substantial investment in information technology infrastructure, which may not yield anticipated benefits, and may be adversely affected by cyberattacks on information technology infrastructure and products and other business disruptions.
The efficient operation of our business requires continued substantial investment in technology infrastructure systems, including partial shifting from virtual private networks to cloud-based networks, and we must attract and retain qualified people to operate these systems, expand and improve them, integrate new systems effectively and efficiently convert to new systems when required. An inability to fund, acquire and implement these systems might impact our ability to respond effectively to changing customer expectations, manage our business, scale our solutions effectively or impact our customer service levels, which could put us at a competitive disadvantage and negatively impact our financial results. Repeated or prolonged interruptions of service due to problems with our systems or third-party technologies, whether or not in our control, could have a significant negative impact on our reputation and our ability to sell products and services. Furthermore, we are highly dependent upon a variety of internal computer and telecommunication systems to operate our business. Failure to design, develop and implement new technology infrastructure systems in an effective and timely manner, or to adequately invest in and maintain these systems, could result in the diversion of management’s attention and resources and could materially adversely affect our operating results, competitive position and ability to efficiently manage our business. Our existing information systems may become obsolete, requiring us to transition our systems to a new platform. Such a transition would be time-consuming, costly and damaging to our competitive position, and could require additional management resources. Failure to implement and deploy new systems or replacement systems on the schedules anticipated, could materially adversely affect our operating results.
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In addition, our business may be impacted by disruptions to our own or third-party information technology ("IT") infrastructure, which could result from (among other causes) cyberattacks on or failures of such infrastructure or compromises to its physical security, as well as from damaging weather or other acts of nature. Cyber-based risks, in particular, are evolving and include attacks on our IT infrastructure, as well as attacks targeting the security, integrity and/or availability of the hardware, software and information installed, stored or transmitted in our products, including after the purchase of those products and when they are installed into third-party products, facilities or infrastructure. Such attacks could disrupt our business operations, our systems or those of third parties, and could impact the ability of our products to work as intended. We and some of our third-party suppliers have experienced cyber-based attacks, and, due to the evolving threat landscape, may continue to experience them going forward, potentially with more frequency. We continue to make investments and adopt measures designed to enhance our protection, detection, response, and recovery capabilities, and to mitigate potential risks to our technology, products, services and operations from potential cyberattacks. However, given the unpredictability, nature and scope of cyberattacks, it is possible that potential vulnerabilities could go undetected for an extended period. As a result of a cyberattack, we could potentially be subject to production downtimes, operational delays or other detrimental impacts on our operations or ability to provide products and services to our customers; destruction or corruption of data; security breaches; manipulation or improper use of our or third-party systems, networks or products; financial losses from remedial actions, loss of business, potential liability, penalties, fines and/or damage to our reputation, any of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
We depend on our intellectual property, and have access to certain intellectual property and information of our customers, suppliers and distributors; infringement or failure to protect our intellectual property could adversely affect our future growth and success.
We rely on a combination of patents, trademarks, copyrights, trade secrets, nondisclosure agreements, customer and supplier agreements, license agreements, restrictive covenants, information technology security systems, internal controls and compliance systems and other measures to protect our intellectual property. We also rely on nondisclosure agreements, information technology security systems and other measures to protect certain customer and supplier information and intellectual property that we have in our possession or to which we have access. Our efforts to protect such intellectual property and proprietary rights may not be sufficient. We cannot be sure that our pending patent applications will result in the issuance of patents to us, that patents issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors or that these patents will be found to be valid or sufficiently broad to preclude our competitors from introducing technologies similar to those covered by our patents and patent applications. Our ability to protect and enforce our intellectual property rights also may be limited. In addition, we may be the target of competitor or other third-party patent enforcement actions seeking substantial monetary damages or seeking to prevent the sale and marketing of certain of our products or services. Our competitive position also may be adversely impacted by limitations on our ability to obtain possession of, and ownership or necessary licenses concerning, data important to the development or provision of our products or service offerings, or by limitations on our ability to restrict the use by others of data related to our products or services. Any of these events or factors could subject us to judgments, penalties and significant litigation costs or temporarily or permanently disrupt our sales and marketing of the affected products or services and could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
Operating outside the United States also exposes us to additional intellectual property risk. The laws and enforcement practices of certain jurisdictions in which we operate may not protect our intellectual property rights to the same extent as in the United States and may impose joint venture, technology transfer, local service or other foreign investment requirements, and restrictions that potentially compromise control over our technology and proprietary information. Failure of foreign jurisdictions to protect our intellectual property rights, an inability to effectively enforce such rights in foreign jurisdictions, or the imposition of foreign jurisdiction investment or sourcing restrictions or requirements could result in loss of valuable proprietary information and could impact our competitive position and financial results.
