Business Description

Business Overview Otis (as defined below) is the world’s largest elevator and escalator manufacturing, installation and service company. Our operations are classified into two segments: New Equipment and Service. Through the New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators, as well as escalators and moving walkways, for residential, commercial and infrastructure projects. The Service segment provides maintenance and repair services for both our products and those of other manufacturers, and provides modernization services to upgrade elevators and escalators. UpLift During 2023, the Company announced UpLift to transform the Company's operating model. UpLift includes, among other aspects, the standardization of processes and improvement of supply chain procurement, as well as organizational changes which result in restructuring actions. See Note 15, "Restructuring and Transformation Costs" for information regarding UpLift restructuring actions and related costs incurred. German Tax Litigation In August 2024, we received a favorable ruling regarding a tax litigation in Germany. As a result, income tax benefits of approximately $185 million and related interest income of approximately $200 million are included in Income tax expense (benefit) and Interest expense (income), net, respectively, in the Consolidated Statements of Operations for 2024. The income tax benefits are recorded as an income tax receivable in Other current assets in the Consolidated Balance Sheets as of December 31, 2024. The interest income includes the reversal of an interest accrual of $50 million and recognition of an interest receivable of approximately $140 million reflected in Accrued liabilities and Other current assets, respectively, in the Consolidated Balance Sheets as of December 31, 2024. The Company has started to receive refunds and anticipates the refund process to continue into 2026. As a result, Other current assets in the Consolidated Balance Sheets as of December 31, 2025 and 2024 include an income tax receivable of approximately $75 million and $175 million, respectively, and an interest receivable of approximately $65 million and $140 million, respectively. Pursuant to the Tax Matters Agreement ("TMA") with RTX Corporation ("RTX", our former parent), and based on the facts and contractual provisions at the time, the Company recorded indemnification expense of $194 million for amounts due to RTX resulting from the outcome of this tax litigation in Germany in 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 and 2024, and the amounts payable to RTX are included in Accrued liabilities in the Consolidated Balance Sheets as of December 31, 2025 and 2024, respectively. See Note 14, "Income Taxes" and Note 20, "Contingent Liabilities" for additional information. Acquisitions of Noncontrolling Interests In October 2025, we purchased all of the outstanding shares of Otis Electric Elevator Company Limited ("Otis Electric") from the noncontrolling shareholder for approximately $215 million ($80 million from Cash and $135 million from borrowings). As a result, $188 million was recorded to Accumulated deficit for the difference between the purchase price and the historical noncontrolling interest carrying value and $27 million was recorded to Noncontrolling interest. Otis Electric is now 100% owned by our joint venture Otis Elevator (China) Investment Company Limited ("Otis China") and one of its subsidiaries. The impact to Accumulated other comprehensive income (loss) was not significant. The Company owned a controlling interest and had operational control of Otis Electric as of and for the years ended December 31, 2025, 2024 and 2023, and all other periods during 2025, 2024 and 2023, and therefore its financial results are included in our Consolidated Financial Statements. In 2024, we purchased all of the outstanding shares of our consolidated subsidiary in Japan from the noncontrolling shareholders for approximately $70 million.…