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Risks Related to Our Common Stock
Anti-takeover provisions could enable our Board of Directors to resist a takeover attempt by a third party and limit the power of our shareholders.
Otis’ amended and restated certificate of incorporation and amended and restated bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with Otis’ Board of Directors rather than to attempt a hostile takeover. These provisions include, among others, (1) the ability of our remaining directors to fill vacancies on Otis’ Board of Directors (except in an instance where a director is removed by shareholders and the resulting vacancy is filled by shareholders); (2) limitations on shareholders’ ability to call a special shareholder meeting; (3) rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings; and (4) the right of Otis’ Board of Directors to issue preferred stock without shareholder approval.
In addition, we are subject to Section 203 of the Delaware General Corporation Law (the "DGCL"), which could have the effect of delaying or preventing a change of control that you may favor. Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with persons that acquire, more than 15% of the outstanding voting stock of a Delaware corporation may not engage in a business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or any of its affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock.
We believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with Otis’ Board of Directors and by providing Otis’ Board of Directors with more time to assess any acquisition proposal. These provisions are not intended to make Otis immune from takeovers; however, these provisions apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that Otis’ Board of Directors determines is not in the best interests of Otis and our shareholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
Our amended and restated bylaws designate the state courts within the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against Otis and our directors and officers.
Otis’ amended and restated bylaws provide that, unless Otis’ Board of Directors otherwise determines, the state courts within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Otis, any action asserting a claim for or based on a breach of a fiduciary duty owed by any current or former director or officer or other employee of Otis to Otis or its shareholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, any action asserting a claim against Otis or any current or former director or officer or other employee of Otis arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws, any action asserting a claim relating to or involving Otis governed by the internal affairs doctrine, or any action asserting an "internal corporate claim" as that term is defined in Section 115 of the DGCL.
To the fullest extent permitted by law, this exclusive forum provision applies to state and federal law claims, including claims under the federal securities laws, including the Securities Exchange Act of 1934, as amended (the "Exchange Act"), although Otis shareholders will not be deemed to have waived Otis’ compliance with the federal securities laws and the rules and regulations thereunder. The enforceability of similar exclusive forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and it is possible that, in connection with claims subject to exclusive federal jurisdiction, a court could find the exclusive forum provision contained in the amended and restated bylaws to be inapplicable or unenforceable.
This exclusive forum provision may limit the ability of our shareholders to bring a claim in a judicial forum that such shareholders find favorable for disputes with Otis or our directors or officers, which may discourage such lawsuits against Otis and our directors and officers. Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could negatively affect our business, results of operations and financial condition.
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Risks Related to the Separation
In connection with the Separation, each of RTX, Otis and Carrier agreed to indemnify the other parties for certain liabilities. If we are required to pay under these indemnities to RTX and/or Carrier, our financial results could be negatively impacted. Also, the RTX or Carrier indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which RTX and Carrier are allocated responsibility, and RTX and/or Carrier may not be able to satisfy their respective indemnification obligations in the future.
Pursuant to the Separation Agreement, the TMA and the EMA, each party agreed to indemnify the other parties for certain liabilities. Indemnities that we may be required to provide RTX and/or Carrier are not subject to any cap, may be significant and could negatively impact our business. Third parties could also seek to hold us responsible for any of the liabilities that RTX and/or Carrier has agreed to retain. The indemnities from RTX and Carrier for our benefit may not be sufficient to protect us against the full amount of such liabilities, and RTX and/or Carrier may not be able to fully satisfy their respective indemnification obligations. Any amounts we are required to pay pursuant to such indemnification obligations and other liabilities could require us to divert cash that would otherwise have been used in furtherance of our operating business. Moreover, even if we ultimately succeed in recovering from RTX or Carrier, as applicable, we may be temporarily required to bear these losses ourselves. Each of these risks could negatively affect our business, results of operations and financial condition.
If the Separation, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, including as a result of subsequent acquisitions of our stock or the stock of RTX, we, as well as RTX, Carrier, and RTX's shareholders, could be subject to significant tax liabilities. In addition, if certain internal restructuring transactions were to fail to qualify as transactions that are generally tax-free for U.S. federal or non-U.S. income tax purposes, we, as well as RTX and Carrier could be subject to significant tax liabilities. In certain circumstances, we could be required to indemnify RTX for material taxes and other related amounts pursuant to indemnification obligations under the TMA.
In connection with the Separation, our former parent UTC received a ruling from the IRS regarding certain U.S. federal income tax matters relating to the Separation and an opinion of outside counsel regarding the qualification of certain elements of the Separation under Section 355 of the Code. The IRS ruling and the opinion of counsel were based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of UTC (and RTX), Otis and Carrier, including those relating to the past and future conduct of UTC (and RTX), Otis and Carrier. Notwithstanding receipt of the IRS ruling and the opinion of counsel, the IRS could determine that the Separation and/or certain related transactions should be treated as taxable transactions for U.S. federal income tax purposes if it determines that any of the representations, assumptions or undertakings upon which the IRS ruling or the opinion of counsel was based were inaccurate or have not been complied with. In addition, the IRS ruling does not address all of the issues that are relevant to determining whether the Separation, together with certain related transactions, qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes. The opinion of counsel represents the judgment of such counsel and is not binding on the IRS or any court, and the IRS or a court may disagree with the conclusions in the opinion of counsel. Accordingly, notwithstanding receipt by UTC of the IRS ruling and the opinion of counsel, there can be no assurance that the IRS will not assert that the Separation and/or certain related transactions did not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge.
If the distribution of Common Stock pursuant to the Separation were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, RTX would recognize a taxable gain as if it had sold the Common Stock in a taxable sale for its fair market value, and RTX shareholders who received Common Stock in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. Even if the distribution of Common Stock pursuant to the Separation were to otherwise qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code, it may result in a taxable gain to RTX (but not its shareholders) under Section 355(e) of the Code if the Separation were deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, shares representing a 50% or greater interest (by vote or value) in RTX or Otis. For this purpose, any acquisitions of RTX or Otis shares within the period beginning two years before the distribution of Common Stock pursuant to the Separation and ending two years after such distribution are presumed to be part of such a plan, although RTX or Otis may be able to rebut that presumption (including by qualifying for one or more safe harbors under applicable Treasury Regulations).
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In addition, in connection with and prior to the Separation, UTC and its subsidiaries completed various internal reorganization transactions. With respect to certain transactions undertaken as part of the internal reorganization, UTC obtained tax rulings in certain non-U.S. jurisdictions and/or opinions of external tax advisors, in each case, regarding the tax treatment of such transactions. Such tax rulings and opinions were based upon and relied on, among other things, various facts and assumptions, as well as certain representations (including with respect to certain valuation matters relating to the internal reorganization), statements and undertakings of UTC (and RTX), Otis, Carrier or their respective subsidiaries. If any of these representations or statements were, or become, inaccurate or incomplete, or if RTX, Otis, Carrier or any of their respective subsidiaries do not fulfill or otherwise comply with any such undertakings or covenants, such tax rulings and/or opinions may be invalid or the conclusions reached therein could be jeopardized. Further, notwithstanding receipt of any such tax rulings and/or opinions, there can be no assurance that the relevant taxing authorities will not assert that the tax treatment of the relevant transactions differs from the conclusions reached in the relevant tax rulings and/or opinions. In the event the relevant taxing authorities prevail with any challenge in respect of any relevant transaction, we, as well as RTX and Carrier, could be subject to significant tax liabilities.
Under the TMA, Otis generally is required to indemnify RTX and Carrier for any taxes resulting from the Separation and certain related transactions (and any related costs and other damages) to the extent such amounts resulted from (1) an acquisition of all or a portion of the equity securities or assets of Otis, whether by merger or otherwise (and regardless of whether we participated in or otherwise facilitated the acquisition), (2) other actions or failures to act by Otis or (3) certain of Otis’ representations, covenants or undertakings contained in any of the Separation-related agreements and documents or in any documents relating to the IRS ruling and/or the opinion of counsel being incorrect or violated. Further, under the TMA, we generally are required to indemnify RTX and Carrier for a specified portion of any taxes (and any related costs and other damages) (a) arising as a result of the failure of the Separation and certain related transactions to qualify as a transaction that is generally tax-free (including as a result of Section 355(e) of the Code) or a failure of any internal separation transaction that is intended to qualify as a transaction that is generally tax-free to so qualify, in each case, to the extent such amounts do not result from a disqualifying action by, or acquisition of equity securities of, Otis, Carrier or RTX or (b) arising from an adjustment, pursuant to an audit or other tax proceeding, with respect to any transaction undertaken in connection with the Separation that is not intended to qualify as a transaction that is generally tax-free. Any such indemnity obligations could be material.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
The security of our products, services and corporate network is a key priority for our business. We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats (as defined in Item 106(a) of Regulation S-K). These risks include, among other things, operational risks, intellectual property theft, fraud, extortion, harm to employees, customers, business partners or the riding public, violation of privacy or security laws and other litigation and legal risk, and reputational risks.
Otis has taken a risk-based approach to cybersecurity, which considers the sensitivity and volume of the relevant data, the potential effects on third parties and individuals, the needs of our business, and the costs and/or practicality of remediation. Based on this qualitative and quantitative assessment, we determine if identified cybersecurity risks are at an acceptable level, or should be mitigated or transferred.
We have implemented cybersecurity policies throughout our operations, including designing and incorporating cybersecurity, as appropriate, into our products and services while they are being developed. Our enterprise risk management ("ERM") process considers cybersecurity threat risks alongside other company risks as part of our overall risk assessment process. Additionally, cybersecurity functional groups incorporate external research and intelligence gathering to keep the organization informed of new and evolving cyber risks.
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We have implemented several cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage material risks from cybersecurity threats, and to protect against, detect and respond to cybersecurity incidents (as defined in Item 106(a) of Regulation S-K), including, among others, the following:
•established a global Security Operations Center to support visibility to cybersecurity incidents in real time;
•require all salaried Otis colleagues to complete an annual cybersecurity training program where specific threats and scenarios are highlighted based on our analysis of current risks to the organization;
•conduct regular phishing email simulations for employees and contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats;
•maintain a robust Cybersecurity Incident Response Plan, which provides a framework for handling cybersecurity incidents based on, among other factors, the potential severity of the incident and facilitates cross-functional coordination across Otis;
•periodically run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies;
•maintain cybersecurity insurance and regularly review our policy and levels of coverage based on current risks;
•monitor emerging data protection and cybersecurity laws, and implement changes to our processes, systems and offerings designed to comply, and through policy, practice and contract (as applicable) require employees, as well as third parties who provide services on our behalf, to treat customer information and data with care;
•conduct several cyber-specific internal audits per year; and
•engage consultants and other third parties in connection with our cybersecurity practices.
As part of the above processes, we conduct monthly third-party scanning of our network.
Otis also applies a risk-based approach to mitigate cybersecurity risks associated with our use of third-party service providers, including those in our supply chain that have access to our customer and employee data or our systems. Third-party risks are included within our ERM process. In addition, cybersecurity considerations affect the selection and oversight of our third-party service providers. We perform due diligence on third parties that have access to our most critical systems, data or facilities that house such systems or data, and based on our risk assessment put in place contractual undertakings and oversight, to manage and reduce the risks associated with such third-party vendors. Such contractual undertakings include requirements to comply with administrative, technical and physical safeguards to satisfy the requirements for certification under ISO 27001, to provide notification of cyber incidents involving our systems or data and an agreement to be subject to cybersecurity audits, which we conduct as appropriate.
While Otis has not experienced a material cybersecurity incident to date, see Item 1A in this Form 10-K for more information regarding cybersecurity-related risks that could materially affect our business strategy, results of operations, or financial condition, under the headings "Information security, data privacy and identity protection may require significant resources and present certain risks to our business, reputation and financial condition", "Our business and financial performance depend on continued substantial investment in information technology infrastructure, which may not yield anticipated benefits, and may be adversely affected by cyberattacks on information technology infrastructure and products and other business disruptions" and "We depend on our intellectual property, and have access to certain intellectual property and information of our customers, suppliers and distributors; infringement or failure to protect our intellectual property could adversely affect our future growth and success".
Cybersecurity Governance
Otis has established a three-level governance model for managing cybersecurity risks. Cybersecurity risks are overseen by the Audit Committee of our Board of Directors (the "Board"). Our Chief Digital Officer ("CDO") and Chief Information Security Officer ("CISO") briefed the Audit Committee and other members of the Board on the Otis Cybersecurity Program, the cyber-threat landscape and cyber-resiliency two times in 2025. Our Cybersecurity Program is directed by both our CDO and CISO and we have established a Cyber Governance Council and Steering Committee made up of senior management (including our CEO). These committees are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan.
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Members of our Board also received briefings on risks associated with AI, data protection (including data privacy laws), our incident response plan and our IT infrastructure in 2025. In addition, the Audit Committee participated in a simulated cybersecurity incident tabletop exercise in 2025. Several members of our Board hold a CERT Certificate in Cybersecurity Oversight issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University, and two members of our Audit Committee attended a continuing education class related to AI governance and strategy through the National Association of Corporate Directors ("NACD") in 2025.
Our CDO and CISO collectively have over 25 years of prior work experience in various roles involving managing information security, developing cybersecurity strategy and implementing effective information and cybersecurity programs, as well as relevant degrees and certifications, including Certified Information Security Manager certification and NACD Cyber training. All Otis colleagues engaged in cybersecurity are required to have a baseline certification (such as Security+, CISSP or CISM), as well as an operational cyber certification (for example, incident response or forensics analysis).
Item 2. Properties
We have a direct physical presence in more than 70 countries with an overall property portfolio comprising approximately 13 million square feet of space. We have approximately 2,300 facilities, of which approximately 47%, 40% and 13% are located in EMEA, Asia and the Americas, respectively. We operate more than 1,400 branches and offices, 11 R&D centers and 16 manufacturing facilities globally. Our principal manufacturing facilities are located across Brazil, China, Japan, France, India, Korea, Spain, and the United States, of which 13 are owned. Our principal R&D centers are located in China, France, Germany, India, Japan, Spain and the United States. Our branches and R&D centers typically support both our New Equipment and Service segments.
Our fixed assets as of December 31, 2025 include manufacturing facilities and non-manufacturing facilities, such as warehouses, and a substantial quantity of machinery and equipment, most of which are general purpose machinery and equipment using special jigs, tools and fixtures and in many instances having automatic control features and special adaptations. The facilities, warehouses, machinery and equipment in use as of December 31, 2025 are substantially in good operating condition.
Item 3. Legal Proceedings
For a discussion regarding material legal proceedings, see "Note 20: Contingent Liabilities" to the Consolidated Financial Statements within Item 8 of this Form 10-K.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our Common Stock is listed on the New York Stock Exchange under the symbol "OTIS". There were approximately 16,800 registered shareholders as of January 22, 2026. The information required by Item 5 with respect to securities authorized for issuance under equity compensation plans is incorporated by reference to Part III, Item 12 in this Form 10-K.
Stock Performance Graph
The following table and graph illustrate the total return from December 31, 2020 through December 31, 2025, for (1) our Common Stock, (2) the Standard and Poor's (the "S&P") 500 Index, and (3) the S&P 500 Industrials Sector Index. The graph and table assume that $100.00 was invested on December 31, 2020 in each of our Common Stock, the S&P 500 Index and the S&P 500 Industrials Sector Index, and that any dividends were reinvested. The comparison reflected in the graph and the table are not intended to forecast the future performance of our Common Stock and may not be indicative of our future performance.
Comparison of Cumulative Total Return — Table
Comparison of Cumulative Total Return — Graph
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Issuer Purchases of Equity Securities
The following table provides information about our purchases during the quarter ended December 31, 2025 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act.
October 1 — October 31 — $ — — $ 1,300
November 1 — November 30 — — — $ 1,300
December 1 — December 31 — — — $ 1,300
Total — $ — —
(1) Average price paid per share includes any broker commissions associated with the repurchases.
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. As of December 31, 2025, the maximum dollar value of shares that may yet be purchased under this current program was approximately $1.3 billion.
Under these programs, 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.
Item 6. [Reserved]
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
BUSINESS OVERVIEW
We are the world’s leading elevator and escalator manufacturing, installation, service and modernization 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 range from relatively simple upgrades of interior finishes and aesthetics to complex upgrades of larger components and sub-systems, including the machine, ropes or belts, safety systems and the entire car or escalator. 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 colleagues. 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 we pursue a global strategy 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.
For additional discussion of our business, refer to Item 1 in this Form 10-K.
UpLift
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. The annual run-rate savings generated by UpLift are approximately $200 million. As of 2025, total restructuring and other incremental costs to complete the transformation ("UpLift transformation costs") are approximately $300 million, including trailing restructuring costs expected in 2026 of $18 million.
The Company generated approximately $70 million of pre-tax savings in each of 2025 and 2024, including run-rate savings of approximately $200 million and $120 million, respectively, driven by our simplified operating structure, optimized organizational spans and layers, and reduced digital technology costs. These savings are primarily reflected in Selling, general and administrative expenses.
UpLift costs incurred are as follows:
UpLift restructuring costs $ 76 $ 31 $ 25
UpLift transformation costs 69 65 16
Total UpLift costs incurred to date are $282 million, including $132 million of restructuring costs and $150 million of transformation costs.
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UpLift restructuring costs are primarily severance costs and are recorded primarily in Selling, general and administrative in the Consolidated Statements of Operations. UpLift transformation costs 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 Consolidated Statements of Operations.
For further details, refer to the discussion on restructuring costs in the "Results of Operations," as well as "Note 15: Restructuring and Transformation Costs" to the Consolidated Financial Statements in Item 8 in this Form 10-K.
German Tax Litigation
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 are included in Income tax expense (benefit), net and Interest expense (income), net, respectively, in the Consolidated Statements of Operations for 2024. Additionally, pursuant to the Tax Matters Agreement ("TMA") with RTX Corporation ("RTX", our former parent), the Company recorded indemnification expense of $194 million for amounts due to RTX resulting from the outcome of the German tax litigation. This expense is included in Other income (expense), net in the Consolidated Statements of Operations for 2024.
Based on additional information received from RTX during the year, which resulted in additional indemnification expense of $67 million, offset by indemnity payments made to RTX of $205 million, the Company now estimates the amount payable to RTX to be $56 million. The indemnification expense is included in Other income (expense), net in the Consolidated Statements of Operations in 2025. This estimate could further change due to the parties' continuing dispute concerning the scope of the final indemnity amount, which will be resolved pursuant to the procedures set forth in the TMA.
For further details, refer to "Note 14: Income Taxes" and "Note 20: Contingent Liabilities" to the Consolidated Financial Statements in Item 8 in this Form 10-K.
Impact of Global Macroeconomic Conditions on Our Company
Global macroeconomic conditions have impacted, and continue to impact, aspects of the Company's operations and overall financial performance. 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 in 2026, as a result of the following, among other things:
•Higher costs of products and services due to tariffs;
•Customer demand impacting our new equipment, maintenance and repair, and modernization businesses;
•Customer liquidity constraints and related credit reserve;
•Cancellations or delays of customer orders; and
•Supplier liquidity, as well as supplier and raw material capacity constraints, delays and related costs.
Other than the impact from new tariffs currently in effect of approximately $20 million during 2025 and a similar impact anticipated in 2026, 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.
See the "Liquidity and Financial Condition" section of this item of this Form 10-K for further detail and Item 1A in this Form 10-K for macroeconomic risks related to our business.
Risks Associated with Ongoing Conflicts
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 cybersecurity 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). We do not have operations in Russia.
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To the extent possible, we continue to operate our business in Ukraine, which represented less than 1% of our 2025, 2024 and 2023 net sales and operating profit.
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.
We cannot predict how the events described above will evolve. Depending on the ultimate outcomes of these conflicts, which remain uncertain, they could heighten certain risks disclosed in Item 1A in this 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 cyberattack 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.
Sustainability-related matters
There have been no, and we do not expect there to be in the near term, material impacts on our business, financial condition or results of operations as a result of compliance with legislation or regulatory rules regarding climate change, from the known physical effects of climate change or as a result of implementing our sustainability-related initiatives or from transitional risks such as increased regulations or customer shifting preference toward low carbon products, as determined under our climate scenarios. Other climate change concerns, however, could subject us to additional costs and restrictions, and we are not able to predict how such regulations or concerns would affect our business, operations or financial results. For a discussion of risks associated with sustainability-related matters, see Item 1A in this Form 10-K.
For a discussion of Otis’ climate near-term science-based targets, see the discussion under "Sustainability and Responsibility" in Item 1 in this Form 10-K.
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RESULTS OF OPERATIONS
Net Sales
Percentage change year-over-year 1 % — % 4 %
The factors contributing to the total percentage change year-over-year in total Net sales are as follows:
Organic volume — % 1 %
Foreign currency translation 1 % (1) %
Acquisitions and divestitures, net and Other — % — %
Total % change 1 % — %
The Organic volume was flat for 2025 driven by an increase in organic sales of 5% in Service, offset by a decrease of (7)% in New Equipment.
The Organic volume increase of 1% for 2024 was driven by an increase in organic sales of 7% in Service, offset by a decrease of (6)% in New Equipment.
See "Segment Review" below for a discussion of Net sales by segment.
Cost of Products and Services Sold
Percentage change year-over-year 1 % — % 3 %
The factors contributing to the percentage change year-over-year in total cost of products and services sold are as follows:
Organic volume (1) % 1 %
Foreign currency translation 1 % (1) %
Acquisitions and divestitures, net and Other 1 % — %
Total % change 1 % — %
The Organic volume decrease of (1)% in total cost of products and services sold in 2025 was primarily driven by the organic sales changes noted above. Productivity was partially offset by the impact of tariffs and inflationary pressures, including higher labor costs.
The Organic volume increase of 1% in total cost of products and services sold in 2024 was primarily driven by the organic sales increases noted above and inflationary pressures, including annual wage increases and higher Service-related material costs, partially offset by productivity and lower commodity prices, primarily steel.
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Gross Margin
Gross margin percentage increased 40 basis points in 2025 compared to 2024, primarily 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.
Gross margin percentage increased 40 basis points in 2024 compared to 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.
Research and Development
Percentage of Net sales 1.1 % 1.1 % 1.0 %
Research and development was relatively flat in 2025 compared to 2024 and 2023. Research and development includes product development and innovation, including digital features, enhancements to current elevator and escalator systems, and the development of the next-generation products.
Selling, General and Administrative
Selling, general and administrative expenses increased $118 million in 2025 compared to 2024, driven by higher restructuring costs, annual wage increases, other employment-related costs and the impact from foreign exchange, partially offset by savings resulting from UpLift.
Selling, general and administrative expenses decreased $23 million in 2024 compared to 2023, driven by savings resulting from UpLift, lower restructuring costs and favorable foreign exchange impacts, partially offset by annual wage increases and higher other employment-related costs.
Selling, general and administrative expenses as a percentage of Net sales increased 70 basis points in 2025 compared to 2024, and decreased 30 basis points in 2024 compared to 2023.
Restructuring Costs
UpLift restructuring costs $ 76 $ 31 $ 25
Other restructuring costs 54 40 42
Total restructuring costs $ 130 $ 71 $ 67
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 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.
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UpLift restructuring costs were $76 million and $31 million in 2025 and 2024, respectively. We also incurred $69 million and $65 million of UpLift transformation costs in 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 Consolidated Statements of Operations.
Other restructuring action costs were $54 million in 2025 and included $36 million of costs related to 2025 actions and $18 million of costs related to 2024 actions.
Most of the expected restructuring 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 2025, and the expected cash payments to complete the actions announced:
(dollars in millions) UpLift Actions Other Actions Total Restructuring
Cash outflows during the year ended December 31, 2025 $ 39 $ 49 $ 88
Expected cash payments remaining to complete actions announced 68 40 108
The approved UpLift restructuring actions are expected to generate approximately $103 million in annual recurring savings by the end of 2025, primarily in Selling, general and administrative expenses, of which approximately $84 million and $39 million were realized during 2025 and 2024, respectively, including $50 million of incremental savings compared to 2024.
For other restructuring actions, we generally expect to achieve annual recurring savings within the two-year period subsequent to initiating the actions, including $33 million for the 2025 actions and $27 million for the 2024 actions, split evenly in Cost of Products and Services Sold and in Selling, general and administrative expenses. Approximately $43 million of savings was realized for the 2025 and 2024 actions during 2025.
For additional discussion of restructuring and transformation costs, see "Note 15: Restructuring and Transformation Costs" to the Consolidated Financial Statements in Item 8 in this Form 10-K.
Other Income (Expense), Net
Other income (expense), net $ (106) $ (236) $ 21
Other income (expense), net primarily includes the impact of changes in the fair value and settlement of derivatives, gains or losses on sale of businesses and fixed assets, earnings from equity method investments, fair value changes on equity securities, impairments, UpLift transformation costs, non-recurring Separation-related adjustments and certain other operating items.
The change in Other income (expense), net of $130 million in 2025 compared to 2024, was primarily driven by lower Separation-related adjustments of $107 million, gains on sales of assets of $29 million, lower impairment loss related to net assets held for sale of $8 million and favorable foreign currency mark-to-market adjustments, partially offset by higher UpLift transformation costs of $4 million.
The change in Other income (expense), net of $(257) million in 2024 compared to 2023, was primarily driven by Separation-related adjustments of $177 million, UpLift transformation costs of $65 million, $18 million of impairment loss related to net assets held for sale, foreign currency mark-to-market adjustments, and non-recurring litigation-related settlement costs, including $18 million in the second quarter of 2024, partially offset by other reserve adjustments.
For additional discussion of the Separation-related adjustments, Litigation-related settlement costs and Held for sale impairment, see "Note 21: Segment Financial Data" to the Consolidated Financial Statements in Item 8 in this Form 10-K. For additional discussion of UpLift transformation costs, see "Note 15: Restructuring and Transformation Costs" to the Consolidated Financial Statements in Item 8 in this Form 10-K.
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Interest Expense (Income), Net
Interest expense (income), net $ 196 $ (31) $ 150
Interest expense (income), net primarily relates to interest expense on our external debt, offset by interest income earned on cash balances and short-term investments, and also includes interest related to tax matters.
The change in Interest expense (income), net of $227 million in 2025 compared to 2024, was primarily driven by the absence of $200 million of interest income related to the favorable ruling received in August 2024 regarding a tax litigation in Germany, higher interest related to the $600 million and €850 million unsecured, unsubordinated debt issued in November 2024, as well as the $500 million unsecured, unsubordinated debt issued in September 2025, partially offset by lower interest expense related to the repayment of the $1.3 billion unsecured, unsubordinated debt in April 2025. Interest expense (income), net in 2025 was also impacted by interest reserve adjustments related to non-recurring tax items.
The change in Interest expense (income), net of $(181) million in 2024 compared to 2023, was primarily driven by approximately $200 million related to the German tax litigation, interest reserve adjustments and higher interest income, partially offset by higher interest expense related to the $600 million and €850 million unsecured, unsubordinated debt issued in November 2024 and $750 million unsecured, unsubordinated debt issued in August 2023.
The average interest rate on our external debt for 2025, 2024 and 2023 was 2.8%, 2.5% and 2.1%, respectively.
For additional discussion of borrowings, see "Note 8: Borrowings and Lines of Credit" to the Consolidated Financial Statements in Item 8 in this Form 10-K. For additional discussion of German tax litigation, see "Note 20: Contingent Liabilities" and "Note 21: Segment Financial Data" to the Consolidated Financial Statements in Item 8 in this Form 10-K.
Income Taxes
The 2025 effective tax rate is higher than the statutory U.S. rate primarily due to higher international tax rates as compared to the lower U.S. federal statutory rate. The 2025 effective tax rate is higher than the 2024 effective tax rate primarily due to the absence of estimated tax benefits arising from the resolution of the German tax litigation and the absence of the reduction in a deferred tax liability related to the mitigation of future repatriation costs, both recorded in 2024, and the tax effect of the increase in our estimated nondeductible TMA indemnity obligation payable to RTX recorded in 2025. These impacts were partially offset by an incremental benefit related to foreign-derived intangible income and foreign valuation allowance releases recorded in 2025.
The 2024 effective tax rate is lower than the 2023 effective tax rate and the statutory U.S. rate primarily due to recognition of estimated tax benefits arising from the resolution of the German tax litigation and the reduction of a deferred tax liability related to the mitigation of future repatriation costs.
The 2023 effective tax rate is higher than the statutory U.S. rate primarily due to higher international tax rates as compared to the lower U.S. federal statutory rate.
For additional discussion of income taxes and the effective income tax rate, see "Note 14: Income Taxes" to the Consolidated Financial Statements in Item 8 in this Form 10-K.
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Noncontrolling Interest in Subsidiaries' Earnings and Net Income Attributable to Otis Worldwide Corporation
Noncontrolling interest in subsidiaries' earnings $ 71 $ 89 $ 92
Net income attributable to Otis Worldwide Corporation $ 1,384 $ 1,645 $ 1,406
Noncontrolling interest in subsidiaries' earnings decreased in 2025 in comparison to 2024, primarily driven by lower net income from non-wholly owned subsidiaries. Other than our acquisition of the noncontrolling shares of Otis Electric during the fourth quarter of 2025, ownership interest in the underlying non-wholly owned subsidiaries has remained generally consistent year-over-year. See "Note 1: Business Overview" to the Consolidated Financial Statements in Item 8 in this Form 10-K for further discussion of the noncontrolling interest acquisition.
Noncontrolling interest in subsidiaries' earnings were relatively flat in 2024 in comparison to 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: Business Overview" to the Consolidated Financial Statements in Item 8 in this Form 10-K for further discussion of the noncontrolling interest acquisition.
Net income attributable to Otis Worldwide Corporation decreased in 2025 compared to 2024, due to a higher effective tax rate and higher interest expense, partially offset by higher operating profit (including the impact of foreign exchange rates) and lower noncontrolling interest in subsidiaries' earnings.
Net income attributable to Otis Worldwide Corporation increased in 2024 compared to 2023, due to a lower effective tax rate and lower interest expense, partially offset by lower operating profit (including the unfavorable impact of foreign exchange rates).
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Segment Review
Summary performance for our operating segments for 2025, 2024 and 2023 was as follows:
Net Sales Operating Profit Operating Profit Margin
Corporate and Unallocated
General corporate expenses and other — — — 180 158 126
UpLift restructuring — — — 76 31 25
Other restructuring — — — 54 40 42
UpLift transformation costs — — — 69 65 16
Separation-related reserve adjustment — — — 70 177 —
Litigation-related settlement costs — — — 21 18 —
Held for sale impairment — — — 10 18 —
Other, net — — — 1 (1) —
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 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 2025, 2024 and 2023 was as follows:
Total Increase (Decrease)Year-Over-Year for:
Operating profit margin 4.8 % 6.1 % 6.6 %
Summary analysis of the Net sales change for New Equipment for 2025 and 2024 compared with the prior years was as follows:
Components of Net sales change: 2025 2024
Organic volume (7) % (6) %
Foreign currency translation — % (1) %
Acquisitions/Divestitures, net and Other — % (1) %
Total % change (7) % (8) %
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2025 Compared with 2024
The organic sales decrease of (7)% was driven by a greater than (20)% decline in China and high single-digit decline in Americas, partially offset by mid single-digit growth in EMEA and Asia Pacific